LG Annual Report
`
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`Fundamental Ex 2007-2
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`04 Message from the CEO
`08 Board of Directors
`10 Holding Structure
`13 Management's Discussion
`
` & Analysis
`23 Audit Report
`
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`Message from the CEO
`
`04
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`

`

`LG will bolster the effort
`towards advancing our
`business structure
`by innovating the very
`foundation of our
`business—R&D and
`manufacturing
`
`05
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`

`Message from the CEO
`
`To our valued shareholders and customers
`
`First and foremost, I would like to express our deepest appreciation for your continued trust and support for LG.
`
`In order to overcome the challenging business conditions presented by the year 2016, LG Corp. and our affiliates focused on creating
`
`differentiated value, and our concerted efforts have been rewarded by increased profits in core businesses and enhanced market
`
`positions in future growth business areas.
`
`In the electronics and display businesses, we have increased our share across global markets with superior technologies in OLED,
`
`motors and compressors, combined with product offerings that create value for customers. In particular, the successful launch of
`
`LG SIGNATURE secured our position as a premium home appliance brand.
`
`Our petrochemical business posted excellent profits through enhanced cost competitiveness, while continuing the transition to a high
`
`value-added business portfolio. Cosmetics sales grew significantly thanks to an expanding customer base across global markets.
`
`We have achieved sustained growth in a stagnant telecommunications market with new service offerings and a broad range of
`
`marketing efforts.
`
`In our future growth business areas, we have continued our efforts towards building a solid profit base for the future by securing new
`
`contracts for our vehicle component business and energy solution business, and discovering new growth drivers such as bio business.
`
`Building on our core strength in world-leading EV battery technology, our vehicle component business is rapidly emerging as a key
`
`business partner for global automakers, supplying key components for GM’s core EV models.
`
`Thanks to these and other solid performances across business areas, LG Corp. posted a consolidated revenue of KRW 10.73 trillion in
`
`2016, up eight percent from the previous year. Our operating profits grew by 18 percent from year 2015 at KRW 1.34 trillion.
`
`However, we expect challenges and changes to continue for the foreseeable future: low growth that has dogged the global economy
`
`is continuing to persist, and the rising specter of protectionism across the globe is signaling radical changes in the political and
`
`economic climate. Industries around the world are being compelled to cope with game-changing technology innovations, such as
`
`artificial intelligence, that are hurtling forward at a breakneck speed.
`
`In response to these tectonic shifts in the business landscape, LG is determined to stay ahead by accurately reading changes and
`
`making farsighted and preemptive responses.
`
`06
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`

`First, our primary focus will be on innovating R&D and manufacturing—the very foundation of our
`business—in order to bolster our effort towards advancing our business structure as a whole.
`
`We will work on dramatically enhancing the competitiveness of our core businesses, while directing our internal and external resources
`
`to fostering future growth business areas.
`
`We will implement new technologies and innovations to enhance manufacturing productivity on a fundamental level, and align our
`
`R&D efforts to customer values to establish a strong and clear link between our R&D efforts and business opportunities and
`
`performances.
`
`Second, we will continue to innovate our business management system to ensure timely
`response to changing business conditions.
`
`LG Corp. and our subsidiaries will implement innovations across our business management processes to further enhance our
`
`capabilities in business forecasting, enabling our entire organization to mount active and timely responses to changing business
`
`conditions and deliver preemptive risk management.
`
`Third, LG will renew our commitment for corporate integrity to remain a respected corporate
`member of our society.
`
`In line with our strong commitment for transparency in business management, LG was one of the first Korean businesses to make a
`
`transition to a holding company structure. We have stayed faithful to our management philosophy, the “Jeong-Do” management,
`
`which represents our unwavering conviction of the value of fair competition.
`
`We stand firm in our belief that the sustainability of our business hinges entirely on the trust bestowed by our customers and society.
`
`LG will renew our commitment for corporate integrity and adhere to the basics and our core principles in all of our business decisions
`
`and conducts.
`
`It is this enduring trust and support from our shareholders and customers that have allowed LG to overcome numerous challenges
`
`over the years and grow into a global corporation. We will scrupulously repay your enduring trust by making a substantial progress in
`
`advancing our business structure and management system, and ultimately, maximizing our corporate value.
`
`Thank You.
`
`CEO & Chairman Bon Moo Koo
`
`07
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`

`Board of Directors
`
`challenge is our power
`
`Koo, Bon Moo
`Chairman of the Board
`Chairman and CEO, LG Corp.
`
`Ha, Hyun Hwoi
`Director
`President, LG Corp.
`
`Kim, Hong Gi
`Director
`Head of Finance and
`Accounting Team,
`LG Corp.
`
`08
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`

`

`Yoon, Dae Hee
` Director
`Chair Professor,
`Gachon University
`
`Noh, Young Bo
` Director
`Representative Partner,
`Bae, Kim & Lee LLC
`
`Lee, Chang Kyu
` Director
`Chairman, Gimco Co., Ltd.
`
`Choi, Sang Tai
`Director
`Visiting Professor,
`Ulsan National Institute
`of Science and Technology
`
`09
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`

`

`Holding Structure
`
`holding structure
`
`Electronics
`
`Chemicals
`
`LG Electronics Inc.
`(33.7%)
`
`LG Display Co., Ltd. (37.9%)
`-Nanumnuri Co., Ltd. (100%)
`LG Innotek Co., Ltd. (40.8%)
`-Innowith Co., Ltd. (100%)
`Hi Plaza Inc. (100%)
`
`Hi-M Solutek Co., Ltd. (100%)
`Hi Teleservice Inc. (100%)
`Ace R&A Co., Ltd. (100%)
`Hi Entech Co., Ltd. (100%)
`LG-Hitachi Water Solutions Co., Ltd. (51.0%)
`Hanuri Co., Ltd. (100%)
`
` Silicon Works Co., Ltd. (33.1%)
`
` LG Siltron Inc. (51.0%)
`
` Lusem Co., Ltd. (68.0%)
`
`※ LG Fuel Cell Systems Korea Inc. (100%)
`
`LG Chem, Ltd. (33.5%)
`
`LG Household &
`Health Care, Ltd. (34.0%)
`
`SEETEC Co., Ltd. (50.0%)
`Haengboknuri Co., Ltd. (100%)
`FarmHannong Co., Ltd. (100%)
` ※-AGROTECH CO., Ltd. (100%)
` ※-FarmBiotec Co., Ltd. (100%)
` ※-Sesil Co., Ltd (71.1%)
` ※-FarmHwaong Co., Ltd. (68.4%)
`
`Coca-Cola Beverage Company (90.0%)
`-Hankook Beverage Co., Ltd. (100%)
`HAI TAI HTB Co., Ltd. (100%)
`TheFaceShop Co., Ltd. (100%)
`Clean Soul Ltd. (50.0%)
`CNP Cosmetics Co., Ltd. (86.0%)
`K&I Co., Ltd. (60.0%)
`Zenisce Co., Ltd. (70.0%)
`Balkeunnuri. Co., Ltd. (100%)
`LG Farouk Co. (50%)
`Genstory Co., Ltd. (50%)
`
`LG Fuel Cell Systems Korea Inc. (100%)
`※LG Fuel Cell Systems Inc.(overseas affiliate) holds 100% of shares in
` LG Fuel Cell Systems Korea Inc.
`
`LG Hausys, Ltd. (33.5%)
`
`LG Tostem BM Co., Ltd. (50.0%)
`Hausys Eng Co., Ltd. (100%)
`
`
`
`10
`
`LG Life Sciences, Ltd. (30.4%)
`
`Sarangnuri (100%)
`
`LG MMA Corp. (50.0%)
`
`※FarmHannong Co., Ltd. and Sesil Co., Ltd hold
` 32.1% and 36.3% of shares in FarmHwaong Co., Ltd.,
` respectively.
`
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`
`

`

`As of December 31, 2016
`Holding Company_1
`No. of subsidiaries_15
`No. of sub-subsidiaries_40
`No. of greatsub-subsidiaries_7
`Other_1
`
`Communication &
`Services
`
`LG Uplus Corp. (36.0%)
`
`CS Leader Co., Ltd. (100%)
`AIN Tele Service Co., Ltd. (100%)
`Medialog Corp. (98.4%)
`Dacom Crossing Co., Ltd. (51.0%)
`CS One Partner Co., Ltd. (100%)
`WithU Corporation Co., Ltd. (100%)
`
`LG CNS Co., Ltd. (85.0%) LG N-Sys Inc. (100%)
`※ Ucess Partners Co., Ltd.
` BNE PARTNERS, Inc. (91.5%)
` Korea Elecom Co., Ltd. (93.1%)
` Haengbokmaru Co., Ltd. (100%)
` BizTech Partners Co., Ltd. (100%)
`
`GIIR Inc. (35.0%)
`
`HS Ad Co., Ltd. (100%)
`L. Best Co., Ltd. (100%)
`
`Serveone Co., Ltd. (100%) Konjiam Yewon Co., Ltd. (90.0%)
`
`LG Management Development Institute (100%)
`LG Sports Ltd. (100%)
`
`※Ucess Partners Co, Ltd. has been sold in year
` 2016, but it remains an affiliate of LG based on
` Monopoly Regulation and Fair Trade Act as of
` December 31, 2016.
`
`11
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`

`

`12
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`
`

`

`Management's Discussion
`& Analysis
`
`2016. 1. 1~2016. 12. 31
`
`13
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`
`

`

`Management’s Discussion & Analysis
`
`2016. 1. 1 ~ 2016. 12. 31
`
`In order to overcome the challenging business conditions presented by the year 2016, LG Corp. and our affiliates focused on
`creating differentiated value, and our concerted efforts have been rewarded by increased profits in core businesses and enhanced
`market positions in future growth business areas.
`
`In the electronics and display businesses, we have increased our share across global markets with superior technologies in
`OLED, motors and compressors, combined with product offerings that create value for customers. In particular, the successful
`launch of LG SIGNATURE secured our position as a premium home appliance brand.
`
`Our petrochemical business posted excellent profits through enhanced cost competitiveness, while continuing the transition to a
`high value-added business portfolio. Cosmetics sales grew significantly thanks to an expanding customer base across global
`markets.
`
`We have achieved sustained growth in a stagnant telecommunications market with new service offerings and a broad range of
`marketing efforts.
`
`In our future growth business areas, we have continued our efforts towards building a solid profit base for the future by securing
`new contracts for our vehicle component business and energy solution business, and discovering new growth drivers such as bio
`business.
`
`Building on our core strength in world-leading EV battery technology, our vehicle component business is rapidly emerging as a key
`business partner for global automakers, supplying key components for GM’s core EV models.
`
`Thanks to these and other solid performances across business areas, LG Corp. posted a consolidated revenue of KRW 10.73 trillion
`in 2016, up eight percent from the previous year. Our operating profits grew by 18 percent from year 2015 at KRW 1.34 trillion.
`
`However, we expect challenges and changes to continue for the foreseeable future: low growth that has dogged the global
`economy is continuing to persist, and the rising specter of protectionism across the globe is signaling radical changes in the political
`and economic climate. Industries around the world are being compelled to cope with game-changing technology innovations, such
`as artificial intelligence, that are hurtling forward at a breakneck speed.
`
`In response to these tectonic shifts in the business landscape, LG is determined to stay ahead by accurately reading changes and
`making farsighted and preemptive responses.
`
`14
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`

`1. Sales and Profit before Tax of Subsidiaries
`
`Company
`
`LG Corp.(*1)
`
`Serveone Co., Ltd. (*2)
`
`LG CNS Co., Ltd. (*2)
`
`LG Siltron Inc. (*2)
`
`Lusem Co., Ltd. (*1)
`
`LG Management
`Development Institute(*1)
`
`LG Sports Ltd. (*1)
`
`2016
`
`614,003
`
`5,661,636
`
`3,036,923
`
`836,297
`
`125,955
`
`81,350
`
`50,193
`
`Sales
`
`2015
`
`YoY
`
`574,117
`
`4,767,046
`
`3,227,462
`
`777,382
`
`186,537
`
`76,751
`
`46,634
`
`6.9%
`
`18.8%
`
`-5.9%
`
`7.6%
`
`-32.5%
`
`6.0%
`
`7.6%
`
`Unit : KRW one million
`
`Profit Before Tax
`
`2016
`
`430,974
`
`158,894
`
`133,654
`
`9,069
`
`1,388
`
`3,068
`
`2015
`
`400,562
`
`110,483
`
`67,581
`
`(22,782)
`
`2,918
`
`1,875
`
`(4,315)
`
`(3,123)
`
`YoY
`
`7.6%
`
`43.8%
`
`97.8%
`
`139.8%
`
`-52.4%
`
`63.6%
`
`-38.2%
`
`164.3%
`
`LG Holdings
`Japan Co.,Ltd.(*1)
`
`8,818
`
`7,680
`
`14.8%
`
`4,959
`
`1,876
`
`(*1) based on the separate statements of income
`(*2) based on the consolidated statements of income
`
`Corporate Purchase Outsourcing and Real Estate Services Segment
`In 2016, Construction Management (CM) unit led the top line growth of the segment. Also, Maintenance, Repair, and Operation
`(MRO) unit, which accounts for the biggest chunk of the revenue, saw rise in sales in China and Vietnam. As a result, sales revenue of
`Serveone grew by 18.8% to KRW 5.66 trillion and generated operating profit of KRW 187 billion up by 41.1% from the year 2015.
`
`IT Services Segment
`After seeing drastic deterioration of profitability in 2015, LG CNS restored profitability levels well within the reach of previous
`years in 2016 thanks to the management’s focus on profitability rather than revenue growth.
`
`Semiconductor and Electronic Components Manufacturing Segment
`After seeing operating profit turning into the black in the year 2015, net income of LG Siltron turned to positive in the year 2016 as
`well. LG Siltron successfully achieved turnaround through productivity enhancement and effective purchase management. LG Siltron
`posted sales of KRW 836 billion and operating profit of KRW 34 billion, up by 7.6% and 529.6%, respectively from the year 2015.
`
`2. Gain(Loss) Valuation of Equity Method
`
`Company
`
`LG Chem Ltd.
`
`LG Household & Health Care, Ltd.
`
`LG Electronics Inc.
`
`LG Uplus Corp.
`
`LG Life Sciences, Ltd.
`
`LG Hitachi Co., Ltd.
`
`GIIR Corporation
`
`LG Hausys, Ltd.
`
`LG MMA Corp.
`
`Others
`
`Total
`
`2016
`
`376,203
`
`170,156
`
`18,315
`
`174,115
`
`8,086
`
`334
`
`4,938
`
`20,913
`
`26,470
`
`7,793
`
`807,323
`
`2015
`
`347,857
`
`137,601
`
`38,325
`
`134,912
`
`2,957
`
`317
`
`3,788
`
`20,940
`
`30,566
`
`2,603
`
`719,866
`
`Unit : KRW one million
`
`YoY
`
`8.1%
`
`23.7%
`
`-52.2%
`
`29.1%
`
`173.5%
`
`5.4%
`
`30.4%
`
`-0.1%
`
`-13.4%
`
`199.4%
`
`12.1%
`
`15
`
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`

`Management’s Discussion & Analysis
`
`2016. 1. 1 ~ 2016. 12. 31
`
`3. Other Revenue
`
`Account
`
`Brand royalty income
`
`Rental Income
`
`Others
`
`Total
`
`2016
`
`247,829
`
`104,876
`
`51,078
`
`403,783
`
`2015
`
`256,839
`
`102,844
`
`47,285
`
`406,968
`
`Unit : KRW one million
`
`YoY
`
`-3.5%
`
`2.0%
`
`8.0%
`
`-0.8%
`
`1) Brand royalty income
`LG Corp. reserves the legal rights over the brand "LG". Value of a brand is determined separately from intellectual property rights
`such as patent rights and a brand constitutes an important competitiveness-enhancing factor that contributes to increasing a
`company's cash flows in the future. Brand value has a material impact on sales by working as a factor to add image and credibility
`to the fundamental competitiveness of a company's products.
`As such, LG Corp. set the vision and core values of the “LG” brand, charged royalty from 2005 to users of the brand for enhancing
`the brand value through systematic brand management and strategic action plan. The company plans to reinvest part of the brand
`royalty income with the aim of elevating it into the global No. 1 brand, thereby, creating a virtuous circle of positive contribution to
`the brand users.
`Basic terms of the brand license agreements are as provided in the following:
`- License fee = (Consolidated sales - Consolidated advertising expenses) X 0.2%
`- Payable monthly
`- 1-year term
`- Adjustment factors applicable depending upon the specific form of usage of the brand (whether used by a joint venture, whether
`logos are used, etc.)
`Brand license fees are calculated and charged monthly based on the amounts of consolidated sales and consolidated advertising
`expenses as reported on the user's financial statements for the prior period. When the user's performance for the relevant period is
`fixed in the following year, then the fees are finally reconciled based on the relevant year's actual figures.
`As of the end of 2016, LG Corp. posted brand royalty income of KRW 247,829 million and 22 companies made brand contract.
`
`2) Rental income
`LG Corp. recorded rental income of KRW 104,876 million in 2016, a 2.0% increase from the previous year.
`
`※ Dividends received
`
`Company
`
`LG Chem Ltd.
`
`LG Uplus Corp.
`
`LG CNS Co., Ltd.
`
`LG Electronics Inc.
`
`LG Household & Health Care, Ltd.
`
`Serveone Co., Ltd.
`
`LG MMA Corp.
`
`LG Hausys, Ltd.
`
`Silicon Works Co., Ltd.
`
`Lusem Co., Ltd.
`
`GIIR Inc.
`
`Others
`
`Total
`
`16
`
`2016
`
`99,987
`
`39,344
`
`6,667
`
`22,038
`
`29,235
`
`28,000
`
`21,000
`
`5,412
`
`5,381
`
`700
`
`1,160
`
`2,374
`
`2015
`
`88,877
`
`23,607
`
`12,593
`
`22,038
`
`21,262
`
`20,000
`
`15,000
`
`5,412
`
`2,754
`
`700
`
`1,160
`
`1,031
`
`261,298
`
`214,434
`
`Unit : KRW one million
`YoY
`
`12.5%
`
`66.7%
`
`-47.1%
`
`0.0%
`
`37.5%
`
`40.0%
`
`40.0%
`
`0.0%
`
`95.4%
`
`0.0%
`
`0.0%
`
`130.4%
`
`21.9%
`
`Fundamental Ex 2007-16
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`4. Investments in Associates for the Years Ended December 31, 2016
`
`Company
`
`Beginning balance Acquisitions Dividends received
`
`Gain(Loss) from
`valuation
`
`Gain from valuation
`recognized in accumulated
`other comprehensive income
`
`LG Chem Ltd.
`
`LG Household &
`Health Care Ltd.
`
`LG Electronics Inc.
`
`LG Uplus Corp.
`
`LG Life Science Co., Ltd.
`
`LG Hitachi Co., Ltd.
`
`GIIR Corporation
`
`LG Hausys, Ltd.
`
`LG MMA Corp.
`
`Silicon Works Co., Ltd.
`
`Others
`
`3,867,167
`
`607,915
`
`3,482,395
`
`1,572,882
`
`75,313
`
`8,298
`
`44,417
`
`257,848
`
`211,114
`
`159,584
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`58,698
`
`17,143
`
`(99,987)
`
`376,203
`
`(29,235)
`
`170,156
`
`(22,038)
`
`(39,344)
`
`-
`
`(5)
`
`(1,160)
`
`(5,412)
`
`(21,000)
`
`(5,381)
`
`0
`
`18,315
`
`174,115
`
`8,086
`
`334
`
`4,938
`
`20,913
`
`26,470
`
`13,268
`
`(5,475)
`
`807,323
`
`(1,187)
`
`5,730
`
`108,623
`
`(1,969)
`
`(83,399)
`
`(63)
`
`(191)
`
`1,721
`
`(143)
`
`(436)
`
`3,787
`
`32,473
`
`Unit : KRW one million
`
`Others
`
`Ending balance
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`146
`
`146
`
`4,142,196
`
`754,566
`
`3,587,295
`
`1,705,684
`
`-
`
`8,564
`
`48,004
`
`275,070
`
`216,441
`
`167,035
`
`74,299
`
`10,979,154
`
`Total
`
`10,345,631
`
`17,143
`
`(223,562)
`
`5. Property, Plant and Equipment
`
`Unit : KRW one million
`
`Description
`
`Beginning balance
`
`Acquisitions
`
`Disposals
`
`Depreciation
`
`Transfers
`
`Impairment
`
`Others
`
`Ending balance
`
`Land
`
`Buildings
`
`Structures
`
`Machinery
`
`Vehicles
`
`Tools and
`equipment
`
`Furniture and
`fixtures
`
`Construction in
`progress
`
`Other property
`
`Total
`
`514,898
`
`1,004,764
`
`198,289
`
`214,832
`
`10,584
`
`106
`
`3,365
`
`185
`
`4,143
`
`11,984
`
`11,066
`
`2,151
`
`(2,150)
`
`(1,699)
`
`(14)
`
`(995)
`
`(136)
`
`(16)
`
`(43,983)
`
`(13,491)
`
`4,398
`
`61,976
`
`21,778
`
`(115,513)
`
`132,595
`
`(42)
`
`(2,322)
`
`(3,858)
`
`255
`
`0
`
`(25)
`
`517,227
`
`(1,212)
`
`1,023,211
`
`293
`
`1,676
`
`(2,828)
`
`207,040
`
`236,696
`
`17,537
`
`(282)
`
`68
`
`9,129
`
`67,982
`
`14,917
`
`(114)
`
`(23,153)
`
`9,505
`
`(6)
`
`(383)
`
`68,748
`
`202,827
`
`215,830
`
`(8,427)
`
`246,073
`
`2,471,315
`
`29,931
`
`282,612
`
`(285)
`
`(13,836)
`
`(48,369)
`
`(250,689)
`
`(226,963)
`
`(8,347)
`
`(4,803)
`
`(246)
`
`(122)
`
`(698)
`
`(480)
`
`380
`
`182,541
`
`219,261
`
`(2,511)
`
`2,481,390
`
`17
`
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`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`Management’s Discussion & Analysis
`
`2016. 1. 1 ~ 2016. 12. 31
`
`6. Investment Property
`
`Unit : KRW one million
`
`Description 　
`
`Beginning balance
`
`Acquisitions
`
`Depreciation
`
`Transfers
`
`Others
`
`Ending balance
`
`Land
`
`Buildings
`
`Structures
`
`Construction in progress
`
`335,452
`
`311,142
`
`5,976
`
`-
`
`137,332
`
`74,406
`
`-
`
`821
`
`-
`
`(17,794)
`
`(1,123)
`
`-
`
`Total
`
`652,570
`
`212,559
`
`(18,917)
`
`(428)
`
`4,512
`
`719
`
`-
`
`4,803
`
`10,834
`
`1,793
`
`84
`
`-
`
`483,190
`
`374,059
`
`5,656
`
`821
`
`12,711
`
`863,726
`
`Details of the fair value of investment property as of December 31, 2016, are as follows.
`
`Book
`value of
`investment
`property:
`
`Book
`value(*1)
`
`Results of valuation
`
`Unit : KRW one million
`
`Twin tower
`(*1),(*3)
`
`Gasandong
`building
`(*1)
`
`Buho
`building
`(*1)
`
`Incheon
`IT Center
`(*1)
`
`Others
`(*2),
`(*4)
`
`Total
`
`Central
`hub
`logistics
`center
`(*1)
`
`2013.
`01.01.
`
`5,570
`
`Chungju
`HUB
`Center
`(*1),(*2)
`
`2013.
`12.04.
`
`7,046
`
`Date of
`revaluation
`
`-
`
`Land
`
`589,494
`
`Gwang
`hwamun
`building
`(*1)
`
`Seoul
`Station
`building
`(*2), (*4)
`
`Kyobashi
`Trust
`Tower
`(*1),(*2)
`
`2012.
`03.16.
`
`2009.
`04.21.
`
`2010.
`09.30.
`
`2013.
`06.04.
`
`2016.
`09.30.
`
`2009.
`01.01.
`
`2014.
`04.01.
`
`2016.
`02.26.
`
`-
`
`456,800
`
`50,966
`
`145,452
`
`16,513
`
`136,793
`
`15,391 166,620
`
`539
`
`1,001,690
`
`Buildings
`and
`structures
`
`543,040
`
`4,345
`
`8,908
`
`343,200
`
`110,104
`
`84,548
`
`1,238
`
`73,941
`
`9,169
`
`30,414
`
`-
`
`665,867
`
`Total
`
`1,132,534
`
`9,915
`
`15,954
`
`800,000
`
`161,070
`
`230,000
`
`17,751
`
`210,734
`
`24,560 197,034
`
`539
`
`1,667,557
`
`(*1) Includes the value of investment property (carrying value that is subject to valuation: ₩268,808 million) occupied by the owner.
`(*2) Acquisition cost is considered as fair value.
`(*3) It is the whole valuation amount of Twin Tower.
`(*4) Newly acquired during current period. establishment of factory or only if there is a consent.
`
`18
`
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`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`7. Debentures and Borrowings
`
`1) Short-term Borrowings
`
`Account
`
`2016.12.31
`
`2015.12.31
`
`short-term borrowings
`
`190,795
`
`168,518
`
`2) Long-term Borrowings
`
`　 Account
`
`Korean currency long-term borrowings (*1)
`
`Foreign currency long-term borrowings
`
`Debentures in Korean won
`
`Discount on debentures
`
`Present value discount account
`
`2016.12.31
`
`2015.12.31
`
`Current
`
`187,427
`
`-
`
`320,000
`
`(60)
`
`(392)
`
`Non-current
`
`349,348
`
`3,059
`
`830,000
`
`(2,318)
`
`(289)
`
`Current
`
`221,162
`
`-
`
`100,000
`
`(133)
`
`(466)
`
`Unit : KRW one million
`
`YoY
`
`13.22%
`
`Unit : KRW one million
`
`Non-current
`
`477,816
`
`2,868
`
`950,000
`
`(2,570)
`
`(680)
`
`Total
`
`506,975
`
`1,179,800
`
`320,563
`
`1,427,434
`
`(*1) Korea currency long-term borrowings include asset securitization liabilities (₩88,000 million)
`
`3) Debentures as of December 31, 2016, 2015
`
`Unit : KRW one million
`
`Company
`
`Description
`
`Issue date
`
`Maturity date
`
`Annual interest rate
`
`2016.12.31
`
`2015.12.31
`
`LG CNS Co., Ltd.
`
`5th public offering
`
`2012. 03. 05
`
`7th public offering
`
`2013. 05. 07
`
`8th public offering
`
`2013.12. 05
`
`9-1th public offering
`
`2015. 04. 16
`
`2015. 04. 16
`
`2017. 03. 05
`
`2018. 05. 07
`
`2016. 12. 05
`
`2018. 04. 16
`
`2020. 04. 16
`
`4.15%
`
`2.96%
`
`3.42%
`
`1.88%
`
`2.07%
`
`100,000
`
`100,000
`
`-
`
`50,000
`
`100,000
`
`100,000
`
`100,000
`
`100,000
`
`50,000
`
`100,000
`
`9-2th public offering
`
`9-3th public offering
`
`2015. 04.16
`
`3rd public offering
`
`2014. 02. 14
`
`4-1th public offering
`
`2015. 10. 01
`
`Serveone Co., Ltd.
`
`4-2th public offering
`
`2015. 10. 01
`
`5-1th public offering
`
`2016. 10. 27
`
`5-2th public offering
`
`2016. 10. 27
`
`38-2th public offering
`
`2012. 06. 04
`
`39th public offering
`
`2014. 02. 07
`
`40th public offering
`
`2014. 03. 14
`
`41st public offering
`
`2015. 06. 16
`
`2-1nd public offering
`
`2015. 05. 29
`
`2-2nd public offering
`
`2015. 05. 29
`
`LG Siltron Inc.
`
`LG N-Sys Co.,Ltd.
`
`2022. 04. 16
`
`2017. 02. 14
`
`2018. 10. 01
`
`2020. 10. 01
`
`2019. 10. 27
`
`2021. 10. 27
`
`2017. 06. 04
`
`2017. 02. 07
`
`2017. 03. 14
`
`2018. 06. 16
`
`2018. 05. 29
`
`2020. 05. 29
`
`Subtotal
`
`Discount on debentures
`
`Current debentures (*)
`
`Total
`
`(*) Discounts on debentures have been deducted.
`
`2.44%
`
`3.21%
`
`1.96%
`
`2.24%
`
`1.92%
`
`2.10%
`
`3.94%
`
`4.21%
`
`4.37%
`
`4.07%
`
`2.32%
`
`2.89%
`
`50,000
`
`100,000
`
`50,000
`
`150,000
`
`110,000
`
`90,000
`
`50,000
`
`30,000
`
`40,000
`
`70,000
`
`40,000
`
`20,000
`
`1,150,000
`
`(2,378)
`
`(319,940)
`
`827,682
`
`50,000
`
`100,000
`
`50,000
`
`150,000
`
`-
`
`-
`
`50,000
`
`30,000
`
`40,000
`
`70,000
`
`40,000
`
`20,000
`
`1,050,000
`
`(2,703)
`
`(99,867)
`
`947,430
`
`19
`
`Fundamental Ex 2007-19
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`Management’s Discussion & Analysis
`
`2016. 1. 1 ~ 2016. 12. 31
`
`8. Issued Capital
`
`Details of issued capital as of December 31, 2016, are as follows.
`
`Type of stock
`
`Common stock
`
`Preferred stock
`
`Number of authorized
`shares
`
`Number of issued
`shares
`
`Number of shares
`owned by related party
`
`Par value (in KRW)
`
`Unit : KRW one million
`Amount of issued
`capital
`
`700,000,000
`
` -
`
`172,557,131
`
`3,314,677
`
`83,037,766
`
` -
`
`5,000
`
`5,000
`
`862,786
`
`16,573
`
`(*)Preferred stocks are stocks without voting rights that are eligible for an additional 1%, based on the face value of the stock compared to common stocks, when
`receiving cash dividends. In case of no dividend payout, they are granted voting rights from the shareholders’ meeting when it is resolved not to pay to the
`shareholders’ meeting when it is resolved to pay dividends.
`
`The Group has 93,789 shares of common stock and 6,810 shares of preferred stock as of December 31, 2016 and 2015, respectively;
`the carrying amounts of common stocks are ₩2,334 million (preferred stock: ₩51 million).
`
`20
`
`Fundamental Ex 2007-20
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`Number of
`issued shares
`
`Number of
`treasury stock
`
`Number of
`dividend shares
`
`Dividend per share
`(in KRW)
`
`172,557,131
`
`3,314,677
`
`93,789
`
`6,810
`
`172,463,342
`
`3,307,867
`
`1,300
`
`1,350
`
`224,202
`
`4,466
`
`Year ended December 31, 2015
`
`Number of
`issued shares
`
`Number of
`treasury stock
`
`Number of
`dividend shares
`
`Dividend per share
`(in KRW)
`
`Type of stock
`
`Common stock
`
`Preferred stock
`
`Type of stock
`
`Common stock
`
`Preferred stock
`
`9. Retained Earnings and Dividends
`
`Changes in retained earnings for the years ended December 31, 2016 and 2015 are as follows.
`
`Year ended
`December 31, 2016
`
`Year ended
`December 31, 2015
`
`Unit : KRW one million
`
`Beginning balance
`
`Profit for the year attributable to the owner of the Company
`
`Dividends
`
`Remeasurements of net defined benefit liability
`
`Changes in retained earnings by equity method
`
`Ending balance
`
`Ending balance
`
`9,871,746
`
`1,074,795
`
`(228,668)
`
`14,434
`
`62,274
`
`(2,521)
`
`10,792,060
`
`Details of dividends for the year ended December 31, 2016 and 2015, are as follows
`
`Year ended December 31, 2016
`
`9,153,234
`
`944,189
`
`(175,937)
`
`5,816
`
`(55,556)
`
`-
`
`9,871,746
`
`Unit : KRW one million
`
`Total dividends
`
`Unit : KRW one million
`
`Total dividends
`
`172,557,131
`
`3,314,677
`
`93,789
`
`6,810
`
`172,463,342
`
`3,307,867
`
`1,000
`
`1,050
`
`172,464
`
`3,473
`
`21
`
`Fundamental Ex 2007-21
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`22
`
`Fundamental Ex 2007-22
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`Audit Report
`
`2016. 1. 1 ~ 2016. 12. 31
`
`23
`
`Fundamental Ex 2007-23
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`Audit Report
`
`2016. 1. 1 ~ 2016. 12. 31
`
`Independent Auditors’ Report
`
`English Translation of Independent Auditors’ Report Originally Issued in Korean on March 16, 2017.
`
`To the Shareholders and the Board of Directors of LG Corp.:
`
`Report on the Consolidated Financial Statements
`We have audited the accompanying consolidated financial statements of LG Corp. and its subsidiaries (the “Group”), which comprise the
`consolidated statements of financial position as of December 31, 2016 and 2015, respectively, and the related consolidated
`statements of comprehensive income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash
`flows, all expressed in Korean won, for the years ended December 31, 2016 and 2015, respectively, and a summary of significant
`accounting policies and other explanatory information.
`
`Management’s Responsibility for the Consolidated Financial Statements
`Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
`Korean International Financial Reporting Standards (“K-IFRS”) and for such internal control as management determines is necessary to
`enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
`
`Auditors’ Responsibility
`Our responsibility is to express an audit opinion on these consolidated financial statements based on our audits.
`We conducted our audits in accordance with Korean Standards on Auditing (“KSAs”). Those standards require that we comply with ethical
`requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
`free from material misstatement.
`
`An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
`The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
`financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
`the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
`circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
`includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
`management, as well as evaluating the overall presentation of the financial statements.
`
`We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our audit opinion.
`
`Opinion
`In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of
`December 31, 2016 and 2015, respectively, and its financial performance and its cash flows for the years then ended in accordance
`with K-IFRS.
`
`March 16, 2017
`
`Notice to Readers
`This report is effective as of March 16, 2017, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’
`report is read. Such events or circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to the auditors’ report.
`
`24
`
`Fundamental Ex 2007-24
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`LG CORP. AND ITS SUBSIDIARIES
`CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
`AS OF DECEMBER 31, 2016 AND 2015
`
`ASSETS
`
`CURRENT ASSETS :
`Cash and cash equivalents
`Financial institution deposits
`Current derivative assets
`Trade receivables, net
`Other receivables, net
`Current tax assets
`Current other assets
`Inventories, net
`
`Total current assets
`
`NON-CURRENT ASSETS :
`Available-for-sale (“AFS”) financial assets
`Non-current trade receivables, net
`Non-current other receivables, net
`Investments in associates and joint ventures
`Deferred tax assets, net
`Non-current other assets
`Property, plant and equipment, net
`Investment property, net
`Intangible assets
`
`Total non-current assets
`
`TOTAL ASSETS
`(Continued)
`
`December 31, 2016
`
`December 31, 2015
`
`Unit : KRW one million
`
`
`
`
`
`
`
`
`
`1,129,035
`206,845
`1,376
`2,551,435
`74,481
`7,854
`369,232
`322,857
`
`4,663,115
`
`
`
`
`
`
`
`
`
`91,043
`17,032
`14,808
`10,979,154
`208,887
`56,279
`2,481,390
`863,726
`114,008
`
`14,826,327
`
`
`
`19,489,442
`
`
`
`870,393
`375,748
`1,138
`2,200,006
`67,236
`4,842
`292,679
`343,518
`
`4,155,560
`
`93,124
`8,369
`17,374
`10,345,631
`194,089
`68,782
`2,471,315
`652,570
`116,586
`
`13,967,840
`
`18,123,400
`
`25
`
`Fundamental Ex 2007-25
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`Audit Report
`
`2016. 1. 1 ~ 2016. 12. 31
`
`LG CORP. AND ITS SUBSIDIARIES
`CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
`AS OF DECEMBER 31, 2016 AND 2015 (CONTINUED)
`
`LIABILITIES AND EQUITY
`
`CURRENT LIABILITIES :
`Current derivative liabilities
`Trade payables
`Other payables
`Short-term borrowings
`Current portion of debentures and long-term borrowings
`Current tax liabilities
`Provisions
`Other current liabilities
`Liabilities related to assets held for sale
`
`Total current liabilities
`
`NON-CURRENT LIABILITIES:
`Non-current derivative liabilities
`Other payables
`Long-term borrowings
`Net defined benefit liability
`Deferred tax liability
`Provisions
`Other non-current liabilities
`
`Total non-current liabilities
`
`TOTAL LIABILITIES
`
`EQUITY :
`Equity attributable to the owners of the parent company
` Issued capital
` Capital surplus
` Other capital items
` Accumulated other comprehensive income (loss)
` Retained earnings
`Non-controlling interests
`
`TOTAL EQUITY
`
`TOTAL LIABILITIES AND EQUITY
`
`(Concluded)
`
`26
`
`December 31, 2016
`
`December 31, 2015
`
`Unit : KRW one million
`
`
`
`
`
`4,406
`1,635,402
`783,695
`190,795
`506,975
`82,386
`51,466
`312,031
`146
`
`3,567,302
`
`53
`83,463
`1,179,800
`56,855
`346,255
`9,761
`25,869
`
`1,702,056
`
`5,269,358
`
`13,874,365
`879,359
`2,364,937
`(2,385)
`(159,606)
`10,792,060
`345,719
`
`14,220,084
`
`19,489,442
`
`2,817
`1,353,031
`536,476
`168,518
`320,563
`70,638
`36,437
`224,145
`-
`
`2,712,625
`
`520
`244,555
`1,427,434
`83,032
`297,952
`10,202
`38,836
`
`2,102,531
`
`4,815,156
`
`12,975,511
`879,359
`2,361,658
`(2,390)
`(134,862)
`9,871,746
`332,733
`
`13,308,244
`
`18,123,400
`
`Fundamental Ex 2007-26
`LG et al. v Fundamental
`IPR2018-00493
`
`

`

`LG C