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    Hanatour Service Inc - 2015 Business Report - Part 1

    Picture of Hanatour Service logoHanatour Service
    01/04/2016 07:00
    RNS Number : 8103T

Hanatour Service Inc.

01 April 2016

Annual Report

I. OUTLINE OF COMPANY

1. Purpose of Company


    PurposeRemark
    1) General travel business
    2) Airline and ship ticket sales business
    3) Souvenir Sales
    4) Issuing of Selling Offers
    5) Real estate dealing and lease
    6) Optional Communication Business
    7) Computer programming and supply
    8) Mail order
    9) Printing and publishing business
    10) Issuing of Periodicals
    11) The transportation business
    12) Institute for traveling specialist
    13) Internet (contents and supply, marketing)
    14) E-commerce and information processing
    15) Advertisement (Internet advertisement)
    16) Information and communication
    17) Homepage and web-hosting
    18) Warehousing
    19) Tourists Hotel and Lodging business
    20) Operation and management of Tourists Hotels &Lodging and other incidental facilities
    21) Tourists Hotels & Lodging facilities related business management
    22) Domestic/Overseas real estate Investment , Operation and Property Management
    23) Real estate agent business
    24) Management of intellectual property rights and license business (Brand, Trademark rights)
    25) Intangible assets sales and service (Knowledge, Information)
    26) Production and distribution (Movies, Broadcasting, Videos and Programs related cultural products & contents)
    27) Digital Contents production and sales
    28) Performing facilities Operation
    29) Planning Performances
    30) Character business
    31) Exhibition and Events agent business
    32) Internet Broadcasting
    33) Tourism Development and Incidental Business(marketing counsel, planning and consulting)
    34) Education service
    35) Operation of E-learning lifelong Education facilities
    36) Gift certificate sales
    37) Wedding consulting
    38) Amusement Park Operation
    39) Comprehensive leisure facilities and operations management
    40) Tourist Development Project
    41) Comprehensive recreation
    42) International Meeting Planning
    43) Camping car
    44) Bonded and tourism product vendors
    45) Accommodation
    46) Accommodation reservation Service
    47) Portal andInternet Information Service
    48) Franchisees
    49) Restaurants
    50) Shopping Center leasingand sublease on a deposit basisbusiness
    51) Ticket sales related to Culture, Arts, Sports Events
    52) Database Development and sales related to Culture, Arts, Sports
    53) Investment of Cultural projects including Performances and film production,
    54) Organization of Events and Sponsors
    55) All rights reserved performance Importand agent business
    56) Copyright and neighboring rights of copyrightagent business 57) Membership sales and brokerage arrangements
    58) Study-Abroad agent business
    59) Lifelong education facilities operating
    60) Financing loan and other financial service business
    61) Electronic financial business operator
    62) Performance, Concert, Exhibition and etc. planning and promotion agency
    63) Credit Card Business
    64) Real Estate Development Business
    65) All other incidental businesses
    

2. History of Company

A. Changes after the establishment


    Oct. 25, 1993Established Kookjin Travel Co., Ltd. (Capital: 350 million won)
    55-4 Seosomun-dong, Jung-gu, Seoul
    Dec. 01, 1995Set the company policy in 'comprehensive wholesales' and launched 'Hana Tour', independent package brand, and commenced the agency sales
    Nov. 28, 2000Listed on KOSDAQ (commenced trading)
    Nov. 10, 2006Listed on LSE(London Stock Exchange)
    Nov. 01, 2011Listed on KOSPI
    Jan. 01, 2012CEO changed - SangHwan Park and HuynSyuk Choi
    

B. Change of trade name


    Mar. 6, 1996Changed the name from Kookjin Travel Co., Ltd. to Hana Tour Co., Ltd.
    * Purpose is to unify the brand name and company image
    

C. Change of location for head office


    Oct. 25, 199355-4 Seosomun-dong, Jung-gu, Seoul
    Mar. 22, 199610F Inju Building, Tour cost fees-1 Seorin-dong, Jongro-gu, Seoul
    Oct. 01, 199711F Hanmi Building, 1 Gonpyeong-dong, Jongro-gu, Seoul
    Jun. 15, 20051 Gongpyeong-dong, Jongro-gu, Seoul
    Jul. 01. 2013HanaTour Bldg. 41, Insadon 5-gil, Jongno-gu, Seoul
    

D. Merger, spin off (merger), comprehensive stock swap, transfer, important business assignment and others

The company has no fact of merger or business assignment since the company establishment to this date of submitting this report.

3. Total Number of Stocks, Etc.

A. Total number of stocks

(As of December 31, 2015)

(Unit: share)


    ClassificationTypes of stocksRemark
    Common stockTotal
    I. Total number of stocks to be issued20,000,00020,000,000
    II. Total number of stocks issued to this point11,616,18511,616,185
    III. Total number of stocks reduced to this point--
    1. Capital deduction--
    2. Retirement of earning--
    3. Repayment of redeemed stocks--
    4. Others--
    IV. Total number of stocks issued (II-III)11,616,18511,616,185
    V. Equity stocks576,163576,163
    VI. Number of shares distributed (IV-V)11,040,02211,040,022
    

B. Change of capital

(1) Status of capital increase

 (Unit: share, won)


    Date of stock
    issuance    		Type of issuanceContents of issued stocks
    TypesQuantityPar
    value    		Issuance amount per stockRemark
    Oct. 25, 1993-Common stock35,00010,00010,000Capital for incorporation
    Jun. 12, 1996Capital increase with consideration (shareholder allotment)Common stock21.50010,00010,000-
    Jul. 25, 1997Capital increase with consideration (shareholder allotment)Common stock35,84010,00010,000-
    Oct.01, 1997-Common stock184,6805,000-Face amount division
    Dec. 02, 1999Capital increase with consideration (shareholder allotment)Common stock115,3205,0005,000-
    Dec. 23, 1999Capital increase with consideration (shareholder allotment)Common stock60,0005,00010,000-
    May, 05, 2000-Common stock3,600,000500-Face amount division
    Nov. 16, 2000Capital increase with consideration (shareholder allotment)Common stock900,0005002,850-
    Aug. 26, 2003Capital increase without considerationCommon stock3,764,034500--
    Oct. 27,2004Capital increase with consideration (shareholder allotment)Common stock76,32250011,850-
    Oct. 27,2004Capital increase without considerationCommon stock1,977,029500--
    Jan. 25, 2006Exercise stock optionsCommon stock137,8005006,171-
    Nov. 11, 2006Capital increaseCommon stock1,161,00050055,711DR
    

(2) Status of capital decrease

 (Unit: share, won)


    Date of capital reductionTypePurposeContents of reduced stocks
    TypesQuantityFace value per stockAmount of acquisition per stock (for capital decrease for consideration)Remark
    --------
    

C. Contents of scheduled change for capital

[No applicable change]

4. Matters on Dividends

A. Matters on dividend for three recent fiscal year


    Classification23rd Term22nd Term21st Term
    Face amount per stock (won)500500500
    Current net income (million won)34,16233,43833,957
    Net income per share (won)2,8772,9782,989
    Total amount of cash dividend (million won)16,56014,47812,511
    Total amount of stock dividend (million won)---
    Tendency of stock dividend (%)52,243.336,8
    Yield rate of cash dividend (%)Common stock1.31.71.7
    Preferred stock-
    Yield rate of stock dividend (%)Common stock-
    Preferred stock-
    Cash dividend per share (won)Common stock1,5001,3001,100
    Preferred stock---
    Stock dividend per shareCommon stock---
    Preferred stock---
    

5. Status of Employees

(As of December 31, 2015)

 (Unit: persons)


    ClassificationNo. of employees
    Office & OperationEtcTotal
    Men1,062351,097
    Women1,2931031,396
    Total2,3551382,493
    

6. Organization

 CHAIRMAN & CEO - GLOBAL STRATEGIC PLANNING DIVISION

 l

 PRESIDENT & CEO

 l

 GLOBAL MANAGEMENTDIVISION , FINANCE DIVISION , GLOBAL GENERAL SALES DIVISION

 l

 AGENCY SALES DIVISION , OVERSEAS BUSINESS DIVISION

II. CONTENTS OF BUSINESS

1. Summary of Business

We, HANATOUR Service Inc. are the market-leading travel/leisure company in Korea with over 140,000 worldwide travel products selling through our website and approximately 8,000 retail travel agencies located across the country.

Our primary business consists of assembling outbound package tours for Korean travelers. The largest scale of operations in the market enables us to negotiate favorable rates with airline carriers, hotel operators and local transportation providers. We package air tickets, hotel rooms and land services and sell them to the end-user by distributing the products through our network of retail travel agents.

2015 had started its 1st quarter with recovered outbound demands and high performance growth rates, however external issues like MERS outbreak in June and the Paris Terrorists Attack in November has impacted the Summer and Winter peak seasons having negative impacts on outbound travel demands.

Even in the situations with difficulties, Hanatour managed to send 2.3 million package travelers YOY growth of 21.0% and 373K FIT travelers YOY growth of 25.5% to overseas destinations.

Regional volume split was as below: Southeast Asia 30.9%, Japan 28.2%, China 19.2%, Europe 7.6%, Domestic 6.9%, South Pacific 4.6%, and Americas 2.6% respectively. Each destinations' revenue contribution was Southeast Asia 32.5%, China 17.6%, Europe 17.1%, Japan 16.5%, South Pacific 8.3%, Americas 6.3%, and Domestic 1.7% showing that followed by 2014, 2015 continued on with its popularity of short haul destinations. Especially Japan, with its low currency value, has shown YOY volume growth of 71.6% driving overall volume growth from beginning of 2015.

Various external issues had influence over 2015. However Hanatour Inc. has managed to gain market share and show volume growth with continuous development of travel products and quality control over customer services.

2. Market Share Rate

The market share rate of the travel business is classified based on the calculation in which the "Total Departures from HANATOUR" is divided by the "Total Departures of Korea." (Crews are excluded from the total departing persons)

The "Total Departure of Korea" is announce by Korea Tourism Organization (KNTO) and the "Total Departures from HANATOUR" is the figure which we report to Korean Association of Travel Agents (KATA).




    Year201520142013
    PersonsTotal
    Departures
    of Korea    		Total
    Departures
    from
    HANATOUR    		Total
    Departures
    of Korea    		Total
    Departures
    from
    HANATOUR    		Total
    Departures
    of Korea    		Total
    Departures
    from
    HANATOUR
    3,734,60317,885,6452,973,58114,726,0882,629,22713,525,297
    Share rate20.88%20.19%19.44%
    

3. Characteristics of the market

There are about 10,000 agents registered in Korea which account for 80% of the companies that are registered in the whole travel-related industry. The travel agents create about 50,000 jobs. In 1982, the travel business was converted from a license business to a registration business which resulted in increase of number of agents. Overseas traveling was completely liberalized in 1989 which brought explosive increase in number of travelers as well as agents. There are mom and pop agents focusing on network-customers, b2c agents focusing on newspaper advertising and walk-in marketing, and wholesale travel agents providing products to aforementioned agents.

There are three special characteristics that make travel industry distinctive.

First, Travel business has seasonality. The pricing and marketing strategies change in accordance to seasons. However, due to 5-work-day policy and more maturing society and corporate cultures, the gap between the demands of seasons are shrinking which demanding changes to the products and strategies of travel agents.

Second, travel industry has time limits and has no inventory. This is in-line with air transportation, and hotel business. Products have to be sold on each day or the inventories will disappear automatically. Therefore it is very important to have marketing strategy and diversified portfolio of products in order to get rid of all the inventories that the company possesses.

Third, travel products are easily plagiarized. Travel products need to have special features since they are easily plagiarized in every way therefore it is more important in this industry to have own distinctive aspects as well as value.

Total number of outbound travelers have recorded CAGR of 6.1% in the last 5 years and KTO is expects the outbound travelers growth will be 5.1% per annum until 2020. Increase in personal income, longer leisure time, high supply of air seat capacity lead by LCCs and other possible growth factors will allow Korean outbound market to grow as we expect in the future.

4. Contents and prospect of new business and others

- None.

III. FINANCIAL DATA

Notice to Readers

This report is effective as of March 16, 2015, the auditor's report date. Certain subsequent events or circumstances may have occurred between the auditor's report date and the time the auditor's report is read. Such events or circumstances could significantly affect the financial statements and may result in modifications to the auditor's report. HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014,

AND FOR THE YEARS ENDED

DECEMBER 31, 2015 AND 2014

ATTACHMENT: INDEPENDENT AUDITORS' REPORT

HANATOUR SERVICE INC.

INDEPENDENT AUDITORS' REPORT

English Translation of Independent Auditors' Report Originally Issued in Korean on March 17, 2016

To the Shareholders and the Board of Directors of

Hanatour Service Inc.:

We have audited the accompanying consolidated financial statements of Hanatour Service Inc. (the "Company") and its subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2015 and 2014 and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows, all expressed in Korean won, for the years ended December 31, 2015 and 2014 and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards ("K-IFRS") and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an audit opinion on these financial statements based on our audits. We conducted our audits in accordance with Korean Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiaries as of December 31, 2015 and 2014, and its financial performance and its cash flows for the years then ended in accordance with K-IFRS.

March 17, 2016

Notice to Readers

This report is effective as of March 17, 2016, the auditors' report date. Certain subsequent events or circumstances may have occurred between the auditors' report date and the time the auditors' report is read. Such events or circumstances could significantly affect the financial statements and may result in modifications to the auditors' report.

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES (the "Group")

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014,

AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

The accompanying consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Group.

Park, Sang Hwan

Choi, Hyun Syuk

CHIEF EXECUTIVE OFFICERS

HANATOUR SERVICE INC.

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2015 AND 2014


    ASSETSDecember 31, 2015December 31, 2014
    (In thousands of Korean won)
    CURRENT ASSETS:
    Cash and cash equivalents146,485,490113,930,509
    Short-term financial instruments60,688,614107,352,265
    Trade receivables57,383,58549,887,596
    Other receivables23,225,14217,742,158
    Finance lease receivables1,170,67140,215
    Inventories9,305,4151,020,045
    Advanced payments34,070,55721,396,505
    Other current assets7,702,9315,027,830
    Other financial assets104,164-
    Current tax assets113,15841,981
    Total current assets340,249,727316,439,104
    NON-CURRENT ASSETS:
    Financial assets classified at fair value through profit or loss ("FVTPL")1,015,625-
    Available for sale ("AFS") financial assets7,917,9978,284,209
    Investment in associates and joint ventures21,165,91721,756,714
    Long-term finance lease receivables1,844,267255,959
    Investment property2,393,3054,138,245
    Property and equipment59,329,32346,310,983
    Intangible assets16,929,20912,269,509
    Other financial assets44,226,79321,002,358
    Deferred tax assets8,306,8585,831,658
    Other non-current assets975,0591,103,248
    Total non-current assets164,104,353120,952,883
    Total assets504,354,080437,391,987
    

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2015 AND 2014


    LIABILITIES AND EQUITYDecember 31, 2015December 31, 2014
    (In thousands of Korean won)
    CURRENT LIABILITIES:
    Trade payables75,471,16675,825,634
    Other payables29,728,12621,371,303
    Income tax payable10,189,3016,231,268
    Deposits received for travel96,002,96782,970,308
    Advance receipts21,028,66719,951,351
    Short-term borrowings19,226,92013,325,713
    Current portion of long-term borrowings2,392,0781,485,989
    Finance lease liabilities656,244635,565
    Provision2,297,8271,993,855
    Other financial liabilities2,743,8304,536,979
    Other current liabilities15,703,69014,641,211
    Total current liabilities275,440,816242,969,176
    NON-CURRENT LIABILITIES:
    Long-term other payables2,871,6082,056,718
    Long-term borrowings6,679,2831,737,289
    Long-term finance lease liabilities1,514,8062,081,741
    Provision for long-term employee benefits560,557548,296
    Total non-current liabilities11,626,2546,424,044
    Total liabilities287,067,070249,393,220
    EQUITY:
    Capital stock5,808,0935,808,093
    Other contributed capital57,322,02657,382,591
    Components of other capital(1,155,344)(1,542,404)
    Retained earnings134,943,490118,640,879
    Equity attributable to the owners of the Parent Company196,918,265180,289,159
    Non-controlling interests20,368,7457,709,608
    Total equity217,287,010187,998,767
    Total liabilities and equity504,354,080437,391,987
    

(Concluded)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


    20152014
    (In thousands of Korean won,
    except per share amounts)
    OPERATING REVENUE459,425,682385,457,930
    OPERATING EXPENSE414,676,177345,013,490
    OPERATING INCOME44,749,50540,444,440
    Financial income3,721,2864,344,607
    Financial expense405,422271,631
    Profit and loss from investment in
    associates and joint ventures    		(472,756)380,997
    Other income7,280,4984,920,766
    Other expense7,927,0133,604,016
    INCOME BEFORE INCOME TAX EXPENSE46,946,09846,215,163
    INCOME TAX EXPENSE12,784,38910,827,875
    NET INCOME34,161,70935,387,288
    

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


    20152014
    (In thousands of Korean won,
    except per share amounts)
    OTHER COMPREHENSIVE INCOME (LOSS) AFTER INCOME TAX EXPENSE559,780(890,447)
    Items that will not be reclassified subsequently
    to profit or loss:    		--
    Items that may be reclassified subsequently to
    profit or loss:    		559,780(890,447)
    Changes in valuation of equity-accounted investees,
    net    		(25,846)7,238
    Gain (loss) on foreign operations translation, net903,761(347,940)
    Loss on valuation of AFS(318,135)(549,745)
    TOTAL COMPREHENSIVE INCOME34,721,48934,496,841
    NET INCOME ATTRIBUTABLE TO:
    Owners of the Parent Company31,740,49833,437,531
    Non-controlling interests2,421,2111,949,757
    34,161,70935,387,288
    COMPREHENSIVE INCOME ATTRIBUTABLE TO:
    Owners of the Parent Company32,127,55732,686,574
    Non-controlling interests2,593,9321,810,267
    34,721,48934,496,841
    EARNINGS PER SHARE ATTRIBUTABLE TO THE
    OWNERS OF THE PARENT COMPANY:
    Basic earnings per common share2,8772,978
    Diluted earnings per common share2,8682,964
    

(Concluded)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


    Capital stockOther
    contributed
    capital    		Components of other capitalRetained
    Earnings    		Non-controlling
    interests    		Total
    (In thousands of Korean won)
    January 1, 20145,808,09382,372,554(791,446)98,776,4906,461,431192,627,122
    Payment of cash dividend---(6,804,601)-(6,804,601)
    Payment of interim cash dividend---(6,768,541)-(6,768,541)
    Cash dividend of subsidiaries----(568,437)(568,437)
    Stock issuance expense of subsidiaries-(43,200)---(43,200)
    Acquisition of treasury stock-(32,996,692)---(32,996,692)
    Exercised stock option rights-5,059,730---5,059,730
    Gain on disposal of treasury stock-982,385---982,385
    Stock compensation expense-1,989,504--18,1942,007,698
    Net income---33,437,5311,949,75735,387,288
    Loss on foreign business translation--(208,451)-(139,489)(347,940)
    Changes in valuation of equity- accounted investees--7,238--7,238
    Loss on valuation of AFS financial assets--(549,745)--(549,745)
    Additional acquisitions of investments in subsidiaries-(4,065)--(935)(5,000)
    Others-22,375--(10,913)11,462
    December 31, 20145,808,09357,382,591(1,542,404)118,640,8797,709,608187,998,767
    January 1, 20155,808,09357,382,591(1,542,404)118,640,8797,709,608187,998,767
    Payment of cash dividend---(7,709,871)-(7,709,871)
    Payment of interim cash dividend---(7,728,015)-(7,728,015)
    Cash dividend of subsidiaries----(655,207)(655,207)
    Stock issuance expense of subsidiaries-(793,069)--(131,561)(924,630)
    Exercised stock option rights-(180,083)--(6,060)(186,143)
    Gain on disposal of treasury stock-114,307---114,307
    Stock compensation expense-1,242,859--8,5991,251,458
    Net income---31,740,4982,421,21134,161,709
    Gain on foreign business translation--731,041-172,721903,762
    Changes in valuation of equity- accounted investees--(25,846)--(25,846)
    Loss on valuation of AFS financial assets--(318,135)--(318,135)
    Paid-in capital increase of subsidiaries-(391,261)--6,058,1525,666,891
    Changes in scope of consolidation----4,737,9644,737,964
    Others-(53,318)--53,318-
    December 31, 20155,808,09357,322,026(1,155,344)134,943,49020,368,746217,287,011
    

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


    20152014
    (In thousands of Korean won)
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Cash generated from operations:
    Net income34,161,70935,387,288
    Additions of expenses not involving cash outflows and others33,297,68127,281,787
    Deduction of incomes not involving cash inflows and others(4,439,551)(5,506,418)
    Movements in operating assets and liabilities:
    Decrease(increase) in trade receivables(7,064,784)10,420,094
    Decrease(Increase) in other receivables(816,318)797,186
    Increase in inventories(8,233,323)(631,927)
    Increase in advance payments(15,232,187)(2,341,081)
    Increase in other current assets(2,565,407)(1,914,568)
    Decrease in other non-current assets71,87070,063
    Increase(decrease) in trade payables(3,136,731)22,225,048
    Increase in other payables9,347,9766,078,719
    Increase in deposits received for travel12,983,89716,914,105
    Increase in advance receipts726,0793,347,692
    Increase in other financial liabilities152,0742,112,338
    Decrease in other current liabilities(5,520,243)(1,815,139)
    Decrease in provisions(378,782)(485,896)
    Decrease in long-term other payables(10,897)(56,442)
    Decrease in other long-term employee benefit(34,857)(57,365)
    43,308,206111,825,484
    Interest expense paid(269,654)(194,300)
    Interest income received3,570,5834,432,124
    Dividend income received95,179142,788
    Income taxes paid(11,706,714)(12,551,297)
    34,997,600103,654,799
    

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


    20152014
    (In thousands of Korean won)
    CASH FLOWS FROM INVESTING ACTIVITIES:
    Cash inflows from investing activities:
    Decrease in short-term financial instruments125,077,30396,289,244
    Decrease in other receivables5,456,8899,085,258
    Disposal of investment in associates and joint venture51-
    Disposal of property and equipment429,878340,750
    Disposal of intangible assets-116,267
    Decrease in finance lease receivables198,50521,948
    Decrease in other financial assets2,523,7022,815,719
    Net cash inflow due to business combination4,585,882-
    138,272,210108,669,186
    Cash outflows for investing activities:
    Increase in short-term financial instruments77,989,964105,859,334
    Increase in other receivables11,016,18912,718,439
    Acquisition of FVTPL1,000,000-
    Acquisition of AFS financial assets250,0003,450,000
    Acquisition of investment in associates and joint venture-1,202,291
    Acquisition of investment property-2,670,373
    Acquisition of property and equipment16,413,80810,316,656
    Acquisition of intangible assets8,098,7143,653,240
    Increase in other financial assets24,448,8198,341,018
    (139,217,494)(148,211,351)
    (945,284)(39,542,165)
    CASH FLOWS FROM FINANCING ACTIVITIES:
    Cash inflows from financing activities:
    Proceeds from short-term borrowings16,866,34913,057,420
    Proceeds from long-term borrowings7,083,0212,517,970
    Paid-in capital increase of subsidiaries5,917,638-
    Exercised stock option rights52,4466,333,900
    29,919,45421,909,290
    Cash outflows for financing activities:
    Repayment of short-term borrowings12,257,9045,373,449
    Repayment of current portion of long-term borrowings1,634,956343,925
    Repayment of finance lease liabilities1,028,793743,161
    Acquisition of treasury stock-32,996,692
    Payment of stock issuance expense927,38943,200
    Acquisition of investment in subsidiaries337,8955,000
    Payment of dividends16,085,96914,141,555
    (32,272,906)(53,646,982)
    (2,353,452)(31,737,692)
    NET INCREASE IN CASH AND CASH
    EQUIVALENTS    		31,698,86432,374,942
    CASH AND CASH EQUIVALENTS, AT BEGINNING OF
    YEAR    		113,930,50981,852,584
    EFFECT OF EXCHANGE RATE CHANGE ON CASH
    AND CASH EQUIVALENTS    		856,117(297,017)
    CASH AND CASH EQUIVALENTS, AT END OF YEAR146,485,490113,930,509
    

(Concluded)

. MANAGEMENT

The directors are elected at a shareholder's meeting by a majority vote of the shareholders present or represented, so long as such number represents at least one quarter of all issued and outstanding shares with voting rights.


    NamePositionDate elected as a director or executive officer
    SangHwan ParkChairman, Chief Executive Officer and DirectorOctober 25, 1993(Officer and Director)
    HeeSeok KweonVice Chairman, DirectorDecember 23, 1995(Director)
    HuynSyuk ChoiPresident, Chief Executive Officer and DirectorJanuary 1, 2012(Officer)
    October 25, 1993(Director)
    Han Seol JungOutside DirectorMarch 24, 2015
    HuiYoung ChoiOutside DirectorMarch 24, 2015
    JangSuk HanOutside DirectorMarch 25, 2016
    JeongWoo ByunOutside DirectorMarch 25, 2016
    

 Outside Director HuiYoung Choi resigned due to personal reasons(January 8, 2016).

. List of major shareholders


    ShareholderNumber of sharesPercentage
    Sanghwan Park and 19 people with a special relationship2,176,47118.74%
    HANATOUR INC.576,1634.96%
    MORGAN STANLEY AND CO INTERNATIONAL PLC224,6431.93%
    HANABANK (MERITZ ASSET MGMT)211,7631.82%
    KB BANK (EASTSPRING ASSET MGMT-SAMSUNG LIFE VUL)211,7101.82%
    STIC INVESTMENTS200,0001.72%
    CITI BANK (EASTSPRING ASSET MGMT)197,2311.70%
    NORGES BANK189,6681.63%
    MACQUARIE FUND SOLUTIONS172,2691.48%
    GOLDMAN SACHS INTERNATIONAL118,9031.02%
    

.. Status of Affiliated Companies and Others


    DomesticNamgang Travel Co., Ltd.
    Hana Tourist Co;,Ltd. (30.23%)
    Hanatour Jeju Co.,Ltd. (77.35%)
    Hanatour Youth (100%)
    Hanauhak INC.(51%)
    Hanatour ITC. (100%)
    Tour Marketing Korea Co., Ltd. (70%)
    OK Tour Co., Ltd. (48.9%)
    Web tour (83.82%)
    Korea Travel Service INC (60%)
    HANA T&MEDIA Co, Ltd (51%).
    CJ Worldis INC (50%)
    Hanatour Business (100%)
    Nex Tour.Co., Ltd.
    H&T Marketing (80%)
    Hana Shop (90%)
    Hotel n Air.com, INC (50%)
    Travel gonggong INC. (50%)
    Center Mark Hotel Inc.
    Tourtips.INC (99.8%)
    Mark Hotel.Inc (100%)
    OverseasHANATOUR Europe S.R.L (50%)
    HANATOUR USA INC. (100%)
    HANATOUR Europe Ltd (70%)
    ALLEGROX TM Management
    HANATOUR Japan Co., Ltd (70%)
    HANATOUR CHINA (100%)
    HANATOUR PTY Ltd (100%)
    UI Coach
    HANATOUR Hong Kong Co., Ltd (100%)
    HANATOUR PTE Ltd. (100%)
    HANATOUR Taiwan Service Inc. (100%)
    HANATOURIST USA, INC
    

. Investment stocks


    Ownership CompanyOwnershipRatio (%)No. of Shares
    Hanatour Business100.00400,000
    Hanatourist Service Inc.30.23906,981
    Hanatour Jeju Co.,Ltd.77.35618,830
    Hanatour Youth100.00400,000
    Hanatour ITC100.0024,400,000
    Tour Marketing Korea Co.,Ltd70.00140,000
    OK Tour Service Inc.48.929,784
    Web tour77.678,777,380
    Hana T & Media Co., Ltd51.00510,000
    Hanauhak INC51.00714,000
    Korea Travel Sevice INC60.00600,000
    Namgang Travel Co., Ltd.Hanatour Business100.00300,000
    CJ Worldis INC50.008,000,001
    H&T Marketing80.00240,000
    Hana Shop90.00360,000
    Nex Tour Co.,LtdWeb tour100.0040,000
    Hotel n Air.com INC.50.003,000,000
    Travel gonggong INC.50.00100,000
    Hotelnfly, INC19.90398,000
    Tourtips.INC100.0010,000,000
    Center Mark Hotel Inc.Hanatour ITC50.001,000,000
    JR No. 10 Management Real Estate Investment Trusts15.151,000,000
    Mark Hotel. Inc100.0030,000,000
    HANA FINANCE SERVICE100.009,800,000
    Interbiz Tour20.00115,600
    KS Credit Information16.66133,333
    SM Duty Free86.6112,650,000
    HANATOUR IMC100.01,400,000
    World ShopHana Shop100.0010,000
    HANATOUR USA INC100.00500,000
    HANATOUR EUROPE LTD70.004,200
    HANATOUR PTE. LTD.100.002,142,000
    HANATOUR JAPAN CO., LTD70.001,400
    UI CoachHANATOUR JAPAN CO., LTD100.001,900
    HANATOUR CHINA100.00-
    HANATOUR PTY LTD100.00600,000
    HANATOUR HONGKONG CO., LTD.100.005,000,000
    HANATOUR TAIWAN SERVICE INC.100.00-
    HANA TOURIST USA. INCHANATOUR USA INC44.5933,000
    HANATOUR EURPOE S.R.L50.005,250
    ALLEGROX TM ManagementHANATOUR JAPAN CO., LTD100.00396
    STAR SHOP & LINEHANATOUR JAPAN CO., LTD100.001,800
    BEIJING HANA INFORMATION TECHNOLOGY CO., LTD100.00-
    HANATOUR SERVICE (M)SDN.BHD100.001,500,000
    

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