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. 3Q 2012 Highlights
• Net income of $35 million ($ 0.44/share) for the quarter
» Aggregate charter revenue of $179 million ($2.26/share)(2)
» Including $10 million cash sweep relating to Frontline vessels
» EBITDA(3) of $145 million ($1.83/share)
• Declared a third quarter dividend of $0.39 per share
» 10% dividend yield(1)
• Declared an additional accelerated fourth quarter dividend of $0.39 per share
» Total cash dividend payment of $0.78 per share in December 2012
OFFSHORE TANKERS DRY BULK CONTAINER
Charter
revenue 52% 30% 10% 8%
3Q-12
1) Announced quarterly cash dividend, annualized / SFL share price $[15.43 (November 28, 2012)
2) 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. 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 months ended September 30, 2012.
3) EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see 3Q-12 press release Appendix 1: Reconciliation of Net Income
to EBITDA. 3
4. Recent developments
• Renewal of fleet continuing
» 1991-built OBOs Front Climber and Front Driver delivered to new owners in October
and November 2012, respectively
» Net proceeds to SFL of approximately $18.5 million, after compensation from
Frontline
» Expected aggregate book gain of approximately $4.4 million in 4Q 2012
» Only two older OBOs remaining in the fleet
• $194 million equity and bonds raised subsequent to quarter-end
» $89 million raised in a public offering of 6 million new shares
» $105 million raised through issuance of 5-year senior unsecured notes
• NOK denominated, but all payments swapped to USD with a fixed interest rate of 6.06% p.a.
• Acquired two modern car carriers in combination with 5-year charters
» Built 2005 and 2006 in Japan
» 6,500 ceu capacity
» 5-year time charter to an investment-grade logistics company in Asia
» $85 million increase in charter backlog
4
5. Cash sweep and profit share
• $10.2m net cash sweep from two separate asset pools
» 22 VLCCs, Suezmaxes and OBOs (acquired in 2004): $13.0m accumulated in 3Q-12
» 5 VLCCs at higher rates (acquired in 2005): Negative adjustment of $2.8m
• $40.1 million cash sweep accumulated year-to-date
» 100% from 22 vessels acquired in 2004
» Full year cash sweep payable in March 2013
VLCC earnings(1) and cash sweep range
$100,000
$90,000
$80,000 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)
$0.17/share
$20,000 20 x VLCC/Suezmax/OBO: Cash sweep range(3)
per quarter
$10,000
$0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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, 6 x Suezmaxes and 2x OBOs acquired in 2004 (after the recently announced sales of two OBOs)
5
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 is reduced to 25 vessels by • From $1,250m to $490m(1) = 60% reduction
selling the oldest tonnage in loan amount
• Further fleet reductions expected • Loan amortization continues (>$70m/yr)
• Weighted average age of ~10 years • Next refinancing: ~$222m 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 2012e 2004 2005 2006 2007 2008 2009 2010 2011 2012e
(2)
Single Hull Suezmax/OBO - DH VLCC - DH Scrap @ $410/ldt Loan
.
1) Estimated loan amount at year-end 2012
2) Source: Clarkson Research Services
6
7. $5.4 billion charter backlog (1)
Charterers by Mkt. Cap Remaining Charter Term(1)
> $5bn < $5bn > 10 yrs 5–10 yrs
44% 39% 66% 32%
0–5 yrs
2%
Private
17%
1) Fixed charter backlog as of September 30, 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 12 months
» General uncertainty in the world economy
» 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
160
140 60
120 50
100 40
80
30
60
20
40
20 10
0 0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 98 99 00 01 02 03 04 05 06 07 08 09 10 11
NB VLCC 5yr VLCC NB 3,500teu 5yr 3,600teu
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
» $614m EBITDA-equivalent last twelve months
» $133m net cash-flow from projects after interest and debt amortization
$ mill.
800
40
133
600
137
400
707
344
200
133
0
Fixed-rate Cash OPEX + Net Loan Net
revenues (2) sweep G&A interest amort.(3) contribution
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 $156 million prepayment relating to vessels on charter to Frontline in 2011, and 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
3Q 2012 2Q 2012
$ mill. $/share $ mill. $/share
Fixed charter hire
VLCC 30.4 0.38 30.4 0.38
Suezmax 10.2 0.13 10.2 0.13
Chemical Tankers 1.5 0.02 1.4 0.02
Container 14.6 0.18 17.0 0.21
Dry bulk incl. OBOs 15.6 0.20 17.6 0.22
Offshore 93.9 1.19 92.3 1.17
Sum fixed charter hire 166.2 2.10 168.9 2.13
Vessel operation expenses and G&A (35.9) (0.45) (34.0) (0.43)
Financial investments 1.9 0.02 1.9 0.02
Accumulated cash sweep/profit share(2) 13.0 0.16 13.5 0.17
EBITDA including accumulated cash sweep 145.2 1.83 150.3 1.90
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 months ended September 30, 2012.
10
11. Profit & Loss
INCOME STATEMENT Three months ended Full year
(in thousands of $ Sep, 30 Jun, 30 2011
except per share data) 2012 2012 (audited)
Charter revenues - operating lease 31,476 34,215 120,024
Accumulated cash sweep from
Charter revenues - finance lease 47,263 47,856 380,518
Revenues classified as Repayment of
Frontline
investment in finance leases (14,612) (14,754) (205,910)
Profit share income - - 482
Cash sweep income 10,162 16,312 -
Total operating revenues 74,289 83,629 295,114
Gain on sale of OBO Front Rider
Gain / (loss) on sale of assets and
termination of charters 1,923 21,704 8,468
Vessel operating expenses (25,364) (23,142) (81,063)
Administrative expenses (2,133) (2,272) (9,885)
Depreciation (13,583) (13,533) (49,929)
Total operating expenses (41,080) (38,947) (140,877)
Operating income 35,132 66,386 162,705
Results in associate 10,669 11,219 50,902
Interest income from associates and
long term investments 5,661 5,653 21,851
Interest income, other 1,198 1,137 1,550
Interest expense (22,067) (21,635) (96,247)
Amortisation of deferred charges (1,500) (1,415) (7,131)
Gain on sale of associate - - 4,064
Other financial items (710) 9 (2,111)
Impairment adjustment to investment - (463) -
Mark to Market of Derivatives 6,176 335 (4,408)
Taxes - - -
Net income 34,559 61,226 131,175
Subsequent to quarter end, SFL
Basic earnings per share ($) 0.44 0.77 1.66 issued 6 million new shares
Weighted average number of shares 79,225,000 79,225,000 79,125,000
79,225,000 79,225,000 79,125,000 11
Common shares outstanding
12. Balance Sheet
BALANCE SHEET
Sep, 30 Jun, 30 Dec 31, 2011
(in thousands of $) 2012 2012 (audited)
ASSETS
Short term
Cash and cash equivalents 66,818 100,788 94,915
Available for sale securities 40,359 39,664 23,324
Amount due from related parties 41,195 30,451 9,775 Includes $40.1 million in
Other current assets 72,988 73,562 64,749 accumulated cash sweep from
Frontline
Long term
Newbuildings and vessel deposits 73,780 61,965 123,750
Vessels and equipment, net 960,400 973,982 896,830
Investment in finance leases 1,116,191 1,135,736 1,159,900
Investment in associate 219,907 203,588 169,838
Amount due from related parties- Long term 235,163 248,775 274,184
Deferred charges 22,943 24,327 25,723
Other long-term assets 52,259 51,252 53,140
Total assets 2,902,003 2,944,090 2,896,128
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short term
Short term and current portion of long term
interest bearing debt 220,051 209,378 150,342
Other current liabilities 20,622 18,315 19,385
Amount due to related parties 7,495 6,704 4,421
Long term
Long term interest bearing debt 1,630,480 1,689,905 1,760,122
Other long term liabilities 113,975 112,327 104,767 Equity ratio of 35%, including
deferred equity of $156.9
Stockholders’ equity 909,380 907,461 857,091 million
Total liabilities and stockholders’ equity 2,902,003 2,944,090 2,896,128
12
13. Liquidity and Financing
• $67 million in cash and cash equivalents
• $40 million in available for sale securities
• $3.1 billion gross interest-bearing debt at 3Q12
» $1.4 billion bank loans - fully consolidated
» $1.3 billion bank loans in ‘Investment in associate’
» $0.5 billion senior unsecured notes – fully consolidated
» Significant scheduled loan repayments
• Raised $194 million in equity and senior unsecured bonds
subsequent to quarter-end
• Demonstrated premium access to the bank market
» $53 million financing on newly acquired car carriers
13
14. Fully financed newbuilding program
Remaining newbuilding program only 5% of Enterprise Value(1)
$ mill.
200
150
Enterprise 100
179
Value(1):
$4.4bn
50
34
0
4Q 2012 2013
Committed financing Remaining ship yard installments
• Six newbuildings representing $213 million remaining gross investments
• Committed undrawn bank debt of $192 million = $21m net capex
• All newbuildings have medium- to long-term charters attached
1) Enterprise Value defined as sum of market capitalization at November 28, 2012 and net interest-bearing debt at September 30, 2012, including all 100% owned subsidiaries
14
15. Covenant Compliance
Free cash > $25m $67m
Working capital(1) >0 $193m
Book equity ratio(2) > 20% 35%
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) Excluding short-term portion of long-term debt
2) Including $156.9 million of deferred equity
15
16. Summary
• Declared third quarter dividend of $0.39 per share
» 10% dividend yield(1)
• $0.78 per share cash payment to shareholders in
December, including accelerated fourth quarter dividend
• Reported net income of $35 million ($0.44/share) in the
third quarter
• EBITDA(2) equivalent cash flow of $145 million
($1.83/share) including associated companies
• Premium access to capital - have raised equity, bonds and
bank financing recently
• Focus on investment opportunities with vessel values at
historic low levels in many segments
1) Announced quarterly cash dividend, annualized / SFL share price $15.43 (November 28, 2012)
2) EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see 3Q-12 press release Appendix 1: Reconciliation of Net
Income to EBITDA.
16
