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’.

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

2 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 Other financial assets 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 Other non-financial assets 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.

3 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Statements of Financial Position, Continued

As of September 30, 2013 and December 31, 2012

(Unaudited) Korean won (millions) Notes September 30, 2013 December 31, 2012

Liabilit ies 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 Other financial liabilities 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 Other non-financial liabilities 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

See accompanying notes to the condensed consolidated interim financial statements.

4 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES 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) Three-month Nine-month Three-month Nine-month Notes period period period 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

See accompanying notes to the condensed consolidated interim financial statements.

5 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES 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) Three-month Nine-month Three-month Nine-month Notes period period period 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

See accompanying notes to the condensed consolidated interim financial statements.

6 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Statements of Changes in Equity

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

(Unaudited) Korean won (millions) Accumulated other Stockholders’ equity Non- Capital Capital Capital Retained comprehensive attributable to owners of controlling stock surplus adjustments earnings income the Company 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: Profit 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) Total comprehensive income for the period - - - 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

See accompanying notes to the condensed consolidated interim financial statements.

LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Statements of Changes in Equity, Continued 7

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

(Unaudited) Korean won (millions) Accumulated other Stockholders’ equity Non- Capital Capital Capital Retained comprehensive attributable to owners of controlling stock surplus adjustments earnings income the Company 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: Profit 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) Total comprehensive income for the period - - - 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

See accompanying notes to the condensed consolidated interim financial statements.

8 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Statements of Cash Flows

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

(Unaudited) Korean won (millions) 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) Other financial assets 22,071 (226,336) Inventories (261,087) (178,858) Other non-financial assets (88,656) (102,930) Trade payables (45,363) 226,641 Other payables (88,051) 26,768 Other financial liabilities (5,620) 55,921 Unearned revenues 21,527 14,213 Provisions 4,368 9,096 Other non-financial liabilities 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

See accompanying notes to the condensed consolidated interim financial statements.

9 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Statements of Cash Flows, Continued

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

(Unaudited) Korean won (millions) 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)

See accompanying notes to the condensed consolidated interim financial statements.

10 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Condensed Consolidated Interim Statements of Cash Flows, Continued

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

(Unaudited) Korean won (millions) 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

See accompanying notes to the condensed consolidated interim financial statements.

11 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Number Stockholder 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

(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 Fiscal Percentage of Subsidiaries Location Products or services year 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 Electronic banking business Dec. 31 100.00 Inchon Smartcard Co., Ltd. Korea Electronic banking business Dec. 31 100.00 Chungnam Smartcard Co., Ltd. Korea Electronic banking business Dec. 31 100.00 Woori Home Shopping & Television Co., Ltd. Korea Distribution Dec. 31 53.03

12 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of Reporting Entity, Continued

(b) Description of Subsidiaries, Continued

September 30, 2013 Fiscal Percentage of Subsidiaries Location Products or services year 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 Real estate development 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 Hong Kotobuki Holding (HK) Ltd. Kong Holding company Dec. 31 100.00 Hai Thanh - Kotobuki Joint Venture Company Vietnam Hotel Dec. 31 70.00 Lotte Shopping Holdings Hong (Hong Kong) Co., Ltd. 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

13 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(b) Description of Subsidiaries, Continued

September 30, 2013 Fiscal Percentage of Subsidiaries Location Products or services year 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 China Distribution Dec. 31 100.00 Lotte (China) Company Management Co., Ltd. China Business management Dec. 31 70.00 LOTTE DEPARTMENT STORE (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.

1. General Description of the Parent Group, Continued

(b) Description of Subsidiaries, Continued 14 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

December 31, 2012 Fiscal Percentage of Subsidiaries Location Products or services year ownership (%)

Lotte Midopa Co., Ltd. Korea Distribution Dec. 31 79.01

Lotte Card Co., Ltd. Korea Credit card, capital Dec. 31 92.54 eB Card Co., Ltd. Korea Electronic banking business Dec. 31 95.00 Gyeonggi Smartcard Co., Ltd. Korea Electronic banking business Dec. 31 100.00 Inchon Smartcard Co., Ltd. Korea Electronic banking business Dec. 31 100.00 Chungnam Smartcard Co., Ltd. Korea Electronic banking business Dec. 31 100.00 Woori Home Shopping & Television Co., Ltd. Korea Distribution Dec. 31 53.03 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 94.50 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 Real estate development 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 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 Hong Kotobuki Holding (HK) Ltd. Kong Holding company Dec. 31 100.00 Hai Thanh - Kotobuki Joint Venture Company Vietnam Hotel Dec. 31 70.00 Lotte Shopping Holdings Hong (Hong Kong) Co., Ltd. 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

15 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(b) Description of Subsidiaries, Continued

December 31, 2012 Fiscal Percentage of Subsidiaries Location Products or services year 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 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 China Distribution Dec. 31 100.00 Lotte (China) Company Management Co., Ltd. China Business management Dec. 31 70.00 LOTTE DEPARTMENT STORE (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.

16 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(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:

September 30, 2013 Korean won (millions) Total Total Net income Company assets liabilities Sales (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

17 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(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:

September 30, 2013 Korean won (millions) Total Total Net income Company assets liabilities Sales (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 -

18 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(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:

December 31, 2012 Korean won (millions) Total Total Net income Company assets liabilities Sales (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)

19 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(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:

December 31, 2012 Korean won (millions) Total Total Net income Company assets liabilities Sales (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

20 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

1. General Description of the Parent Group, Continued

(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.

21 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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’ 22 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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’ 23 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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.

Korean won (millions) 2012 Three-month Nine-month

period 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

24 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

Percentage of ownership (%) Parent's portion in net assets

Korean won Before additional After additional Before additional After additional Subsidiaries (millions) acquisition acquisition acquisition acquisition

Lotte Suwon Station ￦ 28,500 95.00% 95.00% ￦ 47,215 75,715 Shopping Town Co., Ltd. 18,763 95.00% 95.00% 75,699 94,461 Lotte Songdo Shopping Town Co., Ltd. - 58.82% 53.57% 53,486 54,067 LOTTE SHOPPING Avenue 15,936 100.00% 100.00% 17,602 33,537 INDONESIA 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) 104,678 100.00% 100.00% 98,933 203,611 Limited 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:

Korean won (millions)

Percentage of ownership (%) Parent's portion in net assets

Korean won Before capital After capital Before capital After capital Subsidiaries (millions) reductions reductions reductions reductions

Lotte Card Co., Ltd. 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

25 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

5. Trade and Other Receivables

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

Korean won (millions) 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:

Korean won (millions) 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 Gyeongsangnam-do financial assets Metropolitan Government and others 52,637 38,479

Total ￦ 199,621 236,875

26 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions) September 30, 2013 December 31, 2012 Carrying Carrying amount Fair value amount Fair value Cash and cash equivalents Cash and cash equivalents ￦ 1,178,244 1,178,244 933,997 933,997

Loans and Current : receivables (*1) 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 Marketable available-for-sale financial assets 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 Current 6 6 - - for the purpose of Non-current 608 608 48 48 hedging

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.

27 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

7. Fair Value of Financial Instruments, Continued

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

Korean won (millions) 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

28 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

7. Fair Value of Financial Instruments, Continued

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

Korean won (millions) September 30, 2013 December 31, 2012 Number of Percentage of Acquisition Carrying Carrying shares ownership cost amount 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

29 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

7. Fair Value of Financial Instruments, Continued

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

Korean won (millions) September 30, 2013 December 31, 2012 Carrying Carrying amount Fair value 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 Current : amortized cost (*) 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 Current 11,353 11,353 5,595 5,595 purpose of hedging 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.

30 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

7. Fair Value of Financial Instruments, Continued

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

Korean won (millions) 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

Other financial liabilities 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

31 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(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:

Korean won (millions) 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

Financial liabilities at fair value through profit or loss - 882,386 - 882,386 Derivative liabilities - 173,225 - 173,225

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

32 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

7. Fair Value of Financial Instruments, Continued

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

Korean won (millions) 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

Financial liabilities at fair value 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:

Korean won (millions) September 30, 2013 December 31, 2012

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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period period Cost of sales:

- Increase (decrease) of allowance for valuation losses of inventories ￦ (46) 660 (3,071) (212)

33 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

9. Other Non-financial Assets

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

Korean won (millions) 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.

34 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

10. Investments in Associates

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

September 30, 2013 Korean won (millions)

Percentage of Balance at Principal September Company Location business Ownership (%) 30, 2013

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 Real estate development 22.22 9,940 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 Holding company 45.00 44,719 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 Film producing company 26.67 4,657 Hubei XL Cinema Co., Ltd. China Cinema 49.00 5,271

CJ Venture Investment No.14 Culture

Contents Fund Korea Film producing company 30.00 6,697 PT. LOTTE CAPITAL INDONESIA Indonesia Capital 25.00 2,392 Hemisphere Film Investors II LLC(*1) America Film producing company 100.00 24,281 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

Electronic financial service networks Inc. Korea 30.58 10,444

Lotte Incheon Development Co., Ltd Korea Leasing service 37.50 12,550

Electronic banking

Mybi.Co.Ltd(*2) Korea 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.

35 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

10. Investments in Associates, Continued

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

December 31, 2012 Korean won (millions)

Percentage of Balance at Principal December Company Location business Ownership (%) 31, 2012

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 Real estate development 39.14 46,435 Zara Retail Korea Co., Ltd. Korea Retail 20.00 20,397 Lotte Buyeo Resort Co., Ltd. Korea Real estate development 22.22 11,677 LOTTE Giants Co., Ltd. Korea Baseball club 30.00 5,018 Lotte Europe Holdings B.V. Netherlands Holding company 34.26 97,080 Coralis S.A. Luxembourg Holding company 45.00 46,741 M-Venture Culture Investment L.P. Korea Film producing company 25.00 2,608 Capital One Diversity Cinema Fund Korea Film producing company 20.00 849 Capital One Middle-Low Budget Cinema Fund Korea Film producing company 25.00 3,454 Sovik Visual Contents Investment Fund Korea Film producing company 26.67 4,526 Hubei XL Cinema Co., Ltd. China Cinema 49.00 6,189 CJ Venture Investment No.14 Culture

Contents Fund Korea Film producing company 30.00 5,643 PT. LOTTE CAPITAL INDONESIA Indonesia Capital 25.00 2,817 Hemisphere Film Investors II LLC(*) America Film producing company 100.00 25,095 Shandong Longzhile Cinema Co., Ltd. China Cinema 49.02 1,614 Leading Asia Contents Fund Korea Film producing company 21.01 3,994

LOTTE Payment & settlement networks

Electronic financial service Inc. Korea 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.

36 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

10. Investments in Associates, Continued

(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:

2013 Korean won (millions) Changes Balance at Beginning Net income Capital September Company balance Acquisition Dividends (loss) adjustment Other 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 Capital One Middle-Low Budget 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

37 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

10. Investments in Associates, Continued

(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:

2012 Korean won (millions) Changes Balance at Beginning Net income Capital December Company balance Acquisition Dividends (loss) adjustment Disposals Other 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 Capital One Diversity Cinema Fund 905 - - (56) - - - 849 Capital One Middle-Low Budget 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 Hemisphere Film Investors II LLC 21,633 3,479 - 1,818 (1,835) - - 25,095 CJ Venture Investment No.14 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

38 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

10. Investments in Associates, Continued

(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:

September 30, 2013 Korean won (millions) Operating Other Total Current Non-current Current Non-current income comprehensive Comprehensive Company assets assets liabilities liabilities Sales (loss) income (loss) Income (loss) Lotte Station Building Co., Ltd. ￦ 262,132 509,183 196,140 19,186 473,405 52,517 513 40,877 Daehong Communications Co., 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 Capital One Diversity Cinema 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

39 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

10. Investments in Associates, Continued

(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:

December 31, 2012 Korean won (millions) Operating Other Total Current Non-current Current Non-current income comprehensive Comprehensive Company assets assets liabilities liabilities Sales (loss) income (loss) Income (loss) Lotte Station Building Co., Ltd. ￦ 269,016 519,303 209,292 19,756 682,352 80,448 (16,848) (5,010) Daehong Communications Co., 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 Capital One Diversity Cinema 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) CJ Venture Investment No.14 Culture Contents Fund 18,914 - 105 - 1,666 (1,223) - (1,223) PT. LOTTE CAPITAL INDONESIA 11,190 107 28 - 301 172 (13) 159 Hemisphere Film Investors II 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)

40 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

September 30, 2013 Korean won (millions)

Percentage of Balance at Principal September Company Location business Ownership (%) 30, 2013

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.

December 31, 2012 Korean won (millions)

Percentage of Balance at Principal December Company Location business Ownership (%) 31, 2012

Intime Lotte Department Store Co., Ltd. ￦ China Distribution 50.00 - D-Cinema of Korea Co., Ltd. Korea Film equipment 50.00 - Shenyang SL Cinema Investment 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

41 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

2013 Korean won (millions) Changes Balance at Beginning Net income Capital September Company balance Acquisition Dividends (loss) adjustment Other 30, 2013

Intime Lotte Department Store Co., Ltd. ￦ - 41,767 - (41,767) - - - D-Cinema of Korea Co., Ltd. ------Shenyang SL Cinema Investment 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

2012 Korean won (millions) Changes Balance at Beginning Net income Capital December Company balance Acquisition (loss) adjustment Other 31, 2012

Intime Lotte Department Store Co., Ltd. ￦ ------D-Cinema of Korea Co., Ltd. ------Shenyang SL Cinema Investment 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

42 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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 Korean won (millions) Operating Other Total Current Non-current Current Non-current income comprehensive Comprehensive assets assets liabilities liabilities Sales (loss) income (loss) 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 Korean won (millions) Operating Other Total Current Non-current Current Non-current income comprehensive Comprehensive assets assets liabilities liabilities Sales (loss) income (loss) 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

Korean won (millions)

Unrecognized losses for the Unrecognized accumulated Company period losses

Intime Lotte Department Store Co., Ltd. ￦ (13,927) (26,941) D-Cinema of Korea Co., Ltd. - (2,562)

Total ￦ (13,927) (29,503)

43 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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 Korean won (millions) Acquisition cost Acquisition cost as of January as of September 1, 2013 Acquisition Disposals Others (*) 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 Korean won (millions) Acquisition Acquisition cost as of Increase from cost as of January business December 1, 2012 Acquisition combination Disposals Others (*) 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.

44 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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 Korean won (millions) Accumulated Accumulated depreciation depreciation as of January as of September 1, 2013 Disposals Depreciation Others 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 Korean won (millions) Accumulated Accumulated depreciation Increase depreciation as of from as of January business December 1, 2012 Disposals combination Depreciation Others 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

45 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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 Korean won (millions) Acquisition cost Acquisition cost as of January 1, as of September 2013 Acquisitions Disposals Others (*) 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 Korean won (millions) Acquisition cost Increase from Acquisition cost as of January 1, business as of December 31, 2012 combination Others (*) 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.

46 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

13. Investment Property, Continued

(b) Changes in accumulated depreciation of investment property for the nine-month period ended September 30, 2013 and for the year ended December 31, 2012 are as follows:

2013 Korean won (millions) Accumulated Accumulated depreciation as of depreciation as of January 1, 2013 Disposals Depreciation Others September 30, 2013

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

2012 Korean won (millions) Accumulated Increase from Accumulated depreciation as of business depreciation as of January 1, 2012 Depreciation combination Others 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 the year ended December 31, 2012 are as follows:

2013 Korean won (millions) Accumulated impairment 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 Korean won (millions) Accumulated impairment Accumulated impairment 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

47 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

14. Intangible Assets

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

Korean won (millions) 2013 2012 Accumulated Acquisition Accumulated impairment Acquisition Accumulated Accumulated cost depreciation losses Book value cost depreciation 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:

2013 Korean won (millions) Book value Book value as of as of January September 30, 1, 2013 Acquisition Amortization Impairment Disposals Others (*) 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

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

48 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

14. Intangible Assets, Continued

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

2012 Korean won (millions) Book value Increase from Book value as of January 1, business as of December 2012 Acquisition combination Amortization Impairment Disposals Others 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:

Korean won (millions) 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

49 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

16. Borrowings and Debentures

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

Korean won (millions) 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

50 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

16. Borrowings and Debentures, Continued

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

Korean won (millions) Annual December 31, Lender Details Interest rate (%) September 30, 2013 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:

Korean won (millions) Annual December 31, Lender Details Interest rate (%) September 30, 2013 2012

Korea Development Bank Local and others currency 2.38~5.77 ￦ 964,025 656,300 Lotte Co., Ltd. (Japan) and Foreign others 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

51 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

16. Borrowings and Debentures, Continued

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

Korean won (millions) Interest December 31, Description Maturity rate (%) September 30, 2013 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 3M USD 55th placed (foreign currency) May. 20, 2013 Libor+0.80 - 107,110 3M USD 57th placed (foreign currency) Mar. 17, 2014 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 3M JPY currency) Dec. 05, 2014 Libor+0.60 164,801 187,125 58-2nd placed (foreign 3M USD currency) Nov. 28, 2014 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 3M USD 60th placed (foreign currency) Dec. 13, 2015 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 - Korea Seven Co., Ltd. Mar. 19, 2013 5.35 - 100,000 Korea Seven Co., Ltd. Jan. 30, 2015 4.02 40,000 40,000 Korea Seven Co., Ltd. (foreign 3M Euro Yen currency) Jan. 27, 2015 Libor+0.70 24,171 27,445 Korea Seven Co., Ltd. (foreign 3M USD currency) Apr. 14. 2016 Libor+0.50 32,268 - Korea Seven Co., Ltd. - (convertible bonds) May. 08. 2018 7,920 - Lotte Card Co., Ltd. Multiple 2.31~5.20 4,062,831 4,247,795

CS Mart Co., Ltd. Oct. 29, 2015 3.09 16,480 18,713

LOTTE Himart Co., Ltd. 2.90~3.22 (Local currency) Multiple 600,000 300,000 LOTTE Himart Co., Ltd. 3M USD (Foreign currency) Mar. 29, 2016 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

52 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

16. Borrowings and Debentures, Continued

(*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.

53 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

16. Borrowings and Debentures, Continued

(*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.

54 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

16. Borrowings and Debentures, Continued

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

Korean won (millions)

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:

Korean won (millions) 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

55 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

18. Provisions

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

Korean won (millions) 2013 Balance as of September 30, Beginning balance Increase Utilization 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.

56 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

18. Provisions, Continued

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

Korean won (millions) 2012 Balance as of December 31, Beginning balance Increase Utilization 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.

57 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

19. Other Non-financial Liabilities

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

Korean won (millions) 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:

Korean won (millions) 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 summarized as follows:

Korean won (millions) September 30, 2013 December 31, 2012

Present value of other long-term employee benefits ￦ 50,167 46,251

58 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions) 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:

Korean won (millions) 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:

Korean won (millions) September 30, 2013 December 31, 2012

Principal-guaranteed insurance policies ￦ 305,716 319,096 Others 218 224

Total ￦ 305,934 319,320

59 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

20. Employee Benefits, Continued

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

Korean won (millions) 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

(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:

Korean won (millions)

September 30, 2013 December 31, 2012 Type Description 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

60 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Type of Korean won Description derivatives Related accounts (millions)

Cash flow Currency swap Gain on valuation of derivative hedge 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:

Korean won (millions)

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

61 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

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

62 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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 Korean won (millions) Balance as of Beginning Changes for Tax effects for September balance the period the period 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) Change in equity of equity method investments 49,297 5,354 - 54,651

Total ￦ 67,577 (6,228) (2,150) 59,199

2012 Korean won (millions) Balance as of Beginning Changes for Tax effects for December balance the period the period 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) Change in equity of equity method investments 37,500 11,704 93 49,297

Total ￦ 137,806 (68,632) (1,597) 67,577

63 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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: Korean won (millions, except per share amount) 2013 2012 Three-month Nine-month Three-month Nine- period period period 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

(ii) Weighted average number of ordinary shares Number of shares 2013 2012 Three-month Nine-month Three-month Nine-month period period period 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

64 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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: Korean won (millions, except per share amount) 2013 2012 Three-month Nine-month Three-month Nine-month period period period period

Profit for the period attributable to the owners of the 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) - - Profit for the period attributable to the owners of the 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

(*) 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 Number of shares 2013 2012 Three-month Nine-month Three-month Nine-month period period period 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

65 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period 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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period 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

66 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period 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

67 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period period

Other income: Gain on foreign currency transactions ￦ 832 1,339 146 304 Gain on foreign currency translation 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 Loss on foreign currency translation 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.

68 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period 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

69 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

2013 2012

Three-month Nine-month Three-month Nine-month period period period 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 Gain on foreign currency translation 128,193 75,412 41,373 58,256 Gain on valuation of financial liability at fair value through profit or loss 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 Loss on foreign currency translation - 6,247 - 6,574 Loss on valuation of financial liabilities at fair value through profit or loss - 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

70 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions) 2013 2012 Three- Nine- Three- Nine- month month month month Category Details period period period period

Cash and cash Cash and cash equivalents: equivalents: Interest income ￦ 6,559 21,044 8,253 31,099

Loans and Short-term financial instruments: receivables: 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 Available-for-sale financial assets: 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 Investments in associates and joint associates and joint venture: venture Gain (loss) on disposal 9,820 9,820 70 (1,149)

Financial liabilities Borrowings: based on amortized Interest expense 23,191 59,579 14,759 47,463 cost: 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 Derivatives: liabilities at fair Loss on valuation - - 4,410 4,410 value through profit Overseas convertible bonds: or loss: Gain (loss) on valuation 52,461 26,246 10,439 20,621

Derivative assets and Derivatives: liabilities held for Gain (loss) on valuation (61,611) (27,363) (16,188) (20,791) the purpose of Gain (loss) on transaction - 4,191 - (2,738) hedging: Gain (loss) on valuation (other comprehensive income) (*) 32,831 9,929 (1,565) 6,626

(*) 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.

71 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Consumer electronics Department stores Discount Stores Card business retail Others

Main Retail stores for Retail and whole-sale Credit Retail store Others business middle and higher- stores for middle and financial for home end merchandise discounted price services appliance merchandise Major Sales of merchandise Sales of merchandise Credit card Sales of home Sales of products and leasing and leasing and loan appliance merchandise, or services services leasing and others

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

Korean won (millions)

2013

Department Discount Card Consumer stores stores business 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

Korean won (millions) 2012 Discount Card Department stores stores 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

72 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

2013

Operating Depreciation profit for and Profit for

Sales period amortization 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

Korean won (millions)

2012

Operating Depreciation profit for and Profit for

Sales period amortization period

Department stores ￦ 5,799,119 479,921 166,597 518,220 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)

After consolidated adjustments ￦ 17,920,959 1,013,694 527,674 767,126

73 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

33. Operating Segments and Geographic Information, Continued

(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:

Korean won (millions)

September 30, 2013

Assets Liabilities

Department stores ￦ 15,295,700 10,024,313 Discount stores 11,357,893 2,366,557 Card business 7,926,711 6,172,287 Consumer electronics retail 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)

After consolidated adjustments ￦ 37,882,494 21,374,543

Korean won (millions)

December 31, 2012

Assets Liabilities

Department stores ￦ 15,077,912 9,709,881 Discount stores 10,970,095 2,126,180 Card business 8,087,110 6,426,157 Consumer electronics retail 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)

After consolidated adjustments ￦ 36,857,045 21,138,720

74 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

33. Operating Segments and Geographic Information, Continued

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

Korean won (millions)

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.

75 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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 Amount used Korean won (millions), under credit facility Foreign currency Korean won (millions), (thousands) 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 Providing management Mart Co., Ltd. services Lotte Card Co., Ltd. American Express Company, MasterCard Commissions based on credit International, Visa International and JCB card transaction amount International Woori Home Shopping & BC card and Shinhan card Business tie-up and issuing Television Co., Ltd. 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 Himart Shopping Mall Co., Ltd. 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.

76 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

(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 Type of Guaranteed amount company Provided by Guarantee recipient borrowings (thousands)

Lotte Cinema Lotte Shopping The Export-Import Working capital USD 24,000 Vietnam Co., Ltd. Co., Ltd. Bank of Korea Lotte Shopping Lotte Shopping HSBC, Working capital RMB 750,000 Business Co., Ltd. Deutsche Bank Management (Hong Kong) Limited LOTTE Lotte Shopping Korea Exchange Working capital USD 63,800 PROPERTIES Co., Ltd. Bank (CHENGDU) HK Woori Bank USD 70,000 LIMITED

77 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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.

78 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions)

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 Hotel Lotte Pusan Co., Ltd. 6,856 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 LOTTE DATA COMMUNICATION 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:

Korean won (millions)

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 Hotel Lotte Pusan Co., Ltd. 10,649 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 LOTTE DATA COMMUNICATION 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

79 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

36. Transactions and Balances with Related Companies, Continued

(d) The Group has provided guarantees for related companies as of September 30, 2013 as follows:

Type of Guaranteed amount Related company Guarantee recipient borrowings (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..

80 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions) 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.

81 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

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:

Korean won (millions) September 30, 2013 Receivables that are Receivables that are past due as neither past due at the end of the reporting period Receivables Description nor impaired but not impaired impaired(*) Total

Trade and other receivables ￦ 878,340 26,557 15,919 920,816 Other financial assets (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.

Korean won (millions) December 31, 2012 Receivables that are Receivables that are past due as neither past due nor at the end of the reporting period Receivables Description impaired but not impaired impaired(*) Total

Trade and other receivables ￦ 896,610 18,306 15,747 930,663 Other financial assets (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.

82 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

37. Risk Management, Continued

(a) Management of financial risks, continued

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:

Korean won (millions)

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:

Korean won (millions)

2013 2012

Balance at beginning of period ￦ 254,652 222,097 Impairment loss 111,582 154,627 Reversal of impairment loss (9,047) (601) Write-offs (169,822) (142,469) Recoveries 38,157 20,998

Balance at end of period ￦ 225,522 254,652

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:

Korean won (millions)

2013 2012

Balance at beginning of period ￦ 2,376 - Impairment loss - 2,000 Write-offs (376) - Others - 376

Balance at end of period ￦ 2,000 2,376

83 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

37. Risk Management, Continued

(a) Management of financial risks, continued

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:

Korean won (millions) September 30, 2013 Carrying 3 months 3 ~ 6 6 ~ 12 More than

Description amount or less months months 1 year

Trade and other receivables ￦ 26,557 16,781 5,348 2,299 2,129 Other financial assets (current) 170,742 161,627 9,115 - - Other financial assets (non-current) 6,080 - - - 6,080

Total ￦ 203,379 178,408 14,463 2,299 8,209

Korean won (millions) December 31, 2012 Carrying 3 months 3 ~ 6 6 ~ 12 More than

Description amount or less months months 1 year

Trade and other receivables ￦ 18,306 13,964 1,963 1,511 868 Other financial assets (current) 107,172 107,046 126 - - Other financial assets (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.

84 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

37. Risk Management, Continued

(a) Management of financial risks, continued

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:

Korean won (millions) September 30, 2013 Carrying Contractual 3 months 3 ~ 6 6 ~ 12 More than

Description amount cash flows or less months months 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 - Other financial liabilities (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.

85 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

37. Risk Management, Continued

(a) Management of financial risks, continued

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:

Korean won (millions) September 30, 2013 December 31, 2012 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

86 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

37. Risk Management, Continued

(a) Management of financial risks, continued

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:

Korean won (millions) September 30, 2013 December 31, 2012 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:

Korean won (millions)

September 30, 2013 December 31, 2012

Variable rate instruments: Financial assets ￦ 330,373 416,869 Financial liabilities 2,524,416 2,473,551

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:

87 LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2013 and 2012

(Unaudited)

37. Risk Management, Continued

(a) Management of financial risks, continued

Korean won (millions) September 30, 2013 December 31, 2012 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:

Korean won (millions) 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:

Korean won (millions) 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.

88