
ITEM 9.	THE OFFER AND LISTING

Not applicable except for Item 9.A.4. and Item 9.C.

~~The Company's~~Our common shares were listed on the NYSE on June 15, 2004, and commenced trading on that date under the symbol "SFL".


ITEM 10.	ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not Applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

~~The~~Our Memorandum of Association ~~of the Company~~ has previously been filed as Exhibit 3.1 to ~~the Company's~~our Registration Statement on Form F-4 (Registration No. 333-115705) filed with the SEC on May 25, 2004, and is hereby incorporated by reference into this Annual Report.

At our 2013 Annual General Meeting the shareholders voted to amend our Bye-laws, principally those governing General Meetings, proceedings of the Board of Directors and delegation of its powers. ~~These~~Our amended Bye-laws ~~of the Company~~ as adopted by shareholders on September 20, 2013, have previously been filed as Exhibit 1.3 to ~~the Company's~~our annual report on Form 20-F for the year ended December 31, 2014, filed with the SEC on April 9, 2015 and are hereby incorporated by reference to this Annual Report.

At our 2016 Annual General Meeting the shareholders voted to amend our Bye-laws to change the quorum requirement for General Meetings to two Members present in person or by proxy and entitled to vote (whatever the number of shares held by them). ~~These~~Our amended Bye-laws ~~of the Company~~ as adopted by shareholders on September 23, 2016, have previously been filed as Exhibit 1 to ~~the Company’s~~our report on Form 6-K, filed with the SEC on September 29, 2016, and are hereby incorporated by reference to this Annual Report.

At our 2016 Annual General Meeting the shareholders approved the reorganization of ~~the Company’s~~our share capital, which resulted in a reduction of the par value of ~~the Company’s~~our common shares from $1.00 to $0.01 and an increase in the number of authorized shares from 125,000,000 to 150,000,000.

At our 2018 Annual General Meeting, the shareholders approved the increase of ~~the Company’s~~our authorized share capital from US$1,500,000 divided into 150,000,000 common shares of US$0.01 par value each to US$2,000,000 divided into 200,000,000 common shares of US$0.01 par value each by the authorization of an additional 50,000,000 common shares of US$0.01 par value each.

~~The~~

Our purposes and powers ~~of the Company~~ are set forth in Items 6(1) and 7(a) through (h) of our Memorandum of Association and in the Second Schedule of the Bermuda Companies Act of 1981, which is attached as an exhibit to our Memorandum of Association. These purposes include exploring, drilling, moving, transporting and refining petroleum and hydro-carbon products, including oil and oil products; the acquisition, ownership, chartering, selling, management and operation of ships and aircraft; the entering into of any guarantee, contract, indemnity or suretyship and to assure, support, secure, with or without the consideration or benefit, the performance of any obligations of any person or persons; and the borrowing and raising of money in any currency or currencies to secure or discharge any debt or obligation in any manner.

Bermuda law permits the Bye-laws of a Bermuda company to contain provisions excluding personal liability of a director, alternate director, officer, member of a committee authorized under Bye-law 98, resident representative or their respective heirs, executors or administrators to ~~the company~~us for any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the officer or person may be guilty. Bermuda law also grants companies the power generally to indemnify our directors, alternate directors and officers ~~of the Company~~ and any members of a committee authorized under Bye-law 98, resident representatives or their respective heirs, executors or administrators if any such person was or is a party or threatened to be made a party to a threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director, alternate director or officer of ~~the Company~~ours or member of a committee authorized under Bye-law 98, resident representative or their respective heirs, executors or administrators or was serving in a similar capacity for another entity at ~~the Company's~~our request.

Our shareholders have no pre-emptive, subscription, redemption, conversion or sinking fund rights. Shareholders are entitled to one vote for each share held of record on all matters submitted to a vote of our shareholders. Shareholders have no cumulative voting rights. Shareholders are entitled to dividends if and when they are declared by our Board of Directors, subject to any preferred dividend right of holders of any preference shares. Directors to be elected by shareholder require a majority of votes cast at a meeting at which a quorum is present. For all other matters, unless a different majority is required by law or our Bye-laws, resolutions to be approved by shareholders require approval by a majority of votes cast at a meeting at which a quorum is present.

Upon our liquidation, dissolution or winding up, shareholders will be entitled to receive, ratably, our net assets available after the payment of all our debts and liabilities and any preference amount owed to any preference shareholders. The rights of shareholders, including the right to elect directors, are subject to the rights of any series of preference shares we may issue in the future.

Under our Bye-laws annual meetings of shareholders will be held each calendar year at a time and place selected by our Board of Directors (but never in the United Kingdom or Norway). Special meetings of shareholders may be called by our Board of Directors at any time and must be called at the request of shareholders holding at least 10% of our paid-up share capital carrying the right to vote at general meetings. Under our Bye-laws five days' notice of an annual meeting or any special meeting must be given to each shareholder entitled to vote at that meeting. Under Bermuda law accidental failure to give notice will not invalidate proceedings at a meeting. Our Board of Directors may set a record date at any time before or after any date on which such notice is dispatched.

Special rights attaching to any class of our shares may be altered or abrogated with the consent in writing of not less than 75% of the issued shares of that class or with the sanction of a resolution passed at a separate general meeting of the holders of such shares voting in person or by proxy.

Our Bye-laws do not prohibit a director from being a party to, or otherwise having an interest in, any transaction or arrangement with ~~the Company~~us or in which ~~the Company is~~we are otherwise interested. Our Bye-laws provide our Board of Directors the authority to exercise all of the powers of the Company to borrow money and to mortgage or charge all or any part of our property and assets as collateral security for any debt, liability or obligation. Our directors are not required to retire because of their age, and our directors are not required to be holders of our common shares. Directors serve for one year terms, and shall serve until re-elected or until their successors are appointed at the next annual general meeting.

Our Bye-laws provide that no director, alternate director, officer, person or member of a committee, if any, resident representative, or his heirs, executors or administrators, which we refer to collectively as an indemnitee, is liable for the acts, receipts, neglects, or defaults of any other such person or any person involved in our formation, or for any loss or expense incurred by us through the insufficiency or deficiency of title to any property acquired by us, or for the insufficiency or deficiency of any security in or upon which any of our monies shall be invested, or for any loss or damage arising from the bankruptcy, insolvency, or tortious act of any person with whom any monies, securities, or effects shall be deposited, or for any loss occasioned by any error of judgment, omission, default, or oversight on his part, or for any other loss, damage or misfortune whatever which shall happen in relation to the execution of his duties, or supposed duties, to us or otherwise in relation thereto. Each indemnitee will be indemnified and held harmless out of our funds to the fullest extent permitted by Bermuda law against all liabilities, loss, damage or expense (including but not limited to liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him as such director, alternate director, officer, person or committee member or resident representative (or in his reasonable belief that he is acting as any of the above). In addition, each indemnitee shall be indemnified against all liabilities incurred in defending any proceedings, whether civil or criminal, in which judgment is given in such indemnitee's favor, or in which he is acquitted. We are authorized to purchase insurance to cover any liability he may incur under the indemnification provisions of our Bye-laws.

C. MATERIAL CONTRACTS

~~The Company has~~We have not entered into any new material contracts since January 1, ~~2018,~~2019, other than those entered in the ordinary course of business or already attached in the exhibits.

Seadrill’s Plan of Reorganization

On July 2, 2018, Seadrill emerged from Chapter 11 successfully completing its reorganization pursuant its plan of reorganization, or the Plan of Reorganization entered into in 2017. Under the terms of the Plan of Reorganization, ~~the Company has~~we have agreed to reduce the contractual charter hire for each of the three drilling units on charter to the Seadrill Charterers by approximately 29% for a period of five years starting in 2018, with the reduced amounts added back in the period thereafter, as set out in the Restructuring Plan. The term of the charters for West Hercules and West Taurus were extended by 13 months until December 2024. The call options on behalf of the Seadrill Charterers under the relevant leases have also been amended as set out in the Restructuring Plan. In addition, the purchase obligations in the case of West Hercules and West Taurus and the put option in the case of West Linus at expiry of the charters have been amended as set out in the Restructuring Plan. The performance under the charters is guaranteed by Seadrill. The Restructuring Plan is an exhibit incorporated by reference to this annual report.

We also refer you to “Item 4. Information on the Company -A. History and Development of the Company,” “Item 5. Operating and Financial Review and Prospects -B. Liquidity and Capital Resources” and “Item 7. Major Shareholders and Related Party Transactions -B. Related Party Transactions” for a discussion of existing material agreements.

D. EXCHANGE CONTROLS

The Bermuda Monetary Authority, or the BMA, must give permission for all issuances and transfers of securities of a Bermuda exempted company like us. We have received a general permission from the BMA to issue any unissued common shares, and for the free transferability of the common shares as long as our common shares are listed on the NYSE. Our common shares may therefore be freely transferred among persons who are non-residents of Bermuda.

Although we are incorporated in Bermuda, we are classified as non-resident of Bermuda for exchange control purposes by the BMA. Other than transferring Bermuda Dollars out of Bermuda, there are no restrictions on our ability to transfer funds into and out of Bermuda or to pay dividends to U.S. residents who are holders of our common shares or other non-resident holders of our common shares in currency other than Bermuda Dollars.

E. TAXATION

U.S. Taxation

The following discussion is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing and proposed U.S. Treasury Department regulations, or the Treasury Regulations, administrative rulings and pronouncements and judicial decisions, all as of the date of this annual report. Unless otherwise noted, references to the "Company" include the Company's Subsidiaries. This discussion assumes that we do not have an office or other fixed place of business in the United States.

Taxation of the Company's Shipping Income: In General

The Company anticipates that it will derive a significant portion of its gross income from the use and operation of vessels in international commerce and that this income will principally consist of freights from the transportation of cargoes, hire or lease from time or voyage charters and the performance of services directly related thereto, which the Company refers to as "shipping income."

Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States will be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. The Company is not permitted by law to engage in transportation that gives rise to 100% U.S. source income.

Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to U.S. federal income tax.

Based upon the Company's anticipated shipping operations, the Company's vessels will operate in various parts of the world, including to or from U.S. ports. Unless exempt from U.S. federal income taxation under Section 883 of the Code, the Company will be subject to U.S. federal income taxation, in the manner discussed below, to the extent its shipping income is considered derived from sources within the United States.

Application of Section 883 of the Code

Under the relevant provisions of Section 883 of the Code, or Section 883, the Company will be exempt from U.S. federal income taxation on its U.S. source shipping income if:


(i)	It is organized in a "qualified foreign country," which is one that grants an equivalent exemption from tax to corporations organized in the United States in respect of the shipping income for which exemption is being claimed under Section 883, and which the Company refers to as the Country of Organization Requirement; and


(ii)	It can satisfy any one of the following two stock ownership requirements for more than half the days during the taxable year:

the Company's stock is "primarily and regularly traded on an established securities market" located in the United States or a "qualified foreign country," which the Company refers to as the Publicly-Traded Test; or

more than 50% of the Company's stock, in terms of value, is beneficially owned by any combination of one or more individuals who are residents of a "qualified foreign country" or foreign corporations that satisfy the Country of Organization Requirement and the Publicly-Traded Test, which the Company refers to as the 50% Ownership Test.

The U.S. Treasury Department has recognized Bermuda, the country of incorporation of the Company and certain of its subsidiaries, as a "qualified foreign country." In addition, the U.S. Treasury Department has recognized Liberia, the Marshall Islands, Malta and Cyprus, the countries of incorporation of certain of the Company's vessel-owning subsidiaries, as "qualified foreign countries." Accordingly, the Company and its vessel-owning subsidiaries satisfy the Country of Organization Requirement.

Therefore, the Company's eligibility to qualify for exemption under Section 883 is wholly dependent upon being able to satisfy one of the stock ownership requirements.

As discussed below, for the ~~2018~~2019 taxable year we believe the Company satisfied the Publicly-Traded Test, since on more than half the days in the taxable year we believe the Company's common shares were primarily and regularly traded on the NYSE, an established securities market in the United ~~States, namely the NYSE.~~States.

As to the Publicly-Traded Test, the Treasury Regulations under Section 883 provide, in pertinent part, that stock of a foreign corporation will be considered to be "primarily traded" on an established securities market in a country if the number of shares of each class of stock that is traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that is traded during that year on established securities markets in any other single country.

The Publicly-Traded Test also requires our common shares be "regularly traded" on an established securities market. Under the Treasury Regulations, our common shares are considered to be "regularly traded" on an established securities market if shares representing more than 50% of our outstanding common shares, by both total combined voting power of all classes of stock entitled to vote and total value, are listed on the market, referred to as the "listing threshold." The Treasury Regulations further require that with respect to each class of stock relied upon to meet the listing threshold (i) such class of stock is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or 1/6 of the days in a short taxable year, which is referred to as the "trading frequency test", and (ii) the aggregate number of shares of such class of stock traded on such market during the taxable year is at least 10% of the average number of shares of such class of stock outstanding during such year (as appropriately adjusted in the case of a short taxable year), which is referred to as the "trading volume test." Even if we do not satisfy both the trading frequency and trading volume tests, the Treasury Regulations provide that the trading frequency and trading volume tests will be deemed satisfied if our common shares are traded on an established securities market in the United States and such stock is regularly quoted by dealers making a market in our common shares, such as the NYSE on which our common shares are listed.

Notwithstanding the foregoing, our common shares will not be considered to be regularly traded on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding common shares are owned, actually or constructively under certain stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the value of our common shares, which we refer to as the 5 Percent Override Rule.

In order to determine the persons who actually or constructively own 5% or more of our common shares, or 5% Shareholders, we are permitted to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the U.S. Securities and Exchange Commission as having a 5% or more beneficial interest in our common shares. In addition, an investment company identified on a Schedule 13G or Schedule 13D filing which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes.

For our ~~2018~~2019 taxable year, we do not believe that we were subject to the 5 Percent Override Rule and, therefore, we believe that we satisfied the Publicly-Traded Test. There are, however, factual circumstances beyond our control that could cause the Company to lose the benefit of the Section 883 exemption and thereby become subject to U.S. federal income tax on its U.S. source shipping income. For example, Hemen owned as much as approximately 22.5% of our outstanding common shares during the ~~2018~~2019 year. There is, therefore, a risk that the Company could no longer qualify for exemption under Section 883 for a particular taxable year if other 5% Shareholders were, in combination with Hemen, to own 50% or more of the outstanding common shares of the Company on more than half the days during the taxable year. Due to the factual nature of the issues involved, there can be no assurances as to the tax-exempt status of the Company or any of its subsidiaries.

In the event the 5 Percent Override Rule is triggered, the 5 Percent Override Rule will nevertheless not apply if we can establish that among the closely-held group of 5% Shareholders, there are sufficient 5% Shareholders that are considered to be "qualified shareholders" for purposes of Section 883 to preclude non-qualified 5% Shareholders in the closely-held group from owning 50% or more of our common shares for more than half the number of days during the taxable year.

In any year that the 5 Percent Override Rule is triggered with respect to us, we are eligible for the exemption from tax under Section 883 only if we can nevertheless satisfy the Publicly-Traded Test (which requires, among other things, showing that the exception to the 5 Percent Override Rule applies) or if we can satisfy the 50% Ownership Test. In either case, certain substantiation and reporting requirements regarding the identity of our shareholders must be satisfied in order to qualify for the Section 883 exemption. These requirements are onerous and there is no assurance that we would be able to satisfy them.

Taxation in Absence of the Section 883 Exemption

To the extent the benefits of Section 883 are unavailable with respect to any item of U.S. source income, the Company's U.S. source shipping income, to the extent not considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, which we refer to as the "4% gross basis tax regime." Since, under the sourcing rules described above, no more than 50% of the Company's shipping income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on the Company's shipping income, to the extent not considered to be "effectively connected" with the conduct of a U.S. trade or business, would never exceed 2% under the 4% gross basis tax regime.

To the extent the benefits of the Section 883 exemption are unavailable and our U.S. source shipping income is considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, any such "effectively connected" U.S. source shipping income, net of applicable deductions, would be subject to the U.S. federal corporate income tax imposed at rate of 21%. In addition, we may be subject to the 30% "branch profits" tax on earnings "effectively connected" with the conduct of such U.S. trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of such U.S. trade or business.

Our U.S. source shipping income would be considered "effectively connected" with the conduct of a U.S. trade or business only if:

we had, or were considered to have, a fixed place of business in the United States involved in the earning of U.S. source shipping income; and

substantially all of our U.S. source shipping income were attributable to regularly scheduled transportation, such as the operation of a vessel that followed a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States, or, in the case of income from the chartering of a vessel, were attributable to a fixed place of business in the United States.

We do not have, nor will we permit circumstances that would result in having, any vessel sailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S. source shipping income is or will be "effectively connected" with the conduct of a U.S. trade or business.

Gain on Sale of Vessels

Regardless of whether we qualify for exemption under Section 883, we will not be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.

U.S. Taxation of Our Other Income

In addition to our shipping operations, we charter drilling rigs to third parties who conduct drilling operations in various parts of the world. Since we are not engaged in a trade or business in the United States, we do not expect to be subject to U.S. federal income tax on any of our income from such charters.

Taxation of U.S. Holders

The following is a discussion of the material U.S. federal income tax considerations relevant to an investment decision by a U.S. Holder, as defined below, with respect to our common shares. This discussion does not purport to deal with the tax consequences of owning our common shares to all categories of investors, some of which may be subject to special rules. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or foreign law of the ownership of our common shares.

As used herein, the term U.S. Holder means a beneficial owner of our common shares that (i) is a U.S. citizen or resident, a U.S. corporation or other U.S. entity taxable as a corporation, an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or a trust if (a) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) the trust has in effect a valid election to be treated as a United States person for U.S. federal income tax purposes, (ii) owns our common shares as a capital asset, generally, for investment purposes, and (iii) owns less than 10% of our common shares for U.S. federal income tax purposes.

If a partnership holds our common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common shares, you are encouraged to consult your own tax advisor regarding this issue.

Distributions

Subject to the discussion below of passive foreign investment companies, or PFICs, any distributions made by us with respect to our common shares to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in his common shares on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders that are corporations will generally not be entitled to claim a dividends-received deduction with respect to any distributions they receive from us.

Dividends paid on our common shares to a U.S. Holder who is an individual, trust or estate, which we refer to as a U.S. Individual Holder, will generally be treated as "qualified dividend income" that is taxable to such U.S. Individual Holders at preferential tax rates provided that (1) the common shares are readily tradable on an established securities market in the United States (such as the NYSE, on which our common shares are listed); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (see discussion below); and (3) the U.S. Individual Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend.

There is no assurance that any dividends paid on our common shares will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Any dividends paid by the Company which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder.

Sale, Exchange or other Disposition of Common Shares

Assuming we do not constitute a PFIC for any taxable year, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common shares in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's tax basis in such common shares. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder's holding period in the common shares is greater than one year at the time of the sale, exchange or other disposition. Otherwise, it will be treated as short-term capital gain or loss. A U.S. Holder's ability to deduct capital losses is subject to certain limitations.

Passive Foreign Investment Company Status and Significant Tax Consequences

Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a PFIC for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held our common shares, either at least 75% of our gross income for such taxable year consists of "passive income" (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business), or at least 50% of the average value of the assets held by the corporation during such taxable year produce, or are held for the production of, "passive income."

For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute "passive income" unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.

Although there is no legal authority directly on point, we believe that, for purposes of determining whether we are a PFIC, the gross income we derive or are deemed to derive from the time chartering activities of our wholly-owned subsidiaries more likely than not constitutes services income, rather than rental income. Correspondingly, we believe that such income does not constitute "passive income," and the assets that we or our wholly-owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, do not constitute passive assets for purposes of determining whether we are a PFIC. We believe there is substantial legal authority supporting our position consisting of case law and Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. This position is principally based upon the positions that (1) our time charter income will constitute services income, rather than rental income, and (2) Frontline Management and Golden Ocean Management, which provide services to certain of our time-chartered vessels, will be respected as separate entities from Frontline Shipping and the Golden Ocean Charterer, with which they are respectively affiliated.

We intend to take the position that we were not treated as a PFIC for our ~~2018~~2019 taxable year. For the ~~2019~~2020 taxable year and future taxable years, depending upon the relative amount of income we derive from our various assets as well as their relative fair market values, it is possible that we may be treated as a PFIC.

We note that there is no direct legal authority under the PFIC rules addressing our current and proposed method of operation. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future. Accordingly, no assurance can be given that the IRS or a court of law will accept our position, and there is a significant risk that the IRS or a court of law could determine that we are a PFIC.

As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a "Qualified Electing Fund", which election we refer to as a QEF Election. As an alternative to making a QEF election, a U.S. Holder should be able to make a "mark-to-market" election with respect to our common shares, as discussed below, and which election we refer to as a Mark-to-Market Election. In any event, if we were to be treated as a PFIC for any taxable year ending on or after December 31, 2013, a U.S. Holder would be required to file an annual report with the Internal Revenue Service for that year with respect their holding in our common shares.

Taxation of U.S. Holders Making a Timely QEF Election

If we were to be treated as a PFIC for any taxable year and a U.S. Holder makes a timely QEF Election, which U.S. Holder we refer to as an Electing Holder, the Electing Holder must report each year for U.S. federal income tax purposes its pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received from us by the Electing Holder. The Electing Holder's adjusted tax basis in the common shares will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common shares and will not be taxed again once distributed. A U.S. Holder would make a QEF Election with respect to any taxable year that we are a PFIC by filing one copy of IRS Form 8621 with its U.S. federal income tax return. To make a QEF Election, a U.S. Holder must receive annually certain tax information from us. There can be no assurances that we will be able to provide such information annually. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common shares.

Taxation of U.S. Holders Making a Mark-to-Market Election

Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate, our common shares are treated as "marketable stock," a U.S. Holder would be permitted to make a Mark-to-Market Election with respect to our common shares, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common shares at the end of the taxable year over such holder's adjusted tax basis in the common shares. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder's adjusted tax basis in the common shares over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the Mark-to-Market Election. A U.S. Holder's tax basis in its common shares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder.

Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election

Finally, if we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF Election or a Mark-to-Market Election for that year, whom we refer to as a Non-Electing Holder, would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common shares), and (2) any gain realized on the sale, exchange or other disposition of our common shares. Under these special rules:

the excess distribution or gain would be allocated ratably over the Non-Electing Holders' aggregate holding period for the common shares;

the amount allocated to the current taxable year and any taxable years before the Company became a PFIC would be taxed as ordinary income; and

the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of our common shares. If we were a PFIC, and a Non-Electing Holder who is an individual died while owning our common shares, such holder's successor generally would not receive a step-up in tax basis with respect to such common shares.

Taxation of Non-U.S. Holders

A beneficial owner of common shares (other than a partnership) that is not a U.S. Holder is referred to herein as a Non-U.S. Holder.

Dividends on Common Shares

Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax on dividends received from us with respect to our common shares, unless that dividend is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is taxable, or taxable at the full rate, only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.

Sale, Exchange or Other Disposition of Common Shares

Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax on any gain realized upon the sale, exchange or other disposition of our common shares, unless:

the gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States (and, if the Non-U.S. Holder is entitled to the benefits of an income tax treaty with respect to that gain, that gain is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States); or

the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.

If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from the common shares, including dividends and the gain from the sale, exchange or other disposition of the common shares, that is effectively connected with the conduct of that trade or business will generally be subject to regular U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, if you are a corporate Non-U.S. Holder, your earnings and profits that are attributable to the effectively connected income, subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.

Backup Withholding and Information Reporting

In general, dividend payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements. Such payments will also be subject to "backup withholding" if you are a non-corporate U.S. Holder and you:

fail to provide an accurate taxpayer identification number;

are notified by the IRS that you have failed to report all interest or dividends required to be shown on your U.S. federal income tax returns; or

in certain circumstances, fail to comply with applicable certification requirements.

Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on an applicable IRS Form W-8.

If you are a Non-U.S. Holder and you sell your common shares to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or otherwise establish an exemption. If you sell your common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting, but not backup withholding, will apply to a payment of sales proceeds, including a payment made to you outside the United States, if you sell your common shares through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States. Such information reporting requirements will not apply, however, if the broker has documentary evidence that you are a non-U.S. person and certain other conditions are met, or you otherwise establish an exemption.

Backup withholding is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.

Individuals who are U.S. Holders (and to the extent specified in applicable Treasury regulations, certain individuals who are Non-U.S. Holders and certain U.S. entities) who hold "specified foreign financial assets" (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury regulations). Specified foreign financial assets would include, among other assets, our common shares, unless the shares are held through an account maintained with a U.S. financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury regulations, an individual Non-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. U.S. Holders (including U.S. entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under this legislation.

Bermuda Taxation

Under current Bermuda law, we are not subject to tax on income or capital gains. We have received from the Minister of Finance under The Exempted Undertaking Tax Protection Act 1966, as amended, an assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable to us or to any of our operations or shares, debentures or other obligations, until March 31, 2035. We could be subject to taxes in Bermuda after that date. This assurance is subject to the proviso that it is not to be construed to prevent the application of any tax or duty to such persons as are ordinarily resident in Bermuda or to prevent the application of any tax payable in accordance with the provisions of the Land Tax Act 1967 or otherwise payable in relation to any property leased to us. We and our subsidiaries incorporated in Bermuda pay annual government fees to the Bermuda government.

F. DIVIDENDS AND PAYING AGENTS

Not Applicable.

G. STATEMENT BY EXPERTS

Not Applicable.

H. DOCUMENTS ON DISPLAY

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In accordance with these requirements, we file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330, and you may obtain copies at prescribed rates from the public reference facilities maintained by the SEC at its principal office in Washington, D.C. 20549. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. In addition, documents referred to in this annual report may be inspected at our principal executive offices at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM 08. Our filings are also available on our website at ~~www.shipfinance.bm~~www.sflcorp.com. This web address is provided as an inactive textual reference only. Information on our website does not constitute part of this annual report.

I. SUBSIDIARY INFORMATION

Not Applicable.


ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including interest rates and foreign currency fluctuations. We use interest rate swaps to manage interest rate risk and currency swaps to manage currency risks. We may enter into derivative instruments from time to time for speculative purposes.

At December 31, 2018, the Company had entered into combined currency and interest rate swap contracts with a total notional principal of NOK900 million ($151.0 million), to hedge against fluctuations in interest and exchange rates on our NOK900 million senior unsecured bonds due 2019. Under these contracts, variable NIBOR interest rates including additional margin is swapped for fixed interest at an average of 6.03%, and both the payment of interest and eventual settlement of the bonds will have an effective exchange rate of NOK5.96 = $1. The Company has also entered into a combined currency and interest rate counter swap contract with a total notional principal of NOK100 million (approximately $16.8 million), with equal but opposite terms to one of the NOK900 million swaps. This counter swap is not designated for hedge accounting purposes. Upon the swaps’ expiry in March 2019, the Company will settle the final exchange by receiving net NOK800 million and paying net $134.2 million at an effective exchange rate of NOK5.96 = $1. At December 31, 2018 NOK672 million ($77.7million) was outstanding on the NOK900 million senior unsecured bonds.

~~Similarly, at December 31, 2018, the Company~~we had entered into combined currency and interest rate swap contracts with a total notional principal of NOK500 million ($64.0 million), to hedge against fluctuations in interest and exchange rates on our NOK500 million senior unsecured bonds due 2020. Under these contracts, variable NIBOR interest rates including additional margin is swapped for fixed interest at an average of 6.91%, and both the payment of interest and eventual settlement of the bonds will have an effective exchange rate of NOK7.81 = $1. These contracts expire between March and June 2020 and we estimate that we would pay ~~$4.7~~$6.1 million to terminate them as of December 31, ~~2018 (2017: $1.8~~2019 (2018: $4.7 million).

AtSimilarly, at December 31, ~~2018, the Company~~2019, we had entered into currency rate swap contracts and combined currency and interest rate swaps with a total notional principal of ~~NOK472~~NOK600 million ($~~62.1~~76.8 million), to hedge against fluctuations in exchange rates on our NOK600 million senior unsecured bonds due 2023. Under these contracts, variable NIBOR interest rates including additional margins is swapped for variable LIBOR rates including additional ~~margins.~~margins and variable NIBOR interest rates including additional margin is swapped for fixed interest at an average of 6.74%. The eventual settlement of the bonds will have an effective exchange rate of ~~NOK7.60~~NOK7.81 = $1. These contracts expire in September 2023 and we estimate that we would pay ~~$9.6~~$10.7 million to terminate them as of December 31, ~~2018.~~2019 (2018: $9.6 million). During 2019, we had entered into additional combined currency and interest rate swap contracts with a total notional principal of NOK100 million ($11.3 million) to hedge against fluctuations in exchange rates on the NOK100 million tap issue to the NOK600 million. Under these contracts, variable NIBOR interest rates including additional margins is swapped for fixed interest of 6.38%. The eventual settlement of the bonds will have an effective exchange rate of NOK8.89 = $1. These contracts expire in September 2023 and we estimate that we would receive $0.2 million to terminate them as of December 31, 2019 (2018: $0.0 million).

Similarly, at December 31, 2019, we had entered into currency rate contracts and combined currency and interest rate swap contracts with a total notional principal of NOK700 million ($80.5 million), to hedge against fluctuations in interest and exchange rates on our NOK700 million senior unsecured bonds due 2024. Under these contracts, variable NIBOR interest rates including additional margin is swapped for variable LIBOR rates including additional margins and variable NIBOR interest rates including additional margin is swapped for fixed interest at an average of 6.88%. The eventual settlement of the bonds will have an effective exchange rate of NOK8.69 = $1. These contracts expire between June 2024 and we estimate that we would pay $2.4 million to terminate them as of December 31, 2019 (2018: $0.0 million).

At December 31, ~~2018, the Company~~2019, we and ~~its~~our consolidated subsidiaries had entered into interest rate swap contracts with a combined notional principal amount of ~~$721 million~~$1.0 billion at fixed interest rates between 1.07% per annum and ~~2.93%~~6.96% per annum. These interest rate swap agreements mature between ~~January 2019~~June 2020 and ~~April 2023,~~August 2029, and we estimate that we would ~~receive $8.7~~pay $5.5 million to terminate them as of December 31, ~~2018 (2017:~~2019 (2018: receive ~~2.4~~$8.7 million).

The overall effect of our swaps is to fix the interest rate on approximately ~~$0.9~~$1.0 billion of our floating rate debt at December 31, ~~2018 (2017: $1.2~~2019 (2018: $0.9 billion), at a weighted average interest rate of ~~4.68%~~4.26% per annum including margin ~~(2017: 4.31%~~(2018: 4.68%).

Several of our charter contracts contain interest adjustment clauses, whereby the charter rate is adjusted to reflect the actual interest rate on the outstanding loan, effectively transferring interest rate exposure to the counterparty under the charter contract. At December 31, ~~2018,~~2019, a total of ~~$0.8~~$0.7 billion of our floating rate debt was subject to such interest adjustment clauses, including our equity accounted subsidiaries. None of this was subject to interest rate swaps entered into for the benefit of the charterer. The balance of ~~$0.8~~$0.7 billion remained on a floating rate basis. Comparably as at December 31, ~~2017,~~2018, a total of ~~$0.9~~$0.8 billion of our floating rate debt was subject to such interest adjustment clauses, including our equity accounted subsidiaries. Of this, approximately ~~$0.2~~$nil billion was ~~also~~ subject to interest rate swaps entered into for the benefit of the charterer, with the balance of ~~$0.7~~$0.8 billion remaining on a floating rate basis.

At December 31, ~~2018,~~2019, our net exposure, including equity-accounted subsidiaries, to interest rate fluctuations on our outstanding debt was ~~$114.8~~$166.6 million, compared with ~~$132.4~~$114.8 million at December 31, ~~2017.~~2018. Our net exposure to interest fluctuations is based on our total of ~~$1.8~~$1.9 billion floating rate debt outstanding at December 31, ~~2018,~~2019, less the ~~$0.9~~$1.0 billion notional principle of our interest rate swaps and the ~~$0.8~~$0.7 billion remaining floating rate debt subject to interest adjustment clauses under charter contracts. A one per-cent change in interest rates would thus increase or decrease net exposure by approximately ~~$1.1~~$1.7 million per year as of December 31, ~~2018 (2017: $1.3~~2019 (2018: $1.1 million per year).

During February 2020, we successfully placed NOK600 million NIBOR + 4.40% senior unsecured bonds due January 2025. An application will be made for the bonds to be listed on the Oslo Stock Exchange. The net proceeds from the bond issuance will be used for general corporate purposes.

As of March ~~26, 2019,~~27, 2020, we were not party to any other derivative contracts.

~~The Company~~

We may in the future enter into short-term Total Return Swap ("TRS") arrangements relating to our own shares and bonds or securities in other companies.

Apart from our ~~NOK900 million,~~ NOK500 million due 2020, NOK700 million due 2023 and ~~NOK600~~NOK700 million due 2024 floating rate bonds, which have been hedged, the majority of our transactions, assets and liabilities are denominated in U.S. dollars, our functional currency.


ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II


ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Neither we nor any of our subsidiaries have been subject to a material default in the payment of principal, interest, a sinking fund or purchase fund installment or any other material default that was not cured within 30 days. In addition, the payments of our dividends are not, and have not been in arrears or have not been subject to material delinquency that was not cured within 30 days.


ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.


ITEM 15.	CONTROLS AND PROCEDURES


a)	Disclosure Controls and Procedures

Pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act, management assessed the effectiveness of the design and operation of ~~the Company's~~our disclosure controls and procedures as of December 31, ~~2018.~~2019. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that ~~the Company's~~our disclosure controls and procedures were effective as of the evaluation date.


b)	Management's annual report on internal controls over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) promulgated under the Exchange Act.

Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of ~~the assets of the Company;~~our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of Company's management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted the evaluation of the effectiveness of the internal controls over financial reporting using the control criteria framework issued by the Committee of Sponsoring Organizations of the Treadway Commission published in its report entitled Internal Control-Integrated Framework (2013).

Our management with the participation of our Principal Executive Officer and Principal Financial Officer assessed the effectiveness of the design and operation of ~~the Company's~~our internal controls over financial reporting pursuant to Rule 13a-15 of the Exchange Act, as of December 31, ~~2018.~~2019. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that ~~the Company's~~our internal controls over financial reporting were effective as of December 31, ~~2018.~~2019.


c)	Attestation report of the registered public accounting firm

MSPC, Certified Public Accountants and Advisors, a Professional Corporation, our independent registered public accounting firm, has issued their attestation report on the effectiveness of our internal control over financial reporting as of December 31, ~~2018.~~2019. Such report appears on page F-2.


d)	Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

ITEM 16.


ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that our Audit Committee has one Audit Committee Financial Expert. James O'Shaughnessy is an independent Director and is the Audit Committee Financial Expert, as such terms are defined under SEC rules.


ITEM 16B.	CODE OF ETHICS

We have adopted a Code of Ethics that applies to all entities controlled by us and our employees, directors, officers and ~~agents of the Company.~~our agents. We have posted our code of ethics on our website at ~~www.shipfinance.bm~~www.sflcorp.com. We will provide any person, free of charge, with a copy of our code of ethics upon written request to our registered office.


ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal accountant for ~~2018~~2019 and ~~2017~~2018 was MSPC, Certified Public Accountants and Advisors, A Professional Corporation (“MSPC”). The following table sets forth the fees related to audit and other services provided by MSPC.


	2018		2017		2019		2018
Audit Fees (a)	$	560,000	$	540,000	$	560,000	$	560,000
Audit-Related Fees (b)	$	129,000	$	117,000	$	129,000	$	129,000
Tax Fees (c)	—		—		—		—
All Other Fees (d)	$	39,000	$	30,075	$	—	$	39,000
Total	$	728,000	$	687,075	$	689,000	$	728,000


(a)	Audit Fees

Audit fees represent professional services rendered for the audit of our annual financial statements and services provided by the principal accountant in connection with statutory and regulatory filings or engagements.


(b)	Audit -Related Fees

Audit-related fees consisted of assurance and related services rendered by the principal accountant related to the performance of the audit or review of our financial statements which have not been reported under Audit Fees above.


(c)	Tax Fees

Tax fees represent fees for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning.


(d)	All Other Fees

All other fees include services other than audit fees, audit-related fees and tax fees set forth above.


(e)	Audit Committee's Pre-Approval Policies and Procedures

Our Board of Directors has adopted pre-approval policies and procedures in compliance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X, that require the Board of Directors to approve the appointment of our independent auditor before such auditor is engaged and approve each of the audit and non-audit related services to be provided by such auditor under such engagement by ~~the Company.~~us. All services provided by the principal auditor in ~~2018~~2019 and ~~2017~~2018 were approved by the Board of Directors pursuant to the pre-approval policy.


ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.


ITEM 16E.	PURCHASE OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS

No shares have been repurchased by ~~the Company~~us or any “affiliated purchaser,” as such term is defined in Rule 10b-18(a)(3) of the Exchange Act, since January 2006.


ITEM 16F.	CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT

Not applicable.


ITEM 16G.	CORPORATE GOVERNANCE

Pursuant to an exception under the NYSE listing standards available to foreign private issuers, we are not required to comply with all of the corporate governance practices followed by U.S. companies under the NYSE listing standards. The significant differences between our corporate governance practices and the NYSE standards applicable to listed U.S. companies are set forth below.

Executive Sessions.The NYSErequires that non-management directors meet regularly in executive sessions without management. The NYSEalso requires that all independent directors meet in an executive session at least once a year. As permitted under Bermuda law and our Bye-laws, our non-management directors have not regularly held executive sessions without management, and we do not expect them to do so in the future.

Nominating/Corporate Governance Committee.The NYSErequires that a listed U.S. company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Bermuda law and our Bye-laws, we do not currently have a nominating or corporate governance committee.

Audit Committee.The NYSErequires, among other things, that a listed U.S. company have an audit committee with a minimum of three members. As permitted by Rule 10A-3 under the Exchange Act, our audit committee consists of one independent member of our Board of Directors.

Corporate Governance Guidelines.The NYSErequires U.S. companies to adopt and disclose corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation. We are not required to adopt such guidelines under Bermuda law and we have not adopted such guidelines.

Independence of Directors.The NYSE requires that a U.S. listed company maintain a majority of independent directors. As a Foreign Private Issuer, we are exempt from this rule and may comply with it voluntarily. Our Board of Directors currently consists of ~~five~~six directors, four of which are considered "independent" according to NYSE's standards for independence. However, as permitted under Bermuda law, our Board of Directors may in the future not consist of a majority of independent directors.

Compensation Committee. The NYSE requires that a listed U.S. company have a compensation committee of independent directors. As a Foreign Private Issuer we are exempt from this rule and may comply with it voluntarily. As permitted under Bermuda law, our Compensation Committee does not currently, and may not in the future, consist entirely of independent directors.


ITEM 16H.	MINE SAFETY DISCLOSURE

Not applicable.

PART III


ITEM 17.	FINANCIAL STATEMENTS

See Item 18.


ITEM 18.	FINANCIAL STATEMENTS

The following financial statements listed below and set forth on pages F-1 through ~~F-58~~F-63 are filed as part of this annual report:

Financial Statements: ~~Ship Finance International Limited~~SFL Corporation Ltd.



Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-4~~F-5
Consolidated Statements of Comprehensive Income for the years ended December 31, ~~2018, 2017 and 2016~~	~~F-5~~
~~Consolidated Balance Sheets as of December 31,~~2019, 2018 and 2017	F-6
Consolidated Balance Sheets as of December 31, 2019 and 2018	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-7~~F-8
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-8~~F-9
Notes to Consolidated Financial Statements	~~F-10~~F- 11

ITEM 19. EXHIBITS



Number	Description of Exhibit
1.1*	Memorandum of Association of Ship Finance International Limited (the "Company"), incorporated by reference to Exhibit 3.1 of the Company's Registration Statement, SEC File No. 333-115705, filed on May 21, 2004 (the "Original Registration Statement").

1.2*	Amended and Restated Bye-laws of the Company, as adopted on September 28, 2007, incorporated by reference to Exhibit 1 of the Company's 6-K filed on October 22, 2007.

1.3*	Amended and Restated Bye-laws of the Company, as adopted on September 20, 2013, incorporated by reference to Exhibit 1.3 of the Company's 2014 Annual Report filed on Form 20-F on April 9, 2015.

1.4*	Amended and Restated Bye-laws of the Company, as adopted on September 23, 2016, incorporated by reference to Exhibit 1 of the Company's Form 6-K filed on September 29, 2016.

2.1*	Form of Common Stock Certificate of the Company, incorporated by reference to Exhibit 4.1 of the Company's Original Registration Statement.

2.2	Description of Securities of the Company

4.1*	Form of Performance Guarantee dated January 1, 2004, issued by Frontline Ltd, incorporated by reference to Exhibit 10.3 of the Company's Original Registration Statement.

4.2*	Amendment No. 4 to Performance Guarantee dated January 1, 2004, incorporated by reference to Exhibit 4.3 of the Company's 2009 Annual Report as filed on Form 20-F on April 1, 2010.

4.3*	Form of Time Charter, incorporated by reference to Exhibit 10.4 of the Company's Original Registration Statement.

4.4*	Form of Vessel Management Agreements, incorporated by reference to Exhibit 10.5 of the Company's Original Registration Statement.

4.5*	Form of Charter Ancillary Agreement dated January 1, 2004, incorporated by reference to Exhibit 10.6 of the Company's Original Registration Statement.

4.6*	Addendum No. 6 to Charter Ancillary Agreement dated January 1, 2004, incorporated by reference to Exhibit 4.8 of the Company's 2009 Annual Report as filed on Form 20-F on April 1, 2010.

4.7*	Amendments dated August 21, 2007, to the Charter Ancillary Agreements, incorporated by reference to Exhibit 4.8 of the Company's 2007 Annual Report as filed on Form 20-F on March 17, 2008.

4.8*	New Administrative Services Agreement dated November 29, 2007, incorporated by reference to Exhibit 4.10 of the Company's 2007 Annual Report as filed on Form 20-F on March 17, 2008.

4.9*	Share Option Scheme, incorporated by reference to Exhibit 2.2 of the Company's 2006 Annual Report as filed on Form 20-F on July 2, 2007.

4.11*	Bond Agreement relating to Ship Finance International Limited Callable Senior Unsecured Bond Issue 2010/2014, dated October 6, 2010 incorporated by reference to Exhibit 4.11 of the Company's 2010 Annual Report filed on Form 20-F on March 25, 2011.

4.12*	Bond Agreement relating to Ship Finance International Limited Senior Unsecured Callable Convertible Bond Issue 2011/2016, dated February 11, 2011 incorporated by reference to Exhibit 4.12 of the Company's 2010 Annual Report filed on Form 20-F on March 25, 2011.

4.13*	Addendum No. 7 to Charter Ancillary Agreement dated January 1, 2004, incorporated by reference to Exhibit 4.13 of the Company's 2011 Annual Report filed on Form 20-F on April 27, 2012.

4.14*	Addendum No. 3 to Charter Ancillary Agreement dated June 20, 2005, incorporated by reference to Exhibit 4.14 of the Company's 2011 Annual Report filed on Form 20-F on April 27, 2012.

4.15a*	Indenture by and among the Company, U.S. Bank National Association and Deutsche Bank Trust Company Americas, dated January 30, 2013, incorporated by reference to the Company's report on Form 6-K filed on February 4, 2013.

4.15b*	First Supplemental Indenture by and among the Company, U.S. Bank National Association and Deutsche Bank Trust Company Americas, dated January 30, 2013, incorporated by reference to the Company's report on Form 6-K filed on February 7, 2013.



4.16*	Bond Agreement relating to Ship Finance International Limited Callable Senior Unsecured Bond Issue 2012/2017, dated October 16, 2012, incorporated by reference to the Company's 2013 Annual Report filed on Form 20-F on March 28, 2014.

4.17*	Bond Agreement relating to Ship Finance International Limited Callable Senior Unsecured Bond Issue 2014/2019, dated March 17, 2014, incorporated by reference to the Company's 2013 Annual Report filed on Form 20-F on March 28, 2014.

4.18*	Amended and Restated Charter Ancillary Agreement among the Company, the vessel owning subsidiaries of the Company, Frontline Ltd. and Frontline Shipping Limited, dated June 5, 2015 incorporated by reference to the Company's 2015 Annual Report filed on Form 20-F on April 1, 2016.

4.19*	Base Indenture relating to Ship Finance International Senior Unsecured Callable Convertible Bond Issue 2016/2021 dated October 5, 2016, incorporated by reference to Exhibit 99.2 of the Company’s report on Form 6-K filed on October 7, 2016.

4.20*	First Supplemental Indenture to Ship Finance International Senior Unsecured Callable Convertible Bond Issue 2016/2021 dated October 5, 2016, incorporated by reference to Exhibit 99.3 of the Company’s report on Form 6-K filed on October 7, 2016.

4.21*	Restructuring Support and Lock-Up Agreement dated September 12, 2017, incorporated by reference to Exhibit 10.2 of Seadrill Limited's report on Form 6-K filed on September 13, 2017

~~4.22~~4.22*	Bond Agreement relating to Ship Finance International Limited Callable Senior Unsecured Bond Issue 2017/2020, dated June 16, 2017.

~~4.23~~4.23*	Second Supplemental Indenture by and among Ship Finance International Ltd. And U.S. Bank National Association, as Trustee, dated April 23, 2018 to Indenture dated October 5, 2016 for 4.875% Convertible Senior Notes due 2023, incorporated by reference to Exhibit 99.2 of the Company’s report on Form 6-K filed on April 24, 2018

8.1	Significant Subsidiaries of the Company.

12.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

12.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

13.1	Certification of the Principal Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

13.2	Certification of the Principal Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

15.1	Consent of Independent Registered Public Accounting Firm.

* Incorporated herein by reference.



101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Schema Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Schema Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Schema Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Schema Presentation Linkbase Document

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



		~~SHIP FINANCE INTERNATIONAL LIMITED~~SFL Corporation Ltd.
		(Registrant)

Date:	March ~~26, 2019~~27, 2020	By:	/s/ Aksel C. Olesen
			Aksel C. Olesen
			Principal ~~Executive~~Financial Officer

~~Ship Finance International Limited~~

SFL Corporation Ltd.

Index to Consolidated Financial Statements



Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-4~~F-5
Consolidated Statements of Comprehensive Income for the years ended December 31, ~~2018, 2017 and 2016~~	~~F-5~~
~~Consolidated Balance Sheets as of December 31,~~2019, 2018 and 2017	F-6
Consolidated Balance Sheets as of December 31, 2019 and 2018	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-7~~F-8
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-8~~F-9
Notes to the Consolidated Financial Statements	~~F-10~~F- 11

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

~~Ship Finance International Limited~~SFL Corporation Ltd.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of ~~Ship Finance International Limited~~SFL Corporation Ltd and subsidiaries (the "Company") as of December 31, ~~2018~~2019 and ~~2017,~~2018, and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, ~~2018,~~2019, and the related notes (collectively referred to as the financial statements). We also have audited the Company's internal control over financial reporting as of December 31, ~~2018,~~2019, based on criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ~~Ship Finance International Limited~~SFL Corporation Ltd and subsidiaries as of December 31, ~~2018~~2019 and ~~2017,~~2018, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, ~~2018,~~2019, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2018,~~2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's annual report on internal controls over financial reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included, evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition of Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of potential impairment indicators for long-lived assets

As discussed in Note 2 to the consolidated financial statements, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may no longer be recoverable (triggering events). Recoverability of the vessel classes is measured by a comparison of the carrying amount of the assets to future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

We identified the evaluation of potential impairment indicators for long-lived assets to be a critical audit matter. Evaluating the Company’s judgments in determining whether a triggering event exists required a high degree of subjective auditor judgment and an increased extent of effort, including the need to involve valuation specialists.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s process to identify and assess triggering events that may indicate that the carrying amount of a long-lived asset may no longer be recoverable. These included controls related to the consideration of forecasted to actual operating results and market conditions in the determination of a triggering event. We evaluated the Company’s identification of triggering events, including future expected revenues from executed contracts with customers. We compared data used by the Company noting that such factors included both internal and external factors to analyst and industry reports. We evaluated responses as to factors considered and evaluated whether the Company omitted any significant internal or external factors in their evaluation. We evaluated the credentials, expertise and reports of independent valuation experts retained by the Company to estimate the charter-free value of long-lived assets. We evaluated the Company’s data and assumptions to ensure consistency with audit evidence obtained.

Accounting for investments in variable interest entities

As discussed in Note 2 to the consolidated financial statements, the Company reviews its subsidiaries and other entities in which it has variable interest in order to assess whether the entity is a variable interest entity (VIE) and, if so, who should consolidate the entity (the primary beneficiary). The classification of an entity as a VIE is based upon an analysis as to whether either (a) the total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated support; (b) equity interest holders as a group lack either i) the power to direct the activities of the entity that most significantly impact on its economic success, ii) the obligation to absorb the expected losses of the entity, or iii) the right to receive the expected residual returns of the entity; or (c) the voting rights of some investors in the entity are not proportional to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The primary beneficiary of a VIE will consolidate the operations of that entity, irrespective of their proportionate ownership of the VIE.

We identified the accounting for investments in variable interest entities to be a critical audit matter. Evaluating the Company’s judgments in determining whether an entity is a VIE and the primary beneficiary of each VIE required a high degree of complex auditor judgment.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s process to identify a VIE and assess the variable interests of each VIE. These included controls related to the consideration of various interests in an entity, and contemporaneous documentation of the consideration of those interests. We also evaluated the Company’s documentation including the assessments made as to the relative importance of variable interests held by the Company and other parties. We evaluated the factors considered and evaluated whether the Company omitted any significant potential variable interests in their evaluation. We evaluated the accounting entries made to record the results of those VIEs in which the Company was a primary beneficiary and of those VIEs which were owned by the Company and for which another entity was the primary beneficiary. We also evaluated the Company’s data and assumptions to ensure consistency with audit evidence obtained.

/s/ MSPC

Certified Public Accountants and Advisors,

A Professional Corporation

We have served as the Company’s auditor since 2004.

New York, New York

March ~~26, 2019~~27, 2020

~~Ship Finance International Limited~~

SFL Corporation Ltd.

CONSOLIDATED STATEMENTS OF OPERATIONS

for the years ended December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017

(in thousands of $, except per share amounts)

2018
2017
2016
Operating revenues
Direct financing lease interest income - related parties 9,623
16,362
22,850
Direct financing and sales-type lease interest income - other 30,055
21,903
331
Finance lease service revenues - related parties 22,095
35,010
44,523
Profit sharing revenues - related parties 1,779
5,753
51,470
Profit sharing revenues - other —
61
74
Time charter revenues - related parties 53,258
51,832
55,265
Time charter revenues - other 239,468
186,577
171,483
Bareboat charter revenues - related parties —
5,736
10,075
Bareboat charter revenues - other 36,222
34,860
34,964
Voyage charter revenues - other 24,339
21,037
19,329
Other operating income 1,873
1,747
2,587
Total operating revenues 418,712
380,878
412,951
Gain/(Loss) on sale of assets and termination of charters, net (2,578 ) 1,124
(167 )
Gain/(Loss) on sale of subsidiaries and disposal groups 7,613
—
—
Operating expenses

Vessel operating expenses - related parties 45,266
57,714
67,221
Vessel operating expenses - other 83,282
74,080
68,795
Depreciation 104,079
88,150
94,293
Vessel impairment charge 64,338
—
5,314
Administrative expenses - related parties 1,072
831
1,443
Administrative expenses - other 8,095
6,601
7,629
Total operating expenses 306,132
227,376
244,695
Net operating income 117,615
154,626
168,089
Non-operating income / (expense)

Interest income – related parties, associated companies 14,128
15,265
18,675
Interest income – related parties, other 880
422
897
Interest income - other 2,943
3,643
2,164
Interest expense - related parties (6,378 ) —
—
Interest expense - other (107,508 ) (90,414 ) (71,843 )
(Loss)/gain on purchase of bonds 1,146
(2,305 ) (8,802 )
Available-for-sale securities impairment charge —
(4,410 ) —
Dividend income - related parties —
3,300
11,550
Net unrealized gain on equity securities 12,277
—
—
Realized gain on sale of debt and equity securities 13,477
—
—
Other financial items, net 10,407
(2,684 ) (2,089 )
Net income before equity in earnings of associated companies 58,987
77,443
118,641
Equity in earnings of associated companies 14,635
23,766
27,765
Net income 73,622
101,209
146,406
Per share information:

Basic earnings per share $ 0.70
$ 1.06
$ 1.57
Weighted average number of shares outstanding, basic 105,898
95,597
93,497
Diluted earnings per share $ 0.69
$ 1.03
$ 1.50
Weighted average number of shares outstanding, diluted 107,606
102,900
108,040
Cash dividend per share declared and paid $ 1.40
$ 1.60
$ 1.80



	2019			2018			2017
Operating revenues
Interest income related parties – direct financing leases	3,796			9,623			16,362
Interest income other – sales-type, direct financing leases and leaseback assets	56,524			30,055			21,903
Service revenue related parties – direct financing leases	9,855			22,095			35,010
Profit sharing revenues – related parties	5,615			1,779			5,753
Profit sharing revenues – other	—			—			61
Time charter revenues – related parties	51,132			53,258			51,832
Time charter revenues – other	288,019			239,468			186,577
Bareboat charter revenues – related parties	—			—			5,736
Bareboat charter revenues – other	23,490			36,222			34,860
Voyage charter revenues – other	17,617			24,339			21,037
Other operating income	2,801			1,873			1,747
Total operating revenues	458,849			418,712			380,878
Gain/(Loss) on sale of assets and termination of charters, net	—			(2,578		)	1,124
Gain/(Loss) on sale of subsidiaries and disposal groups	—			7,613			—
Operating expenses
Vessel operating expenses – related parties	33,092			45,266			57,714
Vessel operating expenses – other	101,342			83,282			74,080
Depreciation	116,381			104,079			88,150
Vessel impairment charge	60,054			64,338			—
Administrative expenses – related parties	1,484			1,072			831
Administrative expenses – other	8,719			8,095			6,601
Total operating expenses	321,072			306,132			227,376
Net operating income	137,777			117,615			154,626
Non-operating income / (expense)
Interest income – related parties, long term loans to associated companies	14,128			14,128			15,265
Interest income – related parties, other	1,642			880			422
Interest income – other	4,294			2,943			3,643
Interest expense – related parties	—			(6,378		)	—
Interest expense – other	(145,058		)	(107,508		)	(90,414		)
Gain/(Loss) on purchase of bonds	1,802			1,146			(2,305		)
Dividend income – related parties	2,590			—			3,300
Gain/(Loss) on investments in debt and equity securities	67,701			25,754			(4,410		)
Other financial items, net	(12,753		)	10,407			(2,684		)
Net income before equity in earnings of associated companies	72,123			58,987			77,443
Equity in earnings of associated companies	17,054			14,635			23,766
Net income	89,177			73,622			101,209
Per share information:
Basic earnings per share	$	0.83		$	0.70		$	1.06
Weighted average number of shares outstanding, basic	107,614			105,898			95,597
Diluted earnings per share	$	0.83		$	0.69		$	1.03
Weighted average number of shares outstanding, diluted	107,696			107,606			102,900
Cash dividend per share declared and paid	$	1.40		$	1.40		$	1.60

The accompanying notes are an integral part of these consolidated financial statements.

~~Ship Finance International Limited~~

SFL Corporation Ltd.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

for the years ended December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017

(in thousands of $)


	2018		2017		2016		2019		2018		2017
Comprehensive income, net of tax
Net income	73,622		101,209		146,406		89,177		73,622		101,209
Fair value adjustments to hedging financial instruments	(3,433	)	9,974		9,702		(12,748	)	(3,433	)	9,974
Earnings reclassification of previously deferred fair value adjustments to hedging financial instruments	(3,127	)	1,555		—		—		(3,127	)	1,555
Fair value adjustments to investment securities classified as available-for-sale	2,244		(23,528	)	(93,406	)	(2,190	)	2,244		(23,528	)
Unrealized loss from investment securities classified as available-for-sale securities reclassified to Consolidated Statement of Operations	—		2,106		—
Earnings reclassification of previously deferred fair value adjustments to investment securities classified as available-for-sale securities							2,181		—		2,106
Fair value adjustments to hedging financial instruments in associated companies	(206	)	1,182		1,150		—		(206	)	1,182
Other items of comprehensive (loss)/income	(74	)	60		(38	)	(6	)	(74	)	60
Other comprehensive (loss)/income, net of tax	(4,596	)	(8,651	)	(82,592	)	(12,763	)	(4,596	)	(8,651	)
Comprehensive income	69,026		92,558		63,814		76,414		69,026		92,558

The accompanying notes are an integral part of these consolidated financial statements.

~~Ship Finance International Limited~~

SFL Corporation Ltd.

CONSOLIDATED BALANCE SHEETS

as of December 31, ~~2018~~2019 and ~~2017~~2018

(in thousands of $)


	2018		2017		2019		2018
ASSETS
Current assets
Cash and cash equivalents	211,394		153,052		199,521		211,394
Restricted cash	1,000		—		3,495		1,000
Investment in debt and equity securities	87,174		93,802		74,079		87,174
Trade accounts receivable	2,976		12,583		4,583		2,976
Due from related parties	41,771		9,625		22,399		41,771
Other receivables	13,041		9,012		20,132		13,041
Inventories	8,547		5,126		7,934		8,547
Prepaid expenses and accrued income	2,593		2,291		1,635		2,593
Investment in direct financing and sales-type leases, current portion	39,804		32,096
Financial instruments (short-term): at fair value	5,279		108
Investment in sales-type leases, direct financing leases and leaseback assets – current portion					56,189		39,804
Financial instruments at fair value, current portion					520		5,279
Total current assets	413,579		317,695		390,487		413,579
Vessels and equipment, net	1,559,712		1,762,596		1,404,705		1,559,712
Vessels and equipment under capital lease, net	749,889		—
Investment in direct financing and sales-type leases, long-term portion	762,355		585,975
Vessels under finance lease, net					714,476		749,889
Investment in sales-type leases, direct financing leases and leaseback assets – long term					938,198		762,355
Investment in associated companies	25,107		10,678		42,161		25,107
Loans to related parties - associated companies, long-term	310,144		314,000
Long-term receivables from related parties	15,616		—
Other long-term assets	30,810		12,791
Financial instruments (long-term): at fair value	10,633		8,347
Loans to related parties - associated companies, long term					314,000		310,144
Long term receivables from related parties					13,616		15,616
Other long term assets					64,248		30,810
Financial instruments at fair value, long term					3,479		10,633
Total assets	3,877,845		3,012,082		3,885,370		3,877,845
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt	267,149		313,823
Current portion of obligations under capital leases	67,793		9,031
Short-term debt and current portion of long term debt					253,059		267,149
Finance lease liability, current portion					68,874		67,793
Trade accounts payable	1,945		487		3,445		1,945
Due to related parties	1,349		857		3,980		1,349
Accrued expenses	12,510		13,351		17,132		12,510
Financial instruments (short-term): at fair value	45,047		503
Financial instruments at fair value, current portion					6,067		45,047
Other current liabilities	8,332		5,693		13,279		8,332
Total current liabilities	404,125		343,745		365,836		404,125
Long-term liabilities
Long-term debt	1,169,931		1,190,184
Obligations under capital leases	1,104,258		230,576
Financial instruments (long-term): at fair value	16,213		48,618
Other long-term liabilities	3,286		3,962
Long term liabilities
Long term debt					1,355,029		1,169,931
Finance lease liability, long term					1,037,553		1,104,258
Financial instruments at fair value, long term					20,579		16,213
Other long term liabilities					4		3,286
Total liabilities	2,697,813		1,817,085		2,779,001		2,697,813
Commitments and contingent liabilities
Stockholders' equity
Share capital ($0.01 par value; 200,000,000 shares authorized; 119,373,064 shares issued and outstanding at December 31, 2018). $0.01 par value; 150,000,000 shares authorized; 110,930,873 shares issued and outstanding at December 31, 2017).	1,194		1,109
Share capital ($0.01 par value; 200,000,000 shares authorized; 119,391,310 shares issued and outstanding at December 31, 2019). ($0.01 par value; 200,000,000 shares authorized; 119,373,064 shares issued and outstanding at December 31, 2018).					1,194		1,194
Additional paid-in capital	468,844		403,659		469,426		468,844
Contributed surplus	680,703		680,703		648,764		680,703
Accumulated other comprehensive loss	(220	)	(94,612	)	(13,015	)	(220	)
Accumulated other comprehensive loss – associated companies	—		206
Retained earnings	29,511		203,932		—		29,511
Total stockholders' equity	1,180,032		1,194,997		1,106,369		1,180,032
Total liabilities and stockholders' equity	3,877,845		3,012,082		3,885,370		3,877,845

The accompanying notes are an integral part of these consolidated financial statements.

~~Ship Finance International Limited~~

SFL Corporation Ltd.

CONSOLIDATED STATEMENTS OF CASH FLOWS

for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017

(in thousands of $)


	2018		2017		2016		2019		2018		2017
Operating activities
Net income	73,622		101,209		146,406		89,177		73,622		101,209
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	104,079		88,150		94,293		116,381		104,079		88,150
Amortization of deferred charges	10,187		9,013		10,972		8,085		10,187		9,013
Amortization of seller's credit	(447	)	(1,249	)	(1,324	)	(103	)	(447	)	(1,249	)
Amortization of long-term charter contract values acquired with vessels	1,699		—		—
Amortization of charter related deferred asset and straightlining of operating leases							5,406		1,699		—
Vessel impairment charge	64,338		—		5,314		60,054		64,338		—
Available-for-sale securities impairment charge	—		4,410		—
Long-term assets impairment charge	1,730		—		—		9,168		1,730		—
Equity in earnings of associated companies	(14,635	)	(23,766	)	(27,765	)	(17,054	)	(14,635	)	(23,766	)
Loss/(gain) on sale of assets and termination of charters	2,578		(1,124	)	167		—		2,578		(1,124	)
Gain on sale of subsidiary and disposal groups	(7,613	)	—		—		—		(7,613	)	—
Adjustment of derivatives to fair value recognized in net income	(13,898	)	(8,208	)	(4,399	)	3,449		(13,898	)	(8,208	)
Unrealized gain on marketable securities	(12,277	)	—		—
Loss/(gain) on repurchase of bonds	(1,146	)	2,305		8,802
Realized gain on sale of debt and equity securities	(13,476	)	—		—
(Gain)/loss on investments in debt and equity securities							(67,701	)	(25,754	)	4,410
Repayments from investment in sales-type, direct financing and leaseback assets							44,143		—		—
(Gain)/loss on repurchase of bonds							(1,802	)	(1,146	)	2,305
Interest receivable in form of notes	—		(635	)	(633	)	—		—		(635	)
Other, net	1,108		3,959		365		(4,620	)	1,108		3,959
Changes in operating assets and liabilities
Trade accounts receivable	9,607		(9,034	)	(1,492	)	(1,608	)	9,607		(9,034	)
Due from related parties	(1,308	)	10,543		8,433		5,652		(1,308	)	10,543
Other receivables	(3,870	)	2,418		(856	)	(7,090	)	(3,870	)	2,418
Other current assets	(157	)	—		—		2		(157	)	—
Inventories	(3,423	)	(42	)	(27	)	613		(3,423	)	(42	)
Prepaid expenses and accrued income	(301	)	1,317		2,181		958		(301	)	1,317
Trade accounts payable	2,370		(742	)	394		1,500		2,370		(742	)
Accrued expenses	(433	)	(1,188	)	1,046		4,622		(433	)	(1,188	)
Other current liabilities	2,641		460		(11,804	)	475		2,642		460
Net cash provided by operating activities	200,975		177,796		230,073		249,707		200,975		177,796
Investing activities
Repayments from investments in direct financing and sales-type leases	33,486		31,929		30,410
Repayments from investment in direct financing and sales-type leases							—		33,486		31,929
Additions to newbuildings	—		(81,664	)	(188,142	)	—		—		(81,664	)
Purchase of vessels	(1,137,703	)	—		—		(39,326	)	(1,137,703	)	—
Other long-term assets acquired							(211,065	)	—		—
Proceeds from sale of vessels and termination of charters	145,654		74,791		29,102		—		145,654		74,791
Proceeds from sale of subsidiaries, net of cash disposed of	83,485		—		—		—		83,485		—
Proceeds from sale of Frontline shares							82,783		—		—
Net amounts received from/(paid to) associated companies	(24,161	)	27,322		193,517		15,925		(24,161	)	27,322
Other investments and long-term assets, net	32,675		(4,016	)	(25,488	)	(18,198	)	32,675		(4,016	)
Net cash provided by/(used in) investing activities	(866,564	)	48,362		39,399
Net cash (used in)/provided by investing activities							(169,881	)	(866,564	)	48,362
Financing activities
Proceeds from shares issued, net of issuance costs	—		88		323		—		—		88
Principal settlements of cross currency swaps, net	—		(29,186	)	—		(41,769	)	—		(29,186	)
Proceeds from capital leases	944,097		—		—
Proceeds from finance leases							—		944,097		—
Repurchase of bonds	(97,248	)	(68,383	)	(296,800	)	(80,749	)	(97,248	)	(68,383	)
Proceeds from issuance of short-term and long-term debt	825,984		302,104		522,000		458,781		825,984		302,104
Repayments of short-term and long-term debt	(778,731	)	(179,354	)	(329,303	)	(208,538	)	(778,731	)	(179,354	)
Discount received on debt repurchased							1,654		—		—
Debt fees paid	(8,257	)	(2,554	)	(5,099	)	(4,261	)	(8,257	)	(2,554	)
Repayments of lease obligation liability	(11,653	)	(5,296	)	(97	)	(63,663	)	(11,653	)	(5,296	)
Cash dividends paid	(149,261	)	(152,907	)	(168,289	)	(150,659	)	(149,261	)	(152,907	)
Net cash provided by/(used in) financing activities	724,931		(135,488	)	(277,265	)
Net increase/(decrease) in cash and cash equivalents	59,342		90,670		(7,793	)
Net cash (used in)/provided by financing activities							(89,204	)	724,931		(135,488	)
Net (decrease)/increase in cash and cash equivalents							(9,378	)	59,342		90,670
Cash, restricted cash and cash equivalents at start of the year	153,052		62,382		70,175		212,394		153,052		62,382
Cash, restricted cash and cash equivalents at end of the year	212,394		153,052		62,382		203,016		212,394		153,052
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest	104,620		88,201		65,184		72,344		104,620		88,201

The accompanying notes are an integral part of these consolidated financial statements.

~~Ship Finance International Limited~~

SFL Corporation Ltd.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

for the years ended December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017

(in thousands of $, except number of shares)


	2018		2017		2016		2019		2018		2017
Number of shares outstanding
At beginning of year	110,930,873		101,504,575		93,468,000		119,373,064		110,930,873		101,504,575
Shares issued	8,442,191		9,426,298		8,036,575		18,246		8,442,191		9,426,298
At end of year	119,373,064		110,930,873		101,504,575		119,391,310		119,373,064		110,930,873
Share capital
At beginning of year	1,109		1,015		93,468		1,194		1,109		1,015
Shares issued	85		94		117		—		85		94
Transfer arising from reduction in par value of issued shares	—		—		(92,570	)
At end of year	1,194		1,109		1,015		1,194		1,194		1,109
Additional paid-in capital
At beginning of year	403,659		282,502		285,859		468,844		403,659		282,502
Amortization of stock-based compensation	454		374		403		896		454		374
Stock-based compensation forfeitures	(33	)	—		—		(83	)	(33	)	—
Shares issued	—		88		206
Shares issued arising from conversion of 3.25% convertible bonds due 2018	9,927		137,063		—
Shares issued, exercises of share options							—		—		88
Shares issued, consideration paid on vessel acquisition							—		57,960		—
Shares issued, conversion of 3.25% convertible bonds due 2018							—		9,927		137,063
Adjustment to equity component of 3.25% convertible bond due 2018 arising from reacquisition of bonds							—		(9,933	)	(16,368	)
Recognition of equity component arising from issuance of 4.875% convertible bonds due 2023							—		7,906		—
Adjustment to equity component of convertible bonds due 2021 and 2023 arising from reacquisition of bonds	(1,096	)	—		—		(231	)	(1,096	)	—
Equity component of convertible bond issuance due 2021	—		—		4,551
Adjustment to equity component of 3.25% convertible bond issuance due 2018 arising from reacquisition of bonds	(9,933	)	(16,368	)	(8,517	)
Shares issued arising from consideration paid on vessel acquisition	57,960		—		—
Recognition of equity component arising from issuance of 4.875% convertible bonds due 2023	7,906		—		—
At end of year	468,844		403,659		282,502		469,426		468,844		403,659
Contributed surplus
At beginning of year	680,703		680,703		588,133		680,703		680,703		680,703
Transfer arising from reduction in par value of issued shares	—		—		92,570
Dividends declared							(31,939	)	—		—
At end of year	680,703		680,703		680,703		648,764		680,703		680,703
Accumulated other comprehensive loss
At beginning of year	(94,612	)	(84,779	)	(1,037	)	(220	)	(94,612	)	(84,779	)
Fair value adjustments to hedging financial instruments	(3,433	)	9,974		9,702		(12,748	)	(3,433	)	9,974
Earnings reclassification of previously deferred fair value adjustments to hedging financial instruments	(3,127	)	1,555		—		—		(3,127	)	1,555
Fair value adjustments to available-for-sale securities							(2,190	)	2,244		(23,528	)
Earnings reclassification of previously deferred fair value adjustments to available-for-sale securities							2,181		—		2,106
Reclassification of unrealised losses upon adopting of ASU 2016-01	98,782		—		—		—		98,782		—
Fair value adjustments to available-for-sale securities	2,244		(23,528	)	(93,406	)
Unrealized loss from available-for-sale securities reclassified to Consolidated Statement of Operations	—		2,106		—
Reclassification of unrealised losses upon adoption of ASU 2017-12							(32	)	—		—
Other comprehensive loss	(74	)	60		(38	)	(6	)	(74	)	60
At end of year (for breakdown see below)	(220	)	(94,612	)	(84,779	)	(13,015	)	(220	)	(94,612	)
Accumulated other comprehensive loss – associated companies
At beginning of year	206		(976	)	(2,126	)	—		206		(976	)
Fair value adjustment to hedging financial instruments	(206	)	1,182		1,150		—		(206	)	1,182
At end of year (consists entirely of fair value adjustments to hedging financial instruments)	—		206		(976	)	—		—		206


	2018		2017		2016		2019		2018		2017
Retained earnings
At beginning of year	203,932		255,630		277,513		29,511		203,932		255,630
Reclassification of unrealized losses upon adoption of ASU 2016-01	(98,782	)	—		—		—		(98,782	)	—
Reclassification of ineffective portion of designated hedges and instruments upon adoption of ASU 2017-12							32
Net income	73,622		101,209		146,406		89,177		73,622		101,209
Dividends declared	(149,261	)	(152,907	)	(168,289	)	(118,720	)	(149,261	)	(152,907	)
At end of year	29,511		203,932		255,630		—		29,511		203,932
Total stockholders' equity	1,180,032		1,194,997		1,134,095		1,106,369		1,180,032		1,194,997


Accumulated other comprehensive loss	2018		2017		2016		2019		2018		2017
Fair value adjustments to hedging financial instruments	(488	)	6,072		(5,457	)
Fair value adjustments to hedging financial instruments relating to interest rate swaps							(1,514	)	6,714		2,942
Fair value adjustments to hedging financial instruments relating to cross currency swaps							(7,289	)	(7,076	)	—
Fair value adjustments to hedging financial instruments relating to combined cross currency interest rate swaps							(4,433	)	(126	)	3,130
Reclassification of unrealized losses upon adoption of ASU 2017-12							(32	)	—		—
Fair value adjustments to available-for-sale securities	644		(100,382	)	(78,960	)	635		644		(100,382	)
Other items	(376	)	(302	)	(362	)	(382	)	(376	)	(302	)
Accumulated other comprehensive loss	(220	)	(94,612	)	(84,779	)	(13,015	)	(220	)	(94,612	)

The accompanying notes are an integral part of these consolidated financial statements.

~~SHIP FINANCE INTERNATIONAL LIMITED~~

SFL Corporation Ltd.

Notes to the Consolidated Financial Statements


1.	GENERAL

~~Ship Finance International Limited~~SFL Corporation Ltd. ("~~Ship Finance"~~SFL" or the "Company") is an international ship and offshore asset owning and chartering company, incorporated in October 2003 in Bermuda as a Bermuda exempted company. The Company's common shares are listed on the New York Stock Exchange under the symbol "SFL". The Company is primarily engaged in the ownership, operation and chartering out of vessels and offshore related assets on medium and long-term charters.

As of December 31, ~~2018,~~2019, the Company owned ~~three~~3 very large crude oil carriers ("VLCCs"), ~~two~~2 Suezmax crude oil carriers, ~~five~~5 Supramax dry bulk carriers, ~~seven~~7 Handysize dry bulk carriers, ~~two~~2 Kamsarmax dry bulk carriers, ~~eight~~8 Capesize dry bulk carriers, 45 container vessels (including ~~four~~4 chartered-in 19,200 and 19,400 twenty-foot equivalent units ("TEU") container vessels and ~~seven~~7 10,600 TEU and 13,800 TEU container vessels financed through sale and leaseback), ~~two~~2 car carriers, ~~one~~1 jack-up drilling rig, ~~two~~2 ultra-deepwater drilling units, ~~five~~5 offshore support vessels, ~~two~~2 chemical tankers and ~~two~~2 oil product tankers. In addition, the Company has 3 VLCCs and 3 container vessels which are accounted for as leaseback assets (see Note 16 Investment in direct financing, sales-type and leaseback assets).

The ~~two~~2 ultra-deepwater drilling units and the ~~one~~1 jack-up drilling rig referred to above are owned by wholly-owned subsidiaries of the Company that are accounted for using the equity method (see Note 17: Investment in associated companies).

Since the Company's incorporation in 2003 and public listing in 2004, ~~Ship Finance~~SFL has established itself as a leading international ship and offshore asset owning and chartering company, expanding both its asset and customer base.


2.	ACCOUNTING POLICIES

Basis of Accounting

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). The consolidated financial statements include the assets and liabilities and results of operations of the Company and its subsidiaries. All inter-company balances and transactions have been eliminated on consolidation. Where necessary, comparative figures for previous years have been reclassified to conform to changes in presentation in the current year.

Consolidation of variable interest entities

A variable interest entity is defined in Accounting Standards Codification ("ASC") Topic 810 "Consolidation" ("ASC 810") as a legal entity where either (a) the total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated support; (b) equity interest holders as a group lack either i) the power to direct the activities of the entity that most significantly impact on its economic success, ii) the obligation to absorb the expected losses of the entity, or iii) the right to receive the expected residual returns of the entity; or (c) the voting rights of some investors in the entity are not proportional to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

ASC 810 requires a variable interest entity to be consolidated by its primary beneficiary, being the interest holder, if any, which has both (1) the power to direct the activities of the entity which most significantly impact on the entity's economic performance, and (2) the right to receive benefits or the obligation to absorb losses from the entity which could potentially be significant to the entity.

~~We evaluate our~~The Company evaluates its subsidiaries, and any other entities in which ~~we hold~~it holds a variable interest, in order to determine whether ~~we are~~the Company is the primary beneficiary of the entity, and where it is determined that ~~we are~~the Company is the primary beneficiary wethe Company fully consolidate the entity.

Investments in associated companies

Investments in companies over which the Company exercises significant influence but which it does not consolidate are accounted for using the equity method. The Company records its investments in equity-method investees on the consolidated balance sheets as "Investment in associated companies" and its share of the investees' earnings or losses in the consolidated statements of operations as "Equity in earnings of associated companies." At December 31, ~~2018, two~~2019, 2 ultra-deepwater drilling units and ~~one~~1 jack-up drilling rig are owned by ~~three~~3 wholly-owned subsidiaries of the Company that are accounted for using the equity method.

Use of accounting estimates

The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign currencies

The Company's functional currency is the U.S. dollar as the majority of revenues are received in U.S. dollars and the majority of the Company's expenditures are made in U.S. dollars. The Company's reporting currency is also the U.S. dollar. Most of the Company's subsidiaries report in U.S. dollars. Transactions in foreign currencies during the year are translated into U.S. dollars at the rates of exchange in effect at the date of the transaction. Foreign currency monetary assets and liabilities are translated using rates of exchange at the balance sheet date. Foreign currency non-monetary assets and liabilities are translated using historical rates of exchange. Foreign currency transaction gains or losses are included under "Other financial items" in the consolidated statements of operations.

Revenue and expense recognition

Effective from January 1, 2018, wethe Company adopted the new accounting standard ASC Topic 606 "Revenue from Contracts with Customers" using the modified retrospective method, which resulted in no adjustment to our retained earnings on adoption and comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The Company generates its revenues from the charter hire of its vessels and offshore related assets, and freight billings. Revenues are generated from time charter hire, bareboat charter hire, direct financing lease interest income, sales-type lease interest income, finance lease service revenues, profit sharing arrangements, voyage charters and other freight billings.

In a time charter voyage, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. Generally, the charterer has the discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such that the vessel is sent only to safe ports by the charterer and carries only lawful or non hazardous cargo. In a time charter contract, we are responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges, and canal tolls during the hire period. The performance obligations in a time charter contract are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to us. The charterer generally pays the charter hire in advance of the upcoming contract period. The time charter contracts are either operating or direct financing or sales type leases. Where time charters and bareboat charters are considered operating leases, revenues are recorded over the term of the charter as a service is provided. When a time charter contract is linked to an index, we recognize revenue for the applicable period based on the actual index for that period.

Rental payments from either direct financing leases or sales-type leases, are allocated between lease service revenue, if applicable, lease interest income and repayment of net investment in leases. The amount allocated to lease service revenue is based on the estimated fair value, at the time of entering the lease agreement, of the services provided which consist of ship management and operating services.

In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charterer is responsible for any short loading of cargo or "dead" freight. The voyage charter party generally

has standard payment terms with freight paid on completion of discharge. The voyage charter party generally has a "demurrage" clause. As per this clause, the charterer reimburses us for any potential delays exceeding the allowed laytime as per the charter party clause at the ports visited, which is recorded as voyage revenue. Estimates and judgments are required in ascertaining the most likely outcome of a particular voyage and actual outcomes may differ from estimates. Such estimate is reviewed and updated over the term of the voyage charter contract. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo.

We have determined that our voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses, and the revenue is recognized on a straight line basis over the voyage days from the commencement of loading to completion of discharge. Contract assets with regards to voyage revenues are reported as "Voyages in progress" as the performance obligation is satisfied over time. Voyage revenues typically become billable and due for payment on completion of the voyage and discharge of the cargo, at which point the receivable is recognized as "Trade accounts receivable, net".

In a voyage contract, the Company bears all voyage related costs such as fuel costs, port charges and canal tolls. To recognize costs incurred to fulfill a contract as an asset, the following criteria shall be met: (i) the costs relate directly to the contract, (ii) the costs generate or enhance resources of the entity that will be used in satisfying performance obligations in the future and (iii) the costs are expected to be recovered. The costs incurred during the period prior to commencement of loading the cargo, primarily bunkers, are deferred as they represent setup costs and recorded as a current asset and are subsequently amortized on a straight-line basis as we satisfy the performance obligations under the contract. Costs incurred to obtain a contract, such as commissions, are also deferred and expensed over the same period.

For our vessels operating under revenue sharing agreements, or in pools, revenues and voyage expenses are pooled and allocated to each pool’s participants in accordance with an agreed-upon formula. Revenues generated through revenue sharing agreements are presented gross when we are considered the principal under the charter parties with the net income allocated under the revenue sharing agreement presented as within voyage charter income. For revenue sharing agreements that meet the definition of a lease,

we account for such contracts as variable rate operating leases and recognize revenue for the applicable period based on the actual net revenue distributed by the pool.

As detailed in Note 24: Related party transactions, the Company has, or has had, profit sharing arrangements with Frontline Shipping Limited ("Frontline Shipping"), Golden Ocean Group Limited ("Golden Ocean"). The Company also ~~has~~had profit sharing agreements with Deep Sea Supply Shipowning II AS (the “Solstad Charterer”), a wholly owned subsidiary of Solship Invest 3 AS (“Solship”, formerly Deep Sea Supply Plc, or Deep Sea). Amounts receivable under these arrangements are accrued on the basis of amounts earned at the reporting date.

Any contingent elements of rental income, such as profit share, fuel saving payments and interest rate adjustments, are recognized when the contingent conditions have materialized.

Cash and cash equivalents

For the purposes of the consolidated statements of cash flows, all demand and time deposits and highly liquid, low risk investments with original maturities of three months or less are considered equivalent to cash.

Restricted cash

Restricted cash consists of cash which may only be used for certain purposes and is held under a contractual arrangement.

Investment in debt and equity securities

Investments in debt and equity securities include share investments and interest-earning listed and unlisted corporate bonds. Any premium paid on their acquisition is amortized over the life of the bond. Investments in debt securities are recorded at fair value, with unrealized gains and losses recorded as a separate component of other comprehensive income. Investments in equity securities are recorded at fair value, with unrealized gains and losses recorded in the consolidated statement of operations. If circumstances arise which lead the Company to believe that the issuer of a corporate bond may be unable meet its payment obligations in full, or that the fair value at acquisition of the share investment or corporate bond may otherwise not be fully recoverable, then to the extent that a loss is expected to arise that unrealized loss is recorded as an impairment in the statement of operations, with an adjustment if necessary to any unrealized gains or losses previously recorded in other comprehensive income. In determining whether the Company has an other-than-temporary impairment in its investment in bonds, in addition to the Company’s intention and ability to hold the investments until the market recovers, the Company considers the period of decline, the amount and the severity of the decline and the ability of the investment to recover in the near to medium term. The Company also evaluates if the underlying security provided by the bonds is sufficient to ensure that the decline in fair value of these bonds did not result in an other-than-temporary impairment.

The cost of disposals or reclassifications from other comprehensive income is calculated on an average cost basis, where applicable.

The fair value of unlisted corporate bonds is determined from an analysis of projected cash flows, based on factors including the terms, provisions and other characteristics of the bonds, credit ratings and default risk of the issuing entity, the fundamental financial and other characteristics of that entity, and the current economic environment and trading activity in the debt market.

Trade accounts receivable

The amount shown as trade accounts receivable at each balance sheet date includes receivables due from customers for hire of vessels and offshore related assets, net of allowance for doubtful balances. At each balance sheet date, all potentially uncollectable accounts are assessed individually to determine any allowance for doubtful receivables. ~~At December 31, 2018 and 2017, no provision was made for doubtful receivables.~~

Inventories

Inventories are comprised principally of fuel and lubricating oils and are stated at the lower of cost and net realizable value. Cost is determined on a first-in first-out basis.

Vessels and equipment (including operating lease assets)

Vessels and equipment are recorded at historical cost less accumulated depreciation and, if appropriate, impairment charges. The cost of these assets less estimated residual value is depreciated on a straight-line basis over the estimated remaining economic useful life of the asset. The estimated economic useful life of our offshore assets, including drilling rigs and drillships, is 30 years and for all other vessels it is 25 years.

Where an asset is subject to an operating lease that includes fixed price purchase options, the projected net book value of the asset is compared to the option price at the various option dates. If any option price is less than the projected net book value at an option date, the initial depreciation schedule is amended so that the carrying value of the asset is written down on a straight line basis to the option price at the option date. If the option is not exercised, this process is repeated so as to amortize the remaining carrying value, on a straight line basis, to the estimated scrap value or the option price at the next option date, as appropriate.

This accounting policy for fixed assets has the effect that if an option is exercised there will be either a) no gain or loss on the sale of the asset or b) in the event that the option is exercised at a price in excess of the net book value at the option date, a gain will be reported in the statement of operations at the date of delivery to the new owners, under the heading "gain on sale of assets and termination of charters".

The Company capitalizes and depreciates the costs of significant replacements, renewals and upgrades to its vessels over the shorter of the vessel’s remaining useful life or the life of the renewal or upgrade. The amount capitalized is based on management’s judgment as to expenditures that extend a vessel’s useful life or increase the operational efficiency of a vessel. Costs that are not capitalized are recorded as a component of direct vessel operating expenses during the period incurred. Expenses for routine maintenance and repairs are expensed as incurred. Advances paid in respect of vessel upgrades in relation to Exhaust Gas Cleaning Systems ("EGCS" or "scrubbers") and Ballast water treatment systems ("BWTS") are included within "other long-term assets", until such time as the equipment is installed on a vessel, at which point it is transferred to "Vessels and equipment, net".

Office equipment is depreciated at 20% per annum on a reducing balance basis.

Vessels and equipment under ~~capital~~finance lease

The Company charters-in certain vessels and equipment under leasing agreements. Leases of vessels and equipment, where the Company has substantially all the risks and rewards of ownership, are classified as ~~capital lease assets,~~"vessels under finance lease", with corresponding ~~capital~~ lease ~~obligations~~liabilities recorded. ~~Capital lease assets are capitalized at~~

The Company capitalizes and depreciates the ~~commencement~~costs of significant replacements, renewals and upgrades to its vessels over the shorter of the ~~lease at~~vessel’s remaining useful life or the ~~lower~~life of the ~~fair value~~renewal or upgrade. The amount capitalized is based on management’s judgment as to expenditures that extend a vessel’s useful life or increase the operational efficiency of a vessel. Costs that are not capitalized are recorded as a component of direct vessel operating expenses during the ~~leased asset~~period incurred. Expenses for routine maintenance and ~~the present value of the minimum lease payments.~~

For sale and lease back transactions, when the asset sold is for more or less than its carrying amount, any indicated loss or gain on the sale is in substance a prepayment of rent or unearned rent, respectively, and thus, in accordance with ASC 840-40-35-4, the Company defers this prepaid or unearned rental and amortizes it over the lease term. In case the fair value of the asset sold is less than its carrying amount, any indicated loss on the sale is recognized in the consolidated statement of operationsrepairs are expensed as incurred. Advances paid in respect of vessel upgrades in relation to EGCS and BWTS are included within "other long-term assets", until such time as the equipment is installed on a vessel, at which point it is transferred to "Vessels under finance lease, net".

Depreciation of vessels and equipment under capital lease is included within "Depreciation" in the consolidated statement of operations. Vessels and equipment under ~~capital~~finance lease are depreciated on a straight-line basis over the vessels' remaining economic useful lives or on a straight-line basis over the term of the lease. The method applied is determined by the criteria by which the lease has been assessed to be a ~~capital~~finance lease.

Newbuildings

The carrying value of vessels under construction ("newbuildings") represents the accumulated costs to the balance sheet date which the Company has paid by way of purchase installments and other capital expenditures together with capitalized loan interest and associated finance costs. No charge for depreciation is made until a newbuilding is put into operation.

Capitalized interest

Interest expense is capitalized during the period of construction of newbuilding vessels based on accumulated expenditures for the applicable vessel at the Company's capitalization rate of interest. The amount of interest capitalized in an accounting period is determined by applying an interest rate ~~("the capitalization~~(the "capitalization rate") to the average amount of accumulated expenditures for the vessel during the period. The capitalization rate used in an accounting period is based on the rates applicable to borrowings outstanding during the period. The Company does not capitalize amounts in excess of actual interest expense incurred in the period. NaN interest was capitalized in the cost of newbuildings in the year ended December 31, 2019 (2018: $0.0 million; 2017: $1.2 million).

Investment in sales-type leases and direct financing ~~and sales-type~~ leases

Leases (charters) of our vessels where we are the lessor are classified as either direct financing, or sales-type leases, or operating leases, or leaseback assets based on an assessment of the terms of the lease. For charters classified as direct financing leases, the minimum lease payments (reduced in the case of time-chartered vessels by projected vessel operating costs) plus the estimated residual value of the vessel are recorded as the gross investment in the ~~capital~~direct financing lease.

For direct financing leases, the difference between the gross investment in the lease and the carrying value of the vessel is recorded as unearned lease interest income. The net investment in the lease consists of the gross investment less the unearned income. Over the period of the lease each charter payment received, net of vessel operating costs if applicable, is allocated between "lease interest income" and "repayment of investment in lease" in such a way as to produce a constant percentage rate of return on the balance of the net investment in the direct financing lease. Thus, as the balance of the net investment in each direct financing lease decreases, a lower proportion of each lease payment received is allocated to lease interest income and a greater proportion is allocated to lease repayment. For direct financing leases relating to time chartered vessels, the portion of each time charter payment received that relates to vessel operating costs is classified as ~~"lease service revenue"~~"service revenue - direct financing leases".

For sales-type leases, the difference between the gross investment in the lease and the present value of its components, i.e. the minimum lease payments and the estimated residual value, is recorded as unearned lease interest income. The discount rate used in determining the present values is the interest rate implicit in the lease. The present value of the minimum lease payments, computed using the interest rate implicit in the lease, is recorded as the sales price, from which the carrying value of the vessel at the commencement of the lease is deducted in order to determine the profit or loss on sale. As is the case for direct financing leases, the unearned lease interest income is amortized to income over the period of the lease so as to produce a constant periodic rate of return on the net investment in the lease.

For leases entered into on or after January 1, 2019, any difference between the fair value of the leased asset and the costs results in a selling profit or loss. A selling profit is recognized at lease commencement for sales-type leases and over the lease term for direct financing leases. Selling loss is recognized at lease commencement for both sales-type and direct financing leases. The fair value is considered to be the cost of acquiring the vessel unless a significant period has elapsed between the acquisition of the vessel and the commencement of the lease.

Where a sales-type lease, direct financing lease or ~~sales-type lease relates to a~~leaseback asset charter arrangement containing fixed price purchase options, the projected carrying value of the net investment in the lease is compared to the option price at the various option dates. If any option price is less than the projected net investment in the lease at an option date, the rate of amortization of unearned lease interest income is adjusted to reduce the net investment to the option price at the option date. If the option is not exercised, this process is repeated so as to reduce the net investment in the lease to the un-guaranteed residual value or the option price at the next option date, as appropriate.

This accounting policy for investments in direct financing or sales-type leases or lease back assets has the effect that if an option is exercised there will either be a) no gain or loss on the exercise of the option or b) in the event that an option is exercised at a price in excess of the net investment in the lease at the option date, a gain will be reported in the statement of operations at the date of delivery to the new owners.

If the terms of an existing lease are agreed to be amended, ~~other than by renewing~~the modification is evaluated to consider if it is a contract which occurs when the modification grants the lessee an additional right-of-use not included in the original lease and the lease ~~or extending its term, in a manner that would have resulted in a different classification~~payments increase commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the ~~lease had such amended terms been in effect at~~particular contract. If both conditions are met, the amendments are treated as a separate lease. If the conditions are not met, the lease ~~inception, the amended lease agreement shall be considered to be~~is re-evaluated under ASC 842 as a new lease ~~agreement over~~with the ~~remainder of its term.~~new terms.

Leaseback assets

From January 1, 2019, any vessels purchased and leased back to the same party are evaluated under ASC 842. If control is deemed to have not to have passed to the ~~terms of a direct financing or sales-type lease are amended in a way that does not result in it being treated~~Company as purchaser, due for example to the lessee having purchase options, the transaction is accounted for under ASC 310 where the purchase price paid is accounted for as loan receivable and described as a ~~new operating~~leaseback asset. Interest income is recognised on the aggregate loan receivable based on the imputed interest rate and the part of the rental income received is allocated as a reduction of the vessel loan balance.

Any purchase and leaseback transactions entered into before January 1, 2019, were accounted for as leases under ASC 840 and no changes have been made as the Company applied the practical expedients in ASC 842.

Finance lease agreement, the remaining minimum lease payments and, if appropriate, the estimated residual value will be amended to reflect the revised terms, with a corresponding increase or decrease in unearned income.liability

~~Obligations under capital lease~~

The Company charters-in and out ~~four~~4 container vessels on a bareboat basis under long term leasing agreements with corresponding assets classified as investments in direct financing leases. The Company also charters-in ~~seven~~7 container vessels through sale and leaseback financing arrangements with corresponding lease assets classified as "vessels under ~~vessels under capital lease.~~finance lease". Leases of vessels and equipment, where the Company has substantially all the risks and rewards of ownership, are classified as ~~capital leases.~~finance lease liabilities. Each lease payment is allocated between reduction in liability and finance charges to achieve a constant rate on the capital balance outstanding. The interest element of the capital cost is charged to the Consolidated Statement of Operations over the lease period.

Impairment of long-lived assets, including other long-term investments

The carrying value of long-lived assets, including other long-term investments, that are held by the Company are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For vessels, such indicators may include historically low spot charter rates and second hand vessel values. The Company assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition, taking into account the possibility of any existing medium and long-term charter arrangements being terminated early. If the future expected net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the carrying value of the asset and its fair value. In addition, long-lived assets to be disposed of are reported at the lower of carrying amount and fair value less estimated costs to sell. Fair value is generally based on values achieved for the sale/purchase of similar vessels and external appraisals.

Deferred charges

Loan costs, including debt arrangement fees, are capitalized and amortized on a straight line basis over the term of the relevant loan. The straight line basis of amortization approximates the effective interest method in the Company's statement of operations. Amortization of loan costs is included in interest expense. If a loan is repaid early, any unamortized portion of the related deferred charges is charged against income in the period in which the loan is repaid. Similarly, if a portion of a loan is repaid early, the corresponding portion of the unamortized related deferred charges is charged against income in the period in which the early repayment is made.

Convertible bonds

The Company accounts for debt instruments with convertible features in accordance with the details and substance of the instruments at the time of their issuance. For convertible debt instruments issued at a substantial premium to equivalent instruments without conversion features, or those that may be settled in cash upon conversion, it is presumed that the premium or cash conversion option represents an equity component. Accordingly, the Company determines the carrying amounts of the liability and equity components of such convertible debt instruments by first determining the carrying amount of the liability component by measuring the fair value of a similar liability that does not have an equity component. The carrying amount of the equity component representing the embedded conversion option is then determined by deducting the fair value of the liability component from the total proceeds from the issue. The resulting equity component is recorded, with a corresponding offset to debt discount which is subsequently amortized to interest cost using the effective interest method over the period the debt is expected to be outstanding as an additional non-cash interest expense. Transaction costs associated with the instrument are allocated pro-rata between the debt and equity components.

For conventional convertible bonds which do not have a cash conversion option or where no substantial premium is received on issuance, it may not be appropriate to split the bond into the liability and equity components.

A conversion of the bonds at more favorable terms than the original bond is treated as an inducement and the Company recognizes a debt conversion expense equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of securities or consideration issuable pursuant to the original conversion terms.

Financial instruments

In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. For the majority of financial instruments, including most derivatives and long-term debt, standard market conventions and techniques such as options pricing models are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

Interest rate and currency swaps

The Company enters into interest rate swap transactions from time to time to hedge a portion of its exposure to floating interest rates. These transactions involve the conversion of floating interest rates into fixed rates over the life of the transactions without an exchange of underlying principal. The Company also enters into currency swap transactions from time to time to hedge against the effects of exchange rate fluctuations on loan liabilities. Currency swap transactions involve the exchange of fixed amounts of other currencies for fixed US dollar amounts over the life of the transactions, including an exchange of underlying principal. The Company may also enter into a combination of interest and currency swaps "cross currency interest rate swaps". The fair values of the interest rate and currency swap contracts, including cross currency interest rate swaps, are recognized as assets or ~~liabilities,~~liabilities. When the interest rate or currency swap does not qualifies for hedge accounting under ASC Topic 815 "Derivatives and ~~for certain of the Company's swaps the~~Hedging" ("ASC 815"), changes in fair values are recognized in the consolidated statements of operations. When the interest rate and/or currency swap or combination, qualifies for hedge accounting under ASC Topic 815 "Derivatives and Hedging" ("ASC 815"), and the Company has formally designated the swap as a hedge to the underlying loan, and when the hedge is effective, the changes in the fair value of the swap are recognized in other comprehensive income. If it becomes probable that the hedged forecasted transaction to which these swaps relate will not occur, the amounts in other comprehensive income will be reclassified into earnings immediately.

Drydocking provisions

Normal vessel repair and maintenance costs are charged to expense when incurred. The Company recognizes the cost of a drydocking at the time the drydocking takes place, that is, it applies the "expense as incurred" method.

Earnings per share

Basic earnings per share ("EPS") is computed based on the income available to common stockholders and the weighted average number of shares outstanding for basic EPS. Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments.

Share-based compensation

The Company accounts for share-based payments in accordance with ASC Topic 718 "Compensation – Stock Compensation" ("ASC 718"), under which the fair value of stock options issued to employees is expensed over the period in which the options vest. The Company uses the simplified method for making estimates of the expected term of stock options.

Recently Adopted Accounting Standards

In May 2014, issued ASU 2014-09 "Revenue from Contracts with Customers", subsequently amended and collectively Topic 606. The standard replaced almost all existing revenue recognition guidance in U.S. GAAP, with the intention to improve and converge with international standards the financial reporting requirements for revenue from contracts with customers. The core principle of ASC 606 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASC 606 allows for adoption either on a full retrospective basis to each prior reporting period presented or on a modified retrospective basis with the cumulative effect of initially applying the new guidance recognized at the date of initial application, which became effective for the Company beginning January 1, 2018. The majority of vessels are on bareboat or time charters and these continue to be accounted as operating or finance leases in accordance with ASC 840 Leases and related interpretations and the implementation of the new revenue standard therefore did not have an effect on income recognition from such contracts.

The Company adopted ASC 606 in the first quarter of fiscal 2018 on a modified retrospective basis with no changes recognized in the prior year comparative financial statements. The adoption of this standard only impacted our vessels operating on voyage charters. For vessels operating on voyage charters, voyage revenues are, under the new revenue standard, recognized over the estimated length of each voyage, calculated on a load-to-discharge basis. Certain voyage expenses, primarily bunker fuel expenses, are capitalized between the previous discharge port, or contract date if later, and the next load port if they qualify as fulfillment costs under ASC 340 Deferred Costs and Other Assets. ASC 606 has been applied to those voyage contracts that were not completed at the date of initial application. Upon adoption, the cumulative effect of adopting this guidance resulted in a net minor adjustment of $0.1 million to the opening balance of retained earnings as of January 1, 2018 and the Company did not consider this material enough to record. In addition, the adoption of this standard did not have a material impact on the consolidated financial statements of the Company for the year ended December 31, 2018.

In January 2016, the FASB issued ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. ASU 2016-01 particularly relates to the fair value and impairment of equity investments, financial instruments measured at amortized cost, and the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes. ASU 2016-01 became effective for fiscal years and interim periods beginning after December 15, 2017. The Company adopted ASU 2016-01 in the first quarter of fiscal 2018 on a modified retrospective basis, with no changes recognized in the prior year comparatives and a cumulative catch up adjustment recognized in the opening retained earnings. Upon adoption of ASU 2016-01, the Company reclassified approximately $98.8 million of unrealized losses related to its equity investments from accumulated other comprehensive income to retained earnings. As a result of the adoption of this guidance the Company is required to recognize the movement in the fair value of our equity securities in the consolidated statement of operations. For the year ended December 31, 2018, the adoption of the standard resulted in a net unrealized gain of $12.3 million being included in the consolidated statement of operations. The Company anticipates additional volatility to the Company's statements of operations in future periods, due to changes in market prices of the Company's investments in equity securities.

In August 2016, the FASB issued ASU 2016-15 "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments", to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. It addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years with early adoption permitted. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The adoption of these amendments did not have a material impact on the consolidated financial statements of the Company for the year ended December 31, 2018.

In November 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash", to address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The standard was effective for fiscal years beginning after December 15, 2017, and interim periods within those years. For the year ended December 31, 2018, restricted cash has been disclosed as part of cash and cash equivalents in the Consolidated Statement of Cash Flows.

In January 2017, the FASB issued ASU 2017-01 "Business Combinations (Topic 805) - Clarifying the Definition of a Business" which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is required to be applied prospectively and was effective for the Company beginning January 1, 2018. The adoption of ASU 2017-01 did not have a material impact on the consolidated financial statements of the Company for the year ended December 31, 2018.

In May 2017, the FASB issued ASU 2017-09 "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting" to clarify and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. ASU 2017-09 was effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption was permitted. The adoption of ASU 2017-09 did not have a material impact on the consolidated financial statements of the Company for the year ended December 31, 2018.


3.	~~RECENTLY ISSUED ACCOUNTING STANDARDS~~

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02 "Leases" to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 creates a new Accounting Standards Codification Topic 842 "Leases" to replace the previous Topic 840 "Leases." ASU 2016-02 affects both lessees and lessors, although for the latter the provisions are similar to the previous model, but updated to align with certain changes to the lessee model and also the new revenue recognition provisions contained in Topic 606. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018. ~~Early~~

The Company has adopted ASC 842 effective January 1, 2019 using the modified retrospective transition approach, which allows the Company to recognize a cumulative effect adjustment to the opening balance of accumulated deficit in the period of adoption rather than restate our comparative prior year periods. Based on the Company's analysis, the cumulative effect adjustment to the opening balance of accumulated deficit is ~~permitted. Accounting Standards Codification ("ASC") 842 provides a group~~zero because (i) the Company does not have any unamortized initial direct costs as of January 1, 2019 that need to be written off; (ii) the Company does not have any lease incentives or accrued rental transactions that needs to be recognized; and (iii) the timing and pattern of revenue recognition under its revenue contracts that have lease and non-lease components is not materially different. The Company has elected the package of practical expedients applied to all of its leases (including those for which it is a lessee and lessor) that ~~allows entities~~permit it not to ~~not~~ (i) reassess whether any expired or existing contracts are ~~considered~~ or contain leases; (ii) reassess the lease classification for any expired or existing leases ~~and~~, (iii) reassess initial direct costs for any existing ~~leases. The Company plans~~leases and (iv) to ~~adopt ASC 842 on January 1, 2019~~not separate lease and ~~has elected the use~~non-lease components of ~~the practical expedients. Due to this election,~~lease revenue. Furthermore, the Company has ~~determined~~not elected the practical expedient to use hindsight when determining the lease term.

For arrangements where we are the lessor, the new lease standard provides a practical expedient for lessors in which the lessor may elect, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for these components as a single component if both of the following are met: (1) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same and (2) the lease component, if accounted for separately, would be classified as an operating lease. When a lessor, we have elected this expedient for our time charter contracts, voyage charter and bareboat charter contracts that qualify as operating leases and thus do not separate the non-lease component, or service element, from the lease. Revenues from contracts where the non-lease component is the predominant component are accounted for under ASC 606. The adoption of ASC 842 ~~will~~did not have a material impact on the consolidated financial statements.

In ~~December 2018,~~August 2017, the FASB issued ASU ~~No. 2018-20 "Leases~~2017-12 "Derivatives and Hedging (Topic ~~842)~~815): ~~Narrow-Scope~~Targeted Improvements to Accounting for ~~Lessors"~~Hedging Activities" to ~~address issues facing lessors when applying~~enable entities to better portray the ~~leases standard. The amendments addresses~~economics of their risk management activities in the ~~following issues (i) Sales taxes~~financial statements and ~~other similar taxes collected from lessees, which permits lessors, as an accounting policy election, to not evaluate whether certain sales taxes~~enhance the transparency and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs and exclude the costs from being reported as lease revenue with an associated expense. (ii) Certain lessor costs paid directly by lessees, whereby certain lessor costs require lessors to exclude from variable payments, and therefore revenue, lessor costs paid by lessees directly to third parties.understandability of hedge results. The amendments also ~~require lessors to account for costs excluded from~~simplify the ~~consideration~~application of a contract that are paid by the lessor and reimbursed by the lessee as variable payments. A lessor will record those reimbursed costs as revenue. (iii) Recognition of variable payments for contracts with lease and non-lease components. The amendments relate to recognizing variable payments for contracts with lease and non-lease components require lessors to allocate (rather than recognize as currently requiredhedge accounting in ~~the new leases standard)~~ certain variable payments to the lease and non-lease components when the changes in facts and circumstances on which the variable payment is based occur. After the allocation, the amount of variable payments allocated to the lease components will be recognized as income in profit or loss in accordance with the new leasing guidance, while the amount of variable payments allocated to non-lease components will be recognized in accordance with other accounting guidance, such as revenue from contracts with customers.situations. ASU ~~2018-20~~2017-12 is effective for fiscal years and interim periods beginning after December 15, 2018. The ~~Company has determined~~cumulative effect of adopting this guidance resulted in a net adjustment of $32,000 to the ~~adoption~~opening balance of ~~ASU 2018-20 will not have a material impact on the consolidated financial statements.~~retained earnings as of January 1, 2019.


3.	RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted. The Company is ~~currently assessing~~still evaluating the ~~impact~~cumulative effect of ~~ASU 2016-13 on its consolidated financial position, results~~adopting this guidance. Preliminary calculations indicate that this could result in a net adjustment of ~~operations~~up to $25 million to the opening balance of retained earnings with a corresponding credit loss provision arising mainly our investments in associated companies but also affecting our lease receivables, trade receivables and ~~cash flows.~~related party receivables as of January 1, 2020.

In ~~March 2017,~~August 2018, the FASB issued ASU ~~2017-08 "Receivables~~2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities" to amend the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortizedChanges to the ~~earliest call date.~~Disclosure Requirements for Fair Value Measurement". ASU 2018-13 includes certain removals, modifications and additions to the disclosure requirements on fair value measurements in Topic 820. The ~~amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08~~updated guidance is effective for fiscal years, and interim periods beginning after December 15, ~~2018.~~2019. Early adoption is permitted. The Company is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The impact on the consolidated financial statements of the Company will depend on the facts and circumstances of any specific future transactions.

In August 2017, the FASB issued ASU 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results. The amendments also simplify the application of hedge accounting in certain situations. ASU 2017-12 is effective for fiscal years and interim periods beginning after December 15, 2018. The Company has not elected to early adopt. The effect of the adoption of ASU 2017-12 will be that $34.4 thousand of hedge ineffectiveness losses will be reclassified from retained earnings to other comprehensive income.

In July 2018, the FASB issued ASU 2018-10 "'Codification Improvements to Topic 842, Leases" to provide amendments that affect narrow aspects of the guidance issued in the amendments in ASU 2016-02 including those regarding residual value guarantees, rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase option, variable lease payments that depend on an index or a rate, investment tax credits, lease term and purchase option, transition guidance for amounts previously recognized in business combinations, certain transition adjustments, transition guidance for leases previously classified as capital leases under Topic 840, transition guidance for modifications to leases previously classified as direct financing or sales-type leases under Topic 840, transition guidance for sale and leaseback transactions, impairment of net investment in the lease, unguaranteed residual asset, effect of initial direct costs on rate implicit in the lease, and failed sale and leaseback transactions. ASU 2018-10 is effective for fiscal years and interim periods beginning after December 15, 2018. The Company does not expect that the adoption of ASU 2018-10 will have a material effect on the consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-16 "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes." In the United States, eligible benchmark interest rates under Topic 815 are interest rates on direct Treasury obligations of the U.S. government (UST), the London Interbank Offered Rate (LIBOR) swap rate, and the Overnight Index Swap (OIS) Rate based on the Federal Funds Effective Rate. When the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in August 2017, it introduced the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate as the fourth permissible U.S. benchmark rate. The new ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes. ASU 2018-16 is effective for fiscal years and interim periods beginning after December 15, 2019. The Company ~~is currently assessing~~does not expect that the ~~impact~~adoption of ASU 2018-16 will have a material effect on the consolidated financial statements.

In November 2018, the FASB issued ASU No. 2018-18 "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606", which defines a collaborative arrangement as a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard. ASU 2018-18 is effective for fiscal years and interim periods beginning after December 15, 2019. The Company does not expect that the adoption of ASU 2018-18 will have a material effect on the consolidated financial statements.

~~Also in November 2018,~~In April 2019, the FASB issued ASU No. ~~2018-19~~2019-04 "Codification Improvements to Topic 326, Financial ~~Instruments-Credit Losses"~~Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments" to ~~provide new~~clarify and improve areas of guidance related to ~~mitigate~~ the ~~transition complexity by requiring entities other than public business entities, including not-for-profit organizations and certain employee benefit plans, to implement the~~recently issued standards on credit losses, ~~standard issued in 2016,~~hedging, and recognition and measurement. ASU 2019-04 is effective as of the beginning of the first annual reporting period beginning after April 25, 2019 for amendments to ASU 2017-12 and for fiscal ~~years~~and interim periods beginning after December 15, ~~2021, including interim periods within those fiscal years. This aligns~~2019 for amendments relating to ASU 2016-01 and ASU 2016-13. The expected impact of adopting ASU 2016-13 and any related improvements is shown above. The Company does not expect that the implementation date for their annual financial statements with the implementation date for their interim financial statements. The guidance also clarifies that receivables arising from operating leases are not within the scopeadoption of the ~~credit losses standard, but rather, should be accounted~~remaining provisions of ASU 2019-04 will have a material effect on the consolidated financial statements.

In May 2019, the FASB issued ASU No. 2019-05 "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief" to provide an option to irrevocably elect the fair value option for ~~in accordance with the leases standard.~~certain financial assets previously measured at amortized cost basis. ASU ~~2018-19~~2019-05 is effective for fiscal years and interim periods beginning after December 15, 2019. The ~~Company is currently assessing the~~expected impact of adopting ASU ~~2018-19~~2016-13 and any related improvements is shown above. The Company does not expect that the adoption of the remaining provisions of ASU 2019-05 will have a material effect on ~~the~~its consolidated financial ~~statements.~~position, results of operations and cash flows.


4.	SEGMENT INFORMATION

The Company has only ~~one~~1 reportable segment. The Company's assets operate on a world-wide basis and the Company's management does not evaluate performance by geographical region or by asset type, as they believe that any such information would not be meaningful.


5.	TAXATION

Bermuda

Under current Bermudan law, the Company is not required to pay taxes in Bermuda on either income or capital gains. The Company has received written assurance from the Minister of Finance in Bermuda that, in the event of any such taxes being imposed, the Company will be exempted from taxation until the year 2035.

United States

The Company does not accrue U.S. income taxes as, in the opinion of U.S. counsel, the Company is not engaged in a U.S. trade or business and is exempted from a gross basis tax under Section 883 of the U.S. Internal Revenue Code.

A reconciliation between the income tax expense resulting from applying statutory income tax rates and the reported income tax expense has not been presented herein, as it would not provide additional useful information to users of the financial statements as the Company's net income is subject to neither Bermuda nor U.S. tax.

Other Jurisdictions

Certain of the Company's subsidiaries and branches in Norway and the United Kingdom are subject to income tax in their respective jurisdictions. The tax paid by subsidiaries of the Company that are subject to income tax is not material.


6.	EARNINGS PER SHARE

The computation of basic earnings per share ("EPS") is based on the weighted average number of shares outstanding during the year and the consolidated net income of the Company. Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments.

The components of the numerator for the calculation of basic and diluted EPS are as follows:


	Year ended December 31,			Year ended December 31,
(in thousands of $)	2018	2017	2016	2019		2018	2017
Basic earnings per share:
Net income available to stockholders	73,622	101,209	146,406	89,177		73,622	101,209
Diluted earnings per share:
Net income available to stockholders	73,622	101,209	146,406	89,177		73,622	101,209
Interest and other expenses attributable to convertible bonds	123	4,511	15,310
Interest and other expenses or (gains) attributable to convertible bonds				(304	)	123	4,511
Net income assuming dilution	73,745	105,720	161,716	88,873		73,745	105,720

The components of the denominator for the calculation of basic and diluted EPS are as follows:



	Year ended December 31,
(in thousands)	2019	2018	2017
Basic earnings per share:
Weighted average number of common shares outstanding*	107,614	105,898	95,597
Diluted earnings per share:
Weighted average number of common shares outstanding*	107,614	105,898	95,597
Effect of dilutive share options	81	59	26
Effect of dilutive convertible bonds	1	1,649	7,277
Weighted average number of common shares outstanding assuming dilution	107,696	107,606	102,900

Year ended December 31,
(in thousands) 2018
2017
2016
Basic earnings per share:
Weighted average number of common shares outstanding 105,898
95,597
93,497
Diluted earnings per share:

Weighted average number of common shares outstanding* 105,898
95,597
93,497
Effect of dilutive share options 59
26
—
Effect of dilutive convertible bonds 1,649
7,277
14,543
Weighted average number of common shares outstanding assuming dilution 107,606
102,900
108,040


	Year ended December 31,						Year ended December 31,
	2018		2017		2016		2019		2018		2017
Basic earnings per share:	$	0.70	$	1.06	$	1.57	$	0.83	$	0.70	$	1.06
Diluted earnings per share:	$	0.69	$	1.03	$	1.50	$	0.83	$	0.69	$	1.03

*The weighted average number of common shares outstanding excludes 8,000,000 shares issued as part of a share lending arrangement relating to the Company's issuance of 5.75% senior unsecured convertible bonds in October 2016. It also excludes 3,765,842 shares issued as of December 31, ~~2018~~2019 from up to 7,000,000 shares issuable under a share lending arrangement relating to the Company's issuance of 4.875% senior unsecured convertible bonds in April and May 2018. These lent shares are owned by the Company and will be returned on or before maturity of the bonds in 2021 and 2023, respectively.

In February 2018, the Company redeemed the full outstanding amount under the 3.25% senior unsecured convertible bonds due 2018. The remaining outstanding principal amount of $63.2 million was paid in cash, and the premium settled in common shares with the issue of 651,365 new shares.

As of December 31, ~~2018,~~2019, the outstanding balances on the 4.875% senior unsecured convertible bonds issued in April and May 2018 and the 5.75% senior unsecured convertible bonds issued in October 2016 were both anti-dilutive.

~~F-22~~


7.	OPERATING LEASES

Rental income

The minimum future revenues to be received under the Company's non-cancelable operating leases on its vessels as of December 31, ~~2018,~~2019, are as follows:



Year ending December 31,	(in thousands of $)
2020	310,083
2021	272,961
2022	248,508
2023	234,689
2024	168,301
Thereafter	164,818
Total minimum lease revenues	1,399,360

Year ending December 31, (in thousands of $)
2019 313,018
2020 298,033
2021 250,742
2022 179,092
2023 161,125
Thereafter 209,844
Total minimum lease revenues 1,411,854

Contingent rental income

~~There is no~~

In 2019, the Company agreed to install scrubbers or EGCS on 4 vessels which were on time-charter contract, accounted for as operating leases, whereby the Company will receive contingent income based on the cost savings achieved by the charterer on fuel arising from using the scrubbers from January 1, 2020.

The minimum future revenues above are based on payments receivable from the charterers and do not include contingent rental income. Revenues included in income ~~included above.~~are recognized on a straight-line basis.

The cost and accumulated depreciation of vessels (owned and under ~~capital lease)~~finance leases) leased to third parties on non-cancelable operating leases at December 31, ~~2018~~2019 and ~~2017~~2018 were as follows:



(in thousands of $)	2019	2018
Cost	2,100,533	2,336,269
Accumulated depreciation	315,934	309,135
Total	1,784,599	2,027,134

(in thousands of $) 2018
2017
Cost 2,336,269
2,256,747
Accumulated depreciation 309,135
494,151
Total 2,027,134
1,762,596


8.	GAIN/(LOSS) ON SALE OF ASSETS AND TERMINATION OF CHARTERS

The Company has recorded gains/losses on sale of assets and termination of charters as follows:



	Year ended December 31,
(in thousands of $)	2019	2018	2017
Loss on sale of vessels	—	(2,578)	(1,699)
Gain on termination of charters	—	—	2,823
Total Gain/(loss) on sale of assets and termination of charters	—	(2,578)	1,124

Year ended December 31,
(in thousands of $) 2018 2017 2016
(Loss)/gain on sale of vessels (2,578) (1,699) (167)
Gain on termination of charters — 2,823 —
Total loss/(gain) on sale of assets and termination of charters (2,578) 1,124 (167)

The Company distinguishes between gains or losses on termination of charters, where ownership of the underlying vessel is retained, and gains or losses on sale of assets, where the vessel is disposed of and there may be an associated charter termination fee paid or received for early termination of the underlying charter.

~~(Loss)/Gain~~Gain/(loss) on sale of vessels:

No gain or loss on sale of assets and termination of charters was recorded during the year ended December 31, 2019.

During the year ended December 31, 2018, the VLCC Front Circassia, which was accounted for as a direct financing lease asset, was sold to an unrelated third party. A loss of $1.4 million was recorded on the disposal, the proceeds of which included $17.9 million gross sales proceeds and compensation in the form of a loan note of $4.4 million at fair value was received for the early termination of the charter (see Note 24: Related party transactions).

The container vessel SFL Avon, which was accounted for as an operating lease asset, was sold to an unrelated third party during the year ended December 31, 2018 for a loss of $0.2 million on disposal.

The VLCCs Front Page, Front Stratus and Front Serenade which were accounted for as direct financing lease assets during the year ended December 31, 2018, were sold to a related party, ADS Crude Carriers Plc. ("~~ADS"~~ADS Crude Carriers"). Gains of $0.3 million, $0.2 million and $0.3 million were recorded on the disposal of the vessels, respectively. The gross proceeds from the sale was $22.5 million per vessel in addition to compensation, in the form of loan notes of $3.4 million each, received for the early termination of the charters (see Note 24: Related party transactions).

During the year ended December 31, 2018, the VLCCs Front Ariake and Front Falcon, which were accounted for as a direct financing lease assets, were sold to an unrelated third party. A gain of $1,000 and a loss of $1.8 million was recorded on the disposals respectively, and compensation in the form of a loan note of $3.4 million at fair value was received for the early termination of the Front Ariake charter (see Note 24: Related party transactions).

During the year ended December 31, 2017, the Company recorded a net loss of $1.7 million arising from the disposals of ~~four~~4 crude oil tankers and the commencement of a sales-type lease for the 1,700 TEU container vessel MSC Alice as described below.

The VLCC Front Century, the Suezmax Front Brabant, the VLCC Front Scilla and the Suezmax Front Ardenne, which were accounted for as direct financing lease assets, were sold to unrelated third parties in March 2017, May 2017, June 2017 and August 2017, respectively. Losses of $26,000, $1.7 million, $1.1 million and a gain of $0.3 million, respectively, were recorded on the disposals. Sales proceeds included compensation received for early termination of the charters (see Note 24: Related party transactions). The 1,700 TEU container vessel MSC Alice which was previously an operating lease asset, was accounted for as a sales-type lease during the year ended December 31, 2017, following the commencement of a long-term bareboat charter in April 2017 to MSC Mediterranean Shipping Company S.A. ("MSC"), an unrelated party. The terms of the charter provides a minimum fixed price purchase obligation at the expiry of the five ~~year~~years charter period. A gain of $0.7 million was recorded on the transaction.

~~During the year ended December 31, 2016, the Company sold one VLCC and one offshore support vessel to unrelated parties and realized aggregate net loss of $0.2 million on their disposals.~~

Gain on termination of charters:

In ~~April~~ 2017, the 2007-built jack-up drilling rig Soehanah was redelivered to us by the previous charterer, PT Apexindo Pratama Duta ("Apexindo"). ~~Ship Finance~~The Company received a non-amortizing loan note with a term of six years from Apexindo as part of the settlement agreement for the early termination of the charter. The note which has an initial face value of $6.0 million has been recorded at an initial fair value of $2.8 million, resulting as a gain on the termination of the charter.


9.	GAIN ON SALE OF SUBSIDIARIES AND DISPOSAL GROUPS

~~During~~No subsidiaries were sold during the year ended December 31, 2019 or December 31, 2017.

During 2018, the Company entered into an agreement to sell 100% of the share capital of Rig Finance Limited ("Rig Finance"), a wholly owned subsidiary, to an unrelated third party. Rig Finance owned the jack-up drilling rig Soehanah. Net proceeds of $84.4 million were received for the shares, resulting in a net gain of $7.6 million on the sale. At the time of disposal on December 31, 2018, net assets held by Rig Finance were as follows:



(in thousands of $)	~~December 31,~~ 2018
Cash and cash equivalents	915
Vessel and equipment, net	76,875
Charter deposit	(913	)
Other current liabilities	(90	)
Net assets	76,787


10.	OTHER FINANCIAL ITEMS, NET

Other financial items comprise the following items:



	Year ended December 31,
(in thousands of $)	2019		2018		2017
Net payments on non-designated derivatives relating to interest rate swaps	1,389		170		(2,985	)
Net payments on non-designated derivatives relating to cross currency swaps	—		—		—
Net payments on non-designated derivatives relating to combined cross currency and interest rate swaps	(194	)	(891	)	(2,139	)
Total net cash movement on non-designated derivatives	1,195		(721	)	(5,124	)
Net (decrease)/increase in mark-to-market valuation of non-designated derivatives relating to interest rate swaps	(4,123	)	2,687		2,290
Net (decrease)/increase in mark-to-market valuation of non-designated derivatives relating to cross currency swaps	—		—		—
Net (decrease)/increase in mark-to-market valuation of non-designated derivatives relating to combined cross currency and interest rate swaps	673		11,221		5,778
Total net movement in fair value of non-designated derivatives	(3,450	)	13,908		8,068
Net movement in fair value of designated derivatives (ineffective portion)	—		(11	)	140
Impairment of long-term receivables	(9,168	)	(1,729	)	—
Other items	(1,330	)	(1,040	)	(5,768	)
Total other financial items, net	(12,753	)	10,407		(2,684	)

Year ended December 31,
(in thousands of $) 2018
2017
2016
Net cash payments on non-designated derivatives (721 ) (5,124 ) (4,913 )
Net increase in fair value of non-designated derivatives 13,908
8,068
3,917
Net increase in fair value of designated derivatives (ineffective portion) (11 ) 140
482
Other items (2,769 ) (5,768 ) (1,575 )
Total other financial items 10,407
(2,684 ) (2,089 )

The net movement in the fair values of non-designated derivatives and net cash payments thereon relate to non-designated, terminated or de-designated interest rate swaps and cross currency interest rate swaps. The net movement in the fair values of designated derivatives relates to the ineffective portion of interest rate swaps and cross currency interest rate swaps that have been designated as cash flow hedges. Changes in the fair values of the effective portion of interest rate swaps that are designated as cash flow hedges are reported under "Other comprehensive income".

Following the adoption of ASU 2017-12 from January 2019, the Company now recognizes all changes in the fair value of swaps designated as accounting hedges in other comprehensive income. The adoption of the standard resulted in an opening balance adjustments of $32,000 to retained earnings and other comprehensive income. See also Recently Adopted Accounting Standards within Note 2.

The above net movement in the valuation of non-designated derivatives in the year ended December 31, ~~2018,~~2019, includes $0.0 million (2018: $3.1 ~~million (2017:~~million; 2017: $1.6 ~~million; 2016: $nil)~~million) reclassified from "Other comprehensive income", as a result of certain interest rate swaps relating to loan facilities no longer being designated as cash flow hedges.

In February 2016, the offshore support vessel Sea Bear, then chartered to a subsidiary of Deep Sea was sold and its lease canceled. An agreed termination fee was received in the form of a loan note from Deep Sea, receivable over the approximately six remaining years of the canceled lease. The note has an interest rate of 7.25% and has a face value of $14.6 million. The note was evaluated to have an initial fair value of $11.6 million which was determined from analysis of projected cash flows, based on factors including the terms, provisions and other characteristics of the notes, default risk of the issuing entity, the fundamental financial and other characteristics of that entity, and the current economic environment and relevant trading activity in the debt market. In June 2017, Deep Sea completed a merger with Solstad Offshore ASA and Farstad Shipping ASA, creating Solstad Farstad ASA. In October 2018, Solstad Farstad ASA changed its name to Solstad Offshore ASA. The loan note is unsecured and not guaranteed by its holding company. During the year ended December 31, 2019, the Company concluded that the loan note may no longer be recoverable and recorded an impairment charge of long term receivables of $8.2 million (2018: $1.7 million; 2017: $0.0 million) against it.

During the year ended December 31, 2019, the Company also recorded an impairment charge of long term receivables of $0.9 million (2018: $0.0 million; 2017: $0.0 million) against its non-amortizing loan note from Apexindo, following revisions to the agreement.

Other items in the year ended December 31, ~~2018,~~2019, include a net ~~loss~~gain of ~~$2.0~~$0.3 million arising from foreign currency translation ~~(2017:~~(2018: loss ~~$4.5~~$2.0 million; ~~2016: gain $0.1~~2017: loss $4.5 million). Other items also include bank charges and fees relating to loan facilities.


11.	INVESTMENTS IN DEBT AND EQUITY SECURITIES

Marketable securities held by the Company consist of corporate bonds and equity securities.

(in thousands of $) 2018
2017
Amortized cost 76,234
194,184
Accumulated net unrealized (loss)/gain 10,940
(100,382 )
Carrying value 87,174
93,802



(in thousands of $)	2019	2018
Corporate Bonds
Balance at start of the year	13,245	41,742
Disposals during the year	(583)	(26,820)
Additions during the year	2,281	—
Unrealized gain/(loss) recorded in other comprehensive income	(9)	2,244
Realized gain/(loss)*	—	(3,921)
Accumulated other-than-temporary impairment*	(2,181)	—
Balance at end of the year	12,753	13,245

	2019	2018
Shares
Balance at start of the year	73,929	52,060
Disposals during the year	(82,783)	(19,248)
Additions during the year	—	11,572
Unrealized Gain*	29,104	12,277
Realized Gain*	40,777	17,398
FX gain/(loss)	299	(130)
Balance at the end of year	61,326	73,929

Total Investment in Debt and Equity Securities	74,079	87,174

Equity Securities pledged to creditors	43,775	—

Year ended December 31, 2018 Year ended December 31, 2017
(in thousands of $) Amortised Cost Unrealised gains/ (losses)* Fair value Amortised Cost Unrealised gains/ (losses)* Fair value
Corporate Bonds:
Golden Close Senior —
—
—
17,754
(2,240 ) 15,514
Golden Close Convertible —
—
—
9,960
—
9,960
Golden Close Super Senior —
—
—
2,561
347
2,908
NorAm Drilling 4,715
477
5,192
5,181
293
5,474
Oro Negro 7,886
167
8,053
7,886
—
7,886
Total corporate bonds 12,601
644
13,245
43,342
(1,600 ) 41,742
Shares:

Frontline 50,490
10,340
60,830
150,004
(99,514 ) 50,490
NorAm Drilling 3,035
893
3,928
730
732
1,462
Golden Close 108
(108 ) —
108
—
108
ADS Crude Carriers 10,000
(829 ) 9,171
—
—
—
Total shares 63,633
10,296
73,929
150,842
(98,782 ) 52,060
Total 76,234
10,940
87,174
194,184
(100,382 ) 93,802

* ~~This includes foreign currency gains or losses~~Balances included in "Gain on ~~non U.S. dollar denominated equity~~ investments in ~~addition to the changes~~debt and equity securities" in the ~~fair value from market prices movements.~~Consolidated Statements of Operations

The investments in corporate bonds at December 31, 2018, consist of investments in Oro Negro and NorAm Drilling Company AS ("NorAm Drilling") bonds which have a total carrying value of $13.2 million (2017: $41.7 million, including investments in Golden Close Corp. Ltd. ("Golden Close") bonds) and have maturities in 2019 and 2021, respectively. Corporate Bonds

The corporate bonds are classified as available-for-sale securities and are recorded at fair value, with unrealized gains and losses recorded as a separate component of "Other comprehensive income". ~~The accumulated net~~



	Year ended December 31, 2019			Year ended December 31, 2018
(in thousands of $)	Amortised Cost	Unrealised gains/ (losses)*	Fair value	Amortised Cost	Unrealised gains/ (losses)*	Fair value

NorAm Drilling	4,132	558	4,690	4,715	477	5,192
Oro Negro 7.5%	5,705	—	5,705	7,886	167	8,053
Oro Negro 12%	2,281	77	2,358	—	—	—
Total corporate bonds	12,118	635	12,753	12,601	644	13,245

NorAm Drilling Company AS ("NorAm Drilling")

During the financial year ended December 31, 2019, the Company redeemed $0.6 million (2018: $0.5 million) of bonds recognizing 0 gain or loss (2018: $NaN). Additionally, the Company recognized an unrealized gain ~~on these available-for-sale corporate debt securities included~~ in ~~"Other comprehensive income" at~~the year ended December 31, 2019 of $0.1 million in Other Comprehensive Income (2018: $0.2 million; 2017: $0.5 million).

Oro Negro Drilling Pte. Ltd ("Oro Negro")

In the year ended December 31, 2019, the Company acquired $2.3 million of 12% Super Senior Callable Liquidity Bonds from Oro Negro with a face value of $2.3 million. The Company recognized an unrealized gain of $0.1 million in respect of these bonds (2018: $0.0 million; 2017: $0.0 million).

During the year ended December 31, 2019, the Company recognized an unrealized loss of $0.2 million in Other Comprehensive Income (2018: gain $0.2 million; 2017: $2.1 million) on the 7.5% Oro Negro bonds however it was subsequently determined that the bonds were other-than-temporarily impaired and an aggregate impairment loss of $2.2 million was recorded in the Consolidated Statement of Operations (2018: $0.0 million; 2017: $2.9 million).

Golden Close Corp Ltd ("Golden Close")

During 2018, ~~was $0.6~~Golden Close initiated liquidation proceedings. As a result of this, the Company received total proceeds of $26.4 million in settlement of its total investment in corporate bonds, resulting in an overall realized loss $3.9 million recognized in the Statement of Operations. Prior to the liquidation proceedings, an unrealized gain of $1.9 million (2017: ~~loss~~$3.6 million) was recognized in Other Comprehensive Income for the year ended December 31, 2018.

In 2017, the Company determined that the unsecured convertible bonds issued by Golden Close were other-than-temporarily impaired and recorded an aggregate impairment charge in the Statement of ~~$1.6 million).~~Operations of $1.0 million.

Following the adoption of ASU 2016-01 from January 2018, the Company now recognizes any changes in the fair value of equity investments in net income. The adoption of the standard resulted in a net unrealized gain of $12.3 million recorded in the consolidated statement of operations for the year ended December 31, 2018. See also Recently Adopted Accounting Standards~~within Note 2.~~

~~The investments in shares~~



(in thousands of $)	2019	2018
Frontline*	43,775	60,830
NorAm Drilling	4,326	3,928
ADS Crude Carriers	13,225	9,171
Total shares	61,326	73,929

*As at December 31, ~~2018, consist~~2019, the carrying value of ~~listed~~the shares held in Frontline pledged to creditors is $43.8 million (2018: $0.0 million). The Frontline shares with a carrying value of $60.8 million ~~(2017: $50.5 million)~~held as at December 31, 2018 were not pledged to creditors.

Frontline Shares

As of December 31, 2019 the Company held approximately 3.4 million shares (2018: 11.0 million shares) in Frontline (see Note 24: Related ~~party transactions),~~Party Transactions).

During the year ended December 31, 2019, the Company sold approximately 7.6 million shares in Frontline for total proceeds of $82.8 million and recorded realized gains of $40.8 million in the statement of operations in respect of the sales. The Company also sold the remaining approximately 3.4 million shares subject to a repurchase agreement and as at December 31, 2019, the Company had a forward contract to purchase the approximately 3.4 million shares on June 30, 2020 for $36.8 million. The transaction has been accounted for as a secured borrowing, with the shares transferred to 'Marketable securities pledged to creditors' and a liability recorded at December 31, 2019 within debt for $36.8 million (See also Note 20: Short-Term and Long-term Debt).

In the year ended December 31, 2019, the Company recognized a mark to market gain of $25.0 million (2018: $10.3 million) in the Statement of Operations. In the year ended December 31, 2017, the Company recognized a mark to market loss of $27.7 million in Other Comprehensive Income.

NorAm Drilling

As of December 31, 2019 and 2018 the Company held approximately 1.3 million shares in NorAm Drilling which traded in the Norwegian Over the Counter market ("OTC"). The Company recognized a mark to market ~~with a carrying value~~gain of ~~$3.9~~$0.4 million ~~(2017: $1.5~~(2018: $1.0 million) ~~and shares in Golden Close, previously traded~~ in the ~~Norwegian OTC market with a carrying value~~Statement of ~~$nil (2017: $0.1 million).~~

~~During~~Operations in the year ended December 31, 2019, together with a foreign exchange loss of $0.0 million (2018: loss $0.2 million) in Other Financial Items in the Statement of Operations. In the year ended December 31, 2017, the Company recognized a mark to market gain of $0.1 million in Other Comprehensive Income. (See also Note 24: Related Party Transactions)

ADS Crude Carriers

As of December 31, 2019 and 2018 the Company held approximately 4.0 million shares in ADS Crude Carriers. In the year ended December 31, 2019, the Company recognized a mark to market gain of $3.7 million (2018: loss $0.8 million) in the Statement of Operations, along with a foreign exchange gain of $0.3 million (2018: $0.0 million) in Other Financial Items in the Statement of Operations.

During 2018, the Company acquired ~~4,031,800~~approximately 4.0 million shares in ADS ~~a recently formed company in 2018 trading on the Oslo Merkur Market and a related party. The investment in ADS shares were purchased~~Crude Carriers for $10.0 ~~million and have a carrying value of $9.2 million at December 31, 2018 (2017: $nil). See~~million. (See also Note 24: Related ~~party transactions.~~Party Transactions)

In November 2018 NorAm Drilling undertook a share consolidation of 20:1, resulting in a revised investment of 601,023 shares. On the same day NorAm Drilling participated in a rights issue, increasing the Company's investment in shares by 623,447 shares. In December 2018, the Company acquired an additional 41,756 shares bringing the total investment in NorAm Drilling to 1,266,226 shares with a fair value of $3.9 million at December 31, 2018 (2017: $1.5 million).

GoldenClose

During the year ended ~~December 31,~~ 2018, Golden Close initiated liquidation proceedings. As a result of this, the Company received total proceeds of ~~$45.6~~$19.2 million in settlement of its total investment in shares, resulting in an overall net realized gain of ~~$13.5 million. As at~~$17.4 million recognized in the Statement of Operations. In the year ended December 31, 2018, the ~~net investment~~Company recognized an unrealized gain prior to the share settlement of $1.7 million (2017: $0.0 million) in ~~Golden Close debt and equity securities is $nil (2017: $28.5 million).~~the Statement of Operations.

In December 2017, the Company determined that the shares in Golden Close were other-than-temporarily impaired and recorded ~~$3.9~~$0.6 million impairment charge in ~~a separate line in~~ the ~~consolidated statement~~Statement of ~~operations~~Operations for the year ended December 31, 2017.


12.	TRADE ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

Trade accounts receivable

Trade accounts receivable are presented net of allowances for doubtful debts. The allowance for doubtful trade accounts receivable was ~~$nil~~$0 million at both December 31, ~~2018~~2019 and December 31, ~~2017.~~2018. As at December 31, ~~2018,~~2019, the Company has no reason to believe that any amount included in trade accounts receivable will not be recovered through due process or negotiation.

Other receivables

Other receivables, mainly include amounts due from vessel managers and claims receivable, which are presented with no0 allowance for doubtful accounts as of December 31, ~~2018~~2019 and December 31, ~~2017.~~2018.


13.	VESSELS AND EQUIPMENT, NET



(in thousands of $)	2019		2018
Cost	1,867,873		1,955,880
Accumulated depreciation	(463,168	)	(396,168	)
Vessels and equipment, net	1,404,705		1,559,712

(in thousands of $)
2018
2017
Cost 1,955,880
2,256,747
Accumulated depreciation 396,168
494,151
Vessels and equipment, net 1,559,712
1,762,596

In the year ended December 31, 2019, the 5,800 TEU container vessels MSC Margarita and MSC Vidhi, previously recorded as operating lease assets, were reclassified as sales-type leases. The reclassification occurred as a result of amendments to the existing charter contracts. The cost and accumulated depreciation of the container vessels reclassified from vessels and equipment to investment in direct financing leases were $40.3 million and $13.0 million. (Refer to Note 16: Investment in sales-type leases, direct financing leases and leaseback assets).

~~The~~In the year ended December 31, 2019, the Company capitalized costs of $9.7 million related to EGCS and BWTS. Advances paid in respect of vessel upgrades in relation to EGCS and BWTS were included within "other long-term assets", until such time as the equipment was installed on the vessels, at which point the amounts were transferred to "Vessels and equipment, net".

NaN vessel disposals took place in the year ended December 31, 2019. In the year ended December 31, 2018 the Company disposed of ~~one~~1 container vessel, SFL Avon, with a net carrying value of $12.3 million ~~during the year ended December 31, 2018~~ (Refer to Note 8: ~~Gain/(loss)~~Gain on sale of assets and termination of charters).

In addition, the Company sold a wholly owned subsidiary which owned one jack-up drilling rig, Soehanah with a net carrying value of $76.9 million ~~during~~in the year ended December 31, 2018 (Refer Note 9: Gain on sale of subsidiaries and disposal groups).

~~In 2018, the Company had no agreements~~

Total depreciation expense for the construction of newbuilding vessels. In 2017, the Company took delivery of two newbuilding oil product carriers at an aggregate cost of $115.1 million and transferred one container vessel from operating lease asset to a sales-type lease asset. The carrying value of the container vessel reclassified from vessels and equipment ~~to investment in lease asset~~ was ~~$2.3 million.~~

~~Depreciation expense was $104.1~~$80.3 million for the year ended December 31, ~~2018 (2017:~~2019 (2018: $99.6 million; 2017: $88.2 ~~million; 2016: $94.3~~ million).

In the year ended December 31, 2019, an impairment charge of $55.5 million was recorded against the carrying value of 4 offshore support vessels Sea Pike, Sea Halibut,Sea Cheetah and Sea Jaguar and 2 feeder size container vessels Asian Ace and Green Ace (2018: $25.4 million in respect of Sea Pike, Sea Halibut,Sea Cheetah and Sea Jaguar; 2017: $0.0 million).

~~The~~At December 31, 2019, the Company ~~owns five~~owned 5 offshore support vessels which ~~are~~were chartered on a long-term bareboat charter to Deep Sea Supply Shipowning II AS (the “Solstad Charterer”), an indirect wholly owned subsidiary of Solship Invest 3 AS (“Solship”) which is in turn a wholly owned subsidiary of Solstad Offshore ASA (“Solstad”). ~~Four~~NaN of these vessels ~~are~~were accounted for as operating leases within Vessels and Equipment, net,, and the other ~~one is~~1 was accounted for as a ~~finance~~direct financing lease (Refer to Note 16: ~~Investments~~Investment in direct financing, sales-type and ~~sales-type leases)~~leaseback assets). In ~~July~~ 2018, the Company entered into a restructuring agreement with subsidiaries of Solstad, ~~which became effective at the end of August 2018,~~ whereby the Company ~~will~~would receive 50% of the agreed charter hire for ~~two~~2 of the offshore support ~~vessels accounted for as operating leases.~~vessels. All other contracted charter hire income earned from fixed assets and ~~finance~~direct financing lease assets ~~will~~was to be deferred until the end of 2019. In ~~2018, following indications~~April 2019, Solship announced that a Standstill Agreement had been entered into with, amongst others, the Company whereby 100% of charter hire for vessels on charter to Solship was to be deferred. Solship announced that the ~~Solstad Charterer may not have sufficient funds~~Standstill Agreement had been extended until March 31, 2020, subject to ~~fulfill its obligations under~~agreed milestones being met throughout the charters, the vessels were written down to estimated fair value and impairment charges of $25.4 million were made against the four offshore supply vessels accounted for as operating leases. (See also Note 16: Investments in direct financing and sales-type leases).

~~No impairment charges were made in 2017 and $4.8 million was recorded against the carrying value of one container vessel in~~suspension period. During the year ended December 31, ~~2016.~~2019, all the vessels were impaired as described above and in Note 16 and subsequent to year end the charters were terminated (See Note 28: Subsequent Events).

Acquisitions, disposals and impairments in respect of vessels accounted for as sales-type leases, direct financing ~~and sales-type~~ leases, leaseback assets and vessels ~~those accounted for as capital~~under finance leases are discussed in Note 16: ~~Investments~~Investment in sales-type leases, direct financing leases and ~~sales-type leases~~leaseback assets and Note 14: Vessels under ~~capital~~finance lease, ~~net, respectively.~~net.


14.	VESSELS UNDER ~~CAPITAL~~FINANCE LEASE, NET



(in thousands of $)	2019		2018
Cost	755,058		754,392
Accumulated depreciation	(40,582	)	(4,503	)
Vessels under finance lease, net	714,476		749,889

(in thousands of $) 2018
2017
Cost 754,392
—
Accumulated depreciation 4,503
—
Vessels under capital lease, net 749,889
—

As at December 31, 2019, 7 vessels were accounted for as vessels under finance lease, made up of 4 13,800 TEU container vessels and 3 10,600 TEU container vessels. The Company refinanced the vessels through sale and leaseback financing arrangements in the third and fourth quarter of 2018 and derecognized the vessels from the "Vessels and equipment, net" category and reclassified them to the "Vessels under finance lease, net" category. The vessels are leased back for an original term ranging from six to 11 years, with options to purchase each vessel after six years.

In ~~May~~ 2018, the Company took delivery of ~~four~~4 2014 built container vessels, each with approximately 13,800 TEU carrying capacity. The Company initially recorded additions to cost of vessels and equipment of $445.0 million, which included the issuance of 4,024,984 common shares with a value of $58.0 million as part of the consideration. An additional $18.0 million of the consideration paid was assigned to the long term time charter contracts acquired with the vessels which was recorded separately within long term assets and is being amortized to revenue over the remaining period of each contract.

~~In September and October~~ During 2018, the Company also took delivery of ~~three 2015 built container vessels, each with approximately~~3 10,600 TEU carrying ~~capacity. The~~capacity which the Company initially recorded as additions to ~~cost of~~ vessels and equipment at a cost of $315.0 ~~million~~

~~In the third and fourth quarter of~~million. As at December 31, 2018, the Company had refinanced the ~~four~~4 13,800 TEU container vessels and the ~~three~~3 10,600 TEU container vessels with an Asian based financial institution by entering into separate sale and leaseback financing arrangements. The vessels are leased back for an original term ranging from six to 11 years, with options to purchase each vessel after six years. The vessels were derecognized from the Vessels and Equipment category and reclassified to the Vessels under ~~Capital~~Finance Lease category at a total net carrying value of $748.9 million. The Company recorded additions of $5.5 million. ~~Depreciation charged on~~

Total depreciation expense for vessels under ~~capital~~finance lease ~~during~~amounted to $36.1 million for the year ended December 31, ~~2018 was $4.5 million~~2019 and is included in depreciation in the ~~accompanying~~ consolidated statements of operations. (2018: $4.5 million; 2017: $0.0 million).


15.	~~NEWBUILDINGS~~OTHER LONG TERM ASSETS

Other long term assets comprise the following items:



(in thousands of $)	2019	2018
Capital improvements in progress	30,642	1,640
Collateral deposits on swap agreements	17,520	1,820
Value of acquired charter-out contracts, net	13,407	16,302
Long term receivables	1,880	11,048
Other	799	—
Total other long-term assets	64,248	30,810

Capital improvements in progress comprises of advances paid and costs incurred in respect of vessel upgrades in relation to EGCS and BWTS on 9 vessels (2018: 4 vessels). This is recorded in other long term assets until such time as the equipment is installed on a vessel, at which point it is transferred to "Vessels and equipment, net" or "Investment in sales-type leases and direct financing leases'. In the year ended December 31, 2019, the Company transferred costs of $9.7 million in respect of 5 vessels to "Vessels and equipment, net".

In the year ended December 31, 2019, the Company agreed to fund EGCS installations on 3 10,600 TEU container vessels. The ~~carrying~~installation of EGCS is scheduled to be completed in 2020, at which time the cost will be transferred to 'Vessels under finance lease, net'. At December 31, 2019, costs of $21.5 million (2018: $0.0 million) in respect of these vessels has been incurred which are recorded as capital improvements in progress.

During 2018, the Company purchased 4 container vessels, Thalassa Mana, Thalassa Tyhi, Thalassa Doxa and Thalassa Axia with pre-existing time charters to Evergreen Marine. A value of ~~newbuildings represents the accumulated costs which the Company has paid~~$18.0 million was assigned to these charters in purchase installments and other capital expenditures relating to the acquisition of newbuilding vessels, together with capitalized loan interest. No interest was capitalized in the cost of newbuildings2018, in the year ended December 31, ~~2018 (2017: $1.2~~2019 the amortization charged to time charter revenue was $2.9 million (2018: $1.7 million; ~~2016: $1.2~~2017: $0.0 million).

AsLong term receivables balance at December 31, ~~2018, and~~2019 of $1.9 million (2018: $11.0 million) comprises loan notes due from third parties arising from the early termination of charters. Following an independent valuation of the notes, the Company recognized impairment losses totaling $9.2 million during the year ended December 31, ~~2017~~2019 (2018: $1.7 million; 2017: $0.0 million). (Refer to Note 10: Other financial items).

Collateral deposits exist on our interest rate, cross currency interest rate and cross currency swaps. Further amounts may be called upon during the ~~Company had no agreements for~~term of the ~~construction of newbuilding vessels.~~swaps if interest rates or currency rates more adversely.

During 2017, the Company took delivery of two newbuilding oil product carriers, which were under construction as at December 31, 2016. Upon delivery, the vessels were transferred from newbuildings to vessels and equipment (see Note 13: Vessels and equipment, net).


16.	INVESTMENTS IN SALES-TYPE LEASES, DIRECT FINANCING LEASES AND ~~SALES TYPE LEASES~~LEASEBACK ASSETS

Following the adoption of ASU 2016-02 from January 2019, the Company now records new and modified leases as per ASC 842. The Company has elected the practical expedient to not reassess existing leases. The adoption of the standard resulted in no opening balance adjustments. See also Accounting policies within Note 2.



(in thousands of $)	2019	2018
Investments in sales-type and direct financing leases	786,598	802,159
Investments in leaseback assets	207,789	—
	994,387	802,159

As at December 31, 2019, the Company had a total of 26 vessel charters accounted for as sales-type and direct financing leases (2018: 24 vessels) and 6 vessel charters classified as leaseback assets (2018: 0 vessels).

Investments in sales type and direct financing leases

As of December 31, ~~2018, three of~~2019, the ~~Company's VLCCs (2017: nine VLCCs and Suezmax tankers) were~~Company had 3 VLCC crude tankers accounted for as direct financing ~~leases.~~leases (2018: 3 VLCCs). These vessels are ~~chartered~~on charter to Frontline Shipping Limited ("Frontline Shipping") on long-term, fixed rate time charters which extend for various periods depending on the age of the ~~vessels, ranging~~vessels. The time remaining on these three charters ranges from approximately ~~six~~five to eight ~~years.~~years as at December 31, 2019. Frontline Shipping is a wholly owned subsidiary of Frontline, a related ~~party, and the~~party. The terms of the charters do not provide ~~them~~Frontline Shipping with an option to terminate the ~~charter~~charters before the end of ~~its term. The~~their terms. During the year ended December 31, 2019, 2 of these VLCC crude tankers, Front Energy and Front Force underwent EGCS installations. Costs of $4.2 million were capitalized to the net investment in lease balance of the 2 vessels, which represents a 50% share of joint costs with Frontline Shipping Limited.

During the year ended December 31, 2019, there was 0 disposals to VLCCs ~~Front Page, Front Stratus~~ ~~and~~ ~~Front Serenade~~ ~~which were~~accounted for as direct financing leases. In 2018, the Company sold 6 VLCCs accounted for as direct financing leases ~~were sold in July 2018, August 2018 and September 2018, respectively. These vessels were sold~~ to ~~ADS, a related party~~unrelated parties. (see Note 8: Gain/(loss) on sale of assets and termination of ~~charters and Note 24: Related party transactions)~~charters). ~~Prior to~~

Also at December 31, 2019, the ~~sale of these vessels, an impairment charge of $21.8 million was recorded against the carrying value of these three vessels.~~

~~The VLCC~~ ~~Front Circassia, which was accounted for as a direct financing lease, was sold in February 2018 (see Note 8: Gain/(loss) on sale of assets and termination of charters and Note 24: Related party transactions).~~

~~The VLCCs~~ ~~Front Ariake~~ ~~and~~ ~~Front Falcon,~~ ~~which were accounted for as direct financing leases, were sold in October 2018 and November 2018, respectively.An impairment charge of $6.8 million was recorded against the carrying value of VLCC~~ ~~Front Ariake~~ ~~leased to Frontline Shipping.~~

~~The~~ Company ~~owns one~~owned 1 offshore supply vessel accounted for as a direct ~~finance~~financing lease which is chartered on a long-term bareboat charter, together with ~~four~~4 other vessels accounted for as operating leases ~~to the Solstad Charterer~~ (see Note 13: Vessels and equipment, net). ~~In 2018,~~During the year ended December 31, 2019, the Company recorded an impairment charge of ~~$10.3~~$5.0 million against the ~~carrying value of this vessel.~~offshore supply vessel accounted for as a direct financing lease.

~~In addition to the remaining four vessels above leased to related and unrelated third parties,~~As at December 31, 2019, the Company ~~also~~ had ~~four (2017: two)~~19 (2018: 19) container vessels accounted for as direct financing leases and ~~one (2017: one)~~3 (2018: 1) container ~~vessel~~vessels accounted for as a sales-type lease, ~~as at December 31, 2018,~~all of which are ~~all~~ on long-term bareboat charters to MSC Mediterranean Shipping Company S.A. ("MSC"), an unrelated party. The ~~two additional container vessels,~~ ~~MSC Erica~~ ~~and~~ ~~MSC Reef,~~ ~~were also chartered infrom unrelated third parties in December 2018, and immediately commenced a finance lease out to MSC. The~~ terms of the charters for 4 of the container vessels provide a fixed price put option, purchase option or purchase obligation at the expiry of the 15 year charter ~~period for four~~period. The terms of the charters for 15 container vessels provide the charterer with purchase options throughout the term of the charters and the Company with a put option at the end of the seven years year period. The charter contract for the 1 container vessel accounted for as a sales-type lease provides the charterer with a minimum fixed price purchase obligation at the expiry of the five year charter ~~period~~period. During the year ended December 31, 2019, 2 5,800 TEU container vessels, MSC Margarita and MSC Vidhi, which were previously reported under vessels and equipment, were reclassified as sales type leases as a result of amendments made to the charter contract. Included in the amendments to the contracts, the charterer has a fixed price purchase obligation at the expiry of the additional five year charter period. The combined net book value of the vessels transferred was $27.3 million (Refer to Note 13: Vessels and equipment, net). The charter contract for these 2 container vessels provide the charterer with a minimum fixed price purchase obligation at the expiry of the five year charter period.

In 2018, and in respect of assets classified as Investments in sales type and direct financing leases, an impairment charge of $38.9 million was recorded against the carrying value of 4 VLCC's (Front Page, Front Stratus, Front Serenade and Front Ariake) and1 offshore supply vessel (Sea Leopard). In the year ended December 31, 2017 no impairments were recorded.

Investments in leaseback assets

When a sale and leaseback transaction does not qualify for sale accounting, the Company does not recognize the transferred vessels and instead accounts for the ~~fifth container vessel.~~purchase as a leaseback asset.

~~In April 2018,~~During the year ended December 31, 2019, the Company acquired~~15 second hand~~ 6 vessels where control was not deemed to have passed to the Company due to the existence of repurchase options in the leases on acquisition. These have therefore been classified as 'leaseback assets'. These comprise of 3 second-hand feeder size container vessels ~~for an aggregate~~which were acquired in a purchase ~~price of $105.5 million from a subsidiary~~and leaseback with subsidiaries of MSC. The vessels were ~~immediately leased~~chartered back ~~to the seller under seven year~~for approximately six years on bareboat ~~charters.~~basis. The charterer has purchase options throughout the term of the charters and the Company has a put option at the end of the ~~seven~~six year period. Additionally, the Company also entered into purchase and leaseback transactions to acquire 3 newbuilding crude oil tankers. The vessels were acquired from an affiliate of Hunter Group ASA ("Hunter Group") and leased back to the Hunter Group on five year bareboat charters.

~~As at December 31, 2018, the Company had a total of 24 vessels accounted for as direct financing and sales-type leases (2017: 13 vessels).~~

The following lists the components of ~~the~~ investments in sales-type leases, direct financing leases and leaseback assets as at December 31, ~~2018,~~2019 and December 31, ~~2017:~~ 2018:



(in thousands of $)	2019						2018
	Sales-Type Leases and Direct Financing Leases		Leaseback Assets		Total		Sales-Type Leases and Direct Financing Leases
Total minimum lease payments to be received	1,085,642		134,073		1,219,715		1,173,152
Less: amounts representing estimated executory costs including profit thereon, included in total minimum lease payments	(64,222	)	—		(64,222	)	(74,077	)
Net minimum lease payments receivable	1,021,420		134,073		1,155,493		1,099,075
Estimated residual values of leased property (un-guaranteed)	192,429		139,500		331,929		180,080
Less: unearned income	(427,251	)	(65,784	)	(493,035	)	(476,996	)
Total investment in sales-type lease, direct financing lease and leaseback assets	786,598		207,789		994,387		802,159
Current portion	45,361		10,828		56,189		39,804
Long-term portion	741,237		196,961		938,198		762,355

(in thousands of $) 2018
2017
Total minimum lease payments to be received 1,173,152
916,765
Less: amounts representing estimated executory costs including profit thereon, included in total minimum lease payments
(74,077 ) (211,508 )
Net minimum lease payments receivable 1,099,075
705,257
Estimated residual values of leased property (un-guaranteed) 180,080
232,424
Less: unearned income
(476,996 ) (319,610 )
Total investment in direct financing leases 802,159
618,071
Current portion 39,804
32,096
Long-term portion 762,355
585,975
802,159
618,071

~~The chartered-in vessels~~ ~~MSC Anna, MSC Viviana, MSC Erica~~ ~~and~~ ~~MSC Reef~~ ~~are included in the above and had a total carrying value of $581.2 million (2017: $283.9 million for~~ ~~MSC Anna, MSC Viviana). The minimum lease payments included above for these vessels at December 31, 2018 is $870.0 million (2017: $432.2 million).~~

The minimum future gross revenues to be received under the Company's non-cancellable sales type leases, direct financing leases and leaseback assets as of December 31, ~~2018,~~2019, are as follows:



(in thousands of $) Year ending December 31,	Sales-Type Leases and Direct Financing Leases	Leaseback Assets	Total
2020	115,463	25,369	140,832
2021	105,459	27,820	133,279
2022	109,902	27,820	137,722
2023	105,198	27,820	133,018
2024	106,817	23,392	130,209
Thereafter	542,803	1,852	544,655
Total minimum lease payments to be received	1,085,642	134,073	1,219,715

Year ending December 31, (in thousands of $)
2019 106,503
2020 105,877
2021 105,257
2022 104,849
2023 104,690
Thereafter 645,976
Total minimum lease revenues 1,173,152

The above minimum lease revenues includes ~~$162.4~~$140.8 million related to the ~~three~~3 VLCCs leased to Frontline Shipping as of December 31, ~~2018.~~2019. See Note 24: Related Party Transactions.

Interest income earned on investments in direct financing leases, sales type leases and leaseback assets in the year ended December 31, 2019 was as follows:



(in thousands of $)	2019	2018	2017
Investments in sales type and direct financing leases*	56,764	39,678	38,265
Investments in leaseback assets	3,556	—	—
Total	60,320	39,678	38,265

*Interest income earned on investments in sales-type leases and direct financing leases in the above table includes $3.8 million in relation to Frontline Shipping, is a 100% owned subsidiary of Frontline, however the performance under the leases is not guaranteed by Frontline following the amendments agreed in 2015. There is no requirement for a minimum cash balance in Frontline Shipping, but in exchange for releasing the guarantee a dividend restriction was introduced on Frontline Shipping whereby it can only make distributions to its parent company if it can demonstrate it will have minimum free cash of $2.0 million per vessel both prior to and following (i) such distribution and (ii) the payment of the next hire due and any profit share accrued under the charters. Due to the current depressed tanker market, there is a risk that Frontline Shipping may not have sufficient funds to pay the agreed charterhires. However, the performance under the fixed price agreements with Frontline Management whereby we pay management fees of $9,000 per day for each vessel to cover all operating costs including drydocking costs, is guaranteed by Frontline.related party (2018: $9.6 million; 2017: $16.4 million).


17.	INVESTMENT IN ASSOCIATED COMPANIES

The Company has, and has had, certain wholly-owned subsidiaries which are accounted for using the equity method, as it has been determined under ASC 810 that they are variable interest entities in which ~~Ship Finance~~SFL is not the primary beneficiary.

At December 31, 2019, 2018 ~~2017~~ and ~~2016,~~2017, the Company had the following participation in investments that are recorded using the equity method:



	2019		2018		2017
SFL Deepwater Ltd	100.00	%	100.00	%	100.00	%
SFL Hercules Ltd	100.00	%	100.00	%	100.00	%
SFL Linus Ltd	100.00	%	100.00	%	100.00	%

2018
2017
2016
SFL Deepwater Ltd 100.00 % 100.00 % 100.00 %
SFL Hercules Ltd 100.00 % 100.00 % 100.00 %
SFL Linus Ltd 100.00 % 100.00 % 100.00 %

SFL Deepwater Ltd. ("SFL Deepwater"), SFL Hercules Ltd. ("SFL Hercules"), and SFL Linus Ltd. ("SFL Linus") each own drilling units which have been leased to subsidiaries of Seadrill Limited (“Seadrill”), a related party, as further described below. In September 2017, Seadrill announced that it has entered into a restructuring agreement (the “Restructuring Plan”) with more than 97% of its secured bank lenders, approximately 40% of its bondholders and a consortium of investors led by its largest shareholder, Hemen Holding Limited (“Hemen”), who is also the largest shareholder in the Company. The Company, SFL Deepwater, SFL Hercules and SFL Linus have also entered into the Restructuring Plan, which has been implemented by way of prearranged Chapter 11 cases. As part of the Restructuring Plan, the financial covenants on Seadrill have been replaced by financial covenants on a newly established subsidiary of Seadrill, Seadrill Rig Holding Company Limited (“RigCo”), who also acts as guarantor for the obligations under the leases for the ~~three~~3 drilling units, on a subordinated basis to the senior secured lenders in Seadrill and new secured notes.

SFL Deepwater is a 100% owned subsidiary of ~~Ship Finance,~~SFL, incorporated in 2008 for the purpose of holding ~~two~~2 ultra deepwater drilling rigs and leasing those rigs to Seadrill Deepwater Charterer Ltd. and Seadrill Offshore AS, fully guaranteed by their parent company Seadrill. In June 2013, SFL Deepwater transferred one of the rigs and the corresponding lease to SFL Hercules (see below). Accordingly, SFL Deepwater now holds ~~one~~1 ultra deepwater drilling rig which is leased to Seadrill Deepwater Charterer Ltd. In October 2013, SFL Deepwater entered into a $390 million five ~~year~~years term loan and revolving credit facility with a syndicate of banks, which was used in November 2013 to refinance the previous loan facility. In connection with the Restructuring Plan, certain amendments were agreed with the banks under the loan facility, including an extension of the final maturity date by four years. At December 31, ~~2018,~~2019, the balance outstanding under the new facility was ~~$203.7~~$187.9 million ~~(2017: $225.8~~(2018: $203.7 million), and the available amount under the revolving part of the facility was ~~$nil (2017: $nil)~~$0 million (2018: $0 million). The Company guaranteed $84.7 million of this debt at December 31, ~~2018 (2017: $75.0~~2019 (2018: $84.7 million). In addition, the Company has given the banks a first priority pledge over all shares of SFL Deepwater and assignedall claims under a secured loan made by the Company to SFL Deepwater in favor of the banks. This loan is secured by a second priority mortgage over the rig which has been assigned to the banks. The rig is chartered on a bareboat basis and the terms of the charter provide the charterer with various call options to acquire the rig at certain dates throughout the charter. In addition, there is an obligation for the charterer to purchase the rig at a fixed price at the end of the charter, which originally expired in November 2023. In connection with the Restructuring Plan, the lease has been extended by 13 months until December 2024. Because the main asset of SFL Deepwater is the subject of a lease which includes both fixed price call options and a fixed price purchase obligation, it has been determined that this subsidiary of ~~Ship Finance~~SFL is a variable interest entity in which ~~Ship Finance~~SFL is not the primary beneficiary.

SFL Hercules is a 100% owned subsidiary of ~~Ship Finance,~~SFL, incorporated in 2012 for the purpose of holding an ultra deepwater drilling rig and leasing that rig to Seadrill Offshore AS, fully guaranteed by its parent company Seadrill. The rig was transferred, together with the corresponding lease, to SFL Hercules from SFL Deepwater in June 2013. In May 2013, SFL Hercules entered into a $375 million six ~~year~~years term loan and revolving credit facility with a syndicate of banks to partly finance its acquisition of the rig from SFL Deepwater. The facility was drawn in June 2013. In connection with the Restructuring Plan, certain amendments were agreed with the banks under the loan facility, including an extension of the final maturity date by four years. At December 31, ~~2018,~~2019, the balance outstanding under this facility was ~~$210.0~~$201.9 million ~~(2017: $251.3~~(2018: $210.0 million), and the available amount under the revolving part of the facility was ~~$nil (2017: $nil)~~$0 million (2018: $0 million). The Company guaranteed $78.9 million of this debt at December 31, ~~2018 (2017: $70.0~~2019 (2018: $78.9 million). In addition, the Company has given the banks a first priority pledge over all shares of SFL Hercules and assignedall claims under a secured loan made by the Company to SFL Hercules in favour of the banks. This loan is secured by a second priority mortgage over the rig which has been assigned to the banks. The rig is chartered on a bareboat basis and the terms of the charter provide the charterer with various call options to acquire the rig at certain dates throughout the charter. In addition, there is an obligation for the charterer to purchase the rig at a fixed price at the end of the charter, which originally expired in November 2023. In connection with the Restructuring Plan, the lease has been extended by 13 months until December 2024. Because the main asset of SFL Hercules is the subject of a lease which includes both fixed price call options and a fixed price purchase obligation at the end of the charter, it has been determined that this subsidiary of ~~Ship Finance~~SFL is a variable interest entity in which ~~Ship Finance~~SFL is not the primary beneficiary.

SFL Linus is a 100% owned subsidiary of ~~Ship Finance,~~SFL, acquired in 2013 from North Atlantic Drilling Ltd ("NADL"), a related party. SFL Linus holds a harsh environment jack-up drilling rig which was delivered from the shipyard in February 2014 and immediately leased to North Atlantic Linus Charterer Ltd., fully guaranteed by its parent company NADL. NADL is now a subsidiary of Seadrill. In October 2013, SFL Linus entered into a $475 million five ~~year~~years term loan and revolving credit facility with a syndicate of banks to partly finance the acquisition of the rig. The facility was drawn in February 2014. In connection with the Restructuring Plan, certain amendments were agreed with the banks under the loan facility, including an extension of the final maturity date by four years. At December 31, ~~2018,~~2019, the balance outstanding under this facility was ~~$241.5~~$232.1 million ~~(2017: $308.8~~(2018: $241.5 million) and, the available amount under the revolving part of the facility was ~~$nil (2017: $nil)~~$0 million (2018: $0 million). The Company guaranteed $102.5 million of this debt at December 31, ~~2018 (2017: $90.0~~2019 (2018: $102.5 million). In addition, the Company has given the banks a first priority pledge over all shares of SFL Linus and assignedall claims under a secured loan made by the Company to SFL Linus in ~~favour~~favor of the banks. This loan is secured by a second priority mortgage over the rig which has been assigned to the banks. In February 2015, amendments were made to the lease, whereby Seadrill replaced NADL as lease guarantor. The rig is chartered on a bareboat basis and the terms of the charter provide the charterer with various call options to acquire the rig at certain dates throughout the charter. In addition, the charter includes a fixed price put option at the expiry of the charter in 2029. Because the main asset of SFL Linus is the subject of a lease which includes both fixed price call options and a fixed price put option, it has been determined that this subsidiary of ~~Ship Finance~~SFL is a variable interest entity in which ~~Ship Finance~~SFL is not the primary beneficiary.

Summarized balance sheet information of the Company's equity method investees is as follows:


	As of December 31, 2018				As of December 31, 2019
(in thousands of $)	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus
Current assets	58,089	19,558	16,858	21,673	75,079	29,047	22,645	23,387
Non-current assets	967,954	302,362	290,370	375,222	920,801	286,222	273,621	360,958
Total assets	1,026,043	321,920	307,228	396,895	995,880	315,269	296,266	384,345
Current liabilities	69,181	18,252	19,487	31,442	65,832	19,168	20,761	25,903
Non-current liabilities (1)	931,755	297,060	281,627	353,068	887,887	285,147	265,769	336,971
Total liabilities	1,000,936	315,312	301,114	384,510	953,719	304,315	286,530	362,874
Total shareholders' equity (2)	25,107	6,608	6,114	12,385
Total stockholders' equity (2)					42,161	10,954	9,736	21,471


	As of December 31, 2017				As of December 31, 2018
(in thousands of $)	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus
Current assets	97,723	26,242	29,152	42,329	58,089	19,558	16,858	21,673
Non-current assets	1,020,067	317,450	305,852	396,765	967,954	302,362	290,370	375,222
Total assets	1,117,790	343,692	335,004	439,094	1,026,043	321,920	307,228	396,895
Current liabilities	106,628	25,642	29,443	51,543	69,181	18,252	19,487	31,442
Non-current liabilities (1)	1,000,484	315,415	302,819	382,250	931,755	297,060	281,627	353,068
Total liabilities	1,107,112	341,057	332,262	433,793	1,000,936	315,312	301,114	384,510
Total shareholders' equity (2)	10,678	2,635	2,742	5,301
Total stockholders' equity (2)					25,107	6,608	6,114	12,385

(1)

SFL Deepwater, SFL Hercules and SFL Linus non-current liabilities at December 31, ~~2018,~~2019, include ~~$109.0~~$113.0 million ~~(2017: $113.0~~(2018: $109.0 million), $80.0 million ~~(2017:~~(2018: $80.0 million) and $121.0 million ~~(2017:~~(2018: $121.0 million) due to ~~Ship Finance,~~SFL, respectively (see Note 24: Related party transactions). In addition, SFL Deepwater, SFL Hercules and SFL Linus current liabilities at December 31, ~~2018,~~2019, include a further $1.2 million (2018: $0.0 million), $3.4 million (2018: $10.1 million) and $7.4 million ~~and~~(2018: $21.7 ~~million due to Ship Finance. SFL Deepwater balance was $nil (2017: $0.1 million, $3.6 million and $0.2~~ million) due to ~~Ship Finance~~SFL, respectively (see Note 24: Related party transactions).


(2)	In the year ended December 31, ~~2018,~~2019, SFL Deepwater, SFL Hercules and SFL Linus did not pay any dividends ~~(2017:~~(2018: $0.0 million; 2017: $3.4 ~~million; 2016: $46.3~~ million), ~~(2017:~~(2018: $0.0 million; 2017: $3.8 ~~million; 2016: $25.1~~ million), ~~(2017:~~(2018: $0.0 million; 2017: $7.3 ~~million; 2016: $42.1~~ million), respectively.

Summarized statement of operations information of the Company's wholly-owned equity method investees is shown below.


	Year ended December 31, 2018				Year ended December 31, 2019
(in thousands of $)	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus
Operating revenues	64,572	19,594	19,126	25,852	64,142	18,966	18,378	26,798
Net operating revenues	64,410	19,540	19,049	25,821	64,142	18,966	18,378	26,798
Net income (3)	14,635	3,973	3,372	7,290	17,054	4,346	3,622	9,086


	Year ended December 31, 2017				Year ended December 31, 2018
(in thousands of $)	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus
Operating revenues	73,487	20,873	21,827	30,787	64,572	19,594	19,126	25,852
Net operating revenues	73,487	20,873	21,827	30,787	64,410	19,540	19,049	25,821
Net income (3)	23,766	5,981	6,462	11,323	14,635	3,973	3,372	7,290


	Year ended December 31, 2016				Year ended December 31, 2017
(in thousands of $)	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus	TOTAL	SFL Deepwater	SFL Hercules	SFL Linus
Operating revenues	80,269	22,088	23,292	34,889	73,487	20,873	21,827	30,787
Net operating revenues	80,269	22,088	23,292	34,889	73,487	20,873	21,827	30,787
Net income (3)	27,765	6,778	6,424	14,563	23,766	5,981	6,462	11,323

(3)

The net income of SFL Deepwater, SFL Hercules and SFL Linus for the year ended December 31, ~~2018,~~2019, includes interest payable to ~~Ship Finance~~SFL amounting to $5.1 million ~~(2017:~~(2018: $5.1 million; 2017: $5.4 ~~million; 2016: $6.5~~ million), $3.6 million ~~(2017:~~(2018: $3.6 million; 2017: $4.3 ~~million; 2016: $6.5~~ million), and $5.4 million ~~(2017:~~(2018: $5.4 million; 2017: $5.5 ~~million; 2016: $5.6~~ million), respectively (see Note 24: Related party transactions).

SFL Deepwater, SFL Hercules and SFL Linus have loan facilities for which ~~Ship Finance~~SFL provides limited guarantees, as indicated above. These loan facilities ~~contain~~originally contained financial covenants with which ~~Ship Finance~~both SFL and Seadrill must comply. As part of ~~the~~Seadrill's Restructuring Plan, the financial covenants on Seadrill were replaced by financial covenants on a newly established subsidiary of Seadrill, Seadrill Rig Holding Company Limited (“RigCo”), who also acts as guarantor for the obligations under the leases for the ~~three~~3 drilling units, on a subordinated basis to the senior secured lenders in Seadrill and new secured notes. As at December 31, ~~2018, Ship Finance and Seadrill were~~2019, the Company was in compliance with all of the ~~applicable~~ covenants under these long-term debt ~~facilities.~~facilities and has not been notified of non-compliance on the part of RigCo.


18.	ACCRUED EXPENSES



(in thousands of $)	2019	2018
Vessel operating expenses	8,668	5,395
Administrative expenses	1,694	628
Interest expense	6,770	6,487
	17,132	12,510

(in thousands of $) 2018
2017
Vessel operating expenses 5,395
6,111
Administrative expenses 628
552
Interest expense 6,487
6,688
12,510
13,351


19.	OTHER CURRENT LIABILITIES



(in thousands of $)	2019	2018
Deferred and prepaid charter revenue	10,000	7,562
Employee taxes	3,117	195
Other items	162	575
	13,279	8,332

(in thousands of $) 2018
2017
Deferred and prepaid charter revenue 7,562
3,936
Employee taxes 195
18
Other items 575
1,739
8,332
5,693


20.	SHORT-TERM AND LONG-TERM DEBT



(in thousands of $)	2019		2018
Long-term debt:
Norwegian kroner 900 million senior unsecured floating rate bonds due 2019	—		77,722
Norwegian kroner 500 million senior unsecured floating rate bonds due 2020	56,910		57,829
5.75% senior unsecured convertible bonds due 2021	212,230		212,230
Norwegian kroner 700 million senior unsecured floating rate bonds due 2023	79,674		69,395
4.875% senior unsecured convertible bonds due 2023	148,300		151,700
Norwegian kroner 700 million senior unsecured floating rate bonds due 2024	79,674		—
Borrowings secured on Frontline shares	36,763		—
U.S. dollar denominated floating rate debt due through 2025	1,013,626		891,471
Total debt principal	1,627,177		1,460,347
Less: unamortized debt issuance costs	(19,089	)	(23,267	)
Less: current portion of long-term debt	(253,059	)	(267,149	)
Total long-term debt	1,355,029		1,169,931

(in thousands of $) 2018
2017
Long-term debt:
3.25% senior unsecured convertible bonds due 2018 —
63,218
Norwegian kroner 900 million senior unsecured floating rate bonds due 2019 77,722
92,477
Norwegian kroner 500 million senior unsecured floating rate bonds due 2020 57,829
61,001
5.75% senior unsecured convertible bonds due 2021 212,230
225,000
Norwegian kroner 600 million senior unsecured floating rate bonds due 2023 69,395
—
4.875% senior unsecured convertible bonds due 2023 151,700
—
U.S. dollar denominated floating rate debt due through 2025 891,471
1,081,204
Total debt principal 1,460,347
1,522,900
Less: unamortized debt issuance costs
(23,267 ) (18,893 )
Less: current portion of long-term debt
(267,149 ) (313,823 )
Total long-term debt 1,169,931
1,190,184

The outstanding debt as of December 31, ~~2018~~2019, is repayable as follows:



Year ending December 31,	(in thousands of $)
2020	253,059
2021	523,156
2022	265,106
2023	299,650
2024	282,033
Thereafter	4,173
Total debt principal	1,627,177

Year ending December 31, (in thousands of $)
2019 267,149
2020 196,093
2021 463,516
2022 199,466
2023 321,830
Thereafter 12,293
Total debt principal 1,460,347

The weighted average interest rate for consolidated floating rate debt denominated in U.S. dollars and Norwegian kroner ("NOK") as at December 31, ~~2018,~~2019, was ~~4.22%~~4.27% per annum including margin ~~(2017: 4.26%~~(2018: 4.22%). This rate takes into consideration the effect of related interest rate swaps. At December 31, ~~2018,~~2019, the three month US Dollar London Interbank Offered Rate ("LIBOR") was ~~2.808% (2017: 1.694%~~1.91% (2018: 2.81%) and the three month Norwegian Interbank Offered Rate ("NIBOR") was 1.84% (2018: 1.27% ~~(2017: 0.81%~~).

~~3.25% senior unsecured convertible bonds due 2018~~

On January 30, 2013, the Company issued a senior unsecured convertible bond loan totaling $350.0 million. Interest on the bonds is fixed at 3.25% per annum and is payable in cash quarterly in arrears on February 1, May 1, August 1 and November 1. The bonds are convertible into Ship Finance International Limited common shares at any time up to 10 banking days prior to February 1, 2018. Subject to adjustment for any dividend payments in the future, the conversion price at the time of issue was $21.945 per share which represented a premium of approximately 33% to the share price at the time.

In October 2017, the Company entered into separate privately negotiated transactions with certain holders of the bonds and converted principal amounts totaling $121.0 million of the outstanding bonds into 9,418,798 common shares. The Company had previously purchased and canceled bonds with principal amounts totaling $165.8 million in October 2016. The net amount outstanding at December 31, 2018, was $nil (2017: $63.2 million). No gain or loss was recorded in the year ended December 31, 2018 in respect of the equity conversions (2017: a loss of $1.5 million was recorded in the year ended December 31, 2017 on the purchase and cancellation of bonds; 2016: $8.8 million).

In conjunction with the bond issue, the Company loaned up to 6,060,606 of its common shares to an affiliate of one of the underwriters of the issue, in order to assist investors in the bonds to hedge their position. The shares that were lent by the Company were borrowed from Hemen, the largest shareholder of the Company, for a one-time loan fee of $1.0 million.

~~In February 2018, the Company redeemed the full outstanding amount of $63.2 million. This was fully paid in cash, and the premium settled in common shares with the issuance of 651,365 new shares.~~

As required by ASC 470-20 "Debt with conversion and Other Options", the Company calculated the equity component of the convertible bond, taking into account both the fair value of the conversion option and the fair value of the share lending arrangement. The equity component was valued at $20.7 million in 2013 and this amount was recorded as "Additional paid-in capital", with a corresponding adjustment to "Deferred charges", which are amortized to "Interest expense" over the appropriate period. The amortization of this item amounted to $0.1 million in the year ended December 31, 2018 (2017: $1.8 million). The equity component of the converted bonds in 2018 was valued at $nil (2017: $16.4 million for the purchased and canceled bonds) and this amount has been deducted from "Additional paid-in capital".

NOK900 million senior unsecured bonds due 2019

On March 19, 2014, the Company issued a senior unsecured bond loan totaling NOK900.0 million in the Norwegian credit market. The bonds bear quarterly interest at NIBOR plus a margin and are redeemable in full on March 19, 2019. The bonds may, in their entirety, be redeemed at the Company's option from September 19, 2018, upon giving the bondholders at least 30 business ~~days~~days' notice and paying 100.50% of par value plus accrued interest. Subsequent to their issue, ~~at December 31, 2018,~~ the Company has purchased bonds with principal amounts totaling NOK228.0 ~~million (2017: NOK142.0 million), which are being held as treasury bonds.~~million. In March 2019, the Company redeemed in the full outstanding amount of NOK672.0 million. This was fully paid in cash. The net amount outstanding at December 31, ~~2018,~~2019, wasNaN (NOK0.0 million), equivalent to NaN (2018: NOK672.0 million, equivalent to $77.7 ~~million (2017: NOK758.0 million, equivalent to $92.5~~ million).

NOK500 million senior unsecured bonds due 2020

On June 22, 2017, the Company issued a senior unsecured bond loan totaling NOK500.0 million in the Norwegian credit market. The bonds bear quarterly interest at NIBOR plus a margin and are redeemable in full on June 22, 2020. The net amount outstanding at December 31, ~~2018,~~2019, was NOK500.0 million, equivalent to ~~$57.8~~$56.9 million ~~(2017:~~(2018: NOK500.0 million, equivalent to ~~$61.0~~$57.8 million).

5.75% senior unsecured convertible bonds due 2021

On October 5, 2016, the Company issued a senior unsecured convertible bond loan totaling $225.0 million. Interest on the bonds is fixed at 5.75% per annum and is payable in cash quarterly in arrears on January 15, April 15, July 15 and October 15. The bonds are convertible into ~~Ship Finance International Limited~~SFL Corporation Ltd. common shares and mature on October 15, 2021. The net amount outstanding at December 31, ~~2018~~2019 was $212.2 million ~~(2017: $225.0~~(2018: $212.2 million). The initial conversion rate at the time of issuance was 56.2596 common shares per $1,000 bond, equivalent to a conversion price of approximately $17.7747 per share. The conversion rate will be adjusted for dividends in excess of $0.225 per common share per quarter. Since the issuance, dividend distributions have increased the conversion rate to ~~62.9233~~65.4510 common shares per $1,000 bond, equivalent to a conversion price of approximately ~~$15.8924~~$15.28 per share. Based on the closing price of our common stock of ~~$10.53~~$14.54 on December 31, ~~2018,~~2019, the if-converted value was less than the principal amounts by ~~$77.5~~$12.6 million. ~~In December 2018, the~~The Company purchased bonds with principal amounts totaling $12.8 million ~~(2017: $nil)~~in 2018 resulting in a gain of $0.9 ~~million being recorded (2017: $nil; 2016: $nil).~~million. No bonds were purchased in the year ended December 31, 2019.

In conjunction with the bond issue, the Company loaned up to 8,000,000 of its common shares to an affiliate of one of the underwriters of the issue,in order to assist investors in the bonds to hedge their position. The shares that were lent by the Company were initially borrowed from Hemen, the largest shareholder of the Company, for a one-time loan fee of $120,000. In November 2016, the Company issued 8,000,000 new shares, to replace the shares borrowed from Hemen and received $80,000 from Hemen upon the return of the borrowed shares.

As required by ASC 470-20 "Debt with conversion and Other Options", the Company calculated the equity component of the convertible bond, taking into account both the fair value of the conversion option and the fair value of the share lending arrangement. The equity component was valued at $4.6 million ~~in 2016~~at issuance and this amount was recorded as "Additional paid-in capital", with a corresponding adjustment to "Deferred charges", which are amortized to "Interest expense" over the appropriate period. The ~~equity component was valued at $4.1 million in 2018. The~~ amortization of this item amounted to ~~$0.9~~$0.7 million in the year ended December 31, ~~2018 (2017:~~2019 (2018: $0.9 million). As a result of the purchase of bonds in 2018 with principal amounts totaling $12.8 million ~~(2017: $nil),~~ a total of $0.5 million ~~(2017: $nil)~~ was allocated as the reacquisition of the equity component. The balance remaining in equity as at December 31, 2019 was $4.0 million (2018: $4.0 million).

~~NOK600~~NOK 700 millionsenior unsecured bonds due 2023

On September 13, 2018 the Company issued a senior unsecured bond totaling NOK600 million in the Norwegian credit market. The bonds bear quarterly interest at NIBOR plus a margin and are redeemable in full on September 13, 2023. On July 30, 2019, the Company conducted a tap issue of NOK100 million under this facility. The bonds were issued at 101.625% of par, and the new outstanding amount after the tap issue is NOK700 million. The net amount outstanding at December 31, ~~2018,~~2019, was NOK700 million, equivalent to $79.7 million (2018: NOK600 million, equivalent to $69.4 ~~million (2017: NOKnil, equivalent to $nil)~~million).

4.875% senior unsecured convertible bonds due 2023

On April 23, 2018, the Company issued a senior unsecured convertible bond totaling $150.0 million. Additional bonds were issued on May 4, 2018 at a principal amount of $14.0 million. Interest on the bonds is fixed at 4.875% per annum and is payable in cash quarterly in arrears on February 1, May 1, August 1 and November 1. The bonds are convertible into ~~Ship Finance International Limited~~SFL Corporation Ltd. common shares and mature on May 1, 2023. The net amount outstanding at December 31, ~~2018~~2019 was $148.3 million (2018: $151.7 ~~million (December 31, 2017: $nil)~~million). The initial conversion rate at the time of issuance was 52.8157 common shares per $1,000 bond, equivalent to a conversion price of approximately $18.93 per share. Since the issuance, dividend distributions have increased the conversion rate to ~~58.7171~~65.4462 common shares per $1,000 bond, equivalent to a conversion price of approximately ~~$17.03~~$15.28 per share. Based on the closing price of our common stock of ~~$10.53~~$14.54 on December 31, ~~2018,~~2019, the if-converted value was less than the principal amounts by ~~$65.5~~$11.6 million. In ~~December 2018,~~January 2019, the Company purchased bonds with principal amounts totaling $3.4 million (2018: $12.3 ~~million (2017: $nil)~~million). A gain of ~~$0.4~~$0.3 million was recorded on the transaction ~~(2017: $nil; 2016: $nil)~~(2018: $0.4 million).

In conjunction with the bond issue, the Company agreed to loan up to 7,000,000 of its common shares to affiliates of the underwriters of the issue, in order to assist investors in the bonds to hedge their position. As at December 31, ~~2018,~~2019, a total of 3,765,842 shares were issued from up to 7,000,000 shares issuable under a share lending arrangement.

amortization of this item amounted to ~~$1.0~~$1.3 million in the year ended December 31, ~~2018 (2017: $nil)~~2019 (2018: $1.0 million). As a result of the purchase of bonds with principal amounts totaling $3.4 million (2018: $12.3 ~~million (2017: $nil)~~million), a total of $0.2 million (2018: $0.6 ~~million (2017: $nil)~~million) was allocated as the reacquisition of the equity component. The balance remaining in equity as at December 31, 2019 was $7.1 million (2018:$7.4 million).

NOK700 million senior unsecured bonds due 2024

On June 4, 2019, the Company issued a senior unsecured bond totaling NOK700 million in the Norwegian credit market. The bonds bear quarterly interest at NIBOR plus a margin and are redeemable in full on June 4, 2024. The net amount outstanding at December 31, 2019 was NOK700 million equivalent to $79.7 million (2018: NOK0 million, equivalent to $0.0 million).

$5024.9 million senior secured term ~~credit~~loan facility

In ~~June 2018, 15~~February 2019, 3 wholly-owned subsidiaries of the Company entered into a ~~$50.0~~$24.9 million senior secured term loan facility with a bank, secured against 15 feeder size container vessels. The 15 vessels were delivered in April 2018. The Company has provided a corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of seven years. The net amount outstanding at December 31, 2018, was $46.9 million (2017: $nil).

~~$17.5 million secured term loan facility due 2023~~

~~In December 2018, two wholly-owned subsidiaries of the Company entered into a $17.5 million secured term loan facility with a bank, secured against two~~3 Supramax dry bulk carriers. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately five years. The net amount outstanding at December 31, 2019, was $22.9 million (2018: $0.0 million).

$50 million senior secured term loan facility

In February 2019, 3 wholly-owned subsidiaries of the Company entered into a$50 million senior secured term loan facility with a bank, secured against 3 tankers chartered to Frontline Shipping. The Company has provided a corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately four years. The net amount outstanding at December 31, 2019, was $50.0 million (2018: $0.0 million).

$29.5 million term loan facility

In March 2019, 2 wholly-owned subsidiaries of the Company entered into a $29.5 million term loan facility with a bank, secured against 2 car carriers. The Company has provided a corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately five years. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$17.5~~$27.0 million ~~(2017: $nil ).~~(2018: $0.0 million).

$33.1 million term loan facility

In June 2019, 5 wholly-owned subsidiaries of the Company entered into a $33.1 million term loan facility with a syndicate of banks. The Company has provided a corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately four years. The net amount outstanding at December 31, 2019, was $33.1 million (2018: $0.0 million).

$142.5 million senior secured term loan facility

In September 2019, 3 wholly-owned subsidiaries of the Company entered into a $142.5 million senior secured term loan facility with a bank, to partly fund the acquisition of 3 newbuilding crude oil tankers, against which the facility is secured. The Company has provided a corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of five years from the delivery of each vessel. The net amount outstanding at December 31, 2019, was $142.5 million (2018: $0.0 million).

$43 million secured term loan facility

In February 2010, a wholly-owned subsidiary of the Company entered into a $42.6 million secured term loan facility with a bank, bearing interest at LIBOR plus a margin and with a term of approximately five years. The facility is secured against a Suezmax tanker. In November 2014 and November 2019 the terms of the loan were amended and restated, and the facility now matures in ~~November 2019.~~February 2020. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$17.8~~$14.9 million ~~(2017: $20.6~~(2018: $17.8 million).

$43 million secured term loan facility

In March 2010, a wholly-owned subsidiary of the Company entered into a $42.6 million secured term loan facility with a bank, bearing interest at LIBOR plus a margin and with a term of approximately five years. The facility is secured against a Suezmax tanker. In March 2015, the terms of the loan were amended and restated, and the facility now matures in March 2020. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$17.8~~$14.9 million ~~(2017: $20.6~~(2018: $17.8 million).

~~$54 million secured term loan facility~~

In November 2010, two wholly-owned subsidiaries of the Company entered into a $53.7 million secured term loan facility with a bank, secured against two Supramax dry bulk carriers. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and had a term of approximately eight years. This was fully repaid in December 2018. The net amount outstanding at December 31, 2018, was $nil (2017: $26.3 million).

$75 million secured term loan facility

In March 2011, ~~three~~3 wholly-owned subsidiaries of the Company entered into a $75.4 million secured term loan facility with a bank, secured against ~~three~~3 Supramax dry bulk carriers. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately eight years. This was fully repaid in February 2019. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$32.7~~$0 million ~~(2017: $39.0~~(2018: $32.7 million).

$171 million secured term loan facility

In May 2011, ~~eight~~8 wholly-owned subsidiaries of the Company entered into a $171.0 million secured loan facility with a syndicate of banks. The facility is supported by China Export & Credit Insurance Corporation, or SINOSURE, which provides an insurance policy in favor of the banks for part of the outstanding loan. The facility is secured against a 1,700 TEU container vessel and ~~seven~~7 Handysize dry bulk carriers. The facility bears interest at LIBOR plus a margin and has a term of approximately ten years from delivery of each vessel. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$73.7~~$63.4 million ~~(2017: $98.0~~(2018: $73.7 million).

$45 million secured term loan and revolving credit facility

In June 2014, ~~seven~~7 wholly-owned subsidiaries of the Company entered into a $45.0 million secured term loan and revolving credit facility with a bank, secured against ~~seven~~7 4,100 TEU container vessels. The facility bears interest at LIBOR plus a margin and has a term of five years. During June 2019, the terms of loan were amended and the loan was extended by a further two years. At December 31, ~~2018,~~2019, the available amount under the revolving part of the facility was ~~$nil (2017: $9.0~~$0 million (2018: $0.0 million). The net amount outstanding at December 31, ~~2018,~~2019, was $45.0 million ~~(2017: $36.0~~(2018: $45.0 million).

$101 million secured term loan facility

In August 2014, ~~six~~6 wholly-owned subsidiaries of the Company entered into a $101.4 million secured term loan facility with a syndicate of banks, secured against ~~six~~6 offshore support vessels. ~~One~~NaN of the vessels was sold in February 2016 and the facility now relates to the remaining ~~five~~5 vessels. The Company ~~has~~ provided a limited corporate guarantee for this facility, which ~~bears~~bore interest at LIBOR plus a margin and ~~has~~had a term of five years. In October 2017, certain amendments were made to the agreement, including an extension of the final maturity date until January 2023. In June 2019, the Company repurchased $11.0 million of the facility for $9.4 million and recognized a gain on debt extinguishment of $1.7 million. Following the repurchase, the remaining outstanding balance of $33.1 million was refinanced with a new $33.1 million term loan facility in June 2019. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$44.1~~$0.0 million ~~(2017:~~(2018: $44.1 million).

$20 million secured term loan facility

In September 2014, ~~two~~2 wholly-owned subsidiaries of the Company entered into a $20.0 million secured term loan facility with a bank, secured against ~~two~~2 5,800 TEU container vessels. The facility bears interest at LIBOR plus a margin and has a term of five years. In September 2019, the terms of the loan were amended and restated, and the facility now matures in March 2024. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$20.0~~$19.1 million ~~(2017:~~(2018: $20.0 million).

$128 million secured term loan facility

In September 2014, ~~two~~2 wholly-owned subsidiaries of the Company entered into a $127.5 million secured term loan facility with a bank, secured against ~~two~~2 8,700 TEU container vessels, which were delivered in 2014. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of seven years. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$92.4~~$84.0 million ~~(2017: $100.9~~(2018: $92.4 million).

$128 million secured term loan facility

In November 2014, ~~two~~2 wholly-owned subsidiaries of the Company entered into a $127.5 million secured term loan facility with a bank, secured against ~~two~~2 8,700 TEU container vessels, which were delivered in 2015. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of seven years. The net amount outstanding at December 31, ~~2018~~2019 was ~~$95.6~~$87.1 million ~~(2017: $104.1~~(2018: $95.6 million).

$39 million secured term loan facility

In December 2014, ~~two~~2 wholly-owned subsidiaries of the Company entered into a $39.0 million secured term loan facility with a bank, secured against ~~two~~2 Kamsarmax dry bulk carriers. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately eight years. The net amount outstanding at December 31, ~~2018,~~2019, was ~~$26.7~~$24.3 million ~~(2017: $29.1~~(2018: $26.7 million).

~~$250 million secured revolving credit facility~~

In June 2015, 17 wholly-owned subsidiaries of the Company entered into a $250.0 million secured revolving credit facility with a syndicate of banks, secured against 17 tankers chartered to Frontline Shipping. Eight of the tankers were sold and delivered to their new owners prior to December 31, 2017, and the facility was secured against the remaining nine tankers at December 31, 2017. The facility bore interest at LIBOR plus a margin and had a term of three years before repayment in December 2018. At December 31, 2018, the available amount under the facility was $nil (2017: $nil). The net amount outstanding at December 31, 2018, was $nil (2017: $149.0 million).

$166 million secured term loan facility

In July 2015, ~~eight~~8 wholly-owned subsidiaries of the Company entered into a $166.4 million secured term loan facility with a syndicate of banks, secured against ~~eight~~8 Capesize dry bulk carriers. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of seven years. The net amount outstanding at December 31, ~~2018~~2019 was ~~$117.9~~$104.0 million ~~(2017: $131.7~~(2018: $117.9 million).

$210 million secured term loan facility

In November 2015, ~~three~~3 wholly-owned subsidiaries of the Company entered into a $210.0 million secured term loan facility with a syndicate of banks, to partly finance the acquisition of ~~three~~3 container vessels, against which the facility is secured. ~~One~~NaN of the vessels was delivered in 2015, and the remaining ~~two~~2 vessels were delivered in 2016. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of five years from the delivery of each vessel. At December 31, ~~2018,~~2019, the net amount outstanding was ~~$173.9~~$160.8 million ~~(2017: $187.0~~(2018: $173.9 million).

$76 million secured term loan facility

In August 2017, ~~two~~2 wholly-owned subsidiaries of the Company entered into a $76.0 million secured term loan facility with a bank, secured against ~~two~~2 product tanker vessels. The ~~two~~2 vessels were delivered in August 2017. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of seven years. At December 31, ~~2018,~~2019, the net amount outstanding was ~~$69.5~~$64.3 million ~~(2017: $74.7~~(2018: $69.5 million).

$50 millionsecured term credit facility

In June 2018, 15 wholly-owned subsidiaries of the Company entered into a $50.0 million secured term loan facility with a bank, secured against 15 feeder size container vessels. The 15 feeder size container vessels were delivered in April 2018. The Company has provided a corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of seven years. The net amount outstanding at December 31, 2019, was $40.7 million (2018: $46.9 million).

$17.5 million secured term loan facility due 2023

In December 2018, 2 wholly-owned subsidiaries of the Company entered into a $17.5 million secured term loan facility with a bank, secured against 2 Supramax dry bulk carriers. The Company has provided a limited corporate guarantee for this facility, which bears interest at LIBOR plus a margin and has a term of approximately five years. The net amount outstanding at December 31, 2019, was $15.7 million (2018: $17.5 million).

Borrowings secured on Frontline shares

As at December 31, 2019, the Company had a forward contract to repurchase 3.4 million shares of Frontline on June 30, 2020 for $36.8 million. The transaction has been accounted for as a secured borrowing, with the shares transferred to 'Marketable securities pledged to creditors' and a liability recorded at December 31, 2019 within debt for $36.8 million. The Company is required to post collateral of 20% of the total repurchase price plus 100% of the mark to market movement from the repurchase price for the duration of the agreement. As at December 31, 2019, $3.5 million was held as collateral as restricted cash.

The aggregate book value of assets pledged as security against borrowings at December 31, ~~2018,~~2019, was ~~$1,527~~$1,753 million ~~(2017: $1,908~~(2018: $1,527 million).

Agreements related to long-term debt provide limitations on the amount of total borrowings and secured debt, and acceleration of payment under certain circumstances, including failure to satisfy certain financial covenants. As of December 31, ~~2018,~~2019, the Company is in compliance with all of the covenants under its long-term debt facilities. In addition, the $101.4 million secured term loan facility entered into in August 2014 contains certain financial covenants on Solship. As at December 31, 2018, Solship was in compliance with all covenants under the loan agreement.


21.	~~CAPITAL~~FINANCE LEASE ~~OBLIGATIONS~~LIABILITY AND OTHER LONG-TERM LIABILITIES



(in thousands of $)	2019	2018
Unamortized sellers' credit	—	3,282
Other items	4	4
	4	3,286

(in thousands of $) 2018
2017
Unamortized sellers' credit 3,282
3,958
Other items 4
4
3,286
3,962

The unamortized seller's credit ~~is in respect of the five~~related to 5 offshore support vessels on long-term bareboat charters to the Solstad ~~Charterer, a wholly owned subsidiary of Deep Sea Supply AS, which~~Charterer. In the year ended December 31, 2019, the sellers' credit expired and the remaining unamortized balance was eliminated in ~~turn is a wholly owned subsidiary of Solship (formerly Deep Sea). Solship is a wholly owned subsidiary of Solstad Offshore ASA. Between 2007 and 2008,~~conjunction with the ~~Company acquired seven offshore support vessels from subsidiaries of then Deep Sea, which were chartered back to the subsidiaries under bareboat charter agreements. As part~~impairment of the ~~purchase consideration, the Company received seller's credits totaling $39.5 million~~5 vessels, 4 of which are ~~being recognized~~accounted for as ~~additional bareboat revenues over the period of the charters. One of the vessels was sold~~operating leases within Vessels and Equipment, net, and 1 as a direct financing lease. (Refer to Note 13: Vessels and equipment, net and Note 16: Investments in ~~January 2008~~sales-type leases, direct financing leases and ~~the other vessel was sold in February 2016.~~leaseback assets).



(in thousands of $)	2019	2018
Finance lease liability, current portion	68,874	67,793
Finance lease liability, long-term portion	1,037,553	1,104,258
	1,106,427	1,172,051

(in thousands of $) 2018
2017
Current portion of obligations under capital leases 67,793
9,031
Obligations under capital leases - long-term portion 1,104,258
230,576
1,172,051
239,607

In October 2015, the Company entered into agreements to charter in ~~two~~2 19,200 TEU newbuildings container vessels on a bareboat basis, each for a period of 15 years from delivery by the shipyard, and to charter out each vessel for the same 15-year period on a bareboat basis to MSC, an unrelated party. The ~~first vessel was~~vessels were delivered in December 2016 and ~~the second vessel was delivered in~~ March 2017. Both vessels are accounted for as investments in direct financing ~~lease assets.~~leases. (See Note 16: Investments in sales-type leases, direct financing leases and leaseback assets).

In December 2018, the Company entered into agreements to charter in a further ~~two~~2 19,400 TEU container vessels on a bareboat basis, each for a period of 15 years, and to charter out each vessel for the same 15-year period on a bareboat basis to MSC, an unrelated party. The vessels were delivered in December 2018 and both are accounted for as investments in direct financing ~~lease assets.~~leases. (See Note 16: Investments in sales-type leases, direct financing leases and leaseback assets).

~~In the second, third and fourth quarter of~~Also in 2018, the Company acquired ~~four~~4 13,800 TEU container vessels and ~~three~~3 10,600 TEU container vessels, which were subsequently refinanced with an Asian based financial institution by entering into separate sale and leaseback financing arrangements. The vessels are leased back for terms ranging from six to 11 years, with options to purchase the vessel after six years. Due to the terms of the sale and leaseback arrangements, each option is expected to be exercised on the sixth anniversary. These sale and leaseback transactions were accounted for as ~~capital leases (Refer~~vessels under finance leases. (See Note 14: Vessels under ~~capital~~finance lease, net).

The Company's future minimum lease ~~obligations~~liability under the non-cancellable ~~capital~~finance leases are as follows:



Year ending December 31,	(in thousands of $)
2020	128,424
2021	126,726
2022	126,726
2023	126,726
2024	485,999
Thereafter	490,801
Total finance lease liability	1,485,402
Less: imputed interest payable	(378,975	)
Present value of finance lease liability	1,106,427
Less: current portion	(68,874	)
Finance lease liability, long-term portion	1,037,553

Year ending December 31, (in thousands of $)
2019 130,169
2020 126,868
2021 126,726
2022 126,726
2023 126,726
Thereafter 976,801
Total lease obligations 1,614,016
Less: imputed interest payable (441,965 )
Present value of obligations under capital leases 1,172,051
Less: current portion (67,793 )
Obligations under capital leases - long-term portion 1,104,258

Interest incurred on ~~capital leases~~the finance lease liability in the year ended December 31, 2019 was $62.8 million (2018: $21.8 ~~million (2017:~~million; 2017: $16.0 ~~million; 2016: $0.2~~ million).


22.	SHARE CAPITAL, ADDITIONAL PAID-IN CAPITAL AND CONTRIBUTED SURPLUS

Authorized share capital is as follows:


(in thousands of $, except share data)	2018	2017	2019	2018
200,000,000 common shares of $0.01 par value each (2017: 150,000,000 common shares of $0.01 par value each)	2,000	1,500
200,000,000 common shares of $0.01 par value each (2018: 200,000,000 common shares of $0.01 par value each)			2,000	2,000

Issued and fully paid share capital is as follows:



(in thousands of $, except share data)	2019	2018
119,391,310 common shares of $0.01 par value each (2018: 119,373,064 common shares of $0.01 par value each)	1,194	1,194

(in thousands of $, except share data) 2018
2017
119,373,064 common shares of $0.01 par value each (2017: 110,930,873 common shares of $0.01 par value each) 1,194
1,109

The Company's common shares are listed on the New York Stock Exchange.

During the year ended December 31, ~~2018,~~2019, the Company issued a total of no18,246 new shares of $0.01 each following the exercise of 65,000 share options ~~(2017:~~(2018: 0 new shares and 2017: 7,500 new shares ~~of $0.01~~ issued to satisfy 7,500 options exercised). The weighted average exercise price of the options exercised in ~~2017~~2019 was ~~$11.78~~$9.92 per ~~share resulting in a premium on issue of $0.1 million.~~share. In November 2016, the Board of Directors renewed the ~~Ship Finance International Limited~~Company's Share Option Scheme (the "Option Scheme"), originally approved in November 2006. The Option Scheme permits the Board of Directors, at its discretion, to grant options to employees, officers and directors of the Company or its subsidiaries. The fair value cost of options granted is recognized in the statement of operations, and the corresponding amount is credited to additional paid in capital (see also Note 23: Share option plan).

At the Annual General Meeting of the Company held in September 2018, a resolution was passed to approve an increase of the Company’s authorized share capital from $1,500,000 divided into 150,000,000 common shares of $0.01 par value each to $2,000,000 divided into 200,000,000 common shares of $0.01 par value each by the authorization of an additional 50,000,000 common shares of $0.01 par value each.

In May 2018, the Company issued a total of 4,024,984 new shares as part of the consideration paid for the acquisition of ~~four~~4 2014 built container vessels, each with 13,800 TEU carrying capacity. The vessels are employed under long-term time-charters to an unrelated third party (see Note ~~13:~~14: Vessels ~~and equipment,~~under Finance Lease, net).

In April 2018, the Company issued a total of 3,765,842 new shares of par value $0.01 each from up to 7,000,000 issuable under a share lending arrangement in relation with the Company's issuance of 4.875% senior unsecured convertible bonds in April and May 2018. The shares issued have been loaned to affiliates of the underwriters of the bond issue in order to assist investors in the bonds to hedge their position. The bonds are convertible into common shares and mature on May 1, 2023. As required by ASC 470-20 "Debt with ~~conversion~~Conversion and Other Options", the Company calculated the equity component of the convertible bond, which was valued at $7.9 million at issue date and recorded as "Additional paid-in capital" (see Note 20: Short-term and long-term debt). InDuring the year ended December ~~2018,~~31, 2019, the Company purchased bonds with principal amounts totaling $3.4 million (2018: $12.3 ~~million (2017: $nil)~~million). The equity component of these extinguished bonds was valued at $0.2 million (2018: $0.6 ~~million (2017: $nil)~~million) and has been deducted from "Additional paid-in capital".

In October 2017, the Company issued a total of 9,418,798 new shares following separate privately negotiated transactions with certain holders of the 3.25% senior unsecured convertible bonds due 2018 for the conversion of a principal amount of $121.0 million from the outstanding balance of the convertible bonds. In January 2013, the Company issued a senior unsecured convertible bond loan totaling $350 million. The bonds are convertible into common shares at any time up to ten banking days prior to February 1, 2018. The conversion price at the time of issue was $21.945 per share, representing a premium of approximately 33% to the share price at the time.

As required by ASC 470-20 "Debt with Conversion and Other Options", the Company calculated the equity component of the convertible bond, which was valued at $20.7 million and recorded as "Additional paid-in capital" (see Note 20: Short-term and long-term debt). Previously in October 2016, the Company purchased and canceled bonds with principal amounts totaling $165.8 million. The equity component of the converted bonds in 2018 was valued at $nil (2017: $16.4 million for the purchased and canceled bonds) and this amount has been deducted from "Additional paid-in capital".

In November 2016, in relation with the Company's issue in October 2016 of senior unsecured convertible bonds totaling $225 million, the Company issued 8,000,000 new shares of par value $0.01 each. The shares were issued at par value and have been loaned to an affiliate of one of the underwriters of the bond issue, in order to assist investors in the bonds to hedge their position. The bonds are convertible into common shares and mature on October 15, 2021. The initial conversion rate at the time of issuance was 56.2596 common shares per $1,000 bond, equivalent to a conversion price of approximately $17.7747 per share to the share price at the time. Since then, dividend distributions have increased the conversion rate to ~~62.9233,~~65.4510, equivalent to a conversion price of approximately ~~$15.8924~~$15.28 per share. As required by ASC 470-20 "Debt with conversion and Other Options", the Company calculated the equity component of the convertible bond, which was valued at ~~$4.1~~$4.0 million and recorded as "Additional paid-in capital" (see Note 20: Short-term and long-term debt). In the year ended December ~~2018,~~31, 2019, the Company purchased bonds with principal amounts totaling $0.0 million (2018: $12.8 ~~million (2017: $nil)~~million). The equity component of these extinguished bonds was valued at $0.0 million (2018: $0.5 ~~million (2017: $nil)~~million) and has been deducted from "Additional paid-in capital".

~~A reorganization of share capital was approved at~~During the ~~Annual General Meeting~~year ended December 31, 2019, $31.9 million of the ~~Company held in September 2016, in accordance with the Bermuda Companies Act. Following the reorganization, the Company's authorized share capital~~dividend declared was ~~adjusted to 150,000,000 shares of par value $0.01 each, prior to which it had been 125,000,000 shares of par value $1.00 each. As there were 93,504,575 shares issued and fully~~ paid ~~at the time of the reorganization, to reflect the decrease in the par value of each share~~ from ~~$1.00 to $0.01, $92.6 million was transferred from share capital to~~ contributed ~~surplus. The shares of par value $0.01 each rank pari passu in all respects with each other.~~surplus (2018:$0.0 million).


23.	SHARE OPTION PLAN

In November 2006, the Board of Directors approved the ~~Ship Finance International Limited~~Company's Share Option Scheme (the "Option Scheme"). The Option Scheme will expire in November 2026, following the renewal in November 2016. The terms and conditions remain unchanged from those originally adopted in November 2006 and permits the Board of Directors, at its discretion, to grant options to employees, officers and directors of the Company or its subsidiaries. The fair value cost of options granted is recognized in the statement of operations, and the corresponding amount is credited to additional paid-in capital. As of December 31, ~~2018~~

2019 additional paid-in capital was credited with ~~$0.5~~$0.9 million relating to the fair value of options granted in March 2016, September 2017, April 2018, January 2019 and ~~April 2018.~~March 2019.

AsIn January 2019, the Company awarded 100,000 share options at a strike price of ~~December 31, 2018 no options were exercised under~~$11.50 to one officer of the ~~Option Scheme.~~

~~During the year ended December 31, 2018,~~Company and in March 2019, the Company awarded a ~~total~~further 425,000 share options at a strike price of ~~83,000 options~~$12.35 to directors, officers and employees pursuant to the Company's Share Option Scheme. The ~~options~~525,000 awarded in 2019 have a five ~~year~~years term and a three ~~year~~years vesting period and the first options will be exercisable from ~~April 2019~~January 2020 and March 2020 onwards. The average initial strike price was ~~$14.67~~$12.19 per share.

The following summarizes share option transactions related to the Option Scheme in ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017:



	2019			2018			2017
	Options		Weighted average exercise price $	Options		Weighted average exercise price $	Options		Weighted average exercise price $
Options outstanding at beginning of year	417,500		11.43	369,500		12.20	279,000		13.03
Granted	525,000		12.19	83,000		14.67	113,000		14.30
Exercised	(65,000	)	9.92	—		—	(7,500	)	11.78
Forfeited	(42,500	)	11.80	(35,000	)	10.03	(15,000	)	11.78
Options outstanding at end of year	835,000		10.72	417,500		11.43	369,500		12.20

Exercisable at end of year	236,167		9.58	111,500		10.03	85,500		11.43

2018 2017 2016
Options
Weighted average exercise price $
Options
Weighted average exercise price $
Options
Weighted average exercise price $
Options outstanding at beginning of year 369,500
12.20
279,000
13.03
125,000
12.56
Granted 83,000
14.67
113,000
14.30
279,000
14.38
Exercised —
—
(7,500 ) 11.78
(125,000 ) 12.11
Forfeited (35,000 ) 10.03
(15,000 ) 11.78
—
—
Options outstanding at end of year 417,500
11.43
369,500
12.20
279,000
13.03

Exercisable at end of year 111,500
10.03
85,500
11.43
—
—

The exercise price of each option is progressively reduced by the amount of any dividends declared. The above figures show the average of the reduced exercise prices at the beginning and end of the year for options then outstanding. For options granted, exercised or forfeited during the year, the above figures show the average of the exercise prices at the time the options were granted, exercised or forfeited, as appropriate.

The fair values of options granted are estimated on the date of the grant, using the Black-Scholes-Merton option valuation model. The fair values are then expensed over the periods in which the options vest. The weighted average fair value of options granted in ~~2018~~2019 was ~~$3.49~~$2.68 per share as at grant date ~~(2017: $3.77; 2016: $3.06)~~(2018: $3.49; 2017: $3.77). The weighted average assumptions used to calculate the fair values of the new options granted in ~~2018~~2019 were (a) risk free interest rate of 2.36% (2018: 2.63% ~~(2017: 1.58%~~; ~~2016: 1.08%~~2017: 1.58%); (b) expected share price volatility of 25.0% (2018: 29.5% ~~(2017: 33.0%~~; ~~2016: 31.3%~~2017: 33.0%); (c) expected dividend yield of 0% ~~(2017:~~(2018: 0%; ~~2016:~~2017: 0%) and (d) expected life of options 3.5 years ~~(2017:~~(2018: 3.5 years; ~~2016:~~2017: 3.5 years).

The total intrinsic value of 65,000 options exercised in ~~2018~~2019 was ~~$nil~~$0.3 million on the day of exercise ~~(2017: $0.02 million; 2016: $0.3 million). The~~and the Company issued a total ~~amount~~ of 18,246 new shares in full satisfaction of this intrinsic value, with no cash ~~received from~~exchanges.

There were 0 options exercises in 2018.

In 2017, the total intrinsic value of 7,500 options exercised was $0.02 million. The Company issued 7,500 new shares and received cash of $0.1 million in ~~2018 was $nil (2017: $0.1 million; 2016: $0.1 million).~~satisfaction of the value.

As of December 31, ~~2018,~~2019, there are ~~111,500~~236,167 options fully vested but not exercised ~~(2017:~~(2018: 111,500 options; 2017: 85,500 ~~options; 2016: nil~~ options) and their intrinsic value amounted to ~~$nil (2017:~~$1.2 million (2018: $0.0 million; 2017: $0.3 ~~million; 2016: $nil)~~million). The weighted average remaining term of the vested exercisable options is ~~2.7~~1.8 years as of December 31, ~~2018.~~2019.

As of December 31, ~~2018,~~2019, the unrecognized compensation costs relating to non-vested options granted under the Option Scheme was $0.8 million (2018: $0.3 ~~million (2017: $0.5~~ million; ~~2016:~~2017: $0.5 million) and their intrinsic value amounted to ~~$nil (2017:~~$2 million (2018: $0.0 million; 2017: $0.9 ~~million; 2016: $0.5~~ million). This cost will be recognized over the remaining vesting periods, which average 1.3 years (2018: 1.4 ~~years (2017:~~years; 2017: 2.0 ~~years; 2016: 2.2~~ years).

During the year ended December 31, ~~2018,~~2019, the Company recognized ana net expense of ~~$0.5~~$0.8 million in compensation cost relating to the stock options ~~(2017:~~(2018: $0.4 million; ~~2016:~~2017: $0.4 million).


24.	RELATED PARTY TRANSACTIONS

The Company has had transactions with the following related parties, being companies in which our principal shareholder Hemen Holding and companies associated with Hemen have, or had, a significant direct or indirect interest:

– Frontline

– Frontline Shipping

– Seadrill

– Golden Ocean

– ~~United Freight Carriers ("UFC" - which is a joint venture approximately 50% owned by Golden Ocean)~~

~~– Deep Sea Supply Plc. ("Deep Sea") (1)~~

– Seatankers Management Co. Ltd. ~~("Seatankers"~~(“Seatankers”)

– NorAm Drilling

– Golden Close Corp. Ltd. ("Golden Close")

– Sterna Finance Ltd. ("Sterna Finance")

– ADS Crude Carriers ~~Plc ("ADS")~~

~~(1) From October 2017, Deep Sea was determined to no longer be a related party (see below).~~

The Consolidated Balance Sheets include the following amounts due from and to related parties and associated companies, excluding investment in direct financing lease balances ~~(see~~(Refer to Note 16: Investments in sales-type leases, direct financing leases and ~~sales type leases):~~ leaseback assets).



(in thousands of $)	2019	2018
Amounts due from:
Frontline Shipping	2,948	1,225
Frontline	6,708	8,430
Seadrill	51	223
SFL Linus	7,392	21,718
SFL Deepwater	1,246	—
SFL Hercules	3,423	10,125
Golden Ocean	627	50
Other related parties	4	—
Total amount due from related parties	22,399	41,771
Loans to related parties - associated companies, long-term
SFL Deepwater	113,000	109,144
SFL Hercules	80,000	80,000
SFL Linus	121,000	121,000
Total loans to related parties - associated companies, long-term	314,000	310,144
Long-term receivables from related parties
Frontline	9,171	11,170
Frontline Shipping	4,445	4,446
Total long-term receivables from related parties	13,616	15,616
Amounts due to:
Frontline Shipping	3,884	1,125
Frontline	47	125
Golden Ocean	—	91
Other related parties	49	8
Total amount due to related parties	3,980	1,349

(in thousands of $) 2018
2017
Amounts due from:
Frontline Shipping 1,225
—
Frontline 8,430
5,579
Deep Sea —
—
Seadrill 223
—
SFL Linus 21,718
3,559
SFL Deepwater —
171
SFL Hercules 10,125
97
Golden Ocean 50
153
Other related parties —
66
Total amount due from related parties 41,771
9,625
Loans to related parties - associated companies, long-term

SFL Deepwater 109,144
113,000
SFL Hercules 80,000
80,000
SFL Linus 121,000
121,000
Total loans to related parties - associated companies, long-term 310,144
314,000
Long-term receivables from related parties
Frontline 11,170
—
Frontline Shipping 4,446
—
Total long-term receivables from related parties 15,616
—
Amounts due to:

Frontline Shipping 1,125
539
Frontline 125
147
Seatankers —
60
Golden Ocean 91
—
Other related parties 8
111
Total amount due to related parties 1,349
857

SFL Deepwater, SFL Hercules and SFL Linus are wholly-owned subsidiaries which are not fully consolidated but are accounted for under the equity method as at December 31, ~~2018.~~2019 within the financial statements (Refer to Note 17: Investments in associated companies). As described below in "Related party loans", at December 31, ~~2018~~2019 and ~~2017~~,2018, the long-term loans from ~~Ship Finance~~the Company to SFL Deepwater, SFL Hercules, and SFL Linus are presented net of ~~amounts due to them by Ship Finance on~~ their respective current ~~accounts.~~accounts to the extent that it is an amount due to the associates.

Related party leasing and service contracts

~~One~~NaN of the Company's offshore support vessels ~~(2017: one)~~(2018: 1) accounted for as a direct ~~finance~~financing lease and ~~four~~4 of the Company's offshore support vessels ~~(2017: four)~~(2018: 4) accounted for as operating leases were employed under long term charters to a subsidiary of Deep Sea. In June 2017, Deep Sea completed a merger with Solstad Offshore ASA and Farstad Shipping ASA, creating Solstad Farstad, with Hemen's shareholding in Solstad Farstad being below 20%. In October 2018, Solstad Farstad changed its name to Solstad Offshore ASA ("Solstad").The Company determined that Solstad was not a related party as a result of the merger. Following the merger, Solship (formerly Deep Sea), a wholly owned subsidiary of Solstad Farstad, acts as charter guarantor under the ~~long term~~long-term charter agreements.

As at December 31, ~~2018, three~~2019, 3 of the Company's vessels leased to Frontline Shipping ~~(2017: nine)~~(2018: 3) are recorded as investment in direct financing leases. ~~In addition, at December 31, 2018, eight dry bulk carriers were leased to a subsidiary of Golden Ocean under operating leases.~~

At December 31, ~~2018,~~2019, the balance of net investments in direct financing leases with Frontline Shipping was $111.5 million (2018: $115.0 ~~million (2017: $314.0~~ million), of which ~~$8.0~~$8.3 million ~~(2017: $22.3~~(2018: $8.0 million) represents short-term maturities.

In addition, included within vessels and equipment chartered under operating leases at December 31, 2019, there were 8 Capesize dry bulk carriers leased to a fully guaranteed subsidiary of Golden Ocean (2018: 8). At December 31, ~~2018,~~2019, the net book value of assets leased under operating leases to Golden Ocean was ~~$217.7~~$201.7 million ~~(2017: $233.7~~(2018: $217.7 million).

During the year ended December 31, 2016, the Company also earned income from another offshore support vessel leased to a subsidiary of Deep Sea, which was sold in February 2016, and from six dry bulk carriers leased to UFC on short-term charters, which all ended during 2016.

A summary of leasing revenues ~~earned~~and repayments from ~~the~~ Frontline Shipping ~~Deep Sea,~~and Golden Ocean ~~and UFC~~ is as follows:



(in millions of $)	2019	2018	2017
Operating lease income	51.1	53.3	59.4
Direct financing lease interest income	3.8	9.6	16.4
Direct financing lease service revenue	9.9	22.1	35.0
Direct financing lease repayments	7.9	16.8	25.1
Profit share	5.6	1.8	5.8

(in millions of $) 2018
2017
2016
Operating lease income 53.3
59.4
65.3
Direct financing lease interest income 9.6
16.4
22.9
Finance lease service revenue 22.1
35.0
44.5
Direct financing lease repayments 16.8
25.1
30.3
Profit sharing revenues 1.8
5.8
51.5

In June 2015, amendments were made to the charter agreements relating to 17 vessels. The amendments, which are effective from July 1, 2015, and do not affect the duration of the leases, include reductions in the daily time-charter rates to $20,000 per day for VLCCs and $15,000 per day for Suezmax tankers. As consideration for the agreed amendments, the Company received 55 million, ~~ordinary~~(which was reduced to 11 million shares in February 2016 after Frontline enacted a 1-for-5 reverse stock split of its ordinary shares) and also an increase in the profit sharing percentage (see below). A dividend restriction was introduced on Frontline Shipping whereby it can only make distributions to its parent company if it can demonstrate it meets certain conditions.

~~In February 2016, Frontline enacted a 1-for-5 reverse stock split of its ordinary shares, and the Company's holding in Frontline consists of 11 million ordinary shares.~~ In the year ended December 31, ~~2018,~~2019, the Company received dividend income totaling ~~$nil (2017:~~$0.3 million (2018: $0.0 million; 2017: $3.3 ~~million; 2016: $11.6~~ million) on these shares.

In the year ended December 31, 2019, SFL entered into an agreement with Golden Ocean, where the Company agreed to finance EGCS installations on 7 of the 8 Capesize bulk carriers with an amount of up to $2.5 million per vessel, in return for increased charterhire of $1,535 per day for the 1 January 2020 to 30 June 2025 with installations expected to take place up to 2020, upon which the cost will be capitalized into the value of the assets. Profits sharing arrangements were not changed.

Also, 2 of the 3 VLCC crude tankers underwent EGCS installations during the year ended December 31, 2019. The Company incurred costs of $4.2 million, which represent a 50% share of joint costs with Frontline Shipping. Profits sharing arrangements were not changed.

Frontline Shipping pays the Company profit sharing of 50% of their earnings on a time-charter equivalent basis from their use of the Company's fleet above average threshold charter rates calculated on a quarterly basis. The Company earned and recognized profit sharing revenue under the 50% arrangement of ~~$1.5~~$4.8 million in the year ended December 31, ~~2018 (2017:~~2019 (2018: $1.5 million; 2017: $5.6 ~~million; 2016: $50.9~~ million).

In the event that vessels on charter to the Frontline Shipping are agreed to be sold, the Company may either pay or receive compensation for the early termination of the lease. In ~~the year ended December 31,~~February 2018, the Company sold the VLCC Front Circassia to an unrelated third ~~party. The vessel was delivered to the new owner in February 2018,~~party and a termination fee of $4.4 million at fair value (face value $8.9 million) was received from Frontline Shipping in the form of a loan note. The loan note bears interest at a rate of 7.5% and matures in December 2021. ~~The~~In the year ended December 31, 2019, the Company received interest income on these loan notes from Frontline Shipping totaling $0.7 million (2018: $0.5 million; 2017: $0.0 million).

In 2018, the Company also sold the VLCCs Front Page, Front Stratus and Front Serenade to a related third party. The vessels were delivered to the new owner, ADS, in July 2018, August 2018 and September 2018, respectively, and an aggregate termination fee of $10.1 million at fair value was received from Frontline in the form of ~~three~~3 loan notes. The loan notes bear interest at a rate of 7.5% each and mature between November 2024 and May 2025. In October 2018, the Company sold and delivered the VLCC Front Ariake to an unrelated third party. ~~The vessel was delivered to the new owner in October 2018 and a~~A termination fee of $3.4 million at fair value was received from Frontline in the form of a loan note. The loan note bears interest at a rate of 7.5% and matures in November 2023. In the year ended December 31, 2019, the Company received interest income on the four loan notes from Frontline totaling $0.9 million (2018: $0.3 million; 2017: $0.0 million).

In ~~March~~ 2017, ~~May 2017, June 2017 and August 2017,~~ Front Century, Front Brabant, Front Scilla and Front Ardenne on charter to Frontline Shipping were sold and their leases ~~canceled, with~~canceled. The Company received agreed termination fees ~~received~~ of $4.1 million, $3.6 million, $6.5 million and $4.8 million, respectively.

~~In July 2016, the VLCC~~ ~~Front Vanguard~~ ~~on charter to Frontline Shipping was sold and its lease canceled, with an agreed termination fee of $0.3 million received.~~

In February 2016, the offshore support vessel Sea Bear on charter to a subsidiary of Deep Sea was sold and its lease canceled. An agreed termination fee was received in the form of loan notes from Deep Sea, receivable over the approximately six remaining years of the canceled lease. The initial face value of the notes received, on which interest at 7.25% is receivable, was $14.6 million and their initial fair value of $11.6 million was determined from analysis of projected cash flows, based on factors including the terms, provisions and other characteristics of the notes, default risk of the issuing entity, the fundamental financial and other characteristics of that entity, and the current economic environment and trading activity in the debt market. From October 2017, due to the merger of Deep Sea, Solstad Offshore ASA and Farstad Shipping ASA, this loan note is no longer considered a related party receivable. The Company received $0.4 million interest on the loan note in 2017 up until it was considered a related party ~~receivable (2016: $0.9 million).~~receivable.

In the year ended December 31, ~~2018,~~2019, the Company had ~~eight~~8 dry bulk carriers operating on time-charters to a subsidiary of Golden Ocean, which include profit sharing arrangements whereby the Company earns a 33% share of profits earned by the vessels above threshold levels. In the year ended December 31, ~~2018,~~2019, the Company earned ~~$0.2~~$0.8 million income under this arrangement ~~(2017:~~(2018: $0.2 million; ~~2016: $nil)~~2017: $0.2 million).

Until their short-term charters ended on the relevant dates during 2016, the Company had up to six dry bulk carriers operating on time-charters to UFC during 2016, which included profit-sharing arrangements whereby the Company earned a 50% share of profits earned by the vessels above threshold levels. In the year ended December 31, 2016, the Company earned and recognized $0.6 million under this arrangement.

As at December 31, ~~2018,~~2019, the Company was owed a total of $2.9 million (2018: owes $1.2 ~~million (2017: owes $0.3~~ million) toby Frontline Shipping in respect of leasing contracts and profit share.

At December 31, ~~2018,~~2019, the Company was owed ~~$8.4~~$6.7 million ~~(2017: $5.6~~(2018: $8.4 million) by Frontline in respect of various short-term items, including vessel management fees and items relating to the operation of vessels trading in a pool with ~~two~~2 vessels owned by Frontline.

At December 31, ~~2018,~~2019, the Company was owed ~~$21.7~~$7.4 million ~~(2017: $3.6~~(2018: $21.7 million), ~~$nil (2017: $0.2~~$1.2 million (2018: $0.0 million) and ~~$10.1~~$3.4 million ~~(2017: $0.1~~(2018: $10.1 million) by SFL Linus, SFL Deepwater and SFL Hercules, respectively in addition to the loan due to the Company - see below.

The vessels leased to Frontline Shipping are on time charter terms and for each such vessel the Company pays a fixed management/operating fee of $9,000 per day to Frontline Management (Bermuda) Ltd. ("Frontline Management"), a wholly owned subsidiary of Frontline. An exception to this arrangement is for any vessel leased to Frontline Shipping which is sub-chartered on a bareboat basis, for which there is no management fee payable for the duration of the bareboat sub-charter. In addition, during the year ended December 31, ~~2018,~~2019, the Company also had 1514 container vessels, 14 dry bulk carriers, ~~two~~2 Suezmax tankers, ~~two~~2 car carriers and ~~two~~2 product tankers operating on time charter or in the spot market, for which the supervision of the technical management was sub-contracted to Frontline Management. Management fees incurred are included in the table below.

The vessels leased to a subsidiary of Golden Ocean are on time charter terms and for each vessel the Company pays a fixed management/operating fee of $7,000 per day to Golden Ocean ~~Group~~ Management (Bermuda) Ltd. ("Golden Ocean Management")~~, a wholly-owned subsidiary of Golden Ocean.~~. Additionally, in the year ended December 31, ~~2018,~~2019, the Company had 1514 container vessels and 14 dry bulk carriers operating on time-charters, for which part of the operational management was sub-contracted to Golden Ocean Management. Management fees incurred are included in the table below. Management fees are classified as vessel operating expenses in the consolidated statements of operations.

In addition to leasing revenues and repayments, the Company incurred fees with related parties. The Company operates the Suezmax tankers Glorycrown and Everbright in the spot market ~~(until the latter commenced a two year time charter in January 2016)~~ and pays Frontline and its subsidiaries, a management fee of 1.25% of chartering revenues. The Company paid fees to Frontline Management for administrative services, including corporate services, and fees to Seatankers for the provision of advisory and support services. The Company also ~~pays fees to Frontline Management for the management supervision of some of its newbuildings. The Company~~ paid fees to Seatankers Management Norway AS for the provision of office facilities in Oslo, ~~and~~ fees to Frontline Corporate Services Ltd for the provision of office facilities in ~~London. Fees incurred~~London and Golden Ocean for ~~these services are as follows:~~administrative services.



	Year ended
(in thousands of $)	December 31, 2019	December 31, 2018	December 31, 2017
Frontline:
Vessel Management Fees	11,758	24,033	36,536
Newbuilding Supervision Fees	—	—	979
Commissions and Brokerage	291	287	269
Administration Services Fees	201	323	335
Golden Ocean:
Vessel Management Fees	20,440	20,440	20,440
Operating Management Fees	894	793	738
Administration Services Fees	30	—	—
Seatankers:
Administration Services Fees	739	290	82
Office Facilities:
Seatankers Management Norway AS	104	108	105
Frontline Management AS	198	185	136
Frontline Corporate Services Ltd.	212	166	173

Year ended
(in thousands of $) December 31, 2018
December 31, 2017
December 31, 2016
Frontline:
Vessel Management Fees 24,033
36,536
45,931
Newbuilding Supervision Fees —
979
—
Commissions and Brokerage 287
269
390
Administration Services Fees 323
335
576
Golden Ocean:
Vessel Management Fees 20,440
20,440
20,496
Operating Management Fees 793
738
795
Seatankers:
Administration Services Fees 290
82
315
Office Facilities:
Seatankers Management Norway AS 108
105
—
Frontline Management AS 185
136
317
Frontline Corporate Services Ltd 166
173
235

As at December 31, ~~2018,~~2019, the Company ~~owes~~owed Frontline Management and Frontline Management AS a combined total of ~~$0.1~~$0.05 million ~~(2017:~~(2018: $0.1 million) for various items, including technical supervision fees and office costs. ~~At December 31, 2018, the Company also owes Seatankers $nil (2017: $0.1 million) for advisory and support services.~~

On October 5, 2016, the Company issued a senior unsecured convertible bond loan totaling $225.0 million. In conjunction with the bond issue, the Company loaned up to 8,000,000 of its common shares to an affiliate of one of the underwriters of the issue, in order to assist investors in the bonds to hedge their position. The shares that were lent by the Company were initially borrowed from Hemen, the largest shareholder of the Company, for a one-time loan fee of $120,000. In November 2016, the Company issued 8,000,000 new shares, to replace the shares borrowed from Hemen and received $80,000 from Hemen.

In the year ended December 31, 2017, in addition to the above, the Company also paid $0.4 million to a subsidiary of Seadrill for the provision of management services for the jack-up drilling rig Soehanah.

Related party loans – associated companies

~~Ship Finance~~SFL has entered into agreements with SFL Deepwater, SFL Hercules and SFL Linus granting them loans of $145.0 million, $145.0 million and $125.0 million, respectively. The loans to SFL Deepwater and SFL Hercules are fixed interest rate loans, and the loan to SFL Linus was interest free until the newbuilding jack-up drilling rig was delivered to that company, since when it has been a fixed interest rate loan. These loans are repayable in full on October 1, 2023, October 1, 2023 and June 30, 2029, respectively, or earlier if the companies sell their drilling units. The net outstanding loan balances as at December 31, ~~2018,~~2019, were ~~$109.0~~$113.0 million, $80.0 million, and $121.0 million for SFL Deepwater, SFL Hercules and SFL Linus, respectively. ~~Ship Finance~~SFL is entitled to take excess cash from these companies, and such amounts are recorded within their current accounts with ~~Ship Finance.~~SFL. The loan agreements specify that the balance on the current accounts will have no interest applied and will be settled by offset against the eventual repayments of the fixed interest loans. In addition to this, as at December 31, ~~2018~~2019, the Company has current receivables of ~~$nil, $10.1~~$1.2 million, ~~$21.7~~$3.4 million, $7.4 million from SFL Deepwater, SFL Hercules and SFL Linus, respectively ~~(2017: $0.2~~(2018: $0.0 million; ~~$0.1~~$10.1 million; ~~$3.6~~$21.7 million, respectively). In the year ended December 31, ~~2018,~~2019, the Company received interest income on these loans of $5.1 million from SFL Deepwater ~~(2017:~~(2018: $5.1 million; 2017: $5.4 ~~million; 2016: $6.5~~ million), $3.6 million from SFL Hercules ~~(2017:~~(2018: $3.6 million; 2017: $4.3 ~~million; 2016: $6.5~~ million) and $5.4 million from SFL Linus ~~(2017:~~(2018: $5.4 million; 2017: $5.5 ~~million; 2016: $5.6~~ million) totaling $14.1 million ~~(2017:~~(2018: $14.1 million; 2017: $15.2 ~~million; 2016: $18.7~~ million).

Related party purchases and sales of vessels

In the year ended December 31, 2019, no related party vessel sales took place. In the year ended December 31, 2018, the VLCCs Front Page, Front Stratus and Front Serenade which were accounted for as direct financing ~~lease assets,~~leases, were sold to a related party, ADS Crude ~~Carriers Plc. ("ADS").~~Carriers. Gains of $0.3 million, $0.2 million and $0.3 million were recorded on the disposal of the vessels, respectively. The gross proceeds from the sale was $22.5 million

per vessel in addition to compensation, in the form of loan notes of $3.4 million each, received for the early termination of the charters.

No vessels were acquired from or sold to related parties in the year ended December 31, 2017.

Long-term receivables from related parties

The Company received a loan note from Frontline Shipping as compensation for the early termination of the charter of Front Circassia in February 2018. The initial face value of the note was $8.9 million, however, ~~Ship Finance~~SFL recorded the loan note at an initial fair market value of $4.4 million. The loan note bears interest at a rate of 7.5% and matures in December 2021. In the year ended December 31, ~~2018,~~2019, the Company received interest income on this loan note of ~~$0.5 million.~~$0.7 million (2018: $0.5 million; 2017: $0.0 million). This is a non amortizing loan note so there was no repayment received in respect of this loan note.

The Company received loan notes from Frontline as compensation for the early termination of the ~~charter~~charters of Front Page, Front Stratus and Front Serenade in July, August and September 2018, respectively. The initial face value of the notes iswas $3.4 million each, and bears interest at a rate of 7.5%. The loan notes mature in between November 2024 and May 2025. In the year ended December 31, ~~2018,~~2019, the Company received interest income ~~on these~~of $0.7 million (2018: $0.3 million; 2017: $0.0 million) and loan ~~notes~~repayments of ~~$0.3 million.~~$1.2 million (2018: $0.4 million; 2017: $0.0 million) in respect of the notes.

The Company received a loan note from Frontline as compensation for the early termination of the charter of Front Ariake in October 2018. The initial face value of the note was $3.4 million and bears interest at a rate of 7.5%. The note matures in December 2023. In the year ended December 31, ~~2018,~~2019, the Company received interest income of $0.2 million (2018: $0.1 million; 2017: $0.0 million) and loan repayments of $0.6 million (2018: $0.1 million; 2017: $0.0 million) on this loan ~~note of $0.1 million.~~note.

Other related party transactions

In December 2019, the Company signed a $7.5 million senior unsecured revolving credit facility agreement with ADS Crude Carriers Plc, as ‘Borrower’ whereby SFL will provide $5 million of the unsecured facility or 67%. The facility is available for 12 months and carries an interest rate and a commitment fee on the undrawn available balance of the facility. The borrower can voluntarily cancel or repay the facility, in whole or part. The Company received an upfront fee of $50,000 in respect of this contract in the year ended December 31, 2019.

In May 2018, ~~four~~4 wholly-owned subsidiaries of the Company entered into a $320.0 million unsecured loan facility provided by an affiliate of Hemen, Sterna Finance. The unsecured intermediary loan facility was entered into partly to ~~partly~~ fund the acquisition of ~~four~~4 13,800 TEU container vessels acquired in May 2018. The Company had provided a corporate guarantee for this loan facility, which had a fixed interest rate, was non-amortizing and had a term of 13 months from the drawdown date of the loan. Interest expense incurred on the loan in the year ended December 31, ~~2018~~2019 was ~~$6.4 million.~~$0.0 million (2018: $6.4 million; 2017: $0.0 million). The loan balance was prepaid in full in November 2018.

In August 2018, the Company acquired ~~4,031,800~~approximately 4.0 million shares in ADS Crude Carriers, a newly formed company trading on the Oslo Merkur Market. The shares were purchased for $10.0 million, and have a fair value of ~~$9.2~~$13.2 million at December 31, ~~2018 (see~~2019 (Refer to Note 11: Investments in debt and equity securities). These shares, on which no$0.3 million in dividend income was received in the year ended December 31, ~~2018,~~2019, represent ~~17.24%~~17% of the outstanding shares in the company.

In November 2016, the Company acquired approximately 12 million shares in NorAm Drilling for a consideration of approximately $0.7 million. In November 2018, NorAm undertook a share consolidation of 20:1, resulting in a revised investment of 601,023 shares. On the same day NorAm participated in a rights issue, increasing the Company's investment in shares by ~~623,447~~approximately 0.6 million shares. In December 2018, the Company acquired an additional 41,756 shares bringing the total investment in NorAm to ~~1,266,226~~approximately 1.3 million shares with a fair value of $3.9 million. This investment, on which no0 dividend was received in the year ended December 31, ~~2018,~~2019, is included in "Investments in debt and equity securities" (Note 11) ~~(2017: $nil; 2016: $nil)~~(2018: $0.0 million; 2017: $0.0 million).

The Company also holds within "Investments in Debt and Equity Securities" senior secured corporate bonds in NorAm Drilling due 2021. ~~During the year ended December 31,~~In 2018, the Company redeemed a total of ~~466,667~~approximately 0.5 million units at par value and recorded no0 gain or loss on redemption. In the year ended December 31, 2019, the Company partially disposed of its investment in NorAm Drilling securities at par value of $0.3 million. The fair value of the remaining holding at December 31, 2019 was $4.7 million (2018: $5.2 million; 2017: $5.5 million). The Company recorded $0.5 million interest income on its holding of investments in secured notes issued by NorAm Drilling (2018: $0.5 million; 2017: $0.5 million). In addition, the Company earned other income of $0.0 million in the year ended December 31, 2019, (2018: $0.0 million; 2017: $0.1 million). This investment is included in Note 11: Investments in debt and equity securities. Interest amounting to $0.5 million was earned in the year ended December 31, 2018 (2017: $0.5 million; 2016: $0.5 million). In addition, the Company earned other income of $nil in the year ended December 31, 2018, (2017: $0.1 million; 2016: $nil).

During the year ended December 31, 2018, the Company divested its holding in Golden Close ~~initiated liquidation proceedings. As a result of this, the~~securities. The Company received ~~total~~net proceeds of $45.6 million, ~~in settlement of its total investment,~~ resulting in an overall ~~net~~ gain of $13.5 million. The Company earned $0.2 million interest income on ~~the~~its holding of investments in secured notes issued by Golden Close, ~~notes~~ up to the date of ~~redemption of $0.2 million~~divestment, in the year ended December 31, 2018 (2017: $0.6 ~~million; 2016: $0.2~~ million). In the year ended December 31, 2019, the Company received $2.0 million final dividend distribution upon the liquidation of Golden Close. As at December 31, ~~2018,~~2019, the net investment in Golden Close debt and equity securities is ~~$nil (2017:~~$0.0 million (2018: $0.0 million; 2017: $28.5 million).

In June 2017, the Company facilitated a performance guarantee in favour of an oil company relating to a contract for the drillship Deepsea Metro 1. The guarantee had a maximum liability limited to $18.0 million, a maturity of up to six months, and was secured under a first lien mortgage over the drillship, ranking ahead of other secured claims. In the year ended December ~~31,~~ 2017, the Company recorded net fee income of $0.4 million for facilitating the guarantee. The performance guarantee agreement was terminated in September 2017.


25.	FINANCIAL INSTRUMENTS

In certain situations, the Company may enter into financial instruments to reduce the risk associated with fluctuations in interest rates and exchange rates. The Company has a portfolio of swaps which swap floating rate interest to fixed rate, and which also fix the Norwegian kroner to US dollar exchange rate applicable to the interest payable and principal repayment on the NOK bonds. From a financial perspective these swaps hedge interest rate and exchange rate exposure. The counterparties to such contracts are DNB Bank ASA, Nordea Bank Finland Plc., ABN AMRO Bank N.V., NIBC Bank N.V., Skandinaviska Enskilda Banken AB (publ), ING Bank N.V., Danske Bank A/S, Swedbank AB (publ), Credit Agricole Corporate & Investment Bank S.A. and Commonwealth Bank of Australia. Credit risk exists to the extent that the counterparties are unable to perform under the contracts, but this risk is considered not to be substantial as the counterparties are all banks which have provided the Company with loans.

The following tables present the fair values of the Company's derivative instruments that were designated as cash flow hedges and qualified as part of a hedging relationship, and those that were not designated:


(in thousands of $)	2018	2017	2019	2018
Designated derivative instruments -short-term assets:
Interest rate swaps	—	108	520	—
Non-designated derivative instruments -short-term assets:
Cross currency interest rate swaps	5,279	—	—	5,279
Total derivative instruments - short-term assets	5,279	108	520	5,279
Designated derivative instruments -long-term assets:
Interest rate swaps	5,459	5,136	377	5,459
Cross currency interest rate swaps			189	—
Non-designated derivative instruments -long-term assets:
Interest rate swaps	5,174	3,211	2,913	5,174
Total derivative instruments - long-term assets	10,633	8,347	3,479	10,633


(in thousands of $)	2018	2017	2019	2018
Designated derivative instruments -short-term liabilities:
Interest rate swaps	—	248	6,067	—
Cross currency interest rate swaps	33,004	—	—	33,004
Non-designated derivative instruments -short-term liabilities:
Interest rate swaps	—	255
Cross currency interest rate swaps	12,043	—	—	12,043
Total derivative instruments - short-term liabilities	45,047	503	6,067	45,047
Designated derivative instruments -long-term liabilities:
Interest rate swaps	1,811	5,109	5,477	1,811
Cross currency interest rate swaps	4,709	36,120	2,105	4,709
Cross currency swaps	9,607	—	11,049	9,607
Non-designated derivative instruments -long-term liabilities:
Interest rate swaps	86	553	1,948	86
Cross currency interest rate swaps	—	6,836
Total derivative instruments - long-term liabilities	16,213	48,618	20,579	16,213

Interest rate risk management

The Company manages its debt portfolio with interest rate swap agreements denominated in U.S. dollars and Norwegian kroner to achieve an overall desired position of fixed and floating interest rates. At December 31, ~~2018~~2019, the Company and its consolidated subsidiaries had entered into interest rate swap transactions, involving the payment of fixed rates in exchange for LIBOR or NIBOR, as summarized below. The summary includes all swap transactions, most of which are hedges against specific loans.



Notional Principal (in thousands of $)	Inception date	Maturity date	Fixed interest rate
~~$11,130 (remaining at $11,130)~~	~~May 2011~~	~~January 2019~~	~~2.08% - 2.58%~~
$100,000 (remaining at $100,000)	August 2011	August 2021	2.50% - 2.93%
$~~121,133~~108,867 (terminating at $79,733)	May 2012	August 2022	1.76% - 1.85%
$100,000 (remaining at $100,000)	March 2013	April 2023	1.85% - 1.97%
$~~151,008 (equivalent to NOK900 million)~~	~~March 2014~~	~~March 2019~~	~~6.03~~	%	*
~~$92,438~~83,938 (reducing to $70,125)	December 2016	December 2021	~~2.29%~~2.88% - ~~2.63%~~3.12%
$~~95,625~~87,125 (reducing to $70,125)	January 2017	January 2022	~~2.12%~~2.28% - ~~2.58%~~2.79%
$~~26,693~~24,267 (reducing to $19,413)	September 2015	March 2022	1.67	%
$~~173,906~~160,781 (reducing to $149,844)	February 2016	February 2021	1.07% - 1.26%
$63,987 (equivalent to NOK500 million)	October 2017	March - June 2020	6.86% - 6.96%		*
$~~16,833~~56,000 (remaining at $56,000)	June 2019	September 2023	1.84	%	†
$14,699 (equivalent to NOK128 million)	June 2019	September 2023	6.70% - 6.77%		*
$11,254 (equivalent to NOK100 million)	~~September 2018~~	~~March~~August 2019	~~6.03~~September 2023	6.378	%	†
$30,000 (remaining at $30,000)	June 2019	June 2024	2.15	%	†
$48,332 (equivalent to NOK420 million)	June 2019	June 2024	6.85% - 6.90%		†
$100,000 (remaining at $100,000)	August 2019	August 2029	1.45% - 1.60%


*	These swaps relate to the ~~NOK900~~NOK500 million and ~~NOK500~~NOK700 million unsecured bonds due ~~2019~~2020 and ~~2020,~~2023 respectively, ~~and~~whereby the fixed interest ~~rates~~rate paid ~~are~~is exchanged for NIBOR plus the margin on the ~~bonds.~~bond.


†	~~This swap relates~~These swaps relate to the ~~NOK900~~NOK700 million and NOK700 million unsecured ~~bond~~bonds due ~~2019,~~2023 and 2024 respectively, where ~~NIBOR plus~~ a ~~margin~~fixed interest rate is paid in exchange ~~for a fixed interest rate. For the remaining swaps, the fixed interest rate paid is exchanged~~ for LIBOR excluding margin on the underlying ~~loans.~~bonds.

The total net notional principal amount subject to interest swap agreements as at December 31, ~~2018,~~2019, was ~~$0.9~~$1.0 billion ~~(2017: $1.1~~(2018: $0.9 billion).

Foreign currency risk management

The Company ~~has entered into~~is party to currency swap transactions, involving the payment of U.S. dollars in exchange for Norwegian kroner and the payment of Norwegian kroner in exchange for U.S. dollars, which are designated as hedges against the ~~NOK900 million,~~ NOK500 million, NOK700 million and ~~NOK600~~NOK700 million senior unsecured bonds due ~~2019,~~ 2020, 2023 and ~~2023~~2024 respectively. During the last quarter of 2018, the Company entered into a currency swap transaction involving the payment of Norwegian kroner in exchange for U.S. dollars. This swap relates to the NOK900 million bond, but is not designated as a hedging instrument.



Principal Receivable	Principal Payable	Inception date	Maturity date
~~NOK900 million~~	~~US$151.0 million~~	~~March 2014~~	~~March 2019~~
NOK500 million	US$64.0 million	October 2017	March - June 2020
~~NOK472~~NOK600 million	US$~~62.1~~76.8 million	~~September 2018~~June 2019	September 2023
~~US$16.8 million~~	NOK100 million	US$11.3 million	August 2019	September ~~2018~~2023
NOK700 million	~~March~~US$80.5 million	June 2019	June 2024



	Tel: +1	+1 (441)	295-9500	Fax: ~~+1(441)~~	+1 (441) 295-3494
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Shares, $0.01 Par Value	SFL	New York Stock Exchange



Large accelerated filer	[ ~~X ]~~X]	Accelerated filer ~~[ ]~~	☐	Non-accelerated filer ~~[ ]~~	☐

				Emerging growth company ~~[ ]~~	☐



[ ~~X ]~~ X]	U.S. GAAP	[ ] International Financial Reporting Standards as issued by the International Accounting Standards Board	[ ] Other



(in thousands of $)	2019	2018
Interest on US$ floating rate loans	41,420	51,357
Interest on NOK 900M floating rate bonds due 2019	906	4,597
Interest on NOK 500M floating rate bonds due 2020	3,577	3,531
Interest on NOK 700M floating rate bonds due 2023	4,538	1,232
Interest on NOK 700M floating rate bonds due 2024	2,802	—
Interest on 3.25% convertible bonds due 2018	—	171
Interest on 5.75% convertible bonds due 2021	12,203	12,926
Interest on 4.875% convertible bonds due 2023	7,231	5,448
Swap interest	1,146	2,661
Interest on finance lease obligation	62,769	21,775
Other interest	382	—
Amortization of deferred charges	8,085	10,188
	145,059	113,886




Par-la-Ville Place	14 Par-la-Ville Road	Hamilton	HM 08	Bermuda
(Address of principal executive offices)



James Ayers

~~James Ayers~~ Par-la-Ville Place	14 Par-la-Ville Road	Hamilton	HM 08	Bermuda



PART I		PAGE

ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3.	KEY INFORMATION	1
ITEM 4.	INFORMATION ON THE COMPANY	2429
ITEM 4A.	UNRESOLVED STAFF COMMENTS	4147
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	4248
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	77
~~ITEM 7.~~	~~MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS~~	80
~~ITEM 8.~~	~~FINANCIAL INFORMATION~~	85
ITEM 9.7.	~~THE OFFER~~MAJOR SHAREHOLDERS AND ~~LISTING~~	87
~~ITEM 10.~~	~~ADDITIONAL INFORMATION~~RELATED PARTY TRANSACTIONS	88
ITEM ~~11.~~8.	FINANCIAL INFORMATION	93
ITEM 9.	THE OFFER AND LISTING	95
ITEM 10.	ADDITIONAL INFORMATION	96
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	97105
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	99107

PART II

ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	~~100~~108
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	~~100~~108
ITEM 15.	CONTROLS AND PROCEDURES	~~100~~108
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	~~101~~109
ITEM 16B.	CODE OF ETHICS	~~101~~109
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	~~101~~109
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	~~102~~110
ITEM 16E.	PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	~~102~~110
ITEM 16F.	CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT	~~102~~110
ITEM 16G.	CORPORATE GOVERNANCE	~~102~~110
ITEM 16H.	MINE SAFETY DISCLOSURE	~~103~~110

PART III

ITEM 17.	FINANCIAL STATEMENTS	~~104~~111
ITEM 18.	FINANCIAL STATEMENTS	~~104~~111
ITEM 19.	EXHIBITS	~~105~~112


▪	the Company’s ability to generate cash to service its indebtedness;


▪	the Company’s ability to continue to satisfy its financial and other covenants, or obtain waivers relating to such covenants from its lenders under its credit facilities;


▪	the availability of financing and refinancing, as well as the Company’s ability to obtain such financing or refinancing in the future to fund capital expenditures, acquisitions and other general corporate ~~activities;~~activities and the Company's ability to comply with the restrictions and other covenants in its financing arrangements;


▪	the Company’s counterparties’ ability or willingness to honor their obligations under agreements with it;


▪	general market conditions including fluctuations in charter hire rates and vessel values;


▪	~~changes in supply~~availability of skilled workers and ~~generally~~ the ~~number, size and form of providers of goods and services in the markets in which the Company operates;~~related labor costs;


▪	changes in demand in the markets in which the Company operates;


▪	the strength of world economies;


▪	piracy or political events.


▪	changes in demand resulting from changes in the Organization of the Petroleum Exporting Countries’ petroleum production levels and worldwide oil consumption and storage;


▪	developments regarding the technologies relating to oil ~~exploration;~~


▪	~~changes in market demand in countries which import commodities~~exploration and ~~finished goods~~the effects of new products and ~~changes~~new technology in the ~~amount and location of the production of those commodities and finished goods;~~Company’s industry;


▪	increased inspection procedures and more restrictive import and export controls;


▪	the imposition of sanctions by the Office of Foreign Assets Control of the Department of the U.S. Treasury or pursuant to other applicable laws or regulations against the Company or any of its subsidiaries;


▪	~~changes in~~compliance with governmental, tax, environmental and safety regulation, any non-compliance with the ~~Company’s operating expenses, including bunker prices, drydocking and insurance costs;~~U.S. Foreign Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to bribery;


▪	~~performance of the Company’s charterers and other counterparties with whom the Company deals;~~


▪	the impact of the discontinuance of LIBOR after 2021 on any ~~restructuring~~ of the ~~counterparties with whom~~Company’s debt that references LIBOR in the ~~Company deals, including any ongoing restructurings of Deep Sea Supply Shipowing II AS and Solstad Offshore ASA or Solstad;~~interest rate;


▪	timely delivery of vessels under construction within the contracted price;


▪	changes in governmental rules and regulations or actions taken by regulatory authorities;


▪	~~potential disruption~~the length and severity of ~~shipping routes due~~the recent coronavirus outbreak (COVID-19) and its impact on the demand for commercial seaborne transportation and the condition to ~~accidents; and~~the financial markets;


•	In September, October and November 2019, we acquired and took delivery of three 2019 built 300,000 dwt VLCCs - Hunter Atla, Hunter Laga and Hunter Saga respectively. Upon delivery, the vessels immediately commenced five year bareboat charter to an unrelated third party.


•	In February 2020, we delivered the 2002-built VLCC Front Hakata to an unrelated third party for sale proceeds of $33.5 million. Furthermore, we agreed with Frontline Shipping Limited (“FSL”), to terminate the long-term charter for the vessel upon the sale and delivery and paid $3.2 million compensation to FSL for early termination of the charter.


•	In March 2020, we terminated the charters of and delivered Sea Halibut and Sea Pike to an unrelated third party for gross sales proceeds of $1.5 million.


(iii)	net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;


(v)	lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and


(vi)	net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.


	Approximate			Lease	Charter Termination		Approximate			Lease	Charter Termination
Vessel	Built	Dwt.	Flag	Classification	Date		Built	Dwt.	Flag	Classification	Date
VLCCs
Front Hakata	2002	298,500	BA	Direct Financing	2025
Front Energy	2004	305,000	MI	Direct Financing	2027		2004	305,000	MI	Direct Financing	2027
Front Force	2004	305,000	MI	Direct Financing	2027		2004	305,000	MI	Direct Financing	2027
Hunter Atla							2019	300,000	MI	Leaseback assets	2024
Hunter Saga							2019	300,000	MI	Leaseback assets	2024
Hunter Laga							2019	300,000	MI	Leaseback assets	2024

Suezmaxes
Glorycrown	2009	156,000	MI	n/a	n/a	(4)	2009	156,000	MI	n/a	n/a	(2)
Everbright	2010	156,000	MI	n/a	n/a	(4)	2010	156,000	MI	n/a	n/a	(2)

Capesize Dry Bulk Carriers
Belgravia	2009	170,000	MI	Operating	2025	(1)	2009	170,000	MI	Operating	2025	(1)
Battersea	2009	170,000	MI	Operating	2025	(1)	2009	170,000	MI	Operating	2025	(1)
Golden Magnum	2009	180,000	HK	Operating	2025	(1)	2009	180,000	HK	Operating	2025	(1)
Golden Beijing	2010	176,000	HK	Operating	2025	(1)	2010	176,000	HK	Operating	2025	(1)
Golden Future	2010	176,000	HK	Operating	2025	(1)	2010	176,000	HK	Operating	2025	(1)
Golden Zhejiang	2010	176,000	HK	Operating	2025	(1)	2010	176,000	HK	Operating	2025	(1)
Golden Zhoushan	2011	176,000	HK	Operating	2025	(1)	2011	176,000	HK	Operating	2025	(1)
KSL China	2013	180,000	MI	Operating	2025	(1)	2013	180,000	MI	Operating	2025	(1)

Kamsarmax Dry Bulk Carriers
Sinochart Beijing	2012	82,000	HK	Operating	2022		2012	82,000	HK	Operating	2022
Min Sheng 1	2012	82,000	HK	Operating	2022		2012	82,000	HK	Operating	2022

Handysize Dry Bulk Carriers
SFL Spey	2011	34,000	HK	n/a	n/a	(4)	2011	34,000	HK	n/a	n/a	(2)
SFL Medway	2011	34,000	HK	n/a	n/a	(4)	2011	34,000	HK	n/a	n/a	(2)
SFL Trent	2012	34,000	HK	n/a	n/a	(4)	2012	34,000	HK	n/a	n/a	(2)
SFL Kent	2012	34,000	HK	n/a	n/a	(4)	2012	34,000	HK	n/a	n/a	(2)
SFL Tyne	2012	32,000	HK	n/a	n/a	(4)	2012	32,000	HK	n/a	n/a	(2)
SFL Clyde	2012	32,000	HK	n/a	n/a	(4)	2012	32,000	HK	n/a	n/a	(2)
SFL Dee	2013	32,000	HK	n/a	n/a	(4)	2013	32,000	HK	n/a	n/a	(2)

Product Tankers
SFL Trinity	2017	114,000	MI	Operating	2024		2017	114,000	MI	Operating	2024
SFL Sabine	2017	114,000	MI	Operating	2024		2017	114,000	MI	Operating	2024

Chemical Tankers
Maria Victoria V	2008	17,000	PAN	Operating	2021	(1)	2008	17,000	PAN	Operating	2021	(1)
SC Guangzhou	2008	17,000	PAN	Operating	2021	(1)


MSC Erica								2016	19.400 TEU	LIB	Direct Financing	2033	(1) (3)
MSC Reef								2016	19.400 TEU	LIB	Direct Financing	2033	(1) (3)
MSC England								2001	4,132 TEU	LIB	Leaseback assets	2025	(1)
MSC Sarah								2000	4,400 TEU	LIB	Leaseback assets	2025	(1)
MSC Positano								1997	2,456 TEU	LIB	Leaseback assets	2025	(1)

Car Carriers
Composer	2005	6,500 CEU		HK	n/a	n/a	(4)	2005	6,500 CEU	HK	n/a	n/a	(2)
Conductor	2006	6,500 CEU		PAN	n/a	n/a	(4)	2006	6,500 CEU	PAN	n/a	n/a	(2)

Jack-Up Drilling Rigs
West Linus	2014	450 ft		NOR	Direct Financing	2029	(1)	2014	450 ft	NOR	Direct Financing	2029	(1)

Ultra-Deepwater Drill Units
West Hercules	2008	10,000 ft		PAN	Direct Financing	2024	(1)	2008	10,000 ft	PAN	Direct Financing	2024	(1)
West Taurus	2008	10,000 ft		PAN	Direct Financing	2024	(1)	2008	10,000 ft	PAN	Direct Financing	2024	(1)
								��
Supramax Dry Bulk Carriers
SFL Hudson	2009	57,000		MI	Operating	2020		2009	57,000	MI	Operating	2020
SFL Yukon	2010	57,000		HK	n/a	n/a	(4)	2010	57,000	HK	n/a	n/a	(2)
SFL Sara	2011	57,000		HK	n/a	n/a	(4)	2011	57,000	HK	n/a	n/a	(2)
SFL Kate	2011	57,000		HK	Operating	2021		2011	57,000	HK	Operating	2021
SFL Humber	2012	57,000		HK	Operating	2022		2012	57,000	HK	Operating	2022

Offshore support vessels
Sea Leopard	1998	AHTS	(2)	CYP	Direct Financing	2027
Sea Cheetah	2007	AHTS	(2)	CYP	Operating	2027
Sea Jaguar	2007	AHTS	(2)	CYP	Operating	2027
Sea Halibut	2007	PSV	(3)	CYP	Operating	2027
Sea Pike	2007	PSV	(3)	CYP	Operating	2027


(1)	Charterer has purchase options or obligations during the term or at the end of the charter.