Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

RISK FACTORS
Before making an investment decision, you should carefully review the specific risk factors described below,
in addition to the other information contained in this offering memorandum. Our business, financial condition
and results from operations could be materially affected by each of these risks. The market price of the Shares
following the Offering may decline as a result of each of these risks, and you may lose the value of your
investment in whole or in part. These risks are not the only ones we face. Additional risks and uncertainties not
presently known to us, or that we currently believe are immaterial, could also impair our business. Certain other
matters regarding our operations that should be considered before making an investment in the Shares are set
out in “Business” and “Operating and Financial Review and Prospects.” The order of presentation of the risk
factors below is not intended to be an indication of the probability of their occurrence or of their potential effect
on our business.
Risks Relating to Our Business
We operate in a highly competitive market.
We face considerable competition in our operations, both from other ferry operators and from providers of
other means of transport. In particular, many other ferry companies compete on the Helsinki—Tallinn route in
both passenger and cargo traffic. The number of passengers on the Helsinki—Tallinn route has more or less
stabilized over recent years at around six million passengers annually. Although we anticipate that these numbers
will grow in the future, there can be no assurance that this will be the case. We have made significant
investments to modernize our fleet and we believe that we have a strong customer base, an attractive fleet and
product offering and a respectable brand which offer us a competitive advantage. However, we cannot guarantee
that we will be successful in retaining or improving our current market position or in expanding our business
through, for example, potential new routes. In the past, other ferry operators have on occasion entered the
Northern Baltic Sea market through relocation of their existing vessels. Thus, there can be no assurance that new
competitors will not enter the market and further increase competition. Future acquisitions by or consolidation
among our competitors could also increase competition in our markets. Failure to adapt to the changes in the
market, whether caused by political decision-making or otherwise, or to increased competition could have a
material adverse effect on our business, results of operations and financial condition. See “Business—
Competition.”
The introduction of new vessels and routes and related capacity increases involves risks and uncertainties.
We continuously evaluate possibilities to introduce new vessels, to expand into alternative routes and to
expand our business generally. There are risks related to our current plans regarding capacity increases on the
Finland—Estonia and Sweden—Estonia routes. We currently operate two cruise ferries on the Finland—Estonia
route and three cruise ferries on the Sweden—Estonia route. We have ordered the New Cruise Ferry scheduled to
be introduced in the spring of 2006 on the Helsinki—Tallinn route. We believe that traffic on the Sweden—
Estonia routes has future growth potential and, thus, we expect to move the 2,500 passenger cruise ferry
Romantika to operate alongside her sister vessel Victoria I on the Stockholm—Tallinn route. The Regina Baltica
would be removed from the Stockholm—Tallinn route and could be used for new business opportunities.
Furthermore, we recently placed orders for two new high-speed ro-pax ferries to be used on the Helsinki—
Tallinn route. We are also studying the potential to commence traffic between Sweden and Latvia and to
recommence traffic to and from St. Petersburg.
Although we believe that the restructuring of the vessels on the different routes will improve our revenue
and profitability per passenger and facilitate growth in passenger numbers, the New Cruise Ferry and high-speed
ro-pax ferries represent substantial investments for us and, thus, involve risks. In order to market the New Cruise
Ferry to the Finnish public as well as the improved fleet to the Swedish public and to launch the new high-speed
ro-pax concept, we will have to increase our marketing expenditures, which could affect the profitability of our
operations. It is also possible that the interest of the public will not meet our expectations. For example, an
economic downturn in the markets in which we operate could negatively affect disposable income and, as a
result, leisure preferences. In addition, the introduction of new routes involves potential difficulties in obtaining
necessary permits and dealing with local authorities. For example, after almost one year of operation, we
suspended our services to St. Petersburg at the beginning of 2005 as a result of factors such as high port taxes,
difficulties arising from the visa regime imposed upon both European Union and Russian citizens and an
underdeveloped infrastructure. The materialization of any of these risks could have a material adverse effect on
our business, results of operations and financial condition.
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