Ole Hjertaker - Chief Executive Officer, Chief Executive Officer of Ship Finance Management AS and Interim Chief Financial Officer of Ship Finance Management AS

Jonathan Chappell - JP Morgan Chase & Co John Parker - Jefferies Justine Fisher - Goldman Sachs Justine Fisher - Goldman Sachs Group Inc.

Good day, and welcome to the Ship Finance International Q1 2010 Earnings Release Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Ole Hjertaker, CEO. Please go ahead, sir.

Thank you, and welcome to Ship Finance International and the First Quarter Conference Call. My name is Ole Hjertaker, and I'm the CEO in Ship Finance Management. And with me here today I also have Harald Gurvin, Senior Vice President; and Magnus T. Valeberg, who is the Vice President of the company. Before we begin our presentation today, 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 of Directors has declared an increased cash dividend of $0.33 per share. This is a 10% increase over last quarter on the back of successful delivery of two newbuilding Suezmax tankers. This represents $1.32 per share on an annualized basis or 7.3% dividend yield based on closing price yesterday. We have now declared dividends for 25 consecutive quarters and $11.41 in total aggregate cash dividends per share. The net income for the quarter was $57 million or $0.72 per share. This includes a $26 million gain relating to the Suezmax newbuilding Everbright where the charter has paid $44 million upfront. It also includes a $1.8 million gain relating to the sale of Front Vista and a negative $12.8 million mark-to-market of derivatives relating to interest rates swaps. Gross charter revenues including subsidiaries accounted for as investment in associates was $197 million or $2.49 per share in the quarter, and EBITDA equivalent cash flow was $184 million or $2.34 per share. There's been an increased profit share contribution compared to the fourth quarter of 2009. We're up from $5.7 million in the previous quarter to $11.3 million or $0.14 per share this quarter. Since 2004, there has been $80 million or more than $1 per share in annual average profit share contribution. In the quarter, we also completed a refinancing relating to 26 vessels on charter to Frontline. The deal was upsized from $675 million to $725 million based on very strong demand in the banking market. Most of the negative mark-to-market or derivatives relates to this refinancing, and we have also had extraordinary expenses of approximately $2 million relating to the refinancing, which has been expensed this quarter. The 1998 build VLCC Front Vista was sold to a subsidiary, Frontline, for net sales proceeds of $58.5 million in February 2010, including approximately $0.4 million compensation for Frontline for the termination of the charter. We prepaid $36.4 million of associated debt, and net proceed was $22 million. There is a $50 million interest-bearing sellers' credit related to this sale, which will be settled in the second quarter. The second of the two Suezmax tankers newbuildings chartered to North China Shipping was delivered from the shipyard in China in February 2010. For each of the vessels, we will receive an upfront payment of $40.4 million net and the bareboat rate is approximately $16,700 net per day. At the end of the charter period, there are also purchase obligations of approximately $40.4 million net per vessel. North China will have annual purchase options, first time after one year. The net purchase option prices per vessel are approximately $51.2 million after one year; $49 million after two years; $46.6 million after three years; and $44.1 million after year four. Excluding upfront payments and the purchase obligations, the two charters represent a $61 million net increase in our charter backlog. We also continued to reduce our single-hull exposure and the VLCC Golden River has been sold to an unrelated party for a $12.6 million net and delivered in April 2010. We have paid $2.8 million in charter termination fee to Frontline and net of debt prepayments that will be approximately $4.7 million net cash proceeds. There will be a marginally negative property loss effect in the second quarter of approximately $140,000 relating to this transaction. We also have a similar vessel previously announced sold on higher purchase terms, and we are now discussing a potential early termination of this arrangement. Some charter IRS accumulated, but we will be provided additional security until a final agreement is in place. Remaining outstanding under this lease is approximately $23 million. We have recently announced that we have switched most of our newbuilding programs from container ships to Handysize dry bulk vessels. We are now happy to announce that three of the vessels have already been chartered out for three years following delivery at the net charter rate of approximately $12,900 per day. One of the very important features with Ship Finance is our long-term charter portfolio that gives us a very transparent and predictable cash flow. Ship Finance is in a different league than most of the shipping and offshore companies with more than 12 years weighted average charter coverage. We have a total of $6.8 billion of fixed-rate order backlog or more than $87 per share. The EBITDA equivalent backlog is $6 billion or $76 per share. These numbers are all before profit share and do not include any rechartering after end of the current charter periods. Our charter backlog is also very important for financing bank in the current economic climate where access to capital is not as easily available as the previous few years. This is also demonstrated by the very good response to the refinancing we recently completed. Ship Finance generates a very significant cash flow per quarter, and this overview includes all 100%-owned vessels including vessels classified as investment in associate based on U.S. GAAP. The EBITDA equivalent cash flow before profit share was $173 million in the quarter and after profit share, $184 million or $2.34 per share. From the fourth quarter of 2009 to the first quarter of 2010, we have a part effect by the sale of Front Vista in early February 2010 of approximately $1 million, and also we have the full quarter of Glorycrown, the first of the newbuildings Suezmax tankers, which was only partly included in the fourth quarter of 2009 but which was fully included in the first quarter. The net effect of this transaction is about $900,000 in the quarter. In addition, Front Vanadis was sold during the fourth quarter, and therefore, the full effect from a cash flow perspective, came in the first quarter relating to this vessel. In the first quarter, we also had two single-hulled vessels that went on a lower charter rate, which is part of the agreement with Frontline where the vessels will go down to a lower rate on their anniversary date in 2010. The net effect of the first quarter compared to the fourth quarter last year was approximately $1.8 million relating to this. From the first quarter to the second quarter, we will have a full quarter with Everbright, the second Suezmax tanker, recently constructed in China. The net effect of that deal alone is approximately $1.5 million. We will then also have a full quarter excluding Front Vista, which was sold in February, which will also have a negative effect in the quarter. Front Edinburgh, which has been sub-chartered by Frontline and will be on bareboat terms, and therefore, this will also affect the vessel operating expenses where this vessel will then be excluded. The charter rate for the two first years for Front Edinburgh is approximately $2,000 per day. The operating expenses will also be impacted by Front Vista with the full effect in the second quarter. And also, we've seen that the general and administrative expenses was lower in the first quarter than the fourth quarter last year. We do provide a full breakdown of charter hire per vessel, including accounting treatment and this is available upon request to ir@shipfinance.no. If you look at normalized contributions from our projects, and this includes vessels accounted for us as investments in associates, the EBITDA which is defined here as charter hire plus profit share less operating expenses and general and administrative expenses, was $2.34 per share in the quarter. Net interest in the quarter was $43 million or $0.54 per share, and ordinary debt installments relating to the company's projects was approximately $103 million or $1.30 per share. Our net contribution from the projects in the quarter after the above significant repayment of debt, was $39 million or $0.49 per share. This is similar to the fourth quarter net cash flow of $0.47 per share. The declared dividend for the quarter was $0.33 per share so there is a good buffer also after accelerated debt repayments. In the profit and loss statement, a significant portion of charter hire is excluded from book operating revenues. This quarter, repayment of investment and finance leases was unusually high due to a $40 million upfront payment by the charterer relating to the Suezmax Everbright. I would also highlight that as the few non-double hull vessels remaining are chartered to Frontline approach their anniversary date in 2010, there will be a change in accounting treatment. These vessels have now been classified as finance leases, but from their anniversary date in 2010, the accounting treatment will be changed to operating lease. This means that there will also be a depreciation element relating to these vessels from their respective dates onwards. This is the structure that was set up in 2003 and, on average, the depreciation effect will be approximately $2,200 per day, per vessel or approximately $1 million per quarter for all the five vessels. In the first quarter, there was approximately $450,000 in added depreciation relating to this change in accounting treatment for these vessels. The exact anniversary dates are for Front Edinburgh, January 5, 2010; for the Golden River, or ex-Front Lord, the date was February 25, 2010, but this vessel has already been sold and delivered in April. For the Front Duke, the anniversary date is May 29, 2010; for the Front Lady, the date is June 4, 2010; for the Front Highness, the date is July 30, 2010; and for the Front Ace, the date is September 27, 2010. On the balance sheet, the vessels and equipment will have some impact also due to the reclassification of the single-hull vessels as they come off the higher rate and they are reclassified as operating leases. Therefore, in this overview, there is only a very marginal increase in vessels and equipment due to -- even despite the depreciation element. Also, we would like to highlight in the balance sheet that the ultra-deepwater drilling rigs and one Panamax bulker, which are classified as investment in associates, they are not fully consolidated into our balance sheet, but the equity portion relating to these subsidiaries are reflected under long-term assets called investment in associates. We have a deferred equity of $194 million. This is effectively the part of the purchase price that when we paid -- when we bought vessels from Frontline in 2003 and 2004, but which has not been fully recognized in the balance sheet but is amortized to equity over time. This deferred equity is, as I said, $194 million, and the adjusted book equity ratio, including this equity portion, is approximately 31%. In the cash flow statement, I would like to highlight that under investing activities, we can see the element of the charter hire that's reclassified as repayment of investment in finance leases. And this is for the consolidated assets only. The $40.4 million upfront payment relating to the newbuilding Everbright is included in this line in the cash flow statement. The net payments to and from investments in associates, which are not fully consolidated, are on the line called cash received from associates under investing activities. In the quarter, $15.6 million of net cash was transferred from these subsidiaries to the parent company. We do provide full accounts for each of the subsidiaries separately on our web page. All the subsidiary classified as investment in associate also have finance lease accounting, and therefore, a part of the charter hire in these subsidiaries are classified as repayment of investment in finance lease. Shareholders' equity from these subsidiaries appear in the consolidated balance sheet as investment in associate. We had $104 million in available liquidity at quarter end. The loan portfolio consists of loan consolidated to the balance sheet of approximately $2 billion, and in addition, there is $1.8 billion of loans in subsidiaries that are accounted for as investment in associates. We are in full compliance with bank covenants, and we have no near-term refinancing needs, and we only have a marginal remaining investment [indiscernible](26:31) loan program compared to size. We do continue to reduce our interest-bearing debt and have reduced this by close to $200 million during the quarter and also replaced expensive funding with cheaper capital. We therefore expect to see a positive impact on interest expenses in the second quarter. The new $725 million loan facility was significantly oversubscribed, and this demonstrates our standing in the financing market. The loan margin level has increased, but swap interest rates have declined so net interest payable relating to the refinancing is expected to be at a similar level as the previous structure. In the quarter, we also completed financing for the two Suezmax vessels on charter to North China Shipping. The financings match the charters for the vessels and have approximately a five-year maturity. With a portfolio of long-term charters, our strategy is to hedge a substantial portion of our interest exposure. We used swaps, fixed interest and also interest compensation through charters, and currently, close to 85% of our loan portfolio is effectively hedged. We only have $162 million in gross capital commitments, which is a very low number compared to our overall fleet size. $60 million of payments have been made to the yards, which have been funded from our cash position, and we have not yet secured financing for the vessels. Depending on timing and amounts, a significant portion of the remaining investments may, therefore, be funded by bank debt. The newbuildings are primarily dry bulk vessels after we converted contracts for four container vessels into seven Handysize dry bulkers. This was an opportunistic move from our side and three of the bulker vessels have already been chartered out. We believe that this will give our shareholders better value for money compared to building the container vessels as originally ordered three years ago. If you look at our contracted cash flow, we have two very significant counterparts. The largest is Seadrill where we have three ultra-deepwater drilling units and a jack-up drilling rig on charter. These are all backed by 100% Seadrill limited guarantee, and all the deepwater units are sub-chartered to oil majors at very high rates. This has enabled us to frontload the charter rate and lower payments and have reduced the loan balance on these assets very significantly over the last one to 1 1/2 years. Also, for the Frontline charters, we now have 100% Frontline limited guarantee after we made some adjustments to the agreements as we announced in the previous quarter. There is also a cash deposit of $2 million for a double-hull vessel relating to the charters we have with them. And a part of the fleet are double-hull OBOs and these will now over time gradually be modified to carry dry bulk cargo only. We expect this to enhance the earnings capacity for the vessels in the long term, and the expenses for the conversions or the modifications will be carried by the charterer. The profit share agreement with Frontline has generated a lot of additional cash flow for Ship Finance. The original charters were structured fairly low in the tanker cycle, which also means that they have a lower profit share threshold. In the first quarter, $11.3 million of profit share accumulated and this profit share is payable in March 2011. Over the last six years, on average, $80 million have accumulated, and this has enabled the company to fuel significant growth in this period. Also due to Frontline's sub-chartering of several of these vessels, the average breakeven on a T/C basis for the vessels operating in spot markets are estimated to be below the base breakeven levels that we have in the chartering agreement with Frontline, and we will, therefore, expect to see a profit share contribution even when charter rates are below these base levels. Frontline will report their first quarter results tomorrow morning, and we can, therefore, not comment on any detail relating to the charter revenues per segment. We continue our policy of paying dividends on the back of our long-term charter portfolio and we are very happy to announce a 10% increase in dividends this quarter, after the delivery and charter of two newbuildings Suezmax tankers. The performance in the quarter from a cash earnings perspective was good, fueled by $11.3 million profit share contribution in the quarter. We recorded gains in the quarter relating to the second newbuildings Suezmax tanker and also gain on the sale of Front Vista. This was partially offset by a mark-to-market loss on interest rates swaps in connection with the recent refinancing. The charter portfolio remains stable and transparent, and our $6.8 billion portfolio provides a very solid foundation for growth. We have demonstrated our ability to access the financing market, and we will look for transaction opportunities that may arise in the market going forward. The most important factor, however, is of course, to do the right deals, so we cannot give you any specific guiding on size and/or timing of these potential new investments. And with that, I open up for questions.

[Operator Instructions] We are taking the first question from John Chappell from JPMorgan. Jonathan Chappell - JP Morgan Chase & Co: So the dividend increase was a little bit of a surprise, and I understand the thought process there, the stronger results in the first quarter. I'm assuming you wouldn't do a dividend increase if it wasn't sustainable longer term though. So the question about the thought process and the strategy there, is this maybe a sign that projects aren't as available as you would hope, and that there is maybe a better use of cash in the near-term?

The dividend is, of course, assessed by the Board every quarter. So I cannot make any projections on the dividends going forward. As we have communicated in the past, the Board has generally they've had to focus on long-term sustainability when it comes to the dividends. I'd also -- I want to comment that we do see quite a few, call it interesting investment opportunities, and of course, we are looking into some of those and some may materialize and some may not. But I think the key for us, and I mean the management, is really to build our distribution capacity over time. And we do have a very significant charter backlog, and we do generate very significant cash flows. So I'm sure the dividend increase can be attributed to what we have in our portfolio today and should not be seen as a single that we don't find, see any investment opportunities so we don't have anything to spend the capital on. Jonathan Chappell - JP Morgan Chase & Co: On the OBO conversions, you mentioned that the cost is assumed by the charter. First of all, is the charter in that case Frontline, or is it whoever Frontline sub-charters the ships to? And then second of all, even though you're not paying for the conversion, is there any off-hire times associated with these conversions that may hit Ship Finance's results while they're undergoing the conversion process?

No, there's no specific off-hire time relating to this. This is something that will happen gradually over time and will be taken in connection with scheduled dry-dockings. It's not a conversion, it's just really a more a modification where some of the deck equipment is taken away, which facilitates a more efficient use as bulkers at the dry bulk terminals. We also have to bear in mind that these vessels are now approaching an age where they, as trading tankers would incur significant expenses and also more rigorous vesting procedures if they were trading in that market. Instead, when we make these minor modifications really, we think that, that will potentially enhance the long-term cash flows. Of course, in the near term, through effects through the profit share with Frontline, but of course, also these vessels have a trading life beyond the Frontline chartering period, and we think that these vessels have better cash flow potential as dry bulk vessels at that time. Jonathan Chappell - JP Morgan Chase & Co: And is Frontline ultimately paying for the modifications or is it the sub-charters of the ships?

To mind, we have the chartering relationship with Frontline and whether or not they get some of their sub-charters to pay for part of it, I don't know. These are not very expensive modifications. These are really just removal of some excess equipment on the deck. So I don't think it will have any major cash flow impact from a cost perspective. Jonathan Chappell - JP Morgan Chase & Co: And then finally, it sounds like the banking market is may be coming a little bit easier to access credit, but still pretty tight relative to a few years back when you were doing the majority of your projects. Obviously, there's been good reaction for your refinancing so it seems that the availability is there for you. But as you think about future projects, do think -- what do you think is the ideal debt-to-equity structure of projects and how does that compare to the capital structure you used to take on call it in '07 or '08?

It's a very interesting question. I think the way that we have built off the different projects, if you can call it that, in our portfolio, is that when you look across segments, the banks typically have different financing parameters in Offshore segments, say, compared to the Tanker segment or Bulker segment -- or Container segment. What we focus on is, of course, to optimize any investment opportunities in the specific segments, and for us and also, when we look at chartering opportunities, for us the key is that we have access at least as competitive funding in the specific segment that the chartering counterpart that we have. Because on that basis, we believe that we can provide a better cost of capital in that segment and therefore, be competitive, really throughout the cycles. Because in the market we saw in early 2009 when the banks were very, very reluctant to do business, all players were facing this. We were facing it to a certain extent, but the companies with a market presence in the Pacific segment were certainly feeling it. So over time, our aim is to, of course, to maximize the package in the different segments. With that said, for us, what's really driving the equity returns are the equity we can invest in the projects. Because then we -- of course, if you get the right return characteristics on equity, that is something that can, of course, fuel future dividend increases. So there's not a standard template for this. What we see is that when bank funding is not as available for anyone as it was say, two or three years ago, maybe this is a time where we can try to optimize this in a way. Of course, always mindful of the risks and rewards in the different projects and in the specific segments. So I hope that was explaining at least some of our thought process around it. I can't, unfortunately, not give you specific percentage because we don't have one general percentage.

You're now taking the next question from John Parker from Jefferies. John Parker - Jefferies: The single-hull change to one of your contracts, that was -- I assume that's the Front Sabang you're talking about. Can you give me those details again?

No, this is -- which one were you referring to? John Parker - Jefferies: You said there was some change in your contract, you were saying you had sold with a higher purchase agreement.

Yes, yes. We had the higher purchase agreements for single-hull tank -- for two single-hull VLCCs. We had the Front Vanadis, which was terminated early in the fourth quarter of 2009, and I was just making the comment that we are also discussing a potential earlier termination of the second single-hull VLCC. But, of course, we will have to make sure that we get full settlement. There is also early purchase options for the charterer relating to these vessels. So this is something that may happen over the next few months. John Parker - Jefferies: And what was the other ship?

Exactly, so the first was Front Vanadis and the second was Front Sabang. That's the second ship, yes. John Parker - Jefferies: The ships converting to operating lease were the Edinburgh and was there another one?

Yes, all the single-hull vessels on charter to Frontline. All of them will, from their anniversary date in 2010, they will be, from an accounting perspective, treated as operating leases. They have been finance leases all the way through from 2003 till now. But then, now they have to change operating leases. Therefore, there will also be a depreciation element for each of these vessels. And the average depreciation per vessel across the five remaining vessels will be approximately $2,200 per day, per vessel, or an effect of approximately $1 million. John Parker - Jefferies: And the operating lease rate, would that be kind of a $1000 delta that you had in your old arrangement?

Exactly. For the vessels that are chartered on time charter, it will be $7500 in revenues less $6,500 in OpEx. Three of these vessels have been sub-chartered by Frontline on bareboat basis and, therefore, under our arrangement, we bareboat them then directly our from Ship Finance. So then they generate -- both of them will generate $1,000 per day. The Front Edinburgh will generate approximately $2,000 per day for the first two years of that sub-charter period. John Parker - Jefferies: You paid some debt at the rates I think you said in your press release. How much debt did you repay or what was the reason for repaying the debt? I can look it up in your balance sheet.

No, I mean, we have -- we're repaying scheduled repayments of $103 million in the quarter relating to our projects. And then, in addition to that, we've also prepaid some additional debt from our surplus liquidity. So we have not made any specific comments on prepayments on any specific project as such. John Parker - Jefferies: The dry bulk ships you just disclosed that you have them on time charters. Why did you do that as opposed to bareboat, which has been your habit recently?

From our perspective, we are as happy to do time charters as we are to do bareboats. It's all depends on whether or not we feel that we are adequately compensated for taking the operating risk and also compensated for a potential volatility escalation in operating expenses going forward. For very long-term charters, of course, this is expected to have a more significant impact, theoretically, than for shorter-term charters. So when we agree to charter these vessels out on a three-year time charter, we will then buy the technical management services for these vessels. And that is something we could also easily do for vessels on longer-term charters. But as I said, we would do that, of course, only when we feel like we are adequately compensated for both the operating costs and also the potential cost escalation overtime.

And now moving to Phyllis Comer [ph](44:49) from Banque.

Can you let us know if any -- if you have any exposure to the Gulf of Mexico or if Seadrill or Frontline do?

To my knowledge, none of our assets are operated in the Gulf of Mexico, in terms of -- if you're talk about the offshore-related assets. Of course, we have sub-chartered these assets to our chartering counterparts who operate them in the market. Whether or not Frontline has vessels that go to and from the U.S. Gulf, I'm sure they do that from time to time. We don't have their specific schedule for when the vessels are trading there. These vessels also, of course, have insurance coverage for potential oil spill liability.

So basically you would get paid through the insurance company if they were not able to get into a port or something like or were not able to travel through the Gulf of Mexico?

Yes, and I would also add that the vessels, the offshore assets we have, are all on bareboat charters where our chartering counterpart is paying for these insurance coverages. So they, in case something happens, they will, have to -- they will, of course, have to take out the proper insurances. And then, if something should happen, they will then be refunded by their respective insurance companies.

The drilling rigs that you have leased to Seadrill, I mean, do you foresee because of the Gulf of Mexico spill do you foresee any added costs associated with that going forward that may either reduce your profitability of any sort on the rigs?

We don't currently anticipate any impact on our behalf. There could, of course, be impact on the cost of operating these rigs. But then again, Frontline --Seadrill is chartering these rigs from us on bareboat basis, so they will have to cover these additional costs, if any. To my knowledge, there is also differences from region to region as to what kind of security measures are taken and also the whole planning process relating to the drilling of oil wells. But I think I would have to ask you to direct those questions to Seadrill, who, of course, operate in that market and, of course, is experiencing this from day to day, also in their interaction with oil companies.

One other thing, and I apologize if you have gone over this earlier. The single-hulls that you now have with Frontline, what are they going to be -- how long do you think they will still continue to use those? Do they use them in areas where they're still allowed to carry fuel in different regions that allow single-hulls or can you explain that why they're still in use?

Yes, we have in currently five vessels that are not double-hulls. Those are four what we call single-hull vessels and one vessel with double sides. Of these five vessels, three of them have been sub-chartered out by Frontline on bareboat basis, and these charters go beyond the vessel anniversary date in 2010. We don't have any knowledge, as such, as to what Frontline may or may not do with these vessels. We have them on charter to Frontline until 2014 on average. But Frontline can redeliver these vessels to us on basically 30-days notice. From Ship Finance's respect, we have a very low charter rate on these vessels from 2010 onwards. So, of course, if any of these vessels were redelivered to us, we would then be able to sell the vessels potentially for recycling or potentially find alternative employment such as storage or conversion to other uses. So, and we will, of course, notify the market if any of these vessels will or are intended to be redelivered to us. But so far, Frontline has kept these vessels they have remaining.

[Operator Instructions] We're taking now a question from Justine Fisher for Goldman Sachs. Justine Fisher - Goldman Sachs Group Inc.: So the first question that I have was about the dividend again. Can you just remind me when -- I know you guys had the option that you could pay the dividend in stock as opposed to cash. And can you remind me when I guess that option ended or expired? Because again, to echo John's comment, it seems like a quick about-face from paying some of your dividend in stock in order to preserve cash to increasing the amount of the cash dividend.

Yes, we offered shareholders to receive stock instead of cash for four quarters. For the last two quarters, i.e. the fourth quarter of 2009 and now the first quarter 2010, we are not offering shareholders to take stock. Of course, shareholders may reinvest their dividends, and we have a stock reinvestment program set up through Mellon, and there's a link to that directly from our web site, where individual investors can reinvest their dividends. Justine Fisher - Goldman Sachs: And then just to piggyback on Phyllis's questions about the single-hull. So can you talk about what the rates are for storage? I mean, I guess, it would have to be somewhat along lines of lower market tanker rates. But if you, let's say, the rates for those vessels that you're getting from Frontline are $7,500, so if those were redelivered and you used those for storage, how much would you make per day on storage?

That is difficult to be specific because we have not been in direct negotiations for such contracts. I mean, these vessels are on charter to Frontline, basically, through 2014. So unless they tender some of these for a delivery to us, it's not something that we really can have a clear view on. I'm afraid I cannot be specific to your answer. Justine Fisher - Goldman Sachs: But then if you were to reemploy those vessels or even to scrap them, would you have to do it via another counterparty or would it Ship Finance's decision? Because it seems as those you guys never are the ones that make the ultimate employment decisions for the vessels; you just lease them out to other companies. So would you guys end up making the decision on how -- on employment for that ship or would you find someone else to charter it for storage or something like that?

I mean, we, for as long as the vessels are chartered out, of course, our chartering counterparts make the commercial decisions for the specific charters, they will take on. If vessels are redelivered to us, of course, we make those decisions. And one example is it's a small 1700-TEU container vessel, which we are trading in the shorter-term chartering market, which of course, are decisions made by us. So if Frontline should redeliver one of these vessels to us, that will be for our account and our decision only. Justine Fisher - Goldman Sachs: And does that change the longer-term business strategy of the company? I mean, I think some investors may want to own Ship Finance because it's a leasing company, not necessarily because it's a ship manager. So how do you go out dividing up the fleet between fleet that's just a passive lease fleet versus an actively managed fleet?

Yes, I think if you look at our overall portfolio, we have, I would say, in the market an extremely high level of charter coverage with a weighted average charter coverage of more than 12 years. We have, from time to time, taken some smaller positions in the market such as ordering the two Suezmax tankers where we did not have a charter lined up but where we think we ended up with a very, very nice deal and have made a very good profit on those vessels so far. Of course, it's a balancing act and we don't want to compromise the long-term predictability and the sustainability of the company. But that said, we also want to enhance returns for our shareholders. And if we then, from time to time, charter vessels in the short-term market, it is because we think there are greater opportunities by doing that compared to just locking it in long term. Justine Fisher - Goldman Sachs: Should investors think to themselves that if there's -- that if certain of your vessels -- for example, even these dry hull vessels that are delivered a couple of years from now, that if those vessels are put on the market for the short term, that the ultimate goal is to lease them out over the long term. But then, either the rates weren't attractive at that point or you thought you could make more money in the short term chartering them out, but that really the strategy is to put those on long-term charters?

Yes, I think the overall strategy of the company is to keep a portfolio of long-term assets. But, at the same time, let's also hope that investors believe we will try to spice up their returns and, hopefully, increase the distributable cash flow over time by also making some market calls depending on where we think we are in the cycle relative to the different segments. Typically, in a single segment, if we believe we are high up in a cycle, we would tend to go very long and cover to ensure that we end up with a residual value of these assets at the end of the charter period, which is at a conservative depreciated level. Of course, in segments where we think the market has been down, and we think there are good recoverability opportunities, of course, in those segments it could be very opportunistic for us to do shorter charters and try to capture that upside and potentially lock these vessels in at higher rates, some point in the future. So from our side, it's a combination of predominantly a very long-term charter coverage spiced up with, hopefully, some added returns by taking some market positions from time to time. Justine Fisher - Goldman Sachs: My last question, and maybe this is a stupid question, but I've been looking at -- you guys have been chartering most of your fleet out for so long, I can't remember. Does Ship Finance have a chartering desk? Do you guys have a chartering business or who does that chartering if you charter them out yourself?

We have a Commercial Director who is located in Singapore who is taking care of the chartering for us, and is, of course, in close dialog with the shipbrokers and also both in connection with project opportunities but also relating to chartering if that is required.

[Operator Instructions] We have a follow-up question from Justine Fisher from Goldman [Sachs]. Justine Fisher - Goldman Sachs: The recent downgrade of Horizon Lines by Moody's, so they're now rated CCC by both rating agencies, does that have, I mean, any ramifications on your charter relationship with then in terms of even them potentially posting some collateral or are you guys -- how are you monitoring that situation?

There is no direct link between our chartering relation to them and the rating they have. They are, as all of us who are charterers, of course, committed to pay the charter rate, and we, of course, own the assets. So if something very negative should happen, and if they did not pay their charter rates, of course, it would be an option for us to take back the vessels, as we can with all our chartering counterparts. We have had no such incidents with Horizon Lines. We had a very good working relationship, so the recent downgrade does not have a direct impact on us.

There are no further questions.

Then I would like to thank everyone for participating in this conference call, and we look forward to reporting the second quarter numbers in August 2010. Thank you.

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