Hanatour Service Inc - Annual Financial Report - Part 1

Hanatour Service

31/03/2017 08:46

RNS Number : 1496B

Hanatour Service Inc.

31 March 2017

Annual Report

I. OUTLINE OF THE COMPANY

1. Purpose of the Company

Purpose
Remark
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 and Internet Information Service
48) Franchisees
49) Restaurants
50) Shopping Center leasing and 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 Import and 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. Important Business

General travel business

3. History of the Company

A. Changes after the establishment

Oct. 25, 1993
Established Kookjin Travel Co., Ltd. (Capital: 350 million won)
55-4 Seosomun-dong, Jung-gu, Seoul
Dec. 01, 1995
Set the company policy in 'comprehensive wholesales' and launched 'Hana Tour', independent package brand, and commenced the agency sales
Nov. 28, 2000
Listed on KOSDAQ (commenced trading)
Nov. 10, 2006
Listed on LSE(London Stock Exchange)
Nov. 01, 2011
Listed on KOSPI
Jan. 01, 2012
CEO changed - SangHwan Park and HuynSyuk Choi
Mar. 25, 2016
CEO changed - SangHwan Park and JinKook Kim

B. Change of trade name

Mar. 6, 1996
Changed 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, 1993
55-4 Seosomun-dong, Jung-gu, Seoul
Mar. 22, 1996
10F Inju Building, Tour cost fees-1 Seorin-dong, Jongro-gu, Seoul
Oct. 01, 1997
11F Hanmi Building, 1 Gonpyeong-dong, Jongro-gu, Seoul
Jun. 15, 2005
1 Gongpyeong-dong, Jongro-gu, Seoul
Jul. 01. 2013
HanaTour 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.

4. Domestic Place of Business

Classification
Location
Main Business
Head Office
41, Insadong 5-gil, Jongno-gu, Seoul, Republic of Korea
General Travel Business
and
Ticketing
Central Office
39, Namdaemun-ro 9-gil, Jung-gu, Seoul, Republic of Korea
Cheongdam Wedding Center
716, Seolleung-ro, Gangnam-gu, Seoul, Republic of Korea
Sindorim Office
661, Gyeongin-ro, Guro-gu, Seoul, Republic of Korea
Seolleung Office
325, Teheran-ro, Gangnam-gu, Seoul, Republic of Korea
Nowon Office
460, Nohae-ro, Nowon-gu, Seoul, Republic of Korea
Yeonsinnae Office
874, Tongil-ro, Eunpyeong-gu, Seoul, Republic of Korea
Wangsimni Office
326, Wangsimni-ro, Seongdong-gu, Seoul, Republic of Korea
Gimpo International Airport Office
70, Haneul-gil, Gangseo-gu, Seoul, Republic of Korea
Tae-Hwa
29, Insadong 5-gil, Jongno-gu, Seoul, Republic of Korea
Busan
Sales Office
216, Jungang-daero, Dong-gu, Busan, Republic of Korea
Haeundae Office
60, Centum buk-daero, Haeundae-gu, Busan, Republic of Korea
Kimhae
Airport Office
108, Gonghangjinip-ro, Gangseo-gu, Busan, Republic of Korea
Busan Office
(Beomil-dong)
14, Jobang-ro, Dong-gu, Busan, Republic of Korea
Deokcheon Office
12, Gichal-ro, Buk-gu, Busan, Republic of Korea
Incheon
Sales Office
59, Bupyeong-daero, Bupyeong-gu, Incheon, Republic of Korea
Airport Office
47, Gonghang-ro 424beon-gil, Jung-gu, Incheon, Republic of Korea
Airport Office 2
66, Gonghang-ro 424beon-gil, Jung-gu, Incheon, Republic of Korea
Bupyeong Office
7, Sijang-ro 51beon-gil, Bupyeong-gu, Incheon, Republic of Korea
Airport Office 3
124, Yeongjong-daero, Jung-gu, Incheon, Republic of Korea
Daegu
Sales Office
648, Gukchaebosang-ro, Jung-gu, Daegu, Republic of Korea
Daejeon
Sales Office
69, Dunsanseo-ro, Seo-gu, Daejeon, Republic of Korea
Gwangju
Sales Office
188, Guseong-ro, Dong-gu, Gwangju, Republic of Korea
Ulsan Sales Office
105, Gangbuk-ro, Jung-gu, Ulsan, Republic of Korea
Ilsan Office
1080, Jungang-ro, Ilsandong-gu, Goyang-si, Gyeonggi-do, Republic of Korea
Hwajeong Office
16, Hwajung-ro 104beon-gil, Deogyang-gu, Goyang-si, Gyeonggi-do, Republic of Korea
Beomgye Office
180, Simin-daero, Dongan-gu, Anyang-si, Gyeonggi-do, Republic of Korea
Suwon Office
299, Hyowon-ro, Paldal-gu, Suwon-si, Gyeonggi-do, Republic of Korea
Guri Office
189, Gyeongchun-ro, Guri-si, Gyeonggi-do, Republic of Korea
Bundang Office
263, Seongnam-daero, Bundang-gu, Seongnam-si, Gyeonggi-do, Republic of Korea
Gangneung
Slaes Office
317, Gangneung-daero, Gangneung-si, Gangwon-do, Republic of Korea
Chuncheon
Slaes Office
172, Jungang-ro, Chuncheon-si, Gangwon-do, Republic of Korea
Wonju
Sales Office
65, Neungnadong-gil, Wonju-si, Gangwon-do, Republic of Korea
Cheongju
Sales Office
27, Biha-ro, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do, Republic of Korea
Cheonan
Sales Office
218, Chungmu-ro, Seobuk-gu, Cheonan-si, Chungcheongnam-do, Republic of Korea
Jeonju
Sales Office
269, Paldal-ro, Wansan-gu, Jeonju-si, Jeollabuk-do, Republic of Korea
Suncheon
Sales Office
34, Jangseonbaegi-gil, Suncheon-si, Jeollanam-do, Republic of Korea
Mokpo
Sales Office
380, Baengnyeon-daero, Mokpo-si, Jeollanam-do, Republic of Korea
Pohang
Sales Office
3, Daei-ro 46beon-gil, Nam-gu, Pohang-si, Gyeongsangbuk-do, Republic of Korea
Changwon
Sales Office
754, Changwon-daero, Seongsan-gu, Changwon-si, Gyeongsangnam-do, Republic of Korea
Jinju Sales Office
888, Jinju-daero, Jinju-si, Gyeongsangnam-do, Republic of Korea

5. Status of Employees

(As of December 31, 2016)

   (Unit: person)

Classification
Number of employees
Office & Operation
Etc.
Total
Men
1,093
35
1,128
Women
1,358
105
1,463
Total
2,451
140
2,591

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. INFORMATION ON SHARES

1. Total Number of Stocks, Etc.

A. Total number of stocks

(As of December 31, 2016)

(Unit: share)

Classification
Types of stocks
Remark
Common stock
Total
I. Total number of stocks to be issued
20,000,000
20,000,000
II. Total number of stocks issued to this point
11,616,185
11,616,185
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)
11,616,185
11,616,185
V. Equity stocks
576,163
576,163
VI. Number of shares distributed (IV-V)
11,040,022
11,040,022


B. Change of capital

(1) Status of capital increas (Unit: share, won)

Date of stock issuance
Type of issuance
Contents of issued stocks
Types
Quantity
Par value
Issuance amount per stock
Remark
Oct. 25, 1993
-
Common stock
35,000
10,000
10,000
Capital for incorporation
Jun. 12, 1996
Capital increase with consideration (shareholder allotment)
Common stock
21.500
10,000
10,000
-
Jul. 25, 1997
Capital increase with consideration (shareholder allotment)
Common stock
35,840
10,000
10,000
-
Oct.01, 1997
-
Common stock
184,680
5,000
-
Face amount division
Dec. 02, 1999
Capital increase with consideration (shareholder allotment)
Common stock
115,320
5,000
5,000
-
Dec. 23, 1999
Capital increase with consideration (shareholder allotment)
Common stock
60,000
5,000
10,000
-
May, 05, 2000
-
Common stock
3,600,000
500
-
Face amount division
Nov. 16, 2000
Capital increase with consideration (shareholder allotment)
Common stock
900,000
500
2,850
-
Aug. 26, 2003
Capital increase without consideration
Common stock
3,764,034
500
-
-
Oct. 27,2004
Capital increase with consideration (shareholder allotment)
Common stock
76,322
500
11,850
-
Oct. 27,2004
Capital increase without consideration
Common stock
1,977,029
500
-
-
Jan. 25, 2006
Exercise stock options
Common stock
137,800
500
6,171
-
Nov. 11, 2006
Capital increase
Common stock
1,161,000
500
55,711
DR

(2) Status of capital decrease

 (Unit: share, won)

Date of capital reduction
Type
Purpose
Contents of reduced stocks
Types
Quantity
Face value per stock
Amount of acquisition per stock (for capital decrease for consideration)
Remark
-
-
-
-
-
-
-
-

C. Contents of scheduled change for capital

[No applicable change]

2. Matters on Dividends

A. Matters on dividend for three recent fiscal year

Classification
24th Term
23rd Term
22nd Term
Face amount per stock (won)
500
500
500
(Consolidated) Current net income (million won)
8,036
31,740
33,438
(Separated) Current net income (million won)
9,496
28,705
28,121
(Consolidated) Net income per share (won)
727
2,877
2,978
Total amount of cash dividend (million won)
16,600
16,560
14,478
Total amount of stock dividend (million won)
-
-
-
Tendency of stock dividend (%)
206.6
52,2
43.3
Yield rate of cash dividend (%)
Common stock
2.3
1.3
1.7
Preferred stock
Yield rate of stock dividend (%)
Common stock
Preferred stock
Cash dividend per share (won)
Common stock
1,500
1,500
1,300
Preferred stock
-
-
Stock dividend per share
Common stock
-
-
Preferred stock
-
-

III. CONTENTS OF THE BUSINESS

1. Summary of the 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.

2016 had started its 1st quarter with recovered outbound demands mainly to Japan and high performance growth rates. However, external issues like Kumamoto earthquake in April and the Terrorists Attacks from all around Europe had negative impact on overall outbound travel demands to Japan and Europe.

Even in the situations with difficulties, Hanatour managed to send over 3 million package travelers YOY growth of 32.2% and total number of travelers including FIT travelers were 4.9 million with 32.0% of YOY Growth.

Regional volume split was as below: Japan 34.2%, Southeast Asia 28.2%, China 18.4%, Domestic 6.5%, Europe 5.7%, South Pacific 4.5%, and Americas 2.5% respectively. Each destinations' revenue contribution was Southeast Asia 32.2%, China 18.7%, Japan 16.8%, Europe 15.1%, South Pacific 8.6%, Americas 6.8%, and Domestic 1.8% showing that followed by 2015, 2015 continued on with its popularity of short haul destinations. Especially Japan has shown continuous volume growth with YOY volume growth of 48.9% driving overall volume growth from beginning of 2016.

Various external issues had influence over 2016. 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).



Year
2016
2015
2014
Total
Departures
from
HANATOUR
Total
Departures
of Korea
Total
Departures
from
HANATOUR
Total
Departures
of Korea
Total
Departures
from
HANATOUR
Total
Departures
of Korea
4,930,452
20,844,236
3,734,603
17,885,645
2,973,581
14,726,088
Share rate
23.65%
20.88%
20.19%

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 12.5% in the last 5 years. According to UNWTO, the number of international tourists in 2014 was 1.1 billion and they are expecting a dramatic growth in the future: 1.6 billion in 2020 and 1.8 billion in 2030. Tourism industry has been recognized as important industry which has a crucial impact over global economy by accounting 11.6% of the total GDP in 2010. 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. New Business Development

 Not Applicable.

. Status of the Parent Company and Affiliated Companies

1. Status of the parent company

 Not applicable.

2. Status of affiliated companies

(Unit: Share, %)

Name of the Company
Business Contents
No. of Shares
Ownership Ratio (%)
Hanatour Business
Travel Business
400,000
100.00
Hanatour Jeju Co.,Ltd.
Travel Business
618,830
77.35
Hanatour Youth
Travel Business
400,000
100.00
Hanatour ITC
Travel Business
24,400,000
100.00
Tour Marketing Korea Co.,Ltd
Travel Business
140,000
70.00
Web tour
Travel Business
8,777,380
77.67
Hana T & Media Co., Ltd
Publishing
510,000
51.00
Hanauhak INC
Travel Business
714,000
51.00
Korea Travel Sevice INC
Travel Business
600,000
60.00
CJ Worldis INC
Travel Business
8,000,001
50.00
H&T Marketing
Advertising
240,000
80.00
Hana Shop
Retail Business
360,000
90.00
Tourtips.INC
Information Provision
10,000,000
100.00
Mark Hotel. Inc
Hotel Business
30,000,000
100.00
HANA FINANCE SERVICE
Finance Service
9,800,000
100.00
SM Duty Free
Duty Free Business
12,650,000
86.61
HANATOUR IMC
Asset Management
1,400,000
100.0
HANATOUR USA INC
Travel Business
500,000
100.00
HANATOUR EUROPE LTD
Travel Business
4,200
70.00
HANATOUR PTE. LTD.
Travel Business
2,142,000
100.00
HANATOUR JAPAN CO., LTD
Travel Business
1,400,000
70.00
HANATOUR CHINA
Travel Business
-
100.00
HANATOUR PTY LTD
Travel Business
600,000
100.00
HANATOUR HONGKONG CO., LTD.
Travel Business
5,000,000
100.00
HANATOUR TAIWAN SERVICE INC.
Travel Business
-
100.00
BEIJING HANA INFORMATION TECHNOLOGY CO., LTD
Software Technical Development
-
100.00
HANATOUR SERVICE (M)SDN.BHD
Travel Business
1,500,000
100.00

3. Concurrent status of the executive management

Executive management
Concurrent Company
Name
Position
Company
Name
Position
Assigned
Task
SangHwan Park
Chairman,Chief Executive Officer and Director
HANATOUR PTE. LTD.
Chief Executive Officer and Director
General Management
HeeSeok Kweon
Vice Chairman, Director
Hanatour ITC
Chief Executive Officer and Director
General Management
HuynSyuk Choi
Vice Chairman, Director
HANA FINANCE SERVICE
Executive Director
General Management
JinKook
Kim
Chief Executive Officer and Director
Hanatour Youth
Non-executive Director
General Management
Web tour
Non-executive Director
General Management
Hana Shop
Non-executive Director
General Management

.SUMMARY OF FINANCIAL DATA

1. Financial results

(In thousand won, except per share amounts)

Classification
24th Term
23rd Term
22nd Term
Sales
385,789,633
360,011,774
315,417,922
Operating Expenses
(355,412,629)
(325,210,962)
(283,998,639)
Operating Income
30,377,004
34,800,812
31,419,283
Profit Before Tax
17,994,228
37,284,303
36,306,688
Income Tax Expense
(8,498,400)
(8,579,625)
(8,186,098)
Net Income
9,495,828
28,704,677
28,120,590
Net Income per Share(Won)
859
2,602
2,504

2. Financial position

(In thousand won)

Classification
24th Term
23rd Term
22nd Term
Current Assets
213,958,212
177,000,273
230,201,409
Non-Current Assets
203,768,444
222,744,648
134,362,748
Total Assets
417,726,656
399,744,921
364,564,157
Current Liabilities
242,706,784
218,258,654
199,417,973
Long-term Liabilities
3,178,192
2,699,045
467,754
Total Liabilities
245,884,975
220,957,699
199,885,727
Capital Stock
5,808,093
5,808,093
5,808,093
Other Paid-in Capital
58,700,030
58,538,171
57,370,631
Elements of Other Shareholder's Equity
(962,048)
(937,690)
(612,152)
Retained Earnings
108,295,606
115,378,648
102,111,858
Total Shareholder's Equity
171,841,680
178,787,222
164,678,430
Total Liabilities and Shareholder's Equity
417,726,656
399,744,921
364,564,157

. RISK FACTORS

Refer to III - 1. Summary of the Business

. MANAGEMENT

Full-time / Part-time
Name
Position
Assigned Task
Full-time
SangHwan Park
Chairman,Chief Executive Officer and Director
General Management
Full-time
HeeSeok Kweon
Senior Vice Chairman, Director
General Management
Full-time
HuynSyuk Choi
Vice Chairman, Director
General Management
Full-time
JinKook Kim
Chief Executive Officer and Director
General Management
Part-time
Han Seol Jung
Non-executive Director
General Management
Part-time
JeongWoo Byun
Auditor, Outside Director
Outside Director
Part-time
JangSuk Han
Auditor, Outside Director
Outside Director
Part-time
GunHo Cho
Auditor, Outside Director
Outside Director

 Executive Director HuynSyuk Choi resigned due to personal reasons(December 31, 2016).

. LIST OF MAJOR SHAREHOLDERS

Shareholder
Number of shares
Percentage
Sanghwan Park and 19 people with a special relationship
2,176,471
18.74%
HANATOUR INC.
576,163
4.96%
MORGAN STANLEY AND CO INTERNATIONAL PLC
224,643
1.93%
HANABANK (MERITZ ASSET MGMT)
211,763
1.82%
KB BANK (EASTSPRING ASSET MGMT-SAMSUNG LIFE VUL)
211,710
1.82%
STIC INVESTMENTS
200,000
1.72%
CITI BANK (EASTSPRING ASSET MGMT)
197,231
1.70%
NORGES BANK
189,668
1.63%
MACQUARIE FUND SOLUTIONS
172,269
1.48%
GOLDMAN SACHS INTERNATIONAL
118,903
1.02%

. CURRENT STATUS OF INVESTMENTS

1. Domestic

Ownership Company
Ownership Ratio (%)
No. of Shares
Hanatour Business
HANATOUR Service Inc.
100.00
400,000
Hanatourist Service Inc.
HANATOUR Service Inc.
30.23
906,981
Hanatour Jeju Co.,Ltd.
HANATOUR Service Inc.
77.35
618,830
Hanatour Youth
HANATOUR Service Inc.
100.00
400,000
Hanatour ITC
HANATOUR Service Inc.
100.00
24,400,000
Tour Marketing Korea Co.,Ltd
HANATOUR Service Inc.
70.00
140,000
OK Tour Service Inc.
HANATOUR Service Inc.
48.92
9,784
Web tour
HANATOUR Service Inc.
77.67
8,777,380
Hana T & Media Co., Ltd
HANATOUR Service Inc.
51.00
510,000
Hanauhak INC
HANATOUR Service Inc.
51.00
714,000
Korea Travel Sevice INC
HANATOUR Service Inc.
60.00
600,000
Namgang Travel Co., Ltd.
Hanatour Business
100.00
300,000
CJ Worldis INC
HANATOUR Service Inc.
50.00
8,000,001
H&T Marketing
HANATOUR Service Inc.
80.00
240,000
Hana Shop
HANATOUR Service Inc.
90.00
360,000
Nex Tour Co.,Ltd
Web tour
100.00
40,000
Hotel n Air.com INC.
HANATOUR Service Inc.
50.00
2,000,000
Travel gonggong INC.
HANATOUR Service Inc.
50.00
100,000
Hotelnfly, INC
HANATOUR Service Inc.
19.90
398,000
Tourtips.INC
HANATOUR Service Inc.
100.00
10,000,000
Center Mark Hotel Inc.
Hanatour ITC
50.00
1,000,000
JR No. 10 Management Real Estate Investment Trusts
HANATOUR Service Inc.
15.15
1,000,000
Mark Hotel. Inc
HANATOUR Service Inc.
100.00
30,000,000
HANA FINANCE SERVICE
HANATOUR Service Inc.
100.00
9,800,000
Interbiz Tour
HANATOUR Service Inc.
20.00
115,600
SM Duty Free
HANATOUR Service Inc.
82.54
12,650,775
HANATOUR IMC
HANATOUR Service Inc.
100.0
1,400,000
World Shop
Hana Shop
100.00
10,000
Titikaka
Tourtips.INC
20.00
6,000

2. Overseas

Ownership Company
Region
Ownership Ratio (%)
No. of
Shares
HANATOUR USA INC
HANATOUR Service Inc.
LA
100.00
500,000
HANATOUR EUROPE LTD
HANATOUR Service Inc.
London
70.00
4,200
HANATOUR PTE. LTD.
HANATOUR Service Inc.
Singapore
100.00
2,142,000
HANATOUR JAPAN CO., LTD
HANATOUR Service Inc.
Japan
70.00
1,400,000
UI Coach
HANATOUR JAPAN CO., LTD
Japan
100.00
1,900
HANATOUR CHINA
HANATOUR Service Inc.
China
100.00
-
HANATOUR PTY LTD
HANATOUR Service Inc.
Australia
100.00
600,000
HANATOUR HONGKONG CO., LTD.
HANATOUR Service Inc.
Hong Kong
100.00
5,000,000
HANATOUR TAIWAN SERVICE INC.
HANATOUR Service Inc.
Taiwan
100.00
-
HANATOUR EURPOE S.R.L
HANATOUR Service Inc.
Italy
50.00
5,250
ALLEGROX TM Management
HANATOUR JAPAN CO., LTD
Japan
100.00
396
STAR SHOP & LINE
HANATOUR JAPAN CO., LTD
Japan
100.00
1,800
BEIJING HANA INFORMATION TECHNOLOGY CO., LTD
HANATOUR Service Inc.
China
100.00
-
HANATOUR SERVICE (M)SDN.BHD
HANATOUR Service Inc.
Malaysia
100.00
1,500,000
ZHANGJIAJIE YOULAN CANYIN Co.,Ltd
HANATOUR CHINA
China
40.00
-

. MAJOR CREDITORS

Not applicable.

XI. IMPORTANT EVENTS AFTER THE SETTLEMENT OF

ACCOUNTS PERIOD

None.

XII. OTHER IMPORTANT FACTS ABOUT THE BUSINESS

None.

XIII. FINANCIAL DATA

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS AT DECEMBER 31, 2016 AND 2015,

AND FOR THE YEARS ENDED

DECEMBER 31, 2016 AND 2015

ATTACHMENT: INDEPENDENT AUDITORS' REPORT

HANATOUR SERVICE INC.

INDEPENDENT AUDITORS' REPORT

English Translation of Independent Auditors' Report Originally Issued in Korean on March 16, 2017

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 at December 31, 2016 and 2015 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, 2016 and 2015 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 consolidated 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 consolidated 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 consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated 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 at December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with K-IFRS.

March 16, 2017

Notice to Readers

This report is effective as of March 16, 2017, 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 AT DECEMBER 31, 2016 AND 2015,

AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

Park, Sang Hwan

Kim, Jin Kook

CHIEF EXECUTIVE OFFICERS

HANATOUR SERVICE INC.

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS AT DECEMBER 31, 2016 AND 2015

ASSETS
December 31, 2016
December 31, 2015
(In thousands of Korean won)
CURRENT ASSETS:
Cash and cash equivalents
156,047,480
146,485,490
Short-term financial instruments
26,068,166
60,688,614
Trade receivables
80,388,918
57,383,585
Other receivables
19,048,243
23,225,142
Finance lease receivables
1,012,665
1,170,671
Inventories
24,348,212
9,305,415
Advanced payments
31,006,430
34,070,557
Other current assets
7,599,271
7,702,931
Other financial assets
2,249
104,164
Current tax assets
134,313
113,158
Total current assets
345,655,947
340,249,727
NON-CURRENT ASSETS:
Financial assets classified at fair value through profit or loss ("FVTPL")
1,013,875
1,015,625
Available for sale ("AFS") financial assets
5,562,979
7,917,997
Investment in associates and joint ventures
11,784,439
21,165,917
Long-term finance lease receivables
850,833
1,844,267
Investment property
2,358,799
2,393,305
Property and equipment
91,758,218
59,329,323
Intangible assets
15,943,119
16,929,209
Other financial assets
34,352,021
44,226,793
Deferred tax assets
8,047,965
8,306,858
Other non-current assets
2,921,448
975,059
Total non-current assets
174,593,695
164,104,353
Total assets
520,249,642
504,354,080

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

AS AT DECEMBER 31, 2016 AND 2015

LIABILITIES AND EQUITY
December 31, 2016
December 31, 2015
(In thousands of Korean won)
CURRENT LIABILITIES:
Trade payables
77,119,716
75,471,166
Other payables
35,792,263
29,728,126
Income tax payable
8,292,735
10,189,301
Deposits received for travel
113,274,612
96,002,967
Advance receipts
23,126,895
21,028,667
Short-term borrowings
3,410,430
19,226,920
Current portion of long-term borrowings
2,974,745
2,392,078
Finance lease liabilities
939,325
656,244
Provision
2,130,865
2,297,827
Other financial liabilities
3,311,722
2,743,830
Other current liabilities
16,278,623
15,703,690
Total current liabilities
286,651,931
275,440,816
NON-CURRENT LIABILITIES:
Long-term other payables
7,647,420
2,871,608
Long-term borrowings
7,973,961
6,679,283
Bonds
3,245,100
-
Long-term finance lease liabilities
1,683,522
1,514,806
Provision for long-term employee benefits
693,860
560,557
Other non-current liabilities
277,500
-
Total non-current liabilities
21,521,363
11,626,254
Total liabilities
308,173,294
287,067,070
EQUITY:
Capital stock
5,808,093
5,808,093
Other contributed capital
58,105,899
57,322,026
Components of other capital
(831,843)
(1,155,344)
Retained earnings
126,400,362
134,943,490
Equity attributable to the owners of the Parent Company
189,482,511
196,918,265
Non-controlling interests
22,593,837
20,368,745
Total equity
212,076,348
217,287,010
Total liabilities and equity
520,249,642
504,354,080

(Concluded)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

2016
2015
(In thousands of Korean won,
except per share amounts)
OPERATING REVENUE
595,538,710
459,425,683
OPERATING EXPENSE
574,606,757
414,676,177
OPERATING INCOME
20,931,953
44,749,506
Financial income
2,491,010
3,721,286
Financial expense
641,956
405,422
Loss from investment in
associates and joint ventures
(202,936)
(472,757)
Other income
10,395,372
7,280,498
Other expense
9,027,552
7,927,013
INCOME BEFORE INCOME TAX EXPENSE
23,945,891
46,946,098
INCOME TAX EXPENSE
16,418,440
12,784,389
NET INCOME
7,527,451
34,161,709

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

2016
2015
(In thousands of Korean won,
except per share amounts)
OTHER COMPREHENSIVE INCOME AFTER INCOME TAX EXPENSE
469,220
559,780
Items that may be reclassified subsequently to
profit or loss:
469,220
559,780
Changes in valuation of equity-accounted investees,
net
4,341
(25,846)
Gain on foreign operations translation, net
491,795
903,761
Loss on valuation of AFS
(26,916)
(318,135)
TOTAL COMPREHENSIVE INCOME
7,996,671
34,721,489
NET INCOME ATTRIBUTABLE TO:
Owners of the Parent Company
8,035,742
31,740,498
Non-controlling interests
(508,291)
2,421,211
7,527,451
34,161,709
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the Parent Company
8,359,244
32,127,557
Non-controlling interests
(362,573)
2,593,932
7,996,671
34,721,489
EARNINGS PER SHARE ATTRIBUTABLE TO THE
OWNERS OF THE PARENT COMPANY:
Basic earnings per common share
727
2,877
Diluted earnings per common share
726
2,868

(Concluded)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Capital stock
Other
contributed
capital
Components of other capital
Retained
Earnings
Non-controlling
interests
Total
(In thousands of Korean won)
January 1, 2015
5,808,093
57,382,591
(1,542,404)
118,640,879
7,709,608
187,998,767
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
-
-
8,599
1,251,458
Net income
-
-
-
31,740,498
2,421,211
34,161,709
Gain on foreign business translation
-
-
731,041
-
172,721
903,762
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)
-
-
6,058,152
5,666,891
Changes in scope of consolidation
-
-
-
-
4,737,964
4,737,964
Others
-
(53,318)
-
-
53,318
-
December 31, 2015
5,808,093
57,322,026
(1,155,344)
134,943,490
20,368,746
217,287,011
January 1, 2016
5,808,093
57,322,026
(1,155,344)
134,943,490
20,368,746
217,287,011
Payment of cash dividend
-
-
-
(8,832,018)
-
(8,832,018)
Payment of interim cash dividend
-
-
-
(7,746,852)
-
(7,746,852)
Cash dividend of subsidiaries
-
-
-
-
(295,539)
(295,539)
Discount on Stock issuance
-
-
-
-
(111,059)
(111,059)
Disposal of treasury stock
-
1,664,755
-
-
-
1,664,755
Exercised stock option rights
-
(1,983,268)
-
-
-
(1,983,268)
Gain on disposal of treasury stock
-
245,732
-
-
-
245,732
Stock compensation expense
-
247,281
-
-
3,634
250,915
Net income
-
-
-
8,035,742
(508,291)
7,527,451
Gain on foreign business translation
-
-
346,076
-
145,719
491,795
Changes in valuation of equity- accounted investees
-
-
4,341
-
-
4,341
Loss on valuation of AFS financial assets
-
-
(26,916)
-
-
(26,916)
Paid-in capital increase of subsidiaries
-
609,373
-
-
2,990,627
3,600,000
December 31, 2016
5,808,093
58,105,899
(831,843)
126,400,362
22,593,837
212,076,348


HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

2016
2015
(In thousands of Korean won)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations:
Net income
7,527,451
34,161,709
Additions of expenses not involving cash outflows and others
47,400,813
33,297,681
Deduction of incomes not involving cash inflows and others
(3,862,192)
(4,439,551)
Movements in operating assets and liabilities:
Increase in trade receivables
(23,503,304)
(7,064,784)
Increase in other receivables
(1,615,371)
(816,318)
Increase in inventories
(15,108,796)
(8,233,323)
Decrease( Increase) in advance payments
5,241,184
(15,232,187)
Increase in other current assets
(1,762,472)
(2,565,407)
Decrease (Increase) in other non-current assets
(9,940)
71,870
Increase(Decrease) in trade payables
1,742,703
(3,136,731)
Increase in other payables
12,893,929
9,347,976
Increase in deposits received for travel
17,271,797
12,983,897
Increase in advance receipts
2,347,053
726,079
Increase in other financial liabilities
570,132
152,074
Decrease in other current liabilities
(4,218,700)
(5,520,243)
Decrease in provisions
(1,020,811)
(378,782)
Decrease in long-term other payables
(20,243)
(10,897)
Decrease in other long-term employee benefit
(118,000)
(34,857)
43,756,234
43,308,206
Interest expense paid
(844,469)
(269,654)
Interest income received
3,043,962
3,570,583
Dividend income received
91,949
95,179
Income taxes paid
(18,545,895)
(11,706,714)
27,501,781
34,997,600

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

2016
2015
(In thousands of Korean won)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash inflows from investing activities:
Decrease in short-term financial instruments
58,948,372
125,077,303
Decrease in other receivables
20,048,764
5,456,889
Disposal of AFS financial assets
2,738,080
-
Disposal of investment in associates and joint venture
638,297
51
Capital reduction of associates and joint venture
5,000,000
-
Disposal of property and equipment
803,976
429,878
Decrease in finance lease receivables
1,170,997
198,505
Decrease in other financial assets
14,995,029
2,523,702
Net cash inflow due to business combination
-
4,585,882
104,343,515
138,272,210
Cash outflows for investing activities:
Increase in short-term financial instruments
24,272,291
77,989,964
Increase in other receivables
12,403,486
11,016,189
Acquisition of FVTPL
-
1,000,000
Acquisition of AFS financial assets
270,011
250,000
Acquisition of investment in associates and joint venture
1,548,800
-
Acquisition of property and equipment
48,028,731
16,413,808
Acquisition of intangible assets
4,054,650
8,098,714
Increase in other financial assets
7,068,681
24,448,819
(97,646,650)
(139,217,494)
6,696,865
(945,284)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash inflows from financing activities:
Proceeds from short-term borrowings
11,128,434
16,866,349
Proceeds from long-term borrowings
3,394,730
7,083,021
Proceeds from bonds
4,157,511
-
Paid-in capital increase of subsidiaries
3,488,941
5,970,084
22,169,616
29,919,454
Cash outflows for financing activities:
Repayment of short-term borrowings
27,213,152
12,257,904
Repayment of current portion of long-term borrowings
2,897,903
1,634,956
Repayment of finance lease liabilities
713,087
1,028,793
Acquisition of treasury stocks
-
337,895
Payment of stock issuance expense
-
927,389
Payment of dividends
16,874,408
16,085,969
(47,698,550)
(32,272,906)
(25,528,934)
(2,353,452)
NET INCREASE IN CASH AND CASH
EQUIVALENTS
8,669,712
31,698,864
CASH AND CASH EQUIVALENTS, AT BEGINNING OF
YEAR
146,485,490
113,930,509
EFFECT OF EXCHANGE RATE CHANGE ON CASH
AND CASH EQUIVALENTS
892,278
856,117
CASH AND CASH EQUIVALENTS, AT END OF YEAR
156,047,480
146,485,490

(Concluded)

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