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ANNUAL REPORT 2010

E S T R A V E L I A N N U A L R E P O R T 2 0 1 0 2

Contents

ADDRESS BY THE MANAGING DIRECTOR 3Financial highlights of Estravel AS 5Summarised sales of Estravel Group 5Top destination countries of estravel’s customers 6Sales breakdown by customer group 7Ferry ticket sales by carrier 7Package tour sales by operator 8 Sales breakdown by product 8Flights 9Holidays 11Conference travel 12

FINANCIAL STATEMENT 2010Extract from the 2010 Financial Statements of Estravel Ltd

Balance sheet 13Income statement 15Cash flow statement 16Notes 17

AUDITOR’S REPORT 21

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Dear clients and partners!

2010 was a challenging year for Estravel as well as the tourism sector as a whole. Although the overall econo-mic situation stabilised and the recession seemed to be a thing of the past, the tourism sector was still hit by various backlashes. Regardless of everything, Estravel managed to increase its turnover, sales revenue and profit.

Anne SamlikManaging Director and

Member of the Board of AS Estravel

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We all hope that 2011 will be easier than the year before. We hope that the global economy will get back on its feet and the travel sector will also reco-ver, but even if the difficult times continue, Estra-vel can assure all of its clients that we will always be there for them.

I would like to thank our partners and clients for their trust in us! I would also like to thank our emp-loyees, who make Estravel what it is. There are no difficulties we cannot overcome as a team and it is easier for us make our future better together.

The Eyjafjallajökull volcano in Iceland started erup-ting in 2010. The ash created by the eruptions dis-turbed air traffic for weeks and had a significant impact on the tourism sector in Europe. On one hand, this event exposed the vulnerability of the sector, on the other hand it separated the wheat from the chaff – the attitude of airlines and tra-vel agencies became the factor that determined how people regard these companies in the future. Estravel proved during the ash crisis that the big-gest travel agency in the Baltic States knows how to manage crises and provided great service to its clients. The results of our good crisis management were clearly evident in our sales figures in the sub-sequent months.

ANNE SAMLIKManaging Director and Member of the Board of AS Estravel

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SUMMARISED SALES OF ESTRAVEL GROUP

Accounting unit in the group

(in million Estonian kroons)

Sales Internal sales Summarised sales

Estravel AS (Estonia) 685,907,123 5,565,663 680,341,460

Estravel AS (Latvia, dba. FTB Latvia) 64,172,025 3,281,231 60,890,794

Estravel Vilnius (Lithuania, dba. American Express) 93,248,264 2,002,814 91,245,450

Backoffice Services OÜ

TOTAL 843,327,412 10,849,708 832,477,704

FINANCIAL HIGHLIGHTS OF ESTRAVEL AS

(in million Estonian kroons) 2010 2009

gross sales 745.0 720.4

net sales revenue 90.0 86.0

net revenues total 90.6 86.5

pretax profit 17.1 5.4

profit margin (from net revenues) 17.0% 2.2%

share capital 3.0 3.0

shareholders` equity 31.30 26.5

return on assets 16.1% 1.9%

return on equity 46.9% 6.8%

solvency 1.4 1.3

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SALES BY GEOGRAPHICAL AREAS

Destination country in sales order Share % Change %

EU (excluding Finland, Latvia, Lithuania, Estonia) 36.5 5.7

Estonia (incoming and outcoming) 16.1 -3.1

Europe (excluding EU countries) 12.5 -0.6

Finland 7.5 -0.9

Asia 6.8 1.5

USA 6.5 0.0

Lithuania 1.9 0.2

Latvia 1.7 -0.7

North America (excluding USA) 0.9 -0.6

Other countries 9.7 -1.5

A client praises Annika Sokk from the Call Centre

It’s great to get home and find a letter waiting for you as though someone close to you who cares about you has been waiting for you to get back. Caring about people is what Estravel clearly does – and it’s the thing we appreciate most about you :)My thanks to everyone who played a part in making my holiday so special – especially you, Annika!

“Where should Igo?”

Tiina TomingaSenior Travel Consultant

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A client praisesMonika Kõrveman from Leisure Travel Customer Service

Although it was the first time I’d ever spoken to your customer service assistant, it felt as though she’d known me for years. Not in some gushing or overly exaggerated kind of way, mind – just in a way that put me at ease talking to her and made me feel like a valued customer. She came up with a great holiday package for me without needing any prompting. What could be better than that!

Sales breakdown by customer group Ferry ticket sales* by carrier

Business 48%

Private persons 37%

Government & non-profit 11%

Resellers abroad 2%

Resellers in Estonia 2%

Tallink 74.7%

Viking Line 19.3%

Lindaliini 3.1%

Eckero Line 0.9%

Others 1.8%

“Phuket” Tiina Tominga

Senior Travel Consultant

* technical sales

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Package tour sales* by operator Sales* breakdown by product

Airline tickets 59.3%

Hotel accomodation 14.2%

Package tours & cruises 12.8%

Ferry tickets 5.8%

Insurance 1.4%

Bus & car rental 1.0%

Rail tickets 0.7%

Visas 0.4%

Other services 4,4%

* technical sales

Tez Tour 28.4%

Novatours 19.6%

Finnmatkat 15.9%

Horizon Travel 13.8%

TopTours 8.4%

Aurinkomatkat 6.0%

Germalo Reisid 2.2%

Domina World Travel 1.3%

Others 4.4%

“Zambwesi”

“Georg Swing”“Reunion”

Merlin HeinlaidTravel Consultant

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Flights2010 was a year of stabilisation in the sales of airline tickets, which were hit hard during the recession.

The market was still down in the fi rst months of the year and air traffi c in Europe suffered due to the vol-canic ash coming from Iceland, but sales of airline tic-kets started going up again in the second half of the year. Sales of airline tickets in Estravel increased both in terms of money as well as the number of tickets sold during the year.

The new direct fl ights made available to Estonian pas-sengers were another sign that the recession was a thing of the past. For example, Lufthansa opened its Tallinn-Munich route and Polish airline LOT reopened its Tallinn-Warsaw route. Latvian airline airBaltic also offered direct fl ights from Tallinn to various cities in Finland and Stockholm, but these routes were unfortu-nately closed rather fast. Budget airline Ryanair fi nally arrived in Estonia at the end of 2010 after a long wait,

and broadened the selection of destinations that could be reached directly from Tallinn.

The number of air passengers started increasing glob-ally in the previous year as the recession receded, but there is nothing good without the bad. Fuel prices con-tinued to increase and competition among airlines decreased as a result of the merger of several larger companies and the disappearance of smaller ones. The prices of many airline tickets increase in this situa-tion, especially on long-haul fl ights.

“Mexico”

Gertu KallasTravel Consultant

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The recession may be over, but both clients and airlines are still keeping a close eye on their expenses. This is why airlines organised fewer discount campaigns than during the recession. However, more than a thousand Estravel clients fl ew to various Asian countries with the cheap tickets offered by the Ukrainian Aerosvit Airlines.

Although the recession is now almost over, there are still problems in the pricing of airline tickets. The key issue is the increase in the fuel price, which has made fl ying expensive. Political stability in various destina-tions also has an impact on air travel. However, we can still say that indicators went up in 2010 and there is hope that we will also see a similar increase in 2011.

A client praises Krista Punane from the Airport sales office

I’d recommend Estravel to anyone. You realise just

how good the level of service is when you’re somewhere

on the other side of the world and the airline you’re

meant to be flying with goes on strike. We made the

right choice picking you as our travel agency and we’ll

definitely be using you again in future.

Thanks for the great job you did, Krista!“Waikiki” Gertu Kallas

Travel Consultant

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HolidaysSales of package holidays were affected by the continuing recession as well as several natural catastrophes and unrest in the favourite destinations of Estonian tourists. This is why sales of package holidays decreased in 2010 when compared to the previous year.

The decrease was a result of Force majeure events, which could not have been foreseen. The main prob-lem was the Icelandic ash cloud, which temporarily par-alysed air traffi c in Europe, and the fl oods in Madeira that had an adverse effect on tourism in the region. The unstable economic situation also had an impact on the sales of package holidays, as many people decided against travelling abroad. The bankruptcy of one of the largest Estonian tour operators, TopTours, also shook people’s trust in package holidays.

Egypt and the Canary Islands remained the most popu-lar package holiday destinations in winter with Turkey, Crete and Spain still attracting the most holidaymakers in summer. We also successfully offered charter fl ights

“Hawaii”

to Goa, India, at the end of the year. Not many new des-tinations were offered during the year.

The market of ferry tickets in 2010 was stable in com-parison to previous years. The number of passengers increased, but the sales fi gures were similar to those of 2009. The Tudish-piip campaigns of Rimi supermar-kets proved to be an important channel in selling ferry tickets, as it helped Estravel fi nd new clients and made some corrections in the current positions of Tallink and Viking Line on the market.

The impact of the recession was also felt in the provi-sion of accommodation services. Similarly to 2009, sales remained modest and were mostly restricted to business clients.

Gertu KallasTravel Consultant

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Conference travel

The most noteworthy projects of 2010 took place outside Tallinn. We organised accommodation for the teams and spectators in the Rally Estonia 2010 competition in Southern Estonia. In Pärnu we found accommodation for the official delega-tions of the 30th International Hanseatic Days. We also helped to organise several technological and medical conferences that were large in Estonian terms with more than 250 participants. The majo-rity of them were held in Tartu.

Germany and Scandinavian countries remain the biggest foreign markets of Estravel, but we have

In 2010 Estravel remained one of the largest ser-vice providers on the market of conferences and other events with accommodation in Estonia. We had the chance to take part in several big and important projects during the year and comp-leting them successfully demonstrated our high quality and great ability.

A client praises

Hille Järve from the Tartu sales office

The way your staff deal with clients is second to

none

and your offers are always great, giving you t

he chance

to choose the prices and itineraries that suit yo

u best.

Your team, especially Hille, never once forget

the

promises they make, and I was very impressed by

their

ability to arrange my travels at such short not

ice.

started paying more attention to the East. We are not aiming for our closest eastern neighbour Rus-sia and CIS countries alone, as China is also an important direction for us. We continue contribu-ting to the development of domestic tourism and offering various solutions.

Preparations for selling tickets to the 2012 Olym-pic Games in London and organising related trips started in 2010. Estravel entered into an official contract with the official distributor of the Olym-pic Games and our employees passed the rele-vant training course in London and took a look at accommodation options there. Estravel will start selling tickets to the Olympic Games in spring 2011.

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Annual financial statements 2010

BALANCE SHEETassets

Extract from the 2010 Financial Statements of Estravel Ltd

(in Estonian kroons) 12/31/2010 12/31/2009

Current assets

Cash 9,340,340 38,250,278

Receivables and prepayments 77,156,477 51,491,440

Inventories 501,812 831,454

Total current assets 86,998,629 90,573,172

Non-current assets

Financial assets 1,127,141 1,948,624

Property, plant and equipment 1,415,877 1,588,182

Intangible assets 2,043,185 2,615,598

Total non-current assets 4,586,203 6,152,404

Total assets 91,584,832 96,725,576

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BALANCE SHEETliabilities and equity

(in Estonian kroons) 12/31/2010 12/31/2009

Liabilities

Current liabilities 60,230,317 70,176,066

Total current liabilities 60,230,317 70,176,066

Equity

Share capital at par value 3,000,000 3,000,000

Share premium 450,500 450,500

Statutory capital reserve 300,000 300,000

Other reserves 409,834 409,687

Retained earnings (prior periods) 12,489,323 20,596,292

Profit for the period 14,704,858 1,793,031

Total equity 31,354,515 26,549,510

Total liabilities and equity 91,584,832 96,725,576

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INCOME STATEMENT

STATEMENT OF COMPREHENSIVE INCOME

(in Estonian kroons) 2010 2009

Revenue 90,034,425 86,014,838

Other income 577,045 508,972

Other operating expenses -23,802,354 -25,491,133

Personnel expenses -50,725,431 -54,194,934

Depreciation, amortisation and impairment losses -1,285,814 -1,707,808

Other expenses -2,030,401 -2,855,953

Operating profit 12,767,470 2,273,982

Finance income and expenses 4,303,046 3,122,669

Profit before tax 17,070,516 5,396,651

Income tax expense -2,365,658 -3,603,620

Profit for the year 14,704,858 1,793,031

(in Estonian kroons) 2010 2009

Profit for the year 14,704,858 1,793,031

Other comprehensive income:

Exchange differences on translating foreign operations 147 18,139

Total other comprehensive income 147 18,139

Total comprehensive income for the year 14,705,005 1,811,170

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Cash flows from investing activities

Acquisition of property, plant and equipment and intangible assets -551,687 -949,614

Proceeds from sale of property, plant and equipment and intangible assets 0 472,344

Other financial income 83,090 71,266

Proceeds from sale of subsidiary and associated companies 1,579,853 0

Other payments from investing activities -28,850,016 -20,568,961

Loans granted -66,159 0

Repayment of loans granted 380,434 120,909

Interest received 2,472,514 2,348,753

Dividends received 1,000,620 1,020,000

Net cash from investing activities -23,951,351 -17,485,303

STATEMENT OF CASH FLOWS

(in Estonian kroons) 2010 2009

Cash flows from operating activities

Operating profit 12,767,470 2,273,982

Adjustments for

Depreciation, amortisation and impairment losses 1,285,814 1,707,808

Gain/ loss on sale of property, plant and equipment 10,592 305,335

Total adjustments 1,296,406 2,013,143

Change in receivables and prepayments 2,544,092 2,359,724

Change in inventories 329,642 697,813

Change in payables and advances received -10,489,811 -7,175,070

Interest paid -50,828 -70,847

Corporate income tax paid -1,362,109 -4,607,169

Net cash used in operating activities 5,034,862 -4,508,424

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STATEMENT OF CASH FLOWS(continued)

Note 2. Receivables and prepayments

Note 3. Trade receivables

(in Estonian kroons) 2010 2009

Cash flows from financing activities

Dividends paid -9,900,000 -20,002,799

Net cash used in financing activities -9,900,000 -20,002,799

Net cash flow -28,816,489 -41,996,526

Cash and cash equivalents at beginning of period 38,250,278 80,197,585

Decrease in cash and cash equivalents -28,816,489 -41,996,526

Effect of exchange rate fluctuations on cash held -93,449 49,219

Cash and cash equivalents at end of period 9,340,340 38,250,278

As at 31 December (in Estonian kroons) 2010 2009

Trade receivables 11,893,053 15,917,183

Prepaid and refundable taxes 11,000 1,011,046

Other receivables 56,133,403 27,992,691

Prepayments 9,119,021 6,570,520

Total receivables and prepayments 77,156,477 51,491,440

As at 31 December (in Estonian kroons) 2010 2009

Trade receivables 11,953,808 15,410,055

Allowance for doubtful receivables -513,984 -1,279,785

Receivables from the parent and other group companies 453,229 1,786,913

Total trade receivables 11,893,053 15,917,183

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Allowance for doubtful receivables

Note 4. Prepaid taxes and taxes payable

(in Estonian kroons) 2010 2009

Allowance for doubtful receivables at beginning of period 1,279,785 1,548,588

Recovery of items considered doubtful in prior periods -73,514 -89,427

Items considered doubtful in the reporting period 300,962 315,241

Items considered irrecoverable in the reporting period -993,249 -494,617

Allowance for doubtful receivables at end of period 513,984 1,279,785

(in Estonian kroons) 31.12.2010 31.12.2009

Prepayment Payable Prepayment Payable

Corporate income tax 1,003,549

Value added tax 11,000 301,727 7,497 498,462

Personal income tax 1,092,259 941,632

Income tax on fringe benefits 48,199 42,060

Social tax 2,055,755 1,802,866

Mandatory funded pension contributions 71,559 25,167

Unemployment insurance contributions 233,555 206,059

Other Prepaid taxes and taxes payable 236

Total 11,000 3,803,290 1,011,046 3,516,246

Note 5. Other receivables

(in Estonian kroons) 31.12.2010 31.12.2009

Loan receivables 994,929 1,801,724

Interest receivable 226,976 107,279

Accrued items 2,395,226 2,443,761

Group`s cash-pool account 52,163,117 23,313,101

Other receivables 353,155 326,826

Total other receivables 56,133,403 27,992,691

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Note 6. Long-term financial assets

Note 7. Investments in subsidiaries

(in Estonian kroons) 31.12.2010 31.12.2009

Investments in subsidiaries 1,125,058 1,933,362

Long-term receivables 2,083 15,262

Total long-term financial assets 1,127,141 1,948,624

Investments in subsidiaries, general information (In Estonian kroons)

Name of subsidiary Domicile Core activity Shareholding (%)

31/12/10 31/12/09

Estravel Vilnius UAB Lithuania Tourist services 100 100

Backoffice Services Estonia OÜ Estonia Business services – data processing 0 51

Investments in subsidiaries, detailed information (In Estonian kroons)

Name of subsidiary 31/12/09 Disposal Dividends Profit/ loss under the

equity method

31/12/2010

Estravel Vilnius UAB 610,518 514,540 1,125,058

Backoffice Services Estonia OÜ 1,322,844 -322,224 -1,000,620

0

Total 1,933,362 -322,224 -1,000,620 514,540 1,125,058

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Note 9. Payables and advances received

Note 8. Inventories

Note 7. Investments in subsidiaries(continued)

(in Estonian kroons) 31.12.2010 31.12.2009

Trade payables 15,576,787 28,035,251

Payables to employees 3,974,192 3,271,340

Taxes payable 3,803,290 3,516,246

Other payables 4,048,734 5,424,590

Advances received 32,827,314 29,928,639

Total payables and advances received 60,230,317 70,176,066

(in Estonian kroons) 31.12.2010 31.12.2009

Goods purchased for sale 501,812 831,454

Total inventories 501,812 831,454

Investments sold (In Estonian kroons)

Name of subsidiary Investment in the entity

Investment sold in sales price

Profit/ loss frominvestment sold

Backoffice Services Estonia OÜ 51 1,579,853 1,257,629

AS PricewaterhouseCoopers, Pärnu mnt 15, 10141 Tallinn, Estonia T: +372 614 1800, F: +372 614 1900, www.pwc.ee

REPORT OF THE INDEPENDENT AUDITOR ON THE SUMMARY FINANCIAL STATEMENTS

(Translation of the Estonian original)∗

To the Shareholders of AS Estravel

The accompanying summary financial statements, which comprise the balance sheet as of 31 December 2010, the income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, are derived from the audited financial statements of AS Estravel for the year ended 31 December 2010. We expressed an unmodified audit opinion on those financial statements in our report dated 8 March 2011.

The summary financial statements do not contain all the disclosures required by accounting principles generally accepted in Estonia. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of AS Estravel.

Management Board's Responsibility for the Summary Financial Statements

Management Board is responsible for the preparation of the summary financial statements that are derived from the audited financial statements.

Auditor's Responsibility

Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing 810, "Engagements to Report on Summary Financial Statements."

Opinion

In our opinion, the summary financial statements derived from the audited financial statements of AS Estravel for the year ended 31 December 2010 are consistent, in all material respects, with those financial statements.

AS PricewaterhouseCoopers Eva Jansen Auditor’s Certificate No.501

8 March 2011

∗ This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

Helsinki

Tallinn

Riga

Kuressaare

Haapsalu

Vilnius

Pärnu Tartu

JõhviRakvere

Head office of Finland Travel Bureau (SMT) GroupEstravel/American Express Travel (Head Office & 3 sales offices)Estravel Rakvere Estravel HaapsaluEstravel Kuressaare

ESTRAVELI ESINDUSED

Estravel JõhviEstravel PärnuEstravel Tartu (2 sales offices)FTB Latvia Estravel Branch in Riga (3 sales offices)American Express Travel UAB Estravel Vilnius (1 sales office)

Helsinki

Tallinn

Riga

Kuressaare

Haapsalu

Vilnius

Pärnu Tartu

JõhviRakvere

Head Office: Finland Travel Bureau (SMT) GroupEstravel/American Express Travel Tallinn Office & Bureaus (3)Estravel Rakvere BureauEstravel Haapsalu BureauEstravel Kuressaare Bureau

ESTRAVEL OFFICES

Estravel Jõhvi BureauEstravel Pärnu BureauEstravel Tartu Bureaus (2)FTB Latvia Estravel Branch in Riga Bureaus (3)American Express Travel UAB Estravel Vilnius Bureau