REG - Lotte Shopping CoLtd - 2014 1H Semi Annual Report <Origin Href="QuoteRef">023530.KS</Origin> - Part 1
RNS Number : 6978SLotte Shopping Co. Ltd26 September 2014Semi-Annual Report
(45th fiscal year)
For the six month period ended 30 June 2014
To: Financial Services Commission of Korea
KRX KOSPI Market 14 August 2014Company Name : Lotte Shopping Co., Ltd.
CEO : Wonjun Lee
Head Office : 81, Namdaemun-ro, Jung-gu, Seoul
(Tel) +82 2-771-2500
(Homepage) http://www.lotteshopping.comPrepared by : (Position) Head of Investor Relations (Name) Wookyung Kim
(Tel) +82 2-2118-2025On 14 August 2014, Lotte Shopping Co., Ltd. (the "Company") filed its business report for the firstsix monthsof 2014 (the "Business Report") with the Financial Services Commission of Korea (the "FSC") and the KRX KOSPI Market of the Korea Exchange. This is a summary of the Business Report translated into English. Except where indicated otherwise, financial information contained in this summary and in the attached condensed consolidated interim financial statements of the Company as of and for the six month period ended30 June 2014has been prepared in accordance with the Korean equivalent of International Financial Reporting Standards ("Korean IFRS"). References to "1H" of a fiscal year are references to the six month period ended 30 June or, as the context requires, 30 June of such fiscal year.
I. Overview of the Company
A. Main Businesses of the Company
The Company had 56 subsidiaries as of 30 June 2014, and the Company and its subsidiaries (on a consolidated basis, the "Group") may be divided into the following segments: department store segment, discount store segment, finance (credit card service) segment, electronics segment and other segment.
B. Subsidiaries and Affiliates of the Company
1. Consolidated Subsidiaries
See Note 1 of the notes to the attached condensed consolidated interim financial statements of the Company as of and for six month period ended 30 June 2014.
2. Affiliates
The Company has 74 affiliates.
a. Listed companies
Business category
Affiliates
Number of companies
Food
Lotte Confectionary, Lotte Food, Lotte Chilsung Beverage
3
Petrochemical
Lotte Chemical
1
Retail
Lotte Shopping, Lotte Hi-mart
2
Finance / Insurance
Lotte Insurance
1
Communications
Hyundai Information Technology
1
b. Unlisted companies
Business category
Affiliates
Number of companies
Food / Pharmaceutical
Lotteria, Lotte Boulangerie, CH Beverage, MJA Wine, HUI, Chung-buk Soju,
Cinema Food, Baekhak Beverage8
Tourism / Leisure
Lotte Hotel, Lotte Giants, Lotte Hotel Busan, Lotte Corporation, Lotte Cinema, D-Cinema Korea, Lotte JTB, Lotte Gimhae Development, Universal Studios Korea Development
9
Retail
Lotte International, Lotte Station Building, Lotte Logistics, Korea Seven, Lotte.com, Lotte Asahi Liquor, FRL Korea, Woori Home Shopping, Buy the Way, Korea STL, Lotte Suwon Station Shopping Town, Lotte DF Global, Lotte DF Retail, S&S International, NCF, Lotte Songdo Shopping Town, CS Mart
17
Chemical
Korea Fuji Film, Sambark LFT
2
Machinery / Electronics
Lotte Aluminium, Canon Korea Business Solutions
2
Construction /
Real Estate
Lotte Engineering & Construction, Lotte Asset Development, Lotte Incheon Development, Universal Studios Korea Resort Asset Management Corporation, Donggyo Cheonggiwa PFV, L Properties
6
Advertising
Daehong Communications, Mobizap Media, M.Hub
3
Communications
Lotte Data Communication, Han Paysys
2
Financial
Lotte Capital, Lotte Card, Lotte PS Net, Mybi, Busan Hanaro Card, eB Card, Gyeonggi Smartcard, Incheon Smartcard, Chungnam Smartcard, Jang Kyo PFV
10
Petrochemicals
Seetec, KP Chemtech, Daesan MMA, Lotte Mitsui Chemicals, Lotte Versalis Elastomers
5
Manufacturing
DACC Aerospace, Angel With
2
Baekhak Beverage became an affiliate of the Company.
C. Recent Changes in Management
Summary of the appointment of the board of directors at the annual general shareholders' meeting held on 21 March 2014:
Appointment of inside director: Dongbin Shin, Inwon Lee, Youngja Shin, Heon Shin
Appointment of outside directors: Taehyeon Kim, Dongyul Park, Sukeun Kwak, Byungkee Ko
Summary of the appointment of the board of directors at the extraordinary general shareholders' meeting held on 10 June 2014:
Appointment of inside director: Wonjun Lee
D. Recent Acquisitions by the Company
On 19 January 2012, the Company acquired a 97.37% equity interest in CS Mart Co., Ltd. and became its controlling shareholder.
On 31 October 2012, the Company acquired a 65.25% equity interest in Hi-mart Co., Ltd., a retail company for electronics with Himart-Logitec Co., Ltd., Hi-mart Shopping Co., Ltd. and The 1st Hi-mart SPC as its subsidiaries, and became its controlling shareholder.
E. Changes in Capital Stock
1. Increase (decrease) in share capital
(As of 30 June 2014) (Unit: Won, shares)
Date of new stock issuance
Type of issue
Details of the newly issued stock
Type
Quantity
Par value per share
Issued value
Remarks
9 February 2006
Paid-in capital increase (public subscription)
Common stock
6,857,143
5,000
400,000
LSE listed
(GDS)
9 February 2006
Paid-in capital increase (public subscription)
Common stock
1,714,286
5,000
400,000
KRX listed
16 March 2006
Paid-in capital increase (public subscription)
Common stock
471,945
5,000
400,000
LSE listed
(GDS)
22 January 2013
-
Common stock
2,447,518
5,000
-
KRX listed
The Company's Global Depositary Shares ("GDSs") were issued at US$20.67 per GDS, at the ratio of one share of common stock to 20 shares of GDSs. (Applying an exchange rate of Won 967.8 per US$1.00).
On 22 January 2013, additional shares of the Company that were issued in connection with the Company's acquisition of Lotte Midopa were listed on the Korea Exchange.
2. Issuance of convertible bonds
(As of 30 June 2014) (Unit: thousand Won, shares, %)
Type of issue
Date of issuance
Date of maturity
Total face amount
Type of convertible stock
Conversion period
Conversion terms
Outstanding bonds
Rate
Price
Face amount
Shares upon conversion
First Overseas Convertible Bond
5 July 2011
5 July 2016
978,969,250
Unregistered common stock
5 July 2012 ~ 24 June 2016
100%
650
978,969,250
1,506,106
The number of shares upon conversion was calculated by dividing the total principal amount by the conversion price, disregarding fractional shares.
Conversion based on the fixed exchange rates of US$ 1.00 = Won 1,083.50 and JPY 100 = Won 1,345.29, which were the exchange rates announced by the Seoul Money Brokerage Services, Ltd. on 15 June 2011 (the date of the board of directors resolution in connection with the issuance).
In accordance with Korean IFRS 1032, the number of shares to be issued and the amount in connection with the exercise of a conversion right on a convertible security must be fixed for the conversion right to be classified as an equity security. In the Company's case, while the number of shares to be issued is fixed, the amount of principal to be paid upon maturity if the bonds remain unconverted will vary depending on the exchange rate. As such, the convertible bonds must be classified as a debt security, and the Company recognizes the bonds in its liability accounts, instead of in its equity account.
On 5 July 2014, holders exercised their early redemption option and redeemed US$480,000,000 and JPY 22,940,000,000 aggregate principal amount of the convertible bonds.
F. Total Number of Shares
(As of 30 June 2014) (Unit: shares)
Type
Number of shares
Common shares
Total
Number of shares authorized
60,000,000
60,000,000
Total issued shares
32,236,362
32,236,362
Total number of shares withdrawn
745,470
745,470
Number of issued shares
31,490,892
31,490,892
Number of treasury shares
1,938,688
1,938,688
Number of issued and outstanding
29,552,204
29,552,204
G. Voting Rights
(As of 30 June 2014) (Unit: shares)
Type
Number of shares
Remarks
Total issued shares (A)
Common stock
31,490,892
-
Preferred stock
-
-
Shares without voting rights (B)
Common stock
1,938,688
Treasury stock
Preferred stock
-
-
Shares without voting rights pursuant to the Company's articles of incorporation (C)
Common stock
-
-
Preferred stock
-
-
Shares with restricted voting rights pursuant to law (D)
Common stock
-
-
Preferred stock
-
-
Shares with restored voting rights (E)
Common stock
-
-
Preferred stock
-
-
Shares with exercisable voting rights
(F = A - B - C - D + E)
Common stock
29,552,204
-
Preferred stock
-
-
H. Dividends
1. Dividends for the past three years
Subject
45thfiscal year (1H)
44thfiscal year
43rd fiscal year
Par value per share (Won)
5,000
5,000
5,000
Net profit (million Won)
413,268
618,471
1,018,215
Earnings per share (Won)
13,822
20,922
35,058
Total cash dividend (million Won)
-
44,328
43,565
Total stock dividend (million Won)
-
-
-
Cash dividend payout ratio (%)
-
7.17
4.28
Cash dividend yield (%)
Common stock
-
0.38
0.40
Preferred stock
-
-
-
Stock dividend yield (%)
Common stock
-
-
-
Preferred stock
-
-
-
Cash dividend per share (Won)
Common stock
-
1,500
1,500
Preferred stock
-
-
-
Stock dividend per share
Common stock
-
-
-
Preferred stock
-
-
-
Prepared on a separate basis in accordance with Korean IFRS.
2. Calculation of earnings per share for the current period
Category
2014 (1H)
Net profit for the period
Won 413,267,823,672
Interest on issued hybrid securities
Won (4,796,264,727)
Weighted average number of common stock (excluding treasury stock)
29,552,204 shares
Earnings per common share
Won 13,822
II. Business Description
A. Business Overview
The following table is a summary of the Company's main businesses and subsidiaries organized by business segment.
Business segment
Subsidiaries
Main businesses
Department store
Lotte Shopping (department store)
Department store establishment, management and distribution businesses
Discount store
Lotte Shopping (discount store)
Large discount store establishment, management and distribution businesses
Lotte Vietnam Shopping Co., Ltd.
Discount store business in Vietnam
Qingdao Lotte Mart Commercial Co., Ltd.
Discount store business in China
Lotte Mart Co., Ltd.
Lotte Mart China Co., Ltd. and 42 other entities
Liaoning Lotte Mart Co., Ltd.
Jilin Lotte Mart Co., Ltd.
Lottemart (ChongQing) Commericial Company Limited
Lottemart (ChengDu) Commercial Company Limited
PT. Lotte Shopping Indonesia
Discount store business in Indonesia
PT. Lotte Mart Indonesia
Finance
Lotte Card
Credit card business
eB Card Co., Ltd.
Electronic payment and transportation card system (AFC system) businesses
Electronics
Lotte Hi-mart Co., Ltd.
A wholesale and retail company for electronics and household appliances
Other
Lotte Shopping (supermarket)
Supermarket establishment, management and distribution businesses, including supermarket real estate and leasing
CS Mart
Lotte Shopping (cinema)
Producing, investing and distributing movies; management of cinemas
Woori Home Shopping & Television Co., Ltd.
TV home shopping, online shopping and catalogue shopping businesses
Korea Seven Co., Ltd.
Convenience store business
Buy the Way Inc.
Convenience store business
Lotte Songdo Shopping Town Co., Ltd.
Development and management of Lotte Mall Songdo
Lotte Shopping Holdings (Singapore) Pte., Ltd.
Investing in retail businesses in Vietnam, India and Indonesia
Lotte Shopping Holdings (Hong Kong) Ltd.
Investing in retail businesses in China
LHSC Limited
Investing in home shopping businesses in China
Lotte Hotel & Retail Vietnam Pte. Ltd.
A holding company investing in new industries and business expansions in Vietnam
The following table is a summary of the Company's financial condition by business segment.
(Unit: million Won, %)
Business segment
Division
45th fiscal year (1H)
44th fiscal year (1H)
44th fiscal year
43rd fiscal year
Amount
Percentage
of total
Amount
Percentage of total
Amount
Percentage of total
Amount
Percentage
of total
Department Store
Sales
3,973,399
29.0
4,010,785
28.9
8,172,110
29.0
8,245,900
32.9
Operating income
322,100
49.4
333,765
46.4
698,694
47.0
746,267
50.9
Total assets
16,217,987
41.6
15,675,138
41.1
15,667,182
40.2
15,077,912
40.9
Discount Store
Sales
4,043,560
29.5
4,468,440
32.2
8,836,455
31.3
8,954,593
35.8
Operating income
43,881
6.7
110,506
15.3
220,431
14.8
319,564
21.8
Total assets
10,893,122
27.9
11,193,145
29.4
11,008,450
28.2
10,970,095
29.8
Finance
Sales
885,018
6.5
877,030
6.3
1,694,060
6.0
1,672,961
6.7
Operating income
136,868
21.0
115,321
16.0
200,749
13.5
219,288
14.9
Total assets
8,013,760
20.5
8,141,217
21.4
8,537,358
21.9
8,087,110
21.9
Electronics
Sales
1,782,605
13.0
1,649,891
11.9
3,519,060
12.5
604,662
2.4
Operating income
57,210
8.8
93,145
12.9
184,804
12.4
32,942
2.2
Total assets
2,876,269
7.4
2,739,101
7.2
2,755,424
7.1
2,603,494
7.1
Others (1)
Sales
3,022,749
22.0
2,861,085
20.7
5,990,017
21.2
5,565,564
22.2
Operating income
91,694
14.1
67,342
9.4
180,583
12.3
149,407
10.2
Total assets
1,021,250
2.6
373,060
0.9
1,004,152
2.6
118,434
0.3
Total
Sales
13,707,331
100.0
13,867,231
100.0
28,211,702
100.0
25,043,680
100.0
Operating income
651,753
100.0
720,079
100.0
1,485,261
100.0
1,467,468
100.0
Total assets
39,022,388
100.0
38,121,661
100.0
38,972,566
100.0
36,857,045
100.0
(1) Represents adjustments for consolidation.
1. Department store business segment
a. Lotte Shopping (department store)
i. Industry overview
The department store industry in Korea has recorded growth rates of 11.3% in 2011 and 5.4% in 2012 as a result of emphasis on customer service, brand differentiation and high quality. In 2013, the industry continued to demonstrate steady growth with a growth rate of 4.6% and recorded approximately Won 30 trillion in sales while the Korean economy grew only by 2.8%.
Department store market size in Korea
(Unit: trillion Won, %)
Category
2012
2013
2014(1H)
Market size
29.1
29.8
14.5
Growth rate
5.4%
4.6%
(0.3)%
Source: National Statistics Office
Excludes data for outlets.
Number of department stores in Korea
(Unit: stores)
Category
2012
2013
2014(1H)
Number of department stores
89
93
93
Increase (decrease)
3
4
-
Source: National Statistics Office
Excludes data for outlets.
ii. Company overview
Trends in market share
(Unit: %)
Category
2012
2013
2014(1H)
Lotte department store's market share
44.4%
45.8%
47.2%
Source: National Statistics Office and Company data.
Sales from the Company's department stores are gross sales (including sales from leased shops).
The revenue of Lotte Department Stores includes 29 stores owned by the Company, as well as two Young Plaza stores, ten outlet stores, and two stores operated by the Company pursuant to management contracts with Lotte Station Building (an affiliate of the Company).
2. Discount stores business segment
a. Lotte Shopping (discount store)
i. Industry overview
The following tables show the market size and number of discount stores in Korea.
Discount store market size in Korea
(Unit: trillion Won, %)
Category
2012
2013
2014(1H)
Market size
44.2
45.1
22.7
Growth rate
4.9%
2.0%
4.6%
Source: National Statistics Office
Based on data for large marts (defined as having retail space of 3,000 square meters or more - includes certain duty free shops and outlets).
Number of discount stores in Korea
(Unit: stores)
Category
2012
2013
2014(1H)
Number of discount stores
498
511
515
Increase (decrease)
22
13
4
Source: National Statistics Office
Based on data for large marts (defined as having retail space of 3,000 square meters or more - includes certain duty free shops and outlets).
ii. Company overview
The following table shows the market share of Lotte Mart in the discount store market in Korea.
Trends in market share
(Unit: %)
Category
2012
2013
2014(1H)
Lotte Mart's market share
15.9%
15.9%
15.4%
Source: National Statistics Office and Company data
Includes data for 105 domestic discount stores and four VIC Market stores.
b. Lotte Vietnam Shopping Co., Ltd.
i. Industry overview
Trends in market size in Vietnam
Category
2012
2013
2014(1)
Population (thousand people)
90,388
92,477
96,176
GDP (USD 100 million)
1,399
1,700
1,795
Per capita (USD)
1,548
1,838
1,914
Growth rate (%)
5.3
5.4
5.6
Consumer price index (%)
8.1
6.2
7.0
Note:
(1) Projected
Source: Planet Retail and the General Statistics Office of Vietnam
ii. Company overview
The Company opened its first store in Vietnam in south Saigon in December 2008 followed by its second store in Phu Tho in July 2010. The Company has selected Vietnam as one of its target countries for expansion of the discount store business and plans to enhance its presence in Vietnam through aggressive expansion and localization. As of 31 December 2013, the Company operated six stores in Vietnam. In March 2014, the Company opened its first store in Hanoi (Dong Da store).
Status of Lotte Vietnam Shopping Co., Ltd. stores
(Unit: stores)
Category
2012
2013
2014 (2Q)
Number of stores
4
6
7
Increase (decrease)
2
2
1
c. Qingdao Lotte Mart Commercial Co., Ltd., Lotte Mart Co., Ltd., Lotte Mart China Co., Ltd. and42 other entities/ Liaoning Lotte Mart Co., Ltd. / Jilin Lotte Mart Co., Ltd. / Lottemart (ChongQing) Commercial Company Limited / Lottemart (ChengDu) Commercial Company Limited
i. Industry overview
Trends in market size in China
Category
2012
2013
2014(1)
Population (thousand people)
1,354,040
1,360,763
1,367,520
GDP (USD 100 million)
82,411
91,890
102,235
Per capita (USD)
6,086
6,789
7,476
Growth rate (%)
7.7
7.7
7.5
Increase in consumer price index (%)
2.7
2.6
3.0
Note:
(1) Projected
Source: Planet Retail
ii. Company overview
The Company has been actively expanding into the Chinese market, starting with the acquisition of eight Makro stores in China in June 2008. The Company acquired Times Ltd.'s discount stores in 2009. The Company operated 102 stores in China as of 30 June 2014 and plans to continually expand in China.
Status of stores in China
(Unit: stores)
Category
2012
2013
2014(1H)
Number of stores
Shanghai
78
77
73
Qingdao
6
7
6
Beijing
12
12
12
Shenyang
6
9
9
Chongqing
-
2
2
Total
102
107
102
Increase (decrease)
8
5
(5)
d. PT.Lotte Shopping Indonesia and PT.Lotte Mart Indonesia
i. Industry overview
Trends in the market size in Indonesia
Category
2012
2013
2014(1)
Population (million people)
244
248
251
GDP (USD billion)
883
875
847
Increase in consumer price index (%)
4.3
7.3
7.5
Note:
(1) Projected
Source: Planet Retail (March 2014)
ii. Company overview
The Company acquired 19 Makro stores in Indonesia in November 2008 and opened 12 stores through its local retail business subsidiary in 2010, 2011 and 2012. As of 30 June 2014, the Company operated 37 stores in Indonesia and plans to continually expand in Indonesia.
Status of stores in Indonesia
(Unit: stores)
Category
2012
2013
2014(1H)
Number of stores
31
36
37
Increase (decrease)
3
5
1
3. Financial business sector segment
a. Lotte Card
i. Industry overview
Status of credit card business
(As of 30 June 2014)
Type
Company name
Number of companies
Dedicated credit card companies
Lotte Card, Samsung Card, Hyundai Card, Shinhan Card, Hana SK Card, BC Card, KDB Capital, KB Kookmin Card, Woori Card
9
Banks with credit card business
Kyongnam Bank, Kwangju Bank, Industrial Bank of Korea, Daegu Bank, Busan Bank, Suhyup Bank, Standard Chartered Bank, Citibank Korea, Korea Exchange Bank, Jeonbuk Bank, Jeju Bank, NH Nonghyup Bank
12
Source: Press Release from the Credit Finance Association
Credit card issuances and usage data
Year
Number of credit cards
(ten thousand cards)Number of card holders(ten thousand persons)
Credit card charge volumes (trillion Won)
2011
12,214
8,726
558.5
2012
11,623
8,406
577.7
2013
10,203
7,589
585.6
2014 (1Q)
9,540
7,211
141.8
Source: Press release from the Financial Supervisory Service
ii. Company overview
Lotte Card, a subsidiary of the Company, is a leading credit card company in Korea with the largest distribution and service network.
Trends in market share
(Unit: trillion Won, %)
Category
2012
2013
2014 (1Q)
Credit card market size in Korea by charge volumes
577.7
585.6
141.8
Lotte Card's charge volumes
50.7
54.1
12.6
Lotte Card's market share
8.8%
9.2%
8.9%
Source: Financial Statistics Information System of the Financial Supervisory Service
Based on credit purchases (including lump-sum payments, instalments and corporate purchases) and cash loans (including cash services and card loans).
b. eB Card
i. Industry overview
Prepaid cards use electronic money to pay for transportation services. Prepaid cards are used in the transportation and distribution sectors throughout Korea.
Competitivesituation
Comparisons of competitors in 2014(1H)
MYbi
eB Card
Korea Smart Card
Card name
MYbi Card
Cash Bee
T Money
Service area
Busan, Ulsan, Gyeongnam Province, etc.
Gyeonggi Province, Incheon, Chungnam Province, etc.
Seoul, Jeju, Pohang, etc.
Bus
9,025 buses
19,140 buses
11,098 buses
Taxi
46,080 taxies
40,952 taxies
122,225 taxies
Subway
128 stations
-
441 stations
ii. Company overview
eB Card, a subsidiary of the Company, provides electronic money services for store and transportation networks. In December 2010, eB Card issued a new pre-paid card brand called "Cash Bee." Unlike then prepaid transportation cards existing before, Cash Bee cards can be used to make purchases at convenience stores and retail outlets in addition to paying for transportation fares. As of 30 June 2014, Cash Bee cards are accepted at 43,437 places.
In addition, in May 2011, eB Card introduced Near Field Communication (NFC) based pre-paid mobile Cash Bee for NFC compatible mobile smartphones. Users of pre-paid mobile Cash Bee can download the mobile Cash Bee application on to their NFC compatible mobile smartphones to make purchases at convenience stores and retail outlets in addition to paying for transportation fares.
Trends in market share
(Unit: 100 million Won, %)
Category
2011
2012
2013
Market size for prepaid cards in Korea based on sales (1)
2,664
2,641
2,678
EB Card
476
589
692
EB Card's market share
17.9%
22.3%
25.8%
Notes:
(1) Based on disclosure of MYbi, eB Card and Korea Smart Card.
4. Electronics
a. Lotte Hi-mart
i. Industry overview
Market size of household / consumer electronics in Korea
(Unit: trillion Won)
Category
2010
2011
2012
2013
Household electronics
15.1
15.6
15.4
16.6
Computer and communication devices
19.6
23.0
24.4
21.8
Source: National Statistics Office
ii. Company overview
Lotte Hi-Mart was established in 1987. Since then, it quickly established itself as an electronics specialty store with a nationwide store network. Lotte Hi-Mart, which had initially sold large electronic products such as TVs, refrigerators and washing machines, began to offer personal computers in 2001 and other IT products. In 2007, Lotte Hi-Mart began selling mobile products, such as smartphones, tablet PCs and related products, and is continually expanding sales in this area.
In the first half of 2014, although sales of seasonal and display related electronics was slow because of outside factors and changes in trend, Hi-mart's revenue increased by approximately 8.0% on a consolidated basis compared to the first half of 2013, largely due to the continued growth of household electronics and appliances such as refrigerators and washing machines.
Lotte Hi-mart opened 36 new stores during the first quarter and 35 new stores during the second quarter of 2014 and, as of 30 June 2014, operated 430 stores in total.
Lotte Hi-Mart currently operates 11 logistic centres and implements a CS Master system for training and management of specialized installation teams. As of 30 June 2014, 607 household electronics installation teams and 1,672 air conditioner installation teams were in charge of installation. In addition, there were 11 service centres for electronics repair services.
The online shopping mall was launched in 2000 to expand into the rapidly-growing online market and attract young customers who are familiar with the use of the Internet. The shopping mall currently operates through a website (www.e-himart.co.kr).
Market share of household / consumer electronics among household / consumer electronics stores
Store
2011
2012
2013
Lotte HiMart
47.3
47.0
46.6
Electronics Land
7.4
7.1
7.3
Living Plaza
25.8
26.8
26.7
Hi Plaza
19.5
19.0
19.4
Source: Audit reports of respective companies
5. Other Business Segments
a. Lotte Super, CS Mart
i. Industry overview
Large supermarket chains are growing at a slower rate than the industry rate due to stricter laws protecting local merchants that restrict the opening of new stores by large supermarket chains. Overall, the industry was slow to grow due poor consumption levels, mandatory days of closure and shorter hours of business. Accordingly, the industry is seeking various ways to continue growing, such as store diversification and new business development. The sluggish growth is expected to continue in 2014 for large supermarket chains. As such, they are making efforts to boost sales by diversifying new stores, developing new products that follow consumption trends and pioneering new businesses as well as increase profits by improving store operation efficiency and cutting costs.
ii. Company overview
Lotte Super started its supermarket business in April 2000. Starting with the Jeonnong store as its first store, Lotte Super has built up many stores across Korea, including through the acquisition of the chain store business of Hanwha Stores in 2004 and Big Mart and Nice Mart in 2007.
In addition, Lotte Super entered the online supermarket business by opening an online shopping mall in 2009. In 2010, Lotte Super started a new franchise model to strengthen its cooperation with small and medium-sized merchants and contribute to regional communities through increased employment and service improvements, among others. In 2012, Lotte Super strengthened its leading market position by acquiring CS Distribution and thereby creating synergy effects from the newly acquired businesses such as the voluntary franchise business. In March 2013, Lotte Super launched a mobile application to enhance convenience for customers and became the first player in the industry to pave the new avenue of mobile supermarket shopping.
b. Lotte Cinema
i. Industry overview
The Korean film industry recorded sales of Won 433.3 billion in the second quarter of 2014, reflecting a 5.0% increase from the same period in 2013. In the second quarter of 2014, 42.0 million movie tickets were sold, showing a 2.6% decrease from the 43.0 million movie tickets sold during the same period in 2013.
ii. Company overview
As of 30 June 2014, Lotte Cinema operated 100 movie cinemas. In addition, Lotte Cinema entered the Vietnamese market in May 2008 and was the first Korean company to do so. In December 2010, Lotte Cinema opened its first overseas cinema in Songshan, China, as part of its plan to expand in overseas markets. In 2013, Lotte Cinema opened four new cinemas in China and four new cinemas in Vietnam. As of 30 June 2014, Lotte Cinema operated 24 overseas cinemas.
Trends in market share
(Unit: 1,000 persons, %)
Category
2012
2013
2014(2Q)
Number of movie tickets sold in the cinema industry in Korea
194,891
213,349
41,946
Number of movie tickets sold by Lotte Cinema(1)
55,629
63,764
12,284
Lotte Cinema's market share
28.5%
29.9%
29.3%
Note:
(1) Includes the number of movie tickets sold by cinemas managed but not owned by Lotte Cinema.
c. Woori Home Shopping
i. Industry overview
(1) TV home shopping
There are six TV home shopping companies in Korea. Korea Home Shopping (currently GS Home Shopping) and 39 Home Shopping (currently CJ O Shopping) started in 1995, three companies, Woori Home Shopping, Hyundai Home Shopping and NS Home Shopping, joined the market in 2001 and Home & Shopping joined the market in 2011. TV home shopping companies, under the approval of the Korea Communications Commission, furnish customers with product information through TV channels, receive orders, mostly through phone calls, and then deliver the ordered products to customers at their desired locations. Therefore, TV home shopping business operation requires infrastructure, such as broadcasting facilities and logistics systems, strategic products planning and a variety of customer services.
(2) Online shopping mall
Online shopping malls deliver product information directly to consumers through wholesalers and Internet and allow customers to purchase at their convenience and at cheaper prices.
(3) Catalogue
Catalogue companies send catalogues describing products to select customers, and customers can order and purchase products through the catalogues that they receive. Increasing customer base and delivering the optimal product information to customers are important elements in this business.
ii. Company overview
Woori Home Shopping, a subsidiary of the Company, sells a variety of consumer goods and services by means of TV home shopping. In addition, Woori Home Shopping also operates an online shopping mall and catalogue shopping business.
Trends in market share
(Unit: 1,000 persons, %)
Category
2012 (1H)
2013 (1H)
2014 (1H)
Market size of the home shopping industry in Korea
17,072
18,337
19,997
Woori Home Shopping sales
3,162
3,597
4,177
Woori Home Shopping market share
18.5%
19.6%
20.9%
Estimated based on publicly disclosed estimated total sales data for the Company's competitors in Korea (excluding NS Home Shopping and Home & Shopping).
d. Korea Seven / Buy the Way
i. Industry overview
The convenience store industry in Korea faces challenges including market saturation, new government regulations on store openings and conflicts with franchisees. In addition to market maturity which led to a slump in monthly store opening rates, the enforcement of the amended Franchise Act which restricts store openings have forced industry players to shift their strategy from quantitative growth to qualitative growth. Under such environment, the convenience store industry's plans for store openings have shifted from large cities to mid- and small-sized cities and focus has been placed on increasing sales in current stores by diversifying products and increasing price competitiveness. Increased disputes with franchisees has also spurred franchisor companies to seek out new ways to achieve shared growth with their franchisees.
ii. Company overview
Korea Seven, a subsidiary of the Company, has operated a chain of convenience stores in Korea under the brand name 7-Eleven since 1999. Korea Seven acquired 100% of the capital stock of Buy the Way, which also operates convenience stores in Korea, in 2010.
Trends in market share
(Unit: %)
Category
2011
2012
2013
Korea Seven and Buy the Way's market share
29.3%
30.1%
29.6%
Estimated based on Company data and includes acquired Buy the Way stores.
e. Lotte Songdo Shopping Town
The Company completed its land purchases in connection with the construction of Lotte Mall Songdo in July 2011. In December 2013, the Company completed the first-stage of construction, the mart section, which is currently open for business. The second stage of this project is currently undergoing earthworks and is scheduled to be completed by the second half of 2017.
f. Lotte Shopping Holdings (Singapore) Pte., Ltd., Lotte Shopping Holdings (Hong Kong) Co., Ltd., LHSC Limited, Lotte Hotel & Retail Vietnam Pte., Ltd.
As of 30 June 2014, Lotte Shopping Holdings (Singapore) Pte., Ltd. held shares in distribution companies in India, Indonesia and Vietnam (including Lotte Hotel & Retail Vietnam Pte. Ltd., a holding company established to pursue and expand new business opportunities in Vietnam), while Lotte Shopping Holdings (Hong Kong) Co., Ltd. holds shares in distribution companies in China as well as LHSC Limited, a holding company established for the acquisition of a home shopping company, Lucky Pai, in China.
(Unit: million Won,%)
Name of holding company
Name of subsidiaries
Shareholding ratio
Book value for investment stock
Business Type
Lotte Shopping Holdings (Singapore) Pte. Ltd.
Lotte Shopping India Pvt. Ltd.
100.0%
15
Distribution
(department store)
Lottemart C&C India Pvt. Ltd.
100.0%
965
Distribution (mart)
PT.Lotte Shopping Indonesia
25.0%
72,503
Distribution
(mart)
PT.Lotte Mart Indonesia
99.0%
80,340
Distribution
(mart)
Lotte Hotel & Retail Vietnam Pte. Ltd.
40.0%
25,117
Investment company
Lotte Shopping Avenue Indonesia
99.0%
44,187
Distribution
(department store)
Lotte Shopping Plaza Vietnam Co., Ltd.
100.0%
16,940
Distribution
(department store)
Lotte Shopping Holdings
(Hong Kong) Co., Ltd.Lotte Business Management (Tianjin) Co., Ltd.
100.0%
40,576
Distribution (department store)
Lotte Mart China Co., Ltd. and 42 entities
100.0%
640,913
Distribution
(mart)
LHSC Limited
51.0%
87,373
Investment company
Liaoning Lotte Mart Co., Ltd.
60.0%
0
Distribution (mart)
Qingdao Lotte Mart Commercial Co., Ltd.
46.2%
0
Distribution (mart)
Lotte Department Store (Shenyang) Co., Ltd.
100.0%
60,864
Distribution
(department store)
Lotte International Department Store (Weihai) Co., Ltd.
100.0%
30,432
Distribution
(department store)
Jilin Lotte Mart Co., Ltd.
100.0%
15,216
Distribution (mart)
Lotte Shopping Business Management (Hong Kong) Limited
100.0%
10
Bond issuances
Lotte Department Store (Tianjin) Co., Ltd.
100.0%
50,720
Distribution
(department store)
Lotte Department Store (Chengdu) Co., Ltd.
100.0%
40,576
Distribution
(department store)
Lotte Mart (Chongqing) Commercial Company Limited
100.0%
20,288
Distribution (mart)
Lotte Mart (Chengdu) Commercial Company Limited
100.0%
6,086
Distribution (mart)
As of 30 June 2014 (exchange rate of USD 1.00 = KRW 1,014.4)
Financial statements prepared on a separate basis under Singapore FRS and HK FRS.
B. Production and Facilities
1. Plans for the establishment of new stores
Category
Store
Location
Expected establishment date
Department stores
Avenuel World Tower
Sincheon-dong, Songpa-gu, Seoul, Korea
2H 2014
Suwon
Seodun-dong, Gwonseon-gu, Suwon-si, Gyeonggi-do, Korea
2H 2014
Lotte Center Hanoi
Hanoi, Vietnam
September 2014
Outlets
Goyang
Baekseok-dong, Ilsandong-gu, Goyang-si, Gyeonggi-do, Korea
2H 2014
Guri
Inchang-dong, Guri-si, Gyeonggi-do, Korea
2H 2014
East Busan
Dangsa-ri, Gijang-eup, Gijang-gun, Busan, Korea
2H 2014
Gwangmyeong
Iljik-dong, Gwangmyeong-si, Gyeonggi-do, Korea
2H 2014
Cinemas
World Tower
Sincheon-dong, Songpa-gu, Seoul, Korea
2H 2014
Seoul Gayang
Gayang-dong, Gangseo-gu, Seoul, Korea
November 2014
Busan Gwangbok
Jungang-dong, Jung-gu, Busan, Korea
August 2014
Suwon Station
Seodun-dong, Gwonseon-gu, Suwon-si, Gyeonggi-do, Korea
2H 2014
Daegu Sangin
Sangin-dong, Dalseo-gu, Daegu, Korea
November 2014
Seoul Geumcheon
Doksan-dong, Geumcheon-gu, Seoul, Korea
December 2014
Gwangmyeong
Iljik-dong, Gwangmyeong-si, Gyeonggi-do, Korea
December 2014
The above plans are subject to change based on future business conditions.
2. Plans for new establishment and purchase of facilities
a. Investments under progress
(Unit: 100 million Won)
Category
Type
Investment period
Investment asset
Investment effect
Total investment
Prior
Investment
Future investment
Department store
New
investment2014 - 2016
Tangible assets
Increase in sales
26,157
2,386
23,771
Discount store
New
investment2014 - 2016
Tangible assets
Increase in sales
15,903
1,208
14,695
The above plans are subject to change based on future business conditions.
The above plans are for new domestic investments only, and do not include plans for ordinary or overseas investments or capital injections or additional investments to existing investments.
b. Future investment plans
(Unit: 100 million Won)
Business segment
Project name
Expected investment
Expected annual investment
Effect
Asset type
Amount
2014
2015
2016
Department store
New and ordinary investments
Tangible and other assets
34,411
13,953
10,861
9,597
Increase in sales
Discount store
New and ordinary investments
Tangible and other assets
19,288
5,586
7,402
6,300
Increase in sales
The above plans are subject to change based on future business conditions.
C. Sales
(Unit: million Won)
Business segment
Type
Product
45th Fiscal Year (1H)
44th Fiscal Year (1H)
Department Store
Products
Clothes, etc.
Export
-
-
Domestic
3,545,326
3,663,354
Total
3,545,326
3,663,354
Goods
Export
-
-
Domestic
-
-
Total
-
-
Others
Rental fee, etc.
Export
-
-
Domestic
428,073
347,431
Total
428,073
347,431
Total
3,973,399
4,010,785
Discount Store
Products
Food, etc.
Export
-
-
Domestic
3,760,522
4,198,633
Total
3,760,522
4,198,633
Goods
Export
-
-
Domestic
-
-
Total
-
-
Others
Rental fee, etc.
Export
-
-
Domestic
283,038
269,807
Total
283,038
269,807
Total
4,043,560
4,468,440
Finance
Products
Export
-
-
Domestic
1,545
3,415
Total
1,545
3,415
Goods
Export
-
-
Domestic
-
-
Total
-
-
Others
Fees and
commissions, etc.
Export
-
-
Domestic
883,473
873,615
Total
883,473
873,615
Total
885,018
877,030
Electronics
Products
Electronics, etc.
Export
-
-
Domestic
1,775,131
1,642,514
Total
1,775,131
1,642,514
Goods
Export
-
-
Domestic
-
-
Total
-
-
Others
Rental fee, etc.
Export
-
-
Domestic
7,474
7,377
Total
7,474
7,377
Total
1,782,605
1,649,891
Others(1)
Products
Food, etc.
Export
-
-
Domestic
2,332,641
2,247,433
Total
2,332,641
2,247,433
Goods
Food, etc.
Export
-
-
Domestic
61,022
65,948
Total
61,022
65,948
Others
Rental fees, etc.
Export
-
-
Domestic
629,086
547,704
Total
629,086
547,704
Total
3,022,749
2,861,085
Total
Products
Clothes, food, etc.
Export
-
-
Domestic
11,415,165
11,755,349
Total
11,415,165
11,755,349
Goods
Clothes, food, etc.
Export
-
-
Domestic
61,022
65,948
Total
61,022
65,948
Others
Rental fees, etc.
Export
-
-
Domestic
2,231,144
2,045,934
Total
2,231,144
2,045,934
Total
13,707,331
13,867,231
Note:
(1) Represents adjustments for consolidation.
D. Risk Management
See Note 39 of the notes to the attached condensed consolidated interim financial statements of the Company as of and for six month period ended 30 June 2014.
E. Derivative Instruments and Hedge Accounting
See Note 21 of the notes to the attached condensed consolidated interim financial statements of the Company as of and for six month period ended 30 June 2014.
F. Important Management Contracts
1. Department store business
The Company has entered into management agreements to manage certain department stores owned by its subsidiary Lotte Station Building. In return, the Company receives management fees from Lotte Station Building equal to 10% of the operating income (before depreciation expenses) for the relevant department store, which is accounted for as other operating income.
2. Electronics business
Lotte Hi-mart has entered into agreements with numerous manufacturers, through which it establishes price, supply, return and payment of products, as well as an advertisement agency agreement with Daehong Communications and business cooperation agreements with Hyundai Card and Lotte Card.
3. Credit card business
Lotte Card has entered into card issuance agreements with American Express Company, Master Card International, Visa International and JCB International whereby these companies receive from Lotte Card certain percentage of the credit purchase amounts made on the credit cards issued pursuant to such agreements.
4. Other businesses
a. Woori Home Shopping
Woori Home Shopping has entered into an operating lease agreement with Lotte Capital and a joint card issuance agreement with Shinhan Card Co., Ltd., which is renewable on an annual basis. It has also entered into delivery service agreements with Lotte Logistics, Hyundai Logistics Co., Ltd. and CJ Korea Express Corporation, as well as broadcasting programme supply agreements with multiple cable TV stations.
b. Korea Seven
Korea Seven has entered into trademark and operational technology licensing agreements with 7-Eleven, Inc., pursuant to which Korea Seven pays 0.6% of net sales amount as license fees. Also, Korea Seven has granted 7-Eleven, Inc. the right to purchase the shares of Korea Seven up to 10% of its total outstanding shares on January 1 of each year starting from 2003. Korea Seven has also entered into franchising contracts with franchisees and agency agreements with Lotte Logistics for delivery of products to both company-run and franchise stores.
c. NCF
NCF has a royalty agreement with Nice Claup Co., Ltd. pursuant to which NCF pays Nice Claup a sales royalty fee of 2.2% and a production royalty fee of 0.3% of net sales from 1 December 2010 to 31 March 2016.
d. Buy the Way
Buy the Way has entered into a guarantee agreement with Sportstoto guaranteeing payment of delivered goods and the agreement is renewed every year.
III. Financial Matters
Please refer to the Company's condensed consolidated interim financial statements of the Company as of and for six month period ended 30 June 2014 and the related notes attached to this report.
IV. Auditor's Opinion
A. Audit (Review) Opinion on Consolidated Financial Statements
1. Name of auditor / accountants
45th fiscal year (1H)
44th fiscal year
43rd fiscal year
KPMG Samjong
KPMG Samjong
KPMG Samjong
2. Audit (review) opinion
a. Audit (review) for the current business year
The auditor has reviewed the consolidated statements of financial position as of 30 June 2014 and 30 June 2013, as well as the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of Lotte Shopping Co., Ltd. and its subsidiaries for the six months ended 30June 2014 and 2013.
3. Audit contracts
(Unit: million Won, hours)
Fiscal year
Auditor
Description
Fee
Total hours
45th fiscal year (1H)
Samjong KPMG
Review of semi-annual non-consolidated and consolidated financial statements
670
3,300
44th fiscal year
Samjong KPMG
Review of quarterly and semi-annual financial statements
Audit of non-consolidated and consolidated financial statements
620
10,600
45th fiscal year
Samjong KPMG
Review of quarterly and semi-annual financial statements
Audit of non-consolidated and consolidated financial statements
600
10,800
4. Contracts regarding non-audit services with outside auditor
(Unit: million Won)
Fiscal year
Date of contract
Description
Service period
Fee
45th fiscal year
-
N/A
-
-
44th fiscal year
-
N/A
-
-
43rd fiscal year
-
N/A
-
-
V. Corporate Governance and Affiliates
A. Matters regarding Board of Directors
1. Overview of Board of Directors
a. Composition of Board of Directors
Currently, the Company's board of directors (the "Board of Directors") is composed of 11 directors, of whom six are outside directors.
The Board of Directors decides important matters according to the basic management policies of the Company, matters delegated from the general meeting of shareholders and matters required by the Articles of Incorporation or applicable laws.
b. The Board of Director committees
The Board of Directors may have subcommittees to achieve efficient and timely decision-making. The Company currently has an Audit Committee, an Outside Director Nomination Committee and an Internal Transaction Committee. Details regarding operations, authority and composition of such committees are decided by the Board of Directors or relevant laws.
2. Matters regarding Board of Directors committees
a. Name, directors, objectives and authority
Name of committee
Composition
Name
Objectives and authority
Remarks
Audit Committee
Three or more directors (at least two-thirds of whom must be outside directors)
Dongyul Park, Sukeun Kwak, Byungkee Ko
(from 21 March 2014)The committee audits the Company's accounting and operations.
The committee reviews the appropriateness of its performances and regulations every year. If necessary, it proposes revisions to the Board of Directors.
In addition to carrying out the activities specified in items 1 and 2 above, the committee also carries out activities specified by law, the Company's articles of incorporations and the Board of Directors.
-
Outside Director Nomination Committee
Two or more directors (at least half of whom must be outside directors)
Wonjun Lee, Byungkee Ko, Samjin Lim
(from 10 June 2014)The committee recommends candidates for outside directors to the general meeting of shareholders.
The committee must recommend those candidates recommended by shareholders with applicable rights under Article 542 Clause 6 of the Commercial Code.
In addition to carrying out the activities specified in items 1 and 2 above, the committee also carries out activities specified by law, the Company's articles of incorporations and the Board of Directors.
Wonjun Lee appointed
(as of 10 June 2014)Internal Transaction Committee
Three or more directors (at least two-thirds of whom must beoutside directors)
Wonjun Lee, Taehyeon Kim, Myeong Hyeon Baek
(from 10 June 2013)This committee is responsible for reviewing and approving the following:
Internal transactions as defined under Article 11 Clause 2 of the Monopoly Regulation and Fair Trade Act and Article 17 Clause 8 of the related enforcement decree.
Transactions worth more Won 10 billion involving agreements with certain affiliates as defined under Article 2 of the Monopoly Regulation and Fair Trade Act and Article 3 of the related enforcement decree.
Any matters as required for the operation of the other committees.
Wonjun Lee appointed
(as of 10 June 2014)
B. Affiliated Companies
1. Overview of affiliates
(As of 30 June 2014) (Unit: %)
Division
Investee company
Lotte Confectionery
Lotte Chilsung Beverage
Lotte
Food
Lotte
Aluminum
Lotte Construction
Hotel Lotte
Lotte International
Lotte Shopping
Lotte Giants
Lotteria
Lotte Chemical
Korea Fuji Film
Daehong Communications
Canon Korea Business Solutions
Lotte Station Building
Lotte Corporation
Lotte.com
Lotte Logistics
Lotte Capital
Lotte Data Communication
Investor company
Lotte Confectionary
1.0
16.8
9.3
1.4
7.9
30.0
13.6
0.9
8.9
0.0
11.3
4.6
6.1
Lotte Chilsung Beverage
9.3
3.0
1.9
3.9
20.0
1.3
5.0
0.0
7.0
4.6
1.5
1.5
Lotte Food
0.4
1.2
5.0
10.0
7.5
5.0
1.8
0.4
Lotte Aluminum
15.3
8.4
9.0
6.2
5.0
2.6
5.6
Lotte Construction
1.3
6.0
1.0
11.8
Hotel Lotte
3.2
5.8
8.9
13.0
35.2
0.2
34.6
8.8
18.8
12.7
7.1
12.8
28.9
31.1
17.2
8.8
26.6
2.9
Busan Lotte Hotel
4.4
3.9
0.8
11.3
1.0
11.5
Lotte International
0.9
56.8
1.0
0.2
Lotte Shopping
3.4
12.0
15.0
6.2
30.0
38.7
34.0
25.0
34.4
4.6
22.4
Lotte Logistics
13.7
9.0
Lotteria
2.0
0.2
1.0
2.1
12.5
17.3
2.6
34.5
Lotte Chemical
1.0
8.1
32.0
1.7
4.6
Korea Fuji Film
0.3
7.9
9.0
3.5
1.7
Daehong Communications
3.3
3.1
1.1
2.9
18.3
8.2
28.1
Lotte Corporation
31.3
Lotte Capital
Lotte Data Communication
4.8
1.1
4.8
5.6
0.2
Lotte Card
1.5
Lotte.com
0.9
Lotte Boulangerie
Lotte Station Building
2.2
Lotte Insurance
Sambark LFT
MYbi
Korea Seven
Lotte Asset Development
Buy the Way
0.6
Lotte DF Global
eB Card
Hyundai Information Technology
Chungbuk Soju
Lotte Incheon Development
Canon Korea Business Solutions
Lotte
Himart
Total
24.1
32.6
36.4
42.1
87.9
0.7
82.2
41.2
100.0
84.5
45.7
74.5
72.8
50.0
45.5
31.1
88.1
49.7
88.3
73.6
Division
Investee Company
Korea Seven
Lotte Boulangerie
Lotte Asahi
Liquor
Lotte
Card
Seetec
KP Chemtech
FRL
Korea
Daesan MMA
Woori Home Shopping
Lotte JTB
Lotte Assets Development
DCinema of Korea
Lotte Insurance
Lotte PS Net
CH Beverage
MJA Wine
Sambark
LFT
MYbi
Busan Hanaro Card
Busan Lotte Hotel
Investor Company
Lotte Confectionary
16.5
100.0
7.2
Lotte Chilsung Beverage
66.0
14.1
100.0
100.0
Lotte Food
Lotte Aluminum
Lotte Construction
11.8
Hotel Lotte
7.2
26.1
0.0
Busan Lotte Hotel
1.0
1.9
3.9
Lotte International
Lotte Shopping
51.1
92.5
49.0
53.0
39.1
50.0
Lotte Logistics
13.8
Lotteria
Lotte Chemical
50.0
100.0
50.0
20.5
99.5
Korea Fuji Film
Daehong Communications
11.5
Lotte Corporation
Lotte Capital
4.6
Lotte Data Communication
30.9
43.3
Lotte Card
1.2
0.2
4.8
Lotte.com
50.0
30.9
Lotte Boulangerie
Lotte Station Building
14.2
Lotte Insurance
1.8
Sambark LFT
MYbi
80.0
Korea Seven
31.9
Lotte Asset Development
Buy the Way
Lotte DF Global
eB Card
12.5
Hyundai Information Technology
Chungbuk Soju
Lotte Incheon Development
Canon Korea Business Solutions
Lotte
Himart
Total
81.4
100.0
66.0
99.4
50.0
100.0
49.0
50.0
53.0
50.0
100.0
50.0
55.5
93.7
100.0
100.0
99.7
64.4
80.0
0.0
Division
Investee Company
Han Paysys
Universal Studios Korea Resort Development
Lotte Gimhae Development
Buy the Way
Lotte Suwon Station Shopping Town
Lotte DF Global
Lotte DF Retail
eB Card
Gyeonggi Smartcard
Incheon Smartcard
Chungnam Smartcard
Universal Studios Korea Resort Asset Management Corporation
DACC Aerospace
NCF
Lotte Mitsui
Mobizap Media
Hyundai Information Technology
M.Hub
Lotte Songdo Shopping Town
Chungbuk Soju
Bu Investor Company
Lotte Confectionary
Lotte Chilsung Beverage
100.0
Lotte Food
Lotte Aluminum
Lotte Construction
Hotel Lotte
46.1
100.0
Busan Lotte Hotel
Lotte International
Lotte Shopping
100.0
95.0
98.3
56.3
Lotte Logistics
Lotteria
Lotte Chemical
100.0
50.0
Korea Fuji Film
Daehong Communications
70.0
88.2
Lotte Corporation
Lotte Capital
Lotte Data Communication
36.2
5.0
52.3
Lotte Card
95.0
Lotte.com
Lotte Boulangerie
Lotte Station Building
30.0
Lotte Insurance
Sambark LFT
MYbi
22.6
Korea Seven
100.0
Lotte Asset Development
20.2
5.0
30.2
9.4
Buy the Way
Lotte DF Global
97.0
eB Card
100.0
100.0
100.0
Hyundai Information Technology
Chungbuk Soju
Lotte Incheon Development
4.3
Canon Korea Business Solutions
Lotte
Himart
Total
58.8
66.2
100.0
100.0
100.0
100.0
97.0
100.0
100.0
100.0
100.0
30.2
100.0
98.3
50.0
70.0
52.3
88.2
100.0
100.0
Division
Investee Company
HUI
Korea STL
CS Mart
Jangkyo PFV
Lotte Himart
Lotte Incheon Development
Angel With
Versalis Elastomers
Dongyocheongkiwa PFVI
Baekhak Beverage
Investor Company
Lotte Confectionary
Lotte Chilsung Beverage
80.0
Lotte Food
Lotte Aluminum
Lotte Construction
4.8
Hotel Lotte
85.5
28.8
Busan Lotte Hotel
Lotte International
Lotte Shopping
50.0
99.9
65.3
28.8
Lotte Logistics
Lotteria
Lotte Chemical
50.0
Korea Fuji Film
Daehong Communications
Lotte Corporation
Lotte Capital
Lotte Data Communication
Lotte Card
Lotte.com
Lotte Boulangerie
Lotte Station Building
Lotte Insurance
Sambark LFT
MYbi
Korea Seven
Lotte Asset Development
9.5
10.5
Buy the Way
Lotte DF Global
eB Card
Hyundai Information Technology
Chungbuk Soju
90.0
Lotte Incheon Development
Canon Korea Business Solutions
100.0
Lotte
Himart
Total
90.0
50.0
99.9
95.0
65.3
62.5
100.0
50.0
100.0
80.0
Cinema Trading, S&S International, Cinema Food and L Properties are excluded from the list of investee companies as they have no shares owned by other affiliates.
Lotte Incheon Town added as a subsidiary of the Company on 1 July 2014.2. Equity investments
(As of 30 June 2014) (Unit: Shares, million Won, %)
Name of company
Date of initial acquisition
(yyyy.mm.dd)
Purpose
Amount of initial acquisition
Beginning balance
Increase (decrease)
Ending balance
Financial status of the most recent fiscal year
Number of shares
Equity ratio
Book value
Acquisition (disposal)
Evaluation
Number of shares
Equity ratio
Book value
Total assets
Current year
net income
Quantity
Amount
Gain/loss
Lotte Station Building (unlisted)
1986.09.15
Equity investment
250
900,000
25.00
157,380
-
-
-
900,000
25.00
157,380
739,907
56,801
Daehong Communications (unlisted)
1996.12.23
Equity investment
6,277
13,600
34.00
28,785
-
-
-
13,600
34.00
28,785
505,536
12,983
Lotte.com (unlisted)
2000.01.05
Equity investment
2,000
1,600,000
34.39
11,610
-
-
-
1,600,000
34.39
11,610
176,955
6,472
Lotte Boulangerie (unlisted)
2000.09.05
Equity investment
3,000
4,020,222
90.54
9,530
(4,020,222)
1,198
(10,728)
0
0.00
0
42,729
(4,008)
Lotte Card (unlisted)
2002.11.30
Equity investment
34,701
69,995,159
92.54
982,950
-
-
-
69,995,159
92.54
982,950
8,416,824
146,270
Lotte Capital (unlisted)(2)
2001.12.31
Equity investment
6,259
7,445,072
22.36
77,413
-
-
-
7,445,072
22.36
77,413
4,478,638
68,283
Lotteria (unlisted)(2)
2001.12.27
Equity investment
39,719
186,062
38.68
112,864
-
-
-
186,062
38.68
112,864
878,791
30,502
FRL Korea (unlisted)
2004.12.16
Equity investment
2,940
2,352,000
49.00
24,827
-
-
-
2,352,000
49.00
24,827
424,810
68,986
Woori Home Shopping (unlisted)
2006.07.03
Equity investment
28,600
4,242,796
53.03
393,213
-
-
-
4,242,796
53.03
393,213
783,168
67,117
Lotte Assets Development (unlisted)(2)
2007.07.31
Equity investment
30
11,861,031
39.14
53,319
-
-
-
11,861,031
39.14
53,319
316,960
(8,125)
Zara Retail Korea (unlisted)
2007.01.18
Equity investment
130
302,600
20.00
16,106
-
-
-
302,600
20.00
16,106
169,733
6,902
Korea Seven (unlisted)
2009.09.25
Equity investment
28,184
18,526,176
51.14
82,473
-
-
-
18,526,176
51.14
82,473
875,827
22,195
Lotte Gimhae Development (unlisted)
2010.03.18
Equity investment
300
60,000
100.00
300
-
-
-
60,000
100.00
300
938
133
Lotte Suwon Station Shopping Town (unlisted)
2010.04.30
Equity investment
48
19,000,000
95.00
94,810
-
-
-
19,000,000
95.00
94,810
189,605
286
NCF (unlisted)
2010.12.30
Equity investment
18,876
589,800
98.30
19,715
-
-
-
589,800
98.30
19,715
35,554
247
Lotte Giants (unlisted)
1982.04.21
Equity investment
30
6,000
30.00
823
-
-
-
6,000
30.00
823
26,023
(1,570)
Lotte Songdo Shopping Town (unlisted)(2)
2011.06.27
Equity investment
40,000
12,000,000
56.30
60,000
-
-
-
12,000,000
56.30
60,000
259,347
(7,510)
STL (unlisted)
2011.08.24
Equity investment
1,000
500,000
50.00
2,500
-
-
-
500,000
50.00
2,500
4,210
(1,306)
CS Mart (unlisted)
2012.01.16
Equity investment
244,880
12,761,250
99.95
255,826
-
-
-
12,761,250
99.95
255,826
160,403
13,097
Lotte Hi-mart (listed)
2012.10.31
Equity investment
1,248,068
15,403,274
65.25
1,248,068
-
-
-
15,403,274
65.25
1,248,068
2,751,826
124,429
D-Cinema of Korea
(unlisted)
2008.01.28
Equity investment
1,500
300,000
50.00
-
-
-
-
300,000
50.00
0
71,503
2,302
M Venture Cultural Vitalization Investment Association (unlisted)
2009.10.01
Equity investment
2,500
250
25.00
2,500
(75)
(750)
-
175
25.00
1,750
8,746
(1,404)
Capital One
Diversity Cinema Special Investment Association (unlisted)
2010.03.18
Equity investment
1,000
100
20.00
1,000
-
-
-
100
20.00
1,000
3,950
(369)
So Big Contents Investment Union (unlisted)
2011.01.03
Equity investment
4,000
400
26.67
4,000
-
-
-
400
26.67
4,000
17,965
2,435
Capital One Middle-Low Budget Cinema Fund (unlisted)
2011.05.24
Equity investment
3,000
30
25.00
3,000
-
-
-
30
25.00
3,000
14,262
264
CJ Venture Investments Union No. 14 (unlisted)
2011.11.02
Equity investment
6,000
60
30.00
6,000
-
-
-
60
30.00
6,000
21,285
2,371
BS Financial Group
(listed)
1987.09.23
Equity investment
2,775
5,259,597
2.72
84,154
-
-
(5,786)
5,259,597
2.72
78,368
3,507,652
61,140
Shinhan Financial Group (listed)
1997.12.31
Equity investment
637
311,118
0.07
14,716
-
-
(140)
311,118
0.07
14,576
27,424,645
731,638
M Cieta Development
(unlisted)
2006.09.01
Equity investment
1,960
499,800
4.82
2,492
-
-
-
499,800
4.82
2,492
40,927
(819)
Bichae Nuri Development
(unlisted)
2008.06.09
Equity investment
150
171,600
3.00
858
-
-
-
171,600
3.00
858
180,070
(3,178)
Cosmo Investment
(unlisted)(2)
2009.03.27
Equity investment
8,165
65,680
7.76
15,418
-
-
(9)
65,680
7.76
15,409
48,575
2,620
Lotte International
(unlisted)(2)
2006.11.30
Equity investment
1,638
134,215
14.99
52,190
-
-
(2,388)
134,215
14.99
49,802
1,226,123
289
Lotte Aluminum
(unlisted)(2)
2000.11.23
Equity investment
3,000
125,016
12.05
74,956
-
-
234
125,016
12.05
75,190
1,678,414
6,421
Lotte Logistics (after the merge)
(unlisted)
2007.09.28
Equity investment
4,000
66,308
4.64
9,269
-
-
603
66,308
4.64
9,574
629,791
19,543
CJ Venture Investment No. 12 Global Contents Investment Partnership (unlisted)
2009.11.20
Equity investment
1,500
15
3.58
1,500
-
-
-
15
3.58
1,500
33,888
(2,382)
East Gate Media Contents & Technology Fund (unlisted)
2010.08.30
Equity investment
5,000
50
14.71
5,000
-
-
-
50
14.71
5,000
35,039
3,239
ISU-Renaissance Contents Fund (unlisted)
2011.01.13
Equity investment
2,000
40
13.33
2,000
-
-
-
40
13.33
2,000
10,200
(1,751)
Union Global Contents Fund (unlisted)
2011.11.04
Equity investment
4,000
1,200
16.18
12,000
-
-
-
1,200
16.18
12,000
71,647
(1,567)
Michigan Global Contents Fund #3 (unlisted)
2012.08.24
Equity investment
2,000
200
13.33
2,000
-
-
-
200
13.33
2,000
12,875
(1,053)
Leading Asia Contents Fund (unlisted)
2012.09.18
Equity investment
4,000
400
21.01
4,000
-
-
-
400
21.01
4,000
18,963
(169)
Lotte Vietnam Shopping Co., Ltd.
(unlisted)(1)
2006.12.15
Equity investment
3,749
-
100.00
125,243
-
-
-
0
100.00
125,243
277,516
(1,303)
Lotte Europe Holdings B.V.
(unlisted)
2008.05.30
Equity investment
124,379
217,882
31.25
140,479
-
-
-
217,882
31.25
140,479
578,464
(826)
Intime Lotte Department Store
(unlisted)(1)
2008.08.30
Equity investment
10,339
0
82.46
0
-
-
-
0
82.46
0
19,048
(32,660)
Lotte Shopping Holdings(Hong Kong)(unlisted)
2008.10.27
Equity investment
259
987,218,775
100.00
921,730
46,000,000
48,084
-
1,033,218,775
100.00
969,814
1,247,416
(12,532)
Lotte Shopping Holdings(Singapore) Pte., Ltd. (unlisted)
2008.10.28
Equity investment
101
226,055,966
100.00
252,971
10,800,000
11,112
-
236,855,966
100.00
264,083
238,404
(44)
Coralis S.A. (unlisted)
2009.10.29
Equity investment
17,418
787,461
45.00
55,131
-
-
-
787,461
45.00
55,131
108,079
(4,211)
Qingdao Lotte Mart Commercial Co., Ltd.(unlisted)(1)
2008.01.18
Equity investment
33,219
0
53.84
0
-
-
-
0
53.84
0
104,734
(66,685)
Lotte Mart Co., Ltd.(unlisted)(1)
2008.06.02
Equity investment
183,033
0
100.00
80,016
-
-
-
0
100.00
80,016
179,069
(35,644)
Liaoning Lotte Mart Co., Ltd. (unlisted)(1)
2008.07.24
Equity investment
2,107
-
40.00
10,841
-
-
-
0
40.00
10,841
59,194
(12,301)
PT.Lotte Shopping Indonesia (unlisted)
2008.11.20
Equity investment
219,737
2,622,812
55.00
214,068
-
-
-
2,622,812
55.00
214,068
220,521
14,541
Lotte Cinema Vietnam Co., Ltd. (unlisted)(1)
2008.05.02
Equity investment
3,000
0
90.00
7,099
-
-
-
0
90.00
7,099
42,567
(3,113)
Lotte Properties (Shenyang) Limited (unlisted)
2009.01.16
Equity investment
29,018
29,928,756
17.93
41,919
-
-
-
29,928,756
17.93
41,919
609,428
706
Shenyang SL Cinema Investment Management Co., Ltd. (unlisted)(1)
2010.11.16
Equity investment
752
-
49.00
1,496
-
-
-
0
49.00
1,496
2,269
(128)
Hubei XL Cinema Co., Ltd. (unlisted) (1)
2011.06.24
Equity investment
2,048
-
49.00
8,566
-
858
-
0
49.00
9,424
14,908
(2,935)
Hemisphere Film Investors II LLC (unlisted)(1)
2011.07.29
Equity investment
578
-
100.00
26,740
-
-
-
0
100.00
26,740
25,307
604
LOTTE PROPERTIES (CHENGDU) HK LIMITED (unlisted)
2012.02.14
Equity investment
40,878
144,901,152
73.46
160,392
-
-
-
144,901,152
73.46
160,392
360,499
(2,183)
Lotte (China) Management Ltd. (unlisted)(1)
2012.03.19
Equity investment
6,232
-
70.00
6,232
-
-
-
0
70.00
6,232
8,053
(136)
Fubon Multimedia Technology Co., Ltd. (unlisted)
2012.03.07
Equity investment
38,771
7,892,421
6.17
27,645
(305,001)
(1,704)
34,669
7,587,420
5.93
60,610
184,358
19,838
Shandong Longzhile Cinema Co., Ltd. (unlisted)(1)
2012.09.09
Equity investment
1,735
-
49.00
2,612
-
2,915
-
0
49.00
5,527
6,437
(1,126)
Lotte Incheon Development Co., Ltd. (unlisted)
2012.12.11
Equity investment
50
3,000,000
37.50
15,000
-
-
-
3,000,000
37.50
15,000
973,252
(8,292)
Lotte Food Co., Ltd.(2)
2013.01.01
Equity investment
-
47,180
3.45
35,196
-
-
516
47,180
3.45
35,715
1,128,643
113,945
Hyundai Green Food Co., Ltd.
2013.01.01
Equity investment
-
132,326
0.14
2,223
-
-
113
132,326
0.14
2,336
1,590,520
50,790
Lotte Hotel & Retail Vietnam Pte. Ltd. (unlisted)(2)
2013.01.01
Equity investment
-
12,380,000
20.00
14,185
-
-
-
12,380,000
20.00
14,185
68,911
(1,163)
LHSC Limited (unlisted)(2)
2013.01.01
Equity investment
-
27,002,140
16.00
31,506
-
-
-
27,002,140
16.00
31,506
190,513
3
Bank Foundation for Young Entrepreneurs Culture Contents Investment Union (unlisted)
2013.08.29
Equity investment
4,000
40
15.09
4,000
-
-
-
40
15.09
4,000
26,669
37
Hotel Lotte Co., Ltd. (unlisted)(3)
2013.10.01
Equity investment
-
79,254
0.15
11,829
(79,254)
(12,347)
518
0
0.00
0
13,695,447
159,844
Lotte Shopping Reit Management Singapore Pte. Ltd. (unlisted)
2014.01.02
Equity investment
0
-
-
-
2,000,000
1,660
-
2,000,000
100.0
1,660
3,067
(13)
Lotte Incheon Town Co., Ltd. (unlisted)
2014.05.19
Equity Investment
-
-
-
-
10,000
50
-
10,000
100.00
50
-
-
Total
-
-
6,126,683
-
51,076
17,308
-
-
6,195,067
-
-
Notes:
(1) Shares not issued in accordance with the applicable local laws.
(2) New and additional equity shares acquired through the acquisition of Midopa Co., Ltd in the 44th fiscal year.
(3) Acquired through the merger of Hotel Lotte Co., Ltd. with Lotte Buyeo Resort and Lotte Jeju Resort in the 44th fiscal year.
Cost-value method applied to the carrying amount of the above investee companies (except for the carrying amount of investee companies where market price or fair value valuation was applicable).
Loss impairment for Intime Lotte Department Store Co., Ltd., Lotte Shopping Holdings (Hong Kong) Co., Ltd., Qingdao Lotte Mart Commercial Co., Ltd. and Lotte Mart Co., Ltd. was recorded last year.
Fiscal year ends in August for FRL Korea, January for Zara Retail Korea, February for STL and March for Cosmo Investment
VI. Shareholders
A. The Largest Shareholder and Specially Related Parties
(As of 30 June 2014) (Unit: shares, %)
Name
Relationship
Type of shares
Shareholding
Reason for Change
At the beginning of the period
At the end of the period
Number of Shares
Shareholding Ratio
Number of Shares
Shareholding Ratio
Dongbin Shin
Himself
Common shares
4,237,627
13.46
4,237,627
13.46
-
Dongju Shin
Relative
Common shares
4,235,883
13.45
4,235,883
13.45
-
Kyukho Shin
Relative
Common shares
293,877
0.93
293,877
0.93
-
Youngja Shin
Relative
Common shares
232,818
0.74
232,818
0.74
-
Heon Shin
Director
Common shares
142
0.00
0
0.00
Resigned
Hotel Lotte Co., Ltd.
Related company
Common shares
2,781,947
8.83
2,781,947
8.83
-
Korea Fuji Film Co., Ltd.
Related company
Common shares
2,474,543
7.86
2,474,543
7.86
-
Lotte Confectionary Co., Ltd.
Related company
Common shares
2,474,543
7.86
2,474,543
7.86
-
Lotte Data Communication Company
Related company
Common shares
1,515,653
4.81
1,515,653
4.81
-
Lotte Chilsung Co., Ltd.
Related company
Common shares
1,237,272
3.93
1,237,272
3.93
-
Lotte Construction Co., Ltd.
Related company
Common shares
300,019
0.95
300,019
0.95
-
Busan Lotte Hotel, Co., Ltd.
Related company
Common shares
246,720
0.78
246,720
0.78
-
Seonyun Jang
Relative
Common shares
700
0.00
700
0.00
-
Yumi Shin
Relative
Common shares
28,903
0.09
28,903
0.09
-
Lotte Samdong Welfare Foundation
Foundation
Common shares
47,888
0.15
47,888
0.15
-
Yuwon Industry Co., Ltd.
Other
Common shares
3,000
0.01
3,000
0.01
-
Mikyeong Seo
Other
Common shares
30,531
0.10
30,531
0.10
-
Jaeyoung Jang
Other
Common shares
950
0.00
950
0.00
-
Juyoung Yu
Other
Common shares
499
0.00
499
0.00
-
Treasury stock
Other
Common shares
1,938,688
6.16
1,938,688
6.16
-
Total
Common shares
22,082,203
70.12
22,082,061
70.12
-
Preferred shares
0
0
0
0
The number of specially related parties: 17
The largest shareholder: Dongbin Shin
B. Change in the largest shareholder
There has not been any change in the largest shareholder during the reporting period (for the recent three business years).
C. Distribution of Shares
Shareholders owning more than 5% of the Company's shares
(As of 30 June 2014) (Unit: shares, %)
Name
Number of shares
Equity interest
Dongbin Shin
4,237,627
13.46%
Dongju Shin
4,235,883
13.45%
Hotel Lotte Co., Ltd.
2,781,947
8.83%
Korea Fuji Film Co., Ltd.
2,474,543
7.86%
Lotte Confectionary Co., Ltd.
2,474,543
7.86%
National Pension Service
1,724,758
5.48%
The employee stock ownership association has 44,136 shares, which is equal to a 0.14% interest in the Company.
1. Stock Price and Transaction Record
a. Domestic Stock Market
(Unit: Won, shares)
Category
January 2014
February 2014
March 2014
April
2014
May
2014
June
2014
Common stock price
Maximum
410,000
376,500
340,000
336,000
321,500
308,500
Minimum
367,500
337,000
314,500
316,000
298,000
289,000
Average
389,825
347,775
326,690
325,795
309,158
298,263
Transaction volume
Daily maximum
101,221
253,863
71,683
81,920
95,197
66,010
Daily minimum
19,595
25,802
19,393
15,530
20,104
19,388
Monthly total
865,333
1,207,382
769,011
911,909
811,502
661,690
b. Overseas Stock Market
Exchange: London Stock Exchange (Unit: USD)
Category
January 2014
February 2014
March 2014
April
2014
May
2014
June
2014
Common stock price
Maximum
18.99
17.02
15.85
16.00
15.65
15.06
Minimum
16.80
15.50
14.67
15.00
14.65
14.03
Average
18.03
16.11
15.06
15.47
15.01
14.45
VII. Executives and Employees
A. Status of Executives and Employees
1. Executives
Registered Executives
(As of 30 June 2014) (Unit: shares)
Name
Date of Birth (yyyy.mm)
Position
Status as Director
Shares
Duration of tenure
End of term as director
(yyyy.mm.dd)
Common shares
Preferred shares
Kyukho Shin
1922.10
Executive Chairman
Representative Director
293,877
-
-
2015.03.21
Dongbin Shin
1955.02
Chairman
Inside Director
4,237,627
-
-
2016.03.21
Inwon Lee
1947.08
Vice-Chairman
Representative Director
-
-
-
2016.03.21
Wonjun Lee
1956.11
President
Representative Director
-
-
-
2016.03.21
Youngja Shin
1942.10
Inside Director
Inside Director
232,818
-
-
2016.03.21
Sangjin Lim
1960.03
Outside Director
Outside Director
-
-
1 year and 3 months
2015.03.21
Myeong Hyeon Baek
1961.09
Outside Director
Outside Director
-
-
1 year and 3 months
2015.03.21
Taehyeon Kim
1955.06
Outside Director
Outside Director
-
-
2 years and 3 months
2016.03.21
Dongyul Park
1953.07
Outside Director
Outside Director
-
-
3 months
2016.03.21
Sukeun Kwak
1953.08
Outside Director
Outside Director
-
-
3 months
2016.03.21
Byungkee Ko
1955.04
Outside Director
Outside Director
-
-
3 months
2016.03.21
Changes since 31 March 2014:
Representative Director Heon Shin resigned on 24 April 2014.
Won June Lee was appointed as Chief Executive Officer and Representative Director by resolution of the shareholders on 10 June 2014.
Non-registered Executives
(As of 30 June 2014)
(Unit: shares)
Name
Date of birth
(yyyy.mm)Position
Duties
Common shares
Gakgyu Hwang
1955.04
President
Operations
65
Byungyong Noh
1951.06
President
Mart Executive President
10
Jinse So
1950.05
President
Executive President / External Coordiantion
142
Jaehwa Kim
1954.07
Vice President
Audit Director
Jongwon Choi
1957.09
Vice President
Communications
Jongmin Yoon
1960.11
Vice President
Human resources
Heetae Gang
1959.04
Vice President
Department Store China
111
Sunghoi Kim
1943.06
Senior Managing Director
Secretary
Bongcheol Lee
1958.05
Senior Managing Director
Support
Changwon Lee
1959.03
Senior Managing Director
Communications
Jaedon Ryu
1960.08
Senior Managing Director
Secretary
Ilmin Lee
1959.06
Senior Managing Director
Secretary
47
Hyunchul Park
1960.10
Senior Managing Director
Operations
Byungyeon Lim
1964.09
Senior Managing Director
Vision Strategy
Jaeyoon Suh
1958.06
Senior Managing Director
China
Changrak Kim
1957.12
Senior Managing Director
Department Store Business 1
119
Hosung Park
1958.09
Senior Managing Director
Department Store Product
102
Jongin Kim
1963.03
Senior Managing Director
Mart China
24
Yongpyo Moon
1962.04
Senior Managing Director
Mart Strategy support
32
Chunseok Choi
1960.03
Senior Managing Director
Representative Director (Supermarket)
86
Wonchun Cha
1957.12
Senior Managing Director
Representative Director (Cinema)
Gap Lee
1962.09
Managing Director
Operations
105
Chungik Lee
1964.11
Managing Director
Vision Strategy
24
Inkwon Kim
1969.01
Managing Director
Legal
Jonghyeon Kang
1964.05
Managing Director
Operations
Seokhwan Lee
1967.08
Managing Director
Communications
Jinsung Lee
1969.02
Managing Director
Strategy & Insight Center
Gwanggi Min
1956.01
Managing Director
Department Store Daegu Business 2
127
Wansin Lee
1960.10
Managing Director
Department Store Marketing
86
Janghwa Lee
1959.06
Managing Director
Department Store Business 3
Hoju Jang
1960.08
Managing Director
Department Store Finance
Yoonnchul Noh
1961.04
Managing Director
Department Store New business
Donghyuk Jeong
1962.07
Managing Director
Department Store Business 2
32
Jaechan Lee
1960.02
Managing Director
Mart Customer
Yeongheon Lee
1960.10
Managing Director
Mart Southeast Asia
Changhui Nam
1966.10
Managing Director
Mart Product
96
Yeongheon Lee
1958.12
Managing Director
Overseas supermarket business
0
Seungbok Hong
1957.09
Managing Director
Supermarket sales
16
Seunghee Kim
1965.04
Managing Director
Supermarket development
Ikwoo Nam
1962.01
Director
Operations
Gyungmoon Jung
1964.02
Director
Vision Strategy
Sungho Choo
1964.02
Director
Communications
Wonkyu Ki
1966.02
Director
Human resources
62
Taewan Kim
1965.03
Director
Vision Strategy
Woochul Cha
1968.01
Director
Audit Director
16
Yongseok Hwang
1970.02
Director
Corporate culture
16
Changyong Kim
1967.03
Director
Audit Director
Youngchul Jung
1971.05
Director
Secretary
Byeonghui Lee
1969.03
Director
Communications
Chanseo Park
1969.03
Director
Finance
Insoo Baek
1965.06
Director
Strategy & Insight Center
Gwangchul Shin
1967.11
Director
Strategy & Insight Center
29
Chansoo Kim
1965.03
Director
Distribution CFD
Unseong Baek
1965.06
Director
Welfare
71
Soohoi Ku
1958.02
Director
Department Store Vietnam
86
Junwon Lim
1962.05
Director
Pyeonchon branch
Taehak Cho
1961.03
Director
Shenyang branch
86
Suhyun Jang
1964.06
Director
Main branch
104
Bumseok Hwang
1965.09
Director
Youngdeungpo branch
71
Hyungsik Jeon
1963.08
Director
Busan main branch
79
Younsung Jung
1965.03
Director
Avenuel World Tower branch
79
Gyuwan Hwang
1965.02
Director
Jamsil branch
71
Jun Jang
1958.12
Director
Department Store Design
32
Changwon Yoo
1968.02
Director
Department Store GF business
Daehun Park
1964.08
Director
Cheongnyangri branch
62
Minyeol Ryu
1966.03
Director
Gwangju branch
71
Youngjae Cho
1966.04
Director
Department Store Planning
80
Younggeun Hwang
1967.01
Director
Department Store Home appliances
71
Hoseol Lee
1970.07
Director
Department Store Men's sports
63
Giljo Woo
1966.08
Director
Department Store Food products
Wonil Choi
1962.09
Director
Dongrae branch
Chanseok Lee
1961.12
Director
Changwon branch
79
Sungsoo Kim
1964.01
Director
Ulsan branch
79
Taeheung Nam
1964.08
Director
Chengdu World Center branch
Hyeonseok Min
1967.06
Director
Department Store Russia
Wookyung Kim
1967.02
Director
IR Team
12
Jaeyoung Gu
1962.05
Director
Gwangbok branch
20
Daesu Kim
1967.09
Director
Nowon branch
Jungho Song
1966.03
Director
Department Store MD strategy
409
Hyungkyu Lee
1967.01
Director
Daejeon branch
Wansu Park
1968.07
Director
Department Store Management support
100
Jaeok Lee
1969.01
Director
Department Store women's fashion
25
Seondae Lee
1970.01
Director
Department Store Public relations
Gidae Nam
1967.02
Director
Guri branch
55
Gilmo Han
1967.07
Director
Department Store Merchandise
55
Yonghwan Lee
1967.10
Director
Suwon branch
55
Jonghyeok Hyeon
1969.10
Director
Pohang branch
Sangbyeong Park
1970.07
Director
Shopping mall East Busan
Yeongsu Ha
1969.09
Director
Ilsan branch
3
Yeongtaek Yu
1969.06
Director
Department Store Ethical management
Jieun Kim
1969.08
Director
Department StoreOverseas fashion
Gijeong Park
1964.02
Director
Department Store GF business
Jongdo Park
1961.05
Director
Mart China development
86
Jonghwan Kim
1962.05
Director
Mart Gwangju Honam customer
32
Daesik Jang
1966.12
Director
Mart Seoul Gangwon customer
Byeongmoon Hahn
1963.06
Director
Mart overseas cooperation
32
Pyungkyu Hong
1962.11
Director
Mart development in South East Asia
80
Ilgeun Oh
1968.07
Director
Mart site development 1
39
Wonsik Hong
1966.06
Director
Mart Vietnam
32
Jookyung Yoon
1965.04
Director
Mart Indonesia retail
71
Seungsun Song
1971.06
Director
Online mart
Byeongho Ryu
1966.03
Director
Mart Central China
24
Chansik Bang
1966.02
Director
Mart Eastern China
Jinkyung Kim
1964.09
Director
Mart ethical innovation
Joohee Woo
1967.03
Director
Mart fresh foods 1
32
Minhee Lee
1969.08
Director
Mart VIC Market product
Soonjin Jung
1961.10
Director
Mart business development
10
Minho Kang
1968.11
Director
Mart Human resources strategy
10
Hakjae Lee
1966.04
Director
Mart Northern China
32
Gwangho Wang
1965.08
Director
Mart site development 2
32
Heekyung Kim
1962.05
Director
Mart Daejeon Chungcheong customer
166
Gwanghui Seong
1964.06
Director
Mart Lifestyle
71
Eunmo Yang
1967.06
Director
Mart processed foods
31
Yeongsik Park
1964.02
Director
Mart clothing & merchandise
Seungmu Heo
1965.02
Director
Mart Finance
32
Gwani Lee
1969.01
Director
Mart Fresh foods 2
Gyeongu Yu
1966.10
Director
Mart business development 2
Yeongbae Ham
1962.02
Director
Mart Southeast Asia integrated finance
Yeongjun Cho
1971.01
Director
Mart China strategy
Wonho Jung
1969.02
Director
Supermarket marketing
55
Jaehyung Seo
1964.10
Director
Supermarket membership
Hyungseok Han
1965.06
Director
Supermarket processed foods
16
Yonggu Kim
1960.10
Director
Supermarket Yeongnam
16
Minsu Kang
1965.02
Director
Supermarket Planning
15
Cheolho Park
1966.04
Director
Supermarket fresh foods
Eunggeol Kim
1967.03
Director
Supermarket management support
Seungchul You
1962.02
Director
Cinema management support
32
Gwanro Lee
1963.02
Director
Cinema theatre
32
Sangmoo Lee
1968.09
Director
Cinema movie
Hyeongsu Ji
1965.10
Director
Cinea new business
Eungyo Lee
1967.08
Director
Cinema management strategy
Changes since 31 March 2014: Wonjun Lee was newly appointed as President on 25 April 2014.
2. Employees
(As of 30 June 2014) (Unit: persons, year, thousand Won)
Business segment
Gender
The number of employees
Average number of years worked
Aggregate annual compensation
Average compensation per person(1)
Full-time
Contracted
Other
Total
Department
Store(2)
Male
2,199
2
-
2,201
11.8
69,247,624
31,780
Female
3,380
480
-
3,860
8.9
54,424,113
14,556
Discount
Store
Male
3,613
466
-
4,079
6.9
92,777,000
22,762
Female
5,613
3,585
-
9,198
4.1
86,446,000
11,005
Others
Male
1,920
311
-
2,231
5.0
41,132,872
18,234
Female
3,069
1,464
-
4,533
3.5
42,887,636
9,487
Total
19,794
6,308
-
26,102
5.9
386,915,245
15,712
Notes:
(1) Based on eight hour work days and an average total of 24,626 employees.
(2) Includes former employees of Lotte Midopa Co., Ltd., which was acquired by the Company on 1 January 2013.
Starting from the Company's 2010 annual report, the Company disclosed data for both full-time and contract employees. Prior to the Company's 2010 annual report, it only disclosed data for full-time employees. As such, readers should note the differences when comparing the number of employees, average number of years worked, aggregate annual compensation and average compensation per person.
The above table excludes temporary workers.
B. Compensation
Compensation of Directors
(Unit: million Won)
Category
Number of directors
Amount paid
Average per person
Registered Director
5
2,177
435
Outside Director
3
99
33
Audit Committee Member
3
95
32
Total
11
2,371
216
Compensation of Individual Directors
(Unit: million Won)
Name
Position
Amount paid
Note
Kyukho Shin
Executive Chairman
800
Consisting of W800 million in salary
Dongbin Shin
Chairman
500
Consisting of W500 million in salary
Heon Shin
Former Representaive Director
1,994
Consisting of W198 million in salary and W1,796 million in severance pay
VIII. Transactions with Interested Parties
A. Transactions with the Largest Shareholder and its Affiliates
Not applicable.
B. Collateral
Not applicable.
C. Guarantee of Obligations
(Unit: USD 1,000, RMB 1,000)
Company name
Relation
Transaction details
Note
Beginning
Increase
Decrease
Ending
Lotte Properties (Chengdu) HK Limited
Consolidated subsidiary company
USD 140,000
-
-
USD 140,000
Agreed interest is included
USD 50,000
-
-
USD 50,000
Lotte Shopping RUS Ltd.
Company under the equity method
USD 10,000
-
USD 10,000
-
Agreed interest is included
-
USD 5,000
-
USD 5,000
Shandong Longzhile Cinema Co., Ltd.
Company under the equity method
-
RMB 24,000
-
RMB 24,000
Agreed interest is included
Lotte Shopping Holdings(Hongkong) Co., Ltd.
Consolidated subsidiary company
-
USD 38,136
-
USD 38,136
Agreed interest is included
-
USD 38,135
-
USD 38,135
-
USD 38,135
-
USD 38,135
-
USD 38,135
-
USD 38,135
Lotte Shopping Business Management (Hong Kong) Limited
Consolidated subsidiary company
RMB 750,000
-
-
RMB 750,000
Agreed interest is included
IX. Other Relevant Matters
A. Summary of the Minutes from the General Meeting of Shareholders
Date
Matters
Decision
Extraordinary General Meeting of Shareholders
(10June 2014)
Agenda No.1: Appointment of inside director
Approved
44th General Meeting of Shareholders
(21March 2014)
Agenda No. 1: Approval of the Company's 44th fiscal year financial statements
Agenda No. 2: Approval of amendments to articles of incorporation
Agenda No. 3: Appointment of directors
-No. 3-1: Appointment of inside directors
-No. 3-2: Appointment of outside directors
-No. 3-3: Appointment of audit committee membersAgenda No. 4: Approval of compensation limit for directors
Agenda No. 5: Approval of amendments to severance pay
Approved
B. Contingent Liabilities
1. Major legal proceedings
The Company's management does not believe that the final outcome of the lawsuits that it is currently involved in would significantly affect the Company's financial condition.
a. Major lawsuits where the Company is the plaintiff
(Unit: thousand Won)
Business segment
Company (Plaintiff)
Lawsuit details
Claimed amount
Department store
Lotte Shopping
Claim related to cancellation of gross real estate tax (and 7 other cases)
14,107,335
Discount store
Lotte Shopping
Claim related to cancellation of construction permits (and 38 other cases)
2,102,870
Finance
Lotte Card
Debt collection claim (and 294 other cases)
1,801,163
eB Card
Claim related to payment
780,935
Electronics
Lotte Hi-mart
Damages claim (and 3 other cases)
14,092,223
Others
Lotte Shopping (Super)
Claim related to cancellation of business hours restriction (and 14 other cases)
4,219,057
Lotte Shopping (Cinema)
Claim related cancellation fee (and 4 other cases)
9,511,749
Korea Seven
Claim on return of rental deposit (and 49 other cases)
4,096,318
Buy the Way
Claim on return of rental deposit (and 4 other cases)
95,401
b. Major lawsuits where the Company is the defendant
(Unit: thousand Won)
Business segment
Company (Defendant)
Lawsuit details
Claimed amount
Department store
Lotte Shopping
Damages claim (and 8 other cases)
1,311,072
Discount store
Lotte Shopping
Damages claim (and 5 other cases)
10,483,815
Finance
Lotte Card
Damages claim (and 94 other cases)
62,380,972
eB Card
Claim related to remuneration (and 2 other case)
3,016,200
Electronics
Lotte Hi-mart
Damages claim (and 3 other cases)
6,279,935
Others
Lotte Shopping (Super)
Damages claim (and 2 other cases)
3,111,074
Lotte Shopping (Cinema)
Damages claim (and 3 other cases)
3,876,047
Korea Seven
Claim related to cancellation of business hours restriction (and 35 other cases)
3,620,713
Buy the Way
Eviction (and 9 other cases)
363,419
Woori Home Shopping
Claim regarding reimbursement (and 2 other cases)
344,386
2. Bills or checks provided as collateral
(As of 30 June 2014) (Unit: million Won)
Category
Place to submit
Number of instruments
Amount
Note
Others
Korea Seven
Corporation
1
500
Promissory note provided to guarantee a Korea University Foundation lease agreement.
If there is an event of default or a delinquent payment under Lotte Card's asset-backed securities, Lotte Card may be liable under the guarantee it provided for the asset-back securities. If the asset-backed securities are based on a trust, the trustee may request Lotte Card to pledge certain additional assets if the speciality of the existing assets fall below a certain level. In addition, a limited company specialized in asset-backed securities has to bear obligations for early redemption if the circumstance provided in the related agreement are met, such as the average portfolio profitability for three settlement periods in a row becomes lower than the average basic cost ratio for the same period in case of asset-backed securities or the balance of the adjusted principal amount of asset-backed securities at the end of every settlement period becomes lower than the minimum balance of principal amount of such asset-backed securities.
3. Use of proceeds from private placements
(As of 30 June 2014) (Unit: million Won)
Type
Remittance date
Remittance amount
Planned use of proceeds
Actual use of proceeds
Convertible bond issue
5 July 2011
960,003
Overseas investment and repayment of foreign currency borrowings
Overseas investment and repayment of foreign currency borrowings
The exchange rates in effect on the remittance date (5 July 2011), of US$ 1.00 = Won 1,063.8 and JPY 1 = Won 13.1724, were applied.
4. Other Contingent Liabilities
a. Detail of payment guarantees on behalf of specially related parties
Details of guarantee or payment guarantees provided by the Company in favour of its specially related parties are as follows. There are no guarantee or payment guarantees provided by such specially related parties in favour of the Company.
Company name
Guarantor
Guaranteed amount
Term ofguarantee
Remarks
Lotte Shopping Rus Ltd.
Korea Exchange Bank
USD 5,000,000
2 May 2014 to 2 May 2017
Payment guarantees for funding
Shandong Longzhile Cinema Co., Ltd.
Shinhan Bank
RMB 24,000,000
23 June 2014 to 23 June 2017
Payment guarantees for funding
In addition to the above, D Cinema of Korea Co., Ltd. entered into a VPF agreement with Twentieth Century Fox Film Corporation in October 2008, and D Cinema's performance thereunder was guaranteed by CJ CGV Co., Ltd. and the Company (50% each). In addition, the Company has guaranteed Burger King Japan Co., Ltd.'s royalty contract with BK ASIAPAC PTE. Ltd (3.0% of sales and US$25,000 per store opened). Furthermore, the Company, Lotte Hotel and Lotte Construction have entered into a joint supplemental funding agreement in connection with the Won 700 million Lotte Incheon Development asset backed securities due 23 February 2018 issued by HND Able 2nd Limited in case HND Able 2nd Limited is unable to pay principal or interest on the securities.
5. Issuance of hybrid securities recognized as equity
(As of 30 June 2014) (Unit: million Won)
Category
Details
Issuance number
Issue No. 1-1, 2 of Lotte Shopping subordinated hybrid securities
Issuance date
15 November 2013
Issued amount
Won 270 billion (No. 1-1: Won 240 billion, No. 1-2: Won 30 billion)
Purpose of issuance
Repayment of borrowings and general corproate purposes
Type of offering
Private placement
Listed/Unlisted
Unlisted
Recognition as equity for accounting purposes
Issued securities were recognized as equity shares as they are not considered as part of assets that may be collected for money owed to creditors. However, no dividend may be paid until all interests have been paid.
Unpaid accumulated interest
None
Maturity and early redemption
Maturity: 30 years (but may be extended)
Call options are exercisable five years after issuance date.Interest rate (with conditions for rate adjustment)
4.723% (the rate will be recalculated every five years after issuance date as 5-year government bond yield1.5%, with an additional 1% at 10 years after issuance)
Seniority
Issued securities will be considered pari passu with preferred stock of the Company.
6. Sanctions and Fines
a. Lotte Shopping
In July 2013, the Seoul Regional Tax Office commenced a regular tax investigation into the Company and assessed additional taxes, which were paid in full by the Company in February 2014.
b. Lotte Card
Business segment
Company
Date
Sanction / fine
Reason
Measures taken to prevent reoccurrence
Card
Lotte Card
22 March 2010
Advisory from the Financial Supervisory Service
Advisory from the Financial Supervisory Service in connection with excessive credit card recruiting offers.
Termination of employment of the relevant recruiter. Employee training.
21 January 2014
Advisory from the Financial Supervisory Service
Improper operation of board of directors.
Strengthening of management of board of directors operation.
11 February 2014
Warning from the Financial Supervisory Service
Insurance solicitation with misleading information about insurance products.
Employee training.
16 Feburary 2014
Partial suspension of operations for 3 months from the Financial Services Commission
Leaking of customer information.
Reinforcement of information security (physical and IT-related).
The above table summary does not include minor sanctions and fines.
C. Inventory Status
(Unit: million Won)
Business segment
Account
45thfiscal year (1H)
44thfiscal year
43rdfiscal year
Department store
Merchandise
1,357,826
1,406,355
1,247,970
Goods
Goods in process
Half-finished goods
Raw materials
Component materials
Stored goods
Goods not delivered
Unsold property
Completed property
Uncompleted property
Land site
Sub-total
1,357,826
1,406,355
1,247,970
Discount store
Merchandise
596,979
716,340
643,236
Goods
Goods in process
Half-finished goods
Raw materials
Component materials
Stored goods
299
562
819
Goods not delivered
656
413
235
Unsold property
Completed property
Uncompleted property
30,063
36,068
23,931
Land site
26,066
35,130
46,137
Sub-total
654,063
788,513
714,358
Finance
Merchandise
3,046
2,506
3,679
Goods
Goods in process
Half-finished goods
Raw materials
Component materials
Stored goods
Goods not delivered
Unsold property
Completed property
Uncompleted property
Land site
Sub-total
3,046
2,506
3,679
Electronics
Merchandise
452,655
339,729
252,196
Goods
Goods in process
Half-finished goods
Raw materials
Component materials
Stored goods
Goods not delivered
Unsold property
Completed property
Uncompleted property
Land site
Sub-total
452,655
339,729
252,196
Others
Merchandise
226,240
239,866
209,781
Goods
9,056
9,303
9,361
Goods in process
678
1,288
978
Half-finished goods
Raw materials
735
1,166
1,454
Component materials
3
712
452
Stored goods
1,489
2,867
1,478
Goods not delivered
83
68
Unsold property
Completed property
Uncompleted property
193,553
322,104
Land site
308,529
Sub-total
431,754
577,389
532,101
Total
Merchandise
2,636,746
2,704,796
2,356,862
Goods
9,056
9,303
9,361
Goods in process
678
1,288
978
Half-finished goods
Raw materials
735
1,166
1,454
Component materials
3
712
452
Stored goods
1,788
3,429
2,297
Goods not delivered
656
496
303
Unsold property
Completed property
Uncompleted property
223,616
358,172
23,931
Land site
26,066
35,130
354,666
Sub-total
2,899,344
3,114,492
2,750,304
Inventory as percentage of total assets (%)[InventoryAssets100]
7.43%
7.99%
7.46%
Inventory turnover (times)
[Annualized cost of sales{(Period start inventoryPeriod end inventory)2}]
6.3
6.7
7.3
Due diligence of inventories
Business unit
Department store
Discount store
Others
Date of due diligence
-
-
15 January - 25 June
The Company reviews its inventories in the presence of its independent auditors at the end of each financial year but not for any interim period.
D. Securities Issuances
1. Amount of Outstanding Commercial Paper
(As of 30 June 2014) (Unit: million Won)
Remaining maturity period
Under 10 days
Over 10 but under 30 days
Over 30 but under 90 days
Over 90 but under 180 days
Over 180 days but under 1 year
Over 1 but under 2 years
Over 2 but under 3 years
Over 3 years
Total
Amount outstanding
350,000
610,000
200,000
35,000
164,000
118,000
-
160,000
1,637,000
2. Amount of Outstanding Corporate Bonds
(As of 30 June 2014) (Unit: million Won)
Remaining maturity period
Under 1 year
Over 1 but under 2 years
Over 2 but under 3 years
Over 3 but under 4 years
Over 4 but under 5 years
Over 5 but under 10 years
Over 10 years
Total
Amount outstanding
2,174,059
2,091,860
2,515,186
1,636,405
530,000
220,000
-
9,167,510
3. Amount of Outstanding Hybrid Securities
(As of 30 June 2014) (Unit: million Won)
Remaining maturity period
Under 1 year
Over 1 but under 5 years
Over 5 but under 10 years
Over 10 but under 15 years
Over 15 but under 20 years
Over 20 but under 30 years
Over 30 years
Total
Amount outstanding
-
-
-
-
-
270,000
-
270,000
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR GUGDCGBDBGSL
Recent news on Lotte Shopping Co
See all newsREG - Lotte Shopping CoLtd - Annual Financial Report <Origin Href="QuoteRef">023530.KS</Origin>
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AnnouncementREG - Lotte Shopping CoLtd - 3rd Quarter Results <Origin Href="QuoteRef">023530.KS</Origin> - Part 4
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