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Today, H.264/AVC is the state-of-the-art video coding standard. Especially after the 2004 development of its High Profile (HP), it has become one of the primary formats in high definition video content delivery. Recently, a joint Call for Proposals (CfP) on video compression technology has been issued by ISO/IEC MPEG and ITU-T VCEG, targeting at the next generation of video compression standards with substantially higher compression capability than H.264/AVC. As a response to this CfP, Fraunhofer HHI proposed a newly developed video coding scheme which achieves bit rate savings of around 30% when compared to H.264/AVC HP. This paper describes the proposed video coding scheme and discusses its innovative features.