LOTTE SHOPPING CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

March 31, 2015 and 2014

(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 6

Condensed Consolidated Interim Statements of Cash Flows 8

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 March 31, 2015, the condensed consolidated statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2015 and 2014 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 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 Korean Standards on Auditing 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, 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 condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

The statement of financial position of the Group as of December 31, 2014, 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 in accordance with Korean Standards on Auditing and our report thereon, dated March 10, 2015, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2014 presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

KPMG Samjong Accounting Corp. Seoul, Korea May 13, 2015

This report is effective as of May 13, 2015, 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 consolidated 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.

2

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

As of March 31, 2015 and December 31, 2014

(Unaudited) Korean won (millions) Notes March 31, 2015 December 31, 2014

Assets ￦ Cash and cash equivalents 4,7,34,39 1,217,053 1,928,136 Trade and other receivables 4,5,7,38,39 1,013,832 912,952 Other financial assets 6,7,21,39 8,525,434 8,598,854 Inventories 4,8 3,267,816 3,161,054 Income tax refund receivable 2,592 1,037 Other non-financial assets 9 425,670 373,610 Total current assets 14,452,397 14,975,643

Investments in associates and joint ventures 4,10,11 1,231,090 1,163,477 Other financial assets 6,7,21,39 1,914,448 1,919,623 Property, plant and equipment, net 4,12,38 16,033,841 15,900,974 Investment property, net 13 509,120 537,191 Goodwill 4,14 3,291,310 3,277,238 Other intangible assets, net 4,14 886,858 878,845

Other non-financial assets 9 1,379,292 1,365,900 Deferred tax assets 51,620 53,435 Total non-current assets 25,297,579 25,096,683

Total assets ￦ 39,749,976 40,072,326

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 March 31, 2015 and December 31, 2014

(Unaudited) Korean won (millions) Notes March 31, 2015 December 31, 2014

Liabilities Borrowings and debentures, net of debenture issuance costs 4,7,16,36,38,39 ￦ 4,325,359 4,569,650 Trade and other payables 4,7,15,38,39 5,549,230 5,623,106 Other financial liabilities 7,21,39 525,089 612,689 Income tax payables 160,963 228,573 Unearned revenues 17 236,581 235,713 Provisions 18 55,773 54,913 Other non-financial liabilities 19 1,307,810 1,209,270 Total current liabilities 12,160,805 12,533,914

Borrowings and debentures, net of debentures issuance costs 7,16,36,38,39 8,098,165 8,156,914 Other financial liabilities 7,21,39 288,079 257,516 Employee benefit liabilities 4,20 106,738 82,141 Deferred tax liabilities 1,401,728 1,371,924 Unearned revenues 17 10,544 11,150 Provisions 18 28,073 26,803 Other non-financial liabilities 19 94,795 88,087

Total non-current liabilities 10,028,122 9,994,535

Total liabilities 22,188,927 22,528,449

Equity

Common stock of ￦5,000 par value Authorized - 60,000,000 shares Issued and outstanding – 31,490,892 shares 1,22 157,454 157,454 Capital surplus 22 3,910,752 3,910,752 Hybrid securities 23 269,118 269,118 Capital adjustments 24 (78,601) (78,452) Retained earnings 25 12,403,551 12,360,095 Accumulated other comprehensive income 26 84,397 106,836 Stockholders' equity attributable to owners of the Company 16,746,671 16,725,803 Non-controlling interests 814,378 818,074

Total equity 17,561,049 17,543,877

Total liabilities and equity ￦ 39,749,976 40,072,326

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-month periods ended March 31, 2015 and 2014

(Unaudited) Korean won (millions, except for earnings per share) Notes 2015 2014

Sales 28,35,36,38 ￦ 6,935,373 6,785,880 Cost of sales 8,28,31,38 (4,765,029) (4,660,879) Gross profit 2,170,344 2,125,001

Selling, general and administrative expenses 29,31,38 (1,903,164) (1,785,561) Operating profit 267,180 339,440

Other income 30,38 16,700 13,457 Other expenses 30,38 (48,015) (24,323) Finance income 32 43,499 45,260 Finance costs 32 (87,654) (117,050) Equity method income (loss) of investments in associates 10,11 198 (4,792) Profit before income tax 191,908 251,992

Income tax expense 33 (76,471) (108,036) Profit for the period 115,437 143,956

Other comprehensive income (loss) : Items that will never be reclassified to profit or loss: Remeasurements of net defined benefit liabilities 20 (199) (2,250) Net change in equity of equity method investments (710) (91) Income tax on items that will never be reclassified to profit or loss 284 206 Total items that will never be reclassified to profit or loss (625) (2,135) Items that are or may be reclassified to profit or loss: Net change in unrealized fair value of available-for-sale financial assets (41,330) (1,791) Exchange rate differences on translating foreign operations (5,781) 13,324 Effective portion of unrealized changes in fair values of cash flow hedges 21 3,595 (614) Net change in equity of equity method investments (7,901) (10,902) Income tax on items that are or may be reclassified to profit or loss 15,916 2,405 Total items that are or may be reclassified to profit or loss (35,501) 2,422 Other comprehensive income (loss) for the period, net of tax (36,126) 287 Total comprehensive income for the period 79,311 144,243 Profit attributable to: - Owners of the Company 106,189 128,986 - Non-controlling interests 9,248 14,970 115,437 143,956

Total comprehensive income attributable to: - Owners of the Company 83,298 129,739 - Non-controlling interests (3,987) 14,504 79,311 144,243

Earnings per share 27 - Basic earnings per share (in won) 3,512 4,283 - Diluted earnings per share (in won) ￦ 3,458 4,282

See accompanying notes to the condensed consolidated interim financial statements.

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

For the three-month periods ended March 31, 2015 and 2014

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

Balance at January 1, 2014 ￦ 157,454 3,910,752 269,118 (72,155) 11,895,378 63,130 16,223,677 701,565 16,925,242

Total comprehensive income (loss) for the period Profit for the period - - - - 128,986 - 128,986 14,970 143,956 Other comprehensive income (loss): Net change in unrealized fair value of available-for-sale financial assets - - - - - (1,571) (1,571) 245 (1,326) Exchange differences on translating foreign operations - - - - - 14,181 14,181 (1,006) 13,175 Effective portion of unrealized changes in fair values of cash flow hedges - - - - - (418) (418) 25 (393) Remeasurements of net defined benefit liability - - - - (2,340) - (2,340) 270 (2,070) Change in equity of equity method investments - - - - (65) (9,034) (9,099) - (9,099) Sub total - - - - (2,405) 3,158 753 (466) 287 - - - - Total comprehensive income for the period - - - - 126,581 3,158 129,739 14,504 144,243 Transactions with owners of the Company, recognized directly in equity: Dividends to owners of the Company - - - - (44,328) - (44,328) (12,275) (56,603) Interests of hybrid securities - - - - (3,199) - (3,199) - (3,199) Changes in ownership interests in subsidiaries - - - (1,378) - (85) (1,463) 83 (1,380) Other - - - (180) (1) - (181) 1 (180) Sub total - - - (1,558) (47,528) (85) (49,171) (12,191) (61,362)

Balance at March 31, 2014 ￦ 157,454 3,910,752 269,118 (73,713) 11,974,431 66,203 16,304,245 703,878 17,008,123

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, Continued

For the three-month periods ended March 31, 2015 and 2014

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

Balance at January 1, 2015 ￦ 157,454 3,910,752 269,118 (78,452) 12,360,095 106,836 16,725,803 818,074 17,543,877 Total comprehensive income (loss) for the period: Profit for the period - - - - 106,189 - 106,189 9,248 115,437 Other comprehensive income (loss): Net change in unrealized fair value of available-for- sale financial assets - - - - - (16,121) (16,121) (11,934) (28,055) Exchange differences on translating foreign operations - - - - - (4,588) (4,588) (1,109) (5,697) Effective portion of unrealized changes in fair values of cash flow hedges - - - - - 4,175 4,175 (19) 4,156 Remeasurements of net defined benefit liability - - - - 32 - 32 (172) (140) Change in equity of equity method investments - - - - (485) (5,905) (6,390) - (6,390) Sub total - - - - (453) (22,439) (22,892) (13,234) (36,126)

Total comprehensive income (loss) for the period - - - - 105,736 (22,439) 83,297 (3,986) 79,311 Transactions with owners of the Company, recognized directly in equity: Dividends to owners of the Company - - - - (59,105) - (59,105) (14,810) (73,915) Interests of hybrid securities - - - - (3,175) - (3,175) - (3,175) Changes in subsidiaries ------15,100 15,100 Other - - - (149) - - (149) - (149) Sub total - - - (149) (62,280) - (62,429) 290 (62,139)

Balance at March 31, 2015 ￦ 157,454 3,910,752 269,118 (78,601) 12,403,551 84,397 16,746,671 814,378 17,561,049

See accompanying notes to the condensed consolidated interim financial statements.

7

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

For the three-month periods ended March 31, 2015 and 2014

(Unaudited) Korean won (millions) 2015 2014

Cash flows from operating activities Profit for the period ￦ 115,437 143,956 Income tax expense 76,471 108,036 Post-employment benefits 26,985 25,325 Long-term employee benefits 2,344 904 Depreciation 206,529 185,167 Amortization 26,949 31,639 Loss on foreign currency translation 11,404 33,333

Loss on disposal of property, plant and equipment 1,510 6,226 Loss on valuation of financial liabilities at fair value through profit or loss 960 17,409 Loss on valuation of derivative instruments 11,441 513 Equity method loss of investments in associates and joint ventures 19,469 24,480 Rental expenses (Amortization of discount on deposit, etc.) 23,254 23,553 Other expenses 2,660 717

Gain on foreign currency translation (705) (2,700) Gain on disposal of property, plant and equipment (839) (868) Gain on disposal of investment property (699) - Gain on valuation of derivative instruments (5,287) (13,588) Equity method gain of investments in associates and joint ventures (19,667) (19,688) Gain on disposal of investments in subsidiaries, associates and joint ventures (12,591) - Other income (767) (4,483) Cost of card business 108,061 98,385

Income of card business (185,399) (189,510) Interest expense 62,695 62,304 Interest income (22,869) (23,898) Dividend income (1,770) (1,827) Trade receivables (110,375) 64,053 Other receivables (59,788) (15,925)

Other financial assets 180,113 423,436 Inventories (97,681) 6,985

Other non-financial assets (57,673) (27,728) Trade payables (219,661) (189,451) Other payables 57,224 (113,140) Other financial liabilities (71,695) (58,265) Unearned revenues (317) (8,306) Provisions (5,322) (1,857) Other non-financial liabilities 80,266 123,296

Payment of post-employment benefits (17,295) (24,223)

8

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

For the three-month periods ended March 31, 2015 and 2014

(Unaudited) Korean won (millions) 2015 2014

Cash flows from operating activities, continued Plan assets 11,037 20,241 Income tax paid (11,469) (173,038) Interest received 175,733 176,903 Interest paid (35,497) (34,860) Dividends received 78 -

Net cash provided by operating activities ￦ 263,254 673,506

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 three-month periods ended March 31, 2015 and 2014

(Unaudited) Korean won (millions) 2015 2014

Cash flows from investing activities

Proceeds from sale of financial assets ￦ 265,310 253,437 Collection of loans 5,063 7,862 Proceeds from sale of available-for-sale financial assets 4,018 1,848 Proceeds from disposal of property, plant and equipment 22,886 26,080 Proceeds from disposal of intangible assets 14 2,060 Proceeds from disposal of investment property 3,400 - Proceeds from capital distribution from associates 4,511 750 Purchase of financial assets (386,899) (226,984) Increase of loans (1,266) (4,533) Purchase of available-for-sale financial assets (980) (35,865) Purchase of investments in associates and joint ventures (93,371) (3,011) Acquisition of property, plant and equipment (382,170) (372,772) Acquisition of intangible assets (15,973) (18,453) Acquisition of investment property (55) - Acquisition of other investments (425) - Business combination, net of cash acquired 1,336 - Cash out flows from disposal of subsidiaries, net of proceeds received (37) - Interest received 12,070 13,468 Dividends received 2,536 1,901

Net cash used in investing activities ￦ (560,032) (354,212)

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 three-month periods ended March 31, 2015 and 2014

(Unaudited) Korean won (millions) 2015 2014

Cash flows from financing activities

Proceeds from borrowings ￦ 545,624 947,201 Proceeds from issuance of debentures 707,654 160,000 Proceeds related to sale and lease back transactions 1,290 - Repayment of borrowings (828,548) (629,125) Redemption of debentures (777,265) (619,955) Acquisition of additional ownership in subsidiaries - (1,380) Cash out flows from settlement of derivative instruments (11,981) - Payment of hybrid securities interests (3,175) (3,199) Cash out flows from other financing activities (420) (202) Interest paid (50,301) (43,676)

Net cash used in financing activities ￦ (417,122) (190,336)

Net increase (decrease) in cash and cash equivalents (713,900) 128,958 Cash and cash equivalents at beginning of the period 1,928,136 1,309,484 Impact of foreign currency exchange rates on cash and cash equivalents 24 14 Exchange differences on translating foreign operations 2,793 517

Cash and cash equivalents at end of the period ￦ 1,217,053 1,438,973

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

March 31, 2015 and 2014

(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’s stock 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 March 31, 2015 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 share 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 joint ventures. A summary of the subsidiaries of the Company as of March 31, 2015 and December 31, 2014 is as follows:

March 31, 2015 Fiscal Percentage of Subsidiaries Location Products or services year ownership (%)

Lotte Card Co., Ltd. Korea Credit card, financing Dec. 31 93.78 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 The 4th Supreme (*1) Korea SPC Dec. 31 0.90 The 5th Supreme (*1) Korea SPC Dec. 31 0.90

The 6th Supreme (*1) Korea SPC Dec. 31 0.90 The 7th Supreme (*1) Korea SPC Dec. 31 0.90 The 8th Supreme (*1) Korea SPC Dec. 31 0.90 PT. Lotte Members Indonesia Indonesia Business support service Dec. 31 100.00 LOTTE Members China China Business support service Dec. 31 100.00 Woori Home Shopping & Television Co., Ltd. Korea TV Home Shopping Dec. 31 53.03

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of Reporting Entity, Continued

(b) Description of Subsidiaries, continued

March 31, 2015 Fiscal Percentage of Subsidiaries Location Products or services year ownership (%) Lotte DatViet Homeshopping Co., Ltd. Vietnam TV Home Shopping Dec. 31 85.58 Korea Seven Co., Ltd. Korea Distribution Dec. 31 51.14 Buy the way Inc. Korea Distribution Dec. 31 100.00 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. (*2) Korea Consumer electronics Dec. 31 65.25 Lotte Department Store Masan Co., Ltd. Korea Distribution Dec. 31 100.00 Lotte Members Co., Ltd Korea Business support service Dec. 31 93.78 LOTTE.COM INC Korea E-commerce business Dec. 31 50.01 LOTTE PS NET Korea Financial support service Dec. 31 62.78 LOTTE MART COMPANY LIMITED China Distribution Dec. 31 100.00 Lotte (China) Company Management Co., Ltd. China Business management Dec. 31 70.00 Lotte Shopping Holdings Hong (Hong Kong) Co., Limited Kong Holding company Dec. 31 100.00 Qingdao LOTTE Mart Commercial Co., Ltd. China Distribution Dec. 31 100.00 Liaoning LOTTE Mart Co., Ltd. China Distribution Dec. 31 100.00 Lotte Mart China Co., Ltd. and its Distribution, subsidiaries China real estate development Dec. 31 100.00 Jilin LOTTE Mart Co., Ltd. China Distribution Dec. 31 100.00 Lotte Mart (Chongqing) Commercial Co., Ltd. China Distribution Dec. 31 100.00 Lotte Business Management (Tianjin) Co., Ltd. China 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 DEPARTMENT STORE (TIANJIN) CO., LTD. China Distribution Dec. 31 100.00 Lotte Department Store (Chengdu) Co., Ltd. China Distribution Dec. 31 100.00 LOTTE MART (CHENGDU) COMMERCIAL COMPANY LIMITED China Distribution Dec. 31 100.00 Lotte Shopping Business Management (Hong Kong) Hong Limited Kong SPC Dec. 31 100.00

LHSC Limited Cayman Holding company Dec. 31 91.14

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(b) Description of Subsidiaries, continued

March 31, 2015 Fiscal Percentage of Subsidiaries Location Products or services year ownership (%)

Lucky Pai Ltd. and its subsidiaries China TV Home Shopping Dec. 31 100.00 LOTTE PROPERTIES (CHENGDU) HK LIMITED Hong Kong Holding company Dec. 31 73.46 Lotte Properties (Chengdu) Limited China Real estate lease Dec. 31 100.00 LOTTE VIETNAM SHOPPING CO., LTD. Vietnam 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 PT. LOTTE Shopping Avenue Indonesia Indonesia Distribution Dec. 31 100.00 Lotte Shopping India Private Limited India Distribution Dec. 31 100.00 LOTTEMART C&C INDIA PRIVATE LIMITED India Distribution Dec. 31 100.00

Lotte Shopping Plaza Vietnam Co., Ltd. Vietnam Distribution Dec. 31 100.00 Lotte Shopping Reit Management Singapore PTE. LTD. Singapore Real estate lease Dec. 31 100.00 LOTTE HOTEL & RETAIL VIETNAM PTE. LTD. Singapore Holding company Dec. 31 60.00 Kotobuki Holding (HK) Ltd. Hong Kong Holding company Dec. 31 100.00 Hai Thanh - Kotobuki Joint Venture Company Vietnam Hotel Dec. 31 70.00 LOTTE CINEMA VIETNAM CO., LTD. Vietnam Cinema Dec. 31 90.00

(*1) Although the Group holds less than 50% of these investees, the Group determined that the Group controlled these investees, since it was exposed, or had rights, to variable returns from its involvement with these investees and had the ability to affect those returns through its power over these investees.

(*2) During 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. If all 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 March 31, 2015, the total number of the common stocks of LOTTE Himart Co., Ltd. under securities lending agreements is 1,180,384 shares. The Company does not have voting right and disposal of the lent shares is restricted.

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(b) Description of Subsidiaries, continued

December 31, 2014 Fiscal Percentage of Subsidiaries Location Products or services year ownership (%)

Lotte Card Co., Ltd. Korea Credit card, financing Dec. 31 93.78 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 The 4th Supreme (*1) Korea SPC Dec. 31 0.90

The 5th Supreme (*1) Korea SPC Dec. 31 0.90 The 6th Supreme (*1) Korea SPC Dec. 31 0.90 The 7th Supreme (*1) Korea SPC Dec. 31 0.90 PT. Lotte Members Indonesia Indonesia Business support service Dec. 31 100.00 LOTTE Members China China Business support service Dec. 31 100.00 Woori Home Shopping & Television Co., Ltd. Korea TV Home Shopping Dec. 31 53.03 Lotte DatViet Homeshopping Co., Ltd. Vietnam TV Home Shopping Dec. 31 85.58 Korea Seven Co., Ltd. Korea Distribution Dec. 31 51.14 Buy the way Inc. Korea Distribution Dec. 31 100.00 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. (*2) Korea Consumer electronics Dec. 31 65.25 Lotte Incheon Town Co., Ltd. Korea Real estate lease Dec. 31 100.00 Lotte Department Store Masan Co., Ltd. Korea Distribution Dec. 31 100.00 LOTTE MART COMPANY LIMITED China Distribution Dec. 31 100.00 Lotte (China) Company Management Co., Ltd. China Business management Dec. 31 70.00 Lotte Shopping Holdings Hong (Hong Kong) Co., Limited Kong Holding company Dec. 31 100.00 Qingdao LOTTE Mart Commercial Co., Ltd. China Distribution Dec. 31 100.00 Liaoning LOTTE Mart Co., Ltd. China Distribution Dec. 31 100.00 Lotte Mart China Co., Ltd. and its Distribution, subsidiaries China real estate development Dec. 31 100.00 Jilin LOTTE Mart Co., Ltd. China Distribution Dec. 31 100.00 Lotte Mart (Chongqing) Commercial Co., Ltd. China Distribution Dec. 31 100.00 Lotte Business Management (Tianjin) Co., Ltd. China 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

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(b) Description of Subsidiaries, continued

December 31, 2014 Fiscal Percentage of Subsidiaries Location Products or services year ownership (%)

LOTTE DEPARTMENT STORE (TIANJIN) CO., LTD. China Distribution Dec. 31 100.00 Lotte Department Store (Chengdu) Co., Ltd. China Distribution Dec. 31 100.00 LOTTE MART (CHENGDU) COMMERCIAL COMPANY LIMITED China Distribution Dec. 31 100.00 Lotte Shopping Business Management (Hong Kong) Limited Hong Kong SPC Dec. 31 100.00 LHSC Limited Cayman Holding company Dec. 31 91.14 Lucky Pai Ltd. and its subsidiaries China TV Home Shopping Dec. 31 100.00 LOTTE PROPERTIES (CHENGDU) HK LIMITED Hong Kong Holding company Dec. 31 73.46 Lotte Properties (Chengdu) Limited China Real estate lease Dec. 31 100.00 LOTTE VIETNAM SHOPPING CO., LTD. Vietnam Distribution Dec. 31 100.00 Lottemart Danang Co., Ltd. Vietnam 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 PT. LOTTE Shopping Avenue Indonesia Indonesia Distribution Dec. 31 100.00 Lotte Shopping India Private Limited India Distribution Dec. 31 100.00 LOTTEMART C&C INDIA PRIVATE LIMITED India Distribution Dec. 31 100.00 Lotte Shopping Plaza Vietnam Co., Ltd. Vietnam Distribution Dec. 31 100.00

Lotte Shopping Reit Management Singapore PTE. LTD. Singapore Real estate lease Dec. 31 100.00 LOTTE HOTEL & RETAIL VIETNAM PTE. LTD. Singapore Holding company Dec. 31 60.00 Kotobuki Holding (HK) Ltd. Hong Kong Holding company Dec. 31 100.00 Hai Thanh - Kotobuki Joint Venture Company Vietnam Hotel Dec. 31 70.00 LOTTE CINEMA VIETNAM CO., LTD. Vietnam Cinema Dec. 31 90.00

(*1) Although the Group holds less than 50% of these investees, the Group determined that the Group controlled these investees, since it was exposed, or had rights, to variable returns from its involvement with these investees and had the ability to affect those returns through its power over these investees.

(*2) During 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. If all 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 December 31, 2014, 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 of the lent shares is restricted.

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(c) Financial information of significant subsidiaries as of and for the three-month period ended March 31, 2015 and as of and for the year ended December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 Total Net income comprehensive Subsidiaries Assets Liabilities Equity Sales (loss) income (loss)

Lotte Card Co., Ltd. ￦ 8,319,685 6,370,144 1,949,541 377,713 32,861 32,746 eB Card Co., Ltd. 150,986 103,633 47,353 16,482 16 (14) Woori Home Shopping &

Television Co., Ltd. 901,803 293,438 608,365 213,154 17,802 (7,388) Korea Seven Co., Ltd. 893,377 638,813 254,564 642,519 (15,273) (15,340) Buy the way Inc. 212,413 51,646 160,767 60,389 (773) (724) Lotte Suwon Station Shopping

Town Co., Ltd. 364,617 269,924 94,693 12,370 (2,642) (2,640) Lotte Songdo Shopping Town Co.,

Ltd. 234,971 139,524 95,447 1,000 297 297 CS Mart Co., Ltd. 162,116 68,938 93,178 104,869 2,418 2,483 LOTTE Himart Co., Ltd. 2,797,935 1,096,743 1,701,192 858,893 24,405 23,848 Lotte Members Co., Ltd 169,609 137,572 32,037 13,803 2,578 2,522 LOTTE.COM INC 167,782 135,146 32,636 50,533 5,626 1,840 LOTTE MART COMPANY

LIMITED 154,329 157,028 (2,699) 88,729 (4,304) (4,335) Qingdao LOTTE Mart Commercial

Co., Ltd. 65,945 169,918 (103,973) 13,580 (8,588) (9,087) Lotte Shopping Holdings

(Hong Kong) Co., Limited 1,188,862 442,519 746,343 - (499) 7,828 Lotte Mart China Co., Ltd. and its

subsidiaries 717,924 713,676 4,248 216,813 (15,894) (15,945) LOTTE PROPERTIES

(CHENGDU) HK LIMITED 420,414 210,125 210,289 - (1,810) (48) Lotte Properties (Chengdu) Limited 413,418 15,289 398,129 - (937) (1,951) LOTTE VIETNAM SHOPPING

CO., LTD. 389,490 330,231 59,259 52,910 (4,537) (4,644) LOTTE SHOPPING HOLDINGS

(SINGAPORE) PTE. LTD. 336,880 125 336,755 - (243) 1,550 PT. LOTTE SHOPPING

INDONESIA 266,888 156,946 109,942 182,497 2,791 (2,014) PT. LOTTE MART INDONESIA 173,849 159,693 14,156 57,725 (3,410) (4,138)

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(c) Financial information of significant subsidiaries as of and for the three-month period ended March 31, 2015 and as of and for the year ended December 31, 2014 are summarized as follows:, continued

Korean won (millions) December 31, 2014 Total Net income comprehensive Subsidiaries Assets Liabilities Equity Sales (loss) income (loss)

Lotte Card Co., Ltd. ￦ 8,438,539 6,522,855 1,915,684 1,608,601 148,742 136,908 eB Card Co., Ltd. 158,478 111,111 47,367 80,014 (8,138) (8,186) Woori Home Shopping & Television

Co., Ltd. 994,930 355,333 639,597 869,241 84,034 170,551 Korea Seven Co., Ltd. 938,615 665,089 273,526 2,375,559 23,097 23,541 Buy the way Inc. 219,016 57,525 161,491 309,945 3,258 3,507 Lotte Suwon Station Shopping Town

Co., Ltd. 368,805 271,473 97,332 5,910 (2,194) (2,195) Lotte Songdo Shopping Town Co.,

Ltd. 253,521 158,372 95,149 3,194 (2,968) (2,968) CS Mart Co., Ltd. 159,859 69,164 90,695 430,897 9,796 9,837 LOTTE Himart Co., Ltd. 2,774,637 1,089,502 1,685,135 3,754,295 96,438 95,997 LOTTE MART COMPANY

LIMITED 163,345 161,709 1,636 347,958 (22,715) (22,127) Qingdao LOTTE Mart Commercial

Co., Ltd. 80,221 175,107 (94,886) 51,590 (40,741) (43,159) Lotte Shopping Holdings

(Hong Kong) Co., Limited 1,179,121 440,607 738,514 - (343,921) (309,944) Lotte Mart China Co., Ltd. and its

subsidiaries 712,231 692,038 20,193 852,721 (139,611) (141,776) LOTTE PROPERTIES (CHENGDU)

HK LIMITED 422,148 209,035 213,113 - (7,263) (6,123) Lotte Properties (Chengdu) Limited 403,154 5,850 397,304 - (682) (1,778) LOTTE VIETNAM SHOPPING

CO., LTD. 382,772 315,467 67,305 143,261 (7,491) (5,849) LOTTE SHOPPING HOLDINGS

(SINGAPORE) PTE. LTD. 333,054 22 333,032 - 1,469 10,645 PT. LOTTE SHOPPING

INDONESIA 269,896 157,940 111,956 771,908 10,294 12,593 PT. LOTTE MART INDONESIA 183,884 165,590 18,294 241,273 (9,542) (8,821)

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(d) Entities included in subsidiaries in 2015 are as follows:

Description Subsidiaries

Split off from Lotte Card Co., Ltd. Lotte Members Co., Ltd. Reclassification from associate due to acquisition of LOTTE.COM INC additional interests

LOTTE PS NET Established in 2015 The 8th Supreme

(e) Entities excluded from subsidiaries in 2015 are as follows:

Description Subsidiaries

Decrease in percentage of ownership Lotte Incheon Town Co., Ltd.

Statutory merger into a Group entity in 2015 Lottemart Danang Co., Ltd.

Liquidation in 2015 Chungnam Smartcard Co., Ltd.

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(f) Non-controlling interests

Financial information related to significant non-controlling interests for subsidiaries as of and for the three-month period ended March 31, 2015 and as of and for the year ended December 31, 2014 are as follows:

March 31, 2015 Woori Home Shopping & LOTTE Television Co., Lotte Card Korea Seven Himart Description Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Ownership interests held by NCI 46.97% 6.22% 48.86% 34.75%

Current assets ￦ 647,636 7,971,575 254,649 579,822 Non-current assets 253,078 475,259 641,207 741,627

Current liabilities 267,373 2,322,556 467,580 930,729

Non-current liabilities 27,183 4,180,653 171,233 216,072

Net assets 606,158 1,943,625 257,043 174,648

Net assets attributable to non-controlling interests 284,983 121,884 123,969 60,342 Dividends paid to non-controlling interests during the year 10,332 - 1,770 2,707 Revenue 215,267 410,189 642,519 858,893

Profit 16,987 31,081 (16,123) 23,386

Total comprehensive income (8,205) 29,539 (16,189) 22,829

Profit attributable to non-controlling interests 7,916 1,865 (7,878) 8,127 Total comprehensive income attributable to non-controlling

interests (3,916) 1,766 (7,910) 7,934 Cash flows from operating activities (73,458) 466,200 (3,433) (89,317)

Cash flows from investing activities 110,612 (12,570) (15,442) (6,706)

Cash flows from financing activities - (412,555) (73,626) 24,548

Effect of currency exchange rate (11) (11) - -

Net increase (decrease) in cash and cash equivalents 37,143 41,064 (92,501) (71,475)

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(f) Non-controlling interests, continued

Financial information related to significant non-controlling interests for subsidiaries as of and for the three-month period ended March 31, 2015 and as of and for the year ended December 31, 2014 are as follows:, continued

December 31, 2014 Woori Home Shopping & LOTTE Television Co., Lotte Card Korea Seven Himart Description Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Ownership interests held by NCI 46.97% 6.22% 48.86% 34.75%

Current assets ￦ 705,019 8,084,122 297,111 548,189 Non-current assets 288,161 490,891 641,504 749,963

Current liabilities 325,631 2,510,607 398,031 642,428

Non-current liabilities 31,186 4,120,805 267,058 497,133

Net assets 636,363 1,943,601 273,526 158,591

Net assets attributable to non-controlling interests 299,232 121,955 133,650 55,115 Dividends paid to non-controlling interests during the year 8,454 - 1,770 2,051 Revenue 874,831 1,760,811 2,375,559 3,754,295

Profit 83,066 147,390 20,161 92,361

Total comprehensive income 169,684 128,959 17,668 91,919

Profit attributable to non-controlling interests 38,797 9,259 11,286 32,098 Total comprehensive income attributable to non-controlling

interests 79,485 8,097 11,502 31,945 Cash flows from operating activities 118,311 (10,165) 151,697 195,258

Cash flows from investing activities (72,950) (34,608) (37,186) (52,677)

Cash flows from financing activities (18,000) 18,934 (9,614) (99,723)

Effect of currency exchange rate (60) 396 - -

Net increase (decrease) in cash and cash equivalents 27,301 (25,443) 104,897 42,858

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

March 31, 2015 and 2014

(Unaudited)

1. General Description of the Reporting Entity, Continued

(g) Changes in a parent's ownership interest in subsidiaries that did not result in change in control

1) Details of the parent's additional investments in subsidiaries for the three-month period ended March 31, 2015 is summarized as follows:

2015 Korean won (millions)

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

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

Lotte Shopping Plaza Vietnam Co., Ltd. W 2,173 100.00% 100.00% W 27,536 29,708

2) Details of reduction in a parent's investments in subsidiaries from capital reductions for the three-month period ended March 31, 2015 is summarized as follows:

2015 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 Shopping Reit Management Singapore Pte. Ltd. W 1,162 100.00% 100.00% W 1,305 142

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

March 31, 2015 and 2014

(Unaudited)

2. Basis of Accounting

(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. 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, 2014.

(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 consolidated financial statements as of and for the year ended December 31, 2014.

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

March 31, 2015 and 2014

(Unaudited)

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, 2014. The following accounting policies for emissions rights are also expected to be reflected in the Group’s consolidated financial statements as of and for the year ending December 31, 2015.

(a) Emission Rights

The Group accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission which became effective in 2015.

(i) Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

Emission rights held for the purpose of performing the obligation is classified as an intangible asset and is initially measured at cost and are carried at cost less accumulated impairment losses after initial recognition. Emission rights held for short- swing profits are classified as current asset and are measured at fair value with any changes in fair value recognized as profit or loss in the respective reporting period.

The Group derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

(ii) Emission liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when there is a high possibility of outflows of resources in performing the obligation and the costs required to perform the obligation are reliably estimable. Emission liability is an amount of estimated obligations for emission rights to be submitted to the government for the performing period. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at of the end of the reporting period.

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

March 31, 2015 and 2014

(Unaudited)

4. Business combination

Significant business combinations of the Group in 2015 are as follows:

(i) Acquisition of LOTTE.COM INC The Group acquired 15.62% of capital stock of LOTTE.COM INC, which the Group held 34.39% of its capital stock prior to the acquisition, on February 26, 2015. As a result of the acquisition of additional interests, the Group obtained control on LOTTE.COM INC by holding 50.01% of its capital stock.

(ii) Acquisition of LOTTE PS NET The Group and LOTTE.COM INC held 31.91% and 30.87% of LOTTE PS NET, respectively, prior to obtaining control on LOTTE.COM INC. As a result of obtaining control on LOTTE.COM INC, the Group obtained control on LOTTE PS NET by holding 62.78% of its capital stock.

The following summarizes major classes of consideration transferred.

Korean won (millions) Description LOTTE.COM INC LOTTE PS NET

Fair value of the Group’s existing equity interest(*) W 14,104 2,480 Cash and cash equivalents 11,563 - Total consideration transferred 25,667 2,480 Cash and cash equivalents of subsidiary acquired 12,872 26

Net cash inflow W 1,309 26

(*) The Group recognized a gain on disposal of existing equity interests of W6,880 million upon consummation of the business combination. The gain is included in financial income in the Group's statement of comprehensive income for the period ended March 31, 2015.

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

March 31, 2015 and 2014

(Unaudited)

4. Business Combination, Continued

The following summarizes the recognized amounts of assets acquired and liabilities assumed at the acquisition date.

Korean won (millions) Accounts LOTTE.COM INC LOTTE PS NET

Current: Cash and cash equivalents ￦ 12,872 26 Trade and other receivables 86,402 1,526 Inventories 1,560 - Other assets 34,521 728

Non-current: Property, plant and equipment, net 9,099 49,870 Intangible assets, net 17,073 36 Other assets 6,256 9

Total assets 167,783 52,195

Current: Trade and other payables 128,632 4,370 Borrowings and debentures, net of debentures issuance cost - 27,000 Other liabilities 5,408 11,790

Non-current: Employee benefit liabilities 944 - Other liabilities 163 12,300

Total liabilities 135,147 55,460

Total identifiable net assets ￦ 32,636 (3,265)

Goodwill recognized as a result of business combinations is as follows:

Korean won (millions) Accounts LOTTE.COM INC LOTTE PS NET

Total consideration transferred ￦ 25,667 2,480 Non-controlling interests 16,315 (1,215)

Subtotal 41,982 1,265

Less: Fair value of identifiable net assets (32,636) 3,265

Goodwill ￦ 9,346 4,530

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

March 31, 2015 and 2014

(Unaudited)

5. Trade and Other Receivables

Trade and other receivables as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Trade receivables ￦ 667,433 675,461 Other receivables 364,038 253,622 Allowance for doubtful accounts (17,639) (16,131)

Total ￦ 1,013,832 912,952

6. Restricted Deposits

Restricted deposits included in short-term and long-term financial instruments as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) Description Depositary March 31, 2015 December 31, 2014

Current:

Time deposits Woori Bank and others ￦ 56,265 73,610 Special deposits Industrial Bank of Korea and others 129,500 129,500 Money Market Fund Citibank and others 77,955 64,498

Non-current:

Special deposits Citibank and others 95 86 Available-for-sale Gyeongsangnam-do financial assets Metropolitan Government and others 36,312 34,916

Total ￦ 300,127 302,610

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments

(a) The carrying amount and the fair value of financial instruments as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Carrying Carrying amount Fair value amount Fair value Cash and cash equivalents Cash and cash equivalents ￦ 1,217,053 1,217,053 1,928,136 1,928,136

Financial assets at fair Short-term financial instruments 20,001 20,001 30,002 30,002 value through profit or Derivative assets held for the purpose loss of trading 1,144 1,144 1,201 1,201

Sub total 21,145 21,145 31,203 31,203

Loans and receivables Current : (*1) Trade and other receivables 1,013,832 1,013,832 912,952 912,952 Short-term financial instruments 858,656 858,656 712,503 712,503 Short-term loans 13,135 13,135 11,015 11,015 Accrued income 36,716 36,716 38,957 38,957 Current portion of deposits 152,525 152,525 218,337 218,337 Card financial assets 7,442,659 7,442,659 7,587,287 7,587,287 Non-current : Long-term financial instruments 515 515 86 86 Long-term loans 57,294 57,294 65,251 65,251 Deposits 1,239,760 1,239,760 1,203,728 1,203,728 Long-term accrued income 13 13 - - Long-term trade receivable 5,369 5,369 5,369 5,369

Sub total 10,820,474 10,820,474 10,755,485 10,755,485

Available-for-sale Marketable available-for-sale financial assets financial assets (*2) 348,195 348,195 390,009 390,009 Non-marketable available-for-sale financial assets (*3) 234,803 234,803 233,669 233,669

Sub total 582,998 582,998 623,678 623,678

Derivative assets held Current 1,740 1,740 751 751 for the purpose of Non-current 27,357 27,357 20,312 20,312 hedging

Sub total 29,097 29,097 21,063 21,063

Total ￦ 12,670,767 12,670,767 13,359,565 13,359,565

(*1) Book value is considered as a reasonable approximation of fair value. (*2) Marketable available-for-sale financial assets traded in the active market are measured at fair value based on the market prices.

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(a) The carrying amount and the fair value of financial instruments as of March 31, 2015 and December 31, 2014 are summarized as follows:, continued

(*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 from external valuation agencies as of the end of reporting period. Others are recorded at acquisition cost because either the fair value cannot be reliably measured or the difference between fair value and acquisition cost is immaterial.

(b) Other financial assets as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) Account March 31, 2015 December 31, 2014

Current: Short-term financial instruments ￦ 878,657 742,505 Short-term loans 13,135 11,015 Available-for-sale financial assets 2 2 Accrued income 36,716 38,957 Deposits 152,525 218,337 Card business financial assets 7,442,659 7,587,287 Derivative assets held for the purpose of hedging 1,740 751

Subtotal 8,525,434 8,598,854

Non-current: Long-term financial instruments 515 86 Available-for-sale financial assets 582,996 623,676 Long-term loans 57,294 65,251 Deposits 1,239,760 1,203,728 Long-term accrued income 13 - Long-term trade receivables 5,369 5,369 Derivative assets held for the purpose of trading 1,144 1,201 Derivative assets held for the purpose of hedging 27,357 20,312

Subtotal 1,914,448 1,919,623

Total ￦ 10,439,882 10,518,477

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(c) Available-for-sale financial assets as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Number of Percentage of Acquisition Carrying Carrying shares ownership cost amount amount Marketable available-for-sale financial assets:

BNK Financial Group Inc. (Formerly, BS Financial Group Inc.) 6,561,494 2.80% ￦ 42,042 99,735 95,142 Shinhan Financial Group Co., Ltd. 311,118 0.07% 2,247 13,051 13,829 LOTTE FOOD CO., LTD. 47,180 3.45% 10,167 33,262 27,364 momo.com Inc. 21,333,420 15.02% 37,684 195,588 248,289 Others 5,638 6,559 5,385 Subtotal ￦ 97,778 348,195 390,009

Non-marketable available-for-sale financial assets:

Lotte Aluminum Co., Ltd. 125,016 12.05% ￦ 55,881 71,374 71,374 LOTTE Logistics Corp. 66,308 4.64% 4,000 10,278 10,278 Cosmo Asset Management Co., Ltd. 149,807 17.70% 50,118 35,098 35,179 Lotte Properties (Shenyang) Limited 29,928,756 17.93% 41,919 41,919 41,919 Investment in government bonds 33,792 34,350 32,805 Others 42,524 41,784 42,114 Subtotal 228,234 234,803 233,669

Total ￦ 326,012 582,998 623,678

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(d) The carrying amount and the fair value of financial liabilities as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Carrying Carrying amount Fair value amount Fair value Financial liabilities at fair value Overseas convertible bonds ￦ 106,285 106,285 105,325 105,325 through profit or loss Non-current derivative liabilities held for the purpose of trading 23,707 23,707 12,329 12,329

Subtotal 129,992 129,992 117,654 117,654

Financial liabilities based on Current : amortized cost (*) Trade and other payables 5,549,230 5,549,230 5,623,106 5,623,106 Short-term borrowings 1,264,156 1,264,156 1,487,331 1,487,331 Current portion of long-term borrowings 944,984 944,984 837,208 837,208 Current portion of long-term debentures 2,116,219 2,116,219 2,245,111 2,245,111 Accrued expenses 255,187 255,187 310,835 310,835 Current portion of withholding deposit 247,390 247,390 280,484 280,484 Other liabilities 14,300 14,300 1,698 1,698 Non-current : Long-term borrowings 1,233,138 1,233,138 1,369,618 1,369,618 Long-term debentures 6,758,742 6,758,742 6,681,971 6,681,971 Withholding deposit 174,517 174,517 153,119 153,119 Other liabilities 42,661 42,661 30,567 30,567

Subtotal 18,600,524 18,600,524 19,021,048 19,021,048

Derivative liabilities held for the Current 8,212 8,212 19,672 19,672 purpose of hedging Non-current 47,194 47,194 61,501 61,501 Subtotal 55,406 55,406 81,173 81,173 Total ￦ 18,785,922 18,785,922 19,219,875 19,219,875

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

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(e) Other financial liabilities as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Current:

Accrued expenses ￦ 255,187 310,835 Deposit received 247,390 280,484 Derivative liabilities held for the purpose of hedging 8,212 19,672 Finance lease liabilities 13,612 1,042 Others 688 656

Subtotal 525,089 612,689

Non-current:

Deposit received 174,517 153,119 Derivative liabilities held for the purpose of hedging 47,194 61,501 Derivative liabilities held for the purpose of trading 23,707 12,329 Finance lease liabilities 37,268 25,484 Other financial liabilities 5,393 5,083

Subtotal 288,079 257,516

Total ￦ 813,168 870,205

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(f) The fair value hierarchy

The fair value measurements classified by fair value hierarchy as of March 31, 2015 are as follows:

Korean won (millions) Description Level Ⅰ Level Ⅱ Level Ⅲ Total

Available-for-sale financial assets ￦ 348,195 34,350 124,466 507,011 Derivative assets - 30,241 - 30,241

Total financial assets 348,195 64,591 124,466 537,252

Financial liabilities at fair value through profit or loss - 106,285 - 106,285 Derivative liabilities - 55,406 23,707 79,113

Total financial liabilities ￦ - 161,691 23,707 185,398

The fair value measurements classified by fair value hierarchy as of December 31, 2014 are as follows:

Korean won (millions) Description Level Ⅰ Level Ⅱ Level Ⅲ Total

Available-for-sale financial assets ￦ 390,009 32,805 124,546 547,360 Derivative assets - 22,264 - 22,264

Total financial assets 390,009 55,069 124,546 569,624

Financial liabilities at fair value through profit or loss - 105,325 - 105,325 Derivative liabilities - 81,173 12,329 93,502

Total financial liabilities ￦ - 186,498 12,329 198,827

In measuring Level 2 fair values, the Group used Strip & Bootstrapping method and Binomial Tree model, etc. and the Group used the significant observable inputs of risk-free rate and stock price volatility, etc.

In measuring Level 3 fair values, the Group used discounted cash flows model, etc. and the Group used the significant unobservable inputs of forecast annual revenue growth rate and risk-adjusted discount rate, etc.

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

March 31, 2015 and 2014

(Unaudited)

7. Fair Value of Financial Instruments, Continued

(g) Level 3 fair values

Changes in Level 3 fair values for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are as follows:

Korean won (millions) Description March 31, 2015 December 31, 2014

Beginning of the period ￦ 112,217 263,442 Transfer out of Level 3 - (78,206) Loss included in finance costs - Loss on valuation of derivative instruments (11,377) (2,590) Gain included in OCI - Net change in unrealized fair value of available-for- sale financial assets (81) (4,934) Purchases - 37,825 Disposal - (53,519) Reclassification to investments in associates - (49,801)

End of the period ￦ 100,759 112,217

(h) Sensitivity analysis

For the fair values of available-for-sale financial assets and stock options, reasonably possible changes as of March 31, 2015 to one of the significant unobservable inputs, holding other inputs constant, would have the following effects on fair values.

(i) Equity securities

Korean won (millions) Discount rate Terminal growth rate Description 1% Decrease 1% Increase 0.5% Increase 1% Increase

Available-for-sale financial assets ￦ 8,754 (6,854) 2,918 6,271

(ii) Stock options (liability-classified)

Korean won (millions) Discount rate Stock price volatility Description 1% Decrease 1% Increase 1% Decrease 1% Increase

Stock options ￦ (5,330) 5,370 (8) 16

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

March 31, 2015 and 2014

(Unaudited)

8. Inventories

(a) Inventories as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions)

March 31, 2015 December 31, 2014 Allowance Allowance for for Acquisition inventory Acquisition inventory cost valuation Book value cost valuation Book value

Merchandise ￦ 2,970,392 (13,787) 2,956,605 2,891,266 (13,558) 2,877,708 Finished goods 15,026 (4,395) 10,631 16,387 (4,160) 12,227 Goods in process 967 - 967 943 - 943 Raw materials 908 (15) 893 966 (93) 873 Subsidiary materials 11 - 11 9 - 9 Supplies 2,157 - 2,157 2,168 - 2,168 Materials-in-transit 768 - 768 2,206 - 2,206 Unfinished apartment units 283,286 - 283,286 248,859 - 248,859 Lots 12,498 - 12,498 16,061 - 16,061 Total ￦ 3,286,013 (18,197) 3,267,816 3,178,865 (17,811) 3,161,054

(b) For the three-month periods ended March 31, 2015 and 2014, the amount of inventories recognized as cost of goods sold and changes of allowance for valuation losses of inventories are summarized as follows:

Korean won (millions)

2015 2014

Cost of goods sold:

- Amount of inventories recognized as cost of goods sold ￦ 4,475,694 4,384,585 - Changes of allowance for valuation losses of inventories 386 (3,055)

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

March 31, 2015 and 2014

(Unaudited)

9. Other Non-financial Assets

Other non-financial assets as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) Description March 31, 2015 December 31, 2014

Current:

Advance payments ￦ 129,342 109,504 Prepaid expenses 218,535 184,311 Prepaid value added tax 77,624 79,724 Others 169 71

Sub total 425,670 373,610

Non-current:

Long-term advance payments 141,282 131,157 Long-term prepaid expenses (*) 1,233,567 1,230,298 Others 4,443 4,445

Sub total 1,379,292 1,365,900

Total ￦ 1,804,962 1,739,510

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

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

March 31, 2015 and 2014

(Unaudited)

10. Investments in Associates

(a) The details of associates as of March 31, 2015 and December 31, 2014 are summarized as follows:

March 31, 2015 Korean won (millions)

Balance at Principal Percentage of March Company Location business ownership (%) 31, 2015

25.00 ￦ Lotte Station Building Co., Ltd. Korea Distribution 118,894 34.00 Daehong Communications Co., Ltd. Korea Advertisement agency 121,395 Lotte Capital Co., Ltd. Korea Capital 22.36 157,949

38.68 Lotteria Co., Ltd. Korea Restaurant chain 239,731 49.00 FRL Korea Co., Ltd. Korea Retail 162,143 39.14 Lotte Asset Development Co., Ltd. Korea Real estate development 58,708 27.68 Lotte Trading Co., Ltd. Korea Product brokerage 134,609 26.98 Lotte Europe Holdings B.V. Netherlands Holding company 23,880 45.00 Coralis S.A. Luxembourg Holding company 32,720

Others 102,002

Total ￦ 1,152,031

December 31, 2014 Korean won (millions)

Balance at Principal Percentage of December Company Location business ownership (%) 31, 2014

￦ Lotte Station Building Co., Ltd. Korea Distribution 25.00 123,646

Daehong Communications Co., Ltd. Korea Advertisement agency 34.00 122,989 Lotte Capital Co., Ltd. Korea Capital 22.36 152,953

Lotteria Co., Ltd. Korea Restaurant chain 38.68 241,347

FRL Korea Co., Ltd. Korea Retail 49.00 161,831

Lotte Asset Development Co., Ltd. Korea Real estate development 39.14 40,871

Lotte Trading Co., Ltd. Korea Product brokerage 27.68 134,725

Lotte Europe Holdings B.V. Netherlands Holding company 30.97 11,731 Coralis S.A. Luxembourg Holding company 45.00 37,616 Others 119,377

Total ￦ 1,147,086

(b)

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

March 31, 2015 and 2014

(Unaudited)

10. Investments in Associates, Continued

(b) Changes in investments in associates for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are as follows:

Korean won (millions) 2015 Adjustment to Beginning Business Net income Capital Balance at Company balance Acquisition combination Dividends (loss) adjustment Disposal Others March 31 Lotte Station Building Co., Ltd. ￦ 123,646 - - (8,597) 3,457 388 - - 118,894 Daehong Communications Co., Ltd. 122,989 - - (9) 1,517 (2,963) - (139) 121,395 Lotte Capital Co., Ltd. 152,953 - - (2,234) 7,936 (479) - (227) 157,949 Lotteria Co., Ltd. 241,347 - - - 3,315 (4,612) - (319) 239,731 FRL Korea Co., Ltd. 161,831 - - - 959 (647) - - 162,143 Lotte Asset Development Co., Ltd. 40,871 19,571 - - (1,587) (98) - (49) 58,708 Lotte Trading Co., Ltd. 134,725 - - - (914) 59 - 739 134,609 Lotte Europe Holdings B.V. 11,731 10,855 - - (4,809) 1,407 - 4,696 23,880 Coralis S.A. 37,616 - - - (5,119) 223 - - 32,720 Others 119,377 3,887 396 - (4,305) 280 (13,467) (4,166) 102,002

Total ￦ 1,147,086 34,313 396 (10,840) 450 (6,442) (13,467) 535 1,152,031

Korean won (millions) 2014 Adjustment to Beginning Capital Balance at Company balance Acquisition Dividends Net income (loss) adjustment Others December 31 Lotte Station Building Co., Ltd. ￦ 122,212 - (9,940) 12,282 (914) 6 123,646 Daehong Communications Co.,

Ltd. 127,298 - (7) 5,385 (9,029) (658) 122,989 Lotte Capital Co., Ltd. 138,666 - (1,861) 16,731 (583) - 152,953 Lotteria Co., Ltd. 244,228 - - 10,497 (12,209) (1,169) 241,347 FRL Korea Co., Ltd. 112,631 - (13,132) 58,021 4,311 - 161,831 Lotte Asset Development Co.,

Ltd. 46,398 - - (7,829) 1,915 387 40,871 Lotte Trading Co., Ltd. (*) - 42,980 - 54,902 (12,207) 49,050 134,725 Lotte Europe Holdings B.V. 94,132 - - (81,937) (1,890) 1,426 11,731 Coralis S.A. 42,219 - - (5,934) 1,331 - 37,616 Others 123,451 8,481 (1,665) (10,773) 2,262 (2,379) 119,377

Total ￦ 1,051,235 51,461 (26,605) 51,345 (27,013) 46,663 1,147,086

(*) During 2014, the investment was reclassified from available-for-sale financial assets upon acquisition of additional interests.

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

March 31, 2015 and 2014

(Unaudited)

10. Investments in Associates, Continued

(c) Financial information of associates as of and for the three-month period ended March 31, 2015 and as of and for the year ended December 31, 2014 is summarized as follows:

Korean won (millions) 2015 Non- Operating Other Total Current Non-current Current current profit comprehensive comprehensive Company assets assets liabilities liabilities Sales (loss) income (loss) income (loss) Lotte Station Building Co., Ltd. ￦ 306,211 430,788 244,296 17,126 150,242 16,085 1,555 15,383 Daehong Communications Co., Ltd. 178,391 372,643 160,728 39,860 86,322 1,954 (9,066) (5,066) Lotte Capital Co., Ltd. (*) 5,605,227 - 4,894,914 - 196,751 46,890 (3,160) 32,334 Lotteria Co., Ltd. 210,008 851,764 293,857 177,939 266,513 5,856 (12,746) (2,014) FRL Korea Co., Ltd. 375,170 136,080 176,841 3,506 214,887 12,905 (1,320) 637 Lotte Asset Development Co., Ltd. 350,713 198,397 135,858 261,021 34,332 (2,876) (125) (4,180) Lotte Trading Co., Ltd. 216,532 1,040,909 233,764 252,763 184,394 1,116 98 (479) Lotte Europe Holdings B.V. 137,318 494,269 312,412 217,234 21,754 (2,205) 8,291 (10,482) Coralis S.A. 29,370 385,944 340,029 37,034 5,491 (2,950) 494 (10,876)

(*) Since Lotte Capital Co., Ltd. is a financial institution, it does not present current and non-current assets or liabilities.

Korean won (millions) 2014 Non- Operating Other Total Current Non-current Current current profit comprehensive comprehensive Company assets assets liabilities liabilities Sales (loss) income (loss) income (loss) Lotte Station Building Co., Ltd. ￦ 304,777 431,325 222,991 18,528 651,674 65,208 (3,631) 45,496 Daehong Communications Co., Ltd. 192,053 382,859 174,234 45,545 328,003 16,494 (34,972) (19,134) Lotte Capital Co., Ltd. (*) 5,503,352 - 4,816,281 - 632,159 98,756 (1,067) 73,761 Lotteria Co., Ltd. 192,382 838,495 283,197 153,697 1,132,875 37,961 (46,049) (18,913) FRL Korea Co., Ltd. 450,753 131,951 249,220 3,218 1,035,644 150,263 8,796 127,207 Lotte Asset Development Co., Ltd. 327,826 197,174 160,887 257,450 156,356 (6,035) 5,926 (14,066) Lotte Trading Co., Ltd. 241,377 1,041,791 259,390 252,692 945,880 5,206 (46,807) (36,578) Lotte Europe Holdings B.V. 114,023 382,216 312,169 214,934 136,100 (565) (6,049) (271,183) Coralis S.A. 43,180 388,939 346,447 36,545 5,741 (3,559) 928 (12,242)

(*) Since Lotte Capital Co., Ltd. is a financial institution, it does not present current and non-current assets or liabilities.

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

March 31, 2015 and 2014

(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 the entity as a joint venture. The details of joint ventures as of March 31, 2015 and December 31, 2014 are summarized as follows:

March 31, 2015 Korean won (millions)

Balance at Principal Percentage of March 31, Company Location business ownership (%) 2015

￦ D-Cinema of Korea Co., Ltd. Korea Film equipment 50.00 - STL Co., Limited Korea Retail 50.00 1,171 LOTTE JTB Co., Ltd. Korea Travel business 50.00 4,100 Shenyang SL Cinema Investment Management Co., Ltd. China Cinema 49.00 921

Shandong Luckypai TV Shopping China TV Home Shopping 49.00 9,824

Yunnan Maile TV Shopping Media Co., Ltd. China TV Home Shopping 49.00 3,985 Chongqing Yujia Co., Ltd. China TV Home Shopping 49.00 - International Business Center

Company Limited Vietnam Real estate lease 50.00 59,058

Total ￦ 79,059

December 31, 2014 Korean won (millions)

Balance at Principal Percentage of December Company Location business ownership (%) 31, 2014

￦ D-Cinema of Korea Co., Ltd. Korea Film equipment 50.00 - STL Co., Limited Korea Retail 50.00 1,335 Shenyang SL Cinema Investment Management Co., Ltd. China Cinema 49.00 925

Shandong Luckypai TV Shopping China TV Home Shopping 49.00 9,906

Yunnan Maile TV Shopping Media Co., Ltd. China TV Home Shopping 49.00 4,225

Chongqing Yujia Co., Ltd. China TV Home Shopping 49.00 -

Total ￦ 16,391

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

March 31, 2015 and 2014

(Unaudited)

11. Joint Ventures, Continued

(b) Changes in joint ventures for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are as follows:

Korean won (millions) 2015 Adjustment to Beginning Business Net income Capital Balance at Company balance Acquisition combination Dividends (loss) adjustment Others March 31 D-Cinema of Korea Co., Ltd. ￦ ------STL Co., Limited 1,335 - - - (164) - - 1,171 LOTTE JTB Co., Ltd. - - 4,100 - - - - 4,100 Shenyang SL Cinema Investment Management Co., Ltd. 925 - - - (8) 4 - 921 Shandong Luckypai TV Shopping 9,906 - - - (125) - 43 9,824 Yunnan Maile TV Shopping Media Co., Ltd. 4,225 - - (303) 45 - 18 3,985 Chongqing Yujia Co., Ltd. ------International Business Center Company Limited - 59,058 - - - - - 59,058

Total ￦ 16,391 59,058 4,100 (303) (252) 4 61 79,059

Korean won (millions) 2014 Adjustment to Beginning Net income Capital Balance at Company balance Acquisition Dividends (loss) adjustment Others December 31 D-Cinema of Korea Co., Ltd. ￦ ------STL Co., Limited 527 1,500 - (668) (24) - 1,335 Shenyang SL Cinema Investment Management Co., Ltd. 921 - - (13) 17 - 925 Shandong Luckypai TV Shopping 8,506 - - 1,203 - 197 9,906 Yunnan Maile TV Shopping Media Co., Ltd. 3,157 838 (168) 305 - 93 4,225 Chongqing Yujia Co., Ltd. ------

Total ￦ 13,111 2,338 (168) 827 (7) 290 16,391

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

March 31, 2015 and 2014

(Unaudited)

11. Joint Ventures, Continued

(c) Financial information of joint ventures as of and for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are summarized as follows:

Korean won (millions) 2015 Total Other comprehen- Current Non-current Current Non-current Operating comprehen- sive income Company assets assets liabilities liabilities Sales profit (loss) sive income (loss) D-Cinema of Korea Co., Ltd. ￦ 28,150 18,213 47,564 269 6,045 2,237 - 2,009 STL Co., Limited 3,521 1,877 2,664 392 3,633 (313) - (327) LOTTE JTB Co., Ltd. 29,484 4,010 22,858 2,436 5,693 73 - 64 Shenyang SL Cinema Investment Management Co., Ltd. 699 1,700 524 - 363 (17) 8 (8) Shandong Luckypai TV Shopping 46,355 3,532 25,718 - 23,603 (304) - (255) Yunnan Maile TV Shopping Media Co., Ltd. 10,476 8,608 11,333 - 8,401 30 - 92 Chongqing Yujia Co., Ltd. 24,199 296 44,936 - 14,071 (3,471) - (3,468) International Business Center Company Limited 13,473 56,365 30,929 1,625 5,725 3,019 - 2,065

Korean won (millions) 2014 Other Total comprehen- comprehen- Current Non-current Current Non-current Operating sive income sive income Company assets assets liabilities liabilities Sales profit (loss) (loss) (loss) D-Cinema of Korea Co., Ltd. ￦ 26,862 21,568 13,279 38,630 22,792 2,418 - 454 STL Co., Limited 3,629 1,847 2,432 375 9,904 (1,261) (47) (1,384) Shenyang SL Cinema Investment Management Co., Ltd. 614 1,737 469 - 1,303 (134) 114 88 Shandong Luckypai TV Shopping 43,074 3,716 26,574 - 94,998 3,794 - 2,455 Yunnan Maile TV Shopping Media Co., Ltd. 14,234 2,919 10,426 - 29,309 877 - 623 Chongqing Yujia Co., Ltd. 9,721 1,643 28,564 - 57,862 (12,266) - (12,304)

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

Korean won (millions)

March 31, 2015

Company Unrecognized losses for the period Unrecognized accumulated losses

D-Cinema of Korea Co., Ltd. ￦ - (735) Chongqing Yujia Co., Ltd. (1,699) (8,436)

Total ￦ (1,699) (9,171)

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

March 31, 2015 and 2014

(Unaudited)

12. Property, Plant and Equipment

(a) Property, plant and equipment as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Accumulated Accumulated Acquisition Accumulated impairment Acquisition Accumulated impairment cost depreciation losses Book value cost depreciation losses Book value

Land ￦ 8,011,705 - - 8,011,705 7,947,313 - - 7,947,313 Buildings 7,299,727 (2,009,661) - 5,290,066 7,174,380 (1,951,781) - 5,222,599 Structures 349,099 (90,844) - 258,255 346,086 (87,030) - 259,056 Machinery 258,541 (146,386) (23) 112,132 252,362 (141,755) (24) 110,583 Vehicles 8,923 (5,537) - 3,386 8,786 (5,486) - 3,300 Display fixtures 642,615 (357,884) (6,928) 277,803 633,187 (334,310) (62) 298,815 Furniture and fixtures 3,563,850 (2,453,418) (15) 1,110,417 3,486,214 (2,356,973) (15) 1,129,226 Tools and equipment 204,244 (113,013) (2,204) 89,027 203,020 (108,874) (2,195) 91,951 Other PP&E 258,472 (88,292) (15,384) 154,796 247,458 (87,921) (22,151) 137,386 Construction-in- progress 660,470 - - 660,470 676,973 - - 676,973 Finance lease assets 79,296 (11,766) (1,746) 65,784 36,049 (10,539) (1,738) 23,772

Total ￦ 21,336,942 (5,276,801) (26,300) 16,033,841 21,011,828 (5,084,669) (26,185) 15,900,974

(b) Changes in property, plant and equipment for the three-month period ended March 31, 2015 are as follows:

Korean won (millions) 2015 Book value Increase from Book value as of business as of January 1 Acquisitions combination Depreciation Disposals Others (*) March 31

Land ￦ 7,947,313 4,076 - - (2,833) 63,149 8,011,705 Buildings 5,222,599 15,206 - (52,789) (415) 105,465 5,290,066 Structures 259,056 25 - (3,863) - 3,037 258,255 Machinery 110,583 1,016 6,309 (5,948) (13) 185 112,132 Vehicles 3,300 394 - (259) (12) (37) 3,386 Display fixtures 298,815 15,166 - (22,713) (481) (12,984) 277,803 Furniture and fixtures 1,129,226 51,039 9,829 (107,597) (1,513) 29,433 1,110,417 Tools and

equipment 91,951 1,990 - (5,446) (1,983) 2,515 89,027 Other PP&E 137,386 1,202 462 (3,617) (594) 19,957 154,796 Construction-in-

progress 676,973 233,929 535 - (16,489) (234,478) 660,470 Finance lease

assets 23,772 1,479 41,834 (1,117) - (184) 65,784

Total ￦ 15,900,974 325,522 58,969 (203,349) (24,333) (23,942) 16,033,841

(*)Others include reclassifications of construction-in-progress to intangible assets, reclassification to investment property, effects of loss of control of subsidiaries and foreign exchange effects.

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

March 31, 2015 and 2014

(Unaudited)

12. Property, Plant and Equipment, Continued

(c) Changes in property, plant and equipment for the year ended December 31, 2014 are as follows:

Korean won (millions) 2014 Book value Increase from Book value as of January business as of 1 Acquisitions combination Depreciation Impairment Disposals Others (*) December 31

Land ￦ 8,124,642 10,930 - - - (527,251) 338,992 7,947,313 Buildings 4,762,331 22,244 - (201,025) - (400,087) 1,039,136 5,222,599 Structures 204,465 640 - (14,232) - (55,628) 123,811 259,056 Machinery 101,229 28,602 - (24,023) - (521) 5,296 110,583 Vehicles 3,496 962 - (1,066) - (109) 17 3,300 Display fixtures 251,470 60,990 - (78,445) (3) (9,153) 73,956 298,815 Furniture and fixtures 1,075,873 227,376 1,571 (396,299) (2) (7,358) 228,065 1,129,226 Tools and

equipment 120,275 8,797 - (16,594) (1) (31,200) 10,674 91,951 Other PP&E 140,453 14,892 - (14,109) (6,456) (9,263) 11,869 137,386 Construction-in-

progress 1,002,861 1,571,318 - - - (235) (1,896,971) 676,973 Finance lease

assets 1,453 32,766 - (9,423) (1,677) - 653 23,772

Total ￦ 15,788,548 1,979,517 1,571 (755,216) (8,139) (1,040,805) (64,502) 15,900,974

(*) Others include reclassifications of buildings to investment property, effects of loss of control of subsidiaries and foreign exchange effects.

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

March 31, 2015 and 2014

(Unaudited)

13. Investment Property

(a) Investment property as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Accumulated Accumulated Acquisition cost depreciation Book value Acquisition cost depreciation Book value

Land ￦ 211,437 - 211,437 233,762 - 233,762 Buildings 382,019 (84,336) 297,683 392,706 (89,277) 303,429

Total ￦ 593,456 (84,336) 509,120 626,468 (89,277) 537,191

(b) Changes in investment property for the three-month period ended March 31, 2015 are as follows:

Korean won (millions) 2015 Book value Book value as of as of January 1 Acquisition Depreciation Disposals Others (*) March 31

Land ￦ 233,762 - - (960) (21,365) 211,437 Buildings 303,429 55 (3,180) (1,741) (880) 297,683

Total ￦ 537,191 55 (3,180) (2,701) (22,245) 509,120

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

(c) Changes in investment property for the year ended December 31, 2014 are as follows:

Korean won (millions) 2014 Book value Book value as of as of January 1 Depreciation Disposals Others (*) December 31

Land ￦ 271,232 - (943) (36,527) 233,762 Buildings 206,079 (9,438) (630) 107,418 303,429

Total ￦ 477,311 (9,438) (1,573) 70,891 537,191

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

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

March 31, 2015 and 2014

(Unaudited)

14. Goodwill and Intangible Assets

(a) Goodwill and intangible assets as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Accumulated Accumulated Acquisition Accumulated impairment Acquisition Accumulated impairment cost amortization losses Book value cost amortization losses Book value

Goodwill ￦ 3,530,387 - (239,077) 3,291,310 3,516,315 - (239,077) 3,277,238 Industrial property rights 143,793 (5,156) - 138,637 143,302 (4,698) - 138,604 Rights to use facility 524,430 (124,546) - 399,884 524,444 (117,903) - 406,541 Membership 38,803 - (4,377) 34,426 37,921 - (4,445) 33,476 Other intangible assets 566,282 (248,258) (4,113) 313,911 533,286 (228,949) (4,113) 300,224

Total ￦ 4,803,695 (377,960) (247,567) 4,178,168 4,755,268 (351,550) (247,635) 4,156,083

(b) Changes in goodwill and intangible assets for the three-month period ended March 31, 2015 are as follows:

Korean won (millions) 2015 Book value as Book value of Business as of January 1 Acquisition combination Amortization Impairment Disposals Others (*) March 31

Goodwill ￦ 3,277,238 38 13,876 - - - 158 3,291,310 Industrial property rights 138,604 65 26 (283) - - 225 138,637 Rights to use facility 406,541 - - (6,643) - (14) - 399,884 Membership 33,476 675 206 - 69 - - 34,426 Other intangible assets 300,224 13,924 16,877 (20,023) - - 2,909 313,911

Total ￦ 4,156,083 14,702 30,985 (26,949) 69 (14) 3,292 4,178,168

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

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

March 31, 2015 and 2014

(Unaudited)

14. Goodwill and Intangible Assets, Continued

(c) Changes in goodwill and intangible assets for the year ended December 31, 2014 are as follows:

Korean won (millions) 2014 Book value as Book value of Business as of January 1 Acquisition combination Amortization Impairment Disposals Others (*) December 31

Goodwill ￦ 3,407,535 - 5,563 - (157,710) (759) 22,609 3,277,238 Industrial property rights 139,366 325 - (1,135) - - 48 138,604 Rights to use facility 452,130 - - (27,766) - (18,339) 516 406,541 Membership 33,140 1,112 - - (480) (9) (287) 33,476 Other intangible assets 309,216 81,291 8,100 (105,818) (111) (36) 7,582 300,224

Total ￦ 4,341,387 82,728 13,663 (134,719) (158,301) (19,143) 30,468 4,156,083

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

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

March 31, 2015 and 2014

(Unaudited)

15. Trade and Other Payables

Trade and other payables as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Trade payables ￦ 3,549,761 3,761,489 Other payables 1,999,469 1,861,617

Total ￦ 5,549,230 5,623,106

16. Borrowings and Debentures

(a) Borrowings and debentures as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Current:

Short-term borrowings ￦ 1,264,156 1,487,331 Current portion of long-term borrowings 945,493 837,208

Current portion of discount on long-term

borrowings (509) - Current portion of long-term debentures 2,147,682 2,250,212

Current portion of discount on debentures (5,254) (5,101) Exchange rights adjustment (26,209) -

Subtotal 4,325,359 4,569,650

Non-current:

Long-term borrowings 1,234,761 1,371,781

Discount on long-term borrowings (1,623) (2,163)

Long-term debentures 6,908,955 6,863,085

Discount on debentures (43,928) (47,385)

Exchange rights adjustment - (28,404)

Subtotal 8,098,165 8,156,914

Total ￦ 12,423,524 12,726,564

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

March 31, 2015 and 2014

(Unaudited)

16. Borrowings and Debentures, Continued

(b) Short-term borrowings as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions)

Annual March 31, December 31, Lender Details interest rate (%) 2015 2014

Woori Bank and others General 1.45~8.25 ￦ 873,156 792,331 Financial Shinhan Bank and others notes 1.84~6.70 391,000 695,000

￦ Total 1,264,156 1,487,331

(c) Long-term borrowings as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) Annual March 31, December 31, Lender Details interest rate (%) 2015 2014

Korea Development Bank and Local others currency 2.32~3.75 ￦ 957,925 1,129,751 Foreign Lotte Co., Ltd. (Japan) and others currency 1.57~8.35 1,222,329 1,079,238

Sub total 2,180,254 2,208,989

Less: Discount on borrowings (2,132) (2,163)

Sub total 2,178,122 2,206,826

Less: Current portion of long-term borrowings, net of discount (944,984) (837,208)

Total ￦ 1,233,138 1,369,618

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

March 31, 2015 and 2014

(Unaudited)

16. Borrowings and Debentures, Continued

(d) Debentures as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) December 31, Description Maturity Interest rate (%) March 31, 2015 2014

54-2nd placed Mar. 12, 2015 - ￦ - 400,000 1st placed (Global bond) Apr. 07, 2016 3.88 442,000 439,680 2nd placed (Global bond) May 09, 2017 3.38 442,000 439,680 59-1st placed Aug. 07, 2015 2.98 350,000 350,000 59-2nd placed Aug. 07, 2017 3.20 230,000 230,000 59-3rd placed Aug. 07, 2019 3.33 200,000 200,000 60th placed 3M USD (foreign currency) Dec. 13, 2015 Libor+0.68 110,500 109,920 61st placed Mar. 21, 2018 3.05 100,000 100,000 62nd placed Jun. 21, 2018 2.80 110,000 110,000 63-1st placed Jul. 02, 2017 2.79 200,000 200,000 63-2nd placed Jul. 02, 2019 3.08 200,000 200,000 64-1st placed 3M USD (foreign currency) May 25, 2018 Libor+0.50 165,750 164,880 64-2nd placed (foreign currency) May 25, 2018 3M USD Libor 110,500 109,920 64-3rd placed 3M USD (foreign currency) May 25, 2018 Libor+0.02 110,500 109,920 65-1st placed Mar. 03, 2020 2.26 160,000 - 65-2nd placed Mar. 03, 2022 2.45 240,000 - USD convertible bonds (*1) Jul. 05, 2016 - 20,861 20,744 JPY convertible bonds (*1) Jul. 05, 2016 - 85,424 84,581 Exchangeable bonds (*2) Jan. 24, 2018 - 321,200 321,200 Korea Seven Co., Ltd. Jan. 30, 2015 - - 40,000 Korea Seven Co., Ltd. (foreign Jan. 30, 2015 currency) - - 20,243 Korea Seven Co., Ltd. (foreign Apr. 18, 2016 3M USD currency) Libor+0.50 33,150 32,976 Korea Seven Co., Ltd. May 08, 2018 (convertible bonds) - 7,920 7,920 Lotte Card Co., Ltd. Multiple 2.17~4.44 4,769,878 4,641,932 CS Mart Co., Ltd. Oct. 29, 2015 3M JPY Libor+0.50 13,804 13,802 LOTTE Himart Co., Ltd. Multiple 2.90~3.22 600,000 600,000 LOTTE Himart Co., Ltd. Mar. 29, 2016 3M USD (foreign currency) Libor+0.50 33,150 32,976 LSBM Feb. 09, 2015 - - 132,923

Sub total 9,056,637 9,113,297

Less: Discount on debentures (49,182) (52,486)

Less: Exchange rights adjustment (26,209) (28,404)

Total book value 8,981,246 9,032,407

Less: Current portion of debentures, net of discount (2,116,219) (2,245,111)

￦ Total 6,865,027 6,787,296

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

March 31, 2015 and 2014

(Unaudited)

16. Borrowings and Debentures, Continued

(*1) In 2011, the Group issued USD convertible bonds of USD 500 million and JPY convertible bonds of JPY 32.5 billion, among which USD convertible bonds of USD 480,800,000 and JPY convertible bonds of JPY 22,940,000,000 were redeemed during 2014. USD convertible bonds and JPY convertible bonds have been designated as financial liabilities at fair value through profit or loss as of March 31, 2015 and December 31, 2014. The terms and conditions for convertible bonds held as of March 31, 2015 are summarized as follows:

(a) Type of bonds: Registered overseas unsecured convertible bonds (b) Total face value of bonds: USD Bonds: 19,200,000 JPY Bonds: 9,560,000,000 Total (in won): 149,412,924,000 (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 the 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 is 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) (*): 647,979 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 the case where 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.

(*) On March 20, 2015, the general meeting of the Company’s shareholders resolved to distribute cash dividends exceeding 0.5% of the market price of the Company’s stock for the defined period. Consequently, in accordance with terms and conditions of conversion price adjustments, the conversion price was adjusted from W650,000 to W647,979.

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

March 31, 2015 and 2014

(Unaudited)

16. Borrowings and Debentures, Continued

(*2) The Group issued five-year bonds in 2013 which are exchangeable to shares of LOTTE Himart Co., Ltd. During 2015, these exchangeable bonds were reclassified to current liabilities because the put option held by bondholders is exercisable on January 24, 2016, which is within one year from March 31, 2015. The terms and conditions are summarized as follows:

(a) Type of bonds: Registered overseas unsecured exchangeable bonds (b) Total face value of bonds(KRW): 321,200,000,000 (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.

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

March 31, 2015 and 2014

(Unaudited)

16. Borrowings and Debentures, Continued

(e) Maturities of long-term borrowings and debentures as of March 31, 2015 are scheduled as follows:

Korean won (millions)

Borrowings Debentures Total

Within 1 year ￦ 945,493 2,147,682 3,093,175 1 ~ 2 years 631,525 1,454,605 2,086,130

2 ~ 3 years 564,424 2,638,200 3,202,624

3 ~ 4 years 30,000 1,436,150 1,466,150

More than 4 years 8,812 1,380,000 1,388,812

Total ￦ 2,180,254 9,056,637 11,236,891

17. Unearned Revenues

The details of unearned revenues as of March 31, 2015 and December 31, 2014 are as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Current:

Membership point ￦ 95,682 95,703 Other points 97,750 99,233

Unearned rental income 8,152 4,967

Others 34,997 35,810

Subtotal 236,581 235,713

Non-current:

Other points 563 912

Unearned rental income 9,981 10,238

Subtotal 10,544 11,150

Total ￦ 247,125 246,863

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

March 31, 2015 and 2014

(Unaudited)

18. Provisions

(a) Changes in provisions for the three-month period ended March 31, 2015 are as follows:

Korean won (millions) 2015 Balance as of Beginning balance Increase Utilization March 31

Current: Provision for bonus points reward program ￦ 24,443 16,557 (15,266) 25,734 Provision for bonus payable 9,896 18,071 (22,603) 5,364 Provision for sales return 9,186 7,207 (9,172) 7,221 Other provisions 11,388 6,193 (127) 17,454

Subtotal 54,913 48,028 (47,168) 55,773

Non-current: Provision for unused credit card limits (*) 25,546 1,266 - 26,812 Other provisions 1,257 4 - 1,261

Subtotal 26,803 1,270 - 28,073

Total ￦ 81,716 49,298 (47,168) 83,846

(*) The Group records a provision 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.

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

March 31, 2015 and 2014

(Unaudited)

18. Provisions, Continued

(b) Changes in provisions for the year ended December 31, 2014 are as follows:

Korean won (millions) 2014 Balance as of Beginning balance Increase Utilization December 31

Current: Provision for bonus points reward program ￦ 23,391 38,951 (37,899) 24,443 Provision for bonus payable 5,568 55,446 (51,118) 9,896 Provision for sales return 7,375 5,986 (4,175) 9,186 Other provisions 9,896 49,639 (48,147) 11,388

Subtotal 46,230 150,022 (141,339) 54,913

Non-current: Provision for unused credit card limits (*) 30,292 - (4,746) 25,546 Other provisions 2,321 12 (1,076) 1,257

Subtotal 32,613 12 (5,822) 26,803

Total ￦ 78,843 150,034 (147,161) 81,716

(*) The Group records a provision 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.

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

March 31, 2015 and 2014

(Unaudited)

19. Other Non-financial Liabilities

Other non-financial liabilities as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Current:

Withholdings ￦ 70,681 53,938 Withholdings of value added tax 54,784 68,330 Advances received 1,180,631 1,085,458 Other liabilities 1,714 1,544

Subtotal 1,307,810 1,209,270

Non-current: Other liabilities 94,795 88,087

Total ￦ 1,402,605 1,297,357

20. Employee Benefits

(a) Details of defined benefit liabilities as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Present value of defined benefit obligations ￦ 554,106 525,909 Fair value of plan assets (490,184) (486,054)

Total ￦ 63,922 39,855

(b) Details of present value of other long-term employee benefits as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Present value of other long-term employee benefits ￦ 42,816 42,286

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

March 31, 2015 and 2014

(Unaudited)

20. Employee Benefits, Continued

(c) Changes in employee benefits for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are as follows:

Korean won (millions) 2015 2014

Beginning of the period ￦ 525,909 457,032 Current service costs 26,533 102,421 Past service costs - 178 Interest costs 4,604 22,992 Remeasurements : - Loss from change in demographic assumptions - 3,558 - Gain from change in financial assumptions - (8,951) - Loss (gain) from experience adjustments (720) 2,339 Payments (16,184) (56,853) Business combination 11,533 - Others 2,431 3,193

End of the period ￦ 554,106 525,909

(d) Changes in fair value of plan assets for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are as follows:

Korean won (millions) 2015 2014

Beginning of the period ￦ 486,054 412,811 Return on plan assets 4,152 17,781 Actuarial loss (919) (5,823) Employer contribution 2,749 101,153 Payments (13,786) (42,973) Business combination 10,590 - Others 1,344 3,105

End of the period ￦ 490,184 486,054

(e) The components of plan assets as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Principal guaranteed insurance policies ￦ 489,984 485,852 Others 200 202

Total ￦ 490,184 486,054

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

March 31, 2015 and 2014

(Unaudited)

20. Employee Benefits, Continued

(f) Expenses recognized for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions) 2015 2014

Current service costs ￦ 26,533 24,703 Interest costs 4,604 5,047 Return on plan assets (4,152) (4,425) Contributions to defined contribution plans 584 549 Long-term employee benefits 2,344 904

Total ￦ 29,913 26,778

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

March 31, 2015 and 2014

(Unaudited)

21. Derivative Instruments and Hedge Accounting

(a) Details of derivatives outstanding as of March 31, 2015 are as follows:

Type Description Description

Trade Call option The Group holds the right to buy preferred stocks of Lotte Incheon Development Co., Ltd. and Lotte Incheon Town Co., Ltd. Put option The Group grants the right to sell preferred stocks of Lotte Incheon Development Co., Ltd. and Lotte Incheon Town Co., Ltd. to the

preferred stockholders. Put option The Group grants the right to sell preferred stocks of Eunpyeong PFV to

the preferred stockholders. Currency swap At the maturity of the swap, the principal and interest payments for debentures in USD based on floating rates are exchanged back with

the principal and fixed interest rate payments in RMB. Cash flow hedge Currency swap At the maturity of the swap, the principal and the interest payments for debentures in USD and JPY based on floating rates are exchanged back with the principal and fixed interest rate payments in KRW. Currency swap At the maturity of the swap, the principal and the interest payments for the borrowings in USD based on floating rates are exchanged back with the principal and fixed interest rate payments in RMB. Interest swap Pays fixed interest to receive floating rate in KRW short-term borrowings Currency At the maturity of the contract, purchase dollars at the fixed exchange forward rate

(b) Fair value of derivatives outstanding as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions)

March 31, 2015 December 31, 2014 Description Type Assets Liabilities Assets Liabilities

Trade Stock option ￦ - 23,707 - 12,329 Currency swap 1,144 - 1,201 - Cash flow hedge Currency swap 15,816 48,837 8,487 75,427 Interest swap - 6,569 - 5,746 Currency forward 13,281 - 12,576 -

￦ Total 30,241 79,113 22,264 93,502

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

March 31, 2015 and 2014

(Unaudited)

21. Derivative Instruments and Hedge Accounting, Continued

(c) Changes in the fair value of derivative instruments for the three-month period ended March 31, 2015 are as follows:

Korean won Description Type Related accounts (millions)

Trade Stock option Loss on valuation of derivative instruments ￦ (11,378) Currency swap Loss on valuation of derivative instruments (63) Cash flow hedge Currency swap Gain on valuation of derivative instruments 4,127 Gain on valuation of derivatives instruments (card business) 4,383 Unrealized gain on valuation of derivative instruments 4,796 Interest swap Unrealized loss on valuation of derivative instruments (746) Currency forward Gain on valuation of derivative instruments 1,160 Unrealized loss on valuation of derivative instruments (455)

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

March 31, 2015 and 2014

(Unaudited)

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 W5,000 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 March 31, 2015, the Company has not issued any preferred stock and 31,490,892 shares of common stock were issued and outstanding as of March 31, 2015.

(b) Capital surplus as of March 31, 2015 and December 31, 2014 consists of the following:

Korean won (millions)

March 31, 2015 December 31, 2014

Additional paid-in capital ￦ 3,786,431 3,786,431 Others 124,321 124,321

￦ 3,910,752 3,910,752

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

March 31, 2015 and 2014

(Unaudited)

23. Hybrid securities classified as equity

Hybrid securities classified as equity as of March 31, 2015 and December 31, 2014 are as follows:

Korean won (millions) Date of Date of Interest rate issue maturity (%) March 31, 2015 December 31, 2014 Hybrid security 1-1 (*) 2013-11-15 2043-11-15 4.723 ￦ 240,000 240,000 Hybrid security 1-2 (*) 2013-11-15 2043-11-15 4.723 30,000 30,000 Issuance cost (882) (882) Total ￦ 269,118 269,118

(*) Details of hybrid securities are as follows:

Korean won (millions) Hybrid security 1-1 Hybrid security 1-2

Issue price 240,000 30,000 Maturity date 30 years (The Company has the unconditional right to extend the maturity date) Interest rate Issue date ~ 2018-11-15: 4.723%, reset every 5 years as follows: After 5 years: treasury rate (5 years) + 1.5% After 10 years: additionally +1% according to Step-up clauses Interest payments February 15, May 15, August 15 and March 30, June 30, September 30, December condition November 15 of each calendar year 30 of each calendar year (Conditional (Conditional deferral of interest payments is deferral of interest payments is available to available to the Company) the Company) Others The Group can call the hybrid security at year 5 and interest payment date afterwards. The hybrid security holder's preference in the event of liquidation is same as the preference stock holders, higher than the common stock holders but lower than other creditors.

The Group holds the right to extend the maturity dates of the hybrid securities and to defer interest payments for the hybrid securities. If interest payments for the hybrid securities are deferred, the Group cannot declare or pay dividends attributable to common stock. Since the Group has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid securities have been classified as equity instruments.

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

March 31, 2015 and 2014

(Unaudited)

24. Capital Adjustments

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 W1,806 million in 2013 and, as a result, the Company holds 1,938,688 shares of treasury stocks as of March 31, 2015.

25. Retained Earnings

Details of retained earnings as of March 31, 2015 and December 31, 2014 are as follows:

Korean won (millions)

March 31, 2015 December 31, 2014

Legal reserve ￦ 190,006 184,097 Voluntary reserve 11,190,052 10,730,052

Unappropriated retained earnings 1,023,493 1,445,946

￦ 12,403,551 12,360,095

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

March 31, 2015 and 2014

(Unaudited)

26. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (loss) for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are as follows:

Korean won (millions) 2015 Beginning Changes for Tax effects for Balance as of balance the period the period March 31

Net change in unrealized fair value of available for-sale financial assets ￦ 145,678 (25,586) 9,465 129,557 Exchange rate differences on translating foreign operations (70,788) (4,671) 83 (75,376) Effective portion of unrealized changes in fair values of cash flow hedges (10,950) 3,620 555 (6,775) Change in equity of equity method investments 42,896 (7,902) 1,997 36,991

Total ￦ 106,836 (34,539) 12,100 84,397

Korean won (millions) 2014 Beginning Changes for Tax effects for Balance as of balance the year the year December 31

Net change in unrealized fair value of available for-sale financial assets ￦ 94,694 78,526 (27,542) 145,678 Exchange rate differences on translating foreign operations (94,118) 23,569 (239) (70,788) Effective portion of unrealized changes in fair values of cash flow hedges 299 (19,583) 8,334 (10,950) Change in equity of equity method investments 62,255 (27,021) 7,662 42,896

Total ￦ 63,130 55,491 (11,785) 106,836

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

March 31, 2015 and 2014

(Unaudited)

27. Earnings per Share

(a) Basic earnings per share

(i) Basic earnings per share for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions, except per share amount) 2015 2014

Profit for the period attributable to the owners of the Company ￦ 106,189 128,986 Interests of hybrid securities, net of tax (2,407) (2,425)

Weighted average number of common shares outstanding 29,552,204 29,552,204

Basic earnings per share (in won) ￦ 3,512 4,283

(ii) Weighted average number of ordinary shares

Number of shares 2015 2014

Issued ordinary shares at January 1 31,490,892 31,490,892 Effect of treasury shares (1,938,688) (1,938,688) Weighted average number of ordinary shares 29,552,204 29,552,204

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

March 31, 2015 and 2014

(Unaudited)

27. Earnings per Share, Continued

(b) Diluted earnings per share

(i) Diluted earnings per share for three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions, except per share amount) 2015 2014

Profit for the period attributable to the owners of the Company (basic) ￦ 106,189 128,986 Interests of hybrid securities, net of tax (2,407) (2,425) Effect of convertible bonds, net of tax (*1) 728 - Effect of exchange of exchangeable bond, net of tax(*2) (1,513) (25) Diluted profit attributable to ordinary shareholders 102,997 126,536 Dilu ted weighted average number of ordinary shares 29,782,165 29,552,204

Diluted earnings per share (in won) ￦ 3,458 4,282

(*1) For the three-month period ended March 31, 2015, the shares related to Korea Seven Co., Ltd.’s convertible bonds were excluded from diluted earnings per share calculation as their effect would have been anti-dilutive, and for the three-month period ended March 31, 2014, the shares related to USD convertible bonds, JPY convertible bonds and Korea Seven Co., Ltd.’s convertible bonds were excluded from diluted earnings per share calculation as their effect would have been anti-dilutive. (*2) 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 2015 2014

Basic weighted average number of ordinary shares 29,552,204 29,552,204 Effect of conversion of convertible bonds 229,961 -

Diluted weighted average number of ordinary shares 29,782,165 29,552,204

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

March 31, 2015 and 2014

(Unaudited)

27. Earnings per Share, Continued

(b) Diluted earnings per share, continued

(iii) Potential ordinary shares from conversion of convertible bonds as of March 31, 2015 are as follows:

Korean won (millions, except for conversion price) USD Bonds JPY Bonds

Principal amount (*1) ￦ 20,803 128,610 Conversion price (in won) (*2) 647,979 647,979 Number of potential ordinary shares 32,105 198,478

(*1) Principal amount of convertible bonds are the amount of USD 19 million and JPY 9,560 million multiplied by fixed exchange rate of 1,083.50/USD and 13.4529/JPY, respectively. (*2) On March 20, 2015, the general meeting of the Company’s shareholders resolved to distribute cash dividends exceeding 0.5% of the market price of the Company’s stock for the defined period. Consequently, in accordance with terms and conditions of conversion price adjustments, the conversion price was adjusted from W650,000 to W647,979.

28. Sales and Cost of Sales

(a) Details of sales for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015 2014

Sales of merchandise ￦ 5,765,810 5,659,992 Sales of products 13,518 36,634 Other operating revenue 811,544 734,294 Revenue of card business 344,501 354,960

Total ￦ 6,935,373 6,785,880

(b) Details of cost of sales for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015 2014

Cost of merchandise sold ￦ 4,461,336 4,361,756 Cost of products sold 8,321 22,890 Cost of other operating revenue 99,156 83,649 Cost of card business 196,216 192,584

Total ￦ 4,765,029 4,660,879

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

March 31, 2015 and 2014

(Unaudited)

29. Selling, general and administrative expenses:

Details of selling, general and administrative expenses for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015 2014

Salaries ￦ 342,377 330,838 Retirement and termination benefits 27,455 25,611 Other employee benefits 2,344 903 Employee welfare 76,092 72,317 Education and training 4,215 4,055 Travel 9,328 10,298 Maintenance fee for car 986 1,061 Insurance premium 4,767 3,804 Taxes and dues 22,583 21,459 Entertainment expenses 3,152 3,113 Supplies and stationery 18,468 21,138 Communications 10,578 11,594 Utilities 99,717 93,555 Maintenance 21,266 21,158 Rent 263,521 221,830 Depreciation 202,723 181,747 Amortization of intangible assets 19,199 18,250 Commissions and fees 294,675 275,796 Service commission expenses 216,396 204,047 Advertising 74,211 80,097 Sales promotion expenses 137,108 132,022 Decoration 4,332 2,702 Bad debt expenses 130 135 Transportation 43,507 39,847 Provisions 33 5,263 Others 4,001 2,921

Total ￦ 1,903,164 1,785,561

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

March 31, 2015 and 2014

(Unaudited)

30. Other income and expenses

Details of other income and expenses for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015 2014

Other income:

Gain on foreign currency transactions ￦ 680 922 Gain on foreign currency translation 97 371 Gain on disposal of investment property 699 - Gain on disposal of property, plant and equipment 839 868 Reversal of impairment losses on other non-current assets 1 - Reversal of impairment losses on intangible assets 69 -

Others (*1) 14,315 11,296

Total ￦ 16,700 13,457

Other expenses:

Loss on foreign currency transactions ￦ 192 1,169 Loss on foreign currency translation 10 173 Loss on disposal of property, plant and equipment 1,510 6,226 Impairment loss of property, plant and equipment - 7 Loss on disposal of intangible assets - 4 Impairment loss on intangible assets - 183 Loss on disposal of trade receivables - 28 Loss on disposal of other non-current assets - 141 Donation 4,377 3,743 Other bad debt expenses 1,341 98 Taxes and dues 3,784 342 Others (*2) 36,801 12,209

Total ￦ 48,015 24,323

(*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.

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

March 31, 2015 and 2014

(Unaudited)

31. Nature of Expenses

Details of nature of expenses for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015 2014

Purchase of inventories ￦ 4,562,181 4,225,868 Changes in inventories (94,872) 156,776 Employee benefits expense 450,470 434,131 Rent 269,565 224,497 Depreciation and amortization 233,478 216,806 Sales commissions 191,002 186,551 Sales promotion expenses 137,111 132,050 Commissions 197,487 184,504 Service commission expenses 224,035 208,660 Advertising 74,211 80,870 Utilities 102,234 93,893 Taxes and dues 22,617 21,737 Others 298,674 280,097

Total ￦ 6,668,193 6,446,440

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

March 31, 2015 and 2014

(Unaudited)

32. Finance Income and Finance Costs

(a) Details of finance income and finance costs for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015 2014

Finance income:

Interest income ￦ 22,869 23,898 Dividend income 1,770 1,827 Gain on foreign currency transactions 349 73 Gain on foreign currency translation 608 2,329 Gain on disposal of available-for-sale financial assets - 205 Gain on valuation of derivative instruments held for the purpose of hedging 5,287 12,596 Gain on valuation of derivative instruments held for the purpose of trading - 992 Gain on transaction of derivative instruments held for the purpose of hedging 25 3,340 Gain on disposal of investments in subsidiaries , associates and joint ventures 12,591 -

Total ￦ 43,499 45,260

Finance costs: Interest expense ￦ 62,695 62,304 Loss on foreign currency transactions 117 3,664 Loss on foreign currency translation 11,394 33,160 Loss on valuation of financial assets and liabilities at fair value through profit or loss 960 17,409 Loss on disposal of available-for-sale financial assets 792 - Loss on valuation of derivative instruments held for the purpose of trading 11,441 513 Loss on transaction of derivative instruments held for the purpose of hedging 239 - Loss on disposal of investments in subsidiaries, associates and joint ventures 16 -

Total ￦ 87,654 117,050

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

March 31, 2015 and 2014

(Unaudited)

33. 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 three-month period ended March 31, 2015 was 39.8% (for the three-month period ended March 31, 2014: 42.9%). The decrease in effective tax rate was primarily due to the decrease in adjustments for prior periods, etc.

34. Consolidated statements of cash flows

As of March 31, 2015 and December 31, 2014, the details of cash and cash equivalents are as follows:

Korean won (millions)

March 31, 2015 December 31, 2014

Cash ￦ 37,021 42,852 Deposits 360,565 558,107

Other cash equivalents 819,467 1,327,177

Total ￦ 1,217,053 1,928,136

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

March 31, 2015 and 2014

(Unaudited)

35. Operating Segments and Geographic Information

(a) The Group’s 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, 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 as of and for the three-month periods ended March 31, 2015 and 2014 are as follows:

Korean won (millions)

2015

Department Discount Card Consumer stores stores business electronics retail Others Total

External sales ￦ 1,953,293 2,095,005 363,954 858,695 1,664,426 6,935,373 Inter-segment sales 4,543 10,476 46,235 198 38,867 100,319

Total sales ￦ 1,957,836 2,105,481 410,189 858,893 1,703,293 7,035,692

Korean won (millions)

2014

Department Discount Card Consumer stores stores business electronics retail Others Total

External sales ￦ 2,010,838 2,070,887 374,500 804,993 1,524,662 6,785,880

Inter-segment sales 6,092 7,835 50,292 248 36,642 101,109

Total sales ￦ 2,016,930 2,078,722 424,792 805,241 1,561,304 6,886,989

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

March 31, 2015 and 2014

(Unaudited)

35. Operating Segments and Geographic Information, Continued

(c) Reconciliations of total segment sales and profit to their respective consolidated financial statements line items for the three- month periods ended March 31, 2015 and 2014 are summarized as follows:

Korean won (millions)

2015

Operating Depreciation profit for the and Profit for the

Sales period amortization period

Department stores ￦ 1,957,836 143,472 90,954 131,882 Discount stores 2,105,481 10,224 57,175 (43,076) Card business 410,189 42,463 10,982 31,081 Consumer electronics retail 858,893 35,363 13,195 24,405 Others 1,703,293 39,373 57,564 (6,175)

Segment totals 7,035,692 270,895 229,870 138,117

Elimination of inter-segment amounts (100,319) (3,715) 3,608 (22,680)

Consolidated amounts ￦ 6,935,373 267,180 233,478 115,437

Korean won (millions)

2014

Operating Depreciation profit for the and Profit for the

Sales period amortization period

Department stores ￦ 2,016,930 190,674 76,293 163,115 Discount stores 2,078,722 38,265 56,072 (39,034) Card business 424,792 61,821 10,097 43,469 Consumer electronics retail 805,241 19,900 12,900 12,887 Others 1,561,304 32,647 58,149 18,379

Segment totals 6,886,989 343,307 213,511 198,816

Elimination of inter-segment amounts (101,109) (3,867) 3,295 (54,860)

Consolidated amounts ￦ 6,785,880 339,440 216,806 143,956

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

March 31, 2015 and 2014

(Unaudited)

35. Operating Segments and Geographic Information, Continued

(d) Reconciliation of segment assets and liabilities to their respective consolidated financial statement line items as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions)

March 31, 2015

Assets Liabilities

Department stores ￦ 16,636,696 9,986,061 Discount stores 10,439,604 2,495,798 Card business 8,446,833 6,503,209 Consumer electronics retail 2,797,935 1,096,743 Others 6,315,826 2,648,604

Segment totals 44,636,894 22,730,415

Elimination of inter-segment assets and

liabilities (753,510) (753,510) Adjustments of business combinations 794,613 212,022 Investments in subsidiaries and associates (4,928,021) -

Subtotal (4,886,918) (541,488)

After consolidated adjustments ￦ 39,749,976 22,188,927

Korean won (millions)

December 31, 2014

Assets Liabilities

Department stores ￦ 16,794,731 10,029,922 Discount stores 10,412,802 2,569,120 Card business 8,575,013 6,631,412 Consumer electronics retail 2,774,637 1,089,503 Others 6,126,821 2,496,789

Segment totals 44,684,004 22,816,746

Elimination of inter-segment assets and liabilities (503,951) (503,951) Adjustments of business combinations 784,617 215,654 Investments in subsidiaries and associates (4,892,344) -

Subtotal (4,611,678) (288,297)

After consolidated adjustments ￦ 40,072,326 22,528,449

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

March 31, 2015 and 2014

(Unaudited)

35. Operating Segments and Geographic Information, Continued

(e) Sales by geographical areas for three-month periods ended March 31, 2015 and 2014 are summarized as follows:

Korean won (millions)

Region 2015 2014

Domestic ￦ 6,322,676 6,178,021 China 398,599 427,571 Vietnam 68,509 41,308 Indonesia 245,908 240,089

Total ￦ 7,035,692 6,886,989

In presenting information on the basis of geographical areas, geographic sales is based on the physical location of customers.

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

March 31, 2015 and 2014

(Unaudited)

36. Contingent Liabilities and Financial Commitments

(a) As of March 31, 2015, the Group has the following credit facility commitments with financial institutions:

Amount used Credit line under credit facility Korean won (millions), Korean won (millions), Foreign currency (thousands) Foreign currency (thousands)

General loan KRW 2,006,500 KRW 840,500 CNY 2,574,093 CNY 2,182,982 VND 200,000,000 VND 200,000,000 USD 837,927 USD 837,828 IDR 2,120,000,000 IDR 1,760,000,000 HKD 189,000 HKD 156,000 Discount of bill KRW 1,435,000 KRW 750,000 Buyer’s credit KRW 664,000 KRW 31,214 Bank overdraft KRW 305,000 KRW 1,975 CNY 300,000 CNY 285,460 Guarantee KRW 4,600 KRW 3,828 Letter of credit USD 15,200 USD 5,066 Others KRW 57,000 KRW 37

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

Company Contractor Description of contract

Lotte Shopping Co., Ltd. Lotte Station Building Co., Ltd. Providing management services

Lotte Card Co., Ltd. American Express Company, Master Card Commissions based on credit International, Visa International and card transaction amount UNIONPAY INTERNATIONAL

Woori Home Shopping & Lotte Capital Co., Ltd. Contract of operating leases Television Co., Ltd. Kumho Rent-a-car Co., Ltd.

Shinhan card Issuing credit cards Lotte card

LOTTE LOGISTICS CORP. Logistics services HYUNDAI LOGISTICS CO., LTD. CJ Korea Express Corporation HANJIN TRANSPORTATION CO., LTD.

Cable TV operators Providing broadcast programs

Korea Seven Co., Ltd. 7-Eleven, Inc. Using the registered trademark and operating know-how

NCF Co., Ltd. Nice Claup Co., Ltd. Royalty payments based on net revenue of selling and manufacturing amounts

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

March 31, 2015 and 2014

(Unaudited)

36. Contingent Liabilities and Financial Commitments, Continued

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

Company Contractor Description of contract

Buy the way Inc. Sports TOTO Co., Ltd. Renewal guarantees of payments for goods every year

(c) As of March 31, 2015, the Group is the plaintiff in various lawsuits with damage claims totaling W56,557 million and the Group is the defendant in various lawsuits with damage claims totaling W104,931 million, among which W35,185 million is related to a claim against Lotte Card Co., Ltd., a subsidiary of the Company, related to personal data leaks. Since the Group cannot reliably estimate the impacts from lawsuit results related to personal data leaks, no provisions were recognized. The management believes that the ultimate resolutions of other legal action will not have a material effect of the financial position or results of operations of the Group.

(d) 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.

(e) The company has the right to purchase 5.1% of the Hyundai Logistics Co., Ltd. shares held by IGIS I Corporation and in the event the company does not exercise the call option, IGIS I Corporation has the right to require the Company to purchase 5.1% of Hyundai Logistics Co., Ltd. shares held by IGIS I Corporation. In connection with IGIS I Corporation’s borrowings, all IGIS I Corporation shares (W5,992 million of book value) held by the Company have been in pledge in Mizuho Corporate Bank.

(f) Lotte Shopping Co., Ltd. disposed of land and buildings of 3 stores including Lotte mart Jeju store to KTB Confidence Private Real Estate Investment Trust for W220 billion in 2008 and the Company has been leasing the assets. The Company disposed of land and buildings of 6 stores including Lotte department store Bundang store to Lotte Retail Real Estate Investment Trust for W595 billion in 2010 and 2011, and the Company has been leasing the assets. The Company has the options to purchase the assets at a fair value at the end of the lease. In 2014, the Company disposed of land and buildings of 2 Lotte department stores including Ilsan store and 5 Lotte mart stores including Bupyeong store to KB Lotte Master Lease Private Real Estate Investment Trust for W602 billion and the Company has been leasing the assets. The Company disposed of land and buildings of 2 Lotte department stores including Dongnae store and 3 Lotte mart stores including Sungjung store to Capstone Private Real Estate Investment Trust for W500 billion and the Company has been leasing the assets. The Company has the preferential right of negotiation to purchase the assets at the end of the lease, and the Group does not consolidate these structured entities.

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

March 31, 2015 and 2014

(Unaudited)

37. Inter-company Transactions and Balances with Consolidated Companies

The Group has provided guarantees for consolidated companies as of March 31, 2015 as follows:

2015 Guaranteed Consolidated Type of amount company Provided by Guarantee recipient borrowings (thousands)

LOTTE Lotte Shopping Korea Exchange Bank Working capital USD 140,000 PROPERTIES Co., Ltd. (CHENGDU) HK Shinhan Bank USD 50,000 LIMITED

Lotte Shopping Lotte Shopping Standard Chartered Working capital Holdings Co., Ltd. Bank Korea Limited USD 38,136 (Hong Kong) Co., Limited BNP Paribas USD 38,135 Citibank N.A., Hong Kong Branch USD 38,135 SMBC USD 38,135 ING USD120,214

PT. LOTTE Lotte Shopping DBS Working capital USD 20,000 Shopping Avenue Co., Ltd. Indonesia

Lucky Pai Woori Home Shinhan Bank Working capital RMB 46,000 (Shanghai) Shopping & RMB 14,000

Trading Co., Ltd. Television Co., Ltd. RMB 57,000

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies

(a) Details of control and subsidiary relationships with the Company as of March 31, 2015 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 Affiliate of Lotte Group COMPANY 4.81 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.

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies, Continued

(b) Significant transactions which occurred in the normal course of business with related companies for the three-month periods ended March 31, 2015 and 2014 are summarized as follows:

Korean won (millions)

2015

Purchase of Purchase of Other Other Related company Sales inventories fixed asset revenue expenses

Shareholders:

Hotel Lotte Co., Ltd. ￦ 17,765 34 3,267 7 32,652 Lotte Confectionery Co., Ltd. 3,893 43,057 - 52 3,693 Lotte Chilsung Beverage Co., Ltd. 2,551 22,808 - 18 162 Lotte Engineering & Construction Co., Ltd. 1,472 - 112,622 - 96 Hotel Lotte Pusan Co., Ltd. 2,024 - - - 4,979 LOTTE DATA COMMUNICATION COMPANY 7,460 628 43,311 44 42,274 Korea Fuji Film Co., Ltd. 425 170 - - - Sub total 35,590 66,697 159,200 121 83,856

Associates: DAEHONG COMMUNICATIONS INC. 7,249 - 165 14 21,309 Lotte Station Building Co., Ltd. 5,400 - - - 1,571 Lotteria Co., Ltd. 4,514 1,344 - - 62 Lotte Trading Co., Ltd. 1,558 56,317 - - 4 Others 25,169 11,595 4,919 1,331 42,315 Sub total 43,890 69,256 5,084 1,345 65,261

Others: LOTTE FOOD CO., LTD. 4,610 47,586 - 12 1,945 Lotte Aluminum Co., Ltd. 733 2,734 6,064 1 8,141 Lotte Logistics Co., Ltd. 6,847 436,492 518 9,796 50,043 Others 15,612 7,967 1,574 108 38,945 Sub total 27,802 494,779 8,156 9,917 99,074

Total ￦ 107,282 630,732 172,440 11,383 248,191

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies, Continued

(b) Significant transactions which occurred in the normal course of business with related companies for the three-month periods ended March 31, 2015 and 2014 are summarized as follows:, continued

Korean won (millions)

2014

Purchase of Purchase of Other Other Related company Sales inventories fixed asset revenue expenses

Shareholders:

Hotel Lotte Co., Ltd. ￦ 15,442 39 - 205 27,410 Lotte Confectionery Co., Ltd. 5,902 29,945 - 9 3,531 Lotte Chilsung Beverage Co., Ltd. 4,150 24,824 - 10 109 Lotte Engineering & Construction Co., Ltd. 1,308 - 144,410 1 1,718 Hotel Lotte Pusan Co., Ltd. 2,461 - 80 3 4,884 LOTTE DATA COMMUNICATION COMPANY 9,296 802 36,689 126 41,771 Korea Fuji Film Co., Ltd. 467 222 - - 3 Sub total 39,026 55,832 181,179 354 79,426

Associates: DAEHONG COMMUNICATIONS INC. 5,809 - - 21 19,261 Lotte Station Building Co., Ltd. 5,769 - - - 1,667 Lotteria Co., Ltd. 5,389 1,870 - 371 683 Lotte Trading Co., Ltd. 2,487 67,461 - 3 27 Others 19,695 6,695 789 291 41,328 Sub total 39,149 76,026 789 686 62,966

Others: LOTTE FOOD CO., LTD. 5,747 41,516 - 22 1,827 Lotte Aluminum Co., Ltd. 592 3,416 1,827 - 7,505 Lotte Logistics Co., Ltd. 3,158 349,094 - - 46,341 Others 12,298 3,198 2,580 845 11,931 Sub total 21,795 397,224 4,407 867 67,604

Total ￦ 99,970 529,082 186,375 1,907 209,996

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies, Continued

(c) Significant financial transactions with related companies for the three-month periods ended March 31, 2015 and 2014 are summarized as follows:

Korean won (millions)

2015

Capital Capital Related company Borrowings Repayment increase decrease

Associates:

Lotte Europe Holdings B.V ￦ - - 10,855 - Lotte Asset Development Co., Ltd. - - 19,571 - Shandong Longzhile Cinema Co., Ltd. - - 437 - Hemisphere Film Investors II LLC - - - (3,875) Others - - 3,450 (636) Sub total - - 34,313 (4,511)

Others: Lotte Capital Lease & Finance (China) Co., Ltd. and others 12,147 3,966 - -

Total ￦ 12,147 3,966 34,313 (4,511)

Korean won (millions)

2014

Capital Capital Related company Collection Borrowings Repayment increase decrease

Associates: PT. Lotte Capital Indonesia ￦ - - 186 - - Shandong Longzhile Cinema Co., Ltd. 1,741 - - 1,294 - Others - - - 1,717 (750) Sub total 1,741 - 186 3,011 (750)

Others: Lotte Capital Lease & Finance(China) Co., Ltd. - 9,649 - - -

Total ￦ 1,741 9,649 186 3,011 (750)

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies, Continued

(d) Account balances with related companies as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions)

2015

Receivables Payables Trade Other Trade Other Related company receivables receivables payables Borrowings payables

Shareholders:

Hotel Lotte Co., Ltd. ￦ 2,628 92,283 17 - 18,022 Lotte Confectionery Co., Ltd. 345 11,470 19,296 - 2,170 Lotte Chilsung Beverage Co., Ltd. 467 42,565 7,398 - 4,530 Lotte Engineering & Construction Co., Ltd. 24 46,517 - - 237,815 Hotel Lotte Pusan Co., Ltd. 89 10,151 - - 1,682 LOTTE DATA COMMUNICATION COMPANY 8 21,194 378 - 40,948 Korea Fuji Film Co., Ltd. 5 74 100 - 3,030 Sub total 3,566 224,254 27,189 - 308,197

Associates: DAEHONG COMMUNICATIONS INC. 2,172 1,023 1 - 28,991 Lotte Station Building Co., Ltd. 11,339 16,995 1 - 12,027 Lotteria Co., Ltd. 1,360 1,432 633 - 10,945 Lotte Trading Co., Ltd. 63 960 11,185 - 142 Others 4,158 8,306 16,385 5,000 34,363 Sub total 19,092 28,716 28,205 5,000 86,468

Others: LOTTE FOOD CO., LTD. 309 4,101 15,638 - 7,854 Lotte Aluminum Co., Ltd. 59 29,783 1,214 - 9,381 Lotte Logistics Co., Ltd. 3 1,099 201,090 - 24,053 Others 2,907 124,466 2,441 15,221 54,472 Sub total 3,278 159,449 220,383 15,221 95,760

Total ￦ 25,936 412,419 275,777 20,221 490,425

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies, Continued

(d) Account balances with related companies as of March 31, 2015 and December 31, 2014 are summarized as follows:, continued

Korean won (millions)

2014

Receivables Payables Trade Other Trade Other Related company receivables receivables payables Borrowings payables

Shareholders:

Hotel Lotte Co., Ltd. ￦ 101 67,207 - - 59,121 Lotte Confectionery Co., Ltd. 472 11,352 18,102 - 2,502 Lotte Chilsung Beverage Co., Ltd. 118 54,126 5,102 - 4,497 Lotte Engineering & Construction Co., Ltd. 44 49,383 - - 197,912 Hotel Lotte Pusan Co., Ltd. - 10,618 - - 2,929 LOTTE DATA COMMUNICATION COMPANY 147 12,482 327 - 44,016 Korea Fuji Film Co., Ltd. 5 78 178 - 1,259 Sub total 887 205,246 23,709 - 312,236

Associates: DAEHONG COMMUNICATIONS INC. 4,421 838 - - 21,621 Lotte Station Building Co., Ltd. 10,759 14,921 - - 7,329 Lotteria Co., Ltd. 25 1,531 568 - 10,933 Lotte Trading Co., Ltd. 6 1,163 7,507 - 61 Others 77,527 7,871 15,980 - 60,899 Sub total 92,738 26,324 24,055 - 100,843

Others: LOTTE FOOD CO., LTD. 240 1,622 13,717 - 7,800 Lotte Aluminum Co., Ltd. 39 18,377 1,307 - 7,524 Lotte Logistics Co., Ltd. - 1,138 181,676 - 20,204 Others 3,599 150,944 2,590 9,925 48,677 Sub total 3,878 172,081 199,290 9,925 84,205

Total ￦ 97,503 403,651 247,054 9,925 497,284

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

March 31, 2015 and 2014

(Unaudited)

38. Transactions and Balances with Related Companies, Continued

(e) The Group has provided guarantees for related companies as of March 31, 2015 as follows:

Guaranteed amount Related company Guarantee recipient Type of borrowings (thousand)

Associates Lotte Shopping Rus Korea Exchange Working capital USD 5,000

Ltd. Bank Shandong Longzhile Shinhan Bank Working capital RMB 24,000

Cinema Co., Ltd. Joint venture International The Export-Import Working capital USD 18,500 Business Bank of Korea Center Company Limited KEXIM (Vietnam) Working capital USD 1,500

(f) 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.

(g) The fulfillment of the loyalty contract between Burger King Japan Co., Ltd. and BK Asiapac, Pte. Ltd. was guaranteed by the Group.

(h) In 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.

(i) In 2015, Lotte Incheon Town Co., Ltd., which is the Group's associate, entered into a land sale and purchase agreement with the government of Incheon city. As a result of the agreement, the Group collected a security deposit of W30,600 million, which were previously paid by the Group to the city government on behalf of Lotte Incheon Town Co., Ltd., from Lotte Incheon Town Co., Ltd.

(j) In 2013, The Group Issued Hybrid securities, among which ￦20,000 million is held by Lotte Non-Life Insurance Co., Ltd.

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

March 31, 2015 and 2014

(Unaudited)

39. 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 March 31, 2015 and December 31, 2014 are as follows:

Korean won (millions) Account March 31, 2015 December 31, 2014

Cash equivalent (*1) ￦ 1,180,032 1,885,284 Trade and other receivables 1,013,832 912,952

Other financial assets (current) 8,525,434 8,598,854

Other financial assets (non-current) (*2) 1,365,799 1,328,751

Total ￦ 12,085,097 12,725,841

(*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.

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

March 31, 2015 and 2014

(Unaudited)

39. 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 March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 Receivables that Receivables that are past due as are neither past due at the end of the reporting period Receivables Description nor impaired but not impaired impaired(*) Total

Trade and other receivables ￦ 986,100 27,732 17,639 1,031,471 Other financial assets (current) 8,181,880 346,566 191,306 8,719,752 Other financial assets (non- current) 1,360,431 5,368 4,011 1,369,810

Total ￦ 10,528,411 379,666 212,956 11,121,033

(*) The Group sets up an allowance for doubtful account when financial assets are individually determined to be impaired.

Korean won (millions) December 31, 2014 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 ￦ 895,725 17,227 16,131 929,083 Other financial assets (current) 8,116,624 420,415 240,921 8,777,960 Other financial assets (non- current) 1,323,382 5,369 4,000 1,332,751

Total ￦ 10,335,731 443,011 261,052 11,039,794

(*) The Group sets up an allowance for doubtful account when financial assets are individually determined to be impaired.

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

March 31, 2015 and 2014

(Unaudited)

39. 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 three-month period ended March 31, 2015 and for the year ended December 31, 2014 are summarized as follow:

Korean won (millions)

2015 2014

Balance at beginning of the period ￦ 16,131 17,087 Impairment loss 1,568 5,206 Reversal of Impairment loss (12) (220) Write-offs (94) (5,253) Recoveries 16 27 Others 30 (716)

Balance at end of the period ￦ 17,639 16,131

The movement in the allowance for doubtful other financial assets (current) for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are summarized as follow:

Korean won (millions)

2015 2014

Balance at beginning of the period ￦ 179,106 220,727 Impairment loss 49,731 197,360 Write-offs (39,123) (250,811) Recoveries 4,604 11,830

Balance at end of the period ￦ 194,318 179,106

The movement in the allowance for doubtful other financial assets (non-current) for the three-month period ended March 31, 2015 and for the year ended December 31, 2014 are summarized as follow:

Korean won (millions)

2015 2014

Balance at beginning of the period ￦ 4,000 2,000 Impairment loss 11 2,000

Balance at end of the period ￦ 4,011 4,000

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

March 31, 2015 and 2014

(Unaudited)

39. 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 aging 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) March 31, 2015 Carrying 3 months 3 ~ 6 6 ~ 12 More than

Description amount or less months months 1 year

Trade and other receivables ￦ 27,732 12,705 4,688 7,178 3,161 Other financial assets (current) 346,566 346,254 312 - - Other financial assets (non-current) 5,368 - - - 5,368

Total ￦ 379,666 358,959 5,000 7,178 8,529

Korean won (millions) December 31, 2014 Carrying 3 months 3 ~ 6 6 ~ 12 More than

Description amount or less months months 1 year

Trade and other receivables ￦ 17,227 6,847 3,539 5,111 1,730 Other financial assets (current) 420,415 419,906 509 - - Other financial assets (non-current) 5,369 - - - 5,369

Total ￦ 443,011 426,753 4,048 5,111 7,099

5) Guarantees

As of March 31, 2015, 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 ￦31,897 million.

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

March 31, 2015 and 2014

(Unaudited)

39. 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.

Aggregate maturities of financial liabilities, including estimated interest, as of March 31, 2015 are as follows:

Korean won (millions) March 31, 2015 Carrying Contractual 3 months or 3 ~ 6 6 ~ 12 More than

Description amount cash flows less months months 1 year

Borrowings and debentures (current) ￦ 4,325,359 4,435,306 934,661 1,531,991 1,968,654 - Trade and other payables 5,549,230 5,549,231 5,389,052 152,357 7,822 - Other financial liabilities (current) 525,089 526,646 275,748 43,950 206,948 - Borrowings and debentures (non-current) 8,098,165 8,847,450 67,880 51,585 120,779 8,607,206 Other financial liabilities (non-current) 288,079 313,778 25,866 4,070 6,839 277,003

Total ￦ 18,785,922 19,672,411 6,693,207 1,783,953 2,311,042 8,884,209

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

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

March 31, 2015 and 2014

(Unaudited)

39. 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 March 31, 2015 and December 31, 2014 are as follows:

Korean won (millions) March 31, 2015 December 31, 2014 Assets Liabilities Assets Liabilities

USD ￦ 971,410 2,427,468 827,758 2,274,432 EUR 28 1,483 32 1,832 JPY 28,623 403,837 28,521 423,187 RMB 232 - 80 -

Total ￦ 1,000,293 2,832,788 856,391 2,699,451

The closing rates as of March 31, 2015 and December 31, 2014 and the average rates for the three-month period ended March 31, 2015 and 2014 are as follows:

Average rate Closing rate 2015 2014 March 31, 2015 December 31, 2014

USD ￦ 1,100.26 1,069.01 1,105.00 1,099.20 EUR 1,239.34 1,465.03 1,196.77 1,336.52

JPY 9.2339 10.3962 9.2026 9.2014 RMB 176.45 175.25 178.02 177.23

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

March 31, 2015 and 2014

(Unaudited)

39. 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 March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 10% increase 10% decrease 10% increase 10% decrease

USD ￦ (42,972) 42,972 (42,575) 42,575 EUR (145) 145 (180) 180 JPY (27,599) 27,599 (27,604) 27,604 RMB 23 (23) 8 (8)

Total ￦ (70,693) 70,693 (70,351) 70,351

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 March 31, 2015 and December 31, 2014 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)

March 31, 2015 December 31, 2014

Variable rate instruments:

Financial assets ￦ 465,753 587,834 Financial liabilities 3,231,824 3,245,438

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

March 31, 2015 and 2014

(Unaudited)

39. Risk Management, Continued

(a) Management of financial risks, continued

Sensitivity analysis of interest income and expenses from changes in interest rates as of March 31, 2015 and December 31, 2014 are summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 100bps up 100bps down 100bps up 100bps down

Interest income ￦ 4,658 (4,658) 5,878 (5,878) Interest expense 8,015 (8,015) 6,460 (6,460)

Borrowings and debentures for which the Group 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 March 31, 2015 and December 31, 2014 are ￦348,196 million and ￦390,009 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 March 31, 2015 and December 31, 2014 are as summarized as follows:

Korean won (millions) March 31, 2015 December 31, 2014 10% increase 10% decrease 10% increase 10% decrease

Other comprehensive income ￦ 34,820 (34,820) 39,001 (39,001)

(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 March 31, 2015 and December 31, 2014 are as follows:

Korean won (millions) March 31, 2015 December 31, 2014

Liabilities (a) ￦ 22,188,927 22,528,449 Equity (b) 17,561,049 17,543,877 Financial instruments (*) (c) 2,058,688 2,627,789 Borrowings (d) 12,423,524 12,726,565 Liabilities to equity ratio (a/b) 126.35% 128.41% Net borrowings to equity ratio ((d-c)/b) 59.02% 57.56%

(*) Financial instruments mainly consist of ordinary deposits, checking accounts, short-term and long-term financial instruments.

94