Good day and welcome to the Q3 2016 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. Please go ahead.

Thank you and welcome all to Ship Finance International and our third quarter conference call. With me here today I have our CFO, Harald Gurvin and our Senior Vice President, Andre Reppen. 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 within the Securities and Exchange Commission. The Board has declared a quarterly dividend of $0.45 per share. This dividend represents $1.80 per share on an annualized basis or nearly 13% dividend yield based on closing price of $13.90 yesterday. This is the 51st consecutive dividend and we have now paid nearly 22 dividends per share overtime or $1.8 billion in aggregate since 2004. Aggregate charter revenues recorded in the quarter including 100% owned subsidiaries accounted for as investment in associate was $149 million and the EBITDA equivalent cash flow in the third quarter was approximately $115 million. Last 12 months the EBITDA equivalent has been $524 million and the reported net income for the quarter was $32 million or $0.35 per share. In September 2016 we announced a issuance over $225 million senior unsecured convertible notes due to 2021 in the U.S. market. Most of the proceeds were used to repurchase a significant portion of…

Thank you, Ole. On this slide we have shown a pro forma illustration of cash flows for the third quarter compared to the second quarter. Please note that this is only a guideline to assess the Company's performance and is not in accordance with U.S. GAAP. For the third quarter, total charter revenues before profit share were $141.3 million or $1.51 per share, slightly down from $143.4 million in the previous quarter. VLCCs and Suezmaxes revenues were slightly down in the quarter due to the sale of an older VLCC in early July and lower revenues from the two Suezmaxes trading and approval where one is traded in the spot market. Liners revenues were up in the quarter following delivery of the last of the three container vessels to Maersk line in May, which had clearly earnings affects in the third quarter. The reduction in drybulk revenues was due to the drydocking of one of the vessels during the third quarter with a slight reduction in offshore revenues was due to the temporary reduction in the rates for the five offshore supply vessels on charter to Deep Sea supply. We recorded a profit share of $5.4 million under the 50% profit share agreement with Frontline, down from $14 million in the previous quarter. The tanker markets opened in the third quarter compared to the very strong second quarter but are strengthening in November. We also recorded our profit share of approximately $160,000 relating to some of our dry bulk carriers. Revenues from financial investments were down in the quarter, mainly due to lower dividends received on our shareholding in Frontline. So overall, this summarizes to an EBITDA of $114.5 million for the quarter or $1.22 per share, down from $128 million in the previous quarter. We then move on to…

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

Yes, hello guys. Hi Ole. Ole, I want to ask you about opportunities to deploy capital because you have scrapped the number of vessels, tanker vessels with Frontline and I was wondering where can you put new capital to work right now given the weakness in the containership market and the other sectors in the shipping space?

Yes, thank you Fotis. We decided at the beginning of the year, we took what was a, call it internally decided to what we say step back a little bit, sit on the fence if you call it that, because we saw that there was significant shift [inaudible] maritime stocks into other segments. Effect of that, as we all know was of course the significant drop in share prices around in many of these sectors but it also of course means that then there is less capital available for investments in that segment which means again that there will be less price pressure. I think so far we are very happy with that decision because obviously we look at new projects. I will say we screen new project basically on a daily basis but any deal we've looked at so far this year would probably have been even better if you did it today. So from that perspective, terms have only improved I would say in our favor but you’re absolutely correct, what we have seen it's a significant drop also an asset prices which makes it more interesting to invest. We are looking as we speak as opportunities both I would say be looking at opportunities in the tanker market right now. We're looking at some drybulk sort of things, we also look at - of the container market. Of course we cannot comment and we will not be specific on the exact segment or the exact dollar amount that we expect to invest over the next call it few months but the deal opportunities and deal economics I think is certainly approved over the year but for us it’s so important to do the right deals instead of running out and just do a lot of deals just because we have promised to invest a certain amount of capital. That said, with available liquidity we have, has probably never been better so we have a very strong balance sheet I would say and good capacity to grow if and when we see new opportunities. So, we will continue to screen for projects and then hopefully we will find something that is truly accretive also in the long run. And I agree with you we have sold older assets, we have sold some older tanker vessels but we will also taken delivery of new vessels during the last few quarters. So it has been, look it's not been a one-way road but we're also looking at larger transactions that could or could not be very beneficial for the company.

And can I insist a little bit about the type of transactions because a few years ago, where typical transaction was a sale and leaseback with that you could lever up the return with around 60% or 70% debt financing, are we still talking about sale and leaseback transactions or given the fact that asset values have declined so much, you might be tempted to try some to take some market exposure, some greater market exposure by naked assets or assets which short term or medium term period contracts in order to benefit from the backend then anticipate the appreciation in asset values.

I'd say that we look at both and we have invested from time to time in as you say called it naked assets, i.e. assets without specific charter attached to it. It's typically for assets and segment where we believe that we will be able to find a good charter and where we see that there are interesting dynamics for instance on the new building price side et cetera. We did that for the containership we have one charter Hamburg Süd, which we ordered than on speculation and then fixed the charter a few months later. I think with our association to the wider you call it Fredriksen Group our main shareholder Mr. John Fredriksen announced 36% of the shares in the company, we have a very strong position with the different shipyards. I don’t think anyone have ordered more new building than Mr. Fredriksen or company is associated with him at the various yards over, we call it modern history. So from that perspective I think we do see from time to time some interesting opportunities also on that side. But I would not be specific on that because again it all goes down to doing the right deals and we do not want to be sort of tied to the Maersk, if you can call it that in terms of what kind of deals we will do. But we can certainly and we have done in the past, we can build, own, operate is our preference than we control the vessels technically, but of course we can also do more regular say leasebacks which have good a cost of capital arbitrage type nature.

Well of course I appreciate that. And I would like to ask you about your existing contracts, I know that you monitor very closely all of your charters. And I want to focus on the offshore assets with Seadrill and also with Golden Ocean in the drybulk sector. And if you can also comment about some of the containership deals given the fact that we have leased some of the bankruptcy of the Hanjin. I know that you do not have any exposure to Hanjin, but how do you view the credit quality of your charter and I am not talking about overall I am talking about how this has changed from the previous quarter do you feel more confident, less confident? If there anything that you would like to point out about the difference in the credit risk you announced during the last three months?

Well, you are absolutely correct, we monitor very closely our various counter parties. And when we have structured deals we are also building a very steep repayment profile on the loans to take down, call it exposure also on the financing side. But I would say all of our customers are performing 100% and if you look at our collateral exposure on a container side as you pointed out there, we are - our vessels on charter two the largest container line, Maersk line. We have a number of assets on charter two, the second largest MSC. We also have some vessels on charter two Hamburg Süd, who is irrelatively smaller player like seven or eight place, but with a very strong balance sheet. So our preference is of course to charter our assets to market leaders with strong balance sheets. And what we focused lot on is also trying to invest in the right assets. So for instance where we have committed capital on the container side is generally to the big new type of assets and we have very limited exposure to the old Panamax class of vessels where we have seen market have been really poor and where we have seen - even now we have seen a seven year old vessel being scrapped which is something we haven't seen since 80s in the shipping market. So I think one of the things we focused on is being a top of what happening, what kind of assets our customers will demand overtime and positioning ourselves accordingly. But there is not much other than active comments on our various customers. You mentioned Golden Ocean, we now see that the charter rates are now - we see spot fixtures at least in excess of the base rate levels and we did – when we did the deal back in 2005, we structured it with the profits bid at the time. I don’t think that call it that profits bid was priced much into the deal if you can call it that because the market wasn’t that strong at the time. But we’ve seen – as we have seen over the years on with the tankers, we have a profits bids, volatility in these markets, if you have the option that’s a friend. So what we preferred is of course we get options and we will give options.

Thank you very much all. That’s very helpful.

And we’ll take the next question from Magnus Fyhr from Seaport Global.

Thank you. Most of my questions related to deployment of capital, but just one question on the payout ratio, can you talk a bit about you’re thinking there I mean lot of the cushion there has been attributed by the high profit sharing from the tankers, that’s likely to drop here as we’re go into 2017 and just little bit what kind of levels you guys are comfortable with?

Well, that the dividends levels are set by the board on a quarter-by-quarter basis and typically, the focus if I can comment on that from the board has been on what we say, what they believe is the long-term sustainable level and so it’s not directly linked to any profits with in any individual quarter. That’s also what you will see from time-to-time that we make a lot more money than we payout in dividends. And if you go back over the years and if you go back to – from the very start in 2004, you will see that we have related to – compared to net income, we’ve paid out around between 75% and 80% of net income and dividends over the years, but for time-to-time with learning significantly more than to payout. So and if you look at distributable cash flow, the ratio is lower typically. So I cannot give any sort of specific guiding on that of course we monitor the tanker market. We will so reduce the number of tanker vessels on charter to Frontline as to have grown old and we have to sold them, so that is of course taken into consideration when the board looks at the dividend. I think we should not forget also that the liquidity position we have and hopefully good investment capacity we have where we could potentially add new assets to the portfolio that could also build on the distribution capacity.

All right. Thank you.

We’ll now take the next question from Herman Hildan from Clarksons Platou. Please go ahead.

Good afternoon. Hi, so I mean if we going back you just been raising your dividends multiple times went through quite an aggressive investment period, since then – since Q3 you kept your dividends unchanged and you sold on your investments and de-leverage some of your offshore assets were some of the peers have continued to invest and grow their dividends and so on? And then I fully appreciate that any deal you did yesterday or any deal you did today is better than 2007, 2008? But how should we read the situation on you becoming more careful by your strategy or supposed to be investing throughout the cycle and is it mainly finding counterparties there are that you believe are so sustainable throughout the cycle or what’s the key reason for the probably somewhat more conservative approach over the last year?

Well, thanks for that. I wouldn’t say we have – we’d more conservative. If you look at our investment profile over time, you will see that it’s almost been sort of one-year with lots of investment, the next year was lower investments and then again significant investments. As I said for us it’s more important to do the right deals than necessarily the programs amount per quarter of the year and what we’ve also seen and this I hope is one of the benefits of having a diversified segment approach, we can also benchmark deals between segments. Unfortunately, what we have seen in the market generally is that, both the capital markets and also the financing banks are very, very cyclical. So typically towards the peak of the market that’s when you see, the capital markets being very aggressively, call it putting equity into companies and also when the banks are willing to finance the most and leverage the highest. Of course it's a classic recipe for disaster because what we always try to do is to not invest on the peak, but instead try to invest when we are at the lower end of the cycle in a segment. So the fact that we haven't invested so much so far this year shouldn't be really be - you should really read anything specific into that. It’s just being that you haven’t felt that you find the fund the right opportunities for the right deals with the right structure, and that may change of course on short notice. But I cannot give you any specific guidance, because as I mentioned earlier, if we gave you guiding on how much money we would invest next quarter, a next few quarter et cetera, it will - it could create the situation where we feel that we have to invest, where we shouldn’t have invested. So what we do hope over time is that we will steward the company in a way that we build a portfolio with truly accretive deals instead of doing deals that looks good in the short-term, but could end off being diluted deals for shareholders.

I mean from the outside, obviously, I guess you need to know where that you are still very good access to bank financing. And when you look at the asset prices, there are in certain segments in the all time level and I fully appreciate this kind of give guidance on what segments or one million less what amount of capital, but with at least the asset prices being very low that’s a good starting point to be able to do a deal. So what’s kind of the key hurdle to find - what makes you pass on these deals that you’re seeing in the market today, is that counterpart there, is it the residual risks? What's the key hurdle to task in order to do deal with respect to the…

Yes, it's differs from deal to deal really. But we have seen some deals where there are expectations, very high residual values that we are not being comfortable with. But it’s difficult to specific because again it’s all deal related, but what you’re saying is more from a combine perspective that's why we haven’t ended up fair doing the deal. So of course that also we have - we do have expectations for returns over time. So, but that said, last year, we invested $1 billion. So we haven’t been sitting all still. It’s just that the last few quarters, we haven’t announced any new transactions.

But is it fair to kind of say that it's hard to structure deal with the base return in environment where few segments actually generating any returns?

Well that - it all depends on the counterparty. But of course if you - in a market where the - where potential charter rates is losing money day out and day in, that’s of course not a good starting point. So it’s always better for counterparty to actually make money. But what we offer and this is more for sort of traditional, sort of say leaseback type structures. What we offer is of course a very long-term stable provider and what we can also offer because – as a preference is to operate vessels on the time charter basis, I think we have a very efficient operating platform. We don’t have any - like we say hidden fees or call it fees with in some other structure. So I think we can deliver very good value for money and with our access to the capital markets as we illustrated by the convert placement, as you pointed out, we believe we still have very good access to the bank market at least that’s what the banks are pitching on us when they come and propose things for us. And I think we are in an interesting position where we can, where we can grow the portfolio with the right deals of course.

And just a final question, how should we think about Frontline acquisition? You mentioned that’s a part of your liquidity, is that one way of keeping capital, one better opportunity rise or is it a long-term investment like what’s the thinking around that position?

Well, we have full flexibility relating to those shares. So from that perspective it’s a financial investment. But we’ve also generated very good returns on it with more than $14 million in dividends, since 2015. So from our side, it's an opportunistic ownership position. But so far it’s been quite good for us so.

Yes, okay. Thank you very much.

We’ll now take our next question from Øyvind Hagen from Nordea. Øyvind Hagen: Yes, hi guys. Thanks for taking for my question. I understand you cannot provide any details on the negotiations that you stated that you have entered into a Seadrill. But could you give any indication on what you are prioritizing in those negotiations? I mean we have seen you revised charter agreements with all their counterparts in Fredericks and systems in the past and they will come out slightly different. What will you be looking to protect and what will you be more willing to give up when you start these discussions with Seadrill?

Thank you. Well as I said, we cannot really comment anything relating to those discussions other than there has been a contact now with the Seadrill and us. So I hope you appreciate that that this is something that we expect will take some time. I think Seadrill has indicated that they expect to have a solution sometime in the first half of next year. What do you see if you look at other, call it situations, we’ve been into I mean all situations are different, call it, our position is different, the level of guarantees are different. So there are many factors here building in, but what we - our objective is to make sure that we get the best possible, deal out of it for us and our shareholders. That’s our paramount objective. And what we say, I think over time and in other situations, I think we have come out with a reasonably good deal such as the Frontline restructuring back in 2012 where we now sit and generate a lot of the profit split relating to those assets. But as I said, no comments on any specifics there and we just have to wait and see what the solution will end up like. Øyvind Hagen: Okay, thank you. Could you comment if you have involved the banks on your side in the discussions?

I cannot really comment on the discussions or the process. So we will - when there is an announcement we made, we will of course make all the appropriate disclosures. Øyvind Hagen: Okay. Thank you very much.

[Operator Instructions] We’ll now take our next question from John Reardon from Western International.

Good morning or rather good afternoon. Thanks for taking my call. It seems like the company is trucking right along, and you are in a position to really take advantage of some opportunities as they present themselves. Now in your comment, you talked about tankers and bulkers, and containers, and maybe because of your discussions with Seadrill, you didn’t mentioned anything about offshore drilling, recently [indiscernible] on their call said, that they felt that the offshore drilling market had actually bottomed and was showing some signs of life? Would you agree with that or would you just rather not comment about that at all?

Thank you. I think I would leave the market commentary on the drilling side to the market specialists. So I think there are many very good analysts out there who I’m sure, can guide you there. What we do observe is of course that there are a number of idle rigs out there. So - and when we see the charter rates for the vessels that are being fixed now at levels at what was a plus, minus operating expenses. So from that perspective, the market is certainly not very strong. But we do see some fixtures every now and then, but at least what we hear when we speak to analysts is that they expect that what you say - this is also based on the various oil companies budgeting. The expectation is that 2017 may continue to be soft, simply because there’s not so much work to be done and then the analysts hope that 2018 will be better if we have some stability in oil price and the oil companies start spending again because, the flipside for oil company as, yes they may save a lot of money not doing any drilling but of course it also means that their depletion rate will accelerate and that of course is not a good thing into long run. So, I think it's really - I can certainly not call the market, I cannot give you any guiding that the market has turn in any way. I think it will be from a financial investment perspective, I think it will still be painful in that sector but at the same time we do hope that that market will pick up again as steel companies start spending and start building the reserves.

Okay. As a follow-up if I may, we recently had an election here in the U.S. and Mr. Trump got in and he supposedly has been buddies with Mr. Putin. I was wondering if you have a perspective on some developments in the event that say the sanctions against the Russians for their adventures in the Crimea and Ukraine kind of fade from, from the focus on a foreign-policy basis i.e. other opportunities in Russia that have been denied to Ship Finance because of the sanctions.

Well, I don't think - I wouldn’t say that there are many opportunities that there was that, we haven't been in a position to do. I think in most of the drilling assets in the Russian markets are more specialized than that sort of standard deepwater and standard jackup drilling rigs that we primarily look at. So from that perspective I don't anticipate any change. We do of course - we also of course we will be try to be very careful of with the sanctions and not be sort of infringed with sanction exposure so, but so far I know, I don't think we've seen many deals and you know relating to those assets in that area for us that would be interesting for us even without sanctions issues and I really don't expect lot of other opportunities either.

Okay. Thank you very much Ole.

As there are no further questions in the queue, I would like to hand the call back over to your host for any additional or closing remarks.

Thank you. And then I would like to thank everyone for participating in our third quarter conference call and if you do have any follow-up questions, there are contact details in the press release where you can get in touch with us through the contact pages on our website www.shipfinance.bm. Thank you.

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.