Tallinna Sadam

Quarterly Report • Nov 13, 2020

Unaudited interim condensed consolidated report for the 9 months ended 30 September 2020

AS Tallinna Sadam

AS TALLINNA SADAM

UNAUDITED INTERIM CONDENSED CONSOLIDATED REPORT FOR THE 9 MONTHS ENDED 30 SEPTEMBER 2020

Commercial Registry no.	10137319
VAT
registration no.	EE100068489
Postal address	Sadama 25
	15051 Tallinn
Registered office	Sadama 25
	15051 Tallinn
Country of incorporation	Republic of Estonia
Phone	+372 631 8555
E-mail	ts@ts.ee
Corporate website	www.ts.ee
Beginning of financial year	1 January
End of financial year	31 December
Beginning of interim reporting period	1 January
End of interim reporting period	30 September
Legal form	Limited company (AS)
Auditor	KPMG Baltics OÜ

	MANAGEMENT REPORT4
	MANAGEMENT'S CONFIRMATION AND SIGNATURES 16
	INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17
	INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 17
	INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
	INCOME 18
	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 19
	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 20
	NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS21
1.	REPORTING ENTITY21
2.	ACCOUNTING POLICIES21
3.	OPERATING SEGMENTS 23
4.	TRADE AND OTHER RECEIVABLES 24
5.	INVESTMENT IN AN ASSOCIATE25
6.	PROPERTY, PLANT AND EQUIPMENT26
7.	TAXES PAYABLE26
8.	TRADE AND OTHER PAYABLES 26
9.	LOANS AND BORROWINGS27
10.	EQUITY 28
11.	REVENUE29
12.	OPERATING EXPENSES 30
13.	COMMITMENTS 30
14.	CONTINGENT LIABILITIES 31
15.	INVESTIGATIONS CONCERNING THE GROUP31
16.	RELATED PARTY TRANSACTIONS 32
17.	EVENTS AFTER THE REPORTING PERIOD 33

MANAGEMENT REPORT

The Group's performance in the first nine months of 2020 was strongly affected by the restrictions imposed on the cross-border movement of people due to the COVID-19 pandemic. Because of travel restrictions and reduced timetables, both the number of passengers served¹ and vessel calls by ferries on international routes decreased substantially. There were no vessel calls by cruise ships, which had the strongest effect on the second and third quarter and a significant impact on nine-month results. However, cargo throughput at the Group's harbours increased. The pandemic had no major impact on the results of the Group's domestic ferry operations and the icebreaker Botnica.

The decrease in international ferry traffic was the main factor that caused nine-month revenue to decline by EUR 18.5 million, i.e. 18%, to EUR 82.1 million. Because of lower operating volumes and revenue, we reduced our operating expenses but due to a large share of fixed costs the cuts were smaller than the revenue decline and the Group's profitability decreased. The Group earned a net profit of EUR 22.8 million, EUR 13.2 million less than in the same period last year. Profit before income tax on dividends dropped by EUR 14.0 million. Income tax on dividends declined by EUR 0.85 million because the Group paid a smaller dividend: EUR 30.2 million compared with EUR 35.2 million a year earlier. Adjusted EBITDA² decreased by EUR 13.1 million. The decline in nine-month revenue slowed in the third quarter while most of the cost savings were also achieved in the third quarter.

Indicator	Unit	9 months 2020	9 months 2019	Difference	Change %			Q3 2020 Q3 2019 Difference	Change %
Revenue	EUR '000	82,055	100,531	–18,476	–18.4%	31,766	39,181	–7,415	–18.9%
Operating profit	EUR '000	29,305	42,598	–13,293	–31.2%	14,193	17,867	–3,674	–20.6%
Adjusted EBITDA	EUR '000	46,302	59,451	–13,149	–22.1%	19,909	23,745	–3,836	–16.2%
Depreciation, amortisation
and impairment	EUR '000	–17,895	–16,912	–983	5.8%	–5,983	–5,719	–264	4.6%
Income tax	EUR '000	–4,913	–5,764	851	–14.8%	0	0	0	–
Profit for the period	EUR '000	22,795	35,947	–13,152	–36.6%	13,644	17,748	–4,104	–23.1%
Investment	EUR '000	28,926	18,813	10,113	53.8%	11,544	7,743	3,801	49.1%
Number of employees
(average)		469	496	–27	–5.4%	467	515	–48	–9.3%
Cargo volume	t '000	15,537	14,284	1,253	8.8%	5,302	4,275	1,027	24.0%
Number of passengers	'000	3,703	8,297	–4,594	–55.4%	1,620	3,600	–1,980	–55.0%
Number of vessel calls		5,320	5,961	–641	–10.8%	2,123	2,290	–167	–7.3%
Total assets at period-end	EUR '000	622,251	616,176	6,075	1.0%	622,251	616,176	6,075	1.0%
Net debt at period-end	EUR '000	193,354	178,274	15,080	8.5%	193,354	178,274	15,080	8.5%
Equity at period-end Number of shares at	EUR '000	369,672	368,455	1,217	0.3%	369,672	368,455	1,217	0.3%
period-end	'000	263,000	263,000	0	0.0%	263,000	263,000	0	0.0%
Operating profit/revenue		35.7%	42.4%			44.7%	45.6%
Adjusted EBITDA/revenue		56.4%	59.1%			62.7%	60.6%
Profit for the period/
revenue		27.8%	35.8%			43.0%	45.3%
EPS: Profit for the period/
average number of shares	EUR	0.09	0.14	–0.05	–36.6%	0.05	0.07	–0.02	–23.1%
Equity/number of shares at
end of period	EUR	1.41	1.40	0.00	0.3%	1.41	1.40	0.00	0.3%

KEY PERFORMANCE INDICATORS OF THE GROUP

¹ The number of passengers does not include passengers of the Ferry segment who travelled between Estonia's mainland and biggest islands.

² Adjusted EBITDA = profit before depreciation, amortisation and impairment losses, finance income and costs, and income tax expense, adjusted for amortisation of government grants

In the third quarter of 2020, the number of passengers served decreased by 55% while the volume of cargo handled grew by 24% year on year. The number of international route passengers recovered after the COVID-19 related cross-border travel restrictions were eased and lifted in June, rising to about 50% of the level in the same period last year, but fell again slightly in the third quarter (restrictions on travel to Finland were tightened at the end of the quarter). The growth in cargo throughput increased the revenue of the Cargo harbours segment but this had a considerably smaller effect than the decrease in the revenue of the Passenger harbours segment. As a result of lower revenue, the Group's profit figures, including adjusted EBITDA, dropped, because due to a large share of fixed costs the cost savings achieved in the third quarter did not cover the revenue decline. The Group's third-quarter revenue decreased by EUR 7.4 million, i.e. 19%, to EUR 31.8 million and profit for the period dropped by EUR 4.1 million to EUR 13.6 million.

CARGO AND PASSENGER TRAFFIC

In the first nine months of 2020, cargo throughput at the Group's harbours totalled 15.5 million tonnes, rising by 1.3 million tonnes, i.e. 8.8%, compared with the same period last year. In terms of cargo types, the biggest change occurred in the volume of liquid bulk cargo, which grew by around 1.5 million tonnes, i.e. 28%, mainly in the third quarter. The volume of general cargo decreased by 168 thousand tonnes, i.e. 35%, primarily due to a decline in pulpwood exports and in the handling of building materials which in the comparative period was influenced by the construction of Balticconnector, a natural gas pipeline between Estonia and Finland. The volume of dry bulk cargo remained relatively stable, decreasing by 70 thousand tonnes, i.e. 2.2%, mainly due to a decline in crushed stone and scrap metal volumes which was offset by growth in grain and wood pellet volumes. The volume of container cargo decreased by 45 thousand tonnes, i.e. 3.2% (–11.7 thousand units, i.e. –6.9% in TEUs). The volume of ro-ro cargo remained stable, increasing by 61 thousand tonnes, i.e. 1.5%.

In the third quarter of 2020, cargo throughput at the Group's harbours grew rapidly, rising by 1.0 million tonnes, i.e. 24%, year on year to 5.3 million tonnes. The main source of growth was liquid bulk cargo whose volumes increased (0.8 million tonnes, i.e. 71%) due to higher transaction activity caused by the volatility of oil prices. There was also a rise in the volumes of dry bulk cargo (173 thousand tonnes, i.e. 13.9%), ro-ro cargo (64 thousand tonnes, i.e. 4.8%) and container cargo (15 thousand tonnes, i.e. 3.2 %, but a decrease of –5.2% in TEUs) and a slight decrease in the volume of general cargo (–28 thousand tonnes, i.e. –25%).

The number of passengers served in the first nine months dropped by 4.6 million, i.e. 55%, to a mere 3.7 million. This was mainly attributable to the restrictions imposed on cross-border passenger movement due to the COVID-19 pandemic and the instability caused by their constant changes which reduced interest in travelling and the opportunities to do so. In the third quarter, the number of passengers decreased mainly on the Tallinn-Helsinki and Tallinn-Stockholm routes: by 1.3 million and 0.3 million, respectively. The number of cruise passengers was zero (0.4 million passengers in the same period last year).

REVENUE, EXPENSES AND PROFIT

Revenue for the nine months of 2020 decreased by EUR 18.5 million, i.e. 18%, year on year to EUR 82.1 million. In terms of revenue streams, the largest change occurred in vessel dues revenue, which dropped by EUR 8.1 million, i.e. 22%, to EUR 28.4 million. The decrease was mainly attributable to cruise ships and ferries on international routes.

In connection with the COVID-19-related restrictions imposed on cross-border passenger movement from the second half of March to the middle of June, international ferry operators significantly reduced the number of trips and cruise ships did not make any port calls during the cruise season, which usually starts in April. The effect of other changes on vessel dues revenue was considerably smaller. Vessel dues from tankers grew due to an increase in the volume of liquid bulk cargo while vessel dues related to other cargo types decreased slightly. Revenue from passenger fees decreased by EUR 7.3 million, i.e. 55%, which was proportionate to the decline in the number of passengers. Revenue from the provision of public ferry service³ decreased by EUR 1.0 million, mainly because the customer (the state) ordered a smaller number of additional trips to be made by a replacement ferry instead of ordering an additional vessel for the summer high season, which meant both lower revenue and lower costs for the Group. Revenue from the sale of electricity dropped by EUR 0.87 million, i.e. 22%, mostly because the volumes of electricity sold (as an agent) and electricity distribution service provided at cargo harbours declined due to operators' higher operating efficiency. Revenue from other services decreased by EUR 0.55 million, mostly due to a decline in passenger traffic and related ship calls, which reduced revenue from additional services provided to cruise ships and advertising. Cargo charge revenue decreased by EUR 0.37 million, i.e. 7%, due to the combined effect of an increase in the volume of liquid bulk cargo whose cargo charges are lower (including growth in the so-called 'ship to terminal to ship' cargo movements) and a slight decrease in the volumes of other cargo types. Revenue from operating leases decreased somewhat (by EUR 0.28 million), mainly because the number of passengers and related ship calls declined, which reduced revenue from leasing out premises in the harbour area. Charter fee revenue (from the icebreaker Botnica) remained stable year on year. In terms of segments, nine-month revenue decreased primarily in the Passenger harbours segment and somewhat in the Ferry and Cargo harbours segments but remained stable in the segment Other.

Other income grew by EUR 2.0 million, mainly in connection with a non-recurring sales gain on the disposal of the assets used in the harbour operations of the Paljassaare Harbour (the Cargo harbours segment).

Operating expenses for the first nine months decreased by EUR 4.2 million, i.e. 15%. The largest decrease occurred in fuel and energy costs (EUR –2.4 million) because the volumes of electricity and electricity distribution service sold at harbours and the amount of water sold to vessels declined, while increased efficiency and lower fuel prices yielded fuel cost savings in the provision of ferry service. Non-current asset repair costs decreased by EUR 1.3 million, i.e. 26%, due to cost-cutting measures implemented in the Group. Expenses on the purchase of waste management and mooring services decreased by EUR 1.0 million, i.e. 22%, because ferries on international routes and cruise ships made fewer port calls. Expenses on the acquisition of assets of insignificant value grew by EUR 0.59 million in connection with one-off expenses incurred on the implementation of phase 2 (the last phase) in the reconstruction of passenger terminal D at the Old City Harbour. Rental expenses decreased by EUR 0.56 million, mostly because the Ferry segment did not charter an additional vessel for the summer season (additional trips were made by the existing replacement ferry Regula). Other operating expenses grew (by EUR 0.51 million), mainly because expenses on doubtful receivables grew due to the deterioration in the economic environment. Operating expenses for the third quarter decreased by EUR 3.0 million, i.e. 28%, which made a

³ Ferry service between Estonia's mainland and biggest islands

strong contribution to the decrease in nine-month expenses. The decrease was the largest in harbour operations and the Ferry segment.

Personnel expenses decreased slightly (by EUR 0.1 million, i.e. 0.4%) due to downsizing carried out in the second and third quarter and not chartering an additional vessel for the summer. The decrease was reduced by the reversal of an unused bonus provision in the comparative period and one-off downsizing costs incurred this year. Personnel expenses for the third quarter declined by EUR 0.4 million, i.e. 8.7%. In the first nine months of the year, the average number of the Group's employees decreased from 496 to 469, i.e. by 5.4%.

Depreciation, amortisation and impairment expenses for nine months grew by EUR 1.0 million, i.e. 5.8%, primarily in harbour operations where the volume of non-current assets increased through the completion of the reconstruction of passenger terminal D at the Old City Harbour (Passenger harbours segment), which was carried out in stages. Assets retired from use were written down by almost EUR 0.24 million, mainly in connection with the Group's exit from the Paljassaare Harbour (Cargo harbours segment) and the write-off assets demolished during construction work at the Old City Harbour.

Operating profit for nine months decreased by EUR 13.3 million, i.e. 31%, because the decrease in revenue (EUR 18.5 million) and the growth in depreciation, amortisation and impairment expenses (EUR 1.0 million) exceeded the impact of growth in other income (EUR 2.0 million) and the decrease in operating expenses (EUR 4.2 million). The Group's operating margin dropped from 42.4% to 35.7% because the relative decrease in operating profit exceeded the decrease in revenue. The decrease in operating profit slowed down in the third quarter where the Group achieved cost savings, which reduced the impact of the decrease in operating income. Operating margin for the third quarter dropped from 45.6% to 44.7%.

Adjusted EBITDA decreased by EUR 13.1 million to EUR 46.3 million, primarily due to the impact of the Passenger harbours segment where the decrease was EUR 14.5 million. In terms of segments, EBITDA grew in the Cargo harbours segment (by EUR 2.0 million), mainly due to a non-recurring sales gain earned on the disposal of the assets of the Paljassaare Harbour, and slightly in the Ferry segment (by EUR 0.35 million). Adjusted EBITDA for the third quarter decreased by EUR 3.8 million, mainly in the Passenger harbours segment (EUR 5.5 million) and in the segment Other (EUR 0.6 million). Adjusted EBITDA margin for the first nine months dropped from 59.1% to 56.4% while the margin for the third quarter rose from 60.6% to 62.7% because adjusted EBITDA decreased relatively less than revenue.

Finance costs (net) for nine months did not change significantly, decreasing by EUR 38 thousand, i.e. 2.9%.

Profit before tax for nine months decreased year on year by EUR 14.0 million (–34%) to EUR 27.7 million. Profit decreased slightly more than operating profit because the Group's equity-accounted associate Green Marine incurred a loss due to a decrease in the volume of services provided to ferries on international routes and cruise ships and a decline in the sales prices of reprocessed oil waste and the Group's share of that loss was EUR 0.33 million.

The Group declared a dividend of EUR 30.2 million in 2020. Related income tax expense amounted to EUR 4.91 million, EUR 0.85 million less than in the previous year when the Group declared a dividend of EUR 35.2 million. The profit for nine months (EUR 22.8 million) was EUR 13.2 million smaller than the figure for the comparative period (EUR 35.9 million). The profit for the third quarter (EUR 13.6 million) was EUR 4.1 million smaller than the figure for the comparative period.

INVESTMENTS

In the first nine months of 2020, the Group invested EUR 28.9 million, significantly more than in the same period last year (EUR 18.8 million). Investments made in the first nine months of 2020 were mostly related to the construction of a cruise terminal, phase 2 of the reconstruction of passenger terminal D, the installation of automated mooring systems and the beginning of the construction of a multi-storey car park at the Old City Harbour. Other major investments were dredging works at the Paldiski South Harbour, the development of roro traffic at the Muuga Harbour and the installation of battery banks on the ferry Tõll. Investments made in the third quarter totalled EUR 11.5 million.

SEGMENT REPORTING

Total
7,632 100,531
59,451
42,598
59.1%

	Change, 9 months
In thousands of	Passenger	Cargo
euros	harbours	harbours		Ferry Other	Total
Revenue	–16,832	–645	–997	–2	–18,476
Adjusted EBITDA	–14,486	1,980	347	–991	–13,149
Operating profit	–14,730	1,580	158	–301	–13,293

	Q3 2020						Q3 2019
In thousands of	Passenger	Cargo				Passenger	Cargo
euros	harbours	harbours	Ferry	Other	Total	harbours harbours		Ferry	Other	Total
Revenue	10,047	10,342	8,338	3,040	31,767	17,121	9,772	8,989	3,299	39,181
Adjusted EBITDA	6,785	7,035	4,278	1,811	19,909	12,269	5,149	3,930	2,398	23,745
Operating profit	5,151	4,951	2,786	1,305	14,193	10,683	3,160	2,515	1,509	17,867
Adjusted EBITDA
margin	67.5%	68.0%	51.3%	59.6%	62.7%	71.7%	52.7%	43.7%	72.7%	60.6%

	Change, Q3
In thousands of	Passenger	Cargo
euros	harbours	harbours	Ferry	Other	Total
Revenue	–7,074	570	–651	–259	–7,414
Adjusted EBITDA	–5,484	1,886	348	–587	–3,836
Operating profit	–5,532	1,791	271	–204	–3,674

In terms of segments, the largest year-on-year change in nine-month revenue occurred in the Passenger harbours segment (EUR –16.8 million, i.e. –43%), followed by the Ferry segment (EUR –1.0 million, i.e. –4.2%) and the Cargo harbours segment (EUR –0.65 million, i.e. –2.2%). The revenue of the segment Other did not change.

The revenue of the Passenger harbours segment for the first nine months decreased year-on-year, mainly as a result of a decrease in vessel dues and passenger fees revenue caused by the COVID-19 related travel restrictions. There were no port calls by cruise ships and the number of port calls by ferries on international routes and the number of passengers dropped significantly (starting from the second quarter).

The revenue of the Cargo harbours segment for the first nine months declined due to the combined effect of various items of revenue but mostly because the volume of electricity sold (as an agent) and cargo charge revenue decreased, which was mitigated by growth in port dues revenue. The increase in the volume of liquid bulk cargo increased port dues revenue, but as the charges for liquid bulk cargo are lower, the increase did not cover the effect of a decrease in the volumes of other cargo types on total cargo charge revenue. The revenue of the Cargo harbours segment was not significantly affected by the COVID-19 related restrictions. Revenue was reduced by the temporary transfer of the Muuga-Vuosaari route to the Old City Harbour (Passenger harbours segment) in the second quarter due to the temporary reinstatement of border checks.

The revenue of the Ferry segment decreased slightly because the state did not order an additional vessel for extra trips during the summer season. Instead, a smaller number of additional trips was made by the existing replacement ferry Regula, which lowered the segment's total revenue. The decline was partly offset by a rise in fee rates, which are linked to the Estonian consumer and fuel price indices and wage inflation.

The revenue of the segment Other remained stable. The number of days for which the icebreaker Botnica was chartered out did not change. The number of days with lower charter rates was somewhat higher but the effect was offset by the indexation of the contractual fees to the Estonian and Canadian consumer price indices.

In terms of segments, adjusted EBITDA for nine months decreased the most in the Passenger harbours segment, which was expected, declined in the segment Other, and increased somewhat in the Ferry segment and the Cargo harbours segment (in the latter, mainly due to a non-recurring sales gain on the disposal of the assets of the Paljassaare Harbour). Compared to the same period last year, adjusted EBITDA for the third quarter decreased the most in the Passenger harbours segment and less in the segment Other.

Adjusted EBITDA margin for nine months increased from 57.3% to 65.4% in the Cargo harbours segment and from 44.8% to 48.3% in the Ferry segment due to asset disposal gains (which offset the decrease in revenue) and a decrease in expenses, respectively. The margin decreased in the Passenger harbours segment and the segment Other through a decrease in revenue and an increase in expenses (which exceeded revenue growth), respectively. The Group's overall adjusted EBITDA margin decreased from 59.1% to 56.4%. Adjusted EBITDA margin for the third quarter increased in the Cargo harbours segment and the Ferry segment and decreased in the Passenger harbours segment and the segment Other.

IMPACTS OF THE COVID-19 PANDEMIC

The protective measures imposed by countries due to the COVID-19 pandemic had the strongest impact on the Group in the second quarter. As the measures focused on minimizing contact between people and cross-border movement, they had the greatest impact on the tourism sector and passenger traffic, which in turn affected the performance of the Group's Passenger harbours segment.

The state of emergency declared in Estonia in March lasted until 17 May and foreign citizens were banned from entering the country in both Estonia and Finland. Labour migration between Estonia and Finland resumed in the middle of May. Estonia opened its border to arrivals from most European countries from 1 June and Finland opened its border to all arrivals from Estonia on 15 June. Due to changing restrictions and quarantine requirements in most European countries, cruise companies cancelled the cruises they had scheduled and there were no cruise ship calls during the nine months. In connection with a rise in the infection rate in September, Finland re-imposed restrictions on arrivals from Estonia from 28 September. Only people who travel for work, are in transit, or have other compelling reasons can enter Finland without the quarantine requirement. From 15 June, people arriving in Estonia from other countries are subject to a two-week self-isolation requirement, depending on the weekly infection rate per 100,000 inhabitants in the country of departure and the established limit. Cruises between Estonia and Sweden are banned and Sweden has been classified as a high-risk country since spring, which means that all arrivals from Sweden are subject to the two-week self-isolation requirement.

Due to the fall in demand caused by the restrictions, international ferry operators have made a number of adjustments to their timetables and the ferries serving the routes. The Tallinn-Stockholm and the Tallinn-St Petersburg routes have been closed since the middle of March but new temporary routes have been added, such as Paldiski-Sassnitz (from Estonia to Germany) during the state of emergency in Estonia, Tallinn-Mariehamn from June, and Tallinn-Turku from July. At the end of June, a record number of vessels sailed between Estonia and Finland and ferry traffic was busier than ever. However, the total number of passengers was almost half smaller than it was in the same period last year.

There have been no restrictions on cargo transport between countries and cargo throughput at the Group's harbours increased in the second and third quarters due to growth in the volume of liquid bulk cargo. According to management's assessment, cargo transport may be affected by the general economic crisis, caused by the virus containment measures, in the next quarters, mainly through container and ro-ro cargo.

Domestic ferry service on routes between mainland Estonia and the islands of Saaremaa and Hiiumaa that are operated by OÜ TS Laevad, a subsidiary of AS Tallinna Sadam, continued even during the state of emergency but with reduced timetables. The restrictions on movement between mainland and the two islands were lifted on 8 May and normal passenger traffic has resumed with measures taken to prevent the spread of the virus. During the summer months, the number of vehicles carried even increased year on year. The changes resulting from the restrictions did not have a significant impact on the Ferry segment because a major share of ferry service revenue is made up of a fixed fee that does not depend on the number of trips.

The multifunctional icebreaker Botnica, which is operated by OÜ TS Shipping, a subsidiary of AS Tallinna Sadam, has continued its normal operations and its revenue (segment Other) has not been affected by the COVID-19 pandemic so far.

The Group has taken all the necessary measures and cooperates closely with the authorities to prevent the spread of the virus and to protect people's lives and health. From 1 September, passengers arriving from highrisk countries can take a COVID-19 test in the passenger terminals of the Old City Harbour in order to reduce the period of self-isolation and to be able to return to work more quickly.

To compensate for the decrease in revenue in the changed circumstances, we have critically reviewed all of the Group's expenses but due to a large share of fixed costs, a decline in the Group's profitability, particularly in the Passenger harbours segment, is inevitable. To improve the Group's cash flow, some planned investments have been postponed but ongoing investments have not been suspended. The Group's management believes that the impacts of COVID-19 will not affect the Group's ability to continue as a going concern.

SHARE AND SHAREHOLDERS

AS Tallinna Sadam was listed in the Baltic Main List of the Nasdaq Tallinn Stock Exchange on 13 June 2018. The ticker symbol of the share is TSM1T and the ISIN code is EE3100021635. The company has 263,000,000 ordinary shares of which 176,295,032, i.e. 67.03%, are held by the Republic of Estonia. The par value of a share is EUR 1. Each share carries one vote at the general meeting of the shareholders.

The dynamics of the closing price of the AS Tallinna Sadam share and the volume of shares traded since listing on the Nasdaq Tallinn Stock Exchange, i.e. from 13 June 2018 to 30 September 2020, is presented in the graph below:

The opening price of the share in the third quarter of 2020 was EUR 1.92. At 30 September 2020, the closing price of the share was EUR 1.71, having decreased in the third quarter by 10.7%. The company's market capitalisation at 30 September 2020 was EUR 449.7 million (30 June 2020: EUR 503.6 million).

The dynamics of the price of the AS Tallinna Sadam share compared to the OMX Baltic Benchmark GI index is presented in the graph below:

Source: nasdaqbaltic.com

In the third quarter of 2020, there were 11,790 transactions with the Tallinna Sadam share (Q2 2020: 11,175 transactions) in which 3.6 million shares (Q2 2020: 4.5 million shares) changed hands. The total turnover of the transactions was EUR 6.4 million (Q2 2020: EUR 7.9 million).

At 30 September 2020, the company had 14,881 shareholders (30 June 2020: 14,516) but only the Republic of Estonia had an ownership interest exceeding 5% (through the Ministry of Economic Affairs and Communications).

The five largest shareholders as at 30 September 2020 were:

Name of shareholder	Number of shares	Interest, %
Ministry of Economic Affairs and Communications	176,295,032	67%
State Street Bank and Trust Omnibus	10,528,437	4%
European Bank for Reconstruction and Development (EBRD)	9,350,000	4%
SEB Progressiivne Pensionifond	6,484,365	2%
LHV Pensionifond L	5,536,570	2%

The shareholder structure has remained practically the same as it was in the second quarter. The ownership interest of foreign investors has decreased by 0.8 percentage points (from 12.8% to 12.0%) while the ownership interests of Estonian, Latvian, and Lithuanian pension and investment funds and retail investors have grown slightly.

Chart: Shareholder structure as at 30 September 2020

DIVIDENDS

On 29 June 2020, the general meeting approved the proposal of the management board to distribute a dividend of EUR 0.115 per share and EUR 30.2 million in total in 2020. The list of shareholders entitled to receive the dividend was determined on 13 July 2020 (the ex-dividend date: 10 July 2020) and the dividend was paid out to the shareholders on 20 July 2020 (through Nasdaq CSD).

The dividend policy of AS Tallinna Sadam sets the target to pay the shareholders regular post-tax dividends, which in the period 2019-2020 should amount to at least EUR 30 million per year and from 2021 onward to at least 70% of the preceding year's net profit, subject to market conditions, the company's growth, and development plans, and taking into account the need to maintain a reasonable level of liquidity and excluding the impact of nonrecurring transactions.

CORPORATE GOVERNANCE

At 30 September 2020, AS Tallinna Sadam had two 100% owned subsidiaries, OÜ TS Shipping and OÜ TS Laevad, and a 51% interest in an associate, AS Green Marine.

The supervisory board is responsible for the strategic planning of the company's activities and supervising the activities of the management board. According to the Articles of Association of AS Tallinna Sadam, the supervisory board has six to eight members. At 30 September 2020, the supervisory board had eight members: Aare Tark (chairman), Ahti Kuningas, Maarika Honkonen, Raigo Uukkivi, Urmas Kaarlep, Üllar Jaaksoo, Riho Unt and Veiko Sepp, of whom six members are independent. Under the supervisory board, there is a four-member audit committee, which consists of members of the supervisory board and provides advice in supervisory matters.

In the third quarter, there were changes in the composition of the supervisory board. Based on the resolution of the general meeting of 29 June 2020, all members of the supervisory board were recalled from office as from 30 June 2020 and reappointed to office for the following two years, effective from 1 July 2020. In addition, Riho Unt and Veiko Sepp were appointed as new members of the supervisory board with effect from 1 July 2020. The previous supervisory board was recalled in full in order to harmonise the terms of office of all members. At a meeting held on 3 July 2020, the supervisory board re-elected Aare Tark as the chairman of the supervisory board.

The management board is responsible for the day-to-day management of the company in accordance with the law and the Articles of Association. According to the Articles of Association, the management board may have two to five members. At 30 September 2020, the management board had three members: Valdo Kalm (chairman and CEO), Marko Raid (CFO) and Margus Vihman (CCO). The composition of the management board did not change in the third quarter. On 29 September 2020, the supervisory board of AS Tallinna Sadam decided to extend the powers of Valdo Kalm and Marko Raid for another three-year term, which for Valdo Kalm is from 1 March 2021 to 28 February 2024 and for Marko Raid from 18 April 2021 to 17 April 2024.

Further information about the company's corporate governance and members of the management and supervisory boards is presented on the company's website and in its annual report for 2019.

The Group follows the principles of the Estonian Corporate Governance Code.

SIGNIFICANT EVENTS IN THE THIRD QUARTER OF 2020

• 1. Completion of the reconstruction of passenger terminal D. In late July, the Group opened the new modernlooking building of passenger terminal D, which allows serving six million passengers a year. The total area of the redesigned building, which uses state-of-the-art environmentally friendly energy solutions is 14,000 square metres, which is almost twice larger than that of the previous building. The general contractor was AS Nordecon. The terminal is used to serve the passengers of Tallink Group.
• 2. Hybrid ferry Tõll. Since 2 September, passengers on the Virtsu-Kuivastu route have been served by the ferry Tõll which has been converted into Estonia's first hybrid ferry. The ferry's battery banks enable it to partly run on electricity, thus reducing the consumption of diesel fuel and minimizing air pollution. Hybrid ferry Tõll is part of the fleet of OÜ TS Laevad, a subsidiary of AS Tallinna Sadam.
• 3. The design of Rail Baltica's Muuga freight station begins. A contract for the design of Rail Baltica's largest and only port-connected freight station was concluded with SWECO Projekt AS in late September. The construction is due to begin in early 2022.
• 4. Election of the chairman of the supervisory board and appointment of members of the audit committee. At the meeting of the supervisory board of AS Tallinna Sadam held on 3 July 2020, Aare Tark was re-elected as the chairman of the supervisory board. The supervisory board also approved the new composition of the audit committee, which includes Riho Unt, Urmas Kaarlep, Raigo Uukkivi and Maarika Honkonen.
• 5. Dividend distribution. AS Tallinna Sadam paid the shareholders a dividend of EUR 0.115 per share, i.e. EUR 30.2 million in total for 2019. The list of shareholders entitled to receive the dividend was determined on 13 July 2020 and the dividend was paid out to the shareholders on 20 July 2020 (through Nasdaq CSD).
• 6. Changes on the management board of OÜ TS Laevad. The powers of Jaak Kaabel, chairman of the management board of OÜ TS Laevad, a subsidiary of AS Tallinna Sadam, expired on 10 September 2020 and he decided not to run for another term. A public competition was announced for the position of the chairman of the management board of OÜ TS Laevad. Member of the management board Guldar Kivro will serve as acting chairman of the management board from 11 September 2020 until the new chairman is appointed.
• 7. Investor Days. On 8 and 16 September, AS Tallinna Sadam held Investor Days in passenger terminal D of the Old City Harbour. Valdo Kalm and Marko Raid, members of the management board of AS Tallinna Sadam, presented the company and its financial results, talked about future plans, and answered participants' questions. Also, a guided tour was conducted in the newly reconstructed terminal D. There was a lot of interest in the Investor Days. A total of 120 investors attended the events, including both retail investors and the representatives of banks and pension and investment funds.
• 8. Termination of the legal disputes with AS ESTEVE. AS Tallinna Sadam had three legal disputes with AS ESTEVE that were related to AS Tallinna Sadam's early termination of AS ESTEVE's contracts for the provision of mooring services in the Old City Harbour and Paldiski South Harbour and AS ESTEVE's claims for compensation for it. The dispute over the validity of the Old City Harbour mooring services contract ended on 7 September 2020 when the Civil Chamber of the Supreme Court decided not to accept AS ESTEVE's appeal in cessation. In early October, Harju County Court approved a compromise agreement between the parties concerning the validity of the Paldiski South Harbour mooring services contract and the claim for compensation for loss of income of EUR 379,768, plus accrued interest, arising from the allegedly unjustified early termination of the Old City Harbour and Paldiski South Harbour mooring services contracts. As a result of the compromise, the parties terminated the disputes and AS ESTEVE waived all claims against AS Tallinna Sadam.
• 9. Extension of the powers of management board members. On 29 September 2020, the supervisory board of AS Tallinna Sadam decided to extend the terms of office of Valdo Kalm, chairman of the management board, and Marko Raid, member of the management board and CFO, for new three-year term starting from the end of their previous term. Valdo Kalm's new term of office will last from 1 March 2021 to 28 February 2024 and Marko Raid's new term of office will last from 18 April 2021 to 17 April 2024.

MANAGEMENT'S CONFIRMATION AND SIGNATURES

By authorising the unaudited interim condensed consolidated report as at and for the period ended 30 September 2020 for issue, the management board confirms that the information about AS Tallinna Sadam and the companies related to it, as set out on pages 17 to 33, is correct and complete and that:

• 1. the unaudited interim condensed consolidated financial statements have been prepared in accordance with the Estonian Accounting Act and International Financial Reporting Standards as adopted by the European Union (IFRS EU);
• 1. the unaudited interim condensed consolidated financial statements give a true and fair view of the financial position, cash flows and financial performance of the Group;
• 1. all significant events that occurred until the date on which the interim financial report was authorised for issue (12 November 2020) have been properly recognised and disclosed in the unaudited interim condensed consolidated financial statements;
• 1. AS Tallinna Sadam and its subsidiaries are going concerns.

12 November 2020

Valdo Kalm Marko Raid Margus Vihman Chairman of the Member of the Member of the Management Board Management Board Management Board

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros
As at	Note	30 September 2020	31 December 2019
ASSETS
Current assets
Cash and cash equivalents		18,109	35,183
Trade and other receivables	4	13,554	10,614
Contract assets	11	1,072	0
Inventories		216	408
Total other current assets		32,951	46,205
Non-current assets held for sale		98	142
Total current assets		33,049	46,347
Non-current assets
Investment in an associate	5	1,278	1,609
Other long-term receivables	4	243	294
Property, plant and equipment	6	585,696	575,267
Intangible assets		1,985	2,015
Total non-current assets		589,202	579,185
Total assets		622,251	625,532
LIABILITIES
Current liabilities
Loans and borrowings	9	16,766	16,266
Derivative financial instruments		139	243
Provisions		973	1,915
Government grants		1,845	193
Taxes payable	7	1,491	893
Trade and other payables	8	8,813	11,722
Contract liabilities	11	1,912	33
Total current liabilities		31,939	31,265
Non-current liabilities
Loans and borrowings	9	194,697	191,580
Government grants		25,024	24,754
Other payables	8	16	2
Contract liabilities	11	903	913
Total non-current liabilities		220,640	217,249
Total liabilities		252,579	248,514
EQUITY
Share capital	10	263,000	263,000
Share premium		44,478	44,478
Statutory capital reserve		20,262	18,520
Hedge reserve		–139	–243
Retained earnings (prior periods)		19,276	6,859
Profit for the period		22,795	44,404
Total equity		369,672	377,018
Total liabilities and equity		622,251	625,532

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the 9 months ended 30 September

Consolidated statement of profit or loss

In thousands of euros	Note	Q3 2020	Q3 2019	2020	2019
Revenue	3, 11	31,767	39,181	82,055	100,531
Other income		823	209	2,793	789
Operating expenses	12	–7,744	–10,741	–23,281	–27,457
Personnel expenses		–4,581	–5,019	–14,065	–14,127
Depreciation, amortisation and impairment	3	–5,983	–5,719	–17,895	–16,912
Other expenses		–89	–44	–302	–226
Operating profit		14,193	17,867	29,305	42,598
Finance income and costs
Finance income		5	2	29	29
Finance costs		–482	–452	–1,295	–1,333
Finance costs – net		–477	–450	–1,266	–1,304
Share of loss (–)/profit(+) of an associate
accounted for under the equity method		–72	331	–331	417
Profit before income tax		13,644	17,748	27,708	41,711
Income tax expense		0	0	–4,913	–5,764
Profit for the period		13,644	17,748	22,795	35,947
Attributable to:
Owners of the Parent		13,644	17,748	22,795	35,947
Basic earnings and diluted earnings per
share (in euros)		0.05	0.07	0.09	0.14
Basic earnings and diluted earnings per
share – continuing operations (in euros)		0.05	0.07	0.09	0.14
Consolidated statement of other comprehensive income
In thousands of euros	Note	Q3 2020	Q3 2019	2020	2019
Profit for the period		13,644	17,748	22,795	35,947
Other comprehensive income
Items that may be reclassified subsequently to
profit or loss:
Net fair value gain on hedging instruments in cash
flow hedges		33	43	104	76
Total other comprehensive income		33	43	104	76
Total comprehensive income for the period		13,677	17,791	22,899	36,023

Attributable to: Owners of the Parent 13,677 17,791 22,899 36,023

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the 9 months ended 30 September

In thousands of euros	Note	2020	2019
Cash receipts from sale of goods and services		86,160	105,558
Cash receipts related to other income		31	156
Payments to suppliers		–33,746	–34,030
Payments to and on behalf of employees		–11,758	–13,248
Payments for other expenses		–327	–299
Income tax paid on dividends		–4,913	–10,713
Cash from operating activities		35,447	47,424
Purchases of property, plant and equipment		–28,134	–17,909
Purchases of intangible assets		–348	–360
Proceeds from sale of property, plant and equipment		1,618	39
Government grants received		2,061	0
Interest received		15	27
Cash used in investing activities		–24,788	–18,203
Loans received	9	10,000	0
Repayments of loans received	9	–6,383	–6,383
Dividends paid		–30,008	–34,970
Interest paid		–1,331	–1,461
Other payments related to financing activities		–11	–15
Cash used in financing activities		–27,733	–42,829
NET CASH FLOW		–17,074	–13,608
Cash and cash equivalents at beginning of the period		35,183	42,563
Change in cash and cash equivalents		–17,074	–13,608
Cash and cash equivalents at end of the period		18,109	28,955

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the 9 months ended 30 September

			Statutory			Total equity attributable
In thousands of euros	Share capital	Share premium	capital reserve	Hedge reserve	Retained earnings	to owners of the Parent
Equity at 31 December 2018	263,000	44,478	18,520	–425	42,101	367,674
Profit for the period	0	0	0	0	35,947	35,947
Other comprehensive income for the period	0	0	0	76	0	76
Total comprehensive income for the period	0	0	0	76	35,947	36,023
Dividends declared	0	0	0	0	–35,242	–35,242
Total transactions with owners	0	0	0	0	–35,242	–35,242
Equity at 30 September 2019	263,000	44,478	18,520	–349	42,806	368,455
Equity at 31 December 2019	263,000	44,478	18,520	–243	51,263	377,018
Profit for the period	0	0	0	0	22,795	22,795
Other comprehensive income for the period	0	0	0	104	0	104
Total comprehensive income for the period	0	0	0	104	22,795	22,899
Dividends declared Total transactions with owners	0	0	0	0	–30,245	–30,245
	0	0	0	0	–30,245	–30,245
Increase of capital reserve	0	0	1,742	0	–1,742	0
Equity at 30 September 2020	263,000	44,478	20,262	–139	42,071	369,672

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. REPORTING ENTITY

AS Tallinna Sadam (also referred to as the "Parent" or the "Company") is a company incorporated and registered in the Republic of Estonia on 5 November 1996. The interim condensed consolidated financial statements of AS Tallinna Sadam as at and for the nine months ended 30 September 2020 comprise the Parent and its subsidiaries (together referred to as the "Group"). The Group's core business lines are rendering of port services in the capacity of a landlord port, organising passenger ferry service between Estonia's mainland and biggest islands and operating the multifunctional icebreaker Botnica.

The Group owns five harbours: Old City, Saaremaa, Muuga, Paljassaare and Paldiski South. The Old City Harbour in the centre of Tallinn together with the Old City Marina for small vessels and the Saaremaa Harbour designed for receiving cruise ships provide mainly passenger harbour services. The Muuga Harbour, which is Estonia's largest cargo harbour, the Paldiski South Harbour and the Paljassaare Harbour that serves mostly ship repair companies provide mainly cargo harbour services. The Group has ceased active operations in the Paljassaare Harbour and is making preparations to exit from the harbour. In connection with this, in the first nine months of 2020 the Group sold several assets belonging to the Paljassaare Harbour.

Subsidiary	Domicile		Ownership interest (%)	Core business line
		30 September 2020	31 December 2019
OÜ TS Shipping	Republic of Estonia	100	100	Rendering icebreaking and other offshore support services with the multi-functional icebreaker Botnica
OÜ TS Laevad	Republic of Estonia	100	100	Rendering domestic ferry service between Estonia's mainland and biggest islands

The Group's subsidiaries at 30 September 2020 and 31 December 2019:

In addition, the Group has a 51% interest in the associate AS Green Marine but it does not have control over the entity's decision-making. In the Group's financial statements, the interest in the associate is accounted for using the equity method.

The address of the Parent's registered office is Sadama 25, Tallinn 15051, the Republic of Estonia.

The ultimate controlling party of AS Tallinna Sadam is the Republic of Estonia (ownership interest of 67.03% through the Ministry of Economic Affairs and Communications).

2. ACCOUNTING POLICIES

These interim condensed consolidated financial statements for the nine months ended 30 September 2020 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.

Note 2 continued

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes and explanations included in the Group's annual report for the year ended 31 December 2019. See note 2 to the consolidated financial statements in the annual report for 2019 for additional information about significant accounting policies.

The Group's accounting policies have not changed compared to the previous financial year except for the application of IAS 12. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

The interim condensed consolidated financial statements are presented in thousands of euros.

Changes in accounting policies

According to the interpretation of IAS 12 that used to be generally accepted in Estonia until recently, companies did not have to recognise deferred tax for investments in subsidiaries and associates domiciled in Estonia and countries whose income tax system is similar to that of Estonia in their consolidated financial statements. In June 2020, IFRS Interpretations Committee (IFRIC) decided, however, entities preparing IFRS financial statements have to recognise the deferred tax associated with their investments in their consolidated financial statements even if the investments are in countries where income tax is paid only when profit is distributed.

Deferred tax is recognised for temporary differences that arise between the carrying amounts of assets and liabilities and their tax bases (the tax base is the amount attributed to an asset of liability for tax purposes).

Under the laws of the Republic of Estonia, corporate profit for the year is not subject to taxation. The obligation to pay income tax arises on the distribution of profit and it is recognised as an expense (in profit or loss for the period) when the dividend is declared. Due to the nature of the taxation system, companies registered in Estonia generally have no deferred tax assets or liabilities.

The Group incurs deferred tax liabilities only in connection with investments in entities domiciled in countries where profit for the year is subject to income tax and investments in subsidiaries and associates domiciled in Estonia except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Examples of the reversal of taxable temporary differences include the distribution of a dividend, the disposal of an investment, and similar transactions.

Since the Group is able to control its subsidiaries' dividend policy and to block, where necessary, the profit distribution decisions of the associate AS Green Marine, it is able to control the timing of the reversal of the temporary differences associated with those investments. AS Tallinna Sadam has decided not to distribute the profits of the subsidiaries and the associate AS Green Marine in the foreseeable future. Therefore, it has not recognised any deferred tax liabilities. If profit is expected to be distributed in the foreseeable future, a deferred tax liability is recognised for the planned profit distribution, assuming that at the reporting date there are sufficient funds to make the profit distribution and there is sufficient equity from which profit can be distributed in the foreseeable future.

Note 2 continued

The Group measures deferred tax liabilities using tax rates that, based on the tax rates enacted at the reporting date, are expected to apply to the taxable temporary differences in the periods in which the temporary differences are expected to reverse.

The change in the interpretation of the standard does not require the Group to recognise any deferred tax liabilities associated with profit distributions because the subsidiaries and the associate are not planning to distribute dividends in the foreseeable future.

3. OPERATING SEGMENTS

	9 months 2020
	Passenger	Cargo
In thousands of euros	harbours	harbours	Ferry	Other	Total
Vessel dues	13,780	14,570	0	0	28,350
Cargo charges	973	3,989	0	0	4,962
Passenger fees	5,878	109	0	0	5,987
Sale of electricity	343	2,768	0	0	3,111
Sale of ferry services - ticket sales	0	0	8,164	0	8,164
Sale of other services	412	692	38	58	1,200
Lease income	1,196	6,957	512	0	8,665
Charter fees	0	0	0	7,572	7,572
Sale of ferry services - government support	0	0	14,044	0	14,044
Total segment revenue* (note 11)	22,582	29,085	22,758	7,630	82,055
Adjusted segment EBITDA	12,658	19,018	10,996	3,630	46,302
Depreciation and amortisation	–4,910	–6,644	–4,400	–1,704	–17,658
Impairment losses	–65	–172	0	0	–237
Amortisation of government grants
received	147	420	0	0	567
Share of loss of an associate accounted for
under the equity method	0	0	0	331	331
Segment operating profit	7,830	12,622	6,596	2,257	29,305
Finance income and costs, net					–1,266
Share of loss of an associate accounted for
under the equity method					–331
Income tax expense					–4,913
Profit for the period					22,795

* Total segment revenue represents revenue from external customers and excludes inter-segment revenue of EUR 38 thousand and EUR 113 thousand for the Passenger harbours and Cargo harbours segments, respectively, which was eliminated during consolidation.

Note 3 continued

	9 months 2019
	Passenger	Cargo
In thousands of euros	harbours	harbours	Ferry	Other	Total
Vessel dues	22,395	14,084	0	0	36,479
Cargo charges	1,076	4,257	0	0	5,333
Passenger fees	13,134	122	0	0	13,256
Sale of electricity	543	3,435	0	0	3,978
Sale of ferry services - ticket sales	0	0	9,294	0	9,294
Sale of other services	906	741	32	73	1,751
Lease income	1,360	7,092	494	0	8,945
Charter fees	0	0	0	7,560	7,560
Sale of ferry services - government support	0	0	13,935	0	13,935
Total segment revenue* (note 11)	39,414	29,730	23,755	7,632	100,531
Adjusted segment EBITDA	27,144	17,038	10,649	4,621	59,451
Depreciation and amortisation	–4,713	–6,343	–4,210	–1,646	–16,912
Impairment losses	0	0	0	0	0
Amortisation of government grants
received	129	347	0	0	476
Share of profit of an associate accounted
for under the equity method	0	0	0	–417	–417
Segment operating profit	22,560	11,042	6,438	2,558	42,598
Finance income and costs, net					–1,304
Share of profit of an associate accounted
for under the equity method					417
Income tax expense					–5,764
Profit for the period					35,947

* Total segment revenue represents revenue from external customers and excludes inter-segment revenue of EUR 38 thousand and EUR 119 thousand for the Passenger harbours and Cargo harbours segments, respectively, which was eliminated during consolidation.

4. TRADE AND OTHER RECEIVABLES

In thousands of euros	30 September 2020	31 December 2019
At
Receivables from customers	10,716	8,849
Allowance for credit losses	–1,677	–2,160
Prepaid taxes	1,424	1,093
Government grants receivable	2,487	2,287
Other prepayments	478	470
Receivables from an associate (note 16)	20	36
Other receivables	349	333
Total trade and other receivables	13,797	10,908
Of which current receivables	13,554	10,614
non-current receivables	243	294

Note 4 continued

Trade receivables – expected credit loss matrix

In thousands of euros		Days past due
At 30 September 2020	Not past due	0–30	31–60	61–90	>90	Total
Expected credit loss rate	0.80%	1.5%	3.0%	80.0%	100.0%
Total trade and other receivables	8,489	607	19	10	1,591	10,716
Lifetime expected credit loss (ECL)	–68	–9	–1	–8	–1,591	–1,677
At 31 December 2019						9,039
Expected credit loss rate	0.8%	1.5%	3.0%	80.0%	100.0%
Total trade and other receivables	6,220	467	52	45	2,065	8,849
Lifetime expected credit loss (ECL)	–50	–7	–2	–36	–2065	–2,160
						6,689

5. INVESTMENT IN AN ASSOCIATE

In thousands of euros
For the 9 months ended 30 September	2020	2019
Income	2,137	4,340
Expenses	2,706	3,396
Net loss (–)/profit (+)	–600	840

In thousands of euros

At	30 September 2020	31 December 2019
Net assets of the associate	2,505	3,154
The Group's ownership interest in the associate, %	51%	51%
Carrying amount of the Group's investment in the associate in
the Group's statement of financial position	1,278	1,609

6. PROPERTY, PLANT AND EQUIPMENT

In thousands of euros	Land and	Plant and	Other items of	Assets under	Pre	Total
	buildings	equipment	property, plant	construction	payments
			and equipment
At 31 December 2019
Cost	614,182	240,253	7,398	7,699	5,504	875,036
Accumulated depreciation						–
and impairment losses	–216,471	–78,121	–5,177	0	0	299,769
Carrying amount at
31 December 2019	397,711	162,132	2,221	7,699	5,504	575,267
Movements within
9 months ended
30 September 2020
Acquisition and
reconstruction	261	2,135	314	25,800	11	28,521
Sold at carrying amount	–591	–40	0	0	0	–631
Depreciation charge	–8,647	–8,109	–468	0	0	–17,224
Impairment losses	–237	0	0	0	0	–237
Reclassified at carrying
amount	11,735	2,431	24	–10,264	–3,926	0
At 30 September 2020
Cost	624,912	244,661	7,595	23,235	1,589	901,992
Accumulated depreciation						–
and impairment losses	–224,680	–86,112	–5,504	0	0	316,296
Carrying amount at
30 September 2020	400,232	158,549	2,091	23,235	1,589	585,696

7. TAXES PAYABLE

At 30 September 2020, the Group's taxes payable amounted to EUR 1,491 thousand (31 December 2019: EUR 893 thousand).

8. TRADE AND OTHER PAYABLES

In thousands of euros
-----------------------	--

At	30 September 2020	31 December 2019
Trade payables	5,468	5,281
Payables to employees	1,085	1,092
Interest payable	346	405
Accrued taxes payable on remuneration	560	596
Advances for goods and services	682	212
Payables to an associate (note 16)	99	127
Other payables	589	4,011
Total trade and other payables	8,829	11,724
Of which current liabilities	8,813	11,722
non-current liabilities	16	2

9. LOANS AND BORROWINGS

In thousands of euros
At	30 September 2020	31 December 2019
Current portion
Loans and borrowings	7,766	7,266
Debt securities	9,000	9,000
Total current portion	16,766	16,266
Non-current portion
Loans and borrowings	45,447	42,330
Debt securities	149,250	149,250
Total non-current portion	194,697	191,580
Total loans and borrowings	211,463	207,846

Debt securities

All debt securities have been issued in euros and have floating interest rates (base rate of 3-month or 6-month Euribor plus a fixed risk margin). The maturities of debt securities will arrive in 2026 and 2027. In line with settlement schedules, no debt securities were redeemed in the reporting period. At 30 September 2020, the weighted average interest rate of debt securities was 0.77% (30 September 2019: 0.70%).

Loans

All loan agreements are denominated in euros and have floating interest rates (the base is 6-month Euribor). The final maturities of outstanding loan liabilities fall in the period 2024 to 2028. Principal repayments made in the nine-month period ended 30 September 2020 amounted to EUR 6,383 thousand (nine-month period ended 30 September 2019: EUR 6,383 thousand).

At 30 September 2020, the weighted average interest rate of drawn loans was 0.82% (30 September 2019: 0.65%). Considering the effect of derivative transactions used to hedge interest rate risk, at 30 September 2020 the average interest rate of loans was 1.23% (30 September 2019: 1.51%).

In the second quarter a loan agreement was signed with SEB Pank according to which AS Tallinna Sadam can take a loan of EUR 20 million of which EUR 10 million can be drawn before 30 July 2020 and EUR 10 million can be drawn before 31 December 2020. The first portion of EUR 10 million was drawn in July 2020 and the second portion, also EUR 10 million, was drawn in October 2020.

Contractual maturities of loans and borrowings

In thousands of euros
At	30 September 2020
Up to 12 months	16,766
1 - 5 years	68,564
> 5 years	126,133
Total loans and borrowings	211,463

Note 9 continued

Fair value

In the reporting period, the assessment of the Group's risk level did not change and there were no significant changes in the interest rates of international financial markets. Thus, according to the Group's assessment, at 30 September 2020, similarly to 31 December 2019, the fair values of loans and debt securities that are measured at amortised cost did not differ significantly from their carrying amounts.

All derivative financial instruments are measured at fair value in the statement of financial position. The fair value of derivatives is estimated on a monthly basis using pricing provided by banks based on the forward-looking yield curves of interest rate swap transactions from market information providers. In the value hierarchy, this qualifies as a level 2 measurement.

All loan and debt securities agreements currently in force are unsecured, i.e. no assets have been pledged to cover the liabilities, and the debt securities are not listed. The Group has fulfilled all its obligations under the loan and debt securities agreements, including those resulting from special terms. At 30 September 2020, the Group was also in compliance with all the covenants that set requirements to its financial indicators.

10. EQUITY

At 30 September 2020, AS Tallinna Sadam had 263,000,000 registered ordinary shares (31 December 2019: 263,000,000 shares), of which 67.03% were held by the Republic of Estonia (through the Ministry of Economic Affairs and Communications) and 32.97% were held by Estonian and international investment funds, banks, pension funds and retail investors. The par value of a share is EUR 1.

The maximum number of ordinary shares stipulated in the Articles of Association of AS Tallinna Sadam is 664,000,000 (in the comparative period in 2019: 664,000,000). At 30 September 2020 and at 31 December 2019 all shares issued had been fully paid for.

	Q3 2020	Q3 2019	9 months 2020	9 months 2019
Weighted average number of shares	263,000,000	263,000,000	263,000,000	263,000,000
Consolidated net profit for the period (in thousands of euros)	13,644	17,748	22,795	35,947
Basic and diluted earnings per share (in euros)	0.05	0.07	0.09	0.14

Based on the resolution of the annual general meeting of 29 June 2020, the Group a dividend of EUR 0.115 per share and EUR 30,245 thousand in total paid for 2019. The list of shareholders entitled to receive the dividend was determined on 13 July 2020 (the ex-dividend date was 10 July 2020) and the dividend was paid out to the shareholders on 20 July 2020 (through Nasdaq CSD).

11. REVENUE

In thousands of euros
For the 9 months ended 30 September	2020	2019
Revenue from contracts with customers
Vessel dues	28,350	36,479
Cargo charges	4,962	5,333
Passenger fees	5,987	13,256
Sale of electricity	3,111	3,978
Sale of ferry services - ticket sales	8,164	9,294
Sale of other services	1,200	1,751
Total revenue from contracts with customers	51,774	70,091
Revenue from other sources
Operating lease income	8,665	8,945
Charter fees	7,572	7,560
Sale of ferry services - government support	14,044	13,935
Total revenue from other sources	30,281	30,440
Total revenue (note 3)	82,055	100,531

Vessel dues include the tonnage charge calculated on the basis of the gross tonnage of a vessel for each port call. For vessels visiting the port based on a pre-agreed schedule that have a prospective volume discount during the year, the transaction price is allocated between the tonnage services and the option for discounted tonnage services based on the estimated total number of port calls by that vessel during the calendar year. Revenue from tonnage charges is recognised based on the yearly average tariffs and estimated volume as described above. At 30 September 2020, the differences between revenue recognised and amounts billed to customers were recognised as a contract asset of EUR 307 thousand (revenue recognised was larger than the amounts billed) and a contract liability of EUR 1,629 thousand (revenue recognised was smaller than the amounts billed).

Some cargo charge contracts set out a minimum annual cargo volume. If the cargo operator handles less than the minimum, the Group has the right to charge the customer at the end of the calendar year based on the minimum annual cargo volume. Management estimated the Group's remaining right to consideration by reference to the minimum cargo volume and the amount of consideration received from customers as at 30 September 2020. Based on the estimation, the Group recognised contract assets of EUR 765 thousand. At 30 September 2020, revenue received from some customers exceeded management's estimates. As a result, the Group recognised contract liabilities of EUR 220 thousand so that estimated revenue would be evenly recognised over all interim periods of 2020.

Note 11 continued

When connecting to the electricity network, customers pay a connection fee based on the expenses incurred in connecting to the network. The connection service does not represent a separate performance obligation as the customer does not benefit from this service separately from the consumption of electricity. Therefore, connection fees form part of the consideration for electricity and are recognised as revenue over the estimated period during which customers consume electricity. Amounts received for connection fees not yet included in revenue are recognised in the statement of financial position as contract liabilities. At 30 September 2020, such liabilities amounted to EUR 903 thousand (31 December 2019: EUR 913 thousand).

Revenue from ticket sales is recognised over time, as the ferry transfers the passengers and/or vehicles which happens in a single day, or at the point in time when the ticket expires. Consideration received from tickets sold for trips not yet performed is deferred and recognised in the statement of financial position as a contract liability. At 30 September 2020, such liabilities amounted to EUR 63 thousand (31 December 2019: EUR 33 thousand).

12. OPERATING EXPENSES

In thousands of euros
For the 9 months ended 30 September	2020	2019
Fuel, oil and energy costs	6,267	8,629
Technical maintenance and repair of non-current assets	3,765	5,111
Services purchased for infrastructure	2,115	2,060
Tax expenses	2,047	2,068
Consultation and development expenses	381	327
Services purchased	3,450	4,432
Acquisition and maintenance of assets of insignificant value	1,449	856
Advertising expenses	161	258
Lease expenses	426	988
Insurance expenses	570	587
Other operating expenses	2,650	2,141
Total operating expenses	23,281	27,457

13. COMMITMENTS

At 30 September 2020, the Group's contractual commitments related to the acquisition of property, plant and equipment, repairs, and research and development expenditures totalled EUR 16,353 thousand (31 December 2019: EUR 19,810 thousand).

14. CONTINGENT LIABILITIES

In June 2019, the court accepted a statement of claim for damages of EUR 23.8 million in total filed against Group companies OÜ TS Laevad and OÜ TS Shipping in relation to alleged unjustified use of confidential information in a public tender to provide public passenger transport service on the Saaremaa and Hiiumaa routes. The statement of claim is identical to the one filed by the same plaintiffs in a previous civil case which was dismissed by Harju County Court on 8 March 2019 because the plaintiffs did not provide security of EUR 14,000 in total ordered by the court for covering the estimated costs of the proceedings. The Group did not admit guilt and is defending itself in the action. The management board believes that the claim is not substantiated and legal advice indicates that it is not probable that a liability will arise. Thus, the management board has not considered it necessary to recognise a provision for the claim.

Due to a significant decrease in cargo volumes handled, one of the Group's long-term customers has lodged a claim to void select conditions in a long-term cooperation contract concluded between the Group and the customer retrospectively as from 1 January 2015. The conditions set out the minimum cargo volume that the customer is required to handle each calendar year as well as the customer's minimum annual cargo charge obligation, which are related to the contractual penalty charged for failure to meet the minimum cargo charge obligation. The customer's contractual penalties for failure to meet the minimum cargo charge obligation in the years 2015-2017 amount to EUR 0.45 million. The customer's minimum annual cargo charge obligation is EUR 0.31 million.

At the end of 2019, the customer filed an application to the Competition Authority, requesting the initiation of supervision proceedings to establish whether the Group has violated the Competition Act. At the same time the customer made a request to Harju County Court for the suspension of proceedings until the Competition Authority has communicated its opinion on the matter. The County Court did not suspend the proceedings and is planning to rule on the matter at the end of 2020. The management board believes that the claim is not substantiated and legal advice indicates that it is not probable that a liability will arise. Thus, the management board has not considered it necessary to recognise a provision for the claim.

15. INVESTIGATIONS CONCERNING THE GROUP

On 26 August 2015, the Estonian Internal Security Service detained Ain Kaljurand and Allan Kiil, long-term members of the management board of the Group's Parent, AS Tallinna Sadam, as they were suspected of largescale bribery during several prior years. After long-term investigation, on 31 July 2017 the Group filed a civil action lawsuit against Ain Kaljurand, Allan Kiil and other private and legal persons involved in the episodes under investigation. By the order of Harju County Court dated 19 November 2018, the civil action has been included in the criminal proceedings against the above persons. On 28 October 2020, the Harju County Court issued a ruling and terminated the criminal proceedings concerning Allan Kiil in connection with his terminal illness and rejected the application to involve Allan Kiil as a civil defendant and/or a third party. The court ruling has not yet entered into force. At the date of release of these financial statements, court hearings in the criminal matter are

Note 15 continued

ongoing and the court case concerning the other accused persons continues. Based on information available at the reporting date, the management board believes that the above events will not have any material adverse impact on the Group's financial performance or financial position. However, it may continue to cause damage to the Group's reputation.

16. RELATED PARTY TRANSACTIONS

The Republic of Estonia (through the Ministry of Economic Affairs and Communications) holds 67.03% of the shares in AS Tallinna Sadam.

In thousands of euros
For the 9 months ended 30 September	2020	2019
Transactions with an associate
Revenue	123	178
Operating expenses	784	2,047
Transactions with companies in which members of supervisory
and management boards of group companies have significant
influence
Operating expenses	7	12
Other expenses	18	20
Transactions with government agencies and companies in which
the state has control
Revenue	19,006	18,809
Other income	3	5
Operating expenses	4,798	5,769
Other expenses	57	15
Acquisition of property, plant and equipment	4	2,578
In thousands of euros
At	30 September 2020	31 December 2019
Trade receivables from and payables to an associate
Receivables (note 4)	20	36
Payables (note 7)	99	127
Trade receivables from and payables to companies in which
members of supervisory and management boards of group
companies have significant influence
Receivables	2	4
Payables	1	1
Trade receivables from and payables to government agencies
and companies in which the state has control
Receivables	257	412

Liabilities 1,066 1,202

32

Note 16 continued

All purchases and sales of services were transactions conducted in the ordinary course of business on an arm's length basis.

Revenue and operating expenses from transactions with related parties comprise revenue and expenses from sales and purchases of business-related services.

Information presented on companies in which members of the supervisory and management boards of group companies have significant influence is based on the declarations provided by related parties.

17. EVENTS AFTER THE REPORTING PERIOD

At the beginning of October, Harju County Court approved a compromise agreement between AS ESTEVE and AS Tallinna Sadam according to which the parties agreed to terminate their two pending legal disputes and AS ESTEVE agreed to waive all claims against AS Tallinna Sadam. The disputes were related to the early termination of AS ESTEVE's mooring services contracts by AS Tallinna Sadam.

The provision recognised for the expected costs of the disputes as at 30 September 2020 was reversed in the fourth quarter as at the date the court ruling took effect.