lotte shopping co., ltd. and subsidiaries · lotte shopping co., ltd.: reviewed financial...

LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

(With Independent Auditors’ Review Report Thereon)

Contents

Page

Independent Auditors’ Review Report 1

Condensed Consolidated Interim Statements of Financial Position 3

Condensed Consolidated Interim Statements of Comprehensive Income 5

Condensed Consolidated Interim Statements of Changes in Equity 7

Condensed Consolidated Interim Statements of Cash Flows 9

Notes to the Condensed Consolidated Interim Financial Statements 12

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

Lotte Shopping Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of Lotte Shopping Co., Ltd. and its

subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of September 30,

2013, the condensed consolidated statements of comprehensive income for the three-month and nine-month periods ended

September 30, 2013 and 2012, changes in equity and cash flows for the nine-month periods ended September 30, 2013 and

2012 and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial

statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 Interim Financial

Reporting, and for such internal control as management determines is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

Auditors’ review responsibility

Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews. We

did not review the financial statements of certain subsidiaries, whose financial statements constitute 12.45% of the Group’s

consolidated total assets as of September 30, 2013 and 31.31% and 14.85% of the Group’s consolidated sales for the nine-

month periods ended September 30, 2013 and 2012. Other auditors reviewed those financial statements and our report, insofar

as it relates to the subsidiaries, is based solely on the reports of other auditors.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements

established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information

consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and

other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing

standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would

become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews and the reports of other auditors, nothing has come to our attention that causes us to believe that the

accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects,

in accordance with K-IFRS No.1034, ‘Interim Financial Reporting’.

2

Other matters

The procedures and practices utilized in the Republic of Korea to review such consolidated interim financial statements may

differ from those generally accepted and applied in other countries. Accordingly, this report is for use by those

knowledgeable about Korean review standards and their application in practice.

The statement of financial position of the Group as of December 31, 2012, and the related consolidated statements of

comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report,

were audited by us and our report thereon, dated March 11, 2013, expressed an unqualified opinion. The accompanying

condensed consolidated statement of financial position of the Group as of December 31, 2012, presented for comparative

purposes, is not different from that audited by us, from which it was derived in all material respects.

KPMG Samjong Accounting Corp.

Seoul, Korea

November 13, 2013

This report is effective as of November 13, 2013, the review report date. Certain subsequent events or circumstances,

which may occur between the review report date and the time of reading this report, could have a material impact on the

accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the

review report should understand that the above review report has not been updated to reflect the impact of such subsequent

events or circumstances, if any.

LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Financial Position

3

As of September 30, 2013 and December 31, 2012

(Unaudited)

Korean won (millions)

Notes

September 30, 2013

December 31, 2012

Assets

Cash and cash equivalents

7,37 ￦ 1,178,244

933,997

Trade and other receivables

5,7,36,37

904,897

915,693

Other financial assets

6,7,21,37

7,688,909

8,002,000

Inventories

8

3,026,956

2,750,304

Income tax refund receivable

1,109

492

Other non-financial assets

9

510,449

468,156

Total current assets

13,310,564

13,070,642

Investments in associates and joint ventures

10,11

1,058,946

998,432


6,7,21,37

1,734,468

1,845,655

Property, plant and equipment, net

12

15,617,763

14,825,918

Investment property, net

13

537,577

508,257

Goodwill

14

3,490,531

3,488,824

Other intangible assets, net

14

872,440

919,612


9

1,216,494

1,160,198

Deferred tax assets

43,711

39,507

Total non-current assets

24,571,930

23,786,403

Total assets

￦ 37,882,494

36,857,045

See accompanying notes to the condensed consolidated interim financial statements.

4


Condensed Consolidated Interim Statements of Financial Position, Continued

As of September 30, 2013 and December 31, 2012

(Unaudited)


Notes

September 30, 2013

December 31, 2012

Liabilities

Borrowings and debentures,

net of debenture issuance costs

7,16,37 ￦ 4,906,136

4,111,136

Trade and other payables

7,15,36,37

4,796,742

4,934,368

Other financial liabilities

7,37

511,092

495,899

Income tax payables

133,282

255,155

Unearned revenues

17

225,790

207,145

Provisions

18

67,002

40,367

Other non-financial liabilities

19

1,230,851

1,044,949

Total current liabilities

11,870,895

11,089,019

Borrowings and debentures,

net of debentures issuance costs

7,16,37

7,440,879

8,014,280


7,21,37

364,096

337,826

Employee benefit liabilities

20

233,179

164,367

Deferred tax liabilities

1,354,966

1,449,447

Unearned revenues

17

12,387

27,020

Provisions

18

38,119

31,625


19

60,022

25,136

Total non-current liabilities

9,503,648

10,049,701

Total liabilities

21,374,543

21,138,720

Equity

Common stock of ￦5,000 par value

Authorized - 60,000,000 shares

Issued and outstanding – 31,490,892 shares

1,22

157,454

145,217

Capital surplus

22

3,910,752

3,622,183

Capital adjustments

23

(70,025)

(49,325)

Retained earnings

24

11,765,690

11,092,726

Accumulated other comprehensive income

25

59,199

67,577

Stockholders' equity attributable to owners

of the Company

15,823,070

14,878,378

Non-controlling interests

684,881

839,947

Total equity

16,507,951

15,718,325

Total liabilities and equity

￦ 37,882,494

36,857,045


5


Condensed Consolidated Interim Statements of Comprehensive Income

For the three and nine-month periods ended September 30, 2013 and 2012

(Unaudited)

Korean won

(millions, except for earnings per share)

2013

2012 (Restated)

Notes

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Sales

27,33,36 ￦ 6,970,730 20,837,961

6,054,937 17,920,959

Cost of sales

27,30,36

(4,806,591) (14,447,251)

(4,225,642) (12,471,967)

Gross profit

2,164,139 6,390,710

1,829,295 5,448,992

Selling, general and administrative expenses

28,30

(1,821,356) (5,288,833)

(1,540,371) (4,435,298)

Operating profit

3,33

342,783 1,101,877

288,924 1,013,694

Other income

29

16,662 50,172

16,000 59,067

Other expense

29

(23,967) (64,877)

(19,422) (55,437)

Finance income

31

211,601 237,171

86,921 185,850

Finance costs

31

(125,958) (243,173)

(66,049) (178,803)

Equity method income (loss) on investments in

associates

10,11

7,621 (17,063)

13,577 46,272

Profit before income tax

428,742 1,064,107

319,951 1,070,643

Income tax expense

32

(125,473) (282,020)

(91,125) (303,517)

Profit for the period

303,269 782,087

228,826 767,126

Other comprehensive income (loss) :

Items that will not be reclassified to profit or

loss:

Defined benefit plan actuarial gains(losses)

2,619 13,840

(2,640) (3,551)

Net change in equity of equity method

investments

(10) (1,263)

- -

Income tax on items that will not be

reclassified to profit or loss

(517) (2,872)

789 703

Total items that will not be reclassified to

profit or loss

2,092 9,705

(1,851) (2,848)

Items that may be reclassified subsequently

to profit or loss:

Net change in fair value of available for-sale

financial assets

19,880 (33,821)

(12,443) 1,801

Exchange rate differences on translating

foreign operations

(121,308) (9,628)

(34,315) (44,495)

Effective portion of unrealized changes in fair

values of cash flow hedges

32,831 9,929

(1,565) 6,626

Net change in equity of equity method

investments

(7,598) 8,555

4,482 9,629

Income tax on items that may be reclassified

subsequently to profit or loss

(13,943) 3,385

8,557 1,866

Total items that may be reclassified

subsequently to profit or loss

(90,138) (21,580)

(35,284) (24,573)

Other comprehensive loss for the period, net

of tax

(88,046) (11,875)

(37,135) (27,421)

Total comprehensive income for the period

￦ 215,223 770,212

191,691 739,705


6


Condensed Consolidated Interim Statements of Comprehensive Income, Continued

For the three and nine-month periods ended September 30, 2013 and 2012

(Unaudited)

Korean won

(millions, except for earnings per share)

2013

2012 (Restated)

Notes

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Profit attributable to:

- Owners of the Company

￦ 274,505 704,619

207,483 711,410

- Non-controlling interests

28,764 77,468

21,343 55,716

303,269 782,087

228,826 767,126

Total comprehensive income attributable to:

- Owners of the Company

196,366 690,227

168,586 674,726

- Non-controlling interests

18,857 79,985

23,105 64,979

215,223 770,212

191,691 739,705

Earnings per share

26

- Basic earnings per share (in won)

9,289 23,843

7,144 24,495

- Diluted earnings per share (in won)

￦ 7,431 21,748

6,533 22,775


7


Condensed Consolidated Interim Statements of Changes in Equity

For the nine-month periods ended September 30, 2013 and 2012

(Unaudited)


Capital

stock

Capital

surplus

Capital

adjustments

Retained

earnings

Accumulated other

comprehensive

income

Stockholders’ equity

attributable to owners of

the Company

Non-

controlling

interests Total equity

Balance at January 1, 2012 ￦ 145,217

3,622,183

(30,867)

10,091,896

137,806

13,966,235 712,770

14,679,005

Total comprehensive income for the

period:


-

-

-

711,410 - 711,410 55,716 767,126

Other comprehensive income:

Net change in fair value of available for-sale financial assets

-

-

-

- (7,006) (7,006) 8,411 1,405

Exchange rate differences on translating

foreign operations

-

-

-

- (43,487) (43,487) 881 (42,606) Effective portion of unrealized changes in

fair values of cash flow hedges

-

-

-

- 4,475 4,475 (74) 4,401

Defined benefit plan actuarial losses

-

-

-

(3,005) - (3,005) 157 (2,848)

Change in equity of equity method

investments

-

-

-

- 12,339 12,339 (112) 12,227

Sub total

-

-

-

(3,005) (33,679) (36,684) 9,263 (27,421)


-

-

-

708,405 (33,679) 674,726 64,979 739,705

Transactions with owners of the

Company, recognized directly in

equity:

Dividends to owners of the Company

-

-

- (43,565) - (43,565) (10,077) (53,642)

Capital increase from non-controlling

interest

-

-

(20,562) - - (20,562) 20,512 (50) Business combination and initial

consolidation of subsidiary

-

-

- - - - 2,638 2,638

Other

-

-

420 (4,953) - (4,533) (1,330) (5,863)

Balance at September 30, 2012 ￦ 145,217 3,622,183 (51,009) 10,751,783 104,127 14,572,301 789,492 15,361,793



Condensed Consolidated Interim Statements of Changes in Equity, Continued

8


(Unaudited)


Capital

stock

Capital

surplus

Capital

adjustments Retained

earnings

Accumulated other

comprehensive

income

Stockholders’ equity

attributable to owners of

the Company

Non-

controlling

interests Total equity

Balance at January 1, 2013 ￦ 145,217

3,622,183

(49,325)

11,092,726

67,577

14,878,378 839,947

15,718,325

Total comprehensive income for the

period:


-

-

-

704,619 - 704,619 77,468 782,087

Other comprehensive income:

Net change in fair value of available for-

sale financial assets

-

-

-

- (25,100) (25,100) 1,236 (23,864) Exchange rate differences on translating

foreign operations

-

-

-

- (12,683) (12,683) 1,738 (10,945)

Effective portion of unrealized changes in fair values of cash flow hedges

-

-

-

- 6,686 6,686 35 6,721

Defined benefit plan actuarial gains

-

-

-

10,973 - 10,973 (491) 10,482

Change in equity of equity method investments

-

-

-

(777) 6,508 5,731 - 5,731

Sub total

-

-

-

10,196 (24,589) (14,393) 2,518 (11,875)


-

-

-

714,815 (24,589) 690,226 79,986 770,212

Transactions with owners of the

Company, recognized directly in

equity:

Dividends to owners of the Company

-

-

- (43,565) - (43,565) (19,356) (62,921)

Merger of subsidiaries

12,237

243,600

(11,237) - 16,211 260,811 (186,454) 74,357

Consideration for exchange rights

-

44,944

- - - 44,944 - 44,944

Acquisition of treasury stocks

-

-

(1,806) - - (1,806) - (1,806)

Acquisition of treasury stocks in

subsidiaries

-

-

(5,897) - - (5,897) (21,550) (27,447) Capital contribution (deduction) from

non-controlling interest

-

-

(2,820) - - (2,820) (6,341) (9,161)

Changes in consolidation

-

-

- - - - (1,370) (1,370)

Other

-

25

1,060 1,714 - 2,799 19 2,818

Balance at September 30, 2013 ￦ 157,454 3,910,752 (70,025) - 11,765,690 59,199 15,823,070 684,881 16,507,951


http://endic.naver.com/enkrEntry.nhn?entryId=5e1c7a0aa26840d1a3e0f57b9b3f7700&query=%EC%A0%84%ED%99%98%EA%B6%8C%EB%8C%80%EA%B0%80

9


Condensed Consolidated Interim Statements of Cash Flows


(Unaudited)


2013 2012

Cash flows from operating activities Profit for the period ￦ 782,087

767,126

Income tax expense

282,020

303,517

Post-employment benefits

85,010

62,770

Long-term employee benefits

4,941

3,775

Depreciation

528,151

428,699

Amortization

73,370

98,975

Loss on foreign currency translation

10,689

7,747

Loss on disposal of property, plant and equipment

10,178

9,044

Loss on valuation of financial liabilities at fair value through

profit or loss

16,098

-

Loss on valuation of derivative instruments

30,063

20,791

Loss on derivatives transaction

129

2,788

Equity method loss of investments in associates

65,186

11,766

Rental expenses (Amortization of discount on deposit, etc.)

69,421

50,023

Other expenses

5,755

6,005

Gain on foreign currency translation

(79,767)

(59,339)

Gain on disposal of property, plant and equipment

(4,547)

(1,377)

Equity method gain of investments in associates

(48,123)

(58,038)

Gain on valuation of derivative instruments

(2,700)

(4,410)

Gain on derivatives transaction

(4,320)

(50)

Gain on valuation of financial liability at fair value through profit

or loss

(42,344)

(20,621)

Gain on disposal of available-for-sale financial assets

(25,432)

(1,210)

Gain on disposal of investments in associates

(9,820)

(522)

Other income

(10,322)

(11,207)

Income of card business

(551,701)

(554,493)

Cost of card business

318,248

346,203

Interest expense

188,038

143,765

Interest income

(69,235)

(84,488)

Dividends income

(5,881)

(8,948)

Trade receivables

15,478

(139,859)

Other receivables

(28,525)

(17,306)


22,071

(226,336)

Inventories

(261,087)

(178,858)


(88,656)

(102,930)

Trade payables

(45,363)

226,641

Other payables

(88,051)

26,768


(5,620)

55,921

Unearned revenues

21,527

14,213

Provisions

4,368

9,096


174,228

183,572

Payment of post-employment benefits

(28,506)

(38,407)

Plan assets

21,013

24,329

Income tax paid

(427,340)

(348,277)

Interest received

516,369

487,714

Interest paid

(150,081)

(166,071)

Dividends received

109

3,669

Net cash provided by operating activities ￦ 1,267,126

1,272,170


10


Condensed Consolidated Interim Statements of Cash Flows, Continued


(Unaudited)


2013 2012

Cash flows from investing activities

Sale of financial assets ￦ 675,219

510,135

Collection of loans

10,561

4,860

Sale of available-for-sale financial assets

171,680

13,990

Sale of investments in associates and joint ventures

-

10,838

Proceeds from disposal of property, plant and equipment

15,984

47,582

Proceeds from disposal of intangible assets

2,037

48,274

Decrease of other non-financial assets

26

1,155

Purchase of short-term financial assets

(522,258)

(511,406)

Increase of loans

(6,546)

(3,578)

Purchase of available-for-sale financial assets

(32,891)

(51,400)

Purchase of investments in associates and joint ventures

(58,117)

(38,184)

Acquisition of property, plant and equipment

(1,400,550)

(1,280,518)

Acquisition of investment property

(1,370)

-

Acquisition of intangible assets

(47,090)

(83,907)

Acquisition of other investments

(20)

(2,932)

Acquisition of other non-financial assets

(42)

(62,402)

Business combination, net of cash acquired

-

(236,687)

Exclusion from consolidation

(3,031)

-

Interest received

43,398

38,309

Dividends received

19,150

78,093

Net cash used in investing activities ￦ (1,133,860)

(1,517,778)


11


Condensed Consolidated Interim Statements of Cash Flows, Continued


(Unaudited)


2013 2012

Cash flows from financing activities

Proceeds from borrowings ￦ 3,122,144

2,755,928

Proceeds from issuance of debentures

1,917,253

2,153,862

Capital contribution from (distribution to) non-

controlling interests

12,182 27,275

Cash inflows from other financing activities

25

-

Repayment of borrowings

(3,214,807)

(3,077,147)

Redemption of debentures

(1,463,733)

(952,506)

Acquisition of additional ownership in subsidiaries

(3,531)

(28,367)

Acquisition of treasury stocks

(1,806)

-

Distribution to non-controlling interest

(45,704)

-

Cash outflows from other financing activities

(187)

(3,927)

Interest paid

(154,319)

(134,712)

Dividends paid

(62,921)

(53,642)

Net cash provided by financing activities

104,596

686,764

Net increase in cash and cash equivalents

237,862

441,156

Cash and cash equivalents at January 1

933,997

1,958,204

Impact of foreign currency exchange rates on

cash and cash equivalents

1,174

399

Exchange differences on translating foreign

operations

5,211

(7,781)

Cash and cash equivalents at September 30 ￦ 1,178,244

2,391,978



Notes to the Condensed Consolidated Interim Financial Statements


(Unaudited)

12

1. General Description of Reporting Entity

(a) Organization and Description of the Company

Lotte Shopping Co., Ltd. (the “Company”) was established on July 2, 1970 in the Republic of Korea to engage in retail

operations through department stores, discount stores and supermarkets. In addition to the retail operations, the

Company’s business includes a chain of multiplex movie theaters under the brand name of Lotte Cinema and a clothing

retail division. The Company was listed on the Korea Exchange and the London Stock Exchange through an initial public

offering in February 2006.

The stockholders of the Company as of September 30, 2013 are as follows:

(b) Description of Subsidiaries

The consolidated financial statements of the Company comprise the Company and its subsidiaries (together referred to as

the “Group” and individually as “Group entities”) and the Group’s interest in associates and jointly controlled entities. A

summary of the subsidiaries of the Company as of September 30, 2013 and December 31, 2012 is as follows:

September 30, 2013

Subsidiaries

Location Products or services

Fiscal

year

Percentage of

ownership (%)

Lotte Card Co., Ltd.

Korea

Credit card, capital

Dec. 31

93.70

eB Card Co., Ltd.

Korea

Electronic banking business

Dec. 31

95.00

Gyeonggi Smartcard Co., Ltd.

Korea


Dec. 31

100.00

Inchon Smartcard Co., Ltd.

Korea


Dec. 31

100.00

Chungnam Smartcard Co., Ltd.

Korea


Dec. 31

100.00

Woori Home Shopping &

Television Co., Ltd.

Korea

Distribution

Dec. 31

53.03

Stockholder

Number

of shares

Ownership (%)

Shin, Dong Bin 4,237,627

13.46

Shin, Dong Ju 4,235,883

13.45

Shin, Kyuk Ho 293,877

0.93

Shin, Young Ja 232,818

0.74

Hotel Lotte Co., Ltd. 2,781,947

8.83

Korea Fuji Film Co., Ltd. 2,474,543

7.86

Lotte Confectionery Co., Ltd. 2,474,543

7.86

LOTTE DATA COMMUNICATION COMPANY 1,515,653

4.81

Lotte Chilsung Beverage Co., Ltd. 1,237,272

3.93

Lotte Engineering & Construction Co., Ltd. 300,019

0.95

Hotel Lotte Pusan Co., Ltd. 246,720

0.78

Treasury stock 1,938,688

6.16

Others 9,521,302

30.24

Total 31,490,892

100.00




(Unaudited)

13

1. General Description of Reporting Entity, Continued

(b) Description of Subsidiaries, Continued

September 30, 2013

Subsidiaries


Fiscal

year

Percentage of

ownership (%)

Korea Seven Co., Ltd.

Korea

Distribution

Dec. 31

51.14

Buy the way Inc.

Korea

Distribution

Dec. 31

100.00

Lotte Boulangerie Co., Ltd.

Korea

Bakery

Dec. 31

90.54

NCF Co., Ltd.

Korea

Apparel manufacturing

Dec. 31

98.30

Lotte Gimhae Development Co., Ltd.

Korea

Service company

Dec. 31

100.00

Lotte Suwon Station Shopping Town Co., Ltd.

Korea

Real estate development

Dec. 31

95.00

Lotte Songdo Shopping Town Co., Ltd.

Korea


Dec. 31

56.30

CS Mart Co., Ltd.

Korea Distribution

Dec. 31 99.95

LOTTE Himart Co., Ltd.(*1)

Korea

Consumer electronics

Dec. 31 65.25

Himart Logitech Co., Ltd.

Korea

Freight transport agency

Dec. 31 100.00

Himart Shopping Mall Co., Ltd.

Korea

Electronic commerce

Dec. 31 100.00

Lotte Vietnam Shopping Co., Ltd.

Vietnam

Distribution

Dec. 31

100.00

Qingdao Lotte Mart Commercial Co., Ltd.

China

Distribution

Dec. 31

100.00

Lotte Mart Co., Ltd.

China

Distribution

Dec. 31

100.00

LOTTE SHOPPING HOLDINGS

(SINGAPORE) PTE. LTD.

Singapore

Holding company

Dec. 31

100.00

PT. Lotte Shopping Indonesia

Indonesia

Distribution

Dec. 31

80.00

PT. Lotte Mart Indonesia

Indonesia

Distribution

Dec. 31

100.00

Lotte Shopping India Pvt. Ltd.

India

Distribution

Dec. 31

100.00

Lotte Hotel & Retail Vietnam Pte. Ltd.

Singapore

Holding company

Dec. 31

60.00

Kotobuki Holding (HK) Ltd.

Hong

Kong Holding company Dec. 31 100.00

Hai Thanh - Kotobuki Joint Venture Company Vietnam Hotel Dec. 31 70.00

Lotte Shopping Holdings

(Hong Kong) Co., Ltd.

Hong

Kong

Holding company

Dec. 31

100.00

Lotte Mart China Co., Ltd. and its subsidiaries

China

Distribution

Dec. 31

100.00

Lotte Home Shopping Company Limited

Cayman

Holding company

Dec. 31

90.07

Lucky Pai Ltd. and its subsidiaries

China

Distribution

Dec. 31

94.65

Lotte Business Management (Tianjin) Co., Ltd.

China

Distribution

Dec. 31

100.00

Liaoning Lotte Mart Co., Ltd.

China

Distribution

Dec. 31

100.00

Lotte Cinema Vietnam Co., Ltd.

Vietnam

Cinema

Dec. 31

90.00

Jilin Lotte Mart Co., Ltd.

China

Distribution

Dec. 31

100.00




(Unaudited)

14

1. General Description of the Parent Group, Continued


September 30, 2013

Subsidiaries


Fiscal

year

Percentage of

ownership (%)

LOTTE SHOPPING Avenue

INDONESIA

Indonesia

Distribution

Dec. 31

100.00

Lotte Department Store (Shenyang) Co.,

Ltd.

China

Distribution

Dec. 31

100.00

Lotte International Department Store

(Weihai) Co., Ltd. China

Distribution

Dec. 31

100.00

Lotte DatViet Homeshopping Co., Ltd.

Vietnam

Distribution

Dec. 31

86.17

Lottemart Danang Co., Ltd.

Vietnam

Distribution

Dec. 31

100.00

LOTTE DEPARTMENT STORE

(TIANJIN) CO., LTD.

China Distribution Dec. 31 100.00

Lottemart C&C India Pvt. Ltd.

India

Distribution

Dec. 31

100.00

Lotte Shopping Business Management

(Hong Kong) Limited

Hong Kong SPC Dec. 31 100.00

LOTTE PROPERTIES (CHENGDU) HK

LIMITED

Hong Kong Holding company Dec. 31 73.46

Lotte Properties (Chengdu) Limited


Lotte (China) Company Management Co.,

Ltd.

China Business management Dec. 31 70.00


(CHENGDU) CO., LTD.

China

Distribution

Dec. 31

100.00

Lottemart(ChongQing) Commercial

Company Limited

China

Distribution

Dec. 31

100.00

Lotte Shopping Plaza Vietnam Co.,Ltd.

Vietnam Distribution Dec. 31 100.00

PT. Lotte Members Indonesia

Indonesia Business support service Dec. 31 100.00

LOTUS MANAGEMENT PTE. LTD. Singapore Investment company

Dec. 31

100.00

The 2nd Supreme(*2)

Korea

SPC

Dec. 31

0.90

The 3rd Supreme(*2)

Korea

SPC

Dec. 31

0.90

The 4th Supreme(*2)

Korea

SPC

Dec. 31

0.90

The 5th Supreme(*2)

Korea

SPC

Dec. 31

0.90

The 6th Supreme(*2)

Korea

SPC

Dec. 31

0.90

(*1) During the nine-month period ended September 30, 2013, the Company issued exchangeable bonds which are

exchangeable to common stocks of LOTTE Himart Co., Ltd. The total number of the exchangeable common stocks

for the issued bonds is 3,538,224 shares. In case all of the exchangeable bonds are exchanged to the common stocks of

LOTTE Himart Co., Ltd., the Company’s percentage of ownership on LOTTE Himart Co., Ltd. will be decreased

from 65.25% to 50.26%. In addition, the Company entered into securities lending agreements to lend shares of

LOTTE Himart Co., Ltd. owned by the Company up to 50% of the total exchangeable common stocks. As of

September 30, 2013, the total number of the common stocks of LOTTE Himart Co., Ltd. under securities lending

agreements is 1,769,112 shares. The Company does not have voting right and disposal for the lent shares are restricted.

(*2) The Group possesses substantial risks and rewards of Special Purpose Company (SPC) specializing in factoring

credit card sale receivables.






(Unaudited)

15

December 31, 2012

Subsidiaries


Fiscal

year

Percentage of

ownership (%)

Lotte Midopa Co., Ltd.

Korea

Distribution

Dec. 31

79.01


Korea

Credit card, capital

Dec. 31

92.54

eB Card Co., Ltd.

Korea


Dec. 31

95.00

Gyeonggi Smartcard Co., Ltd.

Korea


Dec. 31

100.00

Inchon Smartcard Co., Ltd.

Korea


Dec. 31

100.00

Chungnam Smartcard Co., Ltd.

Korea


Dec. 31

100.00



Korea

Distribution

Dec. 31

53.03


Korea

Distribution

Dec. 31

51.14

Buy the way Inc.

Korea

Distribution

Dec. 31

100.00

Lotte Boulangerie Co., Ltd.

Korea

Bakery

Dec. 31

90.54

NCF Co., Ltd.

Korea

Apparel manufacturing

Dec. 31

94.50

Lotte Gimhae Development Co.,

Ltd.

Korea

Service company

Dec. 31

100.00

Lotte Suwon Station Shopping

Town Co., Ltd.

Korea


Dec. 31

95.00

Lotte Songdo Shopping Town Co.,

Ltd.

Korea


Dec. 31

58.82

CS Mart Co., Ltd.

Korea Distribution

Dec. 31 99.94

LOTTE Himart Co., Ltd.

Korea

Consumer electronics

Dec. 31 65.25

Himart Logitech Co., Ltd.

Korea

Freight transport agency

Dec. 31 100.00


Korea

Electronic commerce

Dec. 31 100.00

Lotte Vietnam Shopping Co., Ltd.

Vietnam

Distribution

Dec. 31

100.00

Qingdao Lotte Mart Commercial

Co., Ltd.

China

Distribution

Dec. 31

100.00

Lotte Mart Co., Ltd.

China

Distribution

Dec. 31

100.00

LOTTE SHOPPING HOLDINGS

(SINGAPORE) PTE. LTD.

Singapore

Holding company

Dec. 31

100.00

PT. Lotte Shopping Indonesia

Indonesia

Distribution

Dec. 31

80.00

PT. Lotte Mart Indonesia

Indonesia

Distribution

Dec. 31

100.00

Lotte Shopping India Pvt. Ltd.

India

Distribution

Dec. 31

100.00

Lotte Hotel & Retail Vietnam Pte.

Ltd.

Singapore

Holding company

Dec. 31

60.00

Kotobuki Holding (HK) Ltd.

Hong

Kong Holding company Dec. 31 100.00

Hai Thanh - Kotobuki Joint Venture

Company Vietnam Hotel Dec. 31 70.00

Lotte Shopping Holdings

(Hong Kong) Co., Ltd.

Hong

Kong

Holding company

Dec. 31

100.00

Lotte Mart China Co., Ltd. and its

subsidiaries

China

Distribution

Dec. 31

100.00

Lotte Home Shopping Company

Limited

Cayman

Holding company

Dec. 31

89.91

Lucky Pai Ltd. and its subsidiaries

China

Distribution

Dec. 31

89.21

Lotte Business Management

(Tianjin) Co., Ltd.

China

Distribution

Dec. 31

100.00




(Unaudited)

16



December 31, 2012

Subsidiaries


Fiscal

year

Percentage of

ownership (%)

Lotte Mart Global Sourcing Center Co.,

Ltd.

China

Trading company

Dec. 31

100.00

Liaoning Lotte Mart Co., Ltd.

China

Distribution

Dec. 31

100.00

Lotte Cinema Vietnam Co., Ltd.

Vietnam

Cinema

Dec. 31

90.00

Jilin Lotte Mart Co., Ltd.

China

Distribution

Dec. 31

100.00


INDONESIA

Indonesia

Distribution

Dec. 31

100.00

Lotte Department Store (Shenyang) Co.,

Ltd.

China

Distribution

Dec. 31

100.00

Lotte International Department Store

(Weihai) Co., Ltd. China

Distribution

Dec. 31

100.00

Lotte DatViet Homeshopping Co., Ltd.

Vietnam

Distribution

Dec. 31

86.17

Lottemart Danang Co., Ltd.

Vietnam

Distribution

Dec. 31

100.00


(TIANJIN) CO., LTD.


Lottemart C&C India Pvt. Ltd.

India

Distribution

Dec. 31

100.00

Lotte Shopping Business Management

(Hong Kong) Limited

Hong Kong SPC Dec. 31 100.00

LOTTE PROPERTIES (CHENGDU) HK

LIMITED

Hong Kong Holding company Dec. 31 73.46

Lotte Properties (Chengdu) Limited


Lotte (China) Company Management Co.,

Ltd.

China Business management Dec. 31 70.00


(CHENGDU) CO., LTD.

China

Distribution

Dec. 31

100.00

Lottemart(ChongQing) Commercial

Company Limited

China

Distribution

Dec. 31

100.00

The 2nd Supreme(*1)

Korea

SPC

Dec. 31

0.90

The 3rd Supreme(*1)

Korea

SPC

Dec. 31

0.90

The 4th Supreme(*1)

Korea

SPC

Dec. 31

0.90

The 5th Supreme(*1)

Korea

SPC

Dec. 31

0.90

Himart 1st ABS Specialty Co., Ltd.(*2)

Korea

SPC

Dec. 31

0.10

(*1) The Group possesses substantial risks and rewards of Special Purpose Company (SPC) specializing in factoring credit

card sale receivables.

(*2) The Group possesses substantial risks and rewards of Special Purpose Company (SPC) specializing in credit card

receivables.




(Unaudited)

17


(c) Financial information of subsidiaries as of and for the nine-month period ended September 30, 2013 and as of and

for the year ended December 31, 2012 are summarized as follows:

Company

September 30, 2013 Korean won (millions)

Total

assets

Total

liabilities Sales

Net income

(loss)

Lotte Card Co., Ltd. 7,807,342 6,055,037 1,188,470 116,590

eB Card Co., Ltd. 163,251 107,404 43,325 795

Gyeonggi Smartcard Co., Ltd. 19,190 2,263 17,173 1,565

Inchon Smartcard Co., Ltd. 16,653 7,170 8,922 534

Chungnam Smartcard Co., Ltd. 3,200 6,823 241 (677)

Woori Home Shopping & Television Co., Ltd. 710,098 268,673 541,405 42,360

Korea Seven Co., Ltd. 903,074 638,414 1,590,683 34,725

Buy the way Inc. 235,331 78,272 328,373 6,160

Lotte Boulangerie Co., Ltd. 42,500 41,679 62,326 (3,387)

NCF Co., Ltd. 28,803 13,680 35,323 (3,195)

Lotte Gimhae Development Co., Ltd. 900 267 1,930 114

Lotte Suwon Station Shopping Town Co., Ltd. 146,384 48,835 - (1,681)

Lotte Songdo Shopping Town Co., Ltd. 197,279 97,744 - (6,092)

CS Mart Co., Ltd. 158,143 78,990 309,590 11,352

LOTTE Himart Co., Ltd. 2,705,845 1,129,345 2,588,386 105,231

Himart Logitech Co., Ltd. 14,393 9,357 109,200 3,896

Himart Shopping Mall Co., Ltd. 4,008 999 5,068 1,254

Lotte Vietnam Shopping Co., Ltd. 257,587 183,587 62,791 (1,651)

Qingdao Lotte Mart Commercial Co., Ltd. 137,030 152,352 55,805 (29,502)

Lotte Mart Co., Ltd. 193,139 183,523 288,764 (17,988) LOTTE SHOPPING HOLDINGS (SINGAPORE) PTE. LTD. 255,541 29 - (21)

PT. Lotte Shopping Indonesia 229,860 126,641 654,242 13,184

PT. Lotte Mart Indonesia 187,047 154,088 183,246 (9,999)

Lotte Shopping India Pvt. Ltd. 4 56 - (2)

Lotte Hotel & Retail Vietnam Pte. Ltd. 70,236 - - (1,133)

Kotobuki Holding (HK) Ltd. 38,288 14 - 3,693

Hai Thanh - Kotobuki Joint Venture Company 81,414 14,584 13,832 560

Lotte Shopping Holdings (Hong Kong) Co., Ltd. 1,223,729 221,917 - (1,490)

Lotte Mart China Co., Ltd. and its subsidiaries 873,514 664,107 837,623 (17,635)

Lotte Home Shopping Company Limited 164,364 - - 6

Lucky Pai Ltd. and its subsidiaries 29,913 32,764 53,784 (4,420)

Lotte Business Management (Tianjin) Co., Ltd. 33,386 54,060 14,969 (17,273)

Liaoning Lotte Mart Co., Ltd. 59,376 58,150 34,255 (7,842)

Lotte Cinema Vietnam Co., Ltd. 43,847 43,427 9,460 (1,424)

Jilin Lotte Mart Co., Ltd. 32,691 34,320 22,087 (7,342)

LOTTE SHOPPING Avenue INDONESIA 43,460 14,419 5,508 (7,084)

Lotte Department Store (Shenyang) Co., Ltd. 18,681 86 - (2,012)

Lotte International Department Store (Weihai) Co., Ltd. 30,184 9,828 2,242 (8,877)

Lotte DatViet Homeshopping Co., Ltd. 2,890 1,039 2,556 (1,927)

Lottemart Danang Co., Ltd. 35,993 16,456 11,161 (1,065)

Lottemart C&C India Pvt. Ltd. 236 7 - 15




(Unaudited)

18


(c) Financial information of subsidiaries as of and for the nine-month period ended September 30, 2013 and as of and

for the year ended December 31, 2012 are summarized as follows, continued:

Company

September 30, 2013 Korean won (millions)

Total

assets

Total

liabilities Sales

Net income

(loss)

LOTTE DEPARTMENT STORE (TIANJIN) CO., LTD. ￦ 41,870 25,472 11,250 (22,530)

Lotte Shopping Business Management (Hong Kong)

Limited

132,243 132,252 - (54)

LOTTE PROPERTIES (CHENGDU) HK LIMITED 354,282 143,968 - (1,612)

Lotte Properties (Chengdu) Limited 350,270 29 - (4,786)

Lotte (China) Company Management Co., Ltd. 7,534 163 3,960 (72)

LOTTE DEPARTMENT STORE(CHENGDU) CO., LTD. 49,579 22,510 1,790 (12,678)

Lottemart (ChongQing) Commercial Company Limited 30,377 13,435 11,369 (4,148)

Lotte Shopping Plaza Vietnam Co.,Ltd. 1,781 26 - (715)

PT. Lotte Members Indonesia 3,551 - - (89)

LOTUS MANAGEMENT PTE. LTD. 9 15 - (7)

The 2nd Supreme 27 17 3,066 -

The 3rd Supreme 337,921 337,899 8,605 -

The 4th Supreme 161,054 160,786 3,392 -

The 5th Supreme 186,297 185,609 3,611 -

The 6th Supreme 191,139 189,876 1,374 -




(Unaudited)

19


(c) Financial information of subsidiaries as of and for the nine-month period ended September 30, 2013 and for the

year ended and 2012 are summarized as follows, continued:

Company

December 31, 2012 Korean won (millions)

Total

assets

Total

liabilities Sales

Net income

(loss)

Lotte Midopa Co., Ltd. ￦ 1,113,731 223,302 375,405 43,739

Lotte Card Co., Ltd. 7,949,005 6,289,018 1,616,039 162,356

eB Card Co., Ltd. 172,096 116,724 46,098 (6,806)

Gyeonggi Smartcard Co., Ltd. 19,232 3,877 23,255 4,695

Inchon Smartcard Co., Ltd. 20,312 11,363 12,466 1,708

Chungnam Smartcard Co., Ltd. 3,549 6,494 459 (687)

Woori Home Shopping & Television Co., Ltd. 715,750 288,089 670,127 66,897

Korea Seven Co., Ltd. 888,701 640,779 1,900,264 41,638

Buy the way Inc. 238,041 87,279 548,787 12,350

Lotte Boulangerie Co., Ltd. 45,160 41,241 86,102 (2,091)

NCF Co., Ltd. 32,588 14,389 48,863 29

Lotte Gimhae Development Co., Ltd. 716 197 2,051 100

Lotte Suwon Station Shopping Town Co., Ltd. 64,870 15,128 - 281

Lotte Songdo Shopping Town Co., Ltd. 190,179 94,497 - (5,457)

CS Mart Co., Ltd. 155,590 87,749 396,626 11,694

LOTTE Himart Co., Ltd. 2,604,671 1,128,075 3,212,151 71,378

Himart Logitech Co., Ltd. 10,333 9,162 109,877 (1,273)

Himart Shopping Mall Co., Ltd. 2,473 687 4,835 1,138

Lotte Vietnam Shopping Co., Ltd. 208,095 131,653 67,639 (992)

Qingdao Lotte Mart Commercial Co., Ltd. 119,178 105,893 53,163 (34,264)

Lotte Mart Co., Ltd. 177,892 151,251 348,748 (11,972) LOTTE SHOPPING HOLDINGS (SINGAPORE) PTE., LTD. 229,004 11 - (15)

PT. Lotte Shopping Indonesia 242,376 131,754 839,394 12,377

PT. Lotte Mart Indonesia 191,310 141,995 195,107 (18,897)

Lotte Shopping India Pvt., Ltd. 4 62 - (5)

Lotte Hotel & Retail Vietnam Pte. Ltd. 112,729 880 - 6,372

Kotobuki Holding (HK) Ltd. 34,590 52 - (16)

Hai Thanh - Kotobuki Joint Venture Company 84,527 9,755 5,559 1,122

Lotte Shopping Holdings (Hong Kong) Co., Ltd. 1,059,440 130,373 - (50,596)

Lotte Mart China Co., Ltd. and its subsidiaries 779,069 557,374 1,033,092 (9,245)

Lotte Home Shopping Company Limited 171,218 28 - (5)

Lucky Pai Ltd. and its subsidiaries 34,954 32,085 84,354 (9,020)

Lotte Business Management (Tianjin) Co., Ltd. 28,679 32,345 19,089 (25,588)

Lotte Mart Global Sourcing Center Co., Ltd. 106 1,311 1,907 (483)

Liaoning Lotte Mart Co., Ltd. 52,550 43,837 37,879 (8,580)

Lotte Cinema Vietnam Co., Ltd. 28,733 26,917 6,925 (1,383)

Jilin Lotte Mart Co., Ltd. 36,952 31,510 27,840 (7,640)

LOTTE SHOPPING Avenue INDONESIA 18,454 852 - (2,873)

Lotte Department Store (Shenyang) Co., Ltd. 1,966 41 - (988)

Lotte International Department Store (Weihai) Co., Ltd. 23,510 5,870 - (3,990)

Lotte DatViet Homeshopping Co., Ltd. 4,409 653 852 (2,391)

Lottemart Danang Co., Ltd. 31,031 10,223 1,152 (42)

LOTTE DEPARTMENT STORE (TIANJIN) CO., LTD. 48,742 21,648 4,175 (16,989)




(Unaudited)

20


(c) Financial information of subsidiaries as of and for the nine-month period ended September 30, 2013 and for the

year ended and 2012 are summarized as follows, continued:

Company

December 31, 2012 Korean won (millions)

Total

assets

Total

liabilities Sales

Net income

(loss)

Lotte Shopping Business Management (Hong Kong)

Limited ￦

130,517 130,474 - 33

LOTTE PROPERTIES (CHENGDU) HK LIMITED 212,105 3 - (302)

Lotte Properties (Chengdu) Limited 317,515 218,581 - (1,655)

Lotte (China) Company Management Co., Ltd. 7,320 42 1,377 (1,366)

LOTTE DEPARTMENT STORE(CHENGDU) CO., LTD. 26,431 5,854 - (4,474)

Lottemart C&C India Pvt. Ltd. 252 7 - (698)

Lottemart (ChongQing) Commercial Company Limited 10,992 1,241 - (1,142)

The 2nd Supreme 228,751 229,528 927 -

The 3rd Supreme 337,949 339,419 966 -

The 4th Supreme 161,065 161,069 380 -

The 5th Supreme 186,309 185,630 405 -

Himart 1st ABS Specialty Co., Ltd. 40 12 9,438 18




(Unaudited)

21


(d) Entities included in consolidation in 2013 are as follows:

Description

Subsidiaries

Established entity in 2013

Lotte Shopping Plaza Vietnam Co.,Ltd.

PT. Lotte members Indonesia

LOTUS MANAGEMENT PTE. LTD.

The 6th Supreme

(e) Entities excluded from consolidation in 2013 are as follows:

Description

Subsidiaries

Statutory merger into the Company in 2013

Lotte Midopa Co., Ltd.

Liquidation in 2013

Himart 1st ABS Specialty Co., Ltd.

Lotte Mart Global Sourcing Center Co., Ltd.

Loss of control in 2013

Yunnan Maile TV Shopping Media Co., Ltd.(*)

Yunnan Travel Co., Ltd.(*)

Yunnan Chunxiaqiudong Commercial Trading Co., Ltd.(*)

(*) Companies described above had been subsidiaries of Lucky Pai Ltd., but they were excluded from consolidation due to

loss of control as of September 30, 2013.

(f) Financial statements of subsidiaries

In preparing the condensed consolidated interim financial statements, the Group used unreviewed or unaudited financial

statements of Lotte Boulangerie Co., Ltd., NCF Co., Ltd., Lotte Gimhae Development Co., Ltd., Lotte Suwon Station

Shopping Town Co., Ltd., Lotte Songdo Shopping Town Co., Ltd., LOTTE SHOPPING HOLDINGS (SINGAPORE) PTE. LTD.,

Lotte Shopping Holdings (Hong Kong) Co., Ltd., Lotte Home Shopping Company Limited, Liaoning Lotte Mart Co., Ltd.,

Qingdao Lotte Mart Commercial Co., Ltd., Lotte cinema Vietnam Co., Ltd., Lotte Shopping India Pvt. Ltd., Lotte Hotel &

Retail Vietnam Pte. Ltd., Lotte Business Management (Tianjin) Co., Ltd., Jilin Lottemart Co., Ltd., LOTTESHOPPING

Avenue INDONESIA, Lotte Department Store (Shenyang) Co., Ltd., Lotte International Department Store(Weihai) Co.,

Ltd. LOTTE DEPARTMENT STORE (TIANJIN) CO., LTD., Lotte Shopping Business Management (Hong Kong)

Limited, Lotte(China) Company Management Co., Ltd., Lucky Pai Ltd. and its subsidiaries, And Lottemart C&C India Pvt.

Ltd., Kotobuki Holding (HK) Ltd., Hai Thanh - Kotobuki Joint Venture Company, Lotte DatViet Homeshopping Co., Ltd.,

LOTTE DEPARTMENT STORE(CHENGDU) CO., LTD, Lottemart (ChongQing) Commercial Company Limited, Lotte

Shopping Plaza Vietnam Co.,Ltd. LOTTE PROPERTIES (CHENGDU) HK LIMITED, Lotte Properties (Chengdu)

Limited, PT. Lotte Members Indonesia, LOTUS MANAGEMENT PTE. LTD., The 2nd Supreme, The 3rd Supreme, The

4th Supreme, The 5th Supreme, The 6th Supreme and, alternatively, performed certain verification procedures to confirm

that significant transactions and financial events were properly included in the subsidiaries’ financial statements.

Therefore, the Company’s management believes that the possible change of the unreviewed or unaudited financial

statements will not have a material effect on the condensed consolidated interim financial statements.




(Unaudited)

22

2 Basis of Preparation

(a) Statement of Compliance

The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting

Standards (“K-IFRS”), as prescribed in the Act on External Audits of Stock Companies.

These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034 ‘Interim

Financial Reporting’ as part of the period covered by the Group’s K-IFRS annual financial statements, and do not include

all of the disclosures required for full annual financial statements. Selected explanatory notes are included to explain events

and transactions that are significant to an understanding of the changes in financial position and performance of the Group

since the last annual consolidated financial statements as at and for the year ended December 31, 2012. These condensed

consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

(b) Use of Estimates and Judgments

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires

management to make judgments, estimates and assumptions that affect the application of accounting policies and the

reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in

applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied

to the financial statements as of and for the year ended December 31, 2012.

3. Significant Accounting Policies

Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial

statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended

December 31, 2012. The following changes in accounting policies are also expected to be reflected in the Group’s

consolidated financial statements as at and for the year ending December 31, 2013.

(a) Changes in accounting policies

(i) K-IFRS No. 1001, ‘Presentation of Financial Statements’

The Group has applied the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since January 1, 2013.

The amendments require presenting in other comprehensive income on the basis of whether they are potentially

reclassifiable to profit or loss subsequently (reclassification adjustments).

(ii) K-IFRS No.1110, ‘Consolidated Financial Statements’

The Group adopted K-IFRS No.1110, ‘Consolidated Financial Statements’ since January 1, 2013. As a result, the Group

has changed its accounting policy with respect to determining whether it has control over and consequently whether it

consolidates its investees. K-IFRS No. 1110 introduces a new control model that is applicable to all investees; among other

things, it requires the consolidation of an investee if the Group controls the investee on the basis of de facto circumstances.

3. Significant Accounting Policies, Continued

(a) Changes in accounting policies, Continued

(iii) K-IFRS No.1111, ‘Joint Arrangements’




(Unaudited)

23

The Group adopted K-IFRS No.1111, ‘Joint Arrangements’ since January 1, 2013. The standard classifies joint

arrangements into two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the

parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the

liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of

the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. The standard requires a joint operator

to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its

interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and

expenses. The standard requires a joint venturer to recognize an investment and to account for that investment using the

equity method.

(iv) K-IFRS No.1112, ‘Disclosure of Interests in Other Entities’

The Group adopted K-IFRS No.1112, ‘Disclosure of Interests in Other Entities’ since January 1, 2013. The standard brings

together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements,

associates and unconsolidated structured entities. The Group is currently assessing the disclosure requirements for interests

in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with the

existing disclosures. The standard requires the disclosure of information about the nature, risks and financial effects of

these interests.

(v) Amendments to K-IFRS No. 1019, ‘Employee Benefits’

The Group has applied the amendments to K-IFRS No. 1019, ‘Employee Benefits’ since January 1, 2013. The standard

requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected

return on plan assets based on the rate used to discount the defined benefit obligation.

(vi) K-IFRS No. 1113, ‘Fair Value Measurement’

The Group adopted K-IFRS No. 1113, ‘Fair Value Measurement’ since January 1, 2013. The standard defines fair value

and a single framework for fair value, and requires disclosures about fair value measurements.

(b) Impact of changes in accounting policy

(i) K-IFRS No.1110, ‘Consolidated Financial Statements’

The Group re-assessed the control conclusion for its investees at September 30, 2013. As a consequence, there is no change

in control relationship with its investees.

(ii) K-IFRS No.1111, ‘Joint Arrangements’

As a result of the adoption of K-IFRS No. 1111, the Group has changed its accounting policy with respect to its interests in

joint arrangements.

Under K-IFRS No. 1111, the Group classifies its interests in joint arrangements as either joint operations or joint ventures

depending on the Group’s rights to the assets and obligations for the liabilities of the arrangements. When making this

assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual

terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole

focus of classification.

The Group has re-evaluated its involvement in its only joint arrangement and has reclassified the investment from jointly

controlled entity to joint venture. Notwithstanding the reclassification, the investment continues to be recognized by

applying the equity method and there has been no impact on the recognized assets, liabilities and comprehensive income of

the Group.

3. Significant Accounting Policies, Continued

(b) Impact of changes in accounting policy, Continued

(iii) Amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’




(Unaudited)

24

The Group applied the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since the annual period

ended December 31, 2012. The Group’s operating profit is calculated as revenue less: (1) cost of sales, and (2) selling,

general and administrative expenses, and is presented separately in the statement of comprehensive income.

The following table summarizes the financial effects on the statement of comprehensive income for the three-month and

nine-month periods ended September 30, 2012. The Group applied the changes of accounting policy retrospectively and

restated its comparative financial statements.


2012

Three-month

period

Nine-month

period

Operating profit before adoption of the amendment ￦ 285,502 1,017,324

Changes:

Cost of sales

Other bad debt expenses (32,295) (105,427)

Reversal of provision 604 4,844

Selling, general and administrative expenses

Taxes and dues 2 40

Reversal (increase) of provision 199 640

Reversal of allowance for doubtful accounts 160 164

Other income and expenses

Gain on foreign currency transactions (146) (304)

Gain on foreign currency translation (997) (1,083)

Reversal of allowance for doubtful accounts (248) (272)

Gain on disposition of tangible asset (835) (1,377)

Gain on disposition of intangible asset - (297)

Reversal of provision (803) (5,484)

Miscellaneous income (14,021) (56,005)

Loss on foreign currency transactions 458 924

Loss on foreign currency translation 1,070 1,173

Loss on disposition of tangible assets 3,199 9,044

Loss on disposition of intangible assets 28 98

Impairment loss of intangible assets - 10

Loss on disposal of other non-current assets - 56

Donation 2,597 8,558

Other bad debt expenses 32,885 107,463

Miscellaneous losses 11,341 32,754

Other 224 851

Operating profit after adoption of the amendment ￦ 288,924 1,013,694




(Unaudited)

25

4. Changes in a parent's ownership interest in subsidiaries that do not result in change in control

(a) Details of the parent's additional investments in subsidiaries are summarized as follows:


Percentage of ownership (%)

Parent's portion in net assets

Subsidiaries

Korean won

(millions)

Before additional

acquisition

After additional

acquisition

Before additional

acquisition

After additional

acquisition

Lotte Suwon Station

Shopping Town Co., Ltd.

￦ 28,500 95.00%

95.00% ￦ 47,215 75,715

18,763 95.00%

95.00%

75,699 94,461 Lotte Songdo Shopping Town

Co., Ltd.

- 58.82%

53.57%

53,486 54,067


INDONESIA

15,936 100.00%

100.00%

17,602 33,537

7,833 100.00%

100.00%

33,427 41,261 Lotte International

Department Store (Weihai)

Co.,Ltd.

11,134 100.00%

100.00%

15,907 27,041 Lottemart (ChongQing)

Commercial Company

Limited

10,815 100.00%

100.00%

9,750 20,565 Lotte Department Store

(Shenyang) Co.,Ltd.

18,732 100.00%

100.00%

1,566 20,298 LOTTE DEPARTMENT

STORE (TIANJIN) CO.,

LTD.

10,944 100.00%

100.00%

20,501 31,446

Lotte Properties (Chengdu)

Limited

104,678 100.00%

100.00%

98,933 203,611

148,923 100.00%

100.00%

209,975 358,897 Lotte Shopping Plaza

Vietnam Co.,Ltd.

2,241 100.00%

100.00%

245 2,486 LOTTE DEPARTMENT

STORE (CHENGDU) CO.,

LTD.

18,931 100.00%

100.00%

15,138 34,069 NCF Co., Ltd.

839 94.50%

98.30%

16,361 17,019 CS Mart Co., Ltd.

9 99.94%

99.95%

75,608 75,613 Lucky Pai Limited

2,682 89.21%

94.65%

(2,798) (2,968)

Total ￦ 400,960

￦ 688,615 1,087,118

(b) Details of reduction in a parent's investments in subsidiaries from capital reductions and acquisitions of treasury stocks in

subsidiaries are summarized as follows:


Percentage of ownership (%)

Parent's portion in net assets

Subsidiaries

Korean won

(millions)

Before capital

reductions

After capital

reductions

Before capital

reductions

After capital

reductions


29,330 92.54%

93.70%

1,567,001 1,559,221 Lotte Songdo Shopping Town

Co., Ltd.

- 53.57%

56.30%

53,323 56,035 Lotte Hotel & Retail Vietnam

Pte. Ltd.

24,561 60.00%

60.00%

67,755 43,194

Total ￦ 53,891

1,688,079 1,658,450




(Unaudited)

26

5. Trade and Other Receivables

Trade and other receivables as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013 December 31, 2012

Trade receivables ￦ 592,910 638,765

Other receivables 327,906 291,899

Allowance for doubtful accounts (15,919) (14,971)

Total ￦ 904,897 915,693

6. Restricted Deposits

Restricted deposits included in short-term and long-term financial instruments as of September 30, 2013 and December 31,

2012 are summarized as follows:


Description Depositary September 30, 2013 December 31, 2012

Current:

Time deposits Woori Bank and others ￦ 22,461 42,056

Special deposits Industrial Bank of Korea 99,500 89,500

Money Market Fund Citibank and others 24,928 66,740

Non-current:

Special deposits Shinhan Bank and others 95 100

Available-for-sale

financial assets

Gyeongsangnam-do

Metropolitan Government

and others 52,637 38,479

Total ￦ 199,621 236,875




(Unaudited)

27

7. Fair Value of Financial Instruments

(a) The carrying amount and the fair value of financial instruments as of September 30, 2013 and December 31, 2012 are

summarized as follows:



Carrying

amount Fair value

Carrying

amount Fair value

Cash and cash

equivalents Cash and cash equivalents ￦ 1,178,244 1,178,244 933,997 933,997

Loans and

receivables (*1) Current :

Trade and other receivables 904,897 904,897 915,693 915,693

Short-term financial instruments 588,292 588,292 740,966 740,966

Short-term loans 3,671 3,671 4,285 4,285

Accrued income 34,905 34,905 41,453 41,453

Current portion of Deposits 93,500 93,500 89,405 89,405

Card financial assets 6,968,527 6,968,527 7,125,763 7,125,763

Other financial assets 8 8 20 20

Non-current :

Long-term financial instruments 95 95 300 300

Long-term loans 76,014 76,014 76,399 76,399

Deposits 1,148,054 1,148,054 1,102,309 1,102,309

Long-term trade receivable 6,080 6,080 6,080 6,080

Subtotal 9,824,043 9,824,043 10,102,673 10,102,673

Available-for-sale

financial assets Marketable available-for-sale

financial assets (*2) 168,987 168,987 338,935 338,935

Non-marketable available-for-sale

financial assets (*3) 334,630 334,630 321,692 321,692

Subtotal 503,617 503,617 660,627 660,627

Derivative assets held

for the purpose of

hedging

Current 6 6 - -

Non-current 608 608 48 48

Subtotal 614 614 48 48

Total ￦ 11,506,518 11,506,518 11,697,345 11,697,345

(*1) Book value is considered as a fairly reasonable approximate value of fair value.

(*2) Marketable available-for-sale financial assets are measured at fair value based on the market prices which are traded

in the active market.

(*3) Some of non-marketable available-for-sale financial assets that do not have a quoted market price in an active market

are measured at fair value based on valuation of external valuation agencies as of the end of reporting period. Others

are recorded based on acquisition cost because fair value cannot be reliably measured and difference between fair

value and acquisition cost is immaterial.




(Unaudited)

28

7. Fair Value of Financial Instruments, Continued

(b) Other financial assets as of September 30, 2013 and December 31, 2012 are summarized as follows:


Account September 30, 2013 December 31, 2012

Current:

Short-term financial instruments ￦ 588,292 740,966

Short-term loans 3,671 4,285

Available-for-sale financial assets - 108

Accrued income 34,905 41,453

Deposits 93,500 89,405

Card business financial assets 6,968,527 7,125,763

Derivative assets held for the purpose of hedging 6 -

Other 8 20

Subtotal 7,688,909 8,002,000

Non-current:

Long-term financial instruments 95 300

Available-for-sale financial assets 503,617 660,519

Long-term loans 76,014 76,399

Deposits 1,148,054 1,102,309

Long-term trade receivables 6,080 6,080

Derivative assets held for the purpose of hedging 608 48

Subtotal 1,734,468 1,845,655

Total ￦ 9,423,377 9,847,655




(Unaudited)

29


(c) Available-for-sale financial assets as of September 30, 2013 and December 31, 2012 are summarized as follows:



Number of

shares

Percentage of

ownership

Acquisition

cost

Carrying

amount

Carrying

amount

Marketable available-for-sale

financial assets:

BS Financial Group Inc. 5,259,597 2.72% ￦ 24,877 84,417 69,427

Shinhan Financial Group Co., Ltd. 311,118 0.07% 2,247 13,580 12,087

LOTTE CHILSUNG

BEVERAGE CO.,LTD

(Common stock) 19,732 1.59% 18,055 33,485 153,051

LOTTE CHILSUNG

BEVERAGE CO.,LTD

(Preferred stock) 385 0.32% 179 149 124

LOTTE CONFECTIONERY

CO., LTD - - - - 68,561

LOTTE FOOD CO.,LTD. 47,180 3.45% 10,167 31,752 31,044

Others 5,638 5,604 4,641

Subtotal ￦ 61,163 168,987 338,935

Non-marketable available-for-sale

financial assets:

LOTTE INTERNATIONAL CO.,

LTD. 134,215 14.99% ￦ 34,465 47,533 45,785

Lotte Aluminum Co., Ltd. 125,016 12.05% 55,881 70,325 74,809

LOTTE Logistics Corp. 66,308 4.64% 4,000 8,893 8,455

Cosmo Asset

Management Co., Ltd. 149,807 17.70% 50,118 35,125 38,589

Lotte Properties (Shenyang) Limited 29,928,756 17.93% 41,919 41,919 41,919

FUBON Multimedia

Technology Co., Ltd. 21,906,421 17.13% 40,499 63,588 61,173

Investment in government bonds 25,395 24,233 197

Others 48,312 43,014 50,765

Subtotal 300,589 334,630 321,692

Total ￦ 361,752 503,617 660,627




(Unaudited)

30


(d) The carrying amount and the fair value of financial liabilities as of September 30, 2013 and December 31, 2012 are




Carrying

amount Fair value

Carrying

amount Fair value

Financial liabilities at fair value

through profit or loss

Overseas convertible bonds ￦ 882,386 882,386 908,633 908,633

Financial liabilities based on

amortized cost (*) Current :

Trade and other payables 4,796,742 4,796,742 4,934,368 4,934,368

Short-term borrowings 1,593,374 1,593,374 2,171,551 2,171,551

Current portion of

long-term borrowings 346,630 346,630 83,112 83,112

Current portion of

long-term debentures 2,083,746 2,083,746 1,856,473 1,856,473

Accrued expenses 261,007 261,007 222,281 222,281

Current portion of

withholding deposit 238,218 238,218 267,908 267,908

Other liabilities 514 514 115 115

Non-current :

Long-term borrowings 1,277,327 1,277,327 970,332 970,332

Long-term debentures 6,163,551 6,163,551 6,135,315 6,135,315

Withholding deposit 197,079 197,079 172,150 172,150

Other liabilities 5,145 5,145 3,252 3,252

Subtotal 16,963,333 16,963,333 16,816,857 16,816,857

Derivative liabilities held for the

purpose of hedging Current 11,353 11,353 5,595 5,595

Non-current 161,872 161,872 162,424 162,424

Subtotal 173,225 173,225 168,019 168,019

Total ￦ 18,018,944 18,018,944 17,893,509 17,893,509

(*) Book value is considered as a fairly reasonable approximate value of fair value.




(Unaudited)

31


(e) Other financial liabilities as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012

Current:

Financial guarantee liabilities ￦ 514

115

Accrued expenses

261,007

222,281

Deposits received

238,218

267,908

Derivative liabilities held for the purpose of hedging

11,353

5,595

Subtotal

511,092

495,899

Non-current:

Deposits received

197,079

172,150


5,145

3,252

Derivative liabilities held for the purpose of hedging

161,872

162,424

Subtotal

364,096

337,826

Total ￦ 875,188

833,725




(Unaudited)

32


(f) The fair value hierarchy

The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used

in making the measurements.

The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value measurements classified by fair value hierarchy as of September 30, 2013 are as follows:


Description Level Ⅰ Level Ⅱ Level Ⅲ Total

Available-for-sale financial

assets ￦ 168,987 24,233 243,689 436,909

Derivative assets - 614 - 614

Total financial assets 168,987 24,847 243,689 437,523


through profit or loss - 882,386 - 882,386

Derivative liabilities - 173,225 - 173,225

Total financial liabilities ￦ - 1,055,611 - 1,055,611




(Unaudited)

33


The fair value measurements classified by fair value hierarchy as of December 31, 2012 are as follows:


Description Level Ⅰ Level Ⅱ Level Ⅲ Total

Available-for-sale financial

assets ￦ 338,935 197 258,085 597,217

Derivative assets - 48 - 48

Total financial assets 338,935 245 258,085 597,265


through profit or loss - 908,633 - 908,633

Derivative liabilities - 168,019 - 168,019

Total financial liabilities ￦ - 1,076,652 - 1,076,652

8. Inventories

(a) Inventories as of September 30, 2013 and December 31, 2012 are summarized as follows:



Merchandise, net of allowance for valuation losses ￦ 2,614,782 2,356,862

Finished goods 7,751 9,361

Goods in process 2,081 978

Raw materials 1,503 1,454

Subsidiary materials 541 452

Supplies 1,804 2,297

Materials-in-transit 195 303

Unfinished apartment units 358,681 23,931

Lots 39,618 354,666

Total ￦ 3,026,956 2,750,304

(b) During the three-month and nine-month periods ended September 30, 2013 and 2012, changes of allowance for valuation

losses of inventories are summarized as follows:


2013 2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Cost of sales:

- Increase (decrease) of allowance for

valuation losses of inventories ￦ (46) 660

(3,071) (212)




(Unaudited)

34

9. Other Non-financial Assets

Other current non-financial assets as of September 30, 2013 and December 31, 2012 are summarized as follows:


Description September 30, 2013 December 31, 2012

Current:

Advance payments ￦ 215,550 202,378

Prepaid expenses 215,202 188,668

Prepaid value added tax 79,396 76,765

Other 301 345

Subtotal 510,449 468,156

Non-current:

Long-term advance payments 121,568 82,632

Long-term prepaid expenses(*) 1,088,637 1,069,914

Other 6,289 7,652

Subtotal 1,216,494 1,160,198

Total ￦ 1,726,943 1,628,354

(*) Long-term prepaid expenses mainly consist of lease prepayments.




(Unaudited)

35

10. Investments in Associates

(a) The details of associates as of September 30, 2013 and December 31, 2012 are summarized as follows:

Company

September 30, 2013

Korean won

(millions)

Location

Principal

business

Percentage of

Balance at

September

30, 2013 Ownership (%)

Lotte Station Building Co., Ltd. Korea

Distribution

25.00 ￦ 138,997

Daehong Communications Co., Ltd. Korea

Advertisement agency 34.00 119,429

Lotte.Com Inc. Korea

Distribution

34.39

7,958

Lotte Capital Co., Ltd. Korea

Capital 22.36 136,166

Lotteria Co., Ltd. Korea

Restaurant chain 38.68 240,967

FRL Korea Co., Ltd. Korea

Retail 49.00 85,252

Lotte Asset Development Co., Ltd. Korea

Real estate development 39.14 46,434

Zara Retail Korea Co., Ltd. Korea

Retail 20.00 19,668

Lotte Buyeo Resort Co., Ltd. Korea


LOTTE Giants Co., Ltd. Korea

Baseball club 30.00 7,015

Lotte Europe Holdings B.V. Netherlands

Holding company 30.21 94,649

Coralis S.A. Luxembourg


S.M.CONTENTS INVESTMENT Korea

Film producing company 25.00 2,741

Capital One Diversity Cinema Fund Korea

Film producing company 20.00 827

Capital One Middle-Low Budget

Cinema Fund

Korea

Film producing company

25.00

3,592

UNION INVESTMENT PARTNERS Korea


Hubei XL Cinema Co., Ltd.

China

Cinema 49.00

5,271

CJ Venture Investment No.14 Culture

Contents Fund

Korea


30.00 6,697

PT. LOTTE CAPITAL INDONESIA

Indonesia

Capital 25.00 2,392

Hemisphere Film Investors II LLC(*1)

America


Shandong Longzhile Cinema Co., Ltd.

China

Cinema 49.02 1,750

Leading Asia Contents Fund Korea

Film producing company 21.01 3,888 LOTTE Payment & settlement

networks Inc. Korea Electronic financial service

30.58

10,444

Lotte Incheon Development Co., Ltd Korea

Leasing service 37.50 12,550

Mybi.Co.Ltd(*2) Korea

Electronic banking

business

17.28 13,933

Total ￦ 1,044,217

(*1) The Group is a non-managing partner of Hemisphere Film Investors II LLC and doesn’t have power to govern its financial

and operation policies, but has significant influence on the entity.

(*2) Although the Group holds less than 20% of the voting power of Mybi.Co.Ltd, the Group has significant influence on the

entity, since the CEO of Lotte Card, a subsidiary, is also the CEO and board member of the investee.




(Unaudited)

36

10. Investments in Associates, Continued

(a) The details of associates as of September 30, 2013 and December 31, 2012 are summarized as follows, continued:

Company

December 31, 2012

Korean won

(millions)

Location

Principal

business

Percentage of

Balance at

December


Lotte Station Building Co., Ltd. Korea

Distribution

25.00 ￦ 139,818

Daehong Communications Co., Ltd. Korea

Advertisement agency 34.00 116,121

Lotte.Com Inc. Korea

Distribution

34.39

7,860

Lotte Capital Co., Ltd. Korea

Capital 22.36 125,123

Lotteria Co., Ltd. Korea

Restaurant chain 38.68 215,716

FRL Korea Co., Ltd. Korea

Retail 49.00 89,372

Lotte Asset Development Co., Ltd. Korea


Zara Retail Korea Co., Ltd. Korea

Retail 20.00 20,397

Lotte Buyeo Resort Co., Ltd. Korea


LOTTE Giants Co., Ltd. Korea

Baseball club 30.00 5,018

Lotte Europe Holdings B.V. Netherlands


Coralis S.A. Luxembourg


M-Venture Culture Investment L.P. Korea


Capital One Diversity Cinema Fund Korea

Film producing company 20.00 849


Cinema Fund Korea


25.00 3,454

Sovik Visual Contents Investment Fund Korea


Hubei XL Cinema Co., Ltd.

China

Cinema 49.00 6,189

CJ Venture Investment No.14 Culture

Contents Fund Korea


30.00

5,643

PT. LOTTE CAPITAL INDONESIA

Indonesia

Capital 25.00 2,817

Hemisphere Film Investors II LLC(*)

America


Shandong Longzhile Cinema Co., Ltd.

China

Cinema 49.02 1,614

Leading Asia Contents Fund Korea


LOTTE Payment & settlement networks

Inc. Korea Electronic financial service

30.58

12,315

Total ￦ 990,462

(*) The Group is a non-managing partner of Hemisphere Film Investors II LLC and doesn’t have power to govern its financial

and operation policies, but has significant influence on the entity.




(Unaudited)

37


(b) Changes in investments in associates for the nine-month period ended September 30, 2013 and for the year ended December

31, 2012 are as follows:

Company

2013


Changes

Beginning

balance Acquisition Dividends

Net income

(loss)

Capital

adjustment

Other

Balance at

September

30, 2013

Lotte Station Building Co., Ltd. ￦ 139,818 - (11,401) 10,091 484 5 138,997

Daehong Communications Co.,

Ltd. 116,121 - (7) 3,776 316 (777) 119,429

Lotte.Com Inc. 7,860 - - (547) 442 203 7,958

Lotte Capital Co., Ltd. 125,123 - (1,861) 12,358 277 269 136,166

Lotteria Co., Ltd. 215,716 - - 18,481 7,386 (616) 240,967

FRL Korea Co., Ltd. 89,372 - - (3,681) - (439) 85,252

Lotte Asset Development Co.,

Ltd. 46,435 - - (4,696) 4,702 (7) 46,434

Zara Retail Korea Co., Ltd. 20,397 - - (799) - 70 19,668

Lotte Buyeo Resort Co.,Ltd. 11,677 - - (1,737) - - 9,940

LOTTE Giants Co., Ltd. 5,018 - - 1,968 - 29 7,015

Lotte Europe Holdings B.V. 97,080 - - (8,592) (3,659) 9,820 94,649

Coralis S.A. 46,741 - - (607) (1,415) - 44,719

S.M.CONTENTS INVESTMENT 2,608 - - 133 - - 2,741

Capital One Diversity Cinema

Fund 849 - - (22) - - 827


Cinema Fund 3,454 - - 138 - - 3,592

UNION INVESTMENT

PARTNERS 4,526 - - 131 - - 4,657

Hubei XL Cinema Co., Ltd. 6,189 - - (1,046) 128 - 5,271

CJ Venture Investment No.14

Culture Contents Fund 5,643 - - 1,054 - - 6,697

PT. LOTTE CAPITAL

INDONESIA 2,817 - - 34 - (459) 2,392

Hemisphere Film Investors II

LLC 25,095 - - (946) 132 - 24,281

Shandong Longzhile Cinema Co.,

Ltd. 1,614 526 - (419) 29 - 1,750

Leading Asia Contents Fund 3,994 - - (106) - - 3,888

LOTTE Payment & settlement

networks Inc. 12,315 - - (1,871) - - 10,444

Lotte Incheon Development Co.,

Ltd - 14,950 - (2,163) (287) 50 12,550

Mybi.Co.Ltd - - - 154 - 13,779 13,933

￦ 990,462 15,476 (13,269) 21,086 8,535 21,927 1,044,217




(Unaudited)

38


(b) Changes in investments in associates for the nine-month period ended September 30, 2013 and for the year ended

December 31, 2012 are as follows, continued:

Company

2012


Changes

Beginning


Net income

(loss)

Capital

adjustment

Disposals

Other

Balance at

December

31, 2012

Lotte Station Building Co., Ltd. ￦ 192,645 - (51,575) 2,959 (4,218) - 7 139,818

Daehong Communications

Co., Ltd. 93,806 1,500 (6) 15,645 5,592 - (416) 116,121

Lotte.Com Inc. 9,686 - - (1,803) (32) - 9 7,860

Lotte Capital Co., Ltd. 111,280 - (1,861) 15,304 620 - (220) 125,123

Lotteria Co., Ltd. 210,427 - - 10,244 (4,487) - (468) 215,716

FRL Korea Co., Ltd. 71,433 - (11,760) 29,699 - - - 89,372

Lakepark Co., Ltd. 4,564 11,935 (3,219) (1,604) 13 (11,689) - -

Lotte Asset Development

Co., Ltd. 50,492 - - (1,845) 2,931 - (5,143) 46,435

Zara Retail Korea Co., Ltd. 16,617 - - 3,780 - - - 20,397

Lotte Buyeo Resort Co., Ltd. 13,381 - - (1,704) - - - 11,677

LOTTE Giants Co., Ltd. 2,220 - - 2,850 - - (52) 5,018

Lakepark AMC 73 204 - (10) - (267) - -

Lotte Europe Holdings B.V. 63,619 22,092 - (3,794) 15,163 - - 97,080

Coralis S.A. 49,178 - - (500) (1,937) - - 46,741

Bliss Co., Ltd. - - - - 2 (2) - -

M-Venture Culture Investment

L.P. 2,667 - (250) 191 - - - 2,608


Fund 905 - - (56) - - - 849


Cinema Fund 2,912 - - 542 - - - 3,454

Sovik Visual Contents Investment

Fund 3,985 - - 541 - - - 4,526

Hubei XL Cinema Co., Ltd. 5,318 2,157 - (971) (315) - - 6,189


LLC 21,633 3,479 - 1,818 (1,835) - - 25,095


Culture Contents Fund 6,009 - - (366) - - - 5,643

PT. LOTTE CAPITAL

INDONESIA - 3,120 - 43 - - (346) 2,817

Shandong Longzhile Cinema

Co., Ltd. - 1,735 - (73) (48) - - 1,614

Leading Asia Cultural Industry

Fund - 4,000 - (6) - - - 3,994

LOTTE Payment & Settlement

Networks Inc. - 12,315 - - - - - 12,315

￦ 932,850 62,537 (68,671) 70,884 11,449 (11,958) (6,629) 990,462




(Unaudited)

39


(c) Financial information of associates as of and for the nine-month period ended September 30, 2013 and as of and for the year

ended December 31, 2012 is summarized as follows:

Company

September 30, 2013


Current

assets

Non-current

assets

Current

liabilities

Non-current

liabilities Sales

Operating

income

(loss)

Other

comprehensive

income (loss)

Total

Comprehensive

Income (loss)

Lotte Station Building Co., Ltd. ￦ 262,132 509,183 196,140 19,186 473,405 52,517 513 40,877


Ltd. 165,344 412,746 179,518 47,427 264,018 10,434 (605) 10,579

Lotte.Com Inc. 90,268 55,321 119,597 2,856 149,913 151 1,874 283

Lotte Capital Co., Ltd. 770,278 3,587,790 316,455 3,373,431 451,501 73,538 2,443 57,715

Lotteria Co., Ltd. 241,850 805,915 304,087 140,475 825,762 43,904 2,251 51,175

FRL Korea Co., Ltd. 304,549 90,559 218,404 2,722 439,096 14,898 (895) (8,408) Lotte Asset Development Co.,

Ltd. 102,499 200,373 154,981 30,140 65,188 (5,888) 11,992 1,427

Zara Retail Korea Co., Ltd. 56,762 110,152 27,625 40,947 161,294 1,584 350 (3,644)

Lotte Buyeo Resort Co.,Ltd. 11,340 222,607 65,194 124,023 14,443 (822) - (7,177)

LOTTE Giants Co., Ltd. 5,933 22,424 4,450 524 32,000 7,978 93 6,654

Lotte Europe Holdings B.V. 211,246 646,160 293,121 308,495 111,583 3,604 (12,202) (38,928)

Coralis S.A. 176,442 243,449 1,513 353,488 - (720) (3,143) (4,478)

S.M.CONTENTS INVESTMENT 6,061 4,903 - - 975 834 - 834


Fund 2,971 1,166 - - 59 (107) - (107) Capital One Middle-Low

Budget Cinema Fund 9,669 4,700 - - 1,091 551 - 551

UNION INVESTMENT PARTNERS 5,962 11,500 - - 2,168 1,932 - 1,932

Hubei XL Cinema Co., Ltd. 2,226 13,695 2,806 534 6,213 (2,121) 261 (1,874)

CJ Venture Investment No.14 Culture Contents Fund 7,992 14,432 100 - 3,825 3,514 - 3,514

PT. LOTTE CAPITAL

INDONESIA 7,516 2,174 17 138 421 171 54 149 Hemisphere Film Investors II

LLC - 24,281 - - - - 132 (814)

Shandong Longzhile Cinema Co., Ltd. 863 4,515 540 551 389 (831) 58 (795)

Leading Asia Contents Fund 9,512 9,115 120 - 654 (545) - (502)

LOTTE Payment & settlement

networks Inc. 8,826 62,103 31,674 43,071 24,714 (2,078) - (6,121) Lotte Incheon Development

Co., Ltd 28,662 949,881 8,514 700,000 17,978 9,181 (764) (6,532)

Mybi.Co.Ltd 64,392 47,755 61,398 3,687 26,210 (862) - 606




(Unaudited)

40


(c) Financial information of associates as of and for the nine-month period ended September 30, 2013 and as of and for the year

ended December 31, 2012 are summarized as follows, continued:

Company

December 31, 2012


Current

assets

Non-current

assets

Current

liabilities

Non-current

liabilities Sales

Operating income

(loss)

Other comprehensive

income (loss)

Total Comprehensive

Income (loss)

Lotte Station Building Co., Ltd. ￦ 269,016 519,303 209,292 19,756 682,352 80,448 (16,848) (5,010)


Ltd. 158,893 360,399 130,864 47,012 348,476 14,119 15,284 29,453

Lotte.Com Inc. 89,106 55,415 120,663 1,005 199,681 (2,017) (94) (5,330)

Lotte Capital Co., Ltd. 4,339,007 14,099 452,318 3,337,448 595,065 92,404 1,787 70,293

Lotteria Co., Ltd. 181,333 746,721 279,757 111,370 985,254 33,885 9,606 29,248

FRL Korea Co., Ltd. 240,220 83,222 136,512 4,538 605,015 80,749 - 60,609 Lotte Asset Development Co.,

Ltd. 108,785 164,299 134,906 20,422 57,254 287 (5,651) (10,364)

Zara Retail Korea Co., Ltd. 48,480 113,009 27,885 31,619 203,744 12,883 - 10,602

Lotte Buyeo Resort Co.,Ltd. 24,873 214,366 41,389 97,000 11,055 (3,891) - (7,670)

LOTTE Giants Co., Ltd. 3,557 22,764 9,376 216 44,765 11,133 (173) 9,674

Lotte Europe Holdings B.V. 151,813 533,769 142,768 308,095 150,596 (3,343) 47,801 32,530

Coralis S.A. 135,627 153,044 4,821 214,482 - (833) (2,565) (3,660)

M-Venture Culture Investment L.P. 10,433 - 3 - 993 762 - 762


Fund 4,319 - 75 - 130 (297) - (297) Capital One Middle-Low

Budget Cinema Fund 13,998 - 180 - 3,715 2,093 - 2,093

Sovik Visual Contents Investment Fund 16,974 - - - 2,533 2,227 - 2,227

Hubei XL Cinema Co., Ltd. 4,223 10,994 2,587 - 4,636 (2,017) 1,778 (240)


Culture Contents Fund 18,914 - 105 - 1,666 (1,223) - (1,223) PT. LOTTE CAPITAL

INDONESIA 11,190 107 28 - 301 172 (13) 159


LLC - 25,095 - - - - (1,834) (17)

Shandong Longzhile Cinema

Co., Ltd. 2,195 1,157 59 - - (133) 3 (146) Leading Asia Cultural Industry

Fund 19,012 - 3 - 110 (16) - (31)

LOTTE Payment & settlement networks Inc. 10,689 69,834 37,343 40,875 32,407 (2,305) - (8,599)




(Unaudited)

41

11. Joint Ventures

(a) When the Group has rights to the net assets of the joint venture entity, the Group classifies the investment in entity as a joint

venture. The details of joint ventures as of September 30, 2013 and December 31, 2012 are summarized as follow:

Company

September 30, 2013

Korean won

(millions)

Location

Principal

business

Percentage of

Balance at

September 30, 2013 Ownership (%)

Intime Lotte Department Store Co., Ltd.(*) China Distribution 82.46 ￦ -

D-Cinema of Korea Co., Ltd. Korea Film equipment 50.00 -

Shenyang SL Cinema Investment

Management Co., Ltd. China Cinema 49.00 967

STL Co., Limited Korea Retail 50.00 775

Shandong Luckypai TV Shopping China Distribution 49.00 9,120

Yunnan Maile TV Shopping Media Co.,

Ltd. China Distribution 49.00 3,867

Total

￦ 14,729

(*) The Company’s percentage of ownership on Intime Lotte Department Store Co., Ltd. is temporarily over 50%, but the

Company has no power to control the entity based on the joint venture agreement with the other investor.

Company

December 31, 2012

Korean won

(millions)

Location

Principal

business

Percentage of

Balance at

December


Intime Lotte Department Store Co., Ltd.

China Distribution 50.00 ￦ -

D-Cinema of Korea Co., Ltd. Korea Film equipment 50.00 -


Management Co., Ltd. China Cinema 49.00 970

STL Co., Limited Korea Retail 50.00 1,187

Shandong Luckypai TV Shopping China Distribution 49.00 5,813

Total

￦ 7,970




(Unaudited)

42

11. Joint Ventures, Continued

(b) Changes in joint ventures for the nine-month period ended September 30, 2013 and for the year ended December 31, 2012

are as follows:

Company

2013


Changes

Beginning


Net income

(loss)

Capital

adjustment

Other

Balance at

September 30, 2013

Intime Lotte Department Store Co.,

Ltd. ￦ - 41,767 - (41,767) - - -

D-Cinema of Korea Co., Ltd. - - - - - - -


Management

Co., Ltd. 970 - - (26) 23 - 967

STL Co., Limited 1,187 - - (412) - - 775

Shandong Luckypai TV Shopping 5,813 - - 3,242 - 65 9,120

Yunnan Maile TV Shopping Media

Co., Ltd. - 874 (166) 814 - 2,345 3,867

￦ 7,970 42,641 (166) (38,149) 23 2,410 14,729

Company

2012


Changes

Beginning

balance Acquisition

Net income

(loss)

Capital

adjustment Other

Balance at

December

31, 2012

Intime Lotte Department Store Co.,

Ltd. ￦ - - - - - -

D-Cinema of Korea Co., Ltd. - - - - - -


Management

Co., Ltd. 1,219 - (185) (64) - 970

STL Co., Limited 576 1,500 (867) (22) - 1,187

Shandong Luckypai TV Shopping 6,074 - 96 - (357) 5,813

￦ 7,869 1,500 (956) (86) (357) 7,970




(Unaudited)

43

11. Joint Ventures, Continued

(c) Financial information of joint ventures as of and for the nine-month period ended September 30, 2013 and as of and for the

year ended December 31, 2012 are summarized as follows:

September 30, 2013


Current

assets

Non-current

assets

Current

liabilities

Non-current

liabilities Sales

Operating income

(loss)

Other comprehensive

income (loss)

Total Comprehensive

Income (loss)

Intime Lotte Department Store Co., Ltd. ￦ 2,146 15,129 114,379 - 36,495 (16,733) (3,780) (23,384)

D-Cinema of Korea

Co., Ltd. 32,516 39,640 77,075 205 18,560 3,393 - 1,111 Shenyang SL Cinema

Investment Management Co.,

Ltd. 508 1,932 471 - 1,083 (50) 45 (5)

STL Co., Limited 2,401 1,116 1,827 141 4,031 (803) - (809) Shandong Luckypai TV

Shopping 42,995 1,536 24,878 - 71,243 6,586 (106) 5,131

Yunnan Maile TV Shopping Media Co., Ltd. 10,710 2,871 6,736 - 22,781 906 (9) 445

December 31, 2012


Current

assets

Non-current

assets

Current

liabilities

Non-current

liabilities Sales

Operating

income

(loss)

Other

comprehensive

income (loss)

Total

Comprehensive

Income (loss)

Intime Lotte Department Store Co., Ltd. ￦ 5,598 17,929 139,015 - 95,439 (22,625) 6,505 (22,466)

D-Cinema of Korea

Co., Ltd. 27,708 50,795 16,002 68,736 22,325 2,428 - 1,308 Shenyang SL Cinema

Investment Management Co., Ltd. 396 2,019 440 - 1,256 (380) (130) (509)

STL Co., Limited 1,921 1,149 623 73 3,098 (1,670) (45) (1,778)

Shandong Luckypai TV

Shopping

41,307 1,313 28,151 - 77,834 3,172 (109) 2,795

(d) Current and accumulated unrecognized equity method losses of investments in joint ventures are summarized as follows:

2013


Company

Unrecognized losses for the

period

Unrecognized accumulated

losses

Intime Lotte Department Store Co., Ltd. ￦ (13,927)

(26,941)

D-Cinema of Korea Co., Ltd.

- (2,562)

Total ￦ (13,927)

(29,503)




(Unaudited)

44

12. Property, Plant and Equipment

(a) Changes in acquisition cost of property, plant and equipment for the nine-month period ended September 30, 2013 and for

the year ended December 31, 2012 are as follows:

2013


Acquisition cost

as of January

1, 2013 Acquisition Disposals Others (*)

Acquisition cost

as of September

30, 2013

Land ￦ 7,571,892 18,021 (5,349) 524,837 8,109,401

Buildings 6,293,801 23,767 (7,765) 142,041 6,451,844

Structures 290,724 449 (20) (5,727) 285,426

Machinery 264,050 7,874 (9,789) (4,286) 257,849

Vehicles 9,454 1,203 (610) (362) 9,685

Display fixtures 463,257 32,040 (55,319) 71,113 511,091

Furniture and fixtures 2,741,908 153,150 (56,673) 147,376 2,985,761

Tools and equipment 207,266 26,780 (4,383) 718 230,381

Other PP&E 211,910 17,528 (337) 6,397 235,498

Construction-in-

progress 975,239 1,152,295 (2,615) (1,012,807) 1,112,112

Total ￦ 19,029,501 1,433,107 (142,860) (130,700) 20,189,048

(*) Others include reclassifications of construction-in-progress to intangible assets and others and foreign exchange effects.

2012


Acquisition

cost as of

January

1, 2012 Acquisition

Increase from

business

combination Disposals Others (*)

Acquisition

cost as of

December

31, 2012

Land ￦ 7,076,909 5,158 245,709 (1,471) 245,587 7,571,892

Buildings 5,407,196 58,376 318,951 (42,912) 552,190 6,293,801

Structures 268,785 8,614 2,722 (2,824) 13,427 290,724

Machinery 242,998 16,544 3,110 (751) 2,149 264,050

Vehicles 8,591 1,153 791 (674) (407) 9,454

Display fixtures 368,505 52,407 4,330 (9,051) 47,066 463,257

Furniture and fixtures 2,123,654 183,153 178,873 (90,172) 346,400 2,741,908

Tools and equipment 193,750 31,224 - (3,177) (14,531) 207,266

Other PP&E 202,193 19,950 515 (2,200) (8,548) 211,910

Construction-in-

progress 885,733 1,401,951 980 (190) (1,313,235) 975,239

Total ￦ 16,778,314 1,778,530 755,981 (153,422) (129,902) 19,029,501

(*) Others include reclassifications of construction-in-progress to intangible assets and others and foreign exchange effects.




(Unaudited)

45

12. Property, Plant and Equipment, Continued

(b) Changes in accumulated depreciation of property, plant and equipment for the nine-month period ended September 30, 2013

and for the year ended December 31, 2012 are as follows:

2013


Accumulated

depreciation

as of January

1, 2013 Disposals Depreciation

Others

Accumulated

depreciation

as of September

30, 2013

Buildings ￦ 1,817,002 (4,851) 146,934 (12,031) 1,947,054

Structures 70,958 (20) 10,626 (2,383) 79,181

Machinery 142,507 (9,726) 21,095 (2,839) 151,037

Vehicles 6,075 (544) 857 (255) 6,133

Display

fixtures 267,861 (50,954) 46,296 1,555 264,758

Furniture and

fixtures 1,736,077 (52,914) 270,024 (14,946) 1,938,241

Tools and

equipment 97,082 (1,857) 16,495 (3,169) 108,551

Other PP&E 66,021 (179) 9,239 1,249 76,330

Total ￦ 4,203,583 (121,045) 521,566 (32,819) 4,571,285

2012


Accumulated

depreciation

as of

January

1, 2012 Disposals

Increase

from

business

combination Depreciation

Others

Accumulated

depreciation

as of

December

31, 2012

Buildings ￦ 1,535,530 (4,669) 105,427 170,945 9,769 1,817,002

Structures 56,333 (156) 857 12,770 1,154 70,958

Machinery 115,760 (557) 2,621 26,689 (2,006) 142,507

Vehicles 5,463 (572) 260 1,189 (265) 6,075

Display

fixtures 226,016 (6,155) 1,133 49,070 (2,203) 267,861

Furniture and

fixtures 1,411,716 (68,291) 106,646 286,476 (470) 1,736,077

Tools and

equipment 86,712 (2,717) - 21,275 (8,188) 97,082

Other PP&E 54,897 (897) 374 15,169 (3,522) 66,021

Total ￦ 3,492,427 (84,014) 217,318 583,583 (5,731) 4,203,583

(c) There are no impairment losses and reversals of impairment losses for the nine-month period ended September 30, 2013




(Unaudited)

46

13. Investment Property

(a) Changes in acquisition cost of investment property for the nine-month period ended September 30, 2013 and for the year

ended December 31, 2012 are as follows:

2013


Acquisition cost

as of January 1,

2013 Acquisitions Disposals Others (*)

Acquisition cost

as of September

30, 2013

Land ￦ 288,697 - - (903) 287,794

Buildings 294,740 1,370 (757) 45,823 341,176

Total ￦ 583,437 1,370 (757) 44,920 628,970

(*) Others include reclassification between property, plant and equipment and investment property and foreign exchange

effects.

2012


Acquisition cost

as of January 1,

2012

Increase from

business

combination

Others (*)

Acquisition cost

as of December 31,

2012

Land ￦ 293,895 30,894 (36,092) 288,697

Buildings 289,640 49,116 (44,016) 294,740

Total ￦ 583,535 80,010 (80,108) 583,437

(*) Others include reclassification between property, plant and equipment and investment property and foreign exchange

effects.




(Unaudited)

47

13. Investment Property, Continued

(b) Changes in accumulated depreciation of investment property for the nine-month period ended September 30, 2013 and for


2013


Accumulated

depreciation as of

January 1, 2013 Disposals Depreciation Others

Accumulated

depreciation as of

September 30, 2013

Buildings ￦ 72,631 (79) 6,586 10,429 89,567

2012


Accumulated

depreciation as of

January 1, 2012 Depreciation

Increase from

business

combination

Others

Accumulated

depreciation as of

December 31, 2012

Buildings ￦ 73,457 7,425 9,474 (17,725) 72,631

(c) Changes in accumulated impairment losses of investment property for the nine-month period ended September 30, 2013 and


2013


Accumulated impairment

as of January 1, 2013 Impairment loss Others


as of September 30, 2013

Land ￦ 762 - (762) -

Buildings 1,787 - 39 1,826 ￦ 2,549 - (723) 1,826

2012



as of January 1, 2012 Impairment loss Others


as of December 31, 2012

Land ￦ - - 762 762

Buildings 584 1,285 (82) 1,787 ￦ 584 1,285 680 2,549




(Unaudited)

48

14. Intangible Assets

(a) Intangible assets as of September 30, 2013 and December 31, 2012 are summarized as follows:


2013 2012

Acquisition

cost

Accumulated

depreciation

Accumulated

impairment

losses Book value

Acquisition

cost

Accumulated

depreciation

Accumulated

impairment losses Book value

Goodwill ￦ 3,496,920

- (6,389) 3,490,531 3,495,316 - (6,492) 3,488,824

Industrial property

rights 141,946 (3,445)

- 138,501 141,478 (2,766) - 138,712

Rights to use facility 550,209 (90,805)

- 459,404 551,744 (69,725) - 482,019

Membership 35,887

- (2,686) 33,201 34,939 - (3,137) 31,802 Other intangible

assets 315,478 (68,259) (5,885) 241,334 322,788 (49,867) (5,842) 267,079

Total ￦ 4,540,440 (162,509) (14,960) 4,362,971 4,546,265 (122,358) (15,471) 4,408,436

(b) Changes in intangible assets for the nine-month period ended September 30, 2013 are as follows:

(*) Others primarily include effects on foreign currency translation and transfers to long-term prepaid expenses.

2013


Book value

as of January 1, 2013 Acquisition Amortization Impairment Disposals

Others (*)

Book value

as of September 30,

2013

Goodwill ￦ 3,488,824 - - - (21) 1,728 3,490,531 Industrial property

rights 138,712 478 (685) - - (4) 138,501

Rights to use facility 482,019 - (21,081) - (1,782) 248 459,404

Membership 31,802 1,562 - (46) - (117) 33,201 Other intangible assets 267,079 42,756 (51,604) (333) (223) (16,341) 241,334

Total ￦ 4,408,436 44,796 (73,370) (379) (2,026) (14,486) 4,362,971




(Unaudited)

49

14. Intangible Assets, Continued

(c) Changes in intangible assets for the year ended December 31, 2012 are as follows:

2012


Book value

as of January 1, 2012 Acquisition

Increase from

business combination

Amortization Impairment Disposals

Others

Book value

as of December 31, 2012

Goodwill ￦ 2,067,205 4 1,449,744 - (271) - (27,858) 3,488,824

Industrial property rights 2,128 1,285 136,104 (857) - - 52 138,712

Rights to use facility 490,969 8,595 - (28,194) - (48,745) 59,394 482,019

Membership 19,489 5,477 2,161 - 10 - 4,665 31,802

Other intangible assets 127,226 92,537 150,501 (104,209) (3,997) (414) 5,435 267,079

Total ￦ 2,707,017 107,898 1,738,510 (133,260) (4,258) (49,159) 41,688 4,408,436

15. Trade and Other Payables

Trade and other payables as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012

Trade payables ￦ 3,280,923

3,313,337

Other payables

1,515,819

1,621,031

Total ￦ 4,796,742

4,934,368




(Unaudited)

50

16. Borrowings and Debentures

(a) Borrowings and debentures as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012

Current:

Short-term borrowings ￦ 1,593,374

2,171,551

Current portion of long-term borrowings

346,630

83,112

Current portion of long-term debentures

2,966,966

1,857,018

Discount on debentures

(834)

(545)

Subtotal

4,906,136

4,111,136

Non-current:

Long-term borrowings

1,278,580

970,332

realization balance

(1,253)

-

Long-term debentures

6,279,891

7,124,033

Discount on debentures

(77,137)

(80,085)

Exchange rights adjustment

(39,202)

-

Subtotal

7,440,879

8,014,280

Total ￦ 12,347,015

12,125,416

http://endic.naver.com/enkrEntry.nhn?entryId=f755a8b440ad44f0ad7414bf9436f6f7&query=%ED%98%84%EC%9E%AC%EA%B0%80%EC%B9%98%ED%95%A0%EC%9D%B8%EC%B0%A8%EA%B8%88




(Unaudited)

51

16. Borrowings and Debentures, Continued

(b) Short-term borrowings as of September 30, 2013 and December 31, 2012 are summarized as follows:


Lender

Details

Annual

Interest rate (%)

September 30, 2013

December 31,

2012 Kookmin Bank and others

General

1.35~6.56 ￦ 1,264,832

1,450,079

Shinhan Bank and others

Financial

notes

2.69~5.95

259,700

524,700

Others Other

5.65~8.40

68,842

196,772

Total ￦ 1,593,374

2,171,551

(c) Long-term borrowings as of September 30, 2013 and December 31, 2012 are summarized as follows:


Lender

Details

Annual

Interest rate (%)

September 30, 2013

December 31,

2012 Korea Development Bank

and others

Local

currency

2.38~5.77 ￦ 964,025

656,300

Lotte Co., Ltd. (Japan) and

others

Foreign

currency

2.30~4.36

661,185

397,144

Subtotal 1,625,210

1,053,444

Less: Discount on borrowings (1,253)

-

Subtotal 1,623,957

1,053,444

Less: Current portion

(346,630)

(83,112)

Total ￦ 1,277,327

970,332




(Unaudited)

52


(d) Debentures as of September 30, 2013 and December 31, 2012 are summarized as follows:

Description

Maturity

Interest

rate (%)


September 30, 2013

December 31,

2012

53rd placed

Dec. 03, 2014

5.30 ￦ 250,000

250,000

54-1st placed

Mar. 12, 2013

4.44

-

200,000

54-2nd placed

Mar. 12, 2015

4.82

400,000

400,000

55th placed (foreign currency)

May. 20, 2013

3M USD

Libor+0.80

-

107,110

57th placed (foreign currency)

Mar. 17, 2014

3M USD

Libor+0.80

215,120

214,220

1st placed (Global bond)

Apr. 07. 2016

3.88

430,240

428,440

2nd placed (Global bond)

May. 09. 2017

3.38

430,240

428,440

58-1st placed (foreign

currency)

Dec. 05, 2014

3M JPY

Libor+0.60

164,801

187,125

58-2nd placed (foreign

currency)

Nov. 28, 2014

3M USD

Libor+1.50

107,560

107,110

59-1st placed

Aug. 07, 2015

2.98

350,000

350,000

59-2nd placed

Aug. 07, 2017

3.20

230,000

230,000

59-3rd placed

Aug. 07, 2019

3.33

200,000

200,000

60th placed (foreign currency) Dec. 13, 2015

3M USD

Libor+0.68

107,560

107,110

61st placed

Mar. 21, 2018

3.05

100,000

-

62nd placed

Jun. 21, 2018

2.80

110,000

-

USD convertible bonds(*1)

Jul . 05, 2016

-

531,741

515,644

JPY convertible bonds (*1)

Jul . 05, 2016

-

350,644

392,989

Exchangeable bonds(*2)

Jan. 24, 2018

-

321,200

-


Mar. 19, 2013

5.35

-

100,000


Jan. 30, 2015

4.02

40,000

40,000

Korea Seven Co., Ltd. (foreign

currency)

Jan. 27, 2015

3M Euro Yen

Libor+0.70

24,171

27,445

Korea Seven Co., Ltd. (foreign

currency)

Apr. 14. 2016

3M USD

Libor+0.50

32,268

-


(convertible bonds)

May. 08. 2018 -

7,920

-


Multiple

2.31~5.20

4,062,831

4,247,795

CS Mart Co., Ltd.

Oct. 29, 2015

3.09

16,480

18,713


(Local currency)

Multiple 2.90~3.22

600,000

300,000


(Foreign currency)

Mar. 29, 2016

3M USD

Libor+0.50

32,268

-

LSBM

Feb. 09, 2015

4.00

131,813

128,910

Subtotal

9,246,857

8,981,051

Less: Discount on debentures

(77,971)

(80,630)

Less: Exchange rights adjustment

(39,202)

-

Total book value

9,129,684

8,900,421

Less: Current portion of debentures, net of discount

(2,966,132)

(1,856,473)

Total

￦ 6,163,552

7,043,948




(Unaudited)

53


(*1) USD convertible bonds and JPY convertible bonds have been designated as financial liabilities at fair value through

profit of loss as of September 30, 2013. During the three-month period ended September 30, 2013, these convertible

bonds were reclassified to current liabilities because the put option held by bondholders is exercisable on July 5, 2014,

which is within one year from September 30, 2013. The terms and conditions are summarized as follows:

(a) Type of bonds: Registered overseas unsecured convertible bonds

(b) Total face value of bonds:

USD Bonds: 500,000,000

JPY Bonds: 32,500,000,000

Total(in won): 978,969,250,000

(c) Exchange Rate

USD Fixed Exchange Rate: exchange rate of KRW 1,083.50/USD 1.00

JPY Fixed Exchange Rate: exchange rate of KRW 13.4529/JPY 1.00

(d) Bond interest rate

Coupon rate(%): -

Yield to maturity(%): 0 (overseas convertible bonds without guarantee in U.S. dollars)

(0.25) (overseas convertible bonds without guarantee in Japanese yen)

(e) Date of bond maturity: July 5, 2016

(f) Principal redemption method:

i. Redemption on maturity date: Redemption in lump sum on the maturity date for the principal amount of bonds for which

a condition for early redemption has not occurred and the conversion right has not been exercised.

ii. Early redemption: The Group has a call option, whereas bond holders have a put option

(g) Put option by bondholders:

the put option can be exercised if any of the following conditions occurs:

On the third anniversary of the date of payment (July 5, 2014);

i. If any change of control occurs in the company; or

ii. The issued stocks of the Company are delisted from the stock exchange or their transaction is suspended for 30

consecutive transaction days or longer.

(h) Call option by the company:

the call option can be exercised if any of the following conditions occurs:

i. If the closing price for 20 transactional days in 30 consecutive transaction days reaches 130% or more of the conversion

price between 3 years from the issuance date and 30 business days to the maturity date;

ii. If the balance of bonds that has not been redeemed reaches less than 10% of the sum of the total issued amount (clean up

call); or

iii. Any additional tax burden arises due to the amendments of the related laws and regulations.

(i) Matters relating to conversion:

i. Conversion ratio (%): 100

ii. Conversion price (KRW per share): 650,000

iii. Method to decide conversion price:

While following Article 5-22 of the Regulations on Issuance, Public Disclosure, etc. of Securities, 23.8% conversion

premium was applied to the closing price of the shares listed on the Korea Exchange on the day of conversion price

determination

iv. Type of shares to be issued following conversion: Registered common shares

v. Period to apply for conversion:

Start date: July 5, 2012

End date: 7 business days prior to the maturity date

vi. Matters for the adjustment of conversion price:

In case when a condition for re-adjustment of the conversion price has occurred, such as share dilution, the conversion

price will be adjusted in accordance with the provisions in the relevant bonds purchase agreement.




(Unaudited)

54


(*2) The Group issued five-year bonds which are exchangeable to shares of LOTTE Himart Co., Ltd. and the Group

recognized the exchange rights of ￦44,944 million as other capital surplus which is not subsequently remeasured to fair

value. The terms and conditions are summarized as follows :

(a) Type of bonds: Registered overseas unsecured exchangeable bonds

(b) Total face value of bonds(KRW): 312,200,000,000

(c) Bond interest rate

Coupon rate(%): 0%

Yield to maturity(%): 0%

(d) Date of bond maturity: January 24, 2018

(e) Principal redemption method:

i. Redemption on maturity date: Redemption in lump sum on the maturity date for the principal amount of bonds for

which a condition for early redemption has not occurred and the exchange right has not been exercised. Early

redemption: The Company has a call option, whereas bond holders have a put option.

ii. Early redemption: Lotte Shopping Co., Ltd. (“Lotte Shopping”) has a call option, whereas bond holders have a put

option.

(f) Put option by bondholders:

The put option can be exercised if any of the following conditions occurs:

On the third anniversary of the date of payment (January 24, 2016);

i. If any change of control occurs in the LOTTE Himart; or

ii. The issued stocks of the Company are delisted from the stock exchange or their transaction is suspended for 30

consecutive transaction days or longer.

(g) Call option by the Company:

The call option can be exercised if any of the following conditions occurs:

i. If the closing price of LOTTE Himart Co., Ltd for 20 transactional days in 30 consecutive transaction days reaches

130% or more of the exchange price between 3 years from the issuance date (January 24, 2013) and 30 business

days to the maturity date;

ii. If the balance of bonds that has not been redeemed reaches less than 10% of the sum of the total issued amount

(clean up call); or

iii. Any additional tax burden arises due to the amendments of the related laws and regulations.

(h) Matters relating to exchange:

i. Exchange ratio (%): 100

ii. Exchange price (KRW per share): 90,780

iii. Type of shares to be issued following exchange: Common shares of LOTTE Himart Co., Ltd. iv. Period to apply for exchange:

Start date: March 5, 2013

End date: January 15, 2018

v. Matters for the adjustment of exchange price:

In case when a condition for re-adjustment of the exchange price has occurred, such as a stock dividend, the

exchange price will be adjusted in accordance with the provisions in the relevant bonds purchase agreement.




(Unaudited)

55


(e) Maturities of long-term borrowings and debentures as of September 30, 2013 are scheduled as follows:


Borrowings

Debentures Total

Within 1 year ￦ 346,630

2,966,966 3,313,596

1 ~ 2 years

765,180

2,375,083 3,140,263

2 ~ 3 years

353,400

1,981,716 2,335,116

3 ~ 4 years

-

1,108,092 1,108,092

More than 4 years

160,000

815,000 975,000

Total ￦ 1,625,210

9,246,857 10,872,067

17. Unearned Revenues

The details of unearned revenues as of September 30, 2013 and December 31, 2012 are as follows:


September 30, 2013

December 31, 2012

Current:

Membership point ￦ 85,963

76,857

Other points

92,500

92,253

Unearned rental income

11,959

7,230

Others

35,368

30,805

Subtotal

225,790

207,145

Non-current:

Other points

4,457

5,067

Unearned rental income

7,930

21,953

Subtotal

12,387

27,020

Total ￦ 238,177

234,165




(Unaudited)

56

18. Provisions

(a) Changes in provisions for the nine-month period ended September 30, 2013 are as follows:


2013

Beginning balance Increase Utilization

Balance as of

September 30,

2013

Current:

Provision for bonus points

reward program ￦ 17,119 32,006 (29,167) 19,958

Provision for bonus payable 6,010 59,667 (40,444) 25,233

Provision for sales return 6,606 2,059 (4,492) 4,173

Other provisions 10,632 20,236 (13,230) 17,638

Subtotal 40,367 113,968 (87,333) 67,002

Non-current:

Provision for unused credit card

limits (*) 30,419 1,492 - 31,911

Other provisions 1,206 5,002 - 6,208

Subtotal 31,625 6,494 - 38,119

Total ￦ 71,992 120,462 (87,333) 105,121

(*) The Group provides an allowance for credit card assets at the amount that equals the product of the unused credit

commitment multiplied by credit conversion factor and provision rate per BASEL discounted by the effective interest

rate.




(Unaudited)

57

18. Provisions, Continued

(b) Changes in provisions for the year ended December 31, 2012 are as follows:


2012

Beginning balance Increase Utilization

Balance as of

December 31,

2012

Current:

Provision for bonus points

reward program ￦ 14,596 45,944 (43,421) 17,119

Provision for bonus payable 6,106 56,529 (56,625) 6,010

Provision for sales return 6,928 4,356 (4,678) 6,606

Other provisions 10,387 19,991 (19,746) 10,632

Subtotal 38,017 126,820 (124,470) 40,367

Non-current:

Provision for unused credit card

limits (*) 34,711 - (4,292) 30,419

Other provisions 681 528 (3) 1,206

Subtotal 35,392 528 (4,295) 31,625

Total ￦ 73,409 127,348 (128,765) 71,992

(*) The Group provides an allowance for credit card assets at the amount that equals the product of the unused credit

commitment multiplied by credit conversion factor and provision rate per BASEL discounted by the effective interest

rate.




(Unaudited)

58

19. Other Non-financial Liabilities

Other non-financial liabilities as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012

Current:

Withholdings ￦ 64,652

131,781

Withholdings of value added tax

57,761

87,557

Advances received

1,105,719

824,858

Other current liabilities

2,719

753

Subtotal

1,230,851

1,044,949

Non-current:

Other non-current liabilities

60,022

25,136

Total ￦ 1,290,873

1,070,085

20. Employee Benefits

(a) Details of defined benefit liabilities as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012

Present value of defined benefit

obligations ￦ 488,946

437,436

Fair value of plan assets

(305,934)

(319,320)

Total ￦ 183,012

118,116

(b) Details of present value of other long-term employee benefits as of September 30, 2013 and December 31, 2012 are



September 30, 2013

December 31, 2012

Present value of other long-term employee

benefits ￦ 50,167

46,251




(Unaudited)

59

20. Employee Benefits, Continued

(c) Changes in employee benefits for the nine-month period ended September 30, 2013 and for the year ended December 31,

2012 are as follows:


2013 2012

Beginning of the period ￦ 437,436

291,927

Current service costs

79,464

81,781

Interest costs

14,808

17,382

Defined benefit plan actuarial losses (gains)

(16,102)

37,108

Payments

(27,546)

(42,832)

Business combination

-

47,530

Others

886

4,540

End of the period ￦ 488,946

437,436

(d) Changes on plan assets of an employee benefit plan for the nine-month period ended September 30, 2013 and for the year

ended December 31, 2012 are as follows:


2013 2012

Beginning of the period ￦ 319,320

181,411

Return on plan assets

9,262

11,859

Actuarial losses

(2,262)

(4,927)

Employer contribution

178

128,537

Payments

(21,191)

(29,500)

Business combination

-

31,489

Others

627

451

End of the period ￦ 305,934

319,320

(e) The components of plan assets as of September 30, 2013 and December 31, 2012 are summarized as follows:



Principal-guaranteed insurance policies ￦ 305,716 319,096

Others

218 224

Total ￦ 305,934 319,320




(Unaudited)

60

20. Employee Benefits, Continued

(f) Expenses recognized for the nine-month periods ended September 30, 2013 and 2012 are as follows:

(g) The principal actuarial assumptions used as of September 30, 2013 and December 31, 2012 are summarized as follows:

September 30, 2013

December 31, 2012

Discount rate

3.26 ~ 6.00%

3.26 ~ 6.00%

Expected rate of promotion

1.62 ~ 3.57%

1.62 ~ 3.57%

Expected rate of increase in salaries

1.50 ~ 7.00%

1.50 ~ 7.00%

21. Derivative Instruments and Hedge Accounting

(a) Details of derivatives outstanding as of September 30, 2013 are as follows:

Type

Description

Description

Cash flow hedge Currency swap At the maturity of the swap, the principal amounts of the

debentures in USD and JPY and borrowings in USD are

exchanged back

Interest swap Sell fixed interest to buy floating rate in KRW short-term borrowings

(b) Fair value of derivatives outstanding as of September 30, 2013 and December 31, 2012 are summarized as follows:


Type Description September 30, 2013

December 31, 2012

Assets

Liabilities

Assets

Liabilities

Cash flow hedge Currency swap

-

171,907

-

166,234

Interest swap

614

1,318

48

1,785

Total

￦ 614

173,225

48

168,019


2013 2012

Current service costs ￦ 79,464

57,059

Interest costs

14,808

12,050

Return on plan assets

(9,262)

(6,339)

Long-term employee benefits

4,941

3,775

Total ￦ 89,951

66,545




(Unaudited)

61

21. Derivative Instruments and Hedge Accounting, Continued

(c) Changes in the fair value of derivative instruments for the nine-month period ended September 30, 2013 are as follows:

Description

Type of

derivatives

Related accounts

Korean won

(millions)

Cash flow

hedge

Currency swap

Gain on valuation of derivative

instruments (non-card business) ￦ (27,363)

Gain on valuation of derivatives

instruments (card business)

(9,690)

Unrealized loss on valuation of

derivative instruments

8,819

Interest swap Unrealized loss on valuation of

derivative instruments

1,110

22. Capital Stock and Capital Surplus

(a) Pursuant to its amended Articles of Incorporation, the Company’s authorized capital stock is 60,000,000 shares, which

consist of common shares and preferred shares each with a par value of ￦5,000 per share. The Company is authorized to

issue non-voting preferred shares of up to one-fourth of the Company’s total issued and outstanding capital stock. Holders

of preferred shares may, upon a resolution of the board of directors at the time of the issuance of the preferred shares, be

entitled to receive dividends prior to the holders of common shares. The preferred shares will be automatically converted

to common shares within ten years of issuance as determined by the Company’s board of directors. However, if the

holders of preferred shares do not receive the minimum dividends as prescribed, the prescribed conversion date will be

extended to the time when all such minimum dividend amount is paid to the holders of preferred shares. As of September

30, 2013, the Company has not issued any preferred stock and 31,490,892 shares of common stock were issued and

outstanding as of September 30, 2013.

(b) Capital surplus as of September 30, 2013 and December 31, 2012 consists of the following:


September 30, 2013

December 31, 2012

Additional paid-in capital ￦ 3,800,277

3,605,117

Others

110,475

17,066

￦ 3,910,752

3,622,183




(Unaudited)

62

23. Treasury stocks

As of January 1, 2013, the Company merged with Lotte Midopa Co., Ltd. In connection with the merger, the Company

issued 1,933,873 shares of common stocks in exchange for 51,475,843 shares of Lotte Midopa Co., Ltd. which the

Company had held and 228 shares of treasury stocks of Lotte Midopa Co., Ltd. The Company recognized the acquisition

cost of the treasury stocks as zero (“0”). In addition, the Company acquired 4,815 shares of fractional shares for ￦1,806

million and, as a result, the Company holds 1,938,688 shares of treasury stocks as of September 30, 2013.

24. Retained Earnings

Details of retained earnings as of September 30, 2013 and December 31, 2012 are as follows:


September 30, 2013

December 31, 2012

Legal reserve ￦ 179,663

175,307

Voluntary reserve

10,100,052

9,160,052

Unappropriated retained earnings

1,485,975

1,757,367

￦ 11,765,690

11,092,726




(Unaudited)

63

25. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (loss) for the nine-month period ended September 30, 2013 and for

the year ended December 31, 2012 were as follows:

2013


Beginning

balance

Changes for

the period

Tax effects for

the period

Balance as of

September

30, 2013

Net change in fair value of available

for-sale financial assets ￦ 87,857

(7,705)

(30)

80,122

Exchange rate differences on

translating foreign operations

(60,458)

(11,367)

(1,316)

(73,141)

Effective portion of unrealized

changes in fair values of cash

flow hedges

(9,119)

7,490

(804)

(2,433)


investments

49,297

5,354

-

54,651

Total ￦ 67,577

(6,228)

(2,150)

59,199

2012


Beginning

balance

Changes for

the period

Tax effects for

the period

Balance as of

December

31, 2012

Net change in fair value of available

for-sale financial assets ￦ 82,362

10,245

(4,750)

87,857

Exchange rate differences on

translating foreign operations

30,084

(93,747)

3,205

(60,458)

Effective portion of unrealized

changes in fair values of cash

flow hedges

(12,140)

3,166

(145)

(9,119)


investments

37,500

11,704

93

49,297

Total ￦ 137,806

(68,632)

(1,597)

67,577




(Unaudited)

64

26. Earnings per Share

(a) Basic earnings per share

(i) Basic earnings per share for the three-month and nine-month periods ended September 30, 2013 and 2012 are as follows:

(ii) Weighted average number of ordinary shares

Korean won (millions, except per share amount)

2013 2012

Three-month

period

Nine-month

period

Three-month

period

Nine-

month period

Profit for the period attributable to the owners of the

Company ￦ 274,505 704,619 207,483 711,410

Weighted average number of ordinary shares

outstanding 29,552,204 29,552,204 29,043,374 29,043,374

Basic earnings per share ￦ 9,289 23,843 7,144 24,495

Number of shares

2013 2012

Three-month

period

Nine-month

period Three-month

period

Nine-month

period

Issued ordinary shares at January 1 31,490,892 31,490,892 29,043,374 29,043,374

Effect of treasury shares (1,938,688) (1,938,688) - -

Weighted average number of ordinary shares 29,552,204 29,552,204 29,043,374 29,043,374




(Unaudited)

65

26. Earnings per Share, Continued

(b) Diluted earnings per share

(i) Diluted earnings per share for the three-month and nine-month periods ended September 30, 2013 and 2012 are as follows:

(*) The effect of exchangeable bond consists of interest expenses and decrease in profit attributable to the owners of the

Company.

(ii) Diluted weighted average number of ordinary shares

Korean won (millions, except per share amount)

2013 2012

Three-month

period

Nine-month

period Three-month

period

Nine-month

period


Company (basic) ￦ 274,505 704,619 207,483 711,410

Loss (gain) on valuation of financial liability at fair value

through profit or loss, net of tax (39,907) (20,251) (7,913) (15,631)

Effect of exchange of exchangeable bond, net of tax (*) (3,790) (8,898) - -


Company (diluted) 230,808 675,470 199,570 695,779

Diluted average number of ordinary shares 31,058,311 31,058,311 30,549,481 30,549,481

Diluted earnings per share ￦ 7,431 21,748 6,533 22,775

Number of shares

2013 2012

Three-month

period

Nine-month

period Three-month

period

Nine-month

period

Weighted average number of ordinary shares (basic) 29,552,204 29,552,204 29,043,374 29,043,374

Effect of conversion of convertible bonds 1,506,107 1,506,107 1,506,107 1,506,107

Diluted weighted average number of ordinary shares 31,058,311 31,058,311 30,549,481 30,549,481




(Unaudited)

66

26. Earnings per Share, Continued

(b) Diluted earnings per share, continued

(iii) Potential ordinary shares from conversion of convertible bonds as of September 30, 2013 are as follows:

Korean won (millions, except for conversion price)

USD Bonds

JPY Bonds

Principal amount (*) ￦ 541,750

437,219

Conversion price (in won)

650,000 650,000

Number of potential ordinary shares

833,462

672,645

(*) Principal amount of convertible bonds are the amount of USD 500 million and JPY 32,500 million multiplied by fixed

exchange rate of 1,083.50/USD and 13.4529/JPY, respectively.

27. Sales and Cost of Sales

(a) Details of sales for the three-month and nine-month periods ended September 30, 2013 and 2012 are as follows:


2013 2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Sales of merchandise ￦ 5,953,609 17,708,958

5,059,303 15,135,938

Sales of products

30,758 96,706

31,881 93,417

Other operating revenue

689,097 2,003,521

579,977 1,667,634

Revenue of card business

297,266 1,028,776

383,776 1,023,970

Total ￦ 6,970,730 20,837,961

6,054,937 17,920,959

(b) Details of cost of sales for the three-month and nine-month periods ended September 30, 2013 and 2012 are as follows:


2013 2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period Cost of merchandise sold ￦ 4,562,039 13,622,023

3,938,772 11,722,162

Cost of products sold

21,069 64,013

20,457 59,824

Cost of other operating revenue

66,035 185,865

49,635 119,660

Cost of card business

157,448 575,350

216,778 570,321

Total ￦ 4,806,591 14,447,251

4,225,642 12,471,967




(Unaudited)

67

28. Selling, general and administrative expenses

Details of selling, general and administrative expenses for the three-month and nine-month periods ended September 30,

2013 and 2012 are as follows:


2013

2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Selling, general and administrative

expenses:

Salaries ￦ 322,894 922,519

251,580 733,069

Retirement and termination benefits

29,718 85,684

20,843 61,676

Other employee benefits

1,304 4,940

964 3,772

Employee welfare

70,249 207,178

52,513 164,249

Education and training

4,841 13,777

4,057 11,922

Travel

10,555 30,319

8,149 24,739

Maintenance fee for car

1,938 5,580

984 3,154

Insurance premium

3,387 10,022

2,705 8,116

Taxes and dues

37,912 111,543

37,223 100,199

Entertainment expenses

3,156 8,195

2,795 7,270

Supplies and stationery

24,383 65,274

20,545 59,896

Communications

11,860 37,008

10,599 34,265

Utilities

105,889 264,672

91,923 229,142

Maintenance

19,462 56,996

16,295 50,108

Rent

216,741 623,508

163,986 478,584

Depreciation

176,483 515,468

147,382 419,992

Amortization of intangible assets

14,475 38,644

16,032 43,272

Commissions and fees

258,213 777,208

228,765 676,588

Service commission expenses

199,356 594,286

198,836 596,706

Advertising

80,923 257,675

78,388 244,772

Sales promotion expenses

163,538 473,734

161,105 396,950

Decoration

4,678 11,573

2,508 15,610

Bad debt expenses (Reversal of allowance for

doubtful accounts)

70 104

(160) 8

Transportation

58,574 157,000

20,012 62,434

Provisions (Reversal of provision)

(2,357) 5,437

(196) (632)

Others

3,114 10,489

2,538 9,437

Total ￦ 1,821,356 5,288,833

1,540,371 4,435,298




(Unaudited)

68

29. Other income and expense

Details of other income and expenses for the three-month and nine-month periods ended September 30, 2013 and 2012 are

as follows:


2013

2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period Other income:

Gain on foreign currency transactions ￦ 832 1,339

146 304


3,758 4,355

997 1,083

Gain on disposal of property, plant and

equipment

463 4,547

835 1,377

Gain on disposal of intangible assets

- 48

- 297

Recovery of impairment losses on other

non-current assets

- 3

- -

Recovery of impairment losses on

intangible assets

- 78

- -

Others (*1)

11,609 39,802

14,022 56,006

Total ￦ 16,662 50,172

16,000 59,067

Other expense:

Loss on foreign currency transactions ￦ 419 3,930

458 924


3,758 4,442

1,070 1,173

Loss on disposal of property, plant and

equipment

3,363 10,178

3,199 9,044

Loss on disposal of intangible assets

13 37

28 98

Impairment loss of intangible assets

337 457

- 10

Loss on disposal of trade receivables

26 82

- -

Loss on disposal of other non-current

assets

- 24

- 56

Donation

3,258 10,399

2,597 8,558

Other bad debt expenses (Reversal of

other bad debt expenses)

970 909

503 1,928

Taxes and dues

33 78

2 40

Others (*2)

11,790 34,341

11,565 33,606

Total ￦ 23,967 64,877

19,422 55,437

(*1) Others primarily relates to income from unused gift certificates after expiration date and penalty from suppliers on

delayed delivery of merchandise.

(*2) Others primarily relates to non-deductible value added tax.




(Unaudited)

69

30. Nature of Expenses

Details of nature of expenses for the three-month and nine-month periods ended September 30, 2013 and 2012 are as

follows:


2013

2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Purchase of inventories ￦ 4,699,117 13,884,440

4,268,511 11,943,463

Changes in inventories

(173,600) (258,166)

(317,124) (224,149)

Employee benefits expense

428,107 1,233,893

327,688 972,043

Rent

217,138 624,860

164,137 479,078

Depreciation, amortization and impairment

207,461 601,521

184,540 527,674

Commissions

174,664 534,513

161,721 480,671

Sales promotion expenses

163,581 473,906

161,105 396,950

Decoration

4,690 11,613

2,508 15,610

Transportation

58,585 157,033

20,013 62,453

Others

848,204 2,472,471

792,914 2,253,472

Total ￦ 6,627,947 19,736,084

5,766,013 16,907,265




(Unaudited)

70

31. Finance Income and Finance Costs

(a) Details of finance income and finance costs for the three-month and nine-month periods ended September 30, 2013 and

2012 are as follows:


2013

2012

Three-month

period

Nine-month

period

Three-month

period

Nine-month

period

Finance income:

Interest income ￦ 20,997 69,235

26,717 84,488

Dividend income

1 5,881

- 8,948

Gain on foreign currency transactions

- 2,027

2,663 7,345


128,193 75,412

41,373 58,256

Gain on valuation of financial liability at fair value


52,461 42,344

10,439 20,621

Gain on disposal of available-for-sale financial

assets

129 25,432

1,249 1,210

Gain on valuation of derivative instruments held for

the purpose of hedging

- 2,700

- -

Gain on valuation of derivative instruments held for

the purpose of trading

- -

4,410 4,410

Gain on transaction of derivative instruments held

for the purpose of hedging

- 4,320

- 50

Gain on disposal of investments in associates

9,820 9,820

70 522

Total ￦ 211,601 237,171

86,921 185,850

Finance costs:

Interest expense ￦ 63,182 188,038

49,783 143,765

Loss on foreign currency transactions

1,163 8,813

82 278


- 6,247

- 6,574

Loss on valuation of financial liabilities at fair value


- 16,098

- -

Loss on disposal of available-for-sale financial

assets

2 1,625

- 986

Loss on valuation of derivative instruments held for

the purpose of hedging

61,611 30,063

16,188 20,791

Loss on transaction of derivative instruments held

for the purpose of hedging

- 129

- 2,788

Other bad debt expenses

- (7,840)

(4) 1,950

Loss on disposal of investments in associates

- -

- 1,671

Total ￦ 125,958 243,173

66,049 178,803




(Unaudited)

71

31. Finance Income and Finance Costs, Continued

(b) Details of finance income and finance costs by financial instruments category for the three-month and nine-month periods

ended September 30, 2013 and 2012 are as follows:

(*) The gain/loss on valuation of available-for-sale finance assets and of derivative assets and liabilities held for the

purpose of hedging (other comprehensive income/loss) are amounts before offsetting effects of income taxes.


2013

2012

Category

Details

Three-

month

period

Nine-

month

period

Three-

month

period

Nine-

month

period

Cash and cash

equivalents:

Cash and cash equivalents:

Interest income ￦ 6,559 21,044

8,253 31,099

Loans and

receivables:

Short-term financial instruments:

Interest income

3,259 12,408

8,282 21,038

Loans:

Interest income

561 1,797

594 1,805

Guarantee deposits:

Interest income

10,540 33,789

9,219 29,463

Available-for-sale

financial assets:

Available-for-sale financial assets:

Interest income

78 197

369 1,083

Dividend income

1 5,881

- 8,948

Gain (loss) on valuation (other

comprehensive income) (*)

19,880 (33,821)

(12,443) 1,801

Loss on disposal

127 23,807

1,249 224

Investments in

associates and joint

venture

Investments in associates and joint

venture:

Gain (loss) on disposal

9,820 9,820

70 (1,149)

Financial liabilities

based on amortized

cost:

Borrowings:

Interest expense

23,191 59,579

14,759 47,463

Debentures:

Interest expense

36,364 118,509

32,393 87,879

Rental guarantee deposits:

Interest expense

3,627 9,950

2,631 8,423

Financial assets and

liabilities at fair

value through profit

or loss:

Derivatives:

Loss on valuation

- -

4,410 4,410

Overseas convertible bonds:

Gain (loss) on valuation

52,461 26,246

10,439 20,621

Derivative assets and

liabilities held for

the purpose of

hedging:

Derivatives:

Gain (loss) on valuation

(61,611) (27,363)

(16,188) (20,791)

Gain (loss) on transaction

- 4,191

- (2,738)

Gain (loss) on valuation (other

comprehensive income) (*)

32,831 9,929

(1,565) 6,626




(Unaudited)

72

32. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods,

deferred tax income/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and

income tax recognized in other comprehensive income. The Group’s effective tax rate for the nine-month period ended

September 30, 2013 was 26.50% (for the nine-month period ended September 30, 2012: 28.35%). The change in effective

tax rate was primarily due to the decrease in deferred tax liabilities resulting from the merger with Lotte Midopa Co., Ltd.

which was the Company’s subsidiary.

33. Operating Segments

(a) The Group’s major reportable segments consist of department stores (retail), discount stores (retail), card business,

consumer electronics retail and others (convenience stores, television home shopping, supermarkets, movie theaters, and

clothing retail) as follows:

Department stores Discount Stores

Card business

Consumer

electronics

retail Others

Main

business

Retail stores for

middle and higher-

end merchandise

Retail and whole-sale

stores for middle and

discounted price

merchandise

Credit

financial

services

Retail store

for home

appliance

Others

Major

products

or services

Sales of merchandise

and leasing

Sales of merchandise

and leasing

Credit card

and loan

services

Sales of home

appliance

Sales of

merchandise,

leasing and

others

(b) Information about reportable segments for the nine-month periods ended September 30, 2013 and 2012 are as follows:


2013

Department

stores

Discount

stores

Card

business

Consumer

electronics retail

Others

Total

External sales ￦ 5,741,625 6,790,065 1,075,639 2,593,855 4,636,777 20,837,961

Internal sales

13,603 2,504 161,476 394 104,415 282,392

Total sales ￦ 5,755,228 6,792,569 1,237,115 2,594,249 4,741,192 21,120,353


2012

Department stores

Discount

stores

Card

business

Others

Total

External sales ￦ 5,772,927

6,745,401

1,066,452

4,336,179

17,920,959

Internal sales

26,192 1,475 141,734

105,272

274,673

Total sales ￦ 5,799,119

6,746,876

1,208,186

4,441,451

18,195,632




(Unaudited)

73

33. Operating Segments and Geographic Information, Continued

(c) Reconciliations of total segment sales and profit to their respective consolidated financial statements line items for the nine-

month periods ended September 30, 2013 and 2012 are summarized as follows:


2013

Sales

Operating

profit for

period

Depreciation

and

amortization

Profit for

period

Department stores ￦ 5,755,228

440,969 210,838 504,852

Discount stores

6,792,569

211,159 166,092 8,682

Card business

1,237,115

157,533 19,802 120,111

Consumer electronics retail

2,594,249

155,555 38,042 110,362

Others

4,741,192

143,321 166,747 104,416

Segment totals

21,120,353

1,108,537 601,521 848,423

Elimination of inter-segment

amounts

(282,392)

(6,660) - (66,336)

After consolidated adjustments ￦ 20,837,961

1,101,877 601,521 782,087


2012

Sales

Operating

profit for

period

Depreciation

and

amortization

Profit for

period


479,921 166,597 518,220

Discount stores

6,746,876

243,537 154,802 78,188

Card business

1,208,186

169,384 22,398 120,234

Others

4,441,451

135,612 183,877 99,354

Segment totals

18,195,632

1,028,454 527,674 815,996

Elimination of inter-segment

amounts

(274,673)

(14,760) - (48,870)


1,013,694 527,674 767,126




(Unaudited)

74


(d) Reconciliation of segment assets and liabilities to their respective consolidated financial statement line items as of

September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

Assets

Liabilities


10,024,313

Discount stores 11,357,893

2,366,557

Card business 7,926,711

6,172,287


2,710,250

1,130,871

Others 5,552,527

1,987,236

Segment totals 42,843,081

21,681,264

Elimination of inter-segment assets and

liabilities (429,825)

(429,825)

Adjustments of business combinations

822,390

123,104

Investments in subsidiaries and associates

(5,353,152)

-

Subtotal

(4,960,587)

(306,721)


21,374,543


December 31, 2012

Assets

Liabilities


9,709,881

Discount stores 10,970,095

2,126,180

Card business 8,087,110

6,426,157


2,603,494

1,129,080

Others 5,503,220

2,017,286

Segment totals 42,241,831

21,408,584

Elimination of inter-segment assets and

liabilities (393,230)

(393,230)

Adjustments of business combinations

735,471

123,366

Investments in subsidiaries and associates

(5,727,027)

-

Subtotal

(5,384,786)

(269,864)


21,138,720




(Unaudited)

75


(e) Sales by geographical areas for the nine-month periods ended September 30, 2013 and 2012 are summarized as follows:


Region

2013 2012

Domestic ￦ 18,565,883

15,865,020

China 1,333,728

1,206,965

Vietnam 96,510

53,090

Indonesia 841,840

795,884

Total ￦ 20,837,961

17,920,959

In presenting information on the basis of geographical areas, geographic sales are based on the physical location of

customers.




(Unaudited)

76

34. Contingent Liabilities and Financial Commitments

(a) As of September 30, 2013, the Group has the following credit facility commitments with financial institutions:

Credit line

Korean won (millions),

Foreign currency

(thousands)

Amount used

under credit facility

Korean won (millions),

Foreign currency (thousands)

General loan KRW 1,416,340 KRW 210,340

CNY 2,253,000 CNY 1,866,681

USD 213,100 USD 208,000

IDR 1,940,000,000 IDR 1,454,000,000

HKD 150,000 HKD 140,950

Discount of bill KRW 530,000 KRW 213,000

Buyer’s credit KRW 556,918 KRW 117,791

Bank overdraft KRW 360,000 KRW 1,730

Letter of credit USD 16,200 USD 5,769

Guarantee KRW 5,003 KRW 2,488

Other KRW 62,000 KRW 3,655

(b) Material contracts of the Group are as follows:

Company

Contractor

Description of contract

Lotte Shopping Co., Ltd. Lotte Station Building Co., Ltd. and CS

Mart Co., Ltd.

Providing management

services

Lotte Card Co., Ltd. American Express Company, MasterCard

International, Visa International and JCB

International

Commissions based on credit

card transaction amount



BC card and Shinhan card Business tie-up and issuing

credit cards

Korea Express Co., Ltd. Logistics services

Cable TV operators Providing broadcast programs

Korea Seven Co., Ltd. 7-Eleven, Inc. Using the registered trademark

and operating know-how

Lotte Boulangerie Co., Ltd. Shikishima Baking Co., Ltd. Bread baking skills and

techniques

NCF Co., Ltd. Nice Claup Co., Ltd. Royalty payments based on net

revenue of selling and

manufacturing amounts

Buy the way Inc. SPORTSTOTO.CO.,LTD

Renewal guarantees of

payments for goods until

December 31, 2013

CS Mart Co., Ltd. Lotte Shopping Co., Ltd.

Paying management service fee

LOTTE Himart Co., Ltd. Himart Logitech Co., Ltd.

Warehouse management and

transportation, installation,

and service consignment


Internet Sales Agent

34. Contingent Liabilities and Financial Commitments, Continued

(c) As of September 30, 2013, the Group are the plaintiff in various lawsuits claiming damages totaling ￦62,247 million and

the Group are the defendant in various lawsuits with damage claims totaling ￦49,777 million.




(Unaudited)

77

(d) As of September 30, 2013, the Group has provided one promissory note as collateral for borrowings from Koryo Central

Educational Institution.

(e) Lotte Card Co., Ltd. has sold certain card assets to SPCs pursuant to the Assets-Backed Securitization Law of the Republic

of Korea and assumed the liability to pay the outstanding card assets when the transferred card assets cannot meet the

prescribed qualifications in the contract or fall into arrears in accordance with the terms of assets transfer agreement and

other contracts. Accordingly, as prescribed in the assets transfer agreement and other contracts, the SPCs have obligations

of early redemption of the asset-backed securities when average portfolio earnings ratio during three consecutive settlement

periods is lower than the average primary cost ratio or when outstanding balance of adjusted securitized assets is less than

the minimum principal balance as of closing date of each settlement period and others.

(f) As of September 30, 2013, the Company, Hotel Lotte Co., Ltd. and Lotte Engineering & Construction Co., Ltd. granted put

options for the preferred stocks of Lotte Incheon Development Co., Ltd. (￦60,000 million of the total issue price) to the

current preferred stockholders. Meanwhile, the Company, Hotel Lotte Co., Ltd. and Lotte Engineering & Construction Co.,

Ltd. have call options for the preferred stocks of Lotte Incheon Development Co., Ltd.,

35. Inter-company Transactions and Balances with Consolidated Companies

The Group has provided guarantees for consolidated companies as of September 30, 2013 as follows:

2013

Consolidated

company

Provided by

Guarantee recipient

Type of

borrowings

Guaranteed amount

(thousands)

Lotte Cinema

Vietnam Co., Ltd.

Lotte Shopping

Co., Ltd.

The Export-Import

Bank of Korea

Working capital

USD 24,000

Lotte Shopping

Business

Management

(Hong Kong)

Limited

Lotte Shopping

Co., Ltd.

HSBC,

Working capital

RMB 750,000

Deutsche Bank

LOTTE

PROPERTIES

(CHENGDU) HK

LIMITED

Lotte Shopping

Co., Ltd.

Korea Exchange

Bank

Working capital

USD 63,800

Woori Bank

USD 70,000




(Unaudited)

78

36. Transactions and Balances with Related Companies

(a) Details of investor and subsidiary relationships with the Company as of September 30, 2013 are as follows:

Related company

Ownership (%)

Control relationship (*)

Hotel Lotte Co., Ltd. 8.83 Affiliate of Lotte Group

Korea Fuji Film Co., Ltd. 7.86 Affiliate of Lotte Group

Lotte Confectionery Co., Ltd. 7.86 Affiliate of Lotte Group

LOTTE DATA COMMUNICATION

COMPANY

4.81

Affiliate of Lotte Group

Lotte Chilsung Beverage Co., Ltd. 3.93 Affiliate of Lotte Group

Lotte Engineering & Construction Co., Ltd. 0.95 Affiliate of Lotte Group

Hotel Lotte Pusan Co., Ltd. 0.78 Affiliate of Lotte Group

(*) Lotte Group represents a group of entities as defined and restricted by the Monopoly Regulation and Fair Trade Act in

Korea.




(Unaudited)

79

36. Transactions and Balances with Related Companies, Continued

(b) Significant transactions which occurred in the normal course of business with related companies for the nine-month periods

ended September 30, 2013 and 2012 are summarized as follows:


2013 2012

Related company

Revenues Expenses

Revenues Expenses

Hotel Lotte Co., Ltd. ￦ 36,644

77,027

33,504

69,520

Lotte Confectionery Co., Ltd. 20,397

100,642

15,480

102,528

Lotte Chilsung Beverage Co., Ltd. 13,107

76,518

13,235

73,947

Lotte Engineering & Construction Co.,

Ltd. 3,012

490,500

9,268

425,760


15,289

6,251

15,280

Lotte Station Building Co., Ltd. 17,542

4,891

17,880

5,194

Lotteria Co., Ltd. 18,386

4,205

17,258

3,538

LOTTE FOOD CO.,LTD. 19,912

136,226

2,804

23,575


COMPANY 23,394

192,911

18,961

146,683

Lotte Trading Co., Ltd. 12,169

223,656

11,324

215,966

Lotte Aluminium Co., Ltd. 1,977

65,459

1,898

69,363

Lotte Logistics Co., Ltd. 8,723

1,261,636

10,548

1,204,446

Others 102,146

279,964

102,420

374,895

Total ￦ 284,265

2,928,924

260,831

2,730,695

(c) Account balances with related companies as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012

Related company

Receivables

Payables

Receivables

Payables

Hotel Lotte Co., Ltd. ￦ 54,424

19,525

37,102

21,720

Lotte Confectionery Co., Ltd. 11,004

22,962

13,553

17,393

Lotte Chilsung Beverage Co., Ltd. 47,581

755

3,741

8,781

Lotte Engineering & Construction Co.,

Ltd. 43,587

90,245

66,377

150,863


3,073

7,396

4,175

Lotte Station Building Co., Ltd. 22,327

10,352

27,335

10,707

Lotteria Co., Ltd. 1,756

10,790

2,142

11,763

LOTTE FOOD CO.,LTD. 2,796

18,968

3,326

19,447


COMPANY 13,464

25,163

11,130

31,740

Lotte Trading Co., Ltd. 644

12,031

4,661

12,445

Lotte Aluminium Co., Ltd. 27,767

8,345

16,485

13,700

Lotte Logistics Co., Ltd. 2,358

192,880

1,550

163,908

Others 255,280

116,548

229,526

102,642

Total ￦ 493,637

531,637

424,324

569,284




(Unaudited)

80

36. Transactions and Balances with Related Companies, Continued

(d) The Group has provided guarantees for related companies as of September 30, 2013 as follows:

Related company

Guarantee recipient

Type of

borrowings

Guaranteed amount

(thousand)

Lotte Shopping Rus Ltd. Woori Bank Working capital USD 10,000

(e) The fulfillment of the VPF contract between D-Cinema of Korea Co., Ltd. and Twentieth Century Fox Film Corporation

was equally guaranteed by CGV and the Group in October 2008.

(f) The fulfillment of the loyalty contract between Burger King Japan Co., Ltd. and BK ASIAPAC, PTE. Ltd. was guaranteed

by the Group.

(g) During the nine-month period ended September 30, 2013, the Company, Hotel Lotte Co., Ltd. and Lotte Engineering &

Construction Co., Ltd. entered into an agreement to jointly provide financial support for HND able 2nd limited (“HND

able”) in default of the principal and interest on the Asset Backed Commercial Paper (“ABCP”, ￦700,000 million of par

value in maturing in 57 months) issued by HND able on May 27, 2013, which is collateralized with the assets of Lotte

Incheon Development Co., Ltd..




(Unaudited)

81

37. Risk Management

(a) Management of financial risks

Objectives and Policies of the Group

Risk management activities of the Group identify credit risk, liquidity risk, market risk and any other potential risk that

may affect financial performance and by eliminating, avoiding and abating the possible risk level to an acceptable range

and to support to a stable and consistent business performance with the intention to contribute to strengthening the Group’s

competitiveness by reducing costs of finance through improving the financial structure and enhancing the efficiency of its

capital operations.

In order to install and implement the financial risk management system, the Group has established risk management

policies in an integrated perspective, and is complying with the risk management policies and procedures by strictly

performing control and review of internal managers.

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its

contractual obligations in an ordinary transaction or investment activity.

Most of the Group’s profit is generated from individual clients and carries low credit risk. Also, the Group deposits its

cash and cash equivalents and short-term financial instruments with financial institutions. Credit risks from these

financial institutions are very limited due to their high solvency.

1) Exposure to credit risk

The book value of a financial asset represents the maximum exposure to credit risk. The maximum exposures to credit

risk as of September 30, 2013 and December 31, 2012 are as follows:


Account

September 30, 2013

December 31, 2012 Cash equivalent(*1) ￦ 1,114,603

874,859

Trade and other receivables

904,897

915,693

Other financial assets (current) (*2)

7,688,909

8,002,000

Other financial assets (non-current) (*2)

1,255,085

1,185,224

Total ￦ 10,963,494

10,977,776

(*1) Cash held by the Group are excluded as there is no exposure to credit risk.

(*2) Equity securities within available-for-sale financial assets are excluded as there is no exposure to credit risk.




(Unaudited)

82

37. Risk Management, Continued

(a) Management of financial risks, continued

2) Impairment loss

Trade and other receivables, other financial assets (current), and other financial assets (non-current), before deducting

the allowance for doubtful accounts as of September 30, 2013 and December 31, 2012 are summarized as follows:


September 30, 2013

Description

Receivables that are

neither past due

nor impaired

Receivables that are past due as

at the end of the reporting period

but not impaired

Receivables

impaired(*) Total

Trade and other receivables ￦ 878,340 26,557 15,919 920,816


(current)

7,518,167 170,742 225,522 7,914,431

Other financial assets (non-

current)

1,249,005 6,080 2,000 1,257,085

Total ￦ 9,645,512 203,379 243,441 10,092,332

(*) The Group sets up an allowance for doubtful account when financial assets are individually determined to be impaired.


December 31, 2012

Description

Receivables that are

neither past due nor

impaired

Receivables that are past due as

at the end of the reporting period

but not impaired

Receivables

impaired(*) Total

Trade and other receivables ￦ 896,610 18,306 15,747 930,663


(current)

7,894,828 107,172 254,652 8,256,652

Other financial assets (non-

current)

1,179,144 6,080 2,376 1,187,600

Total ￦ 9,970,582 131,558 272,775 10,374,915

(*) The Group sets up an allowance for doubtful account when financial assets are individually determined to be impaired.




(Unaudited)

83



3) Allowance for doubtful trade and other receivables

The movement in the allowance for doubtful trade and other receivables for the nine-month period ended September 30,

2013 and for the year ended December 31, 2012 are summarized as follow:


2013

2012

Balance at beginning of period ￦ 14,971

11,927

Impairment loss

2,059

4,039

Reversal of impairment loss

(10)

(32)

Write-offs

(948)

(1,082)

Recoveries

49

3

Others

(202)

116

Balance at end of period ￦ 15,919

14,971

The movement in the allowance for doubtful other financial assets (current) for the nine-month period ended September

30, 2013 and for the year ended December 31, 2012 are summarized as follow:


2013

2012


222,097

Impairment loss

111,582

154,627

Reversal of impairment loss

(9,047)

(601)

Write-offs

(169,822)

(142,469)

Recoveries

38,157

20,998


254,652

The movement in the allowance for doubtful other financial assets (non-current) for the nine-month period ended

September 30, 2013 and for the year ended December 31, 2012 are summarized as follow:


2013

2012


-

Impairment loss

-

2,000

Write-offs

(376)

-

Others

-

376


2,376




(Unaudited)

84



4) Financial assets that are past due as at the end of the reporting period but not impaired

An analysis of the age of trade and other receivables, other financial assets (current), and other financial assets (non-

current) that are past due as at the end of the reporting period but not impaired are summarized as follows:


September 30, 2013

Description

Carrying

amount

3 months

or less

3 ~ 6

months

6 ~ 12

months

More than

1 year

Trade and other

receivables ￦ 26,557 16,781 5,348 2,299 2,129


(current) 170,742 161,627 9,115 - -


(non-current) 6,080 - - - 6,080

Total ￦ 203,379 178,408 14,463 2,299 8,209


December 31, 2012

Description

Carrying

amount

3 months

or less

3 ~ 6

months

6 ~ 12

months

More than

1 year

Trade and other

receivables ￦ 18,306 13,964 1,963 1,511 868


(current) 107,172 107,046 126 - -


(non-current) 6,080 - - - 6,080

Total ￦ 131,558 121,010 2,089 1,511 6,948

5) Guarantees

The Group has provided guarantees to its related companies as discussed in note 36 to the consolidated interim financial

statements.




(Unaudited)

85



Liquidity Risks

Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations associated with its financial

liabilities that are settled by delivering cash or another financial asset due to an adverse managerial or external environment.

In order to systematically manage liquidity risk, the Group predicts and corresponds to potential risks through consistently

analyzing the schedule of cash flow and establishing short-term and long-term capital management plans.

Also, the Group currently deposits a considerable amount with financial institutions with high credit ratings to make proper

provisions for potential liquidity risks. The Group maintains a credit line for overdraft and general loans with various

financial institutions, and can raise funds through the domestic and foreign financial markets based on high credit ratings.

The management of the Group believes that it is possible to redeem liabilities using cash flows from operating activities

and cash in-flow from financial assets.

1) Aggregate maturities of non-derivative financial liabilities

Aggregate maturities of non-derivative financial liabilities, including estimated interest, as of September 30, 2013 are as

follows:


September 30, 2013

Description

Carrying

amount

Contractual

cash flows

3 months

or less

3 ~ 6

months

6 ~ 12

months

More than

1 year

Current portion of borrowings

and debentures ￦ 4,906,136 5,222,135 1,176,496 1,115,164 2,930,475 -

Trade and other payables 4,796,742 4,889,071 4,806,313 60,169 22,589 -


(current) (*) 499,738 507,803 389,380 68,604 49,819 -

Borrowings and debentures 7,440,879 8,071,740 49,797 49,583 99,851 7,872,509

Other financial liabilities (non-

current) (*) 202,224 209,864 - - - 209,864

Total ￦ 17,845,719 18,900,613 6,421,986 1,293,520 3,102,734 8,082,373

(*) Derivative financial liabilities are excluded in the maturity analysis.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at

significantly different amounts.

2) Guarantees

As of September 30, 2013, the Group has provided financial guarantees to associates and joint ventures. Should the

Group be liable for payment upon defaults of the associates and joint ventures, the expected amounts which the Group

is liable to pay within 1 year are ￦10,756 million.




(Unaudited)

86



Market Risks

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will

affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management

is to manage and control market risk exposures within acceptable parameters, while optimizing the Group’s return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such

transactions are carried out under strict supervision of the internal risk management. Generally, the Group seeks to apply

hedge accounting in order to manage volatility in profit or loss.

1) Currency risk

The Group is exposed to currency risk on borrowings and debentures that are denominated in a currency other than the

respective functional currencies of the Group. Currencies that generate exchange positions include USD, JPY and

others. The objective of exchange risk management is to continue stable financial activities by minimizing uncertainty

and profit and loss fluctuations. Foreign currency trade for speculation is strictly prohibited.

The Group enters into currency swap transactions with financial institutions to hedge currency risks of foreign currency

denominated borrowings and debentures. When the Group needs foreign currencies, the Group enters into a forward

exchange contract with major financial institutions to avoid the risks of exchange rate fluctuations.

Assets and liabilities denominated in foreign currencies other than the Group functional currencies as of September 30,

2013 and December 31, 2012 are as follows:



Assets Liabilities Assets Liabilities

USD ￦ 962,721 2,823,838 1,008,930 2,906,270

EUR - 773 - 2,088

JPY 34,038 919,652 38,638 1,050,343

Total ￦ 996,759 3,744,263 1,047,568 3,958,701

The closing rates as of September 30, 2013 and December 31, 2012 and the average rates for the nine-month periods

ended September 30, 2013 and 2012 are as follows:

Average rate

Closing rate

2013

2012

September 30, 2013

December 31, 2012

USD ￦ 1,106.25

1,138.82

1,075.60

1,071.10

EUR

1,456.29

1,459.47

1,451.31

1,416.26

JPY

11.4560

14.3535

10.9867

12.4750




(Unaudited)

87



The Group regularly measures exchange risks on Korean won against foreign currency fluctuations. The Group assumes

that foreign currency exchange rates fluctuate 10% at the end of reporting period, and others variables are not changed.

Sensitivity analysis of income before taxes from changes of foreign currency exchange rate as of September 30, 2013 and

December 31, 2012 are summarized as follows:



10% increase 10% decrease 10% increase 10% decrease USD ￦ (61,965) 61,965 (63,977) 63,977

EUR (77) 77 (209) 209

JPY (32,961) 32,961 (37,427) 37,427

Total ￦ (95,003) 95,003 (101,613) 101,613

Borrowings and debentures with currency swaps and overseas convertible bonds designated as financial liabilities at fair

value through profit or loss are not included. The sensitivity analysis above is related to the monetary assets and

liabilities, denominated in a currency other than the Group’s functional currency, as of September 30, 2013 and

December 31, 2012 of the Group entities in Korea.

2) Interest rate risk

Interest rate risk is the risk of changes in interest income and expense from deposits and borrowings due to fluctuations

in the market interest rate. Interest rate risk of the Group arises on variable interest rate financial instruments and

borrowings. The purpose of interest rate risk management is to minimize value fluctuation of financial assets and

liabilities that occur from uncertainty caused by changes in interest rates.

The Group makes interest swap transactions with financial institutions for hedging interest rate risk of variable

borrowings and debentures.

At the reporting date the interest rate profile of the Group’s variable interest-bearing financial instruments was:

Sensitivity analysis of interest income and expenses from changes in interest rates as of September 30, 2013 and December

31, 2012 are summarized as follows:


September 30, 2013

December 31, 2012 Variable rate instruments:

Financial assets ￦ 330,373

416,869

Financial liabilities

2,524,416

2,473,551




(Unaudited)

88





100bps up 100bps down 100bps up 100bps down Interest income ￦ 3,304 (3,304) 4,169 (4,169)

Interest expense 4,078 (4,078) 4,948 (4,948)

Borrowings and debentures for which the Company has entered into interest rate swap transactions are not included.

3) Price risk

The Group is exposed to fluctuations of price in available-for-sale financial assets. The book values of the marketable

available-for-sale financial assets as of September 30, 2013 and December 31, 2012 are ￦168,987 million and

￦338,935 million, respectively.

The Group assumes that prices of the marketable available-for-sale financial assets fluctuate 10% at the end of

reporting period, and others variables are not changed. Sensitivity analysis of other comprehensive income from

changes of price as of September 30, 2013 and December 31, 2012 are as summarized as follows:


September 30, 2013

December 31, 2012

10%

10%

10%

10%

increase decrease increase decrease

Other comprehensive income ￦ 16,899

(16,899)

33,894

(33,894)

(b) Capital Management

The objective of the Group’s capital management is maximizing shareholders’ profit through maintaining a sound capital

structure. The Group makes necessary improvements to the capital structure through monthly monitoring of financial

ratios such as liabilities to equity ratios and net borrowings to equity ratios in order to achieve an optimal capital structure.

The liabilities to equity ratios and net borrowings to equity ratios as of September 30, 2013 and December 31, 2012 are as

follows:


September 30, 2013

December 31, 2012

Liabilities (a) ￦ 21,374,543

21,138,720

Equity (b)

16,507,951

15,718,325

Financial instruments (*) (c)

1,702,903

1,616,024

Borrowings (d)

12,347,015

12,125,416

Liabilities to equity ratio (a/b)

129.48%

134.48%

Net borrowings to equity ratio ((d-c)/b)

64.48%

66.86%

(*) Financial instruments mainly consist of ordinary deposits, checking accounts, short-term and long-term financial

instruments.

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