SHARE OPTION PLANS

12 Months Ended

Dec. 31, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE OPTION PLANS

25. SHARE OPTION PLANS

In November 2006, the Company's board of directors approved a share option plan, which was cancelled in 2009 and replaced with the Frontline Ltd. Share Option Scheme (the "Frontline Scheme"). The Frontline Scheme permits the board of directors, at its discretion, to grant options to acquire shares in the Company to employees and directors of the Company or its subsidiaries. The subscription price for all options granted under the scheme will be reduced by the amount of all dividends declared by the Company in the period from the date of grant until the date the option is exercised, provided the subscription price is never reduced below the par value of the share.  Options granted under the scheme will vest at a date determined by the board at the date of the grant.  The options granted under the plan to date vest over a period of one to three years and have a five year term.  There is no maximum number of shares authorized for awards of equity share options and authorized, unissued or treasury shares of the Company may be used to satisfy exercised options.

The Company had previously granted 760,000 options of which 142,000 had been forfeited prior to vesting. During 2009, the remaining 618,000 options were cancelled and concurrently replaced with new options. As prescribed by ASC 718, this has been accounted for as a modification of previous award of equity instruments. In addition, a further grant of options for 45,000 shares was awarded in 2009. In April 2011, the Company granted 145,000 share options to directors and employees. The options have a five year term and vest equally over three years from the date of grant.

The fair value of the option modification and of newly granted option awards is estimated on the date of grant or modification using a Black-Scholes option valuation model with the following assumptions:

	2011			2009
Risk free interest rate		1.35	%		1.35	%
Expected life	3.5 years			3.5 years
Expected volatility		62.27	%		61	%
Expected dividend yield		0	%		0	%

The risk-free interest rate was estimated using the interest rate on three-year U.S. treasury zero coupon issues.  The volatility was estimated using historical share price data.  The dividend yield has been estimated at 0% as the exercise price is reduced by all dividends declared by the Company from the date of grant to the exercise date.   It is assumed that 95% of all options granted in 2009 and 2011 will vest.

The following summarizes share option transactions related to the Frontline Scheme:

(in thousands)	Number of Options			Weighted Average Exercise Price
Options outstanding as of December 31, 2008		625.0		NOK 208.78
Granted		663.0		NOK 145.00
Forfeited		(7.0	)	NOK 205.42
Cancelled		(618.0	)	NOK 203.94
Options outstanding as of December 31, 2009		663.0		NOK 144.16
Exercised		(2.3	)	NOK 131.65
Forfeited		(10.0	)	NOK 133.71
Options outstanding as of December 31, 2010		650.7		NOK 131.65
Granted		145.0		NOK 131.10
Exercised		(6.7	)	NOK 132.71
Forfeited		(49.3	)	NOK 130.36
Options outstanding as of December 31, 2011		739.7		NOK 130.46
Exercisable options as at:
December 31, 2011		396.5		NOK 130.46
December 31, 2010		219.0		NOK 131.65
December 31, 2009	Nil			Nil

The weighted average exercise price is adjusted for dividends in accordance with the terms of the plan. The weighted average remaining contractual term for the options outstanding and exercisable at December 31, 2011, 2010 and 2009, is 3.0 years, 3.8 years and 4.8 years, respectively.

The total fair value of share options vested in the years ended December 31, 2011, 2010 and 2009 was $1.8 million, $2.0 million and $nil, respectively.

The weighted average grant-date fair value of options granted during 2011 is $10.42 (2010: $nil per share, 2009: $9.92). The weighted average modification-date fair value of options modified in 2011 is $nil (2010: $nil, 2009: $3.10).

The intrinsic value of share options exercised in the years ended December 31, 2011, 2010 and 2009 was $0.04 million, $nil and $nil, respectively.

As at December 31, 2011, the intrinsic value of both outstanding and exercisable share options was $nil (2010: $2.1 million)

As of December 31, 2011, there was $1.1 million (2010: $1.3 million) in unrecognized compensation cost related to non-vested options granted under the Frontline Scheme. The unrecognized compensation expense is to be recognized over a weighted average period of 1.8 years in accordance with vesting conditions, all of which relates to unvested options. Compensation expense recognized in the years ended December 31, 2011, 2010 and 2009 was $1.6 million, $2.1 million and $3.0 million, respectively.