Exhibit 99.1

INTERIM REPORT

(From January 1, 2014 to June 30, 2014)

THIS IS AN ENGLISH TRANSLATION OF THE INTERIM REPORT ORIGINALLY PREPARED IN THE KOREAN LANGUAGE (IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION). THIS ENGLISH TRANSLATION IS NOT OFFICIAL AND IS PROVIDED FOR INFORMATION PURPOSES ONLY.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON BOTH CONSOLIDATED AND NONCONSOLIDATED BASES IN ACCORDANCE WITH THE KOREAN-INTERNATIONAL FINANCIAL REPORTING STANDARDS (K-IFRS) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

INTERIM REPORT

(From January 1, 2014 to June 30, 2014)

To: Korean Financial Services Commission and Korea Exchange

/s/

Lee, Young-Hoon

Senior Executive Vice President

POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si,     Nam-gu, Gyungsangbuk-do, Korea

Telephone: +82-54-220-0114

/s/

Noh, Min-Yong

Senior Vice President

POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si,     Nam-gu, Gyungsangbuk-do, Korea

Telephone: +82-2-3457-0114

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TABLE OF CONTENTS

I.	Overview	4
II.	Business	10
III.	Financial Statements	32
IV.	Corporate Governance and Company Affiliates	36

Attachment: Independent Auditors’ Review Report

(Non-consolidated and consolidated)

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I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

Business	Note
(1)    Production and sale of crude steel and stainless steel products
(2)    Port/harbor loading/unloading, warehousing and packaging
(3)    Management of professional athletic organizations
(4)    Power generation, renewable energy projects, liquefied natural gas logistics and exploration and other incidental businesses	No engagement in this business during the first half of the fiscal year 2014
(5)    Real property lease business
(6)    Public energy services and distribution system
(7)    Marine transportation of mineral resources; domestic and overseas processing and sales of mineral resources
(8)    Educational services and other incidental services
(9)    Production and sale of non-ferrous metals
(10)  Other businesses incidental or related, directly or indirectly, to the foregoing businesses

B. POSCO Business Group

(1) Name of the Business Group: POSCO

(2) Companies Belonging to the Business Group

POSCO, POSCO COATED & COLOR STEEL Co., Ltd., POSCO Plantec Co., Ltd., DAEWOO INTERNATIONAL CORPORATION, POSCO ICT COMPANY LTD., POSCO CHEMTECH COMPANY LTD., POSCO M-TECH CO., LTD., POSCO ENGINEERING COMPANY CO., LTD., MegaAsset Co., Ltd., Busan E&E Co., Ltd., SUNCHEON ECO TRANS Co., Ltd., SNNC Co., Ltd., eNtoB Corporation, UITrans LRT co. Ltd., POREKA Co., POSMATE, POSCO Humans Co., Ltd., POSCO Engineering & Construction Co., Ltd., POSCO Research Institute, POSCO A&C Co., Ltd., POSCO AST CO., LTD., POSCO LED COMPANY LTD., POSCO E&E, POSCO TMC CO., LTD., , POSCO Processing & Service Co., Ltd., POS-HiMETAL CO., Ltd., Pohang Scrap Recycling Distribution Center Co., Ltd., PNR Co., Ltd., Mapo Hibroad Parking co., Ltd., METAPOLIS Co., Ltd., POSCO TERMINAL Co., Ltd., POSCO Specialty Steel Co., Ltd., POSCO Energy CORPORATION, POSFINE CO., Ltd., PSC Energy Global Co., Ltd., PONUTech Co., Ltd., New Altec Co., Gale International(Korea), LLC., POS-HiAl CO., LTD., Tamra Offshore Wind Power Co., Ltd., Blue O&M CO., LTD., POSCO VENTURE CAPITAL CORPORATION, POSCO ESM Co., Ltd., Pohang Special Welding Co., Ltd., , SPFC Co., Ltd., PMC Tech Co., Ltd, POSCO Green Gas Technology.

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(a) Changes in Companies Belonging to the Business Group

• Exclusion of a Subsidiary: ANJEONG DISTRICT DEVELOPMENT CO., LTD., (January 9, 2014)

• Addition of a Subsidiary: POSCO Green Gas Technology. (April 1, 2014)

• Name change from POSTECH VENTURE CAPITAL CORPORATION to POSCO VENTURE CAPITAL CORPORATION. (May 13, 2014)

(3) Related Laws and Regulations

The Korea Fair Trade Commission has designated POSCO as a company subject to the limitations on Cross Shareholding and Debt Guarantee for Affiliates under the Monopoly Regulation and Fair Trade Act (the “MRFTA”).

Details

(a) Prohibition on Cross Shareholdings (Article 9-1 of the MRFTA)

(b) Prohibition on Debt Guarantees for Affiliated Corporations (Article 10-2 of the MRFTA)

(c) Prohibition on Shareholding of Venture Capitals for Subsidiaries (Article 9-3 of the MRFTA)

(d) Limitation of Voting Rights of Finance or Insurance Companies (Article 11 of the MRFTA)

(e) Resolution of the Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article11-2 of the MRFTA)

(f) Disclosure of Important Facts such as Unlisted Shares (Article 11-3 of the MRFTA)

(g) Disclosure of a corporate group (Article 11-4 of the MRFTA)

(h) Report on Status of Shareholding (Article 13 of the MRFTA)

2. Business Organization

A. Highlights of the Company’s Business Organization

(1) Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyungsangbuk-do, Korea

(2) Steel Works and Offices

(a) Pohang Steel Works: 6262 Donghaean-ro (Dongchon-dong), Nam-gu, Pohang-si, Gyungsangbuk-do, Korea

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(b) Gwangyang Steel Works: 20-26 Pokposarang-gil (Kumho-dong), Gwangyang-si, Chollanam-do, Korea

(c) Principal Executive Office: POSCO Center, 440 Teheran-ro (Daechi-dong), Gangnam-gu, Seoul, Korea

(d) Overseas Offices: For the purpose of supporting international business transactions, the Company operates eight overseas offices as follows:

United Arab Emirates (Dubai), the European Union (Dusseldorf, Germany), Brazil (Rio de Janeiro), Egypt (Cairo), Mongolia (Ulaanbaatar), Australia (Perth), The United States of America (Houston, Texas).

(3) Major Changes in Board of Directors (as of March 14, 2014)

(a) Inside Directors

• New members: Kwon, Oh-Joon (3years), Kim, Jin-Il (1 year), Lee, Young-Hoon (1 year), and Yoon, Dong-Jun (2 years)

(b) Outside Directors

• New members: Kim, Il-Sup (3 years), Sunwoo, Young (3 years) and Ahn, Dong-Hyun (3 years)

(c) Representative Directors

• Prior to March 14, 2014: Chung, Joon-Yang, Park, Ki-Hong, Kim, Joon-Sik, and Chang, In-Hwan

• As of March 14, 2014: Kwon, Oh-Joon, Kim, Jin-Il and Chang, In-Hwan

(4) Major Shareholders of POSCO

(a) National Pension Service holds the largest number of POSCO’s shares.

(b) Date of Disclosure: January 30, 2007

(For further reference, please refer to the public disclosures regarding the change of the major shareholders on January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011, July 22, 2011, January 31, 2012, August 1, 2012, February 1, 2013, August 1, 2013, January 14, 2014, January 23, 2014, and July 29, 2014.)

B. Merger, Acquisition and Handover of Businesses

[None]

C. Major Changes in Production Facilities

Refer to the ‘II. Business (5. Production and Facilities)’

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3. Equity Capital

A. New Issuance of Registered Common Stock

There was no new issuance of registered common stock in the last five years.

B. Convertible Bonds

[None]

C. Bonds with Warrant

[None]

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4. Other Information Regarding Shares

A. Total Number of Shares

	(As of June 30, 2014)
Authorized Shares	Outstanding Shares
200,000,000		87,186,835

The currency of the Republic of Korea is Korean Won (“KRW”).

Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

						(As of June 30, 2014)
Method of Purchase	Type	Beginning*		Increased		Decreased		Cancelled		Balance
Direct			7,403,211		—		614		—		7,402,597
Special Money Trust	Registered Common		—		—		—		—		—
Total			7,403,211		—		614		—		7,402,597

* Beginning Balance: as of December 31, 2013

Board of Directors approved the ‘Disposal of Treasury Stocks as Employee Award’ at the Meeting held on February 7, 2013, where the execution and responsibility of the disposal of the treasury stocks was delegated to the Executive Management Committee. On March 5, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 74 treasury stocks was completed on March 8, 2013. On April 2, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 387 treasury stocks was completed on April 9, 2013. On July 2, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the disposal of 150 treasury stocks was completed on July 8, 2013. On October 1, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 2,009 treasury stocks was completed on October 7, 2013. On January 7, 2014, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 139 treasury stocks was completed on January 9, 2014. On April 15, 2014, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 475 treasury stocks was completed on April 16, 2014.

Changes after June 30, 2014

On July 15, 2014, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 30 treasury stocks was completed on July 16, 2014.

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5. Voting Rights

	(As of June 30, 2014)
Classification of Shares	Number of Shares		Remarks
(1) Number of Outstanding Shares		87,186,835		—
(2) Shares without Voting Rights *		7,402,597		*Treasury Stock 7,402,597 shares
(3) Shares with Voting Rights		79,784,238		—

6. Earnings and Dividend

			(In millions of KRW)
	2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012
Net Profit		658,754		1,582,596		2,499,523
Earnings per Share (KRW)		8,052		20,052		32,359
Cash Dividend Paid		—		633,192		617,956
Pay-out Ratio (%)		—		40.0		24.7
Dividend per Share (KRW)		—		8,000		8,000
Dividend Yield (%)		—		2.45		2.27

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II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments below:

Steel, Trading, Engineering & Construction, and Others.

B. Segment Results

					(In millions of KRW)
Category	2014 1H (January 1, 2014 ~ June 30, 2014)				2013				2012
	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		15,669,104		1,168,637		31,794,574		2,363,377		35,258,970		3,070,168
Trading		10,507,270		117,540		18,307,888		81,696		18,945,642		139,000
Engineering & Construction		4,070,253		154,195		6,896,838		179,186		4,675,596		9,900
Others		1,897,073		130,002		4,865,350		371,875		4,723,943		434,040
Total		32,143,700		1,570,374		61,864,650		2,996,134		63,604,151		3,653,108

2. Current Situation

1) Steel

A. Domestic Market Share

									(Millions of Tons, %)
Category	2014 1H (January 1, 2014 ~ June 30, 2014)				2013				2012				2011
	Production		Market share		Production		Market share		Production		Market share		Production		Market share
Crude Steel Production		36.1		100		66.1		100		69.3		100		68.5		100
POSCO		18.6		51.5		36.4		55.2		38.0		54.6		37.3		54
Others		17.5		48.5		29.7		44.8		31.3		45.4		31.2		46

Source: Korea Iron and Steel Association

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B. Characteristics of the Steel Market

The steel industry supplies materials to major industries such as the automobile, shipbuilding and electronic appliance industries.

C. Summary and Prospect of New Businesses

(1) Establishment of Steelworks in India

(a) The Company entered into a memorandum of understanding with the Orissa state government for the development of iron ore captive mines and for the development and construction of an integrated steelworks facility with an annual production capacity of 12 million tons. (June, 2005)

(b) The Company established POSCO-India Private Limited (“POSCO-India Pvt., Ltd.”). (August, 2005)

(2) Development of Iron Ore Captive Mines in India

(a) POSCO-India filed applications for mining exploration licenses for certain iron ore mines in the region of Khandadhar, Orissa (the “Khandadhar Licenses”). (September, 2005)

(b) The Orissa state government recommended the approval of the Khandadhar Licenses on behalf of POSCO-India to the Indian central government. (December, 2006)

(c) The Indian central government denied the approval for the Khandadhar Licenses and remanded the matter to the Orissa state government for further consideration. (July, 2007)

(d) The Orissa state government resubmitted its recommendation for the approval of the Khandadhar Licenses on behalf of POSCO-India to the Indian central government. (January, 2009)

(e) The Orissa High Court set aside the Orissa State Government’s recommendation to grant the approval of the Khandadhar Licenses to POSCO-India. (July, 2010)

(f) The Orissa State Government filed a special leave petition with the Indian Supreme Court. (November, 2010)

(g) The Orissa State Government and POSCO-India completed the submission of the counter affidavit and the rejoinder. (October, 2011)

(h) The Indian Supreme Court resumed the trial on the merit of the case. (May, 2012)

(i) The Indian Supreme Court decided on the merit of the case. (March, 2013)

(j) Supreme Court ordered to nullify judgment of the High Court regarding the right to explore Kandahar; and the Indian central government reinitiated the approval procedures for right to explore Kandahar. (May, 2013)

(3) Establishment of Steelworks in India

(a) The Indian central government granted the approval for the environmental impact assessment for the construction of a captive port. (May, 2007)

(b) The Indian central government granted the approval for the environmental impact assessment for the construction of steel mills. (July, 2007)

(c) The Indian Supreme Court granted the transformation of the forest land with respect to 2,959 acres of the steel mill construction site. (August, 2008)

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(d) The Indian central government granted the final approval for the deforestation of steel mill construction sites. (December, 2009)

(e) Final plans for the rehabilitation and resettlement of indigenous population were approved by the Rehabilitation and Peripheral Development Advisory Committee (constituted by the Orissa state government). (July, 2010)

(f) The Forest Advisory Committee acting under the Ministry of Environment and Forest temporarily suspended activities at the construction site pending investigation into alleged violation of the Forest Regulation Act. (August, 2010)

(g) The Ministry of Environment and Forest of the Indian central government granted a conditional approval on the construction of the steel mills and the port. (January, 2011)

(h) The Ministry of Environment and Forest of the Indian central government granted the final approval on the construction of the steel mills and the port. (May, 2011)

(i) The Company cleared the crop fields designated for the construction of its steel mill site within the state owned property. (May, 2011).

(j) An environmental organization filed a lawsuit to nullify the approval for the environmental impact assessment in the National Green Tribunal. (August, 2011)

(k) The National Green Tribunal dismissed the lawsuit of nullifying the approval for the environmental impact assessment and ruled that the Ministry of Environment and Forest should reassess the conditions on which clearance was permitted for the project. (March, 2012)

(l) Procurement of the possessory right over 1,704 acres of the steel mill construction site. (March, 2013)

(m) Ministry of Environment and Forest of the Indian central government approved the environmental license for the construction of the steel mill (January, 2014)

(4) Establishment of a Steelwork in Brazil

(a) The Board of Directors resolved to invest a 20% interest in CSP Joint Venture established by POSCO, VALE S.A. and DONGKUK STEEL MILL CO., LTD. (May, 2011)

(b) CSP Joint Venture entered into an Engineering Procurement Construction contract with POSCO E&C. (December, 2011)

(c) Construction of a steelwork with an annual capacity of 3 million tons started. (September, 2012)

(d) Build 4 pillars sustaining the furnace (March, 2014)

(5) Establishment of POSCO-Maharashtra Pvt., Ltd Cold Rolling Mill in India

(a) The Board of Directors resolved to construct a cold rolled line in Maharashtra, India. (November, 2010)

(b) Construction of a cold rolled line with an annual capacity of 1.8 million tons commenced. (November, 2011)

(c) Commencement of a test-run of the cold rolling (December, 2013)

(d) Completion of POSCO-Maharashtra Pvt., Ltd. Cold Rolling Mill. (June, 2014)

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(6) Establishment of a Continuous Galvanizing Line in Thailand

(a) Approval of the Board of Directors (November, 2013)

(b) Contract of the Stie Sales (March, 2014)

(c) Acquisition of the Land Use Rights (June, 2014)

2) Trading

A. Market Share

	(Millions of Dollars, %)
Category	2014 1H (January 1, 2014 ~ June 30, 2014)		2013 1H (January 1, 2013 ~ June 30, 2013)		Growth rate
All Trading Companies in Korea		283,324		276,474		2.5
Daewoo International		3,758		3,804		-1.2

Source: Korea International Trade Association

B. Summary and Prospect of New Businesses

Daewoo International Corporation (“Daewoo International”) is the number one leading trading company in Koreans export industry with its wide range of trading network worldwide including about 100 overseas trading subsidiaries, overseas branches and representative offices in performance of the intermediary trades and exports of various products including steel, non-ferrous metals, and chemical products. Moreover, Daewoo International is making tangible progress in gas field resources development in Myanmar.

Daewoo International has newly entered into the food and forestry development business to secure the future food resources and green energy resources. Daewoo International plans to aggressively drive this successful momentum of active investment and trading by establishing plantations for agro-resources such as rice, soybean, wheat and corn as well as palm oil and afforestation businesses.

3) Engineering & Construction

A. Summary and Prospect of New Businesses

POSCO Engineering & Construction Co. Ltd. (“POSCO Engineering & Construction”), established on February 1982, is currently expanding its business areas to civil engineering, architectural works, energy, urban development and low carbon & green growth businesses. In reference to the number of the overseas contracts signed by POSCO Engineering & Construction in 2013, the business performance of the POSCO Engineering & Construction in the global market has been satisfactory.

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POSCO ENGINEERING COMPANY CO., LTD. succeeded in the development of a management system for the global market and the Engineering, Procurement & Construction (“EPC”) business. POSCO ENGINEERING COMPANY CO., LTD. planed out its global sales strategy and stabilized its global network through its local agencies and localization strategies. Recently, POSCO ENGINEERING COMPANY CO., LTD. expanded its business markets to the countries located in Central and South America such as Ghana and Brazil

4) Others

A. POSCO Energy

POSCO Energy started its commercial operation in February, 1972 as the only privately-owned heat power plant in Korea. Since the early 90’s, POSCO Energy continuously remodeled and built more complex heat power plants meeting the increased demand of electricity in Korea.

B. POSCO ICT

To create a synergy between its information technology (“IT”) and its industrial engineering services, POSCO ICT Co., Ltd. has utilized an automation technology developing its competitiveness in the IT and manufacturing services. POSCO ICT Co., Ltd. is promoting new businesses for light emitting diode, smart grid, and cloud computing.

C. POSCO Chemtech Company Ltd.

POSCO Chemtech Company Ltd. (“POSCO Chemtech”), founded in 1963, specializes in manufacturing of refractories, lime used in steel manufacturing processes as well as a wide range of chemical and environmentally friendly products. POSCO Chemtech provides refractories to a wide range of industries including steel, cement, and ceramic companies. To become a global company, POSCO Chemtech is currently expanding its markets to Japan, China and Indonesia.

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3. Key Products

A. Current Situation of Key Products

		(In hundred millions of KRW, %)
Business Area	Item	Specific Use	Total Sales			Ratio
Steel	Hot-rolled Product (HR)	Steel pipe, Shipbuilding, etc		37.343			15.2
	Cold-rolled Product (CR)	Automobile , Home appliances, etc		73,694			30.1
	Stainless steel Products	Western tableware, etc		51,858			21.1
	By-Product	Plates, Wire rods, etc		82,381			33.6
	Gross Sum			245,276			100.0
	Deduction of Internal Trade			(88,585	)		—
	Sub Total			156,691			—
Trading	Steel, Metal			92,258			60.3
	Chemical, Strategic Item, Energy			3,692			2.4
	Etc			57,135			37.3
	Gross Sum			153,085			100.0
	Deduction of Internal Trade			(48,012	)		—
	Sub Total			105,073			—
Engineering & Construction	Domestic Construction	Architecture		10,298			19.6
		Plant		15,168			28.8
		Civil Engineering		3,252			6.2
		Etc		2			0.0
	Overseas Construction			19,092			36.3
	Owned Construction			3,344			6.4
	Etc			1,471			2.7
	Gross Sum			52,627			100.0
	Deduction of Internal Trade			(11,924	)		—
	Sub Total			40,703			—
Others	Electricity Sales, etc			34,309			100.0
	Deduction of Internal Trade			(15,339	)		—
	Sub Total			18,970			—
	Total Sum			321,437			—

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B. Price Fluctuation Trend of Key Products

	(In thousands of KRW/ Tons, kWh)
Business Area	Products	2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012		2011
Steel	Hot-rolled Product (HR)		709		728		828		941
	Cold-rolled Product (CR)		839		877		999		1,090
Others	Electric Power		148		156		161		133
	Lime		108		119		105		106

Figures for the trading and engineering & construction businesses are not reflected on the table.

[Steel]

(1) Criteria for Calculation

(a) Subjects for Calculation: unit prices of the standard hot-rolled product and cold-rolled product

(b) Calculation Method and Unit: The average price of each product based on its total sales including the freight during the given period.

(2) Factors of Price Fluctuations

Due to the weakened global demand in steel consumption, domestic and overseas steel price has decreased since the end of 2011.

[Others]

* Criteria for Calculation

(a) Electric Power = price of electric power/total amount of generated power

(b) Lime: average sales price including shipping cost

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4. Major Raw Materials

A. Current Status of Major Raw Materials

	(In hundred millions of KRW)
Business Area	Type of Purchase	Item	Specific Use	Purchase Amount (Portion)	Remarks
		Materials for Iron-making,	Iron Ore for Blast Furnaces	58,275(46.5%)	Iron Ore, Coal
Steel	Raw Materials	Sub-materials	Sub-materials for Iron-making, Steelmaking	40,172(32.0%)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	26,988(21.5%)	Nickel, Ferrochrome, STS Scrap Iron, etc.
		Ready-mixed Concrete	Construction of Structure	801(16.1%)
Engineering & Construction	Raw Materials	Steel Pile	Foundation of Structure	44(0.9%)
		Steel Reinforcement	Strengthening Concrete	942(18.9%)
		Cable	Electricity Transfer	95(1.9%)
		Etc	- Pipe and structure for construction etc	3,101(62.2%)
		LNG	Material for Power Generation	8,356(70.9%)
Others	Raw Materials	Limestone	Production of Lime	483(4.1%)
		Etc	Eng. Business etc	2,951(25.0%)

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B. Price Fluctuation Trend of Major Raw Materials

	(In thousands of KRW)
Business Area	Category	2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012
	Iron Ore(per ton)		117		148		165
Steel	Coal(per ton)		138		162		251
	Scrap Iron(per ton)		391		428		513
	Nickel(per ton)		17,379		16,455		20,211
	Ready-mixed Concrete (per m3)		57		57		57
	Steel Pile (per m)		67		70		78
	Steel Reinforcement (per kg)		1.0		1.0		0.8
Engineering & Construction	Cable (per m)		1.0		1.0		0.8
	LNG (per ton)		1,079		979		1,022
Others	Lime (per ton)		20		20		20

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[Steel]

Key Factors in Price Fluctuations

(1) Iron Ore	(In Dollars/ Tons)
	‘14 2Q		‘14 1Q		‘13 4Q		‘13 3Q		‘13 2Q		‘13 1Q		‘12 4Q		‘12 3Q		‘12 2Q		‘12 1Q		‘11 4Q		‘11 3Q
Trend of International Benchmark Price (Free On Board, “FOB”)		94		111		123		123		118		141		113		105		134		135		130		168
(2) Coal	(In Dollars/ Tons)
	‘14 2Q		‘14 1Q		‘13 4Q		‘13 3Q		‘13 2Q		‘13 1Q		‘12 4Q		‘12 3Q		‘12 2Q		‘12 1Q		‘11 4Q		‘11 3Q
Trend of International Benchmark Price (FOB)		120		143		152		145		172		165		170		225		206		235		285		315
(3) Scrap Iron	(In Dollars/ Tons)
	‘14 2Q		‘14 1Q		‘13 4Q		‘13 3Q		‘13 2Q		‘13 1Q		‘12 4Q		‘12 3Q		‘12 2Q		‘12 1Q		‘11 4Q		‘11 3Q
Trend of Purchase Price (Cost and Freight, “CFR”)		365		379		396		367		379		421		379		400		444		466		445		494

(4) Nickel
	‘14 2Q	‘14 1Q	‘13 4Q	‘13 3Q	‘13 2Q	‘13 1Q	‘12 4Q	‘12 3Q	‘12 2Q	‘12 1Q
Trend of London Metal     Exchange (“LME”) Cash Price	USD 8.37/lb USD 18,463/ton	USD 6.64/lb USD 14,645/ton	USD 6.31/lb USD 13,904/ton	USD 6.32/lb USD 13,922/ton	USD 6.78/lb USD 14,952/ton	USD 7.85/lb USD 17,309/ton	USD 7.70/lb USD 16,983/ton	USD 7.41/lb USD 16,334/ton	USD 7.78/lb USD 17,152/ton	USD 8.92/lb USD 19,665/ton

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[Engineering and Construction]

(1) Criteria for Calculation

Products	Criteria for Calculation
Ready-mixed Concrete	Standard 25-210-15
Steel Pile	SPS400 406.4x7.9T
Steel Reinforcement	High Tensile Deformed Bar SD40 D10
Cable	CV 0.6/1kv 2.5mm2 2core

[Others]

(1) Criteria for Calculation

(a) Electric Power: purchase price of electricity from Korea Gas Corporation

* Increase in electricity price is due to the increase of raw material cost and foreign exchange rate.

(b) Lime: purchase price of lime and transportation fees

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5. Production and Facilities

A. Production Capacity

[Steel]

	(Thousands of Tons)
Business Area	Products		20141H (January 1, 2014 ~ June 30, 2014)		2013		2012
Steel		Crude Steel		20,899		40,428		40,447

[Others]

	(MW, Thousands of Tons)
Business Area	Products			2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012
			Inchon		3,052		3,052		3,052
Power Generation		Electric Power	Gwangyang		284		284		284
			Pohang		290		145		—
Lime		Lime			1,095		2,190		2,190

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

	(Thousands of Tons)
Products		2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012
Crude Steel			20,173		38,261		39,702
	Hot-Rolled Products		3,681		8,109		8,670
	Plate		3,050		5,649		6,113
	Wire Rod		1,362		2,334		2,085
	Pickled-Oiled Steel Sheets		1,387		2,640		2,615
Products	Cold-Rolled Products		4,427		8,404		8,176
	Coated Steel		2,878		5,762		5,815
	Electrical Steel		649		1,125		1,173
	Stainless Steel		1,252		2,372		2,396
	Others		2,228		3,566		3,896
	Total		20,914		39,961		40,939

The amount of products is the aggregate of the amount of products of POSCO and subsidiaries of POSCO, which may include interested party transactions.

21

(2) Capacity Utilization Rate for the first half of fiscal year of 2014

	(Thousands of Tons)
	Company	Capacity		Production		Utilization Rate
	POSCO		18,943		18,562		98.0	%
	POSCO Specialty Steel		600		386		64.4	%
	Zhangjiagang Pohang Stainless Steel		550		569		103.5	%
Crude Steel Production	PT.KRAKATAU POSCO		806		656		81.4	%
	Total		20,899		20,173		96.5	%

Trade and engineering & construction businesses are not reflected on the table due to difficulties in measuring capacity, production and utilization rate of such businesses.

[Others]

(1) Production Result

	(Gwh, Thousands of Tons)
	Products	2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012
Power Generation	Electric Power		7,072		15,983		15,751
Lime	Lime		1,184		2,364		2,454

(2) Capacity Utilization Rate for the first half of fiscal year of 2014

	(hr, Thousands of Tons)
Business Area	Products		Capacity		Production		Utilization Rate
	Electric Power	Inchon		4,344		2,420		55.71	%
Power Generation		Gwangyang		4,344		4,054		93.34	%
		Pohang		3,444		2,504		57.65	%
Lime	Lime			1,095		1,184		108.1	%

22

C. Production Facilities

[Land]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation		Ending Book Balance
Steel		2,149,651		84,721		(16,545	)		—		2,217,827
Trade		67,294		—		(210	)		—		67,084
Engineering & Construction		52,171		3,788		(52	)		—		55,907
Others		438,894		1,871		(12	)		—		440,753

[Building]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		4,329,983		282,329		(112,566	)		(150,267	)		4,349,479
Trade		113,738		337		(2,843	)		(1,427	)		109,805
Engineering & Construction		43,726		13,465		—			(1,032	)		56,159
Others		401,388		73,465		(554	)		(16,332	)		457,967

[Structures]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		2,552,373		136,564		(32,923	)		(94,556	)		2,561,458
Trade		8,642		58		(221	)		(226	)		8,253
Engineering & Construction		8,361		52,414		—			(538	)		60,237
Others		215,211		27,821		(658	)		(9,637	)		232,737

[Machinery and Equipments]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		17,388,935		1,817,550		(427,290	)		(914,389	)		17,864,806
Trade		360,873		2,615		(15,662	)		(7,605	)		340,221
Engineering & Construction		19,367		16,317		(1,062	)		(9,758	)		24,864
Others		1,673,661		620,490		(574	)		(115,961	)		2,177,616

23

[Vehicles]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		33,726		4,173		(873	)		(6,591	)		30,435
Trade		3,949		827		(280	)		(709	)		3,787
Engineering & Construction		6,973		7,450		(595	)		(869	)		12,959
Others		6,385		2,861		(2,167	)		(1,497	)		5,582
[Tools and Fixtures]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		44,878		7,378		(566	)		(16,645	)		35,045
Trade		1,029		620		(33	)		(294	)		1,322
Engineering & Construction		1,229		364		(31	)		(320	)		1,242
Others		15,717		2,436		(79	)		(4,670	)		13,404
[Equipment]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		99,557		19,533		(2,511	)		(17,936	)		98,643
Trade		14,158		2,579		(246	)		(3,446	)		13,045
Engineering & Construction		14,773		1,564		(1,483	)		(1,843	)		13,011
Others		44,664		5,749		(308	)		(12,009	)		38,096
[Financial Lease Assets]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		16,569		—		(38	)		(542	)		15,989
Trade		24,623		157		(927	)		(1,582	)		22,271
Engineering & Construction		4,524		—		(3	)		(1,281	)		3,240
Others		54,808		—		(2	)		(2,101	)		52,705
[Assets under Construction]	(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		3,883,578		1,246,769		(2,090,965	)		—			3,039,382
Trade		101,199		82,957		(65,855	)		—			118,301
Engineering & Construction		399,383		43,239		(371,896	)		—			70,726
Others		1,164,129		393,317		(672,150	)		—			885,296

24

(2) Major Capital Expenditures

(a) Investments under Construction

[Steel]	(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
	Expansion	November, 2010 ~ October, 2014	G) Establishment of the Fourth Hot Rolling Mill		16,262		14,132		2,130
		March, 2011~ July, 2014	P) Optimization of the Facilities		22,124		21,400		724
POSCO	Renovation / Replacement	April, 2008 ~ September, 2016	P, G) Expansion of the Capacity of the Raw Materials Treatment Facilities		13,010		10,721		2,289
		January, 2008 ~ December, 2016	Renovation of the second Furnace etc.		36,895		21,906		14,989
POSCO Maharashtra Steel Private Limited	Expansion	November, 2011 ~ June, 2014	Establishment of a Cold-Rolling Mill in India (1.8 million ton)		7,191		5,722		1,469
POSCO SS VINA	Expansion	May, 2010 ~ December, 2014	Construction of Electric Arc Furnace and Section Steel/Rebar Rolling Mill (1.2 million ton)		6,157		5,090		1,067
POSCO-Foshan Steel Processing Center Co., Ltd.	Expansion	March, 2014 ~ December, 2014	Creation of new automobile demand		124		46		78

P stands for Pohang Steel Works.

G stands for Gwangyang Steel Works.

[Trading]	(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to be Invested
Daewoo International	Expansion	August, 2010 ~ April, 2014	Construction of Onshore Pipeline and Offshore Gas Terminal (transportation facility)		2,173		2,173		0
		July, 2013 ~ July, 2014	Acquisition of NEATT (North East Asia Trade Tower) in Songdo, Incheon		2,076		209		1,867
DW E&P Canada Corporation	Expansion	August, 2013 ~ December, 2015	CAPEX		277		90		187

25

[Others]	(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to be Invested
POSCO ICT	Expansion	January, 2014~ December, 2014	Expansion of Smart Management Server For Smart Management Operation Efficiency		336		78		258
POSCO Energy	Expansion	November 2012 ~ January, 2015	Incheon) Establishment of a LNG Combined Cycle Power Plant #7, #8, and #9		10,630		7,975		2,655
		March 2013 ~ December, 2014	Construction of a Cell Manufacturing Plant Laboratory		1,029		392		637

The investments over KRW 10 billion are listed on the table while equity investment is not reflected thereon.

(b) Future Investment Plans

	(In hundred millions of KRW)
Business	Company	Project		Planned Investments
				2014		2015		2016
	POSCO	Expansion, Renovation and Replacement of Existing Facilities	Renovation of Existing Facilities		5,577		6,051		1,532
			Capacity Increase		5,798		1,260		450
Steel	POSCO SS-VINA	Expansion, Renovation and Replacement of Existing Facilities	Exploring new market		1,524		122		0
	SPFC Co., Ltd.	Expansion, Renovation and Replacement of Existing Facilities	Expansion of combined processing facility		0		161		0
Trading	DW E&P Canada Corporation	Expansion, Renovation and Replacement of Existing Facilities	Production increase by drilling		177		87		0
Others	DAEWOO TEXTILE FERGANA LLC	Expansion, Renovation and Replacement of Existing Facilities	Improvement of Productivity and Product Quality		40		46		20

The investments over KRW 10 billion are listed on the table while equity investment is not reflected thereon.

26

6. Product Sales

[Steel]	(In hundred millions of KRW)
Items		2014 1H (January 1, 2014 ~ June 30, 2014)			2013			2012			2011
	Hot-Rolled Products		21,752			37,828			61,723			72,471
	Cold-Rolled Products		22,129			60,509			44,404			65,580
Domestic	Stainless Steel		14,579			29,042			33,902			38,581
	Others		54,176			103,308			124,741			123,194
	Hot-Rolled Products		15,591			21,971			37,910			42,665
Export	Cold-Rolled Products		51,565			110,668			98,140			101,980
	Stainless Steel		37,279			71,356			69,138			66,877
	Others		28,205			45,554			58,730			51,557
	Gross Sum		245,276			480,236			528,688			562,905
Total	Internal Transaction		(88,585	)		(162,290	)		(176,098	)		(171,386	)
	Total		156,691			317,946			352,590			391,519
[Trading]		(In hundred millions of KRW)
Items		2014 1H (January 1, 2014 ~ June 30, 2014)			2013			2012			2011
	Merchandise		4,854			8,490			7,537			8,444
Domestic	Product		247			—			854			1,026
	Others		52			116			90			78
	Merchandise		44,070			86,296			95,062			93,622
Export	Product		103			127			1,426			1,964
	Others		218			145			255			706
Trades among Korea, China & Japan			103,541			164,020			158,911			180,390
Gross Sum			153,085			259,193			264,135			286,230
Internal Transaction			(48,012	)		(76,114	)		(74,679	)		(75,256	)
Total			105,073			183,079			189,456			210,974

27

[Engineering & Construction]			(In hundred millions of KRW)
Items			2014 1H (January 1, 2014~ June 30, 2014)			2013			2012			2011
Construction Contract Revenue	Domestic	Architecture		10,298			16,185			13,730			16,321
		Plant		15,168			41,670			28,323			23,716
		Civil Engineering		3,252			6,969			9,120			11,187
		Others		2			2
	Overseas			19,092			32,039			35,704			24,275
Own Construction				3,344			7,060			2,871			672
Other Subsidiary company sales				1,471			3,895			7,511			8,560
Gross Sum				52,627			107,820			97,259			84,731
Internal Transaction				(11,924	)		(38,852	)		(50,503	)		(29,969	)
Total				40,703			68,968			46,756			54,762

[Others]	(In hundred millions of KRW)
Items	2014 1H (January 1, 2014 ~ June 30, 2014)		2013		2012		2011
Electric Power etc		18,970		48,653		47,240		32,132

7. Derivatives—Currency Forward Contracts

• The Exchangeable Bonds to American Depository Receipts of SK Telecom had been issued in 2011, and the loss on valuation of derivative would have been KRW 941 million.

• Foreign currency swap agreement was entered in order to hedge the exchange rate conversion risk for a part of existing Japanese Yen denominated bonds. The loss on valuation of derivative would have been KRW 423 million.

• Forward exchange contracts were entered, for the purpose of hedging the exchange rate conversion risk. The loss on valuation of derivative would have been KRW 7,708 million.

• Right to exercise put option in relation to the purchase of stakes in Steel Flower Co., Ltd. has been purchased and the derivative valuation of the profit would have been KRW 9,842 million.

28

8. Significant Contracts

Company	Contract	Date	Remarks
POSCO	Cooperation Agreement with Roy Hill Co., Ltd.	January, 2010	The purpose of the Cooperation Agreement was to obtain 15% stake in Roy Hill Holdings Pty. Ltd. which was pursuing the development of Roy Hill iron ore mine in Western Australia.
		January, 2012	POSCO decided to acquire certain additional equity interest in Roy Hill Holdings Pty. Ltd. (2nd phase), which amounts to approximately KRW 1,779 billion.
		March, 2012	POSCO entered into a contract in March 2012 to invest an additional A$ 1,495 million to increase its interest to 15% of the total outstanding and common stocks of Roy Hill Holdings Pty. Ltd.
		April, 2012	POSCO entered into a contract to dispose its 2.5% interest in the total outstanding and common stocks of Roy Hill Holdings Pty. Ltd. to China Steel Corporation for A$ 305 million.
DAEWOO INTERNATIONAL CORPORATION	Gas Sales and Purchase Agreement (“GSPA”) Regarding Shwe, Shwe Phyu and Mya gas field in Myanmar	December, 2008	1)      Contract Parties •     Seller: Daewoo International (51%), ONGC Videsh Limited (17%), Myanmar Oil and Gas Enterprise (15%), GAIL (India) Limited (8.5%) and Korea Gas Corporation (8.5%) •     Buyer: China National United Oil Company (“CNUOC”) 2)      Signed Date: December 24, 2008 3)      Summary of the GSPA •     Gas produced from Shwe and Shwe Phyu gas field in Block A-1 and Mya field in Block A-3 in Myanmar will be transported via the offshore and onshore gas pipelines to CNUOC in China. •     Gas production period is expected to be approximately 30 years. •     Gas sales price will be fluctuated and recalculated quarterly in accordance with the contractual base price, averaged oil price and consumer price. 4)      Remarks •     CNUOC is one of subsidiaries of China National Petroleum Corporation (“CNPC”) and CNPC guarantees CNUOC’s contractual obligations under gas sales and purchase agreement. •     Related Public Announcements: December 2, 2008; December 3, 2008; July 23, 2008; June 4, 2008; December 5, 2007; June 5, 2007; December 7, 2006; June 8, 2006; December 8, 2005; June 9, 2005; December 10, 2004; and June 11, 2004
	Investment for Construction of Facilities (Offshore Gas Production Platform and Onshore Gas Pipelines, etc)	August, 2009	1)      Total Investment: KRW 2,095,727,800,000 2)      Purpose of Investment: construction of new facilities for gas production, processing and transportation 3)      Total Period of Investment: October 1, 2009 ~ September 30, 2014 4)      Remarks •     Location: the north-western offshore and onshore in Myanmar •     Main facilities: offshore platform (gas production capacity: 64,000ft3/day), offshore pipeline (diameter: 32inch, length: 110km), onshore pipeline (diameter: 40 inch, length: 825km) •     Date of Gas Supply: May 1, 2013; daily gas production rate during the plateau period: 50,000ft3/day •     The aforementioned investment is for the phase 1 development; the phase 2 ~ 4 developments will commence consequently approximately 10 years after the completion of the phase 1 development. •     Main business areas: Upstream offshore business (offshore platform, subsea system), Middle stream offshore business (gas pipeline, onshore gas terminal) •     Participants: Daewoo International (51%), ONGC Videsh Limited (17%), Myanmar Oil and Gas Enterprise (15%), GAIL (India) Limited (8.5%) and Korean Gas Corporation (8.5%)

29

Sale of Daewoo Cement (Shandong) Company Limited	July, 2011	1)      Purpose of the Sale : sale of non-core business, divestiture and collection of long term debt 2)      Other information •     The sale price of all of the shares of Daewoo Cement (Shandong) Company Limited has not been determined; the separate disclosure regarding the sale price of Daewoo Cement (Shandong) Company Limited will be made when such information is available. •     The sale price of all of the shares of Daewoo Cement (Shandong) Company Limited is KRW 37,422,000,000 as of December 27, 2000. At the end of March, 2012, the book value of all of the shares of Daewoo Cement (Shandong) Company Limited was KRW 41,600 million under the K-IFRS. •     The official sale date of all of the shares of Daewoo Cement (Shandong) Company Limited has not been determined; actual sale date of all of the shares of Daewoo Cement (Shandong) Company Limited shall be set when the condition precedents of the share purchase agreement between Daewoo Cement (Shandong) Company Limited and a purchaser are satisfied. •     Sale agreement can be nullified when condition precedents of the contract (i.e. government approvals, etc) are not satisfied.
Sale of Kyobo Life Insurance Co., Ltd.	August, 2012	1)      Purpose of the sale was to strengthen financial structure and secure the core investment plan 2)      Other information •     The Board of Directors resolved to sell the shares held in Kyobo Life Insurance Co., Ltd., which amounts to KRW 1,205,400 million as of August 8, 2012.
Acquisition of NEATT (North East Asia Trade Tower) in Songdo, Incheon,	July 2013	1)      Building •     Name: NEATT (North East Asia Trade Tower) •     Location: Songdo, Incheon, Korea 2)      Purchase Price: KRW 207,600,000,000 (2.8% of the total assets on consolidated basis as of the end of year 2012) 3)      Closing Date: July 31, 2014.(tentative) 4)      Miscellaneous •     Building is expected to be purchased by Daewoo International (60%) and POSCO EnC (40%)

9. Research and Development

A. Research and Development ( “R&D”) Organization

Business Area	Company		Organization	Staff
Steel	POSCO	POSCO’s Department	Technical Research Laboratory		1,017
			New Growth Technology Strategy Department		40
			Iron and Steel Technology Strategy Department		40
			Environment and Energy Department		21
			Total		1,118
	POSCO Specialty Steel		R&D Group		21
	POSCO COATED & COLOR STEEL		Product Research Group		19
	POSCO AST CO., LTD.		Product Research Team		4
	Zhangjiagang Pohang Stainless Steel Co., Ltd.		Product Development Group		4
	POSCO Thainox Public Company Ltd.		Product development and research		8
Trade	Daewoo Paper Manufacturing Co., Ltd.		Product Testing Laboratory(LAB) Team		8

30

Engineering & Construction	POSCO Engineering & Construction	R&D Center	84
	POSCO Engineering Company	R&D group	17
	POSCO A&C	R&D Center, Quality Engineering Team	18
Others	POSCO ENERGY	Technology Strategy Department, Fuel Cell Department	65
	POSCO ICT	Information Control Lab	81
	POSCO CHEMTECH COMPANY	R&D Center	33
	POSCO M-TECH CO., LTD.	R&D Center	16
	POS-HiMETAL CO., Ltd.	Product Research Department	5
	PNR CO., Ltd.	Quality Innovation Department	7
	PONUTech Co., Ltd.	R&D Center	9

B. R&D Expenses							(In millions of KRW)
Category	Business Area
	Steel			Trade			Engineering & Construction			Others			Total
Selling and Administrative Cost		58,461			566			5,512			17,568			82,107
Manufacturing Cost		153,976			—			77			3,525			157,578
R&D Cost (Intangible Assets)		139,273			—			696			4,027			143,996
Total		351,710			566			6,285			25,120			383,681
R&D/Sales Ratio		2.24	%		0.01	%		0.15	%		1.32	%		1,19	%

31

III. Financial Statements

1. Non-consolidated Financial Statements

A. Summary on Fiscal Years of 2011, 2012, 2013 and the First Half of Fiscal Year of 2014

				(In millions of KRW)
Account	2014 1H (January 1, 2014 ~ June 30, 2014)			2013			2012			2011
[Current Assets]		10,674,222			11,953,479			12,609,471			13,924,795
Cash & Cash equivalents		1,325,519			1,394,315			1,752,560			1,137,882
Trade Accounts & Notes Receivable(net)		3,052,321			3,393,444			4,087,030			4,220,242
Other Current Financial Instruments		1,225,259			2,599,977			1,323,540			1,381,463
Inventories		5,035,537			4,538,657			5,403,660			7,144,709
Other Current Assets		35,586			27,086			42,681			40,499
[Non-current Assets]		42,255,499			42,288,799			39,710,965			38,803,081
Other Non-current Financial Instruments		2,829,909			3,408,332			3,028,765			3,833,058
Investment in Subsidiaries and Associates		15,709,477			15,092,836			14,100,053			12,824,776
Tangible Assets		23,179,480			23,240,603			22,166,735			21,533,135
Good Will & Other Intangible Assets		429,513			438,783			293,841			222,896
Other Non-current Assets		107,120			108,245			121,571			389,216
Total Assets		52,929,721			54,242,278			52,320,436			52,727,876
[Current Liabilities]		3,079,097			3,704,520			4,543,512			5,015,145
[Non-current Liabilities]		7,721,763			8,226,296			8,612,376			10,114,715
Total Liabilities		10,800,860			11,930,816			13,155,888			15,129,860
[Capital Stock]		482,403			482,403			482,403			482,403
[Capital Surplus]		1,233,088			1.233.040			1,227,692			1,227,692
[Hybrid bond]		996,919			996,919			—			—
[Retained Earnings]		40,903,598			40,774,284			39,842,497			38,122,620
[Other Equity]		(1,487,146	)		(1,175,184	)		(2,388,044	)		(2,234,699	)
Total Shareholders’ Equity		42,128,862			42,311,462			39,164,548			37,598,016
Total Sales		14,783,634			30,543,545			35,664,933			39,171,703
Operating Income		1,083,056			2,215,133			2,789,597			4,330,381
Net Income		658,754			1,582,596			2,499,523			3,188,845
Earnings per share(KRW)		8,052			20,052			32,359			41,279

32

B. The Standards Used for Reporting the Financial Statements

The company prepared its financial statements and its Certified Public Accountant’s audit opinions on financial statements in accordance with the Korean—International Financial Reporting Standards (the “K-IFRS”).

C. Non-consolidated Financial Statements

(1) Balance Sheet

Refer to the attached balance sheet for the first half of fiscal year of 2014.

(2) Income Statements

Refer to the attached income statement for the first half of fiscal year of 2014.

(3) The Note on the Financial Statement

Refer to the auditor’s note about the financial statement.

33

2. Consolidated Financial Statements

A. Summary on Fiscal Years of 2011, 2012, 2013 and the First Half of Fiscal Year of 2014

				(In millions of KRW)
Account	2014 1H (January 1, 2014 ~ June 30, 2014)			2013			2012			2011
[Current Assets]		31,873,839			31,666,211			31,566,116			33,556,911
Cash & Cash equivalents		3,756,871			4,208,562			4,680,526			4,598,682
Other Current Financial Instruments		3,525,785			4,861,088			3,846,433			3,656,270
Accounts Receivable		12,275,617			11,492,601			11,037,973			11,450,515
Inventories		10,876,472			9,798,381			10,584,646			12,283,644
Other Current Assets		1,439,094			1,305,579			1,416,538			1,567,800
[Non-current Assets]		52,693,136			52,789,196			47,699,735			44,851,927
Other Non-current Financial Instruments		4,655,100			5,263,185			4,669,868			5,125,672
Investment Securities		4,295,521			3,808,693			3,039,261			3,831,659
Tangible Assets		35,499,654			35,760,119			32,276,379			28,453,184
Good Will & Other Intangible Assets		5,893,675			5,929,840			5,662,361			5,244,928
Other Non-current Assets		2,349,186			2,027,359			2,051,866			2,196,484
Total Assets		84,566,975			84,455,407			79,265,851			78,408,838
[Current Liabilities]		21,074,597			20,241,159			19,775,001			19,605,357
[Non-current Liabilities]		18,221,678			18,392,218			17,061,432			18,073,561
Total Liabilities		39,296,275			38,633,377			36,836,433			37,678,918
[Controlling Interest]		41,585,343			42,046,037			39,454,142			38,356,350
Capital Stock		482,403			482,403			482,403			482,403
Capital Surplus		1,075,549			1,078,266			1,104,814			1,150,452
Hybrid bond		996,919			996,919			—			—
Retained Earnings		41,129,919			41,090,649			40,346,481			38,709,475
Other Controlling Interest		(2,099,448	)		(1,602,200	)		(2,479,556	)		(1,985,980	)
[Minority Interest]		3,685,357			3,775,993			2,975,276			2,373,570
Total Shareholders’ Equity		45,270,700			45,822,030			42,429,418			40,729,920
Total Sales		32,143,700			61,864,650			63,604,151			68,938,725
Operating Income		1,570,374			2,996,134			3,653,108			5,467,694
Consolidated Net Profit		542,804			1,355,180			2,385,607			3,714,286
[Controlling Interest]		581,011			1,376,396			2,462,081			3,648,136
[Minority Interest]		(38,207	)		(21,216	)		(76,474	)		66,150
Consolidated Total Comprehensive Income		(37,180	)		1,369,450			1,747,685			2,442,377
[Controlling Interest]		41,240			1,444,262			1,911,506			2,530,437
[Minority Interest]		(78,420	)		(74,812	)		(163,821	)		(88,060	)
Earning Per Share		7,077			17,409			31,874			47,224
Number of Consolidated Companies		220			212			218			220

34

B. The Standards Used for Reporting the Financial Statements

The Company prepared its financial statements in accordance with the Korean-International Financial Reporting Standards (the “K-IFRS”) and applied it to each Company’s final financial statements.

C. Consolidated Financial Statements

(1) Consolidated Balance Sheet

Refer to the attached consolidated balance sheet for the first half of fiscal year of 2014.

(2) Consolidated Income Statements

Refer to the attached consolidated financial report for the first half of fiscal year of 2014.

35

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors

(1) Board of Directors

Our board of directors has the ultimate responsibility for management of our business affairs. Under our Articles of Incorporation, the board shall consist of five directors who also act as the executive officers (the “Inside Directors”) and six directors who are to be outside directors (the “Outside Directors”). Our shareholders elect both Inside Directors and Outside Directors at a general meeting of shareholders. Candidates for the Inside Directors are recommended to shareholders by the board of directors after the board reviews such candidates’ qualifications; candidates for the Outside Directors are recommended to the shareholders by a separate board committee consisted of three Outside Directors and one Inside Director (the “Director Candidate Recommendation Committee”) after the committee reviews such candidates’ qualifications. Any shareholder holding an aggregate of 0.5% or more of our outstanding shares with voting rights for at least six months may recommend candidates for Outside Directors to the Director Candidate Recommendation Committee.

Our board of directors maintains the following six special committees:

(a) Director Candidate Recommendation Committee;

(b) Evaluation and Compensation Committee;

(c) Finance and Operation Committee;

(d) Executive Management Committee;

(e) Audit Committee; and

(f) Related Party Transaction Committee.

36

Composition of the Special Committees under the Board of Directors and their Functions (as of August 14, 2014)

Category	Composition	Directors	Major Functions
Director Candidate Recommendation Committee	3 Outside Directors; 1 Inside Director	Lee, Myung-Woo (Chairman) Kim, Il-Sup Ahn, Dong-Hyun Yoon, Dong-Jun	•   Reviews the qualifications of potential candidates for Directors •   Proposes nominees for the Outside Directors •   Advances the nomination process for the Inside Directors and members of the special committees
Evaluation and Compensation Committee	4 Outside Directors	Shin, Chae-Chol (Chairman) Lee, Chang-Hee Lee, Myung-Woo Sunwoo, Young	•   Executes management succession and development plans •   Establishes evaluation procedures of directors •   Reviews the retirement procedures and distribution of the allowance for directors
Finance and Operation Committee	3 Outside Directors; 2 Inside Directors	Shin, Chae-Chol (Chairman) James B. Bemowski Ahn, Dong-Hyun Chang, In-Hwan Lee, Young-Hoon	•   Advances deliberation of new investments in other companies •   Revises the internal regulations regarding the operation of the Board of Directors •   Deliberates financial matters and donations from the range of KRW 100 million and KRW 1 billion
Audit Committee	3 Outside Directors	Kim, Il-Sup (Chairman) Lee, Chang-Hee Sunwoo, Young	•   Audits the accounting system and business operations •   Examines the agenda for financial statements and other reports to be submitted by the Board of Directors at each general meeting of shareholders
Related Party Transactions Committee	3 Outside Directors	Kim, Il-Sup (Chairman) Lee, Chang-Hee Sunwoo, Young	•   Reviews matters related to the internal transactions under the MRFTA.-Holds preliminary review on internal transactions exceeding the amount of KRW 10 billion. •   Holds a deliberation hearing on internal transactions exceeding KRW 3 billion but less than 10 billion.
Executive Management Committee	5 Inside Directors	Kwon, Oh-Joon (Chairman) Kim, Jin-Il Chang, In-Hwan Yoon, Dong-Jun Lee, Young-Hoon	•   Oversees decisions with respect to our operational and management matters •   Reviews management’s proposal for new strategic initiatives •   Reviews deliberation over critical internal matters related to the organization structure and development of personnel •   Reviews and revises work and welfare policies

(2) Establishment and Composition of the Director Candidate Recommendation Committee

(a) Established the Director Candidate Recommendation Committee (March 17, 2000)

(b) Changed the name from the Director Candidate Recommendation Committee to the Director Candidate Recommendation and Evaluation Committee (March 15, 2002)

(c) Changed the name from the Director Candidate Recommendation and Evaluation Committee to the Director Candidate Recommendation Committee (March 12, 2004)

37

(3) List of Outside Directors(as of June 30, 2014)

Name	Experience	Relation with Majority Shareholder	Remarks
Lee, Chang Hee	•   (Present) Professor of College of Law, Seoul National University •   Vice Chairman, Tax Law Association	None	Chairman Board of Directors
James B. Bemowski	•   (Present) Vice Chairman , Business Operations, Doosan Corporation •   Senior Executive Vice President and Chairman of SBB Mutual Southern Bank Berhad, Malaysia •   Senior Partner, McKinsey & Company	None
Shin, Chae-Chol	•   President and Representative Director, LG CNS •   President and Representative Director, IBM Korea	None
Lee, Myoung-Woo	•   (Present) President and Representative Director, Dongwon Industry •   Vice Chairman, Iriver •   CEO, SONY Korea	None
Kim, Il-Sup	•   (Present) President, Seoul School of Integrated Science and Technology •   Chairman, Deloitte Anjin Accounting Corporation •   Vice-Chairman, Samil PWC Accounting Corporation	None
Sunwoo, Young	•   (Present) Managing Partner, Rhi & Partners •   Chief Public Prosecutor, Seoul Eastern District Prosecutor’s Office •   Chief Public Prosecutor, Cheongju District Prosecutor’s Office	None
Ahn, Dong-Hyun	•   (Present) Professor, School of Economics, Seoul National University •   Head of Quant Strategy, Royal Bank of Scotland	None

(4) List of Key Activities of the Board of Directors (January 1, 2014 ~ August14, 2014)

Session	Date	Agenda	Approval
1	January 15	Determining the CEO candidate for qualification assessment and operation of the CEO Candidate Recommendation Committee	Approved
2	January 16	Nomination of the Inside Director Candidate(CEO Candidate)	Approved
3	January 29	Approval of Annual Report & Financial Statements for the 46th FY & Convening Schedule of the 46th Ordinary General Meeting of Shareholders Revision of Compensation Scheme for Outside Directors	Approved Approved
4	February 24	Recommendation of Inside Director Candidate other than the CEO and the Representative Director The 46th Ordinary General Meeting of Shareholders	Approved Approved
5	March 10	Plan for confirming participation in the offering for capital increase of POSCO Plantec	Approved
6	March 14	Appointment of the Chairman of BOD Appointment of Special Committee Members Appointment of the Chairman and the Representative Director(CEO) Appointment of the Representative Directors and Position for the Inside Directors	Approved Approved Approved Approved
7	May 16	Mid-TermStrategy FY2014 RevisedManagement Plan Contribution to POSCOEducational Foundation Donate Credit CardCash Back Mileage to POSCO 1% foundation FY 2014 TransactionPlans with Daewoo International Corporation	Approved Approved Approved Approved Approved
8	August 8	Capital Increase forimprove financial structure of POSCO Maharashtra Steel Co., Ltd. FY 2014 TransactionPlans with affiliated person Plan of Investment byshares for Business Restructuring Change in BusinessStructure of Gwangyang Synthetic Natural Gas Project Declaration ofInterim Dividend for the Financial Year 2014 Gangneung MagnesiumSmelting Business Regional Development Fund Contribution Donation for building‘Safe Korea’ in regards to Sewol Ferry accident	Approved Approved Approved Approved Approved Approved Approved

38

Major Activities of the Outside Directors on the Board of Directors (January 1, 2014 ~ August 14, 2014)

Session	Date	Participation of the Outside Directors (the Number of total members)	Remarks
2014-1	January 15	6 (6)		—
2014-2	January 16	6 (6)		—
2014-3	January 29	6 (6)		—
2014-4	February 24	6 (6)
2014-5	March 10	4 (6)
2014-6	March 14	7 (7)
2014-7	May 16	7 (7)
2014-8	August 8	7 (6)

(5) Composition of the Special Committees and their Activities

(a) Major Activities of Director Candidate Recommendation Committee (January 1, 2014 ~ March 14, 2014)

Date	Agenda	Approval
February 17,	Assessment of qualifications and recommendation of the Outside Directors	Approved
February 24	Assessment of the Inside Directors	—
March 14	Appointment of the special committee members Approval of the designation of positions for the Representative Directors and Inside Directors	— —

(b) Major Activities of Evaluation and Compensation Committee (January 1, 2014 ~ March 14, 2014)

Date	Agenda	Approval
January 29	Evaluation of the management result for the fiscal year of 2013 Revision of Compensation Scheme for Outside Directors	Approved —

Major Activities after March 14, 2014

Date	Agenda	Approval
May 16	Enterprise-wide Management Performance Evaluation Plan for 2014	Approved

(c) Major Activities of Finance and Operation Committee (January 1, 2014 ~ March 14, 2014)

Date	Agenda	Approval
January 29	Extension of Payment Guarantee Plan for United Spiral Pipe, LLC	Approved

39

Major Activities after March 14, 2014

Date	Agenda	Approval
May 16	Donate CreditCard Cash Back Mileage to POSCO 1% foundation POSCO GuaranteeExtension Plan for Titanium Ingot business	— Approved
August 8	Gangneung MagnesiumSmelting Business Regional Development Fund Contribution Payment Guarantee for POSCO-Mexico	— Approved

(d) Major Activities of Related Party Transaction Committee (January 1, 2014 ~ March 14, 2014)

Date	Agenda	Approval
January 28	Review of the operation of the Fair Trading Program	—
March 10	Participating in the Offering for Capital Increase of POSCO Plantec	—

Major Activities after March 14, 2014

Date	Agenda	Approval
March 20	Change in Director for voluntary compliance of Fair Trade	Approved
May 15	Contribution to POSCO Educational Foundation
August 7	Asset Purchase of RIST Steel Structur Research Laboratory Change in BusinessStructure of Gwangyang Synthetic Natural Gas Project Plan of Investment byshares for Business Restructuring Review of the operation of the Fair Trading Program	Approved

(e) Major Activities of Executive Management Committee (January 1, 2014 ~ August 14, 2014)

Session	Date	Agenda	Approval
2014-1	January 7	Disposal of Treasury Stocks as Employee Award	Approved
2014-2	February 11	U.S. LPG procurement and the construction of Storage tank & facilities	Approved
2014-3	April 15	R&D facility investment for Permanent Domain Refinement by Laser Disposal of Treasury Stocks as Employee Award	Approved Approved
2014-4	May 20	Revamping of #2 RH atPohang #2 Steel Making Plant Pohang PowerReceiving Line Revamping	Approved
2014-5	June 3	Closure ofShareholders Register for 2014 Interim Dividends	Approved
2014-6	June 17	Minimizing FOGwastage of Pohang works The replacement ofdecrepit control system at Pohang #1 Hot Strip Mill Gwangyang 3CGLdecrepit facilities replacement	Approved Approved Approved
2014-7	July 15	Capital Increase forimprove financial structure of POSCO Maharashtra Steel Co., Ltd. Technology transferfor CSP Plan for Disposal ofTreasury Share as EmployeeReward	—   Approved Approved
2014-8	August 1	Change in BusinessStructure of Gwangyang Synthetic Natural Gas Project	—

40

B. Audit Committee

Under the Korean laws and our Articles of Incorporation, we are required to have an audit committee (the “Audit Committee”). The Audit Committee may be composed of three or more directors; all members of the Audit Committee must be of Outside Directors. Members of the Audit Committee must also meet the applicable independent criteria set forth under the rules and regulations of the Financial Investment Services and Capital Markets Act. Members of the Audit Committee are elected by the shareholders at the general meeting of shareholders. Our current Audit Committee is composed of three Outside Directors. Members of our Audit Committee are Lee, Chang-Hee (Chairman), Lee, Young-Sun and Shin, Chae-Chol.

The duties of the Audit Committee include:

• Engaging independent auditors;

• Approving independent audit fees;

• Approving audit and non-audit services;

• Reviewing annual financial statements;

• Reviewing audit results and reports, including management comments and recommendations;

• Reviewing our system of controls and policies, including those covering conflicts of interest and business ethics;

• Reviewing and approving all related party transactions; and

• Examining improprieties or suspected improprieties.

Moreover, in connection with the general meeting of shareholders, the Audit Committee examines the agenda, financial statements and other reports to be submitted by the Board of Directors at each general meeting of stockholders. Our internal and external auditors report directly to the Audit Committee. The committee holds its regular meetings at least once each quarter and more frequently if needed.

(1) Composition of the Audit Committee (Auditors)

Name	Qualifications	Remarks
Kim, Il-Sup Lee, Chang-Hee Sunwoo, Young	Satisfies the requirements stipulated in the articles of incorporation	Chairman — —

41

(2) Major Activities of the Audit Committee (Auditors)(January 1, 2014 ~ August 14, 2014)

Session	Date	Agenda	Approval
2014-1	January 28	•   Report Agenda •   Approval of audit and non-audit services for the review of revenue in 2013
2014-2	February 21	•   Deliberation Agenda •   Assessment of the operations of the internal accounting control system for the fiscal year of 2013 •   Internal audit result for the fiscal year of 2013 (Consolidated) •   Election of the external auditor •   Report Agenda •   External audit result for the fiscal year of 2013 (Consolidated)	Approved Approved Approved
2014-3	March 14	•   Deliberation Agenda •   Election of the Chairman of the audit committee •   To nominate the director for internal auditory department	Approved Approved
2014-4	March 20	•   Deliberation Agenda •   Approval of audit and non-audit services for POSCO and its subsidiaries	Approved
2014-5	May 15	•   Deliberation Agenda •   Approval of audit and non-audit services for POSCO and POSCO’s subsidiaries •   Report Agenda •   Result of observance of Stringent Law Control Standard •   Internal audit result for the first quarter of 2014(Consolidated) •   External audit result for the first quarter of 2014(Consolidated) and Audit result of Form 20-F for the fiscal year 2013 •   Audit plans for the fiscal year of 2014 •   Assessment of observance of ethics	Approved
2014-6	August 7	•   Deliberation Agenda •   Approval of audit and non-audit services for POSCO-IPPC •   Report Agenda •   Internal audit result for the second quarter of 2014(Consolidated) •   External audit result for the second quarter of 2014(Consolidated) •   Reporting result of audit for the first half of the fiscal year 2014	Approved

C. Voting Rights by Shareholders

(1) The Cumulative Voting System: The cumulative voting system was introduced at the thirty sixth general meeting of shareholders on March 12, 2004.

(2) Voting by Mail: The voting-by-mail system was introduced at the thirty sixth general meeting of shareholders on March 12, 2004.

42

D. Compensation of Directors and Officers

(1) Directors’ (including Outside Directors) and the Audit Committee members’ (Auditors’) Salaries

							(In millions KRW)
Category	Total Numbers		Total Payment		Average Payment		Ceiling Amount Approved at the Shareholders Meeting		Remarks
Inside Director		5		2,995		151				—
Outside Director		4		177		36				—
Members of the Audit Committee		3		125		30		7,000		—
Total		12		3,297		83				—

Payment Period: January 1, 2014 ~ June 30, 2014

Outside Directors also serving as the members of the Audit Committee are excluded in the count for the Outside Director.

(2) Individual remuneration amount

(In millions KRW)
Name	Experience	Total Payment
Chung, Joon-Yang	Chief Executive Officer and Representative Director		3,996
Park, Ki-Hong	President and Representative Director		1,679
Kim, Joon-Sik	President and Representative Director		1,671
Kim, Yeung Gyu	Senior Executive Vice President		920

* refers to the retired directors as of March 2013 and retirement payment is included in the total remuneration

(3) List of Stock Options Presented to the Executives

• Exercise of the stock option ended on the final day of the stock options exercise period (April 28, 2012).

43

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2014

(With Independent Auditors’ Review Report Thereon)

Table of Contents

	Page
Independent Auditors’ Review Report	1
Condensed Separate Interim Financial Statements
Condensed Separate Interim Statements of Financial Position	3
Condensed Separate Interim Statements of Comprehensive Income (Loss)	5
Condensed Separate Interim Statements of Changes in Equity	6
Condensed Separate Interim Statements of Cash Flows	7
Notes to the Condensed Separate Interim Financial Statements	8

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of June 30, 2014, the condensed separate interim statements of comprehensive income (loss) for the three-month and six-month periods ended June 30, 2014 and 2013, the condensed separate interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2014 and 2013, and notes to the interim financial statements.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed separate interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

The separate statement of financial position of the Company as of December 31, 2013, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated February 25, 2014, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2013, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

Seoul, Korea

August 12, 2014

This report is effective as of August 12, 2014, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO

Condensed Separate Interim Statements of Financial Position

As of June 30, 2014 and December 31, 2013

(Unaudited)

(in millions of Won)	Notes	June 30, 2014		December 31, 2013
Assets
Cash and cash equivalents	20	￦	1,325,519		1,394,315
Trade accounts and notes receivable, net	4,20,32		3,052,321		3,393,444
Other receivables, net	5,20,32		303,464		281,161
Other short-term financial assets	6,14,20		921,795		2,318,816
Inventories	7,29		5,035,537		4,538,657
Assets held for sale	8		—		1,304
Other current assets	9		35,586		25,782
Total current assets			10,674,222		11,953,479
Long-term trade accounts and notes receivable, net	4,20		4,588		4,464
Other receivables, net	5,20		27,327		45,738
Other long-term financial assets	6,14,20		2,802,582		3,362,594
Investments in subsidiaries, associates and joint ventures	10		15,709,477		15,092,836
Investment property, net	11		92,272		92,879
Property, plant and equipment, net	12		23,179,480		23,240,603
Intangible assets, net	13		429,513		438,783
Other long-term assets	9		10,260		10,902
Total non-current assets			42,255,499		42,288,799
Total assets		￦	52,929,721		54,242,278

See accompanying notes to the condensed separate interim financial statements.

3

POSCO

Condensed Separate Interim Statements of Financial Position

As of June 30, 2014 and December 31, 2013, Continued

(Unaudited)

(in millions of Won)	Notes	June 30, 2014			December 31, 2013
Liabilities
Trade accounts and notes payable	20,32	￦	1,004,185			735,457
Short-term borrowings and current portion	14,20		928,111			1,931,283
of long-term borrowings
Other payables	15,20,32		843,804			791,883
Other short-term financial liabilities	16,20		47,032			46,009
Current income tax liabilities			195,677			153,278
Provisions	17		31,526			8,501
Other current liabilities	19		28,762			38,109
Total current liabilities			3,079,097			3,704,520
Long-term borrowings, excluding current portion	14,20		6,373,451			6,731,788
Other payables	15,20		94,705			124,679
Other long-term financial liabilities	16,20		108,662			231,539
Net defined benefit liabilities	18		98,824			100,650
Deferred tax liabilities			999,632			1,034,102
Provisions	17		46,103			—
Other long-term liabilities	19		385			3,538
Total non-current liabilities			7,721,762			8,226,296
Total liabilities			10,800,859			11,930,816
Equity
Share capital	21		482,403			482,403
Capital surplus	21		1,233,088			1,233,040
Hybrid bonds	22		996,919			996,919
Reserves	23		91,847			403,939
Treasury shares	24		(1,578,992	)		(1,579,123	)
Retained earnings			40,903,597			40,774,284
Total equity			42,128,862			42,311,462
Total liabilities and equity		￦	52,929,721			54,242,278

See accompanying notes to the condensed separate interim financial statements.

4

POSCO

Condensed Separate Interim Statements of Comprehensive Income (Loss)

For the three-month and six-month periods ended June 30, 2014 and 2013

(Unaudited)

		For the three-month periods						For the six-month periods
		ended June 30						ended June 30
(in millions of Won, except per share informations)	Notes	2014			2013			2014			2013
Revenue	32	￦	7,419,784			7,739,748			14,783,634			15,424,412
Cost of sales	7,29,32		(6,394,538	)		(6,586,411	)		(12,787,976	)		(13,233,268	)
Gross profit			1,025,246			1,153,337			1,995,658			2,191,144
Selling and administrative expenses	25,29,32
Administrative expenses			(224,245	)		(217,093	)		(449,796	)		(436,274	)
Selling expenses			(235,649	)		(232,852	)		(462,806	)		(470,121	)
Operating profit	26		565,352			703,392			1,083,056			1,284,749
Finance income and costs	20,27
Finance income			351,467			195,542			595,469			547,552
Finance costs			(88,256	)		(398,611	)		(308,145	)		(856,731	)
Other non-operating income and expenses	26,28,32
Other non-operating income			7,931			15,894			11,313			50,134
Other non-operating expenses	29		(117,246	)		(67,957	)		(390,307	)		(125,783	)
Profit before income taxes			719,248			448,260			991,386			899,921
Income tax expense	30		(172,013	)		(66,642	)		(332,632	)		(134,878	)
Profit for the period			547,235			381,618			658,754			765,043
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss :
Remeasurements of defined benefit pension plans, net of tax	18		(19,744	)		31,602			(29,167	)		(41,548	)
Items that are or may be reclassified subsequently to profit or loss :
Net changes in unrealized fair value of available-for-sale investments, net of tax	6,20,23		(92,665	)		67,662			(312,092	)		214,155
Total comprehensive income, net of tax		￦	434,826			480,882			317,495			937,650
Basic and diluted earnings per share	31	￦	6,756			4,913			8,052			9,877

See accompanying notes to the condensed separate interim financial statements.

5

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2014 and 2013

(Unaudited)

	Share		Capital		Hybrid					Tresury			Retained
(in millions of Won)	capital		surplus		bonds		Reserves			shares			earnings			Total
Balance as of January 1, 2013	￦	482,403		1,227,692		—		3,362			(2,391,406	)		39,842,497			39,164,548
Comprehensive income :
Profit for the period		—		—		—		—			—			765,043			765,043
Other comprehensive income
Net changes in unrealized fair value of available-for-sale investments, net of tax		—		—		—		214,155			—			—			214,155
Remeasurements of defined benefit pension plans, net of tax		—		—		—		—			—			(41,548	)		(41,548	)
Transactions with owners of the Company, recognized directly in equity :
Year-end dividends		—		—		—		—			—			(463,467	)		(463,467	)
Issuance of hybrid bonds		—		—		996,919		—			—			—			996,919
Interest of hybrid bonds		—		—		—		—			—			(2,132	)		(2,132	)
Disposal of treasury shares		—		39		—		—			98			—			137
Balance as of June 30, 2013	￦	482,403		1,227,731		996,919		217,517			(2,391,308	)		40,100,393			40,633,655
	Share		Capital		Hybrid					Tresury			Retained
	capital		surplus		bonds		Reserves			shares			earnings			Total
Balance as of January 1, 2014	￦	482,403		1,233,040		996,919		403,939			(1,579,123	)		40,774,284			42,311,462
Comprehensive income :
Profit for the period		—		—		—		—			—			658,754			658,754
Other comprehensive income
Net changes in unrealized fair value of available-for-sale investments, net of tax		—		—		—		(312,092	)		—			—			(312,092	)
Remeasurements of defined benefit pension plans, net of tax		—		—		—		—			—			(29,167	)		(29,167	)
Transactions with owners of the Company, recognized directly in equity :
Year-end dividends		—		—		—		—			—			(478,702	)		(478,702	)
Interest of hybrid bonds		—		—		—		—			—			(21,572	)		(21,572	)
Disposal of treasury shares		—		48		—		—			131			—			179
Balance as of June 30, 2014	￦	482,403		1,233,088		996,919		91,847			(1,578,992	)		40,903,597			42,128,862

See accompanying notes to the condensed separate interim financial statements.

6

POSCO

Condensed Separate Interim Statements of Cash Flows

For six-month periods ended June 30, 2014 and 2013

(Unaudited)

(in millions of Won)	Notes		June 30, 2014			June 30, 2013
Cash flows from operating activities
Profit for the period			￦	658,754			765,043
Adjustments for :
Costs for defined benefit plans				58,428			62,362
Depreciation				1,001,071			943,541
Amortization				37,463			18,669
Finance income				(438,278	)		(370,849	)
Finance costs				170,200			678,005
Gain on disposal of property, plant and equipment				(2,959	)		(5,002	)
Loss on disposal of property, plant and equipment				29,769			67,383
Loss on disposal of investments in subsidiaries, associates and joint ventures				—			12,271
Impairment loss on investments in subsidiaries, associates and joint ventures				88,048			—
Other provision expenses				69,452			—
Income tax expense				332,632			134,878
Others				34,013			(9,953	)
Changes in operating assets and liabilities		34		(57,073	)		586,880
Interest received				50,126			59,367
Interest paid				(170,103	)		(206,269	)
Dividends received				122,713			210,200
Income taxes paid				(215,767	)		(91,141	)
Net cash provided by operating activities				1,768,489			2,855,385
Cash flows from investing activities
Proceeds from disposal of short-term financial instruments				2,614,240			1,929,975
Proceeds from disposal of long-term financial instruments				—			3
Decrease in held-to-maturity investments				—			30,000
Proceeds from disposal of available-for-sale investments				900			60,856
Collection of long-term loans				3,456			7,491
Proceeds from disposal of investment in subsidiaries, associates and joint ventures				—			5,153
Proceeds from disposal of intangible assets				464			1,100
Proceeds from disposal of assets held for sale				1,291			—
Acquisition of short-term financial investments				(1,217,219	)		(1,670,441	)
Acquisition of available-for-sale investments				(21,412	)		(48,028	)
Increase in long-term loans				(14,475	)		(361	)
Acquisition of investment in subsidiaries, associates and joint ventures				(704,054	)		(565,192	)
Acquisition of property, plant and equipment				(876,842	)		(1,947,895	)
Payment for disposal of property, plant and equipment				(9,597	)		(20,814	)
Acquisition of intangible assets				(25,480	)		(56,465	)
Net cash used in investing activities				(248,728	)		(2,274,618	)
Cash flows from financing activities
Proceeds from borrowings				1,369,225			789,995
Increase in long-term financial liabilities				1,217			1,788
Receipt of government grants				—			5,000
Proceeds from issuance of hybrid bonds				—			996,919
Repayment of borrowings				(2,456,884	)		(1,533,727	)
Payment of long-term financial liabilities				(1,600	)		(1,590	)
Decrease in derivative liabilities				—			(23,348	)
Payment of cash dividends				(478,775	)		(463,508	)
Payment of interest of hybrid bonds				(21,740	)		—
Net cash used in financing activities				(1,588,557	)		(228,471	)
Net increase (decrease) in cash and cash equivalents				(68,796	)		352,296
Cash and cash equivalents
Cash and cash equivalents at beginning of the period				1,394,315			1,752,560
Cash and cash equivalents at end of the period			￦	1,325,519			2,104,856

See accompanying notes to the condensed separate interim financial statements.

7

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014

(Unaudited)

1. Reporting Entity

POSCO (the “Company”) is the largest steel producer in Korea which was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and overseas markets.

The shares of the Company have been listed on the Korea Exchange since 1988. The Company owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea, and it also operates internationally through seven of its overseas liaison offices.

As of June 30, 2014, the shares of the Company are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

2. Statement of Compliance

Statement of compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Corporations.

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2013. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements in accordance with K-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor in a subsidiary, an associate or a venture in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

Use of estimates and judgments

(a) Judgements, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

8

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainties were the same as those that applied to the separate financial statements as of and for the year ended December 31, 2013.

(b) Measurement of fair value

The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuation techniques should be classified.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

• Level 1—unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2—inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.

• Level 3—inputs for the assets or liability that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in Note 20.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2013. The following changes in accounting policies are also expected to be reflected in the Company’s separate financial statements as of and for the year ending December 31, 2014.

9

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(a) Changes in accounting policies

The Company has adopted the following new standards and amendments to standards with a date of initial application of January 1, 2014.

1) K-IFRS No. 1032, “Financial Instruments: Presentation”

2) K-IFRS No. 1036, “Impairment of Assets”

3) K-IFRS No. 2121, “Levies”

The details of changes in accounting policies are as follows:

1) Offsetting financial assets and financial liabilities

The Company has applied the amendments to K-IFRS No. 1032, “Financial Instruments: Presentation” since January 1, 2014. The amendments, which should be applied retrospectively, require that a financial asset and a financial liability shall be offset and the net amount presented in the statement of financial position only when the Company currently has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

A legally enforceable right of set-off must not be contingent on a future event and must be legally enforceable in the normal course of business, the event of default and the event of insolvency or bankruptcy of the Company or the counterparties.

If the Company can settle amounts in a manner such that the outcome is, in effect, equivalent to net settlement, the Company will meet the net settlement criterion. The net settlement criterion will occur only if the gross settlement mechanism has features that eliminate or result in insignificant credit and liquidity risk, and that will process receivables and payables in a single settlement process or cycle.

2) Disclosure of impairment loss

The Company has applied the amendments to K-IFRS No. 1036, “Impairment of Assets” since January 1, 2014. The amendments, which should be applied retrospectively, require disclosure of the recoverable amount only if the Company recognized an impairment loss on goodwill or an intangible asset with an indefinite useful life for an individual asset or cash-generating unit.

3) Levies

The Company has adopted K-IFRS No. 2121, “Levies” with a date of initial application of January 1, 2014. K-IFRS No. 2121, which should be applied retrospectively, defines the obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy, as identified by legislation. The liability to pay a levy is recognized progressively if the obligating event occurs over a period of time. If the obligating event is the reaching of a minimum activity threshold, the corresponding liability is recognized when that minimum activity threshold is reached. The Company shall recognize an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy.

(b) Impact of changes in accounting policy

Upon adoption of K-IFRS No. 1032 and K-IFRS No. 2121, there is no impact on the Company’s prior year’s separate financial statements. Upon adoption of K-IFRS No. 1036, the Company will make the required disclosures in the annual financial statements for the year ending December 31, 2014 as applicable.

10

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Current
Trade accounts and notes receivable	￦	3,059,692			3,403,316
Less: Allowance for doubtful accounts		(7,371	)		(9,872	)
	￦	3,052,321			3,393,444
Non-current
Trade accounts and notes receivable	￦	4,588			4,692
Less: Allowance for doubtful accounts		—			(228	)
	￦	4,588			4,464

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ￦217,624 million and ￦203,138 million as of June 30, 2014 and December 31, 2013, respectively, and are included in short-term borrowings.

5. Other Receivables

Other receivables as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Current
Short-term loans	￦	3,908			—
Other accounts receivable		303,086			281,667
Others		7,041			10,065
Less: Allowance for doubtful accounts		(10,571	)		(10,571	)
	￦	303,464			281,161
Non-current
Long-term loans	￦	35,578			54,945
Long-term other accounts receivable		3,520			2,723
Others		2,682			2,523
Less: Allowance for doubtful accounts		(14,453	)		(14,453	)
	￦	27,327			45,738

11

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

6. Other Financial Assets

(a) Other financial assets as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Short-term financial instruments (*1)	￦	919,584		2,317,867
Cash deposits (*2)		2,211		949
	￦	921,795		2,318,816
Non-current
Long-term derivatives assets held for trading	￦	9,841		7,788
Long-term available-for-sale securities (equity instruments)		2,775,347		3,333,915
Long-term available-for-sale securities (bonds)		16,858		20,355
Long-term available-for-sale securities (others)		500		500
Cash deposits (*3)		36		36
	￦	2,802,582		3,362,594

(*1) Financial instruments, amounting to ￦5,200 million and ￦4,700 million as of June 30, 2014 and December 31, 2013, respectively, are collateralized for long-term borrowings from National Forestry Cooperative Federation.

(*2) Deposits are restricted in relation to government assigned projects.

(*3) The Company is required to provide deposits to maintain checking accounts, and accordingly, the withdrawal of these deposits is restricted.

12

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Long-term available-for-sale equity securities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014																December 31, 2013
									Net changes in
									fair value of			Accumulated
	Number of				Acquisition		Fair		available-for-sale			impairment			Book		Book
	shares		Ownership (%)		cost		value		investments			loss			value		value
Marketable equity securities
Nippon Steel & Sumitomo Metal Corporation		238,352,000		2.51	￦	719,622		772,260		52,638			—			772,260		842,909
SK Telecom Co., Ltd. (*1)		603,259		0.75		154,572		142,865		64,163			(75,870	)		142,865		419,933
KB Financial group Inc.		11,590,550		3.00		536,517		407,987		11,590			(140,120	)		407,987		489,701
Hyundai Heavy Industries Co., Ltd.		1,477,000		1.94		343,506		261,429		(82,077	)		—			261,429		379,589
Shinhan Financial group Inc.		4,369,881		0.92		228,778		204,729		82,093			(106,142	)		204,729		206,695
Hana Financial group Inc.		2,430,498		0.84		15,633		91,144		75,511			—			91,144		106,699
Others (12 companies) (*2)						150,940		106,176		37,016			(81,780	)		106,176		108,895
						2,149,568		1,986,590		240,934			(403,912	)		1,986,590		2,554,421
Non-marketable equity securities
The Siam United Steel (*3)		11,071,000		12.30		34,658		60,218		48,085			(22,525	)		60,218		57,643
Nacional Minerios S.A. (*3)		30,784,625		6.48		668,635		526,503		(142,132	)		—			526,503		517,193
Dongbu Metal Co., Ltd. (*3)		3,000,000		10.00		98,242		74,841		(23,401	)		—			74,841		85,371
Others (39 companies) (*4)						141,485		127,195		(2,316	)		(11,974	)		127,195		119,287
						943,020		788,757		(119,764	)		(34,499	)		788,757		779,494
					￦	3,092,588		2,775,347		121,170			(438,411	)		2,775,347		3,333,915

(*1) As of June 30, 2014, 603,257 shares equivalent to 5,429,314 American Depository Receipts (“ADRs”) of SK Telecom Co., Ltd. have been pledged as collateral for the exchangeable bonds issued.

(*2) The Company has recognized ￦1,252 million, ￦2,856 million and ￦465 million of impairment loss on securities of PT.Krakatau Steel, Steel Flower Co., Ltd and Dgenx Co., Ltd, respectively due to significant decline in the fair value of the shares.

(*3) Fair value is based on an analysis performed by an external professional evaluation agency.

(*4) These non-marketable equity securities are recorded at cost since its fair value cannot be reliably measured.

7. Inventories

Inventories as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Finished goods	￦	797,503			755,286
Semi-finished goods		1,373,148			1,259,390
By-products		11,462			13,793
Raw materials		1,125,506			983,902
Fuel and materials		586,409			520,236
Materials-in-transit		1,148,493			1,009,996
Others		557			586
		5,043,078			4,543,189
Less: Allowance for inventories valuation		(7,541	)		(4,532	)
	￦	5,035,537			4,538,657

13

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

The amount of valuation losses of inventories recognized within cost of goods sold during the six-month period ended June 30, 2014 and the year ended December 31, 2013 were ￦7,541 million and ￦4,532 million, respectively.

8. Non-current Assets Held for Sale

Details of non-current assets held for sale as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Investment in associates (*1)	￦	—		1,304

(*1) The Company determined to dispose of the shares of POSVINA Co., Ltd., an associate of the Company, and classified it as assets held for sale as of December 31, 2013. The Company completed the disposal of this investment during the six-month period ended June 30, 2014 and recognized a loss on disposal of asset held for sale of ￦14 million.

9. Other Assets

Other current assets and other long-term assets as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Other current assets
Advance payments	￦	4,886		4,871
Prepaid expenses		30,700		20,911
		35,586		25,782
Other long-term assets
Long-term prepaid expenses		6,462		6,980
Others		3,798		3,935
Less: Allowance for doubtful accounts		—		(13	)
	￦	10,260		10,902

14

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

10. Investments in Subsidiaries, Associates and Joint ventures

(a) Details of subsidiaries and carrying values as of June 30, 2014 and December 31, 2013 are as follows:

						June 30, 2014		December 31, 2013
(in millions of Won)	Country		Principal operations	Ownership (%)		Book value		Book value
[Domestic]
Daewoo International. Co., Ltd.		Korea	Trading		60.31	￦	3,371,481		3,371,481
POSCO ENGINEERING & CONSTRUCTION Co., Ltd.		Korea	Engineering and construction		89.53		1,510,716		1,510,716
POSCO Energy Corp.		Korea	Generation of electricity		89.02		658,176		658,176
POSCO Specialty Steel Co., Ltd.		Korea	Steel manufacturing and sales		72.09		628,842		628,842
POSCO Processing & Service Co., Ltd.		Korea	Steel sales and service		95.31		421,927		421,927
POSCO AST Co., Ltd.		Korea	Steel manufacturing and sales		100.00		176,609		176,609
POSCO Coated & Color Steel Co., Ltd.		Korea	Coated steel manufacturing		56.87		108,421		108,421
POSCO M-TECH Co., Ltd. (*1)		Korea	Packing materials manufacturing		48.85		107,278		107,278
POSCO Venture Capital Co. Ltd. (formerly, POSTECH Venture Capital Corp.)		Korea	Investment in venture companies		95.00		103,780		103,780
POSCO Chemtec Company Ltd.		Korea	Manufacturing and sales		60.00		100,535		100,535
POSCO ICT Co., Ltd.		Korea	Computer hardware and software distribution		65.38		70,990		70,990
POSMATE Co., Ltd.		Korea	Business facility maintenance		54.46		63,222		63,222
POS-HiMETAL Co., Ltd.		Korea	Steel manufacturing and sales		65.00		49,452		49,452
POSCO Family Strategy Fund		Korea	Financial investment		60.79		40,000		40,000
Busan E&E Co. Ltd. (*2)		Korea	Municipal solid waste fuel and power generation		70.00		30,148		30,148
Others (13 companies)							188,264		178,264
						￦	7,629,841		7,619,841

15

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

					June 30, 2014		December 31, 2013
(in millions of Won)	Country	Principal operations	Ownership (%)		Book value		Book value
[Foreign]
PT. KRAKATAU POSCO	Indonesia	Steel manufacturing and sales		70.00	￦	856,906		808,492
POSCO Thainox Public Co., Ltd.	Thailand	Stainless steel manufacturing		84.93		340,249		340,249
POSCO Australia Pty. Ltd.	Australia	Steel sales and mine development		100.00		330,623		330,623
POSCO WA Pty. Ltd.	Australia	Mine development		100.00		607,438		446,093
POSCO Maharashtra Steel Private Ltd.	India	Steel manufacturing and sales		100.00		435,163		355,987
Zhangjiagang Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing		58.60		284,564		284,753
POSCO China Holding Corp.	China	Investment management		100.00		240,430		240,430
POSCO-India Private Ltd.	India	Steel manufacturing and sales		99.99		184,815		184,815
POSCO-Mexico S.A. DE C.V.	Mexico	Plate steel manufacturing		84.84		181,760		182,080
POSCO-Vietnam Co., Ltd.	Vietnam	Steel manufacturing		85.00		157,038		157,295
POSCO VST Co., Ltd.	Vietnam	Stainless steel manufacturing		95.65		145,202		145,288
POSCO America Corporation	USA	Trading-Steel		99.45		140,381		140,381
POSCO(Guangdong) Automotive Steel Co., Ltd.	China	Steel manufacturing and selling		83.64		131,119		131,291
POSCO ASSAN TST STEEL Industry	Turkey	Steel manufacturing and sales		60.00		95,464		95,710
POSCO Investment Co., Ltd.	Hong Kong	Finance		99.99		86,989		87,211
POSCO-JAPAN Co., Ltd.	Japan	Trading-Steel		100.00		68,436		68,436
Qingdao Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing		70.00		65,982		65,982
POSCO (Suzhou) Automotive Processing Center Co., Ltd.	China	Steel manufacturing and sales		90.00		62,494		62,494
POSCO Electrical Steel Inida Private Limited	India	Electrical steel manufacturing and sales		100.00		58,552		58,662
POSCO AFRICA (PROPRIETARY) LIMITED	South Africa	Trading		100.00		50,297		50,297
POSCO China Dalian Plate Processing Center Co., Ltd.	China	Heavy plate processing and marketing		80.00		32,992		32,992
POSCO Asia Co., Ltd.	Hong Kong	Steel transit trade		100.00		32,189		32,189
POSCO(Guangdong) Steel Co., Ltd.	China	Plate steel sheet manufacturing		87.04		31,299		31,299
POSCO-Malaysia SDN. BHD.	Malaysia	Steel manufacturing and sales		80.07		31,027		31,027
POSCO-URUGUAY S.A.	Uruguay	Wood manufacturing and sales		98.04		30,243		29,341
POSCO COATED STEEL (THAILAND) CO., LTD.	Thailand	Plate steel manufacturing and sales		100.00		47,618		6,020
Others (31 companies)						311,502		297,286
						5,040,772		4,696,723
					￦	12,670,613		12,316,564

(*1) As of June 30, 2014, this was classified as an investment in a subsidiary as the Company has control over of more than half of the voting rights by virtue of agreement with Postech, which has 4.72% of ownership in POSCO M-TECH Co., Ltd.

(*2) As of June 30, 2014, this investment is collateral for the Company’s guarantee provided for certain borrowings of its subsidiary from banks.

16

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Details of associates and carrying values as of June 30, 2014 and December 31, 2013 are as follows:

					June 30, 2014		December 31, 2013
(in millions of Won)	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	Korea	Mine investment		25.80	￦	169,106		169,106
POSCO PLANTEC Co., Ltd. (*1)	Korea	Industrial machinery manufacturing		34.52		118,601		185,786
SNNC Co., Ltd.	Korea	Material manufacturing		49.00		100,655		100,655
Others (5 companies)						22,802		18,921
						411,164		474,468
[Foreign]
Nickel Mining Company SAS	New Caledonia	Raw material manufacturing and sales		49.00		189,197		189,197
7623704 Canada Inc.	Canada	Mine investment		10.40		124,341		124,341
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd	China	Tinplate manufacturing and sales		24.00		11,003		11,003
Others (9 companies)						31,866		26,188
						356,407		350,729
					￦	767,571		825,197

(*1) As of June 30, 2014, there is objective evidence of impairment due to a prolonged decline on the fair value of the investment. Recoverable amounts were determined based on fair value less cost to sell, which was calculated by adding a 20.7% control premium to current stock price as of June 30, 2014. The Company recognized an impairment loss of ￦88,048 million as the carrying value was higher than its recoverable amount as of June 30, 2014.

(c) Details of joint ventures and carrying values as of June 30, 2014 and December 31, 2013 are as follows:

					June 30, 2014		December 31, 2013
(in millions of Won)	Country	Principal operations	Ownership (%)		Book value		Book value
Roy Hill Holdings Pty Ltd	Australia	Mine development		10.00	￦	1,225,464		983,569
POSCO-NPS Niobium LLC.	USA	Mine development		50.00		364,609		364,609
KOBRASCO	Brazil	Facilities lease		50.00		98,962		98,962
CSP-Compania Siderurgica do Pecem	Brazil	Steel manufacturing		20.00		469,891		393,925
Others (5 companies)						112,367		110,010
					￦	2,271,293		1,951,075

17

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

11. Investment Property, Net

Changes in the carrying value in investment property for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Depreciation (*1)			Transfer (*2)		Ending
Land	￦	36,020		—			347		36,367
Buildings		52,682		(1,208	)		307		51,781
Structures		4,177		(80	)		27		4,124
Total	￦	92,879		(1,288	)		681		92,272

(*1) The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*2) Mainly includes assets transferred from property, plant and equipment in relation to change in rental ratio and the purpose of use.

2) For the year ended December 31, 2013

(in millions of Won)	Beginning		Depreciation (*1)			Transfer (*2)			Ending
Land	￦	41,811		—			(5,791	)		36,020
Buildings		63,697		(2,793	)		(8,222	)		52,682
Structures		5,018		(186	)		(655	)		4,177
Total	￦	110,526		(2,979	)		(14,668	)		92,879

(*1) The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*2) Mainly includes assets transferred to property, plant and equipment in relation to change in rental ratio and the purpose of use.

18

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

12. Property, Plant and Equipment, Net

Changes in the carrying value of property, plant and equipment for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Others (*1)			Ending
Land	￦	1,397,271		39		(3	)		—			908			1,398,215
Buildings		2,637,774		2,397		(663	)		(122,151	)		81,980			2,599,337
Structures		2,469,046		1,031		(690	)		(96,227	)		222,029			2,595,189
Machinery and equipment		13,202,710		29,516		(15,805	)		(758,289	)		1,152,389			13,610,521
Vehicles		10,769		108		—			(3,812	)		1,713			8,778
Tools		25,680		1,931		(51	)		(7,786	)		2,360			22,134
Furniture and fixtures		47,394		3,640		(1	)		(11,199	)		1,260			41,094
Lease assets		7,007		—		—			(319	)		—			6,688
Construction-in-progress		3,442,952		947,691		—			—			(1,493,119	)		2,897,524
Total	￦	23,240,603		986,353		(17,213	)		(999,783	)		(30,480	)		23,179,480

(*1) Represents assets transferred from construction-in-progress to property, plant and equipment, investment property and intangible assets.

2) For the year ended December 31, 2013

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Others (*1)			Ending
Land	￦	1,367,822		—		(627	)		—			30,076			1,397,271
Buildings		2,734,839		7,034		(8,628	)		(241,678	)		146,207			2,637,774
Structures		2,113,750		16,624		(5,519	)		(181,725	)		525,916			2,469,046
Machinery and equipment		12,888,614		113,921		(57,800	)		(1,456,354	)		1,714,329			13,202,710
Vehicles		13,039		794		(4	)		(8,682	)		5,622			10,769
Tools		29,693		4,006		(9	)		(15,118	)		7,108			25,680
Furniture and fixtures		67,431		2,819		(875	)		(24,829	)		2,848			47,394
Lease assets		7,644		—		—			(637	)		—			7,007
Construction-in-progress		2,943,903		3,009,545		—			—			(2,510,496	)		3,442,952
Total	￦	22,166,735		3,154,743		(73,462	)		(1,929,023	)		(78,390	)		23,240,603

(*1) Represents assets transferred from construction-in-progress to property, plant and equipment, investment property and intangible assets.

19

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

13. Intangible Assets, Net

Changes in the carrying value of intangible assets for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Transfer (*2)			Ending
Intellectual property rights	￦	13,812		—		—			(1,021	)		2,479			15,270
Membership (*1)		48,877		5,829		(501	)		—			—			54,205
Development expense		29,468		—		—			(24,503	)		140,383			145,348
Port facilities usage rights		172,209		—		—			(6,155	)		1,837			167,891
Construction-in-progress		153,719		7,828		—			—			(143,904	)		17,643
Other intangible assets		20,698		11,823		—			(5,784	)		2,419			29,156
	￦	438,783		25,480		(501	)		(37,463	)		3,214			429,513

(*1) Economic useful life of membership is indefinite.

(*2) Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment.

2) For the year ended December 31, 2013

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment (*2)			Transfer (*3)			Ending
Intellectual property rights	￦	8,904		—		(291	)		(1,625	)		—			6,824			13,812
Membership (*1)		49,560		1,022		(1,124	)		—			(581	)		—			48,877
Development expense		30,092		1,902		—			(16,156	)		—			13,630			29,468
Port facilities usage rights		87,983		—		—			(10,265	)		—			94,491			172,209
Construction-in-progress		96,035		98,459		—			—			—			(40,775	)		153,719
Other intangible assets		21,267		1,658		—			(10,021	)		—			7,794			20,698
	￦	293,841		103,041		(1,415	)		(38,067	)		(581	)		81,964			438,783

(*1) Economic useful life of membership is indefinite.

(*2) Since the carrying amount exceeded recoverable amount, impairment loss on memberships was recognized.

(*3) Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment.

20

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

14. Borrowings

(a) Borrowings as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Short-term borrowings
Short-term borrowings	￦	404,262			203,138
Current portion of long-term borrowings		223,382			188,381
Current portion of loans from foreign financial institutions		657			927
Current portion of debentures		300,000			1,540,109
Less: Current portion of discount on debentures		(190	)		(1,272	)
	￦	928,111			1,931,283
Long-term borrowings
Long-term borrowings	￦	525,024			648,251
Loans from foreign financial institutions		866			1,140
Debentures		5,868,440			6,107,973
Less: Discount on debentures issued		(24,965	)		(38,167	)
Add: Premium on debentures redemption		4,086			12,591
	￦	6,373,451			6,731,788

(b) Short-term borrowings as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)			Annual
Lenders	Issuance date	Maturity date	interest rate (%)	June 30, 2014		December 31, 2013
RBS	2014.04.02	2014.07.01	0.56	￦	27,709		—
DBS	2014.04.02	2014.07.01	0.62		34,927		—
HSBC	2014.04.04	2014.07.03	0.58		32,735		—
CA	2014.04.09	2014.07.10	0.56		41,428		—
Mizuho	2014.04.09	2014.07.10	0.60		49,839		—
Others (Transfer of account receivables that does not qualify for derecognition)					217,624		203,138
				￦	404,262		203,138

(c) Current portion of long-term borrowings as of June 30, 2014 and December 31, 2013 are as follows:

				Annual
(in millions of Won)	Lenders	Issuance date	Maturity date	interest rate (%)	June 30, 2014		December 31, 2013
Borrowings	Woori Bank and others	2006.10.31~	2017.03.15~	0.75~1.75	￦	15,532		14,969
		2013.05.08	2041.05.08
Borrowings	Korea EXIM Bank	2010.02.18~	2014.09.23~	4.09~4.50		207,851		173,412
		2011.03.23	2017.07.26
Loans from foreign financial institutions	NATIXIS (*1)	1984.06.30~ 1986.03.31	2014.12.30~ 2017.03.31	2.00		657		927
Debentures	Domestic debentures 292	—	—	—		—		499,975
Debentures	Samurai bonds 10	2011.10.20	2014.10.20	1.67		299,809		300,921
	Global fund 1	—	—	—		—		737,941
					￦	523,849		1,728,145

(*1) As of June 30, 2014 and December 31, 2013, Korea Development Bank has provided guarantees to the Company for loans from foreign financial institutions.

21

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(d) Long-term borrowings excluding current portion as of June 30, 2014 and December 31, 2013 are as follows:

				Annual
(in millions of Won)	Lenders	Issuance date	Maturity date	interest rate (%)	June 30, 2014		December 31, 2013
Borrowings	Woori Bank and others (*1)	2006.10.31~	2017.03.15~	0.75~1.75	￦	63,428		71,194
		2013.05.08	2041.05.08
Borrowings	Korea National Oil Corporation	2007.12.27~ 2013.12.30	2022.06.25~ 2026.12.29	Government bond -2.25		13,066		13,593
Borrowings	Korea EXIM Bank	2010.07.26~	2017.07.26~	4.09~4.50		448,530		563,464
		2013.07.03	2018.03.23
Loans from foreign financial institutions	NATIXIS (*2)	1986.03.31	2017.03.31	2.00		866		1,140
Debentures	Domestic debentures 301 and others	2010.08.04~ 2013.10.04	2015.08.04~ 2023.10.04	3.35~4.81		3,293,642		3,292,417
Debentures	Exchangeable Bond (*3) and others	2006.08.10~ 2013.12.11	2016.08.10~ 2021.12.22	0~5.88		2,553,919		2,789,980
					￦	6,373,451		6,731,788

(*1) Short-term financial instruments amounting to ￦5,200 million and ￦4,700 million as of June 30, 2014 and December 31, 2013, respectively, are collateralized for long-term borrowings from National Forestry Cooperative Federation.

(*2) As of June 30, 2014 and December 31, 2013, Korea Development Bank has provided guarantees to the Company for loans from foreign financial institutions.

(*3) The Company issued bonds exchangeable to SK Telecom Co., Ltd. ADRs through Zeus (Cayman) Ltd., an SPV. The Company accounted for these exchangeable bonds as long-term borrowings. The Company provides guarantees for Zeus (Cayman) Ltd.

22

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

15. Other Payables

Other payables as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Accounts payable	￦	420,254		463,196
Accrued expenses		405,287		306,723
Dividend payable		8,938		9,180
Finance lease liabilities		1,111		1,124
Withholdings		8,214		11,660
	￦	843,804		791,883
Non-current
Long-term accounts payable	￦	66,139		91,827
Accrued expenses		16,730		22,922
Finance lease liabilities		4,310		5,042
Long-term withholdings		7,526		4,888
	￦	94,705		124,679

16. Other Financial Liabilities

Other financial liabilities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Derivative liabilities	￦	38,484		36,964
Financial guarantee liabilities		8,548		9,045
	￦	47,032		46,009
Non-current
Derivative liabilities	￦	58,146		175,463
Financial guarantee liabilities		50,516		56,076
	￦	108,662		231,539

23

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

17. Provisions

(a) Provisions as of June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014				December 31, 2013
(in millions of Won)	Current		Non-current		Current		Non-current
Estimated allowance (*1)	￦	8,177		—		8,501		—
Provision for recovery (*2)		23,349		38,817		—		—
Provision for litigation (*3)		—		7,286		—		—
	￦	31,526		46,103		8,501		—

(*1) Represents the provision for bonuses for executives.

(*2) Due to contamination of the land near the Company’s magnesium plant located in Gangneung, the Company recognized a provision of ￦62,166 million related to restoration costs. When estimating related costs, the Company has assumed that it would use all of technologies and materials available to recover the land. In addition, the Company has applied a discount rate of 3.83% to assess the present value of these costs.

(*3) The Company recognized a provision for several litigations based on the Company’s estimates.

(b) Changes in provisions for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Increase		Utilization			Ending
Estimated allowance at the end of period	￦	8,501		5,538		(5,862	)		8,177
Provision for recovery at the end of period		—		62,166		—			62,166
Provision for litigation at the end of period		—		7,286		—			7,286
	￦	8,501		74,990		(5,862	)		77,629

2) For the year ended December 31, 2013

(in millions of Won)	Beginning		Increase		Utilization			Ending
Estimated allowance at the end of period	￦	6,239		12,428		(10,166	)		8,501

24

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

18. Employee Benefits

(a) Defined contribution plans

The Company operates a defined contribution plan for participating employees. Though the Company pays fixed contributions into a separate fund, employee benefits in the future relating to employee service rendered is based on the contributions to the funds and the investment earnings on it. Plan assets are managed by a trustee within a fund separate from Company’s assets.

The expense related to post-employment benefit plans under defined contribution plans for the six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Expense related to post-employment benefit plans under defined contribution plans	￦	4,888		3,847		9,351		7,352

(b) Defined benefit plans

The Company also operates a defined benefit pension plan for employees. The employees who chose a defined benefit pension plan will receive a defined payment upon termination of their employment if they fulfill the condition to qualify as a recipient. Before the termination of employment, the Company recognizes the pension liability related to defined benefit plans at the end of the reporting period, and measures it at the present value of the defined benefit obligation less the fair value of the plan assets. The Company uses the projected unit credit method in the actuarial valuation of plan assets and the defined benefit obligation.

(c) The amounts recognized in relation to net defined benefit obligations in the statements of financial position as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Present value of funded obligations	￦	966,763			905,918
Fair value of plan assets		(867,939	)		(805,268	)
Net defined benefit liabilities	￦	98,824			100,650

25

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(d) Changes in present value of defined benefit obligations for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Defined benefit obligation at the beginning of period	￦	905,918			817,618
Current service costs		58,086			118,975
Interest costs		16,297			27,942
Remeasurement		34,221			11,553
Transfer-in		1,960			—
Benefits paid		(49,719	)		(70,170	)
Defined benefit obligation at the end of period	￦	966,763			905,918

(e) Changes in fair value of plan assets for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Fair value of plan assets at the beginning of period	￦	805,268			677,362
Interest on plan assets		15,955			24,261
Remeasurement of plan assets		(4,258	)		86
Contributions to plan assets		71,000			140,000
Transfer-in		1,960			—
Benefits paid		(21,986	)		(36,441	)
Fair value of plan assets at the end of period	￦	867,939			805,268

(f) The amounts recognized in the statements of comprehensive income for the six-month period ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Current service costs	￦	28,401		30,054		58,086		60,521
Net interest costs		171		921		342		1,841
	￦	28,572		30,975		58,428		62,362

26

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

19. Other Liabilities

Other liabilities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Advances received	￦	9,221		20,912
Withholding		18,222		15,905
Unearned revenue		1,319		1,292
		28,762		38,109
Non-current
Unearned revenue		385		538
Others		—		3,000
	￦	385		3,538

20. Financial Instruments

(a) Classification of financial instruments

1) Financial assets as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Financial assets at fair value through profit or loss
Derivatives assets held for trading	￦	9,841		7,788
Available-for-sale financial assets		2,792,705		3,354,770
Loans and receivables		5,499,091		7,263,709
	￦	8,301,637		10,626,267

2) Financial liabilities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Financial liabilities at fair value through profit or loss
Derivatives liabilities held for trading	￦	96,630		212,427
Financial liabilities measured as amortized cost
Trade accounts and notes payable		1,004,185		735,457
Borrowings		7,301,562		8,663,071
Financial guarantee liabilities (*1)		59,064		65,121
Others		876,064		916,562
		9,240,875		10,380,211
	￦	9,337,505		10,592,638

27

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(*1) Financial liabilities were recognized in connection with financial guarantee contracts as of June 30, 2014. The details of the amount of guarantees provided are as follows:

(in millions of Won)
Guarantee beneficiary	Financial institution	Foreign currency			Won equivalent
POSCO(Guangdong)	ANZ		USD	10,000,000		10,144
Automotive Steel Co., Ltd.	BOA		USD	30,000,000		30,432
	BTMU		USD	24,000,000		24,346
	ING		USD	23,600,000		23,940
	SMBC		USD	35,000,000		35,504
Zhangjiagang Pohang	BTMU		USD	30,000,000		30,432
Stainless Steel Co., Ltd.	Credit Agricole		USD	50,000,000		50,720
	Mizuho		USD	50,000,000		50,720
POSCO Maharashtra	Citi		USD	60,000,000		60,864
Steel Pvt. Ltd.	DBS		USD	100,000,000		101,440
	HSBC		USD	80,000,000		81,152
	ING		USD	30,000,000		30,432
	KDB		USD	30,000,000		30,432
	Export-Import Bank of Korea		USD	193,000,000		195,779
	SCB		USD	73,069,000		74,121
POSCO ASSAN TST	HSBC		USD	27,000,000		27,389
STEEL Industry	ING		USD	45,000,000		45,648
	KDB		USD	45,000,000		45,648
	SMBC		USD	71,392,500		72,421
POSCO Electrical Steel	ING		USD	50,000,000		50,720
India Private Limited	SCB		USD	33,784,000		34,270
POSCO Investment Co., Ltd.	BOA		USD	45,000,000		45,648
	BOC		CNY	350,000,000		57,096
	BTMU		USD	30,000,000		30,432
	HSBC		USD	50,000,000		50,720
	ING		USD	30,000,000		30,432
	JP Morgan		USD	50,000,000		50,720
	Mizuho		USD	50,000,000		50,720
	SCB		USD	45,000,000		45,648
	SMBC		USD	30,000,000		30,432
POSCO-Mexico S.A. DE C.V	BOA		USD	40,000,000		40,576
	HSBC		USD	40,000,000		40,576
	KDB		USD	50,000,000		50,720
	Mizuho		USD	45,000,000		45,648
	SMBC		USD	69,725,000		70,729
POSCO-Vietnam Co., Ltd.	Export-Import Bank of Korea		USD	196,000,000		198,822
POSCO VST Co., Ltd.	ANZ		USD	25,000,000		25,360
	HSBC		USD	20,000,000		20,288
	Mizuho		USD	20,000,000		20,288
PT. KRAKATAU POSCO	ANZ		USD	73,500,000		74,558
	BOA		USD	35,000,000		35,504
	BTMU		USD	119,000,000		120,714
	Credit Suisse AG		USD	91,000,000		92,310
	HSBC		USD	91,000,000		92,310
	Export-Import Bank of Korea		USD	567,000,000		575,165
	Mizuho		USD	105,000,000		106,512
	SCB		USD	107,800,000		109,352
	SMBC		USD	140,000,000		142,016
	The Tokyo Star Bank, Ltd.		USD	21,000,000		21,302
United Spiral Pipe, LLC	Shinhan Bank		USD	24,500,000		24,853
LLP POSUK Titanium	Kookmin Bank		USD	15,000,000		15,216
			USD	3,316,370,500		3,364,125
			CNY	350,000,000		57,096

28

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

3) Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2014 and 2013 were as follows:

 June 30, 2014

	Finance income and costs
						Gain and loss		Gain and loss
	Interest					on foreign		on foreign			Gain and									Other
	income			Dividend		currency		currency			loss on									comprehensive
(in millions of Won)	(cost)			income (*1)		transactions		translations			disposal			Others			Total			loss
Financial assets at fair value through profit or loss	￦	—			—		—		—			—			2,053			2,053			—
Available-for-sale financial assets		236			35,155		—		—			117,682			(4,573	)		148,500			(312,092	)
Loans and receivables		47,449			—		7,796		(11,016	)		—			(450	)		43,779			—
Financial liabilities at fair value through profit or loss		—			—		—		—			(38,581	)		13,520			(25,061	)		—
Financial liabilities at amortized cost		(125,351	)		—		50,573		116,980			(17,631	)		(91	)		24,480			—
	￦	(77,666	)		35,155		58,369		105,964			61,470			10,459			193,751			(312,092	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of ￦93,573 million for the six-month period ended June 30, 2014.

‚ June 30, 2013

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income (*1)		transactions			translations			disposal			Others			Total			income
Financial assets at fair value through profit or loss	￦	—			—		—			—			8,463			1,570			10,033			—
Available-for-sale financial assets		1,184			38,404		—			—			42,064			(159,754	)		(78,102	)		214,155
Held-to-maturity investments		367			—		—			—			—			—			367			—
Loans and receivables		55,467			—		37,102			10,985			(127	)		(258	)		103,169			—
Financial liabilities at fair value through profit or loss		—			—		—			—			—			(91,756	)		(91,756	)		—
Financial liabilities at amortized cost		(148,094	)		—		(46,442	)		(193,532	)		—			(189	)		(388,257	)		—
	￦	(91,076	)		38,404		(9,340	)		(182,547	)		50,400			(250,387	)		(444,546	)		214,155

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of ￦135,367 million for the six-month period ended June 30, 2013.

29

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

4) Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2014 and 2013 were as follows:

 June 30, 2014

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income (*1)		transactions			translations			disposal			Others			Total			loss
Financial assets at fair value through profit or loss	￦	—			—		—			—			—			1,297			1,297			—
Available-for-sale financial assets		172			7,277		—			—			110,609			(3,309	)		114,749			(92,665	)
Loans and receivables		16,652			—		(24,059	)		(11,741	)		4			(122	)		(19,266	)		—
Financial liabilities at fair value through profit or loss		—			—		—			—			(43,859	)		(19,566	)		(63,425	)		—
Financial liabilities at amortized cost		(52,292	)		—		83,724			192,621			(19,131	)		(46	)		204,876			—
	￦	(35,468	)		7,277		59,665			180,880			47,623			(21,746	)		238,231			(92,665	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of ￦24,980 million for the three-month period ended June 30, 2014.

‚ June 30, 2013

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income (*1)		transactions			translations			disposal			Others			Total			income
Financial assets at fair value through profit or loss	￦	—			—		—			—			8,463			898			9,361			—
Available-for-sale financial assets		268			2,862		—			—			42,064			(57,884	)		(12,690	)		67,662
Loans and receivables		16,248			—		29,877			(4,205	)		(127	)		(127	)		41,666			—
Financial liabilities at fair value through profit or loss		—			—		—			—			—			(40,261	)		(40,261	)		—
Financial liabilities at amortized cost		(71,706	)		—		(13,004	)		(142,597	)		—			(147	)		(227,454	)		—
	￦	(55,190	)		2,862		16,873			(146,802	)		50,400			(97,521	)		(229,378	)		67,662

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of ￦26,308 million for the three-month period ended June 30, 2013.

30

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Fair value

1) Fair value and book value

The carrying amount and the fair value of financial instruments as of June 30, 2014 and December 31, 2013 are as follows :

	June 30, 2014				December 31, 2013
(in millions of Won)	Book value		Fair value		Book value		Fair value
Assets measured at fair value
Available-for-sale financial assets (*1)	￦	2,658,507		2,658,507	￦	3,224,711		3,224,711
Derivatives assets held for trading (*2)		9,841		9,841		7,788		7,788
		2,668,348		2,668,348		3,232,499		3,232,499
Assets measured amortized cost (*3)
Cash and cash equivalents		1,325,519		1,325,519		1,394,315		1,394,315
Trade accounts and notes receivable		3,056,909		3,056,909		3,397,908		3,397,908
Loans and other receivables		1,116,663		1,116,663		2,471,486		2,471,486
		5,499,091		5,499,091		7,263,709		7,263,709
Liabilities measured at fair value
Derivatives liabilities held for trading (*2)		96,630		96,630		212,427		212,427
Liabilities measured amortized cost (*3)
Trade accounts and notes payable		1,004,185		1,004,185		735,457		735,457
Borrowings		7,301,562		7,670,330		8,663,071		8,943,063
Financial guarantee liabilities		59,064		59,064		65,121		65,121
Others		876,064		876,064		916,562		916,562
	￦	9,240,875		9,609,643	￦	10,380,211		10,660,203

(*1) The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average cost of capital of evaluated companies are used as a discount rate. The book value of available-for-sale financial assets accounted for at cost is not included.

(*2) The fair value of derivatives is measured using valuation models such as Black-scholes model and others in which the market yields on government bonds are used as a discount rate.

(*3) The fair value of financial assets and liabilities measured at amortized cost is determined at the present value of estimated future cash flows discounted at the current market interest rate. The fair value is calculated for the disclosures in the notes. On the other hand, the Company has not performed fair value measurement for the financial assets and liabilities measured at amortized cost except borrowings since the fair value is close to their carrying amounts.

31

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) The fair value hierarchy

The fair values of financial instruments by fair value hierarchy as of June 30, 2014 and December 31, 2013 are as follows :

 June 30, 2014

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Available-for-sale financial assets	￦	1,986,590		—		671,917		2,658,507
Derivatives assets held for trading		—		9,841		—		9,841
	￦	1,986,590		9,841		671,917		2,668,348
Financial Liabilities
Derivatives liabilities held for trading	￦	—		96,630		—		96,630

‚ December 31, 2013

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Available-for-sale financial assets	￦	2,554,421		—		670,290		3,224,711
Derivatives assets held for trading		—		7,788		—		7,788
	￦	2,554,421		7,788		670,290		3,232,499
Financial Liabilities
Derivatives liabilities held for trading	￦	—		212,427		—		212,427

3) Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the separate financial statements as of and for the year ended December 31, 2013.

32

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

21. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2014 and December 31, 2013 are as follows:

(Share, Won)	June 30, 2014		December 31, 2013
Authorized shares		200,000,000		200,000,000
Par value	￦	5,000		5,000
Issued shares (*1)		87,186,835		87,186,835
Shared capital (*2)	￦	482,403,125,000		482,403,125,000

(*1) As of June 30, 2014, total shares of ADRs of 54,117,228 are equivalent to 13,529,307 of common stock.

(*2) As of June 30, 2014, the difference between the ending balance of common stock and the par value of issued common stock is ￦46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Share premium	￦	463,825		463,825
Gain on disposal of treasury shares		769,263		769,215
	￦	1,233,088		1,233,040

33

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

22. Hybrid Bonds

Hybrid bonds classified as equity as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	Date of issue	Date of maturity	Rate of interest (%)	June 30, 2014			December 31, 2013
Hybrid bond 1-1 (*1)	2013-06-13	2043-06-13	4.30	￦	800,000			800,000
Hybrid bond 1-2 (*1)	2013-06-13	2043-06-13	4.60		200,000			200,000
Issuance cost					(3,081	)		(3,081	)
				￦	996,919			996,919

(*1) Details of hybrid bonds as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	Hybrid bond 1-1	Hybrid bond 1-2
Issue price	800,000	200,000
Maturity date	30 years (The Company has a right to extend the maturity date)	30 years (The Company has a right to extend the maturity date)
Interest rate	Issue date ~ 2018-06-12 : 4.3%	Issue date ~ 2023-06-12 : 4.6%
	reset every 5 years as follows;	reset every 10 years as follows;
	•   After 5 years : return on government bond (5 years) + 1.3%	•   After 10 years : return on government bond (10 years) + 1.4%
	•   After 10 years : additionally + 0.25% according to Step-up clauses	•   After 10 years : additionally + 0.25% according to Step-up clauses
	•   After 25 years : additionally + 0.75%	•   After 30 years : additionally + 0.75%
Interest payments condition	Quarterly	Quarterly
	(Optional deferral of interest payment is available to the Company)	(Optional deferral of interest payment is available to the Company)
	The Company can call the hybrid bond at year 5 and interest	The Company can call the hybrid bond at year 10 and interest
Others	payment date afterwards	payment date afterwards

The Company holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, the Company cannot declare or pay dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments. The interest accumulated but not paid on the hybrid bonds as of June 30, 2014 amounts to ￦2,133 million.

23. Reserves

Reserves as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Accumulated unrealized changes in the fair value of available-for-sale investments, net of tax	￦	91,847		403,939

24. Treasury Shares

As of June 30, 2014, the Company holds 7,402,597 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

34

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

25. Selling and Administrative Expenses

(a) Administrative expenses

Administrative expenses for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Wages and salaries	￦	48,564		50,418		100,932		100,888
Expenses related to post-employment benefits		5,311		6,258		13,146		12,976
Other employee benefits		12,699		11,639		24,741		22,308
Travel		3,566		4,127		6,587		7,762
Depreciation		5,964		6,235		11,896		12,460
Amortization		13,490		4,398		26,553		9,046
Rental		17,275		13,326		35,065		25,103
Repairs		2,549		2,915		6,225		6,702
Advertising		21,396		22,794		42,312		40,146
Research and development		32,813		31,518		56,412		79,654
Service fees		43,317		42,061		90,081		81,027
Vehicles maintenance		1,755		1,664		3,501		3,481
Industry association fee		1,638		2,092		5,178		5,199
Training		3,204		2,790		4,825		4,456
Conference		1,147		1,131		2,362		2,263
Bad debt expenses		13		5,040		516		4,384
Others		9,544		8,687		19,464		18,419
	￦	224,245		217,093		449,796		436,274

(b) Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Freight and custody expenses	￦	212,706		207,494		418,781		423,702
Operating expenses for distribution center		2,424		2,318		4,893		4,452
Sales commissions		17,188		18,106		32,601		32,647
Sales advertising		510		1,022		770		1,492
Sales promotion		1,114		1,665		2,251		3,136
Sample		327		318		770		690
Sales insurance premium		1,380		1,929		2,740		4,002
	￦	235,649		232,852		462,806		470,121

35

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

26. Adjusted Operating Profit

Adjusted operating profits which include the other profits or losses excluded in operating profit but reflect the results of the Company’s operations for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(in millions of Won)	2014			2013			2014			2013
Operating profits on the statement of comprehensive income	￦	565,352			703,392			1,083,056			1,284,749
Add
Gain on disposals of property, plant and equipment		1,810			2,524			2,959			5,002
Gain on disposals of other long-term assets		—			—			—			246
Gain on disposals of investment in subsidiaries, associates and joint ventures		—			—			—			14,544
Others		6,121			13,370			8,354			30,342
		7,931			15,894			11,313			50,134
Deduct
Loss on disposals of property, plant and equipment		(12,100	)		(48,614	)		(29,769	)		(67,383	)
Other bad debt expenses		—			—			(25,704	)		—
Donations		(9,828	)		(6,145	)		(28,786	)		(18,476	)
Idle tangible assets expenses		(235	)		(9,823	)		(473	)		(16,743	)
Impairment loss on investment in subsidiaries, associates and joint ventures		(20,319	)		—			(88,048	)		—
Loss on disposals of investment in subsidiaries, associates and joint ventures		—			—			—			(12,271	)
Contribution to provisions		(69,452	)		—			(69,452	)		—
Others		(5,312	)		(3,375	)		(148,075	)		(10,910	)
		(117,246	)		(67,957	)		(390,307	)		(125,783	)
Adjusted operating profit	￦	456,037			651,329			704,062			1,209,100

27. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(in millions of Won)	2014			2013			2014		2013
Finance income
Interest income	￦	16,825			16,516			47,685		57,018
Dividend income		32,257			29,170			128,728		173,771
Gain on foreign currency transactions		97,704			120,014			151,090		168,939
Gain on foreign currency translations		109,479			(21,583	)		118,978		95,727
Gain on valuation of derivatives		(15,407	)		898			23,704		1,570
Gain on derivative transactions		—			8,463			6,102		8,463
Gain on disposals of available-for-sale investment		110,609			42,064			117,682		42,064
Gain on redemption of debentures		—			—			1,500		—
	￦	351,467			195,542			595,469		547,552
Finance costs
Interest expenses	￦	52,293			71,706			125,351		148,094
Loss on foreign currency transactions		38,039			103,140			92,721		178,279
Loss on foreign currency translations		(71,401	)		125,219			13,014		278,274
Loss on valuation of derivatives		2,862			40,261			8,131		91,756
Loss on derivative transactions		43,859			—			44,683		—
Impairment loss on available-for-sale investment		3,309			57,883			4,573		159,754
Loss on redemption of debentures		19,131			—			19,131		—
Others		164			402			541		574
	￦	88,256			398,611			308,145		856,731

36

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

28. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Other non-operating income
Gain on disposals of property, plant and equipment	￦	1,810		2,524		2,959		5,002
Gain on disposals of other long-term assets		—		—		—		246
Gain on disposals of investment in subsidiaries, associates and joint ventures		—		—		—		14,544
Others		6,121		13,370		8,354		30,342
	￦	7,931		15,894		11,313		50,134
Other non-operating expenses
Loss on disposals of property, plant and equipment	￦	12,100		48,614		29,769		67,383
Other bad debt expenses		—		—		25,704		—
Donations		9,828		6,145		28,786		18,476
Idle tangible assets expenses		235		9,823		473		16,743
Impairment loss on investment in subsidiaries, associates and joint ventures		20,319		—		88,048		—
Loss on disposals of investment in subsidiaries, associates and joint ventures		—		—		—		12,271
Contribution to provisions		69,452		—		69,452		—
Others (*1)		5,312		3,375		148,075		10,910
	￦	117,246		67,957		390,307		125,783

(*1) As a result of Korea National Tax Service’s periodic audit of tax payments and refunds of the Company, the Company recognized additional tax payments amounting to ￦139,569 million, primarily related to VAT, in the six-month period ended June 30, 2014.

29. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six month periods ended June 30, 2014 and 2013 were as follows (excluding finance costs and income tax expense):

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014			2013
Changes in inventories (*1)	￦	27,641		97,995		(150,635	)		246,204
Raw materials and consumables used		4,564,616		4,793,915		9,316,441			9,676,491
Employee benefits expenses		342,482		352,035		717,421			724,567
Outsourced processing cost		563,096		515,839		1,104,418			1,014,854
Depreciation (*2)		501,517		478,146		1,001,071			943,541
Amortization		18,948		9,325		37,463			18,669
Electricity and water expenses		269,269		213,102		525,798			400,073
Service fees		57,724		56,055		117,885			109,461
Rental		21,654		18,752		44,730			36,085
Advertising		21,396		22,794		42,312			40,146
Freight and custody expenses		212,706		207,494		418,781			423,702
Sales commissions		17,188		18,106		32,601			32,647
Loss on disposals of property, plant and equipment		12,100		48,614		29,769			67,383
Bad debt expenses		13		5,040		26,220			4,384
Impairment loss on investment in subsidiaries, associates and joint ventures		20,319		—		88,048			—
Contribution to provisions		69,452		—		69,452			—
Other expenses		251,557		267,101		669,110			527,239
	￦	6,971,678		7,104,313		14,090,885			14,265,446

(*1) Changes in inventories are the changes in product, semi-finished products and by-product.

(*2) Includes depreciation of investment property.

37

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

30. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax benefit/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and income tax recognized in other comprehensive income. The effective tax rate of the Company for the six-month periods ended June 30, 2014 and 2013 was 33.6% and 15.0%, respectively. The change in effective tax rate was caused mainly by additional income tax payment (￦59,168 million) due to tax investigation and non-deductible expense primarily related to additional VAT payment (note 28) in 2014.

31. Earnings per Share

Basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(in Won except for share information)	2014			2013			2014			2013
Profit for the period	￦	547,235,317,164			381,617,578,251			658,754,438,229			765,042,537,146
Interests of hybrid bonds		(8,240,301,971	)		(2,132,608,696	)		(16,351,402,838	)		(2,132,608,696	)
Weighted-average number of common shares outstanding (*1)		79,784,165			77,244,901			79,783,960			77,244,685
Basic and diluted earnings per share	￦	6,756			4,913			8,052			9,877

(*1) The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(share)	2014			2013			2014			2013
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,402,670	)		(9,941,934	)		(7,402,875	)		(9,942,150	)
Weighted-average number of common shares outstanding		79,784,165			77,244,901			79,783,960			77,244,685

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2014 and 2013, diluted earnings per share is equal to basic earnings per share.

38

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

32. Related Party Transactions

(a) Significant transactions with related companies for the six-month periods ended June 30, 2014 and 2013 were as follows:

1) For the six-month period ended June 30, 2014

	Sales and others (*1)						Purchase and others (*2)
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries (*3)
POSCO ENGINEERING & CONSTRUCTION Co., Ltd.	￦	6,631		16,674		23,305		—		590,485		3,260		12,519		606,264
POSCO Processing & Service Co., Ltd.		518,057		8,578		526,635		473,808		—		—		261		474,069
POSCO Coated & Color Steel Co., Ltd.		228,638		1		228,639		—		—		5,270		66		5,336
POSCO ICT Co., Ltd.		607		2,490		3,097		—		98,062		12,685		79,974		190,721
POSMATE Co., Ltd.		258		2,018		2,276		210		—		7,256		16,491		23,957
eNtoB Co., Ltd.		—		—		—		122,887		1,679		35		9,064		133,665
POSCO Chemtech Company Ltd.		267,799		15,434		283,233		252,731		2,748		152,698		557		408,734
POSCO M-TECH Co., Ltd.		95		16		111		63,612		890		101,477		4,511		170,490
POSCO Energy Corp.		84,605		598		85,203		—		2,263		—		20		2,283
POSCO TMC Co., Ltd.		115,404		—		115,404		—		—		528		764		1,292
POSCO AST Co., Ltd.		266,677		—		266,677		4,836		—		32,579		851		38,266
POS-Himetal Co., Ltd.		5,267		2,313		7,580		80,988		—		—		—		80,988
Daewoo International Corp.		1,707,132		20,605		1,727,737		70,065		—		—		1,656		71,721
POSCO America Corporation		362,592		2		362,594		—		—		—		179		179
POSCO Canada Ltd.		—		—		—		82,489		—		—		—		82,489
POSCO Asia Co., Ltd.		1,010,153		53		1,010,206		96,937		—		8,881		668		106,486
POSCO (Thailand) Company Ltd.		24,771		12		24,783		—		—		—		8		8
Qingdao Pohang Stainless Steel Co., Ltd.		34,895		2		34,897		—		—		—		—		—
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		59,460		—		59,460		—		—		—		—		—
POSCO-Japan Co., Ltd.		719,380		—		719,380		6,362		459		3		447		7,271
POSCO-India Pune Processing Center. Pvt. Ltd.		60,180		62		60,242		—		—		—		—		—
POSCO-Mexico S.A. DE C.V.		136,055		775		136,830		—		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		111,783		581		112,364		—		—		—		—		—
Daewoo International Singapore Pte. Ltd.		—		—		—		45,492		—		—		11,513		57,005
Others		318,813		6,526		325,339		64,950		25,678		9,715		30,280		130,623
		6,039,252		76,740		6,115,992		1,365,367		722,264		334,387		169,829		2,591,847
Associates and joint ventures (*3)
SNNC Co., Ltd.		2,043		5,273		7,316		163,758		—		—		5		163,763
POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.) (*4)		8,400		24		8,424		1,500		37,355		6,347		2,658		47,860
POSCHROME (PROPRIETARY) LIMITED		—		—		—		30,496		—		—		—		30,496
PT. POSMI Steel Indonesia		1,840		—		1,840		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		1,379		—		1,379		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		9,519		—		9,519		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,396		—		1,396		—		—		—		—		—
Others		4		29,466		29,470		2,103		—		—		—		2,103
		24,581		34,763		59,344		197,857		37,355		6,347		2,663		244,222
	￦	6,063,833		111,503		6,175,336		1,563,224		759,619		340,734		172,492		2,836,069

(*1) Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures. These are priced on an arm’s length basis.

(*2) Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products. These are priced on an arm’s length basis.

(*3) As of June 30, 2014, the Company provided guarantees to related parties (note 20).

(*4) Sungjin Geotec Co., Ltd. merged with POSCO Plant Engineering Co., Ltd. and changed its name to POSCO PLANTEC Co., Ltd..

39

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) For the six-month period ended June 30, 2013

	Sales and others						Purchase and others
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., Ltd.	￦	6,474		3,104		9,578		3,042		1,719,415		3,750		6,844		1,733,051
POSCO Processing & Service Co., Ltd.		456,189		—		456,189		651,669		—		—		365		652,034
POSCO Coated & Color Steel Co., Ltd.		234,620		—		234,620		—		—		4,694		82		4,776
POSCO Plant Engineering Co., Ltd.		2,373		19		2,392		1,499		61,936		13,733		2,492		79,660
POSCO ICT Co., Ltd.		609		61		670		45		126,273		13,611		71,192		211,121
eNtoB Co., Ltd.		—		—		—		106,403		3,147		76		9,664		119,290
POSCO Chemtech Company Ltd.		246,231		8,454		254,685		234,608		13,862		134,068		800		383,338
POSCO M-TECH Co., Ltd.		8,785		25		8,810		71,855		544		104,057		244		176,700
POSCO Energy Corp.		41,878		298		42,176		—		—		—		5		5
POSCO TMC Co., Ltd.		94,820		—		94,820		—		—		418		559		977
POSCO AST Co., Ltd.		245,570		—		245,570		3,651		—		29,542		449		33,642
POS-Himetal Co., Ltd.		9,773		62		9,835		75,941		—		—		—		75,941
Daewoo International Corp.		1,726,238		—		1,726,238		3,337		—		—		2,364		5,701
POSCO America Corporation		289,413		1		289,414		—		—		—		260		260
POSCO Canada Ltd.		—		—		—		63,226		—		—		—		63,226
POSCO Asia Co., Ltd.		1,015,630		108		1,015,738		30,105		166		—		969		31,240
POSCO (Thailand) Company Ltd.		23,045		5,750		28,795		—		—		—		35		35
Qingdao Pohang Stainless Steel Co., Ltd.		33,047		—		33,047		—		—		—		14		14
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		70,832		2		70,834		—		—		—		—		—
POSCO-Japan Co., Ltd.		574,209		—		574,209		5,639		—		—		880		6,519
POSCO-India Pune Processing Center. Pvt. Ltd.		69,071		6		69,077		—		—		—		—		—
POSCO-Mexico S.A. DE C.V.		147,446		956		148,402		—		—		—		460		460
POSCO Maharashtra Steel Pvt. Ltd.		89,596		621		90,217		—		—		—		157		157
Daewoo International Singapore Pte. Ltd.		—		—		—		38,339		—		—		—		38,339
Others		259,982		7,793		267,775		45,895		16,087		16,102		48,648		126,732
		5,645,831		27,260		5,673,091		1,335,254		1,941,430		320,051		146,483		3,743,218
Associates and joint ventures
SNNC Co., Ltd.		738		284		1,022		213,740		—		—		—		213,740
POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)		5,993		—		5,993		—		—		—		—		—
POSCHROME (PROPRIETARY) LIMITED		—		—		—		32,603		—		—		—		32,603
PT. POSMI Steel Indonesia		4,606		56		4,662		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		2,065		—		2,065		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		8,419		—		8,419		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		4,101		—		4,101		—		—		—		—		—
Others		541		26,305		26,846		1,668		—		—		174		1,842
		26,463		26,645		53,108		248,011		—		—		174		248,185
	￦	5,672,294		53,905		5,726,199		1,583,265		1,941,430		320,051		146,657		3,991,403

40

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Significant transactions with related companies for the three-month periods ended June 30, 2014 and 2013 were as follows:

1) For the three-month period ended June 30, 2014

	Sales and others						Purchase and others
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., Ltd.	￦	5,126		91		5,217		—		162,999		1,170		1,547		165,716
POSCO Processing & Service Co., Ltd.		262,753		—		262,753		213,359		—		—		155		213,514
POSCO Coated & Color Steel Co., Ltd.		105,886		1		105,887		—		—		2,841		36		2,877
POSCO ICT Co., Ltd.		380		2,486		2,866		—		22,978		6,420		42,509		71,907
POSMATE Co., Ltd.		129		2,017		2,146		78		—		3,970		8,221		12,269
eNtoB Co., Ltd.		—		—		—		64,674		1,019		22		3,814		69,529
POSCO Chemtech Company Ltd.		138,227		10,493		148,720		120,529		1,298		76,782		171		198,780
POSCO M-TECH Co., Ltd.		75		16		91		26,642		397		51,051		4,455		82,545
POSCO Energy Corp.		48,472		299		48,771		—		671		—		—		671
POSCO TMC Co., Ltd.		65,517		—		65,517		—		—		251		343		594
POSCO AST Co., Ltd.		134,277		—		134,277		3,114		—		17,681		601		21,396
POS-Himetal Co., Ltd.		2,258		1,128		3,386		40,541		—		—		—		40,541
Daewoo International Corp.		816,532		1		816,533		22,988		—		—		104		23,092
POSCO America Corporation		192,983		—		192,983		—		—		—		174		174
POSCO Canada Ltd.		—		—		—		35,119		—		—		—		35,119
POSCO Asia Co., Ltd.		495,611		30		495,641		56,743		—		7,502		589		64,834
POSCO (Thailand) Company Ltd.		12,017		8		12,025		—		—		—		1		1
Qingdao Pohang Stainless Steel Co., Ltd.		20,811		2		20,813		—		—		—		—		—
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		27,068		—		27,068		—		—		—		—		—
POSCO-Japan Co., Ltd.		358,272		—		358,272		4,087		459		3		250		4,799
POSCO-India Pune Processing Center. Pvt. Ltd.		31,904		4		31,908		—		—		—		—		—
POSCO-Mexico S.A. DE C.V.		74,931		—		74,931		—		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		47,316		367		47,683		—		—		—		—		—
Daewoo International Singapore Pte. Ltd.		—		—		—		16,914		—		—		11,513		28,427
Others		153,692		6,392		160,084		39,725		21,109		3,763		15,416		80,013
		2,994,237		23,335		3,017,572		644,513		210,930		171,456		89,899		1,116,798
Associates and joint ventures
SNNC Co., Ltd.		1,480		5,210		6,690		75,512		—		—		—		75,512
POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)		5,580		6		5,586		928		23,972		3,387		1,944		30,231
POSCHROME (PROPRIETARY) LIMITED		—		—		—		14,916		—		—		—		14,916
PT. POSMI Steel Indonesia		881		—		881		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		605		—		605		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		5,076		—		5,076		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,396		—		1,396		—		—		—		—		—
Others		1		29,465		29,466		1,070		—		—		—		1,070
		15,019		34,681		49,700		92,426		23,972		3,387		1,944		121,729
	￦	3,009,256		58,016		3,067,272		736,939		234,902		174,843		91,843		1,238,527

41

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) For the three-month period ended June 30, 2013

	Sales and others						Purchase and others
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., Ltd.	￦	3,248		2,964		6,212		2,890		869,888		1,178		—		873,956
POSCO Processing & Service Co., Ltd.		246,811		—		246,811		286,850		—		—		218		287,068
POSCO Coated & Color Steel Co., Ltd.		122,541		—		122,541		—		—		2,447		55		2,502
POSCO Plant Engineering Co., Ltd.		2,367		4		2,371		787		27,332		6,648		966		35,733
POSCO ICT Co., Ltd.		289		57		346		—		81,168		6,689		34,624		122,481
eNtoB Co., Ltd.		—		—		—		54,705		992		38		5,377		61,112
POSCO Chemtech Company Ltd.		120,806		3,999		124,805		114,328		6,795		65,287		516		186,926
POSCO M-TECH Co., Ltd.		4,428		2		4,430		43,757		544		52,783		—		97,084
POSCO Energy Corp.		22,765		165		22,930		—		—		—		—		—
POSCO TMC Co., Ltd.		48,067		—		48,067		—		—		222		351		573
POSCO AST Co., Ltd.		126,474		—		126,474		1,935		—		15,455		363		17,753
POS-Himetal Co., Ltd.		4,261		36		4,297		43,101		—		—		—		43,101
Daewoo International Corp.		821,038		—		821,038		1,900		—		—		817		2,717
POSCO America Corporation		175,695		—		175,695		—		—		—		201		201
POSCO Canada Ltd.		—		—		—		46,342		—		—		—		46,342
POSCO Asia Co., Ltd.		490,966		45		491,011		17,576		130		—		685		18,391
POSCO (Thailand) Company Ltd.		4,699		—		4,699		—		—		—		2		2
Qingdao Pohang Stainless Steel Co., Ltd.		21,108		—		21,108		—		—		—		14		14
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		32,665		2		32,667		—		—		—		—		—
POSCO-Japan Co., Ltd.		293,836		—		293,836		3,916		—		—		335		4,251
POSCO-India Pune Processing Center. Pvt. Ltd.		36,700		1		36,701		—		—		—		—		—
POSCO-Mexico S.A. DE C.V.		74,441		—		74,441		—		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		54,457		621		55,078		—		—		—		117		117
Daewoo International Singapore Pte. Ltd.		—		—		—		19,523		—		—		—		19,523
Others		142,633		—		142,633		29,092		7,883		8,224		24,990		70,189
		2,850,295		7,896		2,858,191		666,702		994,732		158,971		69,631		1,890,036
Associates and jointventures
SNNC Co., Ltd.		354		222		576		108,285		—		—		—		108,285
POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)		3,686		—		3,686		—		—		—		—		—
POSCHROME (PROPRIETARY) LIMITED		—		—		—		17,051		—		—		—		17,051
PT. POSMI Steel Indonesia		2,631		56		2,687		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		867		—		867		—		—		—		—		—
POSCO-SAMSUNG-Slovakia
Processing Center Co., Ltd.		5,691		—		5,691		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,532		—		1,532		—		—		—		—		—
Others		3		26,247		26,250		697		—		—		—		697
		14,764		26,525		41,289		126,033		—		—		—		126,033
	￦	2,865,059		34,421		2,899,480		792,735		994,732		158,971		69,631		2,016,069

42

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(c) The related account balances of significant transactions with related companies as of June 30, 2014 and December 31, 2013 are as follows:

1) June 30, 2014

	Receivables						Payables
(in millions of Won)	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING &CONSTRUCTION Co., Ltd.	￦	1,817		72,803		74,620		—		50,830		41		50,871
POSCO Processing & Service Co., Ltd.		91,029		45		91,074		9,111		738		—		9,849
POSCO Coated & Color Steel Co., Ltd.		63,859		101		63,960		—		5		1,693		1,698
POSCO ICT Co., Ltd.		—		49		49		408		35,401		7,137		42,946
POSMATE Co., Ltd.		—		1,631		1,631		319		1,227		4,272		5,818
eNtoB Corp.		—		—		—		8,933		11,208		13		20,154
POSCO Chemtech Company Ltd.		46,036		3,714		49,750		51,334		15,362		17,022		83,718
POSCO M-TECH Co.,Ltd.		—		19		19		7,609		7,641		27,455		42,705
POSCO Energy Corp.		17,142		1,450		18,592		—		—		1,336		1,336
POSCO TMC Co., Ltd.		28,592		15		28,607		—		10		116		126
POSCO AST Co., Ltd.		52,451		26		52,477		—		5,669		6,006		11,675
POS-Himetal Co., Ltd.		—		1,215		1,215		—		11,528		7		11,535
Daewoo International Corp.		104,753		1,253		106,006		14		—		—		14
POSCO America Corporation		54,288		—		54,288		—		—		—		—
POSCO Asia Co., Ltd.		153,223		2,059		155,282		13,487		—		—		13,487
POSCO (Thailand) Company Ltd.		2,605		—		2,605		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		12,117		—		12,117		—		—		—		—
POSCO-Japan Co., Ltd.		36,156		89		36,245		977		459		—		1,436
POSCO-India Pune Processing Center. Pvt. Ltd.		14,944		—		14,944		—		—		—		—
POSCO MEXICO S.A. DE C.V.		97,526		406		97,932		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		147,437		6,415		153,852		—		—		—		—
Others		66,072		9,023		75,095		13,509		10,800		3,857		28,166
		990,047		100,313		1,090,360		105,701		150,878		68,955		325,534
Associates and jointventures
SNNC Co., Ltd.		168		26		194		22,972		—		—		22,972
POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)		1,790		20		1,810		2,062		1,393		10		3,465
LLP POSUK Titanium		—		3,908		3,908		—		—		—		—
Others		—		9,228		9,228		386		—		1		387
		1,958		13,182		15,140		25,420		1,393		11		26,824
	￦	992,005		113,495		1,105,500		131,121		152,271		68,966		352,358

43

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) December 31, 2013

	Receivables						Payables
(in millions of Won)	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING &CONSTRUCTION Co., Ltd.	￦	40		110,955		110,995		—		105,603		—		105,603
POSCO Processing & Service Co., Ltd.		103,400		73		103,473		17,914		683		—		18,597
POSCO Coated & Color Steel Co., Ltd.		69,260		65		69,325		—		59		1,434		1,493
POSCO ICT Co., Ltd.		75		123		198		—		51,247		—		51,247
POSMATE Co., Ltd.		489		1,533		2,022		141		3,274		1,058		4,473
eNtoB Corp.		—		—		—		8,057		10,311		—		18,368
POSCO Chemtech Company Ltd.		46,943		4,313		51,256		35,829		6,983		8,663		51,475
POSCO M-TECH Co.,Ltd.		18		28		46		12,020		21,326		10,799		44,145
POSCO Energy Corp.		14,733		2,894		17,627		—		421		—		421
POSCO TMC Co., Ltd.		20,510		26		20,536		—		16		50		66
POSCO AST Co., Ltd.		85,501		53		85,554		—		3,004		5,238		8,242
POS-Himetal Co., Ltd.		1,721		12		1,733		—		12,624		—		12,624
Daewoo International Corp.		148,383		878		149,261		9,319		—		—		9,319
POSCO America Corporation		57,554		—		57,554		—		—		—		—
POSCO Canada Ltd.		—		—		—		12,323		—		—		12,323
POSCO Asia Co., Ltd.		134,602		142		134,744		2,063		—		—		2,063
POSCO (Thailand) Company Ltd.		6,052		7		6,059		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		3,329		—		3,329		—		—		—		—
POSCO-Japan Co., Ltd.		73,992		—		73,992		862		108		1		971
POSCO-India Pune Processing Center. Pvt. Ltd.		8,117		—		8,117		—		—		—		—
POSCO MEXICO S.A. DE C.V.		100,016		76		100,092		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		55,392		3,218		58,610		—		—		—		—
Others		54,357		8,887		63,244		6,523		15,421		1,647		23,591
		984,484		133,283		1,117,767		105,051		231,080		28,890		365,021
Associates and jointventures
SNNC Co., Ltd.		140		40		180		16,669		—		—		16,669
POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)		879		46		925		353		—		—		353
POSCHROME (PROPRIETARY) LIMITED		—		67		67		—		—		—		—
LLP POSUK Titanium		—		4,066		4,066		—		—		—		—
Others		—		17		17		319		2		—		321
		1,019		4,236		5,255		17,341		2		—		17,343
	￦	985,503		137,519		1,123,022		122,392		231,082		28,890		382,364

(d) For the six-month periods ended June 30, 2014 and 2013 details of compensation to key management officers were as follows:

(in millions of Won)	June 30, 2014		June 30, 2013
Short-term benefits	￦	15,982		15,301
Long-term benefits		6,137		4,161
Retirement benefits		4,419		4,182
	￦	26,538		23,644

44

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

33. Commitments and Contingencies

(a) Commitments

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2014, 165 million tons of iron ore and 7 million tons of coal remained to be purchased under such long-term contracts.

The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

As of June 30, 2014, the Company entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 6.58 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. The Company is not liable for the repayment of full or part of the money borrowed if the respective projects fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.

As of June 30, 2014, the Company has provided two blank checks to Korea Resources Corporation as collateral for long-term domestic borrowings, and has provided six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for long-term foreign currency borrowings.

(b) Litigation in progress

1) Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

In April 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of ￦986 billion. Through trials to June 30, 2014, the Company submitted its responses that the Japan court did not have jurisdiction on this lawsuit as it should be judged by Korean law and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of June 30, 2014, the Japan court has not made any judgments on this matter. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of June 30, 2014.

In addition, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the New Jersey federal court, United States, against POSCO and POSCO America Co., Ltd., a subsidiary of POSCO, claiming infringement of intellectual property rights related to the production of grain oriented electrical steel sheets. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of June 30, 2014. An estimate of possible loss cannot be reliably determined because the lawsuit is still in the discovery stage and no claim amount has been specified.

45

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) Other lawsuits and claims

The Company is involved in 36 other lawsuits and claims for alleged damages aggregating to ￦68.6 billion as of June 30, 2014 which arose in the ordinary course of business. The Company has recognized provisions amounting to ￦7.3 billion for 8 lawsuits and claims based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for other 28 lawsuits and claims since the Company believes that it does not have a present obligation as of June 30, 2014.

(c) The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO Energy Co., Ltd.

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month period ended June 30, 2014 and 2013 were as follows:

(in millions of Won)	June 30, 2014			June 30, 2013
Trade accounts and notes receivable, net	￦	331,687			297,810
Other accounts receivable		(17,661	)		65,704
Advance payments		(14	)		(4,093	)
Prepaid expenses		(9,271	)		15,480
Inventories		(504,422	)		419,586
Long-term guarantee deposits		(173	)		(569	)
Other long-term assets		—			(89	)
Trade accounts and notes payable		269,796			(7,657	)
Other accounts payable		(113,353	)		(61,246	)
Accrued expenses		105,486			(62,083	)
Advances received		(11,691	)		(1,155	)
Withholdings		2,318			(1,160	)
Unearned revenue		(125	)		(3,505	)
Other short-term liabilities		(1,306	)		1,307
Derivatives liabilities		(6,611	)		—
Payment of severance benefits		(49,719	)		(41,520	)
Plan assets		(49,014	)		(29,930	)
Other long-term liabilities		(3,000	)		—
	￦	(57,073	)		586,880

46

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2014

(With Independent Auditors’ Review Report Thereon)

Table of Contents

	Page
Independent Auditors’ Review Report		1
Condensed Consolidated Interim Financial Statements
Condensed Consolidated Interim Statements of Financial Position		3
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)		5
Condensed Consolidated Interim Statements of Changes in Equity		6
Condensed Consolidated Interim Statements of Cash Flows		8
Notes to the Condensed Consolidated Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of June 30, 2014, the condensed consolidated interim statements of comprehensive income (loss) for the three-month and six-month periods ended June 30, 2014 and 2013, the condensed consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2014 and 2013 and notes to the interim financial statements.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

Auditors’ review responsibility

Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034 “Interim Financial Reporting”.

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

The consolidated statement of financial position of the Company as of December 31, 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated February 25, 2014, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2013, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

Seoul, Korea

August 12, 2014

This report is effective as of August 12, 2014, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2014 and December 31, 2013

(Unaudited)

(in millions of Won)	Notes	June 30, 2014		December 31, 2013
Assets
Cash and cash equivalents	21	￦	3,756,871		4,208,562
Trade accounts and notes receivable, net	4,21,33		12,275,617		11,492,601
Other receivables, net	5,21,33		1,826,738		1,890,423
Other short-term financial assets	6,21		1,699,047		2,970,665
Inventories	7		10,876,472		9,798,381
Current income tax assets			28,555		32,417
Assets held for sale	8		1,190		2,494
Other current assets	14		1,409,349		1,270,668
Total current assets			31,873,839		31,666,211
Long-term trade accounts and notes receivable, net	4,21		79,261		97,000
Other receivables, net	5,21		879,920		797,455
Other long-term financial assets	6,21		3,775,179		4,465,730
Investments in associates and joint ventures	9		4,295,521		3,808,693
Investment property, net	11		710,130		425,229
Property, plant and equipment, net	12		35,499,654		35,760,119
Intangible assets, net	13		5,893,675		5,929,840
Deferred tax assets			1,170,587		1,139,932
Other long-term assets	14		389,209		365,198
Total non-current assets			52,693,136		52,789,196
Total assets		￦	84,566,975		84,455,407

See accompanying notes to the condensed consolidated interim financial statements.

3

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2014 and December 31, 2013, Continued

(Unaudited)

(in millions of Won)	Notes	June 30, 2014			December 31, 2013
Liabilities
Trade accounts and notes payable	21,33	￦	4,072,236			4,231,322
Short-term borrowings and current portion of long-term borrowings	4,15,21		11,463,567			10,713,646
Other payables	16,21,33		2,453,210			2,128,854
Other short-term financial liabilities	17,21		133,523			135,904
Current income tax liabilities			345,981			358,930
Provisions	18		96,337			107,329
Other current liabilities	20		2,509,743			2,565,174
Total current liabilities			21,074,597			20,241,159
Long-term trade accounts and notes payable	21		1,134			559
Long-term borrowings, excluding current portion	15,21		15,510,561			15,532,959
Other payables	16,21		163,755			206,634
Other long-term financial liabilities	17,21		162,027			260,021
Net defined benefit liabilities	19		316,054			273,160
Deferred tax liabilities			1,656,832			1,711,762
Long-term provisions	18,34		195,720			146,272
Other long-term liabilities	20		215,595			260,851
Total non-current liabilities			18,221,678			18,392,218
Total liabilities			39,296,275			38,633,377
Equity
Share capital	22		482,403			482,403
Capital surplus	22		1,075,549			1,078,266
Hybrid bonds	23		996,919			996,919
Reserves	24		(520,454	)		(23,076	)
Treasury shares	25		(1,578,993	)		(1,579,124	)
Retained earnings			41,129,919			41,090,649
Equity attributable to owners of the controlling company			41,585,343			42,046,037
Non-controlling interests	23		3,685,357			3,775,993
Total equity			45,270,700			45,822,030
Total liabilities and equity		￦	84,566,975			84,455,407

See accompanying notes to the condensed consolidated interim financial statements.

4

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

For the three-month and six-month periods ended June 30, 2014 and 2013

(Unaudited)

		For the three-month periods						For the six-month periods
		ended June 30						ended June 30
(in millions of Won, except per share information)	Notes	2014			2013			2014			2013
Revenue	33,36	￦	16,703,572			15,603,109			32,143,700			30,184,992
Cost of sales	7,30,33		(14,890,994	)		(13,745,519	)		(28,643,151	)		(26,653,690	)
Gross profit			1,812,578			1,857,590			3,500,549			3,531,302
Selling and administrative expenses	26,30
Administrative expenses			(540,675	)		(556,946	)		(1,087,607	)		(1,108,765	)
Selling expenses			(432,792	)		(398,052	)		(842,568	)		(803,025	)
Operating profit	27		839,111			902,592			1,570,374			1,619,512
Share of loss of equity-accounted investees	9		(36,872	)		(24,256	)		(123,971	)		(22,991	)
Finance income and costs	21,28
Finance income			868,199			674,673			1,386,305			1,366,266
Finance costs			(708,260	)		(1,108,946	)		(1,361,889	)		(2,112,130	)
Other non-operating income and expenses	27,29
Other non-operating income			37,085			34,476			94,542			72,897
Other non-operating expenses	30		(278,929	)		(139,594	)		(576,953	)		(217,167	)
Profit before income tax	36		720,334			338,945			988,408			706,387
Income tax expense	31,36		(233,176	)		(98,444	)		(445,604	)		(173,625	)
Profit for the period			487,158			240,501			542,804			532,762
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss :
Remeasurements of defined benefit pension plans	19		(25,610	)		44,733			(41,096	)		(35,022	)
Items that are or may be reclassified subsequently to profit or loss :
Capital adjustment arising from investments in equity-method investees			(119,209	)		(26,563	)		(54,921	)		59,157
Net changes in the unrealized fair value of available-for-sale investments	21		(89,932	)		55,884			(294,389	)		157,913
Foreign currency translation differences			(265,158	)		17,172			(189,578	)		251,865
Other comprehensive income (loss), net of tax			(499,909	)		91,226			(579,984	)		433,913
Total comprehensive income for the period		￦	(12,751	)		331,727			(37,180	)		966,675
Profit (loss) attributable to:
Owners of the controlling company		￦	511,170			250,565			581,011			528,573
Non-controlling interests			(24,012	)		(10,064	)		(38,207	)		4,189
Profit for the period		￦	487,158			240,501			542,804			532,762
Total comprehensive income (loss) attributable to:
Owners of the controlling company		￦	66,220			319,167			41,240			900,274
Non-controlling interests			(78,971	)		12,560			(78,420	)		66,401
Total comprehensive income (loss) for the period		￦	(12,751	)		331,727			(37,180	)		966,675
Basic and diluted earnings per share	32	￦	6,304			3,216			7,077			6,815

See accompanying notes to the condensed consolidated interim financial statements.

5

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2014 and 2013

(Unaudited)

	Attributable to owners of the controlling company																			Non-
	Share		Capital			Hybrid					Treasury			Retained			Sub			controlling
(in millions of Won)	capital		surplus			bonds		Reserves			shares			earnings			total			interests			Total
Balance as of January 1, 2013	￦	482,403		1,104,814			—		(88,150	)		(2,391,406	)		40,346,481			39,454,142			2,975,276			42,429,418
Comprehensive income:
Profit for the period		—		—			—		—			—			528,573			528,573			4,189			532,762
Other comprehensive income
Net changes in accumulated comprehensive income of investments in associates, net of tax		—		—			—		43,713			—			—			43,713			15,444			59,157
Net changes in the unrealized fair value of available-for-sale investments, net of tax		—		—			—		157,465			—			—			157,465			448			157,913
Foreign currency translation differences, net of tax		—		—			—		207,551			—			—			207,551			44,314			251,865
Remeasurements of defined benefit pension plans, net of tax		—		—			—		—			—			(37,028	)		(37,028	)		2,006			(35,022	)
Total comprehensive income		—		—			—		408,729			—			491,545			900,274			66,401			966,675
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(463,467	)		(463,467	)		(30,544	)		(494,011	)
Changes in subsidiaries		—		—			—		—			—			—			—			36,393			36,393
Changes in ownership interests in subsidiaries		—		(1,902	)		—		—			—			—			(1,902	)		24,060			22,158
Issuance of hybrid bonds		—		—			996,919		—			—			—			996,919			—			996,919
Interest of hybrid bonds		—		—			—		—			—			(2,132	)		(2,132	)		—			(2,132	)
Disposal of treasury shares		—		39			—		—			98			—			137			—			137
Others		—		568			—		(2,822	)		—			2,044			(210	)		(3,998	)		(4,208	)
Total transactions with owners of the controlling company		—		(1,295	)		996,919		(2,822	)		98			(463,555	)		529,345			25,911			555,256
Balance as of June 30, 2013	￦	482,403		1,103,519			996,919		317,757			(2,391,308	)		40,374,471			40,883,761			3,067,588			43,951,349

See accompanying notes to the condensed consolidated interim financial statements.

6

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2014 and 2013, Continued

(Unaudited)

	Attributable to owners of the controlling company																			Non-
	Share		Capital			Hybrid					Treasury			Retained			Sub			controlling
(in millions of Won)	capital		surplus			bonds		Reserves			shares			earnings			total			interests			Total
Balance as of January 1, 2014	￦	482,403		1,078,266			996,919		(23,076	)		(1,579,124	)		41,090,649			42,046,037			3,775,993			45,822,030
Comprehensive income:
Profit for the period		—		—			—		—			—			581,011			581,011			(38,207	)		542,804
Other comprehensive income
Net changes in accumulated comprehensive income of investments in associates, net of tax		—		—			—		(43,194	)		—			—			(43,194	)		(11,727	)		(54,921	)
Net changes in the unrealized fair value of available-for-sale investments, net of tax		—		—			—		(297,023	)		—			—			(297,023	)		2,634			(294,389	)
Foreign currency translation differences, net of tax		—		—			—		(160,283	)		—			—			(160,283	)		(29,295	)		(189,578	)
Remeasurements of defined benefit pension plans, net of tax		—		—			—		—			—			(39,271	)		(39,271	)		(1,825	)		(41,096	)
Total comprehensive income		—		—			—		(500,500	)		—			541,740			41,240			(78,420	)		(37,180	)
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(478,702	)		(478,702	)		(30,886	)		(509,588	)
Changes in subsidiaries		—		—			—		—			—			—			—			5,249			5,249
Changes in ownership interests in subsidiaries		—		(3,843	)		—		—			—			—			(3,843	)		37,223			33,380
Interest of hybrid bonds		—		—			—		—			—			(21,572	)		(21,572	)		(13,982	)		(35,554	)
Disposal of treasury shares		—		48			—		—			131			—			179			—			179
Others		—		1,078			—		3,122			—			(2,196	)		2,004			(9,820	)		(7,816	)
Total transactions with owners of the controlling company		—		(2,717	)		—		3,122			131			(502,470	)		(501,934	)		(12,216	)		(514,150	)
Balance as of June 30, 2014	￦	482,403		1,075,549			996,919		(520,454	)		(1,578,993	)		41,129,919			41,585,343			3,685,357			45,270,700

See accompanying notes to the condensed consolidated interim financial statements.

7

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2014 and 2013

(Unaudited)

(in millions of Won)	Note	June 30, 2014			June 30, 2013
Cash flows from operating activities
Profit for the period		￦	542,804			532,762
Adjustments for:
Depreciation			1,388,151			1,232,714
Amortization			159,249			89,121
Finance income			(758,731	)		(702,204	)
Finance costs			776,888			1,406,874
Income tax expense			445,604			173,625
Gain on disposal of property, plant and equipment			(3,928	)		(11,743	)
Loss on disposal of property, plant and equipment			19,700			75,043
Share of loss of equity-accounted investees			123,971			22,991
Cost for defined benefit plans			117,821			123,798
Bad debt expenses			100,447			67,325
Loss on valuation of inventories			45,309			48,018
Warranty expense			152,238			58,452
Impairment loss of intangible assets			28,082			467
Others, net			15,280			(12,737	)
			2,610,081			2,571,744
Changes in operating assets and liabilities	35		(2,415,801	)		(448,704	)
Interest received			107,228			126,782
Interest paid			(431,948	)		(345,604	)
Dividends received			83,298			157,991
Income taxes paid			(416,641	)		(558,212	)
Net cash provided by operating activities		￦	79,021			2,036,759

See accompanying notes to the condensed consolidated interim financial statements.

8

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2014 and 2013, Continued

(Unaudited)

(in millions of Won)	Note	June 30, 2014			June 30, 2013
Cash flows from investing activities
Acquisitions of short-term financial instruments		￦	(1,490,372	)		(2,191,585	)
Proceeds from disposal of short-term financial instruments			2,838,283			2,599,893
Increase in loans			(90,478	)		(341,766	)
Collection of loans			9,790			277,797
Acquisitions of available-for-sale investments			(39,019	)		(122,758	)
Proceeds from disposal of available-for-sale investments			6,599			70,627
Acquisitions of investments of equity-accounted investees			(672,064	)		(571,318	)
Proceeds from disposal of investments of equity-accounted investees			134			6,099
Acquisitions of property, plant and equipment			(1,604,740	)		(3,535,771	)
Proceeds from disposal of property, plant and equipment			40,604			26,513
Acquisitions of intangible assets			(146,576	)		(302,431	)
Proceeds from disposal of intangible assets			6,573			2,513
Acquistions of other investment assets			(11,077	)		(55	)
Proceeds from disposal of other investment assets			280			30,230
Proceeds from disposal of assets held for sale			1,291			—
Cash received from (paid in) acquistion of business, net of cash acquired			(84	)		5,399
Cash received from disposal of business			—			7,358
Other, net			4,641			806
Net cash used in investing activities			(1,146,215	)		(4,038,449	)
Cash flows from financing activities
Proceeds from borrowings			1,352,317			4,085,688
Repayment of borrowings			(3,190,831	)		(2,158,087	)
Proceeds from (repayment of) short-term borrowings, net			3,044,375			(232,643	)
Payment of cash dividends			(509,682	)		(495,186	)
Proceeds from issuance of hybrid bonds			—			996,919
Payment of interest of hybrid bonds			(33,788	)		—
Other, net			15,205			9,701
Net cash provided by financing activities			677,596			2,206,392
Effect of exchange rate fluctuation on cash held			(62,093	)		86,016
Net increase (decrease) in cash and cash equivalents			(451,691	)		290,718
Cash and cash equivalents at beginning of the period			4,208,562			4,680,526
Cash and cash equivalents at end of the period		￦	3,756,871			4,971,244

See accompanying notes to the condensed consolidated interim financial statements.

9

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014

(Unaudited)

1. General Information

General information about POSCO, its 41 domestic subsidiaries including POSCO Engineering & Construction Co., Ltd. 178 foreign subsidiaries including POSCO America Corporation (collectively, “the Company”) and its 99 associates and joint ventures are as follows:

(a) The controlling company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of POSCO have been listed on the Korea Exchange since 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through seven of its overseas liaison offices.

As of June 30, 2014, the shares of the POSCO are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

(b) Consolidated subsidiaries acquired or reclassified during the six-month period ended June 30, 2014

1) Consolidated subsidiaries acquired or reclassified during the six-month period ended June 30, 2014 are as follows:

Company	Date of acquisition	Ownership(%)	Reason
Hanjung Power Pty., Ltd	January 2014	100.00	Reclassification from associates
Daewoo Amara Company Limited	January 2014	85.00	New establishment
POSMATE-CHINA CO., LTD	January 2014	100.00	New establishment
Daewoo Precious Resources Co., Ltd.	March 2014	60.00	New establishment
POSCO-Mexico Silao Wire-rod Processing Center	March 2014	66.75	New establishment
POSCO Greengas Tec Co., Ltd.	April 2014	100.00	New establishment
Constructora SCP S.A.	April 2014	100.00	New acquisitions
Santos CMI Construction Inc S.A	April 2014	100.00	New acquisitions
POSCO-China Dalian Steel Fabricating Center	May 2014	51.00	New establishment
Keystone 1st Private Equity Fund	June 2014	55.12	Reclassification from associates

2) Cash outflows (inflows) from business acquisition

(in millions of Won)	Amounts
Consideration transferred	￦	6,319
Less: Cash and cash equivalent acquired		(6,235	)
Total	￦	84

10

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(c) Subsidiaries that were excluded from consolidation during the six-month period ended June 30, 2014 are as follows:

Company	Date of disposal	Reason
POSCO-JOPC Co., Ltd.	January 2014	Statutory merger by POSCO-JWPC CO., Ltd. (formerly, POSCO-JKPC Co., Ltd.)
S&K -SANTOSCMI S.A. DE C.V.	March 2014	Liquidation

2. Statement of Compliance

Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Corporations.

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2013. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

(a) Judgements, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainties were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2013.

(b) Measurement of fair value

The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuation techniques should be classified.

11

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

• Level 1—unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2—inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.

• Level 3—inputs for the assets or liability that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in Note 21.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2013. The following changes in accounting policies are also expected to be reflected in the Company’s consolidated financial statements as of and for the year ending December 31, 2014.

(a) Changes in accounting policies

The Company has adopted the following new standards and amendments to standards with a date of initial application of January 1, 2014.

1) K-IFRS No. 1032, “Financial Instruments: Presentation”

2) K-IFRS No. 1036, “Impairment of Assets”

3) K-IFRS No. 2121, “Levies”

The details of changes in accounting policies are as follows:

1) Offsetting financial assets and financial liabilities

The Company has applied the amendments to K-IFRS No. 1032, “Financial Instruments: Presentation” since January 1, 2014. The amendments, which should be applied retrospectively, require that a financial asset and a financial liability shall be offset and the net amount presented in the statement of financial position only when the Company currently has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

A legally enforceable right of set-off must not be contingent on a future event and must be legally enforceable in the normal course of business, the event of default and the event of insolvency or bankruptcy of the Company or the counterparties.

12

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

If the Company can settle amounts in a manner such that the outcome is, in effect, equivalent to net settlement, the Company will meet the net settlement criterion. The net settlement criterion will occur only if the gross settlement mechanism has features that eliminate or result in insignificant credit and liquidity risk, and that will process receivables and payables in a single settlement process or cycle.

2) Disclosure of impairment loss

The Company has applied the amendments to K-IFRS No. 1036, “Impairment of Assets” since January 1, 2014. The amendments, which should be applied retrospectively, require disclosure of the recoverable amount only if the Company recognized an impairment loss on goodwill or an intangible asset with an indefinite useful life for an individual asset or cash-generating unit.

3) Levies

The Company has adopted K-IFRS No. 2121, “Levies” with a date of initial application of January 1, 2014. K-IFRS No. 2121, which should be applied retrospectively, defines the obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy, as identified by legislation. The liability to pay a levy is recognized progressively if the obligating event occurs over a period of time. If the obligating event is the reaching of a minimum activity threshold, the corresponding liability is recognized when that minimum activity threshold is reached. The Company shall recognize an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy.

(b) Impact of changes in accounting policy

Upon adoption of K-IFRS No. 1032 and K-IFRS No. 2121, there is no impact on the Company’s prior year’s consolidated financial statements. Upon adoption of K-IFRS No. 1036, the Company will make the required disclosures in the annual financial statements for the year ending December 31, 2014 as applicable.

13

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Current
Trade accounts and notes receivable	￦	11,204,130			10,299,826
Finance lease receivables		28,792			36,029
Unbilled due from customers for contract work		1,466,214			1,574,929
Less: Allowance for doubtful accounts		(423,519	)		(418,183	)
	￦	12,275,617			11,492,601
Non-current
Trade accounts and notes receivable	￦	44,725			50,639
Finance lease receivables		55,090			67,251
Less: Allowance for doubtful accounts		(20,554	)		(20,890	)
	￦	79,261			97,000

The trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ￦82,972 million and ￦73,956 million as of June 30, 2014 and December 31, 2013, respectively, and are included in short-term borrowings from financial institutions (Note 15).

5. Other Receivables

Other receivables as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Current
Short-term loans	￦	312,009			298,289
Other accounts receivable		1,272,700			1,322,352
Accrued income		73,410			74,968
Deposits		56,897			69,502
Other checking accounts		288,169			275,892
Less : Allowance for bad debt accounts		(176,447	)		(150,580	)
	￦	1,826,738			1,890,423
Non-current
Long-term loans	￦	755,446			604,478
Long-term other accounts receivable		149,190			152,383
Accrued income		1,010			1,110
Deposits		129,656			111,482
Less : Allowance for bad debt accounts		(155,382	)		(71,998	)
	￦	879,920			797,455

14

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

6. Other Financial Assets

Other financial assets as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Derivatives assets held for trading	￦	91,915		44,082
Short-term available-for-sale securities		10,184		10,772
Current portion of held-to-maturity securities (bonds)		13,207		2,232
Short-term financial instruments (*1,2)		1,583,741		2,913,579
	￦	1,699,047		2,970,665
Non-current
Derivatives assets held for trading	￦	38,768		34,140
Long-term available-for-sale securities (equity instruments) (*3,4,5)		3,401,440		4,068,766
Long-term available-for-sale securities (bonds)		30,710		32,456
Long-term available-for-sale securities (others)		58,119		54,390
Held-to-maturity securities (bonds)		1,458		1,602
Long-term financial instruments (*2)		244,684		274,376
	￦	3,775,179		4,465,730

(*1) As of June 30, 2014 and December 31, 2013, ￦2,855 million and ￦949 million, respectively, are restricted for the use in a government project.

(*2) As of June 30, 2014 and December 31, 2013, financial instruments amounting to ￦267,261 million and ￦261,034 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3) As of June 30, 2014, 603,257 shares equivalent to 5,429,314 American Depository Receipts (“ADRs”) of SK Telecom Co., Ltd. have been pledged as collateral for exchangeable bonds issued.

(*4) During the six-month period ended June 30, 2014, there was a significant decline in the fair value of shares of Steelflower Co., Ltd. and others for a prolonged period, which was considered as objective evidence of impairment. As a result, impairment losses of ￦13,884 million was recognized in profit or loss during the six-month period ended June 30, 2014.

(*5) As of June 30, 2014 and December 31, 2013, ￦305,409 million and ￦691,801 million of long-term available-for-sale securities, respectively, have been provided as collateral for construction projects of CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd. and others.

15

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

7. Inventories

Inventories as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Finished goods	￦	1,631,588			1,406,297
Merchandise		876,860			711,802
Semi-finished goods		1,899,530			1,711,294
Raw materials		2,554,537			2,228,110
Fuel and materials		815,634			801,992
Construction inventories		1,201,778			1,183,390
Materials-in-transit		1,971,545			1,848,389
Others		87,674			96,389
		11,039,146			9,987,663
Less: Allowance for inventories valuation		(162,674	)		(189,282	)
	￦	10,876,472			9,798,381

The amounts of valuation losses of inventories recognized within cost of sales during the six-month period ended June 31, 2014 and the year ended December 31, 2013 were ￦45,309 million and ￦49,172 million, respectively.

8. Non-Current Assets Held for Sale

Details of non-current assets held for sale as of June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014						December 31, 2013
	The controlling						The controlling
(in millions of Won)	company		Subsidiaries		Total		company		Subsidiaries		Total
Property, plant and equipment (*1)	￦	—		1,190		1,190		—		1,190		1,190
Investment in associates (*2)		—		—		—		1,304		—		1,304
	￦	—		1,190		1,190		1,304		1,190		2,494

(*1) POSCO AST determined to dispose of its land and building for employee welfare and classified the amounts as assets held for sale since December 31, 2012.

(*2) The Company determined to dispose of the shares of POSVINA Co., Ltd., an associate of the Company, and classified it as assets held for sale as of December 31, 2013. The Company completed the disposal of this investment during the six-month period ended June 30, 2014 and recognized a loss on disposal of asset held for sale of ￦14 million.

16

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

9. Investments in Associates and Joint Ventures

(a) Details of investments in associates as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014								December 31, 2013
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF		178,565		27.85		178,566	￦	177,123		177,563
POSCO PLANTEC Co., Ltd.		34,055,530		41.95		366,443		144,142		234,203
SNNC Co., Ltd.		18,130,000		49.00		90,650		121,096		123,969
BLUE OCEAN private Equity Fund		333		27.52		33,300		30,831		29,391
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd. (*1)		2,008,000		25.10		10,040		21,655		23,733
Incheon-Gimpo Highway Co., Ltd		9,641,419		29.94		48,207		45,896		37,759
UITrans LRT Co., Ltd. (*1)		3,929,751		38.19		19,649		27,986		19,185
Garolim Tidal Power Plant Co., Ltd.		3,020,220		32.13		15,101		12,648		12,941
Gyunggi Green Energy (*1)		2,880,000		19.00		14,400		3,705		4,996
KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund		11,862,500		12.50		11,863		11,476		6,685
KONES, Corp.		3,250,000		41.67		6,893		5,536		5,784
QSONE Co., Ltd.		200,000		50.00		84,395		84,048		84,096
Others (31 companies) (*1)								51,484		39,820
								737,626		800,125
[Foreign]
Eureka Moly LLC		—		20.00		240,123		209,229		217,513
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		150,779		141,940		140,202
Nickel Mining Company SAS		3,234,698		49.00		157,585		112,357		135,178
7623704 Canada Inc.		114,452,000		10.40		124,341		111,351		119,516
AMCI (WA) Pty Ltd.		49		49.00		209,664		109,836		98,467
KOREA LNG LTD.		2,400		20.00		135,205		56,699		64,453
AES-VCM Mong Duong Power Company Limited		—		30.00		74,161		90,039		81,436
CAML Resources Pty. LTD.		3,239		33.34		40,388		48,716		43,820
NCR LLC		—		29.41		32,348		29,686		30,496
POSCHROME (PROPRIETARY) LIMITED		43,350		50.00		19,892		6,190		7,911
Others (28 companies) (*1)								87,411		90,930
								1,003,454		1,029,922
							￦	1,741,080		1,830,047

(*1) As of June 30, 2014, investments in associates amounting to ￦67,615 million are provided as collateral for the associates’ borrowings.

(b) Details of investments in joint ventures as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014								December 31, 2013
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
POSCO MITSUBISHI CARBOND TECHNOLOGY		11,568,000		60.00		115,680	￦	114,355		115,708
POSCO ES MATERIALS		1,000,000		50.00		43,000		39,330		40,386
								153,685		156,094
[Foreign]
Roy Hill Holdings Pty Ltd.		12,723,959		12.50		1,528,672		1,361,287		825,901
CSP-Compania Siderurgica do Pecem		827,771,230		20.00		469,891		324,194		263,419
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		329,806		343,590
DMSA, AMSA		—		4.00		193,182		164,029		180,355
KOBRASCO		2,010,719,185		50.00		32,950		96,899		95,233
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		25.00		61,961		91,218		96,309
Others (10 companies)								33,323		17,745
								2,400,756		1,822,552
							￦	2,554,441		1,978,646

17

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(c) The movements of investments and joint ventures in associates for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	December 31, 2013							Share of			Other increase			June 30, 2014
Company	Book value		Acquisition		Dividend			profits (losses)			(decrease) (*1)			Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	￦	177,563		—		—			(440	)		—			177,123
POSCO PLANTEC Co., Ltd.		234,203		25,356		—			(126,771	)		11,354			144,142
SNNC Co., Ltd.		123,969		—		(5,149	)		2,385			(109	)		121,096
POSCO MITSUBISHI CARBOND TECHNOLOGY		115,708		—		—			(1,353	)		—			114,355
POSCO ES MATERIALS		40,386		—		—			(1,003	)		(53	)		39,330
BLUE OCEAN private Equity Fund		29,391		—		—			1,926			(486	)		30,831
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.		23,733		—		—			(2,006	)		(72	)		21,655
Incheon-Gimpo Highway Co., Ltd		37,759		8,331		—			(192	)		(2	)		45,896
UITrans LRT Co., Ltd.		19,185		—		—			8,801			—			27,986
Garolim Tidal Power Plant Co., Ltd.		12,941		—		—			(293	)		—			12,648
Gyunggi Green Energy		4,996		—		—			(1,291	)		—			3,705
KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund		6,685		4,849		—			(58	)		—			11,476
KONES, Corp.		5,784		—		—			(248	)		—			5,536
QSONE Co.,Ltd.		84,096		—		—			(48	)		—			84,048
Others (31 companies)		39,820		11,000		—			(928	)		1,592			51,484
		956,219		49,536		(5,149	)		(121,519	)		12,224			891,311
[Foreign]
Roy Hill Holdings Pty Ltd.		825,901		530,492		—			(4,200	)		9,094			1,361,287
POSCO-NPS Niobium LLC		343,590		—		(8,441	)		7,743			(13,086	)		329,806
CSP-Compania Siderurgica do Pecem		263,419		75,966		—			(25,439	)		10,248			324,194
Eureka Moly LLC		217,513		—		—			—			(8,284	)		209,229
South-East Asia Gas Pipeline Company Ltd.		140,202		—		—			7,418			(5,680	)		141,940
Nickel Mining Company SAS		135,178		—		—			(16,744	)		(6,077	)		112,357
DMSA, AMSA		180,355		—		—			(9,666	)		(6,660	)		164,029
7623704 Canada Inc.		119,516		—		(2,035	)		(1,672	)		(4,458	)		111,351
AMCI (WA) Pty Ltd.		98,467		—		—			(2,191	)		13,560			109,836
KOREA LNG Ltd.		64,453		—		(10,066	)		10,077			(7,765	)		56,699
BX STEEL POSCO Cold RolledSheet Co., Ltd.		96,309		—		—			567			(5,658	)		91,218
KOBRASCO		95,233		—		(18,429	)		16,478			3,617			96,899
AES-VCM Mong Duong Power Company Limited		81,436		—		—			(2,076	)		10,679			90,039
CAML Resources Pty. Ltd.		43,820		—		—			3,599			1,297			48,716
NCR LLC		30,496		—		—			(199	)		(611	)		29,686
POSCHROME (PROPRIETARY) LIMITED		7,911		—		—			775			(2,496	)		6,190
Others (38 companies)		108,675		20,382		(1,516	)		13,078			(19,885	)		120,734
		2,852,474		626,840		(40,487	)		(2,452	)		(32,165	)		3,404,210
	￦	3,808,693		676,376		(45,636	)		(123,971	)		(19,941	)		4,295,521

(*1) Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments arising from translations of financial statements of foreign investees and others.

18

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) For the year ended December 31, 2013

(in millions of Won)	December 31, 2012							Share of			Other increase			December 31, 2013
Company	Book Value		Acquisition		Dividend			profits (losses)			(decrease) (*1)			Book Value
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	￦	—		178,566		—			(1,017	)		14			177,563
POSCO PLANTEC Co., Ltd.		181,361		101,210		—			(49,065	)		697			234,203
SNNC Co., Ltd.		147,539		—		(27,685	)		2,183			1,932			123,969
POSCO MITSUBISHI CARBOND TECHNOLOGY		28,060		86,760		—			888			—			115,708
POSCO ES MATERIALS		42,388		—		—			(1,963	)		(39	)		40,386
BLUE OCEAN private Equity Fund		33,839		—		—			(2,015	)		(2,433	)		29,391
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.		29,414		—		—			(5,535	)		(146	)		23,733
Incheon-Gimpo Highway Co., Ltd		13,680		24,521		—			(441	)		(1	)		37,759
UITrans LRT Co., Ltd.		16,444		1,967		—			668			106			19,185
Garolim Tidal Power Plant Co., Ltd.		11,544		2,201		—			(804	)		—			12,941
Gyunggi Green Energy		7,353		5,475		—			(8,213	)		381			4,996
KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund		—		7,013		—			(327	)		(1	)		6,685
KONES, Corp.		6,476		—		—			(740	)		48			5,784
Busan-Gimhae Light Rail Transit Co., Ltd.		7,601		—		—			(7,601	)		—			—
QSONE Co.,Ltd.		—		84,395		—			(299	)		—			84,096
POSMATE Co., Ltd.		46,204		—		—			—			(46,204	)		—
Others (31 companies)		39,096		9,124		—			1,820			(10,220	)		39,820
		610,999		501,232		(27,685	)		(72,461	)		(55,866	)		956,219
[Foreign]
Roy Hill Holdings Pty Ltd.		527,129		446,201		—			(37,781	)		(109,648	)		825,901
POSCO-NPS Niobium LLC		348,646		—		(16,188	)		16,079			(4,947	)		343,590
CSP-Compania Siderurgica do Pecem		214,761		128,185		—			(34,410	)		(45,117	)		263,419
Eureka Moly LLC		213,136		—		—			—			4,377			217,513
South-East Asia Gas Pipeline Company Ltd.		144,831		—		—			(2,585	)		(2,044	)		140,202
Nickel Mining Company SAS		146,699		—		—			(16,617	)		5,096			135,178
DMSA, AMSA		124,326		58,374		—			31			(2,376	)		180,355
7623704 Canada Inc.		—		124,341		—			(1	)		(4,824	)		119,516
AMCI (WA) Pty Ltd.		123,018		—		—			(6,283	)		(18,268	)		98,467
KOREA LNG Ltd.		99,976		—		(21,999	)		21,898			(35,422	)		64,453
BX STEEL POSCO Cold RolledSheet Co., Ltd.		92,888		—		—			2,400			1,021			96,309
KOBRASCO		113,847		—		(26,482	)		21,948			(14,080	)		95,233
AES-VCM Mong Duong Power Company Limited		48,636		—		—			(12,841	)		45,641			81,436
CAML Resources Pty. Ltd.		62,227		—		(12,428	)		17,984			(23,963	)		43,820
NCR LLC		39,303		—		—			(9,609	)		802			30,496
POSCHROME (PROPRIETARY) LIMITED		21,324		—		(7,196	)		2,943			(9,160	)		7,911
Others (38 companies)		107,515		7,439		(5,252	)		(70,504	)		69,477			108,675
		2,428,262		764,540		(89,545	)		(107,348	)		(143,435	)		2,852,474
	￦	3,039,261		1,265,772		(117,230	)		(179,809	)		(199,301	)		3,808,693

(*1) Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments arising from translations of financial statements of foreign investees and others.

(d) The fair value of investments in associates and joint ventures for which there are published price quotations as of June 30, 2014 are as follows:

(in millions of Won)
Company	Fair value
POSCO PLANTEC Co., Ltd.	￦	121,238

19

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(e) Summarized financial information of associates and joint ventures as of and for the six-month period June 30, 2014 and as of and for the year ended December 31, 2013 is as follows:

1) June 30, 2014

(in millions of Won)
Company	Assets		Liabilities		Equity		Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	￦	636,800		1,023		635,777		—		(258	)
POSCO PLANTEC Co., Ltd.		876,222		754,652		121,570		313,391		(83,714	)
SNNC Co., Ltd.		677,601		408,503		269,098		164,660		11,304
POSCO MITSUBISHI CARBOND TECHNOLOGY		337,366		147,724		189,642		—		(2,256	)
POSCO ES MATERIALS		64,634		17,531		47,103		6,135		(2,006	)
BLUE OCEAN private Equity Fund		350,930		238,900		112,030		283,883		7,518
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.		256,186		202,135		54,051		603		(7,994	)
Incheon-Gimpo Highway Co., Ltd		221,259		69,798		151,461		—		(637	)
UITrans LRT Co., Ltd.		132,045		86,059		45,986		—		(411	)
Garolim Tidal Power Plant Co., Ltd.		39,468		140		39,328		—		(913	)
Gyunggi Green Energy		323,917		262,721		61,196		60,088		(8,222	)
KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund		92,738		932		91,806		857		(477	)
KONES, Corp.		2,554		1,700		854		3,252		(597	)
QSONE Co.,Ltd.		244,205		76,108		168,097		6,827		(205	)
[Foreign]
Roy Hill Holdings Pty Ltd.		4,252,472		444,998		3,807,474		—		99,850
POSCO-NPS Niobium LLC		659,408		—		659,408		—		15,486
CSP-Compania Siderurgica do Pecem		3,012,827		1,156,434		1,856,393		—		(17,766	)
South-East Asia Gas Pipeline Company Ltd.		1,828,706		1,261,858		566,848		141,623		29,624
Nickel Mining Company SAS		392,626		108,804		283,822		49,152		(20,434	)
DMSA, AMSA		8,332,286		5,253,670		3,078,616		307,707		(241,639	)
7623704 Canada Inc.		1,082,853		16		1,082,837		—		(551	)
KOREA LNG Ltd.		370,985		4,207		366,778		51,295		50,384
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		809,019		471,759		337,260		643,827		2,269
KOBRASCO		230,642		36,845		193,797		51,533		32,955
CAML Resources Pty. Ltd.		190,767		45,175		145,592		84,782		10,794
POSCHROME (PROPRIETARY) LIMITED		35,150		1,199		33,951		30,450		1,278

20

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) December 31, 2013

(in millions of Won)
Company	Assets		Liabilities		Equity			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	￦	652,849		1,034		651,815			—		(3,684	)
POSCO PLANTEC Co., Ltd.		900,409		765,481		134,928			597,561		(98,435	)
SNNC Co., Ltd.		504,351		235,830		268,521			405,419		8,458
POSCO MITSUBISHI CARBOND TECHNOLOGY		243,644		51,747		191,897			—		89
POSCO ES MATERIALS		59,807		10,590		49,217			5,759		(3,926	)
BLUE OCEAN private Equity Fund		341,118		234,321		106,797			425,678		(7,321	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.		284,290		222,246		62,044			10,224		(15,924	)
Incheon-Gimpo Highway Co., Ltd		157,082		32,691		124,391			—		(1,473	)
UITrans LRT Co., Ltd.		102,828		56,438		46,390			—		(925	)
Garolim Tidal Power Plant Co., Ltd.		43,592		3,350		40,242			—		(2,502	)
Gyunggi Green Energy		333,027		263,608		69,419			21,577		(5,526	)
KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund		55,195		1,712		53,483			1,064		(1,116	)
KONES, Corp.		3,748		2,296		1,452			7,442		(1,612	)
Busan-Gimhae Light Rail Transit Co., Ltd.		752,011		793,042		(41,031	)		34,670		(71,110	)
QSONE Co., Ltd.		247,592		79,399		168,193			882		(597	)
[Foreign]
Roy Hill Holdings Pty Ltd.		2,703,533		244,437		2,459,096			—		(302,248	)
POSCO-NPS Niobium LLC		686,978		—		686,978			—		32,158
CSP-Compania Siderurgica do Pecem		1,520,989		78,847		1,442,142			—		(16,915	)
South-East Asia Gas Pipeline Company Ltd.		1,755,847		1,195,935		559,912			19,878		(10,323	)
Nickel Mining Company SAS		416,878		91,851		325,027			120,324		(39,686	)
DMSA, AMSA		8,636,317		5,190,558		3,445,759			—		(473	)
7623704 Canada Inc.		1,161,363		15		1,161,348			—		(10	)
KOREA LNG Ltd.		381,437		98		381,339			111,602		109,495
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		776,557		418,958		357,599			1,479,765		5,359
KOBRASCO		203,467		13,001		190,466			70,428		42,852
CAML Resources Pty. Ltd.		185,465		52,782		132,683			238,296		53,950
POSCHROME (PROPRIETARY) LIMITED		38,440		3,779		34,661			72,243		6,765

10. Joint Operations

Details of significant joint operations of the Company as of June 30, 2014 and December 31, 2013 are as follows:

		Ownership (%)
Joint operations	Operation	June 30, 2014		December 31, 2013		Location
Myanmar A-1/A-3 mine	Mine development		51.00		51.00	Myanmar
Offshore midstream	Mine development		51.00		51.00	Myanmar
Gleenhills mine	Mine development		20.00		20.00	Canada
Actos Anthracite coal project	Mine development		20.00		20.00	Canada
Mt. Thorley J/V	Mine development		20.00		20.00	Australia
POSMAC J/V	Mine development		20.00		20.00	Australia
CD J/V	Mine development		5.00		5.00	Australia
Intergra Coal J/V	Mine development		2.35		5.95	Australia
RUM J/V	Mine development		10.00		10.00	Australia
Camberwell Coal J/V	Mine development		8.39		8.39	Australia

21

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

11. Investment Property, Net

Changes in the carrying value of investment property for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(a) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Others (*1)			Ending
Land	￦	161,502		—		(7,757	)		—			574			154,319
Buildings		239,193		—		(12,181	)		(5,661	)		1,499			222,850
Structures		3,599		—		—			(270	)		(26	)		3,303
Construction-in-progress		20,935		23		—			—			308,700			329,658
	￦	425,229		23		(19,938	)		(5,931	)		310,747			710,130

(*1) Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

(b) For the year ended December 31, 2013

(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Depreciation			Others (*1)			Ending
Land	￦	211,382		—		12,625		(4,410	)		—			(58,095	)		161,502
Buildings		304,503		10		8,432		(3,129	)		(12,008	)		(58,615	)		239,193
Structures		5,306		—		—		—			(314	)		(1,393	)		3,599
Construction-in-progress		—		20,935		—		—			—			—			20,935
	￦	521,191		20,945		21,057		(7,539	)		(12,322	)		(118,103	)		425,229

(*1) Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

22

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

12. Property, Plant and Equipment, Net

Changes in the carrying value of property, plant and equipment for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(a) For the six-month period ended June 30, 2014

					Business
(in millions of Won)	Beginning		Acquisitions		combination		Disposals			Depreciation (*1)			Others (*2)			Ending
Land	￦	2,708,010		3,830		—		(15	)		—			69,746			2,781,571
Buildings		4,888,835		23,606		—		(8,743	)		(168,157	)		237,869			4,973,410
Structures		2,784,587		8,766		—		(607	)		(104,447	)		174,386			2,862,685
Machinery and equipment		19,442,836		112,292		711		(33,431	)		(1,042,342	)		1,927,441			20,407,507
Vehicles		51,033		4,626		254		(1,256	)		(9,643	)		7,749			52,763
Tools		62,853		6,825		—		(275	)		(21,927	)		3,537			51,013
Furniture and fixtures		173,152		22,470		70		(1,737	)		(35,064	)		3,904			162,795
Capital lease assets		100,524		11,335		—		(31	)		(5,505	)		(12,118	)		94,205
Construction-in-progress		5,548,289		1,867,708		—		(10,283	)		—			(3,292,009	)		4,113,705
	￦	35,760,119		2,061,458		1,035		(56,378	)		(1,387,085	)		(879,495	)		35,499,654

(*1) Impairment losses of property, plant and equipment amounting to ￦4,865 million are included.

(*2) Includes reclassifications for changing purpose of use, adjustments of foreign currency translation differences and others.

(b) For the year ended December 31, 2013

					Business
(in millions of Won)	Beginning		Acquisitions		combination		Disposals			Depreciation (*1)			Others (*2)			Ending
Land	￦	2,646,422		23,404		23,108		(24,548	)		—			39,624			2,708,010
Buildings		4,168,802		72,168		7,352		(48,278	)		(308,084	)		996,875			4,888,835
Structures		2,320,181		29,338		18,568		(7,633	)		(189,740	)		613,873			2,784,587
Machinery and equipment		16,532,204		740,682		9,634		(88,565	)		(1,867,408	)		4,116,289			19,442,836
Vehicles		60,154		10,326		700		(2,356	)		(19,402	)		1,611			51,033
Tools		69,851		20,638		304		(1,811	)		(33,494	)		7,365			62,853
Furniture and fixtures		183,380		31,578		1,087		(4,837	)		(72,062	)		34,006			173,152
Capital lease assets		57,224		670		—		(712	)		(12,766	)		56,108			100,524
Construction-in-progress		6,238,161		5,931,141		—		(10,369	)		—			(6,610,644	)		5,548,289
	￦	32,276,379		6,859,945		60,753		(189,109	)		(2,502,956	)		(744,893	)		35,760,119

(*1) Impairment losses of property, plant and equipment amounting to ￦9,742 million are included.

(*2) Includes reclassifications for changing purpose of use, adjustments of foreign currency translation differences and others.

23

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying value of goodwill and other intangible assets for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(a) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Amortization			Impairment loss			Others (*3)			Ending
Goodwill (*1)	￦	1,615,938		—		2,185		—			—			(7,884	)		(2,638	)		1,607,601
Intellectual property rights		1,474,859		71,353		—		—			(61,174	)		(16,409	)		1,260,530			2,729,159
Premium in rental (*2)		131,267		12,942		—		(6,116	)		(252	)		(5	)		(114	)		137,722
Development expense		61,102		3,366		—		—			(26,949	)		(3,784	)		143,175			176,910
Port facilities usage rights		167,111		433		—		—			(6,594	)		—			1,836			162,786
Exploratation and evaluation assets		359,748		4,641		—		—			—			—			(296,693	)		67,696
Mining development assets		968,191		—		—		—			—			—			(968,191	)		—
Customer relationships		692,880		—		—		—			(25,802	)		—			(1,837	)		665,241
Other intangible assets		458,744		72,578		—		(511	)		(38,478	)		—			(145,773	)		346,560
	￦	5,929,840		165,313		2,185		(6,627	)		(159,249	)		(28,082	)		(9,705	)		5,893,675

(*1) Acquisition amounts include goodwill amounting to ￦2,185 million related to the acquisition of Hanjung Power Pty., Ltd and Santos CMI Construction Inc S.A.

(*2) Premium in rental includes memberships with indefinite useful lives.

(*3) Includes translation adjustment and reclassifications. Reclassifications are primarily those exploration and evaluation assets reclassified to intellectual property rights amounting to ￦1,266,274 million due to commercial development of Myanmar A-1 mine and development expense amounting to ￦137,016 million due to completion of the new ERP system.

(b) For the year ended December 31, 2013

(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Amortization			Impairment loss			Others (*3)			Ending
Goodwill (*1)	￦	1,713,691		—		2,668		—			—			(103,436	)		3,015			1,615,938
Intellectual property rights		275,146		54,182		—		(291	)		(35,532	)		(10,313	)		1,191,667			1,474,859
Premium in rental (*2)		137,733		4,089		1,605		(4,382	)		(211	)		(4,457	)		(3,110	)		131,267
Development expense		60,931		13,717		2,032		—			(23,166	)		(5,675	)		13,263			61,102
Port facilities usage rights		83,122		—		—		—			(10,318	)		—			94,307			167,111
Exploratation and evaluation assets		479,728		4,669		—		—			—			—			(124,649	)		359,748
Mining development assets		1,643,306		289,016		—		—			—			—			(964,131	)		968,191
Customer relationships		750,732		—		—		—			(51,944	)		—			(5,908	)		692,880
Other intangible assets		517,971		211,627		684		(1,102	)		(58,843	)		(1,435	)		(210,158	)		458,744
	￦	5,662,360		577,300		6,989		(5,775	)		(180,014	)		(125,316	)		(5,704	)		5,929,840

(*1) Acquisition amounts include goodwill amounting to ￦2,668 million related to the acquisition of POSCO YongXin Rare Earth Metal Co., Ltd.

(*2) Premium in rental includes memberships with indefinite useful lives.

(*3) Includes translation adjustment and reclassifications.

24

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

14. Other Assets

Other current assets and other long-term assets as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Other current assets
Advance payment	￦	1,250,094		1,138,976
Prepaid expenses		157,730		130,272
Others		1,525		1,420
	￦	1,409,349		1,270,668
Other long-term assets
Long-term advance payment	￦	3,016		3,090
Long-term prepaid expenses		221,202		204,449
Others		164,991		157,659
	￦	389,209		365,198

15. Borrowings

(a) Short-term borrowings and current portion of long-term borrowings as of June 30, 2014 and December 31, 2013 are as follows:

		Interest
(in millions of Won)	Bank	rate(%)	June 30, 2014			December 31, 2013
Short-term borrowings
Bank overdrafts	Bank of America and others	0.1~3.0	￦	129,993			100,211
Short-term borrowings (*1)	HSBC Bank and others	0.4~13.0		9,139,909			7,256,486
				9,269,902			7,356,697
Current portion of long-term liabilities
Current portion of long-term borrowings (*1)	Export-Import Bank of Korea and others	0.5~9.0		1,200,962			856,188
Less : Present value discount				(176	)		(59	)
Current portion of foreign loan	NATIXIS	2.0		657			927
Current portion of debentures (*1)	Korean Development Bank and others	1.5~6.0		992,912			2,502,246
Less : Current portion of discount on debentures issued				(690	)		(2,353	)
				2,193,665			3,356,949
			￦	11,463,567			10,713,646

(*1) Property, plant and equipment, trade accounts and notes receivable, short-term financial assets, available-for-sale financial assets, long-term financial assets and inventories amounting to ￦5,169,874 million, ￦23,151 million (one hundred fifty six sheets of note receivable), ￦43,118 million, ￦285,309 million, ￦50 million and ￦308,857 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.

25

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Long-term borrowings, excluding current portion as of June 30, 2014 and December 31, 2013 are as follows:

		Interest
(in millions of Won)	Bank	rate(%)	June 30, 2014			December 31, 2013
Long-term borrowings (*1)	Export-Import Bank of Korea and others	0.5~11.0	￦	6,743,925			7,017,532
Less : Present value discount				(116,833	)		(43,897	)
Foreign loan (*2)	NATIXIS	2.0		866			1,140
Bonds (*1,3)	Korean Development Bank and others	0.9~6.3		8,912,270			8,590,965
Less : Discount on debentures issued				(33,753	)		(45,372	)
Add : Premium on debentures redemption				4,086			12,591
			￦	15,510,561			15,532,959

(*1) Property, plant and equipment, trade accounts and notes receivable, short-term financial assets, available-for-sale financial assets, long-term financial assets and inventories amounting to ￦5,169,874 million, ￦23,151 million (one hundred fifty six sheets of note receivable), ￦43,118 million, ￦285,309 million, ￦50 million and ￦308,857 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.

(*2) As of June 30, 2014 and December 31, 2013, Korea Development Bank has provided guarantees related to the foreign loan.

(*3) POSCO issued bonds exchangeable bonds with SK Telecom Co., Ltd. ADRs through Zeus (Cayman) Ltd., a consolidated entity, in August 2011. The Company accounted for these exchangeable bonds as long-term borrowings. The Company also provides guarantees for Zeus (Cayman) Ltd.

16. Other Payables

Other payables as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Accounts payable	￦	1,106,635		914,288
Accrued expenses		987,901		873,613
Dividend payable		11,443		11,709
Finance lease liabilities		18,605		14,218
Withholding		328,626		315,026
	￦	2,453,210		2,128,854
Non-current
Accounts payable	￦	86,676		116,160
Accrued expenses		18,763		25,358
Finance lease liabilities		27,337		39,257
Long-term withholding		30,979		25,859
	￦	163,755		206,634

26

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

17. Other Financial Liabilities

Other financial liabilities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Current
Derivatives liabilities	￦	120,211		128,370
Financial guarantee liabilities		13,312		7,534
	￦	133,523		135,904
Non-current
Derivatives liabilities	￦	133,668		229,096
Financial guarantee liabilities		28,359		30,925
	￦	162,027		260,021

18. Provisions

(a) Provisions as of June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014				December 31, 2013
(in millions of Won)	Current		Non-current		Current		Non-current
Provision for bonus payments	￦	41,937		—		52,377		—
Provision for construction warranties		15,316		50,494		35,027		20,669
Provision for legal contingencies and claims (*1)		—		49,113		—		30,330
Recovery provisions (*2)		23,349		43,157		—		4,385
Others (*3)		15,735		52,956		19,925		90,888
	￦	96,337		195,720		107,329		146,272

(*1) The Company recognized probable outflow of resources amounting to ￦37,040 million and ￦17,549 million as provisions for legal contingencies and asserted claims in relation to lawsuits against the Company as of June 30, 2014 and December 31, 2013, respectively.

(*2) Due to contamination of the land near the Company’s magnesium plant located in Gangneung, the Company recognized a provision of ￦62,166 million related to restoration costs. When estimating related costs, the Company has assumed that it would use all of technologies and materials available to recover the land. In addition, the Company has applied a discount rate of 3.83% to assess the present value of these costs.

(*3) As of June 30, 2014 and December 31, 2013, the amount includes a provision of ￦29,400 million and ￦74,888 million, respectively, for expected outflow of resources in connection with the subrogation and financial joint guarantee for the construction projects of POSCO ENGINEERING & CONSTRUCTION Co., Ltd.

27

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Changes in provisions for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others (*1)			Ending
Provision for bonus payments	￦	52,377		14,486		(23,177	)		(1,722	)		(27	)		41,937
Provision for construction warranties		55,696		23,656		(10,409	)		(1,784	)		(1,349	)		65,810
Provision for legal contingencies and claims		30,330		19,776		—			—			(993	)		49,113
Recovery provisions		4,385		62,232		—			—			(111	)		66,506
Others		110,813		58,358		(87,996	)		(10,000	)		(2,484	)		68,691
	￦	253,601		178,508		(121,582	)		(13,506	)		(4,964	)		292,057

(*1) Includes adjustments of foreign currency translation differences and others.

2) For the year ended December 31, 2013

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others (*1)			Ending
Provision for bonus payments	￦	42,904		48,362		(36,126	)		(2,058	)		(705	)		52,377
Provision for construction warranties		50,716		27,008		(15,356	)		(3,887	)		(2,785	)		55,696
Provision for legal contingencies and claims		30,920		5,090		(4,353	)		(1,327	)		—			30,330
Recovery provisions		4,371		130		—			—			(116	)		4,385
Others		49,018		85,947		(23,576	)		(1,597	)		1,021			110,813
	￦	177,929		166,537		(79,411	)		(8,869	)		(2,585	)		253,601

(*1) Includes adjustments of foreign currency translation differences and others.

19. Employee Benefits

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Expense related to post-employment benefit plans under defined contribution plans	￦	5,812		6,594		11,553		11,994

28

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Defined benefit plan

1) The amounts recognized in relation to defined benefit obligations in the statements of financial position as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Present value of funded obligations	￦	1,616,318			1,515,426
Fair value of plan assets		(1,304,603	)		(1,247,483	)
Present value of non-funded obligations		4,339			5,217
Net defined benefit liabilities	￦	316,054			273,160

2) Changes in present value of defined benefit obligations for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Defined benefit obligation at the beginning of period	￦	1,520,643			1,410,399
Current service costs		113,938			238,386
Interest costs		27,448			47,039
Remeasurements		47,596			(12,615	)
Business combinations		—			11,379
Benefits paid		(91,000	)		(129,038	)
Others		2,032			(44,907	)
Defined benefit obligation at the end of period	￦	1,620,657			1,520,643

3) Changes in fair value of plan assets for the six-month period ended June 30, 2014 and the year ended December 31, 2013 were as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Fair value of plan assets at the beginning of period	￦	1,247,483			1,064,711
Interest on plan assets		23,565			37,677
Remeasurement of plan assets		(5,263	)		(1,482	)
Contributions to plan assets		95,831			254,771
Business combinations		—			9,372
Benefits paid		(58,021	)		(82,624	)
Others		1,008			(34,942	)
Fair value of plan assets at the end of period	￦	1,304,603			1,247,483

29

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

4) The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month ended June 30				For the six-month ended June 30
(in millions of Won)	2014		2013		2014		2013
Current service costs	￦	56,720		58,412		113,938		119,680
Net interest costs		2,083		2,019		3,883		4,118
Total	￦	58,803		60,431		117,821		123,798

20. Other Liabilities

Other liabilities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Other current liabilities
Due to customers for contract work	￦	863,978		898,605
Advances received		1,162,142		1,176,621
Unearned revenue		19,577		29,217
Withholdings		176,233		192,497
Deferred revenue		181		202
Others (*1)		287,632		268,032
	￦	2,509,743		2,565,174
Other long-term liabilities
Advances received	￦	153,018		201,432
Unearned revenue		1,207		1,465
Others (*1)		61,370		57,954
	￦	215,595		260,851

(*1) Includes other current liabilities amounting to ￦274,639 million, ￦261,855 million and other long-term liabilities amounting to ￦8,897 million and ￦8,935 million as of June 30, 2014 and December, 31 2013, respectively, due to proportionate consolidation of joint operations which are owned by POSCO’s subsidiaries.

30

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

21. Financial Instruments

(a) Classification of financial instruments

1) Financial assets as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Financial assets at fair value through profit or loss
Derivatives assets held for trading	￦	130,683		78,222
Available-for-sale financial assets		3,500,453		4,166,384
Held-to-maturity investments		14,665		3,834
Loans and receivables		20,081,626		21,206,326
	￦	23,727,427		25,454,766

2) Financial liabilities as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014		December 31, 2013
Financial liabilities at fair value through profit or loss
Derivatives liabilities held for trading	￦	253,879		357,466
Financial liabilities measured at amortized cost
Trade accounts and notes payable		4,073,370		4,231,881
Borrowings		26,974,128		26,246,605
Financial guarantee liabilities		41,671		38,459
Others		2,350,035		2,253,989
		33,439,204		32,770,934
	￦	33,693,083		33,128,400

3) Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2014 and 2013 were as follows:

 June 30, 2014

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income		transactions			translations			disposal			Others			Total			loss
Financial assets at fair value through profit or loss	￦	—			—		—			—			137,775			130,430			268,205			—
Available-for-sale financial assets		43			37,662		—			—			119,192			(13,884	)		143,013			(294,389	)
Held-to-maturity investments		21			—		—			—			—			37			58			—
Loans and receivables		114,174			—		(35,824	)		(159,261	)		(10,243	)		(66	)		(91,220	)		—
Financial liabilities at fair value through profit or loss		—			—		—			—			(131,756	)		(109,754	)		(241,510	)		—
Financial liabilities at amortized cost		(406,139	)		—		88,635			290,610			(17,631	)		(9,605	)		(54,130	)		—
	￦	(291,901	)		37,662		52,811			131,349			97,337			(2,842	)		24,416			(294,389	)

31

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

‚ June 30, 2013

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income		transactions			translations			disposal			Others			Total			income
Financial assets at fair value through profit or loss	￦	353			—		—			—			140,655			152,467			293,475			—
Available-for-sale financial assets		847			48,734		—			—			40,105			(207,676	)		(117,990	)		157,913
Held-to-maturity investments		405			—		—			—			—			42			447			—
Loans and receivables		122,515			—		170,184			180,006			(9,575	)		(59	)		463,071			—
Financial liabilities at fair value through profit or loss		—			—		—			—			(189,806	)		(215,643	)		(405,449	)		—
Financial liabilities at amortized cost		(310,452	)		—		(148,442	)		(515,626	)		—			(4,898	)		(979,418	)		—
	￦	(186,332	)		48,734		21,742			(335,620	)		(18,621	)		(275,767	)		(745,864	)		157,913

4) Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2014 and 2013 were as follows:

 June 30, 2014

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income		transactions			translations			disposal			Others			Total			loss
Financial assets at fair value through profit or loss	￦	—			—		—			—			92,873			107,611			200,484			—
Available-for-sale financial assets		(21	)		8,215		—			—			110,487			(12,306	)		106,375			(89,932	)
Held-to-maturity investments		11			—		—			—			—			15			26			—
Loans and receivables		53,233			—		(147,336	)		(181,720	)		(5,140	)		(29	)		(280,992	)		—
Financial liabilities at fair value through profit or loss		—			—		—			—			(94,593	)		(131,327	)		(225,920	)		—
Financial liabilities at amortized cost		(226,321	)		—		222,480			389,670			(19,131	)		(6,732	)		359,966			—
	￦	(173,098	)		8,215		75,144			207,950			84,496			(42,768	)		159,939			(89,932	)

‚ June 30, 2013

	Finance income and costs
						Gain and loss			Gain and loss
	Interest					on foreign			on foreign			Gain and									Other
	income			Dividend		currency			currency			loss on									comprehensive
(in millions of Won)	(cost)			income		transactions			translations			disposal			Others			Total			income
Financial assets at fair value through profit or loss	￦	269			—		—			—			101,225			71,714			173,208			—
Available-for-sale financial assets		(11	)		10,559		—			—			39,898			(89,370	)		(38,924	)		55,884
Held-to-maturity investments		19			—		—			—			—			21			40			—
Loans and receivables		59,932			—		126,497			53,211			(5,536	)		(40	)		234,064			—
Financial liabilities at fair value through profit or loss		—			—		—			—			(90,039	)		(98,160	)		(188,199	)		—
Financial liabilities at amortized cost		(149,714	)		—		(84,488	)		(378,516	)		—			(1,744	)		(614,462	)		—
	￦	(89,505	)		10,559		42,009			(325,305	)		45,548			(117,579	)		(434,273	)		55,884

32

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Fair value

1) Fair value and book value

The carrying amount and the fair value of financial instruments as of June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014				December 31, 2013
(in millions of Won)	Book value		Fair value		Book value		Fair value
Assets measured at fair value
Available-for-sale financial assets (*1)	￦	3,050,373		3,050,373		3,560,515		3,560,515
Derivatives assets held for trading (*2)		130,683		130,683		78,222		78,222
		3,181,056		3,181,056		3,638,737		3,638,737
Assets measured amortized cost (*3)
Cash and cash equivalents		3,756,871		3,756,871		4,208,562		4,208,562
Trade accounts and notes receivable, net		12,354,878		12,354,878		11,589,601		11,589,601
Loans and other receivables, net		3,969,877		3,969,877		5,408,163		5,408,163
Held-to-maturity investments		14,665		14,665		3,834		3,834
		20,096,291		20,096,291		21,210,160		21,210,160
Liabilities measured at fair value
Derivatives liabilities held for trading (*2)		253,879		253,879		357,466		357,466
Liabilities measured amortized cost (*3)
Trade accounts and notes payable		4,073,370		4,073,370		4,231,881		4,231,881
Borrowings		26,974,128		27,575,965		26,246,605		26,550,721
Financial guarantee liabilities		41,671		41,671		38,459		38,459
Others		2,350,035		2,350,035		2,253,989		2,253,989
	￦	33,439,204		34,041,041		32,770,934		33,075,050

(*1) The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average cost of capital of evaluated companies are used as a discount rate. The book value of available-for-sale financial assets accounted for at cost is not included.

(*2) The fair value of derivatives is measured using valuation models such as Black-scholes model and others in which the market yields on government bonds are used as a discount rate.

(*3) The fair value of financial assets and liabilities measured at amortized cost is determined at the present value of estimated future cash flows discounted at the current market interest rate. The fair value is calculated for the disclosures in the notes. On the other hand, the Company has not performed fair value measurement for the financial assets and liabilities measured at amortized cost except borrowings since the fair value is close to their carrying amounts.

33

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) The fair value hierarchy

The fair values of financial instruments by fair value hierarchy as of June 30, 2014 and December 31, 2013 are as follows:

 June 30, 2014

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	￦	2,249,227		—		801,146		3,050,373
Derivatives assets held for trading		—		130,683		—		130,683
	￦	2,249,227		130,683		801,146		3,181,056
Financial liabilities
Derivatives liabilities held for trading	￦	—		253,879		—		253,879

‚ December 31, 2013

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	￦	2,816,484		—		744,031		3,560,515
Derivatives assets held for trading		—		78,222		—		78,222
	￦	2,816,484		78,222		744,031		3,638,737
Financial liabilities
Derivatives liabilities held for trading	￦	—		357,466		—		357,466

(c) Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2013.

34

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

22. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2014 and December 31, 2013 are as follows:

(Share, in Won)	June 30, 2014		December 31, 2013
Authorized shares		200,000,000		200,000,000
Par value	￦	5,000		5,000
Issued shares (*1)		87,186,835		87,186,835
Shared capital (*2)	￦	482,403,125,000		482,403,125,000

(*1) As of June 30, 2014, total shares of ADRs of 54,117,228 are equivalent to 13,529,307 of common stock.

(*2) As of June 30, 2014, the difference between the ending balance of common stock and the par value of issued common stock is ￦46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Share premium	￦	463,825			463,825
Gain on disposal of treasury shares		769,263			769,215
Other capital surplus		(157,539	)		(154,774	)
	￦	1,075,549			1,078,266

35

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

23. Hybrid Bonds

(a) Hybrid bonds classified as equity as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	Date of issue	Date of maturity	Rate of interest (%)		June 30, 2014			December 31, 2013
Hybrid bond 1-1 (*1)	2013-06-13	2043-06-13		4.30	￦	800,000			800,000
Hybrid bond 1-2 (*1)	2013-06-13	2043-06-13		4.60		200,000			200,000
Issuance cost						(3,081	)		(3,081	)
					￦	996,919			996,919

(*1) Details of hybrid bonds as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	Hybrid bond 1-1	Hybrid bond 1-2
Issue price	800,000	200,000
Maturity date	30 years (The Company has a right to extend the maturity date)	30 years (The Company has a right to extend the maturity date)
	Issue date ~ 2018-06-12 : 4.3%	Issue date ~ 2023-06-12 : 4.6%
	reset every 5 years as follows;	reset every 10 years as follows;
Interest rate	•   After 5 years : return on government bond (5 years) + 1.3%	•   After 10 years : return on government bond (10 years) + 1.4%
	•   After 10 years : additionally +0.25% according to Step-up clauses	•   After 10 years : additionally +0.25% according to Step-up clauses
	•   After 25 years : additionally +0.75%	•   After 30 years : additionally +0.75%
Interest payments	Quarterly	Quarterly
condition	(Optional deferral of interest payment is available to the Company)	(Optional deferral of interest payment is available to the Company)
Others	The Company can call the hybrid bond at year 5 and interest payment date afterwards	The Company can call the hybrid bond at year 10 and interest payment date afterwards

The Company holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, the Company cannot declare or pay dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments. The interest accumulated but not paid on the hybrid bonds as of June 30, 2014 amounts to ￦2,133 million.

(b) POSCO ENERGY Co., Ltd., a subsidiary of the Company, issued hybrid bonds during the year ended December 31, 2013, the entire amount of which is classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	Date of issue	Date of maturity	Rate of interest (%)		June 30, 2014			December 31, 2013
Hybrid bond 1-1 (*1)	2013-08-29	2043-08-29		4.66	￦	165,000			165,000
Hybrid bond 1-2 (*1)	2013-08-29	2043-08-29		4.72		165,000			165,000
Hybrid bond 1-3 (*1)	2013-08-29	2043-08-29		4.72		30,000			30,000
Hybrid bond 1-4 (*1)	2013-08-29	2043-08-29		5.21		140,000			140,000
Issuance cost						(1,532	)		(1,532	)
					￦	498,468			498,468

36

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(*1) Details of hybrid bonds of POSCO ENERGY Co., Ltd. as of June 30, 2014 are as follows :

(in millions of Won)	Hybrid bond 1-1	Hybrid bond 1-2 and 1-3	Hybrid bond 1-4
Issue price	165,000	195,000	140,000
Maturity date	30 years (The Company has a right to extend the maturity date)	30 years (The Company has a right to extend the maturity date)	30 years (The Company has a right to extend the maturity date)
	Issue date ~ 2018-08-29 : 4.66% reset every 5 years as follows;	Issue date ~ 2018-08-29 : 4.72% reset every 5 years as follows;	Issue date ~ 2018-08-29 : 5.21% reset every 5 years as follows;
Interest rate	•   After 5 years : returen on government bond (5 years) + 1.39%	•   After 5 years : returen on government bond (5 years) + 1.45%	•   After 5 years : returen on government bond (5 years) + 1.55%
	•   After 10 years : additionally +0.25% according to Step-up clauses	•   After 10 years : additionally +0.25% according to Step-up clauses	•   After 10 years : additionally +0.25% according to Step-up clauses
	•   After 30 years : additionally +0.75%	•   After 30 years : additionally +0.75%	•   After 30 years : additionally +0.75%
	Quarterly	Quarterly	Quarterly
Interest payments condition	(Optional deferral of interest payment is available to the Company)	(Optional deferral of interest payment is available to the Company)	(Optional deferral of interest payment is available to the Company)
Others	The Company can call the hybrid bond at year 5 and interest payment date afterwards	The Company can call the hybrid bond at year 5 and interest payment date afterwards	The Company can call the hybrid bond at year 5 and interest payment date afterwards

POSCO ENERGY Co.,Ltd., a subsidiary, holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, POSCO ENERGY Co.,Ltd., cannot declare or pay dividends attributable to common stock. Since the subsidiary has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity (non-controlling interests) in the Company’s consolidated financial statements. The interest accumulated but not paid on the hybrid bonds as of June 30, 2014 amounts to ￦1,996 million.

24. Reserves

Reserves as of June 30, 2014 and December 31, 2013 are as follows:

(in millions of Won)	June 30, 2014			December 31, 2013
Accumulated comprehensive loss of investments in associates and joint ventures	￦	(337,220	)		(295,946	)
Changes in the unrealized fair value of available-for-sale investments		183,386			480,409
Currency translation differences		(348,528	)		(189,085	)
Others		(18,092	)		(18,454	)
	￦	(520,454	)		(23,076	)

25. Treasury Shares

As of June 30, 2014, the Company holds 7,402,597 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

37

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

26. Selling and Administrative Expenses

(a) Administrative expenses

Administrative expenses for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Wages and salaries	￦	180,611		183,276		376,445		376,601
Expenses related to defined benefit plan		15,621		17,181		33,682		34,514
Other employee benefits		39,594		40,241		81,965		81,905
Travel		12,887		14,195		23,655		25,702
Depreciation and amortization		82,590		52,305		151,326		106,975
Communication		3,330		3,531		6,886		7,248
Electric power		2,138		1,926		6,515		6,270
Taxes and public dues		15,209		14,101		28,459		28,440
Rental		34,656		24,216		70,003		50,676
Repairs		3,202		4,252		6,075		6,243
Insurance		2,187		1,537		4,609		3,345
Entertainment		3,607		3,768		8,085		7,966
Advertising		26,264		29,908		51,296		48,264
Research and development		36,456		42,159		71,705		102,705
Service fees		48,504		55,412		99,458		111,531
Supplies		2,436		4,304		4,884		7,627
Vehicles maintenance		3,176		2,938		6,034		6,017
Industry association fee		2,704		3,035		8,050		7,715
Training		429		3,060		3,506		6,042
Conference		3,985		4,072		8,221		8,109
Warranty expense		4,018		4,826		9,166		9,454
Bad debt expenses		13,747		42,713		19,509		56,794
Others		3,324		3,990		8,073		8,622
	￦	540,675		556,946		1,087,607		1,108,765

(b) Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Freight and custody expenses	￦	382,005		354,259		745,967		714,221
Operating expenses for distribution center		2,586		2,410		5,303		4,672
Sales commissions		18,454		19,364		36,080		35,178
Sales advertising		607		1,224		898		1,728
Sales promotion		5,733		3,676		10,733		11,719
Sample		692		1,352		1,564		2,530
Sales insurance premium		9,503		6,620		19,680		13,009
Contract cost		11,352		5,764		17,564		14,524
Others		1,860		3,383		4,779		5,444
	￦	432,792		398,052		842,568		803,025

38

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

27. Adjusted Operating Profit

Adjusted operating profits which include the other profits or losses excluded in operating profit but reflect the results of the Company’s operations for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(in millions of Won)	2014			2013			2014			2013
Operating profits on the statement of comprehensive income	￦	839,111			902,592			1,570,374			1,619,512
Add
Gain on disposals of property, plant and equipment		2,539			8,757			3,928			11,743
Gain on disposals of investment in associates and joint ventures		314			—			7,978			2,848
Outsourcing income		5,612			9,093			11,203			15,283
Gain on disposals of wastes		4,803			4,938			18,442			6,575
Gain from claim compensation		3,007			4,205			8,112			9,553
Penalty income from early termination of contracts		2,212			6,022			7,766			12,618
Grant income		663			169			1,061			491
Others		17,935			1,292			36,052			13,786
		37,085			34,476			94,542			72,897
Deduct
Loss on disposals of property, plant and equipment		(11,109	)		(56,302	)		(19,700	)		(75,043	)
Loss on disposals of investment in associates and joint ventures		—			(794	)		—			(16,544	)
Idle tangible assets expenses		(884	)		(9,273	)		(1,772	)		(16,417	)
Impairment losses on property, plant and equipment		(3,112	)		—			(4,865	)		—
Impairment losses on goodwill and other intangible assets		(27,329	)		(3	)		(28,082	)		(467	)
Contribution to provisions		(111,665	)		—			(111,665	)		—
Other bad debt expenses		(18,568	)		(6,582	)		(80,938	)		(10,531	)
Donations		(14,232	)		(7,800	)		(34,074	)		(22,500	)
Loss on disposals of wastes		(5,654	)		(1,627	)		(22,164	)		(10,389	)
Penalty and additional tax payments		(47,406	)		(44,478	)		(215,262	)		(44,478	)
Others		(38,970	)		(12,735	)		(58,431	)		(20,798	)
		(278,929	)		(139,594	)		(576,953	)		(217,167	)
Adjusted operating profit	￦	597,267			797,474			1,087,963			1,475,242

28. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Finance income
Interest income	￦	53,223		60,209		114,238		124,120
Dividend income		8,215		10,559		37,662		48,734
Gain on foreign currency transactions		290,650		327,656		483,263		512,736
Gain on foreign currency translations		268,532		51,764		372,385		320,499
Gain on derivatives transactions		92,955		110,730		144,666		150,981
Gain on valuations of derivatives		38,911		70,331		108,084		164,604
Gain on disposals of available-for-sale investments		110,568		42,275		119,402		42,482
Others		5,145		1,149		6,605		2,110
	￦	868,199		674,673		1,386,305		1,366,266
Finance costs
Interest expenses	￦	226,321		149,714		406,139		310,452
Loss on foreign currency transactions		215,506		285,647		430,452		490,994
Loss on foreign currency translations		60,582		377,069		241,036		656,119
Loss on derivatives transactions		94,719		99,534		138,689		200,123
Loss on valuation of derivatives		66,583		97,019		90,206		228,125
Impairment loss on available-for-sale investments		12,306		89,370		13,884		207,676
Loss on disposals of available-for-sale investments		81		2,377		210		2,377
Others		32,162		8,216		41,273		16,264
	￦	708,260		1,108,946		1,361,889		2,112,130

39

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

29. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Other non-operating income
Gain on disposals of property, plant and equipment	￦	2,539		8,757		3,928		11,743
Gain on disposals of investment in associates and joint ventures		314		—		7,978		2,848
Outsourcing income		5,612		9,093		11,203		15,283
Gain on disposals of wastes		4,803		4,938		18,442		6,575
Gain from claim compensation		3,007		4,205		8,112		9,553
Penalty income from early termination of contracts		2,212		6,022		7,766		12,618
Grant income		663		169		1,061		491
Others		17,935		1,292		36,052		13,786
	￦	37,085		34,476		94,542		72,897
Other non-operating expenses
Loss on disposals of property, plant and equipment	￦	11,109		56,302		19,700		75,043
Loss on disposals of investment in associates and joint ventures		—		794		—		16,544
Idle tangible assets expenses		884		9,273		1,772		16,417
Impairment losses on property, plant and equipment		3,112		—		4,865		—
Impairment losses on intangible assets		27,329		3		28,082		467
Contribution to provisions		111,665		—		111,665		—
Other bad debt expenses		18,568		6,582		80,938		10,531
Donations		14,232		7,800		34,074		22,500
Loss on disposals of wastes		5,654		1,627		22,164		10,389
Penalty and additional tax payments (*1)		47,406		44,478		215,262		44,478
Others		38,970		12,735		58,431		20,798
	￦	278,929		139,594		576,953		217,167

(*1) As a result of Korea National Tax Service’s periodic audit of tax payments and refunds of the Company, the Company recognized additional tax payments amounting to ￦178,640 million, primarily related to VAT, in the six-month period ended June 30, 2014.

40

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

30. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows (excluding finance costs and income tax expense):

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2014		2013		2014		2013
Changes in inventories	￦	2,870,507		2,972,479		5,196,136		5,853,635
Cost of merchandises sold		7,853,275		6,130,907		15,054,084		12,270,134
Employee benefits expenses		735,821		773,437		1,558,861		1,600,209
Outsourced processing cost		2,333,814		2,489,868		4,774,631		4,506,053
Electricity expenses		360,330		289,660		707,930		538,585
Depreciation (*1)		707,229		621,138		1,388,151		1,232,714
Amortization		81,990		39,699		159,249		89,121
Freight and custody expenses		382,005		354,259		745,967		714,221
Sales commissions		18,454		19,364		36,080		35,178
Loss on disposals of property, plant and equipment		11,109		56,302		19,700		75,043
Donations		14,232		7,800		34,074		22,500
Other expenses		774,624		1,085,198		1,475,416		1,845,254
	￦	16,143,390		14,840,111		31,150,279		28,782,647

(*1) Includes depreciation expense of investment property.

31. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax benefit/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and income tax recognized in other comprehensive income. The effective tax rate of the Company for the six-month periods ended June 30, 2014 and 2013 was 45.1% and 24.6%, respectively. The change in effective tax rate was caused mainly by additional income tax payment (￦64,987 million) due to tax investigation and non-deductible expense primarily related to additional VAT payment (note 29) in 2014.

41

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

32. Earnings per Share

(a) Basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

	ended June 30						ended June 30
(Won, except for share information)	2014			2013			2014			2013
Profit attribute to controlling interest	￦	511,169,853,485			250,564,866,306			581,011,149,458			528,572,809,393
Interests of hybrid bonds		(8,240,301,971	)		(2,132,608,696	)		(16,351,402,838	)		(2,132,608,696	)
Weighted-average number of common shares outstanding (*1)		79,784,165			77,244,901			79,783,960			77,244,685
Basic and diluted earnings per share	￦	6,304			3,216			7,077			6,815

(*1) The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(Share)	2014			2013			2014			2013
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,402,670	)		(9,941,934	)		(7,402,875	)		(9,942,150	)
Weighted-average number of common shares outstanding		79,784,165			77,244,901			79,783,960			77,244,685

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2014 and 2013, diluted earnings per share is equal to basic earnings per share.

42

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

33. Related Party Transactions

(a) Significant transactions with related companies for the six-month periods ended June 30, 2014 and 2013 were as follows:

1) For the six-month period ended June 30, 2014

	Sales and others (*1)						Purchase and others (*2)
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries (*3)
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	￦	6,631		16,674		23,305		—		590,485		3,260		12,519		606,264
POSCO Processing & Service Co., Ltd.		518,057		8,578		526,635		473,808		—		—		261		474,069
POSCO COATED & COLOR STEEL Co., Ltd.		228,638		1		228,639		—		—		5,270		66		5,336
POSCO ICT		607		2,490		3,097		—		98,062		12,685		79,974		190,721
POSMATE Co., Ltd.		258		2,018		2,276		210		—		7,256		16,491		23,957
eNtoB Corporation		—		—		—		122,887		1,679		35		9,064		133,665
POSCO CHEMTECH		267,799		15,434		283,233		252,731		2,748		152,698		557		408,734
POSCO M-TECH		95		16		111		63,612		890		101,477		4,511		170,490
POSCO Energy CO., LTD		84,605		598		85,203		—		2,263		—		20		2,283
POSCO TMC Co., Ltd.		115,404		—		115,404		—		—		528		764		1,292
POSCO AST		266,677		—		266,677		4,836		—		32,579		851		38,266
POS-HIMETAL Co., Ltd.		5,267		2,313		7,580		80,988		—		—		—		80,988
Daewoo International Corporation		1,707,132		20,605		1,727,737		70,065		—		—		1,656		71,721
POSCO America Corporation		362,592		2		362,594		—		—		—		179		179
POSCO Canada Ltd.		—		—		—		82,489		—		—		—		82,489
POSCO Asia Co., Ltd.		1,010,153		53		1,010,206		96,937		—		8,881		668		106,486
POSCO (Thailand) Company Ltd.		24,771		12		24,783		—		—		—		8		8
Qingdao Pohang Stainless Steel Co., Ltd.		34,895		2		34,897		—		—		—		—		—
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		59,460		—		59,460		—		—		—		—		—
POSCO-Japan Co., Ltd.		719,380		—		719,380		6,362		459		3		447		7,271
POSCO-India Pune Processing Center. Pvt. Ltd.		60,180		62		60,242		—		—		—		—		—
POSCO-MEXICO S.A. DE C.V.		136,055		775		136,830		—		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		111,783		581		112,364		—		—		—		—		—
DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.		—		—		—		45,492		—		—		11,513		57,005
Others		318,813		6,526		325,339		64,950		25,678		9,715		30,280		130,623
		6,039,252		76,740		6,115,992		1,365,367		722,264		334,387		169,829		2,591,847
Associates and joint ventures (*3)
SNNC Co., Ltd.		2,043		5,273		7,316		163,758		—		—		5		163,763
POSCO PLANTEC Co., Ltd. (*4) (formerly, SUNGJIN GEOTEC Co., Ltd.)		8,400		24		8,424		1,500		37,355		6,347		2,658		47,860
POSCHROME (PROPRIETARY) LIMITED		—		—		—		30,496		—		—		—		30,496
PT. POSMI Steel Indonesia		1,840		—		1,840		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		1,379		—		1,379		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		9,519		—		9,519		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,396		—		1,396		—		—		—		—		—
Others		4		29,466		29,470		2,103		—		—		—		2,103
		24,581		34,763		59,344		197,857		37,355		6,347		2,663		244,222
	￦	6,063,833		111,503		6,175,336		1,563,224		759,619		340,734		172,492		2,836,069

(*1) Sales and others include sales and insignificant other non-operating income. Sales are mainly sales of steel products and these are priced on an arm’s length basis.

(*2) Purchases and others include purchases and overhead costs. Purchases and others are mainly related to purchases of construction services and purchases of raw materials to manufacture steel products. These are priced on an arm’s length basis.

(*3) As of June 30, 2014, the Company provided guarantees to related parties (Note 34).

(*4) Sungjin Geotec Co., Ltd. merged with POSCO Plant Engineering Co., Ltd. and changed its name to POSCO PLANTEC Co., Ltd.

43

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) For the six-month period ended June 30, 2013

	Sales and others						Purchase and others
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	￦	6,474		3,104		9,578		3,042		1,719,415		3,750		6,844		1,733,051
POSCO Processing & Service Co., Ltd.		456,189		—		456,189		651,669		—		—		365		652,034
POSCO COATED & COLOR STEEL Co., Ltd.		234,620		—		234,620		—		—		4,694		82		4,776
POSCO PLANTEC Co., Ltd.		2,373		19		2,392		1,499		61,936		13,733		2,492		79,660
POSCO ICT		609		61		670		45		126,273		13,611		71,192		211,121
eNtoB Corporation		—		—		—		106,403		3,147		76		9,664		119,290
POSCO CHEMTECH		246,231		8,454		254,685		234,608		13,862		134,068		800		383,338
POSCO M-TECH		8,785		25		8,810		71,855		544		104,057		244		176,700
POSCO Energy CO., LTD		41,878		298		42,176		—		—		—		5		5
POSCO TMC Co., Ltd.		94,820		—		94,820		—		—		418		559		977
POSCO AST Co., Ltd.		245,570		—		245,570		3,651		—		29,542		449		33,642
POS-HIMETAL Co., Ltd.		9,773		62		9,835		75,941		—		—		—		75,941
Daewoo International Corporation		1,726,238		—		1,726,238		3,337		—		—		2,364		5,701
POSCO America Corporation		289,413		1		289,414		—		—		—		260		260
POSCO Canada Ltd.		—		—		—		63,226		—		—		—		63,226
POSCO Asia Co., Ltd.		1,015,630		108		1,015,738		30,105		166		—		969		31,240
POSCO (Thailand) Company Ltd.		23,045		5,750		28,795		—		—		—		35		35
Qingdao Pohang Stainless Steel Co., Ltd.		33,047		—		33,047		—		—		—		14		14
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		70,832		2		70,834		—		—		—		—		—
POSCO-Japan Co., Ltd.		574,209		—		574,209		5,639		—		—		880		6,519
POSCO-India Pune Processing Center. Pvt. Ltd.		69,071		6		69,077		—		—		—		—		—
POSCO-MEXICO S.A. DE C.V.		147,446		956		148,402		—		—		—		460		460
POSCO Maharashtra Steel Pvt. Ltd.		89,596		621		90,217		—		—		—		157		157
DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.		—		—		—		38,339		—		—		—		38,339
Others		259,982		7,793		267,775		45,895		16,087		16,102		48,648		126,732
		5,645,831		27,260		5,673,091		1,335,254		1,941,430		320,051		146,483		3,743,218
Associates and joint ventures
SNNC Co., Ltd.		738		284		1,022		213,740		—		—		—		213,740
POSCO PLANTEC Co., Ltd. (formerly, SUNGJIN GEOTEC Co., Ltd.)		5,993		—		5,993		—		—		—		—		—
POSCHROME (PROPRIETARY) LIMITED		—		—		—		32,603		—		—		—		32,603
PT. POSMI Steel Indonesia		4,606		56		4,662		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		2,065		—		2,065		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		8,419		—		8,419		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		4,101		—		4,101		—		—		—		—		—
Others		541		26,305		26,846		1,668		—		—		174		1,842
		26,463		26,645		53,108		248,011		—		—		174		248,185
	￦	5,672,294		53,905		5,726,199		1,583,265		1,941,430		320,051		146,657		3,991,403

44

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(b) Significant transactions with related companies for the three-month periods ended June 30, 2014 and 2013 were as follows:

1) For the three-month period ended June 30, 2014

	Sales and others						Purchase and others
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	￦	5,126		91		5,217		—		162,999		1,170		1,547		165,716
POSCO Processing & Service Co., Ltd.		262,753		—		262,753		213,359		—		—		155		213,514
POSCO COATED & COLOR STEEL Co., Ltd.		105,886		1		105,887		—		—		2,841		36		2,877
POSCO ICT		380		2,486		2,866		—		22,978		6,420		42,509		71,907
POSMATE Co., Ltd.		129		2,017		2,146		78		—		3,970		8,221		12,269
eNtoB Corporation		—		—		—		64,674		1,019		22		3,814		69,529
POSCO CHEMTECH		138,227		10,493		148,720		120,529		1,298		76,782		171		198,780
POSCO M-TECH		75		16		91		26,642		397		51,051		4,455		82,545
POSCO Energy CO., LTD		48,472		299		48,771		—		671		—		—		671
POSCO TMC Co., Ltd.		65,517		—		65,517		—		—		251		343		594
POSCO AST		134,277		—		134,277		3,114		—		17,681		601		21,396
POS-HIMETAL Co., Ltd.		2,258		1,128		3,386		40,541		—		—		—		40,541
Daewoo International Corporation		816,532		1		816,533		22,988		—		—		104		23,092
POSCO America Corporation		192,983		—		192,983		—		—		—		174		174
POSCO Canada Ltd.		—		—		—		35,119		—		—		—		35,119
POSCO Asia Co., Ltd.		495,611		30		495,641		56,743		—		7,502		589		64,834
POSCO (Thailand) Company Ltd.		12,017		8		12,025		—		—		—		1		1
Qingdao Pohang Stainless Steel Co., Ltd.		20,811		2		20,813		—		—		—		—		—
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		27,068		—		27,068		—		—		—		—		—
POSCO-Japan Co., Ltd.		358,272		—		358,272		4,087		459		3		250		4,799
POSCO-India Pune Processing Center. Pvt. Ltd.		31,904		4		31,908		—		—		—		—		—
POSCO-MEXICO S.A. DE C.V.		74,931		—		74,931		—		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		47,316		367		47,683		—		—		—		—		—
DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.		—		—		—		16,914		—		—		11,513		28,427
Others		153,692		6,392		160,084		39,725		21,109		3,763		15,416		80,013
		2,994,237		23,335		3,017,572		644,513		210,930		171,456		89,899		1,116,798
Associates and joint ventures
SNNC Co., Ltd.		1,480		5,210		6,690		75,512		—		—		—		75,512
POSCO PLANTEC Co., Ltd. (formerly, SUNGJIN GEOTEC Co., Ltd.)		5,580		6		5,586		928		23,972		3,387		1,944		30,231
POSCHROME (PROPRIETARY) LIMITED		—		—		—		14,916		—		—		—		14,916
PT. POSMI Steel Indonesia		881		—		881		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		605		—		605		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		5,076		—		5,076		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,396		—		1,396		—		—		—		—		—
Others		1		29,465		29,466		1,070		—		—		—		1,070
		15,019		34,681		49,700		92,426		23,972		3,387		1,944		121,729
	￦	3,009,256		58,016		3,067,272		736,939		234,902		174,843		91,843		1,238,527

45

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) For the three-month period ended June 30, 2013

	Sales and others						Purchase and others
(in millions of Won)	Sales		Others		Total		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	￦	3,248		2,964		6,212		2,890		869,888		1,178		—		873,956
POSCO Processing & Service Co., Ltd.		246,811		—		246,811		286,850		—		—		218		287,068
POSCO COATED & COLOR STEEL Co., Ltd.		122,541		—		122,541		—		—		2,447		55		2,502
POSCO PLANTEC Co., Ltd.		2,367		4		2,371		787		27,332		6,648		966		35,733
POSCO ICT		289		57		346		—		81,168		6,689		34,624		122,481
eNtoB Corporation		—		—		—		54,705		992		38		5,377		61,112
POSCO CHEMTECH		120,806		3,999		124,805		114,328		6,795		65,287		516		186,926
POSCO M-TECH		4,428		2		4,430		43,757		544		52,783		—		97,084
POSCO Energy CO., LTD		22,765		165		22,930		—		—		—		—		—
POSCO TMC Co., Ltd.		48,067		—		48,067		—		—		222		351		573
POSCO AST Co., Ltd.		126,474		—		126,474		1,935		—		15,455		363		17,753
POS-HIMETAL Co., Ltd.		4,261		36		4,297		43,101		—		—		—		43,101
Daewoo International Corporation		821,038		—		821,038		1,900		—		—		817		2,717
POSCO America Corporation		175,695		—		175,695		—		—		—		201		201
POSCO Canada Ltd.		—		—		—		46,342		—		—		—		46,342
POSCO Asia Co., Ltd.		490,966		45		491,011		17,576		130		—		685		18,391
POSCO (Thailand) Company Ltd.		4,699		—		4,699		—		—		—		2		2
Qingdao Pohang Stainless Steel Co., Ltd.		21,108		—		21,108		—		—		—		14		14
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		32,665		2		32,667		—		—		—		—		—
POSCO-Japan Co., Ltd.		293,836		—		293,836		3,916		—		—		335		4,251
POSCO-India Pune Processing Center. Pvt. Ltd.		36,700		1		36,701		—		—		—		—		—
POSCO-MEXICO S.A. DE C.V.		74,441		—		74,441		—		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		54,457		621		55,078		—		—		—		117		117
DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.		—		—		—		19,523		—		—		—		19,523
Others		142,633		—		142,633		29,092		7,883		8,224		24,990		70,189
		2,850,295		7,896		2,858,191		666,702		994,732		158,971		69,631		1,890,036
Associates and joint ventures
SNNC Co., Ltd.		354		222		576		108,285		—		—		—		108,285
POSCO PLANTEC Co., Ltd. (formerly, SUNGJIN GEOTEC Co., Ltd.)		3,686		—		3,686		—		—		—		—		—
POSCHROME (PROPRIETARY) LIMITED		—		—		—		17,051		—		—		—		17,051
PT. POSMI Steel Indonesia		2,631		56		2,687		—		—		—		—		—
POSK (PingHu) Steel Processing Center Co., Ltd.		867		—		867		—		—		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		5,691		—		5,691		—		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,532		—		1,532		—		—		—		—		—
Others		3		26,247		26,250		697		—		—		—		697
		14,764		26,525		41,289		126,033		—		—		—		126,033
	￦	2,865,059		34,421		2,899,480		792,735		994,732		158,971		69,631		2,016,069

46

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(c) The related account balances of significant transactions with related companies as of June 30, 2014 and December 31, 2013 are as follows:

1) June 30, 2014

	Receivables						Payables
(in millions of Won)	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	￦	1,817		72,803		74,620		—		50,830		41		50,871
POSCO Processing & Service Co., Ltd.		91,029		45		91,074		9,111		738		—		9,849
POSCO COATED & COLOR STEEL Co., Ltd.		63,859		101		63,960		—		5		1,693		1,698
POSCO ICT		—		49		49		408		35,401		7,137		42,946
POSMATE Co., Ltd.		—		1,631		1,631		319		1,227		4,272		5,818
eNtoB Corporation		—		—		—		8,933		11,208		13		20,154
POSCO CHEMTECH		46,036		3,714		49,750		51,334		15,362		17,022		83,718
POSCO M-TECH		—		19		19		7,609		7,641		27,455		42,705
POSCO Energy CO., LTD		17,142		1,450		18,592		—		—		1,336		1,336
POSCO TMC Co., Ltd.		28,592		15		28,607		—		10		116		126
POSCO AST Co., Ltd.		52,451		26		52,477		—		5,669		6,006		11,675
POS-HIMETAL Co., Ltd.		—		1,215		1,215		—		11,528		7		11,535
Daewoo International Corp.		104,753		1,253		106,006		14		—		—		14
POSCO America Corporation		54,288		—		54,288		—		—		—		—
POSCO Asia Co., Ltd.		153,223		2,059		155,282		13,487		—		—		13,487
POSCO (Thailand) Company Ltd.		2,605		—		2,605		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		12,117		—		12,117		—		—		—		—
POSCO-Japan Co., Ltd.		36,156		89		36,245		977		459		—		1,436
POSCO-India Pune Processing Center. Pvt. Ltd.		14,944		—		14,944		—		—		—		—
POSCO MEXICO S.A. DE C.V.		97,526		406		97,932		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		147,437		6,415		153,852		—		—		—		—
Others		66,072		9,023		75,095		13,509		10,800		3,857		28,166
		990,047		100,313		1,090,360		105,701		150,878		68,955		325,534
Associates and joint ventures
SNNC Co., Ltd.		168		26		194		22,972		—		—		22,972
POSCO Plant Engineering Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)		1,790		20		1,810		2,062		1,393		10		3,465
LLP POSUK Titanium		—		3,908		3,908		—		—		—		—
Others		—		9,228		9,228		386		—		1		387
		1,958		13,182		15,140		25,420		1,393		11		26,824
	￦	992,005		113,495		1,105,500		131,121		152,271		68,966		352,358

47

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

2) December 31, 2013

	Receivables						Payables
(in millions of Won)	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	￦	40		110,955		110,995		—		105,603		—		105,603
POSCO Processing & Service Co., Ltd.		103,400		73		103,473		17,914		683		—		18,597
POSCO COATED & COLOR STEEL Co., Ltd.		69,260		65		69,325		—		59		1,434		1,493
POSCO ICT		75		123		198		—		51,247		—		51,247
POSMATE Co., Ltd.		489		1,533		2,022		141		3,274		1,058		4,473
eNtoB Corporation		—		—		—		8,057		10,311		—		18,368
POSCO CHEMTECH		46,943		4,313		51,256		35,829		6,983		8,663		51,475
POSCO M-TECH		18		28		46		12,020		21,326		10,799		44,145
POSCO Energy CO., LTD		14,733		2,894		17,627		—		421		—		421
POSCO TMC Co., Ltd.		20,510		26		20,536		—		16		50		66
POSCO AST Co., Ltd.		85,501		53		85,554		—		3,004		5,238		8,242
POS-HIMETAL Co., Ltd.		1,721		12		1,733		—		12,624		—		12,624
Daewoo International Corp.		148,383		878		149,261		9,319		—		—		9,319
POSCO America Corporation		57,554		—		57,554		—		—		—		—
POSCO Canada Ltd.		—		—		—		12,323		—		—		12,323
POSCO Asia Co., Ltd.		134,602		142		134,744		2,063		—		—		2,063
POSCO (Thailand) Company Ltd.		6,052		7		6,059		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		3,329		—		3,329		—		—		—		—
POSCO-Japan Co., Ltd.		73,992		—		73,992		862		108		1		971
POSCO-India Pune Processing Center. Pvt. Ltd.		8,117		—		8,117		—		—		—		—
POSCO MEXICO S.A. DE C.V.		100,016		76		100,092		—		—		—		—
POSCO Maharashtra Steel Pvt. Ltd.		55,392		3,218		58,610		—		—		—		—
Others		54,357		8,887		63,244		6,523		15,421		1,647		23,591
		984,484		133,283		1,117,767		105,051		231,080		28,890		365,021
Associates and joint ventures
SNNC Co., Ltd.		140		40		180		16,669		—		—		16,669
POSCO PLANTEC Co., Ltd. (formerly, SUNGJIN GEOTEC Co., Ltd.)		879		46		925		353		—		—		353
POSCHROME (PROPRIETARY) LIMITED		—		67		67		—		—		—		—
LLP POSUK Titanium		—		4,066		4,066		—		—		—		—
Others		—		17		17		319		2		—		321
		1,019		4,236		5,255		17,341		2		—		17,343
	￦	985,503		137,519		1,123,022		122,392		231,082		28,890		382,364

(d) For the six-month periods ended June 30, 2014 and 2013, details of compensation to key management officers were as follows:

(in millions of Won)	June 30, 2014		June 30, 2013
Short-term benefits	￦	55,740		60,641
Retirement benefits		10,301		13,694
Long-term benefits		14,524		16,161
	￦	80,565		90,496

48

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

34. Commitments and Contingencies

(a) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of June 30, 2014, are as follows:

(in millions of Won)
Guarantors	Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent
[The Company]
POSCO	POSCO(Guangdong) Automotive Steel Co., Ltd.	SMBC and others	USD	122,600,000		124,365
	POSCO Investment Co., Ltd.	BOC	CNY	350,000,000		57,096
		BOA and others	USD	330,000,000		334,752
	POSCO Maharashtra Steel Private Limited	Export-Import Bank of Korea and others	USD	566,069,000		574,220
	POSCO VST Co., Ltd.	ANZ and others	USD	65,000,000		65,936
	POSCO MEXICO S.A. DE C.V.	HSBC and others	USD	244,725,000		248,249
	POSCO-VIETNAM Co., Ltd.	Export-Import Bank of Korea	USD	196,000,000		198,822
	Zeus (Cayman) Ltd.	Creditor	JPY	8,404,595,600		84,046
	Zhangjiagang Pohang Stainless Steel Co., Ltd.	MIZUHO and others	USD	130,000,000		131,872
	POSCO ASSAN TST STEEL INDUSTRY	SMBC and others	USD	188,392,500		191,105
	POSCO Electrical Steel India Private Limited	ING and others	USD	83,784,000		84,990
	PT. KRAKATAU POSCO	Export-Import Bank of Korea and others	USD	1,350,300,000		1,369,744
Daewoo International Corporation	Daewoo Paper Manufacturing Co., Ltd.	HSBC	USD	12,500,000		12,680
	DAEWOO TEXTILE BUKHARA LLC	Export-Import Bank of Korea	USD	20,000,000		20,288
	DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.	NOVA SCOTIA	USD	30,000,000		30,432
	POSCO ASSAN TST STEEL INDUSTRY	ING and others	USD	20,932,500		21,234
	Brazil Sao Paulo Steel Processing Center	SMBC and others	USD	40,000,000		40,576
	Daewoo International (Deutschland) GmbH.	Shinhan Bank	EUR	15,000,000		20,762
	Daewoo International INDIA Private Ltd.	Shinhan Bank	USD	20,000,000		20,288
	PT. Bio Inti Agrindo	Export-Import Bank of Korea	USD	56,000,000		56,806
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	Woori Bank and others	USD	135,000,000		136,944
	INTERNATIONAL BUSINESS CENTER CORPORATION	Export-Import Bank of Korea	USD	20,000,000		20,288
	POSCO E&C Vietnam Co., Ltd.	Export-Import Bank of Korea	USD	16,500,000		16,738
	SANTOSCMI S.A.	CITI Equador and others	USD	46,000,000		46,662
POSCO Processing & Service	POSCO Canada Ltd.	Hana Bank	USD	12,484,500		12,664
POSCO Coated & Color Steel Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO Investment Co., Ltd.	USD	7,986,947		8,102
POSCO ICT	PT. POSCO ICT Indonesia	POSCO Investment Co., Ltd.	USD	3,000,000		3,043
	VECTUS LIMITED	KEB bank	GBP	3,500,000		6,048
		POSCO Investment Co., Ltd.	USD	4,000,000		4,058
POSCO ENERGY CO., LTD.	PT. KRAKATAU POSCO ENERGY	Export-Import Bank of Korea and others	USD	193,900,000		196,692
	TECHREN Solar, LLC	Woori Bank	USD	3,000,000		3,043
POSCO Engineering Co., Ltd.		KEB Bank and others	USD	12,818,876		13,003
	PT PEN INDONESIA	KEB Bank and others	IDR	138,640,155,133		11,729
	POSCO ENGINEERING (THAILAND) Co., Ltd.	Citi Bank Woori Bank and others	USD THB	15,300,000 6,342,881,200		15,520 198,278
POSCO-Japan Co., Ltd.	POSCO-JEPC Co., Ltd.	Mizuho Bank and others	JPY	1,209,497,092		12,095
	POSCO-JWPC Co., Ltd.	Higo bank and others	JPY	974,000,000		9,740
	Xenesys Inc.	Aozora Bank	JPY	250,000,000		2,500
DAEWOO TEXTILE FERGANA LLC	DAEWOO TEXTILE BUKHARA LLC	Bukhara TEX	USD	3,037,183		3,081
DAEWOO TEXTILE BUKHARA LLC	DAEWOO TEXTILE FERGANA LLC	NBU	USD	6,127,060		6,215
POSCO E&C CHINA Co., Ltd.	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	Woori Bank(Beijing branch)	USD	33,000,000		33,475
POSCO-China Holding Corp.	POSCO YongXin Rare Earth Metal Co., Ltd.	Bank of Communications	CNY	71,820,000		11,716
	DONG FANG JIN HONG	KEB Bank	CNY	1,300,000,000		212,069
POSCO CHEMTECH	PT. Krakatau Posco Chemtech Calcination and others	KEB Bank and others	USD	39,484,000		40,053
Posco Specialty Steel Co., Ltd.	POSCO SS-VINA	Export-Import Bank of Korea	USD	354,409,800		359,513
SANTOSCMI S.A.	COMPANIADEAUTOMATIZACION &CONTROL, GENESYS S.A.	Banco de Guayaquil and others	USD	1,550,000		1,572

49

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(in millions of Won)					Won
Guarantors	Guarantee beneficiary	Financial institution	Foreign currency		equivalent
[Associates and joint ventures]
POSCO	United Spiral Pipe, LLC	Shinhan Bank	USD	24,500,000		24,853
	LLP POSUK Titanium	KB Bank	USD	15,000,000		15,216
Daewoo International Corporation	DMSA, AMSA	Export-Import Bank of Korea and others	USD	165,133,333		167,511
	GLOBAL KOMSCO Daewoo LLC	Export-Import Bank of Korea and others	USD	8,050,000		8,166
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Posco e&c Songdo International Building	Hana Bank and others	KRW	356,600		356,600
	CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd. and others	NH Bank and others	KRW	318,226		318,226
POSCO Engineering Co., Ltd.	PT Wampu Electric Power	Woori Bank	USD	344,848		350
	PT Wampu Electric Power and others	Export-Import Bank of Korea and others	USD	7,652,000		7,762
POSCO Processing & Service	Sebang Steel Co., Ltd.	Shinhan Bank	JPY	245,000,000		2,450
POSCO ICT	UITrans LRT Co., Ltd.	KB Bank	KRW	76,000		76,000
	Incheon-Kimpo highway Co.,Ltd.	KDB Bank	KRW	145,000		145,000
	CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.	NH Bank	KRW	2,528		2,528
Daewoo(China) Co., Ltd.	SHANGHAI LANSHENG DAEWOO CORP.	Bank of Communications	CNY	100,000,000		16,313
POSCO CHEMTECH	PT.INDONESIA POS CHEMTECH CHOSUN Ref	KEB Bank	USD	6,000,000		6,086
[Others]
Daewoo International Corporation	Ambatovy Project Investments Limited	Export-Import Bank of Korea	USD	65,454,545		66,397
	Sherritt International Corporation	Export-Import Bank of Korea	USD	21,818,182		22,132
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	The union of City environment	NH Bank and others	KRW	689,450		689,450
	THE GALE INVESTMENTS COMPANY, L.L.C.	Woori Bank	USD	50,000,000		50,720
POSCO ICT	BTL business and others	Kyobo Life Insurance Co.,Ltd and others	KRW	2,055,936		2,055,936
	SMS Energy and others	Hana Bank and others	KRW	163,360		163,360
POSCO M-TECH	PYUNGSAN SI Co., Ltd	Seoul Guarantee Insurance Co., Ltd.	KRW	66		66
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government)	Woori Bank	AUD	8,023,765		7,665
POSCO Engineering Co., Ltd	Kwanma Solar Co., Ltd. and others	Hana Bank and others	KRW	57,430		57,430
	Hyundai ENG Co., Ltd.	Engineering Financial Cooperative	KRW	32,378		32,378
			USD	4,747,854,274		4,816,218
			AUD	8,023,765		7,665
			CNY	1,821,820,000		297,194
			EUR	15,000,000		20,762
			GBP	3,500,000		6,048
			IDR	138,640,155,133		11,729
			JPY	11,083,092,692		110,831
			KRW	3,896,974		3,896,974
			THB	6,342,881,200		198,278

(b) POSCO ENGINEERING & CONSTRUCTION Co., Ltd. has provided the completion guarantees for Samsung C&T Corporation amounting to ￦1,105,813 million while Samsung C&T Corporation has provided the construction guarantees or payment guarantees on customers’ borrowings on behalf of POSCO ENGINEERING & CONSTRUCTION Co., Ltd. amounting to ￦781,652 million as of June 30, 2014.

50

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(c) Other commitments

Details of other commitments of the Company as of June 30, 2014, are as follows:

POSCO	POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2014, 165 million tons of iron ore and 7 million tons of coal remained to be purchased under such long-term contracts.
	POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.
	As of June 30, 2014, POSCO entered into commitments with Korea National Oil Corporation for long- term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 6.58 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. POSCO is not liable for the repayment of full or part of the money borrowed if the respective projects fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.
	POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Korea Development Bank, for seamless funding to POSCO Energy Co., Ltd. under construction of new power plant.
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	As of June 30, 2014, POSCO ENGINEERING & CONSTRUCTION Co., LTD. has comprehensive loan agreements of up to ￦283.5 billion and USD 268 million with Woori Bank and ￦98 billion and USD 743 million with Korea Exchange Bank. Also, POSCO E&C Co., Ltd. has bank overdraft agreements of up to ￦20 billion with Woori Bank which is included in the limit of comprehensive loan agreements and ￦3 billion with Korea Exchange Bank.
POSCO ICT	As of June 30, 2014, in relation to contract enforcement, POSCO ICT Co., Ltd. was provided with ￦55,822 million and ￦39,066 million guaranties from Korea Software Financial Cooperative and Seoul Guarantee Insurance, respectively.

51

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

(d) Litigation in progress

As of June 30, 2014, the Company and certain subsidiaries are defendants in legal actions arising from the normal course of business.

1) Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

In April 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of ￦986 billion. Through trials to June 30, 2014, the Company submitted its responses that the Japan court did not have jurisdiction on this lawsuit as it should be judged by Korean law and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of June 30, 2014, the Japan court has not made any judgments on this matter. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of June 30, 2014.

In addition, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the New Jersey federal court, United States, against POSCO and POSCO America Co., Ltd., a subsidiary of POSCO, claiming infringement of intellectual property rights related to the production of grain oriented electrical steel sheets. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of June 30, 2014. An estimate of possible loss cannot be reliably determined because the lawsuit is still in the discovery stage and no claim amount has been specified.

2) Other lawsuits and claims

The Company is involved in 190 other lawsuits and claims for alleged damages aggregating to ￦363 billion as of June 30, 2014 which arose in the ordinary course of business. The Company made a reliable estimate for 10 lawsuits among the above 190 lawsuits and claims by considering the possibility and amount of outflow of resources and recognized ￦37 billion as provisions for legal contingencies and claims (note 18). Since the Company believes that the Company does not have a present obligation as a result of the lawsuits and claims except the 10 lawsuits for which provision is recognized, the Company has not recorded any provisions for the other lawsuits as of June 30, 2014.

(e) Other contingencies

Company	Description
POSCO	POSCO has provided two blank checks to Korea Resources Corporation and six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for outstanding loans.
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	As of June 30, 2014, POSCO E&C Co., Ltd. has provided twenty-six blank checks and ten blank promissory notes as collateral for agreements and outstanding loans.
Daewoo International Corporation	As of June 30, 2014, Daewoo International Corporation has provided forty-five blank promissory notes and thirteen blank checks to Korea National Oil Corporation as collateral for the guarantee on performance for contracts and others.
POSCO ICT	As of June 30, 2014, POSCO ICT has provided two blank promissory notes and ten blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

52

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

35. Cash Flows from Operating Activities

Adjustments for operating cash flows for the six-month periods ended June 30, 2014 and 2013 were as follows:

(in millions of Won)	June 30, 2014			June 30, 2013
Trade accounts and notes receivable	￦	(891,569	)		(466,091	)
Other financial assets		163,543			(7,829	)
Inventories		(1,192,340	)		557,680
Other current assets		(296,217	)		(33,709	)
Other long-term assets		(44,084	)		14,273
Trade accounts and notes payable		(70,736	)		(559,201	)
Other financial liabilities		(65,356	)		(62,101	)
Other current liabilities		258,609			241,415
Provisions		(98,405	)		(19,451	)
Payment of severance benefits		(91,000	)		(75,997	)
Plan assets		(37,810	)		(27,251	)
Other long-term liabilities		(50,436	)		(10,442	)
	￦	(2,415,801	)		(448,704	)

53

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2014, Continued

(Unaudited)

36. Operating Segments

(a) The Company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments— steel, construction, trading and other. The steel segment includes production of steel products and revenue of such products. The engineering and construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segment includes power generation, liquefied natural gas production, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2013.

(b) Information about reportable segments for the six-month periods ended June 30, 2014 and 2013 was as follows:

1) For the six-month period ended June 30, 2014

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	￦	15,669,104		10,507,270		4,070,253		1,897,073		32,143,700
Internal revenues		8,858,480		4,801,245		1,192,426		1,533,804		16,385,955
Total revenues		24,527,584		15,308,515		5,262,679		3,430,877		48,529,655
Segments profit		662,963		125,709		28,704		26,474		843,850

2) For the six-month period ended June 30, 2013

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	￦	16,210,989		8,536,206		2,957,586		2,480,211		30,184,992
Internal revenues		8,022,724		3,655,551		2,291,469		1,449,141		15,418,885
Total revenues		24,233,713		12,191,757		5,249,055		3,929,352		45,603,877
Segments profit		699,888		20,892		68,247		133,520		922,547

(c) Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the six-month periods ended June 30, 2014 and 2013 were as follows:

(in millions of Won)	June 30, 2014			June 30, 2013
Total profit for reportable segments	￦	843,850			922,547
Corporate fair value adjustments		(77,936	)		(26,784	)
Elimination of inter-segment profits		(223,110	)		(363,001	)
Income tax expense		445,604			173,625
Profit before income tax expense	￦	988,408			706,387

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