At LG Electronics, We Love to Meet Consumers. We Listen Closely to Their Needs and Desires

WHEN LG Electronics MEETS CONSUMERS At LG Electronics, we love to meet consumers. We listen closely to their needs and desires. Then we work to create the world’s finest products. Products that deliver more convenience. More satisfaction. And a brighter, more hopeful future. Isn’t it time we got to know each other better? At LG Electronics, we love to meet consumers. We listen closely to their needs and desires. Then we work to create the world’s finest products. Products that deliver more convenience. More satisfaction. And a brighter, more hopeful future. Isn’t it time we got to know each other better? WHEN CONSUMERS MEET LG Electronics What do you look for in a product? Are you easily seduced by sleek styling? Does reading the specs excite you? Or do you seek out products that exemplify both style and substance? At LG Electronics, we are creating products with stylish design that is second to none. But that beauty is more than skin deep. The real soul of our products is the smart technology that enables them to deliver simply amazing user experiences. Combined together, they create a perfect harmony that fits your life. That is why life’s good—and getting even better—with LG.

01 ConsumerS + LG ELECTRONICS 11 FAITH + LEADERSHIP 41 IMPRESSION + PERFORMANCE 51 STYLISH DESIGN + SMART TECHNOLOGY 56 FACTS & FIGURES 60 GLOBAL NETWORK 62 MANAGEMENT / Board 63 CORPORATE MILESTONES 64 FINANCIAL STATEMENTS Looking for the finer things in life? With stand-out products that reflect your lifestyle and aspirations, LG puts you in a class all your own.

02 + 03 Looking for the ultimate life makeover? With contemporary products that make your home comfy, fresh, and beautiful, LG makes you the center of attention.

04 + 05 Looking for a little fun? With sophisticated products that bring you and your loved ones together to share, play, and relax, LG puts you at the center of excitement.

06 + 07 Looking for the next big thing? With trend-setting products that keep you entertained, informed, and connected, LG puts you on the leading edge of cool.

08 + 09 CLASSY. CHIC. WOW. HIP. WHATEVER WAY YOU WANT TO PUT IT, LIFE’S GOOD WITH LG. THE PERFECT HARMONY OF AND IT IS GETTING EVEN BETTER WITH... CREATING GREATER VALUE FOR EVERY STAKEHOLDER IS OUR ONE AND ONLY FOCUS.

CEO MESSAGE

12 + 13 DEAR SHAREHOLDERS, CONSUMERS, BUSINESS PARTNERS, AND EMPLOYEES, PRODUCT PIPELINE HEALTH To have a healthy ORGANIZATIONAL HEALTH Our business pipeline, our current products must be aligned performance ultimately depends on the quality against clear target segments and our positioning of our people. We must have a more talented and I am pleased to report that the year 2007 was a solid year for LG Electronics as the must reflect true differentiation. We must also motivated organization than our competitors have clear technology and product road maps if we are to surpass them. passion and performance of our employees yielded concrete gains in profitability. Our through multi-generational product planning home appliance and mobile phone businesses were exceptionally successful in providing in all our businesses. FINANCIAL HEALTH When we are healthy in the previous six areas, we will naturally be in good our consumers with superior value by delivering stylishly designed smart appliances and CHANNEL COLLABORATION HEALTH Volume- and financial shape. That said, we must set mobile phones. Our display business also achieved an impressive turnaround during the transaction-based channel relationships are signs appropriate goals and quantify them as key of an unhealthy relationship. In addition to overall performance indicators so we can measure and second half of the year as improved market price positioning and steady cost reductions channel coverage and in-store share, we need to track our progress to ensure that we have the have robust multi-year partnership arrangements correct management systems in place and that helped put it solidly back on the path to profitability. with our partners, including collaborations in product they are working correctly. planning, promotions management, and all-around information sharing. It was exactly 50 years ago this year that Looking at the numbers, we generated incremental revenue growth as non-consolidated LG Electronics was established in Korea and sales rose just over 1.4% to KRW 23.5 trillion. Efficiency gains helped lower selling and CONSUMER RELATIONSHIP HEALTH Every began work on the nation’s first radio set. A lot has interaction with our consumers is a “Moment of changed since then, and we have weathered many administrative costs and overcome a higher cost of sales, boosting operating income by Truth”—an opportunity to make a positive challenges along the way to become a truly global 5.5% to KRW 564.6 billion. On the non-operating side, a strong performance by our impression. We need to make sure that we are company doing business in over 120 nations. constantly listening to and acting on what our Today, as we begin to take a closer interest in the equity-method investees helped net income rise more than fourfold to KRW 1.2 trillion. consumers tell us to ensure that each moment of health of our businesses, we will be laying the The response from the investor community was overwhelming, sending our share prices truth meets and exceeds their expectations. foundation for an even more successful future as we enter our sixth decade in business. I look forward soaring over 80% for the year from KRW 55,000 to KRW 100,000, far outpacing the BUSINESS PORTFOLIO HEALTH We are in some to working with our talented management team to of the most rapidly changing industries in the position the company to achieve its full potential in performance of our global top-tier competitors. world where growth, profitability, and competitive 2008 and beyond as we continue to create greater dynamics can change in just a matter of months. value for all our stakeholders. We hope you will be We must succeed in markets that are big and among them. While our 2007 results are clear proof that our renewed focus on profitability is already growing and countries where we have more profit paying dividends, we still have much to do if we are to achieve our goal of entering the opportunities. We must also have a clear picture of what our portfolio should look like in the future and ranks of the world’s top-three consumer electronics companies by 2010. In last year’s shape it through timely action, including exiting report, I outlined six strategic initiatives that the executive team and I believe will enable businesses as necessary. us to meet our ambitious goal. To recap, the initiatives are: 1) manage for ROIC as well BRAND HEALTH There is no question that our global presence has made us one of the world’s most as growth, 2) structure our business portfolio for leadership, 3) base strategies on clear YONG NAM recognized brands. The question is, are we projecting VICE CHAIRMAN & CEO segment, target, and positioning insights, 4) invest in a clear, global identity, 5) innovate a clear identity that resonates with consumers? We must create a brand consumers are passionate in design as well as technology, and 6) develop a truly global organization. about and willing to pay a premium for.

As we continue to press ahead with these strategic initiatives in 2008, our focus will be squarely on the overall health of our businesses, not on short-term performance. Specifically, we will be paying close attention to the health of our product pipeline, channel collaboration, consumer relationships, business portfolio, brand, organization, and finances. Let me briefly go over these seven measures of health.

14 + 15 Consumer electronics is one of the world’s most 1. MANAGE FOR ROIC AND GROWTH Growth is RISING challenging businesses. Over our 50 years in the good. Growth with profitability is superior. While ABOVE industry, we have faced and overcome countless some might be satisfied with being a global leader challenges to emerge as one of the world’s leading in revenue, we aim to be a leader in shareholder ALL names in electronics. Today, the following six returns, profitability, growth, revenue, and market initiatives are guiding us as we refocus on the share—in that order. Today, our key performance CHALLENGES greatest challenge of all—creating value for our indicators emphasize cash flow and return on shareholders, consumers, partners, and people— invested capital, keeping us focused on creating as we take the next step toward becoming a global shareholder value as we aim for an ROIC of 20% top-three consumer electronics company. by the end of the decade.

YOUNG HA LEE SIMON KANG BB HWANG SKOTT AHN President & CEO President & CEO President & CEO President & CEO Digital Appliance Company Digital Display Company Digital Media Company Mobile Communications Company

16 + 17 2. STRUCTURE OUR PORTFOLIO FOR LEADERSHIP as the middle market is squeezed by competition a clear identity that we believe will resonate with consumers even more passionate about our brand. We operate in over 120 countries today, competing in from above and below. Our clear segment, target, consumers around the globe: LG is a refreshing roughly 30 product categories. We are already a clear and positioning (STP) insights are now guiding us as brand with products that make you feel sophisticated. 6. DEVELOP A TRULY GLOBAL ORGANIZATION To leader in a number of these fields. In the ones that we create consumer value with aspirational and be one of the world’s top companies, we have to have we are not, we are now making strategic, objective premium products to win at both ends of the market. 5. INNOVATE IN DESIGN AS WELL AS TECHNOLOGY world-class people and a world-class organization. decisions on whether to move ahead or exit as we Consumers are becoming increasingly sophisticated in Today, we are seeking out the best minds from around shape our portfolio to achieve our global top-three 4. INVEST IN A CLEAR, GLOBAL IDENTITY The LG their tastes and preferences. They expect products that the globe and equipping our people with the skills goal in all our businesses. brand is one of the best-known names in consumer have the latest technology and design. Our passion for they—and we—need to grow. We continue to cultivate electronics. But consumers are still a little hazy creating products that deliver a perfect harmony of styl- a mindset of excellence and creativity as we re-evaluate 3. BASE OUR STRATEGIES ON CLEAR STP INSIGHTS about who we are and what we stand for. Our ish design and smart technology that fits life is a power- the way we do things and eliminate the waste and Consumer markets are becoming increasingly polarized brand-building focus is now on communicating ful value proposition. One that we believe will make our inefficiencies that hold us back from our true potential.

WOO HYUN PAIK TOM LINTON DOHYUN JUNG DERMOT BODEN President Executive VP Executive VP Executive VP Chief Technology Officer Chief Procurement Officer Chief Financial Officer Chief Marketing Officer

18 + 19

At LG Electronics, we believe that style and substance are not an either-or proposition. We believe in a proverbial “third way”—in delivering a perfect harmony of stylish design and smart technology that fits your life. It is a simple-but-powerful premise that is empowering us to create new and refreshing products that bring a relaxed sophistication to life for consumers like you around the globe.

BRAND IDENTITY

20 + 21 R&D AND DESIGN

Delivering style with substance sounds like a simple task. But it is an incredibly difficult challenge. At LG Electronics, our holistic product development process synergistically brings together some of the world’s best designers, engineers, marketers, and product planners with the mis- sion of creating products that are far more than just the sum of their parts. Our Corporate Institute of Technology, Production Engineering Research Center, and 38 research labs around the globe provide the smart technology that makes our products intuitive, essential, easy-to- use, and up-to-date. Our Corporate Design Center and five regional design studios in Milan, Beijing, New Jersey, Tokyo, and New Delhi provide the stylish design that makes them refined, trend-setting, contemporary, and stand out. Together, this formidable team made 2007 our most prolific year to date at major international design competitions. making the year our most prolific to date. The 11 iF Design Awards, 29 Red Dot Design Awards, and single IDEA Award that we won during the year are a remarkable testimony to the powerful synergy that is propelling us closer to our vision of being a top-three global player in the consumer electronics and telecommunications fields with each passing day.

22 + 23 In the fast-paced mobile phone industry, LG Electronics continues to impress critics and consumers with premium phones that set the standard for cutting-edge technology and sophisticated design. We have embraced touch technology to make advanced features more accessible and intuitive, while keeping our phones sleek and slim. We have used full-metal bodies to create phones that are beautifully solid. We have taken the camera-phone convergence to the next level with 5-megapixel resolution, full manual controls, and robust inte- gration with online photo and video sharing services. And we have adopted the latest 3G technologies like HSDPA to give consumers access to the latest high-speed networks. These amazing technologies, combined with premium design elements, have created phones that are truly innovative. Just imagine what we will think of next.

Mobile Communications Innov ations

24 + 25 Digital Displa y Innov ations

In recent years, LG Electronics has wowed the world with the industry’s first 100-inch LCD and 102-inch Plasma TVs with built-in digital video recorder. Today, we continue to redefine the viewing experience in every dimension. We have adopted full HD resolution across our entire product lineup. We have doubled screen refresh rates for blur- and flicker-free viewing. We have added sensors to continuously op- timize picture quality for ambient light conditions. We have increased contrast up to 50,000:1 for truer colors and deeper blacks. We have added more digital inputs and full HD wireless streaming for easier connections to other devices. And we have worked with audio legend Mr. Mark Levinson to create superior sound without any visible speakers. Just imagine what we will think of next.

26 + 27 LG Electronics believes that great products start with simple but novel ideas that solve real-world problems. We have created air conditioners that cool, heat, and showcase art. We have integrated manual icemaking into freezer doors to provide more convenient access and save energy. We have used steam cleaning technology in our washing machines to save water, energy, and clothing wear-and-tear. We have compressed dust in our bagless vacuums to reduce dustbin emptying and messiness. We have focused the power of light to prepare food four times faster than conventional ovens while preserving all the flavor and nutrients. And we have developed energy solutions that provide electricity, heating, and cooling using clean and renewable energy sources like geothermal energy. Just imagine what we will think of next.

Digital Appliance Innov ations

28 + 29 Digital Media Innov ations

Digital technology is enabling us to deliver exciting, compelling entertainment experiences both at home and on the go. We have turned living rooms into theaters with premium high-definition disc players and stylish home theater audio systems. We have worked with audio legend Mr. Mark Levinson to deliver sound that impresses even hardcore audiophiles. We have created advanced digital signal processing chips that help security cameras deliver clearer, sharper, and brighter images. We have added mobile TV reception to our MP3 players and portable navigation devices for on-the-go entertainment. And we have offered next-generation wireless technologies like HSPDA in our notebooks for ubiquitous connectivity. Just imagine what we will think of next.

30 + 31 It has been 14 years since we made history by being Korea’s first Eliminating Hazardous Substances Enhancing Efficiency As part of our environmental commitment, we are committed to There is a hidden price to pay for all the modern conveniences we major consumer electronics company to make a public meeting and exceeding the world’s toughest environmental standards. enjoy today. Everything that plugs into an electrical circuit consumes The EU’s RoHS Directive has been our focus for the past few years. electricity, even when it is in standby mode or turned off. In August commitment to environmental sustainability in 1994. In the years Known best for its banning of the use of lead, RoHS also restricts 2005, we launched an initiative to limit the standby consumption of the use of three other heavy metals—mercury, cadmium, and our products to one watt or less. As of 2007, we have achieved this that have passed, our commitment has grown and taken on new hexavalent chromium—as well as polybrominated biphenyls and goal for the vast majority of our product lines as well as substantially polybrominated diphenyl ether, both commonly used as flame retar- exceeding it for certain categories such as washing machines (0.3 dimensions. We have continued to make our products more dants in plastics. Our progressive internal guidelines are significantly watts) and LCD TVs (0.5 watts). This is just a part of our ongoing ef- stricter than RoHS, and we continue to work closely with our sup- forts to reduce the power consumption of our products to save our environmentally friendly by systematically and proactively pliers to ensure that raw materials, packaging materials, batteries, consumers money and help conserve our energy resources. and other sourced components meet our high standards. We are eliminating the use of hazardous substances in manufacturing, currently taking the next step toward environmental sustainability by Expanding Recycling phasing out our use of volatile organic compounds, PVC, brominated We believe that one of the greatest environmental contributions we can boosting energy efficiency, and making them easier to recycle. flame retardants, and other substances identified as hazardous by make is to ensure future generations do not find our products piled up in environmental NGOs. a junkyard or buried in a landfill. We currently use a number of holistic Our products are now among the industry’s greenest, and we design approaches to make our products easy and efficient to recycle at the end of their service lives. For example, our home-grown ATROiD continue to innovate with new materials, processes, and software enables us to evaluate the recyclability of products from the initial stages of design, providing our designers and developers with technologies that will help ensure a sustainable future for us, invaluable insights on how to ensure the best use of our planet’s finite resources. We are also involved in major industry e-waste recycling our industry, and the world. initiatives such as the European Recycling Platform and the Electronics Manufacturers Coalition for Responsible Recycling in the US.

MOBILE PHONES Considering that a billion or so phones are sold and discarded AIR CONDITIONERS worldwide each year, eco-design Heating and cooling equipment can have a big impact. Our mobile requires lots of electricity to keep phones now ship with power us comfortable. Our air conditioner adapters that consume just 0.11 outdoor units feature inverter watts when not charging. All compressor technology that reduces components are RoHS compliant, both power consumption and plastics are free of Deca-DBE noise. We use R-410A refrigerant flame retardant, and the main because it does not contribute to circuit board is halogen-free. ozone depletion. Our indoor units Nickel, a metal known to cause skin also have washable filters, irritation in some individuals, is not LCD TVs eliminating another source used in any surface that comes in As flat-panel TVs get larger, of waste. frequent contact with the face. their power consumption rises dramatically. We have reduced the standby power consumption of our LCD TVs to under 1 watt. We have also developed a new technology called “Eye’Q Green” that dynamically adjusts picture quality to match ambient light conditions with the added benefit of improving WORKING DVD REWRITERS energy efficiency by up to 60%. As Almost every computer peripheral with our other products, we have REFRIGERATORS comes with an external power eliminated the use of Deca-BDE Like air conditioners, refrigerators FOR adapter. We designed our latest in plastics. are big consumers of power. Our DVD rewriter to get its power from refrigerators are among the world’s the USB data cable and consume most energy efficient thanks to A just 0.2 watts of power when idle. inverter linear compressors, The elimination of the power highly efficient heat insulators, and adapter also means less optimized airflows. We have also GREENER packaging and cheaper shipping. eliminated the use of Deca-BDE in The unit uses non-halogen flame plastics and adopted eco-friendly retardant and is marked for R-600A refrigerant and FUTURE easy recycling. cyclopentane foam insulation.

34 + 35 Sports has often been called a “universal language” because of Football Golf It is natural that our biggest sports commitment is to football, the In 2006, we became the title sponsor of the LG Skins Game, an annual its ability to bring people together regardless of race, background, world’s most popular sport. We sponsored the Copa América—the event that brings together four of the world’s top male golfers at the world’s oldest international competition—in 2004 and 2007. We have end of the PGA season to vie for USD 1 million in prize money. Stephen or social status. The ideals of teamwork, fair play, and excellence hosted the annual LG Amsterdam Tournament—Europe’s famous Ames topped the skins game for a second straight year in 2007 with pre-season warm-up competition—since 2006. And we continue to USD 675,000 in winnings. www.lgskinsgame.com are things we all can appreciate, regardless of where we come sponsor or host numerous continental and regional competitions each year. In addition to our tournament sponsorships, we sponsor Cricket from or which side we root for. We are proud to be associated with a number of major professional clubs including Sao Paulo FC of Over the years, we have been a major sponsor of the sport loved and Brazil, Olympic Lyon of France, Fulham FC of Britain, and Morelia played across the British Commonwealth, including the International a large and growing number of teams and events in some of the Monarcas Club of Mexico. We are also a proud supporter of the na- Cricket Council (ICC) Cricket World Cups in 1999 and 2003. We also tional teams of Germany, Greece, Hungary, and Iraq. sponsored the respected ICC Player Rankings from 2002 to 2007. world’s favorite leisure pastimes. And regardless of who takes www.cricketratings.com Snowboarding home bragging honors at the end of the day, it is our hope that each We are the title sponsor for the 2008-2009 season of the FIS Snow- Action Sports board World Cup. First held in 1994-1995, the series has evolved We are the title sponsor of the LG Action Sports World Championships, spectator or viewer is left with the unmistakable impression that into one of the world’s biggest winter sports competitions, covering the only major competition tour in action sports. This multi-city US every aspect of this spectacular sport. The LG FIS World Cup will tour pits the world’s top skateboarding, bicycle motocross, inline LG is an exciting, world-class brand that shares their passion for life. take place at 22 resorts in 16 countries between September 2008 skating, and freestyle motocross pros against each other as they vie and March 2009. www.fis-ski.com for the right to compete at the year-end World Championships. www.lgactionsports.com Ice Hockey We have been a partner of the Swedish national team and the title sponsor of the LG Hockey Games since 2006. Hosted by the Swedish Ice Hockey Association, the games have brought together the national teams of Sweden, Russia, Finland, and the Czech Republic every Feb- ruary since 1991 for a tournament that is considered the unofficial European championships. Sweden won the 2007 tournament, and Russia triumphed in 2008. www.lghockeygames.com

FULHAM FC SPONSOR UNITED KINGDOM

LG Skins Game Sponsor United States

LG Action Sports Sponsoring World Championships the United States Sao Paulo FC Sponsor Pursuit Brazil of Excellence

36 + 37 Supporting Education Lending a Helping Hand It is often said that success breeds success. We would like to add Helping young people improve themselves is one of the most re- We are involved in an incredibly diverse range of volunteer programs, warding things in the world. One of our major educational initia- contributing countless hours each year to worthy causes in our com- that it also breeds responsibility. Our success has enabled us to tives is our support of primary schools in underdeveloped regions munities. We partner with Habitat for Humanity to build affordable of Asia. We start with the basics, repairing or rebuilding facilities homes. We operate community kitchen programs for the homeless become actively involved in local communities through a diverse and furnishing classrooms. We also help bridge the “digital divide” and elderly. We provide computer training and other services to by providing computers and Internet access. We are deeply honored the handicapped. We hold blood drives to benefit the Korean Red range of programs and initiatives that span all levels of our that the schools we have helped in China have chosen to rename Cross. We donate to and volunteer at Beautiful Store thrift shops. themselves “LG Hope Schools.” We also support Villa de Las Ninas We help support parentless teens and single mothers. We partner organization. We actively support those striving to achieve their run by the Sisters of Mary Catholic charity in Mexico, an institution with Korea’s Make-A-Wish Foundation to make the dreams of kids that provides secondary and higher education classes as well as with life-threatening illnesses come true. We provide emergency re- dreams. We partner with consumers, local communities, one-year vocational training programs to more than 4,000 under- lief services when disaster strikes. We get college students involved privileged Mexican girls each year. in community service. We help introduce orphans and kids in rural and non-government organizations to meet local needs. We take communities to the wonders of science. We work with United Way Contributing for Good International to make a difference in nine countries across Asia. We a long-term view in our initiatives. We sponsor, support, and Every one of us is financially involved in helping our needy neighbors. sponsor surgeries for kids with cleft lips and palates in the Middle Each month, we donate the small change—the amount less than East and Africa. These are just a few of the ways we are making a volunteer in programs that enhance social welfare, educational, KRW 1,000—from our paychecks to the Usuri Fund, the primary real difference in our local communities. funding source for our community outreach activities. Beyond this, and cultural opportunities. And we do all these things wherever we our executives donate 1% of their monthly paychecks, and union members contribute the same percentage of their annual bonuses. do business around the globe to help make the world a better place. In the spirit of partnership, the donations we make are automatically matched by the company, doubling their impact for good.

Food Donations Brazil

Cleft Lip & Palate Surgeries LG Hope School Morocco China Artificial Limb Donations Nigeria

Eye Check-Up Clinics India Giving Greek Veteran Visit Sponsor Korea Volunteer Teaching Thailand Back Coal Briquette Donations to Korea Our Communities

38 + 39 It is hard to miss how passionate we are about technology, design, the environment, and our THE PERFECT HARMONY OF neighbors. And now, that passion is delivering... We shipped a record 80.5 million mobile phones in 2007, a remarkable consumers with stylish design and innovations in image capture, user It is hard to think of any consumer 27% improvement that boosted sales 20% to USD 11.2 billion. Operat- interface, and Internet connectivity. ing profit margin also continued to improve, rising from 6.8% to 8.1% electronics field that changes more as our premium handsets won over consumers around the globe. In 2008, many of our new phones will feature touch technology to make During the year, we expanded our product localization strategy from their advanced features easier to use. These will include high-tech rapidly and dramatically than the mobile North America, Europe, and Korea to include the CIS, India, and South handsets with advanced camera and Internet features such as the LG- MC phone space. Models seem to come and and Central America. We also sharpened our cost-competitiveness by KF510, LG-KF600, and LG-KF700. We will also launch the LG Secret, the Mobile Communications strengthening operations, increasing our number of global platforms, third phone in our Black Label series. Designed around the concept of Company and streamlining our global supply chain. In 2008, we are aiming to “style that lasts”, the LG Secret has a timeless and elegant design that is go overnight, and only a precious few grow sales volume, revenue, and operating profit by more than 20% enhanced by stylish materials such as carbon fiber and tempered glass. achieve icon status. At LG Electronics, as we target sales of 100 million units. MOBILE PHONES The 2006 global launch of the LG Chocolate phone— MOBILE TECHNOLOGIES We are extremely competitive in all current stylish design and smart technology the first handset in our Black Label series of premium design phones— mobile communications technologies. As the market leader in CDMA has been a tough act to follow, selling over 15 million units through the and 3G phones, we continue to create handsets that will take full ad- make our handsets really stand out. end of 2007. During the year, we launched the LG Shine phone, the second vantage of the increased capacity and bandwidth that technologies Not just in international design phone in our Black Label series, featuring a sleek full-metal body. We like HSUPA and 3G LTE will bring into the mainstream in the coming 1 partnered with fashion icon Prada to launch the Prada Phone by LG, years. We are also adding value by supporting major mobile broadcast a sophisticated and elegant handset with the industry’s first complete standards like DVB-H, MediaFLO, T-DMB, and S-DMB in select models competitions, but where it really advanced touch interface. We also launched the LG Viewty, a feature- across our product lineup. oriented phone with a 5.0-megapixel camera and high-end multimedia counts. Your palm. capabilities. These advanced handsets are just the beginning of what 1. LG-KF510 2. LG-KF700 3. LG Voyager (LG-VX10000) 4. LG Secret (LG-KF750) we believe will be a long series of global best-sellers that will wow 5. LG Viewty (LG-KU990) 6. LG Vu (LG-CU920) 7. LG-KF600 8. LG-KM710 9. LG-KS20 4

5 7 3 42 + 43 Sales rose a healthy 11% to USD 13.6 billion as global demand for full LCD MONITORS In 2007, we retained our No. 4 global market share, We see the “big picture” a little differently HD 1080p flat-panel displays and widescreen monitors continued to close on the heels of No. 3 HP. We are now either first or second in grow across the board. While we recorded an operating loss for the year this market in 24 countries worldwide. During the year, we expanded than others. Lots of companies can deliver due to profitability issues with our plasma TV business, these losses the boundaries of technology and design by introducing new monitors progressively shrank each quarter, setting the stage for us to return with dynamic contrast ratios as high as 50,000:1, color gamuts of up to a no-frills big screen LCD or plasma TV. to profitability in 2008 with a target operating profit of just over USD 80 115% of the NTSC spectrum, and stands with interactive LED lighting DD But only a handful can deliver one that is a million. Although we expect our LCD and plasma TV sales volumes to effects. According to industry statistics, widescreen LCDs rose from 9% Digital Display Company roughly double in the coming year as falling prices bring flat-panel TVs of monitor sales in 2006 to over 35% in 2007, and are on track to pass within reach of more consumers, we also expect fierce competition to 50% in 2008. We expect this trend to help double our sales as we work work of art. At LG Electronics, stylish design limit sales growth to USD 14.1 billion, a modest 3.7% increase. to capture a major portion of this profitable emerging segment.

and smart technology make our flat-panel LCD TVs We were the world’s No. 4 producer of LCD TVs in 2007 with PROJECTORS Although we are a relative newcomer to this business, 14% of the market. Our current lineup includes 19, 22, 26, 32, 37, 42, we are proud to be producing some of the most innovative designs in the HDTVs really stand out. Not just in 47, and 52 inch screen sizes. In 2008, we aim to sell 14 million units and industry. In 2007, we introduced the world’s first wall-mounted projector capture 14% of the global market. (AN110), an innovation that earned us a coveted IDEA Design Award. international design competitions, but We also launched the world’s first ultra-mobile LED-based projector 1 PLASMA TVs We were the world’s No. 2 producer of plasma TVs in 2007 (HS101) to deliver 100 ANSI lumens, more than three-times the previous where it really counts. Your living room. with 30% of the market. Our current lineup includes 32, 42, 50, and 60 category leader. In 2008, we aim to nearly triple sales from 36,000 to inch screen sizes. In July, we took a key step toward returning to profit- 109,000 units as we continue to expand our business and consumer lineup ability by increasing our 50-inch panel production capacity from 360,000 with innovative models, including high-end home theater projectors with to 440,000 units a month. We aim to sell 4 million units and capture full HD resolution. 30% of the global market in 2008. We believe that demand for 32-inch plasma TVs will be particularly strong due to growth in both primary TV purchases in emerging markets and secondary set purchases in developed ones. We expect this business to turn its first operating profit starting in the first quarter of 2008. 1. LG50 2. LG60 3. LG40 4. PG60 5. PG30 6. LG70

44 + 45 We put three years of flat growth soundly behind us in 2007 as sales WASHING MACHINES We led the US market for front-loading washers For a company in the “white goods” business, climbed nearly 18% to USD 12.6 billion and operating profit rose 5.7% to as we continued to expand the capacity and functionality of our front- USD 724 million. Key factors in this robust performance included grow- loading washer and dryer lineup in 2007. We increased capacities to 15 we have got quite a colorful lineup. Today’s ing revenues from premium products worldwide, new channel partners kg and created a dryer control panel that can be rotated 180-degrees, in the US, commercial air conditioners in Europe, and off-season air enabling unit stacking without compromising operating convenience. home appliances not only have to work well. conditioner purchases in Korea. In 2008, we expect solid growth across DA They have to look good. At LG Electronics, Europe and emerging markets to largely offset a slowdown in the US. COOKING APPLIANCES We continued to refine and expand our lightwave Digital Appliance We believe our rapidly expanding commercial air conditioning business oven family in 2007 with the new SolarCube series. Our lightwave tech- Company and a steady stream of new products will provide solid momentum for nology uses a halogen heater to cook food up to four times faster than stylish design and smart technology make profitable growth as we target sales of USD 13.3 billion. conventional ovens while retaining all the flavor and nutrients.

our appliances really stand out. Not just in AIR CONDITIONERS In 2007, our power-saving inverter technologies VACUUM CLEANERS We continued to refine our bagless vacuum tech- and health-conscious features helped us make an exceptionally strong nology to meet consumer expectations in 2007. We introduced a simple- international design competitions, but where showing in the Middle East, Africa, and Europe as we continued to lead but-effective dust compression technology that dramatically decreases the global market. We launched a new range of outdoor units including emptying frequency and dust escape as well as handy new features like it really counts. Your home. our Multi-V Water and Multi-V Plus 2 as we steadily expanded our V-Net an extendable brush tool built into the grip handle and a new floor tool lineup of remote control accessories to make our commercial systems designed to conveniently handle both carpet and hard floors. the most flexible and scalable on the market. We also introduced Hybrid XEO, our first renewable energy heating and cooling system and the BUILT-IN APPLIANCES Our full lineup of built-in ovens, hobs, hoods, most efficient geothermal solution available to date, consuming ap- refrigerators, and dishwashers is designed to seamlessly and elegantly 1 proximately 30% less energy than conventional systems. integrate into any kitchen environment. Equipped with virtually all the latest features of our freestanding appliances and several unique ones REFRIGERATORS We continued to solidify our top-three position in of their own, our built-ins continue to grow in popularity across Europe. the global refrigerator market in 2007. During the year, we introduced refinements such as hidden door hinges, in-door icemakers that free-up HOME NETWORKING Our HomNet smart home solutions continued to freezer space and provide convenient exterior access to water and ice, make inroads in the UAE and China in 2007. HomNet goes a step beyond VitaLight LED technology to keep vegetables fresher, and an improved standard home automation systems to offer advanced control over version of our Green Ion Door-Cooling system that eliminates mold, micro network-enabled LG home appliances and entertainment systems. It bacteria, and unpleasant odors as it maintains a constant temperature also has a community management component to provide integrated throughout the refrigerator compartment. We also continued to expand security, information, and communications services within residential 3 our Swarovski-crystal studded Art Home series in collaboration with complexes. We continue to make plans to bring HomNet solutions to renowned Korean artists. consumers in the US, South Africa, and Europe in the near future.

1. Steam Washing Machine 2. Washer and Drier 3. 3-Door Refrigerator 4. ARTCOOL Air Conditioner 5. Lightwave Oven 6. Side by Side Refrigerator 7. Vacuum Cleaner with Dust Compression System 8. Steam Dishwasher

2 6 8

7 5 46 + 47 We generated sales of USD 5.8 billion in 2007, virtually identical to CAR INFOTAINMENT We continued to expand our presence in the car It used to be that you had to go to a theater our 2006 results. Operating profit was down just over 3% to USD audio aftermarket, capturing the No. 3 ranking in Latin America. We 929 million as we faced increasing product commoditization, falling also successfully launched our portable navigation device lineup in North to really enjoy movies. Now you can grab prices, inaccurate market forecasting, and delays in getting products America as we continued to expand our OEM audio-video-navigation and to market. Today, we continue to enhance profitability by expanding telematics system sales to major global automakers. some popcorn and a soda and head to the outsourcing, setting phase-out schedules for less profitable products, DM living room for a captivating sight and initiating planning for stylish new products, launching new HD products, SECURITY SYSTEMS Surveillance equipment sales grew a solid 10% Digital Media Company and focusing on opportunities in the mobile Internet device, car info- in 2007 as we continued to make inroads in international markets. We sound experience. At LG Electronics, tainment, and security fields. expect sales to accelerate in 2008 as we debut new surveillance cameras 1 featuring our advanced XDI chipset with an industry-leading 570 TV lines HOME AUDIO We captured 13% of the global home-theater-in-a-box of color resolution and a new family of IP cameras and network video stylish design and smart technology make market in 2007, maintaining our No. 2 ranking while closing the gap recorders that will enable us to tap a market segment that is growing with market leader Sony to a mere 2.2 percentage points. We also around 40% annually. entertainment really stand out. Not just in signed a consulting agreement with audio legend Mr. Mark Levinson to take our sound quality to the next level and introduced new models OPTICAL STORAGE We marked our tenth year at the top of the industry international design competitions, but designed to perfectly complement our flat-panel TVs. by extending our market share from 31% to 35% and our leadership with 20x burning, 9.5 mm thick slot-loading, and slim external models. where it really counts. Your imagination. HOME VIDEO We made significant inroads in the high-definition player We continue to look beyond Blu-ray to the next generation of ultra-high- category in 2007 as we grew our market share from zero to 4% following density recording technologies. the January launch of the BH100 “Super Blu”, the world’s first dual-

2 format HD disc player. The HD player market is forecast to double to NOTEBOOK PCs We introduced a broad new lineup of models in 2007 USD 4 billion in 2008 as it stays on track to reach USD 13 billion by 2010. designed to satisfy the full spectrum of users and price points. We continue to deliver trend-setting designs with the latest mobile platforms MOBILE ENTERTAINMENT DEVICES Our latest touch-screen MP3 from Intel as well as next-generation wireless broadband technologies player—the FM37—dazzled the judges at the 2007 iF, EISA, and Red Dot such as HDSPA and WiMAX. design awards with its stylish design and innovative graphical user interface. We aim to offer a touch-screen mobile TV to European football fans in time for the 2008 UEFA European Football Championship. 1. T80 2. HT953TV 3. RH39 4. BE06 5. P300 6. LAC7800 7. LS903

5 + 4 48 49 AND SO, We have COME TO THE MOMENT OF TRUTH. WE HOPE THAT THE PERFECT HARMONY OF IT IS A GROWING APPRECIATION OF OUR COMMITMENT TO CREATING SOMETHING VERY SPECIAL FOR YOU... Life’s good at LG. Everything you want and need is here. Stylish design and smart technology are giving birth TO

LG Champaign Home Theater System (HT762TZ) Red Dot Design Award 2008

LCD TV (LG60) CES Innovations 2008 Award refreshingly new products that bring a relaxed sophistication to life. And it gets better every day...

LG Touch Screen Phone Vu™ (LG-CU920) CES Innovations 2008 Award

LG TROMM SteamDryer™ (DLG8388/DLG7188) CES Innovations 2008 Award FACTS & FIGURES

ORGANIZATION SALES North America Headquarters Europe Headquarters China Headquarters Asia Headquarters 40,848 South & Central America Headquarters 36,730 Middle East & Africa Headquarters 2007 2006 CIS Headquarters

Korea Headquarters IN BILLIONS OF KOREAN WON Global revenue, referring to the total revenue of the global subsidiaries’ account excluding internal transactions CTO CSO CMO CIS 5% CFO KOREA 15% SOUTH & CENTRAL AMERICA 10% CHO DA 29% DD 31% CPO SALES CHINA & ASIA SALES CSCO PACIFIC 17% NORTH BY COMPANY BY REGION AMERICA 27%

MIDDLE EAST 13% DM & AFRICA 7% MID-TERM STRATEGIES MC 27% EUROPE 19% AS OF 2007 Global revenue, referring to the total revenue of the global subsidiaries’ account excluding internal transactions 2008 BUSINESS GOAL 2008 STRATEGY

Global Number 1 player in the digital appliance industry. Market-driving value creation. DA

Excelling to becoming the world’s top display brand by 2010. Building its global leadership in the flat panel display industry DD by providing consumers with differentiated entertainment INVESTMENT experiences with consumer-focused features.

Seize the Global Top 3 by 2010 through advanced infotainment Grow new business by taking advantage of opportunities in DM solutions. digital convergence. EQUIPMENT INVESTMENT 1,115 R&D INVESTMENT 1,678 Advance into the Global Top 3 by 2010 through profitable growth. Reinforce design leadership and enhanced focus on high-end MC feature phones with mobile touch technology. TOTAL 2,793 AS OF 2007 / IN BILLIONS OF KOREAN WON

56 + 57 FACTS & FIGURES

LEADING GLOBAL PRODUCTS GLOBAL PRODUCTION NETWORK

region Country City company Products MARKET SHARE Europe Poland Mlawa LGEMA TV, LCD MNT, PDP MODULE Poland Wroclaw LGEWR LCD TV, REF

CIS Kazakstan Almaty LGEAK TV, W/M, AUDIO Russia Moscow LGERA REF, W/M, PDP TV, LCD TV, FLAT TV, HOME THEATER

35% 21.2% Middle East Turkey Istanbul LGEAT A/C & Africa Egypt Ismailia LGEEG TV, LCD Optical Storage CDMA Handsets Saudi Arabia Riyadh LGESR A/C

China China Hangzhou LGEHN V/C, DVD-R, USB, PRISM SHEET China Huizhou LGEHZ DS, AUDIO China Kunshan LGEKS NOTEBOOK PC, PDA, CAR TELEMATICS China Nanjing LGENP PDP TV, PDP MODULE China Nanjing LGEND MNT, LCD TV, PDP TV China Nanjing LGEPN W/M 18% 36% China Qingdao LGEQD GSM China Qinhuangdao LGEQH CAST Residential Plasma Panels Air Conditioners China Shanghai LGESH DAV China Shenyang LGESY TV China Tianjin LGETA MWO, RAC, RO COMP, VC, MOTOR, MGT China Taizhou LGETR REF, REF-COMP China Yantai LGEYT CDMA, GSM

Asia India New Delhi/Pune LGEIL TV, REF, W/M, A/C, MWO, MNT, GSM, ODD, DVD Indonesia Jakarta LGEIN AUDIO, VIDEO, DVD, MNT, TV, LCD TV, PDP TV, REF 10% 9.7% Thailand Bangkok LGETH W/M, A/C, A/C-COMP, TV Vietnam Hanoi LGEVN FLAT TV, LCD TV, PDP TV, LCD MNT, CRT MNT, A/C, W/M, REF, MWO, V/C DVD Players LCD & Plasma TVs North America Mexico Monterrey LGEMM REF Mexico Mexicali LGEMX LCD TV, LCD MNT, GSM, CDMA Mexico Reynosa LGERS PDP TV, FLAT TV, PDP MODULE

South & Brazil Manaus LGEAZ TV, AUDIO, DVD, A/C Central America Brazil Taubate LGESP CELLULAR, MNT, NOTEBOOK PC

EMPLOYEES STRATEGIC PARTNERS KOREA 29,496 PRADA 3M TOSHIBA RENESAS INTEL TOYOTA SUN OVERSEAS 50,787 BEST BUY NORTEL DUPONT QUALCOMM HITACHI YAHOO YouTube TOTAL 80,283 PHILIPS MICROSOFT MATSUSHITA GE HP GOOGLE

58 + 59 GLOBAL NETWORK

• St. Petersburg • LGESW Stockholm LGEBN • • LGELV Riga LGEEH • LGESC • • LGERA LGELS • • LGERM LGEJE Amsterdam • LGEWR Wroclaw • • LGEMA Mlawa • LGERU • LGEPL Warsaw • LGERI Moscow LGEUK London • LGEDG Düsseldorf • • LGECZ Prague • LGEUR Kiev • LGECI Toronto • LGEFS Paris • LGEAG Vienna • LGEUA LGEMF Villepinte • • LGEMK Budapest • LGEAK Almaty Vladivostok • • LGEUS New Jersey LGEQH Qinhuangdao • • LGESY Shenyang • LGEIS Milan • LGERO Bucharest LGECH Beijing • • ZENITH Chicago • PRODUCTION / SALES • Tashkent • LGERD Beijing • LGEAT Istanbul LGETA Tianjin • • LGEMR San Diego • LGEES Madrid • LGEMU • SERVICE LGEYT Yantai • LGEPT Lisbon LGEQD Qingdao • • • LGEHS Athens • LGEMX Mexicali Algiers • • Tunis • Beirut • Tehran LGEJP Tokyo • • LIAISON OFFICE • Amman LGENP, LGEND, LGEPN Nanjing ••• • LGEAI Huntsville • SALES • LGEMC Casablanca LGESH Shanghai • LGERS Reynosa • • LGEEG Ismalia • LGEHN Hangzhou • R&D DESIGN / OTHERS • LGEEC Cairo • Karachi LGEKS Kunshan • • LGEIL New Delhi • LGETT Taipei • LGEMM Monterrey LGESR Riyadh • LGETR Taizhou • • LOGISTICS • LGEGF Dubai • Dhaka LGEHZ Huizhou • • LGEME • LGEHK Hong Kong LGEMS Mexico City • • Jeddah • LGEAF LGEVN Hanoi •

• LGSI Bangalore • LGEPH Manila • LGETH Bangkok • LGEPS Panama • LGECB Bogota • LGEML Kuala Lumpur • Nairobi • LGESL Singapore

• LGEIN Jakarta • LGEAZ Manaus

• LGEPR Lima

• LGESP Taubate

• LGESA Johannesburg LGECL Santiago • • LGEAR Buenos Aires LGEAP Sydney •

LGERO LG Electronics Romania S.R.L. ASIA LGESC LG Electronics European Shared Service Center B.V. LGEAP LG Electronics Australia Pty, Ltd. LGESW LG Electronics Nordic AB LGEIL LG Electronics India Pvt. Ltd. LGEUK LG Electronics United Kingdom Ltd. LGEIN P.T. LG Electronics Indonesia LGEWR LG Electronics Wroclaw Sp. z.o.o. LGEHZ LG Electronics Huizhou Ltd. LGEJP LG Electronics Japan, Inc. EUROPE LGEKS LG Electronics (Kunshan) LGEML LG Electronics Malaysia SDN. BHD LGEAG LG Electronics Austria GmbH Computer Co., Ltd. LGEPH LG Electronics Philippines Inc. CIS LGEBN LG Electronics Benelux Sales B.V. LGEND LG Electronics Nanjing Display Co., Ltd. LGESL LG Electronics Singapore Pte, Ltd. LGECZ LG Electronics CZ, S.R.O LGEAK LG Electronics Almaty Kazakstan LGENP LG Electronics (Nanjing) Plasma Co., Ltd. LGETH LG Electronics (Thailand) Co., Ltd. LGEDG LG Electronics Deutschland GmbH LGELV LG Electronics Latvia, LLC LGEPN Nanjing LG-Panda Appliances Co., Ltd. LGEVN LG Electronics Vietnam Co., Ltd. LGEEH LG Electronics European Holdings B.V. LGERA LG Electronics RUS, LLC LGEQD Qingdao LG Inspur Digital LGSI LG Soft India Private Ltd. NORTH AMERICA LGEES LG Electronics Espana S.A. LGERI LG Alina Electronics Communication Co., Ltd. LGEFS LG Electronics France S.A.R.L. LGERM LG Electronics RUS-Marketing, LLC LGEQH LG Electronics Qinhuangdao Inc. MIDDLE EAST & AFRICA LGEAI LG Electronics Alabama, Inc. LGEHS LG Electronics Hellas S.A. LGERU LG Electronics Russia & Ukraine LGERD LG Electronics (China) Research LGECI LG Electronics Canada, Inc. SOUTH & CENTRAL AMERICA LGEIS LG Electronics Italia S.P.A. LGEUA LG Electronics Ukraine and Development Center Co., Ltd. LGEAF LG Electronics Africa Logistic FZE LGEMR LG Electronics Mobile Research. LGEJE LG Electronics JIT Europe B.V. LGEUR LG Electronics Ukraine Inc. LGESH Shanghai LG Electronics Co., Ltd. LGEAT Arcelik-LG Klima Sanayi ve Ticaret A.S. U.S.A., LLC LGEAR LG Electronics Argentina S.A. LGELS LG Electronics European Logistics & LGESY LG Electronics Shenyang Inc. LGEEC LG Electronics Egypt Cairo S.A.E. LGEMS LG Electronics Mexico S.A. de C.V. LGEAZ LG Electronics da Amazonia Ltda. Services B.V. LGETA LG Electronics Tianjin Appliances Co., Ltd. LGEEG LG Electronics Egypt S.A.E. LGEMU LG Electronics Mobilecomm U.S.A., Inc. LGECB LG Electronics Colombia Ltda. CHINA LGEMA LG Electronics Mlawa Sp. z.o.o. LGETR LG Electronics (Taizhou) LGEGF LG Electronics Gulf FZE LGEUS LG Electronics U.S.A., Inc. LGECL LG Electronics Inc. Chile Ltda. LGEMF LG Electronics Mobilecomm France LGECH LG Electronics China Holding Company Refrigeration Co., Ltd. LGEMC LG Electronics Morocco S.A.R.L. ZENITH zenith Electronics Corporation LGEPR LG Electronics Peru S.A. LGEMK LG Electronics Magyar KFT LGEHK LG Electronics HK Ltd. LGEYT Langchao LG Digital Mobile LGEME LG Electronics Middle East Co., Ltd. LGEMM LG Electronics Monterrey Mexico LGEPS LG Electronics Panama S.A. LGEPL LG Electronics Polska Sp. z.o.o. LGEHN LG Electronics (Hangzhou) Communication Co., Ltd. LGESA LG Electronics S.A. (Pty) Ltd. S.A. de C.V. LGERS LG Electronics Reynosa, Inc. LGEPT LG Electronics Portugal S.A. Recording Media Co., Ltd. LGETT LG Electronics Taiwan Taipei Co., Ltd. LGESR LG-Shaker Company Ltd. LGEMX LG Electronics Mexicali S.A. de C.V. LGESP LG Electronics de Sao Paulo Ltda.

60 + 61 MANAGEMENT / BOARD CORPORATE MILESTONES MANAGEMENT

YONG NAM 1958 1993 2004 Vice Chairman & CEO • Established as GoldStar • Established a production and sales • Received approval for E-VSB as the next- subsidiary in Huizhou, China (LGEHZ), generation ATSC DTV transmission standard 1959 beginning a full-scale advance into the • Launched world’s first 55-inch LCD TV • Produced Korea’s first radio Chinese market • Commercialized world’s first 71-inch Plasma TV 1962 1995 • Developed world’s first mobile phone with YOUNG HA LEE SIMON KANG BB HWANG SKOTT AHN • Exported Korea’s first radios to the US • Renamed as LG Electronics T-DMB mobile TV reception President & CEO / President & CEO / President & CEO / President & CEO / and Hong Kong • Acquired US-based Zenith Electronics • Developed home cinema system with Digital Appliance Digital Display Digital Media Mobile Company Company Company Communications wireless speakers Company 1965 1997 • Led global CDMA mobile phone market • Produced Korea’s first refrigerator • Developed 40-inch Plasma TV and world’s for the first time first DTV IC chipset 1966 • Established India production subsidiary 2005 • Produced Korea’s first black and white TV (LGEIL) • Launched world’s first notebook with Myung-Kyu Ahn Jong-Eun Kim Nam K. Woo Young Woo Nam T-DMB reception President & CEO / President & CEO / President & CEO / President & CEO / Head of North Head of Europe Head of China Head of Asia 1968 1998 • Launched LG Chocolate, the first phone America Headquarters Headquarters Headquarters Headquarters • Produced Korea’s first air conditioner • Developed world’s first 60-inch Plasma TV in the Black Label series • Developed world’s first 102-inch Plasma TV 1969 1999 • Co-established LG-Nortel, • Produced Korea’s first washing machine • Co-established LG.Philips LCD a telecommunications network equipment Kyung Hoon Byun Ki Wan Kim Young Chan Kim Seog Won Park venture with Nortel Networks President & CEO / President & CEO / President & CEO / President & CEO / Head of South & Head of Middle Head of CIS Head of Korea 1974 2000 • Launched mobile phone with S-DMB Central America East & Africa Headquarters Headquarters Headquarters Headquarters • Listed on the Korea Stock Exchange • Acquired operations of LG Information & reception and recording Communications 1977 • Launched world’s first Internet-enabled 2006 • Produced Korea’s first color TV refrigerator • Launched LG Shine, the second handset in the Black Label series WOO HYUN PAIK DOHYUN JUNG DERMOT BODEN Young Kee Kim 1978 2001 • Launched steam washing machine and President / Executive VP / Executive VP / Executive VP / • Surpassed USD 100 million in exports, • Commercialized asynchronous IMT-2000 interactive TV refrigerator Chief Technology Chief Financial Chief Marketing Chief Human Officer Officer Officer Resources a Korean industry first communications equipment • Developed world’s first 100-inch LCD TV Officer • Launched world’s first Internet-enabled • Launched world’s first full HD (1080p) 1980 washing machine, air conditioner, and 102-inch Plasma TV • Established first EU sales subsidiary microwave oven • Developed world’s first dual-format TOM LINTON Didier in Germany (LGEWG) • Co-established LG.Philips Displays high-definition disc player and drive Executive VP / Chenneveau Chief Executive VP / Procurement Chief Supply 1982 2002 2007 Officer Chain Officer • Established US color TV plant in Huntsville, • Demerged into two companies to unlock • Launched BH100 Super Blu, the world’s first Alabama shareholder value: holding company LG dual-format HD disc player Electronics Investment (LGEI) and operating • Launched Prada Phone by LG with advanced 1984 company LG Electronics (LGE) touch interface • Surpassed KRW 1 trillion in sales for • Commercialized world’s first home • Won record number of international BOARD the first time network system design awards, including 21 iF and 29 Red Dot Design Award 1986 2003 • Launched 120 Hz full HD LCD TV line Chairman of the Board of Directors Outside Directors • Established European VCR plant in Germany • Developed world’s first synchronous- • Shipped 15 millionth LG Chocolate Phone Directors asynchronous IMT-2000 mobile phone • Led US drum washing machine market 1988 • Developed world’s first 76-inch Plasma TV for the first time Yong Nam DOHYUN JUNG Suk-Jean Kang • Established sales and joint venture • Launched world’s first DVD rewriter Vice Chairman / CEO Executive VP / CFO Chairman / CEO Consulting Group production subsidiaries in Thailand compatible with all CD and DVD standards Yu-Sig Kang In-Ki Joo • Led US CDMA mobile phone market for Vice Chairman / CEO of LG Corp. Professor / Yonsei University 1991 the first time Suk-Chae Lee • Established design technology center Consultant / Taepyungyang Lawfirm in Ireland Sung-Won Hong President / Jeollanamdo Innovation Agency for Strategic Industry

62 + 63 FINANCIAL STATEMENTS Report of Independent Auditors

TO THE BOARD OF DIRECTORS present fairly, in all material respects, the financial position of AND SHAREHOLDERS OF LG ELECTRONICS INC. LG Electronics Inc. as of December 31, 2007 and 2006, and the results of its operations, the changes in its retained earnings We have audited the accompanying non-consolidated balance and its cash flows for the years ended December 31, 2007 and sheets of LG Electronics Inc. (the “Company”) as of December 2006, and its changes in shareholders’ equity for the year end- 31, 2007 and 2006, and the related non-consolidated state- ed December 31, 2007, in conformity with accounting principles ments of income, appropriations of retained earnings, and cash generally accepted in the Republic of Korea. Without qualifying flows for the years ended December 31, 2007 and 2006, and our opinion, we draw your attention to following matter. the statement of changes in shareholders’ equity for the year ended December 31, 2007, expressed in Korean won. These The Company adopted the Korea Accounting Institute Opinion financial statements are the responsibility of the Company’ 06-2, Deferred Income taxes on Investments in Subsidiaries, s management. Our responsibility is to express an opinion on Associates and Interests in Joint Ventures, and changed its these financial statements based on our audits. We did not method of accounting for income taxes on temporary differences audit the financial statements of certain subsidiaries, the in- in relation to investments in subsidiaries and equity method vestments in which are reflected in the accompanying non- investees to comply with the new requirement. Accordingly, consolidated financial statements using the equity method of the prior year financial statements, presented herein for com- accounting. The investments in those subsidiaries represent parative purposes, have been restated to reflect the changes to 17.7% and 11.7% of the Company’s total assets as of December conform with SFKAS No. 1. 31, 2007 and 2006, and the equity in their net income represents 48.2% and 46.4% of the Company’s income before income tax Accounting principles and auditing standards and their ap- for the years then ended. These financial statements were plication in practice vary among countries. The accompanying audited by other auditors whose reports have been furnished non-consolidated financial statements are not intended to for us, and our opinion, insofar as it relates to the amounts present the financial position, results of operations, changes included for the subsidiaries, is based solely on the reports of in shareholders’ equity and cash flows in conformity with ac- the other auditors. counting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, We conducted our audits in accordance with auditing standards the procedures and practices used in the Republic of Korea to generally accepted in the Republic of Korea. Those standards audit such financial statements may differ from those generally require that we plan and perform the audit to obtain reasonable accepted and applied in other countries. Accordingly, this report assurance about whether the financial statements are free of and the accompanying financial statements are for use by those material misstatement. An audit includes examining, on a test who are informed about Korean accounting principles or auditing basis, evidence supporting the amounts and disclosures in the standards and their application in practice. financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports 65 Report of Independent Auditors of other auditors provide a reasonable basis for our opinion.

66 Non-Consolidated Balance Sheets In our opinion, based on our audit and the reports of other audi- Seoul, Korea tors, the non-consolidated financial statements referred to above February 26, 2008 68 Non-Consolidated Statements of Income

This report is effective as of February 26, 2008, the audit report date. Certain subsequent events or circumstances, 69 Non-Consolidated Statements of Appropriations of Retained Earnings which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying non-consolidated financial statements and notes thereto. Accordingly, the readers of the audit 70 Non-Consolidated Statement of Changes in Shareholders' Equity report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

71 Non-Consolidated Statements of Cash Flows Samil PricewaterhouseCoopers is the Korean member firm of PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of Pricewaterhouse Coopers International Limited, each of which is a separate and independent legal entity.

64 + 65 Non-Consolidated Balance Sheets Non-Consolidated Balance Sheets

December 31, 2007 and 2006 December 31, 2007 and 2006

(in millions of Korean won) 2007 2006 (in millions of Korean won) 2007 2006

Assets Liabilities and shareholders' equity

Current assets Current liabilities Cash and cash equivalents 532,371 490,315 Short-term borrowings 29,265 37,674 Short-term financial instruments - 20,000 Current maturities of long-term debts and debentures, net 370,867 792,569 Trade accounts and notes receivable, net 548,503 899,904 Trade accounts and notes payable 1,838,402 1,764,116 Inventories, net 945,570 1,103,654 Other accounts payable 1,051,298 1,083,209 Other accounts receivable, net 226,086 232,430 Income taxes payable 42,196 42,813 Prepaid expenses 111,101 75,679 Accrued expenses 835,332 805,438 Accrued income, net 67,283 53,174 Withholdings 46,033 53,705 Advances, net 73,887 55,180 Unearned income 40,132 35,928 Derivative transaction debit 665 6,646 Advances from customers 149,424 284,595 Deferred income tax assets 238,991 161,898 Derivative transaction credit 19,682 1,281 Other current assets, net 82,970 61,497 Total current liabilities 4,422,631 4,901,328

Total current assets 2,827,427 3,160,377 Debentures and convertible bonds, net of current maturities and discounts on debentures 1,366,043 792,197 Property, plant and equipment, net 4,037,055 4,256,321 Long-term debts, net of current maturities 281,460 849,944 Long-term financial instruments 14,854 28,040 Accrued severance benefits, net 245,005 228,635 Long-term investment securities 16,199 37,078 Product warranty reserve 165,031 241,956 Equity method investments 6,308,815 4,583,577 Deferred income tax liabilities 570,213 257,396 Refundable deposits 329,626 319,241 Derivative transaction credit 76,720 23,832 Long-term advance payments 193,540 149,505 Other long-term liabilities - 38 Long-term prepaid expenses 112,189 125,531 Long-term loans receivable, net 90,302 103,748 Total liabilities 7,127,103 7,295,326 Intangible assets, net 398,481 462,217 Derivative transaction debit 5,641 4,507 Commitments and contingencies Other investment assets 3,676 - Shareholders' equity Total assets 14,337,805 13,230,142 Capital stock 809,169 809,169 Capital surplus Paid-in capital in excess of par value 2,207,919 2,207,919 Other capital surplus 12,074 12,074 Capital adjustments Treasury stock (44,893) (44,893) Accumulated other comprehensive income Gain on valuation of available-for-sale securities 5,359 4,623 Loss on valuation of available-for-sale securities (560) (89) Gain on valuation of equity-method investments 847,300 824,148 Loss on valuation of equity-method investments (148,632) (300,365) Retained earnings Statutory reserve 91,049 106,656 Voluntary reserve 2,254,119 2,204,668 Unappropriated retained earnings 1,177,798 110,906

Total shareholders' equity 7,210,702 5,934,816 Total liabilities and shareholders' equity 14,337,805 13,230,142

66 + 67 Non-Consolidated Statements of Income Non-Consolidated Statements of Appropriations of Retained Earnings

Years Ended December 31, 2007 and 2006 Years Ended December 31, 2007 and 2006 (Dates of Appropriations: March 14, 2008 and March 23, 2007 for the years ended December 31, 2007 and 2006, respectively)

(in millions of Korean won, except per share amounts) 2007 2006 (in millions of Korean won) 2007 2006

Sales 23,501,935 23,170,719 Retained earnings before appropriations Unappropriated retained earnings carried over from prior year (44,597) 99 Cost of sales 18,339,833 17,727,403 Cumulative effect of change in accounting principle - (71,182) Gross profit 5,162,102 5,443,316 Changes in retained earnings arising from equity method accounting - (57,214) Net income 1,222,395 239,203 Selling and administrative expenses 4,597,518 4,908,402 1,177,798 110,906 Operating income 564,584 534,914

Non-operating income Transfer from voluntary reserve Reserve for research and manpower development 2,226,347 2,204,668 Interest income 56,009 45,743 Rent income 27,758 28,495 3,404,145 2,315,574 Foreign exchange gains 225,526 326,121 Reversal of allowance for doubtful accounts - 7,473 Appropriations of retained earnings Gain on disposal of investment securities 30,307 24,792 Legal reserve 13,777 12,165 Gain on disposal of property, plant and equipment 41,905 4,988 Reserve for research and manpower development 3,252,504 2,226,347 Gain from redemption of debentures 8,240 20 Cash dividends 137,765 121,659 Equity in earnings of equity-method investees 1,413,598 225,018 Dividends (ratio) per share Gain on settlement of derivatives 35,851 45,936 Common stock: Gain on valuation of derivatives 1,799 11,154 \ 850 (17%) in 2007 Others 22,172 34,641 \ 750 (15%) in 2006 Total non-operating income 1,863,165 754,381 Preferred stock: \ 900 (18%) in 2007 Non-operating expenses \ 800 (16%) in 2006 Interest expense 119,073 150,019 Foreign exchange losses 198,919 172,300 Donations 15,288 15,713 U nappropriated retained earnings to be 3,404,046 2,360,171 Loss from disposal of property, plant and equipment 34,176 15,863 Loss on impairment of assets 101,762 837 carried forward to subsequent year 99 (44,597) Loss from transfer of trade accounts and notes receivable 202,594 204,546 Equity in losses of equity-method investees 119,653 399,644 Loss on settlement of derivatives 40,280 27,101 Loss on valuation of derivatives 72,571 29,499 Other depreciation 23,869 - Others 12,651 11,970 Total non-operating expenses 940,836 1,027,492

Income before income taxes 1,486,913 261,803 Income tax expense 264,518 22,600

Net income 1,222,395 239,203 Basic earnings per share (in won) 7,584 1,480 Diluted earnings per share (in won) 7,584 1,480

68 + 69 Non-Consolidated Statement of Changes in Shareholders' Equity Non-Consolidated Statements of Cash Flows

Year Ended December 31, 2007 Years Ended December 31, 2007 and 2006

Accumulated other Capital Capital Capital Retained (in millions of Korean won) comprehensive total (in millions of Korean won) 2007 2006 stock surplus adjustments income earnings

Balance at January 1, 2007 809,169 2,219,993 (44,893) 687,981 2,466,926 6,139,176 Cash flows from operating activities Cumulative effect of Net income 1,222,395 239,203 changes in accounting principles - - - (159,664) (44,696) (204,360) Restated balance 809,169 2,219,993 (44,893) 528,317 2,422,230 5,934,816 Adjustments to reconcile net income to net cash provided by operating activities Cash dividends - - - - (121,659) (121,659) Depreciation 595,605 591,211 Amortization 116,777 115,763 Appropriation of retained earnings - - - - 2,300,571 5,813,157 Amortization of discounts on debentures 2,294 23,674 Net income - - - - 1,222,395 1,222,395 Provision for severance benefits 218,572 186,811 Change in equity from Loss from transfer of trade accounts and notes receivable 202,594 204,546 equity method - - - 23,152 - 23,152 Bad debt expense 3,643 - Change in equity from Gain on foreign currency translation, net 36,426 (76,640) negative equity method - - - 151,733 - 151,733 Gain from disposal of investment securities, net (28,656) (23,474) Gain on valuation of Loss on impairment of assets, net 101,195 837 available for sale securities - - - 265 - 265 Loss from disposal of property, plant and equipment, net (7,730) 10,875 Balance at December, 2007 809,169 2,219,993 (44,893) 703,467 3,522,966 7,210,702 Equity in losses (gains) of equity-method investees, net (1,293,945) 174,626 Loss (gain) on valuation of derivatives, net 70,772 18,345 Gain on settlement of derivatives, net 4,429 (18,835) Provision for product warranties, net 401,423 738,543 Stock compensation costs 11,256 - Reversal of compensation costs - (5,799) Loss on redemption of debentures (8,240) - Reversal of accounts receivables - (7,473) Others 3,178 21,136 Net adjustments 429,593 1,954,146

70 + 71 Non-Consolidated Statements of Cash Flows Non-Consolidated Statements of Cash Flows

Years Ended December 31, 2007 and 2006 Years Ended December 31, 2007 and 2006

(in millions of Korean won) 2007 2006 (in millions of Korean won) 2007 2006

Changes in operating assets and liabilities Cash flows from investing activities Decrease in trade accounts and notes receivable 149,240 296,236 Disposal of short-term and long term loans 20,818 15,553 (Increase) decrease in other accounts receivable (43,268) 24,252 Increase in short-term and long term loans (12,462) (24,493) Increase in accrued income (31,274) (2,131) Decrease in short-term financial instruments 20,000 - Increase in advances (18,569) (8,889) Increase in short-term financial instruments - (20,000) Increase in other current assets (17,196) (20,485) Disposal of long-term financial instruments 37,936 25,198 Decrease in inventories 152,067 316,254 Acquisition of long-term financial instruments (24,750) (34,293) Increase in prepaid expenses (35,422) (6,038) Proceeds from disposal of investment securities 35,998 23,912 Increase in long-term advance payments (44,035) (11,782) Acquisition of investment securities (222,705) (237,320) Decrease (increase) in long-term prepaid expenses 13,342 (30,461) Return of refundable deposits 57,866 118,886 (Increase) decrease in deferred income tax assets (77,093) 200 Payment of refundable deposits (67,347) (47,675) Increase (decrease) trade accounts and notes payable 55,920 (24,361) Proceeds from disposal of property, plant and equipment 143,296 28,823 Decrease in other accounts payable (33,267) (18,268) Proceeds from disposal of intangible assets 377 23,910 Increase (decrease) in accrued expenses 13,848 (77,616) Proceeds from disposal of derivatives 41,556 50,685 (Decrease) increase in withholdings (7,709) 13,084 Acquisition of property, plant and equipment (577,766) (766,181) (Decrease) increase in advances from customers (84,672) 70,758 Acquisition of intangible assets (77,451) (153,360) (Decrease) increase in income taxes payable (41,681) 20,842 Acquisition of derivatives (40,620) (31,102) Payment of severance benefits (139,880) (210,763) (Increase) decrease in severance insurance deposits (43,402) 9,033 Net cash used in investing activities (665,254) (1,027,457) Decrease in contribution to the National Pension Fund 1,828 4,076 Increase (decrease) in deferred income tax liabilities 293,986 (73,232) Cash flows from financing activities Decrease in product warranty reserve (478,348) (609,086) Proceeds from short-term borrowings 174,679 40,000 Dividends received 22,807 16,673 Repayment of short-term borrowings (175,382) (44,992) Others 476 (56,664) Repayment of current maturities of long-term debt (786,248) (1,011,516) Net changes (392,302) (378,368) Proceeds from issuance of debentures 649,018 - Proceeds from long-term debt 185,320 381,550 Net cash provided by operating activities 1,259,686 1,814,981 Repayment of long-term debt (478,104) (43,559) Payment of dividends (121,659) (199,956)

Net cash used in financing activities (552,376) (878,473) Net increase (decrease) in cash and cash equivalents 42,056 (90,949)

Cash and cash equivalents Beginning of the year 490,315 581,264 End of the year 532,371 490,315

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