Feb. 10, 2006
/
Information Memorandum
Innoplus Co. Ltd.
● Retains design capabilities for core motion picture processing chips/SoC
● Diversification of revenue streams using versatile core technologies
●Most capable and highly experienced R&D workforce
● Numerous proprietary patents & IP’s
●Competitive high-performance products with attractive functions


Notice to Recipients

Pharos Capital Limitedhas been retained by Innoplus Co. Ltd.(“Company”) to act as its exclusive financial advisor(“Advisor”) in connection with the capital-raising of the Company.

The information contained herein has been prepared to assist interested parties in making their own evaluation of the Company and does not purport to be all-inclusive or to contain all of the information that a prospective investor may desire. While the textual information contained herein is believed to be accurate, the Advisor has not independently verified any of the information contained herein in connection with the Summary, and no representation or warranty is made by either the Advisor or Company as to the accuracy, reliability or completeness of this Summary. In all cases, prospective parties should conduct their own investigation and analysis of the Company and the data set forth in this Summary.

By accepting this Summary, the recipient acknowledges and agrees that all information contained herein is of a confidential nature, that the recipient will treat it in a confidential manner and that recipient will not, directly or indirectly, disclose or permit its agents or affiliates to disclose any of such information except in accordance with a signed confidentiality agreement which accompanies or preceded this Summary. Without limiting the generality of the foregoing, the recipient will not reproduce this Summary, in whole or in part, and will use this Summary solely for purposes of evaluation the recipient’s interest in the capital raising. Any proposed actions by the recipient will be made in the written proposal.

All communication or inquiries relating to this Summary or its subject matter can be addressed to either the representative of the Advisor or the representative of the Company listed in the contact information (see page 6).

Contents

Page

Notice to recipients ------1

1. Executive Summary

1.1 Company at-a-glance ------3

1.2 Innoplus’ Competitive Edges ------4

1.3 Facts & Milestones ------6

1.4 Contact Information ------7

2. Company overview

2.1 Business Model ------8

2.2 Market Opportunity ------11

2.3 Management & Workforce ------14

2.4 Technology Details ------15

2.5 Intellectual Property------17

2.6 Investment & Ownership ------18

2.7 Offering & Use of Proceeds ------18

2.8 IPO Outlook ------19

3. Financial Forecast

3.1 Financial Forecast ------19

1. Executive Summary

1.1 Company at-a-glance

Established by 6 former researchers from KT (Korea Telecom) in 2000, Innoplus is a provider of core digital motion picture processor chips and their applications such as PMP (Portable Media Player), DMB receiver units, Navigation units etc. The original 6 founding members at the time of the company’s establishment were experts in chip design and SoC (System-on-Chip) for motion picture and still digital picture applications with over 6~7 years of experience in the field in 2000 (which means that they currently have over 11 ~ 12 years of experiences now).

Expanding upon their technological experiences and know-how, the members of Innoplus has maintained the company’s core technology, that is, the designing capabilities of motion picture and digital still picture processing chips as well as the capability to apply these core chip products to portable devices such as PMP’s. In its early stages of business, the company began the production of digital still picture processing chips and used them to manufacture Phototainer products. Phototainers are mobile devices that can store digital images and motion pictures, and display them through its on-board LCD screen. The company had recorded around KRW 12 Billion in sales through this product before closing this business and moving on to motion picture processing chip designs and PMP productions. It can be said that Innoplus was a first mover in early mobile media devices that set the stage for their entrance into the PMP market, since the Phototainer can be seen as a very early version of the PMP.

After closing down its Phototainer business, Innoplus’current main business focus for 2006 is the PMP market. Innoplus plans to release new multi-functional PMP products that include DMB reception, navigation function, WIFI, electronic album functions etc. in addition to its existing PMP products that have already been launched. Also, recognizing Innoplus’s technologicalcapabilities, PQI (Taiwan) has entered into a partnership with Innoplus, where Innoplus provides PQI with ODM (PMP) products. Because Innoplus retains the core chip design technologies, the company is able to expand their business area into different applications such as web cameras, digital surveillance systems, PC cameras, Digital TV’s, or any other products that can play video/audio contents.

Vision

With their expertise in digital motion picture/still picture processing chips, software and solutions, Innoplus is targeting to become the worldwide leading total solution provider for the digital multimedia market.

1.2 Competitive Edges

Company Differentiated from Mere Assemblers by Retaining Core Technologies

There are currently many PMP providersin the market, but unlike most of them, who are mere device assemblers, Innoplus is highly differentiated from the rest of the pack in that they retain end-to-end solutions and technologies for PMP productions. Many companies simply purchase the necessary components and assemble the PMP products. For them, the assembly is the only value-add that they can provide. However, Innoplus retains the core technologies that determine the functions as well as the performances of the final product. These technologies include chip design technologies for audio/visual signal processing and hardware/software integration technology. More specifically, the engineers at Innoplus have expertise in SoC chip design (including interfacing logic with ARM), digital image/motion picture encoding chip design, low-power IC design, etc. Also, Innoplus is experienced in software programming and porting for various platforms such as Linux, WinCE, etc. Thus, Innoplus’ products can have more attractive functions, higher multimedia compatibility, etc.

■ Most Capable R&D Workforce: Pioneers in the Portable Device Industry

Innoplus had been established by experienced research members from KT with more than 10 years of experience in the related multimedia processing technologies. Before the establishment of the company and even before the mobile multimedia device markets existed, these researchers had been working on video encoder/decoders, time division multiplexers, audio encoder/decoder chip designs, etc. which has served as a basis for Innoplus’ core technologies. Thus, it can be said that Innoplus as well as its R&D workforce are pioneers in the portable multimedia device industry. Most of these R&D members have many years of work experiences in big-name companies and/or research institutes such as LG Electronics, KT Research Center, Samsung Electronics, Hyundai Electronics, etc. As pioneers in the industry, Innoplus had successfully developed and commercialized the Phototainer product, which is a very early version of the current PMP.

■ Versatility of Proprietary Technologies Allow Diversification of Business

Although Innoplus’ main business focus is currently on PMP products, the company does not plan to rely on PMP sales as their only major revenue source. Because the company retains the core technologies, that is, chip designs and system designs for multimedia processing, Innoplus is able to enter other application markets that require their technologies and solutions for image/motion picture display, audio systems, and any other applications that require processing of multimedia data. For example, Innoplus has already developed the MVC201 video codec chip that can be usedfor web cameras, digital surveillance systems, digital TV’s etc. for video/audio signal processing. Like the MVC201 product, Innoplus is able to easily expand into the vast multimedia device market by providing chips, software solutions, components, SoC design, etc. Besides the MVC201, the company also has experiences in the development and mass production of digital surveillance camera chips, JPEG decoder chips (applied in the Phototainer product), etc.

Numerous Proprietary Patents & IP’s

There are many technologies that are required in manufacturing mobile multimedia devices, especially in designing multimedia processor chips. During their years at KT, the founding members of Innoplus had registered over 200 patents related to multimedia processing technology as well as the chip design technologies. With the establishment of Innoplus, the founding members were able to transfer 82 of the patents to the company from KT that were crucial in starting their business such as MPEG audio decoding filters, method of buffer control for motion picture video encoding, etc. On top of that, the company has also developed new IP’s to accommodate their business. The ownership of numerous IP’s and patents for multimedia processing, chip design, etc. is a great advantage over the competition.

■Competitive High-Performance Products with Many Attractive Functions

As in the mobile phone market, the PMP market is also moving towards, high-end and multi-functional products. To meet the market demands in terms of product specifications, the product must have various functions such as decoding function for a wide range of video format (MPEG1,2,4, DivX3,4,5, Xvid, WMV, etc.), audio/image decoding, radio reception, TV tuner, TV input/output, text viewer, etc. Currently, the Innoplus’ PMP product, I-WITH, support these various functions, provides one of the highest system stability and display quality. Additionally, the company will release their next PMP model that integrates DMB reception and GPS/Navigation functions. Innoplus has the definite advantage over others when integrating multiple functions into a single multimedia system since they have the expertise in porting the necessary software/firmware, hardware-software interface technology, multiple file format decoding technology, etc.

1.2 Facts & Milestones

■ Facts

Facts
CEO / Young-Tae Han
Foundation / 2000
Address / A-1007 SK Twin Tower 345-9, Gasan-Dong, Kumchun-ku, Seoul
Paid In Capital / KRW 665 Million
No. of Employees / 32
Products / Multimedia chips, PMP
Independent Auditors / Jewon Accounting Corporation
Target Market / China, Taiwan, HK, UK, US, Korea

■ Milestones

2000.06: Established in Daejeon, South Korea

2000.08: R&D center established

2000.11: TBI Company with approval of the Ministry of Commerce, Industry and Energy

2002.08: Mass production of JPD101, the JPEG decoder chip

2003.03: Mass production of Phototainer

2003.03: The prestigious DIMA innovative Digital Product Award

2003.07: Mass production of MVC201, video codec chip for DVRMVC201

2003.08: The Hot1 Award

2004.11: Co-development of JPX101, the high resolution DVR-specific chip

2005.01: ODM development of mPack PMP for PQI

1.3 Contact Information

Pharos Capital Limited

Mr. D.I. Cho

Associate Director

Tel. +82-2-540-6501

Email.

Innoplus

Mr. Young-Tae Han

CEO / President

Tel. +82-2-866-4676

Email.

2. Company Overview

Innoplus’ main business can be divided into two categories, the motion picture chip and the portable multimedia device businesses. Already retaining experiences in chip design and productions as well as its applications in portable multimedia devices, the company plans to further develop and produce new multimedia chips, targeting other multimedia device manufacturers. As for the portable multimedia device business, Innoplus develops and provides portable applications such as PMP’s and digital albums. In this business, the design of the products is done in-house and the productions are outsourced. This business will be the first cash cow of the company while they prepare to fully launch the chip business with the aim to become a worldwide leading provider of multimedia total solutions.

2.1 Business Model

Portable Multimedia Device Business

With their first PMP product launched, Innoplus is getting ready to launch their next PMP product that has been designed to reflect the trend of digital convergence. Besides the movie, music playing, radio reception, data storage, still picture display, text display functions etc. additional higher-end functions are being demanded by consumers today. Especially with the DMB services, the demands for DMB reception capabilitiesare on the rise. Accordingly, Innoplus’ next PMP products will not only include DMB reception functions but also GPS/Navigation, Wireless Internet functions, etc. As for the Wireless Internet function, Innoplus is currently negotiating with SK Telecom and KT to provide them with Innoplus’ newly developed electronic albums and WIFI PMP’s. SKT and KT are planning to use the WIFI PMP’s education-related applications. The company is confident that they will be able to provide their products to SKT and KT, once this strategic partnership is made, Innoplus will further expand their market share using the contents provided SKT and KT.

Planned Product Lineup

Product / Type
PMP 801 / PMP, Low consumer price
PMP 401 / PMP + NAVIGATION
Electronic Album / Electronic Album + LAN/WLL/PSTN, will be supplied to SKT KT
PMP 803 / PMP, Slim design, low consumer price
DMB PMP / PMP + DMB+ NAVIGATION
WIFI PMP / PMP + Wireless Internet + NAVIGATION, for education applications by KT
WiBro PMP / PMP + Wireless Internet + NAVIGATION

For sales and distributions, Innoplus is currently using independent distributors and sales channels for domestic and overseas markets.

PMP Sales & Marketing Channels / Status

Company / Description / Progress / Remarks
Domestic / Mirae Sound Systems / Direct sales to largest department stores in Korea / Distribution to department stores across the nation
Sample
ONLINE Electronics Distributors / Distributor for retail discount stores / Currently distributing 1,000 units
Final stages in signing exclusive sales rights
Soft Vision / On-line shopping mall / Currently distributing 1,000 units
Final stages in signing exclusive sales rights
Joyoung, Choongyoung Digital, etc. / Distributor for retail stores in Yongsan, Technomart, etc. / Currently distributing 2,100 units
Stable business transactions.
KT / Telephone service provider / Supplied 50 electronic album samples, testing in progress
Development of educational WIFI PMP
SK Telecom / #1 mobile communication service provider / Preparing to deliver electronic albums
Expects to supply 30~50 thousand units in 2006
Overseas / JNC / Hong Kong distributor / Delivered 550 units in Dec. 2005
Sales from HK and China
PQI / Taiwan semiconductor company / PMP ODM, delivered 40 thousand units in 2005
ODM contract continues throughout2006
IMAX / Distributor & manufactuer located in Beijing, China
(Hyundai automotive parts) / Delivered 50 units as samples in Dec. 2005
Delivered additional 150 units in Dec. 2005
INTRO2020 / UKagent / KRW 2 Billion in sales up to 2005 with Phototainer product
Provided PMP samples
SMARTDISK / USagent / KRW 8 Billion in sales up to 2005 with Phototainer product
Proved PMP samples, market testing in progress

Figure 1InnoplusPMP Product (I-WITH)

ASIC / SoC Chip Business

With their expertise in chip design and SoC, Innoplus has been successful in the production of multimedia processing chips. Innoplus’ current chips that are being provided to thirdparties are the multimedia chip (MVC) and the high-resolution DVR chip. The MVC chips provide 15:1 ~ 100:1 compression for motion pictures and are used in such applications as web camera, surveillance systems, PC camera, digital TV’s. Previously, the company had developed chips for use in the Phototainer product as well as similar electronic albums. In addition, having been acknowledged for their superior chip designing technologies the company is currently developing multimedia chips for Telechips and ALogics.

Figure 2Innoplus Multimedia Chip

■ Revenue Estimation of Major Products

Units: KRW Thousand

Category / Product / 2006 / 2007 / 2008
Multimedia Chips / MVC / 2,210,000 / 10,490,000 / 20,050,000
JPD / 2,000,000 / 10,000,000 / 18,000,000
New Product / 1,000,000
Portable Multimedia Devices / Electronic Album / 7,500,000 / 30,000,000 / 36,000,000
PMP / 8,400,000 / 25,000,000 / 30,000,000
DMB PMP / 14,000,000 / 30,000,000 / 50,400,000
WIFI PMP / 8,250,000 / 45,000,000 / 67,500,000
Total / 40,360,000 / 140,490,000 / 203,950,000

*Notes: 10% annual decrease in ASP has been applied

2.3 Market Opportunities

Innoplus plans to focus their business in the PMP market which are showing explosive growth rate in 2006 compared to the previous year. As thedomestic market size is expected to grow from 70 thousand units in 2005 to 270 thousand units in 2006, over 20 companies are entering the PMP market. It is expected that PMP products will become more multi-functional as the mobile phone market trend has shown. PMP manufacturers are currently designing products that include DMB reception, GPS/Navigation, Wireless Internet, etc. and this trend is favorable to Innoplus since the company is able to quickly integrate the desired functions with their core technologies in chip design and software-hardware interfaces. The domestic market was formed in early 2005 and the price of each unit was around KRW 400 ~ 500 thousand in 2005, but this had dropped to around KRW 300 thousand in 2006. PMP products are considered to be the next generation of MP3 players, and thus it is expected that PMP’s will encroach upon the MP3 player market.

■ The PMP Market Size

The worldwide market size for PMP’s had been 770 thousand units in 2005, and this is expected to grow to reach 2.3 million units in 2006. Currency wise, the market size is US$ 280 million and US$ 700 million for 2005 and 2006, respectively. The market is expected to show growth rates of around 130% per annum up to 2008.

Figure3Worldwide PMP Market Size

Units: 1,000 Units, US$ Million

* Source: Korea Electronics Technology Institute (2004)