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Annual Financial Report

31st Mar 2015 08:58

RNS Number : 9678I

Hanatour Service Inc.

31 March 2015

Annual Report

I. OUTLINE OF COMPANY

1. Purpose of 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 basis business

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

56) Copyright and neighboring rights of copyright agent 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) All other incidental businesses

2. History of 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

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

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, 2014)

(Unit: share)

Classification		Types of stocks		Remark
Classification		Common stock	Total	Remark
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		602,083	602,083
VI. Number of shares distributed (IV-V)		11,014,102	1

B. Change of capital

(1) Status of capital increase

(Unit: share, won)

Date of stock issuance	Type of issuance	Contents of issued stocks
Date of stock issuance	Type of issuance	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
Date of capital reduction	Type	Purpose	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]

4. Matters on Dividends

A. Matters on dividend for three recent fiscal year

Classification		22nd Term	21st Term	20th Term
Face amount per stock (won)		500	500	500
Current net income (million won)		28,121	32,727	29,962
Net income per share (won)		2,504	2,881	2,714
Total amount of cash dividend (million won)		14,478	12,511	11,125
Total amount of stock dividend (million won)		-	-	-
Tendency of stock dividend (%)		43.3	38.2	37.1
Yield rate of cash dividend (%)	Common stock	1.7	1.7	2.7
Yield rate of cash dividend (%)	Preferred stock			-
Yield rate of stock dividend (%)	Common stock			-
Yield rate of stock dividend (%)	Preferred stock			-
Cash dividend per share (won)	Common stock	1,300	1,100	900
Cash dividend per share (won)	Preferred stock	-	-	-
Stock dividend per share	Common stock	-	-	-
Stock dividend per share	Preferred stock	-	-	-

5. Status of Employees

(As of December 31, 2014)

(Unit: persons)

Classification	No. of employees
Classification	Office	Operation	Etc	Total
Men	630	354	29	1,013
Women	915	214	93	1,222
Total	1,545	568	122	2,235

6. Organization

CHAIRMAN & CEO - GLOBAL STRATEGIC PLANNING DIVISION

PRESIDENT & CEO

GLOBAL MANAGEMENT DIVISION , FINANCE DIVISION , GLOBAL GENERAL SALES DIVISION

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.

2014 had various external issues starting with political issues in Thailand, typhoon in the Philippines, and the Sewol ferry accident in April. Not like the suppressed demand in 1st quarter, 2nd quarter was showing slow increase in demand when the ferry accident happened which resulted in sudden shrink in leisure purpose travels until the end of the year. Even in the situation like this, Hanatour sent 1.9 million people growing 4.6% YOY in package volume, and almost 3 million people showing 13.1% growth YOY in total outbound volume.

Regional volume split was as below: Southeast Asia 33.2%, China 21.2%, Japan 20.0%, Europe 9.3%, Domestic 8.8%, South Pacific 4.9%, and Americas 2.6% respectively. Each destinations' revenue contribution was Southeast Asia 33.5%, Europe 19.4%, China 19.0%, Japan 10.7%, South Pacific 9.4%, Americas 6.1%, and Domestic 1.9% showing that Southeast Asia and short haul destinations are the big portion for both volume and revenue. Depreciation of Japanese Yen is resulting in the growth of travelers to Japan since the second half of 2014 and the television real-variety program featuring travel episodes to Europe has resulted in strong demands to European destinations. Europe and Japan has shown 35.2% and 21.7% growth respectively from 2013 and lead the actual growth in 2014.

Due to the unexpected external issues, 2014 did not show satisfying performances. However Hanatour Inc. managed to show growth in both market share and volume even within this hard situation, expanding its business fields with FIT brand Hana Free. Hana Free was launched in 2013 as a preparation for the future trend trying to continue to grow as the leader of the industry.

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	2014		2013		2012
Persons	Total Departures of Korea	Total Departures from HANATOUR	Total Departures of Korea	Total Departures from HANATOUR	Total Departures of Korea	Total Departures from HANATOUR
	14,726,088	2,966,193	13,525,297	2,629,227	12,474,142	2,273,528
Share rate	20.14%		19.44%		18.23%

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

-Duty Free Business

The increase of inbound travelers are resulting in the expansion of the market and specifically to shopping and duty free industry as well. Especially duty free industry is now under monopoly by the conglomerates (approximately 81% market share), the government is planning on issuing new licenses to Small and Medium-Sized Enterprises as part of solving this problem. Hanatour Inc. will try to enter the duty free business by partnering with few other SMEs and forming a new entity named "SMEs Duty Free Inc.", bidding for the Incheon Airport Duty free license.

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 STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2014 AND DECEMBER 31, 2013

ASSETS	December 31, 2014		December 31, 2013
	(In thousands of Korean won)
CURRENT ASSETS:
Cash and cash equivalents	￦	113,930,509	￦	81,852,584
Short-term financial instruments		107,352,265		97,258,095
Trade receivables		49,887,596		61,095,270
Other receivables		17,742,158		15,200,897
Finance lease receivables		40,215		-
Inventories		1,020,045		443,042
Advanced payments		21,396,505		19,420,839
Other current assets		5,027,830		3,135,753
Current tax assets		41,981		70,595
Total current assets		316,439,104		278,477,075

NON-CURRENT ASSETS:
Available for sale ("AFS") financial assets		8,284,209		5,547,292
Investment in associates and joint ventures		21,756,714		20,305,785
Long-term finance lease receivables		255,959		-
Investment property		4,138,245		3,972,601
Property and equipment		46,310,983		34,817,158
Intangible assets		12,269,509		11,178,444
Other financial assets		21,002,358		16,555,223
Deferred tax assets		5,831,658		4,322,070
Other non-current assets		1,103,248		1,320,735
Total non-current assets		120,952,883		98,019,308

Total assets	￦	437,391,987	￦	376,496,383

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2014 AND DECEMBER 31, 2013

LIABILITIES AND SHAREHOLDERS' EQUITY	December 31, 2014		December 31, 2013
	(In thousands of Korean won)
CURRENT LIABILITIES:
Trade payables	￦	75,825,634	￦	54,042,693
Other payables		21,371,303		14,207,306
Income tax payable		6,231,268		6,579,648
Deposits received for travel		82,970,308		65,940,047
Advance receipts		19,951,351		16,602,965
Short-term borrowings		13,325,713		6,908,653
Current portion of long-term borrowings		1,485,989		346,849
Finance lease liabilities		635,565		-
Provision		1,993,855		894,709
Other financial liabilities		4,536,979		2,475,866
Other current liabilities		14,641,211		12,813,658
Total current liabilities		242,969,176		180,812,394

NON-CURRENT LIABILITIES:
Long-term other payables		2,056,718		1,656,515
Long-term borrowings		1,737,289		979,976
Long-term finance lease liabilities		2,081,741		-
Provision for long-term employee benefits		548,296		419,518
Deferred income tax liabilities		-		858
Total non-current liabilities		6,424,044		3,056,867
Total liabilities		249,393,220		183,869,261

SHAREHOLDERS' EQUITY:
Capital stock		5,808,093		5,808,093
Other contributed capital		57,382,591		82,372,554
Components of other capital		(1,542,404)		(791,446)
Retained earnings		118,640,879		98,776,490
Equity attributable to the owners of the Parent Company		180,289,159		186,165,691
Non-controlling interests		7,709,608		6,461,431
Total shareholders' equity		187,998,767		192,627,122
Total liabilities and shareholders' equity	￦	437,391,987	￦	376,496,383

(Concluded)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won, except per share amounts)
OPERATING REVENUE	￦	385,457,930	￦	352,655,319

OPERATING EXPENSE		345,013,490		312,295,912

OPERATING INCOME		40,444,440		40,359,407

Financial income		4,344,607		5,256,585
Financial expense		(271,631)		(245,148)
Profit and loss from investment in associates and joint ventures		380,997		(119,623)
Other revenue		4,920,766		7,348,874
Other expense		(3,604,016)		(3,750,484)

INCOME BEFORE INCOME TAX EXPENSE		46,215,163		48,849,610

INCOME TAX EXPENSE		10,827,875		12,786,869

NET INCOME	￦	35,387,288	￦	36,062,740

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won, except per share amounts)
OTHER COMPREHENSIVE EXPENSES AFTER INCOME TAX EXPENSE	￦	(890,447)	￦	(761,461)

Items that will not be reclassified to profit or loss:		-		-

Items that may be reclassified subsequently to profit or loss:		(890,447)		(761,461)
Changes in valuation of equity-accounted investees, net		7,238		(82,072)
Loss on foreign operations translation, net		(347,940)		(611,302)
Loss on valuation of AFS		(549,745)		(68,087)

TOTAL COMPREHENSIVE INCOME	￦	34,496,841	￦	35,301,280

NET INCOME ATTRIBUTABLE TO:
Owners of the Company		33,437,531		33,956,679
Non-controlling interests		1,949,757		2,106,061
		35,387,288		36,062,740

COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the Parent Company		32,686,574		33,352,384
Non-controlling interests		1,810,267		1,948,896
		34,496,841		35,301,280

EARNINGS PER SHARE ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY:
Basic earnings per common share	￦	2,978	￦	2,989
Diluted earnings per common share	￦	2,964	￦	2,963

(Concluded)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	Capital stock		Other contributed capital		Components of other capital		Retained Earnings		Non-controlling interests			Total
	(In thousands of Korean won)
January 1, 2013	￦	5,808,093	￦	80,856,279	￦	(187,151)	￦	76,032,787	￦	17,270,099	￦		179,780,107
Payment of cash dividend		-		-		-		(5,651,151)		-			(5,651,151)
Payment of interim cash dividend		-		-		-		(5,706,651)		-			(5,706,651)
Cash dividend of subsidiaries		-		-		-		-		(197,042)			(197,042)
Stock issue expense of subsidiaries		-		(144,055)		-		-		-			(144,055)
Acquisition of treasury stock		-		(6,596,882)		-		-		-			(6,596,882)
Exercised stock option rights		-		2,031,990		-		-		-			2,031,990
Gain on disposal of treasury stock		-		3,860,008		-		-		-			3,860,008
Stock compensation expense		-		2,366,767		-		-		16,346			2,383,113
Net income		-		-		-		33,956,679		2,106,061			36,062,740
Loss on foreign business translation		-		-		(454,137)		-		(157,166)			(611,303)
Changes in valuation of equity- accounted investees		-		-		(82,071)		-		-			(82,071)
Loss on valuation of AFS financial assets		-		-		(68,087)		-		-			(68,087)
Additional acquisitions of investments in subsidiaries		-		(3,912)		-		-		(209,847)			(213,759)
Disposal of investments in subsidiaries		-		2,359		-		-		2,641			5,000
Changes in the scope of consolidation		-		-		-		-		(12,215,845)			(12,215,845)
Reorganization		-		-		-		153,816		(153,816)			-
Others		-		-		-		(8,990)		-			(8,990)
December 31, 2013	￦	5,808,093	￦	82,372,554	￦	(791,446)	￦	98,776,490	￦	6,461,431	￦		192,627,122

January 1, 2014	￦	5,808,093	￦	82,372,554	￦	(791,446)	￦	98,776,490	￦	6,461,431	￦		192,627,122
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		-		-		18,194			2,007,698
Net income		-		-		-		33,437,531		1,949,757			35,387,288
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, 2014	￦	5,808,093	￦	57,382,591	￦	(1,542,404)	￦	118,640,879	￦	7,709,608	￦		187,998,767

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations:
Net income	￦	35,387,288	￦	36,062,740
Additions of expenses not involving cash outflows and others		27,281,787		27,686,029
Deduction of incomes not involving cash inflows and others		(5,506,418)		(6,288,711)
Movements in operating assets and liabilities:
Decrease(increase) in trade receivables		10,420,094		(17,301,885)
Decrease(Increase) in other receivables		797,186		(4,913,119)
Increase in inventories		(631,927)		(63,235)
Decrease(increase) in advance payments		(2,341,081)		4,088,574
Increase in other current assets		(1,914,568)		(624,925)
Decrease(increase) in other non-current assets		70,063		(1,149,093)
Increase in trade payables		22,225,048		9,154,239
Increase (decrease) in other payables		6,078,719		(648,986)
Increase in deposits received for travel		16,914,105		13,444,134
Increase in advance receipts		3,347,692		2,313,851
Increase in other financial liabilities		2,112,338		195,286
Decrease in provisions		(485,896)		(866,927)
Decrease in other current liabilities		(1,815,139)		(2,160,017)
Decrease in long-term other payables		(56,442)		(151,662)
Decrease in other long-term employee benefit		(57,365)		(61,000)
		111,825,484		58,715,293

Interest expense paid		(194,300)		(198,588)
Interest income received		4,432,124		5,285,833
Dividend income received		142,788		97,706
Income taxes paid		(12,551,297)		(18,007,355)
	￦	103,654,799	￦	45,892,890

(Continued)

HANATOUR SERVICE INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash inflows from investing activities:
Decrease in short-term financial instruments	￦	96,289,244	￦	97,032,200
Decrease in other receivables		9,085,257		3,417,071
Disposal of AFS financial assets		-		109
Disposal of investment in subsidiaries		-		405,255
Disposal of property and equipment		340,750		390,838
Disposal of intangible assets		116,267		38,105
Decrease in other financial assets		2,815,719		1,337,215
Decrease in finance lease receivables		21,948		-
		108,669,185		102,620,793
Cash outflows for investing activities:
Increase in short-term financial instruments		(105,859,334)		(119,406,915)
Increase in other receivables		(12,718,439)		(5,574,621)
Acquisition of AFS financial assets		(3,450,000)		(250,000)
Acquisition of investment in associates and joint venture		(1,202,291)		(4,892)
Acquisition of investment property		(2,670,373)		-
Acquisition of property and equipment		(10,316,656)		(7,728,375)
Acquisition of intangible assets		(3,653,239)		(3,115,758)
Increase in other financial assets		(8,341,018)		(7,840,901)
		(148,211,350)		(143,921,462)
		(39,542,165)		(41,300,668)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash inflows from financing activities:
Proceeds from short-term borrowings		13,057,420		1,572,774
Proceeds from long-term borrowings		2,517,970		-
Disposal of investment in subsidiaries		-		5,000
Exercised stock option rights		6,333,900		7,030,703
		21,909,290		8,608,477
Cash outflows for financing activities:
Acquisition of treasury stock		(32,996,692)		(6,596,882)
Payment of stock issuance expense		(43,200)		(144,055)
Acquisition of investment in subsidiaries		(5,000)		(213,759)
Repayment of finance lease liabilities		(743,161)		-
Repayment of short-term borrowings		(5,373,449)		(4,754,932)
Repayment of current portion of long-term borrowings		(343,925)		(387,442)
Payment of dividends		(14,141,555)		(11,554,844)
		(53,646,982)		(23,651,913)
		(31,737,692)		(15,043,436)

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS		32,374,942		(10,451,214)

CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR		81,852,584		93,015,665

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		(297,017)		(711,867)

CASH AND CASH EQUIVALENTS, AT END OF YEAR	￦	113,930,509	￦	81,852,584

(Concluded)

HANATOUR SERVICE INC.

SEPARATE STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2014 AND 2013

ASSETS	December 31, 2014		December 31, 2013
	(In thousands of Korean won)
CURRENT ASSETS:
Cash and cash equivalents	￦	73,621,001	￦	52,466,287
Short-term financial instruments		88,243,000		83,243,000
Trade receivables		36,617,774		50,841,886
Other receivables		15,851,519		13,903,613
Advance payments		12,968,054		13,036,347
Other current assets		2,900,061		2,264,940
Total current assets		230,201,409		215,756,073

NON-CURRENT ASSETS:
AFS financial assets		8,270,828		5,526,068
Investment in associates		17,288,477		16,086,186
Investment in subsidiaries		51,692,202		40,060,877
Investment property		3,244,171		5,569,769
Property and equipment		29,834,016		27,039,104
Intangible assets		10,254,370		9,446,402
Other financial assets		9,934,467		8,341,264
Deferred tax assets		3,844,217		3,009,462
Total non-current assets		134,362,748		115,079,132

Total assets	￦	364,564,157	￦	330,835,205

(Continued)

HANATOUR SERVICE INC.

SEPARATE STATEMENTS OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2014 AND 2013

LIABILITIES AND SHAREHOLDERS' EQUITY	December 31, 2014		December 31, 2013
	(In thousands of Korean won)
CURRENT LIABILITIES:
Trade payables	￦	66,537,852	￦	48,938,286
Other payables		14,177,419		8,489,350
Income tax payable		4,047,096		5,036,503
Deposits received for travel		79,116,689		61,856,455
Advance receipts		18,621,747		15,745,420
Provisions		1,990,391		891,231
Other financial liabilities		2,695,761		2,659,024
Other current liabilities		12,231,018		11,065,447
Total current liabilities		199,417,973		154,681,716

NON-CURRENT LIABILITIES:
Provision for long-term employee benefits		467,754		419,518
Total non-current liabilities		467,754		419,518
Total liabilities		199,885,727		155,101,234

SHAREHOLDERS' EQUITY:
Capital stock		5,808,093		5,808,093
Other contributed capital		57,370,631		82,429,987
Components of other capital		(612,152)		(68,519)
Retained earnings		102,111,858		87,564,410
Total shareholders' equity		164,678,430		175,733,971
Total liabilities and shareholders' equity	￦	364,564,157	￦	330,835,205

(Concluded)

HANATOUR SERVICE INC.

SEPARATE STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won, except per share amounts)
OPERATING REVENUE	￦	315,417,922	￦	297,598,302

OPERATING EXPENSE		283,998,639		261,057,917

OPERATING INCOME		31,419,283		36,540,385

Financial income		4,963,416		5,449,706
Financial expense		-		(50,369)
Loss from investment in associates and subsidiaries		(615,961)		(438,409)
Other revenue		2,925,631		3,778,363
Other expense		(2,385,681)		(2,316,035)

INCOME BEFORE INCOME TAX EXPENSE		36,306,688		42,963,641

INCOME TAX EXPENSE		8,186,098		10,236,809

NET INCOME		28,120,590		32,726,832

OTHER COMPREHENSIVE EXPENSES AFTER INCOME TAX EXPENSE:		(543,634)		(68,518)

Items that will not be reclassified to profit or Loss		-		-

Items that may be reclassified to profit or loss:		(543,634)		(68,518)
Loss on valuation of AFS financial assets		(543,634)		(68,518)

TOTAL COMPREHENSIVE INCOME	￦	27,576,956	￦	32,658,314

EARNINGS PER SHARE:
Basic earnings per common share	￦	2,504	￦	2,881
Diluted earnings per common share	￦	2,493	￦	2,855

HANATOUR SERVICE INC.

SEPARATE STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	Capital stock		Other contributed capital		Components of other capital		Retained earnings		Total
	(In thousands of Korean won)
January 1, 2013	￦	5,808,093	￦	80,843,372	￦	-	￦	66,195,380	￦	152,846,844
Payment of cash dividend		-		-		-		(5,651,151)		(5,651,151)
Payment of interim cash dividend		-		-		-		(5,706,651)		(5,706,651)
Acquisition of treasury stock		-		(6,596,882)		-		-		(6,596,882)
Exercised stock option rights		-		2,031,990		-		-		2,031,990
Gain on disposal of treasury stock		-		3,860,007		-		-		3,860,007
Stock compensation expense		-		2,291,500		-		-		2,291,500
Loss on valuation of AFS financial assets		-		-		(68,518)		-		(68,518)
Net income		-		-		-		32,726,832		32,726,832
December 31, 2013	￦	5,808,093	￦	82,429,987	￦	(68,518)	￦	87,564,410	￦	175,733,971

January 1, 2014	￦	5,808,093	￦	82,429,987	￦	(68,518)	￦	87,564,410	￦	175,733,972
Payment of cash dividend		-		-		-		(6,804,601)		(6,804,601)
Payment of interim cash dividend		-		-		-		(6,768,541)		(6,768,541)
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		-		1,895,221		-		-		1,895,221
Loss on valuation of AFS financial assets		-		-		(543,634)		-		(543,634)
Net income		-		-		-		28,120,590		28,120,590
December 31, 2014	￦	5,808,093	￦	57,370,631	￦	(612,152)	￦	102,111,858	￦	164,678,430

HANATOUR SERVICE INC.

SEPARATE STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations:
Net income	￦	28,120,590	￦	32,726,832
Additions of expenses not involving cash outflows and others		22,172,041		23,160,637
Deduction of income not involving cash inflows and others		(5,421,547)		(6,050,929)
Movements in operating assets and liabilities:
Decrease (increase) in trade receivables		14,201,661		(14,412,430)
Decrease (increase) in other receivables		585,495		(6,168,615)
Increase in advance payments		(184,851)		(253,727)
Increase in other current assets		(635,121)		(227,545)
Increase (decrease) in trade payables		17,604,753		(4,686,701)
Increase in other payables		5,097,314		1,035,422
Increase in deposits received for travel		17,260,234		10,393,958
Increase in advance receipts		2,876,326		2,403,449
Decrease in provisions		(485,881)		(866,835)
Increase in other financial liabilities		61,737		139,756
Decrease in other current liabilities		(2,630,935)		(1,906,295)
Decrease in provision for long-term employee benefits		(79,000)		(61,000)
		98,542,816		35,225,977

Interest income received		3,718,487		4,354,080
Dividend income received		1,357,034		1,220,668
Income taxes paid		(10,140,439)		(14,932,024)
	￦	93,477,898	￦	25,868,701

(Continued)

HANATOUR SERVICE INC.

SEPARATE STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014		2013
	(In thousands of Korean won)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash inflows from investing activities:
Decrease in short-term financial instruments	￦	92,243,000	￦	74,293,000
Decrease in other receivables		9,085,257		3,417,071
Disposal of AFS financial assets		-		109
Disposal of investment in subsidiaries		-		3,005,000
Disposal of property and equipment		31,270		381,500
Disposal of intangible assets		116,267		38,105
Decrease in other financial assets		1,118,858		622,632
		102,594,652		81,757,417
Cash outflows for investing activities:
Increase in short-term financial instruments		(97,243,000)		(86,543,000)
Increase in other receivables		(11,729,175)		(5,504,621)
Acquisition of AFS financial assets		(3,450,000)		(250,000)
Acquisition of investment in associates		(1,202,291)		(4,892)
Acquisition of investment in subsidiaries		(12,247,287)		(10,745,664)
Acquisition of property and equipment		(2,979,789)		(2,954,412)
Acquisition of intangible assets		(3,156,191)		(2,554,819)
Increase in other financial assets		(2,658,391)		(3,138,482)
		(134,666,124)		(111,695,890)
		(32,071,472)		(29,938,473)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash inflows from financing activity:
Exercised stock option rights		6,333,900		7,030,703
		6,333,900		7,030,703
Cash outflows for financing activities:
Acquisition of treasury stock		(32,996,692)		(6,596,882)
Payment of dividends		(13,573,142)		(11,357,802)
		(46,569,834)		(17,954,684)
		(40,235,934)		(10,923,981)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		21,170,492		(14,993,753)

CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR		52,466,287		67,596,859

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		(15,778)		(136,819)

CASH AND CASH EQUIVALENTS, AT END OF YEAR	￦	73,621,001	￦	52,466,287

(Concluded)

Ⅳ. 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.

Name	Position	Date elected as a director or executive officer
SangHwan Park	Chairman, Chief Executive Officer and Director	October 25, 1993(Officer and Director)
HeeSeok Kweon	Vice Chairman, Director	December 23, 1995(Director)
HuynSyuk Choi	President, Chief Executive Officer and Director	January 1, 2012(Officer) October 25, 1993(Director)
JangSuk Han	Outside Director	March 25, 2005
JeongWoo Byun	Outside Director	March 23, 2006

※ Outside Director SangTae Kim resigned due to personal reasons(July 28,2014).

Ⅴ. List of major shareholders

Shareholder	Number of shares	Percentage
Sanghwan Park and 18 people with a special relationship	2,378,850	20.48%
HANATOUR INC.	602,083	5.18%
SAUDI ARABIAN MONETARY AGENCY	533,576	4.59%
NORGES BANK	456,148	3.93%
TRUSTON SUNSUE Stock Group1 No.3	265,919	2.29%
SHINHAN BANK[MIRAE ASSET GLOBAL INVESTMENTS]	208,758	1.80%
STICHTING DEPOSITARY APG EMERGING MARKET	198,910	1.71%
KB SUNSUE No.2	184,446	1.59%
IMM MID/SMALL CAP Stock No.2	174,738	1.50%
KB BANK (KOREA INVESTMENT & SECURITIES)	152,012	1.31%
MACQUARIE FUND SOLUTIONS	143,605	1.24%
DONGBU MID/SMALL CAP Stock No.1	134,871	1.16%
SYLEBRA CAPITAL PARTNERS MASTER FUND, LTD	128,102	1.10%
KB BANK (SHINYOUNG SECURITIES)	126,122	1.09%

Ⅵ.. Status of Affiliated Companies and Others

Domestic	Namgang 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%)
	Polaris TV (50%)
	Interbiz Tour (20%)
	Hana Finance Service (100%)
Overseas	HANATOUR 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.
	STAR SHOP & LINE
	BEIJING HANA INFORMATION TECHNOLOGY CO., LTD (100%)
	HANATOUR SERVICE (M) SDN BHD (100%)

Ⅶ. Investment stocks

	Ownership Company	Ownership Ratio (%)	No. of Shares
Hanatour Business		100.00	400,000
Hanatourist Service Inc.		30.23	906,981
Hanatour Jeju Co.,Ltd.		77.35	618,830
Hanatour Youth		100.00	400,000
Hanatour ITC		100.00	24,400,000
Tour Marketing Korea Co.,Ltd		70.00	140,000
OK Tour Service Inc.		48.92	9,784
Web tour		83.82	877,738
Hana T & Media Co., Ltd		51.00	510,000
Hanauhak INC		51.00	714,000
Korea Travel Sevice INC		60.00	600,000
Namgang Travel Co., Ltd.	Hanatour Business	100.00	300,000
CJ Worldis INC		50.00	8,000,001
H&T Marketing		80.00	240,000
Hana Shop		90.00	360,000
Seoul Tour Marketing Inc.		2.89	120,000
Hani Tour Inc.		9.54	19,078
Nex Tour Co.,Ltd	Web tour	100.00	40,000
Hotel n Air.com INC.		50.00	3,000,000
Travel gonggong INC.		50.00	100,000
Hotelnfly, INC		19.90	398,000
Tourtips.INC		99.75	3,990,000
Center Mark Hotel Inc.	Hanatour ITC	50.00	1,000,000
JR No. 10 Management Real Estate Investment Trusts		15.15	-
Mark Hotel. Inc		100.00	20,000,000
Woongjin Holdings		0.02	6,903
Kiwoom Culture Fund		5.00	-
HANA FINANCE SERVICE		100.00	9,800,000
Polaris TV		50.00	51,000
Interbiz Tour		20.00	115,600
SMCI Culture Compound No.4		6.45	-
KS Credit Information		16.66	133,333
SMEs Duty Free		13.33	40,000
HANATOUR USA INC		100.00	225,000
HANATOUR EUROPE LTD		70.00	4,200
HANATOUR PTE. LTD.		100.00	2,142,000
HANATOUR JAPAN CO., LTD		70.00	1,400
UI Coach	HANATOUR JAPAN CO., LTD	100.00	-
HANATOUR CHINA		100.00	-
HANATOUR PTY LTD		100.00	600,000
HANATOUR HONGKONG CO., LTD.		100.00	5,000,000
HANATOUR TAIWAN SERVICE INC.		100.00	-
HANA TOURIST USA. INC	HANATOUR USA INC	43.24	32,000
HANATOUR EURPOE S.R.L		50.00	5,250
ALLEGROX TM Management	HANATOUR JAPAN CO., LTD	100.00	396
STAR SHOP & LINE	HANATOUR JAPAN CO., LTD	100.00	1,800
BEIJING HANA INFORMATION TECHNOLOGY CO., LTD		100.00	-
HANATOUR SERVICE (M)SDN.BHD		100.00	1,500,000

Independent Accountant's Review Report

on Internal Accounting Control System("IACS"):

English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of

Hanatour Service Inc.:

We have reviewed the accompanying Report on the Management's Assessment of IACS (the "Management's Report") of Hanatour Service Inc. (the "Company") as of December 31, 2014. The Management's Report and the design and operation of IACS are the responsibility of the Company's management. Our responsibility is to review the Management's Report and issue a review report based on our procedures. The Company's management stated in the accompanying Management's Report that "based on the assessment of the IACS as of December 31, 2014, the Company's IACS has been appropriately designed and is operating effectively as of December 31, 2014, in all material respects, in accordance with the IACS Framework established by the Korea Listed Companies Association."

We conducted our review in accordance with the IACS Review Standards established by the Korean Institute of Certified Public Accountants. Those standards require that we plan and perform a review, the objective of which is to obtain a lower level of assurance than an audit, of the Management's Report, in all material respects. A review includes obtaining an understanding of a company's IACS and making inquiries regarding the Management's Report and, when deemed necessary, performing a limited inspection of underlying documents and other limited procedures.

The Company's IACS represents internal accounting policies and a system to manage and operate such policies to provide reasonable assurance regarding the reliability of separate financial statements prepared, in accordance with Korean International Financial Reporting Standards, for the purpose of preparing and disclosing reliable accounting information. Because of its inherent limitations, IACS may not prevent or detect a material misstatement of the separate financial statements. Also, projections of any evaluation of effectiveness of IACS to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Based on our review, nothing has come to our attention that causes us to believe that the Management's Report referred to above is not fairly stated, in all material respects, in accordance with the IACS Framework established by the Korea Listed Companies Association.

Our review is based on the Company's IACS as of December 31, 2014, and we did not review its IACS subsequent to December 31, 2014. This report has been prepared pursuant to the Acts on External Audit for Stock Companies in the Republic of Korea and may not be appropriate for other purposes or for other users.

March 16, 2015

Report on the Assessment of Internal Accounting

Control System ("IACS")

English Translation of a Report Originally Issued in Korean

To the Board of Directors and Audit Committee of

Hanatour Service Inc.:

I, as the Internal Accounting Control Officer ("IACO") of Hanatour Service Inc. ("the Company"), assessed the status of the design and operation of the Company's IACS for the year ended December 31, 2014.

The Company's management, including IACO, is responsible for designing and operating IACS. I, as the IACO, assessed whether the IACS has been appropriately designed and is effectively operating to prevent and detect any error or fraud that may cause any misstatement of the separate financial statements, for the purpose of preparing and disclosing reliable separate financial statements. I, as the IACO, applied the IACS Framework established by the Korea Listed Companies Association for the assessment of design and operation of the IACS.

Based on the assessment of the IACS, the Company's IACS has been appropriately designed and is operating effectively as of December 31, 2014, in all material respects, in accordance with the IACS Framework.

January 14, 2015

Cho, Kyung Hoon, Internal Accounting Control Officer

Choi, Hyun Syuk, Chief Executive Officer

This information is provided by RNS

The company news service from the London Stock Exchange

END

ACSSDDSWFFISEID

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