Semi-Annual Report

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Semi-Annual Report CGSH Draft 09/08/2010 Semi-annual Report (41th Fiscal year, 1st half) For the six months ended June 30, 2010 To: Financial Services Commission of Korea KRX KOSPI Market August 16, 2010 Company Name : Lotte Shopping Co., Ltd. CEO : Lee, Cheolwoo Head Office : 1, Sogong-dong, Jung-gu, Seoul (Tel) 82-2-771-2500 (Homepage) http://www.lotteshopping.com Prepared by : (Position) Head of Strategic Planning (Name) Kim, Sewan (Tel) 82-2-2118-2018 THIS IS A TRANSLATION OF THE ANNUAL REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION. IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS. UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A NON-CONSOLIDATED BASIS IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN KOREA, OR KOREAN GAAP, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES. 1 CGSH Draft 09/08/2010 I. Overall Condition of Lotte Shopping 1. Business Objective A. Legal / commercial name of company: Lotte Shopping Co., Ltd. (the ―Company‖ or ―we‖) B. Date of establishment The Company was incorporated in July 1970 as a corporation engaged in the general distribution business, including department store, discount store and supermarket businesses. Year. Month Changes 1970.07 Founded as Hyeobwoo Industry Co., Ltd. 1979.11 Changed company name from Hyeobwoo Industry Co., Ltd. to Lotte Shopping Co., Ltd. C. Address, Telephone and homepage Address: 1 Sogong-dong, Jung-gu, Seoul Tel: 82-2-771-2500 Homepage: http://www.lotteshopping.com D. Legislation and regulations related to the distribution industry Legislation and regulations related to the distribution industry are as follows. (a) The Distribution Industry Development Act The Company should abide by provisions in the Act when opening and operating large stores including department stores and large marts. (b) The Monopoly Regulation and Fair Trade Act The Company should engage in fair and free competition over the market. The Act prohibits the Company from actions that could be of impediment to fair competition and imposes certain punishments on any violations against the provisions in the Act. (c) The Promotional Act of Reciprocal Cooperation between Large Enterprises and SMEs The Company might receive recommendations for adjustment in its business activities if the Company’s launch or expansion of businesses is considered to have or potentially have significant adverse effects on the stable management of small and medium enterprises. (d) Other laws and regulations the Company is subject to include the Construction Act, Parking Lot Act, Urban Traffic Arrangement Promotion Act, Commercial Building Lease Protection Act, Manufactured Objects Liabilities Act and the Food Sanitation Act. E. Main Business The Company has continued to open new stores in 2010, including one department store, one outlet store, nine discount stores in Korea and nine discount stores in overseas markets, and is actively promoting new domestic businesses such as outlets, shopping malls (shopping complexes located in suburban or redeveloped areas, which combine leisure and shopping facilities), new format businesses such as ―category killers‖ and fashion businesses (including the development and importation of global brands). With respect to overseas business activities, we opened our second overseas department store in Beijing, China in August 2008, following the opening of our first overseas department store in Moscow, Russia in September 2007. As of June 30, 2010, the mart store business sector has established and is operating 78 mart stores in China, 2 CGSH Draft 09/08/2010 one in Vietnam and 19 in Indonesia as separate entities. The Company is actively seeking out more opportunities for its overseas retail and distribution business through further expansion and new store openings. See ―II. Business Description (Wholesale and Retail)‖. F. Affiliated Companies (As of June 30, 2010) Lotte Confectionery, Lotte Chilsung Beverage, Lotte Samkang, Honam Listed 8 Petrochemical Corporation, Lotte Midopa, KP Chemical, Lotte Shopping, Companies Lotte Insurance Daehong Communication, Lotte.com, Lotteria, Lotte Boulangerie, Lotte Asahi Liquor, Lotte Giants, Lotte Ham, Lotte Hotel Busan, Cinema Trading, Seetec, Wellga, KP Chemtech, Korea Seven, Hotel Lotte, Lotte Engineering and Construction, Lotte Logistics, Lotte Corporation, Lotte Trading, Lotte Aluminum, Lotte Station Building, Lotte Data Communication, Lotte Pharmacy, Lotte Fresh Delica, FRL Korea, Cheongna Energy, Canon Korea Private Business Solutions Inc., Korea FUJIFILM, Lotte Card, Lotte Capital, Daesan 56 Companies MMA, Woori Home Shopping, Lotte JTB, Lotte Asset Development, D- Cinema of Korea, Sanjung Beverage, Hayo Technology, Lotte City Hotel, Changdae Trading, KI Bank, Lotte Jeju Resort, Lotte Buyeo Resort, Liquor BG, CH Beverage, Lotte Wine Sales, Busan Hanarocard, Mybi, Sambark, SambarkLFT, Kirin, Lotte KKD, Han Paysys, Universal Studios Korea Resort Development, Lotte Gimhae Development, Buy the Way, Bongil Losis, Lotte Square Total 64 ※ In total, applying the equity method of accounting, the Company owns 38 companies (27 domestic and 11 overseas). G. Credit Rating Date Securities subject Securities Rating agency Type to rating subject Securities Credit rating (Range) May 31, 2010 Commercial paper A1 Korea Ratings Primary rating May 12, 2010 Commercial paper A1 Nice Investors Service Primary rating May 11, 2010 Commercial paper A1 Korea Investors Service Primary rating May 11, 2010 Corporate bonds AA+ Nice Investors Service Primary rating May 11, 2010 Corporate bonds AA+ Korea Investors Service Primary rating May 20, 2010 Corporate bonds A- (stable) Fitch (England) Regular rating Apr. 28, 2010 Corporate bonds A3 (stable) Moody‘s (America) Regular rating Mar.03, 2010 Corporate bonds AA+ Korea Ratings Primary rating Mar.03, 2010 Corporate bonds AA+ Korea Investors Service Primary rating Nov.24, 2009 Corporate bonds AA+ Nice Investors Service Primary rating Nov.24, 2009 Corporate bonds AA+ Korea Investors Service Primary rating Sep.22, 2009 Corporate bonds AA+ Korea Investors Service Primary rating Sep.22. 2009 Corporate bonds AA+ Korea Ratings Primary rating Jun. 25, 2009 Commercial paper A1 Korea Investors Service Primary rating Jun. 15, 2009 Commercial paper A1 Korea Ratings Primary rating Jun. 15, 2009 Corporate bonds AA+ Korea Investors Service Primary rating Jun. 15, 2009 Corporate bonds AA+ Korea Ratings Primary rating Feb. 06, 2009 Corporate bonds A- (stable) Fitch (England) Primary rating Feb. 04, 2009 Corporate bonds A3 (stable) Moody‘s (America) Primary rating Sep. 29, 2008 Corporate bonds AA+ Korea Ratings Primary rating Sep. 29, 2008 Corporate bonds AA+ Korea Investors Service Primary rating 3 CGSH Draft 09/08/2010 Jun. 27, 2008 Commercial paper A1 Korea Investors Service Primary rating May 20, 2008 Corporate bonds AA+ Korea Investors Service Primary rating May 20, 2008 Corporate bonds AA+ Korea Ratings Primary rating Apr. 21, 2008 Commercial paper A1 Korea Ratings Primary rating Jan. 02, 2008 Commercial paper A1 Korea Investors Service Regular rating Dec. 27, 2007 Commercial paper A1 Korea Ratings Regular rating Jun. 28, 2007 Commercial paper A1 Korea Investors Service Primary rating Jun. 28, 2007 Corporate bonds AA+ Korea Investors Service Regular rating Jun. 26, 2007 Commercial paper A1 Korea Ratings Primary rating May 09, 2007 Corporate bonds AA+ Korea Ratings Regular rating Jan. 10, 2007 Commercial paper A1 Korea Ratings Regular rating Dec. 29, 2006 Commercial paper A1 Korea Investors Service Regular rating Jun. 28, 2006 Commercial paper A1 Korea Investors Service Regular rating Jun. 27, 2006 Commercial paper A1 Korea Ratings Regular rating Feb. 10, 2006 Corporate bonds AA+ Korea Ratings Irregular rating Jan. 18, 2006 Commercial paper A1 Korea Ratings Regular rating Jan. 06, 2006 Commercial paper A1 Korea Investors Service Regular rating 2. Company background A. Company background (1) Significant changes since establishment (a) Company‘s establishment, etc Year. Month Changes 1970.07 Establishment of Hyupwoo industry 1979.01 Relocation of headquarters to 1 Sogong-dong, Jung-gu, Seoul 1982.08 Registered on the Securities Supervisory Service 1979.11 Name changed from Hyupwoo Industry to Lotte Shopping 1984.07 Asset revaluation 1995.03 Capital reduction without consideration to Won 5.6 billion 1995.12 Capital increase to Won 24 billion 1998.07 Asset revaluation 1998.01 Capital increase to Won 26.5 billion 1998.12 Capital increase to Won 100 billion 2004.03 Acquisition of Hanwha Stores Chain Business Division (25 supermarkets, 1 distribution center) 2006.02 Capital increase to Won 142.9 billion 2006.02 Listed on the securities market 2006.03 Capital increase to Won 145.2 billion 2006.08 Acquisition of Woori Home Shopping (53.03%) 2007.05 Acquisition of Big Mart (14 supermarkets, 1 store) 2007.09 Department store opening in Russia 2007.10 Acquisition of Nice Mart (5 supermarkets) 2008.05 Acquisition of Makro in China (8 discount stores) 2008.08 Department store opening in China 2008.11 Acquisition of Makro in Indonesia (19 discount stores) 2009.12 Acquisition of Times in China (57 discount stores, 11 supermarkets) 2010.01 Asset revaluation (for owned lands including 1 Sogong-dong) 4 CGSH Draft 09/08/2010 Year. Month Changes
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