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 December, 2019

Commission File Number:1-13368

POSCO

(Translation of registrant’s name into English)

POSCO Center, 440Teheran-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 Quarterly 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: December 6, 2019	By	/s/ Lim,Seung-Kyu
		(Signature)
		Name :  Lim,Seung-Kyu
		Title :  Executive Vice President

Exhibit 99.1

QUARTERLY REPORT

(From January 1, 2019 to September 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.

QUARTERLY REPORT

(From January 1, 2019 to September 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	31
IV.	Corporate Governance and Company Affiliates	35

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

3

I. OVERVIEW

1. Scope of Business

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

As of September 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, 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)

HOTEL LAONZENA (September 26, 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), Brazil(Rio de Janeiro), Argentina(Jujuy), European Union(Dusseldorf, Germany), and Australia(Perth).

(3) Major Changes in the Board of Directors (as of March 15, 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, October 8, 2019)

6

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

(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 ofBy-Product Hydrogen Generation Business from POSCO ENERGY into POSCO afterspin-off was completed on September 9, 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 September 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 September 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 September 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)
	2019.3Q		2018		2017
(Consolidated) Net Profit		1,784,414		1,690,612		2,790,106
(Separate) Net Profit		1,715,600		1,072,592		2,545,685
Earnings per Share (Consolidated, KRW)		22,211		20,911		34,464
Cash Dividend Paid		480,694		800,009		639,991
Pay-out Ratio (Consolidated, %)		26.9		47.3		22.9
Dividend per Share (KRW)		6,000		10,000		8,000
Dividend Yield (%)		2.6		4.1		2.4

9

II. BUSINESS

1. Overview

1) Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

2) Segment Results

									(In millions of KRW)
Category	2019.3Q				2018				2017
	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		24,477,636		2,488,739		32,358,009		4,536,318		30,230,368		3,628,314
Trading		16,516,474		447,282		22,407,717		383,934		20,802,207		315,201
Engineering & Construction		4,901,465		220,079		6,769,410		411,489		6,886,606		414,988
Others		2,428,224		155,136		3,442,641		210,859		2,735,919		263,331
Total		48,323,799		3,311,236		64,977,777		5,542,600		60,655,100		4,621,834

2. Current Situation

1) Steel : Domestic Market Share

									(Millions of Tons, %)
Category	2019.3Q				2018				2017
	Production		Market share		Production		Market share		Production		Market share
Crude Steel Production		54.9		100		72.5		100		71.1		100
POSCO		28.4		51.7		37.7		52.0		37.2		52.3
Others		26.5		48.3		34.8		48.0		33.9		47.7

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

10

2) Trading

A. Market Share

					(Millions of US Dollars)
Category	2019.3Q		2018.3Q		Growth rate
All Trading Companies in Korea		406,104		450,313		-9.8	%
POSCO International Corp.		4,899		5,805		-15.6

Source: Korea International Trade Association

B. Summary of 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

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.

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.

11

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.

12

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.		63,647			16.84
	Cold-rolled Product (CR)	Automobile , Home appliances, etc.		12,314			32.90
	Stainless Steel Products	Western tableware, etc.		75,910			20.09
	Others	Plates, Wire rods, etc.		114,033			30.17
	Gross Sum			377,904			100.00
	Deduction of Internal Trade			(133,128	)
	Sub Total			244,776
Trading	Steel, Metal			223,608			78.75
	Chemical, Strategic Item, Energy			16,347			5.76
	Others			43,974			15.49
	Gross Sum			283,929			100.00
	Deduction of Internal Trade			(118,764	)
	Sub Total			165,165
Engineering & Construction	Domestic Construction	Architecture		32,935			61.01
		Plant		6,465			11.98
		Civil Engineering		4,264			7.90
		Others		—			0.00
	Overseas Construction			4.668			8.65
	Owned Construction			3,943			7.30
	Others			1,707			3.16
	Gross Sum			53,982			100.00
	Deduction of Internal Trade			(4,967	)
	Sub Total			49,015
Others	Electricity Sales, etc.			44,323
	Deduction of Internal Trade			(20,041	)
	Sub Total			24,282
Total Sum				483,238

13

B. Price Movement Trend of Key Products

				(In thousands of KRW/Tons, KRW/kWh)
Business Area	Products	2019.3Q		2018		2017
Steel	Hot-rolled Product (HR)		708		707		641
	Cold-rolled Product (CR)		804		807		791
Others	Electric Power		97		100		93
	Lime		109		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 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

14

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	93,317 (44.4%)	Iron Ore, Coal
		Sub-materials	Sub-materials for Iron-making, Steelmaking	54,107 (25.8%)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	41,262 (19.7%)	Nickel, Ferrochrome, STS Scrap Iron, etc.
		Others	OtherSub-materials	21,200 (10.1%)	—
Engineering         & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	1,577 (16.9%)
		Steel Reinforcement	Strengthening Concrete	1,492 (16.0%)
		Cable	Electricity Transfer	157 (1.7%)
		Steel Pile	Foundation of Structure	117 (1.2%)
		Others	Construction of Pipe and Structure etc.	5,999 (64.2%)
Others	Raw Materials	LNG	Material for Power Generation	8,519 (43.8%)
		Limestone	Production of Lime	755 (3.9%)
		Others	Engineering business etc.	10,186 (52.3%)

15

B. Price Movement Trend of Major Raw Materials

				(In thousands of KRW)
Business Area	Category	2019.3Q		2018		2017
Steel	Iron Ore(per ton)		102		76		81
	Coal(per ton)		221		228		246
	Scrap Iron(per ton)		359		395		344
	Nickel(per ton)		15,554		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)		688		768		661
	Lime (per ton)		20		19		19

16

[Steel]

Price Movement Trend of Major Raw Materials

(1) Iron Ore

																			(In US Dollars/ Tons)
	’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q		’17.2Q		’17.1Q		’16.4Q
Trend of International Benchmark Price (Free On Board, “FOB”)		92		94		77		64		57		58		68		57		64		57		79		65

(2) Coal

																			(In US Dollars/ Tons)
	’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q		’17.2Q		’17.1Q		‘16 4Q
Trend of International Benchmark Price (FOB)		161		203		206		221		188		190		229		204		189		191		285		200

(3) Scrap Iron

																			(In US Dollars/ Tons)
	’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q		’17.2Q		’17.1Q		‘16 4Q
Trend of Purchase Price (Cost and Freight, “CFR”)		290		312		325		343		350		364		379		344		322		268		284		253

(4) Nickel

’19.3Q

’19.2Q

’19.1Q

’18.4Q

’18.3Q

’18.2Q

’18.1Q

’17.4Q

’17.3Q

’17.2Q

’17.1Q

‘16 4Q

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

USD 7.05 /lb USD 15,540/ton

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

LME : London Metal Exchange

17

[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) LNG: Purchase price from Korea Gas Corporation

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

18

5. Production and Facilities

A. Production Capacity

[Steel]

					(Thousands of Tons)
Business Area	Products		2019.3Q		2018		2017
Steel		Crude Steel		35,569		47,590		47,590

[Others]

	(Electric Power-MW per year, Lime-Thousands of Tons  per year)
Business Area	Products		2019.3Q		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		2019.3Q		2018		2017
Crude Steel			32,188		42,867		42,193
Products	Hot-Rolled Steel		6,589		8,716		8,372
	Plate		5,344		7,432		6,512
	Wire Rod		2,113		2,867		2,830
	Pickled-Oiled Steel		2,264		2,946		3,005
	Cold-Rolled Products		5,591		8,551		7,563
	Coated Steel		4,888		7,163		6,249
	Electrical Steel		630		1,078		1,028
	Stainless Steel		2,894		3,978		3,863
	Others		4,349		5,903		6,359
	Total		34,662		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.

19

(2) Capacity Utilization Rate

						(Thousands of Tons, %)
	Company	Capacity		Production		Utilization Rate
Crude Steel Production	POSCO		31,705		28,406		89.6	%
	Zhangjiagang Pohang Stainless Steel Co., Ltd		825		861		104.4	%
	PT.KRAKATAU POSCO		2,213		2,246		101.5	%
	POSCOSS-VINA Co., Ltd.		825		674		81.7	%
	Total		35,569		32,188		90.5	%

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. 3Q		2018		2017
Power Generation	Electric Power		12,386		15,297		13,774
Lime	Lime		1,900		2,511		2,406

(2) Capacity Utilization Rate

			(Electric Power-hr, Lime-Thousands of Tons)
Business Area	Products		2019. 3Q Capacity			2019. 3Q Production		Utilization Rate
Power Generation	Electric Power	Incheon		6,552			3,822		58	%
		Gwangyang		5,832	��		5,317		91	%
		Pohang		5,832			5,096		87	%
Lime	Lime			1,638			1,900		116	%

C. Production Facilities

[Land]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation		Ending Book Balance
Steel		1,936,973		39,745		(38,293	)		—		1,938,425
Trade		170,115		1,769		(321	)		—		171,563
Engineering & Construction		25,463		13,831		(13,747	)		—		25,547
Others		415,451		29,111		(17,763	)		—		426,799

20

[Buildings]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		3,474,584		454,521			(244,560	)		(233,998	)		3,450,547
Trade		430,863		3,164			46,691			(9,296	)		471,422
Engineering & Construction		79,363		21,849			(20,151	)		(1,850	)		79,211
Others		417,642		202,598			(277,851	)		(12,083	)		330,306
[Structures]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		2,637,523		(272,942	)		148,080			(167,341	)		2,345,320
Trade		22,036		(2,207	)		2,744			—			22,573
Engineering & Construction		14,708		(31,395	)		30,448			—			13,761
Others		243,657		572,058			(350,813	)		(12,354	)		452,548
[Machinery and Equipments]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		15,916,598		3,323,822			(1,850,645	)		(1,724,904	)		15,664,871
Trade		386,081		(60,182	)		45,631			—			371,530
Engineering & Construction		7,139		(29,249	)		28,635			—			6,525
Others		2,208,311		837,071			(1,446,382	)		(102,186	)		1,496,814
[Vehicles]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		19,958		20,161			(12,929	)		(8,627	)		18,563
Trade		5,677		(1,767	)		2,891			(567	)		6,234
Engineering & Construction		1,158		2,376			(2,184	)		(631	)		719
Others		4,548		5,188			(3,496	)		(1,386	)		4,854

21

[Tools and Fixtures]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		47,852		121,060			(222,415	)		99,486			45,983
Trade		10,677		51,228			(25,327	)		(3,934	)		32,644
Engineering & Construction		617		12,155			(12,194	)		—			578
Others		7,018		89,393			26,310			(116,450	)		6,271
[Equipment]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		66,924		8,456			8,546			(19,160	)		64,766
Trade		30,238		19,949			(11,796	)		(7,013	)		31,378
Engineering & Construction		3,304		5,841			(4,747	)		(1,050	)		3,348
Others		35,821		(125,719	)		130,084			—			40,186
[Financial Lease Assets]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		91,928		(165,450	)		627,248			(109,547	)		444,179
Trade		548		76,863			(6,457	)		35			70,989
Engineering & Construction		2,957		166,749			55,178			(1	)		224,883
Others		42,131		(15,523	)		23,375			—			49,983
[Biological Assets]									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		—		—			—			—			—
Trade		80,771		63,487			(20,231	)		(4,192	)		119,835
Engineering & Construction		—		—			—			—			—
Others		—		—			—			—			—

22

[Assets under Construction]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		943,260		1,583,128		(1,116,496	)		(10,150	)		1,399,742
Trade		118,315		72,502		(71,363	)		—			119,454
Engineering & Construction		25,943		2,666		(1,102	)		—			27,507
Others		92,121		447,403		(184,583	)		—			354,941

23

(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		6,272		1,277		4,995
		August, 2016 ~ December, 2021	G) The renovation of #3 furnace P) Establishment of NOx removal equipment for sintering factories		23,065		7,501		15,565
POSCO-CSPC	Establishment	January, 2015 ~December, 2019	Establishment of a 2,500 tonnage press machine		119		101		18

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 ~December, 2022	CPO MILL		595		338		257

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		86		229
		January, 2019 ~ December, 2019	Investment for new IT solutions development		152		94		58
POSCO CHEMICAL	Expansion	November, 2018 ~ November, 2019	Expansion of product lines #1~#8 for the 2nd factory of anode materials		1,598		1,140		458
		March, 2019 ~March, 2020	Expansion of product lines for cathode materials		2,250		591		1,659

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

24

(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.		—		3,882		11,781
			Advancement of products		—		1,670		5,636
	POSCO SS VINA CO., LTD.	Expansion, Renovation and Replacement of Existing Facilities, etc.	Enhancing production efficiency, cost reduction, etc.		7		51		84
Trading	PT. BIO INTI AGRINDO	Expansion, Renovation and Replacement of Existing Facilities, etc.	Realization of profits by selling CPO		48		18		191
Others	POSCO CHEMICAL	Expansion of production facilities	Production increase of anode materials		458		—		—
			Production increase of cathode materials		934		725		—
	POSCO ICT	Expansion, Renovation and Replacement of Existing Facilities, etc.	AI, RPA, etc.		61		276		402
			Investment in POSCO IT Infra, etc.		320		267		284
			Improving of workplaces, etc.		60		64		78
			Smart Management solution, etc.		9		43		50
	POSCO O&M	Expansion, Renovation and Replacement of Existing Facilities, etc.	Renovation of Existing Facilities		65		96		107

The investments over KRW 10 billion are listed on the table

25

6. Product Sales

[Steel]								(In hundred millions of KRW)
Items		2019.3Q			2018			2017
Domestic	Hot-Rolled Products		34,041			48,879			42,950
	Cold-Rolled Products		30,165			39,901			38,298
	Stainless Steel		15,737			21,281			24,798
	Others		58,499			77,230			66,555
Export	Hot-Rolled Products		29,606			35,231			34,277
	Cold-Rolled Products		94,149			124,449			125,622
	Stainless Steel		60,173			79,931			74,880
	Others		55,533			77,311			68,734
Total	Gross Sum		377,904			504,212			476,114
	Internal Transaction		(133,128	)		(180,632	)		(173,810	)
	Total		244,776			323,580			302,304
[Trading]								(In hundred millions of KRW)
Items		2019. 3Q			2018			2017
Domestic	Merchandise		19,817			33,706			24,210
	Product		3,791			4,702			4,079
	Others		877			1,483			1,421
Export	Merchandise		51,580			87,124			87,116
	Product		227			768			938
	Others		560			736			1,107
Trades among the 3 countries			207,076			254,670			229,911
Gross Sum			283,929			383,189			348,782
Internal Transaction			(118,764	)		(159,112	)		(140,760	)
Total			165,165			224,077			208,022

26

[Engineering & Construction]					(In hundred millions of KRW)
Items		2019. 3Q			2018			2017
Domestic	Building		32,935			37,363			32,375
	Plant		6,465			10,238			6,874
	Civil Engineering		4,264			5,129			6,418
	Others		—			337			—
Overseas			4,668			9,471			15,056
Own Construction			3,943			7,568			7,654
Other Subsidiary company sales			1,707			3,101			4,478
Gross Sum			53,982			73,207			72,855
Internal Transaction			(4,967	)		(5,513	)		(3,989	)
Total			49,015			67,694			68,866
[Others]					(In hundred millions of KRW)
Items		2019. 3Q			2018			2017
Electric Power Sales			24,282			34,426			27,359

7. Derivatives

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

As of September 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) and USD 0.5 billion (expiring July, 2024). We recognized KRW 123,624 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 70,125 million of gain on valuation, and KRW 805 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

27

	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% •  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)

28

	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
	Split-off of Domestic steel processing businesses	October, 2019	1) Purpose : To specialize in steel processing business bysplitting-off business division 2) Method :Split-off 3) Resolution date of Board of Directors : October 25, 2019 4) Shareholders’ meeting for approval : March 16, 2020 5) Date ofSplit-off : March 31, 2020 6) Registration date ofSplit-off : April 3, 2020
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 POSPower 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) POSPower 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

29

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
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
		Energy Material R&D Center
	POSCOM-TECH	R&D Center
	POSCO NIPPON STEEL RHF JOINT VENTURE.CO., Ltd.	Quality Innovation Department

B. R&D Expenses in 2019.3Q (In millions of KRW)

Category	Business Area
	Steel			Trade			Engineering & Construction			Others			Total
Selling and Administrative Cost		60,120			1,736			3,330			19,307			84,492
Manufacturing Cost		273,560			169			434			1,422			275,585
R&D Cost (Intangible Assets)		18,150			—			1			2,946			21,097
Total*		351,830			1,905			3,765			23,675			381,174
Government Subsidy		—			—			365			607			971
R&D/Sales Ratio		1.44	%		0.01	%		0.08	%		1.04	%		0.79	%

* This total expenses include government subsidy amount

30

III. Financial Statements

1. Consolidated Financial Statements

A. Summary of Fiscal Years of 2017, 2018 and 2019.3Q

					(In millions of KRW)
Account	2019.3Q (2019.1.1~2019.9.30)		2018		2017
[Total current assets]		34,710,064		33,651,002		31,127,418
Cash and cash equivalents		2,831,727		2,643,865		2,612,530
Other receivables, net		1,646,995		1,385,629		1,636,006
Other short-term financial assets		7,912,020		8,081,096		7,045,880
Trade accounts and notes receivable, net		9,714,312		9,282,609		8,950,548
Inventories		11,770,207		11,499,928		9,950,955
Other current assets		834,803		757,875		931,499
[Totalnon-current assets]		44,909,024		44,597,263		47,897,541
Other receivables, net		1,117,102		863,240		879,176
Otherlong-term financial assets		1,686,348		1,647,898		1,911,684
Investments in associates and joint ventures		3,879,811		3,650,003		3,557,932
Property, plant and equipment, net		30,334,798		30,018,273		31,883,535
Intangible assets, net		5,020,900		5,170,825		5,952,269
Othernon-current assets		2,870,065		3,247,024		3,712,945
Total assets		79,619,088		78,248,265		79,024,959
[Total current liabilities]		16,761,966		18,937,985		18,946,016
[Totalnon-current liabilities]		14,728,939		12,550,729		12,614,935
Total liabilities		31,490,905		31,488,714		31,560,951
[Equity attributable to owners of the controlling company]		44,756,355		43,371,260		43,732,877
Share capital		482,403		482,403		482,403

31

Capital surplus	1,371,230		1,410,551		1,412,565
Hybrid bonds	199,384		199,384		996,919
Retained earnings	45,280,981		44,216,018		43,056,600
Other equity attributable to owners of the controlling company	(2,577,644	)	(2,937,096	)	(2,215,610	)
[Non-controlling Interests]	3,371,828		3,388,291		3,731,131
Total equity	48,128,183		46,759,551		47,464,008
Revenue	48,323,799		64,977,777		60,655,100
Operating profit	3,311,236		5,542,600		4,621,834
Profit	1,956,674		1,892,064		2,973,469
[Profit attributable to owners of the controlling company]	1,784,414		1,690,612		2,790,106
[Profit attributable tonon-controlling interests]	172,260		201,452		183,363
Total comprehensive Income	2,292,527		1,463,535		2,412,311
[Total comprehensive income attributable to owners of the controlling company]	2,120,940		1,271,495		2,218,278
[Total comprehensive income attributable tonon-controlling interests]	171,587		192,040		194,033
Earnings per share(KRW)	22,211		20,911		34,464
Number of Consolidated Companies	164		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 September 30, 2019, Condensed Consolidated Statements of Comprehensive Income (loss), Condensed Consolidated Statements of Changes in Equity, Condensed Consolidated Statements of Cash Flows for the nine-month period ended September 30, 2019, and Notes

32

2. Separate Financial Statements

A. Summary of Fiscal Years of 2017, 2018 and 2019.3Q

			(In millions of KRW)
Account	2019.3Q (2019.1.1~2019.9.30)		2018		2017
[Total current assets]		17,716,459		16,796,400		14,840,421
Cash and Cash equivalents		1,048,877		259,219		332,405
Trade accounts and notes receivable, net		4,045,596		3,968,372		3,867,714
Other receivables, net		432,994		206,432		210,230
Other short-term financial assets		6,801,473		7,025,143		5,824,087
Inventories		5,285,575		5,288,009		4,543,533
Other current assets		101,944		49,225		62,452
[Totalnon-current assets]		37,711,523		37,329,580		38,851,837
Other receivables, net		63,136		57,767		62,421
Otherlong-term financial assets		1,262,682		1,176,757		1,393,316
Investments in Subsidiaries, associates, and joint ventures		15,516,102		15,121,339		15,098,856
Property, plant and equipment, net		19,944,285		20,154,334		21,561,270
Intangible assets, net		679,708		645,222		528,074
Othernon-current assets		245,610		174,161		207,900
Total assets		55,427,982		54,125,980		53,692,258
[Total current liabilities]		2,825,161		3,895,973		3,570,148
[Totalnon-current Liabilities]		6,266,838		4,957,905		4,180,655
Total liabilities		9,091,999		8,853,878		7,750,803
[Share capital]		482,403		482,403		482,403
[Capital surplus]		1,252,220		1,154,775		1,156,429
[Hybrid bonds]		199,384		199,384		996,919
[Retained earnings]		46,151,051		45,175,459		44,605,368

33

Account	2019.3Q (2019.1.1~2019.9.30)			2018			2017
[Other equity]		(1,749,075	)		(1,739,919	)		(1,299,664	)
Total equity		46,335,983			45,272,102			45,941,455
Revenue		23,028,220			30,659,425			28,553,815
Operating profit		2,219,241			3,809,376			2,902,453
Profit		1,715,600			1,072,592			2,545,685
Earnings per share(KRW)		21,352			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 September 30, 2019, Condensed Separate Statements of Comprehensive Income (loss), Condensed Separate Statements of Changes in Equity, Condensed Separate Statements of Cash Flows for the nine-month period ended September 30, 2019, and Notes.

34

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors

(1) Board of Directors (as of November 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; Kim,Joo-Hyun; Chung,Moon-Ki; 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) Audit Committee

(e) Executive Management Committee

Composition of theSub-Committees under the Board of Directors and their Functions(as of November 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
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

35

(2) List of Outside Directors (As of November 14, 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
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

36

(3) List of Key Activities of the Board of Directors (January 1, 2019 ~ November 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
2019-7	July 29	1. Declaration of the second quarter dividend for the fiscal year of 2019 •  Report Agenda	All 1 Case Approved

37

		1. The progress on implementing resolutions made by the Board of Directors and itssub-committees 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
2019-8	September 6	1. Notice of completion onsplit-off & merger of POSCO ENERGY by-product gas power plant 2. Contribution to POSCO Education Foundation 3. Financing plan in the 2nd half of 2019 •  Report Agenda 1. Trade conflict between South Korea and Japan	All 3 Cases Approved
2019-9	November 1	1. Declaration of the third quarter dividend for the fiscal year of 2019 2. Investment on venture funds for new businesses 3. Lease contract on lime sintering facilities 4. Improvement on payment type of long-term incentive policy 5. Revision to the operational regulations of the Board of Directors •  Report Agenda 1. The progress on implementing resolution made by the Board of Directors and itssub-committees for the fiscal year of 2019 2. Business performance on 3rd quarter of 2019 and annual outlook 3. Improvement on business structure of POSCO SS VINA	All 5 Cases Approved

Major Activities of Outside Directors on the Board of Directors (January 1, 2019 ~ November 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)	—
2019-8	September 6	7 (7)	—
2019-9	November 1	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)	—
March 15, 2019	•  Preliminary Review Agenda
	1. Appointment of the Sub-committee Members	—
	2. Appointment of the Representative Director

38

• Major Activities of Director Candidate Recommendation Committee (March 15, 2019~November 14, 2019)

Date	Agenda	Approval
October 31, 2019	•  Preliminary Review Agenda	—
	1. Revision to the operational regulations of the Board of Directors

• 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 Evaluation and Compensation Committee (March 15, 2019~November 14, 2019)

Date	Agenda	Approval
November 1, 2019	1. Improvement on payment type of long-term incentive policy	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

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

Date	Agenda	Approval
April 12, 2019	•  Preliminary Review Agenda	—
	1. Restructuring of by-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
September 5, 2019	•  Deliberation Agenda
	1. Donation to Korea Society	Approved
	2. Land contribution for Gwangyang city library and youth culture center	Approved
	•  Preliminary Review Agenda
	1. Contribution to POSCO Education Foundation	—
	2. Financing plan in the 2nd half of 2019	—
	•  Report Agenda
	1. Review of the 1st half of 2019 operation of the Fair Trading Program	—
October 31, 2019	•  Preliminary Review Agenda
	1. Investment on venture funds for new businesses	—
	2. Lease contract on lime sintering facilities	—

39

• 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 #1 finex to amend partially and will submit to the committee again

• Major Activities of Executive Management Committee (March 15, 2019 ~ November 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. Disposal of investment stocks	Approved
August 20	•  Deliberation Agenda
	1. Sales of Ferro-silicon business	Approved
September 17	•  Deliberation Agenda	—
	1. Replacement of acid retrieval facilities in #1 Cold Rolled Mill in Gwangyang Works	Approved
	2. Production process improvement of DR-BP products in #1 Cold Rolled Mill in Pohang Works	Approved
	3. Establishment of Pohang Incubating Center	Approved
	4. Office building expansion plan to improve work environment for POSCO Humans	Approved
October 24	•  Deliberation Agenda	—
	1. Replacement of unloading facilities in the raw material port in Pohang Works	Approved
	2. Renovation of public relations centers and surrounding area	Approved
	3. Establishment of additional employee cafeteria in Pohang Works	Approved
	4. Improvement of Magnesium business structure	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 ~ November 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

Session	Date	Agenda	Approval
7	October 31	•  Deliberation Agenda •  Audit service contract approval on grain terminal company and unload company in Ukraine •  Report Agenda •  External auditors’ review result on the Consolidated Financial Statements for the third quarter of 2019 •  Approval ofnon-audit services for POSCO •  Internal audit result on the Consolidated Financial Statements for the third quarter of 2019 •  Assessment criteria on appointment of external auditors	Approved

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		5,062		803			—
Outside Director	4		216		50	10,000		—
Members of the Audit Committee	3		157		52			—

Payment Period: January 1, 2019 ~September 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 September 30, 2019.

42

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 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 September 30, 2019, the condensed consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2019 and 2018, the condensed consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 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

November 14, 2019

This report is effective as of November 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 September 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes		September 30, 2019		December 31, 2018
Assets
Cash and cash equivalents		21	W	2,831,727		2,643,865
Trade accounts and notes receivable, net		4,21,26,27,34		9,714,312		9,282,609
Other receivables, net		5,21,34		1,646,995		1,385,629
Other short-term financial assets		6,21		7,912,020		8,081,096
Inventories		7		11,770,207		11,499,928
Current income tax assets				40,932		51,557
Assets held for sale		8		66,598		21,854
Other current assets		14		727,273		684,464
Total current assets				34,710,064		33,651,002
Long-term trade accounts and notes receivable, net		4,21		312,128		427,125
Other receivables, net		5,21		1,117,102		863,240
Other long-term financial assets		6,21		1,686,348		1,647,898
Investments in associates and joint ventures		9		3,879,811		3,650,003
Investment property, net		11		921,373		928,615
Property, plant and equipment, net		12		30,334,798		30,018,273
Goodwill and other intangible assets, net		13		5,020,900		5,170,825
Defined benefit assets, net		19		—		1,489
Deferred tax assets				1,321,445		1,381,031
Othernon-current assets		14		315,119		508,764
Totalnon-current assets				44,909,024		44,597,263
Total assets			W	79,619,088		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 September 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes	September 30, 2019			December 31, 2018
Liabilities
Trade accounts and notes payable	21,34	W	3,714,266			4,006,135
Short-term borrowings and current installments of long-term borrowings	4,15,21		8,358,075			10,289,619
Other payables	16,21,34		1,890,936			1,720,097
Other short-term financial liabilities	17,21		104,229			77,800
Current income tax liabilities			699,404			948,166
Liabilities directly associated with the assets held for sale	8		1,612			—
Provisions	18,35		262,085			301,280
Other current liabilities	20,26,27		1,731,359			1,594,888
Total current liabilities			16,761,966			18,937,985
Long-term trade accounts and notes payable	21		17,623			29,825
Long-term borrowings, excluding current installments	15,21		11,496,807			9,919,651
Other payables	16,21		618,108			148,868
Other long-term financial liabilities	17,21		18,154			64,162
Defined benefit liabilities, net	19		316,825			140,933
Deferred tax liabilities			1,666,707			1,688,893
Long-term provisions	18,35		502,744			431,036
Othernon-current liabilities	20,26		91,971			127,361
Totalnon-current liabilities			14,728,939			12,550,729
Total liabilities			31,490,905			31,488,714
Equity
Share capital	22		482,403			482,403
Capital surplus	22		1,371,230			1,410,551
Hybrid bonds	23		199,384			199,384
Reserves	24		(1,069,340	)		(1,404,368	)
Treasury shares	25		(1,508,303	)		(1,532,728	)
Retained earnings			45,280,981			44,216,018
Equity attributable to owners of the controlling company			44,756,355			43,371,260
Non-controlling interests	23		3,371,828			3,388,291
Total equity			48,128,183			46,759,551
Total liabilities and equity		W	79,619,088			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 and nine-month periods ended September 30, 2019 and 2018

(Unaudited)

(in millions of Won, except per share information)		For the three-month periods ended September 30						For the nine-month periods ended September 30
	Notes	2019			2018			2019			2018
Revenue	26,27,34,37	W	15,988,227			16,410,726			48,323,799			48,356,306
Cost of sales	7,27,31,34		(14,375,600	)		(14,343,743	)		(43,283,629	)		(42,337,552	)
Gross profit			1,612,627			2,066,984			5,040,170			6,018,752
Selling and administrative expenses	31,34
Reversal of (impairment loss) on trade accounts and notes receivable			5,944			(1,890	)		13,942			(38,864	)
Other administrative expenses	28		(490,770	)		(446,565	)		(1,473,389	)		(1,461,907	)
Selling expenses	28		(88,024	)		(87,426	)		(269,487	)		(246,886	)
Operating profit			1,039,777			1,531,103			3,311,236			4,271,095
Share of profit of equity-accounted investees, net	9		88,668			43,800			230,197			75,451
Finance income and costs	21,29
Finance income			602,717			173,988			1,629,594			1,264,108
Finance costs			(691,922	)		(425,048	)		(1,852,447	)		(1,751,851	)
Othernon-operating income and expenses	34
Impairment loss on other receivables			(10,695	)		(15,325	)		(26,112	)		(18,361	)
Othernon-operating income	30		114,913			109,121			272,281			436,206
Othernon-operating expenses	30,31		(290,207	)		28,325			(594,076	)		(418,240	)
Profit before income tax	37		853,251			1,445,964			2,970,673			3,858,408
Income tax expense	32,37		(356,441	)		(388,305	)		(1,013,999	)		(1,136,869	)
Profit			496,810			1,057,659			1,956,674			2,721,539
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans	19		(7,269	)		(9,731	)		(28,150	)		(41,666	)
Net changes in fair value of equity investments at fair value through other comprehensive income	21		(81,552	)		36,687			(63,708	)		(24,454	)
Items that are or may be reclassified subsequently to profit or loss:
Capital adjustment arising from investments in equity-accounted investees			32,091			(57,167	)		104,929			(30,416	)
Foreign currency translation differences			103,200			(119,741	)		322,863			(45,912	)
Gains or losses on valuation of derivatives	21		20			64			(81	)		(174	)
Other comprehensive income (loss), net of tax			46,490			(149,888	)		335,853			(142,622	)
Total comprehensive income		W	543,300			907,771			2,292,527			2,578,917
Profit attributable to:
Owners of the controlling company		W	430,875			1,019,526			1,784,414			2,558,060
Non-controlling interests			65,935			38,133			172,260			163,479
Profit		W	496,810			1,057,659			1,956,674			2,721,539
Total comprehensive income attributable to:
Owners of the controlling company		W	466,171			880,569			2,120,940			2,414,408
Non-controlling interests			77,129			27,202			171,587			164,509
Total comprehensive income		W	543,300			907,771			2,292,527			2,578,917
Basic and diluted earnings per share (in Won)	33		5,357			12,723			22,211			31,775

See accompanying notes to the condensed consolidated interim financial statements.

5

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the nine-month periods ended September 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		—		—			—			—			—			2,558,060			2,558,060			163,479			2,721,539
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—			—			—			(26,645	)		(26,645	)		(15,021	)		(41,666	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—			(42,885	)		—			—			(42,885	)		12,469			(30,416	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—			(13,115	)		—			(12,739	)		(25,854	)		1,400			(24,454	)
Foreign currency translation differences, net of tax		—		—			—			(48,088	)		—			—			(48,088	)		2,176			(45,912	)
Gains or losses on valuation of derivatives, net of tax		—		—			—			(180	)		—			—			(180	)		6			(174	)
Total comprehensive income		—		—			—			(104,268	)		—			2,518,676			2,414,408			164,509			2,578,917
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—			—			—			(279,999	)		(279,999	)		(54,148	)		(334,147	)
Interim dividends		—		—			—			—			—			(240,001	)		(240,001	)		—			(240,001	)
Changes in subsidiaries		—		—			—			—			—			—			—			(2,092	)		(2,092	)
Changes in ownership interest in subsidiaries		—		(2,504	)		—			—			—			—			(2,504	)		1,337			(1,167	)
Repayment of hybrid bonds		—		(2,769	)		(797,535	)		—			—			—			(800,304	)		(359,018	)		(1,159,322	)
Interest of hybrid bonds		—		—			—			—			—			(22,123	)		(22,123	)		(16,610	)		(38,733	)
Disposal of treasury shares		—		133			—			—			326			—			459			—			459
Others		—		3,360			—			1,253			—			(4,291	)		322			(2,638	)		(2,316	)
Total transactions with owners of the controlling company		—		(1,780	)		(797,535	)		1,253			326			(546,414	)		(1,344,150	)		(433,169	)		(1,777,319	)
Balance as of September 30, 2018	W	482,403		1,410,785			199,384			(1,197,673	)		(1,532,728	)		45,331,873			44,694,044			3,379,135			48,073,179

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 nine-month periods ended September 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		—		—			—		—			—			1,784,414			1,784,414			172,260			1,956,674
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(15,065	)		(15,065	)		(13,085	)		(28,150	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		92,533			—			—			92,533			12,396			104,929
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		(42,911	)		—			(20,859	)		(63,770	)		62			(63,708	)
Foreign currency translation differences, net of tax		—		—			—		322,905			—			—			322,905			(42	)		322,863
Gains or losses on valuation of derivatives, net of tax		—		—			—		(77	)		—			—			(77	)		(4	)		(81	)
Total comprehensive income		—		—			—		372,450			—			1,748,490			2,120,940			171,587			2,292,527
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(400,006	)		(400,006	)		(60,274	)		(460,280	)
Interim dividends		—		—			—		—			—			(320,462	)		(320,462	)		—			(320,462	)
Changes in subsidiaries		—		—			—		—			—			—			—			(874	)		(874	)
Changes in ownership interest in subsidiaries		—		(53,871	)		—		—			—			—			(53,871	)		(114,153	)		(168,024	)
Interest of hybrid bonds		—		—			—		—			—			(6,881	)		(6,881	)		(5,456	)		(12,337	)
Disposal of treasury shares		—		12,576			—		—			24,425			—			37,001			—			37,001
Others		—		1,974			—		(37,422	)		—			43,822			8,374			(7,293	)		1,081
Total transactions with owners of the controlling company		—		(39,321	)		—		(37,422	)		24,425			(683,527	)		(735,845	)		(188,050	)		(923,895	)
Balance as of September 30, 2019	W	482,403		1,371,230			199,384		(1,069,340	)		(1,508,303	)		45,280,981			44,756,355			3,371,828			48,128,183

See accompanying notes to the condensed consolidated interim financial statements.

7

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the nine-month periods ended September 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes		September 30, 2019			September 30, 2018
Cash flows from operating activities
Profit			W	1,956,674			2,721,539
Adjustments for:
Depreciation				2,269,280			2,167,285
Amortization				316,947			273,674
Finance income				(842,951	)		(558,899	)
Finance costs				1,082,320			992,830
Income tax expense				1,013,999			1,136,869
Impairment loss on property, plant and equipment				194,688			18,890
Gain on disposal of property, plant and equipment				(21,929	)		(36,811	)
Loss on disposal of property, plant and equipment				61,222			78,565
Impairment loss on goodwill and intangible assets				125,696			2,075
Gain on disposal of goodwill and intangible assets				(1,346	)		(110,814	)
Gain on disposal of investments in subsidiaries, associates and joint ventures				(20,750	)		(45,500	)
Loss on disposal of investments in subsidiaries, associates and joint ventures				5,867			3,419
Share of profit of equity-accounted investees				(230,197	)		(75,451	)
Impairment loss on assets held for sale				40,943			47,581
Gain on disposal of assets held for sale				(8,536	)		(12,123	)
Expenses related to post-employment benefit				176,071			161,185
Impairment loss on trade and other receivables				12,170			57,225
Loss on valuation of inventories				80,988			38,227
Increase to provisions				98,109			272,796
Others, net				(57,305	)		(9,790	)
				4,295,286			4,401,233
Changes in operating assets and liabilities		36		(914,733	)		(2,011,700	)
Interest received				228,018			221,523
Interest paid				(547,833	)		(476,728	)
Dividends received				218,155			166,868
Income taxes paid				(1,295,222	)		(803,294	)
Net cash provided by operating activities			W	3,940,345			4,219,441

See accompanying notes to the condensed consolidated interim financial statements.

8

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes		September 30, 2019			September 30, 2018
Cash flows from investing activities
Acquisitions of short-term financial instruments			W	(27,411,573	)		(23,743,067	)
Proceeds from disposal of short-term financial instruments				27,842,901			22,202,267
Increase in loans				(173,717	)		(421,836	)
Collection of loans				282,778			513,881
Acquisitions of securities				(377,942	)		(311,343	)
Proceeds from disposal of securities				171,793			157,012
Acquisitions of investment in associates and joint ventures				(101,609	)		(22,937	)
Proceeds from disposal of investment in associates and joint ventures				11,293			88,852
Acquisitions of investment property				(18,232	)		(23,467	)
Proceeds from disposal of investment property				1,106			31,159
Acquisitions of property, plant and equipment				(1,609,725	)		(1,354,353	)
Proceeds from disposal of property, plant and equipment				27,912			61,744
Acquisitions of intangible assets				(242,000	)		(83,074	)
Proceeds from disposal of intangible assets				13,256			50,197
Proceeds from disposal of assets held for sale				311			15,930
Payment for acquisition of business, net of cash acquired				(33,961	)		—
Cash received from disposal of business, net of cash transferred				37,776			173,838
Collection of lease receivables				29,008			—
Others, net				12,969			12,710
Net cash used in investing activities				(1,537,656	)		(2,652,487	)
Cash flows from financing activities
Proceeds from borrowings				2,622,141			2,496,313
Repayment of borrowings				(2,458,779	)		(1,448,400	)
Repayment of short-term borrowings, net				(1,466,477	)		(194,375	)
Capital contribution fromnon-controlling interests				23,582			5,808
Payment of cash dividends				(785,551	)		(570,103	)
Payment of interest of hybrid bonds				(12,362	)		(42,033	)
Repayment of hybrid bonds				—			(1,160,000	)
Repayment of lease liabilities				(107,703	)		(23,697	)
Others, net				(112,086	)		(7,222	)
Net cash used in financing activities				(2,297,235	)		(943,709	)
Effect of exchange rate fluctuation on cash held				91,767			1,601
Net increase in cash and cash equivalents				197,221			624,846
Cash and cash equivalents at beginning of the period				2,643,865			2,612,530
Cash and cash equivalents at end of the period		8	W	2,841,086			3,237,376

See accompanying notes to the condensed consolidated interim financial statements.

9

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of September 30, 2019

(Unaudited)

1. General Information

General information about POSCO, its 32 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 131 foreign subsidiaries including POSCO America Corporation (collectively, “the Company”) and its 129 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 September 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 the nine-month period ended September 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
Yuzhnaya Stevedoring Company Limited LLC.	June 2019		100.00	Acquisition of control
ChargEV Inc.	September 2019		100.00	New establishment

(c) Subsidiaries excluded from consolidation during the nine-month period ended September 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
HOTEL LAONZENA	July 2019	Disposal
Daewoo Power and Infra (PTY) Limited	July 2019	Liquidation
POSCO SINGAPORE LNG TRADING PTE. LTD.	September 2019	Liquidation
POSCO-South Asia Co., Ltd.	September 2019	Liquidation

10

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 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 September 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 September 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 September 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 September 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	310,555		194,382		222,512		20,202		28,308		775,959
September 30, 2019		342,101		169,182		217,116		21,365		40,272		790,036

(*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 September 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.

(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	638,395
Lease receivables		225,198
Lease liabilities		597,197

(*1) Prepaid lease payments amounting toW266,396 million, classified as operating leases as of December 31, 2018, was reclassified from other assets to property, plant and equipment.

15

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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 incremental borrowing 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	879,759
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		811,760
Amount discounted using the incremental borrowing rate as of January 1, 2019, the date of initial application		597,197
Finance lease liabilities recognized as of December 31, 2018		94,754
Lease liabilities as of January 1, 2019, the date of initial application		691,951

As of September 30, 2019, the Company recognizedW667,199 million ofright-of-use assets andW604,620 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 toW79,310 million and interest expenses amounted toW22,971 million during the nine-month period ended September 30, 2019.

16

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

4. Trade Accounts and Notes Receivable

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

(in millions of Won)	September 30, 2019			December 31, 2018
Current
Trade accounts and notes receivable	W	8,978,869			8,648,250
Finance lease receivables		227			57,487
Due from customers for contract work		1,146,386			963,060
Less: Allowance for doubtful accounts		(411,170	)		(386,188	)
	W	9,714,312			9,282,609
Non-current
Trade accounts and notes receivable	W	384,393			583,797
Finance lease receivables		50,616			45,873
Less: Allowance for doubtful accounts		(122,881	)		(202,545	)
	W	312,128			427,125

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted toW237,888 million andW468,706 million as of September 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	September 30, 2019			December 31, 2018
Current
Loans	W	324,206			236,782
Other accounts receivable		1,128,818			954,030
Accrued income		182,799			220,066
Deposits		93,853			108,640
Others		15,712			16,201
Lease receivables		43,360			—
Less: Allowance for doubtful accounts		(141,753	)		(150,090	)
	W	1,646,995			1,385,629
Non-current
Loans	W	698,564			731,344
Other accounts receivable		201,742			155,936
Accrued income		110,568			1,855
Deposits		146,549			152,072
Lease receivables		167,428			—
Less: Allowance for doubtful accounts		(207,749	)		(177,967	)
	W	1,117,102			863,240

17

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

6. Other Financial Assets

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Derivatives assets	W	34,938		47,288
Debt securities		321,568		2,987
Deposit instruments(*1,2)		1,713,669		1,931,518
Short-term financial instruments(*2)		5,841,845		6,099,303
	W	7,912,020		8,081,096
Non-current
Derivatives assets	W	154,098		1,795
Equity securities(*3)		1,134,473		1,238,630
Debt securities		27,651		34,327
Other securities(*3)		334,717		338,106
Deposit instruments(*2)		35,409		35,040
	W	1,686,348		1,647,898

(*1) As of September 30, 2019 and December 31, 2018,W4,795 million andW5,715 million, respectively, are restricted for the use in a government projects.

(*2) As of September 30, 2019 and December 31, 2018, financial instruments amounting toW79,054 million andW73,935 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3) As of September 30, 2019 and December 31, 2018,W118,743 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	September 30, 2019			December 31, 2018
Finished goods	W	1,830,501			1,886,040
Merchandise		1,093,973			1,131,416
Semi-finished goods		2,150,509			1,945,567
Raw materials		2,961,395			2,821,972
Fuel and materials		1,022,788			888,941
Construction inventories		761,094			718,884
Materials-in-transit		2,066,157			2,245,740
Others		88,096			68,150
		11,974,513			11,706,710
Less: Allowance for inventories valuation		(204,306	)		(206,782	)
	W	11,770,207			11,499,928

The amounts of loss on valuation of inventories recognized in cost of sales during the nine-month period ended September 30, 2019 and the year ended December 31, 2018 wereW80,988 million andW141,799 million, respectively.

18

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

8. Assets Held for Sale

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

(in millions of Won)	September 30, 2019						December 31, 2018
	The controlling company(* 1)		Subsidiaries (* 2,3,4)		Total		Subsidiaries(* 4)
Asset
Cash and cash equivalents(*5)	W	—		9,359		9,359		—
Property, plant and equipment		18,519		37,472		55,991		21,076
Other financial assets		—		225		225		778
Others		—		1,023		1,023		—
	W	18,519		48,079		66,598		21,854
Liability
Others	W	—		1,612		1,612		—

(*1) During the nine-month period ended September 30, 2019, the controlling company determined to dispose of individual assets that ceased operations includingFe-Si factory, and classified the assets as assets held for sale. During the nine-month period ended September 30, 2019,W659 million, the difference between the fair value less costs of disposal and the book value of the related the assets held for sale, was recognized as an impairment loss on assets held for sale.

(*2) During the nine-month period ended September 30, 2019, POSCO SS VINA Co., Ltd., a subsidiary of the Company, determined to dispose of steel business, and classified the assets as assets held for sale. During the nine-month period ended September 30, 2019,W37,547 million, the difference between the fair value less costs of disposal and the book value of the related business, was recognized as an impairment loss on assets held for sale.

(*3) During the nine-month period ended September 30, 2019, POSCO ICT, a subsidiary of the Company, determined to spin electric car business off into ChargEV Inc., and classified the new Company as assets and liabilities held for sale.

(*4) 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.

(*5) Cash and cash equivalents in the statement of cash flows include cash and cash equivalents that are classified as assets held for sale.

19

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

9. Investments in Associates and Joint Ventures

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

(in millions of Won)	September 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	173,373		174,123
POSPower Co., Ltd(*1)		4,507,138		34.00		179,410		164,927		161,477
SNNC		18,130,000		49.00		90,650		133,108		116,922
QSONE Co., Ltd.		200,000		50.00		84,395		85,839		85,550
Chun-cheon Energy Co., Ltd(*1)		17,308,143		49.10		86,541		60,695		62,478
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		2,008,000		29.53		10,040		17,829		17,382
Daesung Steel(*3)		108,038		17.54		14,000		15,558		15,644
Incheon-Gimpo Expressway Co., Ltd.(*1,3)		9,032,539		18.26		45,163		9,995		13,329
Keystone NO. 1. Private Equity Fund		13,800,000		40.45		13,800		10,770		11,183
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund(*3)		6,485		12.50		6,485		5,842		5,739
KONES, Corp.		3,250,000		41.67		6,893		2,393		2,849
Others (51 companies)(*1)								130,733		123,734
								811,062		790,410
[Foreign]
AES-VCM Mong Duong Power Company Limited(*2)				30.00		164,303		173,488		209,936
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		135,899		222,519		179,459
7623704 Canada Inc.(*3)		114,452,000		10.40		124,341		137,306		126,885
Eureka Moly LLC				20.00		240,123		88,539		82,447
AMCI (WA) PTY LTD		49		49.00		209,664		69,987		71,086
Nickel Mining Company SAS		3,234,698		49.00		157,585		34,144		41,712
KOREA LNG LTD.		2,400		20.00		135,205		48,328		43,554
NCR LLC				29.40		46,168		46,118		37,602
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		134,400,000		40.00		22,423		22,727		—
PT. Batutua Tembaga Raya		128,285		22.00		21,824		18,722		20,479
PT. Wampu Electric Power(*1)		8,708,400		20.00		10,054		14,448		14,120
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,200,000		34.00		9,517		15,456		14,796
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		50		25.00		4,723		6,797		6,478
Others (27 companies)(*1)								123,781		99,728
								1,022,360		948,282
							W	1,833,422		1,738,692

(*1) As of September 30, 2019 and December 31, 2018, investments in associates amounting toW284,132 million andW285,066 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2) As of September 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 September 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 September 30, 2019

(Unaudited)

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

(in millions of Won)	September 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	188,166		180,192
Others (8 companies)								11,597		9,124
								199,763		189,316
[Foreign]
Roy Hill Holdings Pty Ltd(*1)		13,117,972		12.50		1,528,672		1,181,299		1,041,600
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		390,548		363,506
KOBRASCO		2,010,719,185		50.00		32,950		108,503		133,449
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.				25.00		61,961		90,168		88,391
DMSA/AMSA(*1)				4.00		341,153		32,522		26,709
CSP - Compania Siderurgica do Pecem		1,221,586,532		20.00		594,173		—		24,832
Others (12 companies)								43,586		43,508
								1,846,626		1,721,995
							W	2,046,389		1,911,311

(*1) As of September 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 nine-month period ended September 30, 2019 and the year ended December 31, 2018 were as follows:

1) For the nine-month period ended September 30, 2019

(in millions of Won)
Company	December 31, 2018 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(* 1)			September 30, 2019 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	174,123		—		—			(750	)		—			173,373
POSPower Co., Ltd		161,477		—		—			(3,886	)		7,336			164,927
SNNC		116,922		—		(1,450	)		17,636			—			133,108
QSONE Co., Ltd.		85,550		—		(950	)		1,239			—			85,839
Chun-cheon Energy Co., Ltd		62,478		6,050		—			(7,833	)		—			60,695
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		17,382		—		—			447			—			17,829
Daesung Steel		15,644		—		—			(86	)		—			15,558
Incheon-Gimpo Expressway Co., Ltd.		13,329		—		—			(3,334	)		—			9,995
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund		11,183		—		—			(413	)		—			10,770
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		5,739		—		—			103			—			5,842
KONES, Corp.		2,849		—		—			(456	)		—			2,393
POSCO MITSUBISHI CARBON TECHNOLOGY		180,192		—		(16,369	)		24,343			—			188,166
Others (59 companies)		132,858		31,247		(1,063	)		(4,098	)		(16,614	)		142,330
		979,726		37,297		(19,832	)		22,912			(9,278	)		1,010,825
[Foreign]
AES-VCM Mong Duong Power Company Limited		209,936		—		(18,099	)		14,247			(32,596	)		173,488
South-East Asia Gas Pipeline Company Ltd.		179,459		—		(24,267	)		52,032			15,295			222,519
7623704 Canada Inc.		126,885		—		(9,902	)		10,642			9,681			137,306
Eureka Moly LLC		82,447		—		—			(42	)		6,134			88,539
AMCI (WA) PTY LTD		71,086		—		—			(3,324	)		2,225			69,987
Nickel Mining Company SAS		41,712		—		—			(8,764	)		1,196			34,144
KOREA LNG LTD.		43,554		—		(10,934	)		11,020			4,688			48,328
NCR LLC		37,602		6,029		—			(418	)		2,905			46,118
ZHEJIANG HUAYOU-POSCO ESM CO., LTD				22,423		—			58			246			22,727
PT. Batutua Tembaga Raya		20,479		—		—			(2,583	)		826			18,722
PT. Wampu Electric Power		14,120		—		—			(656	)		984			14,448
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		14,796		—		—			38			622			15,456
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,478		—		—			(65	)		384			6,797
Roy Hill Holdings Pty Ltd		1,041,600		—		—			109,354			30,345			1,181,299
POSCO-NPS Niobium LLC		363,506		—		(20,560	)		20,204			27,398			390,548
KOBRASCO		133,449		—		(74,716	)		49,426			344			108,503
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,391		—		(1,574	)		393			2,958			90,168
DMSA/AMSA		26,709		18,557		—			(17,078	)		4,334			32,522
CSP - Compania Siderurgica do Pecem		24,832		35,352		—			(57,647	)		(2,537	)
Others (39 companies)		143,236		507		(15,077	)		30,448			8,253			167,367
		2,670,277		82,868		(175,129	)		207,285			83,685			2,868,986
	W	3,650,003		120,165		(194,961	)		230,197			74,407			3,879,811

21

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(*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.

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 NO1 Natural Resources Private Equity Fund	W	175,553		—		—			(1,430	)		—			174,123
POSPower 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 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 September 30, 2019

(Unaudited)

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

1) September 30, 2019

(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	536,062		767		535,295			—		(679	)
POSPower Co., Ltd		698,286		181,166		517,120			—		(3,580	)
SNNC		668,917		367,101		301,816			528,041		44,349
QSONE Co., Ltd.		249,689		78,011		171,678			13,025		2,479
Chun-cheon Energy Co., Ltd		618,602		492,798		125,804			242,600		(16,342	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		59,416		29,352		30,064			10,788		1,513
Daesung Steel		171,618		114,307		57,311			66,564		(492	)
Incheon-Gimpo Expressway Co., Ltd.		1,023,739		946,887		76,852			37,217		(22,836	)
Keystone NO. 1. Private Equity Fund		177,569		145,812		31,757			12,772		(1,022	)
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund		47,657		919		46,738			1,237		823
KONES, Corp.		1,458		1,350		108			2,376		(1,096	)
POSCO MITSUBISHI CARBON TECHNOLOGY		563,195		250,323		312,872			181,866		40,579
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,862,074		973,435		888,639			409,650		207,789
7623704 Canada Inc.		1,336,112		3,703		1,332,409			—		102,327
Nickel Mining Company SAS		480,146		358,409		121,737			147,946		(18,612	)
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		72,546		15,780		56,766			519		144
KOREA LNG LTD.		241,783		144		241,639			56,689		55,099
PT. Batutua Tembaga Raya		412,522		362,834		49,688			89,677		(11,706	)
PT. Wampu Electric Power		227,225		157,984		69,241			12,003		(3,280	)
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		63,583		12,478		51,105			75,278		111
POSCO SeAH Steel Wire (Nantong) Co., Ltd.		60,536		32,810		27,726			53,189		(274	)
Roy Hill Holdings Pty Ltd		11,032,873		6,194,722		4,838,151			3,377,226		1,133,019
POSCO-NPS Niobium LLC		780,893		—		780,893			—		38,842
KOBRASCO		341,121		124,115		217,006			144,703		98,853
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		1,055,458		722,402		333,056			963,076		1,256
DMSA/AMSA		5,878,517		4,375,311		1,503,206			455,396		(426,928	)
CSP - Compania Siderurgica do Pecem		4,044,214		4,318,983		(274,769	)		1,294,561		(454,922	)

23

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 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 Natural 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 September 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 September 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 land multi-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 the nine-month period ended September 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation(*1)			Others(*2)			Ending
Land	W	278,585		—		(247	)		(562	)		593			278,369
Buildings		571,335		332		(720	)		(15,746	)		86,684			641,885
Structures		1,408		—		—			(470	)		181			1,119
Construction-in-progress		77,287		18,719		—			—			(96,006	)		—
	W	928,615		19,051		(967	)		(16,778	)		(8,548	)		921,373

(*1) Includes impairment loss on investment property amounting toW1,004 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 September 30, 2019

(Unaudited)

(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.

12. Property, Plant and Equipment, Net

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

(a) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Depreciation			Impairment loss(*1)			Others(*2)			Ending
Land	W	2,548,002		8,840		—		(11,783	)		—			—			17,276			2,562,335
Buildings		4,402,452		12,993		50,113		(6,320	)		(235,728	)		(21,499	)		129,474			4,331,485
Structures		2,917,924		11,387		—		(1,040	)		(170,080	)		(9,615	)		85,626			2,834,202
Machinery and equipment		18,518,129		96,753		3,051		(26,669	)		(1,674,837	)		(152,253	)		775,566			17,539,740
Vehicles		31,341		4,553		100		(753	)		(11,239	)		29			6,340			30,371
Tools		66,164		10,322		187		(482	)		(20,832	)		(65	)		30,182			85,476
Furniture and fixtures		136,287		24,014		7		(1,053	)		(27,085	)		(137	)		7,642			139,675
Lease assets(*3)		137,564		93,329		—		(12,700	)		(109,512	)		—			681,355			790,036
Bearer plants		80,771		—		—		—			(4,193	)		—			43,257			119,835
Construction-in-progress		1,179,639		1,493,867		367		(7,741	)		—			(10,150	)		(754,339	)		1,901,643
	W	30,018,273		1,756,058		53,825		(68,541	)		(2,253,506	)		(193,690	)		1,022,379			30,334,798

(*1) The controlling company estimated recoverable amount for individual assets such as CEM andFe-Si factories that ceased operations due to the disposal plan and others by calculating net fair value based on the appraisal value or scrap value and recognized an impairment loss ofW194,004 million for assets since recoverable amounts are less than their carrying amounts for the nine-month period ended September 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 ofK-IFRS No. 1116 “Leases” (January 1, 2019), recognition ofW638,395 million ofright-of-use assets is included in others.

26

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(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 of 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 is determined at their expected scrap value less cost of disposal. 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 estimated based on 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 and deducting 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., a subsidiary, performed the impairment test due to the consecutive operating losses 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 September 30, 2019

(Unaudited)

13. Goodwill and Other Intangible Assets, Net

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

(a) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Amortization			Impairment loss			Others(* 2)			Ending
Goodwill	W	1,125,149		—		31,557		—			—			—			(721	)		1,155,985
Intellectual property rights		2,399,525		96,484		—		(827	)		(192,769	)		(2,558	)		42,705			2,342,560
Premium in rental(*1)		134,793		11,389		—		(7,155	)		(1,139	)		101			6,379			144,368
Development expense		99,163		2,128		—		—			(32,967	)		—			19,026			87,350
Port facilities usage rights		305,081		—		—		—			(17,320	)		—			1			287,762
Exploratation and evaluation assets		192,130		5,005		—		—			—			(118,143	)		(480	)		78,512
Customer relationships		421,773		—		—		—			(41,379	)		—			5,635			386,029
Other intangible assets		493,211		102,374		117		(4,858	)		(31,373	)		(4,189	)		(16,948	)		538,334
	W	5,170,825		217,380		31,674		(12,840	)		(316,947	)		(124,789	)		55,597			5,020,900

(*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 September 30, 2019

(Unaudited)

14. Other Assets

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Advance payments	W	509,472		539,894
Prepaid expenses		173,747		123,770
Firm commitment asset		17,728		11,246
Emission rights		18,840		—
Others		7,487		9,554
	W	727,274		684,464
Non-current
Long-term advance payments	W	22,009		24,280
Long-term prepaid expenses		43,800		334,918
Others(*1)		249,310		149,566
	W	315,119		508,764

(*1) As of September 30, 2019 and December 31, 2018, the Company recognized tax assets amounting toW187,197 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.

15. Borrowings

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

(in millions of Won)	Lenders	Interest rate (%)		September 30, 2019			December 31, 2018
Short-term borrowings
Bank overdrafts	JP Morgan and others		0.7~9.1	W	158,227			294,364
Short-term borrowings	HSBC and others		0.2~10.0		6,250,805			7,193,416
					6,409,032			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		1,079,603			1,234,915
Current portion of debentures	Korea Development Bank and others		2.0~7.7		869,907			1,568,108
Less: Current portion of discount on debentures issued					(467	)		(1,184	)
					1,949,043			2,801,839
				W	8,358,075			10,289,619

29

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

(in millions of Won)	Lenders	Interest rate (%)		September 30, 2019			December 31, 2018
Long-term borrowings	Export-Import Bank of Korea and others		0.2~8.8	W	4,449,764			4,499,199
Less: Present value discount					(27,400	)		(30,526	)
Debentures	Mirae Asset Daewoo Co., Ltd. and others		1.7~4.3		7,100,440			5,469,580
Less: Discount on debentures issued					(25,997	)		(18,602	)
				W	11,496,807			9,919,651

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

(in millions of Won)	Lenders	Book value		Pledged amount
Cash and cash equivalents	Sinhan Bank and others	W	6,612		6,612
Property, plant and equipment and Investment property	Korea Development Bank and others		4,518,179		5,127,519
Trade accounts and notes receivable	Korea Development Bank and others		113,771		113,771
Inventories	Export-Import Bank of Korea and others		188,142		78,591
Financial instruments	Woori Bank and others		45,784		45,784
		W	4,872,488		5,372,277

16. Other Payables

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Accounts payable	W	867,098		783,562
Accrued expenses		722,060		720,773
Dividend payable		3,513		8,673
Lease liabilities(*1)		139,989		10,152
Withholdings		158,276		196,937
	W	1,890,936		1,720,097
Non-current
Accounts payable	W	2,890		1,624
Accrued expenses		3,583		19,021
Lease liabilities(*1)		558,237		84,602
Long-term withholdings		53,398		43,621
	W	618,108		148,868

(*1) As of September 30, 2019, the Company recognized lease liabilities ofW604,620 million on initial application ofK-IFRS No.1116 ”Leases”.

30

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

17. Other Financial Liabilities

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Derivative liabilities	W	56,276		27,328
Financial guarantee liabilities		47,953		50,472
	W	104,229		77,800
Non-current
Derivative liabilities	W	8,541		46,429
Financial guarantee liabilities		9,613		17,733
	W	18,154		64,162

18. Provisions

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

	September 30, 2019				December 31, 2018
(in millions of Won)	Current		Non-current		Current		Non-current
Provision for bonus payments	W	49,210		47,325		46,514		26,964
Provision for construction warranties		9,460		155,309		11,842		130,391
Provision for legal contingencies and claims(*1)		10,085		67,267		16,981		94,169
Provision for the restoration(*2)		5,447		96,517		9,379		79,789
Others(*3)		187,883		136,326		216,564		99,723
	W	262,085		502,744		301,280		431,036

(*1) The Company recognized probable outflow of resources amounting toW46,816 million andW50,888 million as provisions in relation to lawsuits against the Company as of September 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,W24,840 million as provisions for restoration as of September 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 1.67~1.73% to measure present value of these costs.

(*3) As of September 30, 2019 and December 31, 2018, POSCO ENERGY CO., LTD., a subsidiary of the Company, recognizedW212,344 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.

31

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

1) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others(*1)			Ending
Provision for bonus payments	W	73,478		60,151		(51,199	)		(3,408	)		17,513			96,535
Provision for construction warranties		142,233		41,198		(17,194	)		(1,385	)		(83	)		164,769
Provision for legal contingencies and claims		111,150		11,445		(32,872	)		(16,060	)		3,689			77,352
Provision for the restoration		89,168		23,532		(11,369	)		(2,240	)		2,873			101,964
Others		316,287		102,355		(32,659	)		(60,737	)		(1,037	)		324,209
	W	732,316		238,681		(145,293	)		(83,830	)		22,955			764,829

(*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 and nine-month periods ended September 30, 2019 and 2018 were as follows:

	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2019		2018		2019		2018
Expense related to post-employment benefit plans under defined contribution plans	W	11,469		12,198		35,527		32,783

32

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	September 30, 2019			December 31, 2018
Present value of funded obligations	W	2,253,831			2,117,829
Fair value of plan assets(*1)		(1,960,174	)		(1,997,717	)
Present value ofnon-funded obligations		23,168			19,332
Net defined benefit liabilities	W	316,825			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 the nine-month period ended September 30, 2019 and the year ended December 31, 2018 were as follows:

(in millions of Won)	September 30, 2019			December 31, 2018
Defined benefit obligation at the beginning of period	W	2,137,161			1,843,135
Current service costs		173,669			212,323
Interest costs		38,700			54,950
Remeasurements		33,381			212,678
Benefits paid		(113,214	)		(189,165	)
Others		7,302			3,240
Defined benefit obligation at the end of period	W	2,276,999			2,137,161

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

(in millions of Won)	September 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		36,297			50,784
Remeasurement of plan assets		(7,127	)		(19,761	)
Contributions to plan assets		18,687			408,326
Benefits paid		(90,378	)		(163,112	)
Others		4,978			7,314
Fair value of plan assets at the end of period	W	1,960,174			1,997,717

33

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2019		2018		2019		2018
Current service costs	W	58,679		51,625		173,669		158,462
Net interest costs		168		938		2,403		2,723
	W	58,847		52,563		176,072		161,185

20. Other Liabilities

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Due to customers for contract work	W	587,391		709,180
Advances received		762,865		567,375
Unearned revenue		59,873		49,805
Withholdings		291,200		233,981
Firm commitment liability		15,103		24,373
Others		14,927		10,174
	W	1,731,359		1,594,888
Non-current
Unearned revenue	W	32,993		42,992
Others		58,978		84,369
	W	91,971		127,361

34

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

21. Financial Instruments

(a) Classification and fair value of financial instruments

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

① September 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	179,741		—		179,741		—		179,741
Short-term financial instruments		5,841,845		—		5,841,845		—		5,841,845
Debt securities		28,939		—		—		28,939		28,939
Other securities		334,717		4,139		73		330,505		334,717
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments(*2)		9,295		—		9,295		—		9,295
Fair value through other comprehensive income
Equity securities		1,134,473		770,003		—		364,470		1,134,473
Debt securities		5,728		—		—		5,728		5,728
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		2,831,727		—		—		—		—
Trade accounts and notes receivable		8,954,884		—		—		—		—
Other receivables		2,167,500		—		—		—		—
Debt securities		314,552		—		—		—		—
Deposit instruments		1,749,078		—		—		—		—
	W	23,554,479		774,142		6,030,954		731,642		7,536,738
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	56,038		—		56,038		—		56,038
Derivative hedging instruments(*2)		8,779		—		8,779		—		8,779
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		3,731,888		—		—		—		—
Borrowings		19,854,882		—		20,151,073		—		20,151,073
Financial guarantee liabilities		57,566		—		—		—		—
Others		2,094,078		—		—		—		—
	W	25,803,231		—		20,215,890		—		20,215,890

(*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.

35

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 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		—		—		—		—
Deposit 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 the nine-month periods ended September 30, 2019 and 2018 were as follows:

① For the nine-month period ended September 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 loss
Financial assets at fair value through profit or loss	W	105,893			(8,395	)		—			9,931			630			108,059			—
Derivatives assets		—			203,729			—			143,072			—			346,801			—
Financial assets at fair value through other comprehensive income		—			—			—			—			66,041			66,041			(63,708	)
Financial assets measured at amortized cost		122,398			—			528,105			(29,504	)		(309	)		620,690			—
Derivatives liabilities		—			(24,038	)		—			(180,061	)		—			(204,099	)		(81	)
Financial liabilities measured at amortized cost		(571,024	)		—			(569,715	)		(2,431	)		(17,175	)		(1,160,345	)		—
	W	(342,733	)		171,296			(41,610	)		(58,993	)		49,187			(222,853	)		(63,789	)

② For the nine-month period ended September 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	105,627			(432	)		—			5,336			1,975			112,506			—
Derivatives assets		—			41,573			—			170,893			—			212,466			—
Financial assets at fair value through other comprehensive income		—			—			—			—			48,192			48,192			(24,454	)
Financial assets measured at amortized cost		131,709			—			125,751			(30,677	)		(275	)		226,508			—
Derivatives liabilities		—			(27,503	)		—			(150,546	)		—			(178,049	)		(174	)
Financial liabilities measured at amortized cost		(533,550	)		—			(367,510	)		—			(8,306	)		(909,366	)		—
	W	(296,214	)		13,638			(241,759	)		(4,994	)		41,586			(487,743	)		(24,628	)

36

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

① For the three-month period ended September 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	37,796			(7,023	)		—			3,507			—			34,280			—
Derivatives assets		—			95,751			—			60,483			—			156,234			—
Financial assets at fair value through other comprehensive income		—			—			—			—			15,293			15,293			(81,552	)
Financial assets measured at amortized cost		36,518			—			242,400			(10,264	)		(94	)		268,560			—
Derivatives liabilities		—			(21,193	)		—			(69,027	)		—			(90,220	)		19
Financial liabilities measured at amortized cost		(179,820	)		—			(285,364	)		—			(8,167	)		(473,351	)		—
	W	(105,506	)		67,535			(42,964	)		(15,301	)		7,032			(89,204	)		(81,533	)

② For the three-month period ended September 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 income
Financial assets at fair value through profit or loss	W	36,393			(326	)		—			(80	)		—			35,987			—
Derivatives assets		—			(23,933	)		—			73,656			—			49,723			—
Financial assets at fair value through other comprehensive income		—			—			—			—			5,931			5,931			36,687
Financial assets measured at amortized cost		43,988			—			(112,913	)		(8,881	)		(90	)		(77,896	)		—
Derivatives liabilities		—			(14,084	)		—			(54,253	)		—			(68,337	)		64
Financial liabilities measured at amortized cost		(195,894	)		—			10,019			—			(10,593	)		(196,468	)		—
	W	(115,513	)		(38,343	)		(102,894	)		10,442			(4,752	)		(251,060	)		36,751

(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.

37

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

22. Share Capital and Capital Surplus

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

(Share, in Won)	September 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 September 30, 2019, total number of ADRs of 35,339,236 outstanding in overseas stock market are equivalent to 8,834,809 shares of common stock.

(*2) As of September 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	September 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		110,782		162,679
	W	1,371,230		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 September 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	W28,346
Voting rights	No voting rights for 3 years from issue date
Dividend rights	Comparative,Non-participating
	•  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 to common shares from 3 years after the issue date to the end of the redemption period (10 years). Conversion price is equal to issue price, which could be adjusted according to anti-dilution clause.

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.

38

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

23. Hybrid Bonds

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

(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		September 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 September 30, 2019 are as follows:

	Hybrid bond1-2
Maturity	30 years (POSCO has a right to extend the maturity)
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 September 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		September 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

39

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

	Hybrid bond1-4
Maturity	30 years (The issuer has a right to extend the maturity)
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 September 30, 2019 amounts toW639 million.

24. Reserves

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

(in millions of Won)	September 30, 2019			December 31, 2018
Accumulated comprehensive loss of investments in associates and joint ventures	W	(619,285	)		(670,435	)
Changes in fair value of equity investments at fair value through other comprehensive income		(338,211	)		(295,300	)
Foreign currency translation differences		(94,911	)		(417,817	)
Gains or losses on valuation of derivatives		(429	)		(352	)
Others		(16,504	)		(20,464	)
	W	(1,069,340	)		(1,404,368	)

25. Treasury Shares

As of September 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.

40

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

26. Revenue

(a) Disaggregation of revenue

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

① For the nine-month period ended September 30, 2019

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	23,988,855		16,121,940				517,833		40,628,628
Revenue from services		451,076		288,736		37,055		1,718,722		2,495,589
Revenue from construction contract						4,859,983		22,602		4,882,585
Others		37,705		105,798		4,427		169,067		316,997
	W	24,477,636		16,516,474		4,901,465		2,428,224		48,323,799
Timing of revenue recognition
Revenue recognized at a point in time	W	24,026,560		16,227,738		15,859		692,162		40,962,319
Revenue recognized over time		451,076		288,736		4,885,606		1,736,062		7,361,480
	W	24,477,636		16,516,474		4,901,465		2,428,224		48,323,799

② For the nine-month period ended September 30, 2018

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	23,973,412		16,103,338		3,345		441,017		40,521,112
Revenue from services		437,585		480,743		49,981		1,606,067		2,574,376
Revenue from construction contract						4,862,741		26,437		4,889,178
Others		32,757		113,201		16,300		209,382		371,640
	W	24,443,754		16,697,282		4,932,367		2,282,903		48,356,306
Timing of revenue recognition
Revenue recognized at a point in time	W	24,006,169		16,216,539		19,645		657,001		40,899,354
Revenue recognized over time		437,585		480,743		4,912,722		1,625,902		7,456,952
	W	24,443,754		16,697,282		4,932,367		2,282,903		48,356,306

41

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

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

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	8,068,894		5,184,949				176,097		13,429,940
Revenue from services		139,345		92,265		12,487		563,946		808,043
Revenue from construction contract						1,637,441		5,505		1,642,946
Others		14,767		36,896		975		54,659		107,297
	W	8,223,006		5,314,110		1,650,903		800,207		15,988,226
Timing of revenue recognition
Revenue recognized at a point in time	W	8,083,661		5,221,845		10,131		230,756		13,546,393
Revenue recognized over time		139,345		92,265		1,640,772		569,451		2,441,833
	W	8,223,006		5,314,110		1,650,903		800,207		15,988,226

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

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	7,996,136		5,532,883		1,167		159,153		13,689,339
Revenue from services		155,430		168,515		12,138		512,106		848,189
Revenue from construction contract						1,741,179		1,468		1,742,647
Others		14,345		40,025		2,703		73,478		130,551
	W	8,165,911		5,741,423		1,757,187		746,205		16,410,726
Timing of revenue recognition
Revenue recognized at a point in time	W	8,010,481		5,572,908		3,870		234,293		13,821,552
Revenue recognized over time		155,430		168,515		1,753,317		511,912		2,589,174
	W	8,165,911		5,741,423		1,757,187		746,205		16,410,726

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

(in millions of Won)	September 30, 2019		December 31, 2018
Receivables
Account receivables	W	8,954,884		8,819,617
Contract assets
Due from customers for contract work		1,071,556		890,117
Contract liabilities
Advance received		762,341		592,125
Due to customers for contract work		587,391		709,180
Unearned revenue		92,636		91,872

42

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

27. Revenue – Contract Balances

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

(in millions of Won)	September 30, 2019						December 31, 2018
	Construction segment			Others			Construction segment			Others
Accumulated cost	W	27,782,574			251,507			27,860,778			234,092
Accumulated contract profit		2,647,024			44,967			2,266,897			34,815
Accumulated contract loss		(1,120,766	)		(2,061	)		(792,496	)		(12,042	)
Accumulated contract revenue		29,308,832			294,413			29,335,179			256,865

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

(in millions of Won)	September 30, 2019						December 31, 2018
	Construction segment			Others			Construction segment			Others
Due from customers for contract work	W	1,105,075			41,311			914,489			48,571
Due to customers for contract work		(556,970	)		(30,421	)		(676,990	)		(32,190	)
	W	548,105			10,890			237,499			16,381

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

(in millions of Won)	September 30, 2019		December 31, 2018
Construction segment	W	35,443		31,067
Others		540		1,203
	W	35,983		32,270

43

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(d) Due to the factors causing the variation of costs for the nine-month period ended September 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 the nine-month period ended September 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	443,237		(126,141	)		24,911			(101,230	)
Others		2,158		13,320			(4,799	)		8,521
	W	445,395		(112,821	)		20,112			(92,709	)

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contracts to September 30, 2019. The estimation is evaluated for the total contract cost and expected total contract revenue at the end of the reporting period. Also, it may change in 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 against the estimated total cost of completion. 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.

44

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

28. Selling and Administrative Expenses

(a) Other administrative expenses

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

(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2019		2018			2019		2018
Wages and salaries	W	210,590		191,939			616,453		599,478
Expenses related to post-employment benefits		24,774		15,609			64,844		52,767
Other employee benefits		42,701		40,707			131,822		136,794
Travel		10,250		9,778			31,431		29,872
Depreciation		33,761		22,909			99,381		74,512
Amortization		28,110		28,200			84,912		83,636
Communication		2,517		2,367			7,546		7,310
Electricity expenses		2,480		2,191			6,511		6,372
Taxes and public dues		15,574		13,268			47,430		52,265
Rental		9,420		18,527			30,097		52,907
Repairs		3,107		2,123			9,731		9,990
Entertainment		2,738		2,886			8,379		8,518
Advertising		21,276		21,384			63,241		81,184
Research & development		26,839		32,359			83,521		84,130
Service fees		37,417		36,102			125,005		115,360
Vehicles maintenance		1,685		2,305			5,932		6,487
Industry association fee		1,738		1,288			7,155		7,198
Conference		3,462		3,135			11,272		10,141
Increase to (reversal of) provisions		2,126		(11,267	)		4,608		10,679
Others		10,205		10,755			34,118		32,307
	W	490,770		446,565			1,473,389		1,461,907

45

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(b) Selling expenses

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

(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2019		2018		2019		2018
Freight and custody expenses(*1)	W	42,775		43,576		130,312		127,925
Operating expenses for distribution center		2,201		2,673		7,452		7,851
Sales commissions		18,565		17,214		57,164		47,352
Sales advertising		341		1,006		945		2,049
Sales promotion		2,202		3,555		7,217		9,930
Sample		503		458		1,631		1,928
Sales insurance premium		8,208		9,127		24,133		28,307
Contract cost		8,605		6,057		24,684		11,052
Others		4,624		3,760		15,949		10,492
	W	88,024		87,426		269,487		246,886

(*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 September 30, 2019 to those for the same period ended September 30, 2018, the company reclassifiedW922,276 million of expense of shipping service to cost of sales for the nine-month period ended September 30, 2018. This reclassification does not affect the amount of net assets for the year ended December 31, 2018, and net income for the nine-month period ended September 30, 2018.

46

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

29. Finance Income and Costs

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

(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2019		2018			2019		2018
Finance income
Interest income(*1)	W	74,314		80,381			228,291		237,336
Dividend income		15,293		5,931			66,671		50,167
Gain on foreign currency transactions		258,433		206,390			638,199		531,848
Gain on foreign currency translations		77,820		(156,026	)		277,437		177,432
Gain on derivatives transactions		63,843		74,780			148,443		173,231
Gain on valuations of derivatives		97,054		(35,751	)		243,923		79,230
Gain on disposals of financial assets at fair value through profit or loss		5,318		71			12,298		6,461
Gain on valuations of financial assets at fair value through profit or loss		9,673		110			11,120		4,377
Others		969		(1,898	)		3,212		4,026
	W	602,717		173,988			1,629,594		1,264,108
Finance costs
Interest expenses	W	179,820		195,894			571,024		533,550
Loss on foreign currency transactions		219,368		237,961			534,666		562,853
Loss on foreign currency translations		159,849		(84,703	)		422,580		388,186
Loss on derivatives transactions		72,387		55,377			185,432		152,884
Loss on valuation of derivatives		22,496		2,266			64,232		65,160
Loss on disposal of trade accounts and notes receivable		10,264		8,881			29,504		30,677
Loss on disposals of financial assets at fair value through profit or loss		1,810		151			2,367		1,125
Loss on valuations of financial assets at fair value through profit or loss		16,697		436			19,515		4,809
Others		9,231		8,785			23,127		12,607
	W	691,922		425,048			1,852,447		1,751,851

(*1) Interest income calculated using the effective interest method for the nine-month periods ended September 30, 2019 and 2018 wereW122,398 million andW131,709 million, respectively.

47

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

30. OtherNon-Operating Income and Expenses

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

(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2019		2018			2019		2018
Othernon-operating income
Gain on disposals of assets held for sale	W	—		12,019			8,536		12,123
Gain on disposals of investments in subsidiaries, associates and joint ventures		4,929		1,101			20,750		45,500
Gain on disposals of property, plant and equipment		5,567		15,721			21,929		36,811
Gain on disposals of intangible assets		820		9,431			1,346		110,814
Gain on valuation of firm commitment		22,952		12,229			51,920		39,190
Gain on valuation of emission rights		—		—			25,440		—
Gain on disposals of emission rights		11,141		—			11,141		—
Reversal of other provisions		29,120		72			35,291		2,946
Others(*1)		40,384		58,548			95,928		188,822
	W	114,913		109,121			272,281		436,206
Othernon-operating expenses
Impairment loss on assets held for sale	W	37,597		685			40,943		47,581
Loss on disposals of investments in subsidiaries, associates and joint ventures		281		14			5,867		3,419
Loss on disposals of property, plant and equipment		23,826		19,493			61,222		78,565
Impairment losses on property, plant and equipment		45,029		20			194,688		18,890
Impairment losses on intangible assets		124,525		312			125,696		2,075
Loss on valuation of firm commitment		11,704		17,422			30,276		36,117
Idle tangible assets expenses		8,192		2,073			26,619		6,475
Increase to provisions		5,801		7,593			13,172		82,234
Donations		12,935		743			24,129		25,726
Others(*2)		20,317		(76,680	)		71,463		117,158
	W	290,207		(28,325	)		594,075		418,240

(*1) During the nine-month period ended September 30, 2018, the Company recognizedW55,306 million of tax refund other than corporate income tax due to the consequences of appeal to tax tribunal and claim for rectification against tax investigation asnon-operating income.

(*2) During the nine-month period ended September 30, 2018, the Company recognizedW52,997 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 September 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 and nine-month periods ended September 30, 2019 and 2018 were as follows (excluding finance costs and income tax expense):

(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2019		2018		2019		2018
Raw material used, changes in inventories and others	W	9,417,705		9,648,661		28,674,400		28,327,941
Employee benefits expenses		942,398		806,757		2,688,563		2,572,037
Outsourced processing cost		2,067,057		1,840,462		5,829,808		5,323,868
Electricity expenses		247,474		220,731		726,188		684,153
Depreciation(*1)		746,172		730,641		2,269,280		2,167,285
Amortization		113,214		69,239		316,947		273,674
Freight and custody expenses		353,335		367,035		1,084,969		1,050,201
Sales commissions		18,565		17,214		57,164		47,352
Loss on disposal of property, plant and equipment		23,826		19,493		61,222		78,565
Impairment loss on property, plant and equipment		45,029		20		194,688		18,890
Impairment loss on intangible assets		124,525		312		125,696		2,075
Donations		12,935		743		24,129		25,726
Other expenses		1,142,350		1,145,863		3,586,881		3,961,405
	W	15,254,585		14,867,171		45,639,935		44,533,172

(*1) Includes depreciation expense of investment property.

32. Income Taxes

The effective tax rates of the Company for the nine-month periods ended September 30, 2019 and 2018 were 34.13% and 29.46%, respectively.

49

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

33. Earnings per Share

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

(in Won except per share information)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2019			2018			2019			2018
Profit attribute to controlling interest	W	430,875,315,211			1,019,525,874,393			1,784,414,381,573			2,558,060,147,314
Interests of hybrid bonds		(1,681,205,479	)		(1,681,205,479	)		(4,988,794,519	)		(16,039,780,819	)
Weighted-average number of common shares outstanding (*1)		80,115,641			80,000,982			80,113,124			80,000,428
Basic and diluted earnings per share	W	5,357			12,723			22,211			31,775

(*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	)		(7,185,853	)		(7,073,711	)		(7,186,407	)
Weighted-average number of common shares outstanding		80,115,641			80,000,982			80,113,124			80,000,428

Since there were no potential shares of common stock which had dilutive effects as of September 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 September 30, 2019

(Unaudited)

34. Related Party Transactions

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

1) For the nine-month period ended September 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	5,151		11,110		—		226,604		25		12,064
POSCO COATED & COLOR STEEL Co., Ltd.		354,046		1,942		95		—		13,595		586
POSCO ICT(*4)		2,213		4,990		—		226,456		26,235		131,522
eNtoB Corporation		11		66		231,896		28,678		72		18,443
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		289,090		30,298		389,598		12,396		236,114		3,084
POSCO ENERGY CO., LTD.(*5)		147,124		1,252		1,090		—		—		1,672
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		4,426,067		46,572		459,705		—		38,067		4,516
POSCO Thainox Public Company Limited		188,527		13,795		6,706		—		—		3
POSCO America Corporation		232,724		—		—		—		—		1,682
POSCO Canada Ltd.		340		751		245,123		—		—		—
POSCO Asia Co., Ltd.		1,300,580		975		323,203		72		1,484		5,093
Qingdao Pohang Stainless Steel Co., Ltd.		99,757		—		—		—		—		—
POSCO JAPAN Co., Ltd.		1,134,448		36		29,843		3,685		—		2,898
POSCO-VIETNAM Co., Ltd.		222,692		263		—		—		—		37
POSCO MEXICO S.A. DE C.V.		238,357		89		—		—		—		246
POSCO Maharashtra Steel Private Limited		513,467		266		—		—		—		256
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		81,829		1		2,189		—		—		—
POSCO VST CO., LTD.		217,034		—		—		—		—		62
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		285		514,751		—		—		—
Others		685,845		17,396		106,193		19,147		182,202		119,078
		10,139,302		130,087		2,310,392		517,038		497,794		301,242
Associates and joint ventures(*3)
POSCO PLANTEC Co., Ltd.		412		70		2,009		183,351		12,994		16,430
SNNC		4,121		3,910		420,720		—		—		10
POSCO-SAMSUNG-Slovakia Processing Center		50,894		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		841,866		—		—		—
Others		11,830		107,865		43,088		—		—		—
		67,257		111,845		1,307,683		183,351		12,994		16,440
	W	10,206,559		241,932		3,618,075		700,389		510,788		317,682

(*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 September 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.

(*5) During the nine-month period ended September 30, 2019, POSCO ENERGY CO., LTD, subsidiary of the Company, spun offOff-gas power station business sector and it was merged into the Controlling Company. The Controlling Company disposed of LNG terminal business to POSCO ENERGY CO., LTD.

51

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

2) For the nine-month period ended September 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	6,369		76		—		196,752		12		29,718
POSCO COATED & COLOR STEEL Co., Ltd.		356,527		2,724		—		—		6,869		1,276
POSCO ICT		1,972		7,475		—		204,736		24,754		139,216
eNtoB Corporation		9		60		264,079		18,832		217		20,548
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		302,031		28,457		395,063		17,218		234,193		1,271
POSCO ENERGY CO., LTD.		146,878		1,060		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		4,510,731		41,542		532,993		—		43,401		1,200
POSCO Thainox Public Company Limited		215,188		5,249		8,508		—		—		—
POSCO America Corporation		231,452		—		—		—		—		1,715
POSCO Canada Ltd.		190		1,234		197,650		—		—		—
POSCO Asia Co., Ltd.		1,412,737		189		430,584		556		1,876		2,866
Qingdao Pohang Stainless Steel Co., Ltd.		134,544		7		—		—		—		34
POSCO JAPAN Co., Ltd.		1,056,147		6		18,655		2,528		—		2,574
POSCO-VIETNAM CO., Ltd.		220,718		71		—		—		—		8
POSCO MEXICO S.A. DE C.V.		220,900		59		—		—		—		35
POSCO Maharashtra Steel Private Limited		423,802		490		—		—		—		115
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		165,483		—		1,111		—		—		5
POSCO VST CO., LTD.		225,298		1		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		136		170,716		—		—		—
Others		671,217		36,323		115,059		15,708		193,469		95,559
		10,302,193		125,159		2,134,418		456,330		504,791		296,140
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		9,275		144		2,340		119,442		17,299		5,397
SNNC		3,784		799		384,903		—		—		5
POSCO-SAMSUNG-Slovakia Processing Center		56,357		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		602,687		—		—		—
Others		8,557		53,013		54,996		—		—		5
		77,973		53,956		1,044,926		119,442		17,299		5,407
	W	10,380,166		179,115		3,179,344		575,772		522,090		301,547

52

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

1) For the three-month period ended September 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	1,543		21		—		87,255		4		6,831
POSCO COATED & COLOR STEEL Co., Ltd.		120,638		235		95		—		5,911		95
POSCO ICT		704		1		—		77,639		9,180		42,684
eNtoB Corporation		4		6		72,320		11,742		13		5,012
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		91,297		5,169		134,299		4,818		79,731		1,074
POSCO ENERGY CO., LTD.		40,522		628		1,090		—		—		1,610
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,584,691		—		129,661		—		12,030		1,947
POSCO Thainox Public Company Limited		68,495		120		2,973		—		—		—
POSCO America Corporation		48,207		—		—		—		—		1,643
POSCO Canada Ltd.		—		147		93,231		—		—		—
POSCO Asia Co., Ltd.		438,809		390		74,772		72		497		2,297
Qingdao Pohang Stainless Steel Co., Ltd.		40,347		—		—		—		—		—
POSCO JAPAN Co., Ltd.		378,091		36		8,290		664		—		1,411
POSCO-VIETNAM Co., Ltd.		81,157		82		—		—		—		—
POSCO MEXICO S.A. DE C.V.		84,591		58		—		—		—		241
POSCO Maharashtra Steel Private Limited		179,859		79		—		—		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		38,516		1		708		—		—		—
POSCO VST CO., LTD.		80,009		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		105		192,541		—		—		—
Others		260,530		2,836		25,138		8,575		48,620		58,287
		3,538,010		9,914		735,118		190,765		155,986		123,132
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		229		5		610		72,737		3,668		7,068
SNNC		1,374		530		176,094		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		19,130		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		359,018		—		—		—
Others		4,845		21,828		15,961		—		—		—
		25,578		22,363		551,683		72,737		3,668		7,068
	W	3,563,588		32,277		1,286,801		263,502		159,654		130,200

53

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

2) For the three-month period ended September 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	1,402		13		—		57,027		3		6,513
POSCO COATED & COLOR STEEL Co., Ltd.		129,328		—		—		—		2,651		612
POSCO ICT		653		—		—		67,368		8,581		44,048
eNtoB Corporation		4		—		88,165		10,485		159		8,256
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		101,449		5,376		135,439		1,240		78,643		670
POSCO ENERGY CO., LTD.		50,970		358		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,618,711		2,683		189,376		—		14,023		525
POSCO Thainox Public Company Limited		74,564		—		3,056		—		—		—
POSCO America Corporation		96,316		—		—		—		—		768
POSCO Canada Ltd.		—		352		69,486		—		—		—
POSCO Asia Co., Ltd.		460,938		27		194,209		21		551		982
Qingdao Pohang Stainless Steel Co., Ltd.		47,367		—		—		—		—		29
POSCO JAPAN Co., Ltd.		362,715		—		6,938		819		—		1,081
POSCO-VIETNAM Co., Ltd.		56,802		50		—		—		—		—
POSCO MEXICO S.A. DE C.V.		74,511		22		—		—		—		35
POSCO Maharashtra Steel Private Limited		154,893		141		—		—		—		29
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		53,227		—		1,111		—		—		—
POSCO VST CO., LTD.		75,222		1		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		93		70,474		—		—		—
Others		242,439		15,826		69,675		4,694		64,998		32,635
		3,601,511		24,942		827,929		141,654		169,609		96,183
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		4,007		36		708		43,867		6,790		614
SNNC		1,317		197		141,893		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		27,844		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		193,872		—		—		—
Others		3,450		7,885		19,173		—		—		—
		36,618		8,118		355,646		43,867		6,790		614
	W	3,638,129		33,060		1,183,575		185,521		176,399		96,797

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

1) September 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		4,813		4,814		—		43,963		437		44,400
POSCO COATED & COLOR STEEL Co., Ltd.		62,960		275		63,235		10		—		2,809		2,819
POSCO ICT		—		167		167		1,306		62,134		39,846		103,286
eNtoB Corporation		—		—		—		4,316		36,982		5		41,303
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		31,109		4,036		35,145		17,932		53,854		19,180		90,966
POSCO ENERGY CO., LTD.		1,221		8,792		10,013		—		124,169		4,324		128,493
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		593,425		197		593,622		249		2,418		3,949		6,616
POSCO Thainox Public Company Limited		41,333		2		41,335		—		—		—		—
POSCO America Corporation		7,170		—		7,170		—		285		—		285
POSCO Asia Co., Ltd.		463,308		1,333		464,641		11,811		—		—		11,811
Qingdao Pohang Stainless Steel Co., Ltd.		30,935		—		30,935		—		—		—		—
POSCO MEXICO S.A. DE C.V.		115,927		1,260		117,187		—		99		—		99
POSCO Maharashtra Steel Private Limited		277,304		1,523		278,827		—		—		—		—
Others (*1)		454,764		48,169		502,933		69,851		35,317		88,212		193,380
		2,079,457		70,567		2,150,024		105,475		359,221		158,762		623,458
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		—		2		2		1,299		23,884		—		25,183
SNNC		271		71		342		37,679		—		—		37,679
Roy Hill Holdings Pty Ltd		—		—		—		53,017		—		—		53,017
Others		959		38,350		39,309		355		76		—		431
		1,230		38,423		39,653		92,350		23,960		—		116,310
	W	2,080,687		108,990		2,189,677		197,825		383,181		158,762		739,768

(*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 September 30, 2019, corresponding amounts of those loans were recorded as allowance for doubtful accounts.

54

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 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) Significant transactions between the Company, excluding the controlling company, and related companies for the nine-month periods ended September 30, 2019 and 2018 were as follows:

1) For the nine-month period ended September 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	10,134		—		34		12,206
New Songdo International City Development, LLC		5,276		4,471		—		18
SNNC		58,663		—		26,910		51,967
Chuncheon Energy Co., Ltd.		1,227		—		—		—
Noeul Green Energy Co., Ltd.		4,906		—		—		1,217
USS-POSCO Industries		2		—		1,710		—
CSP - Compania Siderurgica do Pecem		90,310		7,419		324,947		26,755
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		25,543		—		32,731		—
LLP POSUK Titanium		—		—		272		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		7		—		2,948		—
POS-SEAHSTEELWIRE(TIANJIN) CO.,Ltd		8,035		—		—		—
PT. Batutua Tembaga Raya		—		631		31,980		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		22,264		—		263		—
Sebang Steel		—		—		4,862		—
DMSA/AMSA		—		—		50,723		—
South-East Asia Gas Pipeline Company Ltd.		49		37,984		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		67,073		16,369		3,714		1,629
POSPower Co., Ltd.		117,851		—		—		—
TK CHEMICAL CORPORATION		131,016		—		50,766		—
Others		168,928		46,136		22,256		22,151
	W	711,284		113,010		554,116		115,943

55

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

2) For the nine-month period ended September 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	12,521		—		62		18,281
New Songdo International City Development, LLC		30,150		33,382		—		12
SNNC		47,805		128		8,874		36,555
Chuncheon Energy Co., Ltd.		24,327		—		—		—
Noeul Green Energy Co., Ltd.		4,782		—		—		—
VSC POSCO Steel Corporation		12,412		—		2,051		15
USS-POSCO Industries		—		—		1,887		—
CSP - Compania Siderurgica do Pecem		176,115		8,963		180,863		26,131
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		35,574		—		56,135		—
LLP POSUK Titanium		—		—		944		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		—		8,806		—
POS-SEAHSTEELWIRE(TIANJIN) CO., Ltd		10,187		—		—		—
PT. Batutua Tembaga Raya		—		48		9,319		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		23,612		—		192		—
Sebang Steel		—		—		11,093		14
DMSA/AMSA		—		—		29,556		587
South-East Asia Gas Pipeline Company Ltd.		—		33,840		—		—
Others		242,254		46,853		14,832		41,473
	W	619,739		123,214		324,614		123,068

56

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

1) For the three-month period ended September 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	4,475		—		13		4,449
New Songdo International City Development, LLC		4,525		—		—		5
SNNC		14,638		—		7,949		20,811
Chuncheon Energy Co., Ltd.		82		—		—		—
Noeul Green Energy Co., Ltd.		1,545		—		—		—
USS-POSCO Industries		—		—		394		—
CSP - Compania Siderurgica do Pecem		5,712		—		104,405		16,169
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		8,998		—		10,576		—
LLP POSUK Titanium		—		—		—		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		4		—		1,140		—
POS-SEAHSTEELWIRE(TIANJIN) CO., Ltd		2,737		—		—		—
PT. Batutua Tembaga Raya		—		136		10,346		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		8,513		—		90		—
Sebang Steel		—		—		—		—
DMSA/AMSA		—		—		20,110		—
South-East Asia Gas Pipeline Company Ltd.		22		28,597		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		22,424		—		1,094		509
POSPower Co., Ltd.		38,579		—		—		—
TK CHEMICAL CORPORATION		44,029		—		11,312		—
Others		65,503		8,112		10,606		13,105
	W	221,786		36,845		178,035		55,048

2) For the three-month period ended September 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	4,773		—		15		10,749
New Songdo International City Development, LLC		4,044		12,091		—		—
SNNC		9,833		128		4,104		19,729
Chuncheon Energy Co., Ltd.		3,978		—		—		—
Noeul Green Energy Co., Ltd.		1,661		—		—		—
VSC POSCO Steel Corporation		177		—		652		—
USS-POSCO Industries		—		—		715		—
CSP - Compania Siderurgica do Pecem		58,639		2,437		121,291		4,591
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,348		—		18,000		—
LLP POSUK Titanium		—		—		197		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		—		3,373		—
POS-SEAHSTEELWIRE(TIANJIN) CO., Ltd		2,975		—		—		—
PT. Batutua Tembaga Raya		—		48		4,200		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,474		—		73		—
Sebang Steel		—		—		2,410		—
DMSA/AMSA		—		—		9,616		—
South-East Asia Gas Pipeline Company Ltd.		—		5,257		—		—
Others		99,238		18,231		6,803		14,308
	W	203,140		38,192		171,449		49,377

57

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

1) September 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	4,646		—		5		4,651		4,521		341		4,862
New Songdo International City Development, LLC		69,494		—		20,592		90,086		—		—		—
Chuncheon Energy Co., Ltd.		—		4,008		—		4,008		586		—		586
POSPower Co., Ltd.		27,021		—		—		27,021		—		115,836		115,836
Nickel Mining Company SAS		—		61,319		119		61,438		2,456		—		2,456
CSP - Compania Siderurgica do Pecem		318,709		—		43,387		362,096		27,922		—		27,922
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		8,489		—		—		8,489		1,470		—		1,470
PT. Batutua Tembaga Raya		—		36,846		592		37,438		9		—		9
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,335		1,201		9		8,545		127		—		127
DMSA/AMSA		—		61,457		1,735		63,192		315		—		315
South-East Asia Gas Pipeline Company Ltd.		7		166,009		—		166,016		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		8,094		—		—		8,094		1,024		—		1,024
TK CHEMICAL CORPORATION		39,927		—		—		39,927		2,565		—		2,565
Others		92,491		157,114		13,296		262,901		7,341		4,645		11,986
	W	576,213		487,954		79,735		1,143,902		48,336		120,822		169,158

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 the nine-month period ended September 30, 2019 and the year ended December 31, 2018 were as follows:

1) September 30, 2019

(in millions of Won)	Beginning		Lend		Collect			Others(* 2)			Ending
Associates and joint ventures
UITrans LRT Co., Ltd.	W	5,695		3,389		—			—			9,084
DMSA/AMSA(*1)		64,297		11,504		—			(14,344	)		61,457
South-East Asia Gas Pipeline Company Ltd.		191,107		—		(35,767	)		10,669			166,009
PT. Batutua Tembaga Raya		35,100		—		—			1,746			36,846
PT. Tanggamus Electric Power		4,423		—		—			329			4,752
PT. Wampu Electric Power		5,330		—		—			397			5,727
PT. POSMI Steel Indonesia		2,236		—		—			167			2,403
Nickel Mining Company SAS		59,664		—		—			1,655			61,319
KRAKATAUPOS-CHEMDONG-SUH CHEMICAL		6,709		—		—			499			7,208
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		3,354		—		(2,236	)		83			1,201
POS-SeAH Steel Wire (Thailand) Co., Ltd.		6,709		—		—			499			7,208
AMCI (WA) PTY LTD		90,480		3,408		—			2,838			96,726
POS-AUSTEM YANTAI AUTOMOTIVE CO.,LTD		5,590		—		—			417			6,007
POS-AUSTEM WUHAN AUTOMOTIVE CO.,LTD		8,945		—		—			665			9,610
Hyo-chun Co., Ltd.(*3)		—		—		—			2,382			2,382
Chun-cheon Energy Co., Ltd.		—		4,008		—			—			4,008
POS-AUSTEM Suzhou Automotive Co., Ltd		—		5,808		—			199			6,007
	W	489,639		28,117		(38,003	)		8,201			487,954

(*1) During the nine-month period ended September 30, 2019, loans amounting toW18,557 million have been converted to shares of DMSA/AMSA, and its amount is included in others.

58

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

(*3) During the nine-month period ended September 30, 2019, it was newly classified to associates.

2) December 31, 2018

(in millions of Won)	Beginning		Lend		Collect			Others(*2)			Ending
Associates and jointventures
New Songdo International City	W	282,775		150		(252,759	)		(30,166	)		—
Development, LLC
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 common shares of DMSA/AMSA, and its amount is included in others.

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

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

(in millions of Won)	September 30, 2019		September 30, 2018
Short-term benefits	W	86,850		86,256
Long-term benefits		11,365		10,922
Retirement benefits		14,031		15,814
	W	112,246		112,992

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.

59

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

35. Commitments and Contingencies

(a) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of September 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		120,130		100,000,000		120,130
	POSCO ASSAN TST STEEL INDUSTRY	SMBC and others		USD	146,527,500		176,023		131,874,750		158,421
	POSCO COATED STEEL (THAILAND) CO., LTD.	The Great & CO Co.,Ltd.(SPC)		THB	5,501,000,000		215,694		5,501,000,000		215,694
	POSCO Maharashtra Steel Private Limited	Export-Import Bank of Korea and others		USD	506,853,000		608,883		126,090,900		151,473
	POSCO MEXICO S.A. DE C.V.	BOA and others		USD	120,000,000		144,156		120,000,000		144,156
	POSCO SS VINA CO., LTD.	Export-Import Bank of Korea and others		USD	299,941,250		360,319		299,663,928		359,986
	POSCO-VIETNAM Co., Ltd.	SMBC and others		USD	156,000,000		187,403		156,000,000		187,403
	PT. KRAKATAU POSCO	Export-Import Bank of Korea and others		USD	1,350,300,000		1,622,115		1,018,862,376		1,223,961
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	Daewoo Global Development. Pte., Ltd	Export-Import Bank of Korea and others		USD	199,884,500		240,121		196,017,000		235,475
	POSCO INTERNATIONAL POWER (PNGLAE) LIMITED (Formerly, Daewoo Power PNG Ltd.)	Export-Import Bank of Korea		USD	44,200,000		53,097		44,200,000		53,097
	GOLDEN LACE POSCO INTERNATIONAL CO., LTD. (Formerly, GOLDEN LACE DAEWOO COMPANY LIMITED.)	Shinhan Bank and others		USD	11,000,000		13,214		11,000,000		13,214
	POSCO ASSAN TST STEEL INDUSTRY	ING and others		USD	14,652,750		17,602		14,652,750		17,602
	PT. Bio Inti Agrindo	Export-Import Bank of Korea and others		USD	135,000,000		162,176		134,072,252		161,061
		KEB Hana bank		IDR	150,000,000,000		12,720		150,000,000,000		12,720
	POSCO INTERNATIONAL AMERICA Corp.								10,000,000		12,013
	POSCO INTERNATIONAL SINGAPOLE Pte. Ltd								5,169,948		6,211
	POSCO INTERNATIONAL MEXICO S.A. de C.V.								13,000,000		15,617
	POSCO INTERNATIONAL Japan Corp.	Bank Mendes Gans		USD	50,000,000		60,065		—		—
	POSCO INTERNATIONAL Malaysia SDN BHD								—		—
	POSCO INTERNATIONAL Deutschland GmbH								—		—
	POSCO INTERNATIONAL Italia S.R.L.								—		—
	SPH Co., Ltd.	Shinyoung securities		KRW	10,000		10,000		—		—
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	POSCO E&C Vietnam Co., Ltd.	POSCO Asia Co., Ltd. and others		USD	47,000,000		56,461		47,000,000		56,461
	POSCO Engineering and Construction India Private Limited	KEB Hana bank		INR	221,000,000		3,766		157,200,000		2,679
	PT.POSCO E&C INDONESIA	POSCO Asia Co., Ltd. and others		USD	10,900,000		13,094		10,900,000		13,094
	Daewoo Global Development. Pte., Ltd	SMBC and others		USD	163,633,000		196,572		163,633,000		196,572
	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	Woori Bank and others		USD	148,000,000		177,792		148,000,000		177,792
	SPH Co., Ltd.	Shinyoung securities		KRW	10,000		10,000		—		—
POSCO ICT	PT.POSCO ICT INDONESIA	POSCO Asia Co., Ltd.		USD	2,700,000		3,244		1,500,000		1,802
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)	PT.Krakatau Posco Chemtech Calcination	POSCO Asia Co., Ltd.		USD	15,200,000		18,260		12,800,000		15,377
POSCO COATED & COLOR STEEL Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO Asia Co., Ltd.		USD	13,986,947		16,803		13,986,947		16,803
POSCO ENERGY CO., LTD	PT. KRAKATAU POSCO ENERGY	Export-Import Bank of Korea and others		USD	193,900,000		232,932		113,149,791		135,927
POSCO Asia Co., Ltd.	POSCO America Corporation	SMBC		USD	70,000,000		84,091		70,000,000		84,091

60

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

[Associates and joint ventures]
POSCO	CSP - Compania Siderurgica do Pecem	Export-Import Bank of Korea and others	USD	392,956,955	472,061	374,990,594	450,476
		BNDES	BRL	464,060,000	134,002	464,060,000	134,002
	LLP POSUK Titanium	SMBC	USD	15,000,000	18,020	15,000,000	18,020
	Nickel Mining Company SAS	SMBC	EUR	46,000,000	60,473	46,000,000	60,473
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	GLOBAL KOMSCO Daewoo LLC	KEB Hana Bank	USD	8,225,000	9,881	8,050,000	9,670
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	New Songdo International City Development, LLC	Others	KRW	440,000	440,000	438,000	438,000
	UITrans LRT Co., Ltd.	Kookmin Bank and others	KRW	20,740	20,740	6,686	6,686
	Chuncheon Energy Co., Ltd.	Kookmin Bank and others	KRW	12,430	12,430	4,008	4,008
	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	1,369	601,667	723
POSCO(Suzhou) Automotive Processing Center Co.,Ltd.	POS-InfraAuto (Suzhou) Co., Ltd	KDB Bank and others	USD	769,500	924	769,500	924
[Others]
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)	Ambatovy Project Investments Ltd. and others	Export-Import Bank of Korea	USD	21,818,182	26,210	3,451,287	4,146
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Ecocity CO.,LTD and others	Others	KRW	1,970,478	1,970,478	874,196	874,196
POSCO ICT	BLT Enterprise and others	KEB Hana Bank and others	KRW	1,225,412	1,225,412	1,225,412	1,225,412
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government) and others	Woori Bank and others	AUD	26,525,154	21,551	26,525,154	21,551
			USD	4,239,588,584	5,093,019	3,346,266,742	4,019,870
			INR	221,000,000	3,766	157,200,000	2,679
			IDR	150,000,000,000	12,720	150,000,000,000	12,720
			THB	5,501,000,000	215,694	5,501,000,000	215,694
			KRW	3,980,075	3,980,075	2,793,877	2,793,877
			BRL	464,060,000	134,002	464,060,000	134,002
			EUR	46,000,000	60,473	46,000,000	60,473
			AUD	26,525,154	21,551	26,525,154	21,551

61

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(b) Other commitments

Details of other commitments of the Company as of September 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 September 30, 2019, 93 million tons of iron ore and 12 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 September 30, 2019, there are 39 vessels under contract, and the average remaining contract period is about 10 years.
	As of September 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 September 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 toW9.8 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 September 30, 2019, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has foreign currency guarantees of up to USD 2,409 million provided by financial institutions and uses USD 703 million with Woori Bank and others.
	The Company is responsible for 3 projects, including the development of ParkOne in Yeouido-dong. As of September 30, 2019, the outstanding amount of loans related to the responsible payment arrangement isW2,274 billion. If the responsibility is not fulfilled, there are duties such as debt 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 company 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 ship’s owner and to take over the ownership of the vessel from the ship’s owner. 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 September 30, 2019, the amount of the ship purchase agreement signed is USD 208 million.
POSCO ICT	As of September 30, 2019, in relation to contract enforcement, POSCO ICT was provided withW92,461 million,W3,620 million andW305 million guaranties from Korea Software Financial Cooperative, Seoul Guarantee Insurance and Engineering Guarantee Insurance, respectively.
	The Company is responsible for 15 projects, including the construction of Bundang Center. As of September 30, 2019, the outstanding amount of loans related to the responsible completion arrangements isW802.7 billion. If the responsiblility is not fulfilled, there are duties such as compensation for principal

62

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(c) 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 September 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 348 lawsuits, including claim for employee right aggregating toW896.5 billion as defendant as of September 30, 2019, which arise from ordinary course of business. The Company has recognized provisions amounting toW46.8 billion for 87 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 September 30, 2019.

(d) 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 September 30, 2019, POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporationn) has provided 33 blank promissory notes and 20 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 September 30, 2019, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided 29 blank checks and 4 blank promissory notes as collateral for agreements and outstanding loans, and has provided joint guarantee ofW10,728,185 million for guarantee that partners had issued from Korea Housing & Urban Guarantee Corporation and others.
POSCO ICT	As of September 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.

63

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

36. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the nine-month periods ended September 30, 2019 and 2018 were as follows:

(in millions of Won)	September 30, 2019			September 30, 2018
Trade accounts and notes receivable	W	(59,239	)		(621,704	)
Other receivables		(313,908	)		(283,836	)
Inventories		20,276			(903,282	)
Other current assets		(6,444	)		(4,254	)
Othernon-current assets		40,745			(1,998	)
Trade accounts and notes payable		(673,278	)		84,133
Other payables		(41,756	)		(95,688	)
Other current liabilities		254,770			46,774
Provisions		(61,304	)		(149,974	)
Payments of severance benefits		(113,214	)		(166,450	)
Plan assets		71,691			54,820
Othernon-current liabilities		(33,072	)		29,759
	W	(914,733	)		(2,011,700	)

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.

64

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

1) For the nine-month period ended September 30, 2019

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	24,477,636		16,516,474		4,901,465		2,428,224		48,323,799
Internal revenues		13,312,742		11,876,420		496,770		2,004,097		27,690,029
Inter segment revenue		9,103,854		6,397,294		452,377		1,903,252		17,856,777
Total revenues		37,790,378		28,392,894		5,398,235		4,432,321		76,013,828
Segment profits		1,549,538		169,160		91,376		419,889		2,229,963

2) For the nine-month period ended September 30, 2018

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	24,443,753		16,697,282		4,932,367		2,282,904		48,356,306
Internal revenues		13,780,144		12,152,833		370,179		2,032,300		28,335,456
Inter segment revenue		9,609,548		6,696,177		313,068		1,950,404		18,569,197
Total revenues		38,223,897		28,850,115		5,302,546		4,315,204		76,691,762
Segment profits		2,457,674		132,887		123,891		151,045		2,865,497

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

(in millions of Won)	September 30, 2019			September 30, 2018
Total profit for reportable segments	W	2,229,963			2,865,497
Corporate fair value adjustments		(60,575	)		(58,545	)
Elimination of inter-segment profits		(212,714	)		(85,413	)
Income tax expense		1,013,999			1,136,869
Profit before income tax expense	W	2,970,673			3,858,408

38. Events after the Reporting Period

(a) Pursuant to the resolution of the Board of Directors on November 1, 2019, the Company decided to pay interim cash dividends ofW2,000 per common share (total dividend:W160.2 billion).

(b) On October 16, 2019, the Company issued unguaranteed Korea won bond310-1,310-2 and310-3 with par value ofW610,000 million,W190,000 million andW200,000 million, respectively. Maturity of the bonds is October 14, 2022 and October 16, 2024 and October 16, 2029, respectively. Also, the Company issued anon-guaranteed senior dollar bond with par value of USD 500 million on November 12, 2019. Maturity of the bond is November 12, 2022.

65

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

September 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 September 30, 2019, the condensed separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2019 and 2018, the condensed separate interim statements of changes in equity and cash flows for the nine-month periods ended September 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

November 14, 2019

This report is effective as of November 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 September 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes		September 30, 2019		December 31, 2018
Assets
Cash and cash equivalents		20	W	1,048,877		259,219
Trade accounts and notes receivable, net		4,14,20,25,32		4,045,596		3,968,372
Other receivables, net		5,20,32		432,994		206,432
Other short-term financial assets		6,20		6,801,473		7,025,143
Inventories		7,29		5,285,575		5,288,009
Assets held for sale		8		38,964		25,683
Other current assets		13		62,980		23,542
Total current assets				17,716,459		16,796,400
Long-term trade accounts and notes receivable, net		4,20		6,989		7,673
Other receivables, net		5,20		63,136		57,767
Other long-term financial assets		6,20		1,262,682		1,176,757
Investments in subsidiaries, associates and joint ventures		9		15,516,102		15,121,339
Investment property, net		10		159,459		108,215
Property, plant and equipment, net		11		19,944,285		20,154,334
Intangible assets, net		12		679,708		645,222
Othernon-current assets		13		79,162		58,273
Totalnon-current assets				37,711,523		37,329,580
Total assets			W	55,427,982		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 September 30, 2019 and December 31, 2018

(Unaudited)

(in millions of Won)	Notes		September 30, 2019			December 31, 2018
Liabilities
Trade accounts and notes payable		20,32	W	998,668			1,106,226
Short-term borrowings and current installments of long-term borrowings		4,14,20		130,735			826,862
Other payables		15,20,32		1,058,316			1,072,733
Other short-term financial liabilities		16,20		11,684			12,638
Current income tax liabilities				474,990			803,543
Provisions		17		12,698			19,165
Other current liabilities		19,25		138,070			54,806
Total current liabilities				2,825,161			3,895,973
Long-term borrowings, excluding current installments		14,20		4,711,491			3,444,108
Other payables		15,20		209,203			144,343
Other long-term financial liabilities		16,20		41,172			79,936
Defined benefit liabilities, net		18		75,684			863
Deferred tax liabilities				1,160,489			1,179,672
Long-term provisions		17,33		59,022			93,719
Othernon-current liabilities		19,25		9,777			15,264
Totalnon-current liabilities				6,266,838			4,957,905
Total liabilities				9,091,999			8,853,878
Equity
Share capital		21		482,403			482,403
Capital surplus		21,35		1,252,220			1,154,775
Hybrid bonds		22		199,384			199,384
Reserves		23		(240,772	)		(207,191	)
Treasury shares		24		(1,508,303	)		(1,532,728	)
Retained earnings				46,151,051			45,175,459
Total equity				46,335,983			45,272,102
Total liabilities and equity			W	55,427,982			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 and nine-month periods ended September 30, 2019 and 2018

(Unaudited)

(in millions of Won, except per share informations)		For the three-month periods ended September 30						For the nine-month periods ended September 30
	Notes	2019			2018			2019			2018
Revenue	25,32	W	7,735,895			7,905,508			23,028,220			23,371,243
Cost of sales	7,29,32		(6,812,557	)		(6,546,332	)		(20,024,140	)		(19,623,460	)
Gross profit			923,338			1,359,176			3,004,080			3,747,783
Selling and administrative expenses	29,32
Reversal of (impairment loss) on trade accounts and notes receivable			2			57			4,638			(1,889	)
Other administrative expenses	26		(203,058	)		(205,351	)		(619,488	)		(648,835	)
Selling expenses	26		(57,806	)		(59,113	)		(169,989	)		(164,251	)
Operating profit			662,476			1,094,769			2,219,241			2,932,808
Finance income and costs	20,27
Finance income			260,782			61,902			835,976			483,334
Finance costs			(197,574	)		(100,173	)		(465,867	)		(388,122	)
Othernon-operating income and expenses	32
Reversal of (impairment loss) on other receivables			(340	)		103			(612	)		3,007
Othernon-operating income	28		71,158			34,977			127,998			216,190
Othernon-operating expenses	28,29		(103,543	)		89,746			(356,236	)		(224,024	)
Profit before income tax			692,959			1,181,324			2,360,500			3,023,193
Income tax expense	30		(193,914	)		(290,225	)		(644,900	)		(783,067	)
Profit			499,045			891,099			1,715,600			2,240,126
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans	18		(2,384	)		(3,967	)		(4,266	)		(7,958	)
Net changes in fair value of equity investments at fair value through other comprehensive income	6,20,23		(67,564	)		36,148			(41,974	)		(20,130	)
Total comprehensive income		W	429,097			923,280			1,669,360			2,212,038
Basic and diluted earnings per share (in Won)	31	W	6,208			11,118			21,352			27,801

See accompanying notes to the condensed separate interim financial statements.

5

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the nine-month periods ended September 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		—		—			—			—			—			2,240,126			2,240,126
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—			—			—			(7,958	)		(7,958	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—			(7,398	)		—			(12,732	)		(20,130	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—			—			—			—			(279,999	)		(279,999	)
Interim dividends		—		—			—			—			—			(240,001	)		(240,001	)
Repayment of hybrid bonds		—		(1,787	)		(797,535	)		—			—			—			(799,322	)
Interest of hybrid bonds		—		—			—			—			—			(22,123	)		(22,123	)
Disposal of treasury shares		—		133			—			—			326			—			459
Balance as of September 30, 2018	W	482,403		1,154,775			199,384			(95,662	)		(1,532,728	)		46,603,400			46,811,572
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		—		—			—			—			—			1,715,600			1,715,600
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—			—			—			(4,266	)		(4,266	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—			(33,581	)		—			(8,393	)		(41,974	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—			—			—			—			(400,006	)		(400,006	)
Interim dividends		—		—			—			—			—			(320,462	)		(320,462	)
Interest of hybrid bonds		—		—			—			—			—			(6,881	)		(6,881	)
Disposal of treasury shares		—		12,576			—			—			24,425			—			37,001
Business combination(Note 35)		—		84,869			—			—			—			—			84,869
Balance as of September 30, 2019	W	482,403		1,252,220			199,384			(240,772	)		(1,508,303	)		46,151,051			46,335,983

See accompanying notes to the condensed separate interim financial statements.

6

POSCO

Condensed Separate Interim Statements of Cash Flows

For the nine-month periods ended September 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes		September 30, 2019			September 30, 2018
Cash flows from operating activities
Profit			W	1,715,600			2,240,126
Adjustments for :
Expenses related to post-employment benefit				88,362			83,402
Depreciation				1,608,237			1,578,971
Amortization				57,776			49,770
Reversal of impairment loss on trade and other receivable				(4,026	)		(1,118	)
Finance income				(623,502	)		(349,196	)
Finance costs				312,416			240,090
Loss on valuation of inventories				—			1,099
Gain on disposal of property, plant and equipment				(18,748	)		(33,509	)
Loss on disposal of property, plant and equipment				63,409			79,917
Impairment losses on property, plant and equipment				209,910			16,264
Gain on disposal of intangible assets				(1,013	)		(99,358	)
Impairment losses on investments in subsidiaries, associates and joint ventures				10,422			34,207
Gain on disposal of assets held for sale				(29,341	)		—
Impairment loss on assets held for sale				5,179			2,374
Gain on disposal of emission rights				(6,122	)		—
Gain on valuation of emission rights				(25,440	)		—
Increase to provisions				(10,013	)		128,016
Income tax expense				644,900			783,067
Others				(4,780	)		(700	)
Changes in operating assets and liabilities		34		(363,768	)		(785,818	)
Interest received				117,263			106,662
Interest paid				(105,868	)		(84,954	)
Dividends received				231,798			175,842
Income taxes paid				(984,991	)		(432,719	)
Net cash provided by operating activities			W	2,887,660			3,732,435

See accompanying notes to the condensed separate interim financial statements.

7

POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2019 and 2018

(Unaudited)

(in millions of Won)	Notes	September 30, 2019			September 30, 2018
Cash flows from investing activities
Decrease in deposits		W	2,250,082			1,978,210
Proceeds from disposal of short-term financial instruments			25,153,652			19,975,926
Proceeds from disposal of debt securities			11			50,000
Proceeds from disposal of equity securities			22,752			45,284
Proceeds from disposal of other securities			3,111			2,578
Proceeds from disposal of stock warrants			—			130
Proceeds from disposal of investments in subsidiaries, associates and joint ventures			13,783			101,294
Proceeds from disposal of property, plant and equipment			—			12,563
Proceeds from disposal of intangible assets			5,587			26,375
Proceeds from disposal of assets held for sale			463,657			231
Proceeds from disposal of emission rights			12,693			—
Proceeds from business combination			2,171			—
Increase in deposits			(2,276,163	)		(2,506,462	)
Acquisition of short-term financial investments			(24,591,354	)		(21,066,973	)
Increase in short-term loans			—			(2,950	)
Increase in long-term loans			(1,773	)		(232	)
Acquisition of debt securities			(290,100	)		(130,216	)
Acquisition of other securities			(110	)		(464	)
Acquisition of investment in subsidiaries, associates and joint ventures			(81,667	)		(151,983	)
Acquisition of property, plant and equipment			(1,128,329	)		(1,095,951	)
Proceeds from disposal of property, plant and equipment			(17,927	)		—
Acquisition of intangible assets			(120,666	)		(42,070	)
Payment for acquisition of business, net of cash acquired			(1,156,953	)		—
Net cash used in investing activities		W	(1,737,543	)		(2,804,710	)
Cash flows from financing activities
Proceeds from borrowings			1,379,550			1,380,252
Increase in long-term financial liabilities			3,237			1,102
Receipt of government grants			—			86
Proceeds from disposals of derivatives			9,683			—
Repayment of borrowings			(996,544	)		(302,340	)
Decrease in long-term financial liabilities			(30,718	)		(10,987	)
Payment of cash dividends			(720,505	)		(520,020	)
Payment of interest of hybrid bonds			(6,906	)		(24,059	)
Repayment of hybrid bonds			—			(800,000	)
Net cash used in financing activities		W	(362,203	)		(275,966	)
Effect of exchange rate fluctuation on cash held			1,744			(4,862	)
Net increase in cash and cash equivalents			789,658			646,897
Cash and cash equivalents at beginning of the period			259,219			332,405
Cash and cash equivalents at end of the period		W	1,048,877			979,302

See accompanying notes to the condensed separate interim financial statements.

8

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of September 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 September 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.

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

9

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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 September 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 September 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 September 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
September 30, 2019		73,537		51,639		61,573		6,880		51,163		244,792

(*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 September 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 September 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 incremental borrowing 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 September 30, 2019, the Company recognizedW109,755 million ofright-of-use assets andW106,175 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 toW18,147 million and interest expenses amounted toW2,191 million during the nine-month period ended September 30, 2019.

14

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

4. Trade Accounts and Notes Receivable

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

(in millions of Won)	September 30, 2019			December 31, 2018
Current
Trade accounts and notes receivable	W	4,058,424			3,989,699
Less: Allowance for doubtful accounts		(12,828	)		(21,327	)
	W	4,045,596			3,968,372
Non-current
Trade accounts and notes receivable	W	11,053			11,904
Less: Present value discount		(2,983	)		(2,983	)
Less: Allowance for doubtful accounts		(1,081	)		(1,248	)
	W	6,989			7,673

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted toW130,735 million andW176,612 million as of September 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	September 30, 2019			December 31, 2018
Current
Loans	W	2,950			2,950
Other accounts receivable		406,236			186,951
Others		31,758			25,065
Less: Allowance for doubtful accounts		(7,950	)		(8,534	)
	W	432,994			206,432
Non-current
Loans	W	31,064			26,335
Long-term other accounts receivable		38,011			36,832
Others		3,266			2,915
Less: Allowance for doubtful accounts		(9,205	)		(8,315	)
	W	63,136			57,767

15

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

6. Other Financial Assets

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Debt securities	W	290,569		21
Deposit instruments(*1)		1,274,796		1,248,715
Short-term financial instruments		5,236,108		5,776,407
	W	6,801,473		7,025,143
Non-current
Long-term derivative assets	W	151,393		1,265
Equity securities		1,041,112		1,104,092
Debt securities		9,209		9,667
Other securities		60,934		61,701
Deposit instruments(*2)		34		32
	W	1,262,682		1,176,757

(*1) As of September 30, 2019 and December 31, 2018,W4,795 million andW5,715 million, respectively, are restricted in use 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 September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)	September 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		263,142		(210,820	)		263,142		301,010
KB Financial group Inc.		3,863,520		0.92		178,839		164,972		(13,867	)		164,972		179,654
Woori Financial Group Inc.		20,280,000		2.81		244,447		252,486		8,039			252,486		316,368
DONGKUK STEEL MILL CO., LTD		1,784,900		1.87		10,460		11,602		1,142			11,602		12,919
SAMWONSTEEL Co., Ltd.		5,700,000		14.25		8,930		16,445		7,515			16,445		16,188
DONGKUK INDUSTRIES COMPANY		2,611,989		4.82		11,911		6,582		(5,329	)		6,582		6,387
Others (6 companies)						55,752		37,264		(18,488	)		37,264		42,247
						984,301		752,493		(231,808	)		752,493		874,773
Non-marketable equity securities
Congonhas Minerios S.A.(*1)		3,658,394		2.02		221,535		225,773		4,238			225,773		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 (26 companies)						136,547		32,017		(104,530	)		32,017		25,692
						388,911		288,619		(100,292	)		288,619		229,319
					W	1,373,212		1,041,112		(332,100	)		1,041,112		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 September 30, 2019

(Unaudited)

7. Inventories

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

(in millions of Won)	September 30, 2019		December 31, 2018
Finished goods	W	984,427		1,146,961
Semi-finished goods		1,502,178		1,343,877
By-products		10,890		6,166
Raw materials		1,251,739		1,130,000
Fuel and materials		617,777		552,270
Materials-in-transit		917,969		1,120,349
Others		595		555
		5,285,575		5,300,178
Less: Allowance for inventories valuation		—		(12,169	)
	W	5,285,575		5,288,009

The amount of loss on valuation of inventories recognized in cost of sales during the year ended December 31, 2018 wasW12,169 million.

8. Assets Held for Sale

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

(in millions of Won)	September 30, 2019(*3)		December 31, 2018
Assets
Investments in subsidiaries(*1)	W	20,445		25,683
Property, plant and equipment(*2)		18,519		—
	W	38,964		25,683

(*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. During the nine-month period ended September 30, 2019, the Company recognizedW4,520 million of impairment loss from the difference between book value and fair value less costs of disposal of the interest, and finished disposal for part of it.

(*2) During the nine-month period ended September 30, 2019, the Company determined to dispose individual assets that ceased operations includingFe-Si factory, and classified the assets as assets held for sale. During the nine-month period ended September 30, 2019,W659 million, the difference between the fair value less costs of disposal and the carrying amount of the related the assets held for sale, was recognized as an impairment loss on assets held for sale.

17

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(*3) During the nine-month period ended September 30, 2019, the Company decided to dispose of 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. As of September 30, 2019, the disposal of the assets and liabilities has been completed, and the Company recognizedW28,626 million of gain on disposal, which is difference between the carrying amount and the sale price.

9. Investments in Subsidiaries, Associates and Joint ventures

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

(in millions of Won)			September 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		639,398		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		368,827		349,097
Others (30 companies)(*2)						485,667		406,124
						6,724,173		6,091,658
					W	12,637,103		12,393,106

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

18

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(*2) During the nine-month period ended September 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 the nine-month period ended September 30, 2019, POSCO CHEMTECH changed its name to POSCO CHEMICAL CO., LTD. and merged with POSCO ES MATERIALS CO., LTD.

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

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

(*7) POSCO (Guangdong) Coated Steel Co., Ltd., was disposed during nine-month period ended September 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 their carrying amounts as of September 30, 2019 and December 31, 2018 are as follows:

(in millions of Won)			September 30, 2019				December 31, 2018
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	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)						39,601		20,530
						364,142		345,071
					W	742,131		634,094

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

(*2) As of September 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 September 30, 2019

(Unaudited)

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

(in millions of Won)				September 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		375,350		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	2,136,868		2,094,139

(*1) As of September 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 the nine-month period ended September 30, 2019 and the year ended December 31, 2018 were as follows:

(a) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Business Combination(*1)		Depreciation(*2)			Transfer(*3)		Ending
Land	W	44,637		41,195					6,138		91,970
Buildings		54,277		25		(3,056	)		6,862		58,108
Structures		9,301				(465	)		545		9,381
	W	108,215		41,220		(3,521	)		13,545		159,459

(*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 September 30, 2019

(Unaudited)

11. Property, Plant and Equipment, Net

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

(a) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Acquisitions		business combination(*4)		Disposals			Depreciation			Impairment(*1)			Others(*3)			Ending
Land	W	1,458,632		—		—		(1,226	)		—			—			(47,290	)		1,410,116
Buildings		2,199,429		2,520		67,751		(3,500	)		(151,800	)		(25,869	)		29,622			2,118,153
Structures		2,244,099		3,171		39,783		(845	)		(130,623	)		(9,573	)		(220,969	)		1,925,043
Machinery and equipment		12,911,467		38,161		696,204		(12,048	)		(1,276,470	)		(164,181	)		447,161			12,640,294
Vehicles		7,340		572		40		—			(4,377	)		—			3,466			7,041
Tools		23,864		2,486		138		(23	)		(8,420	)		—			2,998			21,043
Furniture and fixtures		36,287		3,210		94		(8	)		(7,114	)		(137	)		3,183			35,515
Lease assets(*2)		142,801		—		—		—			(25,912	)		—			127,903			244,792
Construction-in-progress		1,130,415		1,079,110		696		—			—			(10,150	)		(657,783	)		1,542,288
	W	20,154,334		1,129,230		804,706		(17,650	)		(1,604,716	)		(209,910	)		(311,709	)		19,944,285

(*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 by calculating net fair value based on the appraisal value or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the nine-month period ended September 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.

(*4) This increase is due to business combination withOff-gas power station business sector which was spin off from POSCO ENERGY CO., LTD.

21

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(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 of 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 is determined at their expected scrap value less cost of disposal.

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 estimated based on 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 and deducting 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.

22

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

12. Intangible Assets, Net

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

(a) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Reversal of impairment		Transfer(* 2)			Ending
Intellectual property rights	W	24,377		—		(823	)		(4,159	)		—		4,297			23,692
Membership(*1)		73,183		9,204		(6	)		—			276		—			82,657
Development expense		91,758		1,023		—			(31,091	)		—		16,817			78,507
Port facilities usage rights		305,710		—		—			(17,351	)		—		—			288,359
Construction-in-progress		58,561		81,637		—			—			—		(16,633	)		123,565
Other intangible assets		91,633		516		(4,568	)		(5,175	)		—		522			82,928
	W	645,222		92,380		(5,397	)		(57,776	)		276		5,003			679,708

(*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.

(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 certain 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.

23

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

13. Other Assets

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Advance payments	W	5,411		4,157
Prepaid expenses		38,756		19,385
Emission rights		18,813		—
	W	62,980		23,542
Non-current
Long-term prepaid expenses	W	4,849		5,089
Others(* 1)		74,313		53,184
	W	79,162		58,273

(*1) As of September 30, 2019 and December 31, 2018, the Company recognized tax assets amounting toW71,311 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.

24

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

14. Borrowings

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

(in millions of Won)	September 30, 2019			December 31, 2018
Short-term borrowings
Short-term borrowings	W	130,735			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	130,735			826,862
Long-term borrowings
Long-term borrowings	W	1,226			1,141
Debentures		4,730,130			3,456,367
Less: Discount on debentures issued		(19,865	)		(13,400	)
	W	4,711,491			3,444,108

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

(in millions of Won)	Lenders		Issuance date		Maturity date		Annual interest rate (%)		September 30, 2019		December 31, 2018
Short-term borrowings		—		—		—		—	W	—		300,000
Transfers of account receivables that do not qualify for derecognition		—		—		—		—		130,735		176,612
									W	130,735		476,612

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

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

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

(in millions of Won)	Lenders		Issuance date		Maturity date		Annual Interest rate (%)	September 30, 2019		December 31, 2018
Foreign borrowings		KOREA ENERGY AGENCY		2007.12.27~ 2008.12.29		2022.12.29	3 year Government bond	W	1,226		1,141
Debentures		Domestic debentures304-2 and others		2011.11.28~ 2019.07.17		2020.10.04~ 2026.07.17	1.61~4.12		1,676,677		1,177,704
Foreign debentures		Japan Yen private bond and others		2010.10.28~ 2019.07.15		2020.10.28~ 2024.07.15	2.70~5.25		3,033,588		2,265,263
								W	4,711,491		3,444,108

25

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

15. Other Payables

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Accounts payable	W	578,005		590,424
Accrued expenses		432,439		434,379
Dividend payable		2,703		2,764
Lease liabilities(*1)		36,009		10,116
Withholdings		9,160		35,050
	W	1,058,316		1,072,733
Non-current
Long-term accrued expenses	W	810		10,964
Lease liabilities(*1)		204,787		131,646
Long-term withholdings		3,606		1,733
	W	209,203		144,343

(*1) As of September 30, 2019, the Company recognized lease liabilities ofW106,175 million on the initial application ofK-IFRS No. 1116 “Leases”.

16. Other Financial Liabilities

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Financial guarantee liabilities	W	11,684		12,638
Non-current
Derivative liabilities	W	—		34,743
Financial guarantee liabilities		41,172		45,193
	W	41,172		79,936

26

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

17. Provisions

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

(in millions of Won)	September 30, 2019				December 31, 2018
	Current		Non-current		Current		Non-current
Provision for bonus payments(*1,2)	W	7,031		37,394		9,786		26,963
Provision for restoration(*3)		5,447		19,393		9,379		20,324
Provision for legal contingencies and claims(*4)		220		2,235		—		46,432
	W	12,698		59,022		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 September 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 1.67~1.73% to assess present value of these costs.

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

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

1) For the nine-month period ended September 30, 2019

(in millions of Won)	Beginning		Increase		Reversal			Utilization			Transfer		Ending
Provision for bonus payments	W	36,749		14,160		—			(14,086	)		7,602		44,425
Provision for restoration		29,703		934		(277	)		(5,520	)		—		24,840
Provision for legal contingencies and claims		46,432		538		(11,207	)		(33,308	)		—		2,455
	W	112,884		15,632		(11,484	)		(52,914	)		7,602		71,720

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

27

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 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 nine-month periods ended September 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2019		2018		2019		2018
Expense related to post-employment benefit plans under defined contribution plans	W	8,900		8,230		26,521		23,197

(b) Defined benefit plans

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

(in millions of Won)	September 30, 2019			December 31, 2018
Present value of funded obligations	W	1,315,276			1,265,675
Fair value of plan assets		(1,239,592	)		(1,264,812	)
Net defined benefit liabilities	W	75,684			863

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

(in millions of Won)	September 30, 2019			December 31, 2018
Defined benefit obligation at the beginning of period	W	1,265,675			1,108,876
Current service costs		88,947			111,033
Interest costs		23,675			33,757
Remeasurement(*1)		—			132,868
Amount transferred from associate		—			241
Business combination		317			—
Reclassification to liabilities directly related to assets held for sale		(1,448	)		—
Benefits paid		(61,890	)		(121,100	)
Defined benefit obligation at the end of period	W	1,315,276			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.

28

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

(in millions of Won)	September 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		24,260			33,756
Remeasurement of plan assets		(5,883	)		(13,416	)
Contributions to plan assets		—			240,440
Business combination		670			—
Reclassification to liabilities directly related to assets held for sale		(1,448	)		—
Benefits paid		(42,819	)		(104,801	)
Fair value of plan assets at the end of period	W	1,239,592			1,264,812

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

(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2019			2018		2019			2018
Current service costs	W	28,808			26,286		88,947			83,401
Net interest costs		(195	)		—		(585	)		1
	W	28,613			26,286		88,362			83,402

19. Other Liabilities

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

(in millions of Won)	September 30, 2019		December 31, 2018
Current
Advances received	W	5,457		9,902
Withholdings		105,727		25,034
Unearned revenue		26,886		19,870
	W	138,070		54,806
Non-current
Unearned revenue	W	9,777		15,264

29

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 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 September 30, 2019 and December 31, 2018 are as follows:

① September 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	151,393		—		151,393		—		151,393
Short-term financial instruments		5,236,108		—		5,236,108		—		5,236,108
Debt securities		8,050		—		—		8,050		8,050
Other marketable securities		60,934		—		—		60,934		60,934
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		1,041,112		752,493		—		288,619		1,041,112
Debt securities		1,728		—		—		1,728		1,728
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		1,048,877		—		—		—		—
Trade accounts and notes receivable		4,045,474		—		—		—		—
Debt securities		290,000		—		—		—		—
Other receivables		271,752		—		—		—		—
Cash deposits		1,274,830		—		—		—		—
	W	13,432,258		752,493		5,387,501		361,331		6,501,325
Financial liabilities
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable	W	998,668		—		—		—		—
Borrowings		4,842,226		—		5,088,296		—		5,088,296
Financial guarantee liabilities		52,856		—		—		—		—
Others		1,015,902		—		—		—		—
	W	6,909,652		—		5,088,296		—		5,088,296

(*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.

30

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

2) Financial liabilities were recognized in connection with financial guarantee contracts as of September 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		216,234		18,000,000		21,623
Steel Private Limited	HSBC		USD	80,000,000		96,104		8,000,000		9,610
	DBS		USD	100,000,000		120,130		10,000,000		12,013
	SCB		USD	66,853,000		80,311		37,090,900		44,558
	ING		USD	50,000,000		60,065		50,000,000		60,065
	Citi		USD	30,000,000		36,039		3,000,000		3,604
POSCO ASSAN TST	SMBC		USD	62,527,500		75,114		56,274,750		67,603
STEEL INDUSTRY	ING		USD	60,000,000		72,078		54,000,000		64,870
	BNP		USD	24,000,000		28,831		21,600,000		25,948
POSCO Asia Co., Ltd.	BOC		USD	50,000,000		60,065		50,000,000		60,065
	Credit Agricole		USD	50,000,000		60,065		50,000,000		60,065
POSCO MEXICO S.A. DE C.V	SMBC		USD	30,000,000		36,039		30,000,000		36,039
	CITI BANAMEX		USD	30,000,000		36,039		30,000,000		36,039
	BOA		USD	20,000,000		24,026		20,000,000		24,026
	ANZ		USD	20,000,000		24,026		20,000,000		24,026
	Mizho		USD	20,000,000		24,026		20,000,000		24,026
POSCO SS VINA Co., Ltd.	Credit Agricole		USD	50,000,000		60,065		50,000,000		60,065
	HSBC		USD	100,000,000		120,130		100,000,000		120,130
	SMBC		USD	48,000,000		57,662		48,000,000		57,662
	Export-Import Bank of Korea		USD	1,941,250		2,332		1,663,928		1,999
	ANZ		USD	100,000,000		120,130		100,000,000		120,130
POSCO-VIETNAM Co., Ltd.	SMBC		USD	50,000,000		60,065		50,000,000		60,065
	Credit Agricole		USD	40,000,000		48,052		40,000,000		48,052
	BTMU		USD	26,000,000		31,234		26,000,000		31,234
	Citi		USD	20,000,000		24,026		20,000,000		24,026
	MIZUHO		USD	20,000,000		24,026		20,000,000		24,026
PT. KRAKATAU POSCO	Export-Import Bank of Korea		USD	567,000,000		681,137		429,312,942		515,733
	SMBC		USD	140,000,000		168,182		106,165,348		127,537
	BTMU		USD	119,000,000		142,955		88,784,348		106,657
	SCB		USD	107,800,000		129,500		82,141,348		98,677
	MIZUHO		USD	105,000,000		126,137		78,339,130		94,109
	Credit Suisse AG		USD	91,000,000		109,318		67,893,913		81,561
	HSBC		USD	91,000,000		109,318		67,893,913		81,561
	ANZ		USD	73,500,000		88,295		56,550,565		67,934
	BOA		USD	35,000,000		42,046		26,113,043		31,370
	The Tokyo Star Bank, Ltd		USD	21,000,000		25,227		15,667,826		18,822
POSCO COATED STEEL (THAILAND) CO., LTD.	The Great & Co.		THB	5,501,000,000		215,694		5,501,000,000		215,694
LLP POSUK Titanium	SMBC		USD	15,000,000		18,020		15,000,000		18,020
CSP—Compania	Export-Import Bank of Korea		USD	171,344,336		205,836		164,019,493		197,037
Siderurgica do Pecem	Santander		USD	44,322,524		53,245		42,194,220		50,688
	BNP		USD	44,322,524		53,245		42,194,220		50,688
	MIZUHO		USD	44,322,524		53,245		42,194,220		50,688
	Credit Agricole		USD	18,622,913		22,372		17,728,671		21,297
	SOCIETE GENERALE		USD	16,388,154		19,687		15,601,214		18,742
	KfW		USD	16,388,154		19,687		15,601,214		18,742
	BBVA Seoul		USD	18,622,913		22,372		17,728,671		21,297
	ING		USD	18,622,913		22,372		17,728,671		21,297
	BNDES		BRL	464,060,000		134,002		464,060,000		134,002
Nickel Mining Company SAS	SMBC		EUR	46,000,000		60,473		46,000,000		60,473
			USD	3,087,578,705		3,709,110		2,342,482,548		2,814,026
			EUR	46,000,000		60,473		46,000,000		60,473
			THB	5,501,000,000		215,694		5,501,000,000		215,694
			BRL	464,060,000		134,002		464,060,000		134,002

31

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

① For the nine-month period ended September 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	98,218			—		—			525		160,715		—		259,458			—
Financial assets at fair value through other comprehensive income		—			53,690		—			—		—		—		53,690			(41,974	)
Financial assets measured at amortized cost		27,060			—		153,367			—		—		—		180,427			—
Financial liabilities at fair value through profit or loss		—			—		—			805		34,743		—		35,548			—
Financial liabilities measured at amortized cost		(114,716	)		—		(260,504	)		—		—		6,415		(368,805	)		—
	W	10,562			53,690		(107,137	)		1,330		195,458		6,415		160,318			(41,974	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW209,791 million for the nine-month period ended September 30, 2019.

② For the nine-month period ended September 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	99,398			—		—			1,119		(1,160	)		—		99,357			—
Financial assets at fair value through other comprehensive income		—			70,357		—			—		—			—		70,357			(20,130	)
Financial assets measured at amortized cost		16,679			—		(21,812	)		—		—			—		(5,133	)		—
Financial liabilities at fair value through profit or loss		—			—		—			350		25,717			—		26,067			—
Financial liabilities measured at amortized cost		(104,052	)		—		(99,361	)		—		—			5,643		(197,770	)		—
	W	12,025			70,357		(121,173	)		1,469		24,557			5,643		(7,122	)		(20,130	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW102,334 million for the nine-month period ended September 30, 2018.

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

① For the three-month period ended September 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	33,545			—		—			64		92,169		—		125,778			—
Financial assets at fair value through other comprehensive income		—			12,602		—			—		—		—		12,602			(67,564	)
Financial assets measured at amortized cost		10,112			—		69,118			—		—		—		79,230			—
Financial liabilities at fair value through profit or loss		—			—		—			786		—		—		786			—
Financial liabilities measured at amortized cost		(41,127	)		—		(137,661	)		—		—		1,749		(177,039	)		—
	W	2,530			12,602		(68,543	)		850		92,169		1,749		41,357			(67,564	)

32

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW21,850 million for the three-month period ended September 30, 2019.

② For the three-month period ended September 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	34,760			—		—			130		(12,204	)		—		22,686			—
Financial assets at fair value through other comprehensive income		—			2,466		—			—		—			—		2,466			36,148
Financial assets measured at amortized cost		7,643			—		(59,327	)		—		—			—		(51,684	)		—
Financial liabilities at fair value through profit or loss		—			—		—			350		(15,220	)		—		(14,870	)		—
Financial liabilities measured at amortized cost		(40,431	)		—		31,056			—		—			1,401		(7,974	)		—
	W	1,972			2,466		(28,271	)		480		(27,424	)		1,401		(49,376	)		36,148

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW11,105 million for the three-month period ended September 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 September 30, 2019 and December 31, 2018 are as follows:

(in Won, except per share information)	September 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 September 30, 2019, total number of ADRs of 35,339,236 are equivalent to 8,834,809 shares of common stock.

(*2) As of September 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.

33

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

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

(in millions of Won)	September 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		(6,441	)		(91,310	)
Loss on disposals of hybrid bonds		(1,787	)		(1,787	)
	W	1,252,220			1,154,775

22. Hybrid Bonds

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

(in millions of Won)	Date of issue		Date of maturity		Rate of Interest (%)		September 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 September 30, 2019 are as follows:

	Hybrid bond1-2
Maturity	30 years (The Company has a right to extend the maturity)
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 September 30, 2019 amounts toW454 million.

34

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

23. Reserves

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

(in millions of Won)	September 30, 2019			December 31, 2018
Changes in fair value of equity investments at fair value through other comprehensive income	W	(240,772	)		(207,191	)

24. Treasury Shares

As of September 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 and nine-month periods ended September 30, 2019 and 2018 were as follows:

(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2019		2018		2019		2018
Types of revenue
Sales of steel product	W	7,479,188		7,647,210		22,250,287		22,650,954
Transportation services		196,848		182,690		586,683		527,975
Others		59,859		75,608		191,250		192,314
	W	7,735,895		7,905,508		23,028,220		23,371,243
Timing of revenue recognition
Revenue recognized at a point in time	W	7,522,544		7,706,115		22,389,289		22,797,897
Revenue recognized over time		213,351		199,393		638,931		573,346
	W	7,735,895		7,905,508		23,028,220		23,371,243

(b) Contract assets and liabilities

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

(in millions of Won)	September 30, 2019		December 31, 2018
Receivables
Account receivables	W	4,045,474		3,967,091
Contract assets
Account receivables		7,111		8,954
Contract liabilities
Advance received		5,457		9,902
Unearned income		36,663		34,480

35

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

26. Selling and Administrative Expenses

(a) Other administrative expenses

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

(in millions of Won)	For the three-month period ended September 30				For the nine-month period ended September 30
	2019		2018		2019		2018
Wages and salaries	W	60,295		52,532		173,602		177,547
Expenses related to post-employment benefits		6,290		5,295		21,483		21,146
Other employee benefits		12,691		13,067		39,184		45,447
Travel		3,397		2,954		10,211		8,919
Depreciation		5,780		5,027		18,708		12,523
Amortization		9,163		7,438		27,451		21,778
Rental		12,155		13,233		30,607		39,409
Repairs		3,234		2,296		9,051		9,982
Advertising		17,637		17,086		50,540		67,377
Research & development		15,037		24,306		57,313		58,586
Service fees		40,239		45,406		122,966		129,928
Supplies expense		234		216		3,325		1,319
Vehicles maintenance		1,532		1,395		4,649		3,664
Industry association fee		1,202		772		3,833		3,926
Training		6,430		6,076		18,193		16,219
Conference		1,202		1,367		4,193		3,995
Others		6,540		6,885		24,179		27,070
	W	203,058		205,351		619,488		648,835

(b) Selling expenses

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

(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2019		2018		2019		2018
Freight and custody expenses (*1)	W	33,956		32,992		97,641		95,845
Operating expenses for distribution center		1,969		2,474		6,712		7,321
Sales commissions		18,973		20,065		56,404		51,555
Sales advertising		230		858		851		1,687
Sales promotion		896		1,450		3,157		3,875
Sample		187		191		732		950
Sales insurance premium		1,595		1,083		4,492		3,018
	W	57,806		59,113		169,989		164,251

(*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 September 30, 2019 to those for the same period ended September 30, 2018, the company reclassifiedW549,287 million of expense of shipping service to cost of sales for the nine-month period ended September 30, 2018. This reclassification does not affect the amount of net assets for the year ended December 31, 2018, and net income for the nine-month period ended September 30, 2018.

36

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

27. Finance Income and Costs

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

(in millions of Won)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2019			2018			2019		2018
Finance income
Interest income(*1)	W	43,657			42,403			125,278		116,077
Dividend income		34,452			13,571			263,481		172,691
Gain on foreign currency transactions		93,597			48,385			212,474		133,788
Gain on foreign currency translations		(7,322	)		(24,730	)		28,617		19,356
Gain on valuation of derivatives		90,961			(20,322	)		193,749		32,726
Others		5,437			2,595			12,377		8,696
	W	260,782			61,902			835,976		483,334
Finance costs
Interest expenses	W	41,127			40,431			114,716		104,052
Loss on foreign currency transactions		61,415			55,069			151,220		146,448
Loss on foreign currency translations		93,403			(3,143	)		197,008		127,869
Loss on valuation of derivatives		—			7,009			—		7,009
Others		1,629			807			2,923		2,744
	W	197,574			100,173			465,867		388,122

(*1) Interest income calculated using the effective interest method for the nine-month period ended September 30, 2019 and 2018 wereW27,060 million andW16,679 million, respectively.

28. OtherNon-Operating Income and Expenses

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

(in millions of Won)	For the three-month period ended September 30					For the nine-month period ended September 30
	2019		2018			2019		2018
Othernon-operating income
Gain on disposals of property, plant and equipment	W	4,063		13,107			18,748		33,509
Gain on disposals of intangible assets		2		—			1,013		99,358
Gain on disposals of investment in subsidiaries, associates and joint ventures		3,496		1,294			4,689		1,294
Gain on disposals of assets held for sale		28,626		10			29,341		28
Reversal of other provisions		11,207		—			11,484		—
Gain on valuation of emission rights		—		—			25,440		—
Gain on disposals of emission rights		6,122		—			6,122		—
Others(*1)		17,642		20,566			31,161		82,001
	W	71,158		34,977			127,998		216,190
Othernon-operating expenses
Loss on disposals of property, plant and equipment	W	24,872		19,389			63,409		79,917
Impairment loss on property, plant and equipment		48,414		—			209,910		16,264
Impairment loss on investment in subsidiaries, associates and joint ventures		—		—			10,422		34,207
Donations		12,000		—			20,400		21,750
Loss on disposals of emission rights		56		—			56		—
Others(*2)		18,201		(109,135	)		52,039		71,886
	W	103,543		(89,746	)		356,236		224,024

(*1) During the nine-month period ended September 30, 2018, the Company recognizedW55,306 million of tax refund other than corporate income tax due to the consequences of appeal to tax tribunal and claim for rectification against tax investigation asnon-operating income.

37

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

(*2) During the nine-month period ended September 30, 2018, the Company recognizedW52,997 million of additional taxes imposed on value added tax related to imported LNG asnon-operating expense.

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 and nine-month periods ended September 30, 2019 and 2018 were as follows (excluding finance costs and income tax expenses):

(in millions of Won)	For the three-month period ended September 30						For the nine-month period ended September 30
	2019			2018			2019			2018
Changes in inventories(*1)	W	(14,341	)		(43,149	)		(12,660	)		139,839
Raw materials and consumables used		4,779,807			4,470,784			13,798,396			12,972,651
Employee benefits expenses		466,011			434,498			1,334,671			1,336,688
Outsourced processing cost		602,538			579,169			1,829,634			1,752,291
Depreciation(*2)		536,324			529,065			1,608,237			1,578,971
Amortization		19,349			16,913			57,776			49,770
Electricity and water expenses		118,066			145,457			406,686			481,105
Service fees		61,267			69,029			186,129			193,217
Rental		17,858			18,518			44,427			55,944
Advertising		17,637			17,086			50,540			67,377
Freight and custody expenses		216,143			225,844			656,434			645,132
Sales commissions		18,973			20,065			56,404			51,555
Loss on disposals of property, plant and equipment		24,871			19,389			63,409			79,917
Impairment loss on property, plant and equipment		48,414			—			209,910			16,264
Impairment loss on investments in subsidiaries, associates and joint ventures		—			—			10,422			34,207
Other expenses		264,384			218,222			865,436			1,210,772
	W	7,177,301			6,720,890			21,165,851			20,665,700

(*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 the nine-month periods ended September 30, 2019 and 2018 were 27.32% and 25.90%, respectively.

38

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

31. Earnings per Share

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

(in Won, except share information)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2019			2018			2019			2018
Profit for the period	W	499,044,928,266			891,098,863,628			1,715,599,641,115			2,240,126,330,038
Interests of hybrid bonds, net of tax		(1,681,205,479	)		(1,681,205,479	)		(4,988,794,519	)		(16,039,780,819	)
Weighted-average number of common shares outstanding(*1)		80,115,641			80,000,982			80,113,124			80,000,428
Basic and diluted earnings per share	W	6,208			11,118			21,352			27,801

(*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 September 30						For the nine-month periods ended September 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	)		(7,185,853	)		(7,073,711	)		(7,186,407	)
Weighted-average number of common shares outstanding		80,115,641			80,000,982			80,113,124			80,000,428

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

39

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

32. Related Party Transactions

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

1) For the nine-month period ended September 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	5,151		11,110		—		226,604		25		12,064
POSCO COATED & COLOR STEEL Co., Ltd.		354,046		1,942		95		—		13,595		586
POSCO ICT(*4)		2,213		4,990		—		226,456		26,235		131,522
eNtoB Corporation		11		66		231,896		28,678		72		18,443
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		289,090		30,298		389,598		12,396		236,114		3,084
POSCO ENERGY CO., LTD.(*5)		147,124		1,252		1,090		—		—		1,672
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		4,426,067		46,572		459,705		—		38,067		4,516
POSCO Thainox Public Company Limited		188,527		13,795		6,706		—		—		3
POSCO America Corporation		232,724		—		—		—		—		1,682
POSCO Canada Ltd.		340		751		245,123		—		—		—
POSCO Asia Co., Ltd.		1,300,580		975		323,203		72		1,484		5,093
Qingdao Pohang Stainless Steel Co., Ltd.		99,757		—		—		—		—		—
POSCO JAPAN Co., Ltd.		1,134,448		36		29,843		3,685		—		2,898
POSCO-VIETNAM Co., Ltd.		222,692		263		—		—		—		37
POSCO MEXICO S.A. DE C.V.		238,357		89		—		—		—		246
POSCO Maharashtra Steel Private Limited		513,467		266		—		—		—		256
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		81,829		1		2,189		—		—		—
POSCO VST CO., LTD.		217,034		—		—		—		—		62
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		285		514,751		—		—		—
Others		685,845		17,396		106,193		19,147		182,202		119,078
		10,139,302		130,087		2,310,392		517,038		497,794		301,242
Associates and joint ventures(*3)
POSCO PLANTEC Co., Ltd.		412		70		2,009		183,351		12,994		16,430
SNNC		4,121		3,910		420,720		—		—		10
POSCO-SAMSUNG-Slovakia Processing Center		50,894		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		841,866		—		—		—
Others		11,830		107,865		43,088		—		—		—
		67,257		111,845		1,307,683		183,351		12,994		16,440
	W	10,206,559		241,932		3,618,075		700,389		510,788		317,682

(*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 September 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.

(*5) In addition to the above transactions, during the nine-month period ended September 30, 2019, the Company merged withOff-gas Power Station Business Sector of POSCO ENERGY CO.,Ltd. and disposed the LNG terminal business to the subsidary. (Note 8,35)

40

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

2) For the nine-month period ended September 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	6,369		76		—		196,752		12		29,718
POSCO COATED & COLOR STEEL Co., Ltd.		356,527		2,724		—		—		6,869		1,276
POSCO ICT		1,972		7,475		—		204,736		24,754		139,216
eNtoB Corporation		9		60		264,079		18,832		217		20,548
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		302,031		28,457		395,063		17,218		234,193		1,271
POSCO ENERGY CO., LTD.		146,878		1,060		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		4,510,731		41,542		532,993		—		43,401		1,200
POSCO Thainox Public Company Limited		215,188		5,249		8,508		—		—		—
POSCO America Corporation		231,452		—		—		—		—		1,715
POSCO Canada Ltd.		190		1,234		197,650		—		—		—
POSCO Asia Co., Ltd.		1,412,737		189		430,584		556		1,876		2,866
Qingdao Pohang Stainless Steel Co., Ltd.		134,544		7		—		—		—		34
POSCO JAPAN Co., Ltd.		1,056,147		6		18,655		2,528		—		2,574
POSCO-VIETNAM Co., Ltd.		220,718		71		—		—		—		8
POSCO MEXICO S.A. DE C.V.		220,900		59		—		—		—		35
POSCO Maharashtra Steel Private Limited		423,802		490		—		—		—		115
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		165,483		—		1,111		—		—		5
POSCO VST CO., LTD.		224,298		1		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		136		170,716		—		—		—
Others		671,217		36,323		115,059		15,708		193,469		95,559
		10,302,193		125,159		2,134,418		456,330		504,791		296,140
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		9,275		144		2,340		119,442		17,299		5,397
SNNC		3,784		799		384,903		—		—		5
POSCO-SAMSUNG-Slovakia Processing Center		56,357		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		602,687		—		—		—
Others		8,557		53,013		54,996		—		—		5
		77,973		53,956		1,044,926		119,442		17,299		5,407
	W	10,380,166		179,115		3,179,344		575,772		522,090		301,547

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

1) For the three-month period ended September 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	1,543		21		—		87,255		4		6,831
POSCO COATED & COLOR STEEL Co., Ltd.		120,638		235		95		—		5,911		95
POSCO ICT		704		1		—		77,639		9,180		42,684
eNtoB Corporation		4		6		72,320		11,742		13		5,012
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		91,297		5,169		134,299		4,818		79,731		1,074
POSCO ENERGY CO., LTD.		40,522		628		1,090		—		—		1,610
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,584,691		—		129,661		—		12,030		1,947
POSCO Thainox Public Company Limited		68,495		120		2,973		—		—		—
POSCO America Corporation		48,207		—		—		—		—		1,643
POSCO Canada Ltd.		—		147		93,231		—		—		—
POSCO Asia Co., Ltd.		438,809		390		74,772		72		497		2,297
Qingdao Pohang Stainless Steel Co., Ltd.		40,347		—		—		—		—		—
POSCO JAPAN Co., Ltd.		378,091		36		8,290		664		—		1,411
POSCO-VIETNAM Co., Ltd.		81,157		82		—		—		—		—
POSCO MEXICO S.A. DE C.V.		84,591		58		—		—		—		241
POSCO Maharashtra Steel Private Limited		179,859		79		—		—		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		38,516		1		708		—		—		—
POSCO VST CO., LTD.		80,009		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		105		192,541		—		—		—
Others		260,530		2,836		25,138		8,575		48,620		58,287
		3,538,010		9,914		735,118		190,765		155,986		123,132
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		229		5		610		72,737		3,668		7,068
SNNC		1,374		530		176,094		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		19,130		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		359,018		—		—		—
Others		4,845		21,828		15,961		—		—		—
		25,578		22,363		551,683		72,737		3,668		7,068
	W	3,563,588		32,277		1,286,801		263,502		159,654		130,200

41

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

2) For the three-month period ended September 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	1,402		13		—		57,027		3		6,513
POSCO COATED & COLOR STEEL Co., Ltd.		129,328		—		—		—		2,651		612
POSCO ICT		653		—		—		67,368		8,581		44,048
eNtoB Corporation		4		—		88,165		10,485		159		8,256
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		101,449		5,376		135,439		1,240		78,643		670
POSCO ENERGY CO., LTD.		50,970		358		—		—		—		—
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		1,618,711		2,683		189,376		—		14,023		525
POSCO Thainox Public Company Limited		74,564		—		3,056		—		—		—
POSCO America Corporation		96,316		—		—		—		—		768
POSCO Canada Ltd.		—		352		69,486		—		—		—
POSCO Asia Co., Ltd.		460,938		27		194,209		21		551		982
Qingdao Pohang Stainless Steel Co., Ltd.		47,367		—		—		—		—		29
POSCO JAPAN Co., Ltd.		362,715		—		6,938		819		—		1,081
POSCO-VIETNAM Co., Ltd.		56,802		50		—		—		—		—
POSCO MEXICO S.A. DE C.V.		74,511		22		—		—		—		35
POSCO Maharashtra Steel Private Limited		154,893		141		—		—		—		29
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		53,227		—		1,111		—		—		—
POSCO VST CO., LTD.		75,222		1		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		93		70,474		—		—		—
Others		242,439		15,826		69,675		4,694		64,998		32,635
		3,601,511		24,942		827,929		141,654		169,609		96,183
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		4,007		36		708		43,867		6,790		614
SNNC		1,317		197		141,893		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		27,844		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		193,872		—		—		—
Others		3,450		7,885		19,173		—		—		—
		36,618		8,118		355,646		43,867		6,790		614
	W	3,638,129		33,060		1,183,575		185,521		176,399		96,797

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

1) September 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		4,813		4,814		—		43,963		437		44,400
POSCO COATED & COLOR STEEL Co., Ltd.		62,960		275		63,235		10		—		2,809		2,819
POSCO ICT		—		167		167		1,306		62,134		39,846		103,286
eNtoB Corporation		—		—		—		4,316		36,982		5		41,303
POSCO CHEMICAL CO., LTD (Formerly, POSCO CHEMTECH)		31,109		4,036		35,145		17,932		53,854		19,180		90,966
POSCO ENERGY CO., LTD.		1,221		8,792		10,013		—		124,169		4,324		128,493
POSCO INTERNATIONAL Corporation (Formerly, POSCO DAEWOO Corporation)		593,425		197		593,622		249		2,418		3,949		6,616
POSCO Thainox Public Company Limited		41,333		2		41,335		—		—		—		—
POSCO America Corporation		7,170		—		7,170		—		285		—		285
POSCO Asia Co., Ltd.		463,308		1,333		464,641		11,811		—		—		11,811
Qingdao Pohang Stainless Steel Co., Ltd.		30,935		—		30,935		—		—		—		—
POSCO MEXICO S.A. DE C.V.		115,927		1,260		117,187		—		99		—		99
POSCO Maharashtra Steel Private Limited		277,304		1,523		278,827		—		—		—		—
Others(*1)		454,764		48,169		502,933		69,851		35,317		88,212		193,380
		2,079,457		70,567		2,150,024		105,475		359,221		158,762		623,458
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		—		2		2		1,299		23,884		—		25,183
SNNC		271		71		342		37,679		—		—		37,679
Roy Hill Holdings Pty Ltd		—		—		—		53,017		—		—		53,017
Others		959		38,350		39,309		355		76		—		431
		1,230		38,423		39,653		92,350		23,960		—		116,310
	W	2,080,687		108,990		2,189,677		197,825		383,181		158,762		739,768

(*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 September 30, 2019, corresponding amounts of those loans were recorded as allowance for doubtful accounts.

42

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 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 the nine-month periods ended September 30, 2019 and 2018, details of compensation to key management officers were as follows:

(in millions of Won)	September 30, 2019		September 30, 2018
Short-term benefits	W	36,012		34,403
Long-term benefits		4,538		4,629
Retirement benefits		7,998		9,357
	W	48,548		48,389

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 September 30, 2019, 93 million tons of iron ore and 12 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 September 30, 2019, there are 39 vessels under contract and the average remaining contract period is about 10 years.

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

4) As of September 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 September 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 September 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 28 lawsuits, including claim for employee right aggregating toW168.7 billion as defendant as of September 30, 2019, which arise from the ordinary course of business. The Company has recognized provisions amounting toW2.1 billion for one of 28 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 September 30, 2019.

44

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2019

(Unaudited)

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the nine-month periods ended September 30, 2019 and 2018 were as follows:

(in millions of Won)	September 30, 2019			September 30, 2018
Trade accounts and notes receivable, net	W	(20,168	)		(647,385	)
Other accounts receivable		(187,091	)		3,150
Inventories		(21,600	)		14,988
Prepaid expenses		(18,765	)		(17,341	)
Other current assets		(477	)		2,956
Long-term guarantee deposits		(299	)		65
Othernon-current assets		1,182			767
Trade accounts and notes payable		(129,738	)		(35,246	)
Other accounts payable		806			(47,827	)
Accrued expenses		(25,224	)		2,492
Advances received		(1,250	)		(482	)
Withholdings		80,571			6,478
Unearned revenue		2,280			8,334
Other current liabilities		(21,827	)		(9,330	)
Payments of severance benefits		(61,890	)		(108,487	)
Plan assets		42,819			41,052
Othernon-current liabilities		(3,097	)		(2	)
	W	(363,768	)		(785,818	)

35. Business combination

(a) Overview of the business combination

The Company merged with POSCO Processing & Service andOff-gas Power Station Business Sector of POSCO ENERGY CO., Ltd. for the nine-month period ended September 30, 2019. The purpose of the business combination is to promote management efficiency and to enhance shareholder value based on synergy between businesses.

	POSCO Processing & Service	POSCO ENERGY CO., Ltd.Off-gas Power Station Business Sector
Decision date of Board of Directors	2018.11.3	2019.4.12
Acquisition date	2019.1.1	2019.9.1

45

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 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)	POSCO Processing & Service			POSCO ENERGY CO., Ltd.Off-gas Power Station Business Sector
Transfer price
Book value of existing ownership interest	W	385,995
Treasury stock		37,001
Cash		36			1,156,953
		423,032			1,156,953
Identifiable assets, acquired liabilities
Cash and cash equivalents		2,207
Account receivable		—			37,779
Other financial assets		39,670
Inventories		—			6,585
Investment properties		41,220
Property, plant and equipment		—			804,706
Investments in subsidiaries, associates and joint ventures		740,211
Other assets		9,962			2,418
Account payable		—			(19,941	)
Other liabilities		(1,748	)		(874	)
Identifiable net assets		831,522			830,673
Capital surplus arising from business combination
Increase in capital surplus	W	408,490			(326,280	)

36. Events after the reporting period

(a) Pursuant to the resolution of the Board of Directors on November 1, 2019, the Company decided to pay interim cash dividends ofW2,000 per common share (total dividend:W160.2 billion).

(b) On October 16, 2019, the Company issued unguaranteed Korea won bond310-1,310-2 and310-3 with par value ofW610,000 million,W190,000 million andW200,000 million, respectively. Maturity of the bonds is October 14, 2022 and October 16, 2024 and October 16, 2029, respectively. Also, the Company issued anon-guaranteed senior dollar bond with par value of USD 500 million on November 12, 2019. Maturity of the bond is November 12, 2022.

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