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Annual Report

30th Jun 2008 12:59

RNS Number : 8365X

Hanatour Service Inc.

30 June 2008

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) Real estate dealing and lease

5) Computer programming and supply

6) Mail order

7) Printing and publishing business

8) The transportation business

9) Institute for traveling specialist

10) Internet (contents and supply, marketing)

11) E-commerce and information processing

12) Advertisement (Internet advertisement)

13) Information and communication

14) Homepage and web-hosting

15) 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)

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, 1992	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 Gonpyeong-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, 2007)

(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		400,000	400,000
VI. Number of shares distributed (IV-V)		11,216,185	11,216,185

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 without consideration (general subscription)	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	137,200	500	6,171	-
Nov. 10, 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		15th Term	14th Term	13th Term
Face amount per stock (won)		500	500	500
Current net income (million won)		26,876	23,303	16,641
Net income per share (won)		2,352	2,215	1,632
Profit for dividend (million won)		30,146	35,707	18,672
Total amount of cash dividend (million won)		10,215	8,122	6,138
Total amount of stock dividend (million won)		-	-	-
Tendency of stock dividend (%)		38.0	34.9	36.9
Yield rate of cash dividend (%)	Common stock	1.2	1.1	1.4
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	900	750	600
Cash dividend per share (won)	Preferred stock	-	-	-
Stock dividend per share	Common stock	-	-	-
Stock dividend per share	Preferred stock	-	-	-

5. Mstatus of Employees

(As of December 31, 2007)

(Unit: persons)

Classification	No. of employees
Classification	Office	Operation	Etc	Total
Men	119	637	37	793
Women	92	497	120	709
Total	211	1,134	157	1,502

6. Organization chart

Click on, or paste the following link into your web browser, to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/8365X_1-2008-6-30.pdf

II. CONTENTS OF BUSINESS

1. Summary of Business

We are the number one wholesale travel agency in Korea with a 27.9 market share of the tour pakage business measured in terms of the number of outbound leisure travelers originating from Korea and served by the top 30 travel agencies during 2007, according to the Korea Association of Travel Agents, or KATA. The top 30 travel agencies in Korea collectively had a market share of 53.0%, measured in terms of the number of outbound leisure travelers originating from Korea during 2007.

Our primary business consists of assembling outbound pakage tour for Korean travelers, which we sell through approximately 5,000 retail travel agencies in Korea.

Our large scale of operations enable 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. We also sell our products through our website at www.hanatour.com or our call centers, which sales are ultimately handled by the retail travel agents.

"Hanatour" is currently the most widely recognized travel brand name in Korea and according to a survey conducted by the Korea Management Association, we ranked number one in brand recognition in the travel agency category in Korea in the last two years.

2. Market Share Rate

The market share rate of the travel business is classified based on persons and the market share rate is calculated by a number of departures. (Crews are excluded from the total departing persons)

This is based on the data announced monthly by Korea Tourism Organization (KNTO) and the passengers reported to Korea Association of Travel Agents (KATA).

Year	2007		2006		2005
Persons	Total departed persons	Total department persons from Hana Tour	Total departed persons	Total department persons from Hana Tour	Total departed persons	Total department persons from Hana Tour
	12,295,079	1,684,870	10,671,123	1,307,989	9,278,860	946,081
Share rate	13.70%		12.26%		10.20%

3. Characteristics of the market

The travel business registered in Korea is about 9,000 that takes about 80% of entire tourist companies that employees about 50,000 persons that has taken a very important role as the main vein of tourism industry. However, 80% of entire businesses are small companies with 500 million won or less of capital. In 1982, the travel business was converted into the registration system and completely liberated in 1989, brining explosive increase of small travel companies. WTO expects the world travel industry to grow 4.1% of annual average up to 2020. In Korea, with the 5-working day system and dispersed vacation system, it opens up the advanced country-type vacation time.

4. Contents and prospect of new business and others

The company has no detailed investment plan on new business as of the date of submitting this quarterly report, but it plans to strive for qualitative improvement of overseas business and services through the steady expansion of overseas local corporations.

III. FINANCIAL DATA

Notice to Readers

This report is effective as of February 25, 2008, the auditors' report date. Certain subsequent events or circumstances may have occurred between the auditors' report date and the time the auditors' report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the auditors' report.

HANATOUR SERVICE INC.

NON-CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2007 AND 2006

	Korean Won
	2007	2006
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 16,19)	￦ 47,060,055	￦ 72,025,858
Short-term financial instruments (Note 3)	47,582,445	31,278,000
Trade receivables, net of allowance for doubtful accounts of ￦680,156 thousand in 2007 and ￦259,123 thousand in 2006 (Note 15)	19,033,930	15,992,334
Short-term loans (Notes 4,15)	1,025,782	561,000
Accounts receivable-other, net of allowance for doubtful accounts of ￦12,958 thousand in 2007 and ￦2,337 thousand in 2006 (Note 15)	364,560	969,802
Accrued income (Note 15)	1,434,239	915,444
Advanced payments, net of allowance for doubtful accounts of ￦102,292 thousand in 2007 and ￦289,810 thousand in 2005 (Note 15)	9,587,257	12,461,611
Prepaid expenses	1,109,906	1,178,227
Deferred income tax assets (Note 13)	-	852,019
Total current assets	127,198,174	136,234,295

NON-CURRENT ASSETS:
Available for sale securities (Note 5)	600,000	-
Investment securities accounted for using the equity method (Note 6)	14,694,239	12,970,859
Property and equipment, net of accumulated depreciation of ￦5,209,331 thousand as of December 31, 2007 and ￦4,372,414 thousand as of December 31, 2006 (Notes 7 and 8)	32,207,794	31,014,317
Intangible assets, net of amortization (Note 9)	5,855,128	304,007
Long-term financial instruments (Note 3)	2,500	2,500
Guarantee deposits	3,293,804	2,866,166
Membership	471,711	471,711
Total non-current assets	57,125,176	47,629,560

Total assets	￦ 184,323,350	￦ 183,863,855

(Continued)

HANATOUR SERVICE INC.

NON-CONSOLIDATED BALANCE SHEETS (CONTINUED)

AS OF DECEMBER 31, 2007 AND 2006

	Korean Won
LIABILITIES AND SHAREHOLDERS' EQUITY	2007	2006
	(In thousands)
CURRENT LIABILITIES:
Accounts payable-other (Notes 15 and 16)	￦ 40,306,318	￦ 41,281,904
Advanced receipts (Note 15)	3,294,281	1,899,582
Accrued expenses (Note 15)	2,260,379	5,951,403
Withholdings	298,757	4,827,831
VAT withholdings	2,183,706	2,491,828
Income tax payable	3,030,417	4,239,999
Deposits received for overseas traveling (Note 15)	28,672,100	24,490,396
Rental deposits received (Notes 7 and 15)	3,555,888	5,325,835
Operating deposits received from agents	209,180	203,890
Provision for mileage	10,257	-
Deferred income tax liabilities (Note 13)	55,211	-
Total current liabilities	83,876,494	90,712,668

LONG-TERM LIABILITIES:
Deferred income tax liabilities (Note 13)	1,045,289	524,777
Total long-term liabilities	1,045,289	524,777
Total liabilities	84,921,783	91,237,445

SHAREHOLDERS' EQUITY (Notes 10 and 11):
Capital stock	5,808,093	5,808,093
Capital surplus	60,688,560	60,688,560
Capital adjustments	(30,404,399)	(29,524,868)
Accumulated other comprehensive income	(72,704)	(12,541)
Retained earnings	63,382,017	55,667,166
Total shareholders' equity	99,401,567	92,626,410
Total liabilities and shareholders' equity	￦ 184,323,350	￦ 183,863,855

See accompanying notes to non-consolidated financial statements.

HANATOUR SERVICE INC.

NON-CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

	Korean Won
	2007	2006
	(In thousands, except per share amounts)

SALES (Note 15)
Overseas traveling intermediation income	￦ 139,078,802	￦ 111,914,213
Air tickets intermediation income	49,171,426	42,822,789
Other income	11,047,820	11,562,985
	199,298,048	166,299,987

OPERATING EXPENSES (Notes 15 and 21)	163,389,009	136,075,164

OPERATING INCOME	35,909,039	30,224,823

NON-OPERATING INCOME (EXPENSES):
Interest income	5,073,187	1,655,753
Foreign currency exchange gain(loss), net	(461,477)	422,165
Foreign currency translation loss, net	(14,920)	(120,181)
Loss on disposal of investment securities	-	(7)
Reversal of allowance for bad debts	38,669	-
Loss on valuation of investment securities accounted for using the equity method, net (Note 6)	(2,575,296)	(16,684)
Gain on disposal of investment securities accounted for using the equity method, net (Note 6)	1,476,938	1,100,614
Gain on disposal of property and equipment, net	10,119	4,948
Others, net	452,211	638,201
	3,999,431	3,684,809

INCOME BEFORE INCOME TAX	39,908,470	33,909,632

INCOME TAX EXPENSE (Note 13)	13,032,408	10,606,721

NET INCOME	￦ 26,876,062	￦ 23,302,911

BASIC NET INCOME PER SHARE (Note 14)	￦ 2,352	￦ 2,215
DILUTED NET INCOME PER SHARE (Note 14)	￦ 2,352	￦ 2,215

See accompanying notes to non-consolidated financial statements.

HANATOUR SERVICE INC.

NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

	Korean Won
	2007	2006
	(In thousands)
RETAINED EARNING BEFORE APPROPRIATIONS:
Unapproprited retained earnings carried over from prior years	￦ 38,798,512	￦ 34,495,585
Interim cash dividends (Note 12)	(4,606,474)	(3,632,951)
Legal reserve for interim cash dividends	(460,647)	(363,295)
Net income	26,876,062	23,302,911
	60,607,453	53,802,250

TRANSFER FROM RESERVES:	-	-

APPROPRIATIONS:
Legal reserve for cash dividends	560,809	449,000
Loss on disposal of treasury stock	12,220,793	10,064,737
Cash dividends (Note 12)	5,608,093	4,490,000
	18,389,695	15,003,737

UNAPPROPRIATED RETAINED EARNINGS TO BE CARRIED FORWARD TO SUBSEQUENT YEAR	￦ 42,217,758	￦ 38,798,513

See accompanying notes to non-consolidated financial statements.

HANATOUR SERVICE INC.

NON-CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLEDRS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2007

	Korean Won
	Capital stock	Capital surplus	Capital adjustments	Accumulated other comprehensive income	Retained earnings	Total amount
	(In thousands)
January 1, 2007	￦5,808,093	￦60,688,560	￦ (29,524,868)	￦ (12,541)	￦55,667,166	￦92,626,410
Payment of cash dividend					(4,490,000)	(4,490,000)
Amortization of loss on disposal of treasury stock			10,064,737		(10,064,737)	-
Balance after appropriation					41,112,429	41,112,429
Payment of Interim cash dividend					(4,606,474)	(4,606,474)
Net income					26,876,062	26,876,062
Acquisition of treasury stock			(29,518,326)			(29,518,326)
Disposal of treasury stock			25,926,446			25,926,446
Exercise of stock option rights			(2,180,974)			(2,180,974)
Loss on disposal of treasury stock			(12,220,793)			(12,220,793)
Stock compensation expense			7,049,379			7,049,379
Changes in gain on valuation of investment securities				(226,805)		(226,805)
Changes in loss on valuation of investment securities				166,642		166,642
December 31, 2007	￦ 5,808,093	￦ 60,688,560	￦ (30,404,399)	￦ (72,704)	￦ 63,382,017	￦ 99,401,567

See accompanying notes to non-consolidated financial statements.

HANATOUR SERVICE INC.

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

	Korean Won
	2007	2006
	(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	￦ 26,876,062	￦ 23,302,911
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for severance benefits	2,702,688	2,126,936
Stock compensation expense	7,049,379	4,425,566
Bad debt expense	652,888	398,857
Depreciation	1,576,354	1,640,441
Amortization of intangible assets	470,746	49,197
Mileage compensation expense	10,256	-
Foreign currency translation loss(gain), net	18,962	(33,071)
Reversal of allowance for bad debts	(38,669)	-
Gain on disposal of property and equipment, net	(10,119)	(4,948)
Loss on disposal of investments	-	7
Loss on valuation of investment securities accounted for using the equity method, net	3,625,754	658,621
Gain on disposal of investment securities accounted for using the equity method, net	(1,476,938)	(1,100,614)

Changes in operating assets and liabilities:
Increase in trade receivables	(3,574,957)	(5,934,335)
Decrease (Increase) in accounts receivable-other	485,714	(682,109)
Decrease (Increase) in advanced payments	2,913,023	(3,772,194)
Increase in accrued income	(518,795)	(662,448)
Decrease (Increase) in prepaid expenses	68,322	(492,813)
Decrease (Increase) in deferred income tax assets	852,019	(658,835)
Increase(decrease) in accounts payable-other	(994,548)	29,608,431
Increase in advanced receipts	1,394,699	528,300
Increase(decrease) in withholdings	(4,529,074)	4,208,404
Increase(decrease) in VAT withholdings	(308,122)	1,012,354
Increase (Decrease) in accrued expenses	(3,740,256)	5,623,214
Increase in income tax payable	3,448,217	3,176,858
Increase in deposits received for overseas traveling	4,181,704	6,856,891
Increase (Decrease) in operating deposits received from agents	5,290	(13,009)
Payment of severance benefits	(2,653,456)	(2,126,936)
Increase (Decrease) in deferred income tax liabilities	575,723	(27,658)
	39,062,866	68,108,018

(Continued)

HANATOUR SERVICE INC.

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

	Korean Won
	2007	2006
	(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of short-term financial instruments, net	￦ (16,304,445)	￦ (18,075,000)
Extension of short-term loans, net	(464,782)	(506,000)
Disposal (Acquisition) of available-for-sale securities, net	(600,000)	(7)
Disposal of investment securities accounted for using the equity method	1,346,977	2,106,301
Proceeds from disposal of property and equipment	23,847	30,194
Refund of guarantee deposits, net	(427,638)	(1,132,797)
Acquisition of investment securities accounted for using the equity method	(5,301,660)	(6,428,674)
Acquisitions of property and equipment	(3,641,656)	(2,396,461)
Acquisition of intangible assets	(5,163,770)	(273,602)
	(30,533,127)	(26,676,046)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in rental deposits, net	(1,769,948)	(195,307)
Issuance of stock	-	64,411,816
Exercise of stock option rights	6,889,206	3,393,017
Acquisition of treasury stock	(29,518,326)	(37,647,999)
Payment of dividends	(9,096,474)	(7,191,536)
Capital stock issue cost	-	(4,101,743)
	(33,495,542)	18,668,248

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS	(24,965,803)	60,100,220

CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR	72,025,858	11,925,638

CASH AND CASH EQUIVALENTS, AT END OF YEAR	￦ 47,060,055	￦ 72,025,858

See accompanying notes to non-consolidated financial statements.

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	President, Chief Executive Officer and Director	October 25, 1993(Officer and Director)
HeeSeok Kweon	President, Chief Executive Officer and Director	January 1, 2005(Officer) December 23, 1995(Director)
HuynSyuk Choi	Chief Operating Officer, Senior Vice President and Director	January 1, 2005(Officer) October 25, 1993(Director)
JangSuk Han	Outside Director	March 25, 2005
JeongWoo Hyun	Outside Director	March 23, 2006
KiHong Park	Outside Director	March 20, 2007

Ⅴ. List of major shareholders (having more than 5% holding)

Shareholder	Number of shares	Percentage
Sanghwan Park	950,000	8,18%
HeeSeok Kweon	717,500	6,18%
HuynSyuk Choi	580,000	4,99%

Ⅵ. Status of Affiliated Companies and Others

Namgang Travel Co., Ltd. (100%)	Saipan Hana Tour (50%)
Hana TourList Co., Ltd. (30%)	Hana Tour Hawaii Inc. (50%)
Jeju Hana Tour Co., Ltd. (77.35%)	Hana Korea Tour Inc.(50%)
Hana Youth Co., Ltd. (85%)	Hana Tour America Inc. (50%)
Hana Kangsan Co., Ltd. (80%)	Hana Tour Europe SRL (50%)
Hana Tour International Co., Ltd. (100%)	Hana Tour USA Inc. (50%)
Tour Marketing Korea Co., Ltd. (70%)	Hana Tour Europe Limited (70%)
OK Tour Co., Ltd. (50%)	Hana Tour PTE Ltd. (100%)
Webtour.Co,.Ltd.(73.8%)	Hana Tour Japan Co., Ltd. (70%)
Hangyerae Tour Co., Ltd. (60%)	Hanatour Czech S.R.O.(100%)
HANAGOLF INC	Hanatour France(100%)
HANAT&MEDIA Co,Ltd.	HANAFIL GOLF & TOUR

Ⅶ. Investment stocks

	Ownership ratio(%)	Currency	Capital	Investment
Namkang Travel Service Inc.	100	KWN	150,000,000	150,000,000
TourTotal.com Inc.	99	KWN	1,600,000,000	2,517,700,000
Hanatourist Service Inc.	30	KWN	1,500,000,000	450,000,000
Hanatour USA Inc.	50	USD	250,000	250,000
Hana Travel Academy Service Inc.	100	KWN	100,000,000	100,000,000
Hanatour Hawaii Inc.	50	USD	40,000	20,000
Hanatour America	50	USD	20,000	10,000
Hanatour Europe S.R.L	50	USD	10,000	5,000
Hana Korea Tour Inc.	50	USD	40,000	20,000
Cheju Hanatour Service Inc.	77	KWN	170,000,000	131,500,000
Hanayouth Service Inc.	85	KWN	150,000,000	127,500,000
Hanakangsan Service Inc.	80	KWN	150,000,000	120,000,000
Hanatour International Service Inc.	100	KWN	350,000,000	350,000,000
OK Tour Service Inc.	50	KWN	5,640,000,000	2,820,000,000
Korea Cruise Line Service Inc.	70	KWN	50,000,000	35,000,000
Tour Marketing Korea Service Inc.	70	KWN	100,000,000	70,000,000
Web tour	80	KWN	625,000,000	1,000,000,000
Hanatour Europe Limited	30	GBP	6,000	1,800
Hankyoreh Tour Inc.	60	KWN	150,000,000	200,000,000
Hanatour Pte Ltd.	100	SGD	200,000	200,000
Hanatour Japan Ltd.	70	JPY	100,000,000	70,000,000
SAIPAN HANATOUR	50	USD	55,000	27,500
HANATOUR CZECH	100	EUR	7,400	50,000
HANATOUR FRANCE	100	EUR	100,000	100,000

Independent Accountant’s Review Report

on Internal Accounting Control System (“IACS”)

English Translation of a Report Originally Issued in Korean

To the Representative 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, 2007. 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, 2007, the Company’s IACS has been appropriately designed and is operating effectively as of December 31, 2007, 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, 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.

A company’s IACS represents internal accounting policies and a system to manage and operate such policies to provide reasonable assurance regarding the reliability of financial statements prepared, in accordance with accounting principles generally accepted in the Republic of Korea, 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 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, 2007, and we did not review its IACS subsequent to December 31, 2007. 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.

February 25, 2008

Report on the Assessment of Internal Accounting

Control System (“IACS”)

To the Board of Directors and Auditor 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, 2007.

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 which may cause any misstatement of the financial statements, for the purpose of preparing and disclosing reliable financial statements reporting. 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, 2007, in all material respects, in accordance with the IACS Framework.

February 13, 2008

Cho, Kyoung Hoon, Internal Accounting Control Officer

Kweon, Hee Seok , Chief Executive Officer

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR SDWSUSSASEEM

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