BUILDING A NEW PARADIGM FOR ASIAâ€™S PREMIER INTEGRATED RESORT

BUILDING A NEW PARADIGM FOR

ASIA’S PREMIER INTEGRATED RESORT

KANGWON LAND ANNUAL REPORT 2010

P 01 PROFILE

P 02 MESSAGE FROM THE MANAGEMENT

P 06 FINANCIAL HIGHLIGHTS

P 07 STOCK INFORMATION

P 10 KANGWON LAND CASINO

P 14 HOTELS & CONDOS

P 18 HIGH1 SKI RESORT

P 22 HIGH1 C.C.

P 25 OTHERS

P 28 MANAGEMENT EFFICIENCY

P 30 ETHICAL MANAGEMENT

P 32 HR MANAGEMENT

P 34 SOCIAL CONTRIBUTIONS

P 42 MANAGEMENT’S DISCUSSION & ANALYSIS

P 54 FINANCIAL STATEMENTS

P 91 HISTORY

P 92 ORGANIZATION

P 93 FINANCE & IR TEAM INFORMATION

CONTENTS

* Kangwon Land won the sil-

ver prize in the consumer

service sector at the LACP

2009 Vision Award (annual

report competition).

PROFILE Kangwon Land, founded on the Special Law on Support for Development

of Abandoned Mine Areas passed in 1995, celebrated its 12th anniversary

on June 29, 2010. Kangwon Land operates the only casino accessible

to Korean nationals, as well as hotels, condominium complexes, a golf

course with world-class facilities and a ski resort, making it the finest

integrated resort in Korea.

Today, Kangwon Land is poised to become “Asia’s best four-season inte-

grated family resort” by valuing basics and principles, making internal

changes through innovation and establishing its 「Vision 2012」 policy for

sustainable future growth.

Despite numerous challenges such as increased competition in the Asian

casino industry and the gambling industry’s tighter regulatory environ-

ment, Kangwon Land posted KRW 1,313.7 billion in sales and KRW 571.2

billion in operating profits, two all-time highs, by slashing its costs of

sales and fastidiously managing SG&A expenses. Moreover, the company

played its role as a state-run entity by implementing social contribution

projects in a proactive manner, which included contributing to public

finance and revitalizing the economy of the abandoned mine area through

a variety of community development and support programs as well as

other activities.

Over the past several years, Kangwon Land has fulfilled its responsibili-

ties as Korea’s preeminent integrated resort. The company is now poised

to contribute to the sustainable development of the national economy

and the resort industry through various forms of entertainment, unri-

valled facilities and services coupled with Korea’s alluring four-season

climate. Indeed, Kangwon Land will continue to grow into Asia’s leading

year-round integrated family resort while creating new value far into the

future.

0202KANGWON LAND ANNUAL REPORT 2010

12 years have passed since Kangwon Land launched its business while sowing the seeds of hope in an

abandoned mine area in the southern part of Gangwon Province. Now, Kangwon Land has produced

positive tangible results on the basis of the support of its shareholders and investors. During a relatively

short period, Kangwon Land made history in the casino, hotel, ski resort, golf course, condominium and

arts and culture sectors.

Last year, Kangwon Land recorded performances that matched its position in the market as Korea’s

representative four-season integrated resort. I am pleased to bring our shareholders this good

news. Over the past year, despite unfavorable external business conditions, Kangwon Land made

steady efforts to elevate managerial efficiency and respond to the government’s Plan for Advanced

Management of Public Enterprises on the foundation of principles and basics.

As a result, the company posted its best-ever business scorecard with KRW 1,313.7 billion in sales, KRW

571.2 billion in operating profits and KRW 421.8 billion in net profits while renewing record highs every

quarter. In addition, the company has diligently prepared for qualitative growth. Notwithstanding the

expanded business sites and increased number of customers, the company managed its organization with

fewer employees than the previous year and made endeavors to enhance managerial efficiency. These

efforts paid off handsomely. The company recorded an operating profit margin of 43.5%, a five-year high.

Dear Valued Shareholders:

We would like to express our gratitude to you for your ongoing support of Kangwon Land.

02 | 0302MESSAGE FROM THE MANAGEMENT

All of us at Kangwon Land have worked hard to realize our vision of becoming “Asia’s best four-season

integrated family resort” while not resting on our laurels – as the only casino open to Korean nationals.

We opened expanded condominiums in December 2010 and are adding a convention hotel to further

promote the MICE business. We are pushing forward with the remodeling the casino building, with the

aim of enhancing services at the casino and securing international competitiveness as well as boasting

world-class transparency by introducing a precise Casino Variance Zero System.

As a company listed on the Korea Stock Exchange, Kangwon Land is required to enhance its corporate

value, and at the same time, should realize one of the goals of its foundation, which is to stimulate the

economy of the abandoned mine area. I believe that our shareholders are cognizant that through steady

investment, Kangwon Land will realize its two goals – enhancing its corporate value and stimulating the

economy of the abandoned mine area.

Our company will live up to your expectations by growing into Asia’s preeminent four-season integrated

family resort.

The year 2011 is an important stepping stone for us in our effort to become the leading four-season

integrated family resort. All of Kangwon Land’s employees will ceaselessly strive for the steady growth

of the company and greater efficiency while managing a variety of changes.

The construction of the convention hotel will be completed in July 2011. The convention hotel will serve

as an optimized facility for international events such as the 2012 FIS Congress and will contribute to

enhancing the image of Kangwon Land as a world-class tourist and business destination. The remodel-

ing of the casino is scheduled to be completed in 2012, and will serve as a core growth engine by mini-

mizing customers’ inconvenience and doubling the competitiveness of the casino sector.


We will work with more modesty and sincerity to further develop your interest in and support for

Kangwon Land as trustworthy managers of your assets. I ask shareholders to support the passion of

employees and encourage them to put forth their utmost efforts. I believe that we will see Kangwon

Land rapidly grow into Asia’s leading resort.

Once again, I thank you for your support and your continued interest in the company. I wish you and your

family great health, happiness and prosperity.

Thank you.

Kim Hyung BaeActing President and CEO of Kangwon Land

GROWTH STRATEGIES

Expand the resort business through proactive measures*Establish new business facilities in a short time*Push construction work in a stable manner* Make a successful foray into the convention market and broadening the customer base

MANAGEMENT STRATEGIES

Establish a quality-oriented management system*Develop human resources and strengthening their competitiveness*Establish a cost-cutting system*Improve business systems

COMPETITIVE STRATEGIES

Maximize abilities to attract more customers *Improve service systems *Maximize sales power through integrated marketing*Create a luxury brand image

SURVIVAL STRATEGIES

Build a sustainable management system* Make diversified efforts to extend the Special Law on Support for the Development of Abandoned Mine Areas

*Create a transparent and ethical corporate image*Make qualitative improvements in our role for the community

[2011 BUSINESS GOALS]

04 | 0504VISION 2012

「 VISION 2012」 Completing the Construction of Asia’s Best Four-Season Integrated Family Resort High1 Resort is suitable for all seasons and features a variety of entertainment, world-class facilities and services

◆ INITIATING CORE STRATEGIES

◆ FORMULATING DETAILED STRATEGIES

• Offering a convention hotel

• Building a new condominium complex

• Opening High1 Plaza

• Remodeling the casino building

• Improving the scenery

• Expanding year-round attractions

• Implementing local development projects

• Activating integrated local marketing

• Strengthening the resort-specialized management system

• Securing global competitiveness through human resource development

• Providing community-friendly social contribution activities

• Enhancing Korea’s most effective anti-gambling addiction program

• Promoting and supporting less-popular sports

Enhancing the quality of the integrated resort

Forming a tourist belt in the southern part of Gangwon Province

Reinforcing internal competitiveness

Strengthening social responsibilities as a state-run company

SEVEN MILLION VISITORS

0606

Financial HigHligHts


SUMMARIZED FINANCIAL POSITIONS

SUMMARIZED INCOME STATEMENTS

KEY FINANCIAL RATIOS

(KRW Billion)

(KRW Billion)

(%)

2010 2009 2008

Total Assets 2,610 2,387 2,076

Total Liabilities 509 497 445

Total Shareholders’ Equity 2,101 1,890 1,631

2010 2009 2008

Sales 1,314 1,207 1,149

Gross Profit 820 692 673

Operating Profit 571 465 471

Recurring Profit 556 509 446

Net Profit 422 390 309

2010 2009 2008

Sales Growth Ratio 8.9 5.0 7.8

Operating Profit Growth Ratio 22.8 -1.2 12.5

Operating Profit Margin 43.5 38.5 41.0

Debt-to-Equity Ratio 24.1 26.3 27.3

Return on Equity 21.1 22.2 19.3

Dividend per Share (KRW) 970 940 720

06 | 0706

7,706

8,957

10,141

stock inFormation

FINANCIAL HIGHLIGHTS & STOCK INFORMATION

OWNERSHIP STRUCTURE

STOCK INDEX

DIVIDEND & TREASURY STOCK

Dividend

(As of Dec. 31, 2010)

(KRW Billion)

Treasury Stock(Thousand)

2010 2009 2008

No. of Outstanding Shares * 204,129,325 205,010,188 210,135,163

Market Price as of Year-End (KRW) 27,950 16,500 13,650

EPS (KRW) 2,066 1,902 1,472

PER (Times) 13.53 8.68 9.27

2008 2008148.5

2009 2009192.7

2010 2010197.7

Private Sector

Mine Reclamation Corporation: 36.0%

Gangwondo Development Corporation: 6.6%

Jeongseon County: 4.9%

Taebaek City: 1.25%

Samcheok City: 1.25%

Yeongwol County: 1.0%

Treasury Stock: 4.7%

Domestic Institutions: 5.0%

Domestic Retail Investors: 5.6%

Foreign Investors: 33.7% 49%Public Sector

51%

* Weighted-average number of common shares outstanding

0808

INN

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08 | 0908

FOOD & BEVERAGE TEAM Se-young, Jo

Kangwon Land elevated its managerial

efficiency and is cooperating more closely

with the government’s Plan for Advanced

Management of Public Enterprises. As a

result, we posted KRW 1,313.7 billion in

sales and KRW 421.8 billion in net profits,

both of which are all-time highs.

Kangwon Land’s business performance in 2010?

REVIEW OF OPERATIONS

1010

Kangwon Land casino

Internationally, 130 countries are operating approximately 2,800 casinos. Korea has a total of 17 casinos – 16 casinos exclusively for foreigners and one casino accessible to both Korean nationals and foreigners, Kangwon Land. Since the 2000s, nations around the world have been nurturing the casino industry at a national level thanks to its positive effects, which include promoting the tour-ism industry by obtaining foreign currencies and attracting tourists and revi-talizing local economies despite the occasional negative image of casinos. In addition, the casino industry is evolving into a general entertainment industry by introducing the functions of a resort, a theme park and a convention center, branching out from merely places to gamble.

In 2010, Kangwon Land received the recognition of its positive aspects by tak-ing the lead in forming an environment that encumbers the development of the illicit gambling market, revitalizing the local economy and preventing the outflow of national wealth by allowing Korean nationals to engage in games of chance without having to travel abroad, thus mitigating the negative image of casinos. In particular, Kangwon Land is boosting its importance to organizations, the cen-tral government and local governments by expanding its financial contribution.

Popularization of a Casino that Contributes to Both Sales Growth and Profitability

In October 2000, Kangwon Land began to operate a casino with 30 tables, 480 slot machines and a four-star hotel with 197 rooms. In March 2003, Kangwon Land opened a main hotel and casino with 100 tables and 960 slot machines at the current location. In February 2004, the Ministry of Culture and Tourism granted the company a permit to install 32 additional tables for customers. Since then, the company has diversified its selection of games and now operates 132 tables (seven kinds) and 960 slot machines.

Customers can experience a pleasant

and sound gaming culture in a

comfortable atmosphere through a

splendid and magnificent interior, the

kind services of dealers, and the casino

buffet and VIP lounge.

TABLE GAME C TEAM Tae-woo, Kim


Classification Game Type General VIP Total

Table Games

Black Jack 45 4 49

Baccarat 45 16 61

Roulette 10 - 10

Big Wheel 2 - 2

Taisai 4 - 4

Caribbean Stud Poker 4 - 4

Casino War 2 - 2

Casino Facility

Classification Game Type KRW 10 KRW 50 KRW 100 KRW 500 Total

Machine Games

Video Machine 68 19 512 16 615

Reel Machine - - 185 160 345

10 | 1110KANGWON LAND CASINO

CASINO

1212

Despite internal and external business conditions such as the fierce competition in the Asian casino industry, which includes those in Singapore and Macau and the gambling industry’s tighter regulatory environment, in 2010, Kangwon Land’s casino business sales rose 9% year-on-year to KRW 1,255.0 billion in sales, accounting for 95.5% of total sales. The bulk of the sales came from the mass floor sector – sales from slot machines and tables.

Generally, the company enjoyed stronger sales thanks to the rise in the hold percentage, the expansion of a casino game table seat reservation system, and an unoccupied slot machine seat monitoring system that elevated the turnover rates. Despite the strengthening of policies restricting admission to casinos beginning in June 2009, the number of casino visitors reached 3.09 million, an increase of 1.4% due to greater convenience in the casino and the stronger brand power of High1 Resort.

Installation of the World’s First “Casino Variance Zero System”: Precise Computation System in the Casino

In the past, there were some weak points in Kangwon Land’s super-vision of employees handling cash. In response, Kangwon Land built the world’s first precise Casino Variance Zero System that compels dealers to enter the amount of cash collected into a computer network and the data is automatically recorded, thus preventing employee theft by obtaining an accu-rate gauge of cash flows. No wrongdoing can occur as the company can com-pare the amount of money that a dealer enters with the total amount of money that the count room takes in. The company plans to computerize all these pro-cesses by installing ATMs at all tables. This new system, which was developed in-house, not only realizes real-time cash flow checks but also ensures the transparency and objectiveness of the casino business.


50.5% 1

8.0%

2

7.0%

4.5%

Sales Portion

2010

� General Table

� VIP Table

� Slot Games

� Non-Casino

12 | 1312

At the same time, for the prevention of irregularities, we have imple-mented diverse, systematic improvements such as an employee career man-agement system, accident prevention training, the replacement of a security monitor system and the prohibition of the use of checks and high-priced chips in the mass floor sector.

Taking the Lead in the Development of a Sound Leisure Culture

It is crucial to satisfy customers both mentally and physically on the basis of the pleasure of playing games. Accordingly, high-quality service by employees can have a significant impact on customer satisfaction. Kangwon Land endeavors to cater to customer needs and create customer satisfaction not only through the sophisticated and professional skills of dealers but also through the excellent services of employees.

Kangwon Land plans to secure international competitiveness through a resort-type complex, which combines a casino, a convention center, and shopping and entertainment facilities — all with a view to growing into Asia’s best four-season integrated family resort. Furthermore, with an eye toward promoting the casino-resort as a sound leisure culture, we will push creative change and innovation measures such as environmental enhance-ment projects to provide greater convenience for customers and an improved management system.

KANGWON LAND CASINO

1414

HoteLs& condos


The hotel and tourism industries are future growth engines. Countries around the world are strategically promoting these industries. Given the higher educa-tional, intellectual and income levels around the world, modern societies have more interest in travel and leisure products. These sectors are steadily grow-ing along with a wide array of cultural activities such as tourism and sports-related travel and activities. Hotels are not simply a luxury industry, but are diversifying their functions to a multitude of areas with internationalization, popularization and variation.

In addition, they serve a public function as spaces for the economic, cul-tural, artistic and communication activities of nations and communities. The Korean government is geared towards implementing policies that will help develop Korea into the center of Northeast Asia’s tourism industry. These poli-cies include “C-Korea 2010,” an initiative to translate the cultural and sports sectors, including the tourism industry, into a new growth-engine industry. Accordingly, the hotel industry is expected to grow steadily with the rise in the number of tourists and the government’s greater interest.

Kangwon Land announced “High1 Resort” as its new corporate identity and began making full-scale changes to its image as an integrated resort on June 28, 2007.

High1 symbolizes Korea’s biggest resort, which commands a stunning view of natural mountainous landscape and the nation’s best premium-class resort. People visit High1 Resort to escape the hot and humid weather in summer and to enjoy skiing — not on artificial snow — but on natural snow as the region boasts the most snow in Korea; this environment has lead to a steady increase in the number of visitors to the hotels and condominiums. The Kangwon Land Convention Hotel will also serve as a venue for holding the 2012 FIS (International Ski Federation) Congress for the first time in Asia in May 2012. Kangwon Land is expanding the hotel in order to preemptively respond to the global MICE industry and broaden the customer base.

In addition, the company is making an all-out effort to build a world-class resort that can accommodate a wide variety of international events in its vari-ous entertainment and leisure facilities. In terms of sales, we will fulfill our responsibility as a family- and stay-oriented cultural resort by attracting larger groups of tourists.

Increased Sales of Hotels and Condos

Kangwon Land Hotel and High1 Hotel are a five-star and a four-star hotel, respectively. The two have a combined total of 674 rooms. Kangwon Land plans to operate 924 rooms, an increase of 250 rooms after the opening

Kangwon Land has various hotels

and condominiums which cater to

customer needs. We have elevated the

comfort and dignity of customers’ lives

by offering elegant restaurants and

lounges in a natural setting.

ROOMS TEAM Bo-young, Kim

14 | 1514HOTELS & CONDOS

HotelS & CondoS


of Kangwon Land Convention Hotel in the second half of 2011. The company resolved the peak season room shortage problem by opening a condominium complex with about 500 rooms, securing a total of 903 rooms in December 2010. In 2010, the sales of the hotel and condo business reached KRW 20.3 bil-lion and KRW 13.4 billion, respectively. High1 condominium complexes posted an occupancy rate of 60%, an all-time high, thanks to the stronger brand power of High1 Ski Resort.

◆ Kangwon Land Hotel Kangwon Land Hotel is able to meet the diverse needs of its guests, offering a wide selection of dishes, entertainment, and business services as the only super-deluxe hotel in the Gangwon region. This hotel has 477 rooms and offers a variety of rooms at different price points, from standard rooms to quality-service presidential suites. We will maximize customer satisfaction through elegance and convenience as a relaxing and cozy five-star hotel.

◆ Convention Hotel The construction of Convention Hotel is scheduled to be completed in July 2011. The 22-story convention-oriented hotel will have a total floor area of 47,806.12㎡, 250 rooms, a 1,900-seat convention hall and a 550-seat banquet hall as well as event halls, a briefing room and a fitness center. Thanks to its elegant and competitive convention facilities, Convention Hotel will be able to promote its MICE business and play host to more diverse events, thereby increasing the occupancy rate on weekdays. At the same time, Convention Hotel will host the “2012 FIS (International Ski Federation) Congress” in 2012 for the first time in Asia.

Hotel & Condo Occupancy Rates

� High1 Hotel

� Kangwon Land Hotel

� Condominiums

2009 2010

54%

65%

50%

56%

65%

60%

16 | 1716

◆ High1 Hotel High1 Hotel, located 1,100m above sea level, overlooks High1 C.C. and has 197 rooms. High1 Hotel boasts a luxurious interior design and unmatched facilities. To cater to diverse customer needs, the hotel provides a wide range of rooms from the royal suite to the standard room. Guests can enjoy top-notch service in a natural setting. Guests can enjoy playing golf in the picturesque outdoors or make use of the hotel’s capacious interior to relax, host a party, or conduct business.

◆ Mountain Condominium Mountain Condominium features a duplex structure for families, a wide space, differentiated luxury rooms with marble and wooden floors and “the Haneulsam” outdoor spa and ski schools. The condominium complex has a total of 437 separate condos with the addition of 157 luxury penthouse-concept condominiums in 2010.

◆ Valley Condominium Valley Condominium is located nearest to the ski slopes and has 123 rooms; because of this, it is very popular with our younger guests and groups. The condo complex features comfortable economy rooms and a wide variety of exciting entertainment facilities for the enjoyment of visitors.

◆ Hill Condominium Kangwon Land completed the construction of seven condominium buildings on a hill with 343 rooms at the end of 2010. Hill Condominium fea-tures a trendy interior and commands a fine view, and offers various room types for budget travelers. Its facilities include luxury condos for families, an elegant lounge and bar, a kids’ playroom, event halls, a small party hall, High1 Academy, etc.

HOTELS & CONDOS

1818

HigH1 sKi resort


High1 Ski Resort has an exciting giant slalom course, a racing gate and a mogul slope approved by the FIS. Terrain Park of Apollo 1 Slope has Big Air Jump and Half Pipe Courses for snowboarders who desire more active winter sports. In addition, High1 Ski Resort stays open until the end of March thanks to its high altitude and geographical characteristics. All facilities within the ski resort boast tasteful and environmentally friendly spaces which are harmo-nized with the natural environment.

In 2010, High1 Ski Resort posted KRW 20.3 billion in sales thanks to changes in charges, an increase in outdoor billboards, partnerships with credit card com-panies, increased sales of season lockers and a rise in advanced season ticket sales on the back of stronger brand power.

Ranking First in Customer Satisfaction for Two Consecutive Years

High1 Ski Resort ranked first in a customer satisfaction survey con-ducted by the Korea Management Association Consultants for two years in a row. High1 Ski Resort operates not only online channels such as a homepage or e-mail service, but also offline channels such as telephone, fax, meeting cus-tomers face-to-face and the “voice of customers (VOC)” system for dealing with questions or complaints from customers. The company operates the VOC sys-tem under the business philosophy that “80% of service innovation starts from the voices of customers.” Therefore, the ski resort could enjoy the honor of being selected as the first-ranked ski resort in only four years after its opening.

Most Preferred Ski Resort for Four Years Running

High1 Ski Resort undertook diversified efforts to be reborn as the best ski resort in Korea by reflecting customer needs in 2010.

Since its opening, High1 Ski Resort has been running an advanced radio frequency identification (RFID) system for its gondola and lift services. High1 Resort is the only ski resort in Korea which runs three gondola sys-tems. As a result of the efforts to make the ski resort safer, slope-related accidents dropped by roughly 20% from the year before. High1 Ski Resort was picked by customers as the most preferred ski resort for four years in a row. Furthermore, we have expanded convenience facilities within the ski resort from six to 12 and planted 68 species of wildflowers on slopes in an effort to promote High1 Ski Resort as a year-round integrated resort and at the same time, offer a new scenic place to customers during the off-season.

A ski resort is a big symbol of winter to

everyone. High1 Ski Resort, a world-

class ski resort with advanced facilities,

offers excitement and joy to skiers

and snowboarders who want to enjoy

winter.

LEISURE OPERATING TEAMJong-cheol, Joung

18 | 1918HIGH1 SKI RESORT

2020

Taking the Initiative in Advancing Ski Resorts with Electronic Cards

High1 Ski Resort has recorded many firsts in the domestic ski resort industry. It has maintained the lead in advancing domestic ski resorts by intro-ducing new facilities, which have garnered rave reviews from skiers.

Since its opening at the end of 2006, High1 Ski Resort has introduced a number of new facilities and systems – electronic card-type lift passes (RFID system), the RPD (Rope Position Detector), a circulating gondola route, a mobile application and parking within all lift stations. Kangwon Land is the first Korean ski resort with an advanced RFID system to make using a lift platform more convenient. A family, regardless of their skiing levels, rides on a strong aluminum gondola, rides to the top and then moves to their hotel or condo-minium, which was previously impossible in Korea.

High1 Ski Resort has many firsts in terms of safety devices. When a lift is shaken by wind or breaks away from the route, the RPD (Rope Position Detector) system detects it with an electronic sensor, slows down the lift and prepares safety measures immediately.

In December of 2010, the company also launched a mobile applica-tion in step with the new era of smartphones. To date, about 16,000 people have installed the application and are able to monitor webcams while skiing. They also can check the number of skiers at lift platforms, move to less con-gested lift platforms and determine their location to meet friends via their smartphones.


Sales of the SKI Business (KRW Billion)

2008 2009 2010

17.1

17.8

20.3

20 | 2120HIGH1 SKI RESORT

Korea’s Largest Terrain Park

High1 Terrain Park the largest terrain park in Korea. At present, the company runs a novice, an intermediate, a half pipe and an advanced ski course.

For safety, High1 Terrain Park divided the park into two sections: the Green Terrain Park for novices and intermediate skiers and the Black Terrain Park for advanced skiers. The park operates the Park Zone Pass System where skiers receive exclusive tickets for their safety.

For Successful 2012 FIS Congress

Kangwon Land was awarded the right to host the 2012 FIS Congress for the first time in Asia. The construction of Convention Hotel is scheduled to be completed in the second half of 2011. Convention Hotel will serve as the venue of the 2012 FIS Congress. These efforts show that Kangwon Land is also concentrating on the MICE industry to secure more diverse customers.

2222

HigH1 c.c.


Opened in 2005, High1 C.C. public golf course is located 1,137m above sea level. The golf course features a 72-par (7,109 yards) 6,583m-long course with 18 holes. High1 C.C. is perfectly harmonized the exquisite natural scenery of the highlands and its course layout. It offers unique levels of difficulty by hole and course as it is a mountainous course that enjoys less air resistance. Even in summer, the temperature rarely exceeds 25 degrees Celsius, so visitors can enjoy teeing off in ideal weather conditions.

One of Korea’s Finest Golf Courses in 2010

High1 C.C. recorded the highest marks regarding the condition of its course and its management with strong scores for employees’ services. In 2008, Seoul Economic Golf Magazine included the golf course in the list of Korea’s ten best golf courses. The magazine selected the golf course as one of Korea’s Five Best Public Golf Courses in 2010 for two years in a row.

High1 Country Club boasts the perfect

harmony of a beautiful landscape

with a spectacular course layout and

provides customers with the finest

services in Korea.

LEISURE OPERATING TEAM Dong-jin, Kim

22 | 2322HIGH1 C.C.

2424

2010 High1 Resort Cup SBS Charity Ladies’ Open

In August, 2010, Kangwon Land successfully hosted the “2010 High1 Resort Cup SBS Charity Ladies’ Open” which shows a new direction for Korean golf tournaments for three years running since 2008. This prestigious com-petition with the most prize money in Korea attracts the participation of both domestic and overseas top-ranked players including golfers from the LPGA and KLPGA. Furthermore, it serves as a significant contributor to the develop-ment of women’s golf thanks to its excellent management systems. Golfers donate a portion of the prize money to social welfare organizations, a first in Korea, making this golf tournament all the more special. We will endeavor to make this golf tournament into a major golf event that will lead Korea’s golf culture. Also, by holding diverse events such as sales of private collections and pro-ams to promote the participation in charity activities by pro golfers and the gallery, we are opening a new chapter in popu-larizing golf in Korea.

Creating Greater Customer Satisfaction

In 2011, Kangwon Land's High1 C.C. will expand its own special-ized services on the basis of scientific golf course management to maximize customized customer services, enhance the professional management of employees in order to retain its reputation as one of Korea’s top-five public golf courses. The company will spare no efforts in its drive to lay a solid foundation to become the nation’s best golf course.


Sales of High1 C.C. (KRW Billion)

2008 2009 2010

3.6

4.4

4.6

24 | 2524

Efforts to Stimulate the Local and National Economy

Kangwon Land is the biggest company in Gangwon Province. The company posts the province’s most significant sales and pays the highest local tax. Kangwon Land contributes 30% or more of its sales as part of the national tax or other funds to stimulate the national and local economy. Most of all, we create jobs for local residents – about 4,000 jobs in total. Among the jobs, about 70% went to residents of Gangwon Province.

In addition, we have included 23 companies such as Kangwon Nambu Jumin Co., Ltd. as our outsourcing partners in a bid to promote local industries such as security, cleaning and facility management. It is estimated that Kangwon Land creates direct and indirect annual economic effects valued at more than three trillion won in areas such as production, income and added value.

As the resort facilities (a casino, hotels, condos, a golf course and a ski resort) of the early master plan are all operating, Kangwon Land is pushing forward with a new development strategy to achieve the goal of its establish-ment, which include creating future growth engines and the balanced devel-opment of the abandoned mine area. The company is exerting itself to push projects and generate profits in a more stable manner by founding three sub-sidiaries such as High1 Entertainment, High1 Motor Sports Family Resort, and High1 Switch Back Resort with a view to going ahead with five locally suitable development projects such as E-City, Motor Sports Family Resort, Switch Back Resort, Coal Mining Tourist Village and the High1 Complex Town.

Nurturing New Businesses in the Abandoned Mine Areas

Kangwon Land helped establish new corporations outside of the casino business which have filled the economic gap that was created when the region’s mines were abandoned. This was carried out in consideration of the purpose of the “Special Law on Support for Development of Abandoned Mine Areas.” This move is intended to help abandoned mine areas such as Gangwon Province, Munkyeong of North Gyeongsang Province and Boryeong of South Chungcheong Province get on their feet economically and create jobs for them in cooperation with Mine Reclamation Corporation and local governments. Moreover, in order to realize one of the goals of its establishment, the company is helping revitalize the economy of the abandoned mine area by giving con-struction orders to local companies, purchasing local products and engaging in other social contribution activities.

OTHERS

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ENG

E FO

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GRO

WTH

26 | 2726

HOTEL MANAGEMENT TEAM Seul-bum, Kim

Kangwon Land is preparing for both

quantitative and qualitative growth. We

managed the organization with fewer

employees than the previous year and

raised our managerial efficiency despite

expanded business sites. Therefore, we

chalked up an operating profit margin of

43.5%, one of the highest levels in Korea.

wHat are tHe resuLts of Kangwon Land’s steady management innovation activities?

CORPORATE VALUES

2828

management eFFiciency


Ten years after Kangwon Land opened Korea’s only casino facility open to Korean nationals, Kangwon Land is now a truly premium resort complex boasting deluxe hotels and condominiums, a first-rate golf course and world-class ski slopes. In particular, in 2010, the company put its utmost efforts into reinforcing internal competitiveness by defining the blueprint for its Vision 2012 of “reaching a milestone of seven million visitors.”

Kangwon Land believes that it can build strong future competitiveness with more sophisticated systems and the qualitative growth of its human resources. The company set reinforcing a resort-specialized management system and securing global competitiveness through the development of top-notch human resources. Kangwon Land also stepped up its efforts to strengthen its accident prevention system and secure transparency in casino operations. In addition, the company widened the scope of its gambling addiction prevention activi-ties and corporate social responsibilities. Accordingly, the company expanded access to domestic and foreign customers and reinforced the specialties of internal human resources and their differentiated services.

Contributing to Increasing Sales by Revitalizing an “In-House Suggestion System”

Kangwon Land will benefit from cost reduction and profit generation by imple-menting systems to resolve any pending issues with its internal capabilities. To promote internal suggestions, Kangwon Land is strengthening its reward sys-tem for suggestions, offering education programs to reviewers and those who make useful suggestions, nurturing leaders in the suggestion program and improving the suggestion system.

By putting such measures to practice, the company has succeeded in reduc-ing costs, improving revenues and has also bolstered its on-site improvement capability by accommodating creative suggestions.

Introduction of a Sustainable Management System and Publication of a Sustainability Report

Kangwon Land has been making efforts to realize sustainable growth with trust and cooperation, creating value for co-prosperity with shareholders, cus-tomers, partners, employees and communities through steady management innovation and transparent management activities. The company will draw up plans to introduce a companywide sustainable management system for eco-nomic, social and environmental issues in order to realize a more systematic corporate social responsibility-based management program in 2011.

28 | 2928

Kangwon Land plans to secure enough competitiveness for sustainable management. To this end, the company will devote itself to improving service response systems, maximizing sales power through integrated marketing and customer attracting capabilities by building a luxury brand image. Moreover, we will put forth more efforts for the purpose of increasing growth potential for seven million customers and building a four-season integrated family resort by establishing a quality-oriented management system.

MANAGEMENT EFFICIENCY

In addition, the company published the 2010 Sustainability Report, the first sustainability report in its history, by analyzing various management performances in all sectors. We won the Prize of the Minister of Strategy and Finance at the 2010 Korea Sustainable Management Conference held by the Korea Economic Daily in recognition of our achievements. Going forward, Kangwon Land will continue to create sustainable future value by concentrating its energy on new growth platforms, green growth and community-friend-ly social contributions for sustainable management.

[ Introduction Schedule ]

Strengthening the Specialties of Human Resources

In order to solidify a resort-specialized management system, Kangwon Land advanced its management system by systemizing mar-keting service activities through service standardization and revising the system and regulations. We considerably improved the casino management system through a surveillance monitor system with a view to reinforcing the internal accident prevention system. We also established an assistant manager system for increased efficiency in personnel management.

[ Service Differentiation ]

Main Issue Solution

Operate a system to maintain a reasonable number of customers in casino

Ensure customers’ safety and form a sound environment in the casino

Limit the number of customers in the casino to 7,000 at any one time

World’s most precise “Casino Variance Zero System”

Prevent financial shenanigans such as employee embezzlement

Build an innovative, precise casino variance zero system and encourage employees to work in an ethical manner

• Enter the global index and become a sector leader

• Lay the social foundation for being a great company

• Gain trust from the global market and cementing the base for market development as a leading global company

Goals

Activities • Develop and implement our own ethical movement programs and reinforce ethical business performance

• Forge a bond of sympathy on green growth and develop in-company tasks.

• Advanced research on sustainable management index and the publish a report

• Announce the introduction of sustainable management

• Enter domestic and Asian indices

• Introduce evaluation indices of various public organizations and connecting indices with the evaluation of the organization

~2010 (Preparation)

2011~2014 (Execution)

2015~Stage

[PLAN FOR 2011]

Prepare for sustainable management

Enter sustainable management index

Full-scale execution of sustainable management

3030

etHical management


In 2010, Kangwon Land strived to grow steadily while cooperating with share-holders, customers, partners, employees and local communities by carrying out transparent business activities. In particular, the company pursued ethical management strategies to establish a solid base for the second foundation of the company by intensively pushing ethical management systems in consider-ation of the special situations of a company operating the casino business.

With internal self-purification activities, going back to basics and expanding social contribution activities for local communities as basic directions for ethi-cal management, we established a code of ethics for the company and employ-ees in order to fulfill our social responsibilities through righteous corporate activities while seeking mutual prosperity with customers and shareholders.

In addition, Kangwon Land launched the “High-Clean” campaign to practice one theme every six months with the aim of carrying out more ethically active management activities. This campaign aims at strengthening the power of its objectives through events and sharing cases by selecting everyday themes to practice through internal contests.

In 2010, we engaged in “the systematic waste control of company supplies” in July and “writing thank you letters to customers” in October. We selected model cases through a contest and awarded prizes to those who sent in model cases and made use of model cases as materials for ethical education.

30 | 3130ETHICAL MANAGEMENT

Ethical Management as a Key Part of Corporate Culture

In 2010, High1 Resort ordered managers to promote ethical awareness among employees in order to turn ethical awareness into a corporate culture. The company also tightened up rules to severely discipline employees who engage in unethical behavior regardless of position and informed all employees of its intent to strictly enforce the rules.

[ Ethical Management by Kangwon Land ]

Kangwon Land will reform the ethical awareness of employees and form a systematic base to allow ethical management to take root in the organization. Moreover, the company will do its utmost to create a transparent corporate image by practicing a theme-type ethical campaign and implementing a variety of ethical programs while steadily expanding the scope of its social responsibility activities as a state-run company.

[PLAN FOR 2011]

2002

• Organized sexual harassment counselors

2007

• Held a pledge event to promote ethical management practices by the casino division

2003

• Drafted up a basic plan for “clean contracts” for procurement and construction work

• Declaration of ethical management

2008

• Declaration of anti-corruption movement

• Held a signing ceremony for the adoption of the ethical management contract across all departments

• Execution of the compulsory participation system for social volunteer activities

• Published and distributed ethical management manual

2005

• Education on the prevention of sexual harassment in the workplace

• Declaration of clean management to eliminate bribery

2009

• Enterprise-wide promotional activities on ethical management (e-posters, Flash videos)

• Establishment of basic principles of conduct via inspection of workplace discipline and public activities

2006

• Signing of a transparency social agreement and the participation charter

• Signing of a clean workplace agreement with executives

2010

• Realized “Casino Variance Zero System” via a precise computation system

• Strengthened companywide ethical management

- High-Clean campaign - Crystallized High1 ethical

management programs

• Company intranet

• Homepage: produced a page for a reporting center for the public good

• Published a sustainability report

• Implemented cyber ethics education programs

3232

Hr management


Kangwon Land is stepping up its efforts to advance employee education through organizational re-structuring and an improved human resource man-agement system. The company is strengthening the competitiveness of its personnel by practicing the principles of rational and objective personnel man-agement and is striving to secure global competitiveness of its human resourc-es by rolling out a program to foster globally competitive human resources. The company also provides the motivation required for self-development by operating advanced welfare service systems and promoting a cooperative labor-management culture.

In 2010, the company increased the capabilities of its employees and expanded opportunities for self-development through a variety of study programs by running a job variation program and a leadership development course. At the same time, its efforts concentrated on creating a global talent pool with the establishment of a domestic and foreign degree course program.

Restructuring for Work Efficiency

Kangwon Land strives to develop and implement rational and transparent personnel management policies with a growing emphasis on human resource development and management. Accordingly, the company reviewed and improved systems such as establishing a retirement management system, revising the employee education and training guide and preparing a basis for the establishment of a study-abroad program. We achieved the highest work efficiency by maintaining a lean organization while completing the expansion of the condominium complex in 2010.

32 | 3332HR MANAGEMENT

Securing Global Competitiveness through Human Resource Development

Kangwon Land established its principles of personnel management by objectively checking on the efficiency of its personnel, educa-tion, labor-management and welfare systems with the aim of securing global competitiveness through human resource development. The company expanded academic programs such as participation in MBA programs online and abroad in order to reinforce the work-related capabilities of its employees. Kangwon Land also endeavored to develop its human resources, in sync with the global era, by introducing specialized personal education and global human resource development programs.

Furthermore, we laid the foundation for offering specialized services by business type by developing custom-made service courses in consideration of the characteristics of Kangwon Land. We are currently exerting ourselves to increase the capabilities of all employees by introducing smart-learning systems and expanding cyber-training centers.

Going forward, Kangwon Land will build a transparent and fair HR management system by establishing a rational personnel management system and by introducing an efficient human resource management structure. In particular, the company will secure global competitiveness and lay the foundation for growing into Asia’s leading four-season integrated family resort by advancing the management system and expanding the human resource infrastructure. To this end, we will promote a desirable cycle of human resources by introducing a new retirement system and endeavor to develop globally competitive human resources by expanding investment into overseas study programs and foreign language education. We will contribute to the success of the 2012 FIS Congress by nurturing human resources that are in line with global standards and actively introducing advanced IT-based new educational processes such as smart-learning. We plan to strengthen the capabilities of our human resources by enhancing and expanding ethical management education and leadership courses.

[PLAN FOR 2011]


Since its foundation, Kangwon Land has sought to maintain an ongoing dialog with the local community and pursue mutual prosperity through social contribution activities such as education, social welfare, art and culture, and many other forms of cooperation with the community. We were awarded the grand prize in the social contribution sector at the Company of Korea 2010 awards ceremony. We have also won the grand prize in the community development sector of the Social Contributions for three consecutive years since 2007.

social contriBUtions

WOULD YOU OUTLINE KANGWON LAND’S SOCIAL CONTRIBUTION ACTIVITIES IN 2010?

34 | 3534

Kangwon Land engaged in the casino and resort business in an effort to revitalize the economies of abandoned mine areas and to raise the competitiveness of the tourism industry of Korea in accordance with the Special Law on Support for Development of Abandoned Mine Areas. This year, the company marks its 13th anniversary. The company has been evaluated to have produced good results through its processes to play its role as a state-run company, in particular, through its various attempts to boost to the economies of the abandoned mine areas.

We have created jobs for local residents by hiring 70% of our employees and employees of partner firms from Gangwon Province and are steadily contributing to the development of the local community through diverse community-friendly business activities such as supporting local partners, purchasing local products and expanding the High1 Point System (High1 Resort card mileage system) in the area.

Moreover, we are taking the initiative in activating the economy of the southern part of Gangwon Province by gradually investing more than KRW 500 billion into local projects. We maintain our social contribution initiative by allocating a social contribution budget, which amounts to 2% of total sales or 5% of operating profits and promoting diverse social contribution activities in order to increase the welfare of marginalized people such as pneumoconiosis patients in the abandoned mine area.

Second Philanthropy Committee

In June 2010, Kangwon Land launched the second Philanthropy Committee in order to specialize social contribution activities after the first one was established in 2008. Achievements of the first committee include • starting local area-oriented projects such as educa-tion and revitalizing the local economy • expanding and executing the social contribution budget • improving employees’ active social contribution activities • enhancing the competitiveness of the Kangwon Land Welfare Foundation, which is focused on the welfare of the local community.

The second committee set a goal to be a major social contribution company on the basis of its past performances. Therefore, we nur-ture specialized core businesses through selection and focus, increase our social responsibilities and integrated functions of social con-tribution activities and expand our corporate value and sharing through social responsibility activities on the basis of win-win growth.

SOCIAL CONTRIBUTIONS

3636

Social Contribution Activity System for Sustainable Growth

The motto of Kangwon Land’s social contribution aims at reinforcing the capabilities and sustainable growth of the local community. The company founded the Kangwon Land Welfare Foundation by contributing KRW 20 billion in 2003 and launched the High1 Social Volunteer Group in April 2004. Its social contribution activities are led and conducted by the Social Contribution Committee, a local cooperation team, the High1 Social Volunteer Group, which is made up of 75 teams and the Kangwon Land Welfare Foundation. These are the results of our efforts at handling social contribution activities, securing the transparency of activities and building an integrated management system that conducts activities through lower units by establishing the direction and policies of various projects.

The social contribution projects of Kangwon Land are not one-time events; rather, they are planned from a long-term perspective to resolve the root problems of the community and the beneficiaries. With the help of social contribution consultation, Kangwon Land runs projects that reflect the needs of the local community and the characteristics of the company. We have supported social contribu-tion activities with approximately KRW 31.4 billion or 5.5% of our annual operating profits.

Summary of Social Contribution Activities

Kangwon Land’s social contribution activities consist of six sectors such as education and scholarship, art and culture, community revitalization, social service, local partnership and environmental protection and support for the physically challenged.

High1’s ties with marginalized towns in Gangwon Province embrace the local community. The education and scholarship program includes the Happy School project to give elementary school students of low-income families direct support for their school meals, provide fees to middle and high school students for field trips, and support school sports teams and the High1 Dream Scholarship. In the art and culture sector, the company donates running shoes to Uganda, Bangladesh and Cambodia in partnership with UNESCO Korea and runs a multicultural academy for multicultural families in Gangwon Province and abandoned mine areas. The Kangwon Land Welfare Foundation also supports pneumoconiosis treatment in the abandoned mine area, provides medical care for children, home improvement “hope” projects and furnishes support for various social welfare facilities.


Philanthropy CommitteeDate of Establishment

•Jun. 18, 2008

Amount of Donation Accumulated

•KRW 53.4 Billion

Main Business

•�Nurturing social companies (High1 Bakery, Book Start, Happy School), support for local festivals and local social groups and improving housing conditions

Kangwon Land Welfare FoundationDate of Establishment

•Oct. 4, 2003

Amount of Donation Accumulated

•KRW 29.7 Billion

Main Business

•�Support for pneumoconiosis treatment, children’s welfare, social welfare facilities and organizations

36 | 3736SOCIAL CONTRIBUTIONS

EDUCATIONAL PROJECT

This project supports self-study and overseas study for youths via the Happy School Contest, a happy learning environment, and a high-teen expedition.

CULTURE & ART

By participating in the “Best 2015 Educational Culture Contest” in 2008, Kangwon Land had an opportunity to get to know the coal mining area and change perceptions about sharing and recycling. In 2010, Kangwon Land again participated in the hope sharing project for youths and citizens via the Happy Shoes Sharing Festival, the Book Start for closed coal mining areas, corporate sponsorship programs, arts and culture events, the High1 Multicultural Support Projects and local cultural and sports festivals.

COMMUNITY REHABILITATION & WELFARE

In order to re-establish a virtuous cycle among local communities, restore a community identity and promote self-regeneration, Kangwon Land assisted various local community academies and the Art in the Village project. In particular, the company prepared advanced programs that encourage the voluntary participation of local residents after realizing that strengthening the capabilities of local residents critical to ensure for a bright future of the local community. Its ongoing evaluation and rectification processes for such projects have been evaluated as a model case for the nation.

We implemented the Hope Stepping Stone, Sharing Stepping Stone, and Future Stepping Stone projects for the welfare of the underprivileged class of the local community. We have also actively engaged in research and survey projects, as well as emergency relief and lunch box assistance events for the welfare of the closed mine area.

3838

Promoting a Sound Gaming Culture

On the global scene, many nations are fostering casinos as part of the gaming industry. But in Korea, casinos are tightly regulated due to the public’s negative view of casinos. Therefore, Kangwon Land takes an active posture about the policies of the Ministry of Culture and Sports, which is in charge of the casino business, and the National Gaming Control Commission (NGCC).

The company also perseveres in its efforts to minimize the negative effects of the gaming industry, enhance shareholder value and revitalize the local economy while tightening management regulations in order to establish a sound casino culture. In particular, its KLACC (Kangwon Land Addiction Care Center) endeavors to minimize the negative impact on society by actively tackling gambling addiction.


Ski Ski Jump Ski for the Physically Challenged Judo Ice Hockey

Date of Establishment June 2002 September 2009 October 2008 October 2007 September 2004

Number of People 7 5 6 3 28

Counseling on preventing gambling addictions and

diagnosing addictions

Treating gambling addicts with in-house

programs and specialized organizations

Psychiatric treatment with specialized hospitals

Providing travel assistance to those in need after gambling

Number of Cases 30,952 30,028 334 6,747

Others: Kangwon Land is performing such social contribution activities as managing professional judo, ski, and ice hockey teams, as well as a physically challenged ski team to support less popular sports and winter sports, which leads to the development of sports in Gangwon Province. In particular, we have conducted activities in order to strongly support Pyeongchang’s bid to host the 2018 Winter Olympic Games.

38 | 3938

Wining the Grand Prize at the “Company of Korea 2010 Ceremony”

High1 Resort won the grand prize in the social contribution sector at the “Company of Korea 2010 award” ceremony. Korea Customers’ Forum held this event, which awarded prizes to companies, organizations and local governments taking the lead in change and innovation in the economic and social sectors with outstanding management performances and social responsibility pro-grams. The prize winners are selected through a strict screening process including a survey of consumers and experts’ reviews.

High1 Resort’s honor of winning the grand prize was attributable to the company’s diversified efforts to contribute to the development of the community and fulfill its corporate social responsibilities while running a wide array of programs such as welfare for the under-privileged, support for multicultural families, improvement in the educational and cultural environments, environmental protection and the High1 Social Volunteer Group via the Philanthropy Committee and the Kangwon Land Welfare Foundation.

In 2011, Kangwon Land will continue its social contribution activities in cooperation with the Philanthropy Committee, the High1 Social Volunteer Group and the Kangwon Land Welfare Foundation on the foundation of various partnerships with domestic and foreign NGOs, local residents and local governments. The second committee will carry out community-friendly social contribution activities matching the status of Asia’s leading four-season integrated family resort on the basis of its past performances.

[PLAN FOR 2011]

SOCIAL CONTRIBUTIONS

4040

PER

FOR

MA

NC

E FO

R

SUST

AIN

ABI

LITY

40 | 4140

wHat does Kangwon Land do to ensure its sustainabLe growtH and deveLopment?

SUSTAINABLE PERFORMANCE

ROOMS TEAM Ji-hee, Jin

Kangwon Land should not only enhance

its corporate value as a listed company but

also achieve one of its goals to revitalize

the economy of the closed mining areas.

Accordingly, we will engage in low-cost

and high-efficiency management while

pursuing profitability and public purposes. In

addition, we will live up to the expectations

of shareholders by growing into Asia’s best

four-season integrated family resort.

4242

management’s DiscUssion & analysis


Executive Summary

Kangwon Land opened the nation’s only casino accessible to Korean nation-als in order to revitalize the economy of a closed mining area. Since then, the company has posted high profits based on its solid domestic customer base. Presently, the company is faced with a changing business environment as fierce competition in the casino industry develops in Asia. Nevertheless, the company’s employees and executives have risen to the challenge by steadily pushing innovation in order to realize strong profitability. As a result, Kangwon Land has developed into Asia’s one and only ski resort, golf and casino com-plex. The company is thus putting its utmost efforts into becoming Asia’s best four-season integrated resort for both Korean nationals and international visi-tors.

To make this happen, we have set short-term goals and built a strategic sys-tem around a long-term vision, elevated our profitability and actively expanded facilities through employees’ ceaseless innovation and efforts for quality-oriented management. Such efforts paid off handsomely as the company recorded its highest performance in 2010.

In 2010, Kangwon Land achieved sales of KRW 1,313.7 billion, up 8.9% com-pared with the year ended December 31, 2009, and recorded an operating prof-it and net profit of KRW 571.2 billion and KRW 421.8 billion, respectively. These two figures rose 22.8% and 8.1%, respectively, from the year ended December 31, 2009. The company’s total assets as of the year ended December 31, 2009 were valued at KRW 2,609.7 billion, up KRW 223.2 billion compared with the year ended December 31, 2009. ROE and ROA dipped from the year before but remained at a high level. ROE and ROA were 21.1% and 16.9%, respec-tively. This shows the company’s high profitability compared to interest rates in the market. The company’s robust profitability contributed to reinforcing its financial structure. The current ratio in the year ended December 31, 2010 stood at 224.0%, representing a 5.4%p increase compared with the year ended December 31, 2009, while the debt-to-equity ratio stood at 24.2%, down 2.1%p from the year ended December 31, 2009.

Going forward, Kangwon Land will concentrate on improving the company’s qualitative and quantitative growth by expanding sales while reducing costs. Moreover, we will do our utmost to ensure that our shareholders receive the highest possible returns.

42 | 4342

(KRW Billion)

(KRW Billion)

FY2010 FY2009Sales 1,313.7 1,206.7Cost of Sales 494.1 514.5Gross Profit 819.6 692.2Operating Profit 571.2 465.0Net Profit 421.8 390.0Total Assets 2,609.7 2,386.5Total Liabilities 508.6 496.8Total Shareholders’ Equity 2,101.1 1,889.7

(%)Net Profit Ratio (%) 32.1 32.3ROE 21.1 22.2ROA 16.9 17.5Current Ratio (%) 224.0 218.6Debt-to-Equity Ratio (%) 24.2 26.3

(Times)Total Assets Turnover 0.5 0.5 Fixed Assets Turnover 0.9 0.9

FY2010 FY2009YoY

Amount %Sales 1,313.7 1,206.7 107.0 8.9%Cost of Sales 494.1 514.5 -20.4 -4.0%Gross Profit 819.6 692.2 127.4 18.4%Gross Profit Ratio (%) 62.4% 57.4% 5.0%p

Selected Financial Data

Sales and Gross Profit

Revenue amounted to KRW 1,313.7 billion in 2010, up KRW 107.0 billion com-pared with the year ended December 31, 2009, as a result of the constant growth of the casino and resort businesses. Sales rose but the cost of goods sold fell. The cost of goods sold declined KRW 20.4 billion compared with the year ended December 31, 2009, a 4.0% decline. This is because the company incurred a one-time charge for an early employee retirement plan and com-pensation for the abolishment of a progressive stage system for severance pay in addition to regular wages in 2009, but not in 2010. Accordingly, gross profit amounted to KRW 819.6 billion, an increase of KRW 127.4 billion compared with the year ended December 31, 2009. The gross profit ratio stood at 62.4%, a very high level, representing a rise of 5.0%p.

MANAGEMENT’S DISCUSSION & ANALYSIS

Sales(KRW Billion)

2009 2010

1,20

6.7

1,31

3.7

Operating Profit(KRW Billion)

2009 2010

465.

0

571.

2

Net Profit(KRW Billion)

2009 2010

390.

0

421.

8


(KRW Billion)

FY2010 FY2009YoY

Amount %Casino 1,255.0 1,151.6 103.4 9.0%Resort 58.7 55.0 3.7 6.7%Total 1,313.7 1,206.7 107.0 8.9%

FY2010 FY2009 YoYGeneral Table 50.5% 50.5% -VIP Table 18.0% 20.8% -2.8%pSlot Machine 27.0% 24.2% 2.8%pOthers 4.5% 4.5% -

Sales Breakdown

Sales Portion

The casino’s sales reached KRW 1,255.0 billion in 2010, an increase of KRW 103.4 billion or 9.0% compared with the year ended December 31, 2009. This growth is attributable to the mass floor sector’s robust sales, in particular, slot machines. The resort’s sales totaled KRW 58.7 billion in 2010, up KRW 3.7 bil-lion or 6.7% year-on-year. This is because the golf resort and the ski resort’s sales rose year-on-year. Going forward, Kangwon Land will benefit from ris-ing sales in the casino and resort businesses by growing into Asia’s best four-season integrated family resort.

By sales type, slot machine sales displayed a rising trend during 2010. The sales portion of the slot machine business was 27.0% in 2010, a 2.8%p gain compared with the year ended December 31, 2009, while the sales portion of VIP tables was 18.0%, a 2.8%p decline from the year ended December 31, 2009. The sales portion of general tables remained virtually unchanged from the year ended December 31, 2009. The replacement of new slot machines and the installation of a system to monitor unoccupied seats contributed sig-nificantly to the sales growth of slot machines. Notably, the sales portion of general tables remained at a similar level to the figure of the previous year because of stronger table sales, the direct result of increased convenience for customers, which included marked improvements such as the introduction of a game table seat reservation system. But the sales portion of VIP tables tapered off as drops declined due to a decrease in the number of VIP visitors. The resort’s sales stood at 4.5% in 2010, unchanged from the previous year.


� General Table

� VIP Table

� Slot Games

� Non-Casino

Sales Breakdown

50.5% 18.0%

27.

0%

4

.5%

2010

44 | 4544

(KRW Billion)

(Thousand Visitors)

FY2010 FY2009YoY

Amount %Drop 6,314.0 6,531.4 -217.4 -3.3%Payment 5,060.7 5,377.6 -316.9 -5.9%Revenue 1,253.4 1,153.8 99.6 8.6%Hold (%) 19.9% 17.7% 2.2%p

FY2010 FY2009YoY

Visitors %Domestic 3,063 3,013 51 1.7%Foreign 28 34 -6 -17.6%Total 3,091 3,047 44 1.4%Daily visitors 8,469 8,348 121 1.4%Spending per visitor (KRW) 406,824 386,555 20,269 5.2%

Hold

Casino Visitors

Total drops in 2010 amounted to KRW 6,314.0 billion, a KRW 217.4 billion or 3.3% decline compared with the year ended December 31, 2009. Payments fell by KRW 316.9 billion or 5.9% year-on-year to KRW 5,060.7 billion. The decline in payments exceeded the decrease in drops. Accordingly, revenue grew by KRW 99.6 billion or 8.6% year-on-year to KRW 1,253.4 billion. Consequently, the hold percentage rose 2.2%p year-on-year to 19.9%.

In 2010, the number of visitors increased as in 2009. The number of visitors reached 3,091,000, a 44,000 or 1.4% increase from the year ended December 31, 2009. This is because the number of foreign visitors declined while the number of domestic visitors grew. The average number of daily visitors amounted to 8,469, a 121 increase from a year earlier. In addition, spending per visitor reached KRW 406,824, up KRW 20,269 or 5.2% compared with the year ended December 31, 2009. Accordingly, the greater number of visitors and level of spending per person were reflected as an increase in sales.

Hold(%)

2009 2010

17.7

19.9

Domestic Visitors(Thousand Persons)

2009 2010

3,01

3

3,06

3

Foreign Visitors(Thousand Persons)

2009 2010

34 28



(KRW Billion)

FY2010 FY2009YoY

Amount %SG&A Expenses 248.4 227.1 21.3 9.4%Abandoned Mine Area Development Fund

124.6 111.5 13.1 11.8%

Wages & Welfare 56.3 59.9 -3.6 -6.1%Advertising 23.0 17.6 5.4 30.4%Depreciation 10.7 9.6 1.1 10.9%Others 33.8 28.5 5.3 18.6%Operating Profit 571.2 465.0 106.2 22.8%Operating Profit Ratio (%) 43.5% 38.5% 5.0%p

SG&A Expenses and Operating Profit

In 2010, selling, general and administrative costs reached KRW 248.4 bil-lion, up KRW 21.3 billion or 9.4% from the year ended December 31, 2009. A detailed examination of the items in the account reveal that as pretax profits increased, the Abandoned Mine Area Development Fund rose to KRW 124.6 billion, growing KRW 13.1 billion or 11.8% year-on-year. Labor costs (salary, retirement pay, welfare expenses) reached KRW 56.3 billion, declining KRW 3.6 billion. This is because we paid out compensation due to the abolishment of the cumulative system. In 2010, labor costs dropped without any one-off fac-tors. As result, operating profit amounted to KRW 571.2 billion, up KRW 106.2 billion or 22.8% from the year ended December 31, 2009 and the operating profit ratio stood at an impressive 43.5%, a 5.0%p gain from the year ended December 31, 2009.


46 | 4746

(KRW Billion)

FY2010 FY2009YoY

Amount %Non-operating Income 55.1 67.9 -12.8 -18.8%

Interest Income 34.8 33.1 1.7 4.9%Gain on Disposal of Investment Securities

12.3 18.1 -5.8 -32.2%

Others 8.0 16.7 -8.7 -51.3%Non-operating Expense 70.7 24.0 46.7 194.7%

Donation 31.4 15.9 15.5 97.0%Impaired Loss on Investment Securities 15.0 0 15.0 N/A

Others 24.3 8.0 16.3 201.8%

Non-Operating Items

Because Kangwon Land does not depend heavily on loans, but instead invests in financial instruments, it is able to generate relatively high interest income. In 2010, non-operating income reached KRW 55.1 billion, down KRW 12.8 billion compared with the year ended December 31, 2009. Interest income was KRW 34.8 billion, up KRW 1.7 billion from year ended December 31, 2009, and gains on the disposal of investment securities amounted to KRW 12.3 billion, a KRW 5.8 billion year-on-year decline. In addition, miscellaneous gains declined from a year earlier; accordingly, non-operating income fell compared with the year ended December 31, 2009.

In 2010, non-operating expenses amounted to KRW 70.7 billion, a KRW 46.7billion increase compared with the year ended December 31, 2009. The expansion in non-operating expenses is attributable to an increase in dona-tions. Current-term donations reached KRW 31.4 billion, a KRW 15.5 billion rise compared with the year ended December 31, 2009. The increase in dona-tions is because company incurred costs for road and tunnel construction work for business facilities to assist local governments. In addition, a write-off of KRW 15.0 billion occurred from convertible securities, pushing up non-operat-ing expenses.

Non-Operating Income(KRW Billion)

2009 2010

67.9

55.1

Non-Operating Expense(KRW Billion)

2009 2010

24.0

70.7



(KRW Billion)

FY2010 FY2009YoY

Amount %Pretax Income 555.7 508.9 46.8 9.2%Income Tax 133.9 118.9 15.0 12.6%Effective Tax Ratio (%) 24.1% 23.4% 0.7%pNet Profit 421.8 390.0 31.8 8.1%Net Profit Ratio (%) 32.1% 32.3% -0.2%p

Income Tax & Net Profit

In 2010, pretax income reached KRW 555.7 billion, a KRW 46.8 billion increase compared with the year ended December 31, 2009. Income taxes jumped by KRW 15.0 billion to KRW 133.9 billion year-on-year on the back of increased profits.

The effective tax rate climbed 0.7%p year-on-year to 24.1% as the effective rate rose not because of temporary differences, but because of permanent differences stemming from the dissimilarity between K-GAAP and tax accounting.

In 2010, the company’s total assets totaled KRW 2,609.7 billion, an increase of KRW 223.2 billion or 9.4% compared with the year ended December 31, 2009. Cash equivalent assets and long-term investment securities decreased year-on-year but short-term financial instruments and equity-method accounted investments increased by similar amount from the year ended December 31, 2009. Tangible assets recorded a substantial increase compared with the previous term thanks to the opening of a new condominium complex. Meanwhile, the company’s total liabilities reached KRW 508.6 billion, an increase of KRW 11.8 billion compared with the year ended December 31, 2009, a similar level year-on-year. Total shareholders’ equity reached KRW 2,101.1 billion, a KRW 211.4 billion gain compared with the year ended December 31, 2009 as the company obtained about KRW 20 billion in treasury stocks and paid out approximately KRW 192.7 billion in dividends but generated KRW 421.8 billion in net profit.


(KRW Billion)

FY2010 FY2009YoY

Amount %Total Assets 2,609.7 2,386.5 223.2 9.4%Total Liabilities 508.6 496.8 11.8 2.4%Total Shareholders’ Equity 2,101.1 1,889.7 211.4 11.2%Debt Ratio (%) 24.2% 26.3% -2.1%p

Total Assets

Total Shareholders' Equity(KRW Billion)

Total Assets(KRW Billion)

2009 2010

2,38

6.5

2,60

9.7

2009 2010

1,88

9.7

2,10

1.1

48 | 4948

(KRW Billion)Working Capital

Current assets at the end of the current term amounted to KRW 1,105.9 billion, an increase of KRW 42.0 billion or 3.9% compared with the year ended December 31, 2009. This is because cash and cash equivalent assets fell by KRW110.2 billion year-on-year but short-term financial instruments grew by KRW 151.3 billion. Current liabilities amounted to KRW 493.6 billion, an increase of KRW 7.0 billion, slightly higher compared with the year ended December 31, 2009. Among current liabilities, accounts payable slid by KRW 39.7 billion year-on-year but accrued expenses and income tax payable jumped KRW 23.2 billion and KRW 25.4 billion, respectively. The increase in current assets exceeded the increase in current liabilities. Therefore, the current ratio rose 5.4%p to 224.0% from the year before, revealing a very stable financial structure.


FY2010 FY2009YoY

Amount %Current Assets 1,105.9 1,063.9 42.0 3.9%

Cash & Cash Equivalents 36.6 146.8 -110.2 -75.1%Short-term Financial Instruments 796.3 645.0 151.3 23.5%Short-term Investment Securities 144.4 156.1 -11.7 -7.5%Others 128.6 116.0 12.6 10.9%

Current Liabilities 493.6 486.6 7.0 1.4%Accounts and Notes Payable 83.2 122.9 -39.7 -32.3%Accrued Expenses 290.0 266.8 23.2 8.7%Income Tax Payable 100.6 75.2 25.4 33.8%Others 19.8 21.7 -1.9 -8.6%

Current Ratio (%) 224.0% 218.6% 5.4%p


(KRW Billion)Non-Current Asset Analysis

As of end-2010, non-current assets reached KRW 1,503.9 billion, an increase of KRW 181.3 billion compared with the year ended December 31, 2009. Investment assets fell by KRW 14.5 billion to KRW 251.1 billion due to a decline in long-term investment securities. Tangible assets added up to KRW 1,235.1 billion, an increase of KRW 191.3 billion compared with the year ended December 31, 2009.


FY2010 FY2009YoY

Amount %Investment Assets 251.1 265.6 -14.5 -5.5%

Long-term Investment Securities 69.5 131.2 -61.7 -47.1%Equity-method Accounted Investments 149.7 101.2 48.5 47.9%Long-term Loans Receivable 32.0 33.2 -1.2 -3.7%

Tangible Assets 1,235.1 1,043.8 191.3 18.3%Intangible Assets 0.1 0.1 - -Others 17.6 13.1 4.5 33.9%Total 1,503.9 1,322.6 181.3 13.7%

50 | 5150

(KRW Billion)

(KRW)

FY2010 FY2009YoY

Amount %Capital 107.0 107.0 - -Capital Surplus 127.9 127.9 - -Capital Adjustment -145.7 -125.7 -20.0 16.0%Accumulated Other Comprehensive Income -0.6 -2.9 2.3 N/A

Retained Earnings 2,012.5 1,783.4 229.1 12.8%Total Shareholders’ Equity 2,101.1 1,889.7 211.4 11.2%

FY2010 FY2009YoY

Amount %Dividend per Share (KRW) 970 940 30 3.2%Dividend Payout Ratio (%) 46.9% 49.4% -2.5%pDividend Yield Ratio (%) 3.5% 5.7% -2.2%p

Shareholders’ Equity

Dividend

As of end-2010, total shareholders’ equity reached KRW 2,101.1 billion, an increase of KRW 211.4 billion or 11.2% compared with the year ended December 31, 2009. When compared with the year ended December 31, 2009, there was no change in the amount of capital and the capital surplus. The acquisition of treasury stocks, however, caused a KRW 20 billion decline in cap-ital adjustment. Accumulated other comprehensive income increased by KRW 2.3 billion as the loss assessment for available-for-sale securities fell. Retained earnings amounted to current net profit, which exceeded dividend payments made during in 2009. Thus, retaining earnings totaled KRW 2,012.5 billion, a KRW 229.1 billion gain compared with the year ended December 31, 2009.

According to the Shareholder Return Maximization Policy, Kangwon Land offers the highest possible returns within a limit that does not constrain the company’s growth potential. Thus, the dividend for the current term was set at KRW 970 per share, an increase of KRW 30 compared with the year ended December 31, 2009. The dividend payout ratio was 46.9%, in-line with historical levels while the dividend yield ratio based on the year-end share price was 3.5% because company’s stock price rose to a valuation level that is closer to its intrinsic value.

Dividend per Share(KRW)


2009 2010

940

970


(KRW Billion)

Cash Flow Analysis

Cash raised from the current term operating activities amounted to KRW 491.4 billion. This was possible because cash was procured from the current term net profit of KRW 421.8 billion, with depreciation expenses of KRW 59.4 bil-lion. Thus, the KRW 389.0 billion obtained from operating activities was used for investments, while KRW 212.7 billion was used for financing activities. As a result, cash decreased by KRW 200.2 billion year-on-year. The decline in cash was due to the maturity of certain financial instruments and does not mean there was any change in the amount of cash. As previously explained in “Working Capital,” the increase in short-term financial instruments surpassed the decline in cash while available funds expanded year-on-year. Most of the cash deployed for investments was used for the acquisition of tangible assets, while the surplus funds were invested in short-term financial instruments. The cash utilized for the company’s financial activities was to pay out dividends and acquire treasury stocks. No cash was used for financial activities. This means that the company is operating without taking on additional debt following the repayment of short-term borrowings last year.


FY2010 FY2009YoY

Amount %Cash Flows from Operating Activities 491.4 491.9 -0.5 -0.1%Cash Flows from Investing Activities -389.0 -219.0 -170.0 N/ACash Flows from Financing Activities -212.7 -183.1 -29.6 N/ANet Increase in Cash and Cash Equivalents -110.3 89.9 -200.2 N/A

52 | 5352

FINANCIALSTATEMENTS

54 Independent Auditors’ Report

55 Non-Consolidated Statements of Financial Position

56 Non-Consolidated Statements of Income

57 Non-Consolidated Statements of Appropriation of

Retained Earnings

58 Non-Consolidated Statements of Changes in Equity

59 Non-Consolidated Statements of Cash Flows

61 Notes to Non-Consolidated Financial Statements

90 Independent Accountants’ Review Report on Internal

Accounting Control System


inDepenDent aUDitors’ report

Based on a report originally issued in Korean

The Board of Directors and StockholdersKangwon Land, lnc.:

We have audited the accompanying non-consolidated statements of financial position of Kangwon Land, lnc. (the “Company”) as of

December 31, 2010 and 2009, and the related non-consolidated statements of income, appropriation of retained earnings, changes in

equity and cash flows for the years then ended. These non-consolidated financial statements are the responsibility of the Company’s

management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well

as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial

position of Kangwon Land, lnc. as of December 31, 2010 and 2009 and the results of its operations, the appropriation of its retained

earnings, the changes in its equity and its cash flows for the years then ended in conformity with accounting principles generally

accepted in the Republic of Korea.

Seoul, Korea

March 3, 2011

This report is effective as of March 3, 2011, 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 financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

54 | 5554FINANCIAL STATEMENTS

non-consoliDateD statements oF Financial position

As of December 31, 2010 and 2009

Note 2010 2009Assets

Cash and cash equivalents 4, 8 ₩ 36,554,023 ₩ 146,805,822Short-term financial instruments 4 796,322,749 645,000,000Short-term investment securities 5 144,429,268 156,092,876Accounts and notes receivable - trade, less allowance for doubtful accounts of ₩677,312 in 2010 and ₩652,196 in 2009 3,733,497 1,870,742Accrued income 12,689,544 10,929,053Prepaid value-added tax 6,279,985 1,810,502Current deferred income tax assets 18 92,151,064 90,644,220Inventories 1,972,456 1,802,090Other current assets 11,755,496 8,935,524

Total current assets 1,105,888,082 1,063,890,829Long-term investment securities 5 69,450,940 131,169,831Long-term loans receivable 31,951,031 33,191,518Equity-method accounted investments 6 149,659,357 101,192,433Property and equipment, net 7, 8, 25 1,235,106,669 1,043,829,710Intangible assets, net 9, 25 84,577 117,641Non-current deferred tax assets 18 14,320,615 9,827,869Other non-current assets 3,283,675 3,315,568

Total non-current assets 1,503,856,864 1,322,644,570Total assets ₩ 2,609,744,946 ₩ 2,386,535,399

LiabilitiesAccounts and notes payable - trade ₩ 1,767,142 ₩ 1,660,642Accounts and notes payable - other 83,190,446 122,881,075Accrued expenses 13 289,977,476 266,783,742Income tax payable 100,575,902 75,166,039Other current liabilities 18,116,110 20,084,034

Total current liabilities 493,627,076 486,575,532Provision for retirement and severance benefits 12 7,597,652 5,529,255Other non-current liabilities 7,392,744 4,715,957

Total non-current liabilities 14,990,396 10,245,212Total liabilities 508,617,472 496,820,744

Stockholders’ equityCommon stock of ₩500 par value Authorized – 1,000,000,000 shares Issued and outstanding - 213,940,500 shares in 2010 and 2009 1, 14 106,970,250 106,970,250Capital surplus 127,928,535 127,928,535Capital adjustments 15 (145,706,818) (125,659,500)Accumulated other comprehensive income (580,761) (2,940,564)Retained earnings 2,012,516,268 1,783,415,934

Total stockholders’ equity 16 2,101,127,474 1,889,714,655Total liabilities and stockholders’ equity ₩ 2,609,744,946 ₩ 2,386,535,399

(In thousands of Won, except share data)

See accompanying notes to financial statements.


NoN-coNsolidated statemeNts of iNcome

For the years ended December 31, 2010 and 2009

Note 2010 2009Revenue 25 ₩ 1,313,682,568 ₩ 1,206,658,712Cost of sales 13 494,108,466 514,498,275

Gross profit 819,574,102 692,160,437Selling, general and administrative expenses 13, 17 248,363,776 227,128,915

Operating income 25 571,210,326 465,031,522Interest income 5 34,752,019 33,117,374Interest expense - (14,261)Gain on disposal of investment securities, net 12,248,284 18,088,435Gain on foreign currency transactions, net - 513Equity in net loss of Equity-method accounted investees 6 (7,861,983) (309,724)Gain (loss) on disposal of Equity-method accounted investments, net 6 31,829 (12,544)Loss on disposal of property and equipment, net (1,336,699) (590,489)Dividend income 1,693,048 2,921,535Impairment losses on investment securities (15,000,000) -Donations (31,418,005) (15,946,614)Gain on valuation of trading securities 3,127,930 4,622,490Other (9,943,037) -Miscellaneous gains (loss), net (1,820,672) 2,008,612

Other income (expense) (15,527,286) 43,885,327Income before income taxes 555,683,040 508,916,849

Income taxes 18 133,898,378 118,916,396Net income ₩ 421,784,662 ₩ 390,000,453Earnings per share

Basic and diluted earnings per share 19 ₩ 2,066 ₩ 1,902


(In thousands of Won, except earnings per share)

56 | 5756

NoN-coNsolidated statemeNts of appropriatioN of retaiNed earNiNgs


Note 2010 2009Unappropriated retained earnings

Balance at beginning of year ₩ 172,962 ₩ 856,837Net income 421,784,662 390,000,453

Balance at end of year before appropriation 421,957,624 390,857,290

Appropriation of retained earnings Reserve for business expansion 224,000,000 198,000,000Dividends 20 197,685,503 192,684,328

Unappropriated retained earnings to be carried over to subsequent year ₩ 272,121 ₩ 172,962


(In thousands of Won)

Date of Appropriation for 2010: March 25, 2011Date of Appropriation for 2009: March 25, 2010

FINANCIAL STATEMENTS


NoN-coNsolidated statemeNts of chaNges iN equity


Note Common stock Capitalsurplus

Capitaladjustments

Accumulated other

comprehensive income

Retained earnings

Total stockholders’

equity

Balance at January 1, 2009 ₩ 106,970,250 127,928,535 (109,013,975) (36,416,514) 1,541,904,592 1,631,372,888Dividends - - - - (148,489,111) (148,489,111)Net income - - - - 390,000,453 390,000,453Acquisition of treasury stock - - (16,645,525) - - (16,645,525)Change in fair value of available-for-sale securities, net of tax - - - 33,475,950 - 33,475,950

Balance at December 31, 2009 ₩ 106,970,250 127,928,535 (125,659,500) (2,940,564) 1,783,415,934 1,889,714,655

Balance at January 1, 2010 106,970,250 127,928,535 (125,659,500) (2,940,564) 1,783,415,934 1,889,714,655Dividends 20 - - - - (192,684,328) (192,684,328)Net income - - - - 421,784,662 421,784,662Acquisition of treasury stock 15 - - (20,047,318) - - (20,047,318)Change in fair value of available-for-sale securities, net of tax - - - 2,408,725 - 2,408,725Adjustment of equity of Equity-method investee - - - (48,922) - (48,922)

Balance at December 31, 2010 ₩ 106,970,250 127,928,535 (145,706,818) (580,761) 2,012,516,268 2,101,127,474



58 | 5958

NoN-coNsolidated statemeNts of cash flows


2010 2009Cash flows from operating activities

Net income ₩ 421,784,662 ₩ 390,000,453Adjustments for:

Bad debt expenses for doubtful accounts 54,526 105,711Depreciation and amortization 59,413,244 56,600,158Provision for severance benefits 15,464,168 77,389,097Equity in net loss of Equity-method accounted investees 7,861,983 309,724Gain (loss) on disposal of Equity-method accounted investments, net (31,829) 12,544Loss on disposal of property and equipment, net 1,336,699 590,489Impairment losses on investment securities 15,000,000 -Gain on disposal of investment securities, net (12,248,284) (18,088,435)Gain on valuation of trading securities (3,127,930) (4,622,490)Other - 109,457

505,507,239 502,406,708Changes in assets and liabilities:

Accounts and notes receivable - trade (1,887,871) 1,627,904Accrued income (1,760,492) (717,126)Prepaid value-added tax (4,469,483) 848,031Current deferred income tax assets (1,400,109) (30,621,873)Other current assets (2,695,382) 11,200,918Inventories (170,366) (274,582)Non-current deferred income tax assets (5,266,424) 15,141,550Other non-current assets 50,310 (54,011)Accounts and notes payable - trade 106,500 (499,385)Accounts and notes payable - other (32,486,435) 69,132,187Accrued expenses 23,193,734 24,498,096Income taxes payable 25,409,863 (2,808,986)Other current liabilities (1,967,923) 10,840,028Severance insurance deposits 65,761,014 (12,423,165)Cumulative deposits with the National Pension Fund - 9,815Payment of severance benefits (79,156,784) (95,812,931)Other non-current liabilities 2,676,786 (546,343)

Net cash provided by operating activities ₩ 491,444,177 ₩ 491,946,835





NoN-coNsolidated statemeNts of cash flows, coNtiNued


2010 2009Cash flows from investing activities

Proceeds from disposal of short-term financial instruments ₩ 645,000,000 ₩ 515,000,000Proceeds from disposal of short-term investment securities 190,824,041 181,676,188Proceeds from disposal of non-current investment securities - 161,201,942Collection of long-term loans receivable 4,822,487 7,820,245Proceeds from guarantee deposits 21,582 1,655,368Proceeds from disposal of property and equipment 43,085 329,704Acquisition of short-term financial instruments (796,322,749) (850,000,000)Acquisition of short-term investment securities (113,730,000) (39,952,599)Acquisition of non-current investment securities (259,660) (10,034,895)Acquisition of Equity-method accounted investments (56,500,000) (16,513,350)Long-term loans granted (3,582,000) (5,163,500)Payment for guarantee deposits (40,000) (325,832)Acquisition of property and equipments (9,337,597) (27,588,099)Payment for construction-in-progress (249,873,699) (137,065,025)Acquisition of intangible assets (29,820) (975)

Net cash used in investing activities (388,964,330) (218,960,828)

Cash flows from financing activities Proceeds from short-term borrowings - (18,000,000)Dividends paid (192,684,328) (148,489,112)Acquisition of treasury stock (20,047,318) (16,645,525)

Net cash used in financing activities (212,731,646) (183,134,637)Net increase (decrease) in cash and cash equivalents (110,251,799) 89,851,370

Cash and cash equivalents at beginning of year 146,805,822 56,954,452Cash and cash equivalents at end of year ₩ 36,554,023 ₩ 146,805,822



60 | 6160

Notes to NoN-coNsolidated fiNaNcial statemeNts

December 31, 2010 and 2009

1. Organization and Description of Business

Kangwon Land, Inc. (the “Company”) was incorporated on June 29, 1998, under the Commercial Law of the Republic of Korea, to engage in the operations of a casino, tourist hotel and resort which include ski slopes and golf courses, in an effort to rehabilitate a closed coal mine in Southern Kangwon province and to revitalize the local tourist industry. The main business is the tourist hotel, which operates a casino and a condominium as well as recreational facilities for skiing and golf.

The Company’s shares of stock were listed in the Korea Securities Dealers Automated Quotations stock market on October 25, 2001, and listed in the Korea Stock Exchange on September 4, 2003. As of December 31, 2009, the Company’s major stockholders consist of Mine Reclamation Corporation (36.01%) and Kangwondo Development Corporation (6.60%).

2. Basis of Presenting Financial Statements and Summary of Significant Accounting Policies

(a) Basis of Presenting Financial Statements

The Company maintains its accounting records in Korean Won and prepares statutory financial statements in the Korean language in conformity with accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these financial statements are intended solely for use by only those who are informed about Korean accounting principles and practices. The accompanying financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The Company prepares the financial statements in accordance with generally accepted accounting principles in the Republic of Korea, the Company applied the same accounting policies that were adopted in the previous year’s non-consolidated financial statements.

(b) Revenue Recognition

Revenues are recognized when the services related to the casino and hotel are rendered.

(c) Allowance for Doubtful Accounts

Allowance for doubtful accounts is estimated based on an analysis of individual accounts and past experience of collection and presented as a deduction from trade receivables.

(d) Inventories

Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated selling costs. The cost of inventories is determined by the moving average method. Amounts of inventory written down to net realizable value due to losses occurring in the normal course of business are recognized as cost of goods sold and are deducted as an allowance from the carrying value of inventories.





(e) Investments in Securities (Excluding in Subsidiaries, Associates and Joint Ventures)

Classification Upon acquisition, the Company classifies debt and equity securities (excluding investments in subsidiaries, associates and joint

ventures) into the following categories: held-to-maturity, available-for-sale or trading securities.

Investments in debt securities where the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are acquired principally for the purpose of selling in the short term are classified as trading securities. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities.

In accordance with revised Statements of Korea Accounting Standards (“SKAS”) No. 8 Investments in Securities which went into effect on July 1, 2009 and which permits the reclassification of assets held for sale to either the held-to-maturity or available-for-sales categories in rare circumstances, the Company reclassified trading securities as held to maturity (or available for sales securities).

Initial recognition Investments in securities (excluding investments in subsidiaries, associates and joint ventures) are initially recognized at cost.

Subsequent measurement and income recognition Trading securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of trading

securities are included in the statement of income in the period in which they arise. Available-for-sale securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available-for-sale securities are recognized as accumulated other comprehensive income, net of tax, directly in equity. Investments in available-for-sale securities that do not have readily determinable fair values are recognized at cost less impairment, if any. Held-to-maturity investments are carried at amortized cost with interest income and expense recognized in the statement of income using the effective interest method.

Fair value information The fair value of marketable securities is determined using quoted market prices as of the period end. Non-marketable debt

securities are fair valued by discounting cash flows using the prevailing market rates for debt with a similar credit risk and remaining maturity. Credit risk is determined using the Company’s credit rating as announced by accredited credit rating agencies in Korea. The fair value of investments in money market funds is determined by investment management companies.

Presentation Trading securities, available-for-sale securities which mature within one year from the end of the reporting period or where the

likelihood of disposal within one year from end of the reporting period is probable, held-to-maturity securities which mature within one year from the end of the reporting period, short-term deposits and short-term loans are combined and presented as current assets. All other available-for-sale securities and held-to-maturity securities are combined and presented as long-term investments.

Impairment The Company reviews investments in securities whenever events or changes in circumstances indicate that the carrying

amount of the investments may not be recoverable. Impairment losses are recognized when the reasonably estimated recoverable amounts are less than the carrying amount and it is not obviously evidenced that impairment is unnecessary.

62 | 6362

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized and a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized in the asset in prior years. For financial assets measured at amortized cost and available-for-sale assets that are debt securities, the reversal is recognized in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.

(f) Investments in Associates and Subsidiaries

Associates are entities of the Company and its subsidiaries that have the ability to significantly influence the financial and operating policies. It is presumed to have significant influence if the Company holds directly or indirectly 20 percent or more of the voting power unless it can be clearly demonstrated that this is not the case. Subsidiaries are entities controlled by the Company.

Investments in associates and subsidiaries are accounted for using the Equity-method of accounting and are initially recognized at cost.

The Company’s investments in associates and subsidiaries include goodwill identified on the acquisition date (net of any accumulated impairment loss). Goodwill is calculated as the excess of the acquisition cost of an investment in an associate or subsidiary over the Company’s share of the fair value of the identifiable net assets acquired. Goodwill is amortized using the straight-line method over its estimated useful life. Amortization of goodwill is recorded together with equity income (losses).

When events or circumstances indicate that the carrying value of goodwill may not be recoverable, the Company reviews goodwill for impairment and records any impairment loss immediately in the statement of income.

The Company’s share of its post-acquisition profits or losses in investments in associates and subsidiaries is recognized in the statement of income, and its share of post-acquisition movements in equity is recognized in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of each investment. Changes in the carrying amount of an investment resulting from dividends by an associate or subsidiary are recognized when the associate or subsidiary declares the dividend. When the Company’s share of losses in an associate or subsidiary equals or exceeds its interest in the associate or subsidiary, including preferred stock or other long term loans and receivables issued by the associate or subsidiary, the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or subsidiary.

If an associate or a subsidiary uses accounting policies or estimates other than those of the Company for like transactions and events in similar circumstances, the Company makes appropriate adjustments to conform the associate’s accounting policies to those of the Company when the associate’s financial statements are used by the Company in applying the Equity-method. However, under the revised SKAS No. 15 Equity-method of Accounting, in the event that accounting policies and estimates differ due to the application of Exceptions to Accounting for Small and Medium-Sized Entities or K-IFRS, no adjustments are made.

If the investee is a subsidiary, net income and net assets of the parent company’s separate financial statements should agree with the parent company’s share in the net income and net assets of the consolidated financial statements, except when the Company discontinues the application of the Equity-method due to its investment in a subsidiary being reduced to zero.

Unrealized gains on transactions between the Company and its associates or subsidiaries are eliminated to the extent of the Company’s interest in each associate or subsidiary.



(g) Property and Equipment

Property, plant and equipment are stated at cost, (except in the case of revaluations made in accordance with the Asset Revaluation Law, which allowed for asset revaluation prior to the Law being revoked on December 31, 2000.) Assets acquired through investment in kind or donations are recorded at their fair value upon acquisition. For assets acquired in exchange for a non-monetary asset, the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident.

Significant additions or improvements extending useful lives of assets are capitalized. Normal maintenance and repairs are charged to expense as incurred.

Depreciation is computed by using the straight-line method over the estimated useful lives of the assets as follows:

Useful lives (years)Buildings 40

Structures 40Machinery and equipment 4~6

Vehicles 4Tools 4

The golf course and slopes provide the Company with infinite utility. Thus, the golf course and slopes have an indefinite useful life and are not depreciated.

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the expected estimated undiscounted future net cash flows from the use of the asset and its eventual disposal are less than its carrying amount.

(h) Leases

The Company classifies and accounts for leases as either operating or capital leases, depending on the terms of the lease. Leases where the Company assumes substantially all the risks and rewards of ownership are classified as capital leases. All other leases are classified as operating leases.

Where the Company is a lessee under a capital lease, the present value of future minimum lease payments is capitalized and

a corresponding liability is recognized. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

(i) Intangible Assets

Intangible assets are stated at cost less accumulated amortization and impairment losses, if any, Amortization is computed by the straight-line method over the following estimated useful lives of the intangible assets.



64 | 6564

Useful lives (years)Trademark rights 5

Other intangible assets 5

The Company assesses the potential impairment of intangible assets when there is evidence that events or changes in circumstances have made the recovery of an asset’s carrying value unlikely. The carrying value of the assets is reduced to the estimated realizable value and an impairment loss is recorded as a reduction in the carrying value of the related asset and charged to current operations.

(j) Retirement and Severance Benefits

Employees who have been with the Company for more than one year are entitled to lump-sum payments based on current salary rates and length of service when they leave the Company. The Company’s estimated liability under the plan which would be payable if all employees left at the end of the reporting period, is accrued in the accompanying non-consolidated statements of financial position. A portion of the liability is covered by an employees’ severance benefits trust where the employees have a vested interest in the deposit with Dongbu Insurance Co., Ltd. and other insurance companies in trust. The deposit for severance benefits held in trust is, therefore, reflected in the accompanying non-consolidated statements of financial position as a reduction of the liability for retirement and severance benefits.

Through March 1999, under the National Pension Scheme of Korea, the Company transferred a certain portion of retirement allowances for employees to the National Pension Fund. The amount transferred will reduce the retirement and severance benefit amount to be paid to the employees when they leave the Company and is accordingly reflected in the accompanying financial statements as a reduction of the retirement and severance benefits liability. However, due to a new regulation effective April 1999, such transfers to the National Pension Fund are no longer required.

(k) Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at the foreign exchange rate on the end of the reporting period, with the resulting gains or losses recognized in the income statement. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at ₩1,167.6 to US$1, the rate of exchange on December 31, 2010. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into Korean Won at the foreign exchange rate at the date of the transaction.

( l) Provisions

Provisions are recognized when all of the following are met: (1) an entity has a present obligation as a result of a past event, (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and (3) a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, a provision is recorded at the present value of the expenditures expected to be required to settle the obligation.

Where the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The expense generated by the provision is presented net of the amount of expected reimbursement.



(m) Income Taxes

Income tax on the income or loss for the year comprises current and deferred tax. Income tax is recognized in the statement of income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted.

Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period.

A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred tax assets and liabilities are classified as current or non-current based on the classification of the related asset or

liability for financial reporting or the expected reversal date of the temporary difference for those with no related asset or liability such as loss carryforwards and tax credit carryforwards. The deferred tax amounts are presented as a net current asset or liability and a net non-current asset or liability.

Changes in deferred taxes due to a change in the tax rate except for those related to items initially recognized directly in equity are recognized as income in the current year.

(n) Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the Republic of Korea requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to financial statements. Actual results could differ from those estimates.



66 | 6766

3. Restricted Deposits

Deposits which are restricted in use as pledged as collateral for short-term borrowings do not exist as of December 31, 2010 and 2009.

4. Cash and cash equivalents

Cash and cash equivalents and financial instruments as of December 31, 2010 and 2009 are summarized as follows:


Annual interestRates as of

December 31, 20102010 2009

Cash and cash equivalentsCash on hand - ₩ 21,975,506 ₩ 19,244,826 Passbook accounts 1.00% 14,578,517 17,560,996Certificate of deposit - - 60,000,000Specific money trust - - 50,000,000

₩ 36,554,023 ₩ 146,805,822Short-term financial instruments

Time deposits 3.30-5.03% ₩ 376,322,749 ₩ 80,000,000Repurchase agreement - - 210,000,000Certificate of deposit 3.44-4.81% 420,000,000 355,000,000

₩ 796,322,749 ₩ 645,000,000



5. Investment Securities

Investment securities as of December 31, 2010 and 2009 are summarized as follows:


2010 2009Short-term investment securities

Trading Securities ₩ - ₩ 94,622,490Available-for-sale securities 63,925,093 21,472,087Held-to-maturity securities 80,504,175 39,998,299

₩ 144,429,268 ₩ 156,092,876Long-term investment securities

Available-for-sale securities ₩ 68,316,200 ₩ 119,790,576Held-to-maturity securities 1,134,740 11,379,255

₩ 69,450,940 ₩ 131,169,831

(a) Short-term investment securities (i) Trading Securities (current) Trading Securities (current) as of December 31, 2010 and 2009 are summarized as follows:


2010 2009Acquisition cost Fair value Book value Book value

Beneficiary certificates, etc. ₩ - - - ₩ 94,622,490

(ii) Available-for-sale securities (current) Available-for-sale securities (current) as of December 31, 2010 and 2009 are summarized as follows:



Beneficiary certificates, etc. ₩ 62,894,058 63,925,093 63,925,093 ₩ 21,472,087

The Company recognized a gain (loss) on disposal of investment securities, net amounting to ₩9,857 million as non-operating income for the year ended December 31, 2010.

(iii) Held-to-maturity securities (current) Held-to-maturity securities (current) as of December 31, 2010 and 2009 are summarized as follows:


2010 2009Acquisition cost Book value Book value

Government bonds and public bonds ₩ 80,504,175 80,504,175 ₩ 39,998,299



68 | 6968

(b) Long-term Investment Securities

(i) Available-for-sale securities (Non-current) Available-for-sale securities (non-current) as of December 31, 2010 and 2009 are summarized as follows:



Beneficiary certificates, etc. ₩ 70,000,000 68,316,200 68,316,200 ₩ 63,764,500Debt securities, etc. 15,000,000 - - 56,026,076

₩ 85,000,000 68,316,200 68,316,200 ₩ 119,790,576

The Company recognized a gain on disposal of investment securities, net amounting to ₩2,392 million as non-operating income and an impairment loss of ₩1,500 million related to debt securities for the year ended December 31, 2010.

(ii) Held-to-maturity Securities (Non-current) Held-to-maturity securities (non-current) as of December 31, 2010 and 2009 are summarized as follows:


2010 2009Acquisition cost Book value Book value

Government bonds and public bonds ₩ 1,134,740 1,134,740 ₩ 11,379,255

(c) Maturity of investment securities

The maturities of investment securities as of December 31, 2010 are summarized as follows:


Held-to-maturity securities

Book value Fair value

Less than 1 year ₩ 80,504,175 80,504,1751~5 years 1,134,740 1,134,740

₩ 81,638,915 81,638,915

(d) Related to debt securities and bonds, the Company recognized interest income amounting to ₩3,418 million in 2010 and

₩2,709 million in 2009, respectively, as non-operating income.



6. Equity-method Accounted Investments

(i) Investments in companies accounted for using the Equity-method as of December 31, 2010 are summarized as follows:

(In thousands of Won, except percentage of ownership)

Company Percentageof ownership Cost Net assets Balance at

December 31, 2010Black Valley Country Club Co., Ltd. (*) 16.55% ₩ 15,000,000 14,899,441 14,899,441Mungyeong Leisure Town, Inc. 30.00% 18,000,000 17,274,342 17,313,500Donggang Cistar, Inc. 26.35% 35,300,000 35,376,431 35,559,218Daecheon Resort, lnc. 28.57% 18,000,000 17,426,093 17,552,025High1 Entertainment, Inc. 100.00% 64,700,000 58,755,791 58,755,791High1 Motor Resort, Inc. 100.00% 4,301,675 2,526,747 2,526,747High1 Swichback Resort, Inc. 100.00% 3,300,000 3,052,635 3,052,635

₩ 158,601,675 149,311,480 149,659,357

(*) In the case of Black Valley Country Club Co., Ltd., although ownership by the Company is below 20%, the Company accounts for its investments using the Equity-

method as the Company’s CEO is a member of the board of directors.

Investments in companies accounted for using the Equity-method as of December 31, 2009 are summarized as follows:

(In thousands of Won, except percentage of ownership)

Company Percentageof ownership Cost Net assets Balance at

December 31, 2009Black Valley Country Club Co., Ltd.(*) 16.55 % ₩ 15,000,000 14,882,383 14,921,514Mungyeong Leisure Town, Inc. 30.00 % 18,000,000 17,229,980 17,448,054Donggang Cistar, Inc. 27.44 % 35,300,000 24,305,038 35,883,184Daecheon Resort, Inc. 28.25 % 15,000,000 14,792,797 14,945,547High1 Entertainment, Inc. 100.00 % 14,500,000 13,636,405 13,692,460High1 Motor Resort, Inc. 100.00 % 4,301,675 4,204,649 4,301,674

₩ 102,101,675 89,051,252 101,192,434

(*) In the case of Black Valley Country Club Co., Ltd., although ownership by the Company is below 20%, the Company accounts for its investments using the Equity-

method as the Company’s CEO is a member of the board of directors.



70 | 7170

(ii) Changes in goodwill for Equity-method accounted investments for the year ended December 31, 2010 were as follows:


Company Balance at Jan. 1, 2010 Increase Amortized

amountBalance at

Dec. 31, 2010Black Valley Country Club Co., Ltd. ₩ 39,131 - (39,131) -Mungyeong Leisure Town, Inc. 218,074 - (178,916) 39,158 Donggang Cistar, Inc. 291,590 - (108,803) 182,787 Daecheon Resort, lnc. 152,750 13,922 (40,740) 125,932

₩ 701,545 13,922 (367,590) 347,877

Changes in goodwill for Equity-method accounted investments for the year ended December 31, 2009 were as follows:


Company Balance at Jan. 1, 2009 Increase Amortized

amountBalance at

Dec. 31, 2009Black Valley Country Club Co., Ltd. ₩ 78,261 - (39,130) 39,131Mungyeong Leisure Town, Inc. 396,990 - (178,916) 218,074Donggang Cistar, Inc. 400,393 - (108,803) 291,590Daecheon Resort, lnc. 190,938 - (38,188) 152,750

₩ 1,066,582 - (365,037) 701,545

(iii) Details of eliminated unrealized gains from inter-company transactions as of December 31, 2009 are summarized as follows:


Company2009

Property & equipmentHigh1 Entertainment, Inc. ₩ 56,055



(iv) Changes in the opening and closing balances of investments in companies accounted for using the Equity-method for the year ended December 31, 2010 were as follows:


Company Balance atJan. 1, 2010 Net loss

Accumulated other

comprehensive income

Other increase(decrease)

Balance atDec. 31, 2010

Black Valley Country Club Co., Ltd. ₩ 14,921,514 (22,073) - - 14,899,441Mungyeong Leisure Town, Inc. 17,448,054 (134,554) - - 17,313,500Donggang Cistar, Inc. 35,883,184 (173,175) - (150,791) 35,559,218Daecheon Resort, lnc. 14,945,547 (407,855) (14,287) 3,028,620 17,552,025High1 Entertainment Inc. 13,692,460 (5,102,034) (34,635) 50,200,000 58,755,791High1 Motor Resort, Inc. 4,301,674 (1,774,927) - - 2,526,747High1 Swichback Resort, Inc. (*) - (247,365) - 3,300,000 3,052,635

₩ 101,192,433 (7,861,983) (48,922) 56,377,828 149,659,357

(*) During 2010, the Company acquired new Equity-method accounted investments of High1 Swichback Resort, Inc. amounting to ₩3,300 million.

The Company accounted for its investments in the above companies by using the Equity-method of accounting based on the unaudited financial statements as it was unable to obtain the audited financial statements and performed procedures to verify the unaudited financial statements.

Changes in the opening and closing balances of investments in companies accounted for using the Equity-method for the year ended December 31, 2009 were as follows:


Company Balance atJan. 1, 2009

NetIncome (loss)

Other increase(decrease)

Balance atDec. 31, 2009

Black Valley Country Club Co., Ltd. ₩ 14,872,788 48,726 - 14,921,514Mungyeong Leisure Town, Inc. 17,416,412 31,642 - 17,448,054Donggang Cistar, Inc. 35,423,826 459,998 (640) 35,883,184Daecheon Resort, Inc. 15,000,000 (42,550) (11,903) 14,945,547High1 Entertainment, Inc. (*) - (807,540) 14,500,000 13,692,460High1 Motor Resort, Inc. (*) - - 4,301,674 4,301,674

₩ 82,713,026 (309,724) 18,789,131 101,192,433

(*) During 2009, the Company acquired new Equity-method accounted investments of High1 Entertainment, Inc. and High1 Motor Resort, Inc. amounting to

₩14,500 million and ₩4,302 million.

The Company accounted for its investments in the above companies by using the Equity-method of accounting based on the unaudited financial statements as it was unable to obtain the audited financial statements and performed procedures to verify the unaudited financial statements.



72 | 7372

(v) Financial information of Equity-method accounted investments, which represents 100% of the entities’ balances, as of December 31, 2010 is summarized as follows:


Company Total assets Total liabilities Sales Net income (loss)Black Valley Country Club Co., Ltd. ₩ 90,678,776 637,504 5,220,810 102,355Mungyeong Leisure Town, Inc. 70,009,857 12,428,719 6,437,037 147,873Donggang Cistar, Inc. 92,876,084 2,084,891 1,002,055 (641,919)Daecheon Resort, lnc. 82,287,796 21,296,471 - (1,226,112)High1 Entertainmet, Inc. 60,203,849 1,448,058 407,997 (5,045,979)High1 Motor Resort, Inc. 2,556,266 29,519 - (1,774,928)High1 Swichback Resort, Inc. 3,058,379 5,744 - (247,365)

Financial information of Equity-method accounted investments, which represents 100% of the entities’ balances, as of December 31, 2009 is summarized as follows:


Company Total assets Total liabilities Sales Net income (loss)Black Valley Country Club Co., Ltd. ₩ 90,710,538 771,622 5,586,914 531,667Mungyeong Leisure Town, Inc. 69,460,249 12,026,984 7,231,803 701,859Donggang Cistar, Inc. 90,415,437 1,828,325 - 1,665,868Daecheon Resort, lnc. 52,380,992 17,954 - (15,442)High1 Entertainment, Inc. 14,086,780 450,375 - (863,595)High1 Motor Resort, Inc. 4,214,018 9,368 - (97,025)



7. Property and Equipment

(a) Property and equipment at December 31, 2010 and 2009 are summarized as follows:


2010 2009Property and equipment at cost ₩ 1,571,743,129 ₩ 1,323,279,378Accumulated depreciation (293,441,395) (236,254,603)Accumulated impairment loss (43,195,065) (43,195,065)

Property and equipment, net ₩ 1,235,106,669 ₩ 1,043,829,710

(b) Changes in property and equipment for the year ended December 31, 2010 were as follows:


Book value as of Jan. 1 Acquisitions Disposals Depreciation Others(*) Book value as of

Dec. 31Land ₩ 72,923,244 147,087 - - 18,443,514 91,513,845Courses 55,870,399 - - - - 55,870,399Slopes 59,682,299 - - - (1,534,678) 58,147,621Buildings 454,514,520 - - (13,836,208) 236,766,372 677,444,684Structures 177,725,487 - (1,223,768) (4,826,729) 5,733,965 177,408,955Machinery 42,395,400 1,179,972 (1,529) (22,087,847) 3,457,066 24,943,062Vehicles 268,310 460,487 (7) (189,027) - 539,763Tools 41,133,050 7,550,051 (154,480) (18,410,549) 3,268,505 33,386,577Other tangible assets - - - - 4,003,105 4,003,105Construction-in-progress 139,317,001 249,873,699 - - (277,342,042) 111,848,658

₩ 1,043,829,710 259,211,296 (1,379,784) (59,350,360) (7,204,193) 1,235,106,669

(*) The decrease is mainly due to the lawsuit of the cost of construction.

For the year ended December 31, 2010, expenditure on construction-in-process was ₩249,874 million.



74 | 7574

Changes in property, plant and equipment for the year ended December 31, 2009 were as follows:


Book value as of Jan. 1 Acquisitions Disposals Depreciation Others(*) Book value as of

Dec. 31Land ₩ 75,842,369 74,440 - - (2,993,565) 72,923,244Courses 55,870,399 - - - - 55,870,399Slopes 58,851,949 830,350 - - - 59,682,299Buildings 445,590,771 17,462,893 - (14,156,168) 5,617,024 454,514,520Structures 179,803,957 1,793,206 - (4,943,080) 1,071,404 177,725,487Machinery 52,422,565 361,727 (2) (20,702,063) 10,313,173 42,395,400Vehicles 478,214 - (3) (209,901) - 268,310Tools 33,008,972 7,065,483 (214,947) (16,529,952) 17,803,494 41,133,050Construction-in-progress 37,166,528 137,065,025 - - (34,914,552) 139,317,001

₩ 939,035,724 164,653,124 (214,952) (56,541,164) (3,103,022) 1,043,829,710

(*) Others include transfers from construction-in-progress and donation.

For the year ended December 31, 2009, expenditure on construction-in-process was ₩137,065 million.

(c) The officially declared value of land at December 31, 2010, as announced by the Minister of Construction and Transportation, was as follows:


Book value Declared valueLand ₩ 91,513,845 255,988,347

The officially declared value, which is used for government purposes, is not intended to represent fair value.



8. Insurance

As of December 31, 2010, the following assets are insured:


Type Insured assets Insurance coverage InsurerFire insurance Buildings & Machinery ₩ 829,352,000

Dongbu Insurance Co., Ltd., and 2 others

Civil engineering comprehensive risk insurance Slopes 143,942,000Cash theft insurance Cash and cash equivalents 6,000,000

The Company maintains Directors and Officers Liability Insurance to cover liabilities that may rise from operational claims with an insurance coverage of ₩15,000 million. In addition, as of December 31, 2010, the Company maintained an officer fidelity insurance policy with consequential loss coverage of ₩3,000 million.

9. Intangible Assets Changes in intangible assets for the years ended December 31, 2010 and 2009 were as follows:


2010 2009Net balance at beginning of year ₩ 117,641 ₩ 175,660

Additions 29,820 975Amortization (62,884) (58,994)

Net balance at end of year ₩ 84,577 ₩ 117,641

10. Leases

The Company has entered into lease agreements, which are recorded as operating leases. Lease payments for the year ended December 31, 2010, amount to ₩824,161 thousand.

Details of future minimum lease payments as of December 31, 2010, under operating lease contracts were summarized below:


Year Operating leases

Due within a year ₩ 1,261,498Due after one year through to five years 583,861

Total minimum lease payments ₩ 1,845,358



76 | 7776

11. Related Party Transactions

(a) Details of parent and subsidiary relationships as of December 31, 2010 were as follows:

Controlled subsidiary Ownership High1 Entertainment, Inc. 100%

(b) Significant transactions which occurred in the normal course of business with related companies for the years ended December 31, 2010 and 2009 were as follows:


Relationship Name Transaction 2010 2009(*)Subsidiary High1 Entertainment, Inc. Disposal of property ₩ - ₩ 154,818Investee under Equity-method High1 Motor Resort, Inc. Investment in kind ₩ - ₩ 2,288,325

(*) The fair market values were recorded at transaction date.

(c) Key management personnel compensation in total and for each of the following categories for the year ended December 31, 2010 was as follows:


2010 2009Salaries ₩ 814,407 ₩ 772,102Severance payment 79,511 29,402

₩ 893,918 ₩ 801,504

Key management consists of executive officers who have the authority and responsibility in the planning, management and control of the Company’s operations.



12. Retirement and Severance Benefits

Changes in retirement and severance benefits for the years ended December 31, 2010 and 2009 were as follows:


2010 2009Estimated retirement and severance benefits at beginning of year ₩ 89,066,786 ₩ 107,490,620

Accrual for retirement and severance benefits 15,464,168 77,389,097Payments (79,156,784) (95,812,931)

Estimated retirement and severance benefits at end of year 25,374,170 89,066,786Deposit for severance benefit insurance (17,776,518) (83,537,531)

Net balance at end of year ₩ 7,597,652 ₩ 5,529,255

The Company maintains an employees’ severance benefit trust arrangement with Dongbu Life Insurance Co., Ltd. and 7 others. Under this arrangement, the Company has made a deposit in the amount equal to 70.06% and 93.79% of the reserve balances of retirement and severance benefits as of December 31, 2010 and 2009, respectively. This deposit is to be used to guarantee the required payments to the retirees and is accounted for as a reduction in the reserve balance.

13. Commitments and Contingencies

(a) As of December 31, 2010, the Company is involved in legal cases arising from the ordinary course of business. There are 22 cases wherein the Company is the defendant against claims for damages in the total amount of ₩146,712 million, the Company also has 6 pending cases as the plaintiff with claims totaling for ₩162 million. The Company believes that the outcome of these matters is uncertain and would not result in a material loss for the Company. The company recognized a provision for claims for damages amounting to ₩9,475 million.

(b) As of December 31, 2010, Seoul Guarantee Insurance Co., Ltd. has provided guarantees relating to the payment for the damage of forest amounting to approximately ₩29,167 million.

(c) Pursuant to the special laws and regulations related to support for the development of the closed coal mine areas, the

Company is required to pay an amount equal to 20% of income before tax for the year, to the Closed Coal Mine Area Development Fund. The amount is charged to selling and administrative expenses and recorded as an accrued expense at the end of the reporting period.

(d) Promotion fund for tourism: Pursuant to the Promotion Act for Tourism, the Company is required to pay an amount equal to 10% of the total sales of casinos for the year, to the Promotion Fund for Tourism. The Company recorded these amounts as cost of sales and accrued expense as of December 31, 2010.



78 | 7978

14. Stockholders’ Equity

Under the Articles of Incorporation, the Company is authorized to issue 1,000,000,000 shares of common stock. The par value of common stock is ₩500 per share. As of December 31, 2010, 213,940,500 shares of common stock are issued.

15. Treasury stock

As of December 31, 2010, the Company reacquired 10,141,012 issued shares of common stock which it maintains as treasury stock. The Company acquired the treasury stock at market price and recorded these amounts as capital adjustment.

16. Retained Earnings

Retained earnings as of December 31, 2010 and 2009 are summarized as follows:


2010 2009Legal reserve ₩ 59,460,697 ₩ 59,460,697

Reserve for business rationalization 1,067,947 1,067,947

Reserve for improvement of financial structure 30,000,000 30,000,000

Discretionary appropriated retained earnings 1,500,030,000 1,302,030,000

Unappropriated retained earnings 421,957,624 390,857,290

₩ 2,012,516,268 ₩ 1,783,415,934

(a) Legal reserve

The Korean Commercial Code requires the Company to appropriate a legal reserve in an amount equal to at least 10% of cash dividends for each accounting period until the reserve equals 50% of stated capital. The legal reserve may be used to reduce a deficit or may be transferred to common stock in connection with a free issue of shares.

(b) Reserve for business rationalization

Until December 10, 2002, under the Special Tax Treatment Control Law, investment tax credits were allowed for certain investments. The Company was, however, required to appropriate from retained earnings the amount of tax benefits received and transfer such amount into a reserve for business rationalization.

Effective December 11, 2002, the Company was no longer required to establish a reserve for business rationalization despite tax benefits received for certain investments and, consequently, the existing balance is now regarded as a voluntary reserve.



(c) Reserve for improvement of financial structure

Until December 26, 2007, the Regulations on Securities Issuance and Disclosure require the Company to appropriate into a reserve an amount equal to at least 50% of the net gain on disposal of property, plant and equipment and 10% of net income for each year until the Company’s stockholder’s equity equals 30% of total assets. The reserve may be used to reduce a deficit or transferred to common stock in connection with a free issue of shares.

Effective December 27, 2007, the above requirement has been removed and the Company is no longer required to appropriate a reserve for improvement of financial structure and, consequently, the existing balance as of December 31, 2010 is now regarded as a voluntary reserve.

17. Selling, General and Administrative Expenses

Details of selling, general and administrative expenses for the years ended December 31, 2010 and 2009 were as follows:


2010 2009Salaries ₩ 30,833,773 ₩ 33,813,868Accrual for retirement and severance benefits 2,808,273 11,661,433Other employee benefits 22,620,605 14,423,153Travel 1,614,731 1,432,699Entertainment 1,632,475 1,355,719Sales promotion and commission 9,088,764 8,727,772Advertising 22,964,753 17,608,043Supplies 2,129,441 1,472,650Communications 348,482 360,438Maintenance 811,632 459,428Professional service fees 3,838,707 2,537,083Insurance 90,682 61,949Depreciation 10,674,138 9,626,037Amortization 62,884 58,994Taxes and dues 2,772,527 2,372,889Rent 1,002,889 2,119,122Conference 343,819 356,365Research 135,569 98,890Contibution to the Closed Coal Mine Area Development Fund 124,603,404 111,451,532Events 6,260,534 3,996,947Others 3,725,694 3,133,904

₩ 248,363,776 ₩ 227,128,915



80 | 8180

18. Income Taxes

(a) The Company was subject to income taxes on taxable income at the following normal tax rates.

Taxable incomeTax rate

Prior to 2009 2010 2011 ThereafterUp to ₩200 million 12.1% 11.0% 11.0% 11.0%Over ₩200 million 24.2% 24.2% 24.2% 22.0%

(b) The components of income tax expense for the years ended December 31, 2010 and 2009 were as follows:


2010 2009Current ₩ 140,546,912 ₩ 134,367,276Deferred (5,999,590) (6,025,453)Items charged directly to stockholder’s equity (666,944) (9,425,427)

Income tax expense ₩ 133,898,378 ₩ 118,916,396

(c) The income tax expense calculated by applying statutory tax rates to the Company’s taxable income for the year differs from the actual tax expense in the statement of income for the years ended December 31, 2010 and 2009 for the following reasons:


2010 2009Income before income taxes ₩ 555,683,040 ₩ 508,916,849Expense for income taxes at normal tax rates 134,448,896 123,133,678

Tax effects of permanent differences 4,772,252 12,043,002Non-taxation gain (1,695,890) -Tax effects of unused tax credits (7,637,198) (6,461,509)Tax effects of changed tax rates - (973,217)Others 4,010,318 (8,825,558)

Income tax expense ₩ 133,898,378 ₩ 118,916,396Effective tax rate 24.1% 23.4%



(d) As of December 31, 2010, details of temporary differences and deferred tax assets (liabilities) are as follows:


Temporarydifferences at Dec. 31, 2010

Deferred tax assets (liabilites)Current Non-current

Accrued income ₩ (12,689,544) (3,070,870) -Promotion Fund for Tourism 125,116,459 30,278,183 -Closed Coal Mine Area Development Fund 124,603,404 30,154,024 -Accrued severance benefits 11,106,259 - 2,443,377 Severance insurance deposits (33,291,792) - (7,324,194)Accounts and notes payable - other 22,185,533 5,368,899 -Allowance for doubtful accounts 526,561 127,428 -Usable and profitable donation assets 18,601,993 - 4,105,030 Trade accounts receivable 10,664,328 2,580,767 -Construction-in-progress 1,305,708 - 288,069 Property and equipment 44,187,985 - 9,721,964 Accrued expenses 40,229,087 9,735,439 -Donations payable 51,548,171 12,474,658 -Short-term investment securities (1,031,035) (249,511) -Long-term investment securities 1,683,800 - 370,437Equity-method investments 8,319,456 - (190,774)Bonuses payable 19,636,556 4,752,047 -Refund of income tax (4,930,590) - (1,087,750)Additional payment of income tax 6,681,125 - 1,474,143

Depreciation 2,062,609 - 453,774 Impairment losses on investment securities 15,000,000 - 3,300,000 Incidental expense of land 3,483,015 - 766,539

₩ 454,999,088 92,151,064 14,320,615



82 | 8382

As of December 31, 2009, details of temporary differences and deferred tax assets (liabilities) are as follows:


Temporarydifferences at Dec. 31, 2009

Deferred tax assets (liabilites)Current Non-current

Accrued income ₩ (10,929,053) (2,644,831) -Promotion Fund for Tourism 115,639,674 27,984,801 -Closed Coal Mine Area Development Fund 111,451,532 26,971,271 -Accrued severance benefits 54,999,116 - 12,099,806Severance insurance deposits (79,491,233) - (17,488,071)Accounts and notes payable - other 24,492,118 5,927,092 -Allowance for doubtful accounts 546,247 132,192 -Usable and profitable donation assets 19,174,324 - 4,243,534Trade accounts receivable 8,072,000 1,953,424 -Construction-in-progress 1,342,667 - 297,013Property and equipment 44,221,539 - 9,729,957Accrued expenses 39,692,537 9,605,594 -Donations payable 46,327,549 11,211,267 -Reserve for loss on disposal of treasury stock (3,188,187) - (701,401)Short-term investment securities (6,094,577) (1,474,888) -Long-term investment securities 5,200,521 - 1,144,115Equity-method investments 298,556 - (240,665)Bonuses payable 45,364,867 10,978,298 -Refund of income tax (5,067,833) - (1,120,962)Additional payment of income tax 6,876,359 - 1,521,389Depreciation 1,559,793 - 343,154

₩ 420,488,516 90,644,220 9,827,869

(e) Deferred tax assets have been recognized as the Company has determined it is probable that future profits will be available against which the Company can utilize the related benefit.

(f) Unrecognized temporary differences and deferred tax assets for the year ended December 31, 2010 was as follows:


Temporary differences Deferred tax assets Equity-method accounted investments ₩ 9,558,242 2,102,815

(g) Deferred tax assets that were directly charged or credited to accumulated other comprehensive income as of December 31, 2010 are as follows:


Temporary differences Deferred tax liabilities Unrealized loss on valuation of available-for-sale securities ₩ 3,075,668 (666,944)



19. Earnings per Share

(a) Basic earnings per share for the years ended December 31, 2010 and 2009 were as follows:

(In Won, except share information)

2010 2009Basic earnings per share Basic earnings per share

Net income ₩ 421,784,662,770 ₩ 390,000,453,379Weighted-average number of common shares outstanding 204,129,325 205,010,188

Earnings per share ₩ 2,066 ₩ 1,902

(b) Weighted average number of common shares outstanding:

The weighted average number of common stock outstanding for the year ended December 31, 2010 is calculated as follows:

(In shares)

2010Number of Stock Issued Number of Days Outstanding Weighted Number of Stock

January 1, 2010 204,983,328 365 74,818,914,720Effect of treasury stocks held (*) (1,183,840) 263.30 (311,710,940)

203,799,488 74,507,203,780

(*) The Company acquired treasury stock several times for the year ended December 31, 2010.

•Weightedaveragenumberofcommonstockoutstanding:74,507,203,780÷365=204,129,325

The weighted average number of common stock outstanding for the year ended December 31, 2009 is calculated as follows:

(In shares)

2009Number of Stock Issued Number of Days Outstanding Weighted Number of Stock

January 1, 2009 206,234,878 365 75,275,730,470Effect of treasury stocks held (*) (1,251,550) 357.17 (447,011,750)

204,983,328 74,828,718,720

(*) The Company acquired treasury stock several times for the year ended December 31, 2009.

•Weightedaveragenumberofcommonstockoutstanding:74,828,718,720÷365=205,010,188

The Company has no dilutive potential shares, therefore dilutive earnings per share equal to the earnings per share.



84 | 8584

20. Dividends

(a) Details of dividends for the years ended December 31, 2010 and 2009 were as follows:

(In Won, except number of shares)

2010 2009Common stock Common stock

Total dividends ₩ 197,685,503,360 ₩ 192,684,328,320Number of shares 203,799,488 204,983,328Dividend per share ₩ 970 ₩ 940

(b) Dividends as a percentage of net income and par value for the years ended December 31, 2010 and 2009 were as follows:

(In Won)

2010 2009Dividend amount ₩ 197,685,503,360 ₩ 192,684,328,320Net income ₩ 421,784,662,770 ₩ 390,000,453,379Dividends as a percentage of net income 46.87% 49.41%Par value per share ₩ 500 ₩ 500Dividends as a percentage of par value 194% 188%

(c) Dividend yield ratio for the years ended December 31, 2010 and 2009 was as follows:

(In Won)

2010 2009Common stock Common stock

Dividend per share ₩ 970 ₩ 940Market price as of year end 27,950 16,500Dividend yield ratio 3.47% 5.70%



21. Comprehensive Income

Comprehensive income for the years ended December 31, 2010 and 2009 was as follows:


2010 2009Net income ₩ 421,784,663 ₩ 390,000,453

Change in fair value of available-for-sale securities, net of tax effect of ₩(666,944) in 2010 and ₩(9,425,427) in 2009 2,408,724 33,475,950Change in equity of Equity-method investee (48,921) -

Comprehensive income ₩ 424,144,466 ₩ 423,476,403

22. Non-cash Investing and Financing Activities

Significant non-cash investing and financing activities for the years ended December 31, 2010 and 2009 were as follows:


2010 2009Disposal of property through investment in-kind ₩ - ₩ 2,993,565Transfer from construction-in-progress 277,342,041 34,805,095

₩ 277,342,041 ₩ 37,798,660



86 | 8786

23. Date of Authorization for Issue The 2010 financial statements were authorized for issue on February 25, 2011, at the Board of Directors meeting.

24. Value Added Information

Details of accounts included in the computation of value added for the years ended December 31, 2010 and 2009 were follows:


2010 2009Salaries and wages ₩ 156,644,691 ₩ 145,768,537Provision for retirement and severance benefits 15,464,168 77,389,097Other employee benefits 47,780,291 36,432,140Rent 2,311,607 3,235,408Depreciation 59,350,360 56,541,164Amortization 62,884 58,994Taxes and dues 6,986,200 5,667,598

₩ 288,600,201 ₩ 325,092,938


8888

25. Segment Information

The Company’s business segments consist of the casino, hotel, condominium, golf, ski and other business divisions.

Division Goods and Services

CasinoBlack Jack, Baccarat, Roulette, Big Wheel, Tai-SaiCaribbean stud poker, Slot machines and other games

Hotel, Condominium Room charges, Restaurants and barsGolf Green fee and cart feeSki Gondola and lift

(b) The following table provides information for each business segment as of and for the years ended December 31, 2010 and 2009.

(i) For the year ended December 31, 2010


2010Casino Hotel Golf Ski Condominium Others Total

Sales ₩ 1,255,006,990 20,254,771 4,643,540 20,345,951 13,431,316 - 1,313,682,568Operating income (loss) 859,724,928 (8,033,067) 1,497,408 (17,838,320) (15,776,846) (248,363,777) 571,210,326Fixed assets

Property, equipment & Intangible assets 81,244,199 233,447,661 80,417,037 220,145,181 322,047,132 297,890,036 1,235,191,246Depreciation(*) 15,052,257 8,303,407 1,149,484 20,827,020 3,341,576 10,739,500 59,413,244

(*) The sum of depreciation and amortization

(ii) For the year ended December 31, 2009


2009Casino Hotel Golf Ski Condominium Others Total

Sales ₩ 1,151,618,072 20,437,006 4,418,570 17,774,890 11,518,036 892,138 1,206,658,712Operating income (loss) 729,908,094 (11,408,598) 1,158,100 (19,783,587) (8,198,114) (226,644,373) 465,031,522Fixed assets

Property, equipment & Intangible assets 93,988,664 239,664,038 80,114,573 241,537,548 90,891,580 297,750,948 1,043,947,351Depreciation(*) 12,543,476 2,418,483 845,696 20,563,993 3,128,026 17,100,484 56,600,158

(*) The sum of depreciation and amortization




88 | 8988

26. Results of Operations for the Last Interim Period(In Won)

4th Quarter, 2010 4th Quarter, 2009 Revenue ₩ 313,172,860,124 ₩ 302,465,348,411Operating income 103,799,383,204 70,755,231,813Net income for the period 69,727,356,027 68,495,849,101Earnings per share 342 334

27. Planning and Adoption of K-IFRS (International Financing Reporting Standards)

The Company subsequently plans to issue financial statements prepared in accordance with K-IFRS from 2011. The Company organized a Task Force Team to perform preliminary analysis of the effects of K-IFRS adoption and establish accounting systems to apply the new accounting treatments, and trained its relevant personnel internally and externally. The Task Force Team regularly reports the details and status of the Adoption Plan to its board of directors and management. The details of the K-IFRS Adoption Plan are as follows:

Main Activities Preparation Plan State at December 31, 2010

Formation of the K-IFRS Adoption Task Force Team and analysis of the likely effects of K-IFRS adoption

Complete the K-IFRS Adoption Plan by the end of 2010.

Established the K-IFRS Adoption Task Force Team.

Engaged an accounting firm to carry out an analysis of the likely effects of K-IFRS adoption

Training Acquire the skills required for IFRS conversion by the end of 2010.

Held training for in-charge staff (training provided by the Korean Accounting Standards Board)

Alignment of accounting systemsComplete the establishment of accounting systems to apply the new accounting treatments under K-IFRS.

Completed the analysis of the scope of required changes to the system



inDepenDent accoUntants’ review report on

internal accoUnting control system

English translation of a Report Originally Issued in Korean

To the President of Kangwon Land, lnc.:

We have reviewed the accompanying Report on the Operations of Internal Accounting Control System (“IACS”) of Kangwon Land, lnc.

(the “Company”) as of December 31, 2010. The Company’s management is responsible for designing and maintaining effective IACS

and for its assessment of the effectiveness of IACS. Our responsibility is to review management’s assessment and issue a report based

on our review. In the accompanying report of management’s assessment of IACS, the Company’s management stated: “Based on the

assessment on the operations of the IACS, the Company’s IACS has been effectively designed and is operating as of December 31,

2010, in all material respects, in accordance with the IACS Framework issued by the Internal Accounting Control System Operation

Committee.”

We conducted our review in accordance with IACS Review Standards, issued by the Korean Institute of Certified Public Accountants.

Those Standards require that we plan and perform the review to obtain assurance of a level less than that of an audit as to whether

Report on the Operations of Internal Accounting Control System is free of material misstatement. Our review consists principally

of obtaining an understanding of the Company’s IACS, inquiries of company personnel about the details of the report, and tracing

to related documents we considered necessary in the circumstances. We have not performed an audit and, accordingly, we do not

express an audit opinion.

A company’s IACS is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of

its inherent limitations, however, IACS may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness

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 Report on the Operations of Internal Accounting Control System as of

December 31, 2010 is not prepared in all material respects, in accordance with IACS Framework issued by the Internal Accounting

Control System Operation Committee.

This report applies to the Company’s IACS in existence as of December 31, 2009. We did not review the Company’s IACS subsequent to

December 31, 2010. This report has been prepared for Korean regulatory purposes, pursuant to the External Audit Law, and may not

be appropriate for other purposes or for other users.

March 3, 2011

Notice to ReadersThis report is annexed in relation to the audit of the financial statements as of December 31, 2010 and the review of internal accounting control system pursuant to Article 2-3 of the Act on External Audit for Stock Companies of the Republic of Korea.

90 | 9190

History

Jan. 1994Enactment of “Law on Balanced Regional Development and Fostering of Regional Small and Medium Enterprises”

Dec. 1995The enactment of the “Special Law on Support for Development of Abandoned Mine Areas” (the ground for a casino accessible to Korean nationals)

Jun. 1998 Established Kangwon Land Co., Ltd. (KRW 51 billion in public sector)

Jul. 1999 Completed private subscription share offering (with capital stock of KRW 100 billion)

Oct. 2000 Opened the Small Casino Hotel

Sep. 2001 Opened 「Korea Prevention and Cure Center for Gambling Problems」 as an affiliate of Kangwon Land

Oct. 2001 Registered with the KOSDAQ

Jun. 2002 Founded the Kangwon Land Ski Team

Apr. 2003 Opened Kangwon Land hotel, casino and theme park

Sep. 2003 Listed on Korea Stock Exchange and established Kangwon Land Welfare Foundation

Nov. 2003 Stock split (from KRW 5,000 to KRW 500 per share)

Feb. 2004 The Ministry of Culture and Tourism changed the casino business permit (adding 32 tables)

Mar. 2004 Paid out stock dividends (7%)

Sep. 2004 Founded the Kangwon Land Ice Hockey Team

Mar. 2005The “Special Law on Support for Development of Abandoned Mine Areas” amended (Extended to December 31, 2015)

Jul. 2005 Opened Kangwon Land golf course

Nov. 2006 Declared company vision (leading Korean brand in the culture and tourism industry)

Dec. 2006 Grand opening of High1 Ski Resort and condominiums (18 ski slopes, 403 condo rooms)

Jun. 2007 Held High1 Corporate Identity (CI) Declaration Ceremony

Aug. 2007 Selected “HI HOU” as the High1 Resort character

Oct. 2007 Founded High1 judo team

Jan. 2009 Established Kangwon Land subsidiary, High1 Entertainment

Oct. 2009 Established Kangwon Land subsidiary, High1 Motor Sports Family Resort

Jan. 2010 Established Kangwon Land subsidiary, High1 Switch Back Resort

Feb. 2010 Announced the 「Vision 2012」

Dec. 2010 Opened an expanded condominium complex (500 rooms)

HISTORY


organization

President & CEO President & CEO

Executive Vice President

Corporate Audit Department

Casino Management Department

Hotel Management Department

Leisure Management Department

Construction & Facility Management Department

KLACC (Kangwonland Addiction Care Center)

Safety & Security Department

Regional Cooperation Department

Corporate Audit Team 1

Casino Management Team

Corporate Audit Team 2

Casino Operation Team

Customer Service Team

Table Game A~C Team

Machine Game Team

Marketing Team

Food & Beverage Team

Facility Management Team

Construction Management Team

Hotel Management Team

Culinary Team

Safety Management Team

High1 Hotel & Condo Team

Regional Cooperation Team

Regional Business Team

Rooms Team

Leisure Operating Team

Emergency Planning Team

Corporate Audit Committee

Casino Business Division

Resort Business Division

Executive Vice President

Philanthropy Committee

Corporate Planning & Coordination Department

CFO

High1 Sports Division

Secretary Team

Public Relations Team

Surveillance Team

Corporate Planning Team

Finance & IR Team

Human Resources Team

Corporate Strategy Team

Accounting Team

Labor Relations & Welfare Team

Casino Bank Team

Legal Affairs Team

Supply Management Team

Budget management Team

Management Information System Team

General Affairs Team

Management Support Division

92 | 93

Finance & ir team inFormation

Date of Establishment Jun. 29, 1998

KSE Listing Sep. 4, 2003 (KOSDAQ Listed at Oct. 25, 2001)

Stock Code 035250

Paid-in Capital KRW 106,970 million

Number of Shares Issued 213,940,500

Number of Employees 2,976

Headquarters 265 high1-Gil, Jeongseon-County, Gangwon-Province, 233-701, Korea

Finance & ir team 1303, Shinhan DM Bd., 33-1 Mapo-dong, Mapo-gu, Seoul, Korea 121-050 Tel: 82-2-3270-3868 Fax: 82-2-3270-3860

Head of Finance & IR Team

Yun-taek LimTel: 82-33-590-3202E-mail: [email protected]

Manager

Ashley Ruei-Yu LeeTel: 82-2-3270-3868E-mail: [email protected]

Assistant Manager

Hyun-ju KangTel: 82-2-3270-3872E-mail: [email protected]

Senior Manager

Sa-Hoon KimTel: 82-33-590-3223E-mail: [email protected]

Assistant Manager

Tae-kyu ChoiTel: 82-2-3270-3866E-mail: [email protected]

Clerk

Song-hee ChoiTel: 82-33-590-3226E-mail: [email protected]

FINANCE & IR TEAM INFORMATION

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265 High1-Gil, Jeongseon-County, Gangwon-Province, 233-701, Korea TEL_82. 33. 590. 7700 www.high1.com

Documents

BUILDING A NEW PARADIGM FOR ASIAâ€™S PREMIER INTEGRATED RESORT