Exhibit 99.1

POSCO

Non-Consolidated Financial Statements
December 31, 2009 and 2008

(With Independent Auditors’ Report Thereon)

Table of Contents

	Page
Independent Auditors’ Report	1
Non-Consolidated Financial Statements
Non-Consolidated Statements of Financial Position	3
Non-Consolidated Statements of Income	5
Non-Consolidated Statements of Appropriation of Retained Earnings	6
Non-Consolidated Statements of Changes in Equity	7
Non-Consolidated Statements of Cash Flows	8
Notes to the Non-Consolidated Financial Statements	10
Independent Accountants’ Review Report on Internal Accounting Control System	65
Report on the Operations of Internal Accounting Control System	67

Independent Auditors’ Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders of
POSCO:

We have audited the accompanying non-consolidated statements of financial position of POSCO (the “Company”) as of December 31, 2009 and 2008, and the related non-consolidated statements of income, appropriation of retained earnings, changes in equity and cash flows for the years ended December 31, 2009 and 2008. These non-consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the non-consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall non-consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008 and the results of its operations, appropriation of its retained earnings, the changes in its equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea.

Without qualifying our opinion, we draw attention to the following:

As discussed in note 2 to the non-consolidated financial statements, accounting principles and auditing standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations, changes in equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such non-consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting procedures and auditing standards and their application in practice.

Seoul, Korea
February 8, 2009

This report is effective as of February 8, 2010, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying non-consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

POSCO
Non-Consolidated Statements of Financial Position
As of December 31, 2009 and 2008

(in millions of Won)	2009			2008
Assets
Current assets
Cash and cash equivalents (notes 3 and 26)	W	626,782			941,687
Short-term financial instruments (note 3)		5,581,594			1,524,598
Trading securities (note 6)		505,811			1,236,185
Current portion of available-for- sale securities (note 7)		20,230			—
Current portion of held-to-maturity securities (note 7)		20,000			20,000
Trade accounts and notes receivable, net of allowance for doubtful accounts (notes 4, 26 and 30)		2,683,909			3,228,679
Inventories (note 5)		2,996,326			6,415,601
Other accounts receivable, net of allowance for doubtful accounts (notes 4, 26 and 30)		126,942			278,301
Deferred income tax assets (note 27)		286,075			—
Other current assets (note 11)		70,395			48,173
Total current assets		12,918,064			13,693,224
Property, plant and equipment at cost (notes 8 and 31)		40,071,426			36,504,565
Less accumulated depreciation		(23,425,832	)		(22,038,647	)
Property, plant and equipment, net		16,645,594			14,465,918
Investment securities, net (note 7)		10,187,813			8,625,939
Intangible assets, net (notes 9 and 31)		151,829			170,095
Long-term trade accounts receivable, net of allowance for doubtful accounts (note 4)		1,307			4,154
Long-term financial instruments (note 3)		40			40
Other long-term assets, net of allowance for doubtful accounts (notes 3 and 26)		88,118			74,083
Total non-current assets		27,074,701			23,340,229
Total assets	W	39,992,765			37,033,453

See accompanying notes to non-consolidated financial statements.

3

POSCO
Non-Consolidated Statements of Financial Position
As of December 31, 2009 and 2008

(in millions of Won)	2009			2008
Liabilities
Trade accounts payable (notes 26 and 30)	W	739,746			1,108,856
Short-term borrowings (notes 12 and 26)		430,910			340,827
Current portion of long-term debt, net of discount on debentures issued (notes 12, 13 and 26)		1,065			203,641
Accrued expenses		145,484			139,494
Other accounts payable (notes 26 and 30)		993,120			694,681
Withholdings		51,075			40,042
Income tax payable		290,638			1,628,262
Deferred income tax liabilities (note 27)		—			90,307
Other current liabilities (note 15)		33,804			37,088
Total current liabilities		2,685,842			4,283,198
Long-term debt, net of current portion and discount on debentures issued (notes 13 and 26)		5,681,509			4,584,681
Accrued severance benefits, net (note 14)		185,187			260,368
Deferred income tax liabilities (note 27)		400,276			36,533
Other long-term liabilities		88,660			85,016
Total non-current liabilities		6,355,632			4,966,598
Total liabilities		9,041,474			9,249,796
Shareholders’ Equity
Capital stock (note 19)		482,403			482,403
Capital surplus (note 20)		4,404,069			4,291,355
Capital adjustments (note 21)		(2,403,263	)		(2,502,014	)
Accumulated other comprehensive income		524,824			51,790
Retained earnings (note 22)		27,943,258			25,460,123
Total shareholders’ equity		30,951,291			27,783,657
Total liabilities and shareholders’ equity	W	39,992,765			37,033,453

See accompanying notes to non-consolidated financial statements.

4

POSCO
Non-Consolidated Statements of Income
For the years Ended December 31, 2009 and 2008

(in millions of Won except per share amounts)	2009		2008
Sales (note 31)	W	26,953,945		30,642,409
Cost of goods sold (note 24)		22,574,304		22,706,984
Gross profit		4,379,641		7,935,425
Selling and administrative expenses (note 25)		1,231,642		1,395,366
Operating profit		3,147,999		6,540,059
Non-operating income
Interest income		208,473		191,086
Dividend income		60,114		95,382
Gain on valuation of trading securities		5,811		16,185
Gain on disposal of trading securities		21,103		52,923
Gain on disposal of property, plant and equipment		21,274		11,970
Gain on valuation of derivatives (note 17)		7,065		17,985
Gain on disposal of derivatives transactions (note 17)		33,458		1,356
Gain on foreign currency transactions		649,733		827,198
Gain on foreign currency translation		422,225		71,476
Equity in earnings of equity method accounted investments (note 7)		585,436		399,436
Reversal of allowance for doubtful accounts		417		7,655
Gain on disposal of other long-term assets		1,893		29,336
Reversal of stock compensation expense (note 18)		—		55,155
Others		49,256		102,425
		2,066,258		1,879,568
Non-operating expenses
Interest expense		288,575		143,160
Other bad debt expense		21		4,892
Loss on foreign currency transactions		722,956		987,361
Loss on foreign currency translation		15,406		694,011
Donations		106,410		112,856
Loss on disposal of property, plant and equipment		73,822		67,191
Loss on disposal of derivatives transactions (note 17)		19,281		526
Equity in losses of equity method accounted investments (note 7)		235,407		422,784
Loss on disposal of trade accounts and notes receivable		5,458		8,829
Loss on impairment of investments (note 7)		131,126		96,785
Others		33,270		51,702
		1,631,732		2,590,097
Income before income taxes		3,582,525		5,829,530
Income tax expense (note 27)		410,261		1,382,597
Net income	W	3,172,264		4,446,933
Basic earnings per share (note 29)	W	41,380		58,905

See accompanying notes to non-consolidated financial statements.

5

POSCO
Non-Consolidated Statements of Appropriation Retained Earnings
For the years Ended December 31, 2009 and 2008
(Dates of Appropriations : February 26, 2010 and February 27, 2009
for the years ended December 31, 2009 and 2008, respectively)

(in millions of Won)	2009			2008
Retained earnings before appropriation
Unappropriated retained earnings carried over from prior year	W	237,624			230,611
Interim dividends (note 23)		(114,855	)		(188,485	)
Dividends (ratio) per share
W1,500 (30%) in 2009
W2,500 (50%) in 2008
Net income		3,172,264			4,446,933
		3,295,033			4,489,059
Transfer from discretionary reserve
Reserve for technology and human resource development		391,667			351,667
Appropriations of retained earnings
Cash dividends (note 23)		500,714			574,274
Dividends (ratio) per share
W6,500 (130%) in 2009
W7,500 (150%) in 2008
Reserve for research and manpower development		800,000			—
Appropriated retained earnings for business expansion		2,000,000			3,800,000
Appropriated retained earnings for dividends		184,671			228,828
		3,485,385			4,603,102
Unappropriated retained earnings carried forward to subsequent year	W	201,315			237,624

See accompanying notes to non-consolidated financial statements.

6

POSCO
Non-Consolidated Statements of Changes in Equity
For the years ended December 31, 2009 and 2008

	Capital		Capital		Capital			Accumulated Other			Retained
(in millions of Won)	Stock		Surplus		Adjustments			Comprehensive Income			Earnings			Total
Balance as of January 1, 2008	W	482,403	W	4,128,839	W	(2,715,964	)	W	839,727		W	21,768,227		W	24,503,232
Year-end dividends		—		—		—			—			(566,552	)		(566,552	)
Net income		—		—		—			—			4,446,933			4,446,933
Interim dividends		—		—		—			—			(188,485	)		(188,485	)
Changes in capital surplus of equity method accounted investments		—		40,578		—			—			—			40,578
Acquisition of treasury stock		—		—		(36,832	)		—			—			(36,832	)
Disposal of treasury stock		—		121,938		250,782			—			—			372,720
Gain on valuation of avilable-for-sale securities, net		—		—		—			(1,140,947	)		—			(1,140,947	)
Changes in capital adjustments arising from equity method accounted investments		—		—		—			353,010			—			353,010
Balance as of December 31, 2008	W	482,403	W	4,291,355	W	(2,502,014	)	W	51,790		W	25,460,123		W	27,783,657

	Capital		Capital			Capital			Accumulated Other		Retained
(in millions of Won)	Stock		Surplus			Adjustments			Comprehensive Income		Earnings			Total
Balance as of January 1, 2009	W	482,403	W	4,291,355		W	(2,502,014	)	W	51,790	W	25,460,123		W	27,783,657
Year-end dividends		—		—			—			—		(574,274	)		(574,274	)
Net income		—		—			—			—		3,172,264			3,172,264
Interim dividends		—		—			—			—		(114,855	)		(114,855	)
Changes in capital surplus of equity method accounted investments		—		(4,578	)		—			—		—			(4,578	)
Disposal of treasury stock		—		117,292			98,751			—		—			216,043
Loss on valuation of avilable-for-sale securities, net		—		—			—			426,519		—			426,519
Changes in capital adjustments arising from equity method accounted investments		—		—			—			46,515		—			46,515
Balance as of December 31, 2009	W	482,403	W	4,404,069		W	(2,403,263	)	W	524,824	W	27,943,258		W	30,951,291

See accompanying notes to non-consolidated financial statements.

7

POSCO
Non-Consolidated Statements of Cash Flows
For the years Ended December 31, 2009 and 2008

(in millions of Won)	2009			2008
Cash flows from operating activities
Net income	W	3,172,264			4,446,933
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		2,059,548			1,908,805
Accrual of severance benefits		3,320			221,748
Gain on valuation of trading securities		(5,811	)		(16,185	)
Gain on disposal of trading securities		(21,103	)		(52,923	)
Gain on disposal of investments, net		(10,548	)		(13,882	)
Loss on disposal of property, plant and equipment, net		52,548			55,221
Gain on valuation of derivatives		(7,065	)		(17,985	)
Equity in earnings (losses) of equity method accounted investments, net		(350,029	)		23,348
(Reversal of) stock compensation expense		36,100			(55,155	)
Loss (gain) on foreign currency translation, net		(408,522	)		618,739
Loss on disposal of trade accounts and notes receivable		5,458			8,829
Provision for (reversal of) allowance for doubtful accounts, net		8,465			(2,762	)
Loss on impairment of investments		131,126			96,785
Other employee benefit		6,822			60,352
Interest expense		19,396			6,396
Interest income		(906	)		(2,423	)
Loss on valuation of inventories		691			4,003
Others, net		(8,796	)		4,001
		1,510,694			2,846,912
Changes in operating assets and liabilities
Trade accounts and notes receivable		528,932			(1,341,169	)
Other accounts receivable		152,419			(234,489	)
Accrued income		(15,591	)		(3,653	)
Prepaid expenses		318			(2,789	)
Inventories		3,413,323			(3,202,404	)
Trade accounts payable		(365,649	)		507,672
Other accounts payable		296,883			97,269
Accrued expenses		5,121			51,545
Income tax payable		(1,337,623	)		804,539
Advances received		452			407
Payment of severance benefits		(70,354	)		(53,043	)
Deferred income tax assets and liabilities		(171,287	)		(256,305	)
Deposits for severance benefits trust		(8,149	)		(133,747	)
Other current liabilities		(3,256	)		4,097
Dividends from equity method accounted investments		30,711			64,455
Others, net		4,249			17,197
		2,460,499			(3,680,418	)
Net cash provided by operating activities		7,143,457			3,613,427

See accompanying notes to non-consolidated financial statements.

8

POSCO
Non-Consolidated Statements of Cash Flows
For the years Ended December 31, 2009 and 2008

(in millions of Won)	2009			2008
Cash flows from investing activities
Disposal of short-term financial instruments	W	7,107,347			4,580,674
Disposal of trading securities		2,697,287			6,867,212
Redemption of current portion of held-to-maturity securities		40,000			272,000
Disposal of available-for-sale securities		17,093			1,700
Disposal of other long-term assets		16,495			88,066
Disposal of property, plant and equipment		23,095			37,573
Disposal of equity method accounted investments		—			8,606
Acquisition of short-term financial instruments		(11,164,342	)		(4,661,971	)
Acquisition of trading securities		(1,940,000	)		(6,795,000	)
Acquisition of available-for-sale securities		(568,241	)		(1,401,658	)
Acquisition of equity method accounted investments		(239,946	)		(318,843	)
Acquisition of current portion of held-to-maturity securities		(40,000	)		(100,000	)
Acquisition of other long-term assets		(12,273	)		(12,003	)
Acquisition of property, plant and equipment		(4,228,840	)		(3,172,009	)
Cost of removal of property, plant and equipment		(52,103	)		(36,032	)
Acquisition of intangible assets		(14,797	)		(20,986	)
Others, net		(17,005	)		(6,029	)
Net cash used in investing activities		(8,376,230	)		(4,668,700	)
Cash flows from financing activities
Proceeds from short-term borrowings		2,256,539			766,094
Proceeds from long-term borrowings		28,866			5,886
Proceeds from issuance of debentures		1,449,728			1,939,634
Proceeds from treasury stock		249,124			364,753
Increase in other long-term liabilities		25,363			27,357
Acquisition of treasury stock		—			(36,832	)
Repayment of short-term borrowings		(2,158,046	)		(542,074	)
Repayment of current portion of long-term debts		(203,807	)		(432,661	)
Payment of cash dividends		(689,129	)		(755,037	)
Decrease in other long-term liabilities		(39,727	)		(20,915	)
Others, net		(1,043	)		(10,279	)
Net cash provided by financing activities		917,868			1,305,926
Net increase (decrease) in cash and cash equivalents		(314,905	)		250,653
Cash and cash equivalents
Cash and cash equivalents at beginning of the year		941,687			691,034
Cash and cash equivalents at end of the year (note 3)	W	626,782			941,687

See accompanying notes to non-consolidated financial statements.

9

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

1. The Company

POSCO (the “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 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 December 31, 2009, the Company’s major shareholders are as follows:

			Percentage of
	Number of Shares		Ownership (%)
National Pension Service		4,427,612		5.08
Nippon Steel Corporation (*1)		4,394,712		5.04
Mirae Asset Investments Co., Ltd.		2,817,800		3.23
SK Telecom Co., Ltd.		2,481,310		2.85
Shinhan Financial Group Co.,Ltd. (*2)		2,297,551		2.64
Others		70,767,850		81.16
		87,186,835		100.00

(*1)	Nippon Steel Corporation has American Depositary Receipts (ADRs), each of which represents 0.25 share of POSCO’s common share which has par value of W5,000 per share.
(*2)	Includes number of shares held by its subsidiaries.

As of December 31, 2009, 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.

10

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements

Basis of Presenting Financial Statements

The Company maintains its accounting records in Korean won and prepares statutory non-consolidated financial statements in Korean language in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these non-consolidated financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying non-consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The Company prepares the non-consolidated financial statements in accordance with generally accepted accounting principles in the Republic of Korea.

Revenue recognition

The Company’s revenue categories consist of goods sold, and other income. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

Allowance for doubtful accounts

Allowance for doubtful accounts is estimated based on the analysis of individual accounts and past experience of collection and presented as a deduction from trade accounts and notes receivable.

When the terms of trade accounts and notes receivable (the principal, interest rate or term) are modified, either through a court order, such as a reorganization, or by mutual formal agreement, resulting in a reduction in the present value of the future cash flows due to the Company, the difference between the carrying value of the relevant accounts and notes receivable and the present value of the future cash flows is recognized as bad debt expense.

Inventories

The costs of inventories are determined using the moving-weighted average method. Valuation losses incurred when the market price of inventories falls below their carrying amount are reported as a contra inventory account and added to the cost of goods sold and losses incurred because of the difference between the quantity of inventories recorded in the financial statements and the actual quantity found shall be added to the cost of goods sold if it is incurred in the ordinary course of business. Loss on valuation of inventories amounting to W691 million for the year ended December 31, 2009, is added to the cost of goods sold.

11

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements, continued

Investments in securities

Upon acquisition, the Company classifies debt and equity securities (excluding investments in subsidiaries, associates and joint ventures) into the following categories: held-to-maturity, available-for-sale or trading securities. This classification is reassessed at the end of each reporting period.

Investments in debt securities where the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are acquired principally for the purpose of selling in the short term are classified as trading securities. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities.

A security is recognized initially at its acquisition cost, which includes the market value of the consideration given and any other transaction costs. After initial recognition, held-to-maturity securities are accounted for at amortized costs in the statements of financial position and trading and available-for-sale securities are accounted for at their fair values, however, non-marketable securities are accounted for at their acquisition costs if their fair values cannot be reliably estimated. The fair value of marketable securities is determined using quoted market prices as of the period end.

Trading securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of trading securities are included in the income statement in the period in which they arise. Available-for-sale securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available-for-sale securities are recognized as accumulated other comprehensive income, net of tax, directly in equity. Investments in available-for-sale securities that do not have readily determinable fair values are recognized at cost less impairment, if any. Held-to-maturity investments are carried at amortized cost with interest income and expense recognized in the income statement using the effective interest method.

The Company reviews investments in securities whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. Impairment losses are recognized when the reasonably estimated recoverable amounts are less than the carrying amount and it is not obviously evidenced that impairment is unnecessary.

Trading securities are presented as current assets. Available-for-sale securities, which mature within one year from the end of the reporting period or where the likelihood of disposal within one year from the end of the reporting period is probable, are presented as current assets. Held-to-maturity securities, which mature within one year from the end of the reporting period, are presented as current assets. All other available-for-sale securities and held-to-maturity securities are presented as long-term investments.

12

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements, continued

Equity method investments

Investments in equity securities of companies over which the Company exercises significant control or influence are recorded using the equity method of accounting. Differences between the initial purchase price and the Company’s initial proportionate ownership in the net book value of the investee are amortized using the straight-line method over its estimated useful life.

The Company’s share of its post-acquisition profits or losses in investments in associates and subsidiaries is recognized in the income statement, and its share of post-acquisition movements in equity is recognized in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of each investment. Changes in the carrying amount of an investment resulting from dividends by an associate or subsidiary are recognized when the associate or subsidiary declares the dividend. When the Company’s share of losses in an associate or subsidiary equals or exceeds its interest in the associate or subsidiary, including preferred stock or other long term loans and receivables issued by the associate or subsidiary, the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or subsidiary. Unrealized gains on transactions between the Company and its associates or subsidiaries are eliminated to the extent of the Company’s interest in each associate or subsidiary.

The Company’s investments in associates and subsidiaries include goodwill identified on acquisition (net of any accumulated impairment loss). Goodwill is calculated as the excess of the acquisition cost of an investment in an associate or subsidiary over the Company’s share of the fair value of the identifiable net assets acquired. Goodwill is amortized using the straight-line method over its estimated useful life. Amortization of goodwill is recorded together with equity income (losses).

Foreign currency financial statements of equity method investees are translated into Korean won using the exchange rates in effect at the end of the reporting period for assets and liabilities, exchange rates on the date of transaction for equity and annual average exchange rates for income and expenses. Any resulting translation gain or loss is included under the capital adjustment account, a component of shareholders’ equity.

13

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements, continued

Property, plant and equipment, and related depreciation

Property, plant and equipment are stated at cost, except in the case of revaluations made in accordance with the Asset Revaluation Law, which allowed for asset revaluation prior to the Law being revoked.

Depreciation is computed by the straight-line method using rates based on the useful lives of the respective as follows:

	Estimated useful lives
Buildings and structures	20-40 years
Machinery and equipment	8 years
Vehicles	4-9 years
Tools	4 years
Furniture and fixtures	4 years
Finance Lease Assets	18 years

The Company recognizes interest costs and other financial charges on borrowings associated with the production, acquisition, construction or development of property, plant and equipment as an expense in the period in which they are incurred.

Significant additions or improvements extending useful lives of assets are capitalized. Normal maintenance and repairs are charged to expense as incurred.

The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the expected estimated undiscounted future net cash flows from the use of the asset and its eventual disposal are less than its carrying amount.

Leases

The Company classifies and accounts for leases as either operating or capital, depending on the terms. Leases where the Company assumes substantially all of the risks and rewards of ownership are classified as capital leases. All other leases are classified as operating leases.

14

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements, continued

Intangible assets

Intangible assets are stated at cost, which includes acquisition cost, production cost and other costs required to prepare the asset for its intended use. Intangible assets are stated net of accumulated amortization computed using the straight-line method over the estimated useful lives as described below.

	Estimated useful lives
Intellectual property right	5-10 years
Port facilities usage rights	1-75 years
Other intangibles	4-20 years

The Company has estimated useful life of Port facilities usage rights for the period that the Company has been granted to use the Port facilities exclusively in accordance with an agreement with the Government office.

Discounts on debentures

Discounts on debentures are amortized over the term of the debentures using the effective interest rate method. Amortization of the discount is recorded as part of interest expense.

Accrued severance benefits

Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termination of their employment with the Company based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors were to terminate their employment at the end of the reporting period. The Company has partially funded the accrued severance benefits through group severance insurance and the amounts funded under these insurance deposits are classified as a deduction from the accrued severance benefits liability.

Through March 1999, under the National Pension Scheme of Korea, the Company transferred a certain portion of retirement allowances for employees to the National Pension Fund. The amount transferred will reduce the retirement and severance benefit amount to be paid to the employees when they leave the Company and is accordingly reflected in the accompanying non-consolidated statements of financial position as a reduction of the retirement and severance benefits liability. However, due to a regulation effective April 1999, such transfers to the National Pension Fund are no longer required.

15

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements, continued

Valuation of receivables at present value

When the difference between the carrying value of receivables and the present value of future cash flows is material arising from variation of the terms of receivables (the principle, interest rate or term), either through a court order, such as a reorganization, or by mutual agreement, future cash flows expected to be earn are valued at their present value using an appropriate discount rate. The present value discounts are recovered using the effective interest rate method and are recognized as interest income.

Foreign Currency Translation

Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into Korean Won at the foreign exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at the rates of exchange in effect at the end of the reporting period, and the resulting translation gains and losses are recognized in current operations.

Derivatives

All derivative instruments are accounted for at their fair value according to the rights and obligations associated with the derivative contracts. The resulting changes in fair value of derivative instruments are recognized either in the income statement or shareholders’ equity, depending on whether the derivative instruments qualify as a cash flow hedge. Fair value hedge accounting is applied to a derivative instrument purchased with the purpose of hedging the exposure to changes in the fair value of an asset or a liability or a firm commitment that is attributable to a particular risk. The resulting changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in the shareholders’ equity as accumulated other comprehensive income and expense.

An embedded derivative instrument is separated from the host contract and accounted for as a derivative instrument when the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract and a separate instrument with the same terms as the embedded derivative instrument would be a derivative instrument subject to derivative accounting.

Provisions and contingent liabilities

When there is a probability that an outflow of economic benefit will occur due to a present obligation resulting from a past event, and whose amount is reasonably estimable, a corresponding provision is recognized in the financial statements. However, when such outflow is dependent upon a future event, is not certain to occur, or cannot be reliably estimated, only disclosure regarding the contingent liability is made in the notes to the financial statements.

16

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

2. Summary of significant accounting policies and basis of presenting financial statements, continued

Treasury stock

In accordance with the cost method, the acquisition cost of the Company’s treasury stocks are recorded as an adjustment to shareholders’ equity. Gain on disposal of treasury stock is recorded as other capital surplus and loss on disposal of treasury stock is first deducted from the gain on disposal of treasury stock recorded in other capital surplus, recording the balance as capital adjustments and then offset against retained earnings in accordance with the order of disposition of deficit.

Sale of receivables

The Company sells or discounts certain amounts or notes receivable to financial institutions and accounts for these transactions as a sale if the rights and obligations relating to the receivables sold are substantially transferred to the buyers. The losses from the sale of the receivables are charged to operations as incurred.

Income tax and deferred income tax

Income tax on the income or loss for the year comprises current and deferred tax. Income tax is recognized in the statement of income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted.

Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period.

A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Use of Estimates

The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, disclosures of contingent liabilities and others, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

17

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

3. Cash and Cash Equivalents, and Financial Instruments

Cash and cash equivalents, and short-term and long-term financial instruments as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Annual Interest Rate (%)	2009		2008
Cash and cash equivalents
Checking accounts	—	W	817		1,356
Money market deposit accounts	2.30 ~ 3.00		245,500		241,000
Time deposits	3.25 ~ 3.50		70,000		560,000
Time deposits in foreign currency	0.17 ~ 1.14		310,465		139,331
		W	626,782		941,687
Short-term financial instruments
Ordinary deposits (*1)	—		10,667		5,887
Time deposits	1.60 ~ 4.45		2,850,000		910,000
Certificates of deposit	1.60 ~ 4.80		2,370,000		490,000
Repurchase agreement	3.51 ~ 4.44		290,000		60,000
Specified money in trust	—		60,927		58,711
		W	5,581,594		1,524,598
Long-term financial instruments
Guarantee deposits for opening accounts (*2)	—	W	40		40

(*1)	In relation to projects outsourced to the Company by the Korea Government, these deposits are restricted in use.
(*2)	The Company is required to provide deposits to maintain checking accounts and accordingly, the withdrawal of these deposits is restricted.

18

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

4. Accounts and Notes Receivable

(a) Accounts and notes receivable and their respective allowance for doubtful accounts as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Trade accounts and notes receivable	W	2,695,161			3,232,490
Less: Allowance for doubtful accounts		(11,252	)		(3,811	)
	W	2,683,909			3,228,679
Other accounts receivable	W	137,560			290,015
Less: Allowance for doubtful accounts		(10,618	)		(11,714	)
	W	126,942			278,301
Long-term trade accounts receivable	W	1,875			4,353
Less: Allowance for doubtful accounts		(568	)		(199	)
	W	1,307			4,154

(b) Accounts stated at present value under long-term deferred payment terms are as follows:

(in millions of Won)
	Interest							Discount at
Company	Rate (%)		Preiod	Face Value		Present Value		Present Value
BNG Steel Co., Ltd.		8.62	Apr. 01, 2010	W	4,680	W	4,608	W	72
DK Dongsin Co., Ltd.		4.65	Apr. 30, 2011		6,609		6,401		208
				W	11,289	W	11,009	W	280

(*) Discount at present value is presented as allowance for doubtful accounts. Bad debt expense arising from a reduction in the present value of the future cash flow for the year ended December 31, 2009 and 2008 amounted to W 5 million and W 613 million, respectively. Interest income recovered for the year ended December 31, 2009 and 2008 amounted to W 1,036 million and W 2,304 million, respectively.

19

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

5. Inventories

Inventories as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Finished goods	W	344,192			1,194,588
By-products		4,281			16,034
Semi-finished goods		843,720			1,542,922
Raw materials		696,492			1,644,500
Fuel and materials		405,003			428,466
Materials-in-transit		702,807			1,592,502
Others		522			592
		2,997,017			6,419,604
Less: Provision for valuation loss		(691	)		(4,003	)
	W	2,996,326			6,415,601

6. Trading Securities

Trading securities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009				2008
	Acquisition		Fair Value		Book Value		Book Value
Beneficiary certificates	W	500,000	W	505,811	W	505,811	W	1,236,185

20

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

7. Investment Securities

Investment securities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)
	2009			2008
Available-for-sale securities
Marketable equity securities	W	3,650,351			2,818,507
Non-marketable equity securities		767,174			761,644
Investments in bonds		125,125			—
Investments in capital		500			500
		4,543,150			3,580,651
Less: Current portion		(20,230	)		—
		4,522,920			3,580,651
Held-to-maturity securities		51,675			51,553
Less: Current portion		(20,000	)		(20,000	)
		31,675			31,553
Equity method accounted investments		5,633,218			5,013,735
	W	10,187,813			8,625,939

21

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

Available-for-sales securities

(a) Investments in marketable equity securities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009										2008
	Number of		Percentage of		Acquisition		Fair		Book		Book
Company	Shares		Ownership (%)		Cost		Value		Value		Value
SK Telecom Co., Ltd. (*1)		4,372,096		5.41	W	1,222,528	W	743,845	W	743,845	W	891,835
Hana Financial Group Inc.		4,663,776		2.20		29,998		153,438		153,438		90,943
Hyundai Heavy Industries		1,477,000		1.94		343,505		256,260		256,260		294,661
Hanil Iron & Steel Co., Ltd.		206,798		10.14		2,413		2,575		2,575		1,596
HISteel Co., Ltd.		135,357		9.95		1,609		1,895		1,895		1,766
Moonbae Steel Co., Ltd.		1,849,380		9.02		3,588		5,419		5,419		3,921
Dong Yang Steel Pipe Co., Ltd.		1,564,250		2.45		3,911		1,877		1,877		1,400
Korea Line Corporation		—		—		—		—		—		14,347
Shinhan Financial Group Co.,Ltd.		4,369,881		0.92		228,778		188,779		188,779		113,326
SeAH Steel Corporation		610,103		10.17		18,792		22,055		22,055		23,490
Union Steel Co., Ltd.		1,005,000		9.80		40,212		22,110		22,110		14,472
Hanjin Shipping Co., Ltd.		57,226		0.08		2,354		1,185		1,185		1,236
Hanjin Shipping Holdings Co.,Ltd.		11,033		0.08		298		151		151		—
KB Financial Group Inc.		13,115,837		3.39		574,524		783,015		783,015		282,402
LG Powercom Corporation (*2)		3,600,000		2.70		153,000		21,924		21,924		23,400
Nippon Steel Corporation (*1)		238,352,000		3.50		719,622		1,128,734		1,128,734		963,486
Thainox Stainless Public Company Limited		1,200,000,000		15.00		42,301		67,658		67,658		40,299
MacArthur Coal Limited (*3)		21,215,700		8.34		420,805		249,431		249,431		55,927
					W	3,808,238	W	3,650,351	W	3,650,351	W	2,818,507

(*1)	Certain portion of SK Telecom Co., Ltd. shares has been pledged as collateral. (note 10).
(*2)	In January 2010, LG Powercom Corporation’s stocks were exchanged with LG TeleCom, Ltd.’s by merger and accordingly, the differences between the fair values and the acquisition costs amounting to W 131,076 million were recognized as impairment losses.
(*3)	In the prior year, the Company recognized the excess of the acquisition cost of MacArthur Coal Limited over the fair value at the acquisition date amounting to W 96,785 million as impairment losses.

22

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(b) Investments in non-marketable equity securities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009								2008
	Number of		Percentage of		Acquisition		Book		Book
Company	Shares		Ownership (%)		Cost		Value		Value
Nacional Minerios S.A. (formerly, Big Jump Energy Participacoes S.A) (*1)		30,784,625		6.48	W	668,636	W	535,357	W	667,824
THE SIAM UNITED STEEL (*1)		11,071,000		12.30		34,658		65,135		58,367
POSCO Maharashtra Steel Private Limited (*2)		1,138,500		100.00		63,872		63,872		—
POSCO-Turkey Nilufer Processing Center Co., Ltd. (*2,3)		—		100.00		19,983		19,983		—
POSCO (Liaoning) Automotive Processing Center Co., Ltd. (*2,3)		—		90.00		16,952		16,952		—
POSCO India Chennai Steel Processing Centre		—		100.00		14,925		14,925		—
POSCOAST Co., Ltd. (formerly, Taihan ST Co., Ltd.) (*4)		—		—		—		—		13,930
Others (*5)		—		—		66,240		50,950		21,523
					W	885,266	W	767,174	W	761,644

(*1)	The fair value of those investments was based on the valuation report of a public rating services company. Except for those investments, other investments are recorded at cost since their fair values are not readily determinable.
(*2)	Those investments were not accounted for using the equity method as their total assets were under W 10,000 million as of December 31, 2008 and they are also small sized entities or under construction.
(*3)	No shares have been issued in accordance with the local laws or regulations.
(*4)	This investment was reclassified to equity method accounted investments from available-for-sale securities, since the Company has significant influence on investees through additional acquisition of shares in current year.
(*5)	Impairment losses related to others amounted to W 50 million in the current year, and the accumulated impairment losses as of December 31, 2008 were W 15,240 million.

23

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(c) Investments in bonds as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009							2008
		Acquisition		Fair		Book		Book
	Maturity	Cost		Value		Value		Value
Current bonds
Industrial financial debentures	Less than 1 year	W	20,423	W	20,230	W	20,230	W	—
Non-current bonds
Government bonds	1-5 years		4,839		4,317		4,317		—
Industrial financial debentures	1-5 years		100,383		100,578		100,578		—
			105,222		104,895		104,895		—
		W	125,645	W	125,125	W	125,125	W	—

(d) Investments in capital as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009				2008
	Acquisition Cost		Book Value		Book Value
Purunichildcare	W	500	W	500	W	500

24

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(e) Available-for-sale securities are stated at fair value, and the difference between the acquisition cost and fair value are accounted for in the capital adjustment account. The movements of such differences for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009									2008
Company	Beginning Balance			Increase (Decrease)			Ending Balance			Beginning Balance			Increase (Decrease)			Ending Balance
Marketable equity securities
SK Telecom Co., Ltd.	W	(247,137	)	W	(126,237	)	W	(373,374	)	W	(98,383	)	W	(148,754	)	W	(247,137	)
Hana Financial Group Inc.		47,537			48,746			96,283			148,666			(101,129	)		47,537
Hyundai Heavy Industries		(38,098	)		(29,954	)		(68,052	)		224,798			(262,896	)		(38,098	)
Hanil Iron & Steel Co., Ltd.		(809	)		763			(46	)		2,464			(3,273	)		(809	)
HI Steel Co., Ltd.		123			100			223			595			(472	)		123
Munbae Steel Co., Ltd.		90			1,168			1,258			3,365			(3,275	)		90
Dong Yang Steel Pipe Co., Ltd.		(1,958	)		372			(1,586	)		(782	)		(1,176	)		(1,958	)
Korea Line Corporation		4,898			(4,898	)		—			20,155			(15,257	)		4,898
Shinhan Financial Group Co.,Ltd.		(82,790	)		51,591			(31,199	)		(11,114	)		(71,676	)		(82,790	)
Seah Steel Corporation		3,664			(1,119	)		2,545			5,246			(1,582	)		3,664
Union Steel		(20,077	)		5,958			(14,119	)		(12,031	)		(8,046	)		(20,077	)
Hanjin Shipping Co., Ltd.		(1,105	)		69			(1,036	)		—			(1,105	)		(1,105	)
Hanjin Shipping Holdings Co.,Ltd.		—			10			10			—			—			—
KB Financial Group Inc.		(13,843	)		176,467			162,624			—			(13,843	)		(13,843	)
LG Powercom Corporation		(101,088	)		101,088			—			(72,232	)		(28,856	)		(101,088	)
Nippon Steel Corporation		190,214			128,893			319,107			474,780			(284,566	)		190,214
Thainox Stainless Public Company Limited		(1,562	)		21,341			19,779			2,858			(4,420	)		(1,562	)
Macarthur Coal Limited		(209,113	)		150,934			(58,179	)		—			(209,113	)		(209,113	)
		(471,054	)		525,292			54,238			688,385			(1,159,439	)		(471,054	)
Non-marketable equity securities
THE SIAM UNITED STEEL		18,492			5,279			23,771			—			18,492			18,492
Nacional Minerios S.A. (formerly, Big Jump Energy Participacoes S.A)		—			(103,957	)		(103,957	)		—			—			—
Investments in bonds, etc.		—			(95	)		(95	)		—			—			—
		18,492			(98,773	)		(80,281	)		—			18,492			18,492
	W	(452,562	)	W	426,519		W	(26,043	)	W	688,385		W	(1,140,947	)	W	(452,562	)

25

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

Held-To-Maturity Securities

(a) Held-to-maturity securities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009					2008
		Acquisition		Book		Book
	Maturity	Cost		Value		Value
Current portion of held-to-maturity securities
Government bonds and others	Less than 1 year	W	20,000	W	20,000	W	20,000
Held-to-maturity securities
Government bonds and others (*1)	1 ~ 5 years		31,090		31,675		31,553
		W	51,090	W	51,675	W	51,553

(*1) The Company provided government bonds and bonds issued by Seoul Metropolitan Rapid Transit Corp, amounting to W 29,749 million and W 1,926 million, respectively, to the Gyeongsangbuk-Do Province Office as guarantee for environmental remediation of POSCO No. 4 disposal site.

(b) Total interest income earned from investment securities amounted to W 4,835 million and W 6,990 million for the years ended December 31, 2009 and 2008, respectively.

26

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

Equity Method Accounted Investments

(a) Equity method accounted investments as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009										2008
	Number of		Percentage of		Acqusition		Net Asset		Book		Book
Investees (*1)	Shares		Ownership (%)		Cost		Value		Value		Value
Domestic
POSCO E&C Co., Ltd.		27,281,080		89.53	W	365,789	W	1,675,591	W	1,063,089	W	864,030
Posteel Co., Ltd.		17,155,000		95.31		113,393		442,376		421,927		319,914
POSCON Co., Ltd.		3,098,610		88.04		49,822		164,525		70,990		49,099
POSCO Coated & Color Steel Co., Ltd.		3,412,000		56.87		82,017		114,441		108,421		103,912
POSCO Machinery & Engineering Co., Ltd.		1,700,000		100.00		17,052		53,450		24,276		30,824
POSCO ICT Co., Ltd. (*2) (formerly, POSDATA Co., Ltd.)		50,440,720		61.85		52,749		11,603		—		39,544
POSCO Research Institute		3,800,000		100.00		19,000		23,598		23,553		23,356
Seung Kwang Co., Ltd.		2,737,000		69.38		28,408		29,927		29,928		27,957
POSCO Architects & consultants Co., Ltd.		300,000		100.00		1,743		41,910		17,734		14,838
POSCO Specialty Steel Co., Ltd.		26,000,000		100.00		260,000		629,043		628,842		564,515
POSTECH Venture Capital Corp.		5,700,000		95.00		28,500		33,780		33,779		33,059
POSCO Refractories & Environment Co., Ltd.		3,544,200		60.00		41,210		112,505		100,535		74,329
POSCO Terminal Co., Ltd.		2,550,000		51.00		12,750		23,672		23,674		19,681
POSMATE Co., Ltd		214,286		30.00		7,233		12,686		12,270		10,436
Samjung Packing & Aluminum Co., Ltd. (*3)		270,000		9.00		2,781		6,581		5,989		4,035
POSCO Power Corp.		40,000,000		100.00		597,170		623,273		649,148		619,037
SNNC Co., Ltd		18,130,000		49.00		90,650		106,383		100,655		67,410
PNR Corporation		5,467,686		70.00		27,338		25,719		25,720		27,498
POSCOAST Co., Ltd. (*4) (formerly, Taihan ST Co., Ltd.)		3,400,000		85.00		70,085		81,064		75,603		—
POSCO E&E Co., Ltd.		3,480,000		100.00		17,400		17,303		17,303		—
Others		—		—		19,300		32,233		19,430		17,541
						1,904,390		4,261,663		3,452,866		2,911,015

27

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(in millions of Won)	2009											2008
	Number of		Percentage of		Acqusition		Net Asset			Book		Book
Investees (*1)	Shares		Ownership (%)		Cost		Value			Value		Value
Overseas
POSCO America Corporation		367,572		99.45		312,961		131,492			113,510		133,944
POSCO Australia Pty. Ltd.		761,775		100.00		37,352		231,089			330,623		165,573
POSCO Asia Co., Ltd.		9,360,000		100.00		7,425		32,244			32,189		29,158
Zhangjiagang Pohang Stainless Steel Co., Ltd. (*5)		—		58.60		234,204		291,828			283,845		323,170
Guangdong Pohang Coated. Steel Co., Ltd. (*5)		—		87.04		45,503		35,852			31,299		20,901
POSCO (Thailand) Co., Ltd.		12,721,734		85.62		39,677		27,620			25,945		32,934
KOBRASCO		2,010,719,185		50.00		32,950		98,944			98,962		60,429
POSCO Investment Co., Ltd.		5,000,000		100.00		53,189		83,232			85,521		91,303
Poschrome (Proprietary) Limited		21,675		25.00		4,859		15,284			15,090		9,575
Guangdong Xingpu Steel Center Co., Ltd. (*6)		—		—		—		—			—		2,669
POSCO-MKPC SDN.BHD.		25,269,900		44.69		12,574		18,232			17,550		18,037
PT. Posmi Steel Indonesia (*3)		1,193		9.47		782		1,099			1,104		1,020
Qingdao Pohang Stainless Steel Co., Ltd. (*5)		—		70.00		71,463		68,570			65,982		75,888
POSCO (Suzhou) Automotive Processing Center Co., Ltd. (*5)		—		90.00		31,023		55,262			49,429		48,401
POSCO-China Holding Corp. (*5)		—		100.00		165,233		226,581			208,413		228,489
POSCO-Japan Co., Ltd.		90,438		100.00		55,004		82,934			68,436		65,457
POSCO-India Private Ltd.		450,000,000		100.00		110,287		108,538			108,538		54,651
POS-India Pune Steel Processing Centre Pvt. Ltd.		74,787,138		65.00		17,017		23,407			15,016		14,096
POSCO-Foshan Steel Processing Centre Pvt. Ltd. (*5)		—		39.60		9,408		13,502			12,985		12,971
Nickel Mining Company SAS		3,234,698		49.00		157,585		193,204			189,197		219,879
POSCO-Vietnam Co., Ltd. (*5)		—		85.00		198,578		169,452			154,691		232,647
POSCO-Mexico Co., Ltd.		1,304,955,672		84.67		117,950		74,166			62,581		103,485
POSCO-Poland Wroclaw Steel Processing Center Co., Ltd.		30,000		30.00		3,803		4,387			3,399		3,225
Zhongyue POSCO (Qinhuangdau) Tinplate Industrial Co., Ltd. (*5)		—		24.00		6,718		11,268			11,003		11,959
POSCO Vietnam Processing Center Co., Ltd. (*5)		—		80.00		14,914		12,215			11,425		6,234
POSCO (Chongqing) Automotive Processing Center Co., Ltd. (*5)		—		90.00		6,201		9,284			8,057		7,618
BX STEEL POSCO Cold Rolled Sheet Co., Ltd. (*5)		—		25.00		61,961		56,961			63,865		92,064
POSCO-Malaysia SDN. BHD. (*7)		16,200,000		60.00		16,524		(16,213	)		—		—
POSCO (Wuhu) Automotive Processing Center Co., Ltd. (*5)		—		68.57		10,026		13,203			11,533		11,955
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd. (*5,8)		—		30.00		1,608		1,480			1,276		—
POSCO VST Co., Ltd.		64,000,000		90.00		77,068		36,959			71,901		—
Others		—		—		30,128		33,780			26,987		24,988
						1,943,975		2,145,856			2,180,352		2,102,720
					W	3,848,365	W	6,407,519		W	5,633,218	W	5,013,735

28

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(*1)	Due to the difference in the closing schedule of investees’ financial statements, the Company used the unaudited or unreviewed financial statements of these companies as of December 31, 2009, when applying the equity method of accounting.
(*2)	The equity method of accounting has been suspended for investment in POSCO ICT Co., Ltd. as the Company’s net investments have been reduced to zero. Unrecorded changes in equity interest in POSCO ICT Co., Ltd. for the year ended December 31, 2009 was W 477 million.
(*3)	Equity method of accounting is applied as the Company has significant influence over investees directly or indirectly through its affiliates by owning more than 20% of outstanding shares of investees.
(*4)	This investment was reclassified to equity method accounted investments from available-for-sale securities, since the Company has significant influence on investees through additional acquisition of shares in current year.
(*5)	No shares have been issued in accordance with the local laws or regulations.
(*6)	Due to the sales of the interest previously owned by a subsidiary, the Company no longer has significant influence for Guangdong Xingpu Steel Center Co., Ltd. Therefore, the Company has reclassified it to available-for-sale securities from equity method accounted investments.
(*7)	The equity method of accounting has been suspended for investment in POSCO Malaysia SDN. BHD. as the Company’s net investments has been reduced to zero. Unrecorded changes in equity interest in POSCO Malaysia SDN. BHD. for the year ended December 31, 2009 was W 3,891 million and the accumulated unrecorded change in the interest prior to 2009 amounted to W 2,102 million.
(*8)	This investment was reclassified to equity method accounted investments from available-for-sale securities, since its total assets were greater than W 10,000 million as of December 31, 2008.

29

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(b) The valuations of equity method accounted investments as of and for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)
	Dec. 31, 2007		Equity method			Other Increase			Dec. 31, 2008		Equity method			Other Increase			Dec. 31, 2009
Investees	Book Value		Profits (Losses)			(Decrease) (*)			Book Value		Profits (Losses)			(Decrease) (*)			Book Value
Domestic
POSCO E&C Co., Ltd.	W	657,107	W	113,389		W	93,534		W	864,030	W	216,571		W	(17,512	)	W	1,063,089
Posteel Co., Ltd.		283,509		26,262			10,143			319,914		65,851			36,162			421,927
POSCON Co., Ltd.		46,261		5,153			(2,315	)		49,099		19,964			1,927			70,990
POSCO Coated & Color Steel Co., Ltd.		155,769		(37,209	)		(14,648	)		103,912		4,509			—			108,421
POSCO Machinery & Engineering Co., Ltd.		27,005		(341	)		4,160			30,824		(5,720	)		(828	)		24,276
POSCO ICT Co., Ltd. (formerly, POSDATA Co., Ltd.)		95,191		(55,921	)		274			39,544		(41,799	)		2,255			—
POSCO Research Institute		23,196		160			—			23,356		197			—			23,553
Seung Kwang Co., Ltd.		28,916		(958	)		(1	)		27,957		1,971			—			29,928
POSCO Architects & Consultants Co., Ltd.		9,972		4,737			129			14,838		2,748			148			17,734
POSCO Specialty Steel Co., Ltd.		487,376		79,633			(2,494	)		564,515		66,650			(2,323	)		628,842
POSTECH Venture Capital Corp.		36,792		(2,117	)		(1,616	)		33,059		114			606			33,779
POSCO Refractories & Environment Co., Ltd.		74,627		1,806			(2,104	)		74,329		28,885			(2,679	)		100,535
POSCO Terminal Co., Ltd.		18,172		1,510			(1	)		19,681		4,631			(638	)		23,674
POSMATE Co., Ltd.		9,531		1,147			(242	)		10,436		2,669			(835	)		12,270
Samjung Packing & Aluminum Co., Ltd.		5,138		(76	)		(1,027	)		4,035		1,183			771			5,989
POSCO Power Corp.		618,048		17,381			(16,392	)		619,037		27,036			3,075			649,148
SNNC Co., Ltd.		89,516		(22,106	)		—			67,410		33,245			—			100,655
PNR Corporation		—		160			27,338			27,498		(1,778	)		—			25,720
POSCOAST Co., Ltd. (formerly, Taihan ST Co., Ltd.)		—		—			—			—		5,518			70,085			75,603
POSCO E&E Co., Ltd.		—		—			—			—		(97	)		17,400			17,303
Others		15,427		2,114			—			17,541		(4,471	)		6,360			19,430
		2,681,553		134,724			94,738			2,911,015		427,877			113,974			3,452,866
Overseas
POSCO America Corporation		86,093		(24,034	)		71,885			133,944		(19,938	)		(496	)		113,510
POSCO Australia Pty. Ltd.		199,968		79,065			(113,460	)		165,573		26,029			139,021			330,623
POSCO Asia Co., Ltd.		19,380		1,493			8,285			29,158		5,495			(2,464	)		32,189
Zhangjiagang Pohang Stainless Steel Co., Ltd. (*5)		338,703		(78,675	)		63,142			323,170		(17,344	)		(21,981	)		283,845
Guangdong Pohang Coated. Steel Co., Ltd. (*5)		17,313		(20,086	)		23,674			20,901		11,271			(873	)		31,299
POSCO (Thailand) Co., Ltd.		9,696		(10,664	)		33,902			32,934		(6,682	)		(307	)		25,945
KOBRASCO		40,509		40,606			(20,686	)		60,429		21,206			17,327			98,962
POSCO Investment Co., Ltd.		67,036		1,596			22,671			91,303		641			(6,423	)		85,521
Poschrome (Proprietary) Limited		5,056		7,959			(3,440	)		9,575		3,197			2,318			15,090

30

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(in millions of Won)
	Dec. 31, 2007		Equity method			Other Increase		Dec. 31, 2008		Equity method			Other Increase			Dec. 31, 2009
Investees	Book Value		Profits (Losses)			(Decrease) (*)		Book Value		Profits (Losses)			(Decrease) (*)			Book Value
Guangdong Xingpu Steel Center Co., Ltd. (*6)		1,454		452			763		2,669		—			(2,669	)		—
POSCO-MKPC SDN.BHD.		4,587		704			12,746		18,037		621			(1,108	)		17,550
PT. Posmi Steel Indonesia (*3)		803		101			116		1,020		(10	)		94			1,104
Qingdao Pohang Stainless Steel Co., Ltd. (*5)		51,257		(21,747	)		46,378		75,888		(4,742	)		(5,164	)		65,982
POSCO (Suzhou) Automotive Processing Center Co., Ltd. (*5)		30,181		3,522			14,698		48,401		5,375			(4,347	)		49,429
POSCO-China Holding Corp. (*5)		173,158		(29,964	)		85,295		228,489		(3,728	)		(16,348	)		208,413
POSCO-Japan Co., Ltd.		45,878		(15,712	)		35,291		65,457		13,975			(10,996	)		68,436
POSCO-India Private Ltd.		49,386		105			5,160		54,651		—			53,887			108,538
POS-India Pune Steel Processing Centre Pvt. Ltd.		12,160		(7,303	)		9,239		14,096		2,336			(1,416	)		15,016
POSCO-Foshan Steel Processing Centre Pvt. Ltd. (*5)		8,545		648			3,778		12,971		1,063			(1,049	)		12,985
Nickel Mining Company SAS		200,622		(37,608	)		56,865		219,879		(4,335	)		(26,347	)		189,197
POSCO-Vietnam Co., Ltd. (*5)		146,421		(8,082	)		94,308		232,647		(48,542	)		(29,414	)		154,691
POSCO-Mexico Co., Ltd.		21,078		(15,634	)		98,041		103,485		(40,694	)		(210	)		62,581
POSCO-Poland Wroclaw Steel Processing Center Co., Ltd.		—		(1,010	)		4,235		3,225		376			(202	)		3,399
Zhongyue POSCO (Qinhuangdau) Tinplate Industrial Co., Ltd. (*5)		7,128		1,496			3,335		11,959		(96	)		(860	)		11,003
POSCO Vietnam Processing Center Co., Ltd. (*5)		7,893		(3,417	)		1,758		6,234		(415	)		5,606			11,425
POSCO (Chongqing) Automotive Processing Center Co., Ltd. (*5)		—		(1,321	)		8,939		7,618		1,162			(723	)		8,057
BX STEEL POSCO Cold Rolled Sheet Co., Ltd. (*5)		63,238		5,339			23,487		92,064		(23,603	)		(4,596	)		63,865
POSCO-Malaysia SDN. BHD. (*7)		—		(16,524	)		16,524		—		(1,000	)		1,000			—
POSCO (Wuhu) Automotive		—		(286	)		12,241		11,955		607			(1,029	)		11,533
POSCO SAMSUNG Suzhou Steel		—		—			—		—		(1,133	)		2,409			1,276
POSCO VST Co., Ltd.		—		—			—		—		(3,999	)		75,900			71,901
Others		24,163		(9,091	)		9,916		24,988		5,059			(3,060	)		26,987
		1,631,706		(158,072	)		629,086		2,102,720		(77,848	)		155,480			2,180,352
	W	4,313,259	W	(23,348	)	W	723,824	W	5,013,735	W	350,029		W	269,454		W	5,633,218

(*) Other increase (decrease) represents the changes in investment securities primarily due to acquisitions (disposals), dividends received, changes in capital adjustments arising from equity method accounted investments and others. In 2009, the changes in investment securities are primarily due to acquisitions or disposals and dividend received amounted to W 239,946 million and W 30,711 million, respectively.

31

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(c) Details of differences between the initial purchase price and the Company’s initial proportionate ownership in the book value of the investee for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)
	Dec 31, 2007			Increase			Amortization			Dec 31, 2008			Increase			Amortization			Dec 31, 2009
Investees	Balance			(Decrease)			(Recovery)			Balance			(Decrease)			(Recovery)			Balance
POSMATE Co., Ltd.	W	(391	)	W	—		W	(156	)	W	(235	)	W	—		W	(156	)	W	(79	)
Samjung Packing & Aluminum Co., Ltd.		(1,065	)		—			(426	)		(639	)		—			(426	)		(213	)
POSCO Power Corp.		68,906			—			21,203			47,703			—			21,203			26,500
SNNC Co., Ltd.		188			—			42			146			—			42			104
POSCOAST Co., Ltd. (formerly, Taihan ST Co., Ltd.)		—			—			—			—			(11,468	)		(1,360	)		(10,108	)
POSCO America Corporation		95			—			95			—			—			—			—
Guangdong Pohang Coated Steel Co., Ltd.		(3	)		—			(3	)		—			—			—			—
PT POSMI Steel Indonesia		9			—			3			6			—			3			3
POSCO-Poland Wroclaw Steel Processing Center Co., Ltd.		—			243			243			—			—			—			—
POSCO (Chongqing) Automotive Processing Center Co., Ltd.		—			(86	)		(86	)		—			—			—			—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		12,249			—			2,672			9,577			—			2,673			6,904
POSCO Malaysia SDN BHD		—			12,406			2,274			10,132			—			2,481			7,651
POSCO (Wuhu) Automotive Processing Center Co., Ltd.		—			(3	)		—			(3	)		—			(1	)		(2	)
POSCO VST Co., Ltd.		—			—			—			—			39,594			2,640			36,954
	W	79,988		W	12,560		W	25,861		W	66,687		W	28,126		W	27,099		W	67,714

(d) Details on changes in unrealized profit from intercompany transactions for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Allowance for doubtful accounts	W	2,539			3,201
Inventories		147,400			(191,698	)
Property, plant and equipment and intangible assets		(64,195	)		(59,938	)
	W	85,744			(239,435	)

32

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(e) Market values of equity method accounted investments in marketable equity securities as of December 31, 2009 and 2008 are as follows:

(in millions of Won except per share information)	2009
Investees	Number of Shares		Share Price		Fair Value		Book Value
POSCO Coated & Color Steel Co., Ltd.		3,412,000	W	24,300	W	82,912	W	108,421
POSCO ICT Co., Ltd. (formerly, POSDATA Co., Ltd.)		5,044,072		6,530		32,938		—
POSCO Refractories & Environment Co., Ltd.		3,544,200		50,100		177,564		100,535
Samjung Packing & Aluminum Co., Ltd.		270,000		19,950		5,387		5,989

(in millions of Won except per share information)	2008
Investees	Number of Shares		Share Price		Fair Value		Book Value
POSCO Coated & Color Steel Co., Ltd.		3,412,000	W	16,600	W	56,639	W	103,912
POSCO ICT Co., Ltd. (formerly, POSDATA Co., Ltd.)		50,440,720		4,450		224,461		39,544
POSCO Refractories & Environment Co., Ltd.		3,544,200		35,900		127,237		74,329
Samjung Packing & Aluminum Co., Ltd.		270,000		13,700		3,699		4,036

(f) A summary of financial information on equity method investees as of and for the year ended December 31, 2009 is as follows:

(in millions of Won)
Investees	Total Assets		Total Liabilities		Net Assets (*)		Sales		Net Income
Domestic
POSCO E&C Co., Ltd.	W	4,437,612	W	2,565,975	W	1,871,637	W	6,678,534	W	304,857
Posteel Co., Ltd.		747,422		271,631		475,791		1,626,886		(13,923	)
POSCON Co., Ltd.		379,446		194,894		184,552		524,570		21,460
POSCO Coated & Color Steel Co., Ltd.		460,030		209,870		250,160		703,476		(19,245	)
POSCO Machinery & Engineering Co., Ltd.		106,758		53,308		53,450		303,644		(3,329	)
POSCO ICT Co., Ltd. (formerly,POSDATA Co., Ltd.)		300,123		248,382		51,741		378,320		(70,811	)
POSCO Research Institute		26,341		2,743		23,598		19,662		226
Seung Kwang Co., Ltd.		77,764		34,629		43,135		15,647		3,190
POSCO Architects & Consultants Co., Ltd.		57,234		15,324		41,910		77,879		4,452
POSCO Specialty Steel Co., Ltd.		979,836		350,793		629,043		1,272,007		64,658
POSTECH Venture Capital Corp.		36,341		783		35,558		1,309		120

33

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(in millions of Won)
Investees	Total Assets		Total Liabilities		Net Assets (*)			Sales		Net Income
POSCO Refractories & Environment Co., Ltd.		270,749		88,339		182,410			574,400		32,361
POSCO Terminal Co., Ltd.		53,423		7,008		46,415			54,593		8,763
POSMATE Co., Ltd.		62,284		19,999		42,285			74,824		6,478
Samjung Packing & Aluminum Co., Ltd.		162,166		93,432		68,734			303,350		4,089
POSCO Power Corp.		1,717,131		1,102,033		615,098			508,697		59,517
SNNC Co., Ltd.		506,202		286,251		219,951			368,349		85,702
PNR Corporation		36,742		—		36,742			—		(2,798	)
POSCOAST Co., Ltd. (formerly, Taihan ST Co., Ltd.)		207,875		112,506		95,369			215,860		4,696
POSCO E&E Co., Ltd.		17,303		—		17,303			—		(97	)
Overseas
POSCO America Corporation		264,167		120,505		143,662			230,820		(20,470	)
POSCO Australia Pty. Ltd.		611,945		283,114		328,831			90,219		46,929
POSCO Asia Co., Ltd.		185,117		153,988		31,129			1,370,147		2,138
Zhangjiagang Pohang Stainless Steel Co., Ltd.		1,330,788		756,569		574,219			1,843,902		(17,921	)
Guangdong Pohang Coated. Steel Co., Ltd.		99,195		58,006		41,189			146,556		5,961
POSCO (Thailand) Co., Ltd.		120,768		88,510		32,258			161,197		(4,734	)
KOBRASCO		273,311		75,424		197,887			42,415		25,746
POSCO Investment Co., Ltd.		483,727		395,898		87,829			16,385		2,023
Poschrome (Proprietary) Limited		71,241		10,104		61,137			48,411		8,889
POSCO-MKPC SDN.BHD.		96,518		55,717		40,801			106,443		479
PT.Posmi Steel Indonesia		58,908		47,300		11,608			81,089		494
Qingdao Pohang Stainless Steel Co., Ltd.		249,028		138,304		110,724			399,611		(13,778	)
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		163,487		102,085		61,402			298,586		10,354
POSCO-China Holding Corp.		276,583		45,430		231,153			130,800		(3,256	)
POSCO-Japan Co., Ltd.		606,551		509,613		96,938			885,635		1,695
POSCO-India Private Ltd.		113,336		476		112,860			—		—
POSCO India Pune Steel Processing Centre Pvt. Ltd.		137,615		101,603		36,012			115,912		3,516
POSCO-Foshan Steel Processing Centre Pvt. Ltd.		95,182		61,085		34,097			459,522		3,049
Nickel Mining Company SAS		570,556		125,886		444,670			106,632		(20,761	)
POSCO-Vietnam Co., Ltd.		208,784		—		208,784			87,865		(37,728	)
POSCO-Mexico Co., Ltd.		372,713		268,949		103,764			82,870		(17,683	)
POSCO-Poland Wroclaw Steel Processing Center Co., Ltd.		48,260		33,636		14,624			69,765		2,824
Zhongyue POSCO (Qinhuangdau) Tinplate Industrial Co., Ltd.		122,646		70,155		52,491			130,245		6,259
POSCO Vietnam Processing Center Co., Ltd.		38,255		22,986		15,269			47,746		(21	)
POSCO (Chongqing) Automotive Processing Center Co., Ltd.		69,869		59,554		10,315			81,921		1,203
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		948,415		720,570		227,845			1,140,997		(46,709	)
POSCO-Malaysia SDN. BHD.		62,502		89,524		(27,022	)		77,678		(2,047	)
POSCO (Wuhu) Automotive Processing Center Co., Ltd.		58,188		38,934		19,254			88,006		2,295
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		26,876		21,943		4,933			41,740		398
POSCO VST Co., Ltd.		105,542		64,476		41,066			87,926		(9,640	)

34

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(*) The effects of the changes in the accounting principles and estimates of equity method investees when applying equity method for the year ended December 31, 2009 are as follows:

(in millions of Won)
		Net Assets					Net Assets
	Reasons for	before		Adjustment			after
Investees	Changes	Adjustment		Amount			Adjustment
Domestic
Posteel Co., Ltd.	Capitalized costs and others	W	453,456	W	(11,080	)	W	442,376
POSCON Co., Ltd.	Depreciation method		162,471		2,054			164,525
POSCO Coated & Color Steel Co., Ltd.	Capitalized costs		142,258		(27,817	)		114,441
POSCO ICT Co., Ltd. (formerly, POSDATA Co., Ltd.)	Assets revaluation		32,003		(20,400	)		11,603
POSCO Refractories & Environment Co., Ltd.	Depreciation method		109,446		3,059			112,505
Samjung Packing & Aluminum Co., Ltd.	Depreciation method		6,186		395			6,581
POSCO Power Corp.	Capitalized costs and others		615,098		8,175			623,273
SNNC Co., Ltd.	Capitalized costs		107,776		(1,393	)		106,383
Overseas
POSCO America Corporation	Non-application of equity method		142,868		(11,376	)		131,492
POSCO Australia Pty. Ltd.	Non-application of equity method and others		328,831		(97,742	)		231,089
POSCO Asia Co., Ltd.	Non-application of equity method and others		31,129		1,115			32,244
Zhangjiagang Pohang Stainless Steel Co., Ltd.	Depreciation method and others		336,493		(44,665	)		291,828
POSCO Investment Co., Ltd.	Provision for allowance for doubtful accounts		87,829		(4,597	)		83,232
Qingdao Pohang Stainless Steel Co., Ltd.	Depreciation method and others		77,507		(8,937	)		68,570
POSCO-China Holding Corp.	Non-application of equity method		231,153		(4,572	)		226,581
POSCO-Japan Co., Ltd.	Non-application of equity method		96,939		(14,005	)		82,934
POSCO-India Private Ltd.	Organization costs		112,860		(4,322	)		108,538
Nickel Mining Company SAS	Organization costs and others		217,889		(24,685	)		193,204
POSCO-Vietnam Co., Ltd.	Capitalized costs		177,476		(8,024	)		169,452
POSCO-Mexico Co., Ltd.	Capitalized costs		87,858		(13,692	)		74,166
Zhongyue POSCO (Qinhuangdau) Tinplate Industrial Co., Ltd.	Government grants		12,598		(1,330	)		11,268

35

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

8. Property, Plant and Equipment

(a) Property, plant and equipment as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Buildings and structures	W	6,634,738			6,334,513
Machinery and equipment		28,119,425			26,125,355
Tools		146,097			140,634
Vehicles		172,312			169,683
Furniture and fixtures		183,807			173,878
Capital lease assets		11,466			11,466
		35,267,845			32,955,529
Less: Accumulated depreciation		(23,425,832	)		(22,038,647	)
		11, 842,013			10,916,882
Construction-in-progress		3,841,712			2,640,730
Land		961,869			908,306
	W	16,645,594			14,465,918

(b) Changes in property, plant and equipment for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	Beginning Balance		Acquisition (*1)		Disposal			Depreciation			Others (*2)			Ending Balance
Land	W	908,306	W	51,692	W	—		W	—		W	1,871		W	961,869
Buildings		1,978,609		198,670		(2,330	)		(175,507	)		(932	)		1,998,510
Structures		1,490,098		103,342		(6,219	)		(123,655	)		16,354			1,479,920
Machinery and equipment		7,346,339		2,640,058		(14,812	)		(1,684,717	)		(16,436	)		8,270,432
Vehicles		20,302		5,396		(15	)		(8,886	)		6			16,803
Tools		17,317		9,230		(72	)		(9,731	)		(7	)		16,737
Furniture and fixtures		54,025		14,177		(20	)		(18,130	)		5			50,057
Capital lease assets		10,192		—		—			(637	)		—			9,555
Construction-in-progress		2,640,730		4,228,840					—			(3,027,859	)		3,841,711
	W	14,465,918	W	7,251,405	W	(23,468	)	W	(2,021,263	)	W	(3,026,998	)	W	16,645,594

(*1)	Includes acquisition cost transferred from construction-in-progress in relation to the expansion of Pohang transporting plates and others amounting to W 3,022,565 million.
(*2)	Represent assets transferred from construction-in-progress to intangible assets and other property, plant and equipment.

36

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

	Beginning							Depreciation						Ending
(in millions of Won)	Balance		Acquisition (*1)		Disposal			(*2)			Others (*3)			Balance
Land	W	860,350	W	69,379	W	(21,141	)	W	—		W	(282	)	W	908,306
Buildings		2,019,902		138,650		(9,005	)		(168,458	)		(2,480	)		1,978,609
Structures		1,473,696		138,071		(5,069	)		(117,827	)		1,227			1,490,098
Machinery and equipment		7,508,093		1,370,440		(20,959	)		(1,510,333	)		(902	)		7,346,339
Vehicles		28,729		2,056		(322	)		(10,161	)		—			20,302
Tools		19,790		9,765		(37	)		(12,201	)		—			17,317
Furniture and fixtures		38,119		32,768		(80	)		(16,711	)		(71	)		54,025
Capital lease assets		10,829		—		—			(637	)		—			10,192
Construction-in-progress		1,242,141		3,172,009		—			—			(1,773,420	)		2,640,730
	W	13,201,649	W	4,933,138	W	(56,613	)	W	(1,836,328	)	W	(1,775,928	)	W	14,465,918

(*1)	Includes acquisition cost transferred from construction-in-progress amounting to W1,761,129 million.
(*2)	Includes depreciation expense of temporarily idle assets due to routine maintenance.
(*3)	Represent assets transferred from construction-in-progress to intangible assets and other property, plant and equipment.

(c)	The value of the land based on the posted price issued by the Korean tax authority amounted to W3,347,426 million and W3,134,715 million as of December 31, 2009 and 2008, respectively.
(d)	In 2007, the Company entered into a capital lease contract with Ilshin Shipping Co., Ltd. acquiring a ro-ro ship for the exclusive use of transporting plates. As of December 31, 2009, future minimum lease payments under such a capital lease are as follows:

	Minimum
(in millions of Won)	Lease Payments
Less than 1 year	W	1,023
1~5 year		4,591
Over 5 year		5,508
		11,122

(e) As of December 31, 2009 and 2008, property, plant and equipment are insured against fire and other casualty losses for up to W11,617,320 million and W9,648,958 million, respectively.

37

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

9. Intangible Assets

(a) The changes in the carrying value of intangible assets for the years ended December 31, 2009 and 2008 are as follows:

	2009
	Beginning		Increase								Ending
(in millions of Won)	Balance		(Decrease)		Amortization			Others			Balance
Intellectual property rights	W	2,479	W	971	W	(355	)	W	(67	)	W	3,028
Port facilities usage rights		116,554		1,680		(18,090	)		—			100,144
Other intangible assets		51,062		17,440		(19,840	)		(5	)		48,657
	W	170,095	W	20,091	W	(38,285	)	W	(72	)	W	151,829

	2008
	Beginning		Increase								Ending
(in millions of Won)	Balance		(Decrease)		Amortization			Others			Balance
Intellectual property rights	W	1,514	W	1,410	W	(296	)	W	(149	)	W	2,479
Port facilities usage rights		130,596		7,562		(21,604	)		—			116,554
Other intangible assets		79,865		21,774		(50,577	)		—			51,062
	W	211,975	W	30,746	W	(72,477	)	W	(149	)	W	170,095

(b) Amortization of intangible assets is charged to the following accounts:

(in millions of Won)	2009		2008
Manufacturing costs	W	22,191		57,729
Selling and administrative expenses		16,094		14,748
Total	W	38,285		72,477

(c) Details of significant intangible assets are as follows:

						Residual
(in millions of Won)	Description	2009		2008		useful lives
Port facilities usage rights	Masan distribution base usage rights	W	20,978	W	22,860	11 years

(d) Research costs related to development of software and others recorded as other intangible assets are amounted to W28,030 million and W17,499 million as of and for the year ended December 31, 2009, respectively. Research and development expenses incurred for the years ended December 31, 2009 and 2008 were W407,291 million and W419,105 million, respectively.

38

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

10. Pledged assets

(a)	As of December 31, 2009, government bonds and bonds issued by Seoul Metropolitan Rapid Transit Corp, amounting to W 29,749 million and W 1,926 million, respectively, were provided as collateral to the Gyeongsangbuk-Do Province Office as a guarantee for environmental remediation of POSCO No. 4 disposal site.
(b)	As of December 31, 2009, 2,030,526 shares, equivalent to 18,274,731 American depository receipts (“ADRs”) of SK Telecom Co., Ltd. have been pledged as collateral for the exchangeable bonds issued (note 13) and 156,472,000 shares of Nippon Steel Corporation have been pledged as collateral for the 1st samuri bonds issued.
(c)	Guarantees provided by third parties on behalf of the Company as of December 31, 2009 and 2008 were as follows:

(in millions of Won)	2009		2008
Korea Development Bank	EUR3,964,242	W6,637	EUR4,600,591	W8,171

(d) As of December 31, 2009, Seoul Guarantee Insurance Co., Ltd. has provided guarantees amounting to W29,855 million for the company’s execution of contracts and others.

11. Other Assets

Other current and long-term assets as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Other current assets
Accrued income	W	49,987			34,396
Advanced payments		11,943			3,729
Prepaid expense		8,465			8,784
Others		—			1,264
	W	70,395			48,173
Other long-term assets
Log-term loans receivable	W	24,554			6,637
Guarantee deposits		1,771			1,412
Other investment assets		62,485			66,067
		88,810			74,116
Less: Allowance for doubtful accounts		(692	)		(33	)
	W	88,118			74,083

39

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

12. Short-Term Borrowings and Current Portion of Long-Term Debts

(a) Short-term borrowings as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Annual Interest Rate (%)		2009				2008
Foreign currency borrowings		1.80 ~ 3.27	USD	369,055,984	W	430,910		271,035,408	340,827

(b) Current portion of long-term debts as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Annual Interest Rate (%)		2009				2008
Domestic debentures		4.66	KRW	—	W	—		200,000	200,000
Foreign currency long-term borrowings		4.60	JPY	—		—		192,000,000	2,676
Loans from foreign financial institutions		2.00	EUR	636,350		1,065		636,350	1,130
						1,065			203,806
Less: Discount on debentures issued						—			(165	)
					W	1,065			203,641

13. Long-Term Debts

(a) Debentures as of December 31, 2009 and 2008 are as follows:

			Annual Interest
(in millions of Won)	Issue date	Maturity	Rate (%)		2009					2008
Domestic debentures	Mar. 28,2006~ Jan. 20, 2009	Mar. 28,2011~ Jan. 20, 2014		4.66~6.52	KRW	2,300,000	W	2,300,000			2,000,000	2,000,000
9th Samurai Bonds	Jun. 28, 2006	Jun. 28, 2013		2.05	JPY	50,000,000,000		631,410			50,000,000,000	696,945
Euro Bonds	Aug. 10, 2006	Aug. 10, 2016		5.88	USD	300,000,000		350,280			300,000,000	377,250
Exchangeable bonds(* 1)	Aug. 19, 2008	Aug. 19, 2013		—	JPY	52,795,000,000		666,706			52,795,000,000	735,904
Yen dominated FRN	Nov. 11, 2008	Nov. 11, 2013	6 Months Tibor+2.60		JPY	20,000,000,000		252,564			20,000,000,000	278,778
1st Samurai Private Equity Bonds	Dec. 29, 2008	Dec. 29, 2011	6 Months Tibor+1.60		JPY	50,000,000,000		631,410			50,000,000,000	696,945
Global Bonds	Mar. 26, 2009	Mar. 26, 2014		8.75	USD	700,000,000		817,320			—	—
								5,649,690				4,785,822
Add: Premium on bond redemption								10,067				11,112
Less: Current portion								—				(200,000	)
Discount on debentures issued								(64,917	)			(71,525	)
							W	5,594,840				4,525,409

40

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(*1) The Company issued exchangeable bonds, which are exchangeable with SK Telecom Co., Ltd. ADRs, on August 19, 2008. Details of exchangeable bonds are as follows:

Issuance date:	August 19, 2008
Maturity date:	August 19, 2013
Rate:	Interest rate of zero percent
Face value:	JPY 52,795,000,000
Issuance price:	JPY 52,424,229,136
Premium on bond redemption :	JPY 797,204,500 (redeemed on put date or maturity date)
Exchangeable price:	JPY 2,999.11/ADR
Fair value of an exchangeable right at issuance date:	JPY 2,867,605,334
Fair value of an exchangeable right as of December 31, 2009:	JPY 168,944,000
ADRs exchangeable as of December 31, 2009:	ADR 18,274,731
Exercise period of exchangeable right:	Commercing ten business days following the issuance date until ten business days prior to maturity date
Exercisable date of put by bondholders:	August 19, 2011

The Company issued exchangeable bonds which are exchangeable with SK Telecom Co., Ltd. ADRs. The underlying assets of above exchangeable bonds are SK Telecom Co., Ltd. ADRs. The transaction between the Company and Zeus (Cayman) Ltd. is deemed to be a borrowing transaction under generally accepted accounting principles in the Republic of Korea.

(b) Long-term domestic borrowings as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Annual Interest Rate (%)	2009		2008
Korea Resources Corporation	Representive-Borrowing Rate(*)-2.25	W	55,114		49,308
Woori Bank	Representive-Borrowing Rate(*)-1.25		20,405	—
		W	75,519		49,308

(*) The average yield of 3-year government bond which is rounded off to the nearest 0.25% is utilized for the annual interest rate calculation.

41

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(c) Long-term foreign currency borrowings as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Annual Interest Rate (%)		2009				2008
Korea National Oil Corporation (*)	Representive-Borrowing Rate-2.25		USD	4,549,590	W	5,578		2,324,540	2,923
Development Bank of Japan		4.60	JPY	—		—		192,000,000	2,676
						5,578			5,599
Less: Current portion						—			(2,676	)
					W	5,578			2,923

(*) The borrowing is related to the exploration of gas field in the Aral Sea in Uzbekistan with Korea National Oil Corporation (“KNOC”) (note 16).

(d) Loans from foreign financial institutions as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Annual Interest Rate (%)		2009						2008
NATIXIS		2.00	EUR	3,964,241		W	6,637			4,600,591		8,171
Less: Current portion			EUR	(636,350	)		(1,065	)		(636,350	)	(1,130	)
						W	5,572					7,041

(e) Aggregate maturities of long-term debts as of December 31, 2009 are as follows:

(in millions of Won)
					Foreign Currency		Loans from foreign
Period	Debentures (*)		Borrowings		Borrowings		financial institutions		Total
2010	W	—	W	—	W	—	W	1,065	W	1,065
2011		1,683,974		750		—		1,065		1,685,789
2012		500,000		7,571		—		1,065		508,636
2013		1,808,183		8,591		—		1,065		1,817,839
Thereafter		1,667,600		58,607		5,578		2,377		1,734,162
	W	5,659,757	W	75,519	W	5,578	W	6,637	W	5,747,491

(*) The amount includes premium on bond redemption.

42

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

14. Severance Benefits

Changes in accrued severance benefits for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Estimated severance benefits at the beginning of period	W	851,391			682,686
Provision for severance benefits		3,320			221,748
Payment		(70,354	)		(53,043	)
Estimated severance benefits at the end of period	W	784,357			851,391
Transferred to National Pension Fund		(82	)		(84	)
Deposits for severance benefits trust		(599,088	)		(590,939	)
Net balance at the end of period	W	185,187			260,368

As of December 31, 2009 and 2008, the Company has funded approximately 76% and 69% of the total severance benefits through group severance insurance deposits with Samsung Life Insurance Company and others. The beneficiaries of the severance insurance deposits are the Company’s employees.

15. Other Current Liabilities

Other current liabilities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009		2008
Other current liabilities
Advances received	W	25,615		25,162
Unearned revenue		2,012		2,472
Others		6,177		9,454
	W	33,804		37,088

43

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

16. Commitments and Contingencies

(a) As of December 31, 2009, contingent liabilities for outstanding guarantees provided by the Company for the repayment of loans of related companies and others are as follows:

(in millions of Won)		2009				2008
Company	Financial Institution	Guaranteed		Won Equivalent		Guaranteed		Won Equivalent
Related companies
	Bank of Tokyo-Mitsubish	—	—	W	—	USD	42,000,000	W	58,154
		—	—			CNY	29,000,000
POSCO Investment Co., Ltd.	HSBC	USD	346,000,000			USD	100,000,000
		MYR	280,000,000		607,184	MYR	180,000,000		190,822
		CNY	630,000,000			—	—
Zhangjiagang Pohang Stainless Steel Co., Ltd.	Bank of China and others	—	—		—	USD	199,925,000		251,406
POSCO-Vietnam Co., Ltd.	The Export-Import Bank of Korea and others	USD	230,000,000		329,249	USD	200,000,000
		JPY	4,806,750,000			—	—		251,500
					936,433				751,882
Others
OCI Company Ltd. (formerly,DC Chemical Co., Ltd.)	E1 Co., Ltd.	—	—		—	KRW	320		320
Zeus (Cayman) Ltd.	Related creditors	JPY	52,795,000,000		666,706	JPY	52,795,000,000		735,904
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.	Bank of China and others	USD	13,800000		77 554	USD	15,840,000		97,870
		CNY	359,180,000			CNY	423,440,000
					744,260				834,094
				W	1,680,693			W	1,585,976

(b)	As of December 31, 2009, the Company has provided five blank promissory notes to Korea Resources Corporation as collateral for long-term domestic borrowings, and has provided six blank promissory notes to KNOC as collateral for long-term foreign currency borrowings.
(c)	As of December 31, 2009, the Company acquired certain tools and equipment under operating lease agreements from Macquarie Capital Korea Company Limited and others. The Company’s rent expenses with respect to these lease agreements amounted to W4,877 million for the year ended December 31, 2009. Future lease payments under these lease agreements are as follows:

(in millions of Won)
Period	Amount
2010	W	3,269
2011		1,174
2012		304
	W	4,747

44

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(d)	The Company is involved in thirteen lawsuits and claims for alleged damages aggregating to W 13,054 million as of December 31, 2009 which arose in the ordinary course of business. The Company is unable to predict the possible outcome of the above claims. However, in the opinion of management, the foregoing lawsuits and claims will not have a material adverse effect on the Company’s financial position, operating results or cash flows. No provision is recorded in connection with the above lawsuits and claims as of December 31, 2009.
(e)	The Company entered into long-term contracts to purchase iron ore, coal, nickel, chrome and other raw materials. These contracts generally have terms of more than three years and provide for periodic price adjustments to the market price. As of December 31, 2009, 364 million tons of iron ore and 59 million tons of coal remained to be purchased under such long-term contracts.
(f)	The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia regarding the commitment to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. Purchase price is subject to change, following change of monthly standard oil price (JCC) and also price of ceiling is applicable.
(g)	The Company has a bank overdraft agreement of up to W 310,000 million with Woori Bank and six other banks as of December 31, 2009. In addition, the Company entered into a credit purchase loan agreement with Industrial Bank of Korea and five other banks for credit lines of up to W 240,000 million.
(h)	As of December 31, 2009, the Company has an agreement with Woori Bank and ten other banks to open letters of credit, documents against acceptance and documents against payment amounting to US$ 1,420 million and to borrow US$ 500 million in foreign short-term borrowings.
(i)	The outstanding balance of accounts receivable in foreign currency sold to financial institutions as of December 31, 2009 amounted to US$ 235 million for which the Company is contingently liable upon the issuers’ default.
(j)	The Company entered into commitments of foreign currency long-term borrowings which are limited up to the amount of US$ 6.86 million and US$ 3.54 million with KNOC related to the exploration of gas fields in the Aral Sea, Uzbekistan and Namangan-Tergachi, respectively. The Company is not liable for the repayment of full or part of money borrowed if the project fails and also the Company has agreed to pay certain portion of its profits under certain conditions as defined by borrowing agreement.
(k)	The Company has provided a supplemental funding agreement as the largest shareholder by the requests from the creditors including Korea Development Bank for seamless funding to POSCO Power Corp. under construction of new power plants.

45

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

17. Derivatives

(a) Details of derivatives for the year ended December 31, 2009 are as follows:

	Purpose of	Financial
Type of Transaction	Transaction	Institutions	Description of contract
Embedded derivative (*)	Issuing exchangeable bonds	Investee for exchangeable bonds	Exchangeable rights for stock

(*) The Company applied derivative accounting as exchangeable right to investors related to exchangeable bond issued in August 19, 2008 met the criteria of embedded derivatives. Fair values of exchangeable right as of December 31, 2009 and 2008 are W 2,134 million (JPY 168,994,000) and W 9,199 million (JPY 659,937,500), respectively. This exchangeable right is included in other long-term liabilities (note 13).

(b) Details of the gains (losses) on derivatives, net for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	Valuation Gain (Loss)				Transaction Gain (Loss)
Type of Transaction	2009		2008		2009		2008
Currency forward (Swaps)	W	—		—	W	14,177		830
Embedded derivative		7,065		17,985		—		—
	W	7,065		17,985	W	14,177		830

The risk hedge accounting according to KFAS Interpretation 53-70, Accounting for Derivatives, is not applied on the derivative transactions.

46

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

18. Stock Appreciation Rights

(a) The Company granted stock appreciation rights to its executive officers in accordance with the stock appreciation rights plan approved by the Board of Directors. The details of the stock appreciation rights granted are as follows:

	1st Grant	2nd Grant	3rd Grant	4th Grant	5th Grant	6th Grant	Total
Before the modifications (*)
Number of shares	498,000 shares	60,000 shares	22,000 shares	141,500 shares	218,600 shares	90,000 shares	1,030,100 shares
Exercise price	W98,400 per share	W135,800 per share	W115,600 per share	W102,900 per share	W151,700 per share	W194,900 per share
After the modifications (*)
Grant date	July 23, 2001	April 27, 2002	September 18, 2002	April 26, 2003	July 23, 2004	April 28, 2005
Exercise price	W98,900 per share	W136,400 per share	W116,100 per share	W102,900 per share	W151,700 per share	W194,900 per share
Number of shares granted	453,576 shares	55,896 shares	20,495 shares	135,897 shares	214,228 shares	90,000 shares	970,092 shares
Number of shares cancelled	19,409 shares	—	—	—	—	—	19,409 shares
Number of shares exercised	434,167 shares	55,896 shares	20,495 shares	134,106 shares	115,064 shares	62,000 shares	821,728 shares
Number of shares outstanding	—	—	—	1,791 shares	99,164 shares	28,000 shares	128,955 shares
Exercise period	July 24, 2003~ July 23, 2008	April 28, 2004~ April 27, 2009	Sept. 19, 2004~ Sept. 18 2009	April 27, 2005~ April 26, 2010	July 24, 2006~ July 23, 2011	April 29, 2007~ April 28, 2012

(*) The Company modified the number of shares granted under the stock appreciation rights and the exercise price, as presented above (1^st, 2^nd, 3^rd, 4^th and 5^th), in accordance with the resolutions of the Board of Directors on April 26, 2003, October 17, 2003 and October 22, 2004.

(b) Expenses (or income) related to stock appreciation rights granted to executives incurred for the year ended December 31, 2009 are as follows:

(in millions of Won)	1st Grant		2nd Grant			3rd Grant		4th Grant		5th Grant		6th Grant		Total
Prior periods	W	59,945	W	10,801		W	4,843	W	29,770	W	54,680	W	25,486	W	185,525
Current period		—		(21	)		1,228		2,126		26,559		6,208		36,100
	W	59,945	W	10,780		W	6,071	W	31,896	W	81,239	W	31,694	W	221,625

(c) As of December 31, 2009 and 2008, liabilities related to stock appreciation rights which are stated as long-term accrued expenses amounted to W 55,141 million and W 42,779 million, respectively.

47

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

19. Capital Stock

Under the Articles of Incorporation, the Company is authorized to issue 200 million shares of capital stock with par value of W 5,000 per share. As of December 31, 2009, exclusive of retired stock, 87,186,835 shares of common stock have been issued.

The Company is authorized, with the Board of Directors’ approval, to retire treasury stock in accordance with applicable laws up to the maximum amount of certain undistributed earnings. The 9,293,790 shares of common stock were retired with the Board of Directors’ approval.

As of December 31, 2009, ending balance of capital stock amounts to W 482,403 million; however, it is different from par value of issued common stock which amounted to W 435,934 million due to retirement of treasury stock.

As of December 31, 2009, total shares of ADRs are 66,059,024, equivalent to 16,514,756 of common shares.

20. Capital Surplus

(a)	In accordance with the Asset Revaluation Law, the Company had revalued three times a substantial portion of its property, plant and equipment since December 31, 1989. The remaining revaluation increments amounting to W3,173 billion, net of revaluation tax, were recorded as revaluation surplus, a component of shareholders’ equity.
(b)	Other capital surplus consists of gain on disposal of treasury stock and capital surplus by equity method.

21. Capital Adjustments

(a) Details of capital adjustments of the Company as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009				2008
	Number of shares		Book value		Book value
Treasury stock		7,792,072	W	1,662,068		1,760,819
Specified money in trust		2,361,885		741,195		741,195
		10,153,957	W	2,403,263		2,502,014

(b) The voting rights of treasury stock are restricted in accordance with the Korean Commercial Code of the Republic of Korea. In addition, the Company sold 462,962 shares of its treasury stock on October 19, 2009, as approved by the Board of Directors on October 16, 2009. The differences between the book values and the proceeds from the sales were recognized as gains on sale of treasury stock (capital surplus).

48

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

22. Retained Earnings

Retained earnings as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009		2008
Appropriated
Legal reserve	W	241,202		241,202
Reserve for technology and human resource development		720,000		1,071,667
Appropriated retained earnings for business rationalization		918,300		918,300
Appropriated retained earnings for business expansion		21,557,500		17,757,500
Appropriated retained earnings for dividends		1,211,223		982,395
		24,648,225		20,971,064
Unappropriated		3,295,033		4,489,059
	W	27,943,258		25,460,123

Legal Reserve

The Commercial Code of the Republic of Korea requires the Company to appropriate annually, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid, until such a reserve equals 50% of its issued capital stock. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock, or used to reduce accumulated deficit, if any, with the ratification of the Company’s majority shareholders.

23. Dividends

(a) Details of interim and year-end dividends in 2009 and 2008 are as follows:

Interim Cash Dividends

	2009				2008
(in millions of Won)	Dividend Ratio (%)		Dividend Amount		Dividend Ratio (%)		Dividend Amount
Common shares		30	W	114,855		50		188,485

Year-end Cash Dividends

	2009				2008
(in millions of Won)	Dividend Ratio (%)		Dividend Amount		Dividend Ratio (%)		Dividend Amount
Common shares		130	W	500,714		150		574,274

49

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(b) Details of the dividend payout ratio and dividend yield ratio are as follows:

	2009				2008
	Dividend Ratio (%)		Dividend Amount		Dividend Ratio (%)		Dividend Amount
Common shares		30	W	114,855		50		188,485

24. Cost of Goods Sold

Costs of goods sold for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Finished goods, semifinished goods and by-products
Beginning balance of inventories	W	2,749,541			1,359,025
Cost of goods manufactured		20,889,203			24,045,506
Transfer from other accounts		83,486			30,135
Refund of customs		(21,222	)		(10,424	)
Ending balance of inventories		(1,191,502	)		(2,749,541	)
		22,509,506			22,674,701
Others		64,798			32,283
Total	W	22,574,304			22,706,984

50

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

25. Selling, General and Administrative Expenses

Details of selling, general and administrative expenses for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009		2008
Selling expenses	W	626,893		741,683
Fees and charges		112,852		139,095
Salaries and wages		94,600		89,605
Advertising		72,103		80,605
Research and development (note 9)		53,947		60,015
Depreciation		14,704		15,629
Amortization (note 9)		16,094		14,748
Bad debt expenses		8,861		—
Rent		19,821		22,396
Other employ benefits		78,527		100,589
Provision for severance benefits		5,831		32,086
Supplies		4,147		4,490
Travel		12,580		14,674
Training		12,088		17,206
Repairs		10,536		10,346
Communications		7,315		7,937
Vehicle expenses		5,572		5,448
Taxes and dues		4,379		5,283
Entertainment		3,559		4,578
Subscriptions and printing		2,665		2,345
Utilities		455		991
Insurance		11,635		8,744
Stock compensation expense (note 18)		36,100		—
Others		16,378		16,873
	W	1,231,642		1,395,366

51

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

26. Assets and Liabilities Denominated in Foreign Currencies

Monetary assets and liabilities denominated in foreign currencies as of December 31, 2009 and 2008 are as follows:

	2009				2008
			Won				Won
(in millions of Won)	Foreign currency		Equivalent		Foreign currency		Equivalent
Assets
Cash and cash equivalents	USD	266,156	W	310,764	USD	110,967		139,541
	EUR	188		314	EUR	174		310
	Others	—		140	Others	—		116
Trade accounts and notes receivable	USD	327,506		382,396	USD	233,283		293,353
	JPY	3,541,836		44,727	JPY	3,610,125		50,321
	EUR	17,147		28,709	EUR	6,437		11,433
Other accounts receivable	USD	6,662		7,779	USD	4,564		5,740
	JPY	8,879		112	JPY	8,879		124
	Others	—		—	Others	—		38
Guarantee deposits	USD	45		53	USD	106		134
	EUR	135		226	EUR	129		229
	Others	—		95	Others	—		36
			W	775,315				501,375
Liabilities
Trade accounts payable	USD	277,543	W	324,059	USD	386,859		486,475
	JPY	1,140,474		14,402	JPY	1,401,536		19,536
	EUR	871		1,458	EUR	18		32
Other accounts payable	USD	7,484		8,739	USD	10,265		12,908
	JPY	366,221		4,625	JPY	2,424,724		33,798
	EUR	3,183		5,329	EUR	6,965		12,372
	AUD	58		61	AUD	—		—
Debentures	USD	1,000,000		1,167,600	USD	300,000		377,250
	JPY	173,592,205		2,192,157	JPY	173,592,205		2,419,684
Foreign currency short-term borrowings	USD	369,056		430,910	USD	271,035		340,827
Foreign currency long-term borrowings	JPY	—		—	JPY	192,000		2,676
	USD	4,550		5,578	USD	2,325		2,923
Loans from foreign financial institutions	EUR	3,964		6,637	EUR	4,601		8,172
			W	4,161,555				3,716,653

52

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

27. Income Taxes

(a) Income tax expense for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009			2008
Current income taxes (*)	W	581,548			1,638,902
Deferred income tax due to temporary differences		(12,639	)		(527,582	)
Items charged directly to shareholders’ equity		(158,648	)		271,277
	W	410,261			1,382,597

(*) Additional tax payments (or tax returns) arising from finalized tax assessment are added or deducted in current income taxes.

(b) The following table reconciles the expected amount of income tax expense based on statutory rates to the actual amount of taxes recorded by the Company for the years ended December 31, 2009 and 2008:

(in millions of Won)	2009			2008
Net income before income tax expense	W	3,582,525			5,829,530
Income tax expense computed at statutory rate		866,947			1,603,090
Adjustments:
Tax credit		(349,190	)		(182,374	)
Tax returns (*)		(140,442	)		—
Others, net		32,946			(38,119	)
Income tax expense	W	410,261			1,382,597
Effective rate (%)		11.5	%		23.7	%

(*) The Company received tax refunds amounting to W 144,248 million from the additional tax payments in 2005, according to the decision of Tax Tribunal, and recognized W 140,442 million excluding adjusted amount in deferred income tax assets (liabilities) as tax returns.

(c) The Company recognizes deferred income taxes for anticipated future tax consequences resulting from temporary differences between amounts reported for financial reporting and income tax purposes. Deferred tax assets and liabilities are computed on such temporary differences by applying enacted statutory tax rates applicable to the years when such differences are expected to be reversed. The deferred income tax effect of tax amendment amounting to W 23,667 million were recorded in income tax expense.

53

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(d) Changes in temporary differences and deferred income taxes for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	Accumulated temporary differences									Deferred income tax
	Dec. 31, 2008			Inc. (dec.) (*1)			Dec. 31, 2009			Dec. 31, 2008			Inc. (dec.)			Dec. 31, 2009
Reserve for special repairs	W	(281,824	)	W	107,834		W	(173,990	)	W	(62,423	)	W	22,923		W	(39,500	)
Reserve for technology developments		(720,000	)		(80,000	)		(800,000	)		(167,016	)		(8,984	)		(176,000	)
Dividend income from related companies		430,688			30,711			461,399			94,751			6,757			101,508
Depreciation expense		(267,736	)		(89,328	)		(357,064	)		(58,569	)		(19,876	)		(78,445	)
Valuation of equity method accounted investments (*2)		(1,778,197	)		(368,990	)		(2,147,187	)		(299,121	)		(81,125	)		(380,246	)
Prepaid expenses		68,751			4,624			73,375			16,182			1,574			17,756
Impairment loss on property, plant and equipment		42,461			(6,765	)		35,696			9,374			(1,376	)		7,998
Gain on foreign currency translateion		622,855			(431,902	)		190,953			137,581			(97,798	)		39,783
Gain on valuation of available-for-sale securities		(393,580	)		(441,631	)		(835,211	)		(86,587	)		(97,159	)		(183,746	)
Loss on valuation of available-for-sale securities		973,348			(105,189	)		868,159			214,137			(23,142	)		190,995
Tax credit		—			—			—			—			286,556			286,556
Others		362,567			111,472			474,039			74,851			24,289			99,140
		(940,667	)		(1,269,164	)		(2,209,831	)		(126,840	)		12,639			(114,201	)

(in millions of Won)	Accumulated temporary differences									Deferred income tax
	Dec. 31, 2007			Inc. (dec.) (*1)			Dec. 31, 2008			Dec. 31, 2007			Inc. (dec.)			Dec. 31, 2008
Reserve for special repairs	W	(301,751	)	W	19,927		W	(281,824	)	W	(82,982	)	W	20,559		W	(62,423	)
Allowances for doubtful accounts		19,484			(19,484	)		—			5,358			(5,358	)		—
Reserve for technology developments		(1,071,667	)		351,667			(720,000	)		(294,708	)		127,692			(167,016	)
Dividend income from related companies		366,233			64,455			430,688			100,714			(5,963	)		94,751
Depreciation expense		(151,035	)		(116,701	)		(267,736	)		(41,534	)		(17,035	)		(58,569	)
Valuation of equity method accounted investments		(1,423,440	)		(354,757	)		(1,778,197	)		(309,186	)		10,065			(299,121	)
Prepaid expenses		34,422			34,329			68,751			9,465			6,717			16,182
Impairment loss on property, plant and equipment		374,053			(331,592	)		42,461			102,865			(93,490	)		9,375
Gain on foreign currency translateion		—			622,855			622,855			—			137,581			137,581
Gain on valuation of available-for-sale securities		(1,228,045	)		834,465			(393,580	)		(337,712	)		251,125			(86,587	)
Loss on valuation of available-for-sale securities		278,548			694,800			973,348			76,601			137,536			214,137
Others		443,132			(80,565	)		362,567			116,697			(41,847	)		74,850
	W	(2,660,066	)	W	1,719,399		W	(940,667	)	W	(654,422	)	W	527,582		W	(126,840	)

(*1) The adjustments reflect the effect of the finalized tax assessment for the year ended December 31, 2008 and as a result, the deferred income tax balances as of December 31, 2008 have been adjusted.

54

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(*2) As the Company is unlikely to dispose of its investee shares within five years, the income tax effect of W 476,169 million in 2009 is not recognized as it is more likely than not that the deferred tax asset will not be realized.

(e)	Changes in deferred income tax and others which are directly recognized in equity due to changes in valuation of available-for-sale securities for the years ended December 31, 2009 and 2008 amounted to W 158,648 million and W (271,277) million, respectively.
(f)	A summary of deferred tax assets and liabilities as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009						2008
	Current			Non-current			Current			Non-current
Deferred tax assets	W	307,865		W	747,057		W	35,138		W	770,457
Deferred tax liabilities		(21,790	)		(1,147,333	)		(125,445	)		(806,990	)
Net deferred tax assets (liabilities)	W	286,075		W	(400,276	)	W	(90,307	)	W	(36,533	)

28. Comprehensive Income

For the years ended December 31, 2009 and 2008, comprehensive incomes are as follows:

(in millions of Won)	2009			2008
Net income	W	3,172,264			4,446,933
Gain (loss) on valuation of available-for-sale securities		546,820			(1,529,608	)
Less: tax effect		(120,301	)		388,661
Changes in capital adjustments arising from equity method accounted investments		42,192			419,394
Less: tax effect		4,323			(66,384	)
Other comprehensive income		473,034			(787,937	)
Comprehensive income	W	3,645,298			3,658,996

55

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

29. Earnings Per Share

(a) Basic earnings per share for the years ended December 31, 2009 and 2008 were as follows:

(in millions of Won except per share information)	2009		2008
Net income	W	3,172,264		4,446,933
Weighted-average number of common shares outstanding (*)		76,661,240		75,493,523
Basic earnings per share	W	41,380		58,905

(*) Basic earnings per share are computed by dividing net income allocated to common stock, by the weighted-average number of common shares outstanding for the year ended December 31, 2009 and 2008:

	2009			2008
Total number of common shares issued		87,186,835			87,186,835
Weighted-average number of treasury shares		(10,525,595	)		(11,693,312	)
Weighted-average number of common shares outstanding		76,661,240			75,493,523

56

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

30. Related Party Transactions

(a) As of December 31, 2009, the subsidiaries of the Company are as follows:

Domestic (30)	POSCO E&C Co., Ltd., Posteel Co., Ltd., POSCON Co., Ltd., POSCO Coated & Color Steel Co., Ltd., POSCO Machinery & Engineering Co., Ltd., POSCOICT CO., Ltd.(formerly, POSDATA CO., Ltd.), POSCO Research Institute, Seung Kwang Co., Ltd., POSCO Architects & Consultants Co., Ltd., POSCO Specialty Steel Co., Ltd., POSCO Machinery Co., Ltd., POSTECH Venture Capital Corp, POSTECH 2006 Energy Fund, POSCO Refractories & Environment Co., Ltd., POSCO Terminal Co., Ltd., POSMATE Co., Ltd., Samjung Packing & Aluminum Co., Ltd., POSCO Power Corp., PHP Co., Ltd., PNR Co., Ltd., Megaasset Co., Ltd., Daewoo engineering Company, Metapolis Co., Ltd., POSCORE Co., Ltd., Pohang feul cell co., POSCOAST CO., LTD., DAIMYUNG TMS.CO.LTD., POS-HiMETAL CO., Ltd., POSCO E&E Co., Ltd., Universal Studio Resort Development Co., Ltd.
Foreign (50)	POSCO America Corporation, POSCO Australia Pty. Ltd., POSCO Canada Limited, POSCAN Elkview Coal Ltd., POSCO Asia Co., Ltd., VSC POSCO Steel Corp., Dalian POSCO-CFM Coated Steel Co., Ltd., POSCO-CTPC, POSCO-JKPC Co., Ltd., International Business Center Corporation, POSLILAMA E&C Co., Ltd., Zhangjiagang Pohang Stainless Steel Co., Ltd., Guangdong Pohang Coated Steel Co., Ltd., POSCO (Thailand) Co., Ltd., Myanmar POSCO Steel Co., Ltd., Zhangjiagang Posha Steel Port Co., Ltd., POSCO-JOPC Co., Ltd., POSCO Investment Co., Ltd., POSCO-MKPC SDN BHD., Qingdao Pohang Stainless Steel Co., Ltd., POSCO (Suzhou) Automotive Processing Center Co.,Ltd.,
	POSEC-Hawaii Inc., POS-Qingdao Coil Center Co., Ltd., POS-ORE Pty. Ltd., POSCO-China Holding Corp., POSCO-Japan Co., Ltd., POSCO E&C (Zhangjiagang) Engineering &Construction Co., Ltd., POS-CD Pty. Ltd, POS-GC Pty. Ltd, POSCO-India Private. Ltd., POS-India Pune Steel Processing Centre Pvt. Ltd., POSCO-JNPC Co., Ltd., POSCO-Foshan Steel Processing Centre Pvt. Ltd., POSCO E&C (Beijing) Co., Ltd., POSCO-MPC S.A. de C.V., Zhanjiagang Pohang Port Co., Ltd.,
	POSCO-Vietnam Co., Ltd., POSCO Mexico Co., Ltd., POSCO-India Delhi Steel Processing Centre Pvt. Ltd., POSCO (Chongqing) Automotive Processing Center Co., Ltd., POS-NP Pty. Ltd., POSCO Vietnam Processing Center Co., Ltd., Suzhou pos-core Technology Co., Ltd., POSCO-JYPC Co., Ltd., POSCO-Malaysia SDN. BHD., POS-Minerals Corporation, POSCO (Wuhu) Automotive Processing Center Co., Ltd., &TV Communications, POSCO-Phillippine Manila Processing Center INC., POSCO VST Co., Ltd.

57

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(b) Significant transactions, which occurred in the ordinary course of business, with related companies for the years ended December 31, 2009 and 2008 and the related account balances as of December 31, 2009 and 2008 are as follows:

(in millions of Won)	Sales and others (*1)				Purchase and others (*1)				Receivables (*2)				Payables (*2)
	2009		2008		2009		2008		2009		2008		2009		2008
Subsidiaries
POSCO E&C Co., Ltd.	W	4,548	W	13,626	W	2,247,673	W	1,121,335	W	480	W	814	W	437,818	W	249,792
Posteel Co., Ltd.		1,167,949		1,455,354		159,216		244,908		114,783		220,713		3,484		21,651
POSCON Co., Ltd.		106		105		251,144		226,827		12		5		41,085		62,957
Pohang Coated & Color Steel Co., Ltd.		494,938		609,377		1,477		1,916		109,615		48,785		199		71
POSCO Machinery & Engineering Co., Ltd.		1,509		4,309		176,378		158,275		9		2,665		22,839		25,387
POSCOICT Co., Ltd. (formerly, POSDATA Co., Ltd.)		1,015		1,685		184,757		187,186		1		1		32,086		20,311
POSCO Machinery Co., Ltd.		8,843		15,302		80,451		89,248		2		2,188		12,719		28,517
POSCO Refractories & Environment Company Co., Ltd.		86,927		57,189		473,402		350,153		6,880		19,137		66,008		57,791
POSCO Terminal Co., LTD.		14,965		11,716		638		801		1,809		1,394		193		263
Samjung Packing & Aluminum Co., Ltd.(*3)		18,945		25,115		206,918		268,044		1,472		2,578		24,942		17,422
POSCORE CO., LTD.		130,964		131,497		483		176		11,678		20,330		24		—
POSCOAST Co., Ltd.		83,245		—		21,489		—		17,492		—		7,572		—
POSCO America Corporation		169,274		168,553		—		93		531		25		—		405
POSCO Canada Limited		—		40		84,404		289,015		—		21		—		—
POSCO Asia Co., Ltd.		1,093,589		951,867		79,844		203,923		40,548		28,301		1,170		2,978
POSCO Thailand BangKok Processing Center Co., Ltd.		70,129		91,077		5		—		1,768		—		—		—
POSCO-MKPC SDN BHD		54,766		27,170		—		—		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		185,002		93,232		—		—		2,353		4,804		—		—
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		113,392		24,930		—		—		—		—		—		—
POSCO-Japan Co., Ltd.		690,289		1,191,222		75,973		23,233		25,972		21,700		6,701		1,104
POS-India Pune Processing Centre Pvt. Ltd.		110,901		66,931		—		—		—		4,019		1		—
POSCO-Foshan Steel Processing Centre Pvt. Ltd.		58,413		23,940		—		—		—		54		—		—
POSCO-MPC S.A. de C.V.		98,476		61,279		—		—		—		—		—		—
POSCO-Vietnam Co., Ltd.		117,296		1,026		—		—		1,934		1,024		—		—
POSCO-Mexico Co., Ltd		125,057		—		—		—		—		—		—		—

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POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(in millions of Won)	Sales and others (*1)				Purchase and others (*1)				Receivables (*2)				Payables (*2)
	2009		2008		2009		2008		2009		2008		2009		2008
POSCO-India Delhi Steel Processing Centre Pvt. Ltd.		76,997		20,844		498		318		—		605		—		—
POSCO (Chongqing) Automotive Processing Center Co., Ltd.		43,401		4,686		—		—		—		—		—		—
POSCO Malaysia SDN. BHD.		51,191		43,072		—		—		—		—		—		—
POSCO (Wuhu) Automotive Processing Center Co., Ltd.		83,526		—		—		—		—		—		—		—
Others		147,216		127,497		121,447		125,548		3,622		6,352		14,503		19,305
		5,302,869		5,222,641		4,166,197		3,290,999		340,961		385,515		671,344		507,954
Equity method investees
eNtoB Corporation		—		—		223,075		288,604		—		—		6,561		6,016
SNNC Co.,Ltd.		1,437		2,245		368,261		33,867		1,974		19		26,963		1,926
KOBRASCO		—		4,115		2,857		63,968		—		4,115		—		—
Poschrome (Proprietary) Limited		—		98		48,822		91,467		176		—		—		—
POSVINA Co., Ltd.		5,973		12,550		—		—		—		—		—		—
USS-POSCO Industries		241,921		428,092		56		—		18,310		—		—		—
Guangdong Xingpu Steel Center Co., Ltd.		10,801		10,011		—		—		820		1,825		—		—
Others		—		—		181		—		—		—		78		—
		260,132		457,111		643,252		477,906		21,280		5,959		33,602		7,942
	W	5,563,001	W	5,679,752	W	4,809,449	W	3,768,905	W	362,241	W	391,474	W	704,946	W	515,896

(*1)	Sales and others include sales, non-operating income and others; purchases and others include purchases, acquisition of property, plant and equipment, overhead expenses and others.
(*2)	Receivables include trade accounts and notes receivable, other accounts receivable and others; payables include trade accounts payable, other accounts payable and others.

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POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(c) For the years ended December 31, 2009 and 2008, details of compensation to key management officers are as follows:

(in millions of Won)	2009		2008
Salaries	W	11,716		11,900
Severance benefits		5,490		4,093
Management achievement awards and others		14,196		17,525
Total	W	31,402		33,518

Key management officers include directors (including non-executive directors) and internal audit officer who have significant influence and responsibilities in the Company’s business plans, operations and controls. Other than the compensation which is described above, the Company granted stock appreciation rights to its key management officers. The Company recognized expense related to stock appreciation rights which were increased by W 36,100 million, and decreased by W 55,155 million for the year ended December 30, 2009 and 2008, respectively (note 18).

31. Segment Information

(a) The Company has plants in Pohang and in Gwangyang in the Republic of Korea. General information of the plants as of December 31, 2009 is as follows:

	Pohang Mill	Gwangyang Mill
Major Products
Hot Roll	HR coil	HR coil
Cold Roll	CR coil, CR Sheet	CR coil, CR Sheet
Plate	Plate	—
Electric iron	Electric iron coil	—
Stainless	STS HR coil and others	—
Semi-finished goods	Slab, Bloom, Billet	Slab
Major Facilities
Furnaces	1~4 furnaces, F furnace, 1~2 Finex	1~5 furnaces
Others	Steel manufacturing continuous, HR, CR and others	Steel manufacturing continuous, HR, CR and others

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POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(b) Operating results and long-lived assets as of and for the years ended December 31, 2009 and 2008 are as follows:

	2009
(in millions of Won)	Pohang		Gwangyang		Others		Total
Sales (*1)	W	15,250,852	W	11,611,576	W	91,517	W	26,953,945
Property, plant and equipment (*2)	W	8,686,156	W	7,959,438	W	—	W	16,645,594
Intangible assets (*2)		117,781		34,048		—		151,829
	W	8,803,937	W	7,993,486	W	—	W	16,797,423
Depreciation and amortization	W	1,192,497	W	867,051	W	—	W	2,059,548

	2008
(in millions of Won)	Pohang		Gwangyang		Others		Total
Sales (*1)	W	16,537,730	W	14,031,930	W	72,749	W	30,642,409
Property, plant and equipment (*2)	W	8,338,775	W	6,127,143	W	—	W	14,465,918
Intangible assets (*2)		126,018		44,077		—		170,095
	W	8,464,793	W	6,171,220	W	—	W	14,636,013
Depreciation and amortization	W	1,138,197	W	770,608	W	—	W	1,908,805

(*1)	No inter-plant sales transactions between the two plants.
(*2)	Presented at net book value.

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POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

32. Value Added Information

Details of accounts included in the computation of value added for the years ended December 31, 2009 and 2008 are as follows:

(in millions of Won)	2009		2008
Salaries and wages	W	812,217		848,239
Provision for severance benefits		3,219		244,132
Other employ benefit		471,186		684,026
Rent		45,446		44,483
Depreciation and amortization (*)		2,057,668		1,908,805
Taxes and dues		59,737		66,570
	W	3,449,473		3,796,255

(*) Includes amortization and depreciation expense both for assets in use and assets not in use.

33. Operating Results for the Final Interim Period (Unaudited)

Significant operating results of the Company for the three-month periods ended December 31, 2009 and 2008 are as follows:

(in millions of Won except per share information)	Q4 2009		Q4 2008
Sales	W	7,288,132		8,305,291
Operating income		1,586,780		1,397,605
Net income		1,275,327		721,437
Basic earnings per share (in Won)		16,577		9,522

62

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

34. The Company’s plan and status for applying K-IFRS

The company plans to prepare its financial statements under K-IFRS from 2011. To manage all the things accompanied with adoption of K-IFRS, the Company has organized a separate Task Force Team, and it has analyzed the impact of the adoption of K-IFRS and has been on the process of modification of system. Also, the Company has trained persons in charge of adoption of K-IFRS in POSCO and its subsidiaries and Task Force Team reported the results of its operation to the audit committee and management group periodically.

(a) Details of action plans and current status for the preparation of K-IFRS as of December 31, 2009 are as follows:

Major activities	Preparation plans	Current status as of December 31, 2009
Analysis of the impact on adption of K-IFRS and managing the separate Task Force Team for the adoption of K-IFRS	Preparation in adopting K-IFRS by managing the separate Task Force Team for the adoption of K-IFRS	1) Established separate Task Force Team for the adoption of K-IFRS in July 2008 2) Completion of first phase of K-IFRS consulting project provided by the accounting firm from August 2008 to March 2009 (Analysis of the impact on adoption of K-IFRS and creating Group GAAP) 3) Performing second phase of K-IFRS consulting project provided by the accounting firm from April 2009 up to now (Design stand-alone financial closing process with respect to GAAP differences)
Train persons in charge of accounting and related system	Obtaing essential technical knowledge for the adoption of K-IFRS by the end of 2009	Training persons in charge at working level of the Company and its subsidiaries regarding the impact of adoption of K-IFRS and reporting to audit committee and management group from July 2008 up to now.
Modification of system	Modification of the stand-alone financial closing system by the end of 2009 for application of K-IFRS	Modifying the stand-alone financial closing system as of December 31, 2009

63

POSCO
Notes to Non-Consolidated Financial Statements
December 31, 2009

(b) The significant differences expected by making the Company’s financial statements applying K-IFRS available as of December 31, 2009 are as follows. These results are not exhaustive, as in the future other unforeseen differences may appear as a result of future analysis. In addition, practical effect of some of the significant differences listed below may not be obtainable.

Classification	K-IFRS	Current policy
Employee Benefits	Defined benefit obligations represent the present value of projected benefit obligation using the Projected Unit Credit Method and actuarial assumptions.	Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors were to terminate their employment at the end of reporting period.
A method of accounting for an investment presented by separate financial statements	Cost method or applying K-IFRS 1039	Equity method accounting
Deemed cost at the date of transition (PP&E / investment property)	Measure the individual item of PP&E or investment property at fair value and use this value as deemed cost at the date of transition.	—
Derecognition of financial assets	Derecognise a financial asset when the contractual rights to the cash flows from the financial asset expire, or when the transferer transfers the contractual rights to receive the cash flows of the financial asset and transfers substantialy all the risks and rewards of ownership of the financial asset or the entity neither transfers nor retains all the risks and rewards of ownership.	Derecognise a financial asset when the transferer cannot exercise its rights and efficient control and the transferee has the practical ability to sell the asset.
Borrowing Costs	Borrowng costs that are directly attribute to the acquisition, construction or production of a qualifying asset form part of the cost of that asset.	Recognised as an expense.

64

Independent Accountants’ Review Report on Internal Accounting Control System

English translation of a Report Originally Issued in Korean

To the President of
POSCO:

We have reviewed the accompanying Report on the Operations of Internal Accounting Control System (“IACS”) of POSCO (the “Company”) as of December 31, 2009. The Company’s management is responsible for designing and maintaining effective IACS and for its assessment of the effectiveness of IACS. Our responsibility is to review management’s assessment and issue a report based on our review. In the accompanying report of management’s assessment of IACS, the Company’s management stated: “Based on the assessment on the operations of the IACS, the Company’s IACS has been effectively designed and is operating as of December 31, 2009, in all material respects, in accordance with the IACS Framework issued by the Internal Accounting Control System Operation Committee.”

We conducted our review in accordance with IACS Review Standards, issued by the Korean Institute of Certified Public Accountants. Those Standards require that we plan and perform the review to obtain assurance of a level less than that of an audit as to whether Report on the Operations of Internal Accounting Control System is free of material misstatement. Our review consists principally of obtaining an understanding of the Company’s IACS, inquiries of company personnel about the details of the report, and tracing to related documents we considered necessary in the circumstances. We have not performed an audit and, accordingly, we do not express an audit opinion.

A company’s IACS is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, however, IACS may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on our review, nothing has come to our attention that Report on the Operations of Internal Accounting Control System as of December 31, 2009 is not prepared in all material respects, in accordance with IACS Framework issued by the Internal Accounting Control System Operation Committee.

65

This report applies to the Company’s IACS in existence as of December 31, 2009. We did not review the Company’s IACS subsequent to December 31, 2009. This report has been prepared for Korean regulatory purposes, pursuant to the External Audit Law, and may not be appropriate for other purposes or for other users.

Seoul, Korea

February 8, 2010

Notice to Readers

This report is annexed in relation to the audit of the non-consolidated financial statements as of December 31, 2009 and the review of internal accounting control system pursuant to Article 2-3 of the Act on External Audit for Stock Companies of the Republic of Korea.

66

Report on the Operations of Internal Accounting Control System

To the Board of Directors and Audit Committee of
POSCO:

I, as the Internal Accounting Control Officer (“IACO”) of POSCO (the “Company”), have assessed the status of the design and operations of the Company’s internal accounting control system (“IACS’’) as of December 31, 2009.

The Company’s management, including IACO, is responsible for the design and operations of its IACS. I, as the IACO, have assessed whether the IACS has been effectively designed and is operating to prevent and detect any error or fraud which may cause any misstatement of the financial statements, for the purpose of establishing the reliability of financial statement preparation and presentation for external uses. I, as the IACO, applied the IACS Standards established by the IACS Operations Committee for the assessment of design and operations of the IACS.

Based on the assessment of the operations of the IACS, the Company’s IACS has been effectively designed and is operating as of December 31, 2009, in all material respects, in accordance with the IACS Standards issued by the IACS Operations Committee.

January 14, 2010

Lee Dong Hee, Internal Accounting Control Officer

Chung Joon Yang, Chief Executive Officer

67