Anapass ( KQ) Weak market conditions overshadow the stock s real value. Display. June 24, 2011 Company Report. Not Rated

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1 Company Report (12386 KQ) Display Weak market conditions overshadow the stock s real value 1H: The worst is nearly over; Things are likely to pick up starting in 2H Ê shares have performed poorly since its IPO, falling by % from its offering price of W17,333 (which reflects a bonus issue). This weak share performance is attributable to: 1) sluggish LCD TV demand during 1H11 and 2) overhang resulting from venture capitalistsê share sell-offs. Due to the slow recovery of the global TV market, LCD panel makers are projected to remain in the red in 2Q. This leads us to believe that LCD panel makers placed significant price-cutting pressure on parts makers throughout 1H. However, this downward pricing pressure is likely to ease, as panel makers are likely to swing to profit with the arrival of a strong season in 3Q. Venture capitalists held 24% of Ê shares at the time of the companyês IPO, and later engaged in sell-offs, causing overhang. However, these sell-offs seem to be nearing their end, and, as a result, additional overhang risks appear minimal. More than a simple parts maker a technology standard-setter Ê flagship product is the timing controller (T-cons), which receives video signals and transmits control signals to the driver integrated circuits (IC) in LCD panels. Simply put, T-cons in LCD panels are somewhat comparable to computer CPUs. used its high-speed signal transmission and system-on-chip circuit designing technology to develop the Advanced Intra Panel Interface (AiPi). Recognizing the superiority of this AiPi technology, Samsung Electronics (SEC) adopted it in its LCD TV production, forged a partnership with to jointly develop technologies, and made long-term supply contracts with the company. 11 Sales and OP to reach W95.4bn (up 1% YoY), W15.8bn (down 36% YoY) Given that sales of LCD TV parts to SEC account for 93% of Ê sales, global TV demand levels significantly impact the companyês earnings. In 1H, the global TV market faced the worst conditions in history due to EuropeÊs debt crisis and the Japanese earthquake; however, the market is expected to pick up gradually starting in 2H. This year, profit deterioration at seems inevitable given significant pricecutting pressure from customers. However, it should be noted that the company remains relatively profitable compared to its competitors. Despite our conservative earnings estimates, the companyês shares are trading at low multiples: a 11F P/E of 7.x and a 12F P/E of 4.9x. FY Earnings & Valuation Metrics Sales OP OP Margin NP EPS (W) EBITDA FCF ROE P/E (x) P/B (x) EV/ EBITDA (x) 12/ , / , /11F , /12F , /13F , estimates Jonathan Hwang j.hwang@dwsec.com Brian Oh brian.oh@dwsec.com Not Rated Target Price (12M, W) - Share Price (6/23/11, W) 1, Expected Return - EPS Growth (11F, %) Market EPS Growth (11F, %) 23.4 P/E (11F, x) 7. Market P/E (11F, x) 1.4 KOSDAQ Market Cap 15 Shares Outstanding (mn) 1 Avg Trading Volume (6D, ') 198 Avg Trading Value (6D, Wbn) 3 Dividend Yield (11F, %) 9.6 Free Float Week Low 9,6 52-Week High 67,5 Beta (12M, Daily Rate of Return) 1.3 Price Return Volatility (12M Daily,%,SD) 3.6 Foreign Ownership 17.1 Major Shareholder(s): Lee, Kyung-ho et cl. (16.4%) Parakletos Ventures, LLC (7.85%) Price Performance 1M 6M 12M Absolute Relative Share price KOSDAQ 11/1 3/11 Please read carefully important disclosures at the end of this report.

2 Company overview Fabless company specializing in T-Cons for displays Accounts for 3% of SECÊs requirements Founded in 2, is a fabless company specializing in non-memory chip designs for large-size flat panel displays and mobile devices. The company supplies semiconductor foundries like TSMC and UMC with product designs using its high-speed signal transmission and System on Chip (SoC) technologies. As of end-1, Kyung-ho Lee (the largest shareholder) and related parties hold.1% of the companyês stake, while Parakletos Ventures (a Silicon Valley based venture capitalist) owns 7.9%. Timing controllers (T-Cons), a key component of panel displays, accounted for 98% of the companyês sales in 1. Up until 7, mobile display solutions for handsets accounted for over 8% of sales. However, after becoming a registered supplier to Samsung Electronics (SEC) in 8, the proportion of flat panel display solutions (namely T-Con) to its total sales has grown steadily. Consequently, it has rapidly increased its shipments to SEC (accounts for 3% of SECÊs requirements). Although high-margin T-Cons for LCD TVs currently dominate sales, the company plans to steadily expand its product portfolio following Samsung Mobile Display (SMD)Ês adoption of the companyês AiPi+ solutions for AMOLED TVs. is also in the midst of developing a one-chip mobile display solution. Figure 1. Ê flat panel display solution Source: Company data Figure 2. Ê position in T-Con market Figure 3. Ê major shareholders Flat Panel Link & Display Solutions LVDS/AiPi/TCON Mobile Serial Link & Display Solutions f-msl/sub_lvds Mobile Display Controller Lee, Kyung-ho et al.,.1% ANA 3xx LVDS Core DisplayPort ANA 32xx RSDS/mini-LVDS AiPi Core ANA 5xx~51xx f-msl Core SMIA/MIPI/MDDI ANA 52xx~55xx f-msl Tx/Rx for Multimedia, Mobile Parakletos Ventures, LLC, 7.9% ANA 35xx~38xx Timing Controller For FPD ANA 56xx Mobile Graphics Display Controller Others, 72.1% 2

3 Core products and technology T-Con is a non-memory chip that serves as the ÂCPUÊ for displays The importance of AiPi is growing due to the surge in data transmission Timing controllers (T-cons) are the core chips used in LCD panels to receive video signals and transmit control signals to driver integrated circuits (IC) in panel displays. Simply put, T- cons in LCD panels are similar to computer CPUs. The companyês sales are largely attributable to T-Cons; the success of this product is primarily due to the Advanced Intra Panel Interface (AiPi), which transmits video signals by connecting the T-Con with the driver IC in the panel. The importance of this technology is growing as larger and higher-resolution displays with more demanding features (3D TVs, smart TVs, etc.) are leading to a surge in data transmission. Recognizing the superiority of the companyês AiPi technology, Samsung Electronics (SEC) adopted the technology in its LCD TV production, forged a partnership with to jointly develop technologies, and signed long-term supply contracts with the company. is also forming strategic partnerships with leading chipmakers in Korea and abroad to license its technology. Figure 4. Ê major products Value added High Figure 5. AiPi technology vs. former technologies Former AiPi TM 3D TV OLED TV LCD Monitor LED TV Low Low Note PC LCD TV Competitors High Performance (resolution/speed) Faster transmission speed per channel Simplified and thinner PCB of LCD modules Simplified T-Con, less Driver IC Less electricity consumption, improved EMI noise AiPi TM (vs. former technologies) 4~8x 1/2~1/4x 1/3~1/4x 1/2x Figure 6. Ê sales breakdown by product Figure 7. Ê sales breakdown by client Others,1% Mobile solution, 1% % SEC LGE Pantech Wimtech P&C Others IT T-Con, 8% High-end TV T-Con, 62% 8% 6% % Low-end TV T-Con, 28% % %

4 11F: Sales of W95.4bn (up 1% YoY) and OP of 15.8bn (down 36% YoY) The TV industry is likely to recover from 2H We expect 11 sales to remain flat at W95.4bn, but operating profit to plunge 36% YoY to W15.8bn. Given that sales of LCD TV parts to SEC account for 93% of Ê sales, global TV demand significantly impacts the companyês earnings. In 1H, the global TV market faced the worst conditions in history due to EuropeÊs debt crisis and the Japanese earthquake; however, the market is expected to pick up gradually starting in 2H. In 2Q11, we forecast sales at W22.4bn (up 4% QoQ; down 21% YoY) and operating profit at W3.1bn (down 2% QoQ; down 68% YoY). OP margin is likely to decline in 2Q, due to 1) price cutting pressure from customers and 2) the companyês one-off stock grant (W6mn in 1Q; W8mn in 2Q). LCD panel makers expected to turn black in 3Q Due to the slow recovery of the global TV market, LCD panel makers are projected to remain in the red in 2Q. This leads us to believe that LCD panel makers placed significant pricecutting pressure on parts makers throughout 1H. However, as seasonal demand recovers in 3Q, margins at panel makers are expected to turn positive. As price cutting pressures ease and burden from the one-off stock grant subsides, is likely to see improved margins. Table 1. ' quarterly earnings trend and forecasts (Wbn, %) 1Q1 2Q1 3Q1 4Q1 1Q11 2Q11F 3Q11F 4Q11F 1 11F 12F Sales TV T-Con Hz /2Hz IT T-Con Others (mobile) Proportion TV T-Con Hz /2Hz IT T-Con Others (mobile) Operating profit OP margin Net profit NP margin Figure 8. Sales breakdown, operating margin trend and forecast TV T-Con, 6Hz (L) TV T-Con, 1/2Hz (L) 3 IT T-Con (L) Mobile (L) OP margin (R) Figure 9. Annual operating profit trend and forecast TV T-Con, 6Hz (L) TV T-Con, 1/2Hz (L) 16 IT T-Con (L) Mobile (L) 35 OP margin (R) Q9 3Q9 1Q1 3Q1 1Q11 3Q11F F 12F 13F 4

5 Valuation comparison of global peers Table 2. Valuation of global display parts makers (Unit: Wbn, %, x) OP margin P/E P/B EV/EBITDA ROE Mkt cap 1 11F 12F 1 11F 12F 1 11F 12F 1 11F 12F 1 11F 12F Silicon Works Nextchip TLI Telechips Qualcomm 97, Broadcom 18, Nvidia 1, Marvell 9, Mediatek 13, Novatek 2, Realtek ARM Holdings 13, Avg Source: Bloomberg, Figure 1. Share performances of global display parts makers Figure 11. P/B-ROE comparison with global peers (11F) (11/4/1=) Silicon Works Qualcomm Nvidia Broadcom Realtek ARM Holdings (P/B, x) 4 3 Qualcomm Broadcom Realtek Marvell Nvidia Silicon Works Novatek Nextchip 7 11/1 12/1 1/11 2/11 3/11 4/11 5/11 6/11 Source: Bloomberg, Telechips TLI (ROE, %) Source: Bloomberg, Figure 12. Ê P/E band Figure 13. Ê P/B band (Mkt cap, Wbn) x 12.5x 1.x 7.5x 5.x (Mkt cap, Wbn) x 2.5x 2.x 1.5x 1.x /1 5/11 11/11 5/12 11/12 5/13 11/13 11/11F 5/12F 11/12F 5/13F 11/13F Source: 11/1 5/11 11/11F 5/12F 11/12F 5/13F 11/13F Source: 5

6 (12386 KQ/Not Rated) Income Statement (Summarized) Balance Sheet (Summarized) 12/1 12/11F 12/12F 12/13F 12/1 12/11F 12/12F 12/13F Sales Current Assets Cost of Goods Sold Cash and Cash Equivalents Gross Profit Accounts Receivable SG&A Inventories Operating Profit Other Current Assets Non-Operating Income 1 1 Non-Current Assets Interest Income/Expense Investment Assets F/X-Related Gain/Loss Property, Plant and Equipment 2 1 Equity Method Gain/Loss Intangible Assets Asset Disposal Gain/Loss Total Assets Other Non-Operating Profit/Loss Current Liabilities Pretax Profit Accounts Payable Tax Short-Term Debt Profit from Continuing Operation Current Long-Term Debt Profit from Discontinued Operation Other Current Liabilities Tax Effect Non-Current Liabilities Net Profit Bonds Residual Income Long-Term Debt EBITDA Other Non-Current Liabilities Free Cash Flow Total Liabilities Gross Profit Margin Paid-In Capital EBITDA Margin Capital Surplus Operating Margin Retained Earnings Net Margin Stockholders' Equity Cash Flow (Summarized) Forecasts/Valuations (Summarized) 12/1 12/11F 12/12F 12/13F 12/1 12/11F 12/12F 12/13F Cash Flow from Operating Activities P/E (x) Net Profit P/CF (x) Non-Cash Income and Expense P/B (x) Tangible Assets Depreciation EV/EBITDA (x) Intangible Assets Depreciation EPS (W) 2,651 1,488 2,132 2,637 Others 6 CFPS (W) 2,877 1,653 2,241 2,657 Chg in Working Capital BPS (W) 6,7 7,828 8,974 1,621 Chg in Accounts Receivable -1-1 DPS (W) 1, 1, 1, 1, Chg in Inventories Payout Ratio Chg in Accounts Payable Dividend Yield Others Sales Growth Cash Flow from Investment Activities EBITDA Growth Chg in Tangible Assets -2-1 Operating Profit Growth Chg in Intangible Assets EPS Growth Chg in Investment Assets Accounts Receivable Turnover (x) Others -25 Inventory Turnover (x) Cash Flow from Financing Activities Accounts Payable Turnover (x) Chg in Borrowings ROA Chg in Equity ROE Dividends -1-1 ROIC Others Liability to Equity Ratio Chg in Cash Current Ratio 1, Beginning Cash Balance Net Debt to Equity Ratio Ending Cash Balance Interest Coverage Ratio (x) estimates 6

7 Important Disclosures & Disclaimers We managed the IPO of ANAPASS, which listed on November 5, 1, but do not have any special interest in the ANAPASS as of the publication date. Analyst of the subject company or member of the analyst's household does not have any financial interest in the securities of the subject company and the nature of the financial interest (including without limitation, whether it consists of any option, right, warrant, future, long or short position). This report reflects the sole opinion of the analyst without any external influences by third parties. Stock Ratings Industry Ratings Buy Relative performance of % or greater Trading Buy Relative performance of 1% or greater, but with volatility Hold Relative performance of -1% and 1% Sell Relative performance of -1% Overweight Fundamentals are favorable or improving Neutral Fundamentals are steady without any material changes Underweight Fundamentals are unfavorable or worsening (W) ANAPASS 8, 6,,, 6/9 12/9 6/1 12/1 6/11 * Ratings and Target Price History (Share price (----), Target price (----), Not covered ( ), Buy ( ), Trading Buy ( ), Hold ( ), Sell ( )) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. This report has been provided by the research division of Daewoo Securities Co., Ltd. The stock ratings, target prices, estimates and overall viewpoints are from the research division of Daewoo Securities. Investors can access Daewoo SecuritiesÊ research directly through our website ( FirstCall Research, Reuters, FnGuide, WiseFn, FactSet and Bloomberg (DWIR). This document was prepared by Daewoo Securities Co., Ltd. ( Daewoo ). Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith. The information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for information purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose. Daewoo and/or other affiliate companies, their directors, representatives, or employees may have long or short positions in any of the securities or other financial instruments mentioned in this document or issuers described herein at any time and may purchase and/or sale, or offer to purchase and/or sale such securities or other financial instruments in the open market or otherwise, in each case either as principal or agent. This document is for distribution within the United Kingdom to persons authorized under the Financial Services Act Daewoo Securities is the sole provider of information contained in this document. DaewooÊs U.S. affiliate, Daewoo Securities (America) Inc., a member of FINRA/SIPC, is the sole distributor of this document within the U.S. This document may be distributed in the U.S. only to major U.S. institutional investors as defined in Rule 15a-6 of the U.S. Securities Exchange Act of Any U.S. recipient of this document wishing to effect any transactions in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc. Daewoo Securities International Network Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc. Head Office 31-3 Yeouido-dong, Yeengdeungpo-gu Seoul Korea Two International Finance Centre Suites Finance Street, Central Hong Kong 6 Lexington Avenue Suite 31 New York, NY 22 United States Tel: Tel: Tel: Daewoo Securities (Europe) Ltd. Tokyo Representative Office Beijing Representative Office Tower 42, Level Old Broad Street London EC2N 1HQ United Kingdom 7th Floor, Yusen Building Marunouchi, Chiyoda-ku Tokyo -5 Japan Suite 262, Twin Towers (East) B-12 Jianguomenwai Avenue Chaoyang District, Beijing 22 China Tel: Tel: Tel: Shanghai Representative Office Ho Chi Minh Representative Office Unit 13, 28 th Floor, Hang Seng Bank Tower Centec Tower Lujiazui Ring Road Nguyen Thi Minh Khai Street Pudong New Area, Shanghai 1 Ward 6, District 3, Ho Chi Minh City China Vietnam Tel: Tel: