EX-99.1

Sale of Daewoo

Cement

(Shandong)

Company

Limited

July, 2011

1) Purpose of the Sale : sale of non-core business, divestiture and collection of long term debt

2) Other information

-      The sale price of all of the shares of Daewoo Cement (Shandong) Company Limited has not been determined; the separate disclosure regarding the sale price of Daewoo Cement (Shandong) Company Limited will be made when such information is available.

-      The sale price of all of the shares of Daewoo Cement (Shandong) Company Limited is KRW 37,422,000,000 as of December 27, 2000. At the end of March, 2012, the book value of all of the shares of Daewoo Cement (Shandong) Company Limited was KRW 41,600 million under the K-IFRS.

-      The official sale date of all of the shares of Daewoo Cement (Shandong) Company Limited has not been determined; actual sale date of all of the shares of Daewoo Cement (Shandong) Company Limited shall be set when the condition precedents of the share purchase agreement between Daewoo Cement (Shandong) Company Limited and a purchaser are satisfied.

-      Sale agreement can be nullified when condition precedents of the contract (i.e. government approvals, etc) are not satisfied.

Sale of

Kyobo Life

Insurance

Co., Ltd.

August, 2012

1) Purpose of the sale was to strengthen financial structure and secure the core investment plan

2) Other information

- The Board of Directors resolved to sell the shares held in Kyobo Life Insurance Co., Ltd., which amounts to KRW 1,205,400 million as of August 8, 2012.

Acquisition of NEATT

(North East Asia Trade Tower) in Songdo, Incheon,

1) Building

-      Name: NEATT (North East Asia Trade Tower)

-      Location: Songdo, Incheon, Korea

2) Purchase Price: KRW 207,600,000,000 (2.8% of the total assets on consolidated basis as of the end of year 2012)

3) Closing Date: July 31, 2014.(tentative)

4) Miscellaneous

-      Building is expected to be purchased by Daewoo International (60%) and POSCO EnC (40%)

EX-99.1 2 d591336dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO

INTERIM REPORT

(From January 1, 2013 to June 30, 2013)

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

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

INTERIM REPORT

(From January 1, 2013 to June 30, 2013)

To:	Korean Financial Services Commission and Korea Exchange

/s/

Park, Ki-Hong

President and Representative Director

POSCO

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

Telephone: +82-54-220-0114

/s/

Shim, Tong-Wook

Senior Vice President

POSCO

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

Telephone: +82-2-3457-0114

TABLE OF CONTENTS


I.	Overview	4

II.	Business	10

III.	Financial Statements	34

IV.	Corporate Governance and Company Affiliates	38

Attachment:

Independent Auditors’ Review Report

(Non-consolidated and consolidated)

I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)


Business		Note

(1) Production and sale of crude steel and stainless steel products		No engagement in this business during the first half of the fiscal year 2013
(2) Port/harbor loading/unloading, warehousing and packaging
(3) Management of professional athletic organizations
(4) Power generation, renewable energy projects, liquefied natural gas logistics and exploration and other incidental businesses
(5) Real property lease business
(6) Public energy services and distribution system
(7) Marine transportation of mineral resources; domestic and overseas processing and sales of mineral resources
(8) Educational services and other incidental services
(9) Production and sale of non-ferrous metals
(10) Other businesses incidental or related, directly or indirectly, to the foregoing businesses

B. POSCO Business Group

(1) Name of the Business Group: POSCO

(2) Companies Belonging to the Business Group

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

(a) Changes in Companies Belonging to the Business Group

•

Addition of Subsidiary: PMC Tech Co., Ltd. (January 2, 2013)

•

Exclusion of a Subsidiary: POSGREEN Company, Ltd. (January 11, 2013)

•

Exclusion of a Subsidiary: POSBRO COMPANY LTD. (January 11, 2013)

•

Exclusion of a Subsidiary: Seoung Gwang Co., Ltd. (January 21, 2013)

•

Exclusion of a Subsidiary: POSWITH CO., LTD. (January 21, 2013)

•

Exclusion of a Subsidiary: Pohang SPFC Co., Ltd. (January 21, 2013)

•

Exclusion of a Subsidiary: Gunsan SPFC Co., Ltd. (January 21, 2013)

•

Exclusion of a Subsidiary: POSCALCIUM Company, Ltd. (January 21, 2013)

•

Exclusion of a Subsidiary: ReCO Metal Co., Ltd. (January 21, 2013)

•

Exclusion of a Subsidiary: 9DIGIT CO., LTD. (January 21, 2013)

•

Exclusion of a Subsidiary: Busan Sanseong Tunnel Co., Ltd. (January 21, 2013)

•

Addition of a Subsidiary: Green Paju Co., Ltd. (February 1, 2013)

•

POS ECO HOUSING CO., Ltd. changed the name of the company to POSCO Humans Co., Ltd. (February 1, 2013)

•

Gwangyang SPFC Co., Ltd. changed the name of the company to SPFC Co., Ltd. (February 1, 2013)

•

Exclusion of a Subsidiary: Green Paju Co., Ltd. (February 6, 2013)

•

Exclusion of a Subsidiary: MCM Korea Co., Ltd. (March 20, 2013)

(b) Changes in Companies Belonging to the Business Group after June 30, 2013

•

Exclusion of a Subsidiary: POSCO Plant Engineering Co., Ltd. (July 1, 2013) [ – Merged into SUNGJIN GEOTEC Co., Ltd.]

•

SUNGJIN GEOTEC Co., Ltd. changed the name of the company to POSCO Plantec Co., Ltd. (July 1, 2013)

(3) Related Laws and Regulations

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

ø Details

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

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

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

(e) Resolution of the Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article 11-2 of the MRFTA)

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

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

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

2. Business Organization

A. Highlights of the Company’s Business Organization

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

(2) Steel Works and Offices

(a) Pohang Steel Works: 5 Dongchon-dong, Nam-gu, Pohang-si, Kyungsangbuk-do, Korea

(b) Gwangyang Steel Works: 700 Kumho-dong, Gwangyang-si, Chollanam-do, Korea

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

United Arab Emirates (Dubai), the European Union (Dusseldorf, Germany),

Brazil (Rio de Janeiro), Egypt (Cairo), Mongolia (Ulaanbaatar), Australia (Perth),

The United States of America (Houston, Texas), and Chile (Santiago).

(3) Composition of the Board of Directors (as of March 22, 2013)

(a) Inside Directors

•

New members: Chang, In-Hwan (2 years) and Kim, Yeung Gyu (2 years)

(b) Outside Directors

•

New members: Shin, Chae-Chol (2 years) and Lee, Myoung-Woo (3 years)

•

Prior to March 22, 2013: Chung, Joon-Yang, Park, Han-Yong

•

As of March 22, 2013: Chung, Joon-Yang, Park, Ki-Hong, Kim, Joon-Sik, and Chang, In-Hwan

(4) Major Shareholders of POSCO

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

(b) Date of Disclosure: January 30, 2007

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

ø Changes after June 30, 2013

Refer to the public disclosures regarding the change of the major shareholders on August 1, 2013

B. Merger, Acquisition and Handover of Businesses

[None]

C. Major Changes in Production Facilities

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

3. Equity Capital

A. New Issuance of Registered Common Stock

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

B. Convertible Bonds

[None]

C. Bonds with Warrant

[None]

4. Other Information Regarding Shares

A. Total Number of Shares


		(As of June 30, 2013)
Authorized Shares		Outstanding Shares
200,000,000		87,186,835

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

ø Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

(As of June 30, 2013)


Method of Purchase	Type	Beginning*		Increased		Decreased		Cancelled		Balance
Direct			7,449,117		—		461		—		7,448,656
Special Money Trust	Registered		2,493,274		—		—		—		2,493,274

Total	Common		9,942,391		—		461		—		9,941,930

*	Beginning Balance: as of December 31, 2012

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

ø Changes after June 30, 2013

On July 2, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 150 treasury stocks was completed on July 8, 2013.

5. Voting Rights


		(As of June 30, 2013)
Classification of Shares	Number of Shares	Remarks
(1) Number of Outstanding Shares	87,186,835		—
(2) Shares without Voting Rights *	9,941,930		*Treasury Stock 9,941,930 shares
(3) Shares with Voting Rights	77,244,905		—

6. Earnings and Dividend


			(In millions of KRW)
	2013 1H (January 1, 2013 ~ June 30, 2013)		2012		2011
Net Profit		765,043		2,499,523		3,188,845
Earnings per Share (KRW)		9,877		32,359		41,279
Cash Dividend Paid		—		617,956		772,444
Pay-out Ratio (%)		—		24.7		24.2
Dividend per Share (KRW)		—		8,000		10,000
Dividend Yield (%)		—		2.27		2.56

II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments below:

Steel, Trading, Engineering & Construction, and Others.

B. Segment Results

(In millions of KRW)


Category	2013 1H (January 1, 2013 ~ June 30, 2013)				2012				2011
Category	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		16,210,989		1,368,440		35,258,970		3,070,168		39,151,930		4,898,160
Trading		8,536,206		35,246		18,945,642		139,000		21,097,356		123,728
Engineering & Construction		2,957,586		14,410		4,675,596		9,900		5,476,209		138,443
Others		2,480,211		201,416		4,723,943		434,040		3,213,230		307,363

Total		30,184,992		1,619,512		63,604,151		3,653,108		68,938,725		5,467,694

2. Current Situation

1) Steel

A. Domestic Market Share

(Millions of Tons, %)


Category	2013 1H (January 1, 2013 ~ June 30, 2013)				2012				2011				2010
Category	Production		Market share		Production		Market share		Production		Market share		Production		Market share
Crude Steel Production		33.1		100		69.3		100		68.5		100		58.4		100
POSCO		17.9		54.1		38.0		54.6		37.3		54		33.7		58
Others		15.2		45.9		31.3		45.4		31.2		46		24.7		42

ø	Source: Korea Iron and Steel Association

B. Characteristics of the Steel Market

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

C. Summary and Prospect of New Businesses

(1) Establishment of Steelworks in India

(a)

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

(b)

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

(2) Development of Iron Ore Captive Mines in India

(a)

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

(b)

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

(c)

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

(d)

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

(e)

The third party applicant for the Khandadhar Licenses filed a suit against the Orissa State Government claiming that its right as the first applicant should be respected. (February, 2010)

(f)

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

(g)

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

(h)

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

(i)

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

(j)

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

(k)

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

(3) Establishment of Steelworks in India

(a)

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

(b)

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

(c)

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

(d)

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

(e)

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

(f)

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

(g)

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

(h)

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

(i)

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

(j)

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

(k)

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

(l)

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

(4) Establishment of Steelworks in Indonesia

(a)

The Company entered into a memorandum of agreement with Perseroan Terbatas Krakatau Steel, an Indonesian state owned company, to build an integrated steelwork with a total annual production capacity of 6 million tons of steel products in Indonesia. (December, 2009)

(b)

The Company entered into a joint venture agreement. (August, 2010)

(c)

The Company established PT. KRAKATAU POSCO. (September, 2010)

(d)

PT. KRAKATAU POSCO held a groundbreaking ceremony for the establishment of steelworks in Indonesia. (October, 2010)

(e)

The first phase of the construction of the steelworks with an annual production capacity of 3,000,000 tons began. The construction of the steelworks was scheduled to be completed by December, 2013. (July, 2011)

(f)

PT. KRAKATAU POSCO has continuously conducted piling work for the main facilities and started working for the basic ground. (October, 2011)

(g)

PT. KRAKATAU POSCO established a joint venture with Krakatau Industrial Estate Cilegon to build a Calcination factory at Cilegon, Indonesia. (December, 2011)

(h)

PT. KRAKATAU POSCO began to build the steel frame for the steelworks (February, 2012)

(i)

The construction of electricity generation facility commenced. (May, 2012)

(j)

PT. KRAKATAU POSCO constructed the 4^th main pillar in a furnace. (July, 2012)

(k)

Cokes Oven Coal Injection Ceremony (30,800 tons of Australian Coal). (June, 2013)

(5) Establishment of a Steelwork in Brazil

(a)

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

(b)

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

(c)

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

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

(a)

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

(b)

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

(7) Establishment of a Non-Oriented Electrical Steel Sheet Plant in India

(a)

The Board of Directors resolved to construct a non-oriented electrical steel sheet plant in India. (February, 2011)

(b)

Construction of a non-oriented electrical steel plant with an annual capacity 0.3 million tons started. (October, 2011)

(c)

Commencement of a test-run of a Non-Oriented Electrical Steel Sheet Plant. (April, 2013)

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

(a)

The establishment plan for Guangdong Pohang Continuous Galvanizing Line in China was approved by the Board of Directors. (July, 2010)

(b)

The establishment plan for Guangdong Pohang Continuous Galvanizing Line in China was approved by the Chinese government. (October, 2010)

(c)

The Company held a groundbreaking ceremony for the establishment of Guangdong Pohang Continuous Galvanizing Line in China. (March, 2011)

(d)

The construction of electricity generation facility commenced. (November, 2011)

(e)

A test-run of Guangdong Pohang Continuous Galvanizing Line commenced. (July, 2012)

(f)

Completion of the construction of the Continuous Galvanizing Line. (April, 2013)

(9) Establishment of a Stainless Cold Rolled Line in Turkey

(a)

The Board of Directors resolved to construct a stainless cold rolled line in Turkey. (December, 2010)

(b)

Construction of a stainless cold rolled line with an annual capacity 0.2 million tons commenced. (September, 2011) (c) A test-run of a Stainless Cold Rolled Line commenced. (December, 2012)

2) Trading

A. Market Share


			(Millions of Dollars, %)
Category	2013 1H (January 1, 2013 ~ June 30, 2013)		2012 1H (January 1, 2012 ~ June 30, 2012)		Growth rate
All Trading Companies in Korea		276,647		274,976		0.6
Daewoo International		3,808		4,170		-8.7

ø	Source: Korea International Trade Association

B. Summary and Prospect of New Businesses

Daewoo International Corporation (“Daewoo International”) is playing a leading role in Koreans export industry as the number 1 trading company based on its wide range of trading network worldwide including 74 offices/trading corporations, 12 investment firms, and 16 resources companies through intermediary trading and exporting various products including steel, non-ferrous metals, and chemical products. Moreover, Daewoo International is making tangible progress in resources development through Myanmar gas field and Ambatovy nickel projects to excel in Exploration & Production area.

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

3) Engineering & Construction

A. Summary and Prospect of New Businesses

POSCO Engineering & Construction Co. Ltd. (“POSCO Engineering & Construction”), established on February 1982, is currently expanding its business areas to civil engineering, architectural works, energy, urban development and low carbon & green growth businesses. In reference to the number of the overseas contracts signed by POSCO Engineering & Construction in 2012, the business performance of the POSCO Engineering & Construction in the global market has been satisfactory.

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

4) Others

A. POSCO Energy

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

B. POSCO ICT

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

C. POSCO Chemtech Company Ltd.

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

3. Key Products

A. Current Situation of Key Products

(In hundred millions of KRW, %)


Business Area	Item	Specific Use	Total Sales	Ratio
Steel	Hot-rolled Product (HR)	Steel pipe, Shipbuilding, etc	30,421	12.6
	Cold-rolled Product (CR)	Automobile , Home appliances, etc	75,352	31.1
	Stainless steel Products	Western tableware, etc	51,823	21.4
	By-Product	Plates, Wire rods, etc	84,741	35.0
	Gross Sum		242,337	100.0
	Deduction of Internal Trade		(80,227)	—
	Sub Total		162,110	—
Trading	Steel, Metal		80,599	66.1
	Chemical, Strategic Item, Energy		2,990	2.5
	Etc		38,329	31.4
	Gross Sum		121,918	100.0
	Deduction of Internal Trade		(36,556)	—
	Sub Total		85,362	—
Engineering & Construction	Domestic Construction	Architecture	6,987	13.3
		Plant	20,978	40.0
		Civil Engineering	2,997	5.7
		Etc	2	0.0
	Overseas Construction		14,402	27.4
	Owned Construction		4,482	8.5
	Etc		2,643	5.0
	Gross Sum		52,491	100.0
	Deduction of Internal Trade		(22,915)	—
	Sub Total		29,576	—
Others	Electricity Sales, etc		39,293	100.0
	Deduction of Internal Trade		(14,491)	—
	Sub Total		24,802	—
	Total Sum		301,850	—

B. Price Fluctuation Trend of Key Products

(In thousands of KRW/ Tons, kWh)


Business Area	Products	2013 1H (January 1, 2013 ~ June 30, 2013)		2012		2011		2010
Steel	Hot-rolled Product (HR)		737		828		941		845
	Cold-rolled Product (CR)		891		999		1,090		987
Others	Electric Power		158		161		133		137
	Lime		119		105		106		112

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

[Steel]

(1)	Criteria for Calculation

(a)

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

(b)

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

(2)	Factors of Price Fluctuations

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

[Others]

*Criteria for Calculation

(a)

Electric Power = price of electric power/total amount of generated power

(b)

Lime: average sales price including shipping cost

4. Major Raw Materials

A. Current Status of Major Raw Materials

(In hundred millions of KRW)


Business Area	Type of Purchase	Item	Specific Use	Purchase Amount (Portion)	Remarks
Steel	Raw Materials	Materials for Iron-making,	Iron Ore for Blast Furnaces	56,728 (42.0%)	Iron Ore, Coal
		Sub-materials	Sub-materials for Iron-making, Steelmaking	55,482(41.0%)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	23,023 (17.0%)	Nickel, Ferrochrome, STS Scrap Iron, etc.
Engineering & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	693 (12.4%)
		Steel Pile	Foundation of Structure	153 (2.7%)
		Steel Reinforcement	Strengthening Concrete	942 (16.8%)
		Cable	Electricity Transfer	361 (6.5%)
		Etc	—	3,454 (61.6%)
Others	Raw Materials	LNG	Material for Power Generation	10,896 (60.1%)
		Limestone	Production of Lime	434 (2.4%)
		Etc	—	6,795 (37.5%)

B. Price Fluctuation Trend of Major Raw Materials

(In thousands of KRW)


Business Area	Category	2013 1H (January 1, 2013 ~ June 30, 2013)	2012	2011
Steel	Iron Ore(per ton)	151	144	191
	Coal(per ton)	186	232	325
	Scrap Iron(per ton)	441	468	539
	Nickel(per ton)	17,791	19,430	25,802
Engineering & Construction	Ready-mixed Concrete (per m³)	57	57	54
	Steel Pile (per m)	72	73	82
	Steel Reinforcement (per kg)	0.7	0.8	0.8
	Cable (per m)	0.7	0.8	0.8
Others	LNG (per ton)	1,014	1,022	893
Others	Lime (per ton)	20	20	22

[Steel]

ø	Key Factors in Price Fluctuations


(1) Iron Ore		(In Dollars/ Tons)


	2013 2Q		2013 1Q		2012 4Q		2012 3Q		2012 2Q		2012 1Q		2011 4Q		2011 3Q		2011 2Q
Trend of International Benchmark Price (Free On Board, “FOB”)		123		141		113		105		134		135		130		168		171


(2) Coal		(In Dollars/ Tons)


	2013 2Q		2013 1Q		2012 4Q		2012 3Q		2012 2Q		2012 1Q		2011 4Q		2011 3Q		2011 2Q
Trend of International Benchmark Price (FOB)		172		165		170		225		206		235		285		315		330


(3) Scrap Iron		(In Dollars/ Tons)


	2013 2Q		2013 1Q		2012 4Q		2012 3Q		2012 2Q		2012 1Q		2011 4Q		2011 3Q		2011 2Q
Trend of Purchase Price (Cost and Freight, “CFR”)		379		421		379		400		444		466		445		494		480

(4) Nickel

2013 2Q

2013 1Q

2012 4Q

2012 3Q

2012 2Q

2012 1Q

2011 4Q

2011 3Q

2011 2Q

Trend of London Metal Exchange (“LME”) Cash Price

USD

6.78/lb

USD

14,952/ton

USD

7.85/lb

USD

17,309/ton

USD
7.70/lb

USD
16,983/ton

USD
7.41/lb

USD
16,334/ton

USD
7.78/lb

USD
17,152/ton

USD
8.92/lb

USD
19,665/ton

USD

8.3/lb

USD
18,307/ton

USD
10.01/lb

USD
22,069/ton

USD
11.00/lb

USD
24,227/ton

[Engineering and Construction]

(1) Criteria for Calculation


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

[Others]

(1) Criteria for Calculation

(a)

Electric Power: purchase price of electricity from Korea Gas Corporation

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

(b)

Lime: purchase price of lime and transportation fees

5. Production and Facilities

A. Production Capacity

[Steel]

(Thousands of Tons)

Business Area

Products

2013 1H

(January 1, 2013 ~ June 30, 2013)

2012

2011

Steel

Crude Steel

20,179

40,447

39,410

[Others]

(MW, Thousands of Tons)


Business Area	Products		2013 1H (January 1, 2013 ~ June 30, 2013)	2012	2011
Power Generation	Electric Power	Inchon	3,052	3,052	3,052
Power Generation	Electric Power	Gwangyang	284	284	284
Lime	Lime		1,095	2,190	2,190

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

(Thousands of Tons)


Products		2013 1H (January 1, 2013 ~ June 30, 2013)	2012	2011
Crude Steel		18,812	39,702	39,074
Products	Hot-Rolled Products	4,091	8,670	8,456
	Plate	2,819	6,113	6,273
	Wire Rod	1,075	2,085	2,113
	Pickled-Oiled Steel Sheets	1,343	2,615	2,495
	Cold-Rolled Products	4,286	8,176	7,453
	Coated Steel	3,003	5,815	5,358
	Electrical Steel	681	1,173	1,396
	Stainless Steel	1,164	2,396	3,166
	Others	1,652	3,896	3,150

	Total	20,113	40,938	39,860

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

(2) Capacity Utilization Rate for the first half of fiscal year of 2013

(Thousands of Tons)


	Company	Capacity		Production		Utilization Rate
	POSCO		19,029		17,918		94	%
	POSCO Specialty Steel		600		350		58	%
Crude Steel Production	Zhangjiagang Pohang Stainless Steel		550		544		99	%

	Total		20,179		18,812		93	%

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

[Others]

(1) Production Result

(Gwh, Thousands of Tons)


	Products	2013 1H (January 1, 2013 ~ June 30, 2013)	2012	2011
Power Generation	Electric Power	8,211	15,751	12,066
Lime	Lime	1,149	2,454	2,425

(2) Capacity Utilization Rate for the first half of fiscal year of 2013

(hr, Thousands of Tons)


Business Area	Products	Capacity	Production	Utilization Rate
Power Generation	Electric Power	4,344	3,277	75%
Lime	Lime	1,095	1,149	104.9%

C. Production Facilities


[Land]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation	Ending Book Balance
Steel		2,038,212		146,375		(4,155	)			2,180,432
Trade		138,680		27		(3,763	)			134,943
Engineering & Construction		52,959		34,201		(42,207	)			44,953
Others		416,571		33,506		(12,476	)			437,601


[Building]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		3,600,636		147,255		(26,264	)		(137,213	)		3,584,414
Trade		154,857		1,504		(262	)		(2,060	)		154,040
Engineering & Construction		52,766		16,953		(23,771	)		(1,166	)		44,782
Others		360,543		19,469		(5,183	)		(9,107	)		365,723


[Structures]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		2,116,727		263,710		(4,728	)		(86,493	)		2,289,215
Trade		11,237		320		(52	)		(300	)		11,205
Engineering & Construction		12,124		665		(2,463	)		(296	)		10,030
Others		180,093		22,326		(3,266	)		(5,335	)		193,819


[Machinery and Equipments]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		14,949,385		1,202,423		(41,910	)		(842,960	)		15,266,937
Trade		116,846		1,354		(1,233	)		(4,867	)		112,100
Engineering & Construction		25,839		3,659		(6,117	)		(3,351	)		20,031
Others		1,440,134		44,501		(2,046	)		(65,619	)		1,416,970


[Vehicles]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		39,626		7,298		(115	)		(6,633	)		40,177
Trade		5,992		495		(152	)		(1,051	)		5,284
Engineering & Construction		7,600		2,118		(308	)		(1,210	)		8,201
Others		6,936		2,266		(1,141	)		(1,367	)		6,694


[Tools and Fixtures]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		45,128		8,359		(172	)		(10,443	)		42,872
Trade		1,796		294		(1	)		(419	)		1,670
Engineering & Construction		1,912		790		(823	)		(515	)		1,364
Others		21,015		2,874		(1,749	)		(5,304	)		16,836


[Equipment]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		94,611		11,194		(958	)		(17,023	)		87,824
Trade		20,109		1,613		(913	)		(3,667	)		17,141
Engineering & Construction		14,622		7,460		(773	)		(4,627	)		16,681
Others		54,039		5,840		(834	)		(10,347	)		48,697


[Financial Lease Assets]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		17,874		60		(1,170	)		(525	)		16,238
Trade		28,268		1,976		(39	)		(1,717	)		28,489
Engineering & Construction		6,829		1,681		(486	)		(1,291	)		6,733
Others		4,254		7		(777	)		(1,521	)		1,963

(2) Major Capital Expenditures

(a) Investments under Construction


[Steel]		(In hundred millions of KRW)


Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO	Expansion	November, 2010 ~ October, 2014	G) Establishment of the Fourth Hot-coil Mill		16,262		9,851		6,411
		April, 2008~ September, 2016	P, G) Expansion of the Capacity of the Raw Materials Treatment Facilities		13,010		10,298		2,712
		March, 2011~ January, 2014	P) Optimization of the Facilities		22,034		18,285		3,749
	Renovation / Replacement	December, 2010 ~ September, 2017	G) Renovation of the First & Fifth Furnace		10,595		6,426		4,169
		March, 2011 ~ July, 2014	P) Renovation of the First STS Rolling Facilities		2,178		258		1,920
	Other Projects				18,139		8,594		9,546
POSCO Specialty Steel	Renovation / Replacement	April, 2010 ~ September, 2013	Renovation / Replacement of New Equipments in the Existing Rolling Mill		1,549		1,392		157
POSCO AST CO., LTD.	Expansion	September, 2011 ~ May, 2013	Establishment of a Factory and Facilities		447		423		24
POSCO MPPC S.A. DE C.V.	Expansion	October, 2012 ~ October, 2013	Establishment of a #3 Mill		292		154		138
POSCO -Mexico Co., Ltd.	Expansion	November, 2011 ~ June, 2013	Installation of the Second Continuous Galvanizing Line		3,540		2,955		584
POSCO -India Delhi Steel Processing Centre Pvt. Ltd	Expansion	January, 2012~ March, 2013	Establishment of a #2 Mill		153		153		0
POSCO Thainox Public Company Ltd.	Expansion	August, 2012~ March, 2013	Establishment of a new coil center		103		60		42


POSCO Thainox Public Company Ltd.	Expansion	January, 2013~ December, 2013	Strategic Investment—DENOX System in APR Pickling Manufacturing Process	17	15	2
POSCO Maharashtra Steel Private Limited	Expansion	November, 2011 ~ June, 2014	Establishment of a Cold-Coiled Mill in India (1.8 million ton)	7,043	4,962	2,081
POSCO-Indonesia Jakarta Processing Center	Expansion	November, 2012 ~ August, 2013	Establishment of Facilities	178	100	78
POSCO SS VINA	Expansion	May, 2010 ~ July, 2014	Construction of Electric Arc Furnace and Section Steel/Rebar Rolling Mill (1.2 million ton)	6,770	3,064	3,706
PT. KRAKATAU POSCOENERGY	Expansion	August, 2011 ~ March, 2014	Establishment of a gas power plant	3,185	2,694	490
PT. KRAKATAU STEEL POSCO	Expansion	September, 2010 ~ December, 2013	Establishment of a Steel Mill	30,582	27,109	3,473
POSCO Electrical Steel India Private Limited	Expansion	November, 2011 ~ October, 2013	Establishment of a annealing coated line	1,425	1,180	244
POSCO ASSAN TST STEEL Industry	Expansion	September, 2011 ~ April, 2013	Establishment of a Stainless Steel Cold Rolled Mill (0.2 million ton)	2,089	2,011	78
SPFC Co., Ltd.	Expansion	July, 2009 ~ December, 2014	Purchasing of site and buildings for Pohang Steel Works	335	50	285

ø	P stands for Pohang Steel Works.

ø	G stands for Gwangyang Steel Works.


[Trading]		(In hundred millions of KRW)

Company

Date

Project

Total
Investment

Invested
Amount

Amount to
be
Invested

Daewoo International

Expansion

October, 2009 ~

September, 2014

Construction of Natural Gas Production and Transportation Facilities in A-1/A-3 Gas Field in Myanmar

16,843

13,969

2,874


[Others]		(In hundred millions of KRW)

Company

Date

Project

Total
Investment

Invested
Amount

Amount to
be
Invested

POSCO

ICT

Expansion

January, 2012~

December, 2013

Expansion of

Smart Management Server

For Smart Management Operation Efficiency

345

277

POSCO Energy

Expansion

November, 2011 ~

January, 2014

P) Establishment of a Combined Cycle Power Plant

5,950

4,632

1,318

October, 2012 ~January, 2015

Incheon) Establishment of a LNG Combined Cycle Power Plant #6, #7, and #8

10,630

1,418

9,212

POS-HiMETAL

Expansion

January, 2013 ~

December, 2013

Establishment of Facilities

100

Busan E&E

Expansion

October, 2010 ~

October, 2013

Establishment of a Refuse Derived Fuel Facilities

2,449

1,590

858

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

(b) Future Investment Plans

(In hundred millions of KRW)

Business

Company

Project

Planned Investments

2013

2014

2015

Steel

POSCO

Expansion, Renovation and Replacement of Existing Facilities

Renovation of Existing Facilities

4,102

2,813

487

Capacity Increase

19,715

13,169

687

POSCO SS-
VINA

Expansion, Renovation and Replacement of Existing Facilities

316

359

Engineering & Construction

POSCO
E&C
Vietnam Co.,
Ltd.

Expansion, Renovation and Replacement of Existing Facilities

Investment Increase

115

POSCO
Plantec Co.,
Ltd.

Expansion, Renovation and Replacement of Existing Facilities

Renovation of Industrial Machinery Factory in Gwangyang

274

311

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

6. Product Sales


[Steel]		(In hundred millions of KRW)


Items		2013 1H (January 1, 2013 ~ June 30, 2013)	2012	2011	2010
Domestic	Hot-Rolled Products	19,696	61,723	72,471	49,940
	Cold-Rolled Products	25,085	44,404	65,580	77,936
	Stainless Steel	14,995	33,902	38,581	31,621
	Others	57,569	124,741	123,194	99,766
Export	Hot-Rolled Products	10,725	37,910	42,665	22,084
	Cold-Rolled Products	50,267	98,140	101,980	89,059
	Stainless Steel	36,828	69,138	66,877	61,178
	Others	27,172	58,730	51,557	30,946
Total	Gross Sum	242,337	528,688	562,905	462,530
	Internal Transaction	(80,227)	(176,098)	(171,386)	(107,256)
	Total	162,110	352,590	391,519	355,274


[Trading]		(In hundred millions of KRW)


Items		2013 1H (January 1, 2013 ~ June 30, 2013)	2012	2011	2010
Domestic	Merchandise	3,967	7,537	8,444	1,721
	Product	402	854	1,026	217
	Others	88	90	78	19
Export	Merchandise	42,093	95,062	93,622	22,653
	Product	677	1,426	1,964	347
	Others	83	255	706	64
Trades among Korea, China & Japan		74,608	158,911	180,390	69,082
Gross Sum		121,918	264,135	286,230	94,103
Internal Transaction		(36,556)	(74,679)	(75,256)	(31,743)
Total		85,362	189,456	210,974	62,360


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

Items			2013 1H (January 1, 2013 ~ June 30, 2013)			2012			2011			2010
Construction Contract Revenue	Domestic	Architecture		6,987			13,730			16,321			12,823
		Plant		20,978			28,323			23,716			32,811
		Civil Engineering		2,997			9,120			11,187			11,355
		Others		2
	Overseas			14,402			35,704			24,275			8,441
Own Construction				4,482			2,871			672			6,101
Other Subsidiary company sales				2,643			7,511			8,560			7,704
Gross Sum				52,491			97,259			84,731			79,235
Internal Transaction				(22,915	)		(50,503	)		(29,969	)		(35,747	)
Total				29,576			46,756			54,762			43,488

[Others]

(In hundred millions of KRW)

Items

2013 1H
(January 1, 2013 ~
June 30, 2013)

2012

2011

2010

Electric Power

24,802

47,240

32,132

17,751

7. Derivatives—Currency Forward Contracts

•

If the Exchangeable Bonds to American Depository Receipts of SK Telecom issued in 2008 and 2011 had been converted on December 31, 2012, due to the extinction of coupon value, the derivative valuation of the profit and loss which issued in 2008 would have been KRW 0, and the derivative valuation of the loss which issued in 2011 would have been 67,530million respectively.

•

Foreign currency swap agreement was entered in order to hedge the exchange rate conversion risk for a part of existing Japanese Yen denominated bonds. The derivative valuation of the loss would have been KRW 24,226 million.

•

Right to exercise put option in relation to the purchase of stakes in Steel Flower Co., Ltd. has been purchased and the derivative valuation of the profit would have been KRW 7,586 million.

8. Significant Contracts


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

9. Research and Development

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


Business Area	Company		Organization	Staff
Steel	POSCO	POSCO’s Department	Technical Research Laboratory	905
			New Growth Technology Strategy Department	25
			Iron and Steel Technology Strategy Department	81
			Environment and Energy Department	28
			Total	1,039
	POSCO Specialty Steel		R&D Group	20
	POSCO COATED & COLOR STEEL		Product Research Group	11
	POSCO AST CO., LTD.		Product Research Team	3
	Zhangjiagang Pohang Stainless Steel Co., Ltd.		Product Development Group	6
	POSCO Thainox Public Company Ltd.		Product development and research	6


Trade	DAEWOO International Corporation	Pusan Plant R&D Center Development Team	58
Trade	Daewoo Paper Manufacturing Co., Ltd.	R&D Center New Product Development Team	8
Engineering & Construction	POSCO Engineering & Construction	R&D Center	94
	POSCO Engineering Company	R&D group	18
	POSCO Plantec	Technology Innovation Group	10
	POSCO A&C	R&D Center, Quality Engineering Team	27
Others	POSCO ENERGY	Technology Strategy Department, Fuel Cell Department	80
	POSCO ICT	Information Control Lab	58
	POSCO CHEMTECH COMPANY	R&D Center	40
	POSCO M-TECH CO., LTD.	R&D Center	17
	POS-HiMETAL CO., Ltd.	Product Research Department	7
	PNR CO., Ltd.	Quality Innovation Department	3
	PONUTech Co., Ltd.	R&D Center	8


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

Category	Business Area
Category	Steel			Trade			Engineering & Construction			Others			Total
Selling and Administrative Cost		79,852			2,491			2,864			17,498			102,705
Manufacturing Cost		179,382			—			341			1,590			181,313
R&D Cost (Intangible Assets)		10,911			—			—			5,065			15,976
Total		270,145			2,491			3,205			24,153			299,994
R&D/Sales Ratio		1.67	%		0.03	%		0.11	%		0.97	%		0.99	%

III. Financial Statements

1.	Non-consolidated Financial Statements

A. Summary on Fiscal Years of 2010, 2011, 2012 and the First Half of Fiscal Year of 2013

(In millions of KRW)


Account	2013 1H (January 1, 2013 ~ June 30, 2013)			2012			2011			2010
[Current Assets]		11,872,713			12,609,471			13,924,795			12,993,605
Cash & Cash equivalents		2,104,856			1,752,560			1,137,882			672,427
Trade Accounts & Notes Receivable(net)		3,795,278			4,087,030			4,220,242			3,548,448
Other Current Financial Instruments		923,646			1,323,539			1,381,463			2,754,319
Inventories		4,983,794			5,403,660			7,144,709			5,998,545
Other Current Assets		65,139			42,682			40,499			19,866
[Non-current Assets]		41,472,016			39,710,965			38,803,081			36,092,622
Other Non-current Financial Instruments		3,177,696			3,028,766			3,833,058			5,015,783
Investment in Subsidiaries and Associates		14,647,892			14,100,053			12,824,776			10,470,156
Tangible Assets		23,141,946			22,166,735			21,533,135			20,011,110
Good Will & Other Intangible Assets		378,756			293,841			222,896			229,137
Other Non-current Assets		125,726			121,570			389,216			366,435
Total Assets		53,344,729			52,320,436			52,727,876			49,086,227
[Current Liabilities]		5,103,086			4,543,512			5,015,145			6,051,454
[Non-current Liabilities]		7,607,988			8,612,376			10,114,715			7,011,278
Total Liabilities		12,711,074			13,155,888			15,129,860			13,062,732
[Capital Stock]		482,403			482,403			482,403			482,403
[Capital Surplus]		1,227,731			1,227,692			1,227,692			1,158,539
[Retained Earnings]		40,100,393			39,842,497			38,122,620			35,706,778
[Other Equity]		(1,176,872	)		(2,388,044	)		(2,234,699	)		(1,324,225	)
Total Shareholders’ Equity		40,633,655			39,164,548			37,598,016			36,023,495
Total Sales		15,424,411			35,664,933			39,171,703			32,582,037
Operating Income		1,284,749			2,789,597			4,330,381			4,904,125
Net Income		765,043			2,499,523			3,188,845			3,784,361
Earnings per share(KRW)		9,877			32,359			41,279			49,127

B. The Standards Used for Reporting the Financial Statements

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

C. Non-consolidated Financial Statements

(1) Balance Sheet

Refer to the attached balance sheet for the first half of fiscal year of 2013.

(2) Income Statements

Refer to the attached income statement for the first half of fiscal year of 2013.

(3) The Note on the Financial Statement

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

2. Consolidated Financial Statements

A. Summary on Fiscal Years of 2010, 2011, 2012 and the First Half of Fiscal Year of 2013

(In millions of KRW)


Account	2013 1H (January 1, 2013 ~ June 30, 2013)			2012			2011			2010
[Current Assets]		32,079,535			31,566,116			33,556,911			27,672,377
Cash & Cash equivalents		4,971,244			4,680,526			4,598,682			3,521,045
Other Current Financial Instruments		3,191,990			3,846,433			3,656,270			4,383,302
Accounts Receivable		12,207,585			11,037,973			11,450,515			9,219,011
Inventories		10,044,073			10,584,646			12,283,644			9,559,206
Other Current Assets		1,664,643			1,416,538			1,567,800			989,813
[Non-current Assets]		51,627,609			47,699,735			44,851,927			41,746,049
Other Non-current Financial Instruments		5,030,764			4,669,868			5,125,672			6,417,038
Investment Securities		3,545,874			3,039,261			3,831,659			3,306,425
Tangible Assets		34,958,666			32,276,379			28,453,184			25,437,740
Good Will & Other Intangible Assets		5,951,264			5,662,361			5,244,928			4,619,169
Other Non-current Assets		2,141,041			2,051,866			2,196,484			1,965,677
Total Assets		83,707,144			79,265,851			78,408,838			69,418,426
[Current Liabilities]		21,627,879			19,775,001			19,605,357			18,276,777
[Non-current Liabilities]		18,127,916			17,061,432			18,073,561			12,604,482
Total Liabilities		39,755,795			36,836,433			37,678,918			30,881,259
[Controlling Interest]		40,883,761			39,454,142			38,356,350			36,575,685
Capital Stock		482,403			482,403			482,403			482,403
Capital Surplus		1,103,519			1,104,814			1,150,452			1,101,561
Hybrid bond		996,919
Retained Earnings		40,374,471			40,346,481			38,709,475			35,887,696
Other Controlling Interest		(2,073,551	)		(2,479,556	)		(1,985,980	)		(895,975	)
[Minority Interest]		3,067,588			2,975,276			2,373,570			1,961,482
Total Shareholders’ Equity		43,951,349			42,429,418			40,729,920			38,537,167
Total Sales		30,184,992			63,604,151			68,938,725			47,887,255
Operating Income		1,619,512			3,653,108			5,467,694			5,552,513
Consolidated Net Profit		532,762			2,385,607			3,714,286			4,185,651
[Controlling Interest]		528,573			2,462,081			3,648,136			4,105,623
[Minority Interest]		4,189			(76,474	)		66,150			80,029
Consolidated Total Comprehensive Income		966,675			1,747,685			2,442,377			4,765,441
[Controlling Interest]		900,274			1,911,506			2,530,437			4,639,672
[Minority Interest]		66,401			(163,821	)		(88,060	)		125,769
Earning Per Share		6,815			31,874			47,224			53,297
Number of Consolidated Companies		212			218			220			173

B. The Standards Used for Reporting the Financial Statements

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

C. Consolidated Financial Statements

(1) Consolidated Balance Sheet

Refer to the attached consolidated balance sheet for the first half of fiscal year of 2013.

(2) Consolidated Income Statements

Refer to the attached consolidated financial report for the first half of fiscal year of 2013.

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors

(1) Board of Directors

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

Our board of directors maintains the following six special committees:

(a)

Director Candidate Recommendation Committee;

(b)

Evaluation and Compensation Committee;

(c)

Finance and Operation Committee;

(d)

Executive Management Committee;

(e)

Audit Committee; and

(f)

Related Party Transaction Committee.

ø Composition of the Special Committees under the Board of Directors and their Functions (as of August 14, 2013)


Category	Composition	Directors	Major Functions
Director Candidate Recommendation Committee	3 Outside Directors; 1 Inside Director	Lee, Chang-Hee (Chairman) James B. Bemowski Shin, Chae-Chol Kim, Yeung Gyu	- Reviews the qualifications of potential candidates for Directors - Proposes nominees for the Outside Directors - Advances the nomination process for the Inside Directors and members of the special committees

Evaluation and Compensation Committee	4 Outside Directors	Han, Joon-Ho (Chairman) Lee, Young-Sun Shin, Chae-Chol Lee, Myung-Woo	- Executes management succession and development plans - Establishes evaluation procedures of directors - Reviews the retirement procedures and distribution of the allowance for directors

Finance and Operation Committee	3 Outside Directors; 2 Inside Directors	Han, Joon-Ho (Chairman) James B. Bemowski Lee, Myung-Woo Park, Ki-Hong Kim, Joon-Sik	- Advances deliberation of new investments in other companies - Revises the internal regulations regarding the operation of the Board of Directors - Deliberates financial matters and donations from the range of KRW 100 million and KRW 1 billion

Audit Committee	3 Outside Directors	Lee, Chang-Hee (Chairman) Lee, Young-Sun Shin, Chae-Chol	- Audits the accounting system and business operations - Examines the agenda for financial statements and other reports to be submitted by the Board of Directors at each general meeting of shareholders

Related Party Transactions Committee	3 Outside Directors	Lee, Chang Hee (Chairman) Lee, Young-Sun Shin, Chae-Chol	- Reviews matters related to the internal transactions under the MRFTA.-Holds preliminary review on internal transactions exceeding the amount of KRW 10 billion. - Holds a deliberation hearing on internal transactions exceeding KRW 3 billion but less than 10 billion.

Executive Management Committee	5 Inside Directors	Chung, Joon-Yang (Chairman) Park, Ki-Hong Kim, Joon-Sik Chang, In-Hwan Kim, Yeung Gyu	- Oversees decisions with respect to our operational and management matters - Reviews management’s proposal for new strategic initiatives - Reviews deliberation over critical internal matters related to the organization structure and development of personnel - Reviews and revises work and welfare policies

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

(a)

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

(b)

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

(c)

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

(3) List of Outside Directors(as of June 30, 2013)


Name	Experience	Relation with Majority Shareholder	Remarks
Lee, Young-Sun	- President of Hallym University - Professor of Yonsei University	None	Chairman Board of Directors

Han, Joon-Ho	- (Present) CEO and Vice Chairman, Samchully Co., Ltd. - Chairman and CEO, Korea Electric Power Corporation	None

Lee, Chang Hee	- (Present) Professor of College of Law, Seoul National University - International Director, Tax Law Association	None

James B. Bemowski	- (Present) Vice Chairman & CEO, Business Operations, Doosan Corporation - Senior Executive Vice President and Chairman of SBB Mutual Southern Bank Berhad, Malaysia - Senior Partner, McKinsey & Company	None

Shin, Chae-Chol	- President and Representative Director, LG CNS - President and Representative Director, IBM Korea	None

Lee, Myoung-Woo	- (Present) Professor, HanYang University - Vice Chairman, Iriver - CEO, SONY Korea	None

(4) List of Key Activities of the Board of Directors (January 1, 2013 ~ August14, 2013)


Session	Date	Agenda	Approval
2013-1	February 7	1. Approval of the financial statements for the 45th fiscal year and the convocation schedule for the 45th general meeting of shareholders 2. Plan for Disposal of Treasury Stocks as Employee Award	All 2 Cases Approved

2013-2	February 28	1. Decide to file for judicial review of administrative actions of a cease and desist order and fine imposed by Fair Trade Commission 2. Recommendation of candidates for the Inside Director position (Excluding the candidate for the Chief Executive Officer) 3. Agenda for the 45th general meeting of shareholders	All 3 Cases Approved

2013-3	March 22	1. Appointment of the Chairman of the Board of Directors 2. Appointment of the special committee members 3. Approval of designation of Representative Directors and Inside Directors	All 3 Cases Approved

2013-4	May 10	1. Plan for acquisition of SUNGJIN GEOTEC Co., Ltd. and POSCO Plant Engineering Co., Ltd. 2. Change of business structure of a Synthetic Natural Gas project 3. Contribution plan for the financial stability of in small and medium sized businesses 4. Plan for the transaction with Daewoo International in 2012 5. Plan for the transaction with POSCO Process & Service Co., Ltd 6. Financing plan for the second quarter of 2013 7. Renewal of Treasury Stock Specific Money Trust Contract 8. Change of ADR(American Depositary Receipt) Depositary 9. Contribution to POSCO Educational Foundation	All 9 Cases Approved

2013-5

August 8

1. Plan for investment increase for the joint business in PT Krakatau POSCO and provision of the payment guarantee

2. Financing plan for the second half of fiscal year of 2013

3. Distribution of the interim dividend for the first half of fiscal year of 2013

4. Contribution to the Large & Small Business Cooperation Foundation

5. Establishment of ‘POSCO 1% Foundation’

6. Plan for paid-in capital increase through third-party allocation in POSCO Specialty Steel

7. Plan for the transaction with POSCO-ASIA in 2013

8. Plan for the transaction with POSCO E&C in 2013

All 8 Cases

Approved

ø Major Activities of the Outside Directors on the Board of Directors (January 1, 2013 ~ August 14, 2013)


Session	Date	Participation of the Outside Directors (the Number of total members)	Remarks
2013-1	February 7	7 (7)	-

2013-2	February 28	7 (7)	-

2013-3	March 22	6 (6)	-

2013-4	May 10	6 (6)	-

2013-5	August 8	5 (6)	-

(5) Composition of the Special Committees and their Activities

(a)	Major Activities of Director Candidate Recommendation Committee (January 1, 2013 ~ March 22, 2013)


Date	Agenda	Approval
February 7, February 13	Assessment of qualifications and recommendation of the Outside Directors	Approved

February 28	1. Assessment of qualifications and recommendation of the Outside Directors 2. Assessment of the Inside Directors	Approved -

March 22	1. Appointment of the special committee members 2. Approval of the designation of positions for the Representative Directors and Inside Directors	- -

(b) Major Activities of Evaluation and Compensation Committee (January 1, 2013 ~ March 22, 2013)


Date	Agenda	Approval
February 7	Evaluation of the management result for the fiscal year of 2012	Approved

(c)	Major Activities of Finance and Operation Committee (January 1, 2013 ~ March 22, 2013)


Date	Agenda	Approval
February 7	Share Kun-pledge related to Heat recovery business from wastewater in Tancheon	Approved

ø Major Activities after March 22, 2013


Date	Agenda	Approval
May 10	1. Change of business structure of a Synthetic Natural Gas project 2. Contribution plan for the financial stability of small and medium sized businesses 3. Participation in the productivity innovation partnership with small businesses 4. Financing plan for the second quarter of 2013 5. Payment Guarantee for POSCO-Vietnam Co., Ltd.	- - Approved - Approved

June 20	1. Investment plan for securing FeSiAl in Central Asia	Approved

August 6	1. Financing plan for the second half of fiscal year of 2013 2. Contribution to the Large & Small Business Cooperation Foundation 3. Establishment of ‘POSCO 1% Foundation’

(d)	Major Activities of Related Party Transaction Committee (January 1, 2013 ~ March 22, 2013)


Date	Agenda	Approval
February 6	Review of the operation of the Fair Trading Program	-

ø Major Activities after March 22, 2013


Date	Agenda	Approval
May 9	Contribution to POSCO Educational Foundation	-

August 7	1. Sale of a sub-materials storage tank in Pohang Chemical plant to POSCO Chemtech 2. Review of the operation of the Fair Trading Program	Approved

(e)	Major Activities of Executive Management Committee (January 1, 2013 ~ August 14, 2013)


Session	Date	Agenda	Approval
2013-1	March 5	Disposal of Treasury Stocks as Employee Award	Approved

2013-2	April 2	Disposal of Treasury Stocks as Employee Award	Approved

2013-3	May 2	Establishment plan of Stainless Steel Processing Center in Europe	Approved

2013-4	June 4	Disposal of assets by the second renovation of the first furnace in Gwangyang Closing of the shareholder book for recording of the distribution of the interim dividend for the first half of fiscal year of 2013	Approved Approved

2013-5	July 2	Investment of R&D facilities for the construction of the high manganese steel production system Disposal of Treasury Stocks as Employee Award	Approved Approved


Session	Date	Agenda	Approval
2013-6	July 16	Plan for investment increase for the joint business in PT Krakatau POSCO and provision of the payment guarantee	-

2013-7	August 1	Construction of COG Holder for the replacement of #1 COG in Pohang Steel Works	Approved

2013-8	August 8	Investment for the third renovation of the second furnace in Pohang Steel Works and related facilities	Approved

B. Audit Committee

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

The duties of the Audit Committee include:

•

Engaging independent auditors;

•

Approving independent audit fees;

•

Approving audit and non-audit services;

•

Reviewing annual financial statements;

•

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

•

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

•

Reviewing and approving all related party transactions; and

•

Examining improprieties or suspected improprieties.

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

(1) Composition of the Audit Committee (Auditors)

Name

Qualifications

Remarks

Lee, Chang-Hee

Lee, Young-Sun

Shin, Chae-Chol

Satisfies the requirements stipulated in the articles of incorporation

Chairman

(2) Major Activities of the Audit Committee (Auditors)(January 1, 2013 ~ August 14, 2013)


Session	Date	Agenda	Approval
2013-1	February 6	º Deliberation Agenda - Approval of audit and non-audit services for the review of revenue in 2012 º Report Agenda - Reporting of the operations of the internal accounting control system for the fiscal year of 2012	Approved

2013-2	February 27	º Deliberation Agenda - Assessment of the operations of the internal accounting control system for the fiscal year of 2012 - Internal audit result for the fiscal year of 2012 (Consolidated) º Report Agenda - External audit result for the fiscal year of 2012 (Consolidated)	Approved

2013-3	March 21	º Deliberation Agenda - Approval of audit and non-audit services for POSCO and POSCO’s subsidiaries	Approved

2013-4	May 9	º Report Agenda - Internal audit result for the first quarter of 2013 (Consolidated) - External audit result for the first quarter of 2013 (Consolidated) and Audit result of Form 20-F for the fiscal year 2012 - Audit plans for the fiscal year of 2013 - Assessment of observance of ethics

C. Voting Rights by Shareholders

(1)

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

(2)

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

D. Compensation of Directors and Officers

(1)

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

(In millions KRW)


Category	Total Numbers		Total Payment		Average Payment		Ceiling Amount Approved at the Shareholders Meeting		Remarks
Inside Director		5		2,664		353				—
Outside Director		3		199		33				—
Members of the Audit Committee		3		116		38		7,000		—
Total		11		2,979		180				—

ø	Payment Period: January 1, 2013 ~ June 30, 2013

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

(2) List of Stock Options Presented to the Executives

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

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2013

(With Independent Auditors’ Review Report Thereon)

Table of Contents


	Page
Independent Auditors’ Review Report		1

Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Financial Position		3

Condensed Consolidated Interim Statements of Comprehensive Income		5

Condensed Consolidated Interim Statements of Changes in Equity		6

Condensed Consolidated Interim Statements of Cash Flows		8

Notes to the Condensed Consolidated Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of June 30, 2013, the condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2013 and 2012, and the condensed consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2013 and 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

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

Auditor’s review responsibility

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

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

Conclusion

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

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying condensed consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

The consolidated statement of financial position of the Company as of December 31, 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated March 12, 2013, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2012, presented for comparative purposes, is not different from that audited by us in all material respects.

Seoul, Korea

August 13, 2013

This report is effective as of August 13, 2013, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2013 and December 31, 2012

(Unaudited)


(in millions of Won)	Notes	June 30, 2013		December 31, 2012
Assets
Cash and cash equivalents	20	￦	4,971,244		4,680,526
Trade accounts and notes receivable, net	4,20,32		12,207,585		11,037,973
Other receivables	5,20,32		1,841,674		1,997,152
Other short-term financial assets	6,20		1,350,316		1,849,281
Inventories	7		10,044,073		10,584,646
Current income tax assets			34,081		17,168
Assets held for sale	8		213,850		1,190
Other current assets	13		1,416,712		1,398,180

Total current assets			32,079,535		31,566,116

Long-term trade accounts and notes receivable, net	4,20		115,353		142,204
Other receivables	5,20		893,686		808,904
Other long-term financial assets	6,20		4,137,078		3,860,965
Investments in associates	9		3,545,874		3,039,261
Investment property, net	10		527,655		521,191
Property, plant and equipment, net	11		34,958,666		32,276,379
Intangible assets, net	12		5,951,264		5,662,361
Deferred tax assets			1,067,140		994,684
Other long-term assets	13		430,893		393,786

Total non-current assets			51,627,609		47,699,735

Total assets		￦	83,707,144		79,265,851

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of June 30, 2013 and December 31, 2012

(Unaudited)


(in millions of Won)	Notes	June 30, 2013			December 31, 2012
Liabilities
Trade accounts and notes payable	20,32	￦	3,953,918			4,389,195
Short-term borrowings and current installments of long-term borrowings	14,20		12,064,656			10,509,348
Other payables	15,20,32		1,987,978			1,834,904
Other short-term financial liabilities	16,20		111,002			92,741
Current income tax liabilities			306,893			559,328
Liabilities related assets held for sale	8		118,769			—
Provisions	17		125,562			77,831
Other current liabilities	19		2,959,101			2,311,654

Total current liabilities			21,627,879			19,775,001

Long-term trade accounts and notes payable	20		13,754			2,593
Long-term borrowings, excluding current installments	14,20		15,356,793			14,412,085
Other payables	15,20		259,949			243,922
Other long-term financial liabilities	16,20		172,392			117,713
Net defined benefit liabilities	18		402,972			345,688
Deferred tax liabilities			1,465,516			1,461,519
Long-term provisions	17		90,607			100,098
Other long-term liabilities	19		365,933			377,814

Total non-current liabilities			18,127,916			17,061,432

Total liabilities		￦	39,755,795			36,836,433

Equity
Share capital	21	￦	482,403			482,403
Capital surplus	21		1,103,519			1,104,814
Hybrid bonds	22		996,919			—
Reserves	23		317,757			(88,150	)
Treasury shares	24		(2,391,308	)		(2,391,406	)
Retained earnings			40,374,471			40,346,481

Equity attributable to owners of the controlling company			40,883,761			39,454,142
Non-controlling interests			3,067,588			2,975,276

Total equity		￦	43,951,349			42,429,418

Total liabilities and equity		￦	83,707,144			79,265,851

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month and the six-month periods ended June 30, 2013 and 2012

(Unaudited)


		For the three-month periods ended June 30						For the six-month periods ended June 30
(in millions of Won, except per share information)	Notes	2013			2012			2013			2012
Revenue	32,35	￦	15,603,109			16,488,239			30,184,992			32,796,884
Cost of sales	28,32		(13,745,519	)		(14,281,827	)		(26,653,690	)		(28,912,309	)

Gross profit			1,857,590			2,206,412			3,531,302			3,884,575
Selling and administrative expenses	25,28
Administrative expenses			(556,946	)		(475,473	)		(1,108,765	)		(988,355	)
Selling expenses			(398,052	)		(431,309	)		(803,025	)		(850,448	)

Operating profit	3,26		902,592			1,299,630			1,619,512			2,045,772
Share of profit (loss) of equity-accounted investees	9		(24,256	)		(5,285	)		(22,991	)		12,118
Finance income and costs	20,29
Finance income			674,673			325,156			1,366,266			1,112,296
Finance costs			(1,108,946	)		(649,321	)		(2,112,130	)		(1,366,130	)
Other non-operating income and expenses	26,27,32
Other non-operating income			34,476			124,488			72,897			236,727
Other non-operating expenses	28		(139,594	)		(359,252	)		(217,167	)		(429,854	)

Profit before income tax			338,945			735,416			706,387			1,610,929
Income tax expense	30		(98,444	)		(269,660	)		(173,625	)		(509,534	)

Profit for the period			240,501			465,756			532,762			1,101,395

Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss :
Remeasurements of defined benefit pension plans	18		44,733			(22,502	)		(35,022	)		(11,789	)
Items that may be reclassified subsequently to profit or loss :
Capital adjustment arising from investments in equity-method investees			(26,563	)		(123,885	)		59,157			(23,133	)
Net changes in the unrealized fair value of available-for-sale investments	20		55,884			(403,809	)		157,913			(97,582	)
Foreign currency translation differences			17,172			(129,455	)		251,865			(18,680	)

Other comprehensive income (loss), net of tax			91,226			(679,651	)		433,913			(151,184	)

Total comprehensive income (loss) for the period		￦	331,727			(213,895	)		966,675			950,211

Profit (loss) attributable to:
Owners of the controlling company		￦	250,565			509,293			528,573			1,138,831
Non-controlling interests			(10,064	)		(43,537	)		4,189			(37,436	)

Profit for the period		￦	240,501			465,756			532,762			1,101,395

Total comprehensive income (loss) attributable to:
Owners of the controlling company		￦	319,167			(106,111	)		900,274			1,006,757
Non-controlling interests			12,560			(107,784	)		66,401			(56,546	)

Total comprehensive income (loss) for the period		￦	331,727			(213,895	)		966,675			950,211

Basic and diluted earnings per share	31	￦	3,216			6,593			6,815			14,743

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2013 and 2012

(Unaudited)


	Attributable to owners of the controlling company																			Non- controlling interests
(in millions of Won)	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Sub total			Non- controlling interests			Total
Balance as of January 1, 2012	￦	482,403		1,150,452			—		405,426			(2,391,406	)		38,709,475			38,356,350			2,373,570			40,729,920
Comprehensive income :
Profit for the period		—		—			—		—			—			1,138,831			1,138,831			(37,436	)		1,101,395
Net changes in accumulated comprehensive income of investments in associates, net of tax		—		—			—		(24,369	)		—			—			(24,369	)		1,236			(23,133	)
Net changes in the unrealized fair value of available-for-sale investments, net of tax		—		—			—		(98,972	)		—			—			(98,972	)		1,390			(97,582	)
Foreign currency translation differences, net of tax		—		—			—		363			—			—			363			(19,043	)		(18,680	)
Remeasurements of defined benefit pension plans, net of tax		—		—			—		—			—			(9,096	)		(9,096	)		(2,693	)		(11,789	)

Total comprehensive income		—		—			—		(122,978	)		—			1,129,735			1,006,757			(56,546	)		950,211

Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(579,333	)		(579,333	)		(18,721	)		(598,054	)
Changes in subsidiaries		—		—			—		—			—			—			—			4,709			4,709
Changes in ownership interests in subsidiaries		—		(102,913	)		—		—			—			—			(102,913	)		550,861			447,948
Others		—		(47	)		—		11,708			—			1,044			12,705			(3,009	)		9,696

Total transactions with owners of the controlling company		—		(102,960	)		—		11,708			—			(578,289	)		(669,541	)		533,840			(135,701	)

Balance as of June 30, 2012	￦	482,403		1,047,492			—		294,156			(2,391,406	)		39,260,921			38,693,566			2,850,864			41,544,430

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the six-month periods ended June 30, 2013 and 2012

(Unaudited)


	Attributable to owners of the controlling company																			Non- controlling interests
(in millions of Won)	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Sub total			Non- controlling interests			Total
Balance as of January 1, 2013	￦	482,403		1,104,814			—		(88,150	)		(2,391,406	)		40,346,481			39,454,142			2,975,276			42,429,418
Comprehensive income :
Profit for the period		—		—			—		—			—			528,573			528,573			4,189			532,762
Net changes in accumulated comprehensive income of investments in associates, net of tax		—		—			—		43,713			—			—			43,713			15,444			59,157
Net changes in the unrealized fair value of available-for-sale investments, net of tax		—		—			—		157,465			—			—			157,465			448			157,913
Foreign currency translation differences, net of tax		—		—			—		207,551			—			—			207,551			44,314			251,865
Remeasurements of defined benefit pension plans, net of tax		—		—			—		—			—			(37,028	)		(37,028	)		2,006			(35,022	)

Total comprehensive income		—		—			—		408,729			—			491,545			900,274			66,401			966,675

Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(463,467	)		(463,467	)		(30,544	)		(494,011	)
Changes in subsidiaries		—		—			—		—			—			—			—			36,393			36,393
Changes in ownership interests in subsidiaries		—		(1,902	)		—		—			—			—			(1,902	)		24,060			22,158
Issuance of hybrid bonds		—		—			996,919		—			—			—			996,919			—			996,919
Interest of hybrid bonds		—		—			—		—			—			(2,132	)		(2,132	)		—			(2,132	)
Disposal of treasury shares		—		39			—		—			98			—			137			—			137
Others		—		568			—		(2,822	)		—			2,044			(210	)		(3,998	)		(4,208	)

Total transactions with owners of the controlling company		—		(1,295	)		996,919		(2,822	)		98			(463,555	)		529,345			25,911			555,256

Balance as of June 30, 2013	￦	482,403		1,103,519			996,919		317,757			(2,391,308	)		40,374,471			40,883,761			3,067,588			43,951,349

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2013 and 2012

(Unaudited)


(in millions of Won)	Notes	June 30, 2013			June 30, 2012
Cash flows from operating activities
Profit for the period		￦	532,762			1,101,395
Adjustments for :
Depreciation			1,232,714			1,143,464
Amortization			89,121			69,344
Finance income			(702,204	)		(707,950	)
Finance costs			1,406,874			915,785
Income tax expense			173,625			509,534
Gain on disposal of property, plant and equipment			(11,743	)		(8,003	)
Loss on disposal of property, plant and equipment			75,043			31,185
Share of loss (profit) of equity - accounted investees			22,991			(12,118	)
Cost for defined benefit plans			123,798			110,347
(Reversal of) bad debt expenses			67,325			(8,135	)
Loss on valuation of inventories			48,018			67,222
Impairment loss of assets held for sale			—			258,381
Gain on disposal of assets held for sale			—			(147,459	)
Others, net			46,182			(2,713	)

			2,571,744			2,218,884

Changes in operating assets and liabilities	34		(448,704	)		(269,854	)
Interest received			126,782			147,290
Interest paid			(345,604	)		(431,722	)
Dividends received			157,991			119,299
Income taxes paid			(558,212	)		(421,335	)

Net cash provided by operating activities			2,036,759			2,463,957

Cash flows from investing activities
Proceeds from disposal of short-term financial instruments			2,599,893			1,798,442
Collection of loans			277,797			173,435
Proceeds from disposal of available-for-sale investments			70,627			632,013
Proceeds from disposal of investments of equity - accounted investees			6,099			—
Proceeds from disposal of other investment assets			30,230			2,237
Proceeds from disposal of property, plant and equipment			26,513			14,975
Proceeds from disposal of intangible assets			2,513			5,342
Acquisition of short-term financial instruments			(2,191,585	)		(1,564,985	)
Increase in loans			(341,766	)		(199,844	)
Acquisition of available-for-sale investments			(122,758	)		(120,120	)
Acquisition of investments of equity -accounted investees			(571,318	)		(416,293	)
Acquisition of other investment assets			(55	)		(2,219	)
Acquisition of property, plant and equipment			(3,535,771	)		(2,198,276	)
Acquisition of intangible assets			(302,431	)		(382,267	)
Cash received from acquisition of business, net of cash acquired			5,399			6,799
Cash received from disposal of business			7,358			10,365
Other, net			806			69,071

Net cash used in investing activities		￦	(4,038,449	)		(2,171,325	)

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2013 and 2012

(Unaudited)


(in millions of Won)	Notes	June 30, 2013			June 30, 2012
Cash flows from financing activities
Proceeds from borrowings		￦	4,085,688			1,437,822
Repayment of borrowings			(2,158,087	)		(1,080,069	)
Proceeds from (repayment of) short-term borrowings, net			(232,643	)		152,541
Payment of cash dividends			(495,186	)		(597,788	)
Proceeds from issuance of hybrid bonds			996,919			—
Other, net			9,701			205,646

Net cash provided by financing activities			2,206,392			118,152

Effect of exchange rate fluctuation on cash held			86,016			(36,162	)

Net increase in cash and cash equivalents			290,718			374,622

Cash and cash equivalents at beginning of the period			4,680,526			4,598,682

Cash and cash equivalents at end of the period		￦	4,971,244			4,973,304

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2013

(Unaudited)

1. General Information

General information about POSCO, its 42 domestic subsidiaries including POSCO Engineering & Construction Co., Ltd., 169 foreign subsidiaries including POSCO America Corporation and its 95 associates (collectively “the Company”) are as follows:

(a) The controlling company

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

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

As of June 30, 2013, the shares of the POSCO are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

(b) Consolidated subsidiaries acquired or reclassified during the six-month period ended June 30, 2013

Consolidated subsidiaries acquired or reclassified during the six-month period ended June 30, 2013 are as follows:


Company	Date of Acquisition	Ownership (%)	Reason
POSCO Engineering (Thailand) Co., Ltd. (*1)	January, 2013	48.90	reclassification from associate
POSMATE Co., Ltd.	January, 2013	66.23	reclassification from associate
POSCO-Mory-Maruyasu PIPE (*1)	February, 2013	50.00	new establishment
PT. KRAKATAU BLUE WATER	February, 2013	67.00	new establishment
PT. KRAKATAU POS-CHEM DONG-SUH CHEMICAL (*1)	March, 2013	45.00	new establishment
MAX STEEL Co., LTD.	March, 2013	100.00	new acquisitions
Myanmar Daewoo International Corporation	March, 2013	100.00	new establishment
POSCO YongXin Rare Earth Metal Co., Ltd.	March, 2013	51.67	reclassification from associate

(*1)	These subsidiaries are included in the consolidated interim financial statements as the controlling company has control over them in consideration of the board of directors’ composition and others.

Cash outflows (inflows) from business acquisitions


(in millions of Won)	Amounts
Consideration transferred	￦	4,019
Less: cash and cash equivalents acquired		(9,418	)

Total	￦	(5,399	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2013

(Unaudited)

(c)	Subsidiaries that were excluded from consolidation during the six-month period ended June 30, 2013 are as follows:


Company	Date of disposal	Reason
Postech 2006 Energy Fund	January, 2013	Reclassification from subsidiary to associate
Postech Early Stage Fund	January, 2013	Reclassification from subsidiary to associate
Pohang SPFC Co., Ltd.	January, 2013	Statutory merger by SPFC Co., LTD. (formerly, Gwangyang SPFC Co., LTD.)
Gunsan SPFC Co., Ltd.	January, 2013	Statutory merger by SPFC Co., LTD. (formerly, Gwangyang SPFC Co., LTD.)
POSCALCIUM Company, Ltd.	January, 2013	Statutory merger by POSCO Chemtech Company Ltd.
Reco Metal Co., Ltd.	January, 2013	Statutory merger by POSCO M-TECH Co., Ltd.
9 Digit Co., Ltd.	January, 2013	Statutory merger by POSCO M-TECH Co., Ltd.
SeungGwang Co., Ltd.	January, 2013	Statutory merger by POSMATE Co., Ltd.
POSWITH Co., Ltd.	January, 2013	Statutory merger by POSCO Humans Co., Ltd. (formerly, POS ECO HOUSING Co., LTD.)
MCM Korea	March, 2013	Exclusion by corporate liquidation
DAEWOO CANADA LTD.	March, 2013	Exclusion by corporate liquidation
DAEWOO HANDELS GmbH	March, 2013	Exclusion by corporate liquidation
Dalian POSCO Steel Co., Ltd	March, 2013	Disposal
MAX STEEL Co., LTD.	April, 2013	Statutory merger by POSCO-Vietnam Processing Center Co., Ltd.

2. Statement of Compliance

Statement of compliance

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

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2012. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgements

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2012.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2012. The following changes in accounting policy are also expected to be reflected in the Company’s consolidated financial statements as of and for the year ending December 31, 2013.

(a) Changes in accounting policies

The Company has applied the following new standard and amendments since January 1, 2013.

1) K-IFRS No. 1110, “Consolidated Financial Statements”

2) K-IFRS No. 1111, “Joint Arrangements”

3) K-IFRS No. 1112, “Disclosure of Interests in Other Entities”

4) K-IFRS No. 1113, “Fair Value Measurement”

5) K-IFRS No. 1001, “Presentation of Financial Statements”

6) K-IFRS No. 1019, “Employee Benefits”

The details of changes in accounting policies are as follows:

1)	Subsidiaries

The Company adopted K-IFRS No. 1110, “Consolidated Financial Statements” since January 1, 2013. As a result, the Company has changed its accounting policy with respect to determining whether it has control over and consequently whether it consolidates its investees. K-IFRS No. 1110 introduces a new control model that is applicable to all investees; among other things, it requires the consolidation of an investee if the Company controls the investee on the basis of de facto circumstances.

As a result of the adoption of K-IFRS No. 1110, “Consolidated Financial Statements”, the Company changed its control relationship with the following investees:


		Company
Newly included subsidiaries		POSCO Engineering (Thailand) Co., Ltd.
Excluded subsidiaries		Postech 2006 Energy Fund, Postech Early Stage Fund

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

2)	Joint arrangements

The Company adopted K-IFRS No.1111, “Joint Arrangements” since January 1, 2013. The standard classifies joint arrangements into two types—joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant K-IFRS applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venturer to recognize an investment and to account for that investment using the equity method.

Under K-IFRS No. 1111, the Company classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Company’s rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Company considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification.

The Company has re-evaluated its involvement in its only joint arrangement and has reclassified the investment from jointly controlled entity to joint venture. Notwithstanding the reclassification, the investment continues to be recognized by applying the equity method. Management believes that there has been no impact of adoption of the standard on the Company’s consolidated financial statements.

Also, for a joint operation, the standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement. Management believes that there have been no significant differences between previous and new accounting treatment of adoption of the standard.

3)	Disclosure of interests in other entities

The Company adopted K-IFRS No. 1112, “Disclosure of Interests in Other Entities” since January 1, 2013. The standard brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Company is currently assessing the disclosure requirements for interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with the existing disclosures. The standard requires the disclosure of information about the nature, risks and financial effects of these interests.

4)	Fair value measurement

The Company adopted K-IFRS No. 1113, “Fair Value Measurement” since January 1, 2013. The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements including requirements of K-IFRS No. 1107, “Financial Instruments : Disclosures” and other standards.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

5)	Classification of other comprehensive income

The Company has applied the amendments to K-IFRS No. 1001, “Presentation of Financial Statements” since January 1, 2013. The amendments require presenting in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

6)	Employee benefits

The Company has applied the amendments to K-IFRS No. 1019, “Employee Benefits” since January 1, 2013. The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets based on the rate used to discount the defined benefit obligation.

(b)

Impact of changes in accounting policy

1)	As management believes the impact of the amendment to K-IFRS No. 1110, 1111, 1112, 1113 and 1019 on the Company’s prior year’s condensed consolidated interim financial statement is not significant, the comparative period’s condensed consolidated interim financial statements are not restated.

2)	K-IFRS No. 1001, “Presentation of Financial Statements”

The Company adopted the amendment to K-IFRS No. 1001, “Presentation of Financial Statements” from the annual period ended December 31, 2012, which prescribes the Company’s operating profit to be calculated as revenue less: (1) cost of sales, and (2) selling and administrative expenses, and presented separately in the statement of comprehensive income.

Additionally, in the notes to the financial statements (note 26), the Company provides voluntary disclosure of the entity-specific measure of operating performance presented as “adjusted operating profit” which is calculated base on the Company’s own criteria. In doing so, the Company is required to disclose: (1) a reconciliation between the entity-specific measure of operating performance and operating profit or loss presented on the face of the statement of comprehensive income, and (2) the fact that the measure of operating performance disclosed in the notes is calculated based on the Company’s own criteria.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

The Company retrospectively applied the amendment to K-IFRS No. 1001, for which the impact on the three-month and six-month periods ended June 30, 2012 is as follows:


(in millions of Won)	For the three-month period ended June 30, 2012			For the six-month period ended June 30, 2012
Operating profit before adoption of the amendment	￦	1,064,866			1,852,645
Add
Loss on disposals of property, plant and equipment		17,312			31,185
Loss on disposals of assets held for sale		119			9,510
Loss on disposals of investment in subsidiaries and associates		—			395
Idle tangible assets expenses		7,756			14,350
Other bad debt expenses		5,008			9,949
Donations		16,158			40,763
Loss on disposals of wastes		4,024			8,137
Penalty and default losses		7,916			7,916
Impairment loss of assets held for sale		258,381			258,381
Impairment loss of property, plant and equipment and others		36,035			38,020
Others		6,543			11,248

		359,252			429,854

Deduct
Gain on disposals of property, plant and equipment		(5,782	)		(8,003	)
Gain on disposals of investment in subsidiaries and associates		(3,331	)		(7,359	)
Gain on disposals of assets held for sale		(146,309	)		(147,459	)
Reversal of other bad debt allowance		—			(6,196	)
Grant income		(248	)		(1,065	)
Outsourcing income		(745	)		(14,017	)
Gain on disposals of wastes		(3,407	)		(5,680	)
Gain from claim compensation		(1,453	)		(16,153	)
Penalty income from early termination of contracts		(463	)		(14,431	)
Others		37,250			(16,364	)

		(124,488	)		(236,727	)

Operating profit after adoption of the amendment	￦	1,299,630			2,045,772

(c) New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual periods beginning after January 1, 2013, and the Company has not early adopted them. Management believes the impact of the amendments on the Company’s condensed consolidated interim financial statements is not significant.

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

The amendments clarified the application guidance related to offsetting a financial asset and a financial liability. The amendment is mandatorily effective for periods beginning on or after January 1, 2014 with earlier adoption permitted.

(d) Reclassification

The Company made reclassifications within other receivables, other financial assets, other payables, and other financial liabilities on the accompanying condensed consolidated statements of financial position as of December 31, 2012 to conform to current period presentation.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Current
Trade accounts and notes receivable	￦	10,742,687			9,865,436
Capital lease receivables		41,771			44,918
Unbilled due from customers for contract work		1,833,063			1,493,709
Less: allowance for doubtful accounts		(409,936	)		(366,090	)

	￦	12,207,585			11,037,973

Non-current
Trade accounts and notes receivable	￦	49,579			52,763
Capital lease receivables		83,489			102,887
Less: allowance for doubtful accounts		(17,715	)		(13,446	)

	￦	115,353			142,204

The trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ￦78,999 million and ￦80,258 million as of June 30, 2013 and December 31, 2012, respectively, and are included in bank borrowings.

5. Other Receivables

Other receivables as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Current
Short-term loans	￦	242,565			271,067
Other accounts receivable		1,214,603			1,298,878
Accrued income		72,521			71,076
Deposits		71,527			107,208
Other checking accounts		299,796			302,738
Less : allowance for bad debt accounts		(59,338	)		(53,815	)

	￦	1,841,674			1,997,152

Non-current
Long-term loans	￦	680,262			574,255
Long-term other accounts receivable		121,982			164,289
Accrued income		1,261			1,204
Deposits		130,955			110,682
Less : allowance for bad debt accounts		(40,774	)		(41,526	)

	￦	893,686			808,904

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

6. Other Financial Assets

(a)	Other short-term financial assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Derivatives assets held for trading	￦	92,166		62,720
Short-term available-for-sale securities		144,979		133,656
Current portion of held-to-maturity securities (bonds)		1,285		31,237
Short-term financial instruments (*1,2,3,4)		1,111,886		1,621,668

	￦	1,350,316		1,849,281

(*1)	As of June 30, 2013 and December 31, 2012, short-term financial instruments amounting to ￦4,700 million and ￦3,400 million, respectively, are secured in relation to long-term borrowings from the National Forestry Cooperative Federation.

(*2)	As of June 30, 2013 and December 31, 2012, ￦ 12,554 million and ￦ 12,699 million, respectively, are restricted for the use in a government project.

(*3)	As of June 30, 2013 and December 31, 2012, short-term financial instruments amounting to ￦ 6,906 million and ￦ 7,650 million, respectively, are provided as collateral for long-term borrowings.

(*4)	As of June 30, 2013 and December 31, 2012, short-term financial instruments amounting to ￦ 223,739 million and ￦ 153,251 million, respectively, are restricted for use in financial arrangements, pledge and others.

(b)	Other long-term financial assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Derivatives assets held for trading	￦	19,936		8,634
Long-term available-for-sale securities (equity instruments) (*1,2,3)		3,738,796		3,711,169
Long-term available-for-sale securities (bonds)		29,266		26,430
Long-term available-for-sale securities (others)		57,410		43,266
Held-to-maturity securities (bonds)		3,541		3,251
Long-term financial instruments		288,129		68,215

	￦	4,137,078		3,860,965

(*1)	As of June 30, 2013, 2,368,628 shares equivalent to 21,317,653 American Depository Receipts (“ADRs”) of SK Telecom Co., Ltd. have been pledged as collateral for exchangeable bonds issued.

(*2)

During the six-month period ended June 30, 2013, there was a significant decline in the fair value of shares of KB Financial Group Inc. and others for a prolonged period, which was considered as objective evidence of impairment. As a result, an impairment losses of ￦207,676 million was recognized in profit or loss during the six-month period ended June 30, 2013.

(*3)	As of June 30, 2013 and December 31, 2012, ￦ 161,807 million and ￦ 167,100 million of long-term available-for-sale securities, respectively, have been provided as collateral for construction projects of CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd. and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

7. Inventories

(a)	Inventories as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Finished goods	￦	1,404,944			1,475,832
Merchandise		658,796			703,923
Semi-finished goods		1,726,508			1,876,196
Raw materials		2,345,051			2,425,367
Fuel and materials		787,306			893,137
Construction inventories		1,259,721			1,324,873
Materials-in-transit		1,956,085			2,007,106
Others		96,557			93,007

		10,234,968			10,799,441

Less: allowance for inventories valuation		(190,895	)		(214,795	)

	￦	10,044,073			10,584,646

The amounts of valuation losses of inventories recognized within cost of goods sold during the six-month period ended June 30, 2013 and the year ended December 31, 2012 were ￦48,018 million and ￦76,483 million, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

8. Assets Held for Sale

Details of assets held for sale as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013 The controlling company (*1)		December 31, 2012 Subsidiaries (*2)
Assets
Trade accounts and notes receivableand other financial assets	￦	107,274		—
Inventories		2,474		—
Property, plant and equipment		45,541		1,190
Intangible assets		3,215		—
Other assets		55,346		—

		213,850		1,190

Liabilities
Trade accounts and notes payableand other financial liabilities		16,680		—
Borrowings		78,418		—
Other liabilities		23,671		—

		118,769		—

Net assets	￦	95,081		1,190

(*1)

Pursuant to the board of director’s resolution on April 5, 2013, POSCO Plant Engineering Co., Ltd., a subsidiary of the Company, signed a merger agreement with Sungjin Geotec Co., Ltd., an associate of the Company. According to the agreement, Sungjin Geotec Co., Ltd. was an acquirer and POSCO Plant Engineering Co., Ltd. was an acquiree. The merger agreement was approved by the shareholder’s meeting of Sungjin Geotec Co., Ltd. and the merger date was July 1, 2013. As the Company lost control of POSCO Plant Engineering Co., Ltd. due to the merger agreement, the investment in POSCO Plant Engineering Co., Ltd. was reclassified as assets held for sale as of June 30, 2013. Assets held for sale were measured at the lower of the carrying value and fair value less costs to sell.

(*2)

POSCO AST Co., Ltd. determined to dispose of its land and building and classified as assets held for sale as of December 31, 2012. The amount measured at the lower of those carrying amount and fair value less costs to sell of certain land and building was ￦ 1,190 million, the Company recorded impairment loss for the assets held for sale of ￦ 70 million.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

9. Investments in Associates

(a)	Details of investments in associates as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013								December 31, 2012
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
EQP POSCO Global 1st Fund		178,565		27.49		178,566	￦	178,289		—
Sungjin Geotec Co., Ltd.		17,193,510		33.02		239,877		170,176		181,361
SNNC Co., Ltd.		18,130,000		49.00		90,650		123,288		147,539
Poscochemtech Mitsubishi Carbon Tech (*1)		10,644,000		60.00		106,440		106,375		28,060
POSCO-ESM Co., Ltd.		1,000,000		50.00		43,000		41,478		42,388
Blue ocean PEF		333		27.52		33,300		30,078		33,839
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., LTD.		2,008,000		25.10		10,040		26,052		29,414
Incheongimpo Highway Co., Ltd.		3,976,254		29.94		19,881		18,015		13,680
UI trans Co., Ltd.		3,677,697		38.22		18,388		17,083		16,444
Garolim Tidal Power Plant Co., Ltd.		2,580,039		32.13		12,900		11,264		11,544
Gyunggi Green Energy Co., Ltd. (*2)		2,880,000		19.00		14,400		7,956		7,353
KoFC POSCO HANWHA KB
Shared Growth NO. 2. Private Equity Fund (*2)		7,012,500		12.50		7,013		6,730		—
Kones Co., Ltd.		3,250,000		41.67		6,893		5,861		6,476
Busan-Gimhae Light Rail Transit Co., Ltd.		9,160,000		25.00		45,800		3,540		7,601
POSMATE Co., Ltd. (*3)		—		—		—		—		46,204
Others (28 companies)								40,292		39,096

								786,477		610,999

[Foreign]
Roy Hill Holdings Pty Ltd. (*2)		12,723,959		12.50		612,590		542,824		527,129
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		373,803		348,646
CSP (Compania Siderurgica do Pecem)		536,281,399		20.00		366,817		296,480		214,761
Eureka Moly LLC		—		20.00		239,881		236,428		213,136
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		150,779		155,459		144,831
Nickel Mining Company SAS		3,234,698		49.00		157,585		146,945		146,699
DMSA, AMSA (*4)		—		4.00		136,207		135,007		124,326
7623704 Canada Inc. (*2)		114,452,000		10.40		124,341		130,323		—
AMCI (WA) Pty. Ltd.		49		49.00		209,664		114,716		123,018
KOREA LNG Ltd.		2,400		20.00		135,205		114,286		99,976
BX STEEL POSCO Cold RolledSheet Co., Ltd.		—		25.00		61,961		100,170		92,888
KOBRASCO		2,010,719,185		50.00		32,950		93,357		113,847
AES-VCM Mong Duong Power Company Limited		—		30.00		74,161		74,628		48,636
CAML Resources Pty. Ltd.		3,239		33.34		40,388		64,212		62,227
NCR LLC		—		29.41		31,298		40,549		39,303
POSCHROME (PROPRIETARY) LIMITED		43,350		50.00		19,892		12,657		21,324
Others (37 companies)								127,553		107,515

								2,759,397		2,428,262

							￦	3,545,874		3,039,261

(*1)	The Company is not able to exercise control over the investee even though the Company’s percentage of ownership is above 50%.

(*2)	The Company is able to exercise significant influence even though the Company’s percentage of ownership is below 20%.

(*3)	It was reclassified from associate to subsidiary due to the merger with Seoung Gwang Co., Ltd. during the six-month period ended June 30, 2013.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(*4)	The Company is able to exercise significant influence and accounts for the investment in jointly controlled entity using the equity method even though the Company’s percentage of ownership is below 20%.

(b)	The movements of investments in associates for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

June 30, 2013


(in millions of Won)	December 31, 2012		Share of			Other increase			June 30, 2013
Company	Book value		profits (losses)			*(decrease) (1)**			Book value
[Domestic]
EQP POSCO Global 1st Fund	￦	—		(291	)		178,580			178,289
Sungjin Geotec Co., Ltd.		181,361		(11,155	)		(30	)		170,176
SNNC Co., Ltd.		147,539		2,819			(27,070	)		123,288
Poscochemtech Mitsubishi Carbon Tech		28,060		795			77,520			106,375
POSCO-ESM Co., Ltd.		42,388		(910	)		—			41,478
Blue ocean PEF		33,839		(2,546	)		(1,215	)		30,078
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., LTD.		29,414		(3,290	)		(72	)		26,052
Incheongimpo Highway Co., Ltd		13,680		(190	)		4,525			18,015
UI trans Co., Ltd.		16,444		(176	)		815			17,083
Garolim Tidal Power Plant Co., Ltd.		11,544		(281	)		1			11,264
Gyunggi Green Energy Co., Ltd.		7,353		(5,292	)		5,895			7,956
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		—		(282	)		7,012			6,730
Kones Co., Ltd.		6,476		(615	)		—			5,861
Busan-Gimhae Light Rail Transit Co., Ltd.		7,601		(4,061	)		—			3,540
POSMATE Co., Ltd.		46,204		—			(46,204	)		—
Others		39,096		2,948			(1,752	)		40,292

		610,999		(22,527	)		198,005			786,477

[Foreign]
Roy Hill Holdings Pty Ltd.		527,129		(15,083	)		30,778			542,824
POSCO-NPS Niobium LLC		348,646		8,732			16,425			373,803
CSP (Compania Siderurgica do Pecem)		214,761		(17,554	)		99,273			296,480
Eureka Moly LLC		213,136		—			23,292			236,428
South-East Asia Gas Pipeline Company Ltd.		144,831		—			10,628			155,459
Nickel Mining Company SAS		146,699		(7,958	)		8,204			146,945
DMSA, AMSA		124,326		52			10,629			135,007
7623704 Canada Inc.		—		2			130,321			130,323
AMCI (WA) Pty Ltd.		123,018		(3,356	)		(4,946	)		114,716
KOREA LNG Ltd.		99,976		11,870			2,440			114,286
BX STEEL POSCO Cold RolledSheet Co., Ltd.		92,888		(226	)		7,508			100,170
KOBRASCO		113,847		4,613			(25,103	)		93,357
AES-VCM Mong Duong Power Company Limited		48,636		(651	)		26,643			74,628
CAML Resources Pty. Ltd.		62,227		19,068			(17,083	)		64,212
NCR LLC		39,303		(1,653	)		2,899			40,549
POSCHROME (PROPRIETARY) LIMITED		21,324		2,174			(10,841	)		12,657
Others		107,515		(494	)		20,532			127,553

		2,428,262		(464	)		331,599			2,759,397

	￦	3,039,261		(22,991	)		529,604			3,545,874

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

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

December 31, 2012


(in millions of Won) Company	December 31, 2011 Book value		Share of profits (losses)			Other increase (decrease) (*1)			December 31, 2012 Book value
[Domestic]
Sungjin Geotec Co., Ltd.	￦	194,942		(17,162	)		3,581			181,361
SNNC Co., Ltd.		154,131		15,157			(21,749	)		147,539
Poscochemtech Mitsubishi Carbon Tech		—		(860	)		28,920			28,060
POSCO-ESM Co., Ltd.		—		(560	)		42,948			42,388
Blue ocean PEF		35,971		(4,542	)		2,410			33,839
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., LTD.		21,026		8,534			(146	)		29,414
Incheongimpo Highway Co., Ltd		3,500		(377	)		10,557			13,680
UI trans Co., Ltd		3,610		1,268			11,566			16,444
Garolim Tidal Power Plant Co., Ltd.		11,995		(451	)		—			11,544
Gyunggi Green Energy Co., Ltd.		—		(1,572	)		8,925			7,353
Kones Co., Ltd.		6,764		(219	)		(69	)		6,476
Busan-Gimhae Light Rail Transit Co., Ltd.		34,227		(26,626	)		—			7,601
POSMATE Co., Ltd.		22,409		2,158			21,637			46,204
Kyobo Life Insurance Co., Ltd.		1,377,114		37,038			(1,414,152	)		—
Cheongna IBT Co., Ltd.		35,564		(729	)		(34,835	)		—
METAPOLIS Co., Ltd.		15,674		(15,674	)		—			—
MIDAS Information Technology Co., Ltd.		12,476		1,530			(14,006	)		—
Others		56,162		(2,051	)		(15,015	)		39,096

		1,985,565		(5,138	)		(1,369,428	)		610,999

[Foreign]
Roy Hill Holdings Pty Ltd.		—		(16,537	)		543,666			527,129
POSCO-NPS Niobium LLC		374,868		19,199			(45,421	)		348,646
CSP (Compania Siderurgica do Pecem)		124,231		(2,520	)		93,050			214,761
Eureka Moly LLC		109,772		—			103,364			213,136
South-East Asia Gas Pipeline Company Ltd.		136,175		—			8,656			144,831
Nickel Mining Company SAS		168,292		(12,795	)		(8,798	)		146,699
DMSA, AMSA		119,556		(1,176	)		5,946			124,326
AMCI (WA) Pty Ltd.		168,212		(38,706	)		(6,488	)		123,018
KOREA LNG Ltd.		127,901		12,697			(40,622	)		99,976
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		95,577		2,650			(5,339	)		92,888
KOBRASCO		128,884		28,792			(43,829	)		113,847
AES-VCM Mong Duong Power Company Limited		—		(1,246	)		49,882			48,636
CAML Resources Pty. Ltd.		55,465		11,390			(4,628	)		62,227
NCR LLC		24,107		(452	)		15,648			39,303
POSCHROME (PROPRIETARY) LIMITED		24,674		(311	)		(3,039	)		21,324
Others		188,380		(18,549	)		(62,316	)		107,515

		1,846,094		(17,564	)		599,732			2,428,262

	￦	3,831,659		(22,702	)		(769,696	)		3,039,261

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(*1)	Other increase or decrease represents the changes in investment in associates due to acquisitions, disposals, dividends received, change in capital adjustments arising from translations of financial statements of foreign investees and others.

(c)	The fair value of investments in associates for which there are published price quotations as of June 30, 2013 are as follows:


(in millions of Won)
Company	Fair value
Sungjin Geotec Co., Ltd.	￦	171,075

(d)	Summarized financial information of associates as of and for the six-month period June 30, 2013 and the years ended December 31, 2012 is as follows:

June 30, 2013


(in millions of Won)
Company	Assets		Liabilities		Equity		Sales		Net income (loss)
[Domestic]
EQP POSCO Global 1st Fund	￦	655,160		680		654,480		—		(1,018	)
Sungjin Geotec Co., Ltd.		743,541		634,622		108,919		208,361		(21,574	)
SNNC Co., Ltd.		485,980		214,269		271,711		213,911		11,766
Poscochemtech Mitsubishi Carbon Tech		188,018		11,598		176,420		—		(66	)
POSCO-ESM Co., Ltd.		60,599		9,200		51,399		1,942		(1,821	)
Blue ocean PEF		341,097		231,806		109,291		214,693		(9,251	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.		316,576		246,509		70,067		—		(7,901	)
Incheongimpo Highway Co., Ltd.		69,436		10,598		58,838		—		(634	)
UI trans Co., Ltd.		46,819		3,822		42,997		—		(474	)
Garolim Tidal Power Plant Co., Ltd.		36,686		1,629		35,057		—		(873	)
Gyunggi Green Energy Co., Ltd.		344,160		272,016		72,144		—		(2,800	)
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		54,687		844		53,843		536		(756	)
Kones Co., Ltd.		3,351		1,716		1,635		2,429		(1,477	)
Busan-Gimhae Light Rail Transit Co., Ltd.		772,643		758,483		14,160		24,578		(15,918	)
[Foreign]
Roy Hill Holdings Pty Ltd.		1,372,605		117,915		1,254,690		—		(165,402	)
POSCO-NPS Niobium LLC		747,420		18		747,402		—		17,463
CSP (Compania Siderurgica do Pecem)		1,604,362		51,777		1,552,585		—		(8,625	)
South-East Asia Gas Pipeline Company Ltd.		1,691,894		1,071,056		620,838		—		—
Nickel Mining Company SAS		443,994		93,214		350,780		57,991		(21,459	)
DMSA, AMSA		8,869,665		6,652,284		2,217,381		—		1,293
7623704 Canada Inc.		1,265,258		—		1,265,258		—		13
KOREA LNG Ltd.		570,876		71		570,805		60,502		59,351
BX STEEL POSCO Cold RolledSheet Co., Ltd.		945,973		572,943		373,030		750,866		(899	)
KOBRASCO		204,441		17,728		186,713		15,004		8,113
CAML Resources Pty. Ltd.		249,565		99,039		150,526		121,343		57,200
POSCHROME (PROPRIETARY) LIMITED		40,806		2,715		38,091		34,272		5,794

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

December 31, 2012


(in millions of Won)
Company	Assets		Liabilities		Equity		Sales		Net income (loss)
[Domestic]
Sungjin Geotec Co., Ltd.	￦	763,581		632,999		130,582		703,236		(29,219	)
SNNC Co., Ltd.		577,273		261,781		315,492		379,230		16,959
Poscochemtech Mitsubishi Carbon Tech		47,014		247		46,767		—		(1,433	)
POSCO-ESM Co., Ltd.		69,287		16,067		53,220		—		(1,422	)
Blue ocean PEF		347,298		224,338		122,960		429,210		(16,504	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.		333,716		250,540		83,176		229,271		36,971
Incheongimpo Highway Co., Ltd.		44,714		334		44,380		—		(1,323	)
UI trans Co., Ltd.		50,932		12,822		38,110		—		(880	)
Garolim Tidal Power Plant Co., Ltd.		37,476		1,546		35,930		—		(1,404	)
Gyunggi Green Energy Co., Ltd.		103,340		68,990		34,350		—		(467	)
Kones Co., Ltd.		6,739		3,627		3,112		8,274		(527	)
Busan-Gimhae Light Rail Transit Co., Ltd.		787,011		756,606		30,405		16,811		(106,668	)
POSMATE Co., Ltd.		118,077		14,580		103,497		104,705		9,587
METAPOLIS Co., Ltd.		521,942		512,720		9,222		21,063		(35,244	)
[Foreign]
Roy Hill Holdings Pty Ltd.		1,404,336		105,340		1,298,996		—		(146,321	)
POSCO-NPS Niobium LLC		697,431		140		697,291		—		38,412
CSP (Compania Siderurgica do Pecem)		1,088,105		16,551		1,071,554		—		(12,622	)
South-East Asia Gas Pipeline Company Ltd.		1,341,510		763,116		578,394		—		—
Nickel Mining Company SAS		445,344		91,266		354,078		120,224		(33,981	)
DMSA, AMSA		7,935,489		5,906,301		2,029,188		—		(29,407	)
KOREA LNG Ltd.		545,841		64		545,777		109,992		107,953
BX STEEL POSCO Cold RolledSheet Co., Ltd.		922,932		579,140		343,792		1,506,012		2,296
KOBRASCO		231,524		3,831		227,693		121,619		56,282
CAML Resources Pty. Ltd.		209,717		70,502		139,215		284,134		34,162
POSCHROME (PROPRIETARY) LIMITED		53,900		3,582		50,318		89,962		(899	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

10. Investment Property, Net

(a)	Changes in the carrying value of investment property for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

For the six-month period ended June 30, 2013


(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Depreciation			*Others (1)**			Ending
Land	￦	211,382		—		12,625		(2,594	)		—			(6,093	)		215,320
Buildings		304,503		—		8,432		(2,186	)		(6,127	)		3,160			307,782
Structures		5,306		—		—		—			(161	)		(592	)		4,553

Total	￦	521,191		—		21,057		(4,780	)		(6,288	)		(3,525	)		527,655

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

For the year ended December 31, 2012


(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			*Depreciation (1)**			*Others (2)**			Ending
Land	￦	219,477		15,832		1,442		(38,575	)		(475	)		13,681			211,382
Buildings		301,733		13,857		1,560		(6,730	)		(15,044	)		9,127			304,503
Structures		6,323		—		—		—			(322	)		(695	)		5,306

Total	￦	527,533		29,689		3,002		(45,305	)		(15,841	)		22,113			521,191

(*1)	Impairment losses of investment property amounted to ￦ 1,053 million are included.

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

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

11. Property, Plant and Equipment, Net

(a)	The changes in carrying value of property, plant and equipment for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

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


(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Depreciation			*Others (1)**			Ending
Land	￦	2,646,422		13,340		22,458		(10,892	)		—			126,601			2,797,929
Buildings		4,168,802		26,524		6,210		(29,734	)		(149,546	)		126,702			4,148,958
Structures		2,320,181		2,192		18,572		(2,264	)		(92,425	)		258,012			2,504,268
Machinery and equipment		16,532,204		112,042		9,656		(43,208	)		(916,796	)		1,122,141			16,816,039
Vehicles		60,154		5,496		706		(987	)		(10,261	)		5,248			60,356
Tools		69,851		8,719		208		(119	)		(16,680	)		764			62,743
Furniture and fixtures		183,380		18,704		772		(2,084	)		(35,665	)		5,236			170,343
Capital lease assets		57,224		1,718		—		(525	)		(5,053	)		60			53,424
Construction-in-progress		6,238,161		3,493,736		—		—			—			(1,387,291	)		8,344,606

Total	￦	32,276,379		3,682,471		58,582		(89,813	)		(1,226,426	)		257,473			34,958,666

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

For the year ended December 31, 2012


(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			*Depreciation (1)**			*Others (2)**			Ending
Land	￦	2,549,178		51,978		2,377		(26,793	)		—			69,682			2,646,422
Buildings		4,019,829		210,756		12,210		(29,756	)		(298,978	)		254,741			4,168,802
Structures		2,260,437		25,170		—		(24,308	)		(199,970	)		258,852			2,320,181
Machinery and equipment		16,179,384		698,693		5,804		(209,357	)		(1,774,051	)		1,631,731			16,532,204
Vehicles		66,743		15,620		141		(1,244	)		(20,705	)		(401	)		60,154
Tools		80,877		17,404		411		(1,081	)		(36,026	)		8,266			69,851
Furniture and fixtures		169,689		53,040		76		(3,369	)		(65,074	)		29,018			183,380
Capital lease assets		38,542		535		—		(236	)		(9,154	)		27,537			57,224
Construction-in-progress		3,088,505		6,314,731		—		—			—			(3,165,075	)		6,238,161

Total	￦	28,453,184		7,387,927		21,019		(296,144	)		(2,403,958	)		(885,649	)		32,276,379

(*1)	Includes impairment losses of property, plant and equipment amounted to ￦ 12,977 million.

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

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

12.

Goodwill and Other Intangible Assets

(a)	The changes in carrying value of goodwill and other intangible assets for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

For the six-month period ended June 30, 2013


			Increase				Decrease
(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Amortization			Impairment loss			*Others (3)**			Ending
Goodwill (*1)	￦	1,713,691		—		2,668		—			—			—			11,017			1,727,376
Intellectual property rights		275,146		24,731		—		—			(13,193	)		—			(193	)		286,491
Premium in rental (*2)		137,733		2,548		1,602		(2,984	)		(87	)		(460	)		(1,230	)		137,122
Development expense		60,931		5,941		—		—			(12,201	)		—			9,717			64,388
Port facilities usage rights		83,122		—		—		—			(4,936	)		—			49,166			127,352
Exploration and evaluation assets		479,728		1,285		—		—			—			—			(15,466	)		465,547
Mining development assets		1,643,306		173,374		—		—			—			—			—			1,816,680
Customer relationships		750,732		—		—		—			(27,689	)		—			4,051			727,094
Other intangible assets		517,972		128,383		—		(113	)		(31,015	)		(7	)		(16,006	)		599,214

	￦	5,662,361		336,262		4,270		(3,097	)		(89,121	)		(467	)		41,056			5,951,264

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

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

(*3)	Includes translation adjustment and reclassifications.

For the year ended December 31, 2012


			Increase				Decrease
(in millions of Won)	Beginning		Acquisitions		Business combination		Disposals			Amortization			Impairment loss			*Others (3)**			Ending
Goodwill (*1)	￦	1,656,817		—		77,298		—			—			(7,230	)		(13,194	)		1,713,691
Intellectual property rights		274,907		26,677		1		(1,375	)		(24,829	)		—			(235	)		275,146
Premium in rental (*2)		139,144		13,498		622		(10,038	)		(544	)		(12,336	)		7,387			137,733
Development expense		45,583		10,266		—		(148	)		(23,011	)		—			28,241			60,931
Port facilities usage rights		94,746		—		—		—			(11,624	)		—			—			83,122
Exploration and evaluation assets		473,192		7,349		—		—			—			(1,671	)		858			479,728
Mining development assets		1,414,315		228,991		—		—			—			—			—			1,643,306
Customer relationships		807,068		—		—		—			(53,517	)		—			(2,819	)		750,732
Other intangible assets		339,156		201,269		26,748		(652	)		(44,466	)		(9	)		(4,074	)		517,972

	￦	5,244,928		488,050		104,669		(12,213	)		(157,991	)		(21,246	)		16,164			5,662,361

(*1)	Acquisition amounts include goodwill amounting to ￦ 77,298 million related to the acquisition of PONUTech Co., Ltd.

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

(*3)	Includes translation adjustment and reclassifications.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

13. Other Assets

Other current assets and other long-term assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Other current assets
Advance payment	￦	1,243,277		1,205,969
Prepaid expenses		171,500		189,647
Others		1,935		2,564

	￦	1,416,712		1,398,180

Other long-term assets
Long-term advance payment	￦	3,310		2,119
Long-term prepaid expenses		223,300		178,934
Others		204,283		212,733

	￦	430,893		393,786

14. Borrowings

(a)	Short-term borrowings and current portion of long-term borrowings as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	Bank	Interest rate(%)		June 30, 2013			December 31, 2012
Short-term borrowings
Bank overdrafts	BOA and others		0.1~6.0	￦	113,565			123,685
Short-term borrowings (*1)	Shinhan Bank and others		0.3~14.0		8,013,754			7,586,993

					8,127,319			7,710,678

Current portion of long-term liabilities
Current portion of long-term borrowings (*1)	Korean Development Bank and others		0.5~6.0		999,690			898,564
Current portion of foreign loan	NATIXIS		2.0		953			901
Current portion of debentures (*1)	Korean Development Bank and others		1.7~9.0		2,938,309			1,899,430
Less : current portion of discount on debentures issued					(3,878	)		(2,644	)
Add : premium on debentures redemption					2,263			2,419

					3,937,337			2,798,670

				￦	12,064,656			10,509,348

(*1)

Property, plant and equipment, short-term financial assets, available-for-sale financial assets and inventories amounting to ￦ 3,936,090 million, ￦ 17,763 million, ￦ 772,353 million and ￦ 74,731 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	Long-term borrowings, excluding current portion as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	Bank	Interest rate(%)	June 30, 2013			December 31, 2012
Long-term borrowings (*1)	Korean Development Bank and others	0.5~11.0	￦	7,050,239			5,161,711
Less : present value discount				(39,945	)		(44,293	)
Foreign loan (*2)	NATIXIS	2.0		1,649			2,009
Bonds (*1,3)	Korean Development Bank and others	1.5~6.3		8,382,960			9,339,966
Less : discount on debentures issued				(52,738	)		(62,943	)
Add : premium on debentures redemption				14,628			15,635

			￦	15,356,793			14,412,085

(*1)

(*2)	As of June 30, 2013 and December 31, 2012, Korea Development Bank has provided guarantees for borrowings from foreign financial institutions.

(*3)	POSCO issued bonds exchangeable to SK Telecom Co., Ltd.’s ADRs through Zeus (Cayman) Ltd. August 2011. The Company accounted for these exchangeable bonds as long-term borrowings. POSCO provides guarantees for Zeus (Cayman) Ltd.

15. Other Payables

Other payables as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Current
Accounts payable	￦	984,021		737,802
Accrued expenses		751,122		868,015
Dividend payable		10,906		7,487
Finance lease liabilities		12,707		16,044
Withholding		229,222		205,556

	￦	1,987,978		1,834,904

Non-current
Accounts payable	￦	145,233		117,462
Accrued expenses		21,057		24,950
Finance lease liabilities		32,355		32,961
Long-term withholding		61,304		68,549

	￦	259,949		243,922

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

16. Other Financial Liabilities

Other financial liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Current
Derivatives liabilities	￦	105,576		84,922
Financial guarantee liabilities		5,426		7,819

	￦	111,002		92,741

Non-current
Derivatives liabilities	￦	145,713		100,220
Financial guarantee liabilities		26,679		17,493

	￦	172,392		117,713

17. Provisions

(a)	Provisions as of June 30, 2013 and December 31, 2012 are as follows:


	June 30, 2013				December 31, 2012
(in millions of Won)	Current		Non-current		Current		Non-current
Provision for bonus payments	￦	42,774		—		42,904		—
Provision for construction warranties		31,979		19,996		23,489		27,227
Provision for legal contingencies and claims (*1)		—		32,854		—		30,920
Others		50,809		37,757		11,438		41,951

	￦	125,562		90,607		77,831		100,098

(*1)

As of June 30, 2013 and December 31, 2012, the amount includes a provision of ￦25,195 million and ￦23,784 million, respectively, for potential claims in connection with the spin-off of the trading division of Daewoo International Corporation in 2000 (note 33). In addition, the amount as of June 30, 2013 and December 31, 2012, includes a provision of ￦7,659 million and ￦7,136 million, respectively, for a payment guarantee related to borrowings incurred in the disposition of Daewoo Cement (Shandong) Co., Ltd. during the year ended December 31, 2012.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	Changes in provisions for the six-month period ended June 30, 2013 and the year ended December 31, 2012 are as follows:

For the six-month period ended June 30, 2013


(in millions of Won)	Beginning		Increase		Utilization			Reversal			*Others (1)**			Ending
Provision for bonus payments	￦	42,904		26,002		(24,501	)		(1,034	)		(597	)		42,774
Provision for construction warranties		50,716		14,337		(7,021	)		(914	)		(5,143	)		51,975
Provision for legal contingencies and claims		30,920		417		—			—			1,517			32,854
Others		53,389		44,612		(9,572	)		—			137			88,566

	￦	177,929		85,368		(41,094	)		(1,948	)		(4,086	)		216,169

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

For the year ended December 31, 2012


(in millions of Won)	Beginning		Increase		Utilization			Reversal			*Others (1)**			Ending
Provision for bonus payments	￦	47,682		343,062		(347,262	)		(523	)		(55	)		42,904
Provision for construction warranties		50,623		24,694		(16,054	)		(4,472	)		(4,075	)		50,716
Provision for legal contingencies and claims		38,847		8,540		—			(16,163	)		(304	)		30,920
Others		41,623		14,209		(3,450	)		(1,680	)		2,687			53,389

	￦	178,775		390,505		(366,766	)		(22,838	)		(1,747	)		177,929

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

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

18. Employee Benefits

(a)	Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the six-month periods ended June 30, 2013 and 2012 were as follows:


(in millions of Won)	June 30, 2013		June 30, 2012
Expense related to post-employment benefit plans under defined contribution plans	￦	11,994		6,186

(b)	Defined benefit plans

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Present value of funded obligations	￦	1,499,378			1,394,675
Fair value of plan assets		(1,099,774	)		(1,064,711	)
Present value of non-funded obligations		3,368			15,724

Net defined benefit liabilities	￦	402,972			345,688

The changes in present value of defined benefit obligations for the six-month period ended June 30, 2013 and the year ended December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Defined benefit obligation at the beginning of period	￦	1,410,399			1,173,238
Current service costs		119,680			212,450
Interest costs		23,042			51,351
Actuarial losses		46,035			83,050
Business combinations		10,933			1,684
Benefits paid		(75,997	)		(116,846	)
Others		(31,346	)		5,472

Defined benefit obligation at the end of period	￦	1,502,746			1,410,399

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

The changes in fair value of plan assets for the six-month period ended June 30, 2013 and the year ended December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Fair value of plan assets at the beginning of period	￦	1,064,711			832,771
Interest on plan assets		18,924			37,669
Remeasurement of plan assets		1,824			2,157
Contributions of plan assets		77,148			267,420
Business combinations		8,930			906
Others		(21,866	)		(489	)
Benefits paid		(49,897	)		(75,723	)

Fair value of plan assets at the end of period	￦	1,099,774			1,064,711

The amounts recognized in condensed consolidated interim statements of comprehensive income for the six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three -month periods ended June 30				For the six-month periods ended June 30
(in millions of Won)	2013		2012		2013		2012
Current service costs	￦	58,412		50,250		119,680		103,538
Net interest costs		2,019		3,045		4,118		6,809

	￦	60,431		53,295		123,798		110,347

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

19. Other Liabilities

Other liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Other current liabilities
Due to customers for contract work	￦	950,758		529,104
Advances received		1,512,068		1,289,805
Unearned revenue		36,637		46,963
Withholdings		182,917		162,073
Deferred revenue		215		235
Others (*1)		276,506		283,474

	￦	2,959,101		2,311,654
Other long-term liabilities
Advances received	￦	294,883		312,668
Unearned revenue		689		841
Others (*1)		70,361		64,305

	￦	365,933		377,814

(*1)	Includes other current liabilities of ￦ 266,423 million and ￦ 274,490 million and other long-term liabilities of ￦ 13,122 million and ￦ 14,939 million as of June 30, 2013 and December 31, 2012, respectively, related to the Company’s interest in a joint operation owned by POSCO’s subsidiaries.

20. Financial Instruments

(a)	Classification of financial instruments

Financial assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Financial assets at fair value through profit or loss
Derivatives assets held for trading	￦	112,102		71,354
Available-for-sale financial assets		3,970,451		3,914,521
Held-to-maturity investments		4,826		34,488
Loans and receivables		20,855,731		19,787,951

	￦	24,943,110		23,808,314

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

Financial liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Financial liabilities at fair value through profit or loss
Derivatives liabilities held for trading	￦	251,289		185,142
Financial liabilities evaluated as amortized cost
Trade accounts payable		3,967,672		4,391,787
Borrowings		27,421,449		24,921,433
Financial guarantee liabilities		32,105		25,312
Others		2,031,715		1,802,175

		33,452,941		31,140,707

	￦	33,704,230		31,325,849

Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2013 and 2012 were as follows:

¨ June 30, 2013


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

		￦ (186,332)			48,734		21,742			(335,620	)		(18,621	)		(275,767	)		(745,864	)		157,913

June 30, 2012


	Finance income and costs
						Gain and loss			Gain and loss
(in millions of Won)	Interest income (cost)			Dividend income		on foreign currency translations			on foreign currency transactions			Gain and loss on disposal			Others			Total			Other comprehensive income
Financial assets at fair value through profit or loss	￦	—			—		—			—			166,828			(894	)		165,934			—
Available-for-sale financial assets		90			118,017		—			—			68,874			(134,256	)		52,725			(97,582	)
Held-to-maturity investments		830			—		—			—			—			749			1,579			—
Loans and receivables		144,553			—		(21,761	)		(4,660	)		(20,708	)		(188	)		97,236			—
Financial liabilities at fair value through profit or loss		—			—		—			—			(133,220	)		17,398			(115,822	)		—
Financial liabilities at amortized cost		(421,370	)		—		(145	)		3,705			—			(37,676	)		(455,486	)		—

		￦ (275,897)			118,017		(21,906	)		(955	)		81,774			(154,867	)		(253,834	)		(97,582	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2013 and 2012 were as follows:

June 30, 2013


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

	￦	(89,505	)		10,559		42,009			(325,305	)		45,548			(117,579	)		(434,273	)		55,884

June 30, 2012


	Finance income and costs
						Gain and loss			Gain and loss
(in millions of Won)	Interest income (cost)			Dividend income		on foreign currency translations			on foreign currency transactions			Gain and loss on disposal			Others			Total			Other comprehensive income
Financial assets at fair value through profit or loss	￦	—			—		—			—			73,119			(31,248	)		41,871			—
Available-for-sale financial assets		42			52,025		—			—			58,891			(74,384	)		36,574			(403,809	)
Held-to-maturity investments		413			—		—			—			—			729			1,142			—
Loans and receivables		70,845			—		82,578			(11,590	)		(8,126	)		(147	)		133,560			—
Financial liabilities at fair value through profit or loss		—			—		—			—			(45,075	)		84,101			39,026			—
Financial liabilities at amortized cost		(196,394	)		—		(109,700	)		(233,665	)		—			(36,579	)		(576,338	)		—

	￦	(125,094	)		52,025		(27,122	)		(245,255	)		78,809			(57,528	)		(324,165	)		(403,809	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	Fair value

Fair value and book value

The carrying amount and the fair value of financial instruments as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013				December 31, 2012
(in millions of Won)	Book value		Fair value		Book value		Fair value
Assets measured at fair value
Available-for-sale financial assets (*1)		￦ 3,338,829		3,338,829		3,349,606		3,349,606
Derivatives assets held for trading (*2)		112,102		112,102		71,354		71,354

		3,450,931		3,450,931		3,420,960		3,420,960

Assets measured amortized cost (*3)
Cash and cash equivalents		4,971,244		4,971,244		4,680,526		4,680,526
Trade accounts and notes receivable		12,322,938		12,322,938		11,180,177		11,180,177
Loans and other receivables		3,561,549		3,561,549		3,927,248		3,927,248
Held-to-maturity investments		4,826		4,826		34,488		34,488

		20,860,557		20,860,557		19,822,439		19,822,439

Liabilities measured at fair value
Derivatives liabilities held for trading (*2)		251,289		251,289		185,142		185,142
Liabilities measured amortized cost (*3)
Trade accounts and notes payable		3,967,672		3,967,672		4,391,787		4,391,787
Borrowings		27,421,449		27,670,551		24,921,433		25,382,344
Financial guarantee liabilities		32,105		32,105		25,312		25,312
Others		2,031,715		2,031,715		1,802,175		1,802,175

		￦ 33,452,941		33,702,043		31,140,707		31,601,618

(*1)

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

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

(*3)

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

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

The fair value hierarchy

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

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.

Level 3: inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The fair values of financial instruments by fair value hierarchy as of June 30, 2013 and December 31, 2012 are as follows:

a. June 30, 2013


(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	￦	2,540,694		—		798,135		3,338,829
Derivatives assets held for trading		—		112,102		—		112,102

		2,540,694		112,102		798,135		3,450,931

Financial liabilities
Derivatives liabilities held for trading	￦	—		251,289		—		251,289

b. December 31, 2012


(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	￦	2,590,933		—		758,673		3,349,606
Derivatives assets held for trading		—		71,354		—		71,354

		2,590,933		71,354		758,673		3,420,960

Financial liabilities
Derivatives liabilities held for trading	￦	—		185,142		—		185,142

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2012.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

21. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2013 and December 31, 2012 are as follows:


(Share, Won)	June 30, 2013		December 31, 2012
Authorized shares		200,000,000		200,000,000
Par value	￦	5,000		5,000
Issued shares (*1)		87,186,835		87,186,835
Shared capital (*2)	￦	482,403,125,000		482,403,125,000

(*1)	As of June 30, 2013, total shares of ADRs of 52,378,124 are equivalent to 13,094,531 of common stock.

(*2)	As of June 30, 2013, the difference between the ending balance of common stock and the par value of issued common stock is ￦46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Share premium	￦	463,825			463,825
Gains on disposal of treasury shares		763,906			763,867
Other capital surplus		(124,212	)		(122,878	)

	￦	1,103,519			1,104,814

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

22. Hybrid Bonds

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


(in millions of Won)
	Date of issue		Date of maturity		Interest rate (%)		June 30, 2013
Hybrid bond 1-1 (*1)		2013-06-13		2043-06-13		4.3	￦	800,000
Hybrid bond 1-2 (*1)		2013-06-13		2043-06-13		4.6		200,000
Issuance costs								(3,081	)

							￦	996,919

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


(in millions of Won)	Hybrid bond 1-1	Hybrid bond 1-2
Issue price	800,000	200,000

Maturity date	30 years (The Company has a right to extend the maturity date)	30 years (The Company has a right to extend the maturity date)

Interest rate	Issue date ~ 2018-06-12 : 4.3%	Issue date ~ 2023-06-12 : 4.6%
	reset every 5 years as follows:	reset every 10 years as follows:
	• After 5 years: return on government bond (5 years) + 1.3%	• After 10 years: return on government bond (10 years) + 1.4%
	• After 10 years: additionally +0.25% according to Step-up clauses	• After 10 years: additionally +0.25% according to Step-up clauses
	• After 25 years: additionally +0.75%	• After 30 years: additionally +0.75%

Interest payments condition	Quarterly (Optional deferral of interest payment is available)	Quarterly (Optional deferral of interest payment is available)

Others	The Company can call the hybrid bond at year 5 and interest payment date afterwards	The Company can call the hybrid bond at year 10 and interest payment date afterwards

The Company holds the right to extend the maturity dates on hybrid bonds. Furthermore, interest payments may be deferred if the Company elects not to declare dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

23. Reserves

Reserves as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Accumulated comprehensive loss of investments in associates	￦	(85,445	)		(129,159	)
Changes in the unrealized fair value of available-for-sale investments		225,421			67,956
Currency translation differences		198,960			(8,591	)
Others		(21,179	)		(18,356	)

	￦	317,757			(88,150	)

24. Treasury Shares

As of June 30, 2013, the Company holds 9,941,930 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

25. Selling and Administrative Expenses

(a) Administrative expenses

Administrative expenses for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three -month periods					For the six-month periods
	ended June 30					ended June 30
(in millions of Won)	2013		2012			2013		2012
Wages and salaries	￦	183,276		158,263		￦	376,601		342,111
Expenses related to defined benefit plan		17,181		14,809			34,514		30,532
Other employee benefits		40,241		43,060			81,905		88,562
Travel		14,195		12,965			25,702		25,680
Depreciation		52,305		39,267			106,975		84,166
Communication		3,531		3,953			7,248		7,935
Electric power		1,926		2,842			6,270		5,460
Taxes and public dues		14,101		12,473			28,440		27,293
Rental		24,216		24,925			50,676		42,418
Repairs		4,252		3,950			6,243		7,027
Insurance		1,537		1,648			3,345		3,522
Entertainment		3,768		4,180			7,966		8,755
Advertising		29,908		13,880			48,264		29,172
Research & development		42,159		49,016			102,705		91,841
Service fees		55,412		62,359			111,531		126,704
Supplies		4,304		1,017			7,627		6,565
Vehicles maintenance		2,938		5,557			6,017		11,134
Industry association fee		3,035		3,795			7,715		7,740
Training		3,060		5,655			6,042		10,409
Conference		4,072		4,395			8,109		9,492
Warranty expense		4,826		3,944			9,454		6,969
(Reversal of) bad debt allowance		42,713		(17,306	)		56,794		(11,888	)
Others		3,990		20,826			8,622		26,756

	￦	556,946		475,473		￦	1,108,765		988,355

(b) Selling expenses

Selling expenses for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three -month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2013		2012		2013		2012
Freight	￦	354,259		373,299	￦	714,221		742,986
Operating expenses for distribution center		2,410		2,337		4,672		4,671
Sales commissions		19,364		15,648		35,178		34,517
Sales advertising		1,224		988		1,728		1,135
Sales promotion		3,676		3,675		11,719		7,098
Samples		1,352		1,990		2,530		3,978
Sales insurance premium		6,620		8,188		13,009		16,331
Contract cost		5,764		22,762		14,524		35,763
Others		3,383		2,422		5,444		3,969

	￦	398,052		431,309	￦	803,025		850,448

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

26. Adjusted Operating Profit

Adjusted operating profits which include the other profits or losses excluded in operating profit but reflect the results of the Company’s operations for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three -month periods						For the six-month periods
	ended June 30						ended June 30
(in millions of Won)	2013			2012			2013			2012
Operating profit on the statement of comprehensive income	￦	902,592			1,299,630			1,619,512			2,045,772
Add
Gain on disposals of property, plant and equipment		8,757			5,782			11,743			8,003
Gain on disposals of investment in subsidiaries and associates		—			3,331			2,848			7,359
Gain on disposals of assets held for sale		—			146,309			—			147,459
Reversal of other bad debt allowance		—			—			—			6,196
Grant income		169			248			491			1,065
Outsourcing income		9,093			745			15,283			14,017
Gain on disposals of wastes		4,938			3,407			6,575			5,680
Gain from claim compensation		4,205			1,453			9,553			16,153
Penalty income from early termination of contracts		6,022			463			12,618			14,431
Others		1,292			(37,250	)		13,786			16,364

		34,476			124,488			72,897			236,727

Deduct
Loss on disposals of property, plant and equipment		(56,302	)		(17,312	)		(75,043	)		(31,185	)
Loss on disposals of assets held for sale		—			(119	)		—			(9,510	)
Loss on disposals of investment in subsidiaries and associates		(794	)		—			(16,544	)		(395	)
Idle tangible assets expenses		(9,273	)		(7,756	)		(16,417	)		(14,350	)
Other bad debt expenses		(6,582	)		(5,008	)		(10,531	)		(9,949	)
Donations		(7,800	)		(16,158	)		(22,500	)		(40,763	)
Loss on disposals of wastes		(1,627	)		(4,024	)		(10,389	)		(8,137	)
Penalty and default losses		(44,478	)		(7,916	)		(44,478	)		(7,916	)
Impairment loss of assets held for sale		—			(258,381	)		—			(258,381	)
Impairment loss of property, plant and equipment and others		(3,649	)		(36,035	)		(5,157	)		(38,020	)
Others		(9,089	)		(6,543	)		(16,108	)		(11,248	)

		(139,594	)		(359,252	)		(217,167	)		(429,854	)

Adjusted operating profit	￦	797,474			1,064,866			1,475,242			1,852,645

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

27. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


(in millions of Won)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2013		2012			2013		2012
Other non-operating income
Gain on disposals of property, plant and equipment	￦	8,757		5,782			11,743		8,003
Gain on disposals of investment in subsidiaries and associates		—		3,331			2,848		7,359
Gain on disposals of assets held for sale		—		146,309			—		147,459
Reversal of other bad debt allowance		—		—			—		6,196
Grant income		169		248			491		1,065
Outsourcing income		9,093		745			15,283		14,017
Gain on disposals of wastes		4,938		3,407			6,575		5,680
Gain from claim compensation		4,205		1,453			9,553		16,153
Penalty income from early termination of contracts		6,022		463			12,618		14,431
Others		1,292		(37,250	)		13,786		16,364

	￦	34,476		124,488			72,897		236,727

Other non-operating expense
Loss on disposals of property, plant and equipment	￦	56,302		17,312			75,043		31,185
Loss on disposals of assets held for sale		—		119			—		9,510
Loss on disposals of investment in subsidiaries and associates		794		—			16,544		395
Idle tangible assets expenses		9,273		7,756			16,417		14,350
Other bad debt expenses		6,582		5,008			10,531		9,949
Donations		7,800		16,158			22,500		40,763
Loss on disposals of wastes		1,627		4,024			10,389		8,137
Penalty and default losses		44,478		7,916			44,478		7,916
Impairment loss of assets held for sale		—		258,381			—		258,381
Impairment loss of property, plant and equipment and others		3,649		36,035			5,157		38,020
Others		9,089		6,543			16,108		11,248

	￦	139,594		359,252			217,167		429,854

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

28. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows (excluding finance costs and income tax expense):


(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2013		2012		2013		2012
Changes in inventories	￦	2,972,479		4,661,928		5,853,635		9,456,341
Cost of merchandises sold		6,130,907		6,265,910		12,270,134		13,121,526
Employee benefits expenses		773,437		690,800		1,600,209		1,453,777
Outsourced processing cost		2,489,868		1,913,154		4,506,053		3,315,420
Depreciation expenses (*1)		621,138		577,065		1,232,714		1,143,464
Amortization expenses		39,699		36,874		89,121		69,344
Freight and custody expenses		354,259		373,299		714,221		742,986
Commission paid		19,364		15,648		35,178		34,517
Loss on disposals of property, plant, and equipment		56,302		17,312		75,043		31,185
Donations		7,800		16,158		22,500		40,763
Other expenses		1,374,858		979,713		2,383,839		1,771,643

	￦	14,840,111		15,547,861		28,782,647		31,180,966

(*1)	Includes depreciation expense of investment property.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

29. Finance Income and Costs

Details of finance income and costs for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods ended June 30					For the six-month periods ended June 30
(in millions of Won)	2013		2012			2013		2012
Finance income
Interest income	￦	60,209		71,299			124,120		145,473
Dividend income		10,559		52,025			48,734		118,017
Gain on foreign currency transactions		327,656		220,591			512,736		403,765
Gain on foreign currency translations		51,764		(169,805	)		320,499		158,610
Gain on transactions of derivatives		110,730		73,374			150,981		166,642
Gain on valuations of derivatives		70,331		(22,222	)		164,604		8,590
Gain on disposals of available-for-sale investments		42,275		84,319			42,482		94,306
Others		1,149		15,575			2,110		16,893

	￦	674,673		325,156			1,366,266		1,112,296

Finance costs
Interest expenses	￦	149,714		196,393			310,452		421,370
Loss on foreign currency transactions		285,647		247,713			490,994		425,671
Loss on foreign currency translations		377,069		75,450			656,119		159,565
Loss on transactions of derivatives		99,534		45,339			200,123		133,598
Loss on valuations of derivatives		97,019		(3,757	)		228,125		4,631
Impairment loss on available-for-sale investments		89,370		74,384			207,676		134,256
Others		10,593		13,799			18,641		87,039

	￦	1,108,946		649,321			2,112,130		1,366,130

30. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax income/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and income tax recognized in other comprehensive income. The effective tax rate of the Company for the six-month periods ended June 30, 2013 and 2012 was 24.58% and 31.63%, respectively. The change in effective tax rate was caused mainly by the increase in tax credits and decrease in tax effects due to permanent differences related to non-taxable income.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

31. Earnings per Share

(a) Basic and diluted earnings per share for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


(Won, except per share information)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2013			2012		2013			2012
Profit attribute to controlling interest	￦	250,564,866,306			509,293,038,430		528,572,809,393			1,138,831,414,343
Interest payment for hybrid bond		(2,132,608,696	)		—		(2,132,608,696	)		—

Net profit attribute to controlling interest		248,432,257,610			509,293,038,430		526,440,200,697			1,138,831,414,343

Weighted-average number of common shares outstanding (*1)		77,244,901			77,244,444		77,244,685			77,244,444

Basic and diluted earnings per share	￦	3,216			6,593		6,815			14,743

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


	For the three-month periods ended June 30						For the six-month periods ended June 30
	2013			2012			2013			2012
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(9,941,934	)		(9,942,391	)		(9,942,150	)		(9,942,391	)

Weighted-average number of common shares outstanding		77,244,901			77,244,444			77,244,685			77,244,444

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2013 and 2012, diluted earnings per share is equal to basic earnings per share.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

32. Related Party Transactions

(a)	Significant transactions with related companies for the three-month and the six-month periods ended June 30, 2013 and 2012 were as follows:


(in millions of Won)	*Sales and others (1)**								*Purchase and others (2)**
	For the three-month periods ended June 30				For the six-month periods ended June 30				For the three-month periods ended June 30				For the six-month periods ended June 30
	2013		2012		2013		2012		2013		2012		2013		2012
*Subsidiaries (3)**
POSCO E&C Co., Ltd.	￦	6,212		3,593	￦	9,578		7,289	￦	873,956		288,010	￦	1,733,051		567,082
POSCO P&S Co., Ltd.		246,811		240,735		456,189		446,568		287,068		297,775		652,034		704,405
POSCO Coated & Color Steel Co., Ltd.		122,541		112,995		234,620		260,076		2,502		848		4,776		2,231
POSCO ICT Co., Ltd.		346		260		670		555		122,481		97,470		211,121		190,254
POSCO Chemtech Company Ltd.		124,805		126,160		254,685		253,409		186,926		197,241		383,338		392,247
POSCO M-TECH Co., Ltd.		4,430		6,475		8,810		13,150		97,084		72,836		176,700		151,902
POSCO TMC Co., Ltd.		48,067		53,349		94,820		99,420		573		226		977		451
POSCO AST Co., Ltd.		126,474		63,000		245,570		143,993		17,753		15,335		33,642		30,795
Daewoo International Corp.		821,038		1,069,632		1,726,238		2,161,520		2,717		3,291		5,701		6,141
POSCO NST Co., Ltd.		—		55,657		—		119,501		—		1,005		—		1,928
POSCO America Corporation		175,695		183,550		289,414		361,411		201		42		260		50
POSCO Canada Co., Ltd.		—		—		—		—		46,342		33,931		63,226		80,241
POSCO Asia Co., Ltd.		491,011		505,175		1,015,738		998,548		18,391		33,291		31,240		51,341
POSCO-Japan Co., Ltd.		293,836		360,051		574,209		710,301		4,251		6,400		6,519		12,947
POSCO-IPPC Pvt. Ltd.		36,701		46,359		69,077		86,534		—		13		—		15
POSCO-Mexico S.A. DE C.V.		74,441		95,124		148,402		160,072		460		—		460		—
Daewoo International Singapore Pte. Ltd.		—		—		—		—		19,523		13,381		38,339		23,285
POSCO (Suzhou) Automotive
Processing Center Co., Ltd.		32,667		29,960		70,834		59,413		—		—		—		—
POSCO Maharashtra Steel Private Ltd.		55,078		35,735		90,217		76,242		117		—		157		—
eNtoB Corp.		—		1		—		1		61,112		54,866		119,290		116,504
POSCO Plant Engineering Co., Ltd.		2,371		691		2,392		812		35,733		52,969		79,660		126,342
POS-Himetal Co., Ltd.		4,297		6,421		9,835		12,216		43,101		22,192		75,941		54,447
POSMATE Co., Ltd.		225		—		452		—		12,493		—		24,222		—
Others		191,145		207,989		371,341		419,025		57,252		83,680		102,564		149,363

	￦	2,858,191		3,202,912	￦	5,673,091		6,390,056	￦	1,890,036		1,274,802	￦	3,743,218		2,661,971

*Associates (3)**
POSMATE Co., Ltd.	￦	—		254	￦	—		500	￦	—		12,914	￦	—		24,995
SNNC Co., Ltd.		576		410		1,022		950		108,285		51,356		213,740		138,901
Sungjin Geotec Co., Ltd.		3,686		3,971		5,993		11,406		—		—		—		—
DONG BANG METAL IND. CO., LTD.		—		26,092		—		54,927		—		—		—		—
KOBRASCO		26,177		—		26,177		—		—		—		—		—
USS-POSCO Industries (UPI)		—		—		—		85		—		—		—		101
POSCHROME (PROPRIETARY) LIMITED		—		—		—		—		17,051		18,208		32,603		35,582
POSCO-SAMSUNG-Slovakia
Processing Center Co., Ltd.		5,691		3,105		8,419		11,260		—		—		—		—
POSCO SAMSUNG Suzhou Steel		1,532		8,467		4,101		16,575		—		—		—		—
Processing Center Co., Ltd.
PT. POSMI Steel Indonesia		2,687		4,329		4,662		6,809		—		—		—		—
POSK (PingHu) Processing Center Co., Ltd.		867		967		2,065		1,935		—		—		—		—
Others		73		2,006		669		3,262		697		2,110		1,842		4,310

	￦	41,289		49,601	￦	53,108		107,709	￦	126,033		84,588	￦	248,185		203,889

	￦	2,899,480		3,252,513	￦	5,726,199		6,497,765	￦	2,016,069		1,359,390	￦	3,991,403		2,865,860

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

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

(*3)	As of June 30, 2013, the Company provided guarantees to related parties (Note 33).

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	The related account balances of significant transactions with related companies as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	*Receivables (1)**				*Payables (1)**
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
Subsidiaries
POSCO E&C Co., Ltd.	￦	176,361		7,977	￦	385,181		403,630
POSCO P&S Co., Ltd.		79,188		64,564		16,023		32,672
POSCO Plant Engineering Co., Ltd.		142		267		11,511		32,297
POSCO ICT Co., Ltd.		209		287		53,393		91,297
POSCO Coated & Color Steel Co., Ltd.		110,695		108,505		1,356		2,618
POSCO Chemtech Company Ltd.		83,989		47,074		81,336		84,538
POSCO TMC Co., Ltd.		34,375		64,862		93		145
POSCO AST Co., Ltd.		102,526		65,575		9,419		7,800
Daewoo International Corp.		156,324		358,824		357		730
POSCO America Corporation		78,457		63,545		—		—
POSCO Asia Co., Ltd.		80,704		102,849		1,389		2,244
POSCO (Thailand) Company Ltd.		5,617		17,986		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		16,574		8,710		—		—
POSCO-Vietnam Co., Ltd.		384		291		—		—
POSCO-Japan Co., Ltd.		48,183		35,400		502		673
POSCO-IPPC Pvt. Ltd.		18,926		—		—		—
POSCO-Mexico S.A. DE C.V.		123,489		131,669		—		—
POSCO M-TECH Co., Ltd.		1,971		1,293		45,191		36,992
eNtoB Corp.		—		3		15,466		16,581
POSMATE Co., Ltd.		1,776		—		5,109		—
Others		129,516		126,330		53,948		62,244

	￦	1,249,406		1,206,011	￦	680,274		774,461

Associates
POSMATE Co., Ltd.	￦	—		78	￦	—		6,315
SNNC Co., Ltd.		162		229		30,739		37,145
Sungjin Geotec Co., Ltd.		3,423		4,849		—		—
KOBRASCO		6,180		—		—		—
POSCHROME (PROPRIETARY) LIMITED		—		—		—		2,273
Others		140		453		600		804

	￦	9,905		5,609	￦	31,339		46,537

	￦	1,259,311		1,211,620	￦	711,613		820,998

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

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c)	For the six-month periods ended June 30, 2013 and 2012, details of compensation to key management officers were as follows:


(in millions of Won)	June 30, 2013		June 30, 2012
Short-term benefits	￦	60,641		57,477
Retirement benefits		13,694		13,698
Long-term benefits		16,161		11,366

	￦	90,496		82,541

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations. In addition to the compensation described above, the Company provided stock appreciation rights to its executive officers and recorded stock compensation expenses amounted to ￦436 million for the six-month period ended June 30, 2012.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

33. Commitments and Contingencies

(a) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of June 30, 2013, are as follows:

(in millions of Won)

Guarantors

Guarantee beneficiary

Financial institution

Foreign currency

Won equivalent

[The Company]

POSCO

POSCO (Guangdong) Automotive Steel Co., Ltd.

BOA and others

USD

212,600,000

244,426

POSCO Investment Co., Ltd.

BOC

CNY

350,000,000

65,440

BOA and others

USD

380,000,000

436,886

POSCO Maharashtra Steel Pvt. Ltd.

Export-Import Bank of Korea and others

USD

566,069,000

650,810

POSCO VST Co., Ltd.

ANZ (Taipei) and others

USD

65,000,000

74,731

POSCO-MEXICO S.A. DE C.V.

BOA and others

USD

244,725,000

281,360

POSCO-Vietnam Co., Ltd.

Export-Import Bank of Korea

USD

200,000,000

229,940

Zeus (Cayman) Ltd.

Creditor

JPY

38,798,173,522

452,833

Zhangjiagang Pohang Stainless Steel Co., Ltd

BTMU and others

USD

160,000,000

183,952

POSCO ASSAN TST Steel Industry

BOA and others

USD

188,392,500

216,595

POSCO Electrical Steel India Private Limited

ING and others

USD

84,000,000

96,575

PT. KRAKATAU POSCO

Export-Import Bank of Korea and others

USD

1,210,300,000

1,391,482

Daewoo International Corporation

Daewoo Paper Manufacturing Co., Ltd.

HSBC

USD

12,500,000

14,371

Daewoo Textile Bukhara LLC

Export-Import Bank of Korea

USD

22,450,000

25,811

Daewoo International Australia Holdings Pty. Ltd.

KEB bank

USD

12,000,000

13,796

Daewoo International MEXICO S.A. de C.V.

SMBC

USD

55,000,000

63,234

POSCO ASSAN TST STEEL Industry

ING and others

USD

20,932,500

24,066

Brazil Sao Paulo Steel Processing Center Co., Ltd.

SMBC

USD

20,000,000

22,994

Daewoo International Deutschland GmbH

Shinhan Bank

EUR

15,000,000

22,473

PT. Bio Inti Agrindo

Export-Import Bank of Korea

USD

30,000,000

34,491

POSCO E&C Co., Ltd.

HONG KONG POSCO E&C (CHINA) Investment Co., Ltd.

Woori Bank and others

USD

135,000,000

155,210

International Business Center Corporation

Export-Import Bank of Korea

USD

20,000,000

22,994

POSCO E&C Vietnam Co., Ltd.

Export-Import Bank of Korea and others

USD

31,500,000

36,216

SANTOS CMI S.A

CITI Ecuador and others

USD

36,000,000

41,389

POSCO P&S Co., Ltd.

POSCO Canada Pty., Ltd.

Hana Bank

USD

12,484,500

14,353

POSCO Gulf SFC LLC

KEB bank

USD

10,000,000

11,497

POSCO ICT Co., Ltd.

PT. POSCO ICT Indonesia

POSCO Investment Co., Ltd.

USD

3,000,000

3,449

VECTUS Ltd.

KEB bank

GBP

3,500,000

6,138

POSCO Investment Co., Ltd.

USD

4,000,000

4,599

POSCO ICT BRASIL

Woori Bank

BRL

8,875,000

4,640

POSCO Energy Co., Ltd.

TECHREN Solar, LLC

Woori Bank

USD

3,000,000

3,449

POSCO Engineering Co., Ltd.

PT PEN INDONESIA

KEB bank

USD

6,818,876

7,840

KEB Bank and others

IDR

80,026,548,251

9,267

POSCO Engineering (THAILAND)

Citi Bank

USD

15,300,000

17,590

Co., Ltd.

Woori Bank and others

THB

6,285,642,000

232,003

POSCO-Japan Co., Ltd.

POSCO-JEPC Co., Ltd.

Mizuho Bank and others

JPY

3,620,163,704

42,253

POSCO-JKPC Co., Ltd.

Higo bank and others

JPY

1,221,600,000

14,258

POSCO-JOPC Co., Ltd.

Kiyo bank and others

JPY

150,000,000

1,751

Xenesys Inc.

Aozora Bank

JPY

300,000,000

3,501

Daewoo Textile Fergana LLC

Daewoo Textile Bukhara LLC

NBU

USD

3,114,959

3,581

POSCO E&C (CHINA) Co., Ltd.

HONG KONG POSCO E&C (China) Investment Co., Ltd.

Woori Bank (Beijing branch)

USD

33,000,000

37,940

POSCO Chemtech Company Ltd.

PT.Krakatau Posco Chemtech Calcination

KEB Bank

USD

42,055,000

48,351

POSCO Specialty Steel Co., Ltd.

POSCO SS-VINA

Export-Import Bank of Korea

USD

352,409,800

405,166

POSCO-China Holding Corp.

POSCO YongXin Rare Earth Metal Co., Ltd.

KEB Bank and others

CNY

71,820,000

13,428

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(in millions of Won)

Guarantors

Guarantee beneficiary

Financial institution

Foreign currency

Won
equivalent

[Associates]

POSCO

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

BOC and others

USD

2,280,000

2,621

United Spiral Pipe, LLC

Shinhan Bank

USD

24,500,000

28,168

POSUK Titanium LLP

Shinhan Bank

USD

18,000,000

20,695

Daewoo International Corporation

DMSA / AMSA

Export-Import Bank of Korea and others

USD

165,133,333

189,854

GLOBAL KOMSCO Daewoo LLC

Export-Import Bank of Korea and others

USD

8,050,000

9,255

POSCO E&C Co., Ltd.

Taegisan Wind Power Corporation

KDB Bank

KRW

7,500

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.

NH Bank and others

KRW

28,226

PSIB Co., Ltd.

Hana Bank and others

KRW

356,600

POSCO P&S Co., Ltd.

Sebang Steel Co., Ltd.

Fukuoka Bank

JPY

245,000,000

2,860

POSCO Engineering Co., Ltd.

PT Wampu Electric Power

PT Bank Woori Indonesia

USD

344,848

396

POSCO ICT Co., Ltd.

Uitrans LRT Co., Ltd.

Construction Guarantee Cooperative

KRW

64,638

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.

NH Bank

KRW

2,530

Daewoo (China) Co., Ltd.

Shanghai Lansheng Daewoo Corporation

Bank of Communications

CNY

100,000,000

18,697

POSCO Chemtech Company Ltd.

PT.INDONESIA POS CHEMTECH CHOSUN REF

KEB Bank

USD

6,000,000

6,898

[Others]

Daewoo International Corporation

Ambatovy Project Investments Limited

Export-Import Bank of Korea

USD

52,321,770

60,154

Sherritt International Corporation

Export-Import Bank of Korea

USD

21,818,182

25,084

POSCO E&C Co., Ltd.

THE GALE INVESTMENTS COMPANY, L.L.C.

Woori Bank

USD

50,000,000

57,485

The union of City environment improvement for Kukje building and others

NH Bank and others

KRW

235,942

POSCO Plant Engineering Co., Ltd.

Gyeongpo wind power generation and others

KB Bank and others

KRW

255,596

Taiwan Power Company Ltd.

KEB Bank

TWD

50,000,000

1,917

Lotte Construction CO., LTD. and others

KEB Bank

USD

5,883,441

6,764

POSCO ICT Co., Ltd.

BTL business and others

Kyobo Life Insurance Co., Ltd and others

KRW

1,431,581

SMS Energy and others

Hana Bank and others

KRW

198,660

POSCO M-TECH Co., Ltd.

PYUNGSAN SI Co., Ltd

Seoul Guarantee Insurance Co., Ltd.

KRW

POSCO Engineering Co., Ltd

Kwanma Solar Co., Ltd. and others

Hana Bank and others

KRW

46,227

PT MPM and others

Export-Import Bank of Korea

USD

7,052,000

8,108

Hyundai ENG Co., Ltd.

Engineering Financial Cooperative

KRW

42,209

CNY

521,820,000

97,565

EUR

15,000,000

22,473

BRL

8,875,000

4,640

IDR

80,026,548,251

9,267

JPY

44,334,937,226

517,456

KRW

2,669,788

THB

6,285,642,000

232,003

TWD

50,000,000

1,917

GBP

3,500,000

6,138

USD

4,553,035,709

5,234,626

(b)

POSCO E&C Co., Ltd. has provided the completion guarantees for Samsung C&T Corporation amounting to ￦1,896,606 million while Samsung C&T Corporation has provided the construction guarantees or payment guarantees on customers’ borrowings on behalf of POSCO E&C Co., Ltd. amounting to ￦799,130 million as of June 30, 2013. POSCO E&C Co., Ltd. provides payment guarantees on borrowings of customers such as Asset Backed Commercial Paper amounted to ￦335,349 million and Project Financing loan amounted to ￦220,505 million as of June 30, 2013.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

Details of other commitments of the Company as of June 30, 2013, are as follows:


POSCO		POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2013, 206 million tons of iron ore and 21 million tons of coal remained to be purchased under such long-term contracts.

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

		As of June 30, 2013, POSCO entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 3.54 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. POSCO is not liable for the repayment of full or part of the money borrowed if the respective projects fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.

		POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Korea Development Bank, for seamless funding to POSCO Energy Co., Ltd. under construction of new power plant.

		POSCO has provided a supplemental funding agreement amounting to ￦ 9,800 million, as requested from the creditors for seamless funding to Busan E&E Co., Ltd. under construction of Busan RDF power plant and also provided financial joint guarantee for business fulfillment insurance amounting to ￦ 21,329 million related to the construction.

POSCO E&C Co., Ltd		As of June 30, 2013, POSCO E&C Co., Ltd. has comprehensive loan agreements of up to ￦ 360,000 million and USD 308 million with Woori Bank and ￦ 83,000 million and USD 500 million with Korea Exchange Bank. Also, POSCO E&C Co., Ltd. has bank overdraft agreements of up to ￦ 20,000 million with Woori Bank which is included in the limit of comprehensive loan agreements and ￦ 3,000 million with Korea Exchange Bank.

POSCO ICT Co., Ltd.		As of June 30, 2013, in relation to contract enforcement, POSCO ICT Co., Ltd. was provided with ￦ 116,710 million and ￦ 43,802 million guaranties from Korea Software Financial Cooperative and Seoul Guarantee Insurance, respectively. As of June 30, 2013, in relation to transfer of military camp based on Changwon city & land development projects, POSCO ICT Co.,Ltd. provided Kyongnam Bank and other banks with ￦ 620,000 million fund support under fund support agreements between POSCO ICT Co., Ltd. and Unicity 7th LLC. As of June 30, 2013, in relation to Incheongimpo Highway investment projects, POSCO ICT Co., Ltd. provided Korea Development Bank and other banks with ￦ 175,000 million fund support under fund support agreements between POSCO ICT Co., Ltd. and Incheongimpo Highway Co., Ltd.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)


		As of June 30, 2013, in relation to Busan sansung tunnel projects, POSCO ICT Co., Ltd. provided Korean Development Bank and other banks with ￦ 17,000 million fund support under fund support agreements between POSCO ICT Co., Ltd. and Busan Sansung Tunnel Co., Ltd.

		As of June 30, 2013, POSCO ICT Co., Ltd. provided ￦ 2,909 million of guaranties to Seoul Guarantee Insurance to ensure performance guarantee agreement which Busan Navy Residence and others had.

POSCO Specialty Steel Co., Ltd.		As of June 30, 2013, POSCO Specialty Steel Co., Ltd. has agreements for a loan and import letter of credit with Korea Exchange Bank and others.

POSMATE Co., Ltd.		During the year ended December 31, 2012, POSMATE Co., Ltd. disposed of POSMATE Insure Co., Ltd. and had a indemnification agreement of up to ￦ 550 Million with the acquiree when revenue fell short of a certain amount form January 1, 2013 to September 30, 2016.

PT. KRAKATAU POSCO		PT. KRAKATAU POSCO has entered into a USD 1,729 million senior loan agreements with 10 financial institutions including Korea Export-import Bank and Korea Trade Insurance corporation on February 14, 2012.

		PT. KRAKATAU POSCO has entered into a USD 330 million-loan agreements with 6 financial institutions including Bank of America for working capital and trade on June 1, 2013.

(d)	Litigation in progress

As of June 30, 2013, the Company and certain subsidiaries are defendants in legal actions arising from the normal course of business.

1)	Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

During the year ended December 31, 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of JPY 98.6 billion (￦1,150.8 billion). Through trials to the period ended June 30, 2013, the Company submitted its responses that the Japan court did not have jurisdiction on this lawsuit as it should be judged by Korean law and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of June 30, 2013, the Japan court has not made any judgments on this matter. Since the Company does not believe that it is probable that an outflow of resources will be required, the Company has not recorded any provision for this lawsuit as of June 30, 2013.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

In addition, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the New Jersey federal court, United States, against POSCO and POSCO America Co., Ltd., a subsidiary of POSCO, claiming infringement of intellectual property rights related to the production of grain oriented electrical steel sheets. As of June 30, 2013, no claim amount has been made and the Company is under discovery proceedings related to this matter. Due to the early stage of the litigation and the inherent uncertainties, the Company is not able to reliably estimate the amount of compensation and timing, if any, that might be awarded to Nippon Steel & Sumitomo Metal Corporation. Consequently, it is not possible for the Company to make an estimate of the expected financial effect that will result from the ultimate resolution of this civil lawsuit. Therefore, the Company has not recorded any provision for this lawsuit in the U.S. as of June 30, 2013.

2)	Lawsuits related to liability of Daewoo Co., Ltd. which was spun off into Daewoo International Corporation and Daewoo Engineering & Construction Co., Ltd.

In May 2002, Industrial Development Bank of India Limited, the creditor of Daewoo Motors India Ltd. for which Daewoo Co., Ltd. provided a guarantee, filed lawsuits against Daewoo Motors India Ltd., Daewoo Co., Ltd., Daewoo Engineering & Construction Co., Ltd, and Daewoo International Corporation (a subsidiary of POSCO) seeking for the disposition of assets and judgment of debt of Daewoo Motors India Ltd. in India Delhi Mumbai Court. Management of the Company has assessed the likelihood of the outcome of this matter and estimated the amount of possible loss and has made the appropriate provision for these lawsuits as of June 30, 2013 and December 31, 2012.

3)	Other lawsuits and claims

As of June 30, 2013, the Company is involved in 167 other lawsuits and claims for alleged damages aggregating to ￦323 billion as of June 30, 2013, which arose in the ordinary course of business. In the opinion of management, these 167 lawsuits and claims will not have a material adverse effect on the Company’s financial position, operating results or cash flows. Additionally, no provision is recorded in connection with these 167 lawsuits and claims as of June 30, 2013 because the Company has not concluded that a probable loss has occurred on any of the lawsuits and claims.

(e)	Other contingencies


Company		Description
POSCO		POSCO has provided two blank promissory notes and a blank check to Korea Resources Corporation as collateral for long-term domestic borrowings, and has provided six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for long-term foreign currency borrowings.

POSCO E&C Co., Ltd.		As of June 30, 2013, POSCO E&C Co., Ltd. has provided nineteen blank checks and ten blank promissory notes as collateral for agreements and outstanding loans.

Daewoo International Corporation		As of June 30, 2013, Daewoo International Corporation has provided forty-five blank promissory notes and thirteen blank checks to Korea National Oil Corporation as collateral for the guarantee on performance for contracts and others.

POSCO ICT Co., Ltd.		As of June 30, 2013, POSCO ICT Co., Ltd. has provided eight blank promissory notes and ten blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

POSCO Engineering Co., Ltd.		As of June 30, 2013, POSCO Engineering Co., Ltd. has provided one note to Hana Tank Terminal Co., Ltd. as collateral for the guarantee on performance for contracts and others.

POSCO-JKPC Co., Ltd.		As of June 30, 2013, POSCO-JKPC Co., Ltd. has provided one hundred-sixty notes as collateral for borrowings. (JPY 729,387,929, 45% of borrowings from the Kitakyushu Bank, Ltd., 30% of borrowings from Higo bank, Ltd.)

Daewoo International Japan Corp.		As of June 30, 2013, Daewoo International Japan Corp. has provided two hundred-nineteen notes receivable (JPY 1,246,153,074) to Resona bank Ltd. as collateral for loans from bank.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month periods ended June 30, 2013 and 2012 are as follows:


(in millions of Won)	June 30, 2013			June 30, 2012
Trade accounts and notes receivable	￦	(466,091	)		(1,258,106	)
Other financial assets		(7,829	)		(26,882	)
Inventories		557,680			751,597
Other current assets		(33,709	)		(368,587	)
Other long-term assets		14,273			(97,304	)
Trade accounts and notes payable		(559,201	)		25,085
Other financial liabilities		(62,101	)		(121,046	)
Other current liabilities		241,415			913,200
Provisions		(19,451	)		21,213
Payment severance benefits		(75,997	)		(74,514	)
Plan assets		(27,251	)		(46,399	)
Other long-term liabilities		(10,442	)		11,889

	￦	(448,704	)		(269,854	)

35. Operating Segments

(a)

The Company has four reportable operating segments—steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products. The engineering and construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segments include power generation, liquefied natural gas production, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2012.

(b)	Segment assets, liabilities, profit and loss are based on the separate financial statements of the consolidated entities prepared in accordance with K-IFRS. In addition, inter-segment transactions are accounted for on an arm’s length basis.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c)	Information about reportable segments for the six-month periods ended June 30, 2013 and 2012 was as follows:

For the six-month period ended June 30, 2013


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

For the six-month period ended June 30, 2012


(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	￦	18,647,378		9,919,243		1,932,542		2,297,721		32,796,884
Internal revenues		8,739,865		3,741,423		1,495,936		1,223,801		15,201,025
Total revenues		27,387,243		13,660,666		3,428,478		3,521,522		47,997,909
Segments profit (loss)		1,095,580		94,897		38,158		146,271		1,374,906

(d)	Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the six-month periods ended June 30, 2013 and 2012 were as follows:


(in millions of Won)	June 30, 2013			June 30, 2012
Total profit for reportable segments	￦	922,547			1,374,906
Goodwill and PP&E FV adjustments		(26,784	)		(14,057	)
Elimination of inter-segment profits		(363,001	)		(259,454	)
Income tax expense		173,625			509,534

Profit before income tax expense	￦	706,387			1,610,929

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2013

(With Independent Auditors’ Review Report Thereon)

Table of Contents


	Page
Independent Auditors’ Review Report		1

Condensed Separate Interim Financial Statements

Condensed Separate Interim Statements of Financial Position		3

Condensed Separate Interim Statements of Comprehensive Income		5

Condensed Separate Interim Statements of Changes in Equity		6

Condensed Separate Interim Statements of Cash Flows		7

Notes to the Condensed Separate Interim Financial Statements		8

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of June 30, 2013, the condensed separate interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2013 and 2012, and the condensed separate interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2013 and 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

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

Auditor’s review responsibility

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

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

Conclusion

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

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying condensed separate interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

The separate statement of financial position of the Company as of December 31, 2012, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated March 12, 2013, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2012, presented for comparative purposes, is not different from that audited by us in all material respects.

Seoul, Korea

August 13, 2013

This report is effective as of August 13, 2013, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO

Condensed Separate Interim Statements of Financial Position

As of June 30, 2013 and December 31, 2012

(Unaudited)


(in millions of Won)
	Notes	June 30, 2013		December 31, 2012
Assets
Cash and cash equivalents	20	￦	2,104,856		1,752,560
Trade accounts and notes receivable, net	4,20,32		3,795,278		4,087,030
Other receivables	5,20,32		284,384		394,761
Other short-term financial assets	6,14,20		639,262		928,778
Inventories	7,28		4,983,794		5,403,660
Assets held for sale	8		33,335		—
Other current assets	9		31,805		42,682

Total current assets			11,872,714		12,609,471

Long-term trade accounts and notes receivable, net	4,20		274		274
Other receivables	5,20		63,004		60,652
Other long-term financial assets	6,20		3,114,692		2,968,113
Investments in subsidiaries and associates	10		14,647,892		14,100,053
Investment property, net	11		114,966		110,526
Property, plant and equipment, net	12		23,141,946		22,166,735
Intangible assets, net	13		378,756		293,841
Other long-term assets	9		10,485		10,771

Total non-current assets			41,472,015		39,710,965

Total assets		￦	53,344,729		52,320,436

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of June 30, 2013 and December 31, 2012

(Unaudited)


(in millions of Won)
	Notes	June 30, 2013			December 31, 2012
Liabilities
Trade accounts and notes payable	20,32	￦	972,486			978,581
Short-term borrowings	4,14,20		2,753,071			2,116,540
Other payables	15,20,32		1,160,087			1,270,040
Other short-term financial liabilities	16,20		9,120			16,892
Current income tax liabilities	30		135,865			84,355
Provisions	17		7,260			6,239
Other current liabilities	19		65,197			70,865

Total current liabilities			5,103,086			4,543,512

Long-term borrowings	6,14,20		6,303,307			7,487,234
Other payables	15,20		121,533			128,812
Other long-term financial liabilities	16,20		166,820			72,920
Net defined benefit liabilities	18		185,982			140,256
Deferred tax liabilities	30		826,658			779,312
Other long-term liabilities	19		3,688			3,842

Total non-current liabilities			7,607,988			8,612,376

Total liabilities			12,711,074			13,155,888

Shareholders’ Equity
Share capital	21		482,403			482,403
Capital surplus	21		1,227,731			1,227,692
Hybrid bonds	22		996,919			—
Accumulated other comprehensive income	23		217,517			3,362
Treasury shares	24		(2,391,308	)		(2,391,406	)
Retained earnings			40,100,393			39,842,497

Total shareholder’s equity			40,633,655			39,164,548

Total liabilities and shareholders’ equity		￦	53,344,729			52,320,436

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2013 and 2012

(Unaudited)


(in millions of Won, except per share amounts)			For the three-month periods ended June 30						For the six-month periods ended June 30
	Notes		2013			2012			2013			2012
Revenue		32	￦	7,739,748			9,223,384			15,424,412			18,683,803
Cost of sales		7,28,32		(6,586,411	)		(7,669,444	)		(13,233,268	)		(16,190,413	)

Gross profit				1,153,337			1,553,940			2,191,144			2,493,390
Selling and administrative expenses		25,28,32
Administrative expenses				(217,093	)		(213,371	)		(436,274	)		(435,087	)
Selling expenses				(232,852	)		(239,337	)		(470,121	)		(485,632	)

Operating profit		26		703,392			1,101,232			1,284,749			1,572,671
Finance income and costs		20,29
Finance income				195,542			92,165			547,552			552,738
Finance costs				(398,611	)		(253,991	)		(856,731	)		(456,446	)
Other non-operating income and expenses		26,27,32
Other non-operating income				15,894			7,034			50,134			17,470
Other non-operating expenses		28		(67,957	)		(51,045	)		(125,783	)		(110,766	)

Profit before income tax				448,260			895,395			899,921			1,575,667
Income tax expense		30		(66,642	)		(191,432	)		(134,878	)		(333,145	)

Profit for the period				381,618			703,963			765,043			1,242,522
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss :
Remeasurements of defined benefit pension plans, net of tax		18		31,602			(16,435	)		(41,548	)		(3,569	)
Items that may be reclassified subsequently to profit or loss :
Net changes in unrealized fair value of available-for-sale investments, net of tax		6,23		67,662			(336,921	)		214,155			(102,976	)

Total comprehensive income			￦	480,882			350,607			937,650			1,135,977

Basic and diluted earnings per share		31	￦	4,913			9,113			9,877			16,086

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2013 and 2012

(Unaudited)


(in millions of Won)	Share capital		Capital surplus		Hybrid bonds		Accumulated other comprehensive income			Treasury shares			Retained earnings			Total
Balance as of January 1, 2012	￦	482,403		1,227,692		—		156,707			(2,391,406	)		38,122,620			37,598,016
Comprehensive income:
Profit for the period		—		—		—		—			—			1,242,522			1,242,522
Net changes in unrealized fair value of available-for-sale investments, net of tax		—		—		—		(102,976	)		—			—			(102,976	)
Remeasurements of defined benefit pension plans, net of tax		—		—		—		—			—			(3,569	)		(3,569	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(579,333	)		(579,333	)

Balance as of June 30, 2012	￦	482,403		1,227,692		—		53,731			(2,391,406	)		38,782,240			38,154,660


	Share capital		Capital surplus		Hybrid bonds		Accumulated other comprehensive income			Treasury shares			Retained earnings			Total
Balance as of January 1, 2013	￦	482,403		1,227,692		—		3,362			(2,391,406	)		39,842,497			39,164,548
Comprehensive income :
Profit for the period		—		—		—		—			—			765,043			765,043
Net changes in unrealized fair value of available-for-sale investments, net of tax		—		—		—		214,155			—			—			214,155
Remeasurements of defined benefit pension plans, net of tax		—		—		—		—			—			(41,548	)		(41,548	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(463,467	)		(463,467	)
Issuance of hybrid bonds		—		—		996,919		—			—			—			996,919
Interest of hybrid bonds		—		—		—		—			—			(2,132	)		(2,132	)
Disposal of treasury shares		—		39		—		—			98			—			137

Balance as of June 30, 2013	￦	482,403		1,227,731		996,919		217,517			(2,391,308	)		40,100,393			40,633,655

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Cash Flows

For the six-month periods ended June 30, 2013 and 2012

(Unaudited)


(in millions of Won)	Notes	June 30, 2013			June 30, 2012
Cash flows from operating activities
Profit for the period		￦	765,043			1,242,522
Adjustments for :
Costs for defined benefit plans			62,362			53,702
Depreciation			943,541			902,645
Amortization			18,669			19,406
Finance income			(370,849	)		(422,830	)
Finance costs			678,005			325,833
Gain on disposal of property, plant and equipment			(5,002	)		(5,535	)
Loss on disposal of property, plant and equipment			67,383			40,631
Loss on disposal of investments in subsidiaries and associates			12,271			395
Income tax expense			134,878			333,145
Others			(9,953	)		14,224
Changes in operating assets and liabilities	34		586,880			320,453
Interest received			59,367			56,762
Interest paid			(206,269	)		(228,092	)
Dividends received			210,200			155,112
Income taxes paid			(91,141	)		(188,053	)

Net cash provided by operating activities		￦	2,855,385			2,620,320

Cash flows from investing activities
Proceeds from disposal of short-term financial instruments			1,929,975			1,482,411
Proceeds from disposal of long-term financial instruments			3			—
Decrease in held-to-maturity investments			30,000			—
Proceeds from disposal of available-for-sale investments			60,856			579,698
Collection of long-term loans			7,491			7,864
Proceeds from disposal of investment in subsidiaries and associates			5,153			—
Proceeds from (payment for) disposal of property, plant and equipment			(20,814	)		4,737
Proceeds from disposal of intangible assets			1,100			453
Proceeds from disposal of assets held for sale			—			3,378
Acquisition of short-term financial investments			(1,670,441	)		(1,347,951	)
Acquisition of available-for-sale investments			(48,028	)		(19,305	)
Increase in long-term loans			(361	)		(3,483	)
Acquisition of investment in subsidiaries and associates			(565,192	)		(786,562	)
Acquisition of property, plant and equipment			(1,947,895	)		(981,559	)
Acquisition of intangible assets			(56,465	)		(27,425	)

Net cash used in investing activities		￦	(2,274,618	)		(1,087,744	)

Cash flows from financing activities
Proceeds from borrowings			789,995			2,066,801
Increase in other long-term liabilities			1,788			1,558
Receipt of government grants			5,000			—
Proceeds from issuance of hybrid bonds			996,919			—
Repayment of borrowings			(1,533,727	)		(2,632,735	)
Decrease in other long-term liabilities			(1,590	)		(1,308	)
Decrease in derivative liabilities			(23,348	)		—
Payment of cash dividends			(463,508	)		(579,333	)

Net cash used in financing activities		￦	(228,471	)		(1,145,017	)

Net increase in cash and cash equivalents			352,296			387,559
Cash and cash equivalents
Cash and cash equivalents at beginning of the period			1,752,560			1,137,882

Cash and cash equivalents at end of the period		￦	2,104,856			1,525,441

See accompanying notes to the condensed separate interim financial statements.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

1. Reporting Entity

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

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

As of June 30, 2013, the shares of the Company are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

2. Statement of Compliance

Statement of compliance

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

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2012. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

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

Use of estimates and judgements

The preparation of the condensed separate interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the separate financial statements as of and for the year ended December 31, 2012.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2012. The following changes in accounting policy are also expected to be reflected in the Company’s separate financial statements as of and for the year ending December 31, 2013.

(a) Changes in accounting policies

The Company has applied the following new standard and amendments since January 1, 2013.

1) K-IFRS No. 1001, “Presentation of Financial Statements”

2) K-IFRS No. 1019, “Employee Benefits”

3) K-IFRS No. 1113, “Fair Value Measurement”

The details of changes in accounting policies are as follows:

1) Classification of other comprehensive income

2) Employee benefits

3) Fair value measurement

(b) Impact of changes in accounting policy

1)	As management believes the impact of the amendment to K-IFRS No. 1019 and 1113 on the Company’s prior year’s condensed separate interim financial statement is not significant, the comparative period’s condensed separate interim financial statements are not restated.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

2)	Amendments to K-IFRS No. 1001, “Presentation of Financial Statements”

The Company retrospectively applied the amendment to K-IFRS No. 1001, for which the impact on the three-month and the six-month periods ended June 30, 2012 is as follows:


(in millions of Won)	For the three-month period ended June 30, 2012			For the six-month period ended June 30, 2012
Operating profit before adoption of the amendment	￦	1,057,221			1,479,375

Add
Loss on disposals of property, plant and equipment		26,269			40,631
Donations		14,991			37,868
Idle tangible assets expenses		7,672			14,246
Loss on disposals of investment in subsidiaries and associates		—			395
Loss on disposals of assets held for sale		—			9,391
Loss on disposals of intangible assets		122			122
Miscellaneous loss		1,991			8,113

		51,045			110,766

Deduct
Gain on disposals of property, plant and equipment		(3,770	)		(5,535	)
Reversal of impairment of property, plant and equipment		—			(1,606	)
Gain on disposals of assets held for sale		—			(1,150	)
Miscellaneous income		(3,264	)		(9,179	)

		(7,034	)		(17,470	)

Operating profit after adoption of the amendment	￦	1,101,232			1,572,671

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c) New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual periods beginning after January 1, 2013, and the Company has not early adopted them. Management believes the impact of the amendments on the Company’s condensed separate interim financial statements is not significant.

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

The amendments clarified application guidance related to offsetting of a financial asset and a financial liability. The amendments are mandatorily effective for annual periods beginning on or after January 1, 2014 with earlier adoption permitted.

(d) Reclassification

The Company made reclassifications within other receivables, other financial assets, other payables, and other financial liabilities on the accompanying condensed separate statements of financial position as of December 31, 2012 to conform to current period presentation.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Current
Trade accounts and notes receivable	￦	3,808,713			4,099,006
Less: Allowance for doubtful accounts		(13,435	)		(11,976	)

	￦	3,795,278			4,087,030

Non-current
Trade accounts and notes receivable	￦	502			502
Less: Allowance for doubtful accounts		(228	)		(228	)

	￦	274			274

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ￦251,500 million and ￦258,680 million as of June 30, 2013 and December 31, 2012, respectively, and are included in short-term borrowings (note 14).

5. Other Receivables

Other receivables as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Current
Short-term loans	￦	2,000			—
Other accounts receivable		281,143			391,263
Accrued income		10,166			12,531
Other checking accounts		1,647			1,538
Less: Allowance for doubtful accounts		(10,572	)		(10,571	)

	￦	284,384			394,761

Non-current
Long-term loans	￦	59,949			66,775
Long-term other accounts receivable		15,003			6,410
Deposits		2,505			1,920
Less: Allowance for doubtful accounts		(14,453	)		(14,453	)

	￦	63,004			60,652

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

6. Other Financial Assets

(a)	Other short-term financial assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Available-for-sale financial assets
Short-term available-for-sale securities (bonds)	￦	100,000		100,000
Held-to-maturity investments
Current portion of held-to-maturity securities (bonds)		—		29,981
Deposits in financial institutions
Short-term financial instruments (*1)		526,708		786,098
Cash deposits (*2)		12,554		12,699

	￦	639,262		928,778

(*1)	As of June 30, 2013 and December 31, 2012, short-term financial instruments amounting to ￦4,700 million and ￦3,400 million, respectively, are secured in relation to long term borrowings from the National Forestry Cooperative Federation.

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

(b)	Other long-term financial assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Financial assets at fair value through profit or loss
Derivatives assets held for trading	￦	7,586		6,016
Available-for-sale financial assets
Long-term available-for-sale securities (equity instruments)		3,086,793		2,942,915
Long-term available-for-sale securities (bonds)		19,775		18,642
Long-term available-for-sale securities (others)		500		500
Deposit in financial institution
Cash deposits (*1)		38		40

	￦	3,114,692		2,968,113

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c)	Long-term available-for-sale equity securities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013																December 31, 2012
	Number of Shares		Ownership (% )		Acquisition cost		Fair value		Net changes in fair value of available- for-sale investments			Accumulated impairment loss			Book value		Book value
Marketable equity securities
Nippon Steel & Sumitomo Metal Corporation		238,352,000		2.38	￦	719,622		745,556		25,934			—			745,556		624,423
SK Telecom Co., Ltd. (*1)		2,368,630		2.93		610,547		498,267		195,290			(307,570	)		498,267		350,210
KB Financial group Inc. (*2)		11,590,550		3.00		536,517		396,397		—			(140,120	)		396,397		439,282
Hyundai Heavy Industries Co., Ltd.		1,477,000		1.94		343,506		271,030		(72,476	)		—			271,030		357,434
Shinhan Financial group Inc.		4,369,881		0.92		228,778		164,307		41,671			(106,142	)		164,307		169,770
Hana Financial group Inc.		2,430,498		1.00		15,633		80,814		65,181			—			80,814		84,338
Others (10 companies) (*3)						137,774		97,153		29,112			(69,733	)		97,153		157,284

						2,592,377		2,253,524		284,712			(623,565	)		2,253,524		2,182,741
Non-marketable equity securities
The Siam United Steel (*4)		11,071,000		12.30		34,658		61,295		49,162			(22,525	)		61,295		50,717
Nacional Minerios S.A. (*4)		30,784,625		6.48		668,635		555,671		(112,964	)		—			555,671		517,683
Dongbu Metal Co., Ltd. (*4)		3,000,000		10.00		98,242		98,241		(1	)		—			98,241		96,126
Troika Fund (*4)		8,573,849,588		3.66		8,574		7,004		(1,570	)		—			7,004		6,499
Others (36 companies) (*5)						119,204		111,058		251			(8,397	)		111,058		89,149

						929,313		833,269		(65,122	)		(30,922	)		833,269		760,174

					￦	3,521,690		3,086,793		219,590			(654,487	)		3,086,793		2,942,915

(*1)	As of June 30, 2013, 2,368,628 shares equivalent to 21,317,653 American Depository Receipts (“ADRs”) of SK Telecom Co., Ltd. have been pledged as collateral for the exchangeable bonds issued.

(*2)	The Company recognized ￦140,120 million of impairment loss on investment in KB Financial Group Inc. for the six-month period ended June 30, 2013 due to significant decline in the fair value of its shares for a prolonged period.

(*3)	The Company recognized ￦12,370 million and ￦7,264 million of impairment loss on investment in PT. Krakatau Steel and Steel Flower Co., Ltd., respectively, for the six-month period ended June 30, 2013 due to significant decline in the fair value of their shares.

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

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

7. Inventories

Inventories as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Finished goods	￦	749,101			870,917
Semi-finished goods		1,319,961			1,446,058
By-products		13,019			11,399
Raw materials		1,100,917			1,297,926
Fuel and materials		564,498			607,908
Materials-in-transit		1,236,001			1,169,201
Others		578			621

		4,984,075			5,404,030

Less: Allowance for inventories valuation		(281	)		(370	)

	￦	4,983,794			5,403,660

The amount of valuation losses of inventories recognized within cost of goods sold during the six-month period ended June 30, 2013 and the year ended December 31, 2012 were ￦281 million and ￦370 million, respectively.

8. Assets held for Sale

Assets held for sale as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Investment in subsidiaries (*1)	￦	33,335		—

	￦	33,335		—

(*1)

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

9. Other Assets

Other current assets and other long-term assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Other current assets
Advance payments	￦	8,490			4,505
Prepaid expenses		23,315			38,177

		31,805			42,682

Other long-term assets
Long-term prepaid expenses		7,598			8,216
Others		2,900			2,568
Less : Allowance for doubtful accounts		(13	)		(13	)

	￦	10,485			10,771

10. Investments in Subsidiaries and Associates

(a)	Details of subsidiaries and carrying values as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)				June 30, 2013		December 31, 2012
[Domestic]	Country	Principal operations	Ownership (% )	Book value		Book value
Daewoo International Co., Ltd.	Korea	Trading	60.31	￦	3,371,481		3,371,481
POSCO E&C Co., Ltd.	Korea	Engineering and Construction	89.53		1,510,716		1,510,716
POSCO Energy Corp.	Korea	Generation of Electricity	89.02		658,176		658,176
POSCO Specialty Steel Co., Ltd.	Korea	Steel manufacturing and Sales	94.74		628,842		628,842
POSCO P&S Co., Ltd.	Korea	Steel sales and service	95.31		421,927		421,927
POSCO AST Co., Ltd.	Korea	Steel manufacturing and Sales	100.00		176,609		176,609
POSCO Coated &	Korea	Coated steel manufacturing	56.87		108,421		108,421
Color Steel Co., Ltd.
POSCO M-TECH Co., Ltd. (*1)	Korea	Packing materials manufacturing	48.85		107,278		107,278
POSTECH Venture Capital Corp	Korea	Investment in venture companies	95.00		103,780		103,780
POSCO Chemtec Company Ltd.	Korea	Manufacturing and Sales	60.00		100,535		100,535
POSCO ICT Co., Ltd.	Korea	Computer hardware and software distribution	72.54		70,990		70,990
POSMATE Co., Ltd. (*2)	Korea	Business facility maintenance	54.46		63,222		—
POS-HiMETAL Co., Ltd.	Korea	Steel manufacturing and Sales	65.00		49,452		49,452
POSCO Family Strategy Fund	Korea	Financial investment	60.79		40,000		40,000
Busan E&E Co., Ltd. (*3)	Korea	Handling and disposal of water matter	70.00		30,148		30,148
Others (11 companies)					176,265		239,528

				￦	7,617,842		7,617,883

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)


					June 30, 2013		December 31, 2012
[Foreign]	Country	Principal operations	Ownership (% )		Book value		Book value
PT. KRAKATAU STEEL POSCO	Indonesia	Steel manufacturing and sales		70.00	￦	762,298		732,503
POSCO-Thainox Public Company Ltd.	Thailand	Stainless steel manufacturing and sales		84.93		551,807		551,807
POSCO Australia Pty. Ltd.	Austrailia	Iron ore sales and mine development		100.00		330,623		330,623
POSCO WA Pty. Ltd.	Austrailia	Steel sales and mine development		100.00		317,506		312,851
POSCO Maharashtra Steel Pvt. Ltd.	India	Steel manufacturing and sales		100.00		333,048		302,053
Zhangjiagang Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing and sales		58.60		284,988		285,201
POSCO China Holding Corp.	China	Investment management		100.00		240,430		223,436
POSCO-India Private Ltd.	India	Steel manufacturing and sales		99.99		184,815		184,815
POSCO-Mexico S.A. DE C.V.	Mexico	Plate steel manufacturing		84.84		182,410		182,048
POSCO-Vietnam Co., Ltd.	Vietnam	Steel manufacturing		85.00		154,790		155,428
POSCO VST Co., Ltd.	Vietnam	Stainless steel manufacturing		95.65		145,375		145,462
POSCO America Corporation	USA	Trading-Steel		99.45		140,381		140,381
POSCO(Guangdong) Automotive Steel Co., Ltd.	China	Steel manufacturing and selling		83.64		131,579		131,618
POSCO ASSAN TST STEEL Industry	Turkey	Steel manufacturing and sales		60.00		95,964		96,215
POSCO Investment Co., Ltd.	Hong Kong	Finance		99.99		87,693		86,323
POSCO-JAPAN Co., Ltd.	Japan	Trading-Steel		100.00		68,436		68,436
Qingdao Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing and sales		70.00		65,982		65,982
POSCO (Suzhou) Automotive Processing Center Co., Ltd.	China	Steel manufacturing and Sales		90.00		62,494		62,494
POSCO Electrical Steel India Private Limited	India	Electrical steel manufacturing and Sales		100.00		55,694		48,058
POSCO-AFRICA (Proprietary) Limited	South Africa	Trading		100.00		50,297		5,629
POSCO China Dalian Plate Processing Center Co., Ltd.	China	Heavy plate processing and Marketing		80.00		32,992		32,992
POSCO Asia Co., Ltd.	Hong Kong	Steel transit trade		100.00		32,189		32,189
POSCO(Guangdong) Steel Co., Ltd.	China	Plate steel sheet manufacturing		87.04		31,299		31,299
POSCO-Malaysia SDN. BHD.	Malaysia	Steel manufacturing and Sales		80.07		31,027		31,027
POSCO-URUGUAY S.A.	Uruguay	Wood manufacturing and Sales		98.00		28,722		27,724
Others (28 companies)						291,039		278,868

						4,693,878		4,545,462

					￦	12,311,720		12,163,345

(*1)	As of June 30, 2013, this was classified as an investment in a subsidiary as the Company has control over of more than half of the voting rights by virtue of an agreement with Postech, which has 4.72% of ownership in POSCO M-TECH Co., Ltd.

(*2)	It was reclassified from associate to subsidiary due to the merger with Seoung Gwang Co., Ltd. during the six-month period ended June 30, 2013.

(*3)	As of June 30, 2013, this investment is collateral for the Company’s guarantee provided to certain borrowings of its subsidiary from banks.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	Details of associates and carrying values as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)				June 30, 2013		December 31, 2012
[Domestic]	Country	Principal operations	Ownership (% )	Book value		Book value
EQP POSCO Global 1st Fund	Korea	Mine investment	25.80	￦	169,106		—
Sungjin Geotec Co., Ltd.	Korea	Industrial machinery manufacturing	23.71		159,878		159,878
SNNC Co., Ltd.	Korea	Material manufacturing	49.00		100,655		100,655
Posco ESM	Korea	Secondary battery manufacturing	50.00		43,000		43,000
POSMATE Co., Ltd. (*1)	Korea	Business facilities maintenance	—		—		33,295
Others (5 companies)					18,921		9,811

					491,560		346,639

[Foreign]
ROY HILL HOLDINGS PTY LTD.(*2)	Austrailia	Mine development	10.00		597,980		537,369
POSCO-NPS Niobium LLC.	USA	Mine development	50.00		364,609		364,609
Companhia Siderurgica do Pecem(CSP)	Brazil	Steel manufacturing and sales	20.00		366,817		265,740
Nickel Mining Company SAS	New Caledonia	Raw material manufacturing and Sales	49.00		189,197		189,197
7623704 Canada Inc.(*2)	Canada	Mine investment	14.12		124,341		—
KOBRASCO	Brazil	Facilities lease	50.00		98,962		98,962
BX Steel POSCO Cold Rolled Sheet Co., Ltd.	China	Steel manufacturing and sales	25.00		63,874		63,901
Others (12 companies)					38,832		70,291

					1,844,612		1,590,069

				￦	2,336,172		1,936,708

(*1)	It was reclassified from associate to subsidiary due to the merger with Seoung Gwang Co., Ltd. during the six-month period ended June 30, 2013.

(*2)	Although the Company holds less than 20% ownership, the Company classifies its investment in Roy Hill Holdings Pty Ltd. and 7623704 Canada Inc. as investments in associates, as the Company has significant influence over the entity pursuant to the related contractual arrangement.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

11. Investment Property, Net

(a)	The changes in carrying value in investment property for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

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


(in millions of Won)	Beginning		*Depreciation (1)**			*Transfer (2)**		Ending
Land	￦	41,811		—			2,270		44,081
Buildings		63,697		(1,462	)		3,457		65,692
Structures		5,018		(97	)		272		5,193

Total	￦	110,526		(1,559	)		5,999		114,966

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

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

2) For the year ended December 31, 2012


(in millions of Won)	Beginning		*Depreciation (1)**			*Transfer (2)**			Ending
Land	￦	43,258		—			(1,447	)		41,811
Buildings		68,776		(2,905	)		(2,174	)		63,697
Structures		5,384		(194	)		(172	)		5,018

Total	￦	117,418		(3,099	)		(3,793	)		110,526

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

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

12. Property, Plant and Equipment, Net

(a)	The changes in carrying value of property, plant and equipment for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

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


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Others (1)**			Ending
Land	￦	1,367,822		—		(93	)		—			22,966			1,390,695
Buildings		2,734,839		1,597		(1,665	)		(119,701	)		80,344			2,695,414
Structures		2,113,750		424		(914	)		(87,526	)		258,366			2,284,100
Machinery and equipment		12,888,614		25,968		(38,045	)		(710,877	)		1,034,940			13,200,600
Vehicles		13,039		336		(4	)		(3,727	)		3,914			13,558
Tools		29,693		850		(8	)		(7,381	)		1,423			24,577
Furniture and fixtures		67,431		1,103		(838	)		(12,452	)		1,163			56,407
Capital lease assets		7,644		—		—			(318	)		—			7,326
Construction-in-progress		2,943,903		1,987,707		—			—			(1,462,341	)		3,469,269

Total	￦	22,166,735		2,017,985		(41,567	)		(941,982	)		(59,225	)		23,141,946

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

2) For the year ended December 31, 2012


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Others (1)**			Ending
Land	￦	1,275,564		—		(10,242	)		—			102,500			1,367,822
Buildings		2,831,757		7,512		(5,269	)		(237,038	)		137,877			2,734,839
Structures		2,061,348		11,448		(21,146	)		(165,632	)		227,732			2,113,750
Machinery and equipment		12,916,329		80,565		(49,789	)		(1,382,901	)		1,324,410			12,888,614
Vehicles		19,341		256		(22	)		(7,893	)		1,357			13,039
Tools		38,022		2,367		(2	)		(15,123	)		4,429			29,693
Furniture and fixtures		72,334		4,726		(156	)		(28,484	)		19,011			67,431
Capital lease assets		8,281		—		—			(637	)		—			7,644
Construction-in-progress		2,310,159		2,452,832		—			—			(1,819,088	)		2,943,903

Total	￦	21,533,135		2,559,706		(86,626	)		(1,837,708	)		(1,772	)		22,166,735

(*1)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment as well as assets transferred from investment property and assets held for sale.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

13. Intangible Assets, Net

(a)	Changes in carrying values of intangible assets for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

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


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			*Transfer (2)**			Ending
Intellectual property rights	￦	8,904		—		—			(704	)		2,830			11,030
Membership (*1)		49,560		1,022		(1,124	)		—			—			49,458
Development expense		30,092		41		—			(8,186	)		9,247			31,194
Port facilities usage rights		87,983		—		—			(4,910	)		49,258			132,331
Construction-in-progress		96,035		55,013		—			—			(15,707	)		135,341
Other intangible assets		21,267		389		—			(4,869	)		2,615			19,402

	￦	293,841		56,465		(1,124	)		(18,669	)		48,243			378,756

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

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

2) For the year ended December 31, 2012


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			*Impairment (2)**			*Transfer (3)**			Ending
Intellectual property rights	￦	6,376		400		(494	)		(1,053	)		—			3,675			8,904
Membership (*1)		44,523		767		(992	)		—			(6,495	)		11,757			49,560
Development expense		29,182		548		—			(16,905	)		—			17,267			30,092
Port facilities usage rights		99,553		—		—			(11,570	)		—			—			87,983
Construction-in-progress		22,000		90,269		—			—			—			(16,234	)		96,035
Other intangible assets		21,262		2,320		—			(10,858	)		—			8,543			21,267

	￦	222,896		94,304		(1,486	)		(40,386	)		(6,495	)		25,008			293,841

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

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

(*3)	Represents assets transferred form construction-in-progress to other intangible assets and assets transferred from property, plant and equipment. Also represents membership transferred from financial instruments as the estimate for the possibility of membership renewal is changed.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

14. Borrowings

(a)	Borrowings as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Short-term borrowings
Short-term borrowings	￦	695,360			796,662
Current portion of long-term borrowings		103,117			34,769
Current portion of loans from foreign financial institutions		953			901
Current portion of debentures		1,954,477			1,283,742
Less : Current portion of discount on debentures issued		(3,099	)		(1,953	)
Add : Current portion of premium on debentures redemption		2,263			2,419

	￦	2,753,071			2,116,540

Long-term borrowings
Long-term borrowings	￦	831,180			843,014
Loans from foreign financial institutions		1,649			2,009
Debentures		5,499,018			6,680,192
Less : Discount on debentures issued		(43,167	)		(53,616	)
Add : Premium on debentures redemption		14,627			15,635

	￦	6,303,307			7,487,234

(b)	Short-term borrowings as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won) Bank	Issuance date		Maturity date		Annual interest rate (%)		June 30, 2013		December 31, 2012
BOA		2013-04-18		2013-09-04		0.62~0.63	￦	114,949		114,093
DBS		2013-03-29		2013-09-25		0.53~0.65		103,568		121,544
Mizho		2013-04-12		2013-08-27		0.57~0.58		90,067		—
HSBC		2013-04-12		2013-07-11		0.58		56,495		—
Deutsche		2013-04-19		2013-07-18		0.53		46,267		133,833
BTMU		2013-04-18		2013-07-17		0.68		32,514		—
RBS		—		—		—		—		93,230
JP Morgan		—		—		—		—		75,282
Others (discount on account receivables)								251,500		258,680

							￦	695,360		796,662

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c)	Current portion of long-term borrowings as of June 30, 2013 and December 31, 2012 are as follows:

(in millions of Won)

Borrowers

Issuance date

Maturity date

Annual
interest rate (%)

June 30, 2013

December 31, 2012

Borrowings

Woori Bank and others

2006.10.31~
2011.04.28

2017.03.15~
2024.03.15

0.75~1.75

￦ 13,929

12,236

Borrowings

Korea EXIM Bank

2010.02.18~
2010.07.26

2017.02.18~
2017.07.26

4.09~4.50

89,188

22,533

Loans from foreign financial institutions

NATIXIS (*1)

1984.06.30~
1986.03.31

2014.12.30~
2017.03.31

2.00

953

901

Debentures

Domestic debentures 288 and others

2008.08.05~
2009.01.20

2013.08.05~
2014.01.20

5.40~6.52

999,690

499,711

Debentures

Exchangeable Bond and others

2008.08.19~
2009.03.26

2013.08.19~
2014.03.26

0~8.75

953,951

784,497

￦ 2,057,711

1,319,878

(*1)	As of June 30, 2013, and December 31, 2012, Korea Development Bank has provided guarantees for borrowings from foreign financial institutions.

(d)	Long-term borrowings excluding current portion, as of June 30, 2013 and December 31, 2012 are as follows:

(in millions of Won)

Borrowers

Issuance date

Maturity date

Annual
interest rate (%)

June 30, 2013

December 31, 2012

Borrowings

Woori Bank and others (*1)

2006.10.31~
2013.05.08

2017.03.15~
2041.05.08

0.75~1.75

￦ 78,960

85,519

Borrowings

Korea National Oil Corporation

2007.12.27~
2012.12.28

2022.06.25~
2026.12.29

Government

bond~2.25

14,659

13,657

Borrowings

Korea EXIM Bank

2010.02.18~
2013.05.31

2017.02.18~
2018.03.23

4.09~4.50

737,561

743,839

Loans from foreign
financial institutions

NATIXIS (*2)

1984.06.30~
1986.03.31

2014.12.30~
2017.03.31

2.00

1,649

2,009

Debentures

Domestic debentures 301 and others

2010.08.04~
2011.11.28

2015.08.04~
2021.11.28

3.78~4.81

2,593,646

3,092,140

Debentures

Exchangeable Bond (*3) and others

2006.08.10~
2011.12.22

2014.10.20~
2021.12.22

0~5.88

2,876,832

3,550,070

￦

6,303,307

7,487,234

(*1)	Short-term financial instruments amounting to ￦4,700 million and ￦3,400 million, respectively, are collateral for long-term borrowings from National Forestry Cooperative Federation as of June 30, 2013 and December 31, 2012.

(*2)	As of June 30, 2013 and December 31, 2012, Korea Development Bank has provided guarantees for borrowings from foreign financial institutions.

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

15. Other Payables

Other payables as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Current
Accounts payable	￦	765,573		826,075
Accrued expenses		371,552		427,314
Dividend payable		8,584		6,493
Finance lease liabilities		1,184		1,088
Withholdings		13,194		9,070

	￦	1,160,087		1,270,040

Non-current
Long-term accounts payable	￦	90,394		88,938
Accrued expenses		19,230		24,664
Finance lease liabilities		6,047		6,246
Long-term withholdings		5,862		8,964

	￦	121,533		128,812

16. Other Financial Liabilities

Other financial liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Current
Derivative instruments liabilities	￦	—		9,499
Financial guarantee liabilities		9,120		7,393

	￦	9,120		16,892

Non-current
Derivative instruments liabilities	￦	108,463		31,256
Financial guarantee liabilities		58,357		41,664

	￦	166,820		72,920

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

17. Provisions

The changes in provisions for the six-month period ended June 30, 2013 and the year ended December 31, 2012 were as follows:

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


(in millions of Won)	Beginning		Increase		Utilization			Ending
Estimated allowance at the end of period (*1)	￦	6,239		6,022		(5,001	)		7,260

(*1)

Represents the provision for bonuses.

(b)	For the year ended December 31, 2012


(in millions of Won)	Beginning		Increase		Utilization			Ending
Estimated allowance at the end of period (*1)	￦	4,451		241,498		(239,710	)		6,239

(*1)

Represents the provision for bonuses.

18. Employee Benefits

(a)	Defined contribution plans

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

The expense related to post-employment benefit plans under defined contribution plans for the three-month and six-month periods ended June 30, 2013 and 2012 are as follows:

(in millions of Won)

For the three -month periods
ended June 30

For the six-month periods
ended June 30

2013

2012

2013

2012

Expense related to post-employment benefit plans under defined contribution plans

￦

3,847

2,802

7,352

5,357

(b)	Defined benefit plans

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c)	The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Present value of funded obligations	￦	907,449			817,618
Fair value of plan assets		(721,467	)		(677,362	)

Net defined benefit liabilities	￦	185,982			140,256

(d)	The changes in present value of defined benefit obligations for the six-month period ended June 30, 2013 and the year ended December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Defined benefit obligation at the beginning of period	￦	817,618			690,321
Current service costs		60,521			99,066
Interest costs		13,972			31,156
Actuarial losses		56,858			63,184
Benefits paid		(41,520	)		(66,109	)

Defined benefit obligation at the end of period	￦	907,449			817,618

(e)	The changes in the fair value of plan assets for the six-month period ended June 30, 2013 and the year ended December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013			December 31, 2012
Fair value of plan assets at the beginning of period	￦	677,362			513,673
Interest on plan assets		12,131			23,115
Remeasurement of plan assets		2,045			2,732
Contributions to plan assets		50,000			180,000
Benefits paid		(20,071	)		(42,158	)

Fair value of plan assets at the end of period	￦	721,467			677,362

(f)	The amounts recognized in the statements of comprehensive income for the three-month and six month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods ended June 30				For the six-month periods ended June 30
(in millions of Won)	2013		2012		2013		2012
Current service costs	￦	30,054		24,607		60,521		49,681
Net interest costs		921		2,011		1,841		4,021

	￦	30,975		26,618		62,362		53,702

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

19. Other Liabilities

(a) Other liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Current
Advances received	￦	43,332		44,488
Withholding		19,802		20,962
Unearned revenue		2,063		5,415

		65,197		70,865

Non-current
Unearned revenue		688		842
Others		3,000		3,000

	￦	3,688		3,842

20. Financial Instruments

(a) Classification of financial instruments

1) Financial assets as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Financial assets at fair value through profit or loss Derivatives assets held for trading	￦	7,586		6,016
Available-for-sale financial assets		3,207,068		3,062,057
Held-to-maturity investments		—		29,981
Loans and receivables		6,636,618		6,833,586

	￦	9,851,272		9,931,640

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

2) Financial liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Financial liabilities at fair value through profit or loss Derivatives liabilities held for trading	￦	108,463		40,755

Financial liabilities measured as amortized cost
Trade accounts and notes payable		972,486		978,581
Borrowings		9,056,378		9,603,774
Financial guarantee liabilities (*1)		67,477		49,057
Others		1,281,620		1,300,526

		11,377,961		11,931,938

	￦	11,486,424		11,972,693

(*1)	Financial liabilities recognized in connection with financial guarantee contracts as of June 30, 2013 are as follows:


(in millions of Won)
Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent
POSCO(Guangdong)	ANZ	USD	10,000,000		11,497
Automotive Steel Co., Ltd.	BOA	USD	50,000,000		57,485
	BTMU	USD	24,000,000		27,593
	DBS	USD	35,000,000		40,240
	ING	USD	23,600,000		27,133
	SCB	USD	35,000,000		40,240
	SMBC	USD	35,000,000		40,240
BX STEEL POSCO Cold Rolled	Construction Bank	USD	880,000		1,012
Sheet Co., Ltd.	China Bank	USD	1,400,000		1,610
Zhangjiagang Pohang	BTMU	USD	30,000,000		34,491
Stainless Steel Co., Ltd.	Credit Agicole	USD	50,000,000		57,485
	Mizuho	USD	80,000,000		91,976
POSCO Maharashtra	Export-Import Bank of Korea	USD	193,000,000		221,892
Steel Pvt. Ltd.	Citi	USD	60,000,000		68,982
	DBS	USD	100,000,000		114,970
	HSBC	USD	80,000,000		91,976
	ING	USD	30,000,000		34,491
	KDB	USD	30,000,000		34,491
	SC	USD	40,000,000		45,988
	SCB	USD	33,069,000		38,019
POSCO ASSAN TST STEEL Industry	SMBC and others	USD	188,392,500		216,595
POSCO Electrical Steel India Private Limited	ING and others	USD	84,000,000		96,575
POSCO Investment Co., Ltd.	BOA	USD	45,000,000		51,737
	BOC	CNY	350,000,000		65,440
	BTMU	USD	30,000,000		34,491
	HSBC	USD	80,000,000		91,976
	ING	USD	30,000,000		34,491
	JP Morgan	USD	50,000,000		57,485
	KDB	USD	70,000,000		80,479
	SCB	USD	45,000,000		51,737
	SMBC	USD	30,000,000		34,491

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)


(in millions of Won)
Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent
POSCO-Mexico S.A. DE C.V	BOA	USD	40,000,000		45,988
	HSBC	USD	40,000,000		45,988
	KDB	USD	50,000,000		57,485
	Mizuho	USD	45,000,000		51,737
	SMBC	USD	69,725,000		80,163
POSCO-Vietnam Co., Ltd.	Export-Import Bank of Korea	USD	200,000,000		229,940
POSCO VST Co., Ltd.	ANZ	USD	25,000,000		28,743
	HSBC	USD	20,000,000		22,994
	Mizuho	USD	20,000,000		22,994
POSUK Titanium LLP	Shinhan Bank	USD	18,000,000		20,695
PT. KRAKATAU POSCO	Export-Import Bank of Korea	USD	490,000,000		563,353
	ANZ	USD	52,500,000		60,359
	BOA	USD	35,000,000		40,240
	BTMU	USD	119,000,000		136,814
	Credit Suisse	USD	91,000,000		104,623
	HSBC	USD	91,000,000		104,623
	Mizuho	USD	105,000,000		120,719
	SCB	USD	86,800,000		99,794
	SMBC	USD	119,000,000		136,814
	The Tokyo Star Bank, Ltd.	USD	21,000,000		24,144
United Spiral Pipe, LLC	Shinhan Bank	USD	24,500,000		28,168
		USD	3,355,866,500		3,858,246

		CNY	350,000,000		65,440

Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2013 and 2012 were as follows:

June 30, 2013


(in millions of Won)	Finance income and costs
	Interest income (cost)			Dividend income (*1)		Gain and loss on foreign currency transactions			Gain and loss on foreign currency translations			Gain and loss on disposal			Others			Total			Other comprehensive income
Financial assets at fair value through profit or loss	￦	—			—		—			—			8,463			1,570			10,033			—
Available-for-sale financial assets		1,184			38,404		—			—			42,064			(159,755	)		(78,103	)		214,155
Held-to-maturity investments		367			—		—			—			—			—			367			—
Loans and receivables		55,467			—		37,102			10,984			(127	)		(258	)		103,168			—
Financial liabilities at fair value through profit or loss		—			—		—			—			—			(91,756	)		(91,756	)		—
Financial liabilities at amortized cost		(148,094	)		—		(46,442	)		(193,532	)		—			(189	)		(388,257	)		—

	￦	(91,076	)		38,404		(9,340	)		(182,548	)		50,400			(250,388	)		(444,548	)		214,155

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

‚ June 30, 2012


(in millions of Won)	Finance income and costs
	Interest income (cost)			Dividend income (*1)		Gain and loss on foreign currency transactions			Gain and loss on foreign currency translations			Gain and loss on disposal			Others			Total			Other comprehensive income
Financial assets at fair value through profit or loss	￦	—			—		—			—			(1,084	)		—			(1,084	)		—
Available-for-sale financial assets		—			108,125		—			—			59,845			(60,677	)		107,293			(102,976	)
Held-to-maturity investments		784			—		—			—			—			—			784			—
Loans and receivables		57,553			—		(10,871	)		(5,051	)		(182	)		(85	)		41,364			—
Financial liabilities at fair value through profit or loss		—			—		—			—			—			7,138			7,138			—
Financial liabilities at amortized cost		(206,011	)		—		12,028			34,044			—			(510	)		(160,449	)		—

		￦(147,674)			108,125		1,157			28,993			58,579			(54,134	)		(4,954	)		(102,976	)

(*1)	Finance income in the statement of comprehensive income includes the dividends from subsidiaries and associates of ￦101,246 million for the six-month period ended June 30, 2012.

Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2013 and 2012 were as follows:

June 30, 2013


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

	￦	(55,190	)		2,862		16,873			(146,802	)		50,400			(97,521	)		(229,378	)		67,662

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

‚ June 30, 2012


(in millions of Won)	Finance income and costs
	Interest income (cost)			Dividend income (*1)		Gain and loss on foreign currency transactions			Gain and loss on foreign currency translations			Gain and loss on disposal			Others			Total			Other comprehensive income
Financial assets at fair value through profit or loss	￦	—			—		—			—			(1,640	)		—			(1,640	)		—
Available-for-sale financial assets		—			45,421		—			—			59,845			(40,516	)		64,750			(336,921	)
Held-to-maturity investments		390			—		—			—			—			—			390			—
Loans and receivables		28,814			—		14,379			(7,450	)		(182	)		(72	)		35,489			—
Financial liabilities at fair value through profit or loss		—			—		—			—			—			8,915			8,915			—
Financial liabilities at amortized cost		(100,271	)		—		(31,778	)		(162,275	)		—			(192	)		(294,516	)		—

	￦	(71,067	)		45,421		(17,399	)		(169,725	)		58,023			(31,865	)		(186,612	)		(336,921	)

(*1)	Finance income in the statement of comprehensive income includes the dividends from subsidiaries and associates of ￦24,786 million for the three-month period ended June 30, 2012.

(b)	Fair value

Fair value and book value

The carrying amount and the fair value of financial instruments as of June 30, 2013 and December 31, 2012 are as follows :


(in millions of Won)	June 30, 2013				December 31, 2012
	Book value		Fair value		Book value		Fair value
Assets measured at fair value
Available-for-sale financial assets (*1)	￦	2,975,735		2,975,735	￦	2,853,766		2,853,766
Derivatives assets held for trading (*2)		7,586		7,586		6,016		6,016

		2,983,321		2,983,321		2,859,782		2,859,782

Assets measured amortized cost (*3)
Cash and cash equivalents		2,104,856		2,104,856		1,752,560		1,752,560
Trade accounts and notes receivable		3,795,552		3,795,552		4,087,304		4,087,304
Loans and other receivables		736,210		736,210		993,722		993,722
Held-to-maturity investments		—		—		29,981		29,981

		6,636,618		6,636,618		6,863,567		6,863,567

Liabilities measured at fair value
Derivatives liabilities held for trading (*2)		108,463		108,463		40,755		40,755
Liabilities measured amortized cost (*3)
Trade accounts and notes payable		972,486		972,486		978,581		978,581
Borrowings		9,056,378		9,372,928		9,603,774		10,145,751
Financial guarantee liabilities		67,477		67,477		49,057		49,057
Others		1,281,620		1,281,620		1,300,526		1,300,526

	￦	11,377,961		11,694,511	￦	11,931,938		12,473,915

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(*1)

The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average borrowing rates of interest of evaluated companies are used as a discount rate. Available-for-sale financial assets which are not measured at fair value are excluded.

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

(*3)

2) The fair value hierarchy

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

Level 1:

quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:

inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.

Level 3:

inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The fair values of financial instruments by fair value hierarchy as of June 30, 2013 and December 31, 2012 are as follows:

a. June 30, 2013


(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	￦	2,253,524		—		722,211		2,975,735
Derivatives assets held for trading		—		7,586		—		7,586

	￦	2,253,524		7,586		722,211		2,983,321

Financial liabilities
Derivatives liabilities held for trading	￦	—		108,463		—		108,463

b. December 31, 2012


(in millions of Won)	Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	￦	2,182,741		—		671,025		2,853,766
Derivatives assets held for trading		—		6,016		—		6,016

	￦	2,182,741		6,016		671,025		2,859,782

Financial liabilities
Derivatives liabilities held for trading	￦	—		40,755		—		40,755

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

3) Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the separate financial statements as of and for the year ended December 31, 2012

21. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2013 and December 31, 2012 are as follows:


(Share, Won)	June 30, 2013		December 31, 2012
Authorized shares		200,000,000		200,000,000
Par value	￦	5,000		5,000
Issued shares (*1)		87,186,835		87,186,835
Shared capital (*2)	￦	482,403,125,000		482,403,125,000

(*1)	As of June 30, 2013, total shares of ADRs of 52,378,124 are equivalent to 13,094,531 of common stock.

(*2)	As of June 30, 2013, the difference between the ending balance of common stock and the par value of issued common stock is ￦46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Share premium	￦	463,825		463,825
Gain on disposal of treasury shares		763,906		763,867

	￦	1,227,731		1,227,692

22. Hybrid Bonds

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


(in millions of Won)	Date of issue		Date of maturity		Rate of interest (%)		June 30, 2013
Hybrid bond 1-1 (*1)		2013-06-13		2043-06-13		4.3	￦	800,000
Hybrid bond 1-2 (*1)		2013-06-13		2043-06-13		4.6		200,000
Issuance costs								(3,081	)

							￦	996,919

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

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


(in millions of Won)	Hybrid bond 1-1	Hybrid bond 1-2
Issue price	800,000	200,000

Maturity date	30 years (The Company has a right to extend the maturity date)	30 years (The Company has a right to extend the maturity date)

Interest rate	Issue date 2018-06-12 : 4.3%	Issue date 2023-06-12 : 4.6%
	reset every 5 years as follows:	reset every 10 years as follows:
	• After 5 years: return on government bond (5 years) + 1.3%	• After 10 years: return on government bond (10 years) + 1.4%
	• After 10 years: additionally +0.25% according to Step-up clauses	• After 10 years: additionally +0.25% according to Step-up clauses
	• After 25 years: additionally +0.75%	• After 30 years: additionally +0.75%

Interest payments	Quarterly	Quarterly
condition	(Optional deferral of interest payment is available)	(Optional deferral of interest payment is available)

Others	The Company can call the hybrid bond at year 5 and interest payment date afterwards	The Company can call the hybrid bond at year 10 and interest payment date afterwards

23. Accumulated Other Comprehensive Income

(a)	Accumulated other comprehensive income as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	June 30, 2013		December 31, 2012
Accumulated changes in the unrealized fair value of available-for-sale investments, net of tax	￦	217,517		3,362

24. Treasury Shares

As of June 30, 2013, the Company holds 9,941,930 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

25. Selling and Administrative Expenses

(a) Administrative expenses

Administrative expenses for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2013		2012		2013		2012
Wages and salaries	￦	50,418		39,960		100,888		85,515
Expenses related to defined benefit plan		6,258		5,171		12,976		10,593
Other employee benefits		11,639		17,352		22,308		34,850
Travel		4,127		3,445		7,762		7,508
Depreciation		6,235		6,049		12,460		12,285
Amortization		4,398		4,598		9,046		8,930
Rental		13,326		10,058		25,103		20,661
Repairs		2,915		3,164		6,702		5,967
Advertising		22,794		30,030		40,146		59,303
Research & development		31,518		38,644		79,654		70,575
Service fees		42,061		37,984		81,027		75,643
Vehicles maintenance		1,664		1,787		3,481		3,618
Industry association fee		2,092		2,490		5,199		4,936
Training		2,790		4,341		4,456		7,766
Conference		1,131		1,246		2,263		2,701
Bad debt expenses		5,040		426		4,384		5,876
Others		8,687		6,626		18,419		18,360

	￦	217,093		213,371		436,274		435,087

(b) Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2013		2012		2013		2012
Freight and custody expenses	￦	207,494		217,735		423,702		440,013
Operating expenses for distribution center		2,318		2,256		4,452		4,523
Sales commissions		18,106		14,137		32,647		31,680
Sales advertising		1,022		681		1,492		753
Sales promotion		1,665		1,490		3,136		2,723
Sample		318		591		690		862
Sales insurance premium		1,929		2,447		4,002		5,078

	￦	232,852		239,337		470,121		485,632

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

26. Adjusted Operating Profit


	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(in millions of Won)	2013			2012			2013			2012
Operating profits on the statement of comprehensive income	￦	703,392			1,101,232		￦	1,284,749			1,572,671

Add
Gain on disposals of property, plant, and equipment		2,524			3,770			5,002			5,535
Gain on disposals of other long-term assets		—			—			246			—
Gain on disposals of investment in subsidiaries and associates		—			—			14,544			—
Reversal of impairment loss of property, plant and equipment		—			—			—			1,606
Gain on disposals of assets held for sale		—			—			—			1,150
Miscellaneous income		13,370			3,264			30,342			9,179

		15,894			7,034			50,134			17,470

Deduct
Loss on disposals of property, plant and equipment		(48,614	)		(26,269	)		(67,383	)		(40,631	)
Donations		(6,145	)		(14,991	)		(18,476	)		(37,868	)
Idle tangible assets expenses		(9,823	)		(7,672	)		(16,743	)		(14,246	)
Loss on disposals of investment in subsidiaries and associates		—			—			(12,271	)		(395	)
Loss on disposals of assets held for sale		—			—			—			(9,391	)
Loss on disposals of intangible assets		(24	)		(122	)		(24	)		(122	)
Miscellaneous loss		(3,351	)		(1,991	)		(10,886	)		(8,113	)

		(67,957	)		(51,045	)		(125,783	)		(110,766	)

Adjusted operating profit	￦	651,329			1,057,221		￦	1,209,100			1,479,375

27. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2013		2012		2013		2012
Other non-operating income
Gain on disposals of property, plant and equipment	￦	2,524		3,770	￦	5,002		5,535
Reversal of impairment loss of property, plant and equipment		—		—		—		1,606
Gain on disposals of other long-term assets		—		—		246		—
Gain on disposals of assets held for sale		—		—		—		1,150
Gain on disposals of investment in subsidiaries and associates		—		—		14,544		—
Miscellaneous income		13,370		3,264		30,342		9,179

	￦	15,894		7,034	￦	50,134		17,470

Other non-operating expenses
Loss on disposals of property, plant and equipment	￦	48,614		26,269	￦	67,383		40,631
Donations		6,145		14,991		18,476		37,868
Idle tangible assets expenses		9,823		7,672		16,743		14,246
Loss on disposals of investment in subsidiaries and associates		—		—		12,271		395
Loss on disposals of assets held for sale		—		—		—		9,391
Loss on disposal of intangible assets		24		122		24		122
Miscellaneous loss		3,351		1,991		10,886		8,113

	￦	67,957		51,045	￦	125,783		110,766

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

28. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows (excluding finance costs and income tax expense):


	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2013		2012		2013		2012
Changes in inventories (*1)	￦	97,995		66,790	￦	246,204		306,435
Raw materials and consumables used		4,793,915		5,852,444		9,676,491		12,276,675
Employee benefits expenses		352,035		309,127		724,567		617,828
Outsourced processing cost		515,839		493,953		1,014,854		988,344
Depreciation (*2)		478,146		457,185		943,541		902,645
Amortization		9,325		9,914		18,669		19,406
Ordinary research & development expenses		118,953		133,531		259,036		256,294
Electricity and water expenses		213,102		154,674		400,073		309,046
Service fees		56,055		53,472		109,461		106,054
Advertising expenses		22,794		30,030		40,146		59,303
Freight and custody expenses		207,494		217,735		423,702		440,013
Sales commissions		18,106		14,137		32,647		31,680
Loss on disposals of property, plant and equipment		48,614		26,269		67,383		40,631
Other expenses		171,940		353,935		308,671		867,543

	￦	7,104,313		8,173,196	￦	14,265,445		17,221,897

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

(*2)	Includes depreciation expense of investment property.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

29. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(in millions of Won)	2013			2012			2013		2012
Finance income
Interest income	￦	16,516			29,205		￦	57,018		58,338
Dividend income		29,170			70,207			173,771		209,371
Gain on foreign currency transactions		120,014			56,486			168,939		129,352
Gains on foreign exchange translations		(21,583	)		(155,123	)		95,727		63,724
Gain on valuation of derivatives		898			7,131			1,570		7,138
Gain on derivatives transactions		8,463			—			8,463		—
Gain on disposals of financial assets held for trading		—			—			—		556
Gain on disposals of available-for-sale investments		42,064			84,259			42,064		84,259

	￦	195,542			92,165		￦	547,552		552,738

Finance costs
Interest expense	￦	71,706			100,272		￦	148,094		206,012
Loss on foreign currency transactions		103,140			73,885			178,279		128,195
Loss on foreign currency translations		125,219			14,602			278,274		34,731
Loss on valuation of derivatives		40,261			(1,784	)		91,756		—
Impairment loss on available-for-sale investments		57,883			40,516			159,754		60,677
Loss on disposals of available-for-sale investments		—			24,414			—		24,414
Others		402			2,086			574		2,417

	￦	398,611			253,991		￦	856,731		456,446

30. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax income/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and income tax recognized in other comprehensive income. The effective tax rate of the Company for the six-month periods ended June 30, 2013 and 2012 was 15.0% and 21.1%, respectively. The change in effective tax rate was caused mainly by the increase in tax credits and decrease in tax effects due to permanent differences related to non-taxable income.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

31. Earnings Per Share

(a)	Basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows:


	For the three-month periods					For the six-month periods
(in millions of Won except per share information)	ended June 30					ended June 30
(in millions of Won except per share information)	2013			2012		2013			2012
Profit for the period	￦	381,618			703,963	￦	765,043			1,242,522
Interest payment for hybrid bonds		(2,132	)		—		(2,132	)		—
Weighted-average number of common shares outstanding (*1)		77,244,901			77,244,444		77,244,685			77,244,444

Basic and diluted earnings per share	￦	4,913			9,113	￦	9,877			16,086

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


	For the three-month periods						For the six-month periods
	ended June 30						ended June 30
(share)	2013			2012			2013			2012
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(9,941,934	)		(9,942,391	)		(9,942,150	)		(9,942,391	)

Weighted-average number of common shares outstanding		77,244,901			77,244,444			77,244,685			77,244,444

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2013 and 2012, diluted earnings per share is equal to basic earnings per share.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

32. Related Party Transactions

(a)	Significant transactions with related companies for the three-month and six-month periods ended June 30, 2013 and 2012 were as follows:


(in millions of Won)	*Sales and others (1)**								*Purchase and others (2)**
	For the three-month periods				For the six-month periods				For the three-month periods				For the six-month periods
	ended June 30				ended June 30				ended June 30				ended June 30
	2013		2012		2013		2012		2013		2012		2013		2012
*Subsidiaries (3)**
POSCO E&C Co., Ltd.	￦	6,212		3,593	￦	9,578		7,289	￦	873,956		288,010	￦	1,733,051		567,082
POSCO Processing & Service Co., Ltd.		246,811		240,735		456,189		446,568		287,068		297,775		652,034		704,405
POSCO Coated & Color Steel Co., Ltd.		122,541		112,995		234,620		260,076		2,502		848		4,776		2,231
POSCO ICT Co., Ltd.		346		260		670		555		122,481		97,470		211,121		190,254
POSCO Chemtech Company Ltd.		124,805		126,160		254,685		253,409		186,926		197,241		383,338		392,247
POSCO M-TECH Co., Ltd.		4,430		6,475		8,810		13,150		97,084		72,836		176,700		151,902
POSCO TMC Co., Ltd.		48,067		53,349		94,820		99,420		573		226		977		451
POSCO AST Co., Ltd.		126,474		63,000		245,570		143,993		17,753		15,335		33,642		30,795
Daewoo International Corp.		821,038		1,069,632		1,726,238		2,161,520		2,717		3,291		5,701		6,141
POSCO NST Co., Ltd.		—		55,657		—		119,501		—		1,005		—		1,928
POSCO America Corporation		175,695		183,550		289,414		361,411		201		42		260		50
POSCO Canada Co., Ltd.		—		—		—		—		46,342		33,931		63,226		80,241
POSCO Asia Co., Ltd.		491,011		505,175		1,015,738		998,548		18,391		33,291		31,240		51,341
POSCO-Japan Co., Ltd.		293,836		360,051		574,209		710,301		4,251		6,400		6,519		12,947
POSCO-IPPC Pvt. Ltd.		36,701		46,359		69,077		86,534		—		13		—		15
POSCO-Mexico S.A. DE C.V.		74,441		95,124		148,402		160,072		460		—		460		—
Daewoo International Singapore Pte. Ltd.		—		—		—		—		19,523		13,381		38,339		23,285
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		32,667		29,960		70,834		59,413		—		—		—		—
POSCO Maharashtra Steel Private Ltd.		55,078		35,735		90,217		76,242		117		—		157		—
eNtoB Corp.		—		1		—		1		61,112		54,866		119,290		116,504
POSCO Plant Engineering Co., Ltd.		2,371		691		2,392		812		35,733		52,969		79,660		126,342
POS-Himetal Co., Ltd.		4,297		6,421		9,835		12,216		43,101		22,192		75,941		54,447
Posmate Co., Ltd.		225		—		452		—		12,493		—		24,222		—
Others		191,145		207,989		371,341		419,025		57,252		83,680		102,564		149,363

	￦	2,858,191		3,202,912	￦	5,673,091		6,390,056	￦	1,890,036		1,274,802	￦	3,743,218		2,661,971

*Associates (3)**
Posmate Co., Ltd.	￦	—		254	￦	—		500	￦	—		12,914	￦	—		24,995
SNNC Co., Ltd.		576		410		1,022		950		108,285		51,356		213,740		138,901
Sungjin Geotec Co., Ltd.		3,686		3,971		5,993		11,406		—		—		—		—
DONG BANG METAL IND. CO., LTD.		—		26,092		—		54,927		—		—		—		—
KOBRASCO		26,177		—		26,177		—		—		—		—		—
USS-POSCO Industries (UPI)		—		—		—		85		—		—		—		101
Poschrome (Proprietary) Ltd.		—		—		—		—		17,051		18,208		32,603		35,582
POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.		5,691		3,105		8,419		11,260		—		—		—		—
POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.		1,532		8,467		4,101		16,575		—		—		—		—
PT. POSMI Steel Indonesia		2,687		4,329		4,662		6,809		—		—		—		—
POSK (PingHu) Processing Center Co., Ltd.		867		967		2,065		1,935		—		—		—		—
Others		73		2,006		669		3,262		697		2,110		1,842		4,310

	￦	41,289		49,601	￦	53,108		107,709	￦	126,033		84,588	￦	248,185		203,889

	￦	2,899,480		3,252,513	￦	5,726,199		6,497,765	￦	2,016,069		1,359,390	￦	3,991,403		2,865,860

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

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

(*3)	As of June 30, 2013, the Company provided guarantees to related parties (note 33).

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	The related account balances of significant transactions with related companies as of June 30, 2013 and December 31, 2012 are as follows:


(in millions of Won)	*Receivables (1)**				*Payables (1)**
	June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012
Subsidiaries
POSCO E&C Co., Ltd.	￦	176,361		7,977	￦	385,181		403,630
POSCO Processing & Service Co., Ltd.		79,188		64,564		16,023		32,672
POSCO Plant Engineering Co., Ltd.		142		267		11,511		32,297
POSCO ICT Co., Ltd.		209		287		53,393		91,297
POSCO Coated & Color Steel Co., Ltd.		110,695		108,505		1,356		2,618
POSCO Chemtech Company Ltd.		83,989		47,074		81,336		84,538
POSCO TMC Co., Ltd.		34,375		64,862		93		145
POSCO AST Co., Ltd.		102,526		65,575		9,419		7,800
Daewoo International Corp.		156,324		358,824		357		730
POSCO America Corporation		78,457		63,545		—		—
POSCO Asia Co., Ltd.		80,704		102,849		1,389		2,244
POSCO (Thailand) Company Ltd.		5,617		17,986		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		16,574		8,710		—		—
POSCO-Vietnam Co., Ltd.		384		291		—		—
POSCO-Japan Co., Ltd.		48,183		35,400		502		673
POSCO-IPPC Pvt. Ltd.		18,926		—		—		—
POSCO-Mexico S.A. DE C.V.		123,489		131,669		—		—
POSCO M-TECH Co., Ltd.		1,971		1,293		45,191		36,992
eNtoB Corp.		—		3		15,466		16,581
Posmate Co., Ltd.		1,776		—		5,109		—
Others		129,516		126,330		53,948		62,244

	￦	1,249,406		1,206,011	￦	680,274		774,461

Associates
Posmate Co., Ltd.	￦	—		78	￦	—		6,315
SNNC Co., Ltd.		162		229		30,739		37,145
Sungjin Geotec Co., Ltd.		3,423		4,849		—		—
KOBRASCO		6,180		—		—		—
Poschrome (Proprietary) Ltd.		—		—		—		2,273
Others		140		453		600		804

	￦	9,905		5,609	￦	31,339		46,537

	￦	1,259,311		1,211,620	￦	711,613		820,998

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(c)	For the six-month periods ended June 30, 2013 and 2012, details of compensation to key management officers were as follows:


(in millions of Won)	June 30, 2013		June 30, 2012
Short-term benefit	￦	15,301		18,953
Long-term benefits		4,161		7,467
Retirement benefits		4,182		3,470

	￦	23,644		29,890

33. Commitments and Contingencies

(a)	Commitment

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2013, 206 million tons of iron ore and 21 million tons of coal remained to be purchased under such long-term contracts.

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

As of June 30, 2013, the Company entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 3.54 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. The Company is not liable for the repayment of full or part of the money borrowed if the respective projects fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.

As of June 30, 2013, the Company has provided two blank promissory notes and a blank check to Korea Resources Corporation as collateral for long-term domestic borrowings, and has provided six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for long-term foreign currency borrowings.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

(b)	Litigation in progress

Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

Other lawsuits and claims

The Company is involved in 28 other lawsuits and claims for alleged damages aggregating to ￦65.5 billion as of June 30, 2013, which arose in the ordinary course of business. In the opinion of management, these 28 lawsuits and claims will not have a material adverse effect on the Company’s financial position, operating results or cash flows. Additionally, no provision is recorded in connection with these 28 lawsuits and claims as of June 30, 2013 because the Company has not concluded that a probable loss has occurred on any of the lawsuits and claims.

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

(d)

As of June 30, 2013, the Company has provided a supplemental funding agreement amounting to ￦9,800 million, as requested from the creditors for seamless funding to Busan E&E Co., Ltd. under construction of Busan RDF power plant and also provided financial guarantee for business fulfillment insurance amounting to ￦21,329 million related to the construction.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2013

(Unaudited)

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month periods ended June 30, 2013 and 2012 are as follows:


(in millions of Won)	June 30, 2013			June 30, 2012
Financial assets held for trading	￦	—			50,132
Trade accounts and notes receivable		297,810			(226,979	)
Other accounts receivable		65,704			70,520
Accured income		—			(468	)
Advance payments		(4,093	)		845
Prepaid expenses		15,480			(31,470	)
Inventories		419,586			845,411
Long-term guarantee deposits		(569	)		(373	)
Other long-term assets		(89	)		(465	)
Trade accounts and notes payable		(7,657	)		(132,062	)
Dividends Payable		—			(71	)
Other accounsts payable		(61,246	)		(204,242	)
Accrued expenses		(62,083	)		(7,439	)
Advances received		(1,155	)		20,060
Withholdings		(1,160	)		1,948
Unearned revenue		(3,505	)		(34	)
Other long-term liabilities		1,307			22,074
Payment severance benefits		(41,520	)		(38,299	)
Plan assets		(29,930	)		(48,635	)

	￦	586,880			320,453