We were formed in 2003 as a wholly owned subsidiary of Frontline, a major operator
of large crude oil tankers. In 2004, Frontline distributed 25% of our common shares
to its ordinary shareholders in a partial spin off, and our common shares commenced
trading on the New York Stock Exchange, or the NYSE, under the ticker symbol "SFL"
on June 17, 2004. Frontline subsequently made six further dividends of our shares
to its shareholders and its ownership in our Company is now less than one percent.
Our assets at the time consisted of a fleet of Suezmax tankers, Very Large Crude
Carriers, or VLCCs, and oil/bulk/ore carriers, or OBOs.
Since 2004, we have diversified our asset base and now have eight asset types,
comprising crude oil tankers, chemical tankers, container vessels, car carriers,
drybulk carriers, jack-up drilling rigs, ultra-deepwater drilling units and
offshore supply vessels.
Most of our oil tankers are chartered to the Frontline Charterers under longer
term time charters that have remaining terms that range from three to 12 years.
The Frontline Charterers, in turn, charter our vessels to third parties. The
daily base charter rates payable to us under the charters have been fixed in
advance and will decrease as our vessels age. In December 2011, in response
to a restructuring of Frontline necessitated by an extended period of low charter
rates for oil tankers and OBOs, amendments were made to the charter agreements
with the Frontline Charterers relating to 28 double-hull vessels, whereby we
received a compensation payment of $106 million and agreed to temporarily reduce
by $6,500 per day the base charter rates payable on each vessel. The temporary
reduction applies from January 1, 2012, until December 31, 2015. Thereafter,
the base charter rates will revert to the previously agreed levels. For the
duration of the temporary reduction, we are entitled to receive 100% of any
excess above the reduced charter rates earned by the Frontline Charterers on
our vessels, calculated annually on an average daily TCE basis and subject to
a maximum excess of $6,500 per day per vessel. Eleven of the vessels have been
sold since December 2011, including all of the OBOs.
In addition to the base charter rates, the Frontline Charterers pay us a profit
sharing amount equal to 25% of the charter revenues they realize above specified
threshold levels, paid annually and calculated on an average daily TCE basis.
Previously, up until December 31, 2011, this profit sharing rate was 20%. In
terms of the agreement relating to the temporary reduction in base charter rates,
of the $106 million compensation payment received, $50 million represents a
non-refundable advance on profit sharing earnings relating to the 25% profit
sharing agreement which took effect on January 1, 2012.
We have also entered into agreements with Frontline Management to provide fixed
rate operation and maintenance services for the vessels on time charter to the
Frontline Charterers, and for administrative support services. These agreements
enhance the predictability and stability of our cash flows, by fixing substantially
all of the operating expenses of our crude oil tankers.
The charters for the two jack-up drilling rigs, two ultra-deepwater drilling
units, six offshore supply vessels, two chemical tankers and 11 of the container
vessels are all on bareboat terms, under which the respective charterer will
bear all operating and maintenance expenses.
4.04% 
0.71 %