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LETTER TO THE SAMSUNG ELECTRONICS BOARD OF DIRECTORSOUTLINING VALUE ENHANCEMENT PROPOSALS
October 5, 2016 – The board of directors of Samsung Electronics Co., Ltd. (KRX stock code
005930:KS) (“Samsung Electronics”) was today sent a letter by Samsung Electronics
shareholders Blake Capital LLC (“Blake”) and Potter Capital LLC (“Potter”), both of which are
Elliott affiliates. The letter, which is reproduced below, sets out certain restructuring, capital
return, investor access and governance improvement proposals for Samsung Electronics (the“Samsung Electronics Value Enhancement Proposals”). A copy of the letter, together with anaccompanying presentation, can be found at http://sevalueproposals.com
Despite being an impressive leading global technology company, Samsung Electronics’ ordinary
shares typically trade at steep valuation discounts (c. 30% to 70%) when compared to thecompany’s closest peers. The Samsung Electronics Value Enhancement Proposals are designed toaddress that steep valuation gap and be a basis for the sustainable enhancement of shareholder
value for the benefit of all stakeholders. The key proposals include:•

Unlocking the value of Samsung Electronics’ treasury shareholding as part of a
streamlining of the Samsung group structure

the key elements would comprise a demerger into a listed holding company (Samsung
Holdco) and a listed operating company (Samsung Opco); a tender offer by Samsung
Holdco to acquire further Samsung Opco shares; and a share for share merger, on fairterms, of Samsung Holdco with Samsung C&T (KRX stock code 028260:KS)•

Increased capital management efficiency via a special cash dividend of KRW30
trillion or KRW245,000 per ordinary share and the ongoing return of 75% of
Samsung Opco’s free cashflow to shareholders•

A NASDAQ listing (in addition to KRX) for Samsung Opco•

Corporate governance improvements

A spokesperson for Blake and Potter said, “We see this as a defining moment and a tremendous
opportunity for the forthcoming new leadership of Samsung Electronics to further advance thecompany’s remarkable legacy. Now is the time for real shareholder value, corporate governanceand transparency improvements, which we believe will help Samsung Electronics achieve an
equity market valuation that properly reflects its first-class portfolio of businesses. We sincerely
hope that Samsung will seize this opportunity.”
The full text of the letter and important disclosures follow below:

October 5, 2016
LETTER 1 TO THE DIRECTORS OF SAMSUNG ELECTRONICS CO., LTD. (KRX 2STOCK CODE 005930:KS) (“SAMSUNG ELECTRONICS”) – THE SAMSUNG
ELECTRONICS VALUE ENHANCEMENT PROPOSALSYour attention is drawn to the important information which is set out in the Appendix to this letter.

To the directors of Samsung Electronics:
Introduction
We are writing to you in our capacity as Samsung Electronics’ shareholders 3, to put forward therestructuring, capital return, investor access and governance improvement proposals for Samsung
Electronics which are outlined in this letter and the enclosed presentation (the “Samsung
Electronics Value Enhancement Proposals”). The proposals have been designed specifically toaddress the issues outlined in this letter, which we see as having depressed shareholder value atSamsung Electronics over time.
Samsung Electronics has done an impressive job of building a first-class portfolio of businesses
which have made it Korea’s flagship enterprise and one of the world’s most important technology
companies. Despite the recent unfortunate events associated with battery cells for the Galaxy Note
7, Samsung Electronics is well-positioned in terms of market share and profitability. Its strengths
in its core semiconductor, mobile, display and consumer electronics businesses are admired byconsumers and investors around the globe. The founding family and management of Samsung
Electronics in particular deserve to be applauded for these achievements.
At the same time, however, Samsung Electronics’ shareholders have suffered from the long-term
undervaluation of the business by the equity market. Samsung Electronics’ ordinary shares are
currently trading at approximately 6 times expected one-year forward earnings ex-cash 4 , well
below the valuations which have been consistently achieved by a basket of comparable peers of 11
times expected one-year forward earnings ex-cash, as detailed in the enclosed presentation 5, andalso in contrast to the 11 times earnings pricing of the KOSPI 6 on a one-year forward basis. Simply
put, the remarkable achievements of Samsung Electronics are not being properly reflected in themarket’s valuation of its shares, and that problem needs to be addressed.
1This letter is from and is published solely by Blake Capital LLC (“Blake”) and Potter Capital LLC (“Potter”), both of which are
Elliott affiliates. Founded in 1977, Elliott manages two funds, Elliott Associates, L.P. and Elliott International, L.P., with assets
under management totalling more than US$29 billion as at the date of this letter.
2
KRX means Korea Exchange.
3
Blake and Potter currently hold, in aggregate, 760,218 issued ordinary shares in Samsung Electronics, representing approximately
0.62 per cent of the entire issued ordinary share capital of Samsung Electronics (excluding the 17,981,686 ordinary treasury shares(the “Post-cancellation Treasury Shares Balance”) which Samsung Electronics will have after cancelling all of the ordinary
shares which it has repurchased in the current financial year). Elliott affiliates may now have and/or at any time in the future may,without notice to any person (other than as required by, and in accordance with, applicable laws and regulations), establish, longpositions (other than the current shareholdings described) or short positions and/or may increase and/or decrease, whether
fractionally or fully, the size of any long and/or short positions, in each case in respect of or related to any shares or other equity or
debt securities of any member of the Samsung group.
4
Market capitalization of Samsung Electronics as at October 4, 2016 post deduction of cash and cash equivalents, short-term
financial instruments and short-term marketable securities, in each case as of June 30, 2016.
5
See slide 12 of the enclosed presentation.
6
The Korea Composite Stock Price Index.

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We are aware of various public commentaries, including those of a number of international
investment banks, on the options for streamlining the Samsung group. Our purpose in publishing
the Samsung Electronics Value Enhancement Proposals is to allow their full and proper evaluationby all concerned. We believe that, if effected, they would bring significant and sustainable benefits
to all Samsung Electronics’ shareholders (retail, institutional, domestic and international), as wellas to Samsung Electronics’ management and other stakeholders.
We see this as a defining moment and a tremendous opportunity for the forthcoming newleadership of Samsung Electronics to further advance the company’s remarkable legacy. Now is
the time for real shareholder value, corporate governance and transparency improvements, which
we believe will help Samsung Electronics achieve an equity market valuation that properly reflects
its first-class portfolio of businesses. We sincerely hope that you will seize this opportunity.
The Samsung Electronics Value Enhancement Proposals
Rationale – addressing key value-sapping issues
In our assessment, the Samsung Electronics Value Enhancement Proposals will deliver better
capital returns, better corporate governance, and enhanced shareholder value, for all Samsung
Electronics’ shareholders – whilst simplifying, and retaining the founding family’s controllinginterest in, the current Samsung group corporate structure, for the benefit of all stakeholders.
Unnecessarily complex Samsung group structure and ongoing uncertainty around a possible
restructuring
The Samsung group structure is in our view unnecessarily complex, including by virtue of thevarious legacy treasury, circular and cross-shareholdings. Ongoing uncertainty around a possible
broader group restructuring is not helpful.
We believe that an appropriate resolution to the current uncertainty surrounding a possible
restructuring of Samsung Electronics and its affiliates is needed. We foresee obvious sustainable
benefits for all Samsung Electronics’ stakeholders of unlocking the value of Samsung Electronics’significant treasury shareholding and forming a strong and stable corporate structure for theSamsung group, which the Samsung Electronics Value Enhancement Proposals are designed toachieve.
Sub-optimal capital management and bottom-tier shareholder returns at Samsung Electronics
Samsung Electronics is currently significantly overcapitalized and its treasury shareholding is heldon its balance sheet at cost 7. We view Samsung Electronics management’s recent capital return
efforts by way of the KRW11.4 trillion share buyback program (under which all repurchased
shares were or are to be cancelled) 8 as helpful and well-received by the market. However, we also
7

The value of the 19,010,776 ordinary treasury shares as stated in the June 30, 2016 Samsung Electronics interim accounts(1,083,090 of which treasury shares were repurchased under the recent buyback program and are to be cancelled) was KRW10,251
billion. The market value of 19,010,776 Samsung Electronics shares as at October 4, 2016 was KRW30,683 billion – a differenceof KRW20,432 billion (approx. US$18 billion).
8
The program was announced by Samsung Electronics on October 29, 2015. As at September 28, 2016 Samsung Electronics hadannounced completed share buybacks of KRW11.4 trillion (the “2016 Samsung Buyback”).

2believe that those efforts have clearly not been sufficient to remedy Samsung Electronics’
excessive and inefficient capital structure – including a cash balance which had grown to KRW77
trillion as of June 30, 2016, as well as the remaining treasury shareholding.
As the enclosed presentation illustrates, we believe that the resulting balance sheet inefficiencies
have depressed Samsung Electronics’ returns on equity, which, relatively speaking, have beenamongst the lowest in the sector for years. The same is true of dividend yields and dividend payout
ratios.
We see no justification for the business remaining so overcapitalized. The current cash reserves far
exceed the flexibility needed for future investment opportunities and for Samsung Electronics tomaintain and enhance its position as a leading global business. This is especially true in light ofthe continuing robust free cash flow generation levels at Samsung Electronics. As for the existing
Samsung Electronics’ treasury shareholding, if the value of that is not unlocked as part of thegroup streamlining we are proposing, then your recent policy of cancelling repurchased Samsung
Electronics shares should also be applied to the entire treasury shareholding, so that it is no longer
a significant drag on shareholder value.
The lack of an effective international equity listing for Samsung Electronics’ core operating
businesses
Samsung Electronics currently lacks an effective international equity listing (over and above its
KRX listing) for its core operating businesses, despite the impressive scale and global reach of
those businesses. We believe that the absence of such an international listing and related lack ofmarket liquidity has hindered investor access and held back Samsung Electronics’ equity market
value.
Subpar corporate governance within the Samsung group
Despite the Samsung group’s achievements in building world-class companies, we are not alone inobserving that the implementation of best practices in the area of corporate governance has notfollowed suit. For example, last year’s hotly-disputed merger between Samsung C&T Corporation
and Cheil Industries Inc 9 led to calls from other market participants for significant governanceimprovements within the Samsung group.
We believe that Samsung Electronics’ stakeholders would benefit greatly from corporate
governance improvements, including, as a starting point, the adoption of a board structure in linewith Samsung Electronics’ standing as a leading global business.
Key elements and specific benefits
The Samsung Electronics Value Enhancement Proposals, which are intended to address theseissues, would entail certain key elements being implemented by Samsung Electronics and its
affiliates on a consensual basis:9

Now renamed Samsung C&T Corporation (KRX stock code 028260:KS).

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Samsung group restructuring•

Taking action to unlock the value of Samsung Electronics’ treasury shareholding, as part ofa streamlining of the Samsung group structure by –

demerging Samsung Electronics (the “Demerger”) into a listed holding company(“Samsung Holdco”) and a separately listed operating company (“Samsung Opco”);utilizing Samsung Holdco’s treasury shareholding to boost its ownership of Samsung
Opco, by way of a post-listing tender offer made by Samsung Holdco to all otherSamsung Opco shareholders, for the purchase of a portion of the issued share capital of
Samsung Opco, in return for Samsung Holdco treasury shares (the “Tender Offer”);
and

effecting a share for share merger, on fair terms, of Samsung Holdco and Samsung
C&T Corporation (KRX stock code 028260:KS) (“SC&T”) with SC&T being theacquiring/surviving company (the “Samsung Holdco Merger”), in order to achieve
further benefits for stakeholders in terms of group rationalization and control.

The Demerger, along with the Tender Offer and the Samsung Holdco Merger, would in our view
be a capital gains tax efficient way of simplifying the structure of and control over the Samsung
group and unlocking the value of Samsung Electronics’ treasury shareholding.
Special cash dividend and enhanced ongoing returns of capital at Samsung Opco•

Effecting a step change in Samsung Electronics’ capital management and shareholder
returns, with a Samsung Opco special cash dividend of KRW30 trillion or KRW245,000
per ordinary share 10 (a meaningful return of value to shareholders, building on the 2016
Samsung Buyback), and an ongoing commitment, in line with international corporate
standards, to return 75% of Samsung Opco’s free cash flow to its shareholders.

NASDAQ 11 listing for Samsung Opco (in addition to a KRX listing)•

Increasing investor awareness of and access to the Samsung group, including by way of
Samsung Electronics making a commitment to its shareholders to seek a NASDAQ listingfor Samsung Opco (in addition to its KRX listing). We believe that such a listing is long
overdue in light of the scale and global reach of the Samsung Electronics operating
businesses, would facilitate additional international investor access, and would support
further sustainable shareholder value creation.

Board improvements at Samsung Holdco and Samsung Opco
•

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Making long-lasting improvements to corporate governance arrangements at Samsung
Electronics, including by way of the boards of directors of Samsung Holdco and Samsung
Opco becoming more representative of their respective shareholder bases. Specifically, we
believe that the addition to each board of at least three independent directors with suitable

Based on 122.70 million ordinary shares in issue (excluding the Post-cancellation Treasury Shares Balance).
NASDAQ means The NASDAQ Stock Market.

4international corporate backgrounds, and also with a view to enhancing diversity on theboard as part of the changes, would be of real value to all stakeholders.
Possible further steps
We also recognize that once these key improvements have been made there could be scope forfurther ownership separation or minimization as between the financial sector and industrial sector
Samsung group businesses, under two separate listed holding companies. This would be in linewith the continuing regulatory pressures 12 on groups like Samsung to separate financial capitalfrom industrial capital and to improve transparency, including by eliminating any residual circularholdings or cross-holdings in the group.
Independent analysts’ views
Independent research analysts have commented 13 on many of the issues which underpin theSamsung Electronics Value Enhancement Proposals:-“The amount of FCF should continue to rise in the next two years, in spite of risingcapex. As a result, we expect share repurchases/cancellations to recur every year, in
addition to rising cash dividends. Moreover, the company needs to implement anotherround of its ‘special’ share buyback program in the future, since its net cash balanceis still rising, up 6%QoQ to Won64.9tr in 2Q16.” – Macquarie, July 28, 2016-

“One way of unlocking this value could be a holding and operating company
separation... . Advantages could include: (i) streamlining management structure
focused on its business prospects and less group issues; (ii) allowing greatertransparency and potentially higher dividend payments to benefit the holding
company; and (iii) this could involve potential gains from non-core asset disposals andrevaluation of assets.” – Morgan Stanley, July 2, 2016-

“However, given very modest or even negative market expectations, we see significant
rerating upside potential if the company implements better shareholder returns,
either proactively or pushed by minority shareholders.” – Citi, October 27, 2015-

“We believe SEC’s significant non-operating asset value should become clear throughproactive shareholder returns and the group restructuring process.” – Barclays,
October 7, 2015-

“We believe that the market is giving a sizable discount to the value of its cash andinvestment assets which account for 44% of the current market cap due to poor
capital management. Once group restructuring is close to the end, however, we think SEC
will gradually increase shareholder returns via share buybacks and higher dividends, whichshould provide meaningful catalysts to the stock, in our view.” – JP Morgan, June 15, 201512

Including under relevant provisions of the Financial Holding Company Act and the Fair Trade Act.
The analysts’ views mentioned below shall not be taken to mean or imply (i) that the research reports referred to are a
representative sample of all research reports on the topics concerned; or (ii) that the authors of the reports or their employing
banks/brokers endorse in any way the Samsung Electronics Value Enhancement Proposals or the views set out in this letter. We
have emboldened, by way of emphasis, certain parts of the original text of the analysts’ views which appear in this letter.
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“With the newly created incentive to pay out more of it earnings through dividends, allinvestors in SEOC [newco] would benefit. We think, broadly rising dividend yield andvaluation multiple discount on SEC’s shares (lack of transparency, cross-holding
structure, lack of speed in establishing a consistent dividend policy and bloated equity
base due to heavy cash accumulation) could be eliminated and set a tone to avaluation multiple expansion.” – Credit Suisse, January 12, 2015-

“If Samsung Group were to restructure into a holding company, our case studies show
it would be likely to have positive share price implications. LG Group’s value post
restructuring (to a holdco) increased by 38.5% in the first six months, while SK Group’s
value increased 34% immediately after re-listing as a holdco.” – Deutsche Bank, November
3, 2014

Conclusion
We urge each of you, consistent with your duties as directors of Samsung Electronics, to review
the Samsung Electronics Value Enhancement Proposals in the light of the very real and measurable
benefits which we believe they can have for Samsung Electronics’ stakeholders. We expect that afull and open review of the Samsung Electronics Value Enhancement Proposals would be
welcomed by an overwhelming majority of Samsung Electronics’ shareholders.
We hope and believe that these proposals can create an opportunity for the Samsung group to senda strong signal to the market regarding its willingness to listen to shareholder concerns. The
benefits of such a signal would be far-reaching, helping to earn the Samsung group the shareholder
support it needs to achieve any significant long-term restructuring goals, whilst showing realresolve to address the misalignment as between Samsung Electronics’ remarkable businessperformance and its share price. Such leadership by the directors would truly mark a new, evenmore successful chapter, for the Samsung group.

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Yours faithfully,

Blake Capital LLC

Potter Capital LLC

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APPENDIX
IMPORTANT INFORMATION
Many of the statements in this letter are the opinions and/or beliefs of Blake and/or Potter, which
are based on their own analysis of publicly available information. Any statement or opinion
expressed or implied in this letter is provided in good faith but only on the basis that no investment
decision(s) will be made based on, or other reliance will be placed on, any of the contents hereinby others. Nothing in this letter, the enclosed presentation or in any related materials is a statementof or indicates or implies any specific or probable value outcome for Samsung Electronics’
shareholders in any particular circumstance.
Blake, Potter, Elliott and/or any of their respective affiliates (i) may at any time in the future,
without notice to any person (other than as required under, or in compliance with, applicable laws
and regulations), increase or reduce their holdings of any Samsung group entity’s shares or other
equity or debt securities and/or may at any time have long, short, neutral or no economic or otherexposure in respect of any Samsung group entity’s shares or other equity or debt securities; and/or(ii) may now have and/or at any time in the future, without notice to any person (other than as
required under, or in compliance with, applicable laws and regulations), may establish, increase
and/or decrease long or short positions in respect of or related to any Samsung group entity’s
shares or other equity or debt securities, in each case irrespective of whether or not all or any of theSamsung Electronics Value Enhancement Proposals are or are expected to be implemented.
This letter is published solely for informational purposes and is not, and may not be construed as,
investment, financial, legal, tax or other advice.
This letter has been compiled based on publicly available information (which has not been
separately verified by Blake, Potter, Elliott or any of their respective affiliates) and does not:(i)

purport to be complete or comprehensive; or(ii)constitute an agreement, offer, a solicitation of an offer, or any advice or recommendation
to enter into or conclude any transaction or take or refrain from taking any other course ofaction (whether on the terms shown herein or otherwise).

The market data contained in or utilized for the purposes of preparing this letter is (unlessotherwise specified) as at the end of trading hours on October 4, 2016. Changes may haveoccurred or may occur with respect to such market data and neither Blake, Potter, Elliott nor any of
their respective affiliates is under any obligation to provide any updated or additional informationor to correct any inaccuracies in this letter.
The information in this letter contains ‘forward-looking statements.’ Specific forward-looking
statements can be identified by the fact that they do not relate strictly to historical or current facts
and include, without limitation, words such as “may,” “can,” “will,” “expects,” “believes,”“anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could,” “would” orthe negative of such terms or other variations on such terms or comparable terminology. Similarly,
statements that describe any objectives, plans or goals of Blake and/or Potter are forward-looking.
Any forward-looking statements are based on the current intent, belief, expectations, estimates andprojections of Blake and/or Potter. These statements are not guarantees of future performance and8involve risks, uncertainties, assumptions and other factors that are difficult to predict and that
could cause actual results to differ materially. Accordingly, you should not rely upon forwardlooking statements as a prediction of actual results and actual results may vary materially fromwhat is expressed in or indicated by the forward-looking statements.
No representation or warranty, either expressed or implied, is provided in relation to the accuracy,completeness or reliability of the information contained herein, nor is it intended to be a complete
statement or summary of the securities, markets or developments referred to herein. It should not
be regarded by recipients as a substitute for the exercise of their own judgment. You should obtainyour own professional advice and conduct your own independent evaluation with respect to thesubject matter herein. The information contained herein has been made available on the basis thatthe recipient is a person into whose possession such information may be lawfully delivered inaccordance with the laws of the jurisdiction in which the recipient is located.
Each of Blake, Potter, Elliott and their respective affiliates expressly disclaims any responsibility
or liability for any loss howsoever arising from any use of or reliance on this letter or its contents
as a whole or in part by any person, or otherwise howsoever arising in connection with this letter.

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