SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

POSCO

POSCO Center
892 Daechi-4-dong
Gangnam-gu
Seoul, Korea
(Address of principal executive offices)

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

     Form 20-F þ       Form 40-F o

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

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

     Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

     Yes o       No þ

     If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82–o

 

 

This Current Report on Form 6-K is being filed to be incorporated by reference into Registration Statement No. 333-12084 on Form 
F-3.

Consolidated Financial Statements for the Six Months Ended June 30, 2005

     You should read the selected consolidated financial data below together with the unaudited consolidated financial statements as of and for the six months ended June 30, 2004 and 2005 included in this Current Report on Form 6-K. Results of operations in the first six months of 2005 may not be indicative of results of operations for the remainder of 2005 and the full year 2005. For instance, in September 2005, we reduced domestic prices on 11 steel products, including hot-rolled and cold-rolled products, in response to the general decline in global steel prices, primarily attributable to an increased supply from Chinese producers. We anticipate this reduction in domestic steel prices will adversely affect our margins and results of operations for the fourth quarter of 2005.

     Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the Republic of Korea (“Korean GAAP”), which differ in certain significant respects from accounting principles generally accepted in the United States (“U.S. GAAP”). See Note 32 of Notes to Consolidated Financial Statements included herein for a description of these differences and a reconciliation of certain Korean GAAP items to U.S. GAAP.

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

		For the six months ended June 30,
		2004				2005
		(in billions of Won,
		except per share data)
		(unaudited)
INCOME STATEMENT DATA
Korean GAAP
Sales(1)		W	10,835			W	13,180
Cost of goods sold(2)			7,966				8,928
Selling and administrative expenses			566				660
Operating income			2,303				3,592
Interest and dividend income			81				104
Interest expense			106				84
Foreign currency transactions and translation gains, net			78				99
Donations(3)			83				92
Income tax expense			674				1,050
Net income			1,633				2,582
Earnings per share(4)			20,237				32,478
Dividends per share(5)			1,500				2,000
U.S. GAAP(6)
Operating income			2,296				3,565
Net income			1,249				2,595
Basic and diluted earnings per share			15,480				32,639

		As of December 31,				As of June 30,
		2004				2005
		(in billions of Won)
		(unaudited)
BALANCE SHEET DATA
Korean GAAP
Working capital(7)		W	5,493			W	6,191
Property, plant and equipment, net(8)			10,440				11,038
Total assets(8)			24,129				25,781
Long-term debt(9)(10)(11)			2,051				1,638
Total shareholders’ equity(8)			16,386				18,157
U.S. GAAP(6)
Property, plant and equipment, net		W	10,541			W	11,174
Total assets			24,279				25,795
Total shareholders’ equity			16,208				17,793

Operating Results

     Our sales for the six months ended June 30, 2005 increased by 21.6% to Won 13,180 billion from Won 10,835 billion for the six months ended June 30, 2004, reflecting an increase of 23.3% in the average unit sales price per ton of our steel products, which more than offset a 2.6% decrease in the sales volume of our steel products.

     The table below sets out our sales revenues by major steel product categories for the periods indicated. The sales revenues in the table below represent the steel product sales of our consolidated entities which are steel-related companies but do not include the non-steel product sales of those entities. They include sales by our consolidated sales subsidiaries of steel products purchased by these subsidiaries from third parties, including trading companies to which we sell steel products.

		Six months ended June 30,
		2004								2005
		Billions of								Billions of
Steel Products		Won				%				Won				%
Hot rolled products			2,384				24.0				2,938				24.6
Plates			896				9.0				978				8.2
Wire rods			607				6.1				825				6.9
Cold rolled products			3,004				30.2				3,850				32.3
Silicon steel sheets			253				2.6				351				2.9
Stainless steel products			2,370				23.9				2,438				20.4
Others			421				4.2				544				4.6
Total			9,934				100.0				11,925				100.0

     Set forth below is our discussion of unit sales prices and sales volumes of our steel products, which affected our sales revenues.

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

		Six months ended June 30,
Product		2004				2005
		(in thousands of Won per ton)
Hot rolled products		W	444.3			W	581.8
Plates			534.8				686.9
Wire rods			486.6				649.8
Cold rolled products			560.4				730.9
Silicon steel sheets			704.0				900.5
Stainless steel products			2,320.6				2,261.3
Others			452.4				513.5
Average (1)			622.5				767.4

     Unit sales price for all of our principal product lines other than stainless steel products increased for the six months ended June 30, 2005 and the weighted average unit price for our products increased by 23.3% in the first half of 2005 compared to the first half of 2004. For the six months ended June 30, 2005, unit sales price of wire rods, which accounted for 8.2% of total sales volume of steel products, increased by 33.5%; unit sales price of hot rolled products, which accounted for 32.5% of total sales volume of steel products, increased by 30.9%; unit sales price of cold rolled products, which accounted for 33.9% of total sales volume of steel products, increased by 30.4%; unit sales price of plates, which accounted for 9.2% of total sales volume of steel products, increased by 28.4%; and unit sales price of silicon steel sheets, which accounted for 2.5% of total sales volume of steel products, increased by 27.9%. On the other hand, for the six months ended June 30, 2005, unit sales price of stainless steel products, which accounted for 6.9% of total sales volume of steel products, decreased by 2.6%.

     Export prices in Dollar terms increased in the first half of 2004, primarily as a result of the general recovery of the global economy as well as continued increases in transportation costs and prices of raw materials. Export prices in Dollar terms stabilized in the first half of 2005.

     The table below sets out our sales volume by major steel product categories for the periods indicated. The sales volumes in the table below represent the steel product sales of our consolidated entities which are steel-related companies but do not include the non-steel product sales of those entities. They include sales by our consolidated sales subsidiaries of steel products purchased by those subsidiaries from third parties, including trading companies to which we sell steel products.

		Six months ended June 30,
		2004								2005
		Thousands								Thousands
Steel Products		of tons				%				of tons				%
Hot rolled products			5,365				33.6				5,050				32.5
Plates			1,675				10.5				1,424				9.2
Wire rods			1,248				7.8				1,269				8.2
Cold rolled products			5,360				33.6				5,267				33.9
Silicon steel sheets			360				2.3				390				2.5
Stainless steel products			1,021				6.4				1,078				6.9
Others			930				5.8				1,060				6.8
Total			15,959				100.0				15,539				100.0

     Sales volume of silicon steel sheets, which accounted for 2.5% of total sales volume of steel products, showed the greatest increase among our major steel product categories with an increase of 8.3% for the six months ended June 30, 2005 over the corresponding period in 2004. Sales volume of stainless steel products, accounting for 6.9% of total sales volume of steel products, increased by 5.6% and sales volume of wire rods, accounting for 8.2% of total sales volume of steel products, increased by 1.7%. On the other hand, sales volume of plates,

accounting for 9.2% of total sales volume of steel products, represented the largest decline among our product categories with a decrease of 15.0%. Sales volume of hot rolled products, which accounted for 32.5% of total sales volume of steel products, decreased by 5.9% and sales volume of cold rolled products, which represented our largest product category in terms of sales volume, accounting for 33.9% of total sales volume of steel products, decreased by 1.7%. The decline in aggregate sales volume of steel products was primarily attributable to rationalization of certain production facilities in the first half of 2005, which resulted in reduced output of finished products during this period compared with the first half of 2004.

     The table below sets forth our sales, including non-steel sales, by geographic location for the periods indicated.

		Six months ended June 30,
Region		2004				2005
		(in billions of Won)
Korea		W	7,477			W	9,245
Total exports			3,358				3,935
China			1,532				1,600
Asia (excluding Japan and China)/Middle East			640				781
Japan			557				700
North America			220				246
Europe			49				24
Other			359				583
Total			10,835				13,180

     The table below sets forth our sales volume of steel products, by geographic location, for the periods indicated.

		Six months ended June 30,
Region		2004				2005
		(in thousands of tons)
Korea			11,469				11,563
Total exports			4,489				3,976
China			1,560				1,423
Asia (excluding Japan and China)/Middle East			785				797
Japan			874				902
North America			351				329
Europe			56				16
Other			863				509
Total			15,959				15,539

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

     Our domestic sales for the six months ended June 30, 2005 increased by 23.6% in terms of total sales revenues and 0.8% in terms of sales volume of steel products compared to the corresponding period in 2004. For the six months ended June 30, 2005, our domestic sales

accounted for approximately 74.4% of our total sales volume of steel products, compared to 71.9% for the six months ended June 30, 2004. The increase in domestic sales revenues in the first half of 2005 compared to the first half of 2004 was attributable primarily to an increase in the price of steel products sold in Korea and, to a lesser extent, on an increase in domestic sales volume of steel products.

     Our export sales for the six months ended June 30, 2005 increased by 17.2% in terms of total sales revenues and decreased by 11.4% in terms of sales volume of steel products compared to the six months ended June 30, 2004. Exports as a percentage of total sales volume of steel products decreased to 25.6% of such sales volume for the six months ended June 30, 2005 compared to 28.1% for the corresponding period in 2004. The increase in export sales in terms of total sales revenues in the first half of 2005 compared to the first half of 2004 was primarily attributable to an increase in the price of steel products sold abroad, which more than offset the overall decrease in export sales volume of steel products.

     Gross profit for the six months ended June 30, 2005 increased by 48.2% to Won 4,252 billion from Won 2,868 billion for the six months ended June 30, 2004. Gross margin for the six months ended June 30, 2005 increased to 32.3% from 26.5% for the six months ended June 30, 2004. The increase in gross margin reflected the 21.6% increase in sales, which outpaced a 12.1% increase in cost of goods sold for the six months ended June 30, 2005, to Won 8,928 billion from Won 7,966 billion for the corresponding period in 2004. The cost of goods sold rose primarily due to increases in both volume and price of raw materials purchased, as well as an increase in labor expenses resulting from higher performance bonuses. Raw materials costs for the six months ended June 30, 2005 increased primarily as a result of a general increase in the unit costs of coal, iron ore, nickel and scrap metal, as well as an increase in our production of crude steel to 15.0 million tons for the six months ended June 30, 2005 compared to 14.8 million tons for the six months ended June 30, 2004. The average price of coal per ton (including all associated costs such as customs duties and transportation costs) increased from $63.30 for the six months ended June 30, 2004 to $85.40 for the six months ended June 30, 2005. The average price of iron ore per ton (including all associated costs such as customs duties and transportation costs) increased from $21.50 for the six months ended June 30, 2004 to $27.90 for the six months ended June 30, 2005.

     Operating income for the six months ended June 30, 2005 increased by 56.0% to Won 3,592 billion compared to Won 2,303 billion for the corresponding period in 2004. Operating margin for the six months ended June 30, 2005 increased to 27.3% from 21.3% for the six months ended June 30, 2004, reflecting the 48.2% increase in gross profit, which outpaced a 16.7% increase in selling and administrative expenses for the six months ended June 30, 2005 to Won 660 billion from Won 566 billion for the corresponding period in 2004. The increase in selling and administrative expenses resulted principally from increases in fees and charges and provision for doubtful accounts. Our fees and charges for the six months ended June 30, 2005 increased by 79.3% to Won 56 billion from Won 31 billion for the six months ended June 30, 2004, primarily as a result of fees and charges incurred in connection with the outsourcing of certain peripheral administrative functions. Our provision for doubtful accounts for the six months ended June 30, 2005 increased more than five-fold to Won 27 billion from Won 4 billion for the six months ended June 30, 2004, primarily as a result of a slowdown in the construction

industry and an increase in reserve for doubtful receivables of POSCO Engineering & Construction Co., Ltd.

     Our net income for the six months ended June 30, 2005 increased by 58.1% to Won 2,582 billion from Won 1,633 billion for the corresponding period in 2004. Net income increased primarily as a result of the increase in operating income, as well as increases in earnings of equity method investees, interest and dividend income, net gain on foreign currency transactions and translations and a decrease in interest expense. Earnings of equity method investees increased more than seven-fold during the six months ended June 30, 2005 to Won 27 billion from Won 3 billion for the six months ended June 30, 2004, principally as a result of earnings from KOBRASCO and USS-POSCO Industries. Interest and dividend income rose by 28.5% for the six months ended June 30, 2005 to Won 104 billion from Won 81 billion for the six months ended June 30, 2004, primarily as a result of higher interest income due to increased bank deposits, as well as higher dividends declared on certain of our equity holdings. We also recorded net gain on foreign currency transactions and translations of Won 99 billion in the first half of 2005 compared to net gain of Won 78 billion for the corresponding period in 2004. Interest expense for the six months ended June 30, 2005 decreased by 21.0% to Won 84 billion from Won 106 billion for the six months ended June 30, 2004, primarily due to a reduction in the average balance of our debt.

     Our effective tax rate in the first half of 2005 was 28.8% compared to 29.0% in the corresponding period in 2004. Commencing January 1, 2005, the statutory tax rate applicable to us decreased to 27.5% from 29.7%. See Note 25 of Notes to Consolidated Financial Statements.

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

		Six months ended June 30,
		2004				2005
		(in billions of Won)
Net cash provided by operating activities		W	1,864			W	2,366
Net cash used in investing activities			768				1,212
Net cash used in financing activities			744				1,026
Cash and cash equivalents at beginning of period			594				482
Cash and cash equivalents at end of period			938				640
Net increase (decrease) in cash and cash equivalents			344				158

Capital Requirements

     Historically, uses of cash consisted principally of purchases of property, plant and equipment and other assets and payments of long-term debt. Net cash used for investing activities for the six months ended June 30, 2004 and 2005 were Won 768 billion and Won 1,212 billion, respectively. These amounts included purchases of property, plant and equipment of Won 871 billion for the six months ended June 30, 2004 and Won 1,382 billion for the six months ended June 30, 2005. We recorded net acquisition of trading securities of Won 167 billion for the six months ended June 30, 2004 and net disposition of trading securities of Won 216 billion for the six months ended June 30, 2005. We recorded net acquisition of available-for-sale securities of Won 49 billion for the six months ended June 30, 2004 and Won 72 billion for

the six months ended June 30, 2005. We also recorded net disposition of short-term financial instruments of Won 222 billion for the six months ended June 30, 2004 and Won 98 billion for the six months ended June 30, 2005. In our financing activities, for the six months ended June 30, 2004 and 2005, we used cash of Won 620 billion and Won 609 billion, respectively, for principal repayments of outstanding long-term debt. We used Won 357 billion for the repurchase of our shares from the market as treasury stock in the six months ended June 30, 2005. We did not make any such share repurchases in the six months ended June 30, 2004.

     We anticipate that capital expenditures and repayments of outstanding debt will represent the most significant uses of funds for the next several years. From time to time, we may also require capital for investments involving acquisitions and strategic relationships. Our total capital expenditures are estimated to be approximately Won 2,060 billion in the second half of 2005, which we intend to use to maintain our competitive strengths, develop higher margin, higher value-added products and increase our production capacity. We retain the ability to reduce or suspend our planned capital expenditures. However, our failure to undertake planned expenditures on steel-producing facilities could adversely affect the modernization of our production facilities and our ability to produce more higher value-added products.

     In addition to our funding requirements relating to our capital investment program, payments of the principal of and interest on indebtedness will require considerable resources. Principal repayment obligations with respect to long-term debt outstanding as of June 30, 2005 are Won 808 billion in the year ended June 30, 2007, Won 94 billion in the year ended June 30, 2008, Won 619 billion in the year ended June 30, 2009 and Won 23 billion in the year ended June 30, 2010. Long-term debt maturing after June 30, 2010 is Won 99 billion. In addition, as of June 30, 2005, we had short-term borrowings of Won 956 billion and current portion of long term debt of Won 974 billion. We expect to repay these obligations primarily through cash provided by operations and additional borrowings.

     We paid dividends on common stock in the amounts of Won 406 billion in the six months ended June 30, 2004 and Won 523 billion in the six months ended June 30, 2005.

     The following table sets forth the amount of long-term debt, capital lease and operating lease obligations as of June 30, 2005.

		Payments due by period
						Less than								4 to 5				After
Contractual Obligations		Total				1 year				1 to 3 years				years				5 years
						(in billions of Won)
Long-term debt obligations			2,616				974				1,520				122				—
Capital lease obligations			5				4				1				—				—
Operating leases obligations			11				5				6				—				—
Purchase obligations				(a)				(a)				(a)				(a)				(a)
Other long-term liabilities			—				—				—				—				—
Total			2,633				983				1,528				122				—

Capital Resources

     We have traditionally met our working capital and other capital requirements principally from cash provided by operations, while raising the remainder of our requirements primarily through long-term and short-term debt. We do not depend on the use of off-balance sheet financing arrangements.

     Our major sources of cash have been net earnings before depreciation and amortization and proceeds of long-term debt and other long-term liabilities, and we expect that these sources will continue to be our principal sources of cash in the future. Net income before depreciation and amortization were Won 2,428 billion for the six months ended June 30, 2004 and Won 3,409 billion for the six months ended June 30, 2005. Cash proceeds from long-term debt were Won 259 billion for the six months ended June 30, 2004 and Won 229 billion for the six months ended June 30, 2005. Total long-term debt, including current portion but excluding discount on debentures issued, was Won 3,104 billion as of December 31, 2004 and Won 2,615 billion as of June 30, 2005.

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

     Our total shareholders’ equity increased to Won 18,157 billion at June 30, 2005 from Won 16,386 billion at December 31, 2004. This growth is attributable primarily to an increase in retained earnings.

Liquidity

     Our liquidity is affected by exchange rate fluctuations. Approximately 30.2% of our sales in 2004 and 32.0% of our sales in the six months ended June 30, 2005 were denominated in foreign currencies, of which approximately two-thirds were denominated in Dollars and one-third in Yen and which were derived almost entirely from export sales. As of June 30, 2005, approximately 55.0% of our long-term debt (excluding discounts on debentures issued and including current portion) was denominated in foreign currencies, principally in Dollars and Yen. We have incurred foreign currency debt in the past principally due to the limited availability and cost of Won-denominated financing in the Republic, which had historically been higher than for Dollar or Yen-denominated financings.

     Our liquidity is also affected by our construction expenditures and raw materials purchases. Cash used for purchases of property, plant and equipment was Won 871 billion for the six months ended June 30, 2004 and Won 1,382 billion for the six months ended June 30, 2005. We have entered into several long-term contracts to purchase iron ore, coal and other raw materials. The long-term contracts generally have terms of three to ten years and provide for

periodic price adjustments to then-market prices. As of June 30, 2005, 147 million tons of iron ore and 112 million tons of coal remained to be purchased under long-term contracts. We may face unanticipated increases in capital expenditures and raw materials purchases. There can be no assurance that we will be able to secure funds on satisfactory terms from financial institutions or other sources which are sufficient for our unanticipated needs.

     We had a working capital (current assets minus current liabilities) surplus of Won 5,493 billion as of December 31, 2004 and Won 6,191 billion as of June 30, 2005. As of June 30, 2005, we had unused credit lines of approximately Won 1,008 billion out of total available credit lines of Won 1,521 billion. We have not had, and do not believe that we will have, difficulty gaining access to short-term financing sufficient to meet our current requirements.

     The following table sets forth the summary of our significant current assets for the periods indicated:

		As of				As of
		December 31,				June 30,
		2004				2005
		(in billions of Won)
Cash and cash equivalents, net of government grants		W	480			W	638
Short-term financial instruments			647				566
Trading securities			2,690				2,577
Trade accounts and notes receivable, net of allowance for doubtful accounts and present value discount			3,094				3,228
Inventories			3,066				3,865

     Inventories increased by 26.1% as of June 30, 2005 to Won 3,865 billion from Won 3,066 billion, primarily as a result of increases in prices of raw materials, as well as increases in prices of semi-finished and finished steel products.

     Under Korean GAAP, bank deposits and all highly liquid temporary cash instruments within maturities of three months are considered as cash equivalents. Short-term financial instruments primarily consist of time and trust deposits with maturities between four to twelve months.

     The following table sets forth the summary of our significant current liabilities for the periods indicated:

		As of				As of
		December 31,				June 30,
		2004				2005
		(in billions of Won)
Trade accounts and notes payable		W	1,082			W	1,249
Short-term borrowings			658				956
Income tax payable			1,087				982
Current portion of long-term debts, net of discount on debentures issued			1,047				974

     In January 2000, we reduced our period for payment of accounts receivable for all customers from a range of 70 days to 80 days to a range of 30 days to 60 days. We do not believe that these changes in the credit terms for our customers have had or will have a material effect on our cash flows.

     Capital Expenditures and Capacity Expansion

     Our capital expenditures for the six months ended June 30, 2004 and 2005 amounted to Won 871 billion and Won 1,382 billion, respectively.

     Our current capital investment in production facilities emphasizes capacity rationalization, increased production of higher value-added products and improvements in the efficiency of older facilities in order to reduce operating costs. Our total capital expenditures are estimated to be approximately Won 2,060 billion in the second half of 2005. The following table sets out the major items of our capital expenditures currently in progress:

Estimated

Total

remaining cost of

Expected

cost of

completion as of

Project

completion date

project

June 30, 2005

(in billions of Won)

Pohang Works:

Construction of FINEX demonstration plant

December 2006

553

429

Extension of coke plant

September 2007

300

283

Rationalization of silicon steel mill (level 2)

March 2007

300

267

Second relining of no. 3 blast furnace

May 2006

264

249

Replacement of no. 2 hot rolled mill

June 2006

252

219

Replacement of no. 2 plate mill

November 2005

210

16

Installation of rolling equipment at no. 2 hot rolled mill

June 2006

154

145

Gwangyang Works:

Installation of no. 6 continuous galvanizing line

June 2006

190

126

Production Capacity

     The following table sets out the capacity utilization rates for our major production facilities, Pohang Works and Gwangyang Works, for the six months ended June 30, 2005.

		Pohang				Gwangyang
		Works				Works
		(in millions of tons,
		except percentages)
Crude steel and stainless steel production capacity			6.65				8.35
Actual crude steel and stainless steel output			6.60				8.39
Capacity utilization rate (1)			99.2	%			100.5	%

Significant Changes in Korean GAAP

     In March 2005, the Korean Accounting Standards Boards (“KASB”) issued Statements of Korean Financial Accounting Standards (“SKFAS”) No. 18, “Interests in Joint Ventures”. This statement sets forth the definition of joint venture, which requires an investor to recognize assets, liabilities, revenue and expenses related to its investment in a joint venture. Under SKFAS No. 18, joint ventures may be classified into one of the following categories: joint venture business, joint venture assets or joint venture corporation. An investor should apply SKFAS No. 15, “Investments in Associates” in connection with investments categorized as joint venture corporation. This standard will be effective for joint ventures beginning on or after December 31, 2005. We do not expect the adoption of this statement to have a material impact on our financial position or results of operations.

     In March 2005, the KASB issued SKFAS No. 19, “Lease Accounting”, which supersedes the pre-KASB standard of “Accounting Standards for Lease Industry”. Under SKFAS No. 19, lease transactions in which the risks and benefits of ownership are de facto transferred to the lessee should be classified as finance leases; all other lease transactions should be classified as operating leases. In this connection, real estate leases should also be classified as either finance leases or operating leases according to the same criteria used to classify other property leases into such categories. This standard will be effective for lease transactions beginning on or after December 31, 2005. We do not expect the adoption of this statement to have a material impact on our financial position or results of operations.

U.S. GAAP Reconciliation

     Our consolidated financial statements are prepared in accordance with Korean GAAP, which differ in significant respects from U.S. GAAP. For a discussion of the significant differences between Korean GAAP and U.S. GAAP, see Note 32 of Notes to Consolidated Financial Statements.

     We recorded net income under U.S. GAAP of Won 2,595 billion for the six months ended June 30, 2005 compared to net income of Won 1,249 billion for the six months ended June 30, 2004. Our net income under U.S. GAAP of Won 1,249 billion for the first six months of 2004 was 23.5% lower than our net income under Korean GAAP of Won 1,633 billion. Our net income under U.S. GAAP of Won 2,595 billion for the first six months of 2005 was 0.5% higher than our net income under Korean GAAP of Won 2,582 billion. See Note 32(a) of Notes to Consolidated Financial Statements.

Recent Accounting Pronouncements in U.S. GAAP

     In December 2004, the FASB issued SFAS No. 123(R), “Share-based Payment”, which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements using a fair-value-based method. The statement replaces SFAS 123, supersedes Accounting Principles Board (“APB”), Opinion No 25, “Accounting for Stock Issued to Employees”, and amends SFAS No. 95, “Statement of Cash Flows”. The new statement is effective for public entities in the first fiscal year beginning after June 15, 2005. We do not

expect the adoption of this statement to have a significant impact on our results of operations and disclosures.

     In May 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections”, a replacement of APB Opinion No. 20 and FASB Statement No. 3. This statement replaces APB Opinion No. 20, “Accounting Changes”, and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements”, and changes the requirements for the accounting for and reporting of a change in accounting principle. This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This standard is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not expect the adoption of this statement to have a significant impact on our results of operations and disclosures.

     In March 2005, the FASB issued FIN 47, “Accounting for Conditional Asset Retirement Obligations”. This interpretation clarifies the term “conditional asset retirement obligation” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations”. Conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional, thus a liability for the fair value of the conditional asset retirement obligation should be recognized if the fair value of the liability can be reasonably estimated. The uncertainty about the timing and method of settlement should be factored into the measurement of the liability when sufficient information exists. We adopted FIN 47 for the six months ended June 30, 2005. Adoption of FIN 47 did not have a material impact on our results of operations and disclosures.

Market Risks

     We are exposed to foreign exchange rate and interest rate risk primarily associated with underlying liabilities, and to changes in the commodity prices of principal raw materials and the market value of our equity investments. Following evaluation of these positions, we selectively enter into derivative financial instruments to manage the related risk exposures. These contracts are entered into with major financial institutions, which minimizes the risk of credit loss. The activities of our finance division are subject to policies approved by our senior management. These policies address the use of derivative financial instruments, including the approval of counterparties, setting of limits and investment of excess liquidity. Our general policy is to hold or issue derivative financial instruments for hedging purposes. From time to time, we may also enter into derivative financial contracts for trading purposes.

Exchange Rate Risk

     Korea is our most important market and, therefore, a substantial portion of our cash flow is denominated in Won. Most of our exports are denominated in Dollars. Japan is also an important market for us, and we derive significant cash flow denominated in Yen. We are exposed to foreign exchange risk related to foreign currency denominated liabilities and anticipated foreign exchange payments. Anticipated foreign exchange payments, which represent a substantial sum and are mostly denominated in Dollars, relate primarily to imported raw

material costs and freight costs. Foreign currency denominated liabilities relate primarily to foreign currency denominated debt. We use, to a limited extent, currency forward contracts to purchase Dollars to reduce our exchange rate exposure. Under currency forward contracts, we typically agree with the other parties to exchange, at the maturity date, a fixed amount denominated in Dollars with an amount denominated in Yen or Won at fixed exchange rate.

     As of June 30, 2005, we had entered into six currency forward contracts, one nickel future contract and one option contract. Our aggregate net valuation loss of such contracts was approximately Won 3 billion and net transaction loss was Won 2 billion for the six months ended June 30, 2005. We may incur further losses under our existing or any other derivative product transactions entered into in the future. See Note 22 of Notes to Consolidated Financial Statements.

Interest Rate Risk

     We are also subject to market risk exposure arising from changing interest rates. A reduction of interest rates increases the fair value of our debt portfolio, which is primarily of a fixed interest nature. From time to time, we use, to a limited extent, interest rate swaps to reduce interest rate volatility on some of our debt and manage our interest expense by achieving a balanced mixture of floating and fixed rate debt. As of June 30, 2005, we did not have any outstanding interest rate swap contracts.

Commodity Price Risk

     We are exposed to market risk of price fluctuations related to the purchase of raw materials, especially iron ore and coal. To ensure adequate supply of raw materials, we enter into long-term supply contracts to purchase iron ore, coal, nickel, chrome, stainless steel scrap and 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 June 30, 2005, 147 million tons of iron ore and 112 million tons of coal remained to be purchased under long-term supply contracts. We generally do not use commodity derivatives to manage our commodity price risks. As of June 30, 2005, we had entered into one nickel future contract, which recorded net valuation gain of Won 49 million and net transaction gain of Won 133 million for the six months ended June 30, 2005.

Equity Price Risk

     We are exposed to equity price risk primarily from changes in the stock price of SK Telecom and Nippon Steel Corporation. We currently hold a 4.98% interest in SK Telecom (excluding shares placed as collateral for exchangeable bonds issued in August 2003) and a 2.17% interest in Nippon Steel Corporation. We have not entered into any derivative instruments or any other arrangements to manage our equity price risks.

POSCO
and Subsidiaries

Unaudited Consolidated Financial Statements

As of December 31, 2004 and June 30, 2005 and
for the six months ended June 30, 2004 and 2005

POSCO and Subsidiaries
Unaudited Consolidated Balance Sheets
As of June 30, 2005 and December 31, 2004

										(Note 2)
(in millions of Korean won)		2005				2004				2005
Assets
Current assets
Cash and cash equivalents, net of government grants (Notes 3 and 27)		W	637,959			W	480,130			$	616,684
Short-term financial instruments (Notes 3, 13 and 27)			565,763				647,228				546,895
Trading securities (Note 4)			2,576,885				2,689,593				2,490,947
Current portion of held-to-maturity securities (Note 7)			11,096				13,769				10,726
Current portion of available-for-sales securities (Note 7)			152,149				141,573				147,075
Trade accounts and notes receivable, net of allowance for doubtful accounts and present value discount (Notes 5, 13, 27 and 28)			3,228,393				3,093,511				3,120,728
Other accounts and notes receivable, net of allowance for doubtful accounts and present value discount (Notes 5, 17, 27 and 28)			195,083				163,118				188,577
Inventories (Notes 6, 13 and 29)			3,865,050				3,065,521				3,736,152
Deferred income tax assets (Note 25)			44,343				—				42,864
Other current assets, net of allowance for doubtful accounts (Note 11)			330,453				193,373				319,433
Total current assets			11,607,174				10,487,816				11,220,081
Property, plant and equipment, net (Notes 8, 13, 14 and 29)			11,038,430				10,440,291				10,670,305
Investment securities (Notes 7, 13, 27 and 29)			2,317,822				2,345,076				2,240,524
Intangible assets, net (Notes 9 and 29)			459,032				496,315				443,724
Long-term loans receivable, net of allowance for doubtful accounts and present value discount (Notes 5, 27, 28 and 29)			75,846				81,496				73,316
Long-term trade accounts and notes receivable, net of allowance for doubtful accounts and present value discount (Notes 5, 27 and 29)			37,554				36,094				36,301
Deferred income tax assets (Notes 25 and 29)			40,459				54,157				39,110
Guarantee deposits (Notes 27 and 29)			50,831				41,424				49,136
Long-term financial instruments (Notes 3, 13, 27 and 29)			19,334				1,706				18,690
Other long-term assets, net of allowance for doubtful accounts and present value discount (Notes 5, 11 and 29)			134,308				144,585				129,828
Total assets		W	25,780,790			W	24,128,960			$	24,921,015

POSCO and Subsidiaries
Unaudited Consolidated Balance Sheets
As of June 30, 2005 and December 31, 2004

										(Note 2)
(in millions of Korean won)		2005				2004				2005
Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts and notes payable (Notes 27 and 28)		W	1,249,456			W	1,082,299			$	1,207,788
Short-term borrowings (Notes 12, 27 and 28)			955,976				657,541				924,095
Current portion of long-term debts, net of discount on debentures issued (Notes 13 and 27)			973,688				1,046,699				941,216
Accrued expenses (Note 27)			345,564				391,900				334,040
Other accounts and notes payable (Notes 27 and 28)			242,609				225,680				234,518
Withholdings (Note 27)			99,498				94,285				96,180
Income tax payable			982,477				1,086,971				949,712
Deferred income tax liabilities (Note 25)			105,575				—				102,054
Other current liabilities (Note 16)			461,362				409,643				445,975
Total current liabilities			5,416,205				4,995,018				5,235,578
Long-term debts, net of current portion and discount on debentures issued (Notes 13, 27 and 28)			1,637,879				2,050,801				1,583,255
Accrued severance benefits, net (Note 15)			308,425				230,367				298,139
Deferred income tax liabilities (Note 25)			114,232				270,641				110,423
Other long-term liabilities (Notes 14, 16 and 21)			146,688				196,077				141,797
Total liabilities			7,623,429				7,742,904				7,369,192
Commitments and contingencies (Note 17)
Shareholders’ equity
Common stock (Note 1)			482,403				482,403				466,315
Capital surplus (Note 18)			3,891,389				3,895,378				3,761,613
Retained earnings (Note 19)			14,903,527				12,851,118				14,406,503
( Net income: W2,582,398 million in six months ended June 30, 2005 and W3,814,225 million in year ended 2004 Losses in excess of minority interest: W20,787 million in six months ended June 30, 2005 and W13,205 million in year ended 2004)
Capital adjustments, net (Note 20)			(1,498,340	)			(1,150,734	)			(1,448,371	)
			17,778,979				16,078,165				17,186,060
Minority interest
Common stock			168,429				147,917				162,812
Capital surplus and retained earnings			209,953				159,974				202,951
			378,382				307,891				365,763
Total shareholders’ equity			18,157,361				16,386,056				17,551,823
Total liabilities and shareholders’ equity		W	25,780,790			W	24,128,960			$	24,921,015

The accompanying notes are an integral part of these consolidated interim financial statements.

POSCO and Subsidiaries
Unaudited Consolidated Statements of Income
For the six months ended June 30, 2005 and 2004

										(Note 2)
(in millions of Korean won, except per share amounts)		2005				2004				2005
Sales (Notes 28 and 29)		W	13,179,515			W	10,834,665			$	12,739,986
Cost of goods sold (Note 28)			8,927,682				7,966,185				8,629,949
Gross profit			4,251,833				2,868,480				4,110,037
Selling and administrative expenses (Note 23)			659,970				565,596				637,961
Operating income			3,591,863				2,302,884				3,472,076
Non-operating income
Interest and dividend income (Note 28)			104,477				81,296				100,993
Gain on foreign currency transactions			54,573				57,465				52,753
Gain on foreign currency translation			85,005				86,589				82,170
Gain on valuation of trading securities			18,434				7,738				17,819
Gain on disposal of trading securities			24,784				16,757				23,957
Gain on disposal of property, plant and equipment			12,085				4,377				11,682
Gain on valuation of derivatives (Note 22)			880				5,210				850
Gain on derivative transactions (Note 22)			1,381				8,744				1,335
Earnings of equity method investees (Note 7)			27,490				3,294				26,573
Gain on recovery of allowance for doubtful accounts			4,977				2,389				4,811
Gain on disposal of investments			1,231				2,912				1,190
Others			77,177				75,983				74,604
			412,494				352,754				398,737
Non-operating expenses
Interest expense (Note 28)			83,682				105,891				80,891
Other bad debt expense			14,869				4,445				14,373
Loss on foreign currency transactions			32,533				61,083				31,448
Loss on foreign currency translation			7,884				5,232				7,621
Donations (Note 24)			92,136				83,019				89,063
Loss on valuation of trading securities			229				—				221
Loss on disposal of trading securities			7				617				6
Loss on disposal of property, plant and equipment			22,218				12,129				21,477
Loss on valuation of derivatives (Note 22)			4,275				402				4,133
Loss on derivative transactions (Note 22)			3,404				7,318				3,290
Losses of equity method investees (Note 7)			1,970				12,936				1,904
Loss on impairment of investments			82				5,929				79
Others			90,979				35,610				87,947
			354,268				334,611				342,453
Net income before income tax expense and minority interest			3,650,089				2,321,027				3,528,360
Income tax expense (Note 25)			1,050,348				674,113				1,015,319
Net income before minority interest			2,599,741				1,646,914				2,513,041
Minority interest in income of consolidated subsidiaries			(17,343	)			(13,619	)			(16,765	)
Net income		W	2,582,398			W	1,633,295			$	2,496,276
Basic and diluted earnings per share (Note 26) (in Korean won)		W	32,478			W	20,237			$	31

The accompanying notes are an integral part of these consolidated interim financial statements.

POSCO and Subsidiaries
Unaudited Consolidated Statements of Changes in Shareholders’ Equity
For the six months ended June 30, 2005 and 2004

		Common Stock								Capital				Retained				Capital				Minority
(in millions of Korean Won)		Shares				Amount				surplus				earnings				adjustments				interest				Total
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	13,249,567
Net income for 2004			—				—				—				1,633,295				—				—				1,633,295
Effect of change in percentage of ownership of investees			—				—				(188	)			1,152				—				(605	)			359
Dividends			—				—				—				(403,540	)			—				(7,088	)			(410,628	)
Change in losses in excess of minority interest (Note 19)			—				—				—				(14,453	)			—				14,453				—
Overseas operations translation adjustment (Note 20)			—				—				—				—				(37,127	)			(4,240	)			(41,367	)
Changes in valuation gain and loss on investment securities (Note 20)			—				—				—				—				(65,252	)			1,155				(64,097	)
Minority interest in income consolidated subsidiaries			—				—				—				—				—				13,619				13,619
Others			—				—				1,211				1				(4,152	)			—				(2,940	)
Balance as of June 30, 2004			88,966,155			W	482,403			W	3,829,796			W	11,091,535			W	(1,336,519	)		W	310,593			W	14,377,808
Balance 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	16,386,056
Net income for 2005			—				—				—				2,582,398				—				—				2,582,398
Effect of change in percentage of ownership of investees			—				—				(4,156	)			(7	)			—				—				(4,163	)
Effect of change in scope of consolidation (Note 1)			—				—				167				5,003				—				—				5,170
Change in treasury stock			—				—				—				—				(356,652	)			—				(356,652	)
Dividends			—				—				—				(523,274	)			—				—				(523,274	)
Change in losses in excess of minority interest (Note 19)			—				—				—				(7,581	)			—				7,581				—
Overseas operations translation adjustment (Note 20)			—				—				—				—				(12,546	)			—				(12,546	)
Changes in valuation gain and loss on investment securities (Note 20)			—				—				—				—				21,592				—				21,592
Effect of change in percentage of minority interest			—				—				—				—				—				48,376				48,376
Minority interest in income of consolidated subsidiaries			—				—				—				—				—				14,534				14,534
Others			—				—				—				(4,130	)			—				—				(4,130	)
Balance as of June 30, 2005			87,186,835			W	482,403			W	3,891,389			W	14,903,527			W	(1,498,340	)		W	378,382			W	18,157,361

(Note 2)		Common Stock								Capital				Retained				Capital				Minority
(in thousands of US Dollar)		Shares				Amount				surplus				earnings				adjustment				interest				Total
Balance as of January 1, 2005			87,186,835			$	466,315			$	3,765,469			$	12,422,540			$	(1,112,358	)		$	297,624			$	15,839,590
Net income for 2005			—				—				—				2,496,276				—				—				2,496,276
Effect of change in percentage of ownership of investees			—				—				(4,018	)			(6	)			—				—				(4,024	)
Effect of change in scope of consolidation (Note 1)			—				—				162				4,836				—				—				4,998
Change in treasury stock			—				—				—				—				(344,758	)			—				(344,758	)
Dividends			—				—				—				(505,823	)			—				—				(505,823	)
Change in losses in excess of minority interest (Note 19)			—				—				—				(7,329	)			—				7,329				—
Overseas operations translation adjustment (Note 20)			—				—				—				—				(12,127	)			—				(12,127	)
Changes in valuation gain and loss on investment securities (Note 20)			—				—				—				—				20,871				—				20,871
Effect of change in percentage of minority interest			—				—				—				—				—				46,762				46,762
Minority interest in income of consolidated subsidiaries			—				—				—				—				—				14,049				14,049
Others			—				—				—				(3,991	)			—				—				(3,991	)
Balance as of June 30, 2005			87,186,835			$	466,315			$	3,761,613			$	14,406,503			$	(1,448,372	)		$	365,764			$	17,551,823

The accompanying notes are an integral part of these consolidated interim financial statements.

POSCO and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
For the six months ended June 30, 2005 and 2004

										(Note 2)
(in millions of Korean won)		2005				2004				2005
Cash flows from operating activities
Net income		W	2,582,398			W	1,633,295			$	2,496,276
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			827,093				794,376				799,510
Accrual of severance benefits			202,346				84,441				195,598
Provision for doubtful accounts, net			36,907				6,255				35,675
Gain on foreign currency translation, net			(77,717	)			(80,930	)			(75,125	)
Gain on valuation of trading securities, net			(18,205	)			(7,738	)			(17,598	)
Gain on disposal of trading securities, net			(24,777	)			(16,140	)			(23,951	)
Loss on disposal of property, plant and equipment, net			10,133				7,752				9,795
Loss (gain) on valuation of derivatives, net			3,395				(4,808	)			3,283
Loss (gain) on derivatives transaction, net			2,023				(1,426	)			1,955
Losses (earnings) of equity method investees, net			(25,520	)			9,642				(24,669	)
Minority interest in income of consolidated subsidiaries			17,343				13,619				16,765
Others			8,455				8,500				8,173
			961,476				813,543				929,411
Changes in operating assets and liabilities
Increase in trade accounts and notes receivable			(152,699	)			(349,493	)			(147,606	)
Increase in inventories			(778,907	)			(557,957	)			(752,931	)
Increase in other accounts and notes receivable			(20,866	)			(13,110	)			(20,170	)
Increase (decrease) in other current assets			(113,187	)			8,364				(109,411	)
Increase in other long-term assets			—				(35,466	)			—
Increase (decrease) in long-term trade accounts and notes receivable			(34	)			754				(33	)
Increase in trade accounts and notes payable			110,021				78,944				106,352
Increase in other accounts and notes payable			18,291				53,173				17,681
Decrease (increase) in accrued expenses			(54,536	)			13,948				(52,717	)
Decrease (increase) in income tax payable			(107,701	)			118,464				(104,109	)
Increase (decrease) in withholdings			4,283				(7,260	)			4,140
Increase (decrease) in deferred income tax, net			56,073				(38,643	)			54,203
Payment of severance benefits			(112,711	)			(15,077	)			(108,952	)
Increase in group severance insurance deposits			(26,607	)			(30,615	)			(25,720	)
Decrease in national pension fund			142				115				137
Increase in other current liabilities			24,129				169,202				23,324
Decrease (increase) in other long-term liabilities			(23,389	)			22,000				(22,610	)
			(1,177,698	)			(582,657	)			(1,138,422	)
Net cash provided by operating activities			2,366,176				1,864,181				2,287,265

POSCO and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
For the six months ended June 30, 2005 and 2004

										(Note 2)
(in millions of Korean won)		2005				2004				2005
Cash flows from investing activities
Disposal of trading securities			5,867,100				4,873,416				5,671,435
Acquisition of trading securities			(5,651,593	)			(5,040,146	)			(5,463,116	)
Disposal of available-for-sale securities			34,947				7,998				33,782
Acquisition of available-for-sale securities			(107,012	)			(56,868	)			(103,443	)
Disposal of short-term financial instruments			594,657				658,918				574,826
Acquisition of short-term financial instruments			(496,298	)			(436,522	)			(479,747	)
Disposal of long-term financial instruments			279				136,864				270
Acquisition of long-term financial instruments			(11,166	)			(14,264	)			(10,793	)
Acquisition of property, plant and equipment			(1,381,803	)			(871,169	)			(1,335,721	)
Disposal of property, plant and equipment			54,035				20,518				52,233
Proceeds from long-term loans			16,111				2,723				15,574
Long-term loans provided			(26,185	)			(9,502	)			(25,312	)
Acquisition of intangible assets			(40,779	)			(44,014	)			(39,419	)
Disposal of intangible assets			—				9				—
Decrease in guarantee deposits			6,311				13,429				6,101
Increase in guarantee deposits			(13,882	)			(17,221	)			(13,419	)
Disposal of other short-term assets			81,691				26,889				78,966
Acquisition of other short-term assets			(77,930	)			(28,028	)			(75,331	)
Disposal of other long-term assets			17,702				28,671				17,111
Acquisition of other long-term assets			(77,934	)			(19,891	)			(75,335	)
Net cash used in investing activities			(1,211,749	)			(768,190	)			(1,171,338	)
Cash flows from financing activities
Proceeds from short-term borrowings			3,203,005				3,264,685				3,096,187
Proceeds from long-term debts			229,230				259,309				221,585
Proceeds from other long-term liabilities			107,173				8,910				103,599
Repayment of current portion of long-term debts			(561,893	)			(559,386	)			(543,154	)
Repayment of short-term borrowings			(2,955,008	)			(3,253,322	)			(2,856,460	)
Repayment of long-term debts			(47,061	)			(60,790	)			(45,492	)
Payment of cash dividends			(523,274	)			(406,044	)			(505,823	)
Acquisition of treasury stock			(356,652	)			—				(344,758	)
Repayment of other long-term liabilities			(125,438	)			(3,375	)			(121,255	)
Others			4,325				6,040				4,181
Net cash used in financing activities			(1,025,593	)			(743,973	)			(991,390	)
Effect of exchange rate changes on cash and cash equivalents			(4,518	)			(8,026	)			(4,367	)
Net increase in cash and cash equivalents from changes in consolidated subsidiaries			33,939				381				32,807
Net increase in cash and cash equivalents			158,255				344,373				152,977
Cash and cash equivalents
Beginning of the period			482,092				593,946				466,015
End of the period		W	640,347			W	938,319			$	618,992

The accompanying notes are an integral part of these consolidated interim financial statements.

POSCO and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
June 30, 2005 and 2004, and December 31, 2004

1. Consolidated Companies

General descriptions of POSCO, the controlling company, and its controlled subsidiaries (the “Company”), including POSCO Engineering & Construction Co., Ltd. (POSCO E & C) and 16 other domestic subsidiaries and 27 overseas subsidiaries, whose accounts are included in the consolidated financial statements, and 16 equity-method investees, which are excluded from the consolidation, are as follows:

The Controlling Company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea, to manufacture and distribute steel rolled products and plates in the domestic and overseas markets. Annual production capacity is 30,000 thousand tons; 13,300 thousand tons at the Pohang mill and 16,700 thousand tons at the Gwangyang mill. The shares of POSCO have been listed on the Korea Stock Exchange since 1988. POSCO operates two plants and one office in Korea, and seven liaison offices overseas. The principal market for POSCO’s products is the domestic market in Korea, while export and overseas sales are concentrated in Japan, China and other countries in the Asia Pacific region.

Under its Articles of Incorporation, the Company is authorized to issue 200 million shares of common stock with a par value of W5,000 per share. The Company retired 2,891,140; 2,807,690; and 1,815,640 shares of treasury stock with the approval of the Board of Directors on August 25, 2001; November 20, 2002 and July 22, 2003, respectively. In addition, the Company retired 1,779,320 shares of treasury stock on October 19, 2004, in accordance with the resolution of the Board of Directors on July 23, 2004. Accordingly, total issued shares are 87,186,835 as of June 30, 2005.

As of June 30, 2005, POSCO’s shareholders are as follows:

						Percentage of
		Number of Shares				Ownership (%)
National Pension Corporation			3,084,186				3.54
SK Telecom Co., Ltd.			2,481,310				2.84
Pohang University of Science and Technology			2,475,000				2.84
Others			79,146,339				90.78
			87,186,835				100.00

As of June 30, 2005, the shares of POSCO are listed on the Korea Stock Exchange, and its depository receipts are listed on the New York and London Stock Exchanges.

POSCO and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
June 30, 2005 and 2004, and December 31, 2004

Consolidated Subsidiaries

The consolidated financial statements include the accounts of POSCO and its controlled subsidiaries. The following table sets forth certain information with regard to consolidated subsidiaries as of June 30, 2005:

				Net Assets				Number of				Number of Shares												Percentage of						Percentage of
				(in millions of				Outstanding																Ownership						Ownership of
Subsidiaries		Primary Business		Korean won)1				Shares				POSCO				Subsidiaries				Total				(%)				Location		Subsidiaries (%)
Domestic
POSCO E & C		Engineering and construction		W	863,540				30,000,000				27,281,080				—				27,281,080				90.94			Pohang		—
Posteel Co., Ltd.		Steel sales and service			281,367				18,000,000				17,155,000				—				17,155,000				95.31			Pohang		—
POSCON Co., Ltd.		Electronic control devices manufacturing			88,552				3,519,740				3,098,610				—				3,098,610				88.04			Pohang		—
Pohang Coated Steel Co., Ltd.		Coated steel manufacturing			285,110				6,000,000				4,000,000				—				4,000,000				66.67			Pohang		—
POSCO Machinery & Engineering Co., Ltd.		Steel work maintenance			37,977				1,700,000				1,700,000				—				1,700,000				100.00			Pohang		—
POSDATA Co., Ltd.		Computer hardware and software distribution			113,313				6,155,160				4,000,000				—				4,000,000				64.99			Sungnam		—
POSCO Research Institute		Economic research and consulting			23,241				3,800,000				3,800,000				—				3,800,000				100.00			Seoul		—
Seung Kwang Co., Ltd.		Athletic facilities operation			43,840				3,945,000				2,737,000				1,208,000				3,945,000				100.00			Suncheon		POSCO E & C (30.62)
POS-AC Co., Ltd.		Architecture and consulting			13,373				130,000				130,000				—				130,000				100.00			Seoul		—