2. FORWARD LOOKING STATEMENTS
This presentation contains forward looking statements. These statements are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including Ship Finance management's examination of historical operating trends, data
contained in the Company’s records and other data available from third parties. Although Ship Finance believes that these
assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies
which are difficult or impossible to predict and are beyond its control, Ship Finance cannot give assurance that it will achieve or
accomplish these expectations, beliefs or intentions.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking
statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions including
fluctuations in charter hire rates and vessel values, changes in demand in the markets in which we operate, changes in demand
resulting from changes in OPEC's petroleum production levels and world wide oil consumption and storage, developments regarding
the technologies relating to oil exploration, changes in market demand in countries which import commodities and finished goods and
changes in the amount and location of the production of those commodities and finished goods, increased inspection procedures and
more restrictive import and export controls, changes in our operating expenses, including bunker prices, dry-docking and insurance
costs, performance of our charterers and other counterparties with whom we deal, timely delivery of vessels under construction within
the contracted price, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from
pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to
accidents or political events, and other important factors described from time to time in the reports filed by the Company with the
Securities and Exchange Commission.
2
3. 4Q 2012 highlights
• Net income of $51.1 million ($ 0.60/share) for the quarter
» Aggregate charter revenue of $168 million ($1.98/share)(1)
» EBITDA(2) of $134 million ($1.59/share)
• 2012 cash sweep on Frontline vessels: $52.2 million
» Payable to SFL in March 2013
» $12.1 million cash sweep recorded in 4Q-2012
• Fourth quarter dividend of $0.39 per share was prepaid in December 2012
» Dividend yield(3) of approx. 9.6%
OFFSHORE TANKERS DRY BULK LINER
Charter
revenue 50% 29% 11% 10%
4Q-12
1) Charter revenues includes total charter hire from all vessels and rigs, including assets in 100% owned subsidiaries classified as ‘Investment in associates’ and accrued cash sweep income.
2) EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see 4Q-12 press release Appendix 1: Reconciliation of Net Income
to EBITDA.
3) Quarterly cash dividend, annualized / SFL share price $16.27 (February 22, 2013)
3
4. Recent developments
• Acquired two modern car carriers in combination with 5-year charters
» 6,500 ceu capacity, built 2005 and 2006 in Japan
» 5-year time charter to Hyundai Glovis, an investment-grade logistics company
based in Korea
» $85 million increase in charter backlog
• More than $1 billion raised in the capital markets since October 2012
» Combination of equity, bonds, convertible notes and bank financing
» A part of the new capital is earmarked for additional growth
• Renewal of fleet continues
» Seven older vessels sold in 4Q 2012 and 1Q 2013(1)
» Aggregate book gains of approximately $39 million and net cash proceeds(2) of
approximately $68 million over the two quarters
» Five newbuildings under construction, including a dry-bulk carrier and four
container vessels with expected delivery between 1Q 2013 and 1Q 2014
1) Including a vessel due to be delivered to its new owner at the end of 1Q 2013
2) Net cash proceeds after debt prepayment and charter termination compensation
4
5. Cash sweep and profit share
• $52.2m cash sweep in 2012
» 22 VLCCs, Suezmaxes and OBOs (acquired in 2004): $12.1m cash sweep in 4Q-12
» 5 VLCCs at higher rates (acquired in 2005): No cash sweep in 2012
• Most of the Frontline vessels are now employed in the spot market
» Very soft crude-oil tanker market currently = limited cash sweep expectations
$100,000 VLCC earnings(1) and cash sweep range
$90,000
$80,000 (4)
25% profit split
$70,000
above old base
$60,000 rates
$50,000
$40,000
$30,000 Up to
5 x VLCCs - Cash sweep range(2)
$0.15/share per
$20,000 17 x VLCC/Suezmax: Cash sweep range(3) quarter
$10,000
$0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
1) Average earnings for modern VLCC (Clarksons, Research Sercices, quarterly average)
2) Average cash sweep range for 5 x VLCCs acquired in 2005
3) Average cash sweep range for 12x VLCCs and 5 x Suezmaxes acquired in 2004 (excluding vessels announced sold)
5
4) $50 million of profit split was prepaid in 2011
6. Frontline vessels and financial exposure
Vessels on charter to FRO Financial leverage on FRO vessels
• 47 vessels initially in 2004 • Significant reduction in leverage last 4 years
• The fleet has been reduced to 22 • From $1,250m to ~$470m(2) = 60%
vessels by selling the oldest tonnage reduction in loan amount
• Only double-hull VLCCs and Suezmaxes • Loan amortization continues (>$70m/year)
remaining • Next refinancing: ~$220m in 2015
Number of vessels to FRO Financing relating to FRO vessels
50 $1400m
$1200m
40
$1000m
30 $800m
$600m
20 $400m
10 $200m
$0m
- 2004 2005 2006 2007 2008 2009 2010 2011 2012
2004 2005 2006 2007 2008 2009 2010 2011 2012
Single Hull/OBO Suezmax VLCC Scrap @ $420/ldt
(1)
Loan
.
1) Source: Clarkson Research Services
2) Gross available amount per 4Q 2012, adjusted for subsequent prepayments due to vessels sales.
6
7. $5.2 billion charter backlog (1)
Charterers by Mkt. Cap Remaining Charter Term(1)
> $5bn < $5bn > 10 yrs 5–10 yrs
44% 39% 64% 33%
0–5 yrs
3%
Private
17%
1) Fixed charter backlog as of December 31, 2012, adjusted for subsequent acquisitions and sales, excluding future cash sweep/profit share, net of any seller’s credit and assuming certain call options are not exercised
7
8. Historically attractive asset prices
• Downward pressure on asset values in most shipping segments last 18 months
» Banks increasing pressure on weaker owners to sell assets
» Significant deliveries impacting supply/demand ratio
» Shipyards need to fill up production capacity
» Many ship owners have limited access to capital
• Increased focus on efficient vessel designs
» Significant fuel savings compared to older tonnage
» ‘Value gap’ between newbuildings and secondhand vessels
Tanker (1) Container (1) Orders and yard capacity(2)
70 mill. cgt
160 80
60 70
140
120 50 60
100 40 50
80 40
30
60 30
20
40 20
20 10 10
0 0 0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 94 96 98 00 02 04 06 08 10 12
NB VLCC 5yr VLCC NB 3,500teu 5yr 3,600teu est. new orders est. build capacity
1) Source: Clarkson Research Services
2) Source: RS Platou markets
8
9. Contributions from projects last 12 months(1)
• Large performing fleet with significant cash flow
» $585m EBITDA-equivalent last twelve months
» $136m net cash-flow from projects after interest and debt amortization
(2) (3)
1) Not as accounted per US GAAP – used as an internal guideline to assess the Company’s core business.
2) Fixed charter revenues and return on financial investments
3) Ordinary installments relating to the Company’s projects. Excluding prepayments when vessels are sold 9
10. SFL operational performance
• Pro-forma illustration of cash flow (1)
» Not as accounted for under US GAAP
» Used as an internal guideline to assess the Company's performance
» Excluding extraordinary and non-cash items and profit share
4Q 2012 3Q 2012
$ mill. $/share $ mill. $/share
Fixed charter hire
VLCC 30.4 0.36 30.4 0.38
Suezmax 10.2 0.12 10.2 0.13
Chemical Tankers 1.5 0.02 1.5 0.02
Liner (Container and Car Carriers) 18.0 0.21 14.6 0.18
Dry bulk incl. OBOs 14.0 0.17 15.6 0.20
Offshore 81.9 0.97 93.9 1.19
Sum fixed charter hire 155.9 1.84 166.2 2.10
Vessel operation expenses and G&A (35.9) (0.42) (35.9) (0.45)
Financial investments 2.3 0.03 1.9 0.02
Accumulated cash sweep/profit share(2) 12.1 0.14 13.0 0.16
EBITDA including accumulated cash sweep 134.4 1.59 145.2 1.83
1) Including cash flow in subsidiaries accounted for as ‘investment in associate’
2) The numbers include cash sweep accrual in Frontline Shipping Limited only, as there was no accrued cash sweep in Frontline Shipping II Limited for the nine and 12 months ended September 30, 2012 and
December 31, 2012, respectively.
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11. Profit & loss
INCOME STATEMENT Three months ended Twelve months ended
(in thousands of $ Dec, 31 Sept, 30 Dec, 31 Dec, 31
except per share data) 2012 2012 2012 2011
Charter revenues - operating lease 34,104 31,476 137,035 120,024
Charter revenues - finance lease 46,026 47,263 190,198 380,518 Accumulated cash sweep from
Revenues classified as Repayment of investment in Frontline
finance leases (14,573) (14,612) (59,717) (205,910)
Profit share income - - - 482
Cash sweep income 12,097 10,162 52,176 -
Total operating revenues
Gain on sale of four older vessels
77,654 74,289 319,692 295,114
Gain on sale of assets and termination of charters 21,537 1,923 47,386 8,468
Vessel operating expenses (24,744) (25,364) (94,914) (81,063)
Administrative expenses (2,341) (2,133) (8,942) (9,885)
Depreciation (14,225) (13,583) (55,602) (49,929)
Total operating expenses (41,310) (41,080) (159,458) (140,877)
Operating income 57,881 35,132 207,620 162,705
Results in associate 10,163 10,669 43,492 50,902
Interest income from associates and long term
investments 5,668 5,661 22,633 21,851
Interest income, other 1,586 1,198 4,541 1,550
Interest expense (22,354) (22,067) (88,985) (96,247)
Amortization of deferred charges (1,529) (1,500) (5,866) (7,131)
Gain on sale of associate - - - 4,064
Other financial items (730) (710) (2,026) (2,111)
Impairment adjustment to investments - - (3,353) -
Mark to Market of Derivatives 414 6,176 7,780 (4,408)
Taxes - - - -
Net income 51,099 34,559 185,836 131,175
Basic earnings per share ($) 0.60 0.44 2.31 1.66
SFL issued 6 million new shares
Weighted average number of shares 84,768,478 79,225,000 80,594,399 79,125,000
Common shares outstanding 85,225,000 79,225,000 85,225,000 79,125,000 11
12. Balance sheet
BALANCE SHEET Dec, 31 Sept, 30 Dec 31, 2011
(in thousands of $) 2012 2012 (audited)
ASSETS
Excludes $57 million available
Short term
under revolving credit facilities
Cash and cash equivalents 60,542 66,818 94,915
Available for sale securities 55,661 40,359 23,324
Amount due from related parties 54,203 41,195 9,775
Other current assets 72,226 72,988 64,749 Includes $52 million in
accumulated cash sweep from
Long term
Frontline
Newbuildings and vessel deposits 69,175 73,780 123,750
Vessels and equipment, net 1,041,126 960,400 896,830
Investment in finance leases 1,086,989 1,116,191 1,159,900
Investment in associate 232,891 219,907 169,838
Amount due from related parties - Long term 221,884 235,163 274,184
Deferred charges 23,740 22,943 25,723
Other long-term assets 54,652 52,259 53,140
Total assets 2,973,089 2,902,003 2,896,128
LIABILITIES AND STOCKHOLDERS’
EQUITY
Short term
Short term and current portion of long term
interest bearing debt 157,689 220,051 150,342
Other current liabilities 30,602 20,622 19,385
Amount due to related parties 9,227 7,495 4,421
Long term
Long term interest bearing debt 1,673,511 1,630,480 1,760,122
Other long term liabilities 107,292 113,975 104,767 Equity ratio of 37%, including
deferred equity of $151 million
Stockholders’ equity 994,768 909,380 857,091
Total liabilities and stockholders’ equity 2,973,089 2,902,003 2,896,128
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13. Liquidity and financing
• $118 million in total available liquidity
» $61 million cash and cash equivalents
» $57 million available under revolving credit lines
• $56 million in available for sale securities
» Mainly senior secured bonds
• Debt overview
» $1.8 billion consolidated interest bearing debt at quarter
end, including $0.6 billion of senior unsecured notes
» $1.2 billion bank loans in subsidiaries account for as
‘Investment in associate’
13
14. Raised more than $1billion since Oct 2012
• $89m equity offering (Oct 2012)
» 6 million new shares issued
» Proceeds partly used to acquire two car carriers
• $105m senior unsecured notes (Oct 2012)
» NOK 600m due 2017 – priced at NIBOR + 5.00% (all payments
swapped to USD at a fixed interest rate of 6.06%)
» Net proceeds used refinance other indebtedness
• $53m senior secured bank financing (Nov 2012)
» Five-year tenor with a $31m payment at maturity
» Financing of two car carriers
• $420m senior secured bank financing (Dec 2012/Jan 2013)
» Refinancing of the ultra-deepwater drillship West Polaris
» Five-year tenor with a $240m payment at maturity
• $350m convertible notes due 2018 (Jan 2013)
» 3.25% coupon and initial strike price of $21.945
» Partly used to refinance remaining $248m senior notes due 2013
14
15. Fully financed newbuilding program
Remaining newbuilding program less than 5% of Enterprise Value(1)
Enterprise
Value(1):
$4.4bn
• Five newbuildings and $191 million remaining gross investments
• Committed undrawn bank debt of $165 million = $26m net capex
• All newbuildings have medium- to long-term charters attached
1) Enterprise Value defined as sum of market capitalization at February 22, 2013 and net interest-bearing debt at December 31, 2012, including all 100% owned subsidiaries
15
16. Covenant compliance
Free cash(1) > $25m $118m
Working capital(2) >0 $203m
Book equity ratio(3) > 20% 37%
Minimum Value Clauses (where applicable) In compliance
Ship Finance has never experienced any violations of bank covenants,
despite the volatility in the shipping and offshore markets
1) Including $57.5 million in available undrawn credit lines.
2) Excluding short-term portion of long-term debt
3) Including $151.5 million of deferred equity
16
17. Summary
• Reported net income of $51.1 million ($0.60/share) in the fourth
quarter
» $52.2 million total cash sweep in 2012
• EBITDA(1) equivalent cash flow of $134 million ($1.59/share)
including associated companies
• Fourth quarter dividend of $0.39 per share was prepaid in
December 2012
» 10% dividend yield(2)
• More than $1 billion raised in the capital markets since October
2012
» Combination of equity, bonds, convertible notes and bank financing
• Investment opportunities in several segments
1) EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see 4Q-12 press release Appendix 1: Reconciliation of Net
Income to EBITDA.
2) Quarterly cash dividend, annualized / SFL share price $16.27 (February 22, 2012)
17
