Good day. And welcome to the Q2 2015 Ship Finance International Limited Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ole Hjertaker, CEO. Please go ahead.

Thank you, everyone, and welcome to Ship Finance International and our second quarter conference call. With me here today, I also have our CFO, Harald Gurvin. Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on our current plans and expectations, and involve risks and uncertainties that could cause future activities, and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include conditions in the shipping, offshore and credit markets. For further information, please refer to Ship Finance's reports and filings with the Securities and Exchange Commission. The Board has again increased the dividend by $0.01 to $0.44 per share. This dividend represents $1.76 per share on an annualized basis or nearly 12% dividend yield based on closing price of $14.90 yesterday. This is the 46th consecutive dividend and we have now paid nearly $20 in aggregate dividends per share since 2004. Reported net income for the quarter was $68 million or $0.73 per share. This is more than double the result in the previous quarter after a gain relating to the sale of Horizon Lines notes and warrants, but also after writing down nearly $30 million on some feeder-size container vessels. Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries accounted for as investment in associate was $148 million. With the delivery of the Capesize bulkers to Golden Ocean in the third quarter, we expect charter revenues to increase going forward. The EBITDA equivalent cash flow in the second…

Thank you, Ole. On this slide, we have shown our pro forma illustration of cash flows for the second quarter compared to the first quarter. Please note that this is only a guideline to assess the company's performance and is not is in accordance with U.S. GAAP. For the first quarter -- for the second quarter, total charter revenues before profit split and cash sweep were $134 million or $1.34 per share, down from $139 million in the previous quarter. The main reason for the reduction is the decline in offshore revenues due to scheduled reduction in the charter rate for West Taurus in February 2015, which had a full effect in the second quarter. It is important to note that a scheduled rate reduction is balanced by reduced interest and debt repayments on the related financing for the net effect on the distribution capacity is neutral. Revenues from VLCCs were in line with the previous quarter while revenues from Suezmaxes were up due to the stronger earnings on the two Suezmaxes trading in the spot market. One of which was out of service for 10 days in the second quarter and 33 days in the first quarter in connection with the special survey and major upgrade to improve earnings efficiency. Following the revised agreement with Frontline effective from 1st July, fixed charter revenues from the tankers are expected to increase by approximately $1.6 million on average in the third and fourth quarter of 2015. Revenues from liners were up in the quarter due to improved quarter earnings on the two the remaining 8,700 TEU container vessels delivered in January 2015, with seven years charters to Hamburg Süd. Revenues on drybulk carriers was slightly down but will increase going forward, following delivery of the eight Capesize drybulk carriers on charter…

[Operator Instructions] We will now take our first question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

Yes. Hello, guys. And congratulations for the good results. This is a very tough market for many of the high yielding companies and some of the MLPs. And there is a lot of concern about the ability to grow further the dividends and fund the growth. You just announced a dividend increase, which is not very intuitive into the reaction into the current environment. I want to ask you how much capacity do you have to do more deals, based on your existing balance sheet? And how much cash do you expect that you will be generating in excess of your dividend payment?

Thank you, Fotis. It’s an interesting question. And as you point out, we see some of the other, call it, yield vehicles struggle a bit on pricing. I think history speaks for itself, 46 quarters, we have been profitable ever single quarter and we have declared dividends every single quarter. I don’t think any other shipping companies or offshore companies for that matter, correct me if I am wrong, has had that kind of track record. And I think what’s really important here is our approach to our business model. We have a multiple segment approach. We don’t focus on one single segment only, because we know that all these segments are volatile by nature and they have been volatile historically and we have to expect them to be also, call it, volatile going forward. And our ability to balance our investment and also to focus at different deals and different segments means that we can benchmark deals in a different way than the players, who are locked into one segment only can. And hopefully, that will help us, what can we say, do better investment over time that will also support the dividend capacity. In the numbers reported as Harald pointed out, we had nearly $400 million of available liquidity at the quarter end. And then in addition, we had $160 million of what was available for sale securities, including $160 million of Frontline notes. On top of that, we also have 55 million Frontline shares that we received as compensation earlier this year. So I would say that we have a fairly good, what can we say, robust balance sheet and good investment capacity. I will not specify exact number, but the investments we have agreed to, what was a, will, we estimate, we will call it, use around $150 million sort of say plus, minus of our total, call it of our liquidity, maybe less and based on that there should be significant additional investment opportunity. And then for the free cash flow, maybe if you take a look at slide number 10 in our presentation, we illustrated that the net contribution last 12 months was $246 million after the loan interest and amortization, which compares to around $160 million of dividends declared in the period, which clearly illustrates the difference and the cash flow aggregation that we generate in the company.

Thank you very much. And do you forecast that out of this difference, how much do you think it’s the replacement of the asset when they get older and how much is potential growth? Can we assume that half and half of that?

I will not specific the number as such. I mean, we try to take a conservative approach and as you of course correctly point out, everyone who owns maritime assets knows that or any asset for that matter knows that over time you have to renew your assets otherwise the cash flow will stop. So, yes, part of this is call it the renewal and reinvestment and as we just -- as we just announced those little earlier a couple weeks ago, we sold a 20 year older Suezmax tanker basically debt free. Of course that capital, we intend to reinvest in other assets and then continue call it building the company. But I think basically, I think we have a model where we have seen as we have seen over the 11 years, we have been able to increase the company, increase the asset base and we have a much higher charter backlog now than we had 11 years ago. So, I think we are building a company and not what we said, using it up.

Okay. Thank you, Ole. If we exclude the cash flow, the excess free cash flow that you have available for growth and we focus on the liquidity that you have and the securities that you hold in other affiliated companies, what is -- you said that about kind of $50 million is already committed, the rest of it is going for growth. What is your view about deploying this remaining capital and how would you think about your holdings in these affiliates? Is the intention first to exhaust, to use the cash that you have on hand and then sell these investments? Or are there thoughts, there are thoughts of holding these investments in the long-term?

Well. Yeah, I think with respect to the affiliate investments, we have not made up our mind. We have not decided exactly what we want to do with that. We have a lock-up relating to the shares until the general assemblies for voting for the merger is completed. But after that we have full flexibility with respect to what we do. There are no other restrictions relating to those, nor the notes we have. So, we of course hope to be -- opportunistically, we’ve tried to maximize value for our investors. And with respect to other investments, we are constantly of course screening different projects. I think if you look at our different segments, I think right now we have been quite careful on the offshore side because we feel that there is -- what we say, there is a lot of noise, particularly in that segment. We have just invested in containerships. We have invested in bulkers and we also are looking -- but we are looking at other opportunities also in those segments and we are looking at opportunities also on the tanker side. That said it’s all about grabbing the right opportunity at the right moment. So, I wouldn’t rule out, call it offshore-related investments. But as I said, we are cautious and careful and we try not to catch invariable falling knife.

And I want to ask, Ole, the usual question about the segments that they look more attractive right now. You obviously did some containership acquisitions. Are there any sectors that they look more attractive at this point of the cycle? And the collapse of the MLP market, how it has change these potential opportunities in the competitive landscape, given the fact that you are not an MLP and you do not have to pay any cash flow to any sponsor? So, I would assume that there might be even opportunities in the LNG sector where a lot of the MLPs are active? Is this something that you might be looking at?

Absolutely. We would be very interested in the LNG segment. But of course in that specific segment, there have been a significant technology change. So, we have to be a little bit careful on the asset type you invest in. And also fair to say, it’s been relatively overbanked if that’s the word you can use where a lot of players have focused and been willing to over extremely low yields. What we like is nice modern assets. Call it latest technology and also nice cash flows coming out of that. So if we can combine that, yes definitely. But as I said, we are looking at screening several segments at any given time and hopefully, we pick the right investment opportunities when we see that.

Are you able to give your feeling of which sectors look more attractive for this type of long-term deals?

Well, we just did. The latest acquisition was three containerships. In the containership segment, of course there you can see. For the bigger vessels, you can see longer term charters which is something we like, which gives us visibility in cash flows. We’ve also done a bulker deal. Generally, on the bulker side, it’s more relative, more volatile. But if we can structure it right and like we did with Golden Ocean, we have the right profit split optionality in it. It could still be very interested if you buy in at the right time. You mentioned LNG, could be interesting as well and so could both product tankers and crude oil tankers. So, we are looking at a relatively wide specter of assets but we try to stick to our core segments and not venture out beyond that. So, we are not really looking into aircraft leasing or container bulks leasing or aircraft leasing at the moment.

Thank you very much, Ole.

Thank you.

We will now take our next question from [Martillo Rezac from Amory Investments] [ph]. Please go ahead. Hi. Good afternoon. Thank you very much for the call. Just a very quick question. At the end of the quarter, you had not paid anything related to the Golden Ocean transaction, right. So when you say your total remaining CapEx were $518 million that was both for the Golden Ocean plus the containerships, correct?

Now that’s correct. Okay. Thank you.

Thank you.

[Operator Instructions] We will now take our next question from Ceki Aluf Medina from Southpaw Asset Management. Please go ahead.

Good morning, gentlemen. Thank you very much and congratulations on the good numbers. Three questions. First on the impairment, can you please let us know, which of the four 1,700 containerships took this write-down? And is there any guide as to what level you have written this down to? It’s a large number, the $25 million write-down. Second, Apexindo or Soehanah, now, that came off-contract I think this month, August. I was wondering if you could let us know what is going on there if the contract has been extended or what it's going to happen to the jack-up. And third, with respect to the stock price, it has come down recently. The world is a dangerous place these days. I'm wondering in the yield on the equity is pretty high, I'm wondering if there is a price then you probably wouldn't let us know what price it is. But regardless, if there is a price at which you would start buying back your shares because it is -- the yield is in the double digits now, significantly in the double digit.

Yeah. We are going to start off with the impairments on the two smaller container vessels. These are two container vessels trading in this bulk market, SFL Europa and SFL Avon. The Europa 2003 build and the Avon 2010 build. The total impairment, there was 29, which was to bring them in line with the fair values, which is around $8 million for SFL Europa and around $14 million for SFL Avon. But as I said in the speaking notes, we do impairment testing every quarter on all our vessels and these were the only two that were impaired. And we do not based on current expectations see any impairments on other vessels over the next quarters.

Very good. Thank you.

Adding to that of course, going forward, as we bring down the book value that will also reduce depreciation on these vessels going forward. So you can say, over time you will have -- you would have the same accounting effect over time, it’s just that we take it down now and then we have lower depreciation thereafter.

Right.

If we then switch to Soehanah, and this is for those who are not so familiar with all their assets. We have a jack-up drilling rig to an Indonesian listed company called Apexindo. This rig is called Soehanah build 2007 and has been on subcharter to Total since delivery in 2007. And the subcharter to Total is expiring in a couple of weeks. We understand we have not been advised of any new charter, subcharter for that rig. Apexindo is the charter and of course they are liable to -- they have to pay the full charter rate irrespective of whether the rig is working on a subcharter or not working on the subcharter. So from that perspective, we have no news really to report relating to that rig. Other than that they are fully in compliance with the charter and up-to-date with charter payment.

Okay. And with respect to share buyback?

Portfolio, I forgot, Medina. We cannot comment on whether or not the Board will initiate a share buyback program. I think it’s something that has been evaluated from time to time but whether or not that such a program will be initiated, we will have to get back to. And that would also be notified in the market if there would be such buybacks.

Okay. Thank you.

Yes. Thank you.

We will now take our next question from Hardin Bethea from HSB Capital. Please go ahead.

Hi. One question regarding the Frontline vessels, is there's still existing leverage or debt facilities related to the VLCCs and Suezmaxes chartered to Frontline? And if so can you provide that balance relative to kind of market value or scrap values to the vessels?

Yeah. I think that at quarter end we had a $250 million, call it credit facility, a fully revolving credit facility relating to those vessels. That was not utilized at quarter end, so there was nothing drawn on that facility at the time. I would say that the loan facility there is very conservative. It’s just, I would say, a little bit over scrap value, but not that much. And well, way below call it, a charter free market values if you can call that, that’s quoted by the brokers. So it’s a conservative financing and we intend to keep it relatively conservative and simply because these vessels are getting older and we just -- we don't want to be in a situation where leverage is too high on the vessels.

Got it. And so unutilized that $250 million is included in the available liquidity of $400 million?

Yeah. Exactly. Yeah. Yeah. Yeah.

And if you -- on the slide we have relating to the Frontline call it an agreement that’s slide number eight in the presentation. We also see a sensitivity there relating to what could say, market earnings for VLCCs and that illustration is assuming that loan being fully drawn. So when it's not drawn, of course, you have less interest.

All right. Thank you.

Thank you.

As there are no further questions in the queue, that will conclude today’s question-and-answer session. I will now turn it back to the host for any additional or closing remarks.

Yes. Thank you very much. Then I would like to thank everyone for participating in our second quarter conference call. And if you have any follow-up questions, there are contact details in the press release. Thank you.

That would conclude today’s conferment call. Thank you for your participation, ladies and gentlemen. You may now disconnect.