POSCO REPORT 2015

1 POSCOREPORT2015 Integrated REPORT of Economic, Environmental and Social SustainabilityABOUT THIS REPORTI ntegrated REPORT The POSCO REPORT ( REPORT ) is an integrated REPORT of POSCO s economic, social and environmental performances in 2015 . POSCO has been publishing the Environmen-tal REPORT since 1995, the Sustainability REPORT since 2004, and began publishing the POSCO REPORT that integrates the Annual REPORT and Sustainability REPORT since 2012. Also we have integrated the Carbon REPORT into this REPORT since 2014. Reporting Approach This REPORT was produced according to POSCO s own reporting process, referring to the following as guidelines.

2 GRI (Global Reporting Initiative) G4 guideline The International Integrated Reporting Framework set forth by the International Integrated Reporting Council (IIRC) ISO 26000 Principles of the UN Global CompactFinancial Information Reporting Standard The reporting framework and definition of the financial information contained in this REPORT are based on K-IFRS (Korea-International Financial Reporting Standards). REPORT Publication CyclePOSCO has published the REPORT annually since 2004. Reporting Period This REPORT contains information from January 1st, 2015 to Decem ber 31st, 2015 .

3 Quan-titative data includes figures from the three re cent years, while some parts of qualitative data include those up to March 2016. The corporate governance section is based on the de cisions made by the Board of Directors at the meeting held on March 11, 2016. Scope of Reporting The REPORT contains the economic, social, and environmental performances of Pohang Works, Gwangyang Works, Pohang Head Office and Seoul Office. The Section of Perfor-mances in 2015 and plans for 2016 include economic performances of POSCO s sub-sidiaries. The Integrated Sustainability Performance Index accounts for POSCO and its seven affiliates.

4 Some information such as fair trade, quality management, safety and health contains information of all group affiliates which encompass POSCO , domestic and overseas subsidiaries and outsourcing Assurance Samil PwC, an independent assurance institution, conducted assurance on this REPORT in order to assure stakeholders on the credibility of the data and reporting process. As-surance was conducted in accordance with ISAE3000 and AA1000AS Type II. The assur-ance information pertaining to this REPORT is as follows. Independent Assurance REPORT (page 143) Assurance REPORT for POSCO Carbon REPORT (page 145) REPORT Distribution and Feedback This REPORT was published in Korean, English, and Chinese and can be downloaded at POSCO s website.

5 We receive feedback from the stakeholders through various channels including the internet, phone and 6261, Donghaean-ro, Nam-gu, Pohang-si, Gyeongsangbukdo, Korea Phone 054-220-0114, 02-3457-0114 For inquiries on the REPORT Dept. of Environment, Energy and Social Responsibility 02-3457-0198 Website Email IR: PR: Social Contribution: CSR: PhotoThis photo shows a research fellow conducting an axial loading fatigue test of a steel product for an auto parts company. POSCO incorporates technical solutions into products to deliver what customers truly REPORT of Economic,Environmental and Social SustainabilityPOSCO REPORT 2015 POSCO REPORT 20154 CEO S MESSAgE2016 promises to be another year for POSCO to grow with all our stakeholders to become even more nationally loved and globally respected.

6 We ask for your continued interest and support. 5 CEO s MessageDear stakeholders,Last year, for the first time in POSCO s history, we encountered a net loss on a consolidated basis, caused in part by a confluence of negative external factors, including a stagnant domestic economy, increased global compe-tition and ongoing recession in the global steel industry, as well as poor in-ternal performance, including operating loss and foreign exchange these challenges, steel segment within POSCO was able to main-tain higher level of profitability compared to other business sectors.

7 In fact, we were able to accelerate the process of organizational restruc-turing, and reinforce ethical management through IP , an upgrade version of IP This REPORT aims to highlight POSCO s achievements in 2015 in order to assert its competitiveness in spite of unprecedented market challenges, and to outline corporate plans and goals for the past two years, POSCO was able to raise trillion won of non-debt capital through intensive restructuring and divestment ef-forts. So far, our restructuring initiatives have focused primarily on im-proving the financial structure.

8 This year, however, we plan to carry out thorough restructuring by eliminating any latent financial issues that may emerge. Through this plan, the steel sector will serve faithfully as the cash cow to allow continuous growth. In other sectors, differenti-ated competitiveness needs to be achieved in each of the respective segments to gradually expand importance through comprehensive re-organization of the company s portfolio. Also, we will redouble our marketing efforts to minimize the impact of the drop in iron and steel prices and build on the success we have al-ready had in solutions marketing, which allowed an increase in sales of high value-added products.

9 Last year, we introduced the concept of human solutions to win customer loyalty by going beyond techni-cal sales. We will continue to execute leading solutions marketing ini-tiatives for greater customer satisfaction, underpinned by a cohesive approach to R&D, production and sales. The organic links we forge be-tween our different divisions will help us further expand our sales of World Premium products. Furthermore, we will generate new sources of profit through sales of engineering technology, such as designs and operations, as well as steelmaking technology, particularly key part of our approach to embedding IP is to innovate our corporate culture in ethics, safety, environment, and social respon-sibility.

10 POSCO introduced a corporate-wide adoption of a One Strike-Out System aimed to foster an ethical culture. In particular, POSCO adheres to a zero-tolerance policy, regardless of one s title, position, or the degree of gravity for any of the following four major unethical practices: accepting bribes, embezzlement, violation of sexual ethics, and fabrication of information. We will strengthen performance-driven compensation for a high performance-oriented virtuous circle, rigor-ously enforced by strict ethical management. With regard to safety, the number of accidents dropped significantly in 2015 compared to 2014; however, we will continue to push forward until we achieve the goal of zero harm in 2016.