Exhibit 99.1

INTERIM REPORT

(From January 1, 2011 to June 30, 2011)

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

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

INTERIM REPORT

(From January 1, 2011 to June 30, 2011)

To: Korean Financial Services Commission and Korea Exchange

/s/

Choi, Jong-Tae

President and Representative Director

POSCO

1 Koedong-dong, Pohang-si, Nam-gu, Kyungsangbuk-do, Korea

Telephone: +82-54-220-0114

/s/

Shim, Tong-Wook

Senior Vice President

POSCO

Telelphone: +82-2-3457-0114

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TABLE OF CONTENTS

I. Overview

II. Business Organization

III. Financial Statements

IV. Corporate Governance and Company Affiliates

Attachment: Independent Accountants’ Review Report

                      (Non-consolidated and consolidated)

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I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

Business	Note
(1) Production and sale of crude steel and stainless steel products
(2) Port/harbor loading/unloading, warehousing and packaging	No engagement in this business
	during the first half of the
	fiscal year 2011
(3) Management of professional athletic organizations
(4) Power generation, renewable energy projects, liquefied natural gas logistics and exploration, and other incidental businesses
(5) Real property lease business
(6) Public energy services and distribution system
(7) Marine transportation of mineral resources; domestic and overseas processing and sales of mineral resources
(8) Educational services and other incidental services
(9) Production and sale of non-ferrous metals
(10) Other businesses incidental or related, directly or indirectly, to the foregoing businesses

B. POSCO Business Group

(1) Name of Business Group: POSCO

(2) Companies Belonging to Large Business Groups

POSCO, POSCO COATED & COLOR STEEL Co., Ltd., SUNGJIN GEOTEC Co., Ltd., DAEWOO INTERNATIONAL CORPORATION, POSCO ICT COMPANY LTD., POSCO CHEMTECH COMPANY LTD., POSCO M-TECH CO., LTD., POSCO Engineering & Construction Co., Ltd., Seoung Gwang Co., Ltd., POSCO Research Institute, POSCO Processing & Service Co., Ltd., POSCO A&C Co., Ltd., POSCO Specialty Steel Co., Ltd., POSCO Plant Engineering Co., Ltd., POSCO TERMINAL Co., Ltd., POSTECH VENTURE CAPITAL CORPORATION, METAPOLIS Co., Ltd., POSMATE, POSCO POWER CORPORATION, SNNC Co., Ltd., Poscoenc Housing Planning Co., Ltd., POSBRO COMPANY LTD., Suwon Green Environment Co., Ltd., POSCO

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TMC CO., LTD., POSWITH CO., LTD., UITrans LRT co., POSCO-Nippon Steel RHF Joint Venture Co., Ltd., Pohang Fuelcell Power Corporation, Cheongna IBT Co., Ltd., MegaAsset Co., Ltd., Gunsan Steel Processing and Fabricating Center CO., LTD., DAEWOOENGINEERING COMPANY CO., LTD., BASYS INDUSTRY CO., LTD., Pohang Steel Fabrication Center, POSCALCIUM Company, Ltd., DAKOS CO., LTD., SONGDO SE CO., Ltd., eNtoB Corporation, POSCO AST CO., LTD., DAIMYUNG TMS CO., LTD., POSCO LED COMPANY LTD., POSCO E&E, POMIC Co., Ltd., POS-HiMETAL CO., Ltd., POSFINE CO., Ltd., POS ECO HOUSING CO., Ltd., Mapo Hibroad Parking co., Ltd., Gwangyang Steel Processing and Fabricating Center Co., LTD., POSPlate Co., LTD., PLANT EST Co., Ltd., 9DIGIT CO., LTD., YU YOUNG METAL CO., LTD., SHINKI E&T Co., Ltd., ANJEONG DISTRICT DEVELOPMENT CO., LTD., POSGREEN Company, Ltd., Busan E&E Co., Ltd., POREKA Co., POSCO NST.CO., LTD., Pohang Scrap Distribution Center Co., Ltd., PSC Energy Global Co., Ltd., SUNCHEON ECO TRANS Co., Ltd., POSMATEINSURE INSURANCE BROKER CO., LTD., Shinan Energy Co., Ltd.

(a) Changes in Companies Belonging to Large Business Groups before June 30, 2011

• Addition of Subsidiary: Clean Iksan Co., Ltd. (January 3, 2011)

• Addition of Subsidiary: Pohang Scrap Recyling Distribution Center Co., Ltd. (February 1, 2011)

• POSCO Steel Service & Sales CO., Ltd. changed the company name to POSCO Processing & Service Co., Ltd. (February 28, 2011)

• Exclusion of Subsidiary: Clean Iksan Co., Ltd. (March 17, 2011)

• SAMJUNG PACKING AND ALUMINUM CO., LTD. changed the company name to POSCO M-TECH CO., LTD. (March 18, 2011)

• POHANG SFC Co., Ltd. changed the company name to POHANG SPFC Co., Ltd. (March 29, 2011)

• Addition of Subsidiary: SUNCHEON ECO TRANS Co., Ltd. (April 5, 2011)

• Addition of Subsidiary: PSC Energy Global Co., Ltd. (April 5, 2011)

• Addition of Subsidiary: POSMATEINSURE INSURANCE BROKER CO., LTD (June 1, 2011)

• Addition of Subsidiary: Shinan Energy Co., Ltd. (June 1, 2011)

(b) Changes in Companies Belonging to Large Business Groups after June 30, 2011

• Addition of Subsidiary: ReCO Metal Co., Ltd. (August 1, 2011)

• Addition of Subsidiary: Clean Gimpo Co.,Ltd. (August 1, 2011)

(3) Related Laws and Regulations

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

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• Details

(a)	Prohibition on Cross Shareholdings (Article 9-1 of the MRFTA)
(b)	Prohibitions on Debt Guarantees for Affiliated Corporations (Article 10-2 of the MRFTA)
(c)	Prohibitions on Shareholding of Venture Capitals for Subsidiaries (Article 9-3 of the MRFTA)
(d)	Limitation of Voting Rights of Finance or Insurance Companies (Article 11 of the MRFTA)
(e)	Resolution of Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article 11-2 of the MRFTA)
(f)	Disclosure of Important Facts such as Unlisted Shares (Article 11-3 of the MRFTA)
(g)	Report on Status of Shareholding (Article 13 of the MRFTA)

2. Business Organization

A. Highlights of the Company’s Business Organization

(1) Date of the Establishment: April 1, 1968

(2) Location of the Headquarter: 1 Koedong-dong, Nam-gu, Pohang-si, Kyungsangbuk-do, Korea

(3) Steel Works and Offices

(a)	Pohang Steel Works: 5 Dongchon-dong, Nam-gu, Pohang-si, Kyungsangbuk-do, Korea
(b)	Gwangyang Steel Works: 700 Kumho-dong, Gwangyang-si, Chollanam-do, Korea
(c)	Principal Executive Office: POSCO Center, 892 Daechi4 dong, Gangnam-ku, Seoul, Korea
(d)	Overseas Offices: For the purpose of supporting international business, the Company operates nine overseas offices as follows:

United Arab Emirates (Dubai), Czech Republic(Prague), the European Union (Dusseldorf, Germany) Brazil (Rio de Janeiro), Russia (Moscow), Egypt(Cairo), Mongolia(Ullaanbaatar), Australia (Perth) , and Republic of South Africa (Johannesburg)

(4) Composition of the Board of Directors (as of February 25, 2011)

(a) Inside Directors

• There is no change.

(b) Outside Directors

• The terms of office for Ahn, Charles, Sun, Wook, and Park, Sang-Yong have expired on February 25, 2011.

• New members: Nam, Yong, Byun, Dae-Gyu, and Park, Sang-Kil

(c) Representative Directors

• Prior to February 25, 2011: Chung, Joon-Yang, and Choi, Jong-Tae

• As of February 25, 2011: Chung, Joon-Yang, Choi, Jong-Tae, Park, Han-Yong, and Oh, Chang-Kwan

• Changes After June 30, 2011

• Kim, Byung-Ki has resigned from the outside director’s position on July 1, 2011.

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(5) Major POSCO Shareholders

(a)	National Pension Corporation holds the largest number of POSCO’s shares.
(b)	Date of Disclosure: January 30, 2007 (for further reference, please refer to the public disclosures regarding the change of the major shareholders on January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011 and July 22, 2011)

B. Merger, Acquisition and Handover of Businesses

[none]

C. Major Changes in Production Facilities

There was no material change during the first half of the fiscal year 2011.

3. Equity Capital

A. New Issuance of Registered Common Stock

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

B. Convertible Bonds

[None]

C. Bonds with Warrant

[None]

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4. Other Information Regarding Shares

A. Total Number of Shares

(As of June 30, 2011)

Authorized Shares	Outstanding Shares
200,000,000	87,186,835

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

• Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

* Treasury Stock Holding and Cancellation

(As of June 30, 2011)

Method of Purchase	Type	Beginning	Increased	Decreased	Cancelled	Balance
Direct		7,792,072	—	342,955	—	7,449,117
Special Money Trust	Registered Common	2,361,885	131,389	—	—	2,493,274
Total		10,153,957	131,389	342,955	—	9,942,391

• Beginning Balance: as of December 31, 2010

C. Voting Rights

(As of June 30, 2011)

Classification of Shares	Number of Shares	Remarks
(1) Number of Outstanding Shares	87,186,835	—
(2) Shares without Voting Rights *	9,942,391	*Treasury Stock
		9,942,391 shares
(3) Shares with Voting Rights	77,244,444	—

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D. Earnings and Dividend

(In millions of KRW)

	2011 1H
	(January 1, 2011 ~
	June 30, 2011)		2010			2009
Net Profit		2,173,154		4,202,791			3,172,264
Earning per Share (KRW)		28,128		54,558			41,380
Cash Dividend Paid		193,111		770,329			615,569
Pay-out Ratio		—		18.3	%		19.4	%
Dividend per Share (KRW)		2,500		10,000			8,000
Dividend Yield		—		2.03	%		1.31	%

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II. BUSINESS

1. Overview

A. Classification of Business

We separated our business into four segments as below:

Steel, Trading, Engineering & Construction, and Others

B. Segment Results

(In millions of KRW)

	2011 1H
	(January 1, 2011 ~
	June 30, 2011)				2010
Category	Sales		Operating Income		Sales		Operating Income
Steel		19,699,769		2,728,907		35,527,373		5,112,149
Trading		9,985,173		88,289		6,236,031		37,984
E&C		2,309,156		155,693		4,348,796		164,606
Others		1,303,220		129,432		1,775,056		118,781
Total		33,297,318		3,102,321		47,887,255		5,433,520

2. Current Situation

1) Steel

A. Domestic Market Share

(Millions of Tons, %)

	2011 1H
	(January 1, 2011 ~
	June 30, 2011)		2010		2009
Category	Production	Market share	Production	Market share	Production	Market share
Crude Steel Production	33.9	100	58.4	100	48.6	100
POSCO	18.2	54	33.7	58	29.5	61
Others	15.7	46	24.7	42	19.1	39

• Source: Korea Iron and Steel Association

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B. Characteristics of the Steel Market

(1)	The steel industry supplies materials to major industries, including the automobile, shipbuilding and electronics appliance industries
(2)	Domestic sales represent 65%, and overseas sales represent 35% of our total sales volume of steel products. The major overseas markets include Japan, China, and Southeast Asian countries.

C. Current Situation and Prospect of New Businesses

(1) Establishment of Steelworks in India

(a)	POSCO entered into a memorandum of understanding with the Orissa state government for the development of iron ore captive mines and for the development and construction of an integrated steelwork facility with an annual production capacity of 12 million tons. (June, 2005)
(b)	POSCO established POSCO-India Private Limited (“POSCO-India Pvt., Ltd.”). (August, 2005)

(2) Development of Iron Ore Captive Mines in India

(a)	POSCO-India filed applications for mining prospecting licenses in respect of certain iron ore mines in the region of Khandadhar, Orissa (the “Khandadhar Licenses”). (September, 2005)
(b)	The Orissa state government recommended to the Indian central government approval of the Khandadhar Licenses on behalf of POSCO-India. (December, 2006)
(c)	The Indian central government denied approval for the Khandadhar Licenses and remanded the matter to the Orissa state government for further consideration. (July, 2007)
(d)	The Orissa state government resubmitted its recommendation for approval of the Khandadhar Licenses on behalf of POSCO-India. (January, 2009)
(e)	The Orissa High Court set aside the Orissa state government’s recommendation to grant approval for the Khandadhar Licenses, and in response, the Orissa state government planed to file a petition with the Indian Supreme Court to challenge the Orissa High Court order. (July, 2010)
(f)	The Orissa state government filed a petition with the Indian Supreme Court. (November, 2010)
(g)	The Indian Supreme Court upheld the Orissa state government’s recommendation for the approval of the Khandadhar Licenses. (December, 2010)

(3) Establishment of Steelworks in India

(a)	The Indian central government granted approval for environmental impact assessment for the construction of a captive port. (May, 2007)
(b)	The Indian central government granted approval for environmental impact assessment for the construction of steel mills. (July, 2007)
(c)	The Indian Supreme Court granted stage-one clearance for forest diversion with respect to 2,959 acres of forest land. (August, 2008)
(d)	The Indian central government granted approval for the deforestation of steel mill construction sites. (December, 2009)

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(e)	Final plans for rehabilitation and resettlement of indigenous population were approved by the Rehabilitation and Peripheral Development Advisory Committee (constituted by the Orissa state government). (July, 2010)
(f)	The Forest Advisory Committee acting under the Ministry of Environment and Forest temporarily suspended activities at the project construction site pending investigation into alleged violation of the Forest Regulation Act. (August, 2010)
(g)	The Ministry of Environment and Forest of the Indian central government granted a conditional approval the construction of the steel mills and port. (January, 2011)
(h)	The Ministry of Environment and Forest of the Indian central government granted a final approval on the construction of the steel mills and port (May, 2011)
(i)	POSCO cleared the state crop fields designated for the construction of its steel mill site (June, 2011).

(4) Establishment of Steelworks in Indonesia

(a)	POSCO entered into a memorandum of agreement with Perseroan Terbatas Krakatau Steel, an Indonesian state owned company, to build an integrated steelwork with a total annual production capacity of 6 million tons of steel products in Indonesia. (December, 2009)
(b)	POSCO planned to enter into a joint venture agreement in August, 2010
(c)	POSCO established PT. KRAKATAU POSCO. (September, 2010)
(d)	PT. KRAKATAU POSCO held a groundbreaking ceremony for the establishment of steelworks in Indonesia. (October, 2010)
(e)	The first phase of the construction of the steelworks with an annual production capacity of 3,000,000 tons began in July 2011. The construction of the steelworks was scheduled to be completed by December, 2013. (July, 2010)

(5) Establishment of POSCO-Maharashtra Steel Pvt., Ltd. Continuous Galvanizing Line

(a)	The construction started with an annual production capacity of 450 thousand tons. (March, 2010)
(b)	The steel frame construction started. (October, 2010)
(c)	The construction and the installation of production facilities of a continuous galvanizing line commenced. (February, 2011)

(6) Establishment of Guangdong Pohang Continuous Galvanizing Line in China

(a)	The establishment plan of Guangdong Pohang Continuous Galvanizing Line in China was approved by the Board of Directors. (July, 2010)
(b)	The establishment plan of Guangdong Pohang Continuous Galvanizing Line in China was approved by the Chinese government. (October, 2010)
(c)	POSCO held a groundbreaking ceremony for the establishment of Guangdong Pohang Continuous Galvanizing Line in China. (March, 2011)

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2) Trading

A. Market Share

(Millions of Dollars)

	2011 1H	2010 1H
	(January 1, 2011 ~	(January 1, 2010 ~
Category	June 30, 2011)	June 30, 2010)	Growth rate
Whole Korean companies	221,322	274,824	24.17	%
Daewoo International	3,034	3,906	28.74	%

B. Current Situation and Prospect of New Businesses

Since Daewoo International Corporation (“Daewoo International”) is a global trading company which primarily engages in trading of steel and raw materials, the acquisition of Daewoo International resulted in the expansion of the steel market and the creation of a synergy among POSCO and its subsidiaries engaged in engineering and construction, information technology and plantation business. Daewoo International’s sales increased by 17% to KRW 9,092 billion in the first half of 2011 and operating income also increased by 1% to KRW 103 billion in the first half of 2011.

On April 26, 2011, Daewoo International announced that it would acquire 8,500 shares representing an 85% stake of PT. Bio Inti Agrindo, an Indonesia-based agriculture company to start a new business regarding cultivation of oil palm. Since oil palm normally takes 7~8 years to harvest, Daewoo International plans to pay KRW 7.1 billion annually from 2011 to 2018 to reduce the burden of paying in a lump sum of the total investment amount.

3) Engineering & Construction

A. Current Situation and Prospect of New Businesses

POSCO Engineering & Construction, which was established in February 1982, is currently expanding its business area to civil engineering, architectural works, energy, urban development and low carbon & green growth business. In 2011, the size of the domestic construction market is expected to be KRW 110 trillion. Investment in the public sector of the construction industry in Korea is expected to be decreased due to financial deficit but investment at the private sector of construction industry in Korea is expected to be stable. Regarding the number of the oversea contract signed in first half of 2011, the business performance in the global market has been satisfactory. Even though the construction demand from the Middle East and the Southeast Asia has increased, our price competitiveness will not be strong due to the appreciation of KRW in the global market for the second half of 2011.

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Daewoo Engineering Corporation succeeded in developing a management system for the global market and Engineering, Procurement & Construction (“EPC”) business. Daewoo Engineering Corporation planed out its global sales strategies and stabilized its global network through its local agencies and localization strategies. Recently, Daewoo Engineering Corporation expanded its business markets to the Southeastern Asian countries such as Thailand, Indonesia, and Vietnam.

4) Others

A. POSCO Power

POSCO Power started its commercial operation in February 1972 as a privately-owned heat power plant in Korea. In early 1990’s, POSCO Power continuously remodeled and built more complex heat power plants due to the increase of the demand in electricity in Korea.

B. POSCO ICT

To create a synergy between its information technology and its industrial engineering services., POSCO ICT Co., Ltd. has developed its competitiveness in IT and manufacturing services utilizing automation technology. POSCO ICT Co., Ltd. is promoting its new business such as light emitting diode, smart grid, and cloud computing.

C. POSCO Chemtech

POSCO Chemtech Company Ltd., founded in 1963, specializes in the manufacturing of refractories, lime used in steel manufacturing processes as well as a wide range of chemical products and environmentally friendly products. POSCO Chemtech Company Ltd. provides refractories to a wide range of industries including steel, cement, and glass companies. To be a global company, POSCO Chemtech Company Ltd. is currently expanding its market to Japan, China and Indonesia.

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3. Key Products

A. Current Situation of Key Products

(In hundred millions of KRW)

Business
Area	Item	Specific Use	Total Sales			Ratio
Steel	Hot-rolled Product (HR)	Steel pipe, Shipbuilding, etc		55,365			20.10	%
	Cold-rolled Product (CR)	Automobile , Home appliances, etc		81,569			29.70	%
	Cold-rolled Product (CR)	Western tableware, etc		52,637			19.20	%
	By-Product	Cement material, etc		85,252			31.00	%
	Gross Sum			274,824			100.00	%
	Deduction of Internal Trade			(77,826	)		—
	Sub Total			196,998			—
International Trade	Steel, Metal			67,952			48.70	%
	Chemical, Strategic Item, Energy			21,902			15.70	%
	Etc			49,617			35.60	%
	Gross Sum			139,470			100.00	%
	Deduction of Internal Trade			(39,618	)		—
	Sub Total			99,852			—
Engineering & Construction	Domestic Construction	Architecture		7,880			21.70	%
		Plant		9,413			26.00	%
		Civil Engineering		4,757			13.10	%
	Overseas Construction			10,622			29.30	%
	Owned Construction			216			0.60	%
	Etc			3,347			9.20	%
	Gross Sum			36,233			100.00	%
	Deduction of Internal Trade			(13,142	)		—
	Sub Total			23,092			—
Others	Electricity Sales, etc			23,974			100.00	%
	Deduction of Internal Trade			(10,942	)
	Sub Total			13,032			—
	Total Sum			332,973			—

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B. Price Trends of Key Products

(In thousands of KRW/ Tons, kWh)

		2011 1H
		(January 1, 2011 ~
Business Area	Products	June 30, 2011)		2010		2009
Steel Production	Hot-rolled Product (HR)		941		845		799
	Cold-rolled Product (CR)		1,067		987		925
Others	Electric Power		145		144		136
	Lime		111		112		117

• Trading and engineering & construction business are not reflected on the table.

[Steel]

(1) Criteria for Calculation

(a)	Products and Objects for Calculation: unit prices of standard hot-rolled product and cold-rolled product
(b)	Unit and Method for Calculation: the average price of each product based on its total sales during the given period, including freight

(2) Factors of Price Fluctuations

Response to the increase in the price of raw materials such as coal and iron ore in the first and second quarters of 2011, POSCO has raised its domestic steel price by KRW 160 thousand since April 22, 2011.

[Others]

* Criteria for Calculation

(a)	Electric Power = price of electric power/total amount of generated power
(b)	Lime: average sales price including shipping cost

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4. Major Raw Materials

A. Current Situation of Major Raw Materials

(In hundred millions of KRW)

				Purchase
Business	Type of			Amount
Area	Purchase	Item	Specific Use	(Portion)		Remarks
Steel Production	Raw Materials	Iron Ore	Iron Ore for Blast Furnaces	47,100 (31.7	%)	BHP Billiton of Australia, Rio Tinto, VALE of Brazil
		Coal	Coking Coal: Heat Source for Blast Furnaces	34,318 (23.1	%)	Anglo of Australia, Rio Tinto, Teck of Canada
			Smokeless Coal: Sintering Fuel
		Stainless Steel Materials	Key Materials for STS Production	28,526 (19.2	%)	Nickel, Ferrocrome, STS Scrap Iron, etc.
		Other Minerals	Sub-materials for Iron-making, Steelmaking	38,653 (26.0	%)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
Engineering & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	583 (16.7	%)
		Steel Pile	Foundation of Structure	318 (9.1	%)
		Steel reinforcement	Strengthening Concrete	729 (20.9	%)
		Cable	Electricity Transfer	76 (2.2	%)
		Etc.	—	1,791 (51.2	%)
Others	Raw Materials	LNG	Material for power generation	6,047
		Limestone	Production of Lime	454

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B. Price Trends of Key Materials

(In hundred millions of KRW)

		2011 1H
		(January 1, 2011 ~
Business Area	Category	June 30, 2011)		2010		2009
Steel Production (per ton)	Iron Ore		188		157		87
	Coal		269		221		166
	Scrap Iron		566		481		394
	Nickel		28,975		25,308		18,873
Engineering & Construction	Ready-mixed Concrete (per m3)		54		52		55
	Steel pile (per m)		90		72		63
	Steel reinforcement (per kg)		1.0		0.7		0.7
	Cable (per m)		1.0		0.8		0.7
Others	LNG (per ton)		848		781		737
	Lime (per ton)		22		22		22

[Steel]

• Key Factors in Price Fluctuations

(1) Iron Ore

(In Dollars/ Tons)

			2011 1Q
	2011 2Q		(January 1,
	(April 1, 2011 ~		2011 ~ March
	June 30, 2011)		31, 2011)		2010		2009
Trend of International Benchmark Price (Free On Board, hereinafter, “FOB”)		171		173		136		68

• Platts Index (Fe 62%)

(2) Coal

(In Dollars/ Tons)

			2011 1Q
	2011 2Q		(January 1,
	(April 1, 2011 ~		2011 ~ March
	June 30, 2011)		31, 2011)		2010		2009
Trend of International Benchmark Price (FOB)		330		225		191		172

• Coal (FOB): based on Australian premium hard coking coal price

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(3) Scrap Iron

(In Dollars/ Tons)

			2011 1Q
	2011 2Q		(January 1,
	(April 1, 2011 ~		2011 ~ March
	June 30, 2011)		31, 2011)		2010		2009
Trend of Purchase Price (Cost and Freight, hereinafter, “CFR”)		472		502		409		307

• Scrap Iron (CFR)

(4) Nickel

		2011 1Q
	2011 2Q	(January 1, 2011
	(April 1, 2011 ~	~ March
	June 30, 2011)	31, 2011)	2010	2009
Trend of London Metal Exchange (hereinafter, “LME”) Cash Price	USD 11.00/lb	USD 12.20/lb	USD 9.89/lb	USD 6.65/lb
	USD 24,227/ton	USD 26,903/ton	USD 21,809/ton	USD 14,655/ton

[Engineering and Construction]

* Criteria for Calculation

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

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[Others]

(1) Criteria for Calculation

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

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

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

5. Production and Facilities

A. Production Capacity

[Steel]

(Thousands of Tons)

		2011 1H
		(January 1, 2011 ~
Business Area	Products	June 30, 2011)		2010		2009
Steel Production	Crude Steel		18,780		37,560		34,760

[Others]

(MW, Thousands of Tons)

			2011 1H
			(January 1, 2011 ~
Business Area	Products		June 30, 2011)		2010		2009
Power Generation	Electric Power	Incheon		1,526		1,800		1,800
		Gwangyang		142		284		—
Lime	Lime	—		1,095		2,190		2,190

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B. Production and Capacity Utilization Rate

[Steel]

(1) Production

(Thousands of Tons)

		2011 1H
Business		(January 1, 2011 ~
Area	Products	June 30, 2011)		2010		2009
Steel Industry	Crude Steel		19,090		35,365		31,050
	Hot-Rolled Products		4,071		9,120		8,803
	Plate		3,068		4,639		4,486
	Wire Rod		1,070		2,332		2,248
	Pickled-Oiled Steel Sheets		1,222		2,450		1,664
	Cold-Rolled Products		3,780		7,621		6,126
	Coated Steel		2,703		4,627		3,264
	Electrical Steel		636		1,211		974
	Stainless		1,516		1,970		1,520
	Others		1,482		3,066		2,474
	Total Products		19,547		37,035		31,560

• Inside trades among subsidiaries are accurately reflected on the table.

(2) Capacity Utilization Rate for the first half of the fiscal year 2011

(Thousands of Tons)

Business Area	Capacity		Production		Utilization Rate
Crude Steel Production		18,780		19,090		101.7	%

• Capacity Utilization Rate = Production/ Production Capacity

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

21

[Others]

(1) Production

(Gwh, Thousands of Tons)

		2011 1H
		(January 1, 2011 ~
Business Area	Products	June 30, 2011)		2010		2009
Power Generation	Electric Power		5,034		4,863		1,909
Lime	Lime		1,192		2,256		2,040

(2) Capacity Utilization Rate for the first half of 2011

(hr, Thousands of Tons)

Business Area	Products	Capacity		Production		Utilization Rate
Power Generation	Electric Power		8,688		7,057		81.2	%
Lime	Lime		1,095		1,192		108.9	%

C. Production Facilities

[Land] (In millions of KRW)

	Beginning									Ending Book
Business Area	Book Balance		Increased		Decreased			Depreciation		Balance
Steel Production		1,450,215		266,216					—		1,716,431
Trade		144,392				(1,978	)		—		142,414
Engineering & Construction		58,174				(3,974	)		—		54,200
Others		359,070		4,329					—		363,399
Total		2,011,851		270,545		(5,952	)		—		2,276,444

[Building] (In millions of KRW)

	Beginning										Ending Book
Business Area	Book Balance		Increased		Decreased			Depreciation			Balance
Steel Production		3,029,483		449,125		—			(123,454	)		3,355,154
Trade		273,692		—		(7,785	)		(3,514	)		262,393
Engineering & Construction		76,156		—		(31,458	)		(966	)		43,732
Others		171,832		108,933		—			(5,914	)		274,851
Total		3,551,163		558,058		(39,243	)		(133,848	)		3,936,130

22

[Structures] (In millions of KRW)

	Beginning										Ending Book
Business Area	Book Balance		Increased		Decreased			Depreciation			Balance
Steel Production		1,975,735		107,782		—			(75,339	)		2,008,178
Trade		11,182		—		(295	)		(305	)		10,582
Engineering & Construction		4,801		—		(166	)		(161	)		4,474
Others		78,471		79,559		—			(3,811	)		154,219
Total		2,070,189		187,341		(461	)		(79,616	)		2,177,453

[Machinery and Equipments] (In millions of KRW)

	Beginning										Ending Book
Business Area	Book Balance		Increased		Decreased			Depreciation			Balance
Steel Production		12,865,983		1,764,769		—			(685,881	)		13,944,871
Trade		191,884				(1,560	)		(2,672	)		187,652
Engineering & Construction		15,961		11,921		—			(5,771	)		22,111
Others		702,818		377,933		—			(68,047	)		1,012,704
Total		13,776,646		2,154,623		(1,560	)		(762,371	)		15,167,338

[Vehicles] (In millions of KRW)

	Beginning									Ending Book
Business Area	Book Balance		Increased		Decreased		Depreciation			Balance
Steel Production		48,626		2,671		—		(5,465	)		45,832
Trade		8,218		794		—		(1,030	)		7,982
Engineering & Construction		3,157		1,011		—		(680	)		3,488
Others		4,173		2,115		—		(1,147	)		5,141
Total		64,174		6,591		—		(8,322	)		62,443

[Tools and Fixtures] (In millions of KRW)

	Beginning										Ending Book
Business Area	Book Balance		Increased		Decreased			Depreciation			Balance
Steel Production		44,963		16,753		—			(11,372	)		50,344
Trade		1,424		808		—			(276	)		1,956
Engineering & Construction		1,957		17		—			(310	)		1,664
Others		27,094				(4,968	)		(4,486	)		17,640
Total		75,438		17,578		(4,968	)		(16,444	)		71,604

23

[Equipment] (In millions of KRW)

	Beginning										Ending Book
Business Area	Book Balance		Increased		Decreased			Depreciation			Balance
Steel Production		83,918		5,165		—			(211	)		88,872
Trade		11,870		—		(420	)		(28	)		11,422
Engineering & Construction		9,477		109		—			(23	)		9,563
Others		19,412		10,584		—			(60	)		29,936
Total		124,677		15,858		(420	)		(322	)		139,793

[Financial Lease Assets] (In millions of KRW)

	Beginning									Ending Book
Business Area	Book Balance		Increased		Decreased		Depreciation			Balance
Steel Production		11,149		57		—		(491	)		10,715
Trade		499		16		—		(116	)		399
Engineering & Construction		10,521		1,766		—		(1,489	)		10,798
Others		20,937		—		—		(5,387	)		15,550
Total		43,106		1,839		—		(7,483	)		37,462

24

(2) Major Capital Expenditures

(a) Investments under Construction

[Steel]

(In hundred millions of KRW)

								Amount
				Total		Invested		to Be
Products		Date	Project	Investment		Amount		Invested
POSCO	Expansion	November, 2010 ~ January, 2014	G) Establishment of the Fourth Hot-coil Mill		16,015		1,317		14,698
		April, 2008 ~ December, 2011	G) Establishment of the Fifth Coking Mill & Fifth Sintering Mill		17,059		16,175		884
		April, 2008 ~ September, 2016	Expansion of the Capacity of the Raw Materials Treatment Facilities		13,010		4,570		8,440
		October, 2008 ~ March, 2012	P) Establishment of the Pickling Galvanazing Line		2,689		1,370		1,319
		March, 2011~ June, 2013	P) Optimization of the Facilities		22,034		95		21,939
	Renovation / Replacement	December 2010 ~ January 2014	G) Renovation of the First & Fifth Furnace		10,595		901		9,694
POSCO Specialty Steel	Expansion	November, 2009 ~ April, 2012	Establishment of a New Mill (60 ton)		2,584		817		1,767
	Renovation / Replacement	April 2010 ~ February 2012	Renovation / Replacement of New Equipments in the Existing Rolling Mill		1,501		351		1,150
		July 2010 ~ December 2011	Renovation / Replacement of New Equipments in the Existing Steel Wire Producing Mill		120		19		101
POSCO (Suzhou) Automotive Processing Center Co., Ltd.	Expansion	May 2011 ~ January 2012	Purchase of the Land, Establishment of a Factory, and Blanking		152		19		133
POS-HiMETAL CO., Ltd.	Expansion	April 2010 ~ September 2011	Establishment of a Ferromanganese Producing Mill		2,275		1,824		451
POSCO VST Co., Ltd.	Expansion	December 2010 ~ February 2012	Installation of the Second Cold Rolling-Mill		1,439		193		1,175
Guangdong Pohang Coated Steel Co., Ltd.	Expansion	December 2010 ~ December 2011	Installation of a Continuous Galvanizing Line		3,198		1,283		1,915
POSCO Maharashtra Steel Private Limited	Expansion	March 2010 ~ May 2012	Installation of a Continuous Galvanizing Line (First Stage)		2,473		1,639		834
		July 2011 ~ December 2013	Establishment of a Cold-Coiled Mill in India		7,293		931		6,362
POSCO-JNPC Co., Ltd.	Expansion	March 2011 ~ October 2011	Establishment of the Second Warehouse in Yokkaichi, Japan		190		102		87

• P stands for Pohang steel works.

• G stands for Gwangyang steel works.

25

[Engineerng & Construction]

(In hundred millions of KRW)

				Total		Invested		Amount to Be
Items		Date	Project	Investment		Amount		Invested
POSCO Plant Engineering	Expansion	October 2010 ~ July 2011	Establishment of a Processing Plant		308		260		48

[Others]

(In hundred millions of KRW)

								Amount
				Total		Invested		to Be
Items		Date	Project	Investment		Amount		Invested
POSCO POWER	Expansion	October 2011 ~ September 2013	P) Establishment of Combined Cycle Power Plant		5,950		246		5,704
POSCO ICT Co.,Ltd.	Expansion	January 2011 ~ December 2011	Expansion of SM Server		300		46		254
	Expansion	January 2011 ~ December 2011	Current Investment		391		275		115
	Expansion	November 2006 ~ August 2011	Purchase of an Office Building in Pan-Gyo		274		265		9
POSCO CHEMTECH COMPANY LTD.	Expansion	January 2011 ~ December 2011	Maintenance of a Refractory Plant		278		119		159
		April 2011 ~ September 2011	Establishment of a Secondary Battery Anode Material Plant		193		106		87

26

• The investments over KRW 10,000 million are only listed on the table, and the purchase of shares are not reflected on the table.

(b) Planned Investments

[Steel]

(In hundred millions of KRW)

		Planned Investments
Company	Project	2011		2012		2013
POSCO	Expansion, Renovation and Replacement of Existing Facilities		22,083		37,746		26,612
POSCO MEXICO	Expansion, Renovation and Replacement of Existing Facilities		465		2,348		573
POSCO-India Delhi Steel Processing Centre Pvt. Ltd	Expansion, Renovation and Replacement of Existing Facilities		160		—		—

[Engineering & Construction] (In hundred millions of KRW)

		Planned Investments
Company	Project	2011		2012		2013
POSCO Plant Engineering	Expansion, Renovation and Replacement of Existing Facilities		229		330		760

[Others] (In hundred millions of KRW)

		Planned Investments
Company	Project	2011		2012		2013
POSCO CHEMTECH COMPANY	Expansion, Renovation and Replacement of Existing Facilities		827		—		—

27

6. Product Sales

 
[Steel] (In hundred millions of KRW)

		2011 1H			2010
		(January 1, 2011			(January 1, 2010
Items		~ June 30, 2011)			~ December 31, 2010)
Domestic	Hot-Rolled Products		37,567			49,940
	Cold-Rolled Products		35,095			77,936
	Stainless Steel		19,100			31,621
	Others		62,321			95,802
	Subtotal		154,083			255,299
Export	Hot-Rolled Products		17,798			22,075
	Cold-Rolled Products		46,473			88,887
	Stainless Steel		33,537			61,178
	Others		22,932			27,236
	Subtotal		120,740			199,376
Total	Gross Sum		274,823			454,675
	Internal Transaction		(77,826	)		(99,398	)
	Net Sum		196,998			355,276

28

 
[Trading] (In hundred millions of KRW)

		2011 1H			2010
		(January 1, 2011			(January 1, 2010
Items		~ June 30, 2011)			~ December 31, 2010)
Domestic	Product		524			217
	Merchandise		4,469			1,721
	Others		36			19
Export	Product		813			347
	Merchandise		43,131			22,653
	Others		123			64
Trade among Korea, China, Japan			90,374			68,060
Gross Sum			139,470			93,081
Internal Transaction			(39,618	)		(31,487	)
Net Total			99,852			61,594

[Engineering & Construction] (In hundred millions of KRW)

			2011 1H			2010
			(January 1, 2011			(January 1, 2010
Items			~ June 30, 2011)			~ December 31, 2010)
Construction Contract Revenue	Domestic	Architecture		7,880			12,823
		Plant		9,413			32,811
		Civil Engineering		4,757			11,355
	Overseas			9,646			8,441
Own Construction				216			6,101
Other Subsidiary company sales				4,322			7,704
Gross Sum				36,233			79,235
Internal Transaction				(13,142	)		(35,747	)
Total				23,092			43,488

29

 
[Others] (In hundred millions of KRW)

	2011 1H		2010
	(January 1, 2011		(January 1, 2010
Items	~ June 30, 2011)		~ December 31, 2010)
Electric Power		13,032		18,515

7. Derivatives — Currency Forward Contracts

If the Exchangeable Notes to American Depository Receipts of SK Telecom issued on August 19, 2008, had been converted on June 30, 2011, the derivative valuation of the profit would have been KRW 674 million.

8. Significant Contracts

Company	Contract	Date	Remarks
POSCO	Cooperation Agreement with Roy Hill Co., Ltd.	January 2010	- The purpose of the Cooperation Agreement is to obtain 15% stake in Roy Hill iron ore mine in Australia
	Share Purchase Agreement with Thainox Stainless Public Co., Ltd.	July 2011	- POSCO made a share purchase agreement to obtain certain additional equity interest (at least 3,975,811,641 outstanding shares) in Thainox Stainless Public Co., Ltd for the expansion of global stainless steel market. The share purchase will cost KRW 305,875,092,782.
POSCO ICT	R Real Estate Contract	March 2011	- POSCO ICT has purchased its new office building in Pangyo after the sale of its office building in Bundang.
			- Sale Price of its Office Building in Bundang: KRW 65,000,000,000

• Please, refer to Form 6-K for additional information.

30

9. Research and Development

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

Business Area	Company		Organization	Staff
Steel	POSCO	POSCO’s Department	Technical Research Laboratory (Group)		823
			Productivity Research Center		60
			New Growth Technology Strategy Department		25
			Iron and Steel Technology Strategy Department		71
			Environment and Energy Department		21
			Total		1,000
	POSCO Specialty Steel		R&D Group		19
	POSCO COATED & COLOR STEEL		Product Research Group		11
	POSCO-Nippon Steel RHF Joint Venture Co., Ltd.		Product Research Group		2
	POS-HiMETAL CO., Ltd.		Product Research Department		12
	Zhangjiagang Pohang Stainless Steel Co., Ltd.		Product Development Group		6
International Trade	DAEWOO International Corporation		Pusan Plant R&D Center Development Team		63
Engineering & Construction	POSCO Engineering & Construction		R&D Center		112
	POSCO Plant Engineering		Technology Innovation Group		11
	POSCO A&C		R&D Center, Quality Engineering Team		9
Others	POSCO POWER		R&D Center		31
	POSCO ICT		Information Control Lab		72
	POSCO CHEMTECH COMPANY		R&D Center		32
	POSCO M-TECH CO., LTD.		R&D Center		21

31

B. R&D Expenses (In millions of KRW)

	Business Area
				Internation			Engineering &
Category	Steel			al Trade			Construction			Others			Total
Selling and Administrative Cost		67,457			604			8,526			16,615			93,202
Manufacturing Cost		167,142			577			2,148			529			170,396
R&D Cost (Intangible Assets)		5,955			—			1,717			1,263			8,935
Total		240,554			1,181			12,391			18,407			272,533
R&D/Sales Ratio		1.22	%		0.02	%		0.54	%		1.22	%		0.82	%

32

III. Financial Statements

1. Non-consolidated Financial Statements

A. Summary on Fiscal Years 2010 and the First Half of Fiscal Year 2011

(In millions of KRW)

	2011 1H
	(January 1, 2011 ~			December 31,			January 1,
Account	June 30, 2011)			2010			2010
[Current Assets]		14,338,605			12,993,605			12,899,862
Cash & Cash equivalents		1,516,474			672,426			626,782
Accounts Receivable		3,877,956			3,548,448			2,951,783
Other Current Financial Instruments		1,753,327			2,754,319			6,304,563
Inventories		7,138,768			5,998,545			2,996,325
Other Current Assets		52,080			19,867			20,409
[Non-current Assets]		37,339,988			36,092,622			28,954,817
Other Non-current Financial Instruments		4,719,151			5,015,783			4,438,130
Investment Securities		11,353,548			10,470,156			5,787,831
Tangible Assets		20,641,200			20,011,110			18,412,868
Good Will & Other Intangible Assets		231,105			229,137			201,614
Other Non-current Assets		394,984			366,436			114,374
Total Assets		51,678,593			49,086,227			41,854,679
[Current Liabilities]		6,567,382			6,051,454			2,954,337
[Non-current Liabilities]		7,731,675			7,011,278			6,243,096
Total Liabilities		14,299,057			13,062,732			9,197,433
[Capital Stock]		482,403			482,403			482,403
[Capital Surplus]		1,229,699			1,158,539			1,158,539
[Retained Earnings]		37,405,277			35,774,259			32,784,996
[Other Equity]		(1,737,843	)		(1,391,706	)		(1,768,692	)
Total Shareholders’ Equity		37,379,536			36,023,495			32,657,246
Total Sales		19,144,089			32,582,037			—
Operating Income		2,416,968			4,784,518			—
Net Income		2,173,154			3,784,361			—

33

B. The Standards Used for Reporting the Financial Statements

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

C. Non-consolidated Financial Statements

(1) Balance Sheet

Refer to the attached financial report as of June 30, 2011.

(2) Income Statements

Refer to the attached financial report as of June 30, 2011.

(3) The Note on the Financial Statement

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

34

2. Consolidated Financial Statements

A. Summary on Fiscal Years 2010 and the First Half of Fiscal Year 2011

(In millions of KRW)

	2011 1H
	(January 1, 2011 ~			December 31,			January 1,
Account	June 30, 2011)			2010			2010
[Current Assets]		31,661,609			27,658,484			20,415,751
Cash & Cash equivalents		4,285,917			3,521,045			2,273,059
Other Current Financial Instruments		3,686,883			4,383,302			7,211,023
Accounts Receivable		10,946,809			9,205,118			5,286,130
Inventories		11,453,754			9,559,206			4,918,413
Other Current Assets		1,288,246			989,813			727,126
[Non-current Assets]		42,869,446			41,746,049			31,097,292
Other Non-current Financial Instruments		6,022,029			6,417,038			5,308,660
Investment Securities		3,517,988			3,306,425			950,449
Tangible Assets		26,554,598			25,437,740			22,342,747
Good Will & Other Intangible Assets		4,860,722			4,619,169			754,231
Other Non-current Assets		1,914,109			1,965,677			1,741,205
Total Assets		74,531,054			69,404,533			51,513,043
[Current Liabilities]		19,427,460			18,286,148			9,008,563
[Non-current Liabilities]		15,109,837			12,581,218			9,170,799
Total Liabilities		34,537,297			30,867,366			18,179,362
[Controlling Interest]		37,954,950			36,575,686			32,679,964
Capital Stock		482,403			482,403			482,403
Capital Surplus		1,177,188			1,101,561			1,199,666
Retained Earnings		37,776,693			35,955,177			32,634,833
Other Controlling Interest		(1,481,334	)		(963,455	)		(1,636,938	)
[Minority Interest]		2,038,808			1,961,481			653,717
Total Shareholders’ Equity		39,993,758			38,537,167			33,333,681
Total Sales		33,297,317			47,887,255			—
Operating Income		3,102,322			5,433,520			—
Consolidated Net Profit		2,465,046			4,185,651			—
Consolidated Total Comprehensive Income		1,786,128			4,765,441			—
Number of Consolidated Companies		202			173			112

35

B. The Standards Used for Reporting the Financial Statements

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

C. Consolidated Financial Statements

(1) Consolidated Balance Sheet

Refer to the attached consolidated financial report for the first half of the fiscal year 2011 as of June 30, 2011.

(2) Consolidated Income Statements

Refer to the attached consolidated financial report for the first half of the fiscal year 2011 as of June 30, 2011.

36

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors

(1) Board of Directors

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

Our board of directors maintains the following six special committees:

(a)	Director Candidate Recommendation Committee;
(b)	Evaluation and Compensation Committee;
(c)	Finance and Operation Committee;
(d)	Executive Management Committee;
(e)	Audit Committee; and
(f)	Related Party Transaction Commitee.

37

• Composition of the Special Committees under the Board of Directors and their Functions

Category	Composition	Directors	Major Functions
Director Candidate	3 Outside Directors;	Lee, Young-Sun	- Reviews the qualifications of potential candidates
Recommendation	1 Inside Director	Nam, Yong	- Proposes nominees to serve on the Board of Directors as Outside Directors
Committee		Byun, Dae-Gyu
		Choi, Jong-Tae	- Advances nomination of Inside Directors and members of the special committees
Evaluation and	4 Outside Directors	Han, Joon-Ho,	- Executes management succession and development plans
Compensation		Lee, Chang-Hee,	-Establishes evaluation procedures of directors
Committee		Byun, Dae-Gyu	- Reviews directorstion procedures of retirement allowance
		Yoo, Jang-Hee
Finance and	3 Outside Directors;	Han, Joon-Ho	- Advances deliberation of new crucial investments in other companies
Operation Committee	2 Inside Directors	Lee, Young-Sun
		Nam, Yong	- Revises the internal regulations regarding the operation of the Board of Directors
		Park, Han-Yong
		Oh, Chang-Kwan	- Deliberates financial matters and donations between KRW 100 million and KRW 1 billion
Audit Committee	2 Outside Directors	Lee, Chang-Hee	- Audits the accounting system and business operations
		Park, Sang-Kil	- Examines the agenda for, and financial statements and other reports to be submitted by, the Board of Directors at each general meeting of shareholders
Related Party	3 Outside Directors	Lee, Chang Hee	- Reviews the related party and the other internal
Transactions		Park, Sang-Kil	transaction exceeding KRW 10 billion if it complies with the MRFTA
Committee		Yoo, Jang-Hee
			- Reviews the related party and the other internal transactions exceeding KRW 5 billion but less than 10 billion if it complies with the MRFTA and accept or reject the execution of such transaction
Executive Management Committee	5 Inside Directors	Chung, Joon-Yang	- Oversees decisions with respect to our operational and
		Choi, Jong-Tae	management matters
		Park, Han-Yong	- Reviews management’s proposals of new strategic
		Oh, Chang-Kwan	initiatives
		Kim, Jin-Il	- Reviews deliberation over critical internal matters
			related to the organization structure and development
			of personnel
			- Reviews and revise working policies and welfares

* The Vacancy Replacements of the Special Committees Resulting from the Resignation of an Outside Director, Kim, Byung Ki (August 11, 2011)

• A Chairman of the Evaluation and Compensation Committee: Han, Joon-Ho

• A Member of the Evaluation and Compensation Committee: Yoo, Jang-Hee

• A Member of the Related Party Transactions Committee: Yoo, Jang-Hee

38

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

(a)	Established the Director Candidate Recommendation Committee (March 17, 2000)
(b)	Changed the name from the Director Candidate Recommendation Committee to the Director Candidate Recommendation and Evaluation Committee (March 15, 2002)
(c)	Changed the name from the Director Candidate Recommendation and Evaluation Committee to the Director Candidate Recommendation Committee (March 12, 2004)

• Composition of the Director Candidate Recommendation Committee

• Effective Date: February 25, 2011

Lee, Young-Sun (Chairman)	Outside Director	<Satisfies the regulation requiring that more than 50% of directors should be from outside>
Nam, Yong	Outside Director	• Outside Directors (3), Inside Director (1):
(Member)		Pursuant to Article 542-8 of the Commercial Code of the Republic of Korea
Byun, Dae-Gyu (Member)	Outside Director
Choi, Jong-Tae (Member)	Inside Director

(3) List of Outside Directors (as of June 30, 2011)

		Relation with
		Majority
Name	Experience	Shareholder	Remarks
Yoo, Jang-Hee	- President, East Asian Economic Association, Japan	None	Chairman
	- Former Vice President, External Affairs, Ewha Womans University		Board of
			Director
Han, Joon-Ho	- CEO and Vice Chairman, Samchully Co., Ltd.	None
	- Former Chairman and CEO, Korea Electric Power Corporation
Lee, Young-Sun	- President of Hallym University	None
	- Former Professor of Yonsei University
Kim, Byung Ki	- Visiting Professor of College of Engineering, Seoul National University	None
	- Former President and Research Fellow, Samsung Economic Research Institute

39

		Relation with
		Majority
Name	Experience	Shareholder	Remarks
Lee, Chang Hee	- Professor of College of Law, Seoul National University	None
	- Former International Director, Tax Law Association
Nam, Yong	- Vice Chairman and CEO, LG Electronics	None
	- President of Strategic Business Initiatives, LG Corporation Co., Ltd
	- President and CEO, LG Telecom, Ltd.
Byun, Dae-Gyu	- Chairman and CEO, Humax Co., Ltd.	None
	- Member of National Science and Technology Council
	- Full member of the National Academy of Engineering of Korea
Park, Sang-Kil	- Attorney at Law, Kim and Chang	None
	- Prosecutor General, Daejeon High Prosecutor’s Office
	- Prosecutor General, Busan High Prosecutor’s Office

• Changes after June 30, 2011
	• Kim, Byung-Ki has resigned from the outside director’s positon on July 1, 2011.
• List of Key Activities of the Board of Directors (January 1, 2011 — August 29, 2011)

Session	Date	Agenda	Approval
2011-1	January 13	1. Approval of the financial statements for the forty-third fiscal	All 2 Cases
		year and convening schedule of the forty-third general meeting of	Approved
		shareholders
		2. Disposal of treasury shares according to execute equity swap with
		Kookmin Bank
2011-2	February 1	1. Agenda for the forty-second general meeting of shareholders	All 4 Cases
		2. Financing plan for the first half of the fiscal year 2011	Approved
		3. Establishment of an electrical steel coil production line in India
		4. Recommendation of candidates for Inside Directors
2011-3	February 22	Improvement plan for the operation of the Board of Directors	Approved

40

Session	Date	Agenda	Approval
2011-4	February 25	1. Appointment of a chairman of Board of Directors	All 4 Cases
		2. Appointment of the special committee members	Approved
		3. Approval of designation of positions for executive officers
		4. Approval of designation of positions for Inside Directors
2011-5	March 25	1. Approval for the establishment of a FINEX Plant, a wire-rod	All 3 Cases
		production plant and a stainless steel Production plant at Pohang	Approved
		steel works
		2. Participation of Zirconium / Titanium mine joint venture
		3. Investment plan for POSCO-National Pension Service Global
		Investment Fund
2011-6	May 13	1. Investment plan for POSCO-CSPC Co. Ltd in Brazil	All 8 Cases
		2. Capital increase and payment guarantees of POSCO-Mexico	Approved
		3. Capital increase for the benefit of a domestic affiliate, POSCO AST Co., Ltd.
		4. Participation in the final bidding for the acquisition of Korea
		Express Co., Ltd.
		5. Issuance of Global Exchangeable Bonds
		6. Contribution to the POSCO Educational Foundation
		7. Amendment to the internal accounting management regulation
		8. Amendment to the compensation standard for directors and officers
2011-7	August 11*	1. Additional Share Purchase in Nacional Minerios S.A., Brazilian	All 8 Cases
		iron ore miner	Approved
		2. Financing plan for the second half of the fiscal year 2011
		3. Distribution of 2011 Interim Dividend
		4. Business plan of POSCO Processing & Service Co., Ltd. for the
		fiscal year 2011
		5. Business plan of Daewoo International for the fiscal year 2011
		6. Changes in members of the special committee
		7. Improvement of the long-term incentives for the boards of directors
		8. Donation for the recovery from the severe rain storm

*	The meeting date of the board of directors is based on Canadian local time.
• Major Activities of Outside Directors on the Board of Directors (January 1, 2011 — August 29, 2011)

		Number of
		Participating
Session	Date	Outside Directors	Remarks
2011-1	January 13	8
2011-2	February 1	8
2011-3	February 22	8
2011-4	February 25	8
2011-5	March 25	8
2011-6	May 13	8
2011-7	August 11	7	Kim, Byung-Ki has resigned from the outside director’s position on July 1, 2011.

41

(4) Composition of the Special Committees and their Activities

(a) Major Activities of Director Candidate Recommendation Committee (January 1, 2011 — August 29, 2011)

Session	Date	Agenda	Approval
2011-1	January 27	Assessment of qualifications of Inside Directors	—
2011-2	February 1	Assessment of qualifications and recommendation of Outside Directors	Approved
2011-3	February 21	Improvement plan for operation of the Board of Directors	—
2011-4	February 25	1. Appointment of the special committee members	—
		2. Approval of the designation of executive officers
		3. Appointment of Inside Directors
2011-5	August 11	1. Changes in the members of the special committee

(b) Major Activities of Evaluation and Compensation Committee (January 1, 2011 — August 11, 2011)

Session	Date	Agenda	Approval
2011-1	January 13	Evaluation of the fiscal year 2010 management result	Approved
2011-2	May 13	Amendment to the compensation standard for directors and officers	—
2011-3	August 8	Improvement of the long-term incentives for the boards of directors	—

* Kim, Byung-Ki has resigned from the outside director’s position on July 1, 2011.

(c) Major Activities of Finance and Operation Committee (January 1, 2011 — August 3, 2011)

Session	Date	Agenda	Approval
2011-1	January 13	Disposal of treasury shares according to execute equity swap with Kookmin Bank	—
2011-2	February 1	Financing plan for the first half of the fiscal year 2011	—
2011-3	February 21	Improvement plan for operation of the Board of Directors	—
2011-4	March 24	1. Participation of Zirconium / Titanium mine joint venture	—
		2. Investment plan for POSCO-National Pension Service Global Investment Fund
		3. Certification of payment for Zhangjiagang Pohang Stainless Steel Processing Center Co., Ltd.

42

Session	Date	Agenda	Approval
2011-5	May 12	1. Issuance of Global Exchangeable Bonds	—
		2. Participation in the final bidding for the acquisition of Korea Express Co., Ltd.	—
		3. Participation in the wind power generation project *	—
		4. Payment guarantee for the Titanium Slab joint venture	Approved
		5. Contribution to the National Academy of Science	Approved
2011-6	June 17	1. Certification of payment for POSCO-Mexico Co., Ltd.	Approved
		2.Contribution to the Pyeong Chang 2018 Olympic and Paralympic Winter Games Bid Committee	Approved
2011-7	June 27	Participation in the Business Productivity Partnership Program	Approved
2011-8	August 8	1. Additional Share Purchase in Nacional Minerios S.A., Brazilian iron ore miner	—
		2. Financing plan for the second half of the fiscal year 2011	—
		3. Share Purchase of the 50% of shares of Poschrome Ltd. owned by Samancor Ltd.	Approved

* Participation in the wind power generation project has been on hold by the board of directors for the further review of business plans and strategies.

(d) Major Activities of Related Party Transaction Committee (January 1, 2011 — August 29, 2011)

Session	Date	Agenda	Approval
2011-1	January 12	Fair Trading Program operating result and plan	—
2011-2	March 24	Change of a Fair Trading Program manager	Approved
2011-3	May 12	1. Contribution to the POSCO Educational Foundation	—
		2. Capital increase for the double width equipment of POSCO-AST Co., Ltd
2011-4	August 10	Reporting the operation of the Fair Trading Program for the first half	—
		of fiscal year 2011.

* Kim, Byung-Ki has resigned from the outside director’s postion on July 1, 2011

(e) Major Activities of Executive Management Committee (January 1, 2011 — August 29, 2011)

Session	Date	Agenda	Approval
2011-1	January 18	1. Establishment of an electrical steel coil production line in India	—
		2. Capital increase for the establishment of the third plant at POSCO-CSPC Co. Ltd.	Approved
2011-2	February 1	Additional funding for the release of altitude limit of a new steel making plant at Pohang steel works	Approved
2011-3	February 23	Establishment of the third equipment extension site at Gwangyang works	Approved

43

Session	Date	Agenda	Approval
2011-4	March 29	1. Establishment of a fast process equipment for the disposal of slags at	Approved
		Gwangyang works
		2. Rationalization of the first stainless steel rolling line at Pohang steel works
2011-5	April 26	1. Investment plan for POSCO-CSPC Co. in Brazil	—
		2. Capital increase and payment guarantees of POSCO-Mexico continuous galvanizing line	—
		3. Rationalization of the first and the second sintering line and improvement of the dust collection equipments used at the first, the second, the third and the fourth sintering line in Gwangyang	Approved
2011-6	May 26	1. Improvement of the dust collection equipments used at the second and the third stainless steel manufacturing line	Approved
		2. Establishment of a rolled steel processing center in Jilin, China
		3. Closing of the Shareholders Registry for the 2011 interim dividend
2011-7	June 27	Construction of laboratory buildings for raw material testing and ERC	Approved
2011-8	August 23	1. Expansion of the first Hot Press Forming Line at Gunsan Steel Processing and Fabricating Center Co., Ltd.	Approved
		2. The 301st domestic issuance of public bond	Approved

B. Audit Committee

Under the Korean laws and our articles of incorporation, we are required to have an audit committee (hereinafter les of incorporati. The Audit Committee may be composed of three or more directors; all members of the Audit Committee must be Outside Directors. Audit Committee members must also meet the applicable independent criteria set forth under the rules and regulations of the Financial Investment Services and Capital Markets Act. Members of the Audit Committee are elected by the shareholders at the general meeting of shareholders. We currently have an Audit Committee composed of four Outside Directors. Members of our Audit Committee are Lee, Chang-Hee (chairman), Kim, Byung Ki and Park, Sang-Kil.

The duties of the Audit Committee include:

• Engaging independent auditors;

• Approving independent audit fees;

• Approving audit and non-audit services;

• Reviewing annual financial statements;

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

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

• Reviewing and approving all related party transactions; and

• Examining improprieties or suspected improprieties.

44

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

(1) Composition of the Audit Committee (Auditors)

Name	Qualifications	Remarks
Lee, Chang-Hee Kim, Byung Ki Park, Sang-Kil	Satisfies requirements stipulated in the articles of incorporation	Chairman

• Changes After June 30, the Fiscal Year 2011

       • Kim, Byung-Ki has resigned from the outside director’s position on July 1, 2011.

(2) Major Activities of the Audit Committee (Auditors) (January 1, 2011 — August 10, 2011)

Session	Date	Agenda	Approval
2011-1	January 12	• Report Agenda
		- Reporting of the operations of the internal accounting control system for the fiscal year 2010
2011-2	February 1	• Deliberation Agendas
		- Approval of audit and non-audit services of external auditors	Approved
		- Assessment of the operations of the internal accounting control system for the fiscal year 2010	Approved
		- Audit result for the fiscal year 2010	Approved
		- Appointment of external auditors	Approved
		• Report Agenda
		- Audit result for the fiscal year 2010 by external auditor
		- Audit result of POSCO Employee Welfare Fund
2011-3	February 25	• Deliberation Agendas
		- Appointment of a chairman of the Audit Committee	Approved
2011-4	March 24	• Deliberation Agenda
		- Approval of audit and non-audit services for POSCO and POSCO’s subsidiaries	Approved
		• Report Agenda
		- Operation plans for the fiscal year 2010

45

Session	Date	Agenda	Approval
2011-5	May 12	•  Deliberation Agenda
		- Approval of audit and non-audit services of external auditors	Approved
		•   Report Agenda
		- External audit result for the fiscal year 2010 (Consolidated)
		- Internal audit result for the fiscal year 2010 (Consolidated)
		- Audit result for the first quarter of 2011 (Consolidated)
2011-6	August 10	•   Deliberation Agendas
		- Approval of non-audit services of external auditors for POSCO’s subsidiaries	Approved
		- Approval of audit services of external auditors for POSCO’s subsidiaries	Approved
		- Approval of non-audit services of external auditors for POSCO	Approved
		•   Report Agenda
		- External audit result for the fiscal year 2010 (US-GAAP)
		- Audit result for the second quarter of 2011 (Consolidated)
		- Reporting results of audit for the first half of the fiscal year 2011

C. Voting Rights by Shareholders

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

D. Compensation of Directors and Officers

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

(In KRW)

		Ceiling Amount Approved at
Category	Total Payment	Shareholders Meeting	Remarks
Inside Director	1,947 million	7 billion
Independent Non-Executive Director	364 million
Members of the Audit Committee	46 million
Total	2,357 million

46

• Payment Period: January 1, 2011 ~ June 30, 2011.

• Outside Directors do not include the members of the Audit Committee.

(2) List of Stock Options Presented to the Executives

(As of June 30, 2011)

		Number of Share						Exercising	Exercising
Date of Grant	Name	Grant		Exercise		Remaining		Period	Price
July 23, 2004	Chung , Keel-Sou		9,800		9,800		—	July 24, 2006	\151,700
	Kim, Dong-Jin		7,840		7,840		—	~July 23, 2011
	Lee, Ku-Taek		49,000		20,000		29,000
	Kim, Sang-Young		9,800		9,500		300
	Shin, Ki-Chul		9,800		9,800		—
	Kim, Sang-Myun		9,800		9,800		—
	Park, Young-Ju		1,862		—		1,862
	Suh, Yoon-Suk		1,862		1,862		—
April 28, 2005	Yong Ghul Yoon		10,000		—		10,000	April 29, 2007	\194,900
	Noi Ha Cho		10,000		—		10,000	~April 28, 2012
	Wook Sun		2,000		—		2,000
	Charles Ahn		2,000		—		2,000
	Jong Doo Choi		2,000		—		2,000
Total			125,764		68,602		57,162	—	—

• The stock option program was terminated on the thirty eighth general meeting of shareholders

(February 24, 2006).

47

POSCO
and Subsidiaries
Consolidated Interim Financial Statements
(Unaudited)
June 30, 2011

(With Independent Auditors’ Review Report Thereon)

Table of Contents

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

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Stockholders
POSCO:

Reviewed financial statements

We have reviewed the accompanying consolidated statement of financial position of POSCO and subsidiaries (the “Company”) as of June 30, 2011, and the consolidated statements of comprehensive income for the three-month and six-month periods ended June 30, 2011 and 2010 and, changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010 and notes, comprising a summary of significant accounting policies and other explanatory information (“the consolidated interim financial information”).

Management’s responsibility

Management is responsible for the preparation and fair presentation of this consolidated interim financial information in accordance with Korean International Financial Reporting Standard (“K-IFRS”) 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare the consolidated interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to express a conclusion on this consolidated interim financial information based on our review.

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information referred to above is not presented fairly, in all material respects, in accordance with K-IFRS 1034 “Interim Financial Reporting”.

1

Other considerations

As discussed in note 3, the Company prepared the consolidated interim financial information in accordance with accounting policies which management plans to adopt for its first annual financial statements in accordance with K-IFRS. The accounting policies applied for the consolidated interim financial statements may be changed by management as considered necessary in the course of preparation of its first annual financial statements in accordance with K-IFRS for the year ending December 31, 2011.

Seoul, Korea
August 26, 2011

This report is effective as of August 26, 2011, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial information. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO

Consolidated Statements of Financial Position

As of June 30, 2011, December 31, 2010 and January 1, 2010
(Unaudited)

(in millions of Won)	Notes	June 30, 2011		December 31, 2010		January 1, 2010
Assets
Cash and cash equivalents	5,19	W	4,285,917		3,521,045		2,273,059
Trade accounts and notes receivable, net	6,19,24,33		10,946,809		9,205,118		5,286,130
Other short-term financial assets	7,19,33		3,686,883		4,383,302		7,211,023
Inventories	8		11,453,754		9,559,206		4,918,413
Current income tax assets	30		22,526		17,654		11,980
Assets held for sale			—		—		24,961
Other current assets	13		1,265,720		972,159		690,185
Total current assets			31,661,609		27,658,484		20,415,751
Long-term trade accounts and notes receivable, net	6,19		208,362		273,622		522,775
Other long-term financial assets	7,19		6,022,029		6,417,038		5,308,660
Investment in associates	9		3,517,988		3,306,425		950,449
Investment property, net	10		511,177		493,365		558,207
Property, plant and equipment, net	11		26,554,598		25,437,740		22,342,747
Intangible assets, net	12		4,860,722		4,619,169		754,231
Deferred tax assets	30		601,888		538,876		409,748
Other long-term assets	13		592,681		659,814		250,475
Total non-current assets			42,869,445		41,746,049		31,097,292
Total assets	36	W	74,531,054		69,404,533		51,513,043

See accompanying notes to consolidated interim financial statements.

3

POSCO
Consolidated Statements of Financial Position, Continued
As of June 30, 2011, December 31, 2010 and January 1, 2010
(Unaudited)

(in millions of Won)	Notes	June 30, 2011			December 31, 2010			January 1, 2010
Liabilities
Trade accounts and notes payable	19,33	W	4,458,981			3,980,701			2,392,317
Short-term borrowings	14,19		11,209,289			10,476,300			3,958,099
Other short-term financial liabilities	15,19,33		1,614,315			1,520,877			1,054,714
Current income tax liabilities	30		569,130			779,018			389,675
Liabilities related assets held for sale			—			—			80
Provisions	16		57,099			38,004			24,711
Other current liabilities	18,24		2,042,964			1,491,248			1,188,967
Total current liabilities			19,951,778			18,286,148			9,008,563
Long-term trade accounts and notes payable	19,33		813			378			—
Long-term borrowings	14,19		12,603,860			10,663,941			8,241,386
Other long-term financial liabilities	15,19		303,667			175,774			205,096
Employee benefits	17		350,559			503,126			315,418
Deferred tax liabilities	30		1,137,395			1,028,728			377,539
Long-term provisions	16		124,644			128,885			2,969
Other long-term liabilities	18		64,580			80,386			28,391
Total non-current liabilities			14,585,518			12,581,218			9,170,799
Total liabilities	36	W	34,537,296			30,867,366			18,179,362
Shareholders’ equity
Equity attributable to owners of the Company
Share capital	20		482,403			482,403			482,403
Capital surplus	20		1,177,188			1,101,561			1,199,666
Reserves	21		910,072			1,439,807			766,325
Treasury shares	22		(2,391,406	)		(2,403,263	)		(2,403,263	)
Retained earnings			37,776,693			35,955,177			32,634,833
Controlling interests			37,954,950			36,575,685			32,679,964
Non-controlling interests			2,038,808			1,961,482			653,717
Total shareholders’ equity			39,993,758			38,537,167			33,333,681
Total liabilities and shareholders’ equity		W	74,531,054			69,404,533			51,513,043

See accompanying notes to consolidated interim financial statements.

4

POSCO

Consolidated Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2011 and 2010
(Unaudited)

		For the three-month periods						For the six-month periods
		ended June 30						ended June 30
(in millions of Won, except per share information)	Notes	2011			2010			2011			2010
Revenue	24,25,36	W	17,046,753			10,787,954			33,297,317			20,565,217
Cost of sales	28		(14,375,839	)		(8,260,642	)		(28,454,339	)		(15,989,626	)
Gross profit			2,670,914			2,527,312			4,842,978			4,575,591
Selling and administrative expenses	26,28
Administrative expenses			(489,505	)		(303,757	)		(986,623	)		(610,503	)
Selling expenses			(384,262	)		(258,078	)		(756,639	)		(484,068	)
			(873,767	)		(561,835	)		(1,743,262	)		(1,094,571	)
Other operating income	27		37,980			44,365			115,704			126,225
Other operating expenses	27,28		(88,676	)		(43,471	)		(113,098	)		(82,432	)
Operating profit	32		1,746,451			1,966,371			3,102,322			3,524,813
Non-operating income and expenses
Share of profit of equity-accounted investees	36		34,772			30,174			13,425			66,130
Finance income	29		625,532			247,874			1,447,878			735,606
Finance costs	29		(581,533	)		(791,864	)		(1,302,712	)		(1,084,010	)
Profit before income tax			1,825,222			1,452,555			3,260,913			3,242,539
Income tax expense	30,36		(453,238	)		(333,194	)		(795,867	)		(747,065	)
Profit for the period	36		1,371,984			1,119,361			2,465,046			2,495,474
Other comprehensive income
Capital adjustment arising from investments in equity-method investees, net of tax			(55,523	)		(6,446	)		(37,066	)		(33,765	)
Net changes in fare value of available-for-sale investments, net of tax			(258,817	)		(219,816	)		(526,835	)		(160,776	)
Foreign currency translation differences, net of tax			(39,541	)		141,558			(127,933	)		85,346
Defined benefit plan actuarial gains (loses), net of tax			(59,846	)		10,888			12,915			(36,739	)
Other comprehensive income for the period, net of tax			(413,727	)		(73,816	)		(678,919	)		(145,934	)
Total comprehensive income for the period		W	958,257			1,045,545			1,786,127			2,349,540
Profit attributable to:
Owners of the Company		W	1,322,857			1,104,007			2,413,579			2,468,109
Non-controlling interests			49,127			15,354			51,467			27,365
Profit for the period		W	1,371,984			1,119,361			2,465,046			2,495,474
Total comprehensive income attributable to:
Owners of the Company		W	931,384			1,014,103			1,898,554			2,307,198
Non-controlling interests			26,873			31,442			(112,427	)		42,342
Total comprehensive income for the period		W	958,257			1,045,545			1,786,127			2,349,540
Earnings per share	31	W	17,126			14,332			31,240			32,040

See accompanying notes to consolidated interim financial statements.

5

POSCO

Consolidated Statements of Changes in Equity

For the six-month periods ended June 30, 2011 and 2010
(Unaudited)

	Owners of the Company																	Non-
	Share		Capital						Treasury			Retained			Sub			Controlling
(in millions of Won)	Capital		Surplus			Reserves			Shares			Earnings			Total			Interests			Total
Balance as of January 1, 2010	W	482,403		1,199,666			766,325			(2,403,263	)		32,634,833			32,679,964			653,717			33,333,681
Comprehensive income:
Profit for the period		—		—			—			—			2,468,109			2,468,109			27,365			2,495,474
Net changes in accumulated comprehensive income (expense)		—		—			(35,731	)		—			—			(35,731	)		1,966			(33,765	)
Net changes in fair value of available-for-sale investments, net of tax		—		—			(160,733	)		—			—			(160,733	)		(43	)		(160,776	)
Foreign currency translation differences, net of tax		—		—			69,806			—			—			69,806			15,540			85,346
Defined benefit plan actuarial losses, net of tax		—		—			—			—			(34,253	)		(34,253	)		(2,486	)		(36,739	)
Total comprehensive income		—		—			(126,658	)		—			2,433,856			2,307,198			42,342			2,349,540
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—			—			—			(500,714	)		(500,714	)		(16,376	)		(517,090	)
Changes in scope of consolidation		—		—			—			—			—			—			4,923			4,923
Changes in ownership interests in subsidiaries		—		(71,398	)		—			—			—			(71,398	)		45,911			(25,487	)
Paid in capital increase of subsidiaries		—		—			—			—			—			—			7,352			7,352
Others		—		587			(899	)		—			51,212			50,900			5,842			56,742
Total transactions with owners of the Company		—		(70,811	)		(899	)		—			(449,502	)		(521,212	)		47,652			(473,560	)
Balance as of June 30, 2010	W	482,403		1,128,855			638,768			(2,403,263	)		34,619,187			34,465,950			743,711			35,209,661

See accompanying notes to consolidated interim financial statements.

6

POSCO
Consolidated Statements of Changes in Equity, Continued
For the six-month periods ended June 30, 2011 and 2010
(Unaudited)

	Owners of the Company																	Non-
	Share		Capital						Treasury			Retained			Sub			Controlling
(in millions of Won)	Capital		Surplus			Reserves			Shares			Earnings			Total			Interests			Total
Balance as of January 1, 2011	W	482,403		1,101,561			1,439,807			(2,403,263	)		35,955,177			36,575,685			1,961,482			38,537,167
Comprehensive income:
Profit for the period		—		—			—			—			2,413,579			2,413,579			51,467			2,465,046
Net changes in accumulated comprehensive expense of investments of equity-accounted investees, net of tax		—		—			(31,967	)		—			—			(31,967	)		(5,099	)		(37,066	)
Net changes in fair value of available-for-sale investments, net of tax		—		—			(524,965	)		—			—			(524,965	)		(1,870	)		(526,835	)
Foreign currency translation differences, net of tax		—		—			21,924			—			—			21,924			(149,857	)		(127,933	)
Defined benefit plan actuarial losses, net of tax		—		—			—			—			19,983			19,983			(7,068	)		12,915
Total comprehensive income		—		—			(535,008	)		—			2,433,562			1,898,554			(112,427	)		1,786,127
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—			—			—			(577,747	)		(577,747	)		(16,808	)		(594,555	)
Changes in scope of consolidation		—		—			—			—			—			—			73,774			73,774
Changes in ownership interests in subsidiaries		—		6,354			—			—			—			6,354			(6,354	)		—
Paid in capital increase of subsidiaries		—		—			—			—			—			—			137,374			137,374
Acquistion of treasury shares		—		—			—			(61,296	)		—			(61,296	)		—			(61,296	)
Disposal of treasury shares		—		71,160			—			73,153			—			144,313			—			144,313
Others		—		(1,887	)		5,273			—			(34,299	)		(30,913	)		1,767			(29,146	)
Total transactions with owners of the Company		—		75,627			5,273			11,857			(612,046	)		(519,289	)		189,753			(329,536	)
Balance as of June 30, 2011	W	482,403		1,177,188			910,072			(2,391,406	)		37,776,693			37,954,950			2,038,808			39,993,758

See accompanying notes to consolidated interim financial statements.

7

POSCO

Consolidated Statements of Cash Flows

For the six-month periods ended June 30, 2011 and 2010
(Unaudited)

(in millions of Won)	Notes		June 30, 2011			June 30, 2010
Cash flows from operating activities
Cash generated from operations			W	1,226,370			2,831,696
Profit for the period				2,465,046			2,495,474
Adjustments		35		2,042,769			2,476,372
Changes in operating assets and liabilities		35		(3,281,445	)		(2,140,150	)
Interest received				98,560			143,975
Interest paid				(367,873	)		(220,033	)
Dividends received				177,191			57,829
Income taxes paid				(794,578	)		(389,766	)
Net cash provided by operating activities			W	339,670			2,423,701
Cash flows from investing activities
Disposal of short-term financial instruments				3,849,297			9,439,825
Decrease in loans				119,253			143,468
Disposal of available-for-sale investments				12,554			129,139
Disposal of other investment assets				39			24,237
Disposal of investments of equity-accounted investees				1,205			7,847
Disposal of property, plant and equipment				104,464			60,568
Disposal of intangible assets				4,267			3,160
Disposal of net assets from changes in scope of consolidation				—			6,747
Acquisition of short-term financial instruments				(2,578,359	)		(10,223,277	)
Increase in loans				(388,295	)		(53,791	)
Acquisition of available-for-sale investments				(187,737	)		(66,159	)
Acquistion of other investment assets				(5,280	)		(453,575	)
Acquisition of investments of equity-accounted investees				(443,251	)		(214,490	)
Acquisition of property, plant and equipment				(2,255,405	)		(2,911,321	)
Acquisition of intangible assets				(221,815	)		(20,068	)
Acquisition of net assets from changes in scope of consolidation				(85,392	)		(119	)
Other, net				76,025			23,236
Net cash used in investing activities			W	(1,998,430	)		(4,104,573	)

See accompanying notes to consolidated interim financial statements.

8

POSCO
Consolidated Statements of Cash Flows, Continued
For the six-month periods ended June 30, 2011 and 2010
(Unaudited)

(in millions of Won)	Notes	June 30, 2011			June 30, 2010
Cash flows from financing activities
Proceeds from borrowings			3,164,966			1,336,787
Disposal of treasury shares			164,384			—
Proceeds from short-term borrowings			339,990			1,251,666
Repayment of borrowings			(603,169	)		(442,318	)
Acquisition of treasury shares			(61,296	)		—
Payment of cash dividends			(577,747	)		(500,714	)
Other, net			35,004			3,622
Net cash provided by financing activities		W	2,462,132			1,649,043
Effect of exchange rate fluctuation on cash held			(68,369	)		32,235
Net decrease in cash and cash equivalents from changes in scope of consolidation			29,869			—
Net increase in cash and cash equivalents			764,872			406
Cash and cash equivalents at beginning of the period			3,521,045			2,273,059
Cash and cash equivalents at end of the period		W	4,285,917			2,273,465

See accompanying notes to consolidated interim financial statements.

9

POSCO

Notes to Consolidated Interim Financial Statements, Continued

As of June 30, 2011
(Unaudited)

Consolidated Companies

1. General Information

General information about POSCO, its 55 domestic subsidiaries including POSCO Engineering & Construction Co., Ltd., 146 foreign subsidiaries including POSCO America Corporation and its 84 associates are as follows:

(a) The controlling company

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

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

As of June 30, 2011, the shares of POSCO 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 Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Consolidated subsidiaries

Details of consolidated subsidiaries as of June 30, 2011 are as follows:

	Principal Operations	Ownership (%)		Region	Net Equity
[Domestic]
POSCO E&C Co., Ltd.	Engineering and Construction		89.53	Pohang		2,551,887
POSCO P&S Co., Ltd.	Steel sales and service		95.31	Seoul		535,063
POSCO Coated & Color Steel Co., Ltd.	Coated steel manufacturing		56.87	Pohang		246,123
POSCO Plant Engineering Co., Ltd.	Steel work maintenance and machinery installation		100.00	Pohang		93,549
POSCO ICT Co., Ltd.	Computer hardware and software distribution		72.54	Seongnam		217,932
POSCO Research Institute	Economic research and consulting		100.00	Seoul		24,748
Seoung Gwang Co., Ltd.	Athletic facilities operation		100.00	Suncheon		46,786
POSCO Architects & Consultants Co., Ltd.	Architecture and consulting		100.00	Seoul		49,349
POSCO Specialty Steel Co., Ltd.	Steel manufacturing and Sales		100.00	Changwon		833,394
POSTECH Venture Capital Corp.	Investment in venture companies		95.00	Pohang		32,323
eNtoB Co., Ltd.	Electronic commerce		62.38	Seoul		29,158
POSCO Chemtec Company Ltd.	Manufacturing and sellings		60.00	Pohang		278,526
POSCO Terminal Co., Ltd.	Transporting and warehousing		51.00	Gwangyang		68,207
POSCO M-TECH Co., Ltd	Packing materials manufacturing		48.85	Pohang		154,730
POSCO Power Corp.	Generation of Electricity		100.00	Seoul		571,395
Postech 2006 Energy Fund (*2)	Investment in new technologies		22.11	Seoul		26,402
PHP Co., Ltd.	Rental houses		100.00	Incheon		8,009
POSCO TMC Co., Ltd.	Steel manufacturing and Sales		67.76	Cheonan		87,639
PNR Co., Ltd.	Steel manufacturing and Sales		70.00	Pohang		18,098
Megaasset Co., Ltd.	Real estate rental and sales		100.00	Cheonan		11,959
DAEWOO ENGINEERING COMPANY	Construction and engneering service		92.26	Seongnam		166,118
PoHang Feul Cell Co. Ltd.	Generation of electricity		100.00	Pohang		4,353
Pohang SPFC Co., Ltd.	Steel manufacturing		90.00	Pohang		5,248
POSWITH Co., Ltd.	Industrial clean service		100.00	Pohang		3,446
BASYS INDUSTRY CO., LTD.	Panel board, electric and control panel manufacturing		65.00	Seongnam		593
POSTECH BD Newundertaking fund	Bio diesel Industries		100.00	Pohang		90
POSBRO Co., Ltd.	Video game manufacturing		97.79	Seongnam		149
POSCOAST Co., Ltd.	Steel manufacturing and Sales		100.00	Ansan		151,070
DaiMyung TMS Co., Ltd.	Cold- rolling of stainless steel , nickel alloy		100.00	Siheung		(21,933	)
POS-HiMETAL CO., Ltd.	Steel manufacturing and Sales		65.00	Gwangyang		64,339
POSCO E&E Co., Ltd.	Services		100.00	Seoul		17,892
POMIC Co., Ltd.	Education Services		100.00	Pohang		1,942
POSFINE Co., Ltd.	Non metallic minerals manufacturing		69.23	Gwangyang		17,819
POS ECO HOUSING Co., Ltd.	Construction		85.25	Pohang		5,936
Mapo high broad parking Co., Ltd.	Construction		67.00	Seoul		1,497
Dakos Co. Ltd.	Railway equipment manufacturing		81.00	Seongnam		480
Kwang Yang SPFC Co., Ltd.	Steel manufacturing		100.00	Gwangyang		9,317
POSCALCIUM Company, Ltd.	Non metallic minerals manufacturing		70.00	Pohang		2,175
Plant Engineering service Technology Co., Ltd.	Engineering Service		100.00	Pohang		1,503
9Digit Co., Ltd	Steel manufacturing		86.49	Incheon		7,250
Postech Early Stage Fund (*1)	Financial investment		10.00	Pohang		9,997
BUSAN E&E Co., Ltd.	Handling & disposal of waste matter		70.00	Busan		36,876
POSCO Family Strategy Funds	Financial investment		100.00	Pohang		57,142
POREKA Co., Ltd.	Advertising agency		100.00	Seoul		1,348
Songdo SE Co., Ltd.	Cleaning service		100.00	Incheon		1,456
Posgreen Co., Ltd.	Plastic manufacuring		60.00	Gwangyang		3,992
Daewoo International. Co., Ltd.	Trading, Energy & Resource development		66.70	Seoul		1,426,752
POSCOLED Co., Ltd.	LED lightning		80.03	Seongnam		24,650
Gunsan SPFC Co., Ltd.	Steel manufacturing		100.00	Gunsan		21,697
POSCO NST Co., Ltd.	Steel manufacturing		100.00	Busan		38,400
Pohang Scrap Recycling Center Co., Ltd	Steel manufacturing		51.00	Pohang		14,882
PSC energy global Co., Ltd.	Business service		100.00	Pohang		33,827
Suncheon Ecotrans Co., Ltd	Train manufacturing & management		100.00	Suncheon		12,924
Shinan Energy Co., Ltd	manufacturing & management		100.00	Mokpo		1,841
Recometal Co., Ltd	Steel manufacturing		88.60	Hwasung		4,959

11

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

	Principal Operations	Ownership (%)		Region	Net Equity
[Foreign]
POSCO America Corporation	Steel trading		100.00	USA		153,258
POSCO Australia Pty. Ltd.	Iron ore sales & mine development		100.00	Australia		536,860
POSCO Canada Ltd.	Coal sales		100.00	Canada		386,531
POSCAN Elkveiw Coal Ltd.	Coal sales		100.00	Canada		—
POSCO Asia Co., Ltd.	Steel transit trading		100.00	HongKong		32,588
Dalian POSCO Steel Co., Ltd	Steel manufacturing		85.00	China		(4,035	)
POSCO-CTPC Co., Ltd.	Steel manufacturing		100.00	China		29,264
POSCO-JKPC Co., Ltd.	Steel manufacturing		95.00	Japan		17,621
International Business Center Corporation	Leasing Service		60.00	Vietnam		30,914
POSCO E&C Vietnam Co., Ltd.	Steel manufacturing		100.00	Vietnam		(14,677	)
Zhangjiagang Pohang Stainless Steel Co., Ltd.	Stainless steel manufacturing		82.48	China		555,214
Guangdong Pohang Coated Steel Co., Ltd.	Plating steel sheet manufacturing		94.55	China		181,326
POSCO (Thailand) Company Ltd.	Steel manufacturing		100.00	Thailand		41,979
Myanmar POSCO Steel Co., Ltd	Zinc relief manufacturing		70.00	Myanmar		14,162
POSCO-JOPC Co., Ltd.	Steel manufacturing		56.84	Japan		4,452
POSCO Investment Co., Ltd.	Financial Service		100.00	HongKong		90,559
POSCO-MKPC SDN BHD.	Steel manufacturing		70.00	Malaysia		47,035
Qingdao Pohang Stainless Steel Co., Ltd.	Stainless steel manufacturing		100.00	China		107,555
POSCO (Suzhou) Automotive Processing Center Co., Ltd.	Steel manufacturing		100.00	China		72,586
POSCO BioVentures L.P.	Bio tech Industry		100.00	USA		17,230
PT. POSNESIA	Steel manufacturing		70.00	Indonesia		13,122
POSCO E&C - Hawaii Inc.	Real estate Industry		100.00	USA		490
POS-Qingdao Coil Center Co., Ltd.	Steel manufacturing		100.00	China		14,603
POS-Ore Pty. Ltd.	Iron ore sales & mine development		100.00	Australia		45,492
POSCO-China Holding Corp.	A holding company		100.00	China		242,147
POSCO-Japan Co., Ltd.	Steel trading		100.00	Japan		118,978
POS-CD Pty. Ltd.	Coal sales		100.00	Australia		4,366
POS-GC Pty. Ltd.	Coal sales		100.00	Australia		46,106
POSCO-India Private Ltd.	Steel manufacturing		100.00	India		108,064
POSCO-India Pune Steel Processing Centre Pvt. Ltd.	Steel manufacturing		65.00	India		45,673
POSCO-JNPC Co., Ltd.	Steel manufacturing		90.00	Japan		14,542
POSCO-Foshan Steel Processing Center Co.,Ltd.	Steel manufacturing		100.00	China		40,230
POSCO E&C (China) Co., Ltd.	Construction and civil engineering		100.00	China		18,025
POSCO MPC S.A. de C.V.	Steel manufacturing		90.00	Mexico		20,665
Zhangjigang Pohang Port Co., Ltd.	Load and unload Industry		100.00	China		13,600
Qingdao Pos-metal Co., Ltd.	Logistics warehousing		100.00	China		2,048
POSCO-Vietnam Co., Ltd.	Steel manufacturing		85.00	Vietnam		120,907
POSCO-Mexico Co., Ltd.	Mobile steel sheet manufacturing		100.00	Mexico		99,139
POSCO-India Delhi Steel Processing Centre Pvt. Ltd	Steel manufacturing		76.40	India		21,068
POSCO-Poland Wroclaw Steel Processing Center Co., Ltd	Steel manufacturing		60.00	Poland		17,935
POS-NP Pty. Ltd.	Coal sales		100.00	Australia		45,009
POSCO-Vietnam Processing Center Co., Ltd.	Steel manufacturing		89.58	Vietnam		20,668
POSCO (Chongqing) Automotive Processing Center Co, Ltd.	Steel manufacturing		100.00	China		11,235
Suzhou POS-CORE Technology Co., Ltd.	Component manufacturing		100.00	China		24,998
POSCO-JYPC Co., Ltd.	Steel manufacturing		82.37	Japan		1,882
POSCO-Malaysia SDN. BHD.	Steel manufacturing		93.41	Malaysia		(19,252	)
POS-Minerals Corporation	Mine development & sales		85.00	USA		107,057
POSCO (Wuhu) Automotive Processing Center Co., Ltd.	Steel manufacturing		100.00	China		21,991
POSCO E&C India Private Ltd.	Construction and engineering		100.00	India		4,021
POSCO E&C SMART	Steel manufacturing		100.00	Philippines		503
POSCO-Phillippine Manila Processing Center Inc.	Electrotical control equipment manufacturing		100.00	China		9,839
Dalian POSCON Dongbang Automatic Co., Ltd.	Transit trade		70.00	China		4,660
SANPU TRADING CO.,LTD.	Develop of sources		70.04	Australia		1,674
Zhangjiagang BLZ Pohang InternationalTrading Co., Ltd.	Logistics warehousing		100.00	Mexico		4,343
POSCO Mexico Human Tech.	Steel product sales		100.00	UAE		48
POSCO Mexico East Steel Distribution	IT service and DVR business		66.28	China		11,315

12

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

	Principal Operations	Ownership (%)		Region
[Foreign]
POSCO Gulf Logistics LLC.	Construction		100.00	UAE
POSCO ICT-China	Steel manufacturing		100.00	China
DWEMEX S.A.DE C.V.	Lumber manufacturing & sales		99.00	Mexico
POS MPC Servicios de C.V.	Steel product sales		61.00	Mexico
EUROTALY S.A.	Logistics warehousing		98.00	Uruguay
POSCO South East Asia Pte. Ltd.	PRT test track construction		51.00	Singapore
Europe Steel Distribution Center	Service		70.00	Slovenia
VECTUS Ltd.	Stainless steel manufacturing		99.57	England
Zeus(Cayman)	Steel manufacturing		100.00	Cayman Islands
POSCO VST Co., Ltd.	Steel manufacturing		95.65	Vietnam
POSCO Maharashtra Steel Pvt. Ltd.	Steel manufacturing		100.00	India
POSCO India Chennai Steel Processing Centre Pvt. Ltd.	Construction		100.00	India
POSCO Turkey Nilufer Processing Center Co., Ltd.	Steel manufacturing		100.00	Turkey
POSCO Vietnam Ha Noi Processing Center Co., Ltd.	Construction		70.00	Vietnam
POSCO (Liaoning) Automotive Processing Center Co., Ltd.	Steel manufacturing		100.00	China
POSCO-Indonesia Jakarta Processing Center	Steel manufacturing		85.00	Indonesia
POSCO E&C Venezuela C.A	Steel manufacturing		100.00	Venezuela
PT. MRI	Steel manufacturing		65.00	Indonesia
POSCORE-INDIA	Coal sales		100.00	India
POSCO America Alabama Processing Center Co., Ltd.	Construction		100.00	USA
PT DEC Indonesia	Trading Business		95.00	Indonesia
POSCO (Yantai) Automotive Processing Center Co.,Ltd.	Trading Business		100.00	China
POSCO India Steel Distribution Center Private Ltd.	Trading Business		100.00	India
POSCO China Dalian Plate Processing Center Co., Ltd.	Trading Business		90.00	China
POSCO South Asia	Cement manufacturing		100.00	Thailand
POSCO SS VINA	Trading Business		100.00	Vietnam
POSCO-NCR Coal Ltd.	Clothing business		100.00	Canada
POSCO WA Pty. Ltd.	Textile manufacturing		100.00	Australia
POSCO E&C - UZ	Textile manufacturing		100.00	Uzbekistan
POSCO Australia GP Limited	Resource Development		100.00	Australia
Daewoo International America Corp.	Trading Business		100.00	USA
Daewoo International Deutschland GmbH	Trading Business		100.00	Germany
Daewoo International Japan Corp.	Trading Business		100.00	Japan
Daewoo International Singapore Pte. Ltd.	Trading Business		100.00	Singapore
Daewoo Italia S.r.l.	Trading Business		100.00	Italia
Daewoo Cement (Shandong) Co., Ltd.	Cement manufacturing		100.00	China
Daewoo (China) Co., Ltd.	Trading Business		100.00	China
PT. RISMAR Daewoo Apparel	Steel manufacturing		100.00	Indonesia
Daewoo Textile Fergana LLC	Trading Business		100.00	Uzbekistan
Daewoo Textile Bukhara LLC	Trading Business		100.00	Uzbekistan
Daewoo International Australia Holdings Pty. Ltd.	Trading Business		100.00	Australia
Daewoo Paper Manufacturing Co., Ltd.	Develop of sources		66.70	China
Tianjin DW. Paper	Textile manufacturing		68.00	China
POSCO Mauritius Ltd.	Textile manufacturing		100.00	Mauritius
PT. KRAKATAU STEEL POSCO	Trading Business		70.00	Indonesia
MYANMAR Daewoo LTD.	Trading Business		100.00	Myanmar
Dawwoo International MEXICO S.A. de C.V.	Trading Business		100.00	Mexico
Daewoo International Guangzhou Corp.	Trading Business		100.00	China
Daewoo Energy Central Asia	leather manufacturing		100.00	Uzbekistan
Daewoo STC & Apparel Vietnam Ltd.	Steel manufacturing		100.00	Vietnam
MYANMAR Daewoo International Ltd.	Trading Business		55.00	Myanmar
DAYTEK ELECTRONICS CORP.	Trading Business		100.00	Canada
Daewoo (M) SDN. BHD.	Steel manufacturing		100.00	Malaysia
Daewoo CANADA LTD.	Steel manufacturing		100.00	Canada
Daewoo EL SALVADOR S.A. DE C.V.	Trading Business		100.00	El Salvador
GEZIRA TANNERY CO., LTD.	Electrical Industry		100.00	Sudan
POSCO (Zhangjiagang) Stainless Steel Processing Center Co., Ltd.	Construction		100.00	China
Daewoo International Corporation (M) SDN BHD	Raw material manufacturing		100.00	Malaysia
Daewoo International SHANGHAI CO., LTD.	Trading Business		100.00	China
PGSF, LLC	Non-profit charitable organization		100.00	USA

13

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

	Principal Operations	Ownership (%)		Region	Net Equity
[Foreign]
Xenesys Inc.	Construction		50.93	Japan		12,403
Daewoo International INDIA Private Ltd.	Construction		100.00	India		1,897
TECHREN Solar, LLC	Construction		99.90	USA		782
PT. POSCO E&C Indonesia	Construction		100.00	Indonesia		863
Hume Coal Pty. Ltd.	Construction		70.00	Australia		3,760
Daewoo HANDELS GmbH	Construction		100.00	Germany		—
POSCO Foundation	Construction		100.00	India		228
EPC EQUITIES LLP	Construction		70.00	England		4,192
SANTOS CMI Construction Trading LLP	Construction		99.90	England		481
SANTOS CMI INC. USA	Construction		100.00	USA		652
SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA	Construction		99.98	Brazil		2,982
SANTOS CMI PERU S.A.	Construction		99.99	Peru		(241	)
SANTOS CMI COSTA RICA S.A.	Construction		100.00	Coasta Rica		(1,390	)
SANTOS CMI CONSTRUCCIONES S.A. (URUGUAY)	Construction		100.00	Uruguay		59
GENTECH International INC.	Construction		90.00	Panama		(368	)
EPC INVESTMENTS C.V.	Construction		99.99	Netherlands		96
INGENIERiA Y CONSTRUCCION HOLAND CO S.A.	Construction		99.90	Ecuador		107
ASESORiA Y SERVICIOS EPC S.A CHILE	Construction		99.00	Chile		(143	)
SANTOS CMI S.A.	Construction		70.00	Ecuador		12,029
SANTOS CMI CONSTRUCCIONES DE CHILE S.A.	Construction		99.00	Chile		4,114
S&K -SANTOS CMI S.A. DE C.V. (MEXICO)	Construction		99.00	Mexico		(86	)
DV - SANTOS CMI S.A. DE C.V.	Construction		50.00	Mexico		(219	)
COMPANIA DE AUTOMATIZACION & CONTROL, GENESYS S.A.	Construction		90.00	Ecuador		1,596
VAUTIDAMERICAS S.A.	Construction		51.00	Ecuador		474
SANTOS CMI Constructions Argentina S.A.	Construction		95.00	Argentina		(18	)
POSCO E&C Brazil Ltd.	Construction		100.00	Brazil		1,061
POSCO Electrical Steel Inida Private Limited	Electrical Steel Manufacturing		100.00	India		1,255
Daewoo International Cameroon PLC	Resource Development		100.00	Cameroon		43
POSCO ASSAN TST STEEL Industry	Steel manufacturing		70.00	Turkey		136,329
HONG KONG POSCO E&C (CHINA) Investment Co., Ltd.	Investment		100.00	HongKong		(9,029	)

(*1)	In 2011, this company was included in the subsidiaries as the Company has the power over more than half of the voting rights by virtue of an agreement with Postech which has 4.72% of ownership.
(*2)	These subsidiaries are included in the consolidated interim financial statements as the controlling company has control over them in consideration of board of directors’ composition and others.

14

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Details of associates

Details of associates as of June 30, 2011 are as follows:

Investee	Category of Business	Ownership (%)		Region
[Domestic]
MIDAS Information Technology Co., Ltd.	Engineering		25.46	Seoul
Metapolis Co., Ltd.	Multiplex development		40.05	Hwaseong
Songdo New City Development Inc.	Real estate		29.90	Seoul
POSMATE Co., Ltd.	Services		30.00	Seoul
Gail International Korea Ltd.	Real estate		29.90	Seoul
SNNC Co., Ltd.	Raw material manufacturing and sale		49.00	Gwangyang
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.	Real estate		25.10	Chungju
Taegisan Wind Power Corporation	Wind power plant construction and management		50.00	Hoengseong
KOREASOLARPARK Co., Ltd.	Solar power plant construction and management		37.50	Youngam
Garolim Tidal Power Plant Co., Ltd.	Generation of electricity		32.13	Seosan
Cheongna IBT Co., Ltd. (*2)	Multiplex development		18.58	Incheon
PSIB Co., Ltd.	Non-resident building lease		49.00	Seoul
Universal Studios Resort Development Co., Ltd.	Construction		21.88	Hwaseong
Universal Studios Resort Asset Management Corp.	Real estate services		26.16	Seoul
Daewoo national car Gwangju selling Co., Ltd.	Real estate		50.00	Gwanju
Uitrans Co., Ltd.	Transporting		38.19	Seoul
Suwon Green Environment. Co., Ltd.	Construction		27.50	Hwaseong
Pajoo & Viro Co., Ltd.	Construction		40.00	Paju
Green Gimpo Co., Ltd.	Construction		29.90	Gimpo
Busan-Gimhae Light Rail Transit Co., Ltd.	Transporting		25.00	Gimhae
Incheon-Gimpo Highway Co., Ltd.	Construction		25.00	Anyang
Green Jangryang Co., Ltd.	Sewerage treatment		25.00	Pohang
Green Tongyeong Enviro Co., Ltd.	Sewerage treatment		20.40	Tongyoung
POSPLATE Co., Ltd.	Services		68.95	Gwangyang
Pure Gimpo.Co., Ltd	Construction		29.13	Seoul
Pohang Techno Valley AMC Co., Ltd.	Construction		29.50	Pohang
Sungjin Geotec Co., Ltd.	Industrial machinery manufacturing		43.11	Ulsan
Kyobo life insurance co., Ltd.	Life insurance		24.00	Seoul
Dongbang Special Steel Co., Ltd.	Steel processing and sales		35.82	Pohang
Pure Iksan Co., Ltd	Construction		26.45	Pohang
Gyeonggi CES Co., Ltd.	Facility construction		21.84	Yangju
Sunjin Gonghak Baeumteo Co., Ltd.	Domitories management		22.38	Gwanju
Inje Autopia Co., Ltd.	Management		27.53	Inje
Innovalley Co., Ltd.	Real estate developement		28.77	Yongin
Applied Science Corp.	Machinery manufacturing		29.62	Paju
SENTECH KOREA Corp.	Manufacturing		20.25	Paju
AROMA POSTECH RENEWABLE ENERGY Co., Ltd.	Other science research		28.57	Seoul
Hyundai Investment Network Private Equity Fund	Mine investment		50.00	Seoul
Pohang Techno Valley PFV Corporation	Real estate development		28.65	Pohang
BLUE OCEAN Private Equity Fund	Private Equity Financial		27.52	Seoul

15

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Investee	Category of Business	Ownership (%)		Region
[Foreign]
VSC POSCO Steel Corporation	Steel manufacturing and Sale		50.00	Vietnam
KOBRASCO	Facility lease		50.00	Brazil
USS-POSCO Industries	Material manufacturing and sale		50.00	USA
POSCHROME	Raw material manufacturing and sale		50.00	Republic of South Africa
POS-Hyundai Steel Manufacturing India Private Ltd.	Steel processing and sale		29.50	India
POSVINA Co., Ltd.	Plating steel sheet manufacturing		50.00	Vietnam
PT. POSMI Steel Indonesia	Steel processing and sale		37.87	Indonesia
CAML Resources Pty Ltd.	Raw material manufacturing and sale		33.40	Austrailia
Nickel Mining Company SAS	Raw material manufacturing and sale		49.00	New Caledonia
Liaoning Rongyuan Posco Refractories Co., Ltd.	Manufacturing and sale		35.00	China
POSK (PingHu) Processing Center Co., Ltd.	Steel processing and sale		20.00	China
AN KHANH NEW CITY DEVELOPMENT	Highway construction and new town development		50.00	Vietnam
Henan Tsingpu Ferro Alloy Co., Ltd.	Raw material manufacturing and sale		49.00	China
United Spiral Pipe, LLC	Material manufacturing and sale		35.00	USA
Zhongyue POSCO(Qinhuangdau) Tinplate Industrial Co., Ltd.	Plating sheet manufacturing		34.00	China
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.	Steel processing and sale		25.00	China
POSS-SLPC s.r.o.	Steel processing and sale		30.00	Slovakia
Eureka Moly LLC.	Raw material manufacturing and sale		20.00	USA
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.	Steel processing and sale		30.00	China
POSCO SeAH Steel Wire (Nantong) Co., Ltd.	Steel processing and sale		25.00	China
POS-GSFC LLC	Steel processing and sale		44.40	UAE
Yingkou Posrec Refractories Co.,Ltd.	Refractory manufacturing		25.00	China
Zhangjiagang Pohang Refractories Co.,Ltd.	Refractory manufacturing		50.00	China
DAEWOO ENGINEERING(THAILAND) CO., Ltd.	Development and contract		48.90	Thailand
Sebang Steel	Scrap sale		49.00	Japan
NCR LLC	Coal sale		20.00	Canada
AMCI (WA) Pty Ltd.	Iron ore sale & mine development		49.00	Austrailia
POSCO YongXin Rare Earth Metal Co., Ltd.	Energy & Resource development		31.00	China
Shanghai Lansheng Daewoo Coporation	Trading		49.00	China
Shanghai Waigaogiao Free Trade Zone Lansheng Daewoo Int’l Trading Co., Ltd.	Trading		49.00	China
Hanjung Power Pty Ltd.	Electric power manufacturing and sale		49.00	Papua New Guinea
Myanmar Korea Timber International Ltd.	Plating sheet manufacturing		45.00	Myanmar
General Medicines Company Ltd.	Medicine manufacturing and sale		33.00	Sudan
KOREA LNG Ltd.	Gas production and sale		20.00	England
DMSA, AMSA (*3)	Energy & Resource development		4.00	Madagascar
KG Power(M) SDN. BHD	Energy & Resource development		20.00	Malaysia
Daewoo (THAILAND) Co., Ltd.	Trading		50.00	Thailand
N.I.CO., LTD.	Trading		50.00	North Korea
South-East Asia Gas Pipeline Company Ltd.	Pipeline construction		25.04	Myanmar
GLOBAL KOMSCO Daewoo LLC	Mintage		35.00	Uzbekistan
POSUK TITANIUM B.V	Steel manufacturing		50.00	Netherland
POSCO-POGEN AMP (*1)	Steel manufacturing		26.00	India
POSCO-NPS Niobium LLC (*1)	Mine development		50.00	USA
XG Sciences, Inc.(*1)	New material development 20.00			USA

(*1)	These investments are established or acquired in 2011.
(*2)	These investments are accounted for using equity method although the controlling company’s percentage of ownership is below 20%, because it has 40% of voting rights of the investee and therefore is able to exercise significant influence on the investee.
(*3)	DMSA, AMSA are accounted for using equity method although the controlling company’s percentage of ownership is below 20%, because it is able to exercise significant influence of the ventures on strategic financial and operating decisions through representation in Board of Directors.

16

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) Consolidated subsidiaries acquired during the six-month period June 30, 2011 are as follows:

(in millions of Won)
Company	Date of Acquisition	Ownership (%)		Reason
PSC energy global Co., Ltd.	2011.02.16		100.00	new investment
Suncheon Ecotrans Co., Ltd	2011.02.28		100.00	new investment
POSCO M-TECH Co., Ltd	2011.05.01		48.85	delegation of voting rights
9Digit Co., Ltd	2011.05.01		86.49	delegation of voting rights
Shinan Energy Co., Ltd	2011.04.30		100.00	new investment
Recometal Co., Ltd	2011.06.30		88.60	acquisition
EPC EQUITIES LLP	2011.02.18		70.00	acquisition
SANTOS CMI Construction Trading LLP			99.90	acquisition
SANTOS CMI INC. USA			100.00	acquisition
SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA			99.98	acquisition
SANTOS CMI PERU S.A.			99.99	acquisition
SANTOS CMI COSTA RICA S.A.			100.00	acquisition
SANTOS CMI CONSTRUCCIONES S.A. (URUGUAY)			100.00	acquisition
GENTECH International INC.			90.00	acquisition
EPC INVESTMENTS C.V.			99.99	acquisition
INGENIERiA Y CONSTRUCCION HOLAND CO S.A.			99.90	acquisition
ASESORiA Y SERVICIOS EPC S.A CHILE			99.00	acquisition
SANTOS CMI S.A.	2011.02.18		70.00	acquisition
SANTOS CMI CONSTRUCCIONES DE CHILE S.A.			99.00	acquisition
S&K -SANTOS CMI S.A. DE C.V. (MEXICO)			99.00	acquisition
DV - SANTOS CMI S.A. DE C.V.			50.00	acquisition
COMPANIA DE AUTOMATIZACION & CONTROL, GENESYS S.A.			90.00	acquisition
VAUTIDAMERICAS S.A.			51.00	acquisition
SANTOS CMI Constructions Argentina S.A.			95.00	acquisition
HONG KONG POSCO E&C (CHINA) Investment Co., Ltd.	2011.03.01		100.00	new investment
POSCO ASSAN TST STEEL Industry	2011.03.31		70.00	new investment
POSCO E&C Brazil Ltd.	2011.05.31		100.00	new investment
POSCO Electrical Steel Inida Private Limited	2011.06.30		100.00	new investment
Daewoo International Cameroon PLC	2011.06.30		100.00	new investment

(e) Cash outflows caused by acquisition

(in millions of Won)	Amounts
Transfer prices	W	87,694
Less: cash and cash equivalent		(2,302	)
Total	W	85,392

17

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2. Statement of Compliance

Statement of compliance

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

K-IFRS is effective as of the fiscal year beginning on January 1, 2011. The Company has also presented the comparative information in the separate interim financial statements in accordance with K-IFRS.

These consolidated interim financial statements have been prepared in accordance with K-IFRS 1034 “Interim Financial Reporting” as part of the period covered by its first K-IFRS financial statements.

An explanation of how the transition from previous GAAP (“Korean GAAP” (“K-GAAP”)) to K-IFRS has affected the Company’s reported financial position, financial performance and cash flows is provided in note 37.

Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis except for the following items, as described in the accounting policy below.

(a)	Derivatives measured at fair value
(b)	Financial instruments at fair value through profit or loss
(c)	Available-for-sale financial assets measured at fair value
(d)	The liability for stock appreciation rights measured at fair value
(e)	Employee benefits measured at the present value of the defined obligation less the fair value of the plan assets

Functional and presentation currency

These consolidated interim financial statements are presented in Korean won, which is POSCO’s functional currency and the currency of the primary economic environment in which POSCO operates.

18

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Use of estimates and judgements

The preparation of the consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. This includes valuation of property, plant and equipment, trade accounts and notes receivables, inventories, deferred tax assets and derivative financial instruments. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

• Note 17 — Employee Benefits

3. Summary of Significant Accounting Policies

The Company’s transition date to K-IFRS in accordance with K-IFRS 1101 “First-time Adoption of Korean International Financial Reporting Standards” is January 1, 2010, and reconciliations and descriptions of the effect of the transition are provided in note 37.

Consolidation policy

(a) Subsidiaries

A subsidiary is an entity, which is controlled by the Company. Control is the power to govern the financial and operating policies of an entity to obtain benefits from its activities. When assessing whether an entity has the power to govern another entity, the existence and effect of potential voting rights which can be exercised or convertible, are also considered. The financial statements of subsidiaries are included in the consolidated interim financial statement from date on which the acquirer obtains control of the acquiree until the date when the Company ceases to control the subsidiary.

Wherever differences in accounting policies exist between the company and its controlled subsidiaries for similar transactions under common circumstances, the subsidiary’s accounting policy is modified to conform with the standards of the Company.

(b) Associates

An associate is an entity for which the Company has significant influence through voting rights over financial and operating policies of the Company. In general, significant influence is presumed to exist when the Company holds voting rights between 20% and 50% of an investee.

19

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Associates initially are recognized at acquisition cost and are accounted for using the equity method subsequent to the acquisition. The Company’s carrying amount is increased or decreased to recognize its share of the income and expenses and equity movements, after adjustments to align the investees accounting policies with those of the Company. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no objective evidence of impairment.

	When the carrying amount of an equity method investment has been reduced to zero, recognition of further losses is discontinued to the extent that the Company has an obligation or has made payments on behalf of the investee.
(c)	Elimination of intercompany transactions.

Balances on transactions, and any unrealized gain or loss arising from inter-company transactions are eliminated in preparing the consolidated interim financial statements. When an unrealized loss is related to an asset impairment, the impairment loss is recognized in the consolidated statements of comprehensive income.

Foreign currency transactions and translation

Foreign currency transactions are initially recorded using the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on non-monetary items are recognized in other comprehensive income, exchange components of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on non-monetary items are recognized in profit or loss, exchange components of those gains or losses are recognized in profit or loss.

20

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Cash and cash equivalents

Cash and cash equivalents include cash on hand, checking accounts, time deposits and others with original maturities of three months or less, except for equity instruments.

Non-derivative financial assets

Non-derivative financial assets include financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. The Company recognizes loans and receivables on the date that they are originated.

All other non-derivative financial assets are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Except for financial assets at fair value through profit and loss, when a non-derivative financial asset is recognized initially, the Company measures it at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the non-derivative financial asset.

(a) Financial assets at fair value through profit or loss

A non-derivative financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

(b) Held-to-maturity financial assets

If the Company has the positive intent and ability to hold debt securities to maturity, then such non-derivative financial assets are classified as held-to-maturity. Subsequent to initial recognition, the held-to-maturity financial assets are measured at amortized cost by using the effective interest method, less any impairment losses.

(c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, the loans and receivables are measured at amortized cost by using the effective interest rate method, less any impairment losses.

21

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are not classified in any of the previous categories. Subsequent to initial recognition, the available-for-sale financial assets are measured at fair value. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, are measured at cost.

(e) De-recognition of non-derivative financial assets

The Company derecognizes non-derivative financial assets when the contractual rights to the cash flows from the financial asset expire, or the Company transfers the rights to receive the contractual cash flow from the financial asset as well as substantially all the risks and rewards of ownership of the financial asset. Any interest in a transferred financial asset that is created or retained by the Company is recognized as a separate asset or liability.

(f) Offsetting a financial asset and a financial liability

A financial asset and a financial liability are offset and the net amount presented in the statement of financial position only when the Company currently has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Inventories

Inventories are measured at the lower of cost and net realizable value. Costs are determined by using the moving-weighted average method. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The allocation of fixed production overheads to the costs of finished goods or work in progress are based on the normal capacity of the production facilities

When inventories are sold, the carrying amount of those inventories are recognized as cost of goods sold in the period in which the related revenue is recognized and the amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, are recognized as a reduction in the amount of inventories recognized as a cost of goods sold in the period in which the reversal occurs.

22

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Investment property

Properties held to earn rentals or for capital appreciation are classified as investment properties. Investment property is measured initially at cost, including transaction costs incurred to acquire the asset. Subsequently, investment property is measured at cost less accumulated depreciation and accumulated impairment losses.

Property, plant and equipment

Property, plant and equipment are generally measured at cost. The cost includes expenditures that are directly attributable to bringing the asset to a working condition for its intended use and the estimated costs of dismantling and removing the asset, if applicable, and restoring the site on which it is located. However, upon the Company’s transition to K-IFRS, the deemed cost of certain machinery and equipment was measured at fair value.

The cost of replacing a part of an item is recognized in the carrying amount of the item of property, plant and equipment, if the following recognition criteria are met.

(a)	it is probable that future economic benefits associated with the item will flow to the Company; and
(b)	the cost can be measured reliably.

The carrying amount of the replaced part is derecognized at the time the replacement part is recognized. The costs of the day-to-day servicing of the item are recognized in profit or loss as incurred.

Depreciation is based on the cost of an asset less its residual value. Land is not depreciated. Depreciation of property, plant and equipment is recognized in profit or loss on a straight-line basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset, over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognized.

23

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

The estimated useful lives for the current and comparative periods are as follows:

Buildings	10-60 years
Structures	5-50 years
Machinery and equipment	1-25 years
Vehicles	3-10 years
Tools	4-10 years
Furniture and fixtures	3-10 years
Lease assets	3-18 years

The residual value and the useful lives are reviewed at least at the end of each reporting period and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.

In order to apply the useful life which corresponds to the available periods of the machinery and equipment’s expected utility, from January 1, 2011 the Company changed the useful life of certain machinery and equipment in its steel operating segment from 8 years to 15 years. During the six-month period ended June 30, 2011, the depreciation costs decreased by \ 631,617 million as a result of this change in the useful life.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognized as an expense. A qualifying asset takes a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured, or otherwise produced, over a short period of time, are not qualifying assets. Also, assets that are ready for their intended use or sale when acquired are not qualifying assets.

To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset.

The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Company capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.

24

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Intangible assets

Intangible assets are initially measured at cost and the carrying amount is the amount at which an asset is recognized in the statement of financial position after deducting any accumulated amortization and accumulated impairment losses thereon.

Amortization of intangible assets is calculated on a straight-line basis over the estimated useful lives of intangible assets, as described below, with nil residual value from the date that they are available for use.

Intellectual property rights	5-10 years
Development expenses	3-10 years
Port facilities usage rights	1-75 years
Other intangible assets	2-25 years

The estimated useful life and amortization method of intangible assets with a finite useful life are reviewed at each financial year-end and adjusted, if appropriate. An intangible asset with an indefinite useful life is reviewed each period to determine whether events and circumstances continue to support its indefinite useful life.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(a) Goodwill

Goodwill arising on the acquisition of a business is included in intangible assets

Pursuant to K-IFRS 1101, the Company restated only those business combinations occurring on or subsequent to January 1, 2010. With respect to acquisitions closed prior to January 1, 2010, goodwill represents the amount recognized under previous GAAP. Goodwill from the business combinations subsequent to January 1, 2010 is recognized as the Company’s cost of the combination over the Company’s interest in the net fair value of the acquiree’s identifiable assets acquired and liabilities assumed. The excess of the Company’s interest in the net fair value of the acquiree’s identifiable assets acquired and liabilities assumed over the cost of the combination is recognized immediately in profit or loss. Goodwill is not amortized, but is recorded at cost less accumulated impairment losses, if any.

25

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditure is recognized in profit or loss as incurred.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

Impairment for financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on reliably estimated future cash flows of the asset.

Objective evidence that financial assets are impaired can include default or delinquency by an issuer, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. For an investment in an equity security, (a) default or delinquency by an issuer or (b) a significant or prolonged decline in an equity security’s fair value below its cost represent as objective evidence of impairment.

The Company considers evidence of impairment for receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. Receivables and held-to-maturity investment securities which are not individually significant are collectively assessed from impairment by grouping together receivables and held-to-maturity investment securities with similar risk characteristics.

The amount of the impairment loss on financial assets carried at amortized cost is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognized in profit or loss.

26

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. The amount of the reversal is recognized in profit or loss.

The amount of the impairment loss on financial assets carried at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available for sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

Impairments for non-financial assets

The Company assesses at each reporting date whether there is any indication that the Company’s non-financial assets are impaired. If any such indication exists, the Company shall estimate the recoverable amount of the assets, except for assets arising from construction contracts, assets arising from employee benefits, biological assets, inventories, deferred tax assets, investment property (if it applies the fair value model) or assets classified as held for sale (or included in a disposal company that is classified as held for sale). For intangible assets acquired during the business combinations with an indefinite useful life or unusable intangible assets, the impairment test is needed for every year by comparing recoverable amount and the book value regardless of the indication of the impairment.

Recoverable amount is determined for an individual asset or the cash-generating unit to which the asset belongs unless recoverable amount is not calculated for and individual asset. Recoverable amount is defines as the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value-in-use. In assessing value-in-use, the estimated future cash flows expected to be derived from an asset or cash-generating unit are discounted to their present value using a pre-tax discount rate that reflects current market assessments at the time value of money and the risks specific to the asset or cash-generating unit.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognized in profit or loss as an impairment loss.

27

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Goodwill acquired in a business combination is allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that is expected to benefit from the synergies of the combination. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro rate basis. An impairment loss recognized for goodwill is not reversed in a subsequent period. The Company assesses at each reporting date whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized, the Company estimates the recoverable amount of that asset. The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

Non-current assets as held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. For this to be the case, the assets or disposal groups must be available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such assets or disposal groups and its sale must be highly probable. Immediately before classification as held for sale, the assets or components of a disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses are recognized in profit or loss and gains are not recognized in excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment, once classified as held for sale, are not amortized or depreciated.

Non-derivative financial liabilities

Financial liabilities are classified into financial liabilities at fair value through profit or loss and other financial liabilities in accordance with the substance of the contract and definition of financial liabilities, and are recognized on the statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities at fair value through profit or loss are measured at fair value after initial recognition and the changes of fair value are recognized in profit or loss. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost by using the effective interest rate method.

The Company derecognizes a financial liability only when its contractual obligations are discharged, cancelled or expired.

28

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Convertible Bonds

The convertible bonds issued by the Company can be converted into equity security by the choice of bond holder. The number of shares to be issued can be changed accordingly to the fair value of the common shares. The convertible bonds which are the combined financial instruments of bonds and convertible rights are designated as fair value through profit or loss and measured at fair value of June 30, 2011.

Derivative financial instruments and hedges

Derivatives are recognized initially at fair value and are remeasured at fair value at the end of each reporting period. The valuation gain or loss from changes in fair value is recognized as follows.

(a) Embedded derivatives

Embedded derivatives, if any, are separated from the host contract and accounted for separately only if the following criteria have been met:

1) the economic characteristics and the risks of the host contract and the embedded derivative are not clearly and closely related;

2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and

3) the hybrid (combined) instrument is not measured at fair value through profit or loss.

Changes in the fair value of embedded derivatives separated from the host contract are recognized immediately in gain or loss.

However, convertible rights of convertible bonds are not separated from the host contract and the combined financial instruments of bonds and convertible rights are designated as fair value through profit and loss.

(b) Other derivatives

Changes in the fair value of a derivative that is not designated as a hedging instrument are recognized immediately in profit or loss.

29

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Leases

A lease is classified as a finance lease if it transfers substantially all of the risks and rewards incidental to ownership. All other leases are classified as operating leases.

(a) Finance leases

At the commencement of the lease term, the Company recognizes as finance assets and finance liabilities in its statements of financial position, the lesser of the fair value of the leased property and the present value of the minimum lease payments. Any initial direct costs are added to the amount recognized as an asset.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.

(b) Operating leases

Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term.

(c) Determining whether an arrangement contains a lease

At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An asset conveys the right to use the asset if the arrangement conveys to the Company the right to control the use of the underlying asset.

If an arrangement includes a lease, the Company separates the required payments into those for the lease and those for other elements on the basis of their relative fair values. If it is impracticable to separate the payments reliably, an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an inputed finance change on the liability is recognized using the company’s incremental borrowing rate.

30

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Unbilled amount and progress billings

Construction contracts in progress represent the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress billings and recognized losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Company’s contract activities based on normal operating capacity.

Construction contracts in progress is presented as part of trade accounts and notes receivable in the statement of financial position for all contracts in which costs incurred plus recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then the difference is presented as deferred income in the statement of financial position.

Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with a grant’s conditions, and that the grant will be received. Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted from the carrying amount of the asset and recognized in profit or loss on a systematic and rational basis over the life of a depreciable asset.

Other government grants that compensate the Company for expenses incurred are recognized in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognized. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss of the period in which it becomes receivable. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognized in profit or loss of the period in which it becomes receivable.

Employee Benefits

(a) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as profit or loss. If the Company has a legal or constructive the obligation and obligation can be reliably measured, the Company recognizes the amount of expected payment for profit-sharing and bonuses payable as liabilities.

31

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Other long-term employee benefits

Other long-term employee benefits are employee benefits that are not due to be settled within twelve months after the end of the period in which the employees render the related service. The Company recognizes the amount that is the net total of the present value of the future benefits that employees have earned in return for their service in the current and prior periods defined benefit obligation at the balance and minus the fair value of plan assets out of which the obligations are to be settled directly as liability. The liability is determined by discounting estimated future cash flows using the market yields on high quality corporate bonds that have similar maturity to the maturity of related employment benefit. The changes in actuarial assumptions and experience adjustments are recognized in the statement of financial position and profit or loss.

(c) Post-employment benefit: Defined contribution plans

With regard to the defined contribution plan, when an employee has rendered service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plan in exchange for that service as an accrued expense, after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Company recognizes that excess as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

(d) Post-employment benefit: Defined benefit plans

The Company recognizes the pension liability related to defined benefit plans at the end of each reporting period, measured it, at the present value of the defined benefit obligation less the fair value of the plan assets.

The Company uses the projected unit credit method in order to determine the defined benefit obligation. The liability is determined by discounting estimated future cash flows using the market yields on high quality corporate bonds that have similar maturity to the maturity of the related employment benefits less(plus) unrecognized past service cost and unrecognized actuarial losses(gain). The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. The changes in actuarial assumptions and experience adjustments are recognized immediately in other comprehensive income.

When the statement of financial position amount is an asset, the amount is limited to the lesser of the present value of available contribution reductions, or refunds plus unrecognized actuarial losses and unrecognized past service costs.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

32

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Stock Appreciation Rights

The Company granted share options to executives as part of the reward for their services and is accounting for the options as cash-settled share-based payment transactions. For cash-settled share-based payment transactions, the Company measures the goods or services acquired and the liability incurred at the fair value of the liability and recognizes the employment benefits and the liability during the vesting period. Until the liability is settled, the Company remeasures the fair value of the liability at each reporting date and at the date of settlement, with any changes in fair value recognized in profit or loss for the period as well.

Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

Share capital

Common stock is classified as equity and the incremental costs arising directly attributable to the issuance of common stock less its tax effects are deducted from equity.

If POSCO reacquires its own equity instruments, the amount of those instruments (“treasury shares”) are presented as a contra equity account. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of its own equity instruments. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase to equity, and the resulting surplus or deficit on the transaction is recorded in capital surplus.

33

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Revenue

Revenue from the sale of goods, services provided, and the use of assets is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

(a) Sale of goods

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.

(b) Services rendered

Service sales are recognized based on the percentage of completion method at the end of reporting period. The percentage of completion is assessed by extent of service performed based on surveys.

(c) Construction contracts

When the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed in the contract plus any variation in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. The stage of completion of a contract is determined based on the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

When the outcome of a construction contract cannot be estimated reliably, the revenue is recognized only to the extent of contract costs incurred that it is probable will be recoverable. An expected loss on the construction contract shall be recognized as an expense immediately.

Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established.

Finance costs comprise interest expense on borrowings and changes in the fair value of financial assets at fair value through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest rate method.

34

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Income tax

Income tax expense comprises current tax and deferred tax, and is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income.

(a) Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year. Since taxable income excludes income which will be added or deductible in other taxation periods, non-taxable items or non-deductible items from net income on comprehensive income statements, the taxable income and net income on comprehensive income statements differ. Tax payable related to current tax is calculated by using tax rates enacted or substantively enacted.

(b) Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized.

However, deferred tax is not recognized for the following temporary differences:

1) the initial recognition of goodwill; or

2) the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss

All deferred tax liabilities are recognized for taxable differences relating to investments in subsidiaries and jointly controlled entities except the case of that the Company can control the reverse timing of the temporary differences and it is probable that they will not reverse in the foreseeable future.

In addition, deferred tax assets from deductible temporary differences are recognized only when it is probable that they will not reverse in the foreseeable future and it is probable that taxable profits will be available against which the deductible temporary differences can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and the Company reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

35

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

The Company offsets a deferred tax asset against a deferred tax liability of the same taxable entity only if they relate to income taxes levied by the same taxation authority and the entity has a legally enforceable right to offset current tax assets against current tax liabilities.

Earnings per share

The Company calculates basic earnings per share (“EPS”) data for its ordinary shares and present to statement of comprehensive income. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Operating segments

The Company has classified operating segments whose operating results are regularly reviewed by the Company’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance. Management has determined that the CODM of the Company is the CEO. As discussed in Note 36, the Company has four operating segments and an operating segment is a strategic component of the Company. Each Strategic operating segment provides different goods and services and is required for different technology and marketing strategies. So, strategic operating segments are operated separately.

36

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

4. Financial risk management

The Company has exposure to credit risk, liquidity risk and market risk from its use of financial instruments. This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing these risks and the Company’s management of financial risks, including quantitative disclosures.

(a) Risk management policy

The board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The purpose of risk management policies is to identify the potential risk factors that may affect the Company’s financial performance, and minimize, eliminate them to the extent that is acceptable. The risk management framework and policies are regularly reviewed to reflect market situations and changes in the Company’s activities.

The Company aims to establish an effective control environment in which every employee understands his or her responsibility by training, management standard and procedures.

(b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of a nation or an industry in which a customer operates its business does not have a significant influence on credit risk. The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The allowance for impairment includes impairment losses of trade and other receivables that are individually significant, and unidentified impairment losses of the asset in a group of financial assets with similar credit risk characteristics. The allowance for impairment of a group of financial assets is determined based on the past data of financial asset with similar credit risk characteristics.

(c) Liquidity risk management

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it always maintains a diversified maturity profile in its loan portfolio.

The Company’s cash flow from business, borrowing or financing is sufficient to cash requirement for the investment. The Company believes that it is capable of raising funds by borrowing or financing if the Company is not be able to have cash flow from business. The Company has committed borrowing facilities with various banks.

37

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) Market risk management

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The goal of market prices management is optimization of profit and controlling the exposure to market risk within acceptable limits.

1)	Currency risk
	Each segment is influenced by a risk factor of changes in foreign currency exchange rates for the different directions due to the difference in structure of each industry regarding the cash inflows and cash outflows in foreign currency. Steel segment has generally a lack of foreign currency cash outflows, while engineering and construction industry have generally excessive foreign currency inflows due to the nature of a business. Therefore, the result of the business is affected by the changes of foreign exchange rate for the different directions. And trading segment has structure that the cash inflows and outflows of foreign currencies are to be offset; however, the trading segment are exposed to a risk of changes in foreign currency exchange rates when there are differences in currencies on receiving and paying the foreign currency amount and time difference.
	The Company’s policy in respect of foreign currency risks is a natural hedge which foreign currency income should be firstly offset with foreign currency expenditures. And the remaining net exposures after the natural hedge have been hedged using derivative contracts such as forward exchange contracts. In addition, the Company’s derivative transactions are limited to hedge of actual foreign currency transactions and speculative transaction is not permitted. Based on this policy, the group entities have performed currency risk management specific to various characteristics of different segments. The entities in steel industry, which have a lack of foreign currency cash flows, have foreign currency borrowings from banks and hedged foreign currency risks of the foreign currency borrowings by using foreign currency swaps. The entities in engineering and construction industry, which have excessive foreign currency cash flows, have hedged foreign currency risks by using forward exchange contracts. And entities in trading industry have hedged foreign currency risks by using forward exchange contracts when the foreign currencies received and paid are different.
2)	Interest rate risk
	The Company mostly borrows at fixed interest rates. The Company’s management has monitored regularly for hedging interest rate risk of variable rate debt.

38

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(e) Management of capital risk

The fundamental goal of capital management is the maximization of shareholders’ value by means of the stable dividend policy and the retirement of treasury shares. The capital structure of the Company consists of equity and net debt, deducting cash and cash equivalents and current financial instruments from borrowings. The Company applied the same financial risk management strategy that was applied in the previous period. The equity attributable to owners as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows :

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Total borrowings		23,813,149			21,140,241			12,199,485
Less: Cash and cash equivalents		4,285,917			3,521,045			2,273,059
Net borrowings		19,527,232			17,619,196			9,926,426
Total shareholders’ equity		39,993,758			38,537,167			33,333,681
Net borrowings-to-equity ratio		48.83	%		45.72	%		29.78	%

5. Cash and Cash Equivalents

Cash and cash equivalents as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Cash	W	6,094		4,931		339,240
Demand deposit and checking accounts		1,586,612		1,426,715		735,759
Financial cash equivalents		2,511,650		1,816,853		1,166,609
Securities cash equivalents		181,561		272,546		31,451
	W	4,285,917		3,521,045		2,273,059

Cash and cash equivalents of W 266,866 million are restricted for the expansion of facility only.

39

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

6. Trade Accounts and Notes Receivable

(a) Trade accounts and notes receivable as of June 30, 2011 and December 31, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Current
Trade accounts and notes receivable	W	9,866,434			8,415,973			4,740,600
Capital lease receivables		116,703			57,374			59,685
Due from customers for contract work		1,226,441			960,738			685,190
Less: Allowance for doubtful accounts		(262,769	)		(228,967	)		(199,345	)
		10,946,809			9,205,118			5,286,130
Non-current
Trade accounts and notes receivable		52,805			28,792			24,391
Capital lease receivables		173,388			258,664			504,634
Less: Allowance for doubtful accounts		(17,831	)		(13,834	)		(6,250	)
		208,362			273,622			522,775
	W	11,155,171			9,478,740			5,808,905

Borrowings includes the trade accounts and notes receivable sold to financial institutions but derecognition conditions were not met, amounted to W 379,512 millions, W 358,676 millions and W 30,600 million as of June 30, 2011, December 31, 2010 and January 1, 2010, respectively.

(b) Trade receivables include capital lease receivables and capital lease receivables are as follows:

(in millions of Won)
Customer	Contents	June 30, 2011		December 31, 2010		January 1, 2010
Korea Electric Power Corporation	Combined cycle 1~4	W	226,098		253,055		307,191
Tenant of EXPO Apartment	Lease contract of EXPO Apartment		63,993		62,983		257,128
		W	290,091		316,038		564,319

40

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Present value of gross lease investment and minimum lease payments as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Less than 1 year	W	145,909			82,927			89,244
1 year - 5 years		192,981			283,566			532,044
Greater than 5 year		38,027			51,535			83,812
Unrealized interest income		(86,826	)		(101,990	)		(140,781	)
Present value of minimum lease payment	W	290,091			316,038			564,319

7. Other Financial Assets

(a) Other short-term financial assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Financial assets at fair value through profit or loss
Financial assets held for trading	W	41,322		182,208		505,811
Derivatives assets held for trading		99,049		133,731		26,641
Available-for-sale financial assets
Short-term available-for-sale securities (bonds)		34,076		42,831		35,643
Held-to-maturity investments
Current portion of held-to-maturity securities (bonds)		1,785		3,657		20,717
Loans and other receivables
Short-term financial instruments		1,715,297		2,803,492		3,121,352
Special purpose deposits		16,066		42,966		2,709,809
Short-term loans		558,751		258,260		196,925
Other accounts receivable		959,679		704,246		439,521
Accrued income		45,815		47,592		57,987
Deposits		36,305		21,001		21,343
Other checking accounts		178,738		143,318		75,274
	W	3,686,883		4,383,302		7,211,023

41

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Other long-term financial assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Financial assets at fair value through profit or loss
Derivatives asstes held for trading	W	8,410		6,300		60,422
Available-for-sale financial assets
Long-term available-for-sale securities (bonds)		5,487,145		6,022,945		4,786,401
Long-term available-for-sale securities		10,442		7,827		120,812
Long-term available-for-sale securities (investment in capital)		46,132		53,322		91,381
Held-to-maturity investments
Held-to-maturity securities (bonds)		35,920		36,156		91,844
Loan and other receivables
Long-term financial instruments		27,150		4,154		140
Cash deposits		95		89		340
Long-term loans		193,324		143,506		102,264
Long-term other accounts receivable		72,344		50,258		3,686
Accrued income		3,916		3,100		2,245
Deposits		137,151		89,381		49,125
	W	6,022,029		6,417,038		5,308,660

8. Inventories

Inventories as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Finished goods	W	1,359,900			1,093,446			616,803
Merchandise		1,036,493			854,624			171,586
Semi-finished goods		1,997,529			1,695,522			1,034,206
By-products		2,583,726			2,516,167			1,118,235
Raw materials		682,851			670,218			556,545
Fuel and materials		682,968			478,371			402,361
Materials-in-transit		3,123,204			2,252,136			1,018,461
Others		78,766			86,617			45,263
		11,545,437			9,647,101			4,963,460
Allowance for inventories valuation		(91,683	)		(87,895	)		(45,047	)
	W	11,453,754			9,559,206			4,918,413

42

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

9. Investment in Associates

(a) Details of investment in associates as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)
Company	June 30, 2011		December 31, 2010		January 1, 2010
[Domestic]
KYOBO LIFE INSURANCE Co., Ltd.	W	1,334,115		1,314,808		—
Sungjin Geotec Co., Ltd. (*)		223,703		227,245		—
SNNC Co., Ltd.		125,031		145,466		94,520
Busan-Gimhae Light Rail Transit Co., Ltd.		41,833		42,151		42,715
Cheongna IBT Co., Ltd.		37,346		39,607		2,067
Blue ocean PEF		33,300		—		—
METAPOLIS Co., Ltd.		24,085		32,666		38,490
POSMATE Co., Ltd.		21,508		20,989		13,059
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		21,323		21,317		13,527
Others (31 companies)		82,262		156,712		91,442
		1,944,506		2,000,961		295,820
[Foreign]
POSCO-NPS Niobium LLC		350,430		—		—
AMCI (WA) Pty Ltd.		182,558		213,446		—
Nickel Mining Company SAS		169,171		180,671		190,149
KOBRASCO		125,447		141,939		98,943
KOREA LNG Ltd.		123,786		133,793		—
Eureka Moly LLC		103,348		109,177		113,105
DMSA, AMSA		103,136		100,536		—
BX STEEL POSCO Cold RolledSheet Co.,		87,732		89,313		63,667
CAML Resources Pty. Ltd.		68,103		67,401		41,496
South-East Asia Gas Pipeline Company Ltd.		62,517		56,636		—
POSCHROME		27,052		29,201		11,441
USS-POSCO Industries		24,850		40,000		45,961
NCR LLC		23,587		23,931		—
Others (31 companies)		121,765		119,420		89,867
		1,573,482		1,305,464		654,629
	W	3,517,988		3,306,425		950,449

(b) The fair value of investments of equity-accounted investees for which there are published price quotations as of June 30, 2011 are as follows:

(in millions of Won)
Company	Fair value
Sungjin Geotec Co., Ltd.	W	245,008

43

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Summarized financial information of associates as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

1) June 30, 2011

(in millions of Won)
Company	Assets		Liabilities		Equity		Sales		Net income
[Domestic]
KYOBO LIFE INSURANCE Co., Ltd.	W	58,915,128		54,127,623		4,787,505		3,051,333		245,374
Sungjin Geotec Co., Ltd.		697,876		529,493		168,383		355,639		1,987
SNNC Co., Ltd.		551,598		257,807		293,791		191,142		34,125
Busan-Gimhae Light Rail Transit Co., Ltd.		749,195		581,609		167,586		71		(1,019	)
Cheongna IBT Co., Ltd.		444,282		264,501		179,781		158		(10,675	)
Blue ocean PEF		121,000		—		121,000		—		—
METAPOLIS Co., Ltd.		547,265		480,340		66,925		8,512		(14,402	)
POSMATE Co., Ltd.		86,941		14,889		72,052		53,691		3,406
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		294,925		249,724		45,201		32,796		898
[Foreign]
POSCO-NPS Niobium LLC		700,861		—		700,861		16		(12	)
Nickel Mining Company SAS		545,066		105,648		439,418		60,966		(13,599	)
KOBRASCO		348,658		97,764		250,894		68,266		40,146
KOREA LNG Ltd.		16,554		3,918		12,636		45,511		44,430
DMSA, AMSA		5,016,468		3,720,258		1,296,210		—		(1,882	)
BX STEEL POSCO Cold RolledSheet Co.,		1,002,442		680,274		322,168		674,933		5,483
CAML Resources Pty. Ltd.		219,486		67,428		152,058		103,449		7,600
South-East Asia Gas Pipeline Company Ltd.		464,798		17,007		447,791		—		—
POSCHROME		67,404		5,328		62,076		39,475		(1,659	)
USS-POSCO Industries		524,749		453,052		71,697		557,150		(7,185	)

2) June 30, 2010

(in millions of Won)
Company	Assets		Liabilities		Equity		Sales		Net income
[Domestic]
KYOBO LIFE INSURANCE Co., Ltd.	W	57,563,928		52,926,182		4,637,746		3,443,403		232,968
Sungjin Geotec Co., Ltd.		600,667		460,621		140,046		401,551		(9,939	)
SNNC Co., Ltd.		648,884		305,839		343,045		533,291		149,377
Busan-Gimhae Light Rail Transit Co., Ltd.		677,502		508,896		168,606		105		(2,252	)
Cheongna IBT Co., Ltd.		457,438		266,020		191,418		666		(23,413	)
METAPOLIS Co., Ltd.		600,290		518,914		81,376		176,511		(14,542	)
POSMATE Co., Ltd.		94,030		23,770		70,260		130,418		27,707
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		254,216		212,279		41,937		80,772		20,586
[Foreign]
Nickel Mining Company SAS		528,637		95,166		433,471		186,149		27,233
KOBRASCO		348,954		65,076		283,878		136,860		87,957
KOREA LNG Ltd.		13,850		87		13,763		17,691		16,925
DMSA, AMSA		5,301,319		3,930,064		1,371,255		—		(987	)
BX STEEL POSCO Cold RolledSheet Co.,		1,003,494		675,931		327,563		1,421,734		97,645
CAML Resources Pty. Ltd.		210,319		65,298		145,021		265,256		46,969
South-East Asia Gas Pipeline Company Ltd.		227,499		17,966		209,533		—		—
POSCHROME		76,611		7,693		68,918		71,316		6,305
USS-POSCO Industries		459,290		369,082		90,208		1,020,538		(15,710	)

44

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3) January 1, 2010

(in millions of Won)
Company	Assets		Liabilities		Equity
[Domestic]
SNNC Co., Ltd.	W	505,417		285,761		219,656
Busan-Gimhae Light Rail Transit Co., Ltd.		485,887		315,029		170,858k
Cheongna IBT Co., Ltd.		328,046		294,946		33,100
METAPOLIS Co., Ltd.		460,073		364,156		95,917
POSMATE Co., Ltd.		59,804		17,372		42,432
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		144,992		123,640		21,352
[Foreign]
Nickel Mining Company SAS		551,969		102,228		449,741
KOBRASCO		273,311		75,424		197,887
BX STEEL POSCO Cold RolledSheet Co.,		1,018,978		791,925		227,053
CAML Resources Pty. Ltd.		137,046		52,313		84,733
POSCHROME		64,564		9,494		55,070
USS-POSCO Industries		443,184		338,318		104,866

10. Investment Property, Net

(a) Investment property as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Cost	W	736,088			701,005			629,357
Less: Accumulated depreciation and accumulated impairment loss		(224,911	)		(207,640	)		(71,150	)
Carrying value	W	511,177			493,365			558,207

(b) The changes of carrying value in investment property for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 are as follows:

1) For the six-month period ended June 30, 2011

(in millions of Won)	Beginning		Acquisition		Disposal			Depreciaiton (*1)			Others (*2)			Ending
Land	W	211,464		1,898		(15,090	)		—			22,539			220,811
Buildings		278,361		37,833		(29,106	)		(7,414	)		3,928			283,602
Structures		3,540		6,003		—			(118	)		(2,661	)		6,764
Total	W	493,365		45,734		(44,196	)		(7,532	)		23,806			511,177

(*1)	Impairment losses of investment property W 337 million are included.
(*2)	Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

45

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) For the year ended December 31, 2010

					Business
(in millions of Won)	Beginning		Acquisition		combination		Disposal			Depreciation (*1)			Others (*2)		Ending
Land	W	238,682		94,515		522		(65,759	)		(60,463	)		3,967		211,464
Buildings		317,495		66,245		1,391		(47,124	)		(84,655	)		25,009		278,361
Structures		2,030		—		132		—			(809	)		2,187		3,540
Total	W	558,207		160,760		2,045		(112,883	)		(145,927	)		31,163		493,365

(*1)	Impairment losses of investment property W 127,515 million are included.
(*2)	Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

11. Property, Plant and Equipment, Net

(a) Property, plant and equipment as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Cost	W	48,584,405			46,992,804			41,210,602
Less: Accumulated depreciation		(21,991,793	)		(21,523,736	)		(18,866,625	)
Less: Government grants		(38,014	)		(31,328	)		(1,230	)
Book value	W	26,554,598			25,437,740			22,342,747

(b) The changes in carrying value of property, plant and equipment as for the six-month period ended June 30, 2011 are as follows:

					Business
(in millions of Won)	Beginning		Acquisition (*1)		combination		Disposal			Depreciation			Others (*2)			Ending
Land	W	2,011,851		310,724		12,313		(45,215	)		—			(13,229	)		2,276,444
Buildings		3,551,163		599,786		9,322		(33,368	)		(133,847	)		(56,927	)		3,936,129
Structures		2,070,189		162,975		694		(9,668	)		(79,617	)		32,880			2,177,453
Machinery and equipment		13,776,646		2,164,210		6,128		(31,370	)		(762,372	)		13,985			15,167,227
Construction equipment		736		—		—		—			(142	)		—			594
Vehicles		64,173		6,644		859		(379	)		(8,322	)		(532	)		62,443
Tools		75,437		18,904		1,429		(509	)		(16,443	)		(7,214	)		71,604
Furniture and fixtures		124,677		15,491		1,328		(394	)		(323	)		(986	)		139,793
Capital Lease Assets		43,106		69		547		(111	)		(7,483	)		1,334			37,462
Construction-in-progress (*3)		3,719,762		2,261,350		3,495		—			—			(3,299,158	)		2,685,449
Total	W	25,437,740		5,540,153		36,115		(121,014	)		(1,008,549	)		(3,329,847	)		26,554,598

(*1)	Acquisition includes assets transferred from construction-in-progress.
(*2)	Includes reclassification for changing purpose of use, adjustment of foreign currency translation difference and others.
(*3)	Includes capitalized interest amounted to W 5,945 million.

46

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Pledged as collateral assets

(in millions of Won)	Collateral right holder	June 30, 2011		December 31, 2010		January 1, 2010
Land	Korean Development Bank and others	W	158,218		235,486		220,732
Buildings and structures	Korean Development Bank and others		125,753		165,251		105,465
Machinery and equipment	The Export-Import Bank of Korea and others		213,279		231,521		387,828
		W	497,250		632,258		714,025

12. Goodwill and other intangible assets

(a) Goodwill and other intangible assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Cost	W	4,983,667			4,697,429			928,520
Less: Accumulated amortization and		(120,554	)		(77,634	)		(173,895	)
Less: Government grants		(2,391	)		(626	)		(394	)
Book value	W	4,860,722			4,619,169			754,231

(b) The changes in carrying value of goodwill and other intangible assets for the six-month period ended June 30, 2011 are as follows:

			Increase						Decrease
(in millions of Won)	Beginning		Acquisition (*2)		Developement		Business Combination		Disposal			Amortization			Others (*3)			Ending
Goodwill	W	1,505,859		—		—		67,654		—			—			1,719			1,575,232
Intellectual property rights		60,984		168,888		—		—		(345	)		(568	)		(2,329	)		226,630
Premium in renting (*1)		159,761		6,959		—		—		(3,476	)		(4,087	)		(9,939	)		149,218
Development expense		49,275		7,703		182		730		—			(8,940	)		(35	)		48,915
Port facilities usage rights		108,161		—		—		—		—			(6,612	)		(258	)		101,291
Other intangible assets (*2)		2,735,129		58,438		—		2,823		(1,728	)		(30,393	)		(4,833	)		2,759,436
Total	W	4,619,169		241,988		182		71,207		(5,549	)		(50,600	)		(15,675	)		4,860,722

(*1)	Premium in rental includes memberships with indefinite useful lives.
(*2)	Include appraisal differences of W2,436,651 million related to customer relationships, contractions on resources exploration investment and exploration appraisal assets upon acquisition of Deawoo International in 2010.
(*3)	Includes translation differences and other adjustments.

(c) Research and development costs amounting to W 263,597 million and W 250,679 million were classified to expenses for the six-month periods ended June 30, 2011 and 2010, respectively.

47

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

13. Other Assets

(a) Other current assets as as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Other current assets
Advance payment	W	1,003,026		899,006		650,496
Prepaid expenses		254,442		72,180		35,408
Others		8,252		973		4,281
	W	1,265,720		972,159		690,185

(b) Other long-term assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Other non-current assets
Long-term advance payment	W	1,859		141,726		79,444
Long-term prepaid expenses		185,963		109,835		115,447
Others (*1)		404,859		408,253		55,584
	W	592,681		659,814		250,475

(*1) Includes guarantee deposits of \ 257,878 million as of June 30, 2011 and December 31, 2010 in relation to exploration of Australia Roy Hill iron ore mine.

14. Borrowings

(a) Short-term borrowings as as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

			June 30,			December 31,			January 1,
(in millions of Won)	Bank	Interest Rate(%)	2011			2010			2010
Short-term borrowings
Bank overdrafts	BOA, others	0.2~5.0	W	189,319			200,389			106,069
Short-term borrowings	Shinhan Bank, others	0.3~17.0		8,214,374			6,888,796			3,067,103
				8,403,693			7,089,185			3,173,172
Current portion of long-term liabilities
Current portion of long-term borrowings	Korean Development Bank, others	0.7~7.0		436,825			394,227			468,996
Current portion of foreign loan	NATIXIS	2		993			963			1,065
Current portion of debentures (*1)	KB Investment&Securites, others	3.0~8.0		2,386,990			2,548,418			315,085
Less: Current portion of discount on debentures issued				(19,212	)		(3,801	)		(219	)
Current portion of convertible debenture	Nomura Scurities Co., Ltd, others	—		—			447,308			—
				2,805,596			3,387,115			784,927
			W	11,209,289			10,476,300			3,958,099

48

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(*1) The Company issued exchangeable bonds with SK Telecom Co., Ltd. ADRs through Zeus (Cayman) Ltd., a SPV. The Company accounted for these exchangeable bonds as long-term debts under K-IFRS. The exchangeable bonds may be redeemed prior to maturity at 101.51% of their face value for three years from the issuance date at the option of the bondholders. As of June 30, 2011, the JPY 39,970,000,000 (75.7% of total face value) exchangeable bonds are classified as a current portion of long-term borrowings and were redeemed in August 2011. Also, the Company provides guarantees for Zeus(Cayman) Ltd.

(b) Long-term borrowings as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

			June 30,			December 31,			January 1,
(in millions of Won)	Bank	Interest Rate (%)	2011			2010			2010
Long-term borrowings	Korean Development Bank, others	0.7~13.0	W	4,126,588			3,431,521			1,380,902
Less: Present value discount				(86,530	)		(81,610	)		—
Foreign loan	NATIXIS	2		3,704			4,074			5,572
Bonds (*1)		1.5~8.75		8,602,665			7,357,310			6,915,294
Less: Discount on debentures issued				(48,650	)		(64,649	)		(70,449	)
Add: Premium on debentures redemption				2,587			11,138			10,067
Add: Premium on debentures issued				3,496			6,157			—
			W	12,603,860			10,663,941			8,241,386

(*1)

One of the subsidiaries, Daewoo International Corporation issued the convertible bonds with a face value of USD300 million at 100% of face value on July 6, 2009. The convertible bonds will be redeemed at 111.27% of the face value at the maturity date on July 6, 2014 (guaranteed yield to maturity: 5.25%), unless redeemed or converted early. The convertible bonds may be early redeemed on July 6, 2011 at the option of the bondholders at 104.16% of the face value and as a result, they were classified as current portion of long-term borrowings during the current year. Furthermore, the convertible bonds may be early redeemed at the option of the bondholders in certain events such as the change of the parties controlling Daewoo International Corporation. Also, at Daewoo International Corporation’s option, the convertible bonds may be early redeemed on or after July 6, 2012, provided that the market price of Daewoo International Corporation’s common stock is above 130% of the conversion price for at least 20 consecutive trading days. On the other hand, the convertible bonds can be converted into 1 common shares per the face value of W31,269 from July 6, 2010 to June 23, 2014.

The convertible bonds are classified at fair value through profit or loss and measured at fair value of June 30, 2011.

49

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

15. Other Financial Liabilities

(a) Other short-term financial liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Short-term financial liabilities
Accounts payable	W	633,937		874,629		650,767
Accrued expenses		769,041		415,657		352,060
Dividends payable		5,272		6,176		10,194
Derivatives liabilities		50,905		88,447		34,880
Finance lease liabilities		12,200		14,073		6,813
Financial guarantee liabilities		6,150		8,919		—
Withholding		136,810		112,976		—
	W	1,614,315		1,520,877		1,054,714

(b) Other long-term financial liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Long-term financial liabilities
Accounts payable	W	137,655		2,438		4,027
Accrued expenses		14,603		22,349		74,482
Derivatives liabilities		51,532		11,925		8,831
Finance lease liabilities		12,508		27,039		17,074
Financial guarantee liabilities		23,085		19,047		6,295
Long-term withholding		64,284		92,976		94,387
	W	303,667		175,774		205,096

16. Provisions

(a) Provisions as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

	June 30, 2011				December 31, 2010				January 1, 2010
(in millions of Won)	Current		Non-current		Current		Non-current		Current		Non-current
Provision for bonus payments	W	55,062		—		37,978		—		20,861		—
Provision for contingency (*1)		—		121,897		—		126,626		—		—
provision for product warranties		—		37		—		99		—		169
Others		2,037		2,710		26		2,160		3,850		2,800
	W	57,099		124,644		38,004		128,885		24,711		2,969

(*1) As of June 30, 2011 and December 31, 2010, provision of W74,236 million and W75,817 million, respectively, in relation to the potential claim in connection to the spin-off of the trading division of Daewoo Corporation in 2000 is included.

50

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Changes in provisions for the six-month period ended June 30, 2011 are as follows:

(in millions of Won)	Beginning		Increase		Decrease			Others (*1)			Ending
Provision for bonus payments	W	37,978		185,617		(169,026	)		493			55,062
Provision for contingency		126,626		930		—			(5,659	)		121,897
Provision for product warranties		99		10		(67	)		(5	)		37
Others		2,186		3,134		(3	)		(570	)		4,747
	W	166,889		189,691		(169,096	)		(5,741	)		181,743

(*1) Adjustments of foreign currency translation difference are included.

(c) Changes in provisions for the year ended December 31, 2010 are as follows:

(in millions of Won)	Beginning		Increase		Decrease			Others			Ending
Provision for bonus payments	W	20,861		373,335		(356,134	)		(84	)		37,978
Provision for contingency		—		—		—			126,626			126,626
provision for product warranties		169		—		(168	)		98			99
Others		6,650		6,486		(14,675	)		3,725			2,186
	W	27,680		379,821		(370,977	)		130,365			166,889

17. Employee Benefits

(a) Defined Contribution Plans

The Company partially operates a defined contribution plan for participating employees. Though the Company pays fixed contributions into a separate fund, employee benefits relating to employee service in the future is based on the contributions to the funds and the investment earnings on it. Plan assets are managed by a trustee as a separate fund from Company’s assets. The expense related to post-employment benefit plans under defined contribution plans during the six-month period ended June 30, 2011 is W 517 million, which is included in accrued expenses.

(b)

Defined Benefit Plan

The Company partially operates a defined benefit pension plan for employees and uses the projected unit credit method in the actuarial valuation of plan assets and the defined benefit obligation.

(c) The amounts recognized in relation to defined benefit obligations in the statements of financial position as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Present value of funded obligations	W	1,112,610			1,443,954			1,098,475
Fair value of plan assets		(786,624	)		(964,727	)		(790,509	)
Present value of non-funded obligations		24,573			23,899			7,452
Net defined benefit obligations	W	350,559			503,126			315,418

51

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) The changes in present value of defined benefit obligations for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010
Defined benefit obligation at the beginning of period	W	1,467,853			1,105,927
Current service costs		102,850			156,308
Interest costs		34,107			57,473
Actuarial gains and losses		(22,982	)		189,501
Business combination		1,443			52,641
Benefits paid		(466,524	)		(102,837	)
Others		20,436			8,840
Defined benefit obligation at the end of period	W	1,137,183			1,467,853

(e) The changes in fair value of plan assets for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010
Fair value of plan assets at the beginning of period	W	964,727			790,509
Expected return on plan assets		18,304			39,810
Actuarial gains and losses		(3,040	)		22,390
Contributions of participants		80,000			148,354
Business combination		—			38,805
Others		(214,650	)		3,473
Benefits paid		(58,717	)		(78,614	)
Fair value of plan assets at the end of period	W	786,624			964,727

(f) The fair value of plan assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Equity instruments	W	210,927		512,850		455,563
Debt instruments		126,655		289,907		288,282
Deposits		290,028		—		—
Others		159,014		161,970		46,664
	W	786,624		964,727		790,509

52

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(g) The amounts recognized in the statements of comprehensive income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Current service costs	W	102,598			76,664
Past service costs		252			—
Interest costs		34,107			29,516
Expected return on plan assets		(18,304	)		(15,454	)
	W	118,653			90,726

(h) The above expenses recognized in the statement of comprehensive income are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Cost of sales	W	87,811		72,963
Selling and administrative expenses		30,842		17,763
	W	118,653		90,726

(i) Actuarial gains and losses recognized in other comprehensive income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Beginning	W	(152,125	)		—
Current actuarial gains and losses		12,915			(36,739	)
Ending	W	(139,210	)		(36,739	)

(j) The principal actuarial assumptions as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(%)	June 30, 2011		December 31, 2010		January 1, 2010
Discount rate		3.91~5.66		3.22~5.66		3.22~5.66
Expected return on plan assets		2.00~5.77		3.38~6.19		3.38~6.19
Expected future increases in salaries		1.00~6.49		1.00~5.90		1.00~5.90

53

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

18. Other Liabilities

(a) Other current liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Due to customers for contract work	W	709,699		739,076		550,138
Advances received		1,028,984		484,155		320,825
Unearned revenue		19,754		26,338		8,497
Withholding accounts		114,932		105,079		194,856
Deferred revenue		413		378		225
Others		169,182		136,222		114,426
	W	2,042,964		1,491,248		1,188,967

(b) Other long-term liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Advances received	W	2,585		3,583		40
Unearned revenue		1,027		1,539		2,364
Others		60,968		75,264		25,987
	W	64,580		80,386		28,391

19. Financial Instruments

(a) Classification of financial instruments

1) Financial assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Financial assets at fair value through profit or loss
Financial assets held for trading	W	41,322		182,208		505,811
Derivatives assets held for trading		107,459		140,031		87,063
		148,781		322,239		592,874
Available-for-sale financial assets		5,577,795		6,126,925		5,034,237
Held-to-maturity investments		37,705		39,813		112,561
Loans and receivables		19,385,718		17,311,148		14,861,975
	W	25,149,999		23,800,125		20,601,647

54

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) Financial liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Financial liabilities at fair value through profit or loss
Derivatives liabilities held for trading	W	102,437		100,372		43,711
Designated as financial liabilities at fair value through profit or loss		394,481		447,308		—
		496,918		547,680		43,711
Financial liabilities evaluated as amortised cost
Trade accounts and notes payable		4,459,794		3,981,079		2,392,317
Borrowings		23,418,668		20,692,934		12,199,485
Financial guarantee liabilities		29,235		27,966		6,295
Others		1,786,310		1,568,313		1,209,803
		29,694,007		26,270,292		15,807,900
	W	30,190,925		26,817,972		15,851,611

3) Financial profit and loss by category of financial instrument for the six-month period ended June 30, 2011 and the six-month period ended June 30, 2010 is as follows:

	June 30, 2011								June 30, 2010
	Financial		Financial			Financial income			Financial		Financial			Financial income
(in millions of Won)	income		expenses			and expenses			income		expenses			and expenses
Financial assets at fair value through profit or loss	W	267,749		(1,285	)		266,464			72,825		(4,826	)		67,999
Available-for-sale financial assets		82,844		(82	)		82,762			84,367		(46,679	)		37,688
Held-to-maturity investments		866		—			866			1,293		—			1,293
Loans and receivables		358,268		(454,166	)		(95,898	)		342,941		(152,291	)		190,650
Financial liabilities at fair value through profit or loss		2,210		(318,039	)		(315,829	)		30,648		(36,033	)		(5,385	)
Financial liabilities evaluated as amortised cost		735,941		(529,140	)		206,801			203,532		(844,181	)		(640,649	)
	W	1,447,878		(1,302,712	)		145,166			735,606		(1,084,010	)		(348,404	)

(b) Credit risk

1)	Credit risk exposure
	The carrying amount of financial assets is maximum exposure to credit risk. The maximum exposure to credit risk as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Cash and cash equivalents	W	4,285,917		3,521,045		2,273,059
Financial assets at fair value through profit or loss		148,781		322,239		592,874
Available-for-sale financial assets		5,577,795		6,126,925		5,034,237
Held-to-maturity investments		37,705		39,813		112,561
Loans and other receivables		3,944,630		4,311,363		6,780,011
Trade accounts and notes receivable		10,946,809		9,205,118		5,286,130
Long-term trade accounts and notes receivable		208,362		273,622		522,775
	W	25,149,999		23,800,125		20,601,647

55

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) Impairment losses on financial assets

 Allowance for doubtful accounts as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010
Trade accounts and notes receivable	W	280,600		242,802		205,595
Other accounts receivable		62,621		58,934		25,443
Long-term loans		78,072		51,244		23,595
Other assets		46,438		51,325		33,349
	W	467,731		404,305		287,982

‚ Impairment losses on financial assets for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Bad debt expenses	W	65,835			4,987
Impairment of available-for-sale financial assets		56			46,593
Other bad debt expenses		29,775			9,340
Less: Reversal of allowance for doubtful accounts		(14,799	)		(2,983	)
	W	80,867			57,937

ƒ The aging schedule and the impaired losses of trade accounts and notes receivables as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

	June 30, 2011				December 31, 2010				January 1, 2010
	Trade accounts and				Trade accounts and				Trade accounts and
(in millions of Won)	notes receivable		Impairment		notes receivable		Impairment		notes receivable		Impairment
Not due	W	5,840,388		—		5,091,621		—		4,740,186		—
Over due less than 1 month		4,651,123		13,002		3,749,035		5,964		445,823		129
1 month - 3 months		319,997		45		191,386		2,018		75,132		497
3 months - 12 months		260,604		22,898		465,134		15,597		292,698		25,291
over 12 months		363,659		244,655		224,366		219,223		460,661		179,678
	W	11,435,771		280,600		9,721,542		242,802		6,014,500		205,595

56

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

„ Changes in allowance for doubtful accounts for the six-month period ended June 30, 2011 and the year ended December 31, 2010 were as follows:

(in millions of Won)	June 30, 2011			December 31, 2010
Beginning	W	404,305			287,982
Bad debt expenses		65,835			51,185
Other bad debt expenses		29,775			12,877
Reversal of allowance for		(14,799	)		(37,958	)
Other increase (decrease)		(17,385	)		90,219
Ending	W	467,731			404,305

(c) Liquidity risk

1) The maturity analysis of non-derivative financial liabilities

	Over due less		1 year		later than
(in millions of Won)	than 1 year		- 5 years		5 years		Total
Current non-derivative financial liabilities
Trade accounts payable	W	4,458,981		813		—		4,459,794
Financial guarantee liabilities		6,150		23,051		34		29,235
Other financial liabilities		1,557,260		225,731		3,319		1,786,310
Borrowings		11,209,289		5,772,708		6,831,152		23,813,149
	W	17,231,680		6,022,303		6,834,505		30,088,488

Schedule of cash flows relation to interest payment is not included in the table above.

2) The maturity analysis of derivative financial liabilities

	Over due less		1 year		later than
(in millions of Won)	than 1 year		- 5 years		5 years		Total
Derivative financial liabilities
Currency forward	W	35,624		1,182		—		36,806
Currency futures		62		—		—		62
Currency swaps		—		41,742		8,396		50,138
Others		15,219		212		—		15,431
	W	50,905		43,136		8,396		102,437

(d) Currency risk

1) The Company has exposure to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The exposure to currency risk as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

	June 30, 2011				December 31, 2010				January 1, 2010
(in millions of Won)	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
USD	W	464,383		6,084,481		197,552		4,070,865		147,346		420,300
EUR		21,847		63,678		6,018		36,323		32,740		77,629
JPY		27,088		2,368,891		7,358		2,465,574		22,657		57,206
Others		82,573		29,876		57,028		26,059		58,473		18,166

57

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) For the six-month period ended June 30, 2011 and for the year ended December 31, 2010, the effects of a hypothetical 10% strengthening or weakening of functional currency against foreign currencies other than functional currency on profit before tax were as follows:

	June 30, 2011					December 31, 2010
(in millions of Won)	10% increase			10% decrease		10% increase			10% decrease
USD	W	(562,010	)		562,010		(387,331	)		387,331
EUR		(4,183	)		4,183		(3,031	)		3,031
JPY		(234,180	)		234,180		(245,822	)		245,822

(e) Interest rate risk

1) The carrying amount of interest-bearing financial instruments as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Fixed rate
Financial assets	W	5,088,603			7,045,125			8,839,475
Financial liabilities		(21,643,386	)		(19,495,665	)		(11,475,986	)
		(16,554,783	)		(12,450,540	)		(2,636,511	)
Variable rate
Financial liabilities	W	(2,169,763	)		(1,644,576	)		(723,499	)

2)	Sensitivity analysis on the fair value of financial instruments with variable interest rate
	As of June 30, 2011 and December 31, 2010, provided that other factors remain the same and the interest rate of borrowings with floating rates increases or decreases by 1%, the changes in gain or loss during the six-month periods end June 30, 2011 and for the year ended December 31, 2010 are as follows:

	June 30, 2011					December 31, 2010
(in millions of Won)	1% increase			1% decrease		1% increase			1% decrease
Variable rate financial instruments		(10,849	)		10,849		(16,446	)		16,446

58

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(f) Fair value

1)	Fair value and book value
	The carrying amount and the fair value of financial instruments as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows

	June 30, 2011				December 31, 2010				January 1, 2010
(in millions of Won)	Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value
Assets measured fair value
Financial assets held for trading	W	41,322		41,322		182,208		182,208		505,811		505,811
Available-for-sale financial assets		5,291,903		5,291,903		5,766,998		5,766,998		4,612,580		4,612,580
Derivatives assets held for trading		107,459		107,459		140,031		140,031		87,063		87,063
		5,440,684		5,440,684		6,089,237		6,089,237		5,205,454		5,205,454
Assets measured amortised cost
Cash and cash equivalents		4,285,917		4,285,917		3,521,045		3,521,045		2,273,059		2,273,059
Trade accounts and notes receivable		11,155,171		11,155,171		9,478,740		9,478,740		5,808,905		5,808,905
Loans and other receivables		3,944,630		3,944,630		4,311,364		4,311,364		6,780,011		6,780,011
Held-to-maturity investments		37,705		37,705		39,813		39,813		112,561		112,561
		19,423,423		19,423,423		17,350,962		17,350,962		14,974,536		14,974,536
Liabilities measured fair value
Derivatives liabilities held for trading		102,437		102,437		100,372		100,372		43,711		43,711
Convertible bonds		394,481		394,481		447,308		447,308		—		—
		496,918		496,918		547,680		547,680		43,711		43,711
Liabilities measured amortised cost
Trade accounts and notes payable		4,459,794		4,459,794		3,981,079		3,981,079		2,392,317		2,392,317
Borrowings		23,418,668		22,216,009		20,692,934		20,549,484		12,199,485		12,210,969
Financial guarantee liabilities		29,235		29,235		27,966		27,966		6,295		6,295
Others		1,786,310		1,786,310		1,568,313		1,568,313		1,209,803		1,209,803
	W	29,694,007		28,491,348		26,270,292		26,126,842		15,807,900		15,819,384

2) The fair value hierarchy

 The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in measurements.

Level 1:	quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:	Level 2: inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.
Level 3:	Level 3: inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

59

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

‚	The fair value measurements classified by fair value hierarchy as of June 30, 2011, December 31, 2010 and January 1, 2010 were as follows :
a.	June 30, 2011

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Financial assets held for trading	W	40,331		991		—		41,322
Available-for-sale financial assets		4,613,009		10,146		668,748		5,291,903
Derivatives assets held for trading		—		107,459		—		107,459
		4,653,340		118,596		668,748		5,440,684
Financial Liabilities
Derivatives liabilities held for trading		—		102,437		—		102,437
Convertible bonds		394,481		—		—		394,481
	W	394,481		102,437		—		496,918

b. December 31, 2010

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Financial assets held for trading	W	—		182,208		—		182,208
Available-for-sale financial assets		4,944,644		17,194		805,160		5,766,998
Derivatives assets held for trading		—		140,031		—		140,031
		4,944,644		339,433		805,160		6,089,237
Financial Liabilities
Derivatives liabilities held for trading		—		100,372		—		100,372
Convertible bonds		447,308		—		—		447,308
	W	447,308		100,372		—		547,680

c. January 1, 2010

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Financial assets held for trading	W	—		505,811		—		505,811
Available-for-sale financial assets		3,967,463		6,714		638,403		4,612,580
Derivatives assets held for trading		—		87,063		—		87,063
		3,967,463		599,588		638,403		5,205,454
Financial Liabilities
Derivatives liabilities held for trading	W	—		43,711		—		43,711

60

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

20. Share Capital and Contributed Surplus

(a) Share capital

Under the Articles of Incorporation, the Company is authorized to issue 200 million shares of capital stock with par value of W5,000 per share. As of June 30, 2011, 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 June 30, 2011, total shares of ADRs are 54,564,120 equivalents to 13,641,030 of common shares.

	As of June 30, 2011, ending balance of capital stock amounts to W482,403 million; however, it is different from par value of issued common stock, which amounted to W435,934 million, due to retirement of treasury stock.
(b)	Capital surplus

Capital surplus as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Share premium	W	463,825			463,825			463,825
Gains on sale of treasury stock		765,874			694,714			694,714
Capital surplus		(52,511	)		(56,978	)		41,127
	W	1,177,188			1,101,561			1,199,666

21. Reserves

(a) Reserves as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Accumulated comprehensive income (loss) of investments of equity-accounted investees, net of tax	W	(35,876	)		(3,910	)		33,747
Fair value of available-for-sale financial investments, net of tax		789,220			1,314,185			737,235
Currency translation differences, net of tax		158,594			136,670			—
Others		(1,866	)		(7,138	)		(4,657	)
	W	910,072			1,439,807			766,325

61

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

22. Treasury Shares

In January 2011, the Company sold 342,955 shares of treasury stock for \ 164,384 million and recognized \ 71,160 million as a gain on sale of treasury stock in capital surplus. Also, the Company acquired 131,389 shares of treasury stock for \ 61,296 million. As of June 30, 2011, the Company holds 9,942,391 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

23. 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:

1)	Class of shares: registered common stock
2)	The number of shares, Exercise price per share, Exercise period

(per share, won)	5th Grant		6th Grant		Total
Before the modification (*1)
Granted		218,600		90,000		308,600
Exercise price	W	151,700	W	194,900
After the modification (*1)
Granted		214,228		90,000		304,228
Exercised		183,066		64,000		247,066
Unexercised		31,162		26,000		57,162
Exercise price	W	151,700	W	194,900
Exercise period		2006.7.24~2011.7.23		2007.4.29~2012.4.28

(*1) The Company modified the number of shares granted under the stock appreciation rights and the exercise price, as presented above (5^th), in accordance with the resolutions of the Board of Directors on October 22, 2004.

62

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Expenses related to stock appreciation rights granted to executives incurred for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	4th Grant			5th Grant			6th Grant			Total
Accumulated reversal of stock compensation expenses as of December 31, 2010		(83	)		(9,681	)		(3,463	)		(13,227	)
Reversal of stock compensation expenses for the six-month period ended June 30, 2011		—			(1,250	)		(389	)		(1,639	)

(c) The Company uses a fair value approach for calculating remuneration cost. The method and assumption for computing fair value of stock appreciation rights are as follows:

	5th Grant			6th Grant
Risk-free rate of interest		3.48	%		3.67	%
Expected exercise period	57 days			754 days
Expected price-volatility		9.15	%		12.60	%
Rate of expected dividends		2.16	%		1.11	%
Stock price	Won 464,000			Won 464,000
Fair value	Won 311,556			Won 272,791

63

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

24. Construction Contracts

(a) Construction contracts in progress as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Aggregate amount of costs incurred	W	14,360,603			12,778,567			8,846,030
Add: Recognized profits		1,416,153			1,202,835			948,616
Less: Recognized losses		(269,299	)		(197,818	)		(202,275	)
Cumulative construction revenue		15,507,457			13,783,584			9,592,371
Less: Progress billing		(14,973,369	)		(13,505,203	)		(9,388,120	)
Foreign currency gains and losses		(304	)		(1,744	)		1
Others		(17,042	)		(54,975	)		(69,200	)
	W	516,742			221,662			135,052

(b) Customers for contract work as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011			December 31, 2010			January 1, 2010
Due from customers for contract work	W	1,226,441			960,738			685,190
Due to customers for contract work		(709,699	)		(739,076	)		(550,138	)
	W	516,742			221,662			135,052

25. Sales

Details of sales for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Revenues
Goods sales	W	29,501,312		17,917,303
Services sales		1,052,551		726,001
Construction sales		2,413,456		1,855,544
Lease sales		19,816		21,902
Othters		310,182		44,467
	W	33,297,317		20,565,217

64

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

26. Selling and Administrative Expenses

(a)	Administrative expenses
	Administrative expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Wages and salaries	W	298,724		192,093
Expenses related to defined benefit plan		31,180		17,763
Other employee benefits		76,284		53,247
Travel		28,401		16,536
Depreciation		80,511		44,352
Communication		6,099		3,896
Electric power		2,911		2,393
Taxes and public dues		23,305		13,863
Rental		32,277		19,057
Repairs		5,908		6,221
Insurance premium		7,702		1,570
Entertainment		8,856		7,754
Advertising		36,811		47,999
Research & development		93,201		57,875
Service fees		125,816		67,676
Supplies		7,031		5,582
Vehicles maintenance		10,232		7,086
Industry association Fee		6,715		6,635
Training		11,187		11,302
Conference		10,579		7,443
Transfer to provision		7,549		8,369
Bad debt allowance		65,835		4,987
Others		9,509		6,804
	W	986,623		610,503

65

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b)	Selling expenses
	Selling expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Freight	W	663,168		400,478
Operating expenses for distribution center		3,775		4,528
Sales commissions		39,045		32,509
Sales advertising		242		243
Sales promotion		7,170		3,623
Sample		3,198		1,316
Sales insurance premium		10,072		5,944
Contract cost		27,820		33,375
Others		2,149		2,052
	W	756,639		484,068

27. Other Operating Income and Expenses

(a)	Other operating income
	Details of other operating income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Gain on disposal of property, plant and equipment	W	8,353		8,637
Gain on disposal of investment of equity-accounted investees		2,081		1,930
Reversal of allowance for doubtful accounts		14,799		2,983
Miscellaneous income		84,018		106,448
Others		6,453		6,227
	W	115,704		126,225

66

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Other operating expenses

Details of other operating expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Loss on disposal of property, plant and equipment	W	30,078		19,843
Loss on disposal of investment property		4,690		1,220
Cost of idle assets		3,402		442
Other bad debt expenses		29,775		9,340
Contributions		14,262		20,155
Miscellaneous loss		28,752		26,992
Others		2,139		4,440
	W	113,098		82,432

28. Expenses by nature

Expenses that are recorded by nature as cost of sales, selling, general and administrative expenses and other operating expenses in the statements of income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Raw materials and consumables used	W	17,795,630			10,960,579
Changes in inventories		(273,747	)		(382,516	)
Cost of Goods hold		16,269,321			2,783,605
Employee benefits expenses		1,328,230			970,275
Depreciation(*1)		1,103,665			1,415,337
Amortization		33,699			31,794
Other expenses(*2)		(5,946,098	)		1,387,554
	W	30,310,700			17,166,628

(*1)	Includes depreciation expense of investment properties
(*2)	Other general administration expense, physical distribution cost, sales expenses, operating expenses and consolidated adjustment are included.

67

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

29. Finance Income and Costs

Details of finance income and costs for for the six-month period ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Finance income
Interest income	W	96,055		158,637
Dividend income		81,588		81,244
Gain on foreign currency transaction		497,134		308,415
Gain on foreign currency translation		500,955		78,030
Gain on derivatives transactions		202,126		54,849
Gain on valuation of derivatives		66,209		32,639
Others		3,811		21,792
		1,447,878		735,606
Finance costs
Interest expenses		388,853		263,276
Loss on foreign currency transaction		434,468		306,640
Loss on foreign currency translation		155,038		416,743
Loss on derivatives transactions		233,117		27,755
Loss on valuation of derivatives		66,442		13,071
Others		24,794		56,525
	W	1,302,712		1,084,010

30. Income Taxes

(a) Income tax expense for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Current income taxes	W	639,730		691,057
Deferred income tax due to temporary differences		45,655		14,311
Items recorded directly to shareholders’ equity		110,482		41,697
Income tax expense	W	795,867		747,065

68

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(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 six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Net income before income tax expense	W	3,260,913			3,242,539
Income tax expense computed at statutory rate		789,141			784,694
Adjustments:		6,726			(37,629	)
Tax effects due to permanent differences		2,566			26,590
Tax credit		(64,804	)		(137,658	)
Others		68,964			73,439
Income tax expense	W	795,867			747,065
Effective rate (%)		24.41			23.04

(c) The income taxes recorded directly to equity for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Loss on valuation of available-for-sale investments	W	(97,555	)		(34,797	)
Accumulated comprehensive expense of investments of equity-accounted investees		(20,186	)		677
Gains on sale of treasury stock		20,071			—
Others		(12,812	)		(7,577	)
	W	(110,482	)		(41,697	)

69

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) The movements in deferred tax assets (liabilities) for the six-month periods ended June 30, 2011 and 2010 are as follows:

	June 30, 2011									June 30, 2010
(in millions of Won)	Beginning			Inc (Dec)			Ending			Beginning			Inc (Dec)			Ending
Deferred income tax due to temporary differences
Reserve for special repairs	W	(27,776	)		377			(27,399	)		(39,500	)		2,296			(37,204	)
Allowance for doubtful accounts		80,349			1,554			81,903			38,283			25,379			63,662
Reserve for technology developments		(269,892	)		(20,693	)		(290,585	)		(179,828	)		(87,375	)		(267,203	)
Depreciation expense		(61,129	)		12,289			(48,840	)		(78,485	)		(1,337	)		(79,822	)
Share of profit or loss of equity-accounted investees		(149,602	)		(48,047	)		(197,649	)		(52,150	)		(105,153	)		(157,303	)
Reserve for inventory valuation		1,484			506			1,990			987			(283	)		704
Revaluation of assets		(362,949	)		(75,940	)		(438,889	)		(436,051	)		30,212			(405,839	)
Prepaid expenses		18,733			1,360			20,093			17,669			1,617			19,286
Impairment loss on property, plant and equipment		24,858			(1,655	)		23,203			11,080			(1,417	)		9,663
Loss on foreign currency translation		90,656			(63,443	)		27,213			45,306			71,730			117,036
Accrued severance benefits		40,710			21,143			61,853			53,374			(9,645	)		43,729
Group severance insurance deposits		(36,232	)		(6,647	)		(42,879	)		(30,199	)		99			(30,100	)
Provision for construction losses		1,697			(246	)		1,451			263			42,639			42,902
Provision for construction warranty		1,854			(248	)		1,606			534			2,104			2,638
Appropriated retained earnings for technological development		(246	)		41			(205	)		(242	)		81			(161	)
Accrued income		(1,061	)		(928	)		(1,989	)		(570	)		(458	)		(1,028	)
Others		142,322			92,162			234,486			143,976			(9,571	)		134,404
		(506,224	)		(88,415	)		(594,637	)		(505,553	)		(39,082	)		(544,636	)
Deferred income taxes recognized directly to equity
Gain (loss) on valuation of available-for-sale investments		(118,640	)		97,555			(21,085	)		4,011			34,797			38,808
Accumulated comprehensive expense of investments of equity-accounted investees		(20,415	)		20,186			(229	)		4,090			(677	)		3,413
Others		4,132			12,812			16,944			(27,148	)		7,577			(19,571	)
		(134,923	)		130,553			(4,370	)		(19,047	)		41,697			22,650
Deferred tax from tax credit
Tax credit carryforward and others		280,295			(103,865	)		176,430			322,085			(35,494	)		286,591
Deferred tax effect due to unrealized gains (losses) and others		(129,000	)		16,070			(112,930	)		234,724			18,569			253,293
	W	(489,852	)		(45,657	)		(535,507	)		32,209			(14,310	)		17,898

31. Earnings per Share

(a) Basic earnings per share for the six-month periods ended June 30, 2011 and 2010 are as follows:

	For the six-month period		For the six-month period
(in millions of Won, except per share information)	ended June 30, 2011		ended June 30, 2010
Net income attribuete to controlling interest	W	2,413,579		2,468,109
Weighted-average number of common shares outstanding (*1)		77,259,314		77,032,878
Basic earnings per share		31,240		32,040

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

	For the six-month period			For the six-month period
	ended June 30, 2011			ended June 30, 2010
Total number of common shares issued		87,186,835			87,186,835
Weighted-average number of treasury shares		(9,927,521	)		(10,153,957	)
Weighted-average number of common shares outstanding		77,259,314			77,032,878

70

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Basic earnings per share for the three-month periods ended June 30, 2011 and 2010 are as follows:

	For the three-month period		For the three-month period
(in millions of Won, except per share information)	ended June 30, 2011		ended June 30, 2010
Net income attribuete to controlling interest	W	1,322,857		1,104,007
Weighted-average number of common shares outstanding (*1)		77,244,444		77,032,878
Basic earnings per share		17,126		14,332

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

	For the three-month period			For the three-month period
	ended June 30, 2011			ended June 30, 2010
Total number of common shares issued		87,186,835			87,186,835
Weighted-average number of treasury shares		(9,942,391	)		(10,153,957	)
Weighted-average number of common shares outstanding		77,244,444			77,032,878

32. Operating Profit

(a) Operating profit adjusted by previous GAAP for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Operating profits by K-IFRS	W	3,102,322			3,524,813
Deducted
Gains on disposal of property, plant, and equipment		(8,353	)		(8,637	)
Gain on disposal of investment of equity-accounted investees		(2,081	)		(1,930	)
Reversal of allowance for doubtful accounts		(14,799	)		(2,983	)
Reversal of provision		(1,360	)		(3,017	)
Miscellaneous income		(84,018	)		(106,448	)
Others		(5,093	)		(3,210	)
		(115,704	)		(126,225	)
Added
Loss on disposal of property, plant, and equipment		30,078			19,843
Loss on disposal of investment property		4,690			1,220
Idle tangible assets expenses		3,402			442
Other bad debt expenses		29,775			9,340
Donations		14,262			20,155
Miscellaneous expenses		28,752			26,992
Others		2,139			4,440
		113,098			82,432
Operating profits by previous GAAP	W	3,099,716			3,481,020

71

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

33. Related Party Transactions

(a) Significant transactions, which occurred in the ordinary course of business, with related companies for the six-month periods ended June 30, 2011 and 2010 are as follows:

	Sales and others (*1)				Purchase and others (*1)
(in millions of Won)	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Subsidiaries
POSCO E&C Co., Ltd.	W	10,381		3,032		740,536		1,227,168
POSCO Processing&Service		694,061		510,441		700,110		142,739
POSCO Coated & Color Steel Co., Ltd.		315,277		328,461		843		1,394
POSCO ICT Co., Ltd.		745		503		247,992		211,297
POSCO Chemtech Company Ltd. (formerly, POSCO Refractories & Environment Co., Ltd.)		208,201		44,069		365,077		265,703
POSCO TMC CO., LTD.		82,436		73,660		233		52
POSCOAST Co., Ltd.		144,630		155,342		29,895		27,499
Daewoo International Corp.		1,618,153		—		1,534		—
POSCONST.CO.,LTD		76,613		—		2,261		—
POSCO America Corporation		136,449		103,811		—		—
POSCO Canada Ltd.		—		—		106,299		62,426
POSCO Asia Co., Ltd.		913,131		526,379		117,797		73,448
POSCO-JKPC Co., Ltd.		21,139		27,288		200		36
POSCO(Thailand) Co., Ltd.		35,775		66,516		57		1
Qingdao Pohang Stainless Steel Co., Ltd.		28,709		34,780		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		22,535		54,435		—		—
POSCO-Japan Co., Ltd.		654,758		490,025		20,701		44,788
POSCO-India Pune Steel Processing Centre Pvt. Ltd.		64,128		81,692		—		—
POSCO-Mexico Co., Ltd.		149,994		108,585		—		—
POSCO-India Delhi Steel Processing Centre Pvt. Ltd.		32,588		39,722		—		115
POSCO(Wuhu) Automotive Processing Center Co., Ltd.		22,715		59,758		—		—
Daewoo International Singapore Pte. Ltd.		—		—		101,171		—
Others		200,489		457,751		562,264		265,607
	W	5,432,907		3,166,250		2,996,970		2,322,273
Associate
Posmate Co., Ltd.	W	580		569		25,651		22,874
SNNC Co., Ltd.		660		906		185,051		268,230
SUNG JIN GEOTEC Co., Ltd.		23,842		1,798		—		—
USS-POSCO Industries (UPI)		251,279		124,252		29		190
Poschrome(Proprietary) Ltd.		—		—		36,805		31,688
Others		69,935		9,819		3,570		128,563
		346,296		137,344		251,106		451,545
	W	5,779,203		3,303,594		3,248,076		2,773,818

(*1) Sales and others include sales and other operating income. Purchase and others include purchase and overhead cost.

72

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Significant transactions, which occurred in the ordinary course of business, with related companies the related account balances as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

	Receivables (*1)						Payables (*1)
(in millions of Won)	June 30, 2011		December 31, 2010		January 1, 2010		June 30, 2011		December 31, 2010		January 1, 2010
Subsidiaries
POSCO E&C Co., Ltd.	W	3,705		293		480		187,087		190,081		437,819
POSCO Processing&Service		158,121		129,133		114,783		41,134		6,842		2,696
POSCO Plantec		1,180		—		9		25,237		48,058		22,839
POSCO ICT Co., Ltd.		14		—		1		73,178		63,627		54,529
POSCO Coated & Color Steel Co., Ltd.		83,809		104,755		109,616		800		437		199
POSCO Chemtech Company Ltd. (formerly, POSCO Refractories & Environment Co., Ltd.)		37,235		33,743		6,880		88,879		62,669		66,008
POSCO TMC CO., LTD.		15,244		11,823		11,678		41		15		24
POSCOAST Co., Ltd.		19,974		19,065		17,492		8,241		8,255		7,572
Daewoo International Corp.		92,976		139,756		—		304		—		—
PNR Co., Ltd.		912		2,656		644		6,333		3,886		—
POSCONST.CO.,LTD		26,441		—		—		460		—		—
POSCO America Corporation		11,120		12,211		6,163		—		—		—
POSCO Asia Co., Ltd.		40,815		122,626		40,548		10,360		3,767		1,170
POSCO(Thailand) Co., Ltd.		17,501		25,919		18,376		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		6,652		13,805		24,404		—		—		—
POSCO-Vietnam Co., Ltd.		642		683		95,781		—		—		—
POSCO-Japan Co., Ltd.		35,258		28,515		25,972		25		4,958		6,701
POSCO-India Pune Steel Processing Centre Pvt. Ltd.		6,749		10,412		12,356		—		—		—
POSCO-Mexico Co., Ltd.		140,570		80,443		16,247		—		—		—
Others		28,489		12,511		25,429		69,180		28,323		17,840
	W	727,407		748,349		526,859		511,259		420,918		617,397
Associate
Posmate Co., Ltd.		—		1,396		48		5,808		6,391		5,222
SNNC Co., Ltd.		136		182		1,974		19,059		57,512		26,963
USS-POSCO Industries (UPI)		98,865		58,347		39,100		—		—		—
Others		7,269		7,231		176		609		29,714		78
		106,270		67,156		41,298		25,476		93,617		32,263
	W	833,677		815,505		568,157		536,735		514,535		649,660

(*1) Receivables include trade accounts and notes receivable and other receivables. Payables include trade accounts payable and other payables.

(c) For the six-month periods ended June 30, 2011 and 2010, details of compensation to key management officers are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Short-term benefits	W	41,199			39,964
Retirement benefit		13,926			9,968
Other long-term benefits		14,115			12,984
Share-based Payment		(1,639	)		(15,316	)
	W	67,601			47,600

73

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

34. Commitments and Contingencies

(a)	Details of guarantees
	Contingent liabilities on outstanding guarantees provided by the Company as of June 30, 2011, are as follows:

Guarantors	Guarantee beneficiary	Financial institution	Foreign Currency		Won Eequivalent
[The Company] POSCO	POSCO Maharashtra Steel private Ltd.	Export-Import Bank of Korea and others	USD	143,000,000		154,168
	POSCO Investment Co., Ltd.	HSBC	CNY	630,000,000		105,084
			MYR	240,000,000		85,238
			USD	251,296,295		270,923
	POSCO-Vietnam Co., Ltd.	Export-Import Bank of Korea and others	USD	230,000,000		247,963
			JPY	4,806,750,000		64,203
	Zeus (Cayman) Ltd.	Creditors	KRW	52,795		52,795
	Zhangjiagang Pohang Stainless Steel Co., Ltd	Mizuho	USD	160,000,000		172,496
Daewoo International Corporation	Daewoo Textile Bukhara LLC	Export-Import Bank of Korea and others	USD	31,250,000		33,691
	Daewoo Cement (Shandong) Co., Ltd.	Other oversea financial institution	EUR	26,293,368		41,031
			CNY	43,000,000		7,172
		Export-Import Bank of Korea and others	USD	32,318,443		34,843
	Daewoo International Deutschland GmbH	Shinhan Bank	EUR	39,740		62
	Daewoo International Singapore Pte.	Woori Bank	USD	3,268,000		3,523
		STANDARD CHARTERED	USD	5,163,000		5,566
	Daewoo International Japan Corp.	Korea Development Bank	JPY	450,000,000		6,011
		Shinhan Bank	JPY	1,000,000,000		13,357
		MIZUHO	JPY	1,500,000,000		20,035
		SUMITOMO	JPY	2,000,000,000		26,714
	Daewoo Paper Manufacturing Co., Ltd.	Hana Bank	USD	2,800,000		3,019
	Daewoo Int’l Guangzhou Corp.	STANDARD CHARTERED	USD	1,912,220		2,062
	Daewoo International America Corp.	Shinhan Bank	USD	3,984,000		4,295
		Woori Bank	USD	961,000		1,036
POSCO E&C Co., Ltd.	POSCO E&C Vietnam Co., Ltd.	Korea Exchange Bank	USD	11,000,000		11,859
		Export-Import Bank of Korea and others	USD	18,000,000		19,406
		ANZ	USD	5,000,000		5,391
		POSCO Investment Co., Ltd.	USD	9,500,000		10,242
	International Business Center Corporation	Export-Import Bank of Korea and others	USD	20,000,000		21,562
POSCO P&S Co., Ltd.	POSCO Canada Co., Ltd.	Hana Bank	USD	12,484,500		13,460
POSCO JAPAN Co., Ltd.	POSCO-JKPC Co., Ltd.	Higo bank and others	JPY	2,082,400,000		27,814
	POSCO-JYPC Co., Ltd.	Mizuho Bank and others	JPY	1,066,520,800		14,245
	POSCO-JNPC Co., Ltd.	Mizuho Bank and others	JPY	2,282,500,000		30,487
	POSCO-JOPC Co., Ltd.	Mizuho Bank and others	JPY	2,258,750,000		30,170
Daewoo Textile Fergana LLC	Daewoo Textile Bukhara LLC	NBU	UZS	6,519,920,000		4,104
POSCO E&C (Beijing) Co., Ltd.	HONG KONG POSCO E&C (CHINA)	Woori Bank(Beijing branch)	USD	33,000,000		35,577
		KB Bank(Seoul)	KRW	102,000		102,000
POSCO TMC Co., Ltd.	Suzhou POS-CORE Technology Co., Ltd.	POSCO Investment Co., Ltd.	USD	3,000,000		3,234
POSCOAST Co., Ltd.	DaiMyung TMS Co., Ltd.	Korea Exchange Bank	KRW	5,000		5,000

74

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Guarantors	Guarantee beneficiary	Financial institution	Foreign Currency		Won Eequivalent
[Associates] POSCO	BX STEEL POSCO Cold Rolled Sheet Co., Ltd.	Bank of China and others	CNY	313,590,000		52,307
			USD	11,180,000		12,053
	United Spiral Pipe, LLC	Comerica Bank_KOREA	USD	70,000,000		75,467
Daewoo International Corporation	DMSA, AMSA	Other Bank	USD	118,310,667		127,551
		Other oversea financial institution	USD	13,816,000		14,895
POSCO E&C Co., Ltd.	Taegisan Wind Power Corporation	Korea Development Bank	KRW	7,500		7,500
	PSIB Co., Ltd.	Lotte Insurance	KRW	360,000		360,000
	CHUNGJU ENTERPRISE CITY	Nonghyup Bank	KRW	28,226		28,226
POSCO P&S Co., Ltd.	DEVELOPMENT Co., Ltd. Sebang Steel	Fukuoka Bank	JPY	245,000,000		3,272
POSCO ICT Co., Ltd.	CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.	POSCO ICT Co., Ltd.	KRW	2,530		2,530
	Uitrans LRT Co., Ltd.	POSCO ICT Co., Ltd.	KRW	64,638		64,638
	Innovalley Co., Ltd	POSCO ICT Co., Ltd.	KRW	115,336		115,336
Daewoo (China) Co., Ltd.	Shanghai Lansheng Daewoo Coporation	China Construction Bank	CNY	100,000,000		16,680
POSCO China Holding Corp.	POSCO SeAH Steel Wir (Nantong) Co., Ltd.	POSCO Investment Co., Ltd.	USD	7,500,000		8,086
[Others]
Daewoo International Corporation	Ambatovy Project Investments Limited	Export-Import Bank of Korea and others	USD	44,963,575		48,475
	Sherritt International Corporation	Export-Import Bank of Korea and others	USD	6,043,572		6,516
POSCO E&C Co., Ltd.	Seomyun development Co., Ltd and others	ABCP and others	KRW	88,000		88,000
		NH Bank	KRW	14,624		14,624
		ABCP and others	KRW	245,000		245,000
		ABCP and others	KRW	30,000		30,000
		ABCP and others	KRW	45,000		45,000
		ABCP and others	KRW	165,000		165,000
		Woori Bank	KRW	68,000		68,000
		KB Bank and others	KRW	329,970		329,970
		ABCP and others	KRW	145,000		145,000
		Shinhan Bank	KRW	4,950		4,950
		Kyobo Life Insurance Co., Ltd	KRW	310,000		310,000
		Korea Development Bank	KRW	644		644
POSCO P&S Co., Ltd.	Asia Speciality Steel Co., Ltd.	Yamaguchi Bank	JPY	2,700,000,000		36,064
	GIPI	Bank Muscat , Bank Sohar	USD	12,000,000		12,937
POSCO Plant Engineering Co., Ltd.	Halla Precision Eng. Co., Ltd. and others	Kookmin Bank	KRW	248,933		248,933
	GS CALTEX HOU and others	Korea Exchange Bank and others	USD	14,040,091		15,137
POSCO ICT Co., Ltd.	BTL business and others	POSCO ICT Co., Ltd.	KRW	1,219,362		1,219,362
POSCO M-TECH Co., Ltd.	TMC Co., Ltd	Seoul Guarantee Isurance	KRW	68		68
	PYUNGSAN SI Co., Ltd	Seoul Guarantee Isurance	KRW	463		463
	Hyundai Hysco Co., Ltd.	Seoul Guarantee Isurance	KRW	264		264
Daewoo Engineering Co., Ltd	Kwanma Solar Co., Ltd. and others	Hana Bank	KRW	53,029		53,029
	Hyundai ENG Co., Ltd.	Engineering Financial Cooperative	KRW	71,977		71,977
PHP Co., Ltd	Expo apt	Kookmin Bank	KRW	387,849		387,849
Daewoo Cement (Shandong) Co., Ltd.	SDAC	Bank of China	USD	35,000,000		37,734
			CNY	1,086,590,000		181,243
			EUR	26,333,108		41,093
			JPY	20,391,920,800		272,373
			KRW	4,166,158		4,166,158
			MYR	240,000,000		85,238
			USD	1,313,791,363		1,416,400
			UZS	6,519,920,000		4,104

75

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b)	POSCO E&C Co., Ltd. has provided the completion guarantees for Samsung C&T Corporation and Namkwang Engineering & Construction Co., Ltd. amounting to W 3,005,937 million. POSCO E&C Co., Ltd. Provides payment guarantees on customers’ borrowings amounting to ABCP W 872,750 million and Pf loan W 637,830 million as of June 30, 2011.
(c)	Other commitments

POSCO	POSCO entered into a contract with Hanjin Shipping Co., Ltd., Hyundai Merchant Marine Co., Ltd., and others to use a transport ship for the transportation of raw materials and sales of POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. These contracts generally have terms of more than three years and provide for periodic price adjustments to the market price. As of June 30, 2011, 292 million tons of iron ore and 48 million tons of coal remained to be purchased under such long-term contracts. POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia 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 the change of the monthly standard oil price (JCC) and also price ceiling is applicable. As of June 30, 2011, POSCO entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million and USD 3.54 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan and the exploration of gas hydrates in Namangan-Chust, respectively. The repayment of borrowings depends on the success of the projects. POSCO is not liable for the repayment of full or part of the money borrowed if the respective project fails. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by borrowing The Company has lease agreements for using a Ro-Ro (roll-on roll-off) ship and it is recorded as a finance leases. The Company is making repayment of USD 11,583 thousands and W1,953 millions, 90% of ship price, for 12 years.
POSCO ICT Co., Ltd.	POSCO ICT Co., Ltd has signed a Memorandum of Understanding with Samchang co. Ltd,. on acquiring nuclear power business. Date of acquisition and acquisition cost will be decided later.
POSCO E&C Co., Ltd.	To contractors involved in some of the construction contracts operator and financial institutions by agreement with the work of the operating funds operator W117,314 million deposit. POSCO E&C Co., Ltd manage the deposit accounts as a memorandum account without separate accounting treatment reflecting the economic substance because the operator is the owner of above-mentioned account. POSCO E&C Co., Ltd has bank overdraft agreements of up to W20,000 million with Woori Bank which is included in the limit of comprehensive loan agreements and W3,000 million with Korea Exchange Bank. Also POSCO E&C Co., Ltd. has comprehensive loan agreements of up to W260,000 million and W308 million with Woori Bank and W530,000 million with Korea Exchange Bank.

76

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

POSCO Specialty Steel Co., Ltd.	POSCO Specialty Steel Co., Ltd. has a loan agreement, secured by trade accounts receivable, of up to W280,000 million with Woori Bank and others. POSCO Specialty Steel Co., Ltd. has used W150,176 million of this loan agreement.
	POSCO Specialty Steel Co., Ltd. has agreements with Woori Bank and seven other banks for opening letters of credit of up to USD55 million, and for a loan of up to W165,000 million and POSCO Specialty Steel Co., Ltd. has used USD4.6 million for opening letters of credit.
POSCO Terminal Co., Ltd.	As of June 30, 2011, POSCO Terminal Co., Ltd. effected a charter with Polalis sheeping Co., Ltd for the shipping and recognized W9,275 million of service cost. As of June 30, 2011, POSCO Terminal Co., Ltd. entered contracts about using facilities of harbor loading and unloading with Shin-chang and presented W5,697 million of service cost for for using facilities of harbor loading and unloading. POSCO Terminal Co., Ltd. entered the contract of harbor loading and unloading and presented W4,231 million of service cost.
POSCO Power Corp.	POSCO Power Corp. provides the entire quantity of electric power production to Kepco Corp. under the contract of LNG complex electric power.
	POSCO Power Corp. provides the entire quantity of electric power production to Kepco Corp. under the contract of gas complex electric power. POSCO Power Corp. is provided the entire quantity of natural gas from Korea Gas Corp. under the long-term contract of purchase.
Kwang Yang SPFC Co., Ltd.	Kwang Yang SPFC Co., Ltd. has signed delivery contracts with Donghwa, Guangil, Samil on June 14, and it will take into effect starting July.

(d)	Litigation in progress
	As of June 30, 2011, the Company and certain subsidiaries are defendants in legal actions arising from the normal course of business. Details are as follows:

(in millions of Won, in thousnad of foreign currencies)

				Legal equivalent
Company	Legal actions	Amount		Amount		Description
POSCO	11	KRW	11,107		11,107	Lawsuit on the claim for damages
POSCO E&C Co., Ltd.	47	KRW	48,750		48,750	Lawsuit on the claim for payment
POSCO P&S Co., Ltd.	2	KRW	1,135		1,135	Lawsuit on the claim for damages
POSCO Plant Engineering Co., Ltd.	2	KRW	1,638		1,638	Lawsuit on the claim for payment
POSCO ICT Co., Ltd.	8	KRW	1,983		1,983	Lawsuit on the claim for payment
Seoung Gwang Co., Ltd.	2	KRW	2,277		2,277	Imposed high tax rate
POSEC-Hawaii Inc.	1	USD	3,123		3,367	Lawsuit on the claim for compensation and defect-repair
POSCO E&C (Beijing) Co., Ltd.	1	CNY	3,790		632	Lawsuit on the claim
Daewoo Engineering Co., Ltd.	6	KRW	7,312		7,312	Lawsuit on the claim for damages
Posbro Co., Ltd.	1	KRW	435		435	Lawsuit on the claim for payment
Daewoo International Corporation	1	CNY	30,000		5,004	Lawsuit on the claim for damages
	1	EUR	5,000		7,803
	1	INR	4,458,849		106,834
	4	KRW	835		835
	2	USD	520		560

The Company believes that although the outcome of these matters is uncertain, the impacts of these matters are not expected to be material on the Company.

77

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(e)	Other contingencies
	POSCO has provided five blank promissory notes to Korea Resources Corporation and six blank promissory notes to Korea National Oil Corporation as collateral for outstanding loans.
	As of June 30, 2011, POSCO E&C Co., Ltd. has provided eleven blank promissory notes, eleven blank checks and six other notes, approximately amounting to W61,704 million, to Korea Housing Guarantee Co., Ltd. and other financial institutions as collateral for agreements and outstanding loans.
	Daewoo International Co., Ltd has provided fifty-one blank promissory notes to Korea National Oil Corporation as collateral for outstanding loans.

35. Cash Flows from Operating Activities

(a) Adjustments for operating cash flows for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Depreciation (*1)	W	1,016,081			1,338,593
Amortization		50,600			35,154
Finance income (*2)		(940,500	)		(419,643	)
Finance costs (*2)		835,181			770,350
Income tax expense		795,867			747,065
Share of profit or loss of equity-accounted investees		(13,425	)		(66,130	)
Accrual of severance benefits		118,653			90,726
Bad debt expenses		80,811			11,344
Others		99,501			(31,087	)
	W	2,042,769			2,476,372

(*1)	Depreciation expense of investment properties is included.
(*2)	Finance income and finance costs do not contain gains or losses on foreign currency transaction and gains or losses on foreign currency translation.

78

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Changes in operating assets and liabilities for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011			June 30, 2010
Trade accounts and notes receivable	W	(1,757,054	)		(808,563	)
Current financial assets		101,604			(54,152	)
Inventories		(1,924,765	)		(2,076,589	)
Other current assets		(406,140	)		(214,788	)
Other long-term assets		49,597			16,304
Accounts payable		511,849			817,840
Other current financial liabilities		(315,367	)		(50,938	)
Other current liabilities		550,655			278,148
Provision		2,839			12,916
Payment of severance benefits		(93,860	)		(55,035	)
Plan assets		(26,532	)		(7,461	)
Other long-term liabilities		25,729			2,168
	W	(3,281,445	)		(2,140,150	)

36. Operating Segments

(a)

Segment information is provided on the basis of operating segments — steel, trading, construction and others. The operating segments presented reflect the management structure of the company and the way which the company’s management reviews business performance. The segment results and assets are measured based on sales and operating income, and total assets respectively, in accordance with K-IFRS without any adjustment for corporate allocations.

(b)

Revenue and segment profit of each segment for the six-month periods ended June 30, 2011 and 2010 are as follows:

1) For the six-month periods ended June 30, 2011

(in millions of Won)	Steel			Trading		Construction		Others			Consolidated			Total
Gross revenue	W	27,511,149			13,689,795		3,623,334		2,625,816			—			47,450,094
Internal sales		7,809,100			3,910,423		1,314,179		1,119,075			—			14,152,777
Net revenue		19,702,049			9,779,372		2,309,156		1,506,740			—			33,297,317
Interest income		72,729			7,346		12,245		8,961			(5,226	)		96,055
Interest expenses		264,406			50,944		32,809		51,535			(10,841	)		388,853
Depreciation and amortiztion		1,040,510			5,836		15,636		75,382			(70,683	)		1,066,681
Share of profit or loss equity-accounted		(16,775	)		—		—		(1,752	)		31,952			13,425
Income tax expense		715,459			18,190		40,089		19,224			2,905			795,867
Segments income		2,431,482			83,535		99,725		100,938			(250,634	)		2,465,046
Investment in associates		12,508,922			1,725,861		695,981		105,985			(11,518,761	)		3,517,988
Acquisition of non-current assets	W	4,969,440			174,207		39,333		662,005			90,394			5,935,379

79

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) For the six-month periods ended June 30, 2010

(in millions of Won)	Steel		Trading		Construction		Others			Consolidated			Total
Gross revenue	W	21,184,626		1,909,393		4,012,635		1,198,172			—			28,304,826
Internal sales		4,355,606		826,802		2,010,762		546,439			—			7,739,609
Net revenue		16,829,020		1,082,591		2,001,874		651,732			—			20,565,217
Interest income		133,678		1,486		11,910		11,775			(212	)		158,637
Interest expenses		194,207		3,646		28,924		41,093			(4,594	)		263,276
Depreciation and amortization		1,389,963		314		14,761		42,093			(73,384	)		1,373,747
Share of profit or loss of equity-accounted investees		—		—		—		389			65,741			66,130
Income tax expense		663,142		2,893		49,031		(531	)		32,530			747,065
Segments income		2,669,684		9,692		152,628		(10,892	)		(325,638	)		2,495,474
Investment in associate		6,927,552		378,991		596,556		19,208			(6,709,253	)		1,213,054
Acquisition of non-current assets	W	3,557,549		839		53,672		629,404			13,564			4,255,028

(c) Financial positons of each segment as June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

1) June 30, 2011

(in millions of Won)	Steel		Trading		Construction		Others		Consolidated			Total
Assets
Current assets		20,363,088		7,240,496		5,678,722		2,619,191		(4,239,888	)		31,661,609
Non-current assets		43,905,412		3,693,799		1,664,698		3,232,016		(9,626,480	)		42,869,445
		64,268,500		10,934,295		7,343,420		5,851,207		(13,866,368	)		74,531,054
Liabilities
Current liabilities		11,599,855		6,677,398		3,516,044		1,771,253		(3,612,772	)		19,951,778
Non-current liabilities		9,485,505		2,038,864		872,667		2,158,818		29,664			14,585,518
		21,085,360		8,716,262		4,388,711		3,930,071		(3,583,108	)		34,537,296

2) December 31, 2010

(in millions of Won)	Steel		Trading		Construction		Others		Consolidated			Total
Assets
Current assets		18,484,564		6,144,044		4,735,659		2,030,014		(3,735,797	)		27,658,484
Non-current assets		42,289,172		3,461,662		1,741,701		2,948,123		(8,694,609	)		41,746,049
		60,773,736		9,605,706		6,477,360		4,978,137		(12,430,406	)		69,404,533
Liabilities
Current liabilities		11,171,303		5,864,784		3,174,657		1,650,165		(3,574,761	)		18,286,148
Non-current liabilities		8,398,810		1,654,248		457,709		1,757,701		312,750			12,581,218
		19,570,113		7,519,031		3,632,365		3,407,866		(3,262,009	)		30,867,366

3) January 1, 2010

(in millions of Won)	Steel		Trading		Construction		Others		Consolidated			Total
Assets
Current assets		16,779,208		865,041		4,092,438		1,447,448		(2,768,384	)		20,415,751
Non-current liabilities		33,824,870		485,045		1,870,304		2,171,460		(7,254,387	)		31,097,292
		50,604,078		1,350,086		5,962,742		3,618,908		(10,022,771	)		51,513,043
Liabilities
Current liabilities		6,506,543		830,291		2,840,396		1,239,819		(2,408,486	)		9,008,563
Non-current liabilities		7,468,302		7,009		972,346		993,572		(270,430	)		9,170,799
		13,974,845		837,299		3,812,742		2,233,391		(2,678,915	)		18,179,362

80

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) Sales by regional groups for the six-month period ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	June 30, 2011		June 30, 2010
Domestic	W	26,232,953		16,268,464
Japan		1,012,110		590,160
China		2,851,468		2,437,853
Asia		1,351,695		692,654
North America		589,615		113,414
Others		1,259,476		462,672
	W	33,297,317		20,565,217

(e) Non-current assets by regional groups as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	June 30, 2011 (*)		December 31, 2010 (*)		January 1, 2010 (*)
Domestic	W	28,190,880		26,578,068		21,141,956
Japan		280,948		292,742		267,777
China		1,502,347		1,412,997		1,047,802
Asia		780,815		754,191		744,832
North America		83,853		72,809		34,749
Others		1,087,654		1,439,467		418,069
	W	31,926,497		30,550,274		23,655,185

(*) Includes investment property, property, plant and equipment and intangible assets.

37. Transition to K-IFRS

The previously issued consolidated financial statements as of December 31, 2010 and the statements of financial position at the date of transition are stated in accordance with previous GAAP. However these consolidated financial statements have been prepared in accordance with K-IFRS 1101 “First-time Adoption of Korean International Financial Reporting Standards”.

Accordingly, the Company adjusted the financial statements as of December 31, 2010 and previous statements of financial position at the date of transition reported in accordance with previous GAAP. The transition from previous GAAP to K-IFRS affected its reported financial position, financial performance and cash flows is as follows:

(a)	Exemptions elected from K-IFRS 1101 “First-time Adoption of Korean International Financial Reporting Standards” by the Company
	The Company has elected to use one or more of the exemptions in accordance with K-IFRS 1101 for the preparation of statements of financial position at the date of transition and applied the following optional exemptions.

81

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

1)	Business combination
	The Company has not retrospectively applied the business combinations that took place prior to the date of transition to K-IFRS.
2)	Deemed cost of property, plant and equipment
	The Company has elected to use the revaluations of prior to the date of transition to K-IFRS as deemed cost at the date of transition for certain items of property, plant and equipment and use the fair value at the date of transition as deemed cost at the date of transition for certain machinery and equipment.
3)	Borrowing costs
	The Company has capitalized borrowing costs to the qualifying assets for which the commencement date for capitalization is on or after the transition date to K-IFRS .
4)	Cumulative translation differences
	The Company has elected to set the previously cumulative translation differences to zero at the date of transition and these exemption are applied to all foreign operations.
5)	Share-based payment transactions
	The Company has not retrospectively applied K-IFRS accouting requirements to cash-settled share-based payment transactions that took place prior to the date of transition to K-IFRS.
6)	Leases
	For arrangements existing at the date of transition to K-IFRS, the Company determined whether the arrangements were lease arrangements based on the facts and circumstances at the date of transition.

(b) The significant adjustments regarding transition to K-IFRS are as follows:

1)	Employee Benefits
	Under previous GAAP, the Company recognized the amount of accrued severance benefits assuming all eligible employees and directors with at least one year of service were to terminate their employment as of the date of statement of financial position. Under K-IFRS, the Company recognized defined benefit obligation based on actuarial assumptions.
2)	Goodwill acquired in the business combination or a gain from a bargain purchase
	Under previous GAAP, the Company amortized goodwill acquired in a business combination on a straight-line method of less than 20 years and a gain from a bargain purchase reversed in weighted average useful life of depreciable assets. Under K-IFRS, goodwill is not amortized, but is tested for impairment annually. Also, a gain from a bargain purchase is recognized in profit or loss on the acquisition date.

82

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3)	Transfer of financial assets
	Under previous GAAP, the Company recognized transfer of the financial assets to financial institution as disposal transaction when the control is transferred. Under K-IFRS, if the Company retains substantially all the risks and rewards of ownership of the financial asset, it is recognized in the financial liabilities instead of derecognition of financial assets.
4)	Deferred taxes
	Under previous GAAP, the Company recognized deferred tax assets or deferred tax liabilities as the difference between the book base and its tax base regarding the investment in subsidiaries and others. However, under K-IFRS, the Company recognizes deferred tax assets or deferred tax liabilities considering how the temporary differences will be realized.
5)	A lot-solid apartment after rental
	Under previous GAAP, a lot-solid apartment after rental is accounted for as an operating lease. Under K-IFRS, a lot-solid apartment of the rental is accounted for as a finance lease.
6)	Construction contract
	Under previous GAAP, contract revenue associated with a construction contract shall be recognized as revenue by reference to the stage of completion of the contract activity at the end of the reporting period while costs shall be recognized as expenses are incurred. Under K-IFRS, contract revenue and contract costs associated with the construction contract shall be recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period. Also, under previous GAAP, there is no specific guideline for determining and disclosing the gross amount due from customers for contract work and the gross amount due to customers for contract work while under K-IFRS these amounts should be determined and disclosed.

83

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Changes in scope of subsidiaries

	Changes	Subsidiaries
Inclusion(35)	Included in the scope of consolidation under K-IFRS. These entities were not consolidated under K-GAAP since their total assets were less than W10 billion.	PT. POSNESIA, Qingdao Pos-metal Co., Ltd., POSCO E&C India Private Ltd., POSCO E&C SMART, Pohang SFC Co., Ltd., POSWITH Co., Ltd., Basis Industries, Dalian POSCON Dongbang Automatic Co., Ltd., SANPU TRADING CO., LTD., Zhangjiagang BLZ Pohang International Trading Co., Ltd., POSCO Australia GP Limited, POSCO Mexico Human Tech., POSCO Mexico East Steel Distribution Center Co., Ltd., POSTECH BD Newundertaking fund, POSCO Gulf Logistics LLC., POSBRO Co., Ltd., POSCO ICT-China, DWEMEX S.A.DE C.V., POS MPC Servicios de C.V., EUROTALY S.A., POSCO South East Asia Pte. Ltd., VECTUS Ltd., POMIC Co., Ltd., POSCO Maharashtra Steel Pvt. Ltd., POSCO India Chennai Steel Processing Centre Pvt. Ltd., POSCO Turkey Nilufer Processing Center , POSCO Vietnam Ha Noi Processing Center Co., Ltd., POSCO (Liaoning) Automotive Processing Center Co., Ltd., POSCO E&C Venezuela C.A, POSFINE Co., Ltd., PT. MRI, Mapo high broad parking Co., Ltd., Dakos Co., Ltd., POSCALCIUM Company, Ltd
	Included in the scope of consolidation under K-IFRS 2012: Consolidation-Special Purpose Entities	ZEUS(Cayman)
Exclusion(5)	The Company owns less than 50% of voting power. These entities are excluded from the scope of consolidation assuming that the Company does not have de facto control.	Metapolis Co., Ltd., POSMATE Co., Ltd., POSCO M-TECH Co., Ltd., Universal Studios Resort Asset Management Corp., VSC POSCO Steel Corporation

(d) Effects on financial position, financial performance and cash flows by the transition from previous GAAP to K-IFRS

1) Reconciliations of the financial position on January 1, 2010:

	Total			Total			Total
(in millions of Won)	assets			liabilities			equity
Previous GAAP	W	50,311,748			18,647,435			31,664,313
Adjustments:
Changes of consolidation		(575,395	)		(430,521	)		(144,874	)
Revaluation of machinery and equipment		1,945,001			—			1,945,001
Discount of accounts receivable		111,759			111,932			(173	)
Defined benefit liabilities		(63	)		36,497			(36,560	)
Deffered tax effect		(291,237	)		(155,833	)		(135,404	)
Derivatives		(53,945	)		(798	)		(53,147	)
Construction contracts		417,722			388,262			29,460
Application to finance lease by arrangements		(38,965	)		—			(38,965	)
Application to finance lease for a lot-solid apartment after rental		(316,935	)		(359,542	)		42,607
Adjustments of available-for-sale securities		(28,783	)		—			(28,783	)
Reversal of negative goodwill		10,352			—			10,352
Other adjustments		21,784			(58,070	)		79,854
Total adjustments		1,201,295			(468,073	)		1,669,368
K-IFRS	W	51,513,043			18,179,362			33,333,681

84

POSCO
Notes to Consolidated Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) Reconciliation of financial position as of December 31, 2010 and the financial performance for the year ended December 31, 2010

													Total
	Total			Total			Total						comprehensive
(in millions of Won)	assets			liabilities			equity			Net income			income
Previous GAAP	W	67,945,933			30,744,512			37,201,421			4,217,695			4,840,977
Adjustments:
Changes in scope of of consolidated companies		(1,246,713	)		(985,200	)		(261,513	)		206,889			130,970
Revaluation of machinery and equipment		1,633,056			—			1,633,056			(305,945	)		(305,945	)
Transfer of a financial asset		1,344,849			1,338,732			6,117			1,635			1,635
Finance lease		(542,848	)		(557,959	)		15,111			11,469			11,469
Construction contracts		341,623			313,380			28,243			(2,942	)		(2,942	)
Actuarial valuation of defined benefit liabilities		(4,067	)		91,357			(95,424	)		144,073			(8,052	)
Deffered tax effect		(241,991	)		(469,488	)		227,497			55,881			55,881
Withdrawal of amortization on goodwill		68,364			—			68,364			68,364			68,364
Recognition of callable preferred stock as borrowings		—			207,569			(207,569	)		(7,759	)		(7,759	)
Capitalization of financial cost		63,382			92,186			(28,804	)		1,733			1,733
Recognition of financial guarantee liabilities		21,304			27,443			(6,139	)		(1,618	)		(1,618	)
Adjustments of derivative		(36,896	)		(13,496	)		(23,400	)		31,386			31,386
Replacement of investment property		(2,979	)		—			(2,979	)		(2,979	)		(2,979	)
Reversal of negative goodwill		9,819			—			9,819			9,819			9,819
Other adjustments		51,697			78,330			(26,633	)		(242,050	)		(57,498	)
Total adjustments		1,458,600			122,854			1,335,746			(32,044	)		(75,536	)
K-IFRS	W	69,404,533			30,867,366			38,537,167			4,185,651			4,765,441

3)

Cash flow statement

Under K-IFRS, interest received, interest paid and income taxes paid which were presented using indirect method under the previous GAAP are presented using direct method as separate line items of cash flow operating activities. Also, effect of exchange rate fluctuations on cash held which were presented as cash flows from operating activities under the previous GAAP are presented as a separate line item from cash flows from operating, investing and financing activities.

85

POSCO
Separate Interim Financial Statements
(Unaudited)
June 30, 2011

(With Independent Auditors’ Review Report Thereon)

Table of Contents

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

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Stockholders
POSCO:

Reviewed financial statements

We have reviewed the accompanying separate statement of financial position of POSCO (the “Company”) as of June 30, 2011, and separate statements of comprehensive income for the three-month and six month periods ended June 30, 2011 and 2010 changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010 and notes, comprising a summary of significant accounting policies and other explanatory information (“the separate interim financial information”).

Management’s responsibility

Management is responsible for the preparation and fair presentation of this separate interim financial information in accordance with Korean International Financial Reporting Standard (“K-IFRS”) 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare the separate interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to express a conclusion on this separate interim financial information based on our review.

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying separate interim financial information referred to above is not presented fairly, in all material respects, in accordance with K-IFRS 1034 “Interim Financial Reporting”.

Other considerations

As discussed in note 3, the Company prepared the separate interim financial information in accordance with accounting policies which management plans to adopt for its first annual financial statements in accordance with K-IFRS. The accounting policies applied for the separate interim financial statements may be changed by management as considered necessary in the course of preparation of its first annual financial statements in accordance with K-IFRS for the year ending December 31, 2011.

Seoul, Korea
August 26, 2011

This report is effective as of August 26, 2011, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate interim financial information. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO
Separate Statements of Financial Position
As of June 30, 2011, December 31, 2010 and January 1, 2010
(Unaudited)

		June 30,		December 31,		January 1,
(in millions of Won)	Note	2011		2010		2010
Assets
Cash and cash equivalents	5,19	W	1,516,474		672,426		626,782
Trade accounts and notes receivable, net	6,19,33		3,877,956		3,548,448		2,951,783
Other short-term financial assets	7,19		1,753,327		2,754,319		6,304,563
Inventories	8		7,138,768		5,998,545		2,996,325
Other current assets	9		52,080		19,867		20,409
Total current assets			14,338,605		12,993,605		12,899,862
Long-term trade accounts and notes receivable, net	6,19,33		24		24		1,306
Other long-term financial assets	7,19		4,719,151		5,015,783		4,438,130
Investment in subsidiaries and associates	10		11,353,548		10,470,156		5,787,831
Investment property, net	11		119,059		92,273		104,362
Property, plant and equipment, net	12		20,641,200		20,011,110		18,412,868
Intangible assets, net	13		231,105		229,137		201,614
Other non-current assets	9		275,901		274,139		8,706
Total non-current assets			37,339,988		36,092,622		28,954,817
Total assets		W	51,678,593		49,086,227		41,854,679

See accompanying notes to separate interim financial statements.

3

POSCO
Separate Statements of Financial Position, Continued
As of June 30, 2011, December 31, 2010 and January 1, 2010
(Unaudited)

		June 30,			December 31,			January 1,
(in millions of Won)	Note	2011			2010			2010
Liabilities
Trade accounts payable	19,33	W	1,418,483			1,310,877			739,746
Short-term borrowings	14,19		3,394,791			3,116,364			699,849
Other short-term financial liabilities	15		1,265,211			958,081			1,157,314
Current income tax liabilities	30		393,324			594,539			290,638
Provisions	16		26,426			9,582			5,154
Other current liabilities	18		69,147			62,011			61,636
Total current liabilities			6,567,382			6,051,454			2,954,337
Long-term borrowings	14,19		7,019,959			6,296,633			5,681,243
Other long-term financial liabilities	15,19		130,757			52,166			100,758
Employee benefits	17		104,170			324,003			216,823
Deferred tax liabilities	30		473,025			334,199			237,995
Other long-term liabilities	18		3,763			4,277			6,277
Total non-current liabilities			7,731,674			7,011,278			6,243,096
Total liabilities			14,299,056			13,062,732			9,197,433
Shareholders’ Equity
Share capital	20		482,403			482,403			482,403
Capital surplus	20		1,229,700			1,158,539			1,158,539
Reserves	21		653,563			1,011,557			634,571
Treasury shares	22		(2,391,406	)		(2,403,263	)		(2,403,263	)
Retained earnings			37,405,277			35,774,259			32,784,996
Total shareholders’ equity			37,379,537			36,023,495			32,657,246
Total liabilities and shareholders’ equity		W	51,678,593			49,086,227			41,854,679

See accompanying notes to separate interim financial statements.

4

POSCO
Separate Statements of Comprehensive Income
For the three-month and six-month periods ended June 30, 2011 and 2010
(Unaudited)

		For the three- month periods						For the six- month periods
		ended June 30						ended June 30
(in millions of Won, except per share information)	Notes	2011			2010			2011			2010
Revenue	24, 33	W	10,031,967			7,932,695			19,144,089			14,882,221
Cost of sales	27, 33		(8,083,700	)		(5,775,350	)		(15,854,123	)		(10,952,034	)
Gross profit			1,948,267			2,157,345			3,289,966			3,930,187
Selling and administrative expenses
Administrative expenses	25,29		(210,998	)		(165,603	)		(416,731	)		(332,849	)
Selling expenses	25		(212,063	)		(192,914	)		(424,083	)		(366,228	)
Other operating income	26		9,330			24,561			20,647			54,973
Other operating expenses	26		(38,540	)		(25,330	)		(52,831	)		(45,973	)
Operating profit	32		1,495,996			1,798,059			2,416,968			3,240,110
Financial income and costs
Financial income	28		308,793			140,826			728,123			531,716
Financial costs	28		(162,295	)		(547,672	)		(328,146	)		(702,344	)
Profit before income tax			1,642,494			1,391,213			2,816,945			3,069,482
Income tax expense	30		(396,696	)		(288,533	)		(643,791	)		(592,304	)
Profit for the period			1,245,798			1,102,680			2,173,154			2,477,178
Other comprehensive income
Net changes in fair value of available-for-sale investments, net of tax	21		(240,316	)		(198,103	)		(357,994	)		(132,309	)
Defined benefit plan actuarial gains (loss), net of tax	17		(49,655	)		9,455			35,611			(23,756	)
Other comprehensive income, net of tax		W	955,827			914,032			1,850,771			2,321,113
Basic and diluted earnings per share	31	W	16,128			14,314			28,128			32,157

See accompanying notes to separate interim financial statements.

5

POSCO
Separate Statements of Changes in Equity
For the six-month periods ended June 30, 2011 and 2010
(Unaudited)

	Share		Capital					Treasury			Retained
(in millions of Won)	Capital		Surplus		Reserves			Shares			Earnings			Total
Balance as of January 1, 2010	W	482,403		1,158,539		634,571			(2,403,263	)		32,784,996			32,657,246
Comprehensive income:
Profit for the period		—		—		—			—			2,477,178			2,477,178
Net changes in fair value of available-for-sale investments, net of tax		—		—		(132,309	)		—			—			(132,309	)
Defined benefit plan actuarial losses, net of tax		—		—		—			—			(23,756	)		(23,756	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—			—			(500,714	)		(500,714	)
Balance as of June 30, 2010	W	482,403		1,158,539		502,262			(2,403,263	)		34,737,704			34,477,645

	Share		Capital					Treasury			Retained
	Capital		Surplus		Reserves			Shares			Earnings			Total
Balance as of January 1, 2011	W	482,403		1,158,539		1,011,557			(2,403,263	)		35,774,259			36,023,495
Comprehensive income:
Profit for the period		—		—		—			—			2,173,154			2,173,154
Net changes in fair value of available-for-sale investments, net of tax		—		—		(357,994	)		—			—			(357,994	)
Defined benefit plan actuarial gains, net of tax		—		—		—			—			35,611			35,611
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—			—			(577,747	)		(577,747	)
Acquisition of treasury shares		—		—		—			(61,296	)		—			(61,296	)
Disposal of treasury shares		—		71,161		—			73,153			—			144,314
Balance as of June 30, 2011	W	482,403		1,229,700		653,563			(2,391,406	)		37,405,277			37,379,537

See accompanying notes to separate interim financial statements.

6

POSCO
Separate Statements of Cash Flows
For the six-month periods ended June 30, 2011 and 2010
(Unaudited)

(in millions of Won)	Notes	2011			2010
Cash flows from operating activities
Cash generated from operations		W	2,072,355			2,612,181
Profit for the period			2,173,154			2,477,178
Adjustments	35		1,264,616			2,005,565
Changes in operating assets and liabilities	35		(1,365,415	)		(1,870,562	)
Interest received			63,173			124,696
Interest paid			(182,300	)		(131,830	)
Dividends received			181,554			60,696
Income taxes paid			(635,741	)		(303,627	)
Net cash provided by operating activities			1,499,041			2,362,116
Cash flows from investing activities
Disposal of short-term financial instruments			3,088,970			8,969,744
Disposal of available-for-sale investments			297			121,129
Decrease in long-term loans			6,464			—
Disposal of investment in subsidiaries and associates			48			—
Disposal of property, plant and equipment			9,307			7,826
Acquisition of short-term financial investments			(1,957,536	)		(9,645,672	)
Increase in short-term loans			—			(6,100	)
Acquisition of available-for-sale instruments			(159,839	)		(48,061	)
Increase in long-term loans			(6,928	)		(9,081	)
Acquisition of investement in subsidiaries and associates			(880,834	)		(316,737	)
Acquisition of property, plant and equipment			(1,529,833	)		(2,095,472	)
Cost of removal of property, plant and equipment			(6,635	)		(9,513	)
Acquisition of intangible assets			(9,187	)		(5,867	)
Others			(3,247	)		(430,603	)
Net cash used in investing activities			(1,448,953	)		(3,468,407	)
Cash flows from financing activities
Proceeds from borrowings			3,315,418			1,754,880
Increase in long-term financial liabilities			2,119			40,806
Disposal of treasury shares			164,384			—
Repayment of borrowings			(2,044,979	)		(569,999	)
Decrease in long-term financial liablities			(3,939	)		(27,951	)
Acquisition of treasury shares			(61,296	)		—
Payment of cash dividends			(577,747	)		(500,714	)
Net cash used in financing activities			793,960			697,022
Net increase (decrease) in cash and cash equivalents			844,048			(409,269	)
Cash and cash equivalents
Cash and cash equivalents at beginning of the period			672,426			626,782
Cash and cash equivalents at end of the period		W	1,516,474			217,513

See accompanying notes to separate interim financial statements.

7

POSCO
Notes to Separate Interim Financial Statements
As of June 30, 2011
(Unaudited)

1. Reporting Entity

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

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

As of June 30, 2011, the shares of the Company are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

2. Statement of Compliance

Statement of compliance

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

K-IFRS is effective as of the fiscal year beginning on January 1, 2011. The Company has also presented the comparative information in the separate interim financial statements in accordance with K-IFRS.

These interim financial statements are separate interim financial statements in accordance with K-IFRS 1027 “Consolidated and Separate Financial Statements” presented by a parent, an investor in an associate or a venture in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

These separate interim financial statements have been prepared in accordance with K-IFRS 1034 “Interim Financial Reporting” as part of the period covered by its first IFRS financial statements.

An explanation of how the transition from previous GAAP to K-IFRS has affected the Company’s reported financial position, financial performance and cash flows is provided in note 36.

8

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Basis of measurement

The separate financial statements have been prepared under the historical cost basis except for the following items, as described in the accounting policy below.

1)	Derivatives measured at fair value
2)	Trading securities measured at fair value
3)	Available-for-sale financial assets measured at fair value
4)	The liability for stock appreciation rights measured at fair value
5)	Employee benefits measured at the present value of the defined benefit obligation less the fair value of the plan assets

Functional and presentation currency

These financial statements are presented in Korean won, which is the Company’s functional currency and the currency of the primary economic environment in which the Company operates.

Use of estimates and judgements

The preparation of the interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. This includes valuation of property, plant and equipment, trade accounts and notes receivables, inventories, deferred tax assets and derivative financial instruments. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

l Note 17— Employee Benefits

9

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3. Summary of Significant Accounting Policies

The significant accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing the opening K-IFRS statement of financial position at January 1, 2010 for the purposes of the transition to K-IFRSs. The accounting policies the Company presented in interim financial statements are changeable when the accounting policies by opening K-IFRS financial statement of the end of fiscal year December 31, 2011 are confirmed.

The Company’s transition date to K-IFRS in accordance with IFRS1 is January 1, 2010, and reconciliations and descriptions of the effect of the transition are provided in Note 36.

Investments in subsidiaries and associates

These interim financial statements are the separate financial statements in accordance with K-IFRS 1027, “Consolidated and Separate Financial Statements”. The Company applied the cost method to investments in subsidiaries and associates in accordance with K-IFRS 1027. The carrying amount under previous GAAP on the date of transition to K-IFRS is considered to be the deemed cost of investments in subsidiaries and associates on the date of transition. Dividends from a subsidiary or associate are recognized in profit or loss when the right to receive the dividend is established.

Foreign currency transactions and translation

Foreign currency transactions are initially recorded using the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date fair value is initially determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on non-monetary items are recognized in other comprehensive income, exchange components of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on non-monetary items are recognized in profit or loss, exchange components of those gains or losses are recognized in profit or loss.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, checking accounts, time deposits and others with original maturities of three months or less, except for equity instruments.

10

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Non-derivative financial assets

Non-derivative financial assets include financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. The Company recognizes loans and receivables on the date that they are originated.

All other non-derivative financial assets are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Except for financial assets at fair value through profit and loss, when a non-derivative financial asset is recognized initially, the Company measures it at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the non-derivative financial asset.

(a)	Financial assets at fair value through profit or loss
	A non-derivative financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
(b)	Held-to-maturity financial assets
	If the Company has the positive intent and ability to hold debt securities to maturity, then such non-derivative financial assets are classified as held-to-maturity. Subsequent to initial recognition, the held-to-maturity financial assets are measured at amortized cost by using the effective interest method, less any impairment losses.
(c)	Loans and receivables
	Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, the loans and receivables are measured at amortized cost by using the effective interest rate method, less any impairment losses.
(d)	Available-for-sale financial assets
	Available-for-sale financial assets are non-derivative financial assets that are not classified in any of the previous categories. Subsequent to initial recognition, the available-for-sale financial assets are measured at fair value. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, and derivatives those are linked to and must be settled by delivery of such unquoted equity instruments, are measured at cost.

11

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(e)	Derecognition of non-derivative financial assets
	The Company derecognizes non-derivative financial assets when the contractual rights to the cash flows from the financial asset expire, or the Company transfers the rights to receive the contractual cash flow from the financial asset as well as substantially all the risks and rewards of ownership of the financial asset. Any interest in a transferred financial asset that is created or retained by the Company is recognized as a separate asset or liability.
(f)	Offsetting a financial asset and a financial liability
	A financial asset and a financial liability are offset and the net amount presented in the statement of financial position only when the Company currently has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Inventories

Inventories are measured at the lower of cost and net realizable value. Costs are determined by using the moving-weighted average method. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The allocation of fixed production overheads to the costs of finished goods or work in progress are based on the normal capacity of the production facilities.

When inventories are sold, the carrying amount of those inventories are recognized as cost of goods sold in the period in which the related revenue is recognized and the amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, are recognized as a reduction in the amount of inventories recognized as a cost of goods sold in the period in which the reversal occurs.

Investment property

Investment property is held to earn rentals. An investment property including transaction costs is measured initially at its cost. Subsequently, investment property is measured at cost less accumulated depreciation and accumulated impairment losses.

Property, plant and equipment

Property, plant and equipment are generally measured at cost. The cost includes expenditures that are directly attributable to bringing the asset to a working condition for its intended use and the estimated costs of dismantling and removing the asset, if applicable, and restoring the site on which it is located. Upon the Company’s transition to K-IFRS, the deemed cost of certain machinery and equipment was measured at fair value.

12

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

The cost of replacing a part of an item is recognized in the carrying amount of the item of property, plant and equipment, if the following recognition criteria are met.

(a)	it is probable that future economic benefits associated with the item will flow to the Company; and
(b)	the cost can be measured reliably.
	The carrying amount of the replaced part is derecognized at the time the replacement part is recognized. The costs of the day-to-day servicing of the item are recognized in profit or loss as incurred.

Depreciation is based on the cost of an asset less its residual value. Depreciation of property, plant and equipment, except for land, is recognized in profit or loss on a straight-line basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset, over the estimated useful lives of each component of an item of property, plant and equipment. Lease assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognized.

The estimated useful lives for the current and comparative periods are as follows:

Buildings	20-40 years
Structures	20-40 years
Machinery and equipment	1-15 years
Vehicles	4-9 years
Tools	4 years
Furniture and fixtures	4 years
Lease assets	18 years

The residual value and the useful lives are reviewed at least at the end of each reporting period and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.

In order to apply the useful life which corresponds to the available periods of the machinery and equipment’s expected utility, from January 1, 2011 the Company changed the useful life of certain machinery and equipment in its steel operating segment from 8 years to 15 years. During the six-month periods ended June 30, 2011, the depreciation costs decreased by W618,410 million as a result of this change in the useful life.

13

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognized as an expense. A qualifying asset takes a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured, or otherwise produced, over a short period of time, are not qualifying assets. Also, assets that are ready for their intended use or sale when acquired are not qualifying assets.

To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Company capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.

Intangible assets

Intangible assets are initially measured at cost and the carrying amount is the amount at which an asset is recognized in the statement of financial position after deducting any accumulated amortization and accumulated impairment losses thereon.

Amortization of intangible assets is calculated on a straight-line basis over the estimated useful lives of intangible assets, as described below, with nil residual value from the date that they are available for use.

Intellectual property rights	5-10 years
Port facilities usage rights	1 -75 years
Development expenses	4 years
Other intangible assets	4-20 years

The estimated useful life and amortization method of intangible assets with a finite useful life are reviewed at each financial year-end and adjusted, if appropriate. An intangible asset with an indefinite useful life is reviewed each period to determine whether events and circumstances continue to support its indefinite useful life.

14

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Expenditure on research shall be recognized as an expense when it is incurred. An intangible asset arising from development shall be recognized if, and only if, an entity can demonstrate all of following:

(a)	the technical feasibility of completing the intangible assets so that it will be available for use or sale,
(b)	its intention to complete the intangible assets,
(c)	its ability to use or sell the intangible assets,
(d)	how the intangible assets will generate probable future economic benefits — among other things, the entity can demonstrate the existence of a market for the output of the intangible assets or the intangible assets itself or, if it is to be used internally, the usefulness of the intangible assets,
(e)	the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible assets, and
(f)	its ability to measure reliably the expenditure attributable to the intangible assets during its development.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

Leases

A lease is classified as a finance lease if it transfers substantially all of the risks and rewards incidental to ownership. All other leases are classified as operating leases.

(a)	Finance leases
	At the commencement of the lease term, the Company recognizes as finance assets and finance liabilities in its statements of financial position, the lesser of the fair value of the leased property and the present value of the minimum lease payments. Any initial direct costs are added to the amount recognized as an asset.
	Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
	The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.
(b)	Operating leases
	Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term.

15

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Impairment for financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on reliably estimated future cash flows of the asset.

Objective evidence that financial assets are impaired can include default or delinquency by an issuer, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. For an investment in an equity security, (a) default or delinquency by an issuer or (b) a significant or prolonged decline in an equity security’s fair value below its cost represent objective evidence of impairment.

The Company considers evidence of impairment for receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. Receivables and held-to-maturity investment securities which are not individually significant are collectively assessed from impairment by grouping together receivables and held-to-maturity investment securities with similar risk characteristics.

The amount of the impairment loss on financial assets carried at amortized cost is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. The amount of the reversal is recognized in profit or loss.

The amount of the impairment loss on financial assets carried at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

16

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available for sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

Impairment for non-financial assets

The Company assesses at each reporting date whether there is any indication that the Company’s non-financial assets are impaired. If any such indication exists, the Company estimates the recoverable amount of the asset, except for assets arising from employee benefits, inventories, and deferred tax assets.

Recoverable amount is determined for an individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company determines the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is defined as the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value-in-use. In assessing value-in-use, the estimated future cash flows expected to be derived from an asset or cash-generating unit are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognized in profit or loss as an impairment loss.

Impairment losses recognized in respect of cash-generating units are allocated to reduce the carrying amounts of the other assets in the unit on a pro rata basis. The Company assesses at each reporting date whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized, the Company estimates the recoverable amount of that asset. The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

17

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Non-derivative financial liabilities

Financial liabilities are classified into financial liabilities at fair value through profit or loss and other financial liabilities in accordance with the substance of the contract and definition of financial liabilities, and are recognized on the statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities at fair value through profit or loss are measured at fair value after initial recognition and the changes of fair value are recognized in profit or loss. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost by using the effective interest rate method.

The Company derecognizes a financial liability only when its contractual obligations are discharged, cancelled or expired.

Derivative financial instruments

Derivatives are recognized initially at fair value and are remeasured at fair value at the end of each reporting period.

Embedded derivatives, if any, are separated from the host contract and accounted for separately only if the following criteria have been met:

(a)	the economic characteristics and risks of the host contract and the embedded derivative are not closely related;
(b)	a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
(c)	the hybrid (combined) instrument is not measured at fair value through profit or loss.

Changes in the fair value of embedded derivatives separated from the host contract are recognized immediately in profit or loss.

Employee benefits

(a)

Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as profit or loss. If the Company has a legal or constructive obligation and the obligation can be reliably measured, the Company recognizes the amount of expected payment for profit-sharing and bonuses payable as liabilities.

18

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b)	Post-employment benefit: Defined contribution plans
	With regard to the defined contribution plan, when an employee has rendered service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plan in exchange for that service as an accrued expense, after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Company recognizes that excess as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund.
(c)	Post-employment benefit: Defined benefit plans
	The Company recognizes the pension liability related to defined benefit plans at the end of a reporting period, and measures it at the present value of the defined benefit obligation less the fair value of the plan assets.
	The Company uses the projected unit credit method in order to determine the defined benefit obligation. The liability is determined by discounting estimated future cash flows using the market yields on high quality corporate bonds that have a similar maturity to the maturity of the related employment benefit. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. The changes in actuarial assumptions and experience adjustments are recognized outside profit or loss.
	When the amount determined may be an asset, the asset is limited to the net amount of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan and any cumulative unrecognized net actuarial losses and past service cost.
	When the benefits of a plan are enhanced, the portion of the incremental benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

Stock Appreciation Rights

The Company granted share options to executives as part of the reward for their services and is accounting for the options as cash-settled share-based payment transactions. For cash-settled share-based payment transactions, the Company measures the goods or services acquired and the liability incurred at the fair value of the liability and recognizes the employment benefits and the liability during the vesting period. Until the liability is settled, the Company remeasures the fair value of the liability at each reporting date and at the date of settlement, with any changes in fair value recognized in profit or loss for the period as well.

19

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

Share capital

Common stock is classified as equity and the incremental costs arising directly attributable to the issuance of common stock, less its tax effects, are deducted from equity.

If the Company reacquires its own equity instruments, those instruments (“treasury shares”) are deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of its own equity instruments. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase to equity, and the resulting surplus or deficit on the transaction is recorded in capital surplus.

Revenue

The Company’s revenue from the sale of goods and the use of assets is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

(a)	Sale of goods
	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.
(b)	Service rendered
	Service sales are mostly comprised of rental income. Rental income from investment property is recognized in profit or loss on a straight-line basis over the term of the leases.

20

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with a grant’s conditions, and that the grant will be received. Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted from the carrying amount of the asset and recognized in profit or loss on a systematic and rational basis over the life of a depreciable asset. Other government grants that compensate the Company for expenses incurred are recognized in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognized.

Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established.

Finance costs comprise interest expense on borrowings and changes in the fair value of financial assets at fair value through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest method.

Income tax

Income tax expense comprises current tax and deferred tax, and is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income.

(a)

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year. Since taxable income excludes income which will be added or deductible in other taxation periods, non-taxable items or non-deductible items from net income on comprehensive income statements, the taxable income and net income on comprehensive income statements differ. Tax payable related to current tax is calculated by using tax rates enacted or substantively enacted.

21

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b)

Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. However, deferred tax is not recognized for the following temporary differences:

1)	the initial recognition of goodwill; or
2)	the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss

All deferred tax liabilities are recognized for taxable differences relating to investments in subsidiaries and jointly controlled entities except the case of that the Company can control the reverse timing of the temporary differences and it is probable that they will not reverse in the foreseeable future.

In addition, deferred tax assets from deductible temporary differences are recognized only when it is probable that they will not reverse in the foreseeable future and it is probable that taxable profits will be available against which the deductible temporary differences can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and the Company reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

The Company offsets a deferred tax asset against a deferred tax liability of the same taxable entity only if they relate to income taxes levied by the same taxation authority and the entity has a legally enforceable right to offset current tax assets against current tax liabilities.

22

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

Basic and Diluted Earnings per share

The Company calculates basic earnings per share (“EPS”) data for its ordinary shares, which is included at the end of the statement of comprehensive income. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, excluding treasury shares held.

4. Financial risk management

The Company has exposure to credit risk, liquidity risk and market risk from its use of financial instruments. This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing these risks and the Company’s management of financial risks, including quantitative disclosures.

(a) Risk management policy

The board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The purpose of risk management policies is to identify the potential risk factors that may affect the Company’s financial performance, and minimize or eliminate them to the extent that is acceptable. The risk management framework and policies are regularly reviewed to reflect market situations and changes in the Company’s activities.

The Company aims to establish an effective control environment in which every employee understands his or her responsibility by training, management manuals and procedures.

(b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of a nation or an industry in which a customer operates its business does not have a significant influence on credit risk. The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The allowance for impairment includes impairment losses of trade and other receivables that are individually significant, and unidentified impairment losses of the assets in a group of financial assets with similar credit risk characteristics. The allowance for impairment of a group of financial assets is determined based on the historical data of financial assets with similar credit risk characteristics.

23

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Liquidity risk management

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Company’s approach to managing liquidity is to ensure, as far as possible, that it always maintains a diversified maturity profile in its loan portfolio.

The Company’s cash flow from business, borrowing or financing is sufficient to cash requirement for the investment. The Company believes that it is capable of raising funds by borrowing or financing if the Company is not able to have generate cash flow requirements its operations. The Company has committed borrowing facilities with various banks.

(d) Market risk management

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The goal of market risk management is optimization of profit and controlling the exposure to market risk within acceptable limits.

1) Currency risk

The Company is exposed to currency risk for sales, purchases and borrowings in a currency other than the functional currency, Korean Won. The Company’s general policy in respect of foreign currency risks is a natural hedge which foreign currency income should be firstly offset with foreign currency expenditures. And the remaining net exposures after the natural hedge have been hedged using derivative contracts such as forward exchange contracts. And the Company’s management has monitored the currency regularly for hedging foreign exchange exposure.

2) Interest rate risk

The Company mostly borrows at fixed interest rates. The Company’s management has monitored regularly for hedging interest rate risk from variable rate.

(e) Management of capital risk

The fundamental goal of capital management is the maximization of shareholders’ value by means of the stable dividend policy and the retirement of treasury shares. The capital structure of the Company consists of equity and net debt, deducting cash and cash equivalents from borrowings. The Company applied the same financial risk management strategy that was applied in the previous period. The equity attributable to owners as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

(in millions of Won)	2011			2010			January 1, 2010
Total borrowings		10,414,750			9,412,997			6,381,092
Less: Cash and cash equivalents		1,516,474			672,426			626,782
Net borrowings		8,898,276			8,740,571			5,754,310
Total shareholders’ equity		37,379,537			36,023,495			32,657,246
Net borrowings-to-equity ratio		23.81	%		24.26	%		17.62	%

24

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

5. Cash and Cash Equivalents

Cash and cash equivalents as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	2011		2010		January 1, 2010
Checking accounts	W	1,074		886		817
Time deposits		1,130,000		300,000		380,465
Money market trust		245,400		111,500		228,700
Money market funds		140,000		260,040		—
Other cash and cash equivalents		—		—		16,800
	W	1,516,474		672,426		626,782

6. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	2011			2010			January 1, 2010
Current
Trade accounts and notes receivable	W	3,879,906			3,553,135			2,963,035
Less: Allowance for doubtful accounts		(1,950	)		(4,687	)		(11,252	)
		3,877,956			3,548,448			2,951,783
Non-Current
Trade accounts and notes receivable		252			252			1,875
Less: Allowance for doubtful accounts		(228	)		(228	)		(569	)
		24			24			1,306
	W	3,877,980			3,548,472			2,953,089

Borrowings includes the trade accounts and notes receivable sold to financial institutions, but derecognition conditions were not met, amounted to W 254,179 million, W 220,866 million and W 267,874 million as of June 30, 2011, December 31, 2010 and January 1, 2010, respectively.

25

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

7. Other Financial Assets

(a) Other short-term financial assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Financial assets at fair value through profit or loss
Financial assets held for trading	W	40,330		182,208		795,811
Derivatives assets held for trading		428		—		—
Available-for-sale financial assets
Short-term available-for-sale securities (bonds)		—		—		20,230
Held-to-maturity investments
Current portion of held-to-maturity securities (bonds)		—		1,978		20,000
Loans and other receivables
Short-term financial instruments		1,231,431		2,362,621		5,280,927
Cash deposits (*1)		13,857		14,101		10,666
Other accounts receivable, net		449,554		164,376		126,942
Accrued income		17,727		28,888		49,987
Other checking accounts		—		147		—
	W	1,753,327	W	2,754,319	W	6,304,563

(*1)	The Company is required to provide deposits to maintain checking accounts and accordingly, the withdrawal of these deposits is restricted.
(b)	Other long-term financial assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Available-for-sale investments
Long-term available-for-sale securities (bonds)	W	1		11		104,895
Long-term available-for-sale equity securities		4,634,556		4,931,117		4,271,392
Long-term available-for-sale securities (investment in capital)		500		500		500
Held-to-maturity investments
Held-to-maturity securities (bonds) (*1)		29,866		29,830		31,675
Loan and other receivable
Cash deposits (*2)		40		40		40
Long-term loans		49,447		48,950		24,537
Long-term other accounts receivable		3,011		3,122		3,321
Deposits		1,730		2,213		1,770
	W	4,719,151		5,015,783		4,438,130

26

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(*1)	As of June 30, 2011, government bonds amounting to W 29,866 were provided as collateral to the Gyeongsangbuk-Do Province Office as a guarantee for environmental remediation of POSCO No. 4 disposal site.
(*2)	The Company is required to provide deposits to maintain checking accounts and accordingly, the withdrawal of these deposits is restricted.
(c)	Long-term available-for-sale equity securities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							Book Value
	Number of				Acquisition						January 1,
(in millions of Won)	Shares		Ownership (%)		cost		2011		2010		2010
Marketable equity securities
Nippon Steel Corporation (*1)		238,352,000		3.50	W	719,622		827,747		972,351		1,128,734
KB Finanacial group Inc.		15,454,067		4.00		715,356		780,430		786,950		783,015
SK Telecom Co., Ltd. (*1)		4,525,482		5.60		1,250,256		774,422		809,280		743,845
Hyundai Heavy Industries Co.,Ltd		1,477,000		1.94		343,506		655,050		654,311		256,260
MacArthur Coal Limited		21,215,700		7.25		420,805		267,774		314,446		249,431
Shinhan Financial group Inc.		4,369,881		0.92		228,778		222,427		231,167		188,779
Hana Financial group Inc.		4,663,776		2.20		29,998		173,959		201,942		153,438
Others (12 companies)						188,728		216,427		224,913		146,849
						3,897,049		3,918,236		4,195,360		3,650,351
Non-marketable equity securities
Nacional Minerios S.A. (*2)		30,784,625		6.48		668,635		507,530		534,734		535,357
The Siam United Steel (*2)		11,071,000		12.30		34,658		68,604		69,013		65,135
Others (25 companies) (*3)						154,299		140,186		132,010		20,549
						857,592		716,320		735,757		621,041
					W	4,754,641		4,634,556		4,931,117		4,271,392

(*1)	As of June 30, 2011, 2,183,913 shares equivalent to 19,655,219 American depository receipts (“ADRs”) of SK Telecom Co., Ltd. have been pledged as collateral for the exchangeable bonds issued and 130,379,000 shares of Nippon Steel Corporation have been pledged as collateral for the 1st Samurai bonds issued.
(*2)	The corporation has been evaluated using the estimated fair value by an external professional evaluation agency.
(*3)	These non-marketable equity securities are recorded at cost since fair value cannot be reliably measured.

27

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

8. Inventories

Inventories as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Finished goods	W	855,797			698,219			344,191
Semi-finished goods		1,701,748			1,441,128			843,720
By-products		6,481			5,542			4,281
Raw materials		1,563,693			1,704,831			696,492
Fuel and materials		529,429			524,077			405,003
Materials-in-transit		2,486,948			1,624,765			702,807
Others		610			576			522
		7,144,706			5,999,138			2,997,016
Allowance for inventories valuation		(5,938	)		(593	)		(691	)
	W	7,138,768			5,998,545			2,996,325

9. Other Assets

Other current assets and other long-term assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Other current assets
Advance payment	W	5,085			6,218			11,943
Prepaid expenses		46,995			13,649			8,466
		52,080			19,867			20,409
Other long-term assets
Long-term prepaid expenses		10,070			10,687			5,332
Dishonored receivables		13			13			13
Others (*1)		265,831			263,459			4,033
Less : Allowance for doubtful accounts		(13	)		(20	)		(672	)
	W	275,901			274,139			8,706

(*1) Includes guarantee deposits of W 257,878 million as of June 30, 2011 and December 31, 2010 in relation to exploration of Australia Roy Hill iron ore mine.

28

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

10. Investment in Subsidiaries and Associates

(a) Investment in subsidiaries and associates as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Subsidiaries	W	10,286,761		9,662,423		5,260,593
Associates		1,066,787		807,733		527,238
	W	11,353,548		10,470,156		5,787,831

(b) Details of subsidiaries and carrying values as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)									January 1,
[Domestic]	Country	Principal operations	Ownership (%)		2011		2010		2010
Daewoo International. Co., Ltd.	Korea	Trading		66.91	W	3,371,481		3,371,481		—
POSCO E&C Co., Ltd.	Korea	Engineering and Construction		89.53		1,510,716		1,510,716		1,063,089
POSCO Power Corp.	Korea	Generation of Electricity		100.00		649,148		649,148		649,148
POSCO Specialty Steel Co., Ltd.	Korea	Steel manufacturing and Sales		100.00		628,842		628,842		628,842
POSCO P&S Co., Ltd.	Korea	Steel sales and service		95.31		421,927		421,927		421,927
POSCOAST Co., Ltd.	Korea	Steel manufacturing and Sales		100.00		138,909		93,909		75,603
POSCO Coated & Color Steel Co., Ltd.	Korea	Coated steel manufacturing		56.87		108,421		108,421		108,421
POSCO M-TECH Co., Ltd (*1)	Korea	Packing materials manufacturing		48.85		107,278		—		—
POSCO Chemtec Company Ltd.	Korea	Manufacturing and sellings		60.00		100,535		100,535		100,535
POSCO ICT Co., Ltd.	Korea	Computer hardware and software distribution		72.54		70,990		70,990		70,990
POS-HiMETAL CO., Ltd	Korea	Steel manufacturing and Sales		65.00		49,452		31,837		5,837
POSCO Family Strategy Fund	Korea	Financial investment		69.93		40,000		20,000		—
Others (19 companies)						346,022		307,147		213,375
					W	7,543,721		7,314,953		3,337,767

29

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(in millions of Won)									January 1,
[Foreign]	Country	Principal operations	Ownership (%)		2011		2010		2010
POSCO Australia Pty. Ltd.	Austrailia	Steel sellings and mine development		100.00	W	330,623		330,623		330,623
Zhangjiagang Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing		58.60		285,888		283,845		283,845
POSCO WA PTY LTD.	Austrailia	Mine development		100.00		223,570		205,885		—
POSCO China Holding Corp	China	Investment management		100.00		223,436		208,413		208,413
POSCO Maharashtra Steel Pvt. Ltd.	India	Steel manufacturing and Sales		100.00		196,568		84,442		63,872
POSCO Vietnam Co., Ltd.	Vietnam	Steel manufacturing		85.00		158,027		158,806		159,629
POSCO VST Co., Ltd.	Vietnam	Steel manufacturing and Sales		95.65		144,573		105,348		71,901
Guangdong Pohang Coated Steel Co., Ltd.	China	Steel manufacturing		89.06		137,420		64,876		31,299
POSCO-India Private. Ltd.	India	Steel manufacturing		100.00		130,770		108,538		108,538
POSCO America Corporation	USA	Trading-Steel		99.45		117,489		117,489		113,510
POSCO Investment Co., Ltd.	Hong Kong	Finance		100.00		90,522		92,884		94,629
POSCO-Mexico Co., Ltd.	Mexico	Cold-rolled steel manufacturing and sales		84.67		71,787		62,581		62,581
POSCO-Japan Co., Ltd.	Japan	Trading-Steel		100.00		68,436		68,436		68,436
Qingdao Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing and sales		70.00		65,982		65,982		65,982
POSCO (Suzhou) Automotive
Processing Center Co., Ltd.	China	Steel manufacturing and Sales		90.00		62,494		49,429		49,429
PT. KRAKATAU STEEL POSCO	Indonesia	Steel manufacturing and Sales		70.00		47,904		1,625		—
POSCO ASSAN TST STEEL Industry	Turkey	Steel manufacturing and Sales		60.00		37,201		—		—
POSCO China Dalian Plate Processing Center Co., Ltd.	China	Steel manufacturing and Sales		80.00		32,992		32,992		—
Posco Asia Co., Ltd.	Hong Kong	Steel intermediate trading		100.00		32,189		32,189		32,189
POSCO-Malaysia Co.,Ltd.	Malaysia	Steel manufacturing and Sales		80.07		31,027		31,027		—
POSCO Thailand Bangkok Processing Center Co., Ltd.	Thailand	Steel manufacturing and Sales		85.62		25,945		25,945		25,945
Others (27 companies)						228,197		216,115		152,005
						2,743,040		2,347,470		1,922,826
					W	10,286,761		9,662,423		5,260,593

(*1) In 2011, this investment security was reclassified to investment in subsidiaries from investment in associates as the Company has the power over more than half of the voting rights by virtue of an agreement with Postech which has 4.72% of ownership.

30

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Details of associates and carrying values as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)									January 1,
[Domestic]	Country	Principal operations	Ownership (%)		2011		2010		2010
Sungjin Geotec Co., Ltd.	Korea	Industrial machinery manufacturing		26.34	W	159,878		159,878		—
SNNC Co., Ltd.	Korea	Material manufacturing		49.00		100,655		100,655		100,655
POSCO M-TECH Co., Ltd	Korea	Packing materials manufacturing		—		—		107,278		5,989
Others (3 companies)						20,152		26,910		18,384
						280,685		394,721		125,028
[Foreign]
POSCO-NPS Niobium LLC.	USA	Mine development		50.00		364,609		—		—
NMC	New Caledonia	Raw material manufacturing and Sales		49.00		189,197		189,197		189,197
KOBRASCO	Brazil	Facilities lease		50.00		98,962		98,962		98,962
B.X. Steel PSOCO cold rolled sheet co.,ltd.	China	Steel manufacturing and Sales		25.00		64,151		64,383		65,029
POSCHROME	South Africa	Raw material manufacturing and Sales		50.00		30,090		30,090		15,090
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co.,Ltd.	China	Steel manufacturing and Sales		24.00		11,003		11,003		11,003
Others (9 companies)						28,090		19,377		22,929
						786,102		413,012		402,210
					W	1,066,787		807,733		527,238

31

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

11. Investment Property, Net

(a) Investment property as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Acquisition cost	W	166,613			121,666			135,350
Accumulated depreciation		(47,554	)		(29,393	)		(30,988	)
Book value	W	119,059			92,273			104,362

(b) The changes in carrying value in investment property for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 are as follows:

1) For the six-month period ended June 30, 2011

(in millions of Won)	Beginning		Depreciation (*1)			Others (*2)		Ending
Land	W	41,877		—			1,381		43,258
Buildings		48,514		(1,521	)		23,286		70,279
Structures		1,882		(57	)		3,697		5,522
Total	W	92,273		(1,578	)		28,364		119,059

(*1)	The useful live and depreciation method of investment property is identical to those of property, plant and equipment.
(*2)	Mainly includes assets transferred from property, plant and equipment in relation to change in rental ratio.

2) For the year ended December 31, 2010

(in millions of Won)	Beginning		Depreciation (*1)			Others (*2)			Ending
Land	W	47,333		—			(5,456	)		41,877
Buildings		54,855		(2,060	)		(4,281	)		48,514
Structures		2,174		(45	)		(247	)		1,882
Total	W	104,362		(2,105	)		(9,984	)		92,273

(*1)	The useful live and depreciation method of investment property is identical to those of property, plant and equipment.
(*2)	Mainly includes assets transferred to property, plant and equipment in relation to change in rental ratio.

32

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

12. Property, Plant and Equipment, Net

(a) Property, plant and equipment as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Cost	W	40,975,529			39,666,445			35,918,640
Less: Accumulated depreciation		(20,334,329	)		(19,655,335	)		(17,505,772	)
	W	20,641,200			20,011,110			18,412,868

(b) The changes in carrying value of property, plant and equipment for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 are as follows:

1) For the six-month period ended June 30, 2011

(in millions of Won)	Beginning		Acquisition (*1)		Disposal			Depreciation			Others (*2)			Ending
Land	W	1,068,294	W	208,025	W	(466	)	W	—		W	(1,381	)	W	1,274,472
Buildings		2,502,213		437,681		(1,819	)		(110,379	)		(23,068	)		2,804,628
Structures		1,942,405		148,649		(5,741	)		(77,001	)		(3,697	)		2,004,615
Machinery and equipment		11,736,629		1,539,108		(17,767	)		(631,847	)		(218	)		12,625,905
Vehicles		22,753		2,203		—			(4,167	)		—			20,789
Tools		27,807		13,758		(2	)		(6,488	)		—			35,075
Furniture and fixtures		66,345		12,789		—			(11,724	)		—			67,410
Lease assets		8,918		—		—			(319	)		—			8,599
Construction-in-progress		2,635,746		1,535,588		—			—			(2,371,627	)		1,799,707
Total	W	20,011,110	W	3,897,801	W	(25,795	)	W	(841,925	)	W	(2,399,991	)	W	20,641,200

(*1)	Includes acquisition cost transferred from construction-in-progress in relation to the expansion of Gwangyang sintering plates and coke establishment plates and others amounting to W 2,362,213 million.
(*2)	Represent assets transferred from construction-in-progress to intangible assets, other property, plant and equipment and investment property.

2) For the year ended December 31, 2010

(in millions of Won)	Beginning		Acquisition (*1)		Disposal			Depreciation			Others (*2)			Ending
Land	W	914,536	W	155,701	W	(7,398	)	W	—		W	5,455		W	1,068,294
Buildings		1,943,655		755,928		(8,840	)		(192,811	)		4,281			2,502,213
Structures		1,477,745		565,020		(4,229	)		(125,429	)		29,298			1,942,405
Machinery and equipment		10,142,068		3,868,845		(44,740	)		(2,207,565	)		(21,979	)		11,736,629
Vehicles		16,802		14,094		(154	)		(7,989	)		—			22,753
Tools		16,737		19,389		(1	)		(8,318	)		—			27,807
Furniture and fixtures		50,058		34,825		(60	)		(18,478	)		—			66,345
Lease assets		9,555		—		—			(637	)		—			8,918
Construction-in-progress		3,841,712		4,247,847		—			—			(5,453,813	)		2,635,746
Total	W	18,412,868	W	9,661,649	W	(65,422	)	W	(2,561,227	)	W	(5,436,758	)	W	20,011,110

(*1)	Includes acquisition cost transferred from construction-in-progress in relation to the expansion of Gwangyang sintering plates and coke establishment plates and others amounting to W 5,413,802 million.
(*2)	Represent assets transferred from construction-in-progress to intangible assets, other property, plant and equipment and investment property.

33

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

c) Borrowing costs capitalized and capitalized interest rate for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	2011			2010
Borrowing costs capitalised		5,755			2,275
Capitalisation rate		4.55	%		4.72	%

13. Intangible Assets, Net

(a) Intangible assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Acquisition cost	W	871,550			853,218			946,417
Less: Accumulated amortization		(640,445	)		(624,081	)		(744,803	)
	W	231,105			229,137			201,614

(b) Changes in carrying values of intangible assets for the six-month periods ended June 30, 2011 and the year ended December 31, 2010 are as follows:

1) For the six-month periods ended June 30, 2011

			Increase				Decrease
(in millions of Won)	Beginning		Acquisition(*2)		Development		Disposal			Amortization			Ending
Intellectual property rights	W	4,919		758		—		(145	)		(337	)		5,195
Membership (*1)		56,494		—		—		—			—			56,494
Development expense		32,308		—		5,109		—			(6,747	)		30,670
Port facilities usage rights		112,683		—		—		—			(6,612	)		106,071
Other intangible assets		22,733		12,734		—		—			(2,792	)		32,675
	W	229,137		13,492		5,109		(145	)		(16,488	)		231,105

(*1)	Economic useful life of membership is indefinite.
(*2)	Includes acquisition cost transferred from construction-in-progress amounting to W 9,414 million.

34

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) For the year ended December 31, 2010

			Increase				Decrease
(in millions of Won)	Beginning		Acquisition(*2)		Development		Disposal			Amortization			Ending
Intellectual property rights	W	3,028		2,458		—		—			(567	)		4,919
Membership (*1)		49,785		7,815		—		(1,106	)		—			56,494
Development expense		28,030		—		15,046		—			(10,768	)		32,308
Port facilities usage rights		100,144		28,165		—		—			(15,626	)		112,683
Other intangible assets		20,627		11,191		—		—			(9,085	)		22,733
	W	201,614		49,629		15,046		(1,106	)		(36,046	)		229,137

(*1)	Economic life of membership is indefinite.
(*2)	Includes acquisition cost transferred from construction-in-progress amounting to W 40,011 million.

14. Borrowings

(a) Borrowings as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Short-term borrowings
Short-term borrowings	W	1,431,941			1,339,937			698,784
Current portion of long-term borrowings		4,025			750			—
Current portion of loans from foreign financial institutions		993			963			1,065
Current portion of debentures		1,976,920			1,777,956			—
Less: Current portion of discount on debentures issued		(19,088	)		(3,242	)		—
		3,394,791			3,116,364			699,849
Long-term borrowings
Long-term borrowings		828,014			467,378			80,831
Foreign loan		3,704			4,074			5,572
Debentures		6,226,587			5,872,258			5,649,690
Less: Discount on debentures issued		(40,932	)		(58,215	)		(64,917	)
Add : Premium on debentures redemption		2,586			11,138			10,067
		7,019,959			6,296,633			5,681,243
	W	10,414,750			9,412,997			6,381,092

35

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Short-term borrowings as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)					Annual						January 1,
Bank	Issuance date		Maturity date		interest rate (%)		2011		2010		2010
HSBC		2011.04.13		2011.07.15		0.83	W	102,348		224,586		38,590
JPMorgan		2011.04.04		2011.10.04		0.85~1.01		92,493		120,423		—
BNP		2011.02.15		2011.12.27		0.94~1.05		314,085		106,631		—
DEUTSCHE		2011.02.16		2011.12.27		0.95~1.05		160,229		111,686		—
ING		2011.04.04		2011.07.05		0.85		28,687		131,321		77,711
RBS		2011.06.30		2011.09.28		0.80		86,339		41,050		—
DBS		2011.03.17		2011.12.21		0.95~1.01		205,285		—		—
SG		2011.03.16		2011.10.04		1.01		188,296		—		—
Others								—		383,374		314,609
Others (discount on accounts receivable)								254,179		220,866		267,874
							W	1,431,941		1,339,937		698,784

(c) Current portion of long-term borrowings as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

						Annual						January 1,
(in millions of Won)	Borrowers	Issuance date		Maturity date		interest rate (%)		2011		2010		2010
Borrowings	Korea Resources Corporation		2006.10.31		2021.09.15		1.50	W	2,250		750		—
Borrowings	Korea Resources Corporation		2006.12.28		2021.12.15		1.50		755		—		—
Borrowings	Woori Bank		2009.06.11		2017.03.15		2.50		663		—		—
Borrowings	Woori Bank		2009.11.26		2017.03.15		2.50		220		—		—
Borrowings	Woori Bank		2009.12.31		2017.03.15		2.50		137		—		—
Loans from foreign financial institutions	NATIXIS (*1)		1984.06.30		2017.12.31		2.00		993		963		1,065
Debentures	Domestic debentures 282		2006.03.28		2011.03.28		5.00		—		299,786		—
Debentures	Domestic debentures 283		2006.05.10		2011.05.10		5.00		—		499,669		—
Debentures	Domestic debentures 287		2007.05.11		2012.05.11		5.26		499,596		—		—
Debentures	1st Samurai Private Equity Bonds		2008.12.29		2011.12.29	Tibor(6M)+1.60			666,634		696,029		—
Debentures	Yen dominated FRN		2008.11.11		2011.11.11	Tibor(6M)+2.60			267,058		279,230		—
Debentures	Exchangeable bond		2008.08.19		2011.08.19		—		524,544		—		—
								W	1,962,850		1,776,427		1,065

(*1) As of June 30, 2011, Korea Development Bank has provided guarantees for loans from foreign financial institutions.

The Company issued exchangeable bonds with SK Telecom Co., Ltd. ADRs through Zeus (Cayman) Ltd., a SPV. The Company accounted for these exchangeable bonds as long-term debts under K-IFRS. The exchangeable bonds may be redeemed prior to maturity at 101.51% of their face value for three years from the issuance date at the option of the bondholders. As of June 30, 2011, the JPY 39,970,000,000 (75.7% of total face value) exchangeable bonds are classified as a current portion of long-term borrowings and were redeemed in August 2011. Also, the Company provides guarantees for Zeus(Cayman) Ltd.

36

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(d) Long-term borrowings as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

				Annual					January 1,
(in millions of Won)	Borrowers	Issuance date	Maturity date	interest rate (%)	2011		2010		2010
Borrowings	Woori Bank	2006.10.31~	2017.03.15~	1.50~2.50	W	104,040		90,598		75,519
		2011.02.24	2038.04.28
Borrowings	Korea National	2007.12.27~	2022.12.29~	Government bond		7,577		8,004		5,312
	Oil Corporation	2010.12.28	2024.12.29	-2.25
Borrowings	Korea EXIM Bank	2010.02.18~	2017.02.28~	4.09~4.50		716,397		368,776		—
		2011.06.10	2018.03.23
Loans from foreign financial institutions	NATIXIS (*1)	1984.06.30	2017.03.31	2.00		3,704		4,074		5,572
Debentures	Domestic debentures	2008.08.05~	2013.08.05~	4.28~6.52		2,791,015		3,332,348		2,293,320
		2011.05.04	2016.05.04
Debentures	9th Samurai Bonds	2006.06.28~	2013.06.28~	0~8.75		3,397,226		2,492,833		3,301,520
		2011.04.14	2021.04.14
					W	7,019,959		6,296,633		5,681,243

(*1) As of June 30, 2010, Korea Development Bank has provided guarantees for loans from foreign financial institutions.

15. Other Financial Liabilities

(a) Other short-term financial liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Financial guarantee liabilities	W	6,415		6,445		—
Accounts payable		669,911		728,574		987,977
Accrued expenses		572,582		210,040		146,105
Dividends payable		5,503		5,569		5,143
Finance lease liabilities		1,046		1,048		1,023
Withholdings		9,754		6,405		17,066
	W	1,265,211		958,081		1,157,314

37

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Other long-term financial liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Financial guarantee liabilities	W	10,899		9,150		15,210
Accrued expenses		14,514		22,287		72,435
Derivatives liabilities		212		885		2,133
Long-term accounts payable		88,735		—		—
Finance lease liabilities		7,881		8,835		10,126
Long-term withholdings		8,516		11,009		854
	W	130,757		52,166		100,758

16. Provisions

The changes in provisions for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

1) For the six-month period ended June 30, 2011

(in millions of Won)	Beginning		Increase		Decrease			Ending
Estimated allowance at the end of period (*1)	W	9,582		172,563		(155,719	)		26,426

(*1) Represents the provision for bonuses.

2) For the years ended December 31, 2010

(in millions of Won)	Beginning		Increase		Decrease			Ending
Estimated allowance at the end of period	W	5,154		360,114		(355,686	)		9,582

38

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

17. Employee Benefits

(a) Defined contribution plans

The Company partially operates a defined contribution plan for participating employees. Though the Company pays fixed contributions into a separate fund, employee benefits relating to employee service in the future is based on the contributions to the funds and the investment earnings on it. Plan assets are managed by a trustee as a separate fund from Company’s assets. The expense related to post-employment benefit plans under defined contribution plans during the six-month period ended June 30, 2011 is W 363 million, which is included in accrued expenses.

(b) Defined benefit plans

The Company partially operates a defined benefit pension plan for employees and uses the projected unit credit method in the actuarial valuation of plan assets and the defined benefit obligation.

(c) The amounts recognized in relation to defined benefit obligations in the statements of financial position as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
(in millions of Won)	2011			2010			2010
Present value of funded obligations	W	605,204			1,013,165			815,993
Fair value of plan assets		(501,034	)		(689,162	)		(599,170	)
Net defined benefit obligations	W	104,170			324,003			216,823

(d) The changes in present value of defined benefit obligations for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	2011			2010
Defined benefit obligation at the beginning of period	W	1,013,165			815,993
Current service costs		56,751			93,206
Interest costs		23,804			44,534
Actuarial gains and losses		(49,132	)		125,100
Benefits paid		(439,384	)		(65,668	)
Defined benefit obligation at the end of period	W	605,204			1,013,165

39

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(e) The changes in the fair value of plan assets for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	2011			2010
Plan assets at the beginning of period	W	689,162			599,170
Expected return on plan assets		13,443			29,888
Actuarial gains and losses		(3,059	)		(5,415	)
Contributions of participants		80,000			100,000
Benefits paid		(278,512	)		(34,481	)
Plan assets at the end of period	W	501,034			689,162

(f) The fair value of plan assets as of June 30, 2011, December 31, 2010 and January 1, 2010, are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Deposits	W	290,028		—		—
Equity instruments		210,927		512,850		446,718
Debt instruments		—		176,312		152,452
Others		79		—		—
Total	W	501,034		689,162		599,170

(g) The amounts recognized in the statements of comprehensive for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Current service costs	W	56,751			46,978
Interest costs		23,804			22,338
Expected return on plan assets		(13,443	)		(14,955	)
Total	W	67,112			54,361

The above expenses recognized in the statement of comprehensive income are as follows:

(in millions of Won)	2011		2010
Cost of sales	W	52,795		46,307
Selling and administrative expenses		14,317		8,054
Total	W	67,112		54,361

40

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(h) Actuarial gains and losses recognized in other comprehensive income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Beginning	W	(101,802	)		—
Current actuarial gains and losses		35,611			(23,756	)
Ending	W	(66,191	)		(23,756	)

(i) The principal actuarial assumptions as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

							January 1,
	2011			2010			2010
Discount rate		4.33	%		5.21	%		5.21	%
Expected return on plan assets		5.76	%		4.66	%		4.66	%
Expected future increases in salaries		3.00	%		3.00	%		3.00	%

41

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

18. Other Liabilities

(a) Other current liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Other current liabilities
Advances received	W	39,374		33,241		25,614
Withholding		26,933		24,388		34,009
Deferred rental revenue		2,790		4,182		2,013
Deferred revenue		50		200		—
	W	69,147		62,011		61,636

(b) Other long-term liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Other long-term liabilities
Unearned revenue	W	763		1,277		2,305
Others		3,000		3,000		3,972
	W	3,763		4,277		6,277

42

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

19. Financial Instruments

(a) Classification of financial instruments

1) Financial assets as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Financial assets at fair value through profit or loss
Financial assets held for trading	W	40,330		182,208		795,811
Derivatives assets held for trading		428		—		—
		40,758		182,208		795,811
Available-for-sale financial assets		4,635,057		4,931,628		4,397,017
Held-to-maturity investments		29,866		31,808		51,675
Loans and other receivables		7,161,251		6,845,357		9,078,062
	W	11,866,932		11,991,001		14,322,565

2) Financial liabilities as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Financial liabilities at fair value through profit or loss
Derivatives liabilities held for trading	W	212		885		2,133
Financial liabilities evaluated as amortised cost
Accounts payable		1,418,483		1,310,877		739,746
Borrowings		10,414,750		9,412,997		6,381,092
Financial guarantee liabilities (*1)		17,314		15,595		15,210
Others		1,378,441		993,766		1,240,730
		13,228,988		11,733,235		8,376,778
	W	13,229,200		11,734,120		8,378,911

43

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(*1) Financial guarantee contracts recognized in financial guarantee liabilities as of June 30, 2011 are as follows:

(in millions of Won)
Guarantee beneficiary	Financial institution	Foreign Currency		Won Equivalent
POSCO Maharashtra Steel Pvt. Ltd.	Comerica Bank	USD	69,000,000		74,389
United Spiral Pipe, LLC	Shinhan Bank	USD	34,000,000		36,655
	Export-Import Bank of Korea	USD	200,000,000		215,620
POSCO-Vietnam Co., Ltd.	ANZ Bank	USD	30,000,000		32,343
	MIZUHO	JPY	2,655,000,000		35,463
	SUMITOMO	JPY	2,550,000,000		34,060
	China Construction Bank	CNY	196,700,000		32,810
	Industrial and Commercial	CNY	93,890,000		15,661
	Bank of China
	Bank of China	CNY	14,200,000		2,369
BX STEEL POSCO Cold RolledSheet Co., Ltd.	Agricultural Bank of China	CNY	96,300,000		16,063
	China Construction Bank	USD	2,640,000		2,846
	Industrial and Commercial
	Bank of China	USD	1,740,000		1,876
	Agricultural Bank of China	USD	2,400,000		2,587
	Bank of China	USD	4,400,000		4,744
	Mizuho	USD	30,000,000		32,343
Zhangjiagang Pohang Stainless Steel Co., Ltd.	Mizuho	USD	50,000,000		53,905
	Credit Agicole	USD	50,000,000		53,905
	BTMU	USD	30,000,000		32,343
	BOA and others	USD	295,000,000		318,040
POSCO Investment Co., Ltd.	BOC and others	CNY	630,000,000		105,084
	HSBC	MYR	104,691,662		37,182
	HSBC and others	USD	116,296,295		125,379
		USD	915,476,295		986,975
		JPY	5,205,000,000		69,523
		CNY	1,031,090,000		171,987
		MYR	104,691,662		37,182

44

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3) Financial profit and loss by category of financial instrument for the six-month periods ended June 30, 2011 and the six-month periods ended June 30, 2010 is as follows:

	2011								2010
	Financial		Financial			Financial income			Financial		Financial			Financial income
(in millions of Won)	income (*1)		expenses			and expenses			income (*1)		expenses			and expenses
Financial assets at fair value through profit or loss	W	27,497		—			27,497			147,883		—			147,883
Available-for-sale financial assets		74,589		(24	)		74,565			75,668		(46	)		75,622
Held-to-maturity investments		820		—			820			1,954		—			1,954
Loans and receivables		62,928		(93,231	)		(30,303	)		117,440		(91,092	)		26,348
Financial liabilities at fair value through profit or loss		674		—			674			1,197		—			1,197
Financial liabilities are evaluated as amortised cost		436,075		(234,891	)		201,184			139,341		(611,206	)		(471,865	)
	W	602,583		(328,146	)		274,437			483,483		(702,344	)		(218,861	)

(*1) Financial profit in the statement of comprehensive income includes the dividends from subsidiaries and associates W 125,540 million and W 48,233 million for the six-month periods ended June 30, 2011 and the six-month periods ended June 30, 2010.

(b) Credit risk

1) Credit risk exposure

The carrying amount of financial assets is maximum exposure to credit risk. The maximum exposure to credit risk as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Cash and cash equivalents	W	1,516,474		672,426		626,782
Financial assets at fair value through profit or loss		40,758		182,208		795,811
Available-for-sale financial assets		4,635,057		4,931,628		4,397,017
Held-to-maturity investments		29,866		31,808		51,675
Loans and other receivables		1,766,797		2,624,459		5,498,191
Trade accounts and notes receivable		3,877,956		3,548,448		2,951,783
Long-term trade accounts and notes receivable		24		24		1,306
	W	11,866,932		11,991,001		14,322,565

45

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) Impairment losses on financial assets

 Allowance for doubtful accounts as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

					January 1,
(in millions of Won)	2011		2010		2010
Accounts receivable	W	2,179		4,915		11,821
Other accounts receivable		10,571		10,591		10,620
Long-term loans		14,452		14,487		14,470
Other assets		13		20		673
	W	27,215		30,013		37,584

‚ Impairment losses on financial assets for the six-month period ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Bad debt expenses	W	(2,721	)		(6,493	)
Other bad debt expenses		(51	)		(142	)
	W	(2,772	)		(6,635	)

ƒ The aging schedule and the impaired losses of trade accounts and notes receivable as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

	2011				2010				January 1, 2010
	Trade accounts and				Trade accounts and				Trade accounts and
(in millions of Won)	notes receivable		Impairment		notes receivable		Impairment		notes receivable		Impairment
Not due	W	3,751,024		6		3,416,549		2,727		2,739,546		3,235
Over due less than 1 month		61,783		—		53,385		37		69,678		49
1 month - 3 months		40,371		—		37,554		26		9,881		7
3 months - 12 months		15,135		—		37,978		27		26,077		18
over 12 months		11,845		2,173		7,921		2,098		119,728		8,512
	W	3,880,158		2,179		3,553,387		4,915		2,964,910		11,821

„ Changes in allowance for doubtful accounts for the six-month periods ended June 30, 2011 and the year ended December 31, 2010 were as follows:

(in millions of Won)	2011			2010
Beginning	W	30,013			37,584
Reversal of bad debt expenses		(2,772	)		(7,291	)
Other decrease		(26	)		(280	)
Ending	W	27,215			30,013

46

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) Liquidity risk

1) The maturity analysis of non-derivative financial liabilities

	Over due less		1 month		6 months		1 year		later than
(in millions of Won)	than 1 month		- 3 months		- 1 year		- 5 years		5 years		Total
Current non-derivative financial liabilities
Account payable	W	1,418,483		—		—		—		—		1,418,483
Short-term borrowings		1,523,857		1,367,566		503,368		—		—		3,394,791
Financial guarantee liabilities		—		1,604		4,811		—		—		6,415
Other financial liabilities		1,247,997		251		10,547		—		—		1,258,795
		4,190,337		1,369,421		518,726		—		—		6,078,484
Non-current non-derivative financial liabilities
Long-term borrowings		—		—		—		4,970,530		2,049,429		7,019,959
Financial guarantee liabilities		—		—		—		8,818		2,081		10,899
Other financial liabilities		—		—		—		116,327		3,319		119,646
		—		—		—		5,095,675		2,054,829		7,150,504
	W	4,190,337		1,369,421		518,726		5,095,675		2,054,829		13,228,988

Schedule of cash flows relation to interest payment is not included in the table above.

2) The maturity analysis of derivative financial liabilities

	not later than		1 year		later than
(in millions of Won)	1 year		- 5 years		5 years		Total
Derivatives liabilities held for trading Coupon		—		212		—		212

(d) Currency risk

1) The Company has exposure to the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The exposure to currency risk as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

	2011				2010				January 1, 2010
(in millions of Won)	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
EUR	W	19,381		7,784		19,335		11,900		29,249		12,571
USD		416,031		5,266,420		838,688		4,266,232		964,986		2,481,972
JPY		65,626		2,315,038		56,377		2,444,452		44,839		2,211,387
Others		18,569		2,489		230		2,582		235		2,582
	W	519,607		7,591,731		914,630		6,725,166		1,039,309		4,708,512

47

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

2) For the six-month periods ended June 30, 2011 and 2010, the effects of a hypothetical 10% strengthening or weakening of functional currency against foreign currencies other than functional currency on profit before tax were as follows:

	2011						2010
(in millions of Won)	10% increase			10% decrease			10% increase			10% decrease
EUR	W	1,160			(1,160	)		744			(744	)
USD		(485,039	)		485,039			(342,754	)		342,754
JPY		(224,941	)		224,941			(238,808	)		238,808

(e) Interest rate risk

1) The book value of interest-bearing financial instruments as of June 30, 2011, December 31, 2010 and January 1, 2010 is as follows:

(in millions of Won)	2011			2010			January 1, 2010
Fixed rate
Financial Assets	W	2,840,002			3,130,683			6,118,895
Financial Liabilities		(9,119,560	)		(8,126,270	)		(5,158,610	)
		(6,279,558	)		(4,995,587	)		960,285
Variable rate
Financial Liabilities	W	(1,041,011	)		(1,065,861	)		(954,608	)

2) Sensitivity analysis on the fair value of financial instruments with fixed interest rate

The Company does not account for financial instruments with fixed interest rates as financial assets at fair value through profit or loss, and derivative instruments such as interest swap as hedges in fair value hedging accounting. Therefore, fluctuations in interest rates do not affect gain or loss.

3) Sensitivity analysis on the fair value of financial instruments with variable interest rate

As of June 30, 2011 and December 31, 2010, provided that other factors remain the same and the interest rate of borrowings with floating rates increases or decreases by 1%, the changes in interest expense during the six-month periods ended June 30, 2011 and 2010 are as follows:

	2011					2010
(in millions of Won)	1% increase			1% decrease		1% increase			1% decrease
Variable rate financial instruments		(5,205	)		5,205		(10,659	)		10,659

48

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(f) Fair value

1) Fair value and book value

The carrying amount and the fair value of financial instruments as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows :

	2011				2010				January 1, 2010
(in millions of Won)	Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value
Assets measured at fair value
Financial assets held for trading	W	40,330		40,330		182,208		182,208		795,811		795,811
Financial assets at fair value through profit or loss		4,494,370		4,494,370		4,799,107		4,799,107		4,250,843		4,250,843
Derivatives assets held for trading		428		428		—		—		—		—
		4,535,128		4,535,128		4,981,315		4,981,315		5,046,654		5,046,654
Assets measured amortised cost
Cash and cash equivalents		1,516,474		1,516,474		672,426		672,426		626,782		626,782
Current trade accounts and note receivable		3,877,980		3,877,980		3,548,472		3,548,472		2,953,089		2,953,089
Loans and other receivables		1,766,797		1,766,797		2,624,458		2,624,458		5,498,191		5,498,191
Held-to-maturity investments		29,866		29,866		31,808		31,808		51,675		51,675
		7,191,117		7,191,117		6,877,164		6,877,164		9,129,737		9,129,737
Liabilities measured fair value
Derivatives liabilities held for trading		212		212		885		885		2,133		2,133
Liabilities measured amortised cost
Trade accounts payable		1,418,483		1,418,483		1,310,877		1,310,877		739,746		739,746
Borrowings		10,414,750		10,708,817		9,412,997		9,884,031		6,381,092		6,705,438
Financial guarantee liabilities		17,314		17,314		15,595		15,595		15,210		15,210
Others		1,378,442		1,378,442		993,766		993,766		1,240,730		1,240,729
	W	13,228,989		13,523,056		11,733,235		12,204,269		8,376,778		8,701,123

2) Interest rate for determining fair value

Interest rates to discount the estimated cash flows as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

	2011		2010		January 1, 2010
Borrowings		1.18% ~ 5.04%		1.19% ~ 5.14%		1.28% ~ 5.38%

49

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3) The fair value hierarchy

	The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in measurements.
	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
	Level 2: inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.
	Level 3: inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
‚	The fair value measurements classified by fair value hierarchy as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

a. June 30, 2011

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Financial assets held for trading		—		40,330		—		40,330
Derivatives assets held for trading		—		428		—		428
Available-for-sale financial assets		3,918,236		—		576,134		4,494,370
		3,918,236		40,758		576,134		4,535,128
Financial Liabilities
Derivatives liabilities held for trading		—		212		—		212

b. December 31, 2010

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Financial assets held for trading		—		182,208		—		182,208
Available-for-sale financial assets		4,195,360		—		603,747		4,799,107
		4,195,360		182,208		603,747		4,981,315
Financial Liabilities
Derivatives liabilities held for trading		—		885		—		885

c. January 1, 2010

(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial Assets
Financial assets held for trading		—		795,811		—		795,811
Available-for-sale financial assets		3,650,351		—		600,492		4,250,843
		3,650,351		795,811		600,492		5,046,654
Financial Liabilities
Derivatives liabilities held for trading		—		2,133		—		2,133

50

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

ƒ Changes in financial assets classified as level 3 for the six-month periods ended June 30, 2011 and for the years ended December 31, 2010 are as follows:

a. For the six-month periods ended June 30, 2011

			Other comprehensive
(in millions of Won)	Beginning		income			Ending
Available-for-sale financial assets	W	603,747		(27,613	)		576,134

b. For the years ended December 31, 2010

			Other comprehensive
(in millions of Won)	Beginning		income		Ending
Available-for-sale financial assets	W	600,492		3,255		603,747

20. Share Capital and Contributed Surplus

(a) Share capital

Under the Articles of Incorporation, the Company is authorized to issue 200 million shares of common stock with par value of W 5,000 per share. As of June 30, 2011, 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. 9,293,790 shares of common stock were retired with the Board of Directors’ approval.

As of June 30, 2011, total shares of ADRs are 54,564,120 equivalents to 13,641,030 of common stock.

As of June 30, 2011, ending balance of common stock amounts to W 482,403 million; however, it is different from par value of issued common stock, which amounted to W435,934 million, due to retirement of treasury stock.

(b)	Capital surplus
	Capital surplus as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	2011		2010		January 1, 2010
Share premium	W	463,825		463,825		463,825
Gains on disposal of treasury shares		765,875		694,714		694,714
	W	1,229,700		1,158,539		1,158,539

51

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

21. Reserves

(a) Reserves as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

(in millions of Won)	2011		2010		January 1, 2010
Accumulated changes in fair value of available-for-sale investments, net of tax	W	653,563		1,011,557		634,571

(b) The changes in fair value of available-for-sale investments for the six-month periods ended June 30, 2011 and the year ended December 31, 2010 are as follows:

1) For the six-month periods ended June 30, 2011

(in millions of Won)	2011
Beginning balance	W	1,011,557
Changes in fair value of available-for-sale investments		(458,967	)
Tax effects		100,973
Ending balance	W	653,563

2) For the years ended December 31, 2010

(in millions of Won)	2010
Beginning balance	W	634,571
Changes in fair value of available-for-sale investments		483,315
Tax effects		(106,329	)
Ending balance	W	1,011,557

22. Treasury Shares

In January 2011, the Company sold 342,955 shares of treasury stock for W 164,384 million and recognized W 71,160 million as a gain on sale of treasury stock in capital surplus. Also, the Company acquired 131,389 shares of treasury stock for W 61,296 million. As of June 30, 2011, the Company holds 9,942,391 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

52

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

23. 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:

(per share, won)	5th Grant		6th Grant		Total
Before the modification (*)
Granted		218,600		90,000		308,600
Exercise price	W	151,700	W	194,900
After the modification (*)
Granted		214,228		90,000		304,228
Exercised		183,066		64,000		247,066
Unexercised		31,162		26,000		57,162
Exercise price	W	151,700	W	194,900
Exercise period		2006.7.24 ~ 2011.7.23		2007.4.29 ~ 2012.4.28

(*) The Company modified the number of shares granted under the stock appreciation rights and the exercise price, as presented above (5^th), in accordance with the resolutions of the Board of Directors on October 22, 2004.

(b) Expenses related to stock appreciation rights granted to executives incurred for the six-month periods ended June 30, 2011 and the year ended December 31, 2010 are as follows:

(in millions of Won)	4th Grant			5th Grant			6th Grant			Total
Accumulated reversal of stock compensation as of December 31, 2010		(83	)		(9,681	)		(3,463	)		(13,227	)
Reversal of stock compensation expenses For the six-month periods ended June 30, 2011		—			(1,250	)		(389	)		(1,639	)

53

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) The Company uses a fair value approach for calculating remuneration cost. The method and assumption for computing fair value of stock appreciation rights are as follows:

	5th Grant			6th Grant
Risk-free rate of interest		3.48	%		3.67	%
Expected life	57 days			754 days
Expected price-volatility		9.15	%		12.60	%
Rate of expected dividends		2.16	%		1.11	%
Stock price	Won 464,000			Won 464,000
Fair value	Won 311,556			Won 272,791

24. Sales

Details of sales for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Revenues
Sale of goods	W	19,074,103		14,821,060
Services		52,461		43,908
Othters		17,525		17,253
	W	19,144,089		14,882,221

54

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

25. Selling and Administrative Expenses

(a) Administrative expenses

Administrative expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Wages and salaries	W	84,268			72,242
Expenses related to defined benefit plan		14,317			8,054
Other employee benefits		34,051			27,192
Travel		10,759			8,944
Depreciation		10,902			7,830
Amortization		7,630			7,749
Rental		18,783			12,474
Repairs		6,958			5,361
Advertising		41,661			40,942
Research & development		66,579			43,521
Service fees		85,654			67,580
Supplies		4,106			4,027
Vehicles maintenance		3,494			3,011
Industry association fee		4,701			4,747
Training		8,688			10,008
Conference		3,390			3,420
Reverse of bad debt expenses		(2,721	)		(6,493	)
Others		13,511			12,240
	W	416,731			332,849

(b) Selling expenses

Selling expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Freight	W	384,101		327,851
Operating expenses for distribution center		3,618		4,524
Sales commissions		27,287		24,820
Sales advertising		51		105
Sales promotion		2,415		2,341
Sample		1,144		887
Sales insurance premium		5,467		5,700
	W	424,083		366,228

55

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

26. Other Operating Income and Expenses

(a) Other operating income

Details of other operating income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Gain on disposal of property, plant and equipment	W	7,052		6,173
Gain on disposal of other long-term assets		—		283
Miscellaneous income		13,595		48,517
	W	20,647		54,973

(b) Other operating expenses

Details of other operating expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Loss on disposal of property, plant and equipment	W	30,320			23,396
Reverse of other bad debt expenses		(51	)		(142	)
Donations		9,458			12,212
Expenses on assets not in use		3,186			—
Miscellaneous loss		9,918			10,507
	W	52,831			45,973

56

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

27. Expenses by nature

Expenses that are recorded by nature as cost of sales, selling, general and administrative expenses and other operating expenses in the statements of income for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Changes in inventories (*1)	W	(413,792	)		(580,074	)
Raw materials and consumables used		13,156,932			8,431,508
Employee benefits expenses (*2)		643,832			556,824
Depreciation		843,503			1,199,300
Amortization		16,488			17,987
Ordinary research & development expenses		233,721			232,526
Electricity and water expenses		298,516			219,393
Service fees		117,933			98,400
Advertising expenses		41,661			40,942
Freight and custody expenses		384,101			327,851
Commission paid		27,287			24,820
Losses on disposition of property, plant, and equipment		30,320			23,396
Other expenses		1,367,266			1,104,211
	W	16,747,768			11,697,084

(*1)	Changes in inventories are the changes in product, semi-finished products and by-product.
(*2)	Includes depreciation of investment property.

57

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

28. Finance Income and Costs

(a) Details of finance income and costs for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Financial income
Interest income	W	52,069		122,037
Dividend income		200,129		123,118
Gains on disposal of financial assets held for trading		1,118		7,080
Gain on transactions of derivatives		—		26,737
Gains on foreign currency transaction		184,886		216,192
Gains on foreign currency translation		288,490		31,366
Others		1,431		5,186
		728,123		531,716
Financial expenses
Interest expenses		195,966		144,092
Losses on foreign currency translation		120,489		243,033
Losses on foreign currency transaction		10,092		314,251
Others		1,599		968
	W	328,146		702,344

(b) Details of interest income by category of financial instrument for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Cash and cash equivalents		22,165		5,740
Financial instruments		25,621		108,482
Held-to-maturity securities		820		1,954
Others		3,463		5,861
	W	52,069		122,037

(c) Details of interest expenses by category of financial instrument for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Interest on bank overdraft and borrowings		201,661		144,266
Other interest expenses		60		—
Total interest expenses (*1)		201,721		144,266
Less: capitalization of interest expense		5,755		174
	W	195,966		144,092
Average expenditure used to calculate capitalization of interest cost		126,538		3,615

(*1) There are no interest expenses incurred from financial liabilities at fair value through profit or loss.

The capitalization rate for the six-month periods ended June 30, 2011 is 4.55%.

58

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

29. Research and Development Expenses

Research and development expenses recognized as expense for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Selling and administrative expenses	W	66,579		43,521
Cost of sales		167,142		189,005
	W	233,721		232,526

30. Income Taxes

(a) Income tax expense for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011		2010
Current income taxes (*1)	W	434,623		536,241
Deferred income taxes		138,826		12,045
Items recorded directly to shareholders’ equity		70,342		44,018
Income tax expense	W	643,791		592,304

(*1) 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 six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Net income before income tax expense	W	2,816,945			3,069,482
Income tax expense computed at statutory rate		681,701			742,815
Adjustments:		(37,910	)		(150,511	)
Tax effects due to permanent differences		2,265			(2,025	)
Tax effect of finalized tax assessments		(8,056	)		(22,170	)
Tax credit		(61,838	)		(135,614	)
Additional payment of income taxes		19,466			—
Others		10,253			9,298
Income tax expense	W	643,791			592,304
Effective rate (%)		22.9	%		19.3	%

59

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) The income taxes charged directly to equity for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Net changes in fair value of_available-for-sale investments	W	100,876			37,318
Defined benefit plan actuarial gains (losses)		(10,464	)		6,700
Gain on disposal of treasury shares		(20,070	)		—
	W	70,342			44,018

(d) The movements in deferred tax assets (liabilities) for the six-month periods ended June 30, 2011 and 2010 are as follows:

	2011									2010
(in millions of Won)	Dec.31, 2010			Inc(Dec)			June 30, 2011			Dec.31, 2009			Inc(Dec)			June 30, 2010
Deferred income tax due to temporary differences Reserve for special repairs	W	(27,776	)		377			(27,399	)		(39,500	)		2,296			(37,204	)
Reserve for technology developments		(264,000	)		(20,900	)		(284,900	)		(176,000	)		(88,000	)		(264,000	)
Depreciation expense		(65,129	)		14,628			(50,501	)		(78,445	)		(1,612	)		(80,057	)
Prepaid expenses		18,851			1,239			20,090			17,757			1,621			19,378
Impairment loss on property, plant and equipment		7,443			(299	)		7,144			7,998			(226	)		7,772
Reappraisal of property plant and equipment		(345,058	)		(73,123	)		(418,181	)		(411,760	)		27,910			(383,850	)
Loss on foreign currency translation		81,066			(57,761	)		23,305			39,783			63,424			103,207
Others		91,149			20,096			111,245			108,367			(22,918	)		85,449
		(503,454	)		(115,743	)		(619,197	)		(531,800	)		(17,505	)		(549,305	)
Deferred tax from tax credit Tax credit carryforward		239,526			(113,496	)		126,030			286,556			(38,558	)		247,998
		239,526			(113,496	)		126,030			286,556			(38,558	)		247,998
Deferred income taxes recognized directly to equity:
Gain (loss) on valuation of available-for-sale securities		(98,984	)		100,876			1,892			7,249			37,318			44,567
Defined benefit plan actuarial gains (losses)		28,713			(10,463	)		18,250			—			6,700			6,700
		(70,271	)		90,413			20,142			7,249			44,018			51,267
	W	(334,199	)		(138,826	)		(473,025	)		(237,995	)		(12,045	)		(250,040	)

(e) As of June 30, 2011, the Company did not recognize income tax effects associated with the taxable temporary differences W 1,209,618 million (deferred tax liability W 173,981 million) in temporary differences relating valuation of equity method occurred in prior periods since it is remote that the taxable differences will be realized.

60

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

31. Basic and Diluted Earnings Per Share

(a) Basic and diluted earnings per share for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won except per share information)	2011		2010
Net income	W	2,173,154		2,477,178
Weighted-average number of common shares outstanding (*)		77,259,314		77,032,878
Basic and diluted earnings per share		28,128		32,157

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

	2011			2010
Total number of common shares issued		87,186,835			87,186,835
Weighted-average number of treasury stock		(9,927,521	)		(10,153,957	)
Weighted-average number of common stock outstanding		77,259,314			77,032,878

(b) Basic and diluted earnings per share for the three-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won except per share information)	2011		2010
Net income	W	1,245,798		1,102,680
Weighted-average number of common stock outstanding (*)		77,244,444		77,032,878
Basic and diluted earnings per share		16,128		14,314

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

	2011			2010
Total number of common stock issued		87,186,835			87,186,835
Weighted-average number of treasury stock		(9,942,391	)		(10,153,957	)
Weighted-average number of common stock outstanding		77,244,444			77,032,878

61

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

32. Operating Profit

(a) Operating profit adjusted by previous GAAP for the six-month periods ended June 30, 2011 and 2010 are as follows :

(in millions of Won)	2011			2010
Operating profits by K-IFRS	W	2,416,968			3,240,110
Deducted
Gains on disposal of property, plant, and equipment		(7,052	)		(6,173	)
Gain on disposal of other long-term assets		—			(283	)
Miscellaneous income		(13,595	)		(48,517	)
		(20,647	)		(54,973	)
Added
Loss on disposal of property, plant, and equipment		30,320			23,396
Other bad debt expenses		(51	)		(142	)
Donations		9,458			12,212
Expenses on asset not in use		3,186			—
Miscellaneous losses		9,918			10,507
		52,831			45,973
Operating profits by previous GAAP	W	2,449,152			3,231,110

62

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

33. Related Party Transactions

(a) Significant transactions, which occurred in the ordinary course of business, with related companies for the six-month periods ended June 30, 2011 and 2010 are as follows:

	Sales and others (*1)				Purchase and others (*1)
(in millions of Won)	2011		2010		2011		2010
Subsidiaries
POSCO E&C Co., Ltd.	W	10,381		3,032	W	740,536		1,227,168
POSCO Processing&Service		694,061		510,441		700,110		142,739
POSCO Coated & Color Steel Co., Ltd.		315,277		328,461		843		1,394
POSCO ICT Co., Ltd.		745		503		247,992		211,297
POSCO Chemtech Company Ltd.		208,201		44,069		365,077		265,703
POSCO TMC CO., LTD.		82,436		73,660		233		52
POSCOAST Co., Ltd.		144,630		155,342		29,895		27,499
Daewoo International Corp.		1,618,153		—		1,534		—
POSCONST.CO.,LTD		76,613		—		2,261		—
POSCO America Corporation		136,449		103,811		—		—
POSCO Canada Ltd.		—		—		106,299		62,426
POSCO Asia Co., Ltd.		913,131		526,379		117,797		73,448
POSCO-JKPC Co., Ltd.		21,139		27,288		200		36
POSCO(Thailand) Co., Ltd.		35,775		66,516		57		1
Qingdao Pohang Stainless Steel Co., Ltd.		28,709		34,780		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		22,535		54,435		—		—
POSCO-Japan Co., Ltd.		654,758		490,025		20,701		44,788
POS-India Pune Steel
Processing Centre Pvt. Ltd.		64,128		81,692		—		—
POSCO-Mexico Co., Ltd.		149,994		108,585		—		—
POSCO-India Delhi Steel
Processing Centre Pvt. Ltd.		32,588		39,722		—		115
POSCO(Wuhu) Automotive Processing Center Co., Ltd.		22,715		59,758		—		—
Daewoo International Singapore Pte. Ltd.		—		—		101,171		—
Others		200,489		457,751		562,264		265,607
	W	5,432,907		3,166,250	W	2,996,970		2,322,273
Associates
Posmate Co., Ltd.	W	580		569	W	25,651		22,874
SNNC Co., Ltd.		660		906		185,051		268,230
SUNG JIN GEOTEC Co., Ltd.		23,842		1,798		—		—
USS-POSCO Industries		251,279		124,252		29		190
Poschrome(Proprietary). Ltd.		—		—		36,805		31,688
Others		69,935		9,819		3,570		128,563
	W	346,296		137,344	W	251,106		451,545
	W	5,779,203		3,303,594	W	3,248,076		2,773,818

(*1) Sales and others include sales and other operating income. Purchase and others include purchase and overhead cost.

63

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Significant transactions, which occurred in the ordinary course of business, with related companies the related account balances as of June 30, 2011, December 31, 2010 and January 1, 2010 are as follows:

	Receivables (*1)						Payables (*1)
					January, 1						January, 1
(in millions of Won)	2011		201		2010		2011		2010		2010
Subsidiaries
POSCO E&C Co., Ltd.	W	3,705		293		480	W	187,087		190,081		437,819
POSCO Processing&Service		158,121		129,133		114,783		41,134		6,842		2,696
POSCO Plantec		1,180		—		9		25,237		48,058		22,839
POSCO Coated & Color Steel Co., Ltd.		83,809		104,755		109,616		800		437		199
POSCO ICT Co., Ltd.		14		—		1		73,178		63,627		54,529
POSCO Chemtech Company Ltd.		37,235		33,743		6,880		88,879		62,669		66,008
POSCO TMC CO., LTD.		15,244		11,823		11,678		41		15		24
POSCOAST Co., Ltd.		19,974		19,065		17,492		8,241		8,255		7,572
Daewoo International Corp.		92,976		139,756		—		304		—		—
PNR Co., Ltd		912		2,656		644		6,333		3,886		—
POSCONST.CO.,LTD		26,441		—		—		460		—		—
POSCO America Corporation		11,120		12,211		6,163		—		—		—
POSCO Asia Co., Ltd.		40,815		122,626		40,548		10,360		3,767		1,170
POSCO(Thailand) Co., Ltd.		17,501		25,919		18,376		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		6,652		13,805		24,404		—		—		—
POSCO-Vietnam Co., Ltd.		642		683		95,781		—		—		—
POSCO-Japan Co., Ltd.		35,258		28,515		25,972		25		4,958		6,701
POS-India Pune Steel Processing Centre Pvt. Ltd.		6,749		10,412		12,356		—		—		—
POSCO-Mexico Co., Ltd.		140,570		80,443		16,247		—		—		—
Others		28,489		12,511		25,429		69,180		28,323		17,840
	W	727,407		748,349		526,859	W	511,259		420,918		617,397
Associates
Posmate Co., Ltd.	W	—		1,396		48	W	5,808		6,391		5,222
SNNC Co., Ltd.		136		182		1,974		19,059		57,512		26,963
USS-POSCO Industries		98,865		58,347		39,100		—		—		—
Others		7,269		7,231		176		609		29,714		78
	W	106,270		67,156		41,298		25,476		93,617		32,263
	W	833,677		815,505		568,157		536,735		514,535		649,660

(*1) Receivables include trade accounts and notes receivable and other receivables. Payables include trade accounts payable and other payables.

64

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(c) For the six-month periods ended June 30, 2011 and 2010, details of compensation to key management officers are as follows:

(in millions of Won)	2011			2010
Short-term benefits	W	8,995			8,114
Other long-term benefits		12,055			11,929
Retirement benefits		5,082			3,223
Share-based payment		(1,639	)		(15,316	)
	W	24,493			7,950

34. Commitments and Contingencies

(a)	The Company entered into a contract with Hanjin Shipping Co., Ltd., Hyundai Merchant Marine Co., Ltd., and others to use a transport ship for the transportation of raw materials and sales of product.
(b)	The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Korea Development Bank, for seamless funding to POSCO Power Corp. under construction of new power plants.
(c)	The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. These contracts generally have terms of more than three years and provide for periodic price adjustments to the market price. As of June 30, 2011, 292 million tons of iron ore and 48 million tons of coal remained to be purchased under such long-term contracts.
(d)	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 the change of the monthly standard oil price (JCC) and also price ceiling is applicable.
(e)	The Company has lease agreements for using a Ro-Ro (roll-on roll-off) ship and it is recorded as a finance lease. The Company is making payments of USD 11,583 thousands and W 1,953 millions, 90% of the ship’s fair value, for 12 years.
(f)	As of June 30, 2011, the Company entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million and USD 3.54 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan and the exploration of gas hydrates in Namangan-Chust, respectively. The repayment of borrowings depends on the success of the projects. The Company is not liable for the repayment of full or part of the money borrowed if the respective project fails. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by borrowing agreements.

65

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(g)	Litigation in progress
	The Company is involved in 11 lawsuits and claims for alleged damages aggregating to W 11,107 million as of June 30, 2011 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 June 30, 2011.
(h)	As of June 30, 2011, 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 Korea National Oil Corporation as collateral for long-term foreign currency borrowings.

35. Cash Flows from Operating Activities

(a) Adjustments for operating cash flows for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Accrual of severance benefits	W	67,112			54,359
Other employee benefits		5,794			5,200
Depreciation		841,925			1,198,233
Depreciation of investment properties		1,578			1,067
Amortization		16,488			17,987
Reverse of bad debt expenses		(2,721	)		(6,493	)
Finance costs		206,372			452,142
Losses on disposal of property, plant, and equipment		30,320			23,396
Income tax expense		643,791			592,304
Finance income		(543,237	)		(309,378	)
Gains on disposal of property, plant and equipment		(7,052	)		(6,173	)
Others		4,246			(17,079	)
	W	1,264,616			2,005,565

66

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

(b) Changes in operating assets and liabilities for the six-month periods ended June 30, 2011 and 2010 are as follows:

(in millions of Won)	2011			2010
Financial assets held for trading	W	143,326			(8,154	)
Trade accounts and notes receivable		(331,060	)		(391,569	)
Other accounts receivable		(38,938	)		(28,421	)
Advance payments		1,280			5,791
Prepaid expenses		(32,729	)		(34,583	)
Inventories		(1,146,160	)		(2,034,569	)
Long-term guarantee deposits		484			(383	)
Trade accounts payable		109,145			814,429
Dividends Payable		(65	)		(80	)
Other accounsts payable		30,209			(197,732	)
Accrued expenses		(26,170	)		352
Advances received		6,132			30,189
Withholdings		2,546			(3,886	)
Unearned revenue		(1,907	)		793
Other long-term liabilities		18,851			19,234
Payment severance benefits		(71,111	)		(30,589	)
Plan assets		(29,248	)		(11,384	)
	W	(1,365,415	)		(1,870,562	)

36. Transition to K-IFRS

As stated in note 2, the financial statements are the separate interim financial statements prepared in accordance with K-IFRS 1101 ‘First-time Adoption of Korean International Financial Reporting Standards’.

The significant accounting policies stated in note 3 were applied to the separate interim financial statements for periods ended June 30, 2011 and 2010, the separate financial statements as comparative information for the year ended on December 31, 2010 and the separate statements of financial position as of January 1, 2010 (the date of transition).

(a)	Exemptions elected from K-IFRS 1101 ‘First-time Adoption of Korean International Financial Reporting Standards’ by the Company
	The Company has elected to use one or more of the exemptions in accordance with K-IFRS 1101 for the preparation of statements of financial position at the date of transition and applied the following optional exemptions.

67

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

1)	Business combination
	The Company has not retrospectively applied the business combinations that took place prior to the date of transition to K-IFRS.
2)	Deemed cost of property, plant and equipment
	The Company has elected to use the revaluations prior to the date of transition to K-IFRS as deemed cost for certain items of property, plant and equipment and used the fair value at the date of transition as deemed cost for certain machinery and equipment.
3)	Borrowing costs
	The Company has capitalized borrowing costs to the qualifying assets for which the commencement date for capitalization is on or after the transition date to K-IFRS.
4)	Investment in subsidiaries and associates
	The Company has elected to use the carrying values of previous GAAP as deemed costs for the investment in subsidiaries and associates.
5)	Share-based payment transactions
	The Company has not retrospectively applied K-IFRS accounting requirements to cash-settled share-based payment transactions that took place prior to the date of transition to K-IFRS.
6)	Leases
	For arrangements existing at the date of transition to K-IFRS, the Company determined whether the arrangements were lease arrangements based on the facts and circumstances at the date of transition.

(b) The significant adjustments regarding transition to K-IFRS are as follows:

1)	Defined benefit liabilities
	Under previous GAAP, the Company recognized the amount of accrued severance benefits assuming all eligible employees and directors with at least one year of service were to terminate their employment as of the date of the statement of financial position. Under K-IFRS, the Company recognized the defined benefit obligations based on actuarial assumptions.
2)	Derecognition of financial assets
	Under previous GAAP, the Company derecognized financial assets such as trade accounts and notes receivable when transferred to certain financial institutions. Under K-IFRS, if the Company retains substantially all the risks and rewards of ownership of the financial assets, the financial assets are not derecognized.

68

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3)	Tax effect
	Under previous GAAP, the Company recognized deferred tax assets or deferred tax liabilities as the difference between the book and tax basis of its investments in subsidiaries and others. However, under K-IFRS, the Company recognizes deferred tax assets or deferred tax liabilities based upon how the temporary differences will be realized.

(c) Effects on financial position, financial performance and cash flows due to the transition to K-IFRS

1) Reconciliations of the financial position as of January 1, 2010 (the date of transition)

							Total
(in millions of Won)	Total Assets			Total Liabilities			Shareholders’ Equity
Previous GAAP	W	39,992,765			9,041,474			30,951,291
Adjustments:
Derecognition of financial assets		267,874			268,444			(570	)
Revaluation of machinery and equipment(*1)		1,871,636			—			1,871,636
Financial guarantee liabilities		15,210			15,210			—
Defined benefit liabilities		—			31,636			(31,636	)
Other adjustment		(6,731	)		2,950			(9,681	)
Deferred tax effect		(286,075	)		(162,281	)		(123,794	)
Toal adjustment		1,861,914			155,959			1,705,955
K-IFRS	W	41,854,679			9,197,433			32,657,246

(*1) Acquisition costs and accumulated depreciation of machinery and equipment were decreased by W4,017,435 million and W5,889,071 million due to revaluation.

2) Reconciliation of financial position as of June 30, 2010 and the financial performance for the six-month periods ended June 30, 2010:

							Total						Total
							Shareholders’						Comprehensive
(in millions of Won)	Total Assets			Total Liabilities			Equity			Net Income			Income
Previous GAAP	W	44,474,914			11,459,359			33,015,555			2,633,481			2,532,099
Adjustments:
Derecognition of financial assets		249,947			250,237			(290	)		280			280
Revaluation of machinery and equipment		1,743,542			—			1,743,542			(128,094	)		(128,094	)
Financial guarantee liabilities		13,231			13,895			(664	)		(664	)		(664	)
Defined benefit liabilities		(4,633	)		(3,574	)		(1,059	)		61,034			30,578
Cancellation of equity method application		(165,682	)		—			(165,682	)		(74,708	)		(113,404	)
Other adjustment		(6,557	)		(1,344	)		(5,213	)		4,468			4,468
Deferred tax effect		(248,183	)		(139,639	)		(108,544	)		(18,619	)		(4,150	)
Toal adjustment		1,581,665			119,575			1,462,090			(156,303	)		(210,986	)
K-IFRS	W	46,056,579			11,578,934			34,477,645			2,477,178			2,321,113

69

POSCO
Notes to Separate Interim Financial Statements, Continued
As of June 30, 2011
(Unaudited)

3) Reconciliation of financial position as of December 31, 2010 and the financial performance for the year ended December 31, 2010:

							Total						Total
							Shareholders’						Comprehensive
(in millions of Won)	Total Assets			Total Liabilities			Equity			Net Income			Income
Previous GAAP	W	48,190,245			13,108,055			35,082,190			4,202,791			4,807,073
Adjustments:
Derecognition of financial assets		220,865			221,086			(221	)		349			349
Revaluation of machinery and equipment		1,567,064			—			1,567,064			(304,573	)		(304,573	)
Financial guarantee liabilities		15,835			15,595			240			240			240
Defined benefit liabilities		(4,022	)		31,980			(36,002	)		126,149			(4,366	)
Cancellation of equity method application		(653,545	)		—			(653,545	)		(300,144	)		(604,679	)
Other adjustment		(4,460	)		(1	)		(4,459	)		5,221			5,221
Deferred tax effect		(245,755	)		(313,984	)		68,229			54,328			160,280
Toal adjustment		895,982			(45,324	)		941,306			(418,430	)		(747,528	)
K-IFRS	W	49,086,227			13,062,731			36,023,496			3,784,361			4,059,545

Interest received, interest paid and income taxes paid which were presented using indirect method under the previous GAAP are presented using direct method as separate line items of cash flows from operating activities under K-IFRS. Also, effect of exchange rate fluctuations on cash held which were presented as cash flows from operating activities under the previous GAAP are presented as a separate line item from cash flows from operating, investing and financing activities.

70