FY2021 Annual Financial Report

Hanatour Service Inc.

18 December 2023

 

Annual Report

I. OUTLINE OF THE COMPANY

1. Purpose of the Company

Purpose

Remark

1. General Travel Business(Travel Agency) 2. Ticketing and Sales of Airline and Boat 3. Souvenir Sales 4. Issuing of Selling Offers 5. Real Estate Dealing and Lease 6. Optional Communication Business 7. Computer Programming and Supply 8. Telemarketing Business 9. Printing and Publishing Business 10. Issuing of Periodicals 11. Operating School to Train Travel Experts 12. Transportation Business(Chartered Buses) 13. Internet Business (Install and Provide Contents, Internet Marketing) 14. E-commerce and Information Processing 15. Advertisement (Internet and Outdoor Advertisement) 16. Information and communication Related Business 17. Web Hosting and Homepage Establishment 18. Warehousing 19. Tourists Hotel & Lodging business 20. Operation and management of Tourists Hotels & Lodging and other incidental facilities 21. Tourists Hotels & Lodging Management Business 22. Investment, Development, Operation and Asset Management of the Domestic and Overseas Real Estate 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 Other Cultural Products) 27. Production and Distribution of Digital Contents 28. Operating Performance Facilities 29. Planning Performance 30. Character business 31. Exhibition and Event Agency 32. Internet Broadcasting 33. Tourism Development and Incidental Business (Marketing Counsel, Planning and Consulting) 34. Education service 35. Operation of Lifelong E-learning Education Facilities 36. Gift Certificate Sales 37. Wedding Consulting 38. Amusement Park Operation 39. Comprehensive Leisure Facilities and Operation Management 40. Tourist Attraction Development Business 41. Comprehensive Recreation Business 42. International Conference Planning Business 43. Camping Car Business 44. Bonded Goods and Tourism Product Sales Business 45. Accommodation Business 46. Accommodation reservation Service 47. Web Portal and Internet Information Service 48. Franchise Business 49. Restaurant Business 50. Shopping Center Leasing and Sublease Business 51. Ticket sales related to Culture, Arts and Sports Events 52. Database Development and Sales Related to Culture, Arts and Sports 53. Investment of Cultural Projects (Performances and Film Production) 54. Organization of Events and Sponsors 55. Importation and Agency Business of Performance Publication Rights 56. Brokerage Agency Business for Copyrights and Neighboring Copyrights of Performance 57. Membership Sales and Brokerage Arrangements 58. Overseas Studies Agency Business 59. Lifelong Education Facilities Operating 60. Financial Loan and Other Financial Service Business 61. Electronic Financial Business 62. Planning and Promotion of Performance, Concert, Exhibition 63. Credit Card Business 64. Real Estate Development Business 65. Insurance Agent Business 66. All Other Incidental Businesses

2. Important Business

General Travel Business(Travel Agency)

3. History of the Company

A. Changes after the establishment

Date	Important Changes
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
Mar. 26, 2020	CEO changed - JinKook Kim and MiSun Song

B. Change of trade name

Date	Changes
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

Date	Location
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

Not Applicable.

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
Busan Sales Office	11, Jayupyeonghwa-ro, Busanjin-gu, Busan, Republic of Korea
Kimhae Airport Office	108, Gonghangjinip-ro, Gangseo-gu, Busan, Republic of Korea
Incheon Sales Office	59, Bupyeong-daero, Bupyeong-gu, Incheon, Republic of Korea
Airport Office (Terminal1)	271, Gonghang-ro, Jung-gu, Incheon, Republic of Korea
Airport Office (Terminal2)	446, Je2terminal-daero, Jung-gu, Incheon, Republic of Korea
Airport Office (Commodity Support)	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	136, Geumnam-ro, Buk-gu, Gwangju, Republic of Korea
Gangneung Slaes Office	317, Gangneung-daero, Gangneung-si, Gangwon-do, Republic of Korea
Chuncheon Slaes Office	110, Jungang-ro, Chuncheon-si, Gangwon-do, Republic of Korea
Wonju Sales Office	65, Neungnadong-gil, Wonju-si, Gangwon-do, Republic of Korea
Jeonju Sales Office	269, Paldal-ro, Wansan-gu, Jeonju-si, Jeollabuk-do, Republic of Korea
Changwon Sales Office	754, Changwon-daero, Seongsan-gu, Changwon-si, Gyeongsangnam-do, Republic of Korea

5. Status of Employees (As of December 31, 2021)

(Unit: person)

Classification	Office & Operation
Men	590
Women	590
Total	1,180

6. Organization

II. INFORMATION ON SHARES

1. Total Number of Stocks, Etc.

A. Total number of stocks (As of December 31, 2020)

(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		13,939,185	13,939,185	-
III. Total number of stocks reduced to this point		-	-	-
	1. Reduction of capital	-	-	-
	2. Retirement of shares	-	-	-
	3. Repayment of redeemed stocks	-	-	-
	4. Others	-	-	-
IV. Total number of stocks issued (II-III)		13,939,185	13,939,185	-
V. Treasury stocks		549,253	549,253	-
VI. Outstanding stocks (IV-V)		13,389,932	13,389,932	-

B. Change of capital

(1) Status of capital increase

        (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	-	1 to 2 shares
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	Stock Split	Common stock	3,600,000	500	-	1 to 10 shares
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	Bonus Issue	Common stock	1,977,029	500	-	-
Nov. 11, 2006	Capital increase	Common stock	1,161,000	500	55,711	DR
Feb. 28, 2020	Capital increase with consideration (Third-party allotment)	Common stock	2,323,000	500	55,500	-

(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		28th Term	28th Term
Face value per stock (won)		500	500
(Consolidated) Current net income (million won)		(49,987)	(172,012)
(Separated) Current net income (million won)		(38,741)	(99,210)
(Consolidated) Net income per share (won)		(3,285)	(13,210)
Total amount of cash dividend (million won)		-	-
Total amount of stock dividend (million won)		-	-
Dividend payout ratio (%)		-	-
Yield rate of cash dividend (%)	Common stock	-	-
	Preferred stock	-	-
Yield rate of stock dividend (%)	Common stock	-	-
	Preferred stock	-	-
Cash dividend per share (won)	Common stock	-	-
	Preferred stock	-	-
Stock dividend per share	Common stock	-	-
	Preferred stock	-	-

III. CONTENTS OF THE BUSINESS

1. Summary of the Business

For the last 30years, Korea's outbound volume has continued to grow gradually, due to increased leisure time and national disposable income growth. However, the outbreak of COVID-19 restricted cross-country travel and Korea's outbound volume decreased significantly.

Hanatour tried to find new demand for safe travel, commercial travel, chartered flights for Korean residents, and domestic travel, but had to spend the worst year without making notable performance, owing to the aggressive spread of the virus, and strengthening quarantine of overseas immigrants.

As the result of these factors, Korea's outbound volume decreased 78%YOY, Hanatour's PKG volume was 6 thousand showing approximately 97% decrease over 2020 records, and Air Ticket volume was 35thousand showing a significant decrease of 91% YOY. All in all, Hanatour's blended YOY volume growth in 2021 was -93% with approximately 43thousand customers.

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

<Market share rate based on the number of people>

Year	2020		2019		2019
	Total Departures from HANATOUR	Total Departures of Korea	Total Departures from HANATOUR	Total Departures of Korea	Total Departures from HANATOUR	Total Departures of Korea
	42,441	803,201	646,444	3,688,606	5,143,867	26,920,415
Share rate	5.28%		17.53%		19.11%

3. Characteristics of the market

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 industry is easy to copy. Therefore, the company needs to find new elements that would differentiate the company among competitors.

Last, travel industry is volatile. Compared to other industries it is affected by political, diplomatic, various social issues, economic issue, diseases and other aspects as well.

4. New Business Development

   Not Applicable.

Ⅳ. 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 Service Inc.	Travel Business	400,000	100.00
Hana Tourist Inc.	Travel Business	906,981	30.23
Hanatour Jeju Service Inc.	Travel Business	618,830	77.35
Hanatour ITC Service Inc.	Travel Business	24,400,000	100.00
Tour Marketing Korea Service Inc.	Travel Business	140,000	70.00
Web Tour Service Inc.	Travel Business	8,777,380	76.99
Mark Hotel Co., Ltd.	Hotel Business	40,000,000	100.00
Hana Finance Service Inc.	Finance Service	3,400,000	100.00
SM duty free Co., Ltd.	Duty Free Business	12,325,387	90.13
Hanatour USA Inc.	Travel Business	350,000	100.00
Hanatour Europe Ltd.	Travel Business	4,200	70.00
Hanatour Japan Co., Ltd.	Travel Business	6,836,300	53.98
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
Beijing Hana Information Technology Co., Ltd.	Software Technical Development	-	100.00
Hanatour Service (M) Sdn.Bhd.	Travel Business	1,500,000	100.00
HANATOUR EU GMBH	Travel Business	-	100.00
CAMLAO HANATOUR CO., LTD.	Travel Business	300,000	100.00
HANATOUR VIETNAM COMPANY LIMITED	Travel Business	-	85.00
HANATOUR PHILIPPINES CORP.	Travel Business	1,267,980	97.54
HNT ITALIA-SOCIETA' A RESPONSAVILITA' LIMITATA	Travel Business	-	51.00

3. Concurrent status of the executive management

Executive management		Concurrent Company
Name	Position	Company Name	Position	Assigned Task
SangHwan Park	Chairman	HANATOUR PTE LTD.	Director	General Management
KyungKen Yuk	Vice President	Hanatour Business Service Inc.	Director	General Management
		Web Tour Service Inc.	Director	General Management
		SM duty free Co., Ltd.	Chief Executive Officer	General Management
		Hana Finance Service Inc.	Director	General Management
		Hana Tourist Inc.	Director	General Management
		CELINO INC	Director	General Management
		Hanatour ITC Service Inc.	Director	General Management

Ⅴ.SUMMARY OF FINANCIAL DATA

* We've applied K-IFRS 1115 form 2018 and rewrote 2017 and 2016 Financial Results using K-IFRS 1115

1. Financial results

(In thousand won, except per share amounts)

Classification	29th Term	28th Term	27th Term
Sales	10,781,802	73,947,230	462,940,363
Operating Expenses	108,327,485	149,962,759	457,256,969
Operating Income	(97,545,683)	(76,015,530)	5,683,395
Profit Before Tax	(43,530,465)	(131,191,120)	(31,876,068)
Income Tax Expense	(4,789,718)	(31,981,313)	2,779,238
Net Income	(38,740,747)	(99,209,807)	(34,655,306)
Net Income per Share(Won)	(2,893)	(7,619)	(3,131)

2. Financial position

(In thousand won)

Classification	29th Term	28th Term	27th Term
Current Assets	86,185,310	121,274,400	163,151,889
Non-Current Assets	128,627,359	226,035,622	295,927,124
Total Assets	214,812,670	347,310,022	459,079,014
Current Liabilities	92,071,844	95,992,675	226,927,968
Long-term Liabilities	2,199,736	92,035,510	98,159,130
Total Liabilities	94,271,580	188,028,185	325,087,098
Capital Stock	6,969,593	6,969,593	5,808,093
Other Paid-in Capital	16,465,030	186,465,030	58,700,030
Elements of Other Shareholder's Equity	(9,097)	(9,097)	(9,097)
Retained Earnings	97,115,564	(34,143,689)	69,492,890
Total Shareholder's Equity	120,541,089	159,281,837	133,991,916
Total Liabilities and Shareholder's Equity	214,812,670	347,310,022	459,079,014

Ⅵ. RISK FACTORS

Refer to III - 1. Summary of the Business

Ⅶ. MANAGEMENT

Full-time / Part-time	Name	Position	Assigned Task
Full-time	SangHwan Park	Chairman, Director	General Management
Full-time	HeeSeok Kweon	Senior Vice Chairman, Director	General Management
Full-time	MiSun Song	Chief Executive Officer and Director	General Management
Full-time	KyungKen Yuk	Vice President and Director	General Management
Part-time	JeongWoo Byun	Auditor, Outside Director	Outside Director
Part-time	KeunHo Cho	Auditor, Outside Director	Outside Director
Part-time	MoonHyun Kim	Auditor, Outside Director	Outside Director
Part-time	SangMan Han	Auditor, Outside Director	Outside Director
Part-time	InJun Song	Non-Executive Director	Non-Executive Director
Part-time	YoungHo Kim	Non-Executive Director	Non-Executive Director
Part-time	ChanWoo Park	Non-Executive Director	Non-Executive Director

Ⅷ. LIST OF MAJOR SHAREHOLDERS

Shareholder	Number of shares	Percentage
Harmonia 1 limited company and 11 people with a special relationship	3,919,274	28.12%
HANATOUR INC.	549,253	3.94%

Ⅸ. CURRENT STATUS OF INVESTMENTS

1. Domestic

Name of the Company	Ownership Company	Ownership Ratio (%)	No. of Shares
Hanatour Business Service Inc.	HANATOUR Service Inc.	100.00	400,000
Hana Tourist Inc.	HANATOUR Service Inc.	30.23	906,981
Hanatour Jeju Service Inc.	HANATOUR Service Inc.	77.35	618,830
Hanatour ITC Service Inc.	HANATOUR Service Inc.	100.00	24,400,000
Tour Marketing Korea Service Inc.	HANATOUR Service Inc.	70.00	140,000
OK Tour Service Inc.	HANATOUR Service Inc.	48.92	9,784
Web Tour Service Inc.	HANATOUR Service Inc.	76.99	8,777,380
Nextour Co., Ltd.	Web Tour Service Inc.	100.00	40,000
Hotel&Air Co., Ltd.	HANATOUR Service Inc.	50.00	300,000
Gyoyugyeohaeng Co., Ltd	HANATOUR Service Inc.	19.90	398,000
Mark Hotel Co., Ltd.	HANATOUR Service Inc.	100.00	40,000,000
Hana Finance Service Inc.	HANATOUR Service Inc.	100.00	3,400,000
SM duty free Co., Ltd.	HANATOUR Service Inc.	90.13	12,325,387
Triple Corp.	HANATOUR Service Inc.	3.84	6,000
CELINO INC	HANATOUR Service Inc.	50.00	300,000
K Culture Industry Co., Ltd.	HANATOUR Service Inc.	40.00	-
Hani Tour Inc.	HANATOUR Service Inc.	9.54	19,078
SAM Consulting Co.,Ltd.	HANATOUR Service Inc.	7.69	1,667
KC HOSPITALITY CO.,LTD	HANATOUR Service Inc.	10.00	57,600
Jeju Channel Inc.	Hanatour Jeju Service Inc.	8.06	50,000
Dream Co., Ltd.	HANATOUR Service Inc.	2.08	2,250
	Hanatour Jeju Service Inc.	2.08	2,250

2. Overseas

Name of the Company	Ownership Company	Region	Ownership Ratio (%)	No. of Shares
Hanatour USA Inc.	HANATOUR Service Inc.	LA	100.00	350,000
Hanatour Europe Ltd.	HANATOUR Service Inc.	London	70.00	4,200
Hanatour Japan Co., Ltd.	HANATOUR Service Inc.	Japan	53.98	6,836,300
U.I Sightseeing Bus LLC	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 Europe s.r.l	HANATOUR Service Inc.	Italy	50.00	5,250
Allegrox TM Hotel	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
Hanatour Janpan System Vietnam	HANATOUR JAPN CO., LTD	Vietnam	100.00	-
HANATOUR EU GMBH	HANATOUR Service Inc.	Germany	100.00	-
CAMLAO HANATOUR CO., LTD.	HANATOUR Service Inc.	Cambodia	100.00	300,000
HANATOUR VIETNAM COMPANY LIMITED	HANATOUR Service Inc.	Vietnam	85.00	-
HANATOUR PHILIPPINES CORP.	HANATOUR Service Inc.	Philippines	97.54	1,267,980
VISION TOUR, INC.	Hanatour USA Inc.	LA	100.00	300,000
HNT ITALIA - SOCIETA' A RESPONSABILITA' LIMITATA	HANATOUR Service Inc.	Roma	51.00	-

Ⅹ. MAJOR CREDITORS

Not applicable.

XI. IMPORTANT EVENTS AFTER THE SETTLEMENT OF

ACCOUNTS PERIOD

(1)  CAMLAO HANATOUR CO., LTD. which is one of subsidiaries of the Group resolved to dissolve on January 26, 2022.

(2)  CELINO INC which is one of subsidiaries of the Group resolved to dispose on February 14, 2022.

XII. OTHER IMPORTANT FACTS ABOUT THE BUSINESS

None.

Independent Auditors' Report

Based on a report originally issued in Korean

To the Shareholders and Board of Directors of   

Hanatour Service Inc.:

Opinion

We have audited the consolidated financial statements of Hanatour Service Inc. and its subsidiaries (the "Group"), which comprise the consolidated statements of financial position as of December 31, 2021 and 2020, the consolidated statements of comprehensive income (loss), changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards ("K-IFRS").

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing (KSAs).  Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report.  We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with 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.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion.  Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists.  Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit.  We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Group's internal control.

• Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.  We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors' report is Jung Wook Do.

KPMG Samjong Accounting Corp.

Seoul, Korea

March 17, 2022

This report is effective as of March 17, 2022, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2021 and 2020

(In thousands of won)				2021		2020
Assets
Cash and cash equivalents			W	105,686,896		101,851,025
Short-term financial instruments				17,109,692		18,114,794
Trade receivables				11,253,911		9,315,225
Other receivables				4,105,493		9,169,709
Finance lease receivables				449,764		2,137,718
Inventories				1,711,235		2,013,920
Advance payments				11,664,075		9,797,848
Other current assets				2,456,982		3,529,004
Other financial assets				11,437,194		5,123,578
Current tax assets				332,808		633,823
Assets held for sale				-		46,402,958
Current financial assets at FVTPL				-		236,154
Total current assets				166,208,050		208,325,756
Non-current financial assets at FVTPL				2,938,115		4,529,550
Financial assets at FVOCI				1,187,148		1,207,318
Investments in associates and joint ventures				946,873		3,099,867
Long-term finance lease receivables				-		1,336,082
Long-term other receivables				3,363,839		1,328,850
Investment property, net				1,396,521		8,498,609
Property and equipment, net				13,379,039		98,387,081
Right-of-use assets				140,108,105		263,965,044
Intangible assets				32,852,801		41,958,023
Other financial assets				20,293,002		28,196,140
Deferred tax assets				47,721,079		42,376,646
Other non-current assets				201,012		51,949
Total non-current assets				264,387,534		494,935,159
Total assets			W	430,595,584		703,260,915

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

As of December 31, 2021 and 2020

(In thousands of won)				2021		2020
Liabilities
Trade payables			W	8,887,001		7,021,596
Other payables				57,384,884		61,872,256
Income tax payables				304,682		448,134
Deposits received for travel				8,068,636		6,236,819
Advances received				26,119,418		26,524,195
Short-term borrowings				16,563,494		23,900,152
Current portion of long-term borrowings				4,122,122		6,816,375
Finance lease liabilities				35,112,340		22,784,004
Provisions				1,023,018		2,142,207
Other financial liabilities				2,217,777		2,325,020
Other current liabilities				12,719,477		13,191,064
Total current liabilities				172,522,849		173,261,822
Long-term other payables				463,288		6,376,512
Long-term borrowings				10,527,204		94,865,826
Debentures				102,385		311,242
Long-term provisions				181,744		433,008
Long-term finance lease liabilities				182,746,487		299,760,033
Provision for long-term employee benefits				1,023,381		2,316,695
Other financial liabilities				-		475,680
Other non-current liabilities				5,272,119		146,106
Total non-current liabilities				200,316,608		404,685,102
Total liabilities				372,839,457		577,946,924
Equity
Capital stock				6,969,593		6,969,593
Other contributed capital				29,905,656		205,366,093
Components of other capital				1,947,292		2,210,944
Retained earnings				46,504,986		(79,507,585)
Equity attributable to the owners of the Parent Company				85,327,527		135,039,045
Non-controlling interests				(27,571,400)		(9,725,054)
Total equity				57,756,127		125,313,991
Total liabilities and equity			W	430,595,584		703,260,915

HANATOUR SERVICE INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2021 and 2020

(In thousands of won, except earnings per share data)				2021		2020
Operating revenue			W	40,258,282		109,571,614
Operating expense				167,551,792		224,438,313
Bad debt expense				1,907,047		13,343,343
Other operating expense				165,644,745		211,094,970
Operating income				(127,293,510)		(114,866,699)
Interest income by effective interest method				1,173,029		1,875,972
Other financial income				12,622		391,404
Financial expense				8,594,071		9,064,506
Loss from investment in associates and joint ventures				(99,510)		(4,137,405)
Other income				110,530,654		11,708,098
Other expense				47,730,324		74,710,136
Other bad debt expense				3,304,424		718,002
Income (loss) before income taxes				(75,305,534)		(189,521,274)
Income taxes of continuing operations				(4,768,524)		(30,709,687)
Net loss			W	(70,446,260)		(218,571,040)
Net loss from continuing operations				(70,537,010)		(158,811,587)
Net loss from discontinued operations				90,750		(59,759,453)
Other comprehensive income after tax expense				740,869		3,193,888
Items that will never be reclassified to profit of loss:
Loss on valuation financial assets at FVOCI				(98,639)		(70,117)
Items that are or may be reclassified subsequently to profit of loss:
Changes in valuation of equity-accounted investees, net				-		-
Gain on foreign operations translation, net				839,507		3,264,005
Total comprehensive income (loss)			W	(69,705,391)		(215,377,152)
Net income (loss) attributable to:
Owners of the Parent Company				(43,987,430)		(172,012,334)
Non-controlling interests				(26,458,830)		(46,558,706)
			W	(70,446,260)		(218,571,040)
Comprehensive income (loss) attributable to:
Owners of the Parent Company				(43,678,822)		(170,353,428)
Non-controlling interests				(26,026,569)		(45,023,724)
			W	(69,705,391)		(215,377,152)
Earnings (losses) per share
Basic earnings (losses) per share attributable to (in won) :				(3,285)		(13,210)
Continuing operation (in won)				(3,288)		(9,232)
Discontinued operation (in won)				3		(3,978)
Diluted earnings (losses) per share attributable to (in won) :			W	(3,285)		(13,210)
Continuing operation (in won)				(3,288)		(9,232)
Discontinued operation (in won)				3		(3,978)

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

(In thousands of won)		Capital Stock		Other contributed capital		Components of other capital		Retained earnings		Non-controlling interests		Total shareholders' equity
January 1, 2020	W	5,808,093		77,487,067		538,389		96,937,522		37,108,377		217,879,448
Dividends		-		-		-		(4,426,772)		-		(4,426,772)
Dividends of subsidiaries		-		-		-		-		(1,751,550)		(1,751,550)
Stock compensation expense		-		117,236		-		-		109,947		227,183
Net loss		-		-		-		(172,012,334)		(46,558,706)		(218,571,040)
Gain on foreign operations translation		-		-		1,713,558		-		1,550,447		3,264,005
Loss on valuation financial assets at FVOCI		-		-		(54,652)		-		(15,465)		(70,117)
Acquisition of treasury stock		-		(91)		-		-		-		(91)
Paid-in capital increase of Parent company		1,161,500		127,765,000		-		-		-		128,926,500
Paid-in capital increase of Subsidiaries		-		(3,119)		-		-		3,119		-
Changes in scope of consolidation		-		-		13,649		-		(171,224)		(157,575)
December 31, 2020	W	6,969,593		205,366,093		2,210,944		(79,507,584)		(9,725,055)		125,313,991

January 1, 2021	W	6,969,593		205,366,093		2,210,944		(79,507,584)		(9,725,055)		125,313,991
Net loss		-		-		-		(43,987,430)		(26,458,830)		(70,446,260)
Gain on foreign operations translation		-		-		384,299		-		455,208		839,507
Gain on valuation financial assets at FVOCI		-		-		9,528		-		-		9,528
Loss on valuation financial assets at FVOCI		-		-		(85,219)		-		(22,947)		(108,166)
Introduction of capital surplus		-		(170,000,000)		-		170,000,000		-		-
Acquisition of treasury stock		-		(534)		-		-		(310)		(844)
Acquisition of investing stock		-		-		-		-		2,317,404		2,317,404
Paid-in capital increase of Subsidiaries		-		(5,522,994)		-		-		9,524,734		4,001,740
Changes in scope of consolidation		-		63,091		(572,260)		-		(3,661,604)		(4,170,773)
December 31, 2021	W	6,969,593		29,905,656		1,947,292		46,504,986		(27,571,400)		57,756,127

HANATOUR SERVICE INC. AND SUBSIDIARIES                                           

Consolidated Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(In thousands of won)			2021		2020
Cash flows from operating activities
Net loss		W	(70,446,260)		(218,571,040)
Additions of expenses not involving cash outflows and others			97,422,910		157,573,133
Deduction of incomes not involving cash inflows and others			(108,779,131)		(6,077,486)
Movements in operating assets and liabilities:
Decrease (increase) in trade receivables			(1,361,937)		72,070,031
Decrease in other receivables			2,725,948		2,726,123
Decrease in inventories			2,494		28,683,518
Decrease (increase) in advance payments			(8,527,408)		22,781,087
Decrease in other current assets			1,070,342		6,201,879
Increase in other non-current assets			(162,291)		(21,345)
Increase (decrease) in trade payables			1,540,475		(59,455,334)
Decrease in other payables			(17,153,030)		(29,127,075)
Increase (decrease) in deposits received for travel			1,830,804		(89,194,333)
Increase in advances received			2,405		4,237,517
Decrease in other financial liabilities			(110,315)		(433,003)
Decrease in other current liabilities			(844,767)		(11,924,107)
Decrease in provisions			(595,758)		(1,421,352)
Decrease in long-term other payables			(312,711)		(398,385)
Decrease in other long-term employee benefit			(324,900)		(29,340)
			(104,023,130)		(122,379,512)
Interest expense paid			(4,338,649)		(8,658,314)
Interest income received			1,101,003		1,923,042
Dividend income received			-		553,872
Income taxes paid			(28,930)		(4,307,113)
Net cash provided by operating activities		W	(107,289,706)		(132,868,025)

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2021 and 2020

(In thousands of won)			2021		2020
Cash flows from investing activities
Cash inflows from investing activities:
Decrease in short-term financial instruments		W	19,923,883		198,366,449
Decrease in other receivables			247,390		11,964
Disposal of financial assets at FVTPL			1,165,183		1,813,578
Disposal of investment in associates and joint venture			162,722		200,995
Disposal of financial assets at FVOCI			-		14,000
Disposal of property and equipment			308,437		5,798,643
Disposal of intangible assets			11,517		-
Disposal of intangible assets being acquired			-		35,401
Decrease in finance lease receivables			211,479		1,272,889
Decrease in other financial assets			11,332,739		14,673,913
Disposal of assets held for sale			211,178,338		3,500,000
Cash outflows for investing activities:
Increase in short-term financial instruments			16,676,202		106,460,284
Increase in other receivables			403,294		1,477,276
Acquisition of financial assets at FVTPL			250,000		750,000
Acquisition of financial assets at FVOCI			-		221
Acquisition of property and equipment			2,544,706		4,042,829
Acquisition of intangible assets			2,031,228		16,971,962
Increase in other financial assets			2,974,553		8,951,556
Net cash used in investing activities		W	219,661,705		87,033,704

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2021 and 2020

(In thousands of won)			2021		2020
Cash flows from financing activities
Cash inflows from financing activities:
Proceeds from short-term borrowings		W	55,724,965		107,240,149
Proceeds from long-term borrowings			1,281,219		12,708,305
Paid-in capital increase of parent company			-		128,926,500
Paid-in capital increase of subsidiaries			4,001,740		-
Proceeds from leasehold deposits received			110,457		-
Cash outflows for financing activities:
Repayment of short-term borrowings			62,722,484		176,660,646
Repayment of current portion of long-term borrowings			6,614,496		2,300,535
Repayment of long-term borrowings			81,570,000		1,105,070
Repayment of finance lease liabilities			16,130,912		23,406,065
Payment of cost of stock issuing			74,841		6,338
Acquisition of treasury stocks			1,083		-
Payment of dividends			2,972,884		7,453,827
Payment of leasehold deposits received			419,879		-
Net cash provided by financing activities			(109,388,198)		37,942,473
Increase (decrease) in cash on changes in scope of consolidation			641,277		(18,657)
Net decrease in cash and cash equivalents			3,625,078		(7,910,505)
Cash and cash equivalents at beginning of year			101,851,025		110,846,773
Effect of exchange rate change			210,794		(1,085,243)
Cash and cash equivalents at end of year		W	105,686,896		101,851,025

 

END