36^th QUARTERLY REPORT

(The 36^th Fiscal Year)

From January 1, 2003 to September 30, 2003

THIS IS A TRANSLATION OF THE QUARTERLY REPORT IN KOREAN LANGUAGE AND IN SUCH A FORM REQUIRED BY KOREAN SECURITIES SUPERVISORY BOARD.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.

3

36^th QUARTERLY REPORT

(The 36^th Fiscal Year)

From January 1, 2003 to September 30, 2003

To: Financial Supervisory Commission and Korea Stock Exchange

We hereby submit the Quarterly Report for the First quarter of the 36^th fiscal year in accordance with the item 3 of Article 186 of Securities & Exchange Law.

Ku-Taek Lee
President and Representative Director
POSCO
1, Koedong-dong, Pohang City, Kyongsangbuk-do, Korea
Tel) 82-54-220-0114

Yong-Ho Sohn
General Manager of Finance
Management Department
Tel) 82-2-3457-0262

4

CONTENTS

Chapter
I.	Overview
II.	Business
III.	Financial Statements
IV.	Current Situation on Corporate Governance and Company Affiliates
Attachment	Auditor’s Review Report

5

I. Overview

1. Purpose of the Company

    A. Businesses engaged in by the Company

Items	Details
a. To manufacture, market, promote, sell and distribute iron, steel and rolled products	Hot Rolled Coils, Cold Rolled Coils, Stainless Steel, By-Products, etc.
b. To engage in harbor loading and unloading, transportation and warehousing businesses	CTS
c. To engage in leasing of real estate and distribution businesses	POSCO Center
d. To engage in district heating supply business
e. To engage in marine transportation, processing and sales of minerals within or outside Korea
f. To engage in all other conduct, activities or businesses related directly or indirectly with the attainment and continuation of the aforementioned purposes.

    B. Businesses not engaged in by the Company

Items	Details
a) To engage in the supply of LNG and power generation, as well as the distribution business thereof
b) To engage in the management of professional athletic organizations	- Two teams in Pohang and Gwangyang were transformed into regional professional soccer teams.

    C. Businesses engaged by the subsidiaries and affiliates

Items	Details
Pohang Coated Steel : Manufacturing and sales of coated steel sheets
Changwon Specialty Steel Co. : Production & sales of steel bars and steel pipes
POSCON : Manufacturing and sales of electric controlling devices
POSREC : Manufacturing and sales of blast furnaces and refractory bricks
POSCO Machinery Engineering : Maintenance and repair of steel plant machinery & equipment
POSCO Machinery Co. : Maintenance and repair of steel plant machinery & equipment
POSCO Engineering & Construction : Construction and engineering

6

Items	Details
POSCO A.C. Architects & Engineering : Construction design
POSCO Steel Sales & Service : Steel product sales and general trading
POSDATA : Development and sales of computer hardware and software
Seung Kwang : Development and operation of athletic facilities
POSCO Research Institute : Research, consulting, education
POSTECH Venture Capital Co. : Support of venture companies
POSCO Terminal Co. Ltd : Logistics Services

     D. Businesses the company plans to engage in

2. Business Organization

     A. Highlights of the Company’s Business Organization

(1) Historical highlights and changes since establishment

(a) Date of establishment: April 1, 1968

(b) Location of the headquarters: 1, Koedong-dong, Pohang City, Kyongsang buk-do, Korea

(c) Steel Works and Offices

• Pohang Works: 5, Dongchon-dong, Nam-ku, Pohang City, Kyonsangbuk-do, Korea

• Kwangyang Works : 700, Kumho-dong, Dong Kwangyang City, Chollanam-do, Korea

• Seoul Office: POSCO Center 892, Daichi-4 dong, Kangnam-ku, Seoul, Korea

• Tokyo Branch: POSCO Tokyo Bldg.4F. 11-14, Ginza 5-Chome Chuo-Ku, Tokyo 104 Japan

• Overseas Offices: The Company operates six overseas offices (Hanoi, Rio de Janeiro, Singapore, EU) for the purpose of supporting international business

(d) Milestones since Establishment

April. 1, 1968	Pohang Iron and Steel Co., Ltd. established
April. 1, 1970	1st stage construction of Pohang Works begun
July 3, 1973	1st stage construction of Pohang Works completed (1.03 million ton per year (tpy) crude steel)
May 31, 1976	2nd stage construction of Pohang Works completed (2.6 million tpy)
December 8, 1978	3rd stage construction of Pohang Works completed (5.5 million tpy)

7

February 18, 1981	4th stage construction of Pohang Works completed (8.5 million tpy)
May 25, 1983	2nd round of the 4th stage construction of Pohang Works completed (9.1 million tpy)
March 5, 1985	1st stage construction of Gwangyang Works begun
March 3, 1987	Research Institute of Industrial Science & Technology (RIST) founded
May 7, 1987	1st stage construction of Gwangyang Works completed (11.8 million tpy)
June 10, 1988	POSCO listed on the Korea Stock Exchange (the first stock in Korea for public subscription)
July 12, 1988	2nd stage construction of Gwangyang Works completed (14.5 million tpy)
December 4, 1990	3rd stage construction of Gwangyang Works completed (17.5 million tpy)
October 2, 1992	4th stage construction of Gwangyang Works completed (20.8 million tpy)
December 9, 1993	ISO 9002 certification acquired
October 14, 1994	New York Stock Exchange (NYSE) listing
September 1, 1995	POSCO Center opened
October 27, 1995	POSCO’s ADRs listed on LSE
November 28, 1995	Completed Construction of COREX
September 30, 1996	Elected as Chairman of IISI
October 15, 1996	#1 Mini Mill completed
March 14, 1997	Introduced Outside Directors system
August 28, 1997	#4 Cold Rolling Mill in Gwangyang Works completed
April 1, 1998	30th Anniversary of establishment
March 31, 1999	Completed construction of #5 Blast Furnace (24.3million ton in annual crude steel production)
October 4, 2000	Privatization completed after Korea Development Bank sold off stakes in POSCO
July 2, 2001	Launched PI (or POSPIA — Integrated Management system) system
March 15, 2002	Adopted new company name “POSCO”
April 30, 2003	Completion of #3 STS plant
June 2, 2003	Declared POSCO Code of Ethics

(e) Changes in the largest shareholder

- From the ‘Industrial Bank of Korea’ to ‘POSTECH.’

- Date of Disclosure: July 27, 2001

- Others: Refer to the disclosure of the change of the largest shareholder (July 27, 2001)

8

(f). Change of Business Pursuits

The Company is a steel maker that focuses on crude steel production and steel manufacturing, as well as the production and sales of hot/cold rolled steel products. The following are changes in the Company’s business pursuits.

• 1984: (a) Port loading, logistics, and warehouse businesses
          (b) Operation of professional athletic teams added to business pursuits

• 1992: Scientific agriculture and its spread added to business pursuits

• 1994: Real estate leasing and distribution added to business pursuits

• 1995: ‘Scientific agriculture and its spread’ exited from business pursuits
          Urban gas supply and power generation added to business pursuits

• 2001 Regional heating business added to business pursuits

• 2002: Maritime transportation of natural materials at home and abroad, their processing and distribution added to business pursuits

(2) Change of the Company name

• Pohang Iron & Steel Co. Ltd.,4POSCO

• Effective Date: March 15, 2002 (34^th Regular General Shareholders Meeting)

(3) Merger, Acquisition and Handover of Businesses

[Irrelevant]

9

(4) Major Changes in Production Facilities

Date	Item	Production capacity	Remarks
July 3, 1973	Pohang Works Phase 1 completed	1.03 million tons/year	Officially recognized production capacity
May 31, 1976	Pohang Works Phase 2 completed	2.6 million tons/year		"
Dec. 8, 1978	Pohang Works Phase 3 completed	5.5 million tons/ year		"
Feb. 18, 1981	Pohang Works Phase 4-1 completed	8.5 million tons/year		"
May 25, 1983	Pohang Works Phase 4-2 completed	9.1 million tons/year		"
May 7, 1987	Gwangyang Works Phase 1 completed	11.8 million tons/year		"
July 12, 1988	Gwangyang Works Phase 2 completed	14.51 million tons/year		"
Dec. 4, 1990	Gwangyang Works Phase 3 completed	17.5 million tons/year		"
Oct. 2, 1992	Gwangyang Works Phase 4 completed	20.8 million tons/year		"
Oct. 15, 1996	STS and mini mill completed	23 million tons/year		"
Sep. 15, 1997	Gwangyang Works Continuous Casting expanded	23.4 million tons/year		"
Mar. 31, 1999	Gwangyang Works # 5 Blast Furnace completed	24.3 million tons/year		"
Apr. 30, 2003	STS #3 plant completed	24.76 million tons/year		"

o Actual production capacity: 28.46 million tons.

[Refer to II. Business, 3. Production and Facilities, A. Production Capacity and Criteria for its calculation]

(5) Important Developments Related with Business Operation
[Irrelevant]

B. POSCO Conglomerate

(1) Overview of Business Group

• Criteria: In the past, the Korea Fair Trade Commission arbitrarily designated the top 30 Business Groups as Large Business Groups among domestic conglomerates based on the criteria of total assets in the previous fiscal year. KFTC has changed this method of categorization to be based on business practices for regulatory purposes.

- Groups subject to regulations on a ceiling on investment in other companies: Business groups with over 5 trillion won in total assets (except business groups that have a debt ratio

10

of below 100% according to their consolidated financial statements.)

- Groups subjected to regulations on cross shareholding and debt guarantee: conglomerates with over 2 trillion won in total assets

(2) Companies Belonging to Large Business Groups

• A company in which a single shareholder and people with a special relationship to the primary shareholder own more than 30% of its stakes. Or a company in which a single shareholder in effect controls the business.

• POSCO Group:

- The Korea Fair Trade Commission designated business groups subject to regulations on a ceiling on investment in other companies, and those subject to regulations on cross shareholding and debt guarantee in 2003 (April 1, 2003).

- POSCO was excluded from the groups subject to regulations on a ceiling on investment in other companies because it has a debt ratio of below 100%.

- POSCO Group (15 companies) with total assets of 20.533 trillion won was designated as 10^th among those conglomerates subject to the regulation on cross shareholding.

POSEC, POSTEEL, Changwon Specialty Steel, POSDATA, POS-AC, POSCON, POSMEC, POSTECH Venture Capital Corp, POCOS, POS-M, Seng Kwang, POSRI, POSREC, POSCO Terminal

(3) Related laws and regulations

a. Prohibition on Cross Shareholdings (Article 9-o of the Fair Trade Law)

No corporation belonging to a Business Group shall acquire or own any shares of any Affiliated Corporations which have acquired or own some of its shares

b. Prohibitions on Debt Guarantees for Affiliated Corporations (Article 10-2 of the Fair Trade Law)

No corporation shall provide new debt guarantees for its domestic Affiliated Corporations. Existing debt guarantees for domestic Affiliated Corporations shall be liquidated within one (1) year of the date of designation.

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c. Prohibition on owning shares of domestic Affiliated Corporation by venture capital (Article 9-3 of the Fair Trade Law)

No Affiliated Corporation of a Large Business Group established as a corporation for investing in Small-and-Medium Enterprises, pursuant to the Support of the Small-and-Medium Enterprise Start-up Act, shall acquire or own shares of a domestic Affiliated Corporation.

(POSTECH Venture Capital Corp. subject to above clause)

d. Restrictions on the Voting Rights of Finance or Insurance Companies (Article 11 of the Fair Trade Law)

No finance or insurance corporation belonging to a Large Business Group shall exercise its voting rights.

e. Decision of Large-scale Intra-group Transactions by Board of Directors and Notification thereof (Article 11-2 of the Fair Trade Law)

When a corporation belonging to a business group desires to engage in any type of transactions and when the volume of such transactions exceeds the ceiling of ten percent (10%) of assets and is over 10 billion won or is in the form of securities, the board of directors of the said corporation shall reach a decision thereupon and make a notification (within one day) thereof.

f. Report of shareholdings (Article 13 of the Fair Trade Law)

A company subject to the prohibition on cross shareholdings shall report to the Fair Trade Commission the shareholdings status of the company’s shareholders, and their financial status, and their shareholdings in other domestic companies.

12

3. Equity Capital

A. New Issue of Registered Form Common Stock with Face Value of Won 5,000

Date	October 22, 1994	February 25, 1998	May 20, 1998
Purpose	DR issuance	DR issuance	DR issuance
Number of Newly-issued Shares	2,112,676 shares	655,738 shares	1,923,077 shares
	(8,450,704 DRs)	(2,622,952 DRs)	(7,692,308 DRs)
Issue Price Per Share	W114,142 (U$142)	W122,655 (U$76.25)	W73,856 (U$52)
Equity Capital (‘000 Won) After the New Issue	W469,509,050	W472,787,740	W482,403,125
Rate of Increase in Equity Capital	2.3%	0.7%	2.0%

B. Convertible Bonds

     No relevant data.

C. Bonds with Warrant

     No relevant data

4. Other information regarding Shares

A. Total number of shares

(As of September 30, 2003)
Authorized Shares	Outstanding Shares		Shares to be issued
200,000,000		90,781,795		109,218,205

B. Outstanding Shares

(As of September 30, 2003)
Type	Number of shares		Amount (thousand won)
Registered Common Shares		90,781,795		453,908,975
Total		90,781,795		453,908,975

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C. Treasury Stock Holdings

(Shares, KRW)
Time of purchase	Type		Number of Shares		Value
Before Dec, 1999	Registered Common			4,677,646		456,347,847,340
Feb 29, 2000 ~ May 18		"		4,824,030		521,435,498,740
June 14, 2000		"		2,891,140		310,839,507,660
October 4, 2000		"		2,161,180		171,597,692,000
August 30, 2001	Cancellation			2,891,140		290,070,967,340
July 23, 2002	ESOP			633.900		63,599,820,900
November 22, 2002	Cancellation			2,807,690		281,698,345,390
July 22, 2002	ESOP			875,066		87,796,246,846
Total				7,346,200		737,055,165,267

* ESOP (Employee Stock Ownership) : Purchase of Treasury Shares by the ESOA and Complementary Contributions to the ESOA

D. Treasury Stock purchased by fund management institutes under the trust contract

As of September 30, 2003					(KRW, Shares)
Date		Name of the institute	Amount		Number of Shares
Nov. 05, 2001		Hana Bank		100,000,000,000		912,010
	Total			100,000,000,000		912,010

E. Shares held by ESOA (Employee Stock Ownership Association)

(KRW, Shares)
Type	Beginning		Increase		Decreased		Balance
Registered Common		666,601		875,066		28,328		1,513,339
Total		666,601		875,066		28,328		1,513,339

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F. Stock Option

Date of Grant	Name	Number of Share		Exercising Period	Exercising Price
July 23, 2001	Sang-Boo Yoo		92,211	July 24, 2003 ~	KRW 98,900
	Ku-Taek Lee		46,106	July 23, 2008
	Young-Woon Kim		18,443
	Moon-Soo Park		18,443
	Chang-Oh Kang		18,443
	Soo-Yang Han		13,832
	Won-Pyo Lee		13,832
	Kwang-Woong Choi		11,065
	Choong-Sik Shin		11,065
	Jung-Won Kim		11,065
	Seong-Yong Shin		11,065
	Chung-U Park		9,221
	Won-Chul Hwang		9,221
	Sung-Hwan Kim		9,221
	Tae-Hyun Hwang		9,221
	Yong-Keun Kim		9,221
	Kwang-Hee Han		9,221
	Dong-Jin Kim		9,221
	Soo-Chul Shin		9,221
	Moon-Chan Ko		9,221
	Chin-Choon Kim		9,221
	Youn Lee		9,221
	Kyeong-Ryul Ryoo		9,221
	Seong-Sik Cho		9,221
	Jong-Tae Choi		9,221
	Hwang-Kyu Hwang		9,221
	Song Kim		9,221
	Woo-In Lee		9,221
	Ung-Suh Park		2,305
	Jae-Young Chung		2,305
	Guil-Soo Shin		2,305
	Jong-Won Lim		2,305
	Samuel F. Chevalier		2,305
	Soon Kim		2,305

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Date of Grant	Name	Number of Share		Exercising Period	Exercising Price
	Woo-Hee Park		2,305
	Dae-Wook Yoon		1,960
April 27, 2002	Jong-Doo Choi		9,506	April 28, 2004	KRW 136,400
	Joon Yang Chung		9,506	~ April 27, 2009
	Chang-Ho Kim		9,506
	Nam Suk Hur		9,506
	Chang-Kwan Oh		9,506
	Jeon-Young Lee		9,506
Sep. 1 2002	Suk-Man Youn		11,407	Sep. 19, 2004 ~	KRW 116,100
	Young-Tae Keon		9,506	Sep. 18, 2009
April 26, 2003	Chang-Oh Kang		4,900	April 27, 2003 ~	KRW102,900
	Soo-Yang Han		2,940	April 26, 2010
	Won-Pyo Lee		2,940
	Kwang-Woong Choi		5,880
	Kyeong-Ryul Ryoo		4,900
	Kim, E. Han		2,450
	Hyun-Shik, Yoo		2,450
	Han-Kyung, Kim		2,450
	Kwang-Hee Han		1,960
	Dong-Jin Kim		1,960
	Tae-Hyun Hwang		1,960
	Youn Lee		1,960
	Seong-Sik Cho		1,960
	Jong-Tae Choi		1,960
	Hyun-Shik, Chang		9,800
	Oh-Joon, Kwon		9,800

16

Date of Grant	Name	Number of Share		Exercising Period	Exercising Price
	Dong-Hwa, Chung		9,800
	Jin-Il, Kim		9,800
	Chun-Hwan, Lee		9,800
	Dong-Hee, Lee		9,800
	Byung-Jo, Choi		9,800
	Sang-Young, Lee		9,800
	Hyun-Uck, Sung		9,800
	Han-Yong, Park		9,800

o Cancellation of Stock option (’03.7.22) : Byung-Hoon Kim (9,409 stocks)

5. Voting Rights

As of September 30, 2003
		Number of shares		Remarks
1. Shares with voting rights [a-b]			[88,966,155]
	a. Number of outstanding shares		88,966,155
	b. Number of shares without voting rights		0
2. Shares with restricted voting rights [ a + b + c + d ]			[8,258,210]
	a. Restriction by Code of Commerce		8,258,210	Treasury Stock &
	b. Restriction by Securities Exchange Law		0	Stock under trust contract
	c. Restriction by Fair Trade Law		0
	d. Restriction by other regulations		0
3. Shares whose voting rights have been restored			[80,707,945]
Shares which can exercise voting rights [1- 2 + 3]			80,707,945

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6. Earnings and Dividend for The Past Five Fiscal Years

(Million Won)
	The 35th		The 34th			The 33rd			The 32nd			The 31st
Net Profit		1,101,325		819,319			1,636,991			1,558,032			1,122,867
EPS (Won)		13,442		10,043			19,170			16,242			11,968
Net Profit Available for Dividend Payout		1,725,043		759,120			1,946,837			1,479,586			1,218,466
Cash Dividend Paid (Payable)		286,057		204,048			204,704			159,920			117,554
Pay-out Ratio		25.97		24.90	%		12.50	%		10.26	%		10.47	%
Dividend per share (Won)		3,500		2,500			2,500			1,750			1,250
Dividend Yield		2.76		2.20	%		3.18	%		1.43	%		2.02	%
Net asset per share (Won)		129,546		116,516			108,450			96,951			86,245
Recurring Profit per share (Won)		13,442		10,043			19,170			16,242			11,968

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II. Business (Manufacturing)

1. Current Situation of POSCO

(A) Classification of Business Areas for Public Disclosure

[Irrelevant]

(1) Market Share

(Unit: million tons, %)
		Interim of				Annual for the				Annual for the
		the 36th fiscal year				35th fiscal year				34th fiscal year
Category		(3Q of 2003)		Market share		(2002)		Market share		(2001)		Market share
Crude steel production			34.2		100		45.4		100		43.9		100
	POSCO		21.4		63		28.1		62		27.8		63
	Others		12.8		37		17.3		38		16.1		37

o Estimated data

(2) Characteristics of the Steel Market

• The steel industry supplies materials to major export industries, including the automobile, shipbuilding, and electronics appliance industries. By supplying high quality steel materials to the users, POSCO endeavors to attain shared development and prosperity together with its customers.

• The company also maintains a made-to-order supply system in a bid to meet the diverse needs of its customers, and with an eye to securing stable business operation as an integrated steel producer.

(3) Current Situation and Prospect of New Businesses

[Irrelevant]

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2. Key Products and Raw Materials

A. Current Situation of Key Products

(Unit :100 million won)

Business area	Source of sales	Items	Specific utility	Key brands	Sales (portion)
Steel production	Products	Hot rolled products	Steel pipes, shipbuilding, etc.	POSCO	46,247 (44%)
		Cold rolled products	Automobiles, Electronic		36,865 (36%)
			appliances, etc.		17,836 (17%)
		STS	Silverware, steel pipes, etc.
	Others	Byproducts, etc.	Raw material for cement, etc.		852 (1%)
	Transfortation				2,480 (2%)
		Total			104,280 (100%)

Note) Excludes sales discount/transportation fees

B. Price Trends of Key Products

(Unit: won/ton)

		3Q of the 36th	Annual for the 35th	Annual for the 34th
		fiscal year	fiscal year	fiscal year
Items		(Jan. 1~June 30, 2003)	(Jan. 1~Dec. 31, 2002)	(Jan. 1~Dec. 31, 2001)
Hot-rolled coil	Domestic Export	362,465 393,386($329)	317,632 318, 297($255)	287,994 277,614($215)
Cold-rolled steel sheet	Domestic Export	468,986 496,135($415)	417,720 371,319($297)	386,921 367,116($284)

(1) Criteria for Calculation

• Product items and objects for calculation: sale prices of standard hot-rolled coil, and cold-rolled steel sheet.

• Unit and method for calculation: The average price of each product item based on its total sales during the given period, excluding freight revenue.

(2) Factors of Price Fluctuations

20

• Hikes in domestic prices and export prices in tune with a boom in the steel market.

C. Current Situation of Major Raw Materials

(Unit: million won)

				Purchase amount
Business area	Type of purchase	Item	Specific use	(portion)			Remarks
Steel production	Raw materials	Iron ore	Iron ore for blast furnaces		613,404 (26.7	%)	BHP, and Hamersley of Australia CVRD of Brazil
		Coal	Coking coal: Heat source for blast furnaces, Reductant Smokeless coal:		613,574 (26.7	%)	BHP of Australia Fording of Canada
			Sintering fuel
		Iron materials	Iron material for steelmaking		84,878 (3.7	%)	Carbon steel scrap iron, HBI, cold pig iron, etc.
		STS materials	Key materials for STS production		633,915 (27.6	%)	Nickel, Fe-Cr, STS scrap iron, etc.
		Ferro materials Other raw materials	Submaterials for ironmaking, steelmaking		282,870 (12.3	%)	Alloy iron, Nonferrous metal, Claus
		Limestone, other minerals	Submaterials for ironmaking, steelmaking		69,877 (3.0	%)	Limestone, manganese, fluorite
Total					2,298,518

Note) Amount: Based on costs calculated at the point of storage (CIF+customs duty+unloading+other costs)

21

D. Price Trends of Key Materials

(Unit: won/ton)

	3Q of the 36th		The 35th		The 34th
Category	fiscal year		fiscal year		fiscal year
Iron ore		32,567		31,064		33,261
Coal		58,207		61,993		61,832
Scrap iron		192,273		150,529		145,411
Nickel		10,821,855		8,435,974		7,913,810

(1) Criteria for Calculation

The unit price is based on costs calculated at the point of storage (CIF+customs duty+unloading+other costs)

(2) Key Factors in Price Fluctuations

A.  Iron ore (The unit price increased 1,503 won in terms of the won currency compared with the 35^th fiscal year)

• The FOB price increased 9% compared with the 35^th fiscal year and shipping charges rose ($0.52 per ton) due to a rise in oil prices. However, the unit price increased only a little due to a fall in won-dollar exchange rates.

•	Trend of purchase price (CFR):	$	25.22/ton		4	$	24.15/ton		4	$	27.17/ton
	Trend of average exchange rate:	Won	1,291/$		4	Won	1,253/$		4	Won	1,180/$
			(2001	)	4		(2002	)	4		(3Q of 2003)

B.  Coal: (The unit price fell 3,786 won due to a fluctuating won currency compared with the 35^th fiscal year)

• The price calculated in won declined due to a fall in exchange rate.

•	Trend of purchase price (CFR):	$	46.88/ton		4	$	48.55/ton		4	$48.83/ton
			(2001	)			(2002	)		(3Q of 2003)

C. Scrap iron

• The price of imported scrap iron increased as scrap iron on demand rose due to a booming steel market in East Asia, while the supply from the US and Europe declined.

•	Trend of purchase price (CIF):	$	110/ton		4	$	116/ton		4	$158/ton
			(2001	)			(2002	)		(3Q of 2003)

22

D. Nickel

• It is projected that there will be nickel supply shortages amounting to about 30,000 tons in 2003, because STS production capacity worldwide is rising but nickel production facilities are likely to be completed only after 2006. As a result, there will likely be a strong demand for nickel, which will raise nickel prices significantly in the early part of next year.

•	Trend of LME price:	$5,952/ton	4	U$6,768/ton	4	U$9,370/ton
		(2001)		(2002)		(3Q of 2003)

3. Production and Facilities

A. Production capacity

(Thousand Ton)

	2003 3Q		2002		2001
Pohang Works		9,495		12,200		12,200
Kwangyang Works		11,850		15,800		15,800
Total		21,345		28,000		28,000

• Pohang Works : #1 Steel Making (1,950) + #2 Steel Making (6,300) + STS (1,245) = 9,495

• Kwangyang : #1 Steel Making (5,100) + #2 Steel Making (5,400) + Minimill (1,350) = 11,850

• Total = 21,345 thousand tons

* Based on actual capacity revised on April, 1999

B. Production and Capacity Utilization Rate

(1) Production

(Thousand Ton)

			3Q of 2003		2002		2001
		Pohang		9,358		12,164		12,042
		Kwangyang		12,035		15,902		15,784
Crude Steel				21,393		28,066		27,826
	Plate	Pohang		2,290		3,046		3,069
	HR Products			7,831		9,388		9,770
		Pohang		3,018		3,185		3,471
		Kwangyang		4,813		6,203		6,299
	CR Products			6,888		8,923		8,736
		Pohang		876		1,531		1,533
		Kwangyang		6,012		7,392		7,203
	STS	Pohang		1,108		1,236		1,228
	Others	Pohang		2,228		2,949		2,790
		Kwangyang		170		108		228
		Pohang		9,519		11,947		12,092
		Kwangyang		10,995		13,703		13,730

23

			3Q of 2003		2002		2001
Finished Products				20,514		25,650		25,822
		Pohang		177		584		490
		Kwangyang		335		867		927
Intermediate Products				513		1,451		1,416
		Pohang		9,697		12,531		12,582
		Kwangyang		11,330		14,570		14,656
	Total Products			21,027		27,101		27,238

(2) Capacity Utilization Rate for 3Q of 2003 in Terms of Crude Steel Production

(Thousand Ton)

	Capacity		Production		Utilization Rate
Pohang Works		9,495		6,907		96.3
Kwangyang Works		11,850		7,934		100.4
Total		21,345		14,031		98.6

– Utilization Rate = Production/Real Production Capacity.

C. Production Facilities

(1) Book Value of Fixed Assets

(Million Won)

		Beginning Book						Ending Book
		Balance		Change		Depreciation		Balance
Pohang
	Land		411,045		-5,075				405,970
	Building		927,619		107,825		42,386		993,058
	Structures		405,422		25,955		20,542		410,835
	Machinery & Equipment		1,881,226		729,370		406,227		2,204,369
	Vehicles		11,408		9,200		2,964		17,644
	Tools and Fixtures		9,111		2,952		3,272		8,791
	Furniture & Others		20,955		12,912		5,216		28,651
Kwangyang
	Land		379,760		-1,431				378,329
	Building		906,190		16,104		51,392		870,902
	Structures		541,283		4,809		33,004		513,088
	Machinery & Equipment		2,099,283		252,343		453,567		1,898,059
	Vehicles		3,873		9,247		2,184		10,936
	Tools and Fixtures		7,234		7,738		3,442		11,530
	Furniture & Others		8,246		2,521		2,869		7,898

24

(2) Major Capital Expenditures

(a) Investments under construction

(Hundred million Won)     

			Invested
	Total		Amount			Amount to
	Investment		(3Q 2003)			Be invested
Expansion		4,980		1,538 (1,343	)		3,442
Maintenance		3,714		557(281	)		3,157
Total		6,632		2,095(1,624	)		6,599

(b) Planned investments

(Hundred million Won)     

	Total
	Amount	2003		2004		2005
Total			12,739		15,985		16,282

4. Sales

A. Breakdown of Steel Product Sales

(Thousand Ton, Hundred Million Won)

		3Q 2003				2Q 2002				2002
		Volume		Amount		Volume		Amount		Volume		Amount
Hot Rolled Products	Domestic		10,573		39,540		6,921		22,042		14,044		46,732
	Export		1,894		7,801		1,080		3,241		2,294		7,776
	Total		12,467		47,341		8,001		25,283		16,338		54,508
Cold Rolled Products	Domestic		4,647		23,709		2,847		12,558		5,952		27,577
	Export		2,661		14,096		1,828		6,929		3,657		15,019
	Total		7,308		37,805		4,675		19,487		9,609		42,596
Stainless Steel	Domestic		697		11,905		435		6,473		857		13,331
	Export		391		6,072		195		2,778		390		5,772
	Total		1,088		17,977		630		9,251		1,247		19,103
Others	Domestic				1,326		—		634		—		1,326
	Export				35		—		—		—		—
	Total				1,361		—		634		—		1,326
Total	Domestic		15,917		76,480		10,203		41,706		20,853		88,966
	Export		4,946		28,004		3,103		12,948		6,341		28,567
	Total		20,863		104,484		13,306		54,654		27,194		117,533
Discount					-204		—		-110		—		-247
Grand Total			20,863		104,280		13,306		54,544		27,194		117,286

- Export includes local export sales

25

B. Marketing organization, channel and strategy

(1) Organization

Hot Rolled Steel Sales Dept., Cold Rolled Steel Sales Dept., Automotive & Electrical Flat Products Sales Dept., Coated Steel Sales Dept., Stainless Steel Sales Dept.

(2) Sales Channel

i) Direct sales : POSCO 4 Customers

ii) Indirect Sales

- Domestic market : Sales agents, e-sales or POSTEEL

- Overseas Market : General Trading Companies

(3) Sales Condition

- Domestic Sales : Credit sales based on production to order

- Export Sales : Sales based on irrevocable Letter of Credit

(4) Sales strategies

• Change marketing strategy toward higher profits

- Enhance sales mix focused on profitability

- Increase sales of high value-added products and differentiate each market based on the customer.

• Secure Domestic market share and diversification of export market

- Increase market share at domestic competing products

- Secure stable export market and focus on high value-added products

- Increase on time delivery rate

• Strengthen marketing focused on customer oriented

- Increase customers’ satisfaction

- Strengthen the technology service to the customers to support the quality competence

26

6. Related to the Derivatives

A. Foreign Exchange Position

(Unit: USD, EURO: Thousand, JPY: Million)     

		Current Position						Future Position
Nation	Currency	Position		Assets		Debt		Position	Assets	Debt
USA	USD		-812,853		228,490		1,041,343
Japan	JPY		-78,588		8,259		86,847
Germany	DEM
UK	GBP
Euro land	EURO		-32,486		1,106		33,592
Others

* Current position based on foreign assets and debt.

(Unit: USD, EURO: Thousand, JPY: Million)     

		Option Position			Swap Position
Nation	Currency	Position	Assets	Debt	Position		Assets		Debt
USA	USD					174,000		174,000
Japan	JPY					-22,868				22,868
Germany	DEM
UK	GBP
Euro land	EURO
Others

B. Risk Management for Foreign Exchange

     There are three basic strategies for the risk management for foreign exchange.

     First, Natural Hedge.

Maintain the balance between the income and expenditure of foreign exchange to reduce the net exposure.

     Second, Balance the assets and debt.

An Increase in foreign assets as well as a decrease in foreign debt to reduce the exposure to the foreign exchange fluctuation.

     Third, Introduce the risk management system.

POSCO introduced the risk management system on December 15, 2000 to manage the remaining foreign exchange more systematically.

27

7. Important contracts

A. Import Contract

N.A.

8. Research & Development

A. R & D Organization

		Number of
		Teams or groups		Staff
In-house	Technology Development Department		10		96
	Finex Development Department				162
	Technical Research Laboratory (Group)		13		530
Independent	Research Institute of Industrial Science and Technology				327

B. R&D Expense

(Million Won)     

	2002		2001		2000
1. Raw Materials		22,291		21,362		14,782
2. Labor cost		22,954		18,588		20,075
3. Depreciation		11,577		15,626		15,785
4. Subcontract		89,086		100,598		101,561
5. Other Expense		38,189		24,389		24,942
Total		184,097		180,563		177,145

9. Other information for investment decision making

A. Funding from domestic market

(Hundred Million Won)     

Source		Beginning		Increase (Decrease)			Ending Balance
From Money Market
	Banks
	Others
From Capital Market
	Bond (private)		21,000		(4,000	)		17,000
	Bond (public)		21,000		(4,000	)		17,000
Others
Total			21,000		(4,000	)		17,000

28

B. Funding from overseas

(Hundred Million Won)

		Beginning		Increase (Decrease)			Ending Balance
Financial Institutions			3,409		(387	)		3,022
	Bond		17,885		(2,119	)		15,766
	Equity
	Others
	Total		21,294		(2,506	)		18,788

29

III.  Financial Statements

1.  Summary of Unconsolidated Financial Statements

					(Unit: million won)
	3Q 2003		2002		2001		2000		1999
Current Assets		4,972,249		3,772,625		3,560,773		4,543,060		4,166,180
Quick Assets		3,571,979		2,501,696		2,191,303		3,080,993		2,876,489
Inventories		1,400,270		1,270,929		1,369,470		1,462,067		1,289,691
Fixed Assets		12,815,344		13,471,861		14,054,757		13,223,506		13,061,277
Investments		3,508,757		3,869,016		4,609,647		3,990,724		3,443,239
Tangible Assets		8,957,245		9,271,701		9,118,589		8,929,983		9,411,491
Intangible Assets		349,342		331,144		326,521		302,799		206,547
Deferred Assets				—		—		—		—
Total Assets		17,787,593		17,244,486		17,615,530		17,766,566		17,227,457
Current Liabilities		2,280,402		2,497,274		2,252,545		3,509,702		2,994,780
Fixed Liabilities		3,006,367		3,180,416		5,166,492		4,826,918		5,146,157
Total Liabilities		5,286,769		5,677,690		7,419,037		8,336,620		8,140,937
Common Stock		482,403		482,403		482,403		482,403		482,403
Capital Surplus		3,716,728		3,685,953		3,673,621		3,670,457		3,675,351
Retained Earnings		543,952		513,177		500,845		497,681		502,575
Capital Adjustments		3,172,776		3,172,776		3,172,776		3,172,776		3,172,776
Total Shareholders’ Equity		9,674,618		8,483,234		6,986,939		6,662,163		5,208,591
Total Sales		-1,372,925		-1,084,794		-946,470		-1,385,078		-279,825
Operating Profit		12,500,824		11,566,796		10,196,493		9,429,946		9,086,520
Recurring Profit		10,428,072		11,728,595		11,086,119		11,692,000		10,696,148
Net Profit		2,280,185		1,833,485		1,429,457		2,099,224		1,819,452
		2,076,032		1,465,444		1,114,971		1,331,484		1,662,779
		1,518,248		1,101,325		819,319		1,636,991		1,558,032

30

2.  Items to pay attention for use of Financial Statements

A.  Principles to write Financial Statements

The company prepared its financial statements in accordance with Generally Accepted Accounting Principle and Certified Public Accountant’s audit opinions on financial statements are as follows.

	For 3Q 2003 and 2002	For 1999, 2000 and 2001
CPAs	Samil Accounting Corp PricewaterhouseCoopers	Anjin & Co Arthur Anderson
Audit Opinion	Unqualified	Unqualified

B.  Any violations against GAAP

(1) Violations which need to amend financial statements

      N.A.

(2) Violations, which are not related with amendment of financial statements

      N.A.

3.  Unconsolidated Financial Statements

A.  Balance Sheet

      Refer to the attached the review report for the three months periods ended June 30, 2003

B.  Income Statements

      Refer to the attached the review report for the three months periods ended June 30, 2003

C.  The Note in the Financial Statement

      Refer to the auditor’s note in financial statement

D.  The Financial Statement before and after amended in this fiscal year

      N.A

31

4.  Consolidated Financial Statements

A.  Summary for the fiscal years 1998 through 2002

	(million won)
	2002		2001		2000		1999		1998
Current Assets		5,397,476		4,960,937		6,306,451		5,982,514		7,016,426
Quick Assets		3,726,031		3,223,686		4,394,808		4,306,231		5,441,838
Inventories		1,671,446		1,737,251		1,911,643		1,676,282		1,574,588
Fixes Assets		13,679,373		14,444,398		13,840,224		13,707,420		13,562,658
Investments		2,879,987		3,352,924		2,849,980		2,472,524		1,763,880
Tangible Assets		10,324,574		10,600,766		10,454,929		10,811,472		11,153,471
Intangible Assets		474,812		490,708		535,315		423,424		241,257
Deferred Assets		0		—		—		—		404,050
Adjustment for consolidation		0		—		—		—		21,619
Total Assets		19,076,849		19,405,334		20,146,675		19,689,934		20,600,703
Current Liabilities		3,965,489		3,618,918		5,346,831		4,524,361		5,190,203
Fixed Liabilities		3,536,930		5,435,628		5,241,545		5,965,490		7,059,046
Deferred Liabilities				—		—		—		17,231
Total Liabilities		7,502,419		9,054,546		10,588,376		10,489,851		12,266,480
Minority Interest		279,165		168,171		159,623		121,333		118,129
Common Stock		482,403		482,403		482,403		482,403		482,403
Capital Surplus		3,797,737		3,859,030		3,860,756		3,799,991		4,023,046
Retained Earnings		8,219,499		6,966,189		6,595,470		5,193,185		3,675,392
Capital Adjustments		-1,204,374		-1,125,004		-1,539,953		-396,830		35,253
Total Shareholders’ Equity		11,574,430		10,350,789		9,558,299		9,200,082		8,334,223
Total Sales		14,354,918		13,121,097		13,776,214		12,701,013		13,613,157
Operating Profit		2,049,867		1,587,293		2,306,463		2,020,805		1,900,700
Recurring Profit		1,507,437		1,174,673		1,384,660		1,707,201		1,506,764
Total Net Profit		1,109,132		837,210		1,642,350		1,555,348		1,107,696
Consolidated Net Profit		1,089,288		845,679		1,636,667		1,554,397		952,933
Number of Consolidated Companies		33		32		34		34		34

32

B.  Items to pay attention for use of Financial Statements

(1) Principles to write Financial Statements

The company prepared its financial statements in accordance with Generally Accepted Accounting Principle and Certified Public Accountant’s audit opinions on financial statements are as follows.

	For 3Q 2003 and 2002	For FY 1999, 2000 and 2001
CPAs	Samil Accounting Corp PricewaterhouseCoopers	Anjin & Co Arthur Anderson
Audit Opinion	Unqualified	Unqualified

(2) Any violation, need to amend the consolidated financial statement

       N.A

(3) Any violation, does not need to amend the consolidated financial statement

       N.A

(4) The companies included in the consolidated financial statement in the recent 3 fiscal years

	The companies included	The companies added	The companies dropped
2002	POSCO and 33 companies	POSREC Qintao
2001	POSCO and 32 companies	—	POS Energy and other
2000	POSCO and 34 companies	POSTEC Venture and other	Davy Distington Ltd and other

C.  Consolidated Financial Statements

(1) Consolidated Balance Sheet

       Refer to the 35th Consolidated Financial Statements as of December 31, 2002

(2) Consolidated Income Statements

       Refer to the 35th Consolidated Financial Statements as of December 31, 2002

6.  Divisional Financial Status

A.  Divisional Financial Information

     N.A

The POSCO and its related companies have been operating mainly steel business

B.  Regional Financial Information

     N.A

There is not any country or region, in which the sales or assets of the companies or division are bigger than 10% of consolidated sales or assets

33

7.  Financial Statement before and after consolidation

A.  The overview of consolidation

      N.A

B.  Financial Statement before and after consolidation

      N.A

C.  Issues related Consolidation

      N.A

IV.  Current Situation on Corporate Governance and Company Affiliates

1.  Overview of Corporate Governance

A. Issues Related with the Board of Directors

(1) Composition of the Board of Directors

(A) Authority of the Board of Directors

• Deliberation and resolution of legal issues and key matters in business operations

- Discusses and make decisions on the convocation of shareholders meetings and submission of agendas for shareholders meetings, as well as on legal issues including the issuance of new shares, and the repurchase and disposal of company shares

- Discusses and makes decisions on key matters in business operations, including mid- and long-term business strategies, annual business plans, and new investments in and outside of the company

• Recommendation of standing directors of the board, and election of the chairman of the board, president, vice-presidents, executive vice president, and senior vice presidents among standing directors

• Selection of members of the special committees

• Determination of the functions of the board of directors and special committees

(B) Whether to disclose personal profiles of director candidates before shareholders meeting, and whether shareholders can recommend candidates

Feb. 17, 2003	The Director Candidate Recommendation and Evaluation Committee recommended 3 candidates for outside directors
Feb. 18, 2003	The board of directors recommended 2 candidates for standing directors
Feb. 18, 2003	Disclosed the personal profiles of director candidates and their relevant experience
Mar. 14, 2003	Selected directors (shareholders meeting)

34

(C) Establishment and composition of the Director Candidate Recommendation and Evaluation Committee

• Changed the name from the Director Candidate Recommendation Committee (March 17, 2000) to the Director Candidate Recommendation and Evaluation Committee (March 15, 2002)

• Set up the Director Candidate Recommendation and Evaluation Committee

	Is an outside
Name	director	Remarks
Park Ung-suh (Chairman)	•	< Satisfies the regulation requiring that more than 50% of
Lim Jong-won (member)	•	directors should be from outside >
Samuel F. Chevalier (member)	•	- Outside directors (5):
		Pursuant to 3 of Clause 16 under Article 191 in the
Yoo Hyun-shik (member)	•	Securities Exchange Act (Correspondingly applying 2 of
Kim Han-kyung (member)	•	Clause 5 of under Article 54 in the Securities Exchange Act)

(D) List of outside directors

		Relation with
		majority
Name	Experience	shareholder	Remarks
Park Ung-suh	• Prof.of Sejong University, president of the Korea-Australia Foundation	None
	• Former president of Samsung Petrochemical Co.
	(Economics at Seoul National University, PhD in economics from University of Pittsburgh)
Chung Jae-young	• Vice president of SungKyunKwan University	”
	• Former president of the Korean-Japanese Economics and Management Association
	(Business administration at Sungkyunkwan University, PhD in business from Waseda University)

35

		Relation with
		majority
Name	Experience	shareholder	Remarks
Shin Guil-soo	• President of International Strategic Management Institute	”
	• Prof. of Business Administration and Economics, Myongji University
	(Business administration at SNU, PhD in business administration from Myongji University)
Im Jong-won	• Prof. of business administration, SNU	”
	• Former chairman of the Korea Marketing Association
	(Business administration at SNU, PhD in business administration from University of Alabama)
Samuel F. Chevalier	• Former vice chairman, Bank of New York	”
	• Former president of Irving Bank (Economics, Northeastern University)
Kim E. Han	• Distinguished Professor at University of Michigan	”
	• Former advisory professor of the Korea Stock Exchange, advisor to the World Bank
	(MBA at Cornel University, PhD in business administration from State University of New York)
Yoo Hyun-shik	• Former president of Samsung General Chemicals	”
	• Former vice-president of Cheil Industries Inc.
	(Chemical engineering at SNU)
Kim Han-kyung	• Former vice chairman of SK Corp.	”
	• Former president of SK Corp.
	(Business administration at Kyunghee University)

36

• Preparation of internal system to allow access to management information

- Issues critical to company management are set to be deliberated at the board of directors. (Related materials are distributed days before the opening of the board of directors meeting)

- Key agendas to be submitted to the board of directors are pre-examined by a designated special committee that consists mostly of outside directors.

- Operates a division to support outside directors. Regularly reports on management conditions and frequently offers related materials to outside directors.

- Holds workshops and management report sessions for outside directors.

(E) Whether a director is covered by damage liability insurance or not

	Annual insurance		Insurance premium
Name	premium	Insurance benefits	paid by company	Remarks
All directors	326 million won	30 billion won	Entirety

(2) Issues Related with the Operation of the Board of Trustees

(A) Key issues in regulations on the operation of the board of trustees

• Agendas submitted to the board of directors

- Convocation of general shareholders meetings, and agendas submitted to the meetings, issuance of new shares, purchase and disposal of company shares, and deliberation and resolution of legal matters

- Deliberation and resolution of key management issues, including mid- and long-term management strategy, annual business plans, and major internal and external new investments

• Composition of special committees under the board of directors and their functions

Category	Composition	Major functions
Director Candidate Recommendation and Evaluation Committee	5 outside directors	- Evaluation of the qualifications of director candidates and recommendation of outside director candidates
		- Advance screening for nominating representative director, members of special committee(s) — Evaluation of business performance
Finance & Operation Committee	3 outside directors 2 standing directors	- Advance deliberation on crucial new investment in outside companies, and advance deliberation on the revision and abolition of regulations regarding the operation of the board of directors
		- Deliberation and resolution on financing matters, and on donations between 100 million and 1 billion won

37

Category	Composition	Major functions
Audit Committee	4 outside directors	- Audit of corporate accounting and business operations
		- Creation of audit report on closing accounts, and reporting to the shareholders meeting
Management Committee	6 standing directors	- Advance deliberation on and approval of in-house investment schemes
		- Deliberation on important subjects regarding hierarchical structure, development and adjustment of personnel
		- Important subjects on working policy, and changes to welfare

• Operation procedure of the board of directors and special committees (refer to the regulations on the operation of the board of directors)

(B) List of key activities of the board of directors (Jan. 1 - Oct. 17, 2003)

Session	Date	Agenda	Approval	Remarks
2003-1	Jan.16	3 cases including the construction of No. 5 CGL at Gwangyang Works	3 cases approved
2003-2	Feb.18	3 cases including a plan on donations to the POSCO Educational Foundation	3 cases approved
2003-3	Mar.14	6 cases including selection of chairman and president	6 cases approved
2003-4	Apr.26	8 cases including POSTEEL transaction plan for 2003	8 cases approved
2003-5	June 25	4 cases including amendment of Business plan for 2003	4 cases approved
2003-6	July 22	9 cases including Purchase & Retirement of Treasury Stock	9 cases approved
2003-7	Oct.17	7 cases including STS Expansion Plan of ZPSS (Zhangjiagang Pohang Stainless Steel Co., Ltd.) in China	7 cases approved

38

(C) Major activities of outside directors on the board of directors (Jan. 1 - Oct. 17, 2003)

		Number of
		participating
Session	Date	outside directors	Remarks
2003-1	Jan. 16	6 persons
2003-2	Feb. 18	8 persons
2003-3	Mar. 14	8 persons
2003-4	Apr. 26	6 persons
2003-5	June 25	8 persons
2003-6	July 22	8 persons
2003-7	Oct. 17	7 persons

(D) Composition of committees and their activities (Jan. 1 - Oct. 17, 2003)

Date of meeting	Committee	Agenda	Remarks
Jan. 14, 2003	Management Committee	3 cases, including the construction of No. 5 CGL at Gwangyang Works
Jan. 15, 2003	Director Candidate Recommendation and Evaluation Committee	2 cases, including the evaluation of business performance for the entire company in 2002
Jan. 22, 2003	Finance & Operation Committee	2 cases, including donations to help the underprivileged
Feb. 17, 2003	Management Committee	2 cases, including plan on donations to the POSCO Educational Foundation
Feb. 17, 2003	Director Candidate Recommendation and Evaluation Committee	Assessment of qualifications of 3 standing directors
Mar. 4, 2003	Management Committee	Replacement of cold-rolled CLTS 1,2,3 at Gwangyang Works
Mar. 11, 2003	Finance & Operation Committee	2 cases, including charity donations to help Daegu subway fire victims
Mar. 14, 2003	Director Candidate Recommendation and Evaluation Committee	5 cases, including selection of chairman of the board and president
Mar. 28, 2003	Finance & Operation Committee	Planning on support for the 42nd South Jeolla Province residents’ sports competition
Apr. 25, 2003	Finance & Operation Committee	Investment in the construction of a complex-processing center for automobile steel sheets in China

39

Date of meeting	Committee	Agenda	Remarks
Apr. 26, 2003	Director Candidate Recommendation and Evaluation Committee	2 cases, including provision of stock options
May 6, 2003	Management Committee	Upgrading of electrical steel sheets (1st stage)
May 20, 2003	Management Committee	3 cases, including addition of facilities to foundry blast furnace in Pohang
June 10, 2003	Management Committee	2 cases, including installation of degassing facilities at No 2 steel-making plant in Gwangyang
June 24, 2003	Management Committee	2 cases, including expansion of No 9 power plant in Gwangyang
June 25, 2003	Director Candidate Recommendation and Evaluation Committee	Revision of business plan for 2003
June 25, 2003	Finance & Operation Committee	2 cases, including relocation of public facilities in Pohang residential complex to Pohang City
July 15, 2003	Management Committee	3 cases, including Blast Furnace No. 3 and 4 in Pohang, and Blast Furnace No. 3 and 4 in Gwangyang
July 22, 2003	Finance & Operation Committee	3 cases, including plan on establishment of a holding company in China
Aug. 26, 2003	Management Committee	3 cases, including plan on sale of Seungri villa
Sep. 30, 2003	Management Committee	4 cases, including plan on Hydroforming
Oct. 14, 2003	Management Committee	2 cases, including extension of installations TWB Facilities.
Oct. 16, 2003	Finance & Operation Committee	4 cases including STS Expansion Plan of ZPSS(Zhangjiagang Pohang Stainless Steel Co., Ltd.) in China
Oct. 17, 2003	Director Candidate Recommendation and Evaluation Committee	Adjustment to the exercise price and the number of shares granted of the Stock Option Disposal of Treasury Stocks

40

B. Matters Concerning Auditing

(1) Matters Concerning Auditing Organization

(A) Whether to set up the audit committee (auditors), and how to compose the committee, etc.

• Legal ground for establishment: Pursuant to the Commercial Act (Clause 2 under Article 415) and the Securities Exchange Act (Clause 17 under Article 191), POSCO is obliged to set up a committee (total assets exceeding 2 trillion won)

• Establishment

- Date: March 17, 2000

- Members: 4 persons (4 members of outside directors)

• Operated in compliance with regulations on the operation of the audit committee (Legislated on March 17, 2000)

- Arrangement of the meeting: One regular session per quarter and special meetings as necessary

- Resolution of agenda: More than half of the registered members should participate and a minimum of half of the participants should reach consensus

- Submission of agenda: Submitted by committee chairman, chairman of the board, or each member

- Supporting department: In-house auditing department supports the committee for the efficient processing of tasks

(B) Whether to prepare an in-house mechanism to allow the audit committee (auditors) to access relevant management information

- Stipulated in regulations on the operation of the audit committee in compliance with related legislation

1. The committee audits managerial executions by directors

2. The committee may request directors to report on operations, and/or examine the company’s business operations and asset portfolio.

3. The committee may request a director to stop certain deeds, should the director pursue activities in violation of the articles of incorporation as which may cause irrevocable damage to the company.

4. The committee may demand the board of directors to convene a special shareholders meeting.

5. As necessary, the committee may request companies in which POSCO is invested to report on their business operations. If an invested company does not report as requested right away, or if the committee needs to confirm the validity of the report, the committee may also investigate the operations of the invested company and its asset portfolio.

6. As necessary, the committee may receive consulting from outside experts at the company’s expense.

41

(C) Personal profile of the audit committee (auditors)

Name	Experience	Qualifications	Remarks
Chung Jae-young	Vice president of the faculty of humanities and social science at Sungkyunkwan University	Satisfies requirements in the articles of incorporation	Chair
Park Ung-suh	Prof of business administration, Sejong University	”
Kim Eung-han	Distinguished Prof. of University of Michigan	”
Yoo Hyun-shik	Former president of Samsung General Chemicals	”

(2) Major activities of the audit committee (auditors)

Session	Date	Agenda	Approval		Remarks
2003-1st	Jan. 16, 2003	• Report agendas			All members
		- Report on operations of the in-house controlling system in the second half of 2002		-	participating
		- Report on plans on how to operate the audit office in 2003		-
2003-2nd	Feb. 11, 2003	• Review agendas			All members
		- Results of the audit of account for the 35th fiscal year		Approved	participating
		- Assessment of operations of the in-house controlling system in 2002		Approved
		• Report agendas
		- Overview of EP/EDMS/KMS
2003-3rd	Mar. 14, 2003	• Deliberation agenda			All members
		- Approval of the appointment of the audit office head		Approved	participating
2003-4th	Apr. 25, 2003	• Deliberation agendas			3 members
		- Revision of regulations on the operation of the audit committee		Approved	participating
		- Selection of a manager for the self-observation of fair trade		Approved
		• Report agenda
		- Results of audit on account closing for the first quarter of the 36th fiscal year		-
		- Results of restatement of US GAAP links and adjustment		-

42

Session	Date	Agenda	Approval		Remarks
2003-5th	June 25, 2003	• Deliberation agenda			All members
		- Approval of the salary of external auditor for 2003		Approved	participating
2003-6th	July 22, 2003	• Deliberation agenda			All members
		- Results of the audit of account closing for the second quarter of the 36th fiscal year		Approved	participating
		- Made a report of internal accounting control system

C. Execution of Voting Rights by Shareholders

(1) Whether to Adopt the Cumulative Voting System

[Irrelevant]

(2) Whether to Adopt the Ballot Voting System or Electronic Voting System

[Irrelevant]

(3) Execution of Voting Rights by Minority Shareholders

[Irrelevant]

43

D.  Compensation of Executives

(1) Current situation of salary to directors (including outside directors) and members of the audit committee (auditors)

		Maximum pay
		approved by	Average payment
	Total payment	shareholders meeting	per person
Category	(2003.1-2003.9)	(2002)	(2003.1-2003.9)	Remarks
Director	2.53 billion won	3.5 billion won	180 million won

* Standards for bonus payment: Paid out twice per year (January, June) according to business performance within a limit of 100% of his or her basic annual salary (200% for the chairman of the board).

(2) List of Stock Options Presented to Executives

[Refer to D. Stock option under 4. Number of Total Shares, in I. Company Overview]

44

POSCO

Interim Financial Statements
As of September 30, 2003 and for the three-month and
nine-month periods ended September 30, 2003 and for the
nine-month period ended September 30, 2002

Independent Accountant’s Report

To the Board of Directors and Shareholders of
POSCO

We have reviewed the accompanying non-consolidated balance sheet of POSCO (the “Company”) as of September 30, 2003 and the related non-consolidated statements of income and cash flows for the three-month period and nine-month period ended September 30, 2003, and the non-consolidated statements of income and cash flows for the nine-month period ended September 30, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews. We have not reviewed, or performed and audit of, the accompanying non-consolidated statements of income and cash flows for the three-month period ended September 30, 2002, which are presented herein for comparative purposes. Under the quarterly and semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea in effect prior to December 31, 2002, there was no requirement to obtain an audit, or a review, of these comparative statements of income and cash flows for each quarterly period in the interim financial reports.

We conducted our reviews in accordance with the quarterly and semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. These standards require that we plan and perform our review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying non-consolidated financial statements referred to above are not presented fairly, in all material respects, in accordance with financial accounting standards generally accepted in the Republic of Korea.

Samil Accounting Corporation is the Korean member firm of PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

1

As discussed in Note 2 to the non-consolidated financial statements, the financial statements for the year ended December 31, 2002, presented herein for comparative purposes, were readjusted in accordance with SKFAS No. 6. As a result, the dividends payable, previously recorded as current liabilities, amounting to KRW245,216 million, was reverted back to retained earnings. The net effect of this application increased the balance of retained earnings and decreased dividends payable by KRW245,216 million.

As discussed in Notes 15 and 27 to the non-consolidated financial statements, during the nine-month periods ended September 30, 2003 and 2002, the Company entered into sales and purchase transactions with related parties amounting to KRW1,709,708 million and KRW1,104,802 million, respectively, in 2003, and KRW1,579,744 million and KRW1,381,753 million, respectively, in 2002. Related receivables and payables amounted to KRW345,527 million and KRW126,691 million, respectively, as of September 30, 2003, and KRW420,979 million and KRW176,270 million, respectively, as of December 31, 2002. As of September 30, 2003 and December 31, 2002, guarantees provided to related parties amounted to KRW183,795 million and KRW154,413 million, respectively.

As discussed in Note 1 to the non-consolidated financial statements, on October 16, 2003, the Company acquired and retired 1,815,640 shares of treasury stock with the approval of the Board of Directors on July 22, 2003. Accordingly, total issued shares was reduced to 88,966,155 from 90,781,795. In addition, on October 17, 2003, the Company decided to invest KRW287,504 million in equity to Zhangjiagang Pohang Stainless Steel Co., Ltd.

We have previously audited, in accordance with auditing standards generally accepted in the Republic of Korea, the non-consolidated balance sheet of POSCO as of December 31, 2002 and the related non-consolidated statements of income, changes in shareholders’ equity, and cash flows for the year then ended, not presented herein, and in our report dated January 17, 2003, we expressed an unqualified opinion on those non-consolidated financial statements. In our opinion, the information set forth in the accompanying non-consolidated balance sheet as of December 31, 2002, presented herein for comparative purposes, is not materially different from the audited non-consolidated balance sheet referred to above, except for the restatement in accordance with Statement of Korean Financial Accounting Standards No. 6, Subsequent Events.

Samil Accounting Corporation is the Korean member firm of PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

2

Accounting principles and review standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations and cash flows in conformity with accounting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, the procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those who are knowledgeable about Korean accounting principles or review standards and their application in practice.

Seoul, Korea
October 17, 2003

This report is effective as of October 17, 2003, 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 non-consolidated financial statements and notes thereto. 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.

Samil Accounting Corporation is the Korean member firm of PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

3

POSCO
Non-Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
(Unaudited-See Independent Accountant’s Report)

(in millions of Korean Won)			2003		2002
Assets
Current assets
	Cash and cash equivalents (Notes 3 and 26)			334,065		91,093
	Short-term financial instruments (Notes 3 and 26)			367,772		109,011
	Trading securities (Note 6)			1,303,433		982,861
	Current portion of held-to-maturity securities (Note 7)			189,048		22,455
	Trade accounts and notes receivable, net of allowance for doubtful accounts and present value discount (Notes 4, 26 and 27)			1,296,878		1,186,804
	Inventories (Note 5)			1,400,270		1,270,929
	Other accounts and notes receivable, net of allowance for doubtful accounts (Notes 4, 26 and 27)			19,759		34,272
	Other current assets, net of allowance for doubtful accounts (Note 10)			61,024		75,200
		Total current assets		4,972,249		3,772,625
Investment securities (Note 7)				3,401,108		3,775,092
Long-term financial instruments (Note 3)				45		50
Long-term loans, net of allowance for doubtful accounts				1,089		1,089
Long-term trade accounts and notes receivable, net of allowance for doubtful accounts and present value discount (Note 4)				38,194		35,988
Property, plant and equipment, net (Notes 8 and 29)				8,957,245		9,271,701
Intangible assets, net (Notes 9, 28 and 29)				349,341		331,144
Other long-term assets, net of allowance for doubtful accounts (Note 10)				68,322		56,797
Total assets				17,787,593		17,244,486

4

POSCO
Non-Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
(Unaudited-See Independent Accountant’s Report)

(in millions of Korean Won)			2003			2002
Liabilities and shareholders’ equity
Current liabilities
	Trade accounts and notes payable (Notes 26 and 27)			422,269			393,847
	Current portion of long-term debt, net of discount on debentures issued (Note 11)			839,844			1,263,602
	Accrued expenses (Note 26)			200,780			184,578
	Other accounts and notes payable (Notes 26 and 27)			248,501			226,269
	Withholdings			32,633			38,673
	Income tax payable			428,794			367,968
	Dividends payable			1,578			1,601
	Other current liabilities (Note 14)			106,003			20,736
		Total current liabilities		2,280,402			2,497,274
Long-term debt, net of current portion and discount on debentures issued (Note 12)				2,722,410			2,944,313
Accrued severance benefits, net (Note 13)				119,545			73,668
Deferred income tax liabilities (Note 24)				106,811			128,175
Other long-term liabilities (Note 14)				57,601			34,260
		Total liabilities		5,286,769			5,677,690
Commitments and contingencies (Note 15)
Shareholders’ equity
	Capital stock (Note 1)			482,403			482,403
	Capital surplus (Note 16)			3,716,728			3,685,953
	Retained earnings (Note 17)			9,674,618			8,483,234
	Capital adjustments, net (Note 18)			(1,372,925	)		(1,084,794	)
		Total shareholders’ equity		12,500,824			11,566,796
Liabilities and shareholders’ equity				17,787,593			17,244,486

The accompanying notes are an integral part of these non-consolidated financial statements.

5

POSCO
Non-Consolidated Statements of Income
For the three-month and nine-month periods ended
September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

		For the three-month				For the nine-month
		periods ended September 30				periods ended September 30
(in millions of Korean Won)		2003		2002		2003		2002
Sales (Notes 27 and 29)			3,640,126		3,079,528		10,428,072		8,533,880
Cost of goods sold (Note 21)			2,684,214		2,308,778		7,507,685		6,788,444
Gross profit			955,912		770,750		2,920,387		1,745,436
Selling and administrative expenses (Note 22)			234,583		193,316		640,202		554,848
Operating profit			721,329		577,434		2,280,185		1,190,588
Non-operating income
	Interest income		18,348		10,615		43,550		25,703
	Gain on foreign currency transactions		21,178		54,173		47,386		78,390
	Gain on foreign currency translation		50,780		13,067		44,824		132,683
	Gain on valuation of investments using the equity method		18,616		21,478		21,909		—
	Others		25,829		56,769		101,465		119,005
			134,751		156,102		259,134		355,781
Non-operating expenses
	Interest expense		47,664		68,395		168,685		218,641
	Loss on foreign currency transactions		9,163		23,399		40,765		63,572
	Loss on foreign currency translation		51,736		63,282		30,593		21,200
	Donations (Note 23)		13,352		11,748		77,832		18,156
	Loss on valuation of investments using the equity method		—		—		—		14,038
	Impairment loss on property, plant and equipment		—		—		78,823		132,720
	Others		35,351		44,252		66,588		112,847
			157,266		211,076		463,286		581,174
Ordinary income			698,814		522,460		2,076,033		965,195
Extraordinary gain			—		—		—		—
Net income before income taxes			698,814		522,460		2,076,033		965,195
Income tax expense (Note 24)			199,234		144,704		557,785		228,804
Net income			499,580		377,756		1,518,248		736,391
Earnings per share (Note 25) (in Korean Won)			6,102		4,640		18,575		8,991

The accompanying notes are an integral part of these non-consolidated financial statements.

6

POSCO
Non-Consolidated Statements of Cash Flows
For the three-month and nine-month periods ended
September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

			For the three-month						For the nine-month
			periods ended September 30						periods ended September 30
(in millions of Korean Won)			2003			2002			2003			2002
Cash flows from operating activities
	Net income			499,580			377,756			1,518,248			736,391
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation and amortization		368,002			339,524			1,081,834			983,771
		Accrual of severance benefits		40,811			12,597			86,855			54,734
		Loss (gain) on valuation of investments using the equity method		(18,616	)		(21,478	)		(21,909	)		14,038
		Loss (gain) on foreign currency translation		1,576			54,154			(14,423	)		(117,946	)
		Recovery of impairment loss on investments		—			—			—			(588	)
		Interest expense		2,904			3,464			9,422			11,552
		Interest income		(845	)		(771	)		(2,467	)		(2,505	)
		Others		24,981			(1,359	)		99,661			180,434
				418,813			386,130			1,238,971			1,123,490
	Changes in operating assets and liabilities
		Decrease (increase) in trade accounts and notes receivable		(114,536	)		2,728			(110,995	)		94,167
		Decrease (increase) in other accounts and notes receivable		(5,763	)		27,847			51,661			143,649
		Decrease (increase) in inventories		(105,366	)		64,600			(130,357	)		106,313
		Increase (decrease) in deferred income tax liabilities		11,544			—			(21,365	)		(22,262	)
		Increase (decrease) in trade accounts and notes payable		29,081			(37,717	)		28,422			—
		Increase in other accounts and notes payable		64,300			9,004			22,232			15,954
		Increase in income tax payable		35,975			136,295			60,826			165,567
		Payment of severance benefits		(5,381	)		—			(10,056	)		(2,610	)
		Transfers to the National Pension Fund		—			3			12			12
		Increase in retirement insurance deposits		(1,101	)		(549	)		(33,007	)		(1,791	)
		Others		(56,156	)		(65,308	)		74,018			(121,256	)
				(147,403	)		136,903			(68,609	)		377,743
	Net cash provided by operating activities			770,990			900,789			2,688,610			2,237,624

7

POSCO
Non-Consolidated Statements of Cash Flows
For the three-month and nine-month periods ended
September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

			For the three-month						For the nine-month
			periods ended September 30						periods ended September 30
(in millions of Korean Won)			2003			2002			2003			2002
Cash flows from investing activities
		Disposal of short-term financial instruments		27,000			—			294,471			326,704
		Disposal of trading securities		2,144,022			2,723,600			7,034,814			6,590,689
		Disposal of investment securities		99,619			—			109,222			—
		Proceeds from short-term loans		—			81			16			100
		Proceeds from long-term financial instruments		—			—			6			26,679
		Proceeds from office lease deposits		759			—			320,711			26
		Disposal of property, plant and equipment		1,202			921			5,719			31,832
		Acquisition of short-term financial instruments		(25,773	)		(32,784	)		(553,231	)		(207,649	)
		Acquisition of trading securities		(2,396,124	)		(3,107,921	)		(7,326,366	)		(7,277,518	)
		Acquisition of available-for-sale securities		(71	)		(74,671	)		(455	)		(118,253	)
		Acquisition of investment securities using the equity method		(39,891	)		—			(53,000	)		—
		Acquisition of-held-to-maturity securities		(243	)		—			(19,549	)		—
		Acquisition of property, plant and equipment		(233,757	)		(349,947	)		(805,963	)		(1,129,157	)
		Acquisition of intangible assets		(27,219	)		(22,378	)		(73,112	)		(45,151	)
		Payment of office lease deposits		(150	)		(53	)		(320,210	)		(771	)
		Others		26,219			78,624			18,196			56,188
	Net cash used in investing activities			(424,407	)		(784,528	)		(1,368,731	)		(1,746,281	)
Cash flows from financing activities
		Proceeds from long-term debt		514,169			198,853			519,410			494,917
		Disposal (acquisition) of treasury stock		(93,549	)		82,511			(103,520	)		82,511
		Repayment of current maturities of long-term debt		(769,290	)		(574,470	)		(1,147,971	)		(1,059,409	)
		Repayment of long-term debt		(9,190	)		(3,108	)		(17,938	)		(4,494	)
		Payment of cash dividends		(81,656	)		(40,847	)		(326,888	)		(204,112	)
		Others		—			26,858			—			73,431
		Net cash used in financing activities		(439,516	)		(310,203	)		(1,076,907	)		(617,156	)
	Net increase (decrease) in cash and cash equivalents			(92,933	)		(193,942	)		242,972			(125,813	)
Cash and cash equivalents at the beginning of the period				426,998			283,921			91,093			215,792
Cash and cash equivalents at the end of the period				334,065			89,979			334,065			89,979

The accompanying notes are an integral part of these non-consolidated financial statements.

8

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

1. The Company

POSCO (the “Company”) was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and overseas markets. Annual production capacity is 28,000 thousand tons; 12,200 thousand tons at the Pohang mill and 15,800 thousand tons at the Kwangyang mill. The shares of the Company have been listed on the Korea Stock Exchange since 1988. The Company operates two plants and one office in Korea, and one branch and six liaison offices overseas.

Under its Articles of Incorporation, the Company is authorized to issue 200,000,000 shares of common stock (par value of KRW5,000 per share). As of September 30, 2003, 90,781,795 shares of common stock were issued and outstanding. In addition, the Company acquired and retired 2,807,690 and 2,891,140 shares of treasury stock with the approval of the Board of Directors on November 20, 2002 and August 25, 2001, respectively. The Company has decided to acquire and retire 1,815,640 shares of treasury stock with the approval of the Board of Directors on July 22, 2003. The aforementioned treasury shares were acquired and retired on October 16, 2003. Accordingly, total issued shares reduced to 88,966,155 from 90,781,795. As of September 30, 2003, 90,781,795 shares of common stock were issued and outstanding.

In accordance with the approval of shareholders on March 15, 2002, the Company changed its name from POHANG IRON & STEEL Co., Ltd. to POSCO.

As of September 30, 2003, the Company’s shareholders are as follows:

	Number of		Percentage of
	shares		shares (percent)
Pohang University of Science and Technology		3,028,200		3.34
Nippon Steel Corporation		2,894,435		3.19
National Pension Corporation		2,051,377		2.26
The Industrial Bank of Korea		1,688,811		1.86
Others		81,118,972		89.35
		90,781,795		100.00

As of September 30, 2003, the shares of the Company are listed on the Korea Stock Exchange, and its depository receipts are listed on the New York and London Stock Exchanges.

9

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

2. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its interim non-consolidated financial statements, covering the periods beginning after December 31, 2002, are summarized below:

Basis of Financial Statement Presentation

The Company maintains its official accounting records in Korean Won and prepares statutory financial statements in the Korean language in conformity with financial accounting standards generally accepted in the Republic of Korea. The accompanying non-consolidated financial statements have been condensed, restructured and translated into English from the Korean language non-consolidated financial statements. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these non-consolidated financial statements are intended for use by those who are informed about Korean accounting principles and practices. Certain information attached to the Korean language non-consolidated financial statements, but not required for a fair presentation of the Company’s financial position and results of operations, is not presented in the accompanying non-consolidated financial statements.

The preparation of the non-consolidated financial statements requires management to make estimates and assumptions that affect amounts reported therein. Although these estimated are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates.

Effective from January 1, 2003, the Statements of Korean Financial Accounting Standards (“SKFAS”) No. 2 through No. 9, newly published by the Korean Accounting Standards Board (“KASB”), were adopted by the Company in the preparation of its financial statements. The non-consolidated financial statements for the year ended December 31, 2002, presented herein for comparative purposes, were readjusted in accordance with SKFAS No. 6. As a result, the dividends payable, previously recorded as current liabilities, amounting to KRW245,216 million, was reverted back to retained earnings. The net effect of this application increased the balance of retained earnings and decreased dividends payable by KRW245,216 million.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based on an analysis of portfolio quality and management judgment.

Inventories

Inventories are stated at the lower of cost or market, with cost being determined using the moving-average method, except for materials in-transit which are stated at actual cost determined using the specific identification method.

10

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

If the net realizable value of inventory is lower than its cost, the carrying amount is reduced to the net realizable value.

Investment Securities

Investment securities are classified into trading securities, available-for-sale securities or held-to-maturity securities in accordance with the intention of the Company. Trading and available-for-sale securities are reported at fair value, including incidental expenses. Securities that are not publicly traded and which the fair value cannot be reasonably measured are recorded at acquisition cost. Held-to-maturity securities are reported at cost. Differences between the initial cost and face value are amortized using the effective rate over its term. Unrealized gains and losses from trading securities are reported as part of the results of operations, whereas unrealized gains and losses from available-for-sale securities are reported as a capital adjustment in the statement of changes in shareholders’ equity. The accumulated amount in equity is reported in current operations when the relevant securities are disposed or losses are recognized. If the collectible amount of the securities is less than its cost, such losses are recognized in current operations.

Investments in equity securities of companies over which the Company exercises a significant control or influence are recorded using the equity method of accounting. Differences between the initial purchase price and the Company’s initial proportionate ownership of the net book value of the investee are amortized over a period up to twenty years using the straight-line method. Under the equity method, the Company records changes in its proportionate ownership of the book value of the investee in current operations, as capital adjustments or as adjustments to retained earnings, depending on the nature of the underlying change in book value of the investee.

Unrealized profit arising from sales by the Company to equity method investees is fully eliminated. Unrealized profit arising from sales by the equity method investees to the Company or sales between equity method investees is also eliminated considering the percentage of ownership.

The equity method of accounting is applied based on the most recent available unreviewed financial statements of subsidiaries and affiliates.

Foreign currency financial statements of equity method investees are translated into Korean Won using the basic exchange rates in effect as of the balance sheet date for assets and liabilities, and annual average exchange rates for income and expenses. Any resulting translation gain or loss is included in the capital adjustments account, a component of shareholders’ equity.

Capitalization of financial expenses

The Company has expensed as a financial expense for manufacturing, acquisition, and construction for those that require more than 1 year from initial period to conclusion relating to the tangible assets, intangible assets and investment assets.

11

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Present value discount of receivables

The Company has employed reasonable interests rate to discount and evaluate receivables from court receivership, composition proceedings, and negotiation. The difference arising from the aforementioned amount is amortized and accounted for as interest expense.

Property, Plant and Equipment and Related Depreciation

Property, plant and equipment are stated at cost, net of accumulated depreciation, except for certain assets subject to upward revaluations in accordance with the Asset Revaluation Law. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:

Buildings and structures	20 ~ 40 years
Machinery and equipment	8 years
Vehicles	4 years
Tools	4 years
Furniture and fixtures	4 years

Subsequent expenditure on property, plant and equipment shall be capitalized only when it increases future economic benefits beyond its most recently assessed standard of performance; all other subsequent expenditure shall be recognized as an expense in the period in which it is incurred.

Intangible Assets

Intangible assets are stated at acquisition cost, including incidental expenses, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives as described below.

Intellectual property rights	5 ~ 10 years
Land usage rights	40 years
Port facilities usage rights	2 ~ 37 years
Other intangibles	4 ~ 20 years

The costs incurred in relation to the development of new products and new technologies (including the development cost of internally used software and related costs) are recognized and recorded as development cost only if it is probable that future economic benefits that are attributable to the asset will flow into the Company and the cost of the asset can be measured reliably. The useful life of development costs should be based on its estimated useful life, not to exceed twenty years from the date when the asset is available for use.

12

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

As of September 30, 2003, port facilities usage rights is related to the quay and inventory yard contributed by the Company, since April 1987, to the local bureaus of the Maritime Affairs and Fisheries in Kwangyang, Pohang, Pyoungtaek and Masan. The related amortization expense amounted to KRW11,787 million for the nine-month period ended September 30, 2003.

Discounts on Debentures

Discounts on debentures are amortized using the effective interest rate method over the repayment term of the debentures. Amortization of these discounts is included in interest expense.

Income Taxes

The Company recognizes deferred income taxes for anticipated future tax consequences resulting from temporary differences between amounts reported for financial reporting and income tax purposes. Deferred income tax assets and liabilities are computed on such temporary differences by applying enacted statutory tax rates applicable to the years when such differences are expected to reverse. Deferred income tax assets are recognized when it is more likely than not that such deferred income tax assets will be realized. The total income tax provision includes the current income tax expense, under applicable tax regulations, and the change in the balance of deferred income tax assets and liabilities during the period.

Accrued Severance Benefits

Employees and directors with one or more years of service are entitled to receive a lump-sum payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors were to terminate their employment as of the balance sheet date.

The Company has partially funded the accrued severance benefits through group severance insurance deposits with Samsung Life Insurance Company and others.

The contributions to the National Pension Fund in accordance with the National Pension Act in Korea and group severance insurance deposits are deducted from accrued severance benefit liabilities.

Foreign Currency Transactions and Translation

Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at the basic rates in effect at the balance sheet date, and resulting translation gains and losses are recognized in current operations.

13

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Translation of Foreign Operations

Foreign currency assets and liabilities of the Company’s overseas business branches and offices are translated at the exchange rate as of the balance sheet date, and income and expenses are translated at the weighted-average rate of the reporting period. Gains or losses on translation are offset against each other, and the net amount is recognized as an overseas operations translation debit or credit in the capital adjustments account. Overseas operations translation credit or debit is treated as a gain or loss upon closing the foreign branch or office.

Derivative Instruments

The Company enters into derivative transactions to hedge against financial risks. Derivatives are classified into: cash flow hedge, fair market value hedge and hedges for trading purpose. Other investments represent the fair market value of the net assets or liabilities related with derivative transactions. In case of cash flow hedges, unrealized holding gains and losses are recorded as capital adjustments in the balance sheet. In case of fair market value hedges, unrealized holding gains and losses are recorded in the statement of income. If the contract expires, the gains and losses from derivative transactions are presented in the statement of income in case of hedges for fluctuations in fair market value, and are offset against the purchase price of raw materials in case of cash flow hedging.

Impairment of Assets

The Company recognizes an impairment loss when the carrying amount of an asset exceeds its recoverable amount. The impairment loss is recognized in the statement of income and is deducted from the book value of the impaired asset.

3. Cash and Cash Equivalents and Financial Instruments

Cash and cash equivalents, short-term and long-term financial instruments as of September 30, 2003 and December 31, 2002 consist of the following:

		Annual interest
(in millions of Korean Won)		rates (percent)	2003		2002
Cash and cash equivalents
	Cash on hand and in banks	0.5		1,532		3,667
	Checking accounts	—		2,313		1,668
	Money market deposit account	3.25 ~ 3.55		142,000		7,170
	Time deposits in foreign currency	0 ~ 1.23		188,220		78,588
				334,065		91,093

14

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

		Annual interest
(in millions of Korean Won)		rates (percent)	2003		2002
Short-term financial instruments
	Time deposits	4.3 ~ 4.85		233,500		94,500
	Specified money in trust	3.9		2,008		11,979
	Time deposits in foreign currency	0.7		2,264		2,532
	Certificate of deposit	4.28 ~ 4.7		130,000		—
				367,772		109,011
Long-term financial instruments
	Guarantee deposit for opening accounts	—		45		50
				45		50
				701,882		200,154

The Company is required to provide collateral deposits amounting to KRW45 million to open checking accounts and, accordingly, the withdrawal of these deposits is restricted.

15

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

4. Accounts and Notes Receivable

Accounts and notes receivable and their allowance for doubtful accounts as of September 30, 2003 and December 31, 2002 are as follows:

(in millions of Korean Won)		2003			2002
Trade accounts and notes receivable			1,309,989			1,198,995
Less: Allowance for doubtful accounts			(13,067	)		(11,958	)
	Present value discount		(44	)		(233	)
			1,296,878			1,186,804
Other accounts and notes receivable			62,171			74,416
Less: Allowance for doubtful accounts			(42,412	)		(40,144	)
			19,759			34,272
Long-term trade accounts and notes receivable			52,992			53,064
Less: Allowance for doubtful accounts			(98	)		(98	)
	Present value discount		(14,700	)		(16,978	)
			38,194			35,988

The Company’s long-term trade accounts and notes receivable, which are in relation to reorganization claims from liquidation and composition procedures, were discounted using the Company’s weighted-average borrowing rate, which ranges from 7.8 to 8.62 percent.

16

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

5. Inventories

Inventories as of September 30, 2003 and December 31, 2002 are as follows:

(in millions of Korean Won)	2003		2002
Finished goods		197,430		162,549
Semi-finished goods		390,037		354,263
Raw materials		462,669		490,455
Materials in-transit		348,120		261,882
Others		2,014		1,780
		1,400,270		1,270,929

6. Trading Securities

Trading securities as of September 30, 2003 and December 31, 2002 are as follows:

	Book value
(in millions of Korean Won)	2003		2002
Beneficiary certificates		486,601		300,825
Monetary market fund		695,269		682,036
Mutual fund		121,563		—
		1,303,433		982,861

17

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

7. Investment Securities

Investment securities as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)	2003		2002
Available-for-sale securities		1,657,399		2,020,394
Held-to-maturity securities		11,160		72,448
Equity method investments		1,732,549		1,682,250
		3,401,108		3,775,092

Available-For-Sale Securities

Available-for-sale securities as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)	2003		2002
Marketable equity securities		1,450,409		1,618,963
Non-marketable equity securities		203,802		397,076
Investments in bonds		212		12
Equity investments		2,976		4,343
		1,657,399		2,020,394

18

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Investments in marketable equity securities as of September 30, 2003 and December 31, 2002 are as follows:

	2003								2002
			Percentage of
	Number of		ownership		Acquisition
(in millions of Korean Won)	shares		(percent)		cost		Book value		Book value
Hanil Iron & Steel Co., Ltd.(*)		206,798		9.95		2,412		2,295		2,215
Hi Steel Co., Ltd.(*)		123,052		9.95		1,608		1,087		1,477
Moonbae Steel Co., Ltd.		1,849,380		9.02		3,588		2,219		1,219
Chohung Bank		135,394		0.03		3,757		454		555
Hana Bank		4,617,600		2.34		29,998		72,496		75,267
Korea Investment Corporation		588,000		0.76		588		159		126
SK Telecom Co.		5,794,924		6.83		1,657,348		1,066,266		1,327,037
Samjung P&A Co., Ltd.		270,000		9.00		2,714		1,971		2,295
Dong Yang Steel Pipe Co., Ltd.		1,564,250		2.48		3,911		673		579
Nippon Steel Corporation		147,876,000		2.17		285,103		302,789		208,193
						1,991,027		1,450,409		1,618,963

(*)	As of January 1, 2003, HI Steel Co., Ltd. has been split off from Hanil Iron & Steel Co., Ltd.
(**)	1,699,428 SK telecom Co. shares from available-for-sale has been placed as a collateral for exchangeable bonds (Note 12).

19

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Marketable equity securities are stated at fair market value, and the difference between the acquisition cost and fair market value is accounted for in the capital adjustments account, as follows:

(in millions of Korean Won)	Beginning balance			Increase (decrease)			Ending balance
Valuation gain		45,269			14,917			60,186
Valuation loss		(417,333	)		(183,471	)		(600,804	)
		(372,064	)		(168,554	)		(540,618	)

(*) There were no available-for-sale securities disposed during the nine-month period ended September 30, 2003.

20

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Investments in non-marketable equity securities as of September 30, 2003 and December 31, 2002 are as follows:

	2003										2002
			Percentage of
	Number of		ownership		Acquisition		Net
(in millions of Korean Won)	shares		(percent)		cost		asset value		Book value		Book value
Dae kyeong Special Steel Co., Ltd. (*)		1,786,000		19.00		8,930		4,306		8,930		8,930
Kihyup Technology Banking Corporation (***)		600,000		10.34		3,000		3,412		3,000		3,000
Powercomm Corporation (***)		4,500,000		3.00		153,000		24,901		153,000		153,000
The Siam United Steel (****)		9,000,000		10.00		26,640		4,115		26,640		26,640
PT-POSNESIA Stainless Steel Industry (**)		29,610,000		70.00		9,474		10,427		9,474		9,474
POSVINA Co., Ltd. (**)		—		—		—		—		—		1,527
Others		—		—		2,758		3,717		2,758		194,505
						203,802		50,878		203,802		397,076

(*)	The net asset value of the non-marketable equity securities is determined based on the investee companies’ most recent available financial information, which has not been reviewed or audited as of June 30, 2003.
(**)	As of December 31, 2002, the investments in PT-POSNESIA Special Steel Industry, whose operation has been suspended for more than one year, was excluded from the equity method of accounting. Investments in POSVINA, whose total assets as of December 31, 2002 was less than KRW7,000 million, were previously stated at cost, in accordance with financial accounting standards generally accepted in the Republic of Korea, until January 1, 2003 when the Company applied the equity method.
(***)	Based on reviewed financial statements as of June 30, 2003.
(****)	Based on reviewed financial statements as of December 31, 2002.

Investments in bonds as of September 30, 2003 and December 31, 2002 are as follows:

21

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

		2003				2002
(in millions of Korean Won)	Period	Acquisition cost		Book value		Book value
Government bonds	1 ~ 5 years		60		60		12
	5 ~ 10 years		152		152		—
			212		212		12

Equity investments as of September 30, 2003 and December 31, 2002 are as follows:

			2003				2002
	Ownership
(in millions of Korean Won)	(percent)		Acquisition cost		Book value		Book value
Stock Market Stabilization Fund		1.16		1,184		2,976		4,343

Due to the increase in the net assets of its investees, the Company has recorded KRW612 million as a valuation gain on available-for-sale securities in the capital adjustments account as of September 30, 2003.

Held-To-Maturity Securities

Held-to-maturity securities as of September 30, 2003 and December 31, 2002 are as follows:

				2003				2002
(in millions of Korean Won)			Period	Acquisition cost		Book value		Book value
Current portion of held-to-maturity securities:
	Government bonds		Less than 1 year		120,000		116,882		—
		Bonds with subscription rights	”		—		—		432
		Small and medium industry finance debentures	”		49,668		49,668		—

22

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

				2003				2002
(in millions of Korean Won)			Period	Acquisition cost		Book value		Book value
		Bonds in foreign currency	”	US$19,400,000			22,498		15,925
		Exchange equalization fund bonds	”		—		—		6,098
					169,668		189,048		22,455
				US$19,400,000
Held-to-maturity securities:
	Small and medium industry finance debentures		1 ~ 5 years		—		—		49,668
	Bonds in foreign currency		”	US$1,000,000			1,160		12,780
	Government bonds		5 ~ 10 years		10,000		10,000		10,000
					10,000		11,160		72,448
				US$1,000,000
					179,668		200,208		94,903
				US$20,400,000

All the investments in debt securities are held-to-maturity investment debt securities. The Company provided financial bonds of Industrial Bank of Korea, amounting to KRW31,400 million, to the Pusan municipal government as deposits for a performance guarantee in relation to the development of a waste disposal area. Interest income accrued from investment in bonds and held-to-maturity securities amounted to KRW6,854 million and KRW8,738 million for the nine-month periods ended September 30, 2003 and 2002, respectively.

23

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Equity Method Investments

Equity method investments as of September 30, 2003 and December 31, 2002 are as follows:

	2003										2002
			Percentage of				Net
	Number of		ownership		Acquisition		asset value
(in millions of Korean Won)	shares		(percent)		cost		(*)		Book value		Book value
POSCO E&C		27,281,080		90.94		365,789		656,529		260,956		217,599
Posteel Co., Ltd.		17,155,000		95.31		113,393		277,416		269,154		267,792
POSCON Co., Ltd.		3,098,610		90.21		49,822		69,979		24,845		24,643
Pohang Steel Co., Ltd.		4,000,000		66.67		96,151		166,775		163,607		162,938
POSCO Machinery & Engineering Co., Ltd.		1,700,000		100.00		17,052		31,412		11,809		10,810
POSDATA Co., Ltd.		4,000,000		64.99		35,000		65,625		56,522		62,500
POSCO Research Institute		3,800,000		95.00		19,000		22,534		22,532		22,228
Seung Kwang Co., Ltd.		2,737,000		66.03		28,408		27,934		27,893		26,610
POS-AC Co., Ltd.		130,000		100.00		1,043		6,814		618		1,468
Changwon Specialty Steel Co., Ltd.		26,000,000		86.67		260,000		309,699		309,504		304,070
POSCO Machinery Co., Ltd.		1,000,000		100.00		10,000		23,569		14,581		13,609
POSCO Refractories & Environment (POSREC)		3,544,200		60.00		40,859		51,557		47,719		42,689
POSTECH Venture Capital Co., Ltd.		5,700,000		95.00		28,500		32,737		32,758		32,690
Korea Daily News		1,863,949		22.40		19,999		11,030		11,030		13,023
eNtoB Corporation		560,000		17.50		2,800		2,432		2,362		1,879
Pohang Steel America Corporation (POSAM)		281,529		99.43		251,643		155,588		151,484		159,598
POSCO Australia Pty. Ltd. (POSA)		761,775		100.00		37,352		48,503		49,019		48,517
POSCO Asia Co., Ltd. (POA)		9,360,000		100.00		7,425		44,959		12,121		8,890
VSC-POSCO Steel Corporation (VPS)(**)		—		35.00		4,758		4,828		4,616		5,850

24

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

	2003										2002
			Percentage of				Net
	Number of		ownership		Acquisition		asset value
(in millions of Korean Won)	shares		(percent)		cost		(*)		Book value		Book value
DALIAN POSCO-CFM Coil Center Co., Ltd. (**)		—		40.00		9,586		14,752		14,399		19,206
POS-Tianjin Coil Center Co., Ltd. (**)		—		10.00		653		1,301		1,286		1,212
Zhangjiagang Pohang Stainless Steel Co., Ltd. (**)		—		82.48		113,280		151,533		141,190		146,393
SHUNDE Pohang Coated Steel Co., Ltd. (**)		—		93.80		23,165		24,515		27,695		30,955
POS-THAI Service Steel Center Co., Ltd.		477,288		11.67		1,625		847		794		740
Myanmar-POSCO Co., Ltd.		13,440		70.00		2,192		4,859		4,973		4,633
POSINVEST		2,000,000		100.00		22,910		34,603		34,602		34,295
KOBRASCO (***)		2,010,719,185		50.00		32,950		—		—		—
POSCHROME		21,675		25.00		4,859		5,652		5,717		3,833
Shunde Xingpu Steel Center Co., Ltd. (**)		—		10.50		927		1,565		1,580		1,584
POS-HYUNDAI STEEL		2,345,558		10.00		1,057		588		576		482
Posmmit Steel Centre SDN BHD (POS-MMIT)		4,200,000		30.00		2,308		2,364		541		2,308
POSVINA (**)		—		50.00		1,527		3,755		3,444		—
PT POSMI Steel Indonesia (**)		743		9.17		347		219		386		347
Qingdao Pohang Stainless Steel Co., Ltd. (**)		—		80.00		16,096		15,335		15,335		8,859
POSCO Venezuela Compania Anonima (POSVEN) (***)		4,480		40.00		—		—		—		—
POSCO (SUZHOU) Automotive Processing Center Co., Ltd.		—		100.00		7,070		6,901		6,901		—
						1,629,546		2,278,709		1,732,549		1,682,250

25

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

(*)	Due to the delay in closing and settlement of closing differences, the equity method of accounting is applied based on the most recent available financial information, which has not been audited or reviewed as of September 30, 2003.
(**)	No shares have been issued in accordance with the local laws or regulations.
(***)	As of September 30, 2003, the Company discontinued using the equity method of accounting for investments in KOBRASCO, an investee with no book value, and unrecognized loss arising from the discontinuation of the equity method amounted to KRW180 million for the nine-month period ended September 30, 2003. In addition, the Company suspended applying the equity method for POSVEN, an investee with no book value. However, unrecognized loss arising from the discontinuation of the equity method is recorded as an allowance for doubtful accounts (Note 15).

26

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

     The details of the equity method valuation are as follows:

			Jan. 1, 2002 ~ June 30, 2002						July 1, 2002 ~ Sept. 30, 2002						Oct. 1, 2002 ~ Dec. 31, 2002
			Valuation						Valuation						Valuation
			gain and						gain and						gain and
	2002		loss using			Other			loss using			Other			loss using			Other			2002
(in millions of	Beginning		equity			increase or			equity			increase or			equity			increase or			Ending
Korean Won)	balance		method			decrease (*)			method			decrease (*)			method			decrease (*)			balance
POSCO E&C		322,464		(1,250	)		(10,853	)		13,859			(58,542	)		(12,688	)		(35,391	)		217,599
Posteel Co., Ltd.		290,772		(8,482	)		(4,559	)		2,195			(1,112	)		(8,860	)		(2,162	)		267,792
POSCON Co., Ltd.		43,130		1,537			(3,975	)		(888	)		—			(15,161	)		—			24,643
Pohang Steel Co., Ltd.		181,607		7,743			(3,000	)		8,850			(36,644	)		5,398			(1,016	)		162,938
POSCO Machinery & Engineering Co., Ltd.		9,851		643			—			(136	)		—			452			—			10,810
POSDATA Co., Ltd.		55,889		5,198			(2,000	)		942			—			2,770			(299	)		62,500
POSCO Research Institute		22,217		456			—			124			—			(569	)		—			22,228
Seung Kwang Co., Ltd.		25,789		669			—			90			—			62			—			26,610
POS-AC Co., Ltd.		1,818		(95	)		—			(192	)		—			(63	)		—			1,468
Changwon Specialty Steel Co., Ltd.		303,200		10,846			(2,600	)		(33	)		—			(7,343	)		—			304,070
POSCO Machinery Co., Ltd.		14,143		464			—			(502	)		—			(496	)		—			13,609

27

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

			Jan. 1, 2002 ~ June 30, 2002						July 1, 2002 ~ Sept. 30, 2002						Oct. 1, 2002 ~ Dec. 31, 2002
			Valuation						Valuation						Valuation
			gain and						gain and						gain and
	2002		loss using			Other			loss using			Other			loss using			Other			2002
(in millions of	Beginning		equity			increase or			equity			increase or			equity			increase or			Ending
Korean Won)	balance		method			decrease (*)			method			decrease (*)			method			decrease (*)			balance
POSCO Refractories & Environment (POSREC)		18,199		4,369			22,788			816			(295	)		(3,188	)		—			42,689
POSTECH Venture Capital Co., Ltd.		34,171		1,189			(2,683	)		(397	)		(952	)		251			1,111			32,690
Korea Daily News		21,796		(3,147	)		(4,816	)		(621	)		—			1,028			(1,217	)		13,023
eNtoB Corporation		2,109		(165	)		—			(21	)		—			(44	)		—			1,879
Pohang Steel America Corporation (POSAM)		116,928		13,518			(14,869	)		3,019			45,302			16,282			(20,582	)		159,598
POSCO Australia Pty. Ltd. (POSA)		47,361		4,743			(4,657	)		100			(708	)		781			897			48,517
POSCO Asia Co., Ltd. (POA)		7,400		278			(583	)		868			131			489			307			8,890
VSC-POSCO Steel Corporation (VPS)		7,093		1,510			(2,715	)		226			16			(121	)		(159	)		5,850
DALIAN POSCO-CFM Coil Center Co., Ltd.		15,170		1,137			(1,494	)		2,325			369			1,615			84			19,206

28

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

			Jan. 1, 2002 ~ June 30, 2002						July 1, 2002 ~ Sept. 30, 2002						Oct. 1, 2002 ~ Dec. 31, 2002
			Valuation						Valuation						Valuation
			gain and						gain and						gain and
	2002		loss using			Other			loss using			Other			loss using			Other			2002
(in millions of	Beginning		equity			increase or			equity			increase or			equity			increase or			Ending
Korean Won)	balance		method			decrease (*)			method			decrease (*)			method			decrease (*)			balance
POS-Tianjin Coil Center Co., Ltd.		1,119		46			(55	)		71			27			36			(32	)		1,212
Zhangjiagang Pohang Stainless Steel Co., Ltd.		119,148		10,774			1,546			7,588			3,321			8,654			(4,638	)		146,393
SHUNDE Pohang Coated Steel Co., Ltd.		20,532		2,672			4,503			2,068			713			1,662			(1,195	)		30,955
POS-THAI Service Steel Center Co., Ltd.		974		12			(15	)		25			(15	)		6			(247	)		740
Myanmar-POSCO Co., Ltd.		3,567		878			(287	)		273			105			265			(168	)		4,633
POSINVEST		30,582		2,163			(2,231	)		1,063			603			2,890			(775	)		34,295
KOBRASCO		12,426		(4,278	)		(2,644	)		(20,406	)		4,777			(761	)		10,886			—
POSCHROME		3,192		491			316			(8	)		(45	)		417			(530	)		3,833
Shunde Xingpu Steel Center Co., Ltd.		2,187		41			(102	)		153			31			130			(856	)		1,584
POS-HYUNDAI STEEL		431		54			(40	)		27			18			(1	)		(7	)		482
Posmmit Steel Centre SDN BHD		—		—			—			—			—			—			2,308			2,308

29

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

			Jan. 1, 2002 ~ June 30, 2002						July 1, 2002 ~ Sept. 30, 2002					Oct. 1, 2002 ~ Dec. 31, 2002
			Valuation						Valuation					Valuation
			gain and						gain and					gain and
	2002		loss using			Other			loss using		Other			loss using			Other			2002
	Beginning		equity			increase or			equity		increase or			equity			increase or			Ending
(in millions of Korean Won)	balance		method			decrease (*)			method		decrease (*)			method			decrease (*)			balance
POSVINA		—		—			—			—		—			—			—			—
PT POSMI Steel Indonesia		—		—			—			—		—			—			347			347
Qingdao Pohang Stainless Steel Co., Ltd.		—		—			—			—		—			—			8,859			8,859
POSVEN		84,607		(89,530	)		4,923			—		—			—			—			—
		1,819,872		(35,516	)		(30,102	)		21,478		(42,900	)		(6,107	)		(44,475	)		1,682,250

(*) Other increase or decrease represents the fluctuations of the investment securities due to an acquisition (disposition) in the current period, dividend received, valuation gain or loss on investment securities and changes in retained earnings.

30

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

			2003.1.1 ~ 2003.6.30						2003.7.1 ~ 2003.9.30
	2003		Valuation gain			Other			Valuation gain			Other			As of
	Beginning		and loss using			increase or			and loss using			increase or			September 30,
(in millions of Korean Won)	balance		equity method			decrease (*)			equity method			decrease (*)			2003
POSCO E&C		217,599		(377	)		13,247			33,239			(2,752	)		260,956
Posteel Co., Ltd.		267,792		(852	)		6,075			(1,501	)		(2,360	)		269,154
POSCON Co., Ltd.		24,643		849			677			(1,324	)		—			24,845
Pohang Steel Co., Ltd.		162,938		8,232			(6,659	)		(904	)		—			163,607
POSCO Machinery & Engineering Co., Ltd.		10,810		553			—			446			—			11,809
POSDATA Co., Ltd.		62,500		(5,870	)		4			(110	)		(2	)		56,522
POSCO Research Institute		22,228		299			—			5			—			22,532
Seung Kwang Co., Ltd.		26,610		1,001			—			282			—			27,893
POS-AC Co., Ltd.		1,468		(719	)		—			(131	)		—			618
Changwon Specialty Steel Co., Ltd.		304,070		2,141			3,015			278			—			309,504
POSCO Machinery Co., Ltd.		13,609		411			—			561			—			14,581
POSCO Refractories & Environment (POSREC)		42,689		3,482			(1,665	)		3,213			—			47,719
POSTECH Venture Capital Co., Ltd.		32,690		399			(324	)		148			(155	)		32,758
Korea Daily News		13,023		(2,075	)		1,544			(799	)		(663	)		11,030
eNtoB Corporation		1,879		466			—			17			—			2,362
Pohang Steel America Corporation (POSAM)		159,598		(15,391	)		(12,931	)		(4,515	)		24,723			151,484
POSCO Australia Pty. Ltd. (POSA)		48,517		(2,587	)		5,081			(920	)		(1,072	)		49,019
POSCO Asia Co., Ltd. (POA)		8,890		3,248			(103	)		530			(444	)		12,121
VSC-POSCO Steel Corporation (VPS)		5,850		515			(4	)		(284	)		(1,461	)		4,616
DALIAN POSCO-CFM Coil Center Co., Ltd.		19,206		(249	)		(1,739	)		(2,268	)		(551	)		14,399
POS-Tianjin Coil Center Co., Ltd.		1,212		143			(11	)		(12	)		(46	)		1,286
Zhangjiagang Pohang Stainless Steel Co., Ltd.		146,393		7,156			(945	)		(5,885	)		(5,529	)		141,190
SHUNDE Pohang Coated Steel Co., Ltd.		30,955		203			(311	)		(2,099	)		(1,053	)		27,695
POS-THAI Service Steel Center Co., Ltd.		740		(22	)		17			49			10			794
Myanmar-POSCO Co., Ltd.		4,633		653			49			(186	)		(176	)		4,973
POSINVEST		34,295		1,274			(203	)		512			(1,276	)		34,602
POSCHROME		3,833		619			1,387			(164	)		42			5,717
Shunde Xingpu Steel Center Co., Ltd.		1,584		96			(10	)		(32	)		(58	)		1,580
POS-HYUNDAI STEEL		482		60			7			41			(14	)		576
Posmmit Steel Centre SDN BHD (POS-MMIT)		2,308		(1,896	)		(15	)		231			(87	)		541
POSVINA		—		1,509			1,912			172			(149	)		3,444
PT POSMI Steel Indonesia		347		22			(1	)		26			(8	)		386
Qingdao Pohang Stainless Steel Co., Ltd		8,859		—			3,706			—			2,770			15,335
POSCO (SUZHOU) Automotive Processing Center Co., LTD.		—		—			—			—			6,901			6,901
		1,682,250		3,293			11,800			18,616			16,590			1,732,549

31

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

     Details on the elimination of unrealized profit from inter-company transactions are as follows:

	Jan. 1, 2003 ~ Sept. 30, 2003									Jan. 1, 2002 ~ Sept. 30, 2003
				Tangible and									Tangible and
	Current			intangible						Current			intangible
(in millions of Korean Won)	assets			assets			Total			assets			assets			Total
eNtoB Corporation		(50	)		(8	)		(58	)		2			(7	)		(5	)
Posteel Co., Ltd.		(7,955	)		(2	)		(7,957	)		(84	)		9			(75	)
POSCO Refractories & Environment (POSREC)		5			(411	)		(406	)		(9	)		(806	)		(815	)
POS-AC Co., Ltd.		—			(592	)		(592	)		—			(785	)		(785	)
POSCO E&C		—			(11,218	)		(11,218	)		16			(49,185	)		(49,169	)
POSCON Co., Ltd.		(1	)		(2,618	)		(2,619	)		(91	)		(3,292	)		(3,383	)
Changwon Specialty Steel Co., Ltd.		142			—			142			(144	)		—			(144	)
POSDATA Co., Ltd.		—			(1,725	)		(1,725	)		291			(579	)		(288	)
POSCO Machinery Co., Ltd.		—			(1,961	)		(1,961	)		41			(1,743	)		(1,702	)
POSCO Machinery & Engineering Co., Ltd.		(5	)		(469	)		(474	)		35			410			445
Pohang Coated, Ltd.		(306	)		—			(306	)		(786	)		—			(786	)
Pohang Steel America Corporation (POSAM)		(5,208	)		—			(5,208	)		—			—			—
POSCO Australia Pty. Ltd. (POSA)		428			—			428			(813	)		—			(813	)
POSCO Asia Co., Ltd. (POA)		(394	)		—			(394	)		(90	)		—			(90	)
VSC-POSCO Steel Corporation (VPS)		—			51			51			—			51			51
DALIAN POSCO-CFM Coil Center Co., Ltd.		(460	)		—			(460	)		—			—			—
Zhangjiagang Pohang Stainless Steel Co., Ltd.		(9,542	)		13			(9,529	)		—			13			13
Shunde Xingpu Steel Center Co., Ltd.		(570	)		—			(570	)		—			—			—
POS-THAI Service Steel Center Co., Ltd.		(53	)		—			(53	)		—			—			—
KOBRASCO		—			—			—			(203	)		—			(203	)
POSCHROME		60			—			60			—			—			—
Posmmit Steel Centre SDN BHD (POS-MMIT)		(1,907	)		—			(1,907	)		—			—			—
POSVINA		(302	)		—			(302	)		—			—			—
		(26,118	)		(18,940	)		(45,058	)		(1,835	)		(55,914	)		(57,749	)

32

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

	July 1, 2003 ~ Sept. 30, 2003									Jan. 1, 2002 ~ Sept. 30, 2003
				Tangible and									Tangible and
	Current			intangible						Current			intangible
(in millions of Korean Won)	assets			assets			Total			assets			assets			Total
eNtoB Corporation		(8	)		(3	)		(11	)		—			(2	)		(2	)
Posteel Co., Ltd.		(2,492	)		3			(2,489	)		(138	)		3			(135	)
POSCO Refractories & Environment (POSREC)		—			(56	)		(56	)		(6	)		(573	)		(579	)
POS-AC Co., Ltd.		—			(42	)		(42	)		—			(240	)		(240	)
POSCO E&C		86			8,658			8,744			—			(17,026	)		(17,026	)
POSCON Co., Ltd.		(1	)		(1,822	)		(1,823	)		(39	)		(1,609	)		(1,648	)
Changwon Specialty Steel Co., Ltd.		(2	)		106			104			(471	)		—			(471	)
POSDATA Co., Ltd.		—			(71	)		(71	)		—			(654	)		(654	)
POSCO Machinery Co., Ltd.		—			(487	)		(487	)		(1	)		(576	)		(577	)
POSCO Machinery & Engineering Co., Ltd.		2			(295	)		(293	)		(19	)		34			15
Pohang Coated, Ltd.		(554	)		—			(554	)		(1,009	)		—			(1,009	)
Pohang Steel America Corporation (POSAM)		2,690			—			2,690			(57	)		—			(57	)
POSCO Australia Pty. Ltd. (POSA)		43			—			43			(641	)		—			(641	)
POSCO Asia Co., Ltd. (POA)		(184	)		—			(184	)		(77	)		—			(77	)
VSC-POSCO Steel Corporation (VPS)		—			17			17			—			17			17
DALIAN POSCO-CFM Coil Center Co., Ltd.		(376	)		—			(376	)		—			—			—
Zhangjiagang Pohang Stainless Steel Co., Ltd.		(4,900	)		4			(4,896	)		—			4			4
Shunde Xingpu Steel Center Co., Ltd.		(382	)		—			(382	)		—			—			—
POS-THAI Service Steel Center Co., Ltd.		4			—			4			—			—			—
KOBRASCO		—			—			—			(599	)		—			(599	)
POSCHROME		55			—			55			—			—			—
Posmmit Steel Centre SDN BHD (POS-MMIT)		152			—			152			—			—			—
POSVINA		67			—			67			—			—			—
		(5,800	)		6,012			212			(3,057	)		(20,622	)		(23,679	)

33

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Valuation gains and losses on investments recorded as capital adjustments for the nine-month periods ended September 30, 2003 and December 31, 2002 are as follows:

(in millions of Korean Won)	2003			2002			Remarks
Gain on investments		197,256			198,848		Equity method
Loss on investments		(6,358	)		(20,424	)	Equity method
		190,898			178,424

8. Property, Plant and Equipment

Property, plant and equipment as of September 30, 2003 and December 31, 2002 are as follows:

(in millions of Korean Won)	2003			2002
Buildings and structures		4,452,948			4,301,260
Machinery and equipment		18,321,240			17,508,903
Tools		96,568			87,753
Vehicles		142,206			129,406
Furniture and fixtures		124,728			114,541
		23,137,690			22,141,863
Less: Accumulated depreciation		(16,137,002	)		(15,294,665	)
		7,000,688			6,847,198
Construction in-progress		1,410,859			1,794,731
Less: Accumulated impairment loss		(318,836	)		(240,014	)
		1,092,023			1,554,717
Land		864,534			869,786
		8,957,245			9,271,701

The value of the land based on the posted price issued by the Korean tax authority amounted to KRW2,443,947 million and KRW2,377,912 million as of September 30, 2003 and December 31, 2002, respectively.

As of September 30, 2003, property, plant and equipment are insured against fire and other casualty losses up to KRW3,097,773 million. In addition, the Company carries general insurance for vehicles, gas accident liability and disaster insurance for its employees.

In accordance with the Asset Revaluation Law, the Company revalued a substantial portion of its property, plant and equipment by KRW3,819 billion as of December 31, 1989. The remaining revaluation increments amounting to KRW3,173 billion, net of revaluation tax, were credited to revaluation surplus, a component of shareholders’ equity.

34

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Construction in-progress included in property, plant and equipment includes capital investments in Kwangyang No. 2 Minimill. By a resolution of the Board of Directors at a meeting held in May 1998, the construction on the Minimill has been ceased due to the economic situation in the Republic of Korea and the Asia Pacific region. Previously recognized impairment loss on capital investment in Kwangyang No. 2 Minimill amounted to KRW240,014 million as of December 31, 2002. In addition, the Company recognized impairment loss on capital investments amounting to KRW78,822 million for the nine-month period ended September 30, 2003. Accumulated impairment loss as of September 30, 2003 amounted to KRW318,836 million.

The carrying value of property, plant and equipment as of September 30, 2003 are as follows:

	As of													As of
	Dec. 31,						Impairment							September 30,
(in millions of Korean Won)	2002		Acquisition		Disposal		loss		Others (*)			Depreciation		2003
Land		869,786		211		1,623		—		(3,840	)		—		864,534
Buildings		1,854,447		119,031		2,618		—		7,890			94,089		1,884,661
Structures		946,704		40,499		2,352		—		(6,994	)		53,933		923,924
Machinery and equipment		3,985,184		984,647		7,081		—		3,927			860,052		4,106,625
Vehicles		15,281		18,430		6		—		23			5,148		28,580
Tools		16,345		10,800		1		—		(110	)		6,714		20,320
Furniture and fixtures		29,237		15,357		14		—		90			8,092		36,578
Construction in-progress		1,554,717		805,103		—		78,822		(1,188,975	)		—		1,092,023
		9,271,701		1,994,078		13,695		78,822		(1,187,989	)		1,028,028		8,957,245

	As of													As of
	June 30,						Impairment							September 30,
(in millions of Korean Won)	2003		Acquisition		Disposal		loss		Others (*)			Depreciation		2003
Land		861,810		188		—		—		2,536			—		864,534
Buildings		1,905,678		10,826		461		—		628			32,010		1,884,661
Structures		940,072		1,712		19		—		515			18,356		923,924
Machinery and equipment		4,285,858		113,307		1,652		—		(44	)		290,844		4,106,625
Vehicles		29,493		1,091		6		—		7			2,005		28,580
Tools		20,101		2,540		—		—		(37	)		2,284		20,320
Furniture and fixtures		28,420		11,195		1		—		31			3,067		36,578
Construction in-progress		995,837		237,045		—		—		(140,859	)		—		1,092,023
		9,067,269		377,904		2,139		—		(137,223	)		348,566		8,957,245

(*) Foreign currency translation adjustment and replacement of assets in connection with foreign branches.

35

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

The Company’s expenditures in relation to construction in-progress amounted to KRW831,241 million and KRW237,044 for the nine-month periods ended September 30, 2003 and 2002, respectively.

As of September 30, 2003 and December 31, 2002, fully depreciated property, plant and equipment still in use amounted to KRW43 million and KRW44 million, respectively.

As of September 30, 2003 and December 31, 2002, the book values of property, plant and equipment, of which operations have been temporary suspended, amounted to KRW2,837 million and KRW3,655 million, respectively.

9. Intangible Assets

Intangible assets, net of accumulated amortization, as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)	2003		2002
Intellectual property rights		180		227
Port facilities usage rights		133,072		134,209
Development costs and others (Note 28)		216,086		196,705
Land usage rights		3		3
		349,341		331,144

10. Other Assets

Other assets as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)		2003			2002
Other current assets
	Short-term loans		1,167			1,183
	Accrued income		49,771			36,303
	Prepaid expenses		8,766			2,604
	Others (Note 15)		2,541			36,331
	Less: Allowance for doubtful accounts		(1,221	)		(1,221	)
			61,024			75,200
Other long-term assets
	Guarantee deposits (Note 26)		1,100			1,612
	Others (Note 15)		240,236			228,189
	Less: Allowance for doubtful accounts		(173,014	)		(173,004	)
			68,322			56,797
			129,346			131,997

36

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

11. Current Portion of Long-Term Debt

Current portion of long-term debt as of September 30, 2003 and December 31, 2002 are as follows:

		Annual interest
(in millions of Korean Won)		rate (percent)		2003			2002
Foreign currency borrowings, in		LIBOR + 0.60
Won equivalent			2.69 ~ 4.90		16,047			18,515
Loans from foreign financial institutions		LIBOR +
			0.40 ~ 0.80,
			2.00 ~ 4.31		26,090			33,268
Debentures			1.44 ~ 8.00		800,008			1,215,671
					842,145			1,267,454
	Less: Discount on debentures issued				(2,301	)		(3,852	)
					839,844			1,263,602

12. Long-Term Debt

Long-term debt as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)			2003			2002
Foreign currency borrowings, in Won equivalents				32,590			41,487
Loans from foreign financial institutions				269,591			299,436
Debentures				3,276,665			3,888,514
				3,578,846			4,229,437
	Less: Current portion			(842,145	)		(1,267,454	)
		Discount on debentures issued		(14,291	)		(17,670	)
				2,722,410			2,944,313

Long-term foreign currency borrowings as of September 30, 2003 and December 31, 2002 are as follows:

	Annual interest
(in millions of Korean Won)	rate (percent)		2003			2002
MIZUHO		4.90		17,286			22,729
Chase Manhattan Bank	LIBOR + 0.60			2,462			5,145
Development Bank of Japan		4.60		12,842			13,613
				32,590			41,487
Less: Current portion				(16,047	)		(18,515	)
				16,543			22,972

37

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Loans from foreign financial institutions as of September 30, 2003 and December 31, 2002 are as follows:

	Annual interest
(in millions of Korean Won)	rate (percent)		2003			2002
Commerzbank and others		2.00 ~ 6.97		31,811			49,699
Sumitomo Bank	LIBOR + 0.80			65,250			69,677
Citibank	LIBOR + 0.60			172,530			180,060
				269,591			299,436
Less: Current portion				(26,090	)		(33,268	)
				243,501			266,168

Certain loans from foreign financial institutions are covered by guarantees provided by Korea Development Bank amounting to KRW10,575 million and KRW13,165 million as of September 30, 2003 and December 31, 2002, respectively.

Debentures outstanding as of September 30, 2003 and December 31, 2002 are as follows:

		Annual interest
(in millions of Korean Won)		rate (percent)		2003			2002
Domestic debentures			5.00 ~ 8.00		1,700,000			2,100,000
Yankee Bonds			7.1 ~ 7.4		736,824			978,217
Samurai Bonds			1.8		308,682			810,297
Exchangeable bonds			—		531,159			—
					3,276,665			3,888,514
Less: Current portion					(800,008	)		(1,215,671	)
	Discount on debentures issued				(14,291	)		(17,670	)
					2,462,366			2,655,173

(*) The Company issued exchangeable bonds on August 20, 2003. It is exchangeable with SK Telecomm Co. ADRs (American depository     receipt).

Exchangeable bonds as of September 30, 2003 are as follows.

Issue date:	August 20, 2003
Maturity date:	August 20, 2008 (full amount of principal is repaid if not exercised)
Rate:	Interest rate of zero percent
Face value:	JPY 51,622,000,000
Issuing price:	JPY 51,880,110,000
Exchangeable price:	JPY 3,398/ADR
Exercise period   Call:	Commencing 14 days following the issuance date until 14 days prior to maturity date
Put:	On the 3 years following the payment date

The Company has disposed SK Telecom Co shares to Zeus (Cayman) as a collateral pursuant to the aforementioned issuance of the exchangeable bonds. Above transaction meets criteria from

38

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

the securities and exchange law and legal perspective. However, in accordance with GAAP, the aforementioned transaction has been recorded as a borrowing transaction.

Maturities of long-term debt outstanding as of September 30, 2003 are as follows:

					Foreign		Loans from foreign
					currency		financial
(in millions of Korean Won)			Debentures		borrowings		institutions		Total
2005.10 ~ 2006.9				737,574		7,655		184,322		929,551
2006.10 ~ 2007.9				908,682		1,976		11,792		922,450
2007.10 ~ 2008.9				299,242		1,975		11,792		313,009
	Thereafter			531,159		4,937		35,595		571,691
		Total		2,476,657		16,543		243,501		2,736,701

13. Accrued Severance Benefits

Details of accrued severance benefits for the nine-month period ended September 30, 2003 are as follows:

	Accrued severance		National Pension		Group severance
(in millions of Korean Won)	benefits		Fund		insurance deposits
Beginning balance		178,684		128		104,888
Increase		20,788		—		1,469
Decease		3,329		12		496
As of March 31, 2003		196,143		116		105,861
Increase		26,501		—		31,338
Decease		1,346		—		405
As of June 30, 2003		221,298		116		136,794
Increase		41,640		—		2,037
Decease		5,381		—		936
As of September 30, 2003		257,557		116		137,895

As of September 30, 2003, the Company has funded approximately 53.5 percent of the total accrued severance benefits through group severance insurance deposits with Samsung Life Insurance Company and others. The beneficiaries of the severance insurance deposits are the Company’s employees.

39

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

14. Other Liabilities

Other liabilities as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)		2003		2002
Other current liabilities
	Advances received		40,096		17,105
	Unearned revenue		1,724		1,998
	Others		64,183		1,633
			106,003		20,736
Other long-term liabilities
	Others		57,601		34,260
			163,604		54,996

40

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

15. Commitments and Contingencies

As of September 30, 2003, contingent liabilities for outstanding guarantees provided by the Company for the repayment of loans of affiliates and related companies are as follows:

(in U.S. Dollars
and millions of Korean Won)		Foreign currency		Won equivalent		Financial institution
Related company
	VPS	US$	1,608,291		1,850	Credit Lyonnais
	POS-HYUNDAI STEEL		186,486		214	India Development Bank and others
	POSINVEST		146,000,000		167,929	Industrial and Commercial Bank of China and others
	Zhangjiagang Pohang Stainless Steel Co., Ltd.		12,000,000		13,802	Bank of China
		US$	159,794,777		183,795
Others
	Dae Kyeong Special Steel Co., Ltd.		4,318
		US$	3,249,470		8,056	Korea Development Bank
	DC Chemical Co., Ltd.		2,242		2,242	LG-Caltex Gas
	S U S	US$	12,142,950		13,967	J-BIC
	POSMI		1,800,000		2,070	Korea Exchange Bank
	Zeus	JPY	51,622,000,000		531,159
			6,560
		US$	17,192,420		557,494
		JPY	51,622,000,000
			6,560
		US$	176,987,197		741,289
		JPY	51,622,000,000

As of December 31, 2002, the Company provided payment guarantees for affiliated companies and others amounting to KRW154,413 million and KRW25,006 million, respectively.

As of September 30, 2003, the Company provided one blank promissory note to the Bank of China and three blank promissory notes and others to Korea Development Bank, as collateral for outstanding loans.

The Company entered into long-term contracts to purchase iron ore, coal, nickel, chrome and stainless steel scrap. These contracts generally have terms of five to ten years and provide for periodic price adjustments to market price. As of September 30, 2003, 157 million tons of iron ore and 35 million tons of coal remained to be purchased under such long-term contracts.

The Company has entered into a bank overdraft agreement with Woori Bank amounting to KRW10,000 million and mid-day overdraft agreement amounting to KRW150,000 million as of September 30, 2003.

41

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

The Company has guaranteed usage of the bulk carriers of Keo Yang Shipping Co., Ltd. in order to ensure the transportation of raw materials through 2010.

As of September 30, 2003, the Company acquired certain tools and equipment under operating lease agreements from Macquarie IT KOREA Lease Company. The Company’s rent expenses, with respect to the above lease agreements, amounted to KRW2,877 million and KRW6,600 million for the three-month period ended September 30, 2003 and nine-month period ended September 30, 2003, respectively. Future lease payments under the above leases agreements are as follows:

(in millions of Korean Won)
October 1, 2003 ~ December 31, 2003		1,995
	2004	6,768
	2005	4,778
	2006	1,339
		14,880

The Company paid US$106,400,000 on behalf of POSVEN on June 21, 2001, an affiliate which is 40 percent owned by the Company. This payment represented 40 percent of the total long-term debt of POSVEN guaranteed by the Company. On July 20, 2001, an additional payment of US$53,200,000 was due, representing a long-term debt guaranteed by Raytheon Company (“Raytheon”), a shareholder of POSVEN and a joint venture partner with the Company in the construction of a facility in Venezuela. The Company and Raytheon disagreed as to which company is responsible for the payment of the US$53,200,000 amount due. In the meantime, both companies agreed that each would pay half of the amount until the dispute is resolved. The Company, therefore, made a payment of US$26,600,000. Should the dispute be resolved in Raytheon’s favor, the Company may be required to reimburse Raytheon for its US$26,600,000 debt payment made on behalf of POSVEN. In addition, should the dispute, with respect to the completion of facility construction, be resolved in Raytheon’s favor, each shareholder of POSVEN, including the Company, is required to proportionally take over 10 percent of the equity (amounting to US$11,200,000) owned by Raytheon.

In addition, pursuant to a resolution during the general meeting of shareholders on December 23, 2002, the liquidation of POSVEN was determined. Accordingly, the payment amounting to KRW172,996 million made on behalf of POSVEN and recorded as other investment, was fully reserved as part of allowance for doubtful accounts as of December 31, 2002. The Company suspended applying the equity method for POSVEN due to its negative book value (Note 7).

The Company is named as a defendant in various domestic and foreign legal actions arising from the normal course of business. The aggregate amounts of domestic and foreign claims with the Company as the defendant amounted to approximately KRW3,600 million and US$9,050,000 as of September 30, 2003. These litigations are pending as of September 30, 2003. The Company believes that the outcome of these matters is uncertain but, in any event, they would not result in a material ultimate loss for the Company.

42

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

In addition, the litigation in relation to a severance payment was decided in favor of the Company in August 2001. As a result, the Company recorded other receivables amounting to KRW43,378 million and allowances for bad debts amounting to KRW42,223 million, for receivables with uncertain collectibility (excluding receivables from related parties) as of September 30, 2003.

As of September 30, 2003, the Company entered into an agreement with Posteel Co., Ltd., an affiliated company, to supply steel and by-products amounting to KRW900,000 million a year.

In response to the generally unstable economic conditions, the Korean government and the private sector have been implementing structural reforms to historical business practices. Implementation of these reforms is progressing slowly, particularly in the areas of restructuring private enterprises and reforming the banking industry. The Korean government continues to apply pressure to Korean companies to restructure into more efficient and profitable firms. The accompanying non-consolidated financial statements reflect management’s assessment of the impact to date of the economic situation on the financial position of the Company. Actual results may differ materially from management’s current assessment.

16. Capital Surplus

Capital surplus as of September 30, 2003 and December 31, 2002 consists of the following:

(in millions of Korean Won)	2003		2002
Revaluation surplus (Note 8)		3,172,776		3,172,776
Additional paid-in capital		463,825		463,825
Other capital surplus (*)		80,127		49,352
		3,716,728		3,685,953

(*) Other capital surplus consists of gain on sale of treasury stock and others.

43

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

17. Retained Earnings

Retained earnings as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)		2003		2002
Appropriated
	Legal reserve		241,202		241,202
	Reserve for research and human resource development		746,667		626,666
	Reserve for overseas investment loss		—		28,200
	Reserve for business rationalization		918,300		918,300
	Reserve for business expansion		6,119,500		4,982,500
	Appropriated retained earnings for dividends		144,044		119,523
			8,169,713		6,916,391
Unappropriated			1,504,905		1,566,843
			9,674,618		8,483,234

Legal Reserve

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

Other Legal Reserve

Pursuant to the Special Tax Treatment Control Law, the Company appropriates retained earnings as a reserve for overseas investment loss and research and human resource development. These reserves are not available for dividends, but may be transferred to capital stock, or used to reduce accumulated deficit, if any, through an appropriate resolution by the Company’s shareholders.

Interim Dividend

The Company declared interim dividends which were approved through a resolution of the Board of Directors on July 22, 2003. Details of interim dividends in 2003 and 2002 are as follows:

	2003				2002
	Dividend				Dividend
	ratio		Dividend		ratio		Dividend
(in millions of Korean Won)	(percent)		amount		(percent)		amount
Common shares		20		81,649		10		40,842

44

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

18. Capital Adjustments

Capital adjustments as of September 30, 2003 and December 31, 2002 consist of the following:

(in millions of Korean Won)	2003			2002
Treasury stock		(1,050,290	)		(915,995	)
Valuation gain on investment securities (Note 7)		(349,109	)		(193,641	)
Foreign-based operations translation adjustment		26,474			24,842
		(1,372,925	)		(1,084,794	)

As of September 30, 2003, the Company holds 8,858,500 and 912,010 shares of its own common stock amounting to KRW949,176 million and specified money in trust amounting to KRW101,114 million, respectively.

The Company restricts the voting rights of treasury stock in accordance with the Korean Commercial Code. In addition, the Company decided to sell 875,066 shares of its treasury stock to the association of employee stock ownership on July 23, 2003, which was approved by the Board of Directors on July 22, 2003, and the difference between the fair value and the proceeds from the sale was recognized as welfare expenses.

The Company operates one branch in Japan, and the resulting translation gain included in the capital adjustments, as discussed in Note 2 to the non-consolidated financial statements, amounted to KRW26,474 million and KRW24,842 million as of September 30, 2003 and December 31, 2002, respectively.

45

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

19. Stock Option Plan

The Company granted stock options to its executive officers, including affiliates’ executive officers, in accordance with the stock option plan approved by the Board of Directors. The details of the stock options granted are as follows:

	1st Grant (*)	2nd Grant (*)	3rd Grant (*)	4th Grant
Grant date	July 23, 2001	April 27, 2002	Sept. 18, 2002	April 26, 2003
Exercise price	KRW98,900 per share	KRW136,400 per share	KRW116,100 per share	KRW102,900 per share
Number of shares	449,406 shares	58,200 shares	21,340 shares	141,500 shares
Exercise period	July 24, 2003 ~ July 23, 2008	April 28, 2004 ~ April 27, 2009	Sept. 19, 2004 ~ Sept. 18, 2009	April 27, 2005 ~ April 26, 2010
Settlement method	Cash or stock compensation for the difference between the exercise price and fair market value of the option

(*) The Company changed the number of shares granted and the exercise price as presented above, in accordance with the resolution of the Board of Directors on April 26, 2003.

The Company applied the intrinsic value method to calculate the compensation cost related to the stock options and such compensation cost is proportionally allocated and accounted for as stock compensation costs and other liabilities.

The compensation costs for stock options granted to employees and executives recognized for the nine-month period ended September 30, 2003 and for the future periods are as follows:

	1st Grant			2nd Grant		3rd Grant			4th Grant		Total
Prior periods	KRW	8,268		KRW	—	KRW	20		KRW	—	KRW	8,288
For the three-month period ended March 31, 2003		(6,949	)		—		(20	)		—		(6,969	)
For the three-month period ended June 30, 2003		7,709			—		26			208		7,943
For the three-month period ended September 30, 2003		7,976			12		201			824		9,013
For the nine-month period ended September 30, 2003		8,736			12		207			1,032		9,987
Future periods		—			5		213			3,750		3,968
	KRW	17,004		KRW	17	KRW	440		KRW	4,782	KRW	22,243

46

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

20. Derivatives

The Company has entered into cross currency swap agreements with financial institutions to reduce currency risks. Swap contracts outstanding as of September 30, 2003 are as follows:

		Contract amount				Annual interest rate (percent)
	Period	Receipt		Payments		Receipt		Payments
Citibank and others	March 2002 ~ July 2004	US$	174,000	JPY	22,867,580	US$	7.13	JPY	2.93

The gains and losses on currency swap transactions for the nine-month periods ended September 30, 2003 and 2002 are as follows:

	2003		2003		2003			2003			2002		2002			2002		2002
(in millions of Korean Won)	1Q		2Q		3Q			Total			1Q		2Q			3Q		Total
Valuation gain		103		1,189		—			1,292			2,081		—			9,820		11,901
Valuation loss		—		—		(19,192	)		(19,192	)		—		(17,897	)		—		(17,897	)
		103		1,189		(19,192	)		(17,900	)		2,081		(17,897	)		9,820		(5,996	)

21. Cost of Goods Sold

Cost of goods sold for the three-month periods ended September 30, 2003 and 2002 and nine-month periods ended September 30, 2003 and 2002 consists of the following:

	For the three-month						For the nine-month
	period ended						period ended
	September 30						September 30
(in millions of Korean Won)	2003			2002			2003			2002
Finished goods at the beginning of the period		138,229			164,441			162,549			239,371
Cost of goods manufactured		2,592,284			2,250,168			7,383,057			6,443,207
Transfer to other accounts		90,393			(188,132	)		(13,034	)		(148,433	)
Finished goods at the end of the period		(197,430	)		(167,687	)		(197,430	)		(167,687	)
Cost of goods sold for finished goods		2,623,476			2,058,790			7,335,142			6,366,458
Others		60,738			249,988			172,543			421,986
Total		2,684,214			2,308,778			7,507,685			6,788,444

47

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

22. Selling and Administrative Expenses

Selling and administrative expenses for the three-month periods ended September 30, 2003 and 2002 and nine-month periods ended September 30, 2003 and 2002 consist of the following:

	For the three-month periods				For the nine-month periods
	ended September 30				ended September 30
(in millions of Korean Won)	2003		2002		2003		2002
Selling expenses		110,345		102,684		311,133		298,237
Fees and charges		20,382		16,975		54,161		43,223
Salaries and wages		16,585		14,152		49,060		41,927
Rent		13,779		9,609		36,693		28,460
Welfare		16,932		10,856		39,494		26,155
Depreciation		10,815		8,532		29,003		25,106
Advertising		5,682		4,963		22,905		18,521
Research and development		10,995		10,258		31,157		22,489
Provision for severance benefits		3,685		1,448		8,714		5,478
Training		3,506		2,882		8,211		6,737
Repairs		1,981		1,511		6,583		5,946
Travel		2,396		1,950		6,619		6,034
Supplies		507		628		3,014		3,889
Communications		1,275		1,172		3,529		3,618
Taxes and public dues		1,037		723		3,263		1,927
Vehicle expenses		870		988		2,690		2,765
Entertainment		463		428		1,471		2,448
Subscriptions and printing		239		163		950		847
Utilities		319		237		830		668
Insurance		103		99		306		307
Others		12,687		3,058		20,416		10,066
		234,583		193,316		640,202		554,848

23. Donations

Donations contributed by the Company for the three-month periods ended September 30, 2003 and 2002 and nine-month periods ended September 30, 2003 and 2002 consist of the following:

	For the three-month periods				For the nine-month periods
	ended September 30				ended September 30
(in millions of Korean Won)	2003		2002		2003		2002
POSCO Educational Foundation		9,700		10,000		29,100		15,000
Employee benefit welfare		—		—		43,100		—
Others		3,652		1,748		5,632		3,156
		13,352		11,748		77,832		18,156

48

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

24. Income Taxes

The statutory income tax rate applicable to the Company, including resident tax surcharges, was approximately 29.7 percent in 2003 and 2002, respectively.

Income tax expense for the nine-month periods ended September 30, 2003 and 2002 consists of the following:

(in millions of Korean Won)	2003			2002
Current income taxes		585,086			355,922
Deferred income taxes		(27,301	)		(127,118	)
		557,785			228,804

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:

(in millions of Korean Won)	2003			2002
Net income before income tax expense		2,076,033			965,195
Statutory tax rate		16.5/29.7			16.5/29.7
Income tax expense computed at statutory rate		616,573			286,654
Tax credit		(59,927	)		(59,081	)
Others, net		1,139			1,231
Income tax expense		557,785			228,804
Effective rate	26.87 percent			23.71 percent

Components of deferred income taxes as of September 30, 2003 and December 31, 2002 are as follows:

	Beginning balance						Ending balance
	(as of December 31,			Increase			(as of September 30,
(in millions of Korean Won)	2002)			(decrease)			2003)
Reserve for special repairs		(154,132	)		2,155			(151,977	)
Deferred foreign exchange losses		17,644			(6,462	)		11,182
Allowance for severance benefits		652			4,255			4,907
Current assets		71,284			23,410			94,694
Allowance for doubtful accounts		63,156			767			63,923
Accrued income		(10,690	)		(4,007	)		(14,697	)
Reserve for technology developments		(221,760	)		(23,018	)		(244,778	)
Others		105,671			24,264			129,935
Net deferred income tax assets (liabilities)		(128,175	)		21,364			(106,811	)

49

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

25. Earnings Per Share

Basic earnings per share is computed by dividing net income allocated to common stock, by the weighted-average number of common shares outstanding during the period.

	Number of		Number of shares in			Number of days		Weighted number
Period	shares issued		treasury stock (*)			outstanding		of shares
Jan. 1, 2003 ~ March 31, 2003		90,781,795		(9,105,054	)		90		7,350,906,690
April 1, 2003 ~ June 30, 2003		90,781,795		(9,133,276	)		91		7,430,015,229
July 1, 2003 ~ Sept. 30, 2003		90,781,795		(8,903,778	)		92		7,532,777,564
									22,313,699,483

(*) Weighted average

Period	Weighted average number of common shares
July 1, 2003 ~ Sept. 30, 2003	7,532,777,564 ÷ 92 = 81,878,017
Jan. 1, 2003 ~ Sept. 30, 2003	22,313,699,483 ÷ 273 = 81,735,163

Earnings per share and diluted earnings per share are calculated as follows:

	For the		For the		For the		For the
	three-month		three-month		three-month		nine-month
	period ended		period ended		period ended		period ended
(in millions of	March 31,		June 30,		September 30,		September 30,
Korean Won)	2003		2003		2003		2003
Net income		468,673		549,995		499,580		1,518,248
Weighted-average number of shares of common stock		81,676,741		81,648,519		81,878,017		81,735,163
Earnings per share (in Korean Won)		5,738		6,736		6,102		18,575

	For the		For the
	three-month		nine-month
	period ended		period ended		For the year
(in millions of	September 30,		September 30,		December 31,
Korean Won)	2002		2002		2002
Net income		377,756		736,391		1,101,325
Weighted-average number of shares of common stock		81,418,325		81,900,640		81,932,084
Earnings per share (in Korean Won)		4,640		8,991		13,442

Diluted earnings per share

Diluted earnings per share for the three-month periods ended September 30, 2003 and 2002 and nine-month periods ended September 30, 2003 and 2002 are the same as basic earnings per share, since there is no dilutive effect resulting from the stock option plan as of September 30, 2003 and 2002 and June 30, 2003 and 2002.

50

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

26. Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies as of September 30, 2003 and December 31, 2002 are as follows:

		2003				2002
(in millions of				Won equivalent				Won equivalent
Korean Won)		Foreign currency		(in millions)		Foreign currency		(in millions)
Assets:
	Cash (*)	US$	131,270,994		150,986	US$	65,468,977		78,588
		JPY	5,918,000,000		60,893	JPY	250,000,000		2,532
	Trade receivables	US$	96,388,403		110,866	US$	64,017,785		76,847
		JPY	2,341,186,303		24,089	JPY	955,530,483		9,678
		EUR	1,105,574		1,472	EUR	456,710		574
	Other receivables	US$	410,815		473	US$	862,128		1,035
		JPY	—		—	JPY	77,814,049		788
	Trading securities	US$	—		—	US$	28,993,070		34,804
	Guarantee deposits	US$	420,168		483	US$	297,091		357
					349,262				205,203
Liabilities:
	Trade payables	US$	190,808,865		219,468	US$	153,433,334		184,181
		JPY	657,741,333		6,768	JPY	144,975,101		1,468
		EUR	1,468,092		1,954	EUR	190,905		240
	Other accounts payable	US$	4,928,675		5,669	US$	6,027,536		7,235
		JPY	179,771,139		1,850	JPY	89,559,735		907
		EUR	724,252		964	EUR	7,723		10
	Accrued expenses	US$	16,988,254		19,540	US$	78,498,088		94,229
		JPY	69,686,882		717	JPY	1,184,497,963		11,997
		EUR	220,979		294	EUR	5,691,534		7,156
	Debentures (**)	US$	640,605,000		736,824	US$	814,910,000		978,217
		JPY	81,622,000,000		839,841	JPY	80,000,000,000		810,297
	Foreign currency borrowings	US$	2,142,857		2,462	US$	4,285,714		5,145
		JPY	2,928,000,000		30,128	JPY	3,588,000,000		36,342
	Loans from foreign financial institutions	US$	185,869,205		213,787	US$	189,380,163		227,332
		JPY	1,389,537,425		14,298	JPY	2,983,289,425		30,217
		EUR	31,178,899		41,506	EUR	33,313,207		41,887
					2,136,070				2,436,860

(*) Includes cash and cash equivalents, short-term financial instruments, and long-term financial instruments.

(**) Presented at face value.

51

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

27. Related Party Transactions

Significant transactions, which occurred in the ordinary course of business, with related companies for the nine-month periods ended September 30, 2003 and 2002, and the related account balances as of September 30, 2003 and December 31, 2002, are as follows:

(in millions of Korean Won)	Sales				Purchases				Receivables				Payables
Company	2003		2002		2003		2002		2003		2002		2003		2002
POSCO E&C		3,662		2,031		243,975		645,682		36,924		8,495		16,052		72,310
Posteel Co., Ltd.		694,715		1,064,793		23,715		1,186		49,303		186,335		—		900
POSCON Co., Ltd.		—		—		109,259		100,506		7,996		4,399		13,290		15,741
Pohang Steel Co., Ltd.		192,176		168,249		1,124		1,003		23,536		25,477		348		121
POSCO Machinery & Engineering Co., Ltd.		—		—		69,462		59,975		2,559		2,119		9,180		6,795
POSDATA Co., Ltd.		528		511		149,220		118,421		957		118		28,263		26,908
POSCO Research Institute		—		—		7,966		7,168		—		—		3		3,370
Seung Kwang Co., Ltd.		—		—		56		1		583		583		—		1
POS-AC Co., Ltd.		326		299		6,815		11,207		—		—		457		481
Changwon Specialty Steel Co., Ltd.		—		358		44,171		41,634		70		79		8,598		12,879
POSCO Machinery Co., Ltd.		—		—		57,528		48,939		934		317		7,076		9,561
POSTECH Venture Capital Co., Ltd.		40		37		—		10		—		—		45		42
POSREC		82		—		112,567		108,243		15		4		14,654		16,271
POSAM		—		—		106		215		—		—		—		—
POSA		—		—		29,798		53,868		—		—		14,709		587
POSCAN		—		—		25,085		33,320		—		—		—		—
POA		261,036		90,424		73,953		50,629		15,500		16,965		5,714		2,960
PIO		147,520		66,909		6,064		6,453		5,260		3,092		648		231
DALIAN POSCO — CFM Coated Steel Co., Ltd.		9,996		—		—		—		—		—		—		—
POS-Tianjin Coil Center Co., Ltd.		—		248		—		—		—		—		—		—
Zhanjiagang Pohang Coated Steel Co., Ltd.		215,511		—		—		—		18,240		—		—		—
SHUNDE Pohang Coated Steel Co., Ltd.		220		—		—		—		—		—		—		—
POS-THAI Service Steel Center Co., Ltd.		190		45		—		—		—		—		—		—
POSINVEST		—		—		320		987		—		—		165		277
Korea Daily News		—		—		322		223		—		—		1		42
eNtoB Corporation		—		—		48,158		6,406		—		—		2,974		1,728
MIDAS IT		—		—		99		—		—		—		11		—
POSVEN		—		—		—		—		172,996		172,996		—		—
KOBRASCO		—		—		72,119		69,069		—		—		4,503		5,065
UPI		183,706		185,840		—		45		10,654		—		—		—
POSCHROME		—		—		22,920		16,563		—		—		—		—
		1,709,708		1,579,744		1,104,802		1,381,753		345,527		420,979		126,691		176,270

52

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

28. Research and Development Costs

The Company capitalized costs directly related to the ERP system and process innovation as other intangible assets. The summary of other intangible assets as of September 30, 2003 and December 31, 2002 are as follows:

(in millions of Korean Won)	2003			2002
Beginning balance		196,705			177,320
Increase		61,910			71,134
Decrease		(42,529	)		(51,749	)
Ending balance		216,086			196,705

Research and development costs for the three-month periods ended September 30, 2003 and 2002 and nine-month periods ended September 30, 2003 and 2002 are as follows:

	For the three-month periods				For the nine-month periods
	ended September 30				ended September 30
(in millions of Korean Won)	2003		2002		2003		2002
Ordinary research costs		1,714		1,289		4,725		3,391
Development costs		63,780		48,647		162,872		135,137
		65,494		49,936		167,597		138,528

29. Regional Information

The Company has one plant in Pohang and another plant in Kwangyang in the Republic of Korea.

General information on the operations of both plants as of September 30, 2003 are as follows:

			Pohang Mill	Kwangyang Mill
Regional Major Products -
	Major Facilities:
		Hot Roll	HR, HR Sheet	HR coil, HR Sheet
		Cold Roll	CR, CR Sheet	CR coil, CR Sheet
		Plate	Plate		-
		Electric iron	Electric iron coil		-
		Stainless	STS HR Coil, etc		-
		Half-finished goods	Slab, Bloom	Slab
	Major Facilities:
		Furnaces	1~4 furnaces, F furnace, COREX	1~5 furnaces
		Steel manufacturing	1~2 steel manufacturing	1~2 steel manufacturing
		Hot Roll	1~2 HR	1~3 HR, Mini mill
		Cold Roll	1~2 CR	1~4 CR
		Others	HR, Steel plate, STS and others		-
Number of employees			9,310 persons	7,162 persons

53

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Regional financial status and operating results as of September 30, 2003 and December 31, 2002 and for the nine-month periods ended September 30, 2003 and 2002 are as follows:

(in millions of Korean Won)
2003		Pohang		Kwangyang		Others		Total
Sales (*)			5,442,450		4,949,981		35,641		10,428,072
Fixed assets:
	Property, plant and equipment(**)		5,161,340		3,690,742		105,163		8,957,245
	Intangible assets		243,995		105,346		—		349,341
Total			5,405,335		3,796,088		105,163		9,306,586
Depreciation			518,100		563,327		962		1,082,389

(in millions of Korean Won)
2002		Pohang		Kwangyang		Others		Total
Sales (*)			4,617,706		3,887,574		28,600		8,533,880
Fixed assets:
	Property, plant and equipment (**)		4,562,581		4,604,791		104,329		9,271,701
	Intangible assets		216,618		114,526		—		331,144
Total			4,779,199		4,719,317		104,329		9,602,845
Depreciation			420,954		520,982		40,608		982,544

(*) No inter-plant transactions between the two plants.

(**) Presented at book value.

54

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

Regional financial status as and operating results of September 30, 2003 and December 31, 2002 and for the three-month periods ended September 30, 2003 and 2002 are as follows:

(in millions of Korean Won)
2003		Pohang		Kwangyang		Others		Total
Sales (*)			1,939,974		1,688,378		11,774		3,640,126
Fixed assets:
	Property, plant and equipment (**)		5,161,340		3,690,742		105,163		8,957,245
	Intangible assets		243,995		105,346		—		349,341
Total			5,405,335		3,796,088		105,163		9,306,586
Depreciation			177,289		190,314		576		368,179

(in millions of Korean Won)
2002		Pohang		Kwangyang		Others		Total
Sales (*)			1,616,520		1,453,579		9,429		3,079,528
Fixed assets:
	Property, plant and equipment (**)		4,562,581		4,604,791		104,329		9,271,701
	Intangible assets		216,618		114,526		—		331,144
Total			4,779,199		4,719,317		104,329		9,602,845
Depreciation			143,688		181,719		14,307		339,714

(*) No inter-plant transactions between the two plants.

(**) Presented at book value.

55

POSCO
Non-Consolidated Financial Statements
As of September 30, 2003 and December 31, 2002 and for the three-month and
nine-month periods ended September 30, 2003 and 2002
(Unaudited-See Independent Accountant’s Report)

30. Professional Staff Development Cost

The Company’s expenditure on education and training fees, in relation to the development of professional personnel, for the nine-month periods ended September 30, 2003 and 2002 amounted to 8,959 million and 8,805, respectively. Details are as follows:

	For the three-month periods				For the nine-month periods
	ended September 30				ended September 30
(in millions of Korean Won)	2003		2002		2003		2002
Fees for studying abroad		1,217		1,659		4,283		3,958
Fees for education consigned to outside		603		540		1,732		1,382
Tutorial fees		551		577		1,716		1,455
Others		3,253		2,049		6,852		4,872
		5,624		4,825		14,583		11,667

31. Employees Welfare

In order to enhance the welfare of employees, the Company provides fringe benefits to its employees, such as restaurant facilities, dispensary, scholarship, employee stock ownership plan, medical insurance, accident compensation, compensated absence and gymnasium facilities, among others. Employee benefits paid by the Company amounted to KRW382,452 million and KRW256,936 million for the nine- month periods ended September 30, 2003 and 2002, respectively.

32. Reclassification of Prior Year Financial Statement Presentation

Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentation. These reclassifications had no effect on previously reported net income or shareholders’ equity.

56