Dear Shareholders of Samsung Biologics:

On November 14, the Securities and Futures Commission (“SFC”) announced the final result of its audit on our accounting in respect of our associate, Samsung Bioepis (“Bioepis”).  In this regard, we will explain the progress of this issue and our position on the result of the measure taken by the SFC.

?Samsung Biologics (the “Company”) has been audited by the Financial Supervisory Service (“FSS”) since April 2017 as to whether the accounting was properly treated in the Company’s financial statements in respect of Bioepis, a joint venture between the Company and Biogen in the U.S., and the FSS disclosed the result of the audit to the media in early May.

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After numerous meetings of the audit committee and the SFC, the SFC announced the following results of the measure on July 12, 2018: among the alleged accounting violations of the Company, (i) “gross negligence” for failure to record notes regarding call options granted to Biogen in respect of shares in Bioepis to the auditors’ report for 2012 and 2013; (ii) “willful misconduct” for insufficient record of notes to the auditors’ report for 2014; and (iii) order for re-audit by the FSS with respect to the discretionary evaluation of the investment in shares through an inappropriate change of the accounting standards for 2015.

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In its announcement of the decision on re-audit on November 14, the SFC concluded that the Company’s treatment of Bioepis as a consolidated subsidiary as opposed to an associate under the equity method from 2012 to 2014, which was not deemed a violation in July, was to be deemed “negligence” for 2012 to 2013 and “gross negligence” for 2014.  It also announced that the Company’s unjust discretionary evaluation of investment in shares for 2015 and failure to retroactively apply the amended accounting standards to the financial statements after 2012 would be deemed “willful misconduct.”

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Accordingly, the following measures were taken against the Company: i) prosecution against the Company and its representative director; ii) recommendation of dismissal of the Company’s representative director (CEO) and the responsible officer (CFO); iii) compulsory designation of external auditors for 3 years; iv) an order of a corrective measure (retrospective restatement of financial statements); and v) imposition of an administrative fine worth KRW 8 billion for “willful misconduct.”

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According to the KOSPI Listing Regulation, in case of any prosecution for violations of the accounting standards in the amount equal to or greater than 2.5% of the shareholders’ equity (for a large-scale corporation), a listing maintenance review event is triggered and such review must be conducted immediately after suspension of trading activities.  Therefore, the trading of the Company’s shares has been suspended since the SFC’s announcement on its resolution after market closing on November 14.

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We deeply regret the findings of the SFC as we are confident that our accounting treatment has been proper under the K-IFRS.  As such, we filed an administrative lawsuit against the SFC on October 8 regarding the 1st audit result and another administrative lawsuit against the SFC on November 27 regarding the 2nd audit result. Through these lawsuits, the Company aims to have the legality of its accounting treatment recognized.  To prevent the administrative dispositions from taking effect, the Company applied for an order to stay the dispositions on restatement of financial statements, recommendation of dismissal of CEO and CFO, designation of external auditors for 3 years until the court renders a decision.  Furthermore, the Company is delivering its best efforts to cooperate with the listing maintenance review performed by the Korea Exchange so that trading will be resumed as soon as possible.

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As a global contract manufacturing organization (“CMO”) that engages in business with top global bio-pharmaceutical companies, the Company prioritizes corporate ethics, compliance and credibility more than any other value.  With such values in mind, our employees have strived to make the Company the world’s best CMO since its incorporation in 2011.

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We apologize for any inconvenience that you have suffered in exercising property rights as a result of the suspension of trading of shares due to the SFC’s unwillingness to recognize the Company’s transparency and legality.  Samsung Biologics is a company with very solid financials, its current cash reserve being more than 1 trillion KRW.  Therefore, it is unlikely that the issue at hand will impact our corporate values or daily business operations.  We will endeavor to raise shareholder value by providing quality service to our clients and continuing to expand our business.

November 30, 2018

Representative Director & CEO, Tae-Han Kim