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Embedded Solution Company - MDS Technology Co., Ltd.

Investor Relations 2008. Embedded Solution Company - MDS Technology Co., Ltd. Contents. I. Trend of Embedded Industry. I I. Company Overview. I II. Business Domain & Products. I V. Competitive Edges. Ⅴ. Investment Proposal. 2. Ⅰ . Trend of Embedded Industry Ⅰ-1. Embedded system.

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Embedded Solution Company - MDS Technology Co., Ltd.

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  1. Investor Relations 2008 Embedded Solution Company -MDS Technology Co., Ltd.

  2. Contents I Trend of Embedded Industry II Company Overview III Business Domain & Products IV Competitive Edges Ⅴ Investment Proposal 2

  3. Ⅰ. Trend of Embedded Industry Ⅰ-1. Embedded system ● Embedded SW includes all electrical control SW embedded into the products, such as Mobile phones, Car Navigation, Digital TV, Automobile and Aerospace, etc. D-STB 성장성과 과도한 경쟁가능성에 대한 오해 Embedded System Application Development solution Middleware Embedded SW OS LCD Display Mobile phone, Car Navigation, PMP, Automobile, Aerospace, Digital TV, IP set-top box … HW Platform Memory CPU Network Peripheral 3

  4. Ⅰ. Trend of Embedded Industry Ⅰ-2. Market Size ● Application of embedded SW is diversified that expects the market size around 10billion. Korea Global Market DevelopmentTool OS Bundle EICS DevelopmentTool EICS SW OS Bundle Application Mobile PhoneDigital device InfrawareNeomtelMDS MS Windriver Greenhills MDS WindRiver Adventech Mathworks Lauterbach IBM MDS Mathworks IBM ElectronicAppliance Automotive Defense/Aerospace Kontron Radisys Kontron ( MDS ) Advantech IndustrialComputer Market size US$5B US$1.5B US$0.8B US$80M US$50M US$300M US$100M 4 EICS = Electronic Integrated Computing System

  5. Ⅰ. Trend of Embedded Industry Ⅰ-3. Market trend ● Contains very high growth potential ● The demands from each market are vary, however, each industry cooperates and integrates very closely • Systems tends to equip more electronics • High profitable industry/increase in SW proportion • (ex) mobile phone / Automobile • Over 95% of embedded system manufactured in-house Very high in growth potential The trend of embedded industry reflects on our business structure & model • Unlike PC market, each application requires different SW & solution • US$10M~200M sized segment markets are played by a few companies Huge market / Limited competition • Requires close relationship with chipset vendors • Requires development tools for design and bug detection Characteristic of embedded market 5

  6. Contents I Trend of Embedded Industry II Company Overview III Business Domain & Products IV Competitive Edges Ⅴ Investment Proposal 6

  7. Ⅱ. Company Overview Ⅱ-1. Overview Overview Financial Statement (FY 08(E), Unit : KRW billion) Sales Revenue CEO Sangheon Lee 55.8 Operating Income 5.24 Foundation 1994. 3 (Incorporated in 1998) Net Income 4.17 15Fl. Kolon Bilant 222-7 Guro3-dong Guro-gu, Seoul, Korea 152-77 Address Total Assets 45.3 Homepage www.mdstec.com 33.0 Total Capital Overseas Subsidiaries Stockholder Status (As of October, 2008) Others Controlling shareholder, etc Korea Venture Capital India Singapore Malaysia Australia Institutional Investor Treasury stock <Remark> ▲ Par Value : \500 ▲ No. of Listed Stock : 9,501,280 7

  8. Ⅱ. Company Overview Ⅱ-2. History ● MDS has led the history of Korean Embedded SW Industry Expanding Years▶ (2005 ~ ) Growth Years▶ (1998 ~ 2004) • KONTRON (EICS) business launched ‘08 • dSPACE (Design Automation tool) launched • Founded a branch in India ‘04 • Merged DST Corp. ‘07 • Founded Singapore branch • Awarded Digital prize by Ministry of Information & Communication ‘03 • Selected for SW Flagship Government Project – Developing aircraft Real-time OS • - NEOS RTOS, Awarded ‘New SW’ by Ministry of Information & Communication Founding Years▶ (1994 ~ 1997) • Selected for Digital Appliance PostPC Government Project Supervisor by MOCIE ‘01 • R&D Center established ‘00 • - Listed in KOSDAQ(086960) • - MDS Networks, a subsidiary founded ‘06 ‘97 - Selected for the ‘MDS’ Project by the Government - Selected for Embedded Development System Project Supervisor by MOCIE ‘99 ‘94 - MDS Technology established • Founded a branch in Australia • -IT Venture Award by IT KOIVA ‘05 - Partnered with Microsoft for Windows Embedded Business ‘98 Embedded Development ToolProvider No.1 Total Embedded Solution Provider in Korea The Leader of Embedded Development Tool Business 8

  9. Ⅱ. Company Overview Ⅱ-3. Executives CEO / Sangheon Lee CEO / Charles Na Sociology, Seoul National Univ. Overseas Sales in Kolon Corporative Planning in Kolon Group Certificated CEO Course in KAIST US UCSD MBA English, Hankuk Univ. of Foreign Studies Overseas Sales in Samsung Electronics Sales/Planning in Doo-in Electronics CEO /DST Corp. CTO / Myung-sub Chang CFO / Moon-kyu Song Computer Engineering, Seoul National Univ. Computer Engineering in KAIST (Master) SK C&C S/W Development Cyberbank S/W Development Management, Seoul National Univ. Planning in Kolon Group Corporative Planning In Kolon Group 9

  10. Contents I Trend of Embedded Industry II Company Overview III Business Domain & Products IV Competitive Edges Ⅴ Investment Proposal 10

  11. Ⅲ. Business Domain & Products Ⅲ-1. Products ● No.1 Embedded Solution Company in Korea Providing One-stop Solution & Services Embedded SW Others Embedded SW Development Tool Device solution (MID, PMP) Debugger, Compiler Windows Embedded OS Windows CE & Mobile Solution Automotive Solution UWB, Multimedia chip DMB Solution EICS SW Testing Solution Embedded Solution Training Firmware / Embedded OS / Development Tool / Engineering Course 11

  12. Ⅲ. Business Domain & Products Ⅲ-1. Products Windows Embedded OS Major Products Windows CE, Windows XP Embedded, Embedded Server OS, Classic Desktop OS Overview Microsoft Windows Operating system for embedded devices Target Market & Customers - Car Navigation, PMP, ATM, DVR, IP set-top box - Samsung Techwin, LG Nsys, Nautilus Hyosung, Geotel, Reigncom… • A comprehensive operating system platform with proven performance and reliability • Providing highly customized device designs on a flexible platform with easy-to-use • development tools that enables to reduce development time and cost • Ecosystem partner network with world leading silicon vendors (IHVs, ISVs)- No.1 partner of Microsoft in Asia Features & Advantages 12

  13. Ⅲ. Business Domain & Products Ⅲ-1. Products Debugging Tool Major Products TRACE32-PowerDebug/PowerTrace/PowerProbe Overview - ‘De facto standard’ debugger in worldwide Target Market & Customers - Mobile, Digital devices, Consumer Electronics, Automotive, SoC, etc - Samsung Electronics, LG Electronics, Pantech, Hyundai Motor, etc - A set of modular microprocessor development tools which major chip vendors recommend (support more than 350 different CPUs) - Support the latest various development environment - Maximize the efficiency of customer’s development by providing optimal embedded systems development solutions Features & Advantages 13

  14. Ⅲ. Business Domain & Products Ⅲ-1. Products Automotive Solution • Design automation tool for automotive and aerospace • - Supports all development phases from block diagram function prototyping, automatic production code generation to ECU testing and calibration. dSPACE • Modular and static RTOS for automotive • Support all common microcontrollers in the automotive sector • - SiemensVDO, BMW, Audi, Volkswagen, DaimlerChrysler EB tresOS • Development Solution for FlexRay Network communication protocol for automotive • Total solution covering design, modeling, prototyping and analyzing the FlexRay Network EB FlexRay Solution Graphical Modeling and offline simulation Calibration Hardware-in-the-loop simulation Rapid control prototyping Automatic production code generation 14

  15. Ⅲ. Business Domain & Products Ⅲ-1. Products SW Testing & Service Major Products QAC, CodeSonar, VectorCAST, TestQuest Pro, Unicorn, Polaris Solution & services for software testing to ensure the safety and quality assurance Overview - Mobile/Telecom, Consumer Electronics, Automotive, Military, etc - Samsung Electronics, LG Electronics, SKT, Hyundai Motor, etc Target Market & Customers • Automated quality & functional testing • Memory leak detection solution • Source code analysis solution • Static/Dynamic testing solution Features & Advantages 15

  16. Ⅲ. Business Domain & Products Ⅲ-1. Products Device Solution - Providing ODM (Original Design Manufacturing) service- Helping customers to design, engineering and build products from original idea Overview - Navigation + Mobile TV- PMP, PND- IP Set-top Box, Home controller Major Products - Car Navigation, DMB, Home Network, IPTV - Xroad, Reigncom, Neochips, Reneco, Icontrols - Japan, Europe, South America Target Market & Customers • On-demand one-stop service • Selective customization from design to manufacturing • Proven and distinguished quality management system Features & Advantages Benefits Better time-to-market providing outstanding rerun-on-investment for the customers 16

  17. Ⅲ. Business Domain & Products Ⅲ-1. Products Windows CE & Mobile Solution - Multimedia solution for smart phone and PDA, PIMS & Utility Applications - Microsoft Windows Embedded SI Partner (Gold Partner) - Messaging solution (MMS, SMS, SMIL), Camera & Camcorder solution - Platform : Windows Mobile 6.0, Windows CE Windows CE & Mobile Solution - BIFS · Binary Format for Scenes is the MPEG-4’s scene description language, designed for representing, delivering and rendering interactive and streamable rich-media services - TPEG · Transport Protocol Experts Group · Providing the TPEG decoder for delivering traffic and travel information contents through DMB DMB Data Broadcasting Solution <MMS> <BIFS> <TPEG> 17

  18. Ⅲ. Business Domain & Products Ⅲ-1. Products Other Products & Services • - Real-time OS (RTOS) for embedded system • Developing the core technology for air-craft(T-50) • Assigned by SW Flagship Project – under the consortium of Korea Aerospace Industries NEOS RTOS - Agilent Technologies (Universal instruments) - Digital Broadcasting / Electronic Power Test & Measurement - USB Protocol Analyzer /Noise Analysis Test & Measurements - Standard-based and custom embedded and communications solutions for OEMs, Systems, integrators and application providers such as industrial automation, telecommunications, medical, infotainment, defense and aerospace. EICS (Industrial Computer) - RMI Alchemy chip : Power-optimized and high-performance SoC for digital consumer products including PMP, Navigation, etc. - ZigBee chip : ZigBee ready solution which covers chip, module, software SoC Solution • Electronic Design Automation • Acceleration and Emulation for design verification • Altera FPGA solution distribution • Impulse C : C-to-FPGA solution distribution EDA Solution • MDS Academy : The biggest embedded solution training center in Korea • The most up-to-date industry technology curriculum with hands-on training • Produced the largest number of trainees in Korea : more than 10,000 each year Embedded Solution Training 18

  19. Ⅲ. Business Domain & Products Ⅲ-2. Business Domains ● MDS is No.1 Embedded Solution Provider covering every Embedded SW industry in Korea. Boards /SoC SWSolution Development Tool Debugger SW Testing Design Automation Mobile Debugger Mobile Phone SW Mobile Phone Testing MS Windows Embedded OS Device SW Device HW Digital Device/CE SW Testing Automotive Electronic Control Solution Defense/Aerospace Embedded OS Stagnation EICS Growing Industrial Computer Develop <Remark> The size of circle stands for gross profit. 19

  20. Ⅲ. Business Domain & Products Ⅲ-3. Projection ● High feature digital devices such as smart phone and MID will be required more and more embedded solution. ● Many markets, especially automotive, are expected high in growth. Revenue FY08 FY12 CAGR Market Analysis EmbeddedDevelopment tool • SW upgrade would be a major issue for smart phone market 42.1 26.0 14.9 87.9 13% 12% 3% 12% • Demands for ECU development solutions and test automation expect • to be increased in defense and aerospace industry, especially automotive • industry 25.6 16.8 13.4 55.8 EmbeddedSW • Demands for commercial OS and its pricing are expected to increase • Development of new market such as MID and IPTV • Mobile solution market expects to be increased due to the growth of • smart phone market • Needs for communication module for digital device such as MID Others (EmbeddedBoard) • Special purpose chip such as UWB chip expects to be increased • We expect to be a major player in industrial computing market Total 20 (Unit : KRW billion)

  21. Contents I Trend of Embedded Industry II Company Overview III Business Domain & Products IV Competitive Edges Ⅴ Investment Proposal 21

  22. Ⅳ. Competitive Edges Ⅳ-1. Customer values ● Improving the effectiveness & productivity of our customers by providing a total solution Improving the effectiveness & productivity of our customers Goal Cost Competitiveness Time-to-market Quality Assurance Benefit Providing Total Embedded Solution Proven Embedded technology & Experiences Know-how for SW Debugging & Testing Fact • <Remark> • (ex) Samsung : MDS is providing specialized solutions to all divisions of Samsung • (Mobile, Electronic Appliance, SoC, Multimedia, etc division) 22

  23. Ⅳ. Competitive Edges Ⅳ-2. Core technology ● Maintain the Highest Level of Technology and Quality by Embedded Engineers Embedded SW Core Technology Technology in Employment SW testing & quality assurance Technical Support (22%) R&D (28%) Platform development for digital devices Window Embedded OS & Solution 172 persons Automotive ECU Control Logic Mobile phone development solution Technical Sales (27%) Others (23%) 77% of employees having technology background 23

  24. SW (16%) Ⅳ. Competitive Edges Ⅳ-3. Portfolio ● Stable revenue proportion from various customers in each industry Revenue by industry (2008(E)) Revenue by industry (2006) Industrial Computer (36%) Mobile (45%) Mobile(24%) Industrial Computer (38%) Digital Device (19%) Digital Device (38%) Revenue by customer (2006) Revenue by customer (2008(E)) Others-over 800companies (63%) Other 1,000 Customers (45%) Major 10 customers including Samsung ( 55%) Samsung (26%) LG (11%) Revenue by solution (2008(E)) Revenue by solution (2006) Others (6%) Others(6%) Device Solution (18%) Device Solution (14%) Development tool (46%) Development tool (64%) SW (30%) 24

  25. Ⅳ. Competitive Edges Ⅳ-4. Global network ● Broad Customer network with more than 1,000 Customers Mobile/Telecom Digital Devices/ CE SoC Automotive Government/R&D Center University Seoul National University Yonsei University Hanyang University Korea University 25

  26. Ⅳ. Competitive Edges Ⅳ-4. Global network ● Relationship with Worldwide Leading Embedded SW Vendors OS / SW Solution Development Solution SoC DMB 26

  27. Contents I Trend of Embedded Industry II Company Overview III Business Domain & Products IV Competitive Edges Ⅴ Investment Proposal 27

  28. Ⅴ. Investment Proposal Ⅴ-1. Market Dominance ● MDS is No.1 embedded solution company in Korean embedded industry which has a huge ripple effect and growth potential Since our competitors have been weaken or disappeared, we expect to maintain the stronger leadership and market dominance. High profitability Growth potential Stability Fundamental Maintains Operating Profit rate over 10% Expands to various applications of embedded systems Customers & Products in various industries Turnaround Expects high growth of Operating Profit in 2008 (FY07 KRW 2.5 Bn  FY08 KRW 5.2 Bn) • Developing of embedded software for Defense & Aerospace industries • Rigid relationship with worldwide leading embedded solution partners including Microsoft • Developing Micro Projector Issue 28

  29. Ⅴ. Investment Proposal Ⅴ-2. Turnaround ● Financial achievement has been improved, but stock price is still staying low (Stock price/KRW) (Operating profit/KRW Billion) Operating profit Stock price <Remark> Black line means sum of 4 quarterly operating profit 29

  30. Ⅴ. Investment proposal Ⅴ-3. Transaction overview We are seeking financial investors who will purchase our stock from our corporation own stock fund. Proposal Stock purchase from our corporation own stock The proposed investment is flexible and open for negotiation. Our stock price has been devalued compared to net asset value per share. Net asset value per share = \4,200, and the current stock price = \2,300 (as of Nov. 13) Devaluation of stock price Our stockholders have faced a lack of liquidity because the stock price has dropped sharply and the total asset turnover ratio is too low. Lack of liquidity The corporation own stock fund has 18% proportion of total outstanding shares. Thus, the number of floating stock has been extremely decreased. High proportion of corporation own stock 30

  31. Income Statement & Investment Index Balance Sheet ※ Financial Statements ● EV/EBITDA is equal to 3 based on FY08(E) Sales Revenue and current stock price (Unit : KRW Million) (Unit : KRW Million)

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