The assignment of callsigns to their respective countries takes place with help of a so called country file. The default country file is cty.dat, but another file with the identical format can be used instead (e.g. the country file r150s.dat for the CQ-M contest which comes with LM; how to: see Header data dialog). Country files are stored within the LM-CountryFile directory, which can be accessed over the menu item "File | Show LM program data | Country files" easily.
The country files like cty.dat represent a standard which is used by most of the today's major contest software. Cty.dat updates are availiable on the website country-files.com. The country file update can be done comfortably using LM's Update option.
LM file structure
Header data dialog