FNC Ent. INVESTOR RELATIONS 2017 Disclaimer
The 2016 data together with the 2015 data presented in this material have been compiled based on the consolidated financial statements under K-IFRS. Some of the data are the closing data that have not been audited by an external auditor and are provided in this material for your convenience only. For this reason, the content of this material is subject to change reflecting the results of an external audit. Also, please be noted that the data regarding the business management outlook has been only prepared based on FNC Entertainment's internal market projections and analyses of the business environment; thus, there may be discrepancies between the data in this material and the actual business performances due to changes in the business environment and conditions. You, as a prospective investor, should not make investment decisions solely based on the projections, forecasts and outlooks provided in this material given that you are solely accountable for your investment decisions. FNC Entertainment
Contents.
Chapter 01 Company Overview
1. Company Overview 2. Main Businesses
Chapter 02 Investment Highlights
1. Industry Outlook 2. Performance Summary 3. Sales Composition 4. Business Roadmap
[Appendix] Summarized Consolidated Financial Statement FNC Entertainment
Chapter 01 Company Overview
1. Company Overview 2. Main Businesses Chapter 01 Company Overview
1. Company Overview
Company Overview Equity Structure (2016.12.31)
Largest . Company name: FNC Entertainment Co.,Ltd. . Total issued stocks: 14,364,880 Others 38% shareholder, etc. . Date of establishment: December 14, 2006 . Largest shareholders, etc.: 34% 34% . Date of company listed: December 4, 2014 (CEO Han Seong-ho, etc.) . CEO: Han Seong-ho . Suning Universal Media: 22% Treasury . Employees: 265 . Loen Entertainment: 4.5% 1% Suning Loen 22% . Address: 46, Dosan-daero 85-gil, Gangnam-gu, Seoul . Treasury stock: 1% 4.5%
Subsidiaries and Affiliates
FNC Music Japan FNC Academy FNC Add Culture Shanghai Hongyi Entertainment (JV)
. Equity structure: FNC Ent. 100% . Equity structure: FNC Ent. 100% . Equity structure: FNC Ent. 46% . Equity structure: FNC Ent. 49%, . Planning, production of records . Discovering new entertainers, . Video Contents Production Suning Universal Media 51% and concerts in Japan education for students . Drama, TV show production, . Concerts in China, majoring in practical music special press Entertainer management, etc.
5 Chapter 01 Company Overview
2. Main Businesses
Music
. In/external producers and composers . One-stop system from training to recording . Overseas concert management through subsidiary . Specialized entertainer training system with FNC Academy
Management
. Expansion of A-list actors and variety show host line ups . Increased casting of the entertainers in TV shows and advertising . Prominent management manpower and network . Expanding into China and other Asian countries
Media Contents Production
. Get started making media contents through our subsidiary, FNC ADD CULTURE . Capacity to produce dramas and variety shows . Various experiences in producing media contents(Drama, TV Show program, etc.) . Synergy with the entertainer management business
6 FNC Entertainment
Chapter 02 Investment Highlights
1. Industry Outlook 2. Performance Summary 3. Sales Composition 4. Business Roadmap
[Appendix] Summarized Consolidated Financial Statement Chapter 02 Investment Highlights
1. Industry Outlook
− Music market in Japan is the second biggest market in the world but growth rate is slowdown − Music and broadcasting market in China continues to grow with China’s fast economic development
Music Market in Japan Music Market in China Broadcasting Market in Asia
(USD mil) Concert Digital Music Records (USD mil) Concert Digital Music Records (USD mil) Korea China Japan 30,000 5,000 5,000
25,000
4,000 4,000 20,000
3,000 3,000 15,000
2,000 2,000 10,000
1,000 1,000 5,000
0 0 - 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2013 2014 2015
*Source: PWC, KOCCA (2016) *Source: PWC, KOCCA (2016) *Source: PWC, KOCCA (2016)
8 Chapter 02 Investment Highlights
2. Performance Summary
– Continued external growth with CAGR of 23.4% in sales since 2014 – Reduced operating income reflecting the investment expenses incurred from contract of famous entertainers and new businesses(media contents production) from 2015
Sales Operating Income(Loss) Profit(Loss)
(KRW 100 mil) (KRW 100 mil) (KRW 100 mil)
1,000 140 140 CAGR 23.4% 914 120 116 120 800 723 100 100 601 600 79 80 80
59 60 60 400
40 40 22 200 20 20
-25 -63 0 0 0
(20) (20) 2014 2015 2016 2014 2015 2016 2014 2015 2016
9 Chapter 02 Investment Highlights
3. Sales Composition
− Change of sales composition driven by diversified business portfolio and entertainer line-ups − Increased domestic sales resulted from expanded management activities and media contents production
Sales Composition by Business Sales Composition by Country Sales Composition by Entertainer
Print (KRW 100 mil) (KRW 100 mil) Japan Korea China Others (KRW 100 mil) Singer Actor Show host Others 1,000 Media contents production Management 1,000 1,000 Music
800 800 800 5% 5% 8% 7% 4% 600 5% 1% 5% 600 600 5% 5% 30% 35% 26% 32% 400 400 400
70% 60% 64% 56% 94% 83% 200 200 200
0 0 0 2014 2015 2016 2014 2015 2016 2014 2015 2016
10 Chapter 02 Investment Highlights
4. Business Roadmap
− Sustainable profits through a diversified business portfolio and continuous development
Music FTISLAND & CNBLUE’s Concerts
N.Flying’s Debut N.Flying’s Concerts
SF9’s Debut SF9’s Concerts
Girl Group’s Debut
Boy Band Group’s Debut Boy Dance Group’s Debut in China
Management FTISLAND & CNBLUE’s Management
AOA’s Management
Signing on Actors Management of Actors
Signing on Management of TV Show Hosts TV Show Host
Media Contents Preparation for Acquisition of Drama Production Drama Production FNC Add Culture Drama Production Preparation for TV Show Production TV Shows Production
2014 2015 2016 2017 2018
11 FNC Entertainment
[Appendix] Consolidated Financial Statements
Statement of Financial position Income Statement
(KRW million) (KRW million)
Item 2016 2015 2014 Item 2016 2015 2014
Current Assets 83,642 86,301 65,273 Sales 91,417 72,671 60,072 ∙ Cash and cash equivalents 21,165 55,870 19,177 ∙ Cost of sales 76,347 55,035 39,673 ∙ Inventories 1,010 740 762
∙ Other Current Assets 61,467 29,691 45,334 ∙ Gross Profit 15,070 17,636 20,399 Non-current Assets 50,408 23,810 11,107 ∙ Selling General 17,588 11,726 8,817 ∙ Tangible Assets 17,971 4,875 4,842 Administrative Expenses
∙ Intangible Assets 20,232 11,608 3,595 Operating Income(Loss) (2,518) 5,910 11,582 ∙ Other Non-current Assets 12,205 7,327 2,670 ∙ Other Gains 596 518 690 Total Assets 134,050 110,112 76,380
Current Liabilities 23,996 20,875 18,894 ∙ Other Losses 2,827 1,785 456 Non-Current Liabilities 3,910 2,625 1,624
Total Liabilities 27,906 23,500 20,518 ∙ Finance Income 727 704 242
∙ Issued Capital 7,182 7,182 3,152 ∙ Finance Costs 4 12 19 ∙ Capital Surplus 67,711 67,711 38,716
∙ Accumulated Other (3,664) (1,373) (1,769) Profit(Loss) before Tax (4,026) 5,335 12,038 Comprehensive Income(Loss)
∙ Retained Earnings 6,657 13,092 15,763 ∙ Income Tax Expense 2,314 3,085 4,174 ∙ Non-controlling Interests 28,257 - - Profit(Loss) (6,340) 2,249 7,864 Total Equity 106,144 86,612 55,862
※ Based on consolidated financial statements 12 FNC ADD CULTURE INVESTOR RELATIONS 2017 DISCLAIMER
The 2016 data together with the 2015 data presented in this material have been compiled based on the consolidated financial statements under K-IFRS. Some of the data are the closing data that have not been audited by an external auditor and are provided in this material for your convenience only. For this reason, the content of this material is subject to change reflecting the results of an external audit. Also, please be noted that the data regarding the business management outlook has been only prepared based on FNC Entertainment's internal market projections and analyses of the business environment; thus, there may be discrepancies between the data in this material and the actual business performances due to changes in the business environment and conditions. You, as a prospective investor, should not make investment decisions solely based on the projections, forecasts and outlooks provided in this material given that you are solely accountable for your investment decisions. CONTENTS
Chapter 01 General Overview
Chapter 02 Investment Points
[Appendix] FNC ADD CULTURE INVESTOR RELATIONS
Chapter 01 General Overview
1. Company Overview 2. History 3. Businesses 4. Financial Highlights Chapter 01 Company Overview
Chapter 01
1. Company Overview C o m p a n y O v e r v i e w
Company Profile
Company name FNC ADD CULTURE CO.,LTD. CEO Joon Ahn
Date of 1998.01 Paid-in capital KRW 19.5 billion Establishment Date of Company 2002.05 (063440) Employees 83(2016.12) Listed on KOSDAQ
Business Drama〮 TV Variety show Production, Publication Printing, Media Contents (DVD, Blu-ray, MD)
• Headquarter: 376, Jikji Gil, Paju, Gyeonggi-Do, South Korea Address • ChungDam: 54, 79Gil, Appgujungro, Gangnam, Seoul, South Korea • SangAm: 6th Floor, DMS, 12, 54Gil, WorldCupBukro, Mapo, Seoul, South Korea
Homepage http://www.fncadc.com/
CEO Profile Equity Structure (2016.12)
FNC President Joon Ahn Entertainment 30.30% Total issued . Music Technology, NYU, MA stocks . Warner Music Korea, Vice President (2007) Others 52.63% 38,307,875 . CJ E&M Music Division, General Manager (2009) Han Seong-ho, . CJ E&M Music Division, President (2012~2016) etc. . FNC ADD CULTURE, President (2016~) Treasury stock 16.49% 0.57%
17 Chapter 01 Company Overview
Chapter 01
2. History Company Overview
• Drama and TV Variety show(Non-Scripted Format) production department was transferred in 2016 from FNC Ent. • Main Business: Drama & TV Variety show production, publication printing, contents business
1998 Company Foundation (Former KD MEDIA) 2016 Change of Company name (FNC ADD CULTURE) - Special Printing Business (Lottery/ Ticket/ Gift card etc.) Transfer of Drama ∙ TV Variety show Department 2002 Listed on KOSDAQ from FNC Ent to FNC ADD CULTURE 2008 Korea Exclusive License Contract with TV Variety show [Trick & True: The Missing Spoon] Production (KBS2) Walt Disney Home Entertainment 〮 Web-Drama [My Only Love Song] Production 2014 SM Entertainment Season’s Greeting MD Product TV Variety show [Scene Stealer- Drama War] Production (SBS) Production - EXO, Girl’s Generation 2017 TV Variety show [Syndrome man] Production (kBS2)
1998~ FNC Ent. 2016~ Contents Production
FNC ADD CULTURE FNC ADD CULTURE Existing Business 2013~ Contents Production
2013 Drama [Mirae’s Choice] Co-Production(KBS2) 2014 TV Variety show [ChungDam 111] Production (tvN) 2015 Drama [Thank You, My Son] Production (KBS2) Drama [Who Are You – School Series 2015] Production (KBS2) 2016 Web-Drama [Click Your Heart] Production
18 Chapter 01 Company Overview
3. Businesses_ ① TV Contents Production Chapter 02 (Drama & TV Variety show)
Various reference points for Drama and TV Variety show program
Drama
THANK YOU, MY SON(KBS2) WHO ARE YOU(KBS2) BECKY CAME BACK!(KBS2) Web-Drama
TV Variety show
CHUNG DAM 111(tvN) TRICK & TRUE (KBS2) SCENE STEALER (SBS) Syndrome man(KBS2)
19 Chapter 01 Company Overview 3. Businesses_ ① TV Contents Production (Drama & TV Variety show)
Writers & Producer Lineups of FNC ADD CULTURE
Script writer: Kim Sunok Script writer: Baek Yeongsuk Script writer: Lee Yujin
• 2015 MBC
• 2009 SBS
TV Variety show writer: Script writer: Jang Hyeonju Drama Producer: Sin Ucheol Kim Myeongjeong
20 Chapter 01 Company Overview
3. Businesses_ ②Publication Printing & Contents • Publication Printing: Domestic Exclusive Production(Pension Lottery Printing), No 1. Special printing Company • Contents: No 1. Domestic Package Media M/S & MD Business(Entertainment & Sports etc.)
Publication Printing Contents
Pension Lottery Package Media DVD Blu-ray
• Printing Pension Lottery business for 49 years
Ticket ENT Goods MD Sports Goods
Share certificate Gift certificate
Order for Production Publication Plan PR Distribution rights
21 Chapter 01 Company Overview
4. Financial Highlights Company Overview
• Disposal of subsidiary with a high proportion of losses: Improvement profit structure • External growth in sales of TV contents Business & Diversify Sales portfolio in 2017
Annual Performance Financial Ratio Sales Composition by Business
(Unit: KRW 100 million) 1,524% Drama TV Variety show Sales Operating profit Net Income Publication Printing Contents 178 (DVD/MD Product)
12% 112 114
18%
2017E 52% 3 8.1%
2014 2015 2016 0% 18% -17 -24 -35 Current Debt ratio -63 Total borrowings and bonds -74 ratio payable to total assets ※ Based on separate financial statements
• New business in the second half of 2016(Drama & TV variety show) of starting temporary costs incurred at the beginning Contract with writer & Producer, reorganization of management, board of directors & Established New business division • Disposal of overseas subsidiary in 2016(Equity-method loss : ‘2014 62 hundred million, ‘2015 55 hundred million) • Diversify revenue structure in 2017: Balanced Business Portfolio Completion
22 FNC ADD CULTURE INVESTOR RELATIONS
Chapter 02 Investment Points
1. Official start of drama & TV Variety show in 2017 2. Synergy effect with affiliates
[Appendix] Summarized Financial Statement Chapter 02 Investment Points
Chapter 03
1. Official start of drama & TV Variety show in Investment2017 Points
Drama & TV Variety show production roadmap
Securing Representative position Growing into a global media Securing operational infrastructure of Media contents company company 2016 2017.1H 2017.2H 2018
Web-Drama Weekend drama Mini series Mini series ‘My only Love (SBS-April) drama drama song’
Morning Daily Drama (SBS-June)
‘SCENE ‘TRICK & TRUE ’ Weekly TV Weekend TV TV Variety show STEALER ’ Variety show Variety show (Cable) (KBS2) (SBS)
‘Syndrome man’ Web TV Variety (KBS2) show
24 Chapter 02 Investment Points
Chapter 03
2. Synergy effect with Affiliates Investment Points
Strategies to Maximize Synergy by a Balanced Business Portfolio
FNC ADD CULTURE(New business)
Drama TV Variety show
• Package Media • Star Casting New growth engine (Actor & Artist) • MD Product • OST production . Get a variety of Media contents reference . Business synergy with FNC Ent.
FNC ADD CULTURE FNC Ent. Synergy (Existing business) effect with Publication Contents Management Affiliates Printing
Stable business structure & +α . Publication Printing: Pension Lottery printing business for 49 years . Contents business plan: Drama MD & exhibition planning business
• MD Production(Season greeting etc.)
25 Chapter 04
[Appendix] Summarized Financial Statements A p p e n d i x
Statement of Financial position Income Statement (Unit: KRW million) (Unit: KRW million) Item 2014 2015 2016 Item 2014 2015 2016 11,371 Current Assets 7,525 5,886 24,609 Sales 17,802 11,203 Cost of sales 12,715 8,913 7,887 Non-current Assets 17,389 16,391 18,964 Gross Profit 5,087 2,290 3,484 Total Assets 24,914 22,277 43,573 Selling General Administrative (4,761) (4,029) (5,884) Current Liabilities 8,420 7,417 1,614 Expenses Non-Current Operating 1,334 1,554 1,650 326 (1,739) (2,401) Liabilities Income(Loss)
Total Liabilities 9,754 8,971 3,264 Other Gains 172 36 2,752
(1,071) Issued Capital 7,655 9,642 19,514 Other Losses (63) (91)
Finance Income 181 25 118 Capital Surplus 19,424 23,036 43,713 Finance Costs (722) (214) (104) Capital Adjustment (744) (744) (704) Profit(Loss) of actual (6,227) (5,499) (2,838) Accumulated Other value method Comprehensive (41) (25) 83 Profit(Loss) before Income(Loss) (6,332) (7,480) (3,545) Tax Retained Earnings (11,134) (18,603) (22,298) Income Tax Expense 26 (12) 23
Total Equity 15,160 13,306 40,309 Profit(Loss) (6,359) (7,468) (3,568) ※ Based on separate financial statements 26