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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2020

Commission File Number: 1-13368

POSCO

(Translation of registrant’s name into English)

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

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F    ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):    ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):    ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-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 Form 6-K submission or other Commission filing on EDGAR.

POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-translated documents of POSCO’s Interim Report for the year 2020

.

SIGNATURES

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

		POSCO
		(Registrant)
Date: September 10, 2020	By	/s/ Lim, Seung-Kyu
		(Signature)
		Name :  Lim, Seung-Kyu
		Title :  Executive Vice President

Exhibit 99.1

INTERIM REPORT

(From January 1, 2020 to June 30, 2020)

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

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

INTERIM REPORT

(From January 1, 2020 to June 30, 2020)

To:        Korean Financial Services Commission and Korea Exchange

/s/ Chang, In-Hwa

Chang, In-Hwa

President and Representative Director

POSCO

6261 Donghaean-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

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

Telephone: +82-2-3457-0114

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TABLE OF CONTENTS

I.	Overview	4
II.	Business	10
III.	Financial Statements	33
IV.	Corporate Governance and Company Affiliates	37

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

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I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

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 of non-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 Enterprise Group

(1) Name of the Enterprise Group: POSCO

(2) Companies Belonging to the Enterprise Group

POSCO, POSCO CHEMICAL CO., LTD, POSCO INTERNATIONAL Corporation, POSCO COATED & COLOR STEEL Co., Ltd., POSCO ICT, POSCO M-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, Samcheok Blue Power Co., Ltd. (By change of name from POSPower Co., Ltd), Songdo Posco family Housing, POSCO Group University, POSCO Research & Technology, Pohang Techno Valley PFV Corporation, Songdo Development PMC (Project Management Company) LLC., Korea Fuel-Cell, POSCO SPS

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(3) Related Laws and Regulations

The Korea Fair Trade Commission has designated POSCO as Enterprise Group 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 (Article 10-2 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 (Article 11-3 of the MRFTA)

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

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

2. Business Organization

A. Highlights of the Company’s Business Organization

(1) Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyeongsangbuk -do, Korea

(2) Steel Works and Offices

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

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

(c) Seoul Office: POSCO Center, 440 Teheran-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:

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

(3) Major Changes in the Board of Directors (as of March 27, 2020)

(a) Inside Directors

• Re-appointment : Chang, In-Hwa (Representative Director, President), Chon, Jung-Son (Senior Executive Vice President), Kim, Hag-Dong (Senior Executive Vice President) and Jeong, Tak (Senior Executive Vice President)

(b) Outside Directors

• Re-appointment : Chang, Seung-Wha

(c) Audit Committee Member

• New member : Pahk, Heui-Jae (Outside director)

(4) Changes of the Major Shareholders of POSCO

(a) Since January 30, 2007, National Pension Service holds the largest number of common shares of POSCO.

(b) For further reference, please refer to the public disclosures of changes in common shares of the largest shareholder on Financial Supervisory Service website (http://dart.fss.or.kr) with the filing dates given below:

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 9, 2019, April 9, 2019, July 9, 2019, October 8, 2019, January 8, 2020, February 10, 2020, March 11, 2020, April 7, 2020, May 8, 2020, June 3, 2020, July 7, 2020, and August 6, 2020)

B. POSCO’s Merger, Acquisition and Handover of Businesses

(1) March 2016 : Small scale merger of POSHIMETAL Co., Ltd into POSCO

(2) May 2016 : Small scale merger of POSCO Green Gas Technology into POSCO

(3) January 2019 : Small scale merger of POSCO Processing & Service Co., Ltd into POSCO

(4) September 2019 : Small scale merger of By-Product Hydrogen Generation Business from POSCO ENERGY into POSCO after spin-off

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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

[None]

4. Other Information Regarding Shares

A. Total Number of Shares

	(As of June 30, 2020)
Authorized Shares	Issued Shares
200,000,000		87,186,835

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

Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

								(As of June 30, 2020)
Method of Purchase	Type	Beginning*		Increased		Decreased		Cancelled		Balance
Direct	Registered		7,071,194		—		—		—		7,071,194
Trust Contract	Common		—		358,953		—		—		358,953
Total	Stock		7,071,194		358,953		—		—		7,430,147

* Beginning : January 1, 2020

5. Voting Rights

			(As of June 30, 2020)
Classification of Shares	Number of Shares		Remarks
(1) Number of Issued Shares		87,186,835	—
(2) Shares without Voting Rights		7,430,147	- Treasury stock: 7,071,194      - Trust holding: 358,953
(3) Shares with Voting Rights		79,756,688	—

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6. Earnings and Dividends

					(In millions of KRW)
	2020.1H		2019		2018
(Consolidated) Profit*		435,675		1,835,087		1,690,612
(Separate) Profit		459,666		1,175,712		1,072,592
Earnings per Share (Consolidated, KRW)		5,400		22,823		20,911
Cash Dividend Paid		160,061		801,156		800,009
Pay-out Ratio (Consolidated, %)		36.7		43.7		47.3
Dividend per Share (KRW)		2,000		10,000		10,000
Dividend Yield (%)		1.1		4.1		4.1

* (Consolidated) Profit : Profit attributable to owners of the controlling company

7. Stock Prices and Trading Volumes

The stock prices and trading volumes of POSCO for the last 6 months are as follows.

A. The Korean Stock Market

								(KRW/share, In thousands of shares)
		January 2020		February 2020		March 2020		April 2020		May 2020		June 2020
Common share	Highest Price		247,000		224,000		197,000		201,500		184,500		203,000
	Lowest Price		221,000		195,500		138,000		155,000		168,000		174,000
	Average Price		235,600		213,725		167,705		171,200		175,763		188,614
Trading volume	Daily highest		584		538		1,020		994		899		1,149
	Daily lowest		139		182		300		99		245		205
	Monthly		5,297		5,886		11,691		10,230		9,060		9,582

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B. New York Stock Exchange

								(USD/ADS*, In thousands of ADS*)
		January 2020		February 2020		March 2020		April 2020		May 2020		June 2020
American Depositary Share (ADS)	Highest Price		52.3		47.1		41.1		38.6		37.4		42.6
	Lowest Price		44.4		40.2		26.7		31.1		34.3		37.0
	Average Price		50.1		44.3		34.0		34.8		35.9		39.1
Trading volume	Daily highest		508		449		817		375		533		421
	Daily lowest		119		105		252		129		92		107
	Monthly		4,721		4,372		9,676		5,268		4,166		4,902

* ADS : American Depositary Share representing one-fourth of one share of Common Stock

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II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Summary of Financial Status of Segment

									(In millions of KRW)
Segment	2020.1H				2019				2018
	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		13,479,418		308,755		32,078,45		2,786,517		32,358,009		4,536,318
Trading		10,016,612		242,814		22,157,131		542,724		22,407,717		383,934
Engineering & Construction		3,395,502		197,071		6,944,629		338,865		6,769,410		411,489
Others		1,375,826		124,327		3,186,635		200,749		3,442,641		210,859
Total		28,267,367		872,967		64,366,848		3,868,855		64,977,777		5,542,600

2. Business Status of Segments

A. Steel

(1) Summary of Business

There are 69 consolidated companies in the steel segment, including 3 domestic companies including POSCO and POSCO C&C, and 65 overseas companies including POSCO (Zhangjiagang) Stainless Co., Ltd. in China and overseas processing centers. POSCO produces steel materials such as hot rolled, cold rolled and stainless steel at Pohang Works and Gwangyang Works. POSCO C&C is a company specializing in manufacturing surface-treated steel products, POSCO (Zhangjiagang) Stainless Co., Ltd., is a stainless steel sheet manufacturer and seller, and there are other overseas processing centers that process and sell steel materials.

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The steel industry is a fundamental industry that has taken pivotal roles in the national economic development since the 1970s by supplying basic steel materials to demanding industries such as automobiles, shipbuilding, home appliances, construction, etc. The steel industry is a capital and technology-intensive industry that requires enormous initial investments.

The Korean steel market is tariff-free, and especially within the Northeast Asian region, there is little difference in logistics costs among Korea, China and Japan, so it can be viewed as an open market.

All iron ore and coking coal that are the main raw materials for steel manufacturing, are imported. In order to secure stable raw materials sourcing, the company is continuously increasing purchases through raw material development investments by acquiring shares of overseas raw materials companies.

Environmental regulations for the steel industry are being strengthened. To protect the environment, POSCO has continuously invested in environmental facilities and has been actively responding to future environmental changes such as low-carbon and green growth by commercializing the world’s first eco-friendly steel manufacturing method, FINEX and so on.

In the steel industry, automobiles, shipbuilding, and construction are the main demand industries, and steel products are used as raw materials for these demand industries. In terms of sales, the proportion of domestic sale is 55% of total sales and export sales are around 45%, and by export region, the proportion of China, Southeast Asia, and Japan is high, in the first half of 2020. POSCO maintains order based production and sales system, and to secure stable sales, the proportion of direct sales to customers in domestic sales is maintained at about 60%.

The company will focus on the following management activities:

First, in the steel business, the company will operate flexible production and sales system that can minimize the impact of production cuts along with extreme cost reduction. Second, the POSCO Group businesses will pursue continuous business evolution and focus on core businesses. Third, the company will endeavor to create symbiotic values, the core of realizing the corporate citizenship management philosophy. Fourth, the company will create safe and pleasant workplaces and maintain sound labor-management culture to realize higher labor productivity compared to competitors.

(2) Market Share

									(Millions of Tons, %)
Category	2020.1H				2019				2018
	Production		Market share		Production		Market share		Production		Market share
Crude Steel Production		32.9		100		71.4		100		72.5		100
POSCO		16.9		51.7		38.0		53.2		37.7		52.0
Others		15.7		48.3		33.4		46.7		34.8		48.0

Source: World Steel Association (www.worldsteel.org)

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B. Trading

(1) Market Share

			(Millions of US Dollars)
Category	2020.1H		2019.1H		Growth rate
All Trading Companies in Korea		240,642		271,148		-11.3	%
POSCO International Corp.		2,563		3,265		-21.5	%

Source: Korea International Trade Association

(2) Summary of Businesses

POSCO International and its consolidated subsidiaries engage in three major businesses; trading, energy and others. In addition, POSCO International maintains a global network of over 100 subsidiaries and branches in major overseas regions. In the case of the trading business, POSCO International has been actively developing and expanding new businesses in fields such as agro-commodities, LNG trading, and industrial materials based on the know-how accumulated over a long period of time in the traditional trading business and through its vast overseas networks. In the energy business, POSCO International conducts businesses such as natural gas and crude oil development, LNG infrastructure, natural resources and power generation infrastructure.

C. Engineering & Construction

POSCO E&C engages in primarily 4 businesses: construction, energy, civil engineering and plant. In the construction business, based on its know-how in the construction of skyscrapers and commercial complexes, POSCO E&C involves in a new city and private complex development projects. In the energy business, it involves in various power generation plant projects including renewable energy projects. The civil engineering business is about constructing expressways, railroads and bridges. Plant business is the construction of integrated steel mills, EPC projects and industrial plants.

D. Others

(1) POSCO ENERGY

POSCO ENERGY started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 1990’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand for electricity in Korea. POSCO ENERGY acquired the LNG terminal business from POSCO in 2019, providing an opportunity to expand the LNG value chain. The LNG terminal business operates stable business structure through businesses such as tank rental, small scale LNG business, and ship trial run. POSCO ENERGY plans to secure stable profit base through the expansion of the LNG terminal in the future and grow into a general energy company focused on gas and power.

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(2) POSCO ICT

Based on the competitiveness in ICT, POSCO ICT has expanded Smart Factory and provided IT solutions to POSCO and POSCO subsidiaries. POSCO ICT has expanded Smart Factory based on the world’s first continuous process platform “PosFrame” and next-generation production optimization system “MES 3.0”. POSCO ICT has been actively applying smart technology for strategic businesses in manufacturing, logistics, trade, and energy sectors, such as building MES at the POSCO CHEMICAL’s anode and cathode material factory, spreading the Smart Management of POSCO International, and spreading the Intelligent Power Plant of POSCO Energy in order to promote the digital transformation of POSCO subsidiaries and other businesses.

(3) POSCO CHEMICAL

POSCO CHEMICAL operates mainly 3 businesses: refractory, quicklime & chemical and energy material. In the refractory business, POSCO CHEMICAL produces and maintains refractories. In the quicklime & chemical business, POSCO CHEMICAL produces quicklime and chemical products such as coal tar and light oil. In the energy material business, POSCO CHEMICAL provides cathode and anode materials which are the main components for secondary cells: cathode, anode, electrolyte and separation membrane. Due to environment-friendly policy with less carbon emission worldwide, demands for Energy Storage System and Electric Vehicle are expected to grow continuously.

(4) POSCO M-TECH

POSCO M-TECH is a specialized supplier of steel products packaging and steel supplementary materials such as aluminum deoxidizers. In the case of steel products packaging, POSCO M-TECH continuously develops packaging automated molding machines and applies environment-friendly packaging materials. In addition, aluminum deoxidizers engage in primarily 3 types : Pellet, Mini-Pellet and Ingot. POSCO M-TECH has expanded the sales of aluminum deoxidizers in overseas markets.

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3. Key Products

A. Sales of Key Products (2020.1H)    

			(In hundred millions of KRW, %)
Business Area	Item	Specific Use	Total Sales			Ratio
Steel	Hot-rolled Product (HR)	Steel pipe, Shipbuilding, etc.		34,434			16.50
	Cold-rolled Product (CR)	Automobile , Home appliances, etc.		64,101			30.72
	Stainless Steel Products	Western tableware, etc.		45,506			21.81
	Others	Plates, Wire rods, etc.		64,589			30.96
	Gross Sum			208,630			100.00
	Deduction of Internal Trade			(73,836	)
	Sub Total			134,794
Trading	Steel, Metal			118,193			71.83
	Chemical, Strategic Item, Energy			12,497			7.60
	Others			33,847			20.57
	Gross Sum			164,537			100.00
	Deduction of Internal Trade			(64,371	)
	Sub Total			100,166
Engineering & Construction	Domestic Construction	Architecture		22,869			58.29
		Plant		6,983			17.80
		Civil Engineering		2,740			6.98
		Others		—			0.00
	Overseas Construction			3,213			8.19
	Owned Construction			2,150			5.48
	Others			1,275			3.25
	Gross Sum			39,231			100.00
	Deduction of Internal Trade			(5,276	)
	Sub Total			33,955
Others	Electricity Sales, etc.			26,921
	Deduction of Internal Trade			(13,163	)
	Sub Total			13,758
	Total Sum			282,674

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B. Price Movement Trends of Key Products

				(In thousands of KRW/ Tons, KRW/kWh)
Business Area	Products	2020.1H		2019		2018
Steel	Hot-rolled Product (HR)		631		695		707
	Cold-rolled Product (CR)		769		800		807
Others	Electric Power		85		94		100
	Refractory		990		1,073		1,073
	Lime		108		111		108

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

From the 1st quarter of the 49th term, price changes of the refractory product are calculated after excluding new refractory products

[Steel]

(1) Criteria for Calculation

(a) Subjects for Calculation: Unit prices of the standard hot-rolled product and cold-rolled product

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

(2) Factors of Price Changes

Since 2016, prices have continued to rise, but after a slight decline in 2019 as the domestic and overseas demand industry worsened, prices fell sharply due to COVID-19 in 2020.

[Others]

(1) Criteria for Calculation

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

(b) Refractory and lime: Average sales price including shipping cost

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4. Major Raw Materials

A. Current Status of Major Raw Materials

				(In hundred millions of KRW)
Business Area	Type of Purchase	Item	Specific Use	Purchase Amount (Portion, %)	Remarks
Steel	Raw Materials	Materials for Iron-making,	Iron Ore for Blast Furnaces	52,128 (58.1)	Iron Ore, Coal
		Sub-materials	Sub-materials for Iron-making, Steelmaking	17,236 (19.2)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	20,377 (22.7)	Nickel, Ferrochrome, STS Scrap Iron, etc.
Engineering & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	1,231 (21.1)
		Steel Reinforcement	Strengthening Concrete	977 (16.8)
		Cable	Electricity Transfer	48 (0.8)
		Steel Pile	Foundation of Structure	149 (2.6)
		Others	Construction of Pipe and Structure etc.	3,417 (58.7)
Others	Raw Materials	LNG	Material for Power Generation	4,508 (53.3)
		Limestone	Production of Lime	418 (4.9)
		Others	Engineering business etc.	3,528 (41.7)

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B. Price Movement Trends of Major Raw Materials

				(In thousands of KRW)
Business Area	Category	2020.1H		2019		2018
Steel	Iron Ore(per ton)		103		102		76
	Coal(per ton)		165		207		228
	Scrap Iron(per ton)		319		347		395
	Nickel(per ton)		15,046		16,148		15,074
Engineering & Construction	Ready-mixed Concrete (per m3)		63		63		63
	Steel Pile (per m)		136		136		146
	Steel Reinforcement (per kg)		1		1		1
	Cable (per m)		1		1		1
Others	LNG (per ton)		599		668		768
	Lime (per ton)		20		20		19

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[Steel]

Price Movement Trend of Major Raw Materials

(1) Iron Ore

																			(In US Dollars/ Tons)
	’20.2Q		’20.1Q		’19.4Q		’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q
Trend of International Benchmark Price (Free On Board, “FOB”)		88		83		80		92		94		77		64		57		58		68		57		64

(2) Coal

																			(In US Dollars/ Tons)
	’20.2Q		’20.1Q		’19.4Q		’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q
Trend of International Benchmark Price (FOB)		118		155		140		161		203		206		221		188		190		229		204		189

(3) Scrap Iron

																			(In US Dollars/ Tons)
	’20.2Q		’20.1Q		’19.4Q		’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q		’17.3Q
Trend of Purchase Price (Cost and Freight, “CFR”)		254		274		270		290		312		325		343		350		364		379		344		322

(4) Nickel

’20.2Q

’20.1Q

’19.4Q

’19.3Q

’19.2Q

’19.1Q

’18.4Q

’18.3Q

’18.2Q

’18.1Q

’17.4Q

’17.3Q

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

USD 5.54 /lb USD 12,215/ton

USD 5.77 /lb USD 12,723/ton

USD 7.01 /lb USD 15,450/ton

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

LME : London Metal Exchange

18

[Engineering and Construction]

(1) Criteria for Calculation

Products	Criteria for Calculation
Ready-mixed Concrete	Standard 25-210-15
Steel Pile	SPIRAL, 609.6, 12T, STP275, KS F 4602
Steel Reinforcement	High Tensile Deformed Bar SD400 D10mm
Cable	TFR-3, 0.6/1KV, 2.5SQ, 2core

[Others]

(1) Criteria for Calculation

<POSCO ENERGY>

LNG: The average price between LNG purchased from Korea Gas Corporation and LNG purchased directly from foreign suppliers

<POSCO CHEMICAL>

Refractory and lime: Purchase prices and transportation fees

19

5. Production and Facilities

A. Production Capacity

[Steel]

					(Thousands of Tons)
Business Area	Products		2020.1H		2019		2018
Steel		Crude Steel		22,829		47,534		47,590

[Others]

	(Electric Power-MW per year, Lime-Thousands of Tons  per year)
Business Area	Products		2020.1H		2019		2018
Power Generation	Electric Power	Incheon		3,412		3,412		3,412
		Gwangyang		—		284		284
		Pohang		—		290		290
Lime	Lime			1,092		2,190		2,190

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

				(Thousands of Tons)
Products		2020.1H		2019		2018
Crude Steel			19,105		42,948		42,867
Products	Hot-Rolled Steel		4,304		8,739		8,716
	Plate		3,536		7,191		7,432
	Wire Rod		1,300		2,756		2,867
	Pickled-Oiled Steel		1,075		2,967		2,946
	Cold-Rolled Products		3,023		7,416		8,551
	Coated Steel		2,910		6,526		7,163
	Electrical Steel		421		819		1,078
	Stainless Steel		1,860		3,850		3,978
	Others		2,264		5,761		5,903
	Total		20,694		46,025		48,634

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

20

(2) Capacity Utilization Rate

						(Thousands of Tons, %)
	Company	Capacity		Production		Utilization Rate
Crude Steel	POSCO		20,229		16,859		83.3
Production	Zhangjiagang Pohang Stainless Steel Co., Ltd		550		485		88.1
	PT.KRAKATAU POSCO		1,500		1,546		103.1
	POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Former, SS VINA JOINT STOCK COMPANY)		275		215		78.1
	Total		22,554		19,105		83.6

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

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY, formerly SS VINA JOINT STOCK COMPANY, had a production capacity of crude steel 1,100 thousand tons/year: section steel 550 thousand tons/year and reinforcing bar 550 thousand tons/year. However, after the exit of the reinforcing bar business in November 2019, the current crude steel production capacity is 550 thousand tons/year.

[Others]

(1) Production Result

				(Gwh, Thousands of Tons)
Business Area	Products	2020.1H		2019		2018
Power Generation	Electric Power		5,859		15,928		15,297
Lime	Lime		1,111		2,542		2,511

(2) Capacity Utilization Rate

		(Electric Power-hr, Lime-Thousands of Tons)
Business Area	Products	2020.1H Capacity		2020.1H Production		Utilization Rate(%)
Power Generation	Incheon Power Plant		4,368		2,277		52.1
Lime	Lime		1,092		1,111		102

21

C. Production Facilities

(1) The current status of production facilities

[Land]

									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation		Ending Book Balance
Steel		1,900,252		124,350			(238	)		—		2,024,364
Trade		171,177		(120,003	)		—			—		51,174
Engineering & Construction		25,528		912			(99	)		—		26,341
Others		429,102		4,987			(1,762	)		—		432,327

[Buildings]

									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		3,312,799		257,214			(19,335	)		(141,957	)		3,408,721
Trade		477,497		(63,007	)		—			(6,570	)		407,920
Engineering & Construction		72,102		3,225			—			(1,253	)		74,074
Others		353,056		57,562			(11,292	)		(10,413	)		388,913

[Structures]

								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		2,418,025		76,165		(11,333	)		(96,233	)		2,386,624
Trade		22,484		320		(20,347	)		(163	)		2,294
Engineering & Construction		13,175		94		—			(791	)		12,478
Others		450,822		161,485		(818	)		(15,711	)		595,778

[Machinery and Equipments]

								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		15,309,982		1,129,646		(214,226	)		(1,063,809	)		15,161,593
Trade		398,184		7,868		(113,567	)		(17,809	)		274,676
Engineering & Construction		5,267		1,890		(1,113	)		(669	)		5,375
Others		1,504,831		126,772		36,074			(56,387	)		1,611,290

22

[Vehicles]

								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		20,095		6,324		(2,067	)		(3,944	)		20,408
Trade		5,852		1,273		(901	)		(880	)		5,344
Engineering & Construction		783		1,538		(757	)		(1,172	)		392
Others		5,555		2,779		(1,556	)		(1,141	)		5,637

[Tools and Fixtures]

									(In millions of KRW)
Business Area	Beginning Book Balance		Increased			Decreased			Depreciation			Ending Book Balance
Steel		48,984		26,682			(5,452	)		(11,280	)		58,934
Trade		11,647		(4,995	)		(3,438	)		(1,571	)		1,643
Engineering & Construction		599		742			(178	)		(146	)		1,017
Others		9,521		4,526			(1,682	)		(2,059	)		10,306

[Equipment]

								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		64,739		19,882		(8,736	)		(10,011	)		65,874
Trade		30,675		2,685		(1,913	)		(4,708	)		26,739
Engineering & Construction		4,055		2,866		(2,351	)		(1,317	)		3,253
Others		30,663		10,838		(6,034	)		(2,884	)		32,583

[Financial Lease Assets]

								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		417,805		47,936		107,259			(43,952	)		529,048
Trade		81,002		41,178		(14,814	)		(12,476	)		94,890
Engineering & Construction		216,170		197,256		(170,755	)		(20,635	)		222,036
Others		59,605		7,205		(2,129	)		(16,274	)		48,407

23

[Biological Assets]

							(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased		Depreciation			Ending Book Balance
Steel		—		—		—		—			—
Trade		124,193		27,277		2,163		(3,699	)		149,934
Engineering & Construction		—		—		—		—			—
Others		—		—		—		—			—

[Assets under Construction]

								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		1,436,769		1,288,418		(1,158,580	)		(12,502	)		1,554,105
Trade		105,280		19,901		(52,112	)		—			73,069
Engineering & Construction		23,060		1,310		(622	)		—			23,748
Others		364,638		118,141		(143,319	)		—			339,460

24

(2) New Facility Establishment, Purchase, Etc.

(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 ~ September 2023	P) Establishment of by-product gas Power Plant P) Establishment of #6 Coke plant		15,088		2,013		13,074
		February 2017 ~ July 2022	G) The renovation of #3 furnace P) Establishment of coal storage (Silo)		20,731		13,891		6,840

P stands for Pohang Steel Works.

G stands for Gwangyang Steel Works.

Investments over KRW 10 billion are listed on the table.

[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		463		431		32

Investments over KRW 10 billion are listed on the table.

[Others]				(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO ICT	Establishment/ Expansion	January 2020 ~ December 2020	Expansion of SM server		316		49		267
		January 2020 ~ December 2020	System improvement, IT facility purchase, etc.		182		42		140
POSCO CHEMICAL	Establishment/ Expansion	November 2018 ~ September 2020	Expansion of production lines in #2 anode material factory		1,598		1,594		4
	Establishment/ Expansion	March 2019 ~ April 2021	Expansion of product lines in #2 cathode material factory in Gwangyang		2,396		2,222		174
	Establishment/ Expansion	November 2019 ~ November 2021	Expansion of product lines in #2 anode material factory		1,373		187		1,186
	Establishment/ Expansion	February 2020 ~ May 2024	Establishment of artificial graphite anode factory		2,177		3		2,174
	Establishment/ Expansion	November 2019 ~ October 2021	Renovation of refractory factory for production increase		483		82		401
	Purchase	February 2020 ~ August 2020	Land purchase for the establishment of artificial graphite anode factory		130		123		7
POSCO Energy	Establishment/ Expansion	March 2020 ~ December 2021	Expansion of evaporator for Gwangyang LNG Terminal		360		1		359

Investments over KRW 10 billion are listed on the table

25

(b) Future Investment Plans				(In hundred millions of KRW)
Business	Company	Project	Investment effects	Planned Investments
				2020		2021		2022
Steel	POSCO	Establishment or expansion on fixed assets	Cost reduction		0		470		2,878
		Renovation and Replacement of Existing Facilities, etc.	Maintenance of existing facilities, etc.		590		6,553		13,666
	POSCO-CSPC	Establishment or expansion on fixed assets	Production increase and efficiency		0		0		107
Trading	PT. BIO INTI AGRINDO	Establishment/Expansion	Realization of profits by selling CPO		0		96		127
Others	POSCO CHEMICAL	Establishment or expansion on fixed assets	Line up expansion		820		2,077		99
		Renovation and Replacement of Existing Facilities, etc.	Maintenance of refractory factory for facility enhancement		50		351		0
	POSCO ICT	Establishment/Expansion	Improvement of POSCO IT service		316		169		542
			System improvement, etc.		182		380		57
	POSCO O&M	Establishment/Expansion	Renovation of Existing Facilities		67		107		111
	POSCO Energy	Establishment/Expansion	Enhancement of generation capacity		1,146		1,417		1,082

Investments over KRW 10 billion are listed on the table

26

6. Product Sales

[Steel]

		(In hundred millions of KRW)
Items		2020.1H			2019			2018
Domestic	Hot-Rolled Products		17,702			42,605			48,879
	Cold-Rolled Products		17,323			39,716			39,901
	Stainless Steel		10,994			21,167			21,281
	Others		31,863			77,026			77,230
Export	Hot-Rolled Products		16,731			41,064			35,231
	Cold-Rolled Products		46,777			125,658			124,449
	Stainless Steel		34,513			80,181			79,931
	Others		32,726			70,667			77,310
Total	Gross Sum		208,630			498,084			504,212
	Internal Transaction		(73,836	)		(177,299	)		(180,632	)
	Total		134,794			320,785			323,580

[Trading]

		(In hundred millions of KRW)
Items		2020.1H			2019			2018
Domestic	Merchandise		16,425			29,315			33,706
	Product		2,259			5,120			4,702
	Others		185			1,101			1,483
Export	Merchandise		31,679			69,347			87,124
	Product		298			205			768
	Others		1			638			736
Trades among the 3 countries			113,689			270,522			254,670
Gross Sum			164,537			376,247			383,189
Internal Transaction			(64,371	)		(154,677	)		(159,112	)
Total			100,166			221,571			224,077

27

[Engineering & Construction]

		(In hundred millions of KRW)
Items		2020.1H			2019			2018
Domestic	Building		22,869			44,681			37,363
	Plant		6,983			10,953			10,238
	Civil Engineering		2,740			6,098			5,129
	Others		—			—			337
Overseas			3,213			7,190			9,471
Own Construction			2,150			5,712			7,568
Other Subsidiary company sales			1,275			2,248			3,101
Gross Sum			39,231			76,880			73,207
Internal Transaction			(5,276	)		(7,434	)		(5,513	)
Total			33,955			69,446			67,694

[Others]

	(In hundred millions of KRW)
Items	2020.1H		2019		2018
Electric Power Sales		13,758		31,866		34,427

7. Derivatives

We use forward exchange contracts to hedge against the exchange rate risk for foreign currency loans. As of June 30, 2020, 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 contracts to be USD 0.5 billion(expiring August 2023), USD 0.5 billion(expiring July 2024), USD 0.5 billion(expiring November 2022), USD 0.5 billion(expiring January 2023), and USD 0.44 billion(expiring January 2025), and EUR 0.5 billion(expiring January 2024).

We recognized KRW 65,882 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 171,246 million of valuation gain on currency swap contracts. The transaction gain of currency swap contracts is KRW 643 million.

28

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
	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 after spin-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

29

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)
	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 by splitting-off business division 2) Method : Split-off 3) Resolution date of Board of Directors : October 25, 2019 4) Shareholders’ meeting for approval : March 30, 2020 5) Date of Split-off : March 31, 2020 6) Registration date of Split-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

30

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
POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Former, SS VINA JOINT STOCK COMPANY	Joint stock contract with YAMATO KOGYO CO., LTD. and SIAM YAMATO STEEL CO., LTD. to improve business structure	March 2020	1) Purpose: To improve business structure by collaborating with leading company in section steels 2) Information: POSCO’s 100% share of POSCO SS VINA changes to 51% YAMATO KOGYO CO., LTD. takes 30% of shares and SIAM YAMATO STEEL CO., LTD. takes 19% of shares. 3) Conclusion of a contract: March 18, 2020 4) Registration of joint stock company : April 28, 2020

31

9. Research and Development

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

Business Area	Company	Organization
Steel	POSCO	Steel Production and Technology Strategy Office
		Safety & Environmental Planning 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	R&D Center
Others	POSCO ENERGY Co,. LTD	Renewable Energy Business Development Office
	POSCO ICT	R&D Center
	POSCO CHEMICAL	R&D Center
		Energy Material R&D Center
	POSCO M-TECH	R&D Center

B. R&D Expenses in 2020.1H (In millions of KRW)

Category	Business Area
	Steel			Trade			Engineering & Construction			Others			Total
Selling and Administrative Cost		32,986			52			1,624			14,709			49,371
Manufacturing Cost		166,217			45			896			102			167,261
R&D Cost (Intangible Assets)		14,933			—			—			(1,303	)		13,630
Total*		214,136			97			2,520			13,508			230,262
Government Subsidy		—			—			100			—			100
R&D/Sales Ratio (%)		1.59	%		0.00	%		0.07	%		0.98	%		0.81	%

* This total expenses include government subsidy amount

32

III. Financial Statements

1. Consolidated Financial Statements

A. Summary of Fiscal Years of 2018, 2019 and 2020.1H

	(In millions of KRW)
Account	2020.1H		2019		2018
	As of June 30, 2020		As of December 31, 2019		As of December 31, 2018
[Total current assets]		37,746,123		34,842,374		33,651,002
Cash and cash equivalents		6,038,266		3,514,872		2,643,865
Other receivables, net		1,562,008		1,581,517		1,385,629
Other short-term financial assets		10,996,721		8,996,049		8,081,096
Trade accounts and notes receivable, net		8,561,530		9,078,351		9,282,609
Inventories		9,743,455		10,920,320		11,499,928
Other current assets		844,143		751,265		757,875
[Total non-current assets]		44,365,724		44,216,287		44,597,263
Other receivables, net		1,205,454		1,140,878		863,240
Other long-term financial assets		1,595,781		1,669,389		1,647,898
Investments in associates and joint ventures		3,990,672		3,927,755		3,650,003
Property, plant and equipment, net		30,161,877		29,925,973		30,018,273
Intangible assets, net		4,795,377		4,908,473		5,170,825
Other non-current assets		2,616,563		2,643,819		3,247,024
Total assets		82,111,847		79,058,661		78,248,265
[Total current liabilities]		18,265,631		16,323,690		18,937,985
[Total non-current liabilities]		16,253,071		14,940,264		12,550,729
Total liabilities		34,518,702		31,263,954		31,488,714
[Equity attributable to owners of the controlling company]		44,330,920		44,471,873		43,371,260
Share capital		482,403		482,403		482,403

33

Capital surplus		1,335,149			1,376,251			1,410,551
Hybrid bonds		199,384			199,384			199,384
Retained earnings		45,056,397			45,080,118			44,216,018
Other equity attributable to owners of the controlling company		(2,742,413	)		(2,666,283	)		(2,937,096	)
[Non-controlling Interests]		3,262,225			3,322,834			3,388,291
Total equity		47,593,145			47,794,707			46,759,551
	From January 2020 to June 2020			From January 2019 to December 2019			From January 2018 to December 2018
Revenue		28,267,367			64,366,848			64,977,777
Operating profit		872,967			3,868,855			5,542,600
Profit		539,526			1,982,637			1,892,064
[Profit attributable to owners of the controlling company]		435,675			1,835,086			1,690,612
[Profit attributable to non-controlling interests]		103,851			147,551			201,452
Total comprehensive Income		517,905			2,129,105			1,463,535
[Total comprehensive income attributable to owners of the controlling company]		412,741			1,997,731			1,271,495
[Total comprehensive income attributable to non-controlling interests]		105,164			131,374			192,040
Earnings per share(KRW)		5,400			22,823			20,911
Number of Consolidated Companies		165			164			173

B. The Standards Used for Reporting the Financial Statements

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

C. Consolidated Financial Statements

Refer to the attached Condensed Consolidated Financial Statements for the Condensed Consolidated Statements of Financial Position as of June 30, 2020, Condensed Consolidated Statements of Comprehensive Income (loss), Condensed Consolidated Statements of Changes in Equity, Condensed Consolidated Statements of Cash Flows for the six-month period ended June 30, 2020, and Notes

34

2. Separate Financial Statements

A. Summary of Fiscal Years of 2018, 2019 and 2020.1H

	(In millions of KRW)
Account	2020.1H			2019			2018
	As of June 30, 2020			As of December 31, 2019			As of December 31, 2018
[Total current assets]		20,016,741			18,216,066			16,796,400
Cash and Cash equivalents		2,446,945			978,139			259,219
Trade accounts and notes receivable, net		3,142,894			3,987,041			3,968,372
Other receivables, net		380,258			321,352			206,432
Other short-term financial assets		9,727,533			7,858,979			7,025,143
Inventories		4,215,794			4,988,530			5,288,009
Other current assets		103,317			82,025			49,225
[Total non-current assets]		37,603,368			37,494,700			37,329,580
Other receivables, net		89,055			56,468			57,767
Other long-term financial assets		1,176,466			1,257,896			1,176,757
Investments in Subsidiaries, associates, and joint ventures		15,216,814			15,069,857			15,121,339
Property, plant and equipment, net		20,187,097			20,132,199			20,154,334
Intangible assets, net		667,491			708,915			645,222
Other non-current assets		266,445			269,365			174,161
Total assets		57,620,109			55,710,766			54,125,980
[Total current liabilities]		4,737,598			3,331,446			3,895,973
[Total non-current Liabilities]		7,479,749			6,765,135			4,957,905
Total liabilities		12,217,347			10,096,581			8,853,878
[Share capital]		482,403			482,403			482,403
[Capital surplus]		1,252,220			1,252,220			1,154,775
[Hybrid bonds]		199,384			199,384			199,384
[Retained earnings]		45,383,559			45,372,411			45,175,459
[Other equity]		(1,914,804	)		(1,692,233	)		(1,739,919	)

35

Account	2020.1H		2019		2018
Total equity		45,402,762		45,614,185		45,272,102
	From January 2020 to June 2020		From January 2019 to December 2019		From January 2018 to December 2018
Revenue		12,854,680		30,373,511		30,659,425
Operating profit		349,636		2,586,359		3,809,376
Profit		459,666		1,175,712		1,072,592
Earnings per share(KRW)		5,700		14,592		13,186

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”).

C. Separate Financial Statements

Refer to the attached Condensed Separate Financial Statements for the Condensed Separate Statements of Financial Position as of June 30, 2020, Condensed Separate Statements of Comprehensive Income (loss), Condensed Separate Statements of Changes in Equity, Condensed Separate Statements of Cash Flows for the six-month period ended June 30, 2020, and Notes.

36

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors (“BoD”)

(1) Board of Directors (as of August 13, 2020)

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

Our Board of Directors manages the following five Special 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 the Special Committees under the Board of Directors and their Functions(as of August 13, 2020)

Category	Composition	Directors	Major Functions
Director Candidate Recommendation and Management Committee	3 Outside Directors; 1 Inside Director	Kim, Joo-Hyun (Chairman) Bahk, Byong-Won Pahk, Heui-Jae Chon, Jung-Son	•  Qualification review of Outside Director candidates and recommendation to the general meeting of shareholders •  Preliminary review and qualification review of Inside Director candidates •  Preliminary deliberation on appointment of members of Special Committees •  Pre-deliberation of the appointment of Representative Directors other than the CEO and the Representative Director •  Operation of Outside Director Candidate Recommendation Advisory Panel •  Other matters necessary for recommending candidates for Outside Directors •  Agenda development and establishment of operating standards of the BoD and Special Committees •  Pre-deliberation on revision or repeal of the Board of Directors Regulations •  Pre-deliberation of the composition and operation of the Special Committees under the BoD
Evaluation and Compensation Committee	4 Outside Directors	Kim, Shin-Bae (Chairman) Kim, Joo-Hyun Chang, Seung-Wha Kim, Sung-Jin	•  Establishment of management succession and management training plan •  Establishment and execution of management evaluation and compensation plan •  Pre-deliberation on remuneration and retirement allowance of Directors

37

Finance and Related Party Transactions Committee 3 Outside Directors; 1 Inside Director Kim, Sung-Jin (Chairman) Kim, Shin-Bae Chang, Seung-Wha Chang, In-Hwa •  Developing policies for the company’s internal values and financial soundness   •  Prior deliberation in case of filing in, KRW 100 billion or more, litigation or arbitration, responding to reconciliation or mediation in the process of trial or taking any equivalent level of legal actions.   •  External Investments   •  Pre-deliberation on business units other than steel in terms of new external investments, capital increase or investment shares disposal of invested companies (KRW 100 billion or more. Investment and capital increase includes borrowings and liabilities that the company takes)   •  Approval of new external investments on business units other than steel in terms of capital increase or investment shares disposal of invested companies (From KRW 10 billion to less than KRW 100 billion. Investment and capital increase includes borrowings and liabilities that the company takes.)   •  Deliberation and resolution of donation from over KRW 100 million to KRW 1 billion and pre-deliberation of donation over KRW 1 billion   •  Deliberation and resolution of bonds issuance or important borrowings (Including borrowings for refunding over KRW 100 billion)   •  Pre-deliberation of bonds issuance or important borrowings (New long-term borrowings over KRW 100 billion)   •  Deliberation and resolution on collateral provision of non-current assets   •  Deliberation and resolution on debt acquisition of invested company such as security and guarantee (Excludes when the debt is in relation to steel investment)   •  Internal transactions under Monopoly Regulation and Fair Trade Act (The act of providing or trading funds, securities, or assets with related party as business counterpart or for related party)   •  Review of internal transaction-related problems and improvement measures   •  Pre-deliberation of internal transaction (Amount KRW 100 billion or more)   •  Deliberation and resolution of internal transaction (Amount from KRW 5 billion to less than KRW 100 billion)   •  Appointment of Fair Trade Compliance Manager

38

Audit Committee 3 Outside Directors Bahk, Byong-Won (Chairman) Chung, Moon-Ki Pahk, Heui-Jae •  Setting the work scope of the committee   •  Matters that the BoD or Representative Directors delegated   •  Request for Extraordinary general meeting of shareholders   •  Consulting of external experts   •  Audit of the legitimacy of management’s business execution   •  Review soundness and validity of the company’s financial activities and the appropriateness of financial reporting   •  Review the validity of important accounting standards or changes in accounting estimates   •  Evaluation of the operation status of the internal accounting management system   •  Evaluation of the internal control system   •  Agreement on appointment or dismissal of internal audit department representative   •  Contract for appointment, remuneration and non-audit services of independent auditors   •  Evaluation of independent auditors’ audit activities   •  Report internal audit department’s annual audit plan and results   •  Report on the evaluation results of the company’s ethical compliance   •  An independent auditor reports on important facts of the company’s Directors’ misconduct or violation of laws or Articles of Incorporation   •  Report that independent auditors have violated the company’s accounting standards   •  Other matters deemed necessary by each committee member

39

Executive Management Committee 5 Inside Directors Choi, Jeong-Woo (Chairman) Chang, In-Hwa Chon, Jung-Son Kim, Hag-Dong Jeong, Tak •  Business   •  Position system, important matters related to human resource development and coordination   •  Important matters about changing the work system and welfare   •  New establishment plan for chair-professor   •  Housing Policy Establishment (Housing fund support standard and plan for housing construction)   •  Decision on closure of shareholders’ registry   •  Finance   •  Preliminary review on in-house investment plan (New establishment or expansion investment of KRW 200 billion or more)   •  Approval on in-house investment plan   New establishment or expansion investment from KRW 10 billion to less than KRW 200 billion.   Investment of KRW 10 billion or more other than new establishment or expansion (Amount of KRW 5 billion or more for investment in the ordinary course of business)   •  Pre-deliberation on new external investments, capital increase or investment shares disposal of invested companies in Steel Business Unit (KRW 100 billion or more. Investment or capital increase amount includes borrowings and liabilities that the company takes)   •  Approval on new external investments, capital increase or investment shares disposal of invested companies in Steel Business Unit (Amount from KRW 10 billion to less than KRW 100 billion. Investment or capital increase amount includes borrowings and liabilities that the company takes)   •  Acquisition or disposal of tangible, intangible, fixed or important investment assets from KRW 10 billion to less than KRW 200 billion   •  Technology application of over USD 1 million and technology sales contract approval   •  Acquisition of debt such as guarantees for invested company’s collateral involving steel investments   •  Other matters that the Chairman deems necessary or deemed necessary by each committee member

40

(2) List of Outside Directors (As of June 30 2020)

Name	Experience	Relation with Majority Shareholder	Remarks
Chung, Moon-Ki	•  Professor in Accounting, Sungkyunkwan University (2016~Present) •  Partner and Chief Quality Officer, Samil PwC (1981~2012) •  Committee Member, Accounting Review Committee of Financial Supervisory Service •  Ph.D. in Accounting, Sungkyunkwan University	None	Chairman of the Board of Directors
Bahk, Byong-Won	•  Honorary Chairman of Korea Employers Federation (March 2018 ~ Present) •  Chairman of Korea Employers Federation (February 2015 ~ February 2018) •  Chairman of The Korea Federation of Banks (November 2011 ~ November 2014) •  Chairman & CEO Woori Financial Group (March 2007 ~ June 2008) •  MA in Economics, University of Washington (1985)	None
Kim, Joo-Hyun	•  President & CEO, The financial news (April 2017 ~ Present) •  President, Future Korea Institute, Kookmin University (May 2016 ~ March 2017) •  President & CEO, Hyundai Research Institute (January 2004 ~ April 2014) •  Ph.D. in Department of Finance, College of Business, Arizona State University (1989)	None
Kim, Shin-Bae	•  Vice Chairman, SK Group (January 2010 ~ February 2013) •  President, Korea IoT (Internet of Things) Association (March 2005 ~ March 2012) •  President and CEO, SK Telecom (March 2004 ~ December 2008) •  M.B.A., Wharton School, University of Pennsylvania (1985)	None
Chang, Seung-Wha	•  Dean of Seoul National University School of Law (June 2018 ~ Present) •  Professor of Law, Seoul National University (1995 ~ Present) •  World Trade Organization(WTO) as the Appellate Body Member (May 2012 ~ September 2016) •  Member, International Chamber of Commerce(ICC) Court of Arbitration (2000 ~ 2013) •  LL.M and Doctorate in International Trade Law from Harvard Law School (1994)	None
Kim, Sung-Jin	•  Adjunct Professor at Department of Economics, Seoul National University (2011 ~ Present) •  Minister of Maritime Affairs and Fisheries (2006 ~ 2007) •  Administrator of the Small and Medium Business Administration (2004 ~ 2006) •  Ph.D. in Economics Kansas State University (1991)	None
Pahk, Heui-Jae	•  Professor in Mechanical & Aerospace Engineering, Seoul National University (March 1993 ~ Present) •  Chairman of the Board, Korea Youth Foundation (May 2016 ~ Present) •  Head of R&D Strategic Planning, Ministry of Trade, Industry and Energy (April 2013 ~ April 2016) •  SNU Precision CEO (February 1998 ~ December 2016) •  Ph.D in Mechanical Engineering, Seoul National University (1990)	None

41

(3) List of Key Activities of the Board of Directors (January 1, 2020 ~ August 13, 2020)

No.	Date	Agenda	Approval
1	January 31	•   Deliberation Agenda 1.  Approval of the 52nd financial statements and schedule for the general meeting of shareholders •   Report Agenda 1.  The progress on implementing resolution made by the Board of Directors for the fiscal year of 2019 2.  Business performance of the fiscal year of 2019 3.  Report on internal control over financial reporting 4.  Assessment on the effectiveness of internal control over financial reporting	All 1 Case Approved
2	February 21	•   Deliberation Agenda 1.  Agendas for the 52nd general meeting of shareholders 2.  Recommendation of inside director candidates (Candidates other than representative director CEO)	All 2 Cases Approved
3	March 27	•   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 4.  Donation to help organizations and institutions against COVID-19 virus	All 4 Cases Approved
4	April 10	•   Deliberation Agenda 1.  Decision on contract for share repurchase trust	All 1 Case Approved
5	May 8	•   Deliberation Agenda 1.  Resolution on the 1st quarter dividend for the fiscal year of 2020 2.  Transaction Plans with affiliates for the fiscal year of 2020 •   Report Agenda 1.  The business performance of the first quarter of 2020 2.  The progress and plan of venture platform 3.  The performance and assessment of Board of Directors for 2019 4.  Plan for POSCO Group logistics integration	All 2 Cases Approved
6	August 7	• Deliberation Agenda 1.  Resolution on the 2nd quarter dividend for the fiscal year of 2020 •   Report Agenda 1.  The progress on implementing resolution made by the Board of Directors for the fiscal year of 2020 2.  Business performance of the 2nd quarter of the fiscal year of 2020 and yearly outlook 3.  Plans on climate change and climate report publication 4.  Plan to build sculptures in Pohang Hwanho Park	All 1 Case Approved

42

Major Activities of Outside Directors on the Board of Directors (January 1, 2019 ~ August 13, 2020)

No.	Date	Participation of the Outside Directors (the Number of total members)	Remarks
1	January 31	7 (7)	—
2	February 21	7 (7)	—
3	March 27	6 (7)	Absence : Chung, Moon-Ki
4	April 10	6 (7)	Absence : Chung, Moon-Ki
5	May 8	7 (7)	—
6	August 7	7 (7)	—

(4) Composition of the Special Committees and their Activities

• Major Activities of Director Candidate Recommendation Committee(January 1, 2020~March 27, 2020 before the Board of Directors meeting)

Date	Agenda	Approval
February 14 & 21,     2020	[Deliberation] Qualification Assessment and Recommendation of Outside Director Candidates	Approved
February 21, 2020	[Preliminary Review] Qualification Assessment of Inside Director Candidates	—
March 27, 2020	[Preliminary Review]	—
	1.  Appointment of the Special Committees Members 2.  Appointment of the Representative Directors	—

• Major Activities of Evaluation and Compensation Committee(January 1, 2020~March 27, 2020 before the Board of Directors meeting)

Date	Agenda	Approval
January 22, 2020	[Deliberation Agenda] Evaluation of the business performance for the fiscal year of 2019	Approved

• Major Activities of Finance and Related Party Transaction Committee (January 1, 2020~August 13, 2020)

Date	Agenda	Approval
January 31, 2020	1.  Contribution to the Internal Labor Welfare Fund 2.  Contribution to the Mutual Cooperation Fund 3.  Donation to help organizations and institutions against COVID 19 virus	Approved Approved Approved
May 6, 2020	1.  Payment guarantee plan for POSUK 2.  Payment guarantee plan for POSCO-TCS	Approved Approved
May 6 & 8, 2020	Plan for POSCO Group logistics integration	Approved
August 6, 2020	[Deliberation] Venture fund investment to discover new growth business [Report] Fair Trade Compliance Program Performance and Plan	Approved —

43

• Major Activities of Executive Management Committee (January 1, 2019 ~ August 13, 2020)

Date	Agenda	Approval
January 22, 2020	[Preliminary Review] Establishment of #6 Cokes Oven in Pohang works	—
February 18, 2020	Establishment of #6 Cokes Oven in Pohang works	Approved
March 17, 2020	Capital increase for IJPC 3# factory in Indonesia	Approved
May 19, 2020	1.  Construction of air pollutant measurement system in both steel works 2.  Carbon credit trading plan 3.  Gwangyang CEM plant suspension facility disposal	Approved Approved Approved

B. Audit Committee

(1) Composition of the Audit Committee

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

(2) Major Activities of the Audit Committee (January 1, 2020 ~ August 13, 2020)

Session	Date	Agenda	Approval
1	January 30	•   Deliberation Agenda 1.  Assessment of internal control over financial reporting 2.  Approval of audit and non-audit services for POSCO and subsidiaries 3.  Assessment of the Audit Committee for the fiscal year of 2019 •   Report Agenda 1.  Report of operation of internal control over financial reporting in 2019 2.  The result of internal audit for the fiscal year of 2019 and audit plans for the fiscal year of 2020 3.  The assessment on the executive and employees’ conformity to the code of ethics for the fiscal year of 2019	All 3 Cases Approved
2	February 20	•   Deliberation Agenda 1.  Approval of audit and non-audit services for POSCO’s subsidiaries abroad 2.  Internal audit result for the 52nd term •   Report Agenda 1.  External audit result for the 52nd term	All 2 Cases Approved
3	February 21	Review of agenda for general meeting of shareholders	Approved

• At the 52^nd general meeting of shareholders held on March 27, 2020, due to Chang, Seung-Wha’s expiration of term in the audit committee, a new audit committee member, Pahk, Heui-Jae, was elected.

44

Changes after March 31, 2020

Session	Date	Agenda	Approval
4	April 24	•   Deliberation Agenda 1.  Appointment of the chairman of the audit committee •   Report Agenda 1.  Consolidated internal control over financial reporting for the fiscal year of 2019 2.  Assessment of the consolidated internal control over financial reporting for the fiscal year of 2019 3.  Audit report of 20-F for the fiscal year of 2019	Approved
5	May 7	•   Deliberation Agenda 1.  Approval of audit service contract on POSCO SPS •   Report Agenda 1.  Internal audit result on Consolidated financial statements of the 1st quarter of the fiscal year 2020 2.  External review result on Consolidated financial statements of the 1st quarter of the fiscal year 2020	Approved
6	August 6	[Deliberation] Approval on changes in the audit service contract for POSCO(Guangdong) Automotive Steel Co., Ltd. [Report] 1.  Plans to strengthen the operation of the internal accounting management system in 2020 2.  Results of internal audit on consolidated financial statements for the 2nd quarter of 2020 3.  Results of external review on consolidated financial statements for the 2nd quarter of 2020 4.  Internal audit performance for the 1st half of 2020 and plans for the 2nd half of 2020 5.  Audit activity evaluation results of the independent auditor for the year 2019	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: The voting-by-mail system was introduced at the 36th general meeting of shareholders on March 12, 2004.

(3) The Electronic Voting System: The electronic voting system was determined at the Board of Directors’ meeting on February 20, 2019.

45

D. Compensation of Directors and Officers

(1) Directors’ and the Audit Committee members’ Salaries

							(In millions KRW)
Category	Total numbers	Total payment		Average payment (Per person)		Ceiling amount approved at the general meeting of shareholders	Remarks
Inside Director	5		4,167		833			—
Outside Director	4		141		35	10,000		—
Members of the Audit Committee	3		106		35			—

Payment Period: January 1, 2020 ~ June 30, 2020

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

Average payment per person is calculated based on the paid amount to the current directors and audit committee members as of June 30, 2020.

46

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2020

(With Independent Auditors’ Review Report Thereon)

Table of Contents

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

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of June 30, 2020, the condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019, the condensed consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2020 and 2019, 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.

Auditors’ 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 with K-IFRS No. 1034 “Interim Financial Reporting”.

1

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, 2019, 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 12, 2020, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Seoul, Korea

August 13, 2020

This report is effective as of August 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2020 and December 31, 2019

(Unaudited)

(in millions of Won)	Notes	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	21	W	6,038,266		3,514,872
Trade accounts and notes receivable, net	4,21,26,27,34		8,561,530		9,078,351
Other receivables, net	5,21,34		1,562,008		1,581,517
Other short-term financial assets	6,21		10,996,721		8,996,049
Inventories	7		9,743,455		10,920,320
Current income tax assets			34,166		45,930
Assets held for sale	8		79,308		74,158
Other current assets	14		730,669		631,177
Total current assets			37,746,123		34,842,374
Long-term trade accounts and notes receivable, net	4,21		169,333		198,785
Other receivables, net	5,21		1,205,454		1,140,879
Other long-term financial assets	6,21		1,595,781		1,669,389
Investments in associates and joint ventures	9		3,990,672		3,927,755
Investment property, net	11		876,640		878,227
Property, plant and equipment, net	12		30,161,877		29,925,973
Intangible assets, net	13		4,795,377		4,908,473
Defined benefit assets, net	19		13,445		4,280
Deferred tax assets			1,281,442		1,237,285
Other non-current assets	14		275,703		325,241
Total non-current assets			44,365,724		44,216,287
Total assets		W	82,111,847		79,058,661

See accompanying notes to the condensed consolidated interim financial statements.

3

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of June 30, 2020 and December 31, 2019

(Unaudited)

(in millions of Won)	Notes	June 30, 2020			December 31, 2019
Liabilities
Trade accounts and notes payable	21,34	W	3,272,488			3,422,922
Short-term borrowings and current installments of long-term borrowings	4,15,21		10,676,978			8,548,212
Other payables	16,21,34		1,755,225			1,879,508
Other short-term financial liabilities	17,21		107,762			77,827
Current income tax liabilities			369,517			396,616
Liabilities directly associated with the assets held for sale	8		—			8
Provisions	18,35		292,437			360,495
Other current liabilities	20,26,27		1,791,224			1,638,102
Total current liabilities			18,265,631			16,323,690
Long-term trade accounts and notes payable	21		14,095			20,067
Long-term borrowings, excluding current installments	15,21		13,411,809			11,893,401
Other payables	16,21		613,401			585,129
Other long-term financial liabilities	17,21		17,224			31,494
Defined benefit liabilities, net	19		222,937			181,011
Deferred tax liabilities			1,482,859			1,691,498
Long-term provisions	18,35		448,741			458,154
Other non-current liabilities	20,26		42,004			79,510
Total non-current liabilities			16,253,070			14,940,264
Total liabilities			34,518,701			31,263,954
Equity
Share capital	22		482,403			482,403
Capital surplus	22		1,335,149			1,376,251
Hybrid bonds	23		199,384			199,384
Reserves	24		(1,169,286	)		(1,157,980	)
Treasury shares	25		(1,573,126	)		(1,508,303	)
Retained earnings			45,056,397			45,080,117
Equity attributable to owners of the controlling company			44,330,921			44,471,872
Non-controlling interests	23		3,262,225			3,322,835
Total equity			47,593,146			47,794,707
Total liabilities and equity		W	82,111,847			79,058,661

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 six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won, except per share information)		For the three-month periods ended June 30						For the six-month periods ended June 30
	Notes	2020			2019			2020			2019
Revenue	26,27,34,37	W	13,721,554			16,321,335			28,267,367			32,335,573
Cost of sales	7,27,31,34		(12,987,612	)		(14,707,162	)		(26,223,142	)		(28,908,029	)
Gross profit			733,942			1,614,173			2,044,225			3,427,544
Selling and administrative expenses	31,34
Reversal of (impairment loss) on trade accounts and notes receivable			(25,337	)		21,129			(35,325	)		7,998
Other administrative expenses	28		(456,541	)		(476,537	)		(933,607	)		(982,620	)
Selling expenses	28		(84,348	)		(90,203	)		(202,326	)		(181,463	)
Operating profit			167,716			1,068,562			872,967			2,271,459
Share of profit (loss) of equity-accounted investees, net	9		(11,530	)		74,670			20,134			141,529
Finance income and costs	21,29
Finance income			210,669			532,862			1,530,093			1,026,876
Finance costs			(232,049	)		(609,932	)		(1,577,325	)		(1,160,525	)
Other non-operating income and expenses	34
Reversal of (impairment loss) on other receivables			410			(12,026	)		(787	)		(15,416	)
Other non-operating income	30		102,603			83,024			166,904			157,368
Other non-operating expenses	30,31		(103,673	)		(166,679	)		(217,437	)		(303,869	)
Profit before income tax	37		134,146			970,481			794,549			2,117,422
Income tax expense	32,37		(29,278	)		(289,063	)		(255,023	)		(657,559	)
Profit			104,868			681,418			539,526			1,459,863
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans	19		1,198			(11,175	)		(2,652	)		(20,881	)
Net changes in fair value of equity investments at fair value through other comprehensive income	21		36,870			23,383			(165,966	)		17,844
Items that are or may be reclassified subsequently to profit or loss:
Capital adjustment arising from investments in equity-accounted investees			142,902			24,000			81,696			72,838
Foreign currency translation differences			70,576			98,502			66,142			219,663
Gains or losses on valuation of derivatives	21		(784	)		(132	)		(841	)		(100	)
Other comprehensive income (loss), net of tax			250,762			134,578			(21,621	)		289,364
Total comprehensive income		W	355,630			815,996			517,905			1,749,227
Profit attributable to:
Owners of the controlling company		W	40,282			612,286			435,675			1,353,539
Non-controlling interests			64,586			69,132			103,851			106,324
Profit		W	104,868			681,418			539,526			1,459,863
Total comprehensive income attributable to:
Owners of the controlling company		W	282,755			742,367			412,741			1,654,770
Non-controlling interests			72,875			73,629			105,164			94,457
Total comprehensive income		W	355,630			815,996			517,905			1,749,227
Basic and diluted earnings per share (in Won)	33		483			7,622			5,400			16,854

See accompanying notes to the condensed consolidated interim financial statements.

5

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

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

See accompanying notes to the condensed consolidated interim financial statements.

6

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won)	Attributable to owners of the controlling company																			Non- controlling interests			Total
	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Subtotal
Balance as of January 1, 2020	W	482,403		1,376,251			199,384		(1,157,980	)		(1,508,303	)		45,080,117			44,471,872			3,322,835			47,794,707
Comprehensive income:
Profit		—		—			—		—			—			435,675			435,675			103,851			539,526
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(2,768	)		(2,768	)		116			(2,652	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		77,600			—			—			77,600			4,096			81,696
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		(162,981	)		—			(2,985	)		(165,966	)		—			(165,966	)
Foreign currency translation differences, net of tax		—		—			—		69,000			—			—			69,000			(2,858	)		66,142
Gains or losses on valuation of derivatives, net of tax		—		—			—		(799	)		—			—			(799	)		(42	)		(841	)
Total comprehensive income		—		—			—		(17,180	)		—			429,922			412,742			105,163			517,905
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(320,462	)		(320,462	)		(60,517	)		(380,979	)
Interim dividends		—		—			—		—			—			(120,174	)		(120,174	)		—			(120,174	)
Changes in ownership interest in subsidiaries		—		(6,766	)		—		—			—			—			(6,766	)		139,008			132,242
Repayment of redeemable convertible preferred shares		—		(33,581	)		—		—			—			—			(33,581	)		(245,000	)		(278,581	)
Interest of hybrid bonds		—		—			—		—			—			(4,587	)		(4,587	)		(3,637	)		(8,224	)
Acquisition of treasury shares		—		—			—		—			(64,823	)		—			(64,823	)		—			(64,823	)
Others		—		(755	)		—		5,874			—			(8,419	)		(3,300	)		4,373			1,073
Total transactions with owners of the controlling company		—		(41,102	)		—		5,874			(64,823	)		(453,642	)		(553,693	)		(165,773	)		(719,466	)
Balance as of June 30, 2020	W	482,403		1,335,149			199,384		(1,169,286	)		(1,573,126	)		45,056,397			44,330,921			3,262,225			47,593,146

See accompanying notes to the condensed consolidated interim financial statements.

7

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won)	Notes		June 30, 2020				June 30, 2019
Cash flows from operating activities
Profit			W	539,526				1,459,863
Adjustments for:
Depreciation				1,555,037				1,523,108
Amortization				230,394				203,733
Finance income				(749,166	)			(562,510	)
Finance costs				894,470				712,547
Income tax expense				255,023				657,559
Impairment loss on property, plant and equipment				21,400				149,659
Gain on disposal of property, plant and equipment				(7,346	)			(16,362	)
Loss on disposal of property, plant and equipment				78,989				37,396
Impairment loss on other intangible assets				1,184				1,171
Gain on disposal of investments in subsidiaries, associates and joint ventures				(41,339	)			(15,821	)
Loss on disposal of investments in subsidiaries, associates and joint ventures				10,073				5,586
Share of profit of equity-accounted investees				(20,134	)			(141,529	)
Impairment loss on assets held for sale				5,030				3,346
Expenses related to post-employment benefit				123,989				117,226
Impairment loss on trade and other receivables				36,112				7,418
Loss on valuation of inventories				129,398				73,600
Increase to provisions				19,156				82,759
Others, net				(14,354	)			(31,972	)
				2,527,916				2,806,914
Changes in operating assets and liabilities		36		1,205,502				(553,728	)
Interest received				175,455		��		188,096
Interest paid				(346,723	)			(389,714	)
Dividends received				140,616				156,730
Income taxes paid				(391,928	)			(973,112	)
Net cash provided by operating activities			W	3,850,364				2,695,049

See accompanying notes to the condensed consolidated interim financial statements.

8

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won)	Notes		June 30, 2020			June 30, 2019
Cash flows from investing activities
Acquisitions of short-term financial instruments			W	(21,020,169	)		(15,440,039	)
Proceeds from disposal of short-term financial instruments				19,491,360			16,213,040
Increase in loans				(503,914	)		(164,574	)
Collection of loans				544,806			190,831
Acquisitions of securities				(674,767	)		(370,458	)
Proceeds from disposal of securities				270,642			165,242
Acquisitions of investment in associates and joint ventures				(85,908	)		(45,980	)
Proceeds from disposal of investment in associates and joint ventures				7,591			3,598
Acquisitions of investment property				(3,907	)		(12,230	)
Proceeds from disposal of investment property				250			1,127
Acquisitions of property, plant and equipment				(1,622,465	)		(990,483	)
Proceeds from disposal of property, plant and equipment				(19,139	)		30,957
Acquisitions of intangible assets				(197,535	)		(158,570	)
Proceeds from disposal of intangible assets				71,304			9,226
Proceeds from disposal of assets held for sale				590			311
Collection of lease receivables				27,453			19,107
Payment for acquisition of business, net of cash acquired				—			(33,014	)
Cash received from disposal of business, net of cash transferred				38,360			34,266
Others, net				(3,860	)		9,460
Net cash used in investing activities				(3,679,308	)		(538,183	)
Cash flows from financing activities
Proceeds from borrowings				3,218,540			892,587
Repayment of borrowings				(1,044,881	)		(1,372,044	)
Proceeds from (repayment of) short-term borrowings, net				994,266			(1,131,449	)
Capital contribution from non-controlling interests				139,008			23,579
Payment of cash dividends				(500,915	)		(625,406	)
Acquisition of treasury shares				(64,823	)		—
Payment of interest of hybrid bonds				(8,250	)		(8,204	)
Repayment of lease liabilities				(96,092	)		(85,989	)
Repayment of redeemable convertible preferred shares				(278,581	)		—
Others, net				(7,987	)		1,485
Net cash provided by (used in) financing activities				2,350,285			(2,305,441	)
Effect of exchange rate fluctuation on cash held				4,698			57,956
Net increase in cash and cash equivalents				2,526,039			(90,619	)
Cash and cash equivalents at beginning of the period		8		3,515,246			2,643,865
Cash and cash equivalents at end of the period		8	W	6,041,285			2,553,246

See accompanying notes to the condensed consolidated interim financial statements.

9

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2020

(Unaudited)

1. General Information

General information about POSCO, its 33 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 131 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 133 associates and joint ventures are as follows:

(a) The controlling company

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

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

As of June 30, 2020, the shares of the POSCO are listed on the Korea Exchange, while its American Depository Receipts (ADRs) are listed on the New York Stock Exchange.

(b) Consolidated subsidiaries newly included during the six-month period ended June 30, 2020, were as follows:

Company	Date of inclusion	Ownership (%)		Reason
Posco International (Thailand) Co., Ltd.	January 2020		100.00		New establishment
PT POSCO INTERNATIONAL INDONESIA	January 2020		100.00		New establishment
POSCO SPS CORPORATION	April 2020		100.00		New establishment

(c) Subsidiaries excluded from consolidation during the six-month period ended June 30, 2020, were as follows:

Company	Date of exclusion	Reason
LA-SRDC	April 2020	Liquidation
POSCO China Dalian Plate Processing Center Co., Ltd.	June 2020	Disposal

10

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

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

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

(a) Judgments, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. 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.

With the outbreak of COVID-19 pandemic, governments around the globe have implemented measures such as mandatory factory shutdown, shelter-in-place orders, border closures, and travel restrictions. The ultimate impact of COVID-19 pandemic on the Company’s operations is not yet known and will depend on future developments. The duration and significance of COVID-19 is highly uncertain and unpredictable, and the protective measures by the governments around the globe or the Company may lead to substantial business interruption and decrease in business scale. The financial impact of this cannot be reasonably estimated, but management expects the Company to be partially affected to the most areas where it operates. The extent and duration of COVID-19’s impact on the Company’s business cannot yet be reasonably estimated.

11

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-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 of K-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.

12

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2020.

(a) K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors”

The definition of materiality has been clarified, and K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors” have been amended according to the clarified definition. In determining the materiality, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

(b) K-IFRS No. 1103 “Business Combinations”

The amendment clarifies the definition of business when it includes input and process together significantly contribute to ability to create output and requires a simplified assessment that result in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The Company does not expect the effect of the amendment to the consolidated financial statements to be significant.

(c) K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments: Recognition and Measurement”, K-IFRS No. 1107 “Financial Instruments: Disclosures”

The amendments require the application of exceptions to the analysis of future prospects in relation to the application of hedge accounting while uncertainty exists due to the interest rate benchmark reform. The exception assumes that when assessing whether the expected cash flows based on existing interest rate indicators are highly probable, whether there is an economic relationship between the hedged item and the hedging instrument, or whether the hedge relationship between the hedged item and the hedging instrument is highly probable, the interest rate benchmark that the hedged item and the hedging instrument comply with does not change as a result of the interest rate benchmark reform. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

13

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Current
Trade accounts and notes receivable	W	7,730,664			8,352,968
Finance lease receivables		234			221
Due from customers for contract work		1,266,197			1,136,436
Less: Allowance for doubtful accounts		(435,565	)		(411,274	)
	W	8,561,530			9,078,351
Non-current
Trade accounts and notes receivable	W	179,984			209,310
Finance lease receivables		44,740			43,725
Less: Allowance for doubtful accounts		(55,391	)		(54,250	)
	W	169,333			198,785

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted toW240,786 million andW244,305 million as of June 30, 2020 and December 31, 2019, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and is recognized as short-term borrowings from financial institutions.

5. Other Receivables

Other receivables as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Current
Loans	W	305,784			367,580
Other accounts receivable		947,622			971,845
Accrued income		333,663			272,528
Deposits		67,742			86,519
Others		21,007			14,510
Lease receivables		51,009			48,744
Less: Allowance for doubtful accounts		(164,819	)		(180,209	)
	W	1,562,008			1,581,517
Non-current
Loans	W	713,916			701,529
Other accounts receivable		222,348			209,039
Accrued income		75,686			65,275
Deposits		281,286			238,261
Lease receivables		169,230			179,315
Less: Allowance for doubtful accounts		(257,012	)		(252,540	)
	W	1,205,454			1,140,879

14

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

6. Other Financial Assets

Other financial assets as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Derivatives assets	W	142,578		47,541
Debt securities		690,538		342,371
Deposit instruments(*1,2)		2,742,343		1,744,895
Short-term financial instruments(*2)		7,421,262		6,861,242
	W	10,996,721		8,996,049
Non-current
Derivatives assets	W	192,994		64,737
Equity securities(*3)		1,017,957		1,204,902
Debt securities		19,272		25,555
Other securities(*3)		311,402		340,008
Deposit instruments(*2)		54,156		34,187
	W	1,595,781		1,669,389

(*1) As of June 30, 2020 and December 31, 2019,W5,689 million andW4,524 million, respectively, are restricted for the use in government projects.

(*2) As of June 30, 2020 and December 31, 2019, financial instruments amounting toW74,830 million andW73,525 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3) As of June 30, 2020 and December 31, 2019,W108,792 million andW109,395 million of equity and other securities, respectively, have been provided as collateral for borrowings, construction projects and others.

7. Inventories

Inventories as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Finished goods	W	1,610,663			1,655,228
Merchandise		946,938			1,058,874
Semi-finished goods		1,587,368			2,097,289
Raw materials		2,789,427			2,656,341
Fuel and materials		906,740			1,026,133
Construction inventories		848,098			734,649
Materials-in-transit		1,205,936			1,824,044
Others		65,580			83,905
		9,960,750			11,136,463
Less: Allowance for inventories valuation		(217,295	)		(216,143	)
	W	9,743,455			10,920,320

The amounts of loss on valuation of inventories recognized in cost of sales during the six-month period ended June 30, 2020 and the year ended December 31, 2019 wereW129,398 million andW96,201 million, respectively.

15

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

8. Assets Held for Sale

Details of assets held for sale as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020						December 31, 2019
	The controlling company(*1)		Subsidiaries(*2)		Total		The controlling company(*1)		Subsidiaries		Total
Asset
Cash and cash equivalents(*3)	W	—		3,019		3,019		—		374		374
Other financial assets		—		43,734		43,734		—		185		185
Property, plant and equipment		31,705		—		31,705		36,321		32,972		69,293
Others		812		38		850		—		4,306		4,306
	W	32,517		46,791		79,308		36,321		37,837		74,158
Liability
Others	W	—		—		—		—		8		8

(*1) During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM plants, and classified the assets as held for sale. During the six-month period ended June 30, 2020, the Company recognizedW5,030 million of impairment loss for the difference between the fair value less costs to sell and the carrying amount of the assets.

(*2) During the six-month period ended June 30, 2020, the Company classified its assets in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale, since it is to be dissolved at its maturity.

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

16

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

9. Investments in Associates and Joint ventures

(a) Details of investments in associates as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020								December 31, 2019
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund		178,787,468,209		33.41	W	178,787	W	175,248		175,907
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1,2)		4,507,138		34.00		179,410		154,267		161,280
SNNC		18,130,000		49.00		90,650		140,813		142,602
QSONE Co.,Ltd.		200,000		50.00		84,395		85,634		85,887
Chun-cheon Energy Co., Ltd(*1)		17,308,143		49.10		86,541		48,973		56,679
Western Inland highway CO.,LTD.		8,818,236		29.80		44,091		43,552		5,115
Nextrain Co., Ltd.		8,321,920		32.00		41,610		39,932		41,447
Keystone NO. 1. Private Equity Fund		22,523,123		52.58		22,523		19,437		19,438
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		2,008,000		29.53		10,040		17,250		17,824
Daesung Steel(*3)		108,038		17.54		14,000		15,281		15,375
PCC Amberstone Private Equity Fund 1(*3)		8,670,897,169		8.80		8,671		9,230		9,570
Others (57 companies)(*1)								111,339		114,490
								860,956		845,614
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		135,899		229,364		225,933
AES-VCM Mong Duong Power Company Limited(*4)		—		30.00		164,303		181,333		178,892
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3,5)		114,452,000		10.40		124,341		137,516		131,529
Eureka Moly LLC		—		20.00		240,123		88,505		85,349
AMCI (WA) PTY LTD		49		49.00		209,664		72,662		72,937
NCR LLC		—		29.40		49,744		47,845		46,391
KOREA LNG LTD.		2,400		20.00		135,205		46,582		46,557
Nickel Mining Company SAS		3,234,698		49.00		157,585		38,631		37,940
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		134,400,000		40.00		22,423		22,719		22,356
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,200,000		34.00		9,517		15,411		15,128
PT. Wampu Electric Power(*1)		8,708,400		20.00		10,054		14,556		13,363
PT. Batutua Tembaga Raya		128,285		22.00		21,824		10,274		14,717
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		50		25.00		4,723		7,015		6,755
Others (27 companies)(*1)								103,407		121,048
								1,015,820		1,018,895
							W	1,876,776		1,864,509

(*1) As of June 30, 2020 and December 31, 2019, investments in associates amounting toW278,999 million andW258,754 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2) During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3) As of June 30, 2020, 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.

(*4) As of June 30, 2020 and December 31, 2019, shares of PSC Energy Global Co., Ltd., a subsidiary of the Company, are provided as collateral in relation to the associates’ borrowings.

(*5) During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

17

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) Details of investments in joint ventures as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020								December 31, 2019
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	150,859		182,648
Others (8 companies)								13,597		10,305
								164,456		192,953
[Foreign]
Roy Hill Holdings Pty Ltd(*1)		13,117,972		12.50		1,528,672		1,326,394		1,235,682
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		390,336		376,410
KOBRASCO		2,010,719,185		50.00		32,950		54,813		115,641
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		25.00		61,961		91,406		88,935
DMSA/AMSA(*1,2)		—		4.06		398,970		52,678		12,189
CSP - Compania Siderurgica do Pecem		1,367,314,532		20.00		631,796		—		—
Others (10 companies)								33,813		41,436
								1,949,440		1,870,293
							W	2,113,896		2,063,246

(*1) As of June 30, 2020 and December 31, 2019, the investments in joint ventures are provided as collateral in relation to the joint ventures’ borrowings.

(*2) All investors of the joint venture have entered into an agreement to extend the due date for loans made to the joint venture as a means of financial support. However, the Company believes the above agreement for financial support is invalid and is currently in arbitration process for annulment. The Company’s obligation to provide financial support is currently on hold and may change depending on the result of the arbitration.

18

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(c) The movements of investments in associates and joint ventures for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)
Company	December 31, 2019 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			June 30, 2020 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	175,907		—		—			(659	)		—			175,248
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*2)		161,280		—		—			(1,602	)		(5,411	)		154,267
SNNC		142,602		—		(2,901	)		(805	)		1,917			140,813
QSONE Co.,Ltd.		85,887		—		(1,140	)		887			—			85,634
Chun-cheon Energy Co., Ltd		56,679		—		—			(8,079	)		373			48,973
Western Inland highway CO.,LTD.		5,115		38,670		—			(236	)		3			43,552
Nextrain Co., Ltd.		41,447		—		—			(1,515	)		—			39,932
Keystone NO. 1. Private Equity Fund		19,438		—		—			(1	)		—			19,437
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		17,824		—		—			(574	)		—			17,250
Daesung Steel		15,375		—		—			(94	)		—			15,281
PCC Amberstone Private Equity Fund 1		9,570		—		(378	)		121			(83	)		9,230
POSCO MITSUBISHI CARBON TECHNOLOGY		182,648		—		(19,401	)		(12,388	)		—			150,859
Others (65 companies)		124,795		9,614		(348	)		(12,591	)		3,466			124,936
		1,038,567		48,284		(24,168	)		(37,536	)		265			1,025,412
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		225,933		—		(29,933	)		24,736			8,628			229,364
AES-VCM Mong Duong Power Company Limited		178,892		—		(12,753	)		19,291			(4,097	)		181,333
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3)		131,529		—		(7,380	)		8,163			5,204			137,516
Eureka Moly LLC		85,349		—		—			(7	)		3,163			88,505
AMCI (WA) PTY LTD		72,937		—		—			(1,542	)		1,267			72,662
NCR LLC		46,391		—		—			(427	)		1,881			47,845
KOREA LNG LTD.		46,557		—		(5,331	)		5,279			77			46,582
Nickel Mining Company SAS		37,940		—		—			(993	)		1,684			38,631
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		22,356		—		—			(168	)		531			22,719
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		15,128		—		—			(142	)		425			15,411
PT. Wampu Electric Power		13,363		—		—			707			486			14,556
PT. Batutua Tembaga Raya		14,717		—		—			(4,758	)		315			10,274
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,755		—		—			(3	)		263			7,015
Roy Hill Holdings Pty Ltd		1,235,682		—		—			63,198			27,514			1,326,394
POSCO-NPS Niobium LLC		376,410		—		(4,774	)		4,733			13,967			390,336
KOBRASCO		115,641		—		(37,922	)		5,832			(28,738	)		54,813
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,935		—		—			481			1,990			91,406
DMSA/AMSA		12,189		52,692		—			(14,279	)		2,076			52,678
CSP - Compania Siderurgica do Pecem		—		37,623		—			(42,126	)		4,503			—
Others (37 companies)		162,484		—		(10,329	)		(10,305	)		(4,630	)		137,220
		2,889,188		90,315		(108,422	)		57,670			36,509			2,965,260
	W	3,927,755		138,599		(132,590	)		20,134			36,774			3,990,672

(*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) During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3) During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

19

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) For the year ended December 31, 2019

(in millions of Won)
Company	December 31, 2018 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2019 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	174,123		—		—			(976	)		2,760			175,907
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*2)		161,477		—		—			(4,744	)		4,547			161,280
SNNC		116,922		—		(1,450	)		27,655			(525	)		142,602
QSONE Co.,Ltd.		85,550		—		(950	)		1,287			—			85,887
Chun-cheon Energy Co., Ltd		62,478		6,050		—			(11,849	)		—			56,679
Western Inland highway CO.,LTD.		1,494		3,752		—			(167	)		36			5,115
Nextrain Co., Ltd.		10		41,600		—			(163	)		—			41,447
Keystone NO. 1. Private Equity Fund		11,183		8,723		—			(342	)		(126	)		19,438
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		17,382		—		—			442			—			17,824
Daesung Steel		15,644		—		—			(269	)		—			15,375
PCC Amberstone Private Equity Fund 1		9,693		—		(723	)		1,079			(479	)		9,570
POSCO MITSUBISHI CARBON TECHNOLOGY		180,192		—		(16,369	)		19,377			(552	)		182,648
Others (62 companies)		143,578		27,221		(669	)		(24,448	)		(20,887	)		124,795
		979,726		87,346		(20,161	)		6,882			(15,226	)		1,038,567
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		179,459		—		(24,267	)		63,749			6,992			225,933
AES-VCM Mong Duong Power Company Limited		209,936		—		(18,099	)		24,126			(37,071	)		178,892
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3)		126,885		—		(9,902	)		9,912			4,634			131,529
Eureka Moly LLC		82,447		—		—			(25	)		2,927			85,349
AMCI (WA) PTY LTD		71,086		—		—			(4,377	)		6,228			72,937
NCR LLC		37,602		9,605		—			(822	)		6			46,391
KOREA LNG LTD.		43,554		—		(13,404	)		13,501			2,906			46,557
Nickel Mining Company SAS		41,712		—		—			(4,250	)		478			37,940
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		—		22,423		—			61			(128	)		22,356
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		14,796		—		—			10			322			15,128
PT. Wampu Electric Power		14,120		—		—			(1,247	)		490			13,363
PT. Batutua Tembaga Raya		20,479		—		—			(6,209	)		447			14,717
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,478		—		—			80			197			6,755
Roy Hill Holdings Pty Ltd		1,041,600		—		—			158,562			35,520			1,235,682
POSCO-NPS Niobium LLC		363,506		—		(24,933	)		24,543			13,294			376,410
KOBRASCO		133,449		—		(74,716	)		56,474			434			115,641
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,391		—		(1,574	)		665			1,453			88,935
DMSA/AMSA		26,709		23,682		—			(40,415	)		2,213			12,189
CSP - Compania Siderurgica do Pecem		24,832		35,352		—			(57,647	)		(2,537	)		—
Others (38 companies)		143,236		552		(19,430	)		30,168			7,958			162,484
		2,670,277		91,614		(186,325	)		266,859			46,763			2,889,188
	W	3,650,003		178,960		(206,486	)		273,741			31,537			3,927,755

(*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) During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3) During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

20

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(d) Summarized financial information of associates and joint ventures as of and for the six-month period ended June 30, 2020 and the year ended December 31, 2019 are as follows:

1) June 30, 2020

(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	514,469		570		513,899			—		(1,974	)
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1)		956,378		467,794		488,584			—		(2,705	)
SNNC		534,166		230,490		303,676			299,820		(10,070	)
QSONE Co.,Ltd.		249,626		78,357		171,269			8,366		1,774
Chun-cheon Energy Co., Ltd		613,715		513,012		100,703			126,067		(16,766	)
Western Inland highway CO.,LTD.		155,127		9,847		145,280			—		(791	)
Nextrain Co., Ltd.		139,400		11,758		127,642			—		(1,239	)
Keystone NO. 1. Private Equity Fund		184,366		135,430		48,936			9,678		119
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		53,271		25,168		28,103			4,197		(1,944	)
Daesung Steel		168,164		112,428		55,736			37,567		(532	)
PCC Amberstone Private Equity Fund 1		104,936		4		104,932			6,379		1,377
POSCO MITSUBISHI CARBON TECHNOLOGY		439,971		188,618		251,353			54,254		(20,022	)
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,784,195		868,215		915,980			229,933		98,785
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*2)		1,334,428		3		1,334,425			—		78,489
KOREA LNG LTD.		233,268		356		232,912			27,403		26,394
Nickel Mining Company SAS		493,816		361,745		132,071			98,514		(13,569	)
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		74,173		17,554		56,619			96		(546	)
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		71,036		20,083		50,953			44,913		(419	)
PT. Wampu Electric Power		229,179		159,480		69,699			9,627		3,537
PT. Batutua Tembaga Raya		429,571		419,014		10,557			30,787		(22,099	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		62,771		34,263		28,508			31,476		(9	)
Roy Hill Holdings Pty Ltd		8,129,371		1,917,673		6,211,698			1,949,870		666,933
POSCO-NPS Niobium LLC		780,468		—		780,468			—		9,465
KOBRASCO		156,151		46,526		109,625			20,991		11,663
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		960,840		622,080		338,760			596,986		2,617
DMSA/AMSA		5,720,392		3,288,368		2,432,024			219,424		(356,736	)
CSP - Compania Siderurgica do Pecem		3,001,764		4,148,534		(1,146,770	)		669,786		(1,213,081	)

(*1) During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*2) During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

21

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) December 31, 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	516,659		786		515,873			—		7,479
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1)		707,051		199,846		507,205			—		(5,294	)
SNNC		677,508		357,843		319,665			738,977		63,269
QSONE Co.,Ltd.		250,364		78,589		171,775			17,591		2,576
Chun-cheon Energy Co., Ltd		610,089		492,620		117,469			313,438		(24,677	)
Western Inland highway CO.,LTD.		21,980		5,165		16,815			—		(528	)
Nextrain Co., Ltd.		136,203		7,322		128,881			—		(509	)
Keystone NO. 1. Private Equity Fund		187,156		138,219		48,937			18,342		(887	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		53,019		22,971		30,048			17,824		1,497
Daesung Steel		164,708		108,441		56,267			85,537		(1,536	)
PCC Amberstone Private Equity Fund 1		108,797		5		108,792			14,787		12,280
POSCO MITSUBISHI CARBON TECHNOLOGY		474,387		170,678		303,709			216,648		32,334
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,808,529		906,254		902,275			555,075		254,582
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*2)		1,276,857		1		1,276,856			—		95,306
KOREA LNG LTD.		232,935		147		232,788			69,577		67,507
Nickel Mining Company SAS		471,377		331,194		140,183			245,509		2,432
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		73,604		17,765		55,839			641		153
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		65,413		15,232		50,181			101,101		28
PT. Wampu Electric Power		222,266		158,451		63,815			18,163		(6,233	)
PT. Batutua Tembaga Raya		423,608		392,226		31,382			112,568		(28,360	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		61,847		33,989		27,858			77,371		327
Roy Hill Holdings Pty Ltd		11,143,705		5,718,152		5,425,553			5,037,471		1,660,577
POSCO-NPS Niobium LLC		752,617		—		752,617			—		47,521
KOBRASCO		268,139		36,857		231,282			167,022		112,949
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		969,280		637,478		331,802			1,145,794		1,704
DMSA/AMSA		5,703,501		4,202,704		1,500,797			638,797		(504,077	)
CSP - Compania Siderurgica do Pecem		3,959,365		4,249,083		(289,718	)		1,623,843		(465,853	)

(*1) During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*2) During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

22

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of June 30, 2020 are as follows:

Joint operations	Operation	Ownership (%)		Location
Myanmar A-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
Sejong 2-1 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
Sejong 4-1 P3 Block public housing project	Construction		60.00	Korea

11. Investment Property, Net

Changes in the carrying amount of investment property for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Others(*1)			Ending
Land	W	278,465		2,814		(183	)		—			(3,920	)		277,176
Buildings		598,159		3,316		—			(12,771	)		9,220			597,924
Structures		1,178		—		—			(306	)		293			1,165
Right-of-use assets		425		—		(56	)		(5	)		11			375
	W	878,227		6,130		(239	)		(13,082	)		5,604			876,640

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

23

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) For the year ended December 31, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation(*1)			Others(*2)			Ending
Land	W	278,585		—		(5,921	)		—			5,801			278,465
Buildings		571,335		1,548		(5,343	)		(52,416	)		83,035			598,159
Structures		1,408		—		(50	)		(625	)		445			1,178
Right-of-use assets		—		—		—			—			425			425
Construction-in-progress		77,287		18,644		—			—			(95,931	)		—
	W	928,615		20,192		(11,314	)		(53,041	)		(6,225	)		878,227

(*1) Includes impairment loss on investment property recognized in relation to the office for rent of POSCO(Dalian) IT Center Development Co., Ltd. amounting toW32,642 million.

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

12. Property, Plant and Equipment, Net

(a) Changes in the carrying amount of property, plant and equipment for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment loss(*1)			Others(*2)			Ending
Land	W	2,526,059		19,576		(1,782	)		—			—			21,463			2,565,316
Buildings		4,215,454		19,831		(3,225	)		(160,142	)		(288	)		207,998			4,279,628
Structures		2,904,506		76,180		(1,159	)		(112,306	)		(860	)		130,812			2,997,173
Machinery and equipment		17,218,264		93,823		(12,741	)		(1,131,809	)		(7,211	)		892,608			17,052,934
Vehicles		32,285		2,733		(520	)		(7,137	)		—			4,420			31,781
Tools		70,751		9,055		(47	)		(15,076	)		(9	)		7,226			71,900
Furniture and fixtures		130,132		8,243		(2,564	)		(18,449	)		(530	)		11,617			128,449
Lease assets		774,582		64,799		(4,188	)		(93,337	)		—			152,525			894,381
Bearer plants		124,193		—		—			(3,699	)		—			29,440			149,934
Construction-in-progress		1,929,747		1,323,967		(8,962	)		—			(12,502	)		(1,241,869	)		1,990,381
	W	29,925,973		1,618,207		(35,188	)		(1,541,955	)		(21,400	)		216,240			30,161,877

(*1) The Company estimated recoverable amount for individual assets that ceased operations due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized impairment loss since recoverable amounts are less than their carrying amounts as of June 30, 2020. In addition, during the six-month period ended June 30, 2020, the Company recognized impairment loss on certain assets due to damage from fire.

(*2) Represents assets transferred from construction-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.

24

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) For the year ended December 31, 2019

(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Depreciation			Impairment loss(*1,2)			Others(*3)			Ending
Land	W	2,548,002		6,550		—		(2,128	)		—			—			(26,365	)		2,526,059
Buildings		4,402,452		39,551		22,836		(10,376	)		(314,107	)		(90,036	)		165,134			4,215,454
Structures		2,917,924		49,931		2		(3,350	)		(228,616	)		(27,217	)		195,832			2,904,506
Machinery and equipment		18,518,129		175,743		1,216		(78,236	)		(2,250,022	)		(309,604	)		1,161,038			17,218,264
Vehicles		31,341		8,027		189		(742	)		(15,057	)		(559	)		9,086			32,285
Tools		66,164		19,178		5,792		(1,340	)		(28,537	)		(2,106	)		11,600			70,751
Furniture and fixtures		136,287		34,618		252		(1,630	)		(36,309	)		(1,808	)		(1,278	)		130,132
Lease assets(*4)		137,564		72,640		490		(8,401	)		(130,905	)		—			703,194			774,582
Bearer plants		80,771		—		—		—			(5,916	)		—			49,338			124,193
Construction-in-progress		1,179,639		2,261,663		17,697		(24,840	)		—			(10,150	)		(1,494,262	)		1,929,747
	W	30,018,273		2,667,901		48,474		(131,043	)		(3,009,469	)		(441,480	)		773,317			29,925,973

(*1) The Company estimated recoverable amount for individual assets related to CEM and Fe-Si factories, etc. that ceased operations due to the disposal plan and others using fair value less costs to sell based on the appraisal value or scrap value. The Company recognized impairment losses ofW205,396 million since recoverable amounts are less than their carrying amounts.

(*2) As of December 31, 2019, POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (formerly, POSCO SS VINA JOINT STOCK COMPANY), a subsidiary, performed the impairment test due to the consecutive operating losses and recognized impairment losses amounting toW204,546 million.

(*3) Represents assets transferred from construction-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.

(*4) On the date of initial application of K-IFRS No.1116 (January 1, 2019), recognition ofW704,458 million of right-of-use assets is included in others.

(b) Information on lease agreements for which the Company is a lessee is as follows:

1) Right-of-use assets

① Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the six-month period ended June 30, 2020 were as follows:

(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Land	W	341,767		7,776		(10,736	)		14,887			353,694
Buildings and structures		171,112		33,828		(22,243	)		(4,684	)		178,013
Machinery and equipment		215,828		10,100		(29,462	)		929			197,395
Vehicles		14,105		2,849		(5,071	)		1,220			13,103
Ships		24,082		111,537		(13,826	)		—			121,793
Others		8,113		10,246		(12,004	)		24,403			30,758
	W	775,007		176,336		(93,342	)		36,755			894,756

25

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

② Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the year ended December 31, 2019 were as follows:

(in millions of Won)	The date of initial application (January 1, 2019)		Acquisitions		Depreciation			Others			Ending
Land	W	340,107		22,850		(11,461	)		(9,729	)		341,767
Buildings and structures		209,455		23,015		(38,853	)		(22,505	)		171,112
Machinery and equipment		219,877		14,610		(33,751	)		15,092			215,828
Vehicles		20,555		8,735		(10,050	)		(5,135	)		14,105
Ships		26,499		—		(2,417	)		—			24,082
Others		25,529		3,430		(34,373	)		13,527			8,113
	W	842,022		72,640		(130,905	)		(8,750	)		775,007

2) The amounts recognized in profit or loss related to leases for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2020		2019		2020		2019
Interest on lease liabilities	W	8,822		8,825		17,830		17,973
Expenses relating to short-term leases		3,845		10,248		8,850		21,786
Expenses relating to leases of low-value assets		3,595		3,641		7,924		8,637
	W	16,262		22,714		34,604		48,396

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill and other intangible assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment loss			Others(*2)			Ending
Goodwill	W	1,097,809		—		—			—			(761	)		(1,042	)		1,096,006
Intellectual property rights		2,279,210		82,752		(1,360	)		(143,884	)		—			21,574			2,238,292
Membership(*1)		148,078		293		(5,221	)		(100	)		(178	)		(28	)		142,844
Development expense		94,339		344		—			(24,227	)		—			11,042			81,498
Port facilities usage rights		281,398		—		—			(22,549	)		—			148			258,997
Exploratation and evaluation assets		77,271		7,357		—			—			—			(31,627	)		53,001
Customer relationships		374,875		—		—			(22,239	)		—			14			352,650
Other intangible assets		555,493		109,816		(61,398	)		(17,395	)		—			(14,427	)		572,089
	W	4,908,473		200,562		(67,979	)		(230,394	)		(939	)		(14,346	)		4,795,377

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

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

26

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) For the year ended December 31, 2019

(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Amortization			Impairment loss(*2)			Others(*3)			Ending
Goodwill	W	1,125,149		—		26,256		—			—			(55,445	)		1,849			1,097,809
Intellectual property rights		2,399,525		127,479		—		(6,566	)		(271,694	)		(2	)		30,468			2,279,210
Membership(*1)		134,793		15,636		—		(3,326	)		(181	)		24			1,132			148,078
Development expense		99,163		4,484		—		(35	)		(44,418	)		(666	)		35,811			94,339
Port facilities usage rights		305,081		—		—		(4,674	)		(22,923	)		—			3,914			281,398
Exploratation and evaluation assets		192,130		9,642		—		—			—			(123,888	)		(613	)		77,271
Customer relationships		421,773		—		—		—			(51,768	)		—			4,870			374,875
Other intangible assets		493,211		141,578		74		(10,718	)		(40,263	)		(10,111	)		(18,278	)		555,493
	W	5,170,825		298,819		26,330		(25,319	)		(431,247	)		(190,088	)		59,153			4,908,473

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

(*2) In connection with exploration and evaluation of the AD-7 block in Myanmar, POSCO INTERNATIONAL Corporation failed to find economic gas. The Company recognized impairment loss ofW118,140 million for the excess of the carrying amounts of related assets over the special energy loan which may be forgiven the case of project failure.

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

14. Other Assets

Other assets as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Advance payments	W	409,503		453,538
Prepaid expenses		290,506		145,834
Firm commitment assets		15,943		17,490
Others		14,717		14,315
	W	730,669		631,177
Non-current
Long-term advance payments	W	21,884		21,950
Long-term prepaid expenses		81,077		41,256
Others(*1)		172,742		262,035
	W	275,703		325,241

(*1) As of June 30, 2020 and December 31, 2019, the Company recognized tax assets amounting toW128,472 million andW213,071 million, respectively, based on the Company’s best estimate of the income 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.

27

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

15. Borrowings

(a) Short-term borrowings and current portion of long-term borrowings as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	Lenders	Interest rate (%)		June 30, 2020			December 31, 2019
Short-term borrowings
Bank overdrafts	JP Morgan and others		0.20 ~ 8.00	W	207,799			159,075
Short-term borrowings	HSBC and others		0.21 ~ 9.75		6,335,935			5,327,258
					6,543,734			5,486,333
Current portion of long-term liabilities
Current portion of long-term borrowings	Export-Import Bank of Korea and others		0.40 ~ 6.60		1,228,321			1,491,934
Current portion of debentures	The Goldman Sachs Group, Inc. and others		1.88 ~ 5.25		2,906,980			1,571,194
Less: Current portion of discount on debentures issued					(2,057	)		(1,249	)
					4,133,244			3,061,879
				W	10,676,978			8,548,212

(b) Long-term borrowings, excluding current portion as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	Lenders	Interest rate (%)		June 30, 2020			December 31, 2019
Long-term borrowings	Export-Import Bank of Korea and others		0.19 ~ 8.50	W	3,969,138			3,827,152
Less: Present value discount					(21,196	)		(24,374	)
Bonds	KB SECURITIES CO., LTD. and others		0.50 ~ 4.12		9,508,419			8,124,194
Less: Discount on debentures issued					(44,552	)		(33,571	)
				W	13,411,809			11,893,401

(c) Assets pledged as collateral in regards to the borrowings as of June 30, 2020 are as follows:

(in millions of Won)	Lenders	Book value		Pledged amount
Cash and cash equivalents	Sinhan Bank and others	W	23,928		24,228
Property, plant and equipment and Investment property	Korea Development Bank and others		4,842,765		5,343,459
Trade accounts and notes receivable	Korea Development Bank and others		46,971		44,737
Inventories	Export-Import Bank of Korea and others		99,613		12,650
Financial instruments	KOOKMIN BANK and others		42,739		41,539
		W	5,056,016		5,466,613

28

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

16. Other Payables

Other payables as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Accounts payable	W	697,924		832,845
Accrued expenses		680,361		742,370
Dividend payable		3,318		3,106
Lease liabilities		235,187		149,176
Withholdings		138,435		152,011
	W	1,755,225		1,879,508
Non-current
Accounts payable	W	6,359		2,718
Accrued expenses		3,971		4,805
Lease liabilities		549,519		526,294
Long-term withholdings		53,552		51,312
	W	613,401		585,129

17. Other Financial Liabilities

Other financial liabilities as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Derivative liabilities	W	54,003		28,021
Financial guarantee liabilities		53,759		49,806
	W	107,762		77,827
Non-current
Derivative liabilities	W	13,097		17,033
Financial guarantee liabilities		4,127		14,461
	W	17,224		31,494

29

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

18. Provisions

(a) Provisions as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020				December 31, 2019
	Current		Non-current		Current		Non-current
Provision for bonus payments	W	54,201		37,240		76,432		47,237
Provision for construction warranties		6,698		176,863		7,655		162,773
Provision for legal contingencies and claims(*1)		5,544		67,363		6,996		77,488
Provision for the restoration(*2)		5,072		81,252		6,783		80,520
Others(*3,*4)		220,922		86,023		262,629		90,136
	W	292,437		448,741		360,495		458,154

(*1) The Company recognized probable outflow of resources amounting toW46,785 million andW54,228 million as provisions for legal contingencies and asserted claim in relation to lawsuits against the Company as of June 30, 2020 and December 31, 2019, 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,W19,989 million as provisions for restoration as of June 30, 2020. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available currently to restore the land to its original condition. In addition, the Company has applied a discount rate of 1.45%~1.60% to measure present value of these costs.

(*3) As of June 30, 2020 and December 31, 2019, POSCO ENERGY CO., LTD., and Korea Fuel Cell recognizedW79,934 million andW178,959 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources.

(*4) As of June 30, 2020, the Company has recognized emission liabilities ofW61,718 million for greenhouse gas emissions in excess of the quantity of free quota emission rights received, which is expected to be submitted.

30

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) Changes in provisions for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others(*1)			Ending
Provision for bonus payments	W	123,669		38,770		(74,528	)		(1,393	)		4,923			91,441
Provision for construction warranties		170,428		27,046		(11,063	)		(2,358	)		(492	)		183,561
Provision for legal contingencies and claims		84,484		2,085		(12,893	)		(1,005	)		236			72,907
Provision for the restoration		87,303		12,179		(4,294	)		(14,555	)		5,691			86,324
Others		352,765		73,631		(72,263	)		(77,867	)		30,679			306,945
	W	818,649		153,711		(175,041	)		(97,178	)		41,037			741,178

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

2) For the year ended December 31, 2019

(in millions of Won)	Beginning		Increase		Utilization			Reversal			Others(*1)		Ending
Provision for bonus payments	W	73,478		122,714		(86,084	)		(3,077	)		16,638		123,669
Provision for construction warranties		142,233		53,203		(22,858	)		(3,444	)		1,294		170,428
Provision for legal contingencies and claims		111,150		26,407		(37,087	)		(18,098	)		2,112		84,484
Provision for the restoration		89,168		23,559		(13,411	)		(14,379	)		2,366		87,303
Others		316,287		95,747		(38,260	)		(86,458	)		65,449		352,765
	W	732,316		321,630		(197,700	)		(125,456	)		87,859		818,649

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

31

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

19. Employee Benefits

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
	2020		2019		2020		2019
Expenses related to post-employment benefit plans under defined contribution plans	W	11,845		11,530		25,047		24,058

(b) Defined benefit plan

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Present value of funded obligations	W	2,422,616			2,416,203
Fair value of plan assets(*1)		(2,234,092	)		(2,255,149	)
Present value of non-funded obligations		20,968			15,677
Net defined benefit liabilities	W	209,492			176,731

(*1) As of June 30, 2020 and December 31, 2019, the Company recognized net defined benefit assets amounting toW13,445 million andW4,280 million respectively, 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 six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Defined benefit obligation at the beginning of period	W	2,431,880			2,137,161
Current service costs		122,511			236,735
Interest costs		23,630			51,900
Remeasurements		4,252			152,713
Benefits paid		(146,492	)		(152,275	)
Others		7,803			5,646
Defined benefit obligation at the end of period	W	2,443,584			2,431,880

32

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

3) Changes in fair value of plan assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Fair value of plan assets at the beginning of period	W	2,255,149			1,997,717
Interest on plan assets		22,152			48,210
Remeasurement of plan assets		20			(8,692	)
Contributions to plan assets		88,297			342,915
Benefits paid		(136,625	)		(124,962	)
Others		5,099			(39	)
Fair value of plan assets at the end of period	W	2,234,092			2,255,149

4) The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
(in millions of Won)	2020		2019		2020		2019
Current service costs	W	61,202		56,060		122,511		114,990
Net interest costs		179		1,138		1,478		2,235
	W	61,381		57,198		123,989		117,225

20. Other Liabilities

Other liabilities as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Due to customers for contract work	W	779,829		676,054
Advances received		488,475		487,526
Unearned revenue		85,027		61,795
Withholdings		418,805		388,486
Firm commitment liabilities		6,965		15,637
Others		12,123		8,604
	W	1,791,224		1,638,102
Non-current
Unearned revenue	W	18,675		27,161
Others		23,329		52,349
	W	42,004		79,510

33

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(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 June 30, 2020 and December 31, 2019 are as follows

① June 30, 2020

			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	322,743		—		322,743		—		322,743
Short-term financial instruments		7,421,262		—		7,421,262		—		7,421,262
Debt securities		19,183		—		—		19,183		19,183
Other securities		311,402		7,743		1,145		302,514		311,402
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments(*2)		12,829		—		12,829		—		12,829
Fair value through other comprehensive income
Equity securities		1,017,957		540,552		—		477,405		1,017,957
Debt securities		1,706		—		—		1,706		1,706
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		6,038,266		—		—		—		—
Trade accounts and notes receivable		7,542,447		—		—		—		—
Other receivables		2,282,860		—		—		—		—
Debt securities		688,921		—		—		—		—
Deposit instruments		2,796,499		—		—		—		—
	W	28,458,075		548,295		7,757,979		802,808		9,109,082
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	41,410		—		41,410		—		41,410
Derivative hedging instruments(*2)		25,690		—		25,690		—		25,690
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		3,286,583		—		—		—		—
Borrowings		24,088,787		—		24,394,275		—		24,394,275
Financial guarantee liabilities		57,886		—		—		—		—
Others		2,257,530		—		���		—		—
	W	29,757,886		—		24,461,375		—		24,461,375

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

(*2) The Company applies hedge accounting which uses forward contracts as hedging instruments 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 hedge accounting which uses currency swap as hedging instruments in order to hedge the risk of changes in foreign currency which influences cash flow from borrowings.

34

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

② December 31, 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	106,104		—		106,104		—		106,104
Short-term financial instruments		6,861,242		—		6,861,242		—		6,861,242
Debt securities		28,087		—		—		28,087		28,087
Other securities		340,008		1,222		3,330		335,456		340,008
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments		6,174		—		6,174		—		6,174
Fair value through other comprehensive income
Equity securities		1,204,902		782,108		73		422,721		1,204,902
Debt securities		5,686		—		—		5,686		5,686
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		3,514,872		—		—		—		—
Trade accounts and notes receivable		8,214,459		—		—		—		—
Other receivables		2,193,700		—		—		—		—
Debt securities		334,153		—		—		—		—
Deposit instruments		1,779,082		—		—		—		—
	W	24,590,469		783,330		6,976,923		793,950		8,554,203
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	32,193		—		32,193		—		32,193
Derivative hedging instruments		12,861		—		12,861		—		12,861
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		3,442,989		—		—		—		—
Borrowings		20,441,613		—		20,666,476		—		20,666,476
Financial guarantee liabilities		64,267		—		—		—		—
Others		2,401,382		—		—		—		—
	W	26,395,305		—		20,711,530		—		20,711,530

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

2) Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2020 and 2019 were as follows:

① For the six-month period ended June 30, 2020

(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	82,003			7,804			—			2,854			998			93,659			—
Derivatives assets		—			264,487			—			138,177			—			402,664			—
Financial assets at fair value through other comprehensive income		—			—			—			—			25,568			25,568			(165,966	)
Financial assets measured at amortized cost		121,999			—			296,873			(9,620	)		(160	)		409,092			—
Derivatives liabilities		—			(39,069	)		—			(176,867	)		—			(215,936	)		(841	)
Financial liabilities measured at amortized cost		(346,799	)		—			(415,610	)		—			130			(762,279	)		—
	W	(142,797	)		233,222			(118,737	)		(45,456	)		26,536			(47,232	)		(166,807	)

② For the six-month period ended June 30, 2019

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

35

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

3) Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2020 and 2019 were as follows:

① For the three-month period ended June 30, 2020

(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	40,881			7,471			—			2,549			768			51,669			—
Derivatives assets		—			(45,740	)		—			82,386			—			36,646			—
Financial assets at fair value through other comprehensive income		—			—			—			—			262			262			36,870
Financial assets measured at amortized cost		70,267			—			(187,582	)		(3,634	)		(70	)		(121,019	)		—
Derivatives liabilities		—			33,221						(86,565	)					(53,344	)		(784	)
Financial liabilities measured at amortized cost		(171,672	)					236,596						(518	)		64,406			—
	W	(60,524	)		(5,048	)		49,014			(5,264	)		442			(21,380	)		36,086

② For the three-month period ended June 30, 2019

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

(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, 2019.

36

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

22. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2020 and December 31, 2019 are as follows:

(Share, in Won)	June 30, 2020		December 31, 2019
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Shared capital(*2)	W	482,403,125,000		482,403,125,000

(*1) As of June 30, 2020, the total number of ADRs of 30,935,880 outstanding in overseas stock market is equivalent to 7,733,970 shares of common stock.

(*2) As of June 30, 2020, the difference between the ending balance of common stock and the aggregate par value of issued common stock isW46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Share premium	W	463,825		463,825
Gain on disposal of treasury shares		796,623		796,623
Other capital surplus		74,701		115,803
	W	1,335,149		1,376,251

(c) On February 25, 2017, POSCO ENERGY CO., LTD., a subsidiary of the Company, issued redeemable convertible preferred shares amounting toW245,000 million (8,643,193 shares) which are classified as non-controlling interests in the consolidated financial statements. Repayments of shares were made on February 25, 2020 (4,477,246 shares) and March 30, 2020 (4,165,947 shares).

37

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

23. Hybrid Bonds

(a) Hybrid bonds classified as equity as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		June 30, 2020			December 31, 2019
Hybrid bond 1-2(*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 issued by the Company as of June 30, 2020 are as follows:

	Hybrid bond 1-2
Maturity date	30 years (The Company has a right to extend the maturity date)
Interest rate	Issue date ~ 2023-06-12 : 4.6% Reset every 10 years as follows; •    After 10 years: return on government bond of the Republic of Korea (10 years) + 1.40% •    After 10 years: additionally +0.25% according to Step-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 10th anniversary of issuenace and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common shareholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2020 amounts toW454 million.

38

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) POSCO ENERGY CO., LTD., a subsidiary of the Company, issued hybrid bonds which are classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		June 30, 2020			December 31, 2019
Hybrid bond 1-4(*1)		2013-08-29		2043-08-29		5.21	W	140,000			140,000
Issuance cost								(429	)		(429	)
							W	139,571			139,571

(*1) Details of hybrid bonds issued by POSCO ENERGY CO., LTD. as of June 30, 2020 are as follows:

	Hybrid bond 1-4
Maturity date	30 years (The Company has a right to extend the maturity date)
Interest rate	Issue date ~ 2023-08-29 : 5.21% Reset every 10 years as follows; •    After 10 years: return on government bond of the Republic of Korea (10 years) + 1.55% •    After 10 years: additionally + 0.25% according to Step-up clauses •    After 30 years: additionally +0.75%
Interest payments condition	Quarterly (Optional deferral of interest payment is available to the Issuer)
Others	The issuer can call the hybrid bond at 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common shareholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2020 amounts toW639 million.

24. Reserves

Reserves as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Accumulated comprehensive loss of investments in associates and joint ventures	W	(599,389	)		(676,416	)
Changes in fair value of equity investments at fair value through other comprehensive income		(448,053	)		(285,073	)
Foreign currency translation differences		(133,635	)		(202,636	)
Gains or losses on valuation of derivatives		(1,236	)		(438	)
Others		13,027			6,583
	W	(1,169,286	)		(1,157,980	)

39

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

25. Treasury Shares

During the six-month period ended June 30, 2020, the Company entered into a trust contract of acquiring treasury shares following approval of the Board of Directors. The amount committed to purchase treasury shares by this trust contract isW1,000 billion, and the contract period is from April 13, 2020 to April 12, 2021. The number of treasury shares acquired according to the contract is 358,953 during the six-month period ended June 30, 2020.

As of June 30, 2020, the Company holds 7,430,147 treasury shares for share price stabilization and other purposes in accordance with the Board of Director’s resolution.

26. Revenue

(a) Disaggregation of revenue

1) Details of revenue disaggregated by types of revenue and timing of revenue recognition for the six-month periods ended June 30, 2020 and 2019 were as follows:

① For the six-month period ended June 30, 2020

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	13,227,955		9,738,336		—		367,967		23,334,258
Revenue from services		232,864		191,253		22,848		885,331		1,332,296
Revenue from construction contract		—		—		3,368,635		14,207		3,382,842
Others		18,599		87,032		4,019		108,321		217,971
	W	13,479,418		10,016,621		3,395,502		1,375,826		28,267,367
Timing of revenue recognition
Revenue recognized at a point in time	W	13,246,554		9,825,368		104,538		476,289		23,652,749
Revenue recognized over time		232,864		191,253		3,290,964		899,537		4,614,618
	W	13,479,418		10,016,621		3,395,502		1,375,826		28,267,367

② For the six-month period ended June 30, 2019

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

40

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month periods ended June 30, 2020 and 2019 were as follows:

① For the three-month period ended June 30, 2020

(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	6,256,679		4,823,693		—		176,643		11,257,015
Revenue from services		108,391		108,114		10,788		368,404		595,697
Revenue from construction contract		—		—		1,762,872		7,587		1,770,459
Others		8,895		29,139		2,918		57,431		98,383
	W	6,373,965		4,960,946		1,776,578		610,065		13,721,554
Timing of revenue recognition
Revenue recognized at a point in time	W	6,265,574		4,852,832		93,583		234,076		11,446,065
Revenue recognized over time		108,391		108,114		1,682,995		375,989		2,275,489
	W	6,373,965		4,960,946		1,776,578		610,065		13,721,554

② For the three-month period ended June 30, 2019

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

(b) Details of contract assets and liabilities from contracts with customers as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Receivables
Accounts receivable	W	7,542,447		8,214,459
Contract assets
Due from customers for contract work		1,188,416		1,062,677
Contract liabilities
Advance received		492,503		489,658
Due to customers for contract work		779,829		676,054
Unearned revenue		103,539		88,733

41

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

27. Revenue – Contract Balances

(a) Details of ongoing contracts as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020						December 31, 2019
	Construction segment			Others			Construction segment			Others
Accumulated cost	W	29,893,770			300,248			29,106,218			249,751
Accumulated contract profit		2,952,358			59,676			2,863,207			47,107
Accumulated contract loss		(1,199,546	)		(2,403	)		(1,182,989	)		(2,211	)
Accumulated contract revenue		31,646,582			357,521			30,786,436			294,647

(b) Details of due from customers for contract work and due to customers for contract work as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020						December 31, 2019
	Construction segment			Others			Construction segment			Others
Due from customers for contract work	W	1,213,373			52,824			1,087,119			49,317
Due to customers for contract work		(751,585	)		(28,244	)		(639,130	)		(36,924	)
	W	461,788			24,580			447,989			12,393

(c) Details of the provisions of construction loss as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Construction segment	W	33,298		35,526
Others		410		406
	W	33,708		35,932

42

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(d) Due to the factors causing the variation of costs for the six-month period ended June 30, 2020, the estimated total contract costs have changed. Details of changes in estimated total contract costs and the impact on profit before income taxes for the six-month period ended June 30, 2020 and future periods are as follows:

			Changes in profit (loss) of contract
	Changes in estimated
(in millions of Won)	total contract costs		Net income		Future income		Total
Construction segment	W	128,439		20,087		127,633		147,720
Others		2,665		3,451		869		4,320
	W	131,104		23,538		128,502		152,040

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contract to June 30, 2020. The estimation is evaluated for the total contract costs and expected total contract revenue as of the end of the period. Also, it may change during future periods.

(e) Uncertainty of estimates

1) Total contract revenues

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

2) Total contract costs

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

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

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

43

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

28. Selling and Administrative Expenses

(a) Other administrative expenses

Other administrative expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2020		2019		2020		2019
Wages and salaries	W	197,024		197,241		410,520		405,863
Expenses related to post-employment benefits		19,502		18,202		41,881		40,070
Other employee benefits		40,293		43,344		85,751		89,121
Travel		3,537		11,514		9,890		21,181
Depreciation		37,905		31,294		72,857		65,620
Amortization		27,351		28,442		54,633		56,802
Communication		2,409		2,556		4,801		5,029
Electricity		1,849		2,001		4,030		4,031
Taxes and public dues		19,719		18,971		32,075		31,856
Rental		9,632		9,219		16,265		20,677
Repairs		1,311		4,107		3,238		6,624
Entertainment		1,437		2,609		3,545		5,641
Advertising		17,296		24,059		34,653		41,965
Research & development		25,405		26,299		49,271		56,682
Service fees		37,342		36,066		76,775		87,588
Vehicles maintenance		1,129		1,919		2,499		4,247
Industry association fee		2,373		1,980		6,039		5,417
Conference		2,482		3,957		5,325		7,810
Increase to provisions		355		1,084		1,882		2,482
Others		8,190		11,673		17,677		23,914
	W	456,541		476,537		933,607		982,620

(b) Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2020		2019		2020		2019
Freight and custody expenses	W	40,640		40,176		86,103		87,537
Operating expenses for distribution center		1,661		2,657		3,687		5,251
Sales commissions		20,194		22,563		67,919		38,599
Sales advertising		312		370		570		604
Sales promotion		1,393		2,478		3,236		5,015
Sample		331		617		872		1,128
Sales insurance premium		7,452		7,916		15,629		15,925
Contract cost		8,118		7,439		15,750		16,079
Others		4,247		5,987		8,560		11,325
	W	84,348		90,203		202,326		181,463

44

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

29. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30						For the six-month periods ended June 30
	2020			2019			2020		2019
Finance income
Interest income(*1)	W	111,148			78,450			204,002		153,977
Dividend income		1,030			19,870			26,566		51,378
Gain on foreign currency transactions		290,855			261,833			636,287		379,766
Gain on foreign currency translations		(227,550	)		54,450			219,977		199,617
Gain on derivatives transactions		84,616			51,200			144,640		84,600
Gain on valuations of derivatives		(60,773	)		59,795			281,200		146,869
Others		11,343			7,264			17,421		10,669
	W	210,669			532,862			1,530,093		1,026,876
Finance costs
Interest expenses	W	171,672			190,726			346,799		391,204
Loss on foreign currency transactions		236,231			210,009			484,754		315,298
Loss on foreign currency translations		(221,940	)		123,272			490,247		262,731
Loss on derivatives transactions		88,795			71,895			183,330		113,045
Loss on valuation of derivatives		(48,254	)		(1,555	)		55,782		41,736
Loss on disposal of trade accounts and notes receivable		3,670			9,832			9,656		19,240
Others		1,875			5,753			6,757		17,271
	W	232,049			609,932			1,577,325		1,160,525

(*1) Interest income calculated using the effective interest method for the six-month periods ended June 30, 2020 and 2019 wereW121,999 million andW85,880 million, respectively.

45

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

30. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2020		2019			2020		2019
Other non-operating income
Gain on disposals of assets held for sale	W	—		8,536			299		8,536
Gain on disposals of investments in subsidiaries, associates and joint ventures		37,370		1,385			41,339		15,821
Gain on disposals of property, plant and equipment		2,511		4,080			7,346		16,362
Gain on valuation of firm commitment		17,548		9,258			37,666		28,968
Gain on valuation of emission rights		—		25,440			—		25,440
Gain on disposals of emission rights		16,823		—			24,566		—
Reversal of other provisions		561		5,595			839		6,170
Others		27,790		28,730			54,849		56,071
	W	102,603		83,024			166,904		157,368
Other non-operating expenses
Impairment loss on assets held for sale	W	5,030		(849	)		5,030		3,346
Loss on disposals of investments in subsidiaries, associates and joint ventures		5,121		3,716			10,073		5,586
Loss on disposals of property, plant and equipment		38,318		25,099			78,989		37,396
Impairment loss on property, plant and equipment		21,322		81,314			21,400		149,659
Loss on valuation of firm commitment		1,742		14,763			36,075		18,572
Idle tangible asset expenses		5,330		10,808			10,685		18,427
Increase to provisions		372		2,098			1,224		7,371
Donations		4,553		1,788			16,708		11,194
Others		21,885		27,942			37,253		52,318
	W	103,673		166,679			217,437		303,869

31. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows (excluding finance costs and income tax expense):

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2020		2019		2020		2019
Raw material used, changes in inventories and others	W	8,300,004		9,577,372		16,948,281		19,256,695
Employee benefits expenses		852,159		870,497		1,772,198		1,746,165
Outsourced processing cost		2,056,490		1,992,121		4,086,789		3,762,751
Electricity and water		142,562		329,161		313,258		548,963
Depreciation (*1)		784,867		758,349		1,555,037		1,523,108
Amortization		116,107		104,471		230,394		203,733
Freight and custody expenses		329,787		362,400		682,131		731,634
Sales commissions		20,194		22,563		67,919		38,599
Loss on disposal of property, plant and equipment		38,318		25,099		78,989		37,396
Impairment loss on property, plant and equipment		21,322		81,314		21,400		149,659
Donations		4,553		1,789		16,708		11,194
Other		990,157		1,306,735		1,848,640		2,375,454
	W	13,656,520		15,431,871		27,621,744		30,385,351

(*1) Includes depreciation expense of investment property.

46

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

32. Income Taxes

The effective tax rates of the Company for the six-month periods ended June 30, 2020 and 2019 were 32.10% and 31.05%, respectively.

33. Earnings per Share

Basic earnings per share for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in Won except share information)	For the three-month periods ended June 30						For the six-month periods ended June 30
	2020			2019			2020			2019
Profit attributable to controlling interest	W	40,281,852,768			612,285,873,955			435,674,548,777			1,353,539,066,362
Interests of hybrid bonds		(1,662,931,506	)		(1,662,931,506	)		(3,325,863,013	)		(3,307,589,040	)
Weighted-average number of common shares outstanding (*1)		80,006,436			80,115,641			80,061,039			80,111,845
Basic earnings per share	W	483			7,622			5,400			16,854

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

(Shares)	For the three-month periods ended June 30						For the six-month periods ended June 30
	2020			2019			2020			2019
Total number of common shares issued	W	87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,180,399	)		(7,071,194	)		(7,125,796	)		(7,074,990	)
Weighted-average number of common shares outstanding	W	80,006,436			80,115,641			80,061,039			80,111,845

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2020 and 2019, diluted earnings per share is equal to basic earnings per share.

47

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

34. Related Party Transactions

(a) Significant transactions between the controlling company and related companies for the six-month periods ended June 30, 2020 and 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Sales and others(*1)				Purchase and others(*2)
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries (*3)
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	3,548		11,096		15		442,305		60		12,835
POSCO COATED & COLOR STEEL Co., Ltd.		205,766		1,695		—		—		15,176		208
POSCO ICT (*4)		1,429		4,991		—		184,310		20,941		87,668
eNtoB Corporation		7		60		113,378		18,848		28		12,493
POSCO CHEMICAL CO., LTD		144,466		24,770		229,721		12,830		154,424		4,362
POSCO ENERGY CO., LTD.		1,553		1,216		9,995		3		—		11,110
POSCO INTERNATIONAL Corporation		2,795,437		54,331		110,798		—		11,371		2,083
POSCO Thainox Public Company Limited		106,717		137		3,454		—		—		—
POSCO America Corporation		96,266		—		—		—		—		3
POSCO Canada Ltd.		—		816		90,805		—		—		—
POSCO Asia Co., Ltd.		719,978		965		81,671		2,272		1,162		1,419
Qingdao Pohang Stainless Steel Co., Ltd.		70,768		66		—		—		—		176
POSCO JAPAN Co., Ltd.		548,842		—		16,420		2,959		—		1,088
POSCO-VIETNAM Co., Ltd.		101,105		223		—		—		—		20
POSCO MEXICO S.A. DE C.V.		68,574		99		—		—		—		304
POSCO Maharashtra Steel Private Limited		153,754		847		—		—		—		185
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		57,645		—		—		—		—		—
POSCO VST CO., LTD.		132,216		56		—		—		—		20
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		804		291,649		—		—		—
Others		573,063		18,184		41,106		25,580		128,557		58,065
		5,781,134		120,356		989,012		689,107		331,719		192,039
Associates and joint ventures (*3)
POSCO PLANTEC Co., Ltd. (*5)		65		41		916		84,839		4,086		12,431
SNNC		2,901		3,478		219,060		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		17,154		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		625,545		—		—		—
Others		14,332		54,933		28,954		—		—		13,348
		34,452		58,452		874,475		84,839		4,086		25,779
	W	5,815,586		178,808		1,863,487		773,946		335,805		217,818

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

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

(*3) As of June 30, 2020, 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 six-month period ended June 30, 2020, POSCO PLANTEC Co., Ltd. was excluded from associates due to the Company’s loss of significant influence over the investee.

48

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

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

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

(b) Significant transactions between the controlling company and related companies for the three-month periods ended June 30, 2020 and 2019 were as follows:

1) For the three-month period ended June 30, 2020

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	2,011		17		—		198,832		60		5,123
POSCO COATED & COLOR STEEL Co., Ltd.		89,666		1		—		—		6,818		91
POSCO ICT		718		2		—		85,004		10,483		41,213
eNtoB Corporation		3		—		55,786		9,743		9		6,931
POSCO CHEMICAL CO., LTD		61,232		4,828		105,977		8,690		71,609		653
POSCO ENERGY CO., LTD.		266		537		5,385		—		—		5,598
POSCO INTERNATIONAL Corporation		1,274,878		—		31,102		—		—		941
POSCO Thainox Public Company Limited		55,096		71		792		—		—		—
POSCO America Corporation		32,624		—		—		—		—		—
POSCO Canada Ltd.		—		753		51,250		—		—		—
POSCO Asia Co., Ltd.		402,677		746		36,185		504		766		910
Qingdao Pohang Stainless Steel Co., Ltd.		35,299		66		—		—		—		119
POSCO JAPAN Co., Ltd.		230,608		—		9,698		2,339		—		650
POSCO-VIETNAM Co., Ltd.		37,517		108		—		—		—		—
POSCO MEXICO S.A. DE C.V.		17,483		63		—		—		—		249
POSCO Maharashtra Steel Private Limited		36,314		44		—		—		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,094		—		—		—		—		—
POSCO VST CO., LTD.		62,622		56		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		462		136,882		—		—		—
Others		304,164		3,644		14,283		12,622		67,484		28,998
		2,668,272		11,398		447,340		317,734		157,229		91,476
Associates and joint ventures
SNNC		1,491		443		98,634		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		3,229		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		303,358		—		—		—
Others		4,625		39,739		16,589		—		—		5,695
		9,345		40,182		418,581		—		—		5,695
	W	2,677,617		51,580		865,921		317,734		157,229		97,171

49

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

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

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

(c) The related account balances from significant transactions between the controlling company and related companies as of June 30, 2020 and December 31, 2019 are as follows:

1) June 30, 2020

(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	3,005		56		3,061		—		55,360		381		55,741	��
POSCO COATED & COLOR STEEL Co., Ltd.		35,652		—		35,652		—		9		3,089		3,098
POSCO ICT		123		—		123		2,602		70,313		35,076		107,991
eNtoB Corporation		—		34		34		2,698		31,539		18		34,255
POSCO CHEMICAL CO., LTD		20,537		2,904		23,441		11,092		45,121		17,606		73,819
POSCO ENERGY CO., LTD.		166		214		380		—		2,563		13,630		16,193
POSCO INTERNATIONAL Corporation		438,989		10		438,999		756		238		—		994
POSCO Thainox Public Company Limited		34,981		3		34,984		—		—		—		—
POSCO America Corporation		4,432		—		4,432		—		—		—		—
POSCO Asia Co., Ltd.		295,369		847		296,216		3,810		257		—		4,067
Qingdao Pohang Stainless Steel Co., Ltd.		21,523		—		21,523		—		—		—		—
POSCO MEXICO S.A. DE C.V.		40,423		707		41,130		—		—		—		—
POSCO Maharashtra Steel Private Limited		196,825		477		197,302		—		—		—		—
Others		597,632		43,367		640,999		15,367		28,726		85,326		129,419
		1,689,657		48,619		1,738,276		36,325		234,126		155,126		425,577
Associates and joint ventures
SNNC		340		216		556		10,364		—		—		10,364
Roy Hill Holdings Pty Ltd		—		—		—		169,954		—		—		169,954
Others		408		38,077		38,485		4,042		—		—		4,042
		748		38,293		39,041		184,360		—		—		184,360
	W	1,690,405		86,912		1,777,317		220,685		234,126		155,126		609,937

50

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) December 31, 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	5,702		65		5,767		—		78,512		385		78,897
POSCO COATED & COLOR STEEL Co., Ltd.		57,792		—		57,792		—		11		3,828		3,839
POSCO ICT		225		1		226		1,147		129,424		42,844		173,415
eNtoB Corporation		—		—		—		3,459		27,431		—		30,890
POSCO CHEMICAL CO., LTD		35,102		3,578		38,680		17,839		52,710		19,369		89,918
POSCO ENERGY CO., LTD.		1,876		4		1,880		—		3,229		14,912		18,141
POSCO INTERNATIONAL Corporation		633,073		—		633,073		345		2,218		3,839		6,402
POSCO Thainox Public Company Limited		52,826		2		52,828		916		—		—		916
POSCO America Corporation		8,448		—		8,448		—		—		—		—
POSCO Asia Co., Ltd.		508,962		748		509,710		12,784		171		—		12,955
Qingdao Pohang Stainless Steel Co., Ltd.		29,842		—		29,842		—		—		—		—
POSCO MEXICO S.A. DE C.V.		90,351		702		91,053		—		—		—		—
POSCO Maharashtra Steel Private Limited		235,917		444		236,361		—		—		—		—
Others		470,734		33,851		504,585		14,397		40,233		87,652		142,282
		2,130,850		39,395		2,170,245		50,887		333,939		172,829		557,655
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		84		10		94		471		49,511		—		49,982
SNNC		297		65		362		19,769		—		—		19,769
Roy Hill Holdings Pty Ltd		—		—		—		93,383		—		—		93,383
Others		942		706		1,648		3,447		586		—		4,033
		1,323		781		2,104		117,070		50,097		—		167,167
	W	2,132,173		40,176		2,172,349		167,957		384,036		172,829		724,822

(d) Significant transactions between the Company, excluding the controlling company, and related companies for the six-month periods ended June 30, 2020 and 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	2,558		—		5		—
New Songdo International City Development, LLC		51,863		26,450		—		46
SNNC		27,202		—		25,282		107,507
Chuncheon Energy Co., Ltd.		287		211		—		—
Noeul Green Energy Co., Ltd.		3,039		—		—		—
CSP - Compania Siderurgica do Pecem		18,311		4,925		123,368		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		18,928		—		24,782		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		—		2,393		—
POS-SEAHSTEELWIRE (TIANJIN) CO., Ltd		3,294		—		—		—
PT. Batutua Tembaga Raya		—		1,111		16,575		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		12,131		—		165		—
DMSA/AMSA		—		—		29,198		—
South-East Asia Gas Pipeline Company Ltd.		7		38,517		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		15,961		19,438		1,888		452
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		89,910		—		—		—
TK CHEMICAL CORPORATION		59,752		—		18,743		—
Others		61,699		29,773		17,714		16,853
	W	364,942		120,425		260,113		124,858

51

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

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

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

(e) Significant transactions between the Company, excluding the controlling company, and related companies for the three-month periods ended June 30, 2020 and 2019 were as follows:

1) For the three-month period ended June 30, 2020

(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	—		—		—		—
New Songdo International City Development, LLC		31,663		26,450		—		43
SNNC		16,847		—		13,179		508
Chuncheon Energy Co., Ltd.		—		—		—		—
Noeul Green Energy Co., Ltd.		1,516		—		—		—
CSP - Compania Siderurgica do Pecem		1,566		493		39,178		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		8,152		—		12,242		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		—		1,437		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		767		—		—		—
PT. Batutua Tembaga Raya		—		152		5,034		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,287		—		101		—
DMSA/AMSA		—		—		3,035		—
South-East Asia Gas Pipeline Company Ltd.		—		18,511		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		7,096		37		814		185
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		48,026		—		—		—
TK CHEMICAL CORPORATION		24,411		—		6,547		—
Others		28,565		24,208		8,642		7,345
	W	175,896		69,851		90,209		8,081

52

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

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

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

(f) The related account balances from significant transactions between the Company, excluding the controlling company, and related companies as of June 30, 2020 and December 31, 2019 are as follows:

1) June 30, 2020

(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
New Songdo International City Development, LLC	W	14,855		—		20,592		35,447		—		—		—
Chuncheon Energy Co., Ltd.		—		—		—		—		407		—		407
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		59,192		—		—		59,192		—		55,428		55,428
Nickel Mining Company SAS		—		62,977		144		63,121		—		—		—
CSP - Compania Siderurgica do Pecem		174,737		—		12,101		186,838		282		—		282
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		7,981		—		—		7,981		2,762		—		2,762
PT. Batutua Tembaga Raya		—		39,017		984		40,001		1,399		—		1,399
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		9,399		—		—		9,399		113		—		113
DMSA/AMSA		112		7,645		—		7,757		—		—		—
South-East Asia Gas Pipeline Company Ltd.		—		126,628		—		126,628		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		2,912		—		—		2,912		569		—		569
TK CHEMICAL CORPORATION		21,953		—		—		21,953		835		—		835
Others		56,080		160,200		101,593		317,873		471		13,244		13,715
	W	347,221		396,467		135,414		879,102		6,838		68,672		75,510

53

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) December 31, 2019

(in millions of Won)	Receivables								Payables
	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes receivable		Others		Total
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	4,121		—		205		4,326		791		8		799
New Songdo International City Development, LLC		23,626		—		20,592		44,218		—		10		10
Chuncheon Energy Co., Ltd.		—		8,234		—		8,234		657		—		657
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		34,945		—		—		34,945		—		67,543		67,543
Nickel Mining Company SAS		—		60,516		120		60,636		—		—		—
CSP - Compania Siderurgica do Pecem		244,700		—		14,264		258,964		—		33		33
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,273		—		—		10,273		633		—		633
PT. Batutua Tembaga Raya		—		36,291		19,993		56,284		56		—		56
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,035		—		—		7,035		101		—		101
DMSA/AMSA		—		57,999		1,672		59,671		—		—		—
South-East Asia Gas Pipeline Company Ltd.		14		147,367		—		147,381		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		8,078		—		—		8,078		916		—		916
TK CHEMICAL CORPORATION		37,373		—		—		37,373		110		—		110
Others		94,914		138,663		97,804		331,381		7,128		13,379		20,507
	W	465,079		449,070		154,650		1,068,799		10,392		80,973		91,365

(g) Significant financial transactions between the Company, excluding the controlling company, and related companies for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

1) June 30, 2020

(in millions of Won)	Beginning		Lend		Collect			Others(*2)			Ending
Associates and joint ventures
UITrans LRT Co., Ltd.		10,579		5,919		—			—			16,498
DMSA/AMSA (*1)		57,999		—		—			(50,354	)		7,645
South-East Asia Gas Pipeline Company Ltd.		147,367		—		(24,416	)		3,677			126,628
PT. Batutua Tembaga Raya		36,291		—		—			2,726			39,017
PT. Tanggamus Electric Power		4,580		—		—			170			4,750
PT. Wampu Electric Power		5,519		—		—			205			5,724
PT. POSMI Steel Indonesia		2,316		—		—			86			2,402
Nickel Mining Company SAS		60,516		—		—			2,461			62,977
KRAKATAU POS-CHEM DONG-SUH CHEMICAL		6,947		—		(1,239	)		296			6,004
POS-SeaAH Steel Wire (Thailand) Co., Ltd.		6,947		—		—			257			7,204
AMCI (WA) PTY LTD		78,553		1,567		—			1,496			81,616
POS-AUSTEM YANTAI AUTOMOTIVE CO.,LTD		5,789		—		—			215			6,004
POS-AUSTEM WUHAN AUTOMOTIVE CO.,LTD		9,262		—		—			343			9,605
Hyo-chun Co., Ltd.		2,382		—		—			—			2,382
Chun-cheon Energy Co., Ltd.		8,234		—		(8,234	)		—			—
POS-AUSTEM Suzhou Automotive Co., Ltd		5,789		12,067		—			155			18,011
	W	449,070		19,553		(33,889	)		(38,267	)		396,467

(*1) During the six-month period ended June 30, 2020, loans amounting toW52,692 million have been converted to ordinary shares of DMSA/AMSA, and its amount is included in others.

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

54

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) December 31, 2019

(in millions of Won)	Beginning		Lend		Collect			Others(*2)			Ending
Associates and joint ventures
UITrans LRT Co., Ltd.		5,695		4,884		—			—			10,579
DMSA/AMSA(*1)		64,297		15,451		—			(21,749	)		57,999
South-East Asia Gas Pipeline Company Ltd.		191,107		—		(48,027	)		4,287			147,367
PT. Batutua Tembaga Raya		35,100		—		—			1,191			36,291
PT. Tanggamus Electric Power		4,423		—		—			157			4,580
PT. Wampu Electric Power		5,330		—		—			189			5,519
PT. POSMI Steel Indonesia		2,236		—		—			80			2,316
Nickel Mining Company SAS		59,664		—		—			852			60,516
KRAKATAU POS-CHEM DONG-SUH CHEMICAL		6,709		—		—			238			6,947
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		3,354		—		(3,354	)		—			—
POS-SeAH Steel Wire (Thailand) Co., Ltd.		6,709		—		—			238			6,947
AMCI (WA) PTY LTD		90,480		4,669		—			(16,596	)		78,553
POS-AUSTEM YANTAI AUTOMOTIVE CO., LTD		5,590		—		—			199			5,789
POS-AUSTEM WUHAN AUTOMOTIVE CO., LTD		8,945		—		—			317			9,262
Hyo-chun Co., Ltd.		—		—		—			2,382			2,382
Chun-cheon Energy Co., Ltd.		—		8,234		—			—			8,234
POS-AUSTEM Suzhou Automotive Co., Ltd		—		5,827		—			(38)			5,789
	W	489,639		39,065		(51,381	)		(28,253	)		449,070

(*1) During the year ended December 31, 2019, loans amounting toW23,682 million have been converted to ordinary shares of DMSA/AMSA, and its amount is included in others.

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

(h) For the six-month periods ended June 30, 2020 and 2019, details of compensation to key management officers were as follows:

(in millions of Won)	June 30, 2020		June 30, 2019
Short-term benefits	W	53,802		56,769
Long-term benefits		8,525		7,249
Retirement benefits		9,322		10,389
	W	71,649		74,407

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

55

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

35. Commitments and Contingencies

(a) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of June 30, 2020 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.	Credit Agricole		USD		50,000,000		60,035		50,000,000		60,035
	POSCO-VIETNAM Co., Ltd.	SMBC and others		USD		156,000,000		187,309		156,000,000		187,309
	POSCO MEXICO S.A. DE C.V.	BOA and others		USD		120,000,000		144,084		120,000,000		144,084
	POSCO COATED STEEL (THAILAND) CO., LTD.	SMBC and others		THB		5,501,000,000		213,879		5,501,000,000		213,879
	POSCO Maharashtra Steel Private Limited	ING and others		USD		83,784,000		100,599		83,784,000		100,599
	PT. KRAKATAU POSCO	Export-Import Bank of Korea and others		USD		1,350,300,000		1,621,306		862,114,318		1,035,142
	POSCO ASSAN TST STEEL INDUSTRY	SMBC and others		USD		146,527,500		175,936		131,874,750		158,342
POSCO INTERNATIONAL Corporation	Daewoo Global Development. Pte., Ltd	Export-Import Bank of Korea and others		USD		186,625,000		224,081		178,750,000		214,625
	POSCO INTERNATIONAL POWER (PNGLAE) LIMITED	KDB bank		USD		48,317,404		58,015		37,167,234		44,627
	GOLDEN LACE POSCO INTERNATIONAL CO., LTD.	Shinhan Bank and others		USD		11,000,000		13,208		11,000,000		13,208
	PT. Bio Inti Agrindo	Export-Import Bank of Korea and others		USD		148,168,985		177,907		146,062,714		175,378
	POSCO ASSAN TST STEEL INDUSTRY	ING		USD		14,652,750		17,594		14,652,750		17,594
	POSCO INTERNATIONAL AMERICA Corp.	Bank Mendes Gans		USD		50,000,000		60,035		38,291,323		45,977
	POSCO INTERNATIONAL SINGAPORE Pte. Ltd..
	POSCO INTERNATIONAL MEXICO S.A. de C.V.
	POSCO INTERNATIONAL Japan Corp.
	POSCO INTERNATIONAL Malaysia SDN BHD
	POSCO INTERNATIONAL Deutschland GmbH
	POSCO INTERNATIONAL Italia S.R.L.
	Mykolaiv Milling Works PJSC.	Black Sea Trade and Development Bank		USD		26,144,680		31,392		26,144,680		31,392
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	POSCO E&C Vietnam Co., Ltd.	Export-Import Bank of Korea and others		USD		47,000,000		56,433		47,000,000		56,433
	POSCO Engineering and Construction India Private Limited	Hana bank		INR		221,000,000		3,514		192,852,525		3,066
	Songdo Posco family Housing	Shinyoung securities		KRW		20,000		20,000		20,000		20,000
	JB CLARK HILLS	KOREA INVESTMENT&SECURITIES Co., Ltd.		KRW		60,000		60,000		55,000		55,000
	PT.POSCO E&C INDONESIA	POSCO Asia Co., Ltd. and others		USD		10,900,000		13,088		10,900,000		13,088
	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	POSCO Asia Co., Ltd. and others		USD		160,000,000		192,112		153,305,000		184,073
POSCO ICT	PT.POSCO ICT INDONESIA	POSCO Asia Co., Ltd. and others		USD		1,200,000		1,441		1,200,000		1,441
POSCO CHEMICAL CO., LTD	PT.Krakatau Posco Chemical Calcination	POSCO Asia Co., Ltd. and others		USD		15,200,000		18,251		12,000,000		14,408
POSCO COATED & COLOR STEEL Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO Asia Co., Ltd.		USD		13,986,947		16,794		13,986,947		16,794
POSCO ENERGY CO., LTD	PT. KRAKATAU POSCO ENERGY	Export-Import Bank of Korea and others		USD		193,900,000		232,816		96,985,535		116,451
POSCO Asia Co., Ltd.	POSCO America Corporation	SMBC		USD		70,000,000		84,049		70,000,000		84,049
[Associates and joint ventures]
POSCO	CSP - Compania Siderurgica do Pecem	Export-Import Bank of Korea and others		USD		420,000,000		504,292		372,140,666		446,830
		BNDES		BRL		464,060,000		103,114		464,060,000		103,114
	LLP POSUK Titanium	SMBC		USD		13,500,000		16,209		13,500,000		16,209
	Nickel Mining Company SAS	SMBC		EUR		46,000,000		62,109		46,000,000		62,109
POSCO INTERNATIONAL Corporation	GLOBAL KOMSCO Daewoo LLC	Hana Bank		USD		8,225,000		9,876		7,875,000		9,456
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	New Songdo International City Development, LLC	Others		KRW		386,000		386,000		386,000		386,000
	POHANG E&E Co., LTD	Heungkuk Life Insurance Co., Ltd.		KRW		71,930		71,930		62,008		62,008
	UITrans LRT Co., Ltd.	Kookmin Bank and others		KRW		125,845		125,845		107,307		107,307
	Incheon-Gimpo Expressway Co, Ltd.	Kookmin Bank and others		KRW		311,468		311,468		289,379		289,379
	RPSD	Plan-up Sinsajeilcha Co., Ltd		KRW		45,000		45,000		37,000		37,000
	Metropolitan Outer Ring Expressway Co., ltd	Woori Bank and others		KRW		275,989		275,989		14,486		14,486
	Pureun Tongyeong Enviro Co., Ltd.	KDB Bank and others		KRW		22,714		22,714		15,542		15,542
	Pure Gimpo.Co.,Ltd	KDB Bank and others		KRW		44,740		44,740		31,946		31,946
	Clean Iksan Co.,Ltd	SAMSUNG FIRE & MARINE INSURANCE CO.,LTD		KRW		44,054		44,054		30,668		30,668
	NEXTRAIN Co., Ltd	Kookmin Bank and others		KRW		634,752		634,752		—		—
	Chun-cheon Energy Co., Ltd.	Kookmin Bank and others		KRW		149,200		149,200		145,300		145,300
POSCO ICT	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
	Incheon-Gimpo Expressway Co., Ltd.	KDB Bank		KRW		100,000		100,000		100,000		100,000
	Shinahn wind power generation	NH INVESTMENT & SECURITIES CO.,LTD. and others		KRW		17,860		17,860		17,860		17,860
	Western Inland highway CO., LTD.	Kookmin Bank and others		KRW		964,100		964,100		964,100		964,100
	Metropolitan Outer Ring Expressway Co., ltd	Woori Bank and others		KRW		193,700		193,700		193,700		193,700
POSCO CHEMICAL CO., LTD	KRAKATAU POS-CHEM DONG-SUH CHEMICAL	Hana Bank		USD		1,140,000		1,369		506,667		608
POSCO(Suzhou) Automotive Processing Center Co.,Ltd.	POS-InfraAuto (Suzhou) Co., Ltd	Export-Import Bank of Korea and others		USD		769,500		924		769,500		924
[Others]
POSCO INTERNATIONAL Corporation	Sherritt International Corporation and others	Export-Import Bank of Korea		USD		21,818,182		26,197		3,019,552		3,626
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Ecocity CO.,LTD and others	Kookmin Bank and others		KRW		3,984,798		3,984,798		2,135,462		2,135,462
POSCO ICT	BLT Enterprise and others	Hana Bank and others		KRW		1,179,464		1,179,464		1,179,464		1,179,464
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government) and others	Woori Bank and others		AUD		11,637,255		9,602		11,637,255		9,602
PT. Bio lnti Agrindo	KSU Mandob	Bank Muamalat		IDR		80,000,000,000		6,744		80,000,000,000		6,744
				USD		3,369,159,948		4,045,352		2,659,030,636		3,192,702
				KRW		8,747,189		8,747,189		5,900,797		5,900,797
				IDR		80,000,000,000		6,744		80,000,000,000		6,744
				INR		221,000,000		3,514		192,852,525		3,066
				THB		5,501,000,000		213,879		5,501,000,000		213,879
				EUR		46,000,000		62,109		46,000,000		62,109
				AUD		11,637,255		9,602		11,637,255		9,602
				BRL		464,060,000		103,114		464,060,000		103,114

56

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(b) Other commitments

Details of other commitments of the Company as of June 30, 2020 are as follows:

Company	Description
POSCO	POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2020, 81 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.
	POSCO entered into consecutive voyage charter (CVC) contract for the transportation of raw materials. As of June 30, 2020, there are 39 vessels under CVC contracts and the average remaining contract period is about 9 years.
	POSCO entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowings 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 project. POSCO is not liable for the repayment in full or part of borrowings if the project fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreement. As of June 30, 2020, 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 the construction of new power plant by POSCO ENERGY CO., LTD.
	POSCO 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.
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	As of June 30, 2020, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has foreign currency guarantees of up to USD 2,481 million provided by financial institutions and uses USD 783 million with Woori Bank and others.
	The Company is responsible for completion of 2 projects, including the development of Parc One in Yeouido-dong. As of June 30, 2020, the outstanding amount of loans related to the responsible payment arrangement isW2,302 billion which may be assumed in the case of non-performance of developers. If the responsibility is not fulfilled, there are duties such as debt assumption and responsibility for lease.
POSCO ICT	As of June 30, 2020, in relation to contract enforcement, POSCO ICT was provided withW89,473 million,W2,882 million andW305 million guaranties from Korea Software Financial Cooperative, Seoul Guarantee Insurance and Engineering Guarantee Insurance, respectively.
	The Company is responsible for completion of 10 projects, including the construction of Bundang Center. As of June 30, 2020, the outstanding amount of developers’ borrowings amounting toW737.2 billion. If the responsiblility is not fulfilled in which the Company provides payment guarantee.

57

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(c) Litigation in progress

In March 2019, regarding the Songdo International City Development Project in Incheon, NSC Investment and TGC (the “applicant”), former partners of joint venture of POSCO ENGINEERING & CONSTRUCTION CO., LTD. (“POSCO E&C”), have applied to the International Chamber of Commerce of Singapore for arbitration in relation to the POSCO E&C’s alleged contract violation (approximately USD 2 billion). In addition, the applicant filed a confirmation suit with the New York Southern District Court in March 2019 against the fact that all claims listed in the above arbitration application must be settled by ICC arbitration. The claimants are seeking damages allegedly resulting from POSCO E&C’s purported wrongful seizure. As of June 30, 2020, 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 325 lawsuits aggregating toW891.5 billion as defendant as of June 30, 2020, which arise from ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting toW46.8 billion for 94 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 believes that it does not have a present obligation as of June 30, 2020.

(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	As of June 30, 2020, POSCO INTERNATIONAL Corporation has provided 33 blank promissory notes and 17 blank checks to Korea Energy Agency and others as collateral for the guarantee on performance for contracts and others.
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	As of June 30, 2020, 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 ofW8,530,827 million for guarantee that partners had issued from Korea Housing & Urban Guarantee Corporation and others.
POSCO ICT	As of June 30, 2020, POSCO ICT has provided 6 blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

58

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

36. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	June 30, 2020			June 30, 2019
Trade accounts and notes receivable	W	524,843			(310,248	)
Other receivables		22,494			(197,582	)
Inventories		1,260,868			(64,238	)
Other current assets		(91,857	)		82,503
Other non-current assets		(71,387	)		(64,191	)
Trade accounts and notes payable		(299,704	)		(116,517	)
Other payables		(75,977	)		(50,573	)
Other current liabilities		168,919			292,868
Provisions		(137,663	)		(81,657	)
Payments of severance benefits		(146,492	)		(87,522	)
Plan assets		48,328			45,377
Other non-current liabilities		3,130			(1,948	)
	W	1,205,502			(553,728	)

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, 2019.

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

59

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(a) Information about reportable segments for the six-month periods ended June 30, 2020 and 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	13,479,418		10,016,621		3,395,502		1,375,826		28,267,367
Internal revenues		7,383,579		6,437,084		527,600		1,316,242		15,664,505
Inter segment revenue		5,199,890		2,949,668		489,800		1,234,354		9,873,712
Total revenues		20,862,997		16,453,705		3,923,102		2,692,068		43,931,872
Segment profits		137,727		150,120		239,257		184,814		711,918

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

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

(b) Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	June 30, 2020			June 30, 2019
Total profit for reportable segments	W	711,918			1,517,943
Corporate fair value adjustments		(38,676	)		(40,729	)
Elimination of inter-segment profits		(133,716	)		(17,351	)
Income tax expense		255,023			657,559
Profit before income tax expense	W	794,549			2,117,422

38. Events after the Reporting Period

Pursuant to the resolution of the Board of Directors on August 7, 2020, the Company decided to pay interim cash dividends ofW500 per common share (total dividend:W39.9 billion).

60

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2020

(With Independent Auditors’ Review Report Thereon)

Table of Contents

	Page
Independent Auditors’ Review Report		1
Condensed Separate Interim Financial Statements
Condensed Separate Interim Statements of Financial Position		3
Condensed Separate Interim Statements of Comprehensive Income		5
Condensed Separate Interim Statements of Changes in Equity		6
Condensed Separate Interim Statements of Cash Flows		7
Notes to the Condensed Separate Interim Financial Statements		9

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of June 30, 2020, the condensed separate interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019, the condensed separate interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2020 and 2019, 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.

Auditors’ 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 with K-IFRS No. 1034 “Interim Financial Reporting”.

1

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, 2019, 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 12, 2020, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respect, with the audited separate financial statements from which it has been derived.

Seoul, Korea

August 13, 2020

This report is effective as of August 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

2

POSCO

Condensed Separate Interim Statements of Financial Position

As of June 30, 2020 and December 31, 2019

(Unaudited)

(in millions of Won)	Notes	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	20	W	2,446,945		978,139
Trade accounts and notes receivable, net	4,14,20,25,32		3,142,894		3,987,041
Other receivables, net	5,20,32		380,258		321,352
Other short-term financial assets	6,20		9,727,533		7,858,979
Inventories	7,29		4,215,794		4,988,530
Assets held for sale	8		69,757		53,924
Other current assets	13		33,560		28,101
Total current assets			20,016,741		18,216,066
Long-term trade accounts and notes receivable, net	4,20		6,003		6,014
Other receivables, net	5,20		89,055		56,468
Other long-term financial assets	6,20		1,176,466		1,257,896
Investments in subsidiaries, associates and joint ventures	9		15,216,814		15,069,857
Investment property, net	10		156,378		158,077
Property, plant and equipment, net	11		20,187,097		20,132,199
Intangible assets, net	12		667,491		708,915
Other non-current assets	13		104,064		105,274
Total non-current assets			37,603,368		37,494,700
Total assets		W	57,620,109		55,710,766

See accompanying notes to the condensed separate interim financial statements.

3

POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of June 30, 2020 and December 31, 2019

(Unaudited)

(in millions of Won)	Notes	June 30, 2020			December 31, 2019
Liabilities
Trade accounts and notes payable	20,32	W	855,533			667,551
Short-term borrowings and current installments of long-term borrowings	4,14,20		2,464,650			1,146,476
Other payables	15,20,32		1,015,323			1,113,003
Other short-term financial liabilities	16,20		7,556			10,969
Current income tax liabilities			221,791			237,293
Provisions	17		40,125			21,007
Other current liabilities	19,25		132,620			135,147
Total current liabilities			4,737,598			3,331,446
Long-term borrowings, excluding current installments	14,20		6,097,332			5,191,537
Other payables	15,20		234,005			222,802
Other long-term financial liabilities	16,20		36,411			46,925
Defined benefit liabilities, net	18		58,875			54,146
Deferred tax liabilities			1,003,013			1,190,553
Long-term provisions	17,33		49,573			53,942
Other non-current liabilities	19,25		540			5,230
Total non-current liabilities			7,479,749			6,765,135
Total liabilities			12,217,347			10,096,581
Equity
Share capital	21		482,403			482,403
Capital surplus	21		1,252,220			1,252,220
Hybrid bonds	22		199,384			199,384
Reserves	23		(341,677	)		(183,930	)
Treasury shares	24		(1,573,126	)		(1,508,303	)
Retained earnings			45,383,558			45,372,411
Total equity			45,402,762			45,614,185
Total liabilities and equity		W	57,620,109			55,710,766

See accompanying notes to the condensed separate interim financial statements.

4

POSCO

Condensed Separate Interim Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won, except per share informations)			For the three-month periods ended June 30						For the six-month periods ended June 30
	Notes		2020			2019			2020			2019
Revenue		25,32	W	5,884,824			7,475,854			12,854,680			15,292,325
Cost of sales		7,29,32		(5,742,816	)		(6,484,077	)		(11,973,220	)		(13,211,583	)
Gross profit				142,008			991,777			881,460			2,080,742
Selling and administrative expenses		29,32
Reversal of (Impairment loss) on trade accounts and notes receivable				(5,231	)		26			(4,967	)		4,636
Other administrative expenses		26		(192,762	)		(209,610	)		(391,531	)		(416,430	)
Selling expenses		26		(52,490	)		(57,895	)		(135,326	)		(112,183	)
Operating profit (loss)				(108,475	)		724,298			349,636			1,556,765
Finance income and costs		20,27
Finance income				110,535			281,485			784,852			575,194
Finance costs				(37,305	)		(156,029	)		(497,720	)		(268,292	)
Other non-operating income and expenses		32
Reversal of (impairment loss) on other receivables				169			(140	)		(327	)		(272	)
Other non-operating income		28		81,598			35,915			105,723			56,840
Other non-operating expenses		28,29		(97,259	)		(140,046	)		(175,945	)		(252,694	)
Profit (loss) before income tax				(50,737	)		745,483			566,219			1,667,541
Income tax income (expense)		30		57,383			(200,101	)		(106,553	)		(450,987	)
Profit				6,646			545,382			459,666			1,216,555
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans		18		2,627			(1,010	)		(393	)		(1,882	)
Net changes in fair value of equity investments at fair value through other comprehensive income		6,20,23		30,838			37,713			(160,650	)		25,590
Total comprehensive income			W	40,111			582,085			298,623			1,240,263
Basic and diluted earnings per share (in Won)		31	W	62			6,787			5,700			15,144

See accompanying notes to the condensed separate interim financial statements.

5

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won)	Share capital		Capital surplus		Hybrid bonds		Reserves			Treasury shares			Retained earnings			Total
Balance as of January 1, 2019	W	482,403		1,154,775		199,384		(207,191	)		(1,532,728	)		45,175,459			45,272,102
Comprehensive income:
Profit		—		—		—		—			—			1,216,555			1,216,555
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—		—		—			—			(1,882	)		(1,882	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—		—		31,592			—			(6,002	)		25,590
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(400,006	)		(400,006	)
Interim dividends		—		—		—		—			—			(160,231	)		(160,231	)
Interest of hybrid bonds		—		—		—		—			—			(4,562	)		(4,562	)
Disposal of treasury shares		—		12,576		—		—			24,425			—			37,001
Business combination		—		408,490		—		—			—			—			408,490
Balance as of June 30, 2019	W	482,403		1,575,841		199,384		(175,599	)		(1,508,303	)		45,819,331			46,393,057
Balance as of January 1, 2020	W	482,403		1,252,220		199,384		(183,930	)		(1,508,303	)		45,372,411			45,614,185
Comprehensive income:
Profit		—		—		—		—			—			459,666			459,666
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—		—		—			—			(393	)		(393	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—		—		(157,747	)		—			(2,903	)		(160,650	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(320,462	)		(320,462	)
Interim dividends		—		—		—		—			—			(120,174	)		(120,174	)
Interest of hybrid bonds		—		—		—		—			—			(4,587	)		(4,587	)
Acquisition of treasury shares		—		—		—		—			(64,823	)		—			(64,823	)
Balance as of June 30, 2020	W	482,403		1,252,220		199,384		(341,677	)		(1,573,126	)		45,383,558			45,402,762

See accompanying notes to the condensed separate interim financial statements.

6

POSCO

Condensed Separate Interim Statements of Cash Flows

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won)	Notes		June 30, 2020			June 30, 2019
Cash flows from operating activities
Profit			W	459,666			1,216,555
Adjustments for :
Expenses related to post-employment benefit				63,801			59,749
Depreciation				1,126,547			1,071,915
Amortization				50,851			38,426
Impairment loss (reversal of) on trade and other receivables				5,295			(4,364	)
Finance income				(551,380	)		(456,317	)
Finance costs				360,312			177,194
Loss on valuation of inventories				40,802			1,442
Gain on disposal of property, plant and equipment				(6,054	)		(14,685	)
Loss on disposal of property, plant and equipment				94,234			38,537
Impairment losses on property, plant and equipment				22,687			161,496
Gain on disposal of Intangible assets				(131	)		(1,011	)
Gain on disposal of investments in subsidiaries, associates and joint venture				(21,907	)		(1,194	)
Impairment losses on investments in subsidiaries, associates and joint ventures				—			10,422
Gain on disposal of assets held for sale				(26,942	)		(715	)
Impairment loss on assets held for sale				8,945			1,794
Gain on disposal of emission rights				(24,566	)		—
Gain on valuation of emission rights				—			(25,440	)
Increase to provisions				38,674			1,053
Income tax expense				106,553			450,987
Others				(3,631	)		(592	)
Changes in operating assets and liabilities		34		1,572,924			(618,543	)
Interest received				83,513			74,330
Interest paid				(106,974	)		(81,228	)
Dividends received				152,172			200,840
Income taxes paid				(247,633	)		(755,923	)
Net cash provided by operating activities			W	3,197,758			1,544,728

See accompanying notes to the condensed separate interim financial statements.

7

POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

(in millions of Won)	Notes	June 30, 2020			June 30, 2019
Cash flows from investing activities
Decrease in deposits		W	2,137,923			1,500,369
Proceeds from disposal of short-term financial instruments			16,810,440			14,496,900
Collection of short-term loans			807			—
Proceeds from disposal of current portion of debt security			235,068			3
Proceeds from disposal of equity securities			7,938			22,616
Proceeds from disposal of other securities			990			2,772
Proceeds from disposal of investments in subsidiaries, associates and joint ventures			1,292			4,055
Proceeds from disposal of intangible assets			66,614			5,579
Proceeds from disposal of assets held for sale			161,422			—
Proceeds from business combination			—			2,171
Increase in deposits			(2,676,730	)		(1,549,036	)
Acquisition of short-term financial instruments			(17,649,928	)		(13,719,309	)
Increase in long-term loans			(14,852	)		(613	)
Acquisition of debt securities			(627,159	)		(235,011	)
Acquisition of other securities			(9,266	)		(110	)
Acquisition of investment in subsidiaries, associates and joint ventures			(194,275	)		(41,798	)
Acquisition of property, plant and equipment			(1,322,802	)		(703,192	)
Proceeds from disposal of property, plant and equipment			(49,934	)		(6,886	)
Acquisition of intangible assets			(68,813	)		(79,223	)
Net cash used in investing activities		W	(3,191,265	)		(300,713	)
Cash flows from financing activities
Proceeds from borrowings			2,433,096			300,000
Increase in long-term financial liabilities			209			2,975
Proceeds from disposals of derivatives			—			4,515
Receipt of government grants			540			—
Repayment of borrowings			(409,587	)		(666,981	)
Repayment of lease liabilities			(31,654	)		(19,660	)
Decrease in long-term financial liabilities			(284	)		(1,357	)
Payment of cash dividends			(440,648	)		(560,255	)
Acquisition of treasury shares			(64,823	)		—
Payment of interest of hybrid bonds			(4,613	)		(4,587	)
Net cash provided by (used in) financing activities		W	1,482,236			(945,350	)
Effect of exchange rate fluctuation on cash held			(19,923	)		(1,443	)
Net increase in cash and cash equivalents			1,468,806			297,222
Cash and cash equivalents at beginning of the period			978,139			259,219
Cash and cash equivalents at end of the period		W	2,446,945			556,441

See accompanying notes to the condensed separate interim financial statements.

8

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2020

(Unaudited)

1. Reporting Entity

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

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

As of June 30, 2020, the shares of the Company are listed on the Korea Exchange, while its American Depository Receipts (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 the Act on External Audit of Companies, Etc. in the Republic of Korea.

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2019. 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 with K-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.

Use of estimates and judgments

(a) Judgments, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

9

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(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.

With the outbreak of COVID-19 pandemic, governments around the globe have implemented measures such as mandatory factory shutdown, shelter-in-place orders, border closure, and travel restrictions. The ultimate impact of COVID-19 pandemic on the Company’s operations is not yet known and will depend on future developments. The duration and significance of COVID-19 is highly uncertain and unpredictable, and the protective measures by the governments around the globe or the Company may lead to substantial business interruption and decrease in business scale. The financial impact of this cannot be reasonably estimated, but management expects the Company to be partially affected to the most areas where it operates. The extent and duration of COVID-19’s impact on the Company’s business cannot yet be reasonably estimated.

(b) Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-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 of K-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.

10

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2020.

(a) K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors”

The definition of materiality has been clarified, and K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors” have been amended according to the clarified definition. In determining the materiality, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Company does not expect the effect of the amendments to the financial statements to be significant.

(b) K-IFRS No. 1103 “Business Combinations”

The amendment clarifies the definition of business when it includes input and process together significantly contribute to ability to create output and requires a simplified assessment that result in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The Company does not expect the effect of the amendment to the financial statements to be significant.

11

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Current
Trade accounts and notes receivable	W	3,157,907			3,999,991
Less: Allowance for doubtful accounts		(15,013	)		(12,950	)
	W	3,142,894			3,987,041
Non-current
Trade accounts and notes receivable	W	9,516			9,530
Less: Present value discount		(2,501	)		(2,501	)
Less: Allowance for doubtful accounts		(1,012	)		(1,015	)
	W	6,003			6,014

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted toW113,188 million andW167,021 million as of June 30, 2020 and December 31, 2019, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and is recognized as short-term borrowings from financial institutions.

5. Other Receivables

Other receivables as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Current
Loans	W	2,950			2,950
Other accounts receivable		312,290			279,093
Others		70,262			47,257
Less: Allowance for doubtful accounts		(5,244	)		(7,948	)
	W	380,258			321,352
Non-current
Loans	W	49,765			34,224
Long-term other accounts receivable		44,473			27,570
Others		4,017			3,555
Less: Allowance for doubtful accounts		(9,200	)		(8,881	)
	W	89,055			56,468

12

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

6. Other Financial Assets

(a) Other financial assets as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Short-term derivative assets	W	109,943		15,603
Debt securities		686,479		290,559
Deposit instruments(*1)		1,833,331		1,294,525
Short-term financial instruments		7,097,780		6,258,292
	W	9,727,533		7,858,979
Non-current
Long-term derivative assets	W	187,985		64,072
Equity securities		918,561		1,128,641
Debt securities		5,348		9,177
Other securities		64,538		55,972
Deposit instruments(*2)		34		34
	W	1,176,466		1,257,896
				��

(*1) As of June 30, 2020 and December 31, 2019,W5,689 million andW4,524 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 June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020													December 31, 2019
	Number of shares		Ownership (%)		Acquisition cost		Fair value		Net changes in fair value of equity securities			Book value		Book value
Listed equity securities
Nippon Steel Corporation		15,698,500		1.65	W	473,962		177,568		(296,394	)		177,568		276,133
KB Financial group Inc.		3,863,520		0.93		178,839		131,167		(47,672	)		131,167		184,097
Woori Financial Group Inc.		20,280,000		2.81		244,447		178,667		(65,780	)		178,667		235,248
SAMWONSTEEL Co., Ltd.		5,700,000		14.25		8,930		11,343		2,413			11,343		17,214
DONGKUK INDUSTRIES COMPANY		2,611,989		4.82		11,911		6,634		(5,277	)		6,634		6,778
DONGKUK STEEL MILL CO., LTD		—		—		—		—		—			—		8,571
Others (7 companies)						55,759		30,802		(24,957	)		30,802		34,157
						973,848		536,181		(437,667	)		536,181		762,198
Unlisted equity securities
Congonhas Minerios S.A.		3,658,394		2.02		221,535		292,453		70,918			292,453		292,453
POSCO PLANTEC CO., LTD(*1)		18,337,912		10.99		19,437		19,437		—			19,437		—
Korea Nickel CO.LTD		75,600		14.00		10,194		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 (28 companies)						144,191		39,661		(104,530	)		39,661		43,161
						415,992		382,380		(33,612	)		382,380		366,443
					W	1,389,840		918,561		(471,279	)		918,561		1,128,641

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

13

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

7. Inventories

Inventories as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Finished goods	W	869,670			868,012
Semi-finished goods		1,116,624			1,474,153
By-products		12,478			10,763
Raw materials		1,166,238			1,139,517
Fuel and materials		539,754			646,396
Materials-in-transit		551,200			856,706
Others		632			660
		4,256,596			4,996,207
Less: Allowance for inventories valuation		(40,802	)		(7,677	)
	W	4,215,794			4,988,530

The amount of loss on valuation of inventories recognized in cost of sales during the six-month period ended June 30, 2020 and the year ended December 31, 2019 wereW40,802 million andW7,677 million, respectively.

14

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

8. Assets Held for Sale

Assets held for sale as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Assets
Investments in subsidiaries(*1,2)	W	37,240		17,603
Property, plant and equipment(*3,4)		31,705		36,321
Intangible assets		812		—
	W	69,757		53,924

(*1) The Company determined to dispose its partial interest in POSCO Thainox Public Company Limited, a subsidiary of the Company, and classified the investment as assets held for sale. During the six-month period ended June 30, 2020, the Company recognizedW3,915 million of impairment loss for the difference between book value and net fair value of the interest, and completed the disposal for part of it.

(*2) During the six-month period ended June 30, 2020, the Company classified its investment in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale, since it is to be dissolved at its maturity.

(*3) During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM Plants, and classified the assets as held for sale. During the six-month period ended June 30, 2020, the Company recognizedW5,030 million of impairment loss for the difference between the fair value less costs to sell and the carrying amount of the assets.

(*4) During the year ended December 31, 2019, the Company completed the disposal of all assets, liabilities and rights other than LNG tanks under construction, which were to be disposed of, related to a LNG terminal business of the Company to POSCO ENERGY CO., LTD. The construction and disposal were completed during the six-month period ended June 30, 2020 and the Company recognizedW26,633 million of gain on disposal for the difference between the carrying amount and the sale price.

15

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

9. Investments in Subsidiaries, Associates and Joint ventures

(a) Details of subsidiaries and their carrying amounts as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)			June 30, 2020				December 31, 2019
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
POSCO INTERNATIONAL Corporation	Korea	Trading		62.91	W	3,383,745		3,383,745
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 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	Korea	Refractory manufacturing and sales		61.26		207,631		207,631
POSCO O&M Co., Ltd(*1)	Korea	Business facility maintenance		47.17		73,374		73,374
POSCO ICT	Korea	Computer hardware and software distribution		65.38		70,990		70,990
POSCO M-TECH(*1)	Korea	Packing materials manufacturing and sales		48.85		107,278		107,278
POSCO Family Strategy Fund(*2)	Korea	Investment in venture companies		69.91		—		29,596
Busan E&E Co,. Ltd.(*3)	Korea	Municipal solid waste fuel and power generation		70.00		30,148		30,148
Others (10 companies)						117,393		117,393
						5,875,250		5,904,846
[Foreign]
PT. KRAKATAU POSCO	Indonesia	Steel manufacturing and sales		70.00		707,509		707,509
POSCO WA PTY LTD	Australia	Iron ore sales and mine development		100.00		642,434		640,720
POSCO Maharashtra Steel Private Limited	India	Steel manufacturing and sales		100.00		722,569		722,569
POSCO Canada Ltd.	Canada	Coal mine development		100.00		560,879		560,879
POSCO AUSTRALIA PTY LTD	Australia	Iron ore sales and mine development		100.00		330,623		330,623
POSCO (Zhangjiagang) 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		84.29		212,339		212,339
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		52,936		52,936
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 and sales		70.00		65,982		65,982
POSCO(Suzhou) Automotive Processing Center Co., Ltd.	China	Steel manufacturing and sales		90.00		62,494		62,494
POSCO 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 Argentina S.A.U.	Argentina	Mineral exploration, manufacturing and sale		100.00		370,250		370,250
POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Formerly, POSCO SS VINA JOINT STOCK COMPANY)(*4)	Vietnam	Steel manufacturing and sales		51.00		130,526		—
Others (28 companies)(*5)						510,080		485,668
						6,495,561		6,338,909
					W	12,370,811		12,243,755

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

(*2) During the six-month period ended June 30, 2020, the Company classified its investment in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale, since it is to be dissolved at its maturity.

(*3) As of June 30, 2020 and December 31, 2019, the investments in a subsidiary amounting toW30,148 million were provided as collateral in relation to the loan agreement of Busan E&E Co., Ltd.

16

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(*4) During the six-month period ended June 30, 2020, POSCO SS VINA JOINT STOCK COMPANY changed its name to POSCO YAMATO VINA STEEL JOINT STOCK COMPANY. The Company sold 49% of POSCO YAMATO VINA STEEL JOINT STOCK COMPANY and investedW130,526 million in cash.

(*5) During the six-month period ended June 30, 2020, the Company sold the investment in POSCO China Dalian Plate Processing Center Co., Ltd., a subsidiary.

(b) Details of associates and their carrying amounts as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)			June 30, 2020				December 31, 2019
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	Korea	Investment in mines		31.64	W	169,316		169,316
SNNC	Korea	STS material manufacturing and sales		49.00		100,655		100,655
QSONE Co.,Ltd.	Korea	Real estate rental business		50.00		85,550		85,550
Others (6 companies)(*1)						21,177		22,468
						376,698		377,989
[Foreign]
Nickel Mining Company SAS	New Caledonia	Raw material manufacturing and sales		49.00		189,197		189,197
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*2)	Canada	Investment in mines		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)						39,692		39,590
						364,233		364,131
					W	740,931		742,120

(*1) During the six-month period ended June 30, 2020, the investment in POSCO PLANTEC Co., Ltd., an associate, was reclassified from associates to equity securities as the paid-in capital increase of POSCO PLANTEC Co., Ltd. reduced the company’s ownership percentage to less than 20%, resulting in a loss of significant influence over the investee.

(*2) As of June 30, 2020, 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. During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

17

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(c) Details of joint ventures and their carrying amounts as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)				June 30, 2020				December 31, 2019
	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		343,553		322,463
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)							72,484		72,484
						W	2,105,072		2,083,982

(*1) As of June 30, 2020 and December 31, 2019, the investments in joint ventures amounting toW1,225,464 million 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 six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Depreciation(*1)			Transfer(*2)		Ending
Land	W	91,738		—			232		91,970
Buildings		57,228		(2,033	)		388		55,583
Structures		9,111		(305	)		19		8,825
	W	158,077		(2,338	)		639		156,378

(*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.

(b) For the year ended December 31, 2019

(in millions of Won)	Beginning		Business Combination(*1)		Depreciation(*2)			Transfer(*3)		Ending
Land	W	44,637		41,195		—			5,906		91,738
Buildings		54,277		25		(4,070	)		6,996		57,228
Structures		9,301		—		(620	)		430		9,111
	W	108,215		41,220		(4,690	)		13,332		158,077

(*1) These increases were 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.

18

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

11. Property, Plant and Equipment, Net

Changes in the carrying amount of property, plant and equipment for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment(*1)			Others(*2)			Ending
Land	W	1,398,081		—		(6	)		—			—			(231	)		1,397,844
Buildings		2,100,503		2,228		(1,927	)		(103,267	)		(268	)		107,227			2,104,496
Structures		2,030,853		1,443		(1,276	)		(85,825	)		(860	)		18,284			1,962,619
Machinery and equipment		12,602,435		18,329		(9,257	)		(890,670	)		(9,057	)		704,439			12,416,219
Vehicles		9,951		956		(3	)		(3,250	)		—			3,237			10,891
Tools		27,288		694		—			(6,042	)		—			3,047			24,987
Furniture and fixtures		38,329		1,182		—			(5,608	)		—			5,543			39,446
Lease assets		262,368		—		—			(29,547	)		—			109,986			342,807
Construction-in-progress		1,662,391		1,251,944		(3,951	)		—			(12,502	)		(1,010,094	)		1,887,788
	W	20,132,199		1,276,776		(16,420	)		(1,124,209	)		(22,687	)		(58,562	)		20,187,097

(*1) The Company estimated recoverable amount for individual assets that ceased operations due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized impairment loss since recoverable amounts are less than their carrying amounts as of June 30, 2020. In addition, during the six-month period ended June 30, 2020, the Company recognized impairment loss on certain assets due to damage from fire.

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

(b) For the year ended December 31, 2019

(in millions of Won)	Beginning		Acquisitions		business combination(*5)		Disposals			Depreciation			Impairment(*1)			Others(*2,4)			Ending
Land	W	1,458,632		—		—		(1,805	)		—			—			(58,746	)		1,398,081
Buildings		2,199,429		7,157		67,751		(7,706	)		(202,171	)		(25,869	)		61,912			2,100,503
Structures		2,244,099		10,777		39,783		(3,125	)		(173,181	)		(9,585	)		(77,915	)		2,030,853
Machinery and equipment		12,911,467		92,136		696,204		(21,616	)		(1,717,864	)		(176,295	)		818,403			12,602,435
Vehicles		7,340		747		40		—			(6,244	)		—			8,068			9,951
Tools		23,864		5,348		138		(24	)		(11,499	)		—			9,461			27,288
Furniture and fixtures		36,287		4,781		94		(9	)		(9,805	)		(137	)		7,118			38,329
Lease assets(*3)		142,801		27,376		—		—			(34,669	)		—			126,860			262,368
Construction-in-progress		1,130,415		1,838,490		696		—			—			(10,150	)		(1,297,060	)		1,662,391
	W	20,154,334		1,986,812		804,706		(34,285	)		(2,155,433	)		(222,036	)		(401,899	)		20,132,199

(*1) The Company estimated recoverable amount for individual assets related to CEM and Fe-Si factories, etc. that ceased operations due to the disposal plan and others using fair value less costs to sell based on the appraisal value or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2019.

(*2) During the year ended December 31, 2019, the Company decided to sell the rights related to the operation of LNG Terminal to POSCO ENERGY CO., LTD. and reclassified to assets held for sale and liabilities directly associated with the assets held for sale. As of December 31, 2019, the Company recognizedW28,626 million of gain on disposal for the difference between the carrying amount and the sale price.

(*3) Right-of-use assets ofW128,610 million recognized on the date of initial application (January 1, 2019) of the K-IFRS No. 1116 “Leases” are included in other changes.

(*4) Represents assets transferred from construction-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.

(*5) This has increased due to the business combination between the company and POSCO ENERGY’s by-product power generation business.

19

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

(c) Information on lease agreements for which the Company is a lessee is as follows:

1) Right-of-use assets

① Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the six-month period ended June 30, 2020 were as follows.

(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Buildings	W	71,921		—		(3,231	)		—			68,690
Structures		64,434		—		(2,607	)		—			61,827
Machinery and equipment		60,198		—		(2,750	)		—			57,448
Vehicles		6,755		—		(250	)		—			6,505
Ships		24,082		111,537		(13,826	)		—			121,793
Furniture and fixtures		34,978		—		(6,883	)		(1,551	)		26,544
	W	262,368		111,537		(29,547	)		(1,551	)		342,807

② Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the year ended December 31, 2019, were as follows.

(in millions of Won)	The date of initial application (January 1, 2019)		Acquisitions		Depreciation			Others			Ending
Buildings	W	78,384		—		(6,463	)		—			71,921
Structures		53,761		13,502		(2,829	)		—			64,434
Machinery and equipment		65,698		—		(5,500	)		—			60,198
Vehicles		7,256		—		(501	)		—			6,755
Ships		26,499		—		(2,417	)		—			24,082
Furniture and fixtures		39,813		13,874		(16,959	)		(1,750	)		34,978
	W	271,411		27,376		(34,669	)		(1,750	)		262,368

2) Amount recognized in profit or loss

The amounts recognized in profit or loss related to leases for the three-month and the six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
	2020		2019		2020		2019
Interest on lease liabilities	W	2,399		2,196		5,057		4,461
Expenses related to short-term leases		884		1,014		1,890		1,937
Expenses related to leases of low-value assets		1,574		1,323		3,389		2,727
	W	4,857		4,533		10,336		9,125

20

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

12. Intangible Assets, Net

Changes in the carrying amount of intangible assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Transfer(*2)			Ending
Intellectual property rights	W	24,545		—		(1,360	)		(2,984	)		3,486			23,687
Membership(*1)		82,657		—		(345	)		—			—			82,312
Development expense		86,023		102		—			(22,503	)		10,982			74,604
Port facilities usage rights		278,072		—		—			(22,571	)		—			255,501
Construction-in-progress		137,273		50,381		—			—			(13,160	)		174,494
Other intangible assets		100,345		19,725		(61,302	)		(2,793	)		918			56,893
	W	708,915		70,208		(63,007	)		(50,851	)		2,226			667,491

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

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

(b) For the year ended December 31, 2019

(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Transfer(*2)			Ending
Intellectual property rights	W	24,377		—		(1,270	)		(5,678	)		7,116			24,545
Membership(*1)		73,183		9,204		(6	)		—			276			82,657
Development expense		91,758		2,205		—			(41,793	)		33,853			86,023
Port facilities usage rights		305,710		—		(4,674	)		(22,964	)		—			278,072
Construction-in-progress		58,561		114,638		—			—			(35,926	)		137,273
Other intangible assets		91,633		615		(4,568	)		(6,755	)		19,420			100,345
	W	645,222		126,662		(10,518	)		(77,190	)		24,739			708,915

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

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

21

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

13. Other Assets

Other assets as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Advance payments	W	9,901		6,252
Prepaid expenses		23,659		21,849
	W	33,560		28,101
Non-current
Long-term prepaid expenses	W	4,735		5,088
Others(*1)		99,329		100,186
	W	104,064		105,274

(*1) As of June 30, 2020 and December 31, 2019, the Company recognized tax assets amounting toW96,312 million andW97,185 million, respectively, based on the Company’s best estimate of the income 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.

22

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

14. Borrowings

(a) Borrowings as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Short-term borrowings
Short-term borrowings	W	465,153			167,021
Current portion of debentures		2,000,980			980,460
Less: Current portion of discount on debentures issued		(1,483	)		(1,005	)
	W	2,464,650			1,146,476
Long-term borrowings
Long-term borrowings	W	1,225			1,181
Debentures		6,132,211			5,216,681
Less: Discount on debentures issued		(36,104	)		(26,325	)
	W	6,097,332			5,191,537

(b) Short-term borrowings as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	Lenders		Issuance date		Maturity date		Annual interest rate (%)		June 30 , 2020		December 31, 2019
Transfers of account receivables that do not qualify for derecognition		—		—		—		—	W	113,188		167,021
Borrowings in Foreign Trade		MUFG and others		2020.05.19~ 2020.06.23		2020.08.17~ 2020.09.18		0.84~1.99		351,965		—
									W	465,153		167,021

(c) Current portion of long-term borrowings as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)

Lenders

Issuance date

Maturity date

Annual interest rate (%)

June 30 , 2020

December 31, 2019

Debentures

Domestic debentures 306-2 and other

2013.10.04~ 2016.05.03

2020.10.04~ 2021.05.03

1.88~3.50

W

319,896

169,930

Foreign debentures

Global debentures 2 and other

2010.10.28~ 2011.04.14

2020.10.28~ 2021.04.14

4.25~5.25

1,679,601

809,525

W

1,999,497

979,455

(d) Long-term borrowings excluding current portion, as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)

Lenders

Issuance date

Maturity date

Annual Interest rate (%)

June 30, 2020

December 31, 2019

Foreign borrowings

KOREA ENERGY AGENCY

2007.12.27~ 2008.12.29

2022.12.29

3 year Government bond

W

1,225

1,181

Debentures

Domestic debentures 304-2 and others

2011.11.28~ 2019.10.16

2021.07.05~ 2029.10.16

1.56~4.12

2,355,147

2,504,194

Foreign debentures

Japan Yen private bond and others

2011.12.22~ 2020.01.17

2021.12.22~ 2025.01.17

0.50~4.00

3,740,960

2,686,162

W

6,097,332

5,191,537

23

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

15. Other Payables

Other payables as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Accounts payable	W	461,508		630,162
Accrued expenses		432,256		432,835
Dividend payable		2,259		2,296
Lease liabilities		108,874		40,463
Withholdings		10,426		7,247
	W	1,015,323		1,113,003
Non-current
Long-term accrued expenses	W	43		842
Lease liabilities		230,239		216,508
Long-term withholdings		3,723		5,452
	W	234,005		222,802

16. Other Financial Liabilities

Other financial liabilities as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Financial guarantee liabilities	W	7,556		10,969
Non-current
Derivative liabilities	W	—		8,285
Financial guarantee liabilities		36,411		38,640
	W	36,411		46,925

24

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

17. Provisions

(a) Provisions as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020				December 31, 2019
	Current		Non-current		Current		Non-current
Provision for bonus payments(*1,2)	W	12,621		27,845		14,020		35,816
Provision for restoration(*3)		4,902		15,087		6,783		15,942
Provision for legal contingencies and claims(*4)		—		2,052		204		2,184
Provision for product warranties(*5)		22,602		4,589		—		—
	W	40,125		49,573		21,007		53,942

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

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

(*3) Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery as provisions for restoration as of June 30, 2020. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available currently to restore the land to its original condition. In addition, the Company has applied discount rates of 1.45%~1.60% to assess present value of these costs.

(*4) The Company has recognized provisions for certain litigations and other contingencies as of June 30, 2020.

(*5) As of June 30, 2020, the Company recognized the expected claim cost to be charged as a provision.

(b) Changes in provisions for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Beginning		Increase		Reversal			Utilization			Ending
Provision for bonus payments	W	49,836		8,373		—			(17,743	)		40,466
Provision for restoration		22,725		221		(340	)		(2,617	)		19,989
Provision for legal contingencies and claims		2,388		424		(709	)		(51	)		2,052
Provision for product warranties		—		39,077		—			(11,886	)		27,191
	W	74,949		48,095		(1,049	)		(32,297	)		89,698

25

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) For the year ended December 31, 2019

(in millions of Won)	Beginning		Increase		Reversal			Utilization			Transfer		Ending
Provision for bonus payments	W	36,749		23,523		—			(18,038	)		7,602		49,836
Provision for restoration		29,703		549		(277	)		(7,250	)		—		22,725
Provision for legal contingencies and claims		46,432		538		(11,207	)		(33,375	)		—		2,388
	W	112,884		24,610		(11,484	)		(58,663	)		7,602		74,949

18. Employee Benefits

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and the six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods				For the six-month periods
	ended June 30				ended June 30
	2020		2019		2020		2019
Expenses related to post-employment benefit plans under defined contribution plans	W	8,710		8,515		18,907		17,621

(b) Defined benefit plans

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Present value of funded obligations	W	1,424,326			1,435,942
Fair value of plan assets		(1,365,451	)		(1,381,796	)
Net defined benefit liabilities	W	58,875			54,146

26

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) Changes in present value of defined benefit obligations for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Defined benefit obligation at the beginning of period	W	1,435,942			1,265,675
Current service costs		63,559			119,957
Interest costs		13,856			31,567
Remeasurement(*1)		—			104,442
Business combination		—			317
Reclassification to liabilities directly associated with the assets held for sale		—			(1,448	)
Benefits paid		(89,031	)		(84,568	)
Defined benefit obligation at the end of period	W	1,424,326			1,435,942

(*1) The Company does not remeasure the defined benefit plans for the purpose of interim reporting.

3) Changes in the fair value of plan assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Fair value of plan assets at the beginning of period	W	1,381,796			1,264,812
Interest on plan assets		13,614			32,347
Remeasurement of plan assets		(542	)		(6,668	)
Contributions to plan assets		61,585			161,500
Business combination		—			670
Reclassification to liabilities directly associated with the assets held for sale		—			(1,448	)
Benefits paid		(91,002	)		(69,417	)
Fair value of plan assets at the end of period	W	1,365,451			1,381,796

4) The amounts recognized in the statements of comprehensive income for the three-month and the six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods					For the six-month periods
	ended June 30					ended June 30
	2020		2019			2020		2019
Current service costs	W	31,355		28,775			63,559		60,139
Net interest costs		121		(195	)		242		(390	)
	W	31,476		28,580			63,801		59,749

27

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

19. Other Liabilities

Other liabilities as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Current
Advances received	W	5,493		5,112
Withholdings		108,777		106,474
Unearned revenue		18,350		23,561
	W	132,620		135,147
Non-current
Unearned revenue	W	540		5,230

20. Financial Instruments

(a) Classification and fair value of financial instruments

1) The carrying amount and the fair values of financial assets and financial liabilities by fair value hierarchy as of June 30, 2020 and December 31, 2019 are as follows:

① June 30, 2020

			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	297,928		—		297,928		—		297,928
Short-term financial instruments		7,097,780		—		7,097,780		—		7,097,780
Debt securities		8,050		—		—		8,050		8,050
Other securities		64,538		—		—		64,538		64,538
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		918,561		536,181		—		382,380		918,561
Debt securities		1,648		—		—		1,648		1,648
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		2,446,945		—		—		—		—
Trade accounts and notes receivable		3,144,814		—		—		—		—
Debt securities		682,129		—		—		—		—
Other receivables		316,419		—		—		—		—
Deposit instruments		1,833,365		—		—		—		—
	W	16,814,177		536,181		7,395,708		458,616		8,390,505
Financial liabilities
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable	W	855,533		—		—		—		—
Borrowings		8,561,982		—		8,807,627		—		8,807,627
Financial guarantee liabilities		43,967		—		—		—		—
Others		1,177,012		—		—		—		—
	W	10,638,494		—		8,807,627		—		8,807,627

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

28

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

② December 31, 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	79,675		—		79,675			—		79,675
Short-term financial instruments		6,258,292		—		6,258,292			—		6,258,292
Debt securities		8,050		—		—			8,050		8,050
Other securities		55,972		—		—			55,972		55,972
Other receivables		2,000		—		—			2,000		2,000
Fair value through other comprehensive income
Equity securities		1,128,641		762,198		—			366,443		1,128,641
Debt securities		1,686		—		—			1,686		1,686
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		978,139		—		—			—		—
Trade accounts and notes receivable		3,983,573		—		—			—		—
Debt securities		290,000		—		—			—		—
Other receivables		202,819		—		—			—		—
Deposit instruments		1,294,559		—		—			—		—
	W	14,283,406		762,198		6,337,967			434,151		7,534,316
Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	8,285		—		8,285			—		8,285
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		667,551		—		—			—		—
Borrowings		6,338,012		—		6,525,464	��		—		6,525,464
Financial guarantee liabilities		49,609		—		—			—		—
Others		1,325,336		—		—			—		—
	W	8,388,793		—		6,533,749			—		6,533,749

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

29

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) Financial liabilities were recognized in connection with financial guarantee contracts as of June 30, 2020. 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
Subsidiaries
POSCO Maharashtra	SCB		USD	33,784,000		40,564		33,784,000		40,564
Steel Private Limited	ING		USD	50,000,000		60,035		50,000,000		60,035
POSCO ASSAN TST	SMBC		USD	62,527,500		75,077		56,274,750		67,569
STEEL INDUSTRY	ING		USD	60,000,000		72,042		54,000,000		64,838
	BNP		USD	24,000,000		28,817		21,600,000		25,935
POSCO Asia Co., Ltd.	Credit Agricole		USD	50,000,000		60,035		50,000,000		60,035
POSCO MEXICO S.A. DE C.V	CITI BANAMEX		USD	30,000,000		36,021		30,000,000		36,021
	BOA		USD	30,000,000		36,021		30,000,000		36,021
	SMBC		USD	20,000,000		24,014		20,000,000		24,014
	MIZUHO		USD	20,000,000		24,014		20,000,000		24,014
	ANZ		USD	20,000,000		24,014		20,000,000		24,014
POSCO-VIETNAM Co., Ltd.	SMBC		USD	50,000,000		60,035		50,000,000		60,035
	Credit Agricole		USD	40,000,000		48,028		40,000,000		48,028
	BTMU		USD	26,000,000		31,218		26,000,000		31,218
	Citi		USD	20,000,000		24,014		20,000,000		24,014
	MIZUHO		USD	20,000,000		24,014		20,000,000		24,014
PT. KRAKATAU POSCO	Export-Import Bank of Korea		USD	567,000,000		680,797		363,264,797		436,172
	SMBC		USD	140,000,000		168,098		89,832,217		107,862
	BTMU		USD	119,000,000		142,883		75,125,217		90,203
	MIZUHO		USD	105,000,000		126,074		66,286,957		79,591
	SCB		USD	107,800,000		129,435		69,504,217		83,454
	Credit Suisse AG		USD	91,000,000		109,264		57,448,696		68,979
	HSBC		USD	91,000,000		109,264		57,448,696		68,979
	ANZ		USD	73,500,000		88,251		47,850,478		57,454
	BOA		USD	35,000,000		42,025		22,095,652		26,530
	The Tokyo Star Bank, Ltd		USD	21,000,000		25,215		13,257,391		15,918
POSCO COATED STEEL	Citi		THB	801,000,000		31,143		801,000,000		31,143
(THAILAND) CO., LTD.	ANZ		THB	1,175,000,000		45,684		1,175,000,000		45,684
	MUFG		THB	1,175,000,000		45,684		1,175,000,000		45,684
	SC		THB	1,175,000,000		45,684		1,175,000,000		45,684
	SMBC		THB	1,175,000,000		45,684		1,175,000,000		45,684
Associates
LLP POSUK Titanium	SMBC		USD	13,500,000		16,209		13,500,000		16,209
Nickel Mining Company SAS	SMBC		EUR	46,000,000		62,109		46,000,000		62,109
Joint ventures
CSP - Compania	Export-Import Bank of Korea		USD	182,000,000		218,527		162,772,945		195,441
Siderurgica do Pecem	Santander		USD	47,600,000		57,153		41,873,544		50,278
	BNP		USD	47,600,000		57,153		41,873,544		50,278
	MIZUHO		USD	47,600,000		57,153		41,873,544		50,278
	Credit Agricole		USD	20,000,000		24,014		17,593,933		21,125
	SOCIETE GENERALE		USD	20,000,000		24,014		17,593,933		21,125
	KfW		USD	20,000,000		24,014		17,593,933		21,125
	BBVA Seoul		USD	17,600,000		21,132		15,482,645		18,590
	ING		USD	17,600,000		21,132		15,482,645		18,590
	BNDES		BRL	464,060,000		103,114		464,060,000		103,114
			USD	2,340,111,500		2,809,770		1,789,413,734		2,148,550
			EUR	46,000,000		62,109		46,000,000		62,109
			THB	5,501,000,000		213,879		5,501,000,000		213,879
			BRL	464,060,000		103,114		464,060,000		103,114

30

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

3) Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2020 and 2019 were as follows:

① For the six -month period ended June 30, 2020

(in millions of Won)	Finance income and costs																	Other comprehensive income (loss)
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total
Financial assets at fair value through profit or loss	W	77,159			—		—			485		223,151		—		300,795			—
Financial assets at fair value through other comprehensive income		—			24,483		—			—		—		—		24,483			(160,650	)
Financial assets measured at amortized cost		24,207			—		94,915			—		—		—		119,122			—
Financial liabilities at fair value through profit or loss		—			—		—			447		13,977		—		14,424			—
Financial liabilities measured at amortized cost		(113,808	)		—		(217,448	)		—		—		11,840		(319,416	)		—
	W	(12,442	)		24,483		(122,533	)		932		237,128		11,840		139,408			(160,650	)

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW147,724 million for the six -month period ended June 30, 2020.

② For the six -month period ended June 30, 2019

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

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

31

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

4) Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2020 and 2019 were as follows:

① For the three-month period ended June 30, 2020

(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	38,444			—		—			289		(29,542	)		—		9,191			—
Financial assets at fair value through other comprehensive income		—			237		—			—		—			—		237			30,838
Financial assets measured at amortized cost		13,798			—		(46,814	)		—		—			—		(33,016	)		—
Financial liabilities at fair value through profit or loss		—			—		—			422		2,435			—		2,857			—
Financial liabilities measured at amortized cost		(56,712	)		—		108,704			—		—			3,903		55,895			—
	W	(4,470	)		237		61,890			711		(27,107	)		3,903		35,164			30,838

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures ofW38,066 million for the three-month period ended June 30, 2020.

② For the three-month period ended June 30, 2019

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

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

(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, 2019.

32

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

21. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2020 and December 31, 2019 are as follows:

(in Won, except share information)	June 30, 2020		December 31, 2019
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Share capital(*2)	W	482,403,125,000		482,403,125,000

(*1) As of June 30, 2020, the total number of ADRs of 30,935,880 outstanding in overseas stock market is equivalent to 7,733,970 shares of common stock.

(*2) As of June 30, 2020, the difference between the ending balance of common stock and the aggregate par value of issued common stock isW46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Share premium	W	463,825			463,825
Gain on disposal of treasury shares		796,623			796,623
Loss on disposal of hybrid bonds		(1,787	)		(1,787	)
Loss from merger		(6,441	)		(6,441	)
	W	1,252,220			1,252,220

33

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

22. Hybrid Bonds

Hybrid bonds classified as equity as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	Date of issue		Date of maturity		Rate of Interest (%)		June 30, 2020			December 31, 2019
Hybrid bond 1-2(*1)		6/13/2013		6/13/2043		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)
							W	199,384			199,384

(*1) Details of hybrid bonds as of June 30, 2020 are as follows:

	Hybrid bond 1-2
Maturity date	30 years (The Company has a right to extend the maturity date)
Interest rate	Issue date ~ 2023-06-12 : 4.60% Reset every 10 years as follows; •  After 10 years : return on government bond of the Republic of Korea (10 years) + 1.40% •  After 10 years : additionally + 0.25% according to Step-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 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common shareholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2020 amounts toW454 million.

34

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

23. Reserves

Reserves as of June 30, 2020 and December 31, 2019 were as follows:

(in millions of Won)	June 30, 2020			December 31, 2019
Changes in fair value of equity investments at fair value through other comprehensive income	W	(341,677	)		(183,930	)

24. Treasury Shares

During the six-month period ended June 30, 2020, the Company entered into a trust contract of acquiring treasury shares following approval of the Board of Directors. The amount committed to purchase treasury shares by this trust contract isW1,000 billion, and the contract period is from April 13, 2020 to April 12, 2021. The number of treasury shares acquired according to the contract is 358,953 during the six-month period ended June 30, 2020.

As of June 30, 2020, the Company holds 7,430,147 treasury shares for share price stabilization and other purposes in accordance with the Board of Director’s resolution.

25. Revenue

(a) Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2020		2019		2020		2019
Types of revenue
Sales of steel product	W	5,683,303		7,221,131		12,422,165		14,771,099
Transportation services		161,641		193,164		348,051		389,835
Others		39,880		61,559		84,464		131,391
	W	5,884,824		7,475,854		12,854,680		15,292,325
Timing of revenue recognition
Revenue recognized at a point in time	W	5,709,534		7,264,321		12,477,283		14,866,745
Revenue recognized over time		175,290		211,533		377,397		425,580
	W	5,884,824		7,475,854		12,854,680		15,292,325

(b) Details of contract assets and liabilities from contracts with customers as of June 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)	June 30, 2020		December 31, 2019
Receivables
Accounts receivable	W	3,144,814		3,983,573
Contract assets
Accounts receivable		4,083		9,482
Contract liabilities
Advance received		5,493		5,112
Unearned income		18,634		28,484

35

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

26. Selling and Administrative Expenses

(a) Other administrative expenses

Other administrative expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2020		2019		2020		2019
Wages and salaries	W	54,435		56,073		115,690		113,307
Expenses related to post-employment benefits		6,539		5,906		14,182		15,193
Other employee benefits		11,052		13,167		23,287		26,493
Travel		1,822		3,780		4,607		6,814
Depreciation		6,809		6,451		13,662		12,928
Amortization		9,039		9,144		18,456		18,288
Rental		10,946		9,509		24,204		18,452
Repairs		1,581		3,345		3,831		5,817
Advertising		14,490		19,263		29,384		32,902
Research & development		15,586		19,267		31,392		42,276
Service fees		40,068		41,147		77,441		82,727
Supplies		126		585		360		3,091
Vehicles maintenance		1,166		1,816		2,448		3,117
Industry association fee		1,244		908		3,220		2,631
Training		3,863		6,228		8,182		11,763
Conference		885		1,496		1,967		2,991
Others		13,111		11,525		19,218		17,640
	W	192,762		209,610		391,531		416,430

(b) Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30				For the six-month periods ended June 30
	2020		2019		2020		2019
Freight and custody	W	29,401		29,976		63,102		63,685
Operating expenses for distribution center		1,439		2,387		3,158		4,743
Sales commissions		19,535		21,865		64,788		37,431
Sales advertising		219		489		305		621
Sales promotion		302		1,257		696		2,261
Sample		157		331		333		545
Sales insurance premium		1,437		1,590		2,944		2,897
	W	52,490		57,895		135,326		112,183

36

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

27. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2020			2019		2020		2019
Finance income
Interest income(*1)	W	52,242			40,635		101,366		81,621
Dividend income		38,303			101,807		172,207		229,029
Gain on foreign currency transactions		85,665			83,938		232,829		118,877
Gain on foreign currency translations		(43,959	)		3,276		27,339		35,939
Gain on valuation of derivatives		(27,107	)		48,316		237,128		102,788
Others		5,391			3,513		13,983		6,940
	W	110,535			281,485		784,852		575,194
Finance costs
Interest expenses	W	56,712			36,677		113,808		73,589
Loss on foreign currency transactions		59,730			60,011		136,197		89,805
Loss on foreign currency translations		(79,914	)		58,629		246,504		103,605
Others		777			712		1,211		1,293
	W	37,305			156,029		497,720		268,292

(*1) Interest income calculated using the effective interest method for the six-month periods ended June 30, 2020 and 2019 wereW24,207 million andW16,948 million, respectively.

28. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2020		2019			2020		2019
Other non-operating income
Gain on disposals of property, plant and equipment	W	2,232		3,196			6,054		14,685
Gain on disposals of investment in subsidiaries, associates and joint ventures		21,907		—			21,907		1,194
Gain on disposals of assets held for sale		26,644		680			26,942		715
Gain on insurance proceeds		6,027		131			6,886		258
Gain on valuation of emission rights		—		25,440			—		25,440
Gain on disposals of emission rights		16,823		—			24,566		—
Others		7,965		6,468			19,368		14,548
	W	81,598		35,915			105,723		56,840
Other non-operating expenses
Loss on disposals of property, plant and equipment	W	42,935		25,422			94,234		38,537
Impairment loss on property, plant and equipment		22,687		88,681			22,687		161,496
Impairment loss on investment in subsidiaries, associates and joint ventures		—		3,987			—		10,422
Donations		3,000		1,000			11,709		8,400
Impairment loss on assets held for sale		2,616		(713	)		8,945		1,794
Others		26,021		21,669			38,370		32,045
	W	97,259		140,046			175,945		252,694

37

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

29. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows (excluding finance costs and income tax expenses):

(in millions of Won)	For the three-month periods ended June 30					For the six-month periods ended June 30
	2020		2019			2020		2019
Changes in inventories(*1)	W	289,400		(217,026	)		387,281		1,681
Raw materials and consumables used		3,578,505		4,606,866			7,724,146		9,018,589
Employee benefits expenses		437,550		436,959			897,134		868,661
Outsourced processing cost		568,597		628,682			1,227,456		1,227,096
Depreciation(*2)		565,690		533,300			1,126,547		1,071,915
Amortization		25,235		19,336			50,851		38,426
Electricity and water		49,901		135,567			116,551		288,587
Service fees		61,282		63,620			119,628		124,861
Rental		20,162		13,481			42,908		26,569
Advertising		14,490		19,263			29,384		32,902
Freight and custody expenses		164,813		212,431			380,504		440,291
Sales commissions		19,535		21,865			64,788		37,431
Loss on disposals of property, plant and equipment		42,935		25,422			94,234		38,537
Impairment loss on property, plant and equipment		22,687		88,681			22,687		161,496
Impairment loss on investments in subsidiaries, associates and joint ventures		—		3,987			—		10,422
Other expenses		229,607		299,332			397,217		601,086
	W	6,090,389		6,891,766			12,681,316		13,988,550

(*1) Changes in inventories include the changes in the balance of product, semi-finished products and by-products.

(*2) Includes depreciation of investment property.

30. Income Taxes

The effective tax rates of the Company for the six-month periods ended June 30, 2020 and 2019 were 18.82% and 27.05%, respectively.

38

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

31. Earnings per Share

Basic earnings per share for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

(in Won, except share information)	For the three-month periods ended June 30						For the six-month periods ended June 30
	2020			2019			2020			2019
Profit for the period	W	6,645,986,027			545,381,748,420			459,666,301,329			1,216,554,712,849
Interests of hybrid bonds, net of tax		(1,662,931,506	)		(1,662,931,506	)		(3,325,863,013	)		(3,307,589,040	)
Weighted-average number of common shares outstanding(*1)		80,006,436			80,115,641			80,061,039			80,111,845
Basic earnings per share	W	62			6,787			5,700			15,144

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

(shares)	For the three-month periods ended June 30						For the six-month periods ended June 30
	2020			2019			2020			2019
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,180,399	)		(7,071,194	)		(7,125,796	)		(7,074,990	)
Weighted-average number of common shares outstanding		80,006,436			80,115,641			80,061,039			80,111,845

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2020 and 2019, diluted earnings per share is equal to basic earnings per share.

39

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

32. Related Party Transactions

(a) Significant transactions with related companies for the six-month periods ended June 30, 2020 and 2019 were as follows:

1) For the six-month period ended June 30, 2020

(in millions of Won)	Sales and others(*1)				Purchase and others(*2)
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries(*3)
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	3,548		11,096		15		442,305		60		12,835
POSCO COATED & COLOR STEEL Co., Ltd.		205,766		1,695		—		—		15,176		208
POSCO ICT(*4)		1,429		4,991		—		184,310		20,941		87,668
eNtoB Corporation		7		60		113,378		18,848		28		12,493
POSCO CHEMICAL CO., LTD		144,466		24,770		229,721		12,830		154,424		4,362
POSCO ENERGY CO., LTD.		1,553		1,216		9,995		3		—		11,110
POSCO INTERNATIONAL Corporation		2,795,437		54,331		110,798		—		11,371		2,083
POSCO Thainox Public Company Limited		106,717		137		3,454		—		—		—
POSCO America Corporation		96,266		—		—		—		—		3
POSCO Canada Ltd.		—		816		90,805		—		—		—
POSCO Asia Co., Ltd.		719,978		965		81,671		2,272		1,162		1,419
Qingdao Pohang Stainless Steel Co., Ltd.		70,768		66		—		—		—		176
POSCO JAPAN Co., Ltd.		548,842		—		16,420		2,959		—		1,088
POSCO-VIETNAM Co., Ltd.		101,105		223		—		—		—		20
POSCO MEXICO S.A. DE C.V.		68,574		99		—		—		—		304
POSCO Maharashtra Steel Private Limited		153,754		847		—		—		—		185
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		57,645		—		—		—		—		—
POSCO VST CO., LTD.		132,216		56		—		—		—		20
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		804		291,649		—		—		—
Others		573,063		18,184		41,106		25,580		128,557		58,065
		5,781,134		120,356		989,012		689,107		331,719		192,039
Associates and joint ventures(*3)
POSCO PLANTEC Co., Ltd.(*5)		65		41		916		84,839		4,086		12,431
SNNC		2,901		3,478		219,060		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		17,154		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		625,545		—		—		—
Others		14,332		54,933		28,954		—		—		13,348
		34,452		58,452		874,475		84,839		4,086		25,779
	W	5,815,586		178,808		1,863,487		773,946		335,805		217,818

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

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

(*3) As of June 30, 2020, 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) During the six-month period ended June 30, 2020, POSCO PLANTEC Co., Ltd. was excluded from associates due to the Company’s loss of significant influence over the investee.

40

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

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

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

(b) Significant transactions with related companies for the three-month periods ended June 30, 2020 and 2019 were as follows:

1) For the three-month period ended June 30, 2020

(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	2,011		17		—		198,832		60		5,123
POSCO COATED & COLOR STEEL Co., Ltd.		89,666		1		—		—		6,818		91
POSCO ICT		718		2		—		85,004		10,483		41,213
eNtoB Corporation		3		—		55,786		9,743		9		6,931
POSCO CHEMICAL CO., LTD		61,232		4,828		105,977		8,690		71,609		653
POSCO ENERGY CO., LTD.		266		537		5,385		—		—		5,598
POSCO INTERNATIONAL Corporation		1,274,878		—		31,102		—		—		941
POSCO Thainox Public Company Limited		55,096		71		792		—		—		—
POSCO America Corporation		32,624		—		—		—		—		—
POSCO Canada Ltd.		—		753		51,250		—		—		—
POSCO Asia Co., Ltd.		402,677		746		36,185		504		766		910
Qingdao Pohang Stainless Steel Co., Ltd.		35,299		66		—		—		—		119
POSCO JAPAN Co., Ltd.		230,608		—		9,698		2,339		—		650
POSCO-VIETNAM Co., Ltd.		37,517		108		—		—		—		—
POSCO MEXICO S.A. DE C.V.		17,483		63		—		—		—		249
POSCO Maharashtra Steel Private Limited		36,314		44		—		—		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,094		—		—		—		—		—
POSCO VST CO., LTD.		62,622		56		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		462		136,882		—		—		—
Others		304,164		3,644		14,283		12,622		67,484		28,998
		2,668,272		11,398		447,340		317,734		157,229		91,476
Associates and joint ventures
SNNC		1,491		443		98,634		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		3,229		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		303,358		—		—		—
Others		4,625		39,739		16,589		—		—		5,695
		9,345		40,182		418,581		—		—		5,695
	W	2,677,617		51,580		865,921		317,734		157,229		97,171

41

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

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

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

(c) The related account balances from significant transactions with related companies as of June 30, 2020 and December 31, 2019 are as follows:

1) June 30, 2020

(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	3,005			56		3,061		—		55,360		381		55,741
POSCO COATED & COLOR STEEL Co., Ltd.		35,652			—		35,652		—		9		3,089		3,098
POSCO ICT		123			—		123		2,602		70,313		35,076		107,991
eNtoB Corporation		—			34		34		2,698		31,539		18		34,255
POSCO CHEMICAL CO., LTD		20,537			2,904		23,441		11,092		45,121		17,606		73,819
POSCO ENERGY CO., LTD.		166			214		380		—		2,563		13,630		16,193
POSCO INTERNATIONAL Corporation		438,989			10		438,999		756		238		—		994
POSCO Thainox Public Company Limited		34,981			3		34,984		—		—		—		—
POSCO America Corporation		4,432			—		4,432		—		—		—		—
POSCO Asia Co., Ltd.		295,369			847		296,216		3,810		257		—		4,067
Qingdao Pohang Stainless Steel Co., Ltd.		21,523			—		21,523		—		—		—		—
POSCO MEXICO S.A. DE C.V.		40,423			707		41,130		—		—		—		—
POSCO Maharashtra Steel Private Limited		196,825			477		197,302		—		—		—		—
Others		597,632			43,367		640,999		15,367		28,726		85,326		129,419
		1,689,657			48,619		1,738,276		36,325		234,126		155,126		425,577
Associates and joint ventures
SNNC		340			216		556		10,364		—		—		10,364
Roy Hill Holdings Pty Ltd		—			—		—		169,954		—		—		169,954
Others		408			38,077		38,485		4,042		—		—		4,042
		748			38,293		39,041		184,360		—		—		184,360
	W	1,690,405	��		86,912		1,777,317		220,685		234,126		155,126		609,937

42

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

2) December 31, 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	5,702		65		5,767		—		78,512		385		78,897
POSCO COATED & COLOR STEEL Co., Ltd.		57,792		—		57,792		—		11		3,828		3,839
POSCO ICT		225		1		226		1,147		129,424		42,844		173,415
eNtoB Corporation		—		—		—		3,459		27,431		—		30,890
POSCO CHEMICAL CO., LTD		35,102		3,578		38,680		17,839		52,710		19,369		89,918
POSCO ENERGY CO., LTD.		1,876		4		1,880		—		3,229		14,912		18,141
POSCO INTERNATIONAL Corporation		633,073		—		633,073		345		2,218		3,839		6,402
POSCO Thainox Public Company Limited		52,826		2		52,828		916		—		—		916
POSCO America Corporation		8,448		—		8,448		—		—		—		—
POSCO Asia Co., Ltd.		508,962		748		509,710		12,784		171		—		12,955
Qingdao Pohang Stainless Steel Co., Ltd.		29,842		—		29,842		—		—		—		—
POSCO MEXICO S.A. DE C.V.		90,351		702		91,053		—		—		—		—
POSCO Maharashtra Steel Private Limited		235,917		444		236,361		—		—		—		—
Others		470,734		33,851		504,585		14,397		40,233		87,652		142,282
		2,130,850		39,395		2,170,245		50,887		333,939		172,829		557,655
Associates and joint ventures
POSCO PLANTEC Co., Ltd.		84		10		94		471		49,511		—		49,982
SNNC		297		65		362		19,769		—		—		19,769
Roy Hill Holdings Pty Ltd		—		—		—		93,383		—		—		93,383
Others		942		706		1,648		3,447		586		—		4,033
		1,323		781		2,104		117,070		50,097		—		167,167
	W	2,132,173		40,176		2,172,349		167,957		384,036		172,829		724,822

(d) For the six-month periods ended June 30, 2020 and 2019, details of compensation to key management officers were as follows:

(in millions of Won)	June 30, 2020		June 30, 2019
Short-term benefits	W	21,409		23,896
Long-term benefits		2,172		3,123
Retirement benefits		4,836		6,173
	W	28,417		33,192

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

33. Commitments and Contingencies

(a) Commitments

1) The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2020, 81 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.

43

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

3) The Company entered into consecutive voyage charter (CVC) contract for the transportation of raw materials. As of June 30, 2020, there are 39 vessels under CVC contracts and the average remaining contract period is about 9 years.

4) The Company entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowings 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 project. The Company is not liable for the repayment in full or part of borrowings if the project fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreement. As of June 30, 2020, 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.

(b) As of June 30, 2020, 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 21 lawsuits aggregating toW38.9 billion as defendant as of June 30, 2020, which arise from the ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting toW2.1 billion for 1 of 21 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company does not believe it has a present obligation as of June 30, 2020.

44

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month periods ended June 30, 2020 and 2019 were as follows:

(in millions of Won)	June 30, 2020			June 30, 2019
Trade accounts and notes receivable, net	W	830,252			(307,715	)
Other accounts receivable		(5,207	)		(25,342	)
Inventories		740,396			(139,320	)
Prepaid expenses		(1,924	)		(24,988	)
Other current assets		(3,652	)		152
Long-term guarantee deposits		(448	)		58
Derivative assets		4,898			—
Other non-current assets		444			548
Trade accounts and notes payable		193,651			(25,513	)
Other accounts payable		(89,951	)		(92,763	)
Accrued expenses		(16,670	)		22,413
Advances received		381			82
Withholdings		2,303			(251	)
Unearned revenue		(5,227	)		2,876
Other current liabilities		(14,429	)		(4,835	)
Derivative liabilities		5,692			—
Payments of severance benefits		(89,031	)		(48,921	)
Plan assets		29,417			29,487
Other non-current liabilities		(7,971	)		(4,511	)
	W	1,572,924			(618,543	)

35. Events after the reporting period

Pursuant to the resolution of the Board of Directors on August 7, 2020, the Company decided to pay interim cash dividends ofW500 per common share (total dividend:W39.9 billion).

45