42 period Annual report

ANNUAL REPORT 2018

42nd period Annual report

Ranked No. 1 in Anti-crime andSecurity Service category of the K-BPIfor 14 consecutive years (2006~2019)

Ranked No. 1 in Building Maintenancecategory of the Korea Service Grand Prixfor 3 consecutive years (2016~2018)

S-1 Bldg., Sejongdaero 7-gil, Jung-gu, Seoul

http://www.s1.co.krTel:1588-3112

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Letter from the CEO

History

Resolution of the Board of Directors

Annual report

Separate financial statements

Consolidated financial statements

Audit report

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Business overview Company overview Business performance Information on the parent company, subsidiaries, mergers, etc. Business performance and financial status of the past 3 years Tasks of the companyDirectors and auditorsMajor shareholders Investments in other companies made by the company, the company and subsidiaries or the company’s subsidiaries Major creditors, etc. Important facts after settlement of accounts Other important information regarding business

Statement of financial positionIncome statementStatement of changes in equityStatement of cash flow Statements of appropriation of retained earningsNotes to financial statements

Consolidated statement of financial position Consolidated income statement Consolidated statement of changes in equityConsolidated statement of cash flowNotes to consolidated financial statements

Auditor’s reportIndependent auditor report on financial statementsIndependent auditor report on consolidated financial statements

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CEO and internal accounting manager’s report on operating status 47

Contents

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March 31, 2019

Yook Hyun-pyo, CEO of S-1

Product Sales Division has also developed state-of-the-art solutions, such as SVMS and CLES, and extended its service areas to

include smart cities as well as key national infrastructure. S-1 also reinforced its global business with a focus on key overseas bases

in Southeast Asia and the Middle East.

For 2019, we promise to live up to the expectations of shareholders by continuing to challenge ourselves. Many difficulties

in the management environment, such as the domestic economic recession and changes in the employment landscape, are

expected this year as well. But S-1 will overcome these difficulties and lead the industry through thorough preparations and bold

challenges.

For starters, we will lay the foundation for next-generation businesses.

In the age of the 4th Industrial Revolution, we will be able to stay competitive only when we build an independent platform. We

will work with various partners in IT services and retail to build a platform with a focus on S-1 while expanding our security

ecosystem. Last year we launched in-house ventures, which translate the ideas of employees into viable businesses, and operated

task force teams to seek out new businesses and opportunities. This year we will secure future growth engines.

We will continue, as always, to develop new services for customers and enhance quality.

Customer needs are becoming ever more fragmented and increasingly specific. To address this, we will expand our product

lineups to satisfy their various needs, and introduce S-1’s own new services that combine the strengths of various businesses,

such as security and building management. The quality of customer service depends on the attitude and competency of

employees. S-1 established the Blue Asset Technology Education Center, the Cleaning Management Institute and the Bike School

in a bid to enhance the competency of its employees. We will also actively invest in employee education to enhance service

expertise and provide high-quality services this year as well.

Lastly, we will work hard to enhance the value proposition for our shareholders.

Only solid business performance can enhance value for our shareholders. We will continue to ensure that S-1 will grow

continuously by improving business processes and thoroughly preventing undue risks. We will also continuously develop the

organizational culture to encourage sharing and accomplishing common goals. All employees will strive, as always, to produce

the best results as one team.

Dear shareholders!

S-1 will not settle for the status quo. We will never stop challenging ourselves. We will maintain our status as a leading company

by quickly responding to the rapidly changing environment. Your continued support will be greatly appreciated.

Thank you.

Letter from the CEO

Dear shareholders,

I wish the best of health and good fortune for all of you and your family.

Last year, as the 4th industrial revolution began in earnest, rapid changes have been taking place across many industries one by

one, so technology convergence is becoming a reality. There have been many changes in the security industry, and as a result,

competition became tougher. The situation was tough, but S-1 wrote a new history which lead to sales exceeding KRW2 trillion for

the first time since its founding. We accomplished such success through repeated challenges and innovation. Credit goes to the

support of our shareholders and the efforts of all employees. I am truly grateful to all of you.

Over the years S-1 has led changes, and devoted all its energy to securing growth engines in preparation for the future.

Alarm Security Division entered into strategic alliance with common carriers, and launched bundled products to reinforce product

competitiveness, and enhance quality and management efficiency by using big data to improve the patrol process. Building

Management Division extended its services to include large integrated resorts, logistics centers and large multi-purpose buildings,

and thus won more contracts. In addition, the company found strategic businesses that increase the value of real estate, such as

smart parking and electric vehicle charging.

The situation was difficult, but S-1 wrote a new history through endless challenges andinnovation such that our sales exceeded KRW2 trillion for the first time ever in its history.

This was a result of the support of shareholders and efforts of all employees.

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History of the Company

2014. 042014. 08

2015. 022015. 082015. 112015. 122016. 01

2016. 03

2016. 03

2016. 11

2017. 032017. 032017. 05

2017. 10

2017. 112017. 112018. 02

2018. 03

2018. 03

2018. 032018. 05

2018. 062018. 07

2018. 07

2018. 092018. 10

2018. 102018. 12

EverlandLaunched ‘S-1 UVIS-T’, a freight transportation management system serviceLaunched ‘S-1 UVIS-R/F’, a rental car and corporate vehicle operation management systemLaunched ‘Ahnsim Phone LTE’, a mobile personal security serviceLaunched ‘Blue Asset’, the premium total real estate service brandS-1 SVMS acquired highest-level CPNI certification from UK governmentCompleted GOP scientific surveillance system in the mid-western regionOpened ‘S-1 Detection Dog Center’, a social contribution activity for cultural heritage conservationThe 3D & 2D intelligent video analysis solution won the ‘IR52 Jang Young-shil Award’Completed construction of the ‘Blue Asset Technology Education Center’, a total building management training centerReceived the ‘Minister of Trade, Industry and Energy Award’ at Korea Technology Awards 2016Launched ‘SECOM izi’, a self-security productEstablished Vietnamese subsidiaryCompleted construction of the ‘S-1 Bike School’, an education center for motorcyclesReceived Prime Minister’s award at the National Sharing Grand Awards in the corporate social contribution categoryLaunched ‘S-1 PS Anti-ransomware’, a ransomware response service40th anniversaryS-1 intelligent video analysis algorithm acquired Korea Internet & Security Agency intelligent CCTV performance certificationRanked No. 1 in the Anti-crime and security service category of the K-BPI for 13 consecutive yearsRanked No. 1 in Korea Brand Star in the security category for two consecu-tive yearsReceived ‘Best HRD Award of the Year’Acquired Korea Internet & Security Agency personal information manage-ment system (PIMS) certificationHeld ‘5th All-Ring Ahnsim Campaign’ to support crime victimsRanked No. 1 in the Korean Standard-Service Quality Index (KS-SQI) un-manned security category for 6 consecutive yearsReceived ‘Korea Service Grand Prix’ in the building menagement service for 3 consecutive yearsHeld ‘6th S-1 security solution Fair’, a state-of-the-art security exhibitionRanked No. 1 in the KCSI unmanned security category for 4 consecutive yearsLaunched a facial recognition readerLaunched in-house venture Apolo

2010. 032010. 03

2010. 05

2010. 102010. 12

2011. 052011. 05

2011. 092012. 012012. 012012. 032012. 062012. 112012. 112013. 032013. 032013. 042013. 06

2013. 092013. 11

2014. 01

Launched an AED (Automated External Defibrillator)Entered into an MOU with the Korea Association of Cardiopulmonary ResuscitationEstablished Ahnsim Nuri Volunteer Corps, a volunteer corps for cardiopul-monary resuscitation educationLaunched S1 NS, a network security service Received a ‘Good Design Award’ from the Ministry of Knowledge Economy (for the SECOM card reader and Huen home network system)Declared compliance managementReceived the ‘2011 Transparent Management Award’ from the Korean Accounting AssociationEstablished a Chinese subsidiaryLaunched S1 PS, a PC security solution Launched SECOM Homz, a security system exclusively for apartmentsLaunched ‘enfra’, an energy efficiency improvement business brand Completed construction of a state-of-the-art security training centerLaunched UVIS, a vehicle operation management systemOpened the “S1 One Step Study Room” for low-income youthLaunched the indoor 3D UWB detectorChanged company name from S1 to S-1Launched ‘Facecheck S’, a face recognition monitoring solution Launched SECOM Home Blackbox, a smart home security system exclu-sively for apartmentsLaunched ‘Ahnsim Phone Service,’ a mobile personal security serviceAcquired Korea Internet & Security Agency certification for facial recogni-tion algorithmCompleted transfer of the building management business from Samsung

1990. 051993. 051995. 121996. 011996. 031996. 101997. 041997. 061997. 08

1997. 09

1998. 051998. 111999. 01

1999. 101999. 11

Developed a security system for self-service banksEstablished a Technical Research CenterDeveloped a security system for self-service banksListed on the Korea Stock ExchangeChanged company name to S1Developed a residential security systemCompleted a state-of-the-art automated logistics centerHeld an international security forumReceived a contract for establishment of an unmanned alarm system at an ROK airbaseSamsung 3119 Rescue Team designated as the first civilian emergency rescue agency in the countyReached 100,000 contractors, first in the countryOpened the Cheon-an Specialty Security Training FacilityFounded the S1 Taekwondo team and established S-Tech Corporation, a spin-off from S1Acquired Y2K certificationLaunched the Building Master System (BMS)

2000. 02

2000. 05

2000. 07

2000. 092000. 102000. 112002. 072002. 082002. 10

2003. 02

2003. 092003. 09

2003. 11

2003. 12

2004. 02

2004. 032005. 042005. 042005. 062005. 08

2006. 05

2006. 08

2006. 112007. 012007. 05

2007. 11

Signed a partnership agreement with DACOM for high-speed Internet security businessSelected by the Korea Stock Exchange as an “excellent public disclosure corporation” for the year 1999Entered into partnership in the Raemian Ahnsim Apartment Business with Samsung C&T and Samsung Fire & Marine InsuranceLaunched ePass Combi, an intelligent access control systemEntered into partnership in the smart card business with OTI (Israel)Entered into partnership in the smart card business with Samsung CardLaunched Secom Smart FS (Full Security), a new digital productDeveloped world’s first Chip Operating System (COS) for smart cardsImplemented the integrated security system and new employee ID card system for Samsung ElectronicsSelected by the Korea Financial Telecommunications & Clearing Institute as the software developer for the Korean electronic monetary system known as “K Cash”Launched SBMS, a smart building management system Won the first contract for the digital campus system of Chungbuk National UniversityEntered into an agreement with Ajou University for implementation of the multi-functional card systemEntered into an agreement with KT Consortium for a digital home pilot projectEntered into partnership in the wireless security system business with VISONIC (Israel) Acquired Smart card EMV certification from VISAWon the contract for the Busan New Port security systemWon the contract for the electronic voting system pilot projectReceived the Visa Smart Star Award from VISAWon the contract for the biometric access control system of the Incheon International AirportWon the contract for the RFID customs clearance and logistics system of the Ministry of National UnificationEntered into the youth protection agreement with the Government Youth CommissionLaunched a video control systemWon the contract for the RFID integrated security system of HHIC-PhilWon the contract for the pilot project for implementation of the U-Child Protection Area safety system30th anniversary

1977. 111977. 12

Established as Korea Security Co. Ltd.Acquired security service license (Minister of the Interior No. 1)

1970’s

1990’s

2000’s

2010’s

1980’s

1981. 011981. 031986. 091989. 11

Changed company name to Korea Safety System Inc.Launched a security monitoring system service business, first in the countryBuilt a national network by implementing online control systemsJoined the International Surveillance Association as the representative of Korea

2008. 042008. 11

2008. 11

2009. 032009. 042009. 06

2009. 082009. 11

Completed the Marine Safety Management SystemCompleted the Integrated Security System for the Defense Security Com-mandCompleted the security system for the Samsung office building in Seocho-dongEstablished a technology research center in RussiaLaunched SECOM V, an intelligent video control system Launched SECOM Master, an integrated management system for mi-to-large buildingsDeclared green managementDeclared Vision 2020

1980’s1970’s 1990’s 2000’s 2010’s

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Business overview

Company overview

Business performance

Information on the parent company, subsidiaries, mergers, etc.

Business performance and financial status of the past 3 years

Tasks of the company

Directors and auditors

Major shareholders

Investments in other companies made by the company, the company and subsidiaries or the company’s subsidiaries

Major creditors, etc.

Important facts after settlement of accounts

Other important information regarding business

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Annual report

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S-1 provides safety for public facilities, complex shopping malls, plants and high-rise buildings both at home and abroad.

S-1 uses its round-the-clock remote control know-how and experts tothoroughly protect the valuableinformation and technologies of customers.

Product Sales

Information Security

S-1 is capitalizing on its 40-years of experience in leading the domestic security industry

to build and provide integrated security systems for key facilities of the nation, such as

public institutions, industrial facilities, power plants and high-rise buildings.

The company has further enhanced the convenience and security of its face recognition

access control system, which was introduced at the G20 Seoul Summit and the

Nuclear Security Summit, and provides safety for major enterprises and public institu-

tions. Launch of S-1 CLES, a next-generation enterprise security solution, is planned for

the first half of 2019.

S-1 looks after public safety as well. For example, the team has developed an automatic

tunnel accident detection system that detects accidents in tunnels in real-time to enable

quick responses, installed a GOP scientific surveillance system deployed in the mid-west

region, and provides integrated security service for SOC (social overhead capital).

S-1 is also engaged in security consulting and services in global markets. So far S-1 has

established 10 overseas branches and subsidiaries in China, Hungary, Malaysia, including

the Vietnamese subsidiary that was established in 2017.

S-1 protects intangible assets like information and technologies as well as tangible

assets. The company provides total information security service through round-the-clock

remote control services and systematic maintenance.

‘S-1 VP’ is a virus vaccine for detecting and curing viruses and malicious codes in PCs.

‘S-1 PS’ searches for and encrypts personal information files in a PC, and prevents

information leakage. It also improves work efficiency by managing hardware and software

onsite. In 2017, S-1 launched the ‘S-1 PS Anti-ransomware,’ and provides ransomware

response services as well.

S-1’s information security service provides scheduled maintenance as a rental solution,

and can protect the valuable information and IT assets of customers at a reasonable cost.

S-1 provides a high level of safety and security through its convergence security service

that protects both the tangible and intangible assets of customers.

S-1 maximizes the values of customers’ assets with differentiated solutionsas well as safe and pleasant spacemanagement.

Building Management

S-1’s alarm security system service integrates state-of-the-art security devices with

control centers and patrol officers through wired and wireless communication networks.

It uses the national patrol infrastructures and best security personnel to prevent crimes

and accidents and guarantees the highest level of safety by providing fast and correct

on-the-ground responses in an emergency.

In consideration of different consumer needs, such as homes, public institutions, and

commercial facilities, etc, S-1 offers a variety of products to provide the best security and

living conveniences.

In October 2018, S-1 developed differentiated systems such as facial recognition reader

that improved security and convenience and to keep up with changes in the environment

and customer needs.S-1 is ardently endeavoring to provide the best security services by

training of excellent security experts.

In 2015, S-1 launched the premium total building menagement service brand ‘S-1 Blue

Asset’. ‘S-1 Blue Asset’ provides total management service throughout the lifecycle of

a building from initial planning, contracting, construction sale and ultimate demolition.

PM (Property Management) and FM (Facility Management) experts provide lease, sale

and investment consulting as well as energy diagnostics and technical consulting and

thus enhance the operational efficiency and value of the building. The service also

provides the infrastructure required for efficient energy management of the building to

enable smooth and optimized operation.

Due to the excellence of the service, ‘S-1 Blue Asset’ won the Korea Service Grand Prix in

the building management category for three consecutive years (2016, 2017, 2018).

More recently, it has been expanding its business to include housing rental, high-rise

buildings and hotels to create new growth potentials.

1. Business overview

Alarm Security

S-1 provides safety and security for customers with the best manpower, national network, differentiated systems and products.

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S-1 will practice love and sharing, and growth with neighbors and the society.

S-1 guarantees security services that will delight customers by developing the very best security experts.

Social Contributions

Educational Facilities

The S-1 Social Volunteer Corps has been engaged in the ‘Ahnsim Nuri Project’ (support

for Ahnsim villages and cardiopulmonary resuscitation education) targeting schools and

various organizations to help create a safe society in which crimes are prevented and lives

can be saved when afflicted with a health-threatening emergency.

The ‘Termite Detection Dog Project’ for protecting wooden cultural properties, the ‘Hope

Scholarship Project’ for helping youths living in correctional institutions and shelters to

grow into wholesome citizens, and the ‘All-Ring Ahnsim Project’ providing support for

crime victims are all representative social contribution activities of S-1.

The ‘All-Ring Ahnsim Campaign,’ which raises funds for donation through walkathons,

is in its 5th year in 2018. It has become a social contribution event in which employees,

their families and citizens are participating.

In addition, the 3119 Rescue Team, the first civilian emergency rescue organization in

Korea, has conducted rescue activities at numerous accident scenes with state-of-the-

art equipment and a high level of skills. Ordinarily the team focuses on providing safety

education and training for citizens, such as disaster management, first aid and what we

should do when in an emergency.

S-1 is making efforts to raise state-of-the-art security experts. In 1998, the company

established Korea’s first security education institute, the S-1 Training Center, and has

since been training experts who have an upright character, a service-minded attitude,

and fundamental knowledge of relevant technologies. The special programs of the S-1

Training Center include the core value of education, hierarchical leadership education,

the job experts education, global competency education and the challenge education,

which is an Outdoor Training program.

The ‘Total State-of-the-art Security Training Center’, for hands-on training in an environment

the same as the field, the ‘Blue Asset Technology Education Center,’ and the ‘S-1 Bike

School,’ a training center exclusively for motorcycles (opened May 2017) make it possible

to provide customers with the best services.

S-1 is developing state-of-the-art security and technology experts and reinforcing

competitiveness by continuously improving its educational facilities and programs.

S-1 protects not only valuable assets, but also the safety and health ofcustomers.

S-1 is making new standards forstate-of-the-art security solutions by developing innovative technologies.

Personal/Vehicle Security

R&D

‘S-1 Ahnsim Mobile’ is a personal security service that uses SKT and KT MVNO networks

which provide excellent call quality. The service combines S-1’s renowned security

service with smartphones to provide differentiated security services. In case a user is in

an emergency situation, a designated guardian will be notified through the emergency

notification service, and if the customer so requests, S-1 patrol officers will be dispatched.

The guardian can use a dedicated application to see the location of the user, and use

functions like the safety alarm and smartphone power OFF alarm. Also provided are

differentiated services such as a health counseling service for the elderly, and a harmful

content blocking service for juniors/teenagers.

‘S-1 UVIS’ is a vehicle operation management service that combines state-of-the-art

technology and control know-how. A 3G terminal using MVNO communication

networks is installed in the vehicle so that it is possible to check vehicle location,

status and operation information in real time on the website and via smartphone

app. As operational data analysis can be used to improve vehicle operational

efficiency, customers’ operating costs can be reduced.

The Convergence Security Research Center is at the center of S-1’s technology.

Established in 1993, the Convergence Security Research Center employs about 200

researchers who are leading the security market by developing sensor and video

technologies on their own, and launching various products based them.

In particular, ‘S-1 SVMS,’ the intelligent video analysis solution, developed by S-1,

acquired the highest-level certification from the Center for the Protection of National

Infrastructure (CPNI) of the UK government. The system also received the Jang Young

Shil award, the most prestigious technology award in Korea, and the Korea Technology

Award. This its performance was recognized both at home and abroad.

S-1 has also established a ‘Customer Support Office’ in 2017, and has been making efforts

to reinforce onsite support and expertise by organically collaborating with the Convergence

Security Research Center.

S-1 is accelerating its efforts to improve R&D and technology to introduce competitive

solutions and products in global markets.

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4) Information of shares

5) Matters concerning corporate bonds

① Types and total number of issued shares

③ Stock-related matters

② Changes in capital stock There has been no change in capital stock in the past 5 years

“N/A”

Types of shares Number of shares Amount Component ratio Remarks

Common shares 37,999,178 18,999,589 100% -

Closing date December 31

Stock book closing period From January 1 to January 31 Record date December 31

Notification method Website (http://www.s1.co.kr) / Joongang Ilbo

Types of share certificates 1, 5, 10, 50, 100, 500, 1,000, 10,000 shares per certificate (8 types)

Transfer agent

Name of the agent KEB Hana Bank Security Agency Department

Address 72, Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul

(Unit: share, KRW1,000)

2. Company overview

1) Objectives

3) Employees

• Telecommunications business• Security services pursuant to the Security Services Business Act

concerning facility security services, mechanical equipment security services, escort security services and personal protection services

• Development of programs for wired and wireless information and communication businesses, such as the Internet and satellites, manufacture and sale of communication devices, and related service businesses like e-commerce

• Investigation, guidance and counseling with regard to safety management• Transportation, management and arrangement of cash and

valuables• Security services using protection dogs and raising and training of

protection dogs• General electrical work, telecommunications business and general

subsidiary construction work• Export and import of devices and safety management• Development, manufacturing and sale of medical devices and

related services• Manufacturing and sale of water purifiers• Design, supervision, construction and inspection of fire protection

systems• Real estate, equipment and interior construction businesses, and

other related services• Stolen vehicle tracking and recovery systems • Education business• Development, manufacturing, sale, monitoring and certification of

products related to information protection• Recruiting of card merchants and members, and development,

manufacturing, sale, monitoring and certification of related devices and related services

• Environment-friendly, public hygiene, animal disease control, and related services

• Location information business, location-based services, development of programs for location-based services, and manufacturing and sale of related devices

• Manufacturing, sale and maintenance of crime-prevention, disaster-prevention, and safety devices and systems

• Development and sale of software• Manufacturing and sale of foods and pharmaceuticals, and related

services• Health and fitness coaching, management, sale of goods, visiting

care and related services• Operation of welfare facilities for senior citizens and related services• Sale of tombs and funeral services• Energy diagnostics for improving the efficiency of energy use,

investment in facilities, and manufacturing, sale, installation, construction, R&D and management of machines and materials, and related services

• Sale and rental of medical devices for animals and quasi drugs, and related services

• Verification business related to greenhouse gas and energy management by objective

• Renewable energy business (development and generation of renewable energy, and manufacturing, assembly, installation and sale of equipment/cultivation, storing, processing and distribution of raw materials, and other related businesses)

• Management, leasing, supply and brokerage of real estate, facility maintenance services, housing management services, and other related services

• All businesses incidental to the above mentioned

Classification Engineers Salespeople Office workers Other Total

persons 4,723 1,315 273 323 6,634

(as of December 31, 2018, unit: persons)

2) Sales offices in the country

Classification Gyeonggi Gangnam Gyeongin GangbukGyeong-

bukChung-cheong

Buul (Busan-Ulsan)

HonamGyeong-

namGangwon Total

business team 1 1 1 1 1 1 1 1 1 1 10

branch 13 10 11 10 11 10 9 10 8 7 99

total 14 11 12 11 12 11 10 11 9 8 109

(as of December 31, 2018, unit: Location)

※ System service bases

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4. Information on the parent company, subsidiaries, mergers, etc.

2) Subsidiaries

3) Concurrent offices of executives in subsidiaries

(As of December 31, 2018, unit: KRW1,000, share, %)

Subsidiaries Relationship

Company name LocationCapital stock

Businesscategory

Number of shares

owned

Owner-ship

Relation-ship

Human TSS, Inc.Daebo Bldg., 141, Gwongwang-ro, Gwonseon-gu,

Suwon, Gyeonggi-do (Gwonseon-dong)1,000,000

Security system service

200,000 100.00Service

transaction

S-1 CRM CorporationS-1 Bldg., 522, Gyeongsudaero, Paldal-gu,

Suwon, Gyeonggi-do700,000

Call center and telemarketing

140,000 100.00Service

transaction

Samsung BeijingSecurity Systems

18F china merchants tower, NO.118, jianguolu, chaoyang district, Beijing, China

1,181,000Security system

service

Capital stock

unissued100.00

Commodity trade

SOCM LLC#604 6th floor, 4th khoroo, UB platinum,Bayangol district, Ulaanbaatar, Mongolia

96,000Security system

service

Capital stock

unissued100.00 -

S-1 CORPORATION VIETNAM CO., LTD

2nd floor, Halla Office Building, Yen PhongIndustrial Park, Yen Trung Commune,

Yen Phong District, Bac Ninh province, VietNam1,131,000

Security system service

Capital stock

unissued100.00

Commodity trade

S-1 CORPORATION HUNGARY LLC

1036 Budapest, Lajos utca 74-76. 4. em

31,840Security system

service

Capital stock

unissued100.00

Commodity trade

SVIC No. 35 new technology business

investment partnership

11, Seochodaero 74-gil, Seocho-gu, Seoul (Seocho-dong)

2,020,000New technology

investment

Capital stock

unissued99.00

Investment partnership

Executives with concurrent offices Companies they hold concurrent offices inRemarks

Name Position Company name Position Duty

Choi Chan-gyoExecutive managing

director

S-1 CRM Corporation Auditor Auditing

Samsung Beijing Security Systems Director Business management

Kim Soo-beom Managing director

Human TSS, Inc Auditor Auditing

Samsung Beijing Security Systems Director Business management

1) Parent company “N/A”

3. Business performance

1) Sales

2) Key investments and fund-raising status

(Unit: KRW100 million)

(Unit: KRW100 million)

By productSales performance

Remarks42nd period 41st period

Alarm Security 10,030 9,741

Building Management 4,914 4,742

Product Sales 2,958 2,866

Integrated Security 2,004 1,800

Other 77 151

Total 19,983 19,300

Details of investment Amount Fundraising

Security equipment & Facilities 1,204

Internal reservesTools and Supplies 23

Other 152

Total 1,379

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2) Financial position (summary statement of financial position) (Unit: KRW100 million)

Title 42nd 41st 40th

Assets

Ⅰ. Current assets 6,251 5,461 4,090

Ⅱ. Non-current assets 10,209 10,099 10,287

Total assets 16,460 15,560 14,377

Liabilities

Ⅰ. Current liabilities 2,834 2,760 2,698

Ⅱ. Non-current liabilities 1,068 787 717

Total liabilities 3,902 3,547 3,415

Equity

Ⅰ. Capital stock 190 190 190

Ⅱ. Capital Surplus 1,929 1,929 1,929

Ⅲ. Retained earnings 11,958 11,413 10,362

Ⅳ. Other components of equity (1,519) (1,519) (1,519)

Total equity 12,558 12,013 10,962

Total Liabilities Equity 16,460 15,560 14,377

5. Business performance and financial status of the past 3 years

1) Business performance (Summary income statement) (Unit: KRW100 million)

Title 42nd 41st 40th

1. Sales 19,983 19,300 18,183

2. Cost of sales 14,528 13,616 12,675

3. Gross profit 5,455 5,684 5,508

4. Selling and Administrative Expenses 3,528 3,681 3,481

5. Operating profit 1,927 2,003 2,027

6. Other non-operating income 169 140 107

7. Other non-operating expenses 205 287 319

8. Financial income 60 33 17

9. Financial costs 2 1 1

10. Profit before Income tax 1,949 1,888 1,831

11. Income tax expense 938 478 446

12. Profit for the year 1,011 1,410 1,385

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9. Investments in other companies made by the company, the company and subsidiaries or the company’s subsidiaries

Name of other companyParent

company

Invested in other companiesOf other companies which invested

in S-1Number of shares owned

(share)Ownership

(%)Number of shares

owned (share)Ownership

(%)

Human TSS, Inc. S-1 200,000 100.00 - -

S-1CRM Corporation S-1 140,000 100.00 - -

S-1 Samsung Beijing Security Systems S-1 Capital stock unissued 100.00 - -

SOCM LLC S-1 Capital stock unissued 100.00 - -

S-1 CORPORATION VIETNAM CO.,LTD S-1 Capital stock unissued 100.00 - -

S-1 CORPORATION HUNGARY LLC S-1 Capital stock unissued 100.00 - -

SVIC No. 35 New technology business investment partnership

S-1 Capital stock unissued 99.00 - -

Igloo Security S-1 1,209,829 11.00 - -

(As of December 31, 2018)

8. Major shareholders


Name of shareholder Number of shares owned Ownership (%) Relationship with the company

SECOM Japan 9,747,383 25.65

Samsung SDI 4,190,681 11.03

National Pension Service 2,503,012 6.59

Samsung Life Insurance 2,030,476 5.34

THE GOVERNMENT OF SINGAPORE 932,290 2.45

10. Major creditors, etc. “N/A”

11. Important facts after settlement of accounts “N/A”

12. Other important information regarding business “N/A”

6. Tasks facing the company

See “Business Overview”

7. Directors and auditors

Classification Name Position DutyRelationship with

the companyRemarks

Permanent

Yook Hyun-pyoPresident & CEO(internal director)

General manager

None

Kida Koichi(木田公一)

Vice-president and CEO(internal director)

Generalmanager

None

Lim Seok-wooVice-president

(internal director)

Head of theBE Business

DivisionNone

Park Joon-seongExecutive managing

director(internal director)

Head of the management support office

None

Kim Yoon-hwan Auditor - None

Non-permanent

Komatsuzaki Tsuneo (小松崎常夫)

Non-executive director - NoneSECOM IS Laboratory

advisor

Sato Sadahiro (佐藤貞宏)

Non-executive director - None

Head of theinternational

business division of SECOM Group

Lee Sang-beom Outside director - None

Kim Yeong-geol Outside director - None

Takakura Kenshu(髙倉憲秀)

Auditor - None

Head of the technology department,

international division of SECOM Group


22 23

1

2

3

4

5

6

Statement of financial position

Income statement

Statement of changes in equity

Statement of cash flow

Statements of appropriation of retained earnings

Notes to financial statements

24

26

27

28

29

29

Separate financial statements

24 25

(Unit: KRW)

Title 42nd (current) period 41st (prior) period

Liabilities

Ⅰ . Current liabilities 283,335,902,220 276,032,745,821

1. Accounts payable and other liabilities 182,642,081,886 175,338,232,524

2. Value added tax withheld 18,195,448,964 20,374,505,483

3. Income tax payable 19,391,339,844 23,989,997,756

4. Advances from customers 41,733,562,229 51,144,221,168

5. Unearned revenue 15,667,922,711 79,670,000

6. Deposits received 5,705,546,586 5,106,118,890

Ⅱ . Non-current liabilities 106,822,043,565 78,718,515,911

1.Long-term accounts payable and otherliabilities

8,835,634,100 7,242,981,600

2. Net defined benefit liability 8,233,953,666 -


4. Provisions 5,820,000,000 5,820,000,000

5. Long-term unearned revenue 16,247,860,864 -

6. Other non-current liabilities 25,159,241,078 22,180,185,727

Total liabilities 390,157,945,785 354,751,261,732

Equity

Ⅰ . Capital stock 18,999,589,000 18,999,589,000

1. Common capital stock 18,999,589,000 18,999,589,000

Ⅱ . Capital Surplus 192,913,601,374 192,913,601,374

Ⅲ . Retained earnings 1,195,791,501,211 1,141,256,941,507

Ⅳ . Other components of equity (151,880,124,381) (151,884,060,982)

Total Equity 1,255,824,567,204 1,201,286,070,899

Total Liabilities and Equity 1,645,982,512,989 1,556,037,332,631

1. Statement of financial position

(Unit: KRW)


Assets

Ⅰ . Current assets 625,132,288,906 546,155,114,332

1. Cash and cash equivalents 123,777,368,271 149,250,146,233

2. Short-term financial instruments 247,936,136,130 204,406,870,630

3. Accounts receivable and other receivables 118,246,387,485 146,830,659,611

4. Contract assets 33,945,912,549 -

5. Accrued revenue 2,348,770,234 1,571,288,475

6. Inventories 40,234,266,853 39,464,424,658

7. Advance payments 445,992,232 734,982,400

8. Prepaid expenses 58,197,455,152 3,896,742,325

Ⅱ . Non-current assets 1,020,850,224,083 1,009,882,218,299

1. Long-term contract assets 2,179,596,450 -

2. Long-term financial assets 6,000,000 7,000,000

3. Available for sale financial assets - 6,291,806,987

4.Other comprehensive income:financial assets at fair value

9,383,429,182 -

5.Profit and loss:Financial assets at fair value

3,192,071,210 -

6. Loans and receivables 50,869,159,622 49,796,010,484

7. Investments in subsidiaries 7,292,707,960 6,251,067,960

8. Tangible assets 457,385,529,269 460,303,489,213

9. Intangible assets 442,505,722,661 458,215,162,461

10. Long-term prepaid expenses 47,763,609,758 10,621,811

11. Net defined benefit assets - 14,757,801,378

12. Deferred tax assets 272,397,971 14,249,258,005

Total assets 1,645,982,512,989 1,556,037,332,631

42nd period As of December 31, 201841st period As of December 31, 2017S-1 Corporation

26 27

(Unit: KRW)

Title Capital stockPaid-in capital in

excess of par valueRetained earnings

Other capital items

Total

January 1, 2017(beginning of the prior period)

18,999,589,000 192,913,601,374 1,036,177,280,937 (151,929,913,502) 1,096,160,557,809

A. Total comprehensive income

1. Net income - - 140,944,815,341 - 140,944,815,341

2.Gains/loss on valuation of available for sale financial assets

- - - 45,852,520 45,852,520

3.Reassessment of the net defined benefit liabilities (assets)

- - 6,397,643,979 - 6,397,643,979

B. Transactions with the owner

1. Dividends - - (42,262,798,750) - (42,262,798,750)

December 31, 2017(end of prior period)

18,999,589,000 192,913,601,374 1,141,256,941,507 (151,884,060,982) 1,201,286,070,899

January 1, 2018(beginning of current period)

18,999,589,000 192,913,601,374 1,141,256,941,507 (151,884,060,982) 1,201,286,070,899

Accounting Policy change effect - - 52,739,284,565 - 52,739,284,565

Adjusted capital 18,999,589,000 192,913,601,374 1,193,996,226,072 (151,884,060,982) 1,254,025,355,464


1. Net income - - 101,069,579,400 - 101,069,579,400

2.Other comprehensive income: Gains and loss on financial assets at fair value

- - - 3,936,601 3,936,601

3.Reassessment of net defined benefit liabilities (assets)

- - (14,748,706,761) - (14,748,706,761)


1. Dividends - - (84,525,597,500) - (84,525,597,500)

December 31, 2018(end of the current period)

18,999,589,000 192,913,601,374 1,195,791,501,211 (151,880,124,381) 1,255,824,567,204

42nd period From January 1, 2018 to December 31, 201841st period From January 1, 2017 to December 31, 2017S-1 Corporation

3. Statement of changes in equity2. Income statement

(Unit: KRW)


Ⅰ . Sales 1,998,320,017,805 1,929,985,701,788

Ⅱ . Cost of sales 1,452,806,877,775 1,361,599,717,762

Ⅲ . Gross profit 545,513,140,030 568,385,984,026

1. Selling and Administrative expenses 352,784,275,735 368,094,844,152

Ⅳ . Operating profit 192,728,864,295 200,291,139,874

1. Other non-operating income 16,916,592,256 13,986,360,963

2. Other non-operating expense 20,547,332,554 28,703,461,581

3. Financial income 6,011,141,270 3,269,732,143

4. Financial cost 161,541,777 58,496,990

Ⅴ . Profit before Income tax 194,947,723,490 188,785,274,409

1. Income tax expense 93,878,144,090 47,840,459,068

Ⅵ . Profit for the year 101,069,579,400 140,944,815,341

Ⅶ . Earnings per share

Basic earnings per share 2,989 4,169

Diluted earnings per share 2,989 4,169


28 29

(Unit: KRW)

Classification 42nd (current) period 41st (prior) period

Ⅰ . Unappropriated retained earnings 207,337,374,096 222,802,814,392

1.Retained earnings brought forward from the previous year

68,277,216,892 75,460,355,072

2.Cumulative effect of changes in accounting policies

52,739,284,565 -

3.Reassessment of the net defined benefit liabilities (assets)

(14,748,706,761) 6,397,643,979

4. Net income 101,069,579,400 140,944,815,341

Ⅱ . Appropriated retained earnings 154,525,597,500 154,525,597,500

1. Voluntary reserve 70,000,000,000 70,000,000,000

2. Dividend 84,525,597,500 84,525,597,500

Cash dividend 84,525,597,500 84,525,597,500

Dividend per share (rate)

Current period: KRW2,500 (500%)

Prior period: KRW2,500 (500%)

Unappropriated retained earnings carried over to subsequent year

52,811,776,596 68,277,216,892

42nd period From January 1, 2018 to December 31, 2018 Date of appropriation: March 21, 201941st period From January 1, 2017 to December 31, Final date of appropriation: March 21, 2018S-1 Corporation

5. Statements of appropriation of retained earnings

6. Notes to financial statements

For information on the notes, please read the audit report on the financial statements disclosed in the Data Analysis, Retrieval and Transfer

System of the Financial Supervisory Service (http://dart.fss.or.kr) published on March 13, 2019.

4. Statement of cash flow

(Unit: KRW)


Ⅰ . Cash flow from Operating Activities 233,622,971,229 290,452,310,429

1. Cash Flows created from Operating Activities 321,905,724,654 338,973,017,278

A. Net income 101,069,579,400 140,944,815,341

B. Adjustment 270,511,547,306 235,439,650,566

C.Changes in assets and liabilities related to operating activities

(49,675,402,052) (37,411,448,629)

2. Interest received 5,160,643,686 2,071,461,089

3. Dividend revenue 3,186,719,641 62,676,450

4. Income tax paid (96,630,116,752) (50,654,844,388)

Ⅱ . Cash flows from investing activities (174,570,151,691) (225,720,474,175)

1. Increase (decrease) in financial instruments (43,528,265,500) (110,081,406,100)

2.Acquisition of available for sale financial assets

- (300,000,000)

3.Profit and loss:Acquisition of financial assets at fair value

(2,700,000,000) -

4.Other comprehensive income:Acquisition of financial assets at fair value

(3,578,500,000) -

5. Acquisition of tangible assets (129,310,941,332) (121,164,186,267)

6. Disposal of tangible assets 6,891,923,742 10,146,936,928

7. Acquisition of intangible assets (230,088,600) (118,569,040)

8. Disposal of intangible assets - 500,000,000

9. Acquisition of investments in subsidiaries (1,041,640,000) (2,121,000,000)

10. Increase (decrease) in loans and receivables (1,072,640,001) (2,582,249,696)

Ⅲ . Cash flow from financial activities (84,525,597,500) (42,262,798,750)

1. Payment of dividends (84,525,597,500) (42,262,798,750)

Ⅳ . Net increase in cash and cash equivalents (25,472,777,962) 22,469,037,504

Ⅴ . Beginning cash and cash equivalents 149,250,146,233 126,781,108,729

Ⅵ . Ending cash and cash equivalents 123,777,368,271 149,250,146,233


30 31

1

2

3

4

5

Consolidated statement of financial position

Consolidated income statement

Consolidated statement of changes in equity

Consolidated statement of cash flow

Notes to consolidated financial statements

32

34

35

36

37

Consolidated Financial Statements

32 33

(Unit: KRW)


Liabilities

Ⅰ . Current liabilities 306,091,321,734 292,782,419,691

1. Accounts payable and other liabilities 199,836,398,468 187,728,536,160

2. Value added tax withheld 21,802,201,560 23,103,536,073

3. Income tax payable 20,323,816,887 24,715,231,480

4. Advances from customers 41,784,796,138 51,209,891,097

5. Unearned revenue 15,667,922,711 79,670,000


Ⅱ . Non-current liabilities 114,445,256,207 80,917,056,860

1.Long-term accounts payable and otherliabilities

8,835,634,100 7,242,981,600

2. Net defined benefit liability 13,298,105,068 -

3. Deposit received 42,525,353,857 43,475,348,584

4. Provisions 5,820,000,000 5,820,000,000

5. Long-term unearned revenue 16,247,860,864 -

6. Other non-current liabilities 27,718,302,318 24,378,726,676

Total liabilities 420,536,577,941 373,699,476,551

Equity

Controlling Company Shareholder’s Equity 1,262,300,568,277 1,207,828,465,973

Ⅰ . Capital stock 18,999,589,000 18,999,589,000

1. Common capital stock 18,999,589,000 18,999,589,000

Ⅱ . Capital Surplus 192,913,601,374 192,913,601,374

Ⅲ . Retained earnings 1,203,001,155,778 1,148,521,528,923

Ⅳ . Other components of Equity (152,613,777,875) (152,606,253,324)

Non-controlling Interests 17,147,910 9,036,901

Total Equity 1,262,317,716,187 1,207,837,502,874

Total Liabilities and Equity 1,682,854,294,128 1,581,536,979,425

1. Consolidated statement of financial position

(Unit: KRW)


assets

Ⅰ . Current assets 661,458,369,200 575,318,467,890

1. Cash and cash equivalents 147,433,369,018 171,114,297,200

2. Short-term financial instruments 252,836,136,130 208,406,870,630

3. Accounts receivable and other receivables 123,049,402,192 147,994,208,334

4. Contract assets 32,744,472,801 -

5. Accrued revenue 2,359,532,278 1,608,464,780

6. Inventories 42,945,860,207 41,173,539,280

7. Advance payments 1,495,036,583 995,390,029

8. Prepaid expenses 58,354,500,588 4,025,697,637

9. Value added tax refundable 210,575,032 -

10. Other current assets 29,484,371 -

Ⅱ . Non-current assets 1,021,395,924,928 1,006,218,511,535

1. Long-term contract assets 2,179,596,450 -

2. Long-term financial assets 6,000,000 7,000,000

3. Available for sale financial assets - 6,291,806,987

4.Other comprehensive income:Financial assets at fair value

9,383,429,182 -

5.Profit and loss:Financial assets at fair value

4,205,626,086 -

6. Loans and receivables 52,417,737,574 51,381,313,832

7. Tangible assets 459,228,549,548 462,426,324,215

8. Intangible assets 443,261,734,060 458,876,989,729

9. Long-term prepaid expenses 47,768,119,840 10,621,811

10. Net defined benefit assets - 10,912,497,682

11. Deferred tax assets 2,945,132,188 16,311,957,279

Total assets 1,682,854,294,128 1,581,536,979,425

42nd period As of December 31, 201841st period As of December 31, 2017S-1 Corporation and its subsidiaries

34 35

(Unit: KRW)


3. Consolidated statement of changes in equity

Title

Owners’ equityNon-con-

trolling interests

totalCapital stock

Paid-in capi-tal in excess of par value

Retained earnings

Other capital items

Owners’ equity

January 1, 2017(beginning of prior period) 18,999,589,000 192,913,601,374 1,040,420,682,965 (152,388,505,893) 1,099,945,367,446 - 1,099,945,367,446


1. Net income - - 143,327,082,981 - 143,327,082,981 (963,099) 143,326,119,882

2.Gains/loss on valuation ofavailable-for-Sale Financial Assets - - - 45,852,520 45,852,520 - 45,852,520

3.Reassessment of the net defined benefit liabilities (assets) - - 7,036,561,727 - 7,036,561,727 - 7,036,561,727

4.Overseas business profit/loss on foreign exchange - - - (263,599,951) (263,599,951) - (263,599,951)


1. Dividends - - (42,262,798,750) - (42,262,798,750) - (42,262,798,750)

2.Acquisition of investments in subsidiaries - - - - - 10,000,000 10,000,000

December 31, 2017(end of prior period) 18,999,589,000 192,913,601,374 1,148,521,528,923 (152,606,253,324) 1,207,828,465,973 9,036,901 1,207,837,502,874

January 1, 2018(beginning of current period) 18,999,589,000 192,913,601,374 1,148,521,528,923 (152,606,253,324) 1,260,567,750,538 9,036,901 1,260,576,787,439

Accounting Policy change effect - - 52,739,284,565 - 52,739,284,565 - 52,739,284,565

Adjusted capital 18,999,589,000 192,913,601,374 1,201,260,813,488 (152,606,253,324) 1,260,567,750,538 9,036,901 1,260,576,787,439


1. Net income - - 102,970,863,585 - 102,970,863,585 (2,088,991) 102,968,774,594

2.Gain/loss on valuation of available for sale financial assets - - - 3,936,601 3,936,601 - 3,936,601

3.Remeasurement of the net defined benefit liabilities (assets) - - (16,704,923,795) - (16,704,923,795) - (16,704,923,795)

4.Overseas profit/loss on foreign exchange - - - (11,461,152) (11,461,152) - (11,461,152)


1. Dividends - - (84,525,597,500) - (84,525,597,500) - (84,525,597,500)

2.Acquisition of investments in subsidiaries - - - - - 10,200,000 10,200,000

December 31, 2018(end of current period) 18,999,589,000 192,913,601,374 1,203,001,155,778 (152,613,777,875) 1,262,300,568,277 17,147,910 1,262,317,716,187

2. Consolidated income statement

(Unit: KRW)


Ⅰ . Sales 2,018,339,270,821 1,942,266,128,227

Ⅱ . Cost of sales 1,471,226,712,524 1,375,981,177,734

Ⅲ . Gross profit 547,112,558,297 566,284,950,493

1. Selling and Administrative Expenses 347,984,428,593 363,710,593,472

Ⅳ . Operating profit 199,128,129,704 202,574,357,021

1. Other non-operating income 14,182,508,353 14,252,274,109

2. Other non-operating expenses 20,826,258,138 28,847,160,445

3. Financial income 6,274,287,156 3,489,636,755

4. Financial cost 196,747,992 63,528,387

Ⅴ . Profit before Income tax 198,561,919,083 191,405,579,053

1. Income tax expense 95,593,144,489 48,079,459,171

Ⅵ . Profit for the year 102,968,774,594 143,326,119,882

Controlling Company Shareholder’s Equity 102,970,863,585 143,327,082,981

Non-controlling Interests (2,088,991) (963,099)

Ⅶ .Gain and loss per share of the controlling company Shareholder’s equity

Basic earnings per share 3,046 4,239

Diluted earnings per share 3,046 4,239

42nd period From January 1, 2018 to December 31, 201841st period From January 1, 2017 to December 31, 2017S-1 Corporation and its subsidiaries

36 37

(Unit: KRW)


Ⅲ . Cash flow from financial activities (84,515,397,500) (42,262,798,750)

1. Payment of dividends (84,525,597,500) (42,262,798,750)

2.Acquisition of investments in subsidiaries (Increase of non-controlling entity)

10,200,000 -

Ⅳ . Profit/loss on foreign exchange of cash flow 21,407,274 (212,565,208)

Ⅴ .Net increase in cash and cash equivalents (Ⅰ+Ⅱ+Ⅲ+Ⅳ)

(23,680,928,182) 27,016,028,590

Ⅵ . Beginning cash and cash equivalents 171,114,297,200 144,098,268,610

Ⅶ . Ending cash and cash equivalents 147,433,369,018 171,114,297,200

5. Notes to consolidated financial statements

For information on the notes, please read the audit report on the financial statements disclosed in the Data Analysis, Retrieval and Transfer

System of Financial Supervisory Service (http://dart.fss.or.kr) published on March 13, 2019.

4. Consolidated statement of cash flow

(Unit: KRW)


Ⅰ . Cash Flows from Operating Activities 236,971,524,260 294,205,564,106

1. Operating cash flow 329,496,192,082 342,998,268,675

A. Net income 102,968,774,594 143,326,119,882

B. Adjustments 282,095,163,870 243,391,786,951

C.Increase (decrease) in assets and liabilities related to operating activities

(55,567,746,382) (43,719,638,158)

2. Interest received 5,443,385,236 2,281,633,684

3. Dividend revenue 186,659,641 62,676,450

4. Income tax paid (98,154,712,699) (51,137,014,703)

Ⅱ . Cash flows from investing activities (176,158,462,216) (224,714,171,558)

1. Increase (decrease) in financial instruments (44,428,265,500) (110,081,406,100)

2.Acquisition of available for sale financialassets

- (300,000,000)

3.Other comprehensive income:Acquisition of financial assets at fair value

(3,578,500,000) -

4.Profit and loss:Acquisition of financial assets at fair value

(3,679,462,267) -

5. Acquisition of tangible assets (129,959,533,373) (122,132,708,266)

6. Disposal of tangible assets 6,892,143,106 10,147,289,784

7. Acquisition of intangible assets (372,204,181) (257,097,280)

8. Disposal of intangible assets - 500,000,000

9. Increase (decrease) in loans and receivables (1,032,640,001) (2,600,249,696)

10.Acquisition of investments in subsidiaries (Increase of non-controlling interests)

- 10,000,000


38 39

Resolution of the Board of Directors

By a resolution of the Board of Directors, the financial statements and annual report of the

42nd period (January 1, 2018 ~ December 31, 2018) are submitted as described above

January 28, 2019

S-1 Corporation

CEO Yook Hyun-pyo

Resolution of the Boardof Directors

CEO Kida Koichi

Director Lim Seok-woo

Director Park Joon-seong

Director Komatsuzaki Tsuneo

Director Sato Sadahiro

Outside director Lee Sang-beom

Outside director Kim Yeong-geol

40 41

1. Auditor’s report

The auditors audited the accounting and business of the 42nd business year(from January 1, 2018 until December 31, 2018), and report the following:

1) Outline of the auditing method

The auditors perused accounting books and related documents for auditing, and reviewed the financial statements, the consolidated

financial statements and supplementary schedules, and made comparisons, conducted due diligence, requested the presence of

related officials, and asked questions if it was deemed necessary, and followed the appropriate auditing procedure.

If deemed necessary the auditors attended BOD meetings and other important meetings, the auditors received business reports from

directors, and inspected and reviewed documents related to important businesses. In their perusal they used appropriate methods.

The auditors received and reviewed a report on the operating status of the internal accounting management system, which was

instituted to prepare and disclose reliable accounting data.

2) Matters concerning financial statements, such as the statement of financial position, the consolidated statement of financial position, the comprehensive income statement and the consolidated comprehensive income statement.

The financial statements, including the statement of financial position, the consolidated statement of financial position, the

comprehensive income statement, and the consolidated comprehensive income statement, appropriately reflect the financial status

and management performance of the company according to laws and the articles of incorporation.

3) Matters concerning the statements of appropriation of retained earnings

The statements of appropriation of retained earnings are appropriate according to laws and the articles of incorporation.

4) Matters concerning the annual report

The annual report appropriately reflects the status of the company according to laws and the articles of incorporation.

February 26, 2019

1

2

3

Auditor’s report

Independent auditors’ report on financial statements

Independent auditors’ report on consolidated financial statements

41

42

44

Audit Report

S-1 Corporation

Auditor Kim Yoon-hwan

Auditor Takakura Kenshu

42 43

2. Independent auditors’ report on financial statements

To the shareholders and board of directors of S-1 Corporation

Auditor opinion

We audited the financial statements of S-1 Corporation. The financial statements consist of the statement of financial

position as of December 31, 2018 and December 31, 2017, and the income statement, comprehensive income statement,

statement of changes in equity, and statement of cash flow of the two reporting periods ending on the same dates, and the

notes to the financial statements including the summary of significant accounting policies.

In our opinion, the financial statements of S-1 Corporation impartially reflect the financial position of S-1 Corporation as of

December 31, 2018 and December 31, 2017, and the financial performance and cash flow of S-1 Corporation ending on the

same dates according to K-IFRS from the viewpoint of materiality.

Grounds for the auditor opinion

We audited according to Korean auditing standards. Our responsibility according to these standards is described in the paragraph

concerning the auditors’ responsibility for the financial statements in this audit report. We are independent from the company

according to the ethical requirements of Korea related to the auditing of the financial statements, and we fulfilled other ethical

responsibilities according to these requirements. We believe that the auditing evidence we obtained is sufficient and appropriate as

grounds for the audit opinion.

The management and governing body’s responsibility for the financial statements

Management is responsible for preparing and presenting the financial statements impartially according to Korean equivalents

of International Financial Reporting Standards (K-IFRS) as well as the internal controls internally determined to be necessary for

preparing the financial statements without any material distortion caused by illegalities or errors.

When preparing the financial statements, management is responsible for evaluating the company’s ability to continue to exist

as a going concern, and if applicable, disclosing matters related to the going concern. As long as management does not have

any intention of liquidating the company or ceasing operations, management is also responsible for using the going concern’s

accounting methods.

The governing body is responsible for auditing the financial reporting procedure of the company.

Auditors’ responsibility for the auditing of the financial statements

Our purpose is to gain reasonable confidence concerning the absence of material distortions due to illegalities or errors in the

company’s financial statements, and publish an audit report including our opinions. Reasonable confidence means a high level

of confidence, but does not guarantee that the audit conducted according to the auditing standards will always discover

material distortion. Distortion may be caused by illegalities or errors, and if it is reasonably expected that distortions will affect

the economic decision making of stakeholders based on the financial statements individually or collectively, such distortions

will be regarded as material. This audit report is valid as of the audit report date. Accordingly, it is likely that incidents or situations may occur that may seriously affect the attached financial statements of the company between the audit report date and perusal of this report, and as a result this audit report may be modified.

Ernst & Young Korea, 111, Yeoeuigongwon-ro, Yeongdeungpo-gu, Seoul

CEO Seo Jin-seok

March 13, 2019

As part of the audit according to the auditing standards, we make professional judgment and maintain professional suspicions throughout

the auditing process. Also,

ㆍ we identify the risk of material statement of the financial statements due to illegalities or errors, and design and carry out the

auditing procedure corresponding to this risk. We also obtain sufficient and appropriate auditing evidence as grounds for the

audit opinion. As illegalities may involve conspiracy, forgery, intentional omission, false statements or neutralization of internal

controls, the risk of failing to discover distortions due to illegality is greater than that due to errors.

ㆍ we ascertain the requisite internal controls related to the audit in order to design auditing procedures fit for the situation, but

such purpose is not to express opinions on the effectiveness of the internal controls.

ㆍ we evaluate the appropriateness of the accounting policy that management had applied in order to prepare the financial

statements, and the rationality of the disclosure related to the accounting estimates as derived by management.

ㆍ we make conclusions about the appropriateness of the going concern’s assumption of accounting used by management, and

whether there is any important uncertainty related to an event or situation likely to cause significant suspicions about the

ability to exist as a going concern based on the auditing evidence obtained. If we concluded that there has been an important

discrepancy, we call attention to the audit report with regard to the related disclosure of the financial statements, and if the

disclosure is inappropriate, we are required to change our opinions. Our conclusion is based on the auditing evidence we have

obtained until the audit report, but future events or situations may cease the existence of the company as a going concern.

ㆍ we evaluate the general representations, structure and contents of the financial statements including disclosures, and evaluate

whether the financial statements impartially represent the transactions and events on which they are based.

Among various items, we communicate the significant findings of the audit, such as the planned audit scope, time and significant

inadequacies of internal controls, with the governing body.

Additionally, we meet the ethical requirements related to independence, and provide the governing body with a statement that

we communicate all relations deemed to be relevant to our independence, and if applicable, related systematic safety devices

with the governing body.

Oh Jae-young conducted the audit on which this audit report is based.

44 45

3. Independent auditors’ report on consolidated financial statements

To S-1 shareholders and board of directors of S-1 Corporation

Audit opinion

We audited the consolidated financial statements of S-1 Corporation and its subsidiaries (hereinafter referred to as “consolidated

companies”). The consolidated financial statements consist of the consolidated statement of financial position as of December

31, 2018 and December 31, 2017, and the consolidated income statement, comprehensive income statement, consolidated

statement of changes in equity, and consolidated statement of cash flow of the two reporting periods ending on the same

dates, and the notes to the consolidated financial statements including the summary of significant accounting policies.

In our opinion, the consolidated financial statements of the consolidated companies impartially reflect the consolidated

financial position of consolidated companies as of December 31, 2018 and December 31, 2017, and the consolidated financial

performance and consolidated cash flows of the consolidated companies ending on the same dates according to K-IFRS from

the viewpoint of materiality.

Grounds for the audit opinion

We audited according to Korean auditing standards. Our responsibility according to these standards is described in the

paragraph concerning the auditors’ responsibility for the consolidated financial statements in this audit report. We are

independent from the company according to the ethical requirements of Korea related to the auditing of the consolidated

financial statements, and we fulfilled other ethical responsibilities according to these requirements. We believe that the auditing

evidence we obtained is sufficient and appropriate as grounds for the audit opinion.

Managements’ and governing body’s responsibility for the consolidated financial statements

Management is responsible for preparing and presenting the consolidated financial statements impartially according to

Korean equivalents of International Financial Reporting Standards (K-IFRS) as well as the internal controls internally determined

to be necessary for preparing the financial statements without any material distortion caused by illegalities or errors.

When preparing the financial statements, management is responsible for evaluating the consolidated companies’ ability to

continue to exist as going concerns, and if applicable, disclosing matters related to the going concerns. As long as management

does not have any intention of liquidating any company or ceasing operations of such, management is also responsible for

using the going concern’s accounting methods. The governing body is responsible for monitoring the consolidated companies’

financial reporting procedure.

The auditor’s responsibility for the auditing of the consolidated financial statements

Our purpose is to gain reasonable confidence about the absence of material distortions due to illegalities or errors in the

company’s consolidated financial statements, and publish an audit report including our opinions. Reasonable confidence

means a high level of confidence, but does not guarantee that the audit conducted according to the auditing standards

will always discover material distortion. Distortion may be caused by illegalities or errors, and if it is reasonably expected

that distortions will affect the economic decision making of stakeholders based on the consolidated financial statements

individually or collectively, such distortions will be regarded as material.

This audit report is valid as of the audit report date. Accordingly, it is likely that incidents or situations may occur that may seriously affect the attached financial statements of the company between the audit report date and perusal of this report, and as a result this audit report may be modified.

Ernst & Young Korea, 111, Yeoeuigongwon-ro, Yeongdeungpo-gu, Seoul

CEO Seo Jin-seok

March 13, 2019

As part of the audit according to the auditing standards, we make professional judgment and maintain professional suspicions throughout

the auditing process. Also,

ㆍ we identify the risk of material statement of the consolidated financial statements due to illegalities or errors, and design and

carry out the auditing procedure corresponding to this risk. We also obtain sufficient and appropriate auditing evidence

as grounds for the audit opinion. As illegalities may involve conspiracy, forgery, intentional omission, false statements or

neutralization of internal controls, the risk of failing to discover distortions due to illegality is greater than that due to errors.

ㆍ we ascertain the requisite internal controls related to the audit in order to design auditing procedures fit for the situation, but

such purpose is not to express opinions on the effectiveness of the internal controls.

ㆍ we evaluate the appropriateness of the accounting policy that management had applied in order to prepare the financial

statements, and the rationality of the disclosure related to the accounting estimates as derived by management.

ㆍ we make conclusions about the appropriateness of the going concern’s assumption of accounting used by management, and

whether there is any important uncertainty related to an event or situation likely to cause significant suspicions about the

ability to exist as a going concern based on the auditing evidence obtained. If we concluded that there has been an important

discrepancy, we call attention to the audit report with regard to the related disclosure of the financial statements, and if the

disclosure is inappropriate, we are required to change our opinions. Our conclusion is based on the auditing evidence we have

obtained until the audit report, but future events or situations may cease the existence of the company as a going concern.

ㆍ we evaluate the general representations, structure and contents of the financial statements including disclosures, and evaluate

whether the financial statements impartially represent the transactions and events on which they are based.

ㆍ To express our opinions on the consolidated financial statements, we obtain sufficient and appropriate auditing evidence

related to the financial information of the company or the business activities in the group. We are responsible for the direction,

supervision and performance of the group audit, and fully responsible for the audit opinions.

Among various items, we communicate the significant findings of the audit, such as the planned audit scope, time and significant

inadequacies of internal controls, with the governing body.

Additionally, we meet the ethical requirements related to independence, and provide the governing body with a statement that

we communicate all relations deemed to be relevant to our independence, and if applicable, related systematic safety devices

with the governing body.

Oh Jae-young conducted the audit on which this audit report is based.

46 47

CEO and internal accounting manager’s report on the operating status

To the shareholders, board of directors, and auditors of S-1 shareholders

The CEO and the internal accounting manager evaluated the design and operating status of our internal accounting management system

for the fiscal year ending on December 31, 2018.

The management of the company, including the CEO and the internal accounting manager, is responsible for the design and operation of

the internal accounting management system.

To prepare and disclose reliable financial statements, the CEO and internal accounting manager both evaluated whether the company’s

internal accounting system was effectively designed and operated so as to prevent and find errors or illegalities that may cause distortions

in the financial statements.

The CEO and the internal accounting manager used the (former) internal accounting management system standards to evaluate the

design and operating status of the internal accounting management system.

As of December 31, 2018, as a result of the evaluation of the operating status of the internal accounting management system conducted

by the CEO and internal accounting manager based on the (former) internal accounting management system standards, it is believed that

our internal accounting management system was designed and is operated effectively from the viewpoint of materiality.

The CEO and the internal accounting manager confirmed that the report does not include any false descriptions or statements, and

anything that must be described or stated is not omitted.

Additionally, the CEO and internal accounting manager confirmed that nothing likely to cause a serious misunderstanding of the report

was described or stated, and read the report with due care and directly checked and reviewed the contents of the report.

CEO and internal accounting manager’s report on theoperating status

S-1 Corporation

CEO Yook Hyun-pyo

Internal accounting manager Park Joon-seong

January 28, 2019

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42 period Annual report

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