UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

(Mark One)

[_]  REPORT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
     1934

                                       OR

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 2005

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _________________ to _________________

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     Date of event requiring this shell company report _________________

Commission file number 000-49650


                     AKTIESELSKABET DAMPSKIBSSELSKABET TORM
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


                          A/S STEAMSHIP COMPANY TORM
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)


                               Kingdom of Denmark
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)


                  Tuborg Havnevej 18, DK-2900 Hellerup, Denmark
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to section 12(b) of the Act.

    Title of each class                                   Name of each exchange
                                                           on which registered

                                      NONE
--------------------------------------------------------------------------------
Securities registered or to be registered pursuant to section 12(g) of the Act.

Common Shares, par value 10 Danish Kroner per share,*
American Depositary Shares (as evidenced by American Depositary Receipts), each
representing one (1) Common Share.

--------------------------------------------------------------------------------
                                (Title of class)

* Not for trading, but only in connection with the registration of American
Depositary Shares, pursuant to the requirements of the Securities and Exchange
Commission.

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

                                      NONE
--------------------------------------------------------------------------------
                                (Title of class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

36,400,000 common shares, par value 10 Danish Kroner per share.

Indicate by check mark if the registrant is well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                Yes [X]                 No [_]

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

                                Yes [_]                 No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes [X]                 No [_]

Indicate by check mark whether the registrant is a large accelerated filer, and
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

   Large accelerated filer [X]  Accelerated filer [_]  Non-accelerated filer [_]

Indicate by check mark which financial statement item the registrant has elected
to follow.

                                [X]  Item 17            [_]  Item 18


If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

                                Yes [_]                 No [X]

               (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                    PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                Yes [_]                 No [_]

The Company "Aktieselskabet Dampskibsselskabet Torm" is referred to as "TORM" in
this Annual Report.

<PAGE>

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
           AND ADVISERS                                                   1

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE                        1

ITEM 3.    KEY INFORMATION                                                1

ITEM 4.    INFORMATION ON THE COMPANY                                     16

ITEM 4A.   UNRESOLVED STAFF COMMENTS                                      40

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS                   40

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                     64

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY
           TRANSACTIONS. 69

ITEM 8.    FINANCIAL INFORMATION.                                         70

ITEM 9.    THE OFFER AND LISTING.                                         70

ITEM 10.   ADDITIONAL INFORMATION                                         72

ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
           ABOUT MARKET RISK                                              86

ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN
           EQUITY SECURITIES                                              89

ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                89

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF
           SECURITY HOLDERS AND USE OF PROCEEDS.                          89

ITEM 15.   CONTROLS AND PROCEDURES                                        89

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT                               90

ITEM 16B.  CODE OF ETHICS                                                 90

ITEM 16C.  PRINCIPAL ACCOUNTING FEES AND SERVICES                         90

ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR
           AUDIT COMMITTEES                                               91

ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER
           AND AFFILIATED PURCHASES                                       91

ITEM 17.   FINANCIAL STATEMENTS                                           92

ITEM 18.   FINANCIAL STATEMENTS                                           92

ITEM 19.   EXHIBITS                                                       93
<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          Matters  discussed  in  this  report  may  constitute  forward-looking
statements.  The Private Securities  Litigation Reform Act of 1995 provides safe
harbor  protections  for  forward-looking   statements  in  order  to  encourage
companies   to   provide   prospective   information   about   their   business.
Forward-looking  statements  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.

          TORM desires to take  advantage of the safe harbor  provisions  of the
Private  Securities  Litigation  Reform  Act  of  1995  and  is  including  this
cautionary  statement  in  connection  with this safe harbor  legislation.  This
report and any other written or oral  statements made by us or on our behalf may
include forward-looking statements, which reflect our current views with respect
to future events and financial performance.  When used in this report, the words
"anticipate,"  "believe," "expect," "intend," "estimate," "forecast," "project,"
"plan,"   "potential,"  "may,"  "should,"  and  similar   expressions   identify
forward-looking statements.

          The  forward-looking  statements in this report 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 we believe 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,  we cannot  assure you that we will  achieve or  accomplish  these
expectations, beliefs or projections.

          In  addition to these  assumptions  and  matters  discussed  elsewhere
herein and in the documents incorporated by reference herein,  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,  general market conditions,  including fluctuations in
charterhire  rates and vessel values,  changes in demand in the shipping market,
including  the  effect of  changes  in OPEC's  petroleum  production  levels and
worldwide  oil  consumption  and  storage,  changes in  regulatory  requirements
affecting  vessel  operating  including  requirements  for double hull  tankers,
changes in TORM's operating expenses,  including bunker prices,  dry-docking and
insurance costs,  changes in governmental rules and regulations or actions taken
by regulatory authorities, changes in the price of our capital investments, such
as the NORDEN shares,  potential  liability  from pending or future  litigation,
general domestic and international political conditions, potential disruption of
shipping routes due to accidents,  political  events or acts by terrorists,  and
other important  factors  described from time to time in the reports filed by us
with the Securities and Exchange Commission, or the SEC.

ITEM 1.

<PAGE>

                                     PART I

ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

          Not Applicable.

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE

          Not Applicable.

ITEM 3.   KEY INFORMATION

     Please note:  Throughout this report,  the "Company,"  "we," "us" and "our"
all refer to TORM and its subsidiaries.  We use the term deadweight ton, or dwt,
in describing the size of vessels.  Dwt, expressed in metric tons, each of which
is  equivalent  to 1,000  kilograms,  refers to the maximum  weight of cargo and
supplies that a vessel can carry. Unless otherwise indicated,  all references to
"dollars,"  "USD" and "$" in this report are to, and amounts are  presented  in,
U.S. dollars.

A.   Selected Financial Data

     The following table sets forth our selected consolidated financial data for
each of the periods indicated.  The selected consolidated  financial data should
be read in conjunction  with "Operating and Financial  Review and Prospects" and
the consolidated  financial statements and notes thereto, all included elsewhere
within this document.

     Effective  January 1, 2005, we adopted  International  Financial  Reporting
Standards  or IFRS and changed our  reporting  currency  from DKK to USD. We had
previously  presented our financial  statements under Danish GAAP. In accordance
with the Securities and Exchange Commission,  or the SEC, reporting requirements
for first-time  application  of IFRS, in this report we present the  comparative
financial  information  under IFRS only for the fiscal year ended  December  31,
2004.  IFRS differs in certain  respects from United States  generally  accepted
accounting principles,  or U.S. GAAP. The differences between IFRS and U.S. GAAP
as applicable to the historical  financial  statements are summarized in Note 23
to the consolidated financial statements included herein.

     The selected consolidated financial data under U.S. GAAP includes the Liner
activities, which were sold to A.P. M0ller-Maersk A/S on September 16, 2002. The
results of the operations attributable to the Liner activities,  which represent
a  discontinued  operation,  are  presented in two separate  lines in the income
statement after net income from continuing operations. The impact of the sale of
the Liner activities is included herein.


<PAGE>

<TABLE>

                                                               For the year ended December 31

                                               2001           2002        2003              2004           2005
                                               ----           ----        ----              ----           ----
                                                (1)            (1)         (1)          (1)
                                                         (in thousands of USD except for per share information)
<S>                                           <C>              <C>        <C>            <C>          <C>
IFRS financial data


Statement of Operations Data:
Net revenue                                                                               433,320         586,975
Port expenses, bunkers and commissions                                                    (83,769)       (123,138)
                                                                                          --------       ---------
Time charter equivalent earnings                                                          349,551         463,837
Charter hire                                                                              (59,592)        (82,139)
Operating expenses                                                                        (49,791)        (66,744)
Gross profit (Net earnings from shipping                                                  240,168         314,954
activities)
Profit from sale of vessels                                                                     0          54,731
Administrative expenses                                                                   (38,637)        (31,176)
Other operating income                                                                     13,139          12,570
Depreciation and impairment losses                                                        (35,181)        (47,894)
                                                                                          --------        --------
Operating profit                                                                          179,489         303,185
Financial items                                                                            25,839          (3,818)
                                                                                           ------          -------
Profit before tax                                                                         205,328         299,367
Tax expenses                                                                              (18,715)             (4)
                                                                                          --------        --------
Net profit for the year                                                                   186,613         299,363

Balance sheet data (as of end of period):
Total assets (4)                                                                        1,239,562       1,810,138
Non-current liabilities                                                                   406,545         783,648
Shareholders' equity/net assets                                                           715,407         904,651
Common shares                                                                              61,098          61,098
No. of shares outstanding (3) (5)                                                      36,400,000      36,400,000

Other financial data (3)
Dividends declared per share DKK                                                             15.0            23.0
Dividends declared per share USD (6)                                                          2.7             3.6
Earnings per share - basic                                                                    5.4             8.6
Earnings per share - diluted                                                                  5.3             8.6
</TABLE>


<PAGE>

<TABLE>

                                                                              For the year ended December 31

                                                         2001               2002            2003             2004            2005
                                                         ----               ----            ----             ----            ----
                                                          (1)               (1)             (1)              (1)
                                                                        (in thousands of USD except for per share information)
<S>                                                       <C>              <C>           <C>              <C>             <C>
U.S. GAAP financial data (7)
Profit from continuing operations before income           62,248           6,417         51,365           205,337         283,441
taxes and discontinued operations
Tax benefit (expense) on profit                          (19,302)         (4,420)         1,725           (17,683)          4,289
                                                         --------         -------         -----           --------          -----
Profit from continuing operations                         42,946           1,997         53,090           187,654         287,730
Profit from discontinued operations (8)                    2,092           8,849              0                 0               0
                                                           -----           -----              -                 -               -

Net profit before change in accounting                    45,038          10,846         53,090           187,654         287,730
principles (2)
Cumulative effect of change in accounting                                                                                   8,707
principles as at January 1, 2005 (2)
Net profit after change in accounting                                                                                     296,437
principles (2)
Earnings per share - basic:
Profit from continuing operations (3)                        1.2             0.1            1.5               5.4             8.3
Profit from discontinuing operations (3)                     0.1             0.2            0.0               0.0             0.0
Net profit before change in accounting                       1.3             0.3            1.5               5.4             8.3
principles (2)(3)
Cumulative effect of change in accounting                                                                                     0.2
principles as at January 1, 2005 (2)(3)
Net profit after change in accounting                                                                                         8.5
principles (2)(3)
Earnings per share - diluted:
Profit from continued operations (3)                         1.2             0.1            1.5               5.4           8.3
Profit from discontinued operations (3)                      0.1             0.2            0.0               0.0           0.0
Net profit before change in accounting                       1.3             0.3            1.5               5.4           8.3
principles (2) (3)
Cumulative effect of change in accounting                                                                                     0.2
principles as at January 1, 2005 (2)(3)
Net profit after change in accounting                                                                                         8.5
principles (2)(3)
Total assets (4)                                         483,725         562,756        816,646         1,236,317       1,809,639
Non-current liabilities (including capital               180,717         245,046        285,468           406,373         778,786
lease obligations)
Shareholders' equity                                     160,738         168,927        339,738           705,323         891,642
No. of shares outstanding (3)(5)                      36,400,000      36,400,000     36,400,000        36,400,000      36,400,000

</TABLE>

1.   Effective January 1, 2005, we have changed the accounting  policies used in
     preparing our financial statements from Danish GAAP to IFRS and changed our
     reporting  currency from DKK to USD. In  accordance  with the SEC reporting
     requirements for first-time application of IFRS, we present the comparative
     financial  information  only for the fiscal year ended  December  31, 2004.
     Comparative  financial information prepared in accordance with IFRS data is
     not provided for the years ended December 31, 2001 and 2003.

2.   We changed our method of accounting for vessel  drydocking costs under U.S.
     GAAP as of  January 1, 2005.  Please  refer to Note 23 in our  consolidated
     financial  statements included herein and the table presented in footnote 9
     below for further information.

3.   We increased  the share  capital in May 2004 from nominal DKK 182.0 million
     (USD 30.5 million) to nominal DKK 364.0 million (USD 61.1 million)  through
     the issue of 18.2 million bonus shares of DKK 10 (USD 1.7) each.  The bonus
     shares were allotted to our existing  shareholders at the ratio of 1:1. The
     comparative figures are restated to reflect the issue of bonus shares.

4.   Total assets for each period  includes  bonds that serve as collateral  for
     certain of our borrowings. This amount was USD 0 million as of December 31,
     2005,  USD 10 million as of December 31, 2004 for both IFRS and U.S.  GAAP,
     and USD 9 million as of December  31,  2003,  USD 26 million as of December
     31, 2002 and USD 22 million as of December 31, 2001 for U.S. GAAP.

5.   Shares  outstanding as of December 31, 2005 includes  1,558,472 shares that
     we purchased and hold as own shares,  reflected in shareholders' equity. As
     of December 31, 2004 we held 1,566,612 own shares,  as of December 31, 2003
     and December 31, 2002 we held 1,762,736 own shares,  and as of December 31,
     2001 we held 1,742,936 own shares.

6.   Dividends are converted to U.S.  dollars based on the  historical  exchange
     rate for the year in question.

7.   As a  consequence  of the  change  in  reporting  currency  from DKK to USD
     effective as of January 1, 2005,  comparative  U.S. GAAP financial data for
     2001 to 2003 is translated  from DKK into USD for income related data using
     the average USD/DKK  exchange rate for period and for balance sheet related
     data using the USD/DKK exchange rate at the end of such period.

8.   Profit from  discontinued  operations for 2002 includes the gain of USD 7.6
     million on disposal of the Company's Liner activities.

9.   The table below  presents  U.S.  GAAP net income  adjusted for the proforma
     effect of the  change in method of  accounting  for dry dock costs from the
     accrual  method  to  the  deferral  method  as if  the  adopted  method  of
     accounting had been applied during all periods affected.
<TABLE>

     Proforma                                        2001              2002             2003             2004
                                                    -----             -----            -----           ------
                                                        (in millions of USD, except for per share data)
<S>                                                <C>               <C>              <C>             <C>
           Net income as reported                  45,038            10,846           53,090          187,654
           Effect of accounting change                911             1,942               46            1,089
                                                   ------            ------           ------          -------
           Net income                              45,949            12,788           53,136          188,743
                                                   ======            ======           ======          =======
     Per share (basic)
           As reported                                1.3               0.3              1.5              5.4
           Effect of accounting change                0.0               0.1              0.0              0.0
                                                   ------            ------           ------          -------
           Proforma profit                            1.3               0.4              1.5              5.4
                                                   ======            ======           ======          =======
     Per share (diluted)
           As reported                                1.3               0.3              1.5              5.4
           Effect of accounting change                0.0               0.1              0.0              0.0
                                                   ------            ------           ------          -------
           Proforma profit                            1.3               0.4              1.5              5.4
                                                   ======            ======           ======          =======
</TABLE>

EXCHANGE RATE INFORMATION

     The  following  tables  show,  for the five most  recent  financial  years,
certain  information  regarding  the exchange rate between the Danish Kroner and
the U.S.  dollar,  based  on the noon  buying  rate in New York  City for  cable
transfers of DKK as certified for customs  purposes by the Federal  Reserve Bank
of New York,  expressed in DKK per U.S. dollar.  These rates may differ from the
actual  rates used in the  preparation  of our  financial  statements  and other
financial information appearing in this report.

                                        DKK per U.S. dollar
                                        -------------------

                               High       Low      Average (1)    Period End
                              ------     ------    ----------     ----------
Year ended December 31,
2001                          8.8900     7.8260       8.3710        8.3529

2002                          8.6470     7.0850       7.8862        7.0850
2003                          7.1684     5.9150       6.5774        5.9150
2004                          6.3115     5.4596       5.9891        5.4940
2005                          6.3891     5.5161       5.9953        6.2985

------------
(1): The average of the  exchange  rates on the last  business day of each month
     during the relevant period.


                                           DKK per U.S. dollar
                             ---------------------- --- ---------------------
                                     High                       Low
                             ----------------------     ---------------------
Month ended
November 30, 2005                   6.3891                     6.1857
December 31, 2005                   6.3698                     6.1874
January 31, 2006                    6.2284                     6.0714
February 28, 2006                   6.2888                     6.1677
March 31, 2006                      6.2748                     6.1174
April 30, 2006                      6.1710                     5.9076

On April 28,  2006,  the exchange  rate  between the Danish  Kroner and the U.S.
dollar was 5.9076.

B.   Capitalization and Indebtedness

     Not Applicable.

C.   Reason for the Offer and Use of Proceeds

     Not Applicable.

D.   Risk Factors

     Some of the following risks relate  principally to the industry in which we
operate and our  business in general.  Other  risks  relate  principally  to the
securities  market and ownership of our American  Depositary Shares or ADSs. Any
of the  risk  factors  could  materially  and  adversely  affect  our  business,
financial condition or operating results and the trading price of our ADSs.

     Additional  risks  and  uncertainties  that we are not  aware of or that we
currently  believe  are  immaterial  may also  adversely  affect  our  business,
financial condition, liquidity or results of operation.

INDUSTRY SPECIFIC RISK FACTORS

     The product tanker and dry bulk carrier  sectors are cyclical and volatile,
and this may lead to  reductions  and  volatility  in our charter  rates when we
re-charter our vessels, vessel values and results of operations

     The dry bulk carrier and product tanker sectors are cyclical with attendant
volatility  in charter  hire  rates and  industry  profitability.  The degree of
charter hire rate  volatility  among  different  types of dry bulk  carriers and
product  tankers has varied widely.  The charter rates for dry bulk carriers and
especially for product tankers remain near historically high levels. If we enter
into a charter when  charter hire rates are low, our revenues and earnings  will
be adversely affected.  In addition, a decline in charter hire rates likely will
cause the value of our vessels to decline.  We cannot assure you that we will be
able to  successfully  charter our  vessels in the future or renew our  existing
charters at rates  sufficient  to allow us to operate our  business  profitably,
meet our  obligations  or to pay  dividends  to our  shareholders.  The  factors
affecting  the supply and demand for dry bulk  carriers and product  tankers are
outside of our control and are unpredictable.  The nature, timing, direction and
degree of changes in industry conditions are also unpredictable.

     Factors that influence demand for seaborne transportation of cargo include:

     o    demand for and production of dry bulk products,  crude oil and refined
          petroleum products;

     o    the distance cargo is to be moved by sea;

     o    changes in oil production and refining capacity;

     o    global and regional economic and political conditions;

     o    environmental and other regulatory developments; and

     o    changes  in  seaborne  and other  transportation  patterns,  including
          changes  in the  distances  over  which  cargo is  transported  due to
          geographic  changes in where commodities are produced,  oil is refined
          and cargoes are used.

     The factors that influence the supply of vessel capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels;

     o    vessel casualties;

     o    price of steel;

     o    number of vessels that are out of service;

     o    changes  in  environmental  and other  regulations  that may limit the
          useful life of vessels; and

     o    port or canal congestion.

     We anticipate that the future demand for our vessels will be dependent upon
continued economic growth in the world's  economies,  including China and India,
seasonal and regional changes in demand,  changes in the capacity of the world's
dry bulk carrier and product  tanker  fleets and the sources and supply of cargo
to be  transported  by sea.  If the  global  vessel  capacity  increases  in the
shipping  sectors in which we  operate,  but the demand for vessel  capacity  in
these sectors does not increase or increases at a slower rate, the charter rates
paid for our vessels could  materially  decline.  Adverse  economic,  political,
social  or other  developments  could  have a  material  adverse  effect  on our
business,  financial  condition,  results  of  operations  and  ability  to  pay
dividends.

     Because the market value of our vessels may fluctuate significantly, we may
incur losses when we sell vessels, which may adversely affect our earnings

     The fair market value of vessels may increase and decrease depending on but
not limited to the following factors:

     o    general  economic  and  market   conditions   affecting  the  shipping
          industry;

     o    competition from other shipping companies;

     o    types and sizes of vessels;

     o    other modes of transportation;

     o    cost of newbuildings;

     o    shipyard capacity;

     o    governmental or other regulations;

     o    age of vessels;

     o    prevailing level of charter rates; and

     o    technological advances.

     If we sell any of our  tankers or dry bulk  carriers  at a time when vessel
prices have fallen and before an impairment  adjustment is made to our financial
statements,  the sale may be at less than the  vessel's  carrying  amount on our
financial statements, with the result that we shall incur a loss and a reduction
in earnings.

     Our operating results from our fleet are subject to seasonal  fluctuations,
which may adversely affect our operating results

     Our fleet consists of dry bulk carriers and product tankers. We operate our
vessels in markets  that have  historically  exhibited  seasonal  variations  in
demand  and,  as a result,  in charter  rates.  This  seasonality  may result in
quarter-to-quarter  volatility in our operating results.  The dry bulk sector is
typically  stronger in the fall and winter months in  anticipation  of increased
consumption  of coal and other raw materials in the northern  hemisphere  during
the winter months.  As a result,  we expect our revenues to be weaker during the
fiscal quarters ended June 30 and September 30, and,  conversely,  we expect our
revenues to be stronger in fiscal  quarters  ended December 31 and March 31. The
tanker  sector  is  typically   stronger  in  the  fall  and  winter  months  in
anticipation  of  increased  consumption  of oil and  petroleum  products in the
northern hemisphere during the winter months. As a result, our revenues from our
tankers may be weaker during the fiscal quarters ended June 30 and September 30,
and,  conversely,  revenues may be stronger in fiscal quarters ended December 31
and March 31. This seasonality could materially affect our operating results and
cash available for dividends in the future.

     World events could adversely affect our results of operations and financial
condition

     Terrorist attacks such as the attacks on the United States on September 11,
2001,  the bombings in Spain on March 11, 2004 and in London on July 7, 2005 and
the continuing  response of the United States to these  attacks,  as well as the
threat of future terrorist  attacks in the United States or elsewhere,  continue
to cause uncertainty in the world financial markets and may affect our business,
operating results and financial  condition.  The continuing conflict in Iraq may
lead to additional acts of terrorism and armed conflict around the world,  which
may contribute to further economic  instability in the global financial markets.
These  uncertainties  could  also  adversely  affect  our  ability to obtain any
additional financing or, if we are able to obtain additional financing, to do so
on terms favorable to us. In the past, political conflicts have also resulted in
attacks  on  vessels,   mining  of  waterways   and  other  efforts  to  disrupt
international  shipping,  particularly  in the  Arabian  Gulf  region.  Acts  of
terrorism and piracy have also affected  vessels  trading in regions such as the
South China Sea. Any of these  occurrences  could have a material adverse impact
on our business,  financial condition,  results of operations and ability to pay
dividends.

     If we violate  environmental laws or regulations,  the resulting  liability
may significantly and adversely affect our earnings and financial condition

     Our  operations  are subject to  extensive  regulation  designed to promote
tanker  safety,  prevent  cargo and bunker  spills  and  generally  protect  the
environment. Local, national and foreign laws, as well as international treaties
and  conventions,  can subject us to material  liabilities in the event that our
vessels release oil and oil products or other hazardous substances. For example,
the United  States Oil  Pollution  Act of 1990,  or OPA,  provides  that owners,
operators and bareboat  charterers are strictly  liable for the discharge of oil
in U.S. waters,  including the 200 nautical mile zone off each coast of the U.S.
OPA provides for  unlimited  liability in some  circumstances,  such as a vessel
operator's  gross  negligence  or  willful  misconduct  or  failure to report an
incident  or   cooperate   in  oil  removal   activities.   However,   in  other
circumstances, OPA limits liability to the greater of USD 1,200 per gross ton or
USD 10 million per vessel. Under a recently proposed legislation,  OPA liability
limits will be increased,  when such  legislation is enacted,  to the greater of
USD 1,900 per gross ton or USD 16.0 million per tanker.  OPA also permits states
to set their own penalty limits.  Most U.S. states bordering navigable waterways
impose  unlimited   liability  for  discharges  of  oil  in  their  waters.  The
International  Maritime  Organization,  or IMO, has adopted a similar  liability
scheme that may impose strict  liability for oil spills,  subject to limits that
do not apply if the  release  is caused by the  vessel  owner's  intentional  or
reckless conduct.

     U.S.  law,  the  law in  many  of the  nations  in  which  we  operate  and
international treaties and conventions that impact our operations also establish
strict rules  governing  vessel  safety and  structure,  training,  inspections,
financial  assurance for potential  cleanup  liability and other matters.  These
requirements  can limit our ability to operate  our  vessels  and  substantially
increase our operating costs.

     Under OPA, all oil tankers that do not have double hulls will be phased out
by 2015 and will not be  permitted  to come to United  States  ports or trade in
United States waters.  In addition,  OPA specifies  annual  inspections,  vessel
manning,  equipment  and other  construction  requirements  that are in  various
stages of development by the U.S. Coast Guard, or USCG, applicable to new and to
existing vessels.

     In December 2003, the IMO adopted a proposed amendment to the International
Convention  for the  Prevention of Pollution  from Ships to accelerate the phase
out of  single-hull  tankers from 2015 to 2010 unless the  relevant  flag states
extend the date to 2015. Moreover,  the IMO or other regulatory bodies may adopt
further  regulations in the future that could adversely  affect the useful lives
of our tankers as well as our inability to generate income from them.

     These  requirements  can  affect the  resale  value or useful  lives of our
vessels. While all of our tankers are double-hull, we believe that regulation of
the tanker  industry will continue to become more  stringent and more  expensive
for  us  and  for  our   competitors.   Substantial   violations  of  applicable
requirements  or a  catastrophic  release  from one of our vessels  could have a
material  adverse  impact on our financial  condition and results of operations.
Additional laws and regulations may also be adopted that could limit our ability
to do business or increase the cost of our doing  business and that could have a
material   effect  on  our   operations.   Government   regulation  of  tankers,
particularly in the areas of safety and  environmental  impact may change in the
future and require us to incur significant capital expenditure on our vessels to
keep them in compliance.

     Increased  inspection  procedures  and tighter  import and export  controls
could increase costs and disrupt our business

     International   shipping  is  subject  to  various   security  and  customs
inspections  and related  procedures  in  countries  of origin and  destination.
Inspection  procedures  can result in the seizure of  contents  of our  vessels,
delays in the  loading,  offloading  or  delivery  and the  levying of  customs,
duties, fines and other penalties against us.

     It  is  possible  that  changes  to  inspection   procedures  could  impose
additional  financial  and legal  obligations  on us.  Furthermore,  changes  to
inspection  procedures could also impose additional costs and obligations on our
customers  and may, in certain  cases,  render the shipment of certain  types of
cargo impractical.  Any such changes or developments may have a material adverse
effect on our  business,  financial  condition,  results of  operations  and our
ability to pay dividends.

COMPANY SPECIFIC RISK FACTORS

     Servicing  our debt limits  funds  available  for other  purposes and if we
cannot service our debt, we may lose some or all of our vessels

     We must  dedicate  a large  part of our cash flow to paying  principal  and
interest on our  indebtedness.  These payments limit funds available for working
capital,  capital expenditures and other purposes.  Our debt level also makes us
vulnerable to economic downturns and adverse developments in our business. If we
expand our fleet, we will need to take on additional  debt, which would increase
our ratio of debt to equity.  Our  inability  to service debt could also lead to
acceleration of our debt and the foreclosure of all or a portion of our fleet.

     Certain of our loan agreements  contain  restrictive  covenants,  which may
limit our liquidity and corporate activities and prevent proper service of debt,
which could result in the loss of our vessels.

     Some loan agreements  impose operating and financial  restrictions upon us.
These restrictions may limit our ability to:

     o    create liens on our assets;

     o    engage in mergers or acquisitions;

     o    change the management of our vessels or terminate or materially  amend
          the management agreement relating to each vessel; and

     We may need  permission  from our lenders in order for us to engage in some
corporate  actions.  Our lenders'  interests  may be different  from ours and we
cannot  guarantee  that we will be able to obtain our lenders'  permission  when
needed. This may prevent us from taking actions that are in our best interest.

     Our earnings may be adversely affected if we do not successfully employ our
vessels on time charters, in pools or take advantage of the current spot market

     We employ the majority of our vessels on spot voyage charters or short term
time charters.  Our operating  results will  therefore  depend on the prevailing
charter rates in a given time period.  Charter rates are based in part on supply
and demand and are extremely  competitive.  Significant  fluctuations in charter
rates will result in significant  fluctuations in the utilization of our vessels
and our profitability.  Although we charter out some of our vessels on long term
time  charters  when we want to lock in  favorable  charter  rates and  generate
predictable revenue streams, our vessels that are committed to time charters may
not be available  for spot voyages  during an upswing in the shipping  industry,
when spot voyages might be more  profitable.  We are impacted by any increase or
decrease in market rates.  If rates were to decrease  significantly,  we may not
utilize our fleet fully and our earnings could be adversely impacted.

     We may be unable to attract and retain key  management  personnel and other
employees in the bulk and tanker  industries,  which may  negatively  affect the
effectiveness of our management and our results of operations

     Our  management  personnel  make key  decisions to maximize our revenue and
earnings in this highly volatile and cyclical industry. Our success will depend,
in part, on our ability to hire and retain key members of our  management  team.
The  loss of any of  these  individuals  could  adversely  affect  our  business
prospects and financial condition.  Difficulty in hiring and retaining qualified
personnel could adversely  affect our results of operations.  We do not maintain
"key man" life insurance on any of our officers.

     Our vessels may suffer damage and we may face unexpected  dry-dock  repairs
that could affect our cash flow and financial condition

     If our owned  vessels  suffer  damage,  they may need to be  repaired  at a
dry-docking  facility  or  other  type of ship  repair  facility.  The  costs of
dry-dock repairs are  unpredictable  and can be substantial.  We may have to pay
dry-docking  costs that are not covered by our  insurance,  which would decrease
earnings.  Repairs  may involve  long  periods of  inactivity,  which may have a
negative effect on earnings and our ability to service our debt.

     Purchasing  and operating  previously  owned,  or  secondhand,  vessels may
result in increased operating costs and vessels off-hire,  which could adversely
affect our earnings

     We own both vessels  constructed for us directly by builders and previously
owned,  or secondhand,  vessels  purchased  from other owners.  While we inspect
secondhand vessels prior to purchase, this does not normally provide us with the
same knowledge about their  condition and cost of any required (or  anticipated)
repairs that we would have had if these  vessels had been built for and operated
exclusively by us.  Generally,  we do not receive the benefit of warranties from
the builders if we buy vessels older than one year.

     In  general,  the costs to  maintain a vessel in good  operating  condition
increase with the age of the vessel. As of December 31, 2005, our fleet of owned
vessels  included  two tankers and three bulk vessels more than 10 years of age.
Older vessels are typically less fuel  efficient than more recently  constructed
vessels due to improvements in engine and hull  technology.  After vessels reach
15 years of age,  the  majority  of  charterers  and oil  companies  may  impose
restrictions  on vessels  that make it more  difficult to trade the vessels with
optimal  flexibility.  In addition,  these older  vessels must meet certain hull
thickness tests. Furthermore, cargo insurance rates increase for vessels over 15
years of age, making them less desirable to charterers.  We, however, consider a
useful lifetime of 25 years to be the best estimate of the economic  lifetime of
a vessel.

     Governmental  regulations,  safety or other equipment  standards related to
the age of a vessel may require expenditures for alterations, or the addition of
new  equipment,  to our vessels and may restrict the type of activities in which
the vessels may engage.  We cannot assure you that,  as our vessels age,  market
conditions  will  justify  such  expenditures  or  enable  us  to  operate  them
profitably for the remainder of their useful life.

     Risks involved with operating ocean-going vessels could affect our business
and reputation, which would adversely affect our revenues

     The operation of an ocean-going  vessel carries inherent risks. These risks
include the possibility of:

     o    marine disaster;

     o    piracy;

     o    environmental accidents;

     o    cargo and property losses or damage; and

     o    business interruptions caused by mechanical failure, human error, war,
          terrorism,  piracy,  political  action  in  various  countries,  labor
          strikes, or adverse weather conditions.

     Any of these  circumstances or events could increase our costs or lower our
revenues. The involvement of one or more of our vessels in an oil spill or other
environmental  disaster may harm our  reputation  as a safe and reliable  vessel
operator which would adversely affect our revenues.

     We may not have  adequate  insurance to compensate us if one of our vessels
is involved in an accident

     We procure  insurance for our fleet against those risks that we believe the
shipping  industry commonly insures against.  These insurances  include hull and
machinery insurance, protection and indemnity insurance, including environmental
damage  and  pollution  insurance  coverage,  and war risk  insurance.  We carry
insurance  against loss of hire as well.  We can give no  assurance  that we are
adequately  insured  against  all risks.  We may not be able to obtain  adequate
insurance coverage at reasonable rates for our fleet in the future. The insurers
may not pay particular claims.  Our insurance  policies contain  deductibles for
which we will be  responsible,  limitations  and  exclusions,  which although we
believe are standard in the shipping  industry,  may  nevertheless  increase our
costs or lower our revenue.

     Maritime claimants could arrest our vessels, which could interrupt our cash
flow

     Crew  members,  suppliers  of goods and  services to a vessel,  shippers of
cargo and other  parties may be entitled to a maritime  lien against that vessel
for unsatisfied debts,  claims or damages. In many jurisdictions a maritime lien
holder may enforce its lien by  arresting  a vessel and  commencing  foreclosure
proceedings.  The  arrest  or  attachment  of one or more of our  vessels  could
interrupt our cash flow and require us to pay a substantial sum of money to have
the arrest lifted.

     In addition, in some jurisdictions, such as South Africa, under the "sister
ship"  theory of  liability,  a  claimant  may arrest  both the vessel  which is
subject to the claimant's  maritime lien and any "associated"  vessel,  which is
any vessel owned or controlled by the same owner.  Claimants could try to assert
"sister ship"  liability  against one vessel in our fleet for claims relating to
another of our vessels.

     Governments could requisition one or more of our vessels during a period of
war or emergency, resulting in loss of earnings

     A government could requisition for title or seize our vessels.  Requisition
for title  occurs when a  government  takes  control of a vessel and becomes her
owner. Also, a government could requisition one or more of our vessels for hire.
Requisition  for hire occurs  when a  government  takes  control of a vessel and
effectively  becomes  her  charterer  at  dictated  charter  rates.   Generally,
requisitions occur during a period of war or emergency.  Government  requisition
of one or more of our vessels could negatively impact our revenues.

     Our  operations  expose  us to global  risks  that may  interfere  with the
operation of our vessels

     We are an  international  company  and  conduct  our  operations  globally.
Changing economic,  political and governmental conditions in the countries where
we are engaged in business or where our vessels are registered affect us. In the
past, political conflicts, particularly in the Arabian Gulf, resulted in attacks
on vessels,  mining of waterways  and other  efforts to disrupt  shipping in the
area. Acts of terrorism and piracy have also affected vessels trading in regions
such as the  South  China Sea and West  Africa.  Terrorist  attacks  such as the
attacks on the  United  States on  September  11,  2001 and the  United  States'
continuing  response to these attacks, as well as the threat of future terrorist
attacks,  continues  to  cause  uncertainty  in the  world  commercial  markets,
including the energy markets. The recent conflict in Iraq may lead to additional
acts of terrorism,  armed conflict and civil disturbance around the world, which
may  contribute  to further,  instability,  including  in the oil  markets.  The
likelihood of acts of terrorism in the Middle East region and Southeast Asia may
increase as shown by the  attempted  attacks on the Basra Oil  Terminal in April
2004 and the attacks on employees  of Exxon in Yanbu,  Saudi Arabia in early May
2004,  and our  vessels  trading in those  areas may face a higher risk of being
attacked. Future hostilities or other political instability in regions where our
vessels  trade  could  affect  our  trade  patterns  and  adversely  affect  our
operations and performance.

     An  economic  slowdown  in the Asia  Pacific  region  could have a material
adverse effect on our business, financial position and results of operations

     A  significant  number of the port calls made by our vessels  involves,  or
will involve,  the loading or  discharging of raw materials in ports in the Asia
Pacific region.  As a result,  a negative  change in economic  conditions in any
Asia Pacific  country,  but particularly in China, may have an adverse effect on
our  business,  financial  position  and results of  operations,  as well as our
future  prospects.  In recent years,  China has been one of the world's  fastest
growing  economies  in  terms  of  gross  domestic  product,  which  has  had  a
significant  impact on shipping  demand.  We cannot  assure you that such growth
will be  sustained  or that the Chinese  economy  will not  experience  negative
growth in the future.  Moreover,  any  slowdown in the  economies  of the United
States,  the European  Union or certain Asian  countries  may  adversely  effect
economic  growth in China  and  elsewhere.  Our  business,  financial  position,
results of operations, ability to pay dividends as well as our future prospects,
will likely be materially and adversely  affected by an economic downturn in any
of these countries.

     Because we generate nearly all of our revenues in U.S.  dollars,  but incur
some of our  expenses  in Danish  Kroner  and other  currencies,  exchange  rate
fluctuations could hurt our results of operations

     In 2005,  we  generated  nearly all of our  revenues  in U.S.  dollars  but
incurred  approximately  81% of our expenses in U.S dollars and 15% was incurred
in Danish Kroner.  A change in exchange rates could lead to  fluctuations in our
reported net income.

     Interest rate  fluctuations  may  significantly  affect our loan  payments,
which could adversely affect our financial condition

     As of December 31, 2005, all of our loans bore interest at floating  rates.
Increases in prevailing  rates could  increase the amounts that we would have to
pay to our lenders.  As of December 31, 2005,  we had entered into interest swap
agreements  expiring  between  2006 and 2010 for  approximately  61% of the then
outstanding  principal  amounts  of our  loans  that  may  mitigate  some of our
exposure to the risk of rising  interest rates.  However,  increases in interest
rates will increase our payments under loans not covered by caps of the interest
rates of our loans and swap  agreements and may  negatively  affect our earnings
and cash flow.

     Because we are a  non-U.S.  corporation,  you may not have the same  rights
that a creditor of a U.S. corporation may have

     Our investors may have more difficulty in protecting their interests in the
face of actions by the management,  directors or controlling  stockholders  than
would   stockholders   of  a  corporation   incorporated   in  a  United  States
jurisdiction.  In addition, the executive officers and administrative activities
and assets of the Company are located outside the United States. As a result, it
may be more  difficult  for  investors to effect  service of process  within the
United  States upon the  Company,  or to enforce  both in the United  States and
outside the United States judgments against the Company in any action, including
actions predicated upon the civil liability provisions of the federal securities
laws of the United States.

     It may be difficult to serve process on or enforce a United States judgment
against our officers, our directors and us

     We are a Danish  company and our executive  offices are located  outside of
the United  States.  Our officers and directors and some of the experts named in
this  registration  statement reside outside of the United States.  In addition,
substantially  all of our assets and the assets of our  officers,  directors and
experts  are located  outside of the United  States.  As a result,  you may have
difficulty  serving  legal  process  within the United  States upon us or any of
these persons or enforcing any judgments  obtained in U.S.  courts to the extent
assets located in the United States are  insufficient  to satisfy the judgments.
In addition,  there is uncertainty as to whether the courts of Denmark would (1)
enforce  judgments of United States courts  obtained  against us or our officers
and directors  predicated on the civil liability provisions of the United States
federal or state securities  laws, or (2) entertain  original actions brought in
Danish  courts  against us or our officers and  directors  predicated  on United
States federal or state  securities  laws. As a result,  it may be difficult for
you to enforce judgments obtained in United States courts against our directors,
officers and non-U.S. experts.

     There may be no active public market for you to resell our ADSs

     The price of our ADSs may be  volatile,  and may  fluctuate  due to factors
such as:

     o    actual or anticipated fluctuations in our financial results;

     o    mergers and strategic alliances in the shipping industry;

     o    market conditions in the industry;

     o    changes in government regulation;

     o    fluctuations  in our quarterly  revenues and earnings and those of our
          publicly held competitors;

     o    shortfalls in our operating results from levels forecast by securities
          analysts;

     o    announcements concerning us or our competitors; and

     o    the general state of the securities market.

     Historically,  the  shipping  industry  has been highly  unpredictable  and
volatile.  The market for ADSs in the shipping industry may be equally volatile.
The  Copenhagen  Stock  Exchange  is  smaller  and less  liquid  than the  major
securities  exchanges or markets in the United States. The trading volume of our
shares on the Copenhagen  Stock  Exchange has been  volatile.  It may be hard to
predict future trading levels or volatility.  Consequently,  you may not be able
to sell ADSs at the time and at the price you desire.

     Holders  of  ADSs  may  experience  delays  in  receiving  information  and
materials that holders of our common shares may not

     The ADSs are securities  that have been issued by a depositary with whom we
have deposited our common shares. The depositary is responsible for distributing
notices and voting  materials  to holders of the ADSs.  If there is any delay in
such  distributions  on the part of the  depositary,  you may not  receive  such
dividends  or  materials  concurrently  with  holders  of our  common  shares in
Denmark,  and may not receive  such  materials  in time for you to instruct  the
depositary to vote.

     You may receive a smaller  dividend  than what you expected to receive when
the dividend was approved

     Under  Danish  law,  the  board of  directors  proposes  dividends  and the
shareholders  vote whether to accept the proposal or to lower the  dividend.  We
will pay any  dividends in Danish Kroner to our  depository  agent for the ADSs,
and our  depository  agent will  convert  the amounts  into U.S.  dollars at the
relevant  exchange rate and distribute the dividend to you. If the Danish Kroner
depreciates  against the U.S. dollar before our depository agent distributes the
dividend,  you may receive a smaller  dividend than what you expected to receive
at the time the dividend was approved by shareholders.

ITEM 4. INFORMATION ON THE COMPANY

A.   History and Development of the Company

     We are Aktieselskabet  Dampskibsselskabet  Torm, or TORM, a Danish shipping
company founded in 1889 under the Danish Companies Act that is engaged primarily
in the  ownership and operation of product  tankers and bulk  carriers.  We have
also provided liner and offshore marine service vessels, but ceased this service
in September 2002 and December 2003, respectively. Our product tankers primarily
carry refined products such as naphtha,  gasoline, gas oil, jet fuel, and diesel
oil. Our dry bulk vessels carry  commodities  such as coal,  iron ore and grain.
Our vessels  trade  worldwide.  Our  registered  office and  principal  place of
business is at Tuborg  Havnevej 18,  DK-2900  Hellerup,  Denmark.  Our telephone
number is +45 39179200.  All the financial information presented in Item 4 is in
accordance with IFRS.

     We provide transportation  services by utilizing a fleet of vessels that we
own, charter in on short and long term time charters,  or commercially manage as
the manager of a pool or through  contracts with third party owners.  We charter
in tankers and bulk vessels as are needed by the pools we manage.

     Our primary capital expenditures are in connection with the acquisitions of
vessels.  For the past several  years,  we have been  acquiring  new vessels and
disposing  of older  vessels in our fleet to ensure  compliance  with the safety
requirements of the International Maritime Organization,  or the IMO. During the
past three  years,  we have entered  into  contracts  to purchase 33  additional
vessels under construction, or newbuildings, and secondhand vessels, for a total
cost of  approximately  USD 1.2 billion and have sold six vessels for  aggregate
proceeds of approximately USD 139.0 million. As of April 30, 2006, we have taken
delivery of 20 vessels under this investment program and expect to take delivery
of the  remaining  13  vessels,  between  2006 and  2009,  representing  a total
investment of approximately USD 500.0 million.

B.   Business Overview

THE FLEET

     As of December 31, 2005, our fleet of owned vessels consisted of 27 product
tankers  and ten dry bulk  carriers.  The  total  tonnage  of those  vessels  is
approximately  2,186,829 dwt. In addition,  we chartered six product tankers and
seven drybulk  carriers and  commercially  managed  approximately 43 vessels for
third party owners and charterers.

     For an overview of our fleet please refer to Item 4D and for details of our
investment activities please refer to Item 5A.

     Our product tanker division is engaged in the transportation of refined oil
products  such as  gasoline,  jet fuel,  naphtha and gas oil. We own and operate
three  sizes of product  carriers.  The largest  vessels are Aframax  tankers of
approximately  100,000 to 105,000 dwt, that primarily  transport naphtha between
the Arabian Gulf and Japan and other East Asiatic countries. The other two sizes
of product tankers, Panamax, which are tankers of approximately 80,000 to 85,000
dwt,  and  Handymax,  which are tankers of  approximately  40,000 to 50,000 dwt,
operate in the above  mentioned  areas and in the U.S.,  Africa,  Europe and the
Caribbean. One of these vessels is owned in joint venture with a partner.

     Our dry bulk vessels  transport  products such as grain, coal and iron ore.
We operate dry bulk vessels of two sizes: Panamax and Handysize. The Panamax dry
bulk vessels, which range between 60,000 and 80,000 dwt, carry iron ore and coal
as well as commodities such as grain, bauxite and fertilizer.  The Handysize dry
bulk  vessels  are  approximately  20,000 to 30,000  dwt and are fitted to carry
logs, but can also carry commodities such as grain, fertilizer and steel.

     In 1997, we diversified  into the operation of  anchor-handling  tug/supply
vessels and other similar  offshore  craft that service oil rigs but ceased this
activity in December 2003.

     Each of our vessel  categories  generates  gross profits (net earnings from
shipping activities) by operating owned and chartered in vessels.  Gross profits
(net  earnings  from  shipping  activities)  generated  by the Liner  service is
included in the item "Profit  before tax from  discontinued  operations"  in the
Income  Statement.  Over the last three financial years the  contribution to net
earnings from shipping activities per division has been as follows:

Division                                       2004                   2005
--------                                       ----                   ----
Product Tankers                                 56%                    67%
Dry Bulk Vessels                                44%                    33%

     Please refer to Item 5A for a  description  of revenue and gross profit per
division.

PRODUCT TANKER POOLING ARRANGEMENTS

     We employ all of our owned and chartered  product  tankers in three pooling
arrangements,  the LR2 Pool,  the LR1 Pool and the MR Pool,  along with  vessels
from  several  other  shipping  companies.  The  manager  of each  pool  has the
responsibility  for the  commercial  management  of the  participating  vessels,
including the marketing, chartering, operation and bunker (fuel oil) purchase of
the vessels.  Each pool is administered  by a pool board,  which is comprised of
representatives  of each  pool  participant.  The  pool  boards  set the  pools'
policies and issue directives to the pool managers. The pool participants remain
responsible for all other costs including the financing,  insurance, manning and
technical  management of their  vessels.  The earnings of all of the vessels are
aggregated and divided according to the relative performance capabilities of the
vessel and the actual  earning  days each vessel is  available.  Please refer to
Note 2 to our  consolidated  financial  statements  contained herein for further
details relating to the treatment of income from pools.

The LR2 Pool

     As of December 31, 2005,  the LR2 Pool was comprised of 20 Aframax  tankers
that are all double-hull and mainly trade clean  petroleum  products.  We formed
LR2 Management A/S, a Danish corporation,  to serve as the commercial manager of
the LR2 Pool.  During 2004, the role of commercial  manager was transferred to a
limited partnership:  LR 2 Management K/S. LR2 Management A/S, which was renamed
Long Range 2 A/S, is the general partner of the  partnership.  We own 50% of all
issued and outstanding voting stock of Long Range 2 A/S and a 50% interest in LR
2 Management K/S. Maersk Tankers, one of the pool participants,  also owns a 50%
interest in both  entities.  The other  participants  in this pool are  Primorsk
Shipping  Corporation,  Reederei  "Nord" Klaus E.  Oldendorff Ltd. and Rederi AB
Gotland.  Three  of our  owned  vessels  and  two of our  chartered  in  vessels
participated  in this pool. In 2005, we have  exercised  options to purchase the
two  charted-in  vessels  which were  delivered in January 2006 and added to the
pool. We have also contracted to add our 7 newbuildings and another  newbuilding
in  which we have a 50%  interest  to the pool  between  2006 and 2009  when the
vessels are delivered  from the  shipbuilding  yard.  The LR2 pool has also time
chartered  in one  vessel,  the  charter of which is  expected to end in January
2006.  If a  participant  wants to sell one of its vessels in the pool,  it must
give notice to the pool board two months in advance of such sale, and six months
notice is required  for a  participant  to withdraw  all of its vessels from the
pool.  No such  notice has been given from any partner  from  January 1, 2005 to
April 30, 2006.

The LR1 Pool

     As of December 31, 2005, the LR1 Pool consisted of 31 Panamax tankers,  and
we serve as the sole manager of the pool.  The other  participants  in this pool
are Difko, Marinvest Shipping AB, Waterfront Shipping AS, Mitsui OSK Lines Ltd.,
Reederei  "Nord" Klaus E.  Oldendorff  Ltd.,  Great Basic Limited,  Great Global
(Asia) Limited, Prime Marine Corporation Inc. and Rederiaktiebolaget Gotland. As
of December 31, 2005,  nine of our owned and chartered  vessels  participated in
this pool,  and we had  contracted  to add one  newbuilding  vessel and  another
newbuilding  in which we have a 50%  interest  to the pool in 2006 and 2007 when
the vessels are delivered from the shipbuilding  yard. If a participant wants to
sell one of its  vessels  or  withdraw  all of them from the pool,  it must give
three  months  advance  notice to the pool board.  No such notice has been given
from any partner from January 1, 2005 to April 30, 2006.

The MR Pool

     The MR Pool is a pooling  arrangement  we have  entered  into  with  Prisco
Singapore  Pte Ltd. and Sanmar  Shipping for the pooling of 23 Handymax  product
tankers as of December 31, 2005. We serve as the sole manager of the MR Pool. As
of  December  31,  2005,  17 of our  vessels  participated  in this  pool.  If a
participant wants to sell one of its vessels in the pool, it must give notice to
the pool board three  months in advance of such sale,  and six months  notice is
required for a participant to withdraw all of its vessels from the pool. No such
notice has been given from any partner from January 1, 2005 to April 30, 2006.

DRY BULK VESSEL OPERATION

     We operate  both Panamax and  Handysize  vessels in our Bulk  Division.  We
operate our Panamax vessels  ourselves while our Handysize  vessels are operated
through our  participation in the IHC Pool.  Similar to the pooling  arrangement
for our product tankers,  the earnings from the Handysize vessels are aggregated
and divided according to the relative performance capabilities of the vessel and
the actual earning days per vessel.  The pool is  administered  by a pool board,
which is comprised of representatives  of each pool participant.  The pool board
sets the pools'  policies and issues  directives to the pool  manager.  The pool
participants  remain  responsible  for the  financing,  insurance,  manning  and
technical management of their individually owned vessels.

Handysize Pool

     We established a pool called the International  Handybulk Carriers,  or IHC
Pool,  on October 1, 2001,  together  with Pacific  Basin  Shipping  Investments
Limited and Wah Kwong Shipping  Holdings  Limited.  The IHC Pool is comprised of
approximately  50 vessels as at  December  31,  2005.  Pacific  Basin  serves as
commercial  manager for the pool.  We have entered two of our owned vessels into
the pool, TORM Arawa and TORM Pacific.  In April 2006, we sold these two vessels
for  expected  delivery  in  the  second  quarter  of  2006and  will  no  longer
participate in the IHC Pool.

OUR INVESTMENT IN DAMPSKIBSSELSKABET NORDEN A/S ("NORDEN")

     In the  summer  of 2002,  TORM  acquired  a share  holding  in  NORDEN  and
subsequently  launched a public offer on the  Copenhagen  Stock Exchange for the
remainder  of  NORDEN's  shares.  After the  offer,  TORM owned  727,803  shares
representing  33% - excluding  NORDEN's  own shares - acquired at a price of DKK
361 per share for a total  investment of DKK 263 million.  In 2005 we acquired a
small  portion of  additional  shares so that as of December 31,  2005,  we were
NORDEN's single largest  shareholder with 34.8% of NORDEN's  outstanding shares,
excluding own shares.

     NORDEN,  founded in 1871, is a Danish based shipping  company listed on the
Copenhagen Stock Exchange. NORDEN's focus is on tankers and bulk carriers. As of
December 31, 2005,  NORDEN operated  approximately  124 vessels through a mix of
owned and chartered tonnage.

     Despite the fact that the goal of acquiring NORDEN - to create one shipping
company  combining  TORM's  tanker  activities  with  NORDEN's  strength in bulk
markets - was not realized in 2002, we nonetheless  retained the shareholding in
NORDEN.  This was done not only with the aim of making a merger  possible in the
longer term, but also in view of the investment potential.

     In the autumn of 2004, two of NORDEN's shareholders decided to sell a total
of 20% of the  shares  in  NORDEN  to  Rasmussengruppen  AS.  At the  same  time
Rasmussengruppen  reached an agreement with A/S Motortramp,  which owns 25.7% of
the share  capital,  whereby the two  parties  have  granted  one another  first
refusal  on each  other's  shares  in  NORDEN,  and at the same  time  committed
themselves not to sell their shares to a third party for a period of two years.

THE INDUSTRY - TANKERS

     The international product tanker industry provides seaborne  transportation
of refined petroleum products for the oil market. According to industry sources,
tankers  transported  refined oil products  corresponding to  approximately  710
million tons  annually in the fourth  quarter of 2005 showing a 5.7% increase as
compared to fourth quarter 2004. For 2005 as a whole,  industry sources estimate
that  products  trade  increased  by 5%.  The two main types of  operators  that
provide transportation services in the tanker market are:

     o    major oil companies; and

     o    independent ship owners.

     They provide transportation services for end users such as:

     o    oil companies;

     o    oil traders;

     o    petrochemical companies;

     o    government agencies; and

     o    power plants.

     According  to industry  sources,  the world  tanker  fleet above 10,000 dwt
consists of approximately  3,322 vessels totaling 328 million dwt or 6.8% higher
as of January 1, 2006 as  compared to the year  before.  Oil  companies  own, or
control through long-term time charters,  approximately one third of the current
world  tanker  capacity.  Independent  ship  owners own or control the other two
thirds.  Oil  companies  use their  fleets not only to  transport  their own oil
products,  but also to compete with the independent ship owners to transport oil
products for others.

     We believe the quality of tanker  vessels and  operations has improved over
the past several  years,  as charterers  and  regulators  increasingly  focus on
safety and protection of the environment. National authorities and international
conventions have historically regulated the oil transportation  industry.  Since
1990,  the emphasis on  environmental  protection  has  increased.  Legislation,
regulations and regulatory organizations such as the OPA, the IMO, protocols and
classification  society procedures demand  higher-quality  tanker  construction,
maintenance,  repair and  operations.  Charterers  of all types,  including  oil
companies,  terminal operators, shippers and receivers are becoming increasingly
selective in their  acceptance  of tankers and are  inspecting  and vetting both
vessels and companies on a periodic  basis.  As these changes have imposed costs
and potential liabilities on tanker owners and operators,  they have also raised
barriers to entry and favored  ship owners with quality  fleets and  operations.
Limitations  imposed by port states and the IMO on trading of older  single-hull
vessels should  accelerate the commercial  obsolescence  of older,  poor-quality
tankers.

     The  industry  identifies  tankers as either  product  tankers or crude oil
tankers on the basis of various factors including  technical  specifications and
trading  histories.  Crude oil  tankers  carry crude oil and  so-called  "dirty"
products such as fuel oils.  Product  tankers carry refined  petroleum  products
such as  gasoline,  jet fuel,  kerosene,  naphtha  and gas oil,  which are often
referred to as "clean" products.

     Product tankers are tankers that typically have cargo handling systems that
are designed to transport  several  different  refined products  simultaneously,
such as gasoline,  jet fuel, kerosene,  naphtha and heating oil, from refineries
to the ultimate consumer. Product tankers generally have coated cargo tanks that
make it easier to clean the tanks between voyages involving  different  cargoes.
This  coating  also  protects  the steel in the tanks  from  corrosive  cargoes.
Product tankers generally range in size from 10,000 dwt to 110,000 dwt.

     Although  product  tankers  are  designed  to carry  dirty as well as clean
products, they generally do not switch between clean and dirty cargoes. A vessel
carrying  dirty cargo must  undergo a cleaning  process  prior to loading  clean
cargo  and many  charterers  want to  eliminate  any risk of  contamination.  In
addition,  specified design,  outfitting and technical factors tend to make some
vessels better suited to handling the physical properties of distinct cargoes.

     Our vessels primarily transport clean products. Our product tankers are all
double-hull  and range in size from 44,000 dwt to 105,000 dwt. They compete with
tankers of similar  size and  quality.  The rates that we are able to obtain for
our vessels are subject to the supply and demand dynamics described below.

Supply and Demand for Tankers

     The supply of, and demand for, tanker capacity  strongly  influences tanker
charter  rates  and  vessel  values  for all  tankers.  Supply  and  demand  has
historically caused fluctuations in tanker charter rates and secondhand values.

     Demand for oil  tankers  is related to the demand for oil and oil  products
and the distance between points of production and points of consumption.  Demand
for refined petroleum products is, in turn, affected by, among other things:

     o    general economic conditions,  which include increases and decreases in
          industrial production and transportation;

     o    oil prices;

     o    environmental issues or concerns;

     o    climate;

     o    competition from alternative energy sources; and

     o    regulatory environment.

     The  supply of tanker  capacity  is a  function  of the  number of  tankers
delivered to the fleet relative to the number of tankers  permanently taken from
service when they become  technically or economically  obsolete.  Currently,  it
takes approximately 36 to 48 months from the time a building contract is entered
into before a newbuilding is delivered.  The average age of tankers removed from
service  currently ranges between 21 and 25 years.  Other factors  affecting the
supply of tankers include:

     o    the number of combined carriers, or vessels capable of carrying oil or
          dry bulk cargoes, carrying oil cargoes;

     o    the number of newbuildings on order and being delivered;

     o    the number of tankers in lay-up,  which  refers to vessels that are in
          storage,  dry-docked,  awaiting  repairs or otherwise not available or
          out of commission; and

     o    the  number  of  tankers  scrapped  for  obsolescence  or  subject  to
          casualties;

     o    prevailing and expected future charter hire rates;

     o    costs of bunkers, fuel oil, and other operating costs;

     o    the efficiency  and age of the world tanker fleet;

     o    current shipyard capacity; and

     o    government   and  industry   regulation  of  maritime   transportation
          practices, particularly environmental protection laws and regulations.

     Environmental  laws and  regulations  are imposing  requirements on vessels
when they  reach 25 years of age that  reduce the amount of cargo they can carry
or require that the vessel be configured in a different way. These  requirements
tend to  impose  costs on those  older  vessels  and make  operating  them  less
economical.

THE INDUSTRY - DRY BULK FLEET

Overview

     The dry bulk  carrier  industry is highly  fragmented  with many owners and
operators of vessels, including proprietary owners who are large shippers of dry
bulk cargo, state-controlled shipping companies and independent operators.

     Dry bulk cargo consists of the major bulk commodities, which are coal, iron
ore and grain and the minor  bulk  commodities  which  include  steel  products,
forest  products,   agricultural  products,  bauxite  and  alumina,  phosphates,
petcoke,  cement,  sugar,  salt,  minerals,  scrap metal and pig iron.  Dry bulk
carriers are generally single deck ships,  which transport unpacked cargo, which
is poured, tipped or placed through hatchways into the hold of the ships.

     Historically,  charter rates for dry bulk carriers have been  influenced by
the demand for, and the supply of, vessel tonnage. The demand for vessel tonnage
is  largely a  function  of the level of  worldwide  economic  activity  and the
distance  between major trade areas.  Supply is primarily  driven by the size of
the  existing  worldwide  dry bulk  carrier  fleet,  scrapping  and  newbuilding
activity. Charter rates and vessel values are determined in a highly competitive
global market and have been characterized by fluctuations since the mid-1980s.

Vessel Types

     Vessels  utilized  in the  carriage  of major bulk  cargoes  are  generally
classified into three categories, based on carrying capacity:

     o    Handysize dry bulk carriers (20,000 to 30,000 dwt). Unlike most larger
          dry bulk carriers, Handysize dry bulk carriers are equipped with cargo
          gear  such  as  cranes.  This  type  of  vessel  is  well  suited  for
          transporting both major and minor bulk commodities to ports around the
          world that may have draft  restrictions  or are not equipped with gear
          for loading or discharging of cargo.

     o    Panamax dry bulk  carriers  (60,000 to 80,000  dwt).  Panamax dry bulk
          carriers are designed  with the maximum  width,  length and draft that
          will allow them to  transit  fully  laden  through  the Panama  Canal.
          Panamax  vessels are  primarily  used in the  transport of major bulks
          such as grain and coal,  along with some minor  bulks like  phosphate,
          petcoke and salt.

     o    Capesize dry bulk carriers  (100,000 dwt or above).  Capesize dry bulk
          carriers  primarily transit from the Atlantic to the Pacific Ocean via
          Cape Horn or the Cape of Good Hope, hence their name. Capesize vessels
          are typically used for long voyages in the coal and iron ore trades.

     In addition to the three  standard  vessel  types,  the world bulk  carrier
fleet also includes  combination  carriers.  These vessels are typically  large,
capable of carrying  either  crude oil or dry bulk cargoes and compete with both
Capesize and Panamax bulk carriers.  The role of  combination  carriers has been
decreasing  since 1990 because such vessels,  which were not built primarily for
the dry cargo  market  but rather  for the oil  tanker  market,  have come to be
considered less desirable by charterers of oil tankers, since their oil carrying
capacity may be limited and they are not strictly  specialized  for the carriage
of oil.

     Set forth below are some of the  characteristics  of the principal  cargoes
carried by dry bulk carriers.

     o    Coal.  The two  categories  comprising  this  segment  are  steam  (or
          thermal)  coal,  which  is used by power  utilities,  and  coking  (or
          metallurgical)  coal,  which  is used by  steelmakers.  Steam  coal is
          primarily  transported  from  Australia,  South  Africa and the United
          States to Europe and Japan. Coking coal is primarily  transported from
          Australia, the United States and Canada to Europe and Japan.

     o    Iron Ore. Iron ore is primarily  transported from Brazil and Australia
          to China,  Europe and Japan.  The  majority of iron ore  shipments  is
          carried by Capesize dry bulk carriers.

     o    Grain.  The grain trade  includes  wheat,  wheat flour,  coarse grains
          (corn and  barley),  soybeans  and soybean  meal.  Although the annual
          volume of the grain trade is subject to political  factors and weather
          conditions,  shipments have remained  relatively  stable over the past
          five years.  Grain is primarily  transported  from the United  States,
          Canada, Europe, Australia and Argentina to the Far East, Latin America
          and Africa.  Handymax and Panamax vessels carry  approximately  90% of
          the international  seaborne bulktrade while Capesize vessels transport
          the remainder.

     Our dry bulk vessels transport cargoes such as grain, coal and iron ore. We
operate both  Handysize and Panamax dry bulk vessels.  Most of the coal and iron
ore we transport are carried on our Panamax vessels, while both types of vessels
carry grain and fertilizer. The rates that we can achieve for our vessels depend
on the supply and demand dynamics described below.

Demand for Dry Bulk Vessels

     Due to the variety of cargo carried by dry bulk  carriers,  demand for such
vessels  is  dependent  on a number of  factors,  including  world and  regional
economic and political conditions,  developments in international trade, changes
in seaborne and other transportation  patterns,  weather patterns,  crop yields,
armed conflicts, port congestion,  canal closures and other diversions of trade.
Generally,  since larger  ships carry fewer types of cargoes,  demand for larger
vessels is affected by trade patterns in a small number of  commodities.  Demand
for smaller  vessels is more  diversified and is determined by trade in a larger
number of commodities. As a result, charter rates for smaller dry bulk carriers,
such as Handysize dry bulk  carriers,  have tended to be relatively  more stable
than charter rates for larger dry bulk carriers.

Supply of Dry Bulk Carriers

     The size of the  world's  dry bulk  carrier  fleet  changes  as a result of
newbuildings  and  scrapping  or loss  of  vessels.  The  general  trend  in the
development  of the bulk market has always been  closely  linked to the state of
the world economy. The economic downturn in Asia in the late 1990's led to sharp
falls in cargo volumes, and therefore rates, whereas the subsequent recovery has
likewise  acted to  boost  the  sector  with  rates  recovering  to above  those
prevailing  prior to the crisis.  In 2003 and 2004 the dry bulk  market  reached
historically high levels and the charter rates, although volatile, have remained
relatively  high compared to the previous  years due,  among other,  to a strong
demand  from  China  for iron  ore,  coupled  with a low  level  of  newbuilding
deliveries and a low global newbuilding order book in the bulk market. The level
of expected newbuildings in the dry bulk sector in the forthcoming years remains
at a  relatively  low level due to the  preference  by the major  shipyards  for
building  container  and  tanker  vessels  that in recent  years  have been more
profitable to the shipyards.

CHARTERING OF THE FLEET

     Vessels can be chartered by customers in a variety of ways.

     The spot market  provides the most frequent  source of  employment  for our
vessels.  In the spot market, the charterer hires the vessel to carry cargo on a
specific  voyage.  The owner  provides  the crew and bears all vessel  operating
costs and voyage costs, including fuel and port costs.

     A charterer and owner can also enter into a time charter for a vessel. Time
charters involve a charterer hiring a vessel for a fixed period, which may range
from a short  number of days to several  years.  Typical  time  charters are for
periods  of  between  six to 36  months.  In a time  charter,  the  owner  bears
operating  costs,  while the  charterer  is  responsible  for the voyage  costs,
including fuel oil.

     A demise  charter,  also  referred to as a bareboat  charter,  involves the
chartering  of a  vessel  for a fixed  period  of time.  However,  unlike a time
charter, a bareboat charter requires the user to pay for all operating expenses,
maintenance of the vessel and voyage costs.

     All of our tanker vessels and Handysize dry bulk vessels  operate in pools.
Within each pool, a vessel may be time  chartered out by the pool  manager,  but
the  charterhire  is divided  among all of the vessels in the pool and therefore
does not  provide  us with the  steady  income  normally  associated  with  time
charters.  Each pool  manager  will  determine  the number of vessels to be time
chartered depending on charterhire rates and pool board strategy. Vessels in our
pools that are not time chartered  generally trade in the spot market.  However,
the pools do enter into contracts of  affreightment,  which provide a guaranteed
fixed income over a period of time.

MANAGEMENT OF THE FLEET

     We  provide  the  operations,   chartering,   technical  support,  shipyard
supervision,  insurance and financing  management  services necessary to support
our fleet. Our chartering staff, as well as our fleet's management personnel, is
mainly  located in our head office in Copenhagen and in our office in Singapore.
Our  staff  makes   recommendations  to  our  senior  management  regarding  the
chartering of our vessels,  as well as identifying when  opportunities  arise to
buy or sell a vessel. We also have offices in Manila, Hamburg and Tokyo, but all
decisions  relating to the vessels we manage are made or approved in our offices
in Copenhagen and Singapore.

SEASONALITY

     The  demand  for  product  tankers  and  bulk  carriers  has   historically
fluctuated  depending  on the  time of  year.  Demand  for  product  tankers  is
influenced by many factors,  including  general economic  conditions,  but it is
primarily  related to demand for  petroleum  products  in the areas of  greatest
consumption.  Accordingly, demand for product tankers generally rises during the
winter  months and falls during the summer  months in the  Northern  hemisphere.
Demand for bulk carriers is not as volatile as that for tankers, but demand does
generally  increase  in the spring  months in North  America as demand for grain
increases and generally  falls back during the winter  months.  More  consistent
commodities  such as coal,  however,  provide some  stability to the bulk vessel
trade.  Moreover,  these are generalized trading patterns that vary from year to
year and there is no  guarantee  that  similar  patterns  will  continue  in the
future.

ENVIRONMENTAL AND OTHER REGULATIONS

     Government regulation  significantly affects the ownership and operation of
our  vessels.  The  various  types of  governmental  regulation  that affect our
vessels include international  conventions,  national,  state and local laws and
regulations  in force in the countries in which our vessels may operate or where
our vessels are  registered.  We cannot  predict the ultimate  cost of complying
with these requirements, or the impact of these requirements on the resale value
or useful  lives of our vessels.  Various  governmental  and  quasi-governmental
agencies  require  us to  obtain  permits,  licenses  and  certificates  for the
operation  of our  vessels.  Although we believe  that we are  substantially  in
compliance  with  applicable  environmental  and  regulatory  laws  and have all
permits,  licenses and certificates necessary for the conduct of our operations,
future  non-compliance  or failure to maintain  necessary  permits or  approvals
could require us to incur substantial costs or temporarily  suspend operation of
one or more of our vessels.

     We believe  that the  heightened  environmental  and  quality  concerns  of
insurance  underwriters,  regulators  and  charterers  are  leading  to  greater
inspection  and  safety  requirements  on all  vessels  and may  accelerate  the
scrapping of older vessels  throughout  the industry.  Increasing  environmental
concerns  have  created a demand for modern  vessels that are able to conform to
the stricter environmental  standards.  We maintain high operating standards for
all of our vessels  that  emphasize  operational  safety,  quality  maintenance,
continuous  training of our crews and  officers  and  compliance  with U.S.  and
international and other national regulations.

     Our vessels are subject to both scheduled and unscheduled  inspections by a
variety of  governmental  and  private  entities,  each of which may have unique
requirements. These entities include the local port authorities such as the U.S.
Coast Guard, harbor master or equivalent,  classification  societies, flag state
administration  or country of registry,  and charterers,  particularly  terminal
operators and major oil companies which conduct frequent vessel inspections.

     International Maritime Organization

     The International Maritime Organization,  or IMO (the United Nations agency
for  maritime  safety and the  prevention  of marine  pollution  by ships),  has
adopted the International Convention for the Prevention of Marine Pollution from
Ships,  1973,  as modified by the Protocol of 1978 relating  thereto,  which has
been updated through various amendments,  or the "MARPOL Convention.  The MARPOL
Convention relates to environmental standards including oil leakage or spilling,
garbage  management,  as well as the handling  and disposal of noxious  liquids,
harmful substances in packaged forms,  sewage and air emissions.  In March 1992,
the IMO adopted  regulations  that set forth pollution  prevention  requirements
applicable to tankers,  which became effective in July 1993. These  regulations,
which have been adopted by over 150 nations, including many of the jurisdictions
in which our tankers  operate,  provide for,  among other  things,  phase-out of
single hull tankers and more stringent inspection  requirements;  including,  in
part, that:

     o    tankers   between  25  and  30  years  old  must  be  of  double  hull
          construction or of a mid-deck design with  double-sided  construction,
          unless: (1) they have wing tanks or double-bottom  spaces not used for
          the  carriage  of oil,  which  cover at least 30% of the length of the
          cargo tank  section of the hull or bottom;  or (2) they are capable of
          hydrostatically  balanced loading (loading less cargo into a tanker so
          that in the  event of a  breach  of the  hull,  water  flows  into the
          tanker, displacing oil upwards instead of into the sea);

     o    tankers 30 years old or older must be of double hull  construction  or
          mid-deck design with double sided construction; and

     o    all tankers are subject to enhanced inspections.

     Also, under IMO regulations,  a tanker must be of double hull  construction
or a mid-deck design with  double-sided  construction or be of another  approved
design  ensuring  the same level of  protection  against  oil  pollution  if the
tanker:

     o    is the  subject  of a  contract  for a major  conversion  or  original
          construction on or after July 6, 1993;

     o    commences a major  conversion or has its keel laid on or after January
          6, 1994; or

     o    completes a major conversion or is a newbuilding delivered on or after
          July 6, 1996.

     In April 2001, the IMO accelerated its existing timetable for the phase-out
of single hull oil tankers  which  became  effective in  September  2002.  These
regulations  require  the  phase-out  of most single hull oil tankers by 2015 or
earlier,  depending  on the age of the  tanker  and  whether  it has  segregated
ballast tanks.  Under the regulations,  the flag state  administration may allow
for some newer  single  hull ships  registered  in its country  that  conform to
certain  technical   specifications   to  continue   operating  until  the  25th
anniversary of their delivery.  Any port state, however, may deny entry of those
single hull tankers that are allowed to operate until their 25th  anniversary to
ports or offshore terminals.

     However, as a result of the oil spill in November 2002 relating to the loss
of the m.t.  Prestige,  which was owned by a company not affiliated  with us, in
December  2003,  the Marine  Environmental  Protection  Committee of the IMO, or
MEPC,  adopted an amendment to a MARPOL  Convention,  which became  effective in
April 2005. The amendment  revised an existing  regulation 13G  accelerating the
phase-out  of single hull oil tankers  and adopted a new  regulation  13H on the
prevention  of oil  pollution  from oil tankers when  carrying  heavy grade oil.
Under the revised  regulation,  single  hull oil  tankers  must be phased out no
later than April 5, 2005 or the  anniversary of the date of delivery of the ship
on the date or in the year specified in the following table:

Category of Oil Tankers                         Date or Year
-----------------------                         ------------

Category 1 oil tankers of 20,000 dwt and        April 5, 2005 for ships
above  carrying  crude  oil,  fuel  oil,        delivered on April 5, 1982 or
heavy diesel oil or  lubricating  oil as        earlier; or
cargo,  and  of  30,000  dwt  and  above        2005  for  ships delivered after
carrying other oils, which do not comply        April 5, 1982
with the  requirements  for protectively
located segregated ballast tanks

Category  2 - oil  tankers of 20,000 dwt        April 5, 2005 for ships
and above  carrying crude oil, fuel oil,        delivered on April 5, 1977 or
heavy diesel oil or  lubricating  oil as        earlier
cargo,  and  of  30,000  dwt  and  above        2005 for ships delivered after
carrying  other  oils,  which do  comply        April 5, 1977 but before
with the protectively located segregated        January 1, 1978
ballast tank requirements                       2006 for ships delivered in 1978
                                                and 1979
and                                             2007 for ships delivered in
                                                1980 and 1981
Category  3 - oil  tankers  of 5,000 dwt        2008 for ships delivered in 1982
and  above  but less  than  the  tonnage        2009 for ships delivered in 1983
specified for Category 1 and 2 tankers.         2010 for ships delivered in 1984
                                                or later

     Under the revised regulations,  the flag state administration may allow for
some newer  single hull oil tankers  registered  in its country  that conform to
certain technical  specifications to continue operating until the earlier of the
anniversary  of the  date  of  delivery  of  the  vessel  in  2015  or the  25th
anniversary of their delivery.  Any port state, however, may deny entry of those
single hull oil tankers  that are allowed to operate  until the earlier of their
anniversary  date of  delivery  in 2015 or their  25th  anniversary  to ports or
offshore terminals.

     The MEPC, in October 2004,  adopted a unified  interpretation to regulation
13G that  clarified  the date of deliver for tankers  that have been  converted.
Under the  interpretation,  where an oil tanker has undergone a major conversion
that has resulted in the  replacement  of the  fore-body,  including  the entire
cargo carrying section,  the major conversion  completion date of the oil tanker
shall be deemed to be the date of delivery of the ship, provided that:

     o    the oil tanker conversion was completed before July 6, 1996;

     o    the  conversion  included the  replacement of the entire cargo section
          and fore-body and the tanker complies with all the relevant provisions
          of MARPOL Convention applicable at the date of completion of the major
          conversion; and

     o    the  original  delivery  date  of  the  oil  tanker  will  apply  when
          considering  the 15  years  of age  threshold  relating  to the  first
          technical  specifications  survey to be completed in  accordance  with
          MARPOL Convention.

     In December  2003,  the MEPC adopted a new regulation 13H on the prevention
of oil pollution from oil tankers when carrying heavy grade oil, or HGO. The new
regulation  bans the carriage of HGO in single hull oil tankers of 5,000 dwt and
above after  April 5, 2005,  and in single hull oil tankers of 600 dwt and above
but less than 5,000 dwt,  no later than the  anniversary  of their  delivery  in
2008.

     Under regulation 13H, HGO means any of the following:

     o    crude oils having a density at 15(0)C higher than 900 kg/m3;

     o    fuel oils having  either a density at 15(0)C higher than 900 kg/ m3 or
          a kinematic viscosity at 50(0)C higher than 180 mm2/s;

     o    bitumen, tar and their emulsions.

     Under the regulation 13H, the flag state administration may allow continued
operation  of oil  tankers  of 5,000 dwt and  above,  carrying  crude oil with a
density at 15(0)C  higher than 900 kg/m3 but lower than 945 kg/m3,  that conform
to  certain   technical   specifications   and,  in  the  opinion  of  the  such
administration, the ship is fit to continue such operation, having regard to the
size, age,  operational area and structural  conditions of the ship and provided
that the  continued  operation  shall not go  beyond  the date on which the ship
reaches 25 years after the date of its delivery.  The flag state  administration
may also allow  continued  operation  of a single hull oil tanker of 600 dwt and
above but less than 5,000 dwt,  carrying HGO as cargo, if, in the opinion of the
such administration,  the ship is fit to continue such operation,  having regard
to the  size,  age,  operational  area and  structural  conditions  of the ship,
provided  that the  operation  shall  not go  beyond  the date on which the ship
reaches 25 years after the date of its delivery.

     The flag state  administration may also exempt an oil tanker of 600 dwt and
above carrying HGO as cargo if the ship is either engaged in voyages exclusively
within an area under the its jurisdiction,  or is engaged in voyages exclusively
within an area under the  jurisdiction  of  another  party,  provided  the party
within whose jurisdiction the ship will be operating agrees. The same applies to
vessels operating as floating storage units of HGO.

     Any port state, however, can deny entry of single hull tankers carrying HGO
which have been allowed to continue  operation  under the  exemptions  mentioned
above,  into the ports or offshore  terminals  under its  jurisdiction,  or deny
ship-to-ship transfer of HGO in areas under its jurisdiction except when this is
necessary  for the  purpose of  securing  the safety of a ship or saving life at
sea.

     The IMO has also negotiated international conventions that impose liability
for oil pollution in international waters and a signatory's  territorial waters.
In September 1997, the IMO adopted Annex VI to the International  Convention for
the  Prevention  of Pollution  from Ships to address air  pollution  from ships.
Annex VI was  ratified in May 2004 and became  effective  in May 2005.  Annex VI
sets limits on sulfur oxide and nitrogen oxide  emissions from ship exhausts and
prohibits   deliberate  emissions  of  ozone  depleting   substances,   such  as
chlorofluorocarbons.  Annex VI also includes a global cap on the sulfur  content
of fuel oil and allows for special areas to be  established  with more stringent
controls on sulfur  emissions.  Compliance with these  regulations could require
the installation of expensive emission control systems and could have an adverse
financial impact on the operation of our vessels. Additional or new conventions,
laws and regulations  may be adopted that could adversely  affect our ability to
manage our ships.

     The operation of our vessels is also affected by the requirements set forth
in the IMO's  Management  Code for the Safe  Operation  of Ships  and  Pollution
Prevention,  or ISM  Code.  The ISM Code  requires  the party  with  operational
control  of a vessel to develop  an  extensive  safety  management  system  that
includes,  among  other  things,  the  adoption  of a safety  and  environmental
protection  policy setting forth  instructions  and procedures for operating its
vessels safely and describing  procedures for responding to emergencies.  We are
certified as an approved ship manager under the ISM Code.

     The ISM Code  requires  that vessel  operators  obtain a safety  management
certificate for each vessel they operate.  This certificate evidences compliance
by a vessel's  management with code requirements for a safety management system.
No vessel  can  obtain a  certificate  unless  its  manager  has been  awarded a
document  of  compliance,   issued  by  each  flag  state  or  by  an  appointed
classification  society,  under the ISM Code.  All of our vessels have  obtained
safety management certificates.

     Noncompliance  with the ISM Code and other IMO  regulations may subject the
ship owner or a bareboat charterer to increased liability, may lead to decreases
in  available  insurance  coverage  for  affected  vessels and may result in the
denial of access to, or detention in, some ports.  Both the U.S. Coast Guard and
EU authorities  have indicated that vessels not in compliance  with the ISM Code
will be prohibited  from trading in U.S. and European  Union ports,  as the case
may be.

     Many  countries  have  ratified and  currently  follow the  liability  plan
adopted  by the  IMO  and  set  out in the  International  Convention  on  Civil
Liability for Oil Pollution Damage of 1969, or the 1969  Convention.  Under this
convention,  and depending on whether the country in which the damage results is
a party to the 1992 Protocol to the International  Convention on Civil Liability
for Oil Pollution  Damage,  a vessel's  registered  owner is strictly liable for
pollution  damage caused in the  territorial  waters of a  contracting  state by
discharge of persistent  oil,  subject to certain  complete  defenses.  Under an
amendment that became effective in November 2003 for vessels of 5,000 to 140,000
gross  tons (a unit of  measurement  for the  total  enclosed  spaces  within  a
vessel),   liability   is  limited  to   approximately   USD  6.5  million  plus
approximately  USD 913 for each additional  gross ton over 5,000. For vessels of
over  140,000  gross  tons,  liability  is  limited to  approximately  USD 129.9
million.  As the  1969  Convention  calculates  liability  in  terms  of  basket
currencies,  these  figures  are based on currency  exchange  rates on March 20,
2006. Under the 1969 Convention, the right to limit liability is forfeited where
the spill is caused by the owner's  actual  fault;  under the 1992  Protocol,  a
shipowner  cannot  limit  liability  where the  spill is  caused by the  owner's
intentional  or reckless  conduct.  Vessels  trading in  jurisdictions  that are
parties to these  conventions  must provide  evidence of insurance  covering the
liability of the owner. In jurisdictions  where the 1969 Convention has not been
adopted,  including the United States, various legislative schemes or common law
govern,  and  liability  is imposed  either on the basis of fault or in a manner
similar  to that  convention.  We  believe  that our  protection  and  indemnity
insurance will cover the liability under the plan adopted by the IMO.

     The United States Oil Pollution Act of 1990

     The  United  States  Oil  Pollution  Act of 1990,  or OPA,  established  an
extensive  regulatory and liability regime for the protection and cleanup of the
environment from oil spills.  OPA affects all owners and operators whose vessels
trade in the United States,  its  territories  and  possessions or whose vessels
operate in United States waters,  which includes the United States'  territorial
sea and its two hundred nautical mile exclusive  economic zone.  Although OPA is
primarily directed at oil tankers and product tankers,  it applies to discharges
by non-tanker ships,  including dry bulk carriers, of fuel oil, or bunkers, used
to power such vessels.

     Under  OPA,   vessel   owners,   operators  and  bareboat   charterers  are
"responsible parties" and are jointly, severally and strictly liable (unless the
spill results solely from the act or omission of a third party, an act of God or
an act of war) for all  containment and clean-up costs and other damages arising
from  discharges or threatened  discharges of oil from their vessels,  including
bunkers. OPA defines these other damages broadly to include:

     o    natural resources damages and the costs of assessment thereof;

     o    real and personal property damages;

     o    net loss of taxes, royalties, rents, fees and other lost revenues;

     o    lost  profits or  impairment  of earning  capacity  due to property or
          natural resources damage; and

     o    net cost of public services necessitated by a spill response,  such as
          protection  from  fire,   safety  or  health  hazards,   and  loss  of
          subsistence use of natural resources.

     Title VII of the Coast Guard and Maritime  Transportation  Act of 2004,  or
the CGMTA, recently amended OPA to require the owner or operator of any non-tank
vessel of 400 gross  tons or more,  that  carries  oil of any kind as a fuel for
main propulsion,  including  bunkers,  to prepare and submit a response plan for
each  vessel on or before  August 8, 2005.  Previous  law was limited to vessels
that carry oil in bulk as cargo.  The vessel  response  plans  include  detailed
information  on actions to be taken by vessel  personnel  to prevent or mitigate
any discharge or  substantial  threat of such a discharge of ore from the vessel
due to operational activities or casualties.

     OPA limits the liability of  responsible  parties to the greater of USD 600
per gross ton or USD 0.5  million  per dry bulk  carrier  that is over 300 gross
tons (subject to possible  adjustment  for  inflation) and to the greater of USD
1,200 per gross ton or USD 10.0 million per tanker that is over 3,000 gross tons
per discharge (subject to possible  adjustment for inflation).  Under a recently
proposed  legislation,  OPA  liability  limits  will  be  increased,  when  such
legislation  is  enacted,  to the  greater  of USD 950 per  gross ton or USD 0.8
million per dry bulk  carrier  that is over 300 gross tons  (subject to possible
adjustment  for  inflation) and to the greater of USD 1,900 per gross ton or USD
16.0 million per tanker that is over 3,000 gross tons per discharge  (subject to
possible adjustment for inflation). These limits of liability do not apply if an
incident was directly  caused by violation of applicable  United States  federal
safety,  construction or operating regulations or by a responsible party's gross
negligence or willful  misconduct,  or if the responsible party fails or refuses
to report the incident or to cooperate and assist in connection with oil removal
activities. In addition, the Comprehensive Environmental Response,  Compensation
and  Liability  Act, or CERCLA,  which  applies to the  discharge  of  hazardous
substances  (other  than  oil)  whether  on land or at sea,  contains  a similar
liability regime and provides for cleanup, removal and natural resource damages.
Liability under CERCLA is limited to the greater of USD 300 per gross ton or USD
5.0 million for vessels not carrying  hazardous  substances as cargo or residue,
unless the  incident is caused by gross  negligence,  willful  misconduct,  or a
violation  of certain  regulations,  in which case  liability is  unlimited.  We
believe  that  we are  in  substantial  compliance  with  OPA,  CERCLA  and  all
applicable state regulations in the ports where our tankers call.

     OPA requires owners and operators of vessels to establish and maintain with
the U.S. Coast Guard evidence of financial responsibility sufficient to meet the
limit of their  potential  strict  liability under OPA. The U.S. Coast Guard has
enacted regulations requiring evidence of financial responsibility in the amount
of USD 1,500 per gross ton for tankers, coupling the OPA limitation on liability
of USD 1,200 per gross ton with the CERCLA  liability limit of USD 300 per gross
ton. We expect that if the recently proposed  legislation  increasing  liability
limitations  is enacted,  the U.S.  Coast Guard will  increase the amount of the
financial  responsibility  accordingly.  Under  the  regulations,   evidence  of
financial  responsibility  may  be  demonstrated  by  insurance,   surety  bond,
self-insurance or guaranty. Under OPA regulations,  an owner or operator of more
than  one  tanker  will  be  required  to  demonstrate   evidence  of  financial
responsibility  for the entire  fleet in an amount  equal only to the  financial
responsibility  requirement of the tanker having the greatest maximum  liability
under  OPA and  CERCLA.  We have  provided  requisite  guarantees  and  received
certificates of financial  responsibility  from the U.S. Coast Guard for each of
our vessels required to have one.

     We insure each of our vessels  with  pollution  liability  insurance in the
maximum  commercially  available  amount  of USD  1.0  billion  per  vessel  per
incident. A catastrophic spill could exceed the insurance coverage available, in
which event there could be a material adverse effect on our business.

     Under OPA, with certain  limited  exceptions,  all newly built or converted
tankers  operating  in U.S.  waters  must be built with  double-hulls.  Existing
vessels that do not comply with the double-hull  requirement  must be phased out
over a  20-year  period,  from  1995 to 2015,  based on size,  age and  place of
discharge,  unless retrofitted with double-hulls.  Notwithstanding the phase-out
period, OPA currently permits existing  single-hull tankers to operate until the
year 2015 if their operations within U.S. waters are limited to:

     o    discharging  at the  Louisiana  Offshore  Oil Port,  also known as the
          LOOP; or

     o    unloading with the aid of another vessel, a process referred to in the
          industry as lightering,  within authorized  lightering zones more than
          60 miles off-shore.

     Owners or  operators of tankers  operating  in the waters of the U.S.  must
file vessel  response  plans with the U.S.  Coast Guard,  and their  tankers are
required to operate in compliance  with their U.S. Coast Guard  approved  plans.
These response plans must, among other things:

     o    address a "worst  case"  scenario  and  identify  and ensure,  through
          contract  or other  approved  means,  the  availability  of  necessary
          private response resources to respond to a "worst case discharge";

     o    describe crew training and drills; and

     o    identify a  qualified  individual  with full  authority  to  implement
          cleanup actions.

     We have obtained vessel response plans approved by the U.S. Coast Guard for
our vessels  operating in U.S.  waters.  In addition,  the U.S.  Coast Guard has
announced it intends to propose  similar  regulations  requiring  certain tanker
vessels to prepare response plans for the release of hazardous substances.

     Additional U.S. Environmental Requirements

     The U.S.  Clean Air Act of 1970, as amended by the Clean Air Act Amendments
of 1977 and 1990, or the CAA, requires the U.S. Environmental Protection Agency,
or EPA, to  promulgate  standards  applicable  to emissions of volatile  organic
compounds and other air  contaminants.  Our vessels are subject to vapor control
and  recovery   requirements  for  certain  cargoes  when  loading,   unloading,
ballasting,  cleaning and conducting  other  operations in regulated port areas.
Our vessels  that  operate in such port areas are  equipped  with vapor  control
systems that satisfy these  requirements.  The CAA also requires states to draft
State  Implementation  Plans, or SIPs, designed to attain national  health-based
air quality standards in primarily major  metropolitan  and/or industrial areas.
Several SIPs  regulate  emissions  resulting  from vessel  loading and unloading
operations  by  requiring  the  installation  of  vapor  control  equipment.  As
indicated  above,  our  vessels  operating  in covered  port  areas are  already
equipped with vapor control systems that satisfy these requirements.  Although a
risk exists that new regulations could require significant capital  expenditures
and otherwise increase our costs, we believe, based on the regulations that have
been  proposed  to date,  that no material  capital  expenditures  beyond  those
currently  contemplated  and no  material  increase  in costs  are  likely to be
required.

     The  Clean  Water  Act,  or the  CWA,  prohibits  the  discharge  of oil or
hazardous  substances into navigable  waters and imposes strict liability in the
form of  penalties  for  any  unauthorized  discharges.  The  CWA  also  imposes
substantial liability for the costs of removal,  remediation and damages.  State
laws for the control of water pollution also provide varying civil, criminal and
administrative  penalties  in the case of a discharge  of petroleum or hazardous
materials into state waters.  The CWA complements  the remedies  available under
the more recent OPA and CERCLA,  discussed above.  Under current  regulations of
the EPA,  vessels are not  required to obtain CWA permits for the  discharge  of
ballast water in U.S. ports. However, as a result of a recent U.S. federal court
decision,  vessel owners and operators may be required to obtain CWA permits for
the discharge of ballast  water,  or they will face  penalties for failing to do
so. Although the EPA is likely to appeal this decision,  we do not know how this
matter  is  likely  to be  resolved  and we  cannot  assure  you that any  costs
associated with compliance with the CWA's  permitting  requirements  will not be
material to our results of operations.

     The National Invasive Species Act, or NISA, was enacted in 1996 in response
to growing  reports of harmful  organisms being released into U.S. ports through
ballast  water taken on by ships in foreign  ports.  NISA  established a ballast
water management program for ships entering U.S. waters.  Under NISA,  mid-ocean
ballast  water  exchange  is  voluntary,  except for ships  heading to the Great
Lakes,  Hudson Bay, or vessels  engaged in the foreign  export of Alaskan  North
Slope crude oil. However,  NISA's exporting and record-keeping  requirements are
mandatory for vessels bound for any port in the United States.  Although ballast
water  exchange is the primary  means of compliance  with the act's  guidelines,
compliance  can also be achieved  through the retention of ballast water onboard
the  ship,  or the  use  of  environmentally  sound  alternative  ballast  water
management  methods  approved by the U.S. Coast Guard. If the mid-ocean  ballast
exchange is made mandatory  throughout the United States,  or if water treatment
requirements or options are instituted,  the costs of compliance  could increase
for ocean carriers.

     Our  operations  occasionally  generate  and  require  the  transportation,
treatment  and  disposal of both  hazardous  and  non-hazardous  wastes that are
subject to the requirements of the U.S. Resource  Conservation and Recovery Act,
or RCRA, or comparable state, local or foreign requirements.  In addition,  from
time to time we  arrange  for the  disposal  of  hazardous  waste  or  hazardous
substances at offsite  disposal  facilities.  If such  materials are  improperly
disposed of by third parties,  we might still be liable for clean up costs under
applicable laws.

     Several of our vessels currently carry cargoes to U.S. waters regularly and
we  believe  that all of our  vessels  are  suitable  to meet OPA and other U.S.
environmental  requirements  and that  they  would  also  qualify  for  trade if
chartered to serve U.S. ports.

     European Union Tanker Restrictions

     In July 2003, in response to the m.t.  Prestige oil spill in November 2002,
the European  Union  adopted  regulation  that  accelerates  the IMO single hull
tanker  phase-out  timetable.  Under the  regulation no oil tanker is allowed to
operate  under  the  flag of a EU  member  state,  nor  shall  any  oil  tanker,
irrespective  of its flag, be allowed to enter into ports or offshore  terminals
under the jurisdiction of a EU member state after the anniversary of the date of
delivery of the ship in the year specified in the following  table,  unless such
tanker is a double hull oil tanker:

Category of Oil Tankers                         Date or Year
-----------------------                         ------------

Category 1 oil tankers of 20,000 dwt and        2003 for ships delivered in 1980
above  carrying  crude  oil,  fuel  oil,        or earlier
heavy diesel oil or  lubricating  oil as
cargo,  and  of  30,000  dwt  and  above        2004 for ships delivered in 1981
carrying other oils, which do not comply
with the  requirements  for protectively        2005 for ships delivered in 1982
located segregated ballast tanks                or later

Category  2 - oil  tankers of 20,000 dwt        2003 for ships delivered in
and above  carrying crude oil, fuel oil,        1975 or earlier
heavy diesel oil or  lubricating  oil as
cargo,  and  of  30,000  dwt  and  above        2004 for ships delivered in
carrying  other  oils,  which do  comply        1976
with the protectively located segregated
ballast tank requirements                       2005 for ships delivered in
                                                1977
and
                                                2006 for ships delivered in
Category  3 - oil  tankers  of 5,000 dwt        1978 and 1979
and  above  but less  than  the  tonnage
specified for Category 1 and 2 tankers.         2007 for ships delivered in
                                                1980 and 1981

                                                2008 for ships delivered in
                                                1982

                                                2009 for ships delivered in
                                                1983

                                                2010 for ships delivered in
                                                1984 or later

     Furthermore,  under the  regulation,  all oil  tankers of 5,000 dwt or less
must comply with the double hull requirements no later than the anniversary date
of delivery of the ship in the year 2008. The regulation, however, provides that
oil tankers operated  exclusively in ports and inland navigation may be exempted
from the double hull  requirement  provided that they are duly  certified  under
inland water legislation.

     The European  Union,  following the lead of certain  European Union nations
such as Italy and Spain,  as of October  2003,  has also  banned all single hull
tankers of 600 dwt and above carrying HGO,  regardless of flag, from entering or
leaving  its  ports or  offshore  terminals  or  anchoring  in areas  under  its
jurisdiction.  Commencing in 2005, certain single hull tankers above 15 years of
age will also be  restricted  from entering or leaving  European  Union ports or
offshore terminals and anchoring in areas under European Union jurisdiction.

     The European  Union is also  considering  legislation  that would:  (1) ban
manifestly  sub-standard  vessels  (defined as those over 15 years old that have
been  detained by port  authorities  at least twice in a six-month  period) from
European  waters  and create an  obligation  of port  states to inspect  vessels
posing a high risk to maritime safety or the marine  environment and (2) provide
the  European  Union with  greater  authority  and control  over  classification
societies,  including  the ability to seek to suspend or revoke the authority of
negligent societies.  It is impossible to predict what legislation or additional
regulations,  if any,  may be  promulgated  by the  European  Union or any other
country or authority.

VESSEL SECURITY REGULATIONS

     Since the  terrorist  attacks  of  September  11,  2001,  there have been a
variety of  initiatives  intended to enhance  vessel  security.  On November 25,
2002,  the  Maritime  Transportation  Security Act of 2002,  or MTSA,  came into
effect.  To implement certain portions of the MTSA, in July 2003, the U.S. Coast
Guard  issued  regulations  requiring  the  implementation  of certain  security
requirements  aboard vessels  operating in waters subject to the jurisdiction of
the United States.  Similarly, in December 2002, amendments to the International
Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the
convention  dealing  specifically with maritime  security.  The new chapter came
into effect in July 2004 and imposes various  detailed  security  obligations on
vessels and port  authorities,  most of which are contained in the newly created
International  Ship and Port Facilities  Security Code, or ISPS Code.  Among the
various requirements are:

     o    on-board  installation of automatic  information  systems,  or AIS, to
          enhance vessel-to-vessel and vessel-to-shore communications;

     o    on-board installation of ship security alert systems;

     o    the development of vessel security plans; and

     o    compliance with flag state security certification requirements.

     The U.S.  Coast Guard  regulations,  intended  to align with  international
maritime security standards,  exempt non-U.S.  vessels from MTSA vessel security
measures provided such vessels have on board a valid International Ship Security
Certificate  that  attests  to  the  vessel's  compliance  with  SOLAS  security
requirements  and the  ISPS  Code.  We have  implemented  the  various  security
measures addressed by the MTSA, SOLAS and the ISPS Code.

INSPECTION BY CLASSIFICATION SOCIETIES

     Every seagoing vessel must be "classed" by a  classification  society.  The
classification  society certifies that the vessel is "in class," signifying that
the vessel has been built and  maintained  in  accordance  with the rules of the
classification society and complies with applicable rules and regulations of the
vessel's  country of registry and the  international  conventions  of which that
country is a member.  In addition,  where surveys are required by  international
conventions  and  corresponding  laws  and  ordinances  of  a  flag  state,  the
classification  society will undertake them on application or by official order,
acting on behalf of the authorities concerned.

     The  classification  society also  undertakes  on request other surveys and
checks that are  required by  regulations  and  requirements  of the flag state.
These surveys are subject to agreements  made between the vessels' class and the
flag state concerned.

     For maintenance of the class,  regular and  extraordinary  surveys of hull,
machinery, including the electrical plant, and any special equipment classed are
required to be performed as follows:

     Annual Surveys:  For seagoing  ships,  annual surveys are conducted for the
hull and the machinery, including the electrical plant, and where applicable for
special  equipment  classed,  at  intervals  of  12  months  from  the  date  of
commencement of the class period indicated in the certificate.

     Intermediate   Surveys:   Extended   annual  surveys  are  referred  to  as
intermediate  surveys and typically  are conducted two and one-half  years after
commissioning and each class renewal. Intermediate surveys may be carried out on
the occasion of the second or third annual survey.

     Class  Renewal  Surveys:  Class  renewal  surveys,  also  known as  special
surveys,  are  carried  out  for  the  ship's  hull,  machinery,  including  the
electrical  plant,  and for any  special  equipment  classed,  at the  intervals
indicated  by the  character  of  classification  for the hull.  At the  special
survey, the vessel is thoroughly examined,  including audio-gauging to determine
the thickness of the steel structures.  Should the thickness be found to be less
than class  requirements,  the  classification  society  would  prescribe  steel
renewals.  The  classification  society  may grant a one-year  grace  period for
completion of the special  survey.  Substantial  amounts of money may have to be
spent for steel  renewals  to pass a special  survey if the  vessel  experiences
excessive wear and tear. In lieu of the special survey every four or five years,
depending on whether a grace period was granted,  a shipowner  has the option of
arranging with the classification  society for the vessel's hull or machinery to
be on a  continuous  survey  cycle,  in which every part of the vessel  would be
surveyed within a five-year cycle.

     At an owner's  application,  the surveys  required for class renewal may be
split according to an agreed schedule to extend over the entire period of class.
This process is referred to as continuous class renewal.

     All areas  subject to survey as defined by the  classification  society are
required to be surveyed at least once per class period, unless shorter intervals
between  surveys are  prescribed  elsewhere.  The period  between two subsequent
surveys of each area must not exceed five years.

     Most vessels are also  dry-docked  every 30 to 36 months for  inspection of
the underwater parts and for repairs related to inspections.  If any defects are
found, the  classification  surveyor will issue a condition of class, known as a
"recommendation" which must be rectified by the shipowner within prescribed time
limits.

     Most insurance underwriters make it a condition for insurance coverage that
a vessel be  certified  as "in class" by a  classification  society,  which is a
member of the  International  Association of Classification  Societies.  All our
vessels  are  certified  as being "in class" by Lloyd's  Register  or Det Norske
Veritas. All new and secondhand vessels that we purchase must be certified prior
to their delivery under our standard  contracts and memorandum of agreement.  If
the vessel is not  certified on the date of closing,  we have no  obligation  to
take delivery of the vessel.

RISK OF LOSS AND LIABILITY INSURANCE

General

     The  operation  of any  cargo  vessel  includes  risks  such as  mechanical
failure, structural damage to the vessel, collision, personal injuries, property
loss,  cargo  loss  or  damage  and  business   interruption  due  to  political
circumstances in foreign countries,  hostilities and labor strikes. In addition,
there is always an inherent possibility of marine disaster, including oil spills
and other  environmental  mishaps,  and the liabilities  arising from owning and
operating vessels in international trade. OPA, which imposes virtually unlimited
liability upon owners,  operators and demise charterers of any vessel trading in
the United States exclusive economic zone for certain oil pollution accidents in
the United States,  has made liability  insurance more expensive for ship owners
and operators  trading in the U.S.  market.  We carry insurance  against loss of
hire, which protects against  business  interruption  following a loss under our
hull and  machinery  policy.  This  policy  does not  protect  us from  business
interruptions  caused by any other  losses.  While we believe  that our  present
insurance coverage is adequate,  not all risks can be insured,  and there can be
no  guarantee  that any specific  claim will be paid,  or that we will always be
able to obtain adequate insurance coverage at reasonable rates.

Hull and Machinery Insurance

     We have obtained  marine hull and machinery and war risk  insurance,  which
include  damage to a vessel's  hull and  machinery,  collisions  and the risk of
actual or constructive total loss, for all of our vessels.  The vessels are each
covered up to at least fair market value. Under regular  circumstances,  salvage
and towing expenses are covered in connection with casualties.  We also arranged
increased  value and freight  interests  coverage  for each  vessel.  Under this
coverage,  in the event of total loss or total constructive loss of a vessel, we
will be able to recover for amounts not recoverable under the hull and machinery
policy.

Protection and Indemnity Insurance

     Protection  and Indemnity  insurance is provided by mutual  protection  and
indemnity  associations,  or P&I  Associations,  which  cover  our  third  party
liabilities in connection with our shipping activities  including other expenses
and claims in  connection  with  injury or death of crew,  passengers  and other
third parties,  loss or damage to cargo,  damage to other third-party  property,
pollution arising from oil or other substances, wreck removal and related costs.
Protection  and  indemnity  insurance is a form of mutual  indemnity  insurance,
extended by protection and indemnity mutual associations, or "clubs." Subject to
the "capping" discussed below, our coverage, except for pollution, is unlimited.

     Our current  protection and indemnity  insurance  coverage for pollution is
USD 1 billion  per vessel per  incident.  The  thirteen  P&I  Associations  that
comprise the International  Group insure more than 90% of the world's commercial
tonnage and have entered into a pooling agreement to reinsure each association's
liabilities.  Each P&I  Association  has capped  its  exposure  to this  pooling
agreement at USD 4.25 billion.  As a member of two P&I  Associations,  which are
members of the  International  Group,  we are  subject  to calls  payable to the
associations  based on its claim  records  as well as the claim  records  of all
other  members of the  individual  associations,  and members of the pool of P&I
Associations comprising the International Group.

COMPETITION

     We operate in markets that are highly  competitive  and based  primarily on
supply  and  demand.  We  compete  for  charters  on the basis of price,  vessel
location, size, age and condition of the vessel, as well as on our reputation as
an  operator.  We conclude  our time  charters  and voyage  charters in the spot
market  through the use of brokers,  through whom we negotiate  the terms of the
charters based on market  conditions and experience.  We compete  primarily with
owners of tankers in the Handymax, Panamax and Aframax class sizes in our tanker
division.  Ownership of tankers is highly  fragmented and is divided among major
oil companies and independent  tanker owners. Our bulk vessels also compete with
other vessels of the same type and size.

LEGAL PROCEEDINGS

     We are party,  as  plaintiff  or  defendant,  to a variety of lawsuits  for
damages arising  principally from personal injury and property  casualty claims.
Most claims are  covered by  insurance,  subject to  customary  deductibles.  We
believe that these claims will not,  either  individually  or in the  aggregate,
have a material  adverse  effect on us, our  financial  condition  or results of
operations.  From  time  to  time  in the  future  we may be  subject  to  legal
proceedings and claims in the ordinary course of business,  principally personal
injury,  property casualty claims and contract disputes.  Those claims,  even if
lacking merit,  could result in the  expenditure  of  significant  financial and
managerial resources. We have not been involved in any legal proceedings,  which
may have, or have had a significant effect on our financial position, nor are we
aware of any  proceedings  that  are  pending  or  threatened  which  may have a
significant  effect on our  financial  position,  results of  operations or cash
flows.

C.   Organizational Structure

     The following table set forth our  significant  entities as of December 31,
2005.

Entity                                    Activities
------                                    ----------

A/S Dampskibsselskabet TORM               This is the parent company. The
                                          company owned 22 product tankers
                                          and four bulk carriers. This
                                          company employs most of the
                                          employees providing commercial and
                                          technical management for TORM
                                          vessels and pool vessels.


Torm Singapore (Pte) Ltd.                 100% owned subsidiary. The company
                                          owned five product tankers and six
                                          bulk carrier. The company also
                                          provides some commercial and
                                          technical management.

LR2 Management K/S                        50% owned limited partnership.
                                          Maersk Tankers owns the other 50%.
                                          The partnership acts as pool
                                          manager for The LR2 pool.

LR1 Management K/S                        100% owned limited partnership. The
                                          partnership acts as pool manager
                                          for the LR1 pool.

MR Management K/S                         100% owned limited partnership. The
                                          partnership acts as pool manager
                                          for the MR pool.

     During 2004, we  restructured  the activities of the Group with the primary
aim of  transferring  ownership  of vessels from  single-vessel  entities to A/S
Dampskibsselskabet TORM and Torm Singapore (Pte) Ltd thereby reducing the number
of significant entities.

D.   Property, Plant and Equipment

Real Property

     We do not  own  any  real  property  other  than  three  small  residential
properties.  We lease  office  space in  Copenhagen  and  Singapore on contracts
expiring in 2014 and 2008, respectively,  and we have leased eight apartments in
Singapore on contracts  expiring up until December 2007. Please refer to item 5F
for further disclosures relating to our contractual obligations.

Fleet

     The following  table lists our entire fleet of owned vessels as of December
31, 2005:

Product Tankers       Year Built     Dwt         Ownership           Flag (1)
---------------       ----------     ---         ---------           --------
TORM Ingeborg            2003        99,999      D/S TORM            NIS
TORM Valborg             2003        99,999      D/S TORM            NIS
TORM Helene              1997        99,999      D/S TORM            DIS
TORM Signe               2005        72,718      Torm Singapore      Singapore
TORM Sofia               2005        72,718      Torm Singapore      Singapore
TORM Estrid              2004        74,999      D/S TORM            DIS
TORM Ismini              2004        74,999      D/S TORM            DIS
TORM Emilie              2004        74,999      D/S TORM            NIS
TORM Sara                2003        72,718      Torm Singapore      Singapore
TORM Helvig              2005        44,990      D/S TORM            DIS
TORM Ragnhild            2005        44,990      D/S TORM            DIS
TORM Freya               2003        45,990      D/S TORM            DIS
TORM Thyra               2003        45,990      D/S TORM            DIS
TORM Camilla             2003        44,990      D/S TORM            DIS
TORM Carina              2003        44,990      D/S TORM            DIS
TORM Mary                2002        45,990      D/S TORM            DIS
TORM Vita                2002        45,940      D/S TORM            DIS
TORM Gertrud             2002        45,940      D/S TORM            DIS
TORM Gerd                2002        45,940      D/S TORM            DIS
TORM Caroline            2002        44,946      D/S TORM            DIS
TORM Cecilie             2001        44,946      D/S TORM            NIS
TORM Clara               2000        45,999      D/S TORM            DIS
TORM Agnete              1999        47,165      Torm Singapore      Singapore
TORM Gunhild             1999        44,999      D/S TORM            DIS
TORM Anne                1999        44,990      Torm Singapore      Singapore
TORM Gotland             1995        44,999      D/S TORM            DIS
TORM Alice               1995        44,999      D/S TORM            DIS

Bulk Carriers         Year Built     Dwt         Ownership           Flag
-------------         ----------     ---         ---------           ----
TORM Rotna               2001        75,971      Torm Singapore
TORM Tina                2001        75,966      Torm Singapore      Singapore
TORM Marta               1997        69,638      D/S TORM            NIS
TORM Baltic              1997        69,614      Torm Singapore      Singapore
TORM Marlene             1997        69,548      Torm Singapore      Singapore
TORM Tekla               1993        69,268      D/S TORM            DIS
TORM Herdis              1992        69,618      D/S TORM            NIS
TORM Marina              1990        69,637      D/S TORM            DIS
TORM Arawa(2)            1997        27,827      Torm Singapore      Singapore
TORM Pacific(2)          1997        27,802      Torm Singapore      Singapore

(1)  DIS stands for the Danish  International  Shipping  Registry and NIS stands
     for the Norwegian International Shipping Registry.

(2)  TORM Arawa and TORM  Pacific were sold in April 2006 and are expected to be
     delivered to the buyers by July 2006.

Other

     We have entered into various  IT-related,  office  equipment and car rental
contracts which typically  expire after 0.5-2.5 years. We also have  contractual
obligations  relating  to  vessels  chartered  in.  Please  refer to item 5F for
further disclosures relating to our contractual obligations.

     Please  refer  to  Item  5A for  information  relating  to our  contractual
obligations and planned investments.

ITEM 4A. UNRESOLVED STAFF COMMENTS

     None

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

2005 SUMMARY

     In 2005,  we grew both in terms of higher net profit and in the size of our
fleet.  Growth  in the  number  of owned  vessels  combined  with  high,  though
volatile, freight rates within both the tanker and dry bulk segments resulted in
the net profit for 2005 of USD 299  million  (as  compared to USD 187 million in
2004), the highest in the Company's history.  Earnings per share rose to USD 8.6
in 2005 from USD 5.4 in 2004. On April 19, 2006, at the annual general  meeting,
our  shareholders  approved a dividend payment of USD 3.6 (DKK 23) per share (as
compared  to USD 2.7  (DKK  15) per  share  in  2004)  corresponding  to a total
dividend payment of USD 132 million.

     The expansion  and renewal of our fleet  continued  during 2005.  The total
owned fleet  increased  by 25% from 29.5  vessels in 2004 to 37 vessels in 2005.
The fleet owned by the Company has grown by 26%  annually in the past five years
and has, thereby, more than tripled in size since 2001. In addition, the Company
has presently nine vessels chartered, which are to be redelivered after December
31, 2006.  This  development  is set to continue  through an ongoing  investment
program and through the chartering in of additional  tonnage.  As a result,  the
fleet,  and  thereby  the number of earning  days,  is set to  increase  by 57%,
representing  a total of 26 additional  vessels,  by 2009 pursuant to agreements
entered into on April 30, 2006.

     During 2005,  the Company took delivery of four  newbuildings:  two LR1 and
two MR product tankers.  In line with the Company's  strategy to grow our fleet,
the Company purchased a further seven modern  second-hand  product tankers:  two
LR1 and five MR. The Company also sold 4.5 of the oldest product  tankers in our
fleet during 2005.  Our product  tanker fleet thereby  totaled 27 vessels at the
end of 2005.  During  2005,  we have  exercised an option to purchase a dry bulk
carrier,  which  brought the total of vessels in our dry bulk fleet to 10 at the
end of the  year.  As of April  30,  2006,  we  expect  to take  delivery  of 13
additional  vessels,  between  2006 and  2009,  representing  a USD 500  million
investment out of a total investment program of USD 625 million.

TRENDS WITHIN THE PRODUCT TANKER AND BULK SEGMENTS

     Some of the  current  key trends  affecting  the two  segments  in which we
operate are:

          1    Expansion of refining capacity away from the areas of consumption
               in the Western Hemisphere;

          2    Increase  of  importance  of  environmental  regulations  and the
               quality of service;

          3    Lower inventories; and

          4    Delivery of new vessels.

     Expansion of refining  capacity away from the areas of  consumption  in the
Western Hemisphere In recent years, there has been a clear trend of expansion of
refining capacity away from the areas of consumption in the Western Hemisphere.

     According  to PVM Oil  Associates,  from the present  time through to 2012,
additional  refining  capacity  will  primarily  be  built  in  OPEC  countries,
especially  in Saudi  Arabia.  In  addition,  China and India  are  expected  to
increase  capacity through to 2010.  Refining capacity in Europe and the U.S. is
expected to be increased  slightly  but  insufficiently  to meet the  increasing
demand. More stringent  environmental and other restrictions on refineries limit
the scope for additional  refining  capacity in Europe and the U.S.  Considering
the capacity  constraints  at refineries in oil consuming  countries,  increased
demand will be satisfied  through  increased  imports from more distant sources.
This will result in longer transportation  distances for petroleum products from
the  refineries in the Middle East and the Far East to the areas of  consumption
in Europe and the U.S.  We expect  this trend to  positively  affect the product
tanker market.

     Environmental regulations and increase of importance of service quality The
ongoing and ever increasing safety and environmental  requirements have resulted
in customers' demand for higher quality of service both ashore and at sea.

     The International  Maritime  Organization,  or the IMO, the individual flag
states as well as the classification  societies have been issuing more stringent
requirements and regulations governing ship design and the operation of vessels.
The  requirements  represent a wide spectrum of rules from the  construction  of
vessels  and  its  equipment  to the  operation  of the  vessel  as  well as the
qualifications  for officers and ratings  along with the Company's own standards
of vessel  operations.  In addition,  our customers have to an increasing extent
begun to issue their own  environmental and safety  requirements.  The effect is
increased  demand  for  higher  quality of  service  and the  establishment  and
documentation of standard routines and procedures.

     We expect  that this  trend  will  result in  standardized  procedures  and
operations and make it  progressively  difficult to identify  differences in the
way shipowners  operate their tonnage.  As such,  quality of service will in the
future become a key differentiator.

     We consider this to be a positive development which underpins the Company's
strategy to aim for the highest  quality in terms of  education  and training of
our personnel,  design and  shipbuilding of our vessels thereby  ensuring a very
high level of service.

Lower inventories

     Inventories of clean petroleum  products have been at very low levels since
2003. This has been the result of increased consumption combined with the rising
price of crude oil resulting in a number of market  participants  not wishing to
hold  excessive  inventories.  The low  inventories  in turn  result in  erratic
deliveries,  occasionally  forcing market  participants to pay very high freight
rates.

Delivery of new vessels

     Freight  rates in both the product  tanker and bulk  segments  are strongly
influenced  by the  number of  vessels  available  and,  as a  consequence,  the
delivery of new vessels into the market and the scrapping of older vessels.

Product tankers

     We expect  that the  delivery of  newbuilding  product  tankers  during the
period  form 2006 to 2009 will be at  historically  high  levels.  The  existing
global  order  book of product  tankers  due for  delivery  during  that  period
represents  approximately  40 to 45% of the  existing  world  fleet of the three
vessel sizes operated by TORM.

     In 2003,  the EU and the IMO adopted new and revised  rules  requiring  the
phasing out of single-hulled  tankers. The rules will result in the phase out of
single-hulled  tankers,  which have not been built  since the  beginning  of the
1990s,  by 2010. We anticipate  that up to 25% of the world product tanker fleet
will be phased out or will operate in areas,  where the EU and the IMO rules are
not observed.

Dry bulk carriers

     According to  Fearnleys,  the net addition of Panamax bulk  carriers to the
existing  fleet in 2006  will be  approximately  5%.  In the  subsequent  years,
however,  the order book is modest  compared  to the very strong dry bulk market
experienced  in recent  years.  Freight  rates for the Panamax bulk carriers are
affected not only by newbuilding  deliveries in the Panamax  fleet,  but also by
the addition to the fleet of Capesize vessels and Handymax vessels. According to
Fearnleys, 19% of the total fleet of Capesize vessels is expected to be added by
2009 and 15% of the total fleet of  Handymax  vessels is expected to be added by
2008.

TORM 2006-2008 strategy - "GREATER EARNING POWER"

     In 2005,  our Board of Directors  approved a new  three-year  strategy plan
termed "Greater Earning Power.", or the Strategy

     The Strategy plan focuses on the following areas:

     o    Ensuring high long-term return on equity and the shares.

     o    Greater  focus  on the  development  of the  Company's  organizational
          structure and the employees' skills.

     o    Use  of  the  Company's  market  position  to  achieve  better  market
          intelligence  and  knowledge  and  thereby  improve the basis on which
          decisions are made, the speed of such  decisions and thereby  reducing
          uncertainty.

     o    Establish  its  own  organization  or work in  cooperation  with  pool
          partners in the key geographical centers worldwide in order to further
          improve customer service.

     o    Secure  significant  growth in both the  product  tanker  and dry bulk
          segments.

     o    The product tanker  segment shall continue to be the most  significant
          business  area.  Growth shall in general come from within the existing
          business.

     o    Investments  will  primarily  be made in the product  tanker  segment,
          whereas  growth within the bulk segment shall  principally be achieved
          through  chartering  in of vessels  and/or the  exercising of purchase
          options.

     o    The allocation between owned and chartered-in vessels shall at the end
          of the 3-year period be  approximately  70% owned and 30% chartered-in
          tonnage in order to increase the  availability of capital and with the
          aim of increasing flexibility.

     The  Strategy is an  extension  of the  Company's  strategy in recent years
which has focused primarily on the product tankers and to a lesser degree on the
dry  bulk  carriers.  We  have  put  more  emphasis  on  establishing  a  global
organization and developing our employees.

     We plan  to  significantly  increase  the  number  of  earning  days of our
vessels,  subject to  maintaining  profitability  of our  Company.  Based on our
newbuilding  order book and ship  commitments  for time charters as of April 30,
2006,  we expect to increase the number of earning days by 39% by year-end  2008
and by 57% by the end of 2009.

Tanker Division

     It is our long-term  goal to be a significant  consolidator  of the product
tanker  market  within  the LR2,  LR1 and MR  business  areas and to become  the
leading  player in the product  tanker  market.  We expect to achieve  this goal
through the Company's own growth and  development and through growth within each
pool that we operate.  This  strategy is expected to result in better  earnings,
improved  vessel  utilization,  increased  flexibility  for  our  customers  and
leverage of our large-scale purchasing power.

     We  anticipate  to  expand  our  product  tanker  fleet by  continuing  our
newbuilding  program,  through the purchase of secondhand vessels or fleets or a
merger  with  other  companies  which  would  be in  the  best  interest  of our
shareholders and the Company's further development.  Additionally,  we expect to
increase  the  number of  long-term  chartered  product  tankers,  inclusive  of
purchase options.

Bulk Division

     The dry bulk market is highly  fragmented.  We do not expect this market to
be consolidated  during the three-year  period during which the Strategy will be
implemented.

     The Bulk Division is focused on the Panamax  vessels.  We currently have no
newbuildings  on  order.  We  expect  the  growth  to  result  principally  form
chartering in of vessels.

     Chartering  in is,  according to the  Company's  assessment,  the most cost
effective way in which to increase our market  share.  The Strategy for the Bulk
Division is based on  chartering  in tonnage for longer  periods  combined  with
purchase  options.  Accordingly,  it will continue to be the Company's policy to
economically  hedge a significant  portion of this forward exposure and to guard
against volatile trading conditions.

     We expect to incrementally  increase our exposure to the dry bulk market by
expanding in the Panamax business area only through timely acquisitions.

Financial strategy

     We believe that the Company has a very solid  financial  foundation,  which
ensures that there is capacity  available for further timely expansion.  This is
the key to the Company's Strategy.

     In light of the  currently  very high  freight  levels  and  vessel  prices
combined with the Company's  criteria for financial  returns,  we continue to be
prudent and cautious in making  investments.  We retain a significant  financial
capacity to undertake timely investments.

A.   Operating Results

     The financial  information included in the discussion below is derived from
our consolidated  financial  statements.  Effective  January 1, 2005, we adopted
International  Financial  Reporting  Standards or IFRS and changed our reporting
currency from DKK to USD. We had previously  presented our financial  statements
under Danish GAAP. In accordance with the Securities and Exchange Commission, or
the SEC,  reporting  requirements  for  first-time  application of IFRS, in this
report we present the comparative  financial information under IFRS only for the
fiscal  year  ended  December  31,  2004.  .  Please  refer  to  Note  1 to  our
consolidated  financial statements for disclosures of the effects of the changes
in  accounting  policies.  IFRS differs in certain  respects  from United States
generally accepted accounting principles,  or U.S. GAAP. For a discussion of the
primary  differences  between IFRS and U.S. GAAP and a reconciliation  of profit
and  stockholders'  equity to U.S. GAAP,  please see Note 23 to our consolidated
financial statements.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
                              (in thousands of USD)

                                                           2004          2005
                                                           ----          ----

Net revenue                                              433,320      586,975
Port expenses, bunkers and commissions                   (83,769)    (123,138)
                                                        ---------    --------
Time Charter Equivalent Earnings                         349,551      463,837

Charter hire                                             (59,592)     (82,139)
Operating expenses                                       (49,791)     (66,744)
                                                        ----------   ---------
Gross profit (Net earnings from shipping activities)     240,168      314,954

Profit from sale of vessels                                    0       54,731
Administrative expenses                                  (38,637)     (31,176)
Other operating income                                    13,139       12,570
Depreciation and impairment losses                       (35,181)     (47,894)
                                                        ----------   ---------
Operating profit                                         179,489      303,185
Financial items                                           25,839       (3,818)
                                                        ----------   ---------
Profit before tax                                        205,328      299,367

Tax expenses                                             (18,715)          (4)
                                                        ----------   ---------
Net profit for the year                                  186,613      299,363


COMPARISON OF THE YEAR ENDED  DECEMBER 31, 2005 AND THE YEAR ENDED  DECEMBER 31,
2004

     Net profit for the year  increased  by 60% to USD 299  million in 2005 from
USD 187 million in 2004  resulting  in earnings per share of USD 8.6 in 2005 and
USD 5.4 in 2004.  The net  profit  for 2005,  which  includes  a gain on sale of
vessels of USD 55 million and dividend from Dampskibsselskabet Norden A/S of USD
12 million, is considerably higher than expected as reported at the beginning of
the year.

     The considerably  higher profit is primarily due to the net addition of 9.5
vessels to our fleet of owned and long-term chartered vessels.  Freight rates in
the tanker  segment,  which during part of 2005 were  significantly  higher than
expected, further contributed to the reported profit.

     Our total assets  increased by USD 570 million in 2005 to USD 1,810 million
from USD 1,240 million in 2004. The increase  resulted in an increase of USD 517
million in the carrying  amount of our vessels and vessels  under  construction,
mainly due to fleet  expansion,  a decrease in the carrying amount of marketable
securities of USD 58 million and an increase in cash and cash equivalents of USD
91 million.

     The  shareholders'  equity  increased by USD 190 million in 2005 to USD 905
million  compared to USD 715 million in 2004. The solvency  ratio, as defined in
Item 17,  decreased by 8 percentage  points to 50% in 2005 from 58% in 2004. The
significant increase in shareholders' equity is mainly due to the profit in 2005
less  dividend  paid out and value  adjustment  of the  Company's  investment in
Norden. Our total liabilities increased by USD 381 million to USD 905 million in
2005 as  compared  to USD 524  million in 2004  primarily  due to  increases  in
mortgage  debt and bank  loans used to  finance a part of the  expansion  of the
fleet.

Net earnings from shipping activities

     The table below  presents net earnings from shipping  activities on segment
level for the years ended December 31, 2004 and 2005:

<TABLE>
USD million
                                                                Not       Total                               Not         Total
                                            Tanker    Bulk    Allocated    2004       Tanker      Bulk      Allocated      2005
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>        <C>       <C>          <C>        <C>          <C>        <C>
Net revenue                                 255.7     177.5      0.1       433.3        419.3      167.6        0.0        586.9
Port expenses, bunkers and commissions      (68.8)    (15.0)     0.0       (83.8)      (111.4)     (11.7)       0.0       (123.1)
------------------------------------------------------------------------------------------------------------------------------------
Time charter equivalent earnings            186.9     162.5      0.1       349.5        307.9      155.9        0.0        463.8
Charter hire                                (13.5)    (46.1)     0.0       (59.6)       (44.3)     (37.9)       0.0        (82.2)
Operating expenses                          (39.5)    (11.6)     1.3       (49.8)       (51.4)     (15.3)       0.0        (66.7)
------------------------------------------------------------------------------------------------------------------------------------
Gross profit/(loss)
(Net earnings from shipping activities)     133.9     104.8      1.4       240.1        212.2      102.7        0.0        314.9
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Our total net  revenue in 2005 was USD 587  million as  compared to USD 433
million in the previous year. Our net revenue is derived from two segments:  the
Tanker  Division and the Bulk Division.  In the markets in which these divisions
operate,  the time charter  equivalent (TCE) rates,  defined as net revenue less
voyage expenses divided by the number of available  earning days (days available
for service) is used to compare freight rates.  Under time charter contracts the
charterer  pays for the voyage  expenses,  whereas  the  shipowner  pays for the
voyage expenses under voyage charter  contracts.  As a consequence,  we base our
economic decisions primarily upon the expected TCE rates rather than on expected
net revenues.  The analysis of revenue is therefore  based on the development in
time charter equivalent  earnings.  Our time charter equivalent earnings in 2005
were USD 464 million as compared  to USD 350  million in 2004.  The  addition of
tonnage,  especially in the LR1 and MR tanker  business areas, as well as higher
rates in the tanker segment during part of the year were the primary reasons for
the increase in the TCE.

Tanker Division

     Net  revenues in the Tanker  Division in 2005  increased  by 64% to USD 419
million from USD 256 million in 2004,  whereas the TCE earnings increased by USD
121  million,  or 65%,  to USD 308  million in 2005 from USD 187  million in the
previous year.

     The market for the Company's  product  tankers reached a historical peak in
2005,  characterized  by high but volatile  freight  rates with strong  earnings
primarily  during the first and fourth  quarters.  Because of an unusually  high
growth in oil consumption towards the end of 2004, the product tanker market had
a strong  beginning  in 2005.  During the second  quarter of 2005,  the  product
tanker  market  experienced a normal  seasonal  decrease.  However,  the ongoing
growth in demand in the U.S. for the import of gasoline and other oil  products,
especially up to the summer holiday season,  resulted in a steady product tanker
market during mid-year.

     Hurricanes  Katrina and Rita,  which  struck the southern  U.S.  during the
third  quarter of 2005,  had a major and boosting  effect on the product  tanker
market in 2005. 95% of the oil  production in the Mexican Gulf was  interrupted,
and 20% of the local refining  capacity was temporarily  shut down. The refining
capacity in the U.S.  was  restored to normal  output  levels  during the fourth
quarter 2005. Demand for  transportation  capacity increased further as a result
of low inventory levels of refined products in the Western Hemisphere, resulting
from high oil prices and limited  refining  capacity.  We believe that these low
inventories, combined with lack of refinery capacity often resulted in increased
demand for product tankers.

     Charter rates were increased towards the end of 2005, reaching historically
high levels despite a large number of product tanker newbuildings.  According to
Fearnleys,  17% of the total product  tanker fleet entered the market in 2005 as
compared  20%  in  2004.  Concurrently,  according  to  the  Energy  Information
Administration,  oil demand grew by 1.5% in 2005 compared to 3.3% in 2004,  and,
according to  Clarksons,  on average  freight rates during 2005 were 5.0% higher
than in 2004.

     In 2005,  we achieved  freight  rates in the LR2 business area that were on
average 6% higher than in the previous year.  This increased our earnings by USD
4 million.  The number of available  earning days  increased by 165 days,  or 9%
resulting in an increase in earnings of USD 6 million.

     In the LR1  business  area,  we took  delivery of four vessels and sold 2.5
vessels  during 2005. Two of the sold vessels were leased back on five-year time
charters.  These  transactions  were the primary  reason for the increase in the
number  of  available  earning  days of 1,326  days in 2005  representing  a 93%
increase  from the previous year and resulting in an increase in our earnings of
USD 33 million.  The 30% increase in average freight rates in 2005 resulted in a
USD 21 million increase in our earnings.

     In the MR business  area,  the Company took  delivery of seven  vessels and
sold two vessels  during  2005.  The addition of new tonnage was the main reason
for the increase in the number of available  earning days of 1,235 days, or 28%,
which  increased our earnings by USD 26 million.  The average freight rates were
24% higher in 2005 than in the previous year, which affected earnings positively
by USD 30 million.

     The table below shows the TCE earnings in the Tanker Division.

<TABLE>
Earnings for the Tanker division
--------------------------------

USD million                                          MR        LR1        LR2      Unallocated        Total
-----------                                          --        ---        ---      -----------        -----
<S>                                                 <C>        <C>        <C>         <C>              <C>

Time charter equivalent earnings 2004                93         35         60          (1)              187
Change in number of earning days                     26         33          6           -               65
Change in freight rates                              30         21          4           -               55
Other                                                 -          -          -           1                1
                                                    ---        ---        ---         ---              ---
Time charter equivalent earnings 2005               149         89         70           0              308
</TABLE>


     The table below  summarizes  the  earnings  data per quarter for the Tanker
Division.

Earnings data for the Tanker division

<TABLE>
USD/Day                                      2004                    2005                                  2005        % Change
                                        Full year        Q1            Q2           Q3          Q4    Full year       2004-2005
---------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>         <C>          <C>         <C>        <C>              <C>
LR2/Aframax vessels

Available earning days for: *)
- Owned vessels                             1,098          270         271          274         276        1,091             (1%)
- Time chartered vessels                      726          180         171          274         274          899             24%
TCE per earning days **)                   33,116       35,715      30,281       28,185      45,917       35,253              6%
OPEX per earning days   ***)               (4,754)      (5,526)     (4,849)      (5,899)     (6,157)      (5,612)            18%
---------------------------------------------------------------------------------------------------------------------------------

LR1/Panamax vessels

Available earning days for: *)
- Owned vessels                             1,425          372         404          499         551        1,826             28%
- Time chartered vessels                        0          126         248          276         276          925             N/A
TCE per earning days **)                   24,912       32,704      26,906       26,509      41,726       32,300             30%
OPEX per earning days  ***)                (6,153)      (4,991)     (6,836)      (6,074)     (5,680)      (5,903)            (4%)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Earnings data for the Tanker division
<TABLE>

USD/Day                                      2004                     2005                                  2005        % Change
                                        Full year           Q1          Q2           Q3          Q4    Full year       2004-2005
----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>         <C>          <C>         <C>          <C>               <C>
MR vessels
Available earning days for: *)
- Owned vessels                             4,346        1,125       1,270        1,547       1,638        5,581             28%
- Time chartered vessels                        0            0           0            0           0            0              0%
TCE per earning days **)                   21,381       27,465      26,079       23,499      29,373       26,613             24%
OPEX per earning days   ***)               (5,936)      (6,223)     (6,594)      (6,274)     (6,505)      (6,708)            13%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*)   Earning days are the total number of days in the period,  where the vessels
     is ready and available to perform a voyage, i.e. is not in dry-dock etc.

**)  TCE = Time Charter  Equivalent  Earnings = Gross freight income less bunker
     and port expenses.

***) OPEX = Operating expenses for our owned vessels.

Bulk Division

     In the Bulk Division net revenue decreased by 6% to USD 168 million in 2005
from USD 178 million in the previous year,  whereas the time charter  equivalent
earnings decreased by USD 7 million or 4% to USD 156 million in 2005 as compared
to USD 163 million in 2004.

     In 2005,  freight  rates  prevailing  in the dry bulk segment did were less
than freight rates in 2004.  The dry bulk market began the year strongly but has
been extremely volatile throughout 2005.

     At the  outset of 2005,  a large  part of the world  bulk fleet was idle in
ports,  especially in Australia and China,  awaiting loading or discharge due to
lack of port capacity. This contributed to maintaining high rates in early 2005.
From mid 2005,  however,  port  congestion  was reduced to more normal levels in
most ports.

     A lower  rate of growth in the  import  of coal and iron ore  primarily  by
China during the third quarter of 2005,  coupled with an increase in newbuilding
deliveries and limited scrapping, resulted in a decrease in freight rates as the
year progressed.  Notwithstanding these trends, however,  according to Clarkson,
the charter rates ended the year considerably  above the historical mean for the
period 1990-2005 of 12,644 USD/day.

     Given the rise in freight levels in 2003 and 2004 to historically  high, we
elected to take advantage of these circumstances by chartering out a substantial
part of the dry bulk fleet on longer  term time  charter,  often for  periods of
about one year.  These  longer  period  charters  have tended to reduce the risk
inherent  in a market of such  volatility.  We have  continued  to  pursue  this
strategy  successfully  in 2005,  and the Bulk  Division's  income  has not been
significantly affected by the market's volatility.

     Freight  rates in the  Panamax  business  area in 2005 were on  average  9%
higher than in 2004, increasing our earnings by USD 12 million. In this business
area, one vessel, which had previously been chartered in, was added to our fleet
of owned vessels  during 2005.  The decrease in the number of available  earning
days by 506 days from the previous year was due to the net redelivery of tonnage
chartered in, and resulted in the decrease of USD 13 million in the TCE earnings
in this business area.

     In the Handysize  business  area  earnings  decreased by USD 5 million as a
consequence of a reduction in available earning days of 23% and a 5% decrease in
the average freight rates.

     The table below shows the change in the TCE earnings in the Bulk Division.

<TABLE>
Earnings for the Bulk division

USD million                                        Handysize       Panamax         Unallocated          Total
<S>                                                   <C>              <C>              <C>             <C>
Time charter equivalent earnings 2004                 18               144              1               163
Change in number of earning days                      (4)              (13)             -               (17)
Change in freight rates                               (1)               12              -                11
Other                                                  -                 -             (1)               (1)
                                                      ---              ---             ---               ---
Time charter equivalent earnings 2005                 13               143              0               156
</TABLE>

           The table below summarizes the earnings data per quarter for the Bulk
Division.
<TABLE>

Earnings data for the Bulk division
USD/Day                                              2004                     2005                              2005       % Change
                                                Full year         Q1          Q2          Q3         Q4    Full year      2004-2005
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>        <C>         <C>         <C>        <C>          <C>                <C>
Panamax vessels
Available earning days for: *)
- Owned vessels                                     1,853        559         685         736        719        2,698            46%
- Time chartered vessels                            3,776        765         518         504        637        2,425           (36%)
TCE per earning days **)                           25,534     30,641      30,962      27,523     22,585       27,897             9%
OPEX per earning days   ***)                       (5,022)    (4,794)     (4,607)     (4,294)    (5,017)      (4,676)           (7%)
------------------------------------------------------------------------------------------------------------------------------------

Handysize vessels
------------------------------------------------------------------------------------------------------------------------------------
Available earning days for: *)
- Owned vessels                                       732        169         176         184        184          712            (3%)
- Time chartered vessels                              324         30          30          31         13          104           (68%)
TCE per earning days **)                           16,829     18,952      17,645      14,514     13,067       16,011            (5%)
OPEX per earning days   ***)                       (3,173)    (2,916)     (3,908)     (3,690)    (5,049)      (3,919)           24%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*)   Earning days are the total number of days in the period,  where the vessels
     is ready and available to perform a voyage, i.e. is not in dry-dock etc.

**)  TCE = Time Charter  Equivalent  Earnings = Gross freight income less bunker
     and port expenses.

***) OPEX = Operating expenses for own vessels.


     The table below details the earning days of our Panamax  vessels under time
charter agreements and voyage charter agreements in 2004 and 2005.

                                               2004         2005    Change in %

Total earning days                             5,754       5,143       (10.6%)
     Days under time charter agreements        5,585       5,143        (7.9%)
     % of total days                              97.1%      100%
     Days under voyage charter agreements        169           0        (100%)
     % of total days                               2.9%        0%

     The number of earning  days above is higher than the number of earning days
according to the table labeled "Earnings data for the Bulk division" because the
latter only includes owned vessels and vessels chartered in for periods equal to
or longer than six months.

Operation of vessels

     Vessels  chartered  in on time  charters  do not  give  rise  to  operating
expenses  for TORM but only to  charter  hire  payments.  As  compared  to 2004,
charter  hire in the  Tanker  Division  increased  by USD 31  million  to USD 44
million in 2005, whereas charter hire paid in the Bulk Division decreased by USD
8 million to USD 38 million.  The increase in the Tanker  Division was primarily
caused by the sale and lease  back on time  charters  of two  vessels in the LR1
business area in the beginning of 2005.

     The operating expenses for the owned vessels increased by USD 17 million to
USD 67 million in 2005. The most significant  factor behind this development was
the increase in the number of operating  days by 1,987 days,  or 21%,  primarily
due to the addition of owned vessels in the LR1, MR and Panamax  business areas.
The main reasons for the operating  expenses not increasing  proportionately  to
the increase in the number of operating days are one-time  expenses  relating to
the preparation of two vessels for sale and a high number of dry-dockings during
2005 totaling 277 days in 2005 as compared to 30 days in 2004.  Days in dry-dock
are not  included in the number of  operating  days,  whereas the vessels  incur
operating  expenses at similar  levels as during  operation.  In  addition,  the
operating  expenses for some of the vessels  added this year are higher than the
average for the fleet as of the beginning of the year.  The total fleet of owned
vessels incurred 31 off-hire days in 2005 corresponding to three per thousand of
the number of operating days compared to 15 off-hire days in 2004  corresponding
to two per thousand of the number of operating days. The Company regards this as
a very satisfactory level.

     Operating  expenses are mainly incurred in USD and DKK. The average DKK/USD
exchange  rate in 2005 was more or less  unchanged  from 2004 and did not affect
the development in operating expenses significantly.

Administrative expenses and other operating income

     Our  total  administrative  expenses  decreased  from 2004 to 2005 by USD 8
million to USD 31 million mainly due to lower  administrative  costs relating to
the share options plan,  which was partially offset by increased salary expenses
due to the addition of new staff and a general increase in salary levels.

     Administrative  expenses are primarily incurred in DKK. The average DKK/USD
exchange  rate in 2005 was more or less  unchanged  from 2004 and did not affect
the development in administrative expenses significantly.

     Other  operating   income   primarily   comprises  income  from  chartering
commissions  received by TORM in  connection  with the  management  of the three
tanker pools.  Other  operating  income amounted to USD 13 million in 2005 as in
2004 despite an increase in commissions from the tanker pools,  primarily due to
one-time  income of USD 2 million in 2004.  These  commissions  are based on net
revenues  in the  pools,  and the  change is a direct  result  of the  change in
freight  rates and the number of vessels in the pools  compared to the  previous
year.

Vessels and dry-docking

     The  increase  in  tangible  fixed  assets of USD 479  million to USD 1,167
million in 2005 is mainly  attributable to the change in vessels and capitalized
dry-docking. The carrying value of vessels and capitalized dry-docking increased
by USD 419  million  to USD 1,066  million in 2005.  The  increase  relating  to
vessels  amounted to USD 414 million.  The addition of new tonnage amounted to a
total  acquisition  cost of USD  517  million  resulting  from  two  LR1  tanker
newbuildings  and  two LR1  tankers  built  in  2003  and  2004,  two MR  tanker
newbuildings  and five MR tankers  built in 2000 to 2003 as well as one  Panamax
bulk vessel  built in 2001.  Furthermore,  in 2005,  we have sold two MR tankers
built in 1992 and  1994  and 2.5 LR1  tankers  built in 1988 and 1990 at a total
carrying  amount of USD 63 million and  depreciation on the vessels in our fleet
amounted to USD 40 million.  Prepayment on vessels under construction  increased
in 2005 by USD 60 million to USD 97 million due to additional  costs relating to
vessels  under  construction  of  USD  295  million  less  the   above-mentioned
newbuilding  deliveries  of USD 191 million and the  transfer of a vessel  under
construction to non- current assets held for sale at a carrying amount of USD 44
million.

     Depreciation  amounted  to USD 48  million  in 2005 as  compared  to USD 35
million in 2004,  an  increase  of USD 13  million.  The  increase is due to the
expansion of the fleet during 2005.

     As at December 31, 2005,  our  newbuilding  program  comprised of 12 tanker
vessels to be delivered  during 2006 to 2009,  and the  contractual  liabilities
under the program  amounted to USD 540 million.  In addition the Company  called
options in 2005 to acquire  two LR2  tankers on time  charter  built in 1999 and
2000, which were delivered in January 2006. The contractual  liability  relating
to these vessels amounted to USD 94 million as of December 31, 2005. In 2005, we
also contracted to sell one of our LR1 vessels under construction  subsequent to
delivery in 2006 bringing the total net investment program to 13 vessels.

     The  market  value of the  fleet and  investment  program  (7.5 LR2  tanker
newbuildings,  1.5 LR1 tanker  newbuildings,  two MR tanker newbuildings and two
second-hand  LR2 tankers)  exceeded the  carrying  value of the fleet  including
newbuilding contracts by USD 768 million as of December 31, 2005. This valuation
is  based on the  average  of three  internationally  acknowledged  shipbrokers'
valuations.

Other investments (NORDEN)

     Other investments mainly comprise of our investment in approximately 33% of
the shares of Norden with a carrying value of USD 352 million as of December 31,
2005 compared to USD 363 million as of December 31, 2004.

     TORM does not consider Norden as an associated company, as the Company does
not have  influence on decisions  and is not  represented  on Norden's  Board of
directors.  The investment in Norden is valued on the basis of the closing price
on the Copenhagen Stock Exchange on December 31, 2005 of DKK 2,958.63 per share.
The positive effect from the increase in the share price from DKK 2,725.52 as of
December 31, 2004 was offset by the adverse  effect of the change in the DKK/USD
exchange rate of USD 49 million.

     We hold investments in other entities with an aggregate  carrying amount of
USD 9 million as of December 31, 2005, of which USD 2 million concerns  unlisted
entities, compared to USD 5 million as of December 31, 2004. The carrying amount
of the unlisted  shares  constitutes the estimated fair value based on available
information.

Financing

     Net financial items in 2005 were negative by USD 4 million as compared to a
net income of USD 26 million in 2004. The most significant reason for the change
is the lower  dividend  from Norden of USD 12 million in 2005 as compared to USD
34 million in 2004 and an increase in interest expenses of USD 10 million to USD
26 million in 2005  primarily due to the increase in net interest  bearing debt,
as  defined  in Item 17 below,  of USD 360  million  during  the year to USD 632
million in 2005 from USD 272 million in 2004.

     The invested  capital,  as defined in Item 17, increased by USD 558 million
to USD 1,176  million as of December 31, 2005 from USD 618 million in 2004.  The
increase can  primarily be explained by the addition of tonnage and  prepayments
on newbuildings during 2005. Taking into account the development in net interest
bearing debt during 2005, a significant  part of the expansion of our Company is
financed by cash flow from operations and from sale of vessels.

     Shareholders'  equity  increased  by USD 190  million to USD 905 million in
2005. The considerable  growth in shareholders'  equity is mainly due to the net
profit in 2005 of USD 299 million less USD 90 million  dividends paid out during
the year and value  adjustment  of the  Company's  investment in shares in other
companies, including Norden, of USD 23 million.

     Please  refer  to Note 9 to our  consolidated  financial  statements  for a
breakdown  of  financial  items in the  income  statement  and to Note 13 for an
overview of mortgage debt and bank loans.

Tax

     The tax  expense  for  2005  comprises  current  tax for the  year of USD 9
million,  which is unchanged compared to the previous year, less a USD 9 million
reduction  of deferred  tax as compared to an increase in deferred  tax of USD 8
million in 2004. Net tax for 2005 was USD 0 million as compared to an expense of
USD 19 million in 2004. Of the reduction in deferred tax in 2005,  USD 4 million
was a result of a change in the Danish corporation tax rate from 30% to 28%. The
deferred tax  liability as at December 31, 2005 of USD 55 million as compared to
USD 73 million  in the  previous  year was  furthermore  affected  by a currency
exchange  gain of USD 10 million  which is  recognized  in the income  statement
under financial items.

     All  significant  Danish  entities  in our group  entered  into the tonnage
taxation scheme  effective from 2001 and have filed tax returns for 2001 through
2004. The assessment of the tax returns by the tax  authorities has not yet been
completed,  and the recognized  current tax liabilities are therefore to a great
extent based on Management's  judgment  regarding the outcome of the assessment.
TORM paid USD 7 million in corporation  tax on account in 2005  regarding  these
entities.

     Please refer to Item 10E and Notes 3 and 10 to our  consolidated  financial
statements for further information.

B.   Liquidity and capital resources

     The payments of the Company's obligations under loan agreements, along with
the payments of charter hire for chartered-in vessels, and all other commitments
that TORM has entered into,  are paid out of the cash  generated by the Company.
Total cash and cash  equivalents  amounted to USD 157 million at the end of 2005
as compared to USD 66 million at the  beginning of the year,  resulting in a net
increase in cash and cash  equivalents from cash flows of USD 91 million in 2005
as compared to a net increase of USD 38 million in 2004. The primary  sources of
cash flow were profits  from  operating  activities,  additional  borrowing  and
proceeds from the sale of vessels. The cash flows were primarily used to finance
the extensive expansion of the Company's fleet during the year.

     The Company's  operations  generated a historically high cash inflow of USD
261 million compared to an inflow of USD 228 million in 2004.

     During 2005,  our cash flows were  primarily  used to finance our investing
activities. The Company invested USD 636 million in tangible fixed assets during
2005,  primarily  comprising  the  expansion  of our fleet,  compared to USD 187
million in 2004.  The total  cash  inflow  from the sale of vessels  was USD 178
million in 2005  including  USD 47.5 million from the sale and  leaseback of two
vessels.  The  Company  did  not  generate  any  cash  flows  from  the  sale of
non-current assets in 2004.

     The total cash inflow from financing activities amounted to USD 303 million
in 2005 compared to cash outflow of USD 3 million in 2004.  Additional borrowing
generated  inflow  of USD 645  million  in 2005  which was used to  finance  the
purchase of  newbuildings  along with the purchase of  second-hand  vessels.  In
2005,  repayment  of mortgage  debt and bank loans  amounted to USD 252 million.
Dividend  payments  to  TORM  shareholders,  which  in 2005  amounted  to USD 90
million, also affected our cash flow from financing activities.

     The Company has  significant  cash  requirements  associated with long-term
debt and time charters.  The payment of debt and the Company's time charters are
influenced by changes in interest  rates. In order to manage interest rate risk,
the Company  strategically uses various financial instruments which work to swap
the variable interest rate on a portion of the borrowings for fixed rate debt.

     In order to increase  its  financial  flexibility,  TORM entered into three
revolving  facilities  with leading banks in 2005. The  facilities  have a total
limit of USD 498 million,  of which USD 256 million was drawn as of December 31,
2005, and are dedicated to financing the acquisition of new tonnage and used for
the ongoing financing of some of our existing vessels.  As of December 31, 2005,
the Company had approximately USD 535 million of additional loans,  bringing the
total borrowings  available under our credit agreements to USD 1,033 million, of
which USD 242 million was unused,  and bearing a weighted  average interest rate
of LIBOR + 0.73%.

     When  acquiring  vessels,  TORM  usually  pays the  first 20% to 30% of the
contract  price and the  remaining  70% to 80% is  financed  by  mortgage  debt.
However, due to the high inflow of cash in the past two to three years, TORM has
in  certain  cases  paid a greater  portion of the  contract  price.  For all 12
vessels in the newbuilding  program,  the Company has paid  approximately 26% of
the aggregate  contract price. TORM has entered into an agreement to finance the
remaining  purchase price of five of the LR2 product  tankers in the newbuilding
program,  expected to be delivered  during the period from April 2006 to January
2008. The Company expects to enter into financing  agreements for the payment of
the  remaining  purchase  price of the other  seven  vessels in time to meet all
payment obligations.  For all 12 vessels in the newbuilding program, the Company
expects to pay USD 108  million,  of which USD 20 million was paid in 2006.  The
total outstanding contractual commitments amount to USD 402 million.

     TORM  believes  that  based  on  available  cash and  planned  investments,
projected  operating  cash  flows  and  financing  capacity,   the  Company  has
sufficient cash flow to meet the operating  requirements,  cash flow obligations
and other strategic  initiatives  set by the Company's Board of Directors.  TORM
also believes that the current fleet structure, based on time charters and owned
vessels, provides the Company with the flexibility to react to changes in market
conditions  and  thus  reducing  the  Company's   exposure  to  negative  market
developments.

     For further disclosure and discussion of our contractual obligations please
refer to Item 10C and Notes 13 and 17 to the consolidated financial statements.

FOREIGN CURRENCY EFFECTS

     We are exposed to market risk from changes in foreign exchange rates, which
can affect  results from  operations  and financial  condition.  To minimize the
risk,  we manage our exposure to changes in foreign  currency  rates through our
regular operating and financing activities and, when deemed appropriate, through
the use of derivative financial instruments,  primarily cross currency contracts
and forward exchange contracts.

     Please refer to Item 11 for information regarding our hedging strategy.

EFFECTS OF INFLATION

     Inflation  generally  affects  us by  increasing  the  interest  expense of
floating  rate  indebtedness  and by increasing  the cost of labor,  dry-docking
costs and other operating expenses.  We do not believe inflation has had or will
have a material impact on our operations. Inflationary pressures on bunker costs
are not  expected  to have a material  effect on our future  operations  because
freight  rates for voyage  charters  are  generally  sensitive to the price of a
ship's  fuel.  A sharp  rise in bunker  prices  tends to have  only a  temporary
negative effect on results since freights  generally  adjust after prices settle
at a higher level.

C.   Research and development, patents and licenses, etc.

     Not applicable.

D.   Trend information.

EXPECTATIONS FOR 2006

     TORM's  financial  results  primarily rely on  developments in freight rate
levels  and  available  earning  days  within  the  product  tanker and dry bulk
segments.  As of April 30, 2006, 26% of the remaining earning days in the Tanker
Division have been economically  hedged for 2006 through time charter agreements
or other hedging instruments.  Similarly,  as of April 30, 2006, 66% of the Bulk
Division's  remaining earning days have been economically hedged for the rest of
the year...

     The  Company's  forecast of profit before taxes for 2006 is in the range of
USD 155 to USD 175 million.  This range  however is only a forecast and a number
of unpredictable  factors could significantly  impact freight rates and earnings
for both  product  tankers and bulk  carriers.  Furthermore,  it is difficult to
predict the timing of delivery of additional  tonnage we not yet contracted for.
For  2006,  we  estimate  that the  following  factors  will  have the  greatest
influence on our earnings:

     o    Worldwide economic growth;

     o    Consumption of clean petroleum products, especially in the U.S.;

     o    The level of China's import of commodities,  especially iron ore, coal
          and grain;

     o    The addition of product tankers and bulk carriers; and

     o    Other  events  such  as  strikes,  political  instability  in the  oil
          exporting countries, weather conditions, shut-down of refineries, etc.
          Tanker Division

     In 2006,  the tanker  market is  expected to be  positively  affected by an
accelerated  increase in worldwide  demand for oil. The market is expected to be
negatively  affected  by a  substantial  number of  newbuilding  product  tanker
deliveries.

     In 2006,  as in 2005,  the global  product  tanker  fleet is expected to be
affected  by a  historically  large  newbuilding  order  book of  ships  due for
delivery in 2006. According to Fearnleys,  in 2006 the net increase in the fleet
of the three vessel sizes operated by TORM is  anticipated  to be  approximately
17%. The net growth is expected to be reduced in the  succeeding  years and then
leveled,  in light of an expected phase out of single-hull product tankers until
2010.

     Worldwide  consumption  of  oil  is  expected  to  increase  by 2% in  2006
according to the Energy Information  Administration,  or the EIA, with China and
the U.S. being the largest  consumers.  The figure  compares with an increase of
1.5% in  2005.  The  long  distances  involved  in the  transportation  of clean
petroleum  products,  attributable to the fact that additional refinery capacity
is far away from the main consuming  countries,  will, when combined with growth
in consumption, continue to positively affect the product tanker market.

     We expect that for our Tanker Division will experience  lower rates in 2006
than it did in 2005. The decrease in freight rates will to some extent be offset
by the increase in TORM's fleet,  which will increase the number of earning days
in 2006 by  approximately  26% as  compared  to  2005.  As of  April  30,  2006,
approximately 49% of TORM's available earning days in our product tanker segment
for 2006 had been fixed at satisfactory rates.

Bulk Division

     The Bulk  Division has for the past two years  experienced  very high,  but
also highly  volatile  freight rates. We expect that freight rates will continue
to be volatile in 2006 and lower than in 2004 and 2005.

     The  newbuilding  order book for 2006,  and  deliveries of new vessels,  is
significant.  Nevertheless, for years following 2006, the newbuilding order book
is relatively  modest  despite  historically  high freight rates  experienced in
recent years.

     The demand,  and thereby the freight rates, in the bulk market in 2006 will
be driven to a great extent by the development in the world economy,  especially
in China.  As a result of what TORM  believes  will be  another  period of great
volatility, the Company has decided to economically hedge a considerable part of
its  exposure to the bulk market for 2006 in the same way as was done in 2005 by
chartering out a number of vessels for periods of one to two years.  As of April
30, 2006, TORM has economically hedged approximately 78% of the earning days for
the Panamax vessels at an average rate of USD 18,690/day.  The Company  believes
that this will serve as a good earnings base for the Bulk Division.  The Company
will continue to seek period coverage for the remainder of the unhedged  earning
days.

E.   Off-balance sheet arrangements.

     We do not have any off-balance sheet arrangements.

F.   Tabular disclosure of contractual obligations.

     We have various contractual  obligations and commercial commitments to make
future  payments  including  debt  agreements,  lease  obligations  and purchase
commitments.  The following table summarizes our future  obligations under these
contracts due by period as of December 31, 2005 (in USD million):

<TABLE>

USD million                               2006         2007        2008         2009         2010      Thereafter      Total
-----------                               ----         ----        ----         ----         ----      ----------      -----
<S>                                      <C>          <C>          <C>          <C>          <C>          <C>           <C>
Long-Term Debt (1)                        59.9         59.9         90.0         57.5         57.5         464.2         789.0
Interest payments fixed by interest
rate swaps(3)                             17.6         14.2          6.9          0.0          0.0           0.0          38.7
Estimated variable interest
payments (4)                              20.9         21.7         29.4         34.9         31.3          95.5         233.7
Chartered-in Vessels
(Operating leases)                        61.3         34.2         40.7         37.8         23.1          56.2         253.3
Newbuilding installments
(Purchase Obligations)(2)                225.3        146.7         95.5         28.0           --            --         495.5
Other operating leases                     2.2          2.2          1.9          1.7          1.8           5.8          15.6
                                         -----        -----        -----        -----        -----         -----       -------
               Total                     387.2        278.9        264.4        159.9        113.7         621.7       1,825.8
                                         =====        =====        =====        =====        =====         =====       =======
</TABLE>

(1)  Debt payments could be accelerated upon violation of debt covenants. We are
     in compliance at December 31, 2005 and we believe the  likelihood of a debt
     covenant violation is remote.

(2)  Debt  financing  will  provide  an  estimated  70%-80%  of the  newbuilding
     installments.

(3)  Actual  fixed  rates  according  to  interest  rate  swaps are used for the
     covered interest payments. Please refer to Item 11 for further information.

(4)  Variable  interest  payments are estimated based on a 6% floating  interest
     rate,  which was our  estimate of 6 months LIBOR + a margin as of April 30,
     2006.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

     The  preparation of  consolidated  financial  statements in conformity with
IFRS and U.S. GAAP requires our  management  to make  estimates and  assumptions
that affect the reported  amounts of assets and  liabilities,  the disclosure of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period. These
estimates and  assumptions  are affected by the way TORM applies its  accounting
policies.  An  accounting  estimate  is  considered  critical  if: the  estimate
requires  our  management  to make  assumptions  about  matters that were highly
uncertain  at the time the  estimate was made;  different  estimates  reasonably
could have been used;  or the changes in the estimate that would have a material
impact  on  the  Group's  financial  condition  or  results  of  operations  are
reasonably likely to occur from period to period.  Management  believes that the
accounting  estimates  employed  are  appropriate  and  resulting  balances  are
reasonable.  However,  actual  results could differ from the original  estimates
requiring adjustments to these balances in future periods.

     Management  believes  that the  following  are the  significant  accounting
estimates and judgments used in the  preparation of the  consolidated  financial
statements and the reconciliation to U.S. GAAP.

Carrying amounts of vessels

     The Group  evaluates  the  carrying  amounts of the vessels to determine if
events  have  occurred  that  would  require a  modification  of their  carrying
amounts.  The  valuation  of vessels is reviewed  based on events and changes in
circumstances  that indicate whether the carrying amount of the assets might not
be recovered.  In assessing the recoverability of the vessels, the Group reviews
certain  indicators of potential  impairment  such as reported sale and purchase
prices,  market demand and general market  conditions.  Market  valuations  from
leading,  independent and internationally  recognized  shipbroking companies are
obtained on a semi-annual basis as part of the review for potential  impairment.
Under U.S. GAAP, if an indication of impairment is identified,  the undiscounted
future cash flows are  compared  to the  carrying  amount of the assets.  If the
undiscounted  future cash flows are less than the carrying amount, an impairment
loss is recorded based on the difference between the fair value (generally based
on  discounted  future cash flows) and the carrying  amount of the vessels.  If,
under IFRS, an indication of impairment is identified,  the need for recognizing
an impairment  loss is assessed by comparing the carrying  amount of the vessels
to the higher of the net selling price and the discounted future cash flows.

     The review for potential  impairment  indicators  and  projection of future
undiscounted  and  discounted  cash flows  related to the vessels is complex and
requires the Group to make various  estimates  including  future  freight rates,
earnings  from the  vessels  and  discount  rates.  All of these items have been
historically volatile.

     The carrying  amounts of our vessels may not  represent  their  fair-market
value at any point in time as market  prices of second- hand vessels to a degree
tend to fluctuate  with changes in charter  rates and the cost of  newbuildings.
However,  if the estimated future cash flow or related assumptions in the future
experience change, an impairment of vessels may be required.

     There were no impairments of vessels recorded in 2004 or 2005.

Tax

     All  significant  Danish  entities  within the Group entered the then newly
enacted Danish tonnage taxation scheme which went into effect on January 1, 2001
and have filed tax returns for 2001 to 2004.  The  assessment of the tax returns
by the tax  authorities  has not yet been  completed.  The tax  regulations  are
highly  complex,  and while the Group aims to ensure that the  estimates  of tax
assets and  liabilities  that it records are  accurate,  there may be  instances
which might require adjustments to be made to estimates previously recorded.

     The Group  believes  there is a material  uncertainty as to the estimate of
taxes  payable  as of  December  31,  2005  due to the lack of  precedents  that
interpreted  the  tonnage  tax  regulation.  The  estimate  is based on scenario
analyses and  discussions  with the tax  authorities,  tax advisors and industry
organizations,  and the  uncertainty  primarily  relates to the  division of the
activities between income and expenses from shipping related  activities,  which
are taxed  under the  tonnage tax  scheme,  and income and  expenses  from other
activities, which are not taxed under the tonnage tax scheme.

     The Group  believes  that the tax  returns  filed for 2001 to 2004 will not
trigger taxes payable in excess of the amount,  which has been recognized as per
December 31, 2005,  because estimated taxable income to a large extent is offset
by  deductible  losses from prior  periods,  and that the deferred tax liability
recorded is adequate.

CHANGE IN ACCOUNTING POLICIES

     IFRS

     Adoption of International Financial Reporting Standards (IFRS)

     Effective  January  1,  2005,  TORM  adopted  the  International  Financial
Reporting  Standards,  or IFRS,  which  existed as of  December  31,  2005.  The
transition  is accounted for in  accordance  with IFRS 1 First-time  Adoption of
International Financial Reporting Standards,  and our transition date is January
1, 2004.  The adoption of these  standards and  interpretations  has resulted in
changes to the Group's accounting policies in the following areas:

     a) Prior to the adoption of IFRS,  unrealized  gains or losses with respect
to bonds and shares in other companies were recognized in the income  statement,
under financial  items.  Shares are regarded as financial  assets  available for
sale.  In  accordance  with  IAS  39  "Financial  Instruments:  Recognition  and
Measurement"  unrealized  gains or losses with respect to shares are  recognized
directly in  shareholders'  equity and released to the income statement when the
assets are derecognized.  Bonds are classified as financial assets at fair value
through profit or loss.  Therefore,  unrealized  gains or losses with respect to
bonds are still recognized in the income statement.

     b) Deferred  tax assets and  liabilities  under the tonnage tax scheme were
previously  considered  as  contingent  and  were  disclosed  in the  Notes.  In
accordance with IAS 12 "Income  Taxes," the ongoing efforts of convergence  with
US GAAP and in order to align the accounting  under IFRS with US GAAP,  deferred
tax assets and  liabilities  are  recognized in the balance sheet and the change
for the year is recognized in the income statement.

     c) TORM's share option scheme provides  employees with the choice of a cash
settlement or receipt of TORM shares.  At the date the options are granted,  the
difference  between the  exercise  price and the market  price of the shares was
previously recognized as a compensation expense under "administrative  expenses"
in the income  statement.  Receipts and payments relating to the exercise of the
share options were recognized  directly in shareholders'  equity.  In accordance
with IFRS 2  "Share-based  Payment"  the  scheme is  treated  as a  cash-settled
share-based  payment  transaction.  A liability  relating  to share  options not
exercised is  recognized in the balance  sheet.  The change in the liability for
the  period  and the value of the share  options  exercised  in the  period  are
recognized  in the  income  statement.  The  liability  is  measured  using  the
Black-Scholes model. In the cash flow statement cash flows relating to the share
option  scheme  are   reclassified   from  financing   activities  to  operating
activities.

     d)  The  Group  has  chosen  to  apply  the  optional   exemption  in  IFRS
1"First-time  Adoption of International  Financial Reporting Standards" relating
to cumulative translation differences. As a consequence,  cumulative translation
differences are deemed to be zero at the date of transition to IFRS, and gain or
loss on a  subsequent  disposal of an operation  applying a functional  currency
different from USD will exclude  translation  differences  that arose before the
date of transition to IFRS.

     e)  Non-current  assets  held  for sale  were  previously  included  in the
respective  line  in the  balance  sheet  according  to the  type of  asset.  In
accordance  with  IFRS 5  "Non-current  Assets  Held for  Sale and  Discontinued
Operations"  non-current  assets held for sale are  presented in a separate line
under current  assets in the balance sheet and measured at the lower of carrying
amount and fair value less costs to sell.  Depreciation  of an asset ceases when
it is classified as held for sale.

     f)  Highly  liquid  bonds  were  previously  included  in  "Cash  and  cash
equivalents"  in the cash flow  statement.  In accordance  with IAS 7 "Cash Flow
Statements" an investment must be subject to an insignificant risk of changes in
value  to  qualify  as a cash  equivalent.  Consequently,  bonds  with a term to
maturity exceeding 3 months are classified as investing activities.

     g) Forward contracts  regarding bunker purchases were previously  accounted
for as cash flow hedges.  The current practices do not fulfill the documentation
requirements  prescribed  by  IAS 39  "Financial  Instruments:  Recognition  and
Measurement".  Consequently,  value adjustments of forward  contracts  regarding
bunker purchases are recognized in the income statement.

     The effects of the adoption of IFRS

     The adoption of IFRS has resulted in a reduction in the net profit for 2004
of USD 193.1 million to USD 186.6 million,  a reduction in shareholders'  equity
as at January 1, 2004 of USD 65.7  million to USD 347.9  million and a reduction
in  shareholders'  equity as at December  31,  2004,  of USD 75.1 million to USD
715.4 million.

     Changes in accounting estimates and judgments

     The functional currency in the administrative entity is changed from DKK to
USD as of January 1, 2005 in  accordance  with IAS 21 "The Effects of Changes in
Foreign Exchange Rates." A significant part of the DKK assets have been divested
during 2005 and the  activities of the  administrative  entity have been further
integrated with the operating entities.

     The  reporting  currency is changed  from DKK to USD,  which will provide a
truer and fairer view of the financial results,  financial  performance and cash
flows  of  the  Group  in  accordance  with  IAS 1  "Presentation  of  Financial
Statements" and IAS 21 "The Effects of Changes in Foreign  Exchange  Rates." The
change in  reporting  currency is  implemented  retrospectively  from January 1,
2004.

     U.S. GAAP

     As of January 1, 2005,  TORM  changed its method of  accounting  for vessel
dry-docking  costs under US GAAP from the accrual method to the deferral method.
Under the accrual method,  dry-docking costs had been accrued as a liability and
an expense on an estimated  basis in advance of the next scheduled  dry-docking.
Subsequent  payments for dry-docking were charged against the accrued liability.
Under the deferral method,  costs incurred in replacing or renewing the separate
assets that constitute the dry-docking  costs are capitalized and depreciated on
a  straight-line  basis over the  estimated  period until the next  dry-docking.
Dry-docking  activities include, but are not limited to, inspection,  service on
turbocharger, replacement of shaft seals, service on boiler, replacement of hull
anodes,  applying of antifouling and hull paint, steel repairs and refurbishment
and replacement of other parts of the vessel. This change was made to conform to
prevailing  shipping industry  accounting  practices and the Group's  accounting
under  IFRS.  On  January  1, 2005,  TORM  recorded  the effect of the change in
accounting  principles  on  periods  prior  to 2005 as a  cumulative  effect  of
accounting  change  of USD 8.7  million  (net of income  tax of USD 0.4  million
(income))  or USD 0.3 per basic share.  The effect of this change in  accounting
methods on the US GAAP shareholders' equity was an increase of USD 8.7 million.

ACCOUNTING PRINCIPLES NOT YET ADOPTED

     IFRS

     IFRS 7 "Financial  Instruments:  Disclosures"  adds certain new disclosures
about financial  instruments to those currently required by IAS 32, replaces the
disclosures  now  required  by IAS  30  and  compiles  all  of  those  financial
instruments  disclosures  together in a new standard.  The standard is effective
for periods beginning on or after January 1, 2007.

     Amendment to IAS 1 "Presentation  of Financial  Statements".  The amendment
introduces  disclosure  requirements  about  the  level of  capital  and how the
capital is managed. The amendment is effective for periods beginning on or after
January 1, 2007.

     TORM expects to implement  these new  disclosure  requirements  with effect
from the financial year 2006.

     U.S. GAAP

     On December 16,  2004,  the FASB issued  Statement of Financial  Accounting
Standards,  or SFAS, No. 123 (revised 2004)  "Share-based  Payment",  which is a
revision  of SFAS 123,  "Accounting  for  Stock-Based  Compensation".  SFAS 123R
supersedes  APB opinion No. 25,  "Accounting  for Stock issued to Employees" and
its   interpretations,   and  revises  SFAS  123   "Accounting  for  Stock-Based
Compensation".  SFAS 123R  eliminates  the  alternative  to use APB Opinion 25's
intrinsic value method of accounting that was provided in SFAS 123 as originally
issued.  SFAS 123R requires  entities to recognize the cost of employee services
received in exchange for awards of equity  instruments  based on the  grant-date
fair  value of those  awards.  SFAS  123R  applies  to all  awards  granted  and
modified,  repurchased,  or cancelled  after the first  interim or annual period
beginning  after 15 June 2005.  The Company does not expect the adoption of SFAS
123R to have a material impact on the Company's financial position or results of
operations.

     In May  2005,  the FASB  issued  SFAS 154  "Accounting  Changes  and  Error
Corrections  -- a replacement  of APB Opinion No. 20 and FASB  Statement No. 3".
SFAS  154  replaces  APB  20,  "Accounting  Changes",  and  SFAS  3,  "Reporting
Accounting Changes in Interim Financial Statements", and amends the requirements
for the accounting for and reporting of a change in accounting  principle.  SFAS
154 establishes retrospective application, unless impracticable, as the required
method for reporting a change in accounting principle in the absence of explicit
transition requirements specific to the newly adopted accounting principle. SFAS
154 also provides guidance for determining whether retrospective  application of
a change in  accounting  principle is  impracticable  and for reporting a change
when retrospective application is impracticable.  Under SFAS 154, the correction
of an error in  previously  issued  financial  statements  is not an  accounting
change, but involves adjustments to previously issued financial  statements.  In
many,  but not all aspects,  under SFAS 154 the accounting for changes and error
corrections are converged with IAS 8 "Accounting Policies, Changes in Accounting
Estimates  and  Errors".  SFAS  154 is  effective  for  accounting  changes  and
corrections of errors made in fiscal years beginning after 15 December 2005. The
Company  does not expect the  adoption of SFAS 154 to have a material  impact on
the company's financial position or results of operations.

     In  November  2005 the FASB  issued  Staff  Position  No. FAS 115-1 and FAS
124-1,  the Meaning of Other  -Than-Temporary  Impairment and Its Application to
Certain  Investments,  ("FSP No.  115-1").  FSP No.  115-1  provides  accounting
guidance for  identifying and  recognizing  other-than-temporary  impairments of
debt and equity  securities,  as well as cost method  investments in addition to
disclosure  requirements.  FSP No.  115-1 is  effective  for  reporting  periods
beginning  after December 15, 2005, and earlier  application is permitted.  This
new  pronouncement  will be  effective  in 2006 and the Company does not believe
that  adoption  of FSP No.  115-1 will have a material  effect on its  financial
position, cash flows or results of operations.

U. S. GAAP ACCOUNTING POLICIES ADOPTED DURING 2005

     None.

G.   Safe harbor

     Forward-looking  information discussed in this Item 5 includes assumptions,
expectations,  projections,  intentions and beliefs about future  events.  These
statements  are  intended  as  "forward-looking  statements."  We  caution  that
assumptions,  expectations,  projections,  intentions  and beliefs  about future
events may and often do vary from  actual  results  and the  differences  can be
material. Please see "Cautionary Statement Regarding Forward-Looking Statements"
in this Report.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.   Directors and senior management

     Set forth below are the names,  ages and  positions  of our  directors  and
executive officers.

Name                            Age        Position
----                            ---        --------

Board of Directors:
Niels Erik Nielsen               58        Chairman of the Board
Christian Frigast                54        Deputy Chairman of the Board
Lennart Arnold Johan Arrias      57        Director
Ditlev Engel                     42        Director
Rex Harrington                   72        Director, retired in April 2006
Peder Mouridsen                  56        Director
Gabriel Panayotides              51        Director
Nicos Zouvelos                   51        Director, joined in April 2006

Management:
Klaus Kjaerulff                  54        Chief Executive Officer and Acting
                                           Chief Financial Officer
Klaus Nyborg                     42        Chief Financial Officer, resigned in
                                           June 2006

     Biographical  information  with  respect  to  each  of  our  directors  and
executives is set forth below.

     Niels Erik Nielsen has been Chairman of our Board of Directors  since April
25,  2002.  Prior to that Mr.  Nielsen  was the Deputy  Chairman of our Board of
Directors from September 26, 2000. Mr. Nielsen is also a partner with the Danish
law firm,  Bech-Bruun Dragsted,  which provides certain legal services to us. He
is a member of the board of directors  of several  Danish  companies,  including
Amagerbanken Aktieselskab, Ambu A/S, Charles Christensen A/S, Cimber Air Holding
A/S,  Danica-Elektronik  A/S,  Gammelrand  Skaervefabrik  A/S, GPV Industri A/S,
InterMail A/S,  Kongskilde  Industries A/S,  Mezzanin  Kapital A/S, Pele Holding
A/S, Preben Olsen Automobiler A/S, Satair A/S,  SCF-Technologies  A/S and Weibel
Scientific A/S. Mr. Nielsen holds a Masters of Law degree from the University of
Copenhagen.

     Christian  Frigast has been a director of the Company  since  September 26,
2000 and Deputy  Chairman  since April 25,  2002.  Mr.  Frigast is the  managing
director of Axcel A/S, a Danish investment  company.  He also serves as a member
of the Board for numerous companies including Holdingselskabet af 1. august 1997
A/S and several  companies  related to Axcel A/S. Mr. Frigast holds a Masters of
Science degree in Economy from the University of Copenhagen.

     Lennart  Arnold Johan Arrias has been a director of the Company since 2003.
Mr.  Arrias is employed by TORM as a Captain and has been with the Company since
1992. He has been elected by the employees of TORM to our Board of Directors.

     Ditlev Engel has been a director of the Company  since April 25, 2002.  Mr.
Engel is Group  President  and CEO of Vestas  Wind  Systems  A/S. He serves as a
member of the board of directors  for several  companies  related to Vestas Wind
Systems A/S.  Mr.  Engel holds a Bachelor of Science  degree in Economy from the
Copenhagen Business School.

     Rex  Harrington,  a director of the Company since April 2003, is the former
Director  of  Shipping  at  The  Royal  Bank  of  Scotland  (RBS)  where  he had
responsibility for its extensive shipping  portfolio.  He has wide experience in
the shipping industry and in marine finance,  starting his career at the Bank of
England after graduating from Oxford University with a Masters degree. He is now
an independent  shipping advisor. Mr. Harrington is the Chairman of the Advisory
Board  of  the  Liberian   International  Ship  and  Corporate  Registry  and  a
non-executive director of the International Chamber of Commerce Commercial Crime
Services,  which incorporates the International  Maritime Bureau. He also serves
on the board of directors of General Maritime Corporation, a shipping a publicly
traded company with securities  registered under the Securities  Exchange Act of
1934.  In addition,  Mr.  Harrington is a Deputy  Chairman of the  International
Maritime  Industries  Forum and a member  of  various  organizations,  including
InterCargo London Advisory Panel, Lloyds Register of Shipping General Committee,
London  Shipping Law Centre  Steering  Committee  and The Baltic  Exchange.  Mr.
Harrington was a Director of Clarksons (international  shipbrokers) from 1995 to
1998 and of  Lloyds  Register  of  Shipping  from 1994 to 1999.  Mr.  Harrington
retired as a director of the Company at the annual general meeting held in April
2006.

     Peder  Mouridsen  has  been a  director  of the  Company  since  2003.  Mr.
Mouridsen is employed by TORM as a Chief  Engineer and has been with the Company
since  1970.  He has  been  elected  by the  employees  of TORM to our  Board of
Directors.

     Gabriel  Panayotides has been a director of the Company since September 26,
2000. Mr.  Panayotides is Chairman (since 1998) of Excel Maritime Carriers Ltd.,
listed on the American Stock Exchange  since October 1997. Mr.  Panayotides  has
been engaged in the  ownership and operation of ships since 1978 and sits on the
Greek  Committee  of the  classification  societies,  Bureau  Veritas and Lloyds
Register of Shipping.  He has a Bachelors degree from the Pireaus  University of
Economics.

     Nicos  Zouvelos was elected to replace Rex  Harrington as a director of the
Company at the AGM in April 2006.  Mr.  Zouvelos  is General  Manager of Beltest
Shipping  Company  Ltd.,  in  Cyprus.  He holds a Master  of  Science  degree in
Quantative Economics from University of Stirling, Scotland.

     Klaus Kjaerulff has been our Chief Executive  Officer and Managing Director
since September 2000 and our Acting Chief Financial Officer since June 2006. Mr.
Kjaerulff  has  worked  for TORM  since  1976.  From 1997 to 2000,  he served as
Executive Vice President  responsible  for our tanker and bulk  divisions.  From
1981 to 1997,  Mr.  Kjaerulff was Vice President of our tanker  division.  He is
deputy  chairman  of the board of the Danish  Shipowners'  Association  and also
serves  as a member of the board  for ICC  Denmark,  Assuranceforeningen  SKULD,
Norske Veritas Rad and The Trade Council of Denmark.

     Klaus Nyborg was our Chief  Financial  Officer from  February  2002 to June
2006. Prior to working for us, Mr. Nyborg was employed in various  capacities at
the A.P.  M0ller Group,  most recently as Chief  Financial  Officer (CFO) of the
Maersk  Logistics  division.  From 1998 to 2001, he served as Vice President and
Regional CFO at Maersk for the Asia-Mid-East  Region.  From 1997 to 1998, he was
the Regional CFO for the  Europe-Africa  Region.  From 1992 to 1997,  Mr. Nyborg
served as General Manager and Corporate  Secretary in the A.P. M0ller Group. Mr.
Nyborg  serves as a board member of The Danish  Securities  Council.  He holds a
Masters degree in Law and Business Economics and a Diploma in Economics from the
Copenhagen Business School.

B.   Compensation.

     In 2005,  we paid a total of USD 0.9 million to the Board of Directors  and
USD 3.4 million to our executives including exercised stock options. We have not
set aside any amounts to provide pension,  retirement or similar benefits to our
directors and  executive  officers.  For a description  of our stock option plan
please  refer to "Option  Plan" below.  As of December 31, 2005,  members of our
Board of Directors had exercised 81,400 options.

C.   Board Practices.

     The members of our Board of Directors are elected for four-year  terms.  At
the end of each term,  they are  eligible  for  re-election.  All current  Board
members were elected at the annual general  meeting in 2003 and,  except for Mr.
Rex Harrington,  will be eligible for re-election in 2007.  There are no service
contracts  between  us and any of our  directors  providing  for  benefits  upon
termination of a director's election.

Committees of the Board of Directors

     On July 31, 2005, we established an audit committee, which adopted an audit
committee  charter in compliance with Nasdaq's  corporate  governance rules. Our
audit  committee  is  comprised  of two  independent  members  of our  board  of
directors who will be  responsible  for reviewing  our  accounting  controls and
recommending  to the board of directors the engagement of our outside  auditors.
The members of the audit  committee  are Messrs.  Christian  Frigast and Gabriel
Panayotides.  In addition, we have established a remuneration  committee that is
comprised  of two  independent  members  of our  board of  directors  which  are
responsible for establishing  executive officers' compensation and benefits. The
members  of our  compensation  committee  are  Messrs.  Niels Erik  Nielsen  and
Christian Frigast.

Exemptions from Nasdaq corporate governance rules

     We have certified to Nasdaq that our corporate  governance practices are in
compliance  with, and are not prohibited by, the laws of the Kingdom of Denmark.
Therefore,  we are exempt from many of Nasdaq's corporate  governance  practices
other than the  requirements  regarding the  disclosure of a going concern audit
opinion,   notification  of  material   non-compliance   with  Nasdaq  corporate
governance  practices and the  establishment  of an audit committee and a formal
written  audit  committee  charter.  The  practices  that we  follow  in lieu of
Nasdaq's corporate governance rules are described below.

          o    In  lieu  of a  nomination  committee  comprised  of  independent
               directors,  our  board  of  directors  will  be  responsible  for
               identifying and recommending potential candidates to become board
               members  and  recommending  directors  for  appointment  to board
               committees.   Shareholders   may  also   identify  and  recommend
               potential  candidates to become board  members in writing.  Also,
               under Danish law, two of our seven  directors  are elected by our
               employees. No formal written charter has been prepared or adopted
               because this  process is outlined in our Articles of  Association
               and in the laws of the Kingdom of Denmark.

          o    In accordance  with Danish law, we will not be required to obtain
               an independent review of related party transactions for potential
               conflicts  of  interests.  Our board of  directors,  however,  is
               contemplating  adopting a policy that would  require any director
               who has a potential  conflict of interest to identify and declare
               the nature of the  conflict to our board of directors at the next
               meeting of the board of directors. Such policy would additionally
               require  that  related  party  transactions  must be  approved by
               disinterested directors.

          o    As a foreign  private  issuer,  we are not  required  to  solicit
               proxies or provide proxy  statements to Nasdaq pursuant to Nasdaq
               corporate governance rules or Danish law. Consistent with laws of
               the  Kingdom  of  Denmark  and as  provided  in our  Articles  of
               Association,  we will notify our shareholders of meetings between
               14 days and four weeks before the general meeting, which is to be
               held  every  year  before end of April.  This  notification  will
               contain, among other things, information regarding business to be
               transacted  at  the  meeting.   In  addition,   our  Articles  of
               Association provide that shareholders must give us advance notice
               to properly  introduce  any business at a general  meeting of the
               shareholders  no later  than  February  15  before  such  general
               meeting.   Our   Articles  of   Association   also  provide  that
               shareholders may designate a proxy to act on their behalf.

     Other  than as  noted  above,  we are in full  compliance  with  all  other
applicable Nasdaq corporate governance standards.

D.   Employees.

     The numbers of employees we employed,  on average,  for the previous  three
financial years, are as follows:

                                    2003           2004        2005
                                    ----           ----        ----
Land-based employees
            Denmark                   92             93         103
            Other                      3              7          20
            Total                     95            100         123
Seafarers (officers)                 185            195         216
                                     ---            ---         ---
Total employees                      280            295         339

     In 2003, 2004 and 2005,  approximately 30 of our employees were employed in
administrative  positions.  The  majority  of the staff on vessels  owned by our
subsidiaries and associated companies are not employed by us.

E.   Share ownership

     The following table sets forth information as of April 30, 2005,  regarding
the total  amount of capital  stock owned by our  officers  and  directors on an
individual basis:

                                                                   Shares
Name                               Position                        (Nom. Hold.)
----                               --------                        ------------
Niels Erik Nielsen                 Chairman of the Board           *
Christian Frigast                  Deputy Chairman of the Board    *
Lennart Arnold Johan Arrias        Director                        *
Ditlev Engel                       Director                        *
Nicos Zouvelos                     Director                        *
Peder Mouridsen                    Director                        *
Gabriel Panayotides                Director                        *
Klaus Kjaerulff                    Chief Executive Officer         *
Klaus Nyborg                       Chief Financial Officer         *

*     The person beneficially owns less than one percent of our common shares.

Option plan

     In 2001, we created a share option based incentive  program for Management,
key employees and the Board members.  The program  included 23 participants  who
from 2001 to 2003 have been granted  options to purchase  shares in the Company,
where the  option  holder can buy the shares at a  specified  exercise  price or
where the  differential  between the share price as of the day of exercising the
options and the option price may be settled in cash.

     In this respect we acquired  4.39% of our share capital for USD 7.9 million
to cover the economic risk of share price movements in connection with the share
option  incentive  program.  As of December 31, 2005 24,420 treasury shares were
held to cover this  risk.  The value of these  shares was USD 1.2  million as of
December 31, 2005,  whereas the value of the options  exercised  during 2005 was
USD 1.3 million,  which was primarily  settled in cash. As of December 31, 2005,
98% of the options were exercised and as of April 30, 2006, all the options were
exercised.

     Please refer to Note 5 to the consolidated Financial Statements for further
information.

Employee shares

     During  April  2001,  the  Board of  Directors  also  decided  to offer our
employees  200,000 common shares for the price of DKK 10.5 per share. In October
2001, our employees exercised the right to purchase 194,235 of these shares. The
market  price at the date of the grant  was DKK 54.3 per  share.  The  remaining
stock purchase rights have expired.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

A.   Major shareholders.

     Our  capital  stock is  comprised  of common  shares,  par value DKK 10 per
share.  Shareholders  holding 5% or more of the total number of our  outstanding
shares are required to file information  with the Copenhagen Stock  Exchange.The
following table sets forth information regarding the owners of 5% or more of our
common  shares as of April  30,  2006  according  to  announcements  made to the
Copenhagen Stock Exchange in accordance with section 29 of the Danish Securities
Trading Act. None of the shareholders have any special voting rights.

Name                                    Number of Shares     Percentage of Class
----                                    ----------------     -------------------

Beltest Shipping Company Ltd.            11,216,600              30.8%
Menfield Navigation Company Limited       7,282,352              20.0%
A/S Dampskibsselskabet TORM's
Understottelsesfond, Denmark              2,278,440               6.3%

     Beltest and its parent company,  Ryder Holdings Inc., have filed a Schedule
13D with the SEC. Menfield Navigation Company Limited acquired 7,282,352 shares,
or  20.0%  of  our   outstanding   shares  during  2003,   2004  and  2005.  A/S
Dampskibsselskabet  TORM's  Understottelsesfond's  has filed a Schedule 13G with
the SEC and its shareholding in TORM have not changed over the last three years.

     Beltest    Shipping   Company   Ltd.,   A/S    Dampskibsselskabet    TORM's
Understottelsesfond  and Menfield  Navigation Company Limited have given notices
of their shareholdings to the Copenhagen Stock Exchange.

B.   Related party transactions.

     The members of the  Company's  Board of  Directors  and  Management,  close
members of the family to these  persons and  companies  where these persons have
control or exercise significant influence are considered as related parties with
significant influence.

     There have not been any material  transactions with such parties during the
financial  year,  except for a time  charter  agreement  with an entity owned by
Beltest  Shipping  Company  Limited under which TORM paid USD 7.2 million during
2005.

     Management  remuneration  is  disclosed  in  Note  5  to  our  consolidated
financial statements.

C.   Interests of experts and counsel.

     Not Applicable.

ITEM 8. FINANCIAL INFORMATION.

A.   Consolidated Statements and Other Financial Information.

     See Item 17.

DIVIDEND DISTRIBUTION POLICY

     Under Danish law, we are permitted to distribute dividends from our surplus
capital.  Any decision to distribute  dividends will be at the discretion of the
Board of  Directors  and must be  approved  by the  shareholders  at our  annual
general meeting. Our shareholders approved a dividend of DKK 23 corresponding to
USD 3.6 for every DKK 10 share at the annual general meeting in 2006.

     There are no  restrictions  in our existing  financing  arrangements on our
ability to pay dividends to our shareholders.

B.   Significant Changes.

     Not Applicable.

ITEM 9. THE OFFER AND LISTING.

A.   Offer and Listing Details.

     Our common shares  currently trade on the Copenhagen  Stock  Exchange.  The
tables  below sets forth,  for the periods  indicated,  the high and low closing
sale price in Danish Kroner and the average daily trading  volume for our shares
on the Copenhagen  Stock  Exchange.  Although we have provided the average daily
trading  volume of our shares for the periods  indicated,  the trading volume of
our shares on the  Copenhagen  Stock  Exchange is  extremely  volatile and daily
trading ranges from none to several thousand shares.

     The average  daily trading  volume may not be indicative of actual  trading
volumes  and  liquidity.  Please  also refer to "Risk  Factors - There may be no
active  public  market for you to resell our ADSs." For the  previous  five full
years:

  DKK                         2001        2002       2003       2004       2005
                               (*)         (*)        (*)
Low                          22.00       23.07      28.66      96.89     221.99
High                         31.25       30.21      91.44     249.11     361.54
                            ------      ------     ------     ------    -------
Average Daily Volume        18,908      22,350     50,416     81,351    151,415

(*): Adjusted for the issue of bonus shares in May 2004.

<TABLE>

     For the previous two full years and subsequent periods, by quarter:

2004                                      1st quarter      2nd quarter     3rd quarter            4th quarter
----                                      -----------      -----------     -----------            -----------
<S>                                           <C>               <C>             <C>                   <C>
Low                                             96.89           136.54          139.72                 171.12
High                                           198.99           175.74          172.76                 249.11
Average Daily Volume                          106,556           41,774          72,080                102,191

2005                                      1st quarter      2nd quarter     3rd quarter            4th quarter
Low                                            221.99           286.71          306.65                 291.48
High                                           324.85           339.22          361.54                 352.51
Average Daily Volume                          116,375          139,772         161,463                185,729
</TABLE>
<TABLE>

     For the previous six months:

                                           November       December         January        February            March           April
                                               2005           2005            2006            2006             2006            2006
                                               ----           ----            ----            ----             ----            ----
<S>                                         <C>            <C>             <C>             <C>              <C>             <C>
Low                                          291.48         292.24          294.25          292.88           279.46          272.98
High                                         334.66         306.06          310.19          309.20           301.90          298.97
Average Daily Volume                        211,635        207,537         116,082         106,503          117,119         159,177
</TABLE>

B.   Plan of Distribution

     Not Applicable.

C.   Markets.

     Our common shares are currently  trading on the Copenhagen  Stock Exchange.
Our ADSs, each  representing one common share, are listed on the Nasdaq National
Market  under the  abbreviation  "TRMD." The tables  below sets  forth,  for the
periods  indicated,  the high and low closing sale price in U.S. Dollars and the
average  daily  trading  volume for our shares on the  Nasdaq  National  Market.
Trading on the Nasdaq National Market  commenced on April 16, 2002.  Although we
have  provided the average  daily  trading  volume of our shares for the periods
indicated,  the trading  volume of our shares on the Nasdaq  National  Market is
extremely  volatile  and daily  trading  ranges  from none to  several  thousand
shares.

  USD                         2002           2003          2004         2005
  ---                         ----           ----          ----         ----
                               (*)            (*)
Low                           3.15           3.16         17.12        38.68
High                          4.25          15.73         44.90        59.57
Average Daily Volume           454          5,083        14,839       14,213

(*): Adjusted for the issue of bonus shares in May 2004.

<TABLE>
     For the previous two full years and subsequent periods, by quarter:

2004                                          1st quarter             2nd quarter            3rd quarter            4th quarter
----                                          -----------             -----------            -----------            -----------
<S>                                                <C>                      <C>                    <C>                   <C>
Low                                                 17.12                   22.29                  23.00                  29.00
High                                                35.40                   29.49                  29.11                  44.90
Average Daily Volume                               12,436                   7,283                  7,433                 30,889
2005                                          1st quarter             2nd quarter            3rd quarter            4th quarter
Low                                                 38.68                   49.00                  50.28                  45.61
High                                                57.58                   57.39                  59.57                  56.13
Average Daily Volume                               33,664                  11,079                  7,440                  5,446
</TABLE>
<TABLE>
           For each of the previous six months:

                                           November       December         January        February            March           April
                                               2005           2005            2006            2006             2006            2006
                                               ----           ----            ----            ----             ----            ----
<S>                                           <C>            <C>             <C>             <C>              <C>             <C>
Low                                           45.61          46.74           47.76           46.23            45.51           45.27
High                                          54.08          48.90           50.89           50.02            48.31           50.15
Average Daily Volume                          6,833          5,084           4,799           1,781            2,859           3,881

</TABLE>

D.   Selling Shareholders

     Not Applicable.

E.   Dilution

     Not Applicable.

F.   Expenses of the Issue

     Not Applicable.

ITEM 10. ADDITIONAL INFORMATION

     This section  summarizes  our share capital and the material  provisions of
our  Articles of  Association,  including  rights of holders of our shares.  The
description is only a summary and does not describe everything that our Articles
of Association contain. A copy of our Articles of Association was filed with the
Securities  and  Exchange  Commission  on June 28,  2002,  as Exhibit 1.1 to our
annual  report on Form 20-F for the year ended  December 31, 2001.  As a foreign
private  issuer,  we are not  subject to the proxy rules  applicable  to issuers
under  Section 14 of the Exchange  Act of 1934,  as amended,  and our  officers,
directors and principal  shareholders are not subject to the short-swing  profit
disclosure  and  recovery  provisions  of Section  16 of that act.  We intend to
provide  quarterly  reports for the first three  quarters of each fiscal year to
the  Securities  and  Exchange  Commission  on  Form  6-K  containing  unaudited
financial and other information that we file with the Copenhagen Stock Exchange.

A.   Share capital.

     Not Applicable.

B.   Memorandum and Articles of Association.

     Our Articles of Association provide that our principal objectives are

     o    to carry out business within shipping,  chartering and other transport
          services;

     o    to make investments, including in real estate; and

     o    to  carry  on such  other  business  as  determined  by the  Board  of
          Directors to be consistent with such objectives.

     The Rules of  Procedure  that  govern  our Board of  Directors  prohibit  a
director  from   participating  in  the  consideration  of  business   regarding
agreements in which the director is a participant or in which the director has a
material interest.  Any agreements between us and a director or between us and a
third party in which a director has an interest must be approved by the Board of
Directors.  The Rules of Procedure  also provide that a director shall retire at
the first general meeting following the director's 70th birthday.

     Our Articles of Association also contain the following provisions:

     o    our Board of Directors  shall receive a fixed stipend,  which shall be
          set by the Board of Directors and approved by the shareholders  during
          the annual general meeting;

     o    any dividend  payable to a shareholder  which remains  unclaimed after
          five years shall accrue to us;

     o    each common share shall have the right to one vote;

     o    directors  are  elected  for four year  terms,  after  which  they are
          entitled to be re-elected;

     o    there are no redemption rights; and

     o    generally,  proposals  to amend  our  Articles  of  Association  or to
          dissolve or merge with  another  company  require  the  approval of at
          least  2/3  of  all  votes  cast  at a  meeting  at  which  3/5 of the
          outstanding  share  capital  is  present,  unless the  resolution  was
          proposed by the Board of Directors, in which case a simple majority of
          the votes cast at a meeting at which a quorum consisting of 1/3 of the
          outstanding shares is present is required.

     With regard to general and special  meetings,  the Articles of  Association
provide that:

     o    special  meetings  can be convened by the Board of  Directors  and the
          auditors  at any time on at least eight days notice but cannot be more
          than four weeks in advance;

     o    holders  of at least  10% of our share  capital  can  request  special
          meetings by  submitting a written  request to the Board of  Directors,
          which then has 14 days to convene a meeting;

     o    shareholders  desiring  to attend the general  meeting  must obtain an
          admission card from us at least four days prior to the meeting;

     o    admission cards will be issued to registered  holders,  and holders of
          unregistered  shares who have obtained a deposit receipt issued by the
          depositary   bank  (or  Danish   Securities   Center)  and  a  written
          declaration  that the shares will not be  transferred  until after the
          general meeting;

     o    shares  acquired  from  another  shareholder  will not have any voting
          rights unless the shares are registered or unless the holder has filed
          and  provided  proof  of  ownership  at  least  one day  prior  to the
          announcement of the general meeting; and

     o    proposals by shareholders must be submitted in writing to the Board of
          Directors before February 15th in order to be considered at the annual
          general meeting.

DANISH LAW CONSIDERATIONS

     Under  Danish law,  shareholders  are not  permitted  to approve  corporate
matters  by  written  consent  in lieu  of  general  or  special  meetings.  All
shareholders  have access to  corporate  records  filed by each company with the
Danish  Commerce and  Companies  Agency.  These  corporate  records  include the
articles  of  association  and the annual  accounts/financial  statements.  Each
company is also required to keep a share register,  but shareholders do not have
access to it.

     Danish law permits  companies to adopt  cumulative  voting  provisions  and
staggered  terms  for our  board  of  directors,  but we have not  adopted  such
provisions.  Danish law also  prohibits  companies  from adopting  "poison pill"
measures  that could  prevent a takeover  attempt  by  discriminating  against a
shareholder or a group of shareholders.

C.   Material contracts.

     The  following  is a summary of our  material  contracts.  This  summary is
qualified in its entirety by reference to the full text of the actual documents,
which govern the transactions we describe.

NEWBUILDING CONTRACTS

     We have entered into seven  contracts  with Dalian New  Shipbuilding  Heavy
Industry Co. Ltd., each for the construction of a 110,000 dwt product tanker. Of
these contracts two were executed on June 20, 2003, two were executed on October
22, 2003,  one was executed on January 20, 2004 and two were executed on May 25,
2005.  The  contracts  provide  for stage  payments  of 10% upon  signing of the
contracts, 30% during construction,  and 60% upon delivery of the vessel for the
first five of the vessels.  On the other two vessels the  contracts  provide for
stage  payments of 50% upon signing of the contracts,  33% during  construction,
and 17%  upon  delivery  of each of the  vessels.  Delivery  of the  tankers  is
scheduled between April 2006 and January 2009.

     We have entered into four contracts with Guangzhou  Shipyard Int. Co. Ltd.,
each for the construction of a 51,800 dwt product tanker. Of these contracts two
were executed on November 1, 2005 and two were executed on January 16, 2006. The
contracts  provide for stage payments of 20% upon signing of the contracts,  40%
during  construction,  and 40%  upon  delivery  of the  vessel  for  each of the
vessels. Delivery of the tankers is scheduled between August 2008 and June 2009.

LOAN AGREEMENTS AND CREDIT FACILITIES

     On January 15,  2004,  the Company has entered  into a USD 95 million  loan
agreement  with  Nordea  Bank  Danmark  A/S to assist in the  financing  of five
vessels in our fleet.  The interest rate is a variable rate based upon LIBOR. As
security  for our  obligations  under the debt  instrument,  we have  granted to
Nordea  Bank a first  priority  mortgage,  registered  over and against the five
vessels. The loan is due to be repaid in 2014.

     On December  10,  2004,  the  Company  has  entered  into a USD 570 million
revolving credit facility with Danske Bank A/S and Danish Ship Finance to assist
in the  financing  of 20  vessels  in the TORM  fleet.  The  interest  rate is a
variable rate based upon LIBOR. As security for our  obligations  under the debt
instrument,  we have  granted  to Danske  Bank and Danish  Ship  Finance a first
priority mortgage,  registered over and against the 20 vessels.  The loan is due
to be repaid in 2014.

     On March 1, 2005, the Company has entered into a USD 161 million  revolving
credit  facility  with Import Export Bank of China to assist in the financing of
five of the abovementioned  newbuildings.  The interest rate is fixed based upon
LIBOR.  As  security  for our  obligations  under the debt  instrument,  we have
granted to Nordea Bank  Denmark,  who acts as guarantors  towards  Import Export
Bank of China for us, a first priority mortgage, registered over and against the
five vessels. The loan is due to be repaid in 2013.

     On December 23, 2005,  TORM Singapore Pte. Ltd., a company  wholly-owned by
TORM,  has entered into a USD 237 million loan  agreement  with The Hongkong And
Shanghai Banking Corporation Limited to assist in the financing of seven vessels
in the TORM fleet.  The interest  rate is a variable  rate based upon LIBOR.  As
security for our obligations  under the debt instrument,  we have granted to The
Hongkong And Shanghai  Banking  Corporation  Limited a first priority  mortgage,
registered  over and against the seven vessels.  The loan is due to be repaid in
2015.

D.   Exchange controls.

     None.

E.   Taxation.

     The  following  discussion  is a summary  of the  material  Danish and U.S.
federal income tax considerations  relevant to an investment  decision by a U.S.
Holder and a Non-U.S.  Holder,  as defined  below,  in our  American  Depositary
Shares,  or ADSs, as evidenced by American  Depositary  Receipts,  or ADRs. This
discussion does not purport to deal with the tax  consequences of owning ADSs to
all  categories of investors,  some of which,  such as dealers in securities and
investors whose functional  currency is not the U.S.  dollar,  may be subject to
special rules.  You should consult your own tax advisors  concerning the overall
tax consequences  arising in your own particular  situation under U.S.  federal,
state, local or foreign law of the ownership of ADSs.

DANISH TAX CONSIDERATIONS

     Under Danish law, dividends paid in respect of shares are subject to Danish
withholding  tax at the rate of 28%,  without  regard  to the  residency  of the
shareholders.  Non-residents  of  Denmark do not have to pay  additional  Danish
income tax on the dividends,  unless their shares are held in connection  with a
trade or business conducted from a permanent establishment in Denmark.

     Non-resident  shareholders  may be  eligible  for a  refund  of part of the
withholding  tax where  the  shareholders  are  entitled  to,  and  comply  with
procedures  for  claiming  benefits  under an income  tax  convention.  Eligible
shareholders who comply with certain certification procedures may claim a refund
from the Danish tax authorities, which will reduce the effective withholding tax
rate,  normally to 15%. The claim for a refund must be certified by the holder's
local tax authorities on forms prepared by the Danish tax authorities, which are
then submitted to the Danish tax authorities.

     No withholding tax is levied on dividends paid to a corporation which holds
at least 20% of a company's  shares,  provided that the shareholder  company (i)
has held those  shares  for a minimum  of one year  during the time in which the
dividends were paid and (ii) is a resident in another  European Union country or
in a country  with  which  Denmark  has  entered  into a taxation  treaty  which
eliminates or reduces the withholding tax on dividends.

     Under the  current  income tax  convention  between  Denmark and the United
States, dividends on shares  beneficially-owned by U.S. holders who are eligible
for treaty  benefits are subject to an effective  Danish  withholding tax at the
rate of 15%. The withholding  tax rate is reduced to 5% if the beneficial  owner
of the  dividends is a U.S.  company,  which holds  directly at least 10% of the
share capital of the company paying the dividends.

     Denmark has entered into tax  conventions  reducing the  withholding tax to
the applicable  convention  rate for individual  residents of the United States,
Canada, Germany,  Belgium,  Luxembourg,  Norway, Sweden,  Ireland,  Switzerland,
Greece and the United  Kingdom.  The regime does not  entitle the  investor to a
lower  withholding  tax rate than the rate  applicable  according  to the double
taxation  treaty,  but reduces the  withholding tax rate from the normal rate of
28% to the  withholding  tax rate that applies  according to the relevant double
taxation treaty.

     In order to receive  benefits  under the regime  mentioned in the preceding
paragraph,  a U.S.  investor  must  deposit  his shares with a Danish  bank.  An
agreement  on the  deposit  of  shares  must be made  with  the  Danish  bank in
question.

     Further, the U.S. investor must obtain a certificate of residential address
and tax  liability  from the tax  authorities  in the U.S.  and file it with the
Danish account holding bank through which the U.S. investor holds his shares.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

     In the opinion of Seward & Kissel LLP, our U.S. counsel,  the following are
the material U.S.  federal income tax consequences to us and to U.S. Holders and
Non-U.S. Holders, as defined below, regarding our ADSs. The following discussion
of U.S.  federal  income tax matters is based on the  Internal  Revenue  Code of
1986,  as  amended,  which  we  refer  to as  the  "Code,"  judicial  decisions,
administrative  pronouncements,  and existing and proposed regulations issued by
the U.S.  Department of the  Treasury,  all as they exist on the date hereof and
all of which are  subject  to  change,  possibly  with  retroactive  effect.  In
addition,  the discussion is based,  in part, on the description of our business
as described above and assumes that we conduct our business as described in that
section.

     References in the  following  discussion to "we," "us" and "our" are to A/S
Dampskibsselskabet  Torm ("TORM") and its subsidiaries on a consolidated  basis.
For purposes of the discussion  below, the U.S. Holders and Non-U.S.  Holders of
ADSs  generally  will be  treated  as the  owners  of the  common  stock of TORM
represented by the ADSs. In the following discussion, the United States Internal
Revenue Service is referred to as the "IRS."

United States Taxation Of Our Company

     We anticipate  that  substantially  all of our gross income will be derived
from the use and  operation of vessels in  international  commerce and that this
income will principally  consist of freights from the transportation of cargoes,
hire or lease income from voyage,  time or bareboat charters and the performance
of services  directly related thereto,  which we refer to as "shipping  income."
Unless exempt from U.S.  taxation under Section 883 of the Code or under Article
8 of the United  States-Denmark  Income Tax  Treaty,  we will be subject to U.S.
federal  income  taxation,  in the  manner  discussed  below,  to the extent our
shipping income is considered for U.S. federal income tax purposes to be derived
from sources within the United States.

     Shipping income that is attributable to transportation that begins or ends,
but that does not both begin and end, in the United  States  will be  considered
for such tax purposes to be 50% derived from sources  within the United  States.
Shipping income  attributable to transportation that both begins and ends in the
United  States will be  considered  to be 100% derived  from sources  within the
United States. We do not engage in  transportation  that gives rise to 100% U.S.
source income.

     Shipping income attributable to transportation exclusively between non-U.S.
ports will be  considered  to be 100% derived  from  sources  outside the United
States.  Shipping income derived from sources outside the United States will not
be subject to any U.S. federal income tax.

Code Section 883 Exemption

     Under Code  Section 883 and the final  regulations  promulgated  thereunder
that came into effect and applies to us beginning the calendar  year 2005,  TORM
and each  subsidiary  that derives U.S.  source shipping income will qualify for
exemption  from U.S.  federal  income tax under  Section  883 in respect of such
shipping income if, in relevant part:

     o    TORM and each  subsidiary is organized in a qualified  foreign country
          which,  as defined,  is a foreign  country  that grants an  equivalent
          exemption from tax to  corporations  organized in the United States in
          respect of the shipping  income for which  exemption is being  claimed
          under Section 883,  which we refer to as the "country of  organization
          requirement"; and

     o    more than 50% of the value of the stock of TORM and each subsidiary is
          treated as owned,  directly  or  indirectly,  by  individuals  who are
          "residents" of qualified foreign  countries,  which we refer to as the
          "ownership requirement."

     Since the U.S. Treasury Department has recognized  Denmark,  the country of
incorporation  of TORM,  and each of the  countries of  incorporation  of TORM's
subsidiaries  as a qualified  foreign  country in respect of the shipping income
for which exemption is being claimed under Section 883, TORM and each subsidiary
satisfy the country of organization requirement.

     In respect of the  ownership  requirement,  Section 883  provides a special
publicly-traded  rule applicable to both TORM and its subsidiaries.  In the case
of TORM, it will be exempted from having to satisfy the ownership requirement if
its stock is considered to be "primarily and regularly  traded on an established
securities market" located in its country of organization,  Denmark,  in another
qualified  foreign  country  or in the United  States,  which we refer to as the
"publicly-traded test." Furthermore, if TORM satisfies the publicly-traded test,
the  stock of  TORM's  subsidiaries  will be  deemed  to be owned by  individual
residents of Denmark and each of the  subsidiaries  will  satisfy the  ownership
requirement.

     The final regulations  provide,  in pertinent part, that stock of a foreign
corporation  will be  considered  to be  "primarily  traded"  on an  established
securities  market if the number of shares  that are traded  during any  taxable
year on that market  exceeds the number of shares traded during that year on any
other established securities market.

     At present,  the sole class of TORM's stock that is issued and  outstanding
is its  common  stock,  which is listed on the  Copenhagen  Stock  Exchange,  an
established securities market in Denmark.  TORM's common stock as represented by
its ADSs (each  representing  one share of common  stock) is also  listed on the
NASDAQ National Market (NASDAQ),  which is an established  securities  market in
the United  States.  However,  since TORM's common stock as  represented by ADSs
began  trading  on the  NASDAQ on April  17,  2002,  the  trading  activity  has
represented  less than 10% of the common shares traded on the  Copenhagen  Stock
Exchange.  For the  foreseeable  future,  TORM has no reason to expect that more
common shares will not continue to be traded on the  Copenhagen  Stock  Exchange
than on the NASDAQ and  therefore,  the analysis  below  proceeds on the premise
that its common shares are "primarily traded" on the Copenhagen Stock Exchange.

     Under the final regulations, TORM's common stock further provide that stock
will be considered to be "regularly traded" on an established  securities market
if (i) more than 50% of the common  stock is listed on such market and is traded
on such market, other than in de minimis quantities,  on at least 60 days during
the taxable year and (ii) the aggregate number of shares of such stock traded on
such  market is at least  10% of the  average  number  of  shares of such  stock
outstanding during such year.

     For 2005,  TORM's common stock  satisfied these  "regularly-traded"  tests.
Furthermore, TORM has no reason to believe that this will not continue to be the
case notwithstanding the ADS listing on the NASDAQ.

     Notwithstanding the foregoing,  the final regulations provide, in pertinent
part, that TORM's common stock will not be considered to be regularly  traded on
an  established  securities  market for any taxable year in which 50% or more of
the outstanding shares of such stock are owned,  within the meaning of the final
regulations,  on more than half the days during such taxable year by persons who
each own 5% or more of the outstanding  shares of such stock,  which we refer to
as the "5% override rule."

     In the event the 5% override rule is triggered based on its "more than half
the days" standard, the final regulations provide that the 5% override rule will
not apply for such year if we can establish that among the closely-held group of
5%  shareholders,  which we refer to as the "5%  closely-held  group," there are
sufficient 5% shareholders that are considered to be qualified  shareholders for
purposes of Section  883 to preclude  non-qualified  5%  shareholders  in the 5%
closely-held  group from  owning 50% or more of our stock for more than half the
number of days during such year, which we refer to as the "5% closely-held group
exception."

     Based on its shareholdings during 2005, TORM was subject to the 5% override
rule of the final  regulations.  However,  TORM has obtained  from one of its 5%
shareholders,  and from  each  entity  in the chain of  ownership  between  such
shareholder and TORM,  ownership statements required by the final regulations to
support such shareholder's status as a qualified  shareholder for more than half
the days of the  calendar  year 2005.  Since the  percentage  ownership  of TORM
common  shares  owned by such 5% qualified  shareholder  for such period is such
that the common share percentage  owned by the remaining  shareholders in the 5%
closely-held group for such period falls below the 50% ownership threshold, TORM
therefore qualifies for the 5% closely-held exception.

     Therefore,  both TORM and each  subsidiary  is eligible to claim  exemption
from tax under  Section 883 on the U.S.  source  shipping  income  earned during
2005.

The United States-Denmark Income Tax Treaty Exemption

     Without regard to Section 883, we believe that TORM, each Danish subsidiary
and  certain  non-Danish  subsidiaries  would  qualify for  exemption  from U.S.
federal  income  tax under  Article 8 of the  United  States-Denmark  Income Tax
Treaty, which we refer to as the "Treaty."

     Under Article 8 of the Treaty, TORM and each of its Danish subsidiaries and
each of its non-Danish  subsidiaries  that is treated as a "resident" of Denmark
within the meaning of the Treaty (collectively, "Danish subsidiaries") is exempt
from U.S.  federal income tax on the profits derived from the operation of ships
in  international  traffic.  As defined,  profits from the  "operation of ships"
include  profits  derived  from (i) time or  voyage  charters,  (ii) the  inland
transport  of  property   within  the  United  States   undertaken  as  part  of
international traffic, (iii) bareboat charters if the lessee operates the vessel
in international  traffic and (iv) the use,  maintenance or rental of containers
used in  international  traffic.  All of the U.S. source shipping income of TORM
and its Danish  subsidiaries falls within the scope of the exemption provided by
Article 8.

     The Treaty  conditions the eligibility of TORM and its Danish  subsidiaries
to claim exemption under Article 8 upon, among other things, TORM satisfying the
publicly-traded   rule  of  the  "treaty  shopping"  provisions  of  Article  22
(Limitation Of Benefits) of the Treaty.

     The  publicly-traded  rule provides that a Danish corporation such as TORM,
as well as its Danish  subsidiaries,  will be  entitled  to the  benefits of the
Treaty if all of TORM's  shares in the class or  classes  of stock  representing
more than 50% of the vote and value of its stock,  which we refer to as the "50%
vote/value   test,"  are  listed  on  a  "recognized  stock  exchange"  and  are
"substantially  and regularly traded" on one or more recognized stock exchanges,
which we refer to as the  "substantially  and  regularly  traded test." The term
"recognized  stock  exchange"  includes the  Copenhagen  Stock  Exchange and the
NASDAQ.  The shares in a class of stock are considered to be "substantially  and
regularly  traded"  if (i)  trades  in such  class are  effected  on one or more
recognized  stock  exchanges  other than in de minimis  quantities  during every
quarter, and (ii) the aggregate number of shares of that class traded during the
previous taxable year is at least 6% of the average number of shares outstanding
in that class during that taxable year.

     TORM's  common stock is currently  listed on a  recognized  stock  exchange
within the  meaning of the Treaty (the  Copenhagen  Stock  Exchange).  Since the
common  stock  is  TORM's  sole  class  of  stock,  the 50%  vote/value  test is
satisfied.  Based  on their  recent  trading  history  on the  Copenhagen  Stock
Exchange  over the past two years,  the common  shares of TORM also  satisfy the
substantially  and  regularly  traded  test of the  Treaty  and  therefore  TORM
currently  satisfies  the  publicly  traded  rule of Article  22 of the  Treaty.
Although  we cannot  give any  assurances,  we have every  expectation  that the
trading  volume and trading  frequency of TORM's common shares on the Copenhagen
Stock  Exchange will continue to match or exceed the recent  trading  history of
TORM's common shares on the Copenhagen Stock Exchange.

Taxation in Absence of Internal  Revenue  Code  Section 883  Exemption or Treaty
Exemption

     4% Gross Basis Tax Regime. To the extent the benefits of Section 883 or the
Treaty  are  unavailable,  the  U.S.  source  shipping  income  of TORM  and its
subsidiaries  which is not  considered to be  "effectively  connected"  with the
conduct of a U.S. trade or business as discussed below, would be subject to a 4%
tax  imposed by Section  887 of the Code on a gross  basis,  without  benefit of
deductions.  Since under the sourcing rules described above, no more than 50% of
our shipping income would be treated as derived from U.S.  sources,  the maximum
effective  rate of U.S.  federal  income tax on our shipping  income would never
exceed 2% under the 4% gross basis tax regime.

           Net Basis and Branch Tax Regime. To the extent the benefits of the
Section 883 exemption or the Treaty are unavailable and the U.S. source shipping
income of TORM and its subsidiaries is considered to be "effectively connected"
with the conduct of a U.S. trade or business, as discussed below, any such
"effectively connected" U.S. source shipping income, net of applicable
deductions, would be subject to the U.S. federal corporate income tax currently
imposed at graduated rates of up to 35%. In addition, TORM and its subsidiaries
may be subject to the 30% "branch-level" taxes (or such lesser tax as provided
by an applicable income tax treaty) on earnings effectively connected with the
conduct of such trade or business, as determined after allowance for certain
adjustments, and on certain interest paid or deemed paid attributable to the
conduct of their U.S. trade or business.

     The  U.S.  source  shipping  income  of  TORM  or any  subsidiary  will  be
considered  "effectively connected" with the conduct of a U.S. trade or business
only if:

     o    TORM or such  subsidiary  has, or is considered to have, a fixed place
          of business in the United  States  involved in the earning of shipping
          income; and

     o    substantially  all of the U.S.  source shipping income of TORM or such
          subsidiary is attributable to regularly scheduled transportation, such
          as the  operation of a vessel that follows a published  schedule  with
          repeated  sailings  at regular  intervals  between the same points for
          voyages that begin or end in the United States.

     We do not intend to have,  or permit  circumstances  that  would  result in
having,  substantially  all of the U.S.  source  shipping  income of TORM or its
subsidiaries  attributable to regularly scheduled  transportation.  Based on the
foregoing and on the expected mode of our shipping  operations,  we believe that
none of the  U.S.  source  shipping  income  of TORM or any  subsidiary  will be
"effectively connected" with the conduct of a U.S. trade or business.

     Gain on Sale of Vessels.  To the extent any of our vessels  makes more than
an occasional  voyage to U.S. ports,  TORM or its subsidiaries may be considered
for United States  federal income tax purposes to be engaged in the conduct of a
United States trade or business.  As a result,  except to the extent the gain on
the  sale of a  vessel  is  incidental  to the  Shipping  Income  of TORM or its
subsidiaries  that is exempt  under either  Section 883 or the Treaty,  any U.S.
source gain derived by TORM or its  subsidiaries  on the sale of a vessel may be
partly or wholly  subject to United States  federal  income tax as  "effectively
connected" income  (determined under rules different from those discussed above)
under the net basis and branch tax regime described above. However, we intend to
structure  sales of our vessels in such a manner,  including  effecting the sale
and  delivery of vessels  outside of the United  States,  as to not give rise to
U.S. source gain.

Taxation of U.S. Holders

     As used herein,  the term "U.S.  Holder" means a beneficial owner of an ADS
that (i) is a U.S.  citizen or resident,  a United States  corporation  or other
United States entity taxable as a corporation, an estate, the income of which is
subject to United States federal income taxation  regardless of its source, or a
trust  if a  court  within  the  United  States  is  able  to  exercise  primary
jurisdiction  over the  administration of the trust and one or more U.S. persons
have the  authority to control all  substantial  decisions of the trust and (ii)
owns the ADSs as a capital asset, generally, for investment purposes.

     If a  partnership  holds  our ADSs,  the tax  treatment  of a partner  will
generally  depend upon the status of the partner and upon the  activities of the
partnership.  If you are a partner in a partnership holding our ADSs, you should
consult your own tax advisor on this issue.

     Distributions.  Any  distributions  made by the ADS  depositary  agent,  or
depositary,  with respect to our ADSs to a U.S. Holder will generally constitute
dividends to the extent of our current or accumulated  earnings and profits,  as
determined under U.S. federal income tax principles.

     Dividends paid with respect to our ADSs to a  non-corporate  U.S. Holder (a
"U.S.  Individual  Holder") may be eligible for preferential U.S. federal income
tax  rates  (through  2008)  provided  that  (1)  we  are a  "qualified  foreign
corporation,"  (2) the U.S.  Individual Holder has owned our stock for more than
60 days in the  121-day  period  beginning  60 days before the date on which our
stock  becomes  ex-dividend  and (3) we are  not a  passive  foreign  investment
company  for the  taxable  year of the  dividend  or the  immediately  preceding
taxable  year  (which we do not  believe  we are,  have  been or will  be).  The
preferential  tax rates do not apply to U.S.  Holders that are not  individuals,
trusts or estates.

     We will be treated as a "qualified  foreign  corporation" if either (1) our
ADSs are readily  tradable  on an  established  securities  market in the United
States  or (2) we are  eligible  for  the  benefits  of a  satisfactory  (in the
judgment of the U.S. Treasury Secretary) comprehensive income tax treaty between
the  United  States  and  a  foreign  country  which  includes  an  exchange  of
information program.

     Our ADSs will  qualify as readily  tradable  or an  established  securities
market  because they are listed on the NASDAQ  national  market,  which has been
designated by the IRS as so qualifying.  Alternatively,  as discussed  above, we
are eligible for the benefits of the Treaty and the IRS has issued guidance that
the Treaty is  satisfactory  for this  purpose.  Therefore,  we believe that any
dividends paid by us on our ADSs should be eligible for these preferential rates
in the hands of a U.S. Individual Holder. However, certain limitations may apply
to any "extraordinary  dividends" paid by us. Any dividends paid by us which are
not eligible for these  preferential rates will be taxed as ordinary income to a
U.S. Holder.

     Distributions  in excess of our earnings and profits will be treated  first
as a non-taxable  return of capital to the extent of the U.S. Holder's tax basis
in his ADSs on a dollar-for-dollar basis and thereafter as capital gain. Because
we are not a U.S.  corporation,  U.S. Holders that are corporations  will not be
entitled  to  claim  a  dividend   received   deduction   with  respect  to  any
distributions  they  receive  from  us.  Dividends  paid  with  respect  to  the
underlying  common  stock of each ADS will  generally  be  treated  as  "passive
income" (or "passive category income" for taxable years beginning after December
31, 2006) or, in the case of certain types of U.S. Holders,  "financial services
income," (which will be treated as "general  category  income" for taxable years
beginning after December 31, 2006) for purposes of computing  allowable  foreign
tax credits for U.S. foreign tax credit purposes.

     Sale,  Exchange or other  Disposition of ADSs. A U.S. Holder generally will
recognize taxable gain or loss upon a sale, exchange or other disposition of our
ADSs in an amount  equal to the  difference  between the amount  realized by the
U.S. Holder from such sale,  exchange or other disposition and the U.S. Holder's
adjusted  tax basis in the ADSs.  Such gain or loss will be treated as long-term
capital gain or loss if the U.S.  Holder's holding period in the ADSs is greater
than one year at the  time of the  sale,  exchange  or other  disposition.  Such
capital gain or loss will generally be treated as U.S.-source income or loss, as
applicable,  for U.S.  foreign tax credit purposes.  A U.S.  Holder's ability to
deduct capital losses is subject to certain limitations.

U.S. Taxation of "Non-U.S. holders"

     A  beneficial  owner of an ADS that is not a U.S.  Holder  is  referred  to
herein as a "Non-U.S. Holder."

     Distributions.  Non-U.S.  Holders  generally  will not be  subject  to U.S.
federal income tax or withholding tax on dividends received from us with respect
to our common stock,  unless the dividends are  effectively  connected  with the
Non-U.S. Holder's conduct of a trade or business in the United States or, if the
Non-U.S. Holder is entitled to the benefits of an income tax treaty with respect
to  those   dividends,   those   dividends  are   attributable  to  a  permanent
establishment maintained by the Non-U.S. Holder in the United States.

     Sale,  Exchange or Other  Disposition of ADSs.  Non-U.S.  Holders generally
will not be subject to U.S.  federal income tax or  withholding  tax on any gain
realized upon the sale,  exchange or other  disposition of our ADSs unless:  (i)
the gain is effectively connected with the Non-U.S.  Holder's conduct of a trade
or business in the United  States or, if the Non-U.S.  Holder is entitled to the
benefits  of an income  tax  treaty  with  respect  to that  gain,  that gain is
attributable to a permanent  establishment  maintained by the Non-U.S. Holder in
the United States;  or (ii) the Non-U.S.  Holder is an individual who is present
in the United States for 183 days or more during the taxable year of disposition
and other conditions are met.

     If the  Non-U.S.  Holder is engaged in a U.S.  trade or  business  for U.S.
federal income tax purposes,  the income from the ADSs,  including  dividends on
the  underlying  common  stock  and the gain from the  sale,  exchange  or other
disposition of such stock that is effectively connected with the conduct of that
trade or business,  will generally be subject to regular U.S. federal income tax
in the same manner as discussed in the previous section relating to the taxation
of U.S.  Holders.  In addition,  if you are a corporate  Non-U.S.  Holder,  your
earnings and profits that are attributable to the effectively  connected income,
which are subject to certain adjustments, may be subject to an additional branch
profits  tax at a rate of 30%,  or at a lower rate  specified  by an  applicable
income tax treaty.

Backup Withholding and Information Reporting

     In general, dividend payments, or other taxable distributions,  made within
the United States to you will be subject to information  reporting  requirements
and "backup withholding" if you are a non-corporate U.S. Holder and you:

     o    fail to provide an accurate taxpayer identification number;

     o    are notified by the IRS that you have failed to report all interest or
          dividends required to be shown on your federal income tax returns; or

     o    in certain circumstances, fail to comply with applicable certification
          requirements.

     Non-U.S.  Holders  may  be  required  to  establish  their  exemption  from
information  reporting and backup  withholding by certifying their status on IRS
Form W-8BEN, W-8ECI or W-8IMY, as applicable.

     If you sell your ADSs to or through a U.S. office or broker, the payment of
the  proceeds  is  subject  to both  U.S.  backup  withholding  and  information
reporting unless you certify that you are a non-U.S.  person, under penalties of
perjury, or you otherwise establish an exemption.  If you sell your ADSs through
a non-U.S.  office of a non-U.S.  broker and the sales  proceeds are paid to you
outside the United  States then  information  reporting  and backup  withholding
generally will not apply to that payment.  However,  U.S. information  reporting
requirements,  but not  backup  withholding,  will  apply to a payment  of sales
proceeds, including a payment made to you outside the United States, if you sell
your ADSs  through a non-U.S.  office of a broker  that is a U.S.  person or has
some other contacts with the United States.

     Backup  withholding  is not an additional  tax.  Rather,  you generally may
obtain a refund of any amounts  withheld  under  backup  withholding  rules that
exceed your income tax liability by filing a refund claim with the IRS.

Danish Tonnage Taxation Scheme

     On  February  6, 2002,  the  Danish  Government  proposed a bill  regarding
Tonnage  Taxation,  which was enacted on April 18,  2002.  According  to the new
Tonnage  Taxation  Act,  taxable  income  will no  longer be  calculated  as the
difference  between  taxable income and deductible  expenses as under the normal
corporate taxation.  Instead, taxable income is calculated with reference to the
tonnage used by the Company during the year.  The  legislation  was  implemented
retroactively  from January 1, 2001 and in connection with the submission of tax
return for 2001 the Company  decided to enter the tonnage  taxation  scheme with
effect from January 1, 2001.

     The election is binding for a ten-year period and, accordingly,  we will be
covered by the tonnage tax system until 2010.

     Taxable income under the tonnage tax system is calculated using fixed rates
per 100 net  tons  per day for the  vessels.  When  calculating  taxable  income
according to the tonnage tax system,  no deductions or depreciation  charges are
allowed.

     It is as yet  uncertain  whether  activities  in relation to  management of
pools of  vessels  owned by other  shipping  companies  can or  cannot  be taxed
according to the tonnage tax system,  but will be taxed in  accordance  with the
ordinary Danish  corporate tax  legislation.  Special rules apply in relation to
the treatment of financial income/expenses.

     The taxable  income for a Company for a given period is  calculated  as the
sum of the taxable  income  under the tonnage tax system and the taxable  income
made up in accordance  with to the ordinary  Danish  corporate  tax system.  The
taxable income is taxed at the normal  corporate tax rate  (presently 28 %). The
taxable income may be offset by tax losses carried forward  following the normal
Danish Tax rules.

     Capital gains in connection  with the sale of vessels - calculated for each
vessel as the difference  between the sales price and the acquisition price plus
expenses  incurred for  improvement of the vessel - are taxed in accordance with
the normal tax legislation.

     Generally,  recaptured  depreciation should be taken into income.  However,
such taxation may be deferred if new vessels are contracted  within certain time
limits.

     In this respect,  when  converting to the tonnage tax system,  the existing
vessels are  transferred to a transition  account at their tax value.  Any costs
relating to  improvements  of these vessels are added to this  account.  Vessels
acquired  after  transferring  (January  1, 2001) to the  tonnage tax system are
booked on a special  netting  account.  Costs  relating to  improvement of these
vessels  are added to the  netting  account.  If a vessel is sold,  the  smaller
amount of the sales price and the actual  acquisition  price plus  expenses  for
improvements  shall reduce the  transition  account (if the ships were  acquired
prior to entering the tonnage tax system) or netting  account (if the ships were
acquired after entering the tonnage tax system).

     The transition and netting  accounts are reduced annually by a depreciation
rate of 12 %. If the  transition  account is  negative  and at the same time the
netting  account  is  positive,  the  reduction  is made on the basis of the net
amount.

     If the shipping company's transition account becomes negative, the negative
amount shall be included in the taxable  income  unless the  negative  amount is
fully or partially  neutralized by a positive amount on the netting account plus
contracted newbuild tonnage which shall be delivered within maximum three years.

     In accordance with Danish accounting principles, the provision for deferred
tax that existed at the date of enactment was released to income in 2002,  which
was in accordance  with shipping  industry  practice in Denmark.  However,  TORM
changed  its  accounting  policies  in 2005 to comply  with IFRS and in order to
align the  accounting  under IFRS and under U.S.  GAAP  deferred  tax assets and
liabilities  are recorded in the balance  sheet.  As at December  31, 2005,  the
Company  carried a deferred  tax  liability  of USD 54.6  million in the balance
sheet. In 2005, the Company paid income taxes, including tonnage tax, of USD 5.9
million compared to USD 0.1 million in 2004. The Company paid no income taxes in
2001, 2002 and 2003 due to tax losses carried forward.

     The tonnage tax  legislation  is relatively  new, and the guidance from the
authorities is not detailed in every aspect. Accordingly, in connection with the
preparation  of our  tax  returns  for  2001,  2002,  2003  and  2004,  we  made
interpretations  of the new  tonnage  tax  legislation  some of which  have been
challenged by the tax  authorities.  We agree in part to some of the alternative
interpretations  presented  by the tax  authorities  whereas  we do not agree to
other  of  the  alternative   interpretations   presented.  The  differences  in
interpretation  primarily relate to whether certain income and expense items are
taxable under the tonnage  taxation scheme or the ordinary Danish  corporate tax
legislation.  The tax  authorities  have concluded  their  assessment of the tax
return for 2001.  However,  we have  challenged the  assessment  with respect to
certain issues.

F.   Dividends and paying agents.

     Not Applicable.

G.   Statement by experts.

     Not Applicable.

H.   Documents on display.

     We are subject to the informational requirements of the Securities Exchange
Act of 1934,  as amended.  In  accordance  with these  requirements  we file and
submit  reports  and  other   information   with  the  Securities  and  Exchange
Commission.  These materials,  including this annual report and the accompanying
exhibits,  may be  inspected  and  copied  at the  public  reference  facilities
maintained by the Securities and Exchange Commission at 100 F Street, N.E., Room
1580,  Washington,  D.C.  20549.  Copies of these materials can also be obtained
upon  written  request  from  the  Public  Reference  Section  of the SEC at its
principal  office in Washington,  D.C.  20549,  at prescribed  rates or from the
SEC's website on the Internet at http://www.sec.gov, free of charge. Please call
the SEC at 1-800-SEC-0330 for further  information on public reference rooms. In
addition,  documents  referred to in this annual  report may be inspected at our
headquarters at 18 Tuborg Havnevej, DK-2900 Hellerup, Denmark.

I.   Subsidiary Information

     Not Applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk from foreign currency  fluctuations,  changes
in interest rates and changes in the prices of fuel oil. We enter into financial
instruments  to manage these risks,  but do not use  financial  instruments  for
trading or  speculative  purposes.  The  sensitivity  analyses  presented do not
consider  the  effects  that such  adverse  change may have on overall  economic
activity,  nor do  they  consider  additional  actions  management  may  take to
mitigate  its  exposure to such  changes.  Actual  results  may  differ.  For an
overview of the fair value of the derivative financial  instruments please refer
to Note 18.

Foreign Exchange Rate Risk

     As  TORM  uses  USD as  measurement  currency  and  most  of the  Company's
transactions are in USD, TORM only has limited transaction risk, which primarily
relates to costs in DKK.

     Exchange  rate risks are assessed in relation to the USD, and the Company's
policy is to limit the  impact  of  exchange  rate  movements  on the  financial
statements and on the financial position of the Company.

     The expected cash flow in relation to the payment of technical  expenses in
non-USD related currencies,  salaries,  wages and other administrative  expenses
and  dividends  are  typically  covered for a period of up to 1 year ahead.  All
things being equal,  a hypothetical  weakening of 1% in the U.S.  dollar against
Danish Kroner would result in a decrease in the net income of USD 0.8 million in
2006. However, shareholders' equity as of December 31, 2005 would have increased
by approximately USD 4 million had the U.S. dollar weakened by 1% against Danish
Kroner. Such a change in exchange rates would not have impacted our cash flows.

     In order to manage  this  risk,  we enter  into  forward  contracts,  cross
currency contracts and currency options.

Cross currency contracts

     As of December 31, 2005, we had no cross currency  contract in place. As of
December 31, 2004, the fair value of our currency contracts was USD 6.4 million.

Forward Currency Contracts

     In 2005 we entered into forward  contracts  agreeing to sell a total of USD
50 million  against DKK at an average  exchange rate of DKK 6.17 for the purpose
of servicing  our Danish cash flow  requirements.  As of December 31, 2005,  the
fair value of our forward currency  contracts was less than USD (0.1) million as
compared to USD 3.8 million as of December 31,  2004.  The  contracts  expire in
April 2006.

Currency Options

     We have  entered into an agreement to buy put options for USD 16 million in
April 2006. The counterparty must buy USD from us at an exchange rate of 6.00 to
the DKK. In case the USD/DKK exchange rate exceeds the agreed level of 6.81, the
counterparty can purchase USD from us at an exchange rate of DKK 6.1875 per USD.

     As of December  31, 2005,  the fair value of our  currency  options was USD
(0.1) million as compared to USD 3.6 million as of December 31, 2004.

Interest Rate Risk

     As of December  31, 2005,  all of our debts have  variable  interest  rates
based on LIBOR plus a margin.

     In certain  cases,  we utilize  derivative  financial  instruments to avoid
interest rate  fluctuations  on earnings and cash resources.  Typically,  we use
interest rate swaps for periods up to 5 years. The  instrument's  profile always
matches the loan profile of the particular loan in question. The differential to
be paid or  received  under the swap  agreements  is accrued as  interest  rates
change and is recognized as an adjustment to interest expense.

     As of December 31,  2005,  we were  committed to a series of interest  rate
swap  agreements  whereby 42% of our total  floating  rate debt was swapped with
fixed rate obligations  having an average  remaining term of 2.6 year,  expiring
between 2006 and 2010. These  arrangements  effectively change our interest rate
exposure on the hedged debt from a floating  LIBOR rate to an average fixed rate
of 4.1%. An additional 19% of our floating rate debt was swapped with fixed rate
obligations  using interest swaps containing an option element having an average
remaining term of 2.2 years and expiring between 2007 and 2009. An interest rate
swap containing an option element is an agreement where the seller has an option
to ask the buyer to pay actual  LIBOR rate if this is above a certain  threshold
on the fixing day. On three of our  interest  rate swaps with an option  element
this  threshold is 7%. Below this level,  the swaps act as normal  interest rate
swaps and thereby  change our interest  rate  exposure on the hedged debt from a
floating  LIBOR rate to an average fixed rate of 3.8%. If market  interest rates
were to decrease  approximately 1% the interest rate swap agreements in place at
the end of the year would  require  us to pay USD 4.8  million  of  interest  in
excess of market rates.  The fair value of these interest rate swaps at December
31, 2005 was USD 6.6  million as compared to USD 0.2 million as of December  31,
2004.

     A 1% increase in interest  rates on the remaining  variable rate debt would
result in USD 2.0  million of  additional  interest  expense  for the year ended
December  31, 2005 as compared to USD 1.2 million as of December  31,  2004.  We
assess each debt instrument, the level of debt to fix and the timing of entering
into such agreements based on the market conditions.

     At year-end we had a bond  portfolio  with a fair value of USD 0.2 million.
The bonds  were  drawn for early  redemption  and sold with  value on January 2,
2006.

Bunker Price Risk

     Our results of operations could be negatively  impacted by increases in the
price of fuel oil. To cover this risk, we  economically  hedge the price of part
of its bunkers'  requirements  for up to 12 months forward at a fixed price.  In
2005, the Company hedged twenty five per cent of its bunker requirements, and at
year-end it had hedged about twenty nine per cent of the 2006  requirement.  The
market value of these  contracts  was USD 0.0 million at year end as compared to
USD (0.8) million in 2004. A  hypothetical  change of 1 percentage  point in the
price per ton of bunker oil would  result in a change in cost in 2006 of USD 1.2
million based on the expected consumption of bunkers, where the Company, not the
charterer, takes the risk.

     In light of the Company's pool structure, bunker hedging for tankers is not
done in respect of an individual vessel when it has been chartered out. Instead,
bunker hedging is planned in connection with the specific pool's total estimated
bunker  requirements.  Nonetheless,  where a contract of affreightment  covering
several  voyages  has  been  fixed,  the  pool  may  economically  hedge  bunker
requirements specifically for such a contract.

     For the bulk carriers,  bunkers are similarly  economically hedged to match
cargo  contractual  obligations but the  requirements  are generally less, given
that a larger part of earnings are derived from  vessels  chartered  out on time
charter, where the charterer is responsible for the payment of bunkers.

     All bunker  hedgings  and indeed any other form of hedging  are carried out
only  based on  specific  requirements  and not for the  purpose  of any form of
speculation.

Freight Rate Risk

     The  majority of our tanker  vessels are  operated on spot voyage  charters
through our pools.  To manage our exposure to  fluctuations in the freight rates
we may place  certain  of the  pool's  vessels  on time  charter  or enter  into
Contracts of Affreightment  (COA) or freight  derivatives  (FFA,  synthetic T/C,
profit split etc.). Our bulk vessels are primarily placed on time charters.

     The COA's would meet the  definition of a derivative  financial  instrument
according  to SFAS 133,  but  since we in nearly  all  instances  take  physical
delivery,  our COA's qualify for the normal sales and purchase exemption and are
therefore not accounted for as  derivative  financial  instruments.  The freight
derivatives are purely paper deals that require no physical delivery of either a
vessel or a cargo and as such are treated as a derivative financial instrument.

     As of December 31, 2005,  the fair values of the freight  derivatives  were
USD (1.9) million as compared to USD (4.4) million as of December 31, 2004.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not Applicable.

                                     Part II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Neither  we nor any of our  subsidiaries  have been  subject  to a material
default in the payment of principal,  interest,  a sinking fund or purchase fund
installment or any other material  default that was not cured within 30 days. In
addition,  the payment of our dividends are not, and have not been in arrears or
have not been  subject to a material  delinquency  that was not cured  within 30
days.

ITEM 14.  MATERIAL  MODIFICATIONS  TO THE RIGHTS OF SECURITY  HOLDERS AND USE OF
          PROCEEDS.

     None.

ITEM 15. CONTROLS AND PROCEDURES

(a)  Disclosure of controls and procedures.

     As of December 31, 2005, the Company  carried out an evaluation,  under the
supervision and with the  participation of the Company's  management,  including
the  Company's  Chief  Executive  Officer and Chief  Financial  Officer,  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures  pursuant to Rule 13a-14 of the Securities  Exchange Act of 1934,
as amended.  Based upon that evaluation,  the Chief Executive  Officer and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures  are  effective  in  alerting  them  timely to  material  information
relating to the  Company  required  to be  included  in the  Company's  periodic
Securities and Exchange Commission filings.

(b)  Management's annual report on internal controls over financial reporting.

     Not applicable.

(c)  Attestation report of the registered public accounting firm.

     Not applicable.

(d)  Changes in internal control over financial reporting.

     There have been no significant changes in our internal controls or in other
factors that could have significantly  affected those controls subsequent to the
date of the Company's most recent evaluation of internal controls, including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

     We have established an audit committee of the board of directors. Our audit
committee is comprised of two independent  members of our board of directors who
will be responsible  for reviewing our accounting  controls and  recommending to
the board of directors the  engagement of our outside  auditors.  The members of
the audit committee are Messrs.  Christian Frigast and Gabriel Panayotides.  Our
audit committee does not include a financial expert because it is not consistent
with Danish practice.

ITEM 16B. CODE OF ETHICS

     We have not adopted a formal  corporate  code of conduct  applicable to all
directors,  officers and employees because we are not required to have one under
Danish law.

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

     Deloitte Statsautoriseret Revisionsaktieselskab, Copenhagen, Denmark is the
independent  accounting firm that audits the financial statements of the Company
and its  subsidiaries  and is the  principal  accountant  for the  audit  of the
Company.

     The aggregate fee for audit and audit services  provided by Deloitte to the
Company in 2005 and 2004 were:

(in USD million)                          2005                     2004
----------------                          ----                     ----

Audit Fees                                 0.5                      0.3
Audit-Related Fees                         0.0                      0.0
Tax Fees                                   0.1                      0.1
All Other Fees                             0.0                      0.1
Total                                      0.6                      0.5

     The Danish  Annual  Report is audited by  Deloitte  and Ernst & Young.  The
aggregate  fee for  audit and audit  services  provided  by Ernst & Young to the
Company in 2005 is disclosed in Note 6 to the consolidated financial statements.

     Audit  Fees  consist  of fees for the  audit of our  financial  statements,
consents,  and review of documents in  connection  with filings with the SEC and
other statutory or regulatory filings. Audit-Related Fees consist of fees, other
than Audit Fees, for assurances and related services that are reasonably related
to the performance of the audit and review of our financial statements. Tax Fees
consist of fees for  services  rendered for tax  compliance,  tax advice and tax
planning.  All Other Fees  consist of fees for all  services  other than  audit,
audit related or tax related services.

     Our Board of Directors pre-approves all audit,  audit-related and non-audit
services not prohibited by law to be performed by our  independent  auditors and
associated fees prior to the engagement of the independent  auditor with respect
to such services.

ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES

     None.

                                    Part III

ITEM 17. FINANCIAL STATEMENTS

     We  specifically  incorporate  by  reference  in  response to this item the
report  of  the  independent   auditors,   the  consolidated  audited  financial
statements and the accompanying notes, appearing on pages F-1 through F-51.

Non-GAAP measures

     In this document we use the measures:  solvency ratio, net interest bearing
debt and invested capital. Although not GAAP measures they are all commonly used
financial measures.

Solvency ratio

     Solvency  ratio  measures  the  proportion  of the total  assets,  which is
financed by  shareholders'  equity.  We believe  that it is a relevant  measure,
which  management  uses to measure  the  overall  development  in our  financial
position. Solvency ratio is calculated as follows:

(in USD million)                                2004                    2005
----------------                                ----                    ----

Shareholders' equity                             715.4                   904.7
Divided by Total assets                        1,239.6                 1,810.1
Equals Solvency ratio                             57.7%                   50.0%
Net interest bearing debt

           Net interest bearing debt measures the net capital resources, which
cause net interest expenditure and interest rate risk and which together with
the shareholders' equity are used to finance our investments. As such we believe
that net interest bearing debt is a relevant measure, which management uses to
measure the overall development of our use of financing other than shareholders'
equity. Net interest bearing debt is calculated as follows:

(in USD million)                                2004                     2005
----------------                                ----                     ----

Mortgage debt and bank loans                    395.4                    789.0
Less Cash and cash equivalents                 (65.5)                  (156.7)
Less Bonds                                     (58.1)                    (0.2)
Equals Net interest bearing debt                271.8                   632.1

Invested capital

     Invested  capital  measures the net investments  used to achieve our profit
before  financial  items. We believe that invested capital is a relevant measure
that  management  uses to  measure  the  overall  development  of the assets and
liabilities  generating  our net  profit.  Invested  capital  is  calculated  as
follows:

(in USD million)                                 2004                    2005
----------------                                 ----                    ----

Tangible fixed assets                           688.0                 1,167.1
Plus Inventories                                  5.8                    10.9
Plus accounts receivable                         53.7                    70.9
Plus Non-current assets held for sale             0.0                    43.4

Less Deferred tax                               (73.2)                  (54.6)

Less Trade accounts payable                     (15.7)                  (22.9)

Less Current tax liabilities                     (9.4)                   (9.4)

Less Other liabilities                          (23.1)                  (23.6)

Less Deferred income                             (7.4)                   (6.0)

Equals Invested capital                         618.7                 1,175.8

ITEM 18. FINANCIAL STATEMENTS

     Not Applicable.



<PAGE>

                              TORM AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm.....................F-2

Consolidated Statements of Operations for the years ended
   December 31, 2004 and 2005 ..............................................F-3

Consolidated Balance Sheets as of December 31, 2004 and 2005................F-4

Consolidated Statements of Total Gains and Losses for the years ended
    December 31, 2004 and 2005 .............................................F-6

Consolidated Statements of Cash Flow for the years ended
    December 31, 2004 and 2005..............................................F-8

Notes to Consolidated Financial Statements..................................F-9


<PAGE>


           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO
           THE SHAREHOLDERS OF AKTIESELSKABET DAMPSKIBSSELSKABET TORM

     We  have  audited  the   accompanying   consolidated   balance   sheets  of
Aktieselskabet  Dampskibsselskabet TORM and subsidiaries as of December 31, 2005
and 2004, and the related consolidated statements of operations, total gains and
losses,  statement of changes in shareholders' equity and cash flows for each of
the two years in the period ended December 31, 2005. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial  reporting.  An audit includes  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion,  such consolidated  financial statements present fairly, in
all   material    respects,    the   financial    position   of   Aktieselskabet
Dampskibsselskabet  TORM and  subsidiaries  as of December 31, 2005 and 2004 and
the results of their  operations  and their cash flows for each of the two years
in the period ended December 31, 2005 in conformity with International Financial
Reporting Standards.

     International  Financial  Reporting Standards vary in certain respects from
accounting  principles  generally  accepted  in the  United  States of  America.
Information  relating to the nature and effect of such  differences is presented
in Note 23 to the consolidated financial statements.

     As discussed in Note 23 to the  financial  statements,  in 2005 the Company
changed  its  method  of  accounting  for  vessel  dry-docking   expenses  under
principles generally accepted in the United States of America.

Deloitte Statsautoriseret Revisionsaktieselskab
Copenhagen, Denmark

June 9, 2006


<PAGE>

<TABLE>

                                                       TORM AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                          FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
                                                  (EXPRESSED IN THOUSANDS OF USD)
<CAPTION>

                                                                                Note                2004                    2005
                                                                                ----                ----                    ----
<S>                                                                            <C>              <C>                     <C>
Net revenue                                                                                      433,320                 586,975
Port expenses, bunkers and commissions                                                           (83,769)               (123,138)
                                                                                           --------------          --------------
Time charter equivalent earnings                                                                 349,551                 463,837

Charter hire                                                                                     (59,592)                (82,139)
Operating expenses                                                                               (49,791)                (66,744)
                                                                                             ------------            ------------
Gross profit (Net earnings from shipping activities)                               4, 5          240,168                 314,954

Profit from sale of vessels                                                                            0                  54,731
Administrative expenses                                                            5, 6          (38,637)                (31,176)
Other operating income                                                                            13,139                  12,570
Depreciation and impairment losses                                                    8         (35,181)                (47,894)
                                                                                             ------------            ------------
Operating profit                                                                                 179,489                 303,185

Financial items                                                                       9           25,839                  (3,818)
                                                                                             ------------            ------------
Profit before tax                                                                                205,328                 299,367

Tax expenses                                                                         10          (18,715)                     (4)
                                                                                             ------------            ------------
Net profit for the year                                                                          186,613                 299,363
                                                                                             ------------            ------------

Earnings per share

Earnings per share (USD)                                                             21              5.4                     8.6

Earnings per share (DKK) *)                                                                         32.2                    51.5

Diluted earnings per share (USD)                                                     21              5.3                     8.6

Diluted earnings per share (DKK) *)                                                                 32.0                    51.4

*) Calculated from USD to DKK at the average USD/DKK exchange rate for the relevant period.

                            The accompanying notes are an integrated part of these financial statements

</TABLE>

<PAGE>

<TABLE>

                                                       TORM AND SUBSIDIARIES
                                                    CONSOLIDATED BALANCE SHEETS
                                                 AS OF DECEMBER 31, 2004 AND 2005
                                                  (EXPRESSED IN THOUSANDS OF USD)
<CAPTION>

                                                                                  Note             2004                    2005
                                                                                  ----             ----                    ----
<S>                                                                               <C>               <C>                    <C>
ASSETS
NON-CURRENT ASSETS
Tangible fixed assets
Land and buildings                                                                                  395                     883
Vessels and capitalized dry-docking                                                  15         647,516               1,066,474
Vessels under construction and prepayments for vessels                                           37,311                  97,397
Other plant and operating equipment                                                               2,728                   2,319
                                                                                          -------------          --------------
                                                                                      8         687,950               1,167,073
                                                                                          -------------          --------------
Financial fixed assets
Other investments                                                                     7         368,492                 360,993
                                                                                          -------------          --------------
                                                                                                368,492                 360,993
                                                                                          -------------          --------------
Total non-current assets                                                                      1,056,442               1,528,066
                                                                                          -------------          --------------
CURRENT ASSETS
Inventories of bunkers                                                                            5,824                  10,869
Freight receivables, etc.                                                                        36,027                  53,890
Other receivables                                                                                12,765                  14,133
Accruals                                                                                          4,912                   2,853
Marketable securities                                                                15          58,068                     241
Cash and cash equivalent                                                                         65,524                 156,728
                                                                                          -------------          --------------
                                                                                                183,120                 238,714
Non-current assets held for sale                                                     20               0                  43,358
                                                                                          -------------          --------------
Total current assets                                                                            183,120                 282,072
                                                                                          -------------          --------------
TOTAL ASSETS                                                                                  1,239,562               1,810,138
                                                                                          -------------          --------------

                           The accompanying notes are an integrated part of these financial statements.
</TABLE>


<PAGE>

<TABLE>

                                                       TORM AND SUBSIDIARIES
                                              CONSOLIDATED BALANCE SHEETS (CONTINUED)
                                                 AS OF DECEMBER 31, 2004 AND 2005
                                                  (EXPRESSED IN THOUSANDS OF USD)
<CAPTION>

                                                                                Note               2004                   2005
                                                                                ----               ----                   ----
<S>                                                                            <C>              <C>                    <C>

SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Common shares                                                                     11             61,098                 61,098
Treasury shares                                                                   11             (7,748)                (7,708)
Revaluation reserves                                                                            319,354                296,448
Retained profit                                                                                 238,439                415,306
Proposed dividend                                                                                99,861                132,382
Hedging reserves                                                                                    454                  3,258
Translation reserves                                                                              3,949                  3,867
                                                                                           ------------           ------------
Total shareholders' equity                                                                      715,407                904,651
                                                                                           ------------           ------------
LIABILITIES
Non-current liabilities
Deferred tax                                                                      10             73,261                 54,560
Mortgage debt and bank loans                                                   13,15            333,284                729,088
                                                                                           ------------           ------------
Total non-current liabilities                                                                   406,545                783,648
                                                                                           ------------           ------------
Current liabilities
Mortgage debt and bank loans                                                   13,15             62,141                 59,926
Trade payables                                                                                   15,668                 22,918
Current tax liabilities                                                                           9,357                  9,381
Other liabilities                                                                 14             23,060                 23,592
Deferred income                                                                   12              7,384                  6,022
                                                                                           ------------           ------------
Total current liabilities                                                                       117,610                121,839
                                                                                           ------------           ------------
Total liabilities                                                                               524,155                905,487
                                                                                           ------------           ------------
Total shareholders' equity and liabilities                                                    1,239,562              1,810,138
                                                                                           ------------           ------------
Accounting policies                                                              1-3
Collateral security                                                               15
Guarantee and contingent liabilities                                              16
Contractual liabilities                                                           17
Fair value of derivative financial instruments                                    18
Related party transactions                                                        19
Earnings per share                                                                21
Appropriation on net profit for the year incl. Proposed dividend
                                                                                  22
Reconciliation to United States Generally Accepted Accounting
Principles (U.S. GAAP)                                                            23

                           The accompanying notes are an integrated part of these financial statements.
</TABLE>


<PAGE>

<TABLE>

                                                       TORM AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                AS OF DECEMBER 31, 2004 AND 2005
                                                   (EXPRESSED IN MILLIONS OF USD)
<CAPTION>

                                                                                                    Gains/losses
                                                                                          recognized directly in equity
                                             Common    Treasury   Retained   Proposed   Revaluation   Hedging   Translation
                                              shares    shares     profit    dividends    reserve    reserves     reserves    Total
                                              ------    ------     ------    ---------    -------    --------     --------    -----
<S>                                              <C>      <C>         <C>        <C>       <C>          <C>         <C>        <C>
SHAREHOLDERS' EQUITY

Balance at January 1, 2004                     30.5      (8.7)      358.7       36.7         0.0       (3.6)        0.0      413.6
Change in accounting policies                                      (184.4)                 118.7                             (65.7)
                                                ------------------------------------------------------------------------------------
Balance at January 1, 2004 as restated          30.5     (8.7)      174.3       36.7       118.7       (3.6)        0.0      347.9
Changes in shareholders' equity 2004:
Exchange rate adjustment arising on
translation of entities using a
measurement currency different from USD                                                                             4.0        4.0
Reversal of deferred gain/loss on cash
flow hedges at the beginning of the year                                                                3.6                    3.6
Deferred gain/loss on cash flow hedges at
year-end                                                                                                0.4                    0.4
Reversal of fair value adjustment on
available for sale investments at the
beginning of the year                                                                     (118.7)                           (118.7)
Fair value adjustment on available for
sale investments at year-end                                                               319.3                             319.3
                                                ------------------------------------------------------------------------------------
Net gains/losses recognized directly in
the equity                                       0.0      0.0         0.0        0.0       200.6        4.0         4.0      208.6
Profit for the year                                                 186.6                                                    186.6
                                                ------------------------------------------------------------------------------------
Total income/(expenses) for the year             0.0      0.0       186.6        0.0       200.6        4.0         4.0      395.2
Disposal of treasury shares, cost                         1.0                                                                  1.0
Gain on disposal of treasury shares                                   0.1                                                      0.1
Dividends paid                                                                 (35.4)                                        (35.4)
Dividends paid on treasury shares                                     1.5                                                      1.5
Exchange rate adjustment on dividends paid                            1.3       (1.3)                                          0.0
Proposed dividend for the financial year                            (99.9)      99.9                                           0.0
Exercise of share options                                             5.1                                                      5.1
Bonus share issue                               30.6                (30.6)                                                     0.0
Cost of bonus share issue                                             0.0                                                      0.0
                                                ------------------------------------------------------------------------------------
Total changes in shareholders' equity 2004      30.6      1.0        64.1       63.2       200.6        4.0         4.0      367.5
                                                ------------------------------------------------------------------------------------
</TABLE>


<PAGE>

<TABLE>

                                                       TORM AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                            (CONTINUED)
                                                 AS OF DECEMBER 31, 2004 AND 2005
                                                  (EXPRESSED IN MILLIONS OF USD)
<CAPTION>


                                                                                          recognized directly in equity
                                              Common   Treasury   Retained   Proposed   Revaluation   Hedging   Translation
                                              shares    shares     profit    dividends    reserve    reserves     reserves   Total
                                              ------    ------     ------    ---------    -------    --------     --------   -----
<S>                                              <C>      <C>         <C>        <C>       <C>          <C>         <C>       <C>

Shareholders' equity at December 31, 2004       61.1     (7.7)      238.4       99.9       319.3        0.4         4.0      715.4

Changes in shareholders' equity 2005:
Exchange rate adjustment arising on
translation of entities using a
measurement currency different from USD                                                                            (0.1)      (0.1)
Reversal of deferred gain/loss on cash
flow hedges at the beginning of the year                                                                           (0.4)      (0.4)
Deferred gain/loss on cash flow hedges at
year-end                                                                                                            3.3        3.3
Reversal of fair value adjustment on
available for sale investments at the
beginning of the year                                                                                (319.3)                (319.3)
Fair value adjustment on available for
sale investments at year-end                                                                          296.4                  296.4
                                                ------------------------------------------------------------------------------------
Net gains/losses recognized directly in
the equity                                       0.0      0.0         0.0        0.0       (22.9)       2.9        (0.1)     (20.1)
Profit for the year                                                 299.4                                                    299.4
                                                ------------------------------------------------------------------------------------
Total income/(expenses) for the year             0.0      0.0       299.4        0.0       (22.9)       2.9        (0.1)     279.3
Disposal of treasury shares, cost                         0.0                                                                  0.0
Dividends paid                                                                 (94.5)                                        (94.5)
Dividends paid on treasury shares                                     4.1                                                      4.1
Exchange rate adjustment on dividends paid                            5.4       (5.4)                                          0.0
Exercise of share options                                             0.4                                                      0.4
Proposed dividend for the financial year                           (132.4)     132.4                                           0.0
                                                ------------------------------------------------------------------------------------
Total changes in shareholders' equity 2005       0.0      0.0       176.9       32.5       (22.9)       2.9        (0.1)     189.3
                                                ------------------------------------------------------------------------------------

Shareholders' equity at December 31, 2005       61.1     (7.7)      415.3      132.4       296.4        3.3         3.9      904.7

                           The accompanying notes are an integrated part of these financial statements.

</TABLE>


<PAGE>

<TABLE>

                                                       TORM AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF CASH FLOW
                                          FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
                                                  (EXPRESSED IN THOUSANDS OF USD)
<CAPTION>

                                                                                                2004           2005
                                                                                                ----           ----
<S>                                                                                             <C>             <C>
CASH FLOW FROM OPERATING ACTIVITIES
Operating profit                                                                             179,489        303,185

Adjustments:
Reversal of profit from sale of vessels                                                            0       (54,731)
Reversal of depreciation and impairment losses                                                35,181         47,894
Reversal of other non-cash movements                                                           4,112         (6,523)
Dividends received                                                                            34,157         12,825
Interest income and exchange rate gains                                                        3,395          7,809
Interest expenses                                                                            (15,659)       (26,045)
Income taxes paid                                                                               (471)        (7,505)
Change in inventories, accounts receivables and payables                                     (12,178)       (15,797)
                                                                                          -----------    -----------

Net cash inflow/(outflow) from operating activities                                          228,026        261,112
                                                                                          -----------    -----------
CASH FLOW FROM INVESTING ACTIVITIES
Investment in tangible fixed assets                                                         (187,133)      (635,877)
Investment in equity interests and securities                                                      0        (15,415)
Sale of non-current assets                                                                         0        178,157
                                                                                          -----------    -----------
Net cash inflow/(outflow) from investing activities                                         (187,133)      (473,135)
                                                                                          -----------    -----------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowing, mortgage debt and other financial liabilities                                     146,072        645,493
Repayment/redemption, mortgage debt                                                          (85,688)      (251,905)
Repayment/redemption, lease liabilities                                                      (30,348)             0
Dividends paid                                                                               (33,824)       (90,401)
Purchase/disposal of treasury shares                                                           1,023             40
                                                                                          -----------   -----------
Cash inflow/(outflow) from financing activities                                               (2,765)        303,227
                                                                                          -----------    -----------
Net cash inflow/(outflow) from operating,
investing and financing activities                                                            38,128         91,204

Cash and cash equivalents, at January 1                                                       27,396         65,524
                                                                                          -----------    -----------
Cash and cash equivalents, at December 31                                                     65,524        156,728
Of which used as collateral                                                                        0              0
                                                                                              65,524        156,728
                                                                                          -----------    -----------

                           The accompanying notes are an integrated part of these financial statements.
</TABLE>

<PAGE>


                              TORM AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005

NOTE 1

CHANGES IN ACCOUNTING POLICIES

ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

     In the current  year,  the TORM Group has adopted all of the  International
Financial  Reporting  Standards  as at December  31,  2005.  The  transition  is
accounted for in  accordance  with IFRS 1 First-time  Adoption of  International
Financial  Reporting  Standards,  and the date of transition is January 1, 2004.
The adoption of these standards and  interpretations  has resulted in changes to
the Group's accounting policies in the following areas:

     a)  Unrealized  gains or losses  in  respect  of bonds and  shares in other
companies were  previously  recognized in the income  statement  under financial
items. Shares are regarded as financial assets available for sale. In accordance
with IAS 39 "Financial  Instruments:  Recognition  and  Measurement"  unrealized
gains or losses in respect of shares are  recognized  directly in  shareholders'
equity and released to the income  statement  when the assets are  derecognized.
Bonds are  classified as financial  assets at fair value through profit or loss.
Therefore,  unrealized  gains or losses in respect of bonds are still recognized
in the income statement.

     b) Deferred  tax assets and  liabilities  under the tonnage tax scheme were
previously  considered  as  contingent  and  were  disclosed  in the  Notes.  In
accordance  with IAS 12 "Income  Taxes" and the ongoing  efforts to  convergence
with US GAAP and in order to align the accounting  under IFRS and under US GAAP,
deferred tax assets and  liabilities are recognized in the balance sheet and the
change for the year is recognized in the income statement.

     c) TORM's share option scheme  provides the  employees  with the choices of
cash  settlement  or  receipt of TORM  shares.  The  difference  at the date the
options  are  granted  between the  exercise  price and the market  price of the
shares was  previously  recognized as a compensation  expense in  administrative
expenses in the income statement. Receipts and payments relating to the exercise
of the share  options  were  recognized  directly in  shareholders'  equity.  In
accordance  with  IFRS  2  "Share-based   Payment"  the  scheme  is  treated  as
cash-settled  share-based  payment  transactions.  A liability relating to share
options not  exercised is  recognized  in the balance  sheet.  The change in the
liability  for the period and the value of the share  options  exercised  in the
period are recognized in the income  statement.  The liability is measured using
the  Black-Scholes  model. In the cash flow statement cash flows relating to the
share option  scheme are  reclassified  from  financing  activities to operating
activities.

     d)  The  Group  has  chosen  to  apply  the  optional   exemption  in  IFRS
1"First-time  Adoption of International  Financial Reporting Standards" relating
to cumulative translation differences. As a consequence,  cumulative translation
differences are deemed to be zero at the date of transition to IFRS, and gain or
loss on a  subsequent  disposal of an operation  applying a functional  currency
different from USD will exclude  translation  differences  that arose before the
date of transition to IFRS.

     e)  Non-current  assets  held  for sale  were  previously  included  in the
respective  line  in the  balance  sheet  according  to the  type of  asset.  In
accordance  with  IFRS 5  "Non-current  Assets  Held for  Sale and  Discontinued
Operations"  non-current  assets held for sale are  presented in a separate line
under current  assets in the balance sheet and measured at the lower of carrying
amount and fair value less costs to sell.  Depreciation  of an asset ceases when
it is classified as held for sale.

     f)  Highly  liquid  bonds  were  previously  included  in  "Cash  and  cash
equivalents"  in the cash flow  statement.  In accordance  with IAS 7 "Cash Flow
Statements" an investment must be subject to an insignificant risk of changes in
value  to  qualify  as a cash  equivalent.  Consequently,  bonds  with a term to
maturity exceeding 3 months are classified as investing activities.

     g) Forward contracts  regarding bunker purchases were previously  accounted
for as cash flow hedges.  The current practices do not fulfill the documentation
requirements  prescribed  by  IAS 39  "Financial  Instruments:  Recognition  and
Measurement".  Consequently,  value adjustments of forward  contracts  regarding
bunker purchases are recognized in the income statement.

CHANGES IN ACCOUNTING ESTIMATES AND JUDGEMENTS

     The functional currency in the administrative entity is changed to USD from
DKK prospectively from January 1, 2005 in accordance with IAS 21 "The Effects of
Changes in Foreign  Exchange Rates" as a significant part of the DKK assets have
been divested during 2005 and the activities of the  administrative  entity have
been further integrated with the operating entities.

     The  reporting  currency is changed to USD from DKK,  which will  provide a
truer and more fair view of the financial  results,  financial  performance  and
cash flows of the Group in  accordance  with IAS 1  "Presentation  of  Financial
Statements" and IAS 21 "The Effects of Changes in Foreign  Exchange  Rates." The
change in  reporting  currency is  implemented  retrospectively  from January 1,
2004.

EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS

     The effects of the changes in accounting policies,  estimates and judgments
on the balance  sheet as at January 1, 2005 and on the  comparative  figures for
2004 for the Group are illustrated in the statements  presented on the following
page.  The  statements  are  presented in USD in  accordance  with the change in
reporting currency.


<PAGE>

<TABLE>

                                                                                        January 1 - December 31, 2004
                                                                               ----------------------------------------------------
                                                             Reference to                          Effect of
                                                              description       Previous GAAP   transition to IFRS       IFRS
                                                                               ----------------------------------------------------
<S>                                                            <C>                <C>               <C>                 <C>
CONSOLIDATED INCOME STATEMENT
Net revenue                                                                          433.3                               433.3
Port expenses, bunkers and commission                           g                    (83.0)             (0.8)            (83.8)
                                                                                -----------       -----------       -----------
Time charter equivalent earnings                                                     350.3              (0.8)            349.5
Charter hire                                                                         (59.6)                              (59.6)
Operating expenses                                                                   (49.8)                              (49.8)
                                                                                -----------       -----------       -----------
Gross profit/(loss) (Net earnings from shipping
activities                                                                           240.9              (0.8)            240.1
Profit/(loss) from sale of vessels                                                     0.0                                 0.0
Administrative expenses                                         c                    (28.8)             (9.8)            (38.6)
Other operating income                                                                13.2                                13.2
Depreciation and impairment losses                                                   (35.2)                              (35.2)
                                                                                -----------       -----------       -----------
Operating profit                                                                     190.1             (10.6)            179.5
Financial items                                                 a                    199.2            (173.4)             25.8
                                                                                -----------       -----------       -----------
Profit/(loss) before tax                                                             389.3            (184.0)            205.3
Tax expenses                                                    b                     (9.6)             (9.1)            (18.7)
                                                                                -----------       -----------       -----------
Net profit/(loss) for the year                                                       379.7            (193.1)            186.6

ASSETS
Tangible fixed assets                                                                688.0                               688.0
Financial fixed assets                                                               368.5                               368.5
                                                                                -----------       -----------       -----------
Total non-current assets                                                           1,056.5                             1,056.5
Total current assets                                                                 183.1                               183.1
                                                                                -----------       -----------       -----------
Total assets                                                                       1,239.6               0.0           1,239.6

SHAREHOLDERS' EQUITY AND LIABLITIES
Total shareholders' equity                                      b, c                 790.5             (75.1)            715.4
                                                                                -----------       -----------       -----------
Non-current liabilities                                         b                    333.3              73.3             406.6
Current liabilities                                             c                    115.8               1.8             117.6
                                                                                -----------       -----------       -----------
Total liabilities                                                                    449.1              75.1             524.2
Total shareholders' equity and liabilities                                         1,239.6               0.0           1,239.6
                                                                                -----------       -----------       -----------

                                                                                                   January 1,         December 31,
                                                                                                       2004              2004
SHAREHOLDERS' EQUITY
Shareholders' equity, previous GAAP                                                                    413.6             790.5
Deferred tax                                                    b                                      (58.8)            (73.3)
Liability regarding outstanding share options                   c                                       (6.9)             (1.8)
                                                                                                  -----------       -----------
Shareholders' equity, IFRS                                                                             347.9             715.4
                                                                                                  -----------       -----------

</TABLE>

<PAGE>


ACCOUNTING PRINCIPLES NOT YET ADOPTED

     The following standards have not yet been adopted:

     IFRS 7 "Financial Instruments:  Disclosures". The standard adds certain new
disclosures about financial  instruments to those currently  required by IAS 32,
replaces  the  disclosures  now  required  by IAS 30 and  compiles  all of those
financial  instruments  disclosures together in a new standard.  The standard is
effective for periods beginning on or after January 1, 2007.

     Amendment to IAS 1 "Presentation  of Financial  Statements".  The amendment
introduces  disclosure  requirements  about  the  level of  capital  and how the
capital is managed. The amendment is effective for periods beginning on or after
January 1, 2007.

     TORM expects to implement  these new  disclosure  requirements  with effect
from the financial year 2006.

NOTE 2

ACCOUNTING POLICIES

     The annual report has been prepared in  accordance  with the  International
Financial Reporting Standards and the disclosure  requirements for Danish listed
companies'  financial  reporting.  The  financial  statements  are  prepared  in
accordance  with  the  historical  cost  convention   except  where  fair  value
accounting is specifically required by IFRS.

     The functional currency in all major entities is USD, and the Group applies
USD as presentation currency in the preparation of financial statements.

KEY ACCOUNTING POLICIES

     The Management  considers the following to be the most important accounting
policies for the TORM Group.

Participation in pools

     TORM  generates  its revenue  from  shipping  activities,  which to a large
extent are conducted  through  pools.  Total pool revenue is generated from each
vessel  participating in the pools in which the Group  participates and is based
on either voyage or time charter  parties.  The pool measures net revenues based
on the  contractual  rates and the duration of each  voyage,  and net revenue is
recognized  upon delivery of service in accordance with the terms and conditions
of the charter parties.

     The pools are regarded as jointly  controlled  operations,  and the Group's
share of the income  statement  and  balance  sheet in the  respective  pools is
accounted for by recognizing a proportional share, based on participation in the
pool,  combining items of uniform  nature.  The Group's share of the revenues in
the pools is primarily  dependent on the number of days the Group's vessels have
been  available  for the pools in relation to the total  available  pool earning
days during the period.

     TORM acts as pool  manager for 3 pools in which the Group is  participating
with a significant number of vessels. As pool manager TORM receives a chartering
commission  income to cover the expenses  associated with this role. The charter
commission income is calculated as a fixed percentage of the freight income from
each charter agreement.  If the pool does not earn any freight income, TORM will
not receive any commission  income.  The commission  income is recognized in the
income  statement  under  "Other  operating  income"   simultaneously  with  the
recognition of the underlying freight income in the pool.

Cross over voyages

     Revenue and the related expenses are recognized upon delivery of service in
accordance with the terms and conditions of the charter parties.

     For cross over  voyages  (voyages  in  progress  at the end of a  reporting
period) the  uncertainty  and the  dependence  on estimates are greater than for
concluded  voyages.  The Group recognizes a percentage of the estimated  revenue
and voyage  expenses for the voyage  equal to the  percentage  of the  estimated
duration of the voyage  completed  on the balance  sheet date.  The  estimate of
revenue and voyage expenses is based on the expected duration and destination of
the voyage,  vessel statistics  regarding bunker consumption,  estimates of port
expenses and previous experience.

     When  recognizing  net revenue,  there is a risk that the actual  number of
days it takes to complete the voyage will differ from the estimate, and for time
charter  parties a lower day rate may have been agreed for additional  days. The
contract for a single voyage may state several  alternative  destination  ports.
The  destination  port  may  change  during  the  voyage,  and the rate may vary
depending on the  destination  port.  Changes to the  estimated  duration of the
voyage as well as changing  destinations and weather  conditions will affect the
voyage expenses.

Demurrage revenues

     Freight contracts contain conditions regarding the amount of time available
for loading and  discharging  of the vessel.  If these  conditions are breached,
TORM is compensated  for the additional time incurred in the form of a demurrage
revenue.   Demurrage  revenues  are  recognized  upon  delivery  of  service  in
accordance with the terms and conditions of the charter parties.

     Upon  completion of the voyage,  the Group assesses the time spent in port,
and a demurrage claim based on the relevant contractual  conditions is submitted
to the  charterers.  The  claim  will  often  be met by  counter  claims  due to
differences  in the  interpretation  of the  agreement  compared  to the  actual
circumstances of the additional time used. Based on previous experience,  95% of
the demurrage  claim  submitted is recognized  as demurrage  revenue.  The Group
receives the  demurrage  payment upon  reaching  final  agreement of the amount,
which on average is  approximately  100 days after the original  demurrage claim
was submitted.  If the Group accepts a reduction of more than 5% of the original
claim,  or if the  charterer  is not  able to  pay,  demurrage  revenue  will be
affected.

Vessels

     Vessels are measured at cost less accumulated  depreciation and accumulated
impairment losses. Cost comprises acquisition cost and costs directly related to
the  acquisition  up until the time  when the  asset is ready for use  including
interest expenses incurred during the period of construction.

     All  major   components  of  vessels  except  for  dry-docking   costs  are
depreciated on a straight-line  basis to the estimated residual value over their
estimated useful lives, which TORM estimates to be 25 years. The Group considers
that a 25-year depreciable life is consistent with that used by other shipowners
with  comparable  tonnage.  Depreciation  is  based on cost  less the  estimated
residual value.  Residual value is estimated as the lightweight  tonnage of each
vessel multiplied by scrap value per ton. The useful life and the residual value
of the vessels are reviewed at least at each financial  year-end based on market
conditions,  regulatory  requirements  and the Group's business plans. The Group
also  evaluates  the carrying  amounts to determine if events have occurred that
indicate impairment and would require a modification of their carrying amounts.

     Prepayment on vessels under construction is measured at costs incurred.

Dry-docking costs

     The vessels are required to undergo planned dry-dockings for replacement of
certain  components,  major repairs and maintenance of other  components,  which
cannot be carried out while the vessels are  operating,  approximately  every 30
and 60 months depending on the nature of work and external  requirements.  These
dry-docking costs are capitalized and depreciated on a straight-line  basis over
the  estimated  period until the next  dry-docking.  The residual  value of such
components  is estimated at nil.  The useful life of the  dry-docking  costs are
reviewed  at least  at each  financial  year-end  based  on  market  conditions,
regulatory requirements and TORM's business plans.

     The cost of  acquiring a new vessel is divided into  dry-docking  costs and
the  remaining  cost  of  the  vessel.  The  two  elements  are  recognized  and
depreciated  separately.  For  newbuildings,  the initial  dry-docking  asset is
estimated based on the expected costs related to the  first-coming  dry-docking,
which is again based on  experience  and past  history of similar  vessels.  For
second-hand  vessels,  a dry- docking asset is also  segregated and  capitalized
separately, however, taking into account the normal docking intervals in TORM.

     At subsequent  dry-dockings the costs comprise the actual costs incurred at
the dry-docking  yard. Dry docking costs may include the cost of hiring crews to
effect  replacements  and repairs and the cost of parts and materials used, cost
of travel,  lodging and  supervision  of TORM  personnel  and the cost of hiring
third party personnel to oversee a dry-docking.  Dry-docking activities include,
but are not limited to, the inspection, service on turbocharger,  replacement of
shaft  seals,  service  on  boiler,  replacement  of hull  anodes,  applying  of
antifouling and hull paint,  steel repairs and  refurbishment and replacement of
other parts of the vessel.

Deferred tax

     All significant Danish entities within the Group entered the Danish tonnage
taxation  scheme for a binding  10-year  period with effect from January 1, 2001
and have filed tax returns for the fiscal  years 2001 to 2004.  Under the Danish
tonnage taxation scheme, taxable income is not calculated on the basis of income
and expenses as under the normal corporate taxation.  Instead, taxable income is
calculated  with  reference  to the tonnage  used  during the year.  The taxable
income for a Company for a given period is  calculated as the sum of the taxable
income  under the  tonnage  taxation  scheme and the tax- able  income  from the
activities  that are not  covered  by the  tonnage  taxation  scheme  made up in
accordance with the ordinary Danish corporate tax system.

     If the entities'  participation  in the Danish tonnage  taxation  scheme is
abandoned or if the entities' level of investment and activity is  significantly
reduced,  a deferred tax liability will become payable. A deferred tax liability
is recognized in the balance sheet at each period end and is accounted for using
the balance sheet liability method.  Currency exchange  adjustments  relating to
deferred tax are recognized under financial items in the income  statement.  The
deferred tax  liability  relating to the vessels is measured on the basis of the
difference  between  the tax value of the  vessels at the date of entry into the
tonnage taxation scheme and the lower of the cost and the realized or realizable
sales value of the vessels.

OTHER ACCOUNTING POLICIES

Consolidation principles

     The consolidated  financial statements comprise the financial statements of
the Parent Company, A/S Dampskibsselskabet  TORM and its subsidiaries,  i.e. the
entities in which the Parent Company, directly or indirectly, holds the majority
of the votes or otherwise has a controlling interest.

     Entities  in which the  Group  holds  between  20% and 50% of the votes and
exercises  significant but not controlling  influence are regarded as associated
companies.

     Associated  companies  which are by agreement  managed  jointly with one or
more other companies, and therefore subject to joint control (jointly controlled
entities),  are accounted  for using  proportionate  consolidation,  whereby the
individual items in their financial statements are included in proportion to the
ownership share.

     The  consolidated  financial  statements  are  prepared on the basis of the
financial statements of the Parent Company, its subsidiaries and proportionately
consolidated  companies by combining  items of a uniform nature and  eliminating
inter-company  transactions,  balances and shareholdings as well as realized and
unrealized gains and losses on transaction  between the consolidated  companies.
The  financial  statements  used for  consolidation  purposes  are  prepared  in
accordance with the Group's  accounting  policies.  Entities are included in the
consolidated financial statements from the date of acquisition or founding until
the date of disposal or wounding up.

Foreign currencies

     The functional currency of all significant entities including  subsidiaries
and  associated  companies  is USD,  because  the  Group's  vessels  operate  in
international  shipping  markets,  in which revenues and expenses are settled in
USD,  and the Group's most  significant  assets and  liabilities  in the form of
vessels and related  mortgage debt are in USD.  Transactions in currencies other
than the functional  currency are translated into the functional currency at the
date of the  transactions.  Gains or losses arising between the exchange rate at
the transaction date and the exchange rate at the settlement date are recognized
in the income statement under financial items.

     Cash,  accounts receivable and payable and other monetary items denominated
in  currencies  other  than the  functional  currency  are  translated  into the
functional  currency at the exchange rate  prevailing at the balance sheet date.
Differences  between the exchange rate at the transaction  date and the exchange
rate at the balance  sheet date are  recognized  in the income  statement  under
financial items.

     The reporting  currency of the Group is USD. Upon  recognition  of entities
with  functional  currencies  other  than  USD,  the  financial  statements  are
translated  into USD. Items in the income  statement are translated  into USD at
the average  exchange  rates for the  period,  whereas  balance  sheet items are
translated  at  the  exchange  rates  as at the  balance  sheet  date.  Exchange
differences  arising from the  translation of financial  statements into USD are
recognized as a separate  component of shareholders'  equity. On the disposal of
an entity,  the cumulative  amount of the exchange  differences  deferred in the
separate component of equity relating to that entity shall be transferred to the
income statement as part of the gain or loss on disposal.

     An exchange  rate gain or loss relating to a  non-monetary  item carried at
fair value is recognized in the same line as the fair value adjustment.

Derivative financial instruments

     Derivative  financial  instruments,  primarily interest rate swaps, forward
freight agreements and forward contracts regarding bunker purchases, are entered
to hedge  future  committed or  anticipated  transactions.  TORM  applies  hedge
accounting  under the  specific  rules for cash flow  hedges  when  allowed  and
appropriate.  In addition,  TORM takes very limited positions in forward freight
agreements as a supplement to the Group's physical  positions in vessels,  which
are not entered for hedge purposes.

     Derivative  financial  instruments are initially  recognized in the balance
sheet  at cost  and are  subsequently  measured  at  their  fair  value as other
receivables or other liabilities respectively.

     Changes  in fair  value of  derivative  financial  instruments,  which  are
designated  as cash flow  hedges,  are  recognized  directly in share-  holders'
equity under "Hedging reserves".  When the hedged trans- action is recognized in
the income  statement,  the cumulative value adjustment  recognized in equity is
transferred to the income  statement and included in the same line as the hedged
transaction.

     Changes  in fair value of  derivative  financial  instruments  that are not
designated as hedges are recognized in the income  statement.  While effectively
reducing cash flow risk in  accordance  with the risk  management  policy of the
Group, the current use of interest rate swaps with cap features, forward freight
agreements and forward contracts regarding bunker purchases does not qualify for
hedge  accounting.  Changes  in fair  value of  interest  rate  swaps  with caps
features,  for- ward freight  agreements and forward contracts  regarding bunker
purchases are  therefore  recognized in the income  statement  under  "Financial
items", "Net revenue" and "Port expenses, bunkers and commissions" respectively.
Changes in fair value of forward freight  agreements,  which are not entered for
hedge purposes, are recognized in "Net revenue".

     All fair values are based on  market-to-market  prices or standard  pricing
models.

Segment information

     TORM consists of two business segments:  Tanker and Bulk. This segmentation
is based on the Group's internal  management and reporting structure in addition
to evaluation of risk and earnings.  Transactions  between segments are based on
market-related prices and are eliminated at Group level.

     The Group only has one  geographical  segment,  because the Group considers
the global market as a whole,  and as the individual  vessels are not limited to
specific parts of the world.

     The segment income statement  comprises  revenues directly  attributable to
the segment and expenses,  which are directly or indirectly  attributable to the
segment.   Indirect  allocation  of  expenses  is  based  on  distribution  keys
reflecting the segment's use of shared resources.

     The  segment  non-current  assets  consist of the  non-current  assets used
directly for segment operations.

     Current  assets are  allocated  to  segments  to the  extent  that they are
directly attributable to segment operations, including inventories,  outstanding
freight, other receivables and prepayments.

     Segment liabilities comprise segment-operating  liabilities including trade
payables and other liabilities.

     Not-allocated  items  primarily  comprise assets and liabilities as well as
revenues  and  expenses  relating to the Group's  administrative  functions  and
investment activities,  including cash and bank balances, interest bearing debt,
taxes, etc.

Employee benefits

     Wages,  salaries,  social  security  contributions,  paid  holiday and sick
leave,  bonuses and other monetary and non-monetary  benefits are accrued in the
year in which the employees render the associated services.

Pension plans

     The Group has entered into defined  contribution  plans only. Pension costs
related to defined  contribution  plans are recorded in the income  statement in
the year to which they relate.

Share based compensation

     The  Board of  directors,  the  Management  and a number  of key  employees
participate in a share option scheme. The scheme provides these persons with the
choices of cash settlement or receipt of TORM shares.  At the balance sheet date
a liability relating to share options not exercised is recognized in the balance
sheet under other  liabilities.  The change in the  liability for the period and
the value of the share  options  exercised  in the period is  recognized  in the
income statement. The liability is measured using the Black-Scholes model.

Leases

     Agreements  to charter in vessels  and to lease other  property,  plant and
equipment,  where TORM has substantially all the risks and rewards of ownership,
are recognized in the balance sheet as finance leases. Lease assets are measured
at the lower of fair  value and the  present  value of  minimum  lease  payments
determined in the agreements.

     For the  purpose of  calculating  the  present  value,  the  interest  rate
implicit in the lease or an approximate  value is used as discount  factor.  The
lease assets are depreciated  and written down under the same accounting  policy
as the  vessels  owned by the Group or over the lease  period  depending  on the
lease terms.

     The  corresponding  lease  obligation  is  recognized as a liability in the
balance sheet,  and the interest  element of the lease payment is charged to the
income statement as incurred.

     Other charter agreements concerning vessels and other leases are classified
as operating leases, and lease payments are charged to the income statement on a
straight-line  basis over the lease term. The obligation for the remaining lease
period is disclosed in the notes to the financial statement.

     Agreements to charter out vessels,  where  substantially  all the risks and
rewards of ownership are  transferred  to the lessee,  are classified as finance
leases, and an amount equal to the net investment in the lease is recognized and
presented  in the balance  sheet as a  receivable.  The  carrying  amount of the
vessel is  derecognized  and any gain or loss on disposal is  recognized  in the
income statement.

     Other  agreements to charter out vessels are classified as operating leases
and lease income is recognized in the income statement on a straight-line  basis
over the lease term.

Sale and leaseback transactions

     A gain or loss related to a sale and leaseback  transaction  resulting in a
finance lease is deferred and amortized in proportion to the gross rental on the
time charter over the lease term.

     A  gain  related  to a  sale  and  leaseback  transaction  resulting  in an
operating lease is recognized in the income statement  immediately  provided the
transaction  is agreed on market terms or the sales price is lower than the fair
value.  If the sales price exceeds the fair value,  the  difference  between the
sales price and the fair value is deferred and  amortized in  proportion  to the
lease payments over the life of the lease.

     A  loss  related  to a  sale  and  leaseback  transaction  resulting  in an
operating lease is recognized in the income statement at the date of transaction
except if the loss is reflected in future lease payments below fair value, it is
deferred and amortized in proportion to the lease  payments over the life of the
lease.

INCOME STATEMENT

Net revenue

     Income, including net revenue, is recognized in the income statement when:

     o    the income creating activities have been carried out on the basis of a
          binding agreement,

     o    the income can be measured reliably,

     o    it  is  probable  that  the  economic  benefits  associated  with  the
          transaction will flow to the Group, and

     o    costs relating to the transaction can be measured reliably.

     Net revenue comprises freight, charter hire and demurrage revenues from the
vessels and gains and losses from  forward  freight  agreements.  Net revenue is
recognized when it meets the general  criteria  mentioned above and the stage of
completion  can be measured  reliably.  Accordingly,  freight,  charter hire and
demurrage  revenue is  recognized  at selling  price upon delivery of service in
accordance with the charter parties concluded.

Port expenses, bunkers and commissions

     Port expenses,  bunker fuel consumption and commissions are recognized upon
delivery of service in accordance with the charter parties concluded.

Charter hire

     Charter hire includes the expenses  related to the chartering in of vessels
incurred in order to achieve the net revenues for the period.

Operating expenses

     Operating  expenses,  which comprise crew expenses,  repair and maintenance
expenses and tonnage duty, are expensed as incurred.

Profit from sale of vessels

     Profit or loss from sale of  vessels  is  recognized  when the  significant
risks and rewards of ownership  have been  transferred  to the buyer,  and it is
measured  as the  difference  between  the sales  price less sales costs and the
carrying amount of the asset.

Administrative expenses

     Administrative   expenses,   which  comprise  administrative  staff  costs,
management costs, office expenses and other expenses relating to administration,
are expensed as incurred.

Other operating income

     Other  operating  income  primarily   comprises   chartering   commissions,
management fees and profits and losses deriving from the disposal of other plant
and operating equipment.

Depreciation and impairment losses

     Depreciation  and impairment  losses comprise  depreciation of fixed assets
for the period as well as the deduction in the value of vessels by the amount by
which the carrying  amount of the asset exceeds its recoverable  amount.  In the
event of indication of impairment of value,  the carrying amount is assessed and
the value of the asset is reduced to its recoverable  amount equal to the higher
of value in use based on net present  value of future  earnings  from the assets
and its net selling price.

Financial items

     Financial items comprise  interest income and interest  expense,  financing
costs of finance leases,  realized and unrealized  exchange rate gains or losses
relating to  transactions  in  currencies  other than the  functional  currency,
realized gains or losses from other investments and securities, unrealized gains
or losses from  securities,  dividends  received and other financial  income and
expenses  including  value  adjustments  of certain  financial  instruments  not
accounted for as hedging instruments.  Interest is recognized in accordance with
the accrual basis of accounting taking into account the effective interest rate.
Dividends  are  recognized  when the right to receive  payment has been decided,
which is  typically  when the  dividend  has been  declared  and can be received
without conditions.

Tax

     In Denmark,  A/S  Dampskibsselskabet  TORM is jointly taxed with its Danish
subsidiaries.  The Parent Company provides for and pays the aggregate Danish tax
of the taxable  income of these  companies but recovers the relevant  portion of
the taxes  paid from the  subsidiaries  based on each  entity's  portion  of the
aggregate  taxable  income.  Tax expenses  include the  expected  tax  including
tonnage  tax of the  taxable  income  for the  year for the  Group,  adjustments
relating to previous years and the change in deferred tax for the year. However,
tax  relating  to items  posted in  shareholders'  equity is posted  directly in
shareholders' equity.

BALANCE SHEET

Other plant and equipment

     Land is measured at cost.

     Buildings  are  measured  at  cost  less   accumulated   depreciation   and
accumulated  impairment  losses.  Buildings are  depreciated on a  straight-line
basis over 50 years.

     Operating  equipment  is  measured at cost less  accumulated  depreciation.
Computer  equipment is depreciated on a  straight-line  basis over 3 years,  and
other operating equipment is depreciated on a straight-line basis over 5 years.

     Leasehold  improvements are measured at cost less accumulated  amortization
and  impairment   losses,   and  leasehold   improvements  are  amortized  on  a
straight-line  basis over the shorter of the term of the lease and the estimated
useful life.

     Cost  comprises   acquisition  cost  and  costs  directly  related  to  the
acquisition up until the time when the asset is ready for use.

Financial assets

     Financial assets are initially  recognized on settlement date at fair value
plus transaction costs, except for financial assets at fair value through profit
or loss,  which are recognized at fair value.  Financial assets are derecognized
when the rights to receive  cash flows from the assets have expired or have been
transferred.

     Financial assets are classified as:

     o    Financial assets at fair value through profit or loss

     o    Held-to-maturity investments

     o    Loans and receivables or

     o    Available-for-sale financial assets.

Other investments

     Other investments  comprise shares in other companies and are classified as
available-for-sale.  Listed  shares  are  measured  at the  market  value at the
balance sheet date,  and unlisted  shares are measured at estimated  fair value.
Unrealized  gains and losses  resulting from changes in fair value of shares are
recognized in equity.  Realized gains and losses  resulting from sales of shares
are recognized as financial items in the income statement.  The cumulative value
adjustment  recognized in equity is transferred to the income statement when the
shares are sold.

     Dividends  on shares in other  companies  are  recognized  as income in the
period in which they are declared.

     Other investments are presented as non-current unless Management intends to
dispose of the investments within 12 months of the balance sheet date.

Receivables

     Outstanding freight receivables and other receivables that are of a current
nature,  expected to be realized  within 12 months from the balance  sheet date,
are  classified  as loans and  receivables  and  presented  as  current  assets.
Receivables  are  measured  at the lower of  amortized  cost and net  realizable
values, which corresponds to nominal value less provision for bad debts.

Securities

     Bonds are  classified as financial  assets at fair value through  profit or
loss and are  measured at market value at the balance  sheet date.  Realized and
unrealized gains and losses resulting from valuation or realization of bonds are
recognized  as  financial  items  in the  income  statement.  Bonds  are  traded
frequently and therefore presented as current assets.

Impairment of assets

     Non-current  assets are reviewed to determine any indication of impairment.
In the case of such indication, the recoverable amount of the asset is estimated
as the higher of the  asset's  net  selling  price and its value in use. If this
amount is less than the carrying  amount of the asset,  the  carrying  amount is
reduced to the recoverable amount. The impairment loss is recognized immediately
in the income statement.

     For the purpose of assessing  impairment,  assets are grouped at the lowest
levels for which there are separately  identifiable cash flows  (cash-generating
units). For vessels, the cash-generating unit is the total fleet of the Group.

Inventories

     Inventories  consist of bunkers and  lubricants and are stated at the lower
of cost and net realizable  value. The cost is determined by the FIFO-method and
includes  expenditures  incurred in acquiring the  inventories and delivery cost
less discounts.

Non-current assets held for sale

     Non-current  assets held for sale are  presented  in a separate  line under
current assets in the balance sheet and measured at the lower of carrying amount
and fair value less costs to sell.  Depreciation  of an asset  ceases when it is
classified as held for sale.

Treasury shares

     Treasury  shares are recognized as a separate  component of share- holders'
equity at cost. Upon subsequent  disposal of treasury shares,  any consideration
is also recognized directly in shareholders' equity.

Dividend

     Dividend is  recognized  as a liability at the time of  declaration  at the
Annual General  Meeting.  Dividend  proposed for the year is moved from retained
profit and presented as a separate component of shareholders' equity.

Provisions

     Provisions  are  recognized  when the  Group  has a legal  or  constructive
obligation as a result of past events and it is probable that it will lead to an
outflow of resources that can be reliably estimated.  Provisions are measured at
the estimated  ultimate  liability that is expected to arise taking into account
the time value of money.

Liabilities

     Liabilities are generally measured at amortized cost.

     Mortgage  debt and bank loans  relating  to the  financing  of vessels  are
initially  measured at nominal  amounts less premiums and costs  incurred in the
loan arrangement and subsequently at amortized cost with the difference  between
the loan proceeds and the nominal value being recognized in the income statement
over the term of the loan.

STATEMENT OF CASH FLOWS

     The  statement of cash flows shows the Group's cash flows and cash and cash
equivalents at the beginning and the end of the period.

     Cash flow from operating activities is presented indirectly and is based on
profit  before  financial  items for the year  adjusted  for profit from sale of
vessels,  non-cash operating items, changes in working capital, income tax paid,
dividends received and interest paid/received.

     Cash flow from investing  activities  comprises  dividends received and the
purchase and sale of tangible fixed assets and financial fixed assets.

     Cash flow from financing  activities  comprises  changes in long-term debt,
bank  loans,  purchases  or  sales  of  treasury  shares  and  dividend  paid to
shareholders.

     Cash  and cash  equivalents  comprise  cash at bank and in hand and  highly
liquid  bonds with a term to maturity  not  exceeding 3 months.  Other bonds and
other investments are classified as investment activities.

EARNINGS PER SHARE

     Basic earnings per share is calculated by dividing the consolidated  profit
or loss  available  to common  shareholders  by the weighted  average  number of
common shares outstanding during the period. Treasury shares are not included in
the  calculation.  Purchases and sales of treasury  shares during the period are
weighted based on the remaining period.

     Diluted  earnings per share is  calculated  by adjusting  the  consolidated
profit or loss available to common  shareholders and the weighted average number
of common shares outstanding for the effects of all potentially dilutive shares.
Such potentially dilutive common shares are excluded when the effect would be to
increase earnings per share or reduce a loss per share.

UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)

     As a consequence of the registration of American Depository Receipts (ADRs)
with the United States  Securities and Exchange  Commission (SEC), the Group has
prepared a summary of the effect on net income and shareholders'  equity had the
financial statements been prepared in accordance with the accounting  principles
generally accepted in the United States.

NOTE 3

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

     The  preparation of  consolidated  financial  statements in conformity with
IFRS and accounting  principles generally accepted in the United States requires
Management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  the disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the  reporting  period.  These  estimates and  assumptions  are
affected by the way TORM applies its accounting policies. An accounting estimate
is considered  critical if: the estimate requires Management to make assumptions
about  matters  that were highly  uncertain  at the time the  estimate was made;
different  estimates  reasonably  could  have been  used;  or if  changes in the
estimate that would have a material impact on the Group's financial condition or
results of  operations  are  reasonably  likely to occur from  period to period.
Management  believes that the accounting  estimates employed are appropriate and
resulting balances are reasonable. However, actual results could differ from the
original estimates requiring adjustments to these balances in future periods.

     Management  believes  that the  following  are the  significant  accounting
estimates and judgments used in the  preparation of the  consolidated  financial
statements and the reconciliation to US GAAP.

Carrying amounts of vessels

     The Group  evaluates the carrying  amounts of the vessels to deter- mine if
events  have  occurred  that  would  require a  modification  of their  carrying
amounts.  The  valuation  of vessels is reviewed  based on events and changes in
circumstances  that would indicate that the carrying  amount of the assets might
not be recovered.  In assessing  the  recoverability  of the vessels,  the Group
reviews  certain  indicators of potential  impairment  such as reported sale and
purchase prices, market demand and general market conditions.  Market valuations
from leading,  independent and internationally  recognized shipbroking companies
are  obtained  on a  semi-annual  basis  as part  of the  review  for  potential
impairment  indicatory.  Under  US  GAAP,  if an  indication  of  impairment  is
identified,  the undiscounted  future cash flows are compared to carrying amount
of the assets. If these are less than the carrying amount, an impairment loss is
recorded  based on the  difference  between the fair value  (generally  based on
discounted future cash flows) and the carrying amount of the vessels.  If, under
IFRS, an indication of impairment is  identified,  the need for  recognizing  an
impairment  loss is assessed by comparing the carrying  amount of the vessels to
the higher of the net selling price and the discounted future cash flows.

     The review for potential  impairment  indicators  and  projection of future
undiscounted  and  discounted  cash flows  related to the vessels is complex and
requires the Group to make various  estimates  including  future  freight rates,
earnings  from the  vessels  and  discount  rates.  All of these items have been
historically volatile.

     The carrying amounts of TORM's vessels may not represent their  fair-market
value at any point in time as market  prices of second- hand vessels to a degree
tend to fluctuate  with changes in charter  rates and the cost of  newbuildings.
However,  if the estimated future cash flow or related assumptions in the future
experience change, an impairment of vessels may be required.

     There were no impairments of vessels recorded in 2004 or 2005.

Tax

     All  significant  Danish  entities  within the Group entered the then newly
enacted Danish tonnage taxation scheme with effect from January 1, 2001 and have
filed tax returns for 2001 to 2004. The assessment of the tax returns by the tax
authorities has not yet been completed.  The tax regulations are highly complex,
and while the Group aims to ensure the  estimates of tax assets and  liabilities
that it  records  are  accurate,  there may be  instances  where the  process of
agreeing the tax liabilities with the tax authorities could require  adjustments
to be made to estimates previously recorded.

     It is the Group's  assessment that there is material  uncertainty as to the
estimate of taxes  payable as of December 31, 2005 due to the lack of precedents
that have  interpreted  the tonnage  tax  regulation.  The  estimate is based on
scenario  analyses and discussions  with the tax  authorities,  tax advisors and
industry organizations, and the uncertainty primarily relates to the division of
the  activities  between income and expenses from shipping  related  activities,
which are taxed under the tonnage tax scheme, and income and expenses from other
activities, which are not taxed under the tonnage tax scheme.

     The Group  estimates  that the tax returns  filed for 2001 to 2004 will not
trigger taxes payable in excess of the amount,  which has been recognized as per
December 31, 2005,  because estimated taxable income to a large extent is offset
by  deductible  losses from prior  periods,  and that the deferred tax liability
recorded is adequate.


<PAGE>

<TABLE>

NOTE 4  - NET EARNINGS FROM SHIPPING ACTIVITIES (in USD million)
<CAPTION>

                                                                    For the year ended December 31, 2004
                                                             Tanker            Bulk      Not allocated         Total
                                                             ------            ----      -------------         -----
<S>                                                           <C>             <C>           <C>                <C>
CONSOLIDATED SEGMENT INFORMATION
INCOME STATEMENT

Net revenue                                                   255.7           177.5             0.1            433.3
Port expenses, bunkers and commissions                        (68.8)          (15.0)            0.0           (83.8)
                                                           ---------       ---------          ------        ---------
Time Charter Equivalent Earnings                              186.9           162.5             0.1            349.5

Charter hire                                                  (13.5)          (46.1)            0.0           (59.6)
Operating expenses                                            (39.5)          (11.6)            1.3           (49.8)
                                                           ---------        --------        --------        ---------
Gross profit/(loss) (Net earnings from shipping
activities)                                                   133.9           104.8             1.4           240.1
Profit/(loss) from sale of vessels                              0.0             0.0             0.0             0.0
Administrative expenses                                       (28.5)           (9.5)           (0.6)          (38.6)
Other operating income                                         12.9             0.3             0.0            13.2
Depreciation and impairment losses                            (28.6)           (6.5)           (0.1)          (35.2)
                                                            --------        --------        --------         --------
Operating profit                                               89.7            89.1             0.7           179.5
Financial items                                                                                25.8            25.8
                                                                                            --------         --------
Profit/(loss) before tax                                                                       26.5           205.3
Tax expenses                                                                                  (18.7)          (18.7)
                                                                                              ------       ---------
Net profit/(loss) for the year                                                                  7.8           186.6


BALANCE                                                                                     As of December 31, 2004
Total non-current assets                                      565.6           122.3           368.5         1,056.4
Total assets                                                  605.5           130.8           503.3         1,239.6
Total liabilities                                              29.5             8.0           486.7           524.2

OTHER INFORMATION
Additions to tangible fixed assets                            126.4            60.9             0.0           187.3
Impairment losses recognized in the income
statement                                                       0.0             0.0             0.0            0.0
</TABLE>

     Financial items, tax expenses and the termination of the Company's Offshore
and Liner activity are included in "Not allocated".

<PAGE>

     The  comparative  figures on segment  information  have been changed as all
financial  items are included in "Not  allocated",  whereas  previously  certain
financial  items,  among others  interest  expenses from loans on vessels,  were
allocated to segments, Furthermore, mortgage debt and bank loans are included in
"Not allocated", whereas previously allocated to segments.

<TABLE>

                                                                           For the year ended December 31, 2005
                                                             Tanker            Bulk    Not allocated           Total
                                                             ------            ----    -------------           -----
<S>                                                           <C>             <C>           <C>                <C>
CONSOLIDATED SEGMENT INFORMATION
INCOME STATEMENT
Net revenue                                                   419.3           167.6             0.0           586.9
Port expenses, bunkers and commissions                      (111.4)           (11.7)            0.0          (123.1)
                                                           ---------       ---------          ------        ---------
Time Charter Equivalent Earnings                              307.9           155.9             0.0           463.8

Charter hire                                                  (44.3)          (37.9)            0.0           (82.2)
Operating expenses                                            (51.4)          (15.3)            0.0           (66.7)
                                                           ---------        --------        --------        ---------
Gross profit/(loss) (Net earnings from shipping
activities)                                                   212.2           102.7             0.0           314.9
Profit/(loss) from sale of vessels                             54.7             0.0             0.0            54.7
Administrative expenses                                       (25.4)           (5.8)            0.0           (31.2)
Other operating income                                         12.4             0.2             0.0            12.6
Depreciation and impairment losses                            (37.0)          (10.8)            0.0           (47.8)
                                                            --------        --------        --------         --------
Operating profit                                              216.9            86.3             0.0            303.2
                                                            --------        --------
Financial items                                                                                (3.8)           (3.8)
                                                                                            --------        --------
Profit/(loss) before tax                                                                       (3.8)          299.4

Tax expenses                                                                                    0.0             0.0
                                                                                              ------       ---------
Net profit/(loss) for the year                                                                 (3.8)          299.4


BALANCE                                                                                      As of December 31, 2005
Total non-current assets                                    1,025.8           141.3           361.0         1,528.1
Total assets                                                1,139.2           145.5           525.4         1,810.1
Total liabilities                                              39.4             5.7           860.4           905.5

OTHER INFORMATION
Additions to tangible fixed assets                            607.2            28.7             0.0           635.9
Impairment losses recognized in the income
statement                                                       0.4             0.1             0.0             0.5


                                Financial items and tax expenses are included in "Not allocated".

</TABLE>


<PAGE>


NOTE 5  - STAFF COSTS (in USD million)

                                           For the years ended December 31
                                                2004             2005
                                                ----             ----
Total staff costs
Staff costs included in operating                 10.7             12.9
Costs
Staff costs included in administrative            27.4             21.1
expenses
                                             ---------        ---------
Total                                             38.1             34.0
                                             ---------        ---------
Staff costs comprise the following
Wages and salaries                                25.8             30.3
Share-based compensation                           9.8              0.5
Pension costs                                      2.3              2.7
Other social security costs                        0.2              0.5
                                             ---------        ---------
Total                                             38.1             34.0
                                             ---------        ---------
Hereof remuneration to the Board of
Directors and salaries to the Management
Wages and salaries                                 2.5              3.7
Share-based compensation                           3.7              0.5
Pension and social security costs                  0.1              0.1
                                             ---------        ---------
Total                                              6.3              4.3
                                             ---------        ---------

Hereof remuneration to the Board of                1.4              0.9
directors
Hereof salaries to the Management                  4.9              3.4
                                             ---------        ---------
Total                                              6.3              4.3
                                             ---------        ---------

Employee information

     The average  number of staff in TORM in the  financial  year was 339 (2004:
295). The majority of the staff on vessels are not employed by TORM.

     The members of Management  are, in the event of termination by the Company,
entitled to a severance payment of up to 18 months' salary.  The pension age for
members of Management is 62.

<TABLE>

                                                           Total options                  Option allocation per year
                                                              2005                2001               2002              2003
                                                              ----                ----               ----              ----
<S>                                                          <C>                 <C>                  <C>               <C>
Share option program - 2001 to 2005*

Board of Directors
Allocated                                                    105,820              24,420               40,700            40,700
Exercised in 2003                                            (24,420)             (8,140)             (16,280)                0
Exercised in 2004                                            (36,560)            (16,280)              (4,000)          (16,280)
Exercised in 2005                                            (20,420)                  0              (20,420)                0
Forfeited/expired                                                  0                   0                    0                 0
                                                         ------------        ------------         ------------      ------------
Not exercised at December 31, 2005                            24,420                   0                    0            24,420
                                                         ------------        ------------         ------------      ------------
Management
Allocated                                                    463,420             106,940              178,240           178,240
Exercised in 2003                                           (285,180)           (106,940)            (178,240)                0
Exercised in 2004                                           (178,240)                  0                    0          (178,240)
Forfeited/expired                                                  0                   0                    0                 0
                                                         ------------        ------------         ------------      ------------
Not exercised at December 31, 2005                                 0                   0                    0                 0
                                                         ------------        ------------         ------------      ------------
Key Employees
Allocated                                                    634,640             206,120              214,260           214,260
Exercised in 2003                                           (420,380)           (206,120)            (214,260)                0
Exercised in 2004                                           (214,260)                  0                    0          (214,260)
Forfeited/expired                                                  0                   0                    0                 0
                                                        ------------        ------------         ------------      ------------
Not exercised at December 31, 2005                                 0                   0                    0                 0
                                                        ------------        ------------         ------------      ------------
Resigned persons
Allocated                                                    402,760             147,820              131,540           123,400
Exercised in 2003                                           (232,240)           (138,840)             (93,400)                0
Exercised in 2004                                           (162,380)             (8,980)            (30, 000)         (123,400)
Exercised in 2005                                             (8,140)                  0               (8,140)                0
Forfeited/expired                                                  0                   0                    0                 0
                                                         ------------        ------------         ------------      ------------
Not exercised at December 31, 2005                                 0                   0                    0                 0
                                                         ------------        ------------         ------------      ------------
Total number of not exercised options at
December 31, 2005                                             24,420                   0                    0            24,420
                                                         ------------        ------------         ------------      ------------

Not exercised in percentage of common shares                    0.07%               0.00%                0.00%             0.07%

* The figures in the table above and the description below are adjusted to reflect the issue of bonus shares in May 2004.
</TABLE>


     The  classification  has been  adjusted to reflect the persons  association
with TORM as at December 31, 2005.

     In 2001,  a share  option  compensation  plan for 20 of the Board  members,
executives and key employees was introduced.  The plan grants 1,606,640 options,
which are priced at 3  different  dates,  485,300  in 2001,  564,740 in 2002 and
556,600 in 2003.  Option holders may exercise their options in specified periods
and choose to purchase  the  Company's  shares at the strike  price or receive a
cash payment equivalent to the difference between the strike price and the share
price.

     The  individual  must be employed at the grant date to receive  that year's
options.

     The share  options  for 2001 were priced on February  20,  2001,  the share
options for 2002 were  priced on March 20,  2002 and the share  options for 2003
were priced on February 27, 2003.  The 2001 share options are  exercisable  at a
price of DKK 27 (USD 4.53) per share,  the 2002 share  options at a price of DKK
29.25  (USD  4.91) per share and the 2003  share  options at a price of DKK 31.3
(USD 5.25). The share options can be exercised at the earliest 1 year and at the
latest 3 years and four weeks after the pricing,  observing the rules concerning
insider trading.

     In 2005, 28,560 options have been exercised (2004:  591,440).  The weighted
average  share price at the date of exercise is DKK 281.03 (USD 46.86) per share
for shares exercised in 2005 (2004: DKK 184.11 (USD 30.73)). The total number of
not exercised  options at December 31, 2005 is 24,420 which equates 0.07% of the
common  shares.  The Company  has  acquired  treasury  shares to cover the share
option  program.  The  cost  of the  shares  has  been  recognized  directly  in
Shareholders' equity.

     According to the  Black-Scholes  model, the fair value of the not exercised
part of the share option  program is estimated at USD 1.0 mill.  (2004:  USD 1.8
mill.) at the balance sheet date. The amount is recognized in the balance sheet

     The key assumptions of the Black-Scholes model are:

     o    The average  dividend equals 5.81% (2004:  3.48%) of the average share
          price for the period.

     o    The volatility is estimated at 27.7% (2004: 93.76%).

     o    The risk free interest  rate based upon expiry of the options  applies
          to 2.75 % (2004: between 2.37% and 2.50%).

     o    The quoted  share  price as of December  31, 2005 is 305.12  DKK/share
          (48.25 USD/share) (2004: 225.77 DKK/share (41.29 USD/share)).

NOTE 6 - ADMINISTRATIVE EXPENSES (in USD million)

Remuneration to the auditors
appointed at the Annual
                                                          For the year ended
                                                               December 31
                                                            2004        2005
                                                            ----        ----
General Meeting

Ernst & Young
Audit fees                                                   0.2          0.1
Audit-related fees                                           0.0          0.0
Tax fees                                                     0.0          0.0
Fees other services                                          0.0          0.0
                                                       ---------    ---------
Total fees                                                   0.2          0.1
                                                       ---------    ---------
Deloitte
Audit fees                                                   0.3          0.5
Audit-related fees                                           0.0          0.0
Tax fees                                                     0.1          0.1
Fees other services                                          0.1          0.0
                                                       ---------    ---------
Total fees                                                   0.5          0.6
                                                       ---------    ---------

NOTE 7 - FINANCIAL FIXED ASSETS (in USD million)

Other investments                                           2004        2005
                                                            ----        ----
Cost:
Balance at January 1                                        45.1         49.1
Exchange rate adjustment                                     4.0          0.0
Additions                                                    0.0         15.4
Disposals                                                    0.0          0.0
                                                        ---------   ---------
Balance at December 31                                      49.1         64.5
                                                        ---------   ---------
Value adjustment:
Balance as of January 1                                    118.7        319.4
Exchange rate adjustment                                    27.3        (50.5)
Value adjustment for the year                              173.4         27.6
                                                       ---------    ---------
Balance as of December 31                                  319.4        296.5
                                                       ---------    ---------

Carrying amount at December 31:                            368.5        361.0
                                                       ---------    ---------
Hereof listed                                              368.5        358.5
Hereof unlisted                                              0.0          2.5

NOTE 7
<TABLE>

Parent company:
A/S Dampskibsselskabet TORM                 Denmark
<S>                                   <C>                     <C>
Investments in subsidiaries*)                                 Investments in jointly controlled entities*):
Torm Shipware A/S                     100%  Denmark           HMSC Shipping Ltd         50%      Bahamas
Torm Singapore (Pte) Ltd.             100%  Singapore         Long Range 2 A/S          50%      Denmark
Torm Shipping Asia (Pte) Ltd          100%  Singapore         LR2 Management K/S        50%      Denmark
Torm Asia Limited                     100%  Hong Kong
Torm Asia Bulkers Limited             100%  Hong Kong

Eastern Light Shipping Limited        100%  Liberia
Southern Light Shipping Limited       100%  Liberia                Furthermore, TORM is participating
Hermia Shipping Corporation           100%  Liberia           in a number of joint ventures, which are
Hilde Shipping Corporation            100%  Liberia           not legal entities.
Shipping (Germany) G.m.b.H.           100%  Germany
Long Range 1 A/S                      100%  Denmark
Medium Range A/S                      100%  Denmark                The investments in these joint
LR1 Management K/S                    100%  Denmark           ventures are included as investments in
MR Management K/S                     100%  Denmark           jointly controlled operations.
TORM SHIPPING (PHILS.), INC.           25%  Philippines

</TABLE>

     The following  represents the results reflected in the consolidated  income
statement  and the  summarized  balance  sheet  data  that is  reflected  in the
consolidated  balance  sheet for the year ended  December  31,  2004 and 2005 in
accordance with IFRS associated with jointly controlled entities:

                                                          2004           2005
                                                          ----           ----
Net revenue                                               12.5            0.0
Port expenses, bunkers and commissions                   (5.5)            0.0
                                                        ------         ------
Time Charter Equivalent Earnings                           7.0            0.0
Charter hire and operating expenses                       (0.9)            0.0
                                                       --------       --------
Gross profit (Net earnings from shipping activities)       6.1            0.0
Profit  from sale of vessels                               0.0            0.0
Administrative expenses                                   (1.1)          (1.5)
Other operating income                                     2.0            2.7
Depreciation and impairment losses                        (2.9)            0.0
                                                       --------       --------
Operating profit                                           4.1            1.2
Financial items                                            (1.0)          (0.1)
                                                       --------       --------
Profit before tax                                          3.1           (1.1)
Tax expenses                                              (0.4)           0.0
                                                       --------       --------
Net profit for the year                                   (2.7)          (1.1)

Non current assets                                         0.1            0.0
Current assets                                             3.4            2.1

Non-current liabilities                                    0.0            0.0
Current liabilities                                        1.4            1.0

           Other investments:

           Dampskibsselskabet "Norden" A/S          33% **)Denmark

     The Norden  shareholding is currently  treated in TORM's accounts as "Other
investments"  given that TORM is deemed  not to have  significant  influence  on
Norden in the form of board seats or similar.

     *)   Companies with activity in the financial year.

     **)  Including Norden's treasury shares.



<PAGE>

<TABLE>

NOTE 8 - TANGIBLE FIXED ASSETS (in USD million)
<CAPTION>


                                                                      Vessels and      Prepayment on     Other plant
                                                       Land and       capitalized      vessels under     and operating
                                                      buildings       dry-docking       construction       equipment       Total
                                                      ---------       -----------       ------------       ---------       -----
<S>                                                      <C>            <C>             <C>                  <C>           <C>
Cost:
Balance at January 1, 2004                                  1.3           651.0            38.5                 6.7         697.5
Exchange rate adjustment                                    0.0             0.0             0.0                 0.0           0.0
Additions                                                   0.0           120.2            65.3                 1.6         187.1
Disposals                                                   0.0            (1.7)            0.0                (2.4)         (4.1)
Transferred to/from other items                             0.0            66.5           (66.5)                0.0           0.0
                                                       --------        --------        --------            --------      --------
Balance at December 31, 2004                                1.3           836.0            37.3                 5.9         880.5
                                                       --------        --------        --------            --------      --------
Depreciation and impairment losses:

Balance at January 1, 2004                                  0.9           156.8             0.0                 3.7         161.4
Exchange rate adjustment                                    0.0             0.0             0.0                 0.0           0.0
Additions                                                   0.0             0.0             0.0                 0.0           0.0
Disposals                                                   0.0            (1.7)            0.0                (2.3)         (4.0)
Reversal of impairment losses                               0.0             0.0             0.0                 0.0           0.0
Depreciation for the year                                   0.0            33.4             0.0                 1.8          35.2
                                                       --------        --------        --------            --------      --------

Balance at December 31, 2004                                0.9           188.5             0.0                 3.2         192.6

Carrying amount at December 31, 2004                        0.4           647.5            37.3                 2.7         687.9
                                                       --------        --------        --------            --------      --------

Cost:
Balance at January 1, 2005                                  1.3           836.0            37.3                 5.9         880.5
Exchange rate adjustment                                    0.0             0.0             0.0                 0.0           0.0
Additions                                                   0.0           340.1           294.7                 1.1         635.9
Disposals                                                   0.0          (137.3)            0.0                (0.9)       (138.2)
Transferred to/from other items                             0.0           191.2          (191.2)                0.0           0.0
Transferred to non-current assets held for sale             0.0             0.0           (43.4)                0.0        (43.4)
                                                       --------        --------        --------            --------      --------
Balance at December 31, 2005                                1.3         1,230.0            97.4                 6.1       1,334.8
                                                       --------        --------        --------            --------      --------
Depreciation and impairment losses:

Balance at January 1, 2005                                  0.9           188.5             0.0                 3.2         192.6
Exchange rate adjustment                                    0.0             0.0             0.0                 0.0           0.0
Additions                                                   0.0             0.0             0.0                 0.0           0.0
Disposals                                                   0.0           (71.9)            0.0                (0.8)        (72.7)
Reversal of impairment losses                              (0.5)            0.0             0.0                 0.0          (0.5)
Depreciation for the year                                   0.0            47.0             0.0                 1.4          48.4
                                                       --------        --------        --------            --------      --------
Balance at December 31, 2005                                0.4           163.6             0.0                 3.8         167.8
                                                       --------        --------        --------            --------      --------
Carrying amount at December 31, 2005                        0.9         1,066.4            97.4                 2.3       1,167.0
                                                       --------        --------        --------            --------      --------
Hereof finance leases                                       0.0             0.0             0.0                 0.0           0.0
                                                       --------        --------        --------            --------      --------
Hereof financial expenses included in cost                  0.0             1.3             0.2                 0.0           1.5

</TABLE>

     At October 1, 2004 the value of land and buildings  assessed for Danish tax
purposes  amounted to USD 0.5 million  (carrying amount at December 31, 2005 USD
0.4 mill.) compared with USD 0.5 million at October 1, 2003.

     Included in the carrying amount for vessels and capitalized dry-docking are
capitalized  dry-docking  costs in the amount of USD 12.6 million (2004: USD 7.1
mill.).

     Please refer to Note 15 for  information  with  relation to assets used for
collateral security.

NOTE 9 - FINANCIAL ITEMS (in USD million)

                                                            For the years ended
                                                               December 31
                                                            2004        2005
                                                            ----        ----
Financial income
Interest income                                              3.4         3.3
Gain on other investments                                    0.0         0.1
Dividends *)                                                34.1        12.8
Gain on derivative financial instruments                     5.2         0.2
Exchange rate adjustment                                     0.0         9.6
                                                        --------    --------
                                                            42.7        26.0
                                                        --------    --------
Financial expenses
Interest expense on mortgage and bank debt                  14.8        25.6
Net losses on marketable securities at fair
value through profit and loss                                0.4         3.9
Exchange rate adjustments                                    0.8         0.0
Other interest expenses                                      0.9         0.5
Hereof included in the cost of tangible fixed assets         0.0        (0.2)
                                                        --------    --------
                                                            16.9        29.8
                                                        --------    --------
Total financial items                                       25.8        (3.8)
                                                        --------    --------

*)   Includes  dividend on the Norden  shares of USD 12.6 million in 2005 (2004:
     USD 34.0 mill.).

NOTE 10 - TAXES (in USD million)

                                                           For the years ended
                                                                December 31
                                                             2004         2005
                                                             ----         ----
TAX ON PROFIT FOR THE YEAR AND DEFERRED TAX

Current tax for the year                                    (9.6)        (8.8)
Adjustment related to previous years                         0.0          0.0
Adjustment of deferred tax                                  (9.1)         8.8
                                                        ---------    ---------
Tax income/(expenses)                                      (18.7)         0.0
                                                        ---------    ---------

Effective corporate tax rate                                 9.1%         0.0%

Deferred tax liability
Balance at January 1                                        58.8         73.3
Exchange rate adjustment                                     5.4         (9.9)
Reduction of Danish corporation tax from 30% to 28%            -         (4.2)
Deferred tax for the year                                    9.1         (4.6)
                                                        ---------    ---------
Balance at December 31                                      73.3         54.6
                                                        ---------    ---------

     The   Company   participates   in  the   tonnage  tax  scheme  in  Denmark.
Participation in the tonnage tax scheme is binding until December 31, 2010.

     The Company  expects to  participate  in the  tonnage tax scheme  after the
binding  period and at a minimum to maintain its current  investing and activity
level.  No  reconciliation  of income tax is provided,  as it is not  meaningful
under the tonnage tax scheme.

     Essentially all deferred tax relates to vessels  included in the transition
account under the tonnage tax scheme.

NOTE 11 - COMMON SHARES
<TABLE>

                                                                           As of December 31
                                                      2004               2005              2004              2005
                                                      ----               ----              ----              ----
                                                 Number of           Number of        Nominal value,    Nominal value,
                                               shares, mill.       shares, mill.         DKK mill.         DKK mill.
                                               -------------       -------------         ---------         ---------
<S>                                                   <C>                 <C>             <C>                  <C>
Balance at January, 1                                 18.2               36.4             182.0               364.0
Issue of bonus shares                                 18.2                0.0             182.0                0.0

Balance at December, 31                               36.4               36.4             364.0               364.0
</TABLE>


     The common shares consist of 36.4 mill.  shares at denomination  DKK 10 per
share. No shares carry special rights. All issued shares are fully paid.

     In May 2004 the Company  increased  the share  capital from  nominally  DKK
182.0 mill. to nominally DKK 364.0 mill.  through the issue of 18.2 mill.  bonus
shares of DKK 10 each. The bonus shares were allotted to the Company's  existing
shareholders  at the ratio of 1:1.  Beyond this no changes have been made to the
share capital within the last 5 years.

TREASURY SHARES *
<TABLE>

                                      2004             2005            2004            2005             2004            2005
                                    Thousands        Thousands   Nominal value   Nominal value        % of share      % of share
                                   of shares        of shares      DKK million     DKK million          capital         capital
                                   ----------       ----------     -----------     -----------          -------         -------
<S>                                    <C>               <C>              <C>             <C>              <C>              <C>
Balance at January, 1                 1,762.7          1,566.6            17.6            15.7              4.8             4.3
Purchase                                  0.0              0.0             0.0             0.0              0.0             0.0
Sale                                      0.0              0.0             0.0             0.0              0.0             0.0
Share options exercised                (196.1)           (8.1)            (1.9)           (0.1)            (0.5)            0.0
                                  -----------      -----------     -----------     -----------      -----------     -----------
Balance at December, 31               1,566.6          1,558.5            15.7            15.6              4.3             4.3
                                  -----------      -----------     -----------     -----------      -----------     -----------
</TABLE>

     *The figures in the table above and the  description  below are adjusted to
reflect the issue of bonus shares in May 2004.

     At December 31, 2005, the Company's holding of treasury shares  represented
1,558,472 shares (2004: 1,566,612 shares) at denomination DKK 10 per share, with
a total nominal value of USD 2.5 mill.  (2004: USD 2.9 mill.) and a market value
of USD 75.2 million  (2004:  USD 64.7 mill.) The retained  shares equate to 4.3%
(2004: 4.3%) of the Company's common shares.

     Total  consideration  in respect of the purchase of treasury shares was USD
0.0 mill.  (2004: USD 0.0 mill.),  whereas for the sale of shares it was USD 0.0
mill.  (2004: USD 1.0 mill.).  As the disposal of treasury shares is carried out
in connection with the exercise of share options,  the consideration is based on
exercise prices in the share option program.  Of the holding of treasury shares,
24,420 (2004:  52,980) shares are held as a hedge of the Company's  share option
program.  The  remaining  shares  will be used for  further  development  of the
capital structure,  for financing or execution of acquisitions,  for sale or for
other types of transfers.

NOTE 12 -  (in USD million)

                                               As of December 31
DEFERRED INCOME                                2004          2005
                                               ----          ----

Deferred gain related to sale and
lease back transactions                         7.4          5.9
Other                                           0.0          0.1
                                             --------      --------
                                                7.4          6.0
                                             --------      --------

NOTE 13 - MORTGAGE DEBT,  BANK LOANS AND CAPITALIZED  LEASE  OBLIGATIONS (in USD
million)

                                                  As of December 31
To be repaid as follows:                         2004           2005
                                                 ----           ----

Falling due within one year                      62.1           59.9
Falling due between one and two years            47.4           59.9
Falling due between two and three years          57.0           90.0
Falling due between three and four years         27.8           57.5
Falling due between four and five years          39.6           57.5
Falling due after five years                    161.5          464.2
                                              --------       --------
                                                395.4          789.0
                                              --------       --------

     The presented  amounts to be repaid are adjusted by directly  related costs
arose from the issuing of the loans by USD 1.7 mill. (2004: USD 0 mill.),  which
are amortized over the term of the loans.

<TABLE>

                                                                         Effective     Effective      Carrying       Carrying
                                                            Fixed/       interest       interest       amount         amount
                                             Maturity       floating       2004            2005         2004           2005
                                             --------       --------       ----            ----         ----           ----
<S>                                          <C>            <C>              <C>           <C>           <C>            <C>
LOAN
USD                                          2005           Floating        3.8%            -           26.2            0.0
USD                                          2006           Floating        3.9%            -           16.5            0.0
USD                                          2007           Floating        4.0%            -           37.6            0.0
USD                                          2008           Floating        3.3%          5.4%          17.0           37.6
USD                                          2009           Floating        4.3%            -           31.3            0.0
USD                                          2011           Floating        2.8%          5.4%          11.4           22.0
USD                                          2012           Floating        3.8%            -           76.7            0.0
USD                                          2013           Floating        4.4%          5.4%          97.7           14.2
USD                                          2014           Floating        3.9%          4.9%          81.0          490.7
USD                                          2015           Floating           -          5.2%           0.0          226.2

Weighted average effective interest rate                                    3.9%          5.0%
Carrying amount                                                          ---------     ---------       395.4          790.7
                                                                                                     ---------      ---------
</TABLE>

     The  Group  has an early  settlement  option to repay the loans by paying a
breakage costs.

           Part of the loans have been swapped to fixed interest rate. Please
refer to the section "Managing risk and exposure" for further information on
financial risks.

NOTE 14 - OTHER LIABILITIES (in USD million)

                                                             As of December 31
                                                          2004          2005
                                                          ----          ----
Partners and commercial managements                        3.8           6.0
Accrued dry-docking costs                                  0.3           1.9
Accrued interests                                          3.2           3.2
Wages and social expenses                                  5.2           6.5
Derivative financial instruments                           7.3           2.9
Miscellaneous, including items related
 to shipping activities                                    3.3           3.1
                                                       -------       -------
                                                          23.1          23.6
                                                       -------       -------

NOTE 15 - COLLATERAL SECURITY (in USD million)

Collateral security for mortgage debt and bank loans:
                                                             As of December 31
                                                          2004          2005
                                                          ----          ----
Vessels                                                  386.4         760.7
Marketable securities                                      9.9           0.0
                                                       ---------     ---------
                                                         396.3         760.7
                                                       ---------     ---------

     The total  carrying  amount for vessels that have been provided as security
amounts to USD 766.5 mill. as at December 31, 2005.

NOTE 16 - GUARANTEE AND CONTINGENT LIABILITIES (in USD million)

                                                         As of December 31
                                                          2004          2005
                                                          ----          ----
Guarantee liabilities                                      0.7           0.0
                                                        ------        ------

     The guarantee  liabilities  for the Group for 2004 are related to guarantee
liabilities to Danmarks Skibskredit A/S and the Danish Shipowners'  Association.
In 2005, the guarantee liability to Danmarks Skibskredit A/S has been cancelled.

     The   Company  has  as  at  December   31,  2005   contracted   12  vessels
(newbuildings)  (2004: 7 vessels),  an investment  totaling USD 540 mill. (2004:
USD 283 mill.). Furthermore, the Company has exercised the purchase options on 2
time chartered vessels, an investment totaling USD 94 mill.

NOTE 17

USD million
CONTRACTUAL LIABILITIES - AS LESSEE (operating leases)
Charter hire for vessels on time charter:
                                                          2004          2005
                                                          ----          ----

Falling due within one year                               45.0          61.3
Falling due between one and two years                     35.3          34.2
Falling due between two and three years                   31.2          40.7
Falling due between three and four years                  30.7          37.8
Falling due between four and five years                   25.2          23.1
Falling due after five years                              35.8          56.2
                                                      --------     ---------
                                                         203.2         253.3
                                                      --------     ---------
Average period until redelivery (years)                    2.7           3.1

Newbuilding installments  and exercised purchase
options (purchase obligations):
Falling due within one year                               93.5         225.3
Falling due between one and two years                     75.8         146.7
Falling due between two and three years                   57.0          95.5
Falling due between three and four years                  25.6          28.0
Falling due between four and five years                    0.0           0.0
Falling due after five years                               0.0           0.0
                                                      --------     ---------
                                                         251.9         495.5

Other operating leases:
Falling due within one year                                1.1           2.2
Falling due between one and two years                      1.1           2.2
Falling due between two and three years                    0.9           1.9
Falling due between three and four years                   0.8           1.7
Falling due between four and five years                    0.9           1.8
Falling due after five years                               4.6           5.8
                                                      --------     ---------
                                                           9.4          15.6

     Other operating  leases  primarily  consist of contracts  regarding  office
spaces and apartments as well as IT-related contracts.

     During the year,  charter hire expenses have been  recognized in the income
statement  by USD 82.1  mill.  and  other  operating  lease  expenses  have been
recognized by USD 1.5 mill.

USD million
CONTRACTUAL LIABILITIES - AS LESSOR (operating leases)
Charter hire income for vessels on time charter and bareboat charter:

                                                          2004          2005
                                                          ----          ----
Falling due within one year                              114.1         102.7
Falling due between one and two years                      2.6          26.8
Falling due between two and three years                    0.3          13.8
Falling due between three and four years                   0.0          13.7
Falling due between four and five years                    0.0           6.0
Falling due after five years                               0.0           0.0
                                                      --------     ---------
                                                         117.0         163.0
                                                      --------     ---------
Average period until redelivery (years)                    0.5           0.9

     Charter  hire income for vessels on time  charter and  bareboat  charter is
recognized under net revenue.

<TABLE>
NOTE 18 - FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS (in USD million)

                                                                   Fair value adjustments
                                                                     Income statement
<CAPTION>

                                                                    Port                        Shareholders'
                                                                   expenses,                     equity
                                 Fair value at         Net         bunkers       Financial       Hedging          Fair value at
                                 January 1, 2004      revenue      and comm.       items         reserves       December 31, 2004
                                 ---------------      -------      ---------       -----         --------       -----------------
<S>                               <C>                 <C>          <C>             <C>           <C>             <C>
Cross currency swaps                    5.9               -              -          (5.8)             -              0.1
Forward rate contracts                  0.3               -              -           3.9           (0.4)             3.8
Interest rate swaps                    (5.3)              -              -           1.1            4.4              0.2
Currency options                       (0.3)              -              -           3.9              -              3.6
Bunker hedge                            0.0               -           (0.8)            -              -             (0.8)
Forward Freight Agreement               0.2            (4.6)             -             -              -             (4.4)
                                     ------          ------          ------       ------          ------           ------
                                        0.8            (4.6)          (0.8)          3.1            4.0              2.5
                                     ------          ------          ------       ------          ------           ------

</TABLE>


<TABLE>

                                                                   Fair value adjustments
                                                                     Income statement
<CAPTION>

                                                                    Port                        Shareholders'
                                                                   expenses,                     equity
                                 Fair value at         Net         bunkers       Financial       Hedging          Fair value at
                                 January 1, 2005      revenue      and comm.       items         reserves       December 31, 2005
                                 ---------------      -------      ---------       -----         --------       -----------------
<S>                               <C>                 <C>          <C>             <C>           <C>             <C>
Cross currency swaps                    0.1               -              -          (0.1)             -              0.0
Forward rate contracts                  3.8               -              -          (3.9)             -             (0.1)
Interest rate swaps *)                  0.2               -              -           3.5            2.9              6.6
Currency options                        3.6               -              -          (3.6)             -              0.0
Bunker hedge                           (0.8)              -            0.8             -              -              0.0
Forward Freight Agreement              (4.4)            2.5              -             -              -             (1.9)
                                      ------          ------         ------         ------        ------           ------
                                        2.5             2.5            0.8          (4.1)           2.9              4.6
                                      ------          ------         ------         ------        ------           ------
</TABLE>

     Please  refer to the  section  "Managing  risk and  exposure"  for  further
information on commercial and financial risks.

     *) As at December 31, 2005 the Company had entered into  interest rate swap
contracts  with a fair value of USD 3.3 mill.  designated  as hedge of  interest
payments  during the period 2006 to 2008. The gains or losses on these contracts
will be recognized under financial items in the income  statement  together with
the interest payments.

NOTE 19 - RELATED PARTY TRANSACTIONS

     The members of the  Company's  Board of  Directors  and  Management,  close
members of the family to these  persons and  companies  where these persons have
control or exercise significant influence are considered as related parties with
significant influence.

     There have not been any material  transactions with such parties during the
financial  year,  except for a time  charter  agreement  with an entity owned by
Beltest  Shipping  Company  Limited  under which TORM paid USD 7.2 mill.  during
2005. The agreement was mentioned in the annual report for 2004.

     Management remuneration is disclosed in Note 5.

NOTE 20 - NON-CURRENT ASSETS HELD FOR SALE

In 2005, the Company has entered into a contract  concerning  sale of one of the
vessels under  constructions  for delivery in 2006.  The result from the sale of
the vessel will be recognized in the income statement when the risks and rewards
are  transferred  upon delivery of the vessel to the buyer.  The vessel has been
classified as held for sale and is presented separately in the balance sheet and
is included under Tanker in the segment information.

NOTE 21 - EARNINGS PER SHARE

                                                         2004            2005
                                                         ----            ----

Net profit for the year (USD mill.)                     186.6           299.4
                                                     ---------       ---------
Mill. Shares
Average number of shares                                 36.4            36.4
Average number of treasury shares                        (1.6)           (1.6)
                                                     ---------       ---------
Average number of shares outstanding                     34.8            34.8
Dilutive effect of outstanding share options              0.2             0.1
                                                     ---------       ---------
Average number of shares outstanding incl.
dilutive effect of share options                         35.0            34.9
                                                     ---------       ---------
Earnings per share (USD)                                  5.4             8.6
                                                     ---------       ---------
Diluted earnings per share (USD)                          5.3             8.6
                                                     ---------       ---------

     The  comparative  figures for number of shares and  earnings  per share are
restated to reflect the issue of bonus shares in May 2004.

NOTE 22

USD million                                             2004            2005
                                                        ----            ----
APPROPRIATION OF NET PROFIT FOR THE YEAR
INCL. PROPOSED DIVIDEND
Proposed appropriation of net profit for
the year in the Parent Company, A/S
Dampskibsselskabet TORM:
Proposed dividend                                       99.9           132.4
Retained profit                                        105.9           103.3
                                                    ---------       ---------
Net profit for the year                                205.8           235.7
                                                    ---------       ---------

Total shareholders' equity in the Parent
Company, A/S Dampskibsselskabet TORM:
Common shares                                           61.1            61.1
Treasury shares                                         (7.7)           (7.7)
Revaluation reserves                                   319.3           296.4
Retained profit                                        286.8           400.0
Proposed dividend                                       99.9           132.4
Hedging  reserves                                        0.4             3.2
Translation reserves                                     6.0             6.0
                                                    ---------       ---------
Total shareholders' equity                             765.8           891.4
                                                    ---------       ---------
Proposed dividend per share (USD)                        2.7             3.6
                                                    ---------       ---------

NOTE  23  -  RECONCILIATION  TO  UNITED  STATES  GENERALLY  ACCEPTED  ACCOUNTING
PRINCIPLES (U.S. GAAP)

     The TORM Group's  Annual Report has been  prepared in  accordance  with the
International  Financial  Reporting  Standards (IFRS),  which differs in certain
respects from U.S. GAAP.

     The following is a summary of the  adjustments  to net income for the years
ended  December  31, 2004 and 2005 and  shareholders'  equity as of those dates,
necessary to reconcile those to net income and  shareholders'  equity determined
in accordance with U.S. GAAP.

Reconciliation  of Net  income  for the  year to U.S.  GAAP Net  income  (in USD
million)

                                                    Notes     2004       2005
                                                    -----     ----       ----

Net income as reported under IFRS                             186.6     299.4

Dry-docking costs                                    a)        (1.5)      0.0
Write-down on assets                                 b)         0.2       1.4
Derivative financial instruments                     c)         2.6       0.0
Share options                                        d)        (1.2)      0.0
Deferred gain on sale and lease back of vessels      e)         0.0     (17.3)
Deferred taxation                                    f)         1.0       4.3

Net income in accordance with U.S. GAAP
before change in accounting principles                        187.7     287.8
                                                             ------    ------
Cumulative effect of change in accounting
principles as at January 1, 2005                     a)                   8.7

Net income in accordance with U.S. GAAP after
change in accounting principles                               187.7     296.5
                                                             ======    ======

Reconciliation of Shareholders' equity to U.S. GAAP Shareholders' Equity (in USD
million)


                                                     Notes     2004       2005
                                                     -----     ----       ----

Shareholders' equity as reported under IFRS                   715.4     904.7

Dry-docking costs                                    a)        (8.3)      0.0
Write-down on assets                                 b)        (1.9)     (0.5)
Derivative financial instruments                     c)         0.0       0.0
Share options                                        d)        (0.1)      0.0
Deferred gain on sale and lease back of vessels      e)         0.0     (17.3)
Deferred taxation                                    f)         0.2       4.8

Shareholders' equity in accordance with U.S.
GAAP before change in accounting principles                   705.3     891.7

Cumulative effect of change in accounting
principles as at January 1, 2005                                          0.0

Shareholders' equity in accordance with U.S.
GAAP after change in accounting principles                    705.3     891.7

     The Group's accounting  policies under IFRS are described below where these
differ from U.S. GAAP:

     a) Dry-docking costs

     As of January 1, 2005,  TORM  changed its method of  accounting  for vessel
dry-docking  costs under US GAAP from the accrual method to the deferral method.
Under the accrual method,  dry-docking costs had been accrued as a liability and
an expense on an estimated  basis in advance of the next scheduled  dry-docking.
Subsequent  payments for dry-docking were charged against the accrued liability.
Under the deferral method,  costs incurred in replacing or renewing the separate
assets that constitute the dry-docking  costs are capitalized and depreciated on
a  straight-line  basis over the  estimated  period until the next  dry-docking.
Dry-docking  activities include, but are not limited to, inspection,  service on
turbocharger, replacement of shaft seals, service on boiler, replacement of hull
anodes,  applying of antifouling and hull paint, steel repairs and refurbishment
and replacement of other parts of the vessel. This change was made to conform to
prevailing  shipping industry  accounting  practices and the Group's  accounting
under  IFRS.  On  January  1, 2005,  TORM  recorded  the effect of the change in
accounting  principle  on  periods  prior  to 2005  as a  cumulative  effect  of
accounting  change of USD 8.7 mil- lion (net of income tax of USD 0.4  (income))
or USD 0.3 per basic share.  The effect of this change in  accounting  method on
the US GAAP shareholders' equity was an increase of USD 8.7 million.

     The proforma effect of this change,  as if it had been made for 2004, would
be to increase net income as follows:

                                                                      2004
Proforma (USD million)
     Net income as reported                                          187.7
     Effect of accounting change                                       1.1
                                                               ------------
     Net income                                                      188.8
                                                               ============

Per share (diluted)
     As reported                                                       5.4
     Effect of accounting change                                       0.0
     Total                                                             5.4
                                                               ============

     b) Write-down on assets

     In 1998,  TORM  recognized  an  impairment  charge for  certain  vessels on
capital  leases as the  carrying  value at the time  exceeded  the fair value of
these  vessels.  In 2000,  TORM  recognized  an  impairment  charge for  certain
properties for the same reason.  Under IFRS,  impairment  losses are reversed in
subsequent periods if the fair value increases.  The Company recorded a reversal
of the  impairment  loss of USD 1.7  million  for the  increase in fair value of
these  vessels  during  2002 and a reversal  of the  impairment  loss of USD 0.5
million for the increase in fair value of the properties during 2005.

     Under US GAAP,  impairment  losses  cannot be  reversed.  This results in a
difference in  depreciation  expense between US GAAP and IFRS. In February 2005,
the vessels were sold and the remaining  impairment loss was added to the profit
on sale of vessels recognized under IFRS.

     c) Derivative financial instruments

     Both  under  IFRS  and  US  GAAP,   derivative  financial  instruments  are
recognized in the balance sheet at fair value.  For fair value hedges the change
in fair value is set off  against  the change in fair value of the hedged  item.
For cash flow  hedges the change in fair value on the  contract is recorded as a
component of  shareholders'  equity and then transferred to the income statement
when the hedged item is  realized.  The change in fair value on  contracts  that
does not qualify for hedge accounting is recorded in the income statement at the
end of each period.

     TORM has entered into  interest  rate swaps to hedge the interest rate risk
on the long-term loans obtained to finance vessel purchases.

     As part of the  transition  to IFRS the fair value of  interest  rate swaps
classified  as cash flow hedges under  previous  GAAP has been  recognized  as a
separate  component of shareholders'  equity on January 1, 2004. The majority of
these  interest  rate  swaps  have  either  expired  in  2004  or  the  forecast
transaction  was no longer  expected to occur because the  long-term  loans have
been repaid. Consequently,  the fair value of these interest rate swaps has been
transferred to the income statement in 2004.

     Under US GAAP,  TORM  elected to apply hedge  accounting  to interest  rate
swaps  designated as cash flow hedges beginning on October 1, 2003. For interest
rate swaps entered  prior to October 1, 2003 TORM  accounted for changes in fair
value as a component of income.  As from  January 1, 2005,  TORM elected also to
apply  hedge  accounting  under US GAAP for the  remaining  interest  rate swaps
entered prior to October 1, 2003 in order to align the accounting  under US GAAP
and IFRS.

     d) Share options

     Under  IFRS,   TORM's  share  option  scheme  is  treated  as  cash-settled
share-based  payment  transactions.  A liability  relating to share  options not
exercised is  recognized in the balance  sheet.  The change in the liability for
the  period  and the value of the share  options  exercised  in the  period  are
recognized  in the income  statement.  The  liability  is measured at fair value
using the Black-Scholes model.

     Under US GAAP, stock-based compensation is accounted for in accordance with
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees."   and  related   interpretations   in  accounting  for  stock  based
compensation.  Under APB No. 25, the Group recognizes  compensation  expense for
the difference  between the exercise  price and market price at the  measurement
date.  This  compensation  is  amortized  over the vesting  period.  TORM grants
options with cash settlement  terms for which the  measurement  date is the date
that these options are  exercised.  Under APB 25,  compensatory  plans with cash
settlement  terms qualify as variable plans, for which total  compensation  cost
must be  recalculated  each period based on the current  share price,  until the
options are exercised.

     e) Deferred gain on sale and lease back of vessels

     During  2005,  TORM sold and leased back 2 vessels for 5 years.  The leases
are regarded as operating leases under both IFRS and US GAAP.

     Under  IFRS,  the profit on the sale of the  vessels is  recognized  in the
income statement immediately in accordance with IAS 17.

     Under US GAAP the profit on the sale shall be  deferred  and  amortized  in
proportion to the related gross rental charged to expense over the lease term in
accordance  with FAS 28 as the criteria to deviate from this  treatment (cf. FAS
28 a, b and c) were not met.  The profit on the sale and lease back  transaction
will be deferred and amortized on a straight-line basis from February 1, 2005 to
February 1, 2010.

     f) Deferred taxation

     TORM applies the same treatment of deferred tax under IFRS and US GAAP. The
reconciliation  item relates to the tax effect of the  differences in accounting
treatment  expressed by the items a) to e) above. The difference in deferred tax
liability as at December 31, 2005 only relates to the deferral  under US GAAP of
the gain on sale of vessels in item e) above.

     g) Investment in bonds

     Under IFRS,  bonds are classified as financial assets at fair value through
profit or loss and are  measured  at market  value at the  balance  sheet  date.
Realized and unrealized gains and losses resulting from valuation or realization
of bonds are recognized as financial  items in the income  statement.  Bonds are
traded frequently and therefore presented as current assets.

     Under US  GAAP,  investments  in  bonds  are  classified  as an  available-
for-sale,  cf. Statement of Financial  Accounting  Standards No. 115 "Accounting
for Certain  Investments in Debt and Equity  Securities".  Unrealized  gains and
losses are recorded as a component of  shareholders'  equity  unless there is an
other than  temporary  impairment  of the  securities.  There were no other than
temporary impairments in 2004 or 2005.

     The effect of this  difference  on net income and  shareholders'  equity in
2004 and 2005 was USD 0.0 million.

     h) Joint ventures

     The Group has  investments  in entities that are jointly owned and operated
together  with third  parties,  and in which the  parties  have  joint  dominant
influence.   Under  IFRS,  TORM  accounts  for  these   investments   under  the
proportional consolidation method.

     Under U.S.  GAAP,  these  entities  would be accounted for using the equity
method,  which will not result in a  difference  in net income  between IFRS and
U.S. GAAP.

     The results  reflected in the  consolidated  income statement for the years
ended December 31, 2004 and 2005 in accordance  with IFRS  associated with these
joint  ventures  are  represented  in  Note  7  to  the  consolidated  financial
statements.

     i) Earnings Per Share

     Earnings per share is computed consistent with IFRS.

     The following  table sets forth the  computation  of basic and diluted U.S.
GAAP net income per share (in thousands except share and per share data):

<TABLE>
                                                                          2004                  2005
                                                                          ----                  ----
<S>                                                                      <C>                 <C>
Numerator for basic and diluted Earnings Per Share
(in thousands of USD)
Profit from continuing operations                                        187,654             296,437
                                                                     ------------        ------------
Profit from discontinuing operations                                           0                   0
                                                                     ------------        ------------
Profit for the year                                                      187,654             296,437
                                                                     ------------        ------------
No. of shares No. of shares

Weighted average number of shares:
Basic                                                                 34,784,357          34,839,493
Effect of dilutive shares and share options                              260,613              28,725
                                                                     ------------        ------------
Diluted                                                               35,044,970          34,868,218
                                                                     ------------        ------------

Basic earnings per share
Profit from continuing operations                                            5.4                 8.3
Profit from discontinued operations                                          0.0                 0.0
                                                                     ------------        ------------
Profit for the year before change in accounting principles                   5.4                 8.3
Cumulative effect of change in accounting principles as at
January 1, 2005                                                                                  0.2
                                                                     ------------        ------------
Profit after change in accounting principles                                                     8.5
                                                                     ------------        ------------
Diluted earnings per share
Profit from continuing operations                                            5.4                 8.3
Profit from discontinued operations                                          0.0                 0.0
                                                                     ------------        ------------
Profit for the year before change in accounting principles                   5.4                 8.3
                                                                     ------------        ------------
Cumulative effect of change in accounting principles as at
January 1, 2005                                                                                  0.2
                                                                     ------------        ------------
Profit after change in accounting principles                                                     8.5
                                                                     ------------        ------------
</TABLE>

     The weighted  average number of shares excludes the shares  reacquired from
the date of  repurchase.  The  comparative  figures  for  number of  shares  and
earnings  per share are  restated  to reflect  the issue of bonus  shares in May
2004.

     j) New accounting requirements not yet adopted

     On December 16,  2004,  the FASB issued  Statement of Financial  Accounting
Standards  ("SFAS") No. 123 (revised  2004)  "Share-based  Payment",  which is a
revision  of SFAS 123,  "Accounting  for  Stock-Based  Compensation".  SFAS 123R
supersedes  APB opinion No. 25,  "Accounting  for Stock issued to Employees" and
its   interpretations,   and  revises  SFAS  123   "Accounting  for  Stock-Based
Compensation".  SFAS 123R  eliminates  the  alternative  to use APB Opinion 25's
intrinsic value method of accounting that was provided in SFAS 123 as originally
issued.  SFAS 123R requires  entities to recognize the cost of employee services
received in exchange for awards of equity  instruments  based on the  grant-date
fair  value of those  awards.  SFAS  123R  applies  to all  awards  granted  and
modified,  repurchased,  or cancelled  after the first  interim or annual period
beginning  after 15 June 2005.  The Company does not expect the adoption of SFAS
123R to have a material impact on the company's financial position or results of
operations.

     In May  2005,  the FASB  issued  SFAS 154  "Accounting  Changes  and  Error
Corrections  -- a replacement  of APB Opinion No. 20 and FASB  Statement No. 3".
SFAS  154  replaces  APB  20,  "Accounting  Changes",  and  SFAS  3,  "Reporting
Accounting Changes in Interim Financial Statements", and amends the requirements
for the accounting for and reporting of a change in accounting  principle.  SFAS
154 establishes retrospective application, unless impracticable, as the required
method for reporting a change in accounting principle in the absence of explicit
transition requirements specific to the newly adopted accounting principle. SFAS
154 also provides guidance for determining whether retrospective  application of
a change in  accounting  principle is  impracticable  and for reporting a change
when retrospective application is impracticable.  Under SFAS 154, the correction
of an error in  previously  issued  financial  statements  is not an  accounting
change, but involves adjustments to previously issued financial  statements.  In
many,  but not all aspects,  under SFAS 154 the accounting for changes and error
corrections are converged with IAS 8 "Accounting Policies, Changes in Accounting
Estimates  and  Errors".  SFAS  154 is  effective  for  accounting  changes  and
corrections  of errors made in fiscal years  beginning  after December 15, 2005.
The Company does not expect the  adoption of SFAS 154 to have a material  impact
on the company's financial position or results of operations.

     In  November  2005 the FASB  issued  Staff  Position  No. FAS 115-1 and FAS
124-1,  The Meaning of Other  -Than-Temporary  Impairment and Its Application to
Certain  Investments,  ("FSP No.  115-1").  FSP No.  115-1  provides  accounting
guidance for  identifying and  recognizing  other-than-temporary  impairments of
debt and equity  securities,  as well as cost method  investments in addition to
disclosure  requirements.  FSP No.  115-1 is  effective  for  reporting  periods
beginning  after December 15, 2005, and earlier  application is permitted.  This
new  pronouncement  will be  effective  in 2006 and the Company does not believe
that  adoption  of FSP No.  115-1 will have a material  effect on its  financial
position, cash flows or results of operations.


<PAGE>


ITEM 19.   EXHIBITS


 Number                          Description of Exhibits

1.1       [_]  Articles of Association for A/S Dampskibsselskabet TORM (the
               "Company"), dated April 19, 2006

1.2       [_]  Rules of Procedure for the Board of Directors of the Company and
               English Translation(1)

2.2       [_]  Form of Depositary Agreement between Deutsche Bank and the
               Company(1)

4.1       [_]  The Company's Employee Stock Purchase Plan (1)

4.2       [_]  Office lease between PFA Pension II and the Company and English
               Translation (1)

4.3       [_]  Engagement letter of Bech-Bruun Dragsted and English
               Translation(1)

4.4       [_]  DKK 42 million revolving credit facility letter from Danske Bank
               to the Company dated December 11, 1998 and English translation(1)

4.5       [_]  Debt Instrument from Agnete Shipping Corporation to Danske Bank
               Aktieselskab, Singapore Branch, dated August 9, 1995(1)

4.6       [_]  Debt Instrument from Eastern Light Shipping Limited to Danske
               Bank Aktieselskab, Hong Kong Branch, dated November 17, 1995(1)

4.7       [_]  Debt Instrument from Southern Light Shipping Limited to Danske
               Bank Aktieselskab, Hong Kong Branch(1)

4.8       [_]  Debt Instrument from Hermia Shipping Corporation to Danske Bank
               Aktieselskab, Singapore Branch, dated June, 14, 1996 and to
               Danske Bank A/S dated August 29, 2001(1)

4.9       [_]  Debt Instrument from Hilde Shipping Corp. to Danske Bank
               Aktieselskab, dated July 3, 2000(1)

4.10      [_]  Debt Instrument from Skagerak Tankers Limited to Danske Bank
               Aktieselskab, Singapore Branch, dated May 9, 1996(1)

4.11      [_]  Debt Instrument from Anne Product Carriers (PTE) Ltd. To Danske
               Bank Aktieselskab, Singapore Branch, August 28, 1998(1)

4.12      [_]  Debt Instrument from Gunhild Shipping Corporation to Danske Bank
               Aktieselskab, Singapore Branch, dated November 6, 1998(1)

4.13      [_]  Debt Instrument from Tekla Shipping Co. Ltd to Danske Bank,
               Singapore Branch, dated March 23, 1992(1)

4.14      [_]  Debt Instrument from Alice Product Tanker Corporation to Danske
               Bank Aktieselskab, Singapore Branch, dated November 8, 1994(1)

4.15      [_]  Debt Instrument from Bothnia Shipping Corporation to Danske Bank,
               Singapore Branch, dated September 20, 1989(1)

4.16      [_]  Debt Instrument from Olga Shipping Corporation to Danske Bank
               Aktieselskab, Singapore Branch, dated October 27, 1995(1)

4.17      [_]  Secured Loan Agreement, between Caseros Shipping Limited and
               Nordea Bank, dated June 15, 1994(1)

4.18      [_]  Loan Agreement between Estrid Shipping Corporation and Danmarks
               Skibskreditfond, dated November 6, 2001(1)

4.19      [_]  Loan Agreement between Ragnhild Shipping Corporation and Danmarks
               Skibskreditfond, dated November 6, 2001(1)

4.20      [_]  Shipbuilding Contract for the Construction of Hull No. S161,
               between the Company and Samho Heavy Industries Co., Ltd. and
               Hyundai Heavy Industries Co., Ltd., dated November 24, 2000(1)

4.21      [_]  Shipbuilding Contract for the Construction of Hull No. S162,
               between the Company and Samho Heavy Industries Co., Ltd. and
               Hyundai Heavy Industries Co., Ltd., dated November 24, 2000(1)

4.22      [_]  Contract for Construction and Sale of Hull No. S-1089, between
               Thyra Shipping Corporation and Daedong Shipbuilding Co., Ltd.,
               dated March 2, 2001(1)

4.23      [_]  Contract for Construction and Sale of Hull No. S-1090, between
               Freya Shipping Corporation and Daedong Shipbuilding Co., Ltd.,
               dated March 2, 2001(1)

4.24      [_]  Contract for Construction and Sale of Hull No. S-1086, between
               Gertrud Shipping Corporation and Daedong Shipbuilding Co., Ltd.,
               dated November 3, 2000(1)

4.25      [_]  Contract for Construction and Sale of Hull No. S-1087, between
               Gerd Shipping Corporation and Daedong Shipbuilding Co., Ltd.,
               dated November 3, 2000(1)

4.26      [_]  Contract for Construction and Sale of Hull No. S-1079, between
               the Company and Daedong Shipbuilding Co., Ltd., dated August 25,
               2000(1)

4.27      [_]  Contract for Construction and Sale of Hull No. S-1080, between
               the Company and Daedong Shipbuilding Co., Ltd., dated August 25,
               2000(1)

8.1       [_]  List of the Company's subsidiaries(1)

31.1      [_]  Rule 13a-14(a)/15d-14(a) Certification of the Company's Chief
               Executive Officer and Acting Chief Financial Officer

32.1      [_]  Certification of the Company's Chief Executive Officer and Acting
               Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
               adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

----------
(1)  Incorporated by reference from exhibit of same number to Registration
     Statement on Form 20-F, filed February 27, 2002 (File No. 000-49650)


<PAGE>


                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this registration statement on its behalf.

                                    AKTIESELSKABET DAMPSKIBSSELSKABET TORM



                                    By:  /s/ Klaus Kjaerulff
                                         -----------------------------------
                                         Name:   Klaus Kjaerulff
                                         Title:  Chief Executive Officer and
                                                 Acting Chief Financial Officer

Date: June 9, 2006








SK 03810 0001 676485