Ardmore Shipping Corporation Annual Report 2018

FY2018 Annual Report · Ardmore Shipping Corporation
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 ARDMORE SHIPPING CORPORATIONANNUAL REPORT2018ARDMORE SHIPPING 
CORPORATION

2018

ANNUAL REPORT 

Contents

Our Company and Strategy  

Letter from the Chairman  

Letter from the CEO 

Our Philosophy  

Directors & Senior Management 

Our Fleet 

   03

  05

  07 

  11

  13

  17

Ardmore’s Role in the Oil Value Chain 

  19

Corporate & Social Responsibility  

Form 20-F 

  21

  23

01 | 02

Our Company

Ardmore Shipping owns and operates a fleet 
of mid-size product and chemical tankers. We 
provide seaborne transportation of petroleum 
products and chemicals worldwide to oil majors, 
national oil companies, oil and chemical traders, 
and chemical companies, with our modern,  
fuel-efficient fleet of tankers.

Ardmore’s core strategy is to develop a modern, 
high-quality fleet of product and chemical tankers 
through well-timed growth, build key long-term 
commercial relationships and maintain our cost 
advantage in assets, operations and overhead 
through hands-on management, while creating 
significant synergies and economies of scale as 
the Company grows. We provide our services to 
customers through our in-house chartering and 
commercial team. We maintain a broad range 
of vessel employment strategies to maximize 
commercial flexibility and customer diversification, 
enjoying close working relationships with key 
commercial and technical management partners. 
Maintaining outstanding customer service is 
a cornerstone of our business and we seek 
customers who value our active approach to fuel 
efficiency and service delivery. 

 
Ardmore 
Strategy

LONG-TERM VALUE CREATION

Disciplined Capital Allocation

Conservative Balance Sheet

High-Quality Fleet

Transparent Corporate Structure

FOCUS

Mid-Size Product Tankers

Fleet Performance and Service 
Excellence

Voyage Optimization

Fuel Efficiency and Emissions 
Reduction

LOW COST STRUCTURE

Assets Acquired at Cyclical Lows

Operational Cost Advantage

Low Corporate Overhead

Disciplined Investment

03 | 04

Fellow Shareholders, 

On behalf of my board colleagues, 
I am pleased to report on the 
continued progress of Ardmore 
during the year.  

I am also very honoured to write to you 
for the first time as Chairman of the Board 
of Directors, having assumed the position 
from my colleague Regg Jones, effective 
January 1, 2019. I am delighted to have the 
opportunity to follow the admirable example 
that Regg has set, and I look forward to 
working even more closely with the Ardmore 
management team moving forward. 

On behalf of the Board of Directors, I would 
like to express our sincere gratitude to our 
recently retired Directors: Messrs. Albert 
Enste and Robert McIlwraith, for their 
contributions to the evolution of Ardmore 
into a truly best-in-class public shipping 
company. I would also like to welcome our 
two new independent Directors: Ms. Helen 
Tveitan de Jong and Mr. Mats Berglund, who 
joined us during the year; their extensive 
industry experience and practical expertise 
will greatly benefit our shareholders going 
forward.

Corporate governance remains critically 
important to Ardmore and to all of our 
stakeholders. As a public company, we are 
privileged to be entrusted with equity capital 
by our investors, and we are committed to 
deploying that capital in a disciplined and 
profitable manner.

With 2018 being a challenging year for the 
product tanker market, the Company was 
laser focused on operating performance.  
In addition to operating a high-quality, 
fuel-efficient fleet, the Company continues 
to prioritise cost control and organizational 
efficiency. At the same time, Ardmore 
continues to drive industry leading initiatives 
designed to deliver superior operating 

performance and improve fuel efficiency, 
contributing to the ongoing reduction in 
carbon emissions. We remain pleased with 
the Company’s performance in these areas. 
The shipping industry, as with so many other 
industries, is undergoing significant change; 
with our modern eco fleet, we are fully 
committed to playing our part in creating 
a clean, sustainable shipping industry 
by setting the standard for operational 
excellence. 

Our business continues to be highly 
cyclical, with financial strength and capital 
allocation discipline being key factors in 
our ability to deliver long-term shareholder 
value. At the start of 2018, Ardmore took 
delivery of a high-quality MR tanker at an 
attractive price, thereby boosting earnings 
power and delivering superior returns 
on equity. More recently, we sold two 
older MR tankers, improving our fleet’s 
age profile and maintaining a modern, 
highly in-demand fleet. The Company also 
completed refinancing of nine vessels under 
competitively priced leasing transactions. 
These transactions enhanced Ardmore’s 
financial flexibility and positioned the 
Company to capitalize on opportunities to 
build shareholder value through selective 
vessel acquisitions, while also diversifying the 
Company’s sources of funding. We remain 
firmly committed to maintaining a strong 
balance sheet with prudent leverage at all 
times. 

Looking ahead, the focus for 
2019 will continue to be operating 
performance and the maximizing 
of shareholder returns throughout 
the cycle.  

While 2018 was a challenging year for 
product tankers, the outlook for our 
market remains very positive, driven by 
a combination of forecasted oil demand 
growth, refinery capacity growth, and 
incremental tanker demand associated with 

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the impending IMO 2020 regulations, which 
matches up favourably with a historically low 
rate of vessel supply growth.  

We appreciate the strong support we have 
received from our shareholders, financiers, 
customers, employees and business 
partners. Our success depends on the 
strength of these relationships. This is an 
exciting time for the Company; Ardmore 
has an outstanding team and an exceptional 
corporate culture, giving me great 
confidence in our ability to deliver long-term 
shareholder value and great pride in taking 
on the role of Chairman. We look forward to 
continuing to work together on your behalf.  

Curtis Mc Williams
Chairman
Ardmore Shipping Corporation

05 | 06

Dear Shareholders,

It is my pleasure to report on the 

performance of Ardmore Shipping 

Corporation for the year ended 

December 31, 2018. 

In spite of a strong rebound in the charter 
market at the end of the year, 2018 proved 
to be a very challenging year overall for the 
product tanker market. The market was 
primarily affected by short-term factors in 
key import regions in the middle of 2018 
which corrected by year end. Ardmore’s 
focus for the year was on operating 
performance and maintaining financial 
flexibility. We took delivery of a very 
attractively priced MR in January 2018, 
completed the refinancing of nine vessels 
over the year and completed the sale of two 
older vessels in early 2019. Overall, we are 
pleased with the Company’s performance 
in maintaining financial strength throughout 
the challenging market conditions and our 
continued emphasis on operations, efficiency 
and cost control.  

Market Review 2018
Demand growth for the product tanker 
market has been hampered by a number of 
factors since mid-2016. Initially, high product 
inventory levels coupled with low oil price 
volatility resulted in reduced trading activity, 
which persisted for 18 months. As the market 
worked its way through the inventory 
overhang, a temporary decline in refined 
product imports in key consuming regions 
of the Atlantic Basin resulted in MR tanker 
rates reaching a cyclical low in summer 2018. 
This represented an inflection point; charter 
rates began recovering and then rebounded 
in late November driven by a reversal of the 
short-term factors, as well as strong refinery 
throughput in the US Gulf. The recovery in 
demand for product tankers was supported 
by strength in the broader tanker market; 

crude tanker activity increased in the fourth 
quarter as a result of high oil price volatility 
and general oil market dynamics.

Oil demand remained strong in 2018, growing 
by 1.3 million barrels per day (“mbd”) or 1.3% 
year-on-year. Refinery throughput was up 
by 0.6 mbd or 0.7% year-on-year while oil 
product inventories remained within the five-
year average. Overall seaborne volumes of 
refined products were 23.1 mbd in 2018,  
an increase of 1.2% from 2017. 

Meanwhile, after several years of high 
levels of newbuild deliveries, supply growth 
slowed significantly in 2018 due to record 
low deliveries and high levels of scrapping. 
MR tanker supply growth was 0.4% in 2018 
compared to an average of 3.6% for the 
previous three years. 

Commercial and Operating Performance
Ardmore remains, at its core, an operating 
company. During 2018, we continued to 
focus on commercial performance and 
organizational efficiency as fundamental 
drivers of long-term shareholder value. 
Ardmore’s MR pool is fully operational; our 
entire fleet is employed through the pool, 
providing the Company with sufficient scale 
and market presence to continue to deliver a 
high-quality service and achieve commercial 
performance ranking amongst the best of 
our peers. During the year, we continued to 
invest in our organizational capability for 
real-time voyage analysis, vessel optimization 
and leveraging the latest technological 
developments in fuel management across 
our fleet and ashore. 

Most importantly, the team continues to 
prioritize the safety and welfare of our crew 
and the protection of the environment; 
without such stewardship we cannot 
progress as a company.

Finance and Capital Allocation
We reported adjusted EBITDA of $29.2 
million and a net loss from continuing 

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operations of $34.3 million for the year. We 
performed well on managing our operating 
expenses, overhead costs and drydocking 
costs, which continue to be among the 
lowest of our peers.

Disciplined capital allocation and financial 
flexibility will continue to be at the forefront 
of all investment decisions. In a highly 
cyclical industry, our ability to prudently 
time investments and exercise discipline 
will largely determine Ardmore’s ability to 
generate superior returns for our investors. 
During the year we took advantage of the 
soft market conditions, taking delivery of 
the Ardmore Sealancer, acquired at a market 
low and with competitively priced lease 
financing. More recently, we sold two of our 
oldest vessels, the Ardmore Seatrader and 
Ardmore Seamaster, improving our fleet’s 
age profile and reducing required investment 
in drydock and regulatory upgrades.  

During 2018, we also completed the 
refinancing of nine vessels under capital 
lease arrangements with high quality 
counterparts in China, Europe and Japan. 
In the process, we diversified our sources of 
finance, improved our repayment profile and 
bolstered our cash balance. Our cash balance 
at the end of the year was $57 million, 
providing the Company with sufficient 
financial flexibility to selectively acquire 
vessels. Our ability to secure finance in these 
challenging markets emphasises Ardmore’s 
sound reputation, strong relationships and 
financial profile. We thank all our financiers 
for their support and look forward to working 
together in our continued relationship.

Market Outlook
Looking ahead, the outlook for our market is 
very positive; the underlying supply/demand 
fundamentals are intact and the short-term 
factors which contributed to market softness 
in 2018 have reversed. 

of 1.4 million barrels per day in 2019 while 
refinery capacity is expected to increase 
by 2.6 million barrels per day - the largest 
annual increase since the 1970’s. Looking 
forward, we expect demand growth for 
seaborne volumes to rebound strongly over 
the next two years noting the long-term 
historical CAGR of 4%.

The strong underlying demand growth 
is supported by a very favourable supply 
outlook. The orderbook for MRs is 6% at 
the end of February 2019, with deliveries 
stretching to 2021. Scrapping levels increased 
in 2018 for all tanker sectors; driven by softer 
market conditions and increasing costs 
associated with regulatory compliance.  
Net of scrapping, we expect MR supply 
growth to average 0.8% per year between 
2019 and 2020. 

In addition to the positive underlying supply/
demand fundamentals, the oil market 
will undergo a dramatic change in 2020 
significantly boosting demand for tankers. In 
2016, the International Maritime Organization 
(“IMO”) agreed to limit the sulphur content 
in all marine fuels to 0.5%, effective January 
1, 2020 and known as “IMO 2020”. This 
is a very positive development for global 
shipping; it is a major step in the contribution 
to a cleaner environment and reducing 
greenhouse gas emissions.    

The net result of the IMO 2020 regulations 
will be a significant drop in demand for High 
Sulphur Fuel Oil (“HSFO”), with sulphur 
content of 3.5%, and an increase in demand 
for cleaner compliant fuels i.e. Very Low 
Sulphur Fuel Oil (“VLSFO”), with a sulphur 
content of 0.5%, and Marine Gas Oil (“MGO”), 
with a sulphur content of 0.1%. The global 
market for HSFO is 3.5 mbd in 2019 and this 
is expected to drop to 1.4 mbd in 2020 with 
the balance of 2.1 mbd to be made up of 
VLSFO and MGO. 

The International Energy Agency (“IEA”) is 
forecasting oil consumption demand growth 

The new rules will result in a major change to 
existing trading patterns of marine fuels and 

07 | 08

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alterations to the refinery production slate in 
different regions. The US Energy Information 
Administration (“EIA”) expects that, starting 
in the fourth quarter of 2019, IMO 2020 
will encourage global refiners to increase 
refinery runs and, where possible, maximize 
upgrading of HSFO into low-sulphur distillate 
fuel to create compliant marine fuels. The EIA 
expects total US refinery runs to increase by 
4% from 2019 to reach record levels in 2020, 
resulting in refinery utilization rates that 
average 96%. 

As refineries ramp up capacity, we expect 
there will be limited initial availability of 
VLSFO. This, together with practical delays 
associated with the transition, will result in 
a shortfall of compliant fuels that can only 
be filled by MGO. Higher seaborne volumes 
of MGO are expected, while surplus HSFO 
will have to be redirected from current 
consuming regions for further processing 
or alternative uses. In addition to the core 
trades in marine fuels, the increased refinery 
throughput to cater to demand will result in 
surpluses of other refined products, including 
gasoline and naphtha, leading to imbalances 
and further increasing demand for product 
tankers. 

Overall, we expect the increased activity in 
seaborne volumes of refined products to 
result in incremental demand for product 
tankers of 5-10% starting in mid-2019. Given 
the current tight supply/demand balance, we 
believe that this will lead to a surge in tanker 
charter rates for up to two years until the 
market reaches equilibrium.  

This is a very exciting time for our business; 
Ardmore is well positioned to take advantage 
of the market recovery and we look forward 
to generating strong returns on investment 
for our shareholders.  

Closing comments 
I want to take this opportunity to express 
my sincere appreciation to Regg who 
recently stepped down as Chairman of the 

Board. Regg has been Chairman since our 
inception and we have benefitted greatly 
from his wisdom and guidance. He leaves the 
Company in the very capable hands of Curtis 
Mc Williams and our other board members 
who possess a broad range of relevant skills 
and experience and a singular desire to do 
right by our shareholders.

Finally, we would like to take this 

opportunity to thank all of our 

customers, financiers, service 

partners and shareholders for their 

consistent support throughout 

the year and to recognise the 

hard work and dedication of our 

seafarers and shore staff who 

work uncompromisingly every 

day to ensure that Ardmore 

sets the standard for operating 

performance and delivers  

long-term shareholder value.

 Anthony Gurnee
Chief Executive Officer
Ardmore Shipping Corporation

Sources:
• International Energy Agency, Oil 2019: Analysis and Forecast 
to 2024, March 2019
• Clarksons Shipping Intelligence Network, March 2019
• Drewry Research, February 2019
• Maritime Strategies International, 2019
• Ardmore Shipping Corporation’s 2018 Annual Report on Form 

20-F, as filed with the Securities and Exchange Commission  

on February 15, 2019

 
 
 
 
 
09 | 10

•  attract high quality seafarers and 

shore-based professionals by providing 
an organization with integrity, a clear 
sense of purpose, a secure shipboard 
working environment, a stimulating office 
environment, and an opportunity to grow 
professionally;

•  maintain the trust of oil majors by 

approaching the vetting process with 
a complete understanding of their 
objectives and standards, and by using 
their feedback to improve and stay at the 
forefront of best management practices; 
and

•  win the support of experienced 

shipping financiers through prudent risk 
management, good financial reporting, 
and sustaining their confidence in 
Ardmore’s continued financial viability.

We believe that by concentrating on each of 
these areas with passion, we will not merely 
meet, but exceed, the expectations of those 
who have placed their trust in us and believe 
also that this will serve Ardmore well in the 
long journey ahead.

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Shipping is an operationally 
intensive business where 
companies work in a constantly 
changing commercial environment, 
are subject to stringent regulations, 
and trade to all parts of the 
globe. Furthermore, shipping 
companies compete in a cyclical 
and capital-intensive business 
environment which rewards only 
those who keep a sharp lookout for 
opportunities, have the resources 
and resolve to act on them, and 
maintain a tight control on risks 
and costs.

Ardmore embraces the challenges of this 
complex and competitive environment, 
where in order to excel we must:

•  have a total dedication to quality of 
operations, crew welfare, health and 
safety;

•  commitment to the protection of the 

environment and working with regulators, 
authorities and associations to ensure 
adherence to the highest standards;

•  develop a collaborative working 

relationship with our customers by 
thoroughly understanding their business 
objectives, paying attention to detail in 
operations, and having a commercially 
flexible approach to solving issues when 
they arise;

•  choose to work with, and maintain, 

a strong and trusting relationship with,  
the best ‘partner’ companies in order  
to ensure the highest standards; 

 
 
11 | 12

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Mr. Curtis Mc Williams
Chairman of the Board, Chairman 
of the Nominating and Corporate 
Governance Committee, Chairman 
of the Compensation Committee, 
Member of the Audit Committee

Curtis Mc Williams was appointed as a director by the 
board of directors in January 2016 and as our Chairman 
effective January 1, 2019. Mr. Mc Williams is a real estate 
industry veteran with over 25 years of experience in 
finance and real estate. He currently serves as the lead 
Independent Director of Braemar Hotels & Resorts 
Inc. and as a member of the RW Holdings NNN REIT, 
Inc. Board of Directors. He retired from his position 
as President and Chief Executive Officer of CNL Real 
Estate Advisors, Inc. in 2010 after serving in the role 
since 2007. Mr. Mc Williams was also the President and 
Chief Executive Officer of Trustreet Properties Inc. from 
1997 to 2007, and a director of the company from 2005 
to 2007. He served on the Board of Directors and as 
the Audit Committee Chairman of CNL Bank from 1999 
to 2004 and has over 13 years of investment banking 
experience at Merrill Lynch & Co. Mr. Mc Williams has 
a Master’s degree in Business with a concentration 
in Finance from the University of Chicago Graduate 
School of Business and a Bachelor of Science in 
Engineering in Chemical Engineering from Princeton 
University.

Mr. Brian Dunne
Director, Chariman of the Audit 
Committee, Member of the 
Nominating and Corporate 
Goverance Committee

Brian Dunne has been a director of Ardmore since 
June 2010. He is also a director of ReAssure Group 
and Ark Life Assurance Company (subsidiaries of 
SwissRe in the UK and Ireland), Aergen Aviation 
Finance, Chorus Aviation Capital (Ireland) and AASET 
2018-2. He was previously the Chairman of Aviva’s 
health insurance business in Ireland, a director of 
its Irish life and pensions business and a director of 
several other private companies. Mr. Dunne was the 
Chief Financial Officer of ACE Aviation Holdings Inc. 
(‘‘ACE’’) from 2005 until 2012 and was the President 
of the company in 2011 and 2012. ACE was the parent 
holding company of the reorganized Air Canada and a 
number of other entities including Aeroplan LP (now 
AIMIA Inc.) and Air Canada Jazz (now Chorus Aviation 
Inc.). Mr. Dunne was also a director of Air Canada from 
its initial public offering in 2006 until 2008. Prior to 
joining ACE, Mr. Dunne was Chief Financial Officer 
and a director of Aer Lingus Group plc. He started 
his career at Arthur Andersen in 1987 and became a 
partner in 1998. Mr. Dunne is a Fellow of the Institute of 
Chartered Accountants in Ireland and holds a Bachelor 
of Commerce degree and a post graduate diploma in 
Professional Accounting from University College Dublin.

Mr. Reginald Jones* 
Director, Member of the 
Nominating and Corporate 
Governance Committee

Reginald Jones has been a 
director of Ardmore since 2010 

and was our Chairman until December 31, 2018. 
Mr. Jones is a co-founder and Managing Partner of 
Greenbriar Equity Group LLC, a private equity firm 
managing over $3 billion of equity capital and an 
affiliate of which was Ardmore’s largest shareholder 
from Ardmore’s founding until November 2017. Prior to 
founding Greenbriar in 1999, Mr. Jones spent 13 years 
at Goldman, Sachs & Co., where he was a Managing 
Director and Group Head of global transportation 
investment banking. Prior to Goldman Sachs, he 
worked as a consultant at Bain & Company. Mr. Jones 
earned a BA from Williams College and an MBA from 
the Harvard Business School.

Mr. Mats Berglund 
Director, Member of the 
Compensation Committee 

Mats Berglund has been a 
director of Ardmore since 
September 2018. Since June 
2012 he has been the Chief Executive Officer and a 
Director of Pacific Basin, a Hong Kong-listed owner 
and operator of drybulk vessels controlling a fleet of 
over 200 ships. Mr. Berglund has more than 30 years 
of shipping experience in Europe, the United States 
and Asia, including as Chief Financial Officer and 
Chief Operating Officer of marine fuel trader Chemoil 
Energy and Head of Crude Transportation for Overseas 
Shipholding Group. Previously, he served in a variety of 
leadership roles across the Stena group of companies, 
culminating as President of Stena Rederi, Stena’s parent 
company for all shipping activities. Mr. Berglund holds 
an Economist (Civilekonom) degree from Gothenburg 
University Business School and is a graduate of the 
Advanced Management Program at Harvard. He is 
an Executive Committee Member of the Hong Kong 
Shipowners Association and serves on the North of 
England P&I Club Members Board.

*Mr. Jones will not be standing for re-election at the 
Company’s 2019 annual meeting of shareholders.

 
 
 
Ms. Helen Tveitan de Jong 
Director, Member of the  
Audit Committee 

Helen Tveitan de Jong has been 
a director of Ardmore since 
September 2018. She is Chairman 

and Chief Executive Officer of Carisbrooke Shipping 
Holdings Ltd., a specialist owner/operator of mini-bulk 
and project cargo ships controlling a fleet of 32 ships. 
Previously, Ms. Tveitan de Jong held a variety of senior 
ship finance roles, including as a founding partner at 
shipping finance advisory firm THG Capital from 2001 
to 2007, and has held several positions as interim 
Finance Director for shipping companies, most notably 
in the dry bulk sector, from 2003 to 2017. Ms. Tveitan 
de Jong graduated with a DRS in Economics from 
Rotterdam’s Erasmus University.

Dr. Peter Swift 
Director, Member of the  
Compensation Committee

Peter Swift has served as a 
director of Ardmore since its IPO 
in August 2013. Dr Swift’s career 

spans more than 50 years in the maritime industry, 
and he is presently serving in International non-profit 
and charitable directorships, including as the Vice 
Chairman of the Sailors’ Society and a Trustee of 
ISWAN, which includes oversight of Maritime Piracy 
Humanitarian Response Programme, where he was 
the former Chairman. He is a Member of the American 
Bureau of Shipping and the IMO Committee of the 
Royal Institution of Naval Architects and a Director 
of the Green Award Foundation and the Maritime 
Industry Foundation. Dr Swift was previously the 
Managing Director of INTERTANKO from 2000 to 2010 
and a Director of Seascope Shipping Limited from 
1999 to 2001. He was employed by Royal Dutch Shell 
from 1975 to 1999 in a range of senior, international, 
commercial and technical positions. Dr Swift holds a 
PhD in Transport Economics, an MS in Engineering 
degree from the University of Michigan, and a BSc in 
Naval Architecture from the University of Durham. He is 
a Chartered Engineer, a Fellow of the Royal Institution 
of Naval Architects and Member of the Society of Naval 
Architects and Marine Engineers.

Mr. Anthony Gurnee 
Chief Executive Officer,  
President and Director

Anthony Gurnee has been our 
President, Chief Executive Officer 
and a director of Ardmore since 

2010. Between 2000 and 2008, he was the Chief 
Executive Officer of Industrial Shipping Enterprises, 
Inc., a containership and chemical tanker company, and 
Chief Operating Officer of MTM Group, an operator of 
chemical tankers. From 1992 to 1997, he was the Chief 
Financial Officer of Teekay Corporation, where he led 
the company’s financial restructuring and initial public 
offering. Mr. Gurnee began his career as a financier 
with Citicorp, and he served for six years as a surface 
line officer in the U.S. Navy, including a tour with naval 
intelligence. He is a graduate of the U.S. Naval Academy 
and earned an MBA at Columbia Business School, is 
a CFA charter holder, and a fellow of the Institute of 
Chartered Shipbrokers.

Mr. Mark Cameron            
Executive Vice President  
and Chief Operating Officer

Mark Cameron is Ardmore’s 
Executive Vice President and 
Chief Operating Officer. Mr. 

Cameron joined Ardmore as Executive Vice President 
and Chief Operating Officer and was appointed an 
alternate director in June 2010. In addition, Mr Cameron 
is the current Chairman of the International Parcel 
Tankers Association (IPTA), is on the Board of the West 
of England P&I Club and is also an advisory Board 
Member to the NGO Carbon War Room. From 2008 to 
2010, Mr. Cameron served as Vice President, Strategy 
and Planning for Teekay Marine Services, Teekay 
Corporation’s internal ship management function. 
Mr. Cameron spent 11 years at sea, rising to the rank 
of Chief Engineer with Safmarine and later AP Moller, 
including time served onboard bulk carriers, salvage 
tugs, tankers, general cargo, reefer and container ships. 
Mr. Cameron has held a number of senior management 
roles ashore specializing in integrating acquisitions 
covering all facets of ship management, as well as sale 
and purchase, newbuilding supervision, personnel 
management, procurement, fleet management and 
technical supervision.

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Mr. Paul Tivnan
Senior Vice President, Chief 
Financial Officer, Secretary  
and Treasurer

Paul Tivnan is Ardmore’s Senior 
Vice President, Chief Financial 

Officer, Secretary and Treasurer. Mr. Tivnan joined 
Ardmore in June 2010 and was appointed Chief 
Financial Officer in December 2012. From 2002 
to 2010, he was employed at Ernst & Young in the 
Financial Services Advisory department specializing 
in international tax and corporate structuring. He 
was a participant in Ernst & Young’s Accelerated 
Leadership Program from 2008 to 2010. Mr. Tivnan 
holds a BA in Accounting and Finance and an MBS in 
Accounting each from Dublin City University. He is a 
graduate of the London Business School Executive 
Leadership program, a Fellow of the Institute of 
Chartered Accountants of Ireland, an Associate of the 
Irish Taxation Institute and a member of the Institute of 
Chartered Shipbrokers.

Mr. Gernot Ruppelt  
Senior Vice President  
and Chief Commercial Officer

Gernot Ruppelt is Ardmore’s Chief 
Commercial Officer and Senior 
Vice President. Mr. Ruppelt has 

been in charge of Ardmore’s commercial activities 
since joining as Chartering Director in 2013, and was 
promoted to his current position in December 2014. Mr. 
Ruppelt has extensive commercial and management 
experience in the maritime industry. Prior to Ardmore 
he had been a Projects Broker with Poten & Partners 
in New York for five years and, for seven years before 
that, Mr. Ruppelt worked for Maersk Broker and A.P. 
Moller — Maersk in Copenhagen, Singapore and 
Germany. Mr. Ruppelt is a director of Anglo Ardmore 
Ship Management Limited. He also represents Ardmore 
at the INTERTANKO Council and as a member of 
their Worldscale & Markets Committee. Mr. Ruppelt 
completed the two-year ‘Maersk International Shipping 
Education’ program and graduated from Hamburg 
Shipping School. He is also a member of the Institute of 
Chartered Shipbrokers in London.

 
 
 
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Ardmore Shipping operates a fleet of high-quality, modern 
product and chemical tankers. Built at top-tier yards in 
Japan and South Korea, Ardmore’s fleet incorporates 
optimized “Eco” hull, engine, and propeller design 
modifications to improve fuel efficiency and reduce our 
carbon footprint. Ardmore currently has a combined fleet 
of 27* Eco-Design and Eco-Mod product and chemical 
tankers trading globally. 

Eco-Design MRs: 15
Medium Range product tankers are the most flexible in the product 
tanker fleet, carrying a wide range of petroleum products, easy 
chemicals, and edible oils across a diverse set of seaborne trade 
routes. Our Eco-Design vessels were delivered in 2013 or later, with 
latest hull form and engine design to optimize fuel efficiency and 
reduce carbon emissions.

Eco-Mod MRs: 6*
Our Eco-Mod vessels were delivered in 2004-2008, and have 
undergone modifications to engine and propeller design to optimize 
fuel efficiency and reduce carbon emissions. 

Eco-Design Product/Chemical Tankers: 6
Our 37,000 dwt and 25,000 dwt chemical tankers have 14 tank 
segregations, full IMO 2 notation and average tank size of less than 
3,000 cbm3 allowing them to carry a wider range of smaller parcel 
chemicals, as well as to participate in petroleum product trades. 
Our Eco-Design chemical tankers trade globally in refined products, 
commodity chemicals and edible oils.

*Fleet list as at date of filing (February 15, 2019), sale of Ardmore Seamaster completed on February 19, 2019

 
Vessel Name*

Type

Dwt

IMO Constructed Country Flag Specification

Ardmore Seavaliant

Product/Chemical

49,998 2/3

Feb-13

Ardmore Seaventure

Product/Chemical

49,998 2/3

Jun-13

Ardmore Seavantage

Product/Chemical

49,997

2/3

Jan-14

Ardmore Seavanguard

Product/Chemical

49,998 2/3

Feb-14

Ardmore Sealion

Product/Chemical

49,999 2/3

May-15

Ardmore Seafox

Product/Chemical

49,999 2/3

Jun-15

Ardmore Seawolf

Product/Chemical

49,999 2/3

Aug-15

Ardmore Seahawk

Product/Chemical

49,999 2/3

Nov-15

Ardmore Endeavour

Product/Chemical

49,997

2/3

Jul-13

Ardmore Enterprise

Product/Chemical

49,453

2/3

Sep-13

Ardmore Endurance

Product/Chemical

49,466 2/3

Dec-13

Ardmore Encounter

Product/Chemical

49,478

2/3

Jan-14

Ardmore Explorer

Product/Chemical

49,494 2/3

Jan-14

Ardmore Exporter

Product/Chemical

49,466 2/3

Feb-14

Ardmore Engineer

Product/Chemical

49,420 2/3

Mar-14

Ardmore Seafarer

Product/Chemical

45,744

2/3

Aug-04

Ardmore Seamaster*

Product/Chemical

45,840 3

Sep-04

Ardmore Seamariner

Product/Chemical

45,726

3

Oct-06

Ardmore Sealancer

Ardmore Sealeader

Ardmore Sealifter

Product

Product

Product

47,451 —

Jun-08

47,463 —

Aug-08

47,472 —

Jun-08

Ardmore Dauntless

Product/Chemical

37,764

Ardmore Defender

Product/Chemical

37,791

Ardmore Cherokee

Product/Chemical

25,215

Ardmore Cheyenne

Product/Chemical

25,217

Ardmore Chinook

Product/Chemical

25,217

Ardmore Chippewa

Product/Chemical

25,217

2

2

2

2

2

2

Feb-15

Feb-15

Jan-15

Mar-15

Jul-15

Nov-15

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Korea

Japan

Japan

Japan

Japan

Japan

Japan

Japan

Japan

Japan

Japan

Japan

Japan

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

MI

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Mod

Eco-Mod

Eco-Mod

Eco-Mod

Eco-Mod

Eco-Mod

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

Eco-Design

*Fleet list as at date of filing (February 15, 2019), sale of Ardmore Seamaster completed on February 19, 2019

CARGOES CARRIED IN 2018

CPP*

8,377,450 MT

Chemicals

479,242 MT

Veg-Oil

797,448 MT

Total

9,654,140 MT

*Clean Petroleum Products

17 | 18

I

O
L
V
A
L
U
E
C
H
A
N

I

The global oil industry includes a range 
of activities which contribute to the 
transformation of petroleum resources 
into finished petroleum products for 
industrial and retail customers. The crude 
oil value chain begins with the exploration 
and production of petroleum reserves. 
After extraction, unrefined, or “crude” oil 
is transported from producing regions to 
refining centers by a combination of crude 
oil tankers, pipelines, trucking and rail. 
At refining centers crude oil is distilled, 
converted, and blended into finished 

petroleum products for distribution. Ardmore 
is primarily involved in the transportation of 
refined, or “clean” petroleum products from 
refining centers to the end users. 

In 2018, 87% of Ardmore’s cargo by volume 
was generated from clean petroleum 
product transportation. Ardmore’s integrated 
operating platform with in-house technical 
and commercial management enhances 
responsiveness to customers’ demands and 
enables us to deliver a high-quality service 
offering.

EXPLORATION

OIL 
VALUE 
CHAIN

END USER

CRUDE TANKERS

DISTRIBUTION

REFINING

STORAGE

ARDMORE PRODUCT 
TANKER

A
R
D
M
O
R
E
S
R
O
L
E

’

I

N
T
H
E

 
 
 
 
 
 
19 | 20

R
E
S
P
O
N
S
B
L
T
Y

I

I

I

C
O
R
P
O
R
A
T
E
&
S
O
C
A
L

I

Defining Corporate Social Conscience
At Ardmore, maintaining and encouraging a 
corporate social responsibility is an important 
part of who we are and what we do. We are 
fundamentally committed to protecting our 
employees and the environment by adhering 
to the highest possible standards. We view 
this commitment as extending beyond 
our daily businesses operations to the 
communities where we operate. Ardmore’s 
approach to responsible behavior and 
corporate social conscience is built upon five 
core principles: 

• 

• 

• 

• 

• 

comply with statutory rules and 
regulations to ensure all employees work 
under safe, healthy and proper working 
conditions;

strive to eliminate risks that may result 
in accidents, injuries, illness, damage to 
property or to the environment; 

incorporate environmental sustainability 
into Ardmore’s business operations; 

avoid corruption and bribery, and 
promote transparent business practices; 
and

engage the seafaring and onshore 
communities to promote social  
well-being.

Our support for the shipping community, 
locally and globally, extends to our active 
membership in trade organizations that 
represent our industry, including the Irish 
Chamber of Shipping, the Singapore 
Shipping Association, the International Parcel 
Tanker Association and INTERTANKO. We 
are also proud to play our part in training 
the next generation of seafarers through our 
cadet program. 

Safety Culture 
Over 95% of Ardmore’s employees work 
at sea and providing our seafarers with 
healthy, safe and secure working conditions 
is an essential part of our business model. 

Through rigorous onshore and onsite 
training, we believe we can surpass the 
highest safety standards and deliver on 
our objective of creating a consistently 
safe operating environment. Ardmore also 
operates the “Ardmore Safety Award” 
program, an initiative to promote safety 
culture by nominating a designated safety 
champion on each vessel and providing a 
quarterly award to the best safety champion 
across our fleet.  

Environment and Climate 
Within the shipping industry, marine pollution 
constitutes the largest environmental risk. 
We are committed to avoiding pollution 
incidents and reducing fuel consumption as 
a means of reducing our carbon footprint. As 
part of this effort, Ardmore has invested in 
performance management systems across 
its fleet, which provides real-time feedback 
to our crew to allow them to react to 
prevailing conditions. In conjunction with our 
weather routing software, we are now able to 
carry out voyages at previously unattainable 
efficiency levels, reducing our emissions. 

Anti-Corruption and Anti-Bribery 
Initiatives
At Ardmore, we believe corruption, bribery, 
and opaque business practices impede 
global trade and can have highly damaging 
consequences. The risk of corruption means 
not only increased costs and decreased 
market efficacy, but also poses a risk to our 
core ethos, legal exposure and reputation 
of our company. Ardmore is proud to be a 
member of the Maritime Anti-Corruption 
Network (MACN), a global business network 
working towards the vision of a maritime 
industry free of corruption that enables 
fair and transparent trade. Established in 
2011 by a group of committed maritime 
companies, MACN has grown to include 
around 90 members globally, and has 
become one of the pre-eminent examples of 
collective action to tackle corruption. MACN 
collaborates with key stakeholders, including 
governments and international organizations, 
such as the United Nations Development 

 
 
 
Programme, to identify and mitigate the root 
causes of corruption in the maritime industry.

Our Role In The Community 
Ardmore promotes community service 
initiatives for its employees and supports 
a number of local charities and initiatives 
where we operate. We are proud supporters 
of Cork Penny Dinners, a non-profit based 
in Cork, Ireland and Willing Hearts, a similar 
non-profit based in Singapore, both of 
which care for underprivileged families and 
members of the community, and the Cope 
Foundation, an organization that supports 
people with an intellectual disability or 
autism to live their lives. We also support The 
Mission to Seafarers, the Irish Cancer Society, 
the RNLI, Cork Down Syndrome Centre, 
Marymount Hospice and Sail Training. We 
are committed to expanding our community 
service efforts in 2019 and continuing to use 
Ardmore as a catalyst for good.

21 | 22

ARDMORE SHIPPING CORPORATION

Mr. Leon Berman, 
The IGB Group, 
45 Broadway, 
Suite 1150, 
New York, NY 10006, 
USA 
Tel: +1 212 477 8438 
lberman@igbir.com

Auditors
Ernst & Young, 
Ernst & Young Building, 
Harcourt Centre, 
Harcourt Street, 
Dublin 2, 
Ireland 
Tel: +353 1 475 0555

Belvedere Building
69 Pitts Bay Road,  
Ground Floor,
Pembroke, HM08,
Bermuda
Tel: +1 441 405 7800
info@ardmoreshipping.com
www.ardmoreshipping.com

Stock Listing
Ardmore Shipping Corporation’s 
common stock is traded on the 
New York Stock Exchange under 
the ticker “ASC”.

Transfer Agent
Computershare Inc. 
P.O. Box 505000 
Louisville, KY 40233-5000 
USA 
Tel: +1 877 373 6374

Investor Relations
Investor Relations, 
Ardmore Shipping Corporation, 
Belvedere Building, 
69 Pitts Bay Road,  
Ground Floor,
Pembroke, HM08,
Bermuda
Tel: +1 441 405 7800
info@ardmoreshipping.com
www.ardmoreshipping.com

F
O
R
M
2
0
-
F

23 | 24

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

FORM 20-F

(Mark One)
□

�

□

□

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the ﬁscal year ended December 31, 2018

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

OR

For the transition period from

to

OR

SHELL COMPANY 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: 001-36028

ARDMORE SHIPPING CORPORATION

(Exact name of Registrant as speciﬁed in its charter)

Republic of the Marshall Islands
(Jurisdiction of incorporation or organization)

Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke, HM08, Bermuda
(Address of principal executive offices)

Mr. Anthony Gurnee
Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke, HM08, Bermuda
+ 1 441 405 7800
info@ardmoreshipping.com
(Name, Telephone, E-mail and/or Facsimile, and address of Company Contact Person)

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

Common stock, par value $0.01 per share

New York Stock Exchange

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

NONE
(Title of class)

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.

As of December 31, 2018, there were 33,097,831 shares of common stock outstanding, par value
$0.01 per share.

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

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 � No �

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit such ﬁles). Yes � No �

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated
ﬁler or an emerging growth company. See the deﬁnitions of ‘‘large accelerated ﬁler,’’ ‘‘accelerated ﬁler,’’ and
‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated ﬁler □ Accelerated ﬁler � Non-accelerated ﬁler □ Emerging Growth Company □

If an emerging growth company that prepares its ﬁnancial statements in accordance with U.S. GAAP, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised ﬁnancial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. □

† The term ‘‘new or revised ﬁnancial accounting standard’’ refers to any update issued by the Financial
Accounting Standards Board to its Accounting Standards Codiﬁcation after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the ﬁnancial statements
included in this ﬁling:

� U.S. GAAP

□ International Financial Reporting Standards as issued by the international Accounting Standards

Board

□ Other

If ‘‘Other’’ has been checked in response to the previous question, indicate by check mark which ﬁnancial
statement item the registrant has elected to follow: □ 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 �

TABLE OF CONTENTS

PART I

Item 1.

Item 2.

Item 3.

Item 4.

Identity of Directors, Senior Management and Advisors . . . . . . . . . . . . . . . . . . .

Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4.A.

Unresolved Staff Comments

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 5.

Item 6.

Item 7.

Item 8.

Item 9.

Item 10.

Item 11.

Item 12.

PART II

Item 13.

Item 14.

Item 15.

Item 16.

Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . .

Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . .

Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . .

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Quantitative and Qualitative Disclosures about Market Risks . . . . . . . . . . . . . . .

Description of Securities Other than Equity Securities . . . . . . . . . . . . . . . . . . . .

Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . .

Material Modiﬁcations to the Rights of Shareholders and Use of Proceeds . . . . . .

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.A.

Audit Committee Financial Expert

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.B.

Code of Ethics

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.C.

Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.D.

Exemptions from the Listing Standards for Audit Committees

. . . . . . . . . . . . . .

Item 16.E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers . . . . . . . . .

Item 16.F.

Change in Registrant’s Certifying Accountant . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.G.

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.H. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 17.

Item 18.

Item 19.

Financial Statements

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Statements

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

3

3

26

53

53

66

72

74

74

74

83

83

84

84

84

85

85

85

85

85

85

86

86

86

86

86

87

INDEX TO FINANCIAL STATEMENTS OF ARDMORE SHIPPING CORPORATION . . . . . .

F-1

i

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. We desire
to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and
are including this cautionary statement in connection with such safe harbor legislation.

This Annual 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 and assumptions with respect to future events and
ﬁnancial performance and are subject to risks and uncertainties. Forward-looking statements include
statements concerning plans, objectives, goals, expectations, projections, strategies, beliefs about future events
or performance, and underlying assumptions and other statements, which are other than statements of
historical facts. In some cases, words such as ‘‘believe’’, ‘‘anticipate’’, ‘‘intends’’, ‘‘estimate’’, ‘‘forecast’’,
‘‘project’’, ‘‘plan’’, ‘‘potential’’, ‘‘will’’, ‘‘may’’, ‘‘should’’, ‘‘expect’’ and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements in this Annual Report include, among others, such matters as:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

our future operating or ﬁnancial results;

global and regional economic and political conditions;

the strength of national economies and currencies;

general market conditions;

our vessel acquisitions and upgrades, our business strategy and expected capital spending or
operating expenses, including bunker prices, drydocking and insurance costs;

competition in the tanker industry;

shipping market trends and general market conditions, including ﬂuctuations in charter rates and
vessel values and changes in demand for and the supply of tanker vessel capacity;

charter counterparty performance;

changes in governmental rules and regulations or actions taken by regulatory authorities;

our ﬁnancial condition and liquidity, including our ability to obtain ﬁnancing in the future to fund
capital expenditures, acquisitions, reﬁnancing of existing indebtedness and other general corporate
activities;

our ability to comply with covenants in ﬁnancing arrangements;

our exposure to inﬂation;

vessel breakdowns and instances of off-hires;

future dividends;

our ability to enter into ﬁxed-rate charters in the future and our ability to earn income in the spot
market;

our ability to comply with, and the affects of, regulatory requirements or maritime self-regulatory
organizations’ requirements and the cost of such compliance, including, among other things, the
International Maritime Organization (‘‘IMO’’) 2020 fuel regulations, the Safety of Life at Sea
(‘‘SOLAS’’) and Load Lines Convention (‘‘LL Convention’’) standards, and guidelines for ballast
water management systems (‘‘BWMS’’); and

our expectations of the availability of vessels to purchase, the time it may take to construct new
vessels, and vessels’ useful lives.

1

Many of these statements are based on our assumptions about factors that are beyond our ability to control or
predict and are subject to risks and uncertainties that are described more fully under the ‘‘Risk Factors’’
section of this Annual Report. Any of these factors or a combination of these factors could materially affect
our business, results of operations and ﬁnancial condition and the ultimate accuracy of the forward-looking
statements. Factors that might cause future results to differ include, among others, the following:

•

•

•

•

•

•

•

•

•

•

•

changes in demand for and the supply of tanker vessel capacity;

ﬂuctuations in oil prices;

changes in the markets in which we operate;

availability of ﬁnancing and reﬁnancing;

changes in general domestic and international political and trade conditions, including tariffs;

changes in governmental or maritime self-regulatory organizations’ rules and regulations or actions
taken by regulatory authorities;

changes in economic and competitive conditions affecting our business, including market ﬂuctuations
in charter rates;

potential disruption of shipping routes due to accidents, piracy or political events;

potential liability from future litigation and potential costs due to environmental damage and vessel
collisions;

the length and number of off-hire periods and dependence on third-party managers; and

other factors discussed under the ‘‘Risk Factors’’ section of this Annual Report.

You should not place undue reliance on forward-looking statements contained in this Annual Report, because
they are statements about events that are not certain to occur as described or at all. All forward-looking
statements in this Annual Report are qualiﬁed in their entirety by the cautionary statements contained in this
Annual Report. These forward-looking statements are not guarantees of our future performance, and actual
results and future developments may vary materially from those projected in the forward-looking statements.

Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly
any revisions to these forward-looking statements to reﬂect events or circumstances after the date of this
Annual Report or to reﬂect the occurrence of unanticipated events.

2

PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Unless the context otherwise requires, when used in this Annual Report, the terms ‘‘Ardmore’’, ‘‘Ardmore
Shipping’’, the ‘‘Company’’, ‘‘we’’, ‘‘our’’, and ‘‘us’’ refer to Ardmore Shipping Corporation and its
subsidiaries. ‘‘Ardmore Shipping Corporation’’ refers only to Ardmore Shipping Corporation and not its
subsidiaries. Unless otherwise indicated, all references to ‘‘dollars’’, ‘‘U.S. dollars’’ and ‘‘$’’ in this annual
report are to the lawful currency of the United States. Our consolidated ﬁnancial statements are prepared in
accordance with United States generally accepted accounting principles (or U.S. GAAP). We use the term
deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in
describing the size of tankers.

A. Selected Financial Data

The following table sets forth our selected consolidated ﬁnancial data and other operating data. The selected
ﬁnancial data as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016
are derived from our audited consolidated ﬁnancial statements, included elsewhere in this Annual Report. The
selected consolidated ﬁnancial data set forth below as of December 31, 2016, 2015 and 2014 and for the years
ended December 31, 2015 and 2014 have been derived from our audited consolidated ﬁnancial statements,
which are not included in this Annual Report. The ﬁnancial statements have been prepared in accordance with
U.S. GAAP. The data set forth below should be read in conjunction with ‘‘Item 5. Operating and Financial
Review and Prospects.’’

INCOME STATEMENT DATA
REVENUE
Revenue . . . . . . . . . . . . . . . . . . . . . . $210,179,181 195,935,392 164,403,938 157,882,259 67,326,634

Dec 31, 2017

Dec 31, 2015

Dec 31, 2014

Dec 31, 2018

For the years ended
Dec 31, 2016

OPERATING EXPENSES
Commissions and voyage expenses(1)
. .
Vessel operating expenses . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . .
Amortization of deferred drydock
expenditure . . . . . . . . . . . . . . . . . . . .
General and administrative expenses:

98,142,454
67,017,632
35,137,880

72,737,902
62,890,401
34,271,091

37,121,398
56,399,979
30,091,237

30,137,173
7,004,045
46,416,510 29,447,876
24,157,022 14,854,885

3,637,276

2,924,031

2,715,109

2,120,974

2,031,100

8,513,202

(9,616,322)

11,979,017
2,619,748

12,055,725
2,021,487

10,418,876
329,746

12,626,373
3,233,888

Corporate . . . . . . . . . . . . . . . . . . . .
Commercial and chartering(2)
. . . . . .

8,178,666
—
Total operating expenses . . . . . . . . . . 219,795,503 187,422,190 140,404,935 113,580,301 61,516,572
5,810,062
(Loss)/proﬁt from operations . . . . . . .
(4,119,283)
Interest expense and ﬁnance costs . . . . .
16,444
Interest income . . . . . . . . . . . . . . . . .
164,629
606,665
—
Loss on disposal of vessels
. . . . . . . . .
— (2,601,148)
—
Loss on vessel held for sale . . . . . . . . .
—
(6,360,813)
—
—
1,707,223
3,808,366
(Loss)/proﬁt before taxes . . . . . . . . . .
(42,776,078) (12,430,768)
(46,749)
(60,434)
(59,567)
Income tax . . . . . . . . . . . . . . . . . . . .
Net (loss)/proﬁt . . . . . . . . . . . . . . . . . $ (42,939,001) (12,490,335)
1,660,474
3,747,932
(Loss)/earnings per share, basic and
diluted . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average number of common
shares outstanding, basic and diluted . . .

44,301,958
(27,405,608) (21,380,165) (17,754,118) (12,282,704)
15,571
—
—
32,034,825
(79,860)
31,954,965

26,059,122 24,547,661

23,999,003

33,441,879

30,141,891

32,837,866

(162,923)

436,195

(0.37)

(1.31)

0.07

1.23

0.12

3

Dec 31, 2018

Dec 31, 2017
39,457,407

BALANCE SHEET DATA
Cash and cash equivalents . . . . . . . . $ 56,903,038
Net vessels (including drydock
assets)
. . . . . . . . . . . . . . . . . . . . . $729,148,611 755,935,008
Total assets . . . . . . . . . . . . . . . . . . $844,759,801 845,539,989
Net assets . . . . . . . . . . . . . . . . . . . $346,583,934 380,973,760
Senior debt and ﬁnance leases . . . . . $469,830,346 446,917,589
. . . . . . . . . . . . . . . . $399,509,686 390,541,689
Paid in capital
(9,567,929)
Accumulated (deﬁcit)/surplus . . . . . . $ (52,925,752)

As at
Dec 31, 2016
55,952,873

Dec 31, 2015
40,109,382

Dec 31, 2014
59,879,596

788,693,708
883,642,723
404,269,799
462,343,756
401,347,393
2,922,406

662,359,307 489,833,626
778,197,608 562,214,991
347,611,278 327,200,093
415,014,315 224,902,715
337,211,121 338,064,585
10,400,157 (10,864,492)

Dec 31, 2018

CASHFLOW DATA
Net cash provided by operating
activities . . . . . . . . . . . . . . . . . . . . $ 9,426,377
Net cash used in investing activities. . $(17,556,879)
Net cash provided by/(used in)
ﬁnancing activities . . . . . . . . . . . . . $ 25,576,133

Dec 31, 2017

For the years ended
Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

12,421,127
18,416,228
(2,282,251) (122,311,231) (232,849,734)(209,741,529)

37,659,686

42,634,500

(32,629,443)

95,520,221

175,419,834 200,339,153

FLEET OPERATING DATA
Time Charter Equivalent(3)
. . . . . . .
MR Tankers ‘‘Eco-design’’
MR Tankers ‘‘Eco-mod’’ . . . . . . . . .
Chemical Tankers ‘‘Eco-design’’ . . . .
Chemical Tankers ‘‘Eco-mod’’ . . . . .
Fleet weighted average TCE(4)
. . . . .

. .

Operating expenditure
Fleet operating expenses per day(5)
Technical management fees per
day(6)
. . . . . . . . . . . . . . . . . . . . . .
Total ﬂeet operating costs per day. .
Expenditures for drydock(7) . . . . . .
On-hire utilization(8)
. . . . . . . . . . .

Dec 31, 2018

Dec 31, 2017

For the years ended
Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

$
$
$
$
$

$

11,406
11,916
11,406
—
11,529

12,902
12,975
11,949
—
12,709

15,098
14,318
15,395
11,839
14,785

19,149
20,223
17,507
13,417
18,309

15,913
14,793
—
11,404
14,393

6,042

5,914

6,017

5,976

6,197

414
$
$
6,456
$6,599,085

384
6,298
3,809,906

388
6,405
3,099,805

357
6,333
3,314,568

359
6,556
4,921,479

99.30%

99.61%

99.52%

99.70%

99.90%

(1) Voyage expenses are all expenses related to a particular voyage, including any bunker fuel expenses, port

fees, cargo loading and unloading expenses, canal tolls and agency fees.

(2) Commercial and chartering-related general and administrative expenses are the expenses attributable to
our chartering and commercial operations department in connection with our spot trading activities.
(3) Time Charter Equivalent (“TCE”) daily rate, represents net revenues divided by revenue days. Revenue
days are the total number of calendar days the vessels are in our possession less off-hire days generally
associated with drydocking or repairs, idle days or repositioning associated with vessels held for sale. For
vessels employed on voyage charters, TCE is the net rate after deducting voyage expenses incurred,
divided by revenue days, including among other expenses, all commissions and pool administration fees.
MR Tankers Spot & Pool TCE is reported on a discharge to discharge basis.

(4) Fleet weighted average TCE is total gross revenue for the ﬂeet, after deducting voyage expenses incurred
on voyage charters divided by the number of revenue days. Voyage expenses are all expenses related to a
particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses,
canal tolls and agency fees.

(5) Fleet operating expenses per day are routine operating expenses and include crewing, repairs and

maintenance, insurance, stores, lube oils and communication costs. They do not include additional costs
related to upgrading or enhancement of the vessels that are not capitalized.

4

(6) Technical management fees per day are fees paid to any third-party technical manager as well as to our

50%-owned joint venture entity, Anglo Ardmore Ship Management Limited, which provides technical
management services to some of our vessels.

(7) Drydock costs, which include, among other things, costs for in-water surveys, represent direct costs that

are incurred as part of vessel drydocking to meet regulatory requirements, expenditures during
drydocking that add economic life to the vessel, and expenditures during drydocking that increase the
vessel’s earnings capacity or improve the vessel’s operating efficiency.

(8) On-hire utilization represents revenue days divided by net operating days (i.e. operating days less

scheduled off-hire days).

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

5

D. Risk Factors

Some of the following risks relate principally to the industry in which we operate and to our business in
general. Other risks relate principally to the securities market and to ownership of our securities. The
occurrence of any of the events described in this section could signiﬁcantly and negatively affect our business,
ﬁnancial condition, operating results and ability to pay dividends on our shares, or the trading price of our
shares.

RISKS RELATED TO OUR INDUSTRY

The tanker industry is cyclical and volatile in terms of charter rates and proﬁtability, which may affect our
results of operations.

The tanker industry is both cyclical and volatile in terms of charter rates and proﬁtability. A prolonged
downturn in the tanker industry could adversely affect our ability to charter our vessels or to sell them on the
expiration or termination of any charters we may enter into. In addition, the rates payable in respect of any of
our vessels operating in a commercial pool, or any renewal or replacement charters that we enter into, may
not be sufficient for us to operate our vessels proﬁtably. Fluctuations in charter rates and tanker values result
from changes in the supply and demand for tanker capacity and changes in the supply and demand for oil, oil
products and chemicals. The factors affecting the supply and demand for tankers are outside of our control,
and the nature, timing and degree of changes in industry conditions are unpredictable.

Factors that inﬂuence demand for tanker capacity include:

•

•

•

•

•

•

•

•

•

supply of and demand for oil, oil products and chemicals;

regional availability of reﬁning capacity;

global and regional economic and political conditions;

the distance oil, oil products and chemicals are to be moved by sea;

changes in seaborne and other transportation patterns;

environmental and other legal and regulatory developments;

weather and natural disasters;

competition from alternative sources of energy; and

international sanctions, tariffs embargoes, import and export restrictions, nationalizations and wars.
Factors that inﬂuence the supply of tanker capacity include:

•

•

•

•

•

•

the number of newbuilding deliveries;

the scrapping rate of older vessels;

conversion of tankers to other uses;

the price of steel and other raw materials;

the number of vessels that are out of service; and

environmental concerns and regulations.

Historically, the tanker markets have been volatile as a result of a variety of conditions and factors that can
affect the price, supply and demand for tanker capacity. Demand for transportation of oil products and
chemicals over longer distances was signiﬁcantly reduced during the last economic downturn. More recently,
since 2015 vessel oversupply contributed to continuing low charter rates in the tanker industry. As at
January 31, 2019, none of our vessels were on time charter, and 27 of our vessels operated in the spot market
directly. If charter rates decline, we may be unable to achieve a level of charter hire sufficient for us to
operate our vessels proﬁtably or we may have to operate our vessels at a greater loss.

6

Any decrease in spot charter rates in the future or continuation of current rates may adversely affect our
results of operations.

As at January 31, 2019, 27 of our vessels operated directly in the spot market. The earnings of these vessels
are based on the spot market charter rates of the pool or the particular voyage charter.

We may employ in the spot charter market additional vessels that we may acquire in the future. Where we
plan to employ a vessel in the spot charter market, we generally intend to employ the vessel in the spot
market directly. Although spot chartering is common in the tanker industry, the spot charter market may
ﬂuctuate signiﬁcantly based upon tanker and oil product/chemical supply and demand, and there have been
periods when spot rates have declined below the operating cost of vessels. The successful operation of our
vessels in the competitive spot charter market, including within commercial pools, depends upon, among other
things, spot-charter rates and minimizing, to the extent possible, time spent waiting for charters and time spent
traveling unladen to pick up cargo. If spot charter rates decline, we may be unable to operate our vessels
trading in the spot market proﬁtably or meet our obligations, including payments on indebtedness and ﬁnance
lease obligations. A decline in spot charter rates may also affect our ability to pay dividends in the future. In
addition, as charter rates for spot charters are ﬁxed for a single voyage that may last up to several weeks,
during periods in which spot charter rates are rising, we will generally experience delays in realizing the
beneﬁts from such increases.

Our ability to renew the charters on our vessels on the expiration or termination of our current charters, or to
enter into charters on vessels that we may acquire in the future, the charter rates payable under any
replacement charters and vessel values will depend upon, among other things, economic conditions in the
sectors in which our vessels operate at that time, changes in the supply and demand for vessel capacity and
changes in the supply and demand for the seaborne transportation of oil and chemical products.

Declines in oil prices may adversely affect our growth prospects and results of operations.

Global crude oil prices have previously experienced signiﬁcant declines and such declines may reoccur. Any
meaningful decrease in oil prices may adversely affect our business, results of operations and ﬁnancial
condition and our ability to service our indebtedness and pay dividends, as a result of, among other things:

•

•

•

•

•

a possible reduction in exploration for or development of new oil ﬁelds or energy projects, or the
delay or cancelation of existing projects as energy companies lower their capital expenditures
budgets, which may reduce our growth opportunities;

potential lower demand for tankers, which may reduce available charter rates and revenue to us
upon chartering of our vessels;

customers failing to extend or renew contracts upon expiration;

the inability or refusal of customers to make charter payments to us due to ﬁnancial constraints or
otherwise; or

declines in vessel values, which may result in losses to us upon vessel sales or impairment charges
against our earnings.

We have limited current liquidity.

As at December 31, 2018, we had total liquidity of $56.9 million in cash and cash equivalents. Our short-term
liquidity requirements include the payment of operating expenses, drydocking expenditures, debt servicing
costs lease payments, any dividends on our shares of common stock, scheduled repayments of long-term debt,
as well as funding our other working capital requirements. Our short-term spot charters, including our
participation in spot charter pooling arrangements, contribute to the volatility of our net operating cash ﬂow,
and thus our ability to generate sufficient cash ﬂows to meet our short-term liquidity needs. We expect to
manage our near- term liquidity needs from our working capital, together with expected cash ﬂows from
operations and availability under credit facilities. Our existing long-term debt facilities and certain of our
ﬁnance leases require, among other things, that we maintain minimum cash and cash equivalents based on the
greater of a set amount per number of vessels owned and 5% of outstanding debt. The required minimum
cash balance as of December 31, 2018, was $23.5 million. Should we not meet this ﬁnancial covenant or

7

other covenants in our debt facilities, the lenders may declare our obligations under the applicable agreements
immediately due and payable, and terminate any further loan commitments, which would signiﬁcantly affect
our short-term liquidity requirements. A default under ﬁnancing agreements could also result in foreclosure on
any of our vessels and other assets securing the related loans or a loss of our rights as a lessee under our
ﬁnance leases.

Declines in charter rates and other market deterioration could cause us to incur impairment charges.

We evaluate the carrying amounts of our vessels to determine if events have occurred that would require an
impairment of their carrying amounts. The recoverable amount 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.
The review for potential impairment indicators and projection of future cash ﬂows related to our vessels is
complex and requires us to make various estimates, including future charter rates, operating expenses and
drydock costs. Historically, each of these items has been volatile. An impairment charge is recognized if the
carrying value is in excess of the estimated future undiscounted net operating cash ﬂows. The impairment loss
is measured based on the excess of the carrying amount over the fair market value of the asset. An
impairment loss could adversely affect our results of operations.

The market values of our vessels may decrease, which could cause us to breach covenants in our credit
facilities and lease arrangements or result in impairment charges, and we may incur a loss if we sell
vessels following a decline in their market value.

The market values of tankers have historically experienced high volatility. The market prices for tankers
declined signiﬁcantly from historically high levels reached in early 2008 and remain at relatively low levels.
The market value of our vessels will ﬂuctuate depending on general economic and market conditions affecting
the shipping industry and prevailing charter hire rates, competition from other shipping companies and other
modes of transportation, the types, sizes and ages of vessels, applicable governmental regulations and the cost
of new buildings. If the market value of our ﬂeet declines, we may not be able to obtain other ﬁnancing or to
incur debt on terms that are acceptable to us or at all. A decrease in vessel values could also cause us to
breach certain loan-to-value covenants that are contained in our credit facilities and lease arrangements and in
future ﬁnancing agreements that we may enter into from time to time. If we breach such covenants due to
decreased vessel values and we are unable to remedy the relevant breach, our lenders could accelerate our
debt and foreclose on vessels in our ﬂeet or we may lose our rights as a lessee under our ﬁnance leases,
which would adversely affect our business, results of operations and ﬁnancial condition.

In addition, if we sell one or more of our vessels at a time when vessel prices have fallen, the sale price may
be less than the vessel’s carrying value on our consolidated ﬁnancial statements, resulting in a loss on sale or
an impairment loss being recognized, leading to a reduction in earnings. Also, if vessel values fall
signiﬁcantly, this could indicate a decrease in the estimated future undiscounted net operating cash ﬂows for
the vessel, which may result in an impairment adjustment in our ﬁnancial statements, which could adversely
affect our results of operations and ﬁnancial condition.

An over-supply of tanker capacity may lead to reductions in charter rates, vessel values, and proﬁtability.

The market supply of tankers is affected by a number of factors, such as demand for energy resources, oil,
petroleum and chemical products, as well as the level of global and regional economic growth. If the capacity
of new ships delivered exceeds the capacity of tankers being scrapped and lost, tanker capacity will increase.
In addition, the global newbuilding orderbook for LR product tankers, which extends to 2021, and the global
newbuilding orderbooks for MR product tankers and chemical tankers, which each extend to 2020, equaled
approximately 7.0%, 5.7% and 5.7% of their respective ﬂeets as of January 16, 2019. These orderbooks may
also increase further in proportion to their respective existing ﬂeets. If the supply of LR product, MR product
or chemical tanker capacity increases and if the demand for such respective tanker capacity does not increase
correspondingly, charter rates and vessel values could materially decline. A reduction in charter rates and the
value of our vessels may have a material adverse effect on our business, results of operations and ﬁnancial
condition.

In addition, product tankers currently used to transport crude oil and other ‘‘dirty’’ products may be ‘‘cleaned
up’’ and reintroduced into the product tanker market, which would increase the available product tanker

8

tonnage which may affect the supply and demand balance for product tankers. This could have an adverse
effect on our business, results of operations and ﬁnancial position.

The current state of global ﬁnancial markets and economic conditions may adversely impact our ability to
obtain additional ﬁnancing or reﬁnance our existing obligations on acceptable terms, if at all, and
otherwise negatively impact our business.

Global ﬁnancial markets and economic conditions have been, and continue to be, volatile. In the last
economic downturn, operating businesses in the global economy faced tightening credit, weakening demand
for goods and services, deteriorating international liquidity conditions and declining markets. There was a
general decline in the willingness of banks and other ﬁnancial institutions to extend credit, particularly in the
shipping industry due to the historically volatile asset values of vessels. Since 2008, lending by ﬁnancial
institutions worldwide decreased signiﬁcantly compared to the period preceding 2008 and lending to the
shipping industry remains restrictive. As the shipping industry is highly dependent on the availability of credit
to ﬁnance and expand operations, it was negatively affected by this decline.

Also, as a result of concerns about the stability of ﬁnancial markets generally and the solvency of
counterparties speciﬁcally, the cost of borrowing funds during the last economic downturn increased as many
lenders increased interest rates, enacted tighter lending standards, refused to reﬁnance existing debt on similar
terms and, in some cases, ceased to provide funding to borrowers. Due to these factors, additional ﬁnancing
may not be available if needed by us on acceptable terms or at all. If additional ﬁnancing is not available
when needed or is available only on unfavorable terms, we may be unable to meet our obligations as they
come due or we may be unable to enhance our existing business, complete additional vessel acquisitions or
otherwise take advantage of business opportunities as they arise.

Changes in fuel, or bunkers, prices may adversely affect our results of operation.

Fuel, or bunkers, is a signiﬁcant expense for our vessels employed in the spot market and can have a
signiﬁcant impact on pool earnings. For any vessels which may be employed on time charters, the charterer is
generally responsible for the cost and supply of fuel; however, such cost may affect the charter rates we may
be able to negotiate for our vessels. Changes in the price of fuel may adversely affect our proﬁtability. The
imposition of stringent vessel air emissions requirements, such as the IMO’s requirement to reduce the amount
of sulfur in fuel globally by 2020, could lead to marine fuel shortages and substantial increases in marine fuel
prices. The price and supply of fuel is unpredictable and ﬂuctuates based on events outside our control,
including geopolitical developments, supply and demand for oil and gas, actions by the Organization of
Petroleum Exporting Countries (‘‘OPEC’’) and other oil and gas producers, war and unrest in oil producing
countries and regions, regional production patterns and environmental concerns. In addition, fuel price
increases may reduce the proﬁtability and competitiveness of our business versus other forms of
transportation, such as truck or rail.

Changes in the oil, oil products and chemical markets could result in decreased demand for our vessels
and services.

Demand for our vessels and services in transporting oil, oil products and chemicals depends upon world and
regional oil markets. Any decrease in shipments of oil, oil products and chemicals in those markets could have
a material adverse effect on our business, ﬁnancial condition and results of operations. Historically, those
markets have been volatile as a result of the many conditions and events that affect the price, production and
transport of oil, oil products and chemicals, including competition from alternative energy sources. Past
slowdowns of the U.S. and world economies have resulted in reduced consumption of oil and oil products and
decreased demand for our vessels and services, which reduced vessel earnings. Additional slowdowns could
have similar effects on our operating results and may limit our ability to expand our ﬂeet.

We are subject to complex laws and regulations, including environmental laws and regulations, which can
adversely affect our business, results of operations and ﬁnancial condition.

Our operations are subject to numerous laws and regulations in the form of international conventions and
treaties, national, state and local laws and national and international regulations in force in the jurisdictions in
which our vessels operate or are registered, which can signiﬁcantly affect the ownership and operation of our

9

vessels. Compliance with such laws and regulations, where applicable, may require installation of costly
equipment or operational changes and may affect the resale value or useful lives of our vessels. For example,
the IMO set January 1, 2020 as the implementation date for vessels to comply with its low sulfur fuel
requirement. We may comply with this requirement by either using fuel with low sulfur content, which is
more expensive than standard marine fuel, or by upgrading our vessels to provide cleaner exhaust emissions.
Cost of compliance with these regulatory changes may be signiﬁcant. We may also incur additional costs in
order to comply with other existing and future regulatory obligations, including costs relating to, among other
things: air emissions including greenhouse gases; the management of ballast and bilge waters; maintenance
and inspection; elimination of tin-based paint; development and implementation of emergency procedures,
Eco-Mod upgrades of secondhand vessels and insurance coverage or other ﬁnancial assurance of our ability to
address pollution incidents. Environmental or other initiatives or incidents (such as the 2010 Deepwater
Horizon oil spill in the Gulf of Mexico) may result in additional regulatory initiatives or statutes or changes to
existing laws that may affect our operations or require us to incur additional expenses to comply with such
regulatory initiatives, statutes or laws. These costs could have a material adverse effect on our business, results
of operations and ﬁnancial condition.

A failure to comply with applicable laws and regulations may, among other things, result in administrative and
civil penalties, criminal sanctions or the suspension or termination of our operations. Environmental laws often
impose strict, joint and several liability for remediation of spills and releases of oil and hazardous substances,
which could subject us to liability without regard to whether we were negligent or at fault. Under the U.S. Oil
Pollution Act of 1990, for example, owners, operators and bareboat charterers are jointly, severally and strictly
liable for the discharge of oil in U.S. waters, including the 200-nautical mile exclusive economic zone around
the United States. An oil spill could also result in signiﬁcant liability, including ﬁnes, penalties, criminal
liability, remediation costs and natural resource damages under international and U.S. federal, state and local
laws, as well as third-party damages, and could harm our reputation with current or potential charterers of our
tankers. We are required to satisfy insurance and ﬁnancial responsibility requirements for potential oil
(including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover
certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such
risks or that any claims will not have a material adverse effect on our business, results of operations and
ﬁnancial condition.

If we fail to comply with international safety regulations, we may be subject to increased liability, which
may adversely affect our insurance coverage and may result in a denial of access to, or detention in,
certain ports.

The operation of our vessels is affected by the requirements set forth in the IMO’s International Safety
Management Code for the Safe Operation of Ships and Pollution Prevention (‘‘ISM Code’’). The ISM Code
requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive ‘‘Safety
Management System’’ that includes the adoption of safety and environmental protection policies setting forth
instructions and procedures for safe operation and describing procedures for dealing with emergencies. If we
fail to comply with the ISM Code or similar regulations, we may be subject to increased liability or our
existing insurance coverage may be invalidated or decreased for our affected vessels. Such failure may also
result in a denial of access to, or detention of our vessels in, certain ports. The United States Coast Guard
(‘‘USCG’’) and European Union (‘‘EU’’) authorities have indicated that vessels not in compliance with the
ISM Code will be prohibited from trading in U.S. and EU ports, which could have an adverse effect on our
future performance, results of operations, cash ﬂows and ﬁnancial position.

If our vessels suffer damage due to the inherent operational risks of the shipping industry, we may
experience unexpected drydocking costs and delays or total loss of our vessels, which may adversely affect
our business and ﬁnancial condition.

The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes will be at risk of
being damaged or lost because of events, such as marine disasters, bad weather, business interruptions caused
by mechanical failures, grounding, ﬁre, explosions, collisions, human error, war, terrorism, piracy, cyber
attack, latent defects, acts of God climate change and other circumstances or events. Changing economic,
regulatory and political conditions in some countries, including political and military conﬂicts, have from time

10

to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These
hazards may result in death or injury to persons, loss of revenues or property, environmental damage, higher
insurance rates, damage to our customer relationships, market disruptions, delays or rerouting. In addition, the
operation of tankers has unique operational risks associated with the transportation of oil and chemical
products. An oil or chemical spill may cause signiﬁcant environmental damage and the associated costs could
exceed the insurance coverage available to us. Compared to other types of vessels, tankers are exposed to a
higher risk of damage and loss by ﬁre, whether ignited by a terrorist attack, collision or other causes, due to
the high ﬂammability and high volume of the oil or chemicals transported in tankers.

If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock
repairs are unpredictable and may be substantial. We may have to pay drydocking costs if our insurance does
not cover them in full. The loss of revenues while these vessels are being repaired and repositioned, as well as
the actual cost of these repairs, may adversely affect our business, results of operations and ﬁnancial
condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are
conveniently located. We may be unable to ﬁnd space at a suitable drydocking facility or our vessels may be
forced to travel to a drydocking facility that is not conveniently located to our vessels’ positions. The loss of
earnings while such vessels wait for space or travel or are towed to more distant drydocking facilities may be
signiﬁcant. The total loss of any of our vessels could harm our reputation as a safe and reliable vessel owner
and operator. If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent
any such damage, costs or loss which could negatively impact our business, results of operations and ﬁnancial
condition.

We operate our vessels worldwide and, as a result, our vessels are exposed to international risks which may
reduce revenue or increase expenses.

Changing economic, regulatory and political conditions in some countries, including political and military
conﬂicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor
strikes and boycotts. These sorts of events could interfere with shipping routes and result in market
disruptions, which may reduce our revenue and increase our expenses. Our worldwide operations also expose
us to the risk that an increase in restrictions on global trade will harm our business. The rise of populist or
nationalist political parties and leaders in the United States, Europe and elsewhere may lead to increased trade
barriers, trade protectionism and restrictions on trade. The adoption of trade barriers and imposition of tariffs
by governments may reduce global shipping demand and reduce our revenue.

In addition, international shipping is subject to various security and customs inspection and related procedures
in countries of origin and destination and transhipment points. Inspection procedures can result in the seizure
of the cargo or vessels, delays in the loading, offloading or delivery and the levying of customs duties, ﬁnes or
other penalties against vessel owners. It is possible that changes to inspection procedures could impose
additional ﬁnancial and legal obligations on us. In addition, 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 uneconomical or impractical. Any such changes or developments may have a material
adverse effect on our business, results of operations and ﬁnancial condition.

Acts of piracy on ocean-going vessels could adversely affect our business.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the
South China Sea, the Indian Ocean and in the Gulf of Aden. Sea piracy incidents continue to occur,
particularly in the South China Sea, the Strait of Malacca, the Indian Ocean, the Arabian Sea, off the coast of
West Africa, the Red Sea, the Gulf of Aden, the Gulf of Guinea, Venezuela, and in certain areas of the Middle
East, with tankers particularly vulnerable to such attacks. If piracy attacks result in the characterization of
regions in which our vessels are deployed as ‘‘war risk’’ zones or Joint War Committee ‘‘war and strikes’’
listed areas by insurers, premiums payable for such coverage could increase signiﬁcantly and such insurance
coverage may be more difficult to obtain. In addition, crew costs, including costs which may be incurred to
the extent we employ onboard security guards, could increase in such circumstances. We may not be
adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In
addition, detention or hijacking as a result of an act of piracy against our vessels, or an increase in cost, or
unavailability of insurance for our vessels, could have a material adverse impact on our business, results of

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operations, cash ﬂows and ﬁnancial condition and may result in loss of revenues, increased costs and
decreased cash ﬂows to our customers, which could impair their ability to make payments to us under our
charters.

Political instability, terrorist or other attacks, war or international hostilities can affect the tanker industry,
which may adversely affect our business.

We conduct most of our operations outside of the United States, and our business, results of operations, cash
ﬂows, ﬁnancial condition and available cash may be adversely affected by the effects of political instability,
terrorist or other attacks, war or international hostilities. Continuing conﬂicts and recent developments in the
Middle East, and the presence of the United States and other armed forces in regions of conﬂict, may lead to
additional acts of terrorism and armed conﬂict around the world, which may contribute to further world
economic instability and uncertainty in global ﬁnancial markets. As a result of these factors, insurers have
increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. Future
terrorist attacks could result in increased volatility of the ﬁnancial markets and negatively impact the
United States and global economy. These uncertainties could also adversely affect our ability to obtain
additional ﬁnancing on terms acceptable to us or at all. In the past, political instability has 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
West of Africa, South China Sea, South-East Asia and the Gulf of Aden including off the coast of Somalia.
Any of these occurrences could have a material adverse impact on our business, results of operations and
ﬁnancial condition.

If our vessels call on ports located in countries that are subject to restrictions imposed by the
U.S. government, our reputation and the market for our securities could be adversely affected.

Although no vessels owned or operated by us have called on ports located in countries subject to country-
wide or territory-wide sanctions and embargoes imposed by the U.S. government, such as Iran, North Korea,
Syria, the Crimea region, or Cuba, and other authorities or countries identiﬁed by the U.S. government or
other authorities as state sponsors of terrorism, such as Iran, Sudan, Syria and North Korea, in the future our
vessels may call on ports in these countries from time to time on charterers’ instructions in violation of
contractual provisions that prohibit them from doing so. Sanctions and embargo laws and regulations vary in
their application, as they do not all apply to the same covered persons or proscribe the same activities, and
such sanctions and embargo laws and regulations may be amended or strengthened over time.

Although we believe that we have been in compliance with all applicable sanctions and embargo laws and
regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance
in the future, particularly as the scope of certain laws may be unclear and may be subject to changing
interpretations. Any such violation could result in ﬁnes, penalties or other sanctions that could severely impact
the market for our common shares, our ability to access U.S. capital markets and conduct our business and
could result in some investors deciding, or being required, to divest their interest, or not to invest, in us.

Our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that
do not involve us or our vessels and those violations could in turn negatively affect our reputation or the
ability of our charterers to meet their obligations to us or result in ﬁnes, penalties or sanctions.

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

We expect that our vessels will call on ports where smugglers may attempt to hide drugs and other contraband
on vessels, with or without the knowledge of crew members. To the extent our vessels are found with
contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of
any of our crew, we may face governmental or other regulatory claims which could have an adverse effect on
our business, results of operations and ﬁnancial condition.

Maritime claimants could arrest our vessels, which would have a negative effect on our business and
results of operations.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be
entitled to a maritime lien against a vessel for unsatisﬁed debts, claims or damages. In many jurisdictions, a

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maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings.
The arrest or attachment of one or more of our vessels could interrupt our business or require us to pay
signiﬁcant amounts 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 that 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 our vessels during a period of war or emergency, which may adversely affect
our business and results of operations.

A government could requisition for title or seize our vessels. Requisition for title occurs when a government
takes control of a vessel and becomes the owner. Also, a government could requisition our vessels for hire.
Requisition for hire occurs when a government takes control of a vessel and effectively becomes the 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 adversely affect our business, results of operations and
ﬁnancial condition.

Technological innovation could reduce our charter hire income and the value of our vessels.

The charter hire rates and the value and operational life of a vessel are determined by a number of factors,
including the vessel’s efficiency, operational ﬂexibility and physical life. Efficiency includes speed, fuel
economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter various
harbors and ports, utilize related docking facilities and pass through canals and straits. The length of a vessel’s
physical life is related to its original design and construction, its maintenance and the impact of the stress of
operations. If new tankers are built that are more efficient or more ﬂexible or have longer physical lives than
our vessels, competition from these more technologically advanced vessels could adversely affect the amount
of charter hire payments, if any, we receive for our vessels once existing charters expire and the resale value
of our vessels could signiﬁcantly decrease. As a result, our business, results of operations and ﬁnancial
condition could be adversely affected.

We rely on our information systems to conduct our business, and failure to protect these systems against
security breaches could adversely affect our business and results of operations. Additionally, if these
systems fail or become unavailable for any signiﬁcant period of time, our business could be harmed.

The efficient operation of our business, including processing, transmitting and storing electronic and ﬁnancial
information, is dependent on computer hardware and software systems. Information systems are vulnerable to
security breaches by computer hackers and cyber terrorists. We rely on industry accepted security measures
and technology to securely maintain conﬁdential and proprietary information maintained on our information
systems. However, these measures and technology may not adequately prevent security breaches. In addition,
the unavailability of the information systems or the failure of these systems to perform as anticipated for any
reason could disrupt our business and could result in decreased performance and increased operating costs,
causing our business and results of operations to suffer. Any signiﬁcant interruption or failure of our
information systems or any signiﬁcant breach of security could adversely affect our business, results of
operations and ﬁnancial condition.

If labor or other interruptions are not resolved in a timely manner, they could have a material adverse
effect on our business.

We, indirectly through our technical managers, employ masters, officers and crews to operate our vessels,
exposing us to the risk that industrial actions or other labor unrest may occur. A signiﬁcant portion of the
seafarers that crew our vessels are employed under collective bargaining agreements. We may suffer labor
disruptions if relationships deteriorate with the seafarers or the unions that represent them. The collective
bargaining agreements may not prevent labor disruptions, particularly when the agreements are being
renegotiated. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could
prevent or hinder our operations from being carried out as we expect and could have a material adverse effect
on our business, results of operations and ﬁnancial condition.

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RISKS RELATED TO OUR BUSINESS

We will be required to make substantial capital expenditures to expand the number of vessels in our ﬂeet
and to maintain all our vessels, which will depend on our ability to obtain additional ﬁnancing.

Our business strategy is based in part upon the expansion of our ﬂeet through the purchase and ordering of
additional vessels. We will be required to make substantial capital expenditures to expand the size of our ﬂeet.
We also have incurred signiﬁcant capital expenditures in previous years to upgrade secondhand vessels we
have acquired to Eco-Mod standards.

In addition, we will incur signiﬁcant maintenance and capital costs for our current ﬂeet and any additional
vessels we acquire. A newbuilding vessel must be drydocked within ﬁve years of its delivery from a shipyard
and vessels are typically drydocked every 30 to 60 months thereafter depending on the vessel, not including
any unexpected repairs. We estimate the cost to drydock a vessel is between $0.75 million and $1.5 million,
depending on the size and condition of the vessel and the location of drydocking relative to the location of the
vessel.

We may be required to incur additional debt or raise capital through the sale of equity securities to fund the
purchasing of vessels or for drydocking costs from time to time. However, we may be unable to access the
required ﬁnancing if conditions change and we may be unsuccessful in obtaining ﬁnancing for future ﬂeet
growth. Use of cash from operations will reduce available cash. Our ability to obtain bank ﬁnancing or to
access the capital markets for future offerings may be limited by our ﬁnancial condition at the time of any
such ﬁnancing or offering as well as by adverse market conditions resulting from, among other things, general
economic conditions and contingencies and uncertainties that are beyond our control. If we ﬁnance our
expenditures by incurring additional debt, our ﬁnancial leverage could increase. If we ﬁnance our expenditures
by issuing equity securities, our shareholders’ ownership interest in us could be diluted.

We will not be able to take advantage of favorable opportunities in the spot market with respect to vessels
employed on medium to long-term time charters, if any.

As at January 31, 2019, none of our vessels were employed under ﬁxed rate time charter agreements.
However, in the future we may enter into ﬁxed rate time charter agreements with respect to our vessels.
Vessels committed to medium and long-term time charters may not be available for spot charters during
periods of increasing charter hire rates, when spot charters might be more proﬁtable.

If we do not identify suitable vessels or shipping companies for acquisition or successfully integrate any
acquired vessels or shipping companies, we may not be able to grow or effectively manage our growth.

One of our principal strategies is to continue expanding our operations and our ﬂeet. Our future growth will
depend upon a number of factors, some of which may not be within our control. These factors include our
ability to:

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identify suitable tankers and/or shipping companies for acquisitions at attractive prices;

identify businesses engaged in managing, operating or owning tankers for acquisitions or joint
ventures;

integrate any acquired tankers or businesses successfully with our existing operations;

hire, train and retain qualiﬁed personnel and crew to manage and operate our growing business and
ﬂeet;

identify additional new markets;

improve or expand our operating, ﬁnancial and accounting systems and controls; and

obtain required ﬁnancing for our existing and new vessels and operations.

Our failure to effectively identify, purchase, develop and integrate any tankers or businesses could adversely
affect our business, ﬁnancial condition and results of operations. The number of employees that perform
services for us and our current operating and ﬁnancial systems may not be adequate as we implement our plan
to expand the size of our ﬂeet and we may not be able to effectively hire more employees or adequately

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improve those systems. In addition, acquisitions may require additional equity issuances or the incurrence of
additional debt (which may require additional amortization payments or impose more restrictive covenants). If
we are unable to successfully accommodate any growth, our business, results of operations and ﬁnancial
condition may be adversely affected.

Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations,
difficulty in obtaining additional qualiﬁed personnel and managing relationships with customers and suppliers
and integrating newly acquired vessels and operations into existing infrastructures. The expansion of our ﬂeet
may impose signiﬁcant additional responsibilities on our management and staff, and the management and staff
of our technical managers, and may necessitate that we, and they, increase the number of personnel to support
such expansion. We may not be successful in executing our growth plans and we may incur signiﬁcant
expenses and losses in connection with such growth plans.

Delays in deliveries of vessels we may purchase or order, our decision to cancel an order for purchase of a
vessel or our inability to otherwise complete the acquisitions of additional vessels for our ﬂeet, could harm
our operating results.

Although we currently have no vessels on order, under construction or subject to purchase agreements, we
expect to purchase and order additional vessels from time to time. The delivery of these vessels could be
delayed, not completed or cancelled, which would delay or eliminate our expected receipt of revenues from
the employment of these vessels. The seller could fail to deliver these vessels to us as agreed, or we could
cancel a purchase contract because the seller has not met its obligations. The delivery of any vessels we may
propose to acquire could be delayed because of, among other things, hostilities or political disturbances, non-
performance of the purchase agreement with respect to the vessels by the seller, our inability to obtain
requisite permits, approvals or ﬁnancings or damage to or destruction of vessels while being operated by the
seller prior to the delivery date.

If the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to
a charter under which we become responsible for substantial liquidated damages to the customer as a result of
the delay or cancellation, our business, ﬁnancial condition and results of operations could be adversely
affected.

The delivery of vessels we may purchase or order could be delayed because of, among other things:

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work stoppages or other labor disturbances or other events that disrupt the operations of the shipyard
building the vessels;

quality or other engineering problems;

changes in governmental regulations or maritime self-regulatory organization standards;

lack of raw materials;

bankruptcy or other ﬁnancial crisis of the shipyard building the vessels;

our inability to obtain requisite ﬁnancing or make timely payments;

a backlog of orders at the shipyard building the vessels;

hostilities or political or economic disturbances in the countries where the vessels are being built;

weather interference or catastrophic event, such as a major earthquake or ﬁre;

our requests for changes to the original vessel speciﬁcations;

shortages or delays in the receipt of necessary construction materials, such as steel;

our inability to obtain requisite permits or approvals; or

a dispute with the shipyard building the vessels.

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If we purchase and operate second-hand vessels, we will be exposed to increased operating costs that could
adversely affect our earnings and, as our ﬂeet ages, the risks associated with older vessels could adversely
affect our ability to obtain proﬁtable charters.

Our current business strategy includes additional growth through the acquisition of new and second-hand
vessels. While we typically inspect second-hand vessels prior to purchase, this does not provide us with the
same knowledge about their condition 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 of the second-hand
vessels that we acquire. These factors could increase the ultimate cost of any second-hand vessel acquisitions
by us.

In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel.
Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in
engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable
to charterers.

Governmental regulations, safety or other equipment standards related to the age of vessels 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. As our vessels age, market conditions may not justify those
expenditures or enable us to operate our vessels proﬁtably during the remainder of their useful lives.

An increase in operating or voyage expenses would decrease our earnings and cash ﬂows.

As at January 31, 2019, none of our vessels were employed under ﬁxed rate time charter agreements.
However, in the future we may enter into ﬁxed rate time charter agreements with respect to our vessels. For
all vessels operating under time charters, the charterer is primarily responsible for voyage expenses and we
are responsible for the vessel operating expenses. Under spot chartering arrangements, we will be responsible
for all cost associated with operating the vessel, including operating expenses, voyage expenses, bunkers, port
and canal costs.

Our vessel operating expenses include the costs of crew, provisions, deck and engine stores, insurance and
maintenance, repairs and spares, which depend on a variety of factors, many of which are beyond our control.
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydocking
repairs are unpredictable and can be substantial. Increases in any of these expenses would decrease earnings
and cash ﬂow.

We may be unsuccessful in competing in the highly competitive international tanker market, which would
negatively affect our results of operations and ﬁnancial condition and our ability to expand our business.

The operation of tanker vessels and transportation of petroleum and chemical products is extremely
competitive, and our industry is capital intensive and highly fragmented. Competition arises primarily from
other tanker owners, including major oil companies as well as independent tanker companies, some of which
have substantially greater resources than we do. Competition for the transportation of oil products and
chemicals can be intense and depends on price, location, size, age, condition and the acceptability of the
tanker and its operators to the charterers. We may be unable to compete effectively with other tanker owners,
including major oil companies and independent tanker companies.

Our market share may decrease in the future. We may not be able to compete proﬁtably as we seek to expand
our business into new geographic regions or provide new services. New markets may require different skills,
knowledge or strategies than those we use in our current markets, and the competitors in those new markets
may have greater ﬁnancial strength and capital resources than we do.

We derive a signiﬁcant portion of our revenues from a limited number of customers, and the loss of any
such customers could result in a signiﬁcant loss of revenues and cash ﬂow.

We have derived, and we may continue to derive, a signiﬁcant portion of our revenues and cash ﬂow from a
limited number of customers. Vitol Group accounted for more than 10% of our consolidated revenues from
continuing operations during 2018; Vitol Group also accounted for more than 10% of our consolidated
revenues from continuing operations during 2017; and each of Vitol Group, Navig8 Group and Traﬁgura

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accounted for more than 10% of our consolidated revenues from continuing operations during 2016. No other
customer accounted for 10% or more of revenues from continuing operations during any of these periods. The
identity of customers which may account for 10% or more of revenues from continuing operations may vary
from time to time.

If we lose a key customer or if a customer exercises its right under some charters to terminate the charter, we
may be unable to enter into an adequate replacement charter for the applicable vessel or vessels. The loss of
any of our signiﬁcant customers or a reduction in revenues from them could have a material adverse effect on
our business, results of operations, cash ﬂows and ﬁnancial condition.

Our charterers may terminate or default on their charters, which could adversely affect our business,
results of operations and cash ﬂow.

Our charters may terminate earlier than their scheduled expirations. The terms of our existing or future
charters may vary as to which events or occurrences will cause a charter to terminate or give the charterer the
option to terminate the charter, but these may include: a total or constructive loss of the relevant vessel; or the
failure of the relevant vessel to meet speciﬁed performance criteria. In addition, the ability of each of our
charterers to perform its obligations under a charter will depend on a number of factors that are beyond our
control. These factors may include general economic conditions, the condition of the tanker industry, the
charter rates received for speciﬁc types of vessels and various operating expenses. The costs and delays
associated with the default by a charterer under a charter of a vessel may be considerable and may adversely
affect our business, results of operations, cash ﬂows and ﬁnancial condition and our available cash.

To the extent we enter into time charters for our vessels, we cannot predict whether our charterers will, upon
the expiration of their charters, re-charter our vessels on favorable terms or at all. If our charterers are unable
or decide not to re-charter our vessels, we may not be able to re-charter them on terms similar to our current
charters or at all. In addition, the ability and willingness of each of our counterparties to perform its
obligations under a time charter agreement with us will depend on a number of factors that are beyond our
control and may include, among other things, general economic conditions, the condition of the tanker
shipping industry and the overall ﬁnancial condition of the counterparties. Charterers are sensitive to the
commodity markets and may be impacted by market forces affecting commodities. In depressed market
conditions, there have been reports of charterers renegotiating their charters or defaulting on their obligations
under charters. Our customers may fail to pay charter hire or attempt to renegotiate charter rates. If a
counterparty fails to honor its obligations under agreements with us, it may be difficult for us to secure
substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on
time charters may be at lower rates. Any failure by our charterers to meet their obligations to us or any
renegotiation of our charter agreements could have a material adverse effect on our business, ﬁnancial
condition and results of operations.

Our ability to obtain additional debt ﬁnancing may be dependent on the performance of our then-existing
charters and the creditworthiness of our charterers.

The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our
ability to obtain the additional capital resources that we will require to purchase additional vessels or may
signiﬁcantly increase our costs of obtaining such capital. Our inability to obtain additional ﬁnancing at all or
at a higher than anticipated cost may materially affect our results of operations and our ability to implement
our business strategy.

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Our debt levels and lease obligations may limit our ﬂexibility in obtaining additional ﬁnancing and in
pursuing other business opportunities.

As of December 31, 2018, we had $469.8 million in aggregate principal amount of outstanding indebtedness
and ﬁnance lease obligations. In addition, in the future we may enter into new debt arrangements, issue debt
securities or incur additional ﬁnance lease obligations. Our level of debt and lease obligations could have
important consequences to us, including the following:

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our ability to obtain additional ﬁnancing, if necessary, for working capital, capital expenditures,
acquisitions or other purposes may be impaired or such ﬁnancing may not be available on favorable
terms;

we may need to use a substantial portion of our cash from operations to make principal and interest
payments relating to our debt obligations, reducing the funds that would otherwise be available for
operations and future business opportunities;

our debt level could make us more vulnerable than our competitors with less debt to competitive
pressures or a downturn in our business or the economy generally; and

our debt level may limit our ﬂexibility in responding to changing business and economic conditions.

Servicing our current or future indebtedness and lease obligations limits funds available for other purposes
and if we cannot service our debt, we may lose our vessels.

Borrowing under our existing credit facilities and obligations under our lease arrangements require us to
dedicate a signiﬁcant part of our cash ﬂow from operations to paying principal and interest on our
indebtedness under such facilities or obligations under our lease obligations, and we intend to incur additional
debt in the future. These payments limit funds available for working capital, capital expenditures and other
purposes.

Amounts borrowed under our credit facilities bear interest at variable rates. Increases in prevailing rates could
increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount
remains the same, and our net income and cash ﬂows would decrease. Currently, we do not have any hedge
arrangements in place to reduce our exposure to interest rate variability on variable rate debt and lease
obligations.

Our ability to service our debt and lease obligations will depend upon, among other things, our ﬁnancial and
operating performance, which will be affected by prevailing economic and industry conditions and ﬁnancial,
business, regulatory and other factors, some of which are beyond our control. If our results of operations and
cash reserves are not sufficient to service our current or future indebtedness and lease obligations, we may be
forced to:

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reduce dividends;

seek to raise additional capital;

seek to reﬁnance or restructure our debt;

sell tankers;

reduce or delay our business activities, capital expenditures, investments or acquisitions; or

seek bankruptcy protection.

We may be unable to effect any of these remedies, if necessary, on satisfactory terms, and these remedies may
not be sufficient to allow us to meet our debt or lease obligations. If we are unable to meet our debt or lease
obligations or if some other default occurs under our credit facilities or lease arrangements, our lenders could
elect to declare our debt, together with accrued interest and fees, to be immediately due and payable and
proceed against the collateral vessels securing that debt or our lessors could terminate our rights under our
ﬁnance leases.

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We are a holding company and depend on the ability of our subsidiaries to distribute funds to us in order
to satisfy our ﬁnancial obligations and to make dividend payments.

We are a holding company and our subsidiaries which are all directly and indirectly wholly owned by us,
conduct our operations and own all of our operating assets. As a result, our ability to satisfy our ﬁnancial
obligations and to pay dividends to our shareholders depends on the ability of our subsidiaries to generate
proﬁts available for distribution to us and, to the extent that they are unable to generate proﬁts, we will be
unable to pay our creditors or dividends to our shareholders.

Our ability to grow may be adversely affected by our dividend policy.

Under our dividend policy, we expect to distribute on a quarterly basis as dividends on our shares of common
stock an amount equal to 60% of Earnings from Continuing Operations (which represents our earnings per
share reported under U.S. GAAP as adjusted for unrealized and realized gains and losses and extraordinary
items). Accordingly, our growth, if any, may not be as fast as businesses that do not distribute quarterly
dividends. To the extent we do not have sufficient cash reserves or are unable to obtain ﬁnancing from
external sources, our dividend policy may signiﬁcantly impair our ability to meet our ﬁnancial needs or to
grow. Since August 31, 2016, when we paid a cash dividend of $0.11 per share for the quarter ended June 30,
2016, we have not paid cash dividends on our shares of common stock due to losses from continuing
operations. Our board of directors may review and amend our dividend policy from time to time in light of
our plans for future growth and other factors.

Our credit facilities and lease arrangements contain restrictive covenants which among other things, limit the
amount of cash that we may use for other corporate activities, which could negatively affect our growth and
cause our ﬁnancial performance to suffer. Our credit facilities and lease arrangements impose operating and
ﬁnancial restrictions on us. These restrictions may limit our ability, or the ability of our subsidiaries to, among
other things:

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pay dividends and make capital expenditures if we do not repay amounts drawn under our credit
facilities or if there is another default under our credit facilities;

incur additional indebtedness, including the issuance of guarantees;

to incur additional lease obligations;

create liens on our assets;

change the ﬂag, class or management of our vessels or terminate or materially amend the
management agreement relating to each vessel;

sell our vessels;

merge or consolidate with, or transfer all or substantially all our assets to, another person; or

enter into a new line of business.

Certain of our credit facilities and lease obligations require us to maintain speciﬁed ﬁnancial ratios and satisfy
ﬁnancial covenants. These ﬁnancial ratios and covenants require us, among other things, to maintain minimum
solvency, cash and cash equivalents, corporate net worth, working capital, loan-to-value levels and to avoid
exceeding corporate leverage maximum.

As a result of these restrictions, we may need to seek consent from our lenders in order to engage in some
corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain consent
when needed. This may limit our ability to ﬁnance our future operations or capital requirements, make
acquisitions or pursue business opportunities. Our ability to comply with covenants and restrictions contained
in debt instruments and lease arrangements may be affected by events beyond our control, including prevailing
economic, ﬁnancial and industry conditions. If market or other economic conditions deteriorate, we may fail
to comply with these covenants. If we breach any of the restrictions, covenants, ratios or tests in our ﬁnancing
agreements, our obligations may become immediately due and payable, we could be subject to increased rates
or fees, and the lenders’ commitment under our credit facilities, if any, to make further loans may terminate. A

19

default under ﬁnancing agreements or lease arrangements could also result in foreclosure on any of our
vessels and other assets securing related loans or a loss of our rights as a lessee under our ﬁnance leases.

If interest rates increase, it will affect the interest rates under our credit facilities and ﬁnance lease
facilities, which could affect our results of operations.

Amounts borrowed under our existing credit facilities bear interest at an annual rate ranging from 2.50% to
3.50% above LIBOR. Certain of our ﬁnance leases bear interest at an annual rate ranging from 3.00% to
4.50% above LIBOR. Interest rates have recently been at relatively low levels and any increase in interest
rates would lead to an increase in LIBOR, which would affect the amount of interest payable on amounts that
we borrow under our credit facilities and the amount of our obligations under certain of our ﬁnance leases,
which in turn could have an adverse effect on our results of operations.

There is uncertainty as to the continued use of LIBOR in the future.

LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform.
These reforms and other pressures may cause LIBOR to be eliminated or to perform differently than in the
past. The consequences of these developments cannot be entirely predicted, but could include an increase in
the cost of our variable rate indebtedness and obligations.

If we fail to maintain an effective system of internal control over ﬁnancial reporting, we may not be able to
accurately report our ﬁnancial results or prevent fraud. As a result, shareholders could lose conﬁdence in
our ﬁnancial and other public reporting, which would harm our business and the trading price of our
common stock.

Effective internal controls over ﬁnancial reporting are necessary for us to provide reliable ﬁnancial reports
and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to
implement required new or improved controls, or difficulties encountered in their implementation, could cause
us to fail to meet our reporting obligations. In addition, any testing we conduct in connection with
Section 404 of the Sarbanes-Oxley Act of 2002, or any testing conducted by our independent registered public
accounting ﬁrm, may reveal deﬁciencies in our internal controls over ﬁnancial reporting that are deemed to be
material weaknesses or that may require prospective or retroactive changes to our ﬁnancial statements or
identify other areas for further attention or improvement. Inferior internal controls could also cause investors
to lose conﬁdence in our reported ﬁnancial information, which could have a negative effect on the trading
price of our securities.

We are subject to certain risks with respect to our counterparties on contracts, and failure of such
counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our
results of operations.

We have entered into spot charter contracts, commercial pool agreements, ship management agreements, credit
facilities and ﬁnance lease arrangements and other commercial arrangements. Such agreements and
arrangements subject us to counterparty risks. The ability and willingness of each of our counterparties to
perform its obligations under a contract with us will depend on a number of factors that are beyond our
control and may include, among other things, general economic conditions, the condition of the maritime and
offshore industries, the overall ﬁnancial condition of the counterparty, charter rates received for speciﬁc types
of vessels, and various expenses. In addition, in depressed market conditions, our charterers and customers
may no longer need a vessel that is currently under charter or contract or may be able to obtain a comparable
vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing
charter agreements or avoid their obligations under those contracts. Should a counterparty fail to honor its
obligations under agreements with us, we could sustain signiﬁcant losses, which could have a material adverse
effect on our business, ﬁnancial condition and results of operations.

Our business depends upon key members of our senior management team who may not necessarily
continue to work for us.

Our future success depends to a signiﬁcant extent upon certain members of our senior management team. Our
management team includes members who have substantial experience in the product tanker and chemical
shipping industries and have worked with us since inception. Our management team is crucial to the execution

20

of our business strategies and to the growth and development of our business. If the individuals were no
longer affiliated with us, we may be unable to recruit other employees with equivalent talent and experience,
and our business and ﬁnancial condition may suffer as a result.

Our insurance may not be adequate to cover our losses that may result from our operations due to the
inherent risks of the tanker industry.

We carry insurance to protect us against most of the accident-related risks involved in the conduct of our
business, including marine hull and machinery insurance, protection and indemnity insurance, which includes
pollution risks, crew insurance and war risk insurance. However, we may not be adequately insured to cover
losses from our operational risks, which could have a material adverse effect on us. Additionally, our insurers
may refuse to pay particular claims and our insurance may be voidable by the insurers if we take, or fail to
take, certain action, such as failing to maintain certiﬁcation of our vessels with applicable maritime regulatory
organizations. Any signiﬁcant uninsured or under-insured loss or liability could have a material adverse effect
on our business, results of operations and ﬁnancial condition. In addition, we may not be able to obtain
adequate insurance coverage at reasonable rates in the future during adverse insurance market conditions.
Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance
more difficult for us to obtain due to increased premiums or reduced or restricted coverage for losses caused
by terrorist acts generally.

Because we obtain some of our insurance through protection and indemnity associations, we may be
required to make additional premium payments.

We receive insurance coverage for tort liability, including pollution-related liability, from protection and
indemnity associations. We may be subject to increased premium payments, or calls, in amounts based on our
claim records, the claim records of our managers, as well as the claim records of other members of the
protection and indemnity associations. In addition, our protection and indemnity associations may not have
enough resources to cover claims made against them. Our payment of these calls could result in signiﬁcant
expense to us, which could have a material adverse effect on our business, results of operations and ﬁnancial
condition.

Exposure to currency exchange rate ﬂuctuations could result in ﬂuctuations in our operating results.

We operate within the international shipping market, which utilizes the U.S. Dollar as its functional currency.
As a consequence, the majority of our revenues and the majority of our expenses are in U.S. Dollars.

However, we incur certain general and operating expenses, including vessel operating expenses and general
and administrative expenses, in foreign currencies, the most signiﬁcant of which are the Euro, Singapore
Dollar, and British Pound Sterling. This partial mismatch in revenues and expenses could lead to ﬂuctuations
in net income due to changes in the value of the U.S. Dollar relative to other currencies.

Climate change and greenhouse gas restrictions may adversely affect our operating results.

A number of countries have adopted, or are considering the adoption of, international, national or local
regulatory frameworks to reduce greenhouse gas emissions due to the concern about climate change. These
regulatory measures in various jurisdictions include the adoption of cap and trade regimes, carbon taxes,
increased efficiency standards, and incentives or mandates for renewable energy. In November 2016, the Paris
Agreement that deals with greenhouse gas emission reduction measures and targets to limit global temperature
increases came into force, which could result in additional regulation on the shipping industry (although it
does not directly limit greenhouse gas emissions from ships at this time).

Compliance with changes in laws, regulations and obligations relating to climate change, including as a result
of such international negotiations, could increase our costs related to operating and maintaining our vessels
and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas
emissions, or administer and manage a greenhouse gas emissions program. Revenue generation and strategic
growth opportunities may also be adversely affected.

The effects upon the oil industry relating to climate change and the resulting regulations may also include
declining demand for our services. We do not expect that demand for oil will lessen dramatically over the

21

short-term, but in the long-term climate change may reduce the demand for oil or increased regulation of
greenhouse gases may create greater incentives for use of alternative energy sources. Any long-term material
adverse effect on the oil industry could adversely affect the ﬁnancial and operational aspects of our business,
which we cannot predict with certainty at this time.

Regulations relating to ballast water discharge coming into effect during September 2019 may adversely
affect our revenues and proﬁtability.

The IMO has imposed updated guidelines for ballast water management systems specifying the maximum
amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date of
the International Oil Pollution Prevention (‘‘IOPP’’) renewal survey, existing vessels constructed before
September 8, 2017 must comply with the updated D-2 standard on or after September 8, 2019. For most
vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and
eliminate unwanted organisms. Ships constructed on or after September 8, 2017 have been required to comply
with the D-2 standards since September 8, 2017. As of January 31, 2019, we currently have 17 vessels that
will be required to comply with the updated guidelines beginning September 8, 2019 and that are not
currently in compliance. The costs of compliance, and bringing the non-compliant vessels into compliance,
may be substantial and may adversely affect our revenues and proﬁtability.

We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate case
law or bankruptcy law and, as a result, shareholders may have fewer rights and protections under Marshall
Islands law than under a typical jurisdiction in the United States.

Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands
Business Corporations Act (the ‘‘BCA’’). The provisions of the BCA resemble provisions of the corporation
laws of a number of states in the United States. However, there have been few judicial cases in the Marshall
Islands interpreting the BCA. The rights and ﬁduciary responsibilities of directors under the law of the
Marshall Islands are not as clearly established as the rights and ﬁduciary responsibilities of directors under
statutes or judicial precedent in existence in certain U.S. jurisdictions. Shareholder rights may differ as well.
While the BCA does speciﬁcally incorporate the non-statutory law, or judicial case law, of the State of
Delaware and other states with substantially similar legislative provisions, our shareholders may have more

difficulty in protecting their interests in the face of actions by management, directors or controlling
shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction. In addition, the
Marshall Islands does not have a well-developed body of bankruptcy law. As such, in the case of a bankruptcy
involving us, there may be a delay of bankruptcy proceedings and the ability of securityholders and creditors
to receive recovery after a bankruptcy proceeding, and any such recovery may be less predictable.

It may be difficult to serve process on or enforce a U.S. judgment against us, our officers and our directors.

We are a Marshall Islands corporation and several of our executive offices are located outside of the United
States. Most of our directors and officers reside outside the United States. In addition, a substantial portion of
our assets and the assets of our directors, officers and experts are located outside of the United States. As a
result, you may have difficulty serving legal process upon us or any of these persons within the United States.
You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in
U.S. courts against us or any of these persons in any action, including actions based upon the civil liability
provisions of U.S. federal or state securities laws. In addition, there is substantial doubt that the courts of the
Marshall Islands or of non-U.S. jurisdictions in which our offices are located would enter judgments in
original actions brought in those courts predicated on U.S. federal or state securities laws.

Our ability to pay dividends may be limited by the amount of cash we generate from operations following
the payment of fees and expenses, by the establishment of any reserves by our board of directors and by
additional factors unrelated to our proﬁtability.

Although we generally intend to pay regular quarterly dividends on our common shares, we have not paid
dividends on our common stock since August 31, 2016, when we paid a cash dividend of $0.11 per share for
the quarter ended June 30, 2016, and we may not pay dividends in the future. The amount of dividends we

22

pay will depend in part upon the amount of cash we generate from our operations. We may not, however,
have sufficient cash available each quarter to pay dividends, as a result of insufficient levels of proﬁt,
restrictions on the payment of dividends contained in our ﬁnancing arrangements or under applicable law and
the decisions of our management and directors. The amount of cash we have available for dividends may
ﬂuctuate upon, among other things:

•

•

•

•

•

•

•

the rates we obtain from our charters, as well as the rates obtained following expiration of our
existing charters;

the level of our operating costs;

the number of unscheduled off-hire days and the timing of, and number of days required for,
scheduled drydocking of our vessels;

vessel acquisitions and related ﬁnancings, such as restrictions in our credit facilities, lease
arrangements and in any future ﬁnancing arrangements;

prevailing global and regional economic and political conditions;

the effect of governmental regulations and maritime self-regulatory organization standards, including
with respect to environmental and safety matters, on the conduct of our business; and

changes in the bases of taxation of our activities in various jurisdictions.

The actual amount of cash we will have available for dividends will also depend on many factors, including:

•

•

•

•

•

changes in our operating cash ﬂows, capital expenditure requirements, working capital requirements
and other cash needs;

our ﬂeet expansion strategy and associated uses of our cash and our ﬁnancing requirements;

modiﬁcation or revocation of our dividend policy by our board of directors;

the amount of any cash reserves established by our board of directors; and

restrictions under our ﬁnancing agreements and Marshall Islands law.

The amount of cash we generate from our operations may differ materially from our net income or loss for
the period, which may be affected by non-cash items. We may incur other expenses or liabilities that could
reduce or eliminate the cash available for distribution as dividends. Our credit facilities and obligations under
our lease arrangements also restrict our ability to declare and pay dividends if an event of default has occurred
and is continuing or if the payment of the dividend would result in an event of default. In addition, Marshall
Islands law generally prohibits the payment of dividends other than from surplus (retained earnings in excess
of consideration received for the sale of stock above the par value of the stock), or while a company is
insolvent or if it would be rendered insolvent by the payment of such a dividend, and any dividend may be
discontinued at the discretion of our board of directors. As a result of these or other factors, we may pay
dividends during periods when we record losses and may not pay dividends during periods when we record
income.

Future sales of our common shares could cause the market price of our common shares to decline.

The market price for our common shares could decline as a result of sales by existing shareholders of large
numbers of our common shares, or as a result of the perception that such sales may occur. Sales of our
common shares by these shareholders also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and at the prices that we deem appropriate.

Anti-takeover provisions in our charter documents could make it difficult for our shareholders to replace or
remove our current board of directors or could have the effect of discouraging, delaying or preventing a
merger or acquisition, which could adversely affect the market price of our common shares.

Several provisions of our articles of incorporation and bylaws could make it difficult for our shareholders to
change the composition of our board of directors in any one year, preventing them from changing the

23

composition of management. In addition, the same provisions may discourage, delay or prevent a merger or
acquisition that shareholders may consider favorable. These provisions include:

•

•

•

•

•

•

authorizing the board of directors to issue ‘‘blank check’’ preferred stock without shareholder
approval;

providing for a classiﬁed board of directors with staggered, three-year terms;

prohibiting cumulative voting in the election of directors;

authorizing the removal of directors only for cause and only upon the affirmative vote of the holders
of two-thirds of the outstanding shares of our common stock entitled to vote for the directors;

limiting the persons who may call special meetings of shareholders; and

establishing advance notice requirements for nominating candidates for election to our board of
directors or for proposing matters that can be acted on by shareholders at shareholder meetings.

These anti-takeover provisions could substantially impede the ability of public shareholders to beneﬁt from a
change in control and, as a result, may adversely affect the market price of our common stock and your ability
to realize any potential change of control premium.

Tax Risks

U.S. tax authorities could treat us as a ‘‘passive foreign investment company’’, which could have adverse
U.S. federal income tax consequences to U.S. holders.

A foreign corporation will be treated as a passive foreign investment company (‘‘PFIC’’), for U.S. federal
income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of ‘‘passive
income’’ or (2) at least 50% of the average value of the corporation’s assets produce or are held for the
production of ‘‘passive income’’. For purposes of these tests, ‘‘passive income’’ generally includes dividends,
interest, and gains from the sale or exchange of investment property and rents and royalties other than rents
and royalties which are received from unrelated parties in connection with the active conduct of a trade or
business. For purposes of these tests, income derived from the performance of services generally does not
constitute ‘‘passive income’’. U.S. shareholders of a PFIC are subject to an adverse U.S. federal income tax
regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the
gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

Based upon our operations as described herein, we do not have material income from time charters, however
we may have income from time charters in future taxable years. We do not believe that our income from such
time charters should be treated as ‘‘passive income’’ for purposes of determining whether we are a PFIC.
Consequently, the assets that we own and operate in connection with the production of that income should not
constitute passive assets. Accordingly, based on our current operations, we do not believe we will be treated
as a PFIC with respect to any taxable year.

There is substantial legal authority supporting this position consisting of case law and U.S. Internal Revenue
Service (‘‘IRS’’), pronouncements concerning the characterization of income derived from time charters and
voyage charters as services income for other tax purposes. However, there is also authority which
characterizes time charter income as rental income rather than services income for other tax purposes.

Accordingly, no assurance can be given that the IRS or a court of law will accept this position, and there is a
risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given
that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations
change.

If the IRS were successful in asserting that we are or have been a PFIC for any taxable year,
U.S. shareholders would face adverse U.S. federal income tax consequences. Under the PFIC rules, unless a
shareholder makes an election available under the U.S. Internal Revenue Code of 1986, as amended, (‘‘the
Code’’), (which election could itself have adverse consequences for such shareholders, as discussed below
under Item 10.E (‘‘Taxation of Holders — U.S. Federal Income Tax Considerations — U.S. Federal Income
Taxation of United States Holders’’), excess distributions and any gain from the disposition of such

24

shareholder’s common shares would be allocated ratably over the shareholder’s holding period of the common
shares and the amounts allocated to the taxable year of the excess distribution or sale or other disposition and
to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other
taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate,
for that taxable year, and an interest charge would be imposed with respect to such tax. See Item 10.E
(‘‘Taxation of Holders — U.S. Federal Income Tax Considerations — U.S. Federal Income Taxation of
United States Holders’’) for a more comprehensive discussion of the U.S. federal income tax consequences to
United States shareholders if we are treated as a PFIC.

We may have to pay tax on U.S. source shipping income, which would reduce our earnings.

Under the Code, 50% of the gross shipping income of a corporation that owns or charters vessels, as we and
our subsidiaries do, that is attributable to transportation that begins or ends, but that does not both begin and
end, in the United States will be subject to a 4% U.S. federal income tax without allowance for deduction,
unless that corporation qualiﬁes for exemption from tax under Section 883 of the Code and the applicable
Treasury Regulations promulgated thereunder or that corporation is entitled to an exemption from such tax
under an applicable U.S. income tax treaty.

We intend to take the position that we qualiﬁed for this statutory exemption for U.S. federal income tax return
reporting purposes for our 2018 taxable year and we intend to so qualify for future taxable years. However,
there are factual circumstances beyond our control that could cause us to lose the beneﬁt of this tax exemption
and thereby cause us to become subject to U.S. federal income tax on our U.S. source shipping income. For
example, there is a risk that we could no longer qualify for exemption under Section 883 of the Code for a
particular taxable year if ‘‘non-qualiﬁed’’ shareholders with a 5% or greater interest in our stock were, in
combination with each other, to own 50% or more of the outstanding shares of our stock on more than half
the days during the taxable year. Due to the factual nature of the issues involved, we can give no assurances
on our tax-exempt status or that of any of our subsidiaries.

If we or our subsidiaries were not entitled to exemption under Section 883 of the Code for any taxable year,
we or our subsidiaries would be subject for such year to an effective 4% U.S. federal income tax on the
shipping income we or our subsidiaries derive during the year which is attributable to the transport of cargoes
to or from the United States. The imposition of this taxation would have a negative effect on our business and
would decrease our earnings available for distribution to our shareholders.

We may be subject to additional taxes, which could adversely impact our business and ﬁnancial results.

We and our subsidiaries are subject to tax in certain jurisdictions in which we or our subsidiaries are
organized, own assets or have operations. In computing our tax obligations in these jurisdictions, we are
required to take various tax accounting and reporting positions on matters that are not entirely free from doubt
and for which we have not received rulings from the governing authorities. We cannot assure you that, upon
review of these positions, the applicable authorities will agree with our positions. A successful challenge by a
tax authority could result in additional tax imposed on us or our subsidiaries, which could adversely impact
our business and ﬁnancial results.

25

Item 4. Information on the Company

A. History and Development of the Company

We are Ardmore Shipping. We provide seaborne transportation of petroleum products and chemicals
worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with our
modern, fuel-efficient ﬂeet of mid-size product and chemical tankers. As at January 31, 2019, our current ﬂeet
consists of 27 vessels, all of which are in operation.

Ardmore Shipping Corporation was incorporated under the laws of the Republic of the Marshall Islands on
May 14, 2013. We commenced business operations through our predecessor company, Ardmore Shipping
LLC, on April 15, 2010. On August 6, 2013, we completed our initial public offering (‘‘IPO’’) of
10,000,000 shares of our common stock. Prior to our IPO, GA Holdings LLC, who was our sole shareholder,
exchanged its 100% interest in Ardmore Shipping LLC for 8,049,500 shares of Ardmore Shipping
Corporation, and Ardmore Shipping LLC became a wholly owned subsidiary of Ardmore Shipping
Corporation. In March 2014, we completed a follow-on public offering of 8,050,000 common shares. In
November 2015, GA Holdings LLC sold 4,000,000 of its shares of our common stock in an underwritten
public offering. In June 2016, we completed a public offering of 7,500,000 common shares, of which GA
Holdings LLC purchased 1,277,250 shares. In November 2017, GA Holdings LLC disposed the balance of its
remaining 5,787,942 common shares. As of January 31, 2019, 33,097,831 shares of our common stock were
outstanding.

We have 50 wholly owned subsidiaries, the substantial majority of which represent single ship-owning
companies for our ﬂeet, and a 50%-owned joint venture entity, Anglo Ardmore Ship Management Limited
(‘‘AASML’’), which provides technical management services to the majority of our ﬂeet. A list of our
subsidiaries is included as Exhibit 8.1 to this Annual Report.

We maintain our principal executive and management offices at Belvedere Building, 69 Pitts Bay Road,
Ground Floor, Pembroke, HM08, Bermuda. Our telephone number at these offices is +1 441 405 7800.
Ardmore Shipping (Bermuda) Limited (‘‘ASBL’’), a wholly-owned subsidiary incorporated in Bermuda,
carries out our management services and associated functions. Ardmore Shipping Services (Ireland) Limited
(‘‘ASSIL’’), a wholly-owned subsidiary incorporated in Ireland, provides our corporate, accounting, ﬂeet
administration and operations services. Ardmore Shipping (Asia) Pte. Limited (‘‘ASA’’), a wholly-owned
subsidiary incorporated in Singapore, and Ardmore Shipping (Americas) LLC (‘‘ASUSA’’), a wholly-owned
subsidiary incorporated in Delaware, each perform commercial management and chartering services for us.

The SEC maintains an Internet site at www.sec.gov, that contains reports, proxy and information statements,
and other information regarding issuers that ﬁle electronically with the SEC. Our website address is
www.ardmoreshipping.com. The information contained on our website is not part of this annual report.

Vessel Acquisitions and Capital Expenditures

As at January 31, 2019, our current ﬂeet consists of 27 double-hulled product and chemical tankers, all of
which are in operation. We acquired 13 of our vessels as second-hand vessels, seven of which we have
upgraded to increase efficiency and improve performance. In 2015, 2016, 2017 and 2018 we paid an aggregate
of $232.5 million, $174.0 million, $0.4 million and $16.8 million ($1.6 million of which was paid as a deposit
in 2017) respectively, in capital expenditures for vessel acquisitions, vessel equipment, and newbuilding
orders.

As of December 31, 2010, our operating ﬂeet consisted of four vessels. From 2011 to 2015, we acquired or
took delivery (on a net basis) of 20 vessels respectively. In 2016 we acquired (on a net basis) three vessels
and in 2017 we did not acquire any vessels, but paid a deposit for a vessel, Ardmore Sealancer, which we
took delivery of in January 2018.

During 2018, the Ardmore Seatrader was classiﬁed as held for sale. The vessel was delivered to the buyer in
January 2019. On February 1, 2019, we agreed to terms for the sale of the Ardmore Seamaster. The vessel is
expected to be delivered to the buyer in February 2019.

26

B. Business Overview

We commenced business operations in April 2010 with the goal of building an enduring product and chemical
tanker company that emphasizes disciplined capital allocation, service excellence, innovation, and operational
efficiency through our focus on high quality, fuel-efficient vessels. We are led by a team of experienced senior
managers who have previously held senior management positions with highly regarded public shipping
companies and ﬁnancial institutions.

We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively
pursue opportunities to exploit the overlap we believe exists between the clean petroleum product (‘‘CPP’’)
and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such
as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical
operations is beneﬁcial to our CPP customers.

Our fuel-efficient operations are designed to enhance our investment returns and provide value-added service
to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are
well positioned to capitalize on these developments with our ﬂeet of Eco-design and Eco-mod vessels. Our
acquisition strategy is to continue to build our ﬂeet with Eco-design newbuildings and modern second-hand
vessels that can be upgraded to Eco-mod.

We are an integrated shipping company. The majority of our ﬂeet is technically managed by a combination of
ASSIL and AASML and we also retain a third-party technical manager for some of our vessels. We have a
resolute focus on both high-quality service and efficient operations, and we believe that our corporate
overhead and operating expenses are among the lowest of our peers.

Moreover, we are commercially independent, as we have no blanket employment arrangements with
third-party or related-party commercial managers. Through our in-house chartering and commercial team, we
market our services directly to a broad range of customers, including oil majors, national oil companies, oil
and chemical traders, chemical companies, and pooling service providers. We monitor the tanker markets to
understand and best utilize our vessels and may change our chartering strategy to take advantage of changing
market conditions.

We have no related-party transactions concerning our vessel operations or vessel sale and purchase activities.
Certain of our wholly-owned subsidiaries carry out our management and administrative services, with ASBL
being our principal executive office and providing us with corporate and executive management services and
associated functions, ASSIL providing corporate and accounting administrative services, as well as technical
operations services and ﬂeet administration, and ASA and ASUSA providing our commercial management and
chartering services.

We believe that the market for mid-size product and chemical tankers is recovering from cyclical lows,
resulting from strong underlying demand growth driven by both cyclical and secular trends, as well as a
reduction in the supply overhang due to reduced ordering activity and an extended period of ﬂeet growth at a
rate below that of demand growth. We believe that we are well positioned to beneﬁt from a market recovery
with a modern, fuel-efficient ﬂeet, access to capital for growth, a diverse and high-quality customer base, an
emphasis on service excellence in an increasingly demanding regulatory environment and a relative cost
advantage in assets, operations and corporate overhead.

27

Fleet List

As at January 31, 2019, our current ﬂeet consists of 27 vessels, including 21 Eco-design and six Eco-mod
vessels, all of which are in operation. The average age of our vessels at January 31, 2019, was 6.1 years.

Type

Vessel Name
Ardmore Seavaliant
. . . Product/Chemical
Ardmore Seaventure . . . Product/Chemical
Ardmore Seavantage . . . Product/Chemical
Ardmore Seavanguard . . Product/Chemical
Ardmore Sealion . . . . . Product/Chemical
Ardmore Seafox . . . . . . Product/Chemical
Ardmore Seawolf
. . . . . Product/Chemical
Ardmore Seahawk . . . . Product/Chemical
Ardmore Endeavour . . . Product/Chemical
Ardmore Enterprise . . . Product/Chemical
Ardmore Endurance . . . Product/Chemical
Ardmore Encounter
. . . Product/Chemical
Ardmore Explorer
. . . . Product/Chemical
Ardmore Exporter
. . . . Product/Chemical
Ardmore Engineer . . . . Product/Chemical
Ardmore Seafarer . . . . . Product/Chemical
Ardmore Seamaster(1)
. . Product/Chemical
Ardmore Seamariner
. . Product/Chemical
Ardmore Sealancer . . . .
Ardmore Sealeader . . . .
Ardmore Sealifter . . . . .
Ardmore Dauntless . . . . Product/Chemical
Ardmore Defender . . . . Product/Chemical
Ardmore Cherokee . . . . Product/Chemical
Ardmore Cheyenne . . . . Product/Chemical
Ardmore Chinook . . . . . Product/Chemical
Ardmore Chippewa . . . Product/Chemical
Total

Product
Product
Product

. . . . . . . . . . . . .

27

Built
IMO
Dwt Tonnes
Feb-13
2/3
49,998
Jun-13
2/3
49,998
Jan-14
2/3
49,997
2/3
Feb-14
49,998
2/3 May-15
49,999
Jun-15
2/3
49,999
Aug-15
2/3
49,999
Nov-15
2/3
49,999
Jul-13
2/3
49,997
Sep-13
2/3
49,453
Dec-13
2/3
49,466
Jan-14
2/3
49,478
Jan-14
2/3
49,494
Feb-14
2/3
49,466
Mar-14
2/3
49,420
Aug-04
3
45,744
Sep-04
3
45,840
Oct-06
45,726
3
47,451 —
Jun-08
47,463 — Aug-08
Jun-08
47,472 —
Feb-15
2
37,764
Feb-15
2
37,791
Jan-15
2
25,215
Mar-15
2
25,217
Jul-15
2
25,217
25,217
Nov-15
2
1,202,878

Country
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan

Flag
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI

Speciﬁcation
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design

(1) On February 1, 2019, the Company agreed terms for the sale of the Ardmore Seamaster. The vessel is

expected to be delivered to the buyer in February 2019.

C. Business Strategy

Our objective is to solidify our position as a market leader in modern, fuel-efficient, mid-size product and
chemical tankers by engaging in well-timed growth and utilizing our operational expertise and quality-focused
approach to provide value-added services to our customers. The key elements of our business strategy include:

•

•

Disciplined capital allocation and well-timed growth. We have a diligent and patient approach to
capital allocation and expanding our ﬂeet and we are selective as to the quality of ships we seek to
acquire. We believe that our commitment and selectivity in growing our ﬂeet has been instrumental
in building our reputation for quality and service excellence. We also believe that ﬁnancial ﬂexibility
and well-timed growth of quality ships is key to delivering superior returns for shareholders.

Focus on modern high quality, mid-size product and chemical tankers. We maintain a very modern
ﬂeet, with all vessels built in high quality yards in South Korea or Japan. The average sizes of our
product and chemical tankers are substantially similar to the median sizes of the global ﬂeets for
product tankers and chemical tankers. We have developed our strategic focus around mainstream
tanker sizes that are readily employed and actively traded worldwide in broad and deep markets.

28

•

•

•

Additionally, as a result of the overlap between the product and chemical sectors, we believe that
our ﬂeet composition enables us to take advantage of opportunities, both operationally and
strategically, while also providing investment diversiﬁcation.

Optimizing Fuel Effıciency. The shipping industry is experiencing a steady increase in fuel
efficiency, and we intend to remain at the forefront of this development. Our Eco-design vessels
incorporate many of the latest technological improvements, such as electronically-controlled engines,
more efficient hull forms matched with energy efficient propellers, and decreased water resistance.
Our Eco-mod vessels have improved propulsion efficiency and decreased water resistance. In
addition, we achieve further improvements through engine diagnostics and operational performance
monitoring.

Commercial independence, ﬂexibility and customer service. Through our in-house chartering and
commercial team and our ship management joint venture arrangement, we have an integrated
operating platform resulting in leading commercial and operational performance. We maintain a
broad range of existing and potential spot customers, as well as pooling alternatives and potential
time-charter customers, to maximize commercial ﬂexibility and customer diversiﬁcation. Maintaining
outstanding customer service is a cornerstone of our business and we seek customers who value our
active approach to fuel efficiency and service delivery.

Low cost structure. We have established a solid foundation for growth while cost-effectively
managing our operating expenses and corporate overhead. We intend to grow our staff as needed and
to realize further economies of scale as our ﬂeet expands. At the core of our business philosophy is
the belief that well-run companies can deliver high quality service and achieve efficiency
simultaneously, through hands-on management, effective communication with employees, and
constant re-evaluation of budgets and operational performance.

Corporate Officers, Staff and Seafarers

Biographical information with respect to each of our directors and executive officers is set forth in Item 6
(‘‘Directors, Senior Management and Employees’’) of this Annual Report.

As at December 31, 2018, we employed 49 permanent full-time staff and 3 part-time staff onshore. Through
AASML, our 50%-owned joint venture ship manager, and Thome Ship Management, our third party technical
manager, we currently employ approximately 1,076 seafarers, including 711 officers and cadets and 365 crew.

Commercial management is provided directly by our in-house chartering and commercial team, and by
third-party commercial pool managers, in the case of vessels participating in pooling arrangements.
Commercial pools can provide many beneﬁts for vessels operating in the spot market, including the ability to
generate higher returns due to the economies of scale derived by operating a larger ﬂeet.

Customers

Our customers include national, regional, and international companies and our ﬂeet is employed directly on
the tanker spot market through our in-house chartering and commercial team. We may in the future seek to
deploy our vessels on time charter arrangements or on the tanker spot market via third party commercial pool
employment. We believe that developing strong relationships with the end users of our services allows us to
better satisfy their needs with appropriate and capable vessels.

A prospective charterer’s ﬁnancial condition, creditworthiness, and reliability track record are important factors
in negotiating our vessels’ employment.

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 our
reputation. Ownership of tanker vessels is highly fragmented and is divided among publicly listed companies,
state-controlled owners and private ship-owners.

29

The International Product and Chemical Tanker Industry

The information and data contained in this section relating to the international product and chemical tanker
shipping industries have been provided by Drewry Maritime Research (‘‘Drewry’’), and is taken from Drewry’s
database and other sources. Drewry has advised that: (i) some information in their database is derived from
estimates or subjective judgments; and (ii) the information in the databases of other maritime data collection
agencies may differ from the information in their database. We believe that all third-party data provided in
this section, ‘‘The International Product and Chemical Tanker Industry,’’ is reliable.

The world tanker ﬂeet is generally divided into four main categories of vessels based on the main type of
cargo carried. These categories are crude oil, reﬁned petroleum products (both clean and dirty products),
hereinafter referred to as products, chemicals, (including vegetable oils and fats) and specialist products such
as bitumen. There is some overlap between the main tanker types and the cargoes carried which is explained
in the table below.

Principal Tanker Types and Main Cargoes Carried

Vessel Type
ULCC/VLCC
Suezmax
Aframax
Panamax
Long Range 3 (LR3)
Long Range 2 (LR2)
Long Range 1 (LR1)
Medium Range (MR)

Short Range (SR)

Ship Size − Dwt

Tank Type
200,000+
Uncoated
120,000 − 199,999 Uncoated
Uncoated
80,000 − 119,999
60,000 − 79,999
Uncoated
120,000 − 199,999 Coated
Coated
80,000 − 119,999
Coated
60,000 − 79,999
Coated
25,000 − 59,999
Coated
25,000 − 59,999
Coated
25,000 − 59,999
Uncoated
25,000 − 59,999
Coated
10,000 − 24,999
Coated
10,000 − 24,999
Stainless
Uncoated/
Coated

Other Cargoes

Principal Cargo

IMO Status
Non IMO Crude Oil
Non IMO Crude Oil
Non IMO Crude Oil
Non IMO Crude Oil
Non IMO Reﬁned Products
Non IMO Reﬁned Products
Non IMO Reﬁned Products
Reﬁned Products
IMO 2
IMO 3
Reﬁned Products
Non IMO Reﬁned Products
Non IMO Reﬁned Products
Non-IMO Reﬁned Products
Reﬁned Products
IMO 2
IMO 2
Chemicals/Veg Oils Reﬁned Products
Non IMO Various e.g. Bitumen

Reﬁned Products − Dirty
Reﬁned Products − Dirty
Crude; Chemicals/Veg Oils
Crude; Chemicals/Veg Oils
Crude; Chemicals/Veg Oils
Chemicals/Veg Oils
Chemicals/Veg Oils

Chemicals/Veg Oils

Stainless Steel Tankers 10,000 +
10,000+
Specialist Tankers

Source: Drewry

In the product and chemical sectors, there are a number of vessels that possess the ability to carry both
products and some chemicals. These vessels, therefore, represent a ‘swing’ element in supply in both of these
markets. However, in practice many vessels will tend to trade in either reﬁned products or chemicals/vegetable
oils and fats.

In 2018, a total of 3,414 million tons of crude oil, oil products and chemicals were moved by sea. The
marginal increase of 1.0% from 3,381 million tons in 2017 is the result of inventory drawdown to meet the
crude oil demand as the OPEC producers chose to keep a cap on supply and crude oil trade grew by a
nominal 0.6% in 2018. Over the period from 2008 to 2018, seaborne trade in oil products grew at an annual
average rate of 3.2% and in 2018 totalled 1,053 million tons. Provisional estimates indicate seaborne products
trade growth at 2.0% in 2018 compared with 2.9% in 2017 because of inventory drawdown as well as lower
growth in oil demand compared to the previous year.

Between 2013 and 2018, seaborne trade grew by an annual rate of 2.0% for crude oil, 3.1% for oil products,
and 2.7% for chemicals. Over the period from 2013 to 2018, seaborne trade in reﬁned products and chemicals
were two of the fastest growing sectors of international tanker shipping. Changes in world seaborne tanker
trade volumes in the period 2008 to 2018 are shown in the table below.

30

World Seaborne Tanker Trade Volumes

Crude Oil

Oil Products

Chemicals

Total

Year
2008 . . . . . . . . . . . .
2009 . . . . . . . . . . . .
2010 . . . . . . . . . . . .
2011 . . . . . . . . . . . .
2012 . . . . . . . . . . . .
2013 . . . . . . . . . . . .
2014 . . . . . . . . . . . .
2015 . . . . . . . . . . . .
2016 . . . . . . . . . . . .
2017 . . . . . . . . . . . .
2018* . . . . . . . . . . . .
CAGR (2013 − 2018) . .
CAGR (2008 − 2018) . .

Million
tons
2,014
1,928
1,997
1,941
1,988
1,918
1,898
1,962
2,051
2,101
2,113

2.0%
0.5%

Million
tons
% y-o-y
765
0.3%
777
-4.2%
810
3.6%
860
-2.8%
859
2.4%
904
-3.5%
914
-1.0%
3.4%
963
4.6% 1,003
2.4% 1,032
0.6% 1,053

3.1%
3.2%

% y-o-y
5.8%
1.6%
4.3%
6.3%
-0.2%
5.3%
1.1%
5.3%
4.2%
2.9%
2.0%

Million
tons
179
185
197
207
212
217
222
234
234
248
248
2.7%
3.3%

% y-o-y
1.8%
3.3%
6.8%
4.7%
2.6%
2.5%
2.2%
5.3%
0.1%
5.9%
0.1%

% y-o-y
1.7%
-2.3%
4.0%
0.1%
1.7%
-0.6%
-0.2%
4.1%
4.1%
2.8%
1.0%

Million
tons
2,957
2,889
3,004
3,008
3,059
3,039
3,035
3,158
3,288
3,381
3,414

2.4%
1.4%

Global
GDP (IMF)

% y-o-y
3.0%
-0.1%
5.4%
4.3%
3.5%
3.5%
3.6%
3.5%
3.3%
3.7%
3.7%

*

Provisional estimates

The Product Tanker Industry

Source: Drewry

While crude oil tankers transport crude oil from points of production to points of consumption — typically oil
reﬁneries in consuming countries — product tankers can carry both reﬁned and unreﬁned petroleum products,
including some crude oil, as well as fuel oil and vacuum gas oil (often referred to as ‘dirty products’) and gas
oil, gasoline, jet fuel, kerosene and naphtha (often referred to as ‘clean products’). Tankers with no
International Maritime Organization (IMO) certiﬁcation but with coated cargo tanks are designed to carry
products, while tankers with IMO certiﬁcation (normally IMO 2 or IMO 3) and coated cargo tanks are capable
of carrying both products and chemicals/vegetable oils and fats. Given the above, a tanker with IMO 2
certiﬁcation and with an average tank size in excess of 3,000 cubic metres is normally classiﬁed as a product
tanker, while a tanker with IMO 2 certiﬁcation and an average tank size of less than 3,000 cubic metres is
normally categorized as a chemical tanker.

In essence, products can be carried in coated non IMO tankers and IMO rated coated tankers. By this
deﬁnition, the product capable tanker ﬂeet comprises nearly 45% of the total tanker ﬂeet (above 10,000 dwt)
in numbers terms, and therefore plays a key part in the global tanker market.

Demand for product tankers is determined by world oil demand and trade, which is inﬂuenced by various
factors including economic activity, geographic changes in oil production, consumption and reﬁnery capacity,
oil prices, the availability of transport alternatives (such as pipelines) and inventory policies of nations and oil
trading companies. Tanker demand is a product of (i) the volume of cargo transported in tankers, multiplied
by (ii) the distance that cargo is transported.

Oil demand growth and the changing location of oil supply have altered the structure of the tanker market in
recent years. Between 2003 and 2008, more than half of new crude oil production was located in the Middle
East and Africa. These two regions still produce approximately one third of global supply in 2018. However,
in recent years, the United States (U.S.) and Canadian crude oil production have increased as a result of the
development of shale oil deposits, with the U.S. now the largest producer of crude in the world. This has
reduced the U.S. seaborne crude import demand, but is resulting in greater oil product volumes becoming
available for export from the U.S. Gulf, because reﬁners have access to plentiful supplies of competitively
priced feedstock.

New technologies such as horizontal drilling and hydraulic fracturing have triggered a shale oil revolution in
the U.S., and in 2013, for the ﬁrst time in the last two decades, the U.S. produced more oil than it imported.
In view of the rising surplus in oil production, in 2015 the U.S. Congress lifted a 40 year-old ban on crude oil
exports that was put in place after the Arab oil embargo in 1973, thereby allowing U.S. oil producers access
to international markets.

31

The shift in the location of global oil production is also being accompanied by a shift in the location of global
reﬁnery capacity and throughput. In short, capacity and throughput are moving from the developed to the
developing world. Between 2008 and 2018, reﬁnery throughput in the OECD Americas moved up by 7.9% to
19.4 mbpd. Whereas, total OECD reﬁning throughput in the same period increased marginally by 0.3%,
despite cutbacks in OECD Europe and OECD Asia Oceania mainly on account of expansion in OECD
Americas. In 2018, reﬁning throughput of OECD countries stood at 38.5 mbpd and accounted for 46.8% of
global reﬁnery throughput.

Reﬁnery Throughput(1) 2008 − 2018

(‘000 Barrels Per Day)

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

OECD Americas . . . . . . 17,973 17,480 17,931 17,898 18,190 18,492 18,934 18,850 18,960 19,290 19,400
OECD Europe . . . . . . . 13,364 12,377 12,265 11,935 11,942 11,304 11,232 11,900 11,920 12,300 12,100
7,000
OECD Asia Oceania . . .
6,700
7,000
FSU . . . . . . . . . . . . . .
6,850
Non-OECD Europe . . . .
600
500
9,749 10,427 10,864 10,400 10,790 11,830 12,000
China . . . . . . . . . . . . .
8,541 10,000 10,380 10,440 10,600
8,792
Other Asia . . . . . . . . . .
3,500
4,200
4,545
4,470
Latin America . . . . . . .
8,000
6,810
6,501
6,257
Middle East . . . . . . . . .
2,100
2,090
2,255
2,202
Africa . . . . . . . . . . . . .
. . . . . . . . . . . . . 74,116 72,293 74,471 74,682 75,482 75,894 77,149 78,450 79,420 81,780 82,300
Total

6,549
6,170
641
7,762
8,224
4,729
6,069
2,292

6,697
6,401
658
8,630
8,598
4,678
6,164
2,451

7,049
6,188
699
7,299
7,695
5,181
6,211
2,457

6,586
6,592
627
9,041
8,637
4,873
6,324
2,168

8,588
4,589
6,202
2,182

4,550
6,450
2,250

3,830
7,520
1,920

6,890
6,880
500

7,200
6,880
570

6,652
7,069
557

6,720
6,831
559

6,609
6,683
587

(1) The difference between oil consumption and reﬁnery throughput is accounted for by condensates, output

gains; direct burning of crude oil and other non-gas liquids.

Source: Drewry

Asia and the Middle East have steadily increased their export-oriented reﬁnery capacity in the last few years.
As a result of these developments countries such as India and Saudi Arabia have consolidated their positions
as major exporters of products. It is also the case that export-oriented reﬁneries in India and the Middle East,
coupled with the closure of reﬁning capacity in the developed world, have promoted greater long-haul
shipments to cater for product demand.

New reﬁning capacity of 1.3 mbpd came online in 2018 and further new reﬁnery capacity is currently
scheduled for both the Middle East and Asia in the period 2019 to 2023. In the period 2019 to 2023,
anticipated additions to reﬁnery capacity on a regional basis amount to 7.7 mbpd, or 7.7% of existing reﬁnery
capacity.

33

Product Tanker Supply

The global product tanker ﬂeet is classiﬁed as any non stainless steel/specialized tanker between 10,000 dwt
and 60,000 dwt, as well as coated and other ‘product-capable’ vessels over 60,000 dwt. As of January 16,
2019, the world product tanker capable ﬂeet consisted of 3,849 vessels with a combined capacity of
179.6 million dwt. Within the total tanker ﬂeet, MR vessels account for 32.6% of total ship numbers, and in
the global product tanker ﬂeet, they account for 55.9% of total ship numbers. MR vessels are considered the
‘workhorses’ of the ﬂeet.

As of January 16, 2019, the MR product tanker orderbook was 123 vessels totalling 6.1 million dwt. The MR
orderbook as a percentage of the existing MR ﬂeet in terms of number of vessels was 5.7%, compared with
close to 50% at the last peak in 2008. Based on scheduled deliveries, 76 MR product tankers are due for
delivery in the remainder of 2019 and a further 41 MR vessels in 2020. Approximately 60% of the vessels on
order in the MR category are scheduled to be delivered in 2019 and this would increase the MR ﬂeet by
3.5%, assuming no vessel scrapping. However, in recent years, the orderbook has been affected by the non-
delivery of vessels or ‘slippage’ as it is sometimes referred to. Current estimates suggest that in 2018,
approximately 30% of vessels across the entire tanker orderbook scheduled for delivery in 2018 were not
delivered during the year. Some of the non-delivery was a result of delays, either through mutual agreement or
through shipyard problems, while some were due to vessel cancellations. Slippage is likely to remain an issue
going forward and will continue to affect ﬂeet growth.

The other factor that will affect future supply is vessel scrapping. The volume of scrapping is primarily a
function of the age proﬁle of the ﬂeet, scrap prices in relation to current and prospective charter market
conditions, as well as operating, repair and survey costs. In 2016, a total of 32 tankers of a combined capacity
of 2.3 million dwt were sold for scrap, of which 17 tankers of approximately 0.7 million dwt were in the MR
size range. In comparison, 84 tankers with a combined capacity of 10.4 million dwt of tonnage were scrapped
in 2017, of which 19 tankers with a total capacity of 0.8 million dwt were in the MR size range. Low freight
rates in a weak tanker market in 2018 encouraged greater demolitions and provisional data suggests that 156
tankers of a combined capacity of 20.7 million dwt were sold to scrapyards, of which 34 tankers with an
aggregate capacity of 1.4 million dwt were MR tankers.

World Tanker Fleet & Orderbook: January 16, 2019

Vessel Type/Class
ULCC/VLCC . . . . . . . .
Suezmax . . . . . . . . . . .
. . . .
Aframax (Uncoated)
Panamax (Uncoated) . . . .
Crude Tankers . . . . . . .
Long Range 3 (LR3) . . . .
Long Range 2 (LR2) . . . .
Long Range 1 (LR1) . . . .
LR Product Tankers
. . .
Coated IMO 2 . . . . . . . .
Coated IMO 3 & Non

IMO Coated/Uncoated . .
Total MR . . . . . . . . . .
Short Range . . . . . . . . .
Stainless Steel Tankers . . .
. . . . .
Total All Tankers

Fleet
Number M Dwt
228.7
85.7
70.8
5.4
390.6
3.0
39.0
27.2
69.1
44.6

743
548
649
77
2,017
19
356
369
744
982

1,171
2,153
952
737
6,603

51.7
96.3
14.1
16.3
586.4

Size dwt

200,000+
120,000 − 199,999
80,000 − 119,999
60,000 − 79,999

120,000 − 199,999
80,000 − 119,999
60,000 − 79,999

25,000 − 59,999

25,000 − 59,999

10,000 − 24,999
10,000+

Orderbook
Number M Dwt
29.1
10.0
5.2
0.3
44.6
0.0
3.9
1.4
5.2
2.7

94
66
46
5
211
0
34
18
52
55

68
123
50
54
490

3.3
6.1
0.8
1.4
58.2

Source: Drewry

2021 2022+

Orderbook Delivery
% Fleet
Schedule (No. of Vessels)
No. of
Vessels
2019
12.7% 58
12.0% 32
7.1% 30
0
6.5%
10.5% 120
0
0.0%
9.6% 22
4.9% 12
7.0% 34
5.6% 39

2020
32
29
16
5
82
0
3
6
9
11

4
5
0
0
9
0
9
0
9
5

0
0
0
0
0
0
0
0
0
0

5.8% 37
5.7% 76
5.3% 27
7.3% 37
7.4% 294

30
41
21
17
170

1
6
2
0
26

0
0
0
0
0

Two other important factors are likely to affect product tanker supply in the future. The ﬁrst is the requirement
to retroﬁt Ballast Water Management Systems (BWMS) to existing vessels. In February 2004, the IMO
adopted the International Convention for the Control and Management of Ships’ Ballast Water and Sediments.
The IMO Ballast Water Management (BWM) Convention contains an environmentally protective numeric

36

standard for the treatment of a ship’s ballast water before it is discharged. This standard, detailed in
Regulation D-2 of the BWM Convention, sets out the numbers of organisms allowed in speciﬁc volumes of
treated discharge water. The IMO D-2 standard is also the standard that has been adopted by the US Coast
Guard’s ballast water regulations and the US EPA’s Vessel General Permit. The BWM Convention also
contains an implementation schedule for the installation of IMO member state type approved treatment
systems in existing ships and in new vessels, requirements for the development of vessel ballast water
management plans, requirements for the safe removal of sediments from ballast tanks, and guidelines for the
testing and type approval of ballast water treatment technologies. In July 2017, the IMO extended the
regulatory requirement of compliance to BWM Convention from September 8, 2017, to September 8, 2019.
Vessels trading internationally will have to comply with the BWM Convention upon their next special survey
after that date and for an MR2 tanker, the retroﬁt cost could be as much as $1.0 million per vessel including
labour. Expenditure of this kind will be another factor impacting the decision to scrap older vessels once the
extended BWM Convention comes into force in September 2019.

The second factor that is likely to impact future vessel supply is the drive to introduce low sulfur fuels. For
many years, high sulphur fuel oil (HSFO) has been the main fuel of the shipping industry. It is relatively
inexpensive and widely available, but it is ‘dirty’ from an environmental point of view.

The IMO, the governing body of international shipping, has made a decisive effort to diversify the industry
away from HSFO into cleaner fuels that have less harmful effects on the environment and human health.
Effective in 2015, ships operating within the Emission Control Areas (‘ECAs’) covering the Economic
Exclusive Zone of North America, the Baltic Sea, the North Sea, and the English Channel are required to use
marine gas oil with allowable sulfur content up to 0.1%. From January 1, 2020, ships sailing outside ECAs
will switch to an alternate fuel with permitted sulfur content up to 0.5%. This will create openings for a
variety of compliant fuels (with estimates indicating that demand for compliant fuels, such as marine gas oil,
will increase by 2.5 − 3 mbpd), and/or require major capital expenditures for costly ‘scrubbers’ to be
retroﬁtted on existing ships and as such the rules will be another factor hastening the demise of older ships.

The Product Tanker Freight Market

Between 2003 and early 2008, the differential between demand and supply for tankers remained narrow and
rates were generally very ﬁrm. Following the global ﬁnancial crisis in 2009, tanker demand nosedived,
coinciding with substantial tonnage entering the ﬂeet, driving earnings down until the market started to
recover in 2014. Product tanker ﬂeet growth in 2015 was approximately 5.0% in capacity terms and with
demand growing by approximately 6.0% improved utilization rates in the sector have led to much stronger
freight rates. The speciﬁc factors which have led to improved market conditions include:

(i)

increased trade due to higher stocking activity and improved demand for oil products

(ii)

longer voyage distances because of reﬁning capacity additions in Asia

(iii) product tankers are also carrying crude oil encouraged by ﬁrm freight rates for dirty tankers

(iv) lower bunker prices have also been a factor contributing to higher net earnings

The average time charter equivalent (TCE) of the spot rate for a Medium Range (MR) product tanker in 2015
was $18,375/day, compared with an average of $9,833/day in 2014. On a one-year time charter rate basis,
average MR rates rose from $14,438/day in 2014 to $17,271/day in 2015. However, the surge in newbuild
deliveries in 2016 had a negative impact on vessel earnings, with average freight rates in the spot and one
year time charter markets falling to $9,767/day and $15,125/day respectively. Another round of newbuilding
deliveries in 2017 had an adverse effect on supply-demand dynamics and freight rates for product tankers
declined further. In 2017, average one year time charter rate for MR tankers was $13,188/day, while on TCE
basis the average rate during 2017 was $9,158/day. The product tanker market remained weak in 2018 and
TCE rates and one year time charter rates averaged at $9,299/day and $13,175/day respectively. However, the
freight rates improved signiﬁcantly in the closing month of the year.

37

Spot
TCE
(US$/day)
9,767
9,158
9,299
18,033

11,286
4,800
23,600

10,225
4,800
23,600

Time charter (US$/day)

Asset Prices (US$million)

1 Year
15,125
13,188
13,175
14,000

14,639
12,000
19,500

14,174
10,800
20,000

3 Year
15,354
14,333
14,500
14,500

15,213
14,000
18,000

14,921
12,200
18,800

Newbuild
33.1
32.7
35.3
36.0

5 Year Old
24.8
23.4
26.5
27.0

34.8
32.0
37.0

35.3
32.0
44.0

25.5
22.0
29.0

26.4
22.0
38.0

Source: Drewry

Period Averages
2016 . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . .
Dec-18 . . . . . . . . . . . . . . . . . . . .

2014 − 2018
5 Year Avg . . . . . . . . . . . . . . . . .
5 Year Low . . . . . . . . . . . . . . . . .
5 Year High . . . . . . . . . . . . . . . .

2009 − 2018
10 Year Avg . . . . . . . . . . . . . . . .
10 Year Low . . . . . . . . . . . . . . . .
10 Year High . . . . . . . . . . . . . . .

The Chemical Tanker Industry

Introduction

The world chemical industry is one of the largest and most diversiﬁed industries in the world with more than
1,000 large and medium-sized companies manufacturing over 70,000 different product lines. Although most
specialist chemicals are used locally, world trade is becoming an increasingly prominent part of the global
chemical industry for a number of reasons ranging from local stock imbalances to a lack of local production
of particular chemicals in various parts of the world. In broad terms, seaborne trade growth in bulk liquid
chemicals has tracked trends in economic activity and globalization.

The seaborne transportation of chemicals is technically and logistically complex compared with the
transportation of crude oil and oil products, with cargoes ranging from hazardous and noxious chemicals to
products such as edible oils and fats. Consequently, the chemical tanker sector comprises a wide array of
specially constructed small and medium sized tankers designed to carry chemical products in various stages of
production.

Chemical Tanker Demand

Demand for chemicals is affected by, among other things, general economic conditions (including increases
and decreases in industrial production and transportation), chemical prices, feedstock costs and chemical
production capacity. Given their industrial usage, chemical demand, and as a result demand for seaborne
transport, is strongly correlated with global GDP. Seaborne trade in chemicals is characterized by a wide range
of individual cargoes and a relatively regionalized structure compared with crude and products. Given the
geographical complexity and the diversity of cargoes involved and the way in which some cargoes are
transported, estimating total seaborne trade in chemicals is difficult. Essentially, there are four main types of
chemicals transported by sea: i) organic chemicals, ii) inorganic chemicals, iii) vegetable oils and fats and iv)
other commodities such as molasses.

39

In the U.S., the chemicals industry will be affected by the development of shale gas. Increased supplies of
natural gas in the U.S. have already served to push down domestic gas prices and the fall in natural gas prices
has had a beneﬁcial impact on feedstock costs for the petrochemical industry. In particular, the cost of ethane
has fallen signiﬁcantly since 2011, thereby increasing the competitiveness of the U.S. petrochemical industry
within a global perspective. Accordingly, U.S. ethylene production costs have fallen to levels where the U.S.
can now compete with Middle Eastern suppliers, and this opens up new opportunities to expand U.S. ethylene
cracking capacity and subsequently petrochemical capacity. Ethylene cracker utilization in the U.S. has
improved and prior to the fall in oil prices in late 2014, plans had been announced for a number of new
petrochemical plants. Ethylene is a precursor for many of the organic chemicals shipped by sea (e.g. ethylene
dichloride, ethylene glycol), so increased production would lead to increased availability of downstream
chemical products for export from the U.S. Although the Middle East will continue to be the largest supplier
of organic chemicals, the U.S. will be a major exporter of methanol and ethylene derivatives to the Far East
market. Meanwhile, the U.S. and Iran’s new methanol projects have had a signiﬁcant impact on global
seaborne chemical trade.

Chemical Tanker Supply

Chemical tankers are characterized mainly by cargo containment systems which are technically more
sophisticated than those found in conventional oil and product tankers. Since chemical tankers are often
required to carry many products, which are typically hazardous and easily contaminated, cargo segregation
and containment is an essential feature of these tankers.

Chemicals can only be carried in a tanker which has a current IMO Certiﬁcate of Fitness. The IMO regulates
the carriage of chemicals by sea under the auspices of the International Bulk Chemical Code (IBC), which
classiﬁes potentially dangerous cargoes into three categories, typically referred to as IMO 1, IMO 2 and IMO
3. Speciﬁc IMO conventions govern the requirements for particular tanks to be classiﬁed as each grading, with
the pertinent features of each tank being the internal volume and its proximity to the sides and bottom of the
vessel’s hull.

The carriage of 18 cargoes is restricted to IMO Type 1 classiﬁed vessels, while the majority of cargoes require
IMO 2 vessels, including vegetable oils and palm oils. One concession to the IBC Code regulations is an
allowance that IMO 3 tankers may carry other edible oils, an exemption introduced because of the tendency
for such cargoes to be shipped in large bulk parcels. This often requires ships of up to MR size. Despite this
exemption, these vessels are not ‘true’ chemical tankers in the general sense of the word, as they are not able
to carry IMO 2 cargoes.

As well as deﬁning the chemical tanker ﬂeet in terms of IMO type, it is also possible to further deﬁne the
ﬂeet according to the degree of tank segregation, tank size and tank coating as detailed below.

•

•

Chemical parcel tankers: Over 75% of the tanks are segregated with an average tank size less than
3,000 cbm, all of which are stainless steel. A typical chemical parcel tanker might be IMO 2 with a
capacity of 20,000 dwt and have twenty fully segregated tanks which are of stainless steel.

Chemical bulk tankers: Vessels with a lower level of tank segregations (below 75%), with an
average tank size below 3,000 cbm, and with coated tanks. A typical chemical bulk tanker might be
17,000 dwt with 16 coated tanks but 8 segregations and be IMO 2.

Given the above, a broad deﬁnition of a chemical tanker is any vessel with a current IMO certiﬁcate of ﬁtness
with coated/and or stainless steel tanks and an average tank size of less than 3,000 cbm.

Overall, within the product and chemical tanker ﬂeets, it is important to recognize that there are a group of
‘swing’ ships which can trade in either products or in chemicals, vegetable oils and fats. For example, a
product tanker with IMO 2 certiﬁcation may trade from time to time in easy chemicals such as caustic soda.
Equally, an IMO 2 chemical tanker can in theory carry in products. The sector in which these ‘swing’ ships
trade will depend on a number of factors, with the main inﬂuences being the exact technical speciﬁcations of
the ship, the last cargo carried, the state of the freight market in each sector and the operating policy of the
ship owner/operator.

41

As of January 16, 2019, the world IMO 2 Coated and Stainless Steel tanker ﬂeet consisted of 1,677 vessels
with a combined capacity of 36.3 million dwt. The orderbook consisted of 95 vessels with an aggregate
capacity of 2.4 million dwt, or 5.7% of the existing ﬂeet. In 2018, provisional data suggests that only seven
MR chemical tankers totalling 0.3 million dwt were sent for demolition. In addition, chemical tankers are
relatively complex vessel types to build and this increases the barriers to entry for shipyards and the pool of
yards that owners are willing to consider is small.

World Coated IMO 2 and Stainless Steel Tanker Fleet and Orderbook: January 16, 2019

Fleet

Orderbook

Orderbook Delivery Schedule
(No. of Vessels)

Ship Type
Size (DWT)
Coated IMO 2 . . 10,000+
. . 10,000+
Stainless Steel
Total

. . . . . . . .

Number M Dwt
20.1
16.3
36.3

940
737
1,677

Number M Dwt

41
54
95

1.0
1.4
2.4

Source: Drewry

The Chemical Tanker Freight Market

% Fleet
No. of
Vessels

2019
4.4% 17
7.3% 37
5.7% 54

2020
17
17
34

2021
7
0
7

2022+
0
0
0

Nearly 40% to 60% of all chemical movements are covered by COAs, while the spot market covers 35% to
40%. The remainder is made up by other charter arrangements and cargoes moved in tonnage controlled by
exporters or importers. However, the COA-spot ratio varies depending on the vessel sizes,
shipowners’/operators’ chartering strategy and other factors. In the chemical tanker freight market, the level of
reporting of ﬁxture information is far less widespread than for the oil tanker market. Furthermore, it is not
always possible to establish a monthly series of rates for an individual cargo, on a given route, as ﬁxing is
often sporadic, or more often than not covered by contract business. For these reasons, the assessment of spot
freight rate trends in the freight market is made by using a small number of routes where there is sufficient
ﬁxture volume to produce meaningful measurements.

During and following the global ﬁnancial crisis in 2008-09, chemical tanker freight rates declined between
2008 and 2012. However, freight rates on most routes strengthened in 2013, the freight rates continued to
record small gains on the back of increased vessel demand in 2014 and 2015 on account of improved
seaborne chemical trade. However, the freight rates on average declined by 4.5% in 2016 as a result of a
slowdown in demand growth. Freight rates on key routes dropped further in 2017, primarily on account of
supply side pressure, due to greater newbuilding deliveries and subdued demolitions, in an already weak
market. Provisional data for 2018 suggest that global seaborne chemical trade grew marginally by 0.1% and
time charter rates on key routes registered an average gain of 3.2%.

Chemical Tanker Asset Values

As in other shipping sectors, chemical tanker sale and purchase values show a relationship to the charter
market and newbuilding prices. Newbuilding prices are inﬂuenced by shipyard capacity and increased steel
prices; second-hand vessel values may vary because of the country of construction and the level of outﬁtting
of such vessels. Although there has been a relatively high level of activity in recent years, chemical vessels
can be difficult to market to buyers due to the complexity of operations in the chemical market and they may
not always achieve their initial newbuilding premium. Newbuilding price trends in the chemical tanker sector
are more difficult to track than product tankers due to the lower volume of ordering and variation in
speciﬁcation. However, at the end of 2018, prices were generally 25% to 35% lower than the market peak in
early 2008. Similarly, in the second-hand market, asset values in some cases have dropped by nearly 50%
since 2008.

Environmental and Other Regulations

Government regulation and laws signiﬁcantly affect the ownership and operation of our ﬂeet. We are subject
to international conventions and treaties, national, state and local laws and regulations in force in the countries
in which our vessels may operate or are registered relating to safety and health and environmental protection

42

including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous
materials, and the remediation of contamination and liability for damage to natural resources. Compliance with
such laws, regulations and other requirements entails signiﬁcant expense, including vessel modiﬁcations and
implementation of certain operating procedures.

A variety of government and private entities subject our vessels to both scheduled and unscheduled
inspections. These entities include the local port authorities, applicable national authorities such as the United
States Coast Guard (‘‘USCG’’), harbor masters or equivalent, classiﬁcation societies, ﬂag state administrations
(countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to
obtain permits, licenses, certiﬁcates and other authorizations for the operation of our vessels. Failure to
maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary
suspension of the operation of one or more of our vessels.

Increasing environmental concerns have created a demand for vessels that conform to the stricter
environmental standards. We are required to maintain operating standards for all of our vessels that emphasize
operational safety, quality maintenance, continuous training of our officers and crews and compliance with
United States and international regulations. We believe that the operation of our vessels is in substantial
compliance with applicable environmental laws and regulations and that our vessels have all material permits,
licenses, certiﬁcates or other authorizations necessary for the conduct of our operations. However, because
such laws and regulations frequently change and may impose increasingly stricter requirements, 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. In addition, a future serious marine incident that causes signiﬁcant
adverse environmental impact could result in additional legislation or regulation that could negatively affect
our proﬁtability and ﬁnancial condition.

International Maritime Organization (‘‘IMO’’)

The IMO, the United Nations agency for maritime safety and the prevention of pollution by vessels, has
adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modiﬁed by the
Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as ‘‘MARPOL,’’
adopted the International Convention for the Safety of Life at Sea of 1974 (‘‘SOLAS Convention’’), and the
International Convention on Load Lines of 1966 (the ‘‘LL Convention’’). MARPOL establishes environmental
standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and
disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable
to drybulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which
regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to
harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to
sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was
separately adopted by the IMO in September of 1997.

In 2012, the IMO’s Marine Environmental Protection Committee, or the ‘‘MEPC,’’ adopted a resolution
amending the International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals
in Bulk, or the ‘‘IBC Code.’’ The provisions of the IBC Code are mandatory under MARPOL and the SOLAS
Convention. These amendments, which entered into force in June 2014, pertain to revised international
certiﬁcates of ﬁtness for the carriage of dangerous chemicals in bulk and identifying new products that fall
under the IBC Code. We may need to make certain ﬁnancial expenditures to comply with these amendments.

In 2013, the MEPC adopted a resolution amending MARPOL Annex I Condition Assessment Scheme, or
‘‘CAS.’’ These amendments became effective on October 1, 2014, and require compliance with the 2011
International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil
Tankers, or ‘‘ESP Code,’’ which provides for enhanced inspection programs. We may need to make certain
ﬁnancial expenditures to comply with these amendments.

Air Emissions

In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels.
Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial
vessel exhausts and prohibits ‘‘deliberate emissions’’ of ozone depleting substances (such as halons and

43

chloroﬂuorocarbons), emissions of volatile compounds from cargo tanks, and the shipboard incineration of
speciﬁc substances. 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, as explained below. Emissions
of ‘‘volatile organic compounds’’ from certain vessels, and the shipboard incineration (from incinerators
installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or PCBs) are also
prohibited. We believe that all our vessels are currently compliant in all material respects with these
regulations.

The MEPC, adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate
matter and ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI
seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the
amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, at its 70th session, the
MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%) starting
from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels, or
certain exhaust gas cleaning systems. Once the cap becomes effective, ships will be required to obtain bunker
delivery notes and International Air Pollution Prevention (‘‘IAPP’’) Certiﬁcates from their ﬂag states that
specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers
above 0.5% sulphur on ships were adopted and will take effect March 1, 2020. These regulations subject
ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs.

Sulfur content standards are even stricter within certain ‘‘Emission Control Areas,’’ or (‘‘ECAs’’). As of
January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess
of 0.1%. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has
designated four ECAs, including speciﬁed portions of the Baltic Sea area, North Sea area, North American
area and United States Caribbean area. Ocean-going vessels in these areas will be subject to stringent
emission controls and may cause us to incur additional costs. If other ECAs are approved by the IMO, or
other new or more stringent requirements relating to emissions from marine diesel engines or port operations
by vessels are adopted by the U.S. Environmental Protection Agency (‘‘EPA’’) or the states where we operate,
compliance with these regulations could entail signiﬁcant capital expenditures or otherwise increase the costs
of our operations.

Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine
diesel engines, depending on their date of installation. At the MEPC meeting held from March to April 2014,
amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx)
standards in ECAs will go into effect. Under the amendments, Tier III NOx standards apply to ships that
operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx with a marine
diesel engine installed and constructed on or after January 1, 2016. Tier III requirements could apply to areas
that will be designated for Tier III NOx in the future. At MEPC 70 and MEPC 71, the MEPC approved the
North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built after January 1, 2021. The EPA
promulgated equivalent (and in some senses stricter) emissions standards in late 2009. As a result of these
designations or similar future designations, we may be required to incur additional operating or other costs.

As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI is effective as of March 1,
2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption
to an IMO database, with the ﬁrst year of data collection commencing on January 1, 2019. The IMO intends
to use such data as the ﬁrst step in its roadmap (through 2023) for developing its strategy to reduce
greenhouse gas emissions from ships, as discussed further below.

As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All
ships are now required to develop and implement Ship Energy Efficiency Management Plans (‘‘SEEMPS’’),
and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as
deﬁned by the Energy Efficiency Design Index (‘‘EEDI’’). Under these measures, by 2025, all new ships built
will be 30% more energy efficient than those built in 2014.

We may incur costs to comply with these revised standards. Additional or new conventions, laws and
regulations may be adopted that could require the installation of expensive emission control systems and could
adversely affect our business, results of operations, cash ﬂows and ﬁnancial condition.

44

Safety Management System Requirements

The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills.
The Convention of Limitation of Liability for Maritime Claims (the ‘‘LLMC’’) sets limitations of liability for
a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are
in substantial compliance with SOLAS and LL Convention standards.

Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe
Operation of Ships and for Pollution Prevention (the ‘‘ISM Code’’), our operations are also subject to
environmental standards and requirements. 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 rely upon the safety management system
that we and our technical management team have developed for compliance with the ISM Code. The failure
of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased
liability, may decrease available insurance coverage for the affected vessels and may result in a denial of
access to, or detention in, certain ports.

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 the ISM Code requirements for
a safety management system. No vessel can obtain a safety management certiﬁcate unless its manager has
been awarded a document of compliance, issued by each ﬂag state, under the ISM Code. We have obtained
applicable documents of compliance for our offices and safety management certiﬁcates for all of our vessels
for which the certiﬁcates are required by the IMO. The document of compliance and safety management
certiﬁcates are renewed as required.

Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150
meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution.
Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1,
2016 set for application to new oil tankers and bulk carriers. The SOLAS Convention regulation II-1/3-10 on
goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1,
2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building
contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the
functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil
Tankers (GBS Standards).

Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and
require those vessels be in compliance with the International Maritime Dangerous Goods Code (‘‘IMDG
Code’’). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive
material, reﬂecting the latest provisions from the International Atomic Energy Agency, (2) new marking,
packing and classiﬁcation requirements for dangerous goods, and (3) new mandatory training requirements.

The IMO has also adopted the International Convention on Standards of Training, Certiﬁcation and
Watchkeeping for Seafarers (‘‘STCW’’). As of February 2017, all seafarers are required to meet the STCW
standards and be in possession of a valid STCW certiﬁcate. Flag states that have ratiﬁed SOLAS and STCW
generally employ the classiﬁcation societies, which have incorporated SOLAS and STCW requirements into
their class rules, to undertake surveys to conﬁrm compliance.

Furthermore, recent action by the IMO’s Maritime Safety Committee and U.S. agencies indicate that
cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an
attempt to combat cybersecurity threats. For example, cyber-risk management systems must be incorporated
by ship-owners and managers by 2021. This might cause companies to create additional procedures for
monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of
such regulations is hard to predict at this time.

45

Pollution Control and Liability Requirements

The IMO has negotiated international conventions that impose liability for pollution in international waters
and the territorial waters of the signatories to such conventions. For example, the IMO adopted an
International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the ‘‘BWM
Convention’’) in 2004. The BWM Convention entered into force on September 9, 2017. The BWM
Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or
discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM
Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange
requirements, to be replaced in time with mandatory concentration limits, and require all ships to carry a
ballast water record book and an international ballast water management certiﬁcate.

On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of BWM
Convention so that the dates are triggered by the entry into force date and not the dates originally in the
BWM Convention. This, in effect, makes all vessels delivered before the entry into force date ‘‘existing
vessels’’ and allows for the installation of ballast water management systems on such vessels at the ﬁrst
International Oil Pollution Prevention (IOPP) renewal survey following entry into force of the convention. The
MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At
MEPC 71, the schedule regarding the BWM Convention’s implementation dates was also discussed and
amendments were introduced to extend the date existing vessels are subject to certain ballast water standards.
Ships over 400 gross tons generally must comply with a ‘‘D-1 standard,’’ requiring the exchange of ballast
water only in open seas and away from coastal waters. The ‘‘D-2 standard’’ speciﬁes the maximum amount of
viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates.
Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or
after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board
systems to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which
include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the
chemical or physical characteristics of the ballast water, must be approved in accordance with IMO Guidelines
(Regulation D-3). Costs of compliance with these regulations may be substantial.

Once mid-ocean ballast exchange ballast water treatment requirements become mandatory under the BWM
Convention, the cost of compliance could increase for ocean carriers and may have a material effect on our
operations. However, many countries already regulate the discharge of ballast water carried by vessels from
country to country to prevent the introduction of invasive and harmful species via such discharges. The U.S.,
for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange,
or undertake some alternate measure, and to comply with certain reporting requirements.

The IMO adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as
amended by different Protocols in 1976, 1984, and 1992, and amended in 2000 (‘‘the CLC’’). Under the CLC
and depending on whether the country in which the damage results is a party to the 1992 Protocol to the
CLC, a vessel’s registered owner may be strictly liable for pollution damage caused in the territorial waters of
a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed
certain limits on liability expressed using the International Monetary Fund currency unit, the Special Drawing
Rights. The limits on liability have since been amended so that the compensation limits on liability were
raised. The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner’s
actual fault and under the 1992 Protocol where the spill is caused by the shipowner’s intentional or reckless
act or omission where the shipowner knew pollution damage would probably result. The CLC requires ships
over 2,000 tons covered by it to maintain insurance covering the liability of the owner in a sum equivalent to
an owner’s liability for a single incident. We have protection and indemnity insurance for environmental
incidents. P&I Clubs in the International Group issue the required Bunkers Convention ‘‘Blue Cards’’ to
enable signatory states to issue certiﬁcates. All of our vessels are in possession of a CLC State issued
certiﬁcate attesting that the required insurance coverage is in force.

IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the
‘‘Bunker Convention’’) to impose strict liability on ship owners (including the registered owner, bareboat
charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by
discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons

46

to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable
national or international limitation regime (but not exceeding the amount calculated in accordance with the
LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship’s
bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or
damages occur.

Ships are required to maintain a certiﬁcate attesting that they maintain adequate insurance to cover an
incident. In jurisdictions, such as the United States where the CLC or the Bunker Convention has not been
adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of
fault or on a strict-liability basis.

Anti-Fouling Requirements

In 2001, the IMO adopted the International Convention on the Control of Harmful Anti-fouling Systems on
Ships, or the ‘‘Anti-fouling Convention.’’ The Anti-fouling Convention, which entered into force on
September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks
and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will
also be required to undergo an initial survey before the vessel is put into service or before an International
Anti-fouling System Certiﬁcate is issued for the ﬁrst time; and subsequent surveys when the anti-fouling
systems are altered or replaced. We have obtained Anti-fouling System Certiﬁcates for all of our vessels that
are subject to the Anti-fouling Convention.

Compliance Enforcement

Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or 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. The USCG and European Union authorities have
indicated that vessels not in compliance with the ISM Code by applicable deadlines will be prohibited from
trading in U.S. and European Union ports, respectively. As of the date of this report, each of our vessels is
ISM Code certiﬁed. However, there can be no assurance that such certiﬁcates will be maintained in the future.
The IMO continues to review and introduce new regulations. It is impossible to predict what additional
regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our
operations.

The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and
Liability Act

The U.S. Oil Pollution Act of 1990 (‘‘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 or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters,
which includes the U.S.’s territorial sea and its 200 nautical mile exclusive economic zone around the
U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act
(‘‘CERCLA’’), which applies to the discharge of hazardous substances other than oil, except in limited
circumstances, whether on land or at sea. OPA and CERCLA both deﬁne ‘‘owner and operator’’ in the case of
a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact
our operations.

Under OPA, vessel owners and operators 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 (fuel). OPA deﬁnes these other damages broadly to include:

(i)

injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;

(ii)

injury to, or economic losses resulting from, the destruction of real and personal property;

(iii) loss of subsistence use of natural resources that are injured, destroyed or lost;

(iv) net loss of taxes, royalties, rents, fees or net proﬁt revenues resulting from injury, destruction or loss

of real or personal property, or natural resources;

47

(v)

lost proﬁts or impairment of earning capacity due to injury, destruction or loss of real or personal
property or natural resources; and

(vi) net cost of increased or additional public services necessitated by removal activities following a

discharge of oil, such as protection from ﬁre, safety or health hazards, and loss of subsistence use of
natural resources.

OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective
December 21, 2015, the USCG adjusted the limits of OPA liability for a tank vessel, other than a single-hull
tank vessel, over 3,000 gross tons liability to the greater of $2,200 per gross ton or $18,796,800 (subject to
periodic adjustment for inﬂation). These limits of liability do not apply if an incident was proximately caused
by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible
party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party’s
gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible
party fails or refuses to (i) report the incident where the responsibility party knows or has reason to know of
the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or
(iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311
(c), (e)) or the Intervention on the High Seas Act.

CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup,
removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources,
including the reasonable costs associated with assessing same, and health assessments or health effects studies.
There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third
party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton
or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or
$500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total
cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful
misconduct or negligence, or the primary cause of the release was a violation of applicable safety,
construction or operating standards or regulations. The limitation on liability also does not apply if the
responsible person fails or refused to provide all reasonable cooperation and assistance as requested in
connection with response activities where the vessel is subject to OPA.

OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law.
OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG
evidence of ﬁnancial responsibility sufficient to meet the maximum amount of liability to which the particular
responsible person may be subject. Vessel owners and operators may satisfy their ﬁnancial responsibility
obligations by providing a proof of insurance, a surety bond, qualiﬁcation as a self-insurer or a guarantee. We
comply with the USCG’s ﬁnancial responsibility regulations by providing applicable certiﬁcates of ﬁnancial
responsibility.

The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or
statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling, and
a pilot inspection program for offshore facilities. However, several of these initiatives and regulations have
been or may be revised. For example, the U.S. Bureau of Safety and Environmental Enforcement’s (‘‘BSEE’’)
revised Production Safety Systems Rule (‘‘PSSR’’), effective December 27, 2018, modiﬁed and relaxed certain
environmental and safety protections under the 2016 PSSR. Additionally, the BSEE released proposed changes
to the Well Control Rule, which could roll back certain reforms regarding the safety of drilling operations, and
the U.S. President proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling,
expanding the U.S. waters that are available for such activity over the next ﬁve years. The effects of these
proposals are currently unknown. Compliance with any new requirements of OPA and future legislation or
regulations applicable to the operation of our vessels could impact the cost of our operations and adversely
affect our business.

OPA speciﬁcally permits individual states to impose their own liability regimes with regard to oil pollution
incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability
established under OPA and some states have enacted legislation providing for unlimited liability for oil spills.
Many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose

48

strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a
hazardous substance. These laws may be more stringent than U.S. federal law. Moreover, some states have
enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in
some cases, states which have enacted this type of legislation have not yet issued implementing regulations
deﬁning vessel owners’ responsibilities under these laws. We comply with all applicable state regulations in
the ports where our vessels call.

We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each
of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have
an adverse effect on our business, ﬁnancial condition and results of operation.

Other United States Environmental Initiatives

The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (‘‘CAA’’) requires the 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. The CAA also requires states to
draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in each
state. Although state-speciﬁc, SIPs may include regulations concerning emissions resulting from vessel loading
and unloading operations by requiring the installation of vapor control equipment. Our vessels operating in
such regulated port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these
existing requirements.

The U.S. Clean Water Act (‘‘CWA’’) prohibits the discharge of oil, hazardous substances and ballast water in
U.S. navigable waters unless authorized by a duly-issued permit or exemption, 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 and complements the remedies available under OPA and CERCLA. In
2015, the EPA expanded the deﬁnition of ‘‘waters of the United States’’ (‘‘WOTUS’’), thereby expanding
federal authority under the CWA. Following litigation on the revised WOTUS rule, in December 2018, the
EPA and Department of the Army proposed a revised, limited deﬁnition of ‘‘waters of the United States.’’ The
effect of this proposal on U.S. environmental regulations is still unknown.

The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which
requires the installation of equipment on our vessels to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/
or otherwise restrict our vessels from entering U.S. Waters. The EPA will regulate these ballast water
discharges and other discharges incidental to the normal operation of certain vessels within United States
waters pursuant to the Vessel Incidental Discharge Act (‘‘VIDA’’), which was signed into law on December 4,
2018 and replaces the 2013 Vessel General Permit (‘‘VGP’’) program (which authorizes discharges incidental
to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to
reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas scrubbers, and
requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water
management regulations adopted under the U.S. National Invasive Species Act (‘‘NISA’’), such as mid-ocean
ballast exchange programs and installation of approved USCG technology. VIDA establishes a new framework
for the regulation of vessel incidental discharges under the CWA, requires the EPA to develop performance
standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop
implementation, compliance, and enforcement regulations within two years of EPA’s promulgation of
standards. Under VIDA, all provisions of the 2013 VPG and USCG regulations regarding ballast water
treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are ﬁnalized.
Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the
requirements of the VGP, including submission of a Notice of Intent (‘‘NOI’’) or retention of a PARI form
and submission of annual reports. We have submitted NOIs for our vessels where required. Compliance with
the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment
equipment on our vessels or the implementation of other port facility disposal procedures at potentially
substantial cost, or may otherwise restrict our vessels from entering U.S. waters.

49

European Union Regulations

In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source
discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with
serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of
water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The
directive applies to all types of vessels, irrespective of their ﬂag, but certain exceptions apply to warships or
where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial
penalties or ﬁnes and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament
and of the Council of April 29, 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting
and veriﬁcation of carbon dioxide emissions from maritime transport, and, subject to some exclusions,
requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions
annually starting on January 1, 2018, which may cause us to incur additional expenses.

The European Union has adopted several regulations and directives requiring, among other things, more
frequent inspections of high-risk ships, as determined by type, age, and ﬂag as well as the number of times
the ship has been detained. The European Union also adopted and extended a ban on substandard ships and
enacted a minimum ban period and a deﬁnitive ban for repeated offenses. The regulation also provided the
European Union with greater authority and control over classiﬁcation societies, by imposing more
requirements on classiﬁcation societies and providing for ﬁnes or penalty payments for organizations that
failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur
content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive
1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine
fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in
EU ports.

Greenhouse Gas Regulation

Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol
to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and
pursuant to which adopting countries have been required to implement national programs to reduce
greenhouse gas emissions with targets extended through 2020. International negotiations are continuing with
respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any
new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen
Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The 2015 United
Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on
November 4, 2016 and does not directly limit greenhouse gas emissions from ships. On June 1, 2017, the
U.S. President announced that the United States intends to withdraw from the Paris Agreement. The timing
and effect of such action has yet to be determined, but the Paris Agreement provides for a four-year exit
process.

At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a
comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In
accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce
greenhouse gas emissions from ships. The initial strategy identiﬁes ‘‘levels of ambition’’ to reducing
greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of
further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an
average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050,
compared to 2008; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared
to 2008 while pursuing efforts towards phasing them out entirely. The initial strategy notes that technological
innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the
overall ambition. These regulations could cause us to incur additional substantial expenses.

The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states
from 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto
Protocol’s second period from 2013 to 2020. Starting in January 2018, large ships calling at EU ports are
required to collect and publish data on carbon dioxide emissions and other information.

50

In the United States, the EPA issued a ﬁnding that greenhouse gases endanger the public health and safety,
adopted regulations to limit greenhouse gas emissions from certain mobile sources, and proposed regulations
to limit greenhouse gas emissions from large stationary sources. However, in March 2017, the U.S. President
signed an executive order to review and possibly eliminate the EPA’s plan to cut greenhouse gas emissions.
The EPA or individual U.S. states could enact environmental regulations that would affect our operations.

Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or
other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto
Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make signiﬁcant
ﬁnancial expenditures which we cannot predict with certainty at this time. Even in the absence of climate
control legislation, our business may be indirectly affected to the extent that climate change may result in sea
level changes or certain weather events.

International Labour Organization

The International Labor Organization (the ‘‘ILO’’) is a specialized agency of the UN that has adopted the
Maritime Labor Convention 2006 (‘‘MLC 2006’’). A Maritime Labor Certiﬁcate and a Declaration of
Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships above 500
gross tons in international trade. We believe that all our vessels are in substantial compliance with and are
certiﬁed to meet MLC 2006.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives
intended to enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002
(‘‘MTSA’’). To implement certain portions of the MTSA, the USCG issued regulations requiring the
implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction
of the United States and at certain ports and facilities, some of which are regulated by the EPA.

Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port
authorities and mandates compliance with the International Ship and Port Facilities Security Code (‘‘the ISPS
Code’’). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade
internationally, a vessel must attain an International Ship Security Certiﬁcate (‘‘ISSC’’) from a recognized
security organization approved by the vessel’s ﬂag state. Ships operating without a valid certiﬁcate may be
detained, expelled from, or refused entry at port until they obtain an ISSC. The various requirements, some of
which are found in the SOLAS Convention, include, for example, on-board installation of automatic
identiﬁcation systems to provide a means for the automatic transmission of safety-related information from
among similarly equipped ships and shore stations, including information on a ship’s identity, position, course,
speed and navigational status; on-board installation of ship security alert systems, which do not sound on the
vessel but only alert the authorities on shore; the development of vessel security plans; ship identiﬁcation
number to be permanently marked on a vessel’s hull; a continuous synopsis record kept onboard showing a
vessel’s history including the name of the ship, the state whose ﬂag the ship is entitled to ﬂy, the date on
which the ship was registered with that state, the ship’s identiﬁcation number, the port at which the ship is
registered and the name of the registered owner(s) and their registered address; and compliance with ﬂag state
security certiﬁcation requirements.

The USCG 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 ISSC that attests to
the vessel’s compliance with the SOLAS Convention security requirements and the ISPS Code. Future
security measures could have a signiﬁcant ﬁnancial impact on us. We intend to comply with the various
security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.

Inspection by Classiﬁcation Societies

The hull and machinery of every commercial vessel must be classed by a classiﬁcation society authorized by
its country of registry. The classiﬁcation society certiﬁes that a vessel is safe and seaworthy in accordance
with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance
underwriters make it a condition for insurance coverage and lending that a vessel be certiﬁed ‘‘in class’’ by a

51

classiﬁcation society which is a member of the International Association of Classiﬁcation Societies, the IACS.
The IACS has adopted harmonized Common Structural Rules, or the Rules, which apply to oil tankers and
bulk carriers constructed on or after July 1, 2015. The Rules attempt to create a level of consistency between
IACS Societies. All of our vessels are certiﬁed as being ‘‘in class’’ by all the applicable Classiﬁcation
Societies (e.g., American Bureau of Shipping, Lloyd’s Register of Shipping, and DNV-GL).

A vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. In lieu of a
special survey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery would
be surveyed periodically over a ﬁve-year period. Every vessel is also required to be drydocked every 30 to
36 months for inspection of the underwater parts of the vessel. If any vessel does not maintain its class and/or
fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry
cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of
certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such
violation of covenants, could have a material adverse impact on our ﬁnancial condition and results of
operations.

Risk of Loss and Liability Insurance

General

The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision,
property loss, cargo loss or damage and business interruption due to political circumstances in foreign
countries, piracy incidents, 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 shipowners,
operators and bareboat charterers of any vessel trading in the exclusive economic zone of the United States
for certain oil pollution accidents in the United States, has made liability insurance more expensive for
shipowners and operators trading in the United States market. We carry insurance coverage as customary in
the shipping industry. However, not all risks can be insured, speciﬁc claims may be rejected, and we might
not be always able to obtain adequate insurance coverage at reasonable rates.

Hull and Machinery Insurance

We procure hull and machinery insurance, protection and indemnity insurance, which includes environmental
damage and pollution insurance and war risk insurance and freight, demurrage and defense insurance for our
ﬂeet. We may maintain insurance against loss of hire for certain charters or in certain geographical locations
as we consider appropriate, which covers business interruptions that result in the loss of use of a vessel.

Protection and Indemnity Insurance

Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I
Associations, covers our third-party liabilities in connection with our shipping activities. This includes
third-party liability and other related expenses of injury or death of crew, passengers and other third parties,
loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party
property, pollution arising from oil or other substances, and salvage, towing and other related costs, including
wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by
protection and indemnity mutual associations, or ‘‘clubs.’’

Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident.
The 13 P&I Associations that comprise the International Group insure approximately 90% of the world’s
commercial tonnage and have entered into a pooling agreement to reinsure each association’s liabilities. The
International Group’s website states that the pool provides a mechanism for sharing all claims in excess of
$10 million up to, currently, approximately $8.2 billion. As a member of a P&I Association, which is a
member of the International Group, we are subject to calls payable to the associations based on our claim
records as well as the claim records of all other members of the individual associations and members of the
shipping pool of P&I Associations comprising the International Group.

52

Exchange Controls

Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including
foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to
non-resident holders of our common shares.

C. Organizational Structure

Please see Item 4.A (‘‘Information on the Company — History and Development of the Company’’) in this
Annual Report for information about our organizational structure. We have 50 wholly owned subsidiaries and
one 50%-owned joint venture entity. A list of our subsidiaries is included as Exhibit 8.1 to this Annual Report.

D. Property, Plant and Equipment

Other than our vessels, a description of which is included in Item 4.B ‘‘Business Overview — Fleet List’’ of
this Annual Report and is incorporated herein by reference, we own no material property. We have entered
into a lease with a third party for our office space in Cork, Ireland. The lease commenced in March 2016 and
is for a period of 15 years, with an option to terminate the lease after ten years. We have exercised our option
on our lease with a third party for office space at Pembroke, Bermuda for an additional two-year term that
commenced in May 2018. We have entered into leases for our offices in Singapore and Houston, Texas with
third parties that commenced in March 2018 and April 2016, respectively. These leases are for periods of
two years and one year respectively, with an option for a one year further term in Singapore, and
automatically for successive one year terms in Houston until terminated. Average aggregate payments under
these leases are approximately $0.5 million per annum.

As at January 31, 2019, all of our 27 vessels are subject to liens relating to our credit facilities or are subject
to ﬁnance leases under which we are the lessee.

Item 4.A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion and analysis should be read in conjunction with our consolidated ﬁnancial
statements, accompanying notes thereto and other ﬁnancial information, appearing elsewhere in this Annual
Report. The consolidated ﬁnancial statements as of and for the years ended December 31, 2018, 2017, and
2016 have been prepared in accordance with U.S. GAAP. The consolidated ﬁnancial statements are presented
in U.S. dollars unless otherwise indicated.

General

We are Ardmore Shipping Corporation, a company incorporated in the Republic of the Marshall Islands. We
provide seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil
companies, oil and chemical traders, and chemical companies, with our modern, fuel-efficient ﬂeet of mid-size
product and chemical tankers.

We are commercially independent as we have no blanket employment arrangements with third-party or
related-party commercial managers. We market our services directly to our broad range of customers and
commercial pool operators.

Our Charters

We generate revenues by charging customers for the transportation of their petroleum or chemical products
using our vessels. Historically, these services generally have been provided under the following basic types of
contractual arrangements:

•

•

Commercial Pooling Arrangements. Our vessels are pooled together with a group of other similar
vessels for economies of scale and the earnings are pooled and distributed to the vessel owners
according to a prearranged agreement.

Spot Charter. We arrange spot employment for our vessels in-house. We are responsible for all
costs associated with operating the vessel, including vessel operating expenses and voyage expenses.

53

•

Time Charter. Vessels we operate, and for which we are responsible for crewing and for paying
other vessel operating expenses (such as repairs and maintenance, insurance, stores, lube oils,
communication expenses) and technical management fees, are chartered to customers for a ﬁxed
period of time at rates that are generally ﬁxed, but may contain a variable component based on
inﬂation, interest rates, or current market rates. As at January 31, 2019, none of our vessels were on
time charter.

The table below illustrates the primary distinctions among these types of charters and contracts.

Typical contract length
Hire rate basis(1)
Voyage expenses(2)
Vessel operating expenses(3)
Off-hire(4)

Time Charter

1 − 5 years
Daily
Charterer pays
We pay
We pay

Commercial Pool

Indeﬁnite
Varies (daily rate reported)
Pool pays
We pay
We pay

Spot Charter
Single voyage
Varies
We pay
We pay
We pay

(1)
(2)

(3)

(4)

‘‘Hire rate’’ refers to the basic payment from the charterer for the use of the vessel.
‘‘Voyage expenses’’ are all expenses related to a particular voyage, including any bunker fuel expenses,
port fees, cargo loading and unloading expenses, canal tolls and agency fees.
‘‘Vessel operating expenses’’ are costs of operating a vessel that are incurred during a charter, including
costs of crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and
technical management fees.
‘‘Off-hire’’ refers to the time a vessel is not available for service, due primarily to scheduled and
unscheduled repairs or drydocking.

A. Operating Results

Important Financial and Operational Terms and Concepts

We use a variety of ﬁnancial and operational terms and concepts. These include the following:

Vessel Revenues. Vessel revenues primarily include revenues from time charters, spot charters and
commercial pooling arrangements. Vessel revenues are affected by hire rates and the number of days a vessel
operates.

Vessel revenues are also affected by the mix of business among vessels on time charter, spot charter and
vessels in pools. Revenues from vessels in pools or employed in the spot market are more volatile, as they are
typically tied to prevailing market rates.

Voyage Expenses. Voyage expenses are all expenses related to a particular voyage, including any bunker
fuel expenses, port fees, cargo loading and unloading expenses, canal tolls and agency fees. These expenses
are subtracted from shipping revenues to calculate TCE rates (as deﬁned below).

Vessel Operating Expenses. We are responsible for vessel operating expenses, which include crewing,
repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management
fees. The largest components of our vessel operating expenses are generally crews and repairs and
maintenance. Expenses for repairs and maintenance tend to ﬂuctuate from period to period because most
repairs and maintenance typically occur during periodic drydockings. We expect these expenses to increase as
our ﬂeet matures and to the extent that it expands.

Drydocking. We must periodically drydock each of our vessels for inspection, and any modiﬁcations to
comply with industry certiﬁcation or governmental requirements. Generally, each vessel is drydocked every
30 to 60 months. The capitalized costs of drydockings for a given vessel are amortized on a straight-line basis
to the next scheduled drydocking of the vessel.

Depreciation. Depreciation expense typically consists of charges related to the depreciation of the historical
cost of our ﬂeet (less an estimated residual value) over the estimated useful lives of the vessels and charges
relating to the depreciation of upgrades to vessels, which are depreciated over the shorter of the vessel’s
remaining useful life or the life of the renewal or upgrade. We depreciate our vessels over an estimated useful

54

life of 25 years on a straight-line basis to their residual scrap value. The rate we use to calculate the residual
scrap value is $300 per lightweight ton.

Amortization of Deferred Drydock Expenditure. Amortization of deferred drydock expenditure relates to the
amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking.

Time Charter Equivalent (“TCE”) Rates. TCE daily rate, represents net revenues divided by revenue days.
Revenue days are the total number of calendar days the vessels are in our possession less off-hire days
generally associated with drydocking or repairs, idle days or repositioning associated with vessels held for
sale. For vessels employed on voyage charters, TCE is the net rate after deducting voyage expenses incurred,
divided by revenue days, including among other expenses, all commissions and pool administration fees. MR
Tankers Spot & Pool TCE is reported on a discharge to discharge basis.

Revenue Days. Revenue days are the total number of calendar days our vessels were in our possession
during a period, less the total number of off-hire days during the period generally associated with repairs or
drydockings. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are
included in revenue days. We use revenue days to show changes in net voyage revenues between periods.

Operating Days. Operating days are the number of days our vessels are in operation during the year. Where
a vessel is under our ownership for a full year, operating days will generally equal calendar days. Days when
a vessel is in drydock are included in the calculation of operating days, as we incur operating expenses while
in drydock.

Net Voyage Revenues. Net voyage revenues represent revenues less voyage expenses. Because the amount
of voyage expenses we incur for a particular charter depends upon the type of the charter, we use net voyage
revenues to improve the comparability between periods of reported revenues that are generated by the
different types of charters and contracts. We principally use net voyage revenues, a non-GAAP ﬁnancial
measure, because it provides more meaningful information to us about the deployment of our vessels and their
performance than revenues, the most directly comparable ﬁnancial measure under U.S. GAAP.

Commercial Pooling Arrangements. To increase vessel utilization and thereby revenues, we participate in
commercial pools with other ship owners of similar modern, well-maintained vessels. By operating a large
number of vessels as an integrated transportation system, commercial pools offer customers greater ﬂexibility
while achieving scheduling efficiencies. Pools typically employ experienced commercial charterers and
operators who have close working relationships with customers and brokers, while technical management is
performed by each ship owner. Pools negotiate charters with customers primarily in the spot market. The size
and scope of these pools enhance utilization rates for pool vessels by securing backhaul voyages and contracts
of affreightment, which may generate higher effective TCE revenues than otherwise might be obtainable in the
spot market, while providing a higher level of service offerings to customers.

Factors You Should Consider When Evaluating Our Results

We face a number of risks associated with our business and industry and must overcome a variety of
challenges to utilize our strengths and implement our business strategy. These risks include, among others: the
highly cyclical tanker industry; partial dependence on spot charters; ﬂuctuating charter values; changing
economic, political and governmental conditions affecting our industry and business, including changes in
energy prices; material changes in applicable laws and regulations; level of performance by counterparties,
particularly charterers; acquisitions and dispositions; increased operating expenses; increased capital
expenditures; taxes; maintaining customer relationships; maintaining sufficient liquidity; ﬁnancing availability
and terms; and management turnover.

Ship-owners base economic decisions regarding the deployment of their vessels upon actual and anticipated
TCE rates, and industry analysts typically measure rates in terms of TCE rates. This is because under time
charters the customer typically pays the voyage expenses, while under voyage charters, also known as spot
market charters, the shipowner usually pays the voyage expenses. Accordingly, the discussion of revenue
below focuses on TCE rates where applicable.

55

Fleet Growth

As at January 31, 2019, our ﬂeet consists of 27 double-hulled product and chemical tankers all of which are
in operation. We acquired 13 of our vessels as second-hand vessels, of which seven of our vessels were
upgraded to increase efficiency and improve performance. In 2015, 2016, 2017 and 2018 we paid an aggregate
of $232.5 million, $174.0 million, $0.4 million and $16.8 million ($1.6 million of which was paid as a deposit
in 2017) respectively, for vessel acquisitions, vessel equipment and newbuilding orders.

As of December 31, 2010, our operating ﬂeet consisted of four vessels. From 2011 to 2015, our ﬂeet grew on
a net basis by 20 vessels, respectively.

In 2016 we acquired (on a net basis) three vessels and in 2017 we did not acquire any vessels, but paid a
deposit for a vessel, Ardmore Sealancer, which we took delivery of in January 2018. During 2018, the
Ardmore Seatrader was classiﬁed as held for sale. The vessel was delivered to the buyer in January 2019. On
February 1, 2019, we agreed to terms for the sale of the Ardmore Seamaster. The vessel is expected to be
delivered to the buyer in February 2019.

Operating Results

The tables below present our operating results for the years ended December 31, 2018 and 2017 and for
the years ended December 31, 2017 and 2016, respectively, and include related disclosure about year-to-year
changes.

Statement of Operations for the Year Ended December 31, 2018 and December 31, 2017

REVENUE
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $210,179,181

195,935,392

14,243,789

7%

Year Ended

Dec 31, 2018

Dec 31, 2017

Variance

Variance (%)

OPERATING EXPENSES
Commissions and voyage related costs . . . . . . . . .
. . . . . . . . . . . . . . . . .
Vessel operating expenses
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred drydock expenditure . . . .

98,142,454
67,017,632
35,137,880
3,637,276

72,737,902
62,890,401
34,271,091
2,924,031

(25,404,552)
(4,127,231)
(866,789)
(713,245)

11,979,017
2,619,748
187,422,190
8,513,202
(21,380,165)
436,195

(12,430,768)
(59,567)
(12,490,335)

(647,356)
(614,140)
(32,373,313)
(18,129,524)
(6,025,443)
170,470
— (6,360,813)
(30,345,310)
(103,356)
(30,448,666)

General and administrative expenses:

Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and chartering . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . .
(Loss)/proﬁt from operations . . . . . . . . . . . . . .
Interest expense and ﬁnance costs . . . . . . . . . . . .
Interest income
. . . . . . . . . . . . . . . . . . . . . . . .
Loss on vessel held for sale . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Loss before taxes
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss

12,626,373
3,233,888
219,795,503
(9,616,322)
(27,405,608)
606,665
(6,360,813)
(42,776,078)
(162,923)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (42,939,001)

56

(35)%
(7)%
(3)%
(24)%

(5)%
(23)%
(17)%
(213)%
(28)%
39%

N/A
(244)%
(174)%
(244)%

for the year ended December 31, 2018 were $3.2 million compared to $2.6 million for the year ended
December 31, 2017. This increase reﬂects the expansion of chartering and commercial activities in our
Singapore and Houston offices, and an increased headcount in the commercial and chartering departments for
the year ended December 31, 2018. Average headcount increased to 18 as compared to 16 for the year ended
December 31, 2017.

Interest expense and ﬁnance costs (which include loan interest, ﬁnance
Interest expense and ﬁnance costs.
lease interest, and amortization of deferred ﬁnance fees and are net of capitalized interest) for the year ended
December 31, 2018 were $27.4 million, as compared to $21.4 million for the year ended December 31, 2017.
Cash interest expense increased by $4.4 million to $22.7 million for 2018 from $18.3 million for 2017. The
increase in interest expense and ﬁnance costs was primarily due to an increased average LIBOR rate during
the year as well as a change in debt structure due to the new ﬁnance leases entered into as part of vessel
reﬁnancings. Amortization of deferred ﬁnance fees for 2018 was $4.7 million, compared to $3.1 million for
2017. The 2018 amount includes a write-off of deferred ﬁnance fees of $2.3 million relating to the sale and
leaseback transactions.

Statement of Operations for the Year Ended December 31, 2017 and December 31, 2016

REVENUE
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $195,935,392

164,403,938

31,531,454

19%

Year Ended

Dec 31, 2017

Dec 31, 2016

Variance

Variance (%)

OPERATING EXPENSES
Commissions and voyage related costs . . . . . . . . .
Vessel operating expenses
. . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred drydock expenditure . . . .

General and administrative expenses:

72,737,902
62,890,401
34,271,091
2,924,031

37,121,398
56,399,979
30,091,237
2,715,109

(35,616,504)
(6,490,422)
(4,179,854)
(208,922)

Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and chartering . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . .
Proﬁt from operations . . . . . . . . . . . . . . . . . . .
Interest expense and ﬁnance costs . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Interest income
Loss on disposal of vessels
. . . . . . . . . . . . . . . .
(12,430,768)
(Loss)/proﬁt before taxes . . . . . . . . . . . . . . . . .
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
(59,567)
Net (loss)/proﬁt . . . . . . . . . . . . . . . . . . . . . . . . $ (12,490,335)

11,979,017
2,619,748
187,422,190
8,513,202
(21,380,165)
436,195

12,055,725
2,021,487
140,404,935
23,999,003
(17,754,118)
164,629
— (2,601,148)
3,808,366
(60,434)
3,747,932

76,708
(598,261)
(47,017,255)
(15,485,801)
(3,626,047)
271,566
2,601,148
(16,239,134)
867
(16,238,267)

(96)%
(12)%
(14)%
(8)%

1%
(30)%
(33)%
(65)%
(20)%
165%
N/A
(426)%
1%
(433)%

Revenue. Revenue for the year ended December 31, 2017 was $195.9 million, an increase of $31.5 million
from $164.4 million for the year ended December 31, 2016.

The average number of owned vessels increased to 27.0 for the year ended December 31, 2017, from 24.1 for
the year ended December 31, 2016, resulting in revenue days of 9,741 for the year ended December 31, 2017,
as compared to 8,635 for the year ended December 31, 2016.

We had 19 and 17 vessels employed directly in the spot market as at December 31, 2017 and December 31,
2016, respectively. For spot chartering arrangements, we had 6,754 revenue days for the year ended
December 31, 2017, as compared to 4,158 for the year ended December 31, 2016. This increase in spot
chartering revenue days resulted in an increase in revenue of $58.2 million compared to the year ended
December 31, 2016, while changes in spot rates resulted in an increase in revenue of $4.5 million compared
to the year ended December 31, 2016.

58

of drydocking expenditures, repairs and maintenance activities. Our exposure to the highly cyclical spot tanker
market and the growth of our ﬂeet have contributed signiﬁcantly to historical ﬂuctuations in operating cash
ﬂows.

For the year ended December 31, 2018, cash ﬂow provided by operating activities was $9.4 million. Net proﬁt
(after adding back depreciation, amortization and other non-cash items) was an inﬂow of $7.9 million.
Changes in operating assets and liabilities resulted in an inﬂow of $8.1 million and drydock payments were an
outﬂow $6.6 million.

For the year ended December 31, 2017, cash ﬂow provided by operating activities was $18.4 million. Net
proﬁt (after adding back depreciation, amortization and other non-cash items) was an inﬂow of $28.2 million.
Changes in operating assets and liabilities resulted in an outﬂow of $6.0 million and drydock payments were
an outﬂow $3.8 million.

For the year ended December 31, 2016, cash ﬂow provided by operating activities was $42.6 million. Net
proﬁt (after adding back depreciation, amortization and other non-cash items) was an inﬂow of $43.8 million.
Changes in operating assets and liabilities resulted in an inﬂow of $1.9 million and drydock payments were an
outﬂow $3.1 million.

Cash used in investing activities

For the year ended December 31, 2018, net cash used in investing activities was $17.6 million. Payments for
vessel equipment and vessels acquired were $16.8 million for 2018. We had no proceeds from sale of vessels.
Payments for ballast water treatment systems were $0.5 million. Payments for office equipment, and ﬁxtures
and ﬁttings and leasehold improvements were $0.3 million.

For the year ended December 31, 2017, net cash used in investing activities was $2.3 million. Payments for
vessel equipment and vessels acquired were $0.4 million for 2017. We had no proceeds from sale of vessels.
Payments for deposit to purchase a new vessel was $1.6 million. Payments for office equipment, and ﬁxtures
and ﬁttings and leasehold improvements were $0.3 million.

For the year ended December 31, 2016, net cash used in investing activities was $122.3 million. Payments for
vessel equipment and vessels acquired were $174.0 million for 2016. Proceeds from sale of vessels were
$52.7 million. Payments for office equipment, and ﬁxtures and ﬁttings and leasehold improvements were
$1.0 million.

Cash provided by/(used in) ﬁnancing activities

For the year ended December 31, 2018, the net cash provided by ﬁnancing activities was $25.6 million.
Drawdowns of long-term debt amounted to $3.9 million and repayments of debt amounted to $184.3 million.
Total principal repayments of ﬁnance lease arrangements were $7.3 million and total proceeds from ﬁnance
leases were $209.7 million, which proceeds we used primarily to repay debt related to the applicable vessels.
Net proceeds from the sale of common stock under our at-the-market offering program and from the option to
purchase additional shares of our common stock, which option the underwriter partially exercised in January
2018 in connection with the GA Holdings LLC’s public offering of our common shares in November 2017,
for a total of 305,459 shares, amounted to $7.3 million. We also incurred payments of $3.7 million relating to
deferred ﬁnance fees for ﬁnance lease facilities.

For the year ended December 31, 2017, the net cash used in ﬁnancing activities was $32.6 million.
Drawdowns of long-term debt amounted to $11.0 million and repayments of debt amounted to $62.7 million.
Total principal repayments of ﬁnance lease arrangements were $2.0 million and total proceeds from ﬁnance
leases were $33.1 million, which proceeds we used primarily to repay debt related to the applicable vessels.
We also incurred payments of $0.8 million relating to deferred ﬁnance fees for loan facilities. As part of GA
Holdings LLC’s sale of its 5,787,942 remaining shares of our common stock, we repurchased from GA
Holdings LLC 1,435,654 common shares for $11.1 million (excluding professional fees).

For the year ended December 31, 2016, the net cash provided by ﬁnancing activities was $95.6 million.
Drawdowns of long-term debt amounted to $110.0 million and repayments of debt amounted to $42.2 million.
Total principal repayments of ﬁnance lease arrangement were $27.1 million and total proceeds from ﬁnance
lease were $9.3 million. We also incurred payments of $6.0 million relating to deferred ﬁnance fees for loan

61

Voyage charters on the spot market that do not meet the lease deﬁnition (See Note 2.4.1 ‘‘Lease revenue from
voyage charters’’ to our consolidated ﬁnancial statements included in this Annual Report for a description) are
recognized ratably on a load-to-discharge basis (i.e. from when cargo is loaded at the port to when it is
discharged after the next voyage).

Share-based compensation. We grant share-based payment awards, such as restricted stock units, as
incentive-based compensation to certain employees. We granted Stock Appreciation Rights (‘‘SARs’’) to
certain employees and officers in August 2013, March 2014, June 2014, March 2015, January 2016, and
April 2018 (which included dividend equivalent rights). We measure the cost of equity-settled transactions
with employees by reference to the fair value of the equity instruments at the date on which they are granted,
which we calculate according to the Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards
Codiﬁcation Topic No. 718, Compensation — Stock Compensation (‘‘ASC 718’’), see Note 19 (‘‘Share based
compensation’’).

Estimating fair value for share-based payment transactions requires determining the most appropriate valuation
model, which is dependent on the terms and conditions of the grant. This estimate also requires determining
the most appropriate inputs to the valuation model, including the expected life of the award, volatility and
dividend yield, and making certain other assumptions about the award.

Depreciation. Vessels are depreciated on a straight-line basis over their estimated useful economic life from
the date of initial delivery from the shipyard. The useful life of our vessels is estimated at 25 years from the
date of initial delivery from the shipyard. Depreciation is based on cost less estimated residual scrap value.
Residual scrap value is estimated as the lightweight tonnage of each vessel multiplied by the estimated scrap
value per ton. The estimated scrap value is reviewed each year.

Vessel impairment. Vessels and equipment that are ‘‘held and used’’ are assessed for impairment when
events or circumstances indicate the carrying amount of the asset may not be recoverable. When such
indicators are present, a vessel to be held and used is tested for recoverability by comparing the estimate of
future undiscounted net operating cash ﬂows expected to be generated by the use of the vessel over its
remaining useful life and its eventual disposition to its carrying amount. An impairment charge is recognized
if the carrying value is in excess of the estimated future undiscounted net operating cash ﬂows. The
impairment loss is measured based on the excess of the carrying amount over the fair market value of the
asset.

Net operating cash ﬂows are determined by applying various assumptions regarding future revenues net of
commissions, operating expenses, scheduled drydockings, expected off-hire and scrap values. These
assumptions are based on historical trends as well as future expectations. In estimating future revenues, the
Company considers charter rates for each vessel class over the estimated remaining lives of the vessels using
both historical average rates for the Company over the last 5 years, where available, and historical average
one-year time charter rates for the industry over the last 10 years in each case adjusted for inﬂation.
Recognizing that rates tend to be cyclical, and subject to signiﬁcant volatility based on factors beyond our
control, and management believes the use of estimates based on internally forecasted rates and, among other
things, 10-year historical average rates calculated as of the reporting date to be reasonable. Estimated outﬂows
for operating expenses and drydocking requirements are based on historical and budgeted costs and are
adjusted for assumed inﬂation. Utilization is based on historical levels achieved and estimates of a residual
value are consistent with scrap rates used in management’s evaluation of scrap value.

Although management believes that the assumptions used to evaluate potential impairment are reasonable and
appropriate at the time they were made, such assumptions are highly subjective and likely to change, possibly
materially, in the future. There can be no assurance as to how long charter rates and vessel values will remain
at their current levels or whether they will improve by a signiﬁcant degree. If charter rates were to be at
depressed levels, future assessments of vessel impairment would be adversely affected.

In recent years, the market values of vessels have experienced particular volatility, with substantial declines in
many of the charter-free market values, or basic market values, of various vessel classes. As a result, the value
of our vessels may have declined below those vessels’ carrying values, even though we did not impair those

64

Vessel Held For Sale

Ardmore Seatrader
. . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Built
2013

DWT
49,998

Carrying Value as at

Dec 31, 2018
$8,083,405
$8,083,405

Dec 31, 2017
—
—

(1) During 2018, the Ardmore Seatrader was classiﬁed as held for sale. We completed the sale in January

(2)

2019.
In February 1, 2019, the Company agreed terms for the sale of the Ardmore Seamaster. The vessel is
expected to deliver to the buyer in February 2019.
(3) The Ardmore Sealancer was delivered in January 2018.

We estimate that the aggregate carrying value of these vessels exceeded their aggregate basic market value
by approximately $48.0 million as at December 31, 2018, $56.0 million as at December 31, 2017 and
$71.3 million as at December 31, 2016. We believe that 18 of our vessels’ carrying values exceeded the basic
market value as of December 31, 2018, and that 17 of our vessels’ carrying values exceeded the basic market
value as of December 31, 2017 and that 19 of our vessels’ carrying values exceeded the basic market value as
of December 31, 2016. We did not record an impairment of any vessels due to our impairment accounting
policy, as future undiscounted cash ﬂows expected to be earned by such vessels over their operating lives
exceeded the vessels’ carrying amounts. In addition to carrying out our impairment analysis, we performed a
sensitivity analysis for a 10% reduction in forecasted vessel utilization and a 10% reduction in time charter
rates and, in each scenario, the future undiscounted cash ﬂows signiﬁcantly exceeded the carrying value of
each of our vessels.

Contingencies. Claims, suits and complaints arise in the ordinary course of our business. We provide for
contingent liabilities when (i) it is probable that a liability has been incurred at the date of the ﬁnancial
statements and (ii) the amount of the loss can be reasonably estimated.

Financial instruments. We believe that the carrying values of cash and cash equivalents, trade receivables
and trade payables reported in the consolidated balance sheet for those ﬁnancial instruments are reasonable
estimates of their fair values due to their short-term nature. The fair values of long-term debt approximate the
recorded values due to the variable interest rates payable.

Recent Accounting Pronouncements

Please see Note 2.4 ‘‘Summary of signiﬁcant accounting policies’’ to our consolidated ﬁnancial statements
included in Item 18 of this Annual Report for a description of recently issued accounting pronouncements that
may apply to us.

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 the section entitled
‘‘Forward-Looking Statements’’ at the beginning of this Annual 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. Our board of
directors currently consists of seven directors. Each director elected holds office for a three-year term or until
his or her successor has been duly elected and qualiﬁed, except in the event of the director’s death,
resignation, removal or the earlier termination of the director’s term of office. The term of office of each
director is as follows: Class I directors serve for a term expiring at the 2020 annual meeting of shareholders,
Class II directors serve for a term expiring at the 2021 annual meeting of shareholders, and Class III directors
serve for a term expiring at the 2019 annual meeting of the shareholders. Officers are elected from time to

66

time by vote of our board of directors and hold office until a successor is elected. The business address for
each director and executive officer is Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke HM08,
Bermuda.

Name

Mr. Mats Berglund

Mr. Mark Cameron

Mr. Brian Dunne

Mr. Anthony Gurnee

Mr. Reginald Jones

Mr. Curtis McWilliams

Mr. Gernot Ruppelt

Dr. Peter Swift

Mr. Paul Tivnan

Ms. Helen Tveitan de Jong

Age

Class

Position

56

52

52

59

59

63

37

74

39

51

I

Director, Member of the Compensation Committee

N/A Executive Vice President and Chief Operating Officer

III

II

III

III

Director, Chairman of the Audit Committee, Member of the
Nominating and Corporate Governance Committee

Chief Executive Officer, President and Director
Director(1), Member of the Nominating and Corporate Governance
Committee

Chairman of the Board, Chairman of the Nominating and Corporate
Governance Committee, Chairman of the Compensation Committee,
Member of the Audit Committee

N/A Senior Vice President and Chief Commercial Officer

I

Director, Member of the Compensation Committee

N/A Senior Vice President, Chief Financial Officer, Secretary and

Treasurer

II

Director, Member of the Audit Committee

(1) Mr. Jones will not be standing for re-election at the Company’s 2019 annual meeting of shareholders.

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

Mats Berglund has been a director of Ardmore since September 2018. Since June 2012 he has been the Chief
Executive Officer and a Director of Paciﬁc Basin, a Hong Kong-listed owner and operator of drybulk vessels
controlling a ﬂeet of over 200 ships. Mr. Berglund has more than 30 years of shipping experience in Europe,
the United States and Asia, including as Chief Financial Officer and Chief Operating Officer of marine fuel
trader Chemoil Energy and Head of Crude Transportation for Overseas Shipholding Group. Previously, he
served in a variety of leadership roles across the Stena group of companies, culminating as President of Stena
Rederi, Stena’s parent company for all shipping activities. Mr. Berglund holds an Economist (Civilekonom)
degree from the Gothenburg University Business School and is a graduate of the Advanced Management
Program at Harvard. He is an Executive Committee Member of the Hong Kong Shipowners Association and
serves on the North of England P&I Club Members Board.

Mark Cameron is Ardmore’s Executive Vice President and Chief Operating Officer. Mr. Cameron joined
Ardmore as Executive Vice President and Chief Operating Officer and was appointed an alternate director in
June 2010. In addition, Mr Cameron is the current Chairman of the International Parcel Tankers Association
(IPTA), is on the Board of the West of England P&I Club and is also an advisory Board Member to the NGO
Carbon War Room. From 2008 to 2010, Mr. Cameron served as Vice President, Strategy and Planning for
Teekay Marine Services, Teekay Corporation’s internal ship management function. Mr. Cameron spent
11 years at sea rising to the rank of Chief Engineer with Safmarine and later AP Moller, including time served
onboard bulk carriers, salvage tugs, tankers, general cargo, reefer and container ships. Mr. Cameron has held a
number of senior management roles ashore specializing in integrating acquisitions covering all facets of ship
management, as well as sale and purchase, newbuilding supervision, personnel management, procurement,
ﬂeet management and technical supervision.

Brian Dunne has been a director of Ardmore since June 2010. He is also a director of ReAssure Group and
Ark Life Assurance Company (subsidiaries of SwissRe in the UK and Ireland), Aergen Aviation Finance,
Chorus Aviation Capital (Ireland) and AASET 2018-2. He was previously the Chairman of Aviva’s health
insurance business in Ireland, a director of its Irish life and pensions business and a director of several other
private companies. Mr. Dunne was the Chief Financial Officer of ACE Aviation Holdings Inc. (‘‘ACE’’) from
2005 until 2012 and was the President of the company in 2011 and 2012. ACE was the parent holding
company of the reorganized Air Canada and a number of other entities including Aeroplan LP (now AIMIA

67

Inc.) and Air Canada Jazz (now Chorus Aviation Inc.). Mr. Dunne was also a director of Air Canada from its
initial public offering in 2006 until 2008. Prior to joining ACE, Mr. Dunne was Chief Financial Officer and a
director of Aer Lingus Group plc. He started his career at Arthur Andersen in 1987 and became a partner in
1998. Mr. Dunne is a Fellow of the Institute of Chartered Accountants in Ireland and holds a Bachelor of
Commerce degree and a post graduate diploma in Professional Accounting from the University College
Dublin.

Anthony Gurnee has been our President, Chief Executive Officer and a director of Ardmore since 2010.
Between 2000 and 2008, he was the Chief Executive Officer of Industrial Shipping Enterprises, Inc., a
containership and chemical tanker company, and Chief Operating Officer of MTM Group, an operator of
chemical tankers. From 1992 to 1997, he was the Chief Financial Officer of Teekay Corporation, where he led
the company’s ﬁnancial restructuring and initial public offering. Mr. Gurnee began his career as a ﬁnancier
with Citicorp, and he served for six years as a surface line officer in the U.S. Navy, including a tour with
naval intelligence. He is a graduate of the U.S. Naval Academy and earned an MBA at Columbia Business
School, is a CFA charter holder, and a fellow of the Institute of Chartered Shipbrokers.

Reginald Jones has been a director of Ardmore since 2010 and was our Chairman until December 31, 2018.
Mr. Jones is a co-founder and Managing Partner of Greenbriar Equity Group LLC, a private equity ﬁrm
managing over $3 billion of equity capital and an affiliate of which was Ardmore’s largest shareholder from
Ardmore’s founding until November 2017. Prior to founding Greenbriar in 1999, Mr. Jones spent 13 years at
Goldman, Sachs & Co., where he was a Managing Director and Group Head of global transportation
investment banking. Prior to Goldman Sachs, he worked as a consultant at Bain & Company. Mr. Jones
earned a BA from Williams College and an MBA from the Harvard Business School.

Curtis McWilliams was appointed as a director by the board of directors in January 2016 and as our
Chairman effective January 1, 2019. Mr. McWilliams is a real estate industry veteran with over 25 years of
experience in ﬁnance and real estate. He currently serves as the lead Independent Director of Braemar
Hotels & Resorts Inc. and as a member of the RW Holdings NNN REIT, Inc. Board of Directors. He retired
from his position as President and Chief Executive Officer of CNL Real Estate Advisors, Inc. in 2010 after
serving in the role since 2007. Mr. McWilliams was also the President and Chief Executive Officer of
Trustreet Properties Inc. from 1997 to 2007, and a director of the company from 2005 to 2007. He served on
the Board of Directors and as the Audit Committee Chairman of CNL Bank from 1999 to 2004 and has over
13 years of investment banking experience at Merrill Lynch & Co. Mr. McWilliams has a Master’s degree in
Business with a concentration in Finance from the University of Chicago Graduate School of Business and a
Bachelor of Science in Engineering in Chemical Engineering from Princeton University.

Gernot Ruppelt is Ardmore’s Chief Commercial Officer and Senior Vice President. Mr. Ruppelt has been in
charge of Ardmore’s commercial activities since joining as Chartering Director in 2013, and was promoted to
his current position in December 2014. Mr. Ruppelt has extensive commercial and management experience in
the maritime industry. Prior to Ardmore he had been a Projects Broker with Poten & Partners in New York for
ﬁve years and, for seven years before that, Mr. Ruppelt worked for Maersk Broker and A.P. Moller — Maersk
in Copenhagen, Singapore and Germany. Mr. Ruppelt is a director of Anglo Ardmore Ship Management
Limited. He also represents Ardmore at the INTERTANKO Council and as a member of their Worldscale &
Markets Committee. Mr. Ruppelt completed the two-year ‘Maersk International Shipping Education’ program
and graduated from Hamburg Shipping School. He is also a member of the Institute of Chartered Shipbrokers
in London.

Peter Swift has served as a director of Ardmore since its IPO in August 2013. Dr Swift’s career spans more
than 50 years in the maritime industry, and he is presently serving in International non-proﬁt and charitable
directorships, including as the Vice Chairman of the Sailors’ Society and a Trustee of ISWAN, which includes
oversight of Maritime Piracy Humanitarian Response Programme, where he was the former Chairman. He is a
Member of the American Bureau of Shipping and the IMO Committee of the Royal Institution of Naval
Architects and a Director of the Green Award Foundation and the Maritime Industry Foundation. Dr Swift was
previously the Managing Director of INTERTANKO from 2000 to 2010 and a Director of Seascope Shipping
Limited from 1999 to 2001. He was employed by Royal Dutch Shell from 1975 to 1999 in a range of senior,
international, commercial and technical positions. Dr Swift holds a PhD in Transport Economics, an MS in

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Engineering degree from the University of Michigan, and a BSc in Naval Architecture from the University of
Durham. He is a Chartered Engineer, a Fellow of the Royal Institution of Naval Architects and Member of the
Society of Naval Architects and Marine Engineers.

Paul Tivnan is Ardmore’s Senior Vice President, Chief Financial Officer, Secretary and Treasurer. Mr. Tivnan
joined Ardmore in June 2010 and was appointed Chief Financial Officer in December 2012. From 2002 to
2010, he was employed at Ernst & Young in the Financial Services Advisory department specializing in
international tax and corporate structuring. He was a participant in Ernst & Young’s Accelerated Leadership
Program from 2008 to 2010. Mr. Tivnan holds a BA in Accounting and Finance and an MBS in Accounting
each from Dublin City University. He is a graduate of the London Business School Executive Leadership
program, a Fellow of the Institute of Chartered Accountants of Ireland, an Associate of the Irish Taxation
Institute and a member of the Institute of Chartered Shipbrokers.

Helen Tveitan de Jong has been a director of Ardmore since September 2018. She is Chairman and Chief
Executive Officer of Carisbrooke Shipping Holdings Ltd., a specialist owner operator of mini-bulk and project
cargo ships controlling a ﬂeet of 32 ships. Previously, Ms. Tveitan de Jong held a variety of senior ship
ﬁnance roles, including as a founding partner at shipping ﬁnance advisory ﬁrm THG Capital from 2001 to
2007, and has held several positions as interim Finance Director for shipping companies, most notably in the
dry bulk sector, from 2003 to 2017. Ms. Tveitan de Jong graduated with a DRS in Economics from
Rotterdam’s Erasmus University.

B. Compensation of Directors and Senior Management

We paid $2.4 million in aggregate cash compensation to members of our senior executive officers for 2018.
For 2018, each of our non-employee directors annually received cash compensation in the aggregate amount
of $65,000, plus an additional fee of $20,000 for each committee for which a director served as Chairman,
$10,000 for each member of the audit committee and $5,000 for each member of other committees, plus
reimbursements for actual expenses incurred while acting in their capacity as a director. Our Chairman
received an additional $65,000 per year. We paid $551,000 in aggregate compensation to our directors for
2018. Our officers and directors are eligible to receive awards under our equity incentive plan, which is
described below under ‘‘— Equity Incentive Plan.’’ We do not have a retirement plan for our officers or
directors.

We believe that it is important to align the interests of our directors and management with those of our
shareholders. In this regard, we have determined that it generally is beneﬁcial to us and to our shareholders
for our directors and management to have a stake in our long-term performance. We expect that a meaningful
component of the compensation packages for our directors and management will consist of equity interests in
Ardmore in order to promote this alignment of interests.

Equity Incentive Plan

We currently have an equity incentive plan, the 2013 Equity Incentive Plan (the ‘‘plan’’), under which
directors, officers, and employees (including any prospective officer or employee) of us and our subsidiaries
and affiliates, and consultants and service providers to (including persons who are employed by or provide
services to any entity that is itself a consultant or service provider to) us and our subsidiaries and affiliates, as
well as entities wholly-owned or generally exclusively controlled by such persons, may be eligible to receive
incentive stock options, non-qualiﬁed stock options, stock appreciation rights, restricted stock, restricted
stock units, dividend equivalents, unrestricted stock and other equity-based or equity-related awards that the
plan administrator determines are consistent with the purposes of the plan and our interests. Subject to
adjustment for changes in capitalization, the aggregate number of shares of our common stock with respect to
which awards may at any time be granted under the plan will not exceed 8% of the issued and outstanding
shares of our common stock at the time of issuance of the award. The plan is administered by the
compensation committee of our board of directors.

Under the terms of the plan, stock options and stock appreciation rights granted under the plan will have an
exercise price equal to the fair market value of a common share on the date of grant, unless otherwise
determined by the plan administrator, but in no event will the exercise price be less than the fair market value

69

of a common share on the date of grant. Options and stock appreciation rights are exercisable at times and
under conditions as determined by the plan administrator, but in no event will they be exercisable later than
ten years from the date of grant.

The plan administrator may grant shares of restricted stock and awards of restricted stock units subject to
vesting, forfeiture and other terms and conditions as determined by the plan administrator. With respect to
restricted stock units, the award recipient will be paid an amount equal to the number of vested restricted
stock units multiplied by the fair market value of a common share on the date of vesting, which payment may
be paid in the form of cash or common shares or a combination of both, as determined by the plan
administrator. The plan administrator may grant dividend equivalents with respect to grants of restricted
stock units.

Adjustments may be made to outstanding awards in the event of a corporate transaction or change in
capitalization or other extraordinary event. In the event of a ‘‘change in control’’ (as deﬁned in the plan),
unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will
become fully vested and exercisable in full.

Our board of directors may amend or terminate the plan and the plan administrator may amend outstanding
awards, provided that no such amendment or termination may be made that would materially impair any
rights, or materially increase any obligations, of a grantee under an outstanding award without the consent of
the grantee. Shareholder approval of plan amendments may be required under certain circumstances. Unless
terminated earlier by our board of directors, the plan will expire ten years from the date the plan is adopted.

Stock Appreciation Rights

As of December 31, 2018, ASC had granted 1,990,762 SARs (inclusive of 5,779 forfeited SARs) to certain of
its officers and directors under its 2013 Equity Incentive Plan. Under a SAR award, the grantee is entitled to
receive the appreciation of a share of our common stock following the grant of the award. Each SAR provides
for a payment of an amount equal to the excess, if any, of the fair market value of a share of Ardmore’s
common stock at the time of exercise of the SAR over the per share exercise price of the SAR, multiplied by
the number of shares for which the SAR is then exercised. Payment under the SAR will be made in the form
of shares of Ardmore’s common stock, based on the fair market value of a share of Ardmore’s common stock
at the time of exercise of the SAR.

The weighted average exercise price for the SARs outstanding as of December 31, 2018 was $7.72 (2017:
$13.16).

The SAR awards granted prior to 2018 provide that in no event will the appreciation per share for any portion
of the SAR award be deemed to exceed four times (i.e., 400%) the per share exercise price of the SAR. In
other words, the fair market value of a share of our common stock for purposes of calculating the amount
payable under the SARs not deemed to exceed ﬁve times (i.e., 500%) the per share exercise price of the SAR.
Any appreciation in excess of four times the per share exercise price of the SAR will be disregarded for
purposes of calculating the amount payable under the SAR. The SAR awards granted in 2018 did not include
this cap on the maximum appreciation.

As of December 31, 2018, there had been six issuances of SARs: August 2013 (1,078,125 units), March 2014
(22,118 units), June 2014 (5,595 units), March 2015 (37,797 units), January 2016 (205,519 units) and
April 2018 (1,719,733 units). The ﬁrst SARs awards vest and become exercisable ratably over ﬁve years from
the date of grant of the SAR award (i.e., 20% of the shares covered by the SAR award vest on each of the
ﬁrst ﬁve anniversaries of the grant date), and the second, third, fourth, ﬁfth and sixth SAR awards are
scheduled to vest and become exercisable ratably over three years from the date of grant of the SAR award
(i.e., 33% of the shares covered by the SAR award vest on each of the ﬁrst three anniversaries of the grant
date), subject to, and conditioned upon, the grantee’s continued service as an employee, officer or director of
us or one of our subsidiaries or affiliates.

However, vesting on all SAR awards up to July 31, 2016 was subject to the market condition that the fair
market value of a share of our common stock is equal to more than two times the SAR’s per share exercise
price and has remained above such amount for 30 consecutive days. On that date the vesting reverted to being
solely dependent on time of service.

70

On April 4, 2018 ASC cancelled the 1,078,125 SARs awarded on August 1, 2013 (the ‘‘IPO SARs’’), which
had a per share exercise price signiﬁcantly in excess of the current fair market value of a share of ASC’s
common stock and replaced the IPO SARs with new awards of 1,719,733 SARs (the ‘‘New SARs’’) that will
vest in three equal annual tranches. The New SARs have a contractual term of 7 years and provide for certain
dividend equivalent rights, pursuant to which the holder will be entitled upon vesting of the SARs to payment
in the form of additional shares equal to the value of any cash dividends declared and payable during the
applicable vesting period with respect to the shares underlying the portion of the SARs that vest. The New
SARs do not have a market condition and were valued using the Black-Scholes model.

The SAR awards may receive accelerated vesting in cases of termination of service due to death or disability
or in connection with a change of control of the Company. The SAR awards have a term of seven years from
the date of grant and in no event will the SAR be exercisable to any extent following the seventh anniversary
of the grant date. The SAR awards are subject to adjustment in the event of certain changes in capitalization
or other signiﬁcant corporate events, as more fully set forth in the equity incentive plan document. Please see
Note 19 ‘‘Share based compensation’’ to our consolidated ﬁnancial statements included in this Annual Report
for additional information about the SAR awards.

C. Board Practices

Our board of directors currently consists of seven directors, ﬁve of whom, Mats Berglund, Brian Dunne,
Curtis McWilliams, Peter Swift, and Helen Tveitan de Jong, have been determined by our board of directors
to be independent under the rules of the New York Stock Exchange and the rules and regulations of the SEC.
Helen Tveitan de Jong and Mats Berglund were appointed to the board of directors in September 2018,
replacing Albert Enste and Robert McIlwraith, who retired from the board. Our Audit Committee consists of
Brian Dunne, as Chairman, Curtis McWilliams and Helen Tveitan de Jong. Each member of our Audit
Committee is ﬁnancially literate under the current listing standards of the New York Stock Exchange and the
SEC. Our board of directors has determined that Mr. Dunne qualiﬁes as an ‘‘audit committee ﬁnancial expert’’
as such term is deﬁned under SEC rules. The Audit Committee, among other things, reviews our external
ﬁnancial reporting, engages our external auditors, and oversees our ﬁnancial reporting procedures and the
adequacy of our internal accounting controls. The Nominating and Corporate Governance Committee consists
of Curtis McWilliams as Chairman, and Brian Dunne. The Nominating and Corporate Governance Committee
is responsible for recommending to the board of directors nominees for director and directors for appointment
to board committees and advising the board with regard to corporate governance practices. The Compensation
Committee consists of Curtis McWilliams, as Chairman, Peter Swift and Mats Berglund. The Compensation
Committee oversees our equity incentive plan and recommends director and senior employee compensation.
Our shareholders may also nominate directors in accordance with the procedures set forth in our bylaws.
There are no service contracts between us and any of our directors providing for beneﬁts upon termination of
their employment or service. Each of the committees is currently comprised of independent members and
operates under a written charter adopted by the board of directors. All of the committee charters are available
under ‘‘Corporate Governance’’ in the Investors section of our website at www.ardmoreshipping.com.

D. Employees

As of December 31, 2018, approximately 1,076 seagoing staff serve on the vessels that we manage and 49
permanent full-time staff and 3 part-time staff serve on shore. This compares with approximately 1,060
seafarers and approximately 46 staff on shore as of December 31, 2017. Many of our seafarers employed by
our ship managers are unionized under various jurisdictions and are employed under various collective
bargaining agreements that expose us to a risk of potential labor unrest at times when those collective
bargaining agreements are being re-negotiated.

We have entered into employment agreements with four of our executives: Mark Cameron, our Executive Vice
President and Chief Operating Officer; Anthony Gurnee, our President and Chief Executive Officer; Gernot
Ruppelt, our Senior Vice President and Chief Commercial Officer; and Paul Tivnan, our Senior Vice President
and Chief Financial Officer. These employment agreements became effective as of August 1, 2013 and
terminate in accordance with the terms of such agreements. Pursuant to the terms of their respective
employment agreements, our executive officers are prohibited from disclosing or unlawfully using any of our
material conﬁdential information. The employment agreements also include one year non-solicitation and one
year non-compete clauses following the cessation of the employee’s employment with us.

71

The employment agreements require that we maintain director and officer insurance and that we indemnify
and hold the employee harmless against all expenses, liability and loss (including reasonable and necessary
attorneys’ fees, judgments, ﬁnes and amounts paid in settlement) in connection with any threatened or pending
action, suit or proceeding, to which the employee is a party or is threatened to be made a party as a result of
the employee’s employment with us. The indemniﬁcation provisions exclude fraud, willful misconduct or
criminal activity on the employee’s behalf.

E. Share Ownership

The total amount of common stock owned by all of our officers and directors as a group is set forth below in
Item 7. (‘‘Major Shareholders and Related Party Transactions — A. Major Shareholders’’).

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth information regarding beneﬁcial ownership, as of January 31, 2019 (except as
otherwise noted), of our common stock by:

•

•

each person or entity known by us to beneﬁcially own 5% or more of our common stock; and

all our current directors and executive officers and senior management as a group.

The information provided in the table is based on information ﬁled with the SEC and information provided to
us.

The number of shares beneﬁcially owned by each person, entity, director, executive officer or other member of
senior management is determined under SEC rules and the information is not necessarily indicative of
beneﬁcial ownership for any other purpose. Under SEC rules, a person or entity beneﬁcially owns any shares
as to which the person or entity has or shares voting or investment power. In addition, a person or entity
beneﬁcially owns any shares that the person or entity has the right to acquire as of the date 60 days after
January 31, 2019 through the exercise of any stock option or other right; however, any such shares are not
deemed outstanding for the purpose of computing the percentage ownership of any other person. Unless
otherwise indicated, each person or entity has sole voting and investment power (or shares such powers with
his or her spouse) with respect to the shares set forth in the following table.

Shares Beneﬁcially Owned

Identity of person or group
Russell Investments Group Ltd (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donald Smith & Co., Inc. (3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boston Partners (4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Bank of New York Mellon Corporation (5)
. . . . . . . . . . . . . . . . . . . .
Royce & Associates LP (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BlackRock, Inc. (7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dimensional Fund Advisors LP (8)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
All directors and executive officers as a group . . . . . . . . . . . . . . . . . . . .

Number
3,112,752
3,041,010
2,148,566
2,124,098
2,067,444
1,903,432
1,680,982
*

Percentage(1)
9.40%
9.19%
6.49%
6.42%
6.25%
5.75%
5.08%
*

(1) Based on 33,097,831 shares of common stock outstanding on January 31, 2019.
(2) This information is based on the Schedule 13G ﬁled with the SEC on January 29, 2019.
(3) This information is based on the Schedule 13G ﬁled with the SEC on February 8, 2019. According to
this Schedule 13G, Donald Smith & Co., Inc. possessed sole voting power over 2,780,282 shares and
sole dispositive power over 3,041,010 shares; Donald Smith Long/Short Equities Fund, L.P. possessed
sole voting power over 9,230 shares and sole dispositive power 3,041,010 shares; Jon Hartsel possessed
sole voting power over 18,527 shares and sole dispositive power over 3,041,010 shares; and Kamal Shah
possessed sole voting power over 3,200 shares and sole dispositive power over 3,041,010 shares.

(4) This information is based on the Amendment No. 1 to Schedule 13G ﬁled with the SEC on February 12,

2019.

(5) This information is based on the Schedule 13G ﬁled with the SEC on February 4, 2019. According to

72

this Schedule 13G, The Bank of New York Mellon Corporation possessed sole voting power over
2,098,919 shares, sole dispositive power over 2,002,209 shares and shared dispositive power over
121,889 shares; BNY Mellon IHC, LLC possessed sole voting power over 1,920,765 shares, sole
dispositive power over 1,824,055 shares and shared dispositive power over 121,889 shares; and MBC
Investments Corporation possessed sole voting power over 1,920,765 shares, sole dispositive power over
1,824,055 shares and shared dispositive power over 121,889 shares.

(6) This information is based on the Amendment No. 3 to Schedule 13G ﬁled with the SEC on January 16,

2019.

(7) This information is based on the Schedule 13G ﬁled with the SEC on February 8, 2019.
(8) This information is based on the Schedule 13G ﬁled with the SEC on February 8, 2019.
*

Less than 1% of outstanding shares of our common stock.

As of January 31, 2019, we had two shareholders of record located in the United States, one of which is
CEDE & CO., a nominee of The Depository Trust Company, which held an aggregate of 32,975,511 shares of
our common stock, representing approximately 99.63% of our outstanding shares of common stock. We
believe that the shares held by CEDE & CO. include shares of common stock beneﬁcially owned by both
United States and non-U.S. beneﬁcial owners.

Our major shareholders have the same voting rights as our other shareholders. No corporation or foreign
government or other natural or legal person owns more than 50% of our outstanding common stock. We are
not aware of any arrangements, the operation of which may at a subsequent date result in a change in control
of Ardmore.

B. Related Party Transactions

Ardmore Shipping Corporation was incorporated under the laws of the Republic of the Marshall Islands in
May 2013. We commenced business operations through our predecessor company, Ardmore Shipping LLC, in
April 2010. In August 2013, we completed our IPO of shares of our common stock. Prior to our IPO, GA
Holdings LLC, who was our sole shareholder, exchanged its 100% interest in Ardmore Shipping LLC for
8,049,500 shares of Ardmore Shipping Corporation, and Ardmore Shipping LLC became a wholly owned
subsidiary of Ardmore Shipping Corporation. In November 2015, GA Holdings LLC sold 4,000,000 of its
shares of our common stock in an underwritten public offering. In June 2016, we completed a public offering
of 7,500,000 common shares, of which GA Holdings LLC purchased 1,277,250 shares at the public offering
price. In November 2017, GA Holdings LLC disposed of all of its 5,787,942 common shares, of which
5,579,978 shares were sold in an underwritten public secondary offering, 85,654 shares were repurchased by
us in a private transaction, and 122,310 shares were distributed to certain of its members, including Anthony
Gurnee, our chief executive officer and a member of our board of directors. In addition to the 85,654 shares
we repurchased from GA Holdings LLC in a private transaction, we also purchased from the underwriter
1,350,000 shares of our common stock that were sold by GA Holdings LLC in the secondary offering, with
the price of all such repurchases by us being equal to the price per share at which GA Holdings LLC sold
shares to the underwriters in the public offering. Prior to the November 2017 secondary offering, two
members of our board of directors, Reginald Jones and Niall McComiskey, were affiliated with our largest
shareholder, GA Holdings LLC. Following the offering, Niall McComiskey resigned from our board of
directors. Reginald Jones remained a member of our board of directors and does not intend to stand for re-
election at our annual shareholders meeting in 2019.

Any transaction involving the payment of compensation to a director or officer in connection with their duties
to Ardmore are not related party transactions. Please see Item 6.A ‘‘Directors, Senior Management and
Employees-Directors and Senior Management.’’

C. Interest of Experts and Council

Not applicable.

73

Item 8. Financial Information

A. Consolidated Financial Statements and Other Financial Information

See Item 18.

Legal Proceedings

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the
normal course of business, we are not at present party to any legal proceedings or aware of any proceedings
against us, or contemplated to be brought against us, that would have a material effect on our business,
ﬁnancial position, results of operations or liquidity. We maintain insurance policies with insurers in amounts
and with coverage and deductibles as our board of directors believes are reasonable and prudent. We expect
that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if
lacking merit, could result in the expenditure of signiﬁcant ﬁnancial and managerial resources.

Dividend Policy

Under our dividend policy established in September 2015, we expect to pay our shareholders quarterly
dividends of 60% of our Earnings from Continuing Operations, which represents our earnings per share
reported under U.S. GAAP as adjusted for unrealized and realized gains and losses and extraordinary items.
Our board of directors may review and amend our dividend policy from time to time in light of our plans for
future growth and other factors. In addition, our ability to pay dividends will be subject to the amount of cash
reserves established by our board of directors for the conduct of our business, restrictions in our credit
facilities and the provisions of the laws of the Marshall Islands, as well as the other limitations set forth in the
section of this Annual Report entitled ‘‘Risk Factors’’. On April 2, 2015, we introduced our Dividend
Reinvestment Plan. The plan allows existing shareholders to purchase additional common shares by
automatically reinvesting all or any portion of the cash dividends paid on common shares held by the plan
participant.

B. Signiﬁcant Changes

Not Applicable.

Item 9. The Offer and Listing

A. Offer and Listing Details

Shares of our common stock trade on the New York Stock Exchange under the symbol ‘‘ASC’’.

B. Plan of Distribution

Not applicable.

C. Markets

Shares of our common stock trade on the New York Stock Exchange under the symbol ‘‘ASC’’.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

74

B. Memorandum and Articles of Association

Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws have been ﬁled as
Exhibits 3.1 and 3.2, respectively, to Form F-1/A (Registration Number 333-189714), declared effective by the
Securities and Exchange Commission on July 31, 2013. The information contained in these exhibits is
incorporated by reference into this Annual Report.

The rights, preferences and restrictions attaching to our shares of common stock are described in the section
entitled ‘‘Description of Capital Stock’’ of our Registration Statement on Form F-3 (File No. 333-227129),
ﬁled with the SEC on August 31, 2018, and hereby incorporated by reference into this Annual Report.

There are no limitations on the rights to own our securities, including the rights of non-resident or foreign
shareholders to hold or exercise voting rights on the securities, imposed by the laws of the Republic of The
Marshall Islands or by our Articles of Incorporation or Bylaws.

C. Material Contracts

Attached or incorporated by reference as exhibits to this Annual Report are the contracts we consider to be
both material and not entered into in the ordinary course of business. Descriptions are included in Note 8
(‘‘Debt’’) to our consolidated ﬁnancial statements included in this Annual Report with respect to our credit
facilities and Note 9 (‘‘Finance Leases’’) with respect to our ﬁnance leases. Other than these contracts, we
have not entered into any other material contracts in the two years immediately preceding the date of this
Annual Report, other than contracts entered into in the ordinary course of business.

D. Exchange Controls

Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including
foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to
non-resident holders of our common shares.

E. Taxation of Holders

The following is a discussion of the material Marshall Islands and U.S. federal income tax considerations
that may be relevant to us and our shareholders. This discussion does not purport to deal with the tax
consequences of owning common stock to all categories of investors, some of which, such as dealers
in securities or commodities, ﬁnancial institutions, insurance companies, tax-exempt organizations,
U.S. expatriates, persons liable for the alternative minimum tax, persons who hold common stock as part of a
straddle, hedge, conversion transaction or integrated investment, U.S. Holders whose functional currency is
not the United States dollar, investors required to recognize income for U.S. federal income tax purposes no
later than when such income is included on an ‘‘applicable ﬁnancial statement,’’ investors that own, actually
or under applicable constructive ownership rules, 10% or more of the Company’s common stock and persons
who own our stock through an ‘‘applicable partnership interest’’, may be subject to special rules. This
discussion deals only with holders who hold the common stock as a capital asset. You are encouraged to
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 common stock.

Marshall Islands Tax Considerations

The following are the material Marshall Islands tax consequences of our activities to us and of our common
shares to our shareholders. We are incorporated in the Marshall Islands. Under current Marshall Islands law,
we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed
upon payments of dividends by us to our shareholders.

U.S. Federal Income Tax Considerations

The following are the material U.S. federal income tax consequences to (a) us and (b) U.S. Holders and
Non-U.S. Holders, each as deﬁned below, of the common shares. The following discussion of U.S. federal
income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and
proposed regulations issued by the United States Department of the Treasury (‘‘Treasury Regulations’’), all of
which are subject to change, possibly with retroactive effect. The discussion below is based, in part, on the

75

description of our business as described in this annual report and assumes that we conduct our business as
described herein. References in the following discussion to the ‘‘Company’’, ‘‘we’’, ‘‘our’’ and ‘‘us’’ are to
Ardmore Shipping Corporation and its subsidiaries on a consolidated basis.

U.S. Federal Income Taxation of Operating Income: In General

We anticipate that we will earn substantially all our income from the hiring or leasing of vessels for use on a
time charter basis, from participation in a pool or from the performance of services directly related to those
uses, all of which we refer to as ‘‘shipping income’’.

Unless we qualify from an exemption from U.S. federal income taxation under either an applicable tax treaty
or the rules of Section 883 of the Code (‘‘Section 883’’), as discussed below, a foreign corporation such as the
Company will be subject to United States federal income taxation on its ‘‘shipping income’’ that is treated as
derived from sources within the United States (‘‘U.S. source shipping income’’). For U.S. federal income tax
purposes, ‘‘U.S. source shipping income’’ includes 50% of shipping income that is attributable to
transportation that begins or ends, but that does not both begin and end, in the United States.

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

Shipping income attributable to transportation exclusively between U.S. ports is considered to be 100%
derived from U.S. sources. However, we are not permitted by United States law to engage in the
transportation of cargoes that produces 100% U.S. source shipping income.

Exemption of Operating Income from U.S. Federal Income Taxation

Under Section 883 and the Treasury Regulations promulgated thereunder, a foreign corporation will be exempt
from U.S. federal income taxation of its U.S. source shipping income if:

(1)

it is organized in a ‘‘qualiﬁed foreign country’’ which is one that grants an ‘‘equivalent exemption’’
from tax to corporations organized in the United States in respect of each category of shipping
income for which exemption is being claimed under Section 883; and

(2) one of the following tests is met:

(A) more than 50% of the value of its shares is beneﬁcially owned, directly or indirectly, by
‘‘qualiﬁed shareholders’’, which as deﬁned includes individuals who are ‘‘residents’’ of a
qualiﬁed foreign country, to which we refer as the ‘‘50% Ownership Test’’; or

(B)

its shares are ‘‘primarily and regularly traded on an established securities market’’ in a qualiﬁed
foreign country or in the United States, to which we refer as the ‘‘Publicly-Traded Test’’.

The Marshall Islands, the jurisdiction where we and our ship-owning subsidiaries are incorporated, has been
officially recognized by the IRS, as a qualiﬁed foreign country that grants the requisite ‘‘equivalent
exemption’’ from tax in respect of each category of shipping income we earn and currently expect to earn in
the future. Therefore, we will be exempt from U.S. federal income taxation with respect to our U.S. source
shipping income if we satisfy either the 50% Ownership Test or the Publicly-Traded Test.

We believe that we satisfy the Publicly-Traded Test for our 2018 taxable year and therefore qualify for an
exemption from tax under Section 883. We anticipate that we will continue to satisfy the Publicly-Traded Test
but, as discussed below, this is a factual determination made on an annual basis. We do not currently
anticipate circumstances under which we would not be able to satisfy the 50% Ownership Test.

Publicly-Traded Test

The Treasury Regulations under Section 883 provide, in pertinent part, that shares of a foreign corporation
will be considered to be ‘‘primarily traded’’ on an established securities market in a country if the number of
shares of each class of stock that are traded during any taxable year on all established securities markets in
that country exceeds the number of shares in each such class that are traded during that year on established
securities markets in any other single country. The Company’s common shares, which constitute its sole class
of issued and outstanding stock are ‘‘primarily traded’’ on the New York Stock Exchange (‘‘NYSE’’).

76

Under the Treasury Regulations, our common shares will be considered to be ‘‘regularly traded’’ on an
established securities market if one or more classes of our shares representing more than 50% of our
outstanding stock, by both total combined voting power of all classes of stock entitled to vote and total value,
are listed on such market, (the ‘‘listing threshold’’). Since all our common shares are listed on the NYSE, we
satisfy the listing threshold.

The Treasury Regulations also require that with respect to each class of stock relied upon to meet the listing
threshold, (i) such class of stock traded on the market, other than in minimal quantities, on at least 60 days
during the taxable year or one-sixth of the days in a short taxable year (‘‘trading frequency test’’); and (ii) the
aggregate number of shares of such class of stock traded on such market during the taxable year must be at
least 10% of the average number of shares of such class of stock outstanding during such year or as
appropriately adjusted in the case of a short taxable year (the ‘‘trading volume test’’). We believe that we
satisfy the trading frequency and trading volume tests with respect to the 2018 taxable year. Even if this were
not the case, the Treasury Regulations provide that the trading frequency and trading volume tests will be
deemed satisﬁed if, as is the case with our common shares, such class of stock is traded on an established
securities market in the United States and such shares are regularly quoted by dealers making a market in
such shares.

Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that a class of shares will
not be considered to be ‘‘regularly traded’’ on an established securities market for any taxable year in which
50% or more of the vote and value of the outstanding shares of such class are owned, actually or
constructively under speciﬁed share attribution rules, on more than half the days during the taxable year by
persons who each own 5% or more of the vote and value of such class of outstanding stock (‘‘5% Override
Rule’’).

For purposes of being able to determine the persons who actually or constructively own 5% or more of the
vote and value of our common shares (‘‘5% Shareholders’’) the Treasury Regulations permit us to rely on
those persons that are identiﬁed on Schedule 13G and Schedule 13D ﬁlings with the United States Securities
and Exchange Commission, as owning 5% or more of our common shares. The Treasury Regulations further
provide that an investment company which is registered under the Investment Company Act of 1940, as
amended, will not be treated as a 5% Shareholder for such purposes.

In the event the 5% Override Rule is triggered, the Treasury Regulations provide that the 5% Override Rule
will nevertheless not apply if we can establish that within the group of 5% Shareholders, qualiﬁed
shareholders (as deﬁned for purposes of Section 883) own sufficient number of shares to preclude
non-qualiﬁed shareholders in such group from owning 50% or more of our common shares for more than half
the number of days during the taxable year.

We believe that we satisfy the Publicly-Traded Test for the 2018 taxable year and were not subject to the 5%
Override Rule, and we intend to take that position on our 2018 U.S. federal income tax returns. However,
there are factual circumstances beyond our control that could cause us to lose the beneﬁt of the Section 883
exemption for any future taxable year. For example, there is a risk that we could no longer qualify for
Section 883 exemption for a particular taxable year if one or more 5% Shareholders were to own 50% or
more of our outstanding common shares on more than half the days of the taxable year. Under these
circumstances, we would be subject to the 5% Override Rule and we would not qualify for the Section 883
exemption unless we could establish that our shareholding during the taxable year was such that non-qualiﬁed
5% Shareholders did not own 50% or more of our common shares on more than half the days of the taxable
year. Under the Treasury Regulations, we would have to satisfy certain substantiation requirements regarding
the identity of our shareholders. These requirements are onerous and there is no assurance that we would be
able to satisfy them. Given the factual nature of the issues involved, we can give no assurances in regards to
our or our subsidiaries’ qualiﬁcation for the Section 883 exemption.

Taxation in Absence of Section 883 Exemption

If the beneﬁts of Section 883 are unavailable, our U.S. source shipping income would be subject to a 4% tax
imposed by Section 887 of the Code on a gross basis, without the beneﬁt of deductions, or the ‘‘4% gross
basis tax regime’’, to the extent that such income is not considered to be ‘‘effectively connected’’ with the
conduct of a United States trade or business, as described below. Since under the sourcing rules described

77

above, no more than 50% of our shipping income would be treated as being U.S. source shipping income, 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.

To the extent our U.S. source shipping income is considered to be ‘‘effectively connected’’ with the conduct of
a U.S. trade or business, as described below, any such ‘‘effectively connected’’ U.S. source shipping income,
net of applicable deductions, would be subject to U.S. federal income tax, currently imposed at a rate of 21%.
In addition, we would generally be subject to the 30% ‘‘branch proﬁts’’ tax 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 our U.S. trade or business.

Our United States source shipping income would be considered ‘‘effectively connected’’ with the conduct of a
United States trade or business only if:

•

•

we have, or are considered to have, a ﬁxed place of business in the United States involved in the
earning of U.S. source shipping income; and

substantially all of our U.S. source shipping income 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, any vessel sailing to or from
the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our
shipping operations and other activities, it is anticipated that none of our U.S. source shipping income will be
‘‘effectively connected’’ with the conduct of a U.S. trade or business.

United States Taxation of Gain on Sale of Vessels

Regardless of whether we qualify for an exemption under Section 883, we will not be subject to U.S. federal
income tax with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside
of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered
to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the
vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be
considered to occur outside of the United States.

U.S. Federal Income Taxation of United States Holders

As used herein, the term ‘‘U.S. Holder’’ means a holder that for U.S. federal income tax purposes is a
beneﬁcial owner of our common shares and is an individual U.S. citizen or resident, a U.S. corporation or
other U.S. entity taxable as a corporation, an estate the income of which is subject to U.S. 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.

If a partnership holds the common shares, 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 the
common shares, you are encouraged to consult your tax advisor.

Distributions

Subject to the discussion of passive foreign investment companies below, any distributions made by us with
respect to our common shares 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.

Distributions in excess of such 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 our common shares and thereafter as capital gain. Because we are
not a U.S. corporation, U.S. Holders that are corporations will generally not be entitled to claim a dividends
received deduction with respect to any distributions they receive from us. Dividends paid with respect to our

78

common shares will generally be treated as foreign source dividend income and will generally constitute
‘‘passive category income’’ for purposes of computing allowable foreign tax credits for U.S. foreign tax credit
purposes.

Subject to applicable limitations, including a holding period requirement, dividends paid on our common
shares to certain non-corporate U.S. Holders will generally be treated as ‘‘qualiﬁed dividend income’’ that is
taxable to such U.S. Holders at preferential tax rates provided that (1) the common shares are readily tradable
on an established securities market in the U.S. (such as the NYSE, on which our common shares are traded);
and (2) we are not a passive foreign investment company for the taxable year during which the dividend is
paid or the immediately preceding taxable year (which, as discussed below, we do not believe that we are or
will be for any future taxable years).

There is no assurance that any dividends paid on our common shares will be eligible for these preferential
rates in the hands of such non-corporate U.S. Holders, although, as described above, we expect such dividends
to be so eligible provided an eligible non-corporate U.S. Holder meets all applicable requirements. Any
dividends paid by us which are not eligible for these preferential rates will be taxed as ordinary income to a
non-corporate U.S. Holder.

Special rules may apply to any ‘‘extraordinary dividend’’ — generally, a dividend in an amount which is equal
to or in excess of 10% of a shareholder’s adjusted tax basis in a common share — paid by us. If we pay an
‘‘extraordinary dividend’’ on our common shares that is treated as ‘‘qualiﬁed dividend income’’, then any loss
derived by certain non-corporate U.S. Holders from the sale or exchange of such common shares will be
treated as long-term capital loss to the extent of such dividend.

Sale, Exchange or Other Disposition of Common Shares

Assuming we do not constitute a passive foreign investment company for any taxable year, a U.S. Holder
generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common shares
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 tax basis in such shares. Such gain or loss will be treated
as long-term capital gain or loss if the U.S. Holder’s holding period 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. Long-term capital gains of certain non-corporate
U.S. Holders are currently eligible for reduced rates of taxation. A U.S. Holder’s ability to deduct capital
losses is subject to certain limitations.

3.8% Tax on Net Investment Income

A U.S. Holder that is an individual, estate, or, in certain cases, a trust, will generally be subject to a 3.8% tax
on the lesser of (1) the U.S. Holder’s net investment income for the taxable year and (2) the excess of the
U.S. Holder’s modiﬁed adjusted gross income for the taxable year over a certain threshold (which in the case
of individuals will be between $125,000 and $250,000). A U.S. Holder’s net investment income will generally
include distributions we make on the common stock which are treated as dividends for U.S. federal income
tax purposes and capital gains from the sale, exchange or other disposition of the common stock. This tax is
in addition to any income taxes due on such investment income.

Passive Foreign Investment Company Status and Signiﬁcant Tax Consequences

Special U.S. federal income tax rules apply to a U.S. Holder that holds shares in a PFIC for U.S. federal
income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable
year in which such holder holds our common shares, either:

•

•

at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends,
interest, capital gains and rents derived other than in the active conduct of a rental business); or

at least 50% of the average value of our assets during such taxable year produce, or are held for the
production of, passive income.

For purposes of determining whether we are a PFIC, cash held by us will be treated as passive assets. In
addition, we will be treated as earning and owning our proportionate share of the income and assets,

79

respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the
subsidiary’s stock. Income earned, or deemed earned, by us in connection with the performance of services
would not constitute passive income. By contrast, rental income would generally constitute ‘‘passive income’’
unless we were treated under speciﬁc rules as deriving our rental income in the active conduct of a trade or
business.

Based on our current and anticipated operations, we do not believe that we are currently a PFIC or will be
treated as a PFIC for any future taxable year. Our belief is based principally on the position that the gross
income we derive from time chartering activities should constitute services income, rather than rental income.
Accordingly, such income should not constitute passive income, and the assets that we own and operate in
connection with the production of such income, in particular, the vessels, should not constitute passive assets
for purposes of determining whether we are a PFIC. There is substantial legal authority supporting this
position consisting of case law and IRS pronouncements concerning the characterization of income derived
from time charters as services income for other tax purposes. However, there is also authority which
characterizes time charter income as rental income rather than services income for other tax purposes.
Accordingly, no assurance can be given that the IRS or a court of law will accept this position, and there is a
risk that the IRS or a court of law could determine that we are a PFIC. In addition, although we intend to
conduct our affairs in a manner to avoid being classiﬁed as a PFIC with respect to any taxable year, we
cannot assure you that the nature of our operations will not change in the future.

As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a United States
Holder would be subject to different taxation rules depending on whether the United States Holder makes an
election to treat us as a ‘‘Qualiﬁed Electing Fund’’ (‘‘QEF election’’). As an alternative to making a QEF
election, a United States Holder should be able to make a ‘‘mark-to-market’’ election with respect to our
common shares, as discussed below. A United States holder of shares in a PFIC will be required to ﬁle an
annual information return on IRS Form 8621 containing information regarding the PFIC as required by
applicable Treasury Regulations.

Taxation of United States Holders Making a Timely QEF Election

If a United States Holder makes a timely QEF election, which United States Holder we refer to as an
‘‘Electing Holder’’, the Electing Holder must report for United States federal income tax purposes its pro rata
share of our ordinary earnings and net capital gain, if any, for each of our taxable years during which we are
a PFIC that ends with or within the taxable year of the Electing Holder, regardless of whether distributions
were received from us by the Electing Holder. No portion of any such inclusions of ordinary earnings will be
treated as ‘‘qualiﬁed dividend income’’. Net capital gain inclusions of certain non-corporate United States
Holders would be eligible for preferential capital gains tax rates. The Electing Holder’s adjusted tax basis in
the common shares will be increased to reﬂect any income included under the QEF election. Distributions of
previously taxed income will not be subject to tax upon distribution but will decrease the Electing Holder’s
tax basis in the common shares. An Electing Holder would not, however, be entitled to a deduction for its
pro rata share of any losses that we incur with respect to any taxable year. An Electing Holder would
generally recognize capital gain or loss on the sale, exchange or other disposition of our common shares. A
U.S. Holder would make a timely QEF election for our common shares by ﬁling one copy of IRS Form 8621
with its United States federal income tax return for the ﬁrst year in which it held such shares when we were a
PFIC. If we determine that we are a PFIC for any taxable year, we would provide each United States Holder
with all necessary information in order to make the QEF election described above.

Taxation of United States Holders Making a Mark-to-Market Election

Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate will be the case,
our shares are treated as ‘‘marketable stock’’, a United States Holder would be allowed to make a ‘‘mark-to-
market’’ election with respect to our common shares, provided the United States Holder completes and ﬁles
IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election
is made, the United States Holder generally would include as ordinary income in each taxable year the excess,
if any, of the fair market value of the common shares at the end of the taxable year over such Holder’s
adjusted tax basis in the common shares. The U.S. Holder would also be permitted an ordinary loss in respect
of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common shares over its fair market value
at the end of the taxable year, but only to the extent of the net amount previously included in income as a

80

result of the mark-to-market election. A U.S. Holder’s tax basis in its common shares would be adjusted to
reﬂect any such income or loss amount recognized. In a year when we are a PFIC, any gain realized on the
sale, exchange or other disposition of our common shares would be treated as ordinary income, and any loss
realized on the sale, exchange or other disposition of the common shares would be treated as ordinary loss to
the extent that such loss does not exceed the net mark-to-market gains previously included by the U.S. Holder.

Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election

If we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF
election or a ‘‘mark-to-market’’ election for that year, whom we refer to as a ‘‘Non-Electing Holder’’, would
be subject to special rules with respect to (i) any excess distribution (i.e., the portion of any distributions
received by the Non-Electing Holder on the common shares in a taxable year in excess of 125% of the
average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if
shorter, the Non-Electing Holder’s holding period for the common shares), and (ii) any gain realized on the
sale, exchange or other disposition of our common shares. Under these special rules:

•

•

•

the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate
holding period for the common shares;

the amount allocated to the current taxable year, and any taxable year prior to the ﬁrst taxable year
in which we were a PFIC, would be taxed as ordinary income and would not be ‘‘qualiﬁed dividend
income’’; and

the amount allocated to each of the other taxable years would be subject to tax at the highest rate of
tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed
tax deferral beneﬁt would be imposed with respect to the resulting tax attributable to each such other
taxable year.

U.S. Federal Income Taxation of Non-U.S. Holders

As used herein, the term ‘‘Non-U.S. Holder’’ means a holder that, for U.S. federal income tax purposes, is a
beneﬁcial owner of common shares (other than a partnership) that is not a U.S. Holder.

If a partnership holds our common shares, 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
common shares, you are encouraged to consult your tax advisor.

Dividends on Common Shares

A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on dividends
received from us with respect to our common shares, unless that income is effectively connected with the
Non-U.S. Holder’s conduct of a trade or business in the United States.

Sale, Exchange or Other Disposition of Common Shares

A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on any gain
realized upon the sale, exchange or other disposition of our common shares, unless:

•

•

the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the
U.S.; or

the Non-U.S. Holder is an individual who is present in the U.S. for 183 days or more during the
taxable year of disposition and other conditions are met.

Income or Gains Effectively Connected with a U.S. Trade or Business

If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, dividends
on the common shares and gain from the sale, exchange or other disposition of the shares, that is effectively
connected with the conduct of that trade or business (and, if required by an applicable income tax treaty, is
attributable to a U.S. permanent establishment), 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, in
the case of a corporate Non-U.S. Holder, its 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 as may be speciﬁed by an applicable U.S. income tax treaty.

81

Backup Withholding and Information Reporting

In general, dividend payments, or other taxable distributions, and the payment of the gross proceeds on a sale
of our common shares, made within the U.S. to a non-corporate U.S. Holder will be subject to information
reporting. Such payments or distributions may also be subject to backup withholding if the non-corporate
U.S. Holder:

•

•

•

fails to provide an accurate taxpayer identiﬁcation number;

is notiﬁed by the IRS that it has failed to report all interest or dividends required to be shown on its
federal income tax returns; or

in certain circumstances, fails to comply with applicable certiﬁcation requirements.

Non-U.S. Holders may be required to establish their exemption from information reporting and backup
withholding with respect to dividends payments or other taxable distribution on our common shares by
certifying their status on an applicable IRS Form W-8. If a Non-U.S. Holder sells our common shares to or
through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and
information reporting unless the Non-U.S. Holder certiﬁes that it is a non-U.S. person, under penalties of
perjury, or it otherwise establishes an exemption. If a Non-U.S. Holder sells our common shares through a
non-U.S. office of a non-U.S. broker and the sales proceeds are paid outside the U.S., 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, even if that
payment is made outside the U.S., if a Non-U.S. Holder sells our common shares through a non-U.S. office of
a broker that is a U.S. person or has some other contacts with the U.S. Such information reporting
requirements will not apply, however, if the broker has documentary evidence in its records that the Non-U.S.
Holder is not a U.S. person and certain other conditions are met, or the Non-U.S. Holder otherwise establishes
an exemption.

Backup withholding is not an additional tax. Rather, a refund may generally be obtained of any amounts
withheld under backup withholding rules that exceed the taxpayer’s U.S. federal income tax liability by ﬁling
a timely refund claim with the IRS.

Individuals who are U.S. Holders (and to the extent speciﬁed in applicable Treasury regulations, Non-U.S.
Holders and certain U.S. entities) who hold ‘‘speciﬁed foreign ﬁnancial assets’’ (as deﬁned in Section 6038D
of the Code) are required to ﬁle IRS Form 8938 with information relating to the asset for each taxable year in
which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000
on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury
Regulations). Speciﬁed foreign ﬁnancial assets would include, among other assets, our common shares, unless
the common shares are held in an account maintained with a U.S. ﬁnancial institution.

Substantial penalties apply to any failure to timely ﬁle IRS Form 8938, unless the failure is shown to be due
to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to
the extent speciﬁed in applicable Treasury Regulations, a Non-U.S. Holder or a U.S. entity) that is required to
ﬁle IRS Form 8938 does not ﬁle such form, the statute of limitations on the assessment and collection of
U.S. federal income taxes of such holder for the related tax year may not close until three years after the date
that the required information is ﬁled. U.S. Holders (including U.S. entities) and Non-U.S. Holders are
encouraged to consult their own tax advisors regarding their reporting obligations in respect of our common
shares.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

82

H. Documents on Display

Documents concerning us that are referred to herein may be inspected at our principal executive offices at
Belvedere Building, 69 Pitts Bay Road, Ground Floor, Pembroke, HM08, Bermuda.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risks

Please see Note 12 ‘‘Risk management’’ to our consolidated ﬁnancial statements included in this Annual
Report for a description of risk management that may apply to us.

Inﬂation

We do not expect inﬂation to be a signiﬁcant risk to direct expenses in the current and foreseeable economic
environment.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

83

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

PART II

Item 14. Material Modiﬁcations to the Rights of Shareholders and Use of Proceeds

None.

Item 15. Controls and Procedures

A. Disclosure Controls and Procedures

We evaluated pursuant to Rule 13a-15(b) of the Exchange Act the effectiveness of our disclosure controls and
procedures (as deﬁned in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2018.
Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our
disclosure controls and procedures were effective to provide reasonable assurance that the information required
to be disclosed by us in reports ﬁled under the Exchange Act is recorded, processed, summarized and reported
within the time periods speciﬁed in the SEC’s rules and forms. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including the possibility of human error and
the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls
and procedures can only provide reasonable assurance of achieving their control objectives.

B. Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal controls over our ﬁnancial
reporting. Our internal controls were designed to provide reasonable assurance as to the reliability of our
ﬁnancial reporting and the preparation and presentation of the consolidated ﬁnancial statements for external
purposes in accordance with U.S. GAAP.

Our internal controls over ﬁnancial reporting include those policies and procedures that: (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispositions
of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of the ﬁnancial statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made in accordance with authorizations of management and our
directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the ﬁnancial statements.

Management evaluated the effectiveness of our internal control over ﬁnancial reporting as of December 31,
2018 using the framework set forth in the 2013 report of the Treadway Commission’s Committee of
Sponsoring Organizations.

Management’s evaluation as of December 31, 2018 included review of the documentation of controls,
evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a
conclusion on this evaluation. Because of its inherent limitations, internal controls over ﬁnancial reporting
may not prevent or detect misstatements even when determined to be effective and can only provide
reasonable assurance with respect to ﬁnancial statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies and procedures may
deteriorate. Based on the evaluation, management determined that internal controls over ﬁnancial reporting
were effective as of December 31, 2018.

C. Attestation Report of the Registered Public Accounting Firm

Our independent auditors, Ernst & Young, an independent registered public accounting ﬁrm, has audited the
accompanying consolidated ﬁnancial statements and our internal control over ﬁnancing reporting. Their
attestation report on the effectiveness of our internal control over ﬁnancial reporting can be found on page F-3
of this Annual Report.

84

D. Changes in Internal Control Over Financial Reporting.

There were no changes in our internal controls over ﬁnancial reporting that occurred during the period
covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our
internal control over ﬁnancial reporting.

Item 16. Reserved

Item 16.A. Audit Committee Financial Expert

Our board of directors has determined that director and Chair of the Audit Committee, Brian Dunne, qualiﬁes
as an audit committee ﬁnancial expert and is independent under applicable NYSE and SEC standards.

Item 16.B. Code of Ethics

We have adopted a code of conduct and ethics applicable to our directors, chief executive officer, chief
ﬁnancial officer, principal accounting officer and other key management personnel. The code is available for
review on our website at www.ardmoreshipping.com.

Item 16.C. Principal Accountant Fees and Services

Our principal accountants for the ﬁscal years 2018 and 2017 were Ernst & Young.

Audit Fees

The audit fees for the audit of the years ended December 31, 2018 and 2017 were $0.6 million and
$0.4 million respectively.

Audit-Related Fees

Audit-related fees relating to work performed by our principal accountants in 2018 and 2017 were $75,000,
and $142,000, respectively.

Tax Fees

There were no tax fees billed by our principal accountants in 2018 or 2017.

All Other Fees

There were no other fees billed by our principal accountants in 2018 or 2017.

Audit Committee

The Audit Committee is responsible for the appointment, replacement, compensation, evaluation and oversight
of the work of the independent auditors. As part of this responsibility, the audit committee pre-approves the
audit and non-audit services performed by the independent auditors in order to assure that they do not impair
the auditors’ independence. The Audit Committee has adopted a policy which sets forth the procedures and the
conditions pursuant to which services proposed to be performed by the independent auditors may be
pre-approved.

The Audit Committee separately pre-approved all engagements and fees paid to our principal accountants in
2018 and 2017.

Item 16.D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On August 31, 2017, we announced that our board of directors had terminated our previous share repurchase
plan and approved a new share repurchase plan (the ‘‘New Plan’’), which authorizes us to repurchase up to
$25 million of shares of our common stock through to August 31, 2020.

We may repurchase these shares in the open market or in privately negotiated transactions, at times and prices
that are considered to be appropriate by us, but we are not obligated under the terms of the New Plan to
repurchase any shares, and at any time we may suspend, delay or discontinue the New Plan.

85

The total remaining share repurchase authorization at December 31, 2018, was $25.0 million. Neither Ardmore
nor any ‘‘affiliated purchaser,’’ as deﬁned in Rule 10b-18(a)(3) of the Exchange Act, purchased any shares of
our common stock during 2018.

Item 16.F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16.G. Corporate Governance

We, as a foreign private issuer, are not required to comply with certain corporate governance practices
followed by U.S. companies under the New York Stock Exchange (‘‘NYSE’’) listing standards. We believe
that our established practices in the area of corporate governance provide adequate protection to our
shareholders. In this respect, we have voluntarily adopted a number of NYSE required practices, such as
having a majority of independent directors and establishing a compensation committee and a nominating and
corporate governance committee.

The following are the signiﬁcant ways in which our corporate governance practices differ from those followed
by U.S. domestic companies listed on the NYSE, and which differences are permitted by NYSE rules for
‘‘foreign private issuers’’ such as Ardmore Shipping Corporation:

•

•

•

The NYSE requires that U.S. issuers have an audit committee, a compensation committee and a
nominating and corporate governance committee, each comprised entirely of independent directors.
Our audit committee currently consists of three independent directors. Our compensation committee
currently consists of two independent directors. Our nominating and corporate governance committee
currently consists of two independent directors and one non-independent director.

The NYSE requires that U.S. issuers obtain shareholder approval prior to the adoption of equity
compensation plans and prior to certain equity issuances, including, among others, issuing 20% or
more of our outstanding shares of common stock or voting power in a transaction. Our board of
directors approves the adoption of equity compensation plans in lieu of such shareholder approval,
and we do not intend to seek shareholder approval prior to equity issuances that otherwise would
require such approval if we were not a foreign private issuer.

The NYSE requires companies to adopt and disclose corporate governance guidelines. The
guidelines must address, among other things: director qualiﬁcation standards, director
responsibilities, director access to management and independent advisers, director compensation,
director orientation and continuing education, management succession and an annual performance
evaluation. We are not required to adopt such guidelines under Marshall Islands law and we have
not adopted such guidelines.

Item 16.H. Mine Safety Disclosures

Not applicable.

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

See index to Financial Statements on page F-1.

86

Item 19. Exhibits

The following exhibits are ﬁled as part of this Annual Report:

Exhibit
Number

1.1

1.2

2.1

4.1

4.2

4.3

4.4

4.5

4.6

4.7

8.1
12.1

Description

Amended and Restated Articles of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1/A (Registration
Number 333-189714), ﬁled with the SEC on July 22, 2013).

Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2
to the Company’s Registration Statement on Form F-1/A (Registration Number 333-189714),
ﬁled with the SEC on July 22, 2013).

Form of Stock Certiﬁcate (incorporated herein by reference to Exhibit 4.1 to the Company’s
Registration Statement on Form F-1/A (Registration Number 333-189714), ﬁled with the SEC on
July 22, 2013).

Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Company’s
Registration Statement on Form F-1/A (Registration Number 333-189714), ﬁled with the SEC on
July 22, 2013).

Term Loan Facility, dated January 13, 2016, by and among Bailey Shipco LLC, Dover Shipco
LLC, Fair Isle Shipco LLC, Fastnet Shipco LLC, Fitzroy Shipco LLC, Forth Shipco LLC,
Rockall Shipco LLC, Shannon Shipco LLC, Sole Shipco LLC, Trafalgar Shipco LLC, Viking
Shipco LLC, Hebrides Shipco LLC, Ardmore Shipping LLC, the Company, ABN AMRO Bank
N.V. and DVB Bank America N.V. (incorporated herein by reference to Exhibit 4.2 to the
Company’s Report on Form 20-F ﬁled with the SEC on April 6, 2016).
Term Loan Facility, date January 13, 2016, by and among Faroe Shipco LLC, Plymouth Shipco
LLC, Portland Shipco LLC, Wight Shipco LLC, Lundy Shipco LLC, Fisher Shipco LLC,
Humber Shipco LLC, Ardmore Shipping LLC, the Company, Nordea Bank AB, London Branch,
Skandinaviska Enskilda Banken AB (PUBL) and Nordea Bank Finland Plc (incorporated herein
by reference to Exhibit 4.3 to the Company’s Report on Form 20-F ﬁled with the SEC on
April 6, 2016).
Amendment No. 1 to Term Loan Facility, dated August 4, 2016, by and among Bailey Shipco
LLC, Dover Shipco LLC, Fair Isle Shipco LLC, Fastnet Shipco LLC, Fitzroy Shipco LLC, Forth
Shipco LLC, Rockall Shipco LLC, Shannon Shipco LLC, Sole Shipco LLC, Trafalgar Shipco
LLC, Viking Shipco LLC, Hebrides Shipco LLC, Ardmore Shipping LLC, the Company, ABN
AMRO Bank N.V. and DVB Bank America N.V., and the other ﬁnancial institutions party thereto
(incorporated herein by reference to Exhibit 4.4 to the Company’s Report on Form 20-F ﬁled
with the SEC on March 13, 2017).
Term Loan Facility, dated July 29, 2016, Saltee Shipco LLC, Blasket Shipco LLC, Ballycotton
Shipco LLC, Killary Shipco LLC, Ardmore Shipping LLC, the Company, ABN AMRO Bank
N.V., and the other ﬁnancial institutions party thereto (incorporated herein by reference to
Exhibit 4.5 to the Company’s Report on Form 20-F ﬁled with the SEC on March 13, 2017).
Share Purchase Agreement, dated November 26, 2017, between the Company and GA Holdings
(incorporated herein by reference to Exhibit 4.6 to the Company’s Report on Form 20-F ﬁled
with the SEC on March 29, 2017).
Open Market Sale Agreement, dated August 31, 2018, between the Company and Evercore
Group L.L.C., Jefferies LLC and Wells Fargo Securities, LLC (incorporated herein by reference
to Exhibit 1.1 to the Company’s Report on Form 6-K ﬁled with the SEC on August 31, 2018).
Subsidiaries of the Company
Rule 13a-14(a)/15d-14(a) Certiﬁcation of Principal Executive Officer pursuant to section 302 of
the Sarbanes-Oxley Act 2002

87

Exhibit
Number

12.2

13.1

13.2

15.1

101

Description

Rule 13a-14(a)/15d-14(a) Certiﬁcation of Principal Financial Officer pursuant to section 302 of
the Sarbanes-Oxley Act 2002

Certiﬁcation of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certiﬁcation of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Consent of Independent Registered Public Accounting Firm

The following materials from the Company’s Annual Report on Form 20-F for the ﬁscal year
ended December 31, 2018, formatted in eXtensible Business Reporting Language (XBRL):

(i) Consolidated Balance Sheets as of December 31, 2017 and 2018;

(ii) Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and

2018;

(iii) Consolidated Statements of Changes in Equity for the years ended December 31, 2016,

2017 and 2018;

(iv) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2017 and

2018; and

(v) Notes to Consolidated Financial Statements

88

Pursuant to the requirements of the Securities Exchange Act of 1934, the 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 annual report on its behalf.

SIGNATURE

ARDMORE SHIPPING CORPORATION

By: /s/ Anthony Gurnee

Anthony Gurnee
Chief Executive Officer
(Principal Executive Officer)

Date: February 15, 2019

89

TABLE OF CONTENTS

INDEX TO FINANCIAL STATEMENTS OF ARDMORE SHIPPING CORPORATION

Index to Audited Financial Statements of Ardmore Shipping Corporation

Report of independent registered public accounting ﬁrm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report of independent registered public accounting ﬁrm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Audited consolidated ﬁnancial statements

Consolidated balance sheets at December 31, 2018 and 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statement of operations for the years ended December 31, 2018, 2017 and 2016 . . . . .

Consolidated statement of changes in equity for the years ended December 31, 2018, 2017 and

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statement of cash ﬂows for the years ended December 31, 2018, 2017 and 2016 . . . .

Notes to consolidated ﬁnancial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-2

F-3

F-4

F-5

F-6

F-7

F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Ardmore Shipping Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ardmore Shipping Corporation (the
Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in
equity, and cash ﬂows for each of the three years in the period ended December 31, 2018, and the related
notes (collectively referred to as the “consolidated ﬁnancial statements”). In our opinion, the consolidated
ﬁnancial statements present fairly, in all material respects, the ﬁnancial position of the Company as of
December 31, 2018 and 2017, and the results of its operations and its cash ﬂows for each of the three years in
the period ended December 31, 2018, in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company‘s internal control over ﬁnancial reporting as of December 31, 2018,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated February 15, 2019
expressed an unqualiﬁed opinion thereon.

Basis for Opinion

These ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s ﬁnancial statements based on our audits. We are a public accounting
ﬁrm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the US federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the ﬁnancial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts and disclosures in the ﬁnancial statements. Our audits also included evaluating the accounting
principles used and signiﬁcant estimates made by management, as well as evaluating the overall presentation
of the ﬁnancial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young

We have served as the Company’s auditor since 2011.

Dublin, Ireland

February 15, 2019

F-2

To the Shareholders and the Board of Directors of Ardmore Shipping Corporation

Report of Independent Registered Public Accounting Firm

Opinion on Internal Control over Financial Reporting

We have audited Ardmore Shipping Corporation’s internal control over ﬁnancial reporting as of December 31,
2018, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, Ardmore Shipping Corporation (the Company) maintained, in all material respects, effective internal
control over ﬁnancial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and
2017, the related consolidated statements of operations, changes in equity, and cash ﬂows for each of the three
years in the period ended December 31, 2018, and the related notes and our report dated February 15, 2019
expressed an unqualiﬁed opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over ﬁnancial reporting
and for its assessment of the effectiveness of internal control over ﬁnancial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over ﬁnancial reporting based on our audit. We are a
public accounting ﬁrm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the US federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over ﬁnancial
reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Deﬁnition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance
regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over ﬁnancial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial
statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ Ernst & Young

Dublin, Ireland

February 15, 2019

F-3

Ardmore Shipping Corporation

Consolidated Balance Sheet
(Expressed in U.S. dollars, unless otherwise stated)

ASSETS
Current assets
Vessel held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances and deposits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current assets
Vessels and equipment, net of accumulated depreciation of $135.2 million
(2017: $110.2 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ballast water treatment systems, net of accumulated depreciation of $0
(2017: $0)
Deferred drydock expenditure, net of accumulated amortization of
. . . . . . . . . . . . . . . . . . . . . . . . . .
$11.5 million (2017: $10.8 million)
Deposit for vessel acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements, net of accumulated depreciation of $0.2 million
(2017: $0.1 million)
Other non-current assets, net of accumulated depreciation of $0.8 million
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2017: $0.6 million)
Operating lease, right of use asset
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND EQUITY
Current liabilities
Payables, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest on loans and ﬁnance leases
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
Current portion of ﬁnance lease obligations . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease obligations . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current liabilities
Non-current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current portion of ﬁnance lease obligations
. . . . . . . . . . . . . . . . . .
Non-current portion of operating lease obligations . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current liabilities

Equity
Share capital ($0.01 par value, 250,000,000 shares authorised, 35,019,232
issued and 33,097,831 outstanding at December 31, 2018 and 34,061,357
issued and 32,139,956 outstanding at December 31, 2017)
. . . . . . . . . . .
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock (1,921,401 shares at December 31, 2018 and
1,921,401 shares at December 31, 2017) . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deﬁcit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND EQUITY . . . . . . . . . . . . . . . . . . . . . . .

As at

Notes

Dec 31,
2018

Dec 31,
2017

11
4
5
6

7

7

7
7

7

7
10

8
9
10

8
9
10

8,083,405
56,903,038
27,460,132
—
1,291,399
2,132,804
786,084
12,812,039
109,468,901

—
39,457,407
27,264,803
3,100,000
1,412,875
3,015,807
—
9,632,246
83,883,138

721,492,473

751,816,840

528,774

—

7,127,364
—

4,118,168
1,635,000

423,620

446,532

3,549,511
2,169,158
735,290,900
844,759,801

3,640,311
—
761,656,851
845,539,989

24,608,108
35,900
1,732,859
22,834,543
25,849,200
477,147
75,537,757

16,104,399
6,265
1,537,976
37,071,548
3,537,466
—
58,257,654

205,519,705
215,626,898
1,491,507
422,638,110

367,352,022
38,956,553
—
406,308,575

350,192
414,508,403

340,613
405,549,985

(15,348,909)
(52,925,752)
346,583,934
844,759,801

(15,348,909)
(9,567,929)
380,973,760
845,539,989

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

F-4

Ardmore Shipping Corporation

Consolidated Statement of Operations
(Expressed in U.S. dollars, unless otherwise stated)

Notes

Dec 31,
2018

For the years ended
Dec 31,
2017

Dec 31,
2016

REVENUE
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OPERATING EXPENSES
Commissions and voyage related costs . . . . . . . . . .
Vessel operating expenses
. . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred drydock expenditure . . . . .
General and administrative expenses

Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and chartering . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . .
(Loss)/proﬁt from operations . . . . . . . . . . . . . . .
Interest expense and ﬁnance costs . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Loss on disposal of vessels
Loss on vessel held for sale . . . . . . . . . . . . . . . . .
(Loss)/proﬁt before taxes . . . . . . . . . . . . . . . . . .
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss)/proﬁt . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss)/earnings per share, basic and diluted . . . .
Weighted average number of common shares
outstanding, basic and diluted . . . . . . . . . . . . . . . .

13

14
15
11
11

16

17

17

210,179,181

195,935,392

164,403,938

98,142,454
67,017,632
35,137,880
3,637,276

72,737,902
62,890,401
34,271,091
2,924,031

37,121,398
56,399,979
30,091,237
2,715,109

12,626,373
3,233,888
219,795,503
(9,616,322)
(27,405,608)
606,665
—
(6,360,813)
(42,776,078)
(162,923)
(42,939,001)
(1.31)

11,979,017
2,619,748
187,422,190
8,513,202
(21,380,165)
436,195
—
—
(12,430,768)
(59,567)
(12,490,335)
(0.37)

12,055,725
2,021,487
140,404,935
23,999,003
(17,754,118)
164,629
(2,601,148)
—
3,808,366
(60,434)
3,747,932
0.12

32,837,866

33,441,879

30,141,891

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

F-5

Ardmore Shipping Corporation

Consolidated Statement of Changes in Equity
(Expressed in U.S. dollars, unless otherwise stated)

Number of
Shares
Outstanding

Share
Capital

Additional
paid-in
capital

Treasury
stock

Accumulated
(deﬁcit)/surplus

TOTAL

(366,347)
231,646
—

7,500,000
—

Balance as at January 1,
2016 . . . . . . . . . . . . . . . . 26,210,311
Net proceeds from equity
offering . . . . . . . . . . . . . .
Share based compensation . .
Repurchase of common
stock . . . . . . . . . . . . . . . .
Dividend payments . . . . . .
Income for year
. . . . . . . .
Balance as at December 31,
2016 . . . . . . . . . . . . . . . . 33,575,610
—
Share based compensation . .
Repurchase of common
stock . . . . . . . . . . . . . . . .
Loss for year
. . . . . . . . . .
Balance as at December 31,
2017 . . . . . . . . . . . . . . . . 32,139,956
Adoption of accounting
standard . . . . . . . . . . . . . .
Share based compensation . .
Net proceeds from equity
. . . . . . . . . . . . .
offerings
Loss for year
. . . . . . . . . .
Balance as at December 31,
2018 . . . . . . . . . . . . . . . . 33,097,831

957,875
—

(1,435,654)
—

—
—

263,297 338,226,370

(1,278,546)

10,400,157

347,611,278

75,000

63,852,414
— 1,304,325

—
—

— 63,927,414
1,304,325
—

—
2,316
—

1,896,148
—

— (2,993,931)

— (11,225,683)
3,747,932
—

— (2,993,931)
(9,327,219)
3,747,932

340,613 405,279,257
457,046

—

(4,272,477)
—

2,922,406
—

404,269,799
457,046

—
—

(186,318) (11,076,432)

—

— (12,490,335)

— (11,262,750)
(12,490,335)

340,613 405,549,985 (15,348,909)

(9,567,929) 380,973,760

—
—
— 1,636,547

—
—

(418,822)
—

(418,822)
1,636,547

9,579
—

7,321,871
—

—
—
— (42,939,001)

7,331,450
(42,939,001)

350,192 414,508,403 (15,348,909)

(52,925,752) 346,583,934

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

F-6

Ardmore Shipping Corporation

Consolidated Statement of Cash Flows
(Expressed in U.S. dollars, unless otherwise stated)

OPERATING ACTIVITIES
Net (loss)/proﬁt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(42,939,001)

(12,490,335)

3,747,932

Notes

Dec 31,
2018

Dec 31,
2017

Dec 31,
2016

Non-cash items:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred drydock expenditure . . . . . . . .
Share based compensation . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of vessels
. . . . . . . . . . . . . . . . . . . .
Loss on vessel held for sale . . . . . . . . . . . . . . . . . . . .
Amortization of deferred ﬁnance fees . . . . . . . . . . . . . .
Foreign exchange on operating leases . . . . . . . . . . . . . .
Adoption of accounting standard . . . . . . . . . . . . . . . . .

19
11
11
14

35,137,880
3,637,276
1,636,547
—
6,360,813
4,668,077
(200,504)
(418,822)

34,271,091
2,924,031
457,046
—
—
3,060,525
—
—

30,091,237
2,715,109
1,304,325
2,601,148
—
3,415,452
—
—

3,040,535
175,000
239,356
375,510
(58,683)
(3,369,769)
1,965,503
—
(684,537)
(139,578)
315,765
(3,099,805)
42,634,500

(195,329)
3,100,000
121,476
882,968
(786,084)
(3,179,793)
8,507,701
(532,261)
—
29,635
194,883
(6,599,085)
9,426,377

(4,116,021)
200,000
(609,872)
120,555
82,636
(2,292,994)
1,656,356
—
(507,780)
911
(530,015)
(3,809,906)
18,416,228

(16,824,102)
(528,774)
—

(372,504)
—
—

(174,012,168)
—
52,656,414

(52,384)
(151,619)
(17,556,879)

— (1,635,000)
(12,279)
(262,468)
(2,282,251)

—
(530,717)
(424,760)
(122,311,231)

3,902,122
(184,306,269)
209,725,500
(7,336,520)
(3,740,150)
7,331,450

11,092,157
(62,691,746)
33,120,000
(2,060,264)
(826,840)
—
— (11,262,750)
—
—
(32,629,443)
25,576,133
(16,495,466)
17,445,631
55,952,873
39,457,407
39,457,407
56,903,038

110,010,000
(42,208,171)
9,245,749
(27,097,348)
(6,036,243)
63,927,416
(2,993,931)
(9,327,251)
95,520,221
15,843,491
40,109,382
55,952,873

22,583,976
139,849

18,808,333
58,736

13,937,488
122,624

Changes in operating assets and liabilities:

Receivables, trade . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Working capital advances
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances and deposits
. . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for capital items
. . . . . . . . . . . . . . . . . . . . .
Charter revenue received in advance . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other payables
. . . . . . . . .
Accrued interest on loans and ﬁnance leases
Deferred drydock expenditure . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .

Net cash provided by operating activities

INVESTING ACTIVITIES
Payments for acquisition of vessels and equipment . . . . . . .
Payments for acquisition of ballast water treatment systems. .
Net proceeds from sale of vessels . . . . . . . . . . . . . . . . . .
Transfer to segregated account in respect of agreement to
buy new vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for leasehold improvements . . . . . . . . . . . . . . .
Payments for other non-current assets . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . .

FINANCING ACTIVITIES
. . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt
Repayments of long-term debt
. . . . . . . . . . . . . . . . . . . .
Proceeds from ﬁnance leases . . . . . . . . . . . . . . . . . . . . .
Repayments of ﬁnance leases
. . . . . . . . . . . . . . . . . . . .
Payments for deferred ﬁnance fees . . . . . . . . . . . . . . . . .
Net proceeds from equity offerings . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . .
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by/(used in) ﬁnancing activities
. . . . .
Net increase/(decrease) in cash and cash equivalents . . . .
Cash and cash equivalents at the beginning of the year . . . .
Cash and cash equivalents at the end of the year . . . . . .

Cash paid during the year for:
Interest payments in respect of debt and ﬁnance leases . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

F-7

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

1. Overview

1.1. Background

Ardmore Shipping Corporation (NYSE: ASC) (‘‘ASC’’), together with its subsidiaries (collectively
‘‘Ardmore’’ or ‘‘the Company’’), provides seaborne transportation of petroleum products and chemicals
worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with its
modern, fuel-efficient ﬂeet of mid-size product and chemical tankers. As at December 31, 2018 Ardmore had
28 vessels in operation. The average age of Ardmore’s operating ﬂeet at December 31, 2018 was 6.5 years.

1.2. Management and organizational structure

ASC was incorporated in the Republic of the Marshall Islands on May 14, 2013. ASC commenced business
operations through its predecessor company, Ardmore Shipping LLC, on April 15, 2010. On August 6, 2013,
ASC completed its initial public offering (the ‘‘IPO’’) of 10,000,000 shares of its common stock. Prior to the
IPO, GA Holdings LLC, who was then ASC’s sole shareholder, exchanged its 100% interest in Ardmore
Shipping LLC (‘‘ASLLC’’) for 8,049,500 shares of ASC, and ASLLC became a wholly-owned subsidiary of
ASC. Immediately following the IPO, GA Holdings LLC held 44.6% of the outstanding common stock of
ASC, with the remaining 55.4% held by public investors. In a series of transactions between March 2014 and
November 2017, GA Holdings LLC sold or transferred all of its shares of ASC common stock. As of
December 31, 2018, to Ardmore’s knowledge, no shareholder owned more than 10% of ASC’s common stock.

As at December 31, 2018, ASC had 50 wholly-owned subsidiaries, the majority of which represent single
ship-owning companies for ASC’s ﬂeet, and one 50%-owned joint-venture entity which provides technical
management services to the majority of the ASC ﬂeet. Ardmore Shipping (Bermuda) Limited, a wholly-owned
subsidiary incorporated in Bermuda, carries out the Company’s management services and associated functions.
Ardmore Shipping Services (Ireland) Limited, a wholly-owned subsidiary incorporated in Ireland, provides the
Company’s corporate, accounting, ﬂeet administration and operations services. Each of Ardmore Shipping
(Asia) Pte. Limited and Ardmore Shipping (Americas) LLC, wholly-owned subsidiaries incorporated in
Singapore and Delaware, respectively, performs commercial management and chartering services for the
Company.

F-8

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

1. Overview − (continued)

1.3. Vessels

Ardmore’s ﬂeet as at December 31, 2018, comprised the following:

Type

Vessel Name
Ardmore Seavaliant
. . . Product/Chemical
Ardmore Seaventure . . . Product/Chemical
Ardmore Seavantage . . . Product/Chemical
Ardmore Seavanguard . . Product/Chemical
Ardmore Sealion . . . . . . Product/Chemical
Ardmore Seafox . . . . . . Product/Chemical
Ardmore Seawolf
. . . . . Product/Chemical
Ardmore Seahawk . . . . . Product/Chemical
Ardmore Endeavour . . . Product/Chemical
Ardmore Enterprise
. . . Product/Chemical
Ardmore Endurance . . . Product/Chemical
Ardmore Encounter . . . . Product/Chemical
Ardmore Explorer . . . . . Product/Chemical
Ardmore Exporter . . . . . Product/Chemical
Ardmore Engineer
. . . . Product/Chemical
Ardmore Seafarer . . . . . Product/Chemical
Ardmore Seatrader . . . .
Ardmore Seamaster . . . . Product/Chemical
Ardmore Seamariner . . . Product/Chemical
Ardmore Sealeader . . . .
Ardmore Sealifter . . . . .
Ardmore Sealancer . . . .
Ardmore Dauntless . . . . Product/Chemical
Ardmore Defender
. . . . Product/Chemical
Ardmore Cherokee . . . . Product/Chemical
Ardmore Cheyenne . . . . Product/Chemical
Ardmore Chinook . . . . . Product/Chemical
Ardmore Chippewa . . . . Product/Chemical
Total

Product
Product
Product

. . . . . . . . . . . . .

Product

28

Dwt Tonnes
49,998
49,998
49,997
49,998
49,999
49,999
49,999
49,999
49,997
49,453
49,466
49,478
49,494
49,466
49,420
45,744
47,141
45,840
45,726
47,463
47,472
47,451
37,764
37,791
25,215
25,217
25,217
25,217
1,250,019

Built
IMO
Feb-13
2/3
Jun-13
2/3
Jan-14
2/3
2/3
Feb-14
2/3 May-15
Jun-15
2/3
Aug-15
2/3
Nov-15
2/3
Jul-13
2/3
Sep-13
2/3
Dec-13
2/3
Jan-14
2/3
Jan-14
2/3
Feb-14
2/3
Mar-14
2/3
Aug-04
3
Dec-02
—
Sep-04
3
3
Oct-06
— Aug-08
Jul-08
—
Jun-08
—
Feb-15
2
Feb-15
2
Jan-15
2
Mar-15
2
Jul-15
2
Nov-15
2

Country
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Korea
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Korea
Korea
Japan
Japan
Japan
Japan

Flag
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI

Speciﬁcation
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-mod
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design
Eco-design

2. Signiﬁcant accounting policies

2.1. Basis of preparation

The accompanying consolidated ﬁnancial statements have been prepared in accordance with U.S. Generally
Accepted Accounting Principles (‘‘U.S. GAAP’’). The consolidated ﬁnancial statements include the accounts
of ASC and its subsidiaries. All subsidiaries are 100% directly or indirectly owned by ASC. One 50% owned
joint venture entity is accounted for using the equity method (please refer to note 2.21, Equity accounted
investments for more details). All intercompany balances and transactions have been eliminated on
consolidation.

F-9

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

2.2. Uses of estimates

The preparation of the consolidated ﬁnancial statements in accordance with U.S. GAAP requires management
to make estimates and assumptions that affect the amounts reported in the consolidated ﬁnancial statements
and accompanying notes. On an on-going basis, management evaluates the estimates and judgments, including
those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets,
expected future cash ﬂows from long-lived assets to support impairment tests, provisions necessary for
accounts receivables, the selection of inputs used in the valuation model for share-based payment awards,
provisions for legal disputes and contingencies. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable. Actual results could differ from
those estimates.

2.3. Reporting currency

The consolidated ﬁnancial statements are stated in U.S. Dollars. The functional currency of Ardmore is
U.S. Dollars because Ardmore operates in international shipping markets which typically utilize the
U.S. Dollar as the functional currency. Transactions involving other currencies during the year are converted
into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet date,
monetary assets and liabilities that are denominated in currencies other than U.S. Dollar are translated to
reﬂect the year end exchange rates. Resulting gains and losses are included in the accompanying consolidated
statement of operations.

2.4. Summary of signiﬁcant accounting policies

In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update
(‘‘ASU’’) No. 2014-09, Revenue from Contracts with Customers, or ASC 606, a standard that supersedes
virtually all of the prior revenue recognition guidance in U.S. GAAP. The main principle of ASC 606 is that a
company should recognize revenue when promised goods or services are transferred to customers in an
amount that reﬂects the consideration to which an entity expects to be entitled for those goods or services. To
achieve this principle, an entity should apply the following steps: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as,
the entity satisﬁes a performance obligation. The new standard became effective for Ardmore on January 1,
2018. The impact of ASC 606 on the Company’s consolidated ﬁnancial statements is described below.

In February 2016, the FASB issued ASC 842, Leases (‘‘ASC 842’’), a standard which replaces previous topics
on lease accounting. The revised guidance requires lessees to recognize on their balance sheet a right of use
asset and corresponding liability in respect of all material lease contracts. Ardmore previously recognized on
its balance sheet those leases classiﬁed as capital leases. Those leases that are currently accounted for as
operating leases (primarily for office space) are included on Ardmore’s balance sheet as a right of use asset
and related lease liability in accordance with the new guidance. ASC 842 and related amendments are
effective for ﬁscal years, and interim periods within those ﬁscal years, beginning after December 15, 2018,
with early adoption permitted, and requires the modiﬁed retrospective method of adoption.

The Company implemented these two new accounting standards and updated their policies as of January 1,
2018, with ASC 842 being early adopted. Both accounting standards were applied using the modiﬁed
retrospective method. The Company took the practical expedient to not reassess whether any expired or
existing contracts are, or contain, leases. (ASC 842-10-65-1(f)). The implementation of ASC 606 did not have
a material impact on the ﬁnancial statements as the majority of the Company’s spot charters fall under the
scope of the new lease standard ASC 842. An adjustment of $418,822 is presented as a cumulative adjustment
to opening retained earnings as of January 1, 2018. The corresponding adjustment for 2018 was $454,581
resulting in a cumulative effect to revenue of $35,759.

F-10

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

2.4.1. Lease revenue from voyage charters

For the majority of the Company’s spot charters, the Company make its vessels and crew available to operate
as determined by the charterer. On this basis, the Company has concluded that these spot charter contracts
contain a lease. For spot charters where the customer is not taking control of the vessel and only requires a
method of transportation, the Company has concluded that these charters do not contain a lease and are
considered service contracts.

For those spot charters that contain a lease, the Company has performed a quantitative and qualitative analysis
to determine whether the lease component or the non-lease component is the predominant component of the
contract. The Company has determined that the appropriate timeframe for the Company’s quantitative analysis,
is a period of 10 years. The Company believes that a 10-year period is an appropriate timeframe because this
period is expected to include low and high points in the normal shipping cycle. Therefore, the conclusion on
this quantitative analysis is expected to be consistent, regardless of when the analysis is done in the
determined timeframe. The Company’s conclusion on the quantitative analysis done on this basis is that the
lease component is the predominant component. For its qualitative analysis, the Company considered that the
predominant beneﬁt for its customers is taking control of the vessel and having the right to direct its use,
rather than the beneﬁt derived from the service the Company provides executing their instructions. Based on
the Company’s qualitative analyses, the Company has also concluded that the lease component is the
predominant component. As the period the Company makes its vessels and crew available is the same period
that it provides the service to execute the customer’s orders, the Company has concluded that lease and non-
lease component have the same pattern of transfer. As permitted by ASC 842, the Company has taken the
practical expedient to not disclose the different lease and non-lease components.

Additionally, for those spot charters that the Company determined contain a lease the Company is the lessor
and these spot charters have terms that allow the charterer to exercise substantive decision-making rights
which have an economic value to the charterer and therefore allow the charterer to direct how and for what
purpose the vessel will be used. Under these charters there are no substantive substitution rights and the vessel
is speciﬁed in the contract. Voyage expenses will be recognized over the term of the lease. Initial costs, such
as broker commissions, are deferred and expensed over the voyage term.

Lease revenues from voyage charters on the spot market are recognized ratably on a discharge-to-discharge
basis i.e. from when cargo is discharged (unloaded) at the end of one voyage to when it is discharged after the
next voyage. On those cases where the charterer directs the use of the vessel from the loading port, lease
revenue is recognized ratably on a load to discharge basis. Revenue is recognized in both of these cases,
provided an agreed non-cancellable charter between the Company and the charterer is in existence, and
collectability is reasonably assured. Lease revenue under voyage charters is not recognized until a charter has
been agreed even if the vessel has discharged its previous cargo and is proceeding to an anticipated port of
loading.

Demurrage revenue represents payments by the charterer to the Company when the loading or discharging
time exceeds the stipulated time in the voyage charter. Demurrage is only included in the voyage revenue
recognition when the excess time has been incurred. The additional time required to execute the charterer’s
orders are not considered distinct but to form part of the single obligation of making the vessel and the crew
available and executing the charterer’s orders. Demurrage revenue is recognized ratably on a
discharge-to-discharge basis, (i.e. from when cargo is discharged (unloaded) at the end of one voyage to
when it is discharged after the next voyage), provided collection is reasonably assured.

F-11

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

2.4.2. Pool revenues

Ardmore includes certain of its vessels in commercial pooling arrangements from time to time. The pooling
arrangements in which Ardmore participated in 2018, are arrangements in which the earnings from all
participants are pooled and shared. In these arrangements, the members seek to beneﬁt from the more efficient
employment of their vessels as the manager leverages the size of the ﬂeet commercially and operationally. The
manager is responsible for the commercial management on behalf of the members of the pool, and the pool
members are responsible for maintaining the operational efficiency of their participating vessels. Pool revenues
and expenses for the Company’s pool arrangements have been accounted for in accordance with the guidance
for collaborative arrangements. Revenues and voyage expenses of Ardmore’s vessels operating in commercial
pooling arrangements are pooled with the revenues and voyage expenses of other pool participants. The
resulting net pool revenues are allocated to the pool participants according to an agreed formula. The formulas
used to allocate net pool revenues allocate revenue to pool participants on the basis of the number of days a
vessel operates in the pool with weighted adjustments made to reﬂect the vessels’ differing capacities and
performance capabilities. Therefore, the determined net revenues represent the pool members’ consideration
for their different contribution to the collaborative arrangement. Ardmore accounts for its vessels’ share of net
pool revenue on a monthly basis. Net pool revenues due from the pooling arrangements are included in
receivables, trade.

2.4.3. Service revenue from voyage charters

Voyage charters on the spot market that do not meet the lease deﬁnition (as described in Note 2.4.1) are
recognized ratably on a load-to-discharge basis, (i.e. from when cargo is loaded at the port to when it is
discharged after the next voyage). Demurrage revenue, which is included in voyage revenues, represents
payments by the charterer to Ardmore when the loading or discharging time exceeds the stipulated time in the
voyage charter, and is also recognized ratably on a load-to-discharge basis. This reﬂects the consideration to
which the Company expects to be entitled to receive in exchange for the promised services. Voyage expenses
are recognized over the length of the voyage as the performance obligation is satisﬁed. Initial costs to
reposition a vessel are considered fulﬁllment costs and are deferred and recognized from load to discharge in
the same manner as the voyage expenses.

2.4.4. Expenses

Voyage expenses, including commissions and administration fees, are deferred and expensed over the voyage
term. Under time charters or pool employment, expenses such as, port fees, cargo loading and unloading
expenses, canal tolls and agency fees are paid by the charterers. Under voyage charters, these expenses are
borne by Ardmore and are deferred and expensed over the voyage term.

Bunker fuel expenses under voyage charters are borne by Ardmore and these are expensed as incurred.

Vessel operating expenses are costs that are directly attributable to the operation of the vessels such as costs
of crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical
management fees. Vessel operating expenses are expensed as incurred.

2.4.5. Charterhire costs

Charterhire costs relate to amounts paid for chartering in vessels. Charter hire costs are expensed to the
statement of operations as incurred.

2.4.6. Operating leases (office rent)

Operating leases relate to long-term commitments for the Company’s offices. Ardmore recognizes on the
balance sheet the right to use those assets and a corresponding liability in respect of all material lease
contracts. The discount rate used for calculating the cost of the operating leases is the incremental cost of

F-12

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

borrowing. In relation to the Company’s operating leases, prior periods were not restated to reﬂect recording
of the right of use asset/liability related to these leases.

2.4.7. Finance leases

Finance leases relate to ﬁnancing arrangements for vessels in operation. Interest costs are expensed to interest
expense and ﬁnance costs in the consolidated statement of operations using the effective interest method over
the life of the lease.

Following the implementation of ASC 842, Leases, the transactions for the sale and leaseback of vessels,
which were previously classiﬁed as capital leases under ASC 840, Leases, are now classiﬁed as ﬁnance leases
with no other changes.

2.5. Recent accounting pronouncements

In June 2016, the FASB issued ASU 2016 -13: Financial Instruments - Credit Losses (Topic 326) which
requires recognition of management’s estimate of current expected credit losses, rather than the current
incurred losses model. The new model is generally applicable to all ﬁnancial instruments that are not
accounted for at fair value through net income. The standard will be effective for annual and interim periods
beginning after December 15, 2019, with early adoption permitted. We are currently assessing the guidance;
however, the Company does not expect adoption of this standard to have a material impact on its consolidated
ﬁnancial statements and related disclosures.

In July 2018, the FASB issued ASU 2018-11: Leases (Topic 842) Target Improvements which provides lessors
with a permitted practical expedient to not separate non-lease components from the associated lease
component. The Company has elected to apply the expedient in respect of certain voyage revenue from spot
charters.

2.6. Cash and cash equivalents

Ardmore classiﬁes investments with an original maturity date of three months or less as cash and cash
equivalents.

2.7. Receivables, trade

Receivables, trade include amounts due from charterers for hire and other recoverable expenses due to
Ardmore. At the balance sheet date, all potentially uncollectible accounts are assessed individually for the
purposes of determining the appropriate provision for doubtful accounts.

2.8. Working capital advances

Working capital advances relate to capital advanced directly to ship pools in which Ardmore’s vessels operate.
All working capital amounts are classiﬁed as current assets where it is expected that the amounts advanced
will be realized within one year.

2.9. Prepayments

Prepayments consist of payments in advance for insurance or other ad hoc prepaid purchases.

2.10. Advances and deposits

Advances and deposits primarily include amounts advanced to third-party technical managers for expenses
incurred by them in operating the vessels, together with other necessary deposits paid during the course of
business.

2.11. Other receivables

Other receivables primarily relate to insurance claims outstanding, and certain assets held by vessel managers.
Insurance claims are recorded, net of any deductible amounts, at the time Ardmore realizes insured damages,

F-13

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

where recovery is highly likely under the related insurance policies and where Ardmore can make an estimate
of the amount to be reimbursed following the insurance claim. At the balance sheet date, all potentially
uncollectible accounts are assessed individually for the purposes of determining the appropriate provision for
doubtful accounts.

2.12. Inventories

Inventories consist of bunkers, lubricating oils and other consumables on board the Company’s vessels.
Inventories are valued at the lower of cost or market value on a ﬁrst-in ﬁrst-out basis. Cost is based on the
normal levels of cost and comprises the cost of purchase, being the suppliers’ invoice price with the addition
of charges such as freight or duty where appropriate.

2.13. Vessels

Vessels are recorded at their cost less accumulated depreciation. Vessel cost comprises acquisition costs
directly attributable to the vessel and the expenditures made to prepare the vessel for its initial voyage.
Vessels are depreciated on a straight-line basis over their estimated useful economic life from the date of
initial delivery from the shipyard. The useful life of Ardmore’s vessels is estimated at 25 years from the date
of initial delivery from the shipyard. Depreciation is based on cost less estimated residual scrap value.
Residual scrap value is estimated as the lightweight tonnage of each vessel multiplied by the estimated scrap
value per ton.

2.13.1. Capital upgrades

Ardmore capitalizes and depreciates the costs of signiﬁcant replacements, renewals and upgrades to its vessels
over the shorter of the vessel’s remaining useful life or the life of the renewal or upgrade. The amount
capitalized is based on management’s judgment as to expenditures that extend a vessel’s useful life or increase
the operational efficiency of a vessel. Costs that are not capitalized are recorded as a component of direct
vessel operating expenses during the period incurred. Expenses for routine maintenance and repairs are
expensed as incurred.

2.13.2. Ballast water treatment systems (BWTS)

Ardmore is in the process of installing BWTS on each of its vessels that do not currently have the system
installed. This is a requirement of the International Maritime Organization’s Ballast Water Management
Convention which comes into force from September 2019. Ardmore capitalizes and depreciates the costs of
BWTS on each vessel, from the date of completion of the system, over the remaining useful life of the vessel.
As none of these systems were completed nor in use at December 31, 2018 depreciation has not yet
commenced.

2.14. Impairment

Vessels and equipment that are “held and used” are assessed for impairment when events or circumstances
indicate the carrying amount of the asset may not be recoverable. When such indicators are present, a vessel
to be held and used is tested for recoverability by comparing the estimate of future undiscounted net operating
cash ﬂows expected to be generated by the use of the vessel over its remaining useful life and its eventual
disposition to its carrying amount together with the carrying value of deferred drydock and special survey
costs related to the vessel. Net operating cash ﬂows are determined by applying various assumptions regarding
future revenues net of commissions, operating expenses, scheduled drydockings, expected offhire and scrap
values, and taking into account historical revenue data and published forecasts on future world economic
growth and inﬂation. In estimating future revenues, the Company considers charter rates for each vessel class
over the estimated remaining lives of the vessels using both historical average rates for the Company over the
last 5 years, where available, and historical average one-year time charter rates for the industry over the last

F-14

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

10 years in each case adjusted for inﬂation. Recognizing that rates tend to be cyclical and considering market
volatility based on factors beyond the Company’s control, management believes it is reasonable to use
estimates based on a combination of more recent inﬂation-adjusted internally-generated rates and the inﬂation-
adjusted 10-year average historical average industry rates.

During the fourth quarter of ﬁscal year 2018, an impairment assessment of long-lived assets was performed.
The Company’s assessment concluded that impairment was not required for any vessel.

An impairment charge is recognized if the carrying value is in excess of the estimated future undiscounted net
operating cash ﬂows. The impairment loss is measured based on the excess of the carrying amount over the
fair market value of the asset.

2.15. Drydock expenditure

Vessels are typically drydocked every three to ﬁve years. Expenditures incurred in drydocking are deferred
and amortized until the next scheduled drydocking. Ardmore only includes in deferred drydocking costs those
direct costs that are incurred as part of the drydocking to meet regulatory requirements, expenditures that add
economic life to the vessel, and expenditures that increase the vessels earnings capacity or improve the vessels
operating efficiency. Expenses for routine maintenance and repairs are expensed as incurred.

2.16. Vessels under construction

The carrying value of the vessels under construction represents the accumulated costs to the consolidated
balance sheet date which Ardmore has had to pay by way of purchase instalments and other capital
expenditures, together with capitalized interest and other pre-delivery costs. The amount of interest expense
capitalized in an accounting period is determined by applying an interest rate (‘‘the capitalization rate’’) to the
average amount of accumulated expenditures for the asset during the period. The capitalization rates used in
an accounting period are based on the rates applicable to borrowings outstanding during the period. If
Ardmore’s borrowings are directly attributable to the vessels under construction, Ardmore uses the rate on that
borrowing as the capitalization rate. If average accumulated expenditures for the asset exceed the amounts of
speciﬁc borrowings associated with the asset, the capitalization rate applied to such excess is a weighted
average of the rates applicable to other borrowings of Ardmore. Ardmore does not capitalize amounts in
excess of actual interest expense incurred in the period. No charge for depreciation is made until the vessel is
available for use.

2.17. Vessels held for sale

Assets are classiﬁed as held for sale when management, having the authority to approve the action, commits
to a plan to sell the asset, the sale is probable within one year, and the asset is available for immediate sale in
its present condition. Consideration is given to whether an active program to locate a buyer has been initiated,
whether the asset is marketed actively for sale at a price that is reasonable in relation to its current fair value,
and whether actions required to complete the plan indicate that it is unlikely that signiﬁcant changes to the
plan will be made or that the plan will be withdrawn. When assets are classiﬁed as held for sale, they are
tested for impairment. An impairment charge is recognized when the carrying value of the asset exceeds the
estimated fair value, less transaction costs. Assets classiﬁed as held for sale are no longer depreciated.

2.18. Deposit for vessel acquisition

Cash paid as deposit for an acquisition of a vessel that is considered restricted cash.

2.19. Leasehold improvements

Leasehold improvements relate to ﬁt-out costs for work completed on Ardmore’s offices in Ireland and
Singapore. These are recorded at their cost less accumulated depreciation and are depreciated over the life of
the respective leases.

F-15

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

2.20. Other non-current assets

Other assets relate to office equipment, ﬁxtures and ﬁttings. These are recorded at their cost less accumulated
depreciation and are depreciated based on an estimated useful life of ﬁve years.

2.21. Equity accounted investments

Ardmore’s investment in Anglo Ardmore Ship Management Limited is accounted for using the equity method
of accounting. Under the equity method of accounting, investments are stated at initial cost and are adjusted
for subsequent additional investments and the Company’s proportionate share of earnings or losses and
distributions. Ardmore evaluates its equity accounted investment for impairment when events or circumstances
indicate that the carrying value of such investment may have experienced and other than temporary decline in
value below its carrying value. If the estimated fair value is less than the carrying value, the carrying value is
written down to its estimated fair value and the resulting impairment is recorded in Ardmore’s consolidated
statements of operations.

2.22. Payables, trade

Payables, trade include all accounts payable and accrued liabilities in relation to the operating and running of
the vessels, along with amounts due for general and administrative expenses.

2.23. Other payables

Other payables primarily consist of amounts due for minor ad hoc payables.

2.24. Contingencies

Claims, suits and contingencies arise in the ordinary course of Ardmore’s business. Ardmore provides for
these contingencies when (i) it is probable that a liability has been incurred at the date of the ﬁnancial
statements and (ii) the amount of the loss can be reasonably estimated. Disclosure in the notes to the ﬁnancial
statements is required for contingencies that do not meet both these conditions if there is a reasonable
possibility that a liability may have been incurred at the balance sheet date. Any such matters that should be
disclosed, or for which a provision should be established in the accompanying consolidated ﬁnancial
statements, are discussed in Note 21 to the consolidated ﬁnancial statements.

2.25. Distributions to shareholders

Distributions to shareholders are applied ﬁrst to retained earnings. When retained earnings are not sufficient,
distributions are applied to the additional paid in capital account. Ardmore operates a policy of paying out
distributions equal to 60% of Earnings from Continuing Operations.

2.26. Equity issuance costs

Incremental costs incurred that are directly attributable to a proposed or actual offering of equity securities are
deferred and deducted from the related proceeds of the offering, and the net amount is recorded as contributed
shareholders’ equity in the period when such shares are issued. Other costs incurred that are not directly
attributable, but are related, to a proposed or actual offering are expensed as incurred.

2.27. Debt issuance costs

Financing charges which include fees, commissions and legal expenses associated with securing loan facilities
and ﬁnance lease agreements are presented in the consolidated balance sheet as a direct deduction from the
carrying amount of debt liability. These costs are amortized to interest expense and ﬁnance costs in the
consolidated statement of operations using the effective interest rate method over the life of the related debt.

F-16

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

2.28. Share based compensation

Ardmore may grant share-based payment awards, such as restricted stock units, as incentive-based
compensation to certain employees. Ardmore measures the cost of such awards using the grant date fair value
of the award and recognizes that cost, net of estimated forfeitures, over the requisite service period, which
generally equals the vesting period. If the award contains a market condition, such conditions are included in
the determination of the fair value of the stock unit. Once the fair value has been determined, the associated
expense is recognized in the consolidated statement of operations over the requisite service period.

2.29. Treasury stock

When shares are acquired for a reason other than formal or constructive retirement, the shares are presented
separately as a deduction from equity. If the shares are retired or subsequently sold, any gain would be
allocated as a reduction in additional paid in capital and any loss as a reduction in retained earnings.

2.30. Dividend Reinvestment Plan

In April 2015, Ardmore established a Dividend Reinvestment Plan (‘‘DRIP’’) to enable shareholders to
reinvest their quarterly dividend in common shares of the Company. The Form F-3D registration statement
detailing these shares is available from the SEC website. The DRIP allows for the purchase of additional
common shares by either full dividend reinvestment or partial dividend reinvestment.

When a shareholder signs up to the plan there are two options available to Ardmore when sourcing the shares
for settlement under the DRIP.

1. Open Market (‘‘OM’’): Ardmore issues shares already available in the open market or in privately

negotiated transactions.

2. Original Issue (‘‘OI’’): Ardmore registers and issues additional new shares.

The purchase price for shareholders of common shares under the DRIP depends on which option Ardmore
chooses. For OM shares the price is the weighted average of the actual price paid for all shares purchased by
the Transfer Agent on behalf of the participants of the DRIP. For OI shares the price is the daily high and the
daily low average share price for the ﬁve business days immediately preceding the dividend payment date. In
instances where Ardmore chooses OM settlement, the accounting treatment is the same as when a regular
dividend is paid and not reinvested by shareholders, since Ardmore makes a cash payment equal to the
amount of the dividend.

Where Ardmore chooses OI settlement, the Company records an increase in Share Capital for the par value of
the shares and record any excess of market value over par within Additional Paid in Capital. The dividend is
distributed ﬁrst from retained earnings but is applied to additional paid in capital if retained earnings are not
sufficient.

Where Ardmore utilizes existing treasury shares (which can only occur under an OI transaction), the Company
reduces Treasury Shares and increase Share Capital for the par value of the shares to be issued. Any excess of
market value over cost is recorded in Additional Paid in Capital. If a gain arises on utilizing Treasury Stock
for the dividend reinvestment, the Company recognizes the gain within Additional Paid in Capital. If a loss
arises, the Company records the loss within retained earnings

2.31. Financial instruments

The carrying values of cash and cash equivalents, accounts receivable and accounts payable reported in the
consolidated balance sheet are reasonable estimates of their fair values due to their short-term nature. The fair
values of long-term debt approximate the recorded values due to the variable interest rates payable.

F-17

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

2.32. Income taxes

Republic of the Marshall Islands

Ardmore Shipping Corporation (‘‘ASC’’), Ardmore Shipping LLC (‘‘ASLLC’’), Ardmore Maritime Services
LLC, and all vessel owning subsidiaries are incorporated in the Republic of the Marshall Islands. ASC
believes that neither it, nor its subsidiaries, are subject to taxation under the laws of the Republic of the
Marshall Islands and that distributions by its subsidiaries to ASC will not be subject to any taxes under the
laws of the Republic of the Marshall Islands.

Bermuda

Ardmore Shipping (Bermuda) Limited (‘‘ASBL’’) is incorporated in Bermuda. ASC, ASLLC and ASBL are
managed and controlled in Bermuda. ASC is subject to taxation under the laws of Bermuda and distributions
by its subsidiaries to ASC will be subject to any taxes under the laws of Bermuda.

Ireland

Ardmore Shipholding Limited (‘‘ASHL’’) and Ardmore Shipping Services (Ireland) Limited (‘‘ASSIL’’) are
incorporated in Ireland. ASHL is dormant and as such is not anticipated to generate trading income subject to
corporation tax in Ireland.

ASSIL’s trading proﬁts are taxable at the standard corporation tax rate which is currently 12.5% based on
generally accepted accounting principles in Ireland. Any non-trading/passive income is taxed at the higher
corporation tax rate which is currently 25%.

United States of America

Ardmore Shipping (Americas) LLC (‘‘ASUSA’’) and Ardmore Trading (USA) LLC (‘‘ATUSA’’) are
incorporated in Delaware and treated as corporations for U.S. tax purposes. ASUSA and ATUSA will be
subject to U.S. tax on their worldwide net income.

Singapore

Ardmore Shipping (Asia) Pte. Limited (‘‘ASA’’) and Ardmore Tanker Trading (Asia) Pte. Limited (‘‘ATTA’’)
are incorporated in Singapore. ASA qualiﬁed as an ‘‘Approved International Shipping Enterprise’’ by the
Singapore authorities with effect from August 1, 2015. This entitles the company to tax exemption on proﬁts
derived from ship operations for any ships which are owned or chartered in by ASA.

ATTA will be subject to Singapore tax on its worldwide proﬁts. However, the company had not commenced
business as at December 31, 2018 and therefore the Company does not expect it to be taxed for 2018.

Deferred taxation

Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to
differences between the ﬁnancial statements and tax basis of existing assets and liabilities using enacted rates
applicable to the periods in which the differences are expected to affect taxable income. Deferred income tax
balances included on the consolidated balance sheet reﬂect the effects of temporary differences between the
carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be
in effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to
reduce income taxes payable on taxable income in future years. The recoverability of these future tax
deductions is evaluated by assessing the adequacy of future taxable income, including the reversal of
temporary differences and forecasted operating earnings. If it is deemed more likely than not that the deferred
tax assets will not be realized Ardmore provides for a valuation allowance. Income taxes have been provided
for all items included in the consolidated statement of operations regardless of when such items were reported
for tax purposes or when the taxes were actually paid or refunded. Deferred tax for the year ended
December 31, 2018 amounted to $0 (2017: $0).

F-18

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

2. Signiﬁcant accounting policies − (continued)

Uncertainties related to income taxes

Companies are to determine whether it is more-likely-than-not that the tax position taken or expected to be
taken in a tax return will be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-
not threshold it is measured to determine the amount of beneﬁt to recognize in the ﬁnancial statements. The
Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
Uncertainties related to income taxes recognized for the year ended December 31, 2018 amounted to $0
(2017: $0).

3. Business and segmental reporting

Ardmore is primarily engaged in the ocean transportation of petroleum and chemical products in international
trade through the ownership and operation of a ﬂeet of tankers. Tankers are not bound to speciﬁc ports or
schedules and therefore can respond to market opportunities by moving between trades and geographical
areas. Ardmore charters its vessels to commercial shippers through a combination of time-charter, pool and
spot arrangements. The chief operating decision maker (‘‘CODM’’) does not use discrete ﬁnancial information
to evaluate the operating results for each such type of charter. Although revenue can be identiﬁed for these
types of vessel employment, management cannot and does not identify expenses, proﬁtability or other
ﬁnancial information for these charters or other forms of employment. As a result, the CODM reviews
operating results solely by revenue per day and operating results of the ﬂeet. Furthermore, when Ardmore
charters a vessel to a charterer, the charterer is free to trade the vessel worldwide (subject to certain sanctions-
related restrictions) and, as a result, the disclosure of geographic information is impracticable. In this respect,
Ardmore has determined that it operates under one reportable segment, relating to its operations of its vessels.

The following table presents consolidated revenues for customers that accounted for more than 10% of
Ardmore’s consolidated revenues during the years presented:

Navig8 Group . . . . . . . . . . . . . . . . . . . . . . . . .
Vitol
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Traﬁgura . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dec 31, 2018

< 10%

27,025,590

< 10%

For the year ended
Dec 31, 2017

Dec 31, 2016
< 10% 19,158,623
43,960,560
< 10% 17,498,550

34,797,654

The following table present the Company’s revenue contributions by type of vessel employment. As at
December 31, 2018, all of the Company’s 28 vessels were employed in the spot market.

Time charter . . . . . . . . . . . . . . . . . . . . . . . . . .
Spot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Cash and cash equivalents

Dec 31, 2018
—
196,132,999
14,046,182
210,179,181

For the year ended
Dec 31, 2017
1,418,636
155,901,280
38,615,476
195,935,392

Dec 31, 2016
28,294,215
93,162,634
42,947,089
164,403,938

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the year ended

Dec 31, 2018
56,903,038

Dec 31, 2017
39,457,407

Ardmore is required to maintain a minimum cash balance in accordance with its long-term debt facility
agreements (see Note 8) and long-term ﬁnance lease facility agreements (see Note 9).

F-19

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

5. Receivables, trade

There was no provision for doubtful accounts as at December 31, 2018 (2017: $0). The maximum amount of
loss due to the credit risk is the full amount of trade receivables. All trade receivables are current. The
carrying value of receivables approximates their fair value.

6. Working capital advances

At the balance sheet date, all potentially uncollectible working capital advances are assessed individually for
purposes of determining the appropriate provision for doubtful accounts. There was no provision for doubtful
advances at December 31, 2018 (2017: $0).

7. Non-current assets

The scrap value of the vessels is estimated at $300 (2017: $300) per lightweight ton. Interest capitalized in
relation to vessels under construction during the year ended December 31, 2018 was nil (2017: $0). Vessels,
which are owned and operated by Ardmore, have been provided as collateral under certain loan agreements
entered into by Ardmore (see Note 8). Sellers credit in relation to the ﬁnance leases for the Ardmore
Sealeader and Ardmore Sealifter of $2.9 million are included within non-current assets (see Note 9).
Leasehold improvements consist of ﬁt-out costs in relation to work completed on Ardmore’s offices in Ireland
and Singapore. Other non-current assets consist of office equipment, and ﬁxtures and ﬁttings. No impairment
has been recognized as at the balance sheet date.

8. Debt

As at December 31, 2018, Ardmore had ﬁve loan facilities, which it has used primarily to ﬁnance vessel
acquisitions or vessels under construction and also for working capital. ASC’s applicable ship-owning
subsidiaries have granted ﬁrst-priority mortgages against the relevant vessels in favor of the lenders as security
for Ardmore’s obligations under the loan facilities, which totaled 15 vessels as at December 31, 2018. ASC
and its subsidiary ASLLC have provided guarantees in respect of the loan facilities and ASC has granted a
guarantee over its trade receivables in respect of the ABN AMRO Revolving Facility. These guarantees can be
called upon following a payment default. The outstanding principal balances on each loan facility as at
December 31, 2018 and 2017 were as follows:

NIBC Bank Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CACIB Bank Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABN/DVB/NIBC Joint Bank Facility . . . . . . . . . . . . . . . . . .
Nordea/SEB Joint Bank Facility . . . . . . . . . . . . . . . . . . . . . .
ABN AMRO Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABN AMRO Revolving Facility . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred ﬁnance fees
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
. . . . . . . . . . . . . . . . . . . . .
Current portion of deferred ﬁnance fees . . . . . . . . . . . . . . . . .
Total current portion of long-term debt
. . . . . . . . . . . . . . . . .
Non-current portion of long-term debt . . . . . . . . . . . . . . . .

As at

Dec 31, 2018
7,465,000
31,300,000
92,131,594
86,371,847
—
14,994,279
232,262,720
(3,908,472)
228,354,248
24,217,892
(1,383,349)
22,834,543
205,519,705

Dec 31, 2017
8,885,000
34,100,000
162,115,591
132,272,938
64,201,180
11,092,158
412,666,867
(8,243,297)
404,423,570
39,282,538
(2,210,990)
37,071,548
367,352,022

F-20

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

8. Debt − (continued)

Future minimum scheduled repayments under Ardmore’s loan facilities for each year are as follows:

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As at
Dec 31, 2018
24,217,892
39,212,171
26,521,166
142,311,491
232,262,720

NIBC Bank Facility

On September 12, 2014, one of ASC’s subsidiaries entered into a $13.5 million long-term loan facility with
NIBC Bank N.V. to ﬁnance a secondhand vessel acquisition which delivered to Ardmore in 2014. The facility
was drawn down in September 2014 and bears interest at a rate of LIBOR plus 2.90%. Principal repayments
on the loans are made on a quarterly basis, with a balloon payment payable with the ﬁnal instalment. The loan
facility matures in September 2021.

CACIB Bank Facility

On May 22, 2014, two of ASC’s subsidiaries entered into a $39.0 million long-term loan facility with Credit
Agricole Corporate and Investment Bank to ﬁnance two vessels under construction. On March 10, 2016, this
facility was reﬁnanced, the lenders provided an additional $25 million commitment for additional ﬁnancing
and an additional tranche of $2.3 million was drawn down. The $25 million of additional ﬁnancing was drawn
and repaid in full during the three-month period ended September 30, 2016. Interest is calculated on each
tranche at a rate of LIBOR plus 2.50%. Principal repayments on the loans are made on a quarterly basis, with
a balloon payment payable with the ﬁnal instalment. The full facility matures in 2022.

ABN/DVB/NIBC Joint Bank Facility

On January 13, 2016, 12 of ASC’s subsidiaries entered into a $213 million long-term loan facility with ABN
AMRO Bank N.V. (‘‘ABN AMRO’’) and DVB Bank America N.V. to reﬁnance existing facilities. The loan
was fully drawn down on January 22, 2016. Interest is calculated at a rate of LIBOR plus 2.55%. Principal
repayments on the loans are made on a quarterly basis, with a balloon payment payable with the ﬁnal
instalment. The loan matures in 2022. In May 2017, $20.1 million was repaid as part of the reﬁnancing of the
Ardmore Sealeader and Ardmore Sealifter. On December 7, 2018, one of the tranches was repaid as part of
the reﬁnancing of the Ardmore Engineer.

On August 4, 2016, an incremental term loan of $36.6 million was made under the amended facility in
order to fund two vessel acquisitions, and NIBC Bank N.V. joined as an additional lender under the facility.
The incremental term loan consisted of two tranches, and interest is calculated at a rate of LIBOR plus 2.75%.
On December 6, 2018, the two additional tranches were repaid as part of the reﬁnancing of the Ardmore
Seavanguard and Ardmore Exporter.

F-21

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

8. Debt − (continued)

Nordea/SEB Joint Bank Facility

On January 13, 2016, seven of ASC’s subsidiaries entered into a $151 million long-term loan facility with
Nordea Bank AB (publ) and Skandinaviska Enskilda Banken AB (publ) to reﬁnance existing facilities. The
loan was fully drawn down on January 22, 2016. Interest is calculated at a rate of LIBOR plus 2.50%. On
October 29, 2018, two of the tranches were repaid as part of the reﬁnancing of the Ardmore Dauntless and
Ardmore Defender. Principal repayments on the loans are made on a quarterly basis, with a balloon payment
payable with the ﬁnal instalment. The loan matures in 2022.

ABN AMRO Facility

On July 29, 2016, four of ASC’s subsidiaries entered into a $71.3 million long-term loan facility with ABN
AMRO for vessel acquisitions. Three of the four tranches under the facility were drawn down during the third
quarter of 2016. The fourth tranche was drawn down in the fourth quarter of 2016. On June 26, 2018, two of
the tranches were repaid as part of the reﬁnancing of the Ardmore Endurance and Ardmore Enterprise. On
October 31, 2018, the facility was extinguished when the remaining two tranches were repaid as part of the
reﬁnancing of the Ardmore Encounter and Ardmore Explorer.

ABN AMRO Revolving Facility

On October 24, 2017, Ardmore entered into a $15 million revolving credit facility with ABN AMRO to fund
working capital. Interest is calculated at a rate of LIBOR plus 3.5%. Interest payments are payable on a
quarterly basis. The facility matures in October 2020 with an option to extend for a further year.

Long-term debt ﬁnancial covenants

Ardmore’s existing long-term debt facilities described above include certain covenants. The ﬁnancial
covenants require that ASC:

•

•

•

•

•

maintain minimum solvency of not less than 30%;

maintain minimum cash and cash equivalents based on the number of vessels owned and
chartered-in and 5% of outstanding debt; the required minimum cash balance as of December 31,
2018, was $23.5 million;

ensure that the aggregate fair market value of the applicable vessels plus any additional collateral is,
depending on the facility, no less than 130% of the debt outstanding for the facility;

maintain a corporate net worth of not less than $150 million; and

maintain positive working capital, excluding balloon maturities.

The Company was in full compliance with all of its loan covenants as of December 31, 2018 and 2017.

9. Finance leases

As at December 31, 2018 Ardmore was a party, as the lessee, to seven ﬁnance lease facilities, which it has
used primarily to ﬁnance vessel acquisitions and for working capital. ASC’s applicable ship-owning
subsidiaries have granted ﬁrst-priority mortgages against the relevant vessels in favor of the lenders as security
for Ardmore’s obligations under the ﬁnance lease facilities, which totaled 13 vessels as at December 31, 2018
(2017: three vessels). ASC has provided guarantees in respect of the ﬁnance lease facilities. These guarantees

F-22

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

9. Finance leases − (continued)

can be called upon following a payment default. The outstanding principal balances on each ﬁnance lease
facility as at December 31, 2018 and 2017 were as follows:

River Hudson LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Leases No.1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Lease No.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CMBFL Leases No.1 to 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ocean Yield ASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Lease No.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China Huarong Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Total minimum ﬁnance lease payments
. . . . . . . . . . . .
Amounts representing interest and deferred ﬁnance fees
Net minimum ﬁnance lease payments . . . . . . . . . . . . . . . . . . . . . . . .
Amount receivable in respect of ﬁnance leases . . . . . . . . . . . . . . . . . . .
Adjusted net minimum ﬁnance lease payments . . . . . . . . . . . . . . . . .
Current portion of ﬁnance lease obligations . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred ﬁnance fees
. . . . . . . . . . . . . . . . . . . . . . .
Non-current portion of ﬁnance lease obligations . . . . . . . . . . . . . . . . . .
Non-current portion of deferred ﬁnance fees
. . . . . . . . . . . . . . . . . . . .
Total ﬁnance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount receivable in respect of ﬁnance leases . . . . . . . . . . . . . . . . . . .
Net ﬁnance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As at

Dec 31, 2018
10,380,600
36,253,400
17,870,500
87,496,402
66,563,040
26,061,943
51,555,997
296,181,882
(54,705,784)
241,476,098
(2,880,000)
238,596,098
26,589,017
(739,817)
218,985,447
(3,358,549)
241,476,098
(2,880,000)
238,596,098

Dec 31, 2017
11,767,600
41,094,600
—
—
—
—
—
52,862,200
(10,368,181)
42,494,019
(2,880,000)
39,614,019
3,783,044
(245,578)
39,402,440
(445,887)
42,494,019
(2,880,000)
39,614,019

Future minimum scheduled payments under Ardmore’s ﬁnance lease facilities for each year are as follows:

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 − 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum ﬁnance lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts representing interest and deferred ﬁnance fees . . . . . . . . . . . . . . . . . . . .
Net minimum ﬁnance lease payments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount receivable in respect of ﬁnance leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net minimum ﬁnance lease payments . . . . . . . . . . . . . . . . . . . . . . . .

(1)

Includes $8.3 million related to vessel held for sale repayable on January 2, 2019.

As at
Dec 31, 2018
37,532,945
26,868,097
26,523,339
26,470,805
38,028,900
140,757,796
296,181,882
(54,705,784)
241,476,098
(2,880,000)
238,596,098

F-23

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

9. Finance leases − (continued)

Assets recorded under ﬁnance leases consist of the following:

Vessels, equipment and deferred drydock expenditure . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vessel held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As at

Dec 31, 2018
360,675,433
(46,540,825)
8,083,405
322,218,013

Dec 31, 2017
75,712,769
(19,721,568)
—
55,991,201

River Hudson LLC

On December 22, 2016, one of ASC’s subsidiaries entered into an agreement for the sale and leaseback (under
a ﬁnance lease arrangement) of the Ardmore Seatrader. The facility was drawn down in December 2016.
Repayments on the lease are made on a monthly basis and include principal and interest. The ﬁnance lease is
scheduled to expire in 2021 and includes a mandatory purchase obligation for Ardmore to repurchase the
vessel, as well as a purchase option exercisable by Ardmore, which Ardmore could elect to exercise at an
earlier date. On January 2, 2019, Ardmore exercised the purchase option and repaid the facility in full.

Japanese Leases No. 1 and 2

On May 30, 2017, two of ASC’s subsidiaries entered into an agreement for the sale and leaseback (under a
ﬁnance lease arrangement) of the Ardmore Sealeader and Ardmore Sealifter, respectively, with JPV. The
facility was drawn down in May 2017. Repayments on the leases are made on a monthly basis and include
principal and interest. The ﬁnance leases are scheduled to expire in 2023 and include ﬁxed price purchase
options exercisable by Ardmore. As part of the lease arrangement, Ardmore provided the purchasers with
$2.9 million in the aggregate which shall be repaid at the end of the lease period, or upon the exercise of any
of the purchase options. This amount is included as a receivable within ‘Other non-current assets, net’ in the
consolidated balance sheet, with the associated ﬁnance lease liability presented gross of the $2.9 million.

Japanese Lease No. 3

On January 30, 2018, one of ASC’s subsidiaries entered into an agreement for the sale and leaseback (under a
ﬁnance lease arrangement) of the Ardmore Sealancer with Neil Co., Ltd. The facility was drawn down in
January 2018. Repayments on the lease are made on a monthly basis and include principal and interest.
The ﬁnance lease is scheduled to expire in 2024 and includes ﬁxed price purchase options exercisable by
Ardmore. As part of the lease arrangement, Ardmore provided the purchaser with $1.4 million in the
aggregate which shall be repaid at the end of the lease period, or upon the exercise of any of the purchase
options. This amount has been offset against the ﬁnance lease liability in the consolidated balance sheet, with
the associated ﬁnance lease liability presented net of the $1.4 million.

CMBFL Leases No. 1 to 4

On June 26, 2018, two of ASC’s subsidiaries entered into an agreement for the sale and leaseback (under a
ﬁnance lease arrangement) of the Ardmore Endurance and Ardmore Enterprise, respectively, with CMB
Financial Leasing Co., Ltd (‘‘CMBFL’’). The facility was drawn down in June 2018. Interest is calculated at a
rate of LIBOR plus 3.10%. Principal repayments on the leases are made on a quarterly basis. The ﬁnance
leases are scheduled to expire in 2025 and include a mandatory purchase obligation for Ardmore to repurchase
the vessels, as well as purchase options exercisable by Ardmore, which Ardmore could elect to exercise at an
earlier date.

On October 25, 2018, two of ASC’s subsidiaries entered into an agreement for the sale and leaseback (under a
ﬁnance lease arrangement) of the Ardmore Encounter and Ardmore Explorer, respectively, with CMBFL. The
facility was drawn down in October 2018. Interest is calculated at a rate of LIBOR plus 3.00%. Principal

F-24

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

9. Finance leases − (continued)

repayments on the leases are made on a quarterly basis. The ﬁnance leases are scheduled to expire in 2025
and include ﬁxed price purchase options exercisable by Ardmore.

Ocean Yield ASA

On October 25, 2018, two of ASC’s subsidiaries entered into an agreement for the sale and leaseback (under a
ﬁnance lease arrangement) of the Ardmore Dauntless and Ardmore Defender, respectively with Ocean Yield
ASA. The facility was drawn down in October 2018. Interest is calculated at a rate of LIBOR plus 4.50%.
Principal repayments on the leases are made on a monthly basis. The ﬁnance leases are scheduled to expire in
2030 and include ﬁxed price purchase options exercisable by Ardmore.

Japanese Lease No. 4

On November 30, 2018, one of ASC’s subsidiaries entered into an agreement for the sale and leaseback
(under a ﬁnance lease arrangement), with Rich Ocean Shipping of the Ardmore Engineer. The facility was
drawn down in December 2018. Interest is calculated at a rate of LIBOR plus 3.20%. Principal repayments on
the leases are made on a monthly basis. The ﬁnance lease is scheduled to expire in 2029 and includes ﬁxed
price purchase options exercisable by Ardmore.

China Huarong Leases

On November 30, 2018, two of ASC’s subsidiaries entered into an agreement for the sale and leaseback
(under a ﬁnance lease arrangement), of the Ardmore Seavanguard and Ardmore Exporter, respectively, with
China Huarong Financial Leasing Co., Ltd (‘‘China Huarong’’). The facility was drawn down in
December 2018. Interest is calculated at a rate of LIBOR plus 3.50%. Principal repayments on the leases are
made on a quarterly basis. The ﬁnance leases are scheduled to expire in 2025 and include a mandatory
purchase obligation for Ardmore to repurchase the vessels, as well as purchase options exercisable by
Ardmore, which Ardmore could elect to exercise at an earlier date.

Finance leases ﬁnancial covenants

Some of Ardmore’s existing ﬁnance lease facilities (as described above) include ﬁnancial covenants which are
consistent with, or no more onerous than, ASC’s long-term debt ﬁnancial covenants described in Note 8. The
Company was in full compliance with all of its ﬁnance lease covenants as of December 31, 2018 and 2017.

10. Operating leases

10.1. Operating leases — spot charter

For those spot charters that the Company has determined are operating leases, the term of the lease is always
less than one year. The lease payments to be received for ongoing charters at December 31, 2018 relate to
outstanding freight and demurrage revenue expected to be received in the coming months. Therefore, the
disclosure of the maturity analysis of lease payments required by ASC 842, Leases, is limited to one year. For
those ongoing charters at December 31, 2018, the outstanding lease payments to be received by the Company
as at December 31, 2018 amounted to $20.7 million.

10.2. Operating leases — office rent

Ardmore has chosen to early adopt, as of January 1, 2018 ASC 842 Leases which requires lessees to
recognize on their balance sheet a right of use asset and a corresponding liability in respect of all material
lease contracts. The discount rate used is the incremental cost of borrowing. The weighted average remaining
term of the office leases as of December 31, 2018 was 6.5 years.

F-25

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

10. Operating leases − (continued)

The liabilities described below are for the Company’s offices in Cork, Ireland, Singapore, Bermuda and
Houston, Texas and are denominated in various currencies. Under ASC 842, the right of use asset is a
nonmonetary asset and is remeasured into the Company’s reporting currency of the US Dollar using the
exchange rate for the applicable currency as at the adoption date of ASC 842. The operating lease liability is a
monetary liability and is remeasured quarterly using the current forward exchange rates. The difference in
measurement between the right of use asset and lease liability is included in general and administrative
expenses in the consolidated statement of operations.

Operating lease, right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating lease, right of use asset . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease obligations . . . . . . . . . . . . . . . . . . . . . .
Non-current portion of operating lease obligations . . . . . . . . . . . . . . . . . . .
Total operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign exchange gain on operating leases . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign exchange gain on operating leases . . . . . . . . . . . . . . . . . . .

As at

Dec 31, 2018
2,169,158
2,169,158
477,147
1,491,507
1,968,654

Jan 1, 2018
2,440,288
2,440,288
442,957
1,997,331
2,440,288

Twelve months ended

Dec 31, 2018
(200,504)
(200,504)

Dec 31, 2017
—
—

As of December 31, 2018, the Company had the following undiscounted operating lease commitments:

Office space . . . . . . . . . . . . .

11. Sale of vessels

2019
525,715

2020
339,772

2021
296,499

2022
303,198

2023
309,341

2024 − 2026
689,727

In October 2015, Ardmore agreed to terms for the sale of the Ardmore Calypso and Ardmore Capella.
Effective November 2015, Ardmore reclassiﬁed these vessels as vessels held for sale and ceased to depreciate
the vessels. Ardmore exercised the purchase option for the two vessels during the second quarter of 2016 and
repaid all amounts outstanding under the ﬁnance leases. The sale prices for the two vessels totalled
$38.5 million, resulting in an overall net gain of $0.5 million when Ardmore delivered the vessels to the
buyers during April and May of 2016.

In September 2016, Ardmore agreed to terms for the sale of the Ardmore Centurion. Effective
September 2016, Ardmore reclassiﬁed the vessel as held for sale and ceased to depreciate the vessel. The sale
price for the vessel was $15.7 million, resulting in a net loss of $3.1 million when the vessel delivered to the
buyer in October.

The net loss on disposal of the vessels for the year ended December 31, 2016 is calculated as follows:

Sales proceeds . . . . . . . . . . . . . . .
Net book value of vessels . . . . . . .
Sales related costs . . . . . . . . . . . .
Lease termination costs and related

ﬁnance fees . . . . . . . . . . . . . . .
Net (loss)/gain . . . . . . . . . . . . . .

Centurion
15,700,000
(18,222,109)
(531,001)

Calypso
19,150,000
(18,783,238)
(273,458)

Capella
19,350,000
(18,253,669)
(228,210)

Total
54,200,000
(55,259,016)
(1,032,669)

—
(3,053,110)

(254,731)
(161,427)

(254,732)
613,389

(509,463)
(2,601,148)

In 2017, there were no disposals of vessels.

F-26

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

11. Sale of vessels − (continued)

In November 2018, Ardmore agreed to terms for the sale of the Ardmore Seatrader. Effective November 2018,
Ardmore reclassiﬁed the vessel as held for sale and ceased to depreciate the vessel. Ardmore exercised its
purchase option on the ﬁnancing transaction in January 2019 and repaid all amounts outstanding under the
ﬁnance lease. The price for the subsequent sale of the vessel by Ardmore was $8.3 million, resulting in a net
loss of $6.4 million when the vessel delivered to the buyer in January 2019.

The net loss on the vessel held for sale for the year ended December 31, 2018 is calculated as follows:

Sales proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net book value of vessel
Sales related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease termination costs and related ﬁnance fees
. . . . . . . . . . . . . . . . . . . . . . . .
Net loss on vessel held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Seatrader
8,250,000
(14,444,217)
(165,000)
(1,596)
(6,360,813)

12. Risk management

12.1. Operational risk

Ardmore is exposed to operating costs arising from various vessel operations. Key areas of operating risk
include drydock, repair costs, insurance, piracy and fuel prices. Ardmore’s risk management includes various
strategies for technical management of drydock and repairs coordinated with a focus on measuring cost and
quality. Ardmore’s relatively young ﬂeet helps to minimize the risk. Given the potential for accidents and
other incidents that may occur in vessel operations, the ﬂeet is insured against various types of risk. Ardmore
has established a set of countermeasures in order to minimize the risk of piracy attacks during voyages,
particularly through regions which the Joint War Committee or the Company’s insurers consider high risk, or
which they recommend monitoring, to make the navigation safer for sea staff and to protect Ardmore’s assets
The price and supply of fuel is unpredictable and can ﬂuctuate from time to time. Ardmore periodically
considers and monitors the need for fuel hedging to manage this risk.

12.2. Foreign exchange risk

The majority of Ardmore’s transactions, assets and liabilities are denominated in U.S. Dollars, the functional
currency of Ardmore. Ardmore incurs certain general and operating expenses in other currencies (primarily the
Euro, Singapore Dollar and Pound Sterling) and as a result there is a transactional risk to Ardmore that
currency ﬂuctuations will have a negative effect on the value of Ardmore’s cash ﬂows. Such risk may have an
adverse effect on Ardmore’s ﬁnancial condition and results of operations. Ardmore believes these adverse
effects to be immaterial and has not entered into any derivative contracts for either transaction or translation
risk during the year.

12.3. Interest rate risk

The Company is exposed to the impact of interest rate changes primarily through borrowings that require the
Company to make interest payments based on LIBOR. Signiﬁcant increases in interest rates could adversely
affect the Company’s results of operations and its ability to repay debt. The Company monitors interest rate
exposure and may enter into swap arrangements to hedge exposure where it is considered economically
advantageous to do so.

The disclosure in the immediately following paragraph about the potential effects of changes in interest rates
are based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts. A sensitivity
analysis is constrained by several factors, including the necessity to conduct the analysis based on a single
point in time and by the inability to include the extraordinarily complex market reactions that normally would
arise from the market shifts. Although the following results of a sensitivity analysis for changes in interest

F-27

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

12. Risk management − (continued)

rates may have some limited use as a benchmark, they should not be viewed as a forecast. This
forward-looking disclosure also is selective in nature and addresses only the potential impacts on the
Company’s borrowings.

Assuming the Company does not hedge its exposure to interest rate ﬂuctuations, a hypothetical 100
basis-point increase or decrease in the Company’s variable interest rates would have increased or decreased
the Company’s interest expense for the year ended December 31, 2018 by $4.0 million (2017: $4.6 million)
using the average long-term debt and ﬁnance lease balance and actual interest incurred in each period.

12.4. Credit risk

There is a concentration of credit risk with respect to cash and cash equivalents to the extent that substantially
all of the amounts are held in short-term funds (with a credit risk rating of at least AA) managed by
Blackrock and State Street Global Advisors. While Ardmore believes this risk of loss is low, it will keep this
under review and will revise its policy for managing cash and cash equivalents if considered advantageous
and prudent to do so.

Ardmore limits its credit risk with trade accounts receivable by performing ongoing credit evaluations of its
customers’ ﬁnancial condition. It generally does not require collateral for its trade accounts receivable.

Ardmore may have a credit risk in relation to vessel employment and at times may have multiple vessels
employed by one charterer. Ardmore considers and evaluates concentration of credit risk regularly and
performs on-going evaluations of these charterers for credit risk and credit concentration risk. As at
December 31, 2018 Ardmore’s 28 vessels in operation were employed with 24 different charterers.

12.5. Income taxes

Ardmore’s principal objective in relation to liquidity is to ensure that it has access, at minimum cost, to
sufficient liquidity to enable it to meet its obligations as they fall due and to provide adequately for
contingencies. Ardmore’s policy is to manage its liquidity by strict forecasting of cash ﬂows arising from or
expense relating to time charter revenue, pool revenue, vessel operating expenses, general and administrative
overhead and servicing of debt.

13. General and administrative expenses

13.1. Corporate

Staff salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation (non-cash) . . . . . . . . . . . . . . . .
Office administration . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank charges and foreign exchange . . . . . . . . . . . . . . . . .
Auditors’ remuneration . . . . . . . . . . . . . . . . . . . . . . . . . .
Other professional fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other administration costs . . . . . . . . . . . . . . . . . . . . . . . .

Dec 31, 2018
5,419,944
1,636,548
2,658,087
47,142
676,600
2,009,200
178,852
12,626,373

For the year ended
Dec 31, 2017
6,851,692
457,046
2,538,973
219,910
558,600
1,280,163
72,633
11,979,017

Dec 31, 2016
5,709,919
1,304,325
2,565,838
140,942
513,429
1,810,089
11,183
12,055,725

13.2. Commercial and chartering

Commercial and chartering expenses are the expenses attributable to the Company’s chartering and
commercial operations departments in connection with the Company’s spot trading activities.

F-28

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

13. General and administrative expenses − (continued)

Staff salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office administration . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other professional fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other administration costs . . . . . . . . . . . . . . . . . . . . . . . .

14. Interest expense and ﬁnance costs

Interest incurred − debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest incurred − ﬁnance leases . . . . . . . . . . . . . . . . . . . .
Amortization of deferred ﬁnance fees . . . . . . . . . . . . . . . .
Write-off of deferred ﬁnance fees in relation to reﬁnancing . .

Dec 31, 2018
2,414,574
419,773
—
399,541
3,233,888

For the year ended
Dec 31, 2017
1,934,923
341,219
—
343,606
2,619,748

Dec 31, 2016
1,039,169
201,685
426,213
354,420
2,021,487

Dec 31, 2018
17,070,112
5,667,420
2,400,621
2,267,455
27,405,608

For the year ended
Dec 31, 2017
16,430,031
1,889,609
2,536,402
524,123
21,380,165

Dec 31, 2016
13,794,298
544,368
3,415,452
—
17,754,118

15. Interest income

Interest income relates to bank interest received on Ardmore’s cash and cash equivalents balances.

16. Income taxes

(Loss)/proﬁt before taxes was derived from the following sources:

Domestic

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dec 31, 2018
(42,776,078)
(42,776,078)

For the year ended
Dec 31, 2017
(12,430,768)
(12,430,768)

Dec 31, 2016
3,808,366
3,808,366

The components of the provision for income taxes are as follows:

Domestic
Current tax expenses . . . . . . . . . . . . . . . . . . . . .
Income tax expense for year . . . . . . . . . . . . . .

(162,923)
(162,923)

(59,567)
(59,567)

(60,434)
(60,434)

Dec 31, 2018

For the year ended
Dec 31, 2017

Dec 31, 2016

All domestic tax for the years ended December 31, 2018, 2017 and 2016 arose under the Irish tax jurisdiction
for Ardmore Shipping Services (Ireland) Ltd and the U.S. tax jurisdiction for Ardmore Shipping (Americas)
LLC. The tax years 2014 to 2018 remain open to examination by some of the major jurisdictions to which the
Company is subject to tax.

17. Net (loss)/earnings per share

Basic and diluted (loss)/earnings per share is calculated by dividing the net (loss)/earnings available to
common shareholders by the average number of common shares outstanding during the periods. Diluted
earnings per share is calculated by adjusting the net (loss)/earnings available to common shareholders and the
weighted average number of common shares used for calculating basic (loss)/earnings per share for the effects

F-29

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

17. Net (loss)/earnings per share − (continued)

of all potentially dilutive shares. Such dilutive common shares are excluded when the effect would be to
increase earnings per share or reduce a loss per share.

Numerator:
Net (loss)/proﬁt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator:
Weighted average number of shares outstanding . . . . . . . . .
Net (loss)/earnings per share, basic and diluted . . . . . . .

Dec 31, 2018

For the year ended
Dec 31, 2017

Dec 31, 2016

(42,939,001)

(12,490,335)

3,747,932

32,837,866
(1.31)

33,441,879
(0.37)

30,141,891
0.12

For the year ended December 31, 2018, stock appreciation rights (‘‘SARs’’) granting the right to acquire
1,984,983 shares (2017: 1,343,375, 2016: 1,343,375) were outstanding. The SARs have been excluded from
the computation of diluted earnings per share as they are anti-dilutive.

18. Related party transactions

There were no related party transactions during the year ended December 31, 2018.

For the year ended December 31, 2017, in connection with the secondary public offering by GA Holdings
LLC in November 2017, Ardmore repurchased from GA Holdings LLC 1,435,654 shares of its own common
stock for $11.1 million, at a price per share equal to the price per share at which GA Holdings LLC sold
shares to the underwriters in the public offering.

There were no related party transactions for the year ended December 31, 2016.

19. Share based compensation

As at December 31, 2018, ASC had granted 1,990,762 SARs (inclusive of 5,779 forfeited SARs) to certain of
its officers and directors under its 2013 Equity Incentive Plan. Under a SAR award, the grantee is entitled to
receive the appreciation of a share of ASC’s common stock following the grant of the award. Each SAR
provides for a payment of an amount equal to the excess, if any, of the fair market value of a share of ASC’s
common stock at the time of exercise of the SAR over the per share exercise price of the SAR, multiplied by
the number of shares for which the SAR is then exercised. Payment under the SAR will be made in the form
of shares of ASC’s common stock, based on the fair market value of a share of ASC’s common stock at the
time of exercise of the SAR.

On April 4, 2018 ASC cancelled the 1,078,125 SARs awarded on August 1, 2013 (the ‘‘IPO SARs’’), which
had a per share exercise price signiﬁcantly in excess of the current fair market value of a share of ASC’s
common stock and replaced the IPO SARs with new awards of 1,719,733 SARs (the ‘‘New SARs’’) that will
vest in three equal annual tranches. The New SARs have a contractual term of 7 years and provide for certain
dividend equivalent rights pursuant to which the holder will be entitled upon vesting of the SARs to payment
in the form of additional shares equal to the value of any cash dividends declared and payable during the
applicable vesting period with respect to the shares underlying the portion of the SARs that vest. The New
SARs do not have a market condition and were valued using the Black-Scholes model.

The SAR awards granted prior to the 2018 award contain a market condition whereby, in no event will the
appreciation per share for any portion of the SAR award be deemed to exceed four times (i.e. 400%) the per
share exercise price of the SAR. The market condition does not apply after July 31, 2016. The SAR awards
with a market condition, were valued by applying a model based on the Monte Carlo simulation. The model
inputs were the grant price, dividend yield based on the initial intended dividend set out by the Company, a
risk-free rate of return equal to the zero-coupon U.S. Treasury bill commensurate with the contractual terms of

F-30

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

19. Share based compensation − (continued)

the units and expected volatility based on the average of the most recent historical volatilities in the
Company’s peer group. Both the Monte-Carlo simulation and Black-Scholes model rely on the same
underlying ﬁnancial theory.

A summary of awards, simulation inputs, outputs and valuation methodology is as follows:

Model Inputs

SARs
Awarded
Grant Date
22,118
12-Mar-14 . . . . . .
5,595
01-Sept-14 . . . . . .
37,797
06-Mar-15 . . . . . .
15-Jan-16 . . . . . . .
205,519
04-Apr-18 . . . . . . 1,719,733

Exercise
Price
$13.66
$13.91
$10.25
$ 9.20
$ 7.40

Vesting
Period
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs

Grant
Price
$13.66
$13.91
$10.25
$ 9.20
$ 7.40

Dividend
Yield
2.93%
2.88%
3.90%
6.63%
0%

Risk-free
rate of
Return
2.06%
2.20%
1.90%
1.79%
2.51%

Expected
Volatility
56.31%
53.60%
61.38%
58.09%
40.59%

Weighted
Average Fair
Value @
grant date
$4.17
$4.20
$2.98
$2.20
$2.67

Average Expected
Exercise Life
4.6 − 5.0 yrs
4.5 − 5.0 yrs
4.2 − 5.0 yrs
4.0 − 5.0 yrs
4.25 yrs

Valuation
Method
Monte Carlo
Monte Carlo
Monte Carlo
Monte Carlo
Black Scholes

The cost of each tranche of SARs is being recognized by the Company on a straight-line basis. The
recognition of share-based compensation costs related to the tranches that vested before July 31, 2016 would
have been accelerated if the market condition had been met and the requisite service period had been
completed. The Company’s policy for issuing shares upon the exercise, if any, of the SARs is to register and
issue new common shares to the beneﬁciary. Changes in the SARs for the year ended December 31, 2018 are
set forth below:

Balance as at January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SARs granted during the twelve months ended December 31, 2018 . .
SARs exercised/converted/replaced during the twelve months ended
December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SARs forfeited during the twelve months ending December 31, 2018. .
Balance as at December 31, 2018 (none of which are exercisable
or convertible) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No. of
Units
1,343,375
1,719,733

Weighted
average
exercise price
$13.16
$ 7.40

(1,078,125)
—

($14.00)
—

1,984,983

$ 7.72

The total cost related to non-vested awards expected to be recognized through 2020 is set forth below:

Period
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No. of Shares
573,244
573,245
1,146,489

TOTAL
1,185,060
888,795
2,073,855

20. Repurchase of common stock

On August 31, 2017, the Company announced that the board of directors had terminated the previous share
repurchase plan and approved a new share repurchase plan (the ‘‘New Plan’’), which authorizes the Company
to repurchase up to $25 million of shares of its common stock through to August 31, 2020. The Company
may repurchase these shares in the open market or in privately negotiated transactions, at times and prices that
are considered to be appropriate by the Company, but the Company is not obligated under the terms of the
New Plan to repurchase any shares, and at any time the Company may suspend, delay or discontinue the New
Plan.

F-31

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

20. Repurchase of common stock − (continued)

During the year ended December 31, 2017, the Company repurchased 1,435,654 common shares at a
weighted-average price of approximately $7.72 per share for a total of approximately $11.1 million from GA
Holdings LLC, formerly the Company’s largest shareholder. The repurchase was conducted outside of the
New Plan.

During the year ended December 31, 2018, no shares were repurchased.

21. Commitments and contingencies

Debt commitments are disclosed above in Note 8. Finance lease commitments are disclosed above in Note 9.

22. Subsequent events

In November 2018, Ardmore agreed to terms for the sale of the Ardmore Seatrader. Ardmore exercised its
purchase option for the vessel under the ﬁnance lease on January 2, 2019 and repaid all amounts outstanding
under the ﬁnance lease. The price for the subsequent sale of the vessel by Ardmore was $8.3 million, which
was paid upon delivery of the vessel to the buyer on January 9, 2019.

On January 2, 2019, ASC granted 176,659 Restricted Stock Units (RSUs) to certain of its officers and
directors. Under an RSU award, the grantee is entitled to receive a share of ASC’s common stock for each
RSU at the end of the vesting period. Payment under the RSU will be made in the form of shares of ASC’s
common stock. The cost of RSUs will be recognized by the Company on a straight-line basis. The Company’s
policy for issuing shares upon the exercise, if any, of the RSUs is to register and issue new common shares to
the beneﬁciary.

On February 1, 2019, Ardmore agreed to terms for the sale of the Ardmore Seamaster at a price of
$9.7 million. The vessel is expected to deliver to the buyer in February, 2019.

F-32

Ardmore Shipping Corporation

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise stated)

23. Subsidiaries

The following is a list of ASC’s direct and indirect wholly owned subsidiaries as of December 31, 2018:

Ireland

Country of
Name of Company
Incorporation
Ardmore Shipping LLC . . . . . . . . . . . Marshall Islands
Ardmore Shipholding Limited . . . . . . .
Ardmore Maritime Services LLC . . . . . Marshall Islands
Ardmore Shipping (UK) Limited . . . . . . United Kingdom
Ardmore Shipping (Bermuda) Limited . . . Bermuda
Ardmore Shipping (Asia) Pte Limited . . . Singapore
Ardmore Shipping (Americas) LLC . . . . United States
Ardmore Chartering LLC . . . . . . . . . . Marshall Islands
Ardmore Shipping Services (Ireland)
Limited . . . . . . . . . . . . . . . . . . . . .
Ardmore Pool Holdings LLC . . . . . . . . Marshall Islands
Ardmore MR Pool LLC . . . . . . . . . . . Marshall Islands

Ireland

Ardmore Tanker Trading (Asia) Pte Ltd . Singapore
Ardmore Trading (USA) LLC . . . . . . . United States
Hebrides Shipco LLC . . . . . . . . . . . . Marshall Islands
Sole Shipco LLC . . . . . . . . . . . . . . . Marshall Islands
Biscay Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Blasket Shipco LLC . . . . . . . . . . . . . Marshall Islands
Brandon Shipco LLC . . . . . . . . . . . . . Marshall Islands
Dover Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Humber Shipco LLC . . . . . . . . . . . . . Marshall Islands
Kilkee Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Killary Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Kilmore Shipco LLC . . . . . . . . . . . . . Marshall Islands
Magee Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Saltee Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Skellig Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Tramore Shipco LLC . . . . . . . . . . . . . Marshall Islands
Ballycotton Shipco LLC . . . . . . . . . . . Marshall Islands
Wight Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Lundy Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Thames Shipco LLC . . . . . . . . . . . . . Marshall Islands
Valentia Shipco LLC . . . . . . . . . . . . . Marshall Islands
Fair Isle Shipco LLC . . . . . . . . . . . . . Marshall Islands
Malin Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Tyne Shipco LLC . . . . . . . . . . . . . . . Marshall Islands
Forties Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Fitzroy Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Bailey Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Forth Shipco LLC . . . . . . . . . . . . . . . Marshall Islands
Viking Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Cromarty Shipco LLC . . . . . . . . . . . . Marshall Islands
Shannon Shipco LLC . . . . . . . . . . . . . Marshall Islands
Rockall Shipco LLC . . . . . . . . . . . . . Marshall Islands
Faroe Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Dogger Shipco LLC . . . . . . . . . . . . . Marshall Islands
Fisher Shipco LLC . . . . . . . . . . . . . . Marshall Islands
Plymouth Shipco LLC . . . . . . . . . . . . Marshall Islands
Portland Shipco LLC . . . . . . . . . . . . . Marshall Islands
Trafalgar Shipco LLC . . . . . . . . . . . . Marshall Islands
Fastnet Shipco LLC . . . . . . . . . . . . . . Marshall Islands

F-33

Principal Activities

Holding company
Holding company
Holding company
Chartering services
Executive offices and ﬂeet management
Chartering services
Chartering services
Chartering services

Ownership
(%)
100%
100%
100%
100%
100%
100%
100%
100%
100%

Corporate and ﬂeet administration
Holding company
Commercial management and
chartering services
Chartering services
Chartering services
Dormant
Ship ownership and operations
Dormant
Ship ownership and operations
Dormant
Ship ownership and operations
Ship ownership and operations
Dormant
Ship ownership and operations
Ship ownership and operations
Dormant
Ship ownership and operations
Dormant
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Dormant
Ship ownership and operations
Ship ownership and operations
Dormant
Dormant
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Dormant
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations
Ship ownership and operations

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

This is a list of subsidiary companies of Ardmore Shipping Corporation as at December 31, 2018.

Ardmore Shipping Corporation

Subsidiary Companies

1.
2.
3.

4.

5.

6.

7.

8.
9.
10.

11.

12.

13.

14.

15.
16.

Company Name
Ardmore Shipping LLC
Ardmore Maritime Services LLC
Ardmore Shipping (Bermuda) Limited

Incorporation Jurisdiction
Marshall Islands
Marshall Islands
Bermuda

Ardmore Shipping Services (Ireland) Limited (formerly 
Ardmore Shipping Limited)
Ardmore Shipping (Asia) Pte Ltd

Ireland

Singapore

Ardmore Shipping (Americas) LLC

Ardmore Shipping (UK) Limited

Ardmore Shipholding Limited
Ardmore Chartering LLC
Ardmore Pool Holdings LLC

Ardmore MR Pool LLC

Ardmore Trading (USA) LLC

Ardmore Tanker Trading (Asia) Pte Ltd

Anglo Ardmore Ship Management Limited

Dormant Subsidiaries
Single Ship-Owning Subsidiaries 

Delaware, USA

United Kingdom

Ireland
Marshall Islands
Marshall Islands

Marshall Islands

Delaware, USA

Singapore

Hong Kong

Marshall Islands
Marshall Islands

Exhibit 8.1

Ownership
100.00%
100.00%
100.00% (Immediate Parent – Ardmore Maritime 
Services LLC)
100.00% (Immediate Parent – Ardmore Shipping 
(Bermuda) Limited)
100.00% (Immediate Parent – Ardmore Shipping 
(Bermuda) Limited)
100.00% (Immediate Parent – Ardmore Shipping 
(Bermuda) Limited)
100.00% (Immediate Parent – Ardmore Shipping 
(Bermuda) Limited)
100.00% (Immediate Parent – Ardmore Shipping LLC)
100.00% (Immediate Parent – Ardmore Shipping LLC)
100.00% (Immediate Parent – Ardmore Maritime 
Services LLC)
100.00% (Immediate Parent – Ardmore Pool Holdings 
LLC)
100.00% (Immediate Parent – Ardmore Pool Holdings 
LLC)
100.00% (Immediate Parent – Ardmore Pool Holdings 
LLC)
50% (Immediate Parent – Ardmore Shipping (Bermuda) 
Limited)
100.00% (1)
100.00% (2)

(1) We have 9 dormant subsidiaries, incorporated in the Republic of Marshall Islands, which have Ardmore Shipping LLC as the immediate parent company.

(2) We have 28 ship-owning subsidiaries, incorporated in the Republic of Marshall Islands, which have Ardmore Shipping LLC as the immediate parent company.

I, Anthony Gurnee, certify that:

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

EXHIBIT 12.1

1.

2.

3.

4.

I have reviewed this annual report on Form 20-F of Ardmore Shipping Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the 
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this 
report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the 
financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 
for the company and have:

(a)

(b)

(c)

(d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to 
ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for 
external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the 
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the 
annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; 
and

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 
company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)

(b)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal 
control over financial reporting.

Dated: February 15, 2019

By:  /s/ Anthony Gurnee
Anthony Gurnee
President, Chief Executive Officer and Director
(Principal Executive Officer)

I, Paul Tivnan, certify that:

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

EXHIBIT 12.2

1.

2.

3.

4.

I have reviewed this annual report on Form 20-F of Ardmore Shipping Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the 
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this 
report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the 
financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 
for the company and have:

(a)

(b)

(c)

(d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to 
ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for 
external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the 
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the 
annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; 
and

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 
company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)

(b)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal 
control over financial reporting.

Dated: February 15, 2019

By:  /s/ Paul Tivnan
Paul Tivnan
Senior Vice President, Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer)

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

EXHIBIT 13.1

In connection with this Annual Report of Ardmore Shipping Corporation (the “Company”) on Form 20-F for the year ended December 31, 2018 as filed with the 
Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Anthony Gurnee, Chief Executive Officer of the Company, certify, 
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

(2)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Dated: February 15, 2019

By:  /s/ Anthony Gurnee
Anthony Gurnee
President, Chief Executive Officer and Director
(Principal Executive Officer)

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

EXHIBIT 13.2

In connection with this Annual Report of Ardmore Shipping Corporation (the “Company”) on Form 20-F for the year ended December 31, 2018 as filed with the 
Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Paul Tivnan, Chief Financial Officer of the Company, certify, pursuant to 
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

(2)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Dated: February 15, 2019

By:  /s/ Paul Tivnan
Paul Tivnan
Senior Vice President, Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer)

Consent of Independent Registered Public Accounting Firm

EXHIBIT 15.1

We consent to the incorporation by reference in the Registration Statements (Form F-3 No. 333-203205, Form F-3 No. 333-213343, Form S-8 No. 333-213344 and Form 
F-3 No. 333-227129) of our reports dated February 15, 2019, with respect to the consolidated financial statements and the effectiveness of internal control over financial 
reporting of Ardmore Shipping Corporation included in this Annual Report (Form 20-F) for the year ended December 31, 2018.

/s/ Ernst & Young

Dublin, Ireland

February 15, 2019

ARDMORE SHIPPING CORPORATION

Mr. Leon Berman, 
The IGB Group, 
45 Broadway, 
Suite 1150, 
New York, NY 10006, 
USA 
Tel: +1 212 477 8438 
lberman@igbir.com

Auditors
Ernst & Young, 
Ernst & Young Building, 
Harcourt Centre, 
Harcourt Street, 
Dublin 2, 
Ireland 
Tel: +353 1 475 0555

Belvedere Building
69 Pitts Bay Road,  
Ground Floor,
Pembroke, HM08,
Bermuda
Tel: +1 441 405 7800
info@ardmoreshipping.com
www.ardmoreshipping.com

Stock Listing
Ardmore Shipping Corporation’s 
common stock is traded on the 
New York Stock Exchange under 
the ticker “ASC”.

Transfer Agent
Computershare Inc. 
P.O. Box 505000 
Louisville, KY 40233-5000 
USA 
Tel: +1 877 373 6374

Investor Relations
Investor Relations, 
Ardmore Shipping Corporation, 
Belvedere Building, 
69 Pitts Bay Road,  
Ground Floor,
Pembroke, HM08,
Bermuda
Tel: +1 441 405 7800
info@ardmoreshipping.com
www.ardmoreshipping.com

 ARDMORE SHIPPING CORPORATIONANNUAL REPORT2018