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

For the month of November 2005

POSCO

(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

 

 

Non-consolidated Financial Statements for the Nine Months Ended September 30, 2005

     The non-consolidated financial information set forth below has been derived from our unaudited (in the case of information as of and for the nine months ended September 30, 2004 and 2005) and non-consolidated financial statements as of December 31, 2004 and September 30, 2005 and for the nine-month periods ended September 30, 2004 and 2005 included in this Current Report on Form 6-K (the “Non-consolidated Financial Statements”). You should read the selected non-consolidated financial data below with the Non-consolidated Financial Statements. Results of operations in the first nine months of 2005 may not be indicative of results of operations for the remainder of 2005 or the full year 2005.

     The financial information set forth below is non-consolidated, and therefore does not reflect the assets and liabilities and results of operations of our subsidiaries other than as equity method investees. As a result, the non-consolidated interim information set forth below is not comparable with the consolidated financial information presented in our latest annual report on Form 20-F or the consolidated financial information as of and for the six months ended June 30, 2004 and 2005 included in our Current Report on Form 6-K furnished to the Securities and Exchange Commission (the “Commission”) on October 18, 2005.

     In addition, our non-consolidated interim financial statements have been 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 in our Current Report on Form 6-K furnished to the Commission on October 18, 2005 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 nine months ended
		September 30,
		2004				2005
		(in billions of Won,
		except per share data)
		(unaudited)
NON-CONSOLIDATED INCOME STATEMENT DATA
Korean GAAP
Sales		W	14,184			W	16,492
Cost of goods sold			9,984				10,855
Selling and administrative expenses			759				813
Operating profit			3,440				4,824
Interest income			60				44
Dividend income			32				73
Interest expense			113				72
Foreign currency transactions and translation gains, net			92				97
Donations(1)			92				103
Income tax expense			1,005				1,296
Net income			2,647				3,631
Earnings per share(2)			32,696				45,788
Dividends per share(3)			1,500				2,000

		As of				As of
		December 31,				September 30,
		2004				2005
		(in billions of Won)
		(audited)				(unaudited)
NON-CONSOLIDATED BALANCE SHEET DATA
Korean GAAP
Working capital(4)		W	4,520			W	4,710
Property, plant and equipment, net(5)			9,203				10,180
Total assets(5)			21,367				22,934
Long-term debt(6)(7)(8)			1,550				788
Total shareholders’ equity(5)			16,110				18,746

Operating Results

     Our non-consolidated sales for the nine months ended September 30, 2005 increased by 16.3% to Won 16,492 billion from Won 14,184 billion for the nine months ended September 30, 2004, reflecting an increase of 18.6% in the average unit sales price per ton of our steel products, which more than offset a 1.6% decrease in the non-consolidated sales volume of our steel products.

     Our non-consolidated domestic sales for the nine months ended September 30, 2005 increased by 18.5% in terms of non-consolidated domestic sales revenues and decreased by 1.2% in terms of non-consolidated domestic sales volume of steel products compared to the corresponding period in 2004. For the nine months ended September 30, 2005, our non-consolidated domestic sales volume accounted for approximately 74.7% of our non-consolidated total sales volume of steel products, compared to 74.4% for the nine months ended September 30, 2004. The increase in non-consolidated domestic sales revenues in the nine months ended September 30, 2005 compared to the corresponding period in 2004 was attributable primarily to an increase in the price of steel products sold in Korea, which more than offset the overall decrease in non-consolidated domestic sales volume of steel products.

     Our non-consolidated export sales for the nine months ended September 30, 2005 increased by 11.2% in terms of non-consolidated export sales revenues and decreased by 2.7% in terms of non-consolidated export sales volume of steel products compared to the nine months ended September 30, 2004. Exports as a percentage of non-consolidated total sales volume of steel products decreased to 25.3% of such sales volume for the nine months ended September 30, 2005 compared to 25.6% for the corresponding period in 2004. The increase in non-consolidated export sales revenues in the nine months ended September 30, 2005 compared to corresponding period in 2004 was primarily attributable to an increase in the price of steel products sold abroad, which more than offset the overall decrease in non-consolidated export sales volume of steel products.

     Non-consolidated gross profit for the nine months ended September 30, 2005 increased by 34.2% to Won 5,637 billion from Won 4,199 billion for the nine months ended September 30, 2004. Non-consolidated gross margin for the nine months ended September 30, 2005 increased to 34.2% from 29.6% for the nine months ended September 30, 2004. This increase in non-consolidated gross margin reflected the 16.3% increase in non-consolidated sales, which outpaced an 8.7% increase in non-consolidated cost of goods sold for the nine months ended September 30, 2005 to Won 10,855 billion from Won 9,984 billion for the corresponding period in 2004. Our non-consolidated cost of goods sold rose primarily due to increases in both volume and price of raw materials purchased. Non-consolidated raw materials costs for the nine months ended September 30, 2005 increased primarily as a result of a general increase in the unit costs of coal, iron ore, nickel and scrap metal. The average price of coal per ton (including all associated costs such as customs duties and transportation costs) increased from $79.43 for the nine months ended September 30, 2004 to $105.85 for the nine months ended September 30, 2005. The average price of iron ore per ton (including all associated costs such as customs duties and transportation costs) increased from $32.68 for the nine months ended September 30, 2004 to $41.19 for the nine months ended September 30, 2005.

     Non-consolidated operating profit for the nine months ended September 30, 2005 increased by 40.3% to Won 4,824 billion compared to Won 3,440 billion for the corresponding period in 2004. Non-consolidated operating margin for the nine months ended September 30, 2005 increased to 29.3% from 24.3% for the nine months ended September 30, 2004, reflecting the 34.2% increase in non-consolidated gross profit, which outpaced a 7.0% increase in non-consolidated selling and administrative expenses for the nine months ended September 30, 2005 to Won 813 billion from Won 759 billion for the corresponding period in 2004. The increase in non-consolidated selling and administrative expenses resulted principally from increases in non-consolidated advertising expenses and non-consolidated fees and charges. Our non-consolidated advertising expenses increased by 126.0% for the nine months ended September 30, 2005 to Won 64 billion from Won 28 billion for the nine months ended September 30, 2004, primarily reflecting certain adjustments related to internal accounting for advertising expenses. Our non-consolidated fees and charges for the nine months ended September 30, 2005 increased by 37.4% to Won 94 billion from Won 68 billion for the nine months ended September 30, 2004, primarily as a result of fees and charges incurred in connection with the outsourcing of certain peripheral administrative functions.

     Our non-consolidated net income for the nine months ended September 30, 2005 increased by 37.2% to Won 3,631 billion from Won 2,647 billion for the corresponding period in 2004. Non-consolidated net income increased primarily as a result of the increase in non-consolidated operating profit, which more than offset the impact of:

	•		a 29.0% increase in non-consolidated income tax expense to Won 1,296 billion for the nine months ended September 30, 2005 from Won 1,005 billion for the corresponding period in 2004, due to the increase in our taxable income; and
	•		a 50.5% decrease in non-consolidated net non-operating income to Won 103 billion for the nine months ended September 30, 2005 from Won 208 billion for the corresponding period in 2004.

The decrease in non-consolidated net non-operating income primarily reflected:

	•		a 42.9% decrease in net earnings of equity method investees for the nine months ended September 30, 2005 to Won 89 billion from Won 156 billion for the corresponding period in 2004, principally attributable to losses from Zhangjiagang Pohang Stainless Steel Co., Ltd. and Qingdao Pohang Stainless Steel Co., Ltd.; and
	•		a more than two-fold increase in non-consolidated net loss on disposal of property, plant and equipment to Won 59 billion for the nine months ended September 30, 2005 from Won 19 billion for the corresponding period in 2004, primarily resulting from losses on disposals of equipment at Pohang Works and Kwangyang Works.

     Our effective tax rate for the nine-month period ended September 30, 2005 was 26.30% compared to 27.52% 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 24 of Notes to Non-consolidated Financial Statements.

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

		Nine months ended
		September 30,
		2004				2005
		(in billions of Won)
Net cash provided by operating activities		W	3,072			W	3,448
Net cash used in investing activities			1,499				1,467
Net cash used in financing activities			1,623				2,013
Cash and cash equivalents at beginning of period			298				207
Cash and cash equivalents at end of period			248				174
Net increase (decrease) in cash and cash equivalents			(50	)			(32	)

Tax Audit

     From June 13, 2005 to December 12, 2005, the Korean National Tax Service (the “NTS”) is conducting a tax audit on our tax filings made during the period from fiscal year 2000 to fiscal year 2004. Such tax audits are generally conducted by the NTS on a regular basis once every five years for Korean companies, since there is a five year statute of limitations on corporate tax claims. We expect that, after completion of the tax audit, additional taxes may be assessed against us, the exact amount of which we expect would be advised to us by the NTS in January 2006. The amount of additional taxes that may be assessed against us by the NTS is currently unknown but may be substantial.

POSCO

Non-Consolidated Interim Financial Statements
September 30, 2005 and 2004, and December 31, 2004

POSCO
Non-Consolidated Balance Sheets
September 30, 2005 and December 31, 2004
(Unaudited)

(in millions of Korean won)		2005				2004
Assets
Current assets
Cash and cash equivalents (Notes 3 and 26)		W	174,474			W	206,783
Short-term financial instruments (Notes 3 and 26)			622,064				574,886
Trading securities (Note 6)			1,454,466				2,657,338
Current portion of available-for-sale securities (Note 7)			111,022				122,318
Current portion of held-to-maturity securities (Notes 7 and 26)			3,039				3,048
Trade accounts and notes receivable, net of allowance for doubtful accounts (Notes 4, 26 and 27)			2,243,066				1,985,400
Inventories, net (Note 5)			2,744,844				2,108,682
Other accounts and notes receivable, net of allowance for doubtful accounts (Notes 4, 15, 26 and 27)			83,198				68,150
Other current assets, net of allowance for doubtful accounts (Note 10)			32,638				14,973
Total current assets			7,468,811				7,741,578
Property, plant and equipment, net (Notes 8 and 28)			10,180,104				9,203,061
Investment securities, net (Notes 7, 12 and 26)			4,861,885				3,919,464
Intangible assets, net (Notes 9 and 28)			287,411				363,244
Long-term trade accounts and notes receivable, net of allowance for doubtful accounts (Note 4)			35,352				33,007
Long-term financial instruments (Note 3)			45				45
Long-term loan receivables, net of allowance for doubtful accounts			—				396
Other long-term assets, net of allowance for doubtful accounts (Note 10 and 26)			100,381				106,265
Total assets		W	22,933,989			W	21,367,060

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

POSCO
Non-Consolidated Balance Sheets
September 30, 2005 and December 31, 2004
(Unaudited)

(in millions of Korean won)		2005				2004
Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts and notes payable (Notes 26 and 27)		W	443,846			W	608,027
Short-term borrowings (Notes 11 and 26)			—				13,992
Current portion of long-term debts, net of discount on debentures issued (Notes 12 and 26)			884,514				926,572
Accrued expenses (Note 26)			126,254				132,759
Other accounts and notes payable (Notes 26 and 27)			396,475				458,435
Withholdings			26,783				33,135
Income tax payable			811,459				1,012,424
Deferred income tax liabilities (Note 24)			17,188				—
Other current liabilities (Notes 14 and 27)			52,341				36,056
Total current liabilities			2,758,860				3,221,400
Long-term debts, net of current portion and discount on debentures issued (Notes 12 and 26)			788,223				1,549,653
Accrued severance benefits, net (Note 13)			256,258				171,788
Deferred income tax liabilities (Note 24)			335,046				260,165
Other long-term liabilities (Notes 14, 19 and 27)			49,471				54,210
Total liabilities			4,187,858				5,257,216
Commitments and contingencies (Note 15)
Shareholders’ equity
Capital stock (Note 1)			482,403				482,403
Capital surplus (Notes 8 and 16)			3,910,124				3,771,283
Retained earnings (Note 17)			15,810,673				12,864,139
Capital adjustments, net (Notes 7 and 18)			(1,457,069	)			(1,007,981	)
Total shareholders’ equity			18,746,131				16,109,844
Total liabilities and shareholders’ equity		W	22,933,989			W	21,367,060

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

POSCO
Non-Consolidated Statements of Income
Three-Month and Nine-Month Periods Ended September 30, 2005 and 2004
(Unaudited)

		For the three-month periods								For the nine-month periods
(in millions of Korean won,		ended September 30								ended September 30
except per share amounts)		2005				2004				2005				2004
Sales (Notes 27 and 28)		W	5,458,233			W	5,144,206			W	16,492,067			W	14,183,606
Cost of goods sold (Notes 21 and 27)			3,835,044				3,607,099				10,854,828				9,984,423
Gross profit			1,623,189				1,537,107				5,637,239				4,199,183
Selling and administrative expenses (Note 22)			303,804				293,172				812,912				759,466
Operating profit			1,319,385				1,243,935				4,824,327				3,439,717
Non-operating income
Interest income (Note 7)			14,845				20,162				44,099				60,243
Dividend income			7,542				4,145				72,999				32,118
Gain on valuation of trading securities			—				14,799				4,876				22,414
Gain on disposal of trading securities			19,994				5,643				43,493				21,937
Gain on disposal of property, plant and equipment			1,730				829				11,549				4,952
Gain on foreign currency transactions			18,010				20,664				61,788				65,125
Gain on foreign currency translation			9,851				16,186				88,415				99,496
Equity in earnings of investees (Note 7)			89,620				113,496				183,672				172,996
Gain on valuation of derivatives (Note 20)			1,421				—				1,470				—
Others			37,258				101,455				81,304				159,121
			200,271				297,379				593,665				638,402
Non-operating expenses
Interest expense			18,840				34,853				71,916				113,014
Loss on foreign currency transactions			25,862				19,392				49,138				69,006
Loss on foreign currency translation			—				1,757				3,688				3,991
Donations (Note 23)			10,960				10,241				102,754				92,289
Loss on disposal of property, plant and equipment			23,054				6,512				70,627				23,575
Equity in losses of investees (Note 7)			34,723				9,749				94,573				17,069
Loss on derivative transaction (Note 20)			945				1,056				1,247				6,276
Others			21,671				71,169				96,688				104,964
			136,055				154,729				490,631				430,184
Extraordinary income			—				3,387				—				3,387
Income before income taxes			1,383,601				1,389,972				4,927,361				3,651,322
Income tax expense (Note 24)			322,013				377,929				1,295,899				1,004,818
Net income		W	1,061,588			W	1,012,043			W	3,631,462			W	2,646,504
Basic and diluted earnings per share (Note 25) (in Korean won)		W	13,452			W	12,431			W	45,788			W	32,696

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

POSCO
Non-Consolidated Statements of Cash Flows
Three-Month and Nine-Month Periods Ended September 30, 2005 and 2004
(Unaudited)

		For the three-month periods								For the nine-month periods
		ended September 30								ended September 30
(in millions of Korean won)		2005				2004				2005				2004
Cash flows from operating activities
Net income		W	1,061,588			W	1,012,043			W	3,631,462			W	2,646,504
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			353,391				344,819				1,115,955				1,076,364
Accrual of severance benefits			43,575				34,393				217,319				92,142
Loss (gain) on valuation of trading securities, net			11,473				(14,799	)			(4,466	)			(22,414	)
Gain on disposal of trading securities, net			(19,994	)			(5,643	)			(43,493	)			(21,384	)
Loss on disposal of property, plant and equipment, net			21,324				5,683				59,078				18,623
Loss (gain) on disposal of investments, net			1				741				(1	)			3,577
Impairment loss on investments			25				331				75				5,679
Gain on valuation of derivatives, net			(1,336	)			—				(1,385	)			—
Equity in earnings of investee, net			(54,897	)			(103,747	)			(89,099	)			(155,927	)
Recovery of stock compensation			19,412				18,502				21,416				15,387
Gain on foreign currency translation, net			(9,385	)			(16,099	)			(84,908	)			(97,163	)
Loss on derivative transaction, net			580				1,056				286				3,135
Interest expense			1,465				2,437				3,845				6,387
Interest income			(1,494	)			(1,986	)			(3,368	)			(5,550	)
Others			(13,330	)			139,031				(7,334	)			145,029
			350,810				404,719				1,183,920				1,063,885
Changes in operating assets and liabilities
Increase in trade accounts and notes receivable			(230,168	)			(293,022	)			(240,323	)			(500,696	)
Increase (decrease) in other accounts and notes receivable			(6,431	)			23,692				(14,229	)			7,895
Increase (decrease) in accrued income			(2,296	)			1,229				(108	)			40,461
Decrease (increase) in prepaid expenses			9,814				(2,137	)			(15,652	)			(10,012	)
Increase in inventories			(59,810	)			(82,705	)			(639,522	)			(438,033	)
Decrease in trade accounts and notes payable			(260,121	)			(16,266	)			(167,105	)			(4,254	)
Decrease (increase) in other accounts and notes payable			(47,299	)			2,930				(63,314	)			87,748
Decrease (Increase) in income tax payable			(94,512	)			36,165				(200,965	)			137,352
Increase (decrease) in accrued expense			71,811				(2,345	)			(6,504	)			13,324
Payment of severance benefits			(5,057	)			(7,653	)			(105,645	)			(12,579	)
Increase in deferred income tax liabilities			28,800				83,513				88,616				48,417
Others			(39,284	)			(98,873	)			(2,736	)			(8,307	)
			(634,553	)			(355,472	)			(1,367,487	)			(638,684	)
Net cash provided by operating activities			777,845				1,061,290				3,447,895				3,071,705

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

POSCO
Non-Consolidated Statements of Cash Flows
Three-Month and Nine-Month Periods Ended September 30, 2005 and 2004
(Unaudited)

		For the three-month periods								For the nine-month periods
		ended September 30								ended September 30
(in millions of Korean won)		2005				2004				2005				2004
Cash flows from investing activities
Disposal of short-term financial instruments			361,240				250,000				917,640				753,500
Disposal of trading securities			3,077,191				2,003,043				8,450,340				6,218,050
Disposal of available-for-sale securities			30,000				—				60,676				3,666
Disposal of current maturities of held-to-maturity securities			—				33,925				—				170,930
Disposal of property, plant and equipment			2,435				109				14,255				14,668
Acquisition of short-term financial instruments			(544,792	)			(471,794	)			(964,818	)			(802,731	)
Acquisition of trading securities			(2,085,910	)			(2,127,400	)			(7,199,510	)			(6,501,700	)
Acquisition of available-for-sale securities			(1,385	)			(12,982	)			(81,479	)			(26,901	)
Acquisition of investments using the equity method			(413,083	)			(1,057	)			(477,427	)			(19,605	)
Acquisition of held-to-maturity securities			(99,824	)			—				(99,824	)			(31,095	)
Acquisition of property, plant and equipment			(637,546	)			(513,034	)			(2,038,918	)			(1,214,817	)
Acquisition of intangible assets			(1,425	)			(14,404	)			(3,633	)			(53,294	)
Others			(14,852	)			13,282				(44,733	)			(9,713	)
Net cash used in investing activities			(327,951	)			(840,312	)			(1,467,431	)			(1,499,042	)
Cash flows from financing activities
Proceeds from other long-term liabilities			—				727				2,653				4,106
Proceeds from short-term borrowings			—				—				97,442				—
Disposal of treasury stock			400,492				79,936				400,492				79,936
Acquisition of treasury stock			(641,600	)			(258,168	)			(998,252	)			(258,168	)
Repayment of short-term borrowings			(239	)			—				(111,434	)			—
Repayment of current maturities of long-term debts			(200,223	)			(408,521	)			(721,830	)			(918,033	)
Repayment of other long-term liabilities			(392	)			(2,454	)			(1,345	)			(5,519	)
Payment of cash dividends			(157,520	)			(119,121	)			(680,794	)			(525,165	)
Others			(580	)			—				295				—
Net cash used in financing activities			(600,062	)			(707,601	)			(2,012,773	)			(1,622,843	)
Net decrease in cash and cash equivalents			(150,168	)			(486,623	)			(32,309	)			(50,180	)
Cash and cash equivalents
Beginning of the period			324,642				734,936				206,783				298,493
End of the period		W	174,474			W	248,313			W	174,474			W	248,313

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

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

1.		The Company
		POSCO (the “Company”) was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and 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 the Company have been listed on the Korea Stock Exchange since 1988. The Company operates two plants and one office in Korea, and seven liaison offices overseas.
		Under its Articles of Incorporation, the Company is authorized to issue 200 million shares of common stock with a par value of 5,000 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 September 30, 2005.
		As of September 30, 2005, the Company’s major shareholders are as follows:

						Percentage of
		Number of Shares				Ownership (%)
National Pension Corporation			2,810,027				3.22
SK Telecom Co., Ltd.			2,481,310				2.85
Pohang University of Science and Technology			2,410,700				2.76
Others			79,484,798				91.17
			87,186,835				100.00

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

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

2.		Summary of Significant Accounting Policies
		The significant accounting policies followed by the Company in the preparation of its interim non-consolidated financial statements for the three-month and nine-month periods ended September 30, 2005, are summarized below:
		Basis of Financial Statement Presentation The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in conformity with accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying financial statements have been condensed, restructured and translated into English from the Korean language non-consolidated financial statements. Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, results of operations or cash flows, is not presented in the accompanying non-consolidated financial statements.
		Accounting Estimates The preparation of the non-consolidated financial statements requires management to make estimates and assumptions that affect amounts reported therein. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.
		Application of the Statements of Korean Financial Accounting Standards The Korean Accounting Standards Board has published a series of Statements of Korean Financial Accounting Standards (SKFAS), which will gradually replace the existing financial accounting standards established by the Korean Financial Supervisory Commission. As SKFAS Nos. 10, 12 and 13 became applicable to the Company on January 1, 2004, the Company adopted these Standards in its financial statements covering periods beginning January 1, 2004.
		In addition, as SKFAS Nos. 15 through 17 became effective for the Company on January 1, 2005, the Company adopted these Standards in its financial statements for the nine-month period ended September 30, 2005.
		In accordance with SKFAS No. 15, Investments in Associates, equity in earnings and losses of the investees are shown in the income statement as a gross amount. Likewise, positive and negative capital adjustments are shown in the balance sheets as a gross amount. In addition, in accordance with SKFAS No. 16, Deferred Income Taxes, deferred tax assets and liabilities are classified into current and non-current and within each classification deferred tax assets and liabilities are offset and recorded as a net amount. Deferred tax effects applicable to items in shareholders’ equity are directly reflected in the shareholders’ equity account.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

		Revenue Recognition Revenue from the sales of products is recognized when significant risks and rewards of ownership of the goods are transferred.
		Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts based on management’s estimate of the collectibility of individual accounts and historical collection experience.
		Inventories The quantity of inventory on hand is verified using the perpetual inventory system, which continuously updates the quantity of the inventory during the period, and by physical count as of the balance sheet date. Inventories are stated at the lower of cost or market, with cost being determined using the moving-average method, except for materials-in-transit, which are stated at actual cost using the specific identification method. No physical count of inventory has been conducted as of September 30, 2005. If the net realizable value of inventories (current replacement cost for raw materials) is lower than its cost, the carrying amount is reduced to the net realizable value and the difference between the cost and revalued amount is charged to current operations.
		Investments in Securities The Company accounts for equity and debt securities under the provision of SKFAS No. 8, Investments in Securities. This statement requires investments in equity and debt securities to be classified into three categories: trading, available-for-sale and held-to-maturity.
		Securities that are bought and held principally for near-term sale to generate profits from short-term price differences are classified into trading. Trading generally involves active and frequent buying and selling. Debt securities that have fixed or determinable payments and fixed maturity shall be classified as held-to-maturity only if the reporting entity has both the positive intent and ability to hold those securities to maturity. Securities that are not classified as either held-to-maturity securities or trading securities are classified as available-for-sale.
		Securities are initially carried at cost, including incidental expenses, with cost being determined using the gross average method or moving-average method. Debt securities, which the Company has the intent and ability to hold to maturity, are generally carried at cost, adjusted for the amortization of discounts or premiums. Premiums and discounts on debt securities are amortized over the term of the debt using the effective interest rate method. Trading and available-for-sale securities are carried at fair value, except for non-marketable securities classified as available-for-sale securities, which are carried at cost. Non-marketable debt securities are carried at a value using the present value of future cash flows, discounted at a reasonable interest rate determined considering the credit ratings by the independent credit rating agencies.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

		Unrealized valuation gains or losses on trading securities are charged to current operations, and those resulting from available-for-sale securities are recorded as a capital adjustment, the accumulated amount of which shall be charged to current operations when the related securities are sold, or when an impairment loss on the securities is recognized. Impairment losses are recognized in the statement of income when the recoverable amounts are less than the acquisition costs of securities or adjusted costs of debt securities for the amortization of discounts or premiums.
		Investments in Affiliates Investments in equity securities of companies, over which the Company exercises a significant control or influence, are recorded using the equity method of accounting. Under the equity method, the Company records changes in its proportionate ownership in the book value of the investee in current operations, as capital adjustment or as adjustments to retained earnings, depending on the nature of the underlying change in the book value of the investee. The Company discontinues the equity method of accounting for investments in equity method investees when the Company’s share in the accumulated losses equals the cost of the investments, and until the subsequent cumulative changes in its proportionate net income of the investees equals its cumulative proportionate net losses not recognized during the periods when the equity method was suspended. . If the book value of the investee has changed due to the capital increase of the investee, net losses not recognized in the prior periods are reflected in equity method investment securities as an adjustment to retained earnings.
		Differences between the initial purchase price and the Company’s initial proportionate ownership in the net book value of the investee are amortized over the period, not to exceed 20 years, using the straight-line method. However, in case of the investee which is also a subsidiary of the Company, if the additional investment results in the change in the ownership percentage, the difference between the change in the proportionate ownership in the book value of the investee and additional investment is recorded as capital adjustment.
		The Company’s proportionate unrealized profit arising from sales by the Company to equity method investee, sales by the equity method investees to the Company or sales between equity method investees are eliminated. Only unrealized profit arising from sales by the Company to subsidiaries is fully eliminated.
		If the Company has provided allowance for doubtful accounts for receivables due from an equity method investee which is also a subsidiary of the Company, bad debt expenses recognized during the current period should be included in equity method investment securities and reflected in current operations as gain on investments using the equity method.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

		Foreign currency financial statements of equity method investees are translated into Korean won using the exchange rates in effect as of the balance sheet date for assets and liabilities (the exchange rates on the acquisition date for capital accounts), and annual average exchange rates for income and expenses. Any resulting translation gain or loss is included in the capital adjustments account, a component of shareholders’ equity.
		The equity method of accounting is applied based on the most recent available unreviewed financial statements of subsidiaries and affiliates. The Company believes that if the financial statements were reviewed, differences between unreviewed and reviewed financial statements would not have a material effect on the financial statements of the Company.
		Property, Plant and Equipment and Related Depreciation Property, plant and equipment are stated at cost, net of accumulated depreciation, except for certain assets subject to upward revaluations in accordance with the Asset Revaluation Law. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:

		Estimated useful lives
Buildings and structures		20-40 years
Machinery and equipment		8 years
Vehicles		4-9 years
Tools		4 years
Furniture and fixtures		4 years

		The acquisition cost of an asset is comprised of its purchase price and any directly attributable cost of bringing the asset to working condition for its intended use. When the estimated cost of dismantling and removing the asset and restoring the site, after the termination of the asset’s useful life, meets the criteria for the recognition of provisions, the present value of the estimated expenditure shall be included in the cost of the asset.
		Subsequent expenditure on property, plant and equipment shall be capitalized only when it increases future economic benefits beyond its most recently assessed standard of performance; all other subsequent expenditures shall be recognized as an expense in the period in which it is incurred.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

Intangible Assets Intangible assets are stated at acquisition cost, including incidental expenses, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives as described below.

		Estimated useful lives
Intellectual property rights		5-10 years
Land usage rights		40 years
Port facilities usage rights		3-34 years
Other intangibles		4-20 years

		Port facilities usage rights and land usage rights, which represent rights to use certain port facilities and land, are amortized over the term of exclusive rights.
		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 other intangible assets only if it is probable that future economic benefits that are attributable to the asset will flow into the Company, and the cost of the asset can be measured reliably. The useful life of other intangible assets (development cost) should be based on its estimated useful life, not to exceed 20 years from the date when the asset is available for use.
		As of September 30, 2005, port facilities usage rights is related to the quay and inventory yard contributed by the Company, since April 1987, to the local bureaus of the Maritime Affairs and Fisheries in Gwangyang, Pohang, Pyoungtaek and Masan. The related amortization expense amounted to 14,040 million for the nine-month period ended September 30, 2005 (for the three-month period ended September 30, 2005: 4,635 million).
		Discounts on Debentures Discounts on debentures are amortized over the repayment period using the effective interest rate method. The discount is reported on the balance sheet as a direct deduction from the face amount of the debenture. Amortization is included in interest expense.
		Valuation of Assets and Liabilities at Present Value Long-term loans receivable and long-term trade accounts and notes receivable are valued at their present value as discounted at an appropriate discount rate. Discounts are amortized using the effective interest rate method and recognized as an interest income over the life of the related assets.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

		Accrued Severance Benefits Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors were to terminate their employment as of the balance sheet date.
		The Company has partially funded the accrued severance benefits through group severance insurance deposits with Samsung Life Insurance Company and others.
		The contributions to the National Pension Fund in accordance with the National Pension Act in Korea and group severance insurance deposits are deducted from accrued severance benefit liabilities.
		Derivative Instruments All derivative instruments are accounted for at fair value, and unrealized gains and losses from derivative contracts are charged to current operations with resulting rights and obligations being accounted for as asset and liabilities of the Company.
		Foreign Currency Translation Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the exchange rates in effect at the balance sheet date (1,038.0: US$1 as of September 30, 2005 and 1,043.8: US$1 as of December 31, 2004), and resulting translation gains and losses are recognized in current operations.
		Income Taxes The Company recognizes deferred income taxes for anticipated future tax consequences resulting from temporary differences between amounts reported for financial reporting and income tax purposes. Deferred income tax assets and liabilities are computed on such temporary differences by applying enacted statutory tax rates applicable to the years when such differences are expected to reverse. Deferred tax assets are recognized when it is more likely that such deferred tax assets will be realized. Income tax effect of temporary differences is reflected as income tax expenses in the period incurred, and income tax effect of temporary differences in relation to item in shareholders’ equity is directly reflected in the related shareholders’ equity account. The total income tax provision includes the current income tax expense under applicable tax regulations and the change in the balance of deferred income tax assets and liabilities during the period.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

		Deferred tax assets and liabilities in the balance sheet are classified into current and non-current portion, and within each classification, deferred tax assets and deferred tax liabilities are offset and recorded.
		Impairment of Assets The Company assesses the potential impairment of assets which are not recorded at fair value when there is evidence that events or changes in circumstances have made the recovery of an asset’s carrying value to be unlikely. The carrying value of the assets is reduced to the estimated realizable value, and an impairment loss is recorded as a reduction in the carrying value of the related asset and charged to current operations. However, the recovery of the impaired assets would be recorded in current operations up to the cost of the asset, net of accumulated depreciation or amortization, if any, before impairment, when the estimated value of the assets exceeds the carrying value after impairment.
		Capitalization of Financing Expenses Financing expense on borrowing associated with certain qualifying assets during the construction period that meet certain criteria for capitalization can be either capitalized or expensed as incurred. The Company has chosen to expense as a financing expense the cost of manufacturing, acquisition, and construction of property, plant, and equipment that require more than one year from the initial date of manufacture, acquisition, and construction to the date of the estimated completion of the manufacture, acquisition and construction.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

3.		Cash and Cash Equivalents, and Financial Instruments
		Cash and cash equivalents, and short-term and long-term financial instruments as of September 30, 2005 and December 31, 2004, consist of the following:

		Annual Interest Rate
(in millions of Korean won)		(%)				2005				2004
Cash and cash equivalents
Checking accounts			—			W	465			W	1,308
Money market deposit accounts			3.00-3.50				138,300				169,400
Time deposits in foreign currency			1.22				35,709				35,075
Time deposits			—				—				1,000
						W	174,474			W	206,783
Short-term financial instruments
Cash on hand and in banks 1			0.10				2,506				6,240
Time deposits			3.40-3.95				195,000				86,400
Specified money in trust			—				193,558				2,140
Certificates of deposit			3.72-4.30				161,000				181,000
Commercial papers			—				—				29,106
Trust type savings accounts			3.70-4.50				70,000				270,000
						W	622,064			W	574,886
Long-term financial instruments
Guarantee deposits for opening accounts 2						W	45			W	45

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

4.		Accounts and Notes Receivable and Others
		Accounts and notes receivable and their allowance for doubtful accounts as of September 30, 2005 and December 31, 2004, consist of the following:

(in millions of Korean won)		2005				2004
Trade accounts and notes receivable		W	2,249,139			W	2,006,019
Less: Allowance for doubtful accounts			(6,073	)			(20,619	)
		W	2,243,066			W	1,985,400
Other accounts and notes receivable		W	138,436			W	117,426
Less: Allowance for doubtful accounts			(55,238	)			(49,276	)
		W	83,198			W	68,150
Long-term trade accounts and notes receivable		W	45,150			W	45,149
Less: Allowance for doubtful accounts			(9,798	)			(12,142	)
		W	35,352			W	33,007

Accounts stated at present value under long-term deferred payment terms are as follows:

(in millions of						Allowance for
Korean won)						doubtful												Discount Rate
		Face Value				accounts				Book Value				Maturity Date				(%)
Long-term trade accounts receivable
BNG Steel Co., Ltd.		W	44,900			W	8,440			W	36,460			November 2009					8.62
"			7,676				1,145				6,531			December 2008					8.62
Less: Current portion			(7,679	)			(105	)			(7,574	)
		W	44,897			W	9,480			W	35,417
Other accounts receivable
POSCO Venezuela Compania Anonima (POSVEN)		W	6,971			W	86			W	6,885			January 2006					5.09

The Company computed discounts on accounts receivable using the Company’s weighted-average borrowing rate incurred as of the date nearest to the Company’s year end and accounted for them as allowance for doubtful accounts in accordance with SKFAS No. 13, Troubled Debt Restructurings.

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

5.		Inventories
		Inventories as of September 30, 2005 and December 31, 2004, consist of the following:

(in millions of Korean won)		2005				2004
Finished goods		W	416,337			W	188,604
Semi-finished goods			696,100				576,849
Raw materials			1,102,935				820,895
Materials-in-transit			527,015				520,374
Others			2,457				2,067
			2,744,844				2,108,789
Less: Provision for valuation loss			—				(107	)
		W	2,744,844			W	2,108,682

6.		Trading Securities
		Trading securities as of September 30, 2005 and December 31, 2004, are as follows:

(in millions of Korean won)		2005												2004
		Acquisition Cost				Fair Value				Book Value				Book Value
Beneficiary certificates		W	1,150,000			W	1,154,221			W	1,154,221			W	2,350,660
Monetary market fund			300,000				300,245				300,245				275,841
Mutual fund			—				—				—				30,837
		W	1,450,000			W	1,454,466			W	1,454,466			W	2,657,338

7.		Investment Securities
		Investment securities as of September 30, 2005 and December 31, 2004, consist of the following:

(in millions of Korean won)		2005				2004
Available-for-sale securities, net		W	2,157,441			W	1,926,560
Held-to-maturity securities, net			137,055				37,148
Equity-method investments			2,567,389				1,955,756
		W	4,861,885			W	3,919,464

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

Available-For-Sale Securities
Available-for-sale securities as of September 30, 2005 and December 31, 2004, consist of the following:

(in millions of Korean won)		2005				2004
Current portion of available-for-sale securities
Investments in bonds		W	111,022			W	122,318
Available-for-sale securities
Marketable equity securities			1,972,544				1,682,496
Non-marketable equity securities			124,447				130,371
Investments in bonds			60,450				113,693
			2,157,441				1,926,560
		W	2,268,463			W	2,048,878

Investments in marketable equity securities as of September 30, 2005 and December 31, 2004, are as follows:

		2005																2004
(in millions of		Number of				Percentage of				Acquisition				Book				Book
Korean won)		shares				ownership (%)				Cost				Value				Value
Hanil Iron & Steel Co., Ltd.			206,798				10.14			W	2,413			W	4,911			W	3,102
HI Steel Co., Ltd.			135,357				9.95				1,609				2,680				1,747
Munbae Steel Co., Ltd.			1,849,380				9.02				3,588				3,505				2,367
Hana Bank			4,617,600				2.46				29,998				177,778				119,134
Korea Investment			—				—				—				—				135
SK Telecom Co., Ltd.1			5,900,630				7.17				1,678,201				1,197,633				1,170,222
Samjung Packing & Aluminum Co., Ltd.2			—				—				—				—				1,944
Dong Yang Steel Pipe Co., Ltd.			1,564,250				2.46				3,911				1,095				501
Nippon Steel Corporation			147,876,000				2.17				285,102				576,954				375,649
Korea Line Corp.			217,373				2.17				8,067				7,988				7,695
										W	2,012,889			W	1,972,544			W	1,682,496

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

Investments in non-marketable equity securities as of September 30, 2005 and December 31, 2004, are as follows:

		2005																				2004
(in millions of		Number of				Percentage of				Acquisition				Net Asset				Book				Book
Korean won)		Shares				Ownership (%)				Cost				Value 1				Value				Value
Hankyung Shinmun Co., Ltd.			28,728				0.15			W	309			W	149			W	309			W	309
Keo Yang Shipping Co., Ltd.			150,000				0.88				780				1,842				780				780
Dae Kyeong Special Steel Co., Ltd.			1,786,000				19.00				8,930				6,086				8,930				8,930
Kihyup Technology Banking Corp.			600,000				10.34				3,000				3,532				3,000				3,000
Powercomm			4,500,000				3.00				153,000				45,675				45,675				45,675
POSCO Terminal Co., Ltd.2			—				—				—				—				—				5,916
The Seoul Shimun Co., Ltd.			1,614,000				19.40				9,551				2,631				9,551				9,551
The Siam United Steel			9,000,000				10.00				26,640				16,536				26,640				26,640
PT-POSNESIA Stainless Steel Industry 3			29,610,000				70.00				9,474				8,957				1,567				1,567
BX Steel Posco Cold Rolled Sheet Co., Ltd.4			—				10.00				26,803				24,632				26,803				26,803
Others											1,192				1,723				1,192				1,200
										W	239,679			W	111,763			W	124,447			W	130,371

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

Investments in bonds as of September 30, 2005 and December 31, 2004, are as follows:

						2005												2004
(in millions of						Acquisition				Fair				Book				Book
Korean won)		Maturity				Cost				Value				Value				Value
Government bonds		Less than 1 year				W	111,504			W	111,022			W	111,022			W	122,318
		1-5 years					58,848				60,450				60,450				92,807
Others		1-5 years					—				—				—				20,886
						W	170,352			W	171,472			W	171,472			W	236,011

POSCO
Notes to Non-Consolidated Financial Statements
September 30, 2005 and 2004, and December 31, 2004
(Unaudited)

Available-for-sale securities are stated at fair market value, and the difference between the acquisition cost and fair market value is accounted for in the capital adjustment account. The movements of such differences for the nine-month period ended September 30, 2005 and for the year ended December 31, 2004, are as follows:

		2005												2004
(in millions of		Beginning				Increase				Ending				Beginning				Increase				Ending
Korean won)		Balance				(Decrease)1				Balance				Balance				(Decrease)				Balance
Marketable equity securities
Hanil Iron & Steel Co., Ltd.		W	689			W	1,122			W	1,811			W	(76	)		W	765			W	689
HI Steel Co., Ltd.			139				638				777				(555	)			694				139
Munbae Steel Co., Ltd.			(1,221	)			1,161				(60	)			(1,748	)			527				(1,221	)
Chohung Bank			—				—				—				(3,227	)			3,227				—
Hana Bank			89,136				18,004				107,140				71,589				17,547				89,136
Korea Investment			(453	)			453				—				(403	)			(50	)			(453	)
SK Telecom Co., Ltd.			(495,027	)			146,616				(348,411	)			(504,158	)			9,131				(495,027	)
Samjung Packing & Aluminum Co., Ltd.			(770	)			770				—				(849	)			79				(770	)
Dong Yang Steel Pipe Co., Ltd.			(3,410	)			1,369				(2,041	)			(3,402	)			(8	)			(3,410	)
Nippon Steel Corporation			90,547				121,046				211,593				95,691				(5,144	)			90,547
Korea Line Corp.			(372	)			315				(57	)			—				(372	)			(372	)
			(320,742	)			291,494				(29,248	)			(347,138	)			26,396				(320,742	)
Non-marketable equity securities
Powercomm			(107,325	)			29,514				(77,811	)			(111,956	)			4,631				(107,325	)
The Seoul Shinmun Co., Ltd.			2,072				(570	)			1,502				—				2,072				2,072
Investments in Bonds			6,030				(4,823	)			1,207				1,118				4,912				6,030
Stock Market Stabilization Fund			—				—				—				1,179				(1,179	)			—
		W	(419,965	)		W	315,615			W	(104,350	)		W	(456,797	)		W	36,832			W	(419,965	)