Holding Companies ’ cross holdings partially removed: What to expect next

Overweight (Maintain) and Lotte Food to sell their 1.3% Lotte Holdings stake Lotte Chilsung and Lotte Food (002270 KS/Buy/TP: W800,000/CP: W567,000) disclosed Industry Report that they will sell their Lotte Holdings stakes (common shares)—0.7% (485,112 shares) and 0.6% (474,148 shares), respectively—to unwind cross holdings created during the December 1, 2017 group’s holding company conversion.

The cross holding structures with Lotte Holdings arose after Lotte Chilsung and Lotte Food bought back their own shares during their spinoffs/mergers for holding Mirae Asset Daewoo Co., Ltd. company conversion and subsequently transferred the shares to their operating units . The stake disposal will unwind the resulting cross holdings, which is mandated within

[Analyst ] six months from the date of their establishment, as per the Monopoly Regulation and Fair Trade Act (MRFTA).

Dae -ro Jeong +822 -3774 -1634 Lotte Holdings’ move to complete holding company structure: What come s [email protected] next

Su Yeon Lee 1) Unwinding of the remaining new circular/cross shareholdings (within six months +822 -3774 -7162 from date of merger registration) [email protected] Even after unwinding the cross holdings between Lotte Holdings and Lotte Chilsung/Lotte Food, the group will still be left with eight new circular shareholdings and three new cross

holdings, which also need to be untied within six months of the date of their occurrence

(i.e., date of merger registration, which is December 12 th , 2017). Within that period, we think Chairman Shin Dong-bin could directly purchase a 7.3% stake (roughly W331.1bn) in Lotte Holdings from group affiliates as a means to untangle the new circular/cross shareholding structures—and, in so doing, further his control over the group. 2) Meeting subsidiary ownership requirement: Purchase of additional stakes for subsidiary inclusion and disposal of stakes in non-subsidiary affiliates (within two years) By law, Lotte Holdings must own at least 20% of its listed subsidiaries and 40% of its unlisted subsidiaries. Currently, the company holds 25.9% in Lotte Shopping, 22.1% in Lotte Food, 8.2% in Lotte Confectionary, and 19.3% in Lotte Chilsung. Hence, Lotte Holdings needs to acquire, at the very least, an additional 11.8% and 0.7%, respectively, in Lotte Confectionary and Lotte Chilsung. For this purpose, we believe the holding company will opt for tender offer/equity swap/rights offering ( new share distribution), as such an approach would not require any additional capital, and would also be beneficial to the majority shareholder from a capital gains tax perspective. In the case of Lotte Shopping, in which Chairman Shin currently owns 9.9%, Lotte Holdings already satisfies the 20% minimum ownership threshold, meaning there is little tax incentive for the majority shareholder (taxes on capital gains resulting from equity swaps for holding company conversions can be deferred, under the current tax code). Therefore, we think Chairman Shin could either directly exchange his Lotte Shopping shares with the treasury shares held by Lotte Holdings, or partially sell them. 3) Disposal of stakes in financial firms (within two years) Under the MRFTA (Article 8-2), Lotte Holdings must sell its stakes in financial affiliates (total of 10, including and ) and non-affiliate financial companies (including BNK Financial Group) within two years. We think Lotte Holdings could decide to keep some financial affiliates, such as Lotte Card, within the group structure through various means (rather than selling its stakes to outsiders), given their potential for synergy effects. More specifically, Lotte Holdings could either: 1) unload its shares in financial affiliates to Hotel Lotte, Lotte Property & Development, or other affiliates sitting outside of the holding company structure; or 2) split itself into a financial unit and a non-financial unit, to comply with the ban on the ownership of financial companies by non-financial holding companies under the MRFTA.

December 1, 2017 Holding Companies

Lotte Holdings’ cross holdings partially removed

Lotte Chilsung and Lotte Food to sell their 1.3% Lotte Holdings stake

Lotte Chilsung and Lotte Food disclosed that they will sell their Lotte Holdings stakes (common shares)—0.7% (485,112 shares) and 0.6% (474,148 shares), respectively—to unwind cross-shareholdings created during the group’s holding company conversion.

The cross holding structures with Lotte Holdings arose after Lotte Chilsung and Lotte Food bought back their own shares during spinoffs/mergers for holding company conversion, and subsequently transferred the shares to their operating units. The stake disposal will unwind the resulting cross holdings, which is mandated within six months from the date of their establishment, as per the Monopoly Regulation and Fair Trade Act (MRFTA).

Table 1. New cross holdings of Lotte Group No. Subsidiary1 Subsidiary2 Subsidiary3 Notes 1 Lotte Holdings → Daehong → Lotte Holdings 44.0% 1.1%

Lotte Holdings Lotte Data 2 → → Lotte Holdings Communication Cross holding to be addressed automatically after resolution of circular shareholding 7.7% 2.4%

3 Lotte Holdings → Korea Fujifilm → Lotte Holdings 5.0% 3.8% 4 Lotte Holdings → Lotte Chilsung Beverage → Lotte Holdings Decided to sell the stakes on November 30 th , 19.3% 0.7% 2017; cross holding arising from the 5 Lotte Holdings → Lotte Foods → Lotte Holdings distribution of treasury shares (before spinoff) to the operating subsidiary 22.1% 0.6% Source: Mirae Asset Daewoo Research

Table 2. Major shareholders of Lotte Holdings (004990 KS) (shares, %) Lotte Holdings Shareholder Notes # of shares % Shin Dong-bin 7,746,897 10.5 Shin Dong-joo 171,673 0.2 Controlling family’s combined stake of 15.4% Shin Kyeok-ho 2,176,830 3.0

Shin Young-ja 1,195,007 1.6 Shin Yu-mi 42,254 0.1 Lotte Foundation 2,913,988 4.0 Lotte Samdong Welfare Foundation 54,807 0.1 Hotel Lotte 4,808,717 6.5

Lotte Aluminum 4,726,242 6.4

LOTTE CO.,LTD 2,613,965 3.5

Lotte Hotel 389,590 0.5

Lotte Chemical 23,864 0.0

L2 Investment Company 106,151 0.1

Fujifilm Korea 2,832,097 3.8 New cross/circular shareholding structures that will need to be untied within six months Lotte Data Communication 1,734,654 2.4 from date of their establishment

Daehong 817,585 1.1

Lotte Chilsung Beverage 0 0 Decided to sell the stakes to untie circular shareholding on November 30 th , 2017 ( ’17.11.30): Lotte Foods 0 0 485,112 shares for Lotte Chilsung (0.7%), 474,148 shares for Lotte Foods (0.6%) Subtotal 32,354,321 43.9 Treasury shares 13,854,113 18.8 Of these, 4.91mn shares (6.7%) will need to be disposed of within five years Total outstanding shares 73,683,000 100.0 Source: DART, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 2 December 1, 2017 Holding Companies

Lotte Holdings: What to expect next

1) Unwinding of the remaining new circular/cross shareholdings (within six months from date of merger registration)

Even after unwinding the cross holdings between Lotte Holdings and Lotte Chilsung/Lotte Food, the group will still be left with eight new circular shareholdings and three new cross holdings, which also need to be untied within six months of the date of their occurrence (i.e., date of merger registration, which is December 12 th , 2017).

Within that period, we think Chairman Shin Dong-bin could directly purchase a 7.3% stake (roughly W331.1bn) in Lotte Holdings from group affiliates as a means to untangle the new circular/cross shareholding structures—and, in so doing, further his control over the group.

Table 3. New circular shareholding of Lotte Group No. Subsidiary 1 Subsidiary 2 Subsidiary 3 Subsidiary 4 Subsidiary 5 Subsidiary 6 Notes 1 Lotte Holdings → → Daehong → Lotte Holdings Daehong →Lotte Holdings 54.4% 12.5% 1.1% (1.1%, approx. W50 .3bn) Lotte Data 2 Lotte Holdings → Daehong → → Lotte Holdings Communication 44.0% 28.5% 2.4% Lotte Data Lotte Data 3 Lotte Holdings → Lotteria → → Lotte Holdings Communication → Communication Lotte Holdings 54.4% 34.5% 2.4% (2.4%, approx. Lotte Data W106.7bn) 4 Lotte Holdings → Lotteria → Daehong → → Lotte Holdings Communication 54.4% 12.5% 28.5% 2.4%

5 Lotte Holdings → Lotteria → Korea Fujifilm → Lotte Holdings 54.4% 2.1% 3.8% 6 Lotte Holdings → Lotte Corp. → Korea Fujifilm → Lotte Holdings Korea Fujifilm →Lotte 27.7% 56.8% 3.8% Holdings 7 Lotte Holdings → Lotte Logistics → Lotte Corp. → Korea Fujifilm → Lotte Holdings (3.8%, approx. W174.2bn) 18.9% 13.7% 56.8% 3.8% 8 Lotte Holdings → Lotteria → Lotte Logistics → Lotte Corp. → Korea Fujifilm → Lotte Holdings 54.4% 17.3% 13.7% 56.8% 3.8% Source: DART, Mirae Asset Daewoo Research Note: Based on Lotte Holdings’ closing price of W61 ,500 on November 30 th

Mirae Asset Daewoo Research 3 December 1, 2017 Holding Companies

Table 4. Expected changes in stakes in Lotte Holdings should Shin Dong-bin purchase shares of the holding company to untie circular/cross shareholding structures (shares, %) Current Expected change Notes Shareholders # of shares % # of shares % Shin Dong -bin 7,746,897 10.5 13,131,233 17.8 Shin Dong-joo 171,673 0.2 171,673 0.2 Shin Kyeok-ho 2,176,830 3.0 2,176,830 3.0 Controlling family’s combined stake to increase to 22.7% Shin Young-ja 1,195,007 1.6 1,195,007 1.6 Shin Yu-mi 42,254 0.1 42,254 0.1 Lotte Foundation 2,913,988 4.0 2,913,988 4.0 Lotte Samdong Welfare 54,807 0.1 54,807 0.1 Foundation 4,808,717 6.5 4,808,717 6.5 Hotel Lotte 4,726,242 6.4 4,726,242 6.4 Lotte Aluminum 2,613,965 3.5 2,613,965 3.5 LOTTE CO.,LTD 389,590 0.5 389,590 0.5 Lotte Hotel Busan 23,864 0.0 23,864 0.0 Lotte Chemical 106,151 0.1 106,151 0.1 L2 Investment Company Fujifilm Korea 2,832,097 3.8 0 0 Lotte Data Stakes needed to untie circular/cross shareholding 1,734,654 2.4 0 0 structures (7.3%): Assumes that these stakes are sold to Communication 817,585 1.1 0 0 Shin Dong-bin Daehong

Subtotal 32,354,321 43.9 32,354,321 43.9 Of these, 4.91mn shares (6.7%) will need to be disposed Treasury shares 13,854,113 18.8 13,854,113 18.8 of within five years Total outstanding shares 73,683,000 100 73,683,000 100 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 December 1, 2017 Holding Companies

2) Meeting subsidiary ownership requirement: Purchase of additional stakes for subsidiary inclusion and disposal of stakes in non-subsidiary affiliates (within two years)

By law, Lotte Holdings must own at least 20% of its listed subsidiaries and 40% of its unlisted subsidiaries. Currently, the company holds 25.9% in Lotte Shopping, 22.1% in Lotte Food, 8.2% in Lotte Confectionary, and 19.3% in Lotte Chilsung.

Hence, Lotte Holdings needs to acquire, at the very least, an additional 11.8% and 0.7%, respectively, in Lotte Confectionary and Lotte Chilsung. For this purpose, we believe the holding company will opt for tender offer/equity swap/rights offering (new share distribution), as such an approach would not require any additional capital, and would also be beneficial to the majority shareholder from a capital gains tax perspective.

In the case of Lotte Shopping, in which Chairman Shin currently owns 9.9%, Lotte Holdings already satisfies the 20% minimum ownership threshold, meaning there is little tax incentive for the majority shareholder (taxes on capital gains resulting from equity swaps for holding company conversions can be deferred, under the current tax code). Therefore, we think Chairman Shin could either directly exchange his Lotte Shopping shares with the treasury shares held by Lotte Holdings, or partially sell them.

In addition, Lotte Holdings and its subsidiaries must dispose of their stakes in subsidiaries that are outside of the holding company structure and subsidiary stakes held by second-tier subsidiaries within the grace period.

Table 5. Exercise of appraisal rights in case of merger after spin-off (shares, W, Wbn)

Lotte Confectionery Lotte Shopping Lotte Chilsung Beverage Lotte Foods Exercise of Exercise of Exercise of Exercise of Expected Expected Expected Expected Total appraisal rights appraisal rights Value appraisal rights Value appraisal rights Value exercise Value (1) exercise exercise exercise (1+2+3+4) # of Stake # of Stake (2) # of Stake (3) # of Stake (4) price price price price shares (%) shares (%) shares (%) shares (%) 1,170,027 8.2% 204,062 238.8 2,496,755 7.9% 231,404 577.8 58,943 4.8% 1,511,869 89.1 265,327 19.4% 633,128 168.0 1,073.6 Note: Based on common shares Source: DART, Mirae Asset Daewoo Research

Table 6. Expected changes in holding company’s stake in subsidiaries before and after appraisal rights exercise (shares) Before exercise Before exercise Listed subsidiary Remarks # of total issued shares # of shares held Stake (%) # of shares held Stake (%) Lotte Shopping 28,122,047 5,046,021 17.9% 7,275,677 25.90% Meeting subsidiary ownership Lotte Foods 1,131,870 250,164 22.1% 250,162 22.10% requirements of 20% 4,209,102 0 0.0% 346,473 8.20% Not meeting subsidiary ownership Lotte Chilsung Beverage 799,346 154,210 19.3% 154,210 19.30% requirements of 20% Source: Mirae Asset Daewoo Research

Table 7. Tax benefits for holding company conversion under Special Tax Treatment Control Act

Article 38-2 of the Special Tax Treatment Control Act

In case of investment in kind in or equity swaps with a domestic company which converted to a holding company via equity swaps or spin-offs until December 31st, 2018, taxes on gains from investment in kind or equity swaps will be deferred until the shareholding company disposes of its holding Content company shares. The benefit shall apply only to the companies in which a holding company’s stake does not meet the minimum subsidiary shareholding requirement.

Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 December 1, 2017 Holding Companies

3) Disposal of stakes in financial firms (within two years)

Under the MRFTA (Article 8-2), Lotte Holdings must sell its stakes in financial affiliates (total of 10, including Lotte Card and Lotte Capital) and non-affiliate financial companies (including BNK Financial Group) within two years. We think Lotte Holdings could decide to keep some financial affiliates, such as Lotte Card, within the group structure through various means (rather than selling its stakes to outsiders), given their potential for synergy effects.

More specifically, Lotte Holdings could either: 1) unload its shares in financial affiliates to Hotel Lotte, Lotte Property & Development, or other affiliates sitting outside of the holding company structure; or 2) split itself into a financial unit and a non-financial unit, to comply with the ban on the ownership of financial companies by non-financial holding companies under the MRFTA.

Table 8. Requirements for Lotte Holdings to legally qualify as holding company Requirements Details Review Met or not Remarks Assets worth more than W500bn Total asset: W5.3tr Met - For holding The sum of stakes in subsidiaries company owned by a holding company must Sum of stakes in subsidiaries: W3.62tr establishment/c Met - exceed 50% of the holding % of the holding company’s asset value: 68.24% onversion company’s asset value The requirement is expected to Lotte E&C: 3.3%, Lotte International: 27.7% be met through additional stake No shareholding of affiliates, Fujifilm Korea: 5.0%, and Lotte Logistics: 18.9% acquisition/sale, spin-off, merger, Unmet excluding subsidiaries Lotte Data Communication: 7.7%, Igis I: 1.8% or merger following spin-offs, Lotte Logistics: 7.2%, Lotte Accelerator: 16.7% within the grace period (two years) [Listed] Lotte Shopping 25.9%, Lotte Foods: 22.1% [Unlisted] Lotte Station Building: 41.4%, Daehong Communications: 44.0% Lotte Nestle: 50.0%, Lotteria: 54.4% Met - Lotte Asset Development: 60.5%, Lotte.com 63.8% Stakes in subsidiaries: At least 20% Korea Seven: 67.6%, : 85.0% for listed firms and 40% for unlisted BaekHak Beverage: 86.1%, Lotte Members 93.9% firms CH Beverage 100%, MJA Wine: 100% Chung -Buk Soju 100%, The requirement is expected to [Listed] be met through additional stake Lotte Confectionery: 8.2%, Lotte Chilsung Beverage: 19.3% acquisition/sale, spin-off, merger, To legally [Unlisted] Unmet or merger following spin-offs, qualify as Lotte Incheon Development: 37.5%, Lotte Incheon Town: within the grace period (two holding 35.0% years) company 1) Woori Home Shopping: Lotte Rental 8.6% The requirement is expected to (2) Lotte Himart: Lotte Rental 4.9% be met through additional stake Second-tier subsidiaries are not (3) Lotte Data Communication acquisition/sale, spin-off, merger, allowed to own stakes in domestic Lotte Holding Company 2.4%, Lotte Shopping 4.8% Unmet or merger following spin-offs, affiliates Lotte E&C 5.3%, Canon Korea Business Solutions 5.6% within the grace period (two Lotte Station Building 0.2%, Lotte PS Net 31.3% years) Hyundai Info Tech 59.7% Total liabilities: W 1.5tr , total capital: W4. 9tr Debt-to-equity ratio of 200% or less Met - Liability to equity ratio: 30.1 % 1) Financial affiliates Lotte Card, Lotte Capital, Lotte Insurance, EB Card, Card, Hanpaysys, Busan Hanaro, Gyeonggi The requirement is expected to Smartcard, be met through additional stake Incheon Smart Card, Lotte Members No shareholding of financial acquisition/sale, spin-off, (2) Non-affiliated financial companies owned by Unmet subsidiaries merger, or merger following holding companies spin-offs, within the grace BNK Financial Group, Shinhan Financial Group, KB period (two years) Securities, Mirae Asset Daewoo, KTB Investment & Securities, SPARX Asset Management Korea Source: DART, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 6 December 1, 2017 Holding Companies

Fair valuation of Lotte Holdings

For Lotte Holdings, we believe that the following deserve attention: 1) the value of unlisted subsidiaries, Korea Seven, Daehong, and Lotteria (which will likely rise in the event of IPOs); and 2) investments in growth drivers using the proceeds from the sale of financial subsidiary stakes.

Table 9. Lotte Group’s holding company’s fair valuation (Wbn, W, %) Items Value Notes Operating value (1) 1,111

Brand royalties 1,082 Royalty rate of 15bps; applied 15x after cost reduction Real estate investment 29

Investment value (2) 6,543 Listed subsidiaries 2,325 Based on base price and market value Unlisted subsidiaries 4,218 Based on fair value and book value Total asset value (3)=(1)+(2) 7,654

Treasury shares 852 Based on Nov 30 th closing price Net debt (4) 726 Based on expected non-consolidated financial statements Net asset value (5)=(3)-(4) 7,780 Market cap 4,532 Based on Nov 30 th closing price Discount rate to NAV 41.8

No. of shares outstanding (‘000 73,683 Based on common stocks shares) NAV per share 105,593 Theoretical target price 68,636 35% discount to the NAV per share Fair price 69,000

Base price 61,500 Based on Nov 30 th closing price Upside 12.2 Source : DART, Mirae Asset Daewoo Research

Table 10. Lotte Group’s holding company’s value of investment securities (no. of shares, Wbn) No. of total shares No. of holding Appraised Stake Book value 100% value Remarks outstanding company shares value Listed subsidiary 1,910

Lotte Confectionery 4,209,102 346,469 8.2% 629 52 Lotte Shopping 28,122,047 7,275,675 25.9% 5,906 1,528 Market value Lotte Chilsung 799,346 154,209 19.3% 975 188 Lotte Chilsung 1,131,870 250,162 22.1% 642 142 Unlisted subsidiary 2,989 4,110 Korea Seven 36,227,634 24,503,848 67.6% 187 664 449 Daehong Communications 40,000 17,600 44.0% 75 256 113 Fair value Lotteria 481,024 261,861 54.4% 204 450 245 Lotte Station Building 3,600,000 1,490,400 41.4% 280 676 280 Lotte Asset Development 40,302,235 24,372,719 60.5% 112 186 112 Lotte.com 6,127,081 3,911,096 63.8% 31 48 31 Book value Lotte Giants 6,020,000 5,117,000 85.0% 26 31 26 Lotte Incheon Development 8,000,000 3,000,000 37.5% 15 40 15 Lotte International 895,489 247,915 27.7% 93 335 93 Lotte Card 74,740,061 70,088,853 93.8% 1,000 1,703 1,597 Based on the appraised value in Lotte Capital 33,297,512 8,536,058 25.6% 106 1,076 276 the registration statement; Lotte Members 2,462,242 2,311,510 93.9% 36 53 50 required to sell within two years Other 824 824

No. of share Appraised Marketable securities Ownership Book value 100% stake Remarks holdings value Listed firms 415 416 Market value Cheil Worldwide 64,250 0.06% 1 2,312 1 Book value Other - - 414 414 Unlisted firms 104 108 Fair value BaekHak Beverage 7,382,400 86.06% 46 58 50 Book value Other 58 58 Source: DART, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 7 December 1, 2017 Holding Companies

Table 11. Valuation of Lotte Holdings’ subsidiary companies (Wbn) Target Company 2014 2015 2016 2017F Valuation value Korea Seven Revenue 2,616 3,313 3,703 4,073 2017F net profit Operating profit 35 43 47 51 663.5 Target P/E 15.0x Net profit 25 10 41 44

Daehong Revenue 337 382 405 428 2017F net profit Operating profit 17 20 21 22 256.5 Target P/E 15.0x Net profit 16 15 16 17 Lotteria Revenue 1,133 1,123 1,125 1,127 2017F EBITDA Operating profit 25 -2 6 7 449.7 Target EV/EBITDA 12.0x Net profit 20 -13 -9 -8 Source: Mirae Asset Daewoo estimates

Table 12. Lotte Holdings’ brand royalty contracts (Wbn) No. Company Transaction value Total value 1 Lotte Shopping 78.0 78.0 2 Lotte Chemical 45.6 45.6 3 Hotel Lotte 25.7 25.7 4 Lotte E&C 23.0 23.0 5 Lotte Himart 19.5 19.5 6 Lotte Logistics 19.8 19.8 7 Lotte Insurance 14.7 14.7 8 Lotte Chilsung Beverage 12.0 12.0 9 Lotte Advanced Materials 15.6 15.6 10 Lotte Confectionery 8.4 8.4 11 Lotte Foods 9.0 9.0 12 Lotte Card 9.2 9.2 13 Lotte Rental 10.3 10.3 14 Lotte Fine Chemical 6.0 6.0 15 Lotte GRS 5.3 5.3 16 Lotte Home Shopping 5.0 5.0 Total 307.1 307.1 ㆍ Disclosure: Companies with a brand royalty contract value of W5bn or higher for the transaction period ㆍ Transaction period: 10/12/17-12/31/20 Notes ㆍ Payment: Monthly starting in October 2017 ㆍ Value: 0.15% of revenue (excluding advertising expenses) for a given fiscal year ㆍ The above values are our estimates Source: DART, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 8 December 1, 2017 Holding Companies

Figure 1. Korea Lotte Group corporate governance

Source: Dart, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 9 December 1, 2017 Holding Companies

APPENDIX 1

Important Disclosures & Disclaimers

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subj ect company and do not own 1% or more of the subject company's shares outstanding.

Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the . Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo.

Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Daewoo is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Daewoo. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Mirae Asset Securities (HK) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

Mirae Asset Daewoo Research 10 December 1, 2017 Holding Companies

Mirae Asset Daewoo International Network

Mirae Asset Daewoo Co., Ltd. () Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. Global Equity Sales Team Suites 1109-1114, 11th Floor 41st Floor, Tower 42 Mirae Asset Center 1 Building Two International Finance Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 8 Finance Street, Central London EC2N 1HQ Korea Hong Kong United Kingdom China Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000

Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building Vila New York, NY 10019 Los Angeles, California 90071 Olimpia USA USA Sao Paulo - SP 04551-060 Brasil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52 -53 Jakarta Selatan Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City 12190 Vietnam Indonesia Tel: 62-21-515-3281 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building 100 Century Avenue, Pudong New Area Shanghai 91 Pasteur St. 200120 District 1, Ben Nghe Ward, Ho Chi Minh City China Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

Mirae Asset Daewoo Research 11