Tallink Grupp

Quarterly Report • Nov 9, 2017

TALLINK GRUPP AS INTERIM REPORT 9M 2017 (UNAUDITED)

Beginning of the financial year	1 January 2017
End of the financial year	31 December 2017
Interim reporting period	1 January 2017 – 30 September 2017
Commercial Register no.	10238429
Address	Sadama 5/7
	10111, Tallinn
	Republic of Estonia
Phone	+372 6 409 800
Fax	+372 6 409 810
Website	www.tallink.com
Main activity	maritime transport
	(passenger & cargo transport)

TABLE OF CONTENTS

MANAGEMENT REPORT		3
	MANAGEMENT BOARD'S CONFIRMATION	13
	UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS	14
	CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	14
	CONSOLIDATED STATEMENT OF FINANCIAL POSITION	15
	CONSOLIDATED STATEMENT OF CASH FLOWS	16
	CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	17
	NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS	18
Note 1	CORPORATE INFORMATION	18
Note 2	BASIS OF PREPARATION	18
Note 3	SEGMENT INFORMATION	18
Note 4	FINANCIAL ITEMS	20
Note 5	EARNINGS PER SHARE (EPS)	21
Note 6	DERIVATIVE INSTRUMENTS	21
Note 7	PROPERTY, PLANT AND EQUIPMENT	22
Note 8	INTANGIBLE ASSETS	22
Note 9	INTEREST-BEARING LOANS AND BORROWINGS	23
Note 10	SHARE CAPITAL	23
Note 11	DIVIDENDS	24
Note 12	RELATED PARTY DISCLOSURES	24
	STATEMENT BY THE MANAGEMENT BOARD	25

MANAGEMENT REPORT

In the third quarter (1 July – 30 September) of 2017, Tallink Grupp AS and its subsidiaries (the Group) carried 2.9 million passengers, 2% more than in the third quarter of 2016. The Group's unaudited third-quarter revenue grew by 3.3% to EUR 282.7 million (EUR 273.6 million, Q3 2016). Unaudited EBITDA for the third quarter improved by 12.3% to EUR 75.4 million (EUR 67.1 million, Q3 2016) and unaudited net profit increased by 11.7% to EUR 47.8 million (EUR 42.8 million, Q3 2016).

In the third quarter, the Group's revenue and operating result were impacted by following operational factors:

• after the rerouting of ships in December 2016, carriage capacity increased on a number of operated routes;
• in the third quarter of 2017, during June and August, one cruise ferry operated the Tallinn Helsinki route in contrast to two cruise ferries in last year;
• increased competition on Tallinn Helsinki route.

Sales and segments

In the third-quarter, the revenues from all core operational segments increased compared to third quarter last year. The shops and restaurant revenue increased by EUR 3 million and ticket revenue by EUR 1.2 million, the growth was supported by the 2% increase of passenger number. The third-quarter cargo revenue increased by EUR 3.5 million compared to same period last year, the growth was supported by the increase of number of transported cargo units in all geographical segments.

The third-quarter revenue of the Estonia – Finland routes decreased by 6% compared to same period last year. The decrease was driven by decline in passenger numbers that was attributable to smaller total carriage capacity on the routes and increased competition from added capacity by competitors during the summer high season. Despite lower revenue, the Estonia – Finland routes segment result improved as more optimal operating costs resulting from three vessels on the Tallinn – Helsinki route. On the Tallinn – Helsinki route the new Shuttle ferry Megastar started operating in January 2017, next to Shuttle ferry Star. On the Tallinn – Helsinki route cruise service only one cruise ferry is operating in 2017, compared to two cruise ferries in the period of March to August in 2016.

The third-quarter revenue of the Finland-Sweden routes increased by 4% compared to same period last year. Growth was supported by a 1.8% higher passenger number and by a 13.7% increase of number of transported cargo units. The segment's third quarter result increased by EUR 1.9 million, compared to same period last year, amounting to EUR 17.9 million.

The Estonia-Sweden routes third-quarter revenue grew by 8.6% compared to same period last year. Growth was supported by an 8.1% higher passenger number. The number of transported cargo units increased by 2.9%. The segment's result increased by 4.9% to EUR 7.8 million compared to same period last year.

The Latvia-Sweden route third-quarter revenue increased by 66.4% compared to same period last year and the number of transported cargo units increased by 120%. The segment's third-quarter result increased by 4.2% to EUR 4.4 million. Since December 2016, two ships have been operating on the route compared to one ship in the third quarter last year.

Earnings

In the third quarter of 2017, the Group's gross profit grew by EUR 5.2 million compared to the same period last year, amounting to EUR 81.9 million. Third-quarter EBITDA increased by EUR 8.3 million to EUR 75.4 million. Third quarter growth was driven by a higher number of passengers and transported cargo units, attributable to the higher capacity, and more optimal operating costs resulting from three vessels on the Tallinn – Helsinki route. On the other hand, the result was also impacted by a year-on-year rise in fuel costs.

Net finance costs decreased by EUR 0.3 million compared to the third quarter last year mainly from lower interest expenses. The total exchange rate differences and the revaluation of cross currency and interest rate derivatives were on the same level.

The Group's unaudited net profit for the third quarter of 2017 was EUR 47.8 million or EUR 0.071 per share compared to a net profit of EUR 42.8 million or EUR 0.064 per share in the same period last year.

Results of the first 9 months of 2017

In the first 9 months (1 January – 30 September) of 2017, the Group carried 7.4 million passengers which is 2.9% more compared to the same period last year. The Group's unaudited revenue for the period increased by 3.2% to EUR 734.1 million. Unaudited EBITDA increased almost by EUR 10 million and amounted to EUR 129.5 million (EUR 119.6 million, 9M 2016), unaudited net profit for the period was EUR 45.4 million (EUR 40.6 million, 9M 2016 net profit).

The financial result for the first 9 months 2017 was influenced by the scheduled maintenance of five cruise ferries in the first quarter of 2017 and a rise in carriage capacity on several routes after the rerouting of vessels in December 2016. In the first nine months the competition in the maritime traffic between Estonia and Finland has increased, which has put pressure on ticket prices.

Financial position

In the third quarter, the Group's net debt decreased by EUR 18.6 million to EUR 635.2 million. The net debt to EBITDA ratio was 4.0 at the reporting date.

At the end of the third quarter, total liquidity (cash, cash equivalents and unused credit facilities) amounted to EUR 87.5 million (EUR 116.3 million, 30 September 2016) providing a strong financial position for sustainable operations. The Group had EUR 80.2 million (EUR 88.8 million, 30 September 2016) in cash and cash equivalents and EUR 7.3 million (EUR 27.5 million, 30 September 2016) in unused credit lines.

KEY FIGURES

For the period	Q3 2017	Q3 2016	Change %
Revenue (million euros)	282.7	273.6	3.3%
Gross profit (million euros)	81.9	76.8	6.7%
Net profit for the period (million euros)	47.8	42.8	11.7%
EBITDA (million euros)	75.4	67.1	12.3%
Depreciation and amortisation (million euros)	22.2	19.3	15.3%
Capital expenditures (million euros)	2.4	15.1	-84.1%
Weighted average number of ordinary shares outstanding	669 882 040	669 882 040	0.0%
Earnings per share	0.071	0.064	11.7%
Number of passengers	2 912 759	2 855 112	2.0%
Number of cargo units	91 335	81 170	12.5%
Average number of employees	7 566	7 366	2.7%
As at	30.09.17	30.06.17	Change %
Total assets (million euros)	1 714.5	1 739.0	-1.4%
Total liabilities (million euros)	875.6	948.0	-7.6%
Interest-bearing liabilities (million euros)	715.3	735.7	-2.8%
Net debt (million euros)	635.2	653.7	-2.8%
Net debt to EBITDA	4.0	4.3	-7.9%
Total equity (million euros)	838.9	791.1	6.0%
Equity ratio (%)	48.9%	45.5%
Number of ordinary shares outstanding	669 882 040	669 882 040	0.0%
Equity per share	1.25	1.18	6.0%
Ratios	Q3 2017	Q3 2016
Gross margin (%)	29.0%	28.1%
EBITDA margin (%)	26.7%	24.5%
Net profit margin (%)	16.9%	15.7%

EBITDA: Earnings before net financial items, share of profit of equity accounted investees, taxes, depreciation and amortisation Earnings per share: net profit / weighted average number of shares outstanding Equity ratio: total equity / total assets Equity per share: shareholder's equity / number of shares outstanding Gross margin: gross profit / revenue EBITDA margin: EBITDA / revenue Net profit margin: net profit / revenue Net debt: interest-bearing liabilities less cash and cash equivalents Net debt to EBITDA: net debt / 12-months trailing EBITDA

SALES & RESULTS BY SEGMENTS

The following tables provide an overview of the quarterly sales and result development by geographical segments.

		Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q3 change
Estonia -	Passengers (thousands)	1 568	1 186	1 012	1 349	1 485	-5.3%
Finland	Cargo units (thousands)	54	53	52	60	60	11.0%
	Revenue (million euros)	103.1	87.9	73.0	95.5	96.9	-6.0%
	Segment result¹ (million euros)	28.1	20.9	8.1	19.8	28.8	2.5%
Finland -	Passengers (thousands)	863	685	580	765	878	1.8%
Sweden	Cargo units (thousands)	15	19	19	18	17	13.7%
	Revenue (million euros)	100.4	80.5	69.1	88.9	104.4	4.0%
	Segment result¹ (million euros)	16.0	-0.6	-6.0	9.4	17.9	12.1%
Estonia -	Passengers (thousands)	280	223	215	276	303	8.1%
Sweden	Cargo units (thousands)	10	11	11	11	11	2.9%
	Revenue (million euros)	33.0	25.5	23.0	30.8	35.9	8.6%
	Segment result¹ (million euros)	7.5	-0.3	-1.6	3.7	7.8	4.9%
Latvia -	Passengers (thousands)	144	132	133	197	247	71.4%
Sweden	Cargo units (thousands)	2	2	2	3	3	120.0%
	Revenue (million euros)	13.9	11.1	10.6	17.4	23.2	66.4%
	Segment result¹ (million euros)	4.2	0.9	-4.7	-0.6	4.4	4.2%
Other	Revenue (million euros)	26.2	23.4	17.8	30.0	25.6	-2.5%
	Segment result¹ (million euros)	4.4	1.1	1.3	7.7	5.9	33.6%
	Intersegment revenue (million
	euros)	-3.1	-2.3	-1.9	-2.9	-3.3	-3.4%
	Total revenue (million euros)	273.6	226.1	191.5	259.9	282.7	3.3%
	EBITDA (million euros)	67.1	29.9	5.3	48.9	75.4	12.3%
	Total segment result¹ (million
	euros)	60.2	22.0	-2.9	39.9	64.9	7.7%
	Net profit/loss	42.8	3.5	-20.3	17.9	47.8	11.7%

¹ Segment result is the result before administrative expenses, finance costs and taxes.

The following tables provide an overview of the quarterly sales development by operational segments:

Revenue (million euros)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q3 change
Restaurant and shop sales on-board and
onshore	146.8	127.6	107.8	145.6	149.8	2.1%
Ticket sales	82.6	52.4	42.1	65.2	83.8	1.5%
Sales of cargo transportation	25.4	27.1	28.2	29.7	28.9	13.9%
Accommodation sales	6.6	4.4	3.3	5.8	7.1	7.3%
Income from charter of vessels	4.9	6.9	4.8	4.8	4.9	0.0%
Other sales	7.4	7.7	5.4	8.6	8.3	11.4%
Total revenue	273.6	226.1	191.5	259.9	282.7	3.3%

The following graphs provide an overview of the Group's third quarter sales by operational and geographical segments.

MARKET DEVELOPMENTS

The following table provides an overview of the passengers, cargo units and passenger vehicles transported during the third quarter and first 9 months of 2017 and 2016.

Passengers	Q3 2017	Q3 2016	Change	9M 2017	9M 2016	Change
Estonia - Finland	1 484 915	1 568 420	-5.3%	3 845 167	3 891 501	-1.2%
Finland - Sweden	878 492	862 654	1.8%	2 223 966	2 201 271	1.0%
Estonia - Sweden	302 757	280 141	8.1%	793 751	760 174	4.4%
Latvia - Sweden	246 595	143 897	71.4%	576 692	378 293	52.4%
Total	2 912 759	2 855 112	2.0%	7 439 576	7 231 239	2.9%
Cargo units	Q3 2017	Q3 2016	Change	9M 2017	9M 2016	Change
Estonia - Finland	60 409	54 423	11.0%	171 707	155 949	10.1%
Finland - Sweden	16 919	14 878	13.7%	54 311	50 431	7.7%
Estonia - Sweden	10 635	10 336	2.9%	32 191	31 076	3.6%
Latvia - Sweden	3 372	1 533	120.0%	8 742	5 385	62.3%
Total	91 335	81 170	12.5%	266 951	242 841	9.9%
Passenger vehicles	Q3 2017	Q3 2016	Change	9M 2017	9M 2016	Change
Estonia - Finland	235 472	265 491	-11.3%	631 645	672 448	-6.1%
Finland - Sweden	69 782	73 136	-4.6%	134 929	137 896	-2.2%
Estonia - Sweden	24 422	23 322	4.7%	57 330	57 217	0.2%
Latvia - Sweden	23 633	18 394	28.5%	56 523	44 114	28.1%
Total	353 309	380 343	-7.1%	880 427	911 675	-3.4%

The Group's market shares on the routes operated during the 12-month period ended 30 September 2017 were as follows:

• The Group carried approximately 56% of the passengers and 64% of the ro-ro cargo on the route between Tallinn and Helsinki;
• The Group carried approximately 54% of the passengers and 28% of the ro-ro cargo on the routes between Finland and Sweden;
• The Group was the only provider of daily passenger transportation between Estonia and Sweden;
• The Group was the only provider of daily passenger and ro-ro cargo transportation between Riga and Stockholm.

GROUP STRUCTURE

At the reporting date, the Group consisted of 45 companies. All subsidiaries are wholly-owned by Tallink Grupp AS. The following diagram represents the Group's structure at the reporting date:

The Group also owns 34% of Tallink Takso AS.

PERSONNEL

On 30 September 2017, the Group employed 7 306 employees (7 050 on 30 September 2016). The following table provides a more detailed overview of the Group's personnel.

		Average of Q3		Average of 9 months				End of Q3
	2017	2016	Change	2017	2016	Change	2017	2016	Change
Onshore total	1 634	1 701	-3.9%	1 638	1 660	-1.3%	1 579	1 618	-2.4%
Estonia	865	921	-6.1%	878	905	-3.0%	862	866	-0.5%
Finland	520	501	3.8%	506	486	4.1%	478	476	0.4%
Sweden	159	197	-19.3%	165	187	-11.8%	150	193	-22.3%
Latvia	72	69	4.3%	71	67	6.0%	72	70	2.9%
Russia	12	8	50.0%	12	9	33.3%	11	8	37.5%
Germany	6	5	20.0%	6	6	0.0%	6	5	20.0%
On-board	5 303	5 058	4.8%	5 209	4 912	6.0%	5 133	4 830	6.3%
Hotel*	629	607	3.6%	598	595	0.5%	594	602	-1.3%
Total	7 566	7 366	2.7%	7 445	7 167	3.9%	7 306	7 050	3.6%

* The number of hotel personnel is not included in the total number of onshore personnel.

SHAREHOLDERS & SHARE PRICE DEVELOPMENT

The following chart displays the shareholder structure of Tallink Grupp AS as at 30 September 2017.

Since 9 December 2005 the shares of Tallink Grupp AS have been listed on the Tallinn Stock Exchange, where the shares are traded under the ticker symbol TAL1T. The closing share price at the reporting date was EUR 1.03 per share. The following chart gives an overview of the share price development in the past twelve months.

EVENTS IN Q3

Sale of the Superfast vessels

In July, subsidiaries of Tallink Grupp AS, Baltic SF VII Ltd and Baltic SF VIII Ltd concluded agreements for the sale of M/S Stena Superfast VII and M/S Stena Superfast VIII to Stena Ropax Limited. The value of the deal is EUR 133.5 million and the gain on the sale of the vessels is not significant for the consolidated results of Tallink Grupp AS. The vessels will be delivered to the buyer in December 2017. Until then, the vessels will continue to operate in the UK waters according to the charter agreements concluded with Stena Line Ltd in August 2011.

Commencement of an exploratory process relating to potential strategic options

In July, the supervisory board of Tallink Grupp AS started an exploratory process relating to potential strategic options for the Group. Citigroup Global Markets Limited has been appointed as a financial advisor in the process. The strategic options considered will support the Group's long-term strategy and may include attracting new core investors, which could lead to some of the existing shareholders divesting their shares in Tallink Grupp AS (whether by way of voluntary or mandatory take-over offer or otherwise). No assurances are given that any transaction will occur as a result of this process.

Charter agreement extension

In August, a subsidiary of AS Tallink Grupp, Baltic SF IX Limited and Marine Atlantic Inc, a Canadian company with the state participation therein, have concluded to extend the current charter agreement of MV Atlantic Vision (ex. Superfast IX) for one year, until November 2018. The vessel has been on the long-term bareboat charter since November 2008.

EVENTS AFTER THE REPORTING PERIOD AND OUTLOOK

Outlook for 2017

The Group's management expects the operating results for 2017 to be better than that for the previous financial year thanks to the addition of a new fast LNG ferry, Megastar, in January and the rerouting of ships carried out in December 2016. Since February 2017 there have been no charter hire costs from the fast ferry Superstar.

Earnings

The Group's earnings are not generated evenly throughout the year. The summer period is the high season in the Group's operations. In management's opinion and based on prior experience most of the Group's earnings are generated during the summer (June-August).

Research and development projects

Tallink Grupp AS does not have any substantial on-going research and development projects.

RISKS

The Group's business, financial position and operating results could be materially affected by various risks. 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 or unlikely, could also impair our business. 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.

• Accidents, disasters
• Macroeconomic developments
• Changes in laws and regulations
• Relations with trade unions
• Increase in the fuel prices and interest rates
• Market and customer behaviour

MANAGEMENT BOARD'S CONFIRMATION

We confirm that to the best of our knowledge, the management report of Tallink Grupp AS for the first 9 months of 2017 presents a true and fair view of the Group's development, results and financial position and includes an overview of the main risks and uncertainties.

Janek Stalmeister Chairman of the Management Board

Andres Hunt Vice Chairman of the Management Board

Lembit Kitter Member of the Management Board

Tallinn, 9 November 2017

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Unaudited, in thousands of EUR	Q3 2017	Q3 2016	9M 2017	9M 2016
Revenue (Note 3)	282 715	273 615	734 121	711 670
Cost of sales	-200 769	-196 839	-578 026	-560 154
Gross profit	81 946	76 776	156 095	151 516
Sales and marketing expenses	-17 068	-16 571	-54 182	-53 166
Administrative expenses	-11 780	-12 548	-37 234	-38 825
Other operating income	108	180	444	1 753
Other operating expenses	-38	22	-182	-6
Result from operating activities	53 168	47 859	64 941	61 272
Finance income (Note 4)	-102	4 398	7 806	8 760
Finance costs (Note 4)	-5 214	-9 999	-23 183	-29 685
Profit/loss before income tax	47 852	42 258	49 564	40 347
Income tax	-12	580	-4 138	245
Net profit/loss for the period	47 840	42 838	45 426	40 592
Other comprehensive income/expense
Exchange differences on translating foreign operations	-40	-99	-22	-264
Other comprehensive income/expense for the period	-40	-99	-22	-264
Total comprehensive income/expense for the period	47 800	42 739	45 404	40 328
Basic and diluted earnings per share (in EUR per share, note 5)	0.071	0.064	0.068	0.061

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited, in thousands of EUR	30.09.2017	31.12.2016
ASSETS
Cash and cash equivalents	80 161	78 773
Trade and other receivables	51 951	38 674
Prepayments	13 921	7 926
Prepaid income tax	34	91
Inventories	46 314	38 719
Current assets	192 381	164 183
Investments in equity-accounted investees	363	363
Other financial assets	353	348
Deferred income tax assets	18 797	18 791
Investment property	300	300
Property, plant and equipment (Note 7)	1 452 732	1 304 897
Intangible assets (Note 8)	49 579	50 127
Non-current assets	1 522 124	1 374 826
TOTAL ASSETS	1 714 505	1 539 009
LIABILITIES AND EQUITY Interest-bearing loans and borrowings (Note 9) Trade and other payables Payables to owners ¹ Income tax liability	154 855 96 505 3 4	106 112 103 280 4 10
Deferred income	33 010	30 895
Current liabilities Interest-bearing loans and borrowings (Note 9) Derivatives (Note 6)	284 377 560 466 30 798	240 301 452 793 32 359
Non-current liabilities	591 264	485 152
Total liabilities	875 641	725 453
Share capital (Note 10) Share premium	361 736 639	361 736 639
Reserves	70 958	68 774
Retained earnings	405 531	382 407
Equity attributable to equity holders of the Parent	838 864	813 556
Total equity	838 864	813 556
TOTAL LIABILITIES AND EQUITY	1 714 505	1 539 009

¹ Payments related to reduction of share capital.

CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited, in thousands of EUR	9M 2017	9M 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit/loss for the period	45 426	40 592
Adjustments	84 328	79 014
Changes in:
Receivables and prepayments related to operating activities	-20 727	-9 914
Inventories	-7 595	-8 427
Liabilities related to operating activities	-5 238	-326
Changes in assets and liabilities	-33 560	-18 667
Cash generated from operating activities	96 194	100 939
Income tax paid received/ paid	9	-1 621
NET CASH FROM OPERATING ACTIVITIES	96 203	99 318
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, equipment and intangible assets (Notes 7, 8, 9)	-212 031	-46 197
Proceeds from disposals of property, plant, equipment	224	144
Interest received	1	51
NET CASH USED IN INVESTING ACTIVITIES	-211 806	-46 002
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans received (Note 9)	184 000	0
Repayment of loans received (Note 9)	-51 241	-55 039
Change in overdraft (Note 9)	27 580	44 096
Payments for settlement of derivatives	-2 698	-3 341
Payment of finance lease liabilities (Note 9)	-78	-74
Interest paid	-16 159	-18 434
Payment of transaction costs related to loans	-216	0
Dividends paid (Note 11)	-20 096	-13 398
Reduction of share capital	-1	0
Income tax on dividends paid	-4 100	-330
NET CASH FROM/USED IN FINANCING ACTIVITIES	116 991	-46 520
TOTAL NET CASH FLOW	1 388	6 796
Cash and cash equivalents at the beginning of period	78 773	81 976
Increase/decrease in cash and cash equivalents	1 388	6 796
Cash and cash equivalents at the end of period	80 161	88 772

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

						Reserve	Share		Equity
			Trans	Ships re	Manda	for	option		attributable to
	Share	Share	lation	valuation	tory legal	treasury	programme	Retained	equity holders	Total
Unaudited, in thousands of EUR	capital	premium	reserve	reserve	reserve	shares	reserve	earnings	of the Parent	equity
As at 31 December 2016	361 736	639	-11	45 646	23 139	0	0	382 407	813 556	813 556
Net profit/loss for the period (Note 5)	0	0	0	0	0	0	0	45 426	45 426	45 426
Other comprehensive income/expense	0	0	-22	0	0	0	0	0	-22	-22
Total comprehensive income/expense for the period	0	0	-22	0	0	0	0	45 426	45 404	45 404
Transactions with owners of the Company
Transfer from profit for 2016	0	0	0	0	2 206	0	0	-2 206	0	0
Dividends	0	0	0	0	0	0	0	-20 096	-20 096	-20 096
Transactions with owners of the Company,	0	0	0	0	2 206	0	0	-22 302	-20 096	-20 096
recognised directly in equity
As at 30 September 2017	361 736	639	-33	45 646	25 345	0	0	405 531	838 864	838 864
As at 31 December 2015	404 290	639	458	47 693	20 185	-4 163	910	354 410	824 422	824 422
Net profit/loss for the period (Note 5)	0	0	0	0	0	0	0	40 592	40 592	40 592
Total other comprehensive income/expense	0	0	-264	0	0	0	0	0	-264	-264
Total comprehensive income/expense for the period	0	0	-264	0	0	0	0	40 592	40 328	40 328
Transactions with owners of the Company
Transfer from profit for 2015	0	0	0	0	2 954	0	0	-2 954	0	0
Dividends	0	0	0	0	0	0	0	-13 398	-13 398	-13 398
Share-based payment transactions (Note 11)	0	0	0	0	0	0	-910	910	0	0
Cancellation of own shares	-2 361	0	0	0	0	4 163	0	-1 802	0	0
Reduction of share capital	-40 193	0	0	0	0	0	0	0	-40 193	-40 193
Transactions with owners of the Company,	-42 554	0	0	0	2 954	4 163	-910	-17 244	-53 591	-53 591
recognised directly in equity
As at 30 September 2016	361 736	639	194	47 693	23 139	0	0	377 758	811 159	811 159

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 CORPORATE INFORMATION

The consolidated financial statements of Tallink Grupp AS (the "Parent") and its subsidiaries (together referred to as the "Group") for the first 9 months of 2017 were authorised for issue by the Management Board on 9 November 2017.

Tallink Grupp AS is a public limited company incorporated and domiciled in Estonia, with a registered office at Sadama 5/7, Tallinn. Tallink Grupp AS shares have been publicly traded on the Tallinn Stock Exchange since 9 December 2005.

The principal activities of the Group are related to marine transportation in the Baltic Sea (passenger and cargo transportation). As at 30 September 2017, the Group employed 7 306 people (7 234 as at 31 December 2016).

Note 2 BASIS OF PREPARATION

The interim consolidated financial statements of Tallink Grupp AS have been prepared in a condensed form in accordance with IFRS as adopted by EU and in accordance with the requirements of International Accounting Standard (IAS) 34 "Interim Financial Reporting".

The interim consolidated financial statements have been prepared using the same accounting policies and measurement bases that were applied in the preparation of the consolidated financial statements of Tallink Grupp AS for the financial year ended on 31 December 2016.

The interim consolidated financial statements are presented in thousand euros (EUR).

Note 3 SEGMENT INFORMATION

The Group's operations are organized and managed separately according to the nature of the different markets. Different routes represent different business segments.

The following tables present the Group's revenue and profit by reportable segments for the reporting and the comparative period.

Geographical segments – by the location of assets

For the period 1 January - 30 September, in thousands of EUR	Estonia	Estonia	Latvia	Finland		Intersegment
	Finland route	Sweden route	Sweden route	Sweden route	Other	elimination	Total
2017
Sales to external customers	265 352	89 774	51 182	262 442	65 371	0	734 121
Intersegment sales	0	0	0	0	8 033	-8 033	0
Revenue	265 352	89 774	51 182	262 442	73 404	-8 033	734 121
Segment result	56 651	9 941	-906	21 340	14 887	0	101 913
Unallocated expenses							-36 972
Net financial items (Note 4)							-15 377
Profit/loss before income tax							49 564

	Estonia	Estonia	Latvia	Finland		Intersegment
For the period 1 January - 30 September, in thousands of EUR	Finland route	Sweden route	Sweden route	Sweden route	Other	elimination	Total
2016
Sales to external customers	265 356	84 524	33 474	256 901	71 415	0	711 670
Intersegment sales	0	0	0	0	7 671	-7 671	0
Revenue	265 356	84 524	33 474	256 901	79 086	-7 671	711 670
Segment result	54 497	11 871	6 054	15 939	9 989	0	98 350
Unallocated expenses							-37 078
Net financial items (Note 4)							-20 925
Profit/loss before income tax							40 347

Revenue by service

In thousands of EUR	9M 2017	9M 2016
Restaurant and shop sales on-board and onshore	403 235	393 807
Ticket sales	191 074	183 661
Sales of cargo transport	86 852	76 768
Sales of accommodation	16 242	15 151
Income from charter of vessels	14 469	18 622
Other	22 249	23 661
Total revenue of the Group	734 121	711 670

Note 4 FINANCIAL ITEMS

In thousands of EUR	9M 2017	9M 2016
Net foreign exchange gain	3 736	0
Income on interest rate swaps	4 069	419
Income on foreign exchange derivatives	0	8 338
Interest income on financial assets not measured at fair value through profit or loss	1	3
Total finance income	7 806	8 760
Net foreign exchange loss	0	-5 863
Interest expense on financial liabilities measured at amortised cost	-17 977	-20 355
Expenses on foreign exchange derivatives	-2 508	0
Expenses on interest rate swaps	-2 698	-3 467
Total finance costs	-23 183	-29 685
Net finance costs	-15 377	-20 925

Note 5 EARNINGS PER SHARE (EPS)

Basic EPS are calculated by dividing the net profit for the period attributable to ordinary shareholders of the Parent by the weighted average number of ordinary shares outstanding during the period. There were no dilutive outstanding share options on 30 September 2017.

In thousands
	Q3 2017	Q3 2016	9M 2017	9M 2016
Shares issued	669 882	669 882	669 882	669 882
Shares outstanding	669 882	669 882	669 882	669 882

In thousands of EUR	Q3 2017	Q3 2016	9M 2017	9M 2016
Weighted average number of ordinary shares outstanding
(in thousands)	669 882	669 882	669 882	669 882
Net profit/loss attributable to equity holders of the Parent	47 840	42 838	45 426	40 592
Basic EPS (EUR per share)	0.071	0.064	0.068	0.061
Diluted EPS (EUR per share)	0.071	0.064	0.068	0.061

Note 6 DERIVATIVE INSTRUMENTS

The Group uses interest rate swaps to manage its exposure to movements in interest rates. Where the effectiveness of the hedge relationship in a cash flow hedge is demonstrated, changes in the fair value are included in the hedging reserve in shareholders' equity and released to match actual payments on the hedged item. Changes in the fair value of derivatives which do not qualify for hedge accounting under IAS 39 are recognised directly in profit or loss.

As at 30 September 2017, Tallink Grupp AS had two interest rate derivative contracts with a total notional amount of EUR 170 000 thousand with maturities in 2018 and 2019 and two cross-currency derivative contracts with a total notional amount of EUR 120 000 thousand with maturities in 2018. As at 30 September 2017, the fair value of the interest rate derivatives was EUR -5 230 thousand and the fair value of the cross-currency derivatives was EUR -25 568 thousand.

Note 7 PROPERTY, PLANT AND EQUIPMENT

	Land and		Plant and	Assets under
In thousands of EUR	buildings	Ships	equipment	construction	Total
Book value as at 31 December 2016	2 525	1 230 437	23 063	48 872	1 304 897
Additions	0	238 590	12 090	-42 566	208 114
Disposals	0	0	-278	0	-278
Depreciation for the period	-396	-53 753	-5 852	0	-60 001
Book value as at 30 September 2017	2 129	1 415 274	29 023	6 306	1 452 732
As at 30 September 2017
Gross carrying amount	5 607	1 815 922	61 055	6 306	1 888 890
Accumulated depreciation	-3 478	-400 648	-32 032	0	-436 158
Book value as at 31 December 2015	2 942	1 270 102	10 160	28 214	1 311 418
Additions	92	11 212	12 982	19 721	44 007
Disposals	0	0	-34	0	-34
Depreciation for the period	-810	-49 256	-4 099	0	-54 165
Book value as at 30 September 2016	2 224	1 232 058	19 009	47 935	1 301 226
As at 30 September 2016
Gross carrying amount	13 295	1 564 976	45 260	47 935	1 671 466
Accumulated depreciation	-11 071	-332 918	-26 251	0	-370 240

Note 8 INTANGIBLE ASSETS

In thousands of EUR	Goodwill	Trademark	Other	Total
Book value as at 31 December 2016	11 066	27 670	11 391	50 127
Additions	0	0	3 996	3 996
Amortisation for the period	0	-2 187	-2 357	-4 544
Book value as at 30 September 2017	11 066	25 483	13 030	49 579
As at 30 September 2017
Cost	11 066	58 288	36 386	105 740
Accumulated amortisation	0	-32 805	-23 356	-56 161
Book value as at 31 December 2015	11 066	30 586	11 074	52 726
Additions	0	0	2 377	2 377
Disposals	0	0	-78	-78
Amortisation for the period	0	-2 187	-1 934	-4 121
Book value as at 30 September 2016	11 066	28 399	11 439	50 904
As at 30 September 2016
Cost	11 066	58 288	32 006	101 360
Accumulated amortisation	0	-29 889	-20 567	-50 456

				Exchange	Other
In thousands of EUR	31.12.2016	Addition	Repayments	differences	changes¹	30.09.2017
Finance leases	373	79	-78	-3	-53	318
Unsecured bonds	98 627	0	0	-3 421	173	95 379
Overdrafts	40 110	27 580	0	0	0	67 690
Long-term bank loans	419 795	184 000	-51 241	0	-620	551 934
Total borrowings	558 905	211 659	-51 319	-3 424	-500	715 321
Current portion	106 112					154 855
Non-current portion	452 793					560 466
Total borrowings	558 905					715 321

Note 9 INTEREST-BEARING LOANS AND BORROWINGS

¹ Other changes in bonds and bank loans are related to the capitalisation and amortisation of transaction costs. Other changes in finance lease liabilities are related to the termination of lease agreements.

Bonds are nominated in NOK.

Bank overdrafts are secured with commercial pledges(in the total amount of EUR 20 204 thousand) and ship mortgages.

Tallink Grupp AS has given guarantees to HSH Nordbank AG, Nordea Bank Plc and Danske Bank A/S for loans of EUR 287 759 thousand granted to its ship-owning subsidiaries. Ship-owning subsidiaries have given guarantees to Nordea Bank Finland Plc and Swedbank AS for loans of EUR 264 175 thousand granted to Tallink Grupp AS. The primary securities for these loans are pledges of the shares in the ship-owning subsidiaries and mortgages on the ships belonging to the aforementioned subsidiaries.

Note 10 SHARE CAPITAL

According to the articles of association of the Parent effective as from 31 December 2016, the maximum number of common shares is 2 400 000 000. Each share grants one vote at the shareholders' general meeting. Shares acquired by the transfer of ownership are eligible for participating in and voting at a general meeting only if the ownership change has been recorded in the Estonian Central Registry of Securities by the time the list of shareholders entitled to participate in the general meeting is determined.

Tallink Grupp AS has 669 882 040 registered shares without nominal value whose book value is EUR 0.54.

Note 11 DIVIDENDS

The Management Board's long-term goal is to distribute at least 50% of net profit as dividends or capital repayments, taking into account the Group's financial position. The management estimates that in the coming years the distribution per share will be at least EUR 0.02 or above.

The annual general meeting of 2017 decided to pay a dividend of EUR 0.03 per share (EUR 20 096 thousand in total) from the net profit for 2016. The announced dividends were paid out on 5 July 2017.

Note 12 RELATED PARTY DISCLOSURES

The Group has entered into the following transactions with related parties and has the following balances with them.

		Purchases
For the period ended 30 September 2017, in thousands of EUR	Sales to related parties	from related parties	Receivables from related parties	Payables to related parties
Companies controlled by the Key Management Personnel	254	17 344	27	549
Associated companies	0	129	0	27
Total	254	17 473	27	576

	Purchases
For the period ended 30 September 2016, in thousands of	Sales to related	from related	Receivables from related	Payables to related
EUR	parties	parties	parties	parties
Companies controlled by the Key Management Personnel	227	12 743	11	1 017
Associated companies	1	104	0	17
Total	228	12 847	11	1 034

STATEMENT BY THE MANAGEMENT BOARD

Hereby we declare our responsibility for the Tallink Grupp AS Unaudited Interim Consolidated Financial Statements for the first 9 months of 2017 and confirm that these financial statements have been prepared in accordance with IFRS as adopted by the EU and IAS 34 and give a true and fair view of the Group's financial position, financial performance and cash flows.

Tallink Grupp AS and its subsidiaries are able to continue as going concerns for a period of at least one year after the date of approval of these financial statements.

Janek Stalmeister Chairman of the Management Board

Andres Hunt Vice Chairman of the Management Board

Lembit Kitter Member of the Management Board

Tallinn, 9 November 2017