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Corporate Governence Policy
the controlling shareholder and persons with special interest can exercise up to -------% voting rights. in aggregate.56% is owned by domestic. Other shareholders. Including principal shareholders.952 42.49% stake with the company. MINORITY SHAREHOLDERS d RIGHTS The following table shows the minimum shareholdings required for the exercise of the minority shareholders¶ rights.83 Shin Dong Ju 49.298 49. [LC¶s ownership structure] (As for Mar.05 Treasury stocks 14.83%) and Lotte Scholarship Foundation(8.576 8. the shareholder with more than 5% stake is the chairman.48 Shin Dong Bin 69. controlling shareholders and person and foundation with special interests can exercise up to ----% of the voting rights.421.98 Total 1.03% stake.49 Domestic 93.90 Subject to 3% restriction rule Controlling Shareholder & Persons with Special Interest Shin Gyeok Ho 97.88 Other Family members 35.28 Sub Total 710.450 3.965 2.29 Lotte Foundation 123. Minimum Number of shares Right bring shareholders derivative actions Right to claim injunctive relief for director¶s illegal Right to demand dismissal of director/auditor Right to inspect accounting Books Right to demand appointment of inspector Minimum Stake . in total.56 Sub total 697.00 OWNERSHIP STRUCTURE With respect to ordinary items.102 49.49% is owned by foreigner and 6.1 Ownership Structure Voting Right OWNERSHI P STRUCTUR E The largest shareholder of LOTTE CONFECTIONARY CO.69%).400 100. %) Voting right Ordinary items 6.29% stake in the company.149 6.(LC) is Lotte Aluminum with a 15. With the exception of the largest shareholder.69 Other Affiliates 100.350 4. own a 50.000 0. With respect to items such as µElection of members of the Audit Committee who sits as an outside directors¶ and µExclusive of Cumulative Voting¶. the chairman¶s family members and affiliates. 2011) Ownership Number of shares stake (Unit : share. 41. Among those. Shareholders must hold their shares for at least six months to exercise the following minority shareholders rights (with respect to their sh areholdings).268 15.52 Lotte Aluminum 217.532 8. Shin Gyeok Ho(6. control 49..LTD.057 6.97 Other shareholders Foreigner 603.1. 9.
packaging materials. 31. in turn. the chairman Shin Gyeok Ho and affiliates hold 100%. directors of the company each own 3.6% stake of Lotte Shopping and 4. 31. The largest shareholder of Lotte Confectionary is Lotte Aluminum. GYEOK HO Lotte Aluminum Lotte Confectionary ± Lotte Shopping ± Lotte Aluminum ± Lotte Confectionary Lotte Alunimum As of Dec. this circular investment system reinforce his controlling right of Lotte Group. the largest shareholder is Lotte Aluminum with 15.29%. owns 2. 31.7% stake of Lotte Aluminum. Lotte Foundation As of Dec.Right to call an extraordinary shareholders¶ meeting Shareholder proposal right Right to nominate outside directors Based on shares with voting rights 1.6% of Lotte Shopping. 217. materials. Also. in total. his eldest daughter. Lotte Hotel As of Dec. 2009. his eldest son and Shin Dong Bin. 2009. . the largest shareholder of Lotte Shopping is Lotte Confectionary. 31.21% of Lotte Confectionary. 2009.2 Controlling Sharehol er an CONTROLLING SHAREHOLDER-SHIN As of Dec. 2009. the principal shareholder of this company is Lotte Shopping. cardboard boxes.48% and 4. Shin Young Ja. chairman Shin Gyeok Ho owns 31. CANs and plastic bottles. youngest son.52% stake. Shin Dong Ju.83%. Also. 31. As of Dec. produce aluminum foil. The ownership structure of the Group shows circular investments made by and among the affiliates.268. held in 1966. 9.88% stake in the company. 1. The Lotte Foundation holds 8. The Lotte Hotel holds 3. and 13% of Lotte Aluminum.69% of Lotte Confectionary. Lotte Aluminum.3 Other sharehol ers Persons with Special Interest Shin Gyeok Ho Lotte Confectionary Lotte Shopping . Although the chairman Shin Gyeok Ho own large stakes if affiliates of Lotte Group. Chairman Shin Gyeok Ho owns 6. 2009.
Russia ± On 22 January. the business operations will be divided into three components. Vietnam ± On May 2008. Vietnam.5 Possibility of Change in Ownership Structure an Corporate Control . Bleichroeder Advisers.49% stake of Lotte Confectionary. The objective of the venture is to penetrate the lucrative Chinese candy market that has been dominated by domestic Chinese vendors. chocolate maker. Franklin Mutual. Franklin Mutual Advisors. in order to enter the Chinese market. has sold 1.83% of the share. Bibica has been riding on a promising trajectory for success. however. Lotte Group.7% stake (137. Lotte Confectionery holds a 51% stake in the joint venture. there are three shareholders which have more than 5% stake.05% stake of Lotte Confectionary. Arnhold and S. Lotte Confectionary acquired 100% ownership of the Belgian company Chocolaterie Guylian NV (³Guylian´). raising its holding rate to 35. 11. 2011. the domestic investors have 6. As of Feb. Lotte Confectionary successfully bought 840. but also serves as a gateway to enter the growing Russian market as well. on 2 March 2011. The business forecast in these countries alludes to the fact that consumer preference on confectionary goods is likely to experience a steep increase in the domestic market.S. Lotte Japan. Chairman Shin Gyuk Ho who owns 6. and Lotte Shopping. The acquisition enables Lotte Confectionary to not only enter the European market.FOREIGN SHAREHOLDERS As of Feb. Among them.50% and. and dividend payment of 14% including 6% in shares and 8% in cash.000 shares of the Vietnamese Bien Hoa Confectionary (Bibica).56% of Lotte confectionary and there are no single individual that hold 5% or more. a subordinate business operation of the Franklin Templeton investments. it sets an example to domestic firms that seek to expand beyond borders and to enter into a fledging foreign market. Russia.6%. International Value Advisers. Although the partnership does not affect the ownership structure of Lotte Confectionery as a whole. The two companies will manufacture each respective brand products in a Chinese factory acquired by the joint venture capital located in Jinshan. and to place the venture franchise in the top second place of the Chinese market.61% in share of Lotte Confectionary. DOMESTIC SHAREHOLDERS 1. holds 5% in shares of Lotte Confectionary stocks. a U. and became Bibica¶s biggest foreign shareholder. A plot to successfully inherit ¡ 1. and India. Silchester International Investors LLP has 9. 2011.4 Strategic Partner Lotte Confectionary has announced a ³go beyond borders´ strategy to expand its business operations in the confectionary business by aggressively seeking partnership with foreign companies in related fields. foreign shareholder own 41. Having in mind the complex circular ownership structure of the Lotte Group. LLC own 6. LLC own 5. especially in growing economies such as in China. Considering his age and the anticipated succession of the company¶s ownership to his children.946). Hershey plays a role as a main distributor of the product into the Chinese market. Lotte Confectionery has established an $80 million joint venture with Hershey. 11. The largest individual shareholder of Lotte Confectionary is the founder of the Lotte Group. the world leading brand in boxed chocolates. China ± On January 2007.39% and currently owns 3. demonstrating a 20% (33% in 2006) growth rate in sales in the Vietnamese market. it is likely a change in the company¶s ownership will be realized shortly.
97 subtotal Other shareholders Foreign Domestic subtotal Treasury stocks Total 0.the three business operations to his three children.98 0. Japan Lotte Career Shareholding .98 [Shin Dong Bin & Shin Dong Joo¶s Profiles] Shin Gyuk Ho Shin Dong Bin Current Chairman. 31 2011 Dec. 31 2010 Dec. is underway. Shin Dong Joo (Lotte Japan). 31 2008 49. position Group Lotte Group Shin Dong Ju Vice Chairman.98 0. Shin Dong Bin (Lotte Group ± including Lotte Confectionary). Shin Young Hee (Lotte Shopping).98 0.97 49.97 49.97 49. Lotte Vice Chairman. and there is a possibility [Changes in Lotte Confectionary since 2005] Shareholder Shin Gyeok Ho Family members Affiliate company subtotal Strategic Partner Dec. 31 2009 Dec.
3.21~ 07. Kim Chang Seop.24 12. BA.3.3.24 12. and those with less than 2 trillion won in assets must fill at least a quarter of their boards with personnel not currently employed by them. Food Engineering. Personal details of the outside directors are as follows.21 11. Director Rep. and Im Gyeom Mo.COMPOSITION ¢ 2. two are representative directors that are also dual hated in the management of the company.16 11.10~ 00.16~ 08.21~ 08.3.1 Boar of Directors The board of Lotte Confectionary as of Dec. 2009) Year of End of appointment term 09.3.3. Eulji Univ.2. 4 outside directors and 3 internal. 2009 consists of 7 directors.3.24 09.3.3. Hong served in the board¶s directorship until March of 2008 and was replaced by three members that are still incumbent in the board ± Jeon Shin Gi.21 08. 31. Appointment Chae Su Gyu Kim Chang Seop Appointed on March 2007 .16 08.3.21 10.24 12. and Park Hyeon Jin ± at the 41st Shareholder¶s Meeting held on March 2008.3. Korea University Professor of Health Industry Department.3~ Outside Director Outside Director Outside Director Outside Director Sub Total Total Cha Su Gyu Jeon Shin Gi Kim Chang Seop Park Hyeon Jin 07.21 08. Relationship w/ Largest Shareholder N/A N/A Name Career Highlights PhD.17~ 1967. Former executives of companies cannot become board members for their previous employers for two years after their departure.3. Lim resigned and was replaced by Chae Su Gyu on March of 2007 at the 40th Shareholder¶s Meeting.3. listed companies with more than two trillion won in assets must fill more than half of their boards with outside directors.21 Under current regulations.18.104.22.168.24 Tenure Rep. The organization supporting BOD member¶s work is the General Affairs Team. The three of the four outsider directors also serve as directors in the audit committee. formerly of Lotte Canon. Director Chairman Sub Total Kim Sang Hu Shin Dong Bin Shin Gyeok Ho 06.3.21~ 08.21 11. formerly of Lotte World. Of the three internal directors.3. 31. The outside directors have the same access to business information as internal members of the BOD [Board Composition] Position Name (As of Dec. The issue of independence on the outside board members was raised in 2006 as Lotte Confectionary appointed two former employees from the larger Lotte Group into the board: Hong Seong Dae.24 09.4. Seoul National Univ.
Board Size Outside director ratio Tenure Method of Election Contents More than 3 50% of the total number of directors 2 years Voted by AGM More than 50% of attendant shareholders & more than 25% total number of shares Exclude culminative voting CEO becomes the chairperson. Food Engineering. the shareholders can elect some additional directors. Georgia State University KAIST food engineering researcher Professor of Bio-science. If there are two CEOs. Korea Univ. the BOD decides on the chairperson Regular and provisional meetings. Myeongji University Fair Trade Commission Kim & Chang Law Firm advisor Appointed on March 2008 N/A N/A PROVISIONS GOVERNING DIRECTORS Pursuant to the Company¶s AOI. Composition . even if the terms of some directors do not expire. the member of directors is specified more than three. SUB COMMITTEES Lotte Confectionary has such subcommittees working under the Board as the following table. resolution is made based on the presence of a majority of the BOD and the majority consent of the members present. BA. Regular meetings are held on the second Wednesday of every month Compositon Election of directors Method of Voting Board Chairmanship Operation Periodic board of directors meeting Resolution Method In principle. each director and BOD are subject to the following regulations. Members who have special interest on the subject issue considered for voting cannot exercise their voting rights Under the current AOI. Therefore.Park Hyeon Jin Jeon Shin Gi Former Lotte Capital CEO Fomer Lotte Capital advisor PhD.
500 51. During the 41st Shareholder¶s Meeting held on March 2008. The company decides compensation by AGM based on Commercial Law (ss388) and he AOI.413 147. Career information of the former and current auditors are as follows. salary per person 200. The company decided the upper limit of compensation for directors KRW 3.413 1.000 36.000 73. Kim Sang Dae resigned from his auditing post.021 Notes # of people included in calculating: 6 # of people included in calculating: 2 # of people included in calculating: 1 # of people included in calculating: 9 LIABILITY INSURANCE All board members and officers of Lotte Confectionary are insured for directors¶ liability.127 3. The company does not grant stock option to directors for compensation [Compensation] Units: KRW 1. 2009.000 51.171 Amount approved by Shareholder Meeting Avg. the company had one standing auditor (Kim Sang Dae) who served as the auditor between 2003 and 2008. It is believed that directors are evaluated and compensated based on an internal procedure.000 3.Audit Committee Outside Director Nomination Committee Outside directors Internal directors 3 The subcommittee is operated as a non-standing organization. therefore his affiliation with the company was questionable. therefore details on its composition is not disclosed Independence of the Auditors: before the establishment of the Audit Committee.200.000 Item Director Outside Director Auditor Total Total amount paid 1. and an Audit Committee was established that consists of three (3) outside directors.200. However.324. It is not known how directors are evaluated. The company pays all insurance premiums.000. ????? !!! .000 million at the 42nd Shareholder Meeting on 20 March. which is not disclosed to the public. Kim Sang Dae used to work as the senior accounting manager of Lotte Confectionary and Packaging Business Director of Lotte Shopping. Name Career Highlights Notes Kim Sang Dae Milyang High School March 2008: Resigned as Former Accounting Manager in Lotte standing auditor Confectionary March 2006: Reappointed Former Packaging Business Director in as standing auditor Lotte Shopping March 2003: Appointed as standing auditor Personal background of current auditors is covered in the description table of outside directors The 41st Shareholder Meeting also voted and passed the appointment of Jeon Shin Gi as the chairman of the audit committee EVALUATION& COMPENSATION The company does not operate a compensation committee.540 200.
057 shares (6. Chairman Shin Gyeok Ho Shin Gyeok Ho is the Chairman of the larger Lotte Group and shares a significant stake in the company with 97. Vice Chairman Shin Dong Bin. All three members are representative directors of Lotte Confectionary. Top managers of Lotte Confectionary are: Chairman Shin Gyeok Ho. SHIN DONG BIN .83%) KIM SANG HU.2 Management CHIEF EXECUTIVE OFFICER SHIN GYEOK HO. and President Kim Sang Hu.2.
As the retirement of the group¶s founder. Shin Gyuk Ho. Just as Lotte Confectionary retains a very complex circular ownership structure.Lotte Confectionary is part of the business tycoon Shin Gyuk Ho¶s larger business group. Lotte Corporation. seems to become realized .