Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

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The table below summarizes the breakdown of our revenue and segment results distributed among our main geographical segments for the financial years ended August 31, 2003, 2004 and 2005: Revenue1 Gross profit / Segment result2 For the financial year ended August 31, 2003 2004 2005 2003 2004 2005 (EEK in millions) Finland—Estonia ................................... 2,0532,0832,442524 415 372 Sweden—Estonia ................................... 943 1,2321,392 78 204 327 Mainlandbusiness .................................. — 40 88 — 9 50 Others............................................ — 51 141 — (52) (2) Total ............................................. 2,9963,4064,063602 576 747 1 Revenue from external customers. 2 Segment result is the segment gross profit less any segment related marketing expenses. Expenses not related to a specific segment are recorded as unallocated expenses. Financial Year Ended August 31, 2005 Compared to Financial Year Ended August 31, 2004 Revenue. Our revenue consisted of ticket sales (25 percent of revenue in the 2005 financial year compared to 26 percent in the 2004 financial year), restaurant and shop sales onboard and on mainland (47 percent in the 2005 financial year compared to 49 percent in the 2004 financial year), sales of cargo transport (18 percent in both the 2005 financial year and the 2004 financial year), sales of travel packages (four percent in the 2005 financial year compared to five percent in the 2004 financial year) and other income, principally income derived from hotel accommodation sales and charter fees (six percent in the 2005 financial year compared to two percent in the 2004 financial year). Our revenue in the 2005 financial year totaled EEK 4,063 million, an increase of EEK 657 million, or 19 percent, from EEK 3,406 million in the 2004 financial year. The growth was primarily due to increases in our passenger and cargo volumes, 16 and 27 percent, respectively. These increases were due to increased tourism to Estonia and the inclusion of Victoria I on the Stockholm—Tallinn route for its first full financial year as well as consequently increased onboard sales. In addition, Tallink AutoExpress 4 and Hotell Tallink were operative for their first full season and financial year, respectively. Our revenue from the Finland—Estonia route increased to EEK 2,442 million in the 2005 financial year from EEK 2,083 million in the 2004 financial year, reflecting in particular an overall growth in volumes. Our revenue from the Sweden—Estonia routes increased to EEK 1,392 million in the 2005 financial year from EEK 1,232 million in the 2004 financial year. This increase was due to growth in passenger volumes and increased spend per passenger. Revenues from our mainland operations increased to EEK 88 million in the 2005 financial year from EEK 40 million in the 2004 financial year, reflecting in particular the revenue from the operation of Hotell Tallink for its first full financial year. Cost of Sales. Our cost of sales consisted of cost of goods sold (24 percent of total cost base in both the 2005 financial year and the 2004 financial year), port charges (15 percent in the 2005 financial year compared to 16 percent in the 2004 financial year), onboard staff costs (11 percent in the 2005 financial year compared to 12 percent in the 2004 financial year), fuel costs (11 percent in the 2005 financial year compared to nine percent in the 2004 financial year), depreciation and other costs (consisting principally of maintenance and insurance cost, cost for servicing our vessels and cost relating to travel packages). The cost of sales in the 2005 financial year totaled EEK 2,980 million (73 percent of revenue) compared to EEK 2,479 million (73 percent of revenue) in the 2004 financial year, representing an increase of EEK 501 million, or 20 percent. The increase was primarily due to the growth in sales volumes, increased costs for goods acquired as a result of the removal of their tax-free status, and an increase in fuel costs. Gross Profit and Segment Result. Our gross profit amounted to EEK 1,083 million (or approximately 27 percent of revenue) in the 2005 financial year compared with EEK 928 million (or approximately 27 percent of revenue) in the 2004 financial year. The increase of EEK 155 million in the 2005 financial year is primarily explained by the increase in passenger volumes partly offset by the increase in cost of sales. Furthermore, the inclusion of Victoria I, which provides a relatively higher gross profit margin than Regina Baltica operating on the Sweden—Estonia route, and the inclusion of the first full year of operations of our ro-ro cargo vessel Regal Star also contributed to the increase. In addition, the gross profit change reflected the profit derived from the operation of Hotell Tallink for its first full financial year. Our high-speed ferries were unprofitable and made a loss of EEK 55 million in the 2005 financial year. 34
Following the planned introduction of our high-speed ro-pax ferries in 2007 and 2008, we expect that our high-speed ferry operations as a whole will become profitable. The segment result (i.e., gross profit of segment less any segment related marketing expenses) from our Finland—Estonia route shows a decrease to EEK 372 million in the 2005 financial year from EEK 415 million in the 2004 financial year. The segment result from our Sweden—Estonia routes increased to EEK 327 million in the 2005 financial year from EEK 204 million in the 2004 financial year. The segment result breakdown is calculated on a group company basis and is not based solely on the vessels’ direct geographical operations. Therefore, the allocation of the expenses between the segments reported in our financial statements does not fully reflect the vessels’ geographical operations. The unaudited segment result based on revenue and the vessels’ direct geographical expenses on the Finland—Estonia route was EEK 422 million in the 2005 financial year compared to EEK 377 million in the 2004 financial year. This 12 percent increase was due to growth in revenue from this route (17 percent) partly offset by increases in cost of goods sold and in fuel cost. The unaudited segment result based on revenue and the vessels’ direct geographical expenses on the Sweden—Estonia route was EEK 272 million in the 2005 financial year, an increase of 14 percent compared to EEK 238 million in the 2004 financial year. The main driver for this increase was the impact of the inclusion of the first full year of operation of Victoria I. Marketing and Administrative Expenses. Our marketing expenses consist of advertising expenses, depreciation, staff costs and other costs (principally administrative and overhead expenses). Marketing expenses in the 2005 financial year totaled EEK 336 million, or eight percent of revenue, compared to EEK 351 million, or ten percent of revenue, in the 2004 financial year. In the 2004 financial year, marketing expenses as a percentage of revenue were higher due to the extensive marketing campaign related to the launch of Victoria I, the introduction of the Helsinki—Tallinn—St. Petersburg route (discontinued at the beginning of 2005) and the opening of Hotell Tallink. We expect our marketing expenses to increase in the near term as a result of the planned introductions of the New Cruise Ferry and the two high-speed ro-pax ferries. Our administrative expenses consist of depreciation, staff costs and other costs (principally administrative and overhead expenses). Administrative expenses in the 2005 financial year totaled EEK 120 million, or approximately three percent of revenue, compared to EEK 128 million, or approximately four percent of revenue, in the 2004 financial year. Changes in applicable amortization rules of goodwill reduced depreciation in the 2005 financial year by approximately EEK 21 million. Other Operating Income and Other Operating Expenses. Our other operating income consists of gain on disposal of property, plant and equipment, exchange rate differences and penalties received from suppliers. Other operating income increased to EEK 2 million in the 2005 financial year from EEK 1 million in the 2004 financial year. Our other operating expenses consisted of loss on disposal of property, plant and equipment, exchange rate differences and penalties paid to suppliers. Other operating expenses decreased to EEK 1 million in the 2005 financial year from EEK 2 million in the 2004 financial year. Operating Profit. Our operating profit consists of the sum of our segment result net of unallocated expenses. Operating profit totaled EEK 629 million (15 percent of revenue) in the 2005 financial year, an increase of EEK 183 million, or 41 percent, from EEK 446 million (13 percent of revenue) in the 2004 financial year. This increase primarily reflected the overall increase in passenger and cargo volumes and revenue mostly as a result of the introduction of our new vessel Victoria I and the commencement of the operations of Hotell Tallink. Net Financial Items. Our net financial expenses consist of interest and other financial expenses and our foreign exchange losses, net of interest and other financial income and foreign exchange gains. Net financial expenses increased to EEK 159 million (four percent of revenue) in the 2005 financial year, an increase of 18 percent, from EEK 134 million (four percent of revenue) in the 2004 financial year. This increase was primarily due to interest payable on additional loan financing relating to our new investments, including loans relating to the acquisitions of Victoria I, Regal Star and Tallink AutoExpresses 3 and 4. Profit Before Income Taxes. Our profit before income taxes consists of our operating profit and the income from HT Valuuta (an associated company until August 30, 2005), net of financial expenses. Profit before income taxes in the 2005 financial year was EEK 474 million, an increase of EEK 161 million, or 51 percent, compared to EEK 313 million in the 2004 financial year. The increase was primarily due to an increase in passenger and cargo volumes, operating and marketing cost efficiency and decreases in interest rates on our loan facilities. 35
Page 1 and 2: OFFERING MEMORANDUM Aktsiaselts Tal
Page 3 and 4: TABLE OF CONTENTS Summary .........
Page 5 and 6: CERTAIN INFORMATION WITH RESPECT TO
Page 7 and 8: August 31, 2005, with comparative i
Page 9 and 10: SUMMARY This summary should be read
Page 11 and 12: The Offering Offering .............
Page 13 and 14: and there is no obligation on Citig
Page 15 and 16: RISK FACTORS Before making an inves
Page 17 and 18: of our vessels, compliance with env
Page 19 and 20: present, fuel represents approximat
Page 21 and 22: due to decrease over the next three
Page 23 and 24: The Offering TERMS AND CONDITIONS O
Page 25 and 26: Payment Investors in Estonia By sub
Page 27 and 28: unless the exclusive jurisdiction o
Page 29 and 30: An investor shall be liable for the
Page 31 and 32: Exercise of Shareholder Rights by I
Page 33 and 34: BACKGROUND AND REASONS FOR THE OFFE
Page 35 and 36: EXCHANGE RATES The Estonian kroon h
Page 37 and 38: 1 EBITDA = Earnings before net fina
Page 39 and 40: status under the EU regulatory fram
Page 41: into the following principal compon
Page 45 and 46: increase of 87 percent compared to
Page 47 and 48: Currently outstanding loan agreemen
Page 49 and 50: Off-Balance Sheet Guarantees Tallin
Page 51 and 52: Market Risk Disclosure The manageme
Page 53 and 54: Our Geographic Market Area The area
Page 55 and 56: The passenger and ro-ro cargo volum
Page 57 and 58: Strategy facilities and quality onb
Page 59 and 60: We initially chartered all of our v
Page 61 and 62: St. Petersburg—Estonia/Finland Ro
Page 63 and 64: Sales of Cargo Transport General. I
Page 65 and 66: On the Sweden—Estonia routes, we
Page 67 and 68: New Vessels We have embarked on a s
Page 69 and 70: The table below shows the operators
Page 71 and 72: certificates for all our vessels, w
Page 73 and 74: Protection and indemnity insurance
Page 75 and 76: Legal Structure Aktsiaselts Tallink
Page 77 and 78: MANAGEMENT Structure of Our Managem
Page 79 and 80: Mr. Enn Pant (born 1965) was electe
Page 81 and 82: Some members of our supervisory cou
Page 83 and 84: September 2005, SEB Eesti Ühispank
Page 85 and 86: Changes in the Share Capital The ta
Page 87 and 88: paid for from assets excluding the
Page 89 and 90: equirement also applies where membe
Page 91 and 92: the trading system automatically ac
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Recognition and enforcement of judg
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exemption does not apply where the
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PLAN OF DISTRIBUTION Citigroup Glob
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• in any other circumstances that
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(6) The purchaser will not deposit
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INDEPENDENT AUDITORS Pursuant to th
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INDEX TO FINANCIAL STATEMENTS Conso
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FINANCIAL STATEMENTS FOR THE FINANC
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ROMANTIKA FANTAASIA REGINA BALTICA
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Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

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