POSCO (PKX) 6-K Current report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE13a-16 OR15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2019

Commission File Number:1-13368

POSCO

(Translation of registrant’s name into English)

POSCO Center, 440 Teheran-ro, Gangnam-gu, Seoul, Korea, 06194

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form20-F or Form40-F.

Form20-F  ☒            Form40-F  ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1):  ☐

Note: RegulationS-T Rule 101(b)(1) only permits the submission in paper of a Form6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7):  ☐

Note: RegulationS-T Rule 101(b)(7) only permits the submission in paper of a Form6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form6-K submission or other Commission filing on EDGAR.

POSCO is furnishing under cover of Form6-K:

Exhibit 99.1: An English translated documents of POSCO’s INTERIM REPORT of the year 2019.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		POSCO
		(Registrant)
Date: September 6, 2019	By	/s/ Lim,Seung-Kyu
		(Signature)
		Name :  Lim,Seung-Kyu
		Title :  Executive Vice President

Exhibit 99.1

INTERIM REPORT

(From January 1, 2019 to June 30, 2019)

THIS IS AN ENGLISH TRANSLATION OF THE QUARTERLY 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 BASIS 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, 2019 to June 30, 2019)

To:        Korean Financial Services Commission and Korea Exchange

/s/ Chang,In-Hwa

Chang,In-Hwa

President and Representative Director

POSCO

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

Telephone:+82-54-220-0114

/s/ Lim ,Seung-Kyu

Lim, Seung Kyu

Executive Vice President

POSCO

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

Telephone:+82-2-3457-0114

2

TABLE OF CONTENTS

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

Attachment: Independent Auditors’ Review Report
(Consolidated and Separate)

3

I. OVERVIEW

1. Scope of Business

A. POSCO(the “Company”, as of June, 2019)

As of June 2019, the Company’s business scope is as follows:

Business

(1)   To manufacture, market, promote, sell and distribute iron, steel and rolled products;

(2)   To engage in harbor loading and unloading, transportation and warehousing businesses;

(3)   To engage in the management of professional athletic organizations;

(4)   To engage in the supply of gas and power generation as well as in the distribution business thereof and in the resources development business;

(5)   To engage in leasing of real estate and distribution businesses;

(6)   To engage in the supply of district heating business;

(7)   To engage in marine transportation, processing and sales of minerals within or outside of Korea;

(8)   To engage in educational service and other services related to business;

(9)   To engage in manufacture, process and sale ofnon-ferrous metal;

(10)  To engage in technology license sales and engineering business; and

(11)  To engage in all other conducts, activities or businesses which are related, directly or indirectly, to the attainment and continuation of the foregoing purposes

B. POSCO Business Group

(1) Name of the Business Group: POSCO

(2) Companies Belonging to the Business Group

POSCO, POSCO CHEMICAL CO., LTD, POSCO INTERNATIONAL Corporation, POSCO COATED & COLOR STEEL Co., Ltd., POSCO ICT, POSCOM-TECH, Busan E&E Co., Ltd., Suncheon Eco Trans Co., Ltd., SNNC, eNtoB Corporation, UITrans LRT Co. Ltd., POSCO O&M Co., Ltd., POSCO Humans, POSCO ENGINEERING & CONSTRUCTION., LTD., POSCO Research Institute, POSCO A&C, TANCHEON E&E, Pohang Scrap Recycling Distribution Center Co., Ltd., POSCO NIPPON STEEL RHF JOINT VENTURE CO., Ltd., POSCO-Terminal Co., Ltd., POSCO ENERGY CO., LTD., PSC Energy Global Co., Ltd., Gale International Korea, LLC, POSCO Venture Capital Co., Ltd., Pohang Special Welding Co., Ltd., POSCO MITSUBISHI CARBON TECHNOLOGY, POSPower Co., Ltd, Songdo Posco family Housing, HOTEL LAONZENA, POSCO Group University, POSCO PLANTEC Co., Ltd., POSCO e&c Songdo International Building, POSCO Research & Technology, Pohang Techno Valley PFV Corporation, Songdo Development PMC (Project Management Company) LLC.

4

(a) Changes in Companies Belonging to the Business Group

• Exclusion of the Business Group:

POSCO Processing&Service (February 25, 2019)

BLUE O&M Co., Ltd. (February 25, 2019)

MegaAsset Co., Ltd. (February 25, 2019)

POSCO ES MATERIALS (April 9, 2019)

• Name of the Business Group:

From POSMATE to POSCO O&M Co., Ltd. (February 1, 2019)

From POSCO Daewoo Corporation to POSCO INTERNATIONAL Corporation (March 18, 2019)

From POSCO CHEMTECH to POSCO CHEMICAL CO., LTD (March 18, 2019)

From Poscoene to TANCHEON E&E (March 29, 2019)

(3) Related Laws and Regulations

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

Details

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

(b) Prohibition on Debt Guarantees for Affiliated Corporations (Article10-2 of the MRFTA)

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

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

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

(f) Disclosure of Important Facts such as Unlisted Shares (Article11-3 of the MRFTA)

(g) Disclosure of a corporate group (Article11-4 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: 6261Donghaean-ro (Goedong-dong),Nam-gu,Pohang-si, Gyeongsangbuk -do, Korea

5

(2) Steel Works and Offices

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

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

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

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

United Arab Emirates(Dubai), Iran(Teheran), European Union(Dusseldorf, Germany), Brazil(Rio de Janeiro), Argentina(Jujuy), and Australia(Perth).

(3) Major Changes in the Board of Directors (as of June 30, 2019)

(a) Inside Directors

• New members : Jeong, Tak (Senior Executive Vice President) and Kim,Hag-Dong (Senior Executive Vice President)

(b) Outside Directors

• New member : Pahk,Heui-Jae

(c) Representative Directors

• Choi,Jeong-Woo (CEO) and Chang,In-Hwa (President)

(4) Changes of the Major Shareholders of POSCO

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

(b) Date of Disclosure: January 30, 2007

(For further reference, please refer to the public disclosures regarding the change of the major shareholders on January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011, July 22, 2011, January 31, 2012, August 1, 2012, February 1, 2013, August 1, 2013, January 14, 2014, January 23, 2014, July 29, 2014,January 23, 2015, August 5, 2015, January 6, 2016, January 26, 2016, March 15, 2016, April 12, 2016, July 4, 2016, July 5, 2016, July 21, 2016, October 7, 2016, October 11, 2016, January 10, 2017, April 10, 2017, July 12, 2017, October 13, 2017, January 10, 2018, April 11, 2018, July 9, 2018, October 10, 2018, January 8, 2019, April 8, 2019, July 8, 2019)

B. Merger, Acquisition and Handover of Businesses

(1) Small scale merger of POSHIMETAL Co., Ltd into POSCO was completed on March 15, 2016

• Date of merger : March 1, 2016

(2) Small scale merger of POSCO Green Gas Technology into POSCO was completed on May 16, 2016

• Date of merger : May 1, 2016

6

(3) Small scale merger of POSCO Processing & Service into POSCO was completed on Februrary 1, 2019

• Date of merger : January 1, 2019

(4) Small scale merger contract ofBy-Product Hydrogen Generation Business from POSCO ENERGY into POSCO afterspin-off was entered on April 16, 2019

The purpose of mergers above is to enhance the shareholders’ value by increasing operational efficiency and creating synergies between businesses.

POSCO holds a 100% stake in POSHIMETAL Co., Ltd. and a 100% stake in POSCO Green Gas Technology. For the first two small scale mergers, the merger ratio is 1:0 and POSCO did not issue new shares. On the completion of mergers, POSCO remains as a surviving company.

For the POSCO P&S merger, the merger ratio is 1:0.1456475 and POSCO did not issue new shares. On the completion of mergers, POSCO remains as a surviving company.

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]

7

4. Other Information Regarding Shares

A. Total Number of Shares

	(As of June 30, 2019)
Authorized Shares	Outstanding Shares
200,000,000		87,186,835

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

Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

									(As of June 30, 2019)
Method of Purchase	Type		Beginning*		Increased		Decreased		Cancelled		Balance
Direct		Registered		7,185,703		—		114,509		—		7,071,194
Special Money Trust		Common		—		—		—		—		—
Total				7,185,703		—		114,509		—		7,071,194

* Beginning Balance: as of December 31, 2018

• On November 11, 2018, the Executive Management Committee resolved its plan to distribute the treasury stocks and the actual disposal of 114,509 treasury stocks was completed on January 7, 2019.

5. Voting Rights

			(As of June 30, 2019)
Classification of Shares	Number of Shares		Remarks
(1) Number of Outstanding Shares		87,186,835	—
(2) Shares without Voting Rights *		7,071,194	*Treasury Stock 7,071,194 shares
(3) Shares with Voting Rights		80,115,641	—

8

6. Earnings and Dividend

					(In millions of KRW)
	2019.1H		2018		2017
(Consolidated) Net Profit		1,353,539		1,690,612		2,790,106
(Separate) Net Profit		1,216,555		1,072,592		2,545,685
Earnings per Share (Consolidated, KRW)		16,854		20,911		34,464
Cash Dividend Paid		320,463		800,009		639,991
Pay-out Ratio (Consolidated,%)		23.7		47.3		22.9
Dividend per Share (KRW)		4,000		10,000		8,000
Dividend Yield (%)		1.6		4.1		2.4

9

II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Segment Results

									(In millions of KRW)
Category	2019.1H				2018				2017
	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		16,254,629		1,766,581		32,358,009		4,536,318		30,230,368		3,628,314
Trading		11,202,364		298,899		22,407,717		383,934		20,802,207		315,201
Engineering & Construction		3,250,562		110,978		6,769,410		411,489		6,886,606		414,988
Others		1,628,018		95,001		3,442,641		210,859		2,735,919		263,331
Total		32,335,573		2,271,459		64,977,777		5,542,600		60,655,100		4,621,834

2. Current Situation

1) Steel

A. Domestic Market Share

									(Millions of Tons, %)
Category	2019. 1H				2018				2017
	Production		Market share		Production		Market share		Production		Market share
Crude Steel Production		36.5		100		72.5		100		71.1		100
POSCO		18.8		51.5		37.7		52.0		37.2		52.3
Others		17.7		48.5		34.8		48.0		33.9		47.7

Source: world steel association (www.worldsteel.org)

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B. Summary and Prospect of New Businesses

(1) Establishment of the Steelworks in Brazil

(a) 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 initiated. (September, 2012)

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

(e) Receiving electrical power (July, 2015)

(f) Production of slabs commenced (June, 2016)

(g) Construction completed (August, 2016)

(2) Establishment of a Continuous Galvanizing Line in Thailand

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

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

(c) Construction of a steelwork with an annual capacity of 0.45 million tons commenced (September, 2014)

(d) Construction of Continuous Galvanizing Line completed (June, 2016)

(3) Establishment of No.7 Continuous Galvanizing Line at Gwangyang Works

(a) Board of Directors resolved to construct a Continuous Galvanizing Line at Gwangyang Works (December, 2014)

(b) Construction of a steelwork with an annual capacity of 0.5 million tons commenced (September, 2015)

(c) Construction of No.7 Continuous Galvanizing Line completed (April, 2017)

(4) Increase in production capability ofnon-oriented electrical steel at Pohang Works

(a) Board of Directors resolved to increase production capability ofnon-oriented electrical steel at Pohang Works (May, 2015)

(b) Construction of a steelwork with an annual capacity of 0.1 million tons commenced (March, 2016)

(c) Construction completed (February, 2017)

(5) Joint venture with Chongqing Iron and Steel (Group) Company Limited in China

(a) Board of Directors resolved to invest in JV with Chongqing Iron and Steel (January, 2016)

(b) Execution of JV Agreements (April, 2016) – Construction of Steel mills for 1) cold rolled steel products and 2) plated steel products (June, 2016)

11

(c) Termination of JV Agreements (September, 2017)

(d) Liquidation of Steel mills set off (November, 2017)

(e) Completion of liquidation (June, 2018)

2) Trading

A. Market Share

					(Millions of US Dollars)
Category	2019.1H		2018.1H		Growth rate
All Trading Companies in Korea		271,336		296,672		-8.5	%
POSCO International Corp.		3,265		3,902		-16.3	%

Source: Korea International Trade Association

B. Summary and Prospect of New Businesses

POSCO International and its subsidiaries engage in three major business segments; trading, overseas infra-project implementation and resource development. First, it engages in the trading of a wide range of products from steel, automotive and components, machinery and industrial electronics tonon-ferrous metal, food resources, chemicals, commodities and textiles, with both local and international customers. Second, it also actively leads the implementation of overseas projects such as the EPC project and the independent power project (IPP) as a project organizer. Third, it has engaged in overseas resource development projects in oil, gas, mineral and food resources, Furthermore, POSCO International is actively expanding its business spectrum into manufacturing, logistics and real estates development for further growth.

3) Engineering & Construction

A. Summary and Prospect of New Businesses

POSCO E&C is one of the leading engineering and construction companies in Korea, primarily engaged in the planning, design and construction of industrial plants and architectural works and civil engineering projects. In particular, POSCO E&C has established itself as one of the premier engineering and construction companies in Korea through its strong and stable customer base and its cutting-edge technological expertise obtained from construction of advanced integrated steel plants, as well as participation in numerous modernization and rationalization projects at our Pohang Works and Gwangyang Works.

12

4) Others

A. POSCO ENERGY CO., LTD

POSCO ENERGY CO., LTD. (“POSCO ENERGY”) started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 90’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand of electricity in Korea. POSCO ENERGY started its fuel cell business in 2007 and continuously develops, manufactures and provides the operation and management services for fuel cell plants.

B. POSCO ICT

POSCO ICT is established for the purpose of providing services in software development, data processing, and info-communications business. It has an expertise in IT and engineering, which was made in an effort to lead the trend of green growth and convergence. POSCO ICT has provided total solution to overseas existing steel mills and other solution systems through application of optimal information technology. Currently, POSCO ICT applies its developed ICT technology at Smart Factory by applying the industrial IoT and big data at industrial sites. Based on its key technologies, POSCO ICT has been putting efforts to enhance competitiveness of the industries, in areas such as smart factory, smart IT, energy, SOC (railroad/transportation), and environment. POSCO ICT will continue to support to strengthen the core business of POSCO Group and enhance its business competency globally.

C. POSCO CHEMICAL

POSCO CHEMICAL, specializes in manufacturing of refractories, lime used in steel manufacturing processes as well as a wide range of chemical and environmentally friendly products. POSCO CHEMICAL provides refractories to a wide range of industries including steel, cement, and glass companies. POSCO CHEMICAL is currently expanding its comprehensive chemical and carbon material business in the secondary cell, anode materials and needle coke graphites.

D. POSCOM-TECH

POSCOM-TECH is a specialized supplier of steel supplementary materials, including aluminum deoxidizers and steel products packaging. POSCOM-TECH makes its utmost efforts to stronghold its ground as a steel packaging andup-stream material-specialized company.

13

3. Key Products

A. Sales 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.		42,571			16.98
	Cold-rolled Product (CR)	Automobile , Home appliances, etc.		83,887			33.47
	Stainless Steel Products	Western tableware, etc.		48,881			19.50
	Others	Plates, Wire rods, etc.		75,317			30.05
	Gross Sum			250,656			100.00
	Deduction of Internal Trade			(88,110	)
	Sub Total			162,546
Trading	Steel, Metal			150,180			77.73
	Chemical, Strategic Item, Energy			3,781			1.96
	Others			39,249			20.31
	Gross Sum			193,210			100.00
	Deduction of Internal Trade			(81,186	)
	Sub Total			112,024
Engineering & Construction	Domestic Construction	Architecture		21,943			62.31
		Plant		3,729			10.59
		Civil Engineering		2,748			7.80
		Others		539			1.53
	Overseas Construction			2,512			7.13
	Owned Construction			2,927			8.31
	Others			818			2.32
	Gross Sum			35,216			100.00
	Deduction of Internal Trade			(2,711	)
	Sub Total			32,506

14

Business Area	Item	Specific Use	Total Sales			Ratio
Others	Electricity Sales, etc.			29,411
	Deduction of Internal Trade			(13,131	)
	Sub Total			16,280
Total Sum				323,356

B. Price Movement Trend of Key Products

				(In thousands of KRW/ Tons, KRW/kWh)
Business Area	Products	2019.1H		2018		2017
Steel	Hot-rolled Product (HR)		709		707		641
	Cold-rolled Product (CR)		799		807		791
Others	Electric Power		102		100		93
	Lime		110		108		106

Figures for the Trade and Engineering & Construction businesses are not reflected on the table due to difficulties in measuring the price fluctuation trend.

[Steel]

(1) Criteria for Calculation

(a) Subjects for Calculation: Unit prices of the standardhot-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 Changes

From 2016 to 2018, the price of the steel products has continuously increased due to changes in supply and demand of steel market and the reflection of increased raw material price into the cost. The price of steel products in 2019.1H has been similar level of last year due to continuous slowdown in demand for steel products.

[Others]

(1) Criteria for Calculation

(a) Electric Power = Price of electric power / Total amount of generated power

(b) Lime: Average sales price including shipping cost

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4. Major Raw Materials

A. Current Status of Major Raw Materials

				(In hundred millions of KRW)
Business Area	Type of Purchase	Item	Specific Use	Purchase Amount (Portion)	Remarks
Steel	Raw Materials	Materials for Iron-making,	Iron Ore for Blast Furnaces	36,220 (37.3%)	Iron Ore, Coal
		Sub-materials	Sub-materials for Iron-making, Steelmaking	25,341 (26.1%)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	19,155 (19.7%)	Nickel, Ferrochrome, STS Scrap Iron, etc.
		Others	OtherSub-materials	16,471 (16.9%)	—
Engineering         & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	1,199 (19.2%)
		Steel Reinforcement	Strengthening Concrete	1,136 (18.2%)
		Cable	Electricity Transfer	65 (1.0%)
		Steel Pile	Foundation of Structure	105 (1.7%)
		Others	Construction of Pipe and Structure etc.	3,750 (60.0%)
Others	Raw Materials	LNG	Material for Power Generation	5,653 (43.6%)
		Limestone	Production of Lime	506 (3.9%)
		Others	Engineering business etc.	6,802 (52.5%)

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B. Price Movement Trend of Major Raw Materials

				(In thousands of KRW)
Business Area	Category	2019.1H		2018		2017
Steel	Iron Ore(per ton)		99		76		81
	Coal(per ton)		235		228		246
	Scrap Iron(per ton)		365		395		344
	Nickel(per ton)		14,105		15,074		11,763
Engineering & Construction	Ready-mixed Concrete (per m3)		63		63		61
	Steel Pile (per m)		136		146		50
	Steel Reinforcement (per kg)		1.0		1.0		1.0
	Cable (per m)		1.0		1.0		1.0
Others	LNG (per ton)		728		768		661
	Lime (per ton)		20		19		19

17

[Steel]

Price Movement Trend of Major Raw Materials

(1) Iron Ore

																			(In US Dollars/ Tons)
	’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q		’17.2Q		’17.1Q		’16.4Q		’16.3Q
Trend of International Benchmark Price (Free On Board, “FOB”)		94		77		64		57		58		68		57		64		57		79		65		53

(2) Coal

																			(In US Dollars/ Tons)
	’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q		’17.2Q		’17.1Q		‘16 4Q		’16.3Q
Trend of International Benchmark Price (FOB)		203		206		221		188		190		229		204		189		191		285		200		92.5

(3) Scrap Iron

																			(In US Dollars/ Tons)
	’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q		’17.2Q		’17.1Q		‘16 4Q		’16.3Q
Trend of Purchase Price (Cost and Freight, “CFR”)		312		325		343		350		364		379		344		322		268		284		253		227

(4) Nickel

’19.2Q

’19.1Q

’18.4Q

’18.3Q

’18.2Q

’18.1Q

’17.4Q

’17.3Q

’17.2Q

’17.1Q

‘16 4Q

’16.3Q

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

USD 5.56 /lb USD 12,258/ton

USD 5.61 /lb USD 12,369/ton

USD 5.22 /lb USD 11,516/ton

USD 6.02 /lb USD 13,266/ton

USD 6.56 /lb USD 14,467/ton

USD 6.02 /lb USD 13,276/ton

USD 5.25/lb USD 11,584/ton

USD 4.78/lb USD 10,528/ton

USD 4.18/lb USD 9,225/ton

USD 4.66/lb USD 10,271/ton

USD 4.90/lb USD 10,810/ton

USD 4.66/lb USD 10,265/ton

LME : London Metal Exchange

18

[Engineering and Construction]

(1) Criteria for Calculation

Products	Criteria for Calculation
Ready-mixed Concrete	Standard25-210-15
Steel Pile	SPIRAL, 609.6, 12T, STP275, KS F 4602
Steel Reinforcement	High Tensile Deformed Bar SD400 D10mm
Cable	TFR-CV, 0.6/1KV, 2.5SQ, 2core

[Others]

(1) Criteria for Calculation

(a) Electric Power: Purchase price of LNG from Korea Gas Corporation

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

19

5. Production and Facilities

A. Production Capacity

[Steel]

					(Thousands of Tons)
Business Area	Products		2019.1H		2018		2017
Steel		Crude Steel		23,550		47,590		47,590

[Others]

	(Electric Power-MW per year, Lime-Thousands of Tons  per year)
Business Area	Products		2019.1H		2018		2017
		Incheon		3,412		3,412		3,412
Power Generation	Electric Power	Gwangyang		284		284		284
		Pohang		290		290		290
Lime	Lime			2,190		2,190		2,190

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

				(Thousands of Tons)
Products		2019.1H		2018		2017
Crude Steel			21,370		42,867		42,193
Products	Hot-Rolled Steel		4,397		8,716		8,372
	Plate		3,637		7,432		6,512
	Wire Rod		1,409		2,867		2,830
	Pickled-Oiled Steel		1,489		2,946		3,005
	Cold-Rolled Products		3,665		8,551		7,563
	Coated Steel		3,243		7,163		6,249
	Electrical Steel		415		1,078		1,028
	Stainless Steel		1,912		3,978		3,863
	Others		2,973		5,903		6,359
	Total		23,140		48,634		45,781

The amount of products is the aggregate amount of POSCO’s production and production of POSCO subsidiaries, which may include interested parties’ transactions.

20

(2) Capacity Utilization Rate

						(Thousands of Tons, %)
	Company	Capacity		Production		Utilization Rate
Crude Steel Production	POSCO		21,021		18,850		89.7	%
	Zhangjiagang Pohang Stainless Steel Co., Ltd		550		570		103.6	%
	PT.KRAKATAU POSCO		1,429		1,495		104.6	%
	POSCOSS-VINA Co., Ltd.		550		455		82.7	%
	Total		23,550		21,370		90.7	%

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)
Business Area	Products	2019. 1H		2018		2017
Power Generation	Electric Power		8,087		15,297		13,774
Lime	Lime		1,254		2,511		2,406

(2) Capacity Utilization Rate

			(Electric Power-hr, Lime-Thousands of Tons)
Business Area	Products		2019. 1H Capacity		2019. 1H Production		Utilization Rate
Power Generation	Electric Power	Incheon		4,344		2,331		54	%
		Gwangyang		4,344		3,875		89	%
		Pohang		4,344		3,650		84	%
Lime	Lime			1,086		1,254		115	%

C. Production Facilities

[Land]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation		Ending Book Balance
Steel		1,936,973		56,556		(29,690	)		—		1,963,839
Trade		170,115		1,127		1			—		171,243
Engineering & Construction		25,463		6,804		(6,727	)		—		25,540
Others		415,451		1,049		(3,643	)		—		412,857

21

[Buildings]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		3,474,584		169,208			(77,665	)		(165,238	)		3,400,889
Trade		430,863		64,262			5,795			(5,921	)		494,999
Engineering & Construction		79,363		21,596			96			(21,381	)		79,674
Others		417,642		(79,512	)		63,547			13,116			414,793
[Structures]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		2,637,523		69,413			(20,615	)		(113,039	)		2,573,282
Trade		22,036		1,465			(22	)		(750	)		22,729
Engineering & Construction		14,708		213			(4	)		(872	)		14,045
Others		243,657		2,986			(1	)		(8,326	)		238,316
[Machinery and Equipments]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		15,916,598		906,605			(357,191	)		(1,141,819	)		15,324,193
Trade		386,081		31,079			(22,003	)		(19,542	)		375,615
Engineering & Construction		7,139		1,932			3,196			(5,460	)		6,807
Others		2,208,311		46,487			(5,963	)		(73,706	)		2,175,129
[Vehicles]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		19,958		9,242			(4,133	)		(5,385	)		19,682
Trade		5,677		2,571			(1,135	)		(892	)		6,221
Engineering & Construction		1,158		1,132			(917	)		(438	)		935
Others		4,548		2,814			(1,838	)		(901	)		4,623

22

[Tools and Fixtures]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		47,852		5,157		1,316			(9,688	)		44,637
Trade		10,677		4,751		(844	)		(2,777	)		11,807
Engineering & Construction		617		495		(363	)		(156	)		593
Others		7,018		29,021		(27,435	)		(1,448	)		7,156
[Equipment]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		66,924		7,144		826			(11,315	)		63,579
Trade		30,238		7,115		(1,784	)		(4,858	)		30,711
Engineering & Construction		3,304		5,324		(4,454	)		(694	)		3,480
Others		35,821		134,449		(129,143	)		(2,288	)		38,839
[Financial Lease Assets]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		91,928		374,048		25,928			(46,425	)		445,479
Trade		548		64,405		5,402			(5,642	)		64,713
Engineering & Construction		2,957		247,751		1			(18,421	)		232,288
Others		42,131		5,033		4,814			(4,850	)		47,128
[Biological Assets]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		—		—		—			—			—
Trade		80,771		23,026		—			(2,589	)		101,208
Engineering & Construction		—		—		—			—			—
Others		—		—		—			—			—

23

[Assets under Construction]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation		Ending Book Balance
Steel		943,260		691,557		(453,297	)		—		1,181,520
Trade		118,315		24,546		(25,253	)		—		117,608
Engineering & Construction		25,943		464		(1	)		—		26,406
Others		92,121		125,473		(19,961	)		—		197,633

24

(2) Major Capital Expenditures

(a) Investments under Construction

[Steel]				(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO	Expansion/ Establishment	June, 2011 ~December, 2021	P) Establishment of by-product gas Power Plant G) Expansion of high strength steel facilities		5,023		1,130		3,893
		September, 2011 ~ November, 2021	G) The renovation of #3 furnace P) Establishment of NOx removal equipment for sintering factories		22,073		6,398		15,676
POSCO-CSPC	Establishment	January, 2015 ~December, 2019	Establishment of a 2,500 tonnage press machine		107		56		51
PT. KRAKATAU POSCO	Establishment	April, 2017 ~ June, 2019	Establishment of by-product gas facilities		242		152		90

P stands for Pohang Steel Works.

G stands for Gwangyang Steel Works.

[Trade]					(In hundred millions of KRW)
Company		Date		Project	Total Investment		Invested Amount		Amount to Be Invested
PT. BIO INTI AGRINDO	Establishment		December, 2014 ~June, 2022	CPO MILL		571		281		290

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

[Others]				(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO ICT	Expansion	January, 2019 ~ December, 2019	Expansion of smart management server for operation efficiency		315		78		237
		January, 2019 ~ December, 2019	Investment for new IT solutions development		152		45		107
POSCO CHEMICAL	Expansion	November, 2018 ~ November, 2019	Expansion of product lines #1~#8 for the second factory of anode materials		1,598		543		1,055
		March, 2019 ~March, 2020	Expansion of product lines for cathode materials		2,250		116		2,134

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

25

(b) Future Investment Plans

			(In hundred millions of KRW)
Business	Company	Project	Investment effects	Planned Investments
				2019		2020		2021
Steel	POSCO	Expansion, Renovation and Replacement of Existing Facilities, etc.	Maintenance of existing facilities, etc.		997		6,170		10,669
			Advancement of products		584		1,018		5,124
	POSCO SS VINA CO., LTD.	Expansion, Renovation and Replacement of Existing Facilities, etc.	Enhancing production efficiency, cost reduction, etc.		7		49		55
Trading	PT. BIO INTI AGRINDO	Expansion, Renovation and Replacement of Existing Facilities, etc.	Realization of profits by selling CPO		116		55		119
Others	POSCO CHEMICAL	Expansion of production facilities	Production increase of anode materials		1,055		—		—
			Production increase of cathode materials		1,684		450		—
	POSCO ICT	Expansion, Renovation and Replacement of Existing Facilities, etc.	AI, RPA, etc.		62		276		402
			Investment in POSCO IT Infra, etc.		320		267		284
			Improving of workplaces, etc.		64		64		78
			Improving energy efficiency, etc.		9		43		50
	POSCO O&M	Expansion, Renovation and Replacement of Existing Facilities, etc.	Renovation of Existing Facilities		65		99		110

The investments over KRW 10 billion are listed on the table

26

6. Product Sales

[Steel]								(In hundred millions of KRW)
Items		2019.1H			2018			2017
Domestic	Hot-Rolled Products		22,548			48,879			42,950
	Cold-Rolled Products		19,843			39,901			38,298
	Stainless Steel		10,158			21,281			24,798
	Others		40,015			77,230			66,555
Export	Hot-Rolled Products		20,023			35,231			34,277
	Cold-Rolled Products		64,043			124,449			125,622
	Stainless Steel		38,723			79,931			74,880
	Others		35,303			77,311			68,734
Total	Gross Sum		250,656			504,212			476,114
	Internal Transaction		(88,110	)		(180,632	)		(173,810	)
	Total		162,546			323,580			302,304
[Trading]								(In hundred millions of KRW)
Items		2019.1H			2018			2017
Domestic	Merchandise		19,214			33,706			24,210
	Product		2,365			4,702			4,079
	Others		706			1,483			1,421
Export	Merchandise		36,722			87,124			87,116
	Product		125			768			938
	Others		108			736			1,107
Trades among the 3 countries			133,970			254,670			229,911
Gross Sum			193,210			383,189			348,782
Internal Transaction			(81,186	)		(159,112	)		(140,760	)
Total			112,024			224,077			208,022

27

[Engineering & Construction]					(In hundred millions of KRW)
Items		2019.1H			2018			2017
Domestic	Building		21,943			37,363			32,375
	Plant		3,729			10,238			6,874
	Civil Engineering		2,748			5,129			6,418
	Others		539			337			—
Overseas			2,512			9,471			15,056
Own Construction			2,927			7,568			7,654
Other Subsidiary company sales			818			3,101			4,478
Gross Sum			35,217			73,207			72,855
Internal Transaction			(2,711	)		(5,513	)		(3,989	)
Total			32,506			67,694			68,866
[Others]					(In hundred millions of KRW)
Items		2019.1H			2018			2017
Electric Power Sales			16,280			34,426			27,359

7. Derivatives

We purchased forward exchange contracts to hedge the exchange rate risk for foreign currency loans.

As of June 30, 2019, we assessed the fair value of our forward exchange contracts to be USD 0.7 billion (expiring October, 2020), USD 0.55 billion (expiring April, 2021), and a currency swap contract to be USD 0.5 billion (expiring July, 2023). We recognized KRW 66,736 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 36,051 million of gain on valuation, and KRW 19 million of gain on transaction of a currency swap contract.

8. Significant Contracts

Company	Contract	Date	Remarks
POSCO	Small scale merger with POSHIMETAL Co., Ltd.	December, 2015	1) Purpose: Enhancing the shareholders’ value by increasing operational efficiency and creating synergies between businesses 2) Information: POSCO holds 100% a stake in POSHIMETAL Co., Ltd. The merger ratio is 1:0, and POSCO will not be issuing new shares 3) Conclusion of a contract: December 23, 2015 4) Date of merger: March 1, 2016 5) Registration of merger: March 15, 2016

28

	Small scale merger with POSCO GREEN GAS TECHNOLOGY	February, 2016	1) Purpose: Enhancing the shareholders’ value by increasing operational efficiency and creating synergies between businesses 2) Information: POSCO holds a 100% stake in POSCO GREEN GAS TECHNOLOGY. The merger ratio is 1:0, and POSCO will not be issuing new shares 3) Conclusion of a contract: February 26, 2016 4) Date of merger: May 1, 2016 5) Registration of merger: May 16, 2016
	JV Agreement for construction of steel mills for cold rolled steel products and plated steel products	April, 2016	1) Purpose: Expansion of sales of automotive steel in Southwest province of China 2) Information: POSCO signed JV contracts with Chongqing Iron and Steel by holding 10% stake in Chongqing CISL High Strength Cold Rolling Steel Co. Ltd, and 51% stake in Chongqing POSCO CISL Automotive Steel Co., Ltd 3) Execution of JV Agreements: April 6, 2016 4) Termination JV Agreements: September, 2017 5) Liquidation of Steel mills set off: November 13, 2017 6) Completion of liquidation: June 28, 2018
	Small scale merger of POSCO Processing & Service	August, 2018	1) Purpose: To increase operational efficiency 2) Information: POSCO Processing & Service (POSCO P&S) is merged into POSCO •  The merger ratio is 1 : 0.1456475 (POSCO : POSCO P&S) •  POSCO will distribute its treasury shares to the shareholders of POSCO P&S, and new shares will not be issued. 3) Conclusion of a contract: August 23, 2018 4) Date of merger: January 1, 2019 5) Registration of merger: February 2, 2019
	Small scale merger with By-product Hydrogen Generation Business afterspin-off from POSCO ENERGY	April, 2019	1) Purpose: To increase operational efficiency 2) Information:By-product Hydrogen Generation Business of POSCO ENERGY will be merged into POSCO •  The merger ratio is 1 : 0.1145836 (POSCO : POSCO ENERGY) 3) Conclusion of a contract: April 16, 2019 4) Date of merger: September 1, 2019 5) Registration of merger: September 9, 2019
	LNG Terminal Business Transfer Agreement	April, 2019	1) Business transferee: POSCO ENERGY 2) Conclusion of a contract: April 16, 2019 3) Date of transfer: September 1, 2019 4) Transfer amount : KRW 608,019 million 5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY
POSCO International Corporation	Investment on the 2nd stage development of A-1 /A-3 block in Myanmar gas field	June, 2018	1) Investment amount: KRW 511,709,005,500 (USD 473,235,000) 2) Development period: August 1, 2017 ~ December 31, 2022 3) Gas production schedule: By additionally developing Shwe gasfield and newly developing Shwe Phyu gasfield, production will start in 2021 from Shwe and 2022 from Shwe Phyu 4) Other Information •  Location: North-west offshore, Myanmar •  This investment is the 2nd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level by completing more drilling and adding more production wells to current Shwe platform. •  In July 2018, facility design and construction began, and production is scheduled to start in 2021 in Shwe and in 2022 in She Phyu. But the development period includes the duration of feasibility test and basic design from August 2017 to May 2018. •  POSCO International Corporation : 51.0% •  ONGC VIDESH (Oil and Natural Gas Corporation Videsh Limited) : 17.0% •  MOGE (Myanmar Oil and Gas Enterprise): 15.0%

29

			•  GAIL (India) Limited : 8.5% •  KOGAS (Korea Gas Corporation): 8.5% •  Investment size of USD 473,235 thousand, applying the exchange rate of 1USD=1,081.30 KRW, was disclosed on the date of the BOD resolution (May 31, 2018). •  Detailed information and future timeline on this resource development investment is subject to change. Disclosure date : May 31, 2018 (Decision on natural resources investment)
	Small scale merger with Steel segment after spinoff from POSCO Processing & Service	November, 2016	1) Purpose: Expanding the company’s capabilities in steel trading business and enhancing global competitiveness of the company’s steel business 2) Information: POSCO International merges with the steel segment and others of POSCO P&S at the merger ratio of 1: 0.4387662, after the spin off from POSCO P&S 3) Conclusion of a contract: November 4, 2016 4) Date of merger: March 1, 2017 5) Registration of merger: March 2, 2017
POSCO ENGINEERING & CONSTRUCTION	Small scale merger with POSCO ENGINEERING CO., LTD.	November, 2016	1) Purpose: Achieving sustainable profit and growth by enhancing competitiveness 2) Information: POSCO E&C merges with POSCO Engineering at the merger ratio of 1:0, and POSCO E&C will not be issuing new shares 3) Conclusion of a contract: November 23, 2016 4) Date of merger: February 1, 2017 5) Registration of merger: February 14, 2017
POSCO O&M	Small scale merger with Blue O&M and MegaAsset	February, 2019	1) Purpose: Enhancing foundation of growth by improving management efficiency and creating synergies among businesses 2) Information: POSCO O&M merges with Blue O&M and MegaAsset 3) Date of merger: February 1, 2019 4) Registration of merger: February 11, 2019
POSCO ENERGY	Contract of Shares Transfer	July, 2018	1) Contract Parties: Nonghyup Bank (The third agent of KIAMCO PowerEnergy Private Special Assets Investment Trust), Doosan Heavy Industries & Construction, POSCO E&C, Industrial Bank of Korea (The first agent of Multi Asset POS Power Samcheok coal-fired private investment trust) 2) Signed Date: July, August, 2018 3) Contract Amount : KRW 343,706 million 4) Information: Contract of shares transfer for disposal of 68.5% (July) and 2.5% (August) POS Power shares
	Spin-off By-product Hydrogen Generation Business for merger into POSCO	April, 2019	1) Contract counterpart: POSCO 2) Conclusion of a contract: April 16, 2019 3) Date of merger: September 1, 2019 4) Merger payment : KRW 1,163,692 million (No issuance of new shares from POSCO) 5) Information : POSCO merges with Hydrogen Generation Business of POSCO ENERGY at the merger ratio of 1:0.1145836
	LNG Terminal Business Transfer Agreement	April, 2019	1) Business transferor: POSCO 2) Conclusion of a contract: April 16, 2019 3) Date of transfer: September 1, 2019 4) Transfer amount : KRW 608,019 million 5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY

30

9. Research and Development

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

Business Area	Company	Organization
Steel	POSCO	Technology Strategy Office
		Technical Research Laboratories
		Steel Product Research Lab
		Process and Engineering Research Lab
		Automotive Steel Research Lab
		Steel Solution Research Lab
	POSCO COATED & COLOR STEEL Co,. Ltd.	R&D Center
	Zhangjiagang Pohang Stainless Steel Co., Ltd.	R&D Center
	POSCO Thainox Public Company Ltd.	Product Testing Laboratory(LAB) Team
Trading	POSCO International Corporation	Molding R&D Center
		Stainless Quality Technology Group
Engineering & Construction	POSCO Engineering & Construction,. LTD.	R&D Center
	POSCO A&C	Smart Construction R&D Center
Others	POSCO ENERGY Co,. LTD	Gas & Renewable Energy Business Development Office
	POSCO ICT	R&D Center
	POSCO CHEMICAL	R&D Center
	POSCOM-TECH	R&D Center
	POSCO NIPPON STEEL RHF JOINT VENTURE.CO., Ltd.	Quality Innovation Department

B. R&D Expenses in 2019.1H (In millions of KRW)

Category	Business Area
	Steel			Trade			Engineering & Construction			Others			Total
Selling and Administrative Cost		42,683			1,340			1,574			11,351			56,949
Manufacturing Cost		184,631			119			267			1,138			186,155
R&D Cost (Intangible Assets)		11,319			—			1			3,913			15,233
Total*		238,633			1,459			1,842			16,402			258,337
Government Subsidy		—			—			245			21			267
R&D/Sales Ratio		1.47	%		0.01	%		0.06	%		1.01	%		0.80	%

* This total expenses include government subsidy amount

31

III. Financial Statements

1. Consolidated Financial Statements

A. Summary of Fiscal Years of 2017, 2018 and 2019.1H

					(In millions of KRW)
Account	2019.1H (2019.1.1~2019.6.30)		2018		2017
[Total current assets]		34,057,840		33,651,002		31,127,418
Cash and cash equivalents		2,553,246		2,643,865		2,612,530
Other receivables, net		1,591,074		1,385,629		1,636,006
Other short-term financial assets		7,502,959		8,081,096		7,045,880
Trade accounts and notes receivable, net		9,938,458		9,282,609		8,950,548
Inventories		11,708,185		11,499,928		9,950,955
Other current assets		763,918		757,875		931,499
[Totalnon-current assets]		44,933,189		44,597,263		47,897,541
Other receivables, net		880,321		863,240		879,176
Otherlong-term financial assets		1,717,207		1,647,898		1,911,684
Investments in associates and joint ventures		3,787,410		3,650,003		3,557,932
Property, plant and equipment, net		30,340,196		30,018,273		31,883,535
Intangible assets, net		5,166,218		5,170,825		5,952,269
Othernon-current assets		3,041,837		3,247,024		3,712,945
Total assets		78,991,029		78,248,265		79,024,959
[Total current liabilities]		17,684,377		18,937,985		18,946,016
[Totalnon-current liabilities]		13,432,681		12,550,729		12,614,935
Total liabilities		31,117,058		31,488,714		31,560,951
[Equity attributable to owners of the controlling company]		44,457,030		43,371,260		43,732,877
Share capital		482,403		482,403		482,403

32

Capital surplus	1,374,938		1,410,551		1,412,565
Hybrid bonds	199,384		199,384		996,919
Retained earnings	45,020,873		44,216,018		43,056,600
Other equity attributable to owners of the controlling company	(2,620,568	)	(2,937,096	)	(2,215,610	)
[Non-controlling Interests]	3,416,941		3,388,291		3,731,131
Total equity	47,873,971		46,759,551		47,464,008
Revenue	32,335,573		64,977,777		60,655,100
Operating profit	2,271,459		5,542,600		4,621,834
Profit	1,459,863		1,892,064		2,973,469
[Profit attributable to owners of the controlling company]	1,353,539		1,690,612		2,790,106
[Profit attributable tonon-controlling interests]	106,324		201,452		183,363
Total comprehensive Income	1,749,227		1,463,535		2,412,311
[Total comprehensive income attributable to owners of the controlling company]	1,654,770		1,271,495		2,218,278
[Total comprehensive income attributable tonon-controlling interests]	94,457		192,040		194,033
Earnings per share(KRW)	16,854		20,911		34,464
Number of Consolidated Companies	167		173		180

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

Refer to the attached Condensed Consolidated Financial Statements for the Condensed Consolidated Statements of Financial Position as of June 30, 2019, Condensed Consolidated Statements of Comprehensive Income (loss), Condensed Consolidated Statements of Changes in Equity, Condensed Consolidated Statements of Cash Flows for thesix-month period ended June 30, 2019, and Notes

33

2. Separate Financial Statements

A. Summary of Fiscal Years of 2017, 2018 and 2019.1H

	(In millions of KRW)
Account	2019.1H (2019.1.1~2019.6.30)		2018		2017
[Total current assets]		17,599,358		16,796,400		14,840,421
Cash and Cash equivalents		556,441		259,219		332,405
Trade accounts and notes receivable, net		4,280,539		3,968,372		3,867,714
Other receivables, net		295,752		206,432		210,230
Other short-term financial assets		6,553,316		7,025,143		5,824,087
Inventories		5,384,738		5,288,009		4,543,533
Other current assets		528,572		49,225		62,452
[Totalnon-current assets]		37,038,220		37,329,580		38,851,837
Other receivables, net		56,953		57,767		62,421
Otherlong-term financial assets		1,268,866		1,176,757		1,393,316
Investments in Subsidiaries, associates, and joint ventures		15,477,397		15,121,339		15,098,856
Property, plant and equipment, net		19,321,085		20,154,334		21,561,270
Intangible assets, net		665,898		645,222		528,074
Othernon-current assets		248,021		174,161		207,900
Total assets		54,637,578		54,125,980		53,692,258
[Total current liabilities]		3,105,705		3,895,973		3,570,148
[Totalnon-current Liabilities]		5,138,816		4,957,905		4,180,655
Total liabilities		8,244,521		8,853,878		7,750,803
[Share capital]		482,403		482,403		482,403
[Capital surplus]		1,575,841		1,154,775		1,156,429

34

Account	2019.1H (2019.1.1~2019.6.30)			2018			2017
[Hybrid bonds]		199,384			199,384			996,919
[Retained earnings]		45,819,332			45,175,459			44,605,368
[Other equity]		(1,683,903	)		(1,739,919	)		(1,299,664	)
Total equity		46,393,057			45,272,102			45,941,455
Revenue		15,292,325			30,659,425			28,553,815
Operating profit		1,556,765			3,809,376			2,902,453
Profit		1,216,555			1,072,592			2,545,685
Earnings per share(KRW)		15,144			13,186			31,409

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. Separate Financial Statements

Refer to the attached Condensed Separate Financial Statements for the Condensed Separate Statements of Financial Position as of June 30, 2019, Condensed Separate Statements of Comprehensive Income (loss), Condensed Separate Statements of Changes in Equity, Condensed Separate Statements of Cash Flows for thesix-month period ended June 30, 2019, and Notes.

35

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors

(1) Board of Directors (as of August 14, 2019)

Our Board of Directors consists of five inside directors (i.e. Choi,Jeong-Woo; Chang, In-Hwa; Chon,Jung-Son; Kim,Hag-Dong; Jeong, Tak) and seven outside directors (i.e. Kim,Shin-Bae; Bahk,Byong-Won; Chung,Moon-Ki; Kim,Joo-Hyun; Chang,Seung-Wha; Kim,Sung-Jin; Pahk,Heui-Jae).

Our Board of Directors manages the following fivesub-committees:

(a) Director Candidate Recommendation and Management Committee;

(b) Evaluation and Compensation Committee;

(c) Finance and Related Party Transactions Committee;

(d) Executive Management Committee; and

(e) Audit Committee.

Composition of the Special Committees under the Board of Directors and their Functions (as of August 14, 2019)

Category	Composition	Directors	Major Functions
Director Candidate Recommendation and Management Committee	3 Outside Directors; 1 Inside Director	Bahk,Byong-Won (Chairman) Kim,Joo-Hyun Pahk,Heui-Jae Chon,Jung-Son	•  Reviews the qualifications of potential candidates for Directors •  Proposes nominees for the Outside Directors •  Advances the nomination process for the CEO among the Inside Directors and the members of the special committees •  Reviews operational matters of our board of directors
Evaluation and Compensation Committee	4 Outside Directors	Jang,Seung-Wha (Chairman) Kim,Shin-Bae Chung,Moon-Ki Kim,Sung-Jin	•  Executes management succession and development plans •  Establishes evaluation procedures of directors •  Reviews the retirement procedures and distribution of the allowance for directors
Finance and Related Party Transactions Committee	3 Outside Directors; 1 Inside Director	Kim,Joo-Hyun (Chairman) Kim,Sung-Jin Pahk,Heui-Jae Chang,In-Hwa	•  Advances deliberation of new investments in other companies •  Deliberates financial matters and donations from the range of KRW 100 million and KRW 1 billion •  Reviews related party and other internal transactions and ensures compliance with the Monopoly Regulation and Fair Trade Act

36

Audit Committee	3 Outside Directors	Chung,Moon-Ki (Chairman) Bahk,Byong-Won Chang,Seung-Wha	•  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
Executive Management Committee	5 Inside Directors	Choi,Jeong-Woo (Chairman) Chang, In-Hwa Chon,Jung-Son Kim,Hag-Dong Jeong, Tak	•  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) List of Outside Directors (As of June 30, 2019)

Name	Experience	Relation with Majority Shareholder	Remarks
Kim,Shin-Bae	•  Vice Chairman, SK Group (‘10.1~‘13.2) •  President, Korea IoT (Internet of Things) Association (‘05.3~‘12.3) •  President and CEO, SK Telecom (‘04.3~‘08.12) •  M.B.A., Wharton School, University of Pennsylvania (‘85)	None	Chairman of Board of Directors
Bahk,Byong-Won	•  Honorary Chairman of Korea Employers Federation (‘18.3~Present) •  Chairman of Korea Employers Federation (‘15.2 ~‘18.2) •  Chairman of The Korea Federation of Banks (‘11.11~‘14.11) •  Chairman & CEO Woori Financial Group (‘07.3~‘08.6) •  MA in Economics, University of Washington (‘85)	None
Kim,Joo-Hyun	•  President & CEO, The financial news (‘17.4~Present) •  President, Future Korea Institute, Kookmin University (‘16.5~‘17.3) •  President & CEO, Hyundai Research Institute (‘04.1~‘14.4) •  Ph.D. in Department of Finance, College of Business Arizona State University (‘89)	None
Chung,Moon-Ki	•  Professor in Accounting, Sungkyunkwan University (‘16~Present) •  Partner and Chief Quality Officer, Samil PwC (‘81~‘12) •  Committee Member, Accounting Review Committee of Financial Supervisory Service •  Ph.D. in Accounting, Sungkyunkwan University	None
Chang,Seung-Wha	•  Dean of Seoul National University School of Law (‘18.6~Present) •  Professor of Law, Seoul National University (‘95~Present) •  World Trade Organization(WTO) as the Appellate Body Member (‘12.5~‘16.9) •  Member, International Chamber of Commerce(ICC) Court of Arbitration (‘00~‘13) •  LL.M and Doctorate in International Trade Law from Harvard Law School (‘94)	None
Kim,Sung-Jin	•  Adjunct Professor at Department of Economics, Seoul National University (‘11~Present) •  The Minister of Maritime Affairs and Fisheries (‘06~‘07) •  Administrator of the Small and Medium Business Administration (‘04~‘06) •  Ph.D. in Economics Kansas State University (‘91)	None

37

Name	Experience	Relation with Majority Shareholder	Remarks
Pahk,Heui-Jae	•  Professor in Mechanical & Aerospace Engineering, Seoul National University (‘93.3~Present) •  Chairman of the Board, Korea Youth Foundation (’16.5~Present) •  Head of R&D Strategic Planning, Ministry of Trade, Industry and Energy (‘13.4~‘16.4) •  SNU Precision CEO (‘98.2~‘16.12) •  Ph.D in Mechanical Engineering, Seoul National University (‘90)	None

(3) List of Key Activities of the Board of Directors (January 1, 2019 ~ August 14, 2019)

Session	Date	Agenda	Approval
2019-1	January 30	•  Deliberation Agenda 1. Approval of the financial statements for the 51st fiscal year and the convocation schedule for the 51st General Meeting of Shareholders 2. Announcement of closing POSCO P&S merge 3. Appointment of Legal Affairs Office head 4. Contribution of donation to Indonesia for the recovery of damage caused by Tsunami •  Report Agenda 1. The management result for the fiscal year of 2018 2. Report on the operation of the internal accounting control system for the fiscal year of 2018	All 4 Cases Approved
2019-2	February 20	•  Deliberation Agenda 1. Agenda for the 51st General Meeting of Shareholders 2. Recommendation of candidates for the Inside Director position (Excluding the candidate for the Chief Executive Officer)	All 2 Cases Approved
2019-3	March 15	•  Deliberation Agenda 1. Appointment of the Chairman of the Board of Directors 2. Appointment of the Special Committee Members 3. Designation of Representative Directors and presenting positions to Inside Directors	All 3 Cases Approved
2019-4	April 12	•  Deliberation Agenda 1. Business restructuring plan for LNG Terminal andBy-product Hydrogen Generation Business 2. Contribution of donation for the recovery of damage caused by forest fire in Gangwon Province.	All 2 Cases Approved
2019-5	May 10	•  Deliberation Agenda 1. Declaration of the first quarter dividend for the fiscal year of 2019 2. Plan for financing for the fiscal year of 2019 3. Increase of capital and extension of the payment guarantee period for Brazil CSP 4. FY2019 Transaction Plans with affiliates •  Report Agenda 1. The business performance of the first quarter of 2019 2. The performance and assessment of Board of Directors for 2018 3. Standard for selecting domain and the possible list of domains for new business 4. Establishment of venture platform for exploring new business 5.The result of publicizing commemorative project and its future plan	All 4 Cases Approved
2019-6	June 14	1.Approval onspin-off and small scale merger ofBy-product Hydrogen Generation Business •  Report Agenda 1. Charter of Corporate Citizenship	All 1 Case Approved

38

2019-7 July 29 1. Declaration of the second quarter dividend for the fiscal year of 2019   •  Report Agenda   1. The progress on resolution agendas of Board of Directors and sub-committiees for the fiscal year of 2019   2. The business performance of the first half and the outlook of the fiscal year of 2019   3. POSCO Group’s business in China   4. Changes in global trade circumstance   5. Employee safety report All 1 Case Approved

Major Activities of the Outside Directors on the Board of Directors (January 1, 2019 ~ August 14, 2019)

Session	Date	Participation of the Outside Directors (the Number of total members)	Remarks
2019-1	January 30	7 (7)	—
2019-2	February 20	7 (7)	—
2019-3	March 15	7 (7)	—
2019-4	April 12	7 (7)	—
2019-5	May 10	7 (7)	—
2019-6	June 14	7 (7)	—
2019-7	July 29	7 (7)	—

(4) Composition of theSub-committees and their Activities

• Major Activities of Director Candidate Recommendation Committee (January 1, 2019~March 15, 2019)

Date	Agenda	Approval
February 13, February 20, 2019	•  Deliberation Agenda
	1. Qualification Assessment and Recommendation of Outside Director Candidates	Approved
	•  Preliminary Review Agenda	—
	1. Qualification Assessment of Inside Director Candidates(Excluding the candidate for the CEO)k
March 15, 2019	•  Preliminary Review Agenda
	1. Appointment of theSub-committee Members	—
	2. Appointment of the Representative Director

• Major Activities of Evaluation and Compensation Committee (January 1, 2019~March 14, 2019)

Date	Agenda	Approval
January 28, 2019	1. Evaluation of the business performance for the fiscal year of 2018	Approved

• Major Activities of Finance and Related Party Transaction Committee (January 1, 2018~March 14, 2019)

Date	Agenda	Approval
January 30, 2019	•  Deliberation Agenda
	1. Contribution to Labor Welfare Fund
	2. Appointment of Director for voluntary compliance of Fair Trade	Approved
	•  Report Agenda
	1. Review of and plan for the operation of the Fair Trading Program

39

• Major Activities of Finance and Related Party Transaction Committee(March 15, 2019~August 14, 2019)

Date	Agenda	Approval
April 12, 2019	•  Preliminary Review Agenda	—
	1. Restructuring ofby-product gas power plant and LNG terminal business
May 8, 2019	•  Preliminary Review Agenda
	1. Plan for financing in FY2019	—
	•  Deliberation Agenda
	1. Myanmar POSCO sales of stake	Approved
	2. Plan for Payment Guarantee to POSCO-Mexico	Approved

• Major Activities of Executive Management Committee (January 1, 2019 ~ March 14, 2019)

Date	Agenda	Approval
January 30	•  Deliberation Agenda
	1. Sales of stake for Guangdong Shunde Pohang Steel Co., Ltd.	Approved
February 19	•  Deliberation Agenda
	1, Rationalization of Gwangyang # 1 power plant	Approved
	2. Improvement on Gwangyang Works’s working environment	Approved
	3. Disposal of #1 Finex’s melting furnace and induction furnace assets	Hold*

* Decided to hold the agenda about #1finex to amend partially and will submit to the committee again

• Major Activities of Executive Management Committee (March 15, 2019 ~ August 14, 2019)

Date	Agenda	Approval
March 19	•  Deliberation Agenda	Approved
	1. Replacement of Gwangyang #1 and #2 blast furnace’s old wind passing equipment
April 23	•  Preliminary Review Agenda
	1. Increase of capital and extension of the period for payment guarantee of Brazil CSP	—
	•  Deliberation Agenda
	1. R&D investment on STS 3HAPL alternating electrolytic aid pickling machine	Approved
	2. Plan for remodeling of Pohang Dongchon Plaza	Approved
	3. Plan for construction and operation of workplace nursery	Approved
	4. Disposal of 1 Finex tangible assets	Approved
May 21	•  Deliberation Agenda
	Sales plan for Certified Emission Reduction	Hold*
June 18	•  Deliberation Agenda
	1.By-product gas and heat collection facility establishment on #1 Hot Rolled Mill in Gwangyang Works	Approved
	2. Expansion of dust collection facility capability in sintering factory in Gwangyang Works	Approved
July 16	•  Deliberation Agenda
	1. Replacement of 1RH facilities in #2 Steelmaking Plant in Pohang Works	Approved
	2. Replacement of #5 and #6 Oxygen Making Plant and establishment of #17 plant	Approved
	3. Construction of brine-based PosLX upstream demo plant	Approved
	4. R&D facilities of cathode materials for lithium ion batteries	Approved
	5. Construction plan of employee dormitory in Gwangyang Works	Approved
	6. Sales of investment stocks	Approved

* Decided tore-submit after the government’s additional regulation announcement

40

B. Audit Committee

(1) Composition of the Audit Committee

Name	Qualifications	Remarks
Chung,Moon-Ki Bahk, Byong-Won Chang, Seung-Wha	Satisfies the requirements stipulated in the Korean Commercial Act and the Articles of Incorporation	Chairman — —

(2) Major Activities of the Audit Committee (January 1, 2019 ~ August 14, 2019)

Session	Date	Agenda	Approval
1	January 29	•  Deliberation Agenda •  Approval on the appointment of the internal audit department head •  Assessment of the Audit Committee for the fiscal year of 2018 •  Approval of audit andnon-audit services for POSCO and its subsidiaries •  Report Agenda •  Report on the operation of the internal accounting control system for the fiscal year of 2018 •  The result of internal audit for the fiscal year of 2018 and audit plans for the fiscal year of 2019 •  The assessment on the employees’ conformity to the code of ethics	All 3 Cases Approved
2	February 19	•  Deliberation Agenda •  Internal audit result for the fiscal year of 2018 •  Assessment of the operation of the internal accounting control system for the fiscal year of 2018 •  Approval of audit andnon-audit services for POSCO’s Subsidiaries abroad •  Report Agenda •  External audit result for the fiscal year of 2018	All 3 Cases Approved
3	February 20	•  Deliberation Agenda •  Review of agenda for general meeting of shareholders	Approved
4	April 26	•  Deliberation Agenda •  Appointment of the Chairman of the Audit Committee •  Report Agenda •  Consolidated internal audit operation report for the fiscal year of 2018 •  The appraisal on the consolidated internal audit operation report for the fiscal year of 2018 •  External audit result on20-F for the fiscal year of 2018	Approved
5	May 9	•  Deliberation Agenda •  Approval on thenon-audit service for POSCO •  Report Agenda •  Internal audit result on the Consolidated Financial Statements for the first quarter of 2019 •  External auditors’ review result on the Consolidated Financial Statements for the first quarter of 2019	Approved
6	July 26	•  Deliberation Agenda •  Amendment of internal accounting control regulation •  Approval of audit andnon-audit services for POSCO and its subsidiaries •  Report Agenda •  Internal audit result on the Consolidated Financial Statements for the first half of 2019 •  External auditors’ review result on the Consolidated Financial Statements for the first half of 2019 •  Assessment on external auditors’ conduct for the fiscal year of 2018 •  The result of internal audit for the first half of 2019 and audit plans for the second half of 2019	Approved Approved

41

C. Voting Rights of Shareholders

(1) The Cumulative Voting System: The cumulative voting system was introduced at the 36th general meeting of shareholders on March 12, 2004.

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

(3) The Electronic Voting System: The electronic voting system was introduced at the 51st general meeting of shareholders on February 20, 2019.

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		3,377		466			—
Outside Director	4		146		32	10,000		—
Members of the Audit Committee	3		105		35			—
Total	12		3,628		533			—

Payment Period: January 1, 2019 ~June 30, 2019

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

Average Remuneration Amount per Capita: Average remuneration amount is calculated based on the paid amount to the current directors as of June 30, 2019.

(2) Individual remuneration amount (January 1, 2019 ~June 30, 2019)

(In millions KRW)
Name	Experience	Total Payment
Choi,Jeong-Woo	Chief Executive Officer and Representative Director	815
Chang,In-Hwa	President and Representative Director	615
Chon,Jung-Son	Senior Executive Vice President	513

42

Oh,In-Hwan*	President and Representative Director	1,450
Yu, Seong*	Senior Executive Vice President	2,143

* Total payment includes the severance pay of the director who retired in March 2019.

(3) List of Stock Options Presented to the Executives

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

43

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2019

(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, 2019, the condensed consolidated interim statements of comprehensive income for the three-month andsix-month periods ended June 30, 2019 and 2018, the condensed consolidated interim statements of changes in equity and cash flows for thesix-month periods ended June 30, 2019 and 2018, 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 these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard(“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

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 statements 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 Korean Standards on Auditing 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 withK-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

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

The consolidated statement of financial position of the Company as of December 31, 2018, 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 in accordance with Korean Standards on Auditing and our report thereon, dated March 7, 2019, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2018, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Seoul, Korea

August 14, 2019

This report is effective as of August 14, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes		June 30, 2019		December 31, 2018
Assets
Cash and cash equivalents		21	W	2,553,246		2,643,865
Trade accounts and notes receivable, net		4,21,26,27,34		9,938,458		9,282,609
Other receivables, net		5,21,34		1,591,074		1,385,629
Other short-term financial assets		6,21		7,502,959		8,081,096
Inventories		7		11,708,185		11,499,928
Current income tax assets				39,185		51,557
Assets held for sale		8		21,819		21,854
Other current assets		14		702,913		684,464
Total current assets				34,057,839		33,651,002
Long-term trade accounts and notes receivable, net		4,21		469,644		427,125
Other receivables, net		5,21		880,321		863,240
Other long-term financial assets		6,21		1,717,207		1,647,898
Investments in associates and joint ventures		9		3,787,410		3,650,003
Investment property, net		11		933,313		928,615
Property, plant and equipment, net		12		30,340,196		30,018,273
Intangible assets, net		13		5,166,218		5,170,825
Defined benefit assets, net		19		—		1,489
Deferred tax assets				1,321,305		1,381,031
Othernon-current assets		14		317,576		508,764
Totalnon-current assets				44,933,190		44,597,263
Total assets			W	78,991,029		78,248,265

See accompanying notes to the condensed consolidated interim financial statements.

3

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of June 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes	June 30, 2019			December 31, 2018
Liabilities
Trade accounts and notes payable	21,34	W	4,022,626			4,006,135
Short-term borrowings and current installments of long-term borrowings	4,15,21		8,958,133			10,289,619
Other payables	16,21,34		1,822,987			1,720,097
Other short-term financial liabilities	17,21		91,900			77,800
Current income tax liabilities			649,293			948,166
Provisions	18,35		329,327			301,280
Other current liabilities	20,26,27		1,810,111			1,594,888
Total current liabilities			17,684,377			18,937,985
Long-term trade accounts and notes payable	21		35,097			29,825
Long-term borrowings, excluding current installments	15,21		10,241,226			9,919,651
Other payables	16,21		620,344			148,868
Other long-term financial liabilities	17,21		10,979			64,162
Defined benefit liabilities, net	19		247,454			140,933
Deferred tax liabilities			1,713,484			1,688,893
Long-term provisions	18,35		472,351			431,036
Othernon-current liabilities	20,26		91,746			127,361
Totalnon-current liabilities			13,432,681			12,550,729
Total liabilities			31,117,058			31,488,714
Equity
Share capital	22		482,403			482,403
Capital surplus	22		1,374,938			1,410,551
Hybrid bonds	23		199,384			199,384
Reserves	24		(1,112,264	)		(1,404,368	)
Treasury shares	25		(1,508,303	)		(1,532,728	)
Retained earnings			45,020,871			44,216,018
Equity attributable to owners of the controlling company			44,457,029			43,371,260
Non-controlling interests	23		3,416,942			3,388,291
Total equity			47,873,971			46,759,551
Total liabilities and equity		W	78,991,029			78,248,265

See accompanying notes to the condensed consolidated interim financial statements.

4

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month andsix-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won, except per share information)		For the three-month periods ended June 30						For thesix-month periods ended June 30
	Notes	2019			2018			2019			2018
Revenue	26, 27, 34, 37	W	16,321,335			16,083,296			32,335,573			31,945,579
Cost of sales	7, 27, 31, 34		(14,707,162	)		(14,226,274	)		(28,908,029	)		(27,993,810	)
Gross profit			1,614,173			1,857,022			3,427,544			3,951,769
Selling and administrative expenses	31, 34
Reversal of (impairment loss) on trade accounts and notes receivable			21,129			(23,420	)		7,998			(36,974	)
Other administrative expenses	28		(476,537	)		(497,252	)		(982,620	)		(1,015,343	)
Selling expenses	28		(90,203	)		(84,062	)		(181,463	)		(159,460	)
Operating profit			1,068,562			1,252,288			2,271,459			2,739,992
Share of profit (loss) of equity-accounted investees, net	9		74,670			(55,737	)		141,529			31,651
Finance income and costs	21, 29
Finance income			532,862			633,632			1,026,876			1,090,119
Finance costs			(609,932	)		(807,514	)		(1,160,525	)		(1,326,803	)
Othernon-operating income and expenses	34
Impairment loss on other receivables			(12,026	)		(7,690	)		(15,416	)		(3,035	)
Othernon-operating income	30		83,024			266,129			157,368			327,085
Othernon-operating expenses	30, 31		(166,679	)		(351,677	)		(303,869	)		(446,565	)
Profit before income tax	37		970,481			929,431			2,117,422			2,412,444
Income tax expense	32, 37		(289,063	)		(349,093	)		(657,559	)		(748,564	)
Profit			681,418			580,338			1,459,863			1,663,880
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans	19		(11,175	)		(5,379	)		(20,881	)		(31,935	)
Net changes in fair value of equity investments at fair value through other comprehensive income	21		23,383			(16,385	)		17,844			(61,141	)
Items that are or may be reclassified subsequently to profit or loss:
Capital adjustment arising from investments in equity-accounted investees			24,000			37,877			72,838			26,751
Foreign currency translation differences			98,502			52,011			219,663			73,829
Gains or Losses on valuation of derivatives	21		(132	)		(80	)		(100	)		(238	)
Other comprehensive income, net of tax			134,578			68,044			289,364			7,266
Total comprehensive income		W	815,996			648,382			1,749,227			1,671,146
Profit attributable to:
Owners of the controlling company		W	612,286			545,018			1,353,539			1,538,534
Non-controlling interests			69,132			35,320			106,324			125,346
Profit		W	681,418			580,338			1,459,863			1,663,880
Total comprehensive income attributable to :
Owners of the controlling company		W	742,367			601,645			1,654,770			1,533,839
Non-controlling interests			73,629			46,737			94,457			137,307
Total comprehensive income		W	815,996			648,382			1,749,227			1,671,146
Basic and diluted earnings per share (in Won)	33		7,622			6,730			16,854			19,052

See accompanying notes to the condensed consolidated interim financial statements.

5

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Attributable to owners of the controlling company																				Non-
	Share		Capital			Hybrid						Treasury			Retained						controlling
	capital		surplus			bonds			Reserves			shares			earnings			Subtotal			interests			Total
Balance as of January 1, 2018	W	482,403		1,412,565			996,919			(682,556	)		(1,533,054	)		43,056,600			43,732,877			3,731,131			47,464,008
Adjustment on initial application ofK-IFRS No. 1115, net of tax		—		— ��			—			—			—			(76,359	)		(76,359	)		(63,792	)		(140,151	)
Adjustment on initial application ofK-IFRS No. 1109, net of tax		—		—			—			(412,102	)		—			379,370			(32,732	)		(19,544	)		(52,276	)
Adjusted balance as of January 1, 2018		482,403		1,412,565			996,919			(1,094,658	)		(1,533,054	)		43,359,611			43,623,786			3,647,795			47,271,581
Comprehensive income:
Profit		—		—			—			—			—			1,538,534			1,538,534			125,346			1,663,880
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—			—			—			(19,682	)		(19,682	)		(12,253	)		(31,935	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—			13,493			—			—			13,493			13,258			26,751
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—			(63,726	)		—			3,463			(60,263	)		(878	)		(61,141	)
Foreign currency translation differences, net of tax		—		—			—			61,998			—			—			61,998			11,831			73,829
Gains or losses on valuation of derivatives, net of tax		—		—			—			(241	)		—			—			(241	)		3			(238	)
Total comprehensive income		—		—			—			11,524			—			1,522,315			1,533,839			137,307			1,671,146
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—			—			—			(279,999	)		(279,999	)		(48,786	)		(328,785	)
Interim dividends		—		—			—			—			—			(119,999	)		(119,999	)		—			(119,999	)
Changes in subsidiaries		—		—			—			—			—			—			—			(224	)		(224	)
Changes in ownership interest in subsidiaries		—		(1,822	)		—			—			—			—			(1,822	)		10,990			9,168
Repayment of hybrid bonds		—		(2,465	)		(797,535	)		—			—			—			(800,000	)		—			(800,000	)
Interest of hybrid bonds		—		—			—			—			—			(19,805	)		(19,805	)		(11,994	)		(31,799	)
Disposal of treasury shares		—		113			—			—			270			—			383			—			383
Others		—		(456	)		—			953			—			(3,649	)		(3,152	)		642			(2,510	)
Total transactions with owners of the controlling company		—		(4,630	)		(797,535	)		953			270			(423,452	)		(1,224,394	)		(49,372	)		(1,273,766	)
Balance as of June 30, 2018	W	482,403		1,407,935			199,384			(1,082,181	)		(1,532,784	)		44,458,474			43,933,231			3,735,730			47,668,961

See accompanying notes to the condensed consolidated interim financial statements.

6

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the six-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Attributable to owners of the controlling company																			Non-
	Share		Capital			Hybrid					Treasury			Retained						controlling
	capital		surplus			bonds		Reserves			shares			earnings			Subtotal			interests			Total
Balance as of January 1, 2019	W	482,403		1,410,551			199,384		(1,404,368	)		(1,532,728	)		44,216,018			43,371,260			3,388,291			46,759,551
Comprehensive income:
Profit		—		—			—		—			—			1,353,539			1,353,539			106,324			1,459,863
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(10,624	)		(10,624	)		(10,257	)		(20,881	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		66,589			—			—			66,589			6,249			72,838
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		36,311			—			(18,467	)		17,844			—			17,844
Foreign currency translation differences, net of tax		—		—			—		227,517			—			—			227,517			(7,854	)		219,663
Gains or losses on valuation of derivatives, net of tax		—		—			—		(95	)		—			—			(95	)		(5	)		(100	)
Total comprehensive income		—		—			—		330,322			—			1,324,448			1,654,770			94,457			1,749,227
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(400,006	)		(400,006	)		(60,202	)		(460,208	)
Interim dividends		—		—			—		—			—			(160,231	)		(160,231	)		—			(160,231	)
Changes in subsidiaries		—		—			—		—			—			—			—			(874	)		(874	)
Changes in ownership interest in subsidiaries		—		(49,889	)		—		—			—			—			(49,889	)		7,172			(42,717	)
Interest of hybrid bonds		—		—			—		—			—			(4,562	)		(4,562	)		(3,617	)		(8,179	)
Disposal of treasury shares		—		12,576			—		—			24,425			—			37,001			—			37,001
Others		—		1,700			—		(38,218	)		—			45,204			8,686			(8,285	)		401
Total transactions with owners of the controlling company		—		(35,613	)		—		(38,218	)		24,425			(519,595	)		(569,001	)		(65,806	)		(634,807	)
Balance as of June 30, 2019	W	482,403		1,374,938			199,384		(1,112,264	)		(1,508,303	)		45,020,871			44,457,029			3,416,942			47,873,971

See accompanying notes to the condensed consolidated interim financial statements.

7

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes		June 30, 2019			June 30, 2018
Cash flows from operating activities
Profit			W	1,459,863			1,663,880
Adjustments for:
Depreciation				1,523,108			1,436,644
Amortization				203,733			204,435
Finance income				(562,510	)		(666,211	)
Finance costs				712,547			878,785
Income tax expense				657,559			748,564
Impairment loss on property, plant and equipment				149,659			18,870
Gain on disposal of property, plant and equipment				(16,362	)		(21,089	)
Loss on disposal of property, plant and equipment				37,396			59,072
Impairment loss on intangible assets				1,171			1,763
Gain on disposal of intangible assets				(526	)		(101,383	)
Gain on disposal of investments in subsidiaries, associates and joint ventures				(15,821	)		(44,399	)
Loss on disposal of investments in subsidiaries, associates and joint ventures				5,586			3,405
Share of profit of equity-accounted investees				(141,529	)		(31,651	)
Impairment loss on assets held for sale				3,346			46,896
Gain on disposal of assets held for sale				(8,536	)		(103	)
Expenses related to post-employment benefit				117,226			108,622
Impairment loss on trade and other receivables				7,418			40,009
Loss on valuation of inventories				73,600			42,633
Increase to provisions				82,759			216,205
Others, net				(22,910	)		(5,644	)
				2,806,914			2,935,423
Changes in operating assets and liabilities		36		(553,728	)		(1,694,016	)
Interest received				188,096			139,831
Interest paid				(389,714	)		(332,002	)
Dividends received				156,730			138,151
Income taxes paid				(973,112	)		(592,876	)
Net cash provided by operating activities			W	2,695,049			2,258,391

See accompanying notes to the condensed consolidated interim financial statements.

8

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For thesix-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes	June 30, 2019			June 30, 2018
Cash flows from investing activities
Acquisitions of short-term financial instruments		W	(15,440,039	)		(14,513,106	)
Proceeds from disposal of short-term financial instruments			16,213,040			14,491,664
Increase in loans			(164,574	)		(246,383	)
Collection of loans			190,831			283,418
Acquisitions of securities			(370,458	)		(161,250	)
Proceeds from disposal of securities			165,242			103,886
Acquisitions of investment in associates and joint ventures			(45,980	)		(15,030	)
Proceeds from disposal of investment in associates and joint ventures			3,598			84,791
Acquisitions of investment property			(12,230	)		(14,063	)
Proceeds from disposal of investment property			1,127			952
Acquisitions of property, plant and equipment			(990,483	)		(872,537	)
Proceeds from disposal of property, plant and equipment			30,957			31,817
Acquisitions of intangible assets			(158,570	)		(51,413	)
Proceeds from disposal of intangible assets			9,226			38,146
Proceeds from disposal of assets held for sale			311			15,924
Payment for acquisition of business, net of cash acquired			(33,014	)		—
Cash received from disposal of business, net of cash transferred			34,266			130,987
Others, net			28,567			(3,336	)
Net cash used in investing activities			(538,183	)		(695,533	)
Cash flows from financing activities
Proceeds from borrowings			892,587			526,342
Repayment of borrowings			(1,372,044	)		(649,857	)
Proceeds from short-term borrowings, net			(1,131,449	)		(141,737	)
Capital contribution fromnon-controlling interests			23,579			5,808
Payment of cash dividends			(625,406	)		(447,674	)
Payment of interest of hybrid bonds			(8,204	)		(33,738	)
Repayment of hybrid bonds			—			(800,000	)
Others, net			(84,504	)		(25,295	)
Net cash used in financing activities			(2,305,441	)		(1,566,151	)
Effect of exchange rate fluctuation on cash held			57,956			19,146
Net increase (decrease) in cash and cash equivalents			(90,619	)		15,853
Cash and cash equivalents at beginning of the period			2,643,865			2,612,530
Cash and cash equivalents at end of the period		W	2,553,246			2,628,383

See accompanying notes to the condensed consolidated interim financial statements.

9

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2019

(Unaudited)

1. General Information

General information about POSCO, its 32 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 134 foreign subsidiaries including POSCO America Corporation (collectively, “the Company”) and its 128 associates and joint ventures are as follows:

(a) The controlling company

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

The shares of POSCO have been listed on the Korea Exchange since June 10, 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through six of its overseas liaison offices.

As of June 30, 2019, the shares of the POSCO are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchange.

(b) Consolidated subsidiaries included for the first time during thesix-month period ended June 30, 2019 were as follows:

Company	Date of inclusion	Ownership (%)		Reason
GRAIN TERMINAL HOLDING PTE. LTD.	June 2019		75.00	Acquisition of control
Mykolaiv Milling Works PJSC.	June 2019		100.00	Acquisition of control
Yuzhna Stividoring Company Limited	June 2019		100.00	Acquisition of control

(c) Subsidiaries excluded from consolidation during thesix-month period ended June 30, 2019 were as follows:

Company	Date of exclusion	Reason
POSCO Processing & Service	January 2019	Merged into POSCO
DAEWOO PRECIOUS RESOURCES CO., LTD.	January 2019	Liquidation
BLUE O&M Co., Ltd.	February 2019	Merged into POSCO O&M Co., Ltd. (formerly, POSMATE)
MegaAsset Co., Ltd.	February 2019	Merged into POSCO O&M Co., Ltd. (formerly, POSMATE)
POSCO ES MATERIALS CO., LTD.	April 2019	Merged into POSCO CHEMICAL CO., LTD. (formerly, POSCO CHEMTECH)
Daewoo International Guangzhou Corp.	April 2019	Merged into POSCO INTERNATIONAL (CHINA) CO., LTD. (formerly, POSCO DAEWOO CHINA)
POSCO (Guangdong) Coated Steel Co., Ltd.	June 2019	Disposal
POSCO E&C (THAILAND) CO., Ltd.	June 2019	Liquidation
POSCO Gulf SFC LLC	June 2019	Liquidation

10

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

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 theAct on External Audit of Companies, Etc. in the Republic of Korea.

These condensed consolidated interim financial statements have been prepared in accordance withK-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’sK-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, 2018. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

The Company adoptedK-IFRS No. 1116 “Leases” for the first time from January 1, 2019. Changes to significant accounting policies are described in Note 3.

Use of estimates and judgments

(a) Judgments, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim financial statements in conformity withK-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 prospectively.

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 described in the last annual financial statements, except for new significant judgments and key sources of estimation uncertainty related to the application ofK-IFRS No. 1116 “Leases” which are described in Note 3.

(b) Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial andnon-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

11

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

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

Significant valuation issues are reported to the Company’s Audit Committee.

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

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

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

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

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

Information about the assumptions made in measuring fair value is included in Note 21.

3. Summary of Significant Accounting Policies

Except as described inK-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, 2018.

K-IFRS No. 1116 “Leases”

The Company has initially adoptedK-IFRS No. 1116 “Leases” from January 1, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2019.

K-IFRS No. 1116 “Leases” introduced a single accounting model for lessees. As a result, the Company, as a lessee, recognizedright-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.

The Company appliedK-IFRS No. 1116 “Leases” using the modified retrospective approach by recognizing the cumulative effect of initial application as of January 1, 2019, the date of initial application. Accordingly, the comparative information presented for 2018 has not been restated.

12

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(a) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement was or contained a lease underK-IFRS No. 2104 “Determining Whether an Arrangement Contains a Lease”. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. UnderK-IFRS No. 1116 “Leases”, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition toK-IFRS No. 1116 “Leases”, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company appliedK-IFRS No. 1116 only to contracts that were previously identified as leases. Contracts that were not identified as leases underK-IFRS No. 1017 “Leases” andK-IFRS No. 2104 “Determining Whether an Arrangement Contains a Lease” were not reassessed. Therefore, the definition of a lease underK-IFRS No. 1116 has been applied only to contracts entered into or changed on or after January 1, 2019.

At inception or reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease andnon-lease component on the basis of their relative stand-alone prices.

(b) As a lessee

The Company leases many assets, including land, warehouses, handling equipment and IT equipment. As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. UnderK-IFRS No. 1116 “Leases”, the Company recognizesright-of-use assets and lease liabilities for most leases. That is, most leases are presented in the statement of financial position.

However, the Company has elected not to recognizeright-of-use assets and lease liabilities for some leases oflow-value assets (e.g. desktops, IT supplies, etc.). The Company recognizes lease payments associated with these leases as an expense on a straight-line basis over the lease term.

13

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

The Company presentsright-of-use assets in the same line item as it presents underlying assets of the same nature that it owns, and lease liabilities are included in other payables on the consolidated statement of financial position. The carrying amounts ofright-of-use assets as of January 1, 2019, the date of initial application, and June 30, 2019 are as follows:

(in millions of Won)	Property, Plant and Equipment (* 1)
	Land		Buildings and structures		Machinery and equipment		Vehicles		Furniture, fixtures and others		Total
The date of initial application (January 1, 2019)	W	322,797		192,330		214,650		21,021		28,546		779,344
June 30, 2019		348,317		186,596		216,211		19,218		19,266		789,608

(*1) Leases classified as a finance lease underK-IFRS No. 1017 “Leases” at the end of 2018 are included, and the carrying amounts ofright-of-use assets and lease liabilities are equal to the carrying amounts of the finance lease assets and financial lease liabilities measured in accordance withK-IFRS 1017 “Leases” as of January 1, 2019, the date of initial application.

1) Significant accounting policies

The Company recognizes aright-of-use assets and a lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or, as appropriate, a change in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

The Company applies judgment to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities andright-of-use assets recognized.

14

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) Transition

At transition, for leases classified as operating leases underK-IFRS No. 1017 “Leases”, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate as of January 1, 2019, the date of initial application.Right-of-use assets are measured at amounts equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments.

In addition, the Company used the following practical expedients when applyingK-IFRS No. 1116 “Leases” to leases previously classified as operating leases underK-IFRS No. 1017 “Leases”.

• Applied the exemption not to recognizeright-of-use assets and lease liabilities for leases with less than 12 months of lease term.

• Excluded initial direct costs from measuring theright-of-use asset at the date of initial application.

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(c) As a lessor

The Company leases out its investment properties. The Company classified these leases as operating leases, and the accounting policies applicable to the Company as a lessor are not different from those underK-IFRS No. 1017 “Leases”. However, when the Company is an intermediate lessor thesub-leases are classified with reference to theright-of-use asset arising from the head lease, not with reference to the underlying asset.

The Company providessub-leases for leases of vessels classified as operating leases underK-IFRS No. 1017 “Leases” as an intermediate lessor, and classified thesub-leases as finance leases as of January 1, 2019, the date of initial application ofK-IFRS No. 1116 “Leases”. Accordingly, the Company recognized finance lease receivables amounting toW225,198 million. In addition, the Company did not make any adjustments to leases for which the Company is a lessor, except forsub-leases described above as of January 1, 2019, the date of initial application.

15

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(d) Impact on financial statements

The Company recognized additionalright-of-use assets, lease receivables and lease liabilities as of January 1, 2019, the date of initial application. The effect on the financial statements as of January 1, 2019, the date of initial application is as follows:

(in millions of Won)	The date of initial application (January 1, 2019)
Consolidated statement of financial position
Right-of-use assets presented as property, plant and equipment(*1)	W	641,780
Lease receivables		225,198
Lease liabilities		598,902

(*1) Prepaid lease payments amounting toW268,076 million, classified as operating leases as of December 31, 2018, was reclassified from other assets to property, plant and equipment.

When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rates as of January 1, 2019, the date of initial application, and the weighted-average rates applied are 1.8 ~12.6%. The carrying amount of lease liabilities as of January 1, 2019, the date of initial application, is as follow:

(in millions of Won)	The date of initial application (January 1, 2019)
Operating lease commitments as of December 31, 2018	W	893,284
Operating lease commitments not recognized as lease liabilities
- Leases of low -value assets		(50,364	)
- Leases with less than 12 months of lease term at transition		(17,635	)
Operating lease commitments recognized as lease liabilities		825,285
Amount discounted using the incremental borrowing rate as of January 1, 2019, the date of initial application		598,902
Finance lease liabilities recognized as of December 31, 2018		94,754
Lease liabilities as of January 1, 2019, the date of initial application		693,656

As of June 30, 2019, the Company recognizedW662,830 million ofright-of-use assets andW601,345 million of lease liabilities for leases that were previously classified as operating leases.

In addition, the Company recognized depreciation and interest expenses instead of operating lease expenses. The Company recognized depreciation expenses amounted toW54,237 million and interest expenses amounted toW16,163 million during thesix-month period ended June 30, 2019.

16

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Current
Trade accounts and notes receivable	W	9,308,023			8,648,250
Finance lease receivables		45,647			57,487
Due from customers for contract work		994,379			963,060
Less: Allowance for doubtful accounts		(409,591	)		(386,188	)
	W	9,938,458			9,282,609
Non-current
Trade accounts and notes receivable	W	382,381			583,797
Finance lease receivables		216,897			45,873
Less: Allowance for doubtful accounts		(129,634	)		(202,545	)
	W	469,644			427,125

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted toW233,583 million andW468,706 million as of June 30, 2019 and December 31, 2018, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and is recognized as short-term borrowings from financial institutions.

5. Other Receivables

Other receivables as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Current
Loans	W	355,619			236,782
Other accounts receivable		1,025,194			954,030
Accrued income		228,738			220,066
Deposits		110,353			108,640
Others		17,716			16,201
Less: Allowance for doubtful accounts		(146,546	)		(150,090	)
	W	1,591,074			1,385,629
Non-current
Loans	W	665,908			731,344
Other accounts receivable		162,796			155,936
Accrued income		68,583			1,855
Deposits		174,663			152,072
Less: Allowance for doubtful accounts		(191,629	)		(177,967	)
	W	880,321			863,240

17

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

6. Other Financial Assets

Other financial assets as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Derivatives assets	W	35,377		47,288
Debt securities		241,999		2,987
Deposit instruments(*1,2)		1,879,308		1,931,518
Short-term financial instruments(*2)		5,346,275		6,099,303
	W	7,502,959		8,081,096
Non-current
Derivatives assets	W	67,194		1,795
Equity securities(*3)		1,243,432		1,238,630
Debt securities		31,607		34,327
Other securities(*3)		340,118		338,106
Deposit instruments(*2)		34,856		35,040
	W	1,717,207		1,647,898

(*1) As of June 30, 2019 and December 31, 2018,W5,382 million andW5,715 million, respectively, are restricted for the use in a government projects.

(*2) As of June 30, 2019 and December 31, 2018, financial instruments amounting toW65,491 million andW73,935 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3) As of June 30, 2019 and December 31, 2018,W115,501 million andW115,431 million of equity and other securities have been provided as collateral for borrowings, construction projects and others.

7. Inventories

Inventories as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Finished goods	W	1,794,465			1,886,040
Merchandise		962,228			1,131,416
Semi-finished goods		2,093,726			1,945,567
Raw materials		3,033,223			2,821,972
Fuel and materials		976,109			888,941
Construction inventories		782,884			718,884
Materials-in-transit		2,186,549			2,245,740
Others		79,005			68,150
		11,908,189			11,706,710
Less: Allowance for inventories valuation		(200,004	)		(206,782	)
	W	11,708,185			11,499,928

The amounts of loss on valuation of inventories recognized within cost of sales during thesix-month period ended June 30, 2019 and the year ended December 31, 2018 wereW73,600 million andW141,799 million, respectively.

18

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

8. Assets Held for Sale

Details of assets held for sale as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
	Subsidiaries		Subsidiaries
Property, plant and equipment(*1)	W	21,806		21,076
Others		13		778
	W	21,819		21,854

(*1) During the year ended December 31, 2018, DAESAN (CAMBODIA) Co., Ltd., a subsidiary of the Company, determined to dispose of the land and classified the related property, plant and equipment amounting toW21,076 million as assets held for sale.

19

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

9. Investments in Associates and Joint Ventures

(a) Details of investments in associates as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019								December 31, 2018
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund		178,713,975,892		31.27	W	178,787	W	173,730		174,123
POSPower Co., Ltd(*1)		4,507,138		34.00		179,410		169,152		161,477
SNNC		18,130,000		49.00		90,650		116,334		116,922
QSONE Co., Ltd.		200,000		50.00		84,395		85,388		85,550
Chun-cheon Energy Co., Ltd(*1)		17,308,143		49.10		86,541		63,406		62,478
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		2,008,000		29.53		10,040		17,734		17,382
Daesung Steel(*3)		108,038		17.54		14,000		15,671		15,644
Incheon-Gimpo Expressway Co., Ltd.(*1,3)		9,032,539		18.26		45,163		12,209		13,329
Keystone NO. 1. Private Equity Fund		13,800,000		40.45		13,800		11,627		11,183
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund(*3)		6,485		12.50		6,485		5,762		5,739
KONES, Corp.		3,250,000		41.67		6,893		2,504		2,849
Others (50 companies)(*1)								119,552		123,734
								793,069		790,410
[Foreign]
AES-VCM Mong Duong Power Company Limited(*2)		—		30.00		164,303		211,519		209,936
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		135,899		217,290		179,459
7623704 Canada Inc.(*3)		114,452,000		10.40		124,341		132,396		126,885
Eureka Moly LLC		—		20.00		240,123		85,259		82,447
AMCI (WA) PTY LTD		49		49.00		209,664		71,215		71,086
Nickel Mining Company SAS		3,234,698		49.00		157,585		33,899		41,712
KOREA LNG LTD.		2,400		20.00		135,205		46,509		43,554
NCR LLC		—		29.40		44,119		42,592		37,602
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		134,400,000		40.00		22,423		22,590		—
PT. Batutua Tembaga Raya		128,285		22.00		21,824		19,544		20,479
PT. Wampu Electric Power(*1)		8,708,400		20.00		10,054		14,405		14,120
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,200,000		34.00		9,517		15,269		14,796
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		50		25.00		4,723		6,748		6,478
Others (27 companies)(*1)								116,836		99,728
								1,036,071		948,282
							W	1,829,140		1,738,692

(*1) As of June 30, 2019 and December 31, 2018, investments in associates amounting toW296,248 million andW285,066 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2) As of June 30, 2019 and December 31, 2018, shares of PSC Energy Global Co., Ltd., a subsidiary of the Company, are provided as collateral in relation to the associates’ borrowings.

(*3) As of June 30, 2019, it was classified as an associate even though the Company’s ownership percentage is less than 20% of ownership percentage since the Company has significant influence over the investee when considering its structure of the Board of Directors and others.

20

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) Details of investments in joint ventures as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019								December 31, 2018
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
POSCO MITSUBISHI CARBON TECHNOLOGY		11,568,000		60.00	W	115,680	W	181,787		180,192
Others (8 companies)								10,168		9,124
								191,955		189,316
[Foreign]
Roy Hill Holdings Pty Ltd(*1)		13,117,972		12.50		1,528,672		1,120,383		1,041,600
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		376,683		363,506
KOBRASCO		2,010,719,185		50.00		32,950		96,578		133,449
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		25.00		61,961		91,183		88,391
DMSA/AMSA(*1)		—		4.00		338,966		30,899		26,709
CSP - Compania Siderurgica do Pecem		1,108,696,532		20.00		558,821		7,163		24,832
Others (12 companies)								43,426		43,508
								1,766,315		1,721,995
							W	1,958,270		1,911,311

(*1) As of June 30, 2019 and December 31, 2018, the investments in joint ventures were provided as collateral in relation to the joint ventures’ borrowings.

(c) The movements of investments in associates and joint ventures for the six-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

1) For the six-month period ended June 30, 2019

(in millions of Won)
Company	December 31, 2018 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(* 1)			June 30, 2019 Book value
[Domestic]
EQP POSCO Global NO1 Natual Resources PEF	W	174,123		—		—			(393	)		—			173,730
POSPower Co., Ltd		161,477		—		—			(2,403	)		10,078			169,152
SNNC		116,922		—		(1,450	)		862			—			116,334
QSONE Co., Ltd.		85,550		—		(950	)		788			—			85,388
Chun-cheon Energy Co., Ltd		62,478		6,050		—			(5,122	)		—			63,406
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		17,382		—		—			352			—			17,734
Daesung Steel		15,644		—		—			27			—			15,671
Incheon-Gimpo Expressway Co., Ltd.		13,329		—		—			(1,120	)		—			12,209
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund		11,183		—		—			444			—			11,627
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		5,739		—		—			23			—			5,762
KONES, Corp.		2,849		—		—			(345	)		—			2,504
POSCO MITSUBISHI CARBON TECHNOLOGY		180,192		—		(16,369	)		17,964			—			181,787
Others (58 companies)		132,858		15,214		(816	)		(77	)		(17,459	)		129,720
		979,726		21,264		(19,585	)		11,000			(7,381	)		985,024
[Foreign]
AES-VCM Mong Duong Power Company Limited		209,936		—		(18,099	)		18,990			692			211,519
South-East Asia Gas Pipeline Company Ltd.		179,459		—		—			31,309			6,522			217,290
7623704 Canada Inc.		126,885		—		(3,530	)		4,639			4,402			132,396
Eureka Moly LLC		82,447		—		—			(41	)		2,853			85,259
AMCI (WA) PTY LTD		71,086		—		—			(1,894	)		2,023			71,215
Nickel Mining Company SAS		41,712		—		—			(8,787	)		974			33,899
KOREA LNG LTD.		43,554		—		(7,867	)		7,904			2,918			46,509
NCR LLC		37,602		3,980		—			(196	)		1,206			42,592
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		—		22,423		—			(20	)		187			22,590
PT. Batutua Tembaga Raya		20,479		—		—			(1,361	)		426			19,544
PT. Wampu Electric Power		14,120		—		—			(181	)		466			14,405
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		14,796		—		—			(103	)		576			15,269
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,478		—		—			(84	)		354			6,748
Roy Hill Holdings Pty Ltd		1,041,600		—		—			49,181			29,602			1,120,383
POSCO-NPS Niobium LLC		363,506		—		(6,712	)		7,418			12,471			376,683
KOBRASCO		133,449		—		(74,716	)		32,291			5,554			96,578
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,391		—		—			57			2,735			91,183
DMSA/AMSA		26,709		16,370		—			(14,196	)		2,016			30,899
CSP - Compania Siderurgica do Pecem		24,832		—		—			(15,514	)		(2,155	)		7,163
Others (39 companies)		143,236		367		(10,951	)		21,117			6,493			160,262
		2,670,277		43,140		(121,875	)		130,529			80,315			2,802,386
	W	3,650,003		64,404		(141,460	)		141,529			72,934			3,787,410

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

21

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For the year ended December 31, 2018

(in millions of Won)
Company	December 31, 2017 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2018 Book value
[Domestic]
EQP POSCO Global NO 1 Natual Resources PEF	W	175,553		—		—			(1,430	)		—			174,123
POS Power Co., Ltd		—		176,731		—			(3,198	)		(12,056	)		161,477
SNNC		110,424		—		—			6,624			(126	)		116,922
QSONE Co., Ltd.		85,049		—		(550	)		1,051			—			85,550
Chun-cheon Energy Co., Ltd		74,378		—		—			(11,900	)		—			62,478
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		17,252		—		—			130			—			17,382
BLUE OCEAN Private Equity Fund		19,620		—		—			(17,930	)		(1,690	)		—
Daesung Steel		15,500		—		—			144			—			15,644
Incheon-Gimpo Expressway Co., Ltd.		31,660		—		—			(18,331	)		—			13,329
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund		12,379		—		—			(1,295	)		99			11,183
UITrans LRT Co., Ltd.		15,841		—		—			(15,841	)		—			—
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		6,828		—		—			(1,089	)		—			5,739
KONES, Corp.		2,827		—		—			29			(7	)		2,849
POSCO MITSUBISHI CARBON TECHNOLOGY		110,760		—		—			69,594			(162	)		180,192
Others (52 companies)		73,419		44,629		(784	)		18,942			(3,348	)		132,858
		751,490		221,360		(1,334	)		25,500			(17,290	)		979,726
[Foreign]
AES-VCM Mong Duong Power Company Limited		142,348		—		(26,108	)		30,096			63,600			209,936
South-East Asia Gas Pipeline Company Ltd.		197,069		—		(29,301	)		17,709			(6,018	)		179,459
7623704 Canada Inc.		121,702		—		(4,509	)		4,373			5,319			126,885
Eureka Moly LLC		79,398		—		—			(406	)		3,455			82,447
AMCI (WA) PTY LTD		63,378		—		—			(3,412	)		11,120			71,086
Nickel Mining Company SAS		45,905		—		—			(4,268	)		75			41,712
KOREA LNG LTD.		33,422		—		(10,544	)		10,542			10,134			43,554
NCR LLC		33,738		2,505		—			(5,909	)		7,268			37,602
PT. Batutua Tembaga Raya		21,823		—		—			(1,817	)		473			20,479
PT. Wampu Electric Power		13,391		—		—			177			552			14,120
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		15,617		—		—			(735	)		(86	)		14,796
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		6,517		—		—			23			(62	)		6,478
Roy Hill Holdings Pty Ltd		1,125,133		—		—			59,095			(142,628	)		1,041,600
POSCO-NPS Niobium LLC		348,836		—		(22,254	)		21,536			15,388			363,506
KOBRASCO		108,485		—		(37,710	)		75,170			(12,496	)		133,449
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,305		—		—			540			(454	)		88,391
DMSA/AMSA		56,735		17,973		—			(48,802	)		803			26,709
CSP - Compania Siderurgica do Pecem		146,427		—		—			(109,714	)		(11,881	)		24,832
Others (42 companies)		158,213		2,771		(22,588	)		42,937			(38,097	)		143,236
		2,806,442		23,249		(153,014	)		87,135			(93,535	)		2,670,277
	W	3,557,932		244,609		(154,348	)		112,635			(110,825	)		3,650,003

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

22

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(d) Summarized financial information of associates and joint ventures as of and for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 are as follows:

1) June 30, 2019

(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income
[Domestic]
EQP POSCO Global NO1 Natual Resources Private Equity Fund	W	537,212		775		536,437			—		463
POSPower Co., Ltd		677,586		150,930		526,656			—		(2,111	)
SNNC		673,095		415,225		257,870			310,509		403
QSONE Co., Ltd.		249,571		78,795		170,776			8,583		1,577
Chun-cheon Energy Co., Ltd		627,847		496,365		131,482			172,246		(10,664	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		60,412		30,669		29,743			7,930		1,192
Daesung Steel		172,822		114,863		57,959			40,589		155
Incheon-Gimpo Expressway Co., Ltd.		1,032,447		941,946		90,501			24,648		(9,187	)
Keystone NO. 1. Private Equity Fund		175,409		141,533		33,876			10,237		1,097
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		47,147		1,055		46,092			451		177
KONES, Corp.		1,698		1,323		375			1,735		(829	)
POSCO MITSUBISHI CARBON TECHNOLOGY		558,589		256,344		302,245			130,145		29,952
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,851,888		984,129		867,759			256,088		125,035
7623704 Canada Inc.		1,285,200		3		1,285,197			—		44,602
Nickel Mining Company SAS		465,845		345,093		120,752			88,112		(19,090	)
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		65,168		8,744		56,424			87		(51	)
KOREA LNG LTD.		232,680		132		232,548			40,605		39,521
PT. Batutua Tembaga Raya		386,150		332,551		53,599			56,492		(6,064	)
PT. Wampu Electric Power		226,141		157,112		69,029			8,378		(905	)
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		71,202		20,642		50,560			48,617		(303	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		60,765		33,187		27,578			33,640		(349	)
Roy Hill Holdings Pty Ltd		10,259,062		5,959,124		4,299,938			1,899,721		580,732
POSCO-NPS Niobium LLC		753,163		—		753,163			—		14,369
KOBRASCO		304,478		111,323		193,155			92,397		64,582
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		934,287		597,173		337,114			529,518		229
DMSA/AMSA		5,607,227		4,145,517		1,461,710			263,152		(355,363	)
CSP - Compania Siderurgica do Pecem		4,304,481		4,383,584		(79,103	)		878,495		(79,261	)

23

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) December 31, 2018

(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natual Resources Private Equity Fund	W	552,760		783		551,977			—		10,249
POSPower Co., Ltd		425,632		35,761		389,871			—		(4,536	)
SNNC		645,013		384,586		260,427			656,320		14,229
QSONE Co., Ltd.		249,384		78,285		171,099			16,597		2,101
Chun-cheon Energy Co., Ltd		667,454		525,308		142,146			320,950		(18,796	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		63,554		35,003		28,551			16,237		439
BLUE OCEAN Private Equity Fund		305,876		174,640		131,236			459,491		(5,294	)
Daesung Steel		169,305		111,502		57,803			75,474		824
Incheon-Gimpo Expressway Co., Ltd.		1,049,629		931,937		117,692			45,566		(92,202	)
Keystone NO. 1. Private Equity Fund		177,024		144,186		32,838			15,507		(3,962	)
UITrans LRT Co., Ltd.		430,227		435,699		(5,472	)		12,929		(85,344	)
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		59,464		1,061		58,403			2,401		(12,313	)
KONES, Corp.		2,618		1,414		1,204			5,167		70
POSCO MITSUBISHI CARBON TECHNOLOGY		537,138		237,563		299,575			300,986		116,049
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,726,410		1,009,731		716,679			343,471		70,717
7623704 Canada Inc.		1,232,208		1		1,232,207			—		44,320
Nickel Mining Company SAS		465,463		329,084		136,379			207,956		(4,569	)
KOREA LNG LTD.		217,883		110		217,773			54,357		52,720
PT. Batutua Tembaga Raya		332,305		274,580		57,725			128,609		(8,451	)
PT. Wampu Electric Power		223,009		155,407		67,602			13,461		887
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		73,515		24,264		49,251			121,104		(2,231	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		61,782		34,740		27,042			85,619		78
Roy Hill Holdings Pty Ltd		9,666,619		6,043,492		3,623,127			3,259,256		497,469
POSCO-NPS Niobium LLC		726,810		—		726,810			—		41,812
KOBRASCO		317,842		50,945		266,897			229,340		150,550
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		710,518		384,572		325,946			1,341,849		2,159
DMSA/AMSA		5,562,877		4,171,896		1,390,981			731,127		(529,844	)
CSP - Compania Siderurgica do Pecem		4,194,242		4,192,867		1,375			1,860,198		(542,865	)

24

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of June 30, 2019 are as follows:

Joint operations	Operation	Ownership (%)		Location
MyanmarA-1/A-3 mine	Mine development and gas production		51.00	Myanmar
Offshore midstream	Gas transportation facility		51.00	Myanmar
Greenhills mine	Mine development		20.00	Canada
Arctos Anthracite coal project	Mine development		50.00	Canada
Mt. Thorley J/V	Mine development		20.00	Australia
POSMAC J/V	Mine development		20.00	Australia
RUM J/V	Mine development		10.00	Australia
Hanam-Gamil package public housing project	Construction		7.70	Korea
Hanam-Gamil district B6, C2, C3 Block public housing lot development project	Construction		27.00	Korea
Yangsan-Sasong district public housing project(private-participation)	Construction		13.08	Korea
Yangsan-Sasong district public housing project	Construction		49.00	Korea
Sejong2-1 P3 Block public housing project	Construction		37.00	Korea
Yongin-Giheung Station area city development project	Construction		61.00	Korea
Korean wave world complex landmulti-purpose building development project	Construction		33.30	Korea
Sejong4-1 P3 Block public housing project	Construction		60.00	Korea

11. Investment Property, Net

Changes in the carrying amount of investment property for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For the six-month period ended June 30, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Others(*1)			Ending
Land	W	278,585		—		(224	)		—			3,887			282,248
Buildings		571,335		—		(779	)		(9,750	)		754			561,560
Structures		1,408		—		—			(313	)		(97	)		998
Construction-in-progress		77,287		17,760		—			—			(6,540	)		88,507
	W	928,615		17,760		(1,003	)		(10,063	)		(1,996	)		933,313

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

(b) For the year ended December 31, 2018

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation(*1)			Others(*2)			Ending
Land	W	360,402		1,327		(26,826	)		(16,743	)		(39,575	)		278,585
Buildings		634,040		727		(32,807	)		(28,358	)		(2,267	)		571,335
Structures		6,281		—		—			(603	)		(4,270	)		1,408
Construction-in-progress		64,191		42,052		—			(24,948	)		(4,008	)		77,287
	W	1,064,914		44,106		(59,633	)		(70,652	)		(50,120	)		928,615

(*1) Includes impairment loss on investment property recognized by each of the consolidated subsidiaries, including the office for rent of POSCO(Dalian) IT Center Development Co., Ltd. amounting toW51,461 million.

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

25

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

12. Property, Plant and Equipment, Net

Changes in the carrying amount of property, plant and equipment for the six-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For the six-month period ended June 30, 2019

(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Depreciation			Impairment loss(*1)			Others(*2)			Ending
Land	W	2,548,002		6,058		—		(8,186	)		—			—			27,605			2,573,479
Buildings		4,402,452		9,719		50,113		(4,999	)		(157,925	)		(21,499	)		112,494			4,390,355
Structures		2,917,924		6,920		—		(4,000	)		(113,372	)		(9,615	)		50,515			2,848,372
Machinery and equipment		18,518,129		88,139		3,051		(17,786	)		(1,123,093	)		(117,434	)		530,738			17,881,744
Vehicles		31,341		4,534		100		(369	)		(7,645	)		29			3,471			31,461
Tools		66,164		7,876		187		(598	)		(14,065	)		(4	)		4,633			64,193
Furniture and fixtures		136,287		13,649		7		(1,039	)		(19,018	)		(137	)		6,860			136,609
Lease assets(*3)		137,564		40,110		—		(283	)		(75,338	)		—			687,555			789,608
Bearer plants		80,771		—		—		—			(2,589	)		—			23,026			101,208
Construction-in-progress		1,179,639		849,557		367		(7,123	)		—			—			(499,273	)		1,523,167
	W	30,018,273		1,026,562		53,825		(44,383	)		(1,513,045	)		(148,660	)		947,624			30,340,196

(*1) The Company estimated recoverable amount for individual assets such as CEM andFe-Si factories that ceased operations due to the disposal plan and others and recognized an impairment loss for assets since recoverable amounts are less than their carrying amounts for thesix-month period ended June 30, 2019.

(*2) Represents assets transferred fromconstruction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

(*3) On the date of initial application of K-IFRS No. 1116 (January 1, 2019), recognition ofW641,780 million ofright-of-use assets is included in others.

(b) For the year ended December 31, 2018

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment loss(*1,2)			Others(*3)			Ending
Land	W	2,527,650		28,998		(26,157	)		—			6,399			11,112			2,548,002
Buildings		4,877,018		46,129		(21,501	)		(331,688	)		(73,523	)		(93,983	)		4,402,452
Structures		2,765,852		18,749		(2,834	)		(220,218	)		(6,652	)		363,027			2,917,924
Machinery and equipment		19,367,957		145,220		(62,135	)		(2,224,000	)		(143,293	)		1,434,380			18,518,129
Vehicles		32,861		8,538		(1,149	)		(14,835	)		(56	)		5,982			31,341
Tools		63,640		21,337		(1,867	)		(26,421	)		(206	)		9,681			66,164
Furniture and fixtures		145,439		32,258		(577	)		(51,835	)		(1,494	)		12,496			136,287
Lease assets		145,257		28,466		(420	)		(19,224	)		—			(16,515	)		137,564
Bearer plants		65,515		—		—			(3,636	)		—			18,892			80,771
Construction-in-progress		1,892,346		1,884,125		(23,814	)		—			(778,373	)		(1,794,645	)		1,179,639
	W	31,883,535		2,213,820		(140,454	)		(2,891,857	)		(997,198	)		(49,573	)		30,018,273

(*1) During 2018, the Controlling Company evaluated future economic performance of its Synthetic Natural Gas (SNG) facility that was still in trial run stage. Considering the continuous decline in LNG price, increase in coal prices and the need for additional capital investment in the SNG facility, the Controlling Company concluded that the profitability for the SNG facility is unlikely to be sustainable and decided to terminate the operation of SNG facility as of December 31, 2018. The property, plant and equipment in the SNG facility are primarily comprised of machinery and equipment, among which assets with a carrying value ofW167,054 million are expected to be reused in other facilities of the Controlling Company therefore no impairment test was conducted. For the remaining assets impairment test was performed by estimating the recoverable amount of each individual assets. For the assets which are determined to be technically obsolete and therefore sale is unlikely, recoverable amount represents expected scrap value less cost of disposal.

26

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

For the assets for which sale is probable, the recoverable amount is determined based on fair value less cost of disposal. Fair value was measured using cost approach, which is based on estimated the current cost to purchase or replace the asset less applicable depreciation and obsolescence.

Specifically, the Controlling Company used indirect cost approach to estimate the replacement cost for a new asset by applying asset specific inflation factors to the asset’s historical cost. Then the Controlling Company estimates and deducts depreciation for physical deterioration. Depreciation factors are applied primarily based on estimated useful life of the asset and declining balance depreciation method. The fair value measurement of assets in SNG facility is considered to be level 3 because significant inputs used in the estimate, such as asset specific inflation factors and estimated useful lives, are unobservable.

As a result of the impairment test, the Company recognized an impairment loss ofW809,737 million in connection with the property, plant and equipment in the SNG facility.

The Controlling Company has recognized an impairment loss amounting toW61,787 million since recoverable amount on Strip Casting facilities and others is less than its carrying amount for the period ended December 31, 2018.

(*2) As of December 31, 2018, POSCO ENERGY CO., LTD., as a subsidiary, performed the impairment test due to the consecutive operating loss of the fuel cell business, and recognized impairment losses amounting toW54,250 million.

(*3) Represents assets transferred fromconstruction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

27

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill and other intangible assets for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For thesix-month period ended June 30, 2019

(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Amortization			Impairment loss			Others(*2)			Ending
Goodwill	W	1,125,149		—		31,557		—			—			—			1,788			1,158,494
Intellectual property rights		2,399,525		73,446		—		(485	)		(121,382	)		—			23,273			2,374,377
Premium in rental(*1)		134,793		10,598		—		(8,259	)		(85	)		343			7,631			145,021
Development expense		99,163		1,620		—		—			(22,098	)		—			13,394			92,079
Port facilities usage rights		305,081		—		—		—			(11,547	)		—			1			293,535
Exploratation and evaluation assets		192,130		2,149		—		—			—			(4	)		(560	)		193,715
Customer relationships		421,773		—		—		—			(27,497	)		—			3,339			397,615
Other intangible assets		493,211		51,786		117		(513	)		(21,124	)		(677	)		(11,418	)		511,382
	W	5,170,825		139,599		31,674		(9,257	)		(203,733	)		(338	)		37,448			5,166,218

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

(*2) Represents assets transferred fromconstruction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

(b) For the year ended December 31, 2018

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment loss			Others(*3)			Ending
Goodwill	W	1,349,838		—		—			—			(223,709	)		(980	)		1,125,149
Intellectual property rights		2,449,193		334,667		(18,619	)		(198,282	)		(96,475	)		(70,959	)		2,399,525
Premium in rental(*1)		118,310		36,196		(15,675	)		(330	)		(4,218	)		510			134,793
Development expense		80,218		4,248		(32	)		(37,305	)		(411	)		52,445			99,163
Port facilities usage rights		309,373		—		—			(22,975	)		—			18,683			305,081
Exploratation and evaluation assets		205,944		2,654		—			—			(3,339	)		(13,129	)		192,130
Customer relationships		466,945		—		—			(48,499	)		—			3,327			421,773
Power generation permit(*2)		539,405		—		—			—			—			(539,405	)		—
Other intangible assets		433,043		164,594		(1,644	)		(49,190	)		(8,844	)		(44,748	)		493,211
	W	5,952,269		542,359		(35,970	)		(356,581	)		(336,996	)		(594,256	)		5,170,825

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

(*2) During the year ended December 31, 2018, the Company disposed of a portion of shares of its subsidiary, POSPower Co., Ltd, which resulted in the Company’s loss of control, and derecognition of corresponding intangible assets.

(*3) Represents assets transferred fromconstruction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

28

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

14. Other Assets

Other assets as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Advance payments	W	474,859		539,894
Prepaid expenses		178,899		123,770
Firm commitment asset		12,897		11,246
Emission rights(*1)		25,440		—
Others		10,818		9,554
	W	702,913		684,464
Non-current
Long-term advance payments	W	24,308		24,280
Long-term prepaid expenses		44,576		334,918
Others(*2)		248,692		149,566
	W	317,576		508,764

(*1) The Company decided to sell emission rights, which determined to be restricted for use in the future period during thesix-month period ended June 30, 2019, and recognized such emission rights as other assets at fair value measured as of June 30, 2019.

(*2) As of June 30, 2019 and December 31, 2018, the Company recognized tax assets amounting toW194,580 million andW116,693 million based on the Company’s best estimate of the tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years tax audits and claim for rectification are finalized.

29

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

15. Borrowings

(a) Short-term borrowings and current portion of long-term borrowings as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Lenders	Interest rate (%)		June 30, 2019			December 31, 2018
Short-term borrowings
Bank overdrafts	JP Morgan and others		0.6~9.1	W	172,496			294,364
Short-term borrowings	HSBC and others		0.3~10.4		6,361,517			7,193,416
					6,534,013			7,487,780
Current portion of long-term liabilities
Current portion of long-term borrowings	Export-Import Bank of Korea and others		0.8~8.5		1,320,504			1,234,915
Current portion of debentures	Korea Development Bank and others		2.0~6.3		1,104,062			1,568,108
Less: Current portion of discount on debentures issued					(446	)		(1,184	)
					2,424,120			2,801,839
				W	8,958,133			10,289,619

(b) Long-term borrowings, excluding current portion as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Lenders	Interest rate (%)		June 30, 2019			December 31, 2018
Long-term borrowings	Export-Import Bank of Korea and others		0.2~8.8	W	4,280,580			4,499,199
Less: Present value discount					(27,762	)		(30,526	)
Debentures	Mirae Asset Daewoo Co., Ltd. and others		1.9~5.3		6,006,332			5,469,580
Less: Discount on debentures issued					(17,924	)		(18,602	)
				W	10,241,226			9,919,651

(c) Assets pledged as collateral in regards to the borrowings as of June 30, 2019 are as follows:

(in millions of Won)	Lenders	Book value		Pledged amount
Cash and cash equivalents	Sinhan Bank and others	W	5,508		5,508
Property, plant and equipment and Investment property	Korea Development Bank and others		5,423,567		5,401,647
Trade accounts and notes receivable	Korea Development Bank and others		126,924		126,924
Inventories	Export-Import Bank of Korea and others		229,027		148,626
Financial instruments	Woori Bank and others		38,984		38,984
		W	5,824,010		5,721,689

30

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

16. Other Payables

Other payables as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Accounts payable	W	777,283		783,562
Accrued expenses		720,104		720,773
Dividend payable		3,680		8,673
Lease liabilities(*1)		136,896		10,152
Withholdings		185,024		196,937
	W	1,822,987		1,720,097
Non-current
Accounts payable	W	2,894		1,624
Accrued expenses		3,524		19,021
Lease liabilities(*1)		559,886		84,602
Long-term withholdings		54,040		43,621
	W	620,344		148,868

(*1) As of the end of the June 30, 2019, the Company recognized lease liabilities ofW601,345 million on initial application ofK-IFRS No.1116 “Leases”.

31

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

17. Other Financial Liabilities

Other financial liabilities as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Derivative liabilities	W	43,608		27,328
Financial guarantee liabilities		48,292		50,472
	W	91,900		77,800
Non-current
Derivative liabilities	W	6,023		46,429
Financial guarantee liabilities		4,956		17,733
	W	10,979		64,162

18. Provisions

(a) Provisions as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019				December 31, 2018
	Current		Non-current		Current		Non-current
Provision for bonus payments	W	49,771		46,682		46,514		26,964
Provision for construction warranties		8,873		146,174		11,842		130,391
Provision for legal contingencies and claims(*1)		10,022		97,002		16,981		94,169
Provision for the restoration(*2)		7,609		90,699		9,379		79,789
Others(*3,4)		253,052		91,794		216,564		99,723
	W	329,327		472,351		301,280		431,036

(*1) The Company recognized probable outflow of resources amounting toW45,519 million andW50,888 million as provisions in relation to lawsuits against the Company as of June 30, 2019 and December 31, 2018, respectively.

(*2) Due to contamination of lands near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery,W26,210 million as provisions for restoration as of June 30, 2019. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied a discount rate of 1.75~1.84% to measure present value of these costs.

(*3) As of June 30, 2019 and December 31, 2018, POSCO ENERGY CO., LTD., a subsidiary of the Company, recognizedW206,481 million andW200,407 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources.

(*4) As of June 30, 2019 and December 31, 2018, the amount includes a provision ofW17,595 million, for expected outflow of resources in connection with the performance guarantee for the Hwaseong-Dongtan complexes development project of POSCO ENGINEERING & CONSTRUCTION CO., LTD.

32

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) Changes in provisions for the six-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

1) For thesix-month period ended June 30, 2019

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others(*1)			Ending
Provision for bonus payments	W	73,478		35,389		(29,003	)		(2,022	)		18,611			96,453
Provision for construction warranties		142,233		26,137		(12,098	)		(822	)		(403	)		155,047
Provision for legal contingencies and claims		111,150		4,051		(5,734	)		(4,721	)		2,278			107,024
Provision for the restoration		89,168		16,830		(9,610	)		(261	)		2,181			98,308
Others		316,287		74,963		(5,790	)		(33,418	)		(7,196	)		344,846
	W	732,316		157,370		(62,235	)		(41,244	)		15,471			801,678

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

2) For the year ended December 31, 2018

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others(*1)			Ending
Provision for bonus payments	W	49,171		88,879		(60,723	)		(3,856	)		7			73,478
Provision for construction warranties		118,036		56,560		(24,608	)		(7,660	)		(95	)		142,233
Provision for legal contingencies and claims		36,764		84,242		(6,066	)		(3,399	)		(391	)		111,150
Provision for the restoration		134,190		14,912		(9,212	)		(47,682	)		(3,040	)		89,168
Others		249,957		328,879		(118,388	)		(216,668	)		72,507			316,287
	W	588,118		573,472		(218,997	)		(279,265	)		68,988			732,316

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

19. Employee Benefits

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

	For the three-month periods ended June 30				For the six-month periods ended June 30
(in millions of Won)	2019		2018		2019		2018
Expense related to post-employment benefit plans under defined contribution plans	W	11,530		10,076		24,058		20,585

33

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) Defined benefit plan

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Present value of funded obligations	W	2,201,320			2,117,829
Fair value of plan assets(*1)		(1,977,193	)		(1,997,717	)
Present value ofnon-funded obligations		23,327			19,332
Net defined benefit liabilities	W	247,454			139,444

(*1) As of December 31, 2018, the Company recognized net defined benefit assets amounting toW1,489 million, since there are consolidated entities whose fair value of plan assets exceeded the present value of defined benefit obligations.

2) Changes in present value of defined benefit obligations for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Defined benefit obligation at the beginning of period	W	2,137,161			1,843,135
Current service costs		114,990			212,323
Interest costs		25,991			54,950
Remeasurements		28,655			212,678
Benefits paid		(87,522	)		(189,165	)
Others		5,372			3,240
Defined benefit obligation at the end of period	W	2,224,647			2,137,161

3) Changes in fair value of plan assets for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Fair value of plan assets at the beginning of period	W	1,997,717			1,714,166
Interest on plan assets		23,756			50,784
Remeasurement of plan assets		(2,541	)		(19,761	)
Contributions to plan assets		18,280			408,326
Benefits paid		(63,657	)		(163,112	)
Others		3,638			7,314
Fair value of plan assets at the end of period	W	1,977,193			1,997,717

34

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

4) The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

	For the three-month periods ended June 30				For the six-month periods ended June 30
(in millions of Won)	2019		2018		2019		2018
Current service costs	W	56,060		52,420		114,990		106,837
Net interest costs		1,138		1,368		2,235		1,785
	W	57,198		53,788		117,225		108,622

20. Other Liabilities

Other liabilities as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Due to customers for contract work	W	720,536		709,180
Advances received		768,609		567,375
Unearned revenue		50,409		49,805
Withholdings		237,991		233,981
Firm commitment liability		18,835		24,373
Others		13,731		10,174
	W	1,810,111		1,594,888
Non-current
Unearned revenue	W	42,351		42,992
Others		49,395		84,369
	W	91,746		127,361

35

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

21. Financial Instruments

(a) Classification and fair value of financial instruments

1) The fair values of financial assets and financial liabilities by fair value hierarchy as of June 30, 2019 and December 31, 2018 are as follows

① June 30, 2019

			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	89,941		—		89,941		—		89,941
Short-term financial instruments		5,346,275		—		5,346,275		—		5,346,275
Debt securities		28,441		—		—		28,441		28,441
Other securities		340,118		1,337		4,527		334,254		340,118
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments(*2)		12,630		—		12,630		—		12,630
Fair value through other comprehensive income
Equity securities		1,243,432		866,822		—		376,610		1,243,432
Debt securities		1,647		—		—		1,647		1,647
Financial assets measured at amortized cost(*1)
Cash and Cash Equivalents		2,553,246		—		—		—		—
Trade accounts and notes receivable		9,487,705		—		—		—		—
Other receivables		2,101,325		—		—		—		—
Debt securities		243,518		—		—		—		—
Deposit instruments		1,914,164		—		—		—		—
	W	23,364,442		868,159		5,453,373		742,952		7,064,484
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	40,666		—		40,666		—		40,666
Derivative hedging instruments(*2)		8,965		—		8,965		—		8,965
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		4,057,723		—		—		—		—
Borrowings		19,199,359		—		19,440,293		—		19,440,293
Financial guarantee liabilities		53,248		—		—		—		—
Others		2,383,233		—		—		—		—
	W	25,743,194		—		19,489,924		—		19,489,924

(*1) Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates carrying amounts.

(*2) The Company applies hedge accounting which uses forward contracts as hedging instrument in order to hedge the risk of changes in fair value of product prices regarding firm commitments or purchase commitments. Also, the Company applies cash flow accounting which uses currency swap as hedging instrument in order to hedge the risk of changes in foreign currency which influences cash flow from borrowings.

36

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

② December 31, 2018

			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	16,662		—		16,662		—		16,662
Short-term financial instruments		6,099,303		—		6,099,303		—		6,099,303
Debt securities		27,229		—		—		27,229		27,229
Other securities		338,106		1,224		5,205		331,677		338,106
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments		32,421		—		32,421		—		32,421
Fair value through other comprehensive income
Equity securities		1,238,630		891,514		—		347,116		1,238,630
Debt securities		1,638		—		—		1,638		1,638
Financial assets measured at amortized cost(*1)
Cash and Cash Equivalents		2,643,865		—		—		—		—
Trade accounts and notes receivable		8,819,617		—		—		—		—
Other receivables		1,843,381		—		—		—		—
Debt securities		8,447		—		—		—		—
Deposir instruments		1,966,558		—		—		—		—
	W	23,037,857		892,738		6,153,591		709,660		7,755,989
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	60,047		—		60,047		—		60,047
Derivative hedging instruments		13,710		—		13,710		—		13,710
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		4,035,960		—		—		—		—
Borrowings		20,209,270		—		20,377,105		—		20,377,105
Financial guarantee liabilities		68,205		—		—		—		—
Others		1,803,353		—		—		—		—
	W	26,190,545		—		20,450,862		—		20,450,862

(*1) Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates carrying amounts.

2) Finance income and costs by category of financial instrument for thesix-month periods ended June 30, 2019 and 2018 were as follows:

① For thesix-month period ended June 30, 2019

(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income(loss)
Financial assets at fair value through profit or loss	W	68,097			(1,372	)		—			6,424			630			73,779			—
Derivatives assets		—			107,978			—			82,589			—			190,567			—
Financial assets at fair value through other comprehensive income		—			—			—			—			50,748			50,748			17,844
Financial assets measured at amortized cost		85,880			—			285,705			(19,240	)		(215	)		352,130			—
Derivatives liabilities		—			(2,845	)		—			(111,034	)		—			(113,879	)		(100	)
Financial liabilities measured at amortized cost		(391,204	)		—			(284,351	)		(2,431	)		(9,008	)		(686,994	)		—
	W	(237,227	)		103,761			1,354			(43,692	)		42,155			(133,649	)		17,744

37

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

② For thesix-month period ended June 30, 2018

(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W	69,234			(106	)		—			5,416			2,865			77,409			—
Derivatives assets		—			65,506			—			97,237			—			162,743			—
Financial assets at fair value through other comprehensive income		—			—			—			—			41,371			41,371			(61,141	)
Financial assets measured at amortized cost		87,721			—			349,027			(21,796	)		(185	)		414,767			—
Derivatives liabilities		—			(13,419	)		—			(96,293	)		—			(109,712	)		(238	)
Financial liabilities measured at amortized cost		(337,656	)		—			(487,892	)		—			2,286			(823,262	)		—
	W	(180,701	)		51,981			(138,865	)		(15,436	)		46,337			(236,684	)		(61,379	)

3) Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2019 and 2018 were as follows:

① For the three-month period ended June 30, 2019

(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income(loss)
Financial assets at fair value through profit or loss	W	33,024			(2,156	)		—			5,704			32			36,604			—
Derivatives assets		—			59,954			—			49,999			—			109,953			—
Financial assets at fair value through other comprehensive income		—			—			—			—			19,838			19,838			23,383
Financial assets measured at amortized cost		45,426			—			134,303			(9,832	)		(107	)		169,790			—
Derivatives liabilities		—			1,396			—			(70,694	)		—			(69,298	)		(132	)
Financial liabilities measured at amortized cost		(190,726	)		—			(151,301	)		(194	)		(1,737	)		(343,958	)		—
	W	(112,276	)		59,194			(16,998	)		(25,017	)		18,026			(77,071	)		23,251

② For the three-month period ended June 30, 2018

(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation		Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W	35,054			2,077		—			17			1,061			38,209			—
Derivatives assets		—			15,711		—			68,787			—			84,498			—
Financial assets at fair value through other comprehensive income		—			—		—			—			10,677			10,677			(16,385	)
Financial assets measured at amortized cost		50,052			—		320,132			(10,941	)		(92	)		359,151			—
Derivatives liabilities		—			25,911		—			(48,567	)		—			(22,656	)		(80	)
Financial liabilities measured at amortized cost		(175,796	)		—		(470,360	)		—			2,395			(643,761	)		—
	W	(90,690	)		43,699		(150,228	)		9,296			14,041			(173,882	)		(16,465	)

(b) Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2018.

38

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

22. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2019 and December 31, 2018 are as follows:

(Share, in Won)	June 30, 2019		December 31, 2018
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Shared capital(*2)	W	482,403,125,000		482,403,125,000

(*1) As of June 30, 2019, total number of ADRs of 34,955,408 outstanding in overseas stock market are equivalent to 8,738,852 shares of common stock.

(*2) As of June 30, 2019, the difference between the ending balance and the par value of issued common stock isW46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Share premium	W	463,825		463,825
Gain on disposal of treasury shares		796,623		784,047
Other capital surplus		114,490		162,679
	W	1,374,938		1,410,551

(c) POSCO ENERGY CO., LTD., a subsidiary of the Company, issued redeemable convertible preferred shares which are classified asnon-controlling interests in the consolidated financial statements. The details of redeemable convertible preferred shares as of June 30, 2019 are as follows:

(Share, in Won)	Redeemable Convertible Preferred Shares
Issue date	February 25, 2017
Number of shares issued	8,643,193 shares
Price per share	28,346
Voting rights	No voting rights for 3 years from issue date
Dividend rights	Comparative,Non-participanting
	•  Minimum dividend rate for 1~3 years : 3.98%
	•  Minimum dividend rate after 4 years : Comparative rate + Issuance spread + 2%
Details about Redemption	Issuer can demand redemption of all or part of redeemable convertible preferred shares every year after the issue date, for a period of 10 years from the issue date.
Details about Conversion	Stockholders of redeemable convertible preferred shares can convert them from 3 years after the issue date to the end of the redemption period (10 years).

Redeemable convertible preferred stocks are classified as equity because the issuer has a redemption right and can control the circumstances in which the entity can settle a variable quantity of equity instruments.

39

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

23. Hybrid Bonds

(a) Hybrid bonds classified as equity as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Date of issue		Date of maturity		(%)		June 30, 2019			December 31, 2018
Hybrid bond1-2(*1)		2013-06-13		2043-06-13		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)
							W	199,384			199,384

(*1) Details of issuance of hybrid bonds as of June 30, 2019 are as follows:

	Hybrid bond1-2
Maturity date	30 years (POSCO has a right to extend the maturity date)
Interest rate	Issue date ~2023-06-12 : 4.6%
	Reset every 10 years as follows;
	•    After 10 years: return on government bond (10 years) + 1.4%
	•    After 10 years: additionally +0.25% according toStep-up clauses
	•    After 30 years: additionally +0.75%
Interest payments condition	Quarterly (Optional deferral of interest payment is available to POSCO)
Others	POSCO can call the hybrid bond at year 10 and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is higher than the common stockholders, but lower than other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2019 amounts toW454 million.

(b) POSCO ENERGY CO., LTD., a subsidiary of the Company, issued hybrid bonds which are classified asnon-controlling interests in the consolidated financial statements. Hybrid bonds as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		June 30, 2019			December 31, 2018
Hybrid bond1-4(*1)		2013-08-29		2043-08-29		5.21	W	140,000			140,000
Issuance cost								(429	)		(429	)
							W	139,571			139,571

40

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(*1) Details of hybrid bonds of POSCO ENERGY CO., LTD. as of June 30, 2019 are as follows:

	Hybrid bond1-4
Maturity date	30 years (The issuer has a right to extend the maturity date)
Interest rate	Issue date ~2023-08-29 : 5.21% Reset every 10 years as follows; •    After 10 years: return on government bond (10 years) + 1.55% •    After 10 years: additionally + 0.25% according toStep-up clauses •    After 30 years: additionally +0.75%
Interest payments condition	Quarterly (Optional deferral of interest payment is available to the Company)
Others	The issuer can call the hybrid bond at year 10 and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is higher than the common stock holders, but lower than other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2019 amounts toW639 million.

24. Reserves

Reserves as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Accumulated comprehensive loss of investments in associates and joint ventures	W	(645,292	)		(670,435	)
Changes in fair value of equity investments at fair value through other comprehensive income		(258,989	)		(295,300	)
Foreign currency translation differences		(190,299	)		(417,817	)
Gains or losses on valuation of derivatives		(448	)		(352	)
Others		(17,236	)		(20,464	)
	W	(1,112,264	)		(1,404,368	)

41

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

25. Treasury Shares

As of June 30, 2019, the Company holds 7,071,194 shares of treasury stock for price stabilization and others in accordance with the Board of Director’s resolution.

26. Revenue

(a) Disaggregation of revenue

1) Details of revenue disaggregated by types of revenue and timing of revenue recognition for thesix-month periods ended June 30, 2019 and 2018 were as follows:

① For thesix-month period ended June 30, 2019

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	15,919,961		10,936,991		—		341,736		27,198,688
Revenue from services		311,731		196,471		24,568		1,154,776		1,687,546
Revenue from construction contract		—		—		3,222,542		17,097		3,239,639
Others		22,938		68,902		3,452		114,408		209,700
	W	16,254,630		11,202,364		3,250,562		1,628,017		32,335,573
Timing of revenue recognition
Revenue recognized at a point in time	W	15,942,899		11,005,893		5,728		461,406		27,415,926
Revenue recognized over time		311,731		196,471		3,244,834		1,166,611		4,919,647
	W	16,254,630		11,202,364		3,250,562		1,628,017		32,335,573

② For thesix-month period ended June 30, 2018

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	15,977,276		10,570,455		2,178		281,864		26,831,773
Revenue from services		282,155		312,228		37,843		1,093,961		1,726,187
Revenue from construction contract		—		—		3,121,562		24,969		3,146,531
Others		18,412		73,176		13,597		135,903		241,088
	W	16,27 7,843		10,955,859		3,175,180		1,536,697		31,945,579
Timing of revenue recognition
Revenue recognized at a point in time	W	15,995,688		10,643,631		15,775		422,708		27,077,802
Revenue recognized over time		282,155		312,228		3,159,405		1,113,989		4,867,777
	W	16,277,843		10,955,859		3,175,180		1,536,697		31,945,579

42

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month periods ended June 30, 2019 and 2018 were as follows:

① For the three-month period ended June 30, 2019

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	8,019,477		5,529,989		—		181,518		13,730,984
Revenue from services		150,001		98,407		12,500		509,075		769,983
Revenue from construction contract		—		—		1,717,341		10,637		1,727,978
Others		13,336		36,087		2,079		40,888		92,390
	W	8,182,814		5,664,483		1,731,920		742,118		16,321,335
Timing of revenue recognition
Revenue recognized at a point in time	W	8,032,813		5,566,076		2,508		225,262		13,826,659
Revenue recognized over time		150,001		98,407		1,729,412		516,856		2,494,676
	W	8,182,814		5,664,483		1,731,920		742,118		16,321,335

② For the three-month period ended June 30, 2018

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	8,095,289		5,181,756		2,178		141,347		13,420,570
Revenue from services		137,200		180,069		12,024		525,601		854,894
Revenue from construction contract		—		—		1,670,414		9,042		1,679,456
Others		14,831		33,916		7,834		71,795		128,376
	W	8,247,320		5,395,741		1,692,450		747,785		16,083,296
Timing of revenue recognition
Revenue recognized at a point in time	W	8,110,120		5,215,672		10,012		215,704		13,551,508
Revenue recognized over time		137,200		180,069		1,682,438		532,081		2,531,788
	W	8,247,320		5,395,741		1,692,450		747,785		16,083,296

(b) Details of contract assets and liabilities from contracts with customers as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Receivables
Account receivables	W	9,487,705		8,819,617
Contract assets
Due from customers for contract work		920,397		890,117
Contract liabilities
Advance received		767,748		592,125
Due to customers for contract work		720,536		709,180
Unearned revenue		92,353		91,872

43

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

27. Revenue – Contract Balances

(a) Details ofin-progress contracts as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019						December 31, 2018
	Construction segment			Others			Construction segment			Others
Accumulated cost	W	26,856,392			315,065			27,860,778			234,092
Accumulated contract profit		2,558,313			51,140			2,266,897			34,815
Accumulated contract loss		(1,076,338	)		(16,250	)		(792,496	)		(12,042	)
Accumulated contract revenue		28,338,367			349,955			29,335,179			256,865

(b) Details of due from customers for contract work and due to customers for contract work as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019						December 31, 2018
	Construction segment			Others			Construction segment			Others
Due from customers for contract work	W	933,846			60,533			914,489			48,571
Due to customers for contract work		(692,137	)		(28,399	)		(676,990	)		(32,190	)
	W	241,709			32,134			237,499			16,381

(c) Details of the provisions of construction loss as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Construction segment	W	35,244		31,067
Others		625		1,203
	W	35,869		32,270

44

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(d) Due to the factors causing the variation of costs for thesix-month period ended June 30, 2019, the estimated total contract costs have changed. Details of changes in estimated total contract costs and the impact on profits or loss for thesix-month period ended June 30, 2019 and future periods are as follows:

(in millions of Won)	Changes in estimated total contract costs		Changes in profit (loss) of contract
			Net income (loss)			Future income (loss)			Total
Construction segment	W	284,730		(84,532	)		(16,424	)		(100,956	)
Others		6,787		5,519			693			6,212
	W	291,517		(79,013	)		(15,731	)		(94,744	)

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contracts as of June 30, 2019. The estimation is evaluated for the total contract cost and expected total contract revenue as of the end of the period. Also, it may change during future periods.

(e) Uncertainty of estimates

1) Total contract revenues

Total contract revenues are measured based on contractual amount initially agreed. However, the contract revenues can increase due to additional contract work, claims and incentive payments, or decrease due to penalty when the completion of contract is delayed due to the Company’s fault. Therefore, this measurement of contract revenues is affected by the uncertainty of the occurrence of future events.

2) Total contract costs

Contract revenues are recognized based on the percentage of completion, which is measured on the basis of the gross cost amount incurred to date. Total contract costs are estimated based on estimates of future material costs, labor costs, outsourcing cost and others. There is uncertainty in estimates on future contract costs due to various internal and external factors such as fluctuation of market, the risk of business partner and the experience of project performance and others. The significant assumptions including uncertainty of the estimate of total contract costs are as follows:

	Method of significant assumption
Material cost	Assumption based on recent purchasing price and quoted market price
Labor cost	Assumption based on standard monthly and daily labor cost
Outsourcing cost	Assumption based on the past experience rate of similar project and market price

Management reviews the assumptions used in estimated contract costs at each reporting period end and adjusts them, if necessary.

45

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

28. Selling and Administrative Expenses

(a) Other administrative expenses

Other administrative expenses for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2019		2018		2019		2018
Wages and salaries	W	197,241		190,601		405,863		407,539
Expenses related to post-employment benefits		18,202		16,356		40,070		37,158
Other employee benefits		43,344		48,276		89,121		96,087
Travel		11,514		10,827		21,181		20,094
Depreciation		31,294		27,423		65,620		51,603
Amortization		28,442		27,786		56,802		55,436
Communication		2,556		2,318		5,029		4,943
Electricity expenses		2,001		1,940		4,031		4,181
Taxes and public dues		18,971		23,933		31,856		38,997
Rental		9,219		15,935		20,677		34,380
Repairs		4,107		3,744		6,624		7,867
Entertainment		2,609		2,684		5,641		5,632
Advertising		24,059		29,439		41,965		59,800
Research & development		26,299		27,294		56,682		51,771
Service fees		36,066		40,046		87,588		79,258
Vehicles maintenance		1,919		2,239		4,247		4,182
Industry association fee		1,980		2,506		5,417		5,910
Conference		3,957		3,458		7,810		7,006
Increase to provisions		1,084		9,283		2,482		21,946
Others		11,673		11,164		23,914		21,553
	W	476,537		497,252		982,620		1,015,343

(b) Selling expenses

Selling expenses for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2019		2018		2019		2018
Freight and custody expenses(*1)	W	40,176		42,506		87,537		84,350
Operating expenses for distribution center		2,657		2,634		5,251		5,178
Sales commissions		22,563		17,265		38,599		30,138
Sales advertising		370		482		604		1,043
Sales promotion		2,478		3,238		5,015		6,375
Sample		617		840		1,128		1,470
Sales insurance premium		7,916		9,178		15,925		19,180
Contract cost		7,439		4,919		16,079		4,995
Others		5,987		3,000		11,325		6,731
	W	90,203		84,062		181,463		159,460

(*1) The Company identified the shipping services included in the contract with customers as a separate performance obligations, and as of December 31, 2018, expenses incurred for the delivery of shipping services had been reclassified from selling expenses to cost of sales. Meanwhile, in order to compare financial statements ended June 30, 2019 to ended June 30, 2018, the company reclassifiedW598,816 million of expense of shipping service to cost of sales for thesix-month period ended June 30, 2018. This reclassification does not affect the amount of net assets for the year ended December 31, 2018, and net income for thesix-month period ended June 30, 2018.

46

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

29. Finance Income and Costs

Details of finance income and costs for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30					For thesix-month periods ended June 30
	2019			2018		2019		2018
Finance income
Interest income(*1)	W	78,450			85,106		153,977		156,955
Dividend income		19,870			11,738		51,378		44,236
Gain on foreign currency transactions		261,833			155,132		379,766		325,458
Gain on foreign currency translations		54,450			248,562		199,617		333,458
Gain on derivatives transactions		51,200			70,001		84,600		98,451
Gain on valuations of derivatives		59,795			55,556		146,869		114,981
Gain on disposals of financial assets at fair value through profit or loss		5,786			988		6,980		6,390
Gain on valuations of financial assets at fair value through profit or loss		231			3,739		1,447		4,267
Others		1,247			2,810		2,242		5,923
	W	532,862			633,632		1,026,876		1,090,119
Finance costs
Interest expenses	W	190,726			175,796		391,204		337,656
Loss on foreign currency transactions		210,009			198,872		315,298		324,892
Loss on foreign currency translations		123,272			355,050		262,731		472,889
Loss on derivatives transactions		71,895			49,781		113,045		97,507
Loss on valuation of derivatives		(1,555	)		13,934		41,736		62,894
Loss on disposal of trade accounts and notes receivable		9,832			10,941		19,240		21,796
Loss on disposals of financial assets at fair value through profit or loss		83			971		557		974
Loss on valuations of financial assets at fair value through profit or loss		2,386			1,662		2,818		4,373
Others		3,284			507		13,896		3,822
	W	609,932			807,514		1,160,525		1,326,803

(*1) Interest income calculated using the effective interest method for thesix-month periods ended June 30, 2019 and 2018 wereW85,880 million andW87,721 million, respectively.

47

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

30. Other Non-Operating Income and Expenses

Details of othernon-operating income and expenses for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2019		2018		2019		2018
Othernon-operating income
Gain on disposals of assets held for sale	W	8,536		103		8,536		103
Gain on disposals of investments in subsidiaries, associates and joint ventures		1,385		44,399		15,821		44,399
Gain on disposals of property, plant and equipment		4,080		17,284		16,362		21,089
Gain on disposals of intangible assets		526		70,811		526		101,383
Gain on valuation of firm commitment		9,258		22,768		28,968		26,962
Gain on insurance proceeds		986		2,278		1,406		2,463
Gain on valuation of emission rights		25,440		—		25,440		—
Others(*1)		32,813		108,486		60,309		130,686
	W	83,024		266,129		157,368		327,085
Othernon-operating expenses
Impairment loss on assets held for sale	W	(849)		46,896		3,346		46,896
Loss on disposals of investments in subsidiaries, associates and joint ventures		3,716		2,970		5,586		3,405
Loss on disposals of property, plant and equipment		25,099		46,862		37,396		59,072
Impairment losses on property, plant and equipment		81,314		648		149,659		18,870
Impairment losses on intangible assets		168		37		1,171		1,763
Loss on valuation of firm commitment		14,763		3,270		18,572		18,695
Idle tangible assets expenses		10,808		2,190		18,427		4,402
Increase to provisions		2,098		74,359		7,371		74,642
Donations		1,788		8,149		11,194		24,983
Others(*2)		27,774		166,296		51,147		193,837
	W	166,679		351,677		303,869		446,565

(*1) During thesix-month period ended June 30, 2018, the Company recognizedW41,137 million of tax refund without corporate tax due to the consequences of appeal to tax tribunal against tax investigation asnon-operating income.

(*2) During thesix-month period ended June 30, 2018, the Company recognizedW161,772 million of additional taxes imposed about value added tax related to imported LNG asnon-operating expense.

48

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

31. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses, impairment loss on other receivables and othernon-operating expenses in the statements of comprehensive income for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows (excluding finance costs and income tax expense):

(in millions of Won)	For the three-month periods ended June 30				For thesix-month periods ended June 30
	2019		2018		2019		2018
Raw material used, changes in inventories and	W	9,577,372		9,418,496		19,256,695		18,679,280
Employee benefits expenses		870,497		830,316		1,746,165		1,765,280
Outsourced processing cost		1,992,121		1,855,777		3,762,751		3,483,406
Electricity expenses		329,161		232,293		548,963		463,422
Depreciation(*1)		758,349		723,262		1,523,108		1,436,644
Amortization		104,471		95,580		203,733		204,435
Freight and custody expenses		362,400		349,912		731,634		683,166
Sales commissions		22,563		17,265		38,599		30,138
Loss on disposal of property, plant and equipment		25,099		46,862		37,396		59,072
Impairment loss on property, plant and equipment		81,314		648		149,659		18,870
Impairment loss on intangible assets		167		37		1,171		1,763
Donations		1,789		8,149		11,194		24,983
Other expenses		1,306,568		1,615,281		2,374,283		2,815,542
	W	15,431,871		15,193,878		30,385,351		29,666,001

(*1) Includes depreciation expense of investment property.

32. Income Taxes

The effective tax rates of the Company for thesix-month periods ended June 30, 2019 and 2018 were 31.05% and 31.03%, respectively.

49

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

33. Earnings per Share

Basic and diluted earnings per share for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in Won except per share information)	For the three-month periods ended June 30						For thesix-month periods ended June 30
	2019			2018			2019			2018
Profit attribute to controlling interest	W	612,285,873,955			545,018,257,951			1,353,539,066,362			1,538,534,272,921
Interests of hybrid bonds		(1,662,931,506	)		(6,650,931,505	)		(3,307,589,040	)		(14,358,575,340	)
Weighted-average number of common shares outstanding (*1)		80,115,641			80,000,630			80,111,845			80,000,147
Basic and diluted earnings per share	W	7,622			6,730			16,854			19,052

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

(Share)	For the three-month periods ended June 30						For thesix-month periods ended June 30
	2019			2018			2019			2018
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,071,194	)		(7,186,205	)		(7,074,990	)		(7,186,688	)
Weighted-average number of common shares outstanding		80,115,641			80,000,630			80,111,845			80,000,147

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2019 and 2018, diluted earnings per share is equal to basic earnings per share.

50

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

34. Related Party Transactions

(a) Significant transactions between the controlling company and related companies for thesix-month periods ended June 30, 2019 and 2018 were as follows:

1) For thesix-month period ended June 30, 2019

(in millions of Won)	Sales and others(* 1)				Purchase and others(* 2)
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries(* 3)
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	3,608		11,089		—		139,349		21		5,233
POSCO COATED & COLOR STEEL Co., Ltd.		233,408		1,707		—		—		7,684		491
POSCO ICT(*4)		1,509		4,989		—		148,817		17,055		88,838
eNtoB Corporation		7		60		159,576		16,936		59		13,431
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		197,793		25,129		255,299		7,578		156,383		2,010
POSCO ENERGY CO., LTD.		106,602		624		—		—		—		62
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		2,841,376		46,572		330,044		—		26,037		2,569
POSCO Thainox Public Company Limited		120,032		13,675		3,733		—		—		3
POSCO America Corporation		184,517		—		—		—		—		39
POSCO Canada Ltd.		340		604		151,892		—		—		—
POSCO Asia Co., Ltd.		861,771		585		248,431		—		987		2,796
Qingdao Pohang Stainless Steel Co., Ltd.		59,410		—		—		—		—		—
POSCO JAPAN Co., Ltd.		756,357		—		21,553		3,021		—		1,487
POSCO-VIETNAM Co., Ltd.		141,535		181		—		—		—		37
POSCO MEXICO S.A. DE C.V.		153,766		31		—		—		—		5
POSCO Maharashtra Steel Private Limited		333,608		187		—		—		—		256
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		43,313		—		1,481		—		—		—
POSCO VST CO., LTD.		137,025		—		—		—		—		62
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		180		322,210		—		—		—
Others		425,315		14,560		81,055		10,572		133,582		60,791
		6,601,292		120,173		1,575,274		326,273		341,808		178,110
Associates and joint ventures(* 3)
POSCO PLANTEC Co., Ltd.		183		65		1,399		110,614		9,326		9,362
SNNC		2,747		3,380		244,626		—		—		10
POSCO-SAMSUNG-Slovakia Processing Center		31,764		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		482,848		—		—		—
Others		6,985		86,037		27,127		—		—		—
		41,679		89,482		756,000		110,614		9,326		9,372
	W	6,642,971		209,655		2,331,274		436,887		351,134		187,482

(*1) Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2) Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3) As of June 30, 2019, the Company provided guarantees to related parties (Note 35).

(*4) Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

51

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For thesix-month period ended June 30, 2018

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,967		63		—		139,725		9		23,205
POSCO COATED & COLOR STEEL Co., Ltd.		227,199		2,724		—		—		4,218		664
POSCO ICT		1,319		7,475		—		137,368		16,173		95,168
eNtoB Corporation		5		60		175,914		8,347		58		12,292
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		200,582		23,081		259,624		15,978		155,550		601
POSCO ENERGY CO., LTD.		95,908		702		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		2,892,020		38,859		343,617		—		29,378		675
POSCO Thainox Public Company Limited		140,624		5,249		5,452		—		—		—
POSCO America Corporation		135,136		—		—		—		—		947
POSCO Canada Ltd.		190		882		128,164		—		—		—
POSCO Asia Co., Ltd.		951,799		162		236,375		535		1,325		1,884
Qingdao Pohang Stainless Steel Co., Ltd.		87,177		7		—		—		—		5
POSCO JAPAN Co., Ltd.		693,432		6		11,717		1,709		—		1,493
POSCO-VIETNAM CO., Ltd.		163,916		21		—		—		—		8
POSCO MEXICO S.A. DE C.V.		146,389		37		—		—		—		—
POSCO Maharashtra Steel Private Limited		268,909		349		—		—		—		86
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		112,256		—		—		—		—		5
POSCO VST CO., LTD.		150,076		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		43		100,242		—		—		—
Others		428,778		20,497		45,384		11,014		128,471		62,924
		6,700,682		100,217		1,306,489		314,676		335,182		199,957
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		5,268		108		1,632		75,575		10,509		4,783
SNNC		2,467		602		243,010		—		—		5
POSCO-SAMSUNG-Slovakia Processing Center		28,513		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		408,815		—		—		—
Others		5,107		45,128		35,823		—		—		5
		41,355		45,838		689,280		75,575		10,509		4,793
	W	6,742,037		146,055		1,995,769		390,251		345,691		204,750

(b) Significant transactions between the controlling company and related companies for the three-month periods ended June 30, 2019 and 2018 were as follows:

1) For the three-month period ended June 30, 2019

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets			Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	2,198		16		—		72,852			—		2,519
POSCO COATED & COLOR STEEL Co., Ltd.		116,211		1		—		—			5,315		119
POSCO ICT		729		—		—		87,989			8,498		42,677
eNtoB Corporation		3		—		81,080		10,952			33		7,907
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		93,869		5,799		124,303		5,513	��		78,253		1,881
POSCO ENERGY CO., LTD.		49,714		310		—		—			—		42
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,423,768		1		154,881		—			13,381		1,629
POSCO Thainox Public Company Limited		54,928		13,616		2,063		—			—		—
POSCO America Corporation		89,516		—		—		—			—		21
POSCO Canada Ltd.		340		529		75,279		—			—		—
POSCO Asia Co., Ltd.		445,133		498		100,397		—			429		2,235
Qingdao Pohang Stainless Steel Co., Ltd.		5,363		—		—		—			—		—
POSCO JAPAN Co., Ltd.		350,682		—		12,033		707			—		853
POSCO-VIETNAM Co., Ltd.		66,995		96		—		—			—		—
POSCO MEXICO S.A. DE C.V.		75,553		17		—		—			—		—
POSCO Maharashtra Steel Private Limited		142,945		92		—		—			—		256
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		25,309		—		957		—			—		—
POSCO VST CO., LTD.		58,204		—		—		—			—		19
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		41		198,168		—			—		—
Others		204,728		3,439		25,317		4,790			66,424		34,354
		3,206,188		24,455		774,478		182,803			172,333		94,512
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		67		5		648		59,868			4,411		6,651
SNNC		1,399		1,100		128,978		—			—		—
POSCO-SAMSUNG-Slovakia Processing Center		7,901		—		—		—			—		—
Roy Hill Holdings Pty Ltd		—		—		280,820		—			—		—
Others		2,993		74,784		13,962		—			—		—
		12,360		75,889		424,408		59,868			4,411		6,651
	W	3,218,548		100,344		1,198,886		242,671			176,744		101,163

52

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For the three-month period ended June 30, 2018

(in millions of Won)	Sales and others					Purchase and others
	Sales		Others			Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,205		10			—		81,019		—		13,917
POSCO COATED & COLOR STEEL Co., Ltd.		116,447		164			—		—		2,626		475
POSCO ICT		671		1			—		66,547		8,086		46,321
eNtoB Corporation		4		—			90,057		5,001		13		6,479
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		102,349		5,406			127,033		10,291		78,268		453
POSCO ENERGY CO., LTD.		43,813		333			—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,429,416		7			155,339		—		15,483		353
POSCO Thainox Public Company Limited		74,649		5,249			2,255		—		—		—
POSCO America Corporation		71,770		—			—		—		—		61
POSCO Canada Ltd.		190		564			58,158		—		—		—
POSCO Asia Co., Ltd.		455,936		21			148,374		232		423		1,012
Qingdao Pohang Stainless Steel Co., Ltd.		43,146		—			—		—		—		—
POSCO JAPAN Co., Ltd.		343,676		6			5,743		984		—		499
POSCO-VIETNAM Co., Ltd.		75,630		8			—		—		—		—
POSCO MEXICO S.A. DE C.V.		81,299		20	��		—		—		—		—
POSCO Maharashtra Steel Private Limited		134,136		140			—		—		—		56
POSCO (Suzhou) Automotive Processing Center Co., Ltd.		45,102		—			—		—		—		—
POSCO VST CO., LTD.		77,396		—			—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		34			63,389		—		—		—
Others		201,613		12,578			22,869		5,843		63,203		35,253
		3,301,448		24,541			673,217		169,917		168,102		104,879
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		4,932		28			718		47,532		4,751		2,635
SNNC		1,259		180			109,397		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		10,275		—			—		—		—		—
Roy Hill Holdings Pty Ltd		—		—			217,358		—		—		—
Others		2,388		35,397			18,845		—		—		—
		18,854		35,605			346,318		47,532		4,751		2,635
	W	3,320,302		60,146			1,019,535		217,449		172,853		107,514

(c) The related account balances of significant transactions between the controlling company and related companies as of June 30, 2019 and December 31, 2018 are as follows:

1) June 30, 2019

(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	1		3,387		3,388		—		30,793		431		31,224
POSCO COATED & COLOR STEEL Co., Ltd.		55,363		190		55,553		—		5		2,878		2,883
POSCO ICT		—		111		111		1,117		65,547		41,116		107,780
eNtoB Corporation		—		—		—		7,022		36,011		—		43,033
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		61,753		3,858		65,611		17,126		52,799		18,134		88,059
POSCO ENERGY CO., LTD.		32,190		1,272		33,462		—		—		1,425		1,425
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		561,369		27		561,396		2,089		2,089		4,942		9,120
POSCO Thainox Public Company Limited		66,865		290		67,155		—		—		—		—
POSCO America Corporation		18,228		—		18,228		—		—		—		—
POSCO Asia Co., Ltd.		475,451		1,314		476,765		7,957		10		—		7,967
Qingdao Pohang Stainless Steel Co., Ltd.		21,694		—		21,694		—		—		—		—
POSCO MEXICO S.A. DE C.V.		101,314		535		101,849		—		—		—		—
POSCO Maharashtra Steel Private Limited		327,848		1,419		329,267		—		—		—		—
Others(*1)		387,693		43,132		430,825		57,212		24,441		88,395		170,048
		2,109,769		55,535		2,165,304		92,523		211,695		157,321		461,539
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		—		2		2		1,427		13,257		—		14,684
SNNC		534		214		748		14,994		—		—		14,994
Roy Hill Holdings Pty Ltd		—		—		—		27,159		—		—		27,159
Others		368		38,314		38,682		80		76		—		156
		902		38,530		39,432		43,660		13,333		—		56,993
	W	2,110,671		94,065		2,204,736		136,183		225,028		157,321		518,532

(*1) During the year ended December 31, 2018, the Company made loans ofW2,950 million to Suncheon Eco Trans Co., Ltd., a subsidiary of the Company. As of June 30, 2019, corresponding amounts of those loans were recorded as allowance for doubtful accounts.

2) December 31, 2018

53

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	57		5,181		5,238		—		52,775		438		53,213
POSCO COATED & COLOR STEEL Co., Ltd.		55,598		317		55,915		—		25		1,194		1,219
POSCO ICT		—		229		229		1,572		112,960		8,717		123,249
eNtoB Corporation		—		—		—		10,860		22,072		11		32,943
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		40,258		3,883		44,141		19,911		58,725		19,012		97,648
POSCO ENERGY CO., LTD.		22,163		1,700		23,863		—		—		1,425		1,425
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		437,554		1,056		438,610		161		1,881		5,304		7,346
POSCO Thainox Public Company Limited		71,189		—		71,189		467		71		—		538
POSCO America Corporation		14,338		—		14,338		—		221		—		221
POSCO Asia Co., Ltd.		480,205		1,047		481,252		7,839		—		—		7,839
Qingdao Pohang Stainless Steel Co., Ltd.		52,037		—		52,037		—		—		—		—
POSCO MEXICO S.A. DE C.V.		101,179		218		101,397		—		—		—		—
POSCO Maharashtra Steel Private Limited		390,413		1,428		391,841		—		—		—		—
Others		379,950		54,407		434,357		33,183		36,591		85,745		155,519
		2,044,941		69,466		2,114,407		73,993		285,321		121,846		481,160
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		249		10		259		3,275		34,803		—		38,078
SNNC		541		61		602		22,188		—		—		22,188
Roy Hill Holdings Pty Ltd		—		—		—		22,997		—		—		22,997
Others		918		910		1,828		217		76		—		293
		1,708		981		2,689		48,677		34,879		—		83,556
	W	2,046,649		70,447		2,117,096		122,670		320,200		121,846		564,716

(d) Significant transactions between the Company, excluding the controlling company, and related companies for thesix-month periods ended June 30, 2019 and 2018 were as follows:

1) For thesix-month period ended June 30, 2019

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	5,659		—		21		7,757
New Songdo International City Development, LLC		751		4,471		—		13
SNNC		44,025		—		18,961		31,156
Chuncheon Energy Co., Ltd.		1,145		—		—		—
Noeul Green Energy Co., Ltd.		3,361		—		—		1,217
USS-POSCO Industries		2		—		1,316		—
CSP - Compania Siderurgica do Pecem		84,598		7,419		220,542		10,586
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		16,545		—		22,155		—
LLP POSUK Titanium		—		—		272		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		3		—		1,808		—
POS-SEAHSTEELWIRE (TIANJIN) CO., Ltd		5,298		—		—		—
PT. Batutua Tembaga Raya		—		495		21,634		—
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		13,751		—		173		—
Sebang Steel		—		—		4,862		—
DMSA/AMSA		—		—		30,613		—
South-East Asia Gas Pipeline Company Ltd.		27		9,387		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		44,649		16,369		2,620		1,120
POSPower Co., Ltd.		79,272		—		—		—
TK CHEMICAL CORPORATION		86,987		—		39,454		—
Others		103,425		38,024		11,650		9,046
	W	489,498		76,165		376,081		60,895

54

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For thesix-month period ended June 30, 2018

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	7,748		—		47		7,532
New Songdo International City Development, LLC		26,106		21,291		—		12
SNNC		37,972		—		4,770		16,826
Chuncheon Energy Co., Ltd.		20,349		—		—		—
Noeul Green Energy Co., Ltd.		3,121		—		—		—
VSC POSCO Steel Corporation		12,235		—		1,399		15
USS-POSCO Industries		—		—		1,172		—
CSP - Compania Siderurgica do Pecem		117,476		6,526		59,572		21,540
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		25,226		—		38,135		—
LLP POSUK Titanium		—		—		747		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		—		5,433		—
POS-SEAHSTEELWIRE (TIANJIN) CO., Ltd		7,212		—		—		—
PT. Batutua Tembaga Raya		—		—		5,119		—
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		16,138		—		119		—
Sebang Steel		—		—		8,683		14
DMSA/AMSA		—		—		19,940		587
South-East Asia Gas Pipeline Company Ltd.		—		28,583		—		—
Others		143,016		28,622		8,029		27,165
	W	416,599		85,022		153,165		73,691

(e) Significant transactions between the Company, excluding the controlling company, and related companies for the three-month periods ended June 30, 2019 and 2018 were as follows:

1) For the three-month period ended June 30, 2019

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	2,263		—		14		4,386
New Songdo International City Development, LLC		390		—		—		10
SNNC		26,013		—		13,918		10,532
Chuncheon Energy Co., Ltd.		135		—		—		—
Noeul Green Energy Co., Ltd.		1,699		—		—		630
USS-POSCO Industries		2		—		712		—
CSP - Compania Siderurgica do Pecem		62,328		5,352		100,154		10,201
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		7,800		—		11,361		—
LLP POSUK Titanium		—		—		—		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		3		—		956		—
POS-SEAHSTEELWIRE (TIANJIN) CO., Ltd		1,421		—		—		—
PT. Batutua Tembaga Raya		—		130		11,037		—
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		5,658		—		93		—
Sebang Steel		—		—		4,159		—
DMSA/AMSA		—		—		13,858		—
South-East Asia Gas Pipeline Company Ltd.		22		4,582		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		20,034		—		1,280		407
POSPower Co., Ltd.		41,863		—		—		—
TK CHEMICAL CORPORATION		43,612		—		17,525		—
Others		55,486		23,357		6,087		2,207
	W	268,729		33,421		181,154		28,373

55

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For the three-month period ended June 30, 2018

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	3,661		—		15		6,302
New Songdo International City Development, LLC		2,675		11,697		—		7
SNNC		14,882		—		268		11,957
Chuncheon Energy Co., Ltd.		74		—		—		—
Noeul Green Energy Co., Ltd.		1,622		—		—		—
VSC POSCO Steel Corporation		5,568		—		220		15
USS-POSCO Industries		—		—		656		—
CSP - Compania Siderurgica do Pecem		74,644		6,526		35,563		6,067
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		12,382		—		23,506		—
LLP POSUK Titanium		—		—		329		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		—		2,743		—
POS-SEAHSTEELWIRE (TIANJIN) CO., Ltd		4,038		—		—		—
PT. Batutua Tembaga Raya		—		—		2,928		—
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		5,805		—		61		—
Sebang Steel		—		—		2,410		14
DMSA/AMSA		—		—		10,518		587
South-East Asia Gas Pipeline Company Ltd.		—		5,475		—		—
Others		81,280		20,970		4,797		25,432
	W	206,631		44,668		84,014		50,381

(f) The related account balances of significant transactions between the Company, excluding the controlling company, and related companies as of June 30, 2019 and December 31, 2018 are as follows:

1) June 30, 2019

(in millions of Won)	Receivables								Payables
	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes payable		Others		Total
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	1,657		—		6		1,663		3,670		1,020		4,690
New Songdo International City Development, LLC		65,401		—		20,592		85,993		—		—		—
Chuncheon Energy Co., Ltd.		—		2,963		—		2,963		668		—		668
POSPower Co., Ltd.		23,676		—		—		23,676		—		115,836		115,836
Nickel Mining Company SAS		—		61,341		118		61,459		—		—		—
CSP - Compania Siderurgica do Pecem		319,823		—		2,224		322,047		13,909		—		13,909
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		9,092		—		—		9,092		3,242		—		3,242
PT. Batutua Tembaga Raya		—		35,735		12,385		48,120		—		—		—
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		5,638		2,314		19		7,971		143		—		143
DMSA/AMSA		—		57,246		—		57,246		1,173		—		1,173
South-East Asia Gas Pipeline Company Ltd.		7		172,480		—		172,487		—		—		—
POSCO MITSUBISHI CARBON		6,874		—		—		6,874		883		—		883
TK CHEMICAL CORPORATION		33,001		—		—		33,001		1,329		—		1,329
Others		88,201		152,776		12,103		253,080		5,312		4,095		9,407
	W	553,370		484,855		47,447		1,085,672		30,329		120,951		151,280

56

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) December 31, 2018

(in millions of Won)	Receivables								Payables
	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes payable		Others		Total
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	3,593		—		6		3,599		6,160		217		6,377
New Songdo International City Development, LLC		233,157		—		—		233,157		—		—		—
Chuncheon Energy Co., Ltd.		—		—		—		—		—		1,758		1,758
POSPower Co., Ltd.		13,703		—		—		13,703		—		66,856		66,856
Nickel Mining Company SAS		—		59,664		118		59,782		—		—		—
CSP - Compania Siderurgica do Pecem		364,190		—		9,669		373,859		62,578		—		62,578
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,836		—		—		10,836		2,101		—		2,101
PT. Batutua Tembaga Raya		—		35,100		171		35,271		—		—		—
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		6,274		3,354		27		9,655		66		—		66
DMSA/AMSA		—		64,297		—		64,297		—		—		—
South-East Asia Gas Pipeline Company Ltd.		—		191,107		—		191,107		—		—		—
Others		75,382		136,117		13,071		224,570		7,768		5,363		13,131
	W	707,135		489,639		23,062		1,219,836		78,673		74,194		152,867

(g) Significant financial transactions between the Company, excluding the controlling company, and related companies for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

1) June 30, 2019

(in millions of Won)	Beginning		Lend		Collect			Others(* 2)			Ending
Associates and joint ventures
UITrans LRT Co., Ltd.	W	5,695		2,706		—			—			8,401
DMSA/AMSA(*1)		64,297		7,367		—			(14,419	)		57,245
South-East Asia Gas Pipeline Company Ltd.		191,107		—		(23,616	)		4,990			172,481
PT. Batutua Tembaga Raya		35,100		—		—			635			35,735
PT. Tanggamus Electric Power		4,423		—		—			153			4,576
PT. Wampu Electric Power		5,330		—		—			184			5,514
PT. POSMI Steel Indonesia		2,236		—		—			78			2,314
Nickel Mining Company SAS		59,664		—		—			1,677			61,341
KRAKATAUPOS-CHEMDONG-SUH CHEMICAL		6,709		—		—			232			6,941
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		3,354		—		(1,118	)		78			2,314
POS-SeaAH Steel Wire (Thailand) Co., Ltd.		6,709		—		—			232			6,941
AMCI (WA) PTY LTD		90,480		1,821		—			2,584			94,885
POS-AUSTEM YANTAI AUTOMOTIVE CO., LTD		5,590		—		—			194			5,784
POS-AUSTEM WUHAN AUTOMOTIVE CO., LTD		8,945		—		—			308			9,253
Hyo-chun Co., Ltd.(*3)		—		—		—			2,382			2,382
Chun-cheon Energy Co., Ltd.		—		2,964		—			—			2,964
POS-AUSTEM Suzhou Automotive Co., Ltd		—		5,727		—			57			5,784
	W	489,639		20,585		(24,734	)		(635	)		484,855

(*1) During thesix-month period ended June 30, 2019, loans amounting toW16,370 million have been converted to shares of DMSA/AMSA, and its amount is included in others.

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

(*3) During thesix-month period ended June 30, 2019, it was newly classified to associates.

57

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) December 31, 2018

(in millions of Won)	Beginning		Lend		Collect			Others(* 2)			Ending
Associates and jointventures
New Songdo International City Development, LLC	W	282,775		150		(252,759	)		(30,166	)		—
Gale International Korea, LLC		2,000		8,500		(10,500	)		—			—
UITrans LRT Co., Ltd.		—		5,695		—			—			5,695
DMSA/AMSA(*1)		69,713		9,965		(342	)		(15,039	)		64,297
South-East Asia Gas Pipeline Company Ltd.		229,880		—		(47,569	)		8,796			191,107
PT. Batutua Tembaga Raya		29,048		4,678		—			1,374			35,100
PT. Tanggamus Electric Power		3,197		—		—			1,226			4,423
PT. Wampu Electric Power		5,107		—		—			223			5,330
PT. POSMI Steel Indonesia		4,286		—		(2,200	)		150			2,236
Nickel Mining Company SAS		59,668		—		—			(4	)		59,664
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		5,357		—		(5,357	)		—			—
KRAKATAUPOS-CHEMDONG-SUH CHEMICAL		6,428		—		—			281			6,709
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		5,357		4,451		(6,454	)		—			3,354
POS-SeAH Steel Wire (Thailand) Co., Ltd.		6,428		—		—			281			6,709
AMCI (WA) PTY LTD		92,061		3,795		—			(5,376	)		90,480
POS-AUSTEM YANTAI AUTOMOTIVE CO., LTD		5,357		5,564		(5,357	)		26			5,590
POS-AUSTEM WUHAN AUTOMOTIVE CO., LTD		8,571		8,902		(8,571	)		43			8,945
SAMHWAN VINA CO., LTD		1,071		—		(1,071	)		—			—
	W	816,304		51,700		(340,180	)		(38,185	)		489,639

(*1) During the year ended December 31, 2018, loans amounting toW17,559 million have been converted to shares of DMSA/AMSA, and its amount is included in others.

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

(h) For thesix-month periods ended June 30, 2019 and 2018, details of compensation to key management officers were as follows:

(in millions of Won)	June 30, 2019		June 30, 2018
Short-term benefits	W	56,769		56,861
Long-term benefits		7,249		6,530
Retirement benefits		10,389		12,155
	W	74,407		75,546

Key management officers include directors (includingnon-standing directors), executive officials and fellow officials who have significant influences and responsibilities in the Company’s business and operations.

58

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

35. Commitments and Contingencies

(a) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of June 30, 2019 are as follows:

(in millions of Won)			Guarantee limit					Guarantee amount
Guarantor	Guarantee beneficiary	Financial institution	Foreign currency			Won equivalent		Foreign currency		Won equivalent
[The Company]
POSCO	POSCO Asia Co., Ltd.	BOC and others		USD	100,000,000		115,680		100,000,000		115,680
	POSCO ASSAN TST STEEL INDUSTRY	SMBC and others		USD	146,527,500		169,503		131,874,750		152,553
	POSCO COATED STEEL (THAILAND) CO., LTD.	The Great & CO Co., Ltd. (SPC)		THB	5,501,000,000		206,618		5,501,000,000		206,618
	POSCO Maharashtra Steel Private Limited	Export-Import Bank of Korea and others		USD	506,853,000		586,328		126,090,900		145,860
	POSCO MEXICO S.A. DE C.V.	BOA and others		USD	160,000,000		185,088		160,000,000		185,088
	POSCO SS VINA CO., LTD.	Export-Import Bank of Korea and others		USD	299,941,250		346,972		299,663,928		346,651
	POSCO-VIETNAM Co., Ltd.	SMBC and others		USD	156,000,000		180,461		156,000,000		180,461
	PT. KRAKATAU POSCO	Export-Import Bank of Korea and others		USD	1,350,300,000		1,562,027		1,018,862,376		1,178,620
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	Daewoo Global Development. Pte., Ltd.	Export-Import Bank of Korea and others		USD	199,884,500		231,226		199,884,500		231,226
	POSCO INTERNATIONAL POWER (PNGLAE) LIMITED (Formerly, Daewoo Power PNG Ltd.)	Export-Import Bank of Korea		USD	44,200,000		51,131		44,200,000		51,131
	GOLDEN LACE POSCO INTERNATIONAL CO., LTD. (Formerly, GOLDEN LACE DAEWOO COMPANY LIMITED.)	Shinhan Bank and others		USD	11,000,000		12,725		10,000,000		11,568
	POSCO ASSAN TST STEEL INDUSTRY	ING and others		USD	14,652,750		16,950		14,652,750		16,950
	PT. Bio Inti Agrindo	Export-Import Bank of Korea and others		USD	135,000,000		156,168		134,087,946		155,113
		KEB Hana bank		IDR	150,000,000,000		12,270		150,000,000,000		12,270
	POSCO INTERNATIONAL INDIA PVT., LTD. (Formerly, POSCO Daewoo INDIA PVT., LTD.)	Standard Chartered		USD	32,000,000		37,018		—		—
	SPH Co., Ltd.	Shinyoung securities		KRW	10,000		10,000		—		—
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	POSCO E&C Vietnam Co., Ltd.	Export-Import Bank of Korea		USD	47,000,000		54,370		47,000,000		54,370
	POSCO Engineering and Construction India Private Limited	Woori bank and others		INR	104,000,000		1,742		61,000,000		1,022
	PT. POSCO E&C INDONESIA	POSCO Asia Co., Ltd.		USD	10,900,000		12,609		10,900,000		12,609
	Daewoo Global Development. Pte., Ltd	BNP Indonesia		USD	163,633,000		189,291		163,633,000		189,291
	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	SAMSUNG SECURITIES CO., LTD and others		USD	148,000,000		171,206		146,500,000		169,471
	Songdo Posco family Housing	SMBC and others		KRW	10,000		10,000		—		—
POSCO ICT	PT. POSCO ICT INDONESIA	POSCO Asia Co., Ltd.		USD	1,500,000		1,735		1,500,000		1,735
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)	PT. Krakatau Posco Chemtech Calcination	KEB Hana Bank		USD	15,200,000		17,583		15,200,000		17,583
POSCO COATED & COLOR STEEL Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO Asia Co., Ltd. and others		USD	13,986,947		16,180		13,986,947		16,180
POSCO ENERGY CO., LTD	PT. KRAKATAU POSCO ENERGY	Export-Import Bank of Korea and others		USD	193,900,000		224,304		113,149,791		130,892
POSCO Asia Co., Ltd.	POSCO ASSAN TST STEEL INDUSTRY	SMBC		USD	40,000,000		46,272		—		—
	POSCO America Corporation	SMBC		USD	70,000,000		80,976		70,000,000		80,976

59

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

POSCO O&M Co., LTD (Fornerly, POSMATE)	POSCO ICT	Seoul Guarantee Insurance Co., Ltd.	KRW	67	67	67	67
	POSCO	Seoul Guarantee Insurance Co., Ltd.	KRW	30	30	30	30
[Associates and joint ventures]
POSCO	CSP - Compania Siderurgica do Pecem	Export-Import Bank of Korea and others	USD	420,000,000	485,856	374,990,595	433,789
		BNDES	BRL	464,060,000	140,550	464,060,000	140,550
	LLP POSUK Titanium	SMBC	USD	15,000,000	17,352	15,000,000	17,352
	Nickel Mining Company SAS	SMBC	EUR	46,000,000	60,495	46,000,000	60,495
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	GLOBAL KOMSCO Daewoo LLC	KEB Hana Bank	USD	8,225,000	9,515	8,225,000	9,515
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	New Songdo International City Development, LLC	Others	KRW	440,000	440,000	436,000	436,000
	UITrans LRT Co., Ltd.	Kookmin Bank and others	KRW	20,740	20,740	6,004	6,004
	Chuncheon Energy Co., Ltd.	Kookmin Bank and others	KRW	12,430	12,430	2,963	2,963
	Pohang E&E Co., Ltd.	Heungkuk Life Insurance Co., Ltd.	KRW	6,500	6,500	—	—
	Incheon-Gimpo Expressway Co, Ltd.	Kookmin Bank and others	KRW	28,940	28,940	—	—
	JB CLARK HILLS	KOREA INVESTMENT&SECURITIES Co., Ltd.	KRW	40,000	40,000	30,000	30,000
POSCO ICT	Incheon-Gimpo Expressway Co, Ltd.	KDB Bank	KRW	100,000	100,000	100,000	100,000
	UITrans LRT Co., Ltd.	Kookmin Bank	KRW	76,000	76,000	76,000	76,000
	Hyochun Co., Ltd.	Kyobo Securities	KRW	39,575	39,575	39,575	39,575
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)	KRAKATAUPOS-CHEMDONG-SUH CHEMICAL	KEB Hana Bank	USD	1,140,000	1,319	601,667	696
POSCO(Suzhou) Automotive Processing Center Co., Ltd.	POS-InfraAuto (Suzhou) Co., Ltd	KDB Bank and others	USD	780,000	902	780,000	902
[Others]
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	Ambatovy Project Investments Ltd. and others	Export-Import Bank of Korea	USD	21,818,182	25,239	3,883,021	4,492
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Ecocity CO., LTD and others	Others	KRW	1,675,266	1,675,266	755,926	755,926
POSCO ICT	BLT Enterprise and others	KEB Hana Bank and others	KRW	1,214,912	1,214,912	1,193,635	1,193,635
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government)	Woori Bank and others	AUD	26,522,723	21,491	26,522,723	21,491
POSCO O&M Co., LTD (Fornerly, POSMATE)	Korea Electric Power Corporation and others	Seoul Guarantee Insurance Co., Ltd.	KRW	1,527	1,527	1,527	1,527
			USD	4,327,442,129	5,005,986	3,380,667,171	3,910,754
			INR	104,000,000	1,742	61,000,000	1,022
			IDR	150,000,000,000	12,270	150,000,000,000	12,270
			THB	5,501,000,000	206,618	5,501,000,000	206,618
			KRW	3,675,987	3,675,987	2,641,727	2,641,727
			BRL	464,060,000	140,550	464,060,000	140,550
			EUR	46,000,000	60,495	46,000,000	60,495
			AUD	26,522,723	21,491	26,522,723	21,491
			USD	4,327,442,129	5,005,986	3,380,667,171	3,910,754
			INR	104,000,000	1,742	61,000,000	1,022
			IDR	150,000,000,000	12,270	150,000,000,000	12,270
			THB	5,501,000,000	206,618	5,501,000,000	206,618
			KRW	3,675,987	3,675,987	2,641,727	2,641,727
			BRL	464,060,000	140,550	464,060,000	140,550
			EUR	46,000,000	60,495	46,000,000	60,495
			AUD	26,522,723	21,491	26,522,723	21,491

60

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided the completion guarantees for Samsung C&T Corporation amounting toW215,145 million as of June 30, 2019.

(c) Other commitments

Details of other commitments of the Company as of June 30, 2019 are as follows:

Company	Description
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, 2019, 79 million tons of iron ore and 13 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.
	The Company has a long-term service contract for the transportation of raw material. As of June 30, 2019, there are 39 vessels under contract, and the average remaining contract period is about 10 years.
	As of June 30, 2019, POSCO entered into a commitment with KOREA ENERGY AGENCY for long-term foreign currency borrowings, which are limited up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. 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 amount 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. As of June 30, 2019, the ending balance of the borrowing amounts to USD 1.02 million.
	POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to POSCO ENERGY Co., Ltd., a subsidiary of the Company, under construction of new power plant.
	POSCO provides a supplementary fund of up to W9.8 billion to the Company’s subsidiary, Busan E&E Co., Ltd., a subsidiary of the Company, at the request of creditors such as the Korea Development Bank.
	POSCO has provided a supplemental funding agreement, as requested from the creditors, to push forward Suncheon Bay PRT Business of Suncheon Eco Trans Co., Ltd., subsidiary of the Company. On November 2018, creditors sued the company for subrogation based on a supplemental funding agreement. POSCO recognized the provision based on the estimate of the amount and the possibility of any outflows of resources due to the litigation
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	As of June 30, 2019, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has foreign currency guarantee of up to USD 2,417 million and uses USD 716 million with Woori Bank and others.
	The Company is responsible for 3 projects, including the development of ParkOne in Yeouido-dong. As of June 30, 2019, the outstanding amount of loans related to the responsible payment arrangement isW2,258.6 billion. If the responsibility is not fulfilled, there are duties such as dept acquisition and liability leases.
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	The company operates aship-to-ship business in which the ship’s owner is elected to the ship’s owner. The shipper has entered into a ship purchase agreement with the shipper, which obliges the shipper to pay the agreed amount at the end of the term of the vessel’s contract with the shipper and to take over the ownership of the vessel from the shipper. In the event that the shipper fails to fulfill its obligation to purchase the vessel, such as payment of the proceeds from the acquisition of the vessel, it is obliged to take over the ship by transferring the ship’s contractual obligations and rights. As of June 30, 2019, the amount of the ship purchase agreement signed is USD 208 million.
POSCO ICT	As of June 30, 2019, in relation to contract enforcement, POSCO ICT was provided withW110,670 million,W5,434 million andW305 million guaranties from Korea Software Financial Cooperative, Seoul Guarantee Insurance and Engineering Guarantee Insurance, respectively.
	The Company is responsible for 18 projects, including the construction of Bundang Center. As of June 30, 2019, the outstanding amount of loans related to the responsible payment arrangement isW8,999 billion. If the responsiblility is not fulfilled, there are duties such as compensation for principal and interest.

61

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(d) Litigation in progress

In March 2019, regarding the Songdo International City Development Project in Incheon, NSC Investment and TGC (the “applicant”) of POSCO ENGINEERING & CONSTRUCTION CO., LTD. (the “applicant” or “POSCO E&C”) have applied to the International Chamber of Commerce of Singapore, and to the “ICC” for the fact that POSCO E&C’s joint contract violation (approximately USD 2 billion) has applied for mediated. In addition, the applicant filed a confirmation suit with the New York Southern District Court in March 2019 against the fact that all claims listed in the above arbitration application must be settled by ICC arbitration. The claimants are seeking damages allegedly resulting from POSCO E&C’s purported wrongful seizure. As of June 30, 2019, the Company believes that the applicant’s claims are not legally valid and that the present obligation for the above arbitration event does not exist and therefore did not recognize a provision.

The Company is involved in 351 lawsuits, including claim for employee right aggregating toW894.6 billion as defendant as of June 30, 2019, which arise from ordinary course of business. The Company has recognized provisions amounting toW45.5 billion for 101 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for other lawsuits and claims since the Company believes that it does not have a present obligation as of June 30, 2019.

(e) Other contingencies

Company	Description
POSCO	POSCO has provided 3 blank checks to Korea Energy Agency as collateral for long-term foreign currency borrowings.
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	As of June 30, 2019, POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporationn) has provided 33 blank promissory notes and 21 blank checks to Korea Energy Agency and others as collateral for the guarantee on performance for contracts and others.
POSCO ENGINEERING & CONSTRUCTION Co., LTD.	As of June 30, 2019, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided 26 blank checks and 4 blank promissory notes as collateral for agreements and outstanding loans, and has provided joint guarantee ofW9,364,333 million for guarantee that partners had issued from Korea Housing & Urban Guarantee Corporation and others.
POSCO ICT	As of June 30, 2019, POSCO ICT has provided 2 blank promissory notes and 6 blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

62

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

36. Cash Flows from Operating Activities

Changes in operating assets and liabilities for thesix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	June 30, 2019			June 30, 2018
Trade accounts and notes receivable	W	(310,248	)		(847,222	)
Other receivables		(197,582	)		(155,196	)
Inventories		(64,238	)		(586,794	)
Other current assets		82,503			4,050
Othernon-current assets		(64,191	)		(22,130	)
Trade accounts and notes payable		(116,517	)		1,190
Other payables		(50,573	)		25,845
Other current liabilities		292,868			11,093
Provisions		(81,657	)		(40,828	)
Payments of severance benefits		(87,522	)		(131,628	)
Plan assets		45,377			24,879
Othernon-current liabilities		(1,948	)		22,725
	W	(553,728)			(1,694,016	)

37. Operating Segments

The Company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments - steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in 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, 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, 2018.

Segment assets, liabilities and profit (loss) are generally measured based on separate financial statements in accordance withK-IFRS of the subsidiaries that constitute reportable operating segments.

63

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(a) Information about reportable segments for thesix-month periods ended June 30, 2019 and 2018 were as follows:

1) For thesix-month period ended June 30, 2019

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	16,254,629		11,202,364		3,250,562		1,628,018		32,335,573
Internal revenues		8,810,998		8,118,637		271,167		1,313,099		18,513,901
Inter segment revenue		6,083,008		4,353,673		238,116		1,248,146		11,922,943
Total revenues		25,065,627		19,321,001		3,521,729		2,941,117		50,849,474
Segment profits		1,154,554		162,877		33,084		167,428		1,517,943

2) For thesix-month period ended June 30, 2018

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	16,277,843		10,955,859		3,175,180		1,536,697		31,945,579
Internal revenues		8,954,160		7,872,995		241,143		1,312,133		18,380,431
Inter segment revenue		6,221,529		4,372,067		209,243		1,256,868		12,059,707
Total revenues		25,232,003		18,828,854		3,416,323		2,848,830		50,326,010
Segment profits		1,501,199		97,043		102,082		84,405		1,784,729

(b) Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for thesix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	June 30, 2019			June 30, 2018
Total profit for reportable segments	W	1,517,943			1,784,729
Corporate fair value adjustments		(40,729	)		(41,759	)
Elimination of inter-segment profits		(17,351	)		(79,090	)
Income tax expense		657,559			748,564
Profit before income tax expense	W	2,117,422			2,412,444

38. Events after the Reporting Period

(a) Pursuant to the resolution of the Board of Directors on July 29, 2019, the Company decided to pay interim cash dividends ofW2,000 per common share (total dividend:W160.2 billion).

(b) On July 17, 2019, the Company issued unguaranteed bond309-1,309-2 and309-3 with issue price ofW200,000 million,W130,000 million andW170,000 million, respectively. Maturity of the bonds is July 17, 2022 and July 17, 2024 and July 17, 2026, respectively. Also, the Company issued anon-guaranteed senior dollar bond with issue price of USD 500 million on July 15, 2019. Maturity of the bond is July 15, 2024.

64

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2019

(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		9

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, 2019, the condensed separate interim statements of comprehensive income for the three-month andsix-month periods ended June 30, 2019 and 2018, the condensed separate interim statements of changes in equity and cash flows for thesix-month periods ended June 30, 2019 and 2018, 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 these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standard(“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed separate interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

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

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements 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 Korean Standards on Auditing 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 withK-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

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

The separate statement of financial position of the Company as of December 31, 2018, 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 in accordance with Korean Standards on Auditing and our report thereon, dated March 7, 2019, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2018, presented for comparative purposes, is consistent, in all material respect, with the audited separate financial statements from which it has been derived.

Seoul, Korea

August 14, 2019

This report is effective as of August 14, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO

Condensed Separate Interim Statements of Financial Position

As of June 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes		June 30, 2019		December 31, 2018
Assets
Cash and cash equivalents		20	W	556,441		259,219
Trade accounts and notes receivable, net		4,14,20,25,32		4,280,539		3,968,372
Other receivables, net		5,20,32		295,752		206,432
Other short-term financial assets		6,20		6,553,316		7,025,143
Inventories		7,29		5,384,738		5,288,009
Assets held for sale		8		455,111		25,683
Other current assets		13		73,461		23,542
Total current assets				17,599,358		16,796,400
Long-term trade accounts and notes receivable, net		4,20		7,210		7,673
Other receivables, net		5,20		56,953		57,767
Other long-term financial assets		6,20		1,268,866		1,176,757
Investments in subsidiaries, associates and joint ventures		9		15,477,397		15,121,339
Investment property, net		10		156,642		108,215
Property, plant and equipment, net		11		19,321,085		20,154,334
Intangible assets, net		12		665,898		645,222
Othernon-current assets		13		84,169		58,273
Totalnon-current assets				37,038,220		37,329,580
Total assets			W	54,637,578		54,125,980

See accompanying notes to the condensed separate interim financial statements.

3

POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of June 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes		June 30, 2019			December 31, 2018
Liabilities
Trade accounts and notes payable		20,32	W	1,072,946			1,106,226
Short-term borrowings and current installments of long-term borrowings		4,14,20		462,342			826,862
Other payables		15,20,32		957,797			1,072,733
Other short-term financial liabilities		16,20		8,997			12,638
Current income tax liabilities				497,781			803,543
Liabilities directly related to assets held for sale		8		29,221			—
Provisions		17		16,873			19,165
Other current liabilities		19,25		59,748			54,806
Total current liabilities				3,105,705			3,895,973
Long-term borrowings, excluding current installments		14,20		3,528,382			3,444,108
Other payables		15,20		217,782			144,343
Other long-term financial liabilities		16,20		39,922			79,936
Defined benefit liabilities, net		18		40,595			863
Deferred tax liabilities				1,206,870			1,179,672
Long-term provisions		17,33		95,319			93,719
Othernon-current liabilities		19,25		9,946			15,264
Totalnon-current liabilities				5,138,816			4,957,905
Total liabilities				8,244,521			8,853,878
Equity
Share capital		21		482,403			482,403
Capital surplus		21,35		1,575,841			1,154,775
Hybrid bonds		22		199,384			199,384
Reserves		23		(175,599	)		(207,191	)
Treasury shares		24		(1,508,303	)		(1,532,728	)
Retained earnings				45,819,331			45,175,459
Total equity				46,393,057			45,272,102
Total liabilities and equity			W	54,637,578			54,125,980

See accompanying notes to the condensed separate interim financial statements.

4

POSCO

Condensed Separate Interim Statements of Comprehensive Income

For the three-month andsix-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won, except per share informations)		For the three-month periods ended June 30						For thesix-month periods ended June 30
	Notes	2019			2018			2019			2018
Revenue	25,32	W	7,475,854			7,704,845			15,292,325			15,465,735
Cost of sales	7,29,32		(6,484,077	)		(6,607,625	)		(13,211,583	)		(13,077,128	)
Gross profit			991,777			1,097,220			2,080,742			2,388,607
Selling and administrative expenses	29,32
Reversal of (impairment loss) on trade accounts and notes receivable			26			(121	)		4,636			(1,946	)
Other administrative expenses	26		(209,610	)		(223,201	)		(416,430	)		(443,484	)
Selling expenses	26		(57,895	)		(51,774	)		(112,183	)		(105,138	)
Operating profit			724,298			822,124			1,556,765			1,838,039
Finance income and costs	20,27
Finance income			281,485			197,767			575,194			421,432
Finance costs			(156,029	)		(154,492	)		(268,292	)		(287,949	)
Othernon-operating income and expenses	32
Reversal of (impairment loss) on other receivables			(140	)		(442	)		(272	)		2,904
Othernon-operating income	28		35,915			136,850			56,840			181,214
Othernon-operating expenses	28,29		(140,046	)		(213,084	)		(252,694	)		(313,770	)
Profit before income tax			745,483			788,723			1,667,541			1,841,870
Income tax expense	30		(200,101	)		(208,432	)		(450,987	)		(492,843	)
Profit			545,382			580,291			1,216,555			1,349,027
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans	18		(1,010	)		(2,780	)		(1,882	)		(3,991	)
Net changes in fair value of equity investments at fair value through other comprehensive income	6,20,23		37,713			(16,126	)		25,590			(56,278	)
Total comprehensive income		W	582,085			561,385			1,240,263			1,288,758
Basic and diluted earnings per share (in Won)	31	W	6,787			7,170			15,144			16,683

See accompanying notes to the condensed separate interim financial statements.

5

POSCO

Condensed Separate Interim Statements of Changes in Equity

For thesix-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Share capital		Capital surplus			Hybrid bonds			Reserves			Treasury shares			Retained earnings			Total
Balance as of January 1, 2018	W	482,403		1,156,429			996,919			233,390			(1,533,054	)		44,605,368			45,941,455
Adjustment on initial application ofK-IFRS No. 1115, net of tax		—		—			—			—			—			(883	)		(883	)
Adjustment on initial application ofK-IFRS No. 1109, net of tax		—		—			—			(321,654	)		—			321,602			(52	)
Adjusted balance as of January 1, 2018		482,403		1,156,429			996,919			(88,264	)		(1,533,054	)		44,926,087			45,940,520
Comprehensive income:
Profit		—		—			—			—			—			1,349,027			1,349,027
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—			—			—			(3,991	)		(3,991	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—			(59,747	)		—			3,469			(56,278	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—			—			—			—			(279,999	)		(279,999	)
Interim dividends		—		—			—			—			—			(119,999	)		(119,999	)
Repayment of hybrid bonds		—		(2,465	)		(797,535	)		—			—			—			(800,000	)
Interest of hybrid bonds		—		—			—			—			—			(19,805	)		(19,805	)
Disposal of treasury shares		—		113			—			—			270			—			383
Balance as of June 30, 2018	W	482,403		1,154,077			199,384			(148,011	)		(1,532,784	)		45,854,789			46,009,858
Balance as of January 1, 2019	W	482,403		1,154,775			199,384			(207,191	)		(1,532,728	)		45,175,459			45,272,102
Comprehensive income:
Profit		—		—			—			—			—			1,216,555			1,216,555
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—			—			—			(1,882	)		(1,882	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—			31,592			—			(6,002	)		25,590
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—			—			—			—			(400,006	)		(400,006	)
Interim dividends		—		—			—			—			—			(160,231	)		(160,231	)
Interest of hybrid bonds		—		—			—			—			—			(4,562	)		(4,562	)
Disposal of treasury shares		—		12,576			—			—			24,425			—			37,001
Business combination (Note 35)		—		408,490			—			—			—			—			408,490
Balance as of June 30, 2019	W	482,403		1,575,841			199,384			(175,599	)		(1,508,303	)		45,819,331			46,393,057

See accompanying notes to the condensed separate interim financial statements.

6

POSCO

Condensed Separate Interim Statements of Cash Flows

For the six-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes		June 30, 2019			June 30, 2018
Cash flows from operating activities
Profit			W	1,216,555			1,349,027
Adjustments for :
Expenses related to post-employment benefit				59,749			57,116
Depreciation				1,071,915			1,049,906
Amortization				38,426			32,857
Reversal of impairment loss on trade and other receivable				(4,364	)		(958	)
Finance income				(456,317	)		(336,029	)
Finance costs				177,194			195,700
Loss on valuation of inventories				1,442			567
Gain on disposal of property, plant and equipment				(14,685	)		(20,402	)
Loss on disposal of property, plant and equipment				38,537			60,528
Impairment losses on property, plant and equipment				161,496			16,264
Gain on disposal of intangible assets				(1,011	)		(99,361	)
Impairment losses on investments in subsidiaries, associates and joint ventures				10,422			34,207
Impairment loss on assets held for sale				1,794			5,622
Gain on valuation of emissions rights				(25,440	)		—
Increase to provisions				1,053			89,106
Income tax expense				450,987			492,843
Others				(2,501	)		519
Changes in operating assets and liabilities		34		(618,543	)		(671,427	)
Interest received				74,330			70,102
Interest paid				(81,228	)		(69,487	)
Dividends received				200,840			162,271
Income taxes paid				(755,923	)		(364,117	)
Net cash provided by operating activities			W	1,544,728			2,054,854

See accompanying notes to the condensed separate interim financial statements.

7

POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For thesix-month periods ended June 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes	June 30, 2019			June 30, 2018
Cash flows from investing activities
Decrease in deposits		W	1,500,369			1,000,729
Proceeds from disposal of short-term financial instruments			14,496,900			13,155,517
Proceeds from disposal of debt securities			3			—
Proceeds from disposal of equity securities			22,616			43,777
Proceeds from disposal of other securities			2,772			2,578
Proceeds from disposal of investments in subsidiaries, associates and joint ventures			4,055			101,294
Proceeds from disposal of property, plant and equipment			—			9,722
Proceeds from disposal of intangible assets			5,579			26,375
Proceeds from disposal of assets held for sale			—			231
Proceeds from business combination			2,171			—
Increase in deposits			(1,549,036	)		(1,363,420	)
Acquisition of short-term financial investments			(13,719,309	)		(13,011,196	)
Increase in short-term loans			—			(2,950	)
Increase in long-term loans			(613	)		(233	)
Acquisition of debt securities			(235,011	)		(50,221	)
Acquisition of other securities			(110	)		(174	)
Acquisition of investment in subsidiaries, associates and joint ventures			(41,798	)		(129,856	)
Acquisition of property, plant and equipment			(703,192	)		(759,075	)
Proceeds from disposal of property, plant and equipment			(6,886	)		—
Acquisition of intangible assets			(79,223	)		(22,505	)
Net cash used in investing activities		W	(300,713	)		(999,407	)
Cash flows from financing activities
Proceeds from borrowings			300,000			366,335
Increase in long-term financial liabilities			2,975			513
Receipt of government grants			—			86
Proceeds from disposals of derivatives			4,515			—
Repayment of borrowings			(666,981	)		(301,965	)
Decrease in long-term financial liabilities			(21,017	)		(6,227	)
Payment of cash dividends			(560,255	)		(400,011	)
Payment of interest of hybrid bonds			(4,587	)		(21,740	)
Repayment of hybrid bonds			—			(800,000	)
Net cash used in financing activities		W	(945,350	)		(1,163,009	)
Effect of exchange rate fluctuation on cash held			(1,443	)		—
Net increase (decrease) in cash and cash equivalents			297,222			(107,562	)
Cash and cash equivalents at beginning of the period			259,219			332,405
Cash and cash equivalents at end of the period		W	556,441			224,843

See accompanying notes to the condensed separate interim financial statements.

8

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2019

(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 foreign markets.

The shares of the Company have been listed on the Korea Exchange since June 10, 1988. The Company owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea, and it also operates internationally through six of its overseas liaison offices.

As of June 30, 2019, the shares of the Company are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchange.

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 theAct on External Audit of Companies, Etc.in the Republic of Korea.

These condensed separate interim financial statements have been prepared in accordance withK-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’sK-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, 2018. 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 prepared in accordance withK-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.

The Company adoptedK-IFRS No. 1116 “Leases” for the first time from January 1, 2019. Changes to significant accounting policies are described in Note 3.

Use of estimates and judgments

(a) Judgments, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity withK-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.

9

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

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 described in the last annual financial statements, except for new significant judgments and key sources of estimation uncertainty related to the application ofK-IFRS No. 1116 “Leases”, which are described in Note 3.

(b) Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial andnon-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

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

Significant valuation issues are reported to the Company’s Audit Committee.

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

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

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

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

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

Information about the assumptions made in measuring fair value is included in Note 20.

10

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

3. Summary of Significant Accounting Policies

Except as described inK-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, 2018.

K-IFRS No. 1116 “Leases”

The Company has initially adoptedK-IFRS No. 1116 “Leases” from January 1, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2019.

K-IFRS No. 1116 “Leases” introduced a single accounting model for lessees. As a result, the Company, as a lessee, recognizedright-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.

The Company appliedK-IFRS No. 1116 “Leases” using the modified retrospective approach by recognizing the cumulative effect of initial application as of January 1, 2019, the date of initial application. Accordingly, the comparative information presented for 2018 has not been restated.

(a) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement was or contained a lease underK-IFRS No. 2104 “Determining Whether an Arrangement Contains a Lease”. The Company now assesses whether a contract is or Contains a lease based on the new definition of a lease. UnderK-IFRS No. 1116 “Leases”, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition toK-IFRS No. 1116 “Leases”, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company appliedK-IFRS No. 1116 only to contracts that were previously identified as leases. Contracts that were not identified as leases underK-IFRS No. 1017 “Leases” andK-IFRS No. 2104 “Determining Whether an Arrangement Contains a Lease” were not reassessed. Therefore, the definition of a lease underK-IFRS No. 1116 has been applied only to contracts entered into or changed on or after January 1, 2019.

At inception or reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease andnon-lease component on the basis of their relative stand-alone prices.

11

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) As a lessee

The Company leases many assets, including warehouses, handling equipment and IT equipment. As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. UnderK-IFRS No. 1116 “Leases”, the Company recognizesright-of-use assets and lease liabilities for most leases. That is, most leases are presented in the statement of financial position.

However, the Company has elected not to recognizeright-of-use assets and lease liabilities for some leases oflow-value assets (e.g. desktops, IT supplies, etc.). The Company recognizes lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The Company presentsright-of-use assets in the same line item as it presents underlying assets of the same nature that it owns, and lease liabilities are included in other payables on the separate statement of financial position. The carrying amounts ofright-of-use assets as of January 1, 2019, the date of initial application, and June 30, 2019 are as follows:

(in millions of Won)	Property, Plant and Equipment (*1)
	Buildings		Structure		Machinery and equipment		Vehicles		Furniture, fixtures and others		Total
The date of initial application (January 1, 2019)	W	78,384		53,761		65,698		7,256		66,312		271,411
June 30, 2019		75,153		52,346		62,948		7,006		56,011		253,464

(*1) Leases classified as a finance lease underK-IFRS No. 1017 “Leases” at the end of 2018 are included, and the carrying amounts ofright-of-use assets and lease liabilities are equal to the carrying amounts of the finance lease assets and financial lease liabilities measured in accordance withK-IFRS 1017 “Leases” as of January 1, 2019, the date of initial application.

1) Significant accounting policies

The Company recognizes aright-of-use assets and a lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or, as appropriate, a change in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

12

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

The Company applies judgment to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities andright-of-use assets recognized.

2) Transition

At transition, for leases classified as operating leases underK-IFRS No. 1017 “Leases”, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate as of January 1, 2019, the date of initial application.Right-of-use assets are measured at amounts equal to the lease liabilities.

In addition, the Company used the following practical expedients when applyingK-IFRS No. 1116 “Leases” to leases previously classified as operating leases underK-IFRS No. 1017 “Leases”.

• Applied the exemption not to recognizeright-of-use assets and lease liabilities for leases with less than 12 months of lease term.

• Excluded initial direct costs from measuring theright-of-use asset at the date of initial application.

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(c) As a lessor

The Company leases out its investment properties. The Company classified these leases as operating leases, and the accounting policies applicable to the Company as a lessor are not different from those underK-IFRS No. 1017 “Leases”.

Accordingly, the Company did not make any adjustments to leases for which the Company is a lessor as of January 1, 2019, the date of initial application.

13

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(d) Impact on financial statements

The Company recognized additionalright-of-use assets and lease liabilities as of January 1, 2019, the date of initial application. The effect on the financial statements as of January 1, 2019, the date of initial application is as follows:

(in millions of Won)	The date of initial application (January 1, 2019)
Separate statement of financial position
Right-of-use assets presented as property, plant and equipment	W	128,610
Lease liabilities		128,610

When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rates as of January 1, 2019, the date of initial application, and the weighted-average rates applied are 2.1 ~ 2.6%. The carrying amount of lease liabilities as of January 1, 2019, the date of initial application, is as follow:

(in millions of Won)	The date of initial application (January 1, 2019)
Operating lease commitments as of December 31, 2018	W	153,666
Operating lease commitments not recognized as lease liabilities
- Leases of low-value assets		(16,028	)
- Leases with less than 12 months of lease term at transition		(975	)
Operating lease commitments recognized as lease liabilities		136,663
Amount discounted using the incremental borrowing rate as of January 1, 2019, the date of initial application		128,610
Finance lease liabilities recognized as of December 31, 2018		141,762
Lease liabilities as of January 1, 2019, the date of initial application		270,372

As of June 30, 2019, the Company recognizedW115,839 million ofright-of-use assets andW113,471 million of lease liabilities for leases that were previously classified as operating leases.

In addition, the Company recognized depreciation and interest expenses instead of operating lease expenses. The Company recognized depreciation expenses amounted toW12,299 million and interest expenses amounted toW1,507 million during thesix-month period ended June 30, 2019.

14

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Current
Trade accounts and notes receivable	W	4,293,351			3,989,699
Less: Allowance for doubtful accounts		(12,812	)		(21,327	)
	W	4,280,539			3,968,372
Non-current
Trade accounts and notes receivable	W	11,334			11,904
Less: Present value discount		(2,983	)		(2,983	)
Less: Allowance for doubtful accounts		(1,141	)		(1,248	)
	W	7,210			7,673

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted toW162,342 million andW176,612 million as of June 30, 2019 and December 31, 2018, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and is recognized as short-term borrowings from financial institutions (Note 14).

5. Other Receivables

Other receivables as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Current
Loans	W	2,950			2,950
Other accounts receivable		269,171			186,951
Others		31,572			25,065
Less: Allowance for doubtful accounts		(7,941	)		(8,534	)
	W	295,752			206,432
Non-current
Loans	W	28,631			26,335
Long-term other accounts receivable		34,287			36,832
Others		2,909			2,915
Less: Allowance for doubtful accounts		(8,874	)		(8,315	)
	W	56,953			57,767

15

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

6. Other Financial Assets

(a) Other financial assets as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Debt securities	W	235,119		21
Deposit instrument(*1)		1,297,381		1,248,715
Short-term financial instruments		5,020,816		5,776,407
	W	6,553,316		7,025,143
Non-current
Long-term derivative assets	W	64,814		1,265
Equity securities		1,134,440		1,104,092
Debt securities		9,578		9,667
Other securities		60,001		61,701
Deposit instrument(*2)		33		32
	W	1,268,866		1,176,757

(*1) As of June 30, 2019 and December 31, 2018,W5,382 million andW5,715 million, respectively, are restricted in relation to government assigned projects.

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

(b) Equity securities as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019													December 31, 2018
	Number of shares		Ownership (%)		Acquisition cost		Fair value		Net changes in fair value of equity securities			Book value		Book value
Marketable equity securities
Nippon Steel & Sumitomo Metal Corporation		15,698,500		1.65	W	473,962		311,556		(162,406	)		311,556		301,010
KB Financial group Inc.		3,863,520		0.92		178,839		177,142		(1,697	)		177,142		179,654
Woori Bank		20,280,000		3.00		244,447		284,934		40,487			284,934		316,368
DONGKUK STEEL MILL CO., LTD		1,786,827		1.87		10,471		11,990		1,519			11,990		12,919
SAMWONSTEEL Co., Ltd.		5,700,000		14.25		8,930		17,100		8,170			17,100		16,188
DONGKUK INDUSTRIES COMPANY		2,611,989		4.82		11,911		7,183		(4,728	)		7,183		6,387
Others (6 companies)						55,752		39,647		(16,105	)		39,647		42,247
						984,312		849,552		(134,760	)		849,552		874,773
Non-marketable equity securities
Congonhas Minerios S.A.(*1)		3,658,394		2.02		221,535		221,045		(490	)		221,045		182,992
Korea Nickel CO.LTD		75,600		14.00		10,194		10,194		—			10,194		—
Poongsan Special Metal Corp.		315,790		5.00		7,657		7,657		—			7,657		7,657
HANKUM.CO.LTD		21,000		4.99		4,599		4,599		—			4,599		4,599
Core-Industry Co., Ltd.		490,000		19.84		4,214		4,214		—			4,214		4,214
AJUSTEEL CO., LTD		17,000		4.36		4,165		4,165		—			4,165		4,165
Others (32 companies)						139,970		33,014		(106,956	)		33,014		25,692
						392,334		284,888		(107,446	)		284,888		229,319
					W	1,376,646		1,134,440		(242,206	)		1,134,440		1,104,092

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

16

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

7. Inventories

Inventories as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Finished goods	W	1,011,067			1,146,961
Semi-finished goods		1,464,860			1,343,877
By-products		8,669			6,166
Raw materials		1,227,913			1,130,000
Fuel and materials		585,412			552,270
Materials-in-transit		1,087,717			1,120,349
Others		542			555
		5,386,180			5,300,178
Less: Allowance for inventories valuation		(1,442	)		(12,169	)
	W	5,384,738			5,288,009

The amounts of loss on valuation of inventories recognized within cost of sales during thesix-month period ended June 30, 2019 and the year ended December 31, 2018 wereW1,442 million andW12,169 million, respectively.

8. Assets Held for Sale

Assets held for sale as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Assets
Investments in subsidiaries(*1)	W	23,171		25,683
Property, plant and equipment(*2)		377,090		—
Others(*2)		54,850		—
	W	455,111		25,683
Liabilities
Other payables(*2)	W	25,960		—
Others(*2)		3,261		—
	W	29,221		—

(*1) During the year ended December 31, 2017, the Company determined to dispose part of the interest of POSCO Thainox Public Company Limited, subsidiary of the Company, and classified investments in subsidiaries as assets held for sale. The Company recognizedW 1,794 million of impairment loss from the difference between book value and net fair value of the interest, and finished disposal for part of it.

(*2) During thesix-month period ended June 30, 2019, the Company decided to transfer all assets, liabilities and rights related to a LNG terminal business of the Company to POSCO ENERGY CO., LTD. and reclassified the assets and liabilities as assets held for sale and liabilities directly related to the assets held for sale.

17

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

9. Investments in Subsidiaries, Associates and Joint ventures

(a) Details of subsidiaries and carrying amounts as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)			June 30, 2019				December 31, 2018
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)(*1)	Korea	Trading		62.91	W	3,407,448		3,407,110
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Korea	Engineering and construction		52.80		1,014,314		1,014,314
POSCO ENERGY CO., LTD.	Korea	Power generation		89.02		658,176		658,176
POSCO Processing&Service(*2)	Korea	Steel sales and trading		—		—		385,995
POSCO COATED & COLOR STEEL Co., Ltd.	Korea	Coated steel manufacturing and sales		56.87		108,421		108,421
POSCO Venture Capital Co., Ltd.	Korea	Investment in venture companies		95.00		103,780		103,780
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)(*3)	Korea	Refractory manufacturing and sales		61.26		207,631		100,535
POSCO ES MATERIALS CO., LTD.(*3)	Korea	Secondary battery active material manufacturing and sales		—		—		107,096
POSCO O&M Co., Ltd(Formerly, POSMATE)(*4,5)	Korea	Business facility maintenance		47.17		73,374		73,374
POSCO ICT	Korea	Computer hardware and software distribution		65.38		70,990		70,990
POSCOM-TECH(*5)	Korea	Packing materials manufacturing and sales		48.85		107,278		107,278
POSCO Family Strategy Fund	Korea	Investment in venture companies		69.91		29,596		32,457
Busan E&E Co,. Ltd.(*6)	Korea	Municipal solid waste fuel and power generation		70.00		30,148		30,148
Others (9 companies)						101,774		101,774
						5,912,930		6,301,448
[Foreign]
PT. KRAKATAU POSCO	Indonesia	Steel manufacturing and sales		70.00		813,431		813,431
POSCO WA PTY LTD	Australia	Iron ore sales and mine development		100.00		637,714		635,736
POSCO Maharashtra Steel Private Limited	India	Steel manufacturing and sales		100.00		722,569		722,569
POSCO Canada Ltd.(*2)	Canada	Coal mine development		100.00		560,879		—
POSCO AUSTRALIA PTY LTD	Australia	Iron ore sales and mine development		100.00		330,623		330,623
Zhangjiagang Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing and sales		58.60		283,845		283,845
POSCO Thainox Public Company Limited	Thailand	Stainless steel manufacturing and sales		84.39		416,612		416,612
POSCO-China Holding Corp.	China	Investment management		100.00		593,841		593,841
POSCO-India Private Limited	India	Steel manufacturing and sales		99.99		75,567		75,567
POSCO MEXICO S.A. DE C.V.	Mexico	Plate steel manufacturing and sales		83.28		180,072		180,072
POSCO America Corporation	USA	Steel trading		99.45		192,156		192,156
POSCO-VIETNAM Co., Ltd.	Vietnam	Steel manufacturing and sales		100.00		160,572		160,572
POSCO VST CO., LTD.	Vietnam	Stainless steel manufacturing and sales		95.65		144,573		144,573
POSCO(Guangdong) Automotive Steel Co., Ltd.	China	Plate steel manufacturing and sales		83.64		130,751		130,751
POSCO COATED STEEL (THAILAND) CO., LTD.	Thailand	Plate steel manufacturing and sales		100.00		121,592		121,592
POSCO Asia Co., Ltd.	Hong Kong	Steel and raw material trading		100.00		117,710		117,710
POSCO ASSAN TST STEEL INDUSTRY	Turkey	Steel manufacturing and sales		60.00		92,800		92,800
POSCO JAPAN Co., Ltd.	Japan	Steel trading		100.00		68,436		68,436
Qingdao Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing		70.00		65,982		65,982
POSCO(Suzhou) Automotive Processing Center Co., Ltd.	China	Steel manufacturing and sales		90.00		62,494		62,494
POSCO AFRICA (PROPRIETARY) LIMITED	South Africa	Mine development		100.00		50,297		50,297
POSCO-Malaysia SDN. BHD.	Malaysia	Steel manufacturing and sales		81.79		45,479		45,479
POSCO(Guangdong) Coated Steel Co., Ltd.(*7)	China	Plate steel sheet manufacturing and sales		—		—		31,299
POSCO Argentina S.A.U.	Argentina	Mineral exploration, manufacturing and sale		100.00		365,995		349,097
Others (33 companies)(*2)						492,005		406,124
						6,725,995		6,091,658
					W	12,638,925		12,393,106

(*1) During thesix-month period ended June 30, 2019, POSCO DAEWOO Corporation changed its name to POSCO INTERNATIONAL Corporation.

(*2) During thesix-month period ended June 30, 2019, the Company merged with POSCO Processing&Service, and subsidiaries owned by POSCO Processing&Service, such as POSCO Canada Ltd., were newly added.

(*3) During thesix-month period ended June 30, 2019, POSCO CHEMTECH changed its name to POSCO CHEMICAL CO., LTD. and merged with POSCO ES MATERIALS CO., LTD.

(*4) During thesix-month period ended June 30, 2019, POSMATE changed its name to POSCO O&M Co., Ltd.

18

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(*5) The Company classified POSCOM-TECH and POSCO O&M Co., Ltd. as the investments in a subsidiary, considering additional facts and circumstances, such as the relative size of the voting rights held by the Company and the degree of diversification of other voting rights holders, although the Company holds less than half of the voting rights of POSCOM-TECH and POSCO O&M Co., Ltd.

(*6) As of June 30, 2019 and December 31, 2018 the investments in a subsidiary were provided as collateral in relation to the loan agreements of Busan E&E Co., Ltd.

(*7) POSCO (Guangdong) Coated Steel Co., Ltd., was disposed duringsix-month period ended June 30, 2019, and impairment losses recorded by the difference between the value of held for sale and the book value, amounting toW6,435 million.

(b) Details of associates and carrying values as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)			June 30, 2019				December 31, 2018
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	Korea	Mine investment		29.63	W	169,316		169,316
SNNC	Korea	STS material manufacturing and sales		49.00		100,655		100,655
QSONE Co., Ltd.(*1)	Korea	Real estate rental business		50.00		85,550		—
Others (7 companies)(*1)						22,468		19,052
						377,989		289,023
[Foreign]
Nickel Mining Company SAS	New Caledonia	Raw material manufacturing and sales		49.00		189,197		189,197
7623704 Canada Inc.(*2)	Canada	Mine investment		10.40		124,341		124,341
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd	China	Tinplate manufacturing and sales		24.00		11,003		11,003
Others (6 companies)						39,611		20,530
						364,152		345,071
					W	742,141		634,094

(*1) During thesix-month period ended June 30, 2019, the Company merged with POSCO Processing&Service and its associates were newly included in consolidation, such as QSONE Co., Ltd., owned by POSCO Processing&Service.

(*2) As of June 30, 2019, it was classified as an associate even though the Company’s ownership percentage is less than 20% since the Company has significant influence over the investee when considering its structure of the Board of Directors and others.

19

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(c) Details of joint ventures and carrying amounts as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)				June 30, 2019				December 31, 2018
	Country		Principal operations	Ownership (%)		Book value		Book value
Roy Hill Holdings Pty Ltd(*1)		Australia	Mine development		10.00	W	1,225,464		1,225,464
CSP - Compania Siderurgica do Pecem		Brazil	Steel manufacturing and sales		20.00		334,813		336,600
POSCO-NPS Niobium LLC		USA	Mine development		50.00		364,609		364,609
KOBRASCO		Brazil	Steel materials manufacturing and sales		50.00		98,962		98,962
Others (3 companies)							72,483		68,504
						W	2,096,331		2,094,139

(*1) As of June 30, 2019 and December 31, 2018, the investments in joint ventures were provided as collateral in relation to loans from project financing of Roy Hill Holdings Pty Ltd.

10. Investment Property, Net

Changes in the carrying amount of investment property for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For thesix-month period ended June 30, 2019

(in millions of Won)	Beginning		Business Combination(*1)		Depreciation(*2)			Transfer(*3)		Ending
Land	W	44,637		41,195		—			4,594		90,426
Buildings		54,277		25		(2,028	)		4,588		56,862
Structures		9,301		—		(310	)		363		9,354
	W	108,215		41,220		(2,338	)		9,545		156,642

(*1) This increases was due to business combination with POSCO Processing & Service.

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

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

(b) For the year ended December 31, 2018

(in millions of Won)	Beginning		Depreciation(*1)			Transfer(*2)		Ending
Land	W	38,035		—			6,602		44,637
Buildings		49,793		(3,715	)		8,199		54,277
Structures		9,479		(596	)		418		9,301
	W	97,307		(4,311	)		15,219		108,215

(*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 changes in rental ratio and the purpose of use.

20

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

11. Property, Plant and Equipment, Net

Changes in the carrying amount of property, plant and equipment for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For thesix-month period ended June 30, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment(*1)			Others(*3)			Ending
Land	W	1,458,632		—		(1,226	)		—			—			(28,464	)		1,428,942
Buildings		2,199,429		1,665		(2,260	)		(101,412	)		(25,869	)		12,458			2,084,011
Structures		2,244,099		1,859		(578	)		(88,994	)		(9,573	)		(236,433	)		1,910,380
Machinery and equipment		12,911,467		19,958		(7,568	)		(848,658	)		(125,917	)		271,543			12,220,825
Vehicles		7,340		546		—			(2,777	)		—			2,103			7,212
Tools		23,864		1,547		(1	)		(5,558	)		—			530			20,382
Furniture and fixtures		36,287		1,531		(7	)		(4,703	)		(137	)		2,039			35,010
Lease assets(*2)		142,801		—		—			(17,475	)		—			128,138			253,464
Construction-in-progress		1,130,415		656,344		—			—			—			(425,900	)		1,360,859
	W	20,154,334		683,450		(11,640	)		(1,069,577	)		(161,496	)		(273,986	)		19,321,085

(*1) The Company estimated recoverable amount for individual assets such as CEM andFe-Si factories that ceased operations due to the disposal plan and others and recognized an impairment loss for assets since recoverable amounts are less than their carrying amounts for thesix-month period ended June 30, 2019.

(*2) On the date of initial application ofK-IFRS No.1116 (January 1, 2019), recognition ofW128,610 million ofright-of-use assets is included in others.

(*3) Represents assets transferred fromconstruction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

(b) For the year ended December 31, 2018

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment(*1,2)			Others(*3)			Ending
Land	W	1,474,993		—		(9,763	)		—			—			(6,598	)		1,458,632
Buildings		2,334,399		11,743		(10,586	)		(207,946	)		(633	)		72,452			2,199,429
Structures		2,352,008		9,837		(1,469	)		(187,572	)		(3,868	)		75,163			2,244,099
Machinery and equipment		13,437,338		64,645		(47,128	)		(1,677,476	)		(88,642	)		1,222,730			12,911,467
Vehicles		7,047		412		—			(5,197	)		—			5,078			7,340
Tools		21,115		6,076		(3	)		(10,785	)		—			7,461			23,864
Furniture and fixtures		31,050		1,708		(39	)		(8,231	)		(7	)		11,806			36,287
Lease assets		72,105		81,048		—			(10,352	)		—			—			142,801
Construction-in-progress		1,831,215		1,608,023		—			—			(846,401	)		(1,462,422	)		1,130,415
	W	21,561,270		1,783,492		(68,988	)		(2,107,559	)		(939,551	)		(74,330	)		20,154,334

(*1) During 2018, the Company evaluated future economic performance of its Synthetic Natural Gas (SNG) facility that was still in trial run stage. Considering the continuous decline in LNG price, increase in coal prices and the need for additional capital investment in the SNG facility, the Company concluded that the profitability for the SNG facility is unlikely to be sustainable and decided to terminate the operation of SNG facility as of December 31, 2018. The property, plant and equipment in the SNG facility are primarily comprised of machinery and equipment, among which assets with a carrying value ofW180,238 million are expected to bere-used in other facilities of the Company therefore no impairment test was conducted. For the remaining assets impairment test was performed by estimating the recoverable amount of each individual assets. For the assets which are determined to be technically obsolete and therefore sale is unlikely, recoverable amount represents expected scrap value less cost of disposal.

21

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

For the assets for which sale is probable, the recoverable amount is determined based on fair value less cost of disposal. Fair value was measured using cost approach, which is based on estimated the current cost to purchase or replace the asset less applicable depreciation and obsolescence. Specifically, the Company used indirect cost approach to estimate the replacement cost for a new asset by applying asset specific inflation factors to the asset’s historical cost. Then the Company estimates and deducts depreciation for physical deterioration. Depreciation factors are applied primarily based on estimated useful life of the asset and declining balance depreciation method. The fair value measurement of assets in SNG facility is considered to be level 3 because significant inputs used in the estimate, such as asset specific inflation factors and estimated useful lives, are unobservable.

As a result of the impairment test, the Company recognized an impairment loss ofW877,764 million in connection with the property, plant and equipment in the SNG facility.

(*2) The Company has recognizedW61,787 million of impairment losses since recoverable amount on Strip Casting facilities was less than their carrying amount for the year ended December 31, 2018.

(*3) Represents assets transferred fromconstruction-in-progress to intangible assets and other property, plant and equipment, assets transferred to investment property and others.

12. Intangible Assets, Net

Changes in the carrying amount of intangible assets for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For thesix-month period ended June 30, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Reversal of impairment		Transfer(*2)			Ending
Intellectual property rights	W	24,377		—		(485	)		(2,730	)		—		2,508			23,670
Membership(*1)		73,183		9,204		—			—			276		—			82,663
Development expense		91,758		749		—			(20,621	)		—		10,408			82,294
Port facilities usage rights		305,710		—		—			(11,567	)		—		—			294,143
Construction-in-progress		58,561		49,636		—			—			—		(9,058	)		99,139
Other intangible assets		91,633		432		(4,568	)		(3,508	)		—		—			83,989
	W	645,222		60,021		(5,053	)		(38,426	)		276		3,858			665,898

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

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

22

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) For the year ended December 31, 2018

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment(*2)			Transfer(*3)			Ending
Intellectual property rights	W	24,177		—		(401	)		(5,041	)		—			5,642			24,377
Membership(*1)		48,277		26,869		(573	)		—			(1,007	)		(383	)		73,183
Development expense		74,805		1,901		—			(33,997	)		—			49,049			91,758
Port facilities usage rights		310,039		—		—			(23,001	)		—			18,672			305,710
Construction-in-progress		55,292		59,257		—			—			—			(55,988	)		58,561
Other intangible assets		15,484		75,676		—			(7,062	)		(10	)		7,545			91,633
	W	528,074		163,703		(974	)		(69,101	)		(1,017	)		24,537			645,222

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

(*2) The Company has recognized an impairment loss on some intangible assets since the recoverable amounts were less than carrying amounts.

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

13. Other Assets

Other assets as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Advance payments	W	3,987		4,157
Prepaid expenses		44,079		19,385
Emission rights(*1)		25,395		—
	W	73,461		23,542
Non-current
Long-term prepaid expenses	W	4,965		5,089
Others(*2)		79,204		53,184
	W	84,169		58,273

(*1) The Company decided to sell emission rights, which determined to be restricted for use in the future period during thesix-month period ended June 30, 2019, and recognized such emission rights as other assets at fair value measured as of June 30, 2019.

(*2) As of June 30, 2019 and December 31, 2018, the Company recognized tax assets amounting toW76,139 million andW50,112 million based on the Company’s best estimate of the tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years tax audits and claim for rectification are finalized.

23

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

14. Borrowings

(a) Borrowings as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Short-term borrowings
Short-term borrowings	W	462,342			476,612
Current portion of long-term borrowings		—			375
Current portion of debentures		—			350,000
Less: Current portion of discount on debentures issued		—			(125	)
	W	462,342			826,862
Long-term borrowings
Long-term borrowings	W	1,180			1,141
Debentures		3,538,923			3,456,367
Less: Discount on debentures issued		(11,721	)		(13,400	)
	W	3,528,382			3,444,108

(b) Short-term borrowings as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Lenders		Issuance date		Maturity date		Annual interest rate (%)		June 30, 2019		December 31, 2018
Short-term borrowings		Korea Development Bank		2019.05.13		2019.08.13		2.14	W	300,000		300,000
Transfers of account receivables that do not qualify for derecognition		—		—		—		—		162,342		176,612
									W	462,342		476,612

(c) Current portion of long-term borrowings as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Lenders		Issuance date		Maturity date		Annual interest rate		June 30, 2019		December 31, 2018
Borrowings		—		—		—		—	W	—		375
Debentures		—		—		—		—		—		349,875
									W	—		350,250

(d) Long-term borrowings excluding current portion, as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Lenders	Issuance date	Maturity date	Annual Interest rate	June 30, 2019		December 31, 2018
Foreign borrowings	KOREA ENERGY AGENCY	2007.12.27~ 2008.12.29	2022.12.29	3 year Government bond	W	1,180		1,141
Debentures	Domestic debentures304-2 and others	2011.11.28~ 2018.07.05	2020.10.04~ 2023.10.04	1.88~4.12		1,178,042		1,177,704
Foreign debentures	Japan Yen private bond and others	2010.10.28~ 2018.08.01	2020.10.28~ 2023.08.01	2.70~5.25		2,349,160		2,265,263
					W	3,528,382		3,444,108

24

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

15. Other Payables

Other payables as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Accounts payable	W	450,129		590,424
Accrued expenses		458,955		434,379
Dividend payable		2,723		2,764
Lease liabilities(*1)		37,240		10,116
Withholdings		8,750		35,050
	W	957,797		1,072,733
Non-current
Long-term accrued expenses	W	726		10,964
Lease liabilities(*1)		213,188		131,646
Long-term withholdings		3,868		1,733
	W	217,782		144,343

(*1) As of June 30, 2019, the Company recognized lease liabilities ofW113,471 million on the initial application ofK-IFRS No. 1116 “Leases”.

16. Other Financial Liabilities

Other financial liabilities as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Financial guarantee liabilities	W	8,997		12,638
Non-current
Derivative liabilities	W	—		34,743
Financial guarantee liabilities		39,922		45,193
	W	39,922		79,936

25

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

17. Provisions

(a) Provisions as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019				December 31, 2018
	Current		Non-current		Current		Non-current
Provision for bonus payments(*1,2)	W	9,028		35,980		9,786		26,963
Provision for restoration(*3)		7,609		18,601		9,379		20,324
Provision for legal contingencies and claims(*4)		236		40,738		—		46,432
	W	16,873		95,319		19,165		93,719

(*1) Represents the provision for bonuses limited to 33~67% of annual salaries for executives.

(*2) The Company estimated the present value of estimated future cash payments about the long-term service reward, based on actuarial measurement.

(*3) Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery as provisions for restoration as of June 30, 2019. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied discount rates of 1.75~1.84% to assess present value of these costs.

(*4) The Company has recognized provisions for certain litigations and other contingencies as of June 30, 2019.

(b) Changes in provisions for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

1) For thesix-month period ended June 30, 2019

(in millions of Won)	Beginning		Increase		Reversal			Utilization			Transfer		Ending
Provision for bonus payments	W	36,749		8,924		—			(8,267	)		7,602		45,008
Provision for restoration		29,703		752		(236	)		(4,009	)		—		26,210
Provision for legal contingencies and claims		46,432		537		—			(5,995	)		—		40,974
	W	112,884		10,213		(236	)		(18,271	)		7,602		112,192

2) For the year ended December 31, 2018

(in millions of Won)	Beginning		Increase		Utilization			Ending
Provision for bonus payments	W	5,893		45,827		(14,971	)		36,749
Provision for restoration		29,471		9,097		(8,865	)		29,703
Provision for legal contingencies and claims		2,052		44,380		—			46,432
	W	37,416		99,304		(23,836	)		112,884

26

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

18. Employee Benefits

(a) Defined contribution plans

The expense related to post-employment benefit plans under defined contribution plans for the three-month and the six-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2019		2018		2019		2018
Expense related to post-employment benefit plans under defined contribution plans	W	8,515		7,682		17,621		14,967

(b) Defined benefit plans

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Present value of funded obligations	W	1,289,851			1,265,675
Fair value of plan assets		(1,249,256	)		(1,264,812	)
Net defined benefit liabilities	W	40,595			863

2) Changes in present value of defined benefit obligations for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Defined benefit obligation at the beginning of period	W	1,265,675			1,108,876
Current service costs		60,139			111,033
Interest costs		15,783			33,757
Remeasurement(*1)		—			132,868
Transfer-in		—			241
Reclassification to liabilities directly related to assets held for sale		(2,825	)		—
Benefits paid		(48,921	)		(121,100	)
Defined benefit obligation at the end of period	W	1,289,851			1,265,675

(*1) The Company do not remeasure the defined benefit plans for the purpose of interim reporting, and there are no remeasurements of the defined benefit plans.

27

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

3) Changes in the fair value of plan assets for thesix-month period ended June 30, 2019 and the year ended December 31, 2018 were as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Fair value of plan assets at the beginning of period	W	1,264,812			1,108,833
Interest on plan assets		16,173			33,756
Remeasurement of plan assets		(2,595	)		(13,416	)
Contributions to plan assets		—			240,440
Business combination		353			—
Benefits paid		(29,487	)		(104,801	)
Fair value of plan assets at the end of period	W	1,249,256			1,264,812

4) The amounts recognized in the statements of comprehensive income for the three-month and thesix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30					For thesix-month periods ended June 30
	2019			2018		2019			2018
Current service costs	W	28,775			27,704		60,139			57,115
Net interest costs		(195	)		464		(390	)		1
	W	28,580			28,168		59,749			57,116

19. Other Liabilities

Other liabilities as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Current
Advances received	W	7,705		9,902
Withholdings		24,905		25,034
Unearned revenue		27,138		19,870
	W	59,748		54,806
Non-current
Unearned revenue	W	9,946		15,264

28

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

20. Financial Instruments

(a) Classification and fair value of financial instruments

1) The carrying amount and the fair values of financial assets and financial liabilities by fair value hierarchy as of June 30, 2019 and December 31, 2018 are as follows:

① June 30, 2019

			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets held for trading	W	64,814		—		64,814		—		64,814
Short-term financial instruments		5,020,816		—		5,020,816		—		5,020,816
Debt securities		8,050		—		—		8,050		8,050
Other marketable securities		60,001		—		—		60,001		60,001
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		1,134,440		849,552		—		284,888		1,134,440
Debt securities		1,647		—		—		1,647		1,647
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		556,441		—		—		—		—
Trade accounts and notes receivable		4,283,008		—		—		—		—
Debt securities		235,000		—		—		—		—
Other receivables		200,015		—		—		—		—
Cash deposits		1,297,415		—		—		—		—
	W	12,863,647		849,552		5,085,630		356,586		6,291,768
Financial liabilities
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable	W	1,072,946		—		—		—		—
Borrowings		3,990,724		—		4,173,621		—		4,173,621
Financial guarantee liabilities		48,919		—		—		—		—
Others		1,132,834		—		—		—		—
	W	6,245,423		—		4,173,621		—		4,173,621

(*1) Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates carrying amounts.

② December 31, 2018

			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets held for trading	W	1,265		—		1,265		—		1,265
Short-term financial instruments		5,776,407		—		5,776,407		—		5,776,407
Debt securities		8,050		—		—		8,050		8,050
Other marketable securities		61,701		—		—		61,701		61,701
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		1,104,092		874,772		—		229,320		1,104,092
Debt securities		1,638		—		—		1,638		1,638
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		259,219		—		—		—		—
Trade accounts and notes receivable		3,967,091		—		—		—		—
Other receivables		158,256		—		—		—		—
Cash deposits		1,248,747		—		—		—		—
	W	12,588,466		874,772		5,777,672		302,709		6,955,153
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	34,743		—		34,743		—		34,743
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		1,106,226		—		—		—		—
Borrowings		4,270,970		—		4,398,178		—		4,398,178
Financial guarantee liabilities		57,831		—		—		—		—
Others		1,206,529		—		—		—		—
	W	6,676,299		—		4,432,921		—		4,432,921

(*1) Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates carrying amounts.

29

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) Financial liabilities were recognized in connection with financial guarantee contracts as of June 30, 2019. The details of the amount of guarantees provided are as follows:

(in millions of Won)		Guarantee limit				Guarantee amount
Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent		Foreign currency		Won equivalent
POSCO Maharashtra	Export-Import Bank of Korea	USD	180,000,000		208,224		18,000,000		20,822
Steel Private Limited	HSBC	USD	80,000,000		92,544		8,000,000		9,254
	DBS	USD	100,000,000		115,680		10,000,000		11,568
	SCB	USD	66,853,000		77,335		37,090,900		42,906
	ING	USD	50,000,000		57,840		50,000,000		57,840
	Citi	USD	30,000,000		34,704		3,000,000		3,470
POSCO ASSAN TST	SMBC	USD	62,527,500		72,332		56,274,750		65,099
STEEL INDUSTRY	ING	USD	60,000,000		69,408		54,000,000		62,467
	BNP	USD	24,000,000		27,763		21,600,000		24,987
POSCO Asia Co., Ltd.	BOC	USD	50,000,000		57,840		50,000,000		57,840
	Credit Agricole	USD	50,000,000		57,840		50,000,000		57,840
POSCO MEXICO S.A. DE C.V	SMBC	USD	40,000,000		46,272		40,000,000		46,272
	CITI BANAMEX	USD	40,000,000		46,272		40,000,000		46,272
	BOA	USD	30,000,000		34,704		30,000,000		34,704
	BTMU	USD	30,000,000		34,704		30,000,000		34,704
	ING	USD	20,000,000		23,136		20,000,000		23,136
POSCO SS VINA Co., Ltd.	HSBC	USD	100,000,000		115,680		100,000,000		115,680
	ANZ	USD	100,000,000		115,680		100,000,000		115,680
	Credit Agricole	USD	50,000,000		57,840		50,000,000		57,840
	SMBC	USD	48,000,000		55,526		48,000,000		55,526
	Export-Import Bank of Korea	USD	1,941,250		2,246		1,663,928		1,925
POSCO-VIETNAM Co., Ltd.	SMBC	USD	50,000,000		57,840		50,000,000		57,840
	Credit Agricole	USD	40,000,000		46,272		40,000,000		46,272
	BTMU	USD	26,000,000		30,077		26,000,000		30,077
	Citi	USD	20,000,000		23,136		20,000,000		23,136
	MIZUHO	USD	20,000,000		23,136		20,000,000		23,136
PT. KRAKATAU POSCO	Export-Import Bank of Korea	USD	567,000,000		655,906		429,312,942		496,629
	SMBC	USD	140,000,000		161,952		106,165,348		122,812
	BTMU	USD	119,000,000		137,659		88,784,348		102,706
	SCB	USD	107,800,000		124,703		82,141,348		95,021
	MIZUHO	USD	105,000,000		121,464		78,339,130		90,623
	Credit Suisse AG	USD	91,000,000		105,269		67,893,913		78,540
	HSBC	USD	91,000,000		105,269		67,893,913		78,540
	ANZ	USD	73,500,000		85,025		56,550,565		65,417
	BOA	USD	35,000,000		40,488		26,113,043		30,208
	The Tokyo Star Bank, Ltd	USD	21,000,000		24,293		15,667,826		18,125
POSCO COATED STEEL (THAILAND) CO., LTD.	The Great & Co.	THB	5,501,000,000		206,618		5,501,000,000		206,618
LLP POSUK Titanium	SMBC	USD	15,000,000		17,352		15,000,000		17,352
CSP - Compania	Export-Import Bank of Korea	USD	182,000,000		210,538		164,019,493		189,738
Siderurgica do Pecem	Santander	USD	47,600,000		55,064		42,194,220		48,810
	BNP	USD	47,600,000		55,064		42,194,220		48,810
	MIZUHO	USD	47,600,000		55,064		42,194,220		48,810
	Credit Agricole	USD	20,000,000		23,136		17,728,671		20,509
	SOCIETE GENERALE	USD	20,000,000		23,136		17,728,671		20,509
	KfW	USD	20,000,000		23,136		17,728,671		20,509
	BBVA Seoul	USD	17,600,000		20,360		15,601,214		18,047
	ING	USD	17,600,000		20,360		15,601,214		18,047
	BNDES	BRL	464,060,000		140,550		464,060,000		140,550
Nickel Mining Company SAS	SMBC	EUR	46,000,000		60,495		46,000,000		60,495
		USD	3,154,621,750		3,649,269		2,382,482,548		2,756,055
		EUR	46,000,000		60,495		46,000,000		60,495
		THB	5,501,000,000		206,618		5,501,000,000		206,618
		BRL	464,060,000		140,550		464,060,000		140,550

30

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

3) Finance income and costs by category of financial instrument for thesix-month periods ended June 30, 2019 and 2018 were as follows:

① For thesix-month period ended June 30, 2019

(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	64,673			—		—			461		68,545		—		133,679			—
Financial assets at fair value through other comprehensive income		—			41,088		—			—		—		—		41,088			25,590
Financial assets measured at amortized cost		16,948			—		84,249			—		—		—		101,197			—
Financial liabilities at fair value through profit or loss		—			—		—			19		34,744		—		34,763			—
Financial liabilities measured at amortized cost		(73,589	)		—		(122,843	)		—		—		4,666		(191,766	)		—
	W	8,032			41,088		(38,594	)		480		103,289		4,666		118,961			25,590

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW187,941 million for thesix-month period ended June 30, 2019.

② For thesix-month period ended June 30, 2018

(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	64,638			—		—			989		11,044		—		76,671			—
Financial assets at fair value through other comprehensive income		—			67,891		—			—		—		—		67,891			(56,278	)
Financial assets measured at amortized cost		9,036			—		37,515			—		—		—		46,551			—
Financial liabilities at fair value through profit or loss		—			—		—			—		40,937		—		40,937			—
Financial liabilities measured at amortized cost		(63,621	)		—		(130,417	)		—		—		4,242		(189,796	)		—
	W	10,053			67,891		(92,902	)		989		51,981		4,242		42,254			(56,278	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW91,229 million for thesix-month period ended June 30, 2018.

4) Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2019 and 2018 were as follows:

① For the three-month period ended June 30, 2019

(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	31,220			—		—			461		17,190		—		48,871			—
Financial assets at fair value through other comprehensive income		—			13,301		—			—		—		—		13,301			37,713
Financial assets measured at amortized cost		9,415			—		33,449			—		—		—		42,864			—
Financial liabilities at fair value through profit or loss		—			—		—			—		31,109		—		31,109			—
Financial liabilities measured at amortized cost		(36,677	)		—		(64,875	)		—		—		2,356		(99,196	)		—
	W	3,958			13,301		(31,426	)		461		48,299		2,356		36,949			37,713

31

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW88,506 million for the three-month period ended June 30, 2019.

② For the three-month period ended June 30, 2018

(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Impairment loss		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	32,598			—		—			989		2,222		—		35,809			—
Financial assets at fair value through other comprehensive income		—			42,128		—			—		—		—		42,128			(16,126	)
Financial assets measured at amortized cost		5,406			—		35,497			—		—		—		40,903			—
Financial liabilities at fair value through profit or loss		—			—		—			—		54,865		—		54,865			—
Financial liabilities measured at amortized cost		(33,260	)		—		(114,385	)		—		—		1,532		(146,113	)		—
	W	4,744			42,128		(78,888	)		989		57,087		1,532		27,592			(16,126	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW15,683 million for the three-month period ended June 30, 2018.

(b) 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, 2018.

21. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2019 and December 31, 2018 are as follows:

(in Won, except per share information)	June 30, 2019		December 31, 2018
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Shared capital(*2)	W	482,403,125,000		482,403,125,000

(*1) As of June 30, 2019, total number of ADRs of 34,955,408 are equivalent to 8,738,852 shares of common stock.

(*2) As of June 30, 2019, the difference between the ending balance and the par value of issued common stock isW46,469 million due to retirement of 9,293,790 treasury stocks.

32

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) Capital surplus as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Share premium	W	463,825			463,825
Gain on disposal of treasury shares		796,623			784,047
Loss from merger		317,180			(91,310	)
Loss on disposals of hybrid bonds		(11,787	)		(1,787	)
	W	1,575,841			1,154,775

22. Hybrid Bonds

Hybrid bonds classified as equity as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)
	Date of issue		Date of maturity		Rate of Interest (%)		June 30, 2019			December 31, 2018
Hybrid bond1-2(*1)		2013-06-13		2043-06-13		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)
							W	199,384			199,384

(*1) Details of hybrid bonds as of June 30, 2019 are as follows:

	Hybrid bond1-2
Maturity date	30 years (The Company has a right to extend the maturity date)
Interest rate	Issue date ~2023-06-12 : 4.60% Reset every 10 years as follows;
	•    After 10 years : return on government bond (10 years) + 1.40% •    After 10 years : additionally + 0.25% according toStep-up clauses •    After 30 years : additionally + 0.75%
Interest payments condition	Quarterly (Optional deferral of interest payment is available to the Company)
Others	The Company can call the hybrid bond at year 10 and interest payment date afterwards

The interest accumulated but not paid on the hybrid bonds as of June 30, 2019 amounts toW454 million.

33

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

23. Reserves

Reserves as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019			December 31, 2018
Changes in fair value of equity investments at fair value through other comprehensive income	W	(175,599	)		(207,191	)

24. Treasury Shares

As of June 30, 2019, the Company holds 7,071,194 shares of treasury stock for price stabilization and others in accordance with the Board of Director’s resolution.

25. Revenue

(a) Details of revenue disaggregated by types of revenue and timing of revenue recognitionfor the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For thesix-month periods ended June 30
	2019		2018		2019		2018
Types of revenue
Sales of steel product	W	7,221,131		7,471,128		14,771,099		15,003,744
Transportation services		193,164		172,629		389,835		345,284
Others		61,559		61,088		131,391		116,707
	W	7,475,854		7,704,845		15,292,325		15,465,735
Timing of revenue recognition
Revenue recognized at a point in time	W	7,264,321		7,516,739		14,866,745		15,091,782
Revenue recognized over time		211,533		188,106		425,580		373,953
	W	7,475,854		7,704,845		15,292,325		15,465,735

(b) Contract assets and liabilities

Details of contract assets and liabilities from contracts with customers as of June 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	June 30, 2019		December 31, 2018
Receivables
Account receivables	W	4,283,007		3,967,091
Contract assets
Account receivables		4,742		8,954
Contract liabilities
Advance received		7,705		9,902
Unearned income		37,084		34,480

34

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

26. Selling and Administrative Expenses

(a) Other administrative expenses

Other administrative expenses for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month period ended June 30				For the six-month period ended June 30
	2019		2018		2019		2018
Wages and salaries	W	56,073		57,080		113,307		125,015
Expenses related to post-employment benefits		5,906		6,274		15,193		15,851
Other employee benefits		13,167		17,060		26,493		32,380
Travel		3,780		3,337		6,814		5,965
Depreciation		6,451		3,661		12,928		7,496
Amortization		9,144		7,342		18,288		14,340
Rental		9,509		12,955		18,452		26,176
Repairs		3,345		4,628		5,817		7,686
Advertising		19,263		24,341		32,902		50,291
Research & development		19,267		17,853		42,276		34,280
Service fees		41,147		44,341		82,727		84,522
Supplies expense		585		192		3,091		1,103
Vehicles maintenance		1,816		2,244		3,117		2,269
Industry association fee		908		1,380		2,631		3,154
Training		6,228		6,076		11,763		10,143
Conference		1,496		1,304		2,991		2,628
Others		11,525		13,133		17,640		20,185
	W	209,610		223,201		416,430		443,484

(b) Selling expenses

Selling expenses for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2019		2018		2019		2018
Freight and custody expenses (*1)	W	29,976		30,459		63,685		62,853
Operating expenses for distribution center		2,387		2,447		4,743		4,847
Sales commissions		21,865		15,902		37,431		31,490
Sales advertising		489		374		621		829
Sales promotion		1,257		1,375		2,261		2,425
Sample		331		356		545		759
Sales insurance premium		1,590		861		2,897		1,935
	W	57,895		51,774		112,183		105,138

(*1) The Company identified the shipping services included in the contract with customers as a separate performance obligations, and as of December 31, 2018, expenses incurred for the delivery of shipping services had been reclassified from selling expenses to cost of sales. Meanwhile, in order to compare financial statements ended June 30, 2019 to ended June 30, 2018, the company reclassifiedW356,435 million of expense of shipping service to cost of sales for thesix-month period ended June 30, 2018. This reclassification does not affect the amount of net assets for the year ended December 31, 2018, and net income for thesix-month period ended June 30, 2018.

35

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

27. Finance Income and Costs

Details of finance income and costs for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2019		2018			2019		2018
Finance income
Interest income(*1)	W	40,635		38,004			81,621		73,674
Dividend income		101,807		57,811			229,029		159,120
Gain on foreign currency transactions		83,938		35,297			118,877		85,403
Gain on foreign currency translations		3,276		29,045			35,939		44,086
Gain on valuation of derivatives		48,316		34,594			102,788		53,048
Others		3,513		3,016			6,940		6,101
	W	281,485		197,767			575,194		421,432
Finance costs
Interest expenses	W	36,677		33,260			73,589		63,621
Loss on foreign currency transactions		60,011		61,146			89,805		91,379
Loss on foreign currency translations		58,629		82,084			103,605		131,012
Loss on valuation of derivatives		—		(23,560	)		—		—
Others		712		1,562			1,293		1,937
	W	156,029		154,492			268,292		287,949

(*1) Interest income calculated using the effective interest method for thesix-month period ended June 30, 2019 and 2018 wereW16,948 million andW9,036 million, respectively.

28. OtherNon-Operating Income and Expenses

Details of othernon-operating income and expenses for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month period ended June 30				For the six-month period ended June 30
	2019		2018		2019		2018
Othernon-operating income
Gain on disposals of property, plant and equipment	W	3,196		16,824		14,685		20,402
Gain on disposals of intangible assets		1,011		70,761		1,011		99,361
Gain on valuation of emission rights		25,440		—		25,440		—
Others(*1)		6,268		49,265		15,704		61,451
	W	35,915		136,850		56,840		181,214
Othernon-operating expenses
Loss on disposals of property, plant and equipment	W	25,422		46,985		38,537		60,528
Impairment loss on property, plant and equipment		88,681		—		161,496		16,264
Impairment loss on investment in subsidiaries, associates and joint ventures		3,987		—		10,422		34,207
Donations		1,000		7,429		8,400		21,750
Others(*2)		20,956		158,670		33,839		181,021
	W	140,046		213,084		252,694		313,770

(*1) During thesix-month period ended June 30, 2018, the Company recognizedW41,137 million of tax refund without corporate tax due to the consequences of appeal to tax tribunal against tax investigation asnon-operating income.

(*2) During thesix-month period ended June 30, 2018, the Company recognizedW161,772 million of additional taxes imposed on value added tax related to imported LNG asnon-operating expense.

36

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

29. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and othernon-operating expenses in the statements of comprehensive income for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows (excluding finance costs and income tax expenses):

(in millions of Won)	For the three-month period ended June 30					For thesix-month period ended June 30
	2019			2018		2019		2018
Changes in inventories(*1)	W	(217,026	)		2,474		1,681		182,988
Raw materials and consumables used		4,606,866			4,384,602		9,018,589		8,501,867
Employee benefits expenses		436,959			412,750		868,661		902,190
Outsourced processing cost		628,682			586,774		1,227,096		1,173,122
Depreciation(*2)		533,300			526,220		1,071,915		1,049,906
Amortization		19,336			16,638		38,426		32,857
Electricity and water expenses		135,567			167,327		288,587		335,648
Service fees		63,620			66,079		124,861		124,188
Rental		13,481			17,174		26,569		37,426
Advertising		19,263			24,341		32,902		50,291
Freight and custody expenses		212,431			207,449		440,291		419,288
Sales commissions		21,865			15,902		37,431		31,490
Loss on disposals of property, plant and equipment		25,422			46,985		38,537		60,528
Impairment loss on property, plant and equipment		88,681			—		161,496		16,264
Impairment loss on investments in subsidiaries, associates and joint ventures		3,987			—		10,422		34,207
Other expenses		299,332			621,532		601,086		992,550
	W	6,891,766			7,096,247		13,988,550		13,944,810

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

(*2) Includes depreciation of investment property.

30. Income Taxes

The effective tax rates of the Company for thesix-month periods ended June 30, 2019 and 2018 were 27.05% and 26.76%, respectively.

37

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

31. Earnings per Share

Basic and diluted earnings per share for the three-month andsix-month periods ended June 30, 2019 and 2018 were as follows:

(in Won, except share information)	For the three-month periods ended June 30						For thesix-month periods ended June 30
	2019			2018			2019			2018
Profit for the period	W	545,381,748,420			580,290,733,901			1,216,554,712,849			1,349,027,466,410
Interests of hybrid bonds, net of tax		(1,662,931,506	)		(6,650,931,505	)		(3,307,589,040	)		(14,358,575,340	)
Weighted-average number of common shares outstanding(*1)		80,115,641			80,000,630			80,111,845			80,000,147
Basic and diluted earnings per share	W	6,787			7,170			15,144			16,683

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

(in share)	For the three-month periods ended June 30						For thesix-month periods ended June 30
	2019			2018			2019			2018
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,071,194	)		(7,186,205	)		(7,074,990	)		(7,186,688	)
Weighted-average number of common shares outstanding		80,115,641			80,000,630			80,111,845			80,000,147

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2019 and 2018, diluted earnings per share is equal to basic earnings per share.

38

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

32. Related Party Transactions

(a) Significant transactions with related companies for thesix-month periods ended June 30, 2019 and 2018 were as follows:

1) For thesix-month period ended June 30, 2019

(in millions of Won)	Sales and others(*1)				Purchase and others(*2)
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries(*3)
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	3,608		11,089		—		139,349		21		5,233
POSCO COATED & COLOR STEEL Co., Ltd.		233,408		1,707		—		—		7,684		491
POSCO ICT(*4)		1,509		4,989		—		148,817		17,055		88,838
eNtoB Corporation		7		60		159,576		16,936		59		13,431
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		197,793		25,129		255,299		7,578		156,383		2,010
POSCO ENERGY CO., LTD.		106,602		624		—		—		—		62
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		2,841,376		46,572		330,044		—		26,037		2,569
POSCO Thainox Public Company Limited		120,032		13,675		3,733		—		—		3
POSCO America Corporation		184,517		—		—		—		—		39
POSCO Canada Ltd.		340		604		151,892		—		—		—
POSCO Asia Co., Ltd.		861,771		585		248,431		—		987		2,796
Qingdao Pohang Stainless Steel Co., Ltd.		59,410		—		—		—		—		—
POSCO JAPAN Co., Ltd.		756,357		—		21,553		3,021		—		1,487
POSCO-VIETNAM Co., Ltd.		141,535		181		—		—		—		37
POSCO MEXICO S.A. DE C.V.		153,766		31		—		—		—		5
POSCO Maharashtra Steel Private Limited		333,608		187		—		—		—		256
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		43,313		—		1,481		—		—		—
POSCO VST CO., LTD.		137,025		—		—		—		—		62
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		180		322,210		—		—		—
Others		425,315		14,560		81,055		10,572		133,582		60,791
		6,601,292		120,173		1,575,274		326,273		341,808		178,110
Associates and joint ventures(*3)
POSCO PLANTEC Co., Ltd.		183		65		1,399		110,614		9,326		9,362
SNNC		2,747		3,380		244,626		—		—		10
POSCO-SAMSUNG-Slovakia Processing Center		31,764		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		482,848		—		—		—
Others		6,985		86,037		27,127		—		—		—
		41,679		89,482		756,000		110,614		9,326		9,372
	W	6,642,971		209,655		2,331,274		436,887		351,134		187,482

(*1) Sales and others are mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2) Purchases and others are mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3) As of June 30, 2019, the Company provided guarantees to related companies (Note 20).

(*4) Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

39

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For thesix-month period ended June 30, 2018

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,967		63		—		139,725		9		23,205
POSCO COATED & COLOR STEEL Co., Ltd.		227,199		2,724		—		—		4,218		664
POSCO ICT		1,319		7,475		—		137,368		16,173		95,168
eNtoB Corporation		5		60		175,914		8,347		58		12,292
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		200,582		23,081		259,624		15,978		155,550		601
POSCO ENERGY CO., LTD.		95,908		702		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		2,892,020		38,859		343,617		—		29,378		675
POSCO Thainox Public Company Limited		140,624		5,249		5,452		—		—		—
POSCO America Corporation		135,136		—		—		—		—		947
POSCO Canada Ltd.		190		882		128,164		—		—		—
POSCO Asia Co., Ltd.		951,799		162		236,375		535		1,325		1,884
Qingdao Pohang Stainless Steel Co., Ltd.		87,177		7		—		—		—		5
POSCO JAPAN Co., Ltd.		693,432		6		11,717		1,709		—		1,493
POSCO-VIETNAM Co., Ltd.		163,916		21		—		—		—		8
POSCO MEXICO S.A. DE C.V.		146,389		37		—		—		—		—
POSCO Maharashtra Steel Private Limited		268,909		349		—		—		—		86
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		112,256		—		—		—		—		5
POSCO VST CO., LTD.		150,076		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		43		100,242		—		—		—
Others		428,778		20,497		45,384		11,014		128,471		62,924
		6,700,682		100,217		1,306,489		314,676		335,182		199,957
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		5,268		108		1,632		75,575		10,509		4,783
SNNC		2,467		602		243,010		—		—		5
POSCO-SAMSUNG-Slovakia Processing Center		28,513		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		408,815		—		—		—
Others		5,107		45,128		35,823		—		—		5
		41,355		45,838		689,280		75,575		10,509		4,793
	W	6,742,037		146,055		1,995,769		390,251		345,691		204,750

(b) Significant transactions with related companies for the three-month periods ended June 30, 2019 and 2018 were as follows:

1) For the three-month period ended June 30, 2019

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	2,198		16		—		72,852		—		2,519
POSCO COATED & COLOR STEEL Co., Ltd.		116,211		1		—		—		5,315		119
POSCO ICT		729		—		—		87,989		8,498		42,677
eNtoB Corporation		3		—		81,080		10,952		33		7,907
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		93,869		5,799		124,303		5,513		78,253		1,881
POSCO ENERGY CO., LTD.		49,714		310		—		—		—		42
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,423,768		1		154,881		—		13,381		1,629
POSCO Thainox Public Company Limited		54,928		13,616		2,063		—		—		—
POSCO America Corporation		89,516		—		—		—		—		21
POSCO Canada Ltd.		340		529		75,279		—		—		—
POSCO Asia Co., Ltd.		445,133		498		100,397		—		429		2,235
Qingdao Pohang Stainless Steel Co., Ltd.		5,363		—		—		—		—		—
POSCO JAPAN Co., Ltd.		350,682		—		12,033		707		—		853
POSCO-VIETNAM Co., Ltd.		66,995		96		—		—		—		—
POSCO MEXICO S.A. DE C.V.		75,553		17		—		—		—		—
POSCO Maharashtra Steel Private Limited		142,945		92		—		—		—		256
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,309		—		957		—		—		—
POSCO VST CO., LTD.		58,204		—		—		—		—		19
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		41		198,168		—		—		—
Others		204,728		3,439		25,317		4,790		66,424		34,354
		3,206,188		24,455		774,478		182,803		172,333		94,512
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		67		5		648		59,868		4,411		6,651
SNNC		1,399		1,100		128,978		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		7,901		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		280,820		—		—		—
Others		2,993		74,784		13,962		—		—		—
		12,360		75,889		424,408		59,868		4,411		6,651
	W	3,218,548		100,344		1,198,886		242,671		176,744		101,163

40

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) For the three-month period ended June 30, 2018

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,205		10		—		81,019		—		13,917
POSCO COATED & COLOR STEEL Co., Ltd.		116,447		164		—		—		2,626		475
POSCO ICT		671		1		—		66,547		8,086		46,321
eNtoB Corporation		4		—		90,057		5,001		13		6,479
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		102,349		5,406		127,033		10,291		78,268		453
POSCO ENERGY CO., LTD.		43,813		333		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,429,416		7		155,339		—		15,483		353
POSCO Thainox Public Company Limited		74,649		5,249		2,255		—		—		—
POSCO America Corporation		71,770		—		—		—		—		61
POSCO Canada Ltd.		190		564		58,158		—		—		—
POSCO Asia Co., Ltd.		455,936		21		148,374		232		423		1,012
Qingdao Pohang Stainless Steel Co., Ltd.		43,146		—		—		—		—		—
POSCO JAPAN Co., Ltd.		343,676		6		5,743		984		—		499
POSCO-VIETNAM Co., Ltd.		75,630		8		—		—		—		—
POSCO MEXICO S.A. DE C.V.		81,299		20		—		—		—		—
POSCO Maharashtra Steel Private Limited		134,136		140		—		—		—		56
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		45,102		—		—		—		—		—
POSCO VST CO., LTD.		77,396		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		34		63,389		—		—		—
Others		201,613		12,578		22,869		5,843		63,203		35,253
		3,301,448		24,541		673,217		169,917		168,102		104,879
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		4,932		28		718		47,532		4,751		2,635
SNNC		1,259		180		109,397		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		10,275		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		217,358		—		—		—
Others		2,388		35,397		18,845		—		—		—
		18,854		35,605		346,318		47,532		4,751		2,635
	W	3,320,302		60,146		1,019,535		217,449		172,853		107,514

(c) The related account balances of significant transactions with related companies as of June 30, 2019 and December 31, 2018 are as follows:

1) June 30, 2019

(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	1		3,387		3,388		—		30,793		431		31,224
POSCO COATED & COLOR STEEL Co., Ltd.		55,363		190		55,553		—		5		2,878		2,883
POSCO ICT		—		111		111		1,117		65,547		41,116		107,780
eNtoB Corporation		—		—		—		7,022		36,011		—		43,033
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		61,753		3,858		65,611		17,126		52,799		18,134		88,059
POSCO ENERGY CO., LTD.		32,190		1,272		33,462		—		—		1,425		1,425
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		561,369		27		561,396		2,089		2,089		4,942		9,120
POSCO Thainox Public Company Limited		66,865		290		67,155		—		—		—		—
POSCO America Corporation		18,228		—		18,228		—		—		—		—
POSCO Asia Co., Ltd.		475,451		1,314		476,765		7,957		10		—		7,967
Qingdao Pohang Stainless Steel Co., Ltd.		21,694		—		21,694		—		—		—		—
POSCO MEXICO S.A. DE C.V.		101,314		535		101,849		—		—		—		—
POSCO Maharashtra Steel Private Limited		327,848		1,419		329,267		—		—		—		—
Others(*1)		387,693		43,132		430,825		57,212		24,441		88,395		170,048
		2,109,769		55,535		2,165,304		92,523		211,695		157,321		461,539
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		—		2		2		1,427		13,257		—		14,684
SNNC		534		214		748		14,994		—		—		14,994
Roy Hill Holdings Pty Ltd		—		—		—		27,159		—		—		27,159
Others		368		38,314		38,682		80		76		—		156
		902		38,530		39,432		43,660		13,333		—		56,993
	W	2,110,671		94,065		2,204,736		136,183		225,028		157,321		518,532

(*1) During the year ended December 31, 2018, the Company made loans ofW2,950 million to Suncheon Eco Trans Co., Ltd., a subsidiary of the Company. As of June 30, 2019, corresponding amounts of those loans were recorded as allowance for doubtful accounts.

41

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

2) December 31, 2018

(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	57		5,181		5,238		—		52,775		438		53,213
POSCO COATED & COLOR STEEL Co., Ltd.		55,598		317		55,915		—		25		1,194		1,219
POSCO ICT		—		229		229		1,572		112,960		8,717		123,249
eNtoB Corporation		—		—		—		10,860		22,072		11		32,943
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		40,258		3,883		44,141		19,911		58,725		19,012		97,648
POSCO ENERGY CO., LTD.		22,163		1,700		23,863		—		—		1,425		1,425
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		437,554		1,056		438,610		161		1,881		5,304		7,346
POSCO Thainox Public Company Limited		71,189		—		71,189		467		71		—		538
POSCO America Corporation		14,338		—		14,338		—		221		—		221
POSCO Asia Co., Ltd.		480,205		1,047		481,252		7,839		—		—		7,839
Qingdao Pohang Stainless Steel Co., Ltd.		52,037		—		52,037		—		—		—		—
POSCO MEXICO S.A. DE C.V.		101,179		218		101,397		—		—		—		—
POSCO Maharashtra Steel Private Limited		390,413		1,428		391,841		—		—		—		—
Others		379,950		54,407		434,357		33,183		36,591		85,745		155,519
		2,044,941		69,466		2,114,407		73,993		285,321		121,846		481,160
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		249		10		259		3,275		34,803		—		38,078
SNNC		541		61		602		22,188		—		—		22,188
Roy Hill Holdings Pty Ltd		—		—		—		22,997		—		—		22,997
Others		918		910		1,828		217		76		—		293
		1,708		981		2,689		48,677		34,879		—		83,556
	W	2,046,649		70,447		2,117,096		122,670		320,200		121,846		564,716

(d) For thesix-month periods ended June 30, 2019 and 2018, details of compensation to key management officers were as follows:

(in millions of Won)	June 30, 2019		June 30, 2018
Short-term benefits	W	23,896		23,674
Long-term benefits		3,123		2,769
Retirement benefits		6,173		7,753
	W	33,192		34,196

Key management officers include directors (includingnon-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

33. Commitments and Contingencies

(a) Commitments

1) 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, 2019, 79 million tons of iron ore and 13 million tons of coal remained to be purchased under such long-term contracts.

2) 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.

3) The Company entered into consecutive voyage charter (CVC) contract for transportation of raw materials. As of June 30, 2019, there are 39 vessels under contract and the average remaining contract period is about 10 years.

42

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

4) As of June 30, 2019, the Company entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowing, which is limited up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowing depends on the success of the project. The Company is not liable for the repayment of full or part of the money borrowed if the respective project 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, 2019, the ending balance of the borrowing amounts to USD 1.02 million.

5) The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO ENERGY CO., LTD.

6) The Company provides a supplementary fund of up toW9.8 billion to the Company’s subsidiary, Busan E&E Co,. Ltd., at the request of creditors such as the Korea Development Bank.

7) The company provides a supplementary funding for the purpose of promoting the Suncheon Bay PRT business of Suncheon Eco Trans Co., Ltd., a subsidiary of the Company, at the request of creditors. On November 2018, creditors sued the Company for subrogation based on a supplemental funding agreement.

(b) As of June 30, 2019, the Company has provided three blank checks to KOREA ENERGY AGENCY as collateral for long-term foreign currency borrowings.

(c) Litigation in progress

The Company is involved in 27 lawsuits, including claim for employee right aggregating toW170.1 billion as defendant as of June 30, 2019, which arise from the ordinary course of business. The Company has recognized provisions amounting toW2.1 billion for one of 27 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company does not believe it has a present obligation as of June 30, 2019.

43

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for thesix-month periods ended June 30, 2019 and 2018 were as follows:

(in millions of Won)	June 30, 2019			June 30, 2018
Trade accounts and notes receivable, net	W	(307,715	)		(521,816	)
Other accounts receivable		(25,342	)		(27,098	)
Inventories		(139,320	)		84,623
Prepaid expenses		(24,988	)		(19,337	)
Other current assets		152			641
Long-term guarantee deposits		58			199
Othernon-current assets		548			(637	)
Trade accounts and notes payable		(25,513	)		(135,941	)
Other accounts payable		(92,763	)		(24,558	)
Accrued expenses		22,413			14,514
Advances received		82			7,383
Withholdings		(251	)		(618	)
Unearned revenue		2,876			3,744
Other current liabilities		(4,835	)		8,952
Payments of severance benefits		(48,921	)		(86,346	)
Plan assets		29,487			24,870
Othernon-current liabilities		(4,511	)		(2	)
	W	(618,543)			(671,427	)

35. Business combination

(a) Overview of the business combination

The Company merged with POSCO Processing&Service for thesix-month period ended June 30, 2019. The purpose of the business combination is to promote management rationalization by streamlining fund management and operations of POSCO Processing&Service and subsidiaries, and enhancing shareholder value based on merger synergies.

	Date
Decision date of Board of Directors		2018.11.03
Acquisition date		2019.01.01

44

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2019

(Unaudited)

(b) Accounting policies for business combinations

Since the merger between the controlling company and its subsidiaries, the assets acquired and liabilities assumed through the merger are measured at book value in the consolidated financial statements of the Company. The difference between considerations transferred and the book value of net assets recognized is reflected in capital surplus.

(in millions of Won)	Amount
Transfer price
Book value of existing ownership interest	W	385,995
Treasury stock		37,001
Cash		36
		423,032
Identifiable assets, acquired liabilities
Cash and cash equivalents		2,207
Other financial assets		39,670
Investment properties		41,220
Investments in subsidiaries, associates and joint ventures		740,211
Other assets		9,962
Other liabilities		(1,748	)
Identifiable net assets		831,522
Capital surplus arising from business combination
Increase in capital surplus	W	408,490

36. Events after the reporting period

(a) Pursuant to the resolution of the Board of Directors on July 29, 2019, the Company decided to pay interim cash dividends ofW2,000 per common share (total dividend:W160.2 billion).

(b) On July 17, 2019, the Company issued unguaranteed bond309-1,309-2 and309-3 with issue price ofW200,000 million,W130,000 million andW170,000 million, respectively. Maturity of the bonds is July 17, 2022 and July 17, 2024 and July 17, 2026, respectively. Also, the Company issued anon-guaranteed senior dollar bond with issue price of USD 500 million on July 15, 2019. Maturity of the bond is July 15, 2024.

45