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. Following evaluation of these positions, we selectively enter into derivative financial instruments to manage the related risk exposures, primarily with respect to foreign exchange rate and interest rate risks, which are entered into with major financial institutions in order to minimize the risk of credit loss. Our market risk management policy determines the market risk tolerance level, measuring period, controlling responsibilities, management procedures, hedging period and hedging ratio very specifically. We also prohibit all speculative hedging transactions and evaluate and manage foreign exchange exposures to receivables and payables. None of our loss exposures related to derivative contracts are unlimited, and we do not believe that our net derivative positions could result in a material loss to our profit before income tax or total equity due to significant fluctuations of major currencies against the Korean Won. Due to the nature of our derivative contracts primarily as hedging instruments that manage foreign exchange risks, net gain or net loss on derivatives transactions and valuation of derivatives are typically offset by net loss or net gain on foreign currency transaction and translation. We recognized net gain on valuation of derivatives of Won 124 billion and net gain on derivatives transactions of Won 13 billion in 2023, net gain on valuations of derivatives of Won 790 billion and net gain on derivatives transactions of Won 120 billion in 2024 and net gain on valuations of derivatives of Won 80 billion and net loss on derivatives transactions of Won 137 billion in 2025. 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 U.S. 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 amount and are mostly denominated in U.S. dollars, relate primarily to imported raw material costs and freight costs. Foreign currency-denominated liabilities relate primarily to foreign currency-denominated debt. We strive to naturally offset our foreign exchange risk by matching foreign currency receivables with our foreign currency payables and our overseas subsidiaries have sought to further mitigate the adverse impact of exchange rate fluctuations by conducting business transactions in the local currency of the respective market in which the transactions occur. In particular, POSCO INTERNATIONAL’s exposure to fluctuations in exchange rates, including the Won/U.S. dollar exchange rate, is limited because trading transactions typically involve matched purchase and sale contracts, which result in limited settlement exposure, and because POSCO INTERNATIONAL’s contracts with domestic suppliers of products for export and with domestic purchasers of imported products are generally denominated in U.S. dollars. Although the impact of exchange rate fluctuations is partially mitigated by such strategies, we and our subsidiaries, particularly POSCO INTERNATIONAL and POSCO E&C, also periodically enter into derivative contracts, primarily foreign currency swaps and forward exchange contracts, to further hedge some of our foreign exchange risks. 106 Table of Contents Our foreign currency exposure and changes in gain or loss resulting from a 10% foreign exchange rate change against the Korean Won are as follows: For the Year Ended December 31, 2023 2024 2025 Increase Decrease Increase Decrease Increase Decrease (In billions of Won) U.S. dollars W (617 ) W 617 W (549 ) W 549 W (610 ) W 610 Euro (234 ) 234 14 (14 ) 17 (17 ) Japanese Yen 8 (8 ) 9 (9 ) 13 (13 ) See Note 23 to the Consolidated Financial Statements. Interest Rate Risk We are also subject to market risk exposure arising from changing interest rates. In particular, we are exposed to interest rate risk on our existing floating rate borrowings and on additional debt financings that we may periodically undertake for various reasons, including capital expenditures and refinancing of our existing borrowings. A rise in interest rates will increase the cost of our existing variable rate borrowings. If interest rates on borrowings with floating rates had been 1% higher or lower with all other variables held constant, the impact on the gain or loss of the applicable period would be as follows: For the Year Ended December 31, 2023 2024 2025 Increase Decrease Increase Decrease Increase Decrease (In billions of Won) Increase or decrease in profit and equity W (77 ) W 77 W (47 ) W 47 W (62 ) W 62 See Note 23 to the Consolidated Financial Statements. A reduction of interest rates also increases the fair value of our debt portfolio, which is primarily of a fixed interest nature. From time to time, we use, to a limited extent, interest rate swaps to reduce interest rate volatility on some of our debt and manage our interest expense by achieving a balanced mixture of floating and fixed rate debt. 107 Table of Contents The following table summarizes the carrying amounts, fair values, principal cash flows by maturity date and weighted average interest rates of our short-term and long-term liabilities as of December 31, 2025 which are sensitive to exchange rates and/or interest rates. The information is presented in Won, which is our reporting currency. Maturities December 31, 2025 2026 2027 2028 2029 2030 Thereafter Total Fair Value (In billions of Won except rates) Local currency: Fixed rate W 4,163 W 1,718 W 1,626 W 707 W 589 W 1,004 W 9,807 W 9,798 Average weighted rate (1) . 2.21% 2.13% 2.73% 2.79% 2.91% 3.07% 2.48% Variable rate 991 185 0 9 195 589 1,969 1,953 Average weighted rate (1) 4.02% 2.94% 0.00% 2.52% 4.53% 1.25% 3.13% Sub-total 5,154 1,903 1,626 716 784 1,593 11,776 11,751 Foreign currency, principally U.S. dollars and Yen: Fixed rate W 3,055 W 2,473 W 1,622 W 575 W 584 W 1,284 W 9,593 W 9,560 Average weighted rate (1) 1.83% 2.23% 0.68% 6.38% 5.25% 3.21% 2.42% Variable rate 3,945 911 703 35 801 728 7,123 7,116 Average weighted rate (1) 3.81% 3.04% 1.51% 2.51% 5.95% 5.38% 3.88% Sub-total 7,000 3.384 2,325 610 1,385 2,012 16,716 16,676 Total W 12,154 W 5,287 W 3,951 W 1,326 W 2,169 W 3,605 W 28,492 W 28,427 (1) Weighted average rates of the portfolio at the period end. Item 12. Description of Securities Other than Equity Securities Not applicable Item 12.A. Debt Securities Not applicable Item 12.B. Warrants and Rights Not applicable Item 12.C. Other Securities Not applicable