REG - Lotte Shopping CoLtd - 3rd Quarter Results <Origin Href="QuoteRef">023530.KS</Origin> - Part 2
03/03/2016 14:45
- Part 2: For the preceding part double click ID:nRSW9644Ja
under progress
(Unit: 100 million Won)
Category Type Investment period Investment asset Investment effect Total investment PriorInvestment Future investment
Department store New 2015 - 2017 Tangible assets Increase in sales 18,093 2,592 15,501
investment
Discount store New 2015 - 2017 Tangible assets Increase in sales 8,311 591 7,720
investment
※ 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 2015 2016 2017
Department store New and ordinary investments Tangible and other assets 24,643 6,350 7,050 11,243 Increase in sales
Discount store New and ordinary investments Tangible and other assets 12,128 2,166 2,733 7,229 Increase in sales
※ The above plans are subject to change based on future business conditions.
C. Sales
(Unit: million Won)
Department Store Products Clothes, etc. Export - -
Domestic 4,893,623 5,074,698
Total 4,893,623 5,074,698
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 772,413 638,403
Total 772,413 638,403
Total 5,666,036 5,713,101
Discount Store Products Food, etc. Export - -
Domestic 5,920,369 5,743,437
Total 5,920,369 5,743,437
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 427,441 429,128
Total 427,441 429,128
Total 6,347,810 6,172,565
Finance Products Export - -
Domestic 2,886 3,231
Total 2,886 3,231
Goods Export - -
Domestic - -
Total - -
Others Fees andcommissions, etc. Export - -
Domestic 1,356,636 1,281,336
Total 1,356,636 1,281,336
Total 1,359,522 1,284,567
Electronics Products Electronics, etc. Export - -
Domestic 2,878,773 2,787,286
Total 2,878,773 2,787,286
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 11,596 11,647
Total 11,596 11,647
Total 2,890,369 2,798,933
convenience store Products Electronics, etc. Export 11 -
Domestic 2,307,974 1,817,807
Total 2,307,985 1,817,807
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 204,159 169,008
Total 204,159 169,008
Total 2,512,144 1,986,815
Others(1) Products Food, etc. Export 6,436 -
Domestic 1,895,749 1,846,314
Total 1,902,185 1,846,314
Goods Food, etc. Export - -
Domestic 34,325 72,098
Total 34,325 72,098
Others Rental fees, etc. Export - -
Domestic 934,915 815,675
Total 934,915 815,675
Total 2,871,425 2,734,087
Total Products Clothes, food, etc. Export 6,447 -
Domestic 17,899,374 17,272,773
Total 17,905,821 17,272,773
Goods Clothes, food, etc. Export - -
Domestic 34,325 72,098
Total 34,325 72,098
Others Rental fees, etc. Export - -
Domestic 3,707,160 3,345,197
Total 3,707,160 3,345,197
Total 21,647,306 20,690,068
3,707,160
3,345,197
Total
21,647,306
20,690,068
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
nine month period ended As of 30 September 2015.
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
nine month period ended As of 30 September 2015.
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. Credit card business
Lotte Card has entered into card issuance agreements with American Express Company, Master Card International, Visa
International and UNIONPAY 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.
3. Other businesses
a. Woori Home Shopping
Woori Home Shopping has entered into an operating lease agreement with Lotte Capital, KT Rental Corporation and a joint
card issuance agreement with Shinhan Card Co., Ltd., Lotte card wable 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 program 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 nine month
period ended 30 September 2015 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
46th fiscal year (3Q) 45th fiscal year 44rd 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 September 2015 and 30 September 2014,
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 nine months ended 30
September 2015 and 2014.
3. Audit contracts
(Unit: million Won, hours)
Fiscal year Auditor Description Fee Total hours
46th fiscal year (3Q) Samjong KPMG Review of quarterly and semi-annual financial statementsReview of non-consolidated and consolidated financial statements 670 7,100
45th fiscal year Samjong KPMG Review of quarterly and semi-annual financial statementsAudit of non-consolidated and consolidated financial statements 670 12,000
44th fiscal year Samjong KPMG Review of quarterly and semi-annual financial statementsAudit of non-consolidated and consolidated financial statements 620 10,600
4. Contracts regarding non-audit services with outside auditor
(Unit: million Won)
Fiscal year Date of contract Description Service period Fee
46thfiscal year (3Q) 15.03.10 Acquisition related tax accountingdue diligence task 15.03.10 ~ 25
15.06.30
15.03.16 Agreed procedure on the royalty for TOYS "R" US 15.03.16~15.03.20 9
45thfiscal year 14.07.23 Support and consultation related to the drafting of combined financial statements of Lotte Group 14.07.23~14.08.31 40
14.12.01 Taxation review on the transaction between Lotte Shopping and FRL Korea 14.12.01~14.12.31 20
44rd fiscal year - - - -
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 10 directors, of whom five 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
Audit Committee Three or more directors (at least two-thirds of whom must be outside directors)2 outside directors at present Sukeun Kwak, Byungkee Ko ① The committee audits the Company's accounting and operations.② The committee reviews the Interim resignation of Dongyeol Park on 2015.09.24, an inspection commissioner of the audit committee
(from 21 March 2014) appropriateness of its performances and regulations every year. If necessary, it proposes revisions to
the Board of Directors.③ 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)2 outside directors and 1 full-time director at present Wonjun Lee, Byungkee Ko, Hyeryun Kang ① The committee recommends candidates for outside directors to the general meeting of shareholders.② -
(from 20 March 2015) The committee must recommend those candidates recommended by shareholders with applicable rights under
Article 542 Clause 6 of the Commercial Code.③ 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.
Internal Transaction Committee Three or more directors (at least two-thirds of whom must beoutside directors) Wonjun Lee, Taehyeon Kim, Chungsook Moon ①In case of contract between the company and its specially related persons for more than certain -
(from 20 March 2015) scale, fair trade order shall be maintained by suggesting standards for selection of opposite party
②In case of concluding a private contract exceeding 10 billion won with affiliated companies in the
area of construction/logistics/advertisement/system, a deliberation and approval may be made.
Internal Transaction Committee
Three or more directors (at least two-thirds of whom must beoutside directors)
Wonjun Lee, Taehyeon Kim, Chungsook Moon
(from 20 March 2015)
①In case of contract between the company and its specially related persons for more than certain scale, fair trade order
shall be maintained by suggesting standards for selection of opposite party ②In case of concluding a private contract
exceeding 10 billion won with affiliated companies in the area of construction/logistics/advertisement/system, a
deliberation and approval may be made.
-
※ As of 30 September 2015
※ Interim resignation of Dongyeol Park on 2015.09.24, an inspection commissioner of the audit committee.
B. Affiliated Companies
1. Overview of affiliates
(As of 30 September 2015)
(Unit: %)
Investor company Lotte Confectionary 1.0 18.3 9.3 7.9 30.0 13.6 0.9 8.9 8.5 4.6 6.1
Lotte Chilsung Beverage 9.3 3.0 3.9 20.0 2.2 5.0 5.3 4.6 1.5 1.5
Lotte Food 0.0 5.0 10.0 7.5 5.0 1.8
Lotte Aluminum 15.3 8.4 9.0 6.2 5.0 2.6 5.6
Lotte Construction 1.0 11.8
Hotel Lotte 3.2 5.8 8.9 13.0 39.1 0.2 34.6 8.8 18.8 12.7 7.1 12.8 28.9 31.1 13.1 8.8 26.6 2.9
Busan Lotte Hotel 4.4 3.9 0.6 0.8 11.3 1.0 11.5
Lotte International 56.8 1.0 0.2
Lotte Shopping 3.4 12.0 27.7 6.2 30.0 38.7 34.0 25.0 50.0 4.6 22.4
Lotte Logistics 13.7 9.0
Lotteria 1.0 2.1 12.5 17.3 2.6 34.5
Lotte Chemical 1.0 13.2 32.0 1.7 4.6
Korea Fuji Film 7.9 9.0 3.5 1.7
Daehong Communications 3.3 2.9 13.9 8.2 28.5
Lotte Corporation 31.3
Lotte Capital
Lotte Data Communication 4.8 4.8 5.6 0.2
Lotte Card
Lotte.Com
Lotte Station Building
Lotte Insurance
Sambark LFT
MYbi
Korea Seven
Lotte Asset Development
Buy the Way 12.5
Hyundai Information Technology
Chungbuk Soju
Lotte Incheon Development
Canon Korea Business Solutions
Lotte Himart
Aegis First
HyundaiLogistics
Lotte Rental
Woori Home Shopping
Lotte Members
Total 81.4 50.0 99.4 50.0 100.0 49.0 50.0 53.0 50.0 100.0 50.0 53.4 94.9 100.0 100.0 99.7 64.4 80.0 0.0 58.8
Total
81.4
50.0
99.4
50.0
100.0
49.0
50.0
53.0
50.0
100.0
50.0
53.4
94.9
100.0
100.0
99.7
64.4
80.0
0.0
58.8
Bu Investor Company Lotte Confectionary
Lotte Chilsung Beverage 100.0
Lotte Food
Lotte Aluminum
Lotte Construction
Hotel Lotte 46.1 100.0 46.1
Busan Lotte Hotel
Lotte International
Lotte Shopping 100.0 95.0 99.8 56.3
Lotte Logistics
Lotteria
Lotte Chemical 100.0 50.0
Korea Fuji Film
Daehong Communications 70.0 99.9
Lotte Corporation
Lotte Capital
Lotte Data Communication 5.0 52.3
Lotte Card 95.0
Lotte.Com
Lotte Station Building 30.0
Lotte Insurance
Sambark LFT
MYbi
Korea Seven 100.0
Lotte Asset Development 20.2 5.0 30.2 9.4 20.2
Buy the Way
Lotte DF Global 97.7
eB Card - 100.0 100.0
Hyundai Information Technology 0.0
Chungbuk Soju 90.0
Lotte Incheon Development 4.3
Canon Korea Business Solutions
Lotte Himart
Aegis First
HyundaiLogistics
Lotte Rental
Woori Home Shopping
Lotte Members
Total 66.2 100.0 100.0 100.0 100.0 97.7 100.0 100.0 100.0 30.2 100.0 99.8 50.0 70.0 52.3 99.9 100.0 100.0 90.0 66.2
Total
66.2
100.0
100.0
100.0
100.0
97.7
100.0
100.0
100.0
30.2
100.0
99.8
50.0
70.0
52.3
99.9
100.0
100.0
90.0
66.2
Investor Company Lotte Confectionary 1.8
Lotte Chilsung Beverage 86.1 1.8
Lotte Food 50.0 1.9
Lotte Aluminum
Lotte Construction 4.8 14.9
Hotel Lotte 85.5 28.8 85.0 12.5 6.9 100.0 20.8
Busan Lotte Hotel 1.0 10.8
Lotte International
Lotte Shopping 50.0 99.9 60.2 28.8 27.5 17.5 100.0 1.8 93.8
Lotte Logistics 5.5
Lotteria 6.7
Lotte Chemical 50.0 8.6
Korea Fuji Film
Daehong Communications
Lotte Corporation
Lotte Capital 4.6
Lotte Data Communication
Lotte Card
Lotte.Com
Lotte Station Building
Lotte Insurance 4.9
Sambark LFT
MYbi
Korea Seven
Lotte Asset Development 9.5 10.0 94.5 69.5 100.0
Buy the Way
Lotte DF Global
eB Card
Hyundai Information Technology
Chungbuk Soju
Lotte Incheon Development
Canon Korea Business Solutions 100.0
Lotte Himart 4.9
Aegis First 88.8
HyundaiLogistics 51.0
Lotte Rental 100.0 100.0 56.6
Woori Home Shopping 8.6
Lotte Members 0.0
otal 50.0 99.9 95.0 60.2 62.5 100.0 50.0 95.0 86.1 54.9 50.0 94.5 87.0 100.0 35.0 88.8 51.0 99.4 100.0 100.0 50.0 100.0 100.0 56.6
otal
50.0
99.9
95.0
60.2
62.5
100.0
50.0
95.0
86.1
54.9
50.0
94.5
87.0
100.0
35.0
88.8
51.0
99.4
100.0
100.0
50.0
100.0
100.0
56.6
※ 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.
※ For Lotte Shopping, there is change in the shares of Lotte Himart, due to the loan made related to convertible bonds but
its equity interest is 65.25%
2. Equity investments
(As of 30 September 2015)
(Unit: Shares, million Won, %)
Lotte Station Building (unlisted) 1986.09.15 Equity investment 250 900,000 25.00 157,380 - - - 900,000 25.00 157,380 736,102 49,127
Daehong Communications (unlisted) 1996.12.23 Equity investment 6,277 13,600 34.00 28,785 - - - 13,600 34.00 28,785 536,859 14,236
Lotte.com (unlisted) 2000.01.05 Equity investment 2,000 1,600,000 34.39 11,610 1,464,000 11,567 - 3,064,000 50.01 23,177 186,312 -3,103
Lotte Card (unlisted) 2002.11.30 Equity investment 34,701 70,934,391 93.78 1,012,153 -845,538 -12,064 - 70,088,853 93.78 1,000,089 8,438,539 148,742
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 5,484,625 74,618
Lotteria (unlisted)(2) 2001.12.27 Equity investment 39,719 186,062 38.68 112,864 - - - 186,062 38.68 112,864 905,505 34,082
FRL Korea (unlisted) 2004.12.16 Equity investment 2,940 2,352,000 49.00 24,827 - - - 2,352,000 49.00 24,827 582,704 118,410
Woori Home Shopping (unlisted) 2006.07.03 Equity investment 28,600 4,242,796 53.03 393,213 - - - 4,242,796 53.03 393,213 993,086 84,034
Lotte Assets Development (unlisted)(2) 2007.07.31 Equity investment 30 11,861,031 39.14 53,319 3,914,243 19,571 - 15,775,274 39.14 72,890 325,216 -1,422
Zara Retail Korea (unlisted) 2007.01.18 Equity investment 130 302,600 20.00 16,106 - - - 302,600 20.00 16,106 178,893 2,032
Korea Seven (unlisted) 2009.09.25 Equity investment 28,184 18,526,176 51.14 82,473 - - - 18,526,176 51.14 82,473 938,615 23,097
Lotte Gimhae Development (unlisted) 2010.03.18 Equity investment 300 60,000 100.00 300 - - - 60,000 100.00 300 1,138 180
Lotte Suwon Station Shopping Town (unlisted) 2010.04.30 Equity investment 48 19,000,000 95.00 94,810 - - - 19,000,000 95.00 94,810 368,805 -2,194
NCF (unlisted)
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