##### Table of Contents

As filed with the Securities and Exchange Commission on April 30, 2012







UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549

Form 20-F

(Mark One)

| |  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------

OR

| | þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2011

OR

| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------

OR

| |  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

For the transition period
from  to

Commission file number 1-13368

POSCO

(Exact name of Registrant as specified in its charter)



|                                                |  |                                                
|----------------------------------------------- |  | -----------------------------------------------
|POSCO                                           |  | The Republic of Korea                          
|(Translation of Registrants name into English) |  | (Jurisdiction of incorporation or organization)

POSCO Center, 892 Daechi-4-dong, Gangnam-gu

Seoul, Korea 135-777

(Address of principal executive offices)

Kim, Gun

POSCO Center, 892 Daechi-4-dong, Gangnam-gu,

Seoul, Korea 135-777

Telephone: +82-2-3457-1161; E-mail: gunmanno1@posco.com; Facsimile: +82-2-3457-1982(Name, telephone, e-mail and/or facsimile number
and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.



|                                                                                      |  |                                          
|------------------------------------------------------------------------------------- |  | -----------------------------------------
|Title of Each Class                                                                   |  | Name of Each Exchange on Which Registered
|                                                                                      | 
|American Depositary Shares, each representing
one-fourth of one share of common stock |  | New York Stock Exchange, Inc.            
|                                                                                      | 
|Common Stock, par value Won 5,000 per share *                                         |  | New York Stock Exchange, Inc. *          

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which
there is a reporting obligation pursuant to Section 15(d) of the Act.

None

As of December 31, 2011, there were 77,244,244 shares of common stock, par value Won 5,000 per share, outstanding (not including
9,942,391 shares of common stock held by the company as treasury shares)

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
YesþNo ̈

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ̈Noþ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    YesþNo ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes ̈No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþAccelerated filer ̈Non-accelerated filer ̈

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.    U.S. GAAP ̈IFRSþOther ̈

If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow.    Item 17 ̈Item 18 ̈

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈Noþ



|* | Not for trading, but only in connection with the registration of the American Depositary Shares.
|- | ------------------------------------------------------------------------------------------------









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TABLE OF CONTENTS



|         |  |                                                     |   |                                                         |    |  |    | 
|-------- |  | --------------------------------------------------- | - | ------------------------------------------------------- | -- |  | -- | 
|GLOSSARY |  |                                                     | 1 |                                                        
|PART I   |  |                                                     | 2 |                                                        
|ITEM 1.  |  | IDENTITY OF DIRECTORS, SENIOR MANAGERS AND ADVISORS |   |                                                         | 2  | 
|         |  | Item 1.A.                                           |   | Directors and Senior Management                         |    |  | 2  | 
|         |  | Item 1.B.                                           |   | Advisers                                                |    |  | 2  | 
|         |  | Item 1.C.                                           |   | Auditors                                                |    |  | 2  | 
|ITEM 2.  |  | OFFER STATISTICS AND EXPECTED TIMETABLE             |   |                                                         | 2  | 
|         |  | Item 2.A.                                           |   | Offer Statistics                                        |    |  | 2  | 
|         |  | Item 2.B.                                           |   | Method and Expected Timetable                           |    |  | 2  | 
|ITEM 3.  |  | KEY INFORMATION                                     |   |                                                         | 2  | 
|         |  | Item 3.A.                                           |   | Selected Financial Data                                 |    |  | 2  | 
|         |  | Item 3.B.                                           |   | Capitalization and Indebtedness                         |    |  | 4  | 
|         |  | Item 3.C.                                           |   | Reasons for Offer and Use of Proceeds                   |    |  | 4  | 
|         |  | Item 3.D.                                           |   | Risk Factors                                            |    |  | 4  | 
|ITEM 4.  |  | INFORMATION ON THE COMPANY                          |   |                                                         | 17 | 
|         |  | Item 4.A.                                           |   | History and Development of the Company                  |    |  | 17 | 
|         |  | Item 4.B.                                           |   | Business Overview                                       |    |  | 18 | 
|         |  | Item 4.C.                                           |   | Organizational Structure                                |    |  | 35 | 
|         |  | Item 4.D.                                           |   | Property, Plants and Equipment                          |    |  | 35 | 
|ITEM 4A. |  | UNRESOLVED STAFF COMMENTS                           |   |                                                         | 38 | 
|ITEM 5.  |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS        |   |                                                         | 38 | 
|         |  | Item 5.A.                                           |   | Operating Results                                       |    |  | 38 | 
|         |  | Item 5.B.                                           |   | Liquidity and Capital Resources                         |    |  | 52 | 
|         |  | Item 5.C.                                           |   | Research and Development, Patents and Licenses, Etc.    |    |  | 55 | 
|         |  | Item 5.D.                                           |   | Trend Information                                       |    |  | 55 | 
|         |  | Item 5.E.                                           |   | Off-balance Sheet Arrangements                          |    |  | 55 | 
|         |  | Item 5.F.                                           |   | Tabular Disclosure of Contractual Obligations           |    |  | 56 | 
|         |  | Item 5.G.                                           |   | Safe Harbor                                             |    |  | 56 | 
|ITEM 6.  |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES          |   |                                                         | 56 | 
|         |  | Item 6.A.                                           |   | Directors and Senior Management                         |    |  | 56 | 
|         |  | Item 6.B.                                           |   | Compensation                                            |    |  | 59 | 
|         |  | Item 6.C.                                           |   | Board Practices                                         |    |  | 60 | 
|         |  | Item 6.D.                                           |   | Employees                                               |    |  | 61 | 
|         |  | Item 6.E.                                           |   | Share Ownership                                         |    |  | 62 | 
|ITEM 7.  |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS   |   |                                                         | 64 | 
|         |  | Item 7.A.                                           |   | Major Shareholders                                      |    |  | 64 | 
|         |  | Item 7.B.                                           |   | Related Party Transactions                              |    |  | 64 | 
|         |  | Item 7.C.                                           |   | Interests of Experts and Counsel                        |    |  | 64 | 
|ITEM 8.  |  | FINANCIAL INFORMATION                               |   |                                                         | 64 | 
|         |  | Item 8.A.                                           |   | Consolidated Statements and Other Financial Information |    |  | 64 | 
|         |  | Item 8.B.                                           |   | Significant Changes                                     |    |  | 65 | 



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|          |  |                                                                              |    |                                        |    |  |    | 
|--------- |  | ---------------------------------------------------------------------------- | -- | -------------------------------------- | -- |  | -- | 
|ITEM 9.   |  | THE OFFER AND LISTING                                                        |    |                                        | 65 | 
|          |  | Item 9.A.                                                                    |    | Offer and Listing Details              |    |  | 65 | 
|          |  | Item 9.B.                                                                    |    | Plan of Distribution                   |    |  | 67 | 
|          |  | Item 9.C.                                                                    |    | Markets                                |    |  | 67 | 
|          |  | Item 9.D.                                                                    |    | Selling Shareholders                   |    |  | 72 | 
|          |  | Item 9.E.                                                                    |    | Dilution                               |    |  | 72 | 
|          |  | Item 9.F.                                                                    |    | Expenses of the Issuer                 |    |  | 72 | 
|ITEM 10.  |  | ADDITIONAL INFORMATION                                                       |    |                                        | 72 | 
|          |  | Item 10.A.                                                                   |    | Share Capital                          |    |  | 72 | 
|          |  | Item 10.B.                                                                   |    | Memorandum and Articles of Association |    |  | 72 | 
|          |  | Item 10.C.                                                                   |    | Material Contracts                     |    |  | 77 | 
|          |  | Item 10.D.                                                                   |    | Exchange Controls                      |    |  | 77 | 
|          |  | Item 10.E.                                                                   |    | Taxation                               |    |  | 81 | 
|          |  | Item 10.F.                                                                   |    | Dividends and Paying Agents            |    |  | 86 | 
|          |  | Item 10.G.                                                                   |    | Statements by Experts                  |    |  | 86 | 
|          |  | Item 10.H.                                                                   |    | Documents on Display                   |    |  | 86 | 
|          |  | Item 10.I.                                                                   |    | Subsidiary Information                 |    |  | 86 | 
|ITEM 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |    |                                        | 86 | 
|ITEM 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |    |                                        | 89 | 
|          |  | Item 12.A.                                                                   |    | Debt Securities                        |    |  | 89 | 
|          |  | Item 12.B.                                                                   |    | Warrants and Rights                    |    |  | 89 | 
|          |  | Item 12.C.                                                                   |    | Other Securities                       |    |  | 89 | 
|          |  | Item 12.D.                                                                   |    | American Depositary Shares             |    |  | 89 | 
|PART II   |  |                                                                              | 90 |                                       
|ITEM 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |    |                                        | 90 | 
|ITEM 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |    |                                        | 90 | 
|ITEM 15.  |  | CONTROLS AND PROCEDURES                                                      |    |                                        | 91 | 
|ITEM 16.  |  | [RESERVED]                                                                   |    |                                        | 92 | 
|ITEM 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |    |                                        | 92 | 
|ITEM 16B. |  | CODE OF ETHICS                                                               |    |                                        | 92 | 
|ITEM 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |    |                                        | 92 | 
|ITEM 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |    |                                        | 93 | 
|ITEM 16E. |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |    |                                        | 93 | 
|ITEM 16F. |  | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                 |    |                                        | 93 | 
|ITEM 16G. |  | CORPORATE GOVERNANCE                                                         |    |                                        | 93 | 
|ITEM 16H. |  | MINE SAFETY DISCLOSURE                                                       |    |                                        | 94 | 
|PART III  |  |                                                                              | 95 |                                       
|ITEM 17.  |  | FINANCIAL STATEMENTS                                                         |    |                                        | 95 | 
|ITEM 18.  |  | FINANCIAL STATEMENTS                                                         |    |                                        | 95 | 
|ITEM 19.  |  | EXHIBITS                                                                     |    |                                        | 95 | 



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GLOSSARY



|                            |  |                                                                                                                                                                                                                                 
|--------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ADR                       |  | American Depositary Receipt evidencing ADSs.                                                                                                                                                                                    
|ADR depositary            |  | The Bank of New York Mellon.                                                                                                                                                                                                    
|ADS                       |  | American Depositary Share representing one-fourth of one share of Common Stock.                                                                                                                                                 
|Australian Dollar or A$ |  | The currency of the Commonwealth of Australia.                                                                                                                                                                                  
|Commercial Code           |  | Commercial Code of the Republic of Korea.                                                                                                                                                                                       
|common stock              |  | Common stock, par value Won 5,000 per share, of POSCO.                                                                                                                                                                          
|deposit agreement         |  | Deposit Agreement, dated as of September 26, 1994, among POSCO, the ADR Depositary and all holders and beneficial owners from time to time of ADRs issued thereunder, as amended by amendment
no. 1 thereto dated June 25, 1997.
|Dollars, $ or US$     |  | The currency of the United States of America.                                                                                                                                                                                   
|FSCMA                     |  | Financial Investment Services and Capital Markets Act of the Republic of Korea.                                                                                                                                                 
|Government                |  | The government of the Republic of Korea.                                                                                                                                                                                        
|IASB                     |  | International Accounting Standards Board.                                                                                                                                                                                       
|IFRS                      |  | International Financial Reporting Standards.                                                                                                                                                                                    
|Yen or JPY              |  | The currency of Japan.                                                                                                                                                                                                          
|Korea                     |  | The Republic of Korea.                                                                                                                                                                                                          
|Korean GAAP               |  | Generally accepted accounting principles in the Republic of Korea.                                                                                                                                                              
|Gwangyang Works           |  | Gwangyang Steel Works.                                                                                                                                                                                                          
|We                        |  | POSCO and its consolidated subsidiaries.                                                                                                                                                                                        
|Pohang Works              |  | Pohang Steel Works.                                                                                                                                                                                                             
|POSCO Group               |  | POSCO and its consolidated subsidiaries.                                                                                                                                                                                        
|Securities Act            |  | The United States Securities Act of 1933, as amended.                                                                                                                                                                           
|Securities Exchange Act   |  | The United States Securities Exchange Act of 1934, as amended.                                                                                                                                                                  
|SEC                       |  | The United States Securities and Exchange Commission.                                                                                                                                                                           
|tons                      |  | Metric tons (1,000 kilograms), equal to 2,204.6 pounds.                                                                                                                                                                         
|U.S. GAAP                 |  | Generally accepted accounting principles in the United States of America.                                                                                                                                                       
|Won or
(Won)            |  | The currency of the Republic of Korea.                                                                                                                                                                                          

Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.



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PART I

Item 1.Identity of Directors, Senior Managers and Advisors

Item 1.A.Directors and Senior Management

Not applicable

Item 1.B.Advisers

Not applicable

Item 1.C.Auditors

Not applicable

Item 2.Offer Statistics and Expected Timetable

Not applicable

Item 2.A.Offer Statistics

Not applicable

Item 2.B.Method and Expected Timetable

Not applicable

Item 3.Key Information

Item 3.A.Selected Financial Data

The selected financial data presented below should be read in conjunction with our Consolidated Financial Statements and related notes thereto and
Item 5. Operating and Financial Review and Prospects included elsewhere in this annual report. The selected financial data in Won as of December 31, 2010 and 2011 and for each of the years in the two-year period ended December 31, 2011
were derived from our Consolidated Financial Statements included elsewhere in this annual report. Our Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the
International Accounting Standards Board, or IASB. Pursuant to the transitional relief granted by the U.S. Securities and Exchange Commission in respect of the first-time application of IFRS, no audited financial statements and financial information
prepared under IFRS for the year ended December 31, 2009 have been included in this annual report.

The information set forth below
is not necessarily indicative of the results of future operations and should be read in conjunction with Item 5. Operating and Financial Review and Prospects and our consolidated financial statements and related notes included in
this annual report.



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Selected consolidated statements of comprehensive income data



|                                                      |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|----------------------------------------------------- |  | ------------------------------------------------------------------- | ------ |  | ---- | ----- | ------ | ---- |  | --- | ------ | -
|                                                      |  | For the Year Ended December 31,                                     |       
|                                                      |  | 2010                                                                |        |  | 2011 |       |        | 2011 | 
|                                                      |  | (In billions of Won and millions of Dollars, except per share data) |       
|Revenue (1)                                           |  | (Won)                                                               | 47,887 |  |      | (Won) | 68,939 |      |  | US$ | 59,775 |  
|Cost of sales (2)                                     |  |                                                                     | 39,722 |  |      |       | 59,824 |      |  |     | 51,872 |  
|                                                      |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|Gross profit                                          |  |                                                                     | 8,165  |  |      |       | 9,115  |      |  |     | 7,903  |  
|Selling and administrative expenses                   |  |                                                                     | 2,620  |  |      |       | 3,661  |      |  |     | 3,174  |  
|Other operating income                                |  |                                                                     | 231    |  |      |       | 337    |      |  |     | 292    |  
|Other operating expenses                              |  |                                                                     | 342    |  |      |       | 383    |      |  |     | 332    |  
|                                                      |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|Operating profit                                      |  |                                                                     | 5,434  |  |      |       | 5,408  |      |  |     | 4,689  |  
|Share of profit of equity-accounted investees         |  |                                                                     | 183    |  |      |       | 51     |      |  |     | 44     |  
|Finance income                                        |  |                                                                     | 1,739  |  |      |       | 3,190  |      |  |     | 2,766  |  
|Finance costs                                         |  |                                                                     | 2,089  |  |      |       | 3,867  |      |  |     | 3,353  |  
|                                                      |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|Profit before income tax                              |  |                                                                     | 5,267  |  |      |       | 4,782  |      |  |     | 4,147  |  
|Income tax expense                                    |  |                                                                     | 1,081  |  |      |       | 1,068  |      |  |     | 926    |  
|                                                      |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|Profit for the period                                 |  |                                                                     | 4,186  |  |      |       | 3,714  |      |  |     | 3,221  |  
|Total comprehensive income for the period, net of tax |  |                                                                     | 4,765  |  |      |       | 2,442  |      |  |     | 2,117  |  
|                                                      |  |                                                                     |       
|Profit for the period attributable to:                |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|Owners of the controlling company                     |  |                                                                     | 4,106  |  |      |       | 3,648  |      |  |     | 3,163  |  
|Non-controlling interests                             |  |                                                                     | 80     |  |      |       | 66     |      |  |     | 57     |  
|                                                      |  |                                                                     |       
|Total comprehensive income attributable to:           |  |                                                                     |        |  |      |       |        |      |  |     |        |  
|Owners of the controlling company                     |  |                                                                     | 4,640  |  |      |       | 2,530  |      |  |     | 219    |  
|Non-controlling interests                             |  |                                                                     | 126    |  |      |       | (88    | )    |  |     | (76    | )
|                                                      |  |                                                                     |       
|Basic and diluted earnings per share                  |  |                                                                     | 53,297 |  |      |       | 47,224 |      |  |     | 40.95  |  

Selected consolidated statements of financial position data



|                                                                       |  |                                              |        |  |      |       |        |      |  |     |        | 
|---------------------------------------------------------------------- |  | -------------------------------------------- | ------ |  | ---- | ----- | ------ | ---- |  | --- | ------ | 
|                                                                       |  | As of December 31,                           |       
|                                                                       |  | 2010                                         |        |  | 2011 |       |        | 2011 | 
|                                                                       |  | (In billions of Won and millions of Dollars) |       
|Working capital (3)                                                    |  | (Won)                                        | 9,395  |  |      | (Won) | 13,952 |      |  | US$ | 12,097 | 
|                                                                       |  |                                              |       
|Total current assets                                                   |  |                                              | 27,672 |  |      |       | 33,557 |      |  |     | 29,096 | 
|Property, plant and equipment, net                                     |  |                                              | 25,438 |  |      |       | 28,453 |      |  |     | 24,671 | 
|Total non-current assets                                               |  |                                              | 41,746 |  |      |       | 44,852 |      |  |     | 38,890 | 
|Total assets                                                           |  |                                              | 69,418 |  |      |       | 78,409 |      |  |     | 67,987 | 
|                                                                       |  |                                              |       
|Short-term borrowings and current installments of long-term borrowings |  |                                              | 10,476 |  |      |       | 10,792 |      |  |     | 9,357  | 
|Long-term borrowings, excluding current installments                   |  |                                              | 10,664 |  |      |       | 16,020 |      |  |     | 13,891 | 
|Total liabilities                                                      |  |                                              | 30,881 |  |      |       | 37,679 |      |  |     | 32,671 | 
|                                                                       |  |                                              |       
|Share capital                                                          |  |                                              | 482    |  |      |       | 482    |      |  |     | 418    | 
|Total equity                                                           |  |                                              | 38,537 |  |      |       | 40,730 |      |  |     | 35,316 | 

Selected consolidated statements of cash flows data



|                                                   |  |                                              |        |   |      |       |        |      |  |     |        |  
|-------------------------------------------------- |  | -------------------------------------------- | ------ | - | ---- | ----- | ------ | ---- |  | --- | ------ | -
|                                                   |  | For the Year Ended December 31,              |       
|                                                   |  | 2010                                         |        |   | 2011 |       |        | 2011 | 
|                                                   |  | (In billions of Won and millions of Dollars) |       
|Net cash provided by operating activities          |  | (Won)                                        | 3,582  |   |      | (Won) | 1,692  |      |  | US$ | 1,467  |  
|Net cash used in investing activities              |  |                                              | (6,915 | ) |      |       | (5,517 | )    |  |     | (4,784 | )
|Net cash provided by financing activities          |  |                                              | 4,588  |   |      |       | 4,900  |      |  |     | 4,249  |  
|                                                   |  |                                              |       
|Net increase in cash and cash equivalents          |  |                                              | 1,248  |   |      |       | 1,078  |      |  |     | 934    |  
|Cash and cash equivalents at beginning of the year |  |                                              | 2,273  |   |      |       | 3,521  |      |  |     | 3,053  |  
|Cash and cash equivalents at end of the year       |  |                                              | 3,521  |   |      |       | 4,599  |      |  |     | 3,987  |  





|(1) | Includes sales by our consolidated subsidiaries of steel products purchased by such subsidiaries from third parties, including trading companies to which we sell steel products.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes purchases of steel products by our consolidated subsidiaries from third parties, including trading companies to which we sell steel products.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | working capital means current assets minus current liabilities.
|--- | -----------------------------------------------------------------



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EXCHANGE RATE INFORMATION

The following table sets out information concerning the market average exchange rate for the periods and dates indicated.



|                         |  |                 |         |  |                 |  |         |      |  |  |         |  |  |  |         | 
|------------------------ |  | --------------- | ------- |  | --------------- |  | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|Period                   |  | At Endof Period |         |  | Average Rate(1) |  |         | High |  |  | Low     | 
|                         |  | (Per US$1.00)   |        
|2005                     |  |                 | 1,013.8 |  |                 |  | 1,024.2 |      |  |  | 1,060.3 |  |  |  | 998.2   | 
|2006                     |  |                 | 929.6   |  |                 |  | 956.1   |      |  |  | 1,031.0 |  |  |  | 918.0   | 
|2007                     |  |                 | 938.2   |  |                 |  | 929.2   |      |  |  | 950.0   |  |  |  | 902.2   | 
|2008                     |  |                 | 1,257.5 |  |                 |  | 1,102.6 |      |  |  | 1,509.0 |  |  |  | 934.5   | 
|2009                     |  |                 | 1,167.6 |  |                 |  | 1,276.4 |      |  |  | 1,573.6 |  |  |  | 1,152.8 | 
|2010                     |  |                 | 1,138.9 |  |                 |  | 1,156.3 |      |  |  | 1,261.5 |  |  |  | 1,104.0 | 
|2011                     |  |                 | 1,153.3 |  |                 |  | 1,147.5 |      |  |  | 1,199.5 |  |  |  | 1,049.5 | 
|2012 (through April 27)  |  |                 |         |  |                 |  |         |      |  |  |         |  |  |  |         | 
|January                  |  |                 | 1,125.0 |  |                 |  | 1,145.9 |      |  |  | 1,164.3 |  |  |  | 1,121.6 | 
|February                 |  |                 | 1,126.5 |  |                 |  | 1,123.4 |      |  |  | 1,128.4 |  |  |  | 1,116.7 | 
|March                    |  |                 | 1,137.8 |  |                 |  | 1,125.9 |      |  |  | 1,138.1 |  |  |  | 1,114,5 | 
|April (through April 27) |  |                 | 1,135.2 |  |                 |  | 1,135.6 |      |  |  | 1,142.3 |  |  |  | 1,123.4 | 



Source: Seoul
Money Brokerage Services, Ltd.



|(1) | The average rate for each year is calculated as the average of the market average exchange rates on the last business day of each month during the relevant year (or portion
thereof). The average rate for a month is calculated as the average of the market average exchange rates on each business day during the relevant month (or portion thereof).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3.B.Capitalization and Indebtedness

Not applicable

Item 3.C.Reasons for Offer and Use of
Proceeds

Not applicable

Item 3.D.Risk Factors

You
should carefully consider the risks described below.

The global economic downturn in recent years reduced worldwide demand for steel
products. While the rate of deterioration of the global economy slowed in the second half of 2009 and the global economy showed some signs of stabilization and improvement in 2010 and 2011, there can be no assurance that such recovery will continue.

Difficulties affecting the European Union and global financial sectors, adverse conditions and volatility in the European Union and
worldwide credit and financial markets, fluctuations in oil and commodity prices and the general weakness of the European Union and global economy have increased the uncertainty of global economic prospects in general and have adversely
affected the global and Korean economies. The global economic downturn in recent years had a pronounced negative effect on the global demand for steel products and their prices in 2008 and 2009. While the rate of deterioration of the global economy
slowed in the second half of 2009 and the global economy showed some signs of stabilization and improvement in 2010 and 2011, the overall prospects for the Korean and global economy in the second half of 2012 and beyond remain uncertain.

In response to sluggish demand from our customers in industries adversely impacted by the deteriorating global economic conditions in the second
half of 2008, such as the automotive and construction industries, we reduced our crude steel production and sales prices in December 2008 and the first quarter of 2009. Signs that the pace of deterioration in market conditions had slowed began to
appear in the second quarter of 2009, however, and demand from certain segments of our customer



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base, including the domestic automotive and construction industries, showed signs of recovery starting in the second quarter of 2009. In response, we began to incrementally increase our crude
steel production starting in April 2009 and our production level normalized in the second half of 2009. Our crude steel production decreased from 34.7 million tons in 2008 to 31.1 million tons in 2009 but rebounded to 35.4 million
tons in 2010 and 39.1 million tons in 2011. Prices of our steel products also gradually recovered starting in the third quarter of 2009, but our export prices fell substantially in the second half of 2011 due to uncertainties in the global
economy caused by financial difficulties affecting European countries including Greece, Spain, Portugal and Italy. Our domestic sales prices, however, remained relatively stable in the second half of 2011.

We may decide to adjust our future crude steel production or our sales prices on an on-going basis subject to market demand for our products, the
production outlook of the global steel industry and global economic conditions in general. Deterioration of market conditions may result in changes in assumptions underlying the carrying value of certain assets, which in turn could result in
impairment of such assets, including intangible assets such as goodwill. We expect fluctuation in demand for our steel products to continue to prevail at least in the near future, which may adversely affect our business, results of operations or
financial condition.

Korea is our most important market, and our current business and future growth could be materially and
adversely affected if economic conditions in Korea deteriorate.

We are incorporated in Korea, and a substantial portion of our
operations and assets are located in Korea. Korea is our most important market, accounting for 55.1% of our total sales volume of steel products in 2011. Domestic demand for our products is affected by the condition of major steel consuming
industries, such as construction, shipbuilding, automotive, electrical appliances and downstream steel processors, and the Korean economy in general. In addition, the trading operations of Daewoo International Corporation (Daewoo
International) are affected by the general level of trade between Korea and other countries, which in turn tends to fluctuate based on general conditions in the Korean and global economies. As a result, we are subject to political, economic,
legal and regulatory risks specific to Korea.

The economic indicators in Korea in recent years have shown mixed signs, and future growth
of the Korean economy is subject to many factors beyond our control, including developments in the global economy.

Due to recent
liquidity and credit concerns and volatility in the global financial markets, the value of the Won relative to the U.S. Dollar and the stock prices of Korean companies have fluctuated significantly in recent years. In particular, there has been
increased volatility following the downgrading by Standard & Poors Rating Services of the long-term sovereign credit rating of the United States to AA+ from AAA in August 2011 as well as increasing financial
difficulties affecting European countries including Greece, Spain, Portugal and Italy, and the overall prospects for the Korean and global economies in 2012 and beyond remain uncertain. Any future deterioration of the Korean and global economies
could adversely affect our business, results of operations and financial condition.

Developments that could have an adverse impact on
Koreas economy include:



| |  |  | difficulties in the financial sectors in Europe and elsewhere and increased sovereign default risks in select countries and the resulting adverse effects on the
global financial markets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | declines in consumer confidence and a slowdown in consumer spending;
| | - |  | --------------------------------------------------------------------



| |  |  | adverse changes or volatility in foreign currency reserve levels, commodity prices, exchange rates (including fluctuation of the U.S. Dollar, the Euro or
the Japanese Yen exchange rates or revaluation of the Chinese Renminbi), interest rates, inflation rates or stock markets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | continuing adverse conditions in the economies of countries and regions that are important export markets for Korea, such as the United States, Europe, Japan and
China, or in emerging market economies in Asia or elsewhere;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing delinquencies and credit defaults by retail and small- and medium-sized enterprise borrowers;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | the continued emergence of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition
in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the economic impact of any pending or future free trade agreements;
| | - |  | -------------------------------------------------------------------



| |  |  | social and labor unrest;
| | - |  | ------------------------



| |  |  | substantial decreases in the market prices of Korean real estate;
| | - |  | -----------------------------------------------------------------



| |  |  | a decrease in tax revenues and a substantial increase in the Governments expenditures for fiscal stimulus measures, unemployment compensation and other
economic and social programs that, together, would lead to an increased government budget deficit;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loss of investor confidence arising from corporate accounting irregularities and corporate governance issues concerning certain Korean conglomerates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | geo-political uncertainty and risk of further attacks by terrorist groups around the world;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the occurrence of severe health epidemics in Korea and other parts of the world;
| | - |  | --------------------------------------------------------------------------------



| |  |  | deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from trade disputes or
disagreements in foreign policy;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | political uncertainty or increasing strife among or within political parties in Korea;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | hostilities or political or social tensions involving oil producing countries in the Middle East and North Africa and any material disruption in the global
supply of oil or increase in the price of oil;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the occurrence of severe earthquakes, tsunamis and other natural disasters in Korea and other parts of the world, particularly in trading partners (such as the
March 2011 earthquake in Japan, which also resulted in the release of radioactive materials from a nuclear plant that had been damaged by the earthquake); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

We rely on export sales for a significant portion of our total sales. Adverse economic and financial developments in Asia in the future may
have an adverse effect on demand for our products in Asia and increase our foreign exchange risks.

Our export sales and overseas
sales to customers abroad accounted for 44.9% of our total sales volume of steel products in 2011. Our export sales volume to customers in Asia, including China, Japan, Indonesia, Thailand and Malaysia, accounted for 55.8% of our total export sales
volume for steel products in 2011, and we expect our sales to these countries, especially to China, to remain important in the future. Accordingly, adverse economic and financial developments in these countries



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may have an adverse effect on demand for our products. Economic weakness in Asia may also adversely affect our sales to the Korean companies that export to the region, especially companies in the
construction, shipbuilding, automotive, electrical appliances and downstream steel processing industries. Weaker demand in these countries, combined with addition of new steel production capacity, particularly in China, may also reduce export prices
in Dollar terms of our principal products. We attempt to maintain and expand our export sales to generate foreign currency receipts to cover our foreign currency purchases and debt service requirements. Consequently, any decrease in our export sales
could also increase our foreign exchange risks.

Depreciation of the value of the Won against the Dollar and other major foreign
currencies may have a material adverse effect on the results of our operations and on the price of the ADSs.

Our consolidated
financial statements are prepared from our local currency denominated financial results, assets and liabilities and our subsidiaries around the world, which are then translated into Won. A substantial proportion of our consolidated financial results
is accounted for in currencies other than the Won. Accordingly, our consolidated financial results and assets and liabilities may be materially affected by changes in the exchange rates of foreign currencies. In 2011, 44.9% of our sales volume of
steel products was in overseas markets outside of Korea. To the extent that we incur costs in one currency and make sales in another, our profit margins may be affected by changes in the exchange rates between the two currencies. Since the currency
in which sales are recorded may not be the same as the currency in which expenses are incurred, foreign exchange rate fluctuations may materially affect our results of operations. Depreciation of the Won may materially affect the results of our
operations because, among other things, it causes:



| |  |  | an increase in the amount of Won required for us to make interest and principal payments on our foreign currency-denominated debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in Won terms in the costs of raw materials and equipment that we purchase from overseas sources and a substantial portion of our freight costs, which
are denominated primarily in Dollars; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | foreign exchange translation losses on liabilities, which lower our earnings for accounting purposes.
| | - |  | -----------------------------------------------------------------------------------------------------

Appreciation of the Won against major currencies, on the other hand, causes:



| |  |  | our export products to be less competitive by raising our prices in Dollar terms; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | a reduction in net sales and accounts receivables in Won from export sales, which are primarily denominated in Dollars.
| | - |  | -----------------------------------------------------------------------------------------------------------------------

We try to minimize our exposure to currency fluctuations by attempting to maintain export sales, which result in foreign currency receipts, at a
level that covers foreign currency obligations to the extent feasible. As a result, a decrease in our export sales could increase our foreign exchange risks. We attempt to manage the remaining net exposure after natural hedges by entering into
derivative contracts such as forward exchange contracts. Although the impact of exchange rate fluctuations has in the past been partially mitigated by such strategies, our results of operations have historically been affected by exchange rate
fluctuations and there can be no assurance that such strategies will be sufficient to reduce or eliminate the adverse impact of such fluctuations in the future. Because of the larger positive effects of the appreciation of the Won (i.e., the reverse
of the negative effects caused by the depreciation of the Won, as discussed above), depreciation of the Won generally has a negative impact on our results of operations.

Fluctuations in the exchange rate between the Won and the Dollar will also affect the Dollar equivalent of the Won price of the shares of our common stock on the KRX KOSPI Market and, as a



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result, will likely affect the market price of the ADSs. These fluctuations will also affect the Dollar conversion by the depositary for the ADRs of cash dividends, if any, paid in Won on shares
of common stock represented by the ADSs.

We are dependent on imported raw materials, and significant increases in market prices
of essential raw materials could adversely affect our margins and profits.

We purchase substantially all of the principal raw
materials we use from sources outside Korea, including iron ore and coal. POSCO imported approximately 51.6 million dry metric tons of iron ore and 27.6 million wet metric tons of coal in 2011. Iron ore is imported primarily from
Australia, Brazil and South Africa. Coal is imported primarily from Australia, Canada and the United States. Although we have not experienced significant unanticipated supply disruptions in the past, supply disruptions, which could be caused by
political or other events in the countries from which we import these materials, could adversely affect our operations.

In addition, we
are particularly exposed to increases in the prices of coal, iron ore and nickel, which represent the largest components of our cost of goods sold. The prices of our key raw materials have fluctuated significantly in recent years. For example, the
average market price of coal per wet metric ton (benchmark free on board price of Australian premium hard coking coal) was US$172 in 2009, US$191 in 2010 and US$292in 2011. The average market price of iron ore per dry metric ton (free on board price
of Platts Iron Ore index with iron (Fe) 62% content) was US$68 in 2009, US$136 in 2010 and US$167 in 2011. Our long-term supply contracts generally have terms of three to ten years and provide for periodic price adjustments to the then-market
prices. We typically adjust the prices on a quarterly basis and maintain approximately one month of inventory of raw materials. Future increases in prices of our key raw materials and our inability to pass along such increases to our customers could
adversely affect our margins and profits. Increased prices may also cause potential customers to defer purchase of steel products, which would have an adverse effect on our business, financial condition and results of operations.

We operate in a highly competitive global steel industry, and our failure to successfully compete would adversely affect our market position
and business.

The markets for our products are highly competitive and we face intense global competition. In recent years,
driven in part by strong growth in steel consumption in the developing world, particularly in China, the global steel industry has experienced renewed interest in expansion of steel production capacity. China is the largest steel producing country
in the world by a significant margin, with the balance between its domestic production and demand being an important factor in the determination of global steel prices. In addition, the global steel industry has experienced consolidation in recent
years, including through the merger of Mittal and Arcelor in 2006 that created a company with approximately 10% of global steel production capacity. Competition from global steel manufacturers with expanded production capacity such as ArcelorMittal
and new market entrants, especially from China and India, have resulted in significant price competition and may result in declining margins and reductions in revenue. Our larger competitors may use their resources, which may be greater than ours,
against us in a variety of ways, including by making additional acquisitions, investing more aggressively in product development and capacity and displacing demand for our export products.

The increased production capacity, combined with a decrease in demand due to the recent slowdown of the global economy, has resulted in production
over-capacity in the global steel industry. Production over-capacity in the global steel industry may intensify if the slowdown of the global economy is prolonged or demand from developing countries that have experienced significant growth in the
past several years does not meet the recent growth in production capacity. Production over-capacity in the global steel industry is likely to:



| |  |  | reduce export prices in Dollar terms of our principal products, which in turn may reduce our sales prices in Korea;
| | - |  | -------------------------------------------------------------------------------------------------------------------



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| |  |  | increase competition in the Korean market as foreign producers seek to export steel products to Korea as other markets experience a slowdown;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | negatively affect demand for our products abroad and our ability to expand export sales; and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | affect our ability to increase steel production in general.
| | - |  | -----------------------------------------------------------

Steel also competes with other natural and synthetic materials that may be used as steel substitutes, such as aluminum, cement, composites, glass, plastic and wood. Government regulatory initiatives mandating the
use of such materials instead of steel, whether for environmental or other reasons, as well as the development of attractive alternative substitutes for steel products, may reduce demand for steel products and increase competition in the global
steel industry.

As part of our strategy to compete in this challenging landscape, we will continue to invest in developing innovative
products that offer the greatest potential returns and enhance the overall quality of our products, as well as make additional investments in the development of new manufacturing technologies. However, there is no assurance that we will be able to
continue to compete successfully in this economic environment or that the prolonged slowdown of the global economy or production over-capacity will not have a material adverse effect on our business, results of operations or financial condition.

We may not be able to successfully execute our diversification strategy.

In part to prepare for the eventual maturation of the Korean steel market, our overall strategy includes securing new growth engines by diversifying
into new businesses related to our steel operations that we believe will offer greater potential returns, such as participation in EPC (or engineering, procurement and construction) projects in the steel sector, as well as entering into new
businesses not related to our steel operations such as power generation and alternative energy solutions, production of comprehensive materials such as lithium, silicon, carbon and magnesium, information and technology consulting services, and
automation and system integration engineering services. From time to time, we may selectively acquire or invest in companies to pursue such diversification strategy. On September 20, 2010, we acquired a controlling interest in Daewoo
International for Won 3.37 trillion. Daewoo International is a global trading company that primarily engages in trading of steel and raw materials as well as investing in energy and mineral development projects. It also manufactures and sells
textiles, operates a department store in Korea, and holds a 24% interest in Kyobo Life Insurance, Koreas third largest life insurance company in terms of market share in 2011.

The success of the overall diversification strategy will depend, in part, on our ability to realize the growth opportunities and anticipated
synergies. The realization of the anticipated benefits depends on numerous factors, some of which are outside our control, including the availability of qualified personnel, establishment of new relationships and expansion of existing relationships
with various customers and suppliers, procurement of necessary technology and know-how to engage in such businesses and access to investment capital at reasonable costs. The realization of the anticipated benefits may be impeded, delayed or reduced
as a result of numerous factors, some of which are outside our control. These factors include:



| |  |  | difficulties in integrating the operations of the acquired business, including information and accounting systems, personnel, policies and procedures, and in
reorganizing or reducing overlapping operations, marketing networks and administrative functions, which may require significant amounts of time, financial resources and management attention;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unforeseen contingent risks or latent liabilities relating to the acquisition that may become apparent in the future;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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| |  |  | difficulties in managing a larger business; and
| | - |  | -----------------------------------------------



| |  |  | loss of key management personnel or customers.
| | - |  | ----------------------------------------------

Accordingly, we cannot assure you that our diversification strategy can be completed profitably or that the diversification efforts will not adversely affect our combined business, financial condition and results
of operations.

Expansion of our production operations abroad is important to our long-term success, and our limited experience in
the operation of our business outside Korea increases the risk that our international expansion efforts will not be successful.

We conduct international trading and construction operations abroad, and our business relies on a global trading network comprised of overseas
subsidiaries, branches and representative offices. Although many of our subsidiaries and overseas branches are located in developed countries, we also operate in numerous countries with developing economies. In addition, we intend to continue to
expand our production operations internationally by carefully seeking out promising investment opportunities, particularly in China, India, Southeast Asia and Latin America, in part to prepare for the eventual maturation of the Korean steel market.
We may enter into joint ventures with foreign steel producers that would enable us to rely on these businesses to conduct our operations, establish local networks and coordinate our sales and marketing efforts abroad. To the extent that we enter
into these arrangements, our success will depend in part on the willingness of our partner companies to dedicate sufficient resources to their partnership with us.

In other situations, we may decide to establish manufacturing facilities by ourselves instead of relying on partners. The demand and market acceptance for our products produced abroad are subject to a high level of
uncertainty and are substantially dependent upon the market condition of the global steel industry. We cannot assure you that our international expansion plan will be profitable or that we can recoup the costs related to such investments.

Expansion of our trading, construction and production operations abroad requires management attention and resources. In addition, we
face additional risks associated with our expansion outside Korea, including:



| |  |  | challenges caused by distance, language and cultural differences;
| | - |  | -----------------------------------------------------------------



| |  |  | higher costs associated with doing business internationally;
| | - |  | ------------------------------------------------------------



| |  |  | legal and regulatory restrictions, including foreign exchange controls that might prevent us from repatriating cash earned in countries outside Korea;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | longer payment cycles in some countries;
| | - |  | ----------------------------------------



| |  |  | credit risk and higher levels of payment fraud;
| | - |  | -----------------------------------------------



| |  |  | currency exchange risks;
| | - |  | ------------------------



| |  |  | potentially adverse tax consequences;
| | - |  | -------------------------------------



| |  |  | political and economic instability; and
| | - |  | ---------------------------------------



| |  |  | seasonal reductions in business activity during the summer months in some countries.
| | - |  | ------------------------------------------------------------------------------------

The March 11, 2011 natural disaster in Japan and its continuing effects could materially adversely affect our business.

On March 11, 2011, Japan experienced a 9.0 moment magnitude scale undersea earthquake, which triggered tsunami waves that
resulted in extensive and severe infrastructure damage throughout



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the eastern coast of Japan. The earthquake also caused a number of nuclear accidents, including an ongoing major accident at the Fukushima nuclear power plant, making it the most costly natural
disaster on record. Some of our Japanese suppliers of manufacturing equipment as well as our Japanese customers have temporarily suspended their operations due to the March 2011 natural disaster, and some continue to be affected by unreliable power,
shipping constraints, problems with their suppliers, and the continuing effects. Although we believe that we have sufficient access to manufacturing equipment typically sourced from Japan to cover our short-term needs, we may experience shortages or
delays in the supply of manufacturing equipment in the long-term. If we are not able to obtain such equipment from alternative sources on a timely basis or at commercially reasonable terms, or at all, it could adversely impact the production of our
products. In addition, sales to our customers located in Japan represented 12.7% of our total export sales volume for steel products in 2010 but decreased to 8.1% in 2011, and demand from such customers may further decrease as a result of the
slowdown in their business operations due to the recent natural disaster and its continuing effects.

We may from time to time
engage in acquisitions for which we may be required to seek additional sources of capital.

From time to time, we may selectively
acquire or invest in companies or businesses that may complement our business. In order to finance these acquisitions, we intend to use cash on hand, funds from operations, issuances of equity and debt securities, and, if necessary, financings from
banks and other sources as well as entering into consortiums with financial investors. However, no assurance can be given that we will obtain sufficient financing for such acquisitions or investments on terms commercially acceptable to us or at all.
We also cannot assure you that such financings and related debt payment obligations will not have a material adverse impact on our financial condition, results of operations or cash flow.

Further increases in, or new impositions of, anti-dumping or countervailing duty proceedings may have an adverse impact on our export sales.

Currently, several of our products are subject to anti-dumping or countervailing duty proceedings, in the United States and
several emerging markets. Our products that have been subject to anti-dumping or countervailing duty proceedings in the aggregate have not accounted for a material portion of our total sales in recent years. However, there can be no assurance that
increases in, or new impositions of, anti-dumping duties, countervailing duties, quotas or tariffs on our sales of products abroad may not have a material adverse impact on our exports in the future. See Item 4. Information on the Company
 Item 4.B. Business Overview  Markets  Exports.

Cyclical fluctuations based on macroeconomic factors
may adversely affect POSCO E&Cs business and performance.

In order to complement our steel operations, we engage in
engineering and construction activities through POSCO Engineering & Construction Co., Ltd. (POSCO E&C), an 89.5%-owned subsidiary. The construction segment, which accounted for approximately 7.9% of our consolidated sales in
2011 after adjusting for inter-company sales, is highly cyclical and tends to fluctuate based on macroeconomic factors, such as consumer confidence and income, employment levels, interest rates, inflation rates, demographic trends and policies of
the Government. Although we believe that POSCO E&Cs strategy of focusing on high-value-added plant construction and urban planning and development projects such as Songdo New City has enabled it to be exposed to a lesser degree to general
economic conditions in Korea in comparison to some of its domestic competitors, our construction revenues have fluctuated in the past depending on the level of domestic construction activity including new construction orders. POSCO E&Cs
construction operations could suffer in the future in the event of a general downturn in the construction market resulting in weaker demand, which could adversely affect POSCO E&Cs business, results of operations or financial condition.



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Many of POSCO E&Cs domestic and overseas construction projects are on a fixed-price
basis, which could result in losses for us in the event that unforeseen additional expenses arise with respect to the project.

Many of POSCO E&Cs domestic and overseas construction projects are carried out on a fixed-price basis according to a predetermined
timetable, pursuant to the terms of a fixed-price contract. Under such fixed-price contracts, POSCO E&C retains all cost savings on completed contracts but is also liable for the full amount of all cost overruns and may be required to pay
damages for late delivery. The pricing of fixed-price contracts is crucial to POSCO E&Cs profitability, as is its ability to quantify risks to be borne by it and to provide for contingencies in the contract accordingly.

POSCO E&C attempts to anticipate costs of labor, raw materials, parts and components in its bids on fixed-price contracts. However, the costs
incurred and gross profits realized on a fixed-price contract may vary from its estimates due to factors such as:



| |  |  | unanticipated variations in labor and equipment productivity over the term of a contract;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | unanticipated increases in labor, raw material, parts and components, subcontracting and overhead costs, including as a result of bad weather;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delivery delays and corrective measures for poor workmanship; and
| | - |  | -----------------------------------------------------------------



| |  |  | errors in estimates and bidding.
| | - |  | --------------------------------

If unforeseen additional expenses arise over the course of a construction project, such expenses are usually borne by POSCO E&C, and its profit
from the project will be correspondingly reduced or eliminated. If POSCO E&C experiences significant unforeseen additional expenses with respect to its fixed price projects, it may incur losses on such projects, which could have a material
adverse effect on its financial condition and results of operations.

POSCO E&Cs domestic residential property business
is highly dependent on the real estate market in Korea.

The performance of POSCO E&Cs domestic residential property
business is highly dependent on the general condition of the real estate market in Korea. The construction industry in Korea is experiencing a downturn due to excessive investment in recent years in residential property development projects,
stagnation of real property prices and reduced demand for residential property, especially in areas outside of Seoul. In addition, as liquidity and credit concerns and volatility in the global financial markets increased significantly starting in
September 2008, there has been a general decline in the willingness by banks and other financial institutions in Korea to engage in project financing and other lending activities to construction companies, which may adversely impact POSCO
E&Cs ability to meet its desired funding needs. The Government has taken measures to support the Korean construction industry, including easing of regulations imposed on redevelopment of apartment buildings and resale restrictions in the
metropolitan areas, as well as reductions in property taxes. Although the Korean real estate market has temporarily recovered since the second half of 2009 and into 2010, declines in demand and price took place in the Korean real estate market in
2011 due to the downturn of the domestic economic cycle and financial risk in Europe.

We are subject to environmental
regulations, and our operations could expose us to substantial liabilities.

We are subject to national and local environmental
laws and regulations, including increasing pressure to reduce emission of carbon dioxide relating to our manufacturing process, and our steel manufacturing and construction operations could expose us to risk of substantial liability relating to
environmental or health and safety issues, such as those resulting from discharge of pollutants and



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carbon dioxide into the environment, the handling, storage and disposal of solid or hazardous materials or wastes and the investigation and remediation of contaminated sites. We may be
responsible for the investigation and remediation of environmental conditions at currently and formerly operated manufacturing or construction sites. We may also be subject to associated liabilities, including liabilities for natural resource
damage, third party property damage or personal injury resulting from lawsuits brought by the government or private litigants. In the course of our operations, hazardous wastes may be generated at third party-owned or operated sites, and hazardous
wastes may be disposed of or treated at third party-owned or operated disposal sites. If those sites become contaminated, we could also be held responsible for the cost of investigation and remediation of such sites, for any associated natural
resource damage, and for civil or criminal fines or penalties.

Failure to protect our intellectual property rights could impair
our competitiveness and harm our business and future prospects.

We believe that developing new steel manufacturing technologies
that can be differentiated from those of our competitors, such as FINEX, strip casting and silicon steel manufacturing technologies, is critical to the success of our business. We take active measures to obtain protection of our intellectual
property by obtaining patents and undertaking monitoring activities in our major markets. However, we cannot assure you that the measures we are taking will effectively deter competitors from improper use of our proprietary technologies. Our
competitors may misappropriate our intellectual property, disputes as to ownership of intellectual property may arise and our intellectual property may otherwise become known or independently developed by our competitors. Any failure to protect our
intellectual property could impair our competitiveness and harm our business and future prospects.

We rely on trade secrets and
other unpatented proprietary know-how to maintain our competitive position, and unauthorized disclosure of our trade secrets or other unpatented proprietary know-how could negatively affect our business.

We rely on trade secrets and unpatented proprietary know-how and information. We enter into confidentiality agreements with each of our employees
and consultants upon the commencement of an employment or consulting relationship. These agreements generally provide that all inventions, ideas, discoveries, improvements and patentable material made or conceived by the individual arising out of
the employment or consulting relationship and all confidential information developed or made known to the individual during the term of the relationship is our exclusive property. We cannot assure the enforceability of these types of agreements, or
that they will not be breached. We also cannot be certain that we will have adequate remedies for any breach. The disclosure of our trade secrets or other know-how as a result of such a breach could adversely affect our business.

Escalations in tensions with North Korea could have an adverse effect on us and the market value of our securities.

Relations between Korea and North Korea have been tense throughout Koreas modern history. The level of tension between the two Koreas has
fluctuated and may increase abruptly as a result of current and future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of North Koreas political leadership
and concern regarding its implications for political and economic stability in the region. Although Kim Jong-il designated his third son, Kim Jong-eun, as his successor prior to his death, the eventual outcome of such leadership transition remains
uncertain. Only limited information is available about Kim Jong-eun, who is reported to be in his late twenties, and it remains unclear which individuals or factions, if any, will share political power with Kim Jong-eun or assume the leadership if
the transition is not successful.

In addition, there have been heightened security concerns in recent years stemming from North
Koreas nuclear weapon and long-range missile programs as well as its hostile military actions against Korea. North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January



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2003 followed by a nuclear test in October 2006, which increased tensions in the region and elicited strong objections worldwide. In May 2009, North Korea announced that it had successfully
conducted a second nuclear test and test-fired three short-range surface-to-air missiles. In response, the United Nations Security Council unanimously passed a resolution that condemned North Korea for the nuclear test and decided to expand and
tighten sanctions against North Korea. In February 2012, North Korea agreed with the United States to suspend its uranium enrichment activities, place a moratorium on nuclear and long-range missile tests and allow United Nations International
Atomic Energy Agency inspectors to monitor activities at its main nuclear complex in exchange for food aid. However, in April 2012, North Korea failed in its attempt to launch a satellite using a long-range rocket, despite concerns in the
international community that such a launch would be in violation of the recent agreement with the United States as well as United Nations Security Council resolutions that prohibit North Korea from conducting launches that use ballistic missile
technology. Moreover, in March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea has denied
responsibility. In November 2010, North Korea reportedly fired more than one hundred artillery shells that hit Koreas Yeonpyeong Island near the maritime border between Korea and North Korea off the west coast of the Korean peninsula, killing
two Korean soldiers and two civilians, wounding many others and causing significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be further provocation.

North Koreas economy also faces severe challenges. In November 2009, the North Korean government redenominated its currency at a ratio of 100
to 1 as part of a currency reform undertaken in an attempt to control inflation and reduce income gaps. In tandem with the currency redenomination, the North Korean government banned the use or possession of foreign currency by its residents and
closed down privately run markets, which led to severe inflation and food shortages. Such developments may further aggravate social and political tensions within North Korea. There can be no assurance that the level of tension on the Korean
peninsula will not escalate in the future. Any further increase in tensions could have a material adverse effect on the Korean economy and on our business, results of operations and financial condition as well as the prices of our securities.

If you surrender your ADRs to withdraw shares of our common stock, you may not be allowed to deposit the shares again to obtain
ADRs.

Under the deposit agreement, holders of shares of our common stock may deposit those shares with the ADR depositarys
custodian in Korea and obtain ADRs, and holders of ADRs may surrender ADRs to the ADR depositary and receive shares of our common stock. However, under current Korean laws and regulations, the depositary bank is required to obtain our prior consent
for the number of shares to be deposited in any given proposed deposit that exceeds the difference between (i) the aggregate number of shares deposited by us for the issuance of ADSs (including deposits in connection with the initial and all
subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (ii) the number of shares on deposit with the depositary bank at the time of such proposed deposit. It is possible that we may not give the consent.
As a result, if you surrender ADRs and withdraw shares of common stock, you may not be able to deposit the shares again to obtain ADRs. See Item 10. Additional Information  Item 10.D. Exchange Controls.

You may not be able to exercise preemptive rights for additional shares of common stock and may suffer dilution of your equity interest in
us.

The Commercial Code and our articles of incorporation require us, with some exceptions, to offer shareholders the right to
subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we issue new shares to persons other than our shareholders (See Item 10.B. Memorandum and Articles of Association 
Preemptive Rights and Issuance of Additional Shares), a holder of our ADSs will experience dilution of such holding. If none



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of these exceptions is available, we will be required to grant preemptive rights when issuing additional common shares under Korean law. Under the deposit agreement governing the ADSs, if we
offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the ADR depositary, after consultation with us, may make the rights available to you or use reasonable efforts to dispose of the rights on
your behalf and make the net proceeds available to you. The ADR depositary, however, is not required to make available to you any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:



| |  |  | a registration statement filed by us under the Securities Act is in effect with respect to those shares; or
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the offering and sale of those shares is exempt from or is not subject to the registration requirements of the Securities Act.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

We are under no obligation to file any registration statement under the Securities Act to enable you to exercise preemptive rights in respect of the
common shares underlying the ADSs, and we cannot assure you that any registration statement would be filed or that an exemption from the registration requirement under the Securities Act would be available. Accordingly, if a registration statement
is required for you to exercise preemptive rights but is not filed by us, you will not be able to exercise your preemptive rights for additional shares and may suffer dilution of your equity interest in us.

U.S. investors may have difficulty enforcing civil liabilities against us and our directors and senior management.

We are incorporated in Korea with our principal executive offices located in Seoul. The majority of our directors and senior management are
residents of jurisdictions outside the United States, and the majority of our assets and the assets of such persons are located outside the United States. As a result, U.S. investors may find it difficult to effect service of process within the
United States upon us or such persons or to enforce outside the United States judgments obtained against us or such persons in U.S. courts, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. It may
also be difficult for an investor to enforce in U.S. courts judgments obtained against us or such persons in courts in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the U.S. federal
securities laws. It may also be difficult for a U.S. investor to bring an action in a Korean court predicated upon the civil liability provisions of the U.S. federal securities laws against our directors and senior management and non-U.S. experts
named in this annual report.

We could be adversely affected if the U.S. government were to determine that our affiliates
Iran-related business activities are sanctionable under the U.S. Iranian sanction laws and regulations.

We acquired a
controlling interest in Sungjin Geotec Co., Ltd. (Sungjin Geotec), a manufacturer of specialized equipment used in the power and energy industries in May 2010, and we currently hold a 36.7% interest in the company. In recent years,
Sungjin Geotec entered into contracts with various suppliers to supply equipment for the development of natural gas fields in Iran, including natural gas fields located in South Pars that is led by Pars Oil and Gas Company, a subsidiary of National
Iranian Oil Company. Sungjin Geotec recognized revenues of approximately Won 76.2 billion in 2010 and Won 28.3 billion in 2011 from such activities, and it expects to complete all of such contracts by May 2012.

In July 2010, the United States adopted legislation that expands U.S. economic sanctions against foreign companies doing business with Iran in
certain sectors. The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (the CISADA) expands the scope of sanctionable activities by, among other things, broadening the definition of investment under the
Iran



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Sanctions Act (the ISA) arguably to include the supply of goods for use in petroleum and gas production. The CISADA also expands the severity of potential sanctions available under
the ISA and imposes mandatory investigation and reporting requirements designed to increase the likelihood of enforcement. The CISADA requires the imposition of sanctions against parties found by the U.S. administration, following an investigation,
to have engaged in conduct sanctionable under the ISA, subject to certain waiver provisions and exceptions.

Under the ISA, as amended,
sanctions can also be imposed against a company that has actual knowledge of, or should have known of, sanctionable conduct engaged in by another company that it owns or controls. A range of sanctions may be imposed on companies that engage in
sanctionable activities, including among other things the blocking of any property subject to U.S. jurisdiction in which the sanctioned company has an interest, which could include a prohibition on transactions or dealings involving securities of
the sanctioned company. By its terms, the CISADA is applicable to certain investments in Iran that commenced on or after July 1, 2010, and it is not clear whether a supply of equipment after that date pursuant to a legally binding contractual
obligation that arose prior to July 1, 2010 would or would not be determined to be sanctionable under the CISADA.

Sungjin
Geotecs supply contracts described above and/or performance thereunder may be sanctionable under the CISADA if the CISADAs revised definition of investment is interpreted to cover the supply of goods to parties developing gas
fields in Iran and if future performance under the supply contract is not considered to have commenced prior to the enactment of the CISADA. Accordingly, there can be no assurance that Sungjin Geotecs Iran-related business
activities do not constitute sanctionable activities or that we will not be subjected to sanctions under the ISA as amended by the CISADA. Our business and reputation could be adversely affected if the U.S. government were to determine that Sungjin
Geotecs Iran-related business activities constitute sanctionable activity attributable to us. Investors in our securities may also be adversely affected if we are sanctioned under the CISADA or if their investment in the securities is
restricted under any sanctions regimes with which the investors are required to comply. As noted above, sanctions under the ISA could include the blocking of any property in which we have an interest, which would effectively prohibit all U.S.
persons from receiving any payments from us, or otherwise acquiring, holding, withholding, using, transferring, withdrawing, transporting, importing, or exporting any property in which we have any interest.

We expect to continue operations and investments relating to countries targeted by United States and European Union economic sanctions.

The U.S. Department of the Treasurys Office of Foreign Assets Control, or OFAC, enforces certain laws and
regulations (OFAC Sanctions) that impose restrictions upon U.S. persons and, in some instances, foreign entities owned or controlled by U.S. persons, with respect to activities or transactions with certain countries, governments,
entities and individuals that are the subject of OFAC Sanctions (U.S. Sanctions Targets). U.S. persons are also generally strictly prohibited from facilitating such activities or transactions. Similarly, the European Union enforces
certain laws and regulations (E.U. Sanctions) that impose restrictions upon nationals of E.U. member states, persons located within E.U. member states, entities incorporated or constituted under the law of an E.U. member state, or
business conducted in whole or in part in E.U. member states with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of E.U. Sanctions (E.U. Sanctions Targets and
together with U.S. Sanctions Targets, Sanctions Targets). E.U. persons are also generally prohibited from activities that promote such activities or transactions.

We engage in limited business activities and investments relating to Sanctions Targets, including Iran, Myanmar and Sudan. We produce and sell, typically through our sales subsidiaries, steel products to Sanctions
Targets, including automotive steel sheets and other steel materials to Iranian entities. Our subsidiaries also engage in limited business activities and investments relating to Sanctions Targets. In particular, Daewoo International, a global
trading company in which we hold a



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66.6% interest, engages in the trading of steel, raw materials and other items with Sanctions Targets, including Iran and Sudan. Daewoo International also has a portfolio of investments in energy
exploration and production projects, including a gas field exploration project in Myanmar, in which Daewoo International had invested Won 803 billion as of December 31, 2011 and plans to make substantial further investments in the future. This
project is not expected to generate any revenues until 2013. POSCO E&C, a construction company in which we hold an 89.5% interest, engages in the planning, design and construction of industrial facilities in Iran. We also hold a 70.0% interest
in Myanmar-POSCO Steel Co., Ltd., an entity that is an E.U. Sanctions Target under Council Regulation (EC) No. 194/2008, as amended. Our activities and investments do not involve any U.S. goods or services, and we do not export or re-export
U.S. goods or services directly or indirectly to any Sanctions Target. For each of 2010 and 2011, our activities and investments relating to Sanctions Targets accounted for less than 1.0% of our total consolidated revenues and total consolidated
assets, respectively.

We expect to continue to engage in business activities and make investments in Sanctions Targets over the
foreseeable future. Although we believe that OFAC Sanctions under their current terms are not applicable to our activities, our reputation may be adversely affected, some of our U.S. investors may be required to divest their investments in us under
the laws of certain U.S. states or under internal investment policies or may decide for reputational reasons to divest such investments, and some U.S. institutional investors may forego the purchase of our Notes. We are aware of initiatives by U.S.
governmental entities and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations, or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with
countries identified as state sponsors of terrorism. We cannot assure you that the foregoing will not occur or that such occurrence will not have a material adverse effect on the value of our securities.

This annual report contains forward-looking statements that are subject to various risks and uncertainties.

This annual report contains forward-looking statements that are based on our current expectations, assumptions, estimates and
projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as
anticipate, believe, estimate, expect, intend, project, should, and similar expressions. Those statements include, among other things, the discussions of our
business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that
although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be
incorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed above. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and
objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.

Item 4.Information on the Company

Item 4.A.History and Development of the Company

We were established by the Government on April 1, 1968, under the Commercial Code, to manufacture and distribute steel rolled products and plates in the domestic and overseas markets. The Government owned more than
70% of our equity until 1988, when the Government reduced its ownership of our common stock to 35% through a public offering and listing our shares on the KRX



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KOSPI Market. In December 1998, the Government sold all of our common stock it owned directly, and The Korea Development Bank completed the sale of our shares that it owned in September 2000. The
Government no longer holds any direct interest in us, and our outstanding common stock is currently held by individuals and institutions. See Item 7. Major Shareholders and Related Party Transactions  Item 7A. Major
Stockholders.

Our legal and commercial name is POSCO. Our principal executive offices are located at POSCO Center, 892
Daechi-4-dong, Gangnam-gu, Seoul, Korea, and our telephone number is (822) 3457-0975.

Item 4.B.Business Overview

The Company

We are the largest fully
integrated steel producer in Korea, and one of the largest steel producers in the world, based on annual crude steel production. We produced approximately 39.1 million tons of crude steel in 2011 and approximately 35.4 million tons in
2010, a substantial portion of which was produced at Pohang Works and Gwangyang Works. As of December 31, 2011, Pohang Works had 16.7 million tons of annual crude steel and stainless steel production capacity, and Gwangyang Works had an annual
crude steel production capacity of 20.8 million tons. We believe Pohang Works and Gwangyang Works are two of the most technologically advanced integrated steel facilities in the world. We manufacture and sell a diversified line of steel
products, including hot rolled and cold rolled products, plates, wire rods, silicon steel sheets and stainless steel products, and we are able to meet a broad range of customer needs from manufacturing industries that consume steel, including
automotive, shipbuilding, home appliance, engineering and machinery industries.

We sell primarily to the Korean market. Domestic sales
accounted for 55.1% of our total sales volume of steel products in 2011 and 62.7% in 2010. We believe that we had an overall market share of approximately 41% of the total sales volume of steel products sold in Korea in 2011 and approximately 40% in
2010. Our export sales and overseas sales to customers abroad accounted for 44.9% of our total sales volume of steel products in 2011 and 37.3% in 2010. Our major export market is Asia, with Asia other than China and Japan accounting for 28.4%,
China 19.3% and Japan 8.1% of our total steel export sales volume in 2011 and China accounting for 27.0%, Asia other than China and Japan 24.9% and Japan 12.7% of our total steel export sales volume in 2010.

We also engage in businesses that complement our steel manufacturing operations as well as carefully seek out promising investment opportunities to
diversify our businesses both vertically and horizontally, in part to prepare for the eventual maturation of the Korean steel market. POSCO E&C, our consolidated subsidiary in which we hold an 89.53% interest, is one of the leading engineering
and construction companies in Korea that primarily engages in the planning, design and construction of industrial plants and architectural works and civil engineering. Daewoo International, our consolidated subsidiary in which we acquired a
controlling interest in September 2010 for Won 3.37 trillion, is a global trading company that primarily engages in trading of steel and raw materials as well as investing in energy and mineral development projects throughout the world. Daewoo
International also holds a 24% interest in Kyobo Life Insurance, Koreas third largest life insurance company in terms of market share in 2011. POSCO Energy Corporation, our wholly-owned consolidated subsidiary, is the largest private power
generation company in Korea.

We generated revenue of Won 68,939 billion and profit for the period of Won 3,714 billion in 2011, compared
to revenue of Won 47,887 billion and profit for the period of Won 4,186 billion in 2010. We had total assets of Won 78,409 billion and total equity of Won 40,730 billion as of December 31, 2011, compared to total assets of Won 69,418 billion
and total equity of Won 38,537 billion as of December 31, 2010.



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Business Strategy

Leveraging on our success during the past four decades, our goal is to strengthen our position as one of the leading steel producers in the world and strive to rank among the top three global steel companies in
technology leadership, operational excellence and production capacity. In order to compete effectively in the dynamic global market environment driven by emerging economies and increasing demand for more environmentally friendly products, we are
committed to leveraging our competitive advantages and further enhancing our leadership positions. We believe that our proprietary technologies and expertise in developing environmentally-friendly steel production facilities, ability to
independently construct such facilities, and know-how in their efficient operation and management enables us to develop differentiated steel products at a highly competitive cost structure.

We also plan to selectively explore opportunities in growth industries that are integral to our overall business model, and we have identified
steel, comprehensive materials, energy and new businesses as our key areas of focus. We seek to strengthen our competitiveness and pursue growth through the following core business strategies:

Seek Opportunities for EPC Projects and Expand Our Production and Supply Chain Management Infrastructure Abroad

Drawing on our expertise in steel production, construction capabilities of POSCO E&C and natural resources exploration and production know-how
of Daewoo International, POSCO Group plans to carefully seek out promising business opportunities abroad for EPC (or engineering, procurement and construction) projects in the steel sector. We seek out promising investment opportunities abroad,
primarily in China, India, Southeast Asia and Latin America, in part to prepare for the eventual maturation of the Korean steel market. We believe that China, India, Southeast Asia and Latin America will continue to offer substantial growth
opportunities, and we plan to selectively seek investment opportunities to secure development rights to natural resources and construct steel production facilities. For example, we obtained the approval of the Government of India in May 2011 to
construct an integrated steel mill in Orissa State, and we are currently in the process of acquiring the land on which the plant will be constructed. However, the National Green Tribunal, a special court in India that handles the expeditious
disposal of cases pertaining to environmental issues, ruled in March 2012 that the Ministry of Environment should reassess the conditions on which clearance was granted for the project, and we are waiting for the ministrys review of the
tribunals ruling. With respect to development of iron ore mines in Orissa State, we are waiting for the final judgment from the Indian Supreme Court on mining rights.

In June 2010, we also signed a memorandum of understanding with the Government of Karnataka, a state in southwest India, to construct an integrated steel mill in Karnataka, and we are in discussions with the
Government of Karnataka to obtain a mining lease and secure land with appropriate infrastructure.

We are also building a global
distribution network of supply chain management centers to provide processing and logistics services and more effectively respond to changes in consumer trends in the global steel market. In 2011, we operated 54 supply chain management centers
worldwide that recorded aggregate sales of 4.2 million tons of steel products.We plan to continue expanding our global network of supply chain management centers.

Maintain Technology Leadership in Steel Manufacturing

As part of our strategy, we have
identified core products that we plan to further develop, such as premium automotive steel sheets, silicon steel and API-grade steel, and we will continue to invest in developing innovative products that offer the greatest potential returns and
enhance the overall quality of our products. In order to increase our competitiveness and the proportion of our sales of higher



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margin, higher value-added products, we plan to make additional investments in the development of new manufacturing technologies and upgrade our facilities through continued modernization and
rationalization.

We will continue to refine FINEX, a low cost, environmentally friendly steel manufacturing process that optimizes our
production capacity by utilizing non-agglomerated iron ore fines and using non-coking coal as an energy source and a reducing agent. We believe that FINEX offers considerable environmental and economic advantages through elimination of major sources
of pollution such as sintering and coking plants, as well as reducing operating and raw material costs. In recent years, we have developed proprietary manufacturing technology using a compact endless cast rolling mill that combines the FINEX process
with an advanced basic oxygen steelmaking process that uses more scrap in place of pig iron, which enables us to manufacture products at a highly competitive cost structure with lower carbon dioxide emission. Our compact endless cast rolling mill
directly casts coils from liquid steel and uses a rolling process that rolls hot rolled coils up to 40 slabs at a time.

Diversify
into Production of Comprehensive Materials, including Lithium, Silicon, Carbon and Magnesium

We plan to leverage our expertise
in production of various steel-applied materials and venture into the fast-growing and high value-added business of producing environmentally friendly comprehensive materials. We have identified lithium, silicon, carbon and magnesium as our main
investment areas. Demand for lithium, which is used as an anode material in lithium ion batteries, has been increasing in recent years, and we have developed proprietary technology to extract lithium from its brine in approximately one month
compared to twelve months through conventional production processes. Silicon is a critical element in production of semiconductors and solar cells, and we believe that we are well positioned to take advantage of growth opportunities in this market
due to similarities in production of silicon with production of crude steel. We believe we are also able to leverage our expertise in production of crude steel to cost-effective production of carbon and magnesium, which have wide application of
industrial use.

Further Develop Our Capabilities to become an Integrated Provider of Energy Solutions

We plan to pursue strategic synergies with our member companies of the POSCO Group to further strengthen our capabilities in the energy industry.
POSCO Energy Corporation, our wholly-owned subsidiary, is the largest private power generation company in Korea. POSCO E&C, our consolidated subsidiary in which we hold an 89.5% interest, is one of the leading engineering and construction
companies in Korea with expertise in the design and construction of power plants. Daewoo International, our consolidated subsidiary in which we hold a 66.6% interest, engages in various natural resources procurement and energy development projects
around the world. In order to secure adequate procurement of principal raw materials, we have also invested in and will continue to explore additional investment opportunities in various raw material development projects abroad, as well as enter
into long-term contracts with leading suppliers of iron ore, coal and nickel, principally in Australia and Brazil. We believe that the energy industry is a sustainable business area that offers us attractive opportunities. We will continue to seek
opportunities in natural resources development and further expand our power generation and alternative energy solutions businesses, as well as pursue participation in additional power plant projects abroad.

Pursue Cost-Cutting through Operational and Process Innovations

We seek to achieve cost reductions in this era of increasing raw material costs through our company wide process for innovation and enhancing
efficiency of operations. We believe that strategic cost cutting measures through utilization of efficient production methods and management discipline will strengthen our corporate competitiveness. After implementation of Six Sigma innovations in
recent



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years, we are now implementing the Quick Six Sigma program, a customized program that we believe will enhance our corporate culture that rewards innovative ideas at all stages of our operations
and enable us to benchmark successful innovations to all relevant processes within the company. We will also strive to invest more in human resources development to nurture employees who are capable of working in the global environment.

Selectively Seek Opportunities in Growth Industries

We will continue to selectively seek opportunities in growth industries to diversify our business both vertically and horizontally. Through POSCO ICT Co., Ltd., a 72.5%-owned subsidiary, we engage in information
and technology consulting services as well as automation and system integration engineering services. POSCO E&C is one of the leading engineering and construction companies in Korea that primarily engages in the planning, design and construction
of industrial plants and architectural works and civil engineering. On September 20, 2010, we acquired a controlling interest in Daewoo International Corporation for Won 3.37 trillion. Daewoo International is a global trading company that
primarily engages in trading of steel and raw materials as well as investing in energy development projects. We will continue to selectively seek opportunities to indentify new growth engines and diversify our operations.

Major Products

We manufacture and sell a
broad line of steel products, including the following:



| |  |  | hot rolled products;
| | - |  | --------------------



| |  |  | plates;
| | - |  | -------



| |  |  | wire rods;
| | - |  | ----------



| |  |  | cold rolled products;
| | - |  | ---------------------



| |  |  | silicon steel sheets; and
| | - |  | -------------------------



| |  |  | stainless steel products.
| | - |  | -------------------------

The
tables below set out our sales revenues and sales volume by major steel product categories for the periods indicated.



|                         |  |                                 |        |  |      |  |       |                |  |  |        |  |  |  |       | 
|------------------------ |  | ------------------------------- | ------ |  | ---- |  | ----- | -------------- |  |  | ------ |  |  |  | ----- | 
|                         |  | For the Year Ended December 31, |       
|                         |  | 2010                            |        |  | 2011 | 
|Steel Products           |  | Billions ofWon                  |        |  | %    |  |       | Billions ofWon |  |  | %      | 
|Hot rolled products      |  |                                 | 6,583  |  |      |  | 17.2  |                |  |  | 5,896  |  |  |  | 13.7  | 
|Plates                   |  |                                 | 4,196  |  |      |  | 11.0  |                |  |  | 5,770  |  |  |  | 13.4  | 
|Wire rods                |  |                                 | 2,494  |  |      |  | 6.5   |                |  |  | 2,885  |  |  |  | 6.7   | 
|Cold rolled products     |  |                                 | 13,080 |  |      |  | 34.2  |                |  |  | 12,502 |  |  |  | 29.0  | 
|Silicon steel sheets     |  |                                 | 1,674  |  |      |  | 4.4   |                |  |  | 1,719  |  |  |  | 4.0   | 
|Stainless steel products |  |                                 | 7,178  |  |      |  | 18.8  |                |  |  | 6,785  |  |  |  | 15.8  | 
|Others (1)               |  |                                 | 3,000  |  |      |  | 7.9   |                |  |  | 7,513  |  |  |  | 17.4  | 
|                         |  |                                 |        |  |      |  |       |                |  |  |        |  |  |  |       | 
|Total                    |  |                                 | 38,206 |  |      |  | 100.0 |                |  |  | 43,070 |  |  |  | 100.0 | 
|                         |  |                                 |        |  |      |  |       |                |  |  |        |  |  |  |       | 





|(1) | Including all revenue from sale of steel products by Daewoo International. Such revenue was consolidated in 2010 only from the date of our acquisition of Daewoo International on
September 20, 2010, compared to consolidation for the full year in 2011. Prior to September 20, 2010, sales revenue of steel products sold by us to Daewoo International was classified under the applicable steel product category.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                         |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 
|------------------------ |  | ------------------------------- | ------ |  | ---- |  | ----- | ---------------- |  |  | ------ |  |  |  | ----- | 
|                         |  | For the Year Ended December 31, |       
|                         |  | 2010                            |        |  | 2011 | 
|Steel Products           |  | Thousandsof Tons                |        |  | %    |  |       | Thousandsof Tons |  |  | %      | 
|Hot rolled products      |  |                                 | 7,585  |  |      |  | 22.5  |                  |  |  | 6,600  |  |  |  | 17.2  | 
|Plates                   |  |                                 | 4,274  |  |      |  | 12.7  |                  |  |  | 5,272  |  |  |  | 13.8  | 
|Wire rods                |  |                                 | 2,273  |  |      |  | 6.7   |                  |  |  | 2,455  |  |  |  | 6.4   | 
|Cold rolled products     |  |                                 | 12,974 |  |      |  | 38.4  |                  |  |  | 11,843 |  |  |  | 30.9  | 
|Silicon steel sheets     |  |                                 | 1,025  |  |      |  | 3.0   |                  |  |  | 981    |  |  |  | 2.6   | 
|Stainless steel products |  |                                 | 2,381  |  |      |  | 7.1   |                  |  |  | 2,235  |  |  |  | 5.8   | 
|Others (1)               |  |                                 | 3,241  |  |      |  | 9.6   |                  |  |  | 8,915  |  |  |  | 23.3  | 
|                         |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 
|Total                    |  |                                 | 33,754 |  |      |  | 100.0 |                  |  |  | 38,300 |  |  |  | 100.0 | 
|                         |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 





|(1) | Including all sales volume of steel products sold by Daewoo International. Such sales volume was consolidated in 2010 only from the date of our acquisition of Daewoo
International on September 20, 2010, compared to consolidation for the full year in 2011. Prior to September 20, 2010, sales volume of steel products sold by us to Daewoo International was classified under the applicable steel product category.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The sales revenue and sales volume in the tables above represent the steel product sales of our consolidated entities
which are steel-related companies but do not include the non-steel product sales of these entities. They include sales by our consolidated subsidiaries of steel products purchased by these subsidiaries from third parties, including trading companies
to which we sell steel products. The sales of steel products purchased from third parties amounted to approximately 2.2 million tons in 2010 and 9.2 million tons in 2011, accounting for Won 1,708 billion in 2010 and Won 7,972 billion in
2011, respectively.

Prior to our acquisition of Daewoo international on September 20, 2010, the sales revenue and sales volume of
steel products sold by us to Daewoo International were classified under the applicable steel product category in the tables above, compared to all of such steel products being classified as others subsequent to our acquisition on
September 20, 2010. Such categorization resulted in a substantial increase in the sales revenue and sales volume of the others category from 2010 to 2011 while decreasing the sales revenue and sales volume of each of the remaining
product categories during the corresponding periods.

Hot Rolled Products

Hot rolled coils and sheets have many different industrial applications. They are used to manufacture structural steel used in the construction of
buildings, industrial pipes and tanks, and automobile chassis. Hot rolled coil is also manufactured in a wide range of widths and thickness as the feedstock for higher value-added products such as cold rolled products and silicon steel sheets.

Our deliveries of hot rolled products amounted to 6.6 million tons in 2011, representing 17.2% of our total sales volume of steel
products. The Korean market accounted for 5.2 million tons or 78.5% of our hot rolled product sales in 2011, representing a domestic market share of approximately 39%. The largest customers of our hot rolled products are downstream steelmakers
in Korea which use the products to manufacture pipes and cold rolled products.

Hot rolled products constitute our second largest product
category in terms of sales volume and third largest product category in terms of revenue. In 2011, our sales volume of hot rolled products decreased by 13.0% compared to 2010 primarily due to classification of our sales of hot rolled products to
Daewoo International as others starting on September 20, 2010, as well as a decrease in demand from downstream steelmakers in Korea and abroad.



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Plates

Plates are used in shipbuilding, structural steelwork, offshore oil and gas production, power generation, mining, and the manufacture of earth-moving and mechanical handling equipment, boiler and pressure vessels
and other industrial machinery.

Our deliveries of plates amounted to 5.3 million tons in 2011, representing 13.8% of our total
sales volume of steel products. The Korean market accounted for 4.7 million tons or 88.3% of our plate sales in 2011, representing a domestic market share of approximately 37%. The Korean shipbuilding industry, which uses plates to manufacture
chemical tankers, rigs, bulk carriers and containers, and the construction industry are our largest customers of plates.

In 2011, our
sales volume of plates increased by 23.3% compared to 2010, reflecting an increase in demand from the shipbuilding industry.

Wire
Rods

Wire rods are used mainly by manufacturers of wire, fasteners, nails, bolts, nuts and welding rods. Wire rods are also used
in the manufacture of coil springs, tension bars and tire cords in the automotive industry.

Our deliveries of wire rods amounted to
2.5 million tons in 2011, representing 6.4% of our total sales volume of steel products. The Korean market accounted for 1.9 million tons or 78.0% of our wire rod sales in 2011, representing a domestic market share of approximately 48%.
The largest customers for our wire rods are manufacturers of wire ropes and fasteners.

In 2011, our sales volume of wire rods increased
by 8.0% compared to 2010, reflecting an increase in demand from the domestic automotive industry.

Cold Rolled Products

Cold rolled coils and further refined galvanized cold rolled products are used mainly in the automotive industry to produce car
body panels. Other users include the household goods, electrical appliances, engineering and metal goods industries.

Our deliveries of
cold rolled products amounted to 11.8 million tons in 2011, representing 30.9% of our total sales volume of steel products. The Korean market accounted for 6.4 million tons or 54.3% of our cold rolled product sales in 2011, representing a
domestic market share of approximately 49%.

Cold rolled products constitute our largest product category in terms of sales volume and
revenue. In 2011, our sales volume of cold rolled products decreased by 8.7% compared to our sales volume in 2010 primarily due to classification of our sales of cold rolled products to Daewoo International as others starting on
September 20, 2010, as well as a decrease in demand from abroad, reflecting a downturn of the global economy in the second half of 2011.

Silicon Steel Sheets

Silicon steel sheets are used mainly in the manufacture of power
transformers and generators and rotating machines.

Our deliveries of silicon steel sheets amounted to 1.0 million tons in 2011,
representing 2.6% of our total sales volume of steel products. The Korean market accounted for 543 thousand tons or 55.4% of our silicon steel sheet sales in 2011, representing a domestic market share of approximately 91%.

In 2011, our sales volume of silicon steel sheets decreased by 4.3% compared to 2010 due to a decrease in demand from manufacturers of power
transformers and generators.



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Stainless Steel Products

Stainless steel products are used to manufacture household goods and are also used by the chemical industry, paper mills, the aviation industry, the
automotive industry, the construction industry and the food processing industry.

Our deliveries of stainless steel products amounted to
2.2 million tons in 2011, representing 5.8% of our total sales volume of steel products. The Korean market accounted for 876 thousand tons or 39.2% of our stainless steel product sales in 2011, representing a domestic market share of
approximately 58%.

Stainless steel products constitute our second largest product category in terms of revenue. Although sales of
stainless steel products accounted for only 5.8% of our total sales volume in 2011, they represented 15.8% of our total revenues from sales of steel products in 2011. Our sales volume of stainless steel products decreased by 6.2% in 2011 compared to
2010 due to a decrease in demand from our overseas customers in the automotive industry and the household goods industry.

Others

Other products include lower value-added semi-finished products such as pig iron, billets, blooms and slab.

Markets

Korea is our most important market.
Domestic sales represented 55.1% of our total sales volume of steel products in 2011. Our export sales and overseas sales to customers abroad represented 44.9% of our total sales volume of steel products in 2011. Our sales strategy has been to
devote our production primarily to satisfy domestic demand, while seeking export sales to utilize capacity to the fullest extent and to expand our international market presence.

Domestic Market

The
total Korean market for steel products amounted to 51.1 million tons in 2011.

The table below sets out sales of steel products in
Korea for the periods indicated.



|                              |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |                  |       |  |   |  |        |                  |  |  |       |  |  |                  |        |  |   |  |       |  |  |  |        |  |  |  |       | 
|----------------------------- |  | ------------------------------- | ------ |  | ---- |  | ----- | ---------------- |  |  | ------ |  |  | ---------------- | ----- |  | - |  | ------ | ---------------- |  |  | ----- |  |  | ---------------- | ------ |  | - |  | ----- |  |  |  | ------ |  |  |  | ----- | 
|                              |  | For the Year Ended December 31, |       
|                              |  | 2007                            |        |  | 2008 |  |       | 2009             |  |  | 2010   |  |  | 2011             |      
|Source                        |  | Thousandsof Tons                |        |  | %    |  |       | Thousandsof Tons |  |  | %      |  |  | Thousandsof Tons |       |  | % |  |        | Thousandsof Tons |  |  | %     |  |  | Thousandsof Tons |        |  | % | 
|Korean steel companies sales |  |                                 | 42,480 |  |      |  | 77.1  |                  |  |  | 43,570 |  |  |                  | 74.4  |  |   |  | 36,378 |                  |  |  | 80.1  |  |  |                  | 40,390 |  |   |  | 78.1  |  |  |  | 37,934 |  |  |  | 74.2  | 
|Imports (1)                   |  |                                 | 12,628 |  |      |  | 22.9  |                  |  |  | 15,002 |  |  |                  | 25.6  |  |   |  | 9,033  |                  |  |  | 19.9  |  |  |                  | 11,329 |  |   |  | 21.9  |  |  |  | 13,199 |  |  |  | 25.8  | 
|                              |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |                  |       |  |   |  |        |                  |  |  |       |  |  |                  |        |  |   |  |       |  |  |  |        |  |  |  |       | 
|Total domestic sales (1)      |  |                                 | 55,108 |  |      |  | 100.0 |                  |  |  | 58,572 |  |  |                  | 100.0 |  |   |  | 45,411 |                  |  |  | 100.0 |  |  |                  | 51,719 |  |   |  | 100.0 |  |  |  | 51,133 |  |  |  | 100.0 | 
|                              |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |                  |       |  |   |  |        |                  |  |  |       |  |  |                  |        |  |   |  |       |  |  |  |        |  |  |  |       | 





|(1) | Source: POSCO Research Institute.
|--- | ---------------------------------

Total sales
volume of steel products in Korea increased by 6.3% in 2008 primarily due to an increase in demand from the shipbuilding and automotive industries during such period, but decreased by 22.5% in 2009 in response to sluggish demand from customers in
the industries adversely impacted by deteriorating global economic conditions, such as the automotive and construction industries. Total sales volume of steel products in Korea increased by 13.9% in 2010, primarily due to a general recovery of the
global economy and an increase in demand from the automotive industry and the household goods industry, the impact of which was partially offset by a decrease in demand from the construction industry. Total sales volume of steel products in Korea
decreased by 1.1% in 2011 primarily due to a further decrease in demand from the construction industry.



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In recent years, domestic consumers of steel products have also relied on imports from foreign
competitors, primarily from China, Japan and Russia. Import volume of steel products increased from 12.6 million tons in 2007 to 15.0 million tons in 2008, resulting in an increase in their aggregate domestic market share from 22.9% in
2007 to 25.6% in 2008. However, due to the global economic downturn, import volume of steel products decreased significantly to 9.0 million tons of steel products in 2009, resulting in a decrease in market share to 19.9%. Imports from foreign
competitors showed strong growth in recent years as import sales volume rebounded to 11.3 million tons in 2010 and 13.2 million tons in 2011, resulting in an increase in market share to 21.9% in 2010 and 25.8% in 2011.

We sell in Korea higher value-added and other finished products to end-users and semi-finished products to other steel manufacturers for further
processing. Local distribution companies and sales affiliates sell finished steel products to low-volume customers. We provide service technicians for large customers and distributors in each important product area.

Exports

Our export
sales and overseas sales to customers abroad represented 44.9% of our total sales volume of steel products in 2011, 55.8% of which was generated from exports sales and overseas sales to customers in Asian countries. Our export sales and overseas
sales to customers abroad in terms of sales volume increased by 36.3% to 17.2 million tons in 2011 compared to 2010, reflecting consolidation of Daewoo Internationals export sales results in 2011 for the full year compared to the
consolidation of such results in 2010 starting September 20, 2010, the date of our acquisition of the controlling interest in Daewoo International, as well as the general improvement of the global economy in the first half of 2011 and increase
in demand for our products from customers abroad.

The tables below set out our export sales and overseas sales to customers abroad in
terms of sales volume of steel products by geographical market and by product for the periods indicated.



|                                  |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 
|--------------------------------- |  | ------------------------------- | ------ |  | ---- |  | ----- | ---------------- |  |  | ------ |  |  |  | ----- | 
|                                  |  | For the Year Ended December 31, |       
|                                  |  | 2010                            |        |  | 2011 | 
|Region                            |  | Thousandsof Tons                |        |  | %    |  |       | Thousandsof Tons |  |  | %      | 
|Asia (other than China and Japan) |  |                                 | 3,139  |  |      |  | 24.9  |                  |  |  | 4,874  |  |  |  | 28.4  | 
|China                             |  |                                 | 3,405  |  |      |  | 27.0  |                  |  |  | 3,313  |  |  |  | 19.3  | 
|Europe                            |  |                                 | 452    |  |      |  | 3.6   |                  |  |  | 1,752  |  |  |  | 10.2  | 
|Japan                             |  |                                 | 1,598  |  |      |  | 12.7  |                  |  |  | 1,393  |  |  |  | 8.1   | 
|Middle East                       |  |                                 | 267    |  |      |  | 2.1   |                  |  |  | 1,211  |  |  |  | 7.0   | 
|North America                     |  |                                 | 1,280  |  |      |  | 10.2  |                  |  |  | 644    |  |  |  | 3.7   | 
|Others                            |  |                                 | 2,466  |  |      |  | 19.6  |                  |  |  | 3,995  |  |  |  | 23.2  | 
|                                  |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 
|Total                             |  |                                 | 12,607 |  |      |  | 100.0 |                  |  |  | 17,182 |  |  |  | 100.0 | 
|                                  |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 



|                         |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 
|------------------------ |  | ------------------------------- | ------ |  | ---- |  | ----- | ---------------- |  |  | ------ |  |  |  | ----- | 
|                         |  | For the Year Ended December 31, |       
|                         |  | 2010                            |        |  | 2011 | 
|Steel Products           |  | Thousandsof Tons                |        |  | %    |  |       | Thousandsof Tons |  |  | %      | 
|Hot rolled products      |  |                                 | 1,946  |  |      |  | 15.4  |                  |  |  | 1,418  |  |  |  | 8.3   | 
|Plates                   |  |                                 | 643    |  |      |  | 5.1   |                  |  |  | 617    |  |  |  | 3.6   | 
|Wire rods                |  |                                 | 655    |  |      |  | 5.2   |                  |  |  | 541    |  |  |  | 3.1   | 
|Cold rolled products     |  |                                 | 6,364  |  |      |  | 50.5  |                  |  |  | 5,417  |  |  |  | 31.5  | 
|Silicon steel sheets     |  |                                 | 486    |  |      |  | 3.9   |                  |  |  | 438    |  |  |  | 2.5   | 
|Stainless steel products |  |                                 | 1,580  |  |      |  | 12.5  |                  |  |  | 1,358  |  |  |  | 7.9   | 
|Others (1)               |  |                                 | 934    |  |      |  | 7.4   |                  |  |  | 7,392  |  |  |  | 43.0  | 
|                         |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 
|Total                    |  |                                 | 12,607 |  |      |  | 100.0 |                  |  |  | 17,182 |  |  |  | 100.0 | 
|                         |  |                                 |        |  |      |  |       |                  |  |  |        |  |  |  |       | 



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|(1) | Including all export sales of steel products by Daewoo International. Such sales were consolidated in 2010 only from the date of our acquisition of Daewoo international on
September 20, 2010, compared to consolidation for the full year in 2011. Prior to September 20, 2010, sales volume of export steel products sold by us to Daewoo International was classified under the applicable steel product category.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The table below sets out our revenues, including non-steel sales, by geographical location of customers for the periods
indicated.



|                                            |  |                                 |        |  |      |       |        | 
|------------------------------------------- |  | ------------------------------- | ------ |  | ---- | ----- | ------ | 
|                                            |  | For the Year Ended December 31, |       
|Revenue by Geographic Location of Customers |  | 2010                            |        |  | 2011 |      
|                                            |  | (In billions of Won)            |       
|Korea                                       |  | (Won)                           | 37,760 |  |      | (Won) | 53,987 | 
|China                                       |  |                                 | 5,133  |  |      |       | 6,071  | 
|Asia (other than China and Japan)           |  |                                 | 1,763  |  |      |       | 2,645  | 
|Japan                                       |  |                                 | 1,504  |  |      |       | 2,387  | 
|North America                               |  |                                 | 426    |  |      |       | 1,282  | 
|Other                                       |  |                                 | 1,301  |  |      |       | 2,567  | 
|                                            |  |                                 |        |  |      |       |        | 
|Total                                       |  |                                 | 47,887 |  |      |       | 68,939 | 
|                                            |  |                                 |        |  |      |       |        | 

The above tables include sales by our consolidated sales subsidiaries of steel products purchased by these
subsidiaries from third parties, including trading companies to which we sell steel products.

The table below sets out the worlds
apparent steel use for the periods indicated.



|                                         |  |                                 |       |   |      |  |       |      |  |  |       |   |  |      |       |   |  |  |       |  
|---------------------------------------- |  | ------------------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - |  |  | ----- | -
|                                         |  | For the Year Ended December 31, |      
|                                         |  | 2007                            |       |   | 2008 |  |       | 2009 |  |  | 2010  |   |  | 2011 |      
|Apparent steel use (million metric tons) |  |                                 | 1,218 |   |      |  | 1,218 |      |  |  | 1,140 |   |  |      | 1,312 |   |  |  | 1,398 |  
|Percentage of annual increase (decrease) |  |                                 | 7.0   | % |      |  | 0.0   | %    |  |  | (6.4) | % |  |      | 15.1  | % |  |  | 6.5   | %



Source: World
Steel Association.

Recent difficulties affecting the European Union and global financial sectors, adverse conditions and volatility in
the European Union and worldwide credit and financial markets, fluctuations in oil and commodity prices and the general weakness of the European Union and global economies have increased the uncertainty of global economic prospects in general
and have adversely affected the global and Korean economies. Such developments weakened global demand in steel consumption in 2008 and 2009 before the recovery in demand in recent years. The World Steel Association forecasts that global apparent
steel use is expected to increase by 5.4% to 1,474 million metric tons in 2012 after increasing by 6.5% in 2011.

In recent years,
driven in part by strong growth in steel consumption in China, the global steel industry has experienced renewed interest in expansion of steel production capacity. World Steel Dynamics estimated the global crude steel production capacity to be
1,525 million tons in 2011. The increased production capacity, combined with weakening demand due primarily to the recent slowdown of the global economy, has resulted in production over-capacity in the global steel industry. Production
over-capacity in the global steel industry may intensify if the slowdown of the global economy occurs or demand from developing countries that have experienced significant growth in the past several years does not meet the recent growth in
production capacity.

We distribute our export products mostly through Korean trading companies, including Daewoo International, and our
overseas sales subsidiaries. Our largest export market in 2011 was Asian countries other than China and Japan, which accounted for 28.4% of our export volume of steel products, including sales by our overseas subsidiaries. The principal products
exported to Asian countries other than China and Japan were cold rolled products and hot rolled products.Our exports to Asian countries other than China and Japan amounted to 3.1 million tons in 2010 and 4.9 million tons



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in 2011. Our exports to Asian countries other than China and Japan increased by 55.3% in 2011 primarily due to our decision to allocate more products to regions where we could obtain better
export prices. On the other hand, sales volume to China decreased by 2.7% from 3.4 million tons in 2010 to 3.3 million tons in 2011 and sales volume to Japan decreased by 12.8% from 1.6 million tons in 2010 to 1.4 million tons in
2011.

Anti-Dumping and Countervailing Duty Proceedings

In the United States, a number of our products have been subject to anti-dumping and countervailing duty proceedings since 1992. As a result of
these proceedings, our sales of corrosion resistant steel were subject to a countervailing duty margin of 0.10% and an anti-dumping duty margin of 0.05% (which is effectively zero pursuant to the de minimis margin rule). In March 2012, the U.S.
government revoked such anti-dumping order with respect to our corrosion resistant steel sales in the United States.

In India, our sales
of stainless cold rolled steel have been subject to an anti-dumping duty ranging from $62.61 per ton to $234.98 per ton starting in November 2009 for a five-year period. In Russia, our sales of stainless steel have been subject to an anti-dumping
duty of 4.8% starting in November 2010 for a three-year period. In addition, several countries have initiated anti-dumping investigations and other safeguard proceedings relating to our global sales operations, including the initiation of an
anti-dumping investigation by the Brazilian government starting in April 2011 relating to our sales of coated steel products as well as an investigation by the Indonesian government starting in June 2011 relating to our sales of cold rolled
products. We are also subject to anti-dumping proceedings by the Thai government but no anti-dumping tariff was imposed on us in the latest round of assessment completed in July 2010. In March 2012, the Taiwan government initiated an anti-dumping
investigation relating to our sales of steel plates and cold rolled products.

Pricing Policy

We determine the sales price of our products based on market conditions. In setting prices, we take into account our costs, including those of raw
materials, supply and demand in the Korean market, exchange rates, and conditions in the international steel market.

Our export prices
can fluctuate considerably over time, depending on market conditions and other factors. The export prices of our higher value-added steel products in the largest markets are determined considering the prices of similar products charged by our
competitors. Our export prices in Dollar terms decreased in 2008 in response to intensification of the global financial crisis, a trend which lasted until the first half of 2009. Starting in the third quarter of 2009, our export prices gradually
started to recover due to an increase in demand driven by improvement in business confidence and higher level of economic activities as well as a decrease in our inventory level. We maintained similar pricing levels throughout 2010, but we gradually
increased our export prices in the first half of 2011. However, our export prices fell substantially in the second half of 2011 due to uncertainties in the global economy caused by financial difficulties affecting European countries including
Greece, Spain, Portugal and Italy. We may decide to adjust our future sales prices on an on-going basis subject to market demand for our products, prices of raw materials, the production outlook of the global steel industry and global economic
conditions in general.

Raw Materials

Steel Production

The principal raw materials used in producing steel through the basic
oxygen steelmaking method are iron ore and coal. We import all of the coal and virtually all of the iron ore that we use. In 2011, POSCO imported approximately 51.6 million dry metric tons of iron ore and 27.6 million wet metric tons of
coal. Iron ore is imported primarily from Australia, Brazil and South Africa. Coal is



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imported primarily from Australia, Canada and the United States. In 2011, we purchased most of our iron ore and coal imports pursuant to long-term contracts. The long-term contracts generally
have terms of three to ten years and provide for periodic price adjustments to the then-market prices. The long-term contracts to purchase iron ore and coal generally provide for quarterly adjustments to the purchase prices to be determined through
negotiation between the supplier and us. Such price negotiations are driven by various factors, including the global economic outlook, global market prices of raw materials and steel products, supply and demand outlook of raw materials and
production costs of raw materials. Typically, globally influenced buyers and sellers of raw materials determine benchmark prices of raw materials, based on which other buyers and sellers negotiate their prices after taking into consideration the
quality of raw materials and other factors. We typically have an option to increase or decrease the fixed purchase amounts up to 5% or 10% each year. We or the suppliers may cancel the long-term contracts only if performance under the contracts is
prevented by causes beyond our or their control and these causes continue for a specified period.

We also make investments in
exploration and production projects abroad to enhance our ability to meet the requirements for high-quality raw materials, either as part of a consortium or through an acquisition of a minority interest. We purchased approximately 23.2% of our iron
ore and coal imports in 2011 from foreign mines in which we have made investments. Our major investments to procure supplies of coal include an investment of A$50.2 million in July 2010 to acquire a 70% interest in Hume Coal in Australia, which is
currently at an exploration stage, to supply 1.3 million tons of coal per year starting in 2015. In July 2011, we acquired a 20% interest in Mt. Klappan in Canada for C$10 million, which we expect will supply 3 million tons of coal per
year when it becomes operational starting in 2017.

Our major investments to procure supplies of iron ore include an investment of US$500
million in December 2008 to acquire a 6.5% interest in Nacional Minérios S.A., an iron ore mining company in Brazil, in a consortium with Japanese steel manufacturers and trading companies. In 2009, we started importing iron ore from the
Brazilian venture, and we expect to secure approximately 5.0 million tons annually by 2012. We also made an initial investment of A$249 million in 2010 to acquire a 3.75% interest in Roy Hill Holdings Pty., Ltd. We also entered into a contract
in March 2012 to invest an additional A$1,495 million to increase our interest to 15% but sold a 2.5% interest in April 2012 to China Steel Corporation for A$305 million. Through our remaining 12.5% interest in Roy Hill Holdings Pty., Ltd., we
expect to secure approximately 7.0 million tons of iron ore per year. In July 2010, we acquired a 24.5% interest in the Australian Premium Iron (API) iron ore joint venture in Pilbara, Australia for A$184 million, which expects to supply
9.8 million tons of iron ore starting in 2016. We will continue to seek opportunities to enter into additional strategic relationships that would enhance our ability to meet the requirements for principal raw materials.

The average market price of coal per wet metric ton (benchmark free on board price of Australian premium hard coking coal) was US$172 in 2009,
US$191 in 2010, and US$292 in 2011. The average market price of iron ore per dry metric ton (free on board price of Platts Iron Ore index with iron (Fe) 62% content) was US$68 in 2009, US$136 in 2010 and US$167 in 2011.We currently do not
depend on any single country or supplier for our coal or iron ore.

Stainless Steel Production

The principal raw materials for the production of stainless steel are wrought nickel, ferrochrome, stainless steel scrap and carbon steel scrap. We
purchase a substantial portion of our requirements for wrought nickel from leading producers in Australia, Indonesia, New Caledonia and Japan, as well as Korea. A substantial portion of the requirements for ferrochrome is purchased from producers in
South Africa, India and Kazakhstan. Most of the requirements for stainless steel scrap are sourced from domestic and overseas suppliers in Japan, United States, European Union and Southeast Asian countries. As for the requirements for carbon steel
scrap, scrap from the Pohang Steelworks is also utilized. The average market price of nickel per ton trading on the London Metal Exchange increased from US$21,809 in 2010 to US$22,894 in 2011.



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In order to secure stable sources of nickel for stainless steel production, we entered into a joint
venture in May 2006 with Société Minière du Sud Pacifique S.A. to establish SNNC Co., Ltd. (SNNC) a company primarily engaged in nickel smelting. We hold a 49% interest in SNNC, and Société
Minière du Sud Pacifique S.A., a major mining company based in New Caledonia, holds the remaining 51% interest. SNNC operates a nickel smelting works with a production capacity of 30 thousand tons of nickel per year.

Transportation

In
order to meet our transportation needs for iron ore and coal, we have entered into long-term contracts with shipping companies in Korea to retain a fleet of dedicated vessels. These dedicated vessels transported approximately 71% of the total
requirements in 2011, and the remaining 29% was transported by vessels retained through short to medium term contracts, depending on market conditions. Australia and Brazil are the main countries where the vessels are loaded, and they accounted for
63% and 16%, respectively, of our total requirements in 2011. We plan to increase the average size of dedicated vessels we use by approximately 10% by 2020 in order to pursue additional economies of scale, as well as upgrade some of the existing
vessels with others that utilize more energy-efficient technologies.

The Steelmaking Process

Our major production facilities, Pohang Works and Gwangyang Works, produce steel by the basic oxygen steelmaking method. The stainless steel plant
at Pohang Works produces stainless steel by the electric arc furnace method. Continuous casting improves product quality by imparting a homogenous structure to the steel. Pohang Works and Gwangyang Works produce all of their products through the
continuous casting.

Steel  Basic Oxygen Steelmaking Method

First, molten pig iron is produced in a blast furnace from iron ore, which is the basic raw material used in steelmaking. Molten pig iron is then
refined into molten steel in converters by blowing pure oxygen at high pressure to remove impurities. Different desired steel properties may also be obtained by regulating the chemical contents.

At this point, molten steel is made into semi-finished products such as slabs, blooms or billets at the continuous casting machine. Slabs, blooms
and billets are produced at different standardized sizes and shapes. Slabs, blooms and billets are semi-finished lower margin products that we either use to produce our further processed products or sell to other steelmakers that produce further
processed steel products.

Slabs are processed to produce hot rolled coil products at hot strip mills or to produce plates at plate
mills. Hot rolled coils are an intermediate stage product that may either be sold to our customers as various finished products or be further processed by us or our customers into higher value-added products, such as cold rolled sheets and silicon
steel sheets. Blooms and billets are processed into wire rods at wire rod mills.

Stainless Steel  Electric Arc Furnace
Method

Stainless steel is produced from stainless steel scrap, chrome, nickel and steel scrap using an electric arc furnace.
Stainless steel is then processed into higher value-added products by methods similar to those used for steel production. Stainless steel slabs are produced at a continuous casting mill. The slabs are processed at hot rolling mills into stainless
steel hot coil, which can be further processed at cold strip mills to produce stainless cold rolled steel products.



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Competition

Domestic Market

We are the largest fully integrated steel producer in Korea. We
generally face fragmented competition in the domestic market. In hot rolled products, where we had a market share of approximately 39% in 2011, we face competition from a Korean steel producer that operates mini-mills and produces hot rolled coil
products from slabs and from various foreign producers, primarily from China and Japan. In cold rolled products and stainless steel products, where we had a market share of approximately 49% and 58%, respectively, in 2011, we compete with smaller
specialized domestic manufacturers and various foreign producers, primarily from China and Japan. For a discussion of domestic market shares, see  Markets  Domestic Market.

We may face increased competition in the future from new specialized or integrated domestic manufacturers of steel products in the Korean market.
Our biggest competitors in Korea are Hyundai Steel Co., Ltd. with an annual crude steel production of approximately 16.2 million tons and Dongbu Steel Co., Ltd. with an annual crude steel production of approximately 4.6 million tons.
Hyundai Steel Co., Ltd. completed construction of an integrated steel mill with an annual capacity of 4 million tons in January 2010 and added a second furnace with the same capacity in November 2010 and a third furnace with the same capacity
in April 2011.

The Korean Government does not impose quotas on or provide subsidies to local steel producers. As a World Trade
Organization signatory, Korea has also removed all steel tariffs.

Export Markets

The competitors in our export markets include all the leading steel manufacturers of the world. In recent years, there has been a trend toward
industry consolidation among our competitors, and smaller competitors in the global steel market today may become larger competitors in the future. For example, Mittal Steels takeover of Arcelor in 2006 created a company with approximately 10%
of global steel production capacity. Competition from global steel manufacturers with expanded production capacity such as ArcelorMittal, and new market entrants, especially from China and India, could result in a significant increase in
competition. Major competitive factors include range of products offered, quality, price, delivery performance and customer service. Our larger competitors may use their resources, which may be greater than ours, against us in a variety of ways,
including by making additional acquisitions, investing more aggressively in product development and capacity and displacing demand for our export products.

Various export markets currently impose tariffs on different types of steel products. However, we do not believe that tariffs significantly affect our ability to compete in these markets.

Subsidiaries and Global Joint Ventures

Steel Production

In
order to effectively implement our strategic initiatives and to solidify our leadership position in the global steel industry, we have established various subsidiaries and joint ventures around the world.

Korea.We established POSCO Specialty Steel Co., Ltd. as a wholly-owned subsidiary in Korea in February 1997. POSCO Specialty Steel
produces high-quality steel products for the automotive, machinery, nuclear power plant, shipbuilding, aeronautics and electronics industries. Production facilities operated by POSCO Specialty Steel have an aggregate annual production capacity of
840 thousand tons of wire rods, round bars, steel pipes and semi-finished products. POSCO Specialty Steel Co., Ltd. produced 736 thousand tons of such products in 2011.



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In order to expand our sale of value-added products, we established POSCO Coated and Color Sheet Co.,
Ltd. by merging a coated steel manufacturer and a color sheet manufacturer in March 1999. POSCO Coated and Color Sheet produces 600 thousand tons a year of both galvanized and aluminized steel sheets widely used in the construction, automotive
parts and home appliances industries. POSCO Coated and Color Sheet also produces color sheets with an annual capacity of 350 thousand tons that are mainly used for interior and exterior materials and home appliances.

China. We entered into an agreement with Sagang Group Co. to establish Zhangjiagang Pohang Stainless Steel Co., Ltd., a joint venture
company in China for the manufacture and sale of stainless cold rolled steel products. We have an 82.5% interest in the joint venture (including 23.9% interest held by POSCO China Holding Corporation). The plant commenced production of stainless
cold rolled steel products in December 1998. The joint venture also completed the construction of new mills in July 2006 with additional annual production capacity of approximately 800 thousand tons of stainless hot rolled products. Zhangjiagang
Pohang Stainless Steel produced 850 thousand tons of stainless steel products in 2011.

We established Qingdao Pohang Stainless Steel
Co., Ltd., a wholly owned subsidiary set up to manufacture and sell stainless cold rolled steel products in China. The plant became operational in December 2004, with an annual production capacity of 180 thousand tons of stainless cold rolled
steel products. Qingdao Pohang Steel produced 210 thousand tons of such products in 2011.

In August 2003, we entered into a joint
venture agreement with Benxi Iron and Steel Group in China to establish Benxi Steel POSCO Cold Rolled Sheet Co., Ltd. The cold rolling mill with an annual production capacity of 1.9 million tons became operational in March 2006 and the company
produced 2.0 million tons of such products in 2011. We currently hold a 25% interest in this joint venture.

Vietnam.We entered into an agreement with Nippon Steel Corporation to establish POSCO Vietnam Co., Ltd., a joint venture company in Vietnam for the manufacture and sale of cold rolled steel products. We have an 85% interest in the joint venture. We
completed the construction of a plant in September 2009 with an annual production capacity of 1.2 million tons of cold rolled products and commenced commercial production. POSCO Vietnam produced 1,026 thousand tons of such products in
2011.

Thailand.In order to secure an alternative sales source for stainless cold rolled steel products and an export base
for expanding into the Southeast Asia stainless steel markets, we acquired a controlling interest in Thainox Stainless Public Company Limited, a major stainless steel manufacturer in Thailand, in September 2011. We renamed the company as POSCO
Thainox Public Company Limited in October, 2011 and currently hold a 94.9% interest in the company. POSCO Thainox Pcl plans to increase its production volume to 300,000 tons by 2015. The company produced 124 thousand tons of stainless cold
rolled products in 2011.

United States.We entered into a joint venture in March 2007 with US Steel and SeAH to establish
United Spiral Pipe LLC to produce American Petroleum Institute-compliant pipes (API Pipes) and non-API pipes. We hold a 35% interest in the company. US Steel and we each supply 50% of the hot rolled steel required for the production of
pipes. United Spiral Pipe started commercial production in May 2010 and produced 15.4 thousand tons of pipes in 2011.

We also
entered into 50-50 joint venture between U.S. Steel Corporation and us called USS-POSCO Industries Corporation. We sell hot rolled products to USS-POSCO Industries, which uses such products to manufacture cold rolled and galvanized steel products
and tin-plate products for sale in the United States. USS-POSCO Industries produced 894 tons of such products in 2010 and 874 thousand tons in 2011.

Mexico.In Mexico, POSCO Mexico S.A. de C.V. completed the construction of a plant in August 2009 with an annual production capacity of 0.4 million tons of cold rolled products and



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commenced commercial production to supply automotive manufacturers in Mexico, Southeastern United States and South America. POSCO Mexico produced 370 thousand tons of cold rolled products in
2011.

Others.In addition to the above investments, we are carefully seeking out additional promising investment
opportunities abroad. In June 2005, we entered into a memorandum of understanding with Orissa State Government of India for the construction of an integrated steel mill and the development of iron ore mines in Orissa State. We estimate the aggregate
costs of the initial phase of construction and mine development to be approximately $3.7 billion and an additional cost of approximately $8.3 billion in order to increase the annual production capacity to 12 million tons of plates and hot
rolled products. We obtained the approval of the Government of India in May 2011 to construct an integrated steel mill in Orissa State, and we are currently in the process of acquiring the land on which the plant will be constructed. However, the
National Green Tribunal, a special court in India that handles the expeditious disposal of cases pertaining to environmental issues, ruled in March 2012 that the Ministry of Environment should reassess the conditions on which clearance was granted
for the project, and we are waiting for the ministrys review of the tribunals ruling. With respect to development of iron ore mines in Orissa State, we are waiting for the final judgment from the Indian Supreme Court on mining rights. In
June 2010, we also signed a memorandum of understanding with the Government of Karnataka, a state in southwest India, to construct an integrated steel mill in Karnataka, and we are in discussions with the Government of Karnataka to obtain a mining
lease and secure land with appropriate infrastructure.

We have also established supply chain management centers around the world to
provide processing and logistics services such as cutting flat steel products to smaller sizes to meet customers needs. In 2011, our 54 supply chain management centers recorded aggregate sales of 4.2 million tons of steel products.

Steel Trading

Our trading activities consist of exporting and importing a wide range of steel products that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas.
To strengthen our global market presence, we are coordinating these trading activities through a global trading network comprised of overseas subsidiaries, branches and representative offices. Such subsidiaries and offices support our trading
activities by locating suitable local suppliers and purchasers on behalf of ourselves as well as customers, identifying business opportunities and providing information regarding local market conditions. Our consolidated subsidiaries engaged in
steel trading include POSCO Processing & Service Co., Ltd. that primarily focuses in the domestic market, and POSCO Asia Company Limited located in Hong Kong, POSCO Japan Co., Ltd. located in Tokyo, Japan, POSCO America Corporation located
in New Jersey, U.S.A. and POSCO South Asia Co., Ltd. located in Bangkok, Thailand.

On September 20, 2010, we acquired a controlling
interest in Daewoo International for Won 3.37 trillion. Daewoo International is a global trading company that primarily engages in trading of steel and raw materials as well as investing in energy and mineral development projects. It also
manufactures and sells textiles, operates a department store in Korea, and holds a 24% interest in Kyobo Life Insurance, Koreas third largest life insurance company in terms of market share in 2011. Daewoo International was established in
December 2000 when the international trading and construction businesses of Daewoo Corporation were spun off into three separate companies as part of a debt workout program of Daewoo Corporation.

Daewoo Internationals trading activities consist of exporting and importing a wide variety of products and commodities, including iron and
steel, chemicals, natural resources and energy, automotive parts, machinery and plant equipment, electronics products, raw materials for steel production, non-ferrous metals, agricultural commodities, livestock and textiles. Daewoo International is
also engaged in third-country trade, which does not involve exports from or imports to Korea. In the



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past three years, export sales represented more than 50%, third-country trade represented approximately 40% and import sales represented less than 10% of Daewoo Internationals total sales
on a consolidated basis. More than 50% of Daewoo Internationals export sales are derived from its export of steel products including products manufactured by us.

Engineering and Construction

POSCO E&C is one of the leading engineering and
construction companies in Korea, primarily engaged in the planning, design and construction of industrial plants and architectural works and civil engineering projects. In particular, POSCO E&C has established itself as one of the premier
engineering and construction companies in Korea through:



| |  |  | its strong and stable customer base; and
| | - |  | ----------------------------------------



| |  |  | its cutting-edge technological expertise obtained from construction of advanced integrated steel plants, as well as participation in numerous modernization and
rationalization projects at our Pohang Works and Gwangyang Works.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Leveraging its technical know-how and track record
of building some of the leading industrial complexes in Korea, POSCO E&C has also focused on diversifying its operations into construction of high-end apartment complexes and participating in a wider range of architectural works and civil
engineering projects, as well as engaging in urban planning and development projects and expanding its operations abroad. One of its landmark urban planning and development projects includes the development of a 5.7 million-square meter area of
Songdo International City in Incheon, which POSCO E&C is co-developing with Gale International, a respected real estate developer based in the United States. POSCO E&C also has substantial experience in the energy field obtained from the
construction of various power plants for member companies of the POSCO Group, specializing primarily in engineering and construction of LNG and coal-fired thermal power plants. In recent years, POSCO E&C has obtained various orders for such
power plants, including LNG-fired power plants in Incheon, Korea and coal-fired thermal power plants in Ventanas and Angamos, Chile. In response to increasing demand from the energy industry, POSCO E&C plans to continue to target opportunities
in power plant construction, which it believes offers significant growth potential, and thereby enhance its know-how and profitability.

Energy

We have
accumulated several decades of experience and know-how in a wide range of energy-related fields, including natural gas and other forms of power generation. As part of our diversification efforts, we strive to identify business opportunities for
power generation, renewable energy, LNG logistics and natural resources exploration.

POSCO Energy Corporation. In
2006, we acquired the largest domestic private power utility company that operates LNG combined cycle power generation facilities with total power generation capacity of 1,800 megawatts and renamed it POSCO Energy Corporation. POSCO Energy
Corporation expanded its power generation capacity by constructing additional 1,252 megawatts power plants that began commercial operation in June 2011. In December 2010, POSCO Energy Corporation also completed the construction of a 284 megawatts
combined cycle power generation facility utilizing by-product gas generated from our Gwangyang Works. As part of its efforts to geographically diversify its power generation facilities, POSCO Energy Corporation is constructing a 1,200 megawatts
class coal power plant in Vietnam with Applied Energy Services Corporation. In Indonesia, POSCO Energy Corporation has partnered with Krakatau Daya Listrik to build a 200 megawatts byproduct gas power plant, which will be used to power our
integrated mill. POSCO Energy Corporations total power generation capacity was approximately 3,300 megawatts as of December 31, 2011.



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POSCO Energy Corporation is also selectively seeking opportunities to expand into solar, wind and
other renewable energy businesses in order to become an integrated provider of energy solutions. In order to meet the increasing demand and regulatory requirements for clean energy, POSCO Energy Corporation signed a strategic partnership agreement
in February 2007 with FuelCell Energy, a global leader in the field of molten carbonate fuel cell technology, pursuant to which POSCO Energy Corporation is exploring opportunities to expand its business into the stationary fuel cell market. In
consultation with FuelCell Energy, POSCO Energy Corporation completed construction of a fuel cell stack manufacturing plant with an annual production capacity of 34 megawatts in 2011 with the objective of enhancing POSCO Energy Corporations
capability to meet the growing domestic demand for fuel cell energy.

LNG Logistics. In an effort to reduce our dependency
on oil, we became the first private company in Korea to import liquefied natural gas (LNG) in 2005, and we have steadily increased the use of natural gas for energy generation at our steel production facilities. We operate an LNG
receiving terminal that is equipped with two 100,000 kiloliters storage tanks and one 165,000 kiloliters storage tank and additional facilities with capacity to process up to 1.7 million tons of LNG annually in Gwangyang. We are also
constructing an additional 165,000 kiloliters storage tank that is scheduled for completion in May 2013. In order to achieve maximum operational efficiency of our LNG terminal, we participate in the LNG trading and LNG ship gas trial businesses. We
are also building a synthetic natural gas production plant with an annual capacity of 500,000 tons in Gwangyang that is scheduled for completion by the end of 2014. We believe that the synthetic natural gas production plant will provide us with a
stable supply of LNG substitutes that we can utilize to meet our growing needs for energy generation.

Natural Resources
Development. We are also actively seeking business opportunities in the exploration and production of oil and natural gas. In 2007, we participated in the Aral Sea Exploration Project in Uzbekistan, purchasing a 9.8% interest from Korea
National Oil Corporation. Additionally, we acquired a 12.5% interest in 2008 in the Namangan-Tergachi and Chust-Pap Oil and Gas Exploration Project in Uzbekistan. On September 20, 2010, we also acquired a controlling interest in Daewoo
International for Won 3.37 trillion. Daewoo International is a global trading company that primarily engages in trading of steel and raw materials as well as investing in energy and mineral development projects throughout the world. In particular,
Daewoo International joined a consortium with Korea Gas Corporation, ONGC Videsh Ltd. and the Gas Authority of India Ltd. in November 2002, which made a successful bid in the gas exploration, development and production project in the Myanmar A-1 gas
field. In October 2005, the consortium made a successful bid in the gas exploration, development and production project in the Myanmar A-3 gas field, located adjacent to the Myanmar A-1 gas field. In December 2008, the consortium entered into a
sales agreement with China National United Oil Corporation to sell the gas produced from the A-1 and A-3 gas fields for a period of 30 years after the commencement of production. In August 2010, Myanmar Oil & Gas Enterprise, the national
oil and gas company of Myanmar, acquired a 15% interest in each of the projects. As of December 31, 2011, Daewoo International had invested approximately US$411 million in the A-1 gas field project and approximately US$285 million in the A-3
gas field project and held a 51% interest in each of the projects. Daewoo International plans to make substantial further investments in the future, and production of gas from these gas fields is expected to commence in 2013.

Such natural resources development projects, while entailing higher risks than the traditional trading business, offer higher potential returns.
Daewoo International intends to continue to expand its operations by carefully seeking out promising energy development projects abroad. Daewoo International mitigates the risks associated with such investments through subsidies from the Korea
National Oil Corporation and the Korea Resources Corporation, government agencies that promote natural resources development activities and subsidize a portion of the investment amount in the event the investor fails to develop viable deposits. If
the natural resources development activities are successful, the investor must reimburse the relevant agency for the subsidy amount, together with accrued interest.



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Others

We acquired or established several subsidiaries that address specific services to support the operations of Pohang Works and Gwangyang Works. POSCON Co., Ltd., acquired in 1986, provides industrial engineering
services, including manufacturing services utilizing automation technology. POSCO ICT Co., Ltd., founded in 1989, provides information and technology consulting and system network integration and outsourcing services. POSCO Plant Engineering Co.,
Ltd., created from merger of POSCO Machinery & Engineering Co., Ltd. and POSCO Machinery Co., Ltd. in January 2010, provides engineering services related to plant construction and operations. POSCO Chemtech Company Ltd., formerly POSCO
Refractories and Environment Company, Ltd., specializes in the manufacturing of refractories and lime used in steel manufacturing processes as well as a wide range of chemical products.

Insurance

As of December 31, 2011, our property, plant and equipment are insured against
fire and other casualty losses up to Won 25,390 billion. In addition, we carry general insurance for vehicles and accident compensation insurance for our employees to the extent we consider appropriate.

Item 4.C.Organizational Structure

The following table sets out the jurisdiction of incorporation and our ownership interests of our significant subsidiaries:



|                                              |  |                                     |       |  |                               |  |        |  
|--------------------------------------------- |  | ----------------------------------- | ----- |  | ----------------------------- |  | ------ | -
|Name                                          |  | Jurisdiction of      
Incorporation |       |  | Percentage of      
Ownership | 
|Daewoo International Corporation              |  |                                     | Korea |  |                               |  | 66.56  | %
|POSCO Engineering & Construction Co., Ltd     |  |                                     | Korea |  |                               |  | 89.53  | %
|POSCO Energy Corporation                      |  |                                     | Korea |  |                               |  | 100.00 | %
|Zhangjiagang Pohang Stainless Steel Co., Ltd. |  |                                     | China |  |                               |  | 58.60  | %
|POSCO Specialty Steel Co., Ltd.               |  |                                     | Korea |  |                               |  | 100.00 | %
|POSCO Processing & Service Co., Ltd.          |  |                                     | Korea |  |                               |  | 95.31  | %
|POSCO ICT Co., Ltd.                           |  |                                     | Korea |  |                               |  | 72.54  | %

Item 4.D.Property, Plants and Equipment

Our principal properties are Pohang Works, which is located at Youngil Bay on the southeastern coast of Korea, and Gwangyang Works,
which is located in Gwangyang City in the southwestern region of Korea. We expect to increase our production capacity in the future when we increase our capacity as part of our facilities expansion or as a result of continued modernization and
rationalization of our existing facilities. For a discussion of major items of our capital expenditures currently in progress, see Item 5. Operating and Financial Review and Prospects  Item 5.B. Liquidity and Capital Resources
 Liquidity  Capital Expenditures and Capital Expansion.

Pohang Works

Construction of Pohang Works began in 1970 and ended in 1983. Pohang Works currently has an annual crude steel and stainless steel production
capacity of 17.5 million tons. Pohang Works produces a wide variety of steel products. Products produced at Pohang Works include hot rolled sheets, plates, wire rods and cold rolled sheets, as well as specialty steel products such as stainless
steel sheets and silicon steel sheets. These products can also be customized to meet the specifications of our customers.

Situated on a
site of 8.9 million square meters at Youngil Bay on the southeastern coast of Korea, Pohang Works consists of 41 plants, including iron-making, crude steelmaking and continuous casting and other rolling facilities. Pohang Works also has docking
facilities capable of accommodating



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ships as large as 200,000 tons for unloading raw materials, storage areas for up to 34 days supply of raw materials and separate docking facilities for ships carrying products for export.
Pohang Works is equipped with a highly advanced computerized production-management system allowing constant monitoring and control of the production process.

The following table sets out Pohang Works capacity utilization rates for the periods indicated.



|                                                                                                  |  |                                           |       |  |      |  |       |      |  |  |       |  |  |      |       |  |  |  |       | 
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  |  |  | ----- | 
|                                                                                                  |  | As of 
or for the Year Ended December 31, |      
|                                                                                                  |  | 2007                                      |       |  | 2008 |  |       | 2009 |  |  | 2010  |  |  | 2011 |      
|Crude steel and stainless steel production capacity as of end of the year (million tons per year) |  |                                           | 14.30 |  |      |  | 15.00 |      |  |  | 15.00 |  |  |      | 15.00 |  |  |  | 16.65 | 
|Actual crude steel and stainless steel output (million tons)                                      |  |                                           | 13.66 |  |      |  | 14.94 |      |  |  | 14.34 |  |  |      | 14.23 |  |  |  | 16.38 | 
|Capacity utilization rate (%) (1)                                                                 |  |                                           | 95.5  |  |      |  | 99.6  |      |  |  | 95.6  |  |  |      | 94.9  |  |  |  | 99.8  | 





|(1) | Calculated by dividing actual crude steel and stainless steel output by the actual crude steel and stainless steel production capacity for the relevant period as determined by
us.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gwangyang Works

Construction of Gwangyang Works began in 1985 on a site of 13.7 million square meters reclaimed from the sea in Gwangyang City in the
southwestern region of Korea. Gwangyang Works currently has an annual crude steel production capacity of 22.2 million tons. Gwangyang Works specializes in high volume production of a limited number of steel products. Products manufactured at
Gwangyang Works include both hot and cold rolled types.

Gwangyang Works is comprised of 49 plants, including iron-making plants,
steelmaking plants, continuous casting plants, hot strip mills and thin-slab hot rolling plants. The site also features docking and unloading facilities for raw materials capable of accommodating ships of as large as 300,000 tons for unloading raw
materials, storage areas for 38 days supply of raw materials and separate docking facilities for ships carrying products for export.

We believe Gwangyang Works is one of the most technologically advanced integrated steel facilities in the world. Gwangyang Works has a completely
automated, linear production system that enables the whole production process, from iron-making to finished products, to take place without interruption. This advanced system reduces the production time for hot rolled products to only four hours.
Like Pohang Works, Gwangyang Works is equipped with a highly advanced computerized production-management system allowing constant monitoring and control of the production process.

Capacity utilization has kept pace with increases in capacity. The following table sets out Gwangyang Works capacity utilization rates for the
periods indicated.



|                                                                              |  |                                           |       |  |      |  |       |      |  |  |       |  |  |      |       |  |  |  |       | 
|----------------------------------------------------------------------------- |  | ----------------------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  |  |  | ----- | 
|                                                                              |  | As of or for the Year Ended 
December 31, |      
|                                                                              |  | 2007                                      |       |  | 2008 |  |       | 2009 |  |  | 2010  |  |  | 2011 |      
|Crude steel production capacity as of end of the year (million tons per year) |  |                                           | 16.70 |  |      |  | 18.00 |      |  |  | 18.00 |  |  |      | 20.80 |  |  |  | 20.80 | 
|Actual crude steel output (million tons)                                      |  |                                           | 17.41 |  |      |  | 18.20 |      |  |  | 15.19 |  |  |      | 19.48 |  |  |  | 20.94 | 
|Capacity utilization rate (%) (1)                                             |  |                                           | 104.2 |  |      |  | 101.1 |      |  |  | 84.4  |  |  |      | 100.4 |  |  |  | 100.7 | 





|(1) | Calculated by dividing actual crude steel output by the actual crude steel production capacity for the relevant period as determined by us.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

The Environment

We believe we are in
compliance with applicable environmental laws and regulations in all material respects. Our levels of pollution control are higher than those mandated by Government standards. We established an on-line environmental monitoring system with real-time
feedback on pollutant levels and a forecast system of pollutant concentration in surrounding areas. We also



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undergo periodic environmental inspection by both internal and external inspectors in accordance with ISO 14001 standards to monitor execution and maintenance of our environmental management
plan. As we continue to diversify our production operations abroad and the importance of comprehensive environmental management continues to grow, we announced an integrated environmental management system in December 2010, pursuant to which all of
our subsidiaries located in Korea as well as abroad will strive to acquire the ISO 14001 certification by the end of 2012. We also operate a certification program targeting our suppliers and outsourcing partners, pursuant to which they are
encouraged to establish environmental management systems of their own.

We have taken additional measures to ensure that we are
appropriately addressing environmental issues. We recycle most of the by-products from the steelmaking process. A vital part of our production process requires consumption of water, and many of our operations are located on coastal sites or adjacent
to major lakes and rivers. Recognizing the importance of water resources, we established mid-to-long-term water management strategies to more effectively utilize water resources, including increasing water recycling, reducing usage volume,
developing substitute sources and reducing manufacturing discharge harmful to the environment. As part of our efforts to preserve biological diversity, we supply steel slag that is used in the construction of underwater facilities designed to
restore marine ecosystems damaged by rising seawater temperatures. In addition, we have been developing environmentally friendly products such as chrome-free steel sheets in an effort to compete with products from the European Union, the United
States and Japan and to meet strengthened environmental regulations. Anticipating the trend toward increasing regulation of chrome in various steel products, we introduced chrome-free steel products meeting international environmental standards in
2006 that are used to manufacture automotive oil tanks.

We plan to continue to invest in developing more environmentally friendly steel
manufacturing processes. We commenced research and development for a new steel manufacturing technology called FINEX in 1992 jointly with the Research Institute of Industrial Science and Technology and VOEST Alpine, an Australian company, and we
completed the construction of our first FINEX plant in May 2003 with an annual steel production capacity of 0.6 million tons and a second FINEX plant in May 2007 with an annual steel production capacity of 1.5 million tons. The total
annual steel production capacity of our FINEX plants is 2.1 million tons. We are now preparing for the construction of our third FINEX plant, which we expect will commence operations in 2013. We will continue to refine FINEX, a low cost,
environmentally friendly steel manufacturing process that we believe optimizes our production capacity by utilizing non-agglomerated iron ore fines and using non-coking coal as an energy source and a reducing agent. We believe that FINEX offers
considerable environmental and economic advantages by eliminating major sources of pollution such as sinter and coke plants, as well as decreasing operating and raw material costs.

Our climate change response program seeks to minimize the risks from changes in climate as well as to maximize the opportunities available in such
environment by enhancing the energy efficiency of our production process. We invested Won 203 billion in facilities and equipments for the program in 2011, and we spent Won 47 billion in our research and development activities in 2011 to reduce
carbon dioxide emissions. We are also involved in a forestation project in Uruguay, which was registered as the worlds first Clean Development Mechanism project sponsored by a steel producer. Clean Development Mechanism is one of the Kyoto
Protocols project-based mechanisms designed to promote projects that reduce emissions. We have disclosed our carbon dioxide emission levels and efforts to deal with climate changes through various channels, including participating in the
Carbon Disclosure Project in 2011. The Carbon Disclosure Project is an organization based in the United Kingdom that works with major corporations around the world to disclose their greenhouse gas emission levels.

POSCO spent Won 297 billion in 2009, Won 636 billion in 2010 and Won 493 billion in 2011 on anti-pollution facilities. In 2011, approximately 13% of
our investments in facilities were dedicated to investing in low-emission, anti-pollution facilities.



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Item 4A.Unresolved Staff Comments

We do not have any unresolved comments from the Securities and Exchange Commission staff regarding our periodic reports under the
Exchange Act of 1934.

Item 5.Operating and Financial Review and
Prospects

Item 5.A.Operating Results

The following discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with
IFRS, as issued by the IASB.

Overview

We are the largest fully integrated steel producer in Korea. We have four reportable operating segments  a steel segment, an engineering and construction segment, a trading segment and a segment that contains
operations of all other entities which fall below the reporting thresholds. The steel segment includes production of steel products and sale 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 global trading activities of Daewoo International, exporting and importing a wide range of steel products that
are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. The others segment includes power generation, LNG production, network and system integration, logistics and magnesium
coil and sheet production. See Note 37 of Notes to Consolidated Financial Statements.

One of the major factors contributing to our
historical performance has been the growth of the Korean economy, and our future performance will depend at least in part on Koreas general economic growth and prospects. For a description of recent developments that have had and may continue
to have an adverse effect on our results of operations and financial condition, see Item 3. Key Information  Item 3.D. Risk Factors  Korea is our most important market, and our current business and future growth could be materially
and adversely affected if economic conditions in Korea deteriorate. A number of other factors have had or are expected to have a material impact on our results of operations, financial condition and capital expenditures. These factors include:



| |  |  | our sales volume, unit prices and product mix;
| | - |  | ----------------------------------------------



| |  |  | costs and production efficiency;
| | - |  | --------------------------------



| |  |  | exchange rate fluctuations; and
| | - |  | -------------------------------



| |  |  | acquisition of Daewoo International in September 2010.
| | - |  | ------------------------------------------------------

As a result of these factors, our financial results in the past may not be indicative of future results or trends in those results.

Sales Volume, Prices and Product Mix

In recent years, our net sales have been affected
by the following factors:



| |  |  | the demand for our products in the Korean market and our capacity to meet that demand;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | our ability to compete for sales in the export market;
| | - |  | ------------------------------------------------------



| |  |  | price levels; and
| | - |  | -----------------



| |  |  | our ability to improve our product mix.
| | - |  | ---------------------------------------

Domestic demand for our products is affected by the condition of major steel consuming industries, such as construction, shipbuilding, automotive, electrical appliances and downstream steel processors, and the
Korean economy in general.



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In 2011, unit sales prices in Won for all of our principal product lines, other than those categorized
under others, increased. However, the weighted average unit price for our products decreased by 0.6% from 2010 to 2011, as we consolidated sales results of steel products sold by Daewoo International in 2010 only from the date of its
acquisition on September 20, 2010 compared to consolidation for the full year in 2011. Sales prices of steel products manufactured by other steel companies that are sold by Daewoo International are typically lower than those produced and sold
by us.

Unit sales price of plates, which accounted for 13.8% of total sales volume, increased by 11.5% in 2011. Unit sales price of
silicon steel sheets, which accounted for 2.6% of total sales volume, increased by 7.3% in 2011. Unit sales price of wire rods, which accounted for 6.4% of total sales volume, increased by 7.1% in 2011. Unit sales price of cold rolled products,
which accounted for 30.9% of total sales volume, increased by 4.7% in 2011. Unit sales price of hot rolled products, which accounted for 17.2% of total sales volume, increased by 2.9% in 2011. Unit sales price of stainless steel products, which
accounted for 5.8% of total sales volume, increased by 0.7% in 2011. On the other hand, unit sales price of steel products categorized under others, which include steel products sold by Daewoo International and accounted for 23.3% of
total sales volume, decreased by 9.0% in 2011.

Appreciation in the average value of the Won against the Dollar from 2010 to 2011
contributed to a decrease in our export prices in Won terms. The average exchange rate of the Won against the Dollar, as announced by Seoul Money Brokerage Services, Ltd., appreciated from Won 1,156.3 to US$1.00 in 2010 to Won 1,108.1 to US$1.00 in
2011.

Partly in response to the weakening demand resulting from the global economic downturn, our export prices in dollar terms
decreased in the first half of 2009. Starting in the third quarter of 2009, our export prices in dollar terms gradually started to recover due to an increase in demand driven by improvement in business confidence and higher level of economic
activities as well as a decrease in our inventory level. We maintained similar pricing levels throughout 2010, but we gradually increased our export prices in the first half of 2011. However, our export prices fell substantially in the second half
of 2011 due to uncertainties in the global economy caused by financial difficulties affecting European countries including Greece, Spain, Portugal and Italy. We may decide to adjust our future export sales prices on an on-going basis subject to
market demand for our products, the production outlook of the global steel industry and global economic conditions in general. See Item 4. Information on the Company  Item 4.B. Business Overview  Markets  Exports.

The table below sets out the average unit sales prices for our semi-finished and finished steel products for the periods indicated.



|                         |  |                                 |       |  |      |       |       | 
|------------------------ |  | ------------------------------- | ----- |  | ---- | ----- | ----- | 
|                         |  | For the Year Ended December 31, |      
|Products                 |  | 2010                            |       |  | 2011 |      
|                         |  | (In thousands of Won per ton)   |      
|Hot rolled products      |  | (Won)                           | 868   |  |      | (Won) | 893   | 
|Plates                   |  |                                 | 982   |  |      |       | 1,094 | 
|Wire rods                |  |                                 | 1,097 |  |      |       | 1,175 | 
|Cold rolled products     |  |                                 | 1,008 |  |      |       | 1,056 | 
|Silicon steel sheets     |  |                                 | 1,633 |  |      |       | 1,753 | 
|Stainless steel products |  |                                 | 3,014 |  |      |       | 3,037 | 
|Others (1)               |  |                                 | 926   |  |      |       | 843   | 
|                         |  |                                 |       |  |      |       |       | 
|Average (2)              |  | (Won)                           | 1,132 |  |      | (Won) | 1,125 | 
|                         |  |                                 |       |  |      |       |       | 





|(1) | Including all sales results of steel products sold by Daewoo International. Such sales results were consolidated in 2010 only from the date of our acquisition of Daewoo
International on September 20, 2010, compared to consolidation for the full year in 2011. Prior to September 20, 2010, sales results of steel products sold by us to Daewoo International were classified under the applicable steel product
category.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Average prices are based on the weighted average, by sales volume, of our sales for the listed products. See Item 4. Information on the Company 
Item 4.B. Business Overview  Major Products.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Costs and Production Efficiency

Our major costs and operating expenses are raw material purchases, depreciation, labor and other purchases. The table below sets out our cost of
sales and selling and administrative expenses as a percentage of our revenue as well as gross profit margin and operating profit margin for the periods indicated.



|                                    |  |                                 |      |   |      |  |      |  
|----------------------------------- |  | ------------------------------- | ---- | - | ---- |  | ---- | -
|                                    |  | For the Year Ended December 31, |     
|                                    |  | 2010                            |      |   | 2011 | 
|                                    |  | (Percentage of net sales)       |     
|Cost of goods sold                  |  |                                 | 82.9 | % |      |  | 86.8 | %
|Selling and administrative expenses |  |                                 | 5.5  |   |      |  | 5.3  |  
|Gross margin                        |  |                                 | 17.1 |   |      |  | 13.2 |  
|Operating profit margin             |  |                                 | 11.3 |   |      |  | 7.8  |  

Our operating profit margin decreased from 11.3% in 2010 to 7.8% in 2011. Our operating profit margin was negatively
affected in 2011 due to the consolidation of Daewoo Internationals results in 2011 for the full year compared to the consolidation of such results in 2010 starting September 20, 2010, the date of our acquisition of the controlling
interest in Daewoo International. Daewoo International, as a global trading company that primarily engages in trading of steel and raw materials, typically recognizes revenue from its trading activities on a gross basis that results in lower margin
levels.

We are closely monitoring changes in market conditions and we implemented the following measures in recent years to address
challenges posed by the global economic downturn:



| |  |  | pursuing cost reduction through enhancing product designs, improving productivity and reducing transportation costs;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | focusing on marketing activities to increase our domestic market share and export sales; and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | establishing a special sales committee to more effectively respond to changes in market trends and preparing responses to various scenarios of future sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Our production efficiency prior to the recent global economic downturn had benefited from operation near or in excess
of stated capacity levels. Production capacity represents our maximum production capacity that can be achieved with an optimal level of operations of our facilities. In 2009, we reduced our crude steel production in the first quarter of the year but
began to incrementally increase our crude steel production starting in April 2009, and our production level normalized in the second half of 2009. See Item 4. Information on the Company  Item 4.D. Property, Plants and
Equipment.

The table below sets out certain information regarding our efficiency in the production of steel products for the
periods indicated.



|                                                                            |  |                                 |      |  |      |  |      |      |  |  |      | 
|--------------------------------------------------------------------------- |  | ------------------------------- | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|                                                                            |  | For the Year Ended December 31, |     
|                                                                            |  | 2009                            |      |  | 2010 |  |      | 2011 | 
|Crude steel and stainless steel production capacity (million tons per year) |  |                                 | 34.6 |  |      |  | 37.6 |      |  |  | 39.4 | 
|Actual crude steel and stainless steel output (million tons)                |  |                                 | 31.1 |  |      |  | 35.4 |      |  |  | 39.1 | 
|Capacity utilization rate (%)                                               |  |                                 | 90.0 |  |      |  | 94.2 |      |  |  | 99.2 | 
|Steel product sales (million tons) (1)                                      |  |                                 | 31.1 |  |      |  | 33.8 |      |  |  | 38.3 | 





|(1) | Includes sales by our consolidated sales subsidiaries of steel products purchased by them from third parties, including trading companies to which we sell steel products. These
sales amounted to approximately 0.5 million tons in 2009, 2.2 million tons in 2010, and 9.2 million tons in 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Exchange Rate Fluctuations

Our consolidated financial statements are prepared from our local currency denominated financial results, assets and liabilities and our subsidiaries around the world, which are then translated into Won. A
substantial proportion of our consolidated financial results is accounted for in currencies other than the Won. Accordingly, our consolidated financial results and assets and liabilities may be materially affected by changes in the exchange rates of
foreign currencies. In 2011, 44.9% of our sales volume of steel products was in overseas markets outside of Korea. To the extent that we incur costs in one currency and make sales in another, our profit margins may be affected by changes in the
exchange rates between the two currencies. Since the currency in which sales are recorded may not be the same as the currency in which expenses are incurred, foreign exchange rate fluctuations may materially affect our results of operations.
Depreciation of the Won may materially affect the results of our operations because, among other things, it causes:



| |  |  | an increase in the amount of Won required for us to make interest and principal payments on our foreign currency-denominated debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in Won terms in the costs of raw materials and equipment that we purchase from overseas sources and a substantial portion of our freight costs, which
are denominated primarily in Dollars; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | foreign exchange translation losses on liabilities, which lower our earnings for accounting purposes.
| | - |  | -----------------------------------------------------------------------------------------------------

Appreciation of the Won against major currencies, on the other hand, causes:



| |  |  | our export products to be less competitive by raising our prices in Dollar terms; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | a reduction in net sales and accounts receivables in Won from export sales, which are primarily denominated in Dollars.
| | - |  | -----------------------------------------------------------------------------------------------------------------------

We try to minimize our exposure to currency fluctuations by attempting to maintain export sales, which result in foreign currency receipts, at a
level that covers foreign currency obligations to the extent feasible. As a result, a decrease in our export sales could increase our foreign exchange risks. We attempt to manage the remaining net exposure after natural hedges by entering into
derivative contracts such as forward exchange contracts. Although the impact of exchange rate fluctuations has in the past been partially mitigated by such strategies, our results of operations have historically been affected by exchange rate
fluctuations. Because of the larger positive effects of the appreciation of the Won (i.e., the reverse of the negative effects caused by the depreciation of the Won, as discussed above), depreciation of the Won generally has a negative impact on our
results of operations.

Acquisition of Daewoo International in September 2010

On September 20, 2010, we acquired a controlling interest in Daewoo International for Won 3.37 trillion. On a consolidated basis, Daewoo
International generated revenues of Won 19,457 billion and profit for the period of Won 211 billion in 2011, compared to revenues of Won 4,272 billion and profit for the period of Won 128 billion in 2010. In accordance with IFRS as issued by the
IASB, the results of operations of Daewoo International have been consolidated starting on September 20, 2010, the date of acquisition. Accordingly, comparability with our consolidated financial statements for prior years is impacted
accordingly.

Inflation

Inflation in Korea, which was 2.8% in 2009, 2.9% in 2010 and 4.2% in 2011, has not had a material impact on our results of operations in recent years.



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Critical Accounting Estimates

We have prepared our consolidated financial statements in accordance with IFRS as issued by the IASB. These accounting principles require us to make certain estimates and judgments that affect the reported amounts
in our consolidated financial statements. Our estimates and judgments are based on historical experience, forecasted future events and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may
differ under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. We believe the critical accounting policies discussed below are the most important to the portrayal of our financial condition and results
of operations. Each of them is dependent on projections of future market conditions, and they require us to make the most difficult, subjective or complex judgments.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for
exposures in our receivable balances that represent our estimate of probable losses in our short-term and long-term receivable balances from the inability of our customers to make required payments. If the financial condition of our customers were
to deteriorate and negatively impact their ability to make payments, additional allowances may be required. Determining the allowance for doubtful accounts requires significant management judgment and estimates including, among others, the credit
worthiness of our customers, experience of historical collection patterns, potential events and circumstances affecting future collections and the ongoing risk assessment of our customers ability to pay.

Trade account receivables are analyzed on a regular basis and, upon our becoming aware of a customers inability to meet its financial
commitments to us, we reduce the value of the receivable is reduced through a charge to the allowance for doubtful accounts. In addition, we record a charge to the allowance for doubtful accounts upon receipt of customer claims in connection with
sales that management estimates are unlikely to be collected in full. As of December 31, 2011, the percentage of allowance for doubtful accounts to gross account receivables is 2.86%. The increase in allowance for doubtful accounts in 2011 was
primarily the result of the increase in receivables related to the Construction Segment. Assumptions and judgments related to bad debt allowance did not change in 2011.

Specifically, allowance for doubtful accounts are recorded when any of the following loss events occurs: (i) there is objective evidence as to uncollectibility of the account observed through bankruptcy,
default or involuntary dissolution of the customer; (ii) we lose a lawsuit against the customer or our right of claim gets extinguished; (iii) our costs to collect the account exceed the payments to be received; or (iv) dispute with
the customer over the collection of the account persists over three years.

The actual average annual uncollected percentage rate of
accounts receivables resulting in write-offs for the two years in the period ended December 31, 2011 was 0.23%. These historical results, as well as current known conditions impacting the collectability of our accounts receivable balances, are
significant factors for us when we estimate the amount of the necessary allowance for doubtful accounts. Historically, losses from uncollectible accounts receivables have been within expectations and in line with the allowances established. However,
unforeseen circumstances such as adverse market conditions that deviate significantly from our estimates may require us to change the timing of, and make additional allowances to, our receivable balances. In this case, our results of operations,
financial condition and net worth could be materially and adversely affected.

Valuation of Financial Instruments including Debt
and Equity Securities and Derivatives

We invest in various financial instruments including debt and equity securities and
derivatives. Depending on the accounting treatment specific to each type of financial instrument, an estimate of fair value is required to determine the instruments effect on our consolidated financial statements.



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If available, quoted market prices provide the best indication of fair value. We determine the fair
value of our financial instruments using quoted market prices when available, including quotes from dealers trading those securities. If quoted market prices are not available, we determine the fair value based on pricing or valuation models, quoted
prices of instruments with similar characteristics, or discounted cash flows. Determining the fair value of unlisted financial instruments involves a significant degree of management resources and judgment as no quoted prices exist and such
securities are generally very thinly traded. Derivatives for which quoted market prices are not available are valued using valuation models such as the discounted cash flow method. The key inputs used in the valuation of such derivatives depend upon
the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign exchange rates, the spot price of the underlying instrument, volatility and correlation. The fair values based on pricing and
valuation models and discounted cash flow analysis are subject to various assumptions used that, if changed, could significantly affect the fair value of the investments.

We assess at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as
available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the asset is impaired. As part of this impairment review, the investees operating results, net asset value and future
performance forecasts as well as general market conditions are taken into consideration in order to assess whether there is any objective evidence such as significant financial difficulty of the issuer.

We have estimated fair values of material non-marketable securities. We estimated these fair values based on pricing or valuation models, quoted
prices of instruments with similar characteristics, or discounted cash flow models. The discounted cash flow model valuation technique is based on the estimated cash flow projections of the underlying investee. Key assumptions and estimates include
market conditions, revenue growth rates, operating margin rates, income tax rates, depreciation and amortization rates, the level of capital expenditures, working capital amounts and the discount rates. These estimates are based on historical
results of the investee and other market data. In these cash flows projections, the two most significant estimates are the discount rates and revenue growth rates. If the discount rates used in these valuations were increased by 1%, then the
estimated fair values would have decreased by 14% in total. In addition, if the revenue growth rate assumptions were decreased by 1% in the cash flow models, then the estimated fair values would have decreased by 11% in total. If the discount rate
assumptions were increased by 1% or the revenue growth rate assumptions were decreased by 1%, there would be no impact on impairment loss of non-marketable securities.

We recognized losses on impairment of available for sale financial assets of Won 57 billion in 2010 and Won 156 billion in 2011. Loss on impairment of investments increased in 2011 primarily due to an impairment
loss of Won 107 billion resulting from significant and prolonged decline in the fair value of our investment in SK Telecom below cost.

Historically, our estimates and assumptions used to evaluate impairment of investments have been within expectations. However, unforeseen
circumstances such as adverse market conditions that deviate significantly from our estimates may require us to recognize additional losses on impairment of investments. We base our fair value estimates on assumptions we believe to be reasonable,
but which are unpredictable and inherently uncertain. The use of alternative estimates and assumptions could increase or decrease the estimated fair values of our investments and potentially result in different impacts on our results of operations.

Long-lived Assets

At each reporting date, we review the carrying amounts of our tangible and intangible assets (excluding goodwill) to determine whether there is any indication that the carrying amount of those assets may not be
recoverable through continuing use. If any such indication exists, the recoverable amount of the asset (or cash generating unit) is reviewed in order to determine the amount of the impairment, if any. The recoverable amount is the higher of the
assets net selling price (fair value



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reduced by selling costs) and its value in use. When the book value of long-lived asset exceeds the recoverable value of the asset due to obsolescence, physical damage or a decline in market
value and such amount is material, the impairment of asset is recognized and the assets carrying value is reduced to its recoverable value and the resulting impairment loss is charged to current operations. Such recoverable value is based on
our estimates of the future use of assets that is subject to changes in market conditions.

The depreciable lives and salvage values of
our long-lived assets are estimated and reviewed each year based on industry practices and prior experience to reflect economic lives of long-lived assets. Effective January 1, 2011, we changed our estimated useful lives for certain machinery
and equipment in our steel operating segment from the previous eight years to fifteen years based on an asset life study performed in 2011.

Our estimates of the useful lives and recoverable values of long-lived assets are based on historical trends adjusted to reflect our best estimate of future market and operating conditions. Also, our estimates
include the expected future period in which the future cash flows are expected to be generated from continuing use of the assets that we review for impairment and cash outflows to prepare the assets for use that can be directly attributed or
allocated on a reasonable and consistent basis. If applicable, estimates also include net cash flows to be received or paid for the disposal of the assets at the end of their useful lives. As a result of the impairment review, when the sum of the
discounted future cash flows expected to be generated by the assets is less than the book value of the assets, we recognize impairment losses based on the recoverable value of those assets. We make a number of significant assumptions and estimates
in the application of the discounted cash flow model to forecast cash flows, including business prospects, market conditions, selling prices and sales volume of products, costs of production and funding sources. The estimated cash flow forecast
amounts are derived from the most recent financial budgets for the next five years. For periods beyond the five year forecast period, we use a terminal value approach to estimate the cash flows for the remaining years based on an expected estimated
growth rate. This estimated growth rate is based on actual historical results. As of December 31, 2011, we estimated an average discount rate of 8.43% and an average rate of revenue growth of 3.75%. However, given the current economic
environment, it is likely that the estimates and assumptions will be more volatile than they have been in the past. Further impairment charges may be required if triggering events occur, such as adverse market conditions, that suggest deterioration
in an assets recoverability or fair value. Assessment of the timing of when such declines become other than temporary and the amount of such impairment is a matter of significant judgment. Results in actual transactions could differ from those
estimates used to evaluate the impairment of such long-lived assets. If our future cash flow projections are not realized, either because of an extended recessionary period or other unforeseen events, impairment charges may be required in future
periods.

If the estimated average discount rates used in these valuations were increased by 1%, then the estimated fair values would
have decreased by 18% in total. If the estimated average rate of revenue growth rate were decreased by 1%, then the estimated fair values would have decreased by 16% in total. These sensitivity analyses do not affect the impairment loss due to the
absence of an impairment loss indicator for our long-lived assets.

Goodwill

Goodwill is tested for impairment annually at the level of the groups of cash generating units or whenever changes in circumstances indicate that
the carrying amount may not be recoverable. The recoverable amounts of the groups of cash-generating units are determined from the higher of its fair value less cost to sell or its value-in-use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period.



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Our management estimates discount rates using post-tax rates that reflect current market rates for
investments of similar risk. Growth rates are based on industry growth forecasts, and changes in selling prices and direct costs are based on historical experience and expectations of future changes in the market. Cash flow forecasts are derived
from the most recent financial budgets for the next five years. Beyond the specifically forecasted period, we extrapolate cash flows for the remaining years based on an estimated growth rate. This rate does not exceed the average long-term growth
rate for the relevant markets. Once recognized, impairment losses recognized for goodwill are not reversed.

In validating the value in
use determined for the cash generating units, the key assumptions used in the discounted cash-flow model such as discount rates and terminal growth rates were sensitized to test the resilience of value-in-use in 2011. If the estimated average
discount rates used in these valuations were increased by 0.25%, the estimated value-in-use would have decreased by 4.13% in total. If the estimated terminal growth rate were decreased by 0.25%, the estimated value-in-use would have decreased by
3.31% in total. If the discount rate assumptions were increased by 0.25% or the terminal growth rate assumptions were decreased by 0.25%, there would be no impact on goodwill impairment. Based on an impairment test as of December 31, 2011, the value
in use of each of the cash generating units substantially exceeded its respective carrying value.

Inventories

Inventories are stated at the lower of cost or net realizable value. Costs of inventories are determined using the moving-weighted average or
weighted average method while materials-in-transit are determined using the specific identification method. Amounts of inventory are written down to net realizable value due to losses occurring in the normal course of business and the allowance is
reported as a contra inventory account, while the related charge is recognized in cost of goods sold.

The net realizable value is
determined based on the latest selling price available at the end of each quarter taking into account the directly attributable selling costs. The latest selling price is the base price which is the negotiated selling price based upon the recent
transactions entered into with major customers. Considering that our inventory turnover is approximately two months and inventories at balance sheet date would be sold during the following two months, we perform valuation of inventories using the
base price as of the balance sheet date and adjust for significant changes in selling price occurring subsequent to the reporting date. The selling price range used for determining the net realizable value of our inventories ranged from the
inventory cost amount less 23.17% of gross profit margin to the inventory cost amount plus 28.39% of gross profit margin. For inventories in which expected selling prices are less than the cost amount, the necessary adjustment to write-down the
inventories to net realizable value is made. There was no recovery in 2010 and 2011. The inventory write-down charges were Won 39 billion in 2010 and Won 140 billion in 2011.

Deferred Income Tax Assets

In assessing the realization of our deferred income tax
assets, our management considers whether it is probable that a portion or all of the deferred income tax assets will not be realized. The ultimate realization of our deferred income tax assets is dependent on whether we are able to generate future
taxable income in specific tax jurisdictions during the periods in which temporary differences become deductible.

Our management has
scheduled the expected future reversals of the temporary differences and projected future taxable income in making this assessment. However, changes in our evaluation of our deferred income tax assets from period to period could have a significant
effect on our net results and financial condition.

Employee Benefits

Our accounting of employee benefits for defined benefit plans involves judgments about uncertain events including, but not limited to, discount
rates, life expectancy, future pay inflation and expected rate of return on plan assets. The discount rates are determined by reference to the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the
terms of



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our benefits obligations and that are denominated in the same currency in which the benefits are expected to be paid. The expected rate of returns assumptions on plan assets are based on the
portfolio as a whole and determined on the assumptions considering long-term historical returns and asset allocations. Due to changing market and economic conditions, the underlying key assumptions may differ from actual developments and may lead to
significant changes in our defined benefit plan. We immediately recognize all actuarial gains and losses arising from defined benefit plans in retained earnings. If the estimated average discount rates by actuarial assumptions used in these
valuations were increased by 1%, then the estimated provision for severance benefits would have decreased by 7.31% in total. If the estimated future pay inflation rates were decreased by 1%, then the estimated provision for severance benefits would
have decreased by 7.51% in total.

Operating Results  2010 Compared to 2011

The following table presents selected income statement data and changes therein for 2010 and 2011.



|                                                                        |  |                                 |        |  |                  |       |        |        |  |       |        |   |  |  |       |  
|----------------------------------------------------------------------- |  | ------------------------------- | ------ |  | ---------------- | ----- | ------ | ------ |  | ----- | ------ | - |  |  | ----- | -
|                                                                        |  |                                 |        |  | Changes          |      
|                                                                        |  | For the Year Ended December 31, |        |  | 2010 versus 2011 |      
|                                                                        |  | 2010                            |        |  | 2011             |       |        | Amount |  |       | %      |  
|                                                                        |  | (In billions of Won)            |       
|Revenue                                                                 |  | (Won)                           | 47,887 |  |                  | (Won) | 68,939 |        |  | (Won) | 21,051 |   |  |  | 44.0  | %
|Cost of sales                                                           |  |                                 | 39,722 |  |                  |       | 59,824 |        |  |       | 20,101 |   |  |  | 50.6  |  
|                                                                        |  |                                 |        |  |                  |       |        |        |  |       |        |   |  |  |       |  
|Gross profit                                                            |  |                                 | 8,165  |  |                  |       | 9,115  |        |  |       | 950    |   |  |  | 11.6  |  
|Selling and administrative expenses                                     |  |                                 | 2,621  |  |                  |       | 3,660  |        |  |       | 1,040  |   |  |  | 39.7  |  
|Other operating income                                                  |  |                                 | 231    |  |                  |       | 337    |        |  |       | 106    |   |  |  | 45.7  |  
|Other operating expenses                                                |  |                                 | 342    |  |                  |       | 383    |        |  |       | 42     |   |  |  | 12.1  |  
|                                                                        |  |                                 |        |  |                  |       |        |        |  |       |        |   |  |  |       |  
|Operating profit                                                        |  |                                 | 5,434  |  |                  |       | 5,408  |        |  |       | (25    | ) |  |  | (0.5  | )
|Share of profit of equity-accounted investees                           |  |                                 | 183    |  |                  |       | 51     |        |  |       | (132   | ) |  |  | (72.3 | )
|Finance income                                                          |  |                                 | 1,739  |  |                  |       | 3,190  |        |  |       | 1,452  |   |  |  | 83.5  |  
|Finance costs                                                           |  |                                 | 2,088  |  |                  |       | 3,867  |        |  |       | 1,779  |   |  |  | 85.2  |  
|                                                                        |  |                                 |        |  |                  |       |        |        |  |       |        |   |  |  |       |  
|Profit before income tax                                                |  |                                 | 5,267  |  |                  |       | 4,782  |        |  |       | (485   | ) |  |  | (9.2  | )
|Income tax expense                                                      |  |                                 | 1,081  |  |                  |       | 1,068  |        |  |       | (13    | ) |  |  | (1.2  | )
|                                                                        |  |                                 |        |  |                  |       |        |        |  |       |        |   |  |  |       |  
|Profit for the period                                                   |  |                                 | 4,186  |  |                  |       | 3,714  |        |  |       | (471   | ) |  |  | (11.3 | )
|Profit for the period attributable to owners of the controlling company |  |                                 | 4,106  |  |                  |       | 3,648  |        |  |       | (458   | ) |  |  | (11.1 | )
|Profit for the period attributable to non-controlling interests         |  |                                 | 80     |  |                  |       | 66     |        |  |       | (14    | ) |  |  | (17.3 | )





|(1) | Not applicable.
|--- | ---------------

Revenue

The following table presents a breakdown of our revenue by segment, after adjusting for inter-segment transactions that are eliminated during
consolidation, and changes therein for 2010 and 2011.



|              |  |                                 |        |  |                  |       |        |        |  |       |        |  |  |  |       |  
|------------- |  | ------------------------------- | ------ |  | ---------------- | ----- | ------ | ------ |  | ----- | ------ |  |  |  | ----- | -
|              |  |                                 |        |  | Changes          |      
|              |  | For the Year Ended December 31, |        |  | 2010 versus 2011 |      
|              |  | 2010                            |        |  | 2011             |       |        | Amount |  |       | %      | 
|              |  | (In billions of Won)            |       
|Steel         |  | (Won)                           | 35,527 |  |                  | (Won) | 39,152 |        |  | (Won) | 3,625  |  |  |  | 10.2  | %
|Trading       |  |                                 | 6,236  |  |                  |       | 21,097 |        |  |       | 14,861 |  |  |  | 238.3 |  
|Construction  |  |                                 | 4,349  |  |                  |       | 5,476  |        |  |       | 1,127  |  |  |  | 25.9  |  
|Others        |  |                                 | 1,775  |  |                  |       | 3,213  |        |  |       | 1,438  |  |  |  | 81.0  |  
|              |  |                                 |        |  |                  |       |        |        |  |       |        |  |  |  |       |  
|Total revenue |  | (Won)                           | 47,887 |  |                  | (Won) | 68,939 |        |  | (Won) | 21,051 |  |  |  | 44.0  | %
|              |  |                                 |        |  |                  |       |        |        |  |       |        |  |  |  |       |  



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Our revenue increased by 44.0%, or Won 21,051 billion, from Won 47,887 billion in 2010 to Won 68,939
billion in 2011 due to increases in revenues from the trading segment and to a lesser extent, the steel segment and the construction segment. Specifically:

Trading Segment.Revenue from the Trading Segment increased by 238.3%, or Won 14,861 billion, from Won 6,236 billion in 2010 to Won 21,097 billion in 2011 primarily due to the consolidation of
revenue of Daewoo International in 2010 only from the date of its acquisition on September 20, 2010 compared to consolidation for the full year in 2011 and, to a lesser extent, increases in the sales volume of steel products sold by our trading
and sales subsidiaries. On a consolidated basis, Daewoo International generated revenues of Won 4,272 billion in 2010 subsequent to the acquisition, compared to revenues of Won 19,457 billion in 2011.

Steel Segment.Revenue from the Steel Segment increased by 10.2% from Won 35,527 billion in 2010 to Won 39,152 billion in 2011
primarily due to an increase in our sales volume of steel products, which was offset in part by a slight decrease in the average unit sales price per ton of steel products sold by us. Our overall sales volume of steel products increased by 13.5%
from 33.8 million tons in 2010 to 38.3 million tons in 2011, and the weighted average unit sales price per ton of our steel products decreased by 0.6% from Won 1,132 per ton in 2010 to Won 1,125 per ton in 2011. Such factors were
principally attributable to the following:



| |  |  | The sales volume of products categorized under others increased by 175.1% from 2010 to 2011, and the sales volume of our principal product lines of
plates and wire rods increased by 23.3% and 8.0%, respectively, from 2010 to 2011. On the other hand, our sales volume of hot rolled products, cold rolled products, stainless steel products and silicon steel products decreased by 13.0%, 8.7%, 6.2%
and 4.3%, respectively, from 2010 to 2011. For a discussion of changes in sales volume of each of our principal product lines, see Item 4.B. Business Overview  Major Products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The unit sales prices in Won for all of our principal product lines, other than those categorized under others, increased. However, the weighted
average unit price for our products decreased by 0.6% from 2010 to 2011, as we consolidated sales results of steel products sold by Daewoo International in 2010 only from the date of its acquisition on September 20, 2010 compared to
consolidation for the full year in 2011. Sales prices of steel products manufactured by other steel companies that are sold by Daewoo International are typically lower than those produced and sold by us. See  Overview  Sales
Volume, Prices and Product Mix above.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Construction Segment.Revenue from the Construction
Segment increased by 25.9%, or Won 1,127 billion, from Won 4,349 billion in 2010 to Won 5,476 billion in 2011 primarily due to an increase in sales from POSCO E&Cs overseas contracts related to the construction of energy and
steelmaking plants abroad.

Others. The Others Segment includes power generation, LNG production, network and system
integration, logistics and magnesium coil and sheet production. Revenue from the Others Segment increased by 81.0%, or Won 1,438 billion, from Won 1,775 billion in 2010 to Won 3,213 billion in 2011 primarily due to an increase in revenue of POSCO
Energy Corporation, which increased from Won 827 billion in 2010 to Won 1,864 billion in 2011.

Cost of Sales and Gross Profit

Our cost of sales increased by 50.6%, or Won 20,101 billion, from Won 39,722 billion in 2010 to Won 59,824 billion in 2011. The
increase in cost of sales was primarily due to the consolidation of cost of sales of Daewoo International in 2010 only from the date of its acquisition on September 20, 2010 compared to consolidation for the full year in 2011, as well as an
increase in our sales volume of steel



47



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and non-steel products as discussed above and increases in the average prices in Won terms of key raw materials that were used to manufacture finished goods sold.

Our gross profit increased by 11.6%, or Won 950 billion, from Won 8,165 billion in 2010 to Won 9,115 billion. Our gross margin decreased from
17.1% in 2010 to 13.2% in 2011 as the increase in revenue was outpaced by the increase in cost of sales in 2010, as described above. Our gross margin was negatively affected primarily by an increase in the cost of sales of the Steel Segment caused
by increases in the average prices in Won terms of key raw materials, which increase outpaced an increase in the revenue from the Steel Segment. In addition, Daewoo International, as a global trading company that primarily engages in trading of
steel and raw materials, typically recognizes revenue from its trading activities on a gross basis that results in relatively lower margin levels. Accordingly, our gross margin for 2010 was negatively affected by the consolidation of results of
Daewoo International only from the date of its acquisition on September 20, 2010 compared to a full year of such negative effect for 2011.

Operating Income and Expenses

Selling and Administrative Expenses.The
following table presents a breakdown of our selling and administrative expenses and changes therein for 2010 and 2011.



|                                         |  |                                 |       |  |                  |       |       |        |  |       |     |   |  |  |       |  
|---------------------------------------- |  | ------------------------------- | ----- |  | ---------------- | ----- | ----- | ------ |  | ----- | --- | - |  |  | ----- | -
|                                         |  |                                 |       |  | Changes          |      
|                                         |  | For the Year Ended December 31, |       |  | 2010 versus 2011 |      
|                                         |  | 2010                            |       |  | 2011             |       |       | Amount |  |       | %   |  
|                                         |  | (In billions of Won)            |      
|Freight                                  |  | (Won)                           | 949   |  |                  | (Won) | 1,406 |        |  | (Won) | 457 |   |  |  | 48.2  | %
|Sales commissions                        |  |                                 | 70    |  |                  |       | 85    |        |  |       | 16  |   |  |  | 22.3  |  
|Others                                   |  |                                 | 102   |  |                  |       | 120   |        |  |       | 19  |   |  |  | 18.5  |  
|                                         |  |                                 |       |  |                  |       |       |        |  |       |     |   |  |  |       |  
|Total selling expenses                   |  | (Won)                           | 1,120 |  |                  | (Won) | 1,612 |        |  |       | 492 |   |  |  | 43.9  |  
|                                         |  |                                 |       |  |                  |       |       |        |  |       |     |   |  |  |       |  
|Wages and salaries                       |  | (Won)                           | 446   |  |                  | (Won) | 607   |        |  | (Won) | 161 |   |  |  | 36.1  | %
|Expenses related to defined benefit plan |  |                                 | 37    |  |                  |       | 60    |        |  |       | 24  |   |  |  | 64.2  |  
|Other employee benefits                  |  |                                 | 116   |  |                  |       | 165   |        |  |       | 48  |   |  |  | 41.5  |  
|Depreciation                             |  |                                 | 110   |  |                  |       | 173   |        |  |       | 63  |   |  |  | 57.0  |  
|Taxes and public dues                    |  |                                 | 35    |  |                  |       | 51    |        |  |       | 16  |   |  |  | 45.2  |  
|Rental                                   |  |                                 | 55    |  |                  |       | 66    |        |  |       | 11  |   |  |  | 19.8  |  
|Advertising                              |  |                                 | 96    |  |                  |       | 71    |        |  |       | (25 | ) |  |  | (26.3 | )
|Research and development                 |  |                                 | 141   |  |                  |       | 212   |        |  |       | 71  |   |  |  | 50.4  |  
|Service fees                             |  |                                 | 193   |  |                  |       | 287   |        |  |       | 94  |   |  |  | 48.5  |  
|Bad debt allowance                       |  |                                 | 51    |  |                  |       | 104   |        |  |       | 53  |   |  |  | 102.9 |  
|Others                                   |  |                                 | 220   |  |                  |       | 254   |        |  |       | 34  |   |  |  | 15.4  |  
|                                         |  |                                 |       |  |                  |       |       |        |  |       |     |   |  |  |       |  
|Total administrative expenses            |  | (Won)                           | 1,500 |  |                  | (Won) | 2,048 |        |  |       | 548 |   |  |  | 36.5  |  
|                                         |  |                                 |       |  |                  |       |       |        |  |       |     |   |  |  |       |  

Our selling and administrative expenses increased by 39.7%, or Won 1,040 billion, from Won 2,621 billion in 2010 to
Won 3,660 billion in 2011 primarily due to increases in freight expenses, labor-related expenses, service fees and research and development expense. Such factors were principally attributable to the following:



| |  |  | Freight expenses increased by 48.2%, or Won 457 billion, from Won 949 billion in 2010 to Won 1,406 billion in 2011 primarily due to the consolidation of freight
expenses of Daewoo International in 2010 only from the date of its acquisition on September 20, 2010 compared to consolidation for the full year in 2011, as well as an increase in our sales volume resulting from increased demand for, and
shipping of, our products.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our labor-related expenses included in selling and administrative expenses, which consist of wages and salaries, expenses related to defined benefit plans and
other employee benefits, increased by 38.8%, or Won 233 billion, from Won 599 billion in 2010 to Won 832 billion in 2011, primarily due to the consolidation of labor-related expenses of Daewoo International in
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 2010 only from the date of its acquisition on September 20, 2010 compared to consolidation for the full year in 2011. Service fees increased by 48.5%, or Won 94 billion, from Won 193 billion
in 2010 to Won 287 billion in 2011 primarily due to the consolidation of service fees of Daewoo International in 2010 only from the date of its acquisition on September 20, 2010 compared to consolidation for the full year in 2011. Service fees
of Daewoo International consisted primarily of fees paid to financial institutions in connection with accounts receivable-related financing activities.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Research and development expenses increased by 50.4%, or Won 71 billion, from Won 141 billion in 2010 to Won 212 billion in 2011 primarily due to an increase in
our efforts to develop new steel products with enhanced performance features.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Operating Income and
Expenses.The following table presents a breakdown of our other operating income and expenses and changes therein for 2010 and 2011.



|                                                             |  |                                 |                  |  |         |       |     |        |  |       |     |   |  |  |         |   
|------------------------------------------------------------ |  | ------------------------------- | ---------------- |  | ------- | ----- | --- | ------ |  | ----- | --- | - |  |  | ------- | --
|                                                             |  | For the Year Ended December 31, |                  |  | Changes |      
|                                                             |  |                                 | 2010 versus 2011 | 
|                                                             |  | 2010                            |                  |  | 2011    |       |     | Amount |  |       | %   |  
|                                                             |  | (In billions of Won)            |                 
|Gain on disposal of property, plant and equipment            |  | (Won)                           | 26               |  |         | (Won) | 14  |        |  | (Won) | (12 | ) |  |  | (46.2   | )%
|Gain on disposal of investment of equity-accounted investees |  |                                 | 3                |  |         |       | 2   |        |  |       | (1  | ) |  |  | (33.3   | ) 
|Reversal of allowance for doubtful accounts                  |  |                                 | 4                |  |         |       | 86  |        |  |       | 82  |   |  |  | 2,050.0 |   
|Outsourcing income                                           |  |                                 | 11               |  |         |       | 42  |        |  |       | 31  |   |  |  | 281.8   |   
|Gain on disposal of wastes                                   |  |                                 | 3                |  |         |       | 10  |        |  |       | 7   |   |  |  | 233.3   |   
|Gain from claim compensation                                 |  |                                 | 58               |  |         |       | 33  |        |  |       | (25 | ) |  |  | (43.1   | ) 
|Penalty income from early termination of contracts           |  |                                 | 14               |  |         |       | 39  |        |  |       | 25  |   |  |  | 178.6   |   
|Others                                                       |  |                                 | 112              |  |         |       | 111 |        |  |       | (1  | ) |  |  | (0.9    | ) 
|                                                             |  |                                 |                  |  |         |       |     |        |  |       |     |   |  |  |         |   
|Total other operating income                                 |  | (Won)                           | 231              |  |         | (Won) | 337 |        |  |       | 106 |   |  |  | 45.9    |   
|                                                             |  |                                 |                  |  |         |       |     |        |  |       |     |   |  |  |         |   
|Loss on disposal of property, plant and equipment            |  | (Won)                           | 83               |  |         | (Won) | 61  |        |  | (Won) | (22 | ) |  |  | (26.5   | )%
|Loss on disposal of investment property                      |  |                                 | 12               |  |         |       | 9   |        |  |       | (3  | ) |  |  | (25.0   | ) 
|Cost of idle assets                                          |  |                                 | 1                |  |         |       | 17  |        |  |       | 16  |   |  |  | 1,600.0 |   
|Other bad debt expenses                                      |  |                                 | 13               |  |         |       | 28  |        |  |       | 15  |   |  |  | 115.4   |   
|Contributions                                                |  |                                 | 74               |  |         |       | 67  |        |  |       | (7  | ) |  |  | (9.5    | ) 
|Loss on disposal of wastes                                   |  |                                 | 15               |  |         |       | 18  |        |  |       | 3   |   |  |  | 20.0    |   
|Impairment loss of property, plant and equipment and others  |  |                                 | 128              |  |         |       | 99  |        |  |       | (29 | ) |  |  | (22.7   | ) 
|Others                                                       |  |                                 | 15               |  |         |       | 86  |        |  |       | 71  |   |  |  | 473.3   |   
|                                                             |  |                                 |                  |  |         |       |     |        |  |       |     |   |  |  |         |   
|Total other operating expenses                               |  | (Won)                           | 342              |  |         | (Won) | 383 |        |  |       | 41  |   |  |  | 12.0    |   
|                                                             |  |                                 |                  |  |         |       |     |        |  |       |     |   |  |  |         |   

Operating Profit

Due to the factors described above, our operating profit decreased by 0.5%, or Won 25 billion, from Won 5,434 billion in 2010 to Won 5,408 billion in 2011. Our operating margin decreased from 11.3% in 2010 to 7.8%
in 2011.

Non-operating Income and Expenses

Share of Profit of Equity-Accounted Investees. Our share of profit of equity-accounted investees decreased by 72.3%, or Won 132 billion, from Won 183 billion in 2010 to Won 51 billion in 2011
primarily due to worsening of the results of operations of our foreign associates, particularly AMCI (WA) Pty Ltd., BX Steel Posco Cold Rolled Sheet Co., Ltd. and USS-POSCO Industries, as well as an increase in our proportionate net loss from
Sungjin Geotec Co., Ltd. These decreases were partially offset by increases in our proportionate net income from our interest in Kyobo Life Insurance Co., Ltd.



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Finance Income and Finance Costs. The following table presents a breakdown of our
finance income and costs and changes therein for 2010 and 2011.



|                                                        |  |                                 |                  |  |         |       |       |        |  |       |       |   |  |  |          |   
|------------------------------------------------------- |  | ------------------------------- | ---------------- |  | ------- | ----- | ----- | ------ |  | ----- | ----- | - |  |  | -------- | --
|                                                        |  | For the Year Ended December 31, |                  |  | Changes |      
|                                                        |  |                                 | 2010 versus 2011 | 
|                                                        |  | 2010                            |                  |  | 2011    |       |       | Amount |  |       | %     |  
|                                                        |  | (In billions of Won)            |                 
|Interest income                                         |  | (Won)                           | 293              |  |         | (Won) | 216   |        |  | (Won) | (77   | ) |  |  | (26.2    | )%
|Dividend income                                         |  |                                 | 102              |  |         |       | 144   |        |  |       | 42    |   |  |  | 40.8     |   
|Gain on foreign currency transactions                   |  |                                 | 844              |  |         |       | 1,454 |        |  |       | 610   |   |  |  | 72.2     |   
|Gain on foreign currency translations                   |  |                                 | 205              |  |         |       | 259   |        |  |       | 54    |   |  |  | 26.6     |   
|Gain on derivatives transactions                        |  |                                 | 181              |  |         |       | 549   |        |  |       | 369   |   |  |  | 203.7    |   
|Gain on valuation of derivatives                        |  |                                 | 87               |  |         |       | 112   |        |  |       | 25    |   |  |  | 28.6     |   
|Gain on disposal of available-for-sale financial assets |  |                                 | 3                |  |         |       | 455   |        |  |       | 452   |   |  |  | 17,449.9 |   
|Others                                                  |  |                                 | 24               |  |         |       | 2     |        |  |       | (23   | ) |  |  | (93.6    | ) 
|                                                        |  |                                 |                  |  |         |       |       |        |  |       |       |   |  |  |          |   
|Total finance income                                    |  | (Won)                           | 1,739            |  |         | (Won) | 3,190 |        |  | (Won) | 1,452 |   |  |  | 83.5     | % 
|                                                        |  |                                 |                  |  |         |       |       |        |  |       |       |   |  |  |          |   
|Interest expenses                                       |  | (Won)                           | 587              |  |         | (Won) | 788   |        |  | (Won) | 201   |   |  |  | 34.3     | % 
|Loss on foreign currency transactions                   |  |                                 | 809              |  |         |       | 1,620 |        |  |       | 812   |   |  |  | 100.4    |   
|Loss on foreign currency translations                   |  |                                 | 423              |  |         |       | 530   |        |  |       | 106   |   |  |  | 25.1     |   
|Loss on derivatives transactions                        |  |                                 | 175              |  |         |       | 513   |        |  |       | 338   |   |  |  | 192.7    |   
|Loss on valuation of derivatives                        |  |                                 | 18               |  |         |       | 189   |        |  |       | 171   |   |  |  | 961.3    |   
|Impairment of available-for-sale financial assets       |  |                                 | 57               |  |         |       | 153   |        |  |       | 96    |   |  |  | 167.3    |   
|Others                                                  |  |                                 | 19               |  |         |       | 74    |        |  |       | 55    |   |  |  | 294.8    |   
|                                                        |  |                                 |                  |  |         |       |       |        |  |       |       |   |  |  |          |   
|Total finance costs                                     |  | (Won)                           | 2,088            |  |         | (Won) | 3,867 |        |  | (Won) | 1,779 |   |  |  | 85.2     | % 
|                                                        |  |                                 |                  |  |         |       |       |        |  |       |       |   |  |  |          |   

Our gain on disposal of available-for-sale financial assets increased significantly from Won 3 billion in 2010 to
Won 455 billion in 2011 primarily due to recognition of a Won 332 billion gain from our disposal of a minority investment in an iron ore manufacturer in Australia, which was previously impaired due to a significant decline in its fair value below
acquisition cost. Upon disposal, the related unrecognized gain recorded in other comprehensive income was reclassified to profit or loss.

We recognized a net gain on foreign currency transactions of Won 36 billion in 2010 compared to net loss of Won 166 billion in 2011 and our net loss
on foreign currency translations increased by 23.8%, or Won 52 billion, from Won 219 billion in 2010 to Won 271 billion in 2011 as the Won appreciated against the Dollar in 2010 while it depreciated against the Dollar in 2011. The Won depreciated at
a greater level against the Yen in 2010 compared to 2011. In terms of the market average exchange rates announced by Seoul Money Brokerage Services, Ltd., the Won appreciated from Won 1,167.6 to US$1.00 as of December 31, 2009 to Won 1,138.9 to
US$1.00 as of December 31, 2010, while it depreciated against the Dollar to Won 1,153.3 to US$1.00 as of December 30, 2011. The Won depreciated against the Yen from Won 1,262.8 per Yen 100 as of December 31, 2009 to Won
1,397.1 per Yen 100 as of December 31, 2010 and depreciated further to Won 1,485.2 per Yen 100 as of December 31, 2011. Against such fluctuations, we recognized a net gain on valuation of derivatives of Won 69 billion in 2010
compared to a net loss of Won 77 billion in 2011, as well as a 537.2% increase, or Won 31 billion, in net gain on derivative transactions from Won 6 billion in 2010 to Won 37 billion in 2011.

Our interest expenses increased by 34.3%, or Won 201 billion, from Won 587 billion in 2010 to Won 788 billion in 2011 primarily due to the
consolidation of interest expenses of Daewoo International in 2010 only from the date of its acquisition on September 20, 2010 compared to consolidation for the full year in 2011, as well as an increase in the average balance of our borrowings,
which was partially offset by a general decrease in interest rates in Korea.

Our impairment of available-for-sale financial assets
increased by 167.3%, or Won 96 billion, from Won 57 billion in 2010 to Won 153 billion in 2011 primarily due to impairment loss of Won 107 billion in 2011 resulting from a decrease in the fair value of our investment in SK Telecom.



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Income Tax Expense

Income tax expense decreased by 1.2%, or Won 13 billion, from Won 1,081 billion in 2010 to Won 1,068 billion in 2011 primarily due to a 9.2%
decrease in profit before income tax expense, which was partially offset by a decrease in tax credits, from Won 193 billion in 2010 to Won 89 billion in 2011. Our effective tax rates were 20.5% in 2010 and 22.3% in 2011 primarily due to such
decrease in tax credits.

Profit for the Period

Due to the factors described above, our profit for the period decreased by 11.3%, or Won 471 billion, from Won 4,186 billion in 2010 to Won 3,714 billion in 2011. Our net profit margin decreased from 8.7%
in 2010 to 5.4% in 2011.

The following table presents a breakdown of our profit for the period by segment, prior to adjusting for
inter-segment transactions that are eliminated during consolidation, and changes therein for 2010 and 2011.



|                            |  |                                 |       |   |                  |       |       |        |  |       |      |   |  |  |         |   
|--------------------------- |  | ------------------------------- | ----- | - | ---------------- | ----- | ----- | ------ |  | ----- | ---- | - |  |  | ------- | --
|                            |  |                                 |       |   | Changes          |      
|                            |  | For the Year Ended December 31, |       |   | 2010 versus 2011 |      
|                            |  | 2010                            |       |   | 2011             |       |       | Amount |  |       | %    |  
|                            |  | (In billions of Won)            |      
|Steel                       |  | (Won)                           | 4,089 |   |                  | (Won) | 3,689 |        |  | (Won) | (399 | ) |  |  | (9.8    | )%
|Trading                     |  |                                 | 94    |   |                  |       | 195   |        |  |       | 101  |   |  |  | 107.7   |   
|Construction                |  |                                 | 256   |   |                  |       | 155   |        |  |       | (102 | ) |  |  | (39.6   | ) 
|Others                      |  |                                 | 13    |   |                  |       | 155   |        |  |       | 142  |   |  |  | 1,102.5 |   
|Consolidation adjustments   |  |                                 | (266  | ) |                  |       | (480  | )      |  |       | (214 | ) |  |  | 80.5    |   
|                            |  |                                 |       |   |                  |       |       |        |  |       |      |   |  |  |         |   
|Total profit for the period |  | (Won)                           | 4,185 |   |                  | (Won) | 3,714 |        |  | (Won) | (471 | ) |  |  | (11.3   | )%
|                            |  |                                 |       |   |                  |       |       |        |  |       |      |   |  |  |         |   

Segment Results

Steel Segment. Revenue from the Steel Segment increased by 10.2%, or Won 3,625 billion, from Won 35,527 billion in
2010 to Won 39,152 billion in 2011 primarily due to the reasons discussed above. However, our gross margin of the segment, which is gross profit as a percentage of total revenue prior to consolidation adjustments, decreased from 15.7% in 2010 to
12.6% in 2011 primarily due to increases in prices of raw materials that outpaced increases in the sales prices of our steel products. Our profit from the segment, prior to consolidation adjustments, decreased by 9.8%, or Won 399 billion, from Won
4,089 billion in 2010 to Won 3,689 billion in 2011 primarily due to the factors described above, as well as an increase in selling and administrative expenses of the segment from Won 1,925 billion in 2010 to Won 2,230 billion in 2011 primarily due
to increases in freight and custody expenses.

Depreciation and amortization of the Steel Segment, prior to consolidation adjustments,
decreased by 27.8%, or Won 821 billion, from Won 2,949 billion in 2010 to Won 2,128 billion in 2011 primarily due to a change in our estimated useful lives for certain machinery and equipment in our Steel Segment from the previous eight years to
fifteen years based on an asset life study performed in 2011. Income tax expense of the Steel Segment, prior to consolidation adjustments, increased by 8.4%, or Won 87 billion, from Won 1,025 billion in 2010 to Won 1,112 billion in 2011 primarily
due to impact from tax rate changes.

Trading. Revenue from the Trading Segment increased by 238.3%, or Won 14,861
billion, from Won 6,236 billion in 2010 to Won 21,097 billion in 2011 primarily due to the reasons discussed above. Our gross margin of the segment, prior to consolidation adjustments, increased from 3.8% in 2010 to 4.1% in 2011 and our profit from
the Trading Segment, prior to consolidation adjustments, increased by



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107.7%, or Won 101 billion, from Won 94 billion in 2010 to Won 195 billion in 2011 primarily due to the consolidation of revenue of Daewoo International in 2010 only from the date of its
acquisition on September 20, 2010 compared to consolidation for the full year in 2011. On a consolidated basis, Daewoo International generated profit for the period of Won 128 billion in 2010 subsequent to the acquisition, compared to profit for the
period of Won 211 billion in 2011. The Trading Segment recognized income tax credit, prior to consolidation adjustments, of Won 48 billion in 2010 compared to income tax expense of Won 35 billion in 2011.

Construction Segment.Revenue from the Construction Segment increased by 25.9%, or Won 1,127 billion, from Won 4,349
billion in 2010 to Won 5,476 billion in 2011 primarily due to the reasons discussed above. However, our gross margin of the segment, prior to consolidation adjustments, decreased from 9.5% in 2010 to 9.1% in 2011 as the market conditions in the
domestic construction industry further weakened in 2011 that resulted in an increase in competition. Our profit from the Construction Segment, prior to consolidation adjustments, decreased by 39.6%, or Won 102 billion, from Won 256 billion in 2010
to Won 155 billion in 2011 primarily due to the factors described above, as well as due to increases in selling and administrative expenses and financial expenses. Our selling and administrative expenses and financial expenses of the Construction
Segment increased from Won 510 billion in 2010 to Won 753 billion in 2011 primarily due to increases in employee benefits expenses and losses on foreign currency transactions. Income tax expense of the Construction Segment, prior to consolidation
adjustments, decreased by 67.7%, or Won 47 billion, from Won 70 billion in 2010 to Won 23 billion in 2011.

Others Segment.The Others Segment includes power generation, LNG production, network and system integration, logistics and magnesium coil and sheet production. Revenue from the Others Segment increased by 81.0%, or Won 1,438 billion, from Won 1,775
billion in 2010 to Won 3,213 billion in 2011 primarily due to the reasons discussed above. Our gross margin of the segment, prior to consolidation adjustments, decreased from 11.1% in 2010 to 10.2% in 2011. However, our profit from the Others
Segment, prior to consolidation adjustments, increased by 1,102.5%, or Won 142 billion, from Won 13 billion in 2010 to Won 155 billion in 2011 primarily due to increases in profits from POSCO Energy Corporation, which completed construction of
two additional power plants in 2011.

Depreciation and amortization of the Others Segment, prior to consolidation adjustments, increased
by 140.9%, or Won 104 billion, from Won 74 billion in 2010 to Won 178 billion in 2011 primarily due to the construction of two additional power plants by POSCO Energy Corporation. Income tax expense of the Others Segment, prior to consolidation
adjustments, increased by 223.9%, or Won 11 billion, from Won 5 billion in 2010 to Won 16 billion in 2011.

Item 5.B.Liquidity and Capital Resources

The following table sets forth the summary of our cash flows for the periods
indicated



|                                                    |  |                                 |       |   |      |       |       | 
|--------------------------------------------------- |  | ------------------------------- | ----- | - | ---- | ----- | ----- | 
|                                                    |  | For the Year Ended December 31, |      
|                                                    |  | 2010                            |       |   | 2011 |      
|                                                    |  | (In billions of Won)            |      
|Net cash provided by operating activities           |  | (Won)                           | 3,582 |   |      | (Won) | 1,692 | 
|Net cash used in investing activities               |  |                                 | 6,915 |   |      |       | 5,517 | 
|Net cash provided by (used in) financing activities |  |                                 | 4,588 |   |      |       | 4,900 | 
|Effect of exchange rate fluctuations on cash held   |  |                                 | (7    | ) |      |       | 3     | 
|Cash and cash equivalents at beginning of period    |  |                                 | 2,273 |   |      |       | 3,521 | 
|Cash and cash equivalents at end of period          |  |                                 | 3,521 |   |      |       | 4,599 | 
|Net increase in cash and cash equivalents           |  |                                 | 1,248 |   |      |       | 1,078 | 

Capital Requirements

Historically, uses of cash consisted principally of purchases of property, plant and equipment and other assets and repayments of outstanding debt and payments of dividends. From time to time, we have also engaged
in acquisition of treasury shares.



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Net cash used in investing activities was Won 6,915 billion in 2010 and Won 5,517 billion in 2011.
These amounts included acquisition of property, plant and equipment of Won 5,792 billion in 2010 and Won 5,331 billion in 2011. We plan to decrease our capital expenditures in 2012, which we may adjust on an on-going basis subject to market demand
for our products, the production outlook of the global steel industry and global economic conditions in general. We may delay or not implement some of our current capital expenditure plans based on our assessment of such market conditions. We
recorded net disposal of short-term financial instruments of Won 3,030 billion in 2010 and Won 1,238 billion in 2011. We also recorded net acquisition of available-for-sale securities of Won 302 billion in 2010 and net disposal of available-for-sale
securities of Won 89 billion in 2011.

In our financing activities, we used cash of Won 882 billion in 2010 and Won 1,746 billion in 2011
for repayments of borrowings. We paid dividends on common stock in the amount of Won 693 billion in 2010 and Won 771 billion in 2011.

In
recent years, we have also selectively considered various opportunities to acquire or invest in companies that may complement our businesses, as well as invest in overseas resources development projects. For example, we acquired a controlling
interest in Daewoo International on September 20, 2010 for Won 3.37 trillion, and we spent Won 306 billion in 2011 to acquire a controlling interest in Thainox Stainless Public Company Limited, a major stainless steel manufacturer in Thailand.
We may require additional capital for such acquisitions or entering into other strategic relationships. Other than capital required for such activities, we anticipate that capital expenditures, repayments of outstanding debt and payments of cash
dividends will represent the most significant uses of funds for the next several years.

Payments of contractual obligations and
commitments will also require considerable resources. In our ordinary course of business, we routinely enter into commercial commitments for various aspects of our operations, as well as issue guarantees for our related companies indebtedness.
The following table sets forth the amount of long-term debt, capital lease and operating lease obligations as of December 31, 2011.



|                                        |  |                        |        |  |                 |       |        |              |  |       |              |  |  |              |        |  |  |       |        | 
|--------------------------------------- |  | ---------------------- | ------ |  | --------------- | ----- | ------ | ------------ |  | ----- | ------------ |  |  | ------------ | ------ |  |  | ----- | ------ | 
|                                        |  | Payments Due by Period |       
|Contractual Obligations                 |  | Total                  |        |  | Less Than1 Year |       |        | 1 to 3 Years |  |       | 4 to 5 Years |  |  | After5 Years |       
|                                        |  | (In billions of Won)   |       
|Long-term debt obligations (a)          |  | (Won)                  | 17,635 |  |                 | (Won) | 1,295  |              |  | (Won) | 7,138        |  |  | (Won)        | 5,334  |  |  | (Won) | 3,868  | 
|Interest payments on long-term debt (b) |  |                        | 2,849  |  |                 |       | 618    |              |  |       | 1,078        |  |  |              | 563    |  |  |       | 591    | 
|Capital lease obligations (c)           |  |                        | 61     |  |                 |       | 15     |              |  |       | 18           |  |  |              | 18     |  |  |       | 10     | 
|Operating lease obligations (d)         |  |                        | 35     |  |                 |       | 16     |              |  |       | 18           |  |  |              | 1      |  |  |       |       | 
|Purchase obligations (e)                |  |                        | 59,156 |  |                 |       | 14,455 |              |  |       | 17,763       |  |  |              | 14,365 |  |  |       | 12,565 | 
|Accrued severance benefits (f)          |  |                        | 1,352  |  |                 |       | 89     |              |  |       | 221          |  |  |              | 248    |  |  |       | 794    | 
|                                        |  |                        |        |  |                 |       |        |              |  |       |              |  |  |              |        |  |  |       |        | 
|Total                                   |  | (Won)                  | 81,088 |  |                 | (Won) | 16,488 |              |  | (Won) | 26,236       |  |  | (Won)        | 20,529 |  |  | (Won) | 17,828 | 
|                                        |  |                        |        |  |                 |       |        |              |  |       |              |  |  |              |        |  |  |       |        | 





|(a) | Includes the current portion and premium on bond redemption but excludes amortization of discount on debentures and issuance costs.
|--- | -----------------------------------------------------------------------------------------------------------------------------------



|(b) | As of December 31, 2011, a portion of our long-term debt carried variable interest rates. We used the interest rate in effect as of December 31, 2011 in calculating the
interest payments on long-term debt for the periods indicated.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | We entered into a capital lease contract with Ilshin Shipping Co., Ltd. for a vessel for transporting plates and other products.
|--- | --------------------------------------------------------------------------------------------------------------------------------



|(d) | We acquired certain tools and equipment under operating lease agreements with Macquarie Capital Korea Co., Ltd. and others.
|--- | ---------------------------------------------------------------------------------------------------------------------------



|(e) | Our purchase obligations include long-term contracts to purchase iron ore, coal, LNG and other raw materials. These contracts generally have terms of three to ten years and
provide for periodic price adjustments to then-market prices. As of December 31, 2011, 261 million tons of iron ore and 38 million tons of coal remained to be purchased under long-term contracts. In addition, we entered into an
agreement with Tangguh LNG Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price under the agreement with Tangguh LNG Consortium is variable based on the monthly
standard oil price (as represented by the Japan Customs cleared Crude Price), subject to a ceiling. We used the market price in effect as of December 31, 2011 in calculating the iron ore, coal and LNG purchase obligations described above for
the periods indicated.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(f) | Represents, as of December 31, 2011, the expected amount of severance benefits that we will be required to pay under applicable Korean law to all of our employees when they
reach their normal retirement age. The amounts were determined based on the employees current salary rates and the number of service years that will be accumulated upon their retirement. These amounts do not include amounts that may be paid to
employees who cease to work at the company before their normal retirement age.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capital Resources

We have traditionally met our working capital and other capital requirements principally from cash provided by operations, while raising the
remainder of our requirements primarily through long-term debt and short-term borrowings. We expect that these sources will continue to be our principal sources of cash in the future. From time to time, we may also generate cash through sale of
treasury shares and our holdings in available-for-sale securities.

Our net cash provided by operating activities decreased by 52.8% from
Won 3,582 billion in 2010 and Won 1,692 billion in 2011. The sales volume of our steel products increased by 13.5% in such periods as discussed above, which increased gross cash inflow from our sales activities. However, our overall net cash
provided by operating activities decreased by 52.8% as a result of an increase in the price of raw materials in 2011 as well as building up of semi-finished and finished goods due to increase in uncertainties in the global economy from difficulties
affecting the European Union led to an increase in the inventory level and a delay in recoupment of cash used in production activities, including purchase of raw materials. Our inventory level increased from Won 9,559 billion as of December 31,
2010 to Won 12,284 billion as of December 31, 2011.

Proceeds from short-term borrowings, after deducting for repayment of
short-term borrowings, were Won 1,201 billion in 2010 and Won 52 billion in 2011. Net proceeds from borrowings, after deducting for repayment of borrowings, were Won 3,485 billion in 2010 and Won 5,322 billion in 2011. Long-term borrowings,
excluding current installments, were Won 10,664 billion as of December 31, 2010 and Won 16,020 billion as of December 31, 2011, and total short-term borrowings and current installments of long-term borrowings were Won 10,476 billion as of
December 31, 2010 and Won 10,792 billion as of December 31, 2011. We periodically increase our short-term borrowings and adjust our long-term debt financing levels depending on changes in our capital requirements. We also generated
cash of Won 7 billion in 2010 and Won 164 billion in 2011 from the sale of our treasury shares. In April 2012, we also generated cash of Won 580 billion from our disposal of a portion of our holdings of shares in SK Telecom, KB Financial Group and
Hana Financial Group in block trade transactions.

We believe that we have sufficient working capital for our current requirements and
that we have a variety of alternatives available to us to satisfy our liquidity requirements to the extent that they are not met by funds generated by operations, including the issuance of debt and equity securities and bank borrowings denominated
in Won and various foreign currencies. However, our ability to rely on some of these alternatives could be affected by factors such as the liquidity of the Korean and the global financial markets, prevailing interest rates, our credit rating and the
Governments policies regarding Won currency and foreign currency borrowings.

Liquidity

We had working capital (current assets minus current liabilities) of Won 9,396 billion as of December 31, 2010 and Won 13,952 billion as of
December 31, 2011. Our holding of cash and cash equivalents were Won 3,521 billion as of December 31, 2010 and Won 4,599 billion as of December 31, 2011. POSCO had unused credit lines of Won 2,542 billion out of total available credit
lines of Won 4,669 billion as of December 31, 2011. We have not had, and do not believe that we will have, difficulty gaining access to short-term financing sufficient to meet our current requirements.

Our liquidity is affected by exchange rate fluctuations. See  Overview  Exchange Rate Fluctuations.



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Capital Expenditures and Capacity Expansion

Cash used for acquisitions of property, plant and equipment was Won 5,792 billion in 2010 and Won 5,331 billion in 2011. We currently plan to
decrease our capital expenditures in 2012, which we may adjust on an on-going basis subject to market demand for our products, the production outlook of the global steel industry and global economic conditions in general. We may delay or not
implement some of our current capital expenditure plans based on our assessment of such market conditions.

Our current plan for capital
investment in production facilities emphasizes capacity rationalization, increased production of higher value-added products and improvements in the efficiency of older facilities in order to reduce operating costs. The following table sets out the
major items of our capital expenditures as of December 31, 2011:



|                                                                  |  |                          |  |                            |       |  |                                                            |  |       | 
|----------------------------------------------------------------- |  | ------------------------ |  | -------------------------- | ----- |  | ---------------------------------------------------------- |  | ----- | 
|Project                                                           |  | Expected Completion Date |  | Total Cost      of Project |       |  | EstimatedRemaining Cost ofCompletionas of December 31,2011 | 
|                                                                  |  | (In billions of Won)     | 
|Pohang Works:                                                     |  |                          |  |                            |       |  |                                                            |  |       | 
|Construction of a pickling and galvanizing line                   |  | March 2012               |  |                            | 269   |  |                                                            |  | 39    | 
|Optimization of the facilities                                    |  | January 2014             |  |                            | 2,203 |  |                                                            |  | 1,875 | 
|Renovation of the first stainless steel sheets rolling facilities |  | March 2014               |  |                            | 218   |  |                                                            |  | 218   | 
|Gwangyang Works:                                                  |  |                          |  |                            |       |  |                                                            |  |       | 
|Construction of no.4 hot rolled steel plant                       |  | July 2014                |  |                            | 1,626 |  |                                                            |  | 1,404 | 
|Renovation of the first and fifth furnace                         |  | June 2014                |  |                            | 1,060 |  |                                                            |  | 899   | 
|Pohang and Gwangyang Works:                                       |  |                          |  |                            |       |  |                                                            |  |       | 
|Raw materials treatment facility upgrades                         |  | September 2016           |  |                            | 1,301 |  |                                                            |  | 542   | 

Item 5.C.Research and Development, Patents and Licenses, Etc.

We maintain a research and development program to carry out basic research and applied technology development activities. Our
technology development department works closely with the Pohang University of Science & Technology, Koreas first research-oriented college founded by us in 1986, and the Research Institute of Industrial Science and Technology,
Koreas first private comprehensive research institute founded by us in 1987. As of December 31, 2011, Pohang University of Science & Technology and the Research Institute of Industrial Science and Technology employed a total of
approximately 1,027 researchers. In 1994, we founded the POSCO Technical Research Laboratory to carry out applied research and technology development activities. As of December 31, 2011, the Technical Research Laboratory employed a total of 428
researchers.

We recorded research and development expenses of Won 395 billion as cost of goods sold in 2010 and Won 380 billion in 2011,
as well as research and development expenses of Won 141 billion as selling and administrative expenses in 2010 and Won 212 billion in 2011.

Our research and development program has filed over thirty-one thousand industrial rights applications relating to steel-making technology, approximately one-fourth of which were registered as of December 31,
2011, and has successfully applied many of these to the improvement of our manufacturing process.

Item 5.D.Trend Information

These matters are discussed under Item 5.A. and Item 5.B. above where relevant.

Item 5.E.Off-balance Sheet Arrangements

As of December 31, 2010 and 2011, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special



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purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Item 5.F.Tabular Disclosure of Contractual Obligations

These matters are discussed under Item 5.B. above where relevant.

Item 5.G.Safe Harbor

See
Item 3. Key Information  Item 3.D. Risk Factors  This annual report contains forward-looking statements that are subject to various risks and uncertainties.

Item 6.Directors, Senior Management and Employees

Item 6.A.Directors and Senior Management

Board of Directors

Our board of directors
has the ultimate responsibility for the management of our business affairs. Our board consists of five directors who are our executive officers (Inside Directors) and seven directors who are outside directors (Outside
Directors). Our shareholders elect both the Inside Directors and Outside Directors at a general meeting of shareholders. Candidates for Inside Directors are recommended to shareholders by the board of directors after the board reviews such
candidates qualifications, and candidates for Outside Directors are recommended to the shareholders by a separate board committee consisting of three Outside Directors and one Inside Director (Director Candidate Recommendation
Committee) after the committee reviews such candidates qualifications. Any shareholder holding our outstanding shares with voting rights may suggest candidates for Outside Directors to the Director Candidate Recommendation Committee.

Our board of directors maintains the following six sub-committees:



| |  |  | the Director Candidate Recommendation Committee;
| | - |  | ------------------------------------------------



| |  |  | the Evaluation and Compensation Committee;
| | - |  | ------------------------------------------



| |  |  | the Finance and Operation Committee;
| | - |  | ------------------------------------



| |  |  | the Executive Management Committee;
| | - |  | -----------------------------------



| |  |  | the Audit Committee; and
| | - |  | ------------------------



| |  |  | the Related Party Transactions Committee.
| | - |  | -----------------------------------------

Our board committees are described in greater detail below under  Item 6.C. Board Practices.

Under the Commercial Code and our articles of incorporation, one Chairman should be elected among the Outside Directors and several Representative Directors may be elected among the Inside Directors by our board of
directors resolution.



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Inside Directors

Our current Inside Directors are:



|                 |  |                                                     |  |                                           |  |                 |   |  |                |  |    |     |  |  |                            |  |  |          
|---------------- |  | --------------------------------------------------- |  | ----------------------------------------- |  | --------------- | - |  | -------------- |  | -- | --- |  |  | -------------------------- |  |  | ---------
|Name             |  | Position                                            |  | Responsibilities andDivision              |  | YearsasDirector |   |  | YearswithPOSCO |  |    | Age |  |  | Expirationof Term ofOffice
|Chung, Joon-Yang |  | Chief Executive Officer and Representative Director |  |                                          |  |                 | 8 |  |                |  | 37 |     |  |  | 64                         |  |  | March2015
|Park, Han-Yong   |  | President and Representative Director               |  | Chief Staff Officer                       |  |                 | 2 |  |                |  | 33 |     |  |  | 61                         |  |  | March2013
|Cho, Noi-Ha      |  | Senior Executive Vice President                     |  | Head of Carbon Steel Business Division    |  |                 | 0 |  |                |  | 34 |     |  |  | 59                         |  |  | March2013
|Park, Ki-Hong    |  | Senior Executive Vice President                     |  | Chief Financial and Planning Officer      |  |                 | 0 |  |                |  | 6  |     |  |  | 54                         |  |  | March2014
|Kim, Joon-Sik    |  | Senior Executive Vice President                     |  | Head of Stainless Steel Business Division |  |                 | 0 |  |                |  | 30 |     |  |  | 58                         |  |  | March2014

All Inside Directors are engaged in our business on a full-time basis.

Outside Directors

Our current Outside Directors are set out in the table below. Each of our Outside Directors meets the applicable independence standards set forth
under the rules of the Financial Investment Services and Capital Markets of Korea (FSCMA).



|                  |  |          |  |                                                   |  |                 |   |  |     |  |    |                            |  |          
|----------------- |  | -------- |  | ------------------------------------------------- |  | --------------- | - |  | --- |  | -- | -------------------------- |  | ---------
|Name              |  | Position |  | Principal Occupation                              |  | YearsasDirector |   |  | Age |  |    | Expirationof Term ofOffice
|Han, Joon-Ho.     |  | Director |  | CEO, Samchully Co., Ltd.                          |  |                 | 3 |  |     |  | 66 |                            |  | March2014
|Lee, Young-Sun    |  | Director |  | Former President, Hallym University               |  |                 | 3 |  |     |  | 64 |                            |  | March2014
|Lee, Chang-Hee    |  | Director |  | Professor, Seoul National University              |  |                 | 3 |  |     |  | 52 |                            |  | March2015
|Nam, Yong         |  | Director |  | Former Vice Chairman and CEO, LG Electronics Inc. |  |                 | 1 |  |     |  | 64 |                            |  | March2013
|Park, Sang-Kil    |  | Director |  | Lawyer, Kim & Chang                               |  |                 | 1 |  |     |  | 58 |                            |  | March2013
|Byun, Dae-Gyu     |  | Director |  | Chairman and CEO, Humax Co., Ltd.                 |  |                 | 1 |  |     |  | 52 |                            |  | March2013
|James B. Bemowski |  | Director |  | Vice Chairman and CEO, Doosan Co., Ltd.           |  |                 | 0 |  |     |  | 58 |                            |  | March2015

The term of office of the Directors elected in March 2012 is up to three (3) years.Each Directors
term expires at the close of the ordinary general meeting of shareholders convened in respect of the fiscal year that is the last one to end during such Directors tenure.



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Senior Management

In addition to the Inside Directors who are also our executive officers, we have the following executive officers:



|                |  |                                 |  |                                                                        |  |                |    |  |     |  |    | 
|--------------- |  | ------------------------------- |  | ---------------------------------------------------------------------- |  | -------------- | -- |  | --- |  | -- | 
|Name            |  | Position                        |  | Responsibility and Division                                            |  | YearswithPOSCO |    |  | Age | 
|                |  |                                 |  |                                                                       
|Kwon, Oh-Joon   |  | President                       |  | Chief Technology Officer                                               |  |                | 23 |  |     |  | 61 | 
|                |  |                                 |  |                                                                       
|Chang In-Hwan   |  | Senior Executive Vice President |  | Head of Growth and Investment Division                                 |  |                | 29 |  |     |  | 57 | 
|                |  |                                 |  |                                                                       
|Cho, Bong-Rae   |  | Senior Executive Vice President |  | General Superintendent, Pohang Works                                   |  |                | 32 |  |     |  | 59 | 
|                |  |                                 |  |                                                                       
|Song, Sebin     |  | Executive Vice President        |  | Legal Affairs Department                                               |  |                | 1  |  |     |  | 49 | 
|                |  |                                 |  |                                                                       
|Baek, Sung-Kwan |  | Executive Vice President        |  | General Superintendent, Gwangyang Works                                |  |                | 31 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|Woo, Jong-Soo   |  | Executive Vice President        |  | General Superintendent (Technical Research Laboratories)               |  |                | 32 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|Hwang, Eun-Yeon |  | Executive Vice President        |  | Head of Carbon Steel Marketing Division                                |  |                | 25 |  |     |  | 53 | 
|                |  |                                 |  |                                                                       
|Kim, Yeung-Gyu  |  | Executive Vice President        |  | Corporate Relations Division                                           |  |                | 29 |  |     |  | 57 | 
|                |  |                                 |  |                                                                       
|Lee, Hoo-Geun   |  | Executive Vice President        |  | FINEX Research and Development Project Department (Pohang Works)       |  |                | 29 |  |     |  | 54 | 
|                |  |                                 |  |                                                                       
|Lee, Jung-Sik   |  | Executive Vice President        |  | Corporate Strategy Department I                                        |  |                | 32 |  |     |  | 57 | 
|                |  |                                 |  |                                                                       
|Suh, Young-Sea  |  | Executive Vice President        |  | Stainless Steel Marketing Department                                   |  |                | 28 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|Park, Myung-Kil |  | Executive Vice President        |  | Corporate Future Creation Academy                                      |  |                | 26 |  |     |  | 53 | 
|                |  |                                 |  |                                                                       
|Lee, Young-Hoon |  | Executive Vice President        |  | Corporate Strategy Department II                                       |  |                | 26 |  |     |  | 52 | 
|                |  |                                 |  |                                                                       
|Choi, Jeong-Woo |  | Executive Vice President        |  | Corporate Audit Department                                             |  |                | 27 |  |     |  | 54 | 
|                |  |                                 |  |                                                                       
|Park, Kui-Chan  |  | Executive Vice President        |  | Department of External Affairs                                         |  |                | 8  |  |     |  | 54 | 
|                |  |                                 |  |                                                                       
|Kim, Young-Hun  |  | Executive Vice President        |  | Group Training Institute Establishment Project Dept.                   |  |                | 30 |  |     |  | 54 | 
|                |  |                                 |  |                                                                       
|Seo, Myung-Deuk |  | Executive Vice President        |  | Raw Materials Division                                                 |  |                | 27 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|Park, Sung-Ho   |  | Senior Vice President           |  | Steel Technology Strategy Department                                   |  |                | 29 |  |     |  | 55 | 
|                |  |                                 |  |                                                                       
|Yeon, Kyu-Sung  |  | Senior Vice President           |  | Deputy General Superintendent (Maintenance, Pohang Works)              |  |                | 27 |  |     |  | 53 | 
|                |  |                                 |  |                                                                       
|Lee, Kyoung-Mok |  | Senior Vice President           |  | Steel Business Department II                                           |  |                | 30 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|Jeon, Woo-Sig   |  | Senior Vice President           |  | Strategic Business Department                                          |  |                | 26 |  |     |  | 52 | 
|                |  |                                 |  |                                                                       
|Cho, Sang-Ho    |  | Senior Vice President           |  | Magnesium Business Department                                          |  |                | 29 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|An, Tong-Il     |  | Senior Vice President           |  | Deputy General Superintendent (Maintenance, Gwangyang Works)           |  |                | 25 |  |     |  | 52 | 
|                |  |                                 |  |                                                                       
|Yae, Jae-Hen    |  | Senior Vice President           |  | Labor and Outside Services Department                                  |  |                | 27 |  |     |  | 55 | 
|                |  |                                 |  |                                                                       
|Min, Kyung-Zoon |  | Senior Vice President           |  | Deputy General Superintendent (Hot and Cold Rolling, Gwangyang Works)  |  |                | 28 |  |     |  | 53 | 
|                |  |                                 |  |                                                                       
|Kim, Won-Ki     |  | Senior Vice President           |  | Order Processing and Technical Service Department                      |  |                | 30 |  |     |  | 55 | 
|                |  |                                 |  |                                                                       
|Nam, Sik        |  | Senior Vice President           |  | POSCO-Vietnam Co., Ltd.                                                |  |                | 29 |  |     |  | 55 | 
|                |  |                                 |  |                                                                       
|Ko, Suk-Bum     |  | Senior Vice President           |  | Deputy General Superintendent (Administration, Gwangyang Works)        |  |                | 27 |  |     |  | 54 | 
|                |  |                                 |  |                                                                       
|Kim, Hag-Dong   |  | Senior Vice President           |  | Deputy General Superintendent (Iron and Steel Making, Gwangyang Works) |  |                | 27 |  |     |  | 52 | 
|                |  |                                 |  |                                                                       
|Kim, Sun-Won    |  | Senior Vice President           |  | POSCO-South Asia Co., Ltd.                                             |  |                | 29 |  |     |  | 53 | 
|                |  |                                 |  |                                                                       
|Kim, Dong-Chul  |  | Senior Vice President           |  | Steel Business Department I                                            |  |                | 26 |  |     |  | 56 | 
|                |  |                                 |  |                                                                       
|Kim, Jhi-Yong   |  | Senior Vice President           |  | Advanced Materials Business Department                                 |  |                | 19 |  |     |  | 50 | 
|                |  |                                 |  |                                                                       
|Jeon, Cheol     |  | Senior Vice President           |  | Stainless Steel Production and Technology                              |  |                | 29 |  |     |  | 54 | 
|                |  |                                 |  |                                                                       
|Kim, Yong-Min   |  | Senior Vice President           |  | Zhangjiagang Pohang Stainless Steel Co., Ltd.                          |  |                | 29 |  |     |  | 54 | 



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|                 |  |                       |  |                                                                     |  |                |    |  |     |  |    | 
|---------------- |  | --------------------- |  | ------------------------------------------------------------------- |  | -------------- | -- |  | --- |  | -- | 
|Name             |  | Position              |  | Responsibility and Division                                         |  | YearswithPOSCO |    |  | Age | 
|                 |  |                       |  |                                                                    
|Lee, Young-Ki    |  | Senior Vice President |  | Deputy General Superintendent (Hot and Cold Rolling, Pohang Works)  |  |                | 26 |  |     |  | 52 | 
|                 |  |                       |  |                                                                    
|Yu-Seong         |  | Senior Vice President |  | POSCO-Japan Co., Ltd.                                               |  |                | 26 |  |     |  | 55 | 
|                 |  |                       |  |                                                                    
|Shin, Jae-Chul   |  | Senior Vice President |  | Marketing Strategy Department                                       |  |                | 26 |  |     |  | 51 | 
|                 |  |                       |  |                                                                    
|Kim, Se-Hyun     |  | Senior Vice President |  | Productivity Research Center                                        |  |                | 2  |  |     |  | 52 | 
|                 |  |                       |  |                                                                    
|Hwang, Seok-Joo  |  | Senior Vice President |  | Information Planning Department                                     |  |                | 26 |  |     |  | 49 | 
|                 |  |                       |  |                                                                    
|Yim Chang-Hee    |  | Senior Vice President |  | General Superintendent (Gwangyang Research Lab)                     |  |                | 26 |  |     |  | 55 | 
|                 |  |                       |  |                                                                    
|Chang, In-Hwa    |  | Senior Vice President |  | New Growth Business Department                                      |  |                | 1  |  |     |  | 56 | 
|                 |  |                       |  |                                                                    
|Shim, Tong-Wook  |  | Senior Vice President |  | Finance Department                                                  |  |                | 26 |  |     |  | 52 | 
|                 |  |                       |  |                                                                    
|Kwon, Suk-Chul   |  | Senior Vice President |  | POSCO-China Co., Ltd.                                               |  |                | 28 |  |     |  | 55 | 
|                 |  |                       |  |                                                                    
|Lee, Tae-Ju      |  | Senior Vice President |  | European Union Office                                               |  |                | 29 |  |     |  | 54 | 
|                 |  |                       |  |                                                                    
|Yun, Kimok       |  | Senior Vice President |  | Stainless Steel Raw Materials Department                            |  |                | 28 |  |     |  | 54 | 
|                 |  |                       |  |                                                                    
|Kim, Jae-Yeol    |  | Senior Vice President |  | Hot Rolled Products Marketing Department                            |  |                | 26 |  |     |  | 52 | 
|                 |  |                       |  |                                                                    
|Kim, Hong-Soo    |  | Senior Vice President |  | Investment Management Dept.                                         |  |                | 29 |  |     |  | 54 | 
|                 |  |                       |  |                                                                    
|Bae, Chung-Hun   |  | Senior Vice President |  | POSCO-VST Co., Ltd.                                                 |  |                | 27 |  |     |  | 55 | 
|                 |  |                       |  |                                                                    
|Kim, Dong-Soo    |  | Senior Vice President |  | Deputy General Superintendent (Iron and Steel Making, Pohang Works) |  |                | 29 |  |     |  | 53 | 
|                 |  |                       |  |                                                                    
|Chon, Jung-Son   |  | Senior Vice President |  | Raw Materials Procurement Dept.                                     |  |                | 25 |  |     |  | 49 | 
|                 |  |                       |  |                                                                    
|Sung, Gee-Woong  |  | Senior Vice President |  | Environment & Energy Planning Dept.                                 |  |                | 17 |  |     |  | 52 | 
|                 |  |                       |  |                                                                    
|Shin, Geon       |  | Senior Vice President |  | Engineering Research Center                                         |  |                | 30 |  |     |  | 54 | 
|                 |  |                       |  |                                                                    
|Cho Young-Ki     |  | Senior Vice President |  | POSCO-Mexico Co., Ltd.                                              |  |                | 26 |  |     |  | 53 | 
|                 |  |                       |  |                                                                    
|Lee, Bok-Sung    |  | Senior Vice President |  | Deputy General Superintendent (Administration, Pohang Works)        |  |                | 26 |  |     |  | 54 | 
|                 |  |                       |  |                                                                    
|Cho, Yong-Doo    |  | Senior Vice President |  | Management Monitoring Dept.                                         |  |                | 2  |  |     |  | 51 | 
|                 |  |                       |  |                                                                    
|Jeong, Tak       |  | Senior Vice President |  | Overseas Marketing Dept.                                            |  |                | 0  |  |     |  | 52 | 
|                 |  |                       |  |                                                                    
|Chung, Chang-Hwa |  | Senior Vice President |  | Communication Dept.                                                 |  |                | 16 |  |     |  | 50 | 
|                 |  |                       |  |                                                                    
|Son, Chang Hwan  |  | Senior Vice President |  | Automotive Materials Marketing Dept.                                |  |                | 27 |  |     |  | 51 | 
|                 |  |                       |  |                                                                    
|Kim, Kwan Young  |  | Senior Vice President |  | Human Resources and Innovation Dept.                                |  |                | 24 |  |     |  | 50 | 

Item 6.B.Compensation

Compensation of Directors and Officers

Salaries and bonuses for Inside Directors and salaries for Outside Directors are paid in accordance with standards decided by the board of directors
within the limitation of directors remuneration approved by the annual general meeting of shareholders. In addition, executive officers compensation is paid in accordance with standards decided by the board of directors. The aggregate
compensation paid and accrued to all Directors and executive officers was approximately Won 28.4 billion in 2011 and the aggregate amount set aside or accrued by us to provide pension and retirement benefits to such persons was Won 7.4 billion in
2011.

We have also granted stock options to some of our Directors and executive officers. See  Item 6.E. Share
Ownership for a list of stock options granted to our Directors and executive officers. At



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the annual shareholders meeting held in February 2006 our shareholders elected to terminate the stock option program. Stock options granted prior to this meeting remain valid and
outstanding pursuant to the articles of incorporation in effect at the time of the issuance of the stock option.

Item 6.C.Board Practices

Director Candidate Recommendation Committee

The Director Candidate Recommendation Committee is
composed of three Outside Directors, Lee, Young-Sun (committee chair), Han, Joon-Ho, Lee, Chang-Hee, and one Inside Director, Kim, Joon-Sik. The Director Candidate Recommendation Committee reviews the qualifications of potential candidates and
proposes nominees to serve on our board of directors as an Outside Director. Any shareholder holding our outstanding shares with voting rights may suggest candidates for Outside Directors to the Director Candidate Recommendation Committee.

Evaluation and Compensation Committee

The Evaluation and Compensation Committee is composed of four Outside Directors, Byun, Dae-Gyu (committee chair), Han, Joon-Ho, Nam, Yong and Park, Sang-Kil. The Evaluation and Compensation Committees primary
responsibilities include establishing evaluation procedures and compensation plans for executive officers and taking necessary measures to execute such plans.

Finance and Operation Committee

The Finance and Operation Committee is composed of three
Outside Directors, Nam, Yong (committee chair), Byun, Dae-Gyu, James B. Bemowski and two Inside Directors, Cho, Noi-Ha and Park, Ki-Hong. This committee is an operational committee that oversees decisions with respect to finance and operational
matters, including making assessments with respect to potential capital investments and evaluating prospective capital-raising activities.

Executive
Management Committee

The Executive Management Committee is composed of five Inside Directors: Chung, Joon-Yang (committee chair),
Park,Han-Yong, Cho, Noi-Ha, Park, Ki-Hong and Kim, Joon-Sik. This committee oversees decisions with respect to our operational and management matters, including review of managements proposals of new strategic initiatives, as well as
deliberation over critical internal matters related to organization structure and development of personnel.

Audit Committee

Under Korean law and our articles of incorporation, we are required to have an Audit Committee. The Audit Committee may be composed of three or more
directors; all members of the Audit Committee must be Outside Directors. Audit Committee members must also meet the applicable independence criteria set forth under the rules and regulations of the Sarbanes-Oxley Act of 2002. Members of the Audit
Committee are elected by the shareholders at the ordinary general meeting of shareholders. We currently have an Audit Committee composed of three Outside Directors. Members of our Audit Committee are Lee, Chang-Hee (committee chair), Lee, Young-Sun
and Park, Sang-Kil.

The duties of the Audit Committee include:



| |  |  | engaging independent auditors;
| | - |  | ------------------------------



| |  |  | approving independent audit fees;
| | - |  | ---------------------------------



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| |  |  | approving audit and non-audit services;
| | - |  | ---------------------------------------



| |  |  | reviewing annual financial statements;
| | - |  | --------------------------------------



| |  |  | reviewing audit results and reports, including management comments and recommendations;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | reviewing our system of controls and policies, including those covering conflicts of interest and business ethics; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | examining improprieties or suspected improprieties.
| | - |  | ---------------------------------------------------

In addition, in connection with general meetings of stockholders, the committee examines the agenda for, and financial statements and other reports to be submitted by, the board of directors at each general meeting
of stockholders. Our internal and external auditors report directly to the Audit Committee. The committee holds regular meetings at least once each quarter, and more frequently as needed.

Related Party Transactions Committee

The Related Party Transaction Committee is composed of
three Outside Directors, Lee, Chang-Hee (committee chair), Lee, Young-Sun and Park, Sang-Kil. This committee reviews related party and other internal transactions and ensures compliance with the Monopoly Regulation and Fair Trade Act.

Item 6.D.Employees

As of December 31, 2011, we had 34,936 employees, including 17,383 persons employed by our subsidiaries, almost all of whom were employed
within Korea. Of the total number of employees, approximately 80% are technicians and skilled laborers and 20% are administrative staff. We use subcontractors for maintenance, cleaning and transport activities. We had 33,557 employees, including
17,148 persons employed by our subsidiaries, as of December 31, 2010, and 29,811 employees, including 13,295 persons employed by our subsidiaries, as of December 31, 2009. To improve operational efficiency and increase labor productivity,
we plan to reduce the number of our employees in future years through natural attrition. However, we expect the number of persons employed by our subsidiaries in growth industries to increase in the future.

We consider our relations with our work force to be excellent. We have never experienced a work stoppage or strike. Wages of our employees are among
the highest of manufacturing companies in Korea. In addition to a base monthly wage, employees receive periodic bonuses and allowances. Base wages are determined annually following consultation between the management and employee representatives,
who are currently elected outside the framework of the POSCO labor union. A labor union was formed by our employees in June 1988. Union membership peaked at 19,026 employees at the beginning of 1991, but has steadily declined since then. As of
December 31, 2011, only 13 of our employees were members of the POSCO labor union.

In accordance with the National Pension Act of
Korea, we contribute an amount equal to 4.5% of an employees standard monthly wages, and each employee contributes 4.5% of his or her standard monthly wages, into his or her personal pension account. Our employees, including executive officers
as well as non-executive employees, are subject to a pension insurance system, under which we make monthly contributions to the pension accounts of the employees, and upon retirement, such employees are paid from their pension accounts. Prior to
2011, our executive and non-executive employees were subject to a lump-sum severance payment system, under which they were entitled to receive a lump-sum severance payment upon termination of their employment, based on their length of service and
salary level at the time of termination. Starting in 2011, in accordance with the Korean Employee



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Retirement Income Security Act, we replaced such lump-sum severance payment system with our current pension insurance system in the form of either a defined benefit plan or a defined contribution
plan, with a total unfunded portion of Won 340 billion as of December 31, 2011. Our employees have the option of choosing either the defined benefit plan or the defined contribution plan. Lump-sum severance amounts previously accrued prior to
our adoption of the current pension insurance system continue to remain payable. We also provide a wide range of fringe benefits to our employees, including housing, housing loans, company-provided hospitals and schools, a company-sponsored pension
program, an employee welfare fund, industrial disaster insurance, and cultural and athletic facilities.

As of December 31, 2011,
our employees owned, through our employee stock ownership association, approximately 0.01% of our common stock in their association accounts and 2.24% of our common stock in their employee accounts.

Item 6.E.Share Ownership

Common Stock

The persons who are currently
our Directors or executive officers held, as a group, 22,314 common shares as of April 25, 2012, the most recent practicable date for which this information is available. The table below shows the ownership of our common shares by our Directors
and executive officers.



|                 |  |  |       | 
|---------------- |  |  | ----- | 
|Cho, Noi-Ha      |  |  | 3,500 | 
|Chung, Joon-Yang |  |  | 1,714 | 
|Kim, Joon-Sik    |  |  | 1,177 | 
|Kim, Hag-Dong    |  |  | 940   | 
|Kwon, Oh-Joon    |  |  | 900   | 
|Kim, Young-Hun   |  |  | 847   | 
|Lee, Hoo-Geun    |  |  | 548   | 
|Shim, Tong-Wook  |  |  | 470   | 
|Woo, Jong-Soo    |  |  | 441   | 
|Hwang, Seok-Joo  |  |  | 430   | 
|Yim Chang-Hee    |  |  | 419   | 
|Yae, Jae-Hen     |  |  | 380   | 
|Min, Kyung-Zoon  |  |  | 380   | 
|Lee, Kyoung-Mok  |  |  | 372   | 
|Kim, Dong-Chul   |  |  | 370   | 
|Jeon, Cheol      |  |  | 370   | 
|Kwon, Suk-Chul   |  |  | 370   | 
|Suh, Young-Sea   |  |  | 351   | 
|Cho Young-Ki     |  |  | 348   | 
|Lee, Jung-Sik    |  |  | 346   | 
|Park, Sung-Ho    |  |  | 346   | 
|Cho, Sang-Ho     |  |  | 341   | 
|Kim, Dong-Soo    |  |  | 320   | 
|Lee, Bok-Sung    |  |  | 320   | 
|Kim, Kwan-Young  |  |  | 320   | 
|Kim, Sun-Won     |  |  | 312   | 
|Lee, Tae-Ju      |  |  | 297   | 
|Shin, Jae-Chul   |  |  | 293   | 
|Nam, Sik         |  |  | 291   | 
|Kim, Hong-Soo    |  |  | 291   | 
|Baek, Sung-Kwan  |  |  | 261   | 
|Lee, Young-Ki    |  |  | 260   | 
|Ko, Suk-Bum      |  |  | 245   | 
|Kim, Won-Ki      |  |  | 242   | 
|Seo, Myung-Deuk  |  |  | 242   | 
|Chang In-Hwan    |  |  | 234   | 



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|                 |  |  |        | 
|---------------- |  |  | ------ | 
|Yu-Seong         |  |  | 218    | 
|Jeon, Woo-Sig    |  |  | 210    | 
|Park, Ki-Hong    |  |  | 200    | 
|Song, Sebin      |  |  | 200    | 
|Kim, Jhi-Yong    |  |  | 193    | 
|Hwang, Eun-Yeon  |  |  | 189    | 
|Park, Myung-Kil  |  |  | 170    | 
|Cho, Bong-Rae    |  |  | 164    | 
|Kim, Yong-Min    |  |  | 152    | 
|An, Tong-Il      |  |  | 150    | 
|Yeon, Kyu-Sung   |  |  | 145    | 
|Sung, Gee-Woong  |  |  | 143    | 
|Lee, Young-Hoon  |  |  | 128    | 
|Kim, Yeung-Gyu   |  |  | 120    | 
|Park, Kui-Chan   |  |  | 86     | 
|Park, Han-Yong   |  |  | 82     | 
|Choi, Jeong-Woo  |  |  | 60     | 
|Bae, Chung-Hun   |  |  | 59     | 
|Yun, Kimok       |  |  | 57     | 
|Chang, In-Hwa    |  |  | 50     | 
|Kim, Se-Hyun     |  |  | 50     | 
|Kim, Jae-Yeol    |  |  | 50     | 
|Chon, Jung-Son   |  |  | 44     | 
|Shin, Geon       |  |  | 44     | 
|Son, Chang-Hwan  |  |  | 44     | 
|Chung, Chang-Hwa |  |  | 18     | 
|                 |  |  |        | 
|Total            |  |  | 22,314 | 
|                 |  |  |        | 

Stock Options

With respect to the options granted, we may elect either to issue shares of common stock, distribute treasury stock or to pay in cash the difference
between the exercise and the market price at the date of exercise. The options may be exercised by a person who has continued employment with POSCO for two or more years from the date on which the options are granted. Expiration date of options is
seven years from the date on which the options are granted. All of the stock options below relate to our common stock.

At the annual
shareholders meeting held in February 2006, our shareholders elected to terminate the stock option program. Stock options granted prior to this meeting remain valid and outstanding pursuant to the articles of incorporation in effect at the
time of the issuance of the stock option. The following table sets forth information regarding the stock options we have granted to our current Directors and executive officers as of April 30, 2012.



|                 |  |                |  |                 |           |  |               |  |           |                |  |  |                  |  |  |                    |        |  |  |  |        |  |  |  |   | 
|---------------- |  | -------------- |  | --------------- | --------- |  | ------------- |  | --------- | -------------- |  |  | ---------------- |  |  | ------------------ | ------ |  |  |  | ------ |  |  |  | - | 
|                 |  |                |  | Exercise Period |           |  | ExercisePrice |  |           | GrantedOptions |  |  | ExercisedOptions |  |  | ExercisableOptions |       
|Directors        |  | Grant Date     |  | From            |           |  | To            |  |           |                |  | 
|Chung, Joon-Yang |  | April 27, 2002 |  |                 | 4/28/2004 |  |               |  | 4/27/2009 |                |  |  | 136,400          |  |  |                    | 9,316  |  |  |  | 9,316  |  |  |  | 0 | 
|                 |  | July 23, 2004  |  |                 | 7/24/2006 |  |               |  | 7/23/2011 |                |  |  | 151,700          |  |  |                    | 4,900  |  |  |  | 4,900  |  |  |  | 0 | 
|Park, Han-Yong   |  | April 26, 2003 |  |                 | 4/27/2005 |  |               |  | 4/26/2010 |                |  |  | 102,900          |  |  |                    | 9,604  |  |  |  | 9,604  |  |  |  | 0 | 
|Cho, Noi-Ha      |  | April 28, 2005 |  |                 | 4/29/2007 |  |               |  | 4/28/2012 |                |  |  | 194,900          |  |  |                    | 10,000 |  |  |  | 10,000 |  |  |  | 0 | 



|                   |  |                |  |                 |           |  |               |  |           |                |  |  |                  |  |  |                    |       |  |  |  |       |  |  |  |   | 
|------------------ |  | -------------- |  | --------------- | --------- |  | ------------- |  | --------- | -------------- |  |  | ---------------- |  |  | ------------------ | ----- |  |  |  | ----- |  |  |  | - | 
|                   |  |                |  | Exercise Period |           |  | ExercisePrice |  |           | GrantedOptions |  |  | ExercisedOptions |  |  | ExercisableOptions |      
|Executive Officers |  | Grant Date     |  | From            |           |  | To            |  |           |                |  | 
|Kwon, Oh-Joon      |  | April 26, 2003 |  |                 | 4/27/2005 |  |               |  | 4/26/2010 |                |  |  | 102,900          |  |  |                    | 9,604 |  |  |  | 9,604 |  |  |  | 0 | 



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Item 7.Major Shareholders and Related Party
Transactions

Item 7.A.Major Shareholders

The following table sets forth certain information relating to the shareholders of our common stock issued as of December 31, 2011.



|                                            |  |                      |            |  |            |  |        |  
|------------------------------------------- |  | -------------------- | ---------- |  | ---------- |  | ------ | -
|Shareholders                                |  | Number ofSharesOwned |            |  | Percentage | 
|National Pension Service                    |  |                      | 5,937,323  |  |            |  | 6.81   |  
|Nippon Steel Corporation (1)                |  |                      | 4,394,712  |  |            |  | 5.04   |  
|SK Telecom                                  |  |                      | 2,481,310  |  |            |  | 2.85   |  
|Pohang University of Science and Technology |  |                      | 1,905,000  |  |            |  | 2.18   |  
|Directors and executive officers as a group |  |                      | 20,251     |  |            |  | 0.02   |  
|Public (2)                                  |  |                      | 62,505,848 |  |            |  | 71.69  |  
|POSCO (held in the form of treasury stock)  |  |                      | 7,449,117  |  |            |  | 8.54   |  
|POSCO (held through treasury stock fund)    |  |                      | 2,493,274  |  |            |  | 2.86   |  
|                                            |  |                      |            |  |            |  |        |  
|Total issued shares of common stock         |  |                      | 87,186,835 |  |            |  | 100.00 | %
|                                            |  |                      |            |  |            |  |        |  





|(1) | Held in the form of ADRs.
|--- | -------------------------



|(2) | Includes ADRs.
|--- | --------------

As of December 31, 2011, there
were 13,243,566 shares of common stock outstanding in the form of ADRs, representing 15.19% of the total issued shares of common stock.

Item 7.B.Related Party Transactions

We have issued guarantees of Won 3,588 billion as of
December 31, 2010 and Won 7,366 billion as of December 31, 2011 in favor of affiliated and related companies. We have also engaged in various transactions with our subsidiaries and affiliated companies. See Notes 34 and 35 of Notes to
Consolidated Financial Statements.

As of December 31, 2010 and 2011, we had no loans outstanding to our executive officers and
Directors.

Item 7.C.Interests of Experts and Counsel

Not applicable

Item 8.Financial Information

Item 8.A.Consolidated Statements and Other Financial Information

See Item 18. Financial Statements and pages F-1 through F-107.

Legal Proceedings

We have been subject to a number of anti-dumping and countervailing proceedings in the United States, China, India, Russia, Thailand
and Brazil The anti-dumping and countervailing proceedings have not had a material adverse effect on our business and operations. However, there can be no assurance that increases in, or new impositions of, anti-dumping duties, countervailing
duties, quotas or tariffs on our sales of products abroad may not have a material adverse impact on our exports in the future. See Item 4. Information on the Company  Item 4.B. Business Overview  Markets  Exports.

On April 25, 2002, Nippon Steel Corporation announced that it has filed civil lawsuits in Japan and the United States relating to
claims of alleged improper acquisition and infringement of intellectual property rights related to production of grain oriented electrical steel sheets. Nippon Steel Corporation announced that it is seeking an injunction to prohibit us from
manufacturing and selling the allegedly infringing products as well as monetary damages. We have not received any petitions relating to these alleged claims, but we plan to vigorously defend against such claims as necessary upon completion of our
assessment of the merits of the claims.



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Except as described above, we are not involved in any pending or threatened legal or arbitration
proceedings that may have, or have had during the last 12 months, a material adverse effect on our results of operations or financial position.

DIVIDENDS

The amount of dividends paid on our common stock is subject to approval at the
annual general meeting of shareholders, which is typically held in February or March of the following year. In addition to our annual dividends, our board of directors is authorized to declare and distribute interim dividends once a year under our
articles of incorporation. If we decide to pay interim dividends, our articles of incorporation authorize us to pay them in cash, shares or other form of property and to the shareholders of record as of June 30 of the relevant fiscal year. We
may pay cash dividends out of retained earnings that have not been appropriated to statutory reserves.

The table below sets out the
annual dividends declared on the outstanding common stock to shareholders of record on December 31 of the years indicated and the interim dividends declared on the outstanding common stock to shareholders of record on June 30 of the years
indicated. A total of 87,186,835 shares of common stock were issued at the end of 2011. Of these shares, 77,244,444 shares were outstanding and 7,449,117 shares were held by us in treasury and 2,493,274 shares were held through our treasury stock
fund. The annual dividends set out for each of the years below were paid in the immediately following year.



|     |  |                                          |  |                                  |  |                                      
|---- |  | ---------------------------------------- |  | -------------------------------- |  | -------------------------------------
|Year |  | Annual Dividend perCommon Stock toPublic |  | Interim Dividendper Common Stock |  | Average TotalDividend perCommon Stock
|     |  | (In Won)                                
|2007 |  | 7,500                                    |  | 2,500                            |  | 10,000                               
|2008 |  | 7,500                                    |  | 2,500                            |  | 10,000                               
|2009 |  | 6,500                                    |  | 1,500                            |  | 8,000                                
|2010 |  | 7,500                                    |  | 2,500                            |  | 10,000                               
|2011 |  | 7,500                                    |  | 2,500                            |  | 10,000                               

Owners of the ADSs are entitled to receive any dividends payable in respect of the underlying shares of common
stock.

Historically, we have paid to holders of record of our common stock an annual dividend. However, we can give no assurance that we
will continue to declare and pay any dividends in the future.

Item 8.B.Significant
Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since
the date of our Consolidated Financial Statements included in this annual report.

Item 9.The Offer
and Listing

Item 9.A.Offer and Listing Details

Market Price Information

Notes

Not applicable



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##### Table of Contents

Common Stock

The principal trading market for our common stock is the KRX KOSPI Market. Our common stock, which is in registered form and has a par value of Won 5,000 per share, has been listed on the first section of the
KRX KOSPI Market since June 1988 under the identifying code 005490. The table below shows the high and low trading prices and the average daily volume of trading activity on the KRX KOSPI Market for our common stock since January 1, 2007.



|                                  |  |          |         |  |                              |  |         |  |  |  |         | 
|--------------------------------- |  | -------- | ------- |  | ---------------------------- |  | ------- |  |  |  | ------- | 
|                                  |  | Price    |         |  | Average DailyTrading 
Volume | 
|                                  |  | High     |         |  | Low                          |  |        
|                                  |  | (In Won) |         |  | (Number ofShares)            | 
|2007                              |  |          |         |  |                              |  |         |  |  |  |         | 
|First Quarter                     |  |          | 395,000 |  |                              |  | 286,500 |  |  |  | 296,883 | 
|Second Quarter                    |  |          | 481,000 |  |                              |  | 366,000 |  |  |  | 246,291 | 
|Third Quarter                     |  |          | 673,000 |  |                              |  | 443,500 |  |  |  | 298,177 | 
|Fourth Quarter                    |  |          | 765,000 |  |                              |  | 557,000 |  |  |  | 331,286 | 
|2008                              |  |          |         |  |                              |  |         |  |  |  |         | 
|First Quarter                     |  |          | 575,000 |  |                              |  | 437,000 |  |  |  | 334,157 | 
|Second Quarter                    |  |          | 594,000 |  |                              |  | 450,000 |  |  |  | 382,083 | 
|Third Quarter                     |  |          | 544,000 |  |                              |  | 410,000 |  |  |  | 389,984 | 
|Fourth Quarter                    |  |          | 436,500 |  |                              |  | 242,000 |  |  |  | 600,141 | 
|2009                              |  |          |         |  |                              |  |         |  |  |  |         | 
|First Quarter                     |  |          | 430,000 |  |                              |  | 303,000 |  |  |  | 389,081 | 
|Second Quarter                    |  |          | 435,000 |  |                              |  | 369,000 |  |  |  | 390,866 | 
|Third Quarter                     |  |          | 519,000 |  |                              |  | 420,000 |  |  |  | 324,403 | 
|Fourth Quarter                    |  |          | 619,000 |  |                              |  | 472,500 |  |  |  | 293,724 | 
|2010                              |  |          |         |  |                              |  |         |  |  |  |         | 
|First Quarter                     |  |          | 625,000 |  |                              |  | 516,000 |  |  |  | 255,173 | 
|Second Quarter                    |  |          | 560,000 |  |                              |  | 434,500 |  |  |  | 343,367 | 
|Third Quarter                     |  |          | 524,000 |  |                              |  | 460,500 |  |  |  | 257,784 | 
|Fourth Quarter                    |  |          | 538,000 |  |                              |  | 448,500 |  |  |  | 299,776 | 
|2011                              |  |          |         |  |                              |  |         |  |  |  |         | 
|First Quarter                     |  |          | 517,000 |  |                              |  | 450,500 |  |  |  | 345,785 | 
|Second Quarter                    |  |          | 505,000 |  |                              |  | 421,000 |  |  |  | 282,070 | 
|Third Quarter                     |  |          | 480,000 |  |                              |  | 358,500 |  |  |  | 277,876 | 
|Fourth Quarter                    |  |          | 398,000 |  |                              |  | 351,000 |  |  |  | 235,063 | 
|October                           |  |          | 391,000 |  |                              |  | 351,000 |  |  |  | 266,326 | 
|November                          |  |          | 391,500 |  |                              |  | 353,000 |  |  |  | 221,389 | 
|December                          |  |          | 398,000 |  |                              |  | 380,000 |  |  |  | 219,613 | 
|2012                              |  |          |         |  |                              |  |         |  |  |  |         | 
|First Quarter                     |  |          | 424,000 |  |                              |  | 376,000 |  |  |  | 198,190 | 
|January                           |  |          | 418,500 |  |                              |  | 406,000 |  |  |  | 196,089 | 
|February                          |  |          | 423,500 |  |                              |  | 376,000 |  |  |  | 195,168 | 
|March                             |  |          | 424,000 |  |                              |  | 377,500 |  |  |  | 203,312 | 
|Second Quarter (through April 27) |  |          | 384,500 |  |                              |  | 366,500 |  |  |  | 156,111 | 
|April (through April 27)          |  |          | 384,500 |  |                              |  | 366,500 |  |  |  | 156,111 | 

ADSs

Our common stock is also listed on the New York Stock Exchange, the London Stock Exchange and the Tokyo Stock Exchange in the form of ADSs. The ADSs have been issued by The Bank of New York Mellon as ADR depositary
and are listed on the New York Stock Exchange under the symbol PKX. One ADS represents one-fourth of one share of common stock. As of December 31, 2011,13,243,566 ADSs were outstanding, representing 15.19% shares of common stock.



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The table below shows the high and low trading prices and the average daily volume of trading activity
on the New York Stock Exchange for our ADSs since January 1, 2007.



|                                  |  |          |        |  |                             |  |        |  |  |  |         | 
|--------------------------------- |  | -------- | ------ |  | --------------------------- |  | ------ |  |  |  | ------- | 
|                                  |  | Price    |        |  | Average DailyTrading Volume | 
|                                  |  | High     |        |  | Low                         |  |       
|                                  |  | (In US$) |        |  | (Number of ADSs)            | 
|2007                              |  |          |        |  |                             |  |        |  |  |  |         | 
|First Quarter                     |  |          | 106.88 |  |                             |  | 76.49  |  |  |  | 770,003 | 
|Second Quarter                    |  |          | 129.60 |  |                             |  | 99.34  |  |  |  | 712,996 | 
|Third Quarter                     |  |          | 184.54 |  |                             |  | 124.50 |  |  |  | 809,315 | 
|Fourth Quarter                    |  |          | 195.89 |  |                             |  | 147.17 |  |  |  | 721,160 | 
|2008                              |  |          |        |  |                             |  |        |  |  |  |         | 
|First Quarter                     |  |          | 147.74 |  |                             |  | 108.41 |  |  |  | 418,434 | 
|Second Quarter                    |  |          | 147.05 |  |                             |  | 112.80 |  |  |  | 249,329 | 
|Third Quarter                     |  |          | 133.73 |  |                             |  | 88.35  |  |  |  | 294,629 | 
|Fourth Quarter                    |  |          | 89.00  |  |                             |  | 47.14  |  |  |  | 355,604 | 
|2009                              |  |          |        |  |                             |  |        |  |  |  |         | 
|First Quarter                     |  |          | 79.11  |  |                             |  | 47.14  |  |  |  | 212,268 | 
|Second Quarter                    |  |          | 89.00  |  |                             |  | 69.23  |  |  |  | 168,527 | 
|Third Quarter                     |  |          | 108.08 |  |                             |  | 80.73  |  |  |  | 491,455 | 
|Fourth Quarter                    |  |          | 131.47 |  |                             |  | 100.00 |  |  |  | 458,775 | 
|2010                              |  |          |        |  |                             |  |        |  |  |  |         | 
|First Quarter                     |  |          | 140.10 |  |                             |  | 108.23 |  |  |  | 429,700 | 
|Second Quarter                    |  |          | 124.83 |  |                             |  | 88.78  |  |  |  | 559,765 | 
|Third Quarter                     |  |          | 113.98 |  |                             |  | 94.67  |  |  |  | 344,102 | 
|Fourth Quarter                    |  |          | 120.47 |  |                             |  | 95.34  |  |  |  | 376,905 | 
|2011                              |  |          | 117.57 |  |                             |  | 97.46  |  |  |  | 380,459 | 
|First Quarter                     |  |          | 117.57 |  |                             |  | 100.50 |  |  |  | 403,646 | 
|Second Quarter                    |  |          | 116.83 |  |                             |  | 95.86  |  |  |  | 348,986 | 
|Third Quarter                     |  |          | 112.41 |  |                             |  | 76.01  |  |  |  | 314,454 | 
|Fourth Quarter                    |  |          | 89.16  |  |                             |  | 72.51  |  |  |  | 300,073 | 
|October                           |  |          | 89.16  |  |                             |  | 72.51  |  |  |  | 358,137 | 
|November                          |  |          | 85.93  |  |                             |  | 75.30  |  |  |  | 249,881 | 
|December                          |  |          | 87.91  |  |                             |  | 79.91  |  |  |  | 292,200 | 
|2012                              |  |          |        |  |                             |  |        |  |  |  |         | 
|First Quarter                     |  |          | 95.27  |  |                             |  | 80.28  |  |  |  | 266,610 | 
|January                           |  |          | 93.83  |  |                             |  | 80.28  |  |  |  | 300,382 | 
|February                          |  |          | 94.05  |  |                             |  | 90.85  |  |  |  | 200,163 | 
|March                             |  |          | 95.27  |  |                             |  | 82.14  |  |  |  | 299,286 | 
|Second Quarter (through April 27) |  |          | 85.53  |  |                             |  | 79.86  |  |  |  | 238,028 | 
|April (through April 27)          |  |          | 85.53  |  |                             |  | 79.86  |  |  |  | 238,028 | 

Item 9.B.Plan of Distribution

Not applicable

Item 9.C.  Markets

The Korean Securities Market

On
January 27, 2005, the Korea Exchange was established pursuant to the Korea Securities and Futures Exchange Act by consolidating the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or the KOSDAQ, and the KOSDAQ
Committee of the Korea Securities Dealers Association, which had formerly managed the KOSDAQ. There are three different markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, and the KRX Derivatives Market. The Korea
Exchange has two trading floors located in Seoul, one for the KRX KOSPI Market and one for the KRX KOSDAQ Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a limited liability company, the shares of which
are held by (i) investment brokers and investment dealers that were formerly members of the Korea Futures Exchange or the Korea Stock Exchange and (ii) the stockholders of the KOSDAQ. Currently, the Korea Exchange is the only stock
exchange in Korea and is operated by membership, having as its members most of the Korean investment brokers and investment dealers and some Korean branches of foreign investment brokers and investment dealers.



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According to data published by the Korea Exchange, as of December 31, 2011, the aggregate market
value of equity securities listed on the KRX KOSPI Market and the KRX KOSDAQ Market was approximately Won 1,148 trillion, and the average daily trading volume of equity securities for 2011 was approximately 1,025 million shares with an average
transaction value of Won 8,084 billion The Korea Exchange has the power in some circumstances to suspend trading in the shares of a given company or to de-list a security pursuant to the Regulation on Listing on the Korea Exchange. The Korea
Exchange also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading in a security.

The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community
that can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers excess
capacity in a particular industry and induced private companies to offer publicly their securities.

The Korea Exchange publishes the
Korea Composite Stock Price Index, or KOSPI, every ten seconds, which is an index of all equity securities listed on the Korea Exchange. On January 1, 1983, the method of computing KOSPI was changed from the Dow Jones method to the aggregate
value method. In the new method, the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of
the base date, January 4, 1980.

Movements in KOSPI are set out in the following table together with the associated dividend yields
and price earnings ratios.



|                        |  |         |          |  |      |  |          |     |  |  |          |  |  |                               |          |  |                           |  |     |  |  |  |      | 
|----------------------- |  | ------- | -------- |  | ---- |  | -------- | --- |  |  | -------- |  |  | ----------------------------- | -------- |  | ------------------------- |  | --- |  |  |  | ---- | 
|                        |  |         |          |  |      |  |          |     |  |  |          |  |  | Period Average                |         
|Year                    |  | Opening |          |  | High |  |          | Low |  |  | Closing  |  |  | DividendYield (1)(2)(Percent) |          |  | PriceEarningsRatio (2)(3) | 
|1985                    |  |         | 139.53   |  |      |  | 163.37   |     |  |  | 131.40   |  |  |                               | 163.37   |  |                           |  | 5.3 |  |  |  | 5.2  | 
|1986                    |  |         | 161.40   |  |      |  | 279.67   |     |  |  | 153.85   |  |  |                               | 272.61   |  |                           |  | 4.3 |  |  |  | 7.6  | 
|1987                    |  |         | 264.82   |  |      |  | 525.11   |     |  |  | 264.82   |  |  |                               | 525.11   |  |                           |  | 2.6 |  |  |  | 10.9 | 
|1988                    |  |         | 532.04   |  |      |  | 922.56   |     |  |  | 527.89   |  |  |                               | 907.20   |  |                           |  | 2.4 |  |  |  | 11.2 | 
|1989                    |  |         | 919.61   |  |      |  | 1,007.77 |     |  |  | 844.75   |  |  |                               | 909.72   |  |                           |  | 2.0 |  |  |  | 13.9 | 
|1990                    |  |         | 908.59   |  |      |  | 928.82   |     |  |  | 566.27   |  |  |                               | 696.11   |  |                           |  | 2.2 |  |  |  | 12.8 | 
|1991                    |  |         | 679.75   |  |      |  | 763.10   |     |  |  | 586.51   |  |  |                               | 610.92   |  |                           |  | 2.6 |  |  |  | 11.2 | 
|1992                    |  |         | 624.23   |  |      |  | 691.48   |     |  |  | 459.07   |  |  |                               | 678.44   |  |                           |  | 2.2 |  |  |  | 10.9 | 
|1993                    |  |         | 697.41   |  |      |  | 874.10   |     |  |  | 605.93   |  |  |                               | 866.18   |  |                           |  | 1.6 |  |  |  | 12.7 | 
|1994                    |  |         | 879.32   |  |      |  | 1,138.75 |     |  |  | 855.37   |  |  |                               | 1,027.37 |  |                           |  | 1.2 |  |  |  | 16.2 | 
|1995                    |  |         | 1,027.45 |  |      |  | 1,016.77 |     |  |  | 847.09   |  |  |                               | 882.94   |  |                           |  | 1.2 |  |  |  | 16.4 | 
|1996                    |  |         | 882.29   |  |      |  | 986.84   |     |  |  | 651.22   |  |  |                               | 651.22   |  |                           |  | 1.3 |  |  |  | 17.8 | 
|1997                    |  |         | 647.67   |  |      |  | 792.29   |     |  |  | 350.68   |  |  |                               | 376.31   |  |                           |  | 1.5 |  |  |  | 17.0 | 
|1998                    |  |         | 374.41   |  |      |  | 579.86   |     |  |  | 280.00   |  |  |                               | 562.46   |  |                           |  | 1.9 |  |  |  | 10.8 | 
|1999                    |  |         | 565.10   |  |      |  | 1,028.07 |     |  |  | 498.42   |  |  |                               | 1,028.07 |  |                           |  | 1.1 |  |  |  | 13.5 | 
|2000                    |  |         | 1,028.33 |  |      |  | 1,059.04 |     |  |  | 500.60   |  |  |                               | 504.62   |  |                           |  | 1.6 |  |  |  | 18.6 | 
|2001                    |  |         | 503.31   |  |      |  | 704.50   |     |  |  | 468.76   |  |  |                               | 693.70   |  |                           |  | 2.0 |  |  |  | 14.2 | 
|2002                    |  |         | 698.00   |  |      |  | 937.61   |     |  |  | 584.04   |  |  |                               | 627.55   |  |                           |  | 1.4 |  |  |  | 17.8 | 
|2003                    |  |         | 633.03   |  |      |  | 822.16   |     |  |  | 515.24   |  |  |                               | 810.71   |  |                           |  | 2.2 |  |  |  | 10.9 | 
|2004                    |  |         | 821.26   |  |      |  | 936.06   |     |  |  | 719.59   |  |  |                               | 895.92   |  |                           |  | 2.1 |  |  |  | 15.8 | 
|2005                    |  |         | 896.00   |  |      |  | 1,379.37 |     |  |  | 870.84   |  |  |                               | 1,379.37 |  |                           |  | 1.7 |  |  |  | 11.0 | 
|2006                    |  |         | 1,383.32 |  |      |  | 1,464.70 |     |  |  | 1,203.86 |  |  |                               | 1,434.46 |  |                           |  | 1.7 |  |  |  | 11.4 | 
|2007                    |  |         | 1,438.89 |  |      |  | 2,015.48 |     |  |  | 1,345.08 |  |  |                               | 1,897.13 |  |                           |  | 1.4 |  |  |  | 16.8 | 
|2008                    |  |         | 1,891.45 |  |      |  | 1,888.88 |     |  |  | 938.75   |  |  |                               | 1,124.47 |  |                           |  | 2.6 |  |  |  | 8.9  | 
|2009                    |  |         | 1,132.87 |  |      |  | 1,718.88 |     |  |  | 1,018.81 |  |  |                               | 1,682.77 |  |                           |  | 1.2 |  |  |  | 23.7 | 
|2010                    |  |         | 1,681.71 |  |      |  | 2,052.97 |     |  |  | 1,552.79 |  |  |                               | 2,051.00 |  |                           |  | 1.1 |  |  |  | 19.0 | 
|2011                    |  |         | 2,063.69 |  |      |  | 2,231.47 |     |  |  | 1,644.11 |  |  |                               | 1,825.12 |  |                           |  | 1.3 |  |  |  | 13.1 | 
|2012 (through April 27) |  |         | 1,831.69 |  |      |  | 2,057.28 |     |  |  | 1,810.48 |  |  |                               | 1,975.35 |  |                           |  | 1.4 |  |  |  | 12.8 | 





|Source: | The KRX KOSPI Market
|------- | --------------------



|(1) | Dividend yields are based on daily figures. Before 1983, dividend yields were calculated at the end of each month. Dividend yields after January 3, 1984 include cash
dividends only.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Starting in April 2000, dividend yield and price earnings ratio are calculated based on KOSPI 200, an index of 200 equity securities listed on the KRX KOSPI Market. Starting in
April 2000, KOSPI 200 excludes classified companies, companies which did not submit annual reports to the KRX KOSPI Market, and companies which received qualified opinion from external auditors.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The price earnings ratio is based on figures for companies that record a profit in the preceding year.
|--- | ------------------------------------------------------------------------------------------------------

Shares are quoted ex-dividend on the first trading day of the relevant companys accounting period. Since the calendar year is the
accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year.

With certain exceptions, principally to take account of a share being quoted ex-dividend and ex-rights, permitted upward and
downward movements in share prices of any category of shares on any day are limited under the rules of the Korea Exchange to 15% of the previous days closing price of the shares, rounded down as set out below:



|                                   |  |                      |       | 
|---------------------------------- |  | -------------------- | ----- | 
|Previous Days Closing Price (Won) |  | Rounded Downto (Won) |      
|Less than 5,000                    |  |                      | 5     | 
|5,000 to less than 10,000          |  |                      | 10    | 
|10,000 to less than 50,000         |  |                      | 50    | 
|50,000 to less than 100,000        |  |                      | 100   | 
|100,000 to less than 500,000       |  |                      | 500   | 
|500,000 or more                    |  |                      | 1,000 | 

As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing
price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and
offers.

Due to deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities
transactions may be determined by the parties, subject to commission schedules being filed with the Korea Exchange by the financial investment companies with a brokerage license. In addition, a securities transaction tax of 0.15% of the sales price
will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. An agricultural and fishery special surtax of 0.15% of the sales prices will also be imposed on transfer of these shares and
securities on the Korea Exchange. See Item 10. Additional Information  Item 10.E. Taxation  Korean Taxation.



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The number of companies listed on the KRX KOSPI Market, the corresponding total market capitalization
at the end of the periods indicated and the average daily trading volume for those periods are set forth in the following table:



|                        |  |                                                     |     |  |                                     |       |           |                      |  |     |                    |  |  |                  |         |  |                       |       |           |  |  |     |           | 
|----------------------- |  | --------------------------------------------------- | --- |  | ----------------------------------- | ----- | --------- | -------------------- |  | --- | ------------------ |  |  | ---------------- | ------- |  | --------------------- | ----- | --------- |  |  | --- | --------- | 
|                        |  | Market Capitalization on the Last Day ofEach Period |     |  | Average Daily Trading Volume, Value |      
|Year                    |  | Number ofListedCompanies                            |     |  | (Billions ofWon)                    |       |           | (Millions ofUS$) (1) |  |     | Thousandsof Shares |  |  | (Millions ofWon) |         |  | (Thousandsof US$) (1) |      
|1985                    |  |                                                     | 342 |  |                                     | (Won) | 6,570     |                      |  | US$ | 7,381              |  |  |                  | 18,925  |  |                       | (Won) | 12,315    |  |  | US$ | 13,834    | 
|1986                    |  |                                                     | 355 |  |                                     |       | 11,994    |                      |  |     | 13,924             |  |  |                  | 31,755  |  |                       |       | 32,870    |  |  |     | 38,159    | 
|1987                    |  |                                                     | 389 |  |                                     |       | 26,172    |                      |  |     | 33,033             |  |  |                  | 20,353  |  |                       |       | 70,185    |  |  |     | 88,583    | 
|1988                    |  |                                                     | 502 |  |                                     |       | 64,544    |                      |  |     | 94,348             |  |  |                  | 10,367  |  |                       |       | 198,364   |  |  |     | 289,963   | 
|1989                    |  |                                                     | 626 |  |                                     |       | 95,477    |                      |  |     | 140,490            |  |  |                  | 11,757  |  |                       |       | 280,967   |  |  |     | 414,430   | 
|1990                    |  |                                                     | 669 |  |                                     |       | 79,020    |                      |  |     | 110,301            |  |  |                  | 10,866  |  |                       |       | 183,692   |  |  |     | 256,411   | 
|1991                    |  |                                                     | 686 |  |                                     |       | 73,118    |                      |  |     | 96,107             |  |  |                  | 14,022  |  |                       |       | 214,263   |  |  |     | 281,629   | 
|1992                    |  |                                                     | 688 |  |                                     |       | 84,712    |                      |  |     | 107,448            |  |  |                  | 24,028  |  |                       |       | 308,246   |  |  |     | 390,977   | 
|1993                    |  |                                                     | 693 |  |                                     |       | 112,665   |                      |  |     | 139,420            |  |  |                  | 35,130  |  |                       |       | 574,048   |  |  |     | 710,367   | 
|1994                    |  |                                                     | 699 |  |                                     |       | 151,217   |                      |  |     | 191,730            |  |  |                  | 36,862  |  |                       |       | 776,257   |  |  |     | 984,223   | 
|1995                    |  |                                                     | 721 |  |                                     |       | 141,151   |                      |  |     | 182,201            |  |  |                  | 26,130  |  |                       |       | 487,762   |  |  |     | 629,613   | 
|1996                    |  |                                                     | 760 |  |                                     |       | 117,370   |                      |  |     | 139,031            |  |  |                  | 26,571  |  |                       |       | 486,834   |  |  |     | 576,680   | 
|1997                    |  |                                                     | 776 |  |                                     |       | 70,989    |                      |  |     | 50,162             |  |  |                  | 41,525  |  |                       |       | 555,759   |  |  |     | 392,707   | 
|1998                    |  |                                                     | 748 |  |                                     |       | 137,799   |                      |  |     | 114,091            |  |  |                  | 97,716  |  |                       |       | 660,429   |  |  |     | 546,803   | 
|1999                    |  |                                                     | 725 |  |                                     |       | 349,504   |                      |  |     | 305,137            |  |  |                  | 278,551 |  |                       |       | 3,481,620 |  |  |     | 3,039,655 | 
|2000                    |  |                                                     | 704 |  |                                     |       | 188,042   |                      |  |     | 149,275            |  |  |                  | 306,163 |  |                       |       | 2,602,211 |  |  |     | 2,065,739 | 
|2001                    |  |                                                     | 689 |  |                                     |       | 255,850   |                      |  |     | 192,934            |  |  |                  | 473,241 |  |                       |       | 1,997,420 |  |  |     | 1,506,237 | 
|2002                    |  |                                                     | 683 |  |                                     |       | 258,681   |                      |  |     | 215,496            |  |  |                  | 857,245 |  |                       |       | 3,041,598 |  |  |     | 2,533,815 | 
|2003                    |  |                                                     | 684 |  |                                     |       | 355,363   |                      |  |     | 296,679            |  |  |                  | 542,010 |  |                       |       | 2,216,636 |  |  |     | 1,850,589 | 
|2004                    |  |                                                     | 683 |  |                                     |       | 412,588   |                      |  |     | 395,275            |  |  |                  | 372,895 |  |                       |       | 2,232,109 |  |  |     | 2,138,445 | 
|2005                    |  |                                                     | 702 |  |                                     |       | 655,075   |                      |  |     | 646,158            |  |  |                  | 467,629 |  |                       |       | 3,157,662 |  |  |     | 3,114,679 | 
|2006                    |  |                                                     | 731 |  |                                     |       | 704,588   |                      |  |     | 757,948            |  |  |                  | 279,096 |  |                       |       | 3,435,180 |  |  |     | 3,695,331 | 
|2007                    |  |                                                     | 745 |  |                                     |       | 951,900   |                      |  |     | 1,016,770          |  |  |                  | 363,741 |  |                       |       | 5,539,653 |  |  |     | 5,917,168 | 
|2008                    |  |                                                     | 763 |  |                                     |       | 576,888   |                      |  |     | 458,758            |  |  |                  | 352,599 |  |                       |       | 3,211,039 |  |  |     | 2,553,510 | 
|2009                    |  |                                                     | 770 |  |                                     |       | 887,935   |                      |  |     | 762,503            |  |  |                  | 485,657 |  |                       |       | 5,595,552 |  |  |     | 4,976,859 | 
|2010                    |  |                                                     | 777 |  |                                     |       | 1,141,885 |                      |  |     | 1,006,243          |  |  |                  | 380,859 |  |                       |       | 5,619,768 |  |  |     | 4,952,210 | 
|2011                    |  |                                                     | 791 |  |                                     |       | 1,041,999 |                      |  |     | 904,670            |  |  |                  | 353,760 |  |                       |       | 6,836,146 |  |  |     | 5,935,185 | 
|2012 (through April 27) |  |                                                     | 778 |  |                                     |       | 1,131,131 |                      |  |     | 995,539            |  |  |                  | 607,424 |  |                       |       | 5,348,150 |  |  |     | 4,707,049 | 



Source:The Korea Exchange



|(1) | Converted at the Concentration Base Rate of The Bank of Korea or the Market Average Exchange Rate, as the case may be, at the end of the periods indicated.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

The Korean securities markets are principally regulated by the Financial Services Commission and under the regulations set
forth in the FSCMA. In July 2007, the National Assembly of Korea enacted the FSCMA. The FSCMA, which came into effect on February 4, 2009, comprehensively regulates the Korean capital markets, the financial investment business (including
collective investment businesses and trust businesses) and financial investment products (such as securities and derivatives). The FSCMA imposes restrictions on insider trading and price manipulation, requires specified information to be made
available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests. The FSCMA
regulates the operation and monitoring of the securities and derivatives markets.

Protection of Customers Interest in Case of Insolvency of
Investment Brokers or Investment Dealers

Under Korean law, the relationship between a customer and an investment broker or an
investment dealer in connection with a securities sell or buy order is deemed to be a consignment and the securities acquired by a consignment agent (i.e., the investment broker or the investment dealer) through such sell or buy order are regarded
as belonging to the customer in so far as the customer and



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the consignment agents creditors are concerned. Therefore, in the event of a bankruptcy or reorganization procedure involving an investment broker or an investment dealer, the customer of
the investment broker or the investment dealer is entitled to the proceeds of the securities sold by the investment broker or the investment dealer.

When a customer places a sell order with an investment broker or an investment dealer that is not a member of the KRX KOSPI Market or the KRX KOSDAQ Market and this investment broker or investment dealer places a
sell order with another investment broker or investment dealer that is a member of the KRX KOSPI Market or the KRX KOSDAQ Market, the customer is still entitled to the proceeds of the securities sold and received by the non- member company from the
member company regardless of the bankruptcy or reorganization of the non-member company.

Under the FSCMA, the Korea Exchange is obliged
to indemnify any loss or damage incurred by a counterparty as a result of a breach by members of the KRX KOSPI Market or the KRX KOSDAQ Market. If an investment broker or an investment dealer that is a member of the KRX KOSPI Market or the KRX
KOSDAQ Market breaches its obligation in connection with a buy order, the Korea Exchange is obliged to pay the purchase price on behalf of the breaching member. Therefore, the customer can acquire the securities that have been ordered to be
purchased by the breaching member.

When a customer places a buy order with a non-member company and the non-member company places a buy
order with a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer in so far as the customer and the
non-member companys creditors are concerned.

As the cash deposited with an investment broker or an investment dealer is regarded
as belonging to the investment broker or investment dealer, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the investment broker or the investment dealer if a bankruptcy or
rehabilitation procedure is instituted against the investment broker or the investment dealer and, therefore, can suffer from loss or damage as a result. However, in case of the investment broker or the investment dealers bankruptcy,
liquidation, cancellation of investment broker or investment dealer license or other insolvency events, the Depositor Protection Act provides that the Korea Deposit Insurance Corporation will, upon the request of the investors, pay each investor up
to a total of Won 50 million, which shall represent both actual cash deposited and any interest accrued thereon. Pursuant to the FSCMA, as amended, investment brokers or investment dealers are required to deposit the cash received from its
customers at the securities finance company established pursuant to the FSCMA. Set-off or attachment of cash deposits by investment brokers or investment dealers is prohibited. The premiums related to this insurance are paid by investment brokers or
investment dealers.

Clearance and Settlement

The settlement of trades on the Korea Exchange is required to be handled by a settlement agency of the Korea Exchange. The Korea Securities Depository is the institution commissioned by the Korea Exchange to handle
all such settlement of trades. The settlement of trades on the Korea Exchange takes place through a clearance and settlement procedure. The Korea Exchange has adopted the multilateral netting system and carries out the clearance of the trades by
netting the sales and purchases of each Korea Securities Depository participant. The Korea Exchange is required to provide the daily net settlement results of the trades to the Korea Securities Depository one business day after the day of the sale
and purchase contract. The Korea Securities Depository then handles settlement of the securities and the funds based on the information received from the Korea Exchange. The securities are settled through book-entry changes in the accounts of Korea
Securities Depository participants and the funds are settled by transfer to an account at a bank designated by the Korea Securities Depository. Settlement of trades is generally required to take place on the third day following the day of the sale
and purchase contract.



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Item 9.D.Selling Shareholders

Not applicable

Item 9.E.Dilution

Not applicable

Item 9.F.Expenses of the Issuer

Not applicable

Item 10.Additional Information

Item 10.A.Share Capital

Currently, our authorized share capital is 200,000,000 shares, which consists of shares of common stock, par value Won 5,000 per share
(Common Shares) and shares of non-voting stock, par value Won 5,000 per share (Non-Voting Preferred Shares). Our Non-Voting Preferred Shares have a preferential right to dividend payments. Common Shares and Non-Voting
Preferred Shares together are referred to as Shares. Under our articles of incorporation, we are authorized to issue Non-Voting Preferred Shares up to the limit prescribed by applicable law, the aggregate of which currently is one-half
of our total issued and outstanding capital stock. As of December 31, 2011, 87,186,835 Common Shares were issued, of which 7,449,117 shares were held by us in treasury and an additional 2,493,274 shares were held by our treasury stock fund. We
have never issued any Non-Voting Preferred Shares. All of the issued and outstanding Common Shares are fully-paid and non-assessable and are in registered form. We issue share certificates in denominations of 1, 3, 4, 5, 10, 50, 100, 500, 1,000 and
10,000 shares.

Item 10.B.Memorandum and Articles of Association

This section provides information relating to our capital stock, including brief summaries of material provisions of our articles of incorporation,
the FSCMA, the Commercial Code and related laws, all as currently in effect. The following summaries are subject to, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the FSCMA and
the Commercial Code. We have filed copies of our articles of incorporation and these laws (except for the newly enacted the FSCMA) as exhibits to registration statements under the Securities Act or the Securities Exchange Act previously filed by us.

Dividends

We distribute
dividends to our shareholders in proportion to the number of shares owned by each shareholder. The Common Shares represented by the ADSs have the same dividend rights as other outstanding Common Shares.

Holders of Non-Voting Preferred Shares are entitled to receive dividends in priority to the holders of Common Shares in an amount not less than 9%
of the par value of the Non-Voting Preferred Shares as determined by the board of directors at the time of their issuance. If the amount available for dividends is less than the aggregate amount of such minimum dividend, we do not have to declare
dividends on the Non-Voting Preferred Shares.

We may declare dividends annually at the annual general meeting of shareholders which is
held within three months after the end of the fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record as of the end of the preceding fiscal year. We may distribute the annual dividend in cash,
Shares or other form of property. However, a dividend of Shares



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must be distributed at par value. Dividends in Shares may not exceed one-half of the annual dividend. In addition, we may declare, and distribute in cash, interim dividends pursuant to a board
resolution once a fiscal year. We have no obligation to pay any annual dividend unclaimed for five years from the payment date.

Under
the Commercial Code, we may pay an annual dividend only to the extent the net asset amount in our balance sheets exceeds the sum of the following: (i) our stated capital, (ii) the total amount of our capital surplus reserve and legal
reserve accumulated up to the end of the relevant dividend period, and (iii) the legal reserve to be set aside for annual dividend. We may not pay an annual dividend unless we have set aside as earned surplus reserve an amount equal to at least
10% of the cash portion of the annual dividend or unless we have accumulated earned surplus reserve of not less than one-half of our stated capital. We may not use legal reserve to pay cash dividends but may transfer amounts from legal reserve to
capital stock or use legal reserve to reduce an accumulated deficit.

Distribution of Free Shares

In addition to paying dividends in Shares out of our retained or current earnings, we may also distribute to our shareholders an amount transferred
from our capital surplus or legal reserve to our stated capital in the form of free shares. We must distribute such free shares to all our shareholders in proportion to their existing shareholdings.

Preemptive Rights and Issuance of Additional Shares

We may issue authorized but unissued shares at the times and, unless otherwise provided in the Commercial Code, on the terms our board of directors may determine. All our shareholders are generally entitled to
subscribe for any newly issued Shares in proportion to their existing shareholdings. We must offer new Shares on uniform terms to all shareholders who have preemptive rights and are listed on our shareholders register as of the relevant record
date. Under the Commercial Code, we may vary, without shareholders approval, the terms of these preemptive rights for different classes of shares. We must give public notice of the preemptive rights regarding new Shares and their
transferability at least two weeks before the relevant record date. Our board of directors may determine how to distribute Shares for which preemptive rights have not been exercised or where fractions of Shares occur.

Under our articles of incorporation, we may issue new Shares pursuant to a board resolution to persons other than existing shareholders, who in
these circumstances will not have preemptive rights, if the new Shares are:



| |  |  | offered publicly or to underwriters for underwriting pursuant to the FSCMA;
| | - |  | ---------------------------------------------------------------------------



| |  |  | issued to members of our employee stock ownership association pursuant to the FSCMA;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | represented by depositary receipts pursuant to the FSCMA;
| | - |  | ---------------------------------------------------------



| |  |  | issued in a general public offering pursuant to a board resolution in accordance with the FSCMA, the amount of which is no more than 10% of the outstanding
Shares;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | issued to our creditors pursuant to a debt-equity swap;
| | - |  | -------------------------------------------------------



| |  |  | issued to domestic or foreign corporations pursuant to a joint venture agreement, strategic coalition or technology inducement agreement when deemed necessary
for management purposes; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | issued to domestic or foreign financial institutions when necessary for raising funds in emergency cases.
| | - |  | ---------------------------------------------------------------------------------------------------------



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In addition, we may issue convertible bonds or bonds with warrants, each up to an aggregate principal
amount of Won 2 trillion, to persons other than existing shareholders.

Members of our employee stock ownership association, whether or
not they are our shareholders, generally have a preemptive right to subscribe for up to 20% of the Shares publicly offered pursuant to the FSCMA. This right is exercisable only to the extent that the total number of Shares so acquired and held by
members of our employee stock ownership association does not exceed 20% of the total number of Shares then issued. As of December 31, 2011, our employees owned, through our employee stock ownership association, approximately 0.02% of our common
stock in their association accounts and 2.23% of our common stock in their employee accounts.

General Meeting of Shareholders

We hold the annual general meeting of shareholders within three months after the end of each fiscal year. The record date of the register of
shareholders is December 31 of each year, and such shareholders listed on the register of shareholder as of the record date are entitled to exercise their right at the general meeting of shareholders. Subject to a board resolution or court
approval, we may hold an extraordinary general meeting of shareholders:



| |  |  | as necessary;
| | - |  | -------------



| |  |  | at the request of holders of an aggregate of 3% or more of our outstanding Shares;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | at the request of shareholders holding an aggregate of 1.5% or more of our outstanding Shares for at least six months; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | at the request of our audit committee.
| | - |  | --------------------------------------

Holders of Non-Voting Preferred Shares may request a general meeting of shareholders only after the Non-Voting Preferred Shares become entitled to vote or enfranchised, as described under 
Voting Rights below.

We must give shareholders written notice setting out the date, place and agenda of the meeting at least two
weeks before the date of the general meeting of shareholders. However, for holders of 1% or less of the total number of issued and outstanding voting Shares, we may give notice by placing at least two public notices in at least two daily newspapers
or by notices to be posted on the electronic disclosure database system maintained by the Financial Supervisory Service or the Korea Exchange at least two weeks in advance of the meeting. Currently, we use The Seoul Shinmunpublished in
Seoul, The Maeil Shinmunpublished in Taegu and The Kwangju Ilbopublished in Kwangju for this purpose. Shareholders not on the shareholders register as of the record date are not entitled to receive notice of the general meeting
of shareholders or attend or vote at the meeting. Holders of Non-Voting Preferred Shares, unless enfranchised, are not entitled to receive notice of general meetings of shareholders, but may attend such meetings. Our general meetings of shareholders
are held either in Pohang or Seoul.

Voting Rights

Holders of our Common Shares are entitled to one vote for each Common Share, except that voting rights of Common Shares held by us, or by a corporate shareholder that is more than 10% owned by us either directly or
indirectly, may not be exercised. The Commercial Code permitted cumulative voting, under which voting method each shareholder would have multiple voting rights corresponding to the number of directors to be appointed in the voting and may exercise
all voting rights cumulatively to elect one director.

Our shareholders may adopt resolutions at a general meeting by an affirmative
majority vote of the voting Shares present or represented at the meeting, where the affirmative votes also represent at least one-fourth of our total voting Shares then issued and outstanding. However, under the



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Commercial Code and our articles of incorporation, the following matters, among others, require approval by the holders of at least two-thirds of the voting Shares present or represented at a
meeting, where the affirmative votes also represent at least one-third of our total voting Shares then issued and outstanding:



| |  |  | amending our articles of incorporation;
| | - |  | ---------------------------------------



| |  |  | removing a director;
| | - |  | --------------------



| |  |  | effecting any dissolution, merger or consolidation of us;
| | - |  | ---------------------------------------------------------



| |  |  | transferring the whole or any significant part of our business;
| | - |  | ---------------------------------------------------------------



| |  |  | acquisition of all or a part of the business of any other company that may have a material impact on our business;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | issuing any new Shares at a price lower than their par value; or
| | - |  | ----------------------------------------------------------------



| |  |  | approving matters required to be approved at a general meeting of shareholders, which have material effects on our assets, as determined by the Board of
Directors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

In general, holders of Non-Voting Preferred Shares are not entitled to vote on any resolution or receive
notice of any general meeting of shareholders. However, in the case of amendments to our articles of incorporation, or any merger or consolidation of us, or in some other cases that affect the rights or interests of the Non-Voting Preferred Shares,
approval of the holders of Non-Voting Preferred Shares is required. We may obtain the approval by a resolution of holders of at least two-thirds of the Non-Voting Preferred Shares present or represented at a class meeting of the holders of
Non-Voting Preferred Shares, where the affirmative votes also represent at least one-third of our total issued and outstanding Non-Voting Preferred Shares.

Shareholders may exercise their voting rights by proxy. When a shareholder is a corporate entity, such shareholder may give proxies to its officers or directors.

Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlying Common Shares.
Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to vote the Common Shares underlying their ADSs.

Rights of Dissenting Shareholders

In some limited circumstances, including the transfer of the
whole or any significant part of our business and our merger or consolidation with another company, dissenting shareholders have the right to require us to purchase their Shares. Only the shareholders who have executed a share purchase agreement
evidencing their acquisition of the relevant Shares on or prior to the day immediately following the public disclosure of the board resolutions approving any of the aforementioned transactions have the rights to require us to purchase their Shares.
To exercise this right, shareholders, including holders of Non-Voting Preferred Shares, must submit to us a written notice of their intention to dissent before the general meeting of shareholders. Within 20 days after the relevant resolution is
passed at a meeting, the dissenting shareholders must request us in writing to purchase their Shares. We are obligated to purchase the Shares of dissenting shareholders within one month after the expiration of the 20-day period. The purchase price
for the Shares is required to be determined through negotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily Share
prices on the Korea Exchange for the two-month period before the date of the adoption of the relevant board resolution, (2) the weighted average of the daily Share price on the Korea Exchange for the one month period before the date of the
adoption of the relevant resolution and (3) the weighted



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average of the daily Share price on the Korea Exchange for the one week period before such date of the adoption of the relevant resolution. However, the court may determine this price if we or
dissenting shareholders do not accept the purchase price. Holders of ADSs will not be able to exercise dissenters rights unless they have withdrawn the underlying common stock and become our direct shareholders.

Register of Shareholders and Record Dates

Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It registers transfers of Shares on the
register of shareholders on presentation of the Share certificates.

The record date for annual dividends is December 31. For the
purpose of determining the shareholders entitled to annual dividends, the register of shareholders may be closed for the period from January 1 to January 15 of each year. Further, for the purpose of determining the shareholders entitled to
some other rights pertaining to the Shares, we may, on at least two weeks public notice, set a record date and/or close the register of shareholders for not more than three months. The trading of Shares and the delivery of share certificates
may continue while the register of shareholders is closed.

Annual Report

At least one week before the annual general meeting of shareholders, we must make our annual report and audited financial statements available for
inspection at our principal office and at all of our branch offices. In addition, copies of annual reports, the audited financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.

Under the FSCMA, we must file with the FSC and the Korea Exchange (1) an annual business report within 90 days after the end of our
fiscal year, (2) a half-year report within 45 days after the end of the first six months of our fiscal year, and (3) quarterly reports within 45 days after the end of the third month and the ninth month of our fiscal year. Copies of these
reports are or will be available for public inspection at the FSC and the Korea Exchange.

Transfer of Shares

Under the Commercial Code, the transfer of Shares is effected by delivery of share certificates. However, to assert shareholders rights
against us, the transferee must have his name and address registered on our register of shareholders. For this purpose, a shareholder is required to file his name, address and seal with our transfer agent. A non-Korean shareholder may file a
specimen signature in place of a seal, unless he is a citizen of a country with a sealing system similar to that of Korea. In addition, a non-resident shareholder must appoint an agent authorized to receive notices on his behalf in Korea and file a
mailing address in Korea. The above requirements do not apply to the holders of ADSs.

Under current Korean regulations, the Korea
Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a brokerage, dealing or collective investment license and internationally recognized custodians may act as agents and
provide related services for foreign shareholders. Certain foreign exchange controls and securities regulations apply to the transfer of Shares by non-residents or non-Koreans. See Item 10. Additional Information  Item 10.D.
Exchange Controls.

Our transfer agent is Kookmin Bank, located at 36-3, Yeoido-dong, Yeongdeungpo-gu, Seoul, Korea.



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Acquisition of Shares by Us

We may acquire our own Shares, subject to the approval by the general meeting of shareholders. In addition, we may acquire Shares through purchases on the Korea Exchange or through a tender offer or by acquiring
the interests in a trust account holding our own Shares through agreements with trust companies and asset management companies. The aggregate purchase price for the Shares may not exceed the total amount available for distribution of dividends
available at the end of the preceding fiscal year less the amount of dividends and mandatory reserves required to be set aside for that fiscal year, subject to certain procedural requirements.

In accordance with the Commercial Code, we may resell or transfer any Shares acquired by us to a third party, subject to the approval by the Board
of Directors. In general, corporate entities in which we own more than 50% equity interest may not acquire our Shares. Under the FSCMA, we are subject to certain selling restrictions for the Shares acquired by us.

Liquidation Rights

In the event of our
liquidation, after payment of all debts, liquidation expenses and taxes, our remaining assets will be distributed among shareholders in proportion to their shareholdings. Holders of Non-Voting Preferred Shares have no preference in liquidation.

Item 10.C.Material Contracts

None.

Item 10.D.Exchange Controls

Shares and ADSs

The Foreign Exchange Transaction Act and the Presidential Decree and
regulations under that Act and Decree (collectively, Foreign Exchange Transaction Laws) and the Foreign Investment Promotion Law regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean
companies. Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities subject to procedural requirements in accordance with these laws. The FSC has also adopted, pursuant to its authority under the FSCMA, regulations
that restrict investment by foreigners in Korean securities.

Subject to certain limitations, the Ministry of Strategy and Finance has
the authority to take the following actions under the Foreign Exchange Transaction Laws:



| |  |  | if the Government deems it necessary on account of war, armed conflict, natural disaster or grave and sudden and significant changes in domestic or foreign
economic circumstances or similar events or circumstances, the Ministry of Strategy and Finance may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws
apply (including suspension of payment and receipt of foreign exchange) or impose an obligation to deposit, safe-keep or sell any means of payment to The Bank of Korea, a foreign exchange stabilization fund, certain other governmental agencies or
financial companies; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience
significant disruption or that the movement of capital between Korea and other countries is likely to adversely affect the Won, exchange rates or other macroeconomic policies, the Ministry of Strategy and Finance may take action to require any
person who intends to effect a capital transaction to obtain permission or to require any person who effects a capital transaction to deposit a portion of the means of payment acquired in such transactions with The Bank of Korea, a foreign exchange
stabilization fund, certain other governmental agencies or financial companies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Government Review of Issuance of ADSs

In order for us to issue shares represented by ADSs, we are required to file a prior report of the issuance with our designated foreign exchange bank or the Ministry of Strategy and Finance, depending on the
issuance amount. No further Korean governmental approval is necessary for the initial offering and issuance of the ADSs.

Under current
Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by
us for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary
bank at the time of such proposed deposit. We can give no assurance that we would grant our consent, if our consent is required.

Reporting
Requirements for Holders of Substantial Interests

Under the FSCMA, any person whose direct or beneficial ownership of shares with
voting rights, whether in the form of shares or ADSs, certificates representing the rights to subscribe for Shares and equity-related debt securities including convertible bonds and bonds with warrants (collectively, Equity Securities)
together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person accounts for 5% or more of the total outstanding Equity Securities is required to report the status and the purpose
(whether or not to exert an influence on management control over the issuer) of the holdings to the FSC and the Korea Exchange within five business days after reaching the 5% ownership interest. In addition, any change in the purpose of holding such
ownership interest or a change in the ownership interest subsequent to the report which equals or exceeds 1% of the total outstanding Equity Securities is required to be reported to the FSC and the Korea Exchange within five business days from the
date of the change. However, the reporting deadline of such reporting requirement is extended to the tenth day of the month immediately following the month of such change in their shareholding for (1) certain professional investors, as
specified under the FSCMA, or (2) persons who hold shares for purposes other than management control. Those who report the purpose of shareholding as management control of the issuer are prohibited from exercising their voting rights and
acquiring additional shares for five days subsequent to their report under the FSCMA.

Violation of these reporting requirements may
subject a person to criminal sanctions such as fines or imprisonment and may result in a loss of voting rights with respect to the ownership of Equity Securities exceeding 5%. Furthermore, the FSC may issue an order to dispose of non-reported Equity
Securities.

In addition to the reporting requirements described above, any person whose direct or beneficial ownership of a
companys shares accounts for 10% or more of the total issued and outstanding shares with voting rights (a major stockholder) must report the status of his or her shareholding to the Securities and Futures Commission and the Korea
Exchange within five business days after he or she becomes a major stockholder. In addition, any change in the ownership interest subsequent to the report must be reported to the Securities and Futures Commission and the Korea Exchange by the fifth
business day of any changes in his or her shareholding. Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment.

Under the KRX regulations, if a company listed on the KRX KOSPI Market has submitted public disclosure of material matters to a foreign financial investment supervisory authority pursuant to the laws of the foreign
jurisdiction, then it must submit a copy of the public disclosure and a Korean translation thereof to the Korea Exchange. In addition, if a company listed on the KRX KOSPI Market is approved for listing on a foreign stock exchange or determined to
be de-listed from the foreign stock exchange or actually lists on, or de-lists from, a foreign stock exchange, then it must submit to the



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Korea Exchange a copy, together with a Korean translation thereof, of all documents submitted to, or received from, the relevant foreign government, supervisory authority or stock exchange.

Restrictions Applicable to ADSs

No Korean governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares
underlying ADSs and the delivery inside Korea of shares in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration card from the Financial Supervisory Service
(FSS) as described below. The acquisition of the shares by a foreigner must be immediately reported by the foreigner or his standing proxy in Korea to the Governor of the FSS (Governor).

Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs may exercise their preemptive rights for new shares,
participate in free distributions and receive dividends on shares without any further governmental approval.

In addition, under the FSC
regulations, effective as of November 30, 2006, we are required to file a securities registration statement with the FSC and such securities registration statement has to become effective pursuant to the FSCMA in order for us to issue shares
represented by ADSs, except in certain limited circumstances.

Restrictions Applicable to Shares

Under the Foreign Exchange Transaction Laws and FSC regulations (together, the Investment Rules), foreigners may invest, with limited
exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX KOSPI Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX KOSPI Market only through the KRX
KOSPI Market, except in limited circumstances, including, among others:



| |  |  | odd-lot trading of shares;
| | - |  | --------------------------



| |  |  | acquisition of shares (Converted Shares) by exercise of warrant, conversion right under convertible bonds or withdrawal right under depositary
receipts issued outside of Korea by a Korean company;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders rights, including preemptive rights or rights to
participate in free distributions and receive dividends;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been
reached or exceeded with certain exceptions;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | shares acquired by direct investment as defined in the Foreign Investment Promotion Law;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | disposal of shares pursuant to the exercise of appraisal rights of dissenting shareholders;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | disposal of shares in connection with a tender offer;
| | - |  | -----------------------------------------------------



| |  |  | acquisition of shares by a foreign depositary in connection with the issuance of depositary receipts;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | acquisition and disposal of shares through overseas stock exchange market if such shares are simultaneously listed on the KRX KOSPI Market or the KRX KOSDAQ
Market and such overseas stock exchange; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | arms length transactions between foreigners, if all of such foreigners belong to an investment group managed by the same person.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



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The Investment Rules require a foreign investor who wishes to invest in shares for the first time on
the Korea Exchange (including Converted Shares) to register its identity with the FSS prior to making any such investment; however, the registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of
selling such Converted Shares within three months from the date of acquisition of the Converted Shares or who acquire the shares in an over-the-counter transaction or dispose of shares where such acquisition or disposal is deemed to be a foreign
direct investment pursuant to the Foreign Investment Promotion Law. Upon registration, the FSS will issue to the foreign investor an investment registration card which must be presented each time the foreign investor opens a brokerage account with a
financial investment company with a brokerage license or dealing license in Korea. Foreigners eligible to obtain an investment registration card include foreign nationals who are individuals residing abroad for more than six months, foreign
governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated
by decree of the Ministry of Strategy and Finance. All Korean offices of a foreign corporation as a group are treated as a separate foreigner from the offices of the corporation outside Korea. However, a foreign corporation or depositary issuing
depositary receipts may obtain one or more investment registration cards in its name in certain circumstances as described in the relevant regulations.

Upon a foreign investors purchase of shares through the Korea Exchange, no separate report by the investor is required because the investment registration card system is designed to control and oversee
foreign investment through a computer system. However, a foreign investors acquisition or sale of shares outside the Korea Exchange (as discussed above) must be reported by the foreign investor or his standing proxy to the Governor at the time
of each such acquisition or sale; provided, however,that a foreign investor must ensure that any acquisition or sale by it of shares outside the Korea Exchange in the case of trades in connection with a tender offer, odd-lot trading of
shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor by the Korea Securities Depository, financial investment companies with a dealing or brokerage license or
securities finance companies engaged to facilitate such transaction. A foreign investor must appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks)
financial investment companies with a dealing, brokerage or collective investment license and internationally recognized custodians which will act as a standing proxy to exercise shareholders rights or perform any matters related to the
foregoing activities if the foreign investor does not perform these activities himself. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor in cases deemed inevitable by reason
of conflict between laws of Korea and those of the home country of the foreign investor.

Certificates evidencing shares of Korean
companies must be kept in custody with an eligible custodian in Korea. Only foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license, the Korea
Securities Depository and internationally recognized custodians are eligible to act as a custodian of shares for a non-resident or foreign investor. A foreign investor must ensure that his custodian deposits its shares with the Korea Securities
Depository. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor in circumstances where compliance with that requirement is made impracticable, including cases where compliance
would contravene the laws of the home country of such foreign investor.

Under the Investment Rules, with certain exceptions, foreign
investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40% ceiling on the acquisition of shares by foreigners in the aggregate.
Designated public corporations may set a ceiling on the acquisition of shares by a single person according to its articles of incorporation. We set this ceiling at 3% until the discontinuation of our designation as a public corporation on
September 28, 2000. As a result, we currently do not have any ceiling on the acquisition of shares by a single person or by foreigners in the



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aggregate. Furthermore, an investment by a foreign investor of not less than 10% of the outstanding shares with voting rights of a Korean company is defined as a direct foreign investment under
the Foreign Investment Promotion Law, which is, in general, subject to the report to, and acceptance by, the Ministry of Knowledge Economy. The acquisition of shares of a Korean company by a foreign investor may also be subject to certain foreign
shareholding restrictions in the event that the restrictions are prescribed in each specific law which regulates the business of the Korean company.

Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively
for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place
a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened in the name of a financial investment company with a dealing, brokerage or collective investment license. Funds in the foreign currency account may
be remitted abroad without any governmental approval.

Dividends on Shares are paid in Won. No governmental approval is required for
foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a non-resident of Korea must be
deposited either in a Won account with the investors financial investment company with a dealing, brokerage or collective investment license or his Won Account. Funds in the investors Won Account may be transferred to his foreign
currency account or withdrawn for local living expenses up to certain limitations. Funds in the Won Account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of
preemptive rights.

Financial investment companies with a dealing, brokerage or collective investment license are allowed to open foreign
currency accounts with foreign exchange banks exclusively for accommodating foreign investors stock investments in Korea. Through these accounts, these financial investment companies and asset management companies may enter into foreign
exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, as counterparty to foreign investors, without the investors having to open their own accounts with foreign exchange banks.

Item 10.E.Taxation

The following summary is based upon tax laws of the United States and Korea as in effect on the date of this annual report on Form 20-F, and is
subject to any change in United States or Korean law that may come into effect after such date. Investors in the shares of common stock or ADSs are advised to consult their own tax advisers as to the United States, Korean or other tax consequences
of the purchase, ownership and disposition of such securities, including the effect of any national, state or local tax laws.

Korean Taxation

The following is a summary of the principal Korean tax consequences to owners of the common shares or ADSs, as the case may be, who
are non-resident individuals or non-Korean corporations without a permanent establishment in Korea to which the relevant income is attributable or with which the relevant income is effectively connected (Non-resident Holders). The
statements regarding Korean tax laws set forth below are based on the laws in force and as interpreted by the Korean taxation authorities as of the date hereof. This summary is not exhaustive of all possible tax considerations which may apply to a
particular investor and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of the common shares or ADSs, including specifically the tax consequences under Korean
law, the laws of the jurisdiction of which they are resident, and any tax treaty between Korea and their country of residence, by consulting their own tax advisors.



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Tax on Dividends

Dividends on the common shares or ADSs paid (whether in cash or in shares) to a Non-resident Holder will be subject to Korean withholding taxes at
the rate of 22% (including local income tax) or such lower rate as is applicable under a treaty between Korea and such Non-resident Holders country of tax residence. Free distributions of shares representing a capitalization of certain capital
surplus reserves may be subject to Korean withholding taxes.

The tax is withheld by the payer of the dividend. Since the payer is
required to withhold the tax, Korean law does not entitle the person who was subject to the withholding of Korean tax to recover from the Government any part of the Korean tax withheld, even if it subsequently produces evidence that it was entitled
to have tax withheld at a lower rate, except in certain limited circumstances.

Tax on Capital Gains

As a general rule, capital gains earned by Non-resident Holders upon transfer of the common shares or ADSs are subject to Korean withholding tax at
the lower of (i) 11% (including local income tax) of the gross proceeds realized or (ii) 22% (including local income tax) of the net realized gains (subject to the production of satisfactory evidence of the acquisition costs and certain
direct transaction costs), unless exempt from Korean income taxation under the effective Korean tax treaty with the Non-resident Holders country of tax residence.

However, a Non-resident Holder will not be subject to Korean income taxation on capital gains realized upon the sale of the common shares through the KRX KOSPI Market if the Non-resident Holder (i) has no
permanent establishment in Korea and (ii) did not or has not owned (together with any shares owned by any entity with a specified special relationship with such Non-resident Holder) 25% or more of the total issued and outstanding shares of us
at any time during the calendar year in which the sale occurs and during the five calendar years prior to the calendar year in which the sale occurs.

It should be noted that capital gains earned by you (regardless of whether you have a permanent establishment in Korea) from a transfer of ADSs outside Korea will generally be exempt from Korean income taxation,
provided that the ADSs are deemed to have been issued overseas. If and when an owner of the underlying common shares transfers the ADSs following the conversion of the underlying shares for ADSs, such person will not be exempt from Korean income
taxation.

Inheritance Tax and Gift Tax

Korean inheritance tax is imposed upon (1) all assets (wherever located) of the deceased if at the time of his death he was domiciled in Korea and (2) all property located in Korea which passes on death
(irrespective of the domicile of the deceased). Gift tax is imposed in similar circumstances to the above. The taxes are imposed if the value of the relevant property is above a certain limit and vary according to the identity of the parties
involved.

Under Korean inheritance and gift tax laws, securities issued by a Korean corporation are deemed to be located in Korea
irrespective of where they are physically located or by whom they are owned.

Securities Transaction Tax

Securities transaction tax is imposed on the transfer of shares issued by a Korean corporation or the right to subscribe for such shares generally
at the rate of 0.5% of the sales price. In the case of the transfer of shares listed on the KRX KOSPI Market (such as the common shares), the securities transaction tax is imposed generally at the rate of (i) 0.3% of the sales price of such
shares (including agricultural and fishery special surtax thereon) if traded on the KRX KOSPI Market or (ii) subject to certain exceptions, 0.5% of the sales price of such shares if traded outside the KRX KOSPI Market.



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Securities transaction tax or the agricultural and fishery special surtax is not applicable if
(i) the shares or rights to subscribe for shares are listed on a designated foreign stock exchange and (ii) the sale of the shares takes place on such exchange.

Securities transaction tax, if applicable, must be paid by the transferor of the shares or rights, in principle. When the transfer is effected through a securities settlement company, such settlement company is
generally required to withhold and pay (to the tax authority) the tax, and when such transfer is made through a financial investment company with a brokerage license only, such company is required to withhold and pay the tax. Where the transfer is
effected by a Non-resident Holder without a permanent establishment in Korea, other than through a securities settlement company or a financial investment company with a brokerage license, the transferee is required to withhold the securities
transaction tax. Failure to do so will result in the imposition of penalties equal to the sum of (i) between 10% to 40% of the tax amount due, depending on the nature of the improper reporting, and (ii) 10.95% per annum on the tax amount
due for the default period.

Tax Treaties

Currently, Korea has income tax treaties with a number of countries, inter alia, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Luxembourg, Ireland, the Netherlands, New
Zealand, Norway, Singapore, Sweden, Switzerland, the United Kingdom and the United States of America under which the rate of withholding tax on dividend and interest is reduced, generally to between 5% and 16.5% (including local income tax), and the
tax on capital gains derived by a non-resident from the transfer of securities issued by a Korean company is often eliminated.

Each
Non-resident Holder of common shares should inquire for itself whether it is entitled to the benefits of a tax treaty with Korea. It is the responsibility of the party claiming the benefits of a tax treaty in respect of interest, dividend, capital
gains or other income to submit to us (or our agent), the purchaser or the financial investment company with a brokerage license, as the case may be, prior to or at the time of payment, such evidence of tax residence of the party
claiming the treaty benefit as the Korean tax authorities may require in support of its claim for treaty protection. In the absence of sufficient proof, we (or our agent), the purchaser or the financial investment company with a brokerage license,
as the case may be, must withhold tax at the normal rates.

Furthermore, in order for a non-resident of Korea to obtain the benefits of
tax exemption on certain Korean source income (e.g., capital gains and interest) under an applicable tax treaty, Korean tax law requires such non-resident (or its agent) to submit to the payer of such Korean source income an application for a tax
exemption along with a certificate of tax residency of such non-resident issued by a competent authority of the non-residents country of tax residence, subject to certain exceptions. The payer of such Korean source income, in turn, is required
to submit such application to the relevant district tax office by the ninth day of the month following the date of the first payment of such income.

For a non-resident of Korea to obtain the benefits of treaty-reduced tax rates on certain Korean source income (e.g, capital gains and interest) under an applicable tax treaty, Korean tax law requires such
non-resident (or its agents) to submit to the payer of such Korean source income an application for treaty-reduced tax rates prior to receipt of such Korean source income; provided, however, that an owner of ADSs who is a non-resident of Korea is
not required to submit such application, if the Korean source income on the ADSs is paid through an account opened at the Korea Securities Depository by a foreign depository.

At present, Korea has not entered into any tax treaty relating to inheritance or gift tax.



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United States Taxation

This summary describes the material U.S. federal income tax consequences for a U.S. holder (as defined below) of owning our shares of common stock or ADSs. This summary applies to you only if you hold shares of
common stock or ADSs as capital assets for tax purposes. This summary does not apply to you if you are a member of a class of holders subject to special rules, such as:



| |  |  | a dealer in securities or currencies;
| | - |  | -------------------------------------



| |  |  | a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | a bank;
| | - |  | -------



| |  |  | a life insurance company;
| | - |  | -------------------------



| |  |  | a tax-exempt organization;
| | - |  | --------------------------



| |  |  | a person that holds shares of common stock or ADSs that are a hedge or that are hedged against interest rate or currency risks;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | a person that holds shares of common stock or ADSs as part of a straddle or conversion transaction for tax purposes;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | a person whose functional currency for tax purposes is not the U.S. dollar; or
| | - |  | ------------------------------------------------------------------------------



| |  |  | a person that owns or is deemed to own 10% or more of any class of our stock.
| | - |  | -----------------------------------------------------------------------------

This summary is based on laws, treaties and regulatory interpretations in effect on the date hereof, all of which are subject to change, possibly on
a retroactive basis.

Please consult your own tax advisers concerning the U.S. federal, state, local and other national tax consequences
of purchasing, owning and disposing of shares of common stock or ADSs in your particular circumstances.

For purposes of this summary,
you are a U.S. holder if you are a beneficial owner of a share of common stock or ADS that is:



| |  |  | a citizen or resident of the United States;
| | - |  | -------------------------------------------



| |  |  | a U.S. domestic corporation; or
| | - |  | -------------------------------



| |  |  | subject to U.S. federal income tax on a net income basis with respect to income from the share of common stock or ADS.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

Shares of Common Stock and ADSs

In general, if you are the beneficial owner of ADSs, you will be treated as the beneficial owner of the shares of common stock represented by those ADSs for U.S. federal income tax purposes, and no gain or loss
will be recognized if you exchange an ADS for the shares of common stock represented by that ADS.

Dividends

The gross amount of cash dividends that you receive (prior to deduction of Korean taxes) generally will be subject to U.S. federal income taxation
as foreign source dividend income. Dividends paid in Won will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of your (or, in the case of ADSs, the depositarys) receipt of
the



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dividend, regardless of whether the payment is in fact converted into Dollars. If such a dividend is converted into Dollars on the date of receipt, you generally should not be required to
recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should consult their own tax advisers regarding the treatment of any foreign currency gain or loss on any Won received by U.S. holders that are converted into
Dollars on a date subsequent to receipt.

Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of
dividends received by an individual prior to January 1, 2013 with respect to the ADSs and common stock will be subject to taxation at a maximum rate of 15% if the dividends are qualified dividends. Dividends paid on the ADSs and
common stock will be treated as qualified dividends if (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service has approved for the purposes of the qualified dividend
rules and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (PFIC). The income tax treaty between Korea and
the United States (Treaty) has been approved for the purposes of the qualified dividend rules, and we believe we are eligible for benefits under the Treaty. Based on our audited financial statements and relevant market and shareholder
data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2010 or 2011 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and
nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2012 taxable year. You should consult your own tax advisers regarding the availability of the reduced
dividend tax rate in the light of your own particular circumstances.

Distributions of additional shares in respect of shares of common
stock or ADSs that are made as part of a pro-rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.

Sales and Other Dispositions

For U.S. federal income tax purposes, gain or loss that you
realize on the sale or other disposition of shares of common stock or ADSs will be capital gain or loss, and will be long-term capital gain or loss if the shares of common stock or ADSs were held for more than one year. Your ability to offset
capital losses against ordinary income is limited. Long-term capital gain recognized by an individual U.S. holder generally is subject to taxation at a reduced rate.

Foreign Tax Credit Considerations

You should consult your own tax advisers to determine
whether you are subject to any special rules that limit your ability to make effective use of foreign tax credits, including the possible adverse impact of failing to take advantage of benefits under the income tax treaty between the United States
and Korea. If no such rules apply, you generally may claim a credit, up to any applicable reduced rates provided under the Treaty, against your U.S. federal income tax liability for Korean taxes withheld from dividends on shares of common stock or
ADSs, so long as you have owned the shares of common stock or ADSs (and not entered into specified kinds of hedging transactions) for at least a 16-day period that includes the ex-dividend date. Instead of claiming a credit, you may, at your
election, deduct such Korean taxes in computing your taxable income, provided that you do not elect to claim a foreign tax credit for any foreign income taxes paid or accrued for the relevant tax year and subject to generally applicable limitations
under U.S. tax law. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain hedged positions in securities and may not be allowed in respect of arrangements in which your expected economic profit is insubstantial.
You may not be able to use the foreign tax credit associated with any Korean withholding tax imposed on a distribution of additional shares that is not subject to U.S. tax unless you can use the credit against United States tax due on other
foreign-source income.



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Any Korean securities transaction tax or agriculture and fishery special tax that you pay will not be
creditable for foreign tax credit purposes.

The calculation of foreign tax credits and, in the case of a U.S. holder that elects to
deduct foreign taxes, the availability of deductions involves the application of complex rules that depend on a U.S. holders particular circumstances. You should consult your own tax advisers regarding the creditability or deductibility of
such taxes.

U.S. Information Reporting and Backup Withholding Rules

Payments in respect of the notes, shares of common stock or ADSs that are made within the United States or through certain U.S.-related financial
intermediaries are subject to information reporting and may be subject to backup withholding unless the holder (1) is a corporation or other exempt recipient or (2) provides a taxpayer identification number and certifies that no loss of
exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-U.S. status in
connection with payments received within the United States or through a U.S.-related financial intermediary.

Item 10.F.Dividends and Paying Agents

See Item 8.A. Consolidated Statements and Other Financial Information  Dividends above for information concerning our dividend
policies and our payment of dividends. See Item 10.B. Memorandum and Articles of Association  Dividends for a discussion of the process by which dividends are paid on shares of our common stock. The paying agent for payment of our
dividends on ADSs in the United States is the Bank of New York Mellon.

Item 10.G.Statements by
Experts

Not applicable

Item 10.H.Documents on Display

We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials
filed with the SEC at the Public Reference Rooms in Washington, D.C., New York, New York and Chicago, Illinois. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any filings we make
electronically will be available to the public over the Internet at the SECs web site athttp://www.sec.gov.

Item 10.I.Subsidiary Information

Not applicable

Item 11.Quantitative and Qualitative Disclosures about Market Risk

We are exposed to foreign exchange rate and interest rate risk primarily associated with underlying liabilities, and to changes in the commodity
prices of principal raw materials and the market value of our equity investments. Following evaluation of these positions, we selectively enter into derivative financial instruments to manage the related risk exposures. These contracts are entered
into with major financial institutions, which minimizes the risk of credit loss. The activities of our finance division are subject to policies approved by our senior management. These policies address the use of derivative financial instruments,
including the approval of counterparties, setting of limits and



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investment of excess liquidity. Our general policy is to hold or issue derivative financial instruments for hedging purposes. From time to time, we may also enter into derivative financial
contracts for trading purposes.

Exchange Rate Risk

Korea is our most important market and, therefore, a substantial portion of our cash flow is denominated in Won. Most of our exports are denominated in Dollars. Japan is also an important market for us, and we
derive significant cash flow denominated in Yen. We are exposed to foreign exchange risk related to foreign currency denominated liabilities and anticipated foreign exchange payments. Anticipated foreign exchange payments, which represent a
substantial sum and are mostly denominated in Dollars, relate primarily to imported raw material costs and freight costs. Foreign currency denominated liabilities relate primarily to foreign currency denominated debt. We use, to a limited extent,
cross-currency interest rate swaps to reduce our exchange rate exposure with respect to foreign currency denominated debt. Under cross-currency interest rate swaps, we typically agree with the other parties to exchange, at the maturity date, a fixed
amount denominated in one currency with a fixed amount denominated in another currency. Until the maturity date, we agree to exchange interest payments, at specified intervals, calculated based on different interest rates for each currency. We also
use, to a limited extent, currency forward contracts to purchase Dollars to reduce our exchange rate exposure. Under currency forward contracts, we typically agree with the other parties to exchange, at the maturity date, a fixed amount denominated
in Dollars with an amount denominated in Yen or Won at a fixed exchange rate.

Our foreign currency exposure and changes in gain or loss
resulting from a 10% foreign exchange rate change against the Korean Won are as follows:



|             |  |                                  |      |   |          |       |     |          |  |       |          |  |  |       |     | 
|------------ |  | -------------------------------- | ---- | - | -------- | ----- | --- | -------- |  | ----- | -------- |  |  | ----- | --- | 
|             |  | For the Years Ended December 31, |     
|             |  | 2010                             |      |   | 2011     |      
|             |  | Increase                         |      |   | Decrease |       |     | Increase |  |       | Decrease | 
|             |  | (In billions of Won)             |     
|US Dollars   |  | (Won)                            | (495 | ) |          | (Won) | 495 |          |  | (Won) | (706)    |  |  | (Won) | 706 | 
|Japanese Yen |  |                                  | (245 | ) |          |       | 245 |          |  |       | (212)    |  |  |       | 212 | 
|Euro         |  | (Won)                            | (14  | ) |          | (Won) | 14  |          |  | (Won) | (34)     |  |  | (Won) | 34  | 

Interest Rate Risk

We are also subject to market risk exposure arising from changing interest rates. In particular, we are exposed to interest rate risk on our existing floating rate borrowings and on additional debt financings that
we may periodically undertake for various reasons, including capital expenditures and refinancing of our existing borrowings. A rise in interest rates will increase the cost of our existing variable rate borrowings. If interest rates on borrowings
with floating rates had been 1% higher or lower with all other variables held constant, the impact on the gain or loss of the applicable period would be as follows:



|                                                     |  |                                  |    |  |      |       |    | 
|---------------------------------------------------- |  | -------------------------------- | -- |  | ---- | ----- | -- | 
|                                                     |  | For the Years Ended December 31, |   
|                                                     |  | 2010                             |    |  | 2011 |      
|                                                     |  | (In billions of Won)             |   
|Increase or decrease in annual profit and net equity |  | (Won)                            | 16 |  |      | (Won) | 26 | 

A reduction of interest rates also increases the fair value of our debt portfolio, which is primarily of a fixed
interest nature. From time to time, we use, to a limited extent, interest rate swaps to reduce interest rate volatility on some of our debt and manage our interest expense by achieving a balanced mixture of floating and fixed rate debt.



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The following table summarizes the carrying amounts, fair values, principal cash flows by maturity
date and weighted average interest rates of our short-term and long-term liabilities as of December 31, 2011 which are sensitive to exchange rates and/or interest rates. The information is presented in Won, which is our reporting currency.



|                                               |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|---------------------------------------------- |  | --------------------------------- | ------ | - | ---- |  | ----- | ---- |  | ----------- | ----- | - | ----- | ---- | ----- | ----------- | ---------- |  | ----- | ----------------- |  |  | ----------------- | - |  |  | ------ | - |  |  | ------ |  |  |  | ------ | - |  |  | ------- | 
|                                               |  | Maturities                        |       
|                                               |  | 2012                              |        |   | 2013 |  |       | 2014 |  |             | 2015  |   |       | 2016 |       |             | Thereafter |  |       | December 31, 2011 |  |  | December 31, 2010 |  
|                                               |  |                                   |        |   |      |  | Total |      |  | Fair  Value |       |   | Total |      |       | Fair  Value |           
|                                               |  | (In billions of Won except rates) |       
|Local currency:                                |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|Fixed rate                                     |  |                                   | 6,078  |   |      |  | 1,007 |      |  |             | 813   |   |       |      | 1,215 |             |            |  | 1,502 |                   |  |  | 1,028             |   |  |  | 11,643 |   |  |  | 11,766 |  |  |  | 8,426  |   |  |  | 8,599   | 
|Average weightedrate (1)                       |  |                                   | 4.54   | % |      |  | 4.09  | %    |  |             | 3.99  | % |       |      | 3.74  | %           |            |  | 3.55  | %                 |  |  | 3.99              | % |  |  | 4.2    | % |  |  |        |  |  |  | 5.17   | % |  |  |         | 
|Variable rate                                  |  |                                   | 865    |   |      |  | 219   |      |  |             | 228   |   |       |      | 19    |             |            |  | 19    |                   |  |  | 98                |   |  |  | 1,448  |   |  |  | 1,450  |  |  |  | 243    |   |  |  | 243     | 
|Average weightedrate (1)                       |  |                                   | 3.47   | % |      |  | 2.1   | %    |  |             | 2.33  | % |       |      | 2.06  | %           |            |  | 2.09  | %                 |  |  | 2.01              | % |  |  | 2.95   | % |  |  |        |  |  |  | 2.74   | % |  |  |         | 
|                                               |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|Sub-total                                      |  |                                   | 6,943  |   |      |  | 1,226 |      |  |             | 1,041 |   |       |      | 1,234 |             |            |  | 1,521 |                   |  |  | 1,126             |   |  |  | 13,091 |   |  |  | 13,216 |  |  |  | 8,669  |   |  |  | 8,842   | 
|                                               |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|Foreign currency, principally Dollars and Yen: |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|Fixed rate                                     |  |                                   | 4,001  |   |      |  | 1,477 |      |  |             | 2,006 |   |       |      | 1,068 |             |            |  | 1,754 |                   |  |  | 2,644             |   |  |  | 12,950 |   |  |  | 13,115 |  |  |  | 10,987 |   |  |  | 11,2087 | 
|Average weightedrate (1)                       |  |                                   | 1.67   | % |      |  | 2.42  | %    |  |             | 2.46  | % |       |      | 2.78  | %           |            |  | 2.39  | %                 |  |  | 2.51              | % |  |  | 2.24   | % |  |  |        |  |  |  | 2.64   | % |  |  |         | 
|Variable rate                                  |  |                                   | 765    |   |      |  | 161   |      |  |             | 135   |   |       |      | 30    |             |            |  | 45    |                   |  |  | 53                |   |  |  | 1,189  |   |  |  | 1,203  |  |  |  | 1,627  |   |  |  | 1,601   | 
|Average weightedrate (1)                       |  |                                   | 2.15   | % |      |  | 2.68  | %    |  |             | 2.37  | % |       |      | 1.34  | %           |            |  | 1.34  | %                 |  |  | 1.34              | % |  |  | 2.16   | % |  |  |        |  |  |  | 2.18   | % |  |  |         | 
|                                               |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|Sub-total                                      |  |                                   | 4,766  |   |      |  | 1,638 |      |  |             | 2,141 |   |       |      | 1,098 |             |            |  | 1,799 |                   |  |  | 2,697             |   |  |  | 14,139 |   |  |  | 14,318 |  |  |  | 12,614 |   |  |  | 12,809  | 
|                                               |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 
|Total                                          |  |                                   | 11,709 |   |      |  | 2,864 |      |  |             | 3,182 |   |       |      | 2,332 |             |            |  | 3,320 |                   |  |  | 3,823             |   |  |  | 27,230 |   |  |  | 27,534 |  |  |  | 21,283 |   |  |  | 21,651  | 
|                                               |  |                                   |        |   |      |  |       |      |  |             |       |   |       |      |       |             |            |  |       |                   |  |  |                   |   |  |  |        |   |  |  |        |  |  |  |        |   |  |  |         | 





|(1) | Weighted average rates of the portfolio at the period end.
|--- | ----------------------------------------------------------

Commodity Price Risk

We are exposed to
market risk of price fluctuations related to the purchase of raw materials, especially iron ore and coal. To ensure adequate supply of raw materials, we enter into long-term supply contracts to purchase iron ore, coal, nickel, chrome, stainless
steel scrap and LNG. These contracts generally have terms of three to ten years and provide for periodic price adjustments to then-market prices. The long-term contracts to purchase iron ore and coal generally provide for quarterly adjustments to
the purchase prices to be determined through negotiation between the supplier and us. Such price negotiations are driven by various factors, including the global economic outlook, global market prices of raw materials and steel products, supply and
demand outlook of raw materials and production costs of raw materials. Typically, globally influenced buyers and sellers of raw materials determine benchmark prices of raw materials, based on which other buyers and sellers negotiate their prices
after taking into consideration the quality of raw materials and other factors. In case of iron ore, if we fail to agree on the quarterly price adjustment within a predetermined deadline, the supplier and we typically agree on the purchase price
based on the price formula that reflects the spot market price as well as the quality of iron ore and transportation expense. As of December 31, 2011, 261 million tons of iron ore and 38 million tons of coal remained to be purchased
under long-term supply contracts. Increases in prices of our key raw materials and our inability to pass along such increases to our customers could adversely affect our margins and profits.

Equity Price Risk

We are exposed to equity price risk primarily from changes in the stock
price of SK Telecom and Nippon Steel Corporation. As of December 31, 2011, a special purpose vehicle created by us holds a



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2.71% interest in SK Telecom, which are placed as collateral for exchangeable bonds issued in August 2011, and we hold a 3.50% interest in Nippon Steel Corporation. We have not entered into any
derivative instruments or any other arrangements to manage our equity price risks.

Item 12.Description of Securities Other than Equity Securities

Not applicable

Item 12.A.Debt Securities

Not applicable

Item 12.B.Warrants and Rights

Not applicable

Item 12.C.Other Securities

Not applicable

Item 12.D.American Depositary Shares

Fees and Charges

Under the terms of the
deposit agreement, holders of our ADSs are required to pay the following service fees to the depositary:



|                                                                     |  |                                                                                                                                                                                                                                                                                                                                        
|-------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Services                                                             |  | Fees                                                                                                                                                                                                                                                                                                                                   
|Issuance of ADSs upon deposit of shares                              |  | Up to $0.05 per ADS issued                                                                                                                                                                                                                                                                                                             
|Delivery of deposited shares against surrender of ADSs               |  | Up to $0.05 per ADS surrendered                                                                                                                                                                                                                                                                                                        
|Distribution delivery of ADSs pursuant to sale or exercise of rights |  | Up to $0.05 per ADS held                                                                                                                                                                                                                                                                                                               
|Distributions of dividends                                           |  | Up to $0.02 per ADS held                                                                                                                                                                                                                                                                                                               
|Distribution of securities other than ADSs                           |  | A fee equivalent to the fee that would be payable if securities distributed had been shares and such shares had been deposited for issuance of ADSs.                                                                                                                                                                                   
|Other corporate action involving distributions to shareholders       |  | 1. As necessary for taxes and other governmental charges that the depositary or the custodian have to pay on any ADS or share underlying an ADS
(for example, stock transfer taxes, stamp duty or withholding taxes).  2. As
necessary for any charges incurred by the depositary or its agents for servicing the deposited securities.

Holders of our ADSs are also responsible for paying certain fees and expenses incurred by the depositary and certain
taxes and governmental charges such as:



| |  |  | fees for the transfer and registration of shares charged by the registrar and transfer agent for the shares in Korea (i.e., upon deposit and withdrawal of
shares);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses incurred for converting foreign currency into U.S. dollars;
| | - |  | --------------------------------------------------------------------



| |  |  | expenses for cable, telex and fax transmissions and for delivery of securities;
| | - |  | -------------------------------------------------------------------------------



| |  |  | taxes and duties upon the transfer of securities (i.e., when shares are deposited or withdrawn from deposit); and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | fees and expenses incurred in connection with the delivery or servicing of shares on deposit.
| | - |  | ---------------------------------------------------------------------------------------------



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Depositary fees payable upon the issuance and surrender of ADSs are typically paid to the depositary
by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for surrender. The brokers in turn charge these fees to their
clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.

The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than
cash (i.e., stock dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in
direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via the Korea Securities Depositary, or KSD), the depositary generally collects its fees
through the systems provided by KSD (whose nominee is the registered holder of the ADSs held in KSD) from the brokers and custodians holding ADSs in their KSD accounts. The brokers and custodians who hold their clients ADSs in KSD accounts in
turn charge their clients accounts the amount of the fees paid to the depositary.

In the event of refusal to pay the depositary
fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to such holder of ADSs.

The fees and charges that holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary. Holders of
our ADSs will receive prior notice of such changes.

Fees and Payments from the Depositary to Us

In 2011, we received the following payments from the depositary:



|                                                                              |  |   |         | 
|----------------------------------------------------------------------------- |  | - | ------- | 
|Reimbursement of NYSE listing fees:                                           |  | $ | 60,185  | 
|                                                                              | 
|Reimbursement of London Stock Exchange listing fees:                          |  | $ | 6,868   | 
|                                                                              | 
|Reimbursement of Tokyo Stock Exchange fees:                                   |  | $ | 5,020   | 
|                                                                              | 
|Reimbursement of proxy process expenses (printing, postage and distribution): |  | $ | 83,235  | 
|                                                                              | 
|Contributions toward our investor relations efforts:                          |  | $ | 613,269 | 

In addition, as part of its service to us, the depositary waives its fees for the standard costs associated with the
administration of the ADS facility, associated operating expenses, investor relations advice and access to an internet-based tool used in our investor relations activities.

PART II

Item 13.Defaults, Dividend
Arrearages and Delinquencies

Not applicable

Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable



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Item 15.Controls and Procedures

a. Disclosure Controls and Procedures

Our
management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act, as of December 31, 2011. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

b. Managements Annual Report on Internal
Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting is a process designed by, and under the supervision of, our principal executive, principal operating and principal financial officers, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of
our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

Our management has completed an assessment of the effectiveness of our
internal control over financial reporting as of December 31, 2011 based on criteria in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment,
management concluded that our internal control over financial reporting was effective as of December 31, 2011.

KPMG Samjong
Accounting Corp. (KPMG Samjong), an independent registered public accounting firm, which audited our consolidated financial statements as of, and for the year ended, December 31, 2011, as stated in their report which is included
herein, has issued an attestation report on the effectiveness of our internal control over financial reporting.



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c. Attestation Report of the Independent Registered Public Accounting Firm

The attestation report of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting is
furnished in Item 18 of this Form 20-F.

d. Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the year covered by this annual report that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16.[Reserved]

Item 16A.Audit Committee Financial Expert

At our annual general meeting of shareholders in March 2012, our shareholders elected the following two members to the audit committee: Lee,
Chang-Hee (committee chair) and Lee, Young-Sun. The board of directors has approved this newly elected audit committee. Lee, Chang-Hee is an audit committee financial expert and is independent within the meaning of applicable SEC rules.

Item 16B.Code of Ethics

We have adopted a code of business conduct and ethics, as defined in Item 16B. of Form 20-F under the Securities Exchange Act of 1934, as
amended. Our code of business conduct and ethics, called Code of Conduct, applies to our chief executive officer and chief financial officer, as well as to our directors, other officers and employees. Our Code of Conduct is available on our web site
at www.posco.com. If we amend the provisions of our Code of Conduct that apply to our chief executive officer or chief financial officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose
such amendment or waiver on our web site at the same address.

Item 16C.Principal Accountant Fees
and Services

Audit and Non-Audit Fees

The following table sets forth the fees billed to us by our independent auditor, KPMG in 2010 and 2011:



|                   |  |                                 |       |  |      |       |       | 
|------------------ |  | ------------------------------- | ----- |  | ---- | ----- | ----- | 
|                   |  | For the Year Ended December 31, |      
|                   |  | 2010                            |       |  | 2011 |      
|                   |  | (In millions of Won)            |      
|Audit fees         |  | (Won)                           | 5,198 |  |      | (Won) | 5,846 | 
|Audit-related fees |  |                                 | 750   |  |      |       | 946   | 
|Tax fees           |  |                                 | 477   |  |      |       | 687   | 
|Other fees         |  |                                 | 439   |  |      |       | 222   | 
|                   |  |                                 |       |  |      |       |       | 
|Total fees         |  | (Won)                           | 6,864 |  |      | (Won) | 7,701 | 
|                   |  |                                 |       |  |      |       |       | 

Audit fees in 2011 as set forth in the above table are the aggregate fees billed by KPMG Samjong, the Korean member
firm of KPMG International, in connection with the audit of our annual financial statements and the annual financial statements of other related companies and review of interim financial statements.

Audit-related fees in 2011 as set forth in the above table are the aggregate fees billed by KPMG Samjong for due diligence service related to an
acquisition project, accounting advisory service on consolidation and general consultation on financial accounting and reporting standards.



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Tax fees in 2011 as set forth in the above table are fees billed by KPMG Samjong for our tax
compliance and tax planning, as well as tax planning and preparation of other related companies.

Other fees in 2011 as set forth in the
above table are fees billed by KPMG Samjong primarily related to research on advanced developments of enterprise risk management.

Audit Committee
Pre-Approval Policies and Procedures

Our audit committee has not established pre-approval policies and procedures for the engagement
of our independent auditors for services. Our audit committee expressly approves on a case-by-case basis any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or us.

Item 16D.Exemptions from the Listing Standards for Audit Committees

Not applicable

Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets forth the repurchases of common shares by us or any affiliated purchasers during the fiscal year ended December 31,
2011:



|                            |  |                                |   |  |                                     |  |   |                                                                   |  |  |                                                                 |  |  |  |   | 
|--------------------------- |  | ------------------------------ | - |  | ----------------------------------- |  | - | ----------------------------------------------------------------- |  |  | --------------------------------------------------------------- |  |  |  | - | 
|Period                      |  | Total Number ofSharesPurchased |   |  | Average PricePaid Per Share (InWon) |  |   | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plans |  |  | Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans | 
|January 1 to January 31     |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|February 1 to February 29   |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|March 1 to March 31         |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|April 1 to April 30         |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|May 1 to May 31             |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|June 1 to June 30           |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|July 1 to July 31           |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|August 1 to August 31       |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|September 1 to September 30 |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|October 1 to October 31     |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|November 1 to November 30   |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|December 1 to December 31   |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|                            |  |                                |   |  |                                     |  |   |                                                                   |  |  |                                                                 |  |  |  |   | 
|Total                       |  |                                |  |  |                                     |  |  |                                                                   |  |  |                                                                |  |  |  |  | 
|                            |  |                                |   |  |                                     |  |   |                                                                   |  |  |                                                                 |  |  |  |   | 

Item 16F.Change in Registrants Certifying Accountant

Not applicable

Item 16G.Corporate Governance

Pursuant to the rules of the New York Stock Exchange applicable to foreign private issuers like us that are listed on the New York Stock Exchange, we are required to disclose significant differences between the New
York Stock Exchanges corporate governance standards and those that we follow under Korean law and in accordance with our own internal procedures. The following is a summary of such significant differences.



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|                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NYSE Corporate Governance Standards                                                                                                                                                                     |  | POSCOs Corporate Governance Practice                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Director Independence                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Independent directors must comprise a majority of the board                                                                                                                                             |  | Our articles of incorporation provide that our board of directors must comprise no less than a majority of Outside Directors. Our Outside
Directors must meet the criteria for outside directorship set forth under the Korean Securities and Exchange Act.  The majority of our board of directors is independent (as defined in accordance with the New York Stock Exchanges standards), and 7 out of 12 directors are Outside Directors. Under our articles of
incorporation, we may have up to five Inside Directors and seven Outside Directors.                                                                                                        
|                                                                                                                                                                                                        | 
|Nomination/Corporate Governance Committee                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must have a nomination/corporate governance committee composed entirely of independent directors                                                                                       |  | We have not established a separate nomination corporate governance committee. However, we maintain a Director Candidate Recommendation Committee composed of three Outside Directors and one
Inside Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                        | 
|Compensation Committee                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must have a compensation committee composed entirely of independent directors                                                                                                          |  | We maintain an Evaluation and Compensation Committee composed of four Outside Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                        | 
|Executive Session                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must hold meetings solely attended by non-management directors to more effectively check and balance management directors                                                              |  | Our Outside Directors hold meetings solely attended by Outside Directors in accordance with operation guidelines of our board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                        | 
|Audit Committee                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must have an audit committee that is composed of minimum of three directors and satisfy the requirements of Rule 10A-3 under the Exchange Act                                          |  | We maintain an Audit Committee comprised of three Outside Directors who meet the applicable independence criteria set forth under Rule 10A-3 under the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                        | 
|Shareholder Approval of Equity Compensation Plan                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must allow their shareholders to exercise their voting rights with respect to any material revision to the companys equity compensation plan                                          |  | We currently have an Employee Stock Ownership Program. We previously provided a stock options program for officers and directors, as another equity compensation plan. However, during our annual shareholders meeting in February 2006, our shareholders resolved to
terminate the stock option program and amended our articles of incorporation to delete the provision allowing grant of stock options to officers and directors. Consequently, since February 24, 2006, we have not granted stock options to officers and
directors. Matters related to the Employee Stock Ownership Program are not subject to shareholders approval under Korean law.
|                                                                                                                                                                                                        | 
|Corporate Governance Guidelines                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must adopt and disclose corporate governance guidelines                                                                                                                                |  | We have adopted a Corporate Governance Charter setting forth our practices with respect to relevant corporate governance matters. Our Corporate Governance Charter is in compliance with
Korean law but does not meet all requirements established by the New York Stock Exchange for U.S. companies listed on the exchange. A copy of our Corporate Governance Charter is available on our website at www.posco.com.                                                                                                                                                                                                                                         
|                                                                                                                                                                                                        | 
|Code of Business Conduct and Ethics                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                        | 
|Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive
officers |  | We have adopted a Code of Conduct for all directors, officers and employees. A copy of our Code of Conduct is available on our website at www.posco.com.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Item 16H.Mine Safety Disclosure

Not applicable



94



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##### Table of Contents

PART III

Item 17.Financial Statements

Not
applicable

Item 18.Financial Statements



|                                                                                                                                     |  |      |      | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---- | 
|                                                                                                                                     |  | Page |     
|Report of Independent Registered Public Accounting Firm, KPMG Samjong Accounting Corp., on Consolidated Financial Statements         |  |      | F-1  | 
|Report of Independent Registered Public Accounting Firm, KPMG Samjong Accounting Corp. on Internal Control over Financial
 Reporting |  |      | F-2  | 
|Consolidated Statements of Financial Position as of December 31, 2011, 2010 and January 1,
2010                                      |  |      | F-3  | 
|Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011 and
2010                                       |  |      | F-5  | 
|Consolidated Statements of Changes in Equity for the Years Ended December 31, 2011 and 2010                                          |  |      | F-6  | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010                                                 |  |      | F-8  | 
|Notes to Consolidated Financial Statements                                                                                           |  |      | F-10 | 

Item 19.Exhibits



| |      |  |  |   |  |                                                                                                                                                                                                                 
| | ---- |  |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.1  |  |  |  |  | Articles of Incorporation of POSCO (English translation)                                                                                                                                                        
| | 2.1  |  |  |  |  | Form of Common Stock Certificate (including English translation) (incorporated by reference to Exhibit 4.3 to the Registrants Registration Statement No. 33-81554)*                                            
| | 2.2  |  |  |  |  | Form of Deposit Agreement (including Form of American Depositary Receipts) (incorporated by reference to the Registrants Registration Statement (File No. 33-84318) on Form
F-6)*                              
| | 2.3  |  |  |  |  | Letter from ADR Depositary to the Registrant relating to the Pre-release of American Depositary Receipts (incorporated by reference to the Registrants Registration Statement (File
No. 33-84318) on Form F-6)*
| | 8.1  |  |  |  |  | List of consolidated subsidiaries                                                                                                                                                                               
| | 12.1 |  |  |  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                         
| | 12.2 |  |  |  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                         
| | 13.1 |  |  |  |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                         





|* | Filed previously
|- | ----------------



95



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

POSCO:

We have audited the accompanying consolidated statements of financial position of POSCO and subsidiaries (the Company) as of
December 31, 2011, 2010 and January 1, 2010 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2011 and 2010. These consolidated financial statements are
the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of POSCO
and subsidiaries as of December 31, 2011, 2010 and January 1, 2010 and the results of their operations and their cash flows for the years ended December 31, 2011 and 2010, in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board.

As described in note 12 to the consolidated financial statements, the Company
changed the useful life of major machinery and equipment from 8 years to 15 years from January 1, 2011. For the year ended December 31, 2011, this change resulted in a reduction in depreciation expenses of (Won)1,227,169 million.

We also have
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of POSCOs internal control over financial reporting as of December 31, 2011, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 25, 2012 expressed an unqualified opinion on the effectiveness of POSCOs internal control
over financial reporting.

/s/    KPMG Samjong Accounting Corp.

Seoul, Korea

April 25, 2012



F-1



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

on Internal Control over Financial Reporting

The Board of Directors and Stockholders

POSCO:

We have audited POSCOs internal control over financial reporting as of December 31, 2011, based on criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). POSCOs management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on POSCOs
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, POSCO maintained, in all material respects, effective internal control over financial reporting as of December 31,
2011, based on criteria established in Internal Control  Integrated Framework issued by the COSO.

We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of POSCO and subsidiaries as of December 31, 2011, 2010 and January 1, 2010, and the related
consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2011 and 2010, and our report dated April 25, 2012 expressed an unqualified opinion on those consolidated financial statements.

/s/    KPMG Samjong Accounting Corp.

Seoul, Korea

April 25, 2012



F-2



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##### Table of Contents

POSCO

Consolidated Statements of Financial Position

As of December 31, 2011, 2010 and January 1, 2010







|                                                   |  |                      |  |                   |            |  |                   |  |            |                 |  |  |            | 
|-------------------------------------------------- |  | -------------------- |  | ----------------- | ---------- |  | ----------------- |  | ---------- | --------------- |  |  | ---------- | 
|                                                   |  | Notes                |  | December 31, 2011 |            |  | December 31, 2010 |  |            | January 1, 2010 | 
|                                                   |  | (in millions of Won) | 
|Assets                                             |  |                      |  |                   |            |  |                   |  |            |                 |  |  |            | 
|Cash and cash equivalents                          |  | 4,5,20               |  | (Won)             | 4,598,682  |  |                   |  | 3,521,045  |                 |  |  | 2,273,059  | 
|Trade accounts and notes receivable, net           |  | 6,20,25              |  |                   | 11,450,515 |  |                   |  | 9,219,011  |                 |  |  | 5,300,233  | 
|Other short-term financial assets                  |  | 7,20                 |  |                   | 3,656,270  |  |                   |  | 4,383,302  |                 |  |  | 7,211,023  | 
|Inventories                                        |  | 8                    |  |                   | 12,283,644 |  |                   |  | 9,559,206  |                 |  |  | 4,918,413  | 
|Current income tax assets                          |  | 31                   |  |                   | 18,621     |  |                   |  | 17,654     |                 |  |  | 11,980     | 
|Assets held for sale                               |  | 9                    |  |                   | 329,037    |  |                   |  |           |                 |  |  | 24,961     | 
|Other current assets                               |  | 14                   |  |                   | 1,220,142  |  |                   |  | 972,159    |                 |  |  | 690,186    | 
|                                                   |  |                      |  |                   |            |  |                   |  |            |                 |  |  |            | 
|Total current assets                               |  |                      |  |                   | 33,556,911 |  |                   |  | 27,672,377 |                 |  |  | 20,429,855 | 
|Long-term trade accounts and notes receivable, net |  | 6,20                 |  |                   | 183,061    |  |                   |  | 273,622    |                 |  |  | 522,775    | 
|Other long-term financial assets                   |  | 7,20                 |  |                   | 5,125,672  |  |                   |  | 6,417,038  |                 |  |  | 5,308,660  | 
|Investments in associates                          |  | 10                   |  |                   | 3,831,659  |  |                   |  | 3,306,425  |                 |  |  | 950,449    | 
|Investment property, net                           |  | 11                   |  |                   | 527,533    |  |                   |  | 493,365    |                 |  |  | 558,207    | 
|Property, plant and equipment, net                 |  | 12                   |  |                   | 28,453,184 |  |                   |  | 25,437,740 |                 |  |  | 22,342,747 | 
|Intangible assets, net                             |  | 13                   |  |                   | 5,244,928  |  |                   |  | 4,619,169  |                 |  |  | 754,231    | 
|Deferred tax assets                                |  | 31                   |  |                   | 855,603    |  |                   |  | 538,876    |                 |  |  | 409,748    | 
|Other long-term assets                             |  | 14                   |  |                   | 630,287    |  |                   |  | 659,814    |                 |  |  | 250,475    | 
|                                                   |  |                      |  |                   |            |  |                   |  |            |                 |  |  |            | 
|Total non-current assets                           |  |                      |  |                   | 44,851,927 |  |                   |  | 41,746,049 |                 |  |  | 31,097,292 | 
|                                                   |  |                      |  |                   |            |  |                   |  |            |                 |  |  |            | 
|Total assets                                       |  | 36                   |  | (Won)             | 78,408,838 |  |                   |  | 69,418,426 |                 |  |  | 51,527,147 | 
|                                                   |  |                      |  |                   |            |  |                   |  |            |                 |  |  |            | 







See accompanying notes to consolidated financial statements.



F-3



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##### Table of Contents

POSCO

Consolidated Statements of Financial Position

As of
December 31, 2011, 2010 and January 1, 2010







|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|---------------------------------------------------------------------- |  | -------------------- |  | ----------------- | ---------- | - | ----------------- |  | ---------- | --------------- |  |  | ---------- | -
|                                                                       |  | Notes                |  | December 31, 2011 |            |   | December 31, 2010 |  |            | January 1, 2010 | 
|                                                                       |  | (in millions of Won) | 
|Liabilities                                                            |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Trade accounts and notes payable                                       |  | 20                   |  | (Won)             | 4,397,279  |   |                   |  | 3,980,701  |                 |  |  | 2,392,317  |  
|Short-term borrowings and current installments of long-term borrowings |  | 4,15,20              |  |                   | 10,791,510 |   |                   |  | 10,476,300 |                 |  |  | 3,958,099  |  
|Other short-term financial liabilities                                 |  | 16,20                |  |                   | 1,811,190  |   |                   |  | 1,520,877  |                 |  |  | 1,054,714  |  
|Current income tax liabilities                                         |  | 31                   |  |                   | 509,709    |   |                   |  | 779,018    |                 |  |  | 389,675    |  
|Liabilities related assets held for sale                               |  | 9                    |  |                   | 226,607    |   |                   |  |           |                 |  |  | 80         |  
|Provisions                                                             |  | 17                   |  |                   | 69,432     |   |                   |  | 63,809     |                 |  |  | 63,305     |  
|Other current liabilities                                              |  | 19,25                |  |                   | 1,799,631  |   |                   |  | 1,456,072  |                 |  |  | 1,155,441  |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Total current liabilities                                              |  |                      |  |                   | 19,605,358 |   |                   |  | 18,276,777 |                 |  |  | 9,013,631  |  
|Long-term trade accounts and notes payable                             |  | 20                   |  |                   | 383        |   |                   |  | 378        |                 |  |  |           |  
|Long-term borrowings, excluding current installments                   |  | 4,15,20              |  |                   | 16,020,207 |   |                   |  | 10,663,941 |                 |  |  | 8,241,386  |  
|Other long-term financial liabilities                                  |  | 16,20                |  |                   | 350,560    |   |                   |  | 175,774    |                 |  |  | 205,096    |  
|Defined benefits obligations                                           |  | 18                   |  |                   | 340,467    |   |                   |  | 503,126    |                 |  |  | 315,418    |  
|Deferred tax liabilities                                               |  | 31                   |  |                   | 1,168,097  |   |                   |  | 1,028,728  |                 |  |  | 377,539    |  
|Long-term provisions                                                   |  | 17                   |  |                   | 109,343    |   |                   |  | 152,149    |                 |  |  | 12,005     |  
|Other long-term liabilities                                            |  | 19                   |  |                   | 84,503     |   |                   |  | 80,386     |                 |  |  | 28,391     |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Total non-current liabilities                                          |  |                      |  |                   | 18,073,560 |   |                   |  | 12,604,482 |                 |  |  | 9,179,835  |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Total liabilities                                                      |  | 36                   |  | (Won)             | 37,678,918 |   |                   |  | 30,881,259 |                 |  |  | 18,193,466 |  
|Equity                                                                 |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Share capital                                                          |  | 21                   |  |                   | 482,403    |   |                   |  | 482,403    |                 |  |  | 482,403    |  
|Capital surplus                                                        |  | 21                   |  |                   | 1,150,452  |   |                   |  | 1,101,561  |                 |  |  | 1,199,666  |  
|Reserves                                                               |  | 22                   |  |                   | 405,426    |   |                   |  | 1,507,288  |                 |  |  | 833,806    |  
|Treasury shares                                                        |  | 23                   |  |                   | (2,391,406 | ) |                   |  | (2,403,263 | )               |  |  | (2,403,263 | )
|Retained earnings                                                      |  |                      |  |                   | 38,709,475 |   |                   |  | 35,887,697 |                 |  |  | 32,567,352 |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Equity attributable to owners of the controlling company               |  |                      |  |                   | 38,356,350 |   |                   |  | 36,575,686 |                 |  |  | 32,679,964 |  
|Non-controlling interests                                              |  |                      |  |                   | 2,373,570  |   |                   |  | 1,961,481  |                 |  |  | 653,717    |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Total equity                                                           |  |                      |  |                   | 40,729,920 |   |                   |  | 38,537,167 |                 |  |  | 33,333,681 |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  
|Total liabilities and equity                                           |  |                      |  | (Won)             | 78,408,838 |   |                   |  | 69,418,426 |                 |  |  | 51,527,147 |  
|                                                                       |  |                      |  |                   |            |   |                   |  |            |                 |  |  |            |  

See accompanying notes to consolidated financial statements.



F-4



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##### Table of Contents

POSCO

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2011 and 2010







|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|---------------------------------------------------------------------- |  | ------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- |  | ----------- | -
|                                                                       |  | Notes                                             |  | December 31, 2011 |             |   | December 31, 2010 | 
|                                                                       |  | (in millions of Won except per share information) | 
|Revenue                                                                |  | 26,36                                             |  | (Won)             | 68,938,725  |   |                   |  | 47,887,255  |  
|Cost of sales                                                          |  | 29                                                |  |                   | (59,823,850 | ) |                   |  | (39,722,461 | )
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Gross profit                                                           |  |                                                   |  |                   | 9,114,875   |   |                   |  | 8,164,794   |  
|Selling and administrative expenses                                    |  | 27,29                                             |  |                   |             |   |                   |  |             |  
|Administrative expenses                                                |  |                                                   |  |                   | (2,048,264  | ) |                   |  | (1,500,370  | )
|Selling expenses                                                       |  |                                                   |  |                   | (1,612,128  | ) |                   |  | (1,120,340  | )
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|                                                                       |  |                                                   |  |                   | (3,660,392  | ) |                   |  | (2,620,710  | )
|Other operating income                                                 |  | 28                                                |  |                   | 337,078     |   |                   |  | 231,387     |  
|Other operating expenses                                               |  | 29                                                |  |                   | (383,459    | ) |                   |  | (341,951    | )
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Operating profit                                                       |  |                                                   |  |                   | 5,408,102   |   |                   |  | 5,433,520   |  
|Non-operating income and expenses                                      |  |                                                   |  |                   |             |   |                   |  |             |  
|Share of profit of equity-accounted investees                          |  | 10                                                |  |                   | 50,569      |   |                   |  | 182,657     |  
|Finance income                                                         |  | 20,30                                             |  |                   | 3,190,419   |   |                   |  | 1,738,804   |  
|Finance costs                                                          |  | 20,30                                             |  |                   | (3,866,695  | ) |                   |  | (2,087,858  | )
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Profit before income tax                                               |  |                                                   |  |                   | 4,782,395   |   |                   |  | 5,267,123   |  
|Income tax expense                                                     |  | 31,36                                             |  |                   | (1,068,109  | ) |                   |  | (1,081,472  | )
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Profit for the period                                                  |  | 36                                                |  |                   | 3,714,286   |   |                   |  | 4,185,651   |  
|Other comprehensive income (loss), net of tax                          |  |                                                   |  |                   |             |   |                   |  |             |  
|Capital adjustment arising from investments in equity-method investees |  |                                                   |  |                   | (11,240     | ) |                   |  | (40,877     | )
|Net changes in fare value of available-for-sale investments            |  |                                                   |  |                   | (1,231,758  | ) |                   |  | 589,601     |  
|Foreign currency translation differences                               |  |                                                   |  |                   | 1,666       |   |                   |  | 183,190     |  
|Defined benefit plan actuarial losses                                  |  |                                                   |  |                   | (30,577     | ) |                   |  | (152,125    | )
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Total comprehensive income for the period, net of tax                  |  |                                                   |  | (Won)             | 2,442,377   |   |                   |  | 4,765,440   |  
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Profit attributable to:                                                |  |                                                   |  |                   |             |   |                   |  |             |  
|Owners of the controlling company                                      |  |                                                   |  | (Won)             | 3,648,136   |   |                   |  | 4,105,623   |  
|Non-controlling interests                                              |  |                                                   |  |                   | 66,150      |   |                   |  | 80,028      |  
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Profit for the period                                                  |  |                                                   |  | (Won)             | 3,714,286   |   |                   |  | 4,185,651   |  
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Total comprehensive income attributable to:                            |  |                                                   |  |                   |             |   |                   |  |             |  
|Owners of the controlling company                                      |  |                                                   |  | (Won)             | 2,530,437   |   |                   |  | 4,639,671   |  
|Non-controlling interests                                              |  |                                                   |  |                   | (88,060     | ) |                   |  | 125,769     |  
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Total comprehensive income for the period                              |  |                                                   |  | (Won)             | 2,442,377   |   |                   |  | 4,765,440   |  
|                                                                       |  |                                                   |  |                   |             |   |                   |  |             |  
|Basic and diluted earnings per share                                   |  | 32                                                |  | (Won)             | 47,224      |   |                   |  | 53,297      |  

See accompanying notes to consolidated financial statements.



F-5



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##### Table of Contents

POSCO

Consolidated Statements of Changes in Equity

For the years ended December 31, 2011 and 2010







|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|----------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- |  | ------------------------ |  | --------- | -------- |  |  | -------------- | - |  | ---------------- | ---------- | - | --------- |  | ---------- | - |  |  | ---------- | - |  |  | --------- | - |  |  | ---------- | -
|                                                                                                |  | Owners of the Controlling Company |         |  | Non-ControllingInterests |  |           | Total    | 
|                                                                                                |  | ShareCapital                      |         |  | CapitalSurplus           |  |           | Reserves |  |  | TreasuryShares |   |  | RetainedEarnings |            |   | Sub Total |  |            |  
|                                                                                                |  | (in millions of Won)              |        
|Balance as of January 1, 2010                                                                   |  | (Won)                             | 482,403 |  |                          |  | 1,199,666 |          |  |  | 833,806        |   |  |                  | (2,403,263 | ) |           |  | 32,567,352 |   |  |  | 32,679,964 |   |  |  | 653,717   |   |  |  | 33,333,681 |  
|Comprehensive income:                                                                           |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Profit for the period                                                                           |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | 4,105,623  |   |  |  | 4,105,623  |   |  |  | 80,028    |   |  |  | 4,185,651  |  
|Net changes in accumulated comprehensive income (loss) of investments in associates, net of tax |  |                                   |        |  |                          |  |          |          |  |  | (37,656        | ) |  |                  |           |   |           |  |           |   |  |  | (37,656    | ) |  |  | (3,221    | ) |  |  | (40,877    | )
|Net changes in fair value of available-for-sale securities, net of tax                          |  |                                   |        |  |                          |  |          |          |  |  | 576,950        |   |  |                  |           |   |           |  |           |   |  |  | 576,950    |   |  |  | 12,651    |   |  |  | 589,601    |  
|Foreign currency translation differences, net of tax                                            |  |                                   |        |  |                          |  |          |          |  |  | 136,669        |   |  |                  |           |   |           |  |           |   |  |  | 136,669    |   |  |  | 46,521    |   |  |  | 183,190    |  
|Defined benefit plan actuarial losses, net of tax                                               |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | (141,914   | ) |  |  | (141,914   | ) |  |  | (10,211   | ) |  |  | (152,125   | )
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Total comprehensive income                                                                      |  |                                   |        |  |                          |  |          |          |  |  | 675,963        |   |  |                  |           |   |           |  | 3,963,709  |   |  |  | 4,639,672  |   |  |  | 125,768   |   |  |  | 4,765,440  |  
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Transactions with owners of the Company, recognized directly in equity:                         |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Year-end dividends                                                                              |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | (500,714   | ) |  |  | (500,714   | ) |  |  | (16,580   | ) |  |  | (517,294   | )
|Interim dividends                                                                               |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | (192,582   | ) |  |  | (192,582   | ) |  |  |          |   |  |  | (192,582   | )
|Acquisition of subsidiaries                                                                     |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  |           |   |  |  |           |   |  |  | 1,099,349 |   |  |  | 1,099,349  |  
|Changes in ownership interests in subsidiaries                                                  |  |                                   |        |  |                          |  | (92,994   | )        |  |  |               |   |  |                  |           |   |           |  |           |   |  |  | (92,994    | ) |  |  | 23,510    |   |  |  | (69,484    | )
|Paid in capital increase of subsidiaries                                                        |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  |           |   |  |  |           |   |  |  | 79,683    |   |  |  | 79,683     |  
|Others                                                                                          |  |                                   |        |  |                          |  | (5,111    | )        |  |  | (2,481         | ) |  |                  |           |   |           |  | 49,932     |   |  |  | 42,340     |   |  |  | (3,966    | ) |  |  | 38,374     |  
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Total transactions with owners of the Company                                                   |  |                                   |        |  |                          |  | (98,105   | )        |  |  | (2,481         | ) |  |                  |           |   |           |  | (643,364   | ) |  |  | (743,950   | ) |  |  | 1,181,996 |   |  |  | 438,046    |  
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Balance as of December 31, 2010                                                                 |  | (Won)                             | 482,403 |  |                          |  | 1,101,561 |          |  |  | 1,507,288      |   |  |                  | (2,403,263 | ) |           |  | 35,887,697 |   |  |  | 36,575,686 |   |  |  | 1,961,481 |   |  |  | 38,537,167 |  
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  

See accompanying notes to consolidated financial statements.



F-6



---

##### Table of Contents

POSCO

Consolidated Statements of Changes in Equity

For the
years ended December 31, 2011 and 2010









|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|----------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- |  | ------------------------ |  | --------- | -------- |  |  | -------------- | - |  | ---------------- | ---------- | - | --------- |  | ---------- | - |  |  | ---------- | - |  |  | --------- | - |  |  | ---------- | -
|                                                                                                |  | Owners of the Controlling Company |         |  | Non-ControllingInterests |  |           | Total    | 
|                                                                                                |  | ShareCapital                      |         |  | CapitalSurplus           |  |           | Reserves |  |  | TreasuryShares |   |  | RetainedEarnings |            |   | Sub Total |  |            |  
|                                                                                                |  | (in millions of Won)              |        
|Balance as of January 1, 2011                                                                   |  | (Won)                             | 482,403 |  |                          |  | 1,101,561 |          |  |  | 1,507,288      |   |  |                  | (2,403,263 | ) |           |  | 35,887,697 |   |  |  | 36,575,686 |   |  |  | 1,961,481 |   |  |  | 38,537,167 |  
|Comprehensive income:                                                                           |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Profit for the period                                                                           |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | 3,648,136  |   |  |  | 3,648,136  |   |  |  | 66,150    |   |  |  | 3,714,286  |  
|Net changes in accumulated comprehensive income (loss) of investments in associates, net of tax |  |                                   |        |  |                          |  |          |          |  |  | (12,276        | ) |  |                  |           |   |           |  |           |   |  |  | (12,276    | ) |  |  | 1,036     |   |  |  | (11,240    | )
|Net changes in fair value of available-for-sale securities, net of tax                          |  |                                   |        |  |                          |  |          |          |  |  | (1,227,050     | ) |  |                  |           |   |           |  |           |   |  |  | (1,227,050 | ) |  |  | (4,708    | ) |  |  | (1,231,758 | )
|Foreign currency translation differences, net of tax                                            |  |                                   |        |  |                          |  |          |          |  |  | 146,622        |   |  |                  |           |   |           |  |           |   |  |  | 146,622    |   |  |  | (144,956  | ) |  |  | 1,666      |  
|Defined benefit plan actuarial losses, net of tax                                               |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | (24,995    | ) |  |  | (24,995    | ) |  |  | (5,582    | ) |  |  | (30,577    | )
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Total comprehensive income                                                                      |  |                                   |        |  |                          |  |          |          |  |  | (1,092,704     | ) |  |                  |           |   |           |  | 3,623,141  |   |  |  | 2,530,437  |   |  |  | (88,060   | ) |  |  | 2,442,377  |  
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Transactions with owners of the Company,                                                        |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Year-end dividends                                                                              |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | (577,747   | ) |  |  | (577,747   | ) |  |  | (16,831   | ) |  |  | (594,578   | )
|Interim dividends                                                                               |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  | (193,111   | ) |  |  | (193,111   | ) |  |  |          |   |  |  | (193,111   | )
|Acquisition of subsidiaries                                                                     |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  |           |   |  |  |           |   |  |  | 247,483   |   |  |  | 247,483    |  
|Changes in ownership interests in subsidiaries                                                  |  |                                   |        |  |                          |  | (20,694   | )        |  |  |               |   |  |                  |           |   |           |  |           |   |  |  | (20,694    | ) |  |  | (98,606   | ) |  |  | (119,300   | )
|Paid in capital increase of subsidiaries                                                        |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  |           |   |           |  |           |   |  |  |           |   |  |  | 365,249   |   |  |  | 365,249    |  
|Acquisition of treasury shares                                                                  |  |                                   |        |  |                          |  |          |          |  |  |               |   |  |                  | (61,296    | ) |           |  |           |   |  |  | (61,296    | ) |  |  |          |   |  |  | (61,296    | )
|Disposal of treasury shares                                                                     |  |                                   |        |  |                          |  | 69,153    |          |  |  |               |   |  |                  | 73,153     |   |           |  |           |   |  |  | 142,306    |   |  |  |          |   |  |  | 142,306    |  
|Others                                                                                          |  |                                   |        |  |                          |  | 432       |          |  |  | (9,158         | ) |  |                  |           |   |           |  | (30,505    | ) |  |  | (39,231    | ) |  |  | 2,854     |   |  |  | (36,377    | )
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Total transactions with owners of the Company                                                   |  |                                   |        |  |                          |  | 48,891    |          |  |  | (9,158         | ) |  |                  | 11,857     |   |           |  | (801,363   | ) |  |  | (749,773   | ) |  |  | 500,149   |   |  |  | (249,624   | )
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  
|Balance as of December 31, 2011                                                                 |  | (Won)                             | 482,403 |  |                          |  | 1,150,452 |          |  |  | 405,426        |   |  |                  | (2,391,406 | ) |           |  | 38,709,475 |   |  |  | 38,356,350 |   |  |  | 2,373,570 |   |  |  | 40,729,920 |  
|                                                                                                |  |                                   |         |  |                          |  |           |          |  |  |                |   |  |                  |            |   |           |  |            |   |  |  |            |   |  |  |           |   |  |  |            |  

See accompanying notes to consolidated financial statements.



F-7



---

##### Table of Contents

POSCO

Consolidated Statements of Cash Flows

For the years ended December 31, 2011 and 2010







|                                                            |  |                      |  |                   |            |   |                   |  |             |  
|----------------------------------------------------------- |  | -------------------- |  | ----------------- | ---------- | - | ----------------- |  | ----------- | -
|                                                            |  | Note                 |  | December 31, 2011 |            |   | December 31, 2010 | 
|                                                            |  | (in millions of Won) | 
|Cash flows from operating activities                        |  |                      |  |                   |            |   |                   |  |             |  
|Profit for the period                                       |  |                      |  | (Won)             | 3,714,286  |   |                   |  | 4,185,650   |  
|Adjustments for:                                            |  |                      |  |                   |            |   |                   |  |             |  
|Depreciation                                                |  |                      |  |                   | 2,118,626  |   |                   |  | 2,942,137   |  
|Amortization                                                |  |                      |  |                   | 133,289    |   |                   |  | 75,344      |  
|Impairment loss of property, plant and equipment and others |  |                      |  |                   | 99,072     |   |                   |  | 128,083     |  
|Loss on disposal of property, plant and equipment           |  |                      |  |                   | 60,550     |   |                   |  | 83,494      |  
|Finance income                                              |  |                      |  |                   | (1,734,280 | ) |                   |  | (879,110    | )
|Finance costs                                               |  |                      |  |                   | 2,245,957  |   |                   |  | 1,278,630   |  
|Income tax expense                                          |  |                      |  |                   | 1,068,109  |   |                   |  | 1,081,472   |  
|Share of profit or loss of equity-accounted investees       |  |                      |  |                   | (50,569    | ) |                   |  | (182,657    | )
|Accrual of severance benefits                               |  |                      |  |                   | 236,999    |   |                   |  | 173,971     |  
|Bad debt expenses                                           |  |                      |  |                   | 45,477     |   |                   |  | 60,266      |  
|Others                                                      |  |                      |  |                   | 41,136     |   |                   |  | (143,715    | )
|                                                            |  |                      |  |                   |            |   |                   |  |             |  
|                                                            |  |                      |  | (Won)             | 4,264,366  |   |                   |  | 4,617,915   |  
|                                                            |  |                      |  |                   |            |   |                   |  |             |  
|Changes in operating assets and liabilities                 |  | 36                   |  |                   | (4,850,747 | ) |                   |  | (4,453,470  | )
|Interest received                                           |  |                      |  |                   | 218,682    |   |                   |  | 322,659     |  
|Interest paid                                               |  |                      |  |                   | (745,111   | ) |                   |  | (480,020    | )
|Dividends received                                          |  |                      |  |                   | 308,692    |   |                   |  | 141,017     |  
|Income taxes paid                                           |  |                      |  |                   | (1,218,602 | ) |                   |  | (751,746    | )
|                                                            |  |                      |  |                   |            |   |                   |  |             |  
|Net cash provided by operating activities                   |  |                      |  | (Won)             | 1,691,566  |   |                   |  | 3,582,005   |  
|                                                            |  |                      |  |                   |            |   |                   |  |             |  
|Cash flows from investing activities                        |  |                      |  |                   |            |   |                   |  |             |  
|Disposal of short-term financial instruments                |  |                      |  | (Won)             | 5,794,770  |   |                   |  | 17,576,747  |  
|Decrease in loans                                           |  |                      |  |                   | 896,656    |   |                   |  | 25,946      |  
|Disposal of available-for-sale investments                  |  |                      |  |                   | 411,061    |   |                   |  | 258,945     |  
|Disposal of other investment assets                         |  |                      |  |                   |           |   |                   |  | 27,257      |  
|Disposal of investments of equity-accounted investees       |  |                      |  |                   | 2,404      |   |                   |  | 19,394      |  
|Disposal of property, plant and equipment                   |  |                      |  |                   | 140,221    |   |                   |  | 165,794     |  
|Disposal of intangible assets                               |  |                      |  |                   | 55,899     |   |                   |  | 4,964       |  
|Proceeds from disposal of business                          |  |                      |  |                   |           |   |                   |  | 6,747       |  
|Acquisition of short-term financial instruments             |  |                      |  |                   | (4,556,340 | ) |                   |  | (14,546,301 | )
|Increase in loans                                           |  |                      |  |                   | (962,099   | ) |                   |  | (82,079     | )
|Acquisition of available-for-sale investments               |  |                      |  |                   | (322,046   | ) |                   |  | (561,030    | )
|Acquisition of other investment assets                      |  |                      |  |                   | (450       | ) |                   |  | (310,154    | )
|Acquisition of investments of equity-accounted investees    |  |                      |  |                   | (740,971   | ) |                   |  | (914,491    | )
|Acquisition of property, plant and equipment                |  |                      |  |                   | (5,330,968 | ) |                   |  | (5,791,764  | )
|Acquisition of intangible assets                            |  |                      |  |                   | (574,753   | ) |                   |  | (246,466    | )
|Payment for acquisition of business, net of cash acquired   |  |                      |  |                   | (437,464   | ) |                   |  | (3,079,899  | )
|Other, net                                                  |  |                      |  |                   | 107,214    |   |                   |  | 531,569     |  
|                                                            |  |                      |  |                   |            |   |                   |  |             |  
|Net cash used in investing activities                       |  |                      |  | (Won)             | (5,516,866 | ) |                   |  | (6,914,821  | )
|                                                            |  |                      |  |                   |            |   |                   |  |             |  



See accompanying notes to consolidated financial
statements.



F-8



---

##### Table of Contents

POSCO

Consolidated Statements of Cash Flows

For the years ended
December 31, 2011 and 2010









|                                                     |  |                      |  |                   |            |   |                   |  |           |  
|---------------------------------------------------- |  | -------------------- |  | ----------------- | ---------- | - | ----------------- |  | --------- | -
|                                                     |  | Note                 |  | December 31, 2011 |            |   | December 31, 2010 | 
|                                                     |  | (in millions of Won) | 
|Cash flows from financing activities                 |  |                      |  |                   |            |   |                   |  |           |  
|Proceeds from borrowings                             |  |                      |  | (Won)             | 7,068,322  |   |                   |  | 4,367,193 |  
|Disposal of treasury shares                          |  |                      |  |                   | 164,384    |   |                   |  | 6,811     |  
|Proceeds from short-term borrowings                  |  |                      |  |                   | 51,808     |   |                   |  | 1,200,955 |  
|Repayment of borrowings                              |  |                      |  |                   | (1,746,487 | ) |                   |  | (882,477  | )
|Acquisition of treasury shares                       |  |                      |  |                   | (61,296    | ) |                   |  |          |  
|Payment of cash dividends                            |  |                      |  |                   | (770,858   | ) |                   |  | (693,296  | )
|Other, net                                           |  |                      |  |                   | 194,012    |   |                   |  | 588,575   |  
|                                                     |  |                      |  |                   |            |   |                   |  |           |  
|Net cash provided by financing activities            |  |                      |  | (Won)             | 4,899,885  |   |                   |  | 4,587,761 |  
|                                                     |  |                      |  |                   |            |   |                   |  |           |  
|Effect of exchange rate fluctuation on cash held     |  |                      |  |                   | 3,052      |   |                   |  | (6,959    | )
|Net increase in cash and cash equivalents            |  |                      |  |                   | 1,077,637  |   |                   |  | 1,247,986 |  
|Cash and cash equivalents at beginning of the period |  |                      |  |                   | 3,521,045  |   |                   |  | 2,273,059 |  
|                                                     |  |                      |  |                   |            |   |                   |  |           |  
|Cash and cash equivalents at end of the period       |  |                      |  | (Won)             | 4,598,682  |   |                   |  | 3,521,045 |  
|                                                     |  |                      |  |                   |            |   |                   |  |           |  









See accompanying notes to consolidated financial statements.



F-9



---

##### Table of Contents

POSCO

Notes to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|1. | General Information
|-- | -------------------

General information
about POSCO, its 58 domestic subsidiaries (the Company) including POSCO Engineering & Construction Co., Ltd., 161 foreign subsidiaries including POSCO America Corporation and its 91 associates are as follows:

(a) The controlling company

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

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

As of December 31, 2011,
POSCOs shareholders are as follows:



|                                            |  |                  |            |  |               |  |        |  
|------------------------------------------- |  | ---------------- | ---------- |  | ------------- |  | ------ | -
|Share holders name                         |  | Number of shares |            |  | Ownership (%) | 
|National Pension Service                    |  |                  | 5,937,323  |  |               |  | 6.81   | %
|Nippon Steel Corporation (*1)               |  |                  | 4,394,712  |  |               |  | 5.04   | %
|SK Telecom Co., Ltd.                        |  |                  | 2,481,310  |  |               |  | 2.85   | %
|Pohang University of Science and Technology |  |                  | 1,905,000  |  |               |  | 2.18   | %
|Shinhan Financial Group Inc. (*2)           |  |                  | 1,870,879  |  |               |  | 2.15   | %
|Others                                      |  |                  | 70,597,611 |  |               |  | 80.97  | %
|                                            |  |                  |            |  |               |  |        |  
|                                            |  |                  | 87,186,835 |  |               |  | 100.00 | %
|                                            |  |                  |            |  |               |  |        |  





|(*1) | Nippon Steel Corporation has American Depository Receipts (ADRs), each of which represents 0.25 share of POSCOs common share which has par value of (Won)5,000 per share.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | Includes number of shares subsidiaries hold at the end of the reporting period under commercial law.
|---- | ----------------------------------------------------------------------------------------------------

As of December 31, 2011, the shares of POSCO are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo
and London Stock Exchanges.



F-10



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Consolidated subsidiaries

Details of consolidated subsidiaries as of December 31, 2011 and 2010 are as follows:



|                                                                                  |  |                                                       |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |  |        |  |  |          
|--------------------------------------------------------------------------------- |  | ----------------------------------------------------- |  | ------------- | ----------------- |  | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | ------ |  | ----- |  | ------ |  |  |  | ------ |  |  | ---------
|                                                                                  |  |                                                       |  | Ownership (%) |                   |  | Region      
|                                                                                  |  | December 31, 2011                                     |  |               | December 31, 2010 |  |             
|                                                                                  |  | Principal Operations                                  |  | POSCO         |                   |  | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |        |  | Total |  |       
|[Domestic]                                                                        |  |                                                       |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |  |        |  |  |          
|POSCO E&C Co., Ltd.                                                               |  | Engineering and construction                          |  |               | 89.53             |  |              |  |       |       |  |  | 89.53  |  |  |              | 89.53  |  |       |  |       |  |  |  | 89.53  |  |  | Pohang   
|POSCO P&S Co., Ltd.                                                               |  | Steel sales and service                               |  |               | 95.31             |  |              |  |       |       |  |  | 95.31  |  |  |              | 95.31  |  |       |  |       |  |  |  | 95.31  |  |  | Seoul    
|POSCO Coated & Color Steel Co., Ltd.                                              |  | Coated steel manufacturing                            |  |               | 56.87             |  |              |  |       |       |  |  | 56.87  |  |  |              | 56.87  |  |       |  |       |  |  |  | 56.87  |  |  | Pohang   
|POSCO Plant Engineering Co., Ltd.                                                 |  | Steel work maintenance and machinery installation     |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Pohang   
|POSCO ICT Co., Ltd.                                                               |  | Computer hardware and software distribution           |  |               | 72.54             |  |              |  |       |       |  |  | 72.54  |  |  |              | 72.54  |  |       |  |       |  |  |  | 72.54  |  |  | Seongnam 
|POSCO Research Institute                                                          |  | Economic research and consulting                      |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Seoul    
|Seoung Gwang Co., Ltd.                                                            |  | Athletic facilities operation                         |  |               | 69.38             |  |              |  | 30.62  |       |  |  | 100.00 |  |  |              | 69.38  |  |       |  | 30.62  |  |  |  | 100.00 |  |  | Suncheon 
|POSCO Architects & Consultants Co., Ltd.                                          |  | Architecture and consulting                           |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Seoul    
|POSCO Specialty Steel Co., Ltd.                                                   |  | Steel manufacturing and sales                         |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Changwon 
|POSTECH Venture Capital Corp.                                                     |  | Investment in venture companies                       |  |               | 95.00             |  |              |  |       |       |  |  | 95.00  |  |  |              | 95.00  |  |       |  |       |  |  |  | 95.00  |  |  | Pohang   
|eNtoB Co., Ltd.                                                                   |  | Electronic commerce                                   |  |               | 32.19             |  |              |  | 30.20  |       |  |  | 62.39  |  |  |              | 32.19  |  |       |  | 30.20  |  |  |  | 62.39  |  |  | Seoul    
|POSCO Chemtec Company Ltd. (formerly, POSCO Refractories & Environment Co., Ltd.) |  | Manufacturing and sales                               |  |               | 60.00             |  |              |  |       |       |  |  | 60.00  |  |  |              | 60.00  |  |       |  |       |  |  |  | 60.00  |  |  | Pohang   
|POSCO Terminal Co., Ltd.                                                          |  | Transporting and warehousing                          |  |               | 51.00             |  |              |  |       |       |  |  | 51.00  |  |  |              | 51.00  |  |       |  |       |  |  |  | 51.00  |  |  | Gwangyang
|POSCO M-TECH Co., Ltd. (*1)                                                       |  | Packing materials manufacturing                       |  |               | 48.85             |  |              |  |       |       |  |  | 48.85  |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Pohang   
|POSCO ENERGY Co., Ltd.                                                            |  | Generation of electricity                             |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Seoul    
|Postech 2006 Energy Fund (*2)                                                     |  | Investment in new technologies                        |  |               | 10.53             |  |              |  | 11.58  |       |  |  | 22.11  |  |  |              | 10.53  |  |       |  | 11.58  |  |  |  | 22.11  |  |  | Seoul    
|PHP Co., Ltd.                                                                     |  | Rental houses construction and management             |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Incheon  
|POSCO TMC Co., Ltd.                                                               |  | Component manufacturing                               |  |               | 34.20             |  |              |  | 33.56  |       |  |  | 67.76  |  |  |              | 34.20  |  |       |  | 33.56  |  |  |  | 67.76  |  |  | Cheonan  
|PNR Co., Ltd.                                                                     |  | Steel manufacturing and sales                         |  |               | 70.00             |  |              |  |       |       |  |  | 70.00  |  |  |              | 70.00  |  |       |  |       |  |  |  | 70.00  |  |  | Pohang   
|Megaasset Co., Ltd.                                                               |  | Real estate rental and sales                          |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Cheonan  
|POSCO Engineering Company (formerly Daewoo Engineering Company)                   |  | Construction and engineering service                  |  |               |                  |  |              |  | 94.14  |       |  |  | 94.14  |  |  |              |       |  |       |  | 92.26  |  |  |  | 92.26  |  |  | Seongnam 
|Pohang Feul Cell Co. Ltd.                                                         |  | Generation of electricity                             |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Pohang   
|Pohang SPFC Co., Ltd.                                                             |  | Steel manufacturing                                   |  |               |                  |  |              |  | 90.00  |       |  |  | 90.00  |  |  |              |       |  |       |  | 90.00  |  |  |  | 90.00  |  |  | Pohang   
|POSWITH Co., Ltd.                                                                 |  | Industrial clearing service                           |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Pohang   
|BASYS INDUSTRY Co., Ltd.                                                          |  | Panel board, electric and control panel manufacturing |  |               |                  |  |              |  | 65.00  |       |  |  | 65.00  |  |  |              |       |  |       |  | 65.00  |  |  |  | 65.00  |  |  | Seongnam 
|POSTECH BD Newundertaking fund                                                    |  | Bio diesel industries                                 |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Pohang   
|POSBRO Co., Ltd.                                                                  |  | Video game manufacturing                              |  |               |                  |  |              |  | 97.79  |       |  |  | 97.79  |  |  |              |       |  |       |  | 97.79  |  |  |  | 97.79  |  |  | Seongnam 



F-11



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                              |  |                                                    |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |  |        |  |  |          
|--------------------------------------------- |  | -------------------------------------------------- |  | ------------- | ----------------- |  | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | ------ |  | ----- |  | ------ |  |  |  | ------ |  |  | ---------
|                                              |  |                                                    |  | Ownership (%) |                   |  | Region      
|                                              |  | December 31, 2011                                  |  |               | December 31, 2010 |  |             
|                                              |  | Principal Operations                               |  | POSCO         |                   |  | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |        |  | Total |  |       
|POSCO ASTCo., Ltd.                            |  | Steel manufacturing and sales                      |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Ansan    
|DaiMyung TMSCo., Ltd.                         |  | Cold-rolling of stainless steel, nickel alloy      |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Siheung  
|POS-HiMETALCo., Ltd.                          |  | Steel manufacturing and sales                      |  |               | 65.00             |  |              |  |       |       |  |  | 65.00  |  |  |              | 65.00  |  |       |  |       |  |  |  | 65.00  |  |  | Gwangyang
|POSCO E&ECo., Ltd.                            |  | Handling & disposal of waste matter                |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Seoul    
|POMIC Co., Ltd.                               |  | Education services                                 |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Pohang   
|POSFINE Co., Ltd.                             |  | Non metallic minerals manufacturing                |  |               | 69.23             |  |              |  |       |       |  |  | 69.23  |  |  |              | 69.23  |  |       |  |       |  |  |  | 69.23  |  |  | Gwangyang
|POS ECO HOUSINGCo., Ltd.                      |  | Construction                                       |  |               | 85.25             |  |              |  |       |       |  |  | 85.25  |  |  |              | 85.25  |  |       |  |       |  |  |  | 85.25  |  |  | Pohang   
|Mapo high broad parking Co., Ltd.             |  | Construction                                       |  |               |                  |  |              |  | 71.00  |       |  |  | 71.00  |  |  |              |       |  |       |  | 67.00  |  |  |  | 67.00  |  |  | Seoul    
|Dakos Co., Ltd.                               |  | Railway equipment manufacturing                    |  |               |                  |  |              |  | 81.00  |       |  |  | 81.00  |  |  |              |       |  |       |  | 81.00  |  |  |  | 81.00  |  |  | Seongnam 
|Kwang Yang SPFC Co., Ltd.                     |  | Steel manufacturing                                |  |               |                  |  |              |  | 65.84  |       |  |  | 65.84  |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Gwangyang
|POSCALCIUM Company, Ltd.                      |  | Non metallic minerals manufacturing                |  |               |                  |  |              |  | 70.00  |       |  |  | 70.00  |  |  |              |       |  |       |  | 70.00  |  |  |  | 70.00  |  |  | Pohang   
|Plant Engineering service TechnologyCo., Ltd. |  | Engineering service                                |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Pohang   
|9Digit Co., Ltd.                              |  | Steel manufacturing                                |  |               |                  |  |              |  | 86.49  |       |  |  | 86.49  |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Incheon  
|Postech Early Stage Fund (*2)                 |  | Financial investment                               |  |               |                  |  |              |  | 10.00  |       |  |  | 10.00  |  |  |              |       |  |       |  | 10.00  |  |  |  | 10.00  |  |  | Pohang   
|Busan E&E Co., Ltd.                           |  | Handling & disposal of waste matter                |  |               | 70.00             |  |              |  |       |       |  |  | 70.00  |  |  |              | 70.00  |  |       |  |       |  |  |  | 70.00  |  |  | Busan    
|POSCO Family Strategy Funds                   |  | Financial investment                               |  |               | 69.93             |  |              |  | 30.07  |       |  |  | 100.00 |  |  |              | 69.93  |  |       |  | 30.07  |  |  |  | 100.00 |  |  | Pohang   
|POREKA Co., Ltd.                              |  | Advertising agency                                 |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Seoul    
|Songdo SE Co., Ltd.                           |  | Cleaning service                                   |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Incheon  
|Posgreen Co., Ltd.                            |  | Plastic manufacuring                               |  |               |                  |  |              |  | 60.00  |       |  |  | 60.00  |  |  |              |       |  |       |  | 60.00  |  |  |  | 60.00  |  |  | Gwangyang
|Daewoo International Corporation              |  | Trading, energy & resource development             |  |               | 66.56             |  |              |  |       |       |  |  | 66.56  |  |  |              | 67.96  |  |       |  |       |  |  |  | 67.96  |  |  | Seoul    
|POSCOLEDCo., Ltd.                             |  | LED lightning                                      |  |               | 16.70             |  |              |  | 63.33  |       |  |  | 80.03  |  |  |              | 16.70  |  |       |  | 63.33  |  |  |  | 80.03  |  |  | Seongnam 
|Gunsan SPFCCo., Ltd.                          |  | Steel manufacturing                                |  |               |                  |  |              |  | 70.09  |       |  |  | 70.09  |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Gunsan   
|POSCO NSTCo., Ltd.                            |  | Steel manufacturing                                |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Busan    
|Pohang Scrap Recycling Center Co., Ltd.       |  | Steel manufacturing                                |  |               |                  |  |              |  | 51.00  |       |  |  | 51.00  |  |  |              |       |  |       |  | 51.00  |  |  |  | 51.00  |  |  | Pohang   
|PSC energy global Co., Ltd.                   |  | Business service                                   |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Pohang   
|Suncheon Ecotrans Co., Ltd.                   |  | Train manufacturing & management                   |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Suncheon 
|Shinan EnergyCo., Ltd.                        |  | Manufacturing & management                         |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Mokpo    
|Reco Metal Co., Ltd.                          |  | Steel manufacturing                                |  |               |                  |  |              |  | 88.58  |       |  |  | 88.58  |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Hwasung  
|NewAltec Co., Ltd.                            |  | Aluminum products manufacturing and sales          |  |               |                  |  |              |  | 60.10  |       |  |  | 60.10  |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Incheon  
|PONUTech Co., Ltd.                            |  | Nuclear power generation design and repair service |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Ulsan    
|BLUE O&M Co., Ltd                             |  | Service                                            |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  |       |  |  |  |       |  |  | Ulsan    



F-12



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                      |  |                                    |  |               |                   |        |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |        |  |          
|----------------------------------------------------- |  | ---------------------------------- |  | ------------- | ----------------- | ------ | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | ------ |  | ----- |  | ------ |  |  | ------ |  | ---------
|                                                      |  |                                    |  | Ownership (%) |                   | Region
|                                                      |  | December 31, 2011                  |  |               | December 31, 2010 |       
|                                                      |  | Principal Operations               |  | POSCO         |                   |        | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |        |  | Total | 
|[Foreign]                                             |  |                                    |  |               |                   |        |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |        |  |          
|POSCO America Corporation                             |  | Steel trading                      |  |               | 99.45             |        |              |  | 0.55   |       |  |  | 100.00 |  |  |              | 99.45  |  |       |  | 0.55   |  |  | 100.00 |  | USA      
|POSCO Australia Pty. Ltd.                             |  | Iron ore sales & mine development  |  |               | 100.00            |        |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  | 100.00 |  | Australia
|POSCO Canada Ltd.                                     |  | Coal sales                         |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | Canada   
|POSCAN Elkveiw Coal Ltd.                              |  | Coal sales                         |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | Canada   
|POSCO Asia Co., Ltd.                                  |  | Steel transit trading              |  |               | 100.00            |        |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  | 100.00 |  | HongKong 
|Dalian POSCO Steel Co., Ltd                           |  | Steel manufacturing                |  |               | 30.00             |        |              |  | 55.00  |       |  |  | 85.00  |  |  |              | 30.00  |  |       |  | 55.00  |  |  | 85.00  |  | China    
|POSCO-CTPC Co., Ltd.                                  |  | Steel manufacturing                |  |               | 56.60             |        |              |  | 43.40  |       |  |  | 100.00 |  |  |              | 56.60  |  |       |  | 43.40  |  |  | 100.00 |  | China    
|POSCO-JKPC Co., Ltd.                                  |  | Steel manufacturing                |  |               |                  |        |              |  | 95.00  |       |  |  | 95.00  |  |  |              |       |  |       |  | 95.00  |  |  | 95.00  |  | Japan    
|International Business Center Corporation             |  | Leasing service                    |  |               |                  |        |              |  | 60.00  |       |  |  | 60.00  |  |  |              |       |  |       |  | 60.00  |  |  | 60.00  |  | Vietnam  
|POSCO E&C Vietnam Co., Ltd.                           |  | Steel manufacturing                |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | Vietnam  
|Zhangjiagang Pohang Stainless Steel Co., Ltd.         |  | Stainless steel manufacturing      |  |               | 58.60             |        |              |  | 23.88  |       |  |  | 82.48  |  |  |              | 58.60  |  |       |  | 23.88  |  |  | 82.48  |  | China    
|Guangdong Pohang Coated Steel Co., Ltd.               |  | Plating steel sheet manufacturing  |  |               | 84.52             |        |              |  | 10.01  |       |  |  | 94.53  |  |  |              | 89.35  |  |       |  | 6.11   |  |  | 95.46  |  | China    
|POSCO (Thailand) Company Ltd.                         |  | Steel manufacturing                |  |               | 85.62             |        |              |  | 14.38  |       |  |  | 100.00 |  |  |              | 85.62  |  |       |  | 14.38  |  |  | 100.00 |  | Thailand 
|Myanmar POSCO Steel Co., Ltd                          |  | Zinc relief manufacturing          |  |               | 70.00             |        |              |  |       |       |  |  | 70.00  |  |  |              | 70.00  |  |       |  |       |  |  | 70.00  |  | Myanmar  
|POSCO-JOPC Co., Ltd.                                  |  | Steel manufacturing                |  |               |                  |        |              |  | 56.84  |       |  |  | 56.84  |  |  |              |       |  |       |  | 56.84  |  |  | 56.84  |  | Japan    
|POSCO Investment Co., Ltd.                            |  | Financial services                 |  |               | 100.00            |        |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  | 100.00 |  | HongKong 
|POSCO-MKPC SDN BHD.                                   |  | Steel manufacturing                |  |               | 44.69             |        |              |  | 25.31  |       |  |  | 70.00  |  |  |              | 44.69  |  |       |  | 25.31  |  |  | 70.00  |  | Malaysia 
|Qingdao Pohang Stainless Steel Co., Ltd.              |  | Stainless steel manufacturing      |  |               | 70.00             |        |              |  | 30.00  |       |  |  | 100.00 |  |  |              | 70.00  |  |       |  | 30.00  |  |  | 100.00 |  | China    
|POSCO (Suzhou) Automotive Processing Center Co., Ltd. |  | Steel manufacturing                |  |               | 90.00             |        |              |  | 10.00  |       |  |  | 100.00 |  |  |              | 90.00  |  |       |  | 10.00  |  |  | 100.00 |  | China    
|POSCO BioVentures L.P.                                |  | Bio tech industry                  |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | USA      
|PT. POSNESIA                                          |  | Steel manufacturing                |  |               | 70.00             |        |              |  |       |       |  |  | 70.00  |  |  |              | 70.00  |  |       |  |       |  |  | 70.00  |  | Indonesia
|POSCO E&C  Hawaii Inc.                               |  | Real estate industry               |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | USA      
|POS-Qingdao Coil Center Co., Ltd.                     |  | Steel manufacturing                |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | China    
|POS-Ore Pty. Ltd.                                     |  | Iron ore sales & mine development  |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | Australia
|POSCO-China Holding Corp.                             |  | A holding company                  |  |               | 100.00            |        |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  | 100.00 |  | China    
|POSCO-Japan Co., Ltd.                                 |  | Steel trading                      |  |               | 100.00            |        |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  | 100.00 |  | Japan    
|POS-CD Pty. Ltd.                                      |  | Coal sales                         |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | Australia
|POS-GC Pty. Ltd.                                      |  | Coal sales                         |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | Australia
|POSCO-India Private Ltd.                              |  | Steel manufacturing                |  |               | 100.00            |        |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  | 100.00 |  | India    
|POSCO-India Pune Steel Processing CentrePvt. Ltd.     |  | Steel manufacturing                |  |               | 65.00             |        |              |  |       |       |  |  | 65.00  |  |  |              | 65.00  |  |       |  |       |  |  | 65.00  |  | India    
|POSCO-JNPC Co., Ltd.                                  |  | Steel manufacturing                |  |               |                  |        |              |  | 90.00  |       |  |  | 90.00  |  |  |              |       |  |       |  | 90.00  |  |  | 90.00  |  | Japan    
|POSCO-Foshan Steel Processing Center Co., Ltd.        |  | Steel manufacturing                |  |               | 39.60             |        |              |  | 60.40  |       |  |  | 100.00 |  |  |              | 39.60  |  |       |  | 60.40  |  |  | 100.00 |  | China    
|POSCO E&C (China) Co., Ltd.                           |  | Construction and civil engineering |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | China    
|POSCO MPC S.A. de C.V.                                |  | Steel manufacturing                |  |               |                  |        |              |  | 90.00  |       |  |  | 90.00  |  |  |              |       |  |       |  | 90.00  |  |  | 90.00  |  | Mexico   
|Zhangjigang Pohang Port Co., Ltd.                     |  | Load and unload industry           |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | China    
|Qingdao Pujin Steel Material Co., Ltd                 |  | Steel manufacturing                |  |               |                  |        |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  | 100.00 |  | China    
|POSCO-Vietnam Co., Ltd.                               |  | Steel manufacturing                |  |               | 85.00             |        |              |  |       |       |  |  | 85.00  |  |  |              | 85.00  |  |       |  |       |  |  | 85.00  |  | Vietnam  
|POSCO-Mexico Co., Ltd.                                |  | Mobile steel sheet manufacturing   |  |               | 80.68             |        |              |  | 19.32  |       |  |  | 100.00 |  |  |              | 84.67  |  |       |  | 15.33  |  |  | 100.00 |  | Mexico   



F-13



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                        |  |                                            |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |  |        |  |  |             
|------------------------------------------------------- |  | ------------------------------------------ |  | ------------- | ----------------- |  | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | ------ |  | ----- |  | ------ |  |  |  | ------ |  |  | ------------
|                                                        |  |                                            |  | Ownership (%) |                   |  | Region      
|                                                        |  | December 31, 2011                          |  |               | December 31, 2010 |  |             
|                                                        |  | Principal Operations                       |  | POSCO         |                   |  | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |        |  | Total |  |       
|POSCO-India Delhi Steel Processing Centre Pvt. Ltd      |  | Steel manufacturing                        |  |               | 76.40             |  |              |  |       |       |  |  | 76.40  |  |  |              | 76.40  |  |       |  |       |  |  |  | 76.40  |  |  | India       
|POSCO-Poland Wroclaw Steel Processing Center Co., Ltd   |  | Steel manufacturing                        |  |               | 60.00             |  |              |  |       |       |  |  | 60.00  |  |  |              | 60.00  |  |       |  |       |  |  |  | 60.00  |  |  | Poland      
|POS-NP Pty. Ltd.                                        |  | Coal sales                                 |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Australia   
|POSCO-Vietnam Processing Center Co., Ltd.               |  | Steel manufacturing                        |  |               | 89.58             |  |              |  |       |       |  |  | 89.58  |  |  |              | 89.58  |  |       |  |       |  |  |  | 89.58  |  |  | Vietnam     
|POSCO (Chongqing) Automotive Processing Center Co, Ltd. |  | Steel manufacturing                        |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 90.00  |  |       |  | 10.00  |  |  |  | 100.00 |  |  | China       
|Suzhou POS-CORE Technology Co., Ltd.                    |  | Component manufacturing                    |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | China       
|POSCO-JYPC Co., Ltd.                                    |  | Steel manufacturing                        |  |               |                  |  |              |  | 82.37  |       |  |  | 82.37  |  |  |              |       |  |       |  | 82.37  |  |  |  | 82.37  |  |  | Japan       
|POSCO-Malaysia SDN. BHD.                                |  | Steel manufacturing                        |  |               | 80.07             |  |              |  | 13.34  |       |  |  | 93.41  |  |  |              | 80.07  |  |       |  | 13.34  |  |  |  | 93.41  |  |  | Malaysia    
|POS-Minerals Corporation                                |  | Mine development & sales                   |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | USA         
|POSCO (Wuhu) Automotive Processing Center Co., Ltd.     |  | Steel manufacturing                        |  |               | 68.57             |  |              |  | 31.43  |       |  |  | 100.00 |  |  |              | 68.57  |  |       |  | 31.43  |  |  |  | 100.00 |  |  | China       
|POSCO E&C India Private Ltd.                            |  | Construction and engineering               |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | India       
|POSCO E&C SMART                                         |  | Construction and engineering               |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Mexico      
|POSCO-Philippine Manila Processing Center Inc.          |  | Steel manufacturing                        |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Philippines 
|Dalian POSCON Dongbang Automatic Co., Ltd.              |  | Electrical control equipment manufacturing |  |               |                  |  |              |  | 70.00  |       |  |  | 70.00  |  |  |              |       |  |       |  | 70.00  |  |  |  | 70.00  |  |  | China       
|SANPU TRADING CO., LTD.                                 |  | Transit trade                              |  |               |                  |  |              |  | 70.04  |       |  |  | 70.04  |  |  |              |       |  |       |  | 70.04  |  |  |  | 70.04  |  |  | China       
|Zhangjiagang BLZ Pohang International Trading Co., Ltd. |  | Steel transit trading                      |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | China       
|POSCO Mexico Human Tech.                                |  | Service                                    |  |               | 80.00             |  |              |  | 20.00  |       |  |  | 100.00 |  |  |              | 80.00  |  |       |  | 20.00  |  |  |  | 100.00 |  |  | Mexico      
|POSCO Mexico East Steel Distribution Center Co., Ltd    |  | Steel product sales                        |  |               |                  |  |              |  | 56.81  |       |  |  | 56.81  |  |  |              |       |  |       |  | 66.24  |  |  |  | 66.24  |  |  | Mexico      
|POSCO Gulf Logistics LLC.                               |  | Steel product sales                        |  |               |                  |  |              |  |       |       |  |  |       |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | UAE         
|POSCO ICT-China                                         |  | IT service and DVR business                |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | China       
|DWEMEX S.A.DE C.V.                                      |  | Construction                               |  |               |                  |  |              |  | 99.00  |       |  |  | 99.00  |  |  |              |       |  |       |  | 99.00  |  |  |  | 99.00  |  |  | Mexico      
|POS MPC Servicios de C.V.                               |  | Steel manufacturing                        |  |               |                  |  |              |  | 61.00  |       |  |  | 61.00  |  |  |              |       |  |       |  | 61.00  |  |  |  | 61.00  |  |  | Mexico      
|EUROTALY S.A.                                           |  | Lumber manufacturing & sales               |  |               | 98.00             |  |              |  |       |       |  |  | 98.00  |  |  |              | 98.00  |  |       |  |       |  |  |  | 98.00  |  |  | Uruguay     
|POSCO South East AsiaPte. Ltd.                          |  | Steel transit trading                      |  |               |                  |  |              |  | 51.00  |       |  |  | 51.00  |  |  |              |       |  |       |  | 51.00  |  |  |  | 51.00  |  |  | Singapore   
|Europe Steel Distribution Center                        |  | Steel product sales                        |  |               | 50.00             |  |              |  | 20.00  |       |  |  | 70.00  |  |  |              | 50.00  |  |       |  | 20.00  |  |  |  | 70.00  |  |  | Slovenia    
|VECTUS Ltd.                                             |  | PRT test track construction                |  |               |                  |  |              |  | 99.57  |       |  |  | 99.57  |  |  |              |       |  |       |  | 99.57  |  |  |  | 99.57  |  |  | England     
|Zeus (Cayman)                                           |  | Service                                    |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | CaymanIsland
|POSCO VST Co., Ltd.                                     |  | Stainless steel manufacturing              |  |               | 95.65             |  |              |  |       |       |  |  | 95.65  |  |  |              | 92.97  |  |       |  |       |  |  |  | 92.97  |  |  | Vietnam     
|POSCO Maharashtra Steel Pvt. Ltd.                       |  | Steel manufacturing                        |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | India       



F-14



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                        |  |                                   |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |        |  |       |  |        |  |  |  |        |  |  |           
|------------------------------------------------------- |  | --------------------------------- |  | ------------- | ----------------- |  | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | ------ |  | ----- |  | ------ |  |  |  | ------ |  |  | ----------
|                                                        |  |                                   |  | Ownership (%) |                   |  | Region      
|                                                        |  | December 31, 2011                 |  |               | December 31, 2010 |  |             
|                                                        |  | Principal Operations              |  | POSCO         |                   |  | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |        |  | Total |  |       
|POSCO India Chennai Steel Processing Centre Pvt. Ltd.   |  | Steel manufacturing               |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | India     
|POSCO Turkey Nilufer Processing Center Co., Ltd.        |  | Steel manufacturing               |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Turkey    
|POSCO Vietnam Ha Noi Processing Center Co., Ltd.        |  | Steel manufacturing               |  |               | 70.00             |  |              |  |       |       |  |  | 70.00  |  |  |              | 70.00  |  |       |  |       |  |  |  | 70.00  |  |  | Vietnam   
|POSCO (Liaoning) Automotive Processing Center Co., Ltd. |  | Steel manufacturing               |  |               | 90.00             |  |              |  | 10.00  |       |  |  | 100.00 |  |  |              | 90.00  |  |       |  | 10.00  |  |  |  | 100.00 |  |  | China     
|POSCO-Indonesia Jakarta Processing Center               |  | Steel manufacturing               |  |               | 65.00             |  |              |  | 20.00  |       |  |  | 85.00  |  |  |              | 65.00  |  |       |  | 20.00  |  |  |  | 85.00  |  |  | Indonesia 
|POSCO E&C VenezuelaC.A                                  |  | Construction and engineering      |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Venezuela 
|PT. MRI.                                                |  | Mine development                  |  |               | 65.00             |  |              |  |       |       |  |  | 65.00  |  |  |              | 65.00  |  |       |  |       |  |  |  | 65.00  |  |  | Indonesia 
|POSCORE-INDIA                                           |  | Steel manufacturing               |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | India     
|POSCO America Alabama Processing Center Co., Ltd.       |  | Steel manufacturing               |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | USA       
|PT DEC Indonesia                                        |  | Construction                      |  |               |                  |  |              |  | 95.00  |       |  |  | 95.00  |  |  |              |       |  |       |  | 95.00  |  |  |  | 95.00  |  |  | Indonesia 
|POSCO (Yantai) Automotive Processing Center Co., Ltd.   |  | Steel manufacturing               |  |               | 90.00             |  |              |  | 10.00  |       |  |  | 100.00 |  |  |              | 90.00  |  |       |  | 10.00  |  |  |  | 100.00 |  |  | China     
|POSCO India Steel Distribution Center Private Ltd.      |  | Steel logistics                   |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | India     
|POSCO China Dalian Plate Processing Center Co., Ltd.    |  | Steel manufacturing               |  |               | 80.00             |  |              |  | 10.00  |       |  |  | 90.00  |  |  |              | 80.00  |  |       |  | 10.00  |  |  |  | 90.00  |  |  | China     
|POSCO-South Asia Co., Ltd.                              |  | Steel product sales               |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Thailand  
|POSCO SS-VINA Co., LTD                                  |  | Steel manufacturing               |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Vietnam   
|POSCO-NCR Coal Ltd.                                     |  | Coal sales                        |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Canada    
|POSCO WA Pty. Ltd.                                      |  | Iron ore sales & mine development |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              | 100.00 |  |       |  |       |  |  |  | 100.00 |  |  | Australia 
|POSCO E&C  UZ                                          |  | Construction                      |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Uzbekistan
|POSCO Australia GP Limited                              |  | Resource development              |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Australia 
|Daewoo International America Corp.                      |  | Trading business                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | USA       
|Daewoo International Deutschland GmbH                   |  | Trading business                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Germany   
|Daewoo International Japan Corp.                        |  | Trading business                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Japan     
|Daewoo International Singapore Pte. Ltd.                |  | Trading business                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Singapore 
|Daewoo Italia S.r.l.                                    |  | Trading business                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Italia    
|Daewoo Cement (Shandong) Co., Ltd.                      |  | Cement manufacturing              |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | China     
|Daewoo (China) Co., Ltd.                                |  | Trading business                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | China     
|PT. RISMAR Daewoo Apparel                               |  | Clothing business                 |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Indonesia 
|Daewoo Textile Fergana LLC                              |  | Textile manufacturing             |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Uzbekistan
|Daewoo Textile Bukhara LLC                              |  | Textile manufacturing             |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |       |  |       |  | 100.00 |  |  |  | 100.00 |  |  | Uzbekistan



F-15



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                                 |  |                                          |  |                   |       |  |              |  |        |       |  |        |  |  |              |  |  |       |        |  |  |  |        |  |  |            
|---------------------------------------------------------------- |  | ---------------------------------------- |  | ----------------- | ----- |  | ------------ |  | ------ | ----- |  | ------ |  |  | ------------ |  |  | ----- | ------ |  |  |  | ------ |  |  | -----------
|                                                                 |  |                                          |  | Ownership (%)     |       |  | Region      
|                                                                 |  | December 31, 2011                        |  | December 31, 2010 |       | 
|                                                                 |  | Principal Operations                     |  | POSCO             |       |  | Subsidiaries |  |        | Total |  | POSCO  |  |  | Subsidiaries |  |  | Total |        | 
|Daewoo International Australia Holdings Pty. Ltd.                |  | Resource development                     |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Australia  
|Daewoo Paper Manufacturing Co., Ltd.                             |  | Paper industry                           |  |                   |      |  |              |  | 66.70  |       |  | 66.70  |  |  |             |  |  |       | 66.70  |  |  |  | 66.70  |  |  | China      
|Tianjin Daewoo. Paper Co., Ltd                                   |  | Paper industry                           |  |                   |      |  |              |  | 68.00  |       |  | 68.00  |  |  |             |  |  |       | 68.00  |  |  |  | 68.00  |  |  | China      
|POSCO Mauritius Ltd.                                             |  | Mine development & sales                 |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Mauritius  
|PT. KRAKATAU STEEL POSCO                                         |  | Steel manufacturing                      |  |                   | 70.00 |  |              |  |       |       |  | 70.00  |  |  | 70.00        |  |  |       |       |  |  |  | 70.00  |  |  | Indonesia  
|MYANMAR Daewoo LTD.                                              |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Myanmar    
|Dawwoo International MEXICO S.A. de C.V.                         |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Mexico     
|Daewoo International Guangzhou Corp.                             |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | China      
|Daewoo Energy Central Asia                                       |  | Resource development                     |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Uzbekistan 
|Daewoo STC & Apparel Vietnam Ltd.                                |  | Textile manufacturing                    |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Vietnam    
|MYANMAR Daewoo International Ltd.                                |  | Textile manufacturing                    |  |                   |      |  |              |  | 55.00  |       |  | 55.00  |  |  |             |  |  |       | 55.00  |  |  |  | 55.00  |  |  | Myanmar    
|DAYTEK ELECTRONICS CORP.                                         |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Canada     
|Daewoo (M) SDN. BHD.                                             |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Malaysia   
|Daewoo CANADA LTD.                                               |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Canada     
|Daewoo EL SALVADOR S.A. DE C.V.                                  |  | Trading business                         |  |                   |      |  |              |  | 88.00  |       |  | 88.00  |  |  |             |  |  |       | 88.00  |  |  |  | 88.00  |  |  | El Salvador
|GEZIRA TANNERY CO., LTD.                                         |  | Leather manufacturing                    |  |                   |      |  |              |  | 60.00  |       |  | 60.00  |  |  |             |  |  |       | 60.00  |  |  |  | 60.00  |  |  | Sudan      
|POSCO (Zhangjiagang) Stainless Steel Processing Center Co., Ltd. |  | Steel manufacturing                      |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | China      
|Daewoo International Corporation (M) SDN BHD                     |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Malaysia   
|Daewoo International SHANGHAI CO., LTD.                          |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | China      
|PGSF, LLC                                                        |  | Bio tech Industry                        |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | USA        
|Xenesys Inc.                                                     |  | Power generation equipment manufacturing |  |                   | 29.58 |  |              |  | 21.36  |       |  | 50.94  |  |  | 29.58        |  |  |       | 21.36  |  |  |  | 50.94  |  |  | Japan      
|Daewoo International INDIA Private Ltd.                          |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | India      
|TECHREN Solar, LLC                                               |  | Electrical Industry                      |  |                   |      |  |              |  | 99.97  |       |  | 99.97  |  |  |             |  |  |       | 99.97  |  |  |  | 99.97  |  |  | USA        
|PT. POSCO E&C Indonesia                                          |  | Construction                             |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Indonesia  
|Hume Coal Pty. Ltd.                                              |  | Raw material manufacturing               |  |                   |      |  |              |  | 70.00  |       |  | 70.00  |  |  |             |  |  |       | 70.00  |  |  |  | 70.00  |  |  | Australia  
|Daewoo HANDELS GmbH                                              |  | Trading business                         |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | Germany    
|POSCO Foundation                                                 |  | Non-profit charitable organization       |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       | 100.00 |  |  |  | 100.00 |  |  | India      
|EPC EQUITIES LLP                                                 |  | Construction                             |  |                   |      |  |              |  | 70.00  |       |  | 70.00  |  |  |             |  |  |       |       |  |  |  |       |  |  | England    
|SANTOS CMI Construction Trading LLP                              |  | Construction                             |  |                   |      |  |              |  | 99.90  |       |  | 99.90  |  |  |             |  |  |       |       |  |  |  |       |  |  | England    
|SANTOS CMI INC. USA                                              |  | Construction                             |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       |       |  |  |  |       |  |  | USA        
|SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA                         |  | Construction                             |  |                   |      |  |              |  | 99.98  |       |  | 99.98  |  |  |             |  |  |       |       |  |  |  |       |  |  | Brazil     
|SANTOS CMI PERU S.A.                                             |  | Construction                             |  |                   |      |  |              |  | 99.99  |       |  | 99.99  |  |  |             |  |  |       |       |  |  |  |       |  |  | Peru       
|SANTOS CMI COSTA RICA S.A.                                       |  | Construction                             |  |                   |      |  |              |  | 100.00 |       |  | 100.00 |  |  |             |  |  |       |       |  |  |  |       |  |  | Costa Rica 



F-16



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                   |  |                                             |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |   |  |       |  |   |  |  |  |   |  |  |            
|-------------------------------------------------- |  | ------------------------------------------- |  | ------------- | ----------------- |  | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | - |  | ----- |  | - |  |  |  | - |  |  | -----------
|                                                   |  |                                             |  | Ownership (%) |                   |  | Region      
|                                                   |  | December 31, 2011                           |  |               | December 31, 2010 |  |             
|                                                   |  | Principal Operations                        |  | POSCO         |                   |  | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |   |  | Total |  |  
|SANTOS CMI CONSTRUCCIONES S.A. (URUGUAY)           |  | Construction                                |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Uruguay    
|GENTECH International INC.                         |  | Construction                                |  |               |                  |  |              |  | 90.00  |       |  |  | 90.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Panama     
|EPC INVESTMENTS C.V.                               |  | Construction                                |  |               |                  |  |              |  | 99.99  |       |  |  | 99.99  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Netherlands
|INGENIERiA Y CONSTRUCCION HOLAND CO S.A.           |  | Construction                                |  |               |                  |  |              |  | 99.90  |       |  |  | 99.90  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Ecuador    
|ASESORiA Y SERVICIOS EPC S.A CHILE                 |  | Construction                                |  |               |                  |  |              |  | 99.00  |       |  |  | 99.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Chile      
|SANTOS CMI S.A.                                    |  | Construction                                |  |               |                  |  |              |  | 70.00  |       |  |  | 70.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Ecuador    
|SANTOS CMI CONSTRUCCIONES DE CHILE S.A.            |  | Construction                                |  |               |                  |  |              |  | 99.00  |       |  |  | 99.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Chile      
|S&K -SANTOS CMI S.A. DE C.V. (MEXICO)              |  | Construction                                |  |               |                  |  |              |  | 99.00  |       |  |  | 99.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Mexico     
|COMPANIA DE AUTOMATIZACION & CONTROL, GENESYS S.A. |  | Construction                                |  |               |                  |  |              |  | 90.00  |       |  |  | 90.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Ecuador    
|VAUTIDAMERICAS S.A.                                |  | Construction                                |  |               |                  |  |              |  | 51.00  |       |  |  | 51.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Ecuador    
|SANTOS CMI Constructions Argentina S.A.            |  | Construction                                |  |               |                  |  |              |  | 95.00  |       |  |  | 95.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Argentina  
|POSCO E&C Brazil Ltd.                              |  | Construction                                |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Brazil     
|POSCO Electrical Steel Inida Private Limited       |  | Electrical Steel Manufacturing              |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | India      
|Daewoo International Cameroon PLC                  |  | Resource Development                        |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Cameroon   
|POSCO ASSAN TST STEEL Industry                     |  | Resource Development                        |  |               | 60.00             |  |              |  | 10.00  |       |  |  | 70.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Turkey     
|HONG KONG POSCO E&C (CHINA) Investment Co., Ltd.   |  | Investment                                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | HongKong   
|POSCO Klappan Coal Ltd.                            |  | Coal sales                                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Canada     
|DAESAN (Cambodia) Co., Ltd.                        |  | Investment                                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Cambodia   
|Brazil Sao Paulo Steel Processing Center Co., Ltd  |  | Steel manufacturing                         |  |               |                  |  |              |  | 76.00  |       |  |  | 76.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Brazil     
|POSCO (Dalian) IT CenterDevelopment Co., Ltd.      |  | Investment                                  |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | China      
|PT.POSCO Resources Indonesia                       |  | Mine development                            |  |               | 100.00            |  |              |  |       |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Indonesia  
|PT. POSCO ICT Indonesia                            |  | IT service and Electric Control Engineering |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Indonesia  
|PT. POSCO M-Tech Indonesia                         |  | Steel manufacturing                         |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Indonesia  
|PT. KRAKATAU POSCOPOWER                            |  | manufacturing & management                  |  |               |                  |  |              |  | 70.00  |       |  |  | 70.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Indonesia  
|POSCO RUS LLC.                                     |  | Trading business                            |  |               | 90.00             |  |              |  | 10.00  |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Russia     
|POSCO Thainox Co., Ltd.                            |  | Steel manufacturing                         |  |               | 94.93             |  |              |  |       |       |  |  | 94.93  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Thailand   
|Daewoo International ShanghaiWaigaoqiao Co., Ltd.  |  | Merchandising trade                         |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | China      
|PT. Bio Inti Agrindo                               |  | Forest resources Development                |  |               |                  |  |              |  | 85.00  |       |  |  | 85.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Indonesia  
|POSCO E&C Australia Pty Ltd.                       |  | Iron ore sales                              |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Australia  



F-17



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                               |  |                      |  |               |                   |  |              |  |        |       |  |  |        |  |  |              |   |  |       |  |   |  |  |  |   |  |  |        
|---------------------------------------------- |  | -------------------- |  | ------------- | ----------------- |  | ------------ |  | ------ | ----- |  |  | ------ |  |  | ------------ | - |  | ----- |  | - |  |  |  | - |  |  | -------
|                                               |  |                      |  | Ownership (%) |                   |  | Region      
|                                               |  | December 31, 2011    |  |               | December 31, 2010 |  |             
|                                               |  | Principal Operations |  | POSCO         |                   |  | Subsidiaries |  |        | Total |  |  | POSCO  |  |  | Subsidiaries |   |  | Total |  |  
|POSCO-TISCO (Jilin) ProcessingCenter Co., Ltd. |  | Steel manufacturing  |  |               | 73.53             |  |              |  | 14.71  |       |  |  | 88.24  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | China  
|Hunchun POSCO Logistics Co., Ltd.              |  | Logistics            |  |               |                  |  |              |  | 80.00  |       |  |  | 80.00  |  |  |              |  |  |       |  |  |  |  |  |  |  |  | China  
|USA SRDC Corporation                           |  | Scrap sale           |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | USA    
|Daewoo International Vietnam Co., Ltd.         |  | Trading business     |  |               |                  |  |              |  | 100.00 |       |  |  | 100.00 |  |  |              |  |  |       |  |  |  |  |  |  |  |  | Vietnam





|(*1) | In 2011, this company was included as a subsidiary as the Company has the power over more than half of the voting rights by virtue of an agreement with Postech, which has 4.72%
of ownership.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | These subsidiaries are included in the consolidated financial statements as the controlling company has control over them in consideration of the board of directors
composition and others.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-18



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(c) Summarized financial information of subsidiaries as of
December 31, 2011 and 2010 are as follows:

1) December 31, 2011



|                                                                                  |  |                      |           |  |             |  |           |        |  |  |           |   |  |                   |           |  |  |  |         |  
|--------------------------------------------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | --------- | ------ |  |  | --------- | - |  | ----------------- | --------- |  |  |  | ------- | -
|Company                                                                           |  | Assets               |           |  | Liabilities |  |           | Equity |  |  | Sales     |   |  | Net income (loss) |          
|                                                                                  |  | (in millions of Won) |          
|[Domestic]                                                                        |  |                      |           |  |             |  |           |        |  |  |           |   |  |                   |           |  |  |  |         |  
|POSCO E&C Co., Ltd.                                                               |  | (Won)                | 6,819,542 |  |             |  | 4,260,627 |        |  |  | 2,558,915 |   |  |                   | 6,142,026 |  |  |  | 109,921 |  
|POSCO P&S Co., Ltd.                                                               |  |                      | 1,017,070 |  |             |  | 472,175   |        |  |  | 544,895   |   |  |                   | 3,141,999 |  |  |  | 19,234  |  
|POSCO Coated & Color Steel Co., Ltd.                                              |  |                      | 521,471   |  |             |  | 297,947   |        |  |  | 223,524   |   |  |                   | 956,179   |  |  |  | (24,713 | )
|POSCO Plant Engineering Co., Ltd.                                                 |  |                      | 208,084   |  |             |  | 117,629   |        |  |  | 90,455    |   |  |                   | 597,508   |  |  |  | 6,758   |  
|POSCO ICT Co., Ltd.                                                               |  |                      | 687,657   |  |             |  | 446,640   |        |  |  | 241,017   |   |  |                   | 983,649   |  |  |  | 30,578  |  
|POSCO Research Institute                                                          |  |                      | 29,320    |  |             |  | 6,304     |        |  |  | 23,016    |   |  |                   | 30,844    |  |  |  | 216     |  
|Seoung Gwang Co., Ltd.                                                            |  |                      | 82,671    |  |             |  | 34,868    |        |  |  | 47,803    |   |  |                   | 14,652    |  |  |  | 2,522   |  
|POSCO Architects & Consultants Co., Ltd.                                          |  |                      | 93,268    |  |             |  | 40,458    |        |  |  | 52,810    |   |  |                   | 196,794   |  |  |  | 7,236   |  
|POSCO Specialty Steel Co., Ltd.                                                   |  |                      | 1,582,832 |  |             |  | 691,581   |        |  |  | 891,251   |   |  |                   | 1,662,896 |  |  |  | 127,573 |  
|POSTECH Venture Capital Corp.                                                     |  |                      | 34,222    |  |             |  | 1,094     |        |  |  | 33,128    |   |  |                   |          |  |  |  | 1,041   |  
|eNtoB Co., Ltd.                                                                   |  |                      | 99,382    |  |             |  | 69,607    |        |  |  | 29,775    |   |  |                   | 634,830   |  |  |  | 1,249   |  
|POSCO Chemtec Company Ltd. (formerly, POSCO Refractories & Environment Co., Ltd.) |  |                      | 479,615   |  |             |  | 152,416   |        |  |  | 327,199   |   |  |                   | 1,186,623 |  |  |  | 92,391  |  
|POSCO Terminal Co., Ltd.                                                          |  |                      | 96,806    |  |             |  | 15,145    |        |  |  | 81,661    |   |  |                   | 100,710   |  |  |  | 22,955  |  
|POSCO M-TECH Co., Ltd.                                                            |  |                      | 316,953   |  |             |  | 153,876   |        |  |  | 163,077   |   |  |                   | 602,155   |  |  |  | 12,447  |  
|POSCO ENERGY Co., Ltd. (formerly, POSCO Power Corp.)                              |  |                      | 2,891,382 |  |             |  | 2,327,398 |        |  |  | 563,984   |   |  |                   | 1,863,670 |  |  |  | 25,152  |  
|Postech 2006 Energy Fund                                                          |  |                      | 21,662    |  |             |  | 1,042     |        |  |  | 20,620    |   |  |                   |          |  |  |  | (202    | )
|PHP Co., Ltd.                                                                     |  |                      | 66,461    |  |             |  | 58,521    |        |  |  | 7,940     |   |  |                   | 4,456     |  |  |  | 483     |  
|POSCO TMC Co., Ltd.                                                               |  |                      | 204,738   |  |             |  | 113,595   |        |  |  | 91,143    |   |  |                   | 219,580   |  |  |  | 5,746   |  
|PNR Co., Ltd.                                                                     |  |                      | 159,076   |  |             |  | 129,198   |        |  |  | 29,878    |   |  |                   | 74,013    |  |  |  | 13,366  |  
|Megaasset Co., Ltd.                                                               |  |                      | 23,757    |  |             |  | 9,354     |        |  |  | 14,403    |   |  |                   | 63,667    |  |  |  | 5,794   |  
|POSCO Engineering Company (formerly Daewoo Engineering Company)                   |  |                      | 508,290   |  |             |  | 341,946   |        |  |  | 166,344   |   |  |                   | 980,340   |  |  |  | 3,225   |  
|Pohang Feul Cell Co. Ltd.                                                         |  |                      | 12,061    |  |             |  | 8,592     |        |  |  | 3,469     |   |  |                   | 2,235     |  |  |  | (286    | )
|Pohang SPFC Co., Ltd.                                                             |  |                      | 10,021    |  |             |  | 4,221     |        |  |  | 5,800     |   |  |                   | 38,117    |  |  |  | 1,170   |  
|POSWITH Co., Ltd.                                                                 |  |                      | 5,129     |  |             |  | 2,460     |        |  |  | 2,669     |   |  |                   | 13,745    |  |  |  | 151     |  
|BASYS INDUSTRY Co., Ltd.                                                          |  |                      | 967       |  |             |  | 266       |        |  |  | 701       |   |  |                   | 2,500     |  |  |  | 369     |  
|POSTECH BD Newundertaking fund                                                    |  |                      | 90        |  |             |  |          |        |  |  | 90        |   |  |                   |          |  |  |  | (1      | )
|POSBRO Co., Ltd.                                                                  |  |                      | 126       |  |             |  |          |        |  |  | 126       |   |  |                   |          |  |  |  | (54     | )
|POSCO AST Co., Ltd.                                                               |  |                      | 316,695   |  |             |  | 163,548   |        |  |  | 153,147   |   |  |                   | 365,682   |  |  |  | 4,972   |  
|DaiMyung TMS Co., Ltd.                                                            |  |                      | 28,350    |  |             |  | 52,497    |        |  |  | (24,147   | ) |  |                   | 6,265     |  |  |  | (3,695  | )
|POS-HiMETAL Co., Ltd.                                                             |  |                      | 309,369   |  |             |  | 268,788   |        |  |  | 40,581    |   |  |                   | 34,682    |  |  |  | (28,857 | )
|POSCO E&E Co., Ltd.                                                               |  |                      | 22,435    |  |             |  | 127       |        |  |  | 22,308    |   |  |                   |          |  |  |  | 508     |  
|POMIC Co., Ltd.                                                                   |  |                      | 4,411     |  |             |  | 2,431     |        |  |  | 1,980     |   |  |                   | 21,111    |  |  |  | 317     |  
|POSFINE Co., Ltd.                                                                 |  |                      | 62,775    |  |             |  | 48,146    |        |  |  | 14,629    |   |  |                   | 2,285     |  |  |  | (3,847  | )
|POS ECO HOUSING Co., Ltd.                                                         |  |                      | 8,190     |  |             |  | 1,846     |        |  |  | 6,344     |   |  |                   | 13,629    |  |  |  | 265     |  
|Mapo high broad parking Co., Ltd.                                                 |  |                      | 1,676     |  |             |  | 110       |        |  |  | 1,566     |   |  |                   |          |  |  |  | (355    | )
|Dakos Co., Ltd.                                                                   |  |                      | 783       |  |             |  | 321       |        |  |  | 462       |   |  |                   | 225       |  |  |  | (58     | )
|Kwang Yang SPFC Co., Ltd.                                                         |  |                      | 68,279    |  |             |  | 52,806    |        |  |  | 15,473    |   |  |                   | 4,686     |  |  |  | (2,156  | )
|POSCALCIUM Company, Ltd.                                                          |  |                      | 8,403     |  |             |  | 7,004     |        |  |  | 1,399     |   |  |                   | 106       |  |  |  | (1,353  | )
|Plant Engineering service Technology Co., Ltd.                                    |  |                      | 2,327     |  |             |  | 500       |        |  |  | 1,827     |   |  |                   | 6,259     |  |  |  | 354     |  
|9Digit Co., Ltd.                                                                  |  |                      | 33,820    |  |             |  | 27,091    |        |  |  | 6,729     |   |  |                   | 58,341    |  |  |  | (308    | )
|Postech Early Stage Fund                                                          |  |                      | 10,034    |  |             |  | 65        |        |  |  | 9,969     |   |  |                   |          |  |  |  | (31     | )
|Busan E&E Co., Ltd.                                                               |  |                      | 44,731    |  |             |  | 1,687     |        |  |  | 43,044    |   |  |                   |          |  |  |  | 127     |  
|POSCO Family Strategy Funds                                                       |  |                      | 57,678    |  |             |  | 250       |        |  |  | 57,428    |   |  |                   |          |  |  |  | 290     |  
|POREKA Co., Ltd.                                                                  |  |                      | 15,131    |  |             |  | 12,880    |        |  |  | 2,251     |   |  |                   | 20,785    |  |  |  | 1,158   |  
|Songdo SE Co., Ltd.                                                               |  |                      | 1,652     |  |             |  | 282       |        |  |  | 1,370     |   |  |                   | 2,761     |  |  |  | 77      |  



F-19



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                     |  |                      |           |  |             |  |           |        |  |  |           |   |  |                   |            |  |  |  |         |  
|---------------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | --------- | ------ |  |  | --------- | - |  | ----------------- | ---------- |  |  |  | ------- | -
|Company                                              |  | Assets               |           |  | Liabilities |  |           | Equity |  |  | Sales     |   |  | Net income (loss) |           
|                                                     |  | (in millions of Won) |          
|Posgreen Co., Ltd.                                   |  | (Won)                | 8,225     |  |             |  | 4,280     |        |  |  | 3,945     |   |  |                   | 2,944      |  |  |  | (33     | )
|Daewoo International Corporation                     |  |                      | 7,823,738 |  |             |  | 6,302,994 |        |  |  | 1,520,744 |   |  |                   | 18,758,511 |  |  |  | 160,088 |  
|POSCOLED Co., Ltd.                                   |  |                      | 28,717    |  |             |  | 5,917     |        |  |  | 22,800    |   |  |                   | 14,063     |  |  |  | (5,355  | )
|Gunsan SPFC Co., Ltd.                                |  |                      | 51,483    |  |             |  | 30,673    |        |  |  | 20,810    |   |  |                   | 53,797     |  |  |  | (236    | )
|POSCO NST Co., Ltd.                                  |  |                      | 158,470   |  |             |  | 121,493   |        |  |  | 36,977    |   |  |                   | 202,334    |  |  |  | (803    | )
|Pohang Scrap Recycling Center Co., Ltd.              |  |                      | 17,842    |  |             |  | 2,863     |        |  |  | 14,979    |   |  |                   | 1,748      |  |  |  | 143     |  
|PSC energy global Co., Ltd.                          |  |                      | 38,780    |  |             |  |          |        |  |  | 38,780    |   |  |                   |           |  |  |  | (1,595  | )
|Suncheon Ecotrans Co., Ltd.                          |  |                      | 25,526    |  |             |  | 2,878     |        |  |  | 22,648    |   |  |                   |           |  |  |  | 48      |  
|Shinan Energy Co., Ltd.                              |  |                      | 8,494     |  |             |  |          |        |  |  | 8,494     |   |  |                   |           |  |  |  | (56     | )
|Reco Metal Co., Ltd.                                 |  |                      | 15,043    |  |             |  | 13,280    |        |  |  | 1,763     |   |  |                   | 6,761      |  |  |  | (2,658  | )
|NewAltec Co., Ltd.                                   |  |                      | 114,744   |  |             |  | 17,171    |        |  |  | 97,573    |   |  |                   | 92,849     |  |  |  | 638     |  
|PONUTech Co., Ltd.                                   |  |                      | 9,919     |  |             |  | 182       |        |  |  | 9,737     |   |  |                   |           |  |  |  | (263    | )
|BLUE O&M Co., Ltd                                    |  |                      | 988       |  |             |  |          |        |  |  | 988       |   |  |                   |           |  |  |  | (12     | )
|[Foreign]                                            |  |                      |           |  |             |  |           |        |  |  |           |   |  |                   |            |  |  |  |         |  
|POSCO America Corporation                            |  |                      | 416,078   |  |             |  | 223,968   |        |  |  | 192,110   |   |  |                   | 419,258    |  |  |  | 8,866   |  
|POSCO Australia Pty. Ltd.                            |  |                      | 1,161,366 |  |             |  | 462,383   |        |  |  | 698,983   |   |  |                   | 136,144    |  |  |  | 283,875 |  
|POSCO Canada Ltd.                                    |  |                      | 565,424   |  |             |  | 82,867    |        |  |  | 482,557   |   |  |                   | 304,274    |  |  |  | 133,660 |  
|POSCO Asia Co., Ltd.                                 |  |                      | 540,685   |  |             |  | 504,059   |        |  |  | 36,626    |   |  |                   | 2,968,097  |  |  |  | 6,523   |  
|Dalian POSCO Steel Co., Ltd                          |  |                      | 49,104    |  |             |  | 58,254    |        |  |  | (9,150    | ) |  |                   | 90,990     |  |  |  | (8,711  | )
|POSCO-CTPC Co., Ltd.                                 |  |                      | 84,966    |  |             |  | 52,546    |        |  |  | 32,420    |   |  |                   | 134,930    |  |  |  | 1,320   |  
|POSCO-JKPC Co., Ltd.                                 |  |                      | 93,668    |  |             |  | 75,512    |        |  |  | 18,156    |   |  |                   | 87,203     |  |  |  | 1,405   |  
|International Business Center Corporation            |  |                      | 90,577    |  |             |  | 51,831    |        |  |  | 38,746    |   |  |                   | 25,889     |  |  |  | 11,655  |  
|POSCO E&C Vietnam Co., Ltd.                          |  |                      | 77,583    |  |             |  | 77,679    |        |  |  | (96       | ) |  |                   | 114,350    |  |  |  | 6,670   |  
|Zhangjiagang Pohang Stainless SteelCo., Ltd.         |  |                      | 1,569,551 |  |             |  | 986,798   |        |  |  | 582,753   |   |  |                   | 2,808,722  |  |  |  | 4,444   |  
|Guangdong Pohang Coated Steel Co., Ltd.              |  |                      | 394,452   |  |             |  | 163,785   |        |  |  | 230,667   |   |  |                   | 275,521    |  |  |  | (7,849  | )
|POSCO (Thailand) Company Ltd.                        |  |                      | 140,260   |  |             |  | 98,044    |        |  |  | 42,216    |   |  |                   | 231,144    |  |  |  | 1,227   |  
|Myanmar POSCO Steel Co., Ltd                         |  |                      | 27,519    |  |             |  | 9,580     |        |  |  | 17,939    |   |  |                   | 30,967     |  |  |  | 5,885   |  
|POSCO-JOPC Co., Ltd.                                 |  |                      | 80,896    |  |             |  | 76,118    |        |  |  | 4,778     |   |  |                   | 92,296     |  |  |  | 768     |  
|POSCO Investment Co., Ltd.                           |  |                      | 787,069   |  |             |  | 688,482   |        |  |  | 98,587    |   |  |                   | 10,792     |  |  |  | 10,509  |  
|POSCO-MKPC SDN BHD.                                  |  |                      | 165,789   |  |             |  | 116,928   |        |  |  | 48,861    |   |  |                   | 177,822    |  |  |  | 1,763   |  
|Qingdao Pohang Stainless Steel Co., Ltd.             |  |                      | 268,411   |  |             |  | 155,877   |        |  |  | 112,534   |   |  |                   | 615,532    |  |  |  | (3,110  | )
|POSCO (Suzhou) Automotive Processing CenterCo., Ltd. |  |                      | 305,690   |  |             |  | 220,468   |        |  |  | 85,222    |   |  |                   | 384,705    |  |  |  | 11,046  |  
|POSCO BioVentures L.P.                               |  |                      | 16,851    |  |             |  |          |        |  |  | 16,851    |   |  |                   |           |  |  |  | (4,226  | )
|PT. POSNESIA                                         |  |                      | 14,129    |  |             |  | 20        |        |  |  | 14,109    |   |  |                   |           |  |  |  | (28     | )
|POSCO E&C  Hawaii Inc.                              |  |                      | 914       |  |             |  | 503       |        |  |  | 411       |   |  |                   |           |  |  |  | (304    | )
|POS-Qingdao Coil Center Co., Ltd.                    |  |                      | 56,062    |  |             |  | 40,314    |        |  |  | 15,748    |   |  |                   | 117,470    |  |  |  | 65      |  
|POS-Ore Pty. Ltd.                                    |  |                      | 75,312    |  |             |  | 66,851    |        |  |  | 8,461     |   |  |                   | 250,347    |  |  |  | 132,737 |  
|POSCO-China Holding Corp.                            |  |                      | 427,447   |  |             |  | 160,423   |        |  |  | 267,024   |   |  |                   | 173,639    |  |  |  | 3,617   |  
|POSCO-Japan Co., Ltd.                                |  |                      | 1,157,755 |  |             |  | 1,017,990 |        |  |  | 139,765   |   |  |                   | 1,686,385  |  |  |  | 13,518  |  
|POS-CD Pty. Ltd.                                     |  |                      | 72,582    |  |             |  | 68,030    |        |  |  | 4,552     |   |  |                   | 22,575     |  |  |  | 557     |  
|POS-GC Pty. Ltd.                                     |  |                      | 79,517    |  |             |  | 32,397    |        |  |  | 47,120    |   |  |                   | 10,263     |  |  |  | (4,344  | )
|POSCO-India Private Ltd.                             |  |                      | 147,359   |  |             |  | 421       |        |  |  | 146,938   |   |  |                   |           |  |  |  | (1,034  | )
|POSCO-India Pune Steel Processing Centre Pvt. Ltd.   |  |                      | 168,309   |  |             |  | 145,655   |        |  |  | 22,654    |   |  |                   | 211,417    |  |  |  | (16,626 | )
|POSCO-JNPC Co., Ltd.                                 |  |                      | 192,177   |  |             |  | 176,268   |        |  |  | 15,909    |   |  |                   | 207,654    |  |  |  | 716     |  
|POSCO-Foshan Steel Processing Center Co., Ltd.       |  |                      | 178,488   |  |             |  | 135,213   |        |  |  | 43,275    |   |  |                   | 529,788    |  |  |  | 227     |  
|POSCO E&C (China) Co., Ltd.                          |  |                      | 120,135   |  |             |  | 82,361    |        |  |  | 37,774    |   |  |                   | 104,055    |  |  |  | 1,898   |  
|POSCO MPC S.A. de C.V.                               |  |                      | 192,538   |  |             |  | 182,180   |        |  |  | 10,358    |   |  |                   | 316,446    |  |  |  | (6,587  | )
|Zhangjigang Pohang Port Co., Ltd.                    |  |                      | 26,801    |  |             |  | 11,327    |        |  |  | 15,474    |   |  |                   | 6,244      |  |  |  | 222     |  
|Qingdao Pujin Steel Material Co., Ltd                |  |                      | 14,209    |  |             |  | 11,997    |        |  |  | 2,212     |   |  |                   | 79,732     |  |  |  | 13      |  
|POSCO-Vietnam Co., Ltd.                              |  |                      | 659,931   |  |             |  | 576,657   |        |  |  | 83,274    |   |  |                   | 962,490    |  |  |  | (46,976 | )
|POSCO-Mexico Co., Ltd.                               |  |                      | 488,782   |  |             |  | 422,155   |        |  |  | 66,627    |   |  |                   | 396,897    |  |  |  | (43,298 | )



F-20



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                        |  |                      |         |  |             |  |         |        |  |  |         |   |  |                   |         |  |  |  |         |  
|------------------------------------------------------- |  | -------------------- | ------- |  | ----------- |  | ------- | ------ |  |  | ------- | - |  | ----------------- | ------- |  |  |  | ------- | -
|Company                                                 |  | Assets               |         |  | Liabilities |  |         | Equity |  |  | Sales   |   |  | Net income (loss) |        
|                                                        |  | (in millions of Won) |        
|POSCO-India Delhi Steel Processing Centre Pvt. Ltd      |  | (Won)                | 85,349  |  |             |  | 75,582  |        |  |  | 9,767   |   |  |                   | 129,434 |  |  |  | (9,824  | )
|POSCO-Poland Wroclaw Steel Processing CenterCo., Ltd    |  |                      | 62,709  |  |             |  | 49,981  |        |  |  | 12,728  |   |  |                   | 71,871  |  |  |  | (1,483  | )
|POS-NP Pty. Ltd.                                        |  |                      | 57,890  |  |             |  | 15,003  |        |  |  | 42,887  |   |  |                   | 48,404  |  |  |  | 9,480   |  
|POSCO-Vietnam Processing Center Co., Ltd.               |  |                      | 71,203  |  |             |  | 50,417  |        |  |  | 20,786  |   |  |                   | 159,369 |  |  |  | 26      |  
|POSCO (Chongqing) Automotive Processing Center Co, Ltd. |  |                      | 69,253  |  |             |  | 59,468  |        |  |  | 9,785   |   |  |                   | 62,795  |  |  |  | (1,622  | )
|Suzhou POS-CORE Technology Co., Ltd.                    |  |                      | 60,082  |  |             |  | 33,980  |        |  |  | 26,102  |   |  |                   | 96,008  |  |  |  | 781     |  
|POSCO-JYPC Co., Ltd.                                    |  |                      | 67,587  |  |             |  | 64,165  |        |  |  | 3,422   |   |  |                   | 102,700 |  |  |  | 781     |  
|POSCO-Malaysia SDN. BHD.                                |  |                      | 88,635  |  |             |  | 112,566 |        |  |  | (23,931 | ) |  |                   | 140,709 |  |  |  | (4,114  | )
|POS-Minerals Corporation                                |  |                      | 113,694 |  |             |  |        |        |  |  | 113,694 |   |  |                   |        |  |  |  | (808    | )
|POSCO (Wuhu) Automotive Processing Center Co., Ltd.     |  |                      | 69,613  |  |             |  | 45,766  |        |  |  | 23,847  |   |  |                   | 92,554  |  |  |  | 618     |  
|POSCO E&C India Private Ltd.                            |  |                      | 35,982  |  |             |  | 31,304  |        |  |  | 4,678   |   |  |                   | 4,966   |  |  |  | 1,135   |  
|POSCO E&C SMART                                         |  |                      | 4,670   |  |             |  | 4,034   |        |  |  | 636     |   |  |                   | 4,421   |  |  |  | 135     |  
|POSCO-Philippine Manila Processing Center Inc.          |  |                      | 27,412  |  |             |  | 17,492  |        |  |  | 9,920   |   |  |                   | 45,680  |  |  |  | 266     |  
|Dalian POSCON Dongbang Automatic Co., Ltd.              |  |                      | 8,083   |  |             |  | 2,996   |        |  |  | 5,087   |   |  |                   | 5,104   |  |  |  | 382     |  
|SANPU TRADING CO., LTD.                                 |  |                      | 1,842   |  |             |  | 5       |        |  |  | 1,837   |   |  |                   | 73      |  |  |  | 3       |  
|Zhangjiagang BLZ Pohang International Trading Co., Ltd. |  |                      | 15,720  |  |             |  | 10,881  |        |  |  | 4,839   |   |  |                   | 100,833 |  |  |  | 116     |  
|POSCO Mexico Human Tech.                                |  |                      | 787     |  |             |  | 481     |        |  |  | 306     |   |  |                   | 5,378   |  |  |  | 221     |  
|POSCO Mexico East Steel Distribution CenterCo., Ltd     |  |                      | 13,186  |  |             |  | 1,353   |        |  |  | 11,833  |   |  |                   | 5,638   |  |  |  | 110     |  
|POSCO ICT-China                                         |  |                      | 1,737   |  |             |  | 1,294   |        |  |  | 443     |   |  |                   | 4,920   |  |  |  | 114     |  
|DWEMEX S.A.DE C.V.                                      |  |                      | 226     |  |             |  | 62      |        |  |  | 164     |   |  |                   | 2       |  |  |  | (29     | )
|POS MPC Servicios de C.V.                               |  |                      | 667     |  |             |  | 458     |        |  |  | 209     |   |  |                   | 4,902   |  |  |  | 90      |  
|EUROTALY S.A.                                           |  |                      | 16,733  |  |             |  | 127     |        |  |  | 16,606  |   |  |                   | 24      |  |  |  | (898    | )
|POSCO South East Asia Pte. Ltd.                         |  |                      | 5,232   |  |             |  | 2,633   |        |  |  | 2,599   |   |  |                   | 62,235  |  |  |  | 256     |  
|Europe Steel Distribution Center                        |  |                      | 6,775   |  |             |  | 991     |        |  |  | 5,784   |   |  |                   | 13,354  |  |  |  | 322     |  
|VECTUS Ltd.                                             |  |                      | 3,066   |  |             |  | 5,126   |        |  |  | (2,060  | ) |  |                   | 3,560   |  |  |  | (1,530  | )
|POSCO VST Co., Ltd.                                     |  |                      | 356,484 |  |             |  | 268,005 |        |  |  | 88,479  |   |  |                   | 264,616 |  |  |  | (10,669 | )
|POSCO Maharashtra Steel Pvt. Ltd.                       |  |                      | 372,434 |  |             |  | 149,442 |        |  |  | 222,992 |   |  |                   | 44      |  |  |  | 2,036   |  
|POSCO India Chennai Steel Processing Centre Pvt. Ltd.   |  |                      | 89,782  |  |             |  | 80,514  |        |  |  | 9,268   |   |  |                   | 134,409 |  |  |  | (3,232  | )
|POSCO Turkey Nilufer Processing Center Co., Ltd.        |  |                      | 49,588  |  |             |  | 40,578  |        |  |  | 9,010   |   |  |                   | 38,729  |  |  |  | (3,971  | )
|POSCO Vietnam Ha Noi Processing Center Co., Ltd.        |  |                      | 47,931  |  |             |  | 40,500  |        |  |  | 7,431   |   |  |                   | 55,239  |  |  |  | 902     |  
|POSCO (Liaoning) Automotive Processing Center Co., Ltd. |  |                      | 84,315  |  |             |  | 61,131  |        |  |  | 23,184  |   |  |                   | 117,395 |  |  |  | 3,267   |  
|POSCO-Indonesia Jakarta Processing Center               |  |                      | 62,550  |  |             |  | 55,069  |        |  |  | 7,481   |   |  |                   | 64,597  |  |  |  | 216     |  
|POSCO E&C Venezuela C.A                                 |  |                      | 138     |  |             |  |        |        |  |  | 138     |   |  |                   |        |  |  |  |        |  
|PT. MRI                                                 |  |                      | 12,251  |  |             |  | 17,626  |        |  |  | (5,375  | ) |  |                   | 458     |  |  |  | (3,854  | )
|POSCORE-INDIA                                           |  |                      | 10,917  |  |             |  | 8,446   |        |  |  | 2,471   |   |  |                   | 15,186  |  |  |  | (48     | )
|POSCO America Alabama Processing CenterCo., Ltd.        |  |                      | 63,014  |  |             |  | 50,007  |        |  |  | 13,007  |   |  |                   | 85,381  |  |  |  | (858    | )
|PT DEC Indonesia                                        |  |                      | 4,577   |  |             |  | 4,752   |        |  |  | (175    | ) |  |                   | 13,962  |  |  |  | (267    | )
|POSCO (Yantai) Automotive Processing Center Co., Ltd.   |  |                      | 40,586  |  |             |  | 24,355  |        |  |  | 16,231  |   |  |                   | 32,301  |  |  |  | 172     |  
|POSCO India Steel Distribution Center Private Ltd.      |  |                      | 5,224   |  |             |  | 2,204   |        |  |  | 3,020   |   |  |                   | 786     |  |  |  | (427    | )
|POSCO China Dalian Plate Processing Center Co., Ltd.    |  |                      | 106,525 |  |             |  | 65,888  |        |  |  | 40,637  |   |  |                   | 66,113  |  |  |  | (165    | )
|POSCO-South Asia Co., Ltd.                              |  |                      | 13,703  |  |             |  | 199     |        |  |  | 13,504  |   |  |                   | 8,015   |  |  |  | 1,039   |  
|POSCO SS-VINA Co., LTD                                  |  |                      | 74,438  |  |             |  | 409     |        |  |  | 74,029  |   |  |                   |        |  |  |  | (1,122  | )
|POSCO WA Pty. Ltd.                                      |  |                      | 212,984 |  |             |  | 9       |        |  |  | 212,975 |   |  |                   |        |  |  |  | (33,142 | )
|POSCO E&C  UZ                                          |  |                      | 2,279   |  |             |  | 1,789   |        |  |  | 490     |   |  |                   | 2,046   |  |  |  | 104     |  
|POSCO Australia GP Limited                              |  | (Won)                | 97,196  |  |             |  | 5       |        |  |  | 97,191  |   |  |                   |        |  |  |  | (8      | )



F-21



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                                |  |                      |         |  |             |  |         |        |  |  |         |   |  |                   |         |  |  |  |         |  
|--------------------------------------------------------------- |  | -------------------- | ------- |  | ----------- |  | ------- | ------ |  |  | ------- | - |  | ----------------- | ------- |  |  |  | ------- | -
|Company                                                         |  | Assets               |         |  | Liabilities |  |         | Equity |  |  | Sales   |   |  | Net income (loss) |        
|                                                                |  | (in millions of Won) |        
|Daewoo International America Corp.                              |  |                      | 283,653 |  |             |  | 241,259 |        |  |  | 42,394  |   |  |                   | 984,378 |  |  |  | 5,372   |  
|Daewoo International Deutschland GmbH                           |  |                      | 115,256 |  |             |  | 105,288 |        |  |  | 9,968   |   |  |                   | 482,585 |  |  |  | 314     |  
|Daewoo International Japan Corp.                                |  |                      | 245,086 |  |             |  | 236,533 |        |  |  | 8,553   |   |  |                   | 804,864 |  |  |  | 981     |  
|Daewoo International Singapore Pte. Ltd.                        |  |                      | 43,647  |  |             |  | 38,982  |        |  |  | 4,665   |   |  |                   | 902,315 |  |  |  | 481     |  
|Daewoo Italia S.r.l.                                            |  |                      | 63,859  |  |             |  | 60,247  |        |  |  | 3,612   |   |  |                   | 361,821 |  |  |  | 145     |  
|Daewoo Cement (Shandong) Co., Ltd.                              |  |                      | 221,807 |  |             |  | 291,000 |        |  |  | (69,193 | ) |  |                   | 133,502 |  |  |  | 20,361  |  
|Daewoo (China) Co., Ltd.                                        |  |                      | 150,079 |  |             |  | 101,449 |        |  |  | 48,630  |   |  |                   | 54,521  |  |  |  | 726     |  
|PT. RISMAR Daewoo Apparel                                       |  |                      | 17,767  |  |             |  | 18,417  |        |  |  | (650    | ) |  |                   | 58,182  |  |  |  | 1,246   |  
|Daewoo Textile Fergana LLC                                      |  |                      | 64,437  |  |             |  | 65,968  |        |  |  | (1,531  | ) |  |                   | 132,866 |  |  |  | (11,994 | )
|Daewoo Textile Bukhara LLC                                      |  |                      | 51,939  |  |             |  | 49,630  |        |  |  | 2,309   |   |  |                   | 51,312  |  |  |  | (11,500 | )
|Daewoo International Australia Holdings Pty. Ltd.               |  |                      | 151,462 |  |             |  | 12,964  |        |  |  | 138,498 |   |  |                   | 1,935   |  |  |  | 199     |  
|Daewoo Paper Manufacturing Co., Ltd.                            |  |                      | 76,855  |  |             |  | 72,385  |        |  |  | 4,470   |   |  |                   | 76,632  |  |  |  | (5,210  | )
|Tianjin Daewoo. Paper Co., Ltd                                  |  |                      | 14,589  |  |             |  | 33,029  |        |  |  | (18,440 | ) |  |                   |        |  |  |  |        |  
|POSCO Mauritius Ltd.                                            |  |                      | 24,648  |  |             |  | 2,839   |        |  |  | 21,809  |   |  |                   |        |  |  |  | (22     | )
|PT. KRAKATAU STEEL POSCO                                        |  |                      | 819,899 |  |             |  | 44,918  |        |  |  | 774,981 |   |  |                   |        |  |  |  | (2,385  | )
|MYANMAR Daewoo LTD.                                             |  |                      | 6,030   |  |             |  | 41      |        |  |  | 5,989   |   |  |                   | 1,373   |  |  |  | 152     |  
|Dawwoo International MEXICO S.A. de C.V.                        |  |                      | 68,030  |  |             |  | 64,189  |        |  |  | 3,841   |   |  |                   | 240,448 |  |  |  | 299     |  
|Daewoo International Guangzhou Corp.                            |  |                      | 7,666   |  |             |  | 7,473   |        |  |  | 193     |   |  |                   | 61,554  |  |  |  | (1,265  | )
|Daewoo Energy Central Asia                                      |  |                      | 15,571  |  |             |  | 322     |        |  |  | 15,249  |   |  |                   |        |  |  |  |        |  
|Daewoo STC & Apparel Vietnam Ltd.                               |  |                      | 3,848   |  |             |  | 1,313   |        |  |  | 2,535   |   |  |                   | 9,435   |  |  |  | 94      |  
|MYANMAR Daewoo International Ltd.                               |  |                      | 7,651   |  |             |  | 2,240   |        |  |  | 5,411   |   |  |                   | 11,947  |  |  |  | 759     |  
|POSCO (Zhangjiagang) Stainless Steel ProcessingCenter Co., Ltd. |  |                      | 63,505  |  |             |  | 51,088  |        |  |  | 12,417  |   |  |                   | 67,175  |  |  |  | 15      |  
|Daewoo International Corporation (M) SDN BHD                    |  |                      | 8,831   |  |             |  | 6,469   |        |  |  | 2,362   |   |  |                   | 21,190  |  |  |  | 157     |  
|Daewoo International SHANGHAI CO., LTD.                         |  |                      | 63,694  |  |             |  | 52,656  |        |  |  | 11,038  |   |  |                   | 91,541  |  |  |  | 1,286   |  
|PGSF, LLC                                                       |  |                      | 3,138   |  |             |  | 1       |        |  |  | 3,137   |   |  |                   |        |  |  |  | 280     |  
|Xenesys Inc.                                                    |  |                      | 11,804  |  |             |  | 240     |        |  |  | 11,564  |   |  |                   | 2,494   |  |  |  | (3,865  | )
|Daewoo International INDIA Private Ltd.                         |  |                      | 3,285   |  |             |  | 1,277   |        |  |  | 2,008   |   |  |                   | 3,343   |  |  |  | 69      |  
|TECHREN Solar, LLC                                              |  |                      | 5,184   |  |             |  |        |        |  |  | 5,184   |   |  |                   |        |  |  |  | (506    | )
|PT. POSCO E&C Indonesia                                         |  |                      | 37,495  |  |             |  | 34,094  |        |  |  | 3,401   |   |  |                   | 46,665  |  |  |  | 2,114   |  
|Hume Coal Pty. Ltd.                                             |  |                      | 24,316  |  |             |  | 2,499   |        |  |  | 21,817  |   |  |                   |        |  |  |  | (9      | )
|POSCO Foundation                                                |  |                      | 213     |  |             |  | 3       |        |  |  | 210     |   |  |                   |        |  |  |  | 3       |  
|EPC EQUITIES LLP                                                |  |                      | 11,391  |  |             |  | 11,283  |        |  |  | 108     |   |  |                   | 438     |  |  |  | (2,743  | )
|SANTOS CMI Construction Trading LLP                             |  |                      | 13,851  |  |             |  | 13,742  |        |  |  | 109     |   |  |                   | 2,750   |  |  |  | (1,323  | )
|SANTOS CMI INC. USA                                             |  |                      | 23,418  |  |             |  | 22,260  |        |  |  | 1,158   |   |  |                   | 11,604  |  |  |  | (155    | )
|SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA                        |  |                      | 18,771  |  |             |  | 9,381   |        |  |  | 9,390   |   |  |                   | 14,823  |  |  |  | 7,484   |  
|SANTOS CMI PERU S.A.                                            |  |                      | 26,074  |  |             |  | 20,500  |        |  |  | 5,574   |   |  |                   | 59,091  |  |  |  | 4,779   |  
|SANTOS CMI COSTA RICA S.A.                                      |  |                      | 11,856  |  |             |  | 11,480  |        |  |  | 376     |   |  |                   | 1,228   |  |  |  | (1,794  | )
|SANTOS CMI CONSTRUCCIONES S.A. (URUGUAY)                        |  |                      | 122     |  |             |  | 73      |        |  |  | 49      |   |  |                   |        |  |  |  | (9      | )
|GENTECH International INC.                                      |  |                      | 1,595   |  |             |  | 1,166   |        |  |  | 429     |   |  |                   | 1,800   |  |  |  | 728     |  
|EPC INVESTMENTS C.V.                                            |  |                      | 115     |  |             |  | 18      |        |  |  | 97      |   |  |                   |        |  |  |  | (6      | )
|INGENIERiA Y CONSTRUCCION HOLAND CO S.A.                        |  |                      | 115     |  |             |  | 2       |        |  |  | 113     |   |  |                   |        |  |  |  | (2      | )
|ASESORiA Y SERVICIOS EPC S.A CHILE                              |  |                      | 468     |  |             |  | 285     |        |  |  | 183     |   |  |                   | 635     |  |  |  | 88      |  
|SANTOS CMI S.A.                                                 |  |                      | 42,766  |  |             |  | 30,495  |        |  |  | 12,271  |   |  |                   | 34,879  |  |  |  | (5,430  | )
|SANTOS CMI CONSTRUCCIONES DE CHILE S.A.                         |  |                      | 8,430   |  |             |  | 2,669   |        |  |  | 5,761   |   |  |                   | 13,009  |  |  |  | 1,703   |  
|S&K -SANTOS CMI S.A. DE C.V. (MEXICO)                           |  |                      | 125     |  |             |  | 14      |        |  |  | 111     |   |  |                   | 203     |  |  |  | (208    | )
|COMPANIA DE AUTOMATIZACION & CONTROL, GENESYS S.A.              |  |                      | 10,982  |  |             |  | 8,392   |        |  |  | 2,590   |   |  |                   | 14,588  |  |  |  | 923     |  
|VAUTIDAMERICAS S.A.                                             |  |                      | 2,374   |  |             |  | 1,620   |        |  |  | 754     |   |  |                   | 1,765   |  |  |  | 141     |  
|SANTOS CMI Constructions Argentina S.A.                         |  |                      | 82      |  |             |  | 46      |        |  |  | 36      |   |  |                   |        |  |  |  | 1       |  
|POSCO E&C Brazil Ltd.                                           |  | (Won)                | 87,817  |  |             |  | 87,284  |        |  |  | 533     |   |  |                   | 6,200   |  |  |  | (465    | )
|POSCO Electrical Steel Inida Private Limited                    |  |                      | 26,448  |  |             |  | 138     |        |  |  | 26,310  |   |  |                   |        |  |  |  | 346     |  
|Daewoo International Cameroon PLC                               |  |                      | 1,233   |  |             |  |        |        |  |  | 1,233   |   |  |                   |        |  |  |  |        |  



F-22



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                   |  |                      |         |  |             |  |         |        |  |  |         |   |  |                   |         |  |  |  |         |  
|-------------------------------------------------- |  | -------------------- | ------- |  | ----------- |  | ------- | ------ |  |  | ------- | - |  | ----------------- | ------- |  |  |  | ------- | -
|Company                                            |  | Assets               |         |  | Liabilities |  |         | Equity |  |  | Sales   |   |  | Net income (loss) |        
|                                                   |  | (in millions of Won) |        
|POSCO ASSAN TST STEEL Industry                     |  |                      | 59,415  |  |             |  | 1,897   |        |  |  | 57,518  |   |  |                   |        |  |  |  | 1,724   |  
|HONG KONG POSCO E&C (CHINA) InvestmentCo., Ltd.    |  |                      | 171,127 |  |             |  | 174,814 |        |  |  | (3,687  | ) |  |                   |        |  |  |  | (3,466  | )
|DAESAN (Cambodia) Co., Ltd.                        |  |                      | 30,145  |  |             |  | 35,652  |        |  |  | (5,507  | ) |  |                   |        |  |  |  | (946    | )
|Brazil Sao Paulo Steel Processing Center Co., Ltd  |  |                      | 26,987  |  |             |  |        |        |  |  | 26,987  |   |  |                   |        |  |  |  |        |  
|POSCO (Dalian) IT Center Development Co., Ltd.     |  |                      | 152,725 |  |             |  | 1,271   |        |  |  | 151,454 |   |  |                   |        |  |  |  | (1,464  | )
|PT.POSCO Resources Indonesia                       |  |                      | 4,048   |  |             |  | 92      |        |  |  | 3,956   |   |  |                   |        |  |  |  | (415    | )
|PT. POSCO ICT Indonesia                            |  |                      | 3,480   |  |             |  | 2,661   |        |  |  | 819     |   |  |                   |        |  |  |  | (80     | )
|PT. POSCO M-Tech Indonesia                         |  |                      | 2,865   |  |             |  | 149     |        |  |  | 2,716   |   |  |                   | 3,329   |  |  |  | 61      |  
|PT. KRAKATAU POSCOPOWER                            |  |                      | 45,041  |  |             |  | 42,874  |        |  |  | 2,167   |   |  |                   |        |  |  |  | (134    | )
|POSCO RUS LLC.                                     |  |                      | 3,639   |  |             |  | 5       |        |  |  | 3,634   |   |  |                   |        |  |  |  | (273    | )
|POSCO Thainox Co., Ltd.                            |  |                      | 500,214 |  |             |  | 164,464 |        |  |  | 335,750 |   |  |                   | 401,257 |  |  |  | (22,466 | )
|Daewoo International Shanghai Waigaoqiao Co., Ltd. |  |                      | 13,804  |  |             |  | 13,256  |        |  |  | 548     |   |  |                   | 22,354  |  |  |  | 343     |  
|PT. Bio Inti Agrindo                               |  |                      | 18,900  |  |             |  | 9,714   |        |  |  | 9,186   |   |  |                   |        |  |  |  | (1,486  | )
|POSCO E&C Australia Pty Ltd.                       |  |                      | 381     |  |             |  | 624     |        |  |  | (243    | ) |  |                   |        |  |  |  | (237    | )
|POSCO-TISCO (Jilin) Processing Center Co., Ltd.    |  |                      | 12,587  |  |             |  | 12      |        |  |  | 12,575  |   |  |                   |        |  |  |  | (375    | )
|Hunchun POSCO Logistics Co., Ltd.                  |  |                      | 23,725  |  |             |  | 7       |        |  |  | 23,718  |   |  |                   |        |  |  |  | (229    | )
|USA SRDC Corporation                               |  |                      | 311     |  |             |  |        |        |  |  | 311     |   |  |                   |        |  |  |  |        |  
|Daewoo International Vietnam Co., Ltd.             |  |                      | 4,613   |  |             |  |        |        |  |  | 4,613   |   |  |                   |        |  |  |  |        |  



F-23



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) December 31, 2010



|                                                                                  |  |                      |           |  |             |  |           |        |  |  |           |   |  |                   |           |  |  |  |         |  
|--------------------------------------------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | --------- | ------ |  |  | --------- | - |  | ----------------- | --------- |  |  |  | ------- | -
|Company                                                                           |  | Assets               |           |  | Liabilities |  |           | Equity |  |  | Sales     |   |  | Net income (loss) |          
|                                                                                  |  | (in millions of Won) |          
|[Domestic]                                                                        |  |                      |           |  |             |  |           |        |  |  |           |   |  |                   |           |  |  |  |         |  
|POSCO E&C Co., Ltd.                                                               |  | (Won)                | 5,374,601 |  |             |  | 2,890,916 |        |  |  | 2,483,685 |   |  |                   | 6,248,379 |  |  |  | 174,483 |  
|POSCO P&S Co., Ltd.                                                               |  |                      | 954,120   |  |             |  | 425,125   |        |  |  | 528,995   |   |  |                   | 2,062,495 |  |  |  | 4,311   |  
|POSCO Coated & Color Steel Co., Ltd.                                              |  |                      | 500,115   |  |             |  | 250,341   |        |  |  | 249,774   |   |  |                   | 1,001,774 |  |  |  | 6,409   |  
|POSCO Plant Engineering Co., Ltd.                                                 |  |                      | 192,073   |  |             |  | 104,657   |        |  |  | 87,416    |   |  |                   | 439,529   |  |  |  | 11,986  |  
|POSCO ICT Co., Ltd.                                                               |  |                      | 650,864   |  |             |  | 439,011   |        |  |  | 211,853   |   |  |                   | 839,802   |  |  |  | 17,929  |  
|POSCO Research Institute                                                          |  |                      | 27,708    |  |             |  | 4,548     |        |  |  | 23,160    |   |  |                   | 23,207    |  |  |  | 319     |  
|Seoung Gwang Co., Ltd.                                                            |  |                      | 79,894    |  |             |  | 34,281    |        |  |  | 45,613    |   |  |                   | 15,567    |  |  |  | 2,601   |  
|POSCO Architects & Consultants Co., Ltd.                                          |  |                      | 88,792    |  |             |  | 41,247    |        |  |  | 47,545    |   |  |                   | 128,118   |  |  |  | 4,431   |  
|POSCO Specialty Steel Co., Ltd.                                                   |  |                      | 1,307,535 |  |             |  | 536,934   |        |  |  | 770,601   |   |  |                   | 1,543,122 |  |  |  | 101,901 |  
|POSTECH Venture Capital Corp.                                                     |  |                      | 33,170    |  |             |  | 877       |        |  |  | 32,293    |   |  |                   |          |  |  |  | 274     |  
|eNtoB Co., Ltd.                                                                   |  |                      | 66,039    |  |             |  | 36,728    |        |  |  | 29,311    |   |  |                   | 603,684   |  |  |  | 2,516   |  
|POSCO Chemtec Company Ltd. (formerly, POSCO Refractories & Environment Co., Ltd.) |  |                      | 371,160   |  |             |  | 128,254   |        |  |  | 242,906   |   |  |                   | 756,053   |  |  |  | 57,191  |  
|POSCO Terminal Co., Ltd.                                                          |  |                      | 68,503    |  |             |  | 8,494     |        |  |  | 60,009    |   |  |                   | 78,478    |  |  |  | 14,475  |  
|POSCO ENERGY Co., Ltd. (formerly, POSCO Power Corp.)                              |  |                      | 2,459,195 |  |             |  | 1,908,801 |        |  |  | 550,394   |   |  |                   | 827,534   |  |  |  | (35,641 | )
|Postech 2006 Energy Fund                                                          |  |                      | 26,869    |  |             |  | 324       |        |  |  | 26,545    |   |  |                   |          |  |  |  | (964    | )
|PHP Co., Ltd.                                                                     |  |                      | 66,001    |  |             |  | 58,545    |        |  |  | 7,456     |   |  |                   | 2,091     |  |  |  | (583    | )
|POSCO TMC Co., Ltd.                                                               |  |                      | 139,908   |  |             |  | 54,785    |        |  |  | 85,123    |   |  |                   | 189,686   |  |  |  | 6,138   |  
|PNR Co., Ltd.                                                                     |  |                      | 167,789   |  |             |  | 151,229   |        |  |  | 16,560    |   |  |                   | 27,281    |  |  |  | (17,813 | )
|Megaasset Co., Ltd.                                                               |  |                      | 67,875    |  |             |  | 58,958    |        |  |  | 8,917     |   |  |                   | 100,865   |  |  |  | 4,559   |  
|POSCO Engineering Company (formerly Daewoo Engineering Company)                   |  |                      | 434,122   |  |             |  | 276,845   |        |  |  | 157,277   |   |  |                   | 774,791   |  |  |  | 45,099  |  
|Pohang Feul Cell Co. Ltd.                                                         |  |                      | 13,091    |  |             |  | 9,337     |        |  |  | 3,754     |   |  |                   | 4,049     |  |  |  | (276    | )
|Pohang SPFC Co., Ltd.                                                             |  |                      | 13,471    |  |             |  | 8,732     |        |  |  | 4,739     |   |  |                   | 28,933    |  |  |  | (32     | )
|POSWITH Co., Ltd.                                                                 |  |                      | 4,248     |  |             |  | 1,731     |        |  |  | 2,517     |   |  |                   | 12,317    |  |  |  | 442     |  
|BASYS INDUSTRY Co., Ltd.                                                          |  |                      | 825       |  |             |  | 311       |        |  |  | 514       |   |  |                   | 990       |  |  |  | 72      |  
|POSTECH BD Newundertaking fund                                                    |  |                      | 90        |  |             |  |          |        |  |  | 90        |   |  |                   |          |  |  |  | (1      | )
|POSBRO Co., Ltd.                                                                  |  |                      | 181       |  |             |  |          |        |  |  | 181       |   |  |                   |          |  |  |  | (78     | )
|POSCO AST Co., Ltd.                                                               |  |                      | 238,881   |  |             |  | 134,526   |        |  |  | 104,355   |   |  |                   | 330,425   |  |  |  | 7,285   |  
|DaiMyung TMS Co., Ltd.                                                            |  |                      | 22,663    |  |             |  | 43,097    |        |  |  | (20,434   | ) |  |                   | 15,985    |  |  |  | (3,059  | )
|POS-HiMETAL Co., Ltd.                                                             |  |                      | 86,291    |  |             |  | 43,532    |        |  |  | 42,759    |   |  |                   |          |  |  |  | (5,771  | )
|POSCO E&E Co., Ltd.                                                               |  |                      | 17,777    |  |             |  | 69        |        |  |  | 17,708    |   |  |                   |          |  |  |  | 405     |  
|POMIC Co., Ltd.                                                                   |  |                      | 3,888     |  |             |  | 2,126     |        |  |  | 1,762     |   |  |                   | 19,922    |  |  |  | 403     |  
|POSFINE Co., Ltd.                                                                 |  |                      | 31,541    |  |             |  | 13,093    |        |  |  | 18,448    |   |  |                   |          |  |  |  | (883    | )
|POS ECO HOUSING Co., Ltd.                                                         |  |                      | 6,976     |  |             |  | 897       |        |  |  | 6,079     |   |  |                   | 2,231     |  |  |  | (738    | )
|Mapo high broad parking Co., Ltd.                                                 |  |                      | 1,690     |  |             |  | 4         |        |  |  | 1,686     |   |  |                   |          |  |  |  | (237    | )
|Dakos Co., Ltd.                                                                   |  |                      | 3,102     |  |             |  | 2,582     |        |  |  | 520       |   |  |                   | 4,314     |  |  |  | 274     |  
|Kwang Yang SPFC Co., Ltd.                                                         |  |                      | 10,065    |  |             |  | 13        |        |  |  | 10,052    |   |  |                   |          |  |  |  | 52      |  
|POSCALCIUM Company, Ltd.                                                          |  |                      | 8,526     |  |             |  | 5,755     |        |  |  | 2,771     |   |  |                   |          |  |  |  | (226    | )
|Plant Engineering service Technology Co., Ltd.                                    |  |                      | 1,912     |  |             |  | 440       |        |  |  | 1,472     |   |  |                   | 3,063     |  |  |  | 472     |  
|Postech Early Stage Fund                                                          |  |                      | 10,000    |  |             |  |          |        |  |  | 10,000    |   |  |                   |          |  |  |  |        |  
|Busan E&E Co., Ltd.                                                               |  |                      | 14,193    |  |             |  | 638       |        |  |  | 13,555    |   |  |                   |          |  |  |  | (140    | )
|POSCO Family Strategy Funds                                                       |  |                      | 28,538    |  |             |  |          |        |  |  | 28,538    |   |  |                   |          |  |  |  | (62     | )
|POREKA Co., Ltd.                                                                  |  |                      | 3,784     |  |             |  | 2,684     |        |  |  | 1,100     |   |  |                   | 6,274     |  |  |  | 100     |  
|Songdo SE Co., Ltd.                                                               |  |                      | 1,758     |  |             |  | 465       |        |  |  | 1,293     |   |  |                   | 1,021     |  |  |  | (7      | )
|Posgreen Co., Ltd.                                                                |  |                      | 3,978     |  |             |  |          |        |  |  | 3,978     |   |  |                   |          |  |  |  | (22     | )
|Daewoo International Corporation                                                  |  |                      | 6,249,151 |  |             |  | 4,921,296 |        |  |  | 1,327,855 |   |  |                   | 4,094,039 |  |  |  | 94,359  |  
|POSCOLED Co., Ltd.                                                                |  |                      | 28,591    |  |             |  | 638       |        |  |  | 27,953    |   |  |                   | 138       |  |  |  | (1,763  | )
|Gunsan SPFC Co., Ltd.                                                             |  |                      | 30,040    |  |             |  | 15,309    |        |  |  | 14,731    |   |  |                   | 89        |  |  |  | (196    | )
|POSCO NST Co., Ltd.                                                               |  |                      | 94,757    |  |             |  | 57,002    |        |  |  | 37,755    |   |  |                   | 33,164    |  |  |  | 55      |  
|Pohang Scrap Recycling Center Co., Ltd.                                           |  |                      | 14,841    |  |             |  |          |        |  |  | 14,841    |   |  |                   |          |  |  |  | (80     | )



F-24



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|                                                       |  |                      |           |  |             |  |         |        |  |  |         |   |  |                   |           |  |  |  |         |  
|------------------------------------------------------ |  | -------------------- | --------- |  | ----------- |  | ------- | ------ |  |  | ------- | - |  | ----------------- | --------- |  |  |  | ------- | -
|Company                                                |  | Assets               |           |  | Liabilities |  |         | Equity |  |  | Sales   |   |  | Net income (loss) |          
|                                                       |  | (in millions of Won) |          
|[Foreign]                                              |  |                      |           |  |             |  |         |        |  |  |         |   |  |                   |           |  |  |  |         |  
|POSCO America Corporation                              |  | (Won)                | 297,181   |  |             |  | 139,360 |        |  |  | 157,821 |   |  |                   | 288,907   |  |  |  | 9,039   |  
|POSCO Australia Pty. Ltd.                              |  |                      | 1,226,058 |  |             |  | 619,031 |        |  |  | 607,027 |   |  |                   | 106,387   |  |  |  | 50,288  |  
|POSCO Canada Ltd.                                      |  |                      | 424,571   |  |             |  | 65,608  |        |  |  | 358,963 |   |  |                   | 170,421   |  |  |  | 65,299  |  
|POSCO Asia Co., Ltd.                                   |  |                      | 510,844   |  |             |  | 481,379 |        |  |  | 29,465  |   |  |                   | 2,335,842 |  |  |  | 1,376   |  
|Dalian POSCO Steel Co., Ltd                            |  |                      | 155,703   |  |             |  | 155,589 |        |  |  | 114     |   |  |                   | 68,149    |  |  |  | (4,932  | )
|POSCO-CTPC Co., Ltd.                                   |  |                      | 77,281    |  |             |  | 47,763  |        |  |  | 29,518  |   |  |                   | 149,810   |  |  |  | 2,398   |  
|POSCO-JKPC Co., Ltd.                                   |  |                      | 86,911    |  |             |  | 70,353  |        |  |  | 16,558  |   |  |                   | 75,831    |  |  |  | 2,391   |  
|International Business Center Corporation              |  |                      | 95,860    |  |             |  | 56,088  |        |  |  | 39,772  |   |  |                   | 28,354    |  |  |  | 13,884  |  
|POSCO E&C Vietnam Co., Ltd.                            |  |                      | 53,600    |  |             |  | 72,731  |        |  |  | (19,131 | ) |  |                   | 72,865    |  |  |  | 3,753   |  
|Zhangjiagang Pohang Stainless Steel Co., Ltd.          |  |                      | 1,384,622 |  |             |  | 838,301 |        |  |  | 546,321 |   |  |                   | 2,461,020 |  |  |  | 44,034  |  
|Guangdong Pohang Coated Steel Co., Ltd.                |  |                      | 183,036   |  |             |  | 79,330  |        |  |  | 103,706 |   |  |                   | 251,416   |  |  |  | 25,547  |  
|POSCO (Thailand) Company Ltd.                          |  |                      | 163,287   |  |             |  | 118,332 |        |  |  | 44,955  |   |  |                   | 224,630   |  |  |  | 10,117  |  
|Myanmar POSCO Steel Co., Ltd                           |  |                      | 21,556    |  |             |  | 10,245  |        |  |  | 11,311  |   |  |                   | 24,321    |  |  |  | 3,481   |  
|POSCO-JOPC Co., Ltd.                                   |  |                      | 71,955    |  |             |  | 68,233  |        |  |  | 3,722   |   |  |                   | 76,947    |  |  |  | 766     |  
|POSCO Investment Co., Ltd.                             |  |                      | 674,018   |  |             |  | 587,339 |        |  |  | 86,679  |   |  |                   |          |  |  |  | 4,451   |  
|POSCO-MKPC SDN BHD.                                    |  |                      | 116,837   |  |             |  | 69,179  |        |  |  | 47,658  |   |  |                   | 135,852   |  |  |  | 3,395   |  
|Qingdao Pohang Stainless Steel Co., Ltd.               |  |                      | 233,241   |  |             |  | 124,372 |        |  |  | 108,869 |   |  |                   | 542,446   |  |  |  | 5,047   |  
|POSCO (Suzhou) Automotive Processing CenterCo., Ltd.   |  |                      | 219,427   |  |             |  | 149,199 |        |  |  | 70,228  |   |  |                   | 352,367   |  |  |  | 13,688  |  
|POSCO BioVentures L.P.                                 |  |                      | 20,553    |  |             |  | 72      |        |  |  | 20,481  |   |  |                   |          |  |  |  | (10,536 | )
|PT. POSNESIA                                           |  |                      | 13,900    |  |             |  | 21      |        |  |  | 13,879  |   |  |                   |          |  |  |  | (14     | )
|POSCO E&C  Hawaii Inc.                                |  |                      | 1,234     |  |             |  | 509     |        |  |  | 725     |   |  |                   |          |  |  |  | (793    | )
|POS-Qingdao Coil Center Co., Ltd.                      |  |                      | 60,395    |  |             |  | 45,576  |        |  |  | 14,819  |   |  |                   | 149,653   |  |  |  | 1,089   |  
|POS-Ore Pty. Ltd.                                      |  |                      | 104,226   |  |             |  | 12,717  |        |  |  | 91,509  |   |  |                   | 118,687   |  |  |  | 55,491  |  
|POSCO-China Holding Corp.                              |  |                      | 288,754   |  |             |  | 55,571  |        |  |  | 233,183 |   |  |                   | 148,503   |  |  |  | 459     |  
|POSCO-Japan Co., Ltd.                                  |  |                      | 793,265   |  |             |  | 675,363 |        |  |  | 117,902 |   |  |                   | 1,490,633 |  |  |  | 9,850   |  
|POS-CD Pty. Ltd.                                       |  |                      | 69,439    |  |             |  | 65,494  |        |  |  | 3,945   |   |  |                   | 15,214    |  |  |  | (1,771  | )
|POS-GC Pty. Ltd.                                       |  |                      | 34,274    |  |             |  | 8,686   |        |  |  | 25,588  |   |  |                   | 12,475    |  |  |  | 664     |  
|POSCO-India Private Ltd.                               |  |                      | 92,865    |  |             |  | 181     |        |  |  | 92,684  |   |  |                   |          |  |  |  | (21,612 | )
|POSCO-India Pune Steel Processing Centre Pvt. Ltd.     |  |                      | 176,716   |  |             |  | 132,501 |        |  |  | 44,215  |   |  |                   | 206,138   |  |  |  | 8,761   |  
|POSCO-JNPC Co., Ltd.                                   |  |                      | 153,189   |  |             |  | 138,864 |        |  |  | 14,325  |   |  |                   | 179,031   |  |  |  | 2,499   |  
|POSCO-Foshan Steel Processing                          |  |                      |           |  |             |  |         |        |  |  |         |   |  |                   |           |  |  |  |         |  
|Center Co., Ltd.                                       |  |                      | 129,474   |  |             |  | 88,799  |        |  |  | 40,675  |   |  |                   | 518,268   |  |  |  | 6,229   |  
|POSCO E&C (China) Co., Ltd.                            |  |                      | 80,201    |  |             |  | 57,311  |        |  |  | 22,890  |   |  |                   | 117,558   |  |  |  | 889     |  
|POSCO MPC S.A. de C.V.                                 |  |                      | 178,641   |  |             |  | 160,551 |        |  |  | 18,090  |   |  |                   | 240,277   |  |  |  | (2,161  | )
|Zhangjigang Pohang Port Co., Ltd.                      |  |                      | 26,905    |  |             |  | 12,502  |        |  |  | 14,403  |   |  |                   | 5,200     |  |  |  | (789    | )
|Qingdao Pujin Steel Material Co., Ltd                  |  |                      | 7,092     |  |             |  | 5,019   |        |  |  | 2,073   |   |  |                   | 73,408    |  |  |  | 114     |  
|POSCO-Vietnam Co., Ltd.                                |  |                      | 745,465   |  |             |  | 619,297 |        |  |  | 126,168 |   |  |                   | 813,637   |  |  |  | (64,111 | )
|POSCO-Mexico Co., Ltd.                                 |  |                      | 425,200   |  |             |  | 346,865 |        |  |  | 78,335  |   |  |                   | 302,595   |  |  |  | (24,004 | )
|POSCO-India Delhi Steel Processing Centre Pvt. Ltd     |  |                      | 92,712    |  |             |  | 70,813  |        |  |  | 21,899  |   |  |                   | 113,056   |  |  |  | 8,919   |  
|POSCO-Poland Wroclaw Steel Processing CenterCo., Ltd   |  |                      | 49,691    |  |             |  | 33,788  |        |  |  | 15,903  |   |  |                   | 53,941    |  |  |  | 1,929   |  
|POS-NP Pty. Ltd.                                       |  |                      | 57,987    |  |             |  | 13,771  |        |  |  | 44,216  |   |  |                   | 44,773    |  |  |  | 5,282   |  
|POSCO-Vietnam Processing Center Co., Ltd.              |  |                      | 58,283    |  |             |  | 36,039  |        |  |  | 22,244  |   |  |                   | 85,698    |  |  |  | 4,419   |  
|POSCO (Chongqing) Automotive Processing CenterCo, Ltd. |  |                      | 73,480    |  |             |  | 62,378  |        |  |  | 11,102  |   |  |                   | 84,385    |  |  |  | 694     |  
|Suzhou POS-CORE Technology Co., Ltd.                   |  |                      | 56,718    |  |             |  | 32,833  |        |  |  | 23,885  |   |  |                   | 89,248    |  |  |  | 1,559   |  
|POSCO-JYPC Co., Ltd.                                   |  |                      | 55,319    |  |             |  | 53,396  |        |  |  | 1,923   |   |  |                   | 74,565    |  |  |  | (1,017  | )
|POSCO-Malaysia SDN. BHD.                               |  |                      | 78,027    |  |             |  | 98,183  |        |  |  | (20,156 | ) |  |                   | 125,209   |  |  |  | (6,022  | )
|POS-Minerals Corporation                               |  |                      | 113,105   |  |             |  |        |        |  |  | 113,105 |   |  |                   |          |  |  |  | (1,188  | )
|POSCO (Wuhu) Automotive Processing CenterCo., Ltd.     |  |                      | 50,592    |  |             |  | 28,674  |        |  |  | 21,918  |   |  |                   | 124,687   |  |  |  | 2,872   |  
|POSCO E&C India Private Ltd.                           |  |                      | 2,612     |  |             |  | 677     |        |  |  | 1,935   |   |  |                   | 463       |  |  |  | (1,508  | )
|POSCO E&C SMART                                        |  |                      | 532       |  |             |  |        |        |  |  | 532     |   |  |                   |          |  |  |  | (203    | )
|POSCO-Philippine Manila Processing Center Inc.         |  |                      | 25,448    |  |             |  | 15,888  |        |  |  | 9,560   |   |  |                   | 37,558    |  |  |  | 1,462   |  
|Dalian POSCON Dongbang Automatic Co., Ltd.             |  |                      | 7,181     |  |             |  | 2,647   |        |  |  | 4,534   |   |  |                   | 4,013     |  |  |  | 393     |  
|SANPU TRADING CO., LTD.                                |  |                      | 2,424     |  |             |  | 691     |        |  |  | 1,733   |   |  |                   | 89        |  |  |  | (156    | )
|Zhangjiagang BLZ Pohang International TradingCo., Ltd. |  |                      | 10,274    |  |             |  | 5,817   |        |  |  | 4,457   |   |  |                   | 70,923    |  |  |  | 29      |  
|POSCO Mexico Human Tech.                               |  |                      | 522       |  |             |  | 269     |        |  |  | 253     |   |  |                   | 4,206     |  |  |  | 166     |  
|POSCO Mexico East Steel Distribution Center Co., Ltd   |  |                      | 13,872    |  |             |  | 2,370   |        |  |  | 11,502  |   |  |                   | 5,547     |  |  |  | 696     |  



F-25



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                                 |  |                      |         |  |             |  |         |        |  |  |         |   |  |                   |         |  |  |  |         |  
|---------------------------------------------------------------- |  | -------------------- | ------- |  | ----------- |  | ------- | ------ |  |  | ------- | - |  | ----------------- | ------- |  |  |  | ------- | -
|Company                                                          |  | Assets               |         |  | Liabilities |  |         | Equity |  |  | Sales   |   |  | Net income (loss) |        
|                                                                 |  | (in millions of Won) |        
|POSCO Gulf Logistics LLC.                                        |  | (Won)                | 772     |  |             |  | 1       |        |  |  | 771     |   |  |                   | 40      |  |  |  | (86     | )
|POSCO ICT-China                                                  |  |                      | 1,787   |  |             |  | 1,476   |        |  |  | 311     |   |  |                   | 3,884   |  |  |  | 26      |  
|DWEMEX S.A.DE C.V.                                               |  |                      | 370     |  |             |  | 171     |        |  |  | 199     |   |  |                   | 2,084   |  |  |  | 45      |  
|POS MPC Servicios de C.V.                                        |  |                      | 747     |  |             |  | 545     |        |  |  | 202     |   |  |                   | 4,837   |  |  |  | 115     |  
|EUROTALY S.A.                                                    |  |                      | 4,628   |  |             |  | 107     |        |  |  | 4,521   |   |  |                   | 32      |  |  |  | (846    | )
|POSCO South East Asia Pte. Ltd.                                  |  |                      | 1,816   |  |             |  | 41      |        |  |  | 1,775   |   |  |                   | 34,196  |  |  |  | 121     |  
|Europe Steel Distribution Center                                 |  |                      | 6,863   |  |             |  | 1,217   |        |  |  | 5,646   |   |  |                   | 11,789  |  |  |  | 513     |  
|VECTUS Ltd.                                                      |  |                      | 1,255   |  |             |  | 1,721   |        |  |  | (466    | ) |  |                   | 1,886   |  |  |  | (2,352  | )
|POSCO VST Co., Ltd.                                              |  |                      | 195,191 |  |             |  | 131,450 |        |  |  | 63,741  |   |  |                   | 210,656 |  |  |  | (8,333  | )
|POSCO Maharashtra Steel Pvt. Ltd.                                |  |                      | 159,641 |  |             |  | 79,556  |        |  |  | 80,085  |   |  |                   |        |  |  |  | (895    | )
|POSCO India Chennai Steel Processing Centre Pvt. Ltd.            |  |                      | 78,906  |  |             |  | 64,493  |        |  |  | 14,413  |   |  |                   | 52,221  |  |  |  | 73      |  
|POSCO Turkey Nilufer Processing Center Co., Ltd.                 |  |                      | 37,285  |  |             |  | 21,919  |        |  |  | 15,366  |   |  |                   | 3,032   |  |  |  | (2,220  | )
|POSCO Vietnam Ha Noi Processing Center Co., Ltd.                 |  |                      | 42,885  |  |             |  | 36,710  |        |  |  | 6,175   |   |  |                   | 39,675  |  |  |  | (836    | )
|POSCO (Liaoning) Automotive Processing Center Co., Ltd.          |  |                      | 75,444  |  |             |  | 56,654  |        |  |  | 18,790  |   |  |                   | 45,933  |  |  |  |        |  
|POSCO-Indonesia Jakarta Processing Center                        |  |                      | 34,309  |  |             |  | 27,026  |        |  |  | 7,283   |   |  |                   | 42,882  |  |  |  | 1,023   |  
|POSCO E&C Venezuela C.A                                          |  |                      | 137     |  |             |  |        |        |  |  | 137     |   |  |                   |        |  |  |  |        |  
|PT. MRI                                                          |  |                      | 15,933  |  |             |  | 17,380  |        |  |  | (1,447  | ) |  |                   | 1,738   |  |  |  | (931    | )
|POSCORE-INDIA                                                    |  |                      | 6,175   |  |             |  | 3,264   |        |  |  | 2,911   |   |  |                   | 2,936   |  |  |  | (113    | )
|POSCO America Alabama Processing Center Co., Ltd.                |  |                      | 46,133  |  |             |  | 32,406  |        |  |  | 13,727  |   |  |                   | 29,350  |  |  |  | (1,443  | )
|PT DEC Indonesia                                                 |  |                      | 10,439  |  |             |  | 10,345  |        |  |  | 94      |   |  |                   |        |  |  |  | (208    | )
|POSCO (Yantai) Automotive Processing Center Co., Ltd.            |  |                      | 23,072  |  |             |  | 7,904   |        |  |  | 15,168  |   |  |                   |        |  |  |  | (885    | )
|POSCO India Steel Distribution Center Private Ltd.               |  |                      | 3,887   |  |             |  | 130     |        |  |  | 3,757   |   |  |                   | 7       |  |  |  | (67     | )
|POSCO China Dalian Plate Processing Center Co., Ltd.             |  |                      | 55,631  |  |             |  | 17,056  |        |  |  | 38,575  |   |  |                   |        |  |  |  | (3,631  | )
|POSCO-South Asia Co., Ltd.                                       |  |                      | 14,009  |  |             |  | 919     |        |  |  | 13,090  |   |  |                   | 2,954   |  |  |  | (479    | )
|POSCO SS-VINA Co., LTD                                           |  |                      | 38,598  |  |             |  | (851    | )      |  |  | 39,449  |   |  |                   |        |  |  |  | 166     |  
|POSCO WA Pty. Ltd.                                               |  |                      | 225,645 |  |             |  | 808     |        |  |  | 224,837 |   |  |                   |        |  |  |  | (637    | )
|POSCO E&C  UZ                                                   |  |                      | 168     |  |             |  |        |        |  |  | 168     |   |  |                   |        |  |  |  | 1       |  
|POSCO Australia GP Limited                                       |  |                      | 26      |  |             |  |        |        |  |  | 26      |   |  |                   |        |  |  |  | 3       |  
|Daewoo International America Corp.                               |  |                      | 224,042 |  |             |  | 187,747 |        |  |  | 36,295  |   |  |                   | 163,615 |  |  |  | (769    | )
|Daewoo International Deutschland GmbH                            |  |                      | 111,603 |  |             |  | 101,814 |        |  |  | 9,789   |   |  |                   | 115,421 |  |  |  | 428     |  
|Daewoo International Japan Corp.                                 |  |                      | 172,547 |  |             |  | 165,486 |        |  |  | 7,061   |   |  |                   | 184,725 |  |  |  | (638    | )
|Daewoo International Singapore Pte. Ltd.                         |  |                      | 86,642  |  |             |  | 82,455  |        |  |  | 4,187   |   |  |                   | 259,530 |  |  |  | 109     |  
|Daewoo Italia S.r.l.                                             |  |                      | 99,538  |  |             |  | 95,826  |        |  |  | 3,712   |   |  |                   | 96,203  |  |  |  | 139     |  
|Daewoo Cement (Shandong) Co., Ltd.                               |  |                      | 210,277 |  |             |  | 296,165 |        |  |  | (85,888 | ) |  |                   |        |  |  |  |        |  
|Daewoo (China) Co., Ltd.                                         |  |                      | 43,392  |  |             |  | 6,425   |        |  |  | 36,967  |   |  |                   | 1,417   |  |  |  | (874    | )
|PT. RISMAR Daewoo Apparel                                        |  |                      | 15,757  |  |             |  | 17,416  |        |  |  | (1,659  | ) |  |                   | 12,843  |  |  |  | (2,278  | )
|Daewoo Textile Fergana LLC                                       |  |                      | 82,983  |  |             |  | 71,895  |        |  |  | 11,088  |   |  |                   | 38,614  |  |  |  | 3,486   |  
|Daewoo Textile Bukhara LLC                                       |  |                      | 64,283  |  |             |  | 49,522  |        |  |  | 14,761  |   |  |                   | 15,156  |  |  |  | (887    | )
|Daewoo International Australia Holdings Pty. Ltd.                |  |                      | 132,221 |  |             |  | 4,947   |        |  |  | 127,274 |   |  |                   | 293     |  |  |  | 139     |  
|Daewoo Paper Manufacturing Co., Ltd.                             |  |                      | 79,383  |  |             |  | 67,741  |        |  |  | 11,642  |   |  |                   | 22,311  |  |  |  | (18,788 | )
|Tianjin Daewoo. Paper Co., Ltd                                   |  |                      | 13,789  |  |             |  | 31,217  |        |  |  | (17,428 | ) |  |                   | 8,388   |  |  |  | (368    | )
|POSCO Mauritius Ltd.                                             |  |                      | 21,548  |  |             |  |        |        |  |  | 21,548  |   |  |                   |        |  |  |  |        |  
|PT. KRAKATAU STEEL POSCO                                         |  |                      | 3,091   |  |             |  | 1,021   |        |  |  | 2,070   |   |  |                   |        |  |  |  | (198    | )
|MYANMAR Daewoo LTD.                                              |  |                      | 6,242   |  |             |  | 462     |        |  |  | 5,780   |   |  |                   | 203     |  |  |  | (17     | )
|Dawwoo International MEXICO S.A. de C.V.                         |  |                      | 50,298  |  |             |  | 46,319  |        |  |  | 3,979   |   |  |                   | 50,566  |  |  |  | (118    | )
|Daewoo International Guangzhou Corp.                             |  |                      | 10,549  |  |             |  | 9,094   |        |  |  | 1,455   |   |  |                   | 4,702   |  |  |  | (30     | )
|Daewoo Energy Central Asia                                       |  |                      | 15,686  |  |             |  | 627     |        |  |  | 15,059  |   |  |                   |        |  |  |  |        |  
|Daewoo STC & Apparel Vietnam Ltd.                                |  |                      | 4,057   |  |             |  | 1,454   |        |  |  | 2,603   |   |  |                   | 2,262   |  |  |  | (27     | )
|MYANMAR Daewoo International Ltd.                                |  |                      | 6,190   |  |             |  | 2,020   |        |  |  | 4,170   |   |  |                   | 2,233   |  |  |  | 35      |  
|POSCO (Zhangjiagang) Stainless Steel Processing Center
Co., Ltd. |  |                      | 11,841  |  |             |  | 111     |        |  |  | 11,730  |   |  |                   |        |  |  |  |        |  
|Daewoo International Corporation (M) SDN BHD                     |  |                      | 1,138   |  |             |  |        |        |  |  | 1,138   |   |  |                   |        |  |  |  |        |  
|Daewoo International SHANGHAI CO., LTD.                          |  |                      | 6,916   |  |             |  |        |        |  |  | 6,916   |   |  |                   |        |  |  |  |        |  
|PGSF, LLC                                                        |  |                      | 2,922   |  |             |  | 1       |        |  |  | 2,921   |   |  |                   |        |  |  |  | (619    | )
|Xenesys Inc.                                                     |  |                      | 18,333  |  |             |  | 2,653   |        |  |  | 15,680  |   |  |                   | 935     |  |  |  | (3,624  | )
|Daewoo International INDIA Private Ltd.                          |  |                      | 2,273   |  |             |  |        |        |  |  | 2,273   |   |  |                   |        |  |  |  |        |  
|TECHREN Solar, LLC                                               |  |                      | 230     |  |             |  |        |        |  |  | 230     |   |  |                   |        |  |  |  |        |  
|PT. POSCO E&C Indonesia                                          |  |                      | 1,216   |  |             |  | 29      |        |  |  | 1,187   |   |  |                   |        |  |  |  | (235    | )
|POSCO Foundation                                                 |  |                      | 244     |  |             |  | 2       |        |  |  | 242     |   |  |                   |        |  |  |  | (12     | )



F-26



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(d) Details of associates

Details of associates as of December 31, 2011 and 2010 are as follows:



|                                                    |  |                                               |  |                  |       |  |                  |  |       |        |  |           
|--------------------------------------------------- |  | --------------------------------------------- |  | ---------------- | ----- |  | ---------------- |  | ----- | ------ |  | ----------
|                                                    |  |                                               |  | Ownership (% )   |       |  |                 
|Investee                                            |  | Category of Business                          |  | December 31,2011 |       |  | December 31,2010 |  |       | Region
|[Domestic]                                          |  |                                               |  |                  |       |  |                  |  |       |        |  |           
|MIDAS Information Technology Co., Ltd.              |  | Engineering                                   |  |                  | 25.46 |  |                  |  | 25.46 |        |  | Seoul     
|Metapolis Co., Ltd.                                 |  | Multiplex development                         |  |                  | 40.05 |  |                  |  | 40.05 |        |  | Hwaseong  
|Songdo New City Development Inc.                    |  | Real estate                                   |  |                  | 29.90 |  |                  |  | 29.90 |        |  | Seoul     
|POSMATE Co., Ltd.                                   |  | Services                                      |  |                  | 30.00 |  |                  |  | 30.00 |        |  | Seoul     
|POSCO M-TECH Co., Ltd.                              |  | Packing materials manufacturing               |  |                  |      |  |                  |  | 48.85 |        |  | Pohang    
|Gail International Korea Ltd.                       |  | Real estate                                   |  |                  | 29.90 |  |                  |  | 29.90 |        |  | Seoul     
|SNNC Co., Ltd.                                      |  | Raw material manufacturing and sale           |  |                  | 49.00 |  |                  |  | 49.00 |        |  | Gwangyang 
|Chungju enterprise city development Co., Ltd.       |  | Real estate                                   |  |                  | 25.10 |  |                  |  | 25.10 |        |  | Chungju   
|Taegisan Wind Power Corporation                     |  | Wind power plant construction and management  |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Hoengseong
|KOREASOLARPARK Co., Ltd.                            |  | Solar power plant construction and management |  |                  | 37.50 |  |                  |  | 37.50 |        |  | Youngam   
|Garolim Tidal Power Plant Co., Ltd.                 |  | Generation of electricity                     |  |                  | 32.13 |  |                  |  | 32.13 |        |  | Seosan    
|Cheongna IBT Co., Ltd. (*2)                         |  | Multiplex development                         |  |                  | 18.58 |  |                  |  | 18.58 |        |  | Incheon   
|PSIB Co., Ltd.                                      |  | Non-resident building lease                   |  |                  | 49.00 |  |                  |  | 49.00 |        |  | Seoul     
|Universal Studios Resort Development Co., Ltd.      |  | Construction                                  |  |                  | 22.10 |  |                  |  | 22.10 |        |  | Hwaseong  
|Universal Studios Resort Asset Management Corp.     |  | Real estate services                          |  |                  | 26.16 |  |                  |  | 26.16 |        |  | Seoul     
|Daewoo National Car Gwangju Selling Co., Ltd.       |  | Real estate                                   |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Gwangju   
|Uitrans Co., Ltd.                                   |  | Transporting                                  |  |                  | 38.19 |  |                  |  | 38.19 |        |  | Seoul     
|Suwon Green Environment Co., Ltd.                   |  | Construction                                  |  |                  | 27.50 |  |                  |  | 27.50 |        |  | Hwaseong  
|Pajoo & Viro Co., Ltd.                              |  | Construction                                  |  |                  | 40.00 |  |                  |  | 40.00 |        |  | Paju      
|Green Gimpo Co., Ltd.                               |  | Construction                                  |  |                  | 31.84 |  |                  |  | 29.90 |        |  | Gimpo     
|Busan-Gimhae Light Rail Transit Co., Ltd.           |  | Transporting                                  |  |                  | 25.00 |  |                  |  | 25.00 |        |  | Gimhae    
|Incheon-Gimpo Highway Co., Ltd.                     |  | Construction                                  |  |                  | 25.82 |  |                  |  | 25.00 |        |  | Anyang    
|Green Jangryang Co., Ltd.                           |  | Sewerage treatment                            |  |                  | 25.00 |  |                  |  | 25.00 |        |  | Pohang    
|Green Tongyeong Enviro Co., Ltd.                    |  | Sewerage treatment                            |  |                  | 20.40 |  |                  |  | 20.40 |        |  | Tongyoung 
|POSPLATE Co., Ltd.                                  |  | Services                                      |  |                  | 48.95 |  |                  |  | 48.95 |        |  | Gwangyang 
|Pure Gimpo Co., Ltd.                                |  | Construction                                  |  |                  | 28.79 |  |                  |  | 29.13 |        |  | Seoul     
|Pohang Techno Valley AMC Co., Ltd.                  |  | Construction                                  |  |                  | 29.50 |  |                  |  | 29.50 |        |  | Pohang    
|Sungjin Geotec Co., Ltd.                            |  | Industrial machinery manufacturing            |  |                  | 36.69 |  |                  |  | 43.11 |        |  | Ulsan     
|Kyobo Life Insurance Co., Ltd.                      |  | Life insurance                                |  |                  | 24.00 |  |                  |  | 24.00 |        |  | Seoul     
|Dongbang Special Steel Co., Ltd.                    |  | Steel processing and sales                    |  |                  | 35.82 |  |                  |  | 35.82 |        |  | Pohang    
|Pure Iksan Co., Ltd.                                |  | Construction                                  |  |                  | 23.50 |  |                  |  | 31.71 |        |  | Pohang    
|Chuncheon Clean Water Load CO., Ltd                 |  | Sewerage treatment                            |  |                  |      |  |                  |  | 26.55 |        |  | Chuncheon 
|DAERYUN POWER CO., LTD                              |  | Gas production and sales                      |  |                  |      |  |                  |  | 20.85 |        |  | Yangju    
|Gyeonggi CES Co., Ltd.                              |  | Facility construction                         |  |                  | 21.84 |  |                  |  | 21.84 |        |  | Yangju    
|Sunjin Gonghak Baeumteo Co., Ltd.                   |  | Domitories management                         |  |                  |      |  |                  |  | 22.38 |        |  | Gwangju   
|Inje Autopia Co., Ltd.                              |  | Management                                    |  |                  |      |  |                  |  | 27.53 |        |  | Inje      
|Innovalley Co., Ltd.                                |  | Real estate development                       |  |                  | 28.77 |  |                  |  | 28.77 |        |  | Yongin    
|Applied Science Corp.                               |  | Machinery manufacturing                       |  |                  | 29.30 |  |                  |  | 29.30 |        |  | Paju      
|SENTECH KOREA Corp.                                 |  | Manufacturing                                 |  |                  | 20.25 |  |                  |  | 20.25 |        |  | Paju      
|AROMA POSTECH RENEWABLEENERGY Co., Ltd.             |  | Other science research                        |  |                  | 28.57 |  |                  |  | 28.57 |        |  | Seoul     
|Hyundai Investment Network Private Equity Fund (*1) |  | Mine investment                               |  |                  | 50.00 |  |                  |  |      |        |  | Seoul     
|Pohang Techno Valley PFV Corporation (*1)           |  | Real estate development                       |  |                  | 28.65 |  |                  |  |      |        |  | Pohang    
|BLUE OCEAN Private Equity Fund (*1)                 |  | Private equity financial                      |  |                  | 27.52 |  |                  |  |      |        |  | Seoul     
|SUNAM Co., Ltd. (*1)                                |  | Power supply manufacturing                    |  |                  | 23.91 |  |                  |  |      |        |  | Seoul     
|Kones Corporation (*1)                              |  | Technical service                             |  |                  | 41.67 |  |                  |  |      |        |  | Gyeongju  



F-27



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                                                           |  |                                               |  |                  |       |  |                  |  |       |        |  |                        
|-------------------------------------------------------------------------- |  | --------------------------------------------- |  | ---------------- | ----- |  | ---------------- |  | ----- | ------ |  | -----------------------
|                                                                           |  |                                               |  | Ownership (% )   |       |  |                 
|Investee                                                                   |  | Category of Business                          |  | December 31,2011 |       |  | December 31,2010 |  |       | Region
|[Foreign]                                                                  |  |                                               |  |                  |       |  |                  |  |       |        |  |                        
|VSC POSCO Steel Corporation                                                |  | Steel manufacturing and Sale                  |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Vietnam                
|KOBRASCO                                                                   |  | Facility lease                                |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Brazil                 
|USS-POSCO Industries                                                       |  | Material manufacturing and sale               |  |                  | 50.00 |  |                  |  | 50.00 |        |  | USA                    
|Poschrome Pty. Ltd.                                                        |  | Raw material manufacturing and sale           |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Republic ofSouth Africa
|POS-Hyundai Steel Manufacturing IndiaPrivate Ltd.                          |  | Steel processing and sale                     |  |                  | 29.50 |  |                  |  | 29.50 |        |  | India                  
|POSVINA Co., Ltd.                                                          |  | Plating steel sheet manufacturing             |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Vietnam                
|PT. POSMI Steel Indonesia                                                  |  | Steel processing and sale                     |  |                  | 36.69 |  |                  |  | 36.69 |        |  | Indonesia              
|CAML Resources Pty. Ltd.                                                   |  | Raw material manufacturing and sale           |  |                  | 33.34 |  |                  |  | 33.34 |        |  | Australia              
|Nickel Mining Company SAS                                                  |  | Raw material manufacturing and sale           |  |                  | 49.00 |  |                  |  | 49.00 |        |  | New Caledonia          
|Liaoning Rongyuan Posco RefractoriesCo., Ltd.                              |  | Manufacturing and sale                        |  |                  | 35.00 |  |                  |  | 35.00 |        |  | China                  
|POSK (PingHu) Processing CenterCo., Ltd                                    |  | Steel processing and sale                     |  |                  | 20.00 |  |                  |  | 20.00 |        |  | China                  
|AN KHANH NEW CITY DEVELOPMENT                                              |  | Highway construction and new town development |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Vietnam                
|Henan Tsingpu Ferro Alloy Co., Ltd.                                        |  | Raw material manufacturing and sale           |  |                  | 49.00 |  |                  |  | 49.00 |        |  | China                  
|United Spiral Pipe, LLC                                                    |  | Material manufacturing and sale               |  |                  | 35.00 |  |                  |  | 35.00 |        |  | USA                    
|Zhongyue POSCO (Qinhuangdau)Tinplate Industrial Co., Ltd.                  |  | Plating sheet manufacturing                   |  |                  | 34.00 |  |                  |  | 34.00 |        |  | China                  
|BX STEEL POSCO Cold RolledSheetCo., Ltd.                                   |  | Steel processing and sale                     |  |                  | 25.00 |  |                  |  | 25.00 |        |  | China                  
|POSCO-SAMSUNG-SlovakiaProcessing Center                                    |  | Steel processing and sale                     |  |                  | 30.00 |  |                  |  | 30.00 |        |  | Slovakia               
|Eureka Moly LLC                                                            |  | Raw material manufacturing and sale           |  |                  | 20.00 |  |                  |  | 20.00 |        |  | USA                    
|POSCO SAMSUNG Suzhou SteelProcessing Center Co., Ltd.                      |  | Steel processing and sale                     |  |                  | 30.00 |  |                  |  | 30.00 |        |  | China                  
|POSCO SeAH Steel Wire (Nantong)Co., Ltd.                                   |  | Steel processing and sale                     |  |                  | 25.00 |  |                  |  | 25.00 |        |  | China                  
|POS-GSFC LLC                                                               |  | Steel processing and sale                     |  |                  | 48.98 |  |                  |  | 48.98 |        |  | UAE                    
|Yingkou Posrec Refractories Co., Ltd.                                      |  | Refractory manufacturing                      |  |                  | 25.00 |  |                  |  | 25.00 |        |  | China                  
|Zhangjiagang Pohang RefractoriesCo., Ltd.                                  |  | Refractory manufacturing                      |  |                  | 50.00 |  |                  |  | 50.00 |        |  | China                  
|Daewoo Engineering (THAILAND)Co., Ltd.                                     |  | Development and contract                      |  |                  | 48.90 |  |                  |  | 48.90 |        |  | Thailand               
|Sebang Steel                                                               |  | Scrap sale                                    |  |                  | 49.00 |  |                  |  | 49.00 |        |  | Japan                  
|NCR LLC                                                                    |  | Coal sale                                     |  |                  | 20.00 |  |                  |  | 20.00 |        |  | Canada                 
|AMCI (WA) Pty Ltd.                                                         |  | Iron ore sale & mine development              |  |                  | 49.00 |  |                  |  | 49.00 |        |  | Australia              
|POSCO YongXin Rare Earth MetalCo., Ltd.                                    |  | Energy & Resource development                 |  |                  | 31.00 |  |                  |  | 31.00 |        |  | China                  
|Shanghai Lansheng Daewoo Corporation                                       |  | Trading                                       |  |                  | 49.00 |  |                  |  | 49.00 |        |  | China                  
|Shanghai Waigaogiao Free Trade ZoneLansheng Daewoo Intl Trading Co., Ltd. |  | Trading                                       |  |                  | 49.00 |  |                  |  | 49.00 |        |  | China                  
|Hanjung Power Pty., Ltd                                                    |  | Electric power manufacturing and sale         |  |                  | 49.00 |  |                  |  | 49.00 |        |  | Papua New Guinea       
|Myanmar Korea Timber International Ltd.                                    |  | Plating sheet manufacturing                   |  |                  | 45.00 |  |                  |  | 45.00 |        |  | Myanmar                
|General Medicines Company Ltd.                                             |  | Medicine manufacturing and sale               |  |                  | 33.00 |  |                  |  | 33.00 |        |  | Myanmar                
|KOREA LNG Ltd.                                                             |  | Gas production and sales                      |  |                  | 20.00 |  |                  |  | 20.00 |        |  | England                
|DMSA, AMSA (*2)                                                            |  | Energy & Resource development                 |  |                  | 4.00  |  |                  |  | 4.00  |        |  | Madagascar             
|KG Power(M) SDN. BHD                                                       |  | Energy & Resource development                 |  |                  | 20.00 |  |                  |  | 20.00 |        |  | Malaysia               
|Daewoo (THAILAND) CO., LTD.                                                |  | Trading                                       |  |                  | 49.00 |  |                  |  | 49.00 |        |  | Thailand               
|N.I.CO., LTD.                                                              |  | Trading                                       |  |                  | 50.00 |  |                  |  | 50.00 |        |  | North Korea            



F-28



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                          |  |                                      |  |                  |       |  |                  |  |       |        |  |           
|----------------------------------------- |  | ------------------------------------ |  | ---------------- | ----- |  | ---------------- |  | ----- | ------ |  | ----------
|                                          |  |                                      |  | Ownership (% )   |       |  |                 
|Investee                                  |  | Category of Business                 |  | December 31,2011 |       |  | December 31,2010 |  |       | Region
|South-East Asia Gas Pipeline Company Ltd. |  | Pipeline construction                |  |                  | 25.04 |  |                  |  | 25.04 |        |  | Myanmar   
|GLOBAL KOMSCO Daewoo LLC                  |  | Mintage                              |  |                  | 35.00 |  |                  |  | 35.00 |        |  | Uzbekistan
|POSUK TITANIUM B.V                        |  | Steel manufacturing                  |  |                  | 50.00 |  |                  |  | 50.00 |        |  | Netherland
|POSCO-NPS Niobium LLC (*1)                |  | Mine development                     |  |                  | 50.00 |  |                  |  |      |        |  | USA       
|POSCO-POGEN AMP (*1)                      |  | Steel manufacturing                  |  |                  | 26.00 |  |                  |  |      |        |  | India     
|Klappan Coal Joint Venture                |  | Coal sale                            |  |                  | 20.00 |  |                  |  |      |        |  | Canada    
|AES-VCM Mong Duong Power Company Ltd.     |  | Coal sale                            |  |                  | 30.00 |  |                  |  |      |        |  | Vietnam   
|CSP(Compania Siderurgica do Pecem)        |  | Steel manufacturing and sale         |  |                  | 20.00 |  |                  |  |      |        |  | Brazil    
|PT.INDONESIA POS CHOSUN Ref               |  | Refractory manufacturing and sale    |  |                  | 30.00 |  |                  |  |      |        |  | Indonesia 
|NS-Thainox Auto Co., Ltd.                 |  | Steel manufacturing and sale         |  |                  | 49.00 |  |                  |  |      |        |  | Thailand  
|Korea-Siberia Wood                        |  | Forest resources Development         |  |                  | 50.00 |  |                  |  |      |        |  | Russia    
|PT. Tanggamus Electric Power (*1)         |  | Construction and engineering service |  |                  | 20.00 |  |                  |  |      |        |  | Indonesia 
|PT. Wampu Electric Power                  |  | Construction and engineering service |  |                  | 20.00 |  |                  |  |      |        |  | Indonesia 





|(*1) | These securities are newly established or acquired in 2011.
|---- | -----------------------------------------------------------



|(*2) | These securities are accounted for under the equity method of accounting even though the controlling companys percentage of ownership is below 20%, because it is able to
exercise significant influence on the investees.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-29



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(e) Consolidated subsidiaries acquired during the year ended
December 31, 2011 are as follows:



|                                                   |  |                      |           |  |               |  |        |        |  |                            
|-------------------------------------------------- |  | -------------------- | --------- |  | ------------- |  | ------ | ------ |  | ---------------------------
|Company                                            |  | Date of Acquisition  |           |  | Ownership (%) |  |        | Reason
|                                                   |  | (in millions of Won)
|PSC energy global Co., Ltd.                        |  |                      | 2011. 2.  |  |               |  | 100.00 |        |  | new investment             
|Suncheon Ecotrans Co., Ltd.                        |  |                      | 2011. 2.  |  |               |  | 100.00 |        |  | new investment             
|POSCO M-TECH Co., Ltd.                             |  |                      | 2011. 5.  |  |               |  | 48.85  |        |  | delegation of voting rights
|9Digit Co., Ltd.                                   |  |                      | 2011. 5.  |  |               |  | 86.49  |        |  | delegation of voting rights
|Shinan Energy Co., Ltd.                            |  |                      | 2011. 4.  |  |               |  | 100.00 |        |  | new investment             
|Reco Metal Co., Ltd.                               |  |                      | 2011. 6.  |  |               |  | 88.60  |        |  | acquisition                
|NewAltec Co., Ltd.                                 |  |                      | 2011. 7.  |  |               |  | 60.10  |        |  | acquisition                
|PONUTech Co., Ltd.                                 |  |                      | 2011. 8.  |  |               |  | 100.00 |        |  | new investment             
|EPC EQUITIES LLP                                   |  |                      | 2011. 2.  |  |               |  | 70.00  |        |  | acquisition                
|SANTOS CMI Construction Trading LLP                |  |                      | 2011. 2.  |  |               |  | 99.90  |        |  | acquisition                
|SANTOS CMI INC. USA                                |  |                      | 2011. 2.  |  |               |  | 100.00 |        |  | acquisition                
|SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA           |  |                      | 2011. 2.  |  |               |  | 99.98  |        |  | acquisition                
|SANTOS CMI PERU S.A.                               |  |                      | 2011. 2.  |  |               |  | 99.99  |        |  | acquisition                
|SANTOS CMI COSTA RICA S.A.                         |  |                      | 2011. 2.  |  |               |  | 100.00 |        |  | acquisition                
|SANTOS CMI CONSTRUCCIONES S.A. (URUGUAY)           |  |                      | 2011. 2.  |  |               |  | 100.00 |        |  | acquisition                
|GENTECH International INC.                         |  |                      | 2011. 2.  |  |               |  | 90.00  |        |  | acquisition                
|EPC INVESTMENTS C.V.                               |  |                      | 2011. 2.  |  |               |  | 99.99  |        |  | acquisition                
|INGENIERiA Y CONSTRUCCION HOLAND CO S.A.           |  |                      | 2011. 2.  |  |               |  | 99.90  |        |  | acquisition                
|ASESORiA Y SERVICIOS EPC S.A CHILE                 |  |                      | 2011. 2.  |  |               |  | 99.00  |        |  | acquisition                
|SANTOS CMI S.A.                                    |  |                      | 2011. 2.  |  |               |  | 70.00  |        |  | acquisition                
|SANTOS CMI CONSTRUCCIONES DE CHILE S.A.            |  |                      | 2011. 2.  |  |               |  | 99.00  |        |  | acquisition                
|S&K -SANTOS CMI S.A. DE C.V. (MEXICO)              |  |                      | 2011. 2.  |  |               |  | 99.00  |        |  | acquisition                
|COMPANIA DE AUTOMATIZACION & CONTROL, GENESYS S.A. |  |                      | 2011. 2.  |  |               |  | 90.00  |        |  | acquisition                
|VAUTIDAMERICAS S.A.                                |  |                      | 2011. 2.  |  |               |  | 51.00  |        |  | acquisition                
|SANTOS CMI Constructions Argentina S.A.            |  |                      | 2011. 2.  |  |               |  | 95.00  |        |  | acquisition                
|HONG KONG POSCO E&C (CHINA) Investment Co., Ltd.   |  |                      | 2011. 3.  |  |               |  | 100.00 |        |  | new investment             
|POSCO ASSAN TST STEEL Industry                     |  |                      | 2011. 3.  |  |               |  | 70.00  |        |  | new investment             
|POSCO E&C Brazil Ltd.                              |  |                      | 2011. 5.  |  |               |  | 100.00 |        |  | new investment             
|POSCO Electrical Steel Inida Private Limited       |  |                      | 2011. 6.  |  |               |  | 100.00 |        |  | new investment             
|Daewoo International Cameroon PLC                  |  |                      | 2011. 6.  |  |               |  | 100.00 |        |  | new investment             
|POSCO Klappan Coal Ltd.                            |  |                      | 2011. 7.  |  |               |  | 100.00 |        |  | new investment             
|DAESAN (Cambodia) Co., Ltd.                        |  |                      | 2011. 7.  |  |               |  | 100.00 |        |  | acquisition                
|Brazil Sao Paulo Steel Processing Center Co., Ltd  |  |                      | 2011. 7.  |  |               |  | 76.00  |        |  | new investment             
|POSCO (Dalian) IT Center Development Co., Ltd.     |  |                      | 2011. 7.  |  |               |  | 100.00 |        |  | new investment             
|PT.POSCO Resources Indonesia                       |  |                      | 2011. 7.  |  |               |  | 99.80  |        |  | new investment             
|PT. POSCO ICT Indonesia                            |  |                      | 2011. 8.  |  |               |  | 95.00  |        |  | new investment             
|PT. POSCO M-Tech Indonesia                         |  |                      | 2011. 8.  |  |               |  | 100.00 |        |  | new investment             
|PT. KRAKATAU POSCOPOWER                            |  |                      | 2011. 8.  |  |               |  | 90.00  |        |  | new investment             
|POSCO RUS LLC.                                     |  |                      | 2011. 9.  |  |               |  | 100.00 |        |  | new investment             
|POSCO Thainox Co., Ltd.                            |  |                      | 2011. 9.  |  |               |  | 94.93  |        |  | acquisition                
|Daewoo International Shanghai Waigaoqiao Co., Ltd. |  |                      | 2011. 9.  |  |               |  | 100.00 |        |  | new investment             
|PT. Bio Inti Agrindo                               |  |                      | 2011. 9.  |  |               |  | 85.00  |        |  | acquisition                
|POSCO E&C Australia Pty Ltd.                       |  |                      | 2011. 9.  |  |               |  | 100.00 |        |  | new investment             
|POSCO-TISCO (Jilin) Processing Center Co., Ltd.    |  |                      | 2011. 9.  |  |               |  | 60.00  |        |  | new investment             
|Hunchun POSCO Logistics Co., Ltd.                  |  |                      | 2011. 10. |  |               |  | 80.00  |        |  | new investment             
|BLUE O&M Co., Ltd                                  |  |                      | 2011. 12. |  |               |  | 100.00 |        |  | new investment             
|USA SRDC Corporation                               |  |                      | 2011. 12. |  |               |  | 100.00 |        |  | new investment             
|Daewoo International Vietnam Co., Ltd.             |  |                      | 2011. 12. |  |               |  | 100.00 |        |  | new investment             



F-30



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(f) Cash outflows caused by the acquisitions



|                                         |  |                      |          |  
|---------------------------------------- |  | -------------------- | -------- | -
|                                         |  | Amounts              |         
|                                         |  | (in millions of Won) |         
|Consideration transferred                |  | (Won)                | 551,732  |  
|Less: cash and cash equivalents acquired |  |                      | (114,268 | )
|                                         |  |                      |          |  
|Total                                    |  | (Won)                | 437,464  |  
|                                         |  |                      |          |  



|2. | Statement of Compliance
|-- | -----------------------

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board. These are the Companys first consolidated financial statements prepared in accordance with IFRSs and IFRS No. 1 First-time adoption ofInternational Financial Reporting Standards (IFRS No. 1) has been applied.

The Companys date of
transition to IFRSs in accordance with IFRS 1 is January 1, 2010. Prior to the adoption of IFRSs, the Company prepared consolidated financial statements in accordance with Korean Generally Accepted Accounting Principles (K-GAAP). An
explanation of how the transition to IFRSs has affected the Companys reported financial position, financial performance and cash flows is provided in note 38.

Basis of measurement

The consolidated financial statements have been prepared on the
historical cost basis, except for the following material items in the statement of financial position, as described in the accounting policy below.



| | (a) | Derivatives instruments are measured at fair value
| | --- | --------------------------------------------------



| | (b) | Financial instruments at fair value through profit or loss (FVTPL) are measured at fair value
| | --- | ---------------------------------------------------------------------------------------------



| | (c) | Available-for-sale financial assets are measured at fair value
| | --- | --------------------------------------------------------------



| | (d) | The liability for a cash-settled stock appreciation rights is measured at fair value
| | --- | ------------------------------------------------------------------------------------



| | (e) | Defined benefit obligations are measured at the present value of the defined benefit obligation less the fair value of the plan assets
| | --- | --------------------------------------------------------------------------------------------------------------------------------------

Functional and presentation currency

These
consolidated financial statements are presented in Korean won, which is POSCOs functional currency and the currency of the primary economic environment in which POSCO operates.

Use of estimates and judgements

The preparation of the consolidated financial statements in
conformity with 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.



F-31



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the
consolidated financial statements is included in the following notes:



| |  |  | Note 11  Investment property
| | - |  | -----------------------------



| |  |  | Note 12  Property, plant and equipment, net
| | - |  | --------------------------------------------



| |  |  | Note 13  Impairment losses of goodwill
| | - |  | ---------------------------------------

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:



| |  |  | Note 17  Provisions
| | - |  | --------------------



| |  |  | Note 18  Employee Benefits
| | - |  | ---------------------------



| |  |  | Note 25  Construction Contracts
| | - |  | --------------------------------



| |  |  | Note 34  Commitments and Contingencies
| | - |  | ---------------------------------------



|3. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

The significant accounting policies applied by the Company in preparation of its consolidated financial statements are included below. The
accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing the opening IFRS statement of financial position at January 1, 2010 for the purpose of the transition to
IFRSs, unless otherwise indicated.

Consolidation policy



| | (a) | Subsidiaries
| | --- | ------------

A subsidiary is an entity that is
controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of the other entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Company controls another entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until
the date that control ceases.

If a member of the Company uses accounting policies other than those adopted in the consolidated
financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements. Intra-group balances and transactions, and any
unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if intra-group losses indicate an impairment that requires
recognition in the consolidated financial statements.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









| | (b) | Non-controlling interests
| | --- | -------------------------

Non-controlling
interests in a subsidiary are accounted for separately from the parents ownership interests in a subsidiary. Each component of net profit or loss and other comprehensive income is attributed to the owners of the parent and non-controlling
interest holders, even when the allocation reduces the non-controlling interest balance below zero.



| | (c) | Associates
| | --- | ----------

An associate is an entity in which the
Company has significant influence, but not control, over the entitys financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity.

The investment in an associate is initially recognized at cost and the carrying amount is increased or decreased to recognize the
Companys share of the profit or loss and changes in equity of the associate after the date of acquisition. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements. Intra-group losses recognized as expense if intra-group losses indicate an impairment that requires recognition in the consolidated financial statements.

If an associate uses accounting policies different from those of the Company for like transactions and events in similar circumstances, appropriate
adjustments are made to the Companys consolidated financial statements in applying the equity method.

When the Companys
share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the
Company has an obligation or has to make payments on behalf of the investee for further losses.



| | (d) | Joint Ventures
| | --- | --------------

Joint ventures are those entities
over whose activities the Company has joint control, established by contractual agreement, and require unanimous consent for strategic financial and operating decisions. The Company recognizes its interest in a jointly controlled entity using
proportionate consolidation by including separate line items for its share of the assets, liabilities, income and expenses of the jointly controlled entity in the consolidated financial statements.

Business combination



| | (a) | Business combination
| | --- | --------------------

A business combination is
accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

Each identifiable asset and liability is measured at its acquisition-date fair value except for below:



| |  |  | Leases and insurance contracts are required to be classified on the basis of the contractual terms and other factors
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | Only those contingent liabilities assumed in a business combination that are a present obligation and can be measured reliably are recognized
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









| |  |  | Deferred tax assets or liabilities are recognized and measured in accordance with IAS No. 12 Income Taxes
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Employee benefit arrangements are recognized and measured in accordance with IAS No. 19Employee Benefits
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Indemnification assets are recognized and measured on the same basis as the indemnified liability or asset
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Reacquired rights are measured in accordance with special provisions
| | - |  | --------------------------------------------------------------------



| |  |  | Liabilities or equity instruments related to share-based payment transactions are measured in accordance with the method in IFRS No. 2 Share-based
Payment
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Assets held for sale are measured at fair value less costs to sell in accordance with IFRS No. 5 Non-current Assets Held for Sale
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------

As of the acquisition date, non-controlling interests in the acquiree are measured as the non-controlling
interests proportionate share of the acquirees identifiable net assets.

The consideration transferred in a business
combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity
interests issued by the acquirer.

Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs
include finders fees; advisory, legal, accounting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing
debt and equity securities. Acquisition-related costs, other than those associated with the issue of debt or equity securities, are expensed in the periods in which the costs are incurred and the services are received. The costs to issue debt or
equity securities are recognized in accordance with IAS No. 32 Financial Instruments: Presentation and IAS No. 39 Financial Instruments: Recognition and Measurement.



| | (b) | Goodwill
| | --- | --------

The Company measures goodwill at the
acquisition date as:



| |  |  | the fair value of the consideration transferred; plus
| | - |  | -----------------------------------------------------



| |  |  | the recognized amount of any non-controlling interests in the acquiree; plus
| | - |  | ----------------------------------------------------------------------------



| |  |  | if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
| | - |  | -------------------------------------------------------------------------------------------------------------

When the excess is negative, bargain purchase gain is recognized immediately in profit or loss.

As part of its transition to IFRS, the Company elected to restate only those business combinations which occurred on or after January 1, 2010
in accordance with IFRS. In respect of acquisitions prior to January 1, 2010, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP, K-GAAP.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Foreign currency transactions and translation

Foreign currency transactions are initially recorded using the spot exchange rate between the functional currency and the foreign currency at the
date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the original transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date fair value was initially determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were
translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on non-monetary items are recognized in other comprehensive income,
exchange components of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on non-monetary items are recognized in profit or loss, exchange components of those gains or losses are recognized in profit
or loss.

Foreign operations

If
the presentation currency of the Company is different from a foreign operations functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to
presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in
other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the
carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus they are expressed in the functional currency of the foreign operation and translated
at the closing rate.

When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as
part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a
foreign operation, the relevant proportion is reclassified to profit or loss.

Foreign exchange gains or losses arising from a monetary
item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the foreign operation, are
recognized in other comprehensive income in the translation reserve.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, investment in highly liquid securities that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Non-derivative financial assets

The Company recognizes and measures non-derivative financial assets by the following four categories: financial assets at fair value through profit
or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. The Company recognizes financial assets in the consolidated statement of financial position when the Company becomes a party to the
contractual provisions of the instrument.

Upon initial recognition, non-derivative financial assets are measured at their fair value
plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the assets acquisition or issuance.



| | (a) | Financial assets at fair value through profit or loss
| | --- | -----------------------------------------------------

Financial assets are classified at fair value through profit or loss if they are held for trading or designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit
or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.



| | (b) | Held-to-maturity financial assets
| | --- | ---------------------------------

A non-derivative
financial asset with a fixed or determinable payment and fixed maturity, for which the Company has the positive intention and ability to hold to maturity, is classified as held-to-maturity. Subsequent to initial recognition, held-to-maturity
financial assets are measured at amortized cost using the effective interest method.



| | (c) | Loans and receivables
| | --- | ---------------------

Loans and receivables are
non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method except for loans
and receivables for which the effect of discounting is immaterial.



| | (d) | Available-for-sale financial assets
| | --- | -----------------------------------

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as
financial assets at fair value through profit or loss, held-to-maturity securities or loans and receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax effect, recorded in other
comprehensive income in equity. Securities in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such
unquoted equity instruments are measured at cost. When a financial asset is derecognized or impairment losses are recognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or
loss. Dividends on an available-for-sale equity instrument are recognized in profit or loss when the Companys right to receive payment is established.



| | (e) | De-recognition of non-derivative financial assets
| | --- | -------------------------------------------------

The Company derecognizes non-derivative financial assets when the contractual rights to the cash flows from the financial asset expire, or the
Company transfers the rights to



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







receive the contractual cash flows from the financial asset as well as substantially all the risks and rewards of ownership of the financial asset. Any interest in a transferred financial asset
that is created or retained by the Company is recognized as a separate asset or liability.

If the Company retains substantially all the
risks and rewards of ownership of the transferred financial assets, the Company continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.



| | (f) | Offsetting a financial asset and a financial liability
| | --- | ------------------------------------------------------

Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Company currently has a legally enforceable right to offset
the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

Inventories

Inventories are measured at the
lower of cost and net realizable value. Costs are determined by using the moving-weighted average method. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition. The allocation of fixed production overheads to the costs of finished goods or work in progress are based on the normal capacity of the production facilities.

When inventories are sold, the carrying amount of those inventories is recognized as cost of goods sold in the period in which the related revenue
is recognized and the amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories
arising from an increase in net realizable value is recognized as a reduction in the amount of inventories recognized as a cost of goods sold in the period in which the reversal occurs.

Investment property

Property held for the purpose of earning rentals is classified as
investment property. Investment property is measured initially at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at depreciated cost less any accumulated impairment losses.

Property, plant and equipment

Property, plant and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and
accumulated impairment losses. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. In addition, in the preparation of the opening
IFRS consolidated statement of financial position on the date of transition to IFRS, the Company measures certain machinery and equipment at fair value at the date of transition, which is deemed cost, in accordance with IFRS No. 1.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







The cost of replacing a part of an item is recognized in the carrying
amount of the item of property, plant and equipment, if the following recognition criteria are met.



| | (a) | it is probable that future economic benefits associated with the item will flow to the Company; and
| | --- | ---------------------------------------------------------------------------------------------------



| | (b) | the cost can be measured reliably.
| | --- | ----------------------------------

The carrying
amount of the replaced part is derecognized at the time the replacement part is recognized. The costs of the day-to-day servicing of the item are recognized in profit or loss as incurred.

Other than land, the cost of an asset less its residual value are depreciated. Land is not depreciated. Depreciation of property, plant and
equipment is recognized in profit or loss on a straight-line basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset, over the estimated useful lives of each component of an item
of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated
separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss
when the item is derecognized.

The estimated useful lives for the current and comparative periods are as follows:



|                        |  |            
|----------------------- |  | -----------
|Buildings               |  | 10-60 years
|Structures              |  | 4-50 years 
|Machinery and equipment |  | 2-25 years 
|Vehicles                |  | 3-10 years 
|Tools                   |  | 4-10 years 
|Furniture and fixtures  |  | 3-10 years 
|Lease assets            |  | 3-18 years 

The residual value and the useful lives are reviewed at least at the end of each reporting period and, if
expectations differ from previous estimates, the changes are accounted for as changes in accounting estimates.

Borrowing costs

The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the
cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are
manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.

To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of
borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Company immediately recognizes other borrowing



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







costs as an expense. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company shall determine the amount of borrowing
costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset.

The capitalization rate shall be
the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs
that the Company capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and
accumulated impairment losses.

Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the
estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be
available for use, this intangible asset is determined as having an indefinite useful life and not amortized.



|                             |  |           
|---------------------------- |  | ----------
|Intellectual property rights |  | 5-10 years
|Development expenses         |  | 3-10 years
|Port facilities usage rights |  | 2-75 years
|Other intangible assets      |  | 2-25 years

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the
end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments
for those assets. Changes are accounted for as changes in accounting estimates.



| | (a) | Research and development
| | --- | ------------------------

Expenditures on research
activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably,
the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are
recognized in profit or loss as incurred.



| | (b) | Subsequent expenditures
| | --- | -----------------------

Subsequent expenditures
are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as
incurred.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Exploration for and evaluation of mineral resources

The Company is engaged in exploration projects for mineral resources through equity ownership in the mines or other contractual arrangements.
Expenditures related to the development of mineral resources are recognized as exploration or development intangible assets. The nature of these intangible assets are as follows:



| | (a) | Exploration and evaluation assets
| | --- | ---------------------------------

Exploration and
evaluation assets consist of expenditures for topographical studies, geophysical studies and trenching. These assets are reclassified as development assets when it is proved that the exploration has identified an economically feasible mine.



| | (b) | Development assets
| | --- | ------------------

Development assets consist of
expenditures for the evaluation of oil fields, facility construction, drilling for viability and others. These development assets are reclassified as industrial rights (mining rights) at inception of the extraction.

Impairment for financial assets

A financial
asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of
likelihood, are not recognized.

Objective evidence that a financial asset or group of assets is impaired includes observable data that
comes to the attention of the holder of the asset about the following loss events:



| | (a) | significant financial difficulty of the issuer or obligor;
| | --- | ----------------------------------------------------------



| | (b) | a breach of contract, such as a default or delinquency in interest or principal payments;
| | --- | -----------------------------------------------------------------------------------------



| | (c) | the lender, for economic or legal reasons relating to the borrowers financial difficulty, granting to the borrower a concession that the lender would not otherwise
consider;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | it becoming probable that the borrower will enter bankruptcy or other financial reorganization;
| | --- | -----------------------------------------------------------------------------------------------



| | (e) | the disappearance of an active market for that financial asset because of financial difficulties; or
| | --- | ----------------------------------------------------------------------------------------------------



| | (f) | observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual financial assets in the group.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, for an
equity instrument classified as available-for-sale, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







If financial assets have objective evidence that they are impaired,
impairment losses are measured and recognized.



| | (a) | Financial assets carried at amortized cost
| | --- | ------------------------------------------

An
impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the assets original effective
interest rate. If it is not practicable to obtain the instruments estimated future cash flows, impairment losses would be measured by using prices from any observable current market transactions. The Company can recognize impairment losses
directly or establish a provision to cover impairment losses. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtors credit rating), the previously recognized impairment loss shall be reversed either directly or by adjusting an allowance account.



| | (b) | Financial assets carried at cost
| | --- | --------------------------------

If there is
objective evidence that an impairment loss has occurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery
of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of
return for a similar financial asset. Such impairment losses are not reversed.



| | (c) | Available-for-sale financial assets
| | --- | -----------------------------------

When a decline
in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall
be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as
available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the
impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss.

Impairments for non-financial assets

The
carrying amounts of the Companys non-financial assets, other than assets arising from employee benefits, inventories, deferred tax assets and non-current assets held for sale, are reviewed at the end of the reporting period to determine
whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective
of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.

Management estimates the recoverable amount of an individual asset. If it is impossible to measure the individual recoverable amount of an asset, then management estimates the recoverable



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







amount of a cash-generating unit (CGU). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other
assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value-in-use and its fair value less costs to sell. The value-in-use is estimated by applying a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in
profit or loss.

Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies
arising from the goodwill acquired. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment
losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Non-current assets held for sale

Non-current assets or disposal groups comprising assets and
liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets or disposal groups must be available for immediate sale
in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

The Company recognizes an impairment loss for any initial or subsequent write-down of disposal group to fair value less costs to sell, and a gain
for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized in accordance with IAS No. 36 Impairment of Assets.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual
arrangement and the definitions of financial liabilities. The Company recognizes financial liabilities in the consolidated statement of financial position when the Company becomes a party to the contractual provisions of the financial liability.

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon
initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are
directly attributable to the acquisition are recognized in profit or loss as incurred.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Non-derivative financial liabilities other than financial liabilities
at fair value through profit of loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition.
Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

The
Company derecognizes a financial liability from the consolidated statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

Convertible bonds

The convertible bonds
issued by the Company can be converted into equity securities at the option of the bond holders. The number of shares to be issued is adjusted according to the fair value of the common shares. The convertible bonds, which are compound financial
instruments of bonds and conversion rights, are designated and measured at fair value through profit or loss.

Derivative financial instruments and
hedges

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair
value, and changes therein are recognized in profit or loss.



| | (a) | Embedded derivatives
| | --- | --------------------

Embedded derivatives are
separated from the host contract and accounted for separately only if the following criteria have been met: (a) the economic characteristics and risks of the host contract and the embedded derivatives are not clearly and closely related to a
separate instrument with the same terms as the embedded derivative that would meet the definition of a derivative, and (b) the hybrid (combined) instrument is not measured at fair value through profit or loss. Changes in the fair value of
separable embedded derivatives from the host contract are recognized immediately in profit or loss. However, convertible rights of convertible bonds are not separated from the host contract and the compound financial instruments of bonds and
convertible rights are designated and measured at fair value through profit and loss.



| | (b) | Other derivatives
| | --- | -----------------

Changes in the fair value of a
derivative that is not designated as a hedging instrument are recognized immediately in profit or loss.

Leases

The Company classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the Company assumes
substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.



| | (a) | Finance leases
| | --- | --------------

At the commencement of the lease
term, the Company recognizes as finance assets and finance liabilities the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct
costs are added to the amount recognized as an asset.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Minimum lease payments are apportioned between the finance charge and
the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as
expenses in the periods in which they are incurred.

The depreciable amount of a leased asset is allocated to each accounting period
during the period of expected use on a systematic basis consistent with the depreciation policy the Company adopts for similar depreciable assets that are owned. If there is no reasonable certainty that the Company will obtain ownership by the end
of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.



| | (b) | Operating leases
| | --- | ----------------

Lease obligations under operating
leases are recognized as an expense on a straight-line basis over the lease term. Contingent rents are charged as expenses in the periods in which they are incurred.



| | (c) | Determining whether an arrangement contains a lease
| | --- | ---------------------------------------------------

Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether
fulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys a right to use the asset.

At inception or reassessment of the arrangement, management of the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the
basis of their relative fair values. If management of the Company concludes for a financial lease that it is impracticable to separate the payments reliably, the Company recognizes an asset and a liability at an amount equal to the fair value of the
underlying asset that was identified as the subject of the lease. Subsequently, the liability shall be reduced as payments are made and an imputed finance charge on the liability recognized using the purchasers incremental borrowing rate of
interest.

Construction work in progress

Construction work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress
billings and recognized losses. Cost includes all expenditures related directly to specific projects and an allocation of fixed and variable overheads incurred in the Companys contract activities based on normal operating capacity.

Construction work in progress is presented as part of trade accounts and notes receivable in the consolidated statement of financial position for
all contracts in which costs incurred plus recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then the difference is presented as amounts due to customers for contract work in the
consolidated statement of financial position.

Government grants

Government grants are not recognized unless there is reasonable assurance that the Company will comply with the grants conditions and that the grant will be received. Government grants whose



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted from the carrying amount of the assets and recognized in profit or loss on a
systematic and rational basis over the life of the depreciable assets.

Other government grants that compensate the Company for expenses
incurred are recognized in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognized. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which it becomes receivable.

Employee benefits



| | (a) | Short-term employee benefits
| | --- | ----------------------------

Short-term employee
benefits are employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the
Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as profit or loss. If the Company has a legal or constructive obligation which can be reliably measured, the Company
recognizes the amount of expected payment for profit-sharing and bonuses payable as liabilities.



| | (b) | Other long-term employee benefits
| | --- | ---------------------------------

Other long-term
employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render the related service, and are calculated at the present value of the amount of future benefit that employees have
earned in return for their service in the current and prior periods, less the fair value of any related assets. The present value is determined by discounting the expected future cash flows using the interest rate of corporate bonds that have
maturity dates approximating the terms of the Companys obligations and that are denominated in the same currency in which the benefits are expected to be paid. Any actuarial gains and losses are recognized in profit or loss in the period in
which they arise.



| | (c) | Retirement benefits: Defined contribution plans
| | --- | -----------------------------------------------

For defined contribution plans, when an employee has rendered service to the Company during a period, the Company recognizes the contribution
payable to a defined contribution plan in exchange for that service as an accrued expense, after deducting any contributions already paid. If the contributions already paid exceed the contribution due for service before the end of the reporting
period, the Company recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.



| | (d) | Retirement benefits: Defined benefit plans
| | --- | ------------------------------------------

A
defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Companys net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned
in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected
unit credit method.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







The discount rate is the yield at the reporting date on corporate
bonds that have maturity dates approximating the terms of the Companys obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from
actuarial assumption changes and experiential adjustments in other comprehensive income when incurred.

When the fair value of plan
assets exceeds the present value of the defined benefit obligation, the Company recognizes an asset, to the extent of the total of cumulative unrecognized past service cost and the present value of any economic benefits available in the form of
refunds from the plan or reduction in the future contributions to the plan.

Past service costs, which are the change in the present
value of the defined benefits obligation for employee service in prior periods, resulting in the current period from the introduction of, or change to post-employment benefits, are recognized as an expense on a straight-line basis over the average
period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the Company recognizes the past service cost immediately.

Stock appreciation rights

The Company
granted share options to executives as part of the reward for their services and is accounting for the options as cash-settled share-based payment transactions. For cash-settled share-based payment transactions, the Company measures the goods or
services acquired and the liability incurred at the fair value of the liability and recognizes the employment benefits and the liability during the vesting period. Until the liability is settled, the Company remeasures the fair value of the
liability at each reporting date and at the date of settlement, with any changes in fair value recognized in profit or loss for the period as well.

Provisions

Provisions are recognized when
the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the
amount of the obligation.

The risks and uncertainties that inevitably surround many events and circumstances are taken into account in
reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.

Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement shall be
recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an
outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

A provision for
product warranties is recognized when the underlying products are sold. Management determines the Companys provision for product warranties based on historical warranty data and a weighting of possible outcomes against their associated
probabilities. Regarding the



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







provision for construction warranties, the warranty period starts from the completion of construction in accordance with construction contracts. If the Company has an obligation for warranties, a
provision for warranties is estimated based on historical warranty data and recorded as cost of construction and provision for warranties during the construction period.

Share capital

Common stock is classified as equity and the incremental costs arising directly
attributable to the issuance of common stock less their tax effects are deducted from equity.

If the Company reacquires its own equity
instruments, the amount of those instruments (treasury shares) are presented as a contra equity account. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of its own equity instruments. When
treasury shares are sold or reissued subsequently, the amount received is recognized as an increase to equity, and the resulting surplus or deficit on the transaction is recorded in capital surplus.

Revenue

Revenue from the sale of goods,
services provided and the use of assets is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates, which are not significant for all periods presented.



| | (a) | Sale of goods
| | --- | -------------

Revenue from the sale of goods in
the ordinary course of activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an
executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no
continuing management involvement with the goods, and the amount of revenue can be measured reliably. The appropriate timing for transfer of risks and rewards varies depending on the individual terms and conditions of the sales contract. For
international sales, this timing depends on the type of international commercial terms of the contract.



| | (b) | Services rendered
| | --- | -----------------

Service sales are recognized
when services are rendered.



| | (c) | Construction contracts
| | --- | ----------------------

When the outcome of a
construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed in the contract plus any variation in
contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. The stage of completion of a contract is determined based on the proportion that contract costs incurred
for work performed to date bear to the estimated total contract costs.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







When the outcome of a construction contract cannot be estimated
reliably, the revenue is recognized only to the extent of contract costs incurred that it is probable will be recoverable. An expected loss on the construction contract shall be recognized as an expense immediately.



| | (d) | Rental income
| | --- | -------------

Rental income from investment
property, net of lease incentives granted, is recognized in profit or loss on a straight-line basis over the term of the lease.

Finance income and
finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend
income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest
method. Dividend income is recognized in profit or loss on the date that the Companys right to receive payment is established.

Finance costs comprise interest expense on borrowings and changes in the fair value of financial assets at fair value through profit or loss.
Borrowing costs are recognized in profit or loss using the effective interest rate method.

Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it
relates to a business combination, or items recognized directly in equity or in other comprehensive income.



| | (a) | Current tax
| | --- | -----------

Current tax is the expected tax
payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable profit is different
from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit of future periods, and non-taxable or non-deductible items from
the accounting profit.



| | (b) | Deferred tax
| | --- | ------------

Deferred tax is recognized, using the
asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax liability is recognized for all taxable
temporary differences. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which they can be utilized. However, deferred tax is not recognized
for the following temporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting profit or loss nor taxable income.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







The Company recognizes a deferred tax liability for all taxable
temporary differences associated with securities in subsidiaries and associates except to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. The Company recognizes a deferred tax asset for deductible temporary differences arising from securities in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse
in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

The carrying
amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset
to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax
consequences that would follow from the manner in which the Company expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.

Earnings per share

Management calculates
basic earnings per share (EPS) data for the Companys ordinary shares, which is presented at the end of the statement of comprehensive income. Basic EPS is calculated by dividing profit attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Operating segments

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur
expenditures, including revenues and expenses that relate to transactions with any of the Companys other components. All operating segments operating results are regularly reviewed by the Companys chief operating decision maker
(CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management has determined that the CODM of the Company is the CEO.

Segment results that are reported to the CEO include items directly attributable to a segment and do not include allocated items. Segment capital
expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual
periods beginning after January 1, 2011, and the Company has not early adopted them.



| | (a) | Amendments to IFRS No. 7 Financial Instruments: Disclosures
| | --- | -------------------------------------------------------------

The amendments require disclosing the nature of the transferred assets, their carrying amount, and the description of risks and rewards for each class of transferred financial assets that are not derecognized in
their entirety. If the Company derecognizes transferred financial assets but still has their specific risks and rewards, the amendments require additional disclosures on their effect of risks. The amendments will be applied prospectively for the
Companys annual periods beginning on or after July 1, 2011.



| | (b) | Amendments to IAS No. 19 Employee Benefits
| | --- | --------------------------------------------

The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets based on the rate used to discount the defined benefit
obligation. The standard will be applied retrospectively for the Companys annual periods beginning on or after January 1, 2013. Management is currently analyzing the effects of adopting this standard.



| | (c) | Amendments to IAS No. 32 Financial Instruments: Presentationand Financial Instruments: Disclosures
| | --- | ------------------------------------------------------------------------------------------------------

On December 16, 2011 the IASB published amendments to IAS No. 32 Financial Instruments: Presentation to clarify the
application of the offsetting of financial assets and financial liabilities requirement. The IASB also published amendments to IFRS No. 7 Financial Instruments: Disclosures including new disclosures requirements regarding the
offsetting of financial assets and financial liabilities. These amendments are effective for annual periods beginning on or after January 1, 2014, and January 1, 2013, respectively. Management believes that there will be no significant
impact on the Companys financial upon applying of this new standard.



| | (d) | IFRS No. 9, Financial instruments
| | --- | -----------------------------------

IFRS No. 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS No. 9 was issued in November 2009 and
October 2010. It replaces the parts of IAS No. 39 that relate to the classification and measurement of financial instruments. IFRS No. 9 requires financial assets to be classified into two measurement categories: those measured as at fair
value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entitys business model for managing its financial instruments and the contractual cash flow characteristics of the
instrument. For financial liabilities, the standard retains most of the IAS No. 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an
entitys own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. Management is currently analyzing the effects and intends to adopt IFRS No. 9 no later than
the accounting period beginning on or after January 1, 2013.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









| | (e) | IFRS No. 10, Consolidated financial statements
| | --- | ------------------------------------------------

IFRS No. 10, Consolidated financial statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within
the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. Management is currently analyzing the effects and intends to adopt
IFRS No. 10 no later than the accounting period beginning on or after January 1, 2013.



| | (f) | IFRS No. 12, Disclosures of interests in other entities
| | --- | ---------------------------------------------------------

IFRS No. 12, Disclosures of interests in other entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special
purpose vehicles and other off balance sheet vehicles. The Company intends to adopt the disclosures required by IFRS No. 12 no later than the accounting period beginning on or after January 1, 2013.



| | (g) | IFRS No. 13 Fair Value Measurement
| | --- | ------------------------------------

The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements. The standard will be applied prospectively for the Companys annual periods
beginning on or after January 1, 2013.



|4. | Financial risk management
|-- | -------------------------

The Company has
exposure to the following risks from its use of financial instruments:



| |  |  | credit risk
| | - |  | -----------



| |  |  | liquidity risk
| | - |  | --------------



| |  |  | market risk
| | - |  | -----------



| |  |  | operational risk
| | - |  | ----------------

This note
presents information about the Companys exposure to each of the above risks, the Companys objectives, policies and processes for measuring and managing risk, and the Companys management of capital. Further quantitative disclosures
are included throughout these consolidated financial statements.



| | (a) | Risk management policy
| | --- | ----------------------

The Board of Directors has
overall responsibility for the establishment and oversight of the Companys risk management framework. The Companys risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Companys activities.

The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in
which all employees understand their roles and obligations.



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









| | (b) | Credit risk
| | --- | -----------

Credit risk is the risk of financial
loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Companys receivables from customers and investment securities. The Companys exposure
to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of a nation or an industry in which a customer operates its business does not have a significant influence on credit risk. The Company has
established a credit policy under which each new customer is analyzed individually for creditworthiness.

The Company establishes an
allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a
collective loss component established for companies of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar
financial assets.



| | (c) | Liquidity risk management
| | --- | -------------------------

Liquidity risk is the
risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Companys approach to managing liquidity is to ensure, as
far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companys reputation.

The Companys cash flow from business, borrowing or financing is sufficient to meet the cash requirements for the Companys strategic
investments. Management believes that the Company is capable of raising funds by borrowing or financing if the Company is not able to generate cash flow requirements from its operations. The Company has committed borrowing facilities with various
banks.



| | (d) | Market risk management
| | --- | ----------------------

Market risk means that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The goal of market prices management is optimization of profit and controlling the exposure to market risk within acceptable limits.



| | 1) | Currency risk
| | -- | -------------

Each segment is influenced by a risk
factor of changes in foreign currency exchange rates for the different directions due to the difference in structure of each industry regarding the cash inflows and cash outflows in foreign currency. The steel segment generally has a lack of foreign
currency cash outflows, while the engineering and construction segments generally have excessive foreign currency inflows due to the nature of their respective business. Therefore, the result of the business is affected by the changes of foreign
exchange rates. The trading segment is structured such that the cash inflows and outflows of foreign currencies are to be offset; however, the trading segment is exposed to a risk of changes in foreign currency exchange rates when there are
differences in currencies on receiving and paying the foreign currency amount and time differences.



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







The Companys policy in respect of foreign currency risks is a
natural hedge whereby foreign currency income is offset with foreign currency expenditures. The remaining net exposures after the natural hedge have been hedged using derivative contracts such as forward exchange contracts. In addition, the
Companys derivative transactions are limited to hedging actual foreign currency transactions and speculative hedging is not permitted. Based on this policy, the Company entities have performed currency risk management specific to various
characteristics of different segments. The entities in the steel industry, which has a lack of foreign currency cash flows, has foreign currency borrowings from banks and hedges foreign currency risks of the foreign currency borrowings by using
foreign currency swaps. The entities in the engineering and construction segments, which have excessive foreign currency cash flows, have hedged foreign currency risks by using forward exchange contracts. Entities in the trading industry have hedged
foreign currency risks by using forward exchange contracts when the foreign currencies received and paid are different.



| | 2) | Interest rate risk
| | -- | ------------------

The Company mostly borrows at
fixed interest rates. The Companys management monitors interest rate risks regularly.



| | (e) | Management of capital risk
| | --- | --------------------------

The fundamental goal of
capital management is the maximization of shareholders value by means of the stable dividend policy and the retirement of treasury shares. The capital structure of the Company consists of equity and net debt, deducting cash and cash
equivalents and current financial instruments from borrowings. The Company applied the same financial risk management strategy that was applied in the previous period.

The equity attributable to owners as of December 31, 2011, 2010 and January 1, 2010 is as follows:



|                                |  |                      |            |   |                   |  |            |                 |  |  |            |  
|------------------------------- |  | -------------------- | ---------- | - | ----------------- |  | ---------- | --------------- |  |  | ---------- | -
|                                |  | December 31, 2011    |            |   | December 31, 2010 |  |            | January 1, 2010 | 
|                                |  | (in millions of Won) |           
|Total borrowings                |  |                      | 26,811,717 |   |                   |  | 21,140,241 |                 |  |  | 12,199,485 |  
|Less: Cash and cash equivalents |  |                      | 4,598,682  |   |                   |  | 3,521,045  |                 |  |  | 2,273,059  |  
|Net borrowings                  |  |                      | 22,213,035 |   |                   |  | 17,619,196 |                 |  |  | 9,926,426  |  
|Total equity                    |  |                      | 40,729,920 |   |                   |  | 38,537,167 |                 |  |  | 33,333,681 |  
|Net borrowings-to-equity ratio  |  |                      | 54.54      | % |                   |  | 45.72      | %               |  |  | 29.78      | %



|5. | Cash and Cash Equivalents
|-- | -------------------------

Cash and cash
equivalents as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                     |  |                      |           |  |                   |  |           |                 |  |  |           | 
|------------------------------------ |  | -------------------- | --------- |  | ----------------- |  | --------- | --------------- |  |  | --------- | 
|                                     |  | December 31, 2011    |           |  | December 31, 2010 |  |           | January 1, 2010 | 
|                                     |  | (in millions of Won) |          
|Cash                                 |  | (Won)                | 23,954    |  |                   |  | 4,931     |                 |  |  | 339,240   | 
|Demand deposit and checking accounts |  |                      | 1,855,929 |  |                   |  | 1,426,715 |                 |  |  | 735,759   | 
|Time deposits                        |  |                      | 2,664,335 |  |                   |  | 1,816,853 |                 |  |  | 1,166,610 | 
|Other financial cash equivalents     |  |                      | 54,464    |  |                   |  | 272,546   |                 |  |  | 31,450    | 
|                                     |  |                      |           |  |                   |  |           |                 |  |  |           | 
|                                     |  | (Won)                | 4,598,682 |  |                   |  | 3,521,045 |                 |  |  | 2,273,059 | 
|                                     |  |                      |           |  |                   |  |           |                 |  |  |           | 



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|6. | Trade Accounts and Notes Receivable
|-- | -----------------------------------

(a)
Trade accounts and notes receivable as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                             |  |                      |            |   |                   |  |           |                 |  |  |           |  
|-------------------------------------------- |  | -------------------- | ---------- | - | ----------------- |  | --------- | --------------- |  |  | --------- | -
|                                             |  | December 31, 2011    |            |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                             |  | (in millions of Won) |           
|Current                                      |  |                      |            |   |                   |  |           |                 |  |  |           |  
|Unbilled trade accounts and notes receivable |  | (Won)                | 10,265,421 |   |                   |  | 8,415,973 |                 |  |  | 4,740,600 |  
|Capital lease receivables                    |  |                      | 117,230    |   |                   |  | 57,374    |                 |  |  | 59,686    |  
|Due from customers for contract work         |  |                      | 1,361,416  |   |                   |  | 974,631   |                 |  |  | 699,293   |  
|Less: Allowance for doubtful accounts        |  |                      | (293,552   | ) |                   |  | (228,967  | )               |  |  | (199,346  | )
|                                             |  |                      |            |   |                   |  |           |                 |  |  |           |  
|                                             |  |                      | 11,450,515 |   |                   |  | 9,219,011 |                 |  |  | 5,300,233 |  
|                                             |  |                      |            |   |                   |  |           |                 |  |  |           |  
|Non-current                                  |  |                      |            |   |                   |  |           |                 |  |  |           |  
|Unbilled trade accounts and notes receivable |  |                      | 45,061     |   |                   |  | 28,792    |                 |  |  | 24,391    |  
|Unbilled capital lease receivables           |  |                      | 147,634    |   |                   |  | 258,664   |                 |  |  | 504,633   |  
|Less: Allowance for doubtful accounts        |  |                      | (9,634     | ) |                   |  | (13,834   | )               |  |  | (6,249    | )
|                                             |  |                      |            |   |                   |  |           |                 |  |  |           |  
|                                             |  |                      | 183,061    |   |                   |  | 273,622   |                 |  |  | 522,775   |  
|                                             |  |                      |            |   |                   |  |           |                 |  |  |           |  
|                                             |  | (Won)                | 11,633,576 |   |                   |  | 9,492,633 |                 |  |  | 5,823,008 |  
|                                             |  |                      |            |   |                   |  |           |                 |  |  |           |  

The trade accounts and notes receivable sold to financial institution, for which the derecognition conditions were
not met, amounted to (Won)132,908 million, (Won)358,676 million and (Won)30,600 million as of December 31, 2011, 2010 and
January 1, 2010, respectively and are included in bank borrowings (note 15).

(b) Capital lease receivables are as follows:



|                     |  |                                 |  |                   |         |  |                   |  |         |                 |  |  |         | 
|-------------------- |  | ------------------------------- |  | ----------------- | ------- |  | ----------------- |  | ------- | --------------- |  |  | ------- | 
|Customer             |  | Contents                        |  | December 31, 2011 |         |  | December 31, 2010 |  |         | January 1, 2010 | 
|                     |  | (in millions of Won)            | 
|Korea Electric Power |  | Combined thermalpower cycle 1~4 |  | (Won)             | 199,141 |  |                   |  | 253,055 |                 |  |  | 307,191 | 
|Tenant of EXPO       |  | Lease contract                  |  |                   | 65,723  |  |                   |  | 62,983  |                 |  |  | 257,128 | 
|                     |  |                                 |  |                   |         |  |                   |  |         |                 |  |  |         | 
|                     |  |                                 |  | (Won)             | 264,864 |  |                   |  | 316,038 |                 |  |  | 564,319 | 
|                     |  |                                 |  |                   |         |  |                   |  |         |                 |  |  |         | 

(c) The gross amount and present value of minimum lease payments as of December 31, 2011, 2010 and
January 1, 2010 are as follows:



|                                       |  |                      |         |   |                   |  |          |                 |  |  |          |  
|-------------------------------------- |  | -------------------- | ------- | - | ----------------- |  | -------- | --------------- |  |  | -------- | -
|                                       |  | December 31, 2011    |         |   | December 31, 2010 |  |          | January 1, 2010 | 
|                                       |  | (in millions of Won) |        
|Less than 1 year                       |  | (Won)                | 141,670 |   |                   |  | 82,927   |                 |  |  | 89,244   |  
|1 year  5 years                       |  |                      | 169,265 |   |                   |  | 283,566  |                 |  |  | 532,044  |  
|Greater than 5 year                    |  |                      | 24,519  |   |                   |  | 51,534   |                 |  |  | 83,812   |  
|Unrealized interest income             |  |                      | (70,590 | ) |                   |  | (101,989 | )               |  |  | (140,781 | )
|                                       |  |                      |         |   |                   |  |          |                 |  |  |          |  
|Present value of minimum lease payment |  | (Won)                | 264,864 |   |                   |  | 316,038  |                 |  |  | 564,319  |  
|                                       |  |                      |         |   |                   |  |          |                 |  |  |          |  



F-54



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|7. | Other Financial Assets
|-- | ----------------------

(a) Other short-term
financial assets as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                       |  |                      |           |   |                   |  |           |                 |  |  |           |  
|------------------------------------------------------ |  | -------------------- | --------- | - | ----------------- |  | --------- | --------------- |  |  | --------- | -
|                                                       |  | December 31, 2011    |           |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                                       |  | (in millions of Won) |          
|Financial assets at fair value through profit or loss  |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Financial assets held for trading                      |  | (Won)                | 50,861    |   |                   |  | 182,208   |                 |  |  | 795,811   |  
|Derivatives assets held for trading                    |  |                      | 92,055    |   |                   |  | 133,731   |                 |  |  | 26,641    |  
|Available-for-sale financial assets                    |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Short-term available-for-sale securities (bonds)       |  |                      | 31,651    |   |                   |  | 42,831    |                 |  |  | 35,643    |  
|Held-to-maturity investments                           |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Current portion of held-to-maturity securities (bonds) |  |                      | 876       |   |                   |  | 3,657     |                 |  |  | 20,717    |  
|Loans and other receivables                            |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Short-term financial instruments (*1,2)                |  |                      | 1,739,186 |   |                   |  | 2,803,492 |                 |  |  | 5,491,352 |  
|Special purpose deposits (*3)                          |  |                      | 18,558    |   |                   |  | 42,967    |                 |  |  | 49,809    |  
|Short-term loans                                       |  |                      | 367,330   |   |                   |  | 278,029   |                 |  |  | 198,878   |  
|Other accounts receivable                              |  |                      | 1,067,163 |   |                   |  | 744,785   |                 |  |  | 462,529   |  
|Accrued income                                         |  |                      | 59,028    |   |                   |  | 47,828    |                 |  |  | 58,119    |  
|Deposits                                               |  |                      | 73,343    |   |                   |  | 21,230    |                 |  |  | 21,343    |  
|Other receivables                                      |  |                      | 221,125   |   |                   |  | 145,780   |                 |  |  | 106,852   |  
|Allowance for bad debt accounts                        |  |                      | (64,906   | ) |                   |  | (63,236   | )               |  |  | (56,671   | )
|                                                       |  |                      |           |   |                   |  |           |                 |  |  |           |  
|                                                       |  | (Won)                | 3,656,270 |   |                   |  | 4,383,302 |                 |  |  | 7,211,023 |  
|                                                       |  |                      |           |   |                   |  |           |                 |  |  |           |  





|(*1) | As of December 31, 2011 and 2010, short-term financial instruments of
(Won)1,670 million and
(Won)830 million are secured related to long-term borrowings of forestry association, respectively.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | Short-term financial instruments of DaeMyung TMS of
(Won)400 million are provided as collateral to Kookmin bank related to a derivative instrument deposit.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|(*3) | As of December 31, 2011 and 2010, (Won)17,175 million and (Won)14,101 million, respectively, are restricted for the use in a government project.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------

(b) Other long-term financial assets as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                                     |  |                      |           |   |                   |  |           |                 |  |  |           |  
|-------------------------------------------------------------------- |  | -------------------- | --------- | - | ----------------- |  | --------- | --------------- |  |  | --------- | -
|                                                                     |  | December 31, 2011    |           |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                                                     |  | (in millions of Won) |          
|Financial assets at fair value through profit or loss                |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Derivatives assets held for trading                                  |  | (Won)                | 16,696    |   |                   |  | 6,300     |                 |  |  | 60,422    |  
|Available-for-sale financial assets                                  |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Long-term available-for-sale securities (equity
instruments) (*1, 2) |  |                      | 4,509,197 |   |                   |  | 6,022,945 |                 |  |  | 4,786,401 |  
|Long-term available-for-sale securities (bonds)                      |  |                      | 25,847    |   |                   |  | 7,827     |                 |  |  | 120,812   |  
|Long-term available-for-sale securities (others)                     |  |                      | 41,902    |   |                   |  | 53,323    |                 |  |  | 91,381    |  
|Held-to-maturity investments                                         |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Held-to-maturity securities (bonds)                                  |  |                      | 34,698    |   |                   |  | 36,156    |                 |  |  | 91,844    |  
|Loan and other receivables                                           |  |                      |           |   |                   |  |           |                 |  |  |           |  
|Long-term financial instruments                                      |  |                      | 37,074    |   |                   |  | 4,154     |                 |  |  | 140       |  
|Cash deposits (*3)                                                   |  |                      | 658       |   |                   |  | 89        |                 |  |  | 340       |  
|Long-term loans                                                      |  |                      | 298,106   |   |                   |  | 174,982   |                 |  |  | 123,907   |  
|Long-term other accounts receivable                                  |  |                      | 86,922    |   |                   |  | 68,652    |                 |  |  | 6,121     |  
|Accrued income                                                       |  |                      | 956       |   |                   |  | 3,523     |                 |  |  | 2,245     |  
|Deposits                                                             |  |                      | 112,245   |   |                   |  | 90,113    |                 |  |  | 49,125    |  
|Allowance for bad debt accounts                                      |  |                      | (38,629   | ) |                   |  | (51,026   | )               |  |  | (24,078   | )
|                                                                     |  |                      |           |   |                   |  |           |                 |  |  |           |  
|                                                                     |  | (Won)                | 5,125,672 |   |                   |  | 6,417,038 |                 |  |  | 5,308,660 |  
|                                                                     |  |                      |           |   |                   |  |           |                 |  |  |           |  



F-55



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010











|(*1) | As of December 31, 2011, 2,186,546 shares equivalent to 19,678,919 American depository receipts (ADRs) of SK Telecom Co., Ltd. have been pledged as collateral
for the exchangeable bonds issued.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | The Company recorded impairment loss for securities of SK Telecom Co., Ltd. amounting to (Won)503,058 million prior to January 1, 2010. During the year ended December 31, 2011, there was a further significant decline in the fair value of shares of SK Telecom Co., Ltd. for a prolonged
period, which was considered as objective evidence of impairment. As a result, an impairment losses of (Won)107,377 million was recognized
in profit or loss in 2011.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*3) | The Company is required to provide deposits to maintain checking accounts and, accordingly, the withdrawal of these deposits is restricted. As of December 31, 2011 and 2010,
(Won)40 million are restricted, respectively.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8. | Inventories
|-- | -----------

Inventories as of
December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                          |  |                      |            |   |                   |  |           |                 |  |  |           |  
|----------------------------------------- |  | -------------------- | ---------- | - | ----------------- |  | --------- | --------------- |  |  | --------- | -
|                                          |  | December 31, 2011    |            |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                          |  | (in millions of Won) |           
|Finished goods                            |  | (Won)                | 1,556,573  |   |                   |  | 1,093,446 |                 |  |  | 616,803   |  
|Merchandise                               |  |                      | 1,185,496  |   |                   |  | 854,624   |                 |  |  | 171,586   |  
|Semi-finished goods                       |  |                      | 2,163,124  |   |                   |  | 1,695,522 |                 |  |  | 1,034,206 |  
|Raw materials                             |  |                      | 2,563,837  |   |                   |  | 2,516,167 |                 |  |  | 1,118,235 |  
|Fuel and materials                        |  |                      | 758,333    |   |                   |  | 670,218   |                 |  |  | 556,545   |  
|Construction inventories                  |  |                      | 1,245,546  |   |                   |  | 478,973   |                 |  |  | 402,361   |  
|Materials-in-transit                      |  |                      | 2,857,434  |   |                   |  | 2,252,136 |                 |  |  | 1,018,461 |  
|Others                                    |  |                      | 168,895    |   |                   |  | 86,015    |                 |  |  | 45,263    |  
|                                          |  |                      |            |   |                   |  |           |                 |  |  |           |  
|                                          |  |                      | 12,499,238 |   |                   |  | 9,647,101 |                 |  |  | 4,963,460 |  
|                                          |  |                      |            |   |                   |  |           |                 |  |  |           |  
|Less: allowance for inventories valuation |  |                      | (215,594   | ) |                   |  | (87,895   | )               |  |  | (45,047   | )
|                                          |  |                      |            |   |                   |  |           |                 |  |  |           |  
|                                          |  | (Won)                | 12,283,644 |   |                   |  | 9,559,206 |                 |  |  | 4,918,413 |  
|                                          |  |                      |            |   |                   |  |           |                 |  |  |           |  

The amounts of valuation losses of inventories recognized as cost of goods sold during the years ended
December 31, 2011 and 2010 are (Won)140,391 million and (Won)38,762 million, respectively.



|9. | Non-Current Assets Held for Sale
|-- | --------------------------------

Details of
non-current assets held for sale and related liabilities as of December 31, 2011 are as follows:



|                                                                 |  |                             |        |  |                   |  |         |       |  |  |         | 
|---------------------------------------------------------------- |  | --------------------------- | ------ |  | ----------------- |  | ------- | ----- |  |  | ------- | 
|                                                                 |  | The ControllingCompany
(*1) |        |  | Subsidiaries (*2) |  |         | Total | 
|                                                                 |  | (in millions of Won)        |       
|Assets                                                           |  |                             |        |  |                   |  |         |       |  |  |         | 
|Trade accounts and notes receivable and other financial assets   |  | (Won)                       |       |  |                   |  | 63,154  |       |  |  | 63,154  | 
|Inventories                                                      |  |                             |       |  |                   |  | 23,186  |       |  |  | 23,186  | 
|Property, plant and equipment                                    |  |                             | 16,887 |  |                   |  | 172,538 |       |  |  | 189,425 | 
|Intangible assets                                                |  |                             |       |  |                   |  | 7,389   |       |  |  | 7,389   | 
|Other assets                                                     |  |                             |       |  |                   |  | 45,883  |       |  |  | 45,883  | 
|                                                                 |  |                             |        |  |                   |  |         |       |  |  |         | 
|                                                                 |  |                             | 16,887 |  |                   |  | 312,150 |       |  |  | 329,037 | 
|                                                                 |  |                             |        |  |                   |  |         |       |  |  |         | 
|Liabilities                                                      |  |                             |        |  |                   |  |         |       |  |  |         | 
|Trade accounts and note payables and other financial liabilities |  |                             |       |  |                   |  | 28,509  |       |  |  | 28,509  | 
|Borrowings                                                       |  |                             |       |  |                   |  | 144,920 |       |  |  | 144,920 | 
|Other liabilities                                                |  |                             |       |  |                   |  | 53,178  |       |  |  | 53,178  | 
|                                                                 |  |                             |        |  |                   |  |         |       |  |  |         | 
|                                                                 |  |                             |       |  |                   |  | 226,607 |       |  |  | 226,607 | 
|                                                                 |  |                             |        |  |                   |  |         |       |  |  |         | 
|Net assets                                                       |  | (Won)                       | 16,887 |  |                   |  | 85,543  |       |  |  | 102,430 | 
|                                                                 |  |                             |        |  |                   |  |         |       |  |  |         | 



F-56



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010











|(*1) | The controlling company plans to dispose of equipments of existing steel manufacturing plants due to the completion and expected use of new plant. Book value of property, plant
and equipment which are expected to be sold by the first half of 2012, net of impairment recorded, in the amount of (Won)16,887 million,
are reclassified as non-current assets held for sale.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | Daewoo International Corporation, one of the controlling companys subsidiaries, determined to dispose of Daewoo Cement (Shandong) Co., Ltd. in order to close down its
non-core business and collect long-term receivables and securities, with the board of directors resolution on July 28, 2011. Daewoo International Corporation entered into a sales contract with China United Cement Group Co., Ltd. on
August 9, 2011 and requested approval from the Ministry of Commerce of the Peoples Republic of China is in progress as of December 31, 2011.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10. | Investments in Associates and Joint Ventures
|--- | --------------------------------------------

(a) Details of investments in associates as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|-------------------------------------------- |  | -------------------- | ------------- |  | ---------------- |  | ----- | --------------- |  | ----- | --------- |  |  | --------- | --------- |  | ---------- | ----- | --------- |  |  | ----- | ------- | 
|                                             |  | December 31, 2011    |               |  | December 31,2010 |  |       | January 1,2010  | 
|Company                                      |  | Number ofshares      |               |  | Ownership(%)     |  |       | Acquisitioncost |  |       | Bookvalue |  |  | Bookvalue |           |  | Book value |      
|                                             |  | (in millions of Won) |              
|[Domestic]                                   |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|Kyobo Life Insurance Co., Ltd.               |  |                      | 4,920,000     |  |                  |  | 24.00 |                 |  | (Won) | 1,266,900 |  |  | (Won)     | 1,377,114 |  |            | (Won) | 1,314,808 |  |  | (Won) |        | 
|Sungjin Geotec Co., Ltd.                     |  |                      | 17,193,510    |  |                  |  | 36.69 |                 |  |       | 239,877   |  |  |           | 194,942   |  |            |       | 227,245   |  |  |       |        | 
|SNNC Co., Ltd.                               |  |                      | 18,130,000    |  |                  |  | 49.00 |                 |  |       | 90,650    |  |  |           | 154,131   |  |            |       | 145,466   |  |  |       | 94,520  | 
|Busan-Gimhae Light RailTransit Co., Ltd.     |  |                      | 9,160,000     |  |                  |  | 25.00 |                 |  |       | 45,800    |  |  |           | 34,227    |  |            |       | 42,151    |  |  |       | 42,715  | 
|Cheongna IBT Co., Ltd.                       |  |                      | 4,528,384     |  |                  |  | 18.58 |                 |  |       | 45,651    |  |  |           | 35,564    |  |            |       | 39,607    |  |  |       | 2,067   | 
|Blue ocean PEF                               |  |                      | 333           |  |                  |  | 27.52 |                 |  |       | 33,300    |  |  |           | 35,971    |  |            |       |          |  |  |       |        | 
|METAPOLIS Co., Ltd.                          |  |                      | 4,229,280     |  |                  |  | 40.05 |                 |  |       | 15,410    |  |  |           | 15,674    |  |            |       | 32,666    |  |  |       | 38,490  | 
|POSMATE Co., Ltd.                            |  |                      | 214,286       |  |                  |  | 30.00 |                 |  |       | 7,233     |  |  |           | 22,409    |  |            |       | 20,989    |  |  |       | 13,059  | 
|CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd |  |                      | 2,008,000     |  |                  |  | 25.10 |                 |  |       | 10,040    |  |  |           | 21,026    |  |            |       | 21,317    |  |  |       | 13,527  | 
|Others                                       |  |                      |              |  |                  |  |      |                 |  |       |          |  |  |           | 94,507    |  |            |       | 156,712   |  |  |       | 91,442  | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           | 1,985,565 |  |            |       | 2,000,961 |  |  |       | 295,820 | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|[Foreign]                                    |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|POSCO-NPS Niobium LLC                        |  |                      | 325,050,000   |  |                  |  | 50.00 |                 |  |       | 364,609   |  |  |           | 374,868   |  |            |       |          |  |  |       |        | 
|AMCI (WA) Pty Ltd.                           |  |                      |              |  |                  |  | 49.00 |                 |  |       | 213,446   |  |  |           | 168,212   |  |            |       | 213,446   |  |  |       |        | 
|Nickel Mining Company SAS                    |  |                      | 3,234,698     |  |                  |  | 49.00 |                 |  |       | 157,585   |  |  |           | 168,292   |  |            |       | 180,671   |  |  |       | 190,149 | 
|KOBRASCO                                     |  |                      | 2,010,719,185 |  |                  |  | 50.00 |                 |  |       | 32,950    |  |  |           | 128,884   |  |            |       | 141,939   |  |  |       | 98,943  | 
|KOREA LNG Ltd.                               |  |                      | 2,400         |  |                  |  | 20.00 |                 |  |       | 137,993   |  |  |           | 127,901   |  |            |       | 133,793   |  |  |       |        | 
|Eureka Moly LLC                              |  |                      |              |  |                  |  | 20.00 |                 |  |       | 121,209   |  |  |           | 109,772   |  |            |       | 109,177   |  |  |       | 113,105 | 
|DMSA, AMSA                                   |  |                      |              |  |                  |  | 4.00  |                 |  |       | 100,770   |  |  |           | 119,556   |  |            |       | 100,536   |  |  |       |        | 
|BX STEEL POSCO Cold RolledSheet Co., Ltd.    |  |                      |              |  |                  |  | 25.00 |                 |  |       | 61,961    |  |  |           | 95,577    |  |            |       | 89,313    |  |  |       | 63,667  | 
|CAML Resources Pty. Ltd.                     |  |                      | 3,239         |  |                  |  | 33.34 |                 |  |       | 40,388    |  |  |           | 55,465    |  |            |       | 67,401    |  |  |       | 41,496  | 
|South-East Asia Gas Pipeline Company Ltd.    |  |                      | 118,099,219   |  |                  |  | 25.04 |                 |  |       | 131,531   |  |  |           | 136,175   |  |            |       | 56,636    |  |  |       |        | 
|POSCHROME                                    |  |                      | 43,350        |  |                  |  | 50.00 |                 |  |       | 19,859    |  |  |           | 24,674    |  |            |       | 29,201    |  |  |       | 11,441  | 
|USS-POSCO Industries                         |  |                      | 254,649       |  |                  |  | 50.00 |                 |  |       | 277,715   |  |  |           | 16,880    |  |            |       | 40,000    |  |  |       | 45,961  | 
|NCR LLC                                      |  |                      |              |  |                  |  | 20.00 |                 |  |       | 23,744    |  |  |           | 24,107    |  |            |       | 23,931    |  |  |       |        | 
|Others                                       |  |                      |              |  |                  |  |      |                 |  |       |          |  |  |           | 295,731   |  |            |       | 119,420   |  |  |       | 89,867  | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           | 1,846,094 |  |            |       | 1,305,464 |  |  |       | 654,629 | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  | (Won)     | 3,831,659 |  |            | (Won) | 3,306,425 |  |  | (Won) | 950,449 | 
|                                             |  |                      |               |  |                  |  |       |                 |  |       |           |  |  |           |           |  |            |       |           |  |  |       |         | 



F-57



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) The fair value of investments in associates for which there are
published price quotations as of December 31, 2011 are as follows:



|                        |  |                      |         | 
|----------------------- |  | -------------------- | ------- | 
|Company                 |  | Fair value           |        
|                        |  | (in millions of Won) |        
|Sungin Geotec Co., Ltd. |  | (Won)                | 184,830 | 

(c) The movements of investments in associates for the years ended December 31, 2011 and 2010 are as follows:

1) December 31, 2011



|                                             |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|-------------------------------------------- |  | ----------------------- | --------- |  | ----------------------------- | ----- | ------- | ----------------------------- |  | ----- | ----------------------- | - |  | ----- | --------- | 
|Company                                      |  | Dec. 31, 2010Book Value |           |  | Equity methodProfits (Losses) |       |         | Other Increase(Decrease)
(*1) |  |       | Dec. 31, 2011Book Value |  
|                                             |  | (in millions of Won)    |          
|[Domestic]                                   |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|Kyobo Life Insurance Co., Ltd.               |  | (Won)                   | 1,314,808 |  |                               | (Won) | 82,450  |                               |  | (Won) | (20,144                 | ) |  | (Won) | 1,377,114 | 
|Sungjin Geotec Co., Ltd.                     |  |                         | 227,245   |  |                               |       | (33,650 | )                             |  |       | 1,347                   |   |  |       | 194,942   | 
|SNNC Co., Ltd.                               |  |                         | 145,466   |  |                               |       | 49,605  |                               |  |       | (40,940                 | ) |  |       | 154,131   | 
|Busan-Gimhae Light Rail Transit Co., Ltd.    |  |                         | 42,151    |  |                               |       | (7,924  | )                             |  |       |                        |   |  |       | 34,227    | 
|Cheongna IBT Co., Ltd.                       |  |                         | 39,607    |  |                               |       | (4,043  | )                             |  |       |                        |   |  |       | 35,564    | 
|Blue ocean PEF                               |  |                         |          |  |                               |       | 1,478   |                               |  |       | 34,493                  |   |  |       | 35,971    | 
|METAPOLIS Co., Ltd.                          |  |                         | 32,666    |  |                               |       | (16,992 | )                             |  |       |                        |   |  |       | 15,674    | 
|POSMATE Co., Ltd.                            |  |                         | 20,989    |  |                               |       | 3,141   |                               |  |       | (1,721                  | ) |  |       | 22,409    | 
|CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd |  |                         | 21,317    |  |                               |       | (146    | )                             |  |       | (145                    | ) |  |       | 21,026    | 
|Others                                       |  |                         | 156,712   |  |                               |       | (4,290  | )                             |  |       | (57,915                 | ) |  |       | 94,507    | 
|                                             |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|                                             |  |                         | 2,000,961 |  |                               |       | 69,629  |                               |  |       | (85,025                 | ) |  |       | 1,985,565 | 
|                                             |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|[Foreign]                                    |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|POSCO-NPS Niobium LLC                        |  |                         |          |  |                               |       | 5,658   |                               |  |       | 369,210                 |   |  |       | 374,868   | 
|AMCI (WA) Pty Ltd.                           |  |                         | 213,446   |  |                               |       | (32,879 | )                             |  |       | (12,355                 | ) |  |       | 168,212   | 
|Nickel Mining Company SAS                    |  |                         | 180,671   |  |                               |       | (7,073  | )                             |  |       | (5,306                  | ) |  |       | 168,292   | 
|KOBRASCO                                     |  |                         | 141,939   |  |                               |       | 36,911  |                               |  |       | (49,966                 | ) |  |       | 128,884   | 
|KOREA LNG Ltd.                               |  |                         | 133,793   |  |                               |       | 8,026   |                               |  |       | (13,918                 | ) |  |       | 127,901   | 
|Eureka Moly LLC                              |  |                         | 109,177   |  |                               |       | (754    | )                             |  |       | 1,349                   |   |  |       | 109,772   | 
|DMSA, AMSA                                   |  |                         | 100,536   |  |                               |       | 38      |                               |  |       | 18,982                  |   |  |       | 119,556   | 
|BX STEEL POSCO Cold RolledSheet Co., Ltd.    |  |                         | 89,313    |  |                               |       | 1,797   |                               |  |       | 4,467                   |   |  |       | 95,577    | 
|CAML Resources Pty. Ltd.                     |  |                         | 67,401    |  |                               |       | 15,517  |                               |  |       | (27,453                 | ) |  |       | 55,465    | 
|South-East Asia Gas Pipeline Company Ltd.    |  |                         | 56,636    |  |                               |       | (25     | )                             |  |       | 79,564                  |   |  |       | 136,175   | 
|POSCHROME                                    |  |                         | 29,201    |  |                               |       | 1,422   |                               |  |       | (5,949                  | ) |  |       | 24,674    | 
|USS-POSCO Industries                         |  |                         | 40,000    |  |                               |       | (31,585 | )                             |  |       | 8,465                   |   |  |       | 16,880    | 
|NCR LLC                                      |  |                         | 23,931    |  |                               |       | (85     | )                             |  |       | 261                     |   |  |       | 24,107    | 
|Others                                       |  |                         | 119,420   |  |                               |       | (16,028 | )                             |  |       | 192,339                 |   |  |       | 295,731   | 
|                                             |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|                                             |  |                         | 1,305,464 |  |                               |       | (19,060 | )                             |  |       | 559,690                 |   |  |       | 1,846,094 | 
|                                             |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 
|                                             |  | (Won)                   | 3,306,425 |  |                               | (Won) | 50,569  |                               |  | (Won) | 474,665                 |   |  | (Won) | 3,831,659 | 
|                                             |  |                         |           |  |                               |       |         |                               |  |       |                         |   |  |       |           | 





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



F-58



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) December 31, 2010



|                                             |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|-------------------------------------------- |  | ---------------------- | ------- |  | ----------------------------- | ----- | ------- | ------------------------ |  | ----- | ----------------------- | - |  | ----- | --------- | 
|Company                                      |  | Jan. 1, 2010Book Value |         |  | Equity methodProfits (Losses) |       |         | Other Increase(Decrease) |  |       | Dec. 31, 2010Book Value |  
|[Domestic]                                   |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|Kyobo Life Insurance Co., Ltd.               |  | (Won)                  |        |  |                               | (Won) | 54,168  |                          |  | (Won) | 1,260,640               |   |  | (Won) | 1,314,808 | 
|Sungjin Geotec Co., Ltd.                     |  |                        |        |  |                               |       | (9,108  | )                        |  |       | 236,353                 |   |  |       | 227,245   | 
|SNNC Co., Ltd.                               |  |                        | 94,520  |  |                               |       | 63,680  |                          |  |       | (12,734                 | ) |  |       | 145,466   | 
|Busan-Gimhae Light Rail Transit Co., Ltd.    |  |                        | 42,715  |  |                               |       | (563    | )                        |  |       | (1                      | ) |  |       | 42,151    | 
|Cheongna IBT Co., Ltd.                       |  |                        | 2,067   |  |                               |       | (4,201  | )                        |  |       | 41,741                  |   |  |       | 39,607    | 
|METAPOLIS Co., Ltd.                          |  |                        | 38,490  |  |                               |       | (5,824  | )                        |  |       |                        |   |  |       | 32,666    | 
|POSMATE Co., Ltd.                            |  |                        | 13,059  |  |                               |       | (558    | )                        |  |       | 8,488                   |   |  |       | 20,989    | 
|CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd |  |                        | 13,527  |  |                               |       | 7,135   |                          |  |       | 655                     |   |  |       | 21,317    | 
|Others                                       |  |                        | 91,442  |  |                               |       | 3,349   |                          |  |       | 61,921                  |   |  |       | 156,712   | 
|                                             |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|                                             |  |                        | 295,820 |  |                               |       | 108,078 |                          |  |       | 1,597,063               |   |  |       | 2,000,961 | 
|                                             |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|[Foreign]                                    |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|AMCI (WA) Pty Ltd.                           |  |                        |        |  |                               |       |        |                          |  |       | 213,446                 |   |  |       | 213,446   | 
|Nickel Mining Company SAS                    |  |                        | 190,149 |  |                               |       | 9,581   |                          |  |       | (19,059                 | ) |  |       | 180,671   | 
|KOBRASCO                                     |  |                        | 98,943  |  |                               |       | 51,210  |                          |  |       | (8,214                  | ) |  |       | 141,939   | 
|KOREA LNG Ltd.                               |  |                        |        |  |                               |       | 2,934   |                          |  |       | 130,859                 |   |  |       | 133,793   | 
|Eureka Moly LLC                              |  |                        | 113,105 |  |                               |       | (1,165  | )                        |  |       | (2,763                  | ) |  |       | 109,177   | 
|DMSA, AMSA                                   |  |                        |        |  |                               |       | (39     | )                        |  |       | 100,575                 |   |  |       | 100,536   | 
|BX STEEL POSCO Cold RolledSheet Co., Ltd.    |  |                        | 63,667  |  |                               |       | 24,411  |                          |  |       | 1,235                   |   |  |       | 89,313    | 
|CAML Resources Pty. Ltd.                     |  |                        | 41,496  |  |                               |       | 15,660  |                          |  |       | 10,245                  |   |  |       | 67,401    | 
|South-East Asia Gas Pipeline Company Ltd.    |  |                        |        |  |                               |       |        |                          |  |       | 56,636                  |   |  |       | 56,636    | 
|POSCHROME                                    |  |                        | 11,441  |  |                               |       | 783     |                          |  |       | 16,977                  |   |  |       | 29,201    | 
|USS-POSCO Industries                         |  |                        | 45,961  |  |                               |       | (9,165  | )                        |  |       | 3,204                   |   |  |       | 40,000    | 
|NCR LLC                                      |  |                        |        |  |                               |       | (40     | )                        |  |       | 23,971                  |   |  |       | 23,931    | 
|Others                                       |  |                        | 89,867  |  |                               |       | (19,591 | )                        |  |       | 49,144                  |   |  |       | 119,420   | 
|                                             |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|                                             |  |                        | 654,629 |  |                               |       | 74,579  |                          |  |       | 576,256                 |   |  |       | 1,305,464 | 
|                                             |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 
|                                             |  | (Won)                  | 950,449 |  |                               | (Won) | 182,657 |                          |  | (Won) | 2,173,319               |   |  | (Won) | 3,306,425 | 
|                                             |  |                        |         |  |                               |       |         |                          |  |       |                         |   |  |       |           | 





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



F-59



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(d) Summarized financial information of associates as of
December 31, 2011, 2010 and January 1, 2010 are as follows:

1) December 31, 2011



|                                             |  |                      |            |  |             |  |            |        |  |  |           |  |  |                   |            |  |  |  |         |  
|-------------------------------------------- |  | -------------------- | ---------- |  | ----------- |  | ---------- | ------ |  |  | --------- |  |  | ----------------- | ---------- |  |  |  | ------- | -
|Company                                      |  | Assets               |            |  | Liabilities |  |            | Equity |  |  | Sales     |  |  | Net income (loss) |           
|                                             |  | (in millions of Won) |           
|[Domestic]                                   |  |                      |            |  |             |  |            |        |  |  |           |  |  |                   |            |  |  |  |         |  
|Kyobo Life Insurance Co., Ltd.               |  | (Won)                | 60,828,181 |  |             |  | 55,786,580 |        |  |  | 5,041,601 |  |  |                   | 11,610,607 |  |  |  | 487,785 |  
|Sungjin Geotec Co., Ltd.                     |  |                      | 717,665    |  |             |  | 611,548    |        |  |  | 106,117   |  |  |                   | 663,879    |  |  |  | (58,894 | )
|SNNC Co., Ltd.                               |  |                      | 610,059    |  |             |  | 269,318    |        |  |  | 340,741   |  |  |                   | 473,173    |  |  |  | 81,246  |  
|Busan-Gimhae Light Rail Transit Co., Ltd.    |  |                      | 817,402    |  |             |  | 680,492    |        |  |  | 136,910   |  |  |                   | 3,690      |  |  |  | (31,696 | )
|Cheongna IBT Co., Ltd.                       |  |                      | 433,306    |  |             |  | 263,377    |        |  |  | 169,929   |  |  |                   | 305        |  |  |  | (20,527 | )
|Blue ocean PEF                               |  |                      | 385,060    |  |             |  | 254,353    |        |  |  | 130,707   |  |  |                   | 79,583     |  |  |  | 5,371   |  
|METAPOLIS Co., Ltd.                          |  |                      | 579,241    |  |             |  | 534,775    |        |  |  | 44,466    |  |  |                   | 21,333     |  |  |  | (36,861 | )
|POSMATE Co., Ltd.                            |  |                      | 90,403     |  |             |  | 15,317     |        |  |  | 75,086    |  |  |                   | 116,021    |  |  |  | 8,592   |  
|CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd |  |                      | 302,887    |  |             |  | 256,485    |        |  |  | 46,402    |  |  |                   | 67,459     |  |  |  | 2,099   |  
|[Foreign]                                    |  |                      |            |  |             |  |            |        |  |  |           |  |  |                   |            |  |  |  |         |  
|POSCO-NPS Niobium LLC                        |  |                      | 749,737    |  |             |  |           |        |  |  | 749,737   |  |  |                   | 11,433     |  |  |  | 11,317  |  
|Nickel Mining Company SAS                    |  |                      | 496,518    |  |             |  | 94,900     |        |  |  | 401,618   |  |  |                   | 142,456    |  |  |  | (12,983 | )
|KOBRASCO                                     |  |                      | 314,458    |  |             |  | 56,691     |        |  |  | 257,767   |  |  |                   | 130,725    |  |  |  | 73,978  |  
|KOREA LNG Ltd.                               |  |                      | 24,169     |  |             |  | 10,492     |        |  |  | 13,677    |  |  |                   | 95,385     |  |  |  | 92,600  |  
|DMSA, AMSA                                   |  |                      | 5,807,261  |  |             |  | 3,979,755  |        |  |  | 1,827,506 |  |  |                   | 939        |  |  |  | 939     |  
|BX STEEL POSCO Cold RolledSheet Co., Ltd.    |  |                      | 1,099,540  |  |             |  | 745,318    |        |  |  | 354,222   |  |  |                   | 1,421,784  |  |  |  | 7,188   |  
|CAML Resources Pty. Ltd.                     |  |                      | 217,677    |  |             |  | 105,456    |        |  |  | 112,221   |  |  |                   | 278,778    |  |  |  | 46,567  |  
|South-East Asia Gas Pipeline Company Ltd.    |  |                      | 596,972    |  |             |  | 53,140     |        |  |  | 543,832   |  |  |                   |           |  |  |  | (99     | )
|POSCHROME                                    |  |                      | 61,740     |  |             |  | 4,129      |        |  |  | 57,611    |  |  |                   | 96,785     |  |  |  | 1,028   |  
|USS-POSCO Industries                         |  |                      | 470,963    |  |             |  | 434,722    |        |  |  | 36,241    |  |  |                   | 1,062,110  |  |  |  | (61,478 | )

2) December 31, 2010



|                                             |  |                      |            |  |             |  |            |        |  |  |           |  |  |                   |           |  |  |  |         |  
|-------------------------------------------- |  | -------------------- | ---------- |  | ----------- |  | ---------- | ------ |  |  | --------- |  |  | ----------------- | --------- |  |  |  | ------- | -
|Company                                      |  | Assets               |            |  | Liabilities |  |            | Equity |  |  | Sales     |  |  | Net income (loss) |          
|                                             |  | (in millions of Won) |           
|[Domestic]                                   |  |                      |            |  |             |  |            |        |  |  |           |  |  |                   |           |  |  |  |         |  
|Kyobo Life Insurance Co., Ltd.               |  | (Won)                | 57,563,928 |  |             |  | 52,926,182 |        |  |  | 4,637,746 |  |  |                   | 3,443,403 |  |  |  | 232,968 |  
|Sungjin Geotec Co., Ltd.                     |  |                      | 600,667    |  |             |  | 460,621    |        |  |  | 140,046   |  |  |                   | 401,551   |  |  |  | (9,939  | )
|SNNC Co., Ltd.                               |  |                      | 648,884    |  |             |  | 305,839    |        |  |  | 343,045   |  |  |                   | 533,291   |  |  |  | 149,377 |  
|Busan-Gimhae Light Rail Transit Co., Ltd.    |  |                      | 677,502    |  |             |  | 508,896    |        |  |  | 168,606   |  |  |                   | 105       |  |  |  | (2,252  | )
|Cheongna IBT Co., Ltd.                       |  |                      | 457,438    |  |             |  | 266,020    |        |  |  | 191,418   |  |  |                   | 666       |  |  |  | (23,413 | )
|METAPOLIS Co., Ltd.                          |  |                      | 600,290    |  |             |  | 518,914    |        |  |  | 81,376    |  |  |                   | 176,511   |  |  |  | (14,542 | )
|POSMATE Co., Ltd.                            |  |                      | 94,030     |  |             |  | 23,770     |        |  |  | 70,260    |  |  |                   | 130,418   |  |  |  | 27,707  |  
|CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd |  |                      | 254,216    |  |             |  | 212,279    |        |  |  | 41,937    |  |  |                   | 80,772    |  |  |  | 20,586  |  
|[Foreign]                                    |  |                      |            |  |             |  |            |        |  |  |           |  |  |                   |           |  |  |  |         |  
|Nickel Mining Company SAS                    |  |                      | 528,637    |  |             |  | 95,166     |        |  |  | 433,471   |  |  |                   | 186,149   |  |  |  | 27,233  |  
|KOBRASCO                                     |  |                      | 348,954    |  |             |  | 65,076     |        |  |  | 283,878   |  |  |                   | 136,860   |  |  |  | 87,957  |  
|KOREA LNG Ltd.                               |  |                      | 13,850     |  |             |  | 87         |        |  |  | 13,763    |  |  |                   | 17,691    |  |  |  | 16,925  |  
|DMSA, AMSA                                   |  |                      | 5,301,319  |  |             |  | 3,930,064  |        |  |  | 1,371,255 |  |  |                   |          |  |  |  | (987    | )
|BX STEEL POSCO Cold RolledSheet Co., Ltd.    |  |                      | 1,003,494  |  |             |  | 675,931    |        |  |  | 327,563   |  |  |                   | 1,421,734 |  |  |  | 97,645  |  
|CAML Resources Pty. Ltd.                     |  |                      | 210,319    |  |             |  | 65,298     |        |  |  | 145,021   |  |  |                   | 265,256   |  |  |  | 46,969  |  
|South-East Asia Gas Pipeline Company Ltd.    |  |                      | 227,499    |  |             |  | 17,966     |        |  |  | 209,533   |  |  |                   |          |  |  |  |        |  
|POSCHROME                                    |  |                      | 76,611     |  |             |  | 7,693      |        |  |  | 68,918    |  |  |                   | 71,316    |  |  |  | 6,305   |  
|USS-POSCO Industries                         |  |                      | 459,290    |  |             |  | 369,082    |        |  |  | 90,208    |  |  |                   | 1,020,538 |  |  |  | (15,710 | )



F-60



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







3) January 1, 2010



|                                             |  |                      |           |  |             |  |         |        |  |  |         | 
|-------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | ------- | ------ |  |  | ------- | 
|Company                                      |  | Assets               |           |  | Liabilities |  |         | Equity | 
|                                             |  | (in millions of Won) |          
|[Domestic]                                   |  |                      |           |  |             |  |         |        |  |  |         | 
|SNNC Co., Ltd.                               |  | (Won)                | 505,417   |  |             |  | 285,761 |        |  |  | 219,656 | 
|Busan-Gimhae Light Rail Transit Co., Ltd.    |  |                      | 485,887   |  |             |  | 315,029 |        |  |  | 170,858 | 
|Cheongna IBT Co., Ltd.                       |  |                      | 328,046   |  |             |  | 294,946 |        |  |  | 33,100  | 
|METAPOLIS Co., Ltd.                          |  |                      | 460,073   |  |             |  | 364,156 |        |  |  | 95,917  | 
|POSMATE Co., Ltd.                            |  |                      | 59,804    |  |             |  | 17,372  |        |  |  | 42,432  | 
|CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd |  |                      | 144,992   |  |             |  | 123,640 |        |  |  | 21,352  | 
|[Foreign]                                    |  |                      |           |  |             |  |         |        |  |  |         | 
|Nickel Mining Company SAS                    |  |                      | 551,969   |  |             |  | 102,228 |        |  |  | 449,741 | 
|KOBRASCO                                     |  |                      | 273,311   |  |             |  | 75,424  |        |  |  | 197,887 | 
|BX STEEL POSCO Cold RolledSheet Co., Ltd.    |  |                      | 1,018,978 |  |             |  | 791,925 |        |  |  | 227,053 | 
|CAML Resources Pty. Ltd.                     |  |                      | 137,046   |  |             |  | 52,313  |        |  |  | 84,733  | 
|POSCHROME                                    |  |                      | 64,564    |  |             |  | 9,494   |        |  |  | 55,070  | 
|USS-POSCO Industries                         |  |                      | 443,184   |  |             |  | 338,318 |        |  |  | 104,866 | 

(e) Details of significant joint ventures as of December 31, 2011 are as follows:



|               |  |          |        |  |        |  |           |               |  |  |       |  
|-------------- |  | -------- | ------ |  | ------ |  | --------- | ------------- |  |  | ----- | -
|Joint venture  |  | Business |        |  | Region |  |           | Ownership (%) | 
|Mt.Thorley J/V |  |          | Mining |  |        |  | Australia |               |  |  | 20.00 | %
|POSMAC J/V     |  |          | Mining |  |        |  | Australia |               |  |  | 20.00 | %
|CD J/V         |  |          | Mining |  |        |  | Australia |               |  |  | 5.00  | %
|RUM J/V        |  |          | Mining |  |        |  | Australia |               |  |  | 10.00 | %



|11. | Investment Property, Net
|--- | ------------------------

(a) Investment
property as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                               |  |                      |          |   |                  |  |          |                |  |  |         |  
|-------------------------------------------------------------- |  | -------------------- | -------- | - | ---------------- |  | -------- | -------------- |  |  | ------- | -
|                                                               |  | December 31,2011     |          |   | December 31,2010 |  |          | January 1,2010 | 
|                                                               |  | (in millions of Won) |         
|Cost                                                           |  | (Won)                | 766,905  |   |                  |  | 701,005  |                |  |  | 629,357 |  
|Less: Accumulated depreciation and accumulated impairment loss |  |                      | (239,372 | ) |                  |  | (207,640 | )              |  |  | (71,150 | )
|                                                               |  |                      |          |   |                  |  |          |                |  |  |         |  
|Carrying value                                                 |  | (Won)                | 527,533  |   |                  |  | 493,365  |                |  |  | 558,207 |  
|                                                               |  |                      |          |   |                  |  |          |                |  |  |         |  

As of December 31, 2011, the fair value of investment property is (Won)837,511 million, among which the Company evaluated investment property of 7 subsidiaries including International Business Center
Corporation as its book value amounted to (Won)82,396 million since it is believed that fair value is approximately same as book value.

(b) Changes in the carrying value of investment property for the years ended December 31, 2011 and 2010 are as follows:

1) For the year ended December 31, 2011



|           |  |                      |         |  |             |  |         |                     |  |  |          |  |  |                   |          |   |             |  |         |        |  |  |        |   |  |  |         | 
|---------- |  | -------------------- | ------- |  | ----------- |  | ------- | ------------------- |  |  | -------- |  |  | ----------------- | -------- | - | ----------- |  | ------- | ------ |  |  | ------ | - |  |  | ------- | 
|           |  | Beginning            |         |  | Acquisition |  |         | Businesscombination |  |  | Disposal |  |  | Depreciation (*1) |          |   | Others (*2) |  |         | Ending | 
|           |  | (in millions of Won) |        
|Land       |  | (Won)                | 211,464 |  |             |  | 41,243  |                     |  |  | 94       |  |  |                   | (57,905  | ) |             |  | (14,010 | )      |  |  | 38,591 |   |  |  | 219,477 | 
|Buildings  |  |                      | 278,361 |  |             |  | 109,757 |                     |  |  |         |  |  |                   | (56,953  | ) |             |  | (22,783 | )      |  |  | (6,649 | ) |  |  | 301,733 | 
|Structures |  |                      | 3,540   |  |             |  | 6,072   |                     |  |  |         |  |  |                   |         |   |             |  | (640    | )      |  |  | (2,649 | ) |  |  | 6,323   | 
|           |  |                      |         |  |             |  |         |                     |  |  |          |  |  |                   |          |   |             |  |         |        |  |  |        |   |  |  |         | 
|Total      |  | (Won)                | 493,365 |  |             |  | 157,072 |                     |  |  | 94       |  |  |                   | (114,858 | ) |             |  | (37,433 | )      |  |  | 29,293 |   |  |  | 527,533 | 
|           |  |                      |         |  |             |  |         |                     |  |  |          |  |  |                   |          |   |             |  |         |        |  |  |        |   |  |  |         | 





|(*1) | Impairment losses of investment property amounted to
(Won)23,048 million are included.
|---- | --------------------------------------------------------------------------------------



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



F-61



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) For the year ended December 31, 2010



|           |  |                      |         |  |             |  |         |                     |  |  |          |  |  |                   |          |   |             |  |          |        |  |  |        |  |  |  |         | 
|---------- |  | -------------------- | ------- |  | ----------- |  | ------- | ------------------- |  |  | -------- |  |  | ----------------- | -------- | - | ----------- |  | -------- | ------ |  |  | ------ |  |  |  | ------- | 
|           |  | Beginning            |         |  | Acquisition |  |         | Businesscombination |  |  | Disposal |  |  | Depreciation (*1) |          |   | Others (*2) |  |          | Ending | 
|           |  | (in millions of Won) |        
|Land       |  | (Won)                | 238,682 |  |             |  | 87,114  |                     |  |  | 7,923    |  |  |                   | (65,759  | ) |             |  | (60,463  | )      |  |  | 3,967  |  |  |  | 211,464 | 
|Buildings  |  |                      | 317,495 |  |             |  | 47,088  |                     |  |  | 20,548   |  |  |                   | (47,124  | ) |             |  | (84,656  | )      |  |  | 25,010 |  |  |  | 278,361 | 
|Structures |  |                      | 2,030   |  |             |  |        |                     |  |  | 1,945    |  |  |                   |         |   |             |  | (809     | )      |  |  | 374    |  |  |  | 3,540   | 
|           |  |                      |         |  |             |  |         |                     |  |  |          |  |  |                   |          |   |             |  |          |        |  |  |        |  |  |  |         | 
|Total      |  | (Won)                | 558,207 |  |             |  | 134,202 |                     |  |  | 30,416   |  |  |                   | (112,883 | ) |             |  | (145,928 | )      |  |  | 29,351 |  |  |  | 493,365 | 
|           |  |                      |         |  |             |  |         |                     |  |  |          |  |  |                   |          |   |             |  |          |        |  |  |        |  |  |  |         | 





|(*1) | Impairment losses of investment property amounted to
(Won)127,515 million are included.
|---- | ---------------------------------------------------------------------------------------



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



|12. | Property, Plant and Equipment, Net
|--- | ----------------------------------

(a)
Property, plant and equipment as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                |  |                      |             |   |      |  |             |                 |  |  |             |  
|------------------------------- |  | -------------------- | ----------- | - | ---- |  | ----------- | --------------- |  |  | ----------- | -
|                                |  | 2011                 |             |   | 2010 |  |             | January 1, 2010 | 
|                                |  | (in millions of Won) |            
|Cost                            |  | (Won)                | 51,653,789  |   |      |  | 46,992,804  |                 |  |  | 41,210,602  |  
|Less : Accumulated depreciation |  |                      | (23,134,937 | ) |      |  | (21,523,736 | )               |  |  | (18,866,625 | )
|Less : Government grants        |  |                      | (65,668     | ) |      |  | (31,328     | )               |  |  | (1,230      | )
|                                |  |                      |             |   |      |  |             |                 |  |  |             |  
|Book value                      |  | (Won)                | 28,453,184  |   |      |  | 25,437,740  |                 |  |  | 22,342,747  |  
|                                |  |                      |             |   |      |  |             |                 |  |  |             |  

(b) The changes in carrying value of property, plant and equipment as for the years ended December 31, 2011 and
2010 are as follows:

1) For the year ended December 31, 2011



|                         |  |                      |            |  |                  |  |           |                     |  |  |          |  |  |                   |          |   |             |  |            |        |  |  |            |   |  |  |            | 
|------------------------ |  | -------------------- | ---------- |  | ---------------- |  | --------- | ------------------- |  |  | -------- |  |  | ----------------- | -------- | - | ----------- |  | ---------- | ------ |  |  | ---------- | - |  |  | ---------- | 
|                         |  | Beginning            |            |  | Acquisition (*1) |  |           | Businesscombination |  |  | Disposal |  |  | Depreciation (*2) |          |   | Others (*3) |  |            | Ending | 
|                         |  | (in millions of Won) |           
|Land                     |  | (Won)                | 2,011,851  |  |                  |  | 450,151   |                     |  |  | 92,806   |  |  |                   | (55,751  | ) |             |  |           |        |  |  | 50,121     |   |  |  | 2,549,178  | 
|Buildings                |  |                      | 3,551,163  |  |                  |  | 701,166   |                     |  |  | 38,382   |  |  |                   | (38,755  | ) |             |  | (278,097   | )      |  |  | 45,970     |   |  |  | 4,019,829  | 
|Structures               |  |                      | 2,070,189  |  |                  |  | 289,524   |                     |  |  | 8,961    |  |  |                   | (10,775  | ) |             |  | (163,072   | )      |  |  | 65,610     |   |  |  | 2,260,437  | 
|Machinery and equipment  |  |                      | 13,777,382 |  |                  |  | 2,892,960 |                     |  |  | 204,871  |  |  |                   | (45,950  | ) |             |  | (1,605,342 | )      |  |  | 955,463    |   |  |  | 16,179,384 | 
|Vehicles                 |  |                      | 64,173     |  |                  |  | 21,041    |                     |  |  | 1,981    |  |  |                   | (1,795   | ) |             |  | (17,894    | )      |  |  | (763       | ) |  |  | 66,743     | 
|Tools                    |  |                      | 75,437     |  |                  |  | 38,477    |                     |  |  | 2,259    |  |  |                   | (1,477   | ) |             |  | (37,743    | )      |  |  | 3,924      |   |  |  | 80,877     | 
|Furniture and fixtures   |  |                      | 124,677    |  |                  |  | 66,297    |                     |  |  | 1,995    |  |  |                   | (1,657   | ) |             |  | (28,249    | )      |  |  | 6,626      |   |  |  | 169,689    | 
|Capital Lease Assets     |  |                      | 43,106     |  |                  |  | 8,029     |                     |  |  | 20       |  |  |                   | (145     | ) |             |  | (14,081    | )      |  |  | 1,613      |   |  |  | 38,542     | 
|Construction-in-progress |  |                      | 3,719,762  |  |                  |  | 4,593,524 |                     |  |  | 10,536   |  |  |                   |         |   |             |  |           |        |  |  | (5,235,317 | ) |  |  | 3,088,505  | 
|                         |  |                      |            |  |                  |  |           |                     |  |  |          |  |  |                   |          |   |             |  |            |        |  |  |            |   |  |  |            | 
|Total                    |  | (Won)                | 25,437,740 |  |                  |  | 9,061,169 |                     |  |  | 361,811  |  |  |                   | (156,305 | ) |             |  | (2,144,478 | )      |  |  | (4,106,753 | ) |  |  | 28,453,184 | 
|                         |  |                      |            |  |                  |  |           |                     |  |  |          |  |  |                   |          |   |             |  |            |        |  |  |            |   |  |  |            | 





|(*1) | Acquisition includes assets transferred from construction-in-progress.
|---- | ----------------------------------------------------------------------



|(*2) | Impairment losses of property, plant and equipment amounted to
(Won)25,852 million are included.
|---- | ------------------------------------------------------------------------------------------------



|(*3) | Includes reclassification for changing purpose of use, adjustment of foreign currency translation difference and others.
|---- | ------------------------------------------------------------------------------------------------------------------------



F-62



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) For the year ended December 31, 2010



|                         |  |                      |            |  |                  |  |            |                     |  |  |          |  |  |              |          |   |             |  |            |        |  |  |            |   |  |  |            | 
|------------------------ |  | -------------------- | ---------- |  | ---------------- |  | ---------- | ------------------- |  |  | -------- |  |  | ------------ | -------- | - | ----------- |  | ---------- | ------ |  |  | ---------- | - |  |  | ---------- | 
|                         |  | Beginning            |            |  | Acquisition (*1) |  |            | Businesscombination |  |  | Disposal |  |  | Depreciation |          |   | Others (*2) |  |            | Ending | 
|                         |  | (in millions of Won) |           
|Land                     |  | (Won)                | 1,767,579  |  |                  |  | 169,090    |                     |  |  | 94,126   |  |  |              | (26,396  | ) |             |  |           |        |  |  | 7,452      |   |  |  | 2,011,851  | 
|Buildings                |  |                      | 2,754,487  |  |                  |  | 442,607    |                     |  |  | 278,812  |  |  |              | (68,791  | ) |             |  | (217,835   | )      |  |  | 361,883    |   |  |  | 3,551,163  | 
|Structures               |  |                      | 1,579,212  |  |                  |  | 592,421    |                     |  |  | 12,059   |  |  |              | (9,410   | ) |             |  | (131,556   | )      |  |  | 27,463     |   |  |  | 2,070,189  | 
|Machinery and equipment  |  |                      | 11,735,492 |  |                  |  | 4,170,812  |                     |  |  | 247,224  |  |  |              | (54,912  | ) |             |  | (2,480,608 | )      |  |  | 159,374    |   |  |  | 13,777,382 | 
|Vehicles                 |  |                      | 52,113     |  |                  |  | 39,444     |                     |  |  | 11,221   |  |  |              | (3,524   | ) |             |  | (27,359    | )      |  |  | (7,722     | ) |  |  | 64,173     | 
|Tools                    |  |                      | 67,107     |  |                  |  | 43,480     |                     |  |  | 1,520    |  |  |              | (26,324  | ) |             |  | (20,479    | )      |  |  | 10,133     |   |  |  | 75,437     | 
|Furniture and fixtures   |  |                      | 84,232     |  |                  |  | 67,128     |                     |  |  | 2,559    |  |  |              | (7,063   | ) |             |  | (52,601    | )      |  |  | 30,422     |   |  |  | 124,677    | 
|Capital Lease Assets     |  |                      | 23,060     |  |                  |  | 20,948     |                     |  |  | 88       |  |  |              | (556     | ) |             |  | (11,699    | )      |  |  | 11,265     |   |  |  | 43,106     | 
|Construction-in-progress |  |                      | 4,279,465  |  |                  |  | 5,493,240  |                     |  |  | 72,485   |  |  |              | (24,796  | ) |             |  |           |        |  |  | (6,100,632 | ) |  |  | 3,719,762  | 
|                         |  |                      |            |  |                  |  |            |                     |  |  |          |  |  |              |          |   |             |  |            |        |  |  |            |   |  |  |            | 
|Total                    |  | (Won)                | 22,342,747 |  |                  |  | 11,039,170 |                     |  |  | 720,094  |  |  |              | (221,772 | ) |             |  | (2,942,137 | )      |  |  | (5,500,362 | ) |  |  | 25,437,740 | 
|                         |  |                      |            |  |                  |  |            |                     |  |  |          |  |  |              |          |   |             |  |            |        |  |  |            |   |  |  |            | 





|(*1) | Acquisition includes assets transferred from construction-in-progress.
|---- | ----------------------------------------------------------------------



|(*2) | Includes reclassification for changing purpose of use, adjustment of foreign currency translation difference and others.
|---- | ------------------------------------------------------------------------------------------------------------------------

(c) Borrowing costs capitalized and the capitalized interest rate for the years ended December 31, 2011 and 2010 are as follows:



|                            |  |                      |           |   |                   |  |         |  
|--------------------------- |  | -------------------- | --------- | - | ----------------- |  | ------- | -
|                            |  | December 31, 2011    |           |   | December 31, 2010 | 
|                            |  | (in millions of Won) |          
|Average expenditure costs   |  |                      | 1,433,877 |   |                   |  | 350,000 |  
|Capitalized borrowing costs |  |                      | 78,777    |   |                   |  | 12,897  |  
|Capitalized interest rate   |  |                      | 5.49      | % |                   |  | 3.68    | %

(d) Pledged as collateral assets



|                              |  |                                            |  |                      |         |  |                  |  |         |                |  |  |         | 
|----------------------------- |  | ------------------------------------------ |  | -------------------- | ------- |  | ---------------- |  | ------- | -------------- |  |  | ------- | 
|                              |  | Collateral right holder                    |  | December 31,2011     |         |  | December 31,2010 |  |         | January 1,2010 | 
|                              |  |                                            |  | (in millions of Won) |        
|Land (*1)                     |  | Korean Development Bank and others         |  | (Won)                | 381,096 |  |                  |  | 235,486 |                |  |  | 220,732 | 
|Buildings and structures (*1) |  | Korean Development Bank and others         |  |                      | 139,169 |  |                  |  | 165,251 |                |  |  | 105,465 | 
|Machinery and equipment       |  | The Export-Import Bank of Korea and others |  |                      | 218,816 |  |                  |  | 231,521 |                |  |  | 387,828 | 
|                              |  |                                            |  |                      |         |  |                  |  |         |                |  |  |         | 
|                              |  |                                            |  | (Won)                | 739,081 |  |                  |  | 632,258 |                |  |  | 714,025 | 
|                              |  |                                            |  |                      |         |  |                  |  |         |                |  |  |         | 





|(*1) | Investment property are included.
|---- | ---------------------------------

(e) Based on an
asset life study performed in 2011, the Company changed the estimated useful life of certain machinery and equipments in its steel business from 8 years to 15 years. During the year ended December 31, 2011, the depreciation costs decreased by (Won)1,227,169 million as a result of this change in the estimated useful life.



F-63



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|13. | Goodwill and Other Intangible Assets
|--- | ------------------------------------

(a)
Goodwill and other intangible assets as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                                |  |                      |           |   |                   |  |           |                 |  |  |          |  
|--------------------------------------------------------------- |  | -------------------- | --------- | - | ----------------- |  | --------- | --------------- |  |  | -------- | -
|                                                                |  | December 31, 2011    |           |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                                                |  | (in millions of Won) |          
|Cost                                                            |  | (Won)                | 5,457,923 |   |                   |  | 4,697,429 |                 |  |  | 928,520  |  
|Less : Accumulated amortization and accumulated impairment loss |  |                      | (210,923  | ) |                   |  | (77,634   | )               |  |  | (173,895 | )
|Less : Government grants                                        |  |                      | (2,072    | ) |                   |  | (626      | )               |  |  | (394     | )
|                                                                |  |                      |           |   |                   |  |           |                 |  |  |          |  
|Book value                                                      |  | (Won)                | 5,244,928 |   |                   |  | 4,619,169 |                 |  |  | 754,231  |  
|                                                                |  |                      |           |   |                   |  |           |                 |  |  |          |  

(b) The changes in carrying value of goodwill and other intangible assets for the years ended December 31, 2011
and 2010 are as follows:

1) For the year ended December 31, 2011



|                                  |  |                      |           |  |             |  |         |             |  |  |                     |  |  |          |         |  |              |  |         |            |  |  |             |   |  |        |         |   |  |  |          |   |  |  |           | 
|--------------------------------- |  | -------------------- | --------- |  | ----------- |  | ------- | ----------- |  |  | ------------------- |  |  | -------- | ------- |  | ------------ |  | ------- | ---------- |  |  | ----------- | - |  | ------ | ------- | - |  |  | -------- | - |  |  | --------- | 
|                                  |  |                      |           |  | Increase    |  |         | Decrease    |  |  |                     |  |  |          |        
|                                  |  | Beginning            |           |  | Acquisition |  |         | Development |  |  | Businesscombination |  |  | Disposal |         |  | Amortization |  |         | Impairment |  |  | Others (*3) |   |  | Ending |        
|                                  |  | (in millions of Won) |          
|Goodwill (*1)                     |  | (Won)                | 1,447,743 |  |             |  |        |             |  |  |                    |  |  |          | 224,032 |  |              |  |        |            |  |  |            |   |  |        | (14,958 | ) |  |  |         |   |  |  | 1,656,817 | 
|Intellectual property rights      |  |                      | 119,100   |  |             |  | 171,402 |             |  |  |                    |  |  |          |        |  |              |  | (7,544  | )          |  |  | (16,258     | ) |  |        |        |   |  |  | 8,207    |   |  |  | 274,907   | 
|Premium in rental (*2)            |  |                      | 159,761   |  |             |  | 15,355  |             |  |  |                    |  |  |          | 9       |  |              |  | (3,457  | )          |  |  | (8,391      | ) |  |        |        |   |  |  | (24,133  | ) |  |  | 139,144   | 
|Development expense               |  |                      | 49,275    |  |             |  | 13,978  |             |  |  | 252                 |  |  |          | 688     |  |              |  | (44     | )          |  |  | (20,092     | ) |  |        |        |   |  |  | 1,526    |   |  |  | 45,583    | 
|Port facilities usage rights      |  |                      | 108,161   |  |             |  |        |             |  |  |                    |  |  |          |        |  |              |  |        |            |  |  | (13,130     | ) |  |        |        |   |  |  | (285     | ) |  |  | 94,746    | 
|Exploration and evaluation assets |  |                      | 594,464   |  |             |  | 10,151  |             |  |  |                    |  |  |          |        |  |              |  | (38,563 | )          |  |  |            |   |  |        |        |   |  |  | (92,860  | ) |  |  | 473,192   | 
|Mining development assets         |  |                      | 1,058,354 |  |             |  | 357,681 |             |  |  |                    |  |  |          |        |  |              |  | (96     | )          |  |  |            |   |  |        |        |   |  |  | (1,624   | ) |  |  | 1,414,315 | 
|Client relationships              |  |                      | 778,080   |  |             |  |        |             |  |  |                    |  |  |          | 75,836  |  |              |  |        |            |  |  | (46,848     | ) |  |        |        |   |  |  |         |   |  |  | 807,068   | 
|Other intangible assets           |  |                      | 304,231   |  |             |  | 95,557  |             |  |  |                    |  |  |          | 8,160   |  |              |  | (5,684  | )          |  |  | (28,569     | ) |  |        |        |   |  |  | (34,539  | ) |  |  | 339,156   | 
|                                  |  |                      |           |  |             |  |         |             |  |  |                     |  |  |          |         |  |              |  |         |            |  |  |             |   |  |        |         |   |  |  |          |   |  |  |           | 
|                                  |  | (Won)                | 4,619,169 |  |             |  | 664,124 |             |  |  | 252                 |  |  |          | 308,725 |  |              |  | (55,388 | )          |  |  | (133,288    | ) |  |        | (14,958 | ) |  |  | (143,708 | ) |  |  | 5,244,928 | 
|                                  |  |                      |           |  |             |  |         |             |  |  |                     |  |  |          |         |  |              |  |         |            |  |  |             |   |  |        |         |   |  |  |          |   |  |  |           | 





|(*1) | Acquisition amounts include goodwill amounting to
(Won)119,260 million related to the acquisition of POSCO Thainox Co., Ltd. in 2011 (note 37).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------



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



|(*3) | Includes translation differences and other adjustments.
|---- | -------------------------------------------------------



F-64



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) For the year ended December 31, 2010



|                                  |  |                      |         |  |             |  |         |             |  |  |                     |  |  |          |           |  |              |  |         |             |  |  |         |   |  |  |         |   |  |  |           | 
|--------------------------------- |  | -------------------- | ------- |  | ----------- |  | ------- | ----------- |  |  | ------------------- |  |  | -------- | --------- |  | ------------ |  | ------- | ----------- |  |  | ------- | - |  |  | ------- | - |  |  | --------- | 
|                                  |  |                      |         |  | Increase    |  |         | Decrease    |  |  |                     |  |  |          |          
|                                  |  | Beginning            |         |  | Acquisition |  |         | Development |  |  | Businesscombination |  |  | Disposal |           |  | Amortization |  |         | Others (*3) |  |  | Ending  |  
|                                  |  | (in millions of Won) |        
|Goodwill (*1)                     |  | (Won)                | 268,080 |  |             |  |        |             |  |  |                    |  |  |          | 1,179,663 |  |              |  |        |             |  |  |        |   |  |  |        |   |  |  | 1,447,743 | 
|Intellectual property rights      |  |                      | 50,365  |  |             |  | 7,863   |             |  |  |                    |  |  |          | 58,245    |  |              |  | (12     | )           |  |  | (1,142  | ) |  |  | 3,781   |   |  |  | 119,100   | 
|Premium in rental (*2)            |  |                      | 168,701 |  |             |  | 39,309  |             |  |  |                    |  |  |          | 34        |  |              |  | (6,015  | )           |  |  | (788    | ) |  |  | (41,480 | ) |  |  | 159,761   | 
|Development expense               |  |                      | 47,648  |  |             |  | 21,417  |             |  |  | 28                  |  |  |          | 4,338     |  |              |  | (7,522  | )           |  |  | (14,611 | ) |  |  | (2,023  | ) |  |  | 49,275    | 
|Port facilities usage rights      |  |                      | 99,552  |  |             |  | 28,024  |             |  |  |                    |  |  |          |          |  |              |  |        |             |  |  | (19,415 | ) |  |  |        |   |  |  | 108,161   | 
|Exploration and evaluation assets |  |                      |        |  |             |  | 84,807  |             |  |  |                    |  |  |          | 509,657   |  |              |  |        |             |  |  |        |   |  |  |        |   |  |  | 594,464   | 
|Mining development assets         |  |                      |        |  |             |  | 50,793  |             |  |  |                    |  |  |          | 1,007,561 |  |              |  |        |             |  |  |        |   |  |  |        |   |  |  | 1,058,354 | 
|Client relationships              |  |                      |        |  |             |  |        |             |  |  |                    |  |  |          | 789,200   |  |              |  |        |             |  |  | (11,120 | ) |  |  |        |   |  |  | 778,080   | 
|Other intangible assets           |  |                      | 119,885 |  |             |  | 83,784  |             |  |  |                    |  |  |          | 148,587   |  |              |  | (12,424 | )           |  |  | (28,268 | ) |  |  | (7,333  | ) |  |  | 304,231   | 
|                                  |  |                      |         |  |             |  |         |             |  |  |                     |  |  |          |           |  |              |  |         |             |  |  |         |   |  |  |         |   |  |  |           | 
|                                  |  | (Won)                | 754,231 |  |             |  | 315,997 |             |  |  | 28                  |  |  |          | 3,697,285 |  |              |  | (25,973 | )           |  |  | (75,344 | ) |  |  | (47,055 | ) |  |  | 4,619,169 | 
|                                  |  |                      |         |  |             |  |         |             |  |  |                     |  |  |          |           |  |              |  |         |             |  |  |         |   |  |  |         |   |  |  |           | 





|(*1) | Acquisition amounts include goodwill amounting to
(Won)1,163,922 million related to acquisition of Daewoo International Corporation in 2010 (note 37).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(*3) | Includes translation differences and other adjustments.
|---- | -------------------------------------------------------

(c) For the purpose of impairment testing, goodwill is allocated to individual operating entities determined to be CGUs. The goodwill amount as of December 31, 2011, December 31, 2010 and
January 1, 2010 are as follows:



|                                                                     |  |                      |           |  |                   |  |           |                 |  |  |         | 
|-------------------------------------------------------------------- |  | -------------------- | --------- |  | ----------------- |  | --------- | --------------- |  |  | ------- | 
|                                                                     |  | December 31, 2011    |           |  | December 31, 2010 |  |           | January 1, 2010 | 
|                                                                     |  | (in millions of Won) |          
|Daewoo International Corporation (*1)                                |  | (Won)                | 1,163,922 |  |                   |  | 1,163,922 |                 |  |  |        | 
|POSCO Engineering Company (formerly Daewoo Engineering Company)
(*2) |  |                      | 194,637   |  |                   |  | 194,637   |                 |  |  | 194,637 | 
|POSCO-Thainox Public Company Limited (*3)                            |  |                      | 119,259   |  |                   |  |          |                 |  |  |        | 
|Multiple units without significant goodwill (*4)                     |  |                      | 178,999   |  |                   |  | 89,184    |                 |  |  | 73,443  | 
|                                                                     |  |                      |           |  |                   |  |           |                 |  |  |         | 
|Total                                                                |  | (Won)                | 1,656,817 |  |                   |  | 1,447,743 |                 |  |  | 268,080 | 
|                                                                     |  |                      |           |  |                   |  |           |                 |  |  |         | 





|(*1) | Recoverable amounts of Daewoo international Corporation were determined based on value-in- use. As of December 31, 2011, value-in-use is estimated by applying 6.90%~7.40%
discount rate and 2.65%~3.15% terminal growth rate with 5 years, the period for the estimated future cash flows, based on managements business plan. No impairment loss of goodwill was recognized during the year ended December 31, 2011 as
the recoverable amount exceeded the carrying value of the CGU.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | Recoverable amounts of POSCO Engineering Company were determined based on value-in-use. As of December 31, 201, value-in-use is estimated by applying 11.71%~13.71% discount
rate and 1%~3% terminal growth rate with 5 years, the period for the estimated future cash flows based on managements business plan. No impairment loss of goodwill was recognized during the year ended December 31, 2011 as the recoverable
amount exceeded the carrying value of the CGU.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*3) | No impairment loss of goodwill was recognized since there was no objective evidence of impairment noted subsequent to September 30, 2011, the date POSCO  Thainox
Public Company Limited was acquired.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*4) | Among multiple units without significant goodwill, goodwill in the amount of
(Won)14,958 million related to the CGU of DAESAN (CAMBODIA) Co. Ltd is fully impaired during 2011 due to negative capital.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-65



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|14. | Other Assets
|--- | ------------

(a) Other current assets as of
December 31, 2011, 2010 and January 1, 2010 are as follows:



|                     |  |                      |           |  |                   |  |         |                 |  |  |         | 
|-------------------- |  | -------------------- | --------- |  | ----------------- |  | ------- | --------------- |  |  | ------- | 
|                     |  | December 31, 2011    |           |  | December 31, 2010 |  |         | January 1, 2010 | 
|                     |  | (in millions of Won) |          
|Other current assets |  |                      |           |  |                   |  |         |                 |  |  |         | 
|Advance payment      |  | (Won)                | 1,035,846 |  |                   |  | 899,006 |                 |  |  | 650,496 | 
|Prepaid expenses     |  |                      | 180,369   |  |                   |  | 72,180  |                 |  |  | 35,408  | 
|Others               |  |                      | 3,927     |  |                   |  | 973     |                 |  |  | 4,282   | 
|                     |  |                      |           |  |                   |  |         |                 |  |  |         | 
|                     |  | (Won)                | 1,220,142 |  |                   |  | 972,159 |                 |  |  | 690,186 | 
|                     |  |                      |           |  |                   |  |         |                 |  |  |         | 

(b) Other long-term assets as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                           |  |                      |         |  |                   |  |         |                 |  |  |         | 
|-------------------------- |  | -------------------- | ------- |  | ----------------- |  | ------- | --------------- |  |  | ------- | 
|                           |  | December 31, 2011    |         |  | December 31, 2010 |  |         | January 1, 2010 | 
|                           |  | (in millions of Won) |        
|Other non-current assets   |  |                      |         |  |                   |  |         |                 |  |  |         | 
|Long-term advance payment  |  | (Won)                | 2,895   |  |                   |  | 141,726 |                 |  |  | 79,444  | 
|Long-term prepaid expenses |  |                      | 190,741 |  |                   |  | 109,835 |                 |  |  | 115,447 | 
|Others (*1)                |  |                      | 436,651 |  |                   |  | 408,253 |                 |  |  | 55,584  | 
|                           |  |                      |         |  |                   |  |         |                 |  |  |         | 
|                           |  | (Won)                | 630,287 |  |                   |  | 659,814 |                 |  |  | 250,475 | 
|                           |  |                      |         |  |                   |  |         |                 |  |  |         | 





|(*1) | Includes guarantee deposits of (Won)257,878 million as of
December 31, 2011 and 2010 in relation to exploration of Australia Roy Hill iron ore mine.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------



|15. | Borrowings
|--- | ----------

(a) Short-term borrowings and
current portion of long-term borrowings as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|------------------------------------------------------- |  | -------------------------------- |  | ---------------------------- |  | --------------------------- |  | ---------------- |  | ---------------- | ---------- | - | ---------------- |  | ---------- | -------------- |  |  | --------- | -
|                                                        |  | Bank                             |  | Borrowing date               |  | Maturity date               |  | InterestRate (%) |  | December 31,2011 |            |   | December 31,2010 |  |            | January 1,2010 | 
|                                                        |  | (in millions of Won)             | 
|Short-term borrowings                                   |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|Bank overdrafts                                         |  | BOA, others                      |  | March 2011~December 2011     |  | March 2012~December 2012    |  | 0.4~6.1          |  | (Won)            | 233,804    |   |                  |  | 200,389    |                |  |  | 106,069   |  
|Bank borrowings (*1)                                    |  | HSBC, others                     |  | January 2011~December 2011   |  | January 2012~December 2012  |  | 0.3~11.4         |  |                  | 9,339,182  |   |                  |  | 6,888,796  |                |  |  | 3,067,103 |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  | 9,572,986  |   |                  |  | 7,089,185  |                |  |  | 3,173,172 |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|Current portion of long-term borrowings                 |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|Current portion oflong-term bank borrowings
(*1)        |  | NH Bank,others                   |  | December 2000~September 2011 |  | February 2012~December 2012 |  | 0.7~11.0         |  |                  | 428,409    |   |                  |  | 394,227    |                |  |  | 468,996   |  
|Current portion of foreign loan                         |  | NATIXIS                          |  | June 1984                    |  | December 2012               |  | 2.0              |  |                  | 951        |   |                  |  | 963        |                |  |  | 1,065     |  
|Current portion of debentures (*1)                      |  | KB Investment& Securities,others |  | May 2007~November 2009       |  | February 2012~November 2012 |  | 5.2~7.3          |  |                  | 790,050    |   |                  |  | 2,995,726  |                |  |  | 315,085   |  
|Less : Current portion of discount on debentures issued |  |                                  |  |                              |  |                             |  |                  |  |                  | (886       | ) |                  |  | (3,801     | )              |  |  | (219      | )
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  | 1,218,524  |   |                  |  | 3,387,115  |                |  |  | 784,927   |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  | (Won)            | 10,791,510 |   |                  |  | 10,476,300 |                |  |  | 3,958,099 |  
|                                                        |  |                                  |  |                              |  |                             |  |                  |  |                  |            |   |                  |  |            |                |  |  |           |  



F-66



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010











|(*1) | Property, plant and equipment, investment in associates and long-term prepaid expenses amounting to (Won)706,560 million, (Won)103,169 million and
(Won)391 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b) Long-term borrowings, excluding current portion as of December 31, 2011, 2010 and January 1, 2010 are as
follows:



|                                       |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  |            |   |                |  |            |   |  |  |           |  
|-------------------------------------- |  | ------------------------------- |  | -------------- | ----------------------------- |  | ------------- |  | ------------------------- | ---------------- |  |  | ---------------- |  |  | ---------------- | ---------- | - | -------------- |  | ---------- | - |  |  | --------- | -
|                                       |  | Bank                            |  | Borrowing date |                               |  | Maturity date |  |                           | InterestRate (%) |  |  | December 31,2011 |  |  | December 31,2010 |            |   | January 1,2010 | 
|                                       |  | (in millions of Won)            | 
|Long-term bank borrowings (*1)         |  | Korean Development Bank, others |  |                | December 2000~
September 2011 |  |               |  | January 2013~
August 2039 |                  |  |  | 0.1~13.0         |  |  | (Won)            | 4,614,391  |   |                |  | 3,431,521  |   |  |  | 1,381,648 |  
|Less : Present value discount          |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  | (302,118   | ) |                |  | (81,610    | ) |  |  | (746      | )
|Foreign loan (*2)                      |  | NATIXIS                         |  |                | June 1984                     |  |               |  | March 2017                |                  |  |  | 2.0              |  |  |                  | 3,071      |   |                |  | 4,074      |   |  |  | 5,572     |  
|Debentures (*1,3,4)                    |  | Korean Development Bank, others |  |                | June 2006~December 2011       |  |               |  | May 2013~December 2021    |                  |  |  | 1.6~8.8          |  |  |                  | 11,776,893 |   |                |  | 7,357,310  |   |  |  | 6,915,294 |  
|Less : Discount on debentures issued   |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  | (94,356    | ) |                |  | (64,649    | ) |  |  | (70,449   | )
|Add : Premium on debentures redemption |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  | 21,493     |   |                |  | 11,138     |   |  |  | 10,067    |  
|Add : Premium on debentures issued     |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  | 833        |   |                |  | 6,157      |   |  |  |          |  
|                                       |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  |            |   |                |  |            |   |  |  |           |  
|                                       |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  | (Won)            | 16,020,207 |   |                |  | 10,663,941 |   |  |  | 8,241,386 |  
|                                       |  |                                 |  |                |                               |  |               |  |                           |                  |  |  |                  |  |  |                  |            |   |                |  |            |   |  |  |           |  





|(*1) | Property, plant and equipment, investment in associates and long-term prepaid expenses amounting to (Won)706,560 million, (Won)103,169 million and
(Won)391 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | Korea Development Bank has provided guarantees related to this foreign loan.
|---- | ----------------------------------------------------------------------------



|(*3) | In 2009, one of the controlling companys subsidiaries, Daewoo International Corporation, issued convertible bonds with a face value of USD 300 million and a 5 year
maturity. They are classified as fair value through profit or loss and measured at fair value ((Won)333,004 million) as of December 31,
2011.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*4) | The Company redeemed JPY 39,970,000,000 (75.7% of total face value) exchangeable bonds in August 2011. The Company issued exchangeable bonds with SK Telecom Co., Ltd. ADRs in
August 2011. The Company accounted for these exchangeable bonds as long-term debts under IFRS. The exchangeable bonds may be redeemed prior to maturity at 105.11% of their face value for three years from the issuance date at the option of the
bondholders.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(c) Certain borrowing agreements require the Company to maintain certain financial covenants. Management
believes the Company has been in compliance with these financial covenants for all periods presented.



F-67



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|16. | Other Financial Liabilities
|--- | ---------------------------

(a) Other
short-term financial liabilities as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                 |  |                      |           |  |                   |  |           |                 |  |  |           | 
|-------------------------------- |  | -------------------- | --------- |  | ----------------- |  | --------- | --------------- |  |  | --------- | 
|                                 |  | December 31, 2011    |           |  | December 31, 2010 |  |           | January 1, 2010 | 
|                                 |  | (in millions of Won) |          
|Short-term financial liabilities |  |                      |           |  |                   |  |           |                 |  |  |           | 
|Accounts payable                 |  | (Won)                | 1,048,895 |  |                   |  | 874,629   |                 |  |  | 650,767   | 
|Accrued expenses                 |  |                      | 457,070   |  |                   |  | 415,657   |                 |  |  | 352,060   | 
|Dividends payable                |  |                      | 5,822     |  |                   |  | 6,176     |                 |  |  | 10,194    | 
|Derivatives liabilities          |  |                      | 146,903   |  |                   |  | 90,384    |                 |  |  | 34,880    | 
|Finance lease liabilities        |  |                      | 15,295    |  |                   |  | 14,073    |                 |  |  | 6,813     | 
|Financial guarantee liabilities  |  |                      | 7,510     |  |                   |  | 8,919     |                 |  |  |          | 
|Withholding                      |  |                      | 129,695   |  |                   |  | 111,039   |                 |  |  |          | 
|                                 |  |                      |           |  |                   |  |           |                 |  |  |           | 
|                                 |  | (Won)                | 1,811,190 |  |                   |  | 1,520,877 |                 |  |  | 1,054,714 | 
|                                 |  |                      |           |  |                   |  |           |                 |  |  |           | 

(b) Other long-term financial liabilities as of December 31, 2011, 2010 and January 1, 2010 are as
follows:



|                                |  |                      |         |  |                   |  |         |                 |  |  |         | 
|------------------------------- |  | -------------------- | ------- |  | ----------------- |  | ------- | --------------- |  |  | ------- | 
|                                |  | December 31, 2011    |         |  | December 31, 2010 |  |         | January 1, 2010 | 
|                                |  | (in millions of Won) |        
|Long-term financial liabilities |  |                      |         |  |                   |  |         |                 |  |  |         | 
|Accounts payable                |  | (Won)                | 149,308 |  |                   |  | 2,438   |                 |  |  | 4,027   | 
|Accrued expenses                |  |                      | 20,068  |  |                   |  | 22,348  |                 |  |  | 74,482  | 
|Derivatives liabilities         |  |                      | 48,934  |  |                   |  | 11,925  |                 |  |  | 8,831   | 
|Finance lease liabilities       |  |                      | 29,504  |  |                   |  | 27,039  |                 |  |  | 17,074  | 
|Financial guarantee liabilities |  |                      | 24,732  |  |                   |  | 19,046  |                 |  |  | 6,295   | 
|Long-term withholding           |  |                      | 78,014  |  |                   |  | 92,978  |                 |  |  | 94,387  | 
|                                |  |                      |         |  |                   |  |         |                 |  |  |         | 
|                                |  | (Won)                | 350,560 |  |                   |  | 175,774 |                 |  |  | 205,096 | 
|                                |  |                      |         |  |                   |  |         |                 |  |  |         | 



|17. | Provisions
|--- | ----------

(a) Provisions as of
December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                  |  |                      |        |  |                   |  |         |                 |  |  |             |  |  |         |         |  |             |  |        |  |  |  |        | 
|------------------------------------------------- |  | -------------------- | ------ |  | ----------------- |  | ------- | --------------- |  |  | ----------- |  |  | ------- | ------- |  | ----------- |  | ------ |  |  |  | ------ | 
|                                                  |  | December 31, 2011    |        |  | December 31, 2010 |  |         | January 1, 2010 | 
|                                                  |  | Current              |        |  | Non-current       |  |         | Current         |  |  | Non-current |  |  | Current |         |  | Non-current | 
|                                                  |  | (in millions of Won) |       
|Provision for bonus payments                      |  | (Won)                | 47,682 |  |                   |  |        |                 |  |  | 37,978      |  |  |         |        |  |             |  | 20,861 |  |  |  |       | 
|Provision for construction warranties             |  |                      | 19,656 |  |                   |  | 30,967  |                 |  |  | 25,804      |  |  |         | 23,264  |  |             |  | 38,594 |  |  |  | 9,035  | 
|Provision for legal contingencies and
claims (*1) |  |                      |       |  |                   |  | 38,847  |                 |  |  |            |  |  |         | 126,626 |  |             |  |       |  |  |  |       | 
|Others                                            |  |                      | 2,094  |  |                   |  | 39,529  |                 |  |  | 27          |  |  |         | 2,259   |  |             |  | 3,850  |  |  |  | 2,970  | 
|                                                  |  |                      |        |  |                   |  |         |                 |  |  |             |  |  |         |         |  |             |  |        |  |  |  |        | 
|                                                  |  | (Won)                | 69,432 |  |                   |  | 109,343 |                 |  |  | 63,809      |  |  |         | 152,149 |  |             |  | 63,305 |  |  |  | 12,005 | 
|                                                  |  |                      |        |  |                   |  |         |                 |  |  |             |  |  |         |         |  |             |  |        |  |  |  |        | 





|(*1) | As of December 31, 2011 and 2010, includes provision of
(Won)38,847 million and
(Won)75,817 million, respectively, for a potential claim in connection to the spin-off of the trading division of Daewoo International
Corporation in 2000 (note 34).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-68



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Changes in provisions for the year ended December 31, 2011 are
as follows:



|                                             |  |                      |         |  |          |  |        |          |  |  |             |   |  |        |         |   |  |  |         | 
|-------------------------------------------- |  | -------------------- | ------- |  | -------- |  | ------ | -------- |  |  | ----------- | - |  | ------ | ------- | - |  |  | ------- | 
|                                             |  | Beginning            |         |  | Increase |  |        | Decrease |  |  | Others (*1) |   |  | Ending |        
|                                             |  | (in millions of Won) |        
|Provision for bonus payments                 |  | (Won)                | 37,978  |  |          |  | 30,592 |          |  |  | (20,888     | ) |  |        |        |   |  |  | 47,682  | 
|Provision for construction warranties        |  |                      | 49,068  |  |          |  | 30,724 |          |  |  | (12,958     | ) |  |        | (16,211 | ) |  |  | 50,623  | 
|Provision for legal contingencies and claims |  |                      | 126,626 |  |          |  |       |          |  |  |            |   |  |        | (87,779 | ) |  |  | 38,847  | 
|Others                                       |  |                      | 2,286   |  |          |  | 34,820 |          |  |  | (272        | ) |  |        | 4,789   |   |  |  | 41,623  | 
|                                             |  |                      |         |  |          |  |        |          |  |  |             |   |  |        |         |   |  |  |         | 
|                                             |  | (Won)                | 215,958 |  |          |  | 96,136 |          |  |  | (34,118     | ) |  |        | (99,201 | ) |  |  | 178,775 | 
|                                             |  |                      |         |  |          |  |        |          |  |  |             |   |  |        |         |   |  |  |         | 





|(*1) | Include adjustments of foreign currency translation difference and transfer to non-current liability held for sale.
|---- | -------------------------------------------------------------------------------------------------------------------

(c) Changes in provisions for the year ended December 31, 2010 are as follows:



|                                             |  |                      |        |  |          |  |         |          |  |  |             |   |  |        |         |   |  |  |         | 
|-------------------------------------------- |  | -------------------- | ------ |  | -------- |  | ------- | -------- |  |  | ----------- | - |  | ------ | ------- | - |  |  | ------- | 
|                                             |  | Beginning            |        |  | Increase |  |         | Decrease |  |  | Others (*1) |   |  | Ending |        
|                                             |  | (in millions of Won) |       
|Provision for bonus payments                 |  | (Won)                | 20,861 |  |          |  | 373,335 |          |  |  | (356,134    | ) |  |        | (84     | ) |  |  | 37,978  | 
|Provision for construction warranties        |  |                      | 47,629 |  |          |  | 17,216  |          |  |  | (15,705     | ) |  |        | (72     | ) |  |  | 49,068  | 
|Provision for legal contingencies and claims |  |                      |       |  |          |  |        |          |  |  |            |   |  |        | 126,626 |   |  |  | 126,626 | 
|Others                                       |  |                      | 6,820  |  |          |  | 6,486   |          |  |  | (14,843     | ) |  |        | 3,823   |   |  |  | 2,286   | 
|                                             |  |                      |        |  |          |  |         |          |  |  |             |   |  |        |         |   |  |  |         | 
|                                             |  | (Won)                | 75,310 |  |          |  | 397,037 |          |  |  | (386,682    | ) |  |        | 130,293 |   |  |  | 215,958 | 
|                                             |  |                      |        |  |          |  |         |          |  |  |             |   |  |        |         |   |  |  |         | 





|(*1) | Include adjustments of foreign currency translation difference and increase due to acquisition of Daewoo International Corporation.
|---- | -----------------------------------------------------------------------------------------------------------------------------------



|18. | Employee Benefits
|--- | -----------------

(a) Defined Contribution
Plans

The Company partially operates a defined contribution plan for participating employees. Though the Company pays fixed
contributions into a separate fund, employee benefits relating to employee service in the future is based on the contributions to the funds and the investment earnings on it. Plan assets are managed by a trustee as a separate fund from the
Companys assets. The expense related to post-employment benefit plans under defined contribution plans during the year ended December 31, 2011 is (Won)8,874 million, which is included in profit or loss based on the function of the related employees.

(b) Defined Benefit Plan

The Company partially operates a defined benefit pension plan for employees
and uses the projected unit credit method in the actuarial valuation of plan assets and the defined benefit obligation.

(c) The amounts
recognized in relation to defined benefit obligations in the statements of financial position as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                        |  |                      |           |   |                  |  |           |                |  |  |           |  
|--------------------------------------- |  | -------------------- | --------- | - | ---------------- |  | --------- | -------------- |  |  | --------- | -
|                                        |  | December 31,2011     |           |   | December 31,2010 |  |           | January 1,2010 | 
|                                        |  | (in millions of Won) |          
|Present value of funded obligations     |  | (Won)                | 1,158,329 |   |                  |  | 1,443,954 |                |  |  | 1,098,475 |  
|Fair value of plan assets               |  |                      | (832,771  | ) |                  |  | (964,727  | )              |  |  | (790,509  | )
|Present value of non-funded obligations |  |                      | 14,909    |   |                  |  | 23,899    |                |  |  | 7,452     |  
|                                        |  |                      |           |   |                  |  |           |                |  |  |           |  
|Net defined benefit obligations         |  | (Won)                | 340,467   |   |                  |  | 503,126   |                |  |  | 315,418   |  
|                                        |  |                      |           |   |                  |  |           |                |  |  |           |  



F-69



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(d) The changes in present value of defined benefit obligations for the
years ended December 31, 2011 and 2010 are as follows:



|                                                    |  |                      |           |   |                  |  |           |  
|--------------------------------------------------- |  | -------------------- | --------- | - | ---------------- |  | --------- | -
|                                                    |  | December 31,2011     |           |   | December 31,2010 | 
|                                                    |  | (in millions of Won) |          
|Defined benefit obligation at the beginning of year |  | (Won)                | 1,467,853 |   |                  |  | 1,105,927 |  
|Current service costs (*1)                          |  |                      | 207,871   |   |                  |  | 156,308   |  
|Interest costs                                      |  |                      | 67,372    |   |                  |  | 57,473    |  
|Actuarial losses                                    |  |                      | 43,166    |   |                  |  | 189,501   |  
|Business combinations                               |  |                      | 221       |   |                  |  | 52,641    |  
|Benefits paid                                       |  |                      | (593,369  | ) |                  |  | (102,837  | )
|Others                                              |  |                      | (19,876   | ) |                  |  | 8,840     |  
|                                                    |  |                      |           |   |                  |  |           |  
|Defined benefit obligation at the end of year       |  | (Won)                | 1,173,238 |   |                  |  | 1,467,853 |  
|                                                    |  |                      |           |   |                  |  |           |  





|(*1) | This amount includes loss from a plan settlement in the amount of
(Won)3,704 million for the year ended December 31, 2011.
|---- | --------------------------------------------------------------------------------------------------------------------------

(e) The changes in fair value of plan assets for the years ended December 31, 2011 and 2010 are as follows:



|                                                     |  |                      |          |   |                   |  |         |  
|---------------------------------------------------- |  | -------------------- | -------- | - | ----------------- |  | ------- | -
|                                                     |  | December 31, 2011    |          |   | December 31, 2010 | 
|                                                     |  | (in millions of Won) |         
|Fair value of plan assets at the beginning of period |  | (Won)                | 964,727  |   |                   |  | 790,509 |  
|Expected return on plan assets                       |  |                      | 38,244   |   |                   |  | 39,810  |  
|Actuarial gains and losses                           |  |                      | 3,073    |   |                   |  | 22,390  |  
|Contributions of participants                        |  |                      | 190,909  |   |                   |  | 148,354 |  
|Business combination                                 |  |                      | 354      |   |                   |  | 38,805  |  
|Others                                               |  |                      | 14,059   |   |                   |  | 3,473   |  
|Benefits paid                                        |  |                      | (378,595 | ) |                   |  | (78,614 | )
|                                                     |  |                      |          |   |                   |  |         |  
|Fair value of plan assets at the end of period       |  | (Won)                | 832,771  |   |                   |  | 964,727 |  
|                                                     |  |                      |          |   |                   |  |         |  

(f) The fair value of plan assets as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                   |  |                      |         |  |                   |  |         |                 |  |  |         | 
|------------------ |  | -------------------- | ------- |  | ----------------- |  | ------- | --------------- |  |  | ------- | 
|                   |  | December 31, 2011    |         |  | December 31, 2010 |  |         | January 1, 2010 | 
|                   |  | (in millions of Won) |        
|Equity instruments |  | (Won)                | 7,703   |  |                   |  | 512,850 |                 |  |  | 455,563 | 
|Debt instruments   |  |                      | 103,074 |  |                   |  | 289,907 |                 |  |  | 288,282 | 
|Deposits           |  |                      | 538,260 |  |                   |  |        |                 |  |  |        | 
|Others             |  |                      | 183,734 |  |                   |  | 161,970 |                 |  |  | 46,664  | 
|                   |  |                      |         |  |                   |  |         |                 |  |  |         | 
|                   |  | (Won)                | 832,771 |  |                   |  | 964,727 |                 |  |  | 790,509 | 
|                   |  |                      |         |  |                   |  |         |                 |  |  |         | 

(g) The amounts recognized in profit or loss for the years ended December 31, 2011 and 2010 are as follows:



|                               |  |                      |         |   |                   |  |         |  
|------------------------------ |  | -------------------- | ------- | - | ----------------- |  | ------- | -
|                               |  | December 31, 2011    |         |   | December 31, 2010 | 
|                               |  | (in millions of Won) |        
|Current service costs          |  | (Won)                | 207,871 |   |                   |  | 156,308 |  
|Interest costs                 |  |                      | 67,372  |   |                   |  | 57,473  |  
|Expected return on plan assets |  |                      | (38,244 | ) |                   |  | (39,810 | )
|                               |  |                      |         |   |                   |  |         |  
|                               |  | (Won)                | 236,999 |   |                   |  | 173,971 |  
|                               |  |                      |         |   |                   |  |         |  



F-70



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(h) The above expenses recognized in profit or loss are as follows:



|                                    |  |                      |         |  |                   |  |         | 
|----------------------------------- |  | -------------------- | ------- |  | ----------------- |  | ------- | 
|                                    |  | December 31, 2011    |         |  | December 31, 2010 | 
|                                    |  | (in millions of Won) |        
|Cost of goods sold                  |  | (Won)                | 177,020 |  |                   |  | 137,263 | 
|Selling and administrative expenses |  |                      | 59,979  |  |                   |  | 36,708  | 
|                                    |  |                      |         |  |                   |  |         | 
|                                    |  | (Won)                | 236,999 |  |                   |  | 173,971 | 
|                                    |  |                      |         |  |                   |  |         | 

(i) Accumulated actuarial gains and losses, net of tax, recognized in other comprehensive income as of and for the
years ended December 31, 2011 and 2010 are as follows:



|                                   |  |                      |           |   |                   |  |          |  
|---------------------------------- |  | -------------------- | --------- | - | ----------------- |  | -------- | -
|                                   |  | December 31, 2011    |           |   | December 31, 2010 | 
|                                   |  | (in millions of Won) |          
|Beginning balance                  |  | (Won)                | (152,125  | ) |                   |  |         |  
|Current actuarial gains and losses |  |                      | (30,577   | ) |                   |  | (152,125 | )
|                                   |  |                      |           |   |                   |  |          |  
|Ending balance                     |  | (Won)                | (182,702) |   |                   |  | (152,125 | )
|                                   |  |                      |           |   |                   |  |          |  

(j) The principal actuarial assumptions as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                 |  |                   |           |  |                   |  |           |                 |  |  |           | 
|-------------------------------- |  | ----------------- | --------- |  | ----------------- |  | --------- | --------------- |  |  | --------- | 
|                                 |  | December 31, 2011 |           |  | December 31, 2010 |  |           | January 1, 2010 | 
|                                 |  | (%)               |          
|Discount rate                    |  |                   | 3.86~5.42 |  |                   |  | 3.22~5.66 |                 |  |  | 3.22~5.66 | 
|Expected return on plan assets   |  |                   | 2.00~5.29 |  |                   |  | 3.38~6.19 |                 |  |  | 3.38~6.19 | 
|Expected future salary increases |  |                   | 1.03~7.35 |  |                   |  | 1.00~5.90 |                 |  |  | 1.00~5.90 | 



|19. | Other Liabilities
|--- | -----------------

(a) Other current
liabilities as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                   |  |                      |           |  |                   |  |           |                 |  |  |           | 
|---------------------------------- |  | -------------------- | --------- |  | ----------------- |  | --------- | --------------- |  |  | --------- | 
|                                   |  | December 31, 2011    |           |  | December 31, 2010 |  |           | January 1, 2010 | 
|                                   |  | (in millions of Won) |          
|Due to customers for contract work |  | (Won)                | 449,470   |  |                   |  | 703,900   |                 |  |  | 516,611   | 
|Advances received                  |  |                      | 973,427   |  |                   |  | 484,155   |                 |  |  | 320,825   | 
|Unearned revenue                   |  |                      | 36,935    |  |                   |  | 26,338    |                 |  |  | 8,497     | 
|Withholding accounts               |  |                      | 114,941   |  |                   |  | 105,079   |                 |  |  | 194,856   | 
|Deferred revenue                   |  |                      | 362       |  |                   |  | 378       |                 |  |  | 225       | 
|Others (*1)                        |  |                      | 224,496   |  |                   |  | 136,221   |                 |  |  | 114,428   | 
|                                   |  |                      |           |  |                   |  |           |                 |  |  |           | 
|                                   |  | (Won)                | 1,799,631 |  |                   |  | 1,456,071 |                 |  |  | 1,155,442 | 
|                                   |  |                      |           |  |                   |  |           |                 |  |  |           | 





|(*1) | Includes other current liabilities amounting to
(Won)204,653 million,
(Won)129,318 million and
(Won)94,749 million as of December 31, 2011, 2010 and January 1, 2010, respectively, due to proportionate consolidation of joint
ventures which are owned by POSCOs subsidiaries.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b) Other long-term liabilities as of December 31, 2011, 2010
and January 1, 2010 are as follows:



|                  |  |                      |        |  |                   |  |        |                 |  |  |        | 
|----------------- |  | -------------------- | ------ |  | ----------------- |  | ------ | --------------- |  |  | ------ | 
|                  |  | December 31, 2011    |        |  | December 31, 2010 |  |        | January 1, 2010 | 
|                  |  | (in millions of Won) |       
|Advances received |  | (Won)                | 1,547  |  |                   |  | 3,583  |                 |  |  | 40     | 
|Unearned revenue  |  |                      | 1,200  |  |                   |  | 1,539  |                 |  |  | 2,364  | 
|Others (*1)       |  |                      | 81,756 |  |                   |  | 75,264 |                 |  |  | 25,987 | 
|                  |  |                      |        |  |                   |  |        |                 |  |  |        | 
|                  |  | (Won)                | 84,503 |  |                   |  | 80,386 |                 |  |  | 28,391 | 
|                  |  |                      |        |  |                   |  |        |                 |  |  |        | 



F-71



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010











|(*1) | Includes other long-term liabilities amounting to
(Won)14,857 million,
(Won)12,254 million and
(Won)10,957 million as of December 31, 2011, 2010 and January 1, 2010, respectively, due to proportionate consolidation of joint
ventures which are owned by POSCOs subsidiaries.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|20. | Financial Instruments
|--- | ---------------------

(a) Classification of
financial instruments

1) Financial assets as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 
|----------------------------------------------------- |  | -------------------- | ---------- |  | ----------------- |  | ---------- | --------------- |  |  | ---------- | 
|                                                      |  | December 31, 2011    |            |  | December 31, 2010 |  |            | January 1, 2010 | 
|                                                      |  | (in millions of Won) |           
|Financial assets at fair value through profit or loss |  |                      |            |  |                   |  |            |                 |  |  |            | 
|Financial assets held for trading                     |  | (Won)                | 50,861     |  |                   |  | 182,208    |                 |  |  | 795,811    | 
|Derivatives assets held for trading                   |  |                      | 108,751    |  |                   |  | 140,031    |                 |  |  | 87,063     | 
|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 
|                                                      |  |                      | 159,612    |  |                   |  | 322,239    |                 |  |  | 882,874    | 
|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 
|Available-for-sale financial assets                   |  |                      | 4,608,597  |  |                   |  | 6,126,926  |                 |  |  | 5,034,237  | 
|Held-to-maturity securities                           |  |                      | 35,574     |  |                   |  | 39,813     |                 |  |  | 112,561    | 
|Loans and receivables                                 |  |                      | 20,210,417 |  |                   |  | 17,325,040 |                 |  |  | 14,586,078 | 
|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 
|                                                      |  | (Won)                | 25,014,200 |  |                   |  | 23,814,018 |                 |  |  | 20,615,750 | 
|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 

2) Financial liabilities as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                                         |  |                      |            |  |                   |  |            |                 |  |  |            | 
|------------------------------------------------------------------------ |  | -------------------- | ---------- |  | ----------------- |  | ---------- | --------------- |  |  | ---------- | 
|                                                                         |  | December 31, 2011    |            |  | December 31, 2010 |  |            | January 1, 2010 | 
|                                                                         |  | (in millions of Won) |           
|Financial liabilities at fair value through profit or loss               |  |                      |            |  |                   |  |            |                 |  |  |            | 
|Derivatives liabilities held for trading                                 |  | (Won)                | 195,837    |  |                   |  | 102,309    |                 |  |  | 43,711     | 
|Designated as financial liabilities at fair value through profit or loss |  |                      | 333,004    |  |                   |  | 447,308    |                 |  |  |           | 
|                                                                         |  |                      |            |  |                   |  |            |                 |  |  |            | 
|                                                                         |  |                      | 528,841    |  |                   |  | 549,617    |                 |  |  | 43,711     | 
|                                                                         |  |                      |            |  |                   |  |            |                 |  |  |            | 
|Financial liabilities evaluated as amortized cost                        |  |                      |            |  |                   |  |            |                 |  |  |            | 
|Trade accounts and notes payable                                         |  |                      | 4,397,662  |  |                   |  | 3,981,079  |                 |  |  | 2,392,317  | 
|Borrowings                                                               |  |                      | 26,478,713 |  |                   |  | 20,692,933 |                 |  |  | 12,199,485 | 
|Financial guarantee liabilities                                          |  |                      | 32,242     |  |                   |  | 27,965     |                 |  |  | 6,295      | 
|Others                                                                   |  |                      | 1,933,671  |  |                   |  | 1,566,377  |                 |  |  | 1,209,803  | 
|                                                                         |  |                      |            |  |                   |  |            |                 |  |  |            | 
|                                                                         |  |                      | 32,842,288 |  |                   |  | 26,268,354 |                 |  |  | 15,807,900 | 
|                                                                         |  |                      |            |  |                   |  |            |                 |  |  |            | 
|                                                                         |  | (Won)                | 33,371,129 |  |                   |  | 26,817,971 |                 |  |  | 15,851,611 | 
|                                                                         |  |                      |            |  |                   |  |            |                 |  |  |            | 



F-72



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







3) Financial profit and loss by category of financial instrument for
the years ended December 31, 2011 and 2010 is as follows:



| |  | December 31, 2011
| | - | -----------------



|                                                           |  |                            |          |   |                |  |         |                                    |  |  |                                             |   |  |                         |          |   |        |  |          |       |  |  |                        |   |  |  |            |   |  |  |            |  
|---------------------------------------------------------- |  | -------------------------- | -------- | - | -------------- |  | ------- | ---------------------------------- |  |  | ------------------------------------------- | - |  | ----------------------- | -------- | - | ------ |  | -------- | ----- |  |  | ---------------------- | - |  |  | ---------- | - |  |  | ---------- | -
|                                                           |  | Financial income and costs |          |   |                | 
|                                                           |  | Interestincome(cost)       |          |   | Dividendincome |  |         | loss onforeigncurrencytransactions |  |  | Gain and losson foreigncurrencytranslations |   |  | Gain andloss ondisposal |          |   | Others |  |          | Total |  |  | Othercomprehensiveloss |  
|                                                           |  | (in millions of Won)       |         
|Financial assets at fair value through profit or loss      |  | (Won)                      | 3        |   |                |  |        |                                    |  |  |                                            |   |  |                         |         |   |        |  | 544,913  |       |  |  | 70,656                 |   |  |  | 615,572    |   |  |  |           |  
|Available-for-sale financial assets                        |  |                            | 768      |   |                |  | 143,880 |                                    |  |  |                                            |   |  |                         |         |   |        |  | 453,540  |       |  |  | (152,804               | ) |  |  | 445,384    |   |  |  | (1,231,758 | )
|Held-to-maturity securities                                |  |                            | 1,749    |   |                |  |        |                                    |  |  |                                            |   |  |                         |         |   |        |  |         |       |  |  | (311                   | ) |  |  | 1,438      |   |  |  |           |  
|Loans and receivables                                      |  |                            | 213,714  |   |                |  |        |                                    |  |  | (26,239                                     | ) |  |                         | 46,971   |   |        |  | (41,171  | )     |  |  | (95                    | ) |  |  | 193,180    |   |  |  |           |  
|Financial liabilities at fair value through profit or loss |  |                            |         |   |                |  |        |                                    |  |  |                                            |   |  |                         |         |   |        |  | (506,664 | )     |  |  | (150,963               | ) |  |  | (657,627   | ) |  |  |           |  
|Financial liabilities are evaluated as amortized cost      |  |                            | (788,348 | ) |                |  |        |                                    |  |  | (140,052                                    | ) |  |                         | (317,867 | ) |        |  |         |       |  |  | (27,956                | ) |  |  | (1,274,223 | ) |  |  |           |  
|                                                           |  |                            |          |   |                |  |         |                                    |  |  |                                             |   |  |                         |          |   |        |  |          |       |  |  |                        |   |  |  |            |   |  |  |            |  
|                                                           |  | (Won)                      | (572,114 | ) |                |  | 143,880 |                                    |  |  | (166,291                                    | ) |  |                         | (270,896 | ) |        |  | 450,618  |       |  |  | (261,473               | ) |  |  | (676,276   | ) |  |  | (1,231,758 | )
|                                                           |  |                            |          |   |                |  |         |                                    |  |  |                                             |   |  |                         |          |   |        |  |          |       |  |  |                        |   |  |  |            |   |  |  |            |  



| |  | December 31, 2010
| | - | -----------------



|                                                           |  |                            |          |   |                |  |         |                                    |  |  |                                             |   |  |                         |          |   |        |  |          |       |  |  |                          |   |  |  |          |   |  |  |         | 
|---------------------------------------------------------- |  | -------------------------- | -------- | - | -------------- |  | ------- | ---------------------------------- |  |  | ------------------------------------------- | - |  | ----------------------- | -------- | - | ------ |  | -------- | ----- |  |  | ------------------------ | - |  |  | -------- | - |  |  | ------- | 
|                                                           |  | Financial income and costs |          |   |                | 
|                                                           |  | Interestincome(cost)       |          |   | Dividendincome |  |         | loss onforeigncurrencytranslations |  |  | Gain and losson foreigncurrencytransactions |   |  | Gain andloss ondisposal |          |   | Others |  |          | Total |  |  | Othercomprehensiveincome |  
|                                                           |  | (in millions of Won)       |         
|Financial assets at fair value through profit or loss      |  | (Won)                      | 196      |   |                |  |        |                                    |  |  |                                            |   |  |                         |         |   |        |  | 195,543  |       |  |  | 63,568                   |   |  |  | 259,307  |   |  |  |        | 
|Available-for-sale financial assets                        |  |                            | 9,822    |   |                |  | 102,161 |                                    |  |  |                                            |   |  |                         |         |   |        |  | 624      |       |  |  | (57,133                  | ) |  |  | 55,474   |   |  |  | 589,601 | 
|Held-to-maturity securities                                |  |                            | 64       |   |                |  |        |                                    |  |  |                                            |   |  |                         |         |   |        |  | 465      |       |  |  |                         |   |  |  | 529      |   |  |  |        | 
|Loans and receivables                                      |  |                            | 282,846  |   |                |  |        |                                    |  |  | (18,628                                     | ) |  |                         | 20,483   |   |        |  | (2,827   | )     |  |  | (430                     | ) |  |  | 281,444  |   |  |  |        | 
|Financial liabilities at fair value through profit or loss |  |                            |         |   |                |  |        |                                    |  |  |                                            |   |  |                         |         |   |        |  | (174,943 | )     |  |  | 7,319                    |   |  |  | (167,624 | ) |  |  |        | 
|Financial liabilities are evaluated as amortized cost      |  |                            | (586,883 | ) |                |  |        |                                    |  |  | 54,231                                      |   |  |                         | (239,375 | ) |        |  |         |       |  |  | (6,157                   | ) |  |  | (778,184 | ) |  |  |        | 
|                                                           |  |                            |          |   |                |  |         |                                    |  |  |                                             |   |  |                         |          |   |        |  |          |       |  |  |                          |   |  |  |          |   |  |  |         | 
|                                                           |  | (Won)                      | (293,955 | ) |                |  | 102,161 |                                    |  |  | 35,603                                      |   |  |                         | (218,892 | ) |        |  | 18,862   |       |  |  | 7,167                    |   |  |  | (349,054 | ) |  |  | 589,601 | 
|                                                           |  |                            |          |   |                |  |         |                                    |  |  |                                             |   |  |                         |          |   |        |  |          |       |  |  |                          |   |  |  |          |   |  |  |         | 



F-73



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Credit risk

1) Credit risk exposure

The
carrying amount of financial assets is the Company`s maximum exposure to credit risk. The maximum exposure to credit risk as of December 31, 2011, 2010 and January 1, 2010 is as follows:



|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 
|----------------------------------------------------- |  | -------------------- | ---------- |  | ----------------- |  | ---------- | --------------- |  |  | ---------- | 
|                                                      |  | December 31, 2011    |            |  | December 31, 2010 |  |            | January 1, 2010 | 
|                                                      |  | (in millions of Won) |           
|Cash and cash equivalents                             |  | (Won)                | 4,598,682  |  |                   |  | 3,521,045  |                 |  |  | 2,273,059  | 
|Financial assets at fair value through profit or loss |  |                      | 159,612    |  |                   |  | 322,239    |                 |  |  | 882,874    | 
|Available-for-sale financial assets                   |  |                      | 4,608,597  |  |                   |  | 6,126,926  |                 |  |  | 5,034,237  | 
|Held-to-maturity investments                          |  |                      | 35,574     |  |                   |  | 39,813     |                 |  |  | 112,561    | 
|Loans and other receivables                           |  |                      | 3,978,159  |  |                   |  | 4,311,362  |                 |  |  | 6,490,011  | 
|Trade accounts and notes receivable                   |  |                      | 11,450,515 |  |                   |  | 9,219,011  |                 |  |  | 5,300,233  | 
|Long-term trade accounts and notes receivable         |  |                      | 183,061    |  |                   |  | 273,622    |                 |  |  | 522,775    | 
|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 
|                                                      |  | (Won)                | 25,014,200 |  |                   |  | 23,814,018 |                 |  |  | 20,615,750 | 
|                                                      |  |                      |            |  |                   |  |            |                 |  |  |            | 

The Company provides financial guarantees to subsidiaries and has exposure to credit risk. The maximum credit
exposures as December 31, 2011, 2010 and January 1, 2010 are (Won)4,542,734 million, (Won)3,468,336 million and
(Won)3,993,115 million, respectively.

2) Impairment losses on financial assets

 Allowance for doubtful accounts as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                    |  |                      |         |  |                   |  |         |                 |  |  |         | 
|----------------------------------- |  | -------------------- | ------- |  | ----------------- |  | ------- | --------------- |  |  | ------- | 
|                                    |  | December 31, 2011    |         |  | December 31, 2010 |  |         | January 1, 2010 | 
|                                    |  | (in millions of Won) |        
|Trade accounts and notes receivable |  | (Won)                | 303,186 |  |                   |  | 242,801 |                 |  |  | 205,595 | 
|Other accounts receivable           |  |                      | 36,453  |  |                   |  | 58,934  |                 |  |  | 25,443  | 
|Long-term loans                     |  |                      | 61,222  |  |                   |  | 51,244  |                 |  |  | 23,595  | 
|Other assets                        |  |                      | 5,860   |  |                   |  | 4,084   |                 |  |  | 31,711  | 
|                                    |  |                      |         |  |                   |  |         |                 |  |  |         | 
|                                    |  | (Won)                | 406,721 |  |                   |  | 357,063 |                 |  |  | 286,344 | 
|                                    |  |                      |         |  |                   |  |         |                 |  |  |         | 

 Impairment losses on financial assets for the years ended December 31, 2011 and 2010 are as follows:



|                                                        |  |                      |         |   |                   |  |         |  
|------------------------------------------------------- |  | -------------------- | ------- | - | ----------------- |  | ------- | -
|                                                        |  | December 31, 2011    |         |   | December 31, 2010 | 
|                                                        |  | (in millions of Won) |        
|Bad debt expenses on trade receivables                  |  | (Won)                | 103,848 |   |                   |  | 51,185  |  
|Impairment of available-for-sale financial assets       |  |                      | 152,804 |   |                   |  | 57,172  |  
|Impairment of held to maturity financial assets         |  |                      | 579     |   |                   |  |        |  
|Other bad debt expenses (*1)                            |  |                      | 28,081  |   |                   |  | 12,877  |  
|Less: Reversal of allowance for doubtful accounts       |  |                      | (86,452 | ) |                   |  | (3,796  | )
|Less: Impairment of available-for-sale financial assets |  |                      |        |   |                   |  | (38     | )
|Less: Impairment of held to maturity financial assets   |  |                      | (268    | ) |                   |  |        |  
|                                                        |  |                      |         |   |                   |  |         |  
|                                                        |  | (Won)                | 198,592 |   |                   |  | 117,400 |  
|                                                        |  |                      |         |   |                   |  |         |  





|(*1) | Other bad debt expenses are mainly related to other receivables and long-term loans.
|---- | ------------------------------------------------------------------------------------



F-74



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







 The aging schedule and the impaired losses of trade accounts and notes receivables as of December 31, 2011, 2010 and January 1, 2010 are as
follows:



|                           |  |                                    |            |  |                   |  |         |                                    |  |  |            |  |  |                                    |         |  |            |  |           |  |  |  |         | 
|-------------------------- |  | ---------------------------------- | ---------- |  | ----------------- |  | ------- | ---------------------------------- |  |  | ---------- |  |  | ---------------------------------- | ------- |  | ---------- |  | --------- |  |  |  | ------- | 
|                           |  | December 31, 2011                  |            |  | December 31, 2010 |  |         | January 1, 2010                    | 
|                           |  | Trade accounts andnotes receivable |            |  | Impairment        |  |         | Trade accounts andnotes receivable |  |  | Impairment |  |  | Trade accounts andnotes receivable |         |  | Impairment | 
|                           |  | (in millions of Won)               |           
|Not due                    |  | (Won)                              | 6,154,045  |  |                   |  | 8,137   |                                    |  |  | 5,105,514  |  |  |                                    |        |  |            |  | 4,754,288 |  |  |  |        | 
|Over due less than 1 month |  |                                    | 4,868,928  |  |                   |  | 233     |                                    |  |  | 3,749,035  |  |  |                                    | 5,964   |  |            |  | 445,823   |  |  |  | 129     | 
|1 month  3 months         |  |                                    | 256,022    |  |                   |  | 1,506   |                                    |  |  | 191,386    |  |  |                                    | 2,018   |  |            |  | 75,132    |  |  |  | 497     | 
|3 months  12 months       |  |                                    | 301,875    |  |                   |  | 37,032  |                                    |  |  | 465,134    |  |  |                                    | 15,597  |  |            |  | 292,699   |  |  |  | 25,291  | 
|over 12 months             |  |                                    | 355,892    |  |                   |  | 256,278 |                                    |  |  | 224,365    |  |  |                                    | 219,222 |  |            |  | 460,661   |  |  |  | 179,678 | 
|                           |  |                                    |            |  |                   |  |         |                                    |  |  |            |  |  |                                    |         |  |            |  |           |  |  |  |         | 
|                           |  | (Won)                              | 11,936,762 |  |                   |  | 303,186 |                                    |  |  | 9,735,434  |  |  |                                    | 242,801 |  |            |  | 6,028,603 |  |  |  | 205,595 | 
|                           |  |                                    |            |  |                   |  |         |                                    |  |  |            |  |  |                                    |         |  |            |  |           |  |  |  |         | 

 Changes in the allowance for doubtful accounts for the years ended December 31, 2011 and 2010 were as follows:



|                              |  |                      |         |   |                   |  |         |  
|----------------------------- |  | -------------------- | ------- | - | ----------------- |  | ------- | -
|                              |  | December 31, 2011    |         |   | December 31, 2010 | 
|                              |  | (in millions of Won) |        
|Beginning                     |  | (Won)                | 357,063 |   |                   |  | 286,344 |  
|Bad debt expenses             |  |                      | 103,848 |   |                   |  | 51,185  |  
|Other bad debt expenses       |  |                      | 28,081  |   |                   |  | 12,877  |  
|Reversal of bad debt expenses |  |                      | (86,452 | ) |                   |  | (3,796  | )
|Other increase (decrease)     |  |                      | 4,181   |   |                   |  | 10,453  |  
|                              |  |                      |         |   |                   |  |         |  
|Ending                        |  | (Won)                | 406,721 |   |                   |  | 357,063 |  
|                              |  |                      |         |   |                   |  |         |  

(c) Liquidity risk

1) Contractual maturities for non-derivative financial liabilities, including estimated interest payments, are as follows:



|                                     |  |                      |            |  |                        |  |            |                  |  |  |                 |  |  |                   |            |  |       |  |           |  |  |  |            | 
|------------------------------------ |  | -------------------- | ---------- |  | ---------------------- |  | ---------- | ---------------- |  |  | --------------- |  |  | ----------------- | ---------- |  | ----- |  | --------- |  |  |  | ---------- | 
|                                     |  | Book value           |            |  | Cash flow forcontracts |  |            | Duewithin 1 year |  |  | 1 year- 5 years |  |  | later than5 years |            |  | Total | 
|                                     |  | (in millions of Won) |           
|Non-derivative financial liabilities |  |                      |            |  |                        |  |            |                  |  |  |                 |  |  |                   |            |  |       |  |           |  |  |  |            | 
|Trade accounts payable               |  | (Won)                | 4,397,662  |  |                        |  | 4,397,662  |                  |  |  | 4,397,279       |  |  |                   | 383        |  |       |  |          |  |  |  | 4,397,662  | 
|Financial guaranteeliabilities (*1)  |  |                      | 32,242     |  |                        |  | 4,547,734  |                  |  |  | 4,547,732       |  |  |                   |           |  |       |  |          |  |  |  | 4,547,734  | 
|Other financial liabilities          |  |                      | 1,933,671  |  |                        |  | 1,933,671  |                  |  |  | 1,656,778       |  |  |                   | 266,837    |  |       |  | 10,056    |  |  |  | 1,933,671  | 
|Borrowings (*2)                      |  |                      | 26,811,717 |  |                        |  | 29,673,269 |                  |  |  | 11,991,293      |  |  |                   | 13,463,085 |  |       |  | 4,218,891 |  |  |  | 29,673,269 | 
|                                     |  |                      |            |  |                        |  |            |                  |  |  |                 |  |  |                   |            |  |       |  |           |  |  |  |            | 
|                                     |  | (Won)                | 33,175,292 |  |                        |  | 40,552,336 |                  |  |  | 22,593,082      |  |  |                   | 13,730,305 |  |       |  | 4,228,947 |  |  |  | 40,552,336 | 
|                                     |  |                      |            |  |                        |  |            |                  |  |  |                 |  |  |                   |            |  |       |  |           |  |  |  |            | 





|(*1) | For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | Includes cash flows of embedded derivative instruments in relation to exchangeable bonds (exchange right).
|---- | ----------------------------------------------------------------------------------------------------------



F-75



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) The maturity analysis of derivative financial liabilities is as
follows:



|                                 |  |                          |         |  |                 |  |        |                   |  |  |       |  |  |  |         | 
|-------------------------------- |  | ------------------------ | ------- |  | --------------- |  | ------ | ----------------- |  |  | ----- |  |  |  | ------- | 
|                                 |  | Over due lessthan 1 year |         |  | 1 year- 5 years |  |        | later than5 years |  |  | Total | 
|                                 |  | (in millions of Won)     |        
|Derivative financial liabilities |  |                          |         |  |                 |  |        |                   |  |  |       |  |  |  |         | 
|Currency forward                 |  | (Won)                    | 135,813 |  |                 |  | 20,986 |                   |  |  |      |  |  |  | 156,799 | 
|Currency futures                 |  |                          | 141     |  |                 |  |       |                   |  |  |      |  |  |  | 141     | 
|Currency swaps                   |  |                          |        |  |                 |  | 14,885 |                   |  |  | 149   |  |  |  | 15,034  | 
|Others                           |  |                          | 10,949  |  |                 |  | 12,914 |                   |  |  |      |  |  |  | 23,863  | 
|                                 |  |                          |         |  |                 |  |        |                   |  |  |       |  |  |  |         | 
|                                 |  | (Won)                    | 146,903 |  |                 |  | 48,785 |                   |  |  | 149   |  |  |  | 195,837 | 
|                                 |  |                          |         |  |                 |  |        |                   |  |  |       |  |  |  |         | 

(d) Currency risk

1) The Company has exposure to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The exposure to currency risk as of
December 31, 2011, 2010 and January 1, 2010 is as follows:



|       |  |                      |           |  |                   |  |            |                 |  |  |             |  |  |        |           |  |             |  |           |  |  |  |           | 
|------ |  | -------------------- | --------- |  | ----------------- |  | ---------- | --------------- |  |  | ----------- |  |  | ------ | --------- |  | ----------- |  | --------- |  |  |  | --------- | 
|       |  | December 31, 2011    |           |  | December 31, 2010 |  |            | January 1, 2010 | 
|       |  | Assets               |           |  | Liabilities       |  |            | Assets          |  |  | Liabilities |  |  | Assets |           |  | Liabilities | 
|       |  | (in millions of Won) |          
|USD    |  | (Won)                | 3,852,909 |  |                   |  | 10,912,882 |                 |  |  | 3,485,974   |  |  |        | 8,440,832 |  |             |  | 1,114,116 |  |  |  | 2,911,218 | 
|EUR    |  |                      | 275,012   |  |                   |  | 610,454    |                 |  |  | 382,573     |  |  |        | 518,244   |  |             |  | 61,989    |  |  |  | 90,200    | 
|JPY    |  |                      | 236,046   |  |                   |  | 2,353,794  |                 |  |  | 188,060     |  |  |        | 2,642,725 |  |             |  | 67,496    |  |  |  | 2,268,593 | 
|Others |  |                      | 130,753   |  |                   |  | 136,294    |                 |  |  | 60,066      |  |  |        | 41,011    |  |             |  | 59,923    |  |  |  | 30,754    | 

2) As of December 31, 2011 and 2010, provided that functional currency against foreign currencies other than
functional currency hypothetically strengthens or weakens by 10%, the changes in gain or loss during the years ended December 31, 2011 and 2010 are as follows:



|    |  |                      |          |   |                   |  |         |              |  |  |              |   |  |  |         | 
|--- |  | -------------------- | -------- | - | ----------------- |  | ------- | ------------ |  |  | ------------ | - |  |  | ------- | 
|    |  | December 31, 2011    |          |   | December 31, 2010 | 
|    |  | 10% increase         |          |   | 10% decrease      |  |         | 10% increase |  |  | 10% decrease |  
|    |  | (in millions of Won) |         
|USD |  | (Won)                | (705,997 | ) |                   |  | 705,997 |              |  |  | (495,486     | ) |  |  | 495,486 | 
|EUR |  |                      | (33,544  | ) |                   |  | 33,544  |              |  |  | (13,567      | ) |  |  | 13,567  | 
|JPY |  |                      | (211,775 | ) |                   |  | 211,775 |              |  |  | (245,467     | ) |  |  | 245,467 | 

(e) Interest rate risk

1) The carrying amount of interest-bearing financial instruments as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                      |  |                      |             |   |                   |  |             |                 |  |  |             |  
|--------------------- |  | -------------------- | ----------- | - | ----------------- |  | ----------- | --------------- |  |  | ----------- | -
|                      |  | December 31, 2011    |             |   | December 31, 2010 |  |             | January 1, 2010 | 
|                      |  | (in millions of Won) |            
|Fixed rate            |  |                      |             |   |                   |  |             |                 |  |  |             |  
|Financial assets      |  | (Won)                | 7,086,835   |   |                   |  | 7,008,969   |                 |  |  | 8,839,475   |  
|Financial liabilities |  |                      | (24,169,245 | ) |                   |  | (19,495,665 | )               |  |  | (11,475,986 | )
|                      |  |                      |             |   |                   |  |             |                 |  |  |             |  
|                      |  |                      | (17,082,410 | ) |                   |  | (12,486,696 | )               |  |  | (2,636,511  | )
|                      |  |                      |             |   |                   |  |             |                 |  |  |             |  
|Variable rate         |  |                      |             |   |                   |  |             |                 |  |  |             |  
|Financial liabilities |  | (Won)                | (2,642,472  | ) |                   |  | (1,644,576  | )               |  |  | (723,499    | )



F-76



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) Sensitivity analysis on the fair value of financial instruments
with variable interest rate

As of December 31, 2011 and 2010, provided that other factors remain the same and the interest rate of
borrowings with floating rates increases or decreases by 1%, the changes in gain or loss during the years ended December 31, 2011 and 2010 are as follows:



|                                    |  |                      |         |   |                   |  |        |             |  |  |             |   |  |  |        | 
|----------------------------------- |  | -------------------- | ------- | - | ----------------- |  | ------ | ----------- |  |  | ----------- | - |  |  | ------ | 
|                                    |  | December 31, 2011    |         |   | December 31, 2010 | 
|                                    |  | 1% increase          |         |   | 1% decrease       |  |        | 1% increase |  |  | 1% decrease |  
|                                    |  | (in millions of Won) |        
|Variable rate financial instruments |  | (Won)                | (26,425 | ) |                   |  | 26,425 |             |  |  | (16,446     | ) |  |  | 16,446 | 

(f) Fair value

1) Fair value and book value

The carrying amount and the fair value of financial instruments as of
December 31, 2011, 2010 and January 1, 2010 are as follows



|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|---------------------------------------- |  | -------------------- | ---------- |  | ----------------- |  | ---------- | --------------- |  |  | ---------- |  |  | ---------- | ---------- |  | ---------- |  | ---------- |  |  |  | ---------- | 
|                                         |  | December 31, 2011    |            |  | December 31, 2010 |  |            | January 1, 2010 | 
|                                         |  | Book Value           |            |  | Fair Value        |  |            | Book Value      |  |  | Fair Value |  |  | Book Value |            |  | Fair Value | 
|                                         |  | (in millions of Won) |           
|Assets measured fair value               |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Financial assets held for trading        |  | (Won)                | 50,861     |  |                   |  | 50,861     |                 |  |  | 182,208    |  |  |            | 182,208    |  |            |  | 795,811    |  |  |  | 795,811    | 
|Available-for-sale financial assets      |  |                      | 4,390,224  |  |                   |  | 4,390,224  |                 |  |  | 5,766,998  |  |  |            | 5,766,998  |  |            |  | 4,612,580  |  |  |  | 4,612,580  | 
|Derivatives assets held for trading      |  |                      | 108,751    |  |                   |  | 108,751    |                 |  |  | 140,031    |  |  |            | 140,031    |  |            |  | 87,063     |  |  |  | 87,063     | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|                                         |  |                      | 4,549,836  |  |                   |  | 4,549,836  |                 |  |  | 6,089,237  |  |  |            | 6,089,237  |  |            |  | 5,495,454  |  |  |  | 5,495,454  | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Assets measured amortized cost           |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Cash and cash equivalents                |  |                      | 4,598,682  |  |                   |  | 4,598,682  |                 |  |  | 3,521,045  |  |  |            | 3,521,045  |  |            |  | 2,273,059  |  |  |  | 2,273,059  | 
|Trade accounts and notes receivable      |  |                      | 11,633,576 |  |                   |  | 11,633,576 |                 |  |  | 9,492,633  |  |  |            | 9,492,633  |  |            |  | 5,823,008  |  |  |  | 5,823,008  | 
|Loans and other receivables              |  |                      | 3,978,159  |  |                   |  | 3,978,159  |                 |  |  | 4,311,362  |  |  |            | 4,311,362  |  |            |  | 6,490,011  |  |  |  | 6,490,011  | 
|Held-to-maturity investments             |  |                      | 35,574     |  |                   |  | 35,574     |                 |  |  | 39,813     |  |  |            | 39,813     |  |            |  | 112,561    |  |  |  | 112,561    | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|                                         |  |                      | 20,245,991 |  |                   |  | 20,245,991 |                 |  |  | 17,364,853 |  |  |            | 17,364,853 |  |            |  | 14,698,639 |  |  |  | 14,698,639 | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Liabilities measured fair value          |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Derivatives liabilities held for trading |  |                      | 195,837    |  |                   |  | 195,837    |                 |  |  | 102,309    |  |  |            | 102,309    |  |            |  | 43,711     |  |  |  | 43,711     | 
|Convertible bonds                        |  |                      | 333,004    |  |                   |  | 333,004    |                 |  |  | 447,308    |  |  |            | 447,308    |  |            |  |           |  |  |  |           | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|                                         |  |                      | 528,841    |  |                   |  | 528,841    |                 |  |  | 549,617    |  |  |            | 549,617    |  |            |  | 43,711     |  |  |  | 43,711     | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Liabilities measured amortized cost      |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|Trade accounts and notes payable         |  |                      | 4,397,662  |  |                   |  | 4,397,662  |                 |  |  | 3,981,079  |  |  |            | 3,981,079  |  |            |  | 2,392,317  |  |  |  | 2,392,317  | 
|Borrowings                               |  |                      | 26,478,713 |  |                   |  | 26,793,230 |                 |  |  | 20,692,933 |  |  |            | 20,549,483 |  |            |  | 12,199,485 |  |  |  | 12,210,969 | 
|Financial guarantee liabilities          |  |                      | 32,242     |  |                   |  | 32,242     |                 |  |  | 27,965     |  |  |            | 27,965     |  |            |  | 6,295      |  |  |  | 6,295      | 
|Others                                   |  |                      | 1,933,671  |  |                   |  | 1,933,671  |                 |  |  | 1,566,377  |  |  |            | 1,566,377  |  |            |  | 1,209,803  |  |  |  | 1,209,804  | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 
|                                         |  | (Won)                | 32,842,288 |  |                   |  | 33,156,805 |                 |  |  | 26,268,354 |  |  |            | 26,124,904 |  |            |  | 15,807,900 |  |  |  | 15,819,385 | 
|                                         |  |                      |            |  |                   |  |            |                 |  |  |            |  |  |            |            |  |            |  |            |  |  |  |            | 



F-77



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) Interest rates used for determining fair value

The interest rates used to discount estimated cash flows as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                |  |                   |  |                   |  |                
|------------------------------- |  | ----------------- |  | ----------------- |  | ---------------
|                                |  | December 31, 2011 |  | December 31, 2010 |  | January 1, 2010
|Interest rate of Borrowings (%) |  | 1.8 ~ 4.62        |  | 1.19 ~ 5.14       |  | 1.28 ~ 5.38    

3) The fair value hierarchy



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



|         |  |                                                                                                                 
|-------- |  | ----------------------------------------------------------------------------------------------------------------
|Level 1: |  | quoted prices (unadjusted) in active markets for identical assets or liabilities.                               
|Level 2: |  | inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly.
|Level 3: |  | inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).  



| |  | The fair values of financial instruments, by valuation method as of December 31, 2011, 2010 and January 1, 2010 are as follows:
| | - | -------------------------------------------------------------------------------------------------------------------------------

a. December 31, 2011



|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|---------------------------------------- |  | -------------------- | --------- |  | ------- |  | ------- | ------- |  |  | ------- |  |  |  | --------- | 
|                                         |  | Level 1              |           |  | Level 2 |  |         | Level 3 |  |  | Total   | 
|                                         |  | (in millions of Won) |          
|Financial Assets                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Financial assets held for trading        |  |                      |          |  |         |  | 50,861  |         |  |  |        |  |  |  | 50,861    | 
|Available-for-sale financial assets      |  |                      | 3,419,961 |  |         |  | 31,022  |         |  |  | 939,241 |  |  |  | 4,390,224 | 
|Derivatives assets held for trading      |  |                      |          |  |         |  | 108,751 |         |  |  |        |  |  |  | 108,751   | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|                                         |  |                      | 3,419,961 |  |         |  | 190,634 |         |  |  | 939,241 |  |  |  | 4,549,836 | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Financial Liabilities                    |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Derivatives liabilities held for trading |  |                      |          |  |         |  | 195,837 |         |  |  |        |  |  |  | 195,837   | 
|Convertible bonds                        |  |                      | 333,004   |  |         |  |        |         |  |  |        |  |  |  | 333,004   | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|                                         |  |                      | 333,004   |  |         |  | 195,837 |         |  |  |        |  |  |  | 528,841   | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 

b. December 31, 2010



|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|---------------------------------------- |  | -------------------- | --------- |  | ------- |  | ------- | ------- |  |  | ------- |  |  |  | --------- | 
|                                         |  | Level 1              |           |  | Level 2 |  |         | Level 3 |  |  | Total   | 
|                                         |  | (in millions of Won) |          
|Financial Assets                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Financial assets held for trading        |  |                      |          |  |         |  | 182,208 |         |  |  |        |  |  |  | 182,208   | 
|Available-for-sale financial assets      |  |                      | 4,944,644 |  |         |  | 17,194  |         |  |  | 805,160 |  |  |  | 5,766,998 | 
|Derivatives assets held for trading      |  |                      |          |  |         |  | 140,031 |         |  |  |        |  |  |  | 140,031   | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|                                         |  |                      | 4,944,644 |  |         |  | 339,433 |         |  |  | 805,160 |  |  |  | 6,089,237 | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Financial Liabilities                    |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Derivatives liabilities held for trading |  |                      |          |  |         |  | 102,309 |         |  |  |        |  |  |  | 102,309   | 
|Convertible bonds                        |  |                      | 447,308   |  |         |  |        |         |  |  |        |  |  |  | 447,308   | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|                                         |  |                      | 447,308   |  |         |  | 102,309 |         |  |  |        |  |  |  | 549,617   | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 



F-78



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







c. January 1, 2010



|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|---------------------------------------- |  | -------------------- | --------- |  | ------- |  | ------- | ------- |  |  | ------- |  |  |  | --------- | 
|                                         |  | Level 1              |           |  | Level 2 |  |         | Level 3 |  |  | Total   | 
|                                         |  | (in millions of Won) |          
|Financial Assets                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Financial assets held for trading        |  | (Won)                |          |  |         |  | 795,811 |         |  |  |        |  |  |  | 795,811   | 
|Available-for-sale financial assets      |  |                      | 3,967,463 |  |         |  | 6,714   |         |  |  | 638,403 |  |  |  | 4,612,580 | 
|Derivatives assets held for trading      |  |                      |          |  |         |  | 87,063  |         |  |  |        |  |  |  | 87,063    | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|                                         |  |                      | 3,967,463 |  |         |  | 599,588 |         |  |  | 638,403 |  |  |  | 5,205,454 | 
|                                         |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Financial Liabilities                    |  |                      |           |  |         |  |         |         |  |  |         |  |  |  |           | 
|Derivatives liabilities held for trading |  | (Won)                |          |  |         |  | 43,711  |         |  |  |        |  |  |  | 43,711    | 



| |  | Changes in fair value of financial instruments measured by Level 3 for the years ended December 31, 2011 and 2010 are as follows:
| | - | ---------------------------------------------------------------------------------------------------------------------------------

a. December 31, 2011



|                                    |  |                      |         |  |           |  |         |                          |  |  |                       |  |  |        |          |   |  |  |         | 
|----------------------------------- |  | -------------------- | ------- |  | --------- |  | ------- | ------------------------ |  |  | --------------------- |  |  | ------ | -------- | - |  |  | ------- | 
|                                    |  | Beginning            |         |  | Valuation |  |         | Acquisition,others 
(*1) |  |  | Disposal,others 
(*1) |  |  | Ending |         
|                                    |  | (in millions of Won) |        
|Available-for-sale financial assets |  | (Won)                | 805,160 |  |           |  | 157,329 |                          |  |  | 98,242                |  |  |        | (121,490 | ) |  |  | 939,241 | 





|(*1) | Included change in amounts due to change of fair value level.
|---- | -------------------------------------------------------------

b. December 31, 2010



|                                    |  |                      |         |  |           |  |        |                          |  |  |                       |  |  |        |        |   |  |  |         | 
|----------------------------------- |  | -------------------- | ------- |  | --------- |  | ------ | ------------------------ |  |  | --------------------- |  |  | ------ | ------ | - |  |  | ------- | 
|                                    |  | Beginning            |         |  | Valuation |  |        | Acquisition,others 
(*1) |  |  | Disposal,others 
(*1) |  |  | Ending |       
|                                    |  | (in millions of Won) |        
|Available-for-sale financial assets |  | (Won)                | 638,403 |  |           |  | 11,568 |                          |  |  | 164,382               |  |  |        | (9,193 | ) |  |  | 805,160 | 





|(*1) | Included change in amounts due to change of fair value level.
|---- | -------------------------------------------------------------



|21. | Share Capital and Contributed Surplus
|--- | -------------------------------------

(a)
Share capital

Under the Articles of Incorporation, the Company is authorized to issue 200 million shares of capital stock with par
value of (Won)5,000 per share. As of December 31, 2011, exclusive of retired stock, 87,186,835 shares of common stock have been issued.

The Company is authorized, with the Board of Directors approval, to retire treasury stock in accordance with applicable laws up to
the maximum amount of certain undistributed earnings. The 9,293,790 shares of common stock were retired with the Board of Directors approval.

As of December 31, 2011, total shares of ADRs are 52,974,264 equivalents to 13,243,566 of common shares.

As of December 31, 2011, ending balance of capital stock amounts to (Won)482,403 million; however, it
is different from par value of issued common stock, which amounted to (Won)435,934 million, due to retirement of treasury stock.



F-79



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Capital surplus

Capital surplus as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                |  |                      |           |   |                   |  |           |                 |  |  |           | 
|------------------------------- |  | -------------------- | --------- | - | ----------------- |  | --------- | --------------- |  |  | --------- | 
|                                |  | December 31, 2011    |           |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                |  | (in millions of Won) |          
|Share premium                   |  | (Won)                | 463,825   |   |                   |  | 463,825   |                 |  |  | 463,825   | 
|Gains on sale of treasury stock |  |                      | 763,867   |   |                   |  | 694,714   |                 |  |  | 694,714   | 
|Capital surplus                 |  |                      | (77,240   | ) |                   |  | (56,978   | )               |  |  | 41,127    | 
|                                |  |                      |           |   |                   |  |           |                 |  |  |           | 
|                                |  | (Won)                | 1,150,452 |   |                   |  | 1,101,561 |                 |  |  | 1,199,666 | 
|                                |  |                      |           |   |                   |  |           |                 |  |  |           | 



|22. | Reserves
|--- | --------

(a) Reserves as of
December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                                                     |  |                      |         |   |                   |  |           |                 |  |  |         |  
|-------------------------------------------------------------------- |  | -------------------- | ------- | - | ----------------- |  | --------- | --------------- |  |  | ------- | -
|                                                                     |  | December 31, 2011    |         |   | December 31, 2010 |  |           | January 1, 2010 | 
|                                                                     |  | (in millions of Won) |        
|Accumulated comprehensive income (loss) of investments in associates |  | (Won)                | (16,186 | ) |                   |  | (3,909    | )               |  |  | 33,747  |  
|Fair value of available-for-sale financial investments               |  |                      | 154,617 |   |                   |  | 1,381,667 |                 |  |  | 804,716 |  
|Currency translation differences                                     |  |                      | 283,516 |   |                   |  | 136,669   |                 |  |  |        |  
|Others                                                               |  |                      | (16,521 | ) |                   |  | (7,139    | )               |  |  | (4,657  | )
|                                                                     |  |                      |         |   |                   |  |           |                 |  |  |         |  
|                                                                     |  | (Won)                | 405,426 |   |                   |  | 1,507,288 |                 |  |  | 833,806 |  
|                                                                     |  |                      |         |   |                   |  |           |                 |  |  |         |  

(b) Changes in fair value of available-for-sale securities as of December 31, 2011, 2010 and January 1,
2010 are as follows:



|                                                       |  |                      |           |   |                   |  |           |  
|------------------------------------------------------ |  | -------------------- | --------- | - | ----------------- |  | --------- | -
|                                                       |  | December 31, 2011    |           |   | December 31, 2010 | 
|                                                       |  | (in millions of Won) |          
|Beginning balance                                      |  | (Won)                | 1,381,667 |   |                   |  | 804,716   |  
|Changes in fair-value of available-for-sale securities |  |                      | (974,031  | ) |                   |  | 593,946   |  
|Reclassification to profit or loss upon disposal       |  |                      | (252,102  | ) |                   |  | (1,665    | )
|Others                                                 |  |                      | (917      | ) |                   |  | (15,330   | )
|                                                       |  |                      |           |   |                   |  |           |  
|Ending balance                                         |  | (Won)                | 154,617   |   |                   |  | 1,381,667 |  
|                                                       |  |                      |           |   |                   |  |           |  



|23. | Treasury Shares
|--- | ---------------

In January 2011, the Company
sold 342,955 shares of treasury stock for (Won)164,384 million and recognized
(Won)69,153 million, net of tax, as a gain on sale of treasury stock in capital surplus. Also, the Company acquired 131,389 shares of
treasury stock for (Won)61,296 million in 2011. As of December 31, 2011, the Company holds 9,942,391 shares of treasury stock for
price stabilization in accordance with the Board of Directors resolution.



F-80



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|24. | Stock Appreciation Rights
|--- | -------------------------

(a) The Company
granted stock appreciation rights to its executive officers in accordance with the stock appreciation rights plan approved by the Board of Directors. The details of the stock appreciation rights granted are as follows:

1) Class of shares: registered common stock

2) The number of shares, Exercise price per share, Exercise period



|                |  |                  |                     | 
|--------------- |  | ---------------- | ------------------- | 
|                |  | 6th Grant        |                    
|                |  | (per share, won) |                    
|Granted         |  |                  | 90,000              | 
|Exercised       |  |                  | 64,000              | 
|Unexercised     |  |                  | 26,000              | 
|Exercise price  |  | (Won)            | 194,900             | 
|Exercise period |  |                  | 2007.4.29~2012.4.28 | 

(b) Reversal of stock compensation expenses for the years ended December 31, 2011 and 2010 are (Won)4,223 million and (Won)13,227
million. Also, the Companys liabilities arising from stock appreciation rights as of December 31, 2011, 2010 and January 1, 2010 are (Won)4,788 million, (Won)22,286 million and
(Won)58,356 million, respectively.

(c) The Company uses a fair value approach for calculating remuneration cost. The method and assumption for computing fair value of stock appreciation rights are as follows:



|                            |  |           |         |  
|--------------------------- |  | --------- | ------- | -
|                            |  | 6th Grant |        
|Risk-free interest rate     |  |           | 3.43    | %
|Option life                 |  |           | 104     |  
|Expected volatility         |  |           | 0.1659  |  
|Rate of expected dividends  |  |           | 2.63    | %
|Stock price                 |  | (Won)     | 380,000 |  
|Fair value of share options |  | (Won)     | 184,157 |  



|25. | Construction Contracts
|--- | ----------------------

(a) Construction
contracts in progress as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                   |  |                      |             |   |                   |  |             |                 |  |  |            |  
|---------------------------------- |  | -------------------- | ----------- | - | ----------------- |  | ----------- | --------------- |  |  | ---------- | -
|                                   |  | December 31, 2011    |             |   | December 31, 2010 |  |             | January 1, 2010 | 
|                                   |  | (in millions of Won) |            
|Aggregate amount of costs incurred |  | (Won)                | 14,457,692  |   |                   |  | 12,778,567  |                 |  |  | 8,846,030  |  
|Add : Recognized profits           |  |                      | 1,345,850   |   |                   |  | 1,202,835   |                 |  |  | 948,616    |  
|Less : Recognized losses           |  |                      | (305,287    | ) |                   |  | (197,818    | )               |  |  | (202,275   | )
|Cumulative construction revenue    |  |                      | 15,498,255  |   |                   |  | 13,783,584  |                 |  |  | 9,592,371  |  
|Less : Progress billing            |  |                      | (14,577,258 | ) |                   |  | (13,505,203 | )               |  |  | (9,388,120 | )
|Foreign currency gains and losses  |  |                      | (1,957      | ) |                   |  | (1,744      | )               |  |  | 1          |  
|Others                             |  |                      | (7,094      | ) |                   |  | (5,906      | )               |  |  | (21,570    | )
|                                   |  |                      |             |   |                   |  |             |                 |  |  |            |  
|                                   |  | (Won)                | 911,946     |   |                   |  | 270,731     |                 |  |  | 182,682    |  
|                                   |  |                      |             |   |                   |  |             |                 |  |  |            |  



F-81



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Amount due from and due to customers for contract work as of
December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                     |  |                      |           |   |                   |  |          |                 |  |  |          |  
|------------------------------------ |  | -------------------- | --------- | - | ----------------- |  | -------- | --------------- |  |  | -------- | -
|                                     |  | December 31, 2011    |           |   | December 31, 2010 |  |          | January 1, 2010 | 
|                                     |  | (in millions of Won) |          
|Due from customers for contract work |  | (Won)                | 1,361,416 |   |                   |  | 974,631  |                 |  |  | 699,293  |  
|Due to customers for contract work   |  |                      | (449,470  | ) |                   |  | (703,900 | )               |  |  | (516,611 | )
|                                     |  |                      |           |   |                   |  |          |                 |  |  |          |  
|                                     |  | (Won)                | 911,946   |   |                   |  | 270,731  |                 |  |  | 182,682  |  
|                                     |  |                      |           |   |                   |  |          |                 |  |  |          |  



|26. | Revenue
|--- | -------

Details of revenue for the years
ended December 31, 2011 and 2010 are as follows:



|                   |  |                      |            |  |                   |  |            | 
|------------------ |  | -------------------- | ---------- |  | ----------------- |  | ---------- | 
|                   |  | December 31, 2011    |            |  | December 31, 2010 | 
|                   |  | (in millions of Won) |           
|Revenues           |  |                      |            |  |                   |  |            | 
|Goods sales        |  | (Won)                | 61,001,789 |  |                   |  | 41,848,201 | 
|Services sales     |  |                      | 2,440,639  |  |                   |  | 1,604,524  | 
|Construction sales |  |                      | 5,297,892  |  |                   |  | 4,130,984  | 
|Rental income      |  |                      | 39,862     |  |                   |  | 42,898     | 
|Others             |  |                      | 158,543    |  |                   |  | 260,648    | 
|                   |  |                      |            |  |                   |  |            | 
|                   |  | (Won)                | 68,938,725 |  |                   |  | 47,887,255 | 
|                   |  |                      |            |  |                   |  |            | 



|27. | Selling and Administrative Expenses
|--- | -----------------------------------

(a)
Administrative expenses

Administrative expenses for years ended December 31, 2011 and 2010 are as follows:



|                                         |  |                      |           |  |                   |  |           | 
|---------------------------------------- |  | -------------------- | --------- |  | ----------------- |  | --------- | 
|                                         |  | December 31, 2011    |           |  | December 31, 2010 | 
|                                         |  | (in millions of Won) |          
|Wages and salaries                       |  | (Won)                | 606,819   |  |                   |  | 446,023   | 
|Expenses related to defined benefit plan |  |                      | 60,271    |  |                   |  | 36,708    | 
|Other employee benefits                  |  |                      | 164,508   |  |                   |  | 116,293   | 
|Travel                                   |  |                      | 56,635    |  |                   |  | 43,592    | 
|Depreciation                             |  |                      | 172,807   |  |                   |  | 110,093   | 
|Communication                            |  |                      | 13,061    |  |                   |  | 9,195     | 
|Electric power                           |  |                      | 7,529     |  |                   |  | 5,269     | 
|Taxes and public dues                    |  |                      | 50,617    |  |                   |  | 34,869    | 
|Rental                                   |  |                      | 65,559    |  |                   |  | 54,739    | 
|Repairs                                  |  |                      | 14,919    |  |                   |  | 9,660     | 
|Insurance premium                        |  |                      | 18,239    |  |                   |  | 10,252    | 
|Entertainment                            |  |                      | 17,905    |  |                   |  | 17,050    | 
|Advertising                              |  |                      | 70,939    |  |                   |  | 96,305    | 
|Research & development                   |  |                      | 212,472   |  |                   |  | 141,314   | 
|Service fees                             |  |                      | 286,635   |  |                   |  | 192,979   | 
|Supplies                                 |  |                      | 14,357    |  |                   |  | 17,012    | 
|Vehicles maintenance                     |  |                      | 21,491    |  |                   |  | 15,851    | 
|Industry association Fee                 |  |                      | 10,200    |  |                   |  | 10,403    | 
|Training                                 |  |                      | 24,375    |  |                   |  | 24,762    | 
|Conference                               |  |                      | 21,739    |  |                   |  | 17,659    | 
|Warranty expense                         |  |                      | 14,166    |  |                   |  | 19,733    | 
|Bad debt expense                         |  |                      | 103,848   |  |                   |  | 51,186    | 
|Others                                   |  |                      | 19,173    |  |                   |  | 19,423    | 
|                                         |  |                      |           |  |                   |  |           | 
|                                         |  | (Won)                | 2,048,264 |  |                   |  | 1,500,370 | 
|                                         |  |                      |           |  |                   |  |           | 



F-82



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Selling expenses

Selling expenses for the years ended December 31, 2011 and 2010 are as follows:



|                                           |  |                      |           |  |                   |  |           | 
|------------------------------------------ |  | -------------------- | --------- |  | ----------------- |  | --------- | 
|                                           |  | December 31, 2011    |           |  | December 31, 2010 | 
|                                           |  | (in millions of Won) |          
|Freight                                    |  | (Won)                | 1,406,269 |  |                   |  | 948,891   | 
|Operating expenses for distribution center |  |                      | 8,115     |  |                   |  | 8,694     | 
|Sales commissions                          |  |                      | 85,410    |  |                   |  | 69,823    | 
|Sales advertising                          |  |                      | 1,204     |  |                   |  | 1,483     | 
|Sales promotion                            |  |                      | 16,179    |  |                   |  | 12,096    | 
|Sample                                     |  |                      | 7,321     |  |                   |  | 3,478     | 
|Sales insurance premium                    |  |                      | 19,915    |  |                   |  | 14,579    | 
|Contract cost                              |  |                      | 62,986    |  |                   |  | 58,340    | 
|Others                                     |  |                      | 4,729     |  |                   |  | 2,956     | 
|                                           |  |                      |           |  |                   |  |           | 
|                                           |  | (Won)                | 1,612,128 |  |                   |  | 1,120,340 | 
|                                           |  |                      |           |  |                   |  |           | 



|28. | Other Operating Income and Expenses
|--- | -----------------------------------

(a)
Other operating income

Details of other operating income for the years ended December 31, 2011 and 2010 are as follows:



|                                                             |  |                      |         |  |                   |  |         | 
|------------------------------------------------------------ |  | -------------------- | ------- |  | ----------------- |  | ------- | 
|                                                             |  | December 31, 2011    |         |  | December 31, 2010 | 
|                                                             |  | (in millions of Won) |        
|Gain on disposal of property, plant and equipment            |  | (Won)                | 13,812  |  |                   |  | 26,366  | 
|Gain on disposal of investment of equity-accounted investees |  |                      | 2,247   |  |                   |  | 2,942   | 
|Reversal of allowance for doubtful accounts                  |  |                      | 86,451  |  |                   |  | 3,796   | 
|Outsourcing income                                           |  |                      | 42,136  |  |                   |  | 11,055  | 
|Gain on disposal of wastes                                   |  |                      | 9,641   |  |                   |  | 2,997   | 
|Gain from claim compensation                                 |  |                      | 33,103  |  |                   |  | 58,200  | 
|Penalty income from early termination of contracts           |  |                      | 38,570  |  |                   |  | 14,081  | 
|Others                                                       |  |                      | 111,118 |  |                   |  | 111,950 | 
|                                                             |  |                      |         |  |                   |  |         | 
|                                                             |  | (Won)                | 337,078 |  |                   |  | 231,387 | 
|                                                             |  |                      |         |  |                   |  |         | 

(b) Other operating expenses

Details of other operating expenses for the years ended December 31, 2011 and 2010 are as follows:



|                                                            |  |                      |         |  |                  |  |         | 
|----------------------------------------------------------- |  | -------------------- | ------- |  | ---------------- |  | ------- | 
|                                                            |  | December 31,2011     |         |  | December 31,2010 | 
|                                                            |  | (in millions of Won) |        
|Loss on disposal of property, plant and equipment           |  | (Won)                | 60,550  |  |                  |  | 83,494  | 
|Loss on disposal of investment property                     |  |                      | 8,826   |  |                  |  | 11,896  | 
|Cost of idle assets                                         |  |                      | 16,881  |  |                  |  | 795     | 
|Other bad debt expenses                                     |  |                      | 28,081  |  |                  |  | 12,877  | 
|Contributions                                               |  |                      | 66,558  |  |                  |  | 74,343  | 
|Loss on disposal of wastes                                  |  |                      | 17,648  |  |                  |  | 15,245  | 
|Impairment loss of property, plant and equipment and others |  |                      | 99,072  |  |                  |  | 128,083 | 
|Others                                                      |  |                      | 85,843  |  |                  |  | 15,218  | 
|                                                            |  |                      |         |  |                  |  |         | 
|                                                            |  | (Won)                | 383,459 |  |                  |  | 341,951 | 
|                                                            |  |                      |         |  |                  |  |         | 



F-83



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POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|29. | Expenses by Nature
|--- | ------------------

Expenses by nature in the
statements of comprehensive income for the years ended December 31, 2011 and 2010 are as follows:



|                                  |  |                      |            |  |                  |  |            | 
|--------------------------------- |  | -------------------- | ---------- |  | ---------------- |  | ---------- | 
|                                  |  | December 31,2011     |            |  | December 31,2010 | 
|                                  |  | (in millions of Won) |           
|Changes in inventories            |  | (Won)                | 40,166,313 |  |                  |  | 19,496,278 | 
|Employee benefits expenses        |  |                      | 2,639,966  |  |                  |  | 2,363,727  | 
|Depreciation (*1)                 |  |                      | 2,133,011  |  |                  |  | 2,960,550  | 
|Amortization                      |  |                      | 133,288    |  |                  |  | 75,344     | 
|Outsourcing fee                   |  |                      | 7,823,815  |  |                  |  | 7,270,872  | 
|Electricity and water expenses    |  |                      | 692,544    |  |                  |  | 504,308    | 
|Research and development expenses |  |                      | 592,649    |  |                  |  | 537,025    | 
|Freight and custody expenses      |  |                      | 1,406,268  |  |                  |  | 948,891    | 
|Losses on disposition             |  |                      | 60,550     |  |                  |  | 83,494     | 
|Donation                          |  |                      | 66,559     |  |                  |  | 74,344     | 
|Other operating expenses          |  |                      | 256,350    |  |                  |  | 184,114    | 
|Other expenses                    |  |                      | 7,896,389  |  |                  |  | 8,186,175  | 
|                                  |  |                      |            |  |                  |  |            | 
|                                  |  | (Won)                | 63,867,702 |  |                  |  | 42,685,122 | 
|                                  |  |                      |            |  |                  |  |            | 





|(*1) | Includes depreciation expense of investment properties.
|---- | -------------------------------------------------------



|30. | Finance Income and Costs
|--- | ------------------------

Details of finance
income and costs for the years ended December 31, 2011 and 2010 are as follows:



|                                                        |  |                      |           |  |                   |  |           | 
|------------------------------------------------------- |  | -------------------- | --------- |  | ----------------- |  | --------- | 
|                                                        |  | December 31, 2011    |           |  | December 31, 2010 | 
|                                                        |  | (in millions of Won) |          
|Finance income                                          |  |                      |           |  |                   |  |           | 
|Interest income                                         |  | (Won)                | 216,234   |  |                   |  | 292,928   | 
|Dividend income                                         |  |                      | 143,880   |  |                   |  | 102,161   | 
|Gain on foreign currency transaction                    |  |                      | 1,454,103 |  |                   |  | 844,321   | 
|Gain on foreign currency translation                    |  |                      | 259,014   |  |                   |  | 204,568   | 
|Gain on derivatives transactions                        |  |                      | 549,439   |  |                   |  | 180,933   | 
|Gain on valuation of derivatives                        |  |                      | 111,637   |  |                   |  | 86,823    | 
|Gain on disposal of available-for-sale financial assets |  |                      | 454,543   |  |                   |  | 2,590     | 
|Others                                                  |  |                      | 1,569     |  |                   |  | 24,480    | 
|                                                        |  |                      |           |  |                   |  |           | 
|                                                        |  |                      | 3,190,419 |  |                   |  | 1,738,804 | 
|                                                        |  |                      |           |  |                   |  |           | 
|Finance costs                                           |  |                      |           |  |                   |  |           | 
|Interest expenses                                       |  |                      | 788,348   |  |                   |  | 586,883   | 
|Loss on foreign currency transaction                    |  |                      | 1,620,394 |  |                   |  | 808,718   | 
|Loss on foreign currency translation                    |  |                      | 529,910   |  |                   |  | 423,460   | 
|Loss on derivatives transactions                        |  |                      | 512,882   |  |                   |  | 175,196   | 
|Loss on valuation of derivatives                        |  |                      | 188,742   |  |                   |  | 17,784    | 
|Impairment of available-for-sale financial assets       |  |                      | 152,804   |  |                   |  | 57,172    | 
|Others                                                  |  |                      | 73,615    |  |                   |  | 18,645    | 
|                                                        |  |                      |           |  |                   |  |           | 
|                                                        |  | (Won)                | 3,866,695 |  |                   |  | 2,087,858 | 
|                                                        |  |                      |           |  |                   |  |           | 



F-84



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|31. | Income Taxes
|--- | ------------

(a) The Company was subject to
income taxes on taxable income at the following normal tax rates.



|                                            |  |                |       |   |      |  |       |            |  |  |       |  
|------------------------------------------- |  | -------------- | ----- | - | ---- |  | ----- | ---------- |  |  | ----- | -
|                                            |  | 2010           |       |   | 2011 |  |       | Thereafter | 
|                                            |  | Taxable income |      
|Up to
(Won)200 million                      |  |                | 11.00 | % |      |  | 11.00 | %          |  |  | 11.00 | %
|Over (Won)200 million up to (Won)20 billion |  |                | 24.20 | % |      |  | 24.20 | %          |  |  | 22.00 | %
|Over (Won)20
billion                        |  |                | 24.20 | % |      |  | 24.20 | %          |  |  | 24.20 | %

In December 2011, the Korean government changed the corporate income tax rate (including resident tax) for taxable
income exceeding (Won)20 billion from 22.0% to 24.2% prospectively from 2012.

(b) Income tax expense for the years ended December 31, 2011 and 2010 are as follows:



|                                                 |  |                      |           |   |                   |  |           |  
|------------------------------------------------ |  | -------------------- | --------- | - | ----------------- |  | --------- | -
|                                                 |  | December 31, 2011    |           |   | December 31, 2010 | 
|                                                 |  | (in millions of Won) |          
|Current income taxes                             |  | (Won)                | 1,069,240 |   |                   |  | 1,111,427 |  
|Deferred income tax due to temporary differences |  |                      | (318,722  | ) |                   |  | 103,054   |  
|Less: Items recorded directly to equity          |  |                      | 317,591   |   |                   |  | (133,009  | )
|                                                 |  |                      |           |   |                   |  |           |  
|Income tax expense                               |  | (Won)                | 1,068,109 |   |                   |  | 1,081,472 |  
|                                                 |  |                      |           |   |                   |  |           |  

(c) The following table reconciles the expected amount of income tax expense based on statutory rates
(24.2%) to the actual amount of taxes recorded by the Company for the years ended December 31, 2011 and 2010:



|                                                                  |  |                      |           |   |                   |  |           |  
|----------------------------------------------------------------- |  | -------------------- | --------- | - | ----------------- |  | --------- | -
|                                                                  |  | December 31, 2011    |           |   | December 31, 2010 | 
|                                                                  |  | (in millions of Won) |          
|Net income before income tax expense                              |  | (Won)                | 4,782,395 |   |                   |  | 5,267,123 |  
|Income tax expense computed at statutory rate                     |  |                      | 1,157,340 |   |                   |  | 1,274,644 |  
|Adjustments:                                                      |  |                      | (89,231   | ) |                   |  | (193,172  | )
|Tax effects due to permanent differences                          |  |                      | (13,798   | ) |                   |  | (28,973   | )
|Tax credit                                                        |  |                      | (193,633  | ) |                   |  | (268,873  | )
|Unrecognised deferred tax assets                                  |  |                      | 68,905    |   |                   |  | 49,196    |  
|Tax rate change effect                                            |  |                      | 17,661    |   |                   |  |          |  
|Foreign tax rate differential                                     |  |                      | 56,010    |   |                   |  | 24,693    |  
|Difference in tax rate of equity method accounted for investments |  |                      | (27,669   | ) |                   |  | (12,753   | )
|Over (under) provision from prior years                           |  |                      | (15,739   | ) |                   |  | 40,315    |  
|Others                                                            |  |                      | 19,032    |   |                   |  | 3,223     |  
|                                                                  |  |                      |           |   |                   |  |           |  
|Income tax expense                                                |  | (Won)                | 1,068,109 |   |                   |  | 1,081,472 |  
|                                                                  |  |                      |           |   |                   |  |           |  
|Effective rate (%)                                                |  |                      | 22.33     |   |                   |  | 20.53     |  

(d) The income taxes (charged) credited directly in equity for the years ended December 31, 2011 and 2010 are
as follows:



|                                                           |  |                      |          |   |                  |  |         |  
|---------------------------------------------------------- |  | -------------------- | -------- | - | ---------------- |  | ------- | -
|                                                           |  | December 31,2011     |          |   | December 31,2010 | 
|                                                           |  | (in millions of Won) |         
|(Loss) gain on valuation of available-for-sale investments |  | (Won)                | (306,827 | ) |                  |  | 122,651 |  
|Gains on sale of treasury stock                            |  |                      | 22,078   |   |                  |  |        |  
|Others                                                     |  |                      | (31,628  | ) |                  |  | (27,199 | )
|                                                           |  |                      |          |   |                  |  |         |  
|                                                           |  | (Won)                | (316,377 | ) |                  |  | 95,452  |  
|                                                           |  |                      |          |   |                  |  |         |  



F-85



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(e) The movements in deferred tax assets (liabilities) for the years
ended December 31, 2011 and 2010 are as follows:



|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|--------------------------------------------------------------- |  | -------------------- | -------- | - | ----------------- |  | -------- | ------------- |  |  | ------------- | - |  | --------- | -------- | - | ------------- |  | -------- | - |  |  | -------- | -
|                                                                |  | December 31, 2011    |          |   | December 31, 2010 | 
|                                                                |  | Dec. 31, 2010        |          |   | Inc (Dec)         |  |          | Dec. 31, 2011 |  |  | Dec. 31, 2009 |   |  | Inc (Dec) |          |   | Dec. 31, 2010 | 
|                                                                |  | (in millions of Won) |         
|Deferred income tax due to temporary differences                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|Reserve for special repairs                                     |  | (Won)                | (27,776  | ) |                   |  | (1,883   | )             |  |  | (29,659       | ) |  |           | (39,500  | ) |               |  | 11,724   |   |  |  | (27,776  | )
|Allowance for doubtful accounts                                 |  |                      | 80,349   |   |                   |  | 24,272   |               |  |  | 104,621       |   |  |           | 38,283   |   |               |  | 42,066   |   |  |  | 80,349   |  
|Reserve for technology developments                             |  |                      | (269,892 | ) |                   |  | (96,340  | )             |  |  | (366,232      | ) |  |           | (179,828 | ) |               |  | (90,064  | ) |  |  | (269,892 | )
|Depreciation expense                                            |  |                      | (61,129  | ) |                   |  | 2,841    |               |  |  | (58,288       | ) |  |           | (78,485  | ) |               |  | 17,356   |   |  |  | (61,129  | )
|Share of profit or loss of equity-accounted investees           |  |                      | (170,016 | ) |                   |  | (54,120  | )             |  |  | (224,136      | ) |  |           | (52,151  | ) |               |  | (117,865 | ) |  |  | (170,016 | )
|Reserve for inventory valuation                                 |  |                      | 1,484    |   |                   |  | (2,998   | )             |  |  | (1,514        | ) |  |           | 987      |   |               |  | 497      |   |  |  | 1,484    |  
|Revaluation of assets                                           |  |                      | (362,949 | ) |                   |  | (207,454 | )             |  |  | (570,403      | ) |  |           | (436,051 | ) |               |  | 73,102   |   |  |  | (362,949 | )
|Prepaid expenses                                                |  |                      | 18,733   |   |                   |  | 2,704    |               |  |  | 21,437        |   |  |           | 17,669   |   |               |  | 1,064    |   |  |  | 18,733   |  
|Impairment loss on property, plant and equipment                |  |                      | 24,858   |   |                   |  | 634      |               |  |  | 25,492        |   |  |           | 11,080   |   |               |  | 13,778   |   |  |  | 24,858   |  
|Loss on foreign currency translation                            |  |                      | 90,656   |   |                   |  | 5,131    |               |  |  | 95,787        |   |  |           | 45,306   |   |               |  | 45,350   |   |  |  | 90,656   |  
|Accrued severance benefits                                      |  |                      | 40,710   |   |                   |  | 14,343   |               |  |  | 55,053        |   |  |           | 53,374   |   |               |  | (12,664  | ) |  |  | 40,710   |  
|Group severance insurance deposits                              |  |                      | (36,232  | ) |                   |  | (6,859   | )             |  |  | (43,091       | ) |  |           | (30,199  | ) |               |  | (6,033   | ) |  |  | (36,232  | )
|Provision for construction losses                               |  |                      | 1,697    |   |                   |  | 1,155    |               |  |  | 2,852         |   |  |           | 263      |   |               |  | 1,434    |   |  |  | 1,697    |  
|Provision for construction warranty                             |  |                      | 13,056   |   |                   |  | 2,846    |               |  |  | 15,902        |   |  |           | 13,040   |   |               |  | 16       |   |  |  | 13,056   |  
|Appropriated retained earnings for technological development    |  |                      | (246     | ) |                   |  | 81       |               |  |  | (165          | ) |  |           | (242     | ) |               |  | (4       | ) |  |  | (246     | )
|Accrued income                                                  |  |                      | (1,061   | ) |                   |  | (888     | )             |  |  | (1,949        | ) |  |           | (570     | ) |               |  | (491     | ) |  |  | (1,061   | )
|Others                                                          |  |                      | 317,876  |   |                   |  | 58,231   |               |  |  | 376,107       |   |  |           | 318,235  |   |               |  | (359     | ) |  |  | 317,876  |  
|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|                                                                |  |                      | (339,882 | ) |                   |  | (258,304 | )             |  |  | (598,186      | ) |  |           | (318,789 | ) |               |  | (21,093  | ) |  |  | (339,882 | )
|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|Deferred income taxes recognized directly to equity             |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|Gain (loss) on valuation of available-for-sale securities       |  |                      | (305,406 | ) |                   |  | 306,827  |               |  |  | 1,421         |   |  |           | (182,755 | ) |               |  | (122,651 | ) |  |  | (305,406 | )
|Others                                                          |  |                      | 4,141    |   |                   |  | 31,628   |               |  |  | 35,769        |   |  |           | (23,058  | ) |               |  | 27,199   |   |  |  | 4,141    |  
|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|                                                                |  |                      | (301,265 | ) |                   |  | 338,455  |               |  |  | 37,190        |   |  |           | (205,813 | ) |               |  | (95,452  | ) |  |  | (301,265 | )
|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|Deferred tax from tax credit                                    |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|Tax credit carryforward and others                              |  |                      | 280,295  |   |                   |  | (23,418  | )             |  |  | 256,877       |   |  |           | 322,085  |   |               |  | (41,790  | ) |  |  | 280,295  |  
|Deferred tax effect due to unrealized gains (losses) and others |  |                      | (129,000 | ) |                   |  | 120,625  |               |  |  | (8,375        | ) |  |           | 234,726  |   |               |  | (363,726 | ) |  |  | (129,000 | )
|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  
|                                                                |  | (Won)                | (489,852 | ) |                   |  | 177,358  |               |  |  | (312,494      | ) |  |           | 32,209   |   |               |  | (522,061 | ) |  |  | (489,852 | )
|                                                                |  |                      |          |   |                   |  |          |               |  |  |               |   |  |           |          |   |               |  |          |   |  |  |          |  



F-86



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(f) Deferred tax assets and liabilities as of December 31, 2011,
2010 and January 1, 2010 are as follows:

1) December 31, 2011



|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|--------------------------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | ----------- | --- |  |  | --------- | -
|                                                                |  | December 31, 2011    |          
|                                                                |  | Assets               |           |  | Liabilities |  |             | Net | 
|                                                                |  | (in millions of Won) |          
|Deferred income tax due to temporary differences                |  |                      |           |  |             |  |             |     |  |  |           |  
|Reserve for special repairs                                     |  | (Won)                |          |  |             |  | (29,659)    |     |  |  | (29,659)  |  
|Allowance for doubtful accounts                                 |  |                      | 104,672   |  |             |  | (51)        |     |  |  | 104,621   |  
|Reserve for technology developments                             |  |                      |          |  |             |  | (366,232)   |     |  |  | (366,232) |  
|Depreciation expense                                            |  |                      | 12,319    |  |             |  | (70,607)    |     |  |  | (58,288)  |  
|Share of profit or loss of equity-accounted investees           |  |                      |          |  |             |  | (224,136)   |     |  |  | (224,136) |  
|Reserve for inventory valuation                                 |  |                      | 4,319     |  |             |  | (5,833)     |     |  |  | (1,514)   |  
|Revaluation of assets                                           |  |                      |          |  |             |  | (570,403)   |     |  |  | (570,403) |  
|Prepaid expenses                                                |  |                      | 23,045    |  |             |  | (1,608)     |     |  |  | 21,437    |  
|Impairment loss on property, plant and equipment                |  |                      | 25,492    |  |             |  |            |     |  |  | 25,492    |  
|Loss on foreign currency translation                            |  |                      | 176,621   |  |             |  | (80,834)    |     |  |  | 95,787    |  
|Accrued severance benefits                                      |  |                      | 75,912    |  |             |  | (20,859)    |     |  |  | 55,053    |  
|Group severance insurance deposits                              |  |                      |          |  |             |  | (43,091)    |     |  |  | (43,091)  |  
|Provision for construction losses                               |  |                      | 2,852     |  |             |  |            |     |  |  | 2,852     |  
|Provision for construction warranty                             |  |                      | 15,902    |  |             |  |            |     |  |  | 15,902    |  
|Appropriated retained earnings for technological development    |  |                      |          |  |             |  | (165)       |     |  |  | (165)     |  
|Accrued income                                                  |  |                      |          |  |             |  | (1,949)     |     |  |  | (1,949)   |  
|Others                                                          |  |                      | 382,735   |  |             |  | (6,628)     |     |  |  | 376,107   |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|                                                                |  |                      | 823,869   |  |             |  | (1,422,055) |     |  |  | (598,186) |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|Deferred income taxes recognized directly to equity             |  |                      |           |  |             |  |             |     |  |  |           |  
|Gain (loss) on valuation of available-for-sale investments      |  |                      | 199,317   |  |             |  | (197,896)   |     |  |  | 1,421     |  
|Others                                                          |  |                      | 49,898    |  |             |  | (14,129)    |     |  |  | 35,769    |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|                                                                |  |                      | 249,215   |  |             |  | (212,025)   |     |  |  | 37,190    |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|Deferred tax from tax credit                                    |  |                      |           |  |             |  |             |     |  |  |           |  
|Tax credit carryforward and others                              |  |                      | 292,255   |  |             |  | (35,378)    |     |  |  | 256,877   |  
|Deferred tax effect due to unrealized gains (losses) and others |  |                      | 494,450   |  |             |  | (502,825)   |     |  |  | (8,375)   |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|                                                                |  | (Won)                | 1,859,789 |  |             |  | (2,172,283  | )   |  |  | (312,494  | )
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  



F-87



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) December 31, 2010



|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|--------------------------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | ----------- | --- |  |  | --------- | -
|                                                                |  | December 31, 2010    |          
|                                                                |  | Assets               |           |  | Liabilities |  |             | Net | 
|                                                                |  | (in millions of Won) |          
|Deferred income tax due to temporary differences                |  |                      |           |  |             |  |             |     |  |  |           |  
|Reserve for special repairs                                     |  | (Won)                |          |  |             |  | (27,776)    |     |  |  | (27,776)  |  
|Allowance for doubtful accounts                                 |  |                      | 80,349    |  |             |  |            |     |  |  | 80,349    |  
|Reserve for technology developments                             |  |                      |          |  |             |  | (269,892)   |     |  |  | (269,892) |  
|Depreciation expense                                            |  |                      | 7,555     |  |             |  | (68,684)    |     |  |  | (61,129)  |  
|Share of profit or loss of equity-accounted investees           |  |                      |          |  |             |  | (170,016)   |     |  |  | (170,016) |  
|Reserve for inventory valuation                                 |  |                      | 1,484     |  |             |  |            |     |  |  | 1,484     |  
|Revaluation of assets                                           |  |                      |          |  |             |  | (362,949)   |     |  |  | (362,949) |  
|Prepaid expenses                                                |  |                      | 18,852    |  |             |  | (119)       |     |  |  | 18,733    |  
|Impairment loss on property, plant and equipment                |  |                      | 24,858    |  |             |  |            |     |  |  | 24,858    |  
|Loss on foreign currency translation                            |  |                      | 193,582   |  |             |  | (102,926)   |     |  |  | 90,656    |  
|Accrued severance benefits                                      |  |                      | 61,414    |  |             |  | (20,704)    |     |  |  | 40,710    |  
|Group severance insurance deposits                              |  |                      |          |  |             |  | (36,232)    |     |  |  | (36,232)  |  
|Provision for construction losses                               |  |                      | 1,697     |  |             |  |            |     |  |  | 1,697     |  
|Provision for construction warranty                             |  |                      | 13,056    |  |             |  |            |     |  |  | 13,056    |  
|Appropriated retained earnings for technological development    |  |                      |          |  |             |  | (246)       |     |  |  | (246)     |  
|Accrued income                                                  |  |                      |          |  |             |  | (1,061)     |     |  |  | (1,061)   |  
|Others                                                          |  |                      | 345,109   |  |             |  | (27,233)    |     |  |  | 317,876   |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|                                                                |  |                      | 747,956   |  |             |  | (1,087,838) |     |  |  | (339,882) |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|Deferred income taxes recognized directly to equity             |  |                      |           |  |             |  |             |     |  |  |           |  
|Gain (loss) on valuation of available-for-sale securities       |  |                      | 266       |  |             |  | (305,672)   |     |  |  | (305,406) |  
|Others                                                          |  |                      | 30,112    |  |             |  | (25,971)    |     |  |  | 4,141     |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|                                                                |  |                      | 30,378    |  |             |  | (331,643)   |     |  |  | (301,265) |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|Deferred tax from tax credit                                    |  |                      |           |  |             |  |             |     |  |  |           |  
|Tax credit carryforward and others                              |  |                      | 315,140   |  |             |  | (34,845)    |     |  |  | 280,295   |  
|Deferred tax effect due to unrealized gains (losses) and others |  |                      | 341,471   |  |             |  | (470,471)   |     |  |  | (129,000) |  
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  
|                                                                |  | (Won)                | 1,434,945 |  |             |  | (1,924,797  | )   |  |  | (489,852  | )
|                                                                |  |                      |           |  |             |  |             |     |  |  |           |  



F-88



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







3) January 1, 2010



|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  
|--------------------------------------------------------------- |  | -------------------- | --------- |  | ----------- |  | ---------- | --- |  |  | -------- | -
|                                                                |  | December 31, 2010    |          
|                                                                |  | Assets               |           |  | Liabilities |  |            | Net | 
|                                                                |  | (in millions of Won) |          
|Deferred income tax due to temporary differences                |  |                      |           |  |             |  |            |     |  |  |          |  
|Reserve for special repairs                                     |  | (Won)                |          |  |             |  | (39,500    | )   |  |  | (39,500  | )
|Allowance for doubtful accounts                                 |  |                      | 38,283    |  |             |  |           |     |  |  | 38,283   |  
|Reserve for technology developments                             |  |                      |          |  |             |  | (179,828   | )   |  |  | (179,828 | )
|Depreciation expense                                            |  |                      | 3,103     |  |             |  | (81,588    | )   |  |  | (78,485  | )
|Share of profit or loss of equity-accounted investees           |  |                      |          |  |             |  | (52,151    | )   |  |  | (52,151  | )
|Reserve for inventory valuation                                 |  |                      | 987       |  |             |  |           |     |  |  | 987      |  
|Revaluation of assets                                           |  |                      |          |  |             |  | (436,051   | )   |  |  | (436,051 | )
|Prepaid expenses                                                |  |                      | 17,756    |  |             |  | (87        | )   |  |  | 17,669   |  
|Impairment loss on property, plant and equipment                |  |                      | 11,080    |  |             |  |           |     |  |  | 11,080   |  
|Loss on foreign currency translation                            |  |                      | 132,071   |  |             |  | (86,765    | )   |  |  | 45,306   |  
|Accrued severance benefits                                      |  |                      | 53,374    |  |             |  |           |     |  |  | 53,374   |  
|Group severance insurance deposits                              |  |                      |          |  |             |  | (30,199    | )   |  |  | (30,199  | )
|Provision for construction losses                               |  |                      | 263       |  |             |  |           |     |  |  | 263      |  
|Provision for construction warranty                             |  |                      | 13,040    |  |             |  |           |     |  |  | 13,040   |  
|Appropriated retained earnings for technological development    |  |                      |          |  |             |  | (242       | )   |  |  | (242     | )
|Accrued income                                                  |  |                      |          |  |             |  | (570       | )   |  |  | (570     | )
|Others                                                          |  |                      | 263,171   |  |             |  | 55,064     |     |  |  | 318,235  |  
|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  
|                                                                |  |                      | 533,128   |  |             |  | (851,917   | )   |  |  | (318,789 | )
|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  
|Deferred income taxes recognized directly to equity             |  |                      |           |  |             |  |            |     |  |  |          |  
|Gain (loss) on valuation of available-for-sale investments      |  |                      | 9,821     |  |             |  | (192,576   | )   |  |  | (182,755 | )
|Others                                                          |  |                      | 4,874     |  |             |  | (27,932    | )   |  |  | (23,058  | )
|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  
|                                                                |  |                      | 14,695    |  |             |  | (220,508   | )   |  |  | (205,813 | )
|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  
|Deferred tax from tax credit                                    |  |                      |           |  |             |  |            |     |  |  |          |  
|Tax credit carryforward and others                              |  |                      | 362,608   |  |             |  | (40,523    | )   |  |  | 322,085  |  
|Deferred tax effect due to unrealized gains (losses) and others |  |                      | 338,150   |  |             |  | (103,424   | )   |  |  | 234,726  |  
|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  
|                                                                |  | (Won)                | 1,248,581 |  |             |  | (1,216,372 | )   |  |  | 32,209   |  
|                                                                |  |                      |           |  |             |  |            |     |  |  |          |  

(f) As of December 31, 2011, the Company did not recognize income tax effects associated with taxable temporary
differences of (Won)3,121,101 million (deferred tax liability (Won)777,328 million) mainly relating to increase in retained earnings of subsidiaries since it is probable that the temporary difference will not reverse in the foreseeable future. As of December 31, 2011,
the Company did not recognize income tax effect associated with deductible temporary differences of (Won)1,352,764 million (deferred tax
assets (Won)327,369 million) mainly relating to loss of subsidiaries and affiliates due to remote possibility of realization.



|32. | Earnings per Share
|--- | ------------------

(a) Basic and diluted
earnings per share for the years ended December 31, 2011 and 2010 are as follows:



|                                                          |  |                                                  |            |  |      |  |            | 
|--------------------------------------------------------- |  | ------------------------------------------------ | ---------- |  | ---- |  | ---------- | 
|                                                          |  | 2011                                             |            |  | 2010 | 
|                                                          |  | (in millions of Won,except per shareinformation) |           
|Profit attribute to controlling interest                  |  | (Won)                                            | 3,648,136  |  |      |  | 4,105,623  | 
|Weighted-average number of common shares outstanding
(*1) |  |                                                  | 77,251,818 |  |      |  | 77,032,878 | 
|Basic and diluted earnings per share                      |  |                                                  | 47,224     |  |      |  | 53,297     | 



F-89



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010











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



|                                                     |  |      |            |   |      |  |             |  
|---------------------------------------------------- |  | ---- | ---------- | - | ---- |  | ----------- | -
|                                                     |  | 2011 |            |   | 2010 | 
|Total number of common shares issued                 |  |      | 87,186,835 |   |      |  | 87,186,835  |  
|Weighted-average number of treasury shares           |  |      | (9,935,017 | ) |      |  | (10,153,957 | )
|                                                     |  |      |            |   |      |  |             |  
|Weighted-average number of common shares outstanding |  |      | 77,251,818 |   |      |  | 77,032,878  |  
|                                                     |  |      |            |   |      |  |             |  



|33. | Related Party Transactions
|--- | --------------------------

(a) Significant
transactions with related companies for the year ended December 31, 2011 and 2010 are as follows:



|                                         |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 
|---------------------------------------- |  | --------------------- | ---------- |  | -------------------------- |  | --------- | ---- |  | ----- | --------- |  |  |  | --------- | 
|                                         |  | Sales and others (*1) |            |  | Purchases and others 
(*2) | 
|                                         |  | 2011                  |            |  | 2010                       |  |           | 2011 |  |       | 2010      | 
|                                         |  | (in millions of Won)  |           
|Subsidiaries (*3)                        |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 
|POSCO E&C Co., Ltd.                      |  | (Won)                 | 26,536     |  |                            |  | 7,441     |      |  | (Won) | 1,687,665 |  |  |  | 2,292,524 | 
|POSCO Processing & Service Co., Ltd.     |  |                       | 1,181,088  |  |                            |  | 1,082,903 |      |  |       | 1,406,245 |  |  |  | 478,030   | 
|POSCO Coated & Color Steel Co., Ltd.     |  |                       | 593,656    |  |                            |  | 685,698   |      |  |       | 1,890     |  |  |  | 3,178     | 
|POSCO ICT Co., Ltd.                      |  |                       | 1,537      |  |                            |  | 1,212     |      |  |       | 507,883   |  |  |  | 485,525   | 
|POSCO Chemtech Company Ltd.              |  |                       | 423,643    |  |                            |  | 142,677   |      |  |       | 755,515   |  |  |  | 573,973   | 
|POSCO TMC Co., Ltd.                      |  |                       | 168,314    |  |                            |  | 151,323   |      |  |       | 884       |  |  |  | 91        | 
|POSCO AST Co., Ltd.                      |  |                       | 319,258    |  |                            |  | 267,323   |      |  |       | 58,475    |  |  |  | 57,180    | 
|Daewoo International Corp.               |  |                       | 3,896,857  |  |                            |  | 867,916   |      |  |       | 5,599     |  |  |  | 3,799     | 
|POSCO NST Co., Ltd.                      |  |                       | 186,809    |  |                            |  | 9,256     |      |  |       | 4,734     |  |  |  |          | 
|POSCO America Corporation                |  |                       | 353,904    |  |                            |  | 233,594   |      |  |       | 1         |  |  |  |          | 
|POSCO Canada Ltd.                        |  |                       |           |  |                            |  |          |      |  |       | 289,047   |  |  |  | 170,842   | 
|POSCO Asia Co., Ltd.                     |  |                       | 2,029,781  |  |                            |  | 1,377,802 |      |  |       | 178,395   |  |  |  | 148,706   | 
|POSCO-Japan Co., Ltd.                    |  |                       | 1,628,069  |  |                            |  | 1,161,919 |      |  |       | 34,860    |  |  |  | 272,282   | 
|POSCO-IPPC Pvt. Ltd.                     |  |                       | 148,343    |  |                            |  | 164,628   |      |  |       |          |  |  |  |          | 
|POSCO-Mexico Co., Ltd.                   |  |                       | 347,915    |  |                            |  | 273,241   |      |  |       | 176       |  |  |  |          | 
|Daewoo International Singapore Pte. Ltd. |  |                       |           |  |                            |  |          |      |  |       | 149,029   |  |  |  | 12,447    | 
|Others                                   |  |                       | 927,595    |  |                            |  | 1,432,296 |      |  |       | 1,198,091 |  |  |  | 750,526   | 
|                                         |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 
|                                         |  | (Won)                 | 12,233,305 |  |                            |  | 7,859,229 |      |  | (Won) | 6,278,489 |  |  |  | 5,249,103 | 
|Associates (*3)                          |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 
|SNNC Co., Ltd.                           |  |                       | 4,787      |  |                            |  | 1,763     |      |  |       | 447,130   |  |  |  | 519,871   | 
|USS-POSCO Industries                     |  |                       | 342,594    |  |                            |  | 308,998   |      |  |       | 29        |  |  |  | 264       | 
|Poschrome(Proprietary) Ltd.              |  |                       |           |  |                            |  |          |      |  |       | 72,502    |  |  |  | 80,282    | 
|Others                                   |  |                       | 213,232    |  |                            |  | 31,528    |      |  |       | 59,444    |  |  |  | 303,446   | 
|                                         |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 
|                                         |  | (Won)                 | 560,613    |  |                            |  | 342,289   |      |  | (Won) | 579,105   |  |  |  | 903,863   | 
|                                         |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 
|                                         |  | (Won)                 | 12,793,918 |  |                            |  | 8,201,518 |      |  | (Won) | 6,857,594 |  |  |  | 6,152,966 | 
|                                         |  |                       |            |  |                            |  |           |      |  |       |           |  |  |  |           | 





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



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



|(*3) | As of December 31, 2011, the Company provided guarantees to related parties (note 34).
|---- | --------------------------------------------------------------------------------------



F-90



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(b) Significant transactions with related companies the related account
balances as of December 31, 2011, 2010 and January 1, 2010 are as follows:



|                                         |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 
|---------------------------------------- |  | -------------------- | --------- |  | ------------- |  | ------- | -------------- |  |  | ------- |  |  | ----- | ------- |  | -------------- |  | ------- |  |  |  | ------- | 
|                                         |  | Receivables (*1)     |           |  | Payables (*1) | 
|                                         |  | 2011                 |           |  | 2010          |  |         | January 1,2010 |  |  | 2011    |  |  | 2010  |         |  | January 1,2010 | 
|                                         |  | (in millions of Won) |          
|Subsidiaries                             |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 
|POSCO E&C Co., Ltd.                      |  | (Won)                | 647       |  |               |  | 293     |                |  |  | 480     |  |  | (Won) | 241,918 |  |                |  | 190,081 |  |  |  | 437,819 | 
|POSCO Processing & Service Co., Ltd.     |  |                      | 88,838    |  |               |  | 129,133 |                |  |  | 114,783 |  |  |       | 1,512   |  |                |  | 6,842   |  |  |  | 2,696   | 
|POSCO Plantec Co., Ltd.                  |  |                      | 65        |  |               |  |        |                |  |  | 9       |  |  |       | 42,534  |  |                |  | 48,058  |  |  |  | 2,839   | 
|POSCO ICT Co., Ltd.                      |  |                      | 30        |  |               |  |        |                |  |  | 1       |  |  |       | 62,583  |  |                |  | 63,627  |  |  |  | 54,529  | 
|POSCO Coated & Color Steel
Co., Ltd.     |  |                      | 116,252   |  |               |  | 104,755 |                |  |  | 109,616 |  |  |       | 335     |  |                |  | 437     |  |  |  | 199     | 
|POSCO Chemtech Company Ltd.              |  |                      | 37,808    |  |               |  | 33,743  |                |  |  | 6,880   |  |  |       | 82,048  |  |                |  | 62,669  |  |  |  | 66,008  | 
|POSCO TMC Co., Ltd.                      |  |                      | 21,601    |  |               |  | 11,823  |                |  |  | 11,678  |  |  |       | 134     |  |                |  | 15      |  |  |  | 24      | 
|POSCO AST Co., Ltd.                      |  |                      | 33,266    |  |               |  | 19,065  |                |  |  | 17,492  |  |  |       | 7,090   |  |                |  | 8,255   |  |  |  | 7,572   | 
|Daewoo International Corp.               |  |                      | 284,125   |  |               |  | 139,756 |                |  |  |        |  |  |       | 1,589   |  |                |  |        |  |  |  |        | 
|POSCO NST Co., Ltd.                      |  |                      | 64,012    |  |               |  |        |                |  |  |        |  |  |       | 676     |  |                |  |        |  |  |  |        | 
|POSCO America Corporation                |  |                      | 32,346    |  |               |  | 12,211  |                |  |  | 6,163   |  |  |       |        |  |                |  |        |  |  |  |        | 
|POSCO Asia Co., Ltd.                     |  |                      | 227,476   |  |               |  | 122,626 |                |  |  | 40,548  |  |  |       | 1,407   |  |                |  | 3,767   |  |  |  | 1,170   | 
|POSCO-TBPC Co., Ltd.                     |  |                      | 27,381    |  |               |  | 18,376  |                |  |  |        |  |  |       |        |  |                |  |        |  |  |  |        | 
|Qingdao Pohang Stainless Steel Co., Ltd. |  |                      | 6,713     |  |               |  | 13,805  |                |  |  | 24,404  |  |  |       |        |  |                |  |        |  |  |  |        | 
|POSCO-Vietnam Co., Ltd.                  |  |                      | 422       |  |               |  | 683     |                |  |  | 95,781  |  |  |       |        |  |                |  |        |  |  |  |        | 
|POSCO-Japan Co., Ltd.                    |  |                      | 52,362    |  |               |  | 28,515  |                |  |  | 25,972  |  |  |       | 1,546   |  |                |  | 4,958   |  |  |  | 6,701   | 
|POSCO-IPPC Pvt. Ltd.                     |  |                      | 3,484     |  |               |  | 10,412  |                |  |  | 12,356  |  |  |       |        |  |                |  |        |  |  |  |        | 
|POSCO-Mexico Co., Ltd.                   |  |                      | 171,908   |  |               |  | 80,443  |                |  |  | 16,247  |  |  |       |        |  |                |  |        |  |  |  |        | 
|Others                                   |  |                      | 81,255    |  |               |  | 15,167  |                |  |  | 26,073  |  |  |       | 83,201  |  |                |  | 32,209  |  |  |  | 17,840  | 
|                                         |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 
|                                         |  | (Won)                | 1,249,991 |  |               |  | 748,349 |                |  |  | 526,859 |  |  | (Won) | 526,573 |  |                |  | 420,918 |  |  |  | 617,397 | 
|Associates                               |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 
|Posmate Co., Ltd.                        |  | (Won)                |          |  |               |  | 1,396   |                |  |  | 48      |  |  | (Won) | 7,198   |  |                |  | 6,391   |  |  |  | 5,222   | 
|SNNC Co., Ltd.                           |  |                      | 223       |  |               |  | 182     |                |  |  | 1,974   |  |  |       | 23,187  |  |                |  | 57,512  |  |  |  | 26,963  | 
|USS-POSCO Industries                     |  |                      |          |  |               |  | 58,347  |                |  |  | 39,100  |  |  |       |        |  |                |  |        |  |  |  |        | 
|Others                                   |  |                      | 21,160    |  |               |  | 7,231   |                |  |  | 176     |  |  |       | 809     |  |                |  | 29,714  |  |  |  | 78      | 
|                                         |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 
|                                         |  | (Won)                | 21,383    |  |               |  | 67,156  |                |  |  | 41,298  |  |  | (Won) | 31,194  |  |                |  | 93,617  |  |  |  | 32,263  | 
|                                         |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 
|                                         |  | (Won)                | 1,271,374 |  |               |  | 815,505 |                |  |  | 568,157 |  |  | (Won) | 557,767 |  |                |  | 514,535 |  |  |  | 649,660 | 
|                                         |  |                      |           |  |               |  |         |                |  |  |         |  |  |       |         |  |                |  |         |  |  |  |         | 





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

(c) Compensation to key management, which consists of normal wages and salaries, bonus and employee benefits for the years ended December 31,
2011 and 2010, details of compensation to key management officers are as follows:



|                         |  |                      |         |  |      |  |         | 
|------------------------ |  | -------------------- | ------- |  | ---- |  | ------- | 
|                         |  | 2011                 |         |  | 2010 | 
|                         |  | (in millions of Won) |        
|Short-term benefits      |  | (Won)                | 93,231  |  |      |  | 72,753  | 
|Other long-term benefits |  |                      | 23,407  |  |      |  | 16,757  | 
|Retirement benefits      |  |                      | 26,971  |  |      |  | 21,110  | 
|                         |  |                      |         |  |      |  |         | 
|                         |  | (Won)                | 143,609 |  |      |  | 110,620 | 
|                         |  |                      |         |  |      |  |         | 



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Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Key management officers include directors (including non-standing
directors), executive officials and fellow officials who have significant influence and responsibilities in the Companys business and operations. In addition to compensation described above, the Company provided stock appreciation rights to
its executive officers and recorded reversal of stock compensation expenses amounted to (Won)4,223 million and (Won)13,227 million, respectively, for the years ended December 31, 2011 and 2010 (note 24).



|34. | Commitments and Contingencies
|--- | -----------------------------

(a) Details of
guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of December 31, 2011, are as follows:



|                     |  |                                              |  |                                        |  |                  |  |  |                |  |  |  |         | 
|-------------------- |  | -------------------------------------------- |  | -------------------------------------- |  | ---------------- |  |  | -------------- |  |  |  | ------- | 
|Guarantors           |  | Guarantee beneficiary                        |  | Financial institution                  |  | Foreign Currency |  |  | Won Equivalent | 
|[The Company]        |  |                                              |  |                                        |  |                  |  |  |                |  |  |  |         | 
|POSCO                |  | Guangdong Pohang Coated Steel Co., Ltd.      |  | SMBC and others                        |  | USD              |  |  | 122,600,000    |  |  |  | 141,395 | 
|                     |  | POSCO Investment Co., Ltd.                   |  | BOC and others                         |  | CNY              |  |  | 630,000,000    |  |  |  | 114,981 | 
|                     |  |                                              |  | HSBC                                   |  | MYR              |  |  | 240,000,000    |  |  |  | 87,110  | 
|                     |  |                                              |  | HSBC and others                        |  | USD              |  |  | 255,000,000    |  |  |  | 294,092 | 
|                     |  | POSCO Maharashtra Steel Pvt. Ltd.            |  | Export-Import Bank of Korea and others |  | USD              |  |  | 143,000,000    |  |  |  | 164,922 | 
|                     |  | POSCO VST Co., Ltd.                          |  | ANZ(Tapei) and others                  |  | USD              |  |  | 65,000,000     |  |  |  | 74,965  | 
|                     |  | POSCO-Mexico Co., Ltd.                       |  | HSBC and others                        |  | USD              |  |  | 60,000,000     |  |  |  | 69,198  | 
|                     |  | POSCO-VIETNAM Co., Ltd.                      |  | Export-Import Bank of                  |  |                  |  |  |                |  |  |  |         | 
|                     |  |                                              |  | Korea and others                       |  | USD              |  |  | 230,000,000    |  |  |  | 265,259 | 
|                     |  |                                              |  | Mizuho and others                      |  | JPY              |  |  | 4,806,760,000  |  |  |  | 71,388  | 
|                     |  | Zhangjiagang Pohang Stainless Steel Co., Ltd |  | Mizuho and others                      |  | USD              |  |  | 160,000,000    |  |  |  | 184,528 | 
|                     |  | Zeus (Cayman) Ltd.                           |  | Creditor                               |  | JPY              |  |  | 12,825,000,000 |  |  |  | 190,472 | 
|                     |  | Zeus (Cayman) II Ltd.                        |  | Creditor                               |  | JPY              |  |  | 24,526,000,000 |  |  |  | 364,250 | 
|Daewoo International |  | Daewoo (China) Co., Ltd.                     |  | Hana Bank                              |  | USD              |  |  | 15,000,000     |  |  |  | 17,300  | 
|Corporation          |  |                                              |  |                                        |  |                  |  |  |                |  |  |  |         | 
|                     |  | Daewoo Cement (Shandong) Co., Ltd.           |  | Other oversea financial institution    |  | EUR              |  |  | 24,565,296     |  |  |  | 36,703  | 
|                     |  |                                              |  | Korea Exchange Bank                    |  | CNY              |  |  | 43,000,000     |  |  |  | 7,848   | 
|                     |  |                                              |  | Export-Import Bank of                  |  | USD              |  |  | 29,832,409     |  |  |  | 34,406  | 
|                     |  |                                              |  | Korea and others                       |  |                  |  |  |                |  |  |  |         | 
|                     |  | Daewoo International America Corp.           |  | Shinhan Bank                           |  | USD              |  |  | 500,000        |  |  |  | 577     | 
|                     |  | Daewoo International                         |  |                                        |  |                  |  |  |                |  |  |  |         | 
|                     |  | Australia Holdings Pty. Ltd.                 |  | Korea Exchange Bank                    |  | USD              |  |  | 7,198,000      |  |  |  | 8,301   | 
|                     |  | Daewoo International Japan Corp.             |  | Shinhan Bank                           |  | JPY              |  |  | 1,000,000,000  |  |  |  | 14,852  | 
|                     |  |                                              |  | ANZ_KOREA                              |  | JPY              |  |  | 1,000,000,000  |  |  |  | 14,852  | 
|                     |  |                                              |  | MIZUHO                                 |  | JPY              |  |  | 1,500,000,000  |  |  |  | 22,277  | 
|                     |  |                                              |  | SMBC                                   |  | JPY              |  |  | 1,500,000,000  |  |  |  | 22,277  | 



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Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                            |  |                                                  |  |                                        |  |                  |  |  |                 |  |  |  |         | 
|--------------------------- |  | ------------------------------------------------ |  | -------------------------------------- |  | ---------------- |  |  | --------------- |  |  |  | ------- | 
|Guarantors                  |  | Guarantee beneficiary                            |  | Financial institution                  |  | Foreign Currency |  |  | Won Equivalent  | 
|                            |  | Daewoo International Shanghai Pty. Ltd.          |  | MIZUHO                                 |  | USD              |  |  | 10,000,000      |  |  |  | 11,533  | 
|                            |  | Daewoo Paper Manufacturing Co., Ltd.             |  | HSBC                                   |  | USD              |  |  | 12,500,000      |  |  |  | 14,416  | 
|                            |  | Daewoo Textile Bukhara LLC                       |  | Export-Import Bank of Korea and others |  | USD              |  |  | 29,100,000      |  |  |  | 33,561  | 
|                            |  | Daewoo International                             |  | SMBC                                   |  | USD              |  |  | 25,000,000      |  |  |  | 28,833  | 
|                            |  | MEXICO S.A. de C.V.                              |  |                                        |  |                  |  |  |                 |  |  |  |         | 
|                            |  | PT. Bio Inti Agrindo                             |  | Export-Import Bank of Korea            |  | USD              |  |  | 7,000,000       |  |  |  | 8,073   | 
|                            |  | POSCO E&C Vietnam Co., Ltd.                      |  | Korea Exchange Bank                    |  | USD              |  |  | 5,000,000       |  |  |  | 5,767   | 
|                            |  |                                                  |  | Export-Import Bank of                  |  |                  |  |  |                 |  |  |  |         | 
|POSCO E&C Co., Ltd.         |  |                                                  |  | Korea and others                       |  | USD              |  |  | 18,000,000      |  |  |  | 20,759  | 
|                            |  |                                                  |  | POSCO Investment Co., Ltd.             |  | USD              |  |  | 9,500,000       |  |  |  | 10,956  | 
|                            |  | HONG KONG POSCO E&C (CHINA) Investment Co., Ltd. |  | Woori Bank                             |  | USD              |  |  | 30,000,000      |  |  |  | 34,599  | 
|                            |  | International Business Center Corporation        |  | Export-Import Bank of Korea and others |  | USD              |  |  | 20,000,000      |  |  |  | 23,066  | 
|POSCO P&S Co., Ltd.         |  | POSCO Canada Pty., Ltd.                          |  | Hana Bank                              |  | USD              |  |  | 12,484,500      |  |  |  | 14,398  | 
|POSCO ICT Co., Ltd.         |  | VECTUS Ltd.                                      |  | POSCO Investment Co., Ltd.             |  | USD              |  |  | 2,000,000       |  |  |  | 2,307   | 
|                            |  | POSCO ICT Indonesia                              |  | POSCO Investment Co., Ltd.             |  | USD              |  |  | 1,500,000       |  |  |  | 1,730   | 
|POSCO Energy Co., Ltd       |  | PSC Energy Global Co., Ltd                       |  | Other foreign banks                    |  | USD              |  |  | 129,879,356     |  |  |  | 149,790 | 
|                            |  | TECHREN Solar, LLC                               |  | Woori Bank                             |  | USD              |  |  | 9,571,600       |  |  |  | 11,039  | 
|Pos Calcium CO., Ltd        |  | Pos Calcium CO., Ltd                             |  | Seoul Guarantee Insurance Co., Ltd.    |  | KRW              |  |  | 48,982,500      |  |  |  | 49      | 
|                            |  | POSCO-JKPC Co., Ltd.                             |  | Higo bank and others                   |  | JPY              |  |  | 1,867,200,000   |  |  |  | 27,731  | 
|                            |  | POSCO-JNPC Co., Ltd.                             |  | Mizuho Bank and others                 |  | JPY              |  |  | 2,110,000,000   |  |  |  | 31,337  | 
|POSCO JAPAN Co., Ltd.       |  | POSCO-JOPC Co., Ltd.                             |  | Mizuho Bank and others                 |  | JPY              |  |  | 1,847,500,000   |  |  |  | 27,438  | 
|                            |  | POSCO-JYPC Co., Ltd.                             |  | Mizuho Bank and others                 |  | JPY              |  |  | 1,333,780,580   |  |  |  | 19,809  | 
|Daewoo Textile Fergana LLC  |  | Daewoo Textile Bukhara LLC                       |  | NBU                                    |  | UZS              |  |  | 6,519,920,000   |  |  |  | 4,213   | 
|POSCO E&C (CHINA) Co., Ltd. |  | HONG KONG POSCO E&C                              |  | KB Bank(Seoul)                         |  | KRW              |  |  | 102,000,000,000 |  |  |  | 102,000 | 
|                            |  | (China) Investment Co., Ltd.                     |  | Woori Bank(Beijing branch)             |  | USD              |  |  | 33,000,000      |  |  |  | 38,059  | 
|[Associates]                |  |                                                  |  |                                        |  |                  |  |  |                 |  |  |  |         | 
|POSCO                       |  | BX STEEL POSCO Cold Rolled                       |  | BOC and others                         |  | CNY              |  |  | 316,860,000     |  |  |  | 57,830  | 
|                            |  | Sheet Co., Ltd.                                  |  |                                        |  | USD              |  |  | 8,220,000       |  |  |  | 9,480   | 
|                            |  | United Spiral Pipe, LLC                          |  | Shinhan Bank                           |  | USD              |  |  | 24,500,000      |  |  |  | 28,256  | 
|Daewoo International        |  | DMSA, AMSA                                       |  | Other Bank                             |  | USD              |  |  | 123,866,667     |  |  |  | 142,855 | 
|Corporation                 |  |                                                  |  | Other oversea financial                |  | USD              |  |  | 16,133,333      |  |  |  | 18,607  | 
|institution                 |  |                                                  |  |                                        |  |                  |  |  |                 |  |  |  |         | 
|                            |  | GLOBAL KOMSCO Daewoo LLC                         |  | Export-Import Bank of Korea and others |  | USD              |  |  | 5,950,000       |  |  |  | 6,862   | 



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Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                  |  |                                           |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|--------------------------------- |  | ----------------------------------------- |  | ----------------------------------- |  | ---------------- |  |  | ----------------- |  |  |  | --------- | 
|Guarantors                        |  | Guarantee beneficiary                     |  | Financial institution               |  | Foreign Currency |  |  | Won Equivalent    | 
|POSCO E&C Co., Ltd.               |  | PSIB Co., Ltd.                            |  | Hana Bank                           |  | KRW              |  |  | 356,600,000,000   |  |  |  | 356,600   | 
|                                  |  | Taegisan Wind Power                       |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|                                  |  | Corporation                               |  | Korea Development Bank              |  | KRW              |  |  | 7,500,000,000     |  |  |  | 7,500     | 
|                                  |  | CHUNGJU ENTERPRISE CITY                   |  | NH Bank                             |  | KRW              |  |  | 22,458,760,000    |  |  |  | 22,459    | 
|                                  |  | DEVELOPMENT Co., Ltd.                     |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|                                  |  | Pohang Technovalley Pvf Co., Ltd.         |  | Shinhan Bank                        |  | KRW              |  |  | 7,140,000,000     |  |  |  | 7,140     | 
|POSCO P&S Co., Ltd.               |  | Sebang Steel                              |  | Fukuoka Bank                        |  | JPY              |  |  | 245,000,000       |  |  |  | 3,639     | 
|POSCO ICT Co., Ltd.               |  | Uitrans LRT Co., Ltd.                     |  | Construction Guarantee Cooperative  |  | KRW              |  |  | 64,637,717,095    |  |  |  | 64,638    | 
|                                  |  | CHUNGJU ENTERPRISE CITY                   |  | NH Bank                             |  | KRW              |  |  | 2,530,000,000     |  |  |  | 2,530     | 
|                                  |  | DEVELOPMENT Co., Ltd.                     |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|POSCO China Co., Ltd.             |  | POSCO SeAH Steel Wire (Nantong) Co., Ltd. |  | POSCO Investment Co., Ltd.          |  | USD              |  |  | 7,500,000         |  |  |  | 8,650     | 
|Daewoo(China) Co., Ltd.           |  | Shanghai Lansheng                         |  | China Construction Bank             |  | CNY              |  |  | 100,000,000       |  |  |  | 18,251    | 
|                                  |  | Daewoo Corporation                        |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|[Others]                          |  |                                           |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|Daewoo International              |  | Ambatovy Project                          |  | Export-Import Bank of               |  | USD              |  |  | 46,653,812        |  |  |  | 53,806    | 
|Corporation                       |  | Investments Limited                       |  | Korea and others                    |  |                  |  |  |                   |  |  |  |           | 
|                                  |  | Sherritt International                    |  | Export-Import Bank of               |  | USD              |  |  | 6,090,268         |  |  |  | 7,024     | 
|                                  |  | Corporation                               |  | Korea and others                    |  |                  |  |  |                   |  |  |  |           | 
|POSCO E&C Co., Ltd.               |  | Cooperative                               |  | NH Bank and others                  |  | KRW              |  |  | 3,000,000,000     |  |  |  | 3,000     | 
|                                  |  | Other cooperatives                        |  | ABCP and others                     |  | KRW              |  |  | 935,687,702,025   |  |  |  | 935,688   | 
|                                  |  | 1st ALDJ PFV, Ltd                         |  | Hana Bank and others                |  | KRW              |  |  | 277,212,000,000   |  |  |  | 277,212   | 
|                                  |  | THE GALE INVESTMENTS                      |  | Woori Bank                          |  | USD              |  |  | 50,000,000        |  |  |  | 57,665    | 
|                                  |  | COMPANY, L.L.C. and others                |  |                                     |  |                  |  |  |                   |  |  |  |           | 
|POSCO P&S Co., Ltd.               |  | Asia Speciality Steel Co., Ltd.           |  | Yamaguchi Bank                      |  | JPY              |  |  | 2,700,000,000     |  |  |  | 40,099    | 
|                                  |  | GIPI                                      |  | Bank Muscat, Bank Sohar             |  | USD              |  |  | 12,000,000        |  |  |  | 13,840    | 
|POSCO Plant Engineering Co., Ltd. |  | Gyeongpo wind power generation and others |  | KB Bank                             |  | KRW              |  |  | 235,638,897,793   |  |  |  | 235,639   | 
|                                  |  | GS CALTEX HOU and others                  |  | Korea Exchange Bank and others      |  | USD              |  |  | 14,025,043        |  |  |  | 16,175    | 
|POSCO ICT Co., Ltd.               |  | BTL business and others                   |  | Kyobo Life Insurance Co.,Ltd and ot |  | KRW              |  |  | 1,604,990,406,464 |  |  |  | 1,604,990 | 
|POSCO M-TECH Co., Ltd.            |  | PYUNGSAN SI Co., Ltd                      |  | Seoul Guarantee Insurance Co., Ltd. |  | KRW              |  |  | 441,611,863       |  |  |  | 442       | 
|                                  |  | Hyundai Hysco Co., Ltd.                   |  | Seoul Guarantee Insurance Co., Ltd. |  | KRW              |  |  | 2,194,500,000     |  |  |  | 2,195     | 
|Daewoo Engineering Co., Ltd       |  | Kwanma Solar Co., Ltd. and others         |  | Hana Bank                           |  | KRW              |  |  | 50,509,662,000    |  |  |  | 50,510    | 
|                                  |  | Hyundai ENG Co., Ltd.                     |  | Engineering Financial Cooperative   |  | KRW              |  |  | 65,937,188,179    |  |  |  | 65,937    | 
|PHP Co., Ltd                      |  | Expo apt                                  |  | KB Bank                             |  | KRW              |  |  | 387,849,000,000   |  |  |  | 387,849   | 



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Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                   |  |                       |  |                       |  |                  |  |  |                   |  |  |  |           | 
|---------------------------------- |  | --------------------- |  | --------------------- |  | ---------------- |  |  | ----------------- |  |  |  | --------- | 
|Guarantors                         |  | Guarantee beneficiary |  | Financial institution |  | Foreign Currency |  |  | Won Equivalent    | 
|Daewoo Cement (Shandong) Co., Ltd. |  | SDAC                  |  | Bank of China         |  | USD              |  |  | 35,000,000        |  |  |  | 40,366    | 
|                                   |  |                       |  |                       |  |                  |  |  |                   |  |  |  |           | 
|                                   |  |                       |  |                       |  | CNY              |  |  | 1,089,860,000     |  |  |  | 198,910   | 
|                                   |  |                       |  |                       |  | EUR              |  |  | 24,565,296        |  |  |  | 36,703    | 
|                                   |  |                       |  |                       |  | JPY              |  |  | 57,261,240,580    |  |  |  | 850,421   | 
|                                   |  |                       |  |                       |  | KRW              |  |  | 4,126,376,427,919 |  |  |  | 4,126,376 | 
|                                   |  |                       |  |                       |  | MYR              |  |  | 240,000,000       |  |  |  | 87,110    | 
|                                   |  |                       |  |                       |  | USD              |  |  | 1,792,604,988     |  |  |  | 2,067,411 | 
|                                   |  |                       |  |                       |  | UZS              |  |  | 6,519,920,000     |  |  |  | 4,213     | 
|                                   |  |                       |  |                       |  |                  |  |  |                   |  |  |  |           | 

(b) POSCO E&C Co., Ltd. has provided the completion guarantees for Samsung C&T Corporation and Namkwang
Engineering & Construction Co., Ltd. amounting to (Won)2,748,647 million. POSCO E&C Co., Ltd. provides payment guarantees on
borrowings of customers such as Asset Backed Commercial Paper amounted to (Won)695,343 million and Project Financing loan amounted to (Won)444,836 million as of December 31, 2011.

(c) Other commitments



|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|POSCO               |  | POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. These contracts generally have terms of more than three
years and provide for periodic price adjustments to the market price. As of December 31, 2011, 261 million tons of iron ore and 38 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 regarding the commitment to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. Purchase price is subject to change, following the change of the monthly standard oil price (JCC) and also price ceiling is
applicable.  As of December 31, 2011, POSCO entered into commitments with Korea
National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 3.54 million and USD 4.12 million, respectively. The borrowings are related to the exploration of gas hydrates in Aral
Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Chinabad, west-Fergana,, respectively. The repayment of borrowings depends on the success of the projects. POSCO is not liable for the
repayment of full or part of the money borrowed if the respective project fails. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by borrowing agreements.
|                    | 
|POSCO E&C Co., Ltd  |  | To contractors involved in some of the construction contracts operator and financial institutions by agreement with the work of the operating
funds operator 81,254 million deposit. POSCO E&C Co., Ltd manage the deposit accounts as a memorandum account without separate accounting treatment reflecting the economic substance because the operator is the owner of above-mentioned
account.  POSCO E&C Co., Ltd has bank overdraft agreements of up to 20,000
million with Woori Bank which is included in the limit of comprehensive loan agreements and 3,000 million with Korea Exchange Bank. Also POSCO E&C Co., Ltd. has comprehensive loan agreements of up to 260,000 million and USD 308 million with
Woori Bank and 53,000 million with Korea Exchange Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                    | 
|POSCO ICT Co., Ltd. |  | POSCO ICT Co., Ltd. has entered into the repayment agreement with SMS Energy Co.,Ltd., which borrowed money from several lenders including Hana Bank, for its new and renewable energy
business. According to the agreement, if the borrower cannot redeem the loan, POSCO ICT Co., Ltd. should repay or undertake it amounting to 300,126 million and should take charge of revenues from selling electric power after the repayment. Also, if
the borrower cannot run the new and renewable energy business due to default and bankruptcy, POSCO ICT Co., Ltd. may acquire the business unit from the borrower.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



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Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







|                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|POSCO Specialty Steel Co., Ltd. |  | POSCO Specialty Steel Co., Ltd. has a loan agreement, secured by trade accounts receivable, of up to 280,000 million with Woori Bank and
others. POSCO Specialty Steel Co., Ltd. has used 147,547 million of this loan agreement.  POSCO Specialty Steel Co., Ltd. has agreements with Woori Bank and nine other banks for opening letters of credit of up to USD 98 million, and for a loan of up to 102,255 million. POSCO Specialty Steel Co., Ltd.
has used USD 0.6 million, CHF 1.6 million, JPY 95 million and EUR 0.6 million for opening letters of credit and 9,737 million for a loan.

(d) Litigation in progress

As of December 2011, the Company and certain subsidiaries are defendants in legal actions arising from the normal course of business. Details of amount claimed are as follows:



|                                                              |  |                                                         |    |  |        |  |     |                        |  |  |             |  |  |  |        |  |  |                                                                                             
|------------------------------------------------------------- |  | ------------------------------------------------------- | -- |  | ------ |  | --- | ---------------------- |  |  | ----------- |  |  |  | ------ |  |  | --------------------------------------------------------------------------------------------
|Company                                                       |  | Legal actions                                           |    |  | Amount |  |     | Legal equivalentamount |  |  | Description
|                                                              |  | (in millions of Won, in thousand of foreign currencies)
|POSCO                                                         |  |                                                         | 12 |  |        |  | KRW |                        |  |  | 8,806       |  |  |  | 8,806  |  |  | Lawsuit on the claim for damages                                                            
|POSCO E&C Co., Ltd.                                           |  |                                                         | 44 |  |        |  | KRW |                        |  |  | 31,067      |  |  |  | 31,067 |  |  | Lawsuit on the claim for payment                                                            
|POSCO P&S Co., Ltd.                                           |  |                                                         | 1  |  |        |  | KRW |                        |  |  | 931         |  |  |  | 931    |  |  | Lawsuit on the claim for damages                                                            
|POSCO Plant Engineering Co., Ltd.                             |  |                                                         | 4  |  |        |  | KRW |                        |  |  | 3,088       |  |  |  | 3,088  |  |  | Lawsuit on the claim for payment                                                            
|POSCO ICT Co., Ltd.                                           |  |                                                         | 8  |  |        |  | KRW |                        |  |  | 2,211       |  |  |  | 2,211  |  |  | Lawsuit on the claim for payment                                                            
|Seoung Gwang Co., Ltd.                                        |  |                                                         | 2  |  |        |  | KRW |                        |  |  | 2,277       |  |  |  | 2,277  |  |  | Imposed high tax rate                                                                       
|POSCO E&C (China) Co., Ltd.                                   |  |                                                         | 1  |  |        |  | CNY |                        |  |  | 3,790       |  |  |  | 692    |  |  | Lawsuit on the claim for payment of work completed related with the subcontractor and second
|POSCO Engineering Co., Ltd. (formerly Daewoo Engineering Co., |  |                                                         | 8  |  |        |  | KRW |                        |  |  | 20,774      |  |  |  | 20,774 |  |  | Lawsuit on the claim for damages                                                            
|POSBRO Co., Ltd.                                              |  |                                                         | 1  |  |        |  | KRW |                        |  |  | 435         |  |  |  | 435    |  |  | Lawsuit on the claim for payment                                                            
|Daewoo International Corporation                              |  |                                                         | 1  |  |        |  | CNY |                        |  |  | 30,000      |  |  |  | 5,475  |  |  | Lawsuit on the claim for damages                                                            
|                                                              |  |                                                         | 1  |  |        |  | EUR |                        |  |  | 5,000       |  |  |  | 7,471  |  |  |                                                                                             
|                                                              |  |                                                         | 1  |  |        |  | INR |                        |  |  | 4,458,849   |  |  |  | 97,025 |  |  |                                                                                             
|                                                              |  |                                                         | 3  |  |        |  | KRW |                        |  |  | 711         |  |  |  | 711    |  |  |                                                                                             
|                                                              |  |                                                         | 3  |  |        |  | USD |                        |  |  | 824         |  |  |  | 951    |  |  |                                                                                             
|                                                              |  |                                                         | 1  |  |        |  | UYU |                        |  |  | 1,103       |  |  |  | 66     |  |  |                                                                                             

The Company believes that although the outcome of these matters is uncertain, the impacts of these matters are not
expected to be material to the Company.

(e) Other contingencies

POSCO has provided five blank promissory notes to Korea Resources Corporation and six blank promissory notes to Korea National Oil Corporation as collateral for outstanding loans.

As of September 31, 2011, POSCO E&C Co., Ltd. has provided ten blank promissory notes, eleven blank checks and six other notes, amounting to (Won)61,704 million approximately, to Korea Housing Guarantee Co., Ltd. and other financial institutions as collateral for agreements and outstanding
loans.

Daewoo International Co., Ltd has provided fifty-one blank promissory notes to Korea National Oil Corporation as collateral for
the guarantee on performance for contracts and others.



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010









|35. | Cash Flows from Operating Activities
|--- | ------------------------------------

Changes
in operating assets and liabilities for the years ended December 31, 2011 and 2010 are as follows:



|                                    |  |                      |            |   |                   |  |            |  
|----------------------------------- |  | -------------------- | ---------- | - | ----------------- |  | ---------- | -
|                                    |  | December 31, 2011    |            |   | December 31, 2010 | 
|                                    |  | (in millions of Won) |           
|Trade accounts and notes receivable |  | (Won)                | (2,402,346 | ) |                   |  | (538,949   | )
|Other financial assets              |  |                      | (187,607   | ) |                   |  | 226,211    |  
|Inventories                         |  |                      | (2,538,178 | ) |                   |  | (3,518,927 | )
|Other current assets                |  |                      | (310,397   | ) |                   |  | (137,246   | )
|Other long-term assets              |  |                      | 47,929     |   |                   |  | (77,912    | )
|Accounts payable                    |  |                      | 265,993    |   |                   |  | (342,177   | )
|Other financial liabilities         |  |                      | 260,306    |   |                   |  | 35,008     |  
|Other current liabilities           |  |                      | 384,943    |   |                   |  | 185,226    |  
|Provisions                          |  |                      | (36,511    | ) |                   |  | 9,157      |  
|Payment of severance benefits       |  |                      | (574,759   | ) |                   |  | (90,951    | )
|Plan assets                         |  |                      | 252,671    |   |                   |  | (140,173   | )
|Other long-term liabilities         |  |                      | (12,791    | ) |                   |  | (62,737    | )
|                                    |  |                      |            |   |                   |  |            |  
|                                    |  | (Won)                | (4,850,747 | ) |                   |  | (4,453,470 | )
|                                    |  |                      |            |   |                   |  |            |  



|36. | Operating Segments
|--- | ------------------

(a) Our operating
businesses are organized based on the nature of markets and customers. We have four reportable operating segments  steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products.
The engineering and construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both 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, liquefied natural gas
production, network and system integration and logistics.

(b) Segment profit and loss is determined the same way that consolidated net
after tax profit for the period is determined under IFRS without any adjustment for corporate allocations. The accounting policies used by each segment are consistent with the accounting policies used in the preparation of the consolidated financial
statements. Segment assets and liabilities are measured based on total assets and liabilities in accordance with IFRS without any adjustment for corporate allocations. Also, segment assets and liabilities are based on the separate financial
statements of the entities instead of on consolidated basis. In addition, there are varying levels of transactions amongst the reportable segments. These transactions include sales of property, plant and assets, and rendering of construction service
and so on. Inter-segment transactions are accounted for on an arms length basis.



F-97



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(c) Information about reportable segments as December 31, 2011,
2010 and January 1, 2010 are as follow:

1) For the year ended December 31, 2011



|                                                                          |  |                      |            |  |         |  |            |              |  |  |           |  |  |       |           |  |  |  |            | 
|------------------------------------------------------------------------- |  | -------------------- | ---------- |  | ------- |  | ---------- | ------------ |  |  | --------- |  |  | ----- | --------- |  |  |  | ---------- | 
|                                                                          |  | Steel                |            |  | Trading |  |            | Construction |  |  | Others    |  |  | Total |          
|                                                                          |  | (in millions of Won) |           
|External revenues                                                         |  | (Won)                | 39,151,930 |  |         |  | 21,097,356 |              |  |  | 5,476,209 |  |  |       | 3,213,230 |  |  |  | 68,938,725 | 
|Internal revenues                                                         |  |                      | 17,138,610 |  |         |  | 7,525,555  |              |  |  | 2,996,933 |  |  |       | 2,446,417 |  |  |  | 30,107,515 | 
|Total revenues                                                            |  |                      | 56,290,540 |  |         |  | 28,622,911 |              |  |  | 8,473,142 |  |  |       | 5,659,647 |  |  |  | 99,046,240 | 
|Interest income                                                           |  |                      | 154,671    |  |         |  | 43,842     |              |  |  | 22,744    |  |  |       | 22,025    |  |  |  | 243,282    | 
|Interest expenses                                                         |  |                      | 551,478    |  |         |  | 93,532     |              |  |  | 69,050    |  |  |       | 110,615   |  |  |  | 824,675    | 
|Depreciation and amortization                                             |  |                      | 2,128,182  |  |         |  | 37,320     |              |  |  | 31,238    |  |  |       | 178,429   |  |  |  | 2,375,169  | 
|Impairment loss of property, plant and
equipment and others               |  |                      | 25,177     |  |         |  | 34,544     |              |  |  | 23,397    |  |  |       | 995       |  |  |  | 84,113     | 
|Impairment of available-for-sale financial assets                         |  |                      | 136,638    |  |         |  |           |              |  |  |          |  |  |       | 16,166    |  |  |  | 152,804    | 
|Share of profit or loss of investment in subsidiaries and associates
(*1) |  |                      | (33,361)   |  |         |  |           |              |  |  |          |  |  |       | (6,888)   |  |  |  | (40,249)   | 
|Income tax expense                                                        |  |                      | 1,111,709  |  |         |  | 35,322     |              |  |  | 22,536    |  |  |       | 16,454    |  |  |  | 1,186,021  | 
|Segments profit                                                           |  |                      | 3,689,461  |  |         |  | 195,298    |              |  |  | 154,618   |  |  |       | 155,277   |  |  |  | 4,194,654  | 
|Segments assets                                                           |  |                      | 67,961,383 |  |         |  | 12,120,560 |              |  |  | 8,764,698 |  |  |       | 6,663,297 |  |  |  | 95,509,938 | 
|Investment in associates                                                  |  |                      | 14,226,687 |  |         |  | 1,899,762  |              |  |  | 918,079   |  |  |       | 186,490   |  |  |  | 17,231,018 | 
|Acquisition of non-current assets                                         |  |                      | 9,385,381  |  |         |  | 607,076    |              |  |  | 207,619   |  |  |       | 594,514   |  |  |  | 10,794,590 | 
|Segments liabilities                                                      |  | (Won)                | 23,169,910 |  |         |  | 9,706,622  |              |  |  | 5,554,097 |  |  |       | 4,528,283 |  |  |  | 42,958,912 | 

2) For the year ended December 31, 2010



|                                                                          |  |                      |            |   |         |  |           |              |  |  |           |  |  |       |           |   |  |  |            |  
|------------------------------------------------------------------------- |  | -------------------- | ---------- | - | ------- |  | --------- | ------------ |  |  | --------- |  |  | ----- | --------- | - |  |  | ---------- | -
|                                                                          |  | Steel                |            |   | Trading |  |           | Construction |  |  | Others    |  |  | Total |          
|                                                                          |  | (in millions of Won) |           
|External revenues                                                         |  | (Won)                | 35,527,373 |   |         |  | 6,236,030 |              |  |  | 4,348,796 |  |  |       | 1,775,056 |   |  |  | 47,887,255 |  
|Internal revenues                                                         |  |                      | 10,725,583 |   |         |  | 3,174,342 |              |  |  | 3,574,669 |  |  |       | 1,104,332 |   |  |  | 18,578,926 |  
|Total revenues                                                            |  |                      | 46,252,956 |   |         |  | 9,410,372 |              |  |  | 7,923,465 |  |  |       | 2,879,388 |   |  |  | 66,466,181 |  
|Interest income                                                           |  |                      | 243,306    |   |         |  | 5,829     |              |  |  | 25,312    |  |  |       | 23,986    |   |  |  | 298,433    |  
|Interest expenses                                                         |  |                      | 425,024    |   |         |  | 27,859    |              |  |  | 60,292    |  |  |       | 91,799    |   |  |  | 604,974    |  
|Depreciation and amortization                                             |  |                      | 2,949,227  |   |         |  | 16,613    |              |  |  | 30,545    |  |  |       | 74,079    |   |  |  | 3,070,464  |  
|Impairment loss of property, plant and equipment and others               |  |                      | 730        |   |         |  |          |              |  |  | 127,516   |  |  |       | 2,636     |   |  |  | 130,882    |  
|Impairment of available-for-sale financial assets                         |  |                      | 11,627     |   |         |  |          |              |  |  | 1,754     |  |  |       | 43,791    |   |  |  | 57,172     |  
|Share of profit or loss of investment in subsidiaries and associates (*1) |  |                      | (1,324     | ) |         |  | (852      | )            |  |  |          |  |  |       | (9,516    | ) |  |  | (11,692    | )
|Income tax expense                                                        |  |                      | 1,025,156  |   |         |  | (47,967   | )            |  |  | 69,780    |  |  |       | 5,080     |   |  |  | 1,052,049  |  
|Segments profit                                                           |  |                      | 4,088,737  |   |         |  | 94,014    |              |  |  | 256,183   |  |  |       | 12,913    |   |  |  | 4,451,847  |  
|Segments assets                                                           |  |                      | 60,773,736 |   |         |  | 9,605,706 |              |  |  | 6,477,360 |  |  |       | 4,978,137 |   |  |  | 81,834,939 |  
|Investment in associate                                                   |  |                      | 11,694,102 |   |         |  | 1,664,760 |              |  |  | 601,559   |  |  |       | 39,845    |   |  |  | 14,000,266 |  
|Acquisition of non-current assets                                         |  |                      | 10,500,517 |   |         |  | 669,485   |              |  |  | 169,591   |  |  |       | 1,480,715 |   |  |  | 12,820,308 |  
|Segments liabilities                                                      |  | (Won)                | 19,570,113 |   |         |  | 7,519,031 |              |  |  | 3,632,366 |  |  |       | 3,407,866 |   |  |  | 34,129,376 |  

3) For the year ended January 1, 2010



|                     |  |                      |            |  |         |  |           |              |  |  |           |  |  |       |           |  |  |  |            | 
|-------------------- |  | -------------------- | ---------- |  | ------- |  | --------- | ------------ |  |  | --------- |  |  | ----- | --------- |  |  |  | ---------- | 
|                     |  | Steel                |            |  | Trading |  |           | Construction |  |  | Others    |  |  | Total |          
|                     |  | (in millions of Won) |           
|Segments assets      |  | (Won)                | 50,413,387 |  |         |  | 1,353,462 |              |  |  | 5,916,985 |  |  |       | 3,618,611 |  |  |  | 61,302,445 | 
|Segments liabilities |  |                      | 13,795,461 |  |         |  | 839,222   |              |  |  | 3,766,113 |  |  |       | 2,233,248 |  |  |  | 20,634,044 | 



F-98



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(d) Reconciliations of total segment revenues, profit or loss, assets
and liabilities, and other significant items to their respective consolidated financial statement line items are as follows:

1)
Revenues



|                                      |  |                      |             |   |                   |  |             |  
|------------------------------------- |  | -------------------- | ----------- | - | ----------------- |  | ----------- | -
|                                      |  | December 31, 2011    |             |   | December 31, 2010 | 
|                                      |  | (in millions of Won) |            
|Total revenue for reportable segments |  | (Won)                | 99,046,240  |   |                   |  | 66,466,181  |  
|Elimination of inter-segment revenue  |  |                      | (30,107,515 | ) |                   |  | (18,578,926 | )
|                                      |  |                      |             |   |                   |  |             |  
|                                      |  | (Won)                | 68,938,725  |   |                   |  | 47,887,255  |  
|                                      |  |                      |             |   |                   |  |             |  

2) Profit



|                                     |  |                      |           |   |                   |  |           |  
|------------------------------------ |  | -------------------- | --------- | - | ----------------- |  | --------- | -
|                                     |  | December 31, 2011    |           |   | December 31, 2010 | 
|                                     |  | (in millions of Won) |          
|Total profit for reportable segments |  | (Won)                | 4,194,654 |   |                   |  | 4,451,847 |  
|Goodwill and PP&E FV adjustments     |  |                      | (39,490   | ) |                   |  | (10,873   | )
|Elimination of inter-segment profits |  |                      | (440,878  | ) |                   |  | (255,323  | )
|Income tax expense                   |  |                      | 1,068,109 |   |                   |  | 1,081,472 |  
|                                     |  |                      |           |   |                   |  |           |  
|Profit before income tax expense     |  | (Won)                | 4,782,395 |   |                   |  | 5,267,123 |  
|                                     |  |                      |           |   |                   |  |           |  

3) Assets



|                                          |  |                      |             |   |                   |  |             |                 |  |  |            |  
|----------------------------------------- |  | -------------------- | ----------- | - | ----------------- |  | ----------- | --------------- |  |  | ---------- | -
|                                          |  | December 31, 2011    |             |   | December 31, 2010 |  |             | January 1, 2010 | 
|                                          |  | (in millions of Won) |            
|Total assets for reportable segments (*1) |  | (Won)                | 95,509,938  |   |                   |  | 81,834,939  |                 |  |  | 61,302,445 |  
|Equity-accounted investees                |  |                      | (13,393,184 | ) |                   |  | (10,693,841 | )               |  |  | (6,539,705 | )
|Goodwill and PP&E FV adjustments          |  |                      | 4,357,046   |   |                   |  | 4,053,576   |                 |  |  |           |  
|Elimination of inter-segment assets       |  |                      | (8,064,963  | ) |                   |  | (5,776,248  | )               |  |  | (3,235,593 | )
|                                          |  |                      |             |   |                   |  |             |                 |  |  |            |  
|                                          |  | (Won)                | 78,408,837  |   |                   |  | 69,418,426  |                 |  |  | 51,527,147 |  
|                                          |  |                      |             |   |                   |  |             |                 |  |  |            |  





|(*) | As segment assets and liabilities are determined based on separate financial statements, for subsidiaries which are in a different segment from that of its immediate parent
company, their carrying amount in separate financial statements is eliminated upon consolidation. In addition, adjustments are made to adjust the amount of investment in associates from the amount reflected in segment assets to that determined using
equity method in consolidated financial statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4) Liabilities



|                                          |  |                      |            |   |                   |  |            |                 |  |  |            |  
|----------------------------------------- |  | -------------------- | ---------- | - | ----------------- |  | ---------- | --------------- |  |  | ---------- | -
|                                          |  | December 31, 2011    |            |   | December 31, 2010 |  |            | January 1, 2010 | 
|                                          |  | (in millions of Won) |           
|Total liabilities for reportable segments |  | (Won)                | 42,958,912 |   |                   |  | 34,129,376 |                 |  |  | 20,634,044 |  
|Goodwill and PP&E FV adjustments          |  |                      | (341,853   | ) |                   |  | (340,291   | )               |  |  |           |  
|Elimination of inter-segment liabilities  |  |                      | (4,938,141 | ) |                   |  | (2,907,826 | )               |  |  | (2,440,579 | )
|                                          |  |                      |            |   |                   |  |            |                 |  |  |            |  
|                                          |  | (Won)                | 37,678,918 |   |                   |  | 30,881,259 |                 |  |  | 18,193,465 |  
|                                          |  |                      |            |   |                   |  |            |                 |  |  |            |  



F-99



---

##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







5) Other significant items



|                                                            |  |                      |           |   |                                |  |         |                             |  |  |              |   |  |              |           |  |                                |  |           |                             |  |  |              |   |  |  |         |   |  |  |           | 
|----------------------------------------------------------- |  | -------------------- | --------- | - | ------------------------------ |  | ------- | --------------------------- |  |  | ------------ | - |  | ------------ | --------- |  | ------------------------------ |  | --------- | --------------------------- |  |  | ------------ | - |  |  | ------- | - |  |  | --------- | 
|                                                            |  | December 31, 2011    |           |   | December 31, 2010              | 
|                                                            |  | TotalSegment         |           |   | Goodwill andPP&E FVadjustments |  |         | Elimination ofinter-segment |  |  | Consolidated |   |  | TotalSegment |           |  | Goodwill andPP&E FVadjustments |  |           | Eliminationof inter-segment |  |  | Consolidated |  
|                                                            |  | (in millions of Won) |          
|Interest income                                             |  | (Won)                | 243,282   |   |                                |  |        |                             |  |  | (27,048      | ) |  |              | 216,234   |  |                                |  | 298,433   |                             |  |  |             |   |  |  | (5,505  | ) |  |  | 292,928   | 
|Interest expenses                                           |  |                      | 824,675   |   |                                |  | (6,312  | )                           |  |  | (30,015      | ) |  |              | 788,348   |  |                                |  | 604,974   |                             |  |  | (1,301       | ) |  |  | (16,790 | ) |  |  | 586,883   | 
|Depreciation and amortization                               |  |                      | 2,375,169 |   |                                |  | 63,691  |                             |  |  | (172,561     | ) |  |              | 2,266,299 |  |                                |  | 3,070,464 |                             |  |  | 13,073       |   |  |  | (47,642 | ) |  |  | 3,035,895 | 
|Share of profit or loss of equity-accounted investees       |  |                      | (40,249   | ) |                                |  |        |                             |  |  | 90,818       |   |  |              | 50,569    |  |                                |  | (11,692   | )                           |  |  |             |   |  |  | 194,348 |   |  |  | 182,656   | 
|Income tax expense                                          |  |                      | 1,186,021 |   |                                |  | (12,194 | )                           |  |  | (105,718     | ) |  |              | 1,068,109 |  |                                |  | 1,052,049 |                             |  |  |             |   |  |  | 29,423  |   |  |  | 1,081,472 | 
|Impairment loss of property, plant and equipment and others |  |                      | 84,113    |   |                                |  |        |                             |  |  | 14,958       |   |  |              | 99,071    |  |                                |  | 130,882   |                             |  |  |             |   |  |  | (2,799  | ) |  |  | 128,083   | 
|Impairment of available-for-sale financial assets           |  |                      | 152,804   |   |                                |  |        |                             |  |  |             |   |  |              | 152,804   |  |                                |  | 57,172    |                             |  |  |             |   |  |  |        |   |  |  | 57,172    | 
|                                                            |  |                      |           |   |                                |  |         |                             |  |  |              |   |  |              |           |  |                                |  |           |                             |  |  |              |   |  |  |         |   |  |  |           | 
|                                                            |  | (Won)                | 4,825,815 |   |                                |  | 45,185  |                             |  |  | (229,566     | ) |  |              | 4,641,434 |  |                                |  | 5,202,282 |                             |  |  | 11,772       |   |  |  | 151,035 |   |  |  | 5,365,089 | 
|                                                            |  |                      |           |   |                                |  |         |                             |  |  |              |   |  |              |           |  |                                |  |           |                             |  |  |              |   |  |  |         |   |  |  |           | 

(e) Revenue by geographic area for years ended December 31, 2011 and 2010 are as follows:



|              |  |                      |            |  |                   |  |            | 
|------------- |  | -------------------- | ---------- |  | ----------------- |  | ---------- | 
|              |  | December 31, 2011    |            |  | December 31, 2010 | 
|              |  | (in millions of Won) |           
|Domestic      |  | (Won)                | 53,986,926 |  |                   |  | 37,759,641 | 
|Japan         |  |                      | 2,386,578  |  |                   |  | 1,503,703  | 
|China         |  |                      | 6,070,588  |  |                   |  | 5,133,279  | 
|Asia          |  |                      | 2,645,428  |  |                   |  | 1,763,108  | 
|North America |  |                      | 1,281,906  |  |                   |  | 426,138    | 
|Others        |  |                      | 2,567,299  |  |                   |  | 1,301,386  | 
|              |  |                      |            |  |                   |  |            | 
|              |  | (Won)                | 68,938,725 |  |                   |  | 47,887,255 | 
|              |  |                      |            |  |                   |  |            | 

In presenting information on the basis of geography, segment revenue is based on the geographical location of
customers.

(f) Non-current assets by geographic area as of December 31, 2011, December 31, 2010 and January 1, 2010
are as follows:



|              |  |                      |            |  |                   |  |            |                 |  |  |            | 
|------------- |  | -------------------- | ---------- |  | ----------------- |  | ---------- | --------------- |  |  | ---------- | 
|              |  | December 31, 2011    |            |  | December 31, 2010 |  |            | January 1, 2010 | 
|              |  | (in millions of Won) |           
|Domestic      |  | (Won)                | 29,386,052 |  |                   |  | 27,145,016 |                 |  |  | 21,141,361 | 
|Japan         |  |                      | 320,009    |  |                   |  | 292,742    |                 |  |  | 267,777    | 
|China         |  |                      | 1,474,983  |  |                   |  | 1,384,862  |                 |  |  | 1,047,802  | 
|Asia          |  |                      | 1,752,302  |  |                   |  | 754,191    |                 |  |  | 744,832    | 
|North America |  |                      | 110,702    |  |                   |  | 72,809     |                 |  |  | 29,460     | 
|Others        |  |                      | 1,181,597  |  |                   |  | 900,654    |                 |  |  | 423,953    | 
|              |  |                      |            |  |                   |  |            |                 |  |  |            | 
|              |  | (Won)                | 34,225,645 |  |                   |  | 30,550,274 |                 |  |  | 23,655,185 | 
|              |  |                      |            |  |                   |  |            |                 |  |  |            | 



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Non-current assets by geographic area include investment property,
property, plant and equipment, goodwill and other intangible assets.

(g) The are no customers whose revenue is 10% or more of total
consolidated revenues.



|37. | Business Combinations
|--- | ---------------------

(a) Daewoo
International Corporation

POSCO acquired a 68.15% controlling financial interest in Daewoo International Corporation, a Korean Company
listed on the Korean Securities Exchange (Daewoo International), for (Won)3,371,481 million in cash in 2010. There is no
contingent consideration. The acquisition was consummated on September 20, 2010. Daewoo International is engaged in various business activities, such as providing export services, export agent services, intermediary trading, manufacturing,
distribution and natural resource development. Goodwill arising from the acquisition primarily results from synergies the Company and its subsidiaries expect to realized. The results of operations of Daewoo International Corporation have been
consolidated from the date of acquisition. Therefore, comparability with POSCOs consolidated financial statements for prior years is impacted accordingly. The amounts of revenues and net profit of Daewoo International Corporation since the
acquisition date to December 31, 2010 included in consolidated revenues and net profit amounted to (Won)3,951,609 million and (Won)870,295 million, respectively.

Goodwill recognized as a result of POSCOs acquisition of Daewoo International Corporation was as follows:



|                                                                 |  |                      |           | 
|---------------------------------------------------------------- |  | -------------------- | --------- | 
|                                                                 |  | Amount               |          
|                                                                 |  | (in millions of Won) |          
|I. Consideration transferred                                     |  | (Won)                | 3,371,481 | 
|II.Non-controlling interests (*1)                                |  |                      | 1,042,678 | 
|                                                                 |  |                      |           | 
|Total                                                            |  |                      | 4,414,159 | 
|                                                                 |  |                      |           | 
|III.Acquired identifiable assets and liabilities                 |  |                      |           | 
|[Assets]                                                         |  |                      |           | 
|Cash and cash equivalents                                        |  |                      | 403,971   | 
|Trade accounts and notes receivable and other financial assets   |  |                      | 2,881,084 | 
|Inventories                                                      |  |                      | 722,807   | 
|Property, plant and equipment and intangible assets              |  |                      | 3,182,679 | 
|Other assets                                                     |  |                      | 1,642,274 | 
|                                                                 |  |                      |           | 
|Total                                                            |  |                      | 8,832,815 | 
|                                                                 |  |                      |           | 
|[Liabilities]                                                    |  |                      |           | 
|Trade accounts and notes payable and other financial liabilities |  |                      | 1,058,922 | 
|Borrowings                                                       |  |                      | 3,733,623 | 
|Other liabilities                                                |  |                      | 790,033   | 
|                                                                 |  |                      |           | 
|Total                                                            |  |                      | 5,582,578 | 
|                                                                 |  |                      |           | 
|Total acquired net assets                                        |  |                      | 3,250,237 | 
|                                                                 |  |                      |           | 
|IV.Goodwill recognized                                           |  | (Won)                | 1,163,922 | 
|                                                                 |  |                      |           | 





|(*1) | The non-controlling interests at the acquisition date were measured using their proportionate share in the recognized amounts of Daewoo International Corporations
identifiable net assets.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







Pro-forma Information

The following summarized pro forma consolidated statement of comprehensive income information assumes that the Daewoo International Corporation
acquisition occurred as of January 1, 2010. The pro forma results reflect certain adjustments related to the acquisition, such as increased depreciation and amortization expense on assets acquired from Daewoo International resulting from the
fair valuation of assets acquired in place on acquisition date, i.e. September 30, 2010. The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of Daewoo International Corporation.

If the Company had acquired Daewoo International Corporation as of January 1, 2010, pro-forma consolidated revenues and proforma
net profit for the year ended December 31, 2010 would have been (Won)57,967,590 million and (Won)4,129,693 million, respectively.

(b) POSCO-Thainox Public Company Limited.

The Company has acquired additional shares in POSCO-Thainox
Public Company Limited from its previous largest shareholder on September 23, 2011 in order to expand its footprint in the cold-rolled stainless steel sheets and coils market in Southeast Asia and to achieve its synergy effects with its
existing operations in the region. The Company obtained control of POSCO-Thainox Public Company Limited. since its voting interest increased from 15.39% to 75.32%. There is no contingent consideration. The results of operations of POSCO-Thainox
Public Company Limited have been consolidated from the date of acquisition. Therefore, comparability with POSCOs consolidated financial statements for prior years is impacted accordingly The amounts of revenues and net profit of POSCO-Thainox
Public Company Limited since the acquisition date included in consolidated revenues and net profit amounted to (Won)92,798 million and (Won)11,658 million, respectively. Goodwill recognized in this business combination is as follows:



|                                                                 |  |                      |         | 
|---------------------------------------------------------------- |  | -------------------- | ------- | 
|                                                                 |  | Amount               |        
|                                                                 |  | (in millions of Won) |        
|I. Consideration transferred                                     |  |                      |         | 
|Fair value of investment held before acquisition (*1)            |  | (Won)                | 99,382  | 
|Cash                                                             |  |                      | 390,474 | 
|                                                                 |  |                      |         | 
|Total                                                            |  |                      | 489,856 | 
|                                                                 |  |                      |         | 
|II. Non-controlling interests (*2)                               |  |                      | 121,413 | 
|                                                                 |  |                      |         | 
|Total                                                            |  |                      | 611,269 | 
|                                                                 |  |                      |         | 
|III. Acquired identifiable assets and liabilities                |  |                      |         | 
|[Assets]                                                         |  |                      |         | 
|Cash and cash equivalents                                        |  |                      | 62,080  | 
|Trade accounts and notes receivable and other financial assets   |  |                      | 102,464 | 
|Inventories                                                      |  |                      | 149,901 | 
|Property, plant and equipment and intangible assets              |  |                      | 340,487 | 
|Other assets                                                     |  |                      | 20,129  | 
|                                                                 |  |                      |         | 
|Total                                                            |  |                      | 675,061 | 
|                                                                 |  |                      |         | 
|[Liabilities]                                                    |  |                      |         | 
|Trade accounts and notes payable and other financial liabilities |  |                      | 147,382 | 
|Borrowings                                                       |  |                      | 11,803  | 
|Other liabilities                                                |  |                      | 23,867  | 
|                                                                 |  |                      |         | 
|Total                                                            |  |                      | 183,052 | 
|                                                                 |  |                      |         | 
|Total acquired net assets                                        |  |                      | 492,009 | 
|                                                                 |  |                      |         | 
|IV. Goodwill recognized                                          |  | (Won)                | 119,260 | 
|                                                                 |  |                      |         | 



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010











|(*1) | Upon acquisition of the business, a (Won)57,080 million
re-measurement gain on the Companys existing investment in the acquiree prior to acquisition date (acquisition cost: (Won)42,302 million)
was recognized as finance income. The fair value of this existing investment was determined using quoted market price of the shares on acquisition date.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(*2) | The non-controlling interests at the acquisition date were measured using their proportionate share in the recognized amounts of POSCO-Thainox Public Company Limiteds
identifiable net assets
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

After obtaining control, Company acquired additional 19.61% of shares amounting to (Won)126,927 million through tender offer. In results, the percentage of shares increased from 75.32% to 94.93% as of December 31, 2011.
Carrying value of POSCO-Thainox Public Companys net assets is (Won)667,571 million. Regarding this transaction, non-controlling interests
decreased by (Won)95,885 million and related differential amounts amounting to
(Won)31,043 million was deducted from consolidated capital surplus since it is equity transaction between consolidated entities.

Pro-forma Information

The following summarized pro forma consolidated statement of comprehensive income information assumes that the POSCO-Thainox Public Company Limited
acquisition occurred as of January 1, 2011. The pro forma results reflect certain adjustments related to the acquisition, such as increased depreciation and amortization expense on assets acquired from POSCO-Thainox Public Company Limited
resulting from the fair valuation of assets acquired in place on acquisition date, September 23, 2011. The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of POSCO-Thainox Public
Company Limited.

If the Company had acquired POSCO-Thainox Public Company Limited as of January 1, 2011, pro-forma consolidated
revenues and pro-forma consolidated net profit for the year ended December 31, 2011 would have been (Won)69,243,204 million and (Won)3,726,225 million, respectively.



|38. | Transition to IFRS
|--- | ------------------

As stated in note 2,
these are the Companys first consolidated financial statements prepared in accordance with IFRSs as issued by International Accounting Standards Board. The accounting policies set out in note 3 have been applied in preparing the financial
statements as of and for the year ended December 31, 2011, the comparative information presented in theses consolidated financial statements as of and for the year ended December 31, 2010 and in preparation of an opening IFRS statement of
financial position at the date of transition, January 1, 2010.

In preparing its opening IFRS statement of financial position, the
Company has adjusted amounts reported in accordance with previous GAAP. An explanation of how the transition from previous GAAP to IFRSs has affected the Companys reported financial position, financial performance and cash flows is as follows:

(a) Exemptions elected from IFRS No. 1 First-time Adoption of International Financial Reporting Standards.

The Company has elected to use one or more of the exemptions in accordance with IFRS No. 1 for the preparation of statements of
financial position at the date of transition and applied the following optional exemptions.

1) Business combination

The Company has not retrospectively applied the business combinations that took place prior to the date of transition to IFRS.



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







2) Deemed cost of property, plant and equipment

The Company has elected to use the revaluations of prior to the date of transition to IFRS as deemed cost at the date of transition for certain
items of property, plant and equipment and use the fair value at the date of transition as deemed cost at the date of transition for certain machinery and equipment.

3) Borrowing costs

The Company has capitalized borrowing costs to the qualifying assets for which
the commencement date for capitalization is on or after the transition date to IFRS.

4) Cumulative translation differences

The Company has elected to set the previously cumulative translation differences to zero at the date of transition and these exemption are applied
to all foreign operations.

5) Share-based payment transactions

The Company has not retrospectively applied IFRS accounting requirements to cash-settled share-based payment transactions that took place prior to
the date of transition to IFRS.

6) Leases

For arrangements existing at the date of transition to IFRS, the Company determined whether the arrangements were lease arrangements based on the facts and circumstances at the date of transition.

(b) The significant adjustments regarding transition to IFRS are as follows:

1) Employee Benefits

Under
previous GAAP, the Company recognized the amount of accrued severance benefits assuming all eligible employees and directors with at least one year of service were to terminate their employment as of the date of statement of financial position.
Under IFRS, the Company recognized defined benefit obligation based on actuarial assumptions.

2) Goodwill acquired in the business
combination or a gain from a bargain purchase

Under previous GAAP, the Company amortized goodwill acquired in a business combination on
a straight-line method of less than 20 years and a gain from a bargain purchase reversed in weighted average useful life of depreciable assets. Under IFRS, goodwill is not amortized, but is tested for impairment annually. Also, a gain from a bargain
purchase is recognized in profit or loss on the acquisition date.

3) Transfer of financial assets

Under previous GAAP, the Company recognized transfer of the financial assets to financial institution as disposal transaction when the control is
transferred. Under IFRS, if the Company retains substantially all the risks and rewards of ownership of the financial asset, it is recognized in the financial liabilities instead of derecognition of financial assets.



F-104



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







4) Deferred taxes

Under previous GAAP, the Company recognized deferred tax assets or deferred tax liabilities as the difference between the book base and its tax
base regarding the investment in subsidiaries and others. However, under IFRS, the Company recognizes deferred tax assets or deferred tax liabilities considering how the temporary differences will be realized.

5) A lot-solid apartment after rental

Under previous GAAP, a lot-solid apartment after rental is accounted for as an operating lease. Under IFRS, a lot-solid apartment of the rental is accounted for as a finance lease.

(c) Changes in scope of subsidiaries



|               |  |                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  | Changes                                                                                                                                                               |  | Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Inclusion (35) |  | Included in the scope of consolidation under IFRS. These entities were not consolidated under GAAP since their total assets were less than
(Won)10 billion.           |  | PT. POSNESIA, Qingdao Pos-metal Co., Ltd., POSCO E&C India Private Ltd., POSCO E&C SMART, Pohang SFC Co., Ltd., POSWITH Co., Ltd., Basis Industries, Dalian POSCON Dongbang Automatic
Co., Ltd., SANPU TRADING CO., LTD., Zhangjiagang BLZ Pohang International Trading Co., Ltd., POSCO Australia GP Limited, POSCO Mexico Human Tech., POSCO Mexico East Steel Distribution Center Co., Ltd., POSTECH BD Newundertaking fund, POSCO Gulf
Logistics LLC., POSBRO Co., Ltd., POSCO ICT-China, DWEMEX S.A.DE C.V., POS MPC Servicios de C.V., EUROTALY S.A., POSCO South East Asia Pte. Ltd., VECTUS Ltd., POMIC Co., Ltd., POSCO Maharashtra Steel Pvt. Ltd., POSCO India Chennai Steel Processing
Centre Pvt. Ltd., POSCO Turkey Nilufer Processing Center, POSCO Vietnam Ha Noi Processing Center Co., Ltd., POSCO (Liaoning) Automotive Processing Center Co., Ltd., POSCO E&C Venezuela C.A, POSFINE Co., Ltd., PT. MRI, Mapo high broad parking
Co., Ltd., Dakos Co., Ltd., POSCALCIUM Company, Ltd
|               |  |                                                                                                                                                                      
|               |  | Included in the scope of consolidation under IFRS, SIC12: Consolidation-Special Purpose Entities                                                                      |  | ZEUS(Cayman)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                      
|Exclusion(5)   |  | The Company owns less than 50% of voting power. These entities are excluded from the scope of consolidation assuming that the Company does not have de facto control. |  | Metapolis Co., Ltd., POSMATE Co., Ltd., POSCO M-TECH Co., Ltd., Universal Studios Resort Asset Management Corp., VSC POSCO Steel Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







(d) Effects on financial position, financial performance and cash flows
by the transition from previous GAAP to IFRS

1) Reconciliations of the financial position on January 1, 2010:



|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |  
|-------------------------------------------------- |  | -------------------- | ---------- | - | ---------------- |  | ---------- | ----------- |  |  | ---------- | -
|                                                   |  | Totalassets          |            |   | Totalliabilities |  |            | Totalequity | 
|                                                   |  | (in millions of Won) |           
|Previous GAAP                                      |  | (Won)                | 50,311,748 |   |                  |  | 18,647,434 |             |  |  | 31,664,314 |  
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |  
|Adjustments :                                      |  |                      |            |   |                  |  |            |             |  |  |            |  
|Changes of consolidation                           |  |                      | (455,814   | ) |                  |  | (526,348   | )           |  |  | 70,534     |  
|Revaluation of machinery and equipment             |  |                      | 1,939,001  |   |                  |  |           |             |  |  | 1,939,001  |  
|Transfer of a financial asset                      |  |                      | 111,759    |   |                  |  | 111,932    |             |  |  | (173       | )
|Recognition of financial guarantee liabilities     |  |                      | 6,295      |   |                  |  | 6,295      |             |  |  |           |  
|Reversal of negative goodwill                      |  |                      | 10,352     |   |                  |  |           |             |  |  | 10,352     |  
|Actuarial valuation of defined benefit liabilities |  |                      | (63        | ) |                  |  | 36,603     |             |  |  | (36,666    | )
|Finance lease                                      |  |                      | (355,899   | ) |                  |  | (359,542   | )           |  |  | 3,643      |  
|Construction contracts                             |  |                      | 448,066    |   |                  |  | 428,736    |             |  |  | 19,330     |  
|Other adjustments                                  |  |                      | (192,101   | ) |                  |  | 467        |             |  |  | (192,568   | )
|Deferred tax effect                                |  |                      | (296,198   | ) |                  |  | (152,112   | )           |  |  | (144,086   | )
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |  
|Total adjustments                                  |  |                      | 1,215,398  |   |                  |  | (453,969   | )           |  |  | 1,669,367  |  
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |  
|IFRS                                               |  | (Won)                | 51,527,146 |   |                  |  | 18,193,465 |             |  |  | 33,333,681 |  
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |  

2) Reconciliation of financial position as of December 31, 2010 and the financial performance for the year
ended December 31, 2010



|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |   |  |                          |           |   |  |  |           |  
|-------------------------------------------------- |  | -------------------- | ---------- | - | ---------------- |  | ---------- | ----------- |  |  | ---------- | - |  | ------------------------ | --------- | - |  |  | --------- | -
|                                                   |  | Totalassets          |            |   | Totalliabilities |  |            | Totalequity |  |  | Net income |   |  | Totalcomprehensiveincome |          
|                                                   |  | (in millions of Won) |           
|Previous GAAP                                      |  | (Won)                | 67,945,933 |   |                  |  | 30,744,512 |             |  |  | 37,201,421 |   |  |                          | 4,217,695 |   |  |  | 4,840,977 |  
|Adjustments :                                      |  |                      |            |   |                  |  |            |             |  |  |            |   |  |                          |           |   |  |  |           |  
|Changes in scope of consolidated companies         |  |                      | (1,246,713 | ) |                  |  | (985,200   | )           |  |  | (261,513   | ) |  |                          | 206,889   |   |  |  | 130,970   |  
|Revaluation of machinery and equipment             |  |                      | 1,633,056  |   |                  |  |           |             |  |  | 1,633,056  |   |  |                          | (305,945  | ) |  |  | (305,945  | )
|Transfer of a financial asset                      |  |                      | 1,344,849  |   |                  |  | 1,338,732  |             |  |  | 6,117      |   |  |                          | 1,635     |   |  |  | 1,635     |  
|Recognition of financial guarantee liabilities     |  |                      | 21,304     |   |                  |  | 27,443     |             |  |  | (6,139     | ) |  |                          | (1,618    | ) |  |  | (1,618    | )
|Reversal of negative goodwill                      |  |                      | 9,819      |   |                  |  |           |             |  |  | 9,819      |   |  |                          | 9,819     |   |  |  | 9,819     |  
|Withdrawal of amortization on goodwill             |  |                      | 68,364     |   |                  |  |           |             |  |  | 68,364     |   |  |                          | 68,364    |   |  |  | 68,364    |  
|Actuarial valuation of defined benefit liabilities |  |                      | (4,067     | ) |                  |  | 91,357     |             |  |  | (95,424    | ) |  |                          | 144,073   |   |  |  | (8,052    | )
|Finance lease                                      |  |                      | (542,848   | ) |                  |  | (557,959   | )           |  |  | 15,111     |   |  |                          | 11,469    |   |  |  | 11,469    |  
|Construction contracts                             |  |                      | 367,427    |   |                  |  | 339,184    |             |  |  | 28,243     |   |  |                          | (2,942    | ) |  |  | (2,942    | )
|Capitalization of financial cost                   |  |                      | 63,382     |   |                  |  | 92,186     |             |  |  | (28,804    | ) |  |                          | 1,733     |   |  |  | 1,733     |  
|Other adjustments                                  |  |                      | (89        | ) |                  |  | 260,492    |             |  |  | (260,581   | ) |  |                          | (221,402  | ) |  |  | 30,631    |  
|Deferred tax effect                                |  |                      | (241,991   | ) |                  |  | (469,488   | )           |  |  | 227,497    |   |  |                          | 55,881    |   |  |  | 55,881    |  
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |   |  |                          |           |   |  |  |           |  
|Total adjustments                                  |  |                      | 1,472,493  |   |                  |  | 136,747    |             |  |  | 1,335,746  |   |  |                          | (32,044   | ) |  |  | (8,055    | )
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |   |  |                          |           |   |  |  |           |  
|IFRS                                               |  | (Won)                | 69,418,426 |   |                  |  | 30,881,259 |             |  |  | 38,537,167 |   |  |                          | 4,185,651 |   |  |  | 4,832,922 |  
|                                                   |  |                      |            |   |                  |  |            |             |  |  |            |   |  |                          |           |   |  |  |           |  



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##### Table of Contents

POSCO

Notes
to Consolidated Financial Statements

For the years ended December 31, 2011 and 2010







3) Cash flow statement

Under IFRS, interest received, interest paid and income taxes paid which were presented using indirect method under the previous GAAP are presented
using direct method as separate line items of cash flow operating activities. Also, effect of exchange rate fluctuations on cash held which were presented as cash flows from operating activities under the previous GAAP are presented as a separate
line item from cash flows from operating, investing and financing activities.



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##### Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



POSCO(Registrant)




/s/ Chung, Joon-YangName:

Chung, Joon-YangTitle:

Chief Executive Officer and Representative DirectorDate:

April 30, 2012




---

##### Table of Contents

Exhibit Index



|     |  |   |  |                                                                                                                                                                                                                 
|---- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  |  |  | Articles of incorporation of POSCO (English translation)                                                                                                                                                        
|2.1  |  |  |  | Form of Common Stock Certificate (including English translation) (incorporated by reference to Exhibit 4.3 to the Registrants Registration Statement No. 33-81554)*                                            
|2.2  |  |  |  | Form of Deposit Agreement (including Form of American Depositary Receipts) (incorporated by reference to the Registrants Registration Statement (File No. 33-84318) on Form
F-6)*                              
|2.3  |  |  |  | Letter from ADR Depositary to the Registrant relating to the Pre-release of American Depositary Receipts (incorporated by reference to the Registrants Registration Statement (File No.
33-84318) on Form F-6)*
|8.1  |  |  |  | List of consolidated subsidiaries                                                                                                                                                                               
|12.1 |  |  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                         
|12.2 |  |  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                         
|13.1 |  |  |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                         





|* | Filed previously
|- | ----------------