LG Electronics

LG ElectronicsConsolidated Financial StatementsDecember 31, 2013 and 2012

LG ElectronicsIndexDecember 31, 2013 and 2012Page(s)Report of Independent Auditors.1-2Consolidated Financial StatementsConsolidated Statements of Financial Position.3Consolidated Statements of Income .4Consolidated Statements of Comprehensive Income .5Consolidated Statements of Changes in Equity .6Consolidated Statements of Cash Flows7.Notes to the Consolidated Financial Statements. 8 - 129

Report of Independent AuditorsTo the Board of Directors and Shareholders ofLG Electronics Inc.We have audited the accompanying consolidated statements of financial position of LG Electronics Inc.and its subsidiaries (collectively the “Group”) as of December 31, 2013, December 31, 2012 andJanuary 1, 2012, and the related consolidated statements of income, comprehensive income, changesin equity and cash flows for the years ended December 31, 2013 and 2012, expressed in Korean won.These financial statements are the responsibility of the Group’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits. We did not audit the financialstatements of certain consolidated subsidiaries, whose financial statements represent 37% of theGroup’s consolidated total assets as of December 31, 2013, December 31, 2012 and January 1, 2012,respectively, and 53% and 54% of the Group’s consolidated total sales for the years ended December31, 2013 and 2012, respectively. These statements were audited by other auditors whose reports havebeen furnished us and our opinion, insofar as it relates to the amounts included for those subsidiaries,is based solely on the reports of other auditors.We conducted our audits in accordance with auditing standards generally accepted in the Republic ofKorea. Those standards require that we plan and perform the audits to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.In our opinion, based on our audits and the reports of the other auditors, the consolidated financialstatements referred to above present fairly, in all material respects, the financial position of the Groupas of December 31, 2013, December 31, 2012 and January 1, 2012, and their financial performanceand cash flows for the years ended December 31, 2013 and 2012, in conformity with InternationalFinancial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”).Samil PricewaterhouseCoopers, 92 Hangang-daero, Yongsan-gu, Seoul 140-702, Korea, www.samil.com

LG ElectronicsConsolidated Statements of Financial PositionDecember 31, 2013 and 2012, and January 1, 2012(in millions of Korean won)NoteAssetsCurrent assetsCash and cash equivalentsFinancial depositsTrade receivablesLoans and other receivablesOther financial assetsInventoriesCurrent income tax assetsOther current assetsAssets classified as held for sale5,6,425,6,425,75,7,425,8,429December 31, 2013December 31, 2012January 1, 5575,6323,2386,906,99322,362,726Non-controlling 879(327,469)(242,223)12,215,535940,877Total equity12,689,36912,705,74713,156,412Total liabilities and equity35,528,06434,766,05035,519,138Non-current assetsFinancial depositsLoans and other receivablesOther financial assetsProperty, plant and equipmentIntangible assetsDeferred income tax assetsInvestments in associates and joint venturesInvestment propertyOther non-current assets10115,6,425,7,425,8,42121318141510Total assetsLiabilitiesCurrent liabilitiesTrade payablesBorrowingsOther payablesOther financial liabilitiesCurrent income tax liabilitiesProvisionsOther current liabilitiesLiabilities related to assets held for saleNon-current liabilitiesBorrowingsOther payablesOther financial liabilitiesDeferred income tax liabilitiesNet defined benefit liabilityProvisionsOther non-current liabilitiesTotal liabilitiesEquity attributable to owners of the Parent CompanyPaid-in capital:Capital stockShare premiumRetained earningsAccumulated other comprehensive lossOther components of 5,8,421819202122232425The accompanying notes are an integral part of these consolidated financial statements.3

LG ElectronicsConsolidated Statements of IncomeYears ended December 31, 2013 and 2012(in millions of Korean won, except per share amounts)Note20132012Net sales2758,140,37655,122,623Cost of 92,101,9891,342,6371,284,6691,216,723Gross profit28,2928,2928,2928,29Selling and marketing expensesAdministrative expensesResearch and development expensesService costsOperating incomeFinancial incomeFinancial expensesGain from equity method valuationOther non-operating incomeOther non-operating t before income taxIncome tax 2176,76845,93692,38210,420Earnings per share for profit attributable tothe common equity holders of the Parent Company977508Earnings per share for profit attributable tothe preferred equity holders of the Parent Company1,027558Profit for the yearProfit for the year attributable to:Equity holders of the Parent CompanyNon-controlling interestEarnings per share attributableto the equity holders of the ParentCompany during the year (in won):36The accompanying notes are an integral part of these consolidated financial statements.4

LG ElectronicsConsolidated Statements of Comprehensive IncomeYears ended December 31, 2013 and 2012(in millions of Korean won)NoteProfit for the year20132012222,704102,802Other comprehensive income(loss), net of taxItems that will not be reclassified subsequently to profit or loss:Remeasurements of the net defined benefit liability1926,482(111,003)Share of remeasurements for the net defined benefit liability of associates14618(22,641)Items that will be reclassified subsequently to profit or loss:Other comprehensive income(loss) fromassociates and joint ventures14(25,310)(43,558)Cash flow hedges85,7734,184Available-for-sale financial assets85,846Currency translation differencesOther comprehensive loss for the year, net of taxTotal comprehensive income(loss) for the year, net of taxComprehensive income(loss) for the year, net of tax,attributable to:Equity holders of the Parent CompanyNon-controlling interestTotal comprehensive income(loss) for the year, net of The accompanying notes are an integral part of these consolidated financial statements.5(601)

LG ElectronicsConsolidated Statements of Changes in EquityYears ended December 31, 2013 and 2012Attributable to equity holders of the Parent Company(in millions of Korean won)Balance at January 1, 2012Effect of changes in accounting policiesRestated amountComprehensive income:Profit for the yearRemeasurements of the net defined benefit liabilityShare of remeasurements forthe net defined benefit liability of associatesShare of other comprehensive loss ofassociates and joint venturesCash flow hedgesAvailable-for-sale financial assetsCurrency translation differencesTotal comprehensive incomeTransaction with equity holders:DividendsChanges in ownership interest over subsidiariesIssuance of common shares of subsidiariesConversion rights and stock warrants ofsubsidiaries exercisedOthersTotal transactions with equity holdersBalance at December 31, 2012Balance at January 1, 2013Comprehensive income:Profit for the yearRemeasurements of the net defined benefit liabilityShare of remeasurements forthe net defined benefit liability of associatesShare of other comprehensive loss ofassociates and joint venturesCash flow hedgesAvailable-for-sale financial assetsCurrency translation differencesTotal comprehensive incomeTransaction with equity holders:DividendsIssuance of convertible bonds by subsidiaryEstablishment of subsidiaryConversion rights of subsidiaries exercisedChanges in ownership interest over subsidiariesReturn of investments in subsidiaryTotal transactions with equity holdersBalance at December 31, therComprehensiveIncome(loss)OtherComponentsof 2,689,3692373,992,3488,885,523The accompanying notes are an integral part of these consolidated financial ,2488,16413,156,412

LG ElectronicsConsolidated Statements of Cash FlowsYears ended December 31, 2013 and 2012(in millions of Korean won)NoteCash flows from operating activitiesCash generated from operationsInterest receivedInterest paidDividends receivedIncome tax paidNet cash generated from operating activities38Cash flows from investing activitiesDecrease in financial depositsDecrease in loans and other receivablesProceeds from disposal of other financial assetsProceeds from disposal of property, plant and equipmentProceeds from disposal of intangible assetsProceeds from disposal of and recovery of investments in associatesand joint venturesBusiness transferProceeds from disposal of assets held for saleProceeds from disposal of investment propertyDecrease in other assetsIncrease in financial depositsIncrease in loans and other receivablesAcquisition of other financial assetsAcquisition of property, plant and equipmentAcquisition of intangible assetsAcquisition of investments in associates and joint venturesDecrease in cash and cash equivalents due to changes in scope of of subsidiariesAcquisition of other assetsNet cash used in investing activitiesCash flows from financing activitiesProceeds from borrowingsIssuance of common shares of subsidiariesStock warrants exercisedRepayments of borrowingsDividends paidNet cash provided by(used in) financing activities3837Exchange losses on cash and cash equivalentsNet increase(decrease) in cash and cash equivalentsCash and cash equivalents at the beginning of yearCash and cash equivalents at the end of 0692,185,000The accompanying notes are an integral part of these consolidated financial statements.72012

LG ElectronicsNotes to the Consolidated Financial StatementsDecember 31, 2013 and 20121.General InformationLG Electronics Inc.(the Parent Company) was spun off from LG Electronics Investment Ltd.on April 1, 2002. The Parent Company’s shares are listed on the Korea Exchange, and someof its preferred shares, in the form of global depositary receipts (“DRs”), are listed on theLondon Stock Exchange as of the reporting date. The Parent Company is domiciled in Koreaat Yeoui-daero, Yeungdeungpo-gu, Seoul.As of December 31, 2013, LG Corp. owns 33.7% of the Parent Company’s total shares,excluding preferred shares, while financial institutions, foreign investors and others own therest.The Group is engaged in the manufacture and sale of electronic products including mobilephones, TV, air conditioners, refrigerators, washing machines and personal computers. As ofDecember 31, 2013, the Group operates six business segments and other supportingsegments through the Parent Company and subsidiaries all over the world. The ParentCompany as of December 31, 2013, has 138 subsidiaries and its consolidated subsidiariesas of December 31, 2013, are as follows:8