##### Table of Contents



As filed with the Securities and
    Exchange Commission on June 27, 2007
     UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
    Form 20-F
  (Mark One)o

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

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934For the fiscal year ended
    December 31, 2006ORo

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

SHELL COMPANY REPORT PURSUANT
    TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934Date of event requiring this
    shell company
    reportFor the transition period
    from          to   Commission file number
    1-13368
    POSCO
 (Exact name of Registrant as
    specified in its charter)
    The Republic of Korea
 (Jurisdiction of incorporation
    or organization)
  Finance Division
 POSCO Center
 892 Daechi-4-dong,
    Gangnam-gu
 Seoul, Korea
 (Address of principal executive
    offices)
  Securities
    registered or to be registered pursuant to Section 12(b) of
    the Act.
  Title of Each Class

Name of Each Exchange on Which RegisteredAmerican Depositary Shares, each
    representing

New York Stock Exchange, Inc.one-fourth of one share of common
    stock

New York Stock Exchange, Inc.*Common Stock, par value Won 5,000
    per share   Securities
    registered or to be registered pursuant to Section 12(g) of
    the Act.
  None
 (Title
    of Class)
  Securities
    for which there is a reporting obligation pursuant to
    Section 15(d) of the Act.
  NONE
 (Title
    of Class)
    77,592,942 shares
    of common stock, par value Won 5,000 per share
  þ o
  o þ
  þ o
  Rule 12b-2
 Large accelerated
    filer þ     Accelerated
    filer o     Non-accelerated
    filer o
  o þ
  Rule 12b-2 o þ
  (APPLICABLE
    ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
    PAST FIVE YEARS)
  o o
  *
    
    Not for trading, but only in
    connection with the registration of the American Depositary
    Shares.




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##### 



TABLE OF
    CONTENTS
   
 GLOSSARY


1PART I


2ITEM 1.
    IDENTITY OF DIRECTORS, SENIOR MANAGERS AND ADVISORS


2Item 1.A.
    Directors and Senior Management


2Item 1.B.
    Advisers


2Item 1.C.
    Auditors


2ITEM 2. OFFER
    STATISTICS AND EXPECTED TIMETABLE


2ITEM 3. KEY
    INFORMATION


2Item 3.A.
    Selected Financial Data


2Item 3.B.
    Capitalization and Indebtedness


4Item 3.C.
    Reasons for Offer and Use of Proceeds


4Item 3.D. Risk
    Factors


4ITEM 4.
    INFORMATION ON THE COMPANY


10Item 4.A.
    History and Development of the Company


10Item 4.B.
    Business Overview


10Item 4.C.
    Organizational Structure


23Item 4.D.
    Property, Plants and Equipment


23ITEM 4A.
    UNRESOLVED STAFF COMMENTS


25ITEM 5.
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS


25Item 5.A.
    Operating Results


25Item 5B.
    Liquidity and Capital Resources


34Item 5C.
    Research and Development, Patents and Licenses,
    Etc.


40Item 5.D. Trend
    Information


40Item 5.E.
    Off-balance Sheet Arrangements


40Item 5.F.
    Tabular Disclosure of Contractual Obligations


40Item 5.G. Safe
    Harbor


40ITEM 6.
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


41Item 6.A.
    Directors and Senior Management


41Item 6.B.
    Compensation


45Item 6.C. Board
    Practices


46Item 6.D.
    Employees


49Item 6.E. Share
    Ownership


50ITEM 7. MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS


53Item 7.A. Major
    Shareholders


53Item 7.B.
    Related Party Transactions


53Item 7.C.
    Interests of Experts and Counsel


53ITEM 8.
    FINANCIAL INFORMATION


53Item 8A.
    Consolidated Statements and Other Financial
    Information


53Item 8B.
    Significant Changes


54ITEM 9. THE
    OFFER AND LISTING


54Item 9.A. Offer
    and Listing Details


54Item 9.B. Plan
    of Distribution


57Item 9.C.
    Markets


57Item 9.D.
    Selling Shareholders


62Item 9.E.
    Dilution


62Item 9.F.
    Expenses of the Issuer


62ITEM 10.
    ADDITIONAL INFORMATION


62Item 10.A.
    Share Capital


62Item 10.B.
    Memorandum and Articles of Association


62Item 10.C.
    Material Contracts


66Item 10.D.
    Exchange Controls


66Item 10.E.
    Taxation


70Item 10.F.
    Dividends and Paying Agents


75Item 10.G.
    Statements by Experts


75Item 10.H.
    Documents on Display


75Item 10.I.
    Subsidiary Information


76ITEM 11.
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK


76ITEM 12.
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES


77PART II


78ITEM 13.
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES


78ITEM 14.
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
    OF PROCEEDS


78ITEM 15.
    CONTROLS AND PROCEDURES


78ITEM 16.
    [RESERVED]


79ITEM 16A. AUDIT
    COMMITTEE FINANCIAL EXPERT


79ITEM 16B. CODE
    OF ETHICS


79ITEM 16C.
    PRINCIPAL ACCOUNTANT FEES AND SERVICES


79ITEM 16D.
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES


80ITEM 16E.
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS


80PART III


80ITEM 17.
    FINANCIAL STATEMENTS


80ITEM 18.
    FINANCIAL STATEMENTS


81ITEM 19.
    EXHIBITS


82EX-1.1 ARTICLES OF INCORPORATION OF POSCOEX-7.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-8.1 LIST OF SUBSIDIARIES OF POSCOEX-12.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002EX-12.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002EX-13.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002EX-15.1 CONSENT OF SAMIL PRICEWATERHOUSECOOPERS   i




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GLOSSARY  ADR
    
    American Depositary Receipt evidencing ADSs.ADR depositary
    
    The Bank of New York.ADS
    
    American Depositary Share representing one-fourth of one share
    of Common Stock.Australian Dollar or A$
    
    The currency of the Commonwealth of Australia.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.Government
    
    The government of the Republic of Korea.Yen or JPY
    
    The currency of Japan.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.Republic
    
    The Republic of Korea.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 W
    
    The currency of the Republic of Korea.   1




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##### Table of Contents



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 3.
    Key
    Information  Item 3.A.
    Selected
    Financial Data    INCOME
    STATEMENT DATA
  For the Year Ended December 31,2002


2003


2004


2005


2006


2006(11)(In billions of Won and millions of Dollars, except per share
    data)Korean GAAP:Sales(1)

W
14,355


W
17,789


W
23,973


W
26,302


W
25,842


US$
27,787Cost of goods sold(2)


11,338



13,451



17,361



18,767



19,897



21,394Selling and administrative expenses


967



1,075



1,293



1,451



1,556



1,674Operating income


2,050



3,263



5,319



6,083



4,389



4,720Interest expense


332



250



192



149



183



197Foreign currency transaction and
    translation gains (losses), net


135



(105
)


179



159



99



106Donations(3)


50



103



170



153



155



166Income tax expenses


398



730



1,502



1,474



922



991Net income


1,089



1,996



3,814



4,022



3,314



3,564Basic and diluted earnings per
    share of common stock(4)


13,295



24,496



47,185



50,790



42,115



45.28Dividends per share of common stock


3,500



6,000



8,000



8,000



8,000



8.60U.S.
    GAAP(5):Operating income

W
2,021


W
3,235


W
5,299


W
5,671


W
4,259


US$
4,579Net income


1,018



1,997



3,460



4,102



3,408



3,665Basic and diluted earnings per
    share of common stock


12,430



24,508



42,806



51,789



43,304



46.56  2




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##### Table of Contents



BALANCE
    SHEET DATA
  For the Year Ended December 31,2002


2003


2004


2005


2006


2006(11)(In billions of Won and millions of Dollars, except per share
    data)Korean GAAP:Working capital(6)

W
1,695


W
3,450


W
5,493


W
5,759


W
7,155


US$
7,694Property, plant and equipment,
    net(7)


10,325



9,846



10,440



12,272



14,643



15,745Total assets(7)


19,077



20,769



24,129



27,507



31,149



33,494Long-term debt(8)(9)(10)


3,194



2,952



2,051



1,131



2,726



2,931Total shareholders Equity(7)


11,820



13,250



16,386



19,874



22,402



24,088U.S.
    GAAP(5):Property, plant and equipment, net

W
10,322


W
9,880


W
10,541


W
12,420


W
14,860


US$
15,978Total assets


19,000



20,838



24,279



27,525



31,208



33,557Total shareholders Equity


11,464



13,018



16,208



19,498



21,972



23,626     (1)
    
    Includes sales by our consolidated sales 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)
    
    Includes donations to educational foundations supporting basic
    science and technology research. See Item 5.
    Operating and Financial Review and Prospects 
    Item 5.C. Research and Development, Patents and Licenses,
    Etc. and Note 24 of Notes to Consolidated Financial
    Statements.(4)
    
    See Note 26 of Notes to Consolidated Financial Statements
    for method of calculation.(5)
    
    A description of the material differences between Korean GAAP
    and U.S. GAAP as well as the reconciliation to U.S. GAAP are
    discussed in detail in Note 32 of Notes to Consolidated
    Financial Statements.(6)
    
    Working capital means current assets minus current
    liabilities.(7)
    
    Reflects revaluations of assets permitted under Korean law.(8)
    
    Net of current portion and discount on debentures issued.(9)
    
    For information regarding swap transactions entered into by us,
    see Item 5. Operating and Financial Review and
    Prospects  Item 5A. Operating
    Results  Exchange Rate Fluctuations and
    Note 22 of Notes to Consolidated Financial Statements.(10)
    
    Monetary assets and liabilities denominated in foreign
    currencies are translated into Korean Won at the basic rates in
    effect at the balance sheet date and resulting translation gains
    and losses are recognized in current operations. See
    Notes 2 and 27 of Notes to Consolidated Financial
    Statements.(11)
    
    Translated into U.S. Dollars at the rate of Won 930.00 to
    US$1.00, the noon buying rate of the Federal Reserve Bank of New
    York for Won in effect on December 29, 2006. This
    translation should not be construed as a representation that the
    Korean Won amounts represent, have been, or could be converted
    to U.S. Dollars at that rate or any other rate. 3




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EXCHANGE
    RATE INFORMATION
    At End


AveragePeriod

of Period


Rate(1)


High


Low(Per US$1.00)2002


1,186.3



1,242.0



1,332.0



1,160.62003


1,192.0



1,183.0



1,262.0



1,146.02004


1,035.1



1,139.3



1,195.1



1,035.12005


1,010.0



1,023.2



1,059.8



997.02006


930.0



954.3



1002.9



913.72007 (through June 26)


926.1



934.8



949.1



922.3January


941.0



936.8



942.2



925.4February


942.3



936.9



942.3



932.5March


941.1



942.9



949.1



937.2April


931.0



930.7



937.0



926.1May


927.4



927.6



934.0



922.3June (through June 26)


926.1



928.3



932.3



926.1       (1)
    
    The average rate for each full year is calculated as the average
    of the noon buying rates on the last business day of each month
    during the relevant year. The average rate for a full month is
    calculated as the average of the noon buying 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    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.
     4




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
    financial problems relating to chaebols, or Korean
    conglomerates, and their suppliers;
    failure or lack of progress in restructuring of chaebolsand other large troubled companies or the financial sector,
    including credit card companies;
    loss of investor confidence arising from corporate accounting
    irregularities and corporate governance issues of certain
    chaebols;
    a slowdown in consumer spending;
    adverse changes or volatility in foreign currency reserve
    levels, commodity prices, exchange rates, interest rates or
    stock markets;
    adverse developments in the economies of countries that are
    important export markets for Korea, such as the United States,
    Japan and China, or in emerging market economies in Asia or
    elsewhere;
    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 manufacturing base from
    Korea to China);
    social and labor unrest;
    a decrease in tax revenues and a substantial increase in the
    Korean governments expenditures for unemployment
    compensation and other social programs that, together, would
    lead to an increased government budget deficit;
    geo-political uncertainty and risk of further attacks by
    terrorist groups around the world;
    implementation of free trade agreements between Korea and other
    countries, including the United States;
    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 involving oil producing countries in the Middle East
    and any material disruption in the supply of oil or increase in
    the price of oil; and
    an increase in the level of tension 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.
   5




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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.
    
    an increase in the amount of Won required for us to make
    interest and principal payments on our foreign
    currency-denominated debt, which accounted for approximately
    50.8% of our total long-term debt (excluding discounts on
    debentures issued and including current portion) as of
    December 31, 2006;
    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.      We are
    dependent on imported raw materials.
    We
    expect global steel production capacity to continue to expand in
    the near future, and over-capacity in the global steel industry
    may return.
    Consolidation
    in the global steel industry may increase
    competition.
   6




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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.
        
    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.  Several
    of our products have been and may become subject to anti-dumping
    or countervailing proceedings, which may have an adverse effect
    on our export sales.
   7




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Cyclical
    fluctuations based on macroeconomic factors may adversely affect
    the business and performance of our engineering and construction
    segment.
    Fixed
    price construction contracts without price escalation provisions
    could result in losses for our engineering and construction
    segment in the event that unforeseen additional expenses arise
    with respect to the construction project.
    The
    Korean housing construction market fluctuates based on the
    Governments real estate policies.
    Escalations
    in tension with North Korea could have an adverse effect on us
    and the market value of our securities.
   8




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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.
    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.
    
    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.    This
    annual report contains forward-looking statements
    that are subject to various risks and
    uncertainties.
   9




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##### Table of Contents



Item 4.
    Information
    on the Company  Item 4.A.
    History
    and Development of the Company    (822) 3457-0114.
  Item 4.B.
    Business
    Overview  The
    Company
        Business
    Strategy
   10




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Continue
    to Seek Investment Opportunities Abroad and Establish Global
    Production Base
    Develop
    Leading Technology to Increase Sales of Higher Margin, Higher
    Value-Added Products and Enhance Quality of Our
    Products
      Enhance
    Efficiency of Operations and Cost-Effectiveness through
    Company-Wide Process Innovation
   11




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Continue
    to Expand Our Export Customer Base
    Secure
    Procurement of Raw Materials through Strategic Investments and
    Long-Term Contracts
    Selectively
    Seek Opportunities in Growth Industries
    Major
    Products
    
    hot rolled products;
    plates;
    wire rods;
    cold rolled products;
    silicon steel sheets; and
    stainless steel products. 12




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##### Table of Contents



Year Ended December 31,2002


2003


2004


2005


2006Billions of





Billions of





Billions of





Billions of





Billions ofSteel Products

Won


%


Won


%


Won


%


Won


%


Won


%Hot rolled products


3,416



25.4



4,185



26.1



5,449



25.1



5,877



25.0



4,650



20.8Plates


1,237



9.2



1,320



8.2



1,987



9.1



2,253



9.6



2,380



10.7Wire rods


1,178



8.7



1,064



6.6



1,351



6.2



1,528



6.5



1,243



5.6Cold rolled products


4,310



32.0



5,208



32.4



6,564



30.2



7,527



32.0



6,765



30.3Silicon steel sheets


347



2.6



431



2.7



531



2.4



688



2.9



681



3.0Stainless steel products


2,278



16.9



3,172



19.7



4,920



22.6



4,543



19.3



5,751



25.8Others


700



5.2



687



4.3



952



4.4



1,132



4.7



859



3.8Total


13,465



100.0



16,067



100.0



21,753



100.0



23,547



100.0



22,329



100.0   Year Ended December 31,2002


2003


2004


2005


2006Thousands





Thousands





Thousands





Thousands





ThousandsSteel Products

of Tons


%


of Tons


%


of Tons


%


of Tons


%


of Tons


%Hot rolled products


11,461



37.8



11,514



37.6



10,966



34.5



10,330



33.2



9,604



31.0Plates


3,060



10.1



3,047



9.9



3,385



10.6



3,193



10.3



3,615



11.7Wire rods


2,808



9.3



2,777



9.1



2,503



7.9



2,366



7.6



2,153



6.9Cold rolled products


9,503



31.3



9,770



31.9



10,242



32.2



10,468



33.6



10,864



35.1Silicon steel sheets


589



1.9



671



2.2



705



2.2



737



2.4



686



2.2Stainless steel products


1,394



4.6



1,778



5.8



2,069



6.5



1,919



6.2



2,260



7.3Others


1,518



5.0



1,100



3.5



1,926



6.1



2,100



6.7



1,802



5.8Total


30,333



100.0



30,657



100.0



31,796



100.0



31,115



100.0



30,984



100.0     Hot
    Rolled Products
       13




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##### Table of Contents



Plates
        Wire
    Rods
        Cold
    Rolled Products
        Silicon
    Steel Sheets
       14




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##### Table of Contents



Stainless
    Steel Products
        Others
    Markets
    Domestic
    Market
      Year Ended December 31,2002


2003


2004


2005


2006Thousands





Thousands





Thousands





Thousands





ThousandsRegion

of Tons


%


of Tons


%


of Tons


%


of Tons


%


of Tons


%POSCOs sales


21,090



48.2



21,121



46.6



23,599



50.0



22,880



48.5



20,991



42.3Other Korean steel companies
    sales


17,732



40.6



17,838



39.3



15,969



33.9



15,957



33.9



18,052



36.4Imports(1)


4,898



11.2



6,411



14.1



7,595



16.1



8,287



17.6



10,591



21.3Total domestic sales(1)


43,720



100.0



45,370



100.0



47,163



100.0



47,124



100.0



49,634



100.0     (1)
    
    Source: 2006 Official Statistics, Korea Iron & Steel
    Association.     15




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Exports
    Year Ended December 31,2002


2003


2004


2005


2006Thousands





Thousands





Thousands





Thousands





ThousandsRegion

of Tons


%


of Tons


%


of Tons


%


of Tons


%


of Tons


%China


2,828



30.6



3,510



36.8



3,138



38.3



2,640



32.1



2,524



25.3Japan


1,780



19.3



1,719



18.0



1,661



20.3



1,843



22.4



1,959



19.6Asia (other than China and Japan)


2,414



26.1



2,259



23.7



1,502



18.3



1,636



19.9



1,895



19.0North America


978



10.6



715



7.5



737



9.0



761



9.2



963



9.6Europe


294



3.2



236



2.5



116



1.4



34



0.4



318



3.2Others


949



10.3



1,096



11.5



1,043



12.7



1,320



16.0



2,335



23.3Total


9,243



100.0



9,535



100.0



8,198



100.0



8,234



100.0



9,994



100.00   Year Ended December 31,2002


2003


2004


2005


2006Thousands





Thousands





Thousands





Thousands





ThousandsSteel Products

of Tons


%


of Tons


%


of Tons


%


of Tons


%


of Tons


%Hot rolled products


2,224



24.1



2,464



25.8



2,049



25.0



1,960



23.8



2,477



24.8Plates


300



3.2



363



3.8



295



3.6



229



2.8



228



2.3Wire rods


679



7.3



598



6.3



252



3.1



333



4.1



498



5.0Cold rolled products


4,694



50.8



4,649



48.8



4,139



50.5



4,142



50.3



4,774



47.8Silicon steel sheets


161



1.7



223



2.3



245



3.0



262



3.2



369



3.7Stainless steel products


706



7.6



795



8.3



1,019



12.4



1,032



12.5



1,245



12.4Others


478



5.2



443



4.7



199



2.4



276



3.3



403



4.0Total


9,243



100.0



9,535



100.0



8,198



100.0



8,234



100.0



9,994



100.0  16




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##### Table of Contents



Year Ended December 31,Region

2004


2005


2006(In billions)Korea

W
16,738


W
18,566


W
17,250China


3,316



3,118



3,070Asia (other than China and Japan)


1,257



1,502



1,486Japan


1,164



1,372



1,312North America


529



550



610Other


969



1,194



2,114Total


23,973



26,302



25,842       Year Ended December 31,2002


2003


2004


2005


2006Apparent Crude Steel Use (million
    metric tons)


917



984



1,091



1,113



1,178Percentage of annual increase
    (decrease)


6.3
%


7.3
%


10.9
%


2.0
%


5.8
%             50-50
 17




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##### Table of Contents



Pricing
    Policy
      Raw
    Materials
  Steel
    Production
       18




---



##### Table of Contents



Stainless
    Steel Production
    ferro-nickel
  Transportation
   19




---



##### Table of Contents



The
    Steelmaking Process
    Steel 
    Basic Oxygen Steelmaking Method
        Stainless
    Steel  Electric Arc Furnace Method
    Competition
  Domestic
    Market
        Export
    Markets
   20




---



##### Table of Contents



Joint
    Venture and Other Investments
                 21




---



##### Table of Contents



Subsidiaries
    POSCO
    Engineering & Construction
      POSCO
    Steel Service & Sales Co., Ltd.
    Diversification
       22




---



##### Table of Contents



Insurance
    Item 4.C.
    Organizational
    Structure    Jurisdiction of


Percentage ofName

Incorporation


OwnershipPOSCO Engineering &
    Construction Co., Ltd.


Korea



90.9
%POSCO Power Corporation


Korea



100.0
%Zhangjiagang Pohang Stainless
    Steel Co., Ltd.


China



82.5
%POSCO Specialty Steel Co.,
    Ltd.


Korea



100.0
%POSCO Steel Service &
    Sale Co., Ltd.


Korea



95.3
%POSDATA Co., Ltd.


Korea



61.9
%   Item 4.D.
    Property,
    Plants and Equipment    Pohang
    Works
     23




---



##### Table of Contents



Year Ended December 31,2002


2003


2004


2005


2006Crude steel and stainless steel
    production capacity (million tons per year)


12.20



12.67



13.30



13.30



13.30Actual crude steel and stainless
    steel output (million tons)


12.16



12.67



13.45



13.36



12.60Capacity utilization rate(%)(1)


99.7



100.0



101.1



100.4



94.7     (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
          Year Ended December 31,2002


2003


2004


2005


2006Crude steel and stainless steel
    production capacity (million tons per year)


15.80



16.23



16.70



16.70



16.70Actual crude steel and stainless
    steel output (million tons)


15.90



16.23



16.76



17.19



17.45Capacity utilization rate(%)(1)


100.6



100.0



100.4



102.9



104.5     (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.  The
    Environment
   24




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##### Table of Contents



Item 4A.
    Unresolved
    Staff Comments    Item 5.
    Operating
    and Financial Review and Prospects  Item 5.A.
    Operating
    Results    Overview
  Sales
    Volume, Prices and Product Mix
    
    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.       25




---



##### Table of Contents



Year Ended December 31,Product

2004


2005


2006(In thousands of Won per ton)Hot rolled products

W
496.9


W
568.9


W
484.2Plates


586.8



705.4



658.4Wire rods


539.6



645.9



577.2Cold rolled products


640.8



719.0



622.7Silicon steel sheets


753.0



934.0



991.8Stainless steel products


2,378.4



2,366.9



2,544.3Others


494.4



538.6



476.6Average(1)

W
684.1


W
756.8


W
720.6     (1)
    
    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. 26




---



##### Table of Contents



Costs
    and Production Efficiency
      Year Ended December 31,2004


2005


2006(Percentage of net sales)Cost of goods sold


72.4
%


71.4
%


77.0
%Selling and administrative
    expenses(1)


5.4



5.5



6.0Total operating expenses


77.8



76.9



83.0Gross margin


27.6



28.6



23.0Operating margin


22.2



23.1



17.0     (1)
    
    See Note 23 of Notes to Consolidated Financial Statements.      2004


2005


2006Crude steel and stainless steel
    production capacity(1) (million tons per year)(1)(2)


30.9



30.9



31.2Actual crude steel and stainless
    steel output (million tons)(2)


31.1



31.4



31.2Capacity utilization rate(%)(2)


100.6



101.6



99.9Steel product sales (million
    tons)(2)


31.80



31.12



30.98Man-hours
    per ton of crude steel produced(3)


1.12



1.16



1.13     (1)
    
    Includes production capacity of POSCO Specialty Steel Co., Ltd.
    and Zhangjiagang Pohang Stainless Steel Co., Ltd.(2)
    
    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 1.2 million tons in 2002, 1.4 million
    tons in 2003, 1.0 million tons in 2004, 1.0 million
    tons in 2005 and 0.8 million tons in 2006.(3)
    
    Does not include in the calculation employees of our
    subsidiaries or subcontractors.  Exchange
    Rate Fluctuations
    
    an increase in the amount of Won required for us to make
    interest and principal payments on our foreign
    currency-denominated debt, which accounted for approximately
    50.8% of our total long-term debt (excluding discounts on
    debentures issued and including current portion) as of
    December 31, 2006;
    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
    in Dollars; and
    foreign exchange translation losses on liabilities, which lower
    our earnings for accounting purposes. 27




---



##### Table of Contents



Impairment
    Loss on the No. 2 Mini-mill at Gwangyang
    Works
  construction-in-progress
  Reportable
    Operating Segments
    Inflation
    Critical
    Accounting Estimates
   28




---



##### Table of Contents



Allowance
    for Doubtful Accounts
    Valuation
    of Investment Securities and Derivatives
            Impairment
    of Long-lived Assets
   29




---



##### Table of Contents



and/or
  Operating
    Results
  2006
    Compared to 2005
         30




---



##### Table of Contents



31




---



##### Table of Contents



Segment
    Results  Steel
      Segment
    Results  Engineering and Construction
      Segment
    Results  Trading
      2005
    Compared to 2004
         32




---



##### Table of Contents



33




---



##### Table of Contents



Segment
    Results  Steel
      Segment
    Results  Engineering and Construction
      Segment
    Results  Trading
      Item 5.B.
    Liquidity
    and Capital Resources    Year Ended December 31,2004


2005


2006(In billions of Won)Net cash provided by operating
    activities

W
4,946


W
5,464


W
3,900Net cash used in investing
    activities


3,386



3,744



3,379Net cash used in financing
    activities


1,650



1,578



227Cash and cash equivalents at
    beginning of period


594



482



654Cash and cash equivalents at end
    of period


482



654



936Net increase (decrease) in cash
    and cash equivalents


(112
)


172



282   Capital
    Requirements
   34




---



##### Table of Contents



Payments Due by PeriodLess than








AfterContractual Obligations

Total


1 Year


1 to 3 Years


4 to 5 Years


5 Years(In billions of Won)Long-term debt obligations


2,738.7







1,098.0



1,640.7



Capital lease obligations


0.3



0.3











Operating leases obligations


5.2



4.2



1.0







Purchase obligations


(a
)


(a
)


(a
)


(a
)


(a
)Other long-term liabilities


















Total


2,744.2



4.5



1,099.0



1,640.7



     (a)
    
    Our purchase obligations include long-term contracts to purchase
    iron ore, coal, nickel, chrome, stainless steel scrap and
    liquefied natural gas. These contracts generally have terms of
    three to ten years and provide for periodic price adjustments to
    then-market prices. As of December 31, 2006,
    462 million tons of iron ore and 120 million tons of
    coal remained to be purchased under long-term contracts.   35




---



##### Table of Contents



Capital
    Resources
          Liquidity
       36




---



##### Table of Contents



As of December 31,2004


2005


2006(In billions of Won)Cash and cash equivalents, net of
    government grants

W
480


W
653


W
936Short-term financial instruments


647



760



867Trading securities


2,690



2,611



2,001Trade accounts and notes
    receivable, net of allowance for doubtful accounts and present
    value discount


3,094



3,045



3,492Inventories


3,066



3,793



4,018       As of December 31,2004


2005


2006(In billions of Won)Trade accounts and notes payable

W
1,082


W
1,146


W
1,507Short-term borrowings


658



860



1,239Income tax payable


1,087



1,367



701Current portion of long-term debt,
    net of discount on debentures issued


1,047



1,057



404     Capital
    Expenditures and Capacity Expansion
   37




---



##### Table of Contents



Estimated RemainingExpected





Cost of CompletionCompletion


Total Cost of


as of December 31,Project

Date


Project


2006(In billions of Won)Pohang Works:Construction of FINEX plant(1)


April 2007



731



37Second relining of no. 3
    blast furnace


July 2007



256



13Installation of de-phosporization
    facility at no. 2. steelmaking plant(1)


March 2007



149



14Expansion of cokes plant


December 2007



277



139Modernization of no. 2 plate
    mill


January 2008



115



104Installation of heat treatment
    furnace at no. 3 plate plant


August 2007



110



79Pickling and tandem cold rolled
    mill at no. 2 cold rolling mill(1)


March 2007



141



38Gwangyang Works:Modernization of no. 3 hot
    rolled mill


December 2007



235



142Coke oven gas purification
    facility(1)


June 2007



175



73Relining of no. 3 blast
    furnace


December 2007



147



119Modernization of no. 2
    continuous galvanizing line


December 2007



61



50Installation of de-phosporization
    facility at no. 2. steelmaking department


December 2007



195



166     (1)
    
    Completed as of the filing date of this annual report on
    Form 20-F.  Significant
    Changes in Korean GAAP
       38




---



##### Table of Contents



U.S.
    GAAP Reconciliation
      Recent
    Accounting Pronouncements in U.S. GAAP
          accrue-in-advance
 39




---



##### Table of Contents



Item 5.C.
    Research
    and Development, Patents and Licenses, Etc.          Item 5.D.
    Trend
    Information    Item 5.E.
    Off-balance
    Sheet Arrangements    Item 5.F.
    Tabular
    Disclosure of Contractual Obligations    Item 5.G.
    Safe
    Harbor   40




---



##### Table of Contents



Item 6.
    Directors,
    Senior Management and Employees  Item 6.A.
    Directors
    and Senior Management  Board of
    Directors
      
    the Director Candidate Recommendation Committee;
    the Evaluation and Compensation Committee;
    the Finance and Operation Committee;
    the Executive Management Committee;
    the Audit Committee; and
    the Insider Trading Committee.     41




---



##### Table of Contents



Standing
    Directors
    Years

Years



ExpirationResponsibility

as

with



of TermName

Position

and Division

Director

POSCO

Age

of OfficeLee, Ku-Taek

Chief Executive Officer and
    Representative Director




18



38



61


February 2010Yoon, Seok-Man

President and Representative
    Director

Chief Marketing Officer, Corporate
    Communication Dept.


4



30



58


February 2010Lee, Youn

President and Representative
    Director

General Superintendent, Stainless
    Steel Division


3



33



59


February 2008Chung, Joon-Yang

President and Representative
    Director

Chief Operating Officer and
    Technology Officer


4



32



59


February 2010Cho, Soung-Sik

Senior Executive Vice President

POSCO-India Pvt. Ltd.


2



32



56


February 2009Lee, Dong-Hee

Senior Executive Vice President

Chief Finance Officer


2



30



57


February 2009    42




---



##### Table of Contents



Outside
    Directors
    ExpirationYears as



of TermName

Position

Principal Occupation

Director

Age

of OfficeKim, E. Han

Chairman of the Board

Professor, University of Michigan


5



60


February 2008Park, Young-Ju

Director

Chairman, Eagon Industrial Co.,
    Ltd.


4



66


February 2009Jun, Kwang-Woo

Director

Chairman, Deloitte Consulting


4



58


February 2010Jones, Jeffrey D

Director

Attorney, Kim & Chang


4



54


February 2010Suh, Yoon-Suk

Director

Professor, Ewha Womans
    University


4



52


February 2009Park, Won-Soon

Director

Executive Director, Beautiful
    Foundation


4



51


February 2010Sun, Wook

Director

Former President & CEO,
    Samsung Human Resources Development Center


3



62


February 2008Ahn, Charles

Director

Chairman of the Board, AhnLab, Inc.


3



45


February 2008Huh, Sung K

Director

President, Gwangju Institute of
    Science and Technology


2



59


February 2009     Senior
    Management
    Years withName

Position

Responsibility and Division

POSCO

AgeKim, Dong-Jin

Senior Executive Vice President

POSCO-China Holding Corp.


33



60Choi, Jong-Tae

Senior Executive Vice President

Chief Staff Officer


33



57Kim, Sang-Ho

Executive Vice President

Legal Affairs Dept.


6



53Hur, Nam-Suk

Executive Vice President

General Superintendent, Gwangyang
    Works


32



57Oh, Chang-Kwan

Executive Vice President

General Superintendent, Pohang
    Works


29



54Kwon, Young-Tae

Executive Vice President

Coal Procurement Dept., Iron Ore
    Procurement and Raw Materials Investment Dept., Steelmaking Raw
    Materials Procurement Dept.


32



56 43




---



##### Table of Contents



Years withName

Position

Responsibility and Division

POSCO

AgeChang, Hyun-Shik

Executive Vice President

Energy Business Dept.


5



56Kim, Jin-Il

Executive Vice President

Market Development Dept.,
    Production Order and Process Dept., Product Technology Dept.


32



54Kwon, Oh-Joon

Executive Vice President

General Superintendent, Technical
    Research Laboratories


20



56Park, Han-Yong

Executive Vice President

Human Resources Dept.


29



56Chung, Keel-Sou

Executive Vice President

Zhangjiagang POSCO Stainless Steel
    Co. Ltd.


32



57Ha, Sang-Wook

Senior Vice President

Deputy General Superintendent,
    Technical Research Laboratories


32



54Kim, Sang-Young

Senior Vice President

Corporate Communication Dept.


20



55Lee, Young-Suk

Senior Vice President

Stainless Steel Strategy Dept.,
    Stainless Steel Sales Dept., Stainless Steel Sales Development
    Dept.


30



56Kim, Sang-Myun

Senior Vice President

Deputy General Superintendent,
    Gwangyang Works (Administration)


29



56Park, Kee-Young

Senior Vice President

Hot Rolled Steel Sales Dept., API
    Steel Sales Dept., Plate Sales Dept., Wire Rod Sales Dept.


30



55Won, Jong-Hai

Senior Vice President

Materials Purchasing and Supply
    Management Dept.


30



55Kim, Tae-Man

Senior Vice President

Deputy General Superintendent,
    Pohang Works (Administration)


28



53Cho, Jun-Gil

Senior Vice President

Deputy General Superintendent,
    Pohang Works (Hot and Cold Rolling)


30



54Yoo, Kwang-Jae

Senior Vice President

Stainless Steel Production and
    Technology


29



55Yoon, Yong-Chul

Senior Vice President

Deputy General Superintendent,
    Gwangyang Works (Iron and Steel Making)


29



54Cho, Noi-Ha

Senior Vice President

Deputy General Superintendent,
    Gwangyang Works (Hot and Cold Rolling)


29



54Yoon, Yong-Won

Senior Vice President

Facilities Investment Planning
    Dept., Plant and Equipment Procurement Dept.


29



54 44




---



##### Table of Contents



Years withName

Position

Responsibility and Division

POSCO

AgeKim, Soo-Kwan

Senior Vice President

Auditing Dept., Corporate Ethics
    Dept.


30



55Park, Ki-Hong

Senior Vice President

Corporate Strategic Planning Dept.


1



49Choo, Wung-Yong

Senior Vice President

European Union Office


24



54Kim, Sung-Kwan

Senior Vice President

India Project Dept.


30



56Jang, Byung-Hyo

Senior Vice President

POSCO-Japan Corp.


30



53Kim, Joon-Sik

Senior Vice President

Technology Development Dept.


26



53Jang, Young-Ik

Senior Vice President

Stainless Steel Raw Materials
    Procurement Dept.


28



53Kim, Moon-Seok

Senior Vice President

Seoul Office


28



53Yun, Tai-Han

Senior Vice President

Marketing Strategy Dept., Sales
    and Production Planning Dept.


27



54Cho, Bong-Rae

Senior Vice President

Deputy General Superintendent,
    Pohang Works (Iron and Steel Making)


27



54Chang, In-Hwan

Senior Vice President

Cold Rolled Steel Sales Dept.,
    Automotive Flat Products Sales Dept., Automotive Flat Products
    Exports Dept., Flat Products Sales SCM Dept., Coated Steel Sales
    Dept., Electrical Steel Sales Dept.


26



52Kong, Yoon-Chan

Senior Vice President

Human Resources Development
    Center, Corporate Philanthropy Dept.


27



53Lee, In-Bong

Vice President

Information Planning Dept.


26



52Shin, Jung-Suk

Vice President

Zhangjiagang POSCO Stainless Steel
    Co. Ltd.(Marketing)


28



54An, Byung-Sik

Vice President

Deputy General Superintendent,
    Pohang Works (Maintenance)


29



51Baek, Sung-Kwan

Vice President

Business Investment Dept., Vietnam
    Steel Project Dept., Magnesium Project Dept.


26



51Cho, Chang-Hwan

Vice President

Deputy General Superintendent,
    Gwangyang Works (Maintenance)


27



52Yoon, Dong-Jun

Vice President

Business Innovation Dept.


23



48   Item 6.B.
    Compensation  Compensation
    of Directors and Officers
   45




---



##### Table of Contents



Item 6.C.
    Board
    Practices  Director
    Candidate Recommendation Committee
    Evaluation
    and Compensation Committee
    Finance
    and Operation Committee
    Executive
    Management Committee
    Audit
    Committee
   46




---



##### Table of Contents




    engaging independent auditors;
    approving independent audit fees;
    approving audit and non-audit services;
    reviewing annual financial statements;
    reviewing audit results and reports, including management
    comments and recommendations;
    reviewing our system of controls and policies, including those
    covering conflicts of interest and business ethics; and
    examining improprieties or suspected improprieties.    Insider
    Trading Committee
   47




---



##### Table of Contents



Differences
    in Corporate Governance Practices
    NYSE Corporate Governance Standards

POSCOs Corporate Governance PracticeDirector IndependenceIndependent 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
    Securities and Exchange Act of Korea.The majority of our board of
    directors is independent (as defined in accordance with the New
    York Stock Exchanges standards), and 9 out of
    15 directors are Outside Directors.Nomination/Corporate Governance
    CommitteeListed 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 Standing Director.Compensation CommitteeListed companies must have a
    compensation committee composed entirely of independent directors

We maintain an Evaluation and
    Compensation Committee composed of four Outside Directors.Executive SessionListed 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 CommitteeListed companies must have an audit
    committee that is composed of more than three directors and
    satisfy the requirements of Rule 10A-3 under the Exchange Act

We maintain an Audit Committee
    comprised of four Outside Directors who meet the applicable
    independence criteria set forth under Rule 10A-3 under the
    Exchange Act.Shareholder Approval of Equity
    Compensation PlanListed companies must allow its
    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
    incorporations to delete the provision allowing grant of stock
    options to officers and directors. Consequently we may not grant
    stock options to officers and directors starting February 24,
    2006. Matters related to the Employee Stock Ownership Program
    are not subject to shareholders approval under Korean law. 48




---



##### Table of Contents



NYSE Corporate Governance Standards

POSCOs Corporate Governance PracticeCorporate Governance
    GuidelinesListed 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.co.kr.Code of Business Conduct and
    EthicsListed 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.co.kr.   Item 6.D.
    Employees         49




---



##### Table of Contents



Item 6.E.
    Share
    Ownership  Common
    Stock
    Number of CommonShareholders

Shares OwnedChang-Kwan Oh


770Jong-Tae Choi


673E. Han Kim


364Jin-Il Kim


150Young-Ik Jang


138In-Bong Lee


130Tai-Han Yun


130In-Hwan Jang


130Joon-Sik Kim


128Tae-Man Kim


91Yong-Chul Yoon


81Yong-Won Yoon


79Noi-Ha Cho


70Soo-Kwan Kim


42Sang-Wook Ha


40Oh-Joon Kwon


19Han-Yong Park


12Jun-Gil Cho


2Youn Lee


2Dong-Jin Kim


2Nam-Suk Hur


2Kee-Yeoung Park


2Jong-Hai Won


2Kwang-Jae Yoo


2Total


3,061  50




---



##### Table of Contents



Stock
    Options
      Number of


Number of


Number ofExercise Period


Exercise


Granted


Exercised


ExercisableDirectors

Grant Date

From


To


Price


Options


Options


OptionsKu-Taek Lee

July 23, 2001


7/24/2003



7/23/2008



98,900



45,184



24,518



20,666July 23, 2004


7/24/2006



7/23/2011



151,700



49,000



0



49,000Tae-Hyun Hwang

July 23, 2001


7/24/2003



7/23/2008



98,900



9,037



7,653



1,384April 26, 2003


4/27/2005



4/26/2010



102,900



1,921



192



1,729Seok-Man Yoon

September 18, 2002


9/19/2004



9/18/2009



116,100



11,179



4,000



7,179July 23, 2004


7/24/2006



7/23/2011



151,700



7,840



0



7,840Youn Lee

July 23, 2001


7/24/2003



7/23/2008



98,900



9,037



903



8,134April 26, 2003


4/27/2005



4/26/2010



102,900



1,921



192



1,729July 23, 2004


7/24/2006



7/23/2011



151,700



7,840



0



7,840Joon-Yang Chung

April 27, 2002


4/28/2004



4/27/2009



136,400



9,316



3,931



5,385July 23, 2004


7/24/2006



7/23/2011



151,700



4,900



0



4,900Soung-Sik Cho

July 23, 2001


7/24/2003



7/23/2008



98,900



9,037



5,903



3,134April 26, 2003


4/27/2005



4/26/2010



102,900



1,921



192



1,729Dong-Hee Lee

April 26, 2003


4/27/2005



4/26/2010



102,900



9,604



960



8,644Young-Ju Park

July 23, 2004


7/24/2006



7/23/2011



151,700



1,862



0



1,862E. Han Kim

April 26, 2003


4/27/2005



4/26/2010



102,900



2,401



0



2,401Kwang-Woo Jun

July 23, 2004


7/24/2006



7/23/2011



151,700



1,862



0



1,862Jeffrey D. Jones

July 23, 2004


7/24/2006



7/23/2011



151,700



1,862



0



1,862Yoon-Suk Suh

July 23, 2004


7/24/2006



7/23/2011



151,700



1,862



0



1,862Wook Sun

April 28, 2005


4/29/2007



4/28/2012



194,900



2,000



0



2,000Charles Ahn

April 28, 2005


4/29/2007



4/28/2012



194,900



2,000



0



2,000   51




---



##### Table of Contents



Number of


Number of


Number ofExercise Period


Exercise


Granted


Exercised


ExercisableExecutive Officers

Grant Date

From


To


Price


Options


Options


OptionsDong-Jin Kim

July 23, 2001


7/24/2003



7/23/2008



98,900



9,037



7,903



1,134April 26, 2003


4/27/2005



4/26/2010



102,900



1,921



192



1,729July 23, 2004


7/24/2006



7/23/2011



151,700



7,840



0



7,840Jin-Chun Kim

July 23, 2001


7/24/2003



7/23/2008



98,900



9,037



8,037



1,000Jong-Tae Choi

July 23, 2001


7/24/2003



7/23/2008



98,900



9,037



4,903



4,134April 26, 2003


4/27/2005



4/26/2010



102,900



1,921



192



1,729Sang-Ho Kim

April 28, 2005


4/29/2007



4/28/2012



194,900



12,000



0



12,000Nam-Suk Hur

April 27, 2002


4/28/2004



4/27/2009



136,400



9,316



5,316



4,000April 28, 2005


4/29/2007



4/28/2012



194,900



2,000



0



2,000Chang-Kwan Oh

April 27, 2002


4/28/2004



4/27/2009



136,400



9,316



3,931



5,385Young-Tae Kwon

September 18, 2002


9/19/2004



9/18/2009



116,100



9,316



931



8,385Hyun-Shik Chang

April 26, 2003


4/27/2005



4/26/2010



102,900



9,604



960



8,644Jin-Il Kim

April 26, 2003


4/27/2005



4/26/2010



102,900



9,604



8,272



1,332Oh-Joon Kwon

April 26, 2003


4/27/2005



4/26/2010



102,900



9,604



960



8,644Han-Yong Park

April 26, 2003


4/27/2005



4/26/2010



102,900



9,604



5,282



4,322Keel-Sou Chung

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Sang-Wook Ha

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Sang-Young Kim

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Young-Suk Lee

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Sang-Myun Kim

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Kee-Yeoung Park

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Kyu-Jeong Lee

July 23, 2004


7/24/2006



7/23/2011



151,700



9,800



0



9,800Jong-Hai Won

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000Tae-Man Kim

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000Jun-Gil Cho

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000Kwang-Jae Yoo

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000Yong-Chul Yoon

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000Noi-Ha Cho

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000Yong-Won Yoon

April 28, 2005


4/29/2007



4/28/2012



194,900



10,000



0



10,000  52




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##### Table of Contents



Item 7.
    Major
    Shareholders and Related Party Transactions  Item 7.A.
    Major
    Shareholders    Number ofShareholders

Shares Owned


PercentageNational Pension Corporation


2,496,272



2.86SK Telecom


2,481,310



2.85Pohang University of Science and
    Technology


2,330,000



2.67Directors and executive officers
    as a group


3,061



0.00Public(1)


70,282,299



80.61POSCO (held in the form of
    treasury stock)


7,022,466



8.06POSCO (held through treasury stock
    fund)


2,571,427



2.95Total issued shares of common stock


87,186,835



100.00
%     (1)
    
    Includes 18,753,548 shares of common stock, representing
    21.51% of the total issued shares of common stock, in the form
    of ADRs.  Item 7.B.
    Related
    Party Transactions      Item 7.C.
    Interests
    of Experts and Counsel    Item 8.
    Financial
    Information  Item 8.A.
    Consolidated
    Statements and Other Financial Information    Legal
    Proceedings
  Claim
    against the Fair Trade Commission
     53




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##### Table of Contents



Anti-dumping
    and Countervailing Proceedings and Safeguard
    Measures
      Dividends
      Average TotalAnnual Dividend per


Interim Dividend per


Dividend perYear

Common Stock to Public


Common Stock


Common Stock(In Won)2002


3,000



500



3,5002003


5,000



1,000



6,0002004


6,500



1,500



8,0002005


6,000



2,000



8,0002006


6,000



2,000



8,000       Item 8.B.
    Significant
    Changes  Not Applicable
  Item 9.
    The
    Offer and Listing  Item 9.A.
    Offer
    and Listing Details  Market
    Price Information
  Notes
  Not Applicable
 54




---



##### Table of Contents



Common
    Stock
    Price

Average DailyHigh

Low

Trading Volume(In Won)

(Number of Shares)2002First Quarter


160,000



117,500



303,579Second Quarter


154,000



121,500



323,772Third Quarter


139,000



101,000



324,477Fourth Quarter


130,500



103,500



269,6242003First Quarter


133,000



92,400



336,187Second Quarter


127,000



97,500



300,224Third Quarter


152,500



123,500



310,936Fourth Quarter


163,000



131,500



345,2722004First Quarter


181,000



156,500



312,764Second Quarter


177,000



131,000



413,523Third Quarter


184,000



145,000



241,698Fourth Quarter


203,000



163,000



287,6322005First Quarter


225,500



176,500



293,360Second Quarter


203,000



174,500



298,650Third Quarter


240,500



182,000



295,458Fourth Quarter


236,500



199,500



334,1402006First Quarter


251,500



196,500



391,776Second Quarter


287,000



217,500



381,220Third Quarter


254,000



225,500



269,202Fourth Quarter


318,500



239,000



243,5472007First Quarter


395,000



286,500



282,570January


329,500



286,500



249,795February


377,500



338,000



296,034March


395,000



333,000



304,724Second Quarter (through June 26)


481,000



366,000



252,448April


400,000



366,000



274,187May


446,000



392,500



212,728June (through June 26)


481,000



443,000



274,661  55




---



##### Table of Contents



ADSs
      Price


Average DailyHigh


Low


Trading Volume(In US$)


(Number of ADSs)2002First Quarter


29.25



22.41



372,788Second Quarter


30.64



23.35



355,145Third Quarter


29.52



21.30



354,089Fourth Quarter


27.40



21.20



268,7502003First Quarter


28.66



18.46



324,595Second Quarter


26.55



19.26



333,511Third Quarter


32.49



26.08



262,191Fourth Quarter


33.97



28.98



477,5802004First Quarter


38.43



33.55



578,963Second Quarter


39.01



27.97



1,013,306Third Quarter


40.14



32.47



729,723Fourth Quarter


47.50



36.49



765,0032005First Quarter


54.85



41.22



866,811Second Quarter


49.70



43.75



790,208Third Quarter


57.08



44.12



606,928Fourth Quarter


56.01



47.85



671,0242006First Quarter


63.80



48.97



812,089Second Quarter


74.41



56.07



922,906Third Quarter


66.88



58.59



760,752Fourth Quarter


84.88



63.00



748,7892007First Quarter


106.88



76.49



770,003January


88.18



76.49



718,195February


59.77



89.96



728,882March


106.88



89.87



852,614Second Quarter (through June 26)


129.60



99.34



719,552April


107.93



99.34



736,761May


119.30



105.16



639,143June (through June 26)


129.60



117.9



798,707  56




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##### Table of Contents



Item 9.B.
    Plan
    of Distribution  Not Applicable
  Item 9.C.
    Markets  The
    Korean Securities Market
         57




---



##### Table of Contents



Period AverageDividend


PriceYield(1)(2)


EarningsYear

Opening


High


Low


Closing


(Percent)


Ratio(2)(3)1979


131.28



131.28



104.38



118.97



17.8



3.81980


100.00



119.36



100.00



106.87



20.9



2.61981


97.95



165.95



93.14



131.37



13.2



3.11982


123.60



134.48



106.00



128.99



10.5



3.41983


122.52



134.46



115.59



121.21



6.9



3.81984


115.25



142.46



115.25



142.46



5.1



4.51985


139.53



163.37



131.40



163.37



5.3



5.21986


161.40



279.67



153.85



272.61



4.3



7.61987


264.82



525.11



264.82



525.11



2.6



10.91988


532.04



922.56



527.89



907.20



2.4



11.21989


919.61



1,007.77



844.75



909.72



2.0



13.91990


908.59



928.82



566.27



696.11



2.2



12.81991


679.75



763.10



586.51



610.92



2.6



11.21992


624.23



691.48



459.07



678.44



2.2



10.91993


697.41



874.10



605.93



866.18



1.6



12.71994


879.32



1,138.75



855.37



1,027.37



1.2



16.21995


1,027.45



1,016.77



847.09



882.94



1.2



16.41996


882.29



986.84



651.22



651.22



1.3



17.81997


647.67



792.29



350.68



376.31



1.5



17.01998


374.41



579.86



280.00



562.46



1.9



10.81999


565.10



1,028.07



498.42



1,028.07



1.1



13.52000


1,028.33



1,059.04



500.60



504.62



1.6



18.62001


503.31



704.50



468.76



693.70



2.0



14.22002


698.00



937.61



584.04



627.55



1.4



17.82003


633.03



822.16



515.24



810.71



2.2



10.92004


821.26



936.06



719.59



895.92



2.1



15.82005


896.00



1,379.37



870.84



1,379.37



1.7



11.02006


1,383.32



1,464.70



1,203.86



1,434.46



1.7



11.42007 (through June 26)


1,438.89



1,813.84



1,345.08



1,749.55



1.6



14.5     Source:
  (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.(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 Stock Market Division of the Korea
    Exchange. Starting in April 2000, excludes classified companies,
    companies which did not submit annual reports to the Stock
    Market Division of the Korea Exchange, 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.   58




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##### Table of Contents



Rounded DownPrevious Days Closing Price (Won)

to (Won)Less than 5,000


55,000 to less than 10,000


1010,000 to less than 50,000


5050,000 to less than 100,000


100100,000 to less than 500,000


500500,000 or more


1,000      59




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##### Table of Contents



Market Capitalizationon the Last Day of Each Period


Average Daily Trading Volume and ValueNumber ofListed


(Billions of


(Millions of


Thousands


(Millions of


(Thousands ofYear

Companies


Won)


Dollars)(1)


of Shares


Won)


Dollars)(1)1979


355



2,609



5,391



5,382



4,579



4,6411980


352



2,527



3,829



5,654



3,897



5,9051981


343



2,959



4,224



10,565



8,708



12,4321982


334



3,000



4,408



9,704



6,667



8,9041983


328



3,490



4,387



9,325



5,941



7,4681984


336



5,149



6,223



14,847



10,642



12,8621985


342



6,570



7,381



18,925



12,315



13,8341986


355



11,994



13,924



31,755



32,870



38,1591987


389



26,172



33,033



20,353



70,185



88,5831988


502



64,544



94,348



10,367



198,364



289,9631989


626



95,477



140,490



11,757



280,967



414,4301990


669



79,020



110,301



10,866



183,692



256,4111991


686



73,118



96,107



14,022



214,263



281,6291992


688



84,712



107,448



24,028



308,246



390,9771993


693



112,665



139,420



35,130



574,048



710,3671994


699



151,217



191,730



36,862



776,257



984,2231995


721



141,151



182,201



26,130



487,762



629,6131996


760



117,370



139,031



26,571



486,834



575,6801997


776



70,989



50,162



41,525



555,759



392,7071998


748



137,799



114,091



97,716



660,429



546,8031999


725



349,504



305,137



278,551



3,481,620



3,039,6552000


704



188,042



149,275



306,163



2,602,211



2,065,7392001


689



255,850



192,934



473,241



1,997,420



1,506,2372002


683



258,681



215,496



857,245



3,041,598



2,533,8152003


684



355,363



296,679



542,010



2,216,636



1,850,5892004


683



412,588



395,275



372,895



2,232,109



2,138,4452005


702



655,075



646,158



467,629



3,157,662



3,114,6792006


731



704,588



757,948



279,096



3,435,180



3,695,3312007 (through June 26)


732



860,124



928,658



332,119



4,278,673



4,619,599     Source:
  (1)
    
    Converted at the Concentration Base Rate of The Bank of Korea or
    the Market Average Exchange Rate as announced by the Seoul Money
    Brokerage Services Limited, as the case may be, at the end of
    the periods indicated.   60




---



##### Table of Contents



Further
    Opening of the Korean Securities Market
          Protection
    of Customers Interest in Case of Insolvency of Securities
    Companies
         61




---



##### Table of Contents



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    Item 10.B.
    Memorandum
    and Articles of Association    Dividends
       62




---



##### Table of Contents



Distribution
    of Free Shares
    Preemptive
    Rights and Issuance of Additional Shares
      
    publicly offered pursuant to the Securities and Exchange Act;
    issued to members of our employee stock ownership association;
    represented by depositary receipts;
    issued through offering to public investors, 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; or
    issued to domestic or foreign financial institutions when
    necessary for raising funds in emergency cases.     63




---



##### Table of Contents



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.    The Seoul Shinmun The Maeil
    Shinmun The Kwangju Ilbo
    Voting
    Rights
      
    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;
    effecting our acquisition of all of the business of any other
    company;
    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.   64




---



##### Table of Contents



Rights of
    Dissenting Shareholders
  20-day
  Register
    of Shareholders and Record Dates
    and/or
  Annual
    Report
     65




---



##### Table of Contents



Transfer
    of Shares
      24-3,
  Acquisition
    of Shares by Us
      Liquidation
    Rights
    Item 10.C.
    Material
    Contracts    Item 10.D.
    Exchange
    Controls  Notes
   66




---



##### Table of Contents



Shares
    and ADSs
      Government
    Review of Issuance of ADRs
      Reporting
    Requirements for Holders of Substantial Interests
     67




---



##### Table of Contents



Restrictions
    Applicable to ADSs
      Restrictions
    Applicable to Shares
    
    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; and
    direct investment as defined in the Foreign Investment Promotion
    Law.     68




---



##### Table of Contents



provided, however
         69




---



##### Table of Contents



Item 10.E.
    Taxation  Form 20-F,
  Korean
    Taxation
    
    a resident of Korea;
    a corporation with registered office or main office is located
    in Korea or actual management of which takes place in
    Korea; or
    engaged in a trade or business in Korea through a permanent
    establishment or a fixed base to which the relevant income is
    attributable or with which the relevant income is effectively
    connected.  Note
  Taxation
    of Interest
    Taxation
    of Capital Gains
   70




---



##### Table of Contents



Inheritance
    Tax and Gift Tax
      Shares
    or ADSs
  Dividends
    on the Shares of Common Stock or ADSs
      Taxation
    of Capital Gains
         71




---



##### Table of Contents



Tax
    Treaties
  Korea-United Korea-United Korea-United
    Inheritance
    Tax and Gift Tax
        Securities
    Transaction Tax
   72




---



##### Table of Contents



United
    States Taxation
    
    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 notes, shares of common stock or ADSs that
    are a hedge or that are hedged against interest rate or currency
    risks;
    a person that holds notes, 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.        
    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 note, share of common stock or
    ADS. 73




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##### Table of Contents



Notes
  Interest
    Sale,
    Exchange or Retirement
    Shares
    of Common Stock and ADSs
    Dividends
         74




---



##### Table of Contents



Sales and
    Other Dispositions
    Foreign
    Tax Credit Considerations
  16-day
      U.S.
    Information Reporting and Backup Withholding Rules
  U.S.-related non-U.S. status U.S.-related
  Item 10.F.
    Dividends
    and Paying Agents    Item 10.G.
    Statements
    by Experts  Not applicable
  Item 10.H.
    Documents
    on Display  Form 20-F, 1-800-SEC-0330.
 75




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##### Table of Contents



http://www.sec.gov.
  Item 10.I.
    Subsidiary
    Information  Not applicable
  Item 11.
    Quantitative
    and Qualitative Disclosures about Market Risk    Exchange
    Rate Risk
      Interest
    Rate Risk
   76




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##### Table of Contents



and/or
  MaturitiesDecember 31, 2006


December 31, 20052007


2008


2009


2010


2011


Thereafter


Total


Fair Value


Total


Fair Value(In millions of Won except rates)Local currency:Fixed rate


344,974



33,825



336,217



4,288



874,315



58,379



1,651,998



1,640,606



991,100



1,017,635Average weighted rate(1)


4.38
%


4.90
%


4.54
%


3.43
%


4.98
%


2.68
%


4.68
%






5.30
%


Variable rate










5,000















5,000



5,000







Average weighted rate(1)










5.31
%














5.31
%










Sub-total


344,974



33,825



341,217



4,288



874,315



58,379



1,656,998



1,645,606



991,100



1,017,635Foreign currency, principally
    Dollars and Yen:Fixed rate


1,290,619



433,678



73,325



190,670



15,194



693,112



2,696,599



2,753,934



2,020,892



2,035,777Average weighted rate(1)


3.54
%


0.30
%


4.48
%


5.92
%


5.39
%


3.70
%


3.27
%






2.82
%


Variable rate


8,019



8,019



8,019



4,010











28,068



28,068



37,357



37,357Average weighted rate(1)


6.17
%


6.17
%


6.17
%


6.17
%










6.17
%






5.50
%


Sub-total


1,298,639



441,698



81,344



194,680



15,194



693,112



2,724,666



2,782,002



2,058,249



2,073,134Total


1,643,612



475,523



422,562



198,968



889,509



751,491



4,381,664



4,427,607



3,049,349



3,090,769     (1)
    
    Weighted average rates of the portfolio at the period end.  Commodity
    Price Risk
    Equity
    Price Risk
    Item 12.
    Description
    of Securities Other than Equity Securities  Not Applicable
 77




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##### Table of Contents



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
  Item 15.
    Controls
    and Procedures  a.
    Disclosure
    Controls and Procedures  Rules 13a-15(e) 15d-15(e)
  b.
    Managements
    Annual Report on Internal Control Over Financial
    Reporting           78




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##### Table of Contents



c.
    Attestation
    Report of the Independent Registered Public Accounting
    Firm  Form 20-F.
  d.
    Changes
    in Internal Control Over Financial Reporting    Item 16.
    [Reserved]  Item 16A.
    Audit
    Committee Financial Expert    Item 16B.
    Code
    of Ethics  Form 20-F www.posco.co.kr.
  Item 16C.
    Principal
    Accountant Fees and Services  Audit and
    Non-Audit Fees
    For the Year Ended December 31,2005


2006(In millions of Won)Audit fees


W1,064



W1,485Audit-related fees


846



141Tax fees


59



104Other fees






Total fees


W1,969



W1,730    79




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##### Table of Contents



Audit
    Committee Pre-Approval Policies and Procedures
  case-by-case
  Item 16D.
    Exemptions
    from the Listing Standards for Audit Committees  Not Applicable
  Item 16E.
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers    Total Number of


Maximum NumberShares Purchased as


of Shares that mayTotal Number of


Average Price


Part of Publicly


yet be PurchasedPeriod

Shares Purchased


Paid per Share


Announced Plans


under the Plans(In Won)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


1,347,417


W
261,759



1,347,417



396,318June 1 to June 30


1,055,988



234,409



396,318



July 1 to July 31


613,815
(1)


240,064







August 1 to August 31


117,457
(1)


234,085







September 1 to September 30


73,292
(1)


238,035







October 1 to October 31


15,000
(1)


251,742







November 1 to November 30


8,000
(1)


271,934







December 1 to December 31


177,219
(1)


297,054







Total


3,408,188


W
249,729



1,743,735



     (1)
    
    Stocks purchased through the treasury stock fund PART III  Item 17.
    Financial
    Statements  Not Applicable
 80




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##### Table of Contents



Item 18.
    Financial
    Statements  PageReport of Independent Registered
    Public Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2005 and 2006


F-3Consolidated Statements of Income
    for the Years Ended December 31, 2004, 2005 and 2006


F-4Consolidated Statements of Changes
    in Shareholders Equity for the years ended
    December 31, 2004, 2005 and 2006


F-5Consolidated Statements of Cash
    Flows for the Years Ended December 31, 2004, 2005 and 2006


F-6Notes to Consolidated Financial
    Statements


F-7  81




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##### Table of Contents



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)*7
.1



Computation of ratio of earnings
    to fixed charges8
.1



List of subsidiaries of POSCO12
.1



Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200212
.2



Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200213
.1



Certification pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200215
.1



Consent of Samil
    PricewaterhouseCoopers, the Korean member firm of
    PricewaterhouseCoopers     *
    
    Filed previously 82




---



##### Table of Contents



SIGNATURES
  Form 20-F
     (Registrant)
  Ku-Taek
    Lee
 Title:
    Chief Executive Officer and
    Representative Director   83




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm       Consolidated
    financial statements
      Internal
    control over financial reporting
    Samil PricewaterhouseCoopers is the
    Korean member firm of  PricewaterhouseCoopers.
    PricewaterhouseCoopers refers to the network of member firms of
    PricewaterhouseCoopers International Limited, each of which is a
    separate and independent legal entity.
 F-1




---



##### Table of Contents



F-2




---



##### Table of Contents



POSCO and
    Subsidiaries
  Consolidated Balance Sheets
 December 31, 2006 and 2005
  (Note 2)2006


2005


2006(In millions of Korean wonand thousands of US dollar)ASSETSCurrent assetsCash and cash equivalents, net of
    government grants (Notes 3 and 27)

W
936,288


W
653,364


$
1,006,761Short-term financial instruments
    (Notes 3, 13 and 27)


867,310



760,371



932,591Trading securities (Note 4)


2,000,647



2,610,502



2,151,234Current portion of
    available-for-sales securities (Note 7)


13,375



90,889



14,381Current portion of held-to-maturity
    securities (Note 7)


153,476



2,688



165,028Trade accounts and notes
    receivable, net of allowance for doubtful accounts and present
    value discount (Notes 5, 13, 27 and 28)


3,491,659



3,044,720



3,754,472Other accounts and notes
    receivable, net of allowance for doubtful accounts and present
    value discount (Notes 5, 17, 27 and 28)


246,804



241,587



265,381Inventories, net (Notes 6, 13
    and 29)


4,018,205



3,792,594



4,320,651Deferred income tax assets
    (Note 25)


118,073



131,790



126,960Other current assets, net of
    allowance for doubtful accounts (Note 11)


391,116



311,831



420,555Total current assets


12,236,953



11,640,336



13,158,014Property, plant and equipment, net
    (Notes 8, 13, 14 and 29)


14,643,120



12,271,710



15,745,290Investment securities
    (Notes 7, 13, 27 and 29)


3,165,055



2,815,741



3,403,285Intangible assets, net
    (Notes 9 and 29)


557,082



453,709



599,013Long-term loans receivable, net of
    allowance for doubtful accounts and present value discount
    (Notes 5, 27, 28 and 29)


62,295



42,040



66,984Long-term trade accounts and notes
    receivable, net of allowance for doubtful accounts and present
    value discount (Notes 5, 27 and 29)


44,348



41,390



47,686Deferred income tax assets
    (Notes 25 and 29)


266,866



39,922



286,953Guarantee deposits (Notes 27
    and 29)


60,368



49,081



64,911Long-term financial instruments
    (Notes 3, 13, 27 and 29)


12,339



19,506



13,267Other long-term assets, net of
    allowance for doubtful accounts and present value discount
    (Notes 5, 11 and 29)


100,647



133,875



108,224Total assets

W
31,149,073


W
27,507,310


$
33,493,627LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesTrade accounts and notes payable
    (Notes 27 and 28)

W
1,507,227


W
1,145,729


$
1,620,674Short-term borrowings
    (Notes 12, 27 and 28)


1,238,749



859,774



1,331,988Current portion of long-term debts,
    net of discount on debentures issued (Notes 13 and 27)


404,412



1,057,200



434,851Accrued expenses (Note 27)


221,936



698,062



238,641Other accounts and notes payable
    (Notes 27 and 28)


290,867



194,486



312,760Withholdings (Note 27)


133,131



101,956



143,151Income tax payable


701,037



1,366,847



753,803Deferred income tax liabilities
    (Note 25)


77,541



645



83,377Other current liabilities
    (Note 16)


507,395



456,864



545,589Total current liabilities


5,082,295



5,881,563



5,464,834Long-term debts, net of current
    portion and discount on debentures issued (Notes 13, 27
    and 28)


2,725,502



1,131,270



2,930,648Accrued severance benefits, net
    (Note 15)


331,006



274,812



355,920Deferred income tax liabilities
    (Note 25)


460,342



213,867



494,992Other long-term liabilities
    (Notes 14, 16 and 21)


148,186



132,121



159,338Total liabilities


8,747,331



7,633,633



9,405,732Commitments and contingencies
    (Note 17)Shareholders equityCommon stock (Note 1)


482,403



482,403



518,713Capital surplus (Note 18)


4,035,273



3,991,409



4,339,003Retained earnings (Note 19)


18,863,333



16,168,892



20,283,154( Net income:
    W3,314,181 million in 2006 and W4,022,492 million in
    2005Losses in excess of minority
    interest: W2,568 million in 2006 and W22,448 million
    in 2005)Capital adjustments, net
    (Note 20)


(1,468,474
)


(1,153,697
)


(1,579,005
)21,912,535



19,489,007



23,561,865Minority interestCommon stock


251,479



174,457



270,408Capital surplus and retained
    earnings


237,728



210,213



255,622489,207



384,670



526,030Total shareholders equity


22,401,742



19,873,677



24,087,895Total liabilities and
    shareholders equity

W
31,149,073


W
27,507,310


$
33,493,627    F-3




---



##### Table of Contents



POSCO and
    Subsidiaries
  Consolidated Statements of Income
 Year Ended December 31, 2006, 2005 and 2004
  (Note 2)2006


2005


2004


2006(In millions of Korean won and thousands of US dollar,except per share amounts)Sales (Notes 28 and
    29)

W
25,842,326


W
26,301,788


W
23,973,053


$
27,787,447Cost of goods sold
    (Note 28)


19,896,764



18,767,195



17,360,706



21,394,370Gross profit


5,945,562



7,534,593



6,612,347



6,393,077Selling and administrative
    expenses (Note 23)


1,556,415



1,451,317



1,292,928



1,673,564Operating income


4,389,147



6,083,276



5,319,419



4,719,513Non-operating incomeInterest and dividend income
    (Note 28)


182,832



161,135



141,054



196,594Gain on foreign currency
    transactions


156,722



114,615



130,915



168,518Gain on foreign currency translation


84,269



148,857



177,889



90,611Gain on valuation of trading
    securities


19,467



15,357



22,497



20,932Gain on disposal of trading
    securities


67,284



59,436



43,012



72,349Gain on disposal of property, plant
    and equipment


19,144



24,225



13,769



20,585Gain on valuation of derivatives
    (Note 22)


1,857



1,671



9,594



1,997Gain on derivative transactions
    (Note 22)


15,477



3,857



12,452



16,642Earnings of equity method investees
    (Note 7)


47,147



26,095



3,505



50,695Gain on recovery of allowance for
    doubtful accounts


13,776



18,591



126,861



14,812Gain on disposal of investments


8,183



2,973



7,304



8,799Others


133,066



210,853



139,967



143,083749,224



787,665



828,819



805,617Non-operating expensesInterest expense (Note 28)


183,290



149,337



192,030



197,086Other bad debt expense


70,370



30,146



16,229



75,667Loss on foreign currency
    transactions


137,567



95,646



112,343



147,922Loss on foreign currency translation


4,855



9,091



17,407



5,220Losses of equity method investees
    (Note 7)


722



6,371







776Donations (Note 24)


154,678



153,018



169,546



166,321Loss on disposal of property, plant
    and equipment


54,179



42,815



29,086



58,257Loss on valuation of derivatives
    (Note 22)


820



21,393



2,646



882Loss on derivative transactions
    (Note 22)


40,363



9,000



9,332



43,401Loss on impairment of investments


2,088



11,846



94,824



2,245Others


204,847



854,089



165,273



220,265853,779



1,382,752



808,716



918,042Extraordinary income










3,388



Net income before income tax
    expense and minority interest


4,284,592



5,488,189



5,342,910



4,607,088Income tax expense (Note 25)


921,951



1,473,589



1,501,646



991,345Net income before minority interest


3,362,641



4,014,600



3,841,264



3,615,743Minority interest in income of
    consolidated subsidiaries


48,460



(7,892
)


27,039



52,108Net income

W
3,314,181


W
4,022,492


W
3,814,225


$
3,563,635Per share data(Note 26) (in
    Korean won and US dollar)Basic and diluted ordinary income
    per share

W
42,115


W
50,790


W
47,155


$
45.28Basic and diluted earnings per share


42,115



50,790



47,185



45.28    F-4




---



##### Table of Contents



POSCO and
    Subsidiaries
  Consolidated Statements of Changes in
    Shareholders Equity
 Year Ended December 31, 2006, 2005 and 2004
  Common


Common


Capital


Retained


Capital


MinorityStock


Amount


Surplus


Earnings


Adjustments


Interest


Total(In millions of Korean won and thousands of US dollar)Balance as of January 1,
    2004


88,966,155


W
482,403


W
3,828,773


W
9,875,080


W
(1,229,988
)

W
293,299


W
13,249,567Net income for 2004














3,814,225











3,814,225Effect of change in percentage of
    ownership of investees










1,527



1,167











2,694Dividends














(524,602
)










(524,602
)Change in losses in excess of
    minority interest (Note 19)














(10,042
)






10,042



Retirement of treasury stock


(1,779,320
)










(304,711
)










(304,711
)Change in treasury stock










63,695







158,025







221,720Overseas operations translation
    adjustment


















(126,552
)






(126,552
)Changes in valuation gain and loss
    on investment securities


















51,933







51,933Effect of change in percentage of
    minority interest






















(22,488
)


(22,488
)Minority interest in income of
    consolidated subsidiaries






















27,038



27,038Others










1,383



1



(4,152
)






(2,768
)Balance as of December 31,
    2004


87,186,835


W
482,403


W
3,895,378


W
12,851,118


W
(1,150,734
)

W
307,891


W
16,386,056Balance as of January 1,
    2005


87,186,835


W
482,403


W
3,895,378


W
12,851,118


W
(1,150,734
)

W
307,891


W
16,386,056Net income for 2005














4,022,492











4,022,492Effect of change in scope of
    consolidation (Note 1)










167



3,981











4,148Effect of change in percentage of
    ownership of investees










(12,893
)


598











(12,295
)Dividends














(680,794
)










(680,794
)Change in losses in excess of
    minority interest (Note 19)














(22,448
)






22,448



Change in treasury stock










108,018







(279,061
)






(171,043
)Overseas operations translation
    adjustment


















(11,524
)






(11,524
)Changes in valuation gain and loss
    on investment securities


















290,143







290,143Effect of change in percentage of
    minority interest






















62,223



62,223Minority interest in income of
    consolidated subsidiaries






















(7,892
)


(7,892
)Others










739



(6,055
)


(2,521
)






(7,837
)Balance as of December 31,
    2005


87,186,835


W
482,403


W
3,991,409


W
16,168,892


W
(1,153,697
)

W
384,670


W
19,873,677Balance as of January 1,
    2006


87,186,835


W
482,403


W
3,991,409


W
16,168,892


W
(1,153,697
)

W
384,670


W
19,873,677Net income for 2006














3,314,181











3,314,181Effect of change in scope of
    consolidation (Note 1)










(1,012
)


40,649











39,637Effect of change in percentage of
    ownership of investees










(8,645
)














(8,645
)Dividends














(636,487
)










(636,487
)Change in losses in excess of
    minority interest (Note 19)














(2,568
)






2,568



Change in treasury stock










50,565







(711,485
)






(660,920
)Overseas operations translation
    adjustment (Note 20)


















(51,839
)






(51,839
)Changes in valuation gain and loss
    on investment securities (Note 20)


















462,912







462,912Effect of change in percentage of
    minority interest






















53,509



53,509Minority interest in income of
    consolidated subsidiaries






















48,460



48,460Others










2,956



(21,334
)


(14,365
)






(32,743
)Balance as of December 31,
    2006


87,186,835


W
482,403


W
4,035,273


W
18,863,333


W
(1,468,474
)

W
489,207


W
22,401,742Balance as of January 1,
    2006


87,186,835


$
518,713


$
4,291,838


$
17,385,906


$
(1,240,535
)

$
413,624


$
21,369,546Net income for 2006














3,563,635











3,563,635Effect of change in scope of
    consolidation (Note 1)










(1,088
)


43,709











42,621Effect of change in percentage of
    ownership of investees










(9,296
)














(9,296
)Dividends














(684,394
)










(684,394
)Change in losses in excess of
    minority interest (Note 19)














(2,762
)






2,762



Change in treasury stock










54,371







(765,037
)






(710,666
)Overseas operations translation
    adjustment (Note 20)


















(55,741
)






(55,741
)Changes in valuation gain and loss
    on investment securities (Note 20)


















497,755







497,755Effect of change in percentage of
    minority interest






















57,537



57,537Minority interest in income of
    consolidated subsidiaries






















52,107



52,107Others










3,178



(22,940
)


(15,447
)






(35,209
)Balance as of December 31,
    2006


87,186,835


$
518,713


$
4,339,003


$
20,283,154


$
(1,579,005
)

$
526,030


$
24,087,895    F-5




---



##### Table of Contents



POSCO and
    Subsidiaries
  Consolidated Statements of Cash Flows
 Year Ended December 31, 2006, 2005 and 2004
  (Note 2)2006


2005


2004


2006(In millions of Korean won and thousands of US dollar)Cash flows from operating
    activitiesNet income

W
3,314,181


W
4,022,492


W
3,814,225


$
3,563,635Adjustments to reconcile net income
    to net cash provided by operating activitiesDepreciation and amortization


1,782,738



1,612,556



1,565,361



1,916,923Accrual of severance benefits


144,931



213,082



192,648



155,840Provision for doubtful accounts, net


173,931



115,865



(56,961
)


187,024Gain on foreign currency
    translation, net


(76,453
)


(138,296
)


(165,136
)


(82,208
)Gain on valuation of trading
    securities, net


(18,863
)


(15,124
)


(22,497
)


(20,282
)Loss (gain) on valuation of
    derivatives, net


(1,037
)


19,722



(6,948
)


(1,115
)Loss (gain) on derivatives
    transaction, net


24,886



5,143



(3,120
)


26,759Gain on disposal of trading
    securities and investments, net


(66,507
)


(58,865
)


(42,159
)


(71,513
)Loss on disposal of property, plant
    and equipment, net


35,035



18,590



15,317



37,672Earnings of equity method
    investees, net


(46,425
)


(19,724
)


(3,505
)


(49,919
)Minority interest in income of
    consolidated subsidiaries


48,460



(7,892
)


27,039



52,107Others


374,968



391,778



382,045



403,1902,375,664



2,136,835



1,882,084



2,554,478Changes in operating assets and
    liabilitiesDecrease(Increase) in trade
    accounts and notes receivable


(398,201
)


45,112



(869,353
)


(428,173
)Increase in inventories


(380,143
)


(706,528
)


(903,532
)


(408,756
)Increase in other accounts and
    notes receivable


(30,932
)


(94,499
)


(63,329
)


(33,260
)Increase in accrued income


(26,205
)


(19,757
)


33,906



(28,178
)Increase in advance payments


(73,034
)


(83,702
)


1,076



(78,531
)Increase in prepaid expenses


(5,009
)


(1,360
)


(1,565
)


(5,386
)Increase(Decrease) in trade
    accounts and notes payable


272,270



(170,131
)


317,983



292,764Increase(Decrease) in other
    accounts and notes payable


122,673



(7,571
)


73,813



131,906Increase(Decrease) in advances
    received


78,449



(7,888
)


104,073



84,354Increase(Decrease) in accrued
    expenses


(459,579
)


493,376



52,874



(494,171
)Increase(Decrease) in income tax
    payable


(715,691
)


281,240



486,198



(769,560
)Deferred income tax, net


(59,480
)


(151,602
)


137,986



(63,957
)Payment of severance benefits


(36,817
)


(84,049
)


(28,346
)


(39,588
)Increase in group severance
    insurance deposits


(48,880
)


(98,790
)


(95,848
)


(52,559
)Increase(Decrease) in other current
    liabilities


5,855



(30,479
)


(4,598
)


6,296Others


(35,515
)


(58,375
)


8,247



(38,189
)(1,790,239
)


(695,003
)


(750,415
)


(1,924,988
)Net cash provided by operating
    activities


3,899,606



5,464,324



4,945,894



4,193,125Cash flows from investing
    activitiesDisposal of trading securities


15,322,978



12,758,304



10,482,755



16,476,321Acquisition of trading securities


(14,516,637
)


(12,536,599
)


(10,546,422
)


(15,609,287
)Disposal of available-for-sale
    securities


145,990



347,987



27,558



156,978Acquisition of available-for-sale
    securities


(669,732
)


(620,686
)


(194,344
)


(720,142
)Disposal of short-term financial
    instruments


1,516,362



1,322,222



1,416,087



1,630,497Acquisition of short-term financial
    instruments


(1,610,510
)


(1,434,935
)


(1,354,342
)


(1,731,732
)Disposal of long-term financial
    instruments


113,339



1,509



3



121,870Acquisition of property, plant and
    equipment


(3,709,422
)


(3,360,537
)


(2,265,074
)


(3,988,626
)Disposal of property, plant and
    equipment


425,976



66,273



74,041



458,039Collection of short-term loans


64,436



107,484



100,983



69,286Short-term loans provided


(62,641
)


(119,033
)


(39,864
)


(67,356
)Long-term loans provided


(6,388
)


(33,406
)


(4,665
)


(6,869
)Acquisition of intangible assets


(131,575
)


(81,605
)


(89,739
)


(141,479
)Acquisition of other investment
    assets


(131,096
)


(239,211
)


(1,083,445
)


(140,962
)Others


(130,556
)


77,816



90,326



(140,383
)Net cash used in investing
    activities


(3,379,476
)


(3,744,417
)


(3,386,142
)


(3,633,846
)Cash flows from financing
    activitiesProceeds from short-term borrowings


4,119,189



4,828,860



5,847,951



4,429,236Proceeds from long-term debt


2,160,279



594,312



280,038



2,322,881Proceeds from other long-term
    liabilities


15,535



497,193



72,136



16,704Disposal of treasury stock


69,779



931,664



81,724



75,031Repayment of current portion of
    long-term debt


(1,188,281
)


(1,040,410
)


(1,018,064
)


(1,277,722
)Repayment of short-term borrowings


(3,821,014
)


(4,715,293
)


(5,861,889
)


(4,108,617
)Repayment of long-term debt


(165,212
)


(328,037
)


(106,558
)


(177,648
)Payment of cash dividends


(636,487
)


(680,794
)


(524,570
)


(684,394
)Acquisition of treasury stock


(851,123
)


(1,295,163
)


(304,712
)


(915,186
)Repayment of other long-term
    liabilities


(78,173
)


(398,998
)


(76,300
)


(84,057
)Others


148,808



29,024



(39,477
)


160,010Net cash used in financing
    activities


(226,700
)


(1,577,642
)


(1,649,721
)


(243,762
)Effect of exchange rate changes on
    cash and cash equivalents


(15,245
)


(4,425
)


(22,267
)


(16,393
)Net increase in cash and cash
    equivalents from changes in consolidated subsidiaries


4,364



33,939



382



4,693Net increase(decrease) in cash and
    cash equivalents


282,549



171,779



(111,854
)


303,817Cash and cash
    equivalentsBeginning of the period


653,871



482,092



593,946



703,087End of the period

W
936,420


W
653,871


W
482,092


$
1,006,904   Supplemental cash flow information for the years ended
    December 31 is follows:
  2006


2005


2004


2006(In millions of Korean won and thousands of US dollar)Cash paid during the year for
    interest

W
179,501


W
154,240


W
214,845


$
193,012Cash paid during the year for
    Income tax


1,305,077



1,443,439



854,899



1,403,309    F-6




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes
    to Consolidated Financial Statements
 December 31,
    2006 and 2005
  1.
    Consolidated
    Companies    The
    Controlling Company
      Percentage ofNumber of Shares


Ownership (%)National Pension Corporation


2,496,272



2.86SK Telecom Co., Ltd.


2,481,310



2.85Pohang University of Science and
    Technology


2,330,000



2.67Others


79,879,253



91.6287,186,835



100.00     Consolidated
    Subsidiaries
    Number of











Percentage of




Percentage ofPrimary




Outstanding


Number of Shares


Ownership




Ownership ofSubsidiaries

Business

Net Assets


Shares


POSCO


Subsidiaries


Total


(%)


Location

Subsidiaries (%)(In millions of Korean Won)(1)DomesticPOSCO E & C

Engineering and
    construction

W
1,106,668



30,000,000



27,281,080







27,281,080



90.94


Pohang

Posteel Co., Ltd.

Steel sales and
    service


293,447



18,000,000



17,155,000







17,155,000



95.31


Pohang

POSCON Co., Ltd.

Electronic
    control devices
    manufacturing


129,593



3,519,740



3,098,610







3,098,610



88.04


Pohang

Pohang Coated Steel
    Co., Ltd.

Coated steel
    manufacturing


267,016



6,000,000



4,000,000







4,000,000



66.67


Pohang

POSCO Machinery &
    Engineering Co., Ltd.

Steel work maintenance


51,062



1,700,000



1,700,000







1,700,000



100.00


Pohang

POSDATA Co., Ltd.

Computer hardware
    and software


159,511



81,551,600



50,440,720







50,440,720



61.85


Sungnam

distributionPOSCO Research Institute

Economic research


23,010



3,800,000



3,800,000







3,800,000



100.00


Seoul

and consultingSeung Kwang Co., Ltd.

Athletic facilities


43,647



3,945,000



2,737,000



1,208,000



3,945,000



100.00


Suncheon

POSCO E & Coperation



























(30.62) F-7




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Number of











Percentage of




Percentage ofPrimary




Outstanding


Number of Shares


Ownership




Ownership ofSubsidiaries

Business

Net Assets


Shares


POSCO


Subsidiaries


Total


(%)


Location

Subsidiaries (%)(In millions of Korean Won)(1)POS-AC Co., Ltd.

Architecture and

W
23,294



230,000



230,000







230,000



100.00


Seoul

consultingPOSCO Specialty Steel Co., Ltd.
    (Formerly Changwon Specialty Steel Co., Ltd.)

Specialty steel 
    manufacturing


436,303



26,000,000



26,000,000







26,000,000



100.00


Changwon

POSCO Machinery Co., Ltd.

Machinery 
    installation


33,135



1,000,000



1,000,000







1,000,000



100.00


Gwangyang

POSTECH Venture Capital Corp.

Investment in
    venture companies


32,740



6,000,000



5,700,000







5,700,000



95.00


Pohang

POSCO Refractories &
    Environment Company Ltd. (POSREC)

Manufacturing


120,342



5,907,000



3,544,200







3,544,200



60.00


Pohang

POSCO Terminal Co., Ltd.

Distribution and 
    warehousing


32,600



5,000,000



2,550,000







2,550,000



51.00


Gwangyang

Posmate Co., Ltd.
    (Formerly Dongwoosa Service Inc.)

Facilities management


31,385



714,286



214,286







214,286



30.00


Seoul

Samjung Packing &
    Aluminum Co., Ltd.

Packing materials 
    manufacturing


68,955



3,000,000



270,000



831,756



1,101,756



36.73


Pohang

Posmate Inc.
    (27.73)POSCO Power Corp.

Generation of Electricity


489,762



40,000,000



40,000,000







40,000,000



100.00


Seoul

(3)POSTECH 2006 Energy Fund

Investment in new 
    technology


28,619



















22.11


Seoul

POSTECH 
    Venture
    Capital Corp.
    (10.53)(2)(3)
    POSCO Power
    Corp.(11.58)POSCO America Corporation (POSAM)

Steel trading


111,614



317,806



316,051



1,755



317,806



100.00


U.S.A.

POSCAN (0.55)POSCO Australia Pty. Ltd. (POSA)

Steel trading


88,772



761,775



761,775







761,775



100.00


Australia

POSCO Canada Ltd. (POSCAN)

Coal trading


59,582



1,099,885







1,099,885



1,099,885



100.00


Canada

Posteel (100.00)POSCO Asia Co.,Ltd. (POA)

Steel trading


18,353



9,360,000



9,360,000







9,360,000



100.00


Hongkong

VSC POSCO Steel Corporation (VPS)

Steel manufacturing


11,352



















40.00


Vietnam

Posteel (5.00) 
    Posteel (15.00)(2)DALIAN POSCO  CFM Coated
    Steel Co., Ltd.

Coated steel 
    manufacturing


12,894



















55.00


China

POSCO-China 
    Holding Corp. 
    (10.00)(2)POS-Tianjin Coil Center Co.,
    Ltd.

Steel service center


7,880



















70.00


China

Posteel (60.00)(2)POSMETAL Co., Ltd.

Steel service center


6,304



6,000







3,000



3,000



50.00


Japan

Posteel (50.00)Shanghai Real Estate Development
    Co., Ltd.

Real estate rental


76,688



















100.00


China

POSCO E & C 
    (100.00)(2)
    POSCO E & CIBC Corporation

Real estate rental


21,958



















60.00


Vietnam

(60.00)(2)POSLILAMA Steel Structure Co.,
    Ltd.

Steel structure 
    fabrication and sales


(14,075
)


















70.00


Vietnam

POSCO E & C 
    (60.00), 
    Posteel 
    (10.00)(2)Zhangjiagang Pohang Stainless Steel
    Co., Ltd. (ZPSS)

Stainless steel 
    manufacturing


481,471



















82.48


China

POSCO-China 
    Holding Corp. 
    (23.88)(2)Guangdong Pohang Coated Steel Co.,
    Ltd.

Coated steel 
    manufacturing


18,377



















95.19


China

POSCO-China 
    Holding Corp.(11.52)(2)POSCO-Thailand Co., Ltd.

Steel service 
    center


15,247



5,941,570



2,327,288



2,136,187



4,463,475



75.12


Thailand

Posteel (35.95) F-8




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Number of











Percentage of




Percentage ofPrimary




Outstanding


Number of Shares


Ownership




Ownership ofSubsidiaries

Business

Net Assets


Shares


POSCO


Subsidiaries


Total


(%)


Location

Subsidiaries (%)(In millions of Korean Won)(1)Zhangjiagang POSHA Steel Port Co.,
    Ltd. (ZPSP)

Depot service

W
12,391



















90.00


China

POSCO E & C 
    (25.00), 
    ZPSS (65.00)(2)POSCO Investment Co., Ltd.

Finance


64,793



5,000,000



5,000,000







5,000,000



100.00


Hongkong

Qingdao Pohang Stainless Steel Co.,
    Ltd.

Stainless steel 
    manufacturing


63,728



















80.00


China

POSCO-China 
    Holding Corp.
    (10.00)(2)POSCO (Suzhou) Automotive
    Processing Center Co., Ltd.

Steel service 
    center


21,279



















100.00


China

POSCO-China
    Holding Corp.
    (10.00)(2)POSEC-Hawaii Inc.

Construction


15,186



24,400







24,400



24,400



100.00


U.S.A.

POSCO E & C
    (100.00)POS-Qingdao Coil Center Co.,
    Ltd.

Steel service 
    center


7,876



















100.00


China

Posteel (100.00)(2)POS-ORE Pty. Ltd.

Iron ore mining 
    and trading


27,994



17,500,001







17,500,001



17,500,001



100.00


Australia

POSA (100.00)POSCO-China Holding Corp.

Investment


167,666



















100.00


China

(2)POSCO-JAPAN Co., Ltd.

Steel trading


49,481



90,438



90,438







90,438



100.00


Japan

POSCO Engineering &
    Consulting Co., Ltd. (Zhangjiagang)

Facilities
    manufacturing


5,104



















100.00


China

POSCO E & C 
    (100.00)(2)POS-CD Pty. Ltd.

Coal trading


9,360



12,550,000







12,550,000



12,550,000



100.00


Australia

POSA (100.00)POS-GC Pty. Ltd.

Coal trading


7,813



11,050,000







11,050,000



11,050,000



100.00


Australia

POSA (100.00)POSCO  India Private
    Ltd.

Coal trading


47,608



225,000,000



224,999,999







224,999,999



100.00


India

POS-India Steel Processing Centre
    Pvt. Ltd.

Steel service center


13,746



65,790,858



42,764,058







42,764,058



65.00


India

POS-NPC

Steel service center


(504
)


20,000







18,000



18,000



90.00


Japan

POSCO-JAPAN
    (90.00)(3)POSCO-Foshan Steel Processing
    Center Co.,Ltd.

Steel service center


13,325



















100.00


China

POA(40.00)
    POSCO-China
    (60.00)(2),(3)POSCAN Elkview Coal Ltd.

Coal trading


28,646



304,016







304,016



304,016



100.00


Canada

POSCAN
    (100.00)POS-MPC S.A. de C.V.

Steel service center


13,308



















61.00


Mexico

POSAM
    (61.00)(2),(3)Zhangjigang Pohang Port Co.,
    Ltd.

Raw material and
    steel depot service


9,743



















100.00


China

ZPSS(47.30) 
    ZPSP(27.70) 
    POSCO-China 
    (25.00)(2),(3)POSCO-Vietnam Co., Ltd.

Cold-rolled steel 
    manufacturing
    and sales


34,512



















100.00


Vietnam

(2),(3)     (1)
    
    Net assets of the Companys overseas subsidiaries are
    translated at the exchange rate as of the balance sheet date.(2)
    
    No shares have been issued in accordance with the local laws and
    regulations.(3)
    
    These subsidiaries are newly included in the consolidation. F-9




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Equity-Method
    Investees
    Percentage of




Percentage ofPrimary




Number of Shares


Ownership




Ownership ofInvestees

Business

Net Assets


POSCO


Subsidiaries


Total


(%)


Location

Subsidiaries (%)(In millions of Korean Won)(1)DomesticeNtoB Corporation

E-business

W
20,936



560,000



180,000



740,000



23.13


Seoul

POSDATA and 
    others (5.63)MIDAS Information Technology Co.,
    Ltd.

Engineering


16,889







866,190



866,190



25.46


Seoul

POSCO E & C 
    (25.46)Songdo New City Development
    Inc.

Real estate


(119,916
)














29.90


Seoul

POSCO E&C 
    (29.90)3SNNC Co., Ltd.

Fe-Cr manufacturing


38,402



3,822,000







3,822,000



49.00


Gwangyang

(2)Gale International Korea, Inc.

Real estate


7,527















29.90


Seoul

POSCO E&C 
    (29.90)3ForeignKOBRASCO

Steel trading


74,422



2,010,719,185







2,010,719,185



50.00


Brazil

(2)Fujiura Butsuryu Center Co.,
    Ltd.

Warehousing


2,782







600



600



30.00


Japan

POSCO-JAPAN 
    (30.00)USS  POSCO Industries
    (UPI)

Steel processing


121,016















50.00


U.S.A.

POSAM 
    (50.00)(2),(3)Poschrome (Proprietary) Limited

Fe-Cr manufacturing


24,253



21,675







21,675



25.00


Republic of
    South Africa

Guangdong Xingpu Steel Center Co.,
    Ltd.

Steel processing


13,773















21.00


China

Posteel (10.50)(3)POS-Hyundai Steel Manufacturing
    India Private Ltd.

Steel processing


9,422



2,345,558



4,573,842



6,919,400



29.50


India

Posteel (19.50)POSCO Bioventures LP.

Investment in 
    companies in the 
    bio-tech industry


29,271















100.00


U.S.A.

POSAM
    (100.00)(3),(4)POSVINA Co., Ltd.

Steel manufacturing


4,305















50.00


Vietnam

(2),(3)POSMMIT Steel Centre SDN BHD
    (POSMMIT)

Steel service center


13,064



4,200,000







4,200,000



30.00


Malaysia

PT POSMI Steel Indonesia (POSMI)

Steel service center


8,291



1,193



3,579



4,772



37.87


Indonesia

Posteel (28.40)(2)CAML Resources Pty. Ltd.

Material Processing


55,332







3,239



3,239



33.34


Australia

POSA(33.34)(2)Hubei Huaerliang POSCO Silicon
    Science & Technology Co., Ltd.

Material Processing


10,574















30.00


China

POSCO-China
    (30.00)(3)     (1)
    
    Net assets of the Companys overseas subsidiaries are
    translated at the exchange rate as of the balance sheet date.(2)
    
    The Company owns over 30% equity interest in KOBRASCO, UPI,
    POSMI, POSVINA Co., Ltd and CAML Resources Pty. Ltd. As the
    Company is not the major shareholder, they were excluded from
    consolidation.(3)
    
    No shares have been issued in accordance with the local laws and
    regulations.(4)
    
    The Company owns 100% equity interest in POSCO Bioventures LP.
    However, due to an agreement with POSCO Bioventures LP., which
    prohibits the Company from engaging in management activities,
    POSCO Bioventures LP. was excluded from consolidation. F-10




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Subsidiaries
    Excluded from the Consolidated Financial
    Statements
  Percentage ofNumber of Shares


Percentage of




Ownership ofInvestees

Primary Business

Net Assets


POSCO


Subsidiaries


Total


Ownership (%)


Location

Subsidiaries (%)(In millions of Korean Won)(1)DomesticMetapolis Co., Ltd.

Construction

W
38,477







400,500



400,500



40.05


Hwasung

POSCO E & C
    (40.05)(2)Aroma Soft Corp.

Software consulting,
    reseach, and
    development


6,497







1,004,080



1,004,080



22.35


Seoul

POSTECH Venture
    Capital Corp.
    (22.35)(2)Applied Science Corp.

Semiconductor
    componants 
    manufacturing


665







33,870



33,870



29.97


Seoul

POSTECH Venture
    Capital Corp.
    (29.97)(2)POSBRO Co., Ltd.

WiBro Multi-Player
    terminals R&D and
    sales


395







1,224,000



1,224,000



51.00


Gunpo

POSDATA
    (51.00)(4)PHP Co., Ltd.

Rental residence
    construction and
    management


300







400,000



400,000



100.00


Incheon

POSCO E & C
    (100.00)(4)ForeignPT. POSNESIA Stainless Steel
    Industry

STS/CR


11,458



29,610,000







29,610,000



70.00


Indonesia

(3)Myanmar- POSCO Steel Co., Ltd.

Steel manufacturing
    and sales


3,506



13,440







13,440



70.00


Myanmar

(5)Dalian Poscon Dongbang Automatic
    Co., Ltd.

Facilities
    manufacturing


1,437















70.00


China

POSCON (70.00)(2)Qingdao Posco Steel Processing Co.,
    Ltd.

Steel service center


1,321















100.00


China

POA (100.00)(2)VECTUS Ltd.

Transportation
    (transportation
    system, PRT)


4,219







3,250,000



3,250,000



100.00


U.K.

POSTEEL (76.93) 
    POSCON (7.69) 
    POSDATA (7.69)(2)
    POSCO Machinery
    & Engineering (7.69)Yingkou Putie Furnace Refractories
    Co., Ltd.

Manufacturing


132















25.00


China

POSREC (25.00)(2)Liaoning Rongyuan Posco
    Refractories Co., Ltd.

Manufacturing


4,030















35.00


China

POSREC (35.00)(2)POSCO E&C (Beijing) Co.,
    Ltd.

Construdtion and
    engineering


6,381















100.00


China

POSCO E & C 
    (100.00)(2)Zhangjiagang Pohang Refractories
    Co., Ltd.

Manufacturing


1,166















50.00


China

POSREC (50.00)(2)POSCO Engineering &
    Construction Nigeria, Ltd.

Construdtion and
    engineering


1,929















100.00


Nigeria

POSCO E & C
    (100.00)(4)Nickel Mining Company SAS

Fe-Cr manufacturing


57



490







490



49.00


New Caledonia

(4)POSDATA-China

Computer service


193















100.00


China

POSDATA 
    (100.00)(4)POS-YPC Co., Ltd

Steel manufacturing,
    warehousing, and
    shipping


(169
)






34,000



34,000



69.40


Japan

POSCO-Japan
    (69.4)(4)POSK Steel (Pinghu) Processing
    Center Co., Ltd.

Steel manufacturing
    and sales


4,653















20.00


China

(4)     (1)
    
    The net assets of the Companys overseas subsidiaries are
    translated at the exchange rate as of the balance sheet date.(2)
    
    Total assets were less than W7,000 million as of
    December 31, 2006.(3)
    
    The investee is in the process of liquidation as of
    December 31, 2006.(4)
    
    The capital investment was less than W7,000 million as of
    December 31, 2006.(5)
    
    The investee has shut down operations as of December 31,
    2006. F-11




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Change
    in Scope of Consolidation
  POS-MPC
      Subsidiaries

Location

ReasonMyanmar- POSCO Steel Co.,
    Ltd.

Myanmmar

Suspension of businessKorea Energy Investment, Ltd.

Korea

Disolved after being merged by
    POSCO Power Corp.SEO MUEUN Development Inc.

Korea

Cancelation of management
    agreement   2.
    Summary
    of Significant Accounting Policies    Basis
    of Consolidated Financial Statements Presentation
    Accounting
    Estimates
    Application
    of the Statements of Korean Financial Accounting
    Standards
   F-12




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    06-2
  Principles
    of Consolidation
      Cash
    and Cash Equivalents, and Financial Instruments
    Revenue
    Recognition
        Allowance
    for Doubtful Accounts
   F-13




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Inventories
  materials-in-transit,
  first-in,
  Investments
    in Securities
  Investments in Securities
        Investments
    in Affiliates
   F-14




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Property,
    Plant and Equipment
    EstimatedUseful LivesBuildings and structures


5-60 yearsMachinery and equipment


3-25 yearsTools


4-20 yearsVehicles


3-10 yearsFurniture and fixtures


3-20 years      F-15




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Intangible
    Assets
    EstimatedUseful LivesGoodwill


5 yearsNegative goodwill


5-10 yearsIntellectual property rights


5-10 yearsPort facilities usage rights


1-75 years
(2)Land usage rights


20-50 years
(2)Deferred development expenses



(1)Long term power capacity rights


contract termOther intangible assets


2-25 years     (1)
    
    The costs incurred in relation to the development of new
    products and new technologies, including the development cost of
    internally used software and related costs, are recognized and
    recorded as development costs only if it is probable that future
    economic benefits that are attributable to the asset will flow
    into the entity and the cost of the asset can be measured
    reliably. The useful life of development costs is based on its
    estimated useful life, not to exceed 20 years from the date
    when the asset is available for use.(2)
    
    Port facilities usage rights and land usage rights represent the
    rights to use certain port facilities and land. Estimated useful
    lives of those rights whose estimated useful lives of
    20 years or more are determined based on the term of
    contractual rights.    Discounts
    on Debentures
    Government
    Grants
     F-16




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Valuation
    of Assets and Liabilities at Present Value
    Restructuring
    of Receivables
    Accrued
    Severance Benefits
        Derivative
    Instruments
    Lease
    Transactions
   F-17




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Foreign
    Currency Translation
    Translation
    of Foreign Operations
    Reclassification
    of Prior Year Consolidated Financial Statement
    Presentation
    Income
    Taxes
      Impairment
    of Assets
    Capitalization
    of Financing Expenses
   F-18




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Contingent
    Liabilities
    Sale
    of Receivables
    Treasury
    Stock
    Stock
    Appreciation Rights
    Basic
    Earnings Per Share and Basic Ordinary Income Per
    Share
    United
    States Dollar Amounts
   F-19




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Cost determination methods for Inventories and Depreciation
    methods for Property, Plant and Equipment of POSCO and its
    Controlled Subsidiaries are as follow:
  Depreciation of Property,Company

Inventories(1)

Plant and EquipmentPOSCO

Moving-average method

Straight-line methodPOSCO E & C

2

2Posteel Co., Ltd.

2

2POSCON Co., Ltd.

2

Straight-line method, 
    Declining-balance methodPohang Coated Steel Co., Ltd.

Gross average method

Straight-line methodPOSCO Machinery &
    Engineering Co., Ltd.

Moving-average method

2POSDATA Co., Ltd.

2

2POSCO Research Institute

N/A

2Seung Kwang Co., Ltd.

Gross average method

Straight-line method,
    Declining-balance methodPOS-AC Co., Ltd.

N/A

2POSCO Specialty Steel Co.,
    Ltd.

Moving-average method

Straight-line methodPOSCO Machinery Co., Ltd.

2

2POSTECH Venture Capital Co.,
    Ltd.

N/A

Declining-balance methodPOSCO Refractories &
    Environment Company Ltd. (POSREC)

Moving-average method

Straight-line method, 
    Declining-balance methodPOSCO Terminal Co., Ltd.

N/A

2Samjung Packing &
    Aluminum Co., Ltd.

2

2Posmate Co., Ltd.

2

Declining-balance methodPOSCO Power Co., Ltd.

Moving-average method

Straight-line methodPostech 2006 Energy Fund

N/A

N/APOSCO America Corp. (POSAM)

Moving-average method

2POSCO Australia Pty. Ltd. (POSA)

Gross average method

2POSCO Canada Ltd. (POSCAN)

2

Straight-line method,
    Unit of production methodPOSCO Asia Co., Ltd. (POA)

N/A

Declining-balance methodVSC POSCO Steel Corporation (VPS)

Moving-average method

Straight-line methodDALIAN POSCO  CFM Coated
    Steel Co., Ltd.

2

2POS-Tianjin Coil Center Co.,
    Ltd.

2

2POSMETAL Co., Ltd.

2

2Shanghai Real Estate Development
    Co., Ltd.

N/A

2IBC Corporation

Specific identification method

2POSLILAMA Steel Structure Co.,
    Ltd.

Moving-average method

2Zhangjiagang Pohang Stainless Steel
    Co., Ltd.

2

2Guangdong Pohang Coated Steel Co.,
    Ltd.

2

2POS-THAI Steel Service Center Co.,
    Ltd.

2

2Qingdao Pohang Stainless Steel Co.,
    Ltd.

2

2Zhangjiagang POSHA Steel Port Co.,
    Ltd.

2

2POSCO Investment Co., Ltd.

N/A

2POSCO (SUZHOU) Automotive
    Processing Center Co., Ltd.

Moving-average method

2POS-Qingdao Coil Center Co.,
    Ltd.

Moving-average method

Straight-line methodPOSCO-China Holding Corp.

N/A

2POS-ORE Pty. Ltd.

2

2POSCO-Japan Co., Ltd.

Gross average method

2POSEC-Hawaii Inc.

N/A

2POSCO E&C (Zhangjiagang)
    Engineering & Consulting Co., Ltd.

2

2POS-GC Pty. Ltd.

Gross average method

2POS-CD Pty. Ltd.

2

2POSCO-India Private Ltd.

N/A

2POS-India Steel Processing Centre
    Pvt. Ltd.

2

2POS-NPC Co., Ltd.

Moving-average method

2POSCO-Foshan Steel Processing
    Center Co., Ltd.

Specific identification method

2POSCAN Elkview Coal Ltd.

N/A

N/APOS-MPC S.A. de C.V.

2

Straight-line methodZhangjigang Pohang Port Co.,
    Ltd.

2

2POSCO-Vietnam Co., Ltd.

2

2     (1)
    
    Specific identification method is used for
    materials-in-transit. F-20




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   3.
    Cash and
    Cash Equivalents, and Financial Instruments    Annual InterestRate (%)


2006


2005(In millions of Korean Won)Cash and cash
    equivalentsCash on hand and bank deposits


0.00 ~ 1.00


W
19,925


W
13,498Checking accounts






4,123



5,801Corporate bank deposits


0.00 ~ 4.00



18,541



10,470Time deposits in foreign currency
    and others


0.00 ~ 5.29



567,333



348,844Maintained by overseas affiliates


0.00 ~ 6.00



326,498



275,258936,420



653,871Less : Government grants






(132
)


(507
)W
936,288


W
653,364Short-term financial
    instrumentsTime deposits


3.00 ~ 5.00


W
473,710


W
86,750Installment accounts


4.00 ~ 5.00



1,534



1,169Specified money in trust






20,447



23,753Certificates of deposit


3.00 ~ 5.14



199,000



129,500Commercial papers


4.00 ~ 5.00



20,220



34,805Others


3.00 ~ 5.05



127,591



475,431Maintained by overseas affiliates


3.00 ~ 5.00



24,808



8,963W
867,310


W
760,371Long-term financial
    instrumentsInstallment accounts


4.00-5.00


W
11,212


W
12,041Guarantee deposits for opening
    accounts






116



104Others


0.00-4.00



1,011



7,361W
12,339


W
19,506    F-21




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  4.
    Trading
    Securities    2006


2005(In millions of Korean Won)Beneficiary certificates

W
1,985,888


W
2,161,453Corporate bond


14,118



Money market fund


641



449,049W
2,000,647


W
2,610,502   5.
    Accounts
    and Notes Receivable, and Others    2006


2005(In millions of Korean Won)Trade accounts and notes receivable

W
3,723,033


W
3,188,928Less: Allowance for doubtful
    accounts


(231,215
)


(144,060
)Present value discount


(159
)


(148
)W
3,491,659


W
3,044,720Other accounts and notes receivable

W
285,919


W
312,218Less: Allowance for doubtful
    accounts


(38,573
)


(70,556
)Present value discount


(542
)


(75
)W
246,804


W
241,587Long-term loans receivable

W
62,814


W
42,332Less: Allowance for doubtful
    accounts


(469
)


(263
)Present value discount


(50
)


(29
)W
62,295


W
42,040Long-term trade accounts and notes
    receivable

W
57,567


W
55,771Less: Allowance for doubtful
    accounts


(9,901
)


(12,134
)Present value discount


(3,318
)


(2,247
)W
44,348


W
41,390  F-22




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Present Value


Book


Maturity

DiscountFace Value


Discount


Value


Date

Rate (%)(In millions of Korean Won)Other accounts receivableTawryu Construction Co., Ltd.

W
19,418


W
542


W
18,876


2007

5.00Long-term loans receivableOh Sehwan and others

W
305


W
50


W
255


2017

7.50Short-term and long-term trade
    accounts receivableBNG Steel Co., Ltd.(1)

W
37,218


W
5,687


W
31,531


2008 ~2009

8.60Others


31,441



3,477



27,964


2011 ~2014

3.00 ~7.50W
68,659


W
9,164


W
59,495Other long-term assetsSoftpartk Co., Ltd.

W
198


W
43


W
155


2009

6.50Others


254



69



185


2008-2018

6.50-7.50W
452


W
112


W
340     (1)
    
    The company recognizes allowance for bad debts on present value
    discounts incurred from restructured receivables under work-out
    plans.      AdditionsBalance at


Charged to


Change in





Balance atBeginning of


Costs and


Scope of





the End ofDescription

Period


Expenses


Consolidation


Deductions(1)


Period(In millions of Korean Won)Year ended December 31,
    2006:Reserves deducted in the balance
    sheet from the assets to which the apply:Allowance for doubtful accounts

W
263,111


W
173,931


W



W
69,805


W
367,237Year ended December 31,
    2005:Reserves deducted in the balance
    sheet from the assets to which the apply:Allowance for doubtful accounts


158,944



115,865



11



11,709



263,111Year ended December 31,
    2004:Reserves deducted in the balance
    sheet from the assets to which the apply:Allowance for doubtful accounts


325,187



(56,961
)






109,282



158,944     (1)
    
    Deduction for allowance for doubtful accounts includes amount
    written off as uncollectible and others. F-23




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   6.
    Inventories    2006


2005(In millions of Korean Won)Finished goods, net

W
844,790


W
724,930By-products


30,795



3,326Semi-finished goods, net


800,754



790,251Raw materials, net


1,113,870



1,103,373Fuel and materials


395,331



296,444Materials-in-transit


716,271



645,441Others, net


116,394



228,829W
4,018,205


W
3,792,594   7.
    Investment
    Securities    2006


2005(In millions of Korean Won)Available-for-sale securities

W
2,848,226


W
2,090,079Held-to-maturity securities


110,326



241,474Equity-method investments


206,503



484,188W
3,165,055


W
2,815,741   Available-For-Sale
    Securities
    2006


2005(In millions of Korean Won)Current portion of
    available-for-sale securitiesInvestments in bonds

W
13,375


W
90,889Available-for-sale securitiesMarketable equity securities


2,337,984



1,647,770Non-marketable equity securities


459,188



384,466Investments in bonds


35,581



41,292Equity investments


15,473



16,5512,848,226



2,090,079W
2,861,601


W
2,180,968  F-24




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006


2005Number of


Percentage of


Acquisition


Book


BookShares


Ownership (%)


Cost


Value(1)


Value(In millions of Korean Won)Hanil Iron & Steel Co.,
    Ltd.


206,798



10.14


W
2,413


W
4,435


W
3,846HI Steel Co., Ltd.


135,357



9.95



1,609



2,166



2,166Munbae Steel Co., Ltd.


1,849,380



9.02



3,588



2,395



2,904Hana Bank


4,663,776



2.26



29,998



228,058



213,333SK Telecom Co., Ltd.(2)


4,195,552



5.17



1,187,162



931,735



874,827Dong Yang Steel Pipe Co.,
    Ltd.


1,564,250



2.45



3,911



1,025



1,095Nippon Steel Corporation


208,876,000



3.07



548,108



1,117,010



534,152Korea Line Corp.


217,373



2.17



8,067



10,760



5,608Others










21,149



40,400



9,839W
1,806,005


W
2,337,984


W
1,647,770     (1)
    
    Marketable equity securities are stated at fair market value and
    the difference between the acquisition cost and the fair market
    value is accounted for as a capital adjustment and minority
    interest accounts in the consolidated balance sheets.(2)
    
    The 1,853,981 SK Telecom Co., Ltd. shares have been placed as a
    collateral for exchangeable bonds (Note 13). F-25




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2006


2005Number of


Percentage of


Acquisition


Book


BookShares


Ownership (%)


Cost


Value


Value(In millions of Korean Won)Hankyung Shinmun Co., Ltd.


28,728



0.15


W
309


W
309


W
309Keo Yang Shipping Co., Ltd.


150,000



0.88



780



780



780Jeonnam Pro Football Co.,
    Ltd.


19,799



13.20



99



99



99Dae Kyeong Special Steel Co.,
    Ltd.


1,786,000



19.00



8,930



8,930



8,930The Korea Metal Journal Co.,
    Ltd.


2,000



2.67



20



20



20Pohang Steelers Co., Ltd.


40,000



16.67



200



200



200Kihyup Technology Banking
    Corp.


600,000



10.34



3,000



3,000



3,000Poshome Co., Ltd.


10,000



3.69



50



50



50LG Powercom Corporation(1)


7,500,000



5.00



246,000



106,845



86,258The Seoul Shinmun Co., Ltd.


1,614,000



19.40



7,479







ESCO Professionals, Ltd.


4,210



7.02



21



21



21TFS Global Co., Ltd.


5,290



8.82



26



26



26The Siam United Steel


11,071,000



12.30



34,658



34,658



26,640Global Unity Ltd.


70,649



13.33



710



710



710PT. POSNESIA Stainless Steel
    Industry(4)


29,610,000



70.00



9,474



1,567



1,567BX STEEL POSCO Cold Rolled Sheet
    Co., Ltd.(2)






10.00



26,803



26,803



26,803CTA Co., Ltd.


73,390



14.68



37



37



37Woori DCI Co., Ltd.


5,653



18.84



28



28



28RCC Co., Ltd.


9,053



18.11



45



45



45Myanmar- POSCO Steel Co., Ltd.(3)


13,440



70.00



2,192



3,717



Nickel Mining Company SAS(4)


490



49.00



28



28



Wuhan Excellent Steel Center(2)






5.00



432



432



POSK Steel (Pinghu) Processing
    Center Co., Ltd.(2),(4)






20.00



928



928



Incheon International Airport
    Railroad Co., Ltd.


22,101,940



12.00



110,510



110,510



103,048Busan-Gimhae Light Rail Transit
    Co., Ltd.


2,028,600



14.00



17,954



17,954



9,555Seoul Metro Line Nine Corporation


1,516,045



10.00



8,515



8,515



15,160Hankuk Leisure Co., Ltd.


839,964



16.42



8,476



8,476



8,476Vectus Limited(4)


3,250,000



100.00



6,241



4,219



4,633POSCO-Foshan Steel Processing
    Center Co.,Ltd.(2)


















5,001Others










228,284



120,281



83,070W
722,229


W
459,188


W
384,466  F-26




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (1)
    
    The fair value of LG Powercom Corporation was based on the
    valuation report of a public rating services company.
    Investments without an objective fair value were recorded as
    acquisition costs, except for LG Powercom Corporation.(2)
    
    No shares have been issued in accordance with the local laws or
    regulations.(3)
    
    Myanmar- POSCO Steel Co., Ltd. is reclassified from
    equity-method investments into available-for-sale securities due
    to non-operations for year 2006.(4)
    
    Investees in the process of liquidation, or in possession of
    total assets less than W7,000 million as of
    December 31, 2006, were excluded from the equity method
    investments.    2006


2005Beginning


Increase


Ending


Beginning


Increase


EndingBalance


(Decrease)


Balance


Balance


(Decrease)


Balance(In millions of Korean Won)Marketable equity
    securitiesHanil Iron & Steel Co.,
    Ltd.

W
1,039


W
428


W
1,467


W
689


W
350


W
1,039HISteel Co., Ltd.


404







404



139



265



404Moonbae Steel Co., Ltd.


(496
)


(369
)


(865
)


(1,221
)


725



(496
)Hana Financial Group Inc.


132,918



10,676



143,594



89,136



43,782



132,918Korea Investment Corporation














(453
)


453



SK Telecom Co., Ltd.


(352,910
)


167,725



(185,185
)


(495,027
)


142,117



(352,910
)Samjung Packing &
    Aluminum Co., Ltd.














(770
)


770



Dong Yang Steel Pipe Co.,
    Ltd.


(2,041
)


(51
)


(2,092
)


(3,410
)


1,369



(2,041
)Nippon Steel Corporation


180,562



231,891



412,453



90,547



90,015



180,562Korea Line Corporation


(1,783
)


3,735



1,952



(372
)


(1,411
)


(1,783
)Others


3,221



15,424



18,645



10



3,211



3,221(39,086
)


429,459



390,373



(320,732
)


281,646



(39,086
)Non-marketable equity
    securitiesLG Powercom Corporation


(115,813
)


14,926



(100,887
)


(169,875
)


54,062



(115,813
)Others


670



(1,288
)


(618
)


8,102



(7,432
)


670(115,143
)


13,638



(101,505
)


(161,773
)


46,630



(115,143
)W
(154,229
)

W
443,097


W
288,868


W
(482,505
)

W
328,276


W
(154,229
)  F-27




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006


2005Maturity

Acquisition Cost


Book Value


Book Value(In millions of Korean Won)Government bonds

Less than 1 year

W



W



W
90,8891-5 years


1



1



635-10 years










Others

Less than 1 year


13,375



13,375



1-5 years


49,372



35,580



41,22962,748



48,956



132,181Less: Current portion




(13,375
)


(13,375
)


(90,889
)W
49,373


W
35,581


W
41,292     2006


2005Acquisition Cost


Book Value


Book Value(In millions of Korean Won)Contractor financial fund

W
12,284


W
12,284


W
12,167Software financial fund and others


3,171



3,189



4,384W
15,455


W
15,473


W
16,551     2006


2005Gross


Gross








Gross


GrossAmortized


Unrealized


Unrealized


Fair


Amortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value


Cost


Gains


Losses


Value(In millions of Korean Won)Government and municipal bonds

W
1


W



W



W
1


W
93,024


W



W
2,072


W
90,952Other bonds


48,452



503







48,955



41,786







557



41,22948,453



503







48,956



134,810







2,629



132,181Marketable equity securities


1,812,118



356,023



(169,843
)


2,337,984



1,459,796



189,383



1,409



1,647,770Non-Marketable equity securities


439,450



3



(19,735
)


459,188



335,764



54,062



5,360



384,466W
2,300,021


W
356,529


W
(189,578
)

W
2,846,128


W
1,930,370


W
243,445


W
9,398


W
2,164,417    F-28




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Held-To-Maturity
    Securities
    2006


2005Acquisition


Book


BookMaturity

Cost


Value


Value(In millions of Korean Won)Current portion of
    held-to-maturity securitiesGovernment and municipal bonds

Less than 1 year

W
153,411


W
153,476


W
2,688Held-to-maturity
    securitiesGovernment and municipal bonds

1 ~5 years


79,646



79,854



211,0512

5 ~10 years


30,333



30,472



30,423109,979



110,326



241,474W
263,390


W
263,802


W
244,162    F-29




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Equity-Method
    Investments
    Number of


Percentage of


Acquisition


Net


Book valueShares Owned


Ownership


Cost


Asset(1)


2006


2005(In millions of Korean Won)KOBRASCO


2,010,719,185



50.00


W
32,950


W
37,211


W
32,622


W
30,268Fujiura Butsuryu Center Co.,
    Ltd.


600



30.00



632



835



835



824USS-POSCO Industries(2)






50.00



234,293



60,508



49,380



61,707Poschrome (Proprietary) Limited


21,675



25.00



4,859



6,063



4,826



6,153Guangdong Xingpu Steel Center Co.,
    Ltd.(2)






21.00



1,852



2,892



2,487



2,985POS-Hyundai Steel Manufacturing
    India Private Limited


6,919,400



29.50



3,136



2,780



2,780



2,229eNtoB Corporation


740,000



23.13



3,700



4,842



4,399



4,188POSVINA Co., Ltd.(2)






50.00



1,527



2,153



2,066



1,593Posmmit Steel Centre Sdn Bhd


4,200,000



30.00



2,308



3,919



3,891



3,212PT POSMI Steel Indonesia


4,772



37.87



1,467



3,140



3,205



1,746MIDAS Information Technology Co.,
    Ltd.


866,190



25.46



433



4,300



4,292



3,226Posco Power Co., Ltd.(3)






0.00















290,255CAML Resources Pty Ltd


3,239



33.34



40,388



18,448



37,717



38,673POSCO Bioventures. LP(2)






100.00



43,691



29,271



33,931



33,717Songdo New City Development
    Inc.(2),(4)






29.90



6,674



(35,855
)






Hubei Huaerliang POSCO Silicon
    Science & Technology Co., Ltd.(2)






30.00



3,236



3,172



3,186



3,412SNNC Co., Ltd.


3,822,000



49.00



19,110



18,817



18,816



Gale International Korea, Inc.(2)






29.90



21



2,251



2,070



W
400,277


W
164,747


W
206,503


W
484,188     (1)
    
    Due to the delay in the closing of December 31, 2006
    accounts and the settlement of closing differences, the equity
    method of accounting is applied based on the most recent
    available December 31, 2006 financial information, which
    has not been audited or reviewed.(2)
    
    No shares have been issued in accordance with the local laws and
    regulations.(3)
    
    POSCO Power Corp. is included in the scope of consolidation as a
    consolidated subsidiary and excluded from the equity-method
    investments.(4)
    
    Unrecorded changes in equity interest in Songdo New City
    Development Inc. amounted to a negative W42,529 million. F-30




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Earnings(Losses) of


OtherJanuary 1,


Equity Method


Increase


December 31,2006


Investees


(Decrease)(1)


2006(In millions of Korean Won)KOBRASCO

W
30,268


W
21,831


W
(19,477
)

W
32,622Fujiura Butsuryu Center Co.,
    Ltd.


824



105



(94
)


835USS-POSCO Industries


61,707



8,469



(20,796
)


49,380Poschrome (Proprietary) Limited


6,153



1,481



(2,808
)


4,826Guangdong Xingpu Steel Center Co.,
    Ltd.


2,985



(342
)


(156
)


2,487POS-Hyundai Steel Manufacturing
    India Private Limited


2,229



677



(126
)


2,780eNtoB Corporation


4,188



211







4,399POSVINA Co., Ltd.


1,593



975



(502
)


2,066Posmmit Steel Centre Sdn Bhd


3,212



737



(58
)


3,891PT POSMI Steel Indonesia


1,746



(78
)


1,537



3,205MIDAS Information Technology Co.,
    Ltd.


3,227



1,255



(190
)


4,292Posco Power Co., Ltd.


290,255



1,580



(291,835
)


CAML Resources Pty Ltd


38,673



1,335



(2,291
)


37,717POSCO Bioventures. LP


33,716



4,521



(4,306
)


33,931Songdo New City Development
    Inc.














Hubei Huaerliang POSCO Silicon
    Science & Technology Co., Ltd.


3,412



(50
)


(176
)


3,186SNNC Co., Ltd.






(252
)


19,068



18,816Gale International Korea,
    Inc.






3,970



(1,900
)


2,070W
484,188


W
46,425


W
(324,110
)

W
206,503   F-31




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Earnings(Losses) of


OtherJanuary 1,


Equity Method


Increase


December 31,2005


Investees


(Decrease)(1)


2005(In millions of Korean Won)KOBRASCO

W
11,203


W
17,663


W
1,402


W
30,268Fujiura Butsuryu Center Co.,
    Ltd.


648



296



(120
)


824USS-POSCO Industries


65,084



(517
)


(2,860
)


61,707Suzhou Dongshin Color Metal Sheet
    Co., Ltd.


3,361



(60
)


(3,301
)


Poschrome (Proprietary) Limited


7,000



1,303



(2,150
)


6,153Guangdong Xingpu Steel Center Co.,
    Ltd.


3,094



(89
)


(20
)


2,985POS-Hyundai Steel Manufacturing
    India Private Limited


2,276



357



(404
)


2,229eNtoB Corporation


3,762



426







4,188POSVINA Co., Ltd.


3,145



(789
)


(763
)


1,593POSMMIT Steel Centre Sdn Bhd


3,015



317



(120
)


3,212PT POSMI Steel Indonesia


1,599



173



(26
)


1,746POSCO Bioventures LP


33,221



(4,103
)


4,598



33,716MIDAS Information Technology Co.,
    Ltd.


2,646



667



(86
)


3,227Seoul Metro Line Nine Corporation


2,152







(2,152
)


Posco Power Co., Ltd.






(811
)


291,066



290,255CAML Resources Pty Ltd






4,863



33,810



38,673Hubei Huaerliang POSCO Silicon
    Science & Technology Co., Ltd.






28



3,384



3,412W
142,206


W
19,724


W
322,258


W
484,188     (1)
    
    Other increase or decrease represents the changes in investment
    securities due to acquisitions (disposals), dividends received,
    valuation gain or loss on investment securities, changes in
    retained earnings and others. F-32




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2006


2005Property, Plant








Property, Plantand Equipment,








and Equipment,Current


and Intangible





Current


and IntangibleAssets


Assets


Total


Assets


Assets


Total(In millions of Korean Won)KOBRASCO

W
5,370


W



W
5,370


W
(7,997
)

W



W
(7,997
)Fujiura Butsuryu Center Co.,
    Ltd.


18







18



(6
)






(6
)USS-POSCO Industries


1,433







1,433



(12,562
)






(12,562
)Poschrome (Proprietary) Limited


(63
)






(63
)


(371
)






(371
)Guangdong Xingpu Steel Center Co.,
    Ltd.


(358
)






(358
)


39







39eNtoB Corporation


37



(6
)


31



(149
)


(65
)


(214
)POSVINA Co., Ltd.


777







777



(531
)






(531
)Posmmit Steel Centre Sdn Bhd


306







306



(143
)






(143
)PT POSMI Steel Indonesia


(57
)






(57
)


115







115MIDAS Information Technology Co.,
    Ltd.






(8
)


(8
)










W
7,463


W
(14
)

W
7,449


W
(21,605
)

W
(65
)

W
(21,670
)     January 1,


Increase


Amortization


December 31,2006


(Decrease)


(Recovery)


2006(In millions of Korean Won)POSMMIT Steel Centre Sdn Bhd

W
39


W



W
20


W
19PT POSMI Steel Indonesia


354



49



182



221CAML Resources Pty. Ltd.


25,042







5,763



19,279Posco Power Co., Ltd.


65,804



(62,148
)


3,656



W
91,239


W
(62,099
)

W
9,621


W
19,519  F-33




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Total





Net IncomeTotal Assets


Liabilities


Sales


(Loss)(In millions of Korean Won)KOBRASCO

W
179,347


W
104,925


W
332,507


W
32,923Fujiura Butsuryu Center Co.,
    Ltd.


15,886



13,104



17,924



289USS-POSCO Industries


442,407



321,391



989,269



14,071Poschrome (Proprietary) Limited


31,882



7,629



33,574



6,310Guangdong Xingpu Steel Center Co.,
    Ltd.


38,939



25,166



70,730



300POS-Hyundai Steel Manufacturing
    India Private Limited


18,715



9,293



67,780



2,296eNtoB Corporation


62,033



41,097



322,192



984POSVINA Co., Ltd.


5,668



1,363



18,859



230Posmmit Steel Centre Sdn Bhd


37,025



23,961



48,504



1,566PT POSMI Steel Indonesia


42,606



34,315



48,667



234MIDAS Information Technology Co.,
    Ltd.


21,445



4,556



17,708



4,682CAML Resources Pty Ltd


102,949



47,617



102,229



20,973POSCO Bioventures. LP


29,271







19



938Songdo New City Development
    Inc.


914,973



1,034,889



152,068



(52,489
)Hubei Huaerliang POSCO Silicon
    Science & Technology Co., Ltd.


21,232



10,658



15,421



(168
)SNNC Co., Ltd.


38,584



182







(513
)Gale International Korea,
    Inc.


11,834



4,307



20,731



7,210W
2,014,796


W
1,684,453


W
2,258,182


W
39,836  F-34




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  8.
    Property,
    Plant and Equipment    2006


2005(In millions of Korean Won)Buildings and structures

W
6,308,204


W
5,755,154Machinery and equipment


24,280,940



21,333,817Vehicles


201,878



176,715Tools


402,294



404,094Furniture and fixtures


257,624



231,26331,450,940



27,901,043Less: Accumulated depreciation


(20,804,990
)


(19,312,121
)Less: Accumulated impairment loss






(2,786
)10,645,950



8,586,136Land


1,311,755



1,203,300Less: Accumulated impairment loss






(565
)1,311,755



1,202,735Construction-in-progress


2,685,415



2,566,456Less: Accumulated impairment loss






(83,617
)2,685,415



2,482,839W
14,643,120


W
12,271,710         Construction-in-progress construction-in-progress
 F-35




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Elimination ofBeginning














Intercompany


EndingBalance


Acquisition(1)


Disposal


Depreciation(3)


Others(2)


Transactions


Balance(In millions of Korean Won)Land

W
1,202,734


W
56,561


W
10,116


W



W
62,639


W
(63
)

W
1,311,755Buildings


2,268,834



314,727



7,770



175,188



165,398



(165,902
)


2,400,099Structures


1,246,290



175,023



3,569



110,623



136,735



(77,298
)


1,366,558Machinery and equipment


4,866,840



2,873,485



31,762



1,394,402



886,787



(526,770
)


6,674,178Vehicles


30,429



28,597



647



16,760



4,737



(2,255
)


44,101Tools


101,568



36,409



415



52,247



790



(1,971
)


84,134Furniture and fixtures


72,176



38,907



678



29,346



1,028



(5,208
)


76,879Construction-in-progress


2,482,839



3,346,112



441,589







(2,568,247
)


(133,699
)


2,685,416W
12,271,710


W
6,869,821


W
496,546


W
1,778,566


W
(1,310,133
)

W
(913,166
)

W
14,643,120     Elimination ofBeginning














Intercompany


EndingBalance


Acquisition(1)


Disposal


Depreciation(3)


Others(2)


Transactions


Balance(In millions of Korean Won)Land

W
1,108,817


W
95,381


W
14,110


W



W
12,655


W
(9
)

W
1,202,734Buildings


2,199,308



261,371



27,150



161,172



(8,578
)


5,055



2,268,834Structures


889,437



425,886



5,666



89,966



26,178



421



1,246,290Machinery and equipment


3,851,869



2,274,621



28,596



1,235,562



(12,228
)


16,736



4,866,840Vehicles


35,624



9,554



1,120



13,997



425



(57
)


30,429Tools


98,294



50,999



304



48,055



697



(63
)


101,568Furniture and fixtures


57,064



38,328



1,113



23,197



261



833



72,176Construction-in-progress


2,199,878



3,618,271



131,909







(2,945,299
)


(258,102
)


2,482,839W
10,440,291


W
6,774,411


W
209,968


W
1,571,949


W
(2,925,889
)

W
(235,186
)

W
12,271,710     (1)
    
    Includes asset transfer from
    construction-in-progress.(2)
    
    Includes foreign currency translation adjustments, asset
    transfers and adjustments resulting from the effect of changes
    in the scope of consolidation.(3)
    
    Includes depreciation expense of idle property. F-36




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   9.
    Intangible
    Assets    2006


2005(In millions of Korean Won)Goodwill

W
90,105


W
Negative goodwill


(1,388
)


(1,794
)Intellectual property rights


1,221



1,394Land usage rights


23,439



43,422Development costs


67,862



47,299Port facilities usage rights


112,102



127,258Long-term electricity supply
    contract rights


68,544



Other intangible assets(1)


195,197



236,130W
557,082


W
453,709     (1)
    
    The Company capitalized costs directly related to the Enterprise
    Resource Planning (ERP) system and the process innovation as
    other intangible assets.    Elimination ofBeginning








Amortization





Intercompany


EndingBalance


Acquisition


Disposal


(Recovery)


Others(1)


Transactions


Balance(In millions of Korean Won)Goodwill

W



W
100,088


W



W
9,983


W



W



W
90,105Negative goodwill


(1,794
)










(406
)










(1,388
)Intellectual property rights


1,394



50



9



230



16







1,221Land usage rights


43,422



2,503



21,571



195



(720
)






23,439Development costs


47,299



3,527



418



5,025



22,870



(391
)


67,862Port facilities usage rights


127,258



3,272







18,429



1







112,102Long-term electricity supply
    contract rights






73,559







5,015











68,544Other intangible assets


236,130



58,057



650



66,340



(25,969
)


(6,031
)


195,197W
453,709


W
241,056


W
22,648


W
104,811


W
(3,802
)

W
(6,422
)

W
557,082  F-37




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Elimination ofBeginning








Amortization





Intercompany


EndingBalance


Acquisition


Disposal


(Recovery)


Others(1)


Transactions


Balance(In millions of Korean Won)Negative goodwill

W
(457
)

W
(2,031
)

W



W
(694
)

W



W



W
(1,794
)Intellectual property rights


485



1,159







186



(64
)






1,394Land usage rights


32,416



10,053



192



(2,653
)


(1,508
)






43,422Development costs


32,591



29,381







13,021



(1,770
)


118



47,299Port facilities usage rights


146,396



595







19,732



(1
)






127,258Other intangible assets


284,884



134,709



89,635



95,845



(857
)


2,874



236,130W
496,315


W
173,866


W
89,827


W
125,437


W
(4,200
)

W
2,992


W
453,709     (1)
    
    Includes impairment loss, transfers of an asset, adjustments
    arising from foreign currency translations and changes in
    consolidation scope, and others.    (In millions of Korean Won)2007

W
99,4622008


83,8392009


47,8872010


24,2402011


10,836W
266,264   10.
    Research
    and Development Costs, and Others   F-38




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  11.
    Other
    Assets    2006


2005(In millions of Korean Won)Other current assetsShort-term loans receivable
    (Notes 27 and 28)

W
34,071


W
42,665Accrued income


74,037



45,517Advance payments


263,623



199,580Prepaid expenses


18,285



15,724Others


53,533



40,728443,549



344,214Less: Allowance for doubtful
    accounts


(52,433
)


(32,383
)W
391,116


W
311,831Other long-term
    assetsOther investment assets
    (Notes 5, 8 and 29)

W
135,405


W
139,320Less: Allowance for doubtful
    accounts


(34,646
)


(3,714
)Present value discount


(112
)


(1,731
)W
100,647


W
133,875   12.
    Short-Term
    Borrowings    AnnualFinancial Institutions

Interest Rate (%)

2006


2005(In millions of Korean Won)Won currency
    borrowingsShinhan Bank and others

3.83-5.00

W
111,394


W
216,150Foreign currency
    borrowingsYamaguchi Bank and others

1.00-5.00


24,029



13,716Shinhan Bank and others

1.00-6.00


1,103,326



629,9081,127,355



643,624W
1,238,749


W
859,774  F-39




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  13.
    Long-Term
    Debts    AnnualFinancial Institutions

Interest Rate (%)

2006


2005(In millions of Korean Won)DebenturesDomestic and foreign debentures

1.84-8.00

W
231,100


W
991,609Less: Discount on debentures issued




(203
)


(1,083
)230,897



990,526Won currency
    borrowingsKorea Exchange Bank and others

1.00-5.70


1,885



26,731Foreign currency
    borrowingsDevelopment Bank of Japan and
    others

1.00-4.60


162,485



28,202164,370



54,933Loans from foreign financial
    institutionsSumitomo Bank and others

2.00LIBOR + 0.80


8,797



9,065Lease obligationHP Financial Services

5.00


348



2,676W
404,412


W
1,057,200     AnnualInterest Rate

2006


2005(In millions of Korean Won)Domestic debentures

4.66 - 5.00

W
1,467,653


W
562,060Yankee Bonds








263,547Samurai Bonds

2.05


390,915



258,012Euro Bonds

5.88


278,880



Exchangeable bonds(1)




403,596



443,9702,541,044



1,527,589Less: Current portion




(231,100
)


(991,609
)Discount on debentures issued




(13,144
)


(2,697
)W
2,296,800


W
533,283  F-40




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    AnnualFinancial Institutions

Interest Rate (%)

2006


2005(In millions of Korean Won)Won currency
    borrowingsThe Korea Development Bank and
    others

1.00-6.00

W
77,951


W
212,890Less: Current portion




(1,885
)


(26,731
)76,066



186,159Foreign currency
    borrowingsDevelopment Bank of Japan and
    others

1.00-7.00


488,672



403,926Less: Current portion




(162,485
)


(28,202
)326,187



375,724Loans from foreign financial
    institutionsSumitomo Bank and others

2.00LIBOR + 0.80


35,246



45,169Less: Current portion




(8,797
)


(9,065
)26,449



36,104W
428,702


W
597,987       (1)
    
    POSCO issued exchangeable bonds on August 20, 2003. They
    are exchangeable with 15,267,837 SK Telecom Co., Ltd. American
    Depository Receipts (ADRs).    Issuance date:

August 20, 2003Maturity date:

August 20, 2008 (full amount of
    principal is repaid if not exercised)Rate:

Interest rate of zero percentFace value:

JPY 51,622,000,000Issuance price:

JPY 51,880,110,000Exchangeable price:

JPY 3,094/ADRExercise call period:

Commencing ten business days
    following the issuance date until ten business days prior to
    maturity dateExercise put period:

Exactly three years following the
    payment date    F-41




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Loans fromForeign


ForeignWon Currency


Currency


FinancialPeriod

Debentures


Borrowings


Borrowings


Institutions


Total(In millions of Korean Won)2008

W
433,646


W
3,825


W
29,304


W
8,797


W
475,5722009


336,756



5,282



72,547



8,797



423,3822010






4,288



189,892



4,787



198,967Thereafter


1,539,542



62,671



34,444



4,068



1,640,725W
2,309,944


W
76,066


W
326,187


W
26,449


W
2,738,646     Beneficiaries

2006


2005(In millions of Korean won)Land

Shinhan Bank and others

W
74,198


W
43,005Buildings and structures

The Korea Development Bank and
    others


134,531



42,304Machinery and equipment

Mizuho Bank and others


461,413



28Cash and cash equivalents

Mizuho Bank and others






12,041Short-term and long-term financial
    instruments

The Korea Development Bank


5,600



4,650Inventories

Korea First Bank






195,000Trade accounts and notes receivable

Mizuho Bank and others


44,445



40,630Available-for-sale securities

Exchangeable bond creditor


410,796



333,366Held-to-maturity securities

Gyeongsangbuk-do provincial office


31,334



31,298W
1,162,317


W
702,322     2006


2005Foreign


Won


Foreign


WonFinancial Institutions

Currency


Equivalent


Currency


Equivalent(In millions of Korean Won )The Korea Development Bank


EUR 6,062,451



7,410



EUR 6,389,136



7,668    F-42




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  14.
    Capital
    Lease and Operating Lease Agreements  Capital
    Lease
      Period

Principal


Interest


Total(In millions of Korean Won)2007

W
334


W
4


W
338   Operating
    Lease
    Period

Amount(In millions ofKorean Won)2007

W
4,1832008


8832009


1382010


1W
5,205   15.
    Accrued
    Severance Benefits    Beginning











EndingBalance


Increase


Decrease


Adjustments(1)


Balance(In millions of Korean Won)Accrued severance benefits

W
723,954


W
144,602


W
41,048


W
6,539


W
834,047National Pension Fund


(2,515
)






(218
)


(87
)


(2,384
)Group severance insurance deposits


(446,627
)


(113,682
)


(63,507
)


(3,855
)


(500,657
)W
274,812


W
30,920


W
(22,677
)

W
2,597


W
331,006     (1)
    
    Includes foreign currency adjustments, changes in consolidation
    scope and others. F-43




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     (In millions of Korean Won)2007

W
16,9532008


27,4332009


33,5342010


45,0182011 ~2016


381,420W
504,358     16.
    Other
    Liabilities    2006


2005(In millions of Korean Won)Other current
    liabilitiesAdvances received

W
405,450


W
334,166Unearned revenue


2,648



3,164Others


99,297



119,534W
507,395


W
456,864Other long-term
    liabilitiesReserve for allowance

W
22,427


W
17,524Others (Notes 14 and 21)


125,759



114,597W
148,186


W
132,121  F-44




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  17.
    Commitments
    and Contingencies    Entity Being

Financial

Amount


WonGrantors

Guaranteed

Institution

Guaranteed(1)


Equivalent(In millions)POSCO

POSCO Investment Co., Ltd.

Bank of Tokyo-Mitsubishi UFJ, Ltd.

US$
56,845,654


W
52,844Zhangjiagang Pohang Stainless
    Steel Co., Ltd.

Bank of China and others


329,925,000



306,698BX STEEL POSCO Cold Rolled Sheet
    Co., Ltd.

Industrial & Commercial Bank
    of China


33,023,068



30,698POSCO E&C

IBC Corporation

The Korea Development Bank and
    others


47,000,000



43,691Shanghai Real Estate Development
    Co., Ltd.

Woori Bank and others


20,000,000



18,592POSLILAMA Steel Structure Co., Ltd.

The Export-Import Bank of Korea
    and others


43,000,000



39,973POSCO E&C (Beijing) Co., Ltd.

Korea Exchange Bank


4,446,000



4,146POSCO Investment Co., Ltd.

Qingdao Pohang Stainless Steel
    Co., Ltd.

Bank of Tokyo-Mitsubishi UFJ, Ltd.


56,000,000



52,058POSVINA Co., Ltd.

Shinhan Bank


1,500,000



1,394POSCO(Guangdong) Coated Steel
    Co.,Ltd

Bank of Tokyo-Mitsubishi UFJ, Ltd.


15,000,000



13,944POS-MPC S.A. de C.V.

Bank of Tokyo-Mitsubishi UFJ, Ltd.


6,600,000



6,135POSCO-Japan Co., Ltd.

Fujiura Butsuryu Center Co., Ltd.

Nippon Life Insurance Company and
    others

JPY
950,000,000



7,427POS-NPC Co., Ltd.

Mizuho Bank and others


2,600,000,000



20,328W
597,928     (1)
    
    Currencies other than US$ or JPY are translated into US$ amounts.   F-45




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Entity Being

Financial

Amount


WonGrantors

Guaranteed

Institution

Guaranteed


Equivalent(In millions of Korean Won)POSCO

DC Chemical Co., Ltd.

E1 Co., Ltd.

W
961



961The Siam United Steel Co., Ltd.

Japan Bank for International
    Cooperation

US$
10,241,684



9,521Zeus

Related creditors

JPY
51,622,000,000



403,596POSCO E&C

Daejeon Energy System Co., Ltd.

Woori Bank

W
23,900



23,900Pan Pacific Corp

Korea Exchange Bank


12,508



12,508Ioncity Co.,Ltd

Samsung Life Insurance Co., Ltd.


2,400



2,400Others






22,953



22,953W
475,839     
    a performance guarantee to Samsung Corporation amounting to
    W1,391,110 million, in exchange Samsung Corporation
    provided a performance guarantee and a payment guarantee on
    customers borrowings on behalf of the Company amounting to
    W1,096,265 million.
    guaranteed debts for Jungwoo Construction and 21 other companies
    amounting to W954,544 million.
    guaranteed debts for Eco-Town Corporation, an investee,
    amounting to W143,260 million.
    A payment guarantee for Keumseki Co., Ltd.s borrowing
    amounting to W60,555 million. In connection with its
    guarantee, the Company accrued W41,300 million in guarantee
    liability due to Keumseki Co., Ltd. financial condition . Also,
    the Company provided an allowance for bad debts on the trade
    receivables and short-term loans receivable amounting to
    W35,771 million from Keumseki Co., Ltd.     F-46




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Company

Plaintiff

Claim Amount


Description(In millions of Korean Won)POSCO

Songdo Construction Co.,Ltd. And
    others

W
2,728


15 lawsuits including claim for
    operation damages due to loss of the sands beachGu ja eun and other 19


7,363


Claim for refund of Sindorim
    Posvill Bldg land sale amountHwang jae ho and others


6,140


Lawsuit filed on construction of
    residents-only sports comlex in Songdo FirstworldPOSCO E & C

Choi ki hyo and other 378


963


Claim for damages by StarcityKookmin Bank


1,223


Claim for damages by Sindorim
    Posvill BldgKorea Construction Financial Co.,


6,692


Claim filed by Daesung ConstructionPosteel Co., Ltd.

Metal Industry Co.,Ltd.

US$
1,246,535


Claim for damages due to breach of
    contract (second trial won, plaintiff appeals)Duetsch Brauhaus Co.,Ltd.

W
700


Claim for damages due to breach of
    lease agreement (lost the first trial, filed an appeal)POSCO Research Institute

An hong sik


100


Lawsuit claiming for excessive
    profits (lost the first trial, motion for a new trial in process)Wang dong wha

CNY
2,502,236


Labor dispute on additional wages
    and compensation for damages (first public trial on going)POSCO Specialty Steel
    Co., Ltd.

BNG Steel Co., Ltd.

W
21,329


Counteraction against claim on
    restructured receivables regarding undertaking of BNG
    Steels assetPOSCO Refractories &
    Environment Company Ltd. (POSREC)

Kim Choong il


224


Claim for damages(second trial
    won, plaintiff appeals)POSCON Co., Ltd.

DIBO TECH CO.,LTD.


787


Claim for non existence of debt    F-47




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
                   F-48




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
                         F-49




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        18.
    Capital
    Surplus    2006


2005(In millions of Korean Won)Additional paid-in capital

W
462,810


W
463,825Revaluation surplus


3,233,730



3,233,730Others


338,733



293,854W
4,035,273


W
3,991,409   19.
    Retained
    Earnings    2006


2005(In millions of Korean Won)AppropriatedLegal reserve

W
241,201


W
241,201Appropriated retained earnings for
    business stabilization


918,300



918,300Other legal reserve


1,383,333



1,303,333Voluntary reserve


12,926,733



9,735,19915,469,567



12,198,033Unappropriated


3,393,766



3,970,859W
18,863,333


W
16,168,892   Legal
    Reserve
   F-50




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Other
    Legal Reserve
    Voluntary
    Reserve
    Additional
    Losses of Minority Interest
    Dividends
    Interim Cash Dividends

2006


2005


2004(In millions of Korean Won)Number of outstanding shares


77,780,460



78,759,934



80,707,945Dividend ratio


40
%


40
%


30
%Dividend amount

W
155,561


W
157,520


W
121,062   Year-End Cash Dividends

2006


2005


2004(In millions of Korean Won)Number of outstanding shares


77,592,942



80,154,281



80,503,664Dividend ratio


120
%


120
%


130
%Dividend amount

W
465,558


W
480,926


W
523,274     2006


2005


2004Dividend


Dividend


Dividend


Dividend


Dividend


DividendPayout Ratio


Yield Ratio


Payout Ratio


Yield Ratio


Payout Ratio


Yield RatioCommon shares


18.74
%


2.59
%


15.87
%


3.96
%


16.89
%


4.28
%  F-51




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  20.
    Capital
    Adjustments    2006


2005(In millions of Korean Won)Treasury stock

W
(1,670,690
)

W
(959,205
)Cumulative foreign currency
    translation adjustment


(47,452
)


4,386Valuation loss on investment
    securities and others


249,668



(198,878
)W
(1,468,474
)

W
(1,153,697
)       21.
    Stock
    Appreciation Rights    1st
    Grant


2nd
    Grant


3rd
    Grant


4th
    Grant


5th
    Grant


6th
    GrantBefore the
    modifications(1)Number of shares


498,000 shares



60,000 shares



22,000 shares



141,500 shares



218,600 shares



90,000 sharesExercise price

W
98,400 per share


W
135,800 per share


W
115,600 per share


W
102,900 per share


W
151,700 per share


W
194,900 per shareAfter the
    modifications(1)Grant date


July 23, 2001



April 27, 2002



September 18, 2002



April 26, 2003



July 23, 2004



April 28, 2005Exercise price

W
98,900 per share


W
136,400 per share


W
116,100 per share


W
102,900 per share


W
151,700 per share


W
194,900 per shareNumber of shares granted


453,576 shares



55,896 shares



20,495 shares



135,897 shares



214,228 shares



90,000 sharesNumber of shares cancelled


19,409 shares



















Number of shares exercised


377,745 shares



32,741 shares



4,931 shares



74,931 shares







Number of shares outstanding


56,422 shares



23,155 shares



15,564 shares



60,966 shares



214,228 shares



90,000 sharesExercise period


July 24, 2003 -



April 28, 2004 -



Sept. 19, 2004 -



April 27, 2005 -



July 24, 2006 -



April 29, 2007 -July 23, 2008



April 27, 2009



Sept. 18 2009



April 26, 2010



July 23, 2011



April 28, 2012     (1)
    
    The Company changed the number of shares granted and the
    exercise price as presented above, in accordance with the
    resolutions of the Board of Directors dated April 26, 2003,
    October 17, 2003, and October 22, 2004.   F-52




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    1st
    Grant


2nd
    Grant


3rd
    Grant


4th
    Grant


5th
    Grant


6th
    Grant


Total(In millions of Korean Won)Prior period

W
39,645


W
3,749


W
1,732


W
13,235


W
8,243


W
310


W
66,914Current period


7,315



3,070



1,537



6,556



23,720



7,687



49,885Future period






















1,543



1,543W
46,960


W
6,819


W
3,269


W
19,791


W
31,963


W
9,540


W
118,342     2006


2005Number of Stock


Weighted-Average


Number of Stock


Weighted-AverageStock Appreciation

Appreciation


Exercise Price per


Appreciation


Exercise Price perRights Outstanding,

Rights


Share


Rights


Share(In Korean Won)Beginning of year


534,642


W
140,258



722,007


W
118,711Granted










90,000



194,900Excercised


(74,307
)


109,404



(277,365
)


101,899Canceled














Forfeited














Stock appreciation rights
    outstanding, end of year


460,335



145,238



534,642



140,258Excercisable at the year end


370,335


W
133,169



230,414


W
108,276Weighted-average fair value at
    grant date





W
116,176






W
116,176     Appreciation Rights OutstandingWeighted-Average


Weighted-AverageRemaining


Exercise PriceExercise Prices


Shares


Contractual Life


per Share(In Korean Won)98,900



56,422



1.56 years


W
98,900136,400



23,155



2.32 years



136,400116,100



15,564



2.72 years



116,100102,900



60,966



3.32 years



102,900151,700



214,228



4.56 years



151,700194,900



90,000



5.33 years



194,900460,335



4.00 years


W
145,238  F-53




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  22.
    Derivatives    Type of

Purpose of

Financial

Valuation


Valuation


Transaction


TransactionCompany

Transaction

Transaction

Institutions

Gain


Loss


Gain


Loss(In millions of Korean Won)POSCO

Currency forward

Trading

SC Korea First

W



W



W
779


W
11,491Nickel future



Bank and others Sempra Metal Ltd.














12,205POSCO E&C

Currency forward



Citibank Korea and others


1



791



732



920Posteel Co., Ltd.





Hana bank and others










37



300Pohang Coated





Shinhan Bank










1,258



843Steel Co., Ltd.

Option






1,856



12



1,734



83POSDATA

Currency forward

Cash flow
    hedge

Korea Exchange Bank










53



25POSCO Specialty Steel Co.,
    Ltd.



Fair market
    value hedge

SC Korea First Bank






17



190



78POSCO Power Co., Ltd.

SWAP

Trading

Korea Development Bank and others










10,694



14,418W
1,857


W
820


W
15,477


W
40,363     Type of

Purpose of

Financial

Valuation


Valuation


Transaction


TransactionCompany

Transaction

Transaction

Institutions

Gain


Loss


Gain


Loss(In millions of Korean Won)POSCO

Currency forward

Trading

SC Korea First Bank and others

W



W
18,727


W
688


W
861Nickel future



Sempra Metal Ltd.










1,674



637POSCO E&C

Currency forward



Citibank Korea and others


1,546



1,982



600



6,722Posteel Co., Ltd.





Hana bank and others










170



37Pohang Coated





Shinhan Bank






684



112



125Steel Co., Ltd.

Option






125







486



564POSDATA

Currency forward



Korea Exchange Bank










90



12POSCO Specialty Steel Co.,
    Ltd.





SC Korea First Bank










37



42W
1,671


W
21,393


W
3,857


W
9,000  F-54




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Type of

Purpose of

Financial

Valuation


Valuation


Transaction


TransactionCompany

Transaction

Transaction

Institutions

Gain


Loss


Gain


Loss(In millions of Korean Won)POSCO

Currency swap

Trading

Citybank Korea and others

W



W



W
683


W
Nickel future



Sempra Metal Ltd.










2,800



5,980Currency forward



CALYON


6







597



1,092POSCO E&C





Citibank Korea and others


9,588



2,646



4,900



1,499Posteel Co., Ltd.





Citibank Korea










328



694Pohang Coated Steel Co., Ltd.





Shinhan Bank










3,106



67POSCO Specialty Steel Co.,
    Ltd.





SC Korea First Bank










38



W
9,594


W
$2,646


W
12,452


W
9,332   23.
    Selling
    and Administrative Expenses    2006


2005


2004(In millions of Korean Won)Transportation and storage

W
539,589


W
492,921


W
493,790Salaries


183,943



168,746



149,153Welfare


111,666



116,542



103,638Depreciation and amortization


72,983



60,742



68,145Fees and charges


62,610



122,204



76,710Advertising


87,666



98,158



49,382Research and development expenses


54,035



52,545



70,949Severance benefits


26,109



29,475



25,051Sales commissions


42,644



23,409



18,286Travel


21,468



18,808



18,530Rent


16,313



16,345



17,287Repairs


8,846



14,736



20,047Training


18,496



17,367



11,765Office supplies


6,957



7,654



8,103Provision for doubtful accounts


117,337



104,310



53,671Meeting


9,368



9,680



8,576Taxes and public dues


18,936



14,914



13,661Vehicle expenses


2,941



2,155



6,509Membership fees


7,273



8,876



5,391Sales promotions


22,471



5,745



6,474Entertainment


7,904



7,315



6,444Others


116,860



58,670



61,366W
1,556,415


W
1,451,317


W
1,292,928  F-55




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  24.
    Donations    2006


2005


2004(In millions of Korean Won)POSTECH

W
22,000


W
17,050


W
32,479POSCO Educational Foundation


33,000



33,000



39,500POSCO Welfare Fund


59,400



69,960



58,000Others


40,278



33,008



39,567W
154,678


W
153,018


W
169,546   25.
    Income
    Taxes    2006


2005


2004(In millions of Korean Won)Current income taxes

W
691,315


W
1,547,761


W
1,361,874Deferred income taxes


230,636



(74,172
)


139,772W
921,951


W
1,473,589


W
1,501,646     2006


2005


2004(In millions of Korean Won)Net income before income tax
    expense

W
4,284,592


W
5,488,189


W
5,342,910Statutory tax rate (%)


27.5



27.5



29.7Income tax expense computed at
    statutory rate


1,178,260



1,509,252



1,586,844Tax credit


(181,739
)


(215,892
)


(161,939
)Others, net


(74,570
)


180,229



76,741Income tax expense

W
921,951


W
1,473,589


W
1,501,646Effective rate (%)


21.52



26.85



28.11   06-2, Accounting treatment for taxable temporary differences
    associated with investments in subsidiaries, associates, and
    interest in joint ventures
 F-56




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006Before Adjustment


Adjustment


After Adjustment(In millions of Korean Won)Deferred income tax liabilities(1)

W
450,955


W
9,387


W
460,342Minority interest


491,133



(1,926
)


489,207Income tax expense


903,714



18,237



921,951Net income before minority interest


3,380,878



(18,237
)


3,362,641Minority interest in income of
    consolidated subsidiaries


50,385



(1,925
)


48,460Net income


3,330,492



(16,311
)


3,314,181   2005Before Adjustment


Adjustment


After Adjustment(In millions of Korean Won)Deferred income tax liabilities(1)

W
220,628


W
(6,761
)

W
213,867Capital adjustments


(1,151,609
)


(2,088
)


(1,153,697
)Minority interest


386,766



(2,096
)


384,670Income tax expense


1,482,438



(8,849
)


1,473,589Net income before minority interest


4,005,751



8,849



4,014,600Minority interest in income of
    consolidated subsidiaries


(5,796
)


(2,096
)


(7,892
)Net income


4,011,547



10,945



4,022,492Basic and diluted earnings per
    share

W
50,652/share






W
50,790/share     (1)
    
    Part of deferred tax liabilities is classified as non-current
    liabilities.  26.
    Earnings
    Per Share    2006


2005


2004Number of Shares Issued(1)(I)


87,186,835



87,186,835



87,186,835Accumulated Number of Treasury
    Shares(2)


3,099,818,765



2,915,875,434



2,324,518,992Number of Days Outstanding


365



365



366Weighted-Average Number of
    Treasury Shares (II)


8,492,654



7,988,700



6,351,145Weighted-Average Number of Common
    Shares ((I)-(II))


78,694,181



79,198,135



80,835,690     (1)
    
    No change for the year ended December 31, 2006.(2)
    
    This number is comprised of acquisitions and disposals of
    treasury stocks, which are shown on a net basis.   F-57




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006


2005


2004(In millions of Korean Won,except per share amounts)Net ordinary income

W
3,314,181


W
4,022,492


W
3,811,843Weighted-average number of common
    shares outstanding


78,694,181



79,198,135



80,835,690Basic ordinary income and earnings
    per share

W
42,115


W
50,790


W
47,155     2006


2005


2004(In millions of Korean Won,except per share amounts)Net income

W
3,314,181


W
4,022,492


W
3,814,225Weighted-average number of common
    shares outstanding


78,694,181



79,198,135



80,835,690Basic net income and earnings per
    share

W
42,115


W
50,790


W
47,185   Diluted
    Earnings Per Share
   F-58




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  27.
    Assets
    and Liabilities Denominated in Foreign Currencies    2006


2005Won


WonForeign Currency(3)


Equivalent


Equivalent(In millions of Korean Won)AssetsCash and cash equivalents(1)

US$


310,532,020


W
288,671


W
320,964JPY


2,813,798



22



275Overseas subsidiaries (US$)


323,083,993



300,339



284,221Trade accounts and notes receivable

US$


232,664,898



216,285



552,622JPY


2,358,376,350



18,438



31,912EUR


7,491,962



9,157



4,346Overseas subsidiaries (US$)


464,123,798



431,449



244,741Other accounts and notes receivable

US$


30,132,257



28,011



10,066JPY


16,987,193



133



336Overseas subsidiaries (US$)


67,780,423



63,009



18,526Short-term and long-term loans
    receivable

Overseas subsidiaries (US$)


41,075,306



38,184



19,302Long-term trade accounts and notes
    receivable

Overseas subsidiaries (US$)










71Investment securities(2)

Overseas subsidiaries (US$)


43,628,434



40,557



37,502Guarantee deposits

US$


162,449



151



332EUR


34,458



42



Overseas subsidiaries (US$)


25,657,296



23,851



1,306W
1,458,299


W
1,526,522   F-59




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2006


2005Won


WonForeign Currency(3)


Equivalent


Equivalent(In millions of Korean Won)LiabilitiesTrade accounts and notes payable

US$


52,627,051


W
48,922


W
782,304JPY


1,687,520,861



13,194



19,564EUR


3,161,589



3,864



13,215Overseas subsidiaries (US$)


338,829,755



314,976



72,520Other accounts and notes payable

US$


18,616,545



17,306



7,599JPY


809,139,661



6,326



2,624EUR


5,887,443



7,196



4,937Overseas subsidiaries (US$)


42,430,861



39,444



362Accrued expenses

US$


94,066



87



8,591Overseas subsidiaries (US$)


16,160,872



15,023



18,785Short-term borrowings

US$


15,180,781



14,112



10,424Overseas subsidiaries (US$)


1,181,389,845



1,098,220



633,200Withholdings

US$


22,211



21



5,025EUR


301,745



369



6,796Overseas subsidiaries (US$)


3,067,691



2,852



8,058Debentures(2), (4)

US$


300,000,000



278,880



263,547JPY


101,622,000,000



794,512



701,982Foreign currency loans(4)

US$


34,288,961



31,875



JPY


576,000,000



4,503



24,109Overseas subsidiaries (US$)


311,756,670



289,809



379,817Loans from foreign financial
    institutions(4)

US$


14,918,501



13,868



19,430EUR


17,490,732



21,378



25,739W
3,016,737


W
3,008,628     (1)
    
    Includes cash and cash equivalents, short-term financial
    instruments and long-term financial instruments.(2)
    
    Presented at face value.(3)
    
    Currencies other than US dollars, Japanese yen, and Euros are
    converted into US dollars. The amounts of overseas subsidiaries
    are converted into US dollars.(4)
    
    Includes current portion of long-term debts. F-60




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   28.
    Related
    Party Transactions    Sales and Others (1)


Purchases and Others(1)2006


2005


2004


2006


2005


2004(In millions of Korean Won)POSCO E&C

W
12,134


W
3,758


W
9,317


W
1,618,205


W
1,732,462


W
891,474Posteel Co., Ltd.


966,254



1,030,276



919,618



93,315



86,005



67,193POSCON Co., Ltd.


177



131



139



219,602



235,232



194,847Pohang Steel Co., Ltd.


367,443



426,007



303,425



853



1,105



271POSCO Machinery &
    Engineering Co., Ltd.


1,908



92



5,001



125,996



160,787



116,424POSDATA Co., Ltd.


2,290



1,009



989



175,046



182,149



209,839POSCO Research Institute














18,553



14,350



13,203Seung Kwang Co., Ltd.














6



110



35POS-AC Co., Ltd.


732



566



517



30,546



29,554



20,980POSCO Specialty Steel Co.,
    Ltd.


2,844



3,440



31



70,299



53,618



75,984POSCO Machinery Co., Ltd.


1,929



121



116



76,189



107,648



95,892POSCO Refractories &
    Environment (POSREC)


166



261



137



211,122



195,329



173,917POSTECH Venture Capital Co.,
    Ltd.


77



63



59











Pohang Steel America Corporation
    (POSAM)


84,227



97,920



33,446



277







POSCO Australia Pty. Ltd. (POSA)


17,821



10,163



1,115



2,235



31,305



41,673POSCO Canada Ltd. (POSCAN)














91,502



102,841



56,143POSCO Asia Co., Ltd. (POA)


440,078



552,694



573,772



73,353



130,871



146,016Zhangjiagang Pohang Stainless
    Steel Co., Ltd.


487,037



723,522



714,832











POSCO  Japan Co.,
    Ltd.


566,208



544,636



409,845



75,170



75,604



30,846Others


324,358



317,176



86,821



253,698



338,718



W
3,275,683


W
3,711,835


W
3,059,180


W
3,135,967


W
3,477,688


W
2,134,737   F-61




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Receivables(2)


Payables(2)2006


2005


2006


2005(In millions of Korean Won)POSCO E&C

W
7,933


W
53


W
77,678


W
193,856Posteel Co., Ltd.


69,539



111,790



3,198



1,760POSCON Co., Ltd.


1



1



18,016



28,638Pohang Steel Co., Ltd.


41,029



33,896



94



66POSCO Machinery &
    Engineering Co., Ltd.


4



4



13,211



14,449POSDATA Co., Ltd.


1



43



26,639



26,709POSCO Research Institute










3,766



2,674Seung Kwang Co., Ltd.


2,034



2,063







POS-AC Co., Ltd.






1



1,177



888POSCO Specialty Steel Co.,
    Ltd.






1,231



3,103



2,119POSCO Machinery Co., Ltd.


30



1



11,203



9,863POSCO Refractories &
    Environment (POSREC)


9



17



23,742



23,774POSTECH Venture Capital Co.,
    Ltd.














53Pohang Steel America Corporation
    (POSAM)


401



9







POSCO Australia Pty. Ltd. (POSA)






618







POSCO Canada Ltd. (POSCAN)


13







14,166



5,726POSCO Asia Co., Ltd. (POA)


20,827



8,749



1,277



6,931Zhangjiagang Pohang Stainless
    Steel Co., Ltd.


6



175,415







POSCO  Japan Co.,
    Ltd.


20,685



19,599



5,428



1,542Others


9,430



97,123



23,396



28,772W
171,942


W
450,613


W
226,094


W
347,820     (1)
    
    Sales and others include sales, non-operating income and others;
    purchases and others include purchases, overhead expenses and
    others.(2)
    
    Receivables include trade accounts, other accounts receivable
    and others; payables include trade accounts, other accounts
    payable and others. F-62




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Sales and others(1)


Purchases and others(1)2006


2005


2004


2006


2005


2004(In millions of Korean Won)eNtoB Corporation

W



W



W



W
134,703


W
170,258


W
131,377KOBRASCO














141,859



202,262



104,848POSCHROME














35,009



45,043



51,820Posmmit Steel Centre SDN BHD
    (POS-MMIT)


3,971



10,229



7,655











PT POSMI Steel Indonesia










5











POSVINA


2,684



11,239



12,599











USS  POSCO Industries
    (UPI)


356,190



312,377



365,362











Guangdong Xingpu Steel Center Co.,
    Ltd.


10,295



















MIDAS Information Technology.,
    Ltd.






















15W
373,140


W
333,845


W
385,621


W
311,571


W
417,563


W
288,060   Receivables(2)


Payables(2)2006


2005


2006


2005(In millions of Korean Won)eNtoB Corporation

W



W



W
1,917


W
2,329KOBRASCO










9,737



POSCHROME














4,719Posmmit Steel Centre SDN BHD
    (POS-MMIT)






29







POSVINA






1,100







Guangdong Xingpu Steel Center Co.,
    Ltd.


2,337











W
2,337


W
1,129


W
11,654


W
7,048     (1)
    
    Sales and others include sales, non-operating income and others;
    purchases and others include purchases, overhead expenses and
    others.(2)
    
    Receivables include trade accounts, other accounts receivable
    and others; payables include trade accounts, other accounts
    payable and others. F-63




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Revenues




Expenses2006


2005


2004




2006


2005


2004(In millions of Korean Won)




(In millions of Korean Won)Sales

W
7,670,446


W
8,293,069


W
5,982,359


Cost of goods sold

W
7,332,282


W
8,094,089


W
5,849,925Interest income


694



1,322



2,242


Interest expense


3,912



3,778



2,272Rental income


1,273



1,014



727


Selling and administrative expenses


259,038



156,157



120,428Others


8,107



3,074



3,693


Others


85,288



44,455



16,396W
7,680,520


W
8,298,479


W
5,989,021




W
7,680,520


W
8,298,479


W
5,989,021     2006


2005




2006


2005(In millions of Korean Won)




(In millions of Korean Won)Trade accounts and notes receivable

W
709,207


W
1,046,732


Trade accounts and notes payable

W
494,980


W
728,395Short-term loans receivable


41,642



36,310


Short-term borrowings


71,630



28,064Other accounts and notes receivable


8,431



5,415


Other accounts and notes payable


173,648



269,287Long-term loans receivable


56,613



37,359


Long-term debts


25,121



23,557Other assets


113,497



208,316


Other liabilities


164,011



284,829W
929,390


W
1,334,132




W
929,390


W
1,334,132   29.
    Segment
    and Regional Information    Engineering and








ConsolidationSteel


Construction


Trading


Others


Adjustment


Consolidated(In millions of Korean Won)Statement of incomeExternal customers

W
23,727,533


W
3,752,233


W
3,046,127


W
2,986,879


W
(7,670,446
)

W
25,842,326Less: Inter-segment


3,984,759



1,631,547



632,841



1,421,299



7,670,446



Net sales

W
19,742,774


W
2,120,686


W
2,413,286


W
1,565,580


W



W
25,842,326Operating income

W
4,078,997


W
282,489


W
24,202


W
252,283


W
(248,824
)

W
4,389,147Depreciation and amortization


1,712,672



12,284



5,967



141,114



(89,299
)


1,782,738Balance sheetInventories

W
3,550,674


W
225,378


W
127,600


W
217,963


W
(103,410
)

W
4,018,205Investments


5,867,366



434,047



276,560



527,388



(3,393,443
)


3,711,918Property, plant and equipment


14,075,709



75,712



201,797



1,358,874



(1,068,972
)


14,643,120Intangible assets


258,874



25,889



430



125,147



146,742



557,082  F-64




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Engineering and








ConsolidationSteel


Construction


Trading


Others


Adjustment


Consolidated(In millions of Korean Won)Statement of incomeExternal customers

W
24,886,534


W
3,993,961


W
3,373,587


W
2,340,775


W
(8,293,069
)

W
26,301,788Less: Inter-segment


3,974,711



1,845,747



990,742



1,481,869



8,293,069



Net sales

W
20,911,823


W
2,148,214


W
2,382,845


W
858,906


W



W
26,301,788Operating income

W
5,879,972


W
244,910


W
24,453


W
190,378


W
(256,437
)

W
6,083,276Depreciation and amortization


1,604,241



11,874



7,626



70,693



(81,880
)


1,612,554Balance sheetInventories

W
3,275,723


W
205,622


W
102,569


W
314,233


W
(105,553
)

W
3,792,594Investments


4,662,747



348,143



273,938



468,074



(2,611,346
)


3,141,556Property, plant and equipment


12,223,681



63,747



213,681



571,320



(800,719
)


12,271,710Intangible assets


326,780



26,712



505



110,527



(10,815
)


453,709     Engineering and








ConsolidationSteel


Construction


Trading


Others


Adjustment


Consolidated(In millions of Korean Won)Statement of incomeExternal customers

W
22,683,873


W
2,741,240


W
2,986,345


W
1,543,954


W
(5,982,359
)

W
23,973,053Less: Inter-segment


3,322,773



1,051,816



626,580



981,190



5,982,359



Net sales

W
19,361,100


W
1,689,424


W
2,359,765


W
562,764


W



W
23,973,053Operating income

W
5,180,632


W
93,851


W
34,770


W
90,640


W
(80,473
)

W
5,319,420Depreciation and amortization


1,553,823



10,983



7,933



77,002



(84,380
)


1,565,361Balance sheetInventories

W
2,541,127


W
285,129


W
72,463


W
223,809


W
(57,007
)

W
3,065,521Investments


4,089,017



303,413



282,491



328,247



(2,298,630
)


2,704,538Property, plant and equipment


10,198,426



66,330



230,082



510,987



(565,534
)


10,440,291Intangible assets


410,192



18,633



1,515



78,445



(12,470
)


496,315  F-65




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Sales(1)


Long-Lived AssetsCustomer Location

2006


2005


2004


2006


2005(In millions of Korean Won)Korea

W
17,250,163


W
18,566,060


W
16,738,372


W
14,658,557


W
12,310,240Japan


1,311,685



1,371,510



1,163,541



59,540



65,282China


3,070,422



3,117,909



3,315,789



1,102,657



951,921Asia/Pacific, excluding Japan and
    China


1,486,331



1,502,205



1,257,108



164,018



113,001North America


610,240



550,331



529,080



88,794



52,337Others


2,113,485



1,193,773



969,163



48,866



44,172Consolidation adjustments














(922,230
)


(811,534
)W
25,842,326


W
26,301,788


W
23,973,053


W
15,200,202


W
12,725,419     (1)
    
    Represents revenues, net of consolidation adjustments, incurred
    based on customers locations instead of the Company and
    subsidiaries locations. F-66




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2006Non-Financial


FinancialInstitution


Institution(In millions of Korean Won)AssetsCurrent assets

W
12,161,686


W
75,267Non-current assets


18,776,636



135,485Investment assets


3,576,481



135,438Property, plant and equipment


14,643,073



47Intangible assets


557,082



Total assets

W
30,938,322


W
210,752LiabilitiesCurrent liabilities

W
4,994,825


W
87,471Non-current liabilities


3,664,895



141Total liabilities


8,659,720



87,612Shareholders
    equityCommon stock


373,716



108,687Capital surplus


4,035,273



Retained earnings


18,839,242



24,091Capital adjustments


(1,458,837
)


(9,638
)Minority interest


489,208



Total shareholders equity


22,278,602



123,140Total liabilities and
    shareholders equity

W
30,938,322


W
210,752  F-67




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006Non-Financial


FinancialInstitution


Institution(In millions of Korean Won)Sales

W
25,832,162


W
10,164Cost of goods sold


19,891,544



5,220Selling and administrative expenses


1,553,868



2,547Operating income


4,386,750



2,397Non-operating income


743,537



5,687Non-operating expenses


851,338



2,441Net income before income tax
    expense and minority interest


4,278,949



5,643Income tax expense


921,382



569Net income before minority interest


3,357,567



5,074Minority interest in income of
    consolidated subsidiaries


(48,460
)


Net income

W
3,309,107


W
5,074   30.
    Operating
    Results for the Final Interim Period    2006


2005(Unaudited)


(Unaudited)(In millions of Korean Won, except per share amount)Sales

W
7,363,295


W
6,353,114Cost of sales


5,651,442



5,004,931Operating income


1,238,385



1,108,800Net income


1,051,779



377,935Ordinary income per share


13,531



4,792Net income per share


13,531



4,792  F-68




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  31.
    Supplemental
    Cash Flow Information    2006


2005


2004(In millions of Korean Won)Noncash financing activities:Reclassification to current from
    noncurrent relating to loans from foreign financial institutions

W
8,797


W
9,065


W
10,678Reclassification to current from
    noncurrent relating to
    long-term
    debt


164,370



54,933



74,241Reclassification to current from
    noncurrent relating to debentures


231,100



991,609



961,607Noncash investing activities:Reclassification to current from
    noncurrent relating to held-to-maturity securities


153,476



2,688



13,769     32.
    Significant
    Differences between Korean GAAP and U.S. GAAP  Reconciliation
    to U.S. Generally Accepted Accounting Principles
     F-69




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (a)
    Reconciliation
    of net income from Korean GAAP to U.S. GAAP  Adjustments Before


Income Tax


Adjustments AfterIncome Tax


Effect


Income Tax(In millions of Korean Won, except share data)For the year ended
    December 31, 2006Net income under Korean GAAP









W
3,314,181Adjustments:Fixed asset revaluation

W
20,152


W
(5,542
)


14,610Capitalized costs


35,435



(9,745
)


25,690Capitalized repairs


(1,269
)


349



(920
)Investment securities


54,070



(14,869
)


39,201Amortizing of goodwill


25,322



(6,964
)


18,358Others, net


(4,588
)


1,263



(3,325
)W
129,122


W
(35,508
)

W
93,614Net income as adjusted in
    accordance with U.S. GAAP









W
3,407,795Basic and diluted earnings per
    share, as adjusted, in accordance with U.S. GAAP









W
43,304Weighted-average shares outstanding










78,694,181   Adjustments Before


Income Tax


Adjustments AfterIncome Tax


Effect


Income Tax(In millions of Korean Won, except share data)For the year ended
    December 31, 2005Net income under Korean GAAP









W
4,022,492Adjustments:Fixed asset revaluation

W
19,301


W
(5,222
)


14,079Capitalized costs


15,381



(4,230
)


11,151Capitalized repairs


(5,312
)


1,461



(3,851
)Investment securities


81,659



(22,456
)


59,203Amortizing of goodwill


8,875



(2,441
)


6,434Others, net


4,187



(12,097
)


(7,910
)W
124,091


W
(44,985
)

W
79,106Net income as adjusted in
    accordance with U.S. GAAP









W
4,101,598Basic and diluted earnings per
    share, as adjusted, in accordance with U.S. GAAP









W
51,789Weighted-average shares outstanding










79,198,135   F-70




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Adjustments Before


Income Tax


Adjustments AfterIncome Tax


Effect


Income Tax(In millions of Korean Won, except share data)For the year ended
    December 31, 2004Net income under Korean GAAP









W
3,814,225Adjustments:Fixed asset revaluation

W
26,428


W
(6,840
)


19,588Capitalized costs


47,458



(13,051
)


34,407Capitalized repairs


(9,422
)


2,591



(6,831
)Investment securities


(557,615
)


153,344



(404,271
)Others, net


4,270



(1,174
)


3,096W
(488,881
)

W
134,870


W
(354,011
)Net income as adjusted in
    accordance with U.S. GAAP









W
3,460,214Basic and diluted earnings per
    share, as adjusted, in accordance with U.S. GAAP









W
42,806Weighted-average shares outstanding










80,835,690   (b)
    Reconciliation
    of shareholders equity from Korean GAAP to U.S.
    GAAP  Adjustments Before


Income Tax


Adjustments AfterIncome Tax


Effect


Income Tax(In millions of Korean Won)As of December 31,
    2006Total shareholders equity
    under Korean GAAP









W
22,401,742Minority interest










(489,207
)21,912,535Adjustments:Fixed asset revaluation

W
(155,755
)

W
19,986



(135,769
)Capitalized costs


321,643



(88,452
)


233,191Capitalized repairs


2,455



(675
)


1,780Investment securities


(84,269
)


23,174



(61,095
)Amortizing of goodwill


34,196



(9,404
)


24,792Cumulative effect of FAS 123R


(4,097
)


1,127



(2,970
)Others, net


(431
)


119



(312
)W
113,742


W
(54,125
)

W
59,617Shareholders equity, as
    adjusted, in accordance with U.S. GAAP









W
21,972,152   F-71




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Adjustments Before


Income Tax


Adjustments AfterIncome Tax


Effect


Income Tax(In millions of Korean Won)As of December 31,
    2005Total shareholders equity
    under Korean GAAP









W
19,873,677Minority interest










(384,670
)19,489,007Adjustments:Fixed asset revaluation

W
(175,907
)

W
25,528



(150,379
)Capitalized costs


286,208



(78,707
)


207,501Capitalized repairs


3,724



(1,024
)


2,700Investment securities


(66,594
)


18,313



(48,281
)Amortization of goodwill


8,875



(2,441
)


6,434Others, net


60



(8,873
)


(8,813
)W
56,366


W
(47,204
)

W
9,162Shareholders equity, as
    adjusted, in accordance with U.S. GAAP









W
19,498,169   Adjustments Before


Income Tax


Adjustments AfterIncome Tax


Effect


Income Tax(In millions of Korean Won)As of December 31,
    2004Total shareholders equity
    under Korean GAAP









W
16,386,056Minority interest










(307,891
)16,078,165Adjustments:Fixed asset revaluation

W
(195,045
)

W
30,705



(164,340
)Capitalized costs


270,827



(74,477
)


196,350Capitalized repairs


9,036



(2,485
)


6,551Investment securities


(48,399
)


214,510



166,111Others, net


(4,127
)


1,135



(2,992
)Deferred taxed related to OCI










(71,788
)W
32,292


W
169,388


W
129,892Shareholders equity, as
    adjusted, in accordance with U.S. GAAP









W
16,208,057   (c)
    Fixed
    asset revaluation   F-72




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (d)
    Capitalized
    costs        2006


2005


2004(In millions of Korean Won)Capitalized interest

W
123,350


W
86,269


W
84,948Depreciation of capitalized
    interest


(72,034
)


(60,581
)


(55,871
)Net income impact

W
51,316


W
25,688


W
29,077       2006


2005


2004(In millions of Korean Won)Net income impact

W
(13,782
)

W
(18,404
)

W
(2,230
)   (e)
    Capitalized
    repairs   F-73




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (f)
    Guarantees    (g)
    Stock
    Appreciation Rights       F-74




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005


2004(In millions of Korean Won, except per-share amounts)Net Income, as reported

W
4,101,598


W
3,460,214Add: Stock-based employee
    compensation expense included in reported net income, net of
    related tax effects


4,574



1,215Deduct: Stock-based employee
    compensation expense determined under the fair value method, net
    of related tax effects


(6,457
)


(2,303
)Pro forma net earnings


4,099,715



3,459,126Earning per share-basic:As reported


51,789



42,806Pro forma


51,765



42,792Earning per share-diluted:As reported


51,789



42,806Pro forma


51,765



42,792     2006Dividend yield range


3.23 ~3.34
%Expected volatility range


31.29 ~31.63
%Risk-free interest rate range


4.82 ~4.84
%Expected lives (in years)


2.81 ~3.57     2006

2005

2004(In millions of Korean Won)Net income impact

W
(4,171
)

W
2,455


W
4,829     (h)
    Investment
    Securities    (i)
    Recognition
    of an impairment loss   F-75




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
          (ii)
    Recognition
    of gain on disposal of available for sale
    investments      2006


2005


2004(In millions of Korean Won)Impairment loss

W
(1,026
)

W
(7,882
)

W
(562,838
)Recognition of gains on disposal


55,096



89,541



5,223Net income impact

W
54,070


W
81,659


W
(557,615
)     Available-for-Sale
    Securities:
  2006


2005


2004(In millions of Korean Won)Book value at prior yearend plus
    investment acquired during current year

W
2,420,474


W
1,864,297


W
2,261,620Unrealized gains and losses
    incurred during current year


443,097



328,276



47,272Permanent impairment loss incurred
    during current year


(1,970
)


(11,605
)


(3,190
)Fair value (Korean GAAP)


2,861,601



2,180,968



2,305,702Accumulated other-than-temporary
    impairment


(86,357
)


(68,682
)


(50,487
)Fair value (US GAAP)

W
2,775,244


W
2,112,286


W
2,255,215  F-76




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##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (i)
    Goodwill    (j)
    Deferred
    Income Taxes    33.
    Additional
    Financial Information in Accordance with U.S. GAAP  (a)
    Deferred
    taxes in accordance with U.S. GAAP    2006


2005


2004(In millions of Korean Won)Deferred tax assets:Fixed asset revaluation

W
19,986


W
25,528


W
30,705Capitalized foreign exchange losses










3,071Investment securities


221,139



77,984



69,822Impairment loss on fixed assets


129,264



129,135



129,135Impairment loss on investment
    securities


45,979



23,078



221,337Allowance for doubtful accounts


91,478



61,142



32,148Allowance for severance benefits


21,964



101,867



69,913Depreciation expense


2,168



18,980



17,299Capital expenditures


74







9,489Research and development expense






12,988



9,804Deferred taxes related to OCI


12,141



182,824



Denied accrual expenses


78,402



120,198



16,452Others


45,172



86,287



115,681Total deferred tax assets


667,767



840,011



724,856   F-77




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##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2006


2005


2004(In millions of Korean Won)Deferred tax
    liabilities:Gain on valuation of equity method
    investments


118,895



134,441



81,400Reserve for repairs


110,930



132,120



137,394Accrued income


16,446



917



3,453Reserve for technology


397,375



388,117



367,283Capitalized repairs


675



1,024



2,485Capitalized costs


89,361



78,707



78,876Deferred taxes related to OCI


141,155



162,434



71,788Others






30,159



101,061Total deferred tax liabilities


874,837



927,919



843,740Net deferred tax assets
    (liabilities)

W
(207,070
)

W
87,908


W
118,884   (b)
    Comprehensive
    income    2006


2005


2004(In millions of Korean Won)Net income, as adjusted, in
    accordance with U.S. GAAP

W
3,407,795


W
4,101,598


W
3,460,214Other comprehensive income, net of
    tax:Foreign currency translation
    adjustments


(51,838
)


(7,150
)


(91,750
)Unrealized gains (losses) on
    investments


351,307



85,195



434,753Add (less): Reclassification
    adjustment for losses (gains) included in income


43,135



(1,665
)


(1,288
)Comprehensive income, as adjusted,
    in accordance with U.S. GAAP

W
3,750,399


W
4,177,978


W
3,801,929  F-78




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##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Foreign Currency


Unrealized Gains


Accumulated otherTranslation


(Losses) on


ComprehensiveAdjustments


Investments


Income(In millions of Korean Won)Balance, December 31, 2003

W
103,286


W
(255,742
)

W
(152,456
)Foreign currency translation
    adjustments, net of tax benefit of W34,801 million


(91,750
)






(91,750
)Unrealized gains on investments,
    net of tax expense of W(164,905) million






434,753



434,753Less: Reclassification adjustment
    for net realized gain included in income, net of tax expense of
    W488 million






(1,288
)


(1,288
)Current period change


(91,750
)


433,465



341,715Balance, December 31, 2004

W
11,536


W
177,723


W
189,259Foreign currency translation
    adjustments, net of tax benefit of W2,712 million


(7,150
)






(7,150
)Unrealized gains on investments,
    net of tax expense of W(32,316) million






85,195



85,195Less: Reclassification adjustment
    for net realized gain included in income, net of tax expense of
    W632 million






(1,665
)


(1,665
)Current period change


(7,150
)


83,530



76,380Balance, December 31, 2005

W
4,386


W
261,253


W
265,639Foreign currency translation
    adjustments, net of tax benefit of W19,663 million


(51,838
)






(51,838
)Unrealized gains on investments,
    net of tax expense of W(147,661) million






351,307



351,307Add: Reclassification adjustment
    for net realized losses included in income, net of tax benefit
    of W (16,362) million






43,135



43,135Current period change


(51,838
)


394,442



342,604Balance, December 31, 2006

W
(47,452
)

W
655,695


W
608,243   (c)
    Fair
    Value of financial instruments    (i) Cash and cash equivalents, short-term financial
    instruments, trading securities, trade accounts and notes
    receivable, trade accounts and notes payable, and short-term
    borrowings
    (ii) Investment Securities
   F-79




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (iii) Long-Term loans, trade account and notes
    receivable
    (iv) Long-Term debt
      2006


2005Carrying Amount


Fair Value


Carrying Amount


Fair Value(In millions of Korean Won)Cash and cash equivalents

W
936,288


W
936,288


W
653,364


W
653,364Short-term financial instruments


867,310



867,310



760,371



760,371Trading securities


2,000,647



2,000,647



2,610,502



2,610,502Trade accounts and notes
    receivable, including long-term loans


3,845,106



3,845,106



3,369,737



3,369,737Investment securities


3,165,055



3,165,055



2,815,741



2,815,741Short-term borrowings


1,238,749



1,238,749



859,774



859,774Trade accounts and notes payable


1,507,227



1,507,227



1,145,729



1,145,729Long-term debt, including current
    portion


3,129,914



3,189,205



2,188,470



2,233,670   (d)
    Minority
    interest    (e)
    Classification
    differences in the Consolidated Statements of
    Income   F-80




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Components
    of Other non-operating expenses
    2006


2005


2004(In millions of Korean Won)Loss on disposal of investments

W
66,116


W
121,474


W
7,869Loss on impairment of property,
    plant and equipment


2,740







72,692Additional payment of income taxes


13,472



194,506



10,054Provision for early retirement
    benefits(1)


14,672



418,567



16,637Others


107,847



119,542



58,021Total

W
204,847


W
854,089


W
165,273     (1)
    
    In 2000, the Company initiated an ongoing plan to offer special
    termination benefits to employees who voluntarily accept early
    retirement and received applications for early retirement from
    employees. The Company recorded an expense amounting to
    W14,672 million, W418,567 million and
    W16,637 million, for the years ended December 31,
    2006, 2005 and 2004, respectively, which represents lump sum
    early retirement benefits which were either paid or accrued for
    the applicants who were notified of acceptance and approval of
    their applications at each year end. The employees were
    terminated effective on or before December 31, 2006 and all
    liabilities associated with these early retirement benefits were
    settled by December 2006.  Extraordinary
    income
    (f)
    Consolidated
    statement of cash flows     F-81




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Components
    of Others financing activities
    2006


2005


2004(In millions of Korean Won)Proceeds from other current
    liabilities

W
88,907


W
2,289


W
5,344Repayment of other current
    liabilities






(1,640
)


(44,539
)Issuance of new shares by
    subsidiaries


67,431



39,675



8,948Dividends paid by subsidiaries


(7,530
)


(11,300
)


(9,230
)Total

W
148,808


W
29,024


W
(39,477
)   (g)
    Segment    Subtotalbefore


ReconcilingSteel


Construction


Trading


Others


Elimination


Adjustments


Consolidated(In millions of Korean Won)Segments total assets

W
29,553,435


W
2,255,376


W
1,026,031


W
3,412,719


W
36,247,561


W
(5,098,488
)

W
31,149,073   34.
    Recent
    Accounting Pronouncements  U.S.
    GAAP
         F-82




---



##### Table of Contents



POSCO and
    Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Korean
    GAAP
         F-83




---



##### 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)*7
.1



Computation of ratio of earnings
    to fixed charges8
.1



List of subsidiaries of POSCO12
.1



Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200212
.2



Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200213
.1



Certification pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200215
.1



Consent of Samil
    PricewaterhouseCoopers, the Korean member firm of
    PricewaterhouseCoopers     *
    
    Filed previously