DNP
AnnualReport2017

30

Contents

DNP
in Brief

Synopsis of
Performance

6

Message toShareholders

14

SpecialFeatureToday’s Innovation isTomorrow’s Basic“P&I
Innovations”
16

Message from Management

20

Expanding DNP ’s Business Areas
by Applying and Developing
Technologies
22
24
26

DNP
AnnualReport
2017

100

28

Internet of Secure Things( IoST) Technologies

DNP at a Glance

74 Management ’s Discussion and Analysis

34

Our Products and Services

84 Selected Financial Data (unaudited)36

Evolution of DNP ’s Businesses

86 Consolidated Financial Statements

38

Investor Information

107 Independent Auditors’Report

40

Segment
Information

Medical Information
Processing Technologies

108

Appendix

108 Major Subsidiaries and Affiliates

42

Business Strategies

110 DNP ’s Main Proprietary Technologies

44

Financial Results

114 Glossary

46 Lifestyle and Industrial Supplies
46

Business Strategies

48

Financial Results

117 Sources of Information about DNP

50 Electronics
50

Business Strategies

52

Financial Results

54

How DNP Works to
Achieve Sustainable
Development

55 CSR : DNP ’s Three Corporate
Responsibilities
56

Compliance with Laws andSocial Ethics

56

Construction of Systems that
Support Business Continuity

57

Contributing to Social Development

58

Information Security

59

Environmental Conservation andRealizing a Sustainable FutureElectron Beam (EB) Technologies
Film Technologies
for OLED Displays

Financial
Section32

42 Information Communication

2

72

60 Corporate Governance
60 Corporate Governance71

Board of Directors, Statutory
Auditors and Corporate Officers

Editorial Policy
Our corporate philosophy is “the DNP Group
connects individuals and society, and provides
new value.” When we say “new value,” we are nottalking only in terms of business operations, i.e.
the development of new products and services.
We are also referring to creating value in themedium and long terms by paying attention to theenvironment, society and governance, making
quick and accurate decisions, and engaging inwell-coordinated corporate activities. In “Annual
Report 2017,” we discuss what kinds of value
DNP will create from the resources available to us
within and outside of our corporate Group, fromboth financial and non-financial standpoints.
This annual report is aimed at providing information about
DNP’s businesses, management vision, and businessresults. Opinions and forecasts contained in the report werebased on the best judgment of management at the time thereport was prepared, so we cannot guarantee that all
information contained in the report is completely infallible.
In this annual report, “DNP” refers to the entire DNP Group,and “we” refers to DNP or the DNP management team.
(In the section on Corporate Governance (pp 60-70), “DNP”
refers to Dai Nippon Printing Co., Ltd.)

Photo (right): The Ichigaya district surrounding DNP headquarters, in Tokyo’s Shinjuku Wardphoto: Naoki Honjo

Synopsis of Performance
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries

Grand Summary of
Financial Results

2017

2016

2015

Dollars in thousands
except per share amounts

2017Statements of Operations (¥ million)
Net sales

Years ended March 31
Change2017/2016($ thousand)¥

1,410,173¥

1,455,916¥

1,462,118$

12,590,830-3.1 %

Operating income

31,41145,472

48,174

280,455-30.9 %

Ordinary income

36,74052,65153,759328,036-30.2 %

Income before income taxes

39,831

54,84151,062355,634-27.4 %Net income attributable toparent company shareholders

25,22633,58826,924225,232-24.9 %

Balance Sheets (¥ million)
Total net assets($ thousand)¥Interest-bearing debt
Total assets

1,081,286¥

1,063,242¥

1,124,092

$

1.7 %

169,135

189,821

187,946

1,510,134-10.9 %

1,741,904

1,718,636

1,809,462

15,552,714

1.4 %Cash Flow Statements (¥ million)
Cash flow from operating activities

9,654,339($ thousand)¥

71,945¥72,629¥85,731$

642,365-0.9 %Cash flow from investing activities

14,012(60,883)(50,540)

125,108–

Cash flow from financing activities(45,223)(47,166)(23,865)

403,777-4.1 %

Free cash flow*

85,957

11,74635,191

767,473

631.8 %Per Share Data (¥)
Net income($)¥

Net assets
Cash dividend

40.79

0.36

-23.2 %

1,680.55

1,618.66

1,675.63

15.00

3.8 %

32

32

32

0.29

–

¥

53.10

¥

41.82

$

Profit Margins (%)
Operating income margin

2.23

3.12

3.29

2.23

-0.89

EBITDA margin

7.34

8.42

8.24

7.34

-1.08

Net income to net sales

1.79

2.31

1.84

1.79

-0.52

ROE (%)

2.46

3.20

2.67

2.46

-0.74

ROA (%)

1.46

1.90

1.59

1.46

-0.44

Financial Ratios

D/E ratio (%)
Interest coverage ratio (times)

16

19

17

16

–

16.59

20.79

21.32

16.59

–

29.43

18.84

27.94

29.43

–

Valuations (against share price on March 31)
PER (times)
PBR (times)

0.71

0.62

0.70

0.71

–

EV/EBITDA (times)

6.69

5.23

6.01

6.69

–

PCFR (times)

8.52

6.36

8.00

8.52

–

Dividend yield (%)

2.67

3.20

2.74

2.67

-0.53

Returns to Shareholders (¥ million, %)Values of shares repurchased
Dividend payout ratio (%)($ thousand)¥

14,99919,998

–

78.50

60.30

76.50

$

133,920

–

78.50

–

OthersLong-term credit rating (R&I)

AA–

AA–

AA–

AA–

–

Foreign ownership (%)

23.91

22.01

25.54

23.91

–

U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥112=U.S.$1, the approximate Tokyo foreign exchange market rate as of March 31, 2017.
* Free cash flow = net cash from operating activities + net cash from investing activities22 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief

We expanded sales of some products, including sales promotion tools,
smart cards, and aseptic PET plastic bottle filling systems.

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development

The Lifestyle and Industrial Supplies segment succeeded in boosting sales
and profits, with operating income growing by 14.6% year on year.

72 Financial Section
108 Appendix

We reaped 71.9 billion yen in net cash from operating activities, and85.9 billion yen in free cash flow*.
* Free cash flow = net cash from operating activities + net cash from investing activities

Net Sales(¥ billion)

Operating Income

Net Income Attributable toParent Company Shareholders(¥ billion)(¥ billion)

60

2,000

40

50.1
1,500

48.2

1,446.6 1,448.6 1,462.1 1,455.9 1,410.2
40

33.6
45.5

30

25.6

35.8
31.4

1,000

20

26.9

25.2

19.2

20
500

10

0

0

13

14

15

16

0

13

17

14

15

16

13

17

Net Income per Share

ROE

ROA

(¥)

(%)

(%)

60

4

14

15

1.6

1.6

14

15

16

17

4

53.10
3.2
39.82

40

41.82

40.79

2.8

3

3

2.7

2.5

2.2

29.84

2

1.9

2

1.5

1.2

20
1

0

1

0

13

14

15

16

17

0

13

14

15

16

17

13

16

17

3

Income before Income Taxes

EBITDA(¥ billion)(¥ billion)

60

48.6

50

51.1

150

54.8

39.8

40

125.0

118.8

35.2

120.5

122.6
103.5

100

30
20

50

10
0

0

13

14

15

16

13

17

Total Net Assets

(¥)

1,200

2,000

1,124.1
937.1

15

16

17

Net Assets per Share(¥ billion)

1,000

14

1,063.2 1,081.3

1,675.6 1,618.7 1,680.6

976.4
1,500

1,386.9

1,448.0

800
1,000

600
400

500
200
0

0

13

14

15

16

13

17

Interest-bearing Debt

Total Assets(¥ billion)(¥ billion)

250

2,000

227.2

200

14

182.6

187.9

15

1,809.5

16

17

1,718.6 1,741.9

1,579.0 1,574.8

189.8
169.1

1,500

150
1,000
100
500

50

0

0

13

14

15

16

13

17

14

15

16

PER (Price Earnings Ratio)

PBR (Price Book-value Ratio)(times)(times)

40

1.5

30

29.70

17

29.43

27.94

1.0

24.84

20

0.64

0.68

0.70

13

14

15

18.84

0.62

0.71

0.5
10

DNP
AnnualReport
2017

4

0

0

13

14

15

16

17

16

17

2 Synopsis of
Performance

Capital Expenditures*

Research and Development Expenditures(¥ billion)(¥ billion)

120

40

100

97.3
88.3

30

6 Message toShareholders
14 Special Feature

30.8

31.7

30.8

31.8

30 DNP in Brief

31.4

80

63.5

40 Segment
Information

57.1

55.0

60

20

54 How DNP Works to
Achieve Sustainable
Development

40
10
20

72 Financial Section

0

0

13

14

15

16

13

17

14

15

16

108 Appendix

17* Figures include capital expenditures for intangible fixed assets.

Depreciation Expense

Free Cash Flow*(¥ billion)(¥ billion)

100

100

80

80.2

86.0
80

73.5

67.0

65.3

60

61.5

61.7

60

40

40

35.2
27.9

20

20

11.7

0

0

13

14

15

16

13

17

14

15

16

17

* Free cash flow = net cash from operating activities+ net cash from investing activities

Net Sales by Segment (Year ended March 31, 2017)

Operating Income by Segment (Year ended March 31, 2017)(¥ billion)(¥ billion)

Information
Communication

Information
Communication

801.2

Lifestyle andIndustrial Supplies

Lifestyle andIndustrial Supplies

388.2

Electronics

16.5

Beverages

56.6
0

14.4

Electronics

169.4

Beverages

18.9

200

400

600

800

2.4
0

1,000

10

20

Capital Expenditures by Segment (Year ended March 31, 2017)

Employees by Segment (As of March 31, 2017)(¥ billion)(persons)

Information
Communication

28.7

Lifestyle andIndustrial Supplies

12.6

Electronics

Beverages
1,278Electronics
3,937

30

Corporate
2,117

Information
Communication
20,832

7.7

Beverages

3.8
0

10

20

30

Lifestyle andIndustrial Supplies
10,6445

Message toShareholders

DNP
AnnualReport20176

2 Synopsis of
Performance

We will provide new value
to help solve society’s challenges,
mainly in our “four growth areas.”

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information

In October 2016, we celebrated the 140th anniversary of DNP’s founding.

54 How DNP Works to
Achieve Sustainable
Development

When it was established in 1876, the Company focused on letterpress printing,

72 Financial Section

which was the state-of-the-art technology of the time. Since then, we have

108 Appendix

continually expanded our fields of business by applying and developing the printing
technologies that are our core strengths. Now, in order to stimulate even more
rapid growth amid today’s dramatically changing business environment, we areundertaking new changes.
In “DNP Group Vision 2015,” we identified “four growth areas” in which to focus
our efforts: Knowledge and Communication; Food and Healthcare; Lifestyle andMobility; and Environment and Energy. We selected these areas as the businessarenas in which we will create new value by identifying social challenges in Japanand overseas and applying our expertise in “P&I” (printing and information) to finding
solutions for them.
For example, advanced information security, enhancing education of the next
generation, safe and reliable food supplies, healthy and comfortable living in various
types of dwelling spaces, conservation of the environment and energy resources,
respect for diversity, etc. We hope to help bring about a future in which these issues
have been resolved to the point that people take these things for granted as “basics.”
By taking up the challenge of making such a future a reality, we want to continue tobe “indispensable” to consumers and businesses.
We intend to further refine and multiply DNP’s P&I strengths, and to surge ahead
by exercising the comprehensive strength of the DNP Group. We will continue towork hard to earn the trust of all of DNP’s shareholders and other stakeholders.

Yoshitoshi Kitajima
President

7

Q.

What was the fiscal term throughMarch 2017 like?

Kitajima: Our corporate philosophy is to “connect
individuals and society, and provide new value”—that’s
how we build DNP’s corporate value in the medium andlong term. This philosophy contains our commitment totaking the initiative to find out what consumers need,and to creating new value that helps solve society’s
problems. The business environment is undergoing
rapid and significant changes; rather than simply
responding to changes, we must work to generatechanges ourselves.
Toward that end, DNP has promoted “P&I
innovations” that generate innovative new value bymaking the most of our strengths in printing (P) andinformation (I) technologies. Also, in order to boost
the competitiveness of our operations, the entire
DNP Group engaged in structural reforms including
reorganization and integration of business units andGroup companies.
While we did see government stimulus measureslift employment a bit along with other signs of mild
recovery in the Japanese economy, we have yet to seea full recovery given the strong yen, sluggish personal
consumption, and a slowdown in overseas economies.
Especially in the printing industry, factors like lower unit
prices combined with decreased demand for books,
magazines and other paper media forced us to remain
in a very tough position.
As a result, although net sales from Lifestyle andIndustrial Supplies increased in the year ended March2017 compared to the previous year, sales from theInformation Communication and Electronics segments
declined, so overall net sales for the term declined 3.1%
year on year to 1,401.2 billion yen. Operating income
declined 30.9% from a year earlier to 31.4 billion yen,largely due to the impact of the stronger yen on earnings
from our Electronics segment and from Imaging
Communication, which does photo-related business inNorth America and elsewhere outside Japan, as well as
increased retirement benefit costs resulting fromthe Bank of Japan’s negative interest rate policy.
On the other hand, we laid the groundwork for building
corporate value in the future by making aggressive upfront
investments that will allow us to generate new value.

DNP
AnnualReport2017

8

Q.

How will you achieve greater corporate
value in the medium and long terms?

Kitajima: First of all, we will focus on generating value
by expanding our business, primarily in our “fourgrowth areas.” In order to achieve that, each businessdivision will exert its comprehensive strengths in order
to increase synergetic effects so the entire corporate
Group can work together to seek solutions for social
challenges. By doing so, we will generate new value.
We will also provide more value to the global
market. We believe that the value we create through“P&I innovations” is indispensable not just for people
in Japan, but for people all over the world. We will
provide new value to the global market by respecting
the diversity in different parts of the world and adjusting
the formats of our products and services to meet thosevarious needs.
In addition, we will continue to actively increase
corporate value by means of all kinds of structuralreforms. In order to enhance the profitability of existingand new businesses, we will undertake various structuralreforms—including raising efficiency and reducing costsin our business operations and adjusting our businessframework and operating locations—and boost thecompetitiveness of our businesses.

Q.

What do you mean by generating value
primarily in growth areas?

Kitajima: There are many kinds of social issues currently
in need of solutions. The “Sustainable Development
Goals” adopted at the United Nations Sustainable
Development Summit in September 2015 lists a numberof such issues, and DNP can help solve many of themby leveraging its “P&I” strengths.
By providing society and consumers with new valuethat leads to the solution of social problems in our four
growth areas (Knowledge and Communication; Foodand Healthcare; Lifestyle and Mobility; Environment andEnergy), we will increase DNP’s own corporate value.
Now please allow me to introduce some of our recent
initiatives.

Be indispensable
to individuals andsociety

We will continue to provide “indispensable value” toindividuals and society by applying the combined strengthsof DNP and our partners to the resolution of social issues
that we ourselves have selected as “growth areas.”

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information

Building DNP’s Corporate Value

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Solvingsocial problems

Contributing tosociety

DNP’s growth1

2Lifestyle and Mobility
Environment and Energy

Information Communication
Lifestyle and Industrial Supplies
Electronics
Beverages
AssetsP&I strengths
Make full use of strengths such as printing
and information (P&I) technologies, sales,
project planning and manufacturing● Amalgamate strengths by cooperating within
and beyond the DNP Group●Net assets: 1,081.2 billion yen● Total assets: 1,741.9 billion yen●

Human resources
Number of employees:
38,808 (consolidated basis)(34,060 in Japan, 4,748 overseas)

Intellectual property
Number of Japanese patents held: 12,358

Increase corporate value by means of all kinds of structural reforms

Food and Healthcare

Provide value to the global market

Generate value by expanding business, primarily in growth areas

Select social issues that DNP can help solve; determine business growth areas

Knowledge and Communication

3

Production and sales bases
Number of production bases: 61 in Japan, 16 overseas● Number of sales bases: 38 in Japan, 28 overseas●

Research and development facilities
Research and Development Center
Technology Development Center● Advanced Business Center● Development department of each business unit
● R&D outlays: 31.3 billion yen(in fiscal year ended March 2017)●●(As of March 31, 2017)

9

○

○

DNP
AnnualReport201710

In Knowledge and Communication, our aims are to
support people’s lives through active communicationand to foster rich and varied culture. In addition
to information media and content production, thisarea also relates to the creation of safe and reliablecommunication mechanisms supported by advanced
security technologies.
Since forming capital and business ties with
Nihon Unisys, Ltd. in January 2013, we have beencollaborating in various ways, including strengthening
the business base from which we offer marketingand other services aimed at finance and distribution
companies, jointly developing various marketing
platforms, and promoting global expansion. We havebeen especially successful together in endeavors likeconstructing settlement platforms using international
brand prepaid and debit cards, and electronic moneyrelated systems.
In April 2016, we started collaborating with
Cybertrust Japan Co., Ltd., which specializes inelectronic certification, in order to enhance our online
identity verification services. In September of that year,
we also entered into a capital and business alliancewith Future Link Network Co., Ltd. (FLN) in order toexpand our community-building business by using
FLN’s community information portal site and local
currency points.
The Food and Healthcare area is affected by dramatic
demographic changes around the world including,in Japan, a rising average age and falling birth rate.
Amid these changes, DNP is developing products
and services that support safe, high-quality lifestyles
including support for lifelong health maintenance. In
addition to providing safe and hygienic packages thatpeople can use with confidence for foods, beverages
and pharmaceuticals, etc., we will continue to promotebusinesses related to a variety of other fields suchas agricultural films, regenerative medicine and otherlife science-related fields. In May 2016, we agreed
to a tie-up with SIG Combibloc Group AG, one of
the world’s leading manufacturers of cartons forfood and beverages, and began working to expand
business in the Japanese market. Worldwide, some
10,000 kinds of products are packaged using SIG
systems. Japanese food and beverage manufacturers
have responded very positively to the SIG packaging
because it can be made in unusual shapes rarely
seen in Japan, which will make it easy to differentiate
products on store shelves, and because the cartonscan be filled with a wide variety of contents. We hopeto start full-scale production in the spring of 2018.
We started mass production of “Innovative Barrier(IB) film,” a highly transparent film with excellent
barrier properties, in 1998. We use it mainly for foodpackaging, and for a wide range of other applications.
We are working to build on these achievements bypromoting the development of new products like film
for curveable OLED displays and high barrier films forindustrial use.
○

Concerning Lifestyle and Mobility, we will continue
to provide products and services that deliver very
comfortable, safe, secure living in a variety of settings
including homes, commercial facilities, offices, medical
facilities, automobiles and railroad cars.
For the automotive market, for example, in addition todecorative films with the wood grain and other designs that
we have long supplied for auto interiors, we have developed
new products with excellent functionality. These include“DNP ultra weather-resistant hard-coat transfer film,” which
improves the weather resistance and wear resistanceof resin glass, a lighter-weight alternative to ordinary
automotive glass that helps reduce energy consumption by
reducing auto body weight, and “DNP adhesive films” thatstrongly bond together different materials, such as carbon
fiber-reinforced plastic with metal. In addition, DNP
Tamura Plastic Co., Ltd. has won a large share of
the Japanese market for side visors attached to the
top edges of automobile side windows. We intend todevelop new products by combining DNP Tamura’s
expertise in resin molding with DNP’s strength indecorative technologies and functional films.

○

In Environment and Energy, we are working to realize
a sustainable society that simultaneously supports
economic development and preservation of the global
environment. We intend to work harder than everto develop environmentally conscious products andservices that will help conserve resources and energy
and lead to the preservation of biological diversity. In
February 2017, DNP received the 26th Grand Prize for
Global Environment Award, Japan Business Federation
Chairman’s Prize in recognition of achievements like
DNP Lighting Film, which conserves energy by effectively
reflecting and diffusing sunlight entering a window tobrighten an entire room. DNP Lighting Film can be usedin various settings including residential, office, commercial
or medical facilities and schools, etc. and can be applied
during renovation as well as new construction. As a test,
DNP Lighting Film was applied to laminated glass usedin windows installed on the northern side of a building,where there was little sunlight. The brightness of the roomroughly doubled compared to what it was before applying
the film*1, and the cost of electricity required for lighting
declined by about 13%*2. In energy-related business, DNP
already controls a large share of the world market forlithium-ion rechargeable battery components. In addition
to enhancing the functionality of our photovoltaic module
components, we will work harder to accommodate
demand related to smart houses and smart cities.
*1 Study conducted by DNP: maximum values measured between 9 am and		
6 pm on June 5, 2015
*2 Study conducted by DNP: measured between 9 am and 6 pm on July 2,		2015

Making “tomorrow’s basic”
a reality by generating
new value inour four growth areas

What kinds of social challenges does theworld face today? We identified four growthareas by asking ourselves this question.
We will continue to make use of the printing
and information (P&I) technologies that are
DNP’s core strengths in order to create newvalue that will contribute to solving social
challenges in these areas.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Highperformance
products that
control lightand heat

Expand lineup ofenvironmentallyconscious
products
and services

Establish
systems for
tracing raw
materials

Sustainable
use of natural
resources

Energy creation
Energy storage
Energy saving

Knowledge andCommunication

Stimulation of
paper and
electronic
publications
distribution
markets

InboundandoutboundtourismDevelopment ofmultilingual
communication

We will support people’s lifestyles
through pleasant communicationand provide products and services
that foster culture.

Publishing&Media
Services

Environment andEnergyWe will speed up
development of a variety of
products and services aimed atrealizing a sustainable society thatcombines economic developmentwith environmental preservation.

“Internet of things”
that connects
many things
to the Internet

Safe and reliable
information
platforms

MarketingCommunication

P&I

Display
Components/
Electronic
Devices

INNOVATIONS

Industrial
Supplies

Living Space
Materials

Development ofelectric cars andother nextgeneration
vehiclesInformation
services thatcan be usedsafely ina variety ofvenuesActualizing
a smart societythat comfortably
connects
various spaces

Deployment of
automated
driving systems

Information
Security/
Business Process
Outsourcing (BPO)

Imaging
Communication

Reliablesettlement
solutions

Food and
Healthcare
Amid worldwide
demographic changes,
including a falling birth rateand increasing longevity
in Japan, we will support safe,
high-quality lifestyles andwork to provide new valuethat supports lifelong healthmaintenance.

Packaging

Lifestyle and Mobility
We will continue to provide new valuethat makes it possible to enjoy a highdegree of comfort, safety and security
in a variety of settings including homes,commercial facilities, offices andmedical facilities, automobiles andrailway cars.

Commercializationof regenerative
medicine

More advanced
medical imaging
control systems

Universal design
products
that are easy foreveryone to use

Developmentof products
to help increase
agricultural
productivity

Reduction offood loss
through use ofhigh-performance
films

11

Q.

How will you provide value tothe global market?

Kitajima: DNP provides the value that it creates not only
within Japan, but in a broad variety of locations aroundthe world.
As of the end of March 2017, DNP operated 28 sales
bases and 16 manufacturing plants in 15 countries anda region in North America, Europe, Asia and elsewhere.
Whenever we branch out overseas, we respond
meticulously to the characteristics of each region and theneeds of the people who live there.
Let me offer some examples of our overseas
operations. We are boosting the competitiveness ofour smart card business in Southeast Asia by forming
operational and capital alliances with major card
manufacturers in Vietnam and Indonesia. In Packaging,
we will use our operating bases in Indonesia andVietnam to expand operations in Thailand, Myanmar andother surrounding countries so that we can better serve
global corporate clients. Our Imaging Communication
business, which mainly handles photographic printing
supplies, also earns a high proportion of its net sales
from overseas. In North America, where there is strong
demand for photo printing, we are focusing on securing
new customers by making the most of our two local
manufacturing bases. At our Malaysian plant, too, we will
increase production aimed at the photo ID card market.
Our Electronics segment will keep working to further
expand sales of metal masks for making OLED displays,
a field where we already control the overwhelming
majority of the world market, and to collaborate
with overseas companies, for example by licensing
technologies related to color filters used in liquid crystal
displays. In order to respond appropriately to growing
demand for semiconductor photomasks in China, weestablished a joint venture photomask manufacturing
and sales company there in partnership with Photronics,
Inc. of the U.S. The new company plans to begin mass
production in December 2018.

DNP
AnnualReport
2017

12

Q.

It seems that you are also initiating
various structural reforms.

Kitajima: We are investing a great deal of effort invarious structural reforms aimed at building corporate
value by expanding our businesses and reducing costs,
etc. We are reviewing our business portfolio fromthe standpoints of growth potential and profitability,
and implementing business structure reforms such asorganizational restructuring, consolidation and M&A
strategies.
For example, in April 2016 we consolidated multiple
business units in charge of marketing and information
security-related functions and launched one new
business unit that combines all of their strengths. In
October of the same year, we merged three Group
companies that handle functions like marketing or
information media project planning and production, andestablished DNP Communication Design Co., Ltd.
Then in April of 2017, we launched DNP Digital Solutions
Co., Ltd. in order to strengthen development andoperation of information-related systems. Through solid
cooperation between the new business unit and these
new companies, we intend to promote integrationof marketing and settlement services, bolster thecompetitiveness of our information and communication
technologies and business process outsourcing
businesses, and construct new business models.
In addition, we continue to engage in cost structurereforms aimed at improving profitability. For example,
we are promoting production innovation initiatives aimed
at improving production efficiency by achieving optimal
production through the realization of a nationwide,
uniformly managed manufacturing framework, and byimplementing digital technology-driven “smart factory”
ideas.

Q.

People are looking for activities thatemphasize the environment, society,and corporate governance (ESG),
aren’t they?

Kitajima: Since before ESG became a buzzword,
DNP was already actively involved with the environmentand society and has always engaged in a variety ofcorporate activities in parallel with enhancing ourcorporate governance.
First, regarding the environment, DNP’s businessactivities benefit from nature’s abundance in a variety
of ways, such as procurement of raw materials fromforest resources and the use of water and energy in
our manufacturing processes. That’s why we are always
thinking about how to coexist with the global environmentand seek to operate sustainable businesses.

Concerning society, we build trust with our many
stakeholders by engaging in honest, good-faith corporate
activities. In addition, as I explained earlier, we work to
expand our business by solving environmental and othersocial issues related to our four growth areas.
In regard to governance, we construct and implement
systems for making decisions that support appropriate
and comprehensive management, for appropriately
and promptly conducting business based on thosedecisions, and for supervising the functions I justmentioned. In June 2016, we determined to makea smaller board of directors in order to speed up
management decisions so we can keep pace with therapidly changing business environment. Accordingly,
we reduced the number of directors by six from 18
in the previous year, giving us a total of 12 directors
including two independent (outside) directors.
DNP has received a great deal of praise for thesetypes of ideas and initiatives, from general society
as well as from investors. For example, DNP has
been included in many indices of socially responsible
investments, most notably the FTSE4Good Global
Index for 17 consecutive years, and the Dow Jones
Sustainability Indices (as of July 2017). Selection forthese indices is based on information disclosed by
the Company through various reports and websites,
etc., as well as on independent research. DNP is highly
regarded for, among other things, promptly and properly
disclosing both financial and nonfinancial information.

Q.

DNP has become an official partner of
the Olympic and Paralympic GamesTokyo 2020, hasn’t it?

Kitajima: We view these Games as important
opportunities from a business as well as social standpoint,
so we became an official partner* in October 2016.
For the Olympic Games Tokyo 1964, DNP tookcharge of printing Games tickets, commemorative
stickers, and posters. For the Olympic Winter Games
Nagano 1998, we were responsible for issuing
accreditation (ID) cards and supported the operationsof the Games by providing a variety of products andservices.
Based on these experiences, we would like to provide
various types of support for the success and smooth
operation of the Olympic and Paralympic Games Tokyo
2020. These may include printing services that makeuse of advanced anti-counterfeiting technologies, bywhich we can produce Games tickets, accreditation
cards, and various kinds of announcements needed
to generate excitement for the tournament, as well as
operational skills and services. We will also increasecooperation with other official corporate partners.

Q.

What are your thoughts regarding
shareholder returns?

Kitajima: Our basic policy is to pay stable dividends
while taking into consideration business performance,
dividend payout ratio, and other relevant factors.
At the same time, we support future businessdevelopment by using retained earnings to enhance ourfinancial constitution and strengthen our managementbase. We allocate retained earnings for such purposes
as investment in research and development of newtechnologies and new businesses, capital investment,
and strategic alliances, mergers and/or acquisitions,etc., that enable us to actively create new businesses.
We also keep our eyes on our funding requirements andmarket trends as we consider whether to repurchasetreasury shares as a means of returning profits toshareholders.
Historically, we increased our annual dividend payout
each year for six consecutive years, from 18 yen in
the fiscal term ended March 2003 to 36 yen in the term
ended March 2008. In the fiscal year ended March 2009,
the year in which financial crisis followed the collapse of
Lehman Brothers Holdings Inc., we reduced the payoutby 4 yen to 32 yen, and we have maintained our annual
dividend payout at 32 yen for nine consecutive years
through the year ended March 2017.
DNP repurchased treasury shares for seven consecutive
years from the fiscal term ended March 2003 until theterm ended March 2009. We also did so in the fiscal
terms ended March 2016 and 2017, resulting in theretiring of a total of 141.31 million shares, or 18.6%of the total number of issued shares. In the fiscal year
through March 2018 we plan to continue this trend andretire up to 15 million shares worth up to 15 billion yen.
DNP positions the return of profits to our shareholders
as an important management responsibility, and I
hope that shareholders will understand the Company’s
policies and perspective in this regard.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Going forward, we will be grateful for continued
guidance and cooperation from all of our shareholders.

* DNP is an Official Partner (Printing Services) of the Olympic and Paralympic
Games Tokyo 2020.

13

DNP
AnnualReport201714

Special Feature:

Today’s Innovation is Tomorrow’s Basic

P&I Innovations
DNP strives to provide new value that will help solve society’s challenges, primarily infour growth areas: Knowledge and Communication; Food and Healthcare; Lifestyleand Mobility; and Environment and Energy.
The “Sustainable Development Goals” adopted by the United Nations lists a numberof the challenges for which corporations and other entities around the world are being
asked to look for solutions. DNP will meet those challenges by refining and synergizing
the strengths in printing and information technologies that we have been cultivatingover the course of our 140-year history.
This Special Feature section contains a message from our management andexamples of cutting-edge DNP projects, in order to introduce “P&I innovations” thatgenerate innovative value by making use of all of DNP’s abilities, including in areas
like sales and project planning, manufacturing and production control,
intellectual property and branding, in addition to our core technological strengths.

CONTENTS
16

Message from Management

20

Expanding DNP’s Business Areas
by Applying and Developing Technologies
22Internet of Secure Things (IoST) Technologies

24

Electron Beam (EB) Technologies

26

Film Technologies for OLED Displays

28

Medical Information Processing Technologies
15

P&I Innovations
We create new value
with P&I innovations.

ToshikiSugimoto
Senior Corporate Officer
Research andDevelopment Center

DNP
AnnualReport201716

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief

DNP has created many products that command top market share by using our core technologies:“Printing and Information technologies” that we have developed since the foundation of
the company in cooperation with companies around the world.
We will continue to develop a variety of products and services that will become “basics” of

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section

everyday life in the future.

108 Appendix

DNP’s capacity for technological development iswhat has enabled the expansion of our business areas
While the industrial structure in Japan has changed dramaticallysince DNP was founded, we have succeeded in expanding
into a wide variety of industrial fields. For example, bywidening the range of materials on which we print, fromprinting paper to cardboard, plastic films, cloth, metal plate,glass and more, we have been able to develop and supply awide variety of products.
Until supermarkets started appearing in the 1950s, many
products were sold by weight at retail shops, but this system
all but vanished with the start of pre-packaged productdistribution. This trend in turn gave rise to demands for colorful
packages, mostly for processed foods, cosmetics andhousehold items, that would not only preserve their contents ina hygienic manner but also stimulate consumers’ desire topurchase upon being noticed at the store, and DNP’s
packaging operations contributed to making such packages
popular. During the period of rapid economic growth inJapan, DNP supplied interior materials printed with wood-liketextures and patterns as the housing supply was expanded.
Today, DNP’s “printing” can be found on a large number of
items that are used in everyday life.
Photolithography, one of the techniques used for preparing
printing plates, could also be used for making precise patterns
required for manufacturing many electronics products. In 1958,
we succeeded in producing shadow masks, components thatwere essential for manufacturing cathode ray tubes used incolor televisions. DNP then contributed to the spread ofJapanese-made color televisions by mass-producing shadow
masks. Since then, we have provided a number of importantcomponents, such as color filters for liquid crystal displays(LCDs) and deposition masks used in the manufacture oforganic light-emitting diode (OLED) displays. We also utilized
photolithography in the manufacturing process in thesemiconductor field, and further developed it as a technology
for manufacturing integrated circuits and also large-scale
integrated circuits (LSIs). Today photolithography is the basic
technology of “nanotechnology” that enables us to operate at
the nanometer (1 billionth of a meter) level.
DNP was also one of the first printers to introduce digitaltechnology in its printing production processes; in the early
1970s, we started working on computerized typesetting
systems (CTSs) for prepress processes. After that, weconstructed advanced systems capable of rapidly processing
large amounts of text and image data that enabled us topromote digital media such as CD-ROMs, DVDs, andwebsites. Once digitized, all kinds of information can beprocessed in a variety of formats including printed papermaterials and electronic books. DNP’s competency inhandling both paper and electronic media is an advantagethat we use in such businesses as multi-format publication
planning and production, and development of our “honto”
hybrid bookstore network that links online and in-store salesof paper and electronic books. Meanwhile, increasing
digitization and networking have led to the need for a higher
degree of information security. In addition to printing
holograms and other anti-counterfeiting devices on smart
cards and other products, DNP has been focusing on
reinforcing security related to various types of software
applications and networks.
In addition, we are working on more ways to use theadvanced image processing technologies that we havedeveloped through printing services in order to enrich people’s
lives, for example, by applying them to the life science field.
These are some of the ways in which DNP has expanded its
business areas by valuing, refining and synergizing
technologies in order to seize new business opportunities.

17

Promoting P&I innovations—Providing new value by taking the initiative to solve social challenges
As shown in the diagram of basic printing processes on pages
20-21 of this report, “Project planning and design” processes
relate to “Information processing” capabilities; “Microfabrication”
techniques used for preparing printing plates lead to thedevelopment of “Precision coating” technologies, i.e. theapplication of thin layers of ink or other substances, and“Post-processing” technologies for making products ineasy-to-use formats are related to commercialization of final
products. DNP takes the various technologies involved inthese printing processes, refines them and creates synergies bycombining them with state-of-the-art technologies from fields
such as material development, evaluation and analysis, “Kansei(sensibility) analysis,” brain science, the Internet of things (IoT),
and artificial intelligence (AI).
As one of the very few comprehensive printing companies
in the world, DNP possesses an abundance of top-classtechnologies and capabilities related to printing (P) andinformation (I). Our goal is to create innovative new value thatsolves social problems by flexibly combining these P&I-basedstrengths with other capabilities including sales and projectplanning, manufacturing and production management,
intellectual property and branding. In our “DNP Group Vision
2015,” we call these solutions “P&I innovations.”
Smart cards provide a good example of how this process
can work. A smart card is a plastic card with an embedded
IC chip. In the 1970s, DNP launched a “P” business of printing
on plastic cards. From the 1980s, we started adding “I” value
related to smart card development. For example, we developed
all types of software needed for safe financial transactions. After
receiving outsourcing contracts from financial institutions, westarted handling card issuance processing including encrypting
customer information, writing that information onto IC chips,
and mailing a card to each customer. In other words, wedeveloped this business into a diverse set of outsourced
business processes. In addition, we began offering merchants
who accept international brand cards like VISA, Mastercard and
JCB, a platform for prepaid electronic settlement services as analternative to payment by credit card. DNP has created a large
number of innovations through these types of sophisticatedcombinations of “P” and “I” technologies.

DNP technologies give rise to new value■ Realizing a more convenient society for■ consumers

DNP
AnnualReport201718

As an example of how DNP creates new value, let us introduce
a recent development related to distribution and sales promotion,
whereby DNP serves to connect retail stores and consumers.
After starting with paper media such as newspaper inserts
and product brochures, our sales promotion-related businessbranched out to include advertising and distribution ofpromotional campaign information and coupons, etc., throughwebsites accessed via smartphones or other information
devices, for e-commerce as well as more traditional sales. In
recent years, as lifestyles have become more diverse,
advertisers no longer seek to deliver the same information to
everyone at once, but rather to transmit personally optimized
information at the best time for each individual. In order to doso, it is necessary to understand the behavior of individual
consumers. DNP has synergized big data with artificial
intelligence (AI) technologies like deep learning in order todevelop its “diip digital marketing platform,” a service thatsystematically analyzes and utilizes information related toconsumer behavior.
The “diip”service quickly aggregates data related toconsumers’ behavior at both physical and online stores andbusinesses. It then uses sophisticated functions to analyze thosedata, to determine the most appropriate types of information foreach person—including the most suitable products—and todeliver the information via a combination of paper and digital
media at optimal times according to each person’s lifestyle.

■ For safe and reliable communication
At the same time that the importance of information in society
is rapidly increasing and IoT and AI usage are becoming
more widespread, risks related to cyber-attacks and various
Internet crimes are also becoming more serious. In response tothis growing risk, there is strong demand for secure andpleasant communication. As it works to provide solutions thatmeet this demand, DNP is employing technologies andexpertise related to advanced information security, digitizationand networking.
Based on our recognition that safety is essential for the IoT,
our goal as we work to develop the systems and services
necessary for a high level of information security is to achieve
an “Internet of Secure Things” (IoST). For example, in addition
to using authentication and encryption technologies that wehave developed in our smart card business to protect various
types of IoT devices from unauthorized use, DNP also
provides “CrackProof” software that protects applications
from a variety of risks including hacking and analysis aimed atreverse engineering. As part of our comprehensive
information security business, in 2016 we established Cyber
Knowledge Academy Co., Ltd. to train people to handle
cyber-attacks against corporations. The academy provides a
training environment that enables trainees to acquire,
maintain and upgrade the skills they need to be able torespond to previously undiscovered new cyber-attacks.

■ Manufacturing to evolve people’s lifestyles

our printing business. In addition, we were able to establish
a pathway for the development of culturing vessels of thequality required to make regenerative medicine practical.
Furthermore, as printing processes, including information
processing, have become increasingly digitized andnetworked, we have been investigating the potential ofvarious information processing technologies that DNP has
developed to be used in medical imaging and medical
information systems. Together with PSP Corp., with which
we established a capital and business alliance in December
2014, we are developing a medical image management
system called Picture Archiving and Communication System(PACS), and working to develop systems that automaticallyanalyze X-rays, CTs, MRIs and other images to support
diagnosis of breast cancer and other diseases. In addition,
DNP is promoting a remote medical imaging diagnostic
support business that uses IT to transmit images recorded
at regional hospitals or clinics to radiologists in remotelocations and to return diagnostic reports from theradiologists to the requesting facility.
Although we have already produced some impressive
achievements through our P&I innovations, DNP’s P&I
technologies still have more tremendous potential. By
considering social problems that consumers face in their
daily lives and working hard to solve them through one
innovation after another, we believe that we can create asafe and secure society where people can live pleasant andcomfortable lives. We intend to continue creating new value
by enhancing and synergizing our P&I strengths.

Next we’d like to introduce examples of technicalinnovations related to manufacturing.
In order to display an image by using liquid crystals, wemust use “orientation technology” to form the liquid crystal
materials so they will be aligned precisely in an arbitrary
direction. In order to exhibit high-level optical performanceon thin and flexible film substrates, we have developed
novel precision coating technology and new materials thatenable liquid crystals to be aligned accurately.
We are using these technologies to develop products likeretardation films that correct the coloration of OLED displays,
and dimming windows that control the amount of transmitted
light without the use of mechanical blinds.

■ Supporting lifelong health maintenance
DNP started to expand its business area into the life sciencefield about 10 years ago, by sending some researchers to auniversity hospital that was conducting advanced researchin regenerative medicine and other state-of-the-art areas.
At the time, not a few people seemed to think it was rather
strange for a printing company to begin doing medical
research. However, in regenerative medicine, there is aneed for cell-culturing dishes that enable various kinds ofcells to be cultured uniformly, or to be cultured in specificpatterns, or to be peeled off in sheet form from the dish.
DNP has been able to meet these demands by processing
the surface of cell-culturing dishes using microfabrication andsurface processing technologies that we developed through2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Various technologies that support “P&I innovations”

Etching
processing
Precision
engraving
Living spacedesignPrecision
coating

Photolithography

Microfabrication
Branding

Publishingsolutions

PackagingdesignFonttechnologies

Sales promotion

Dispersion
andcomposition

Materials
development

Authenticationandencryption

AI

IoT

Process
simulation

Assessment
andanalysis

Databaseanalysis
Optical design
Kansei(sensibility)
analysis

Pigments andphotosensitive
materials
Biomass
plastics

Biocompatible
materials

Big data
analysis

Process andmaterial
diagnosis

Organic synthesis
technologies

3D imageprocessing

Data analysis
Naturallanguageprocessing

Modularization
technologies

Organicinorganic hybrids

Information
security

Text processing

Assay design
Transfer
processing

Laminating
technologies
Polymer materials

Image
processing andrecognition

Information
processing

Nanoimprinting

Plastic forming

Postprocessing

VacuumdepositionMedia
conversion
technologies

Molding

Aseptic filling
processing
Electron beam(EB) andUV curing

Coating
Hologram

Project
planning anddesignBookbinding
processing

Printing

Liquid crystalalignment

Brain science

Computersimulations
Cell culture

Deep learning

19

Expanding DNP’s Business Areas
by Applying and Developing Technologies
DNP is one of the largest comprehensive printing companies in the world. We provide a variety of
products and services in a wide range of business areas to consumers and some 30,000 corporateclients in Japan and around the globe. DNP’s main strengths are the printing and information technologies
that it has cultivated since its founding in 1876. The Company has used these technologies to branch out
from book, magazine, and commercial printing into diverse fields including packaging, decorative materials,
display components, and electronic devices, and has developed many products in which
it holds the world’s largest market share.

Feedback
Publishing solutions
Sales promotion design
Information design
Packaging design

Optical design

etc.

Plan and design products;
design every process fromselecting materials andprinting methods
to delivery.

Example of pub(offset printing)

Manuscript/
Information processing

Information
Processing
Digital font

Basic
Proce

Project planningand design

Living space design

Create layout data consisting of integrated text and image data.

Process information
appropriately while
controlling its security

FilmmakingApplied to digital media,
information security,and other fields

PlatemakingColor separate data into four colors(CMYK*) and output printing data for eachcolor onto film (film making). Transfer
the information from each film to a metal
plate to form a master (plate making).

Font technologies
Media conversion
technologies
A paper book, e-book, andhybrid bookstore membership card

Image processing andrecognition
Data analysis
Information security

etc.

Microfabrication
Form minute patterns on metal surfaces
Applied to electronics, life science, and other fields

Color management LSI

DNP
AnnualReport201720

Smart card

Etching processing

Molding

Precision engraving

Hologram

Photolithography

Color filter (magnified view)

Photomask* C for cyan, M for magenta, Y for yellow, K for “key plate” (black)

Touch panel sensoretc.

2 Synopsis of
Performance
6 Message toShareholders
Aseptic filling system for
PET plastic bottles

14 Special Feature
30 DNP in Brief
40 Segment
Information

Biomatech® biobased
packaging materials

Effectivenessassessment

54 How DNP Works to
Achieve Sustainable
Development
Pouch for lithium-ion
rechargeable battery

Product delivery

Printing inspection equipment
for printed materials

72 Financial Section
108 Appendix

Post-processing
Form into easy-to-use shapes
Stabilize development qualityof aseptic filling systems andother packaging products;
improve productivity

Binding andpost-processing

Printing
sses

Bookbinding processing

Collate and bind printed pages
together to form books.

Aseptic filling processing
Plastic forming
Laminating technologies
Transfer processing

lication printing

etc.

Printing
Wrap plate around roll, supply ink, and perform high-speed,
high-precision printing.

Transparent barrier films

Precision Coating
Apply a thin, uniform layer of ink

Residential interior materials(floor coverings)

Combine material design with technologies
like film thickness control, multi-layering,and surface processing in order to provide functionality
Printing

Coating

EB and UV curing

Vacuum depositionetc.

Dye-sublimation thermaltransfer printing media

Anti-reflection films

21

Businesses that DNP created by applying and developing technologies

IoST ® Technologies
Information security initiatives aimed at helping society
use the IoT safely and reliably
The “Internet of Things” (IoT) is a world in which many things have built-in sensors and connect directly
to the Internet so that they can collect and exchange information. As use of the IoT becomes morewidespread, it is becoming increasingly likely that lifestyles and business styles are about to radicallychange. Along with hopes for a more comfortable future comes increasing risk of global-scale cyberattacks. With cyber attacks becoming more organized and more sophisticated, corporations and public
entities have been hit by shutdowns of their information systems, information theft, and other problems
arising from security breaches.
That is why DNP has set to work to solve social problems related to information security; we aim to
make the “Things” of the IoT “secure,” i.e. to make it an “Internet of Secure Things” (IoST®).

■ Improving device security■ by using technologies that we cultivated■ in our smart card business
Cryptographic protocols like SSL (Secure Sockets Layer) andTLS (Transport Layer Security) have been used for years to
encrypt data transmitted by Internet as a security measure for
e-commerce and other online services. However, we do not
yet have adequate security measures for handling dataexchanged with IoT devices.
DNP is working to address this problem and improve thesecurity of IoT devices by embedding in them an IC chip thatincorporates the same high level of security used for smart

Kunimitsu
Sato
Deputy General Manager
Communication & Information Center
Information Innovation Operations

DNP
AnnualReport201722

cards. Using this IC chip to safely store important data, suchas electronic certificates, individual IDs used for personalauthentication, and data encryption keys, will guard against
malicious outsiders seeking to tamper with or illicitly acquiredata, or to impersonate a legitimate user.
DNP became one of the first in its industry to enter thesmart card business in 1981, and it was through developing
smart cards that DNP cultivated the abilities necessary forsolving this problem. In addition to the counterfeiting
prevention technologies that we had already developed inorder to safely print and process stock certificates, cash
vouchers, and other valuable certificates, we had to develop
technologies for securely managing networked data as wehave continued to lead the domestic smart card market fromits inception: for example, we developed smart card operating
systems and applications, we developed and operate card
issuance processing systems, and we manage the onlinetransmission of card-related data. According to our own
research, DNP currently controls about 55% of the Japanese2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

market for credit cards (in terms of the number of cards
produced) and about 80% of the market for cash cards(in terms of the number of orders received). DNP produces
about 150 million smart cards per year in Japan. We haveapplied the strengths we acquired through our smart cardbusiness to the construction of advanced personal authentication
technologies for use in a wide variety of information platforms
including SIM cards used in smartphones. Now we intend toextend our reach further, to the IoT.

■ DNP’s “IoST Platform”
In the future, the number of IoT devices is expected toincrease sharply, climbing as high as 50 billion units
worldwide by 2020 according to a forecast by Cisco Internet
Business Solutions Group. With the advent of the “IoT society,”in which many of the devices that surround us in daily life will
① Mutual authentication

IoT services② Establishment of
secure session

OK!

IoT services

become contact points for information exchange, information
security is becoming more important than ever.
In answer to this growing need for information security,
DNP proposes to create an “Internet of Secure Things” (IoST).
Based on our awareness that information security is vital to
the IoT, DNP will focus on developing products and services
for the secure version that we call the IoST.
By utilizing the information processing and security
technologies that we cultivated through the development ofsmart cards, DNP’s “IoST Platform” will appropriately expand thescope of IoT applications while solidly protecting information
pertaining to companies and private citizens. By creating a secure
information infrastructure that safely and securely connects
cloud environments and IoT devices, we intend to support asociety that can truly enjoy the convenience of the IoT.

③ Exchange ofcorrect information

IoT services
IoST Platform

OK!
SecureEncrypted
communication

OK!

IoT device

IC chip

Unique ID
crypto key
Certificate

IoT device

IC chip

Correct
data

network
Firmware

IoT device

Device management• Monitoring, remote control• License management• Firmware updating• Secure bootIC chip management• Issuance, management andupdating of keys and certificates

IC chip
Unique ID
crypto key
Certificate

23

Businesses that DNP created by applying and developing technologies

Electron Beam (EB)Technologies
Approaching technology with the consumer in mind——Taking our environmentally conscious floor coverings to world markets
Electron Beam (EB) coating technology is one of DNP’s core technologies. It allows us to instantly improvethe durability of resins and coating films by exposing them to electron beams. We use this technology inthe development of highly scratch-resistant, abrasion-resistant, and soil-resistant decorative sheet usedas building material. Amid increasing awareness of the need to protect our global environment, DNP set
about to develop decorative floor coverings made with environmentally conscious resin films.

■ Using EB technology to develop■ environmentally conscious decorative sheet
A wood grain pattern emerges gradually as layers of color are
overlaid in stages on resin film. In the mid-1990s, polyvinyl
chloride (PVC) film printed with wood-grain patterns was
widely used as decorative sheet in the Japanese building
industry. However, as plasticizers used in the manufacture ofthis sheet, as well as hydrogen chloride gas, dioxin, and othersubstances generated during burning of the sheet, were foundto have damaging effects on the global environment and on
people’s health, the development of PVC-free products
became a hot topic.

IchiroKawahata
General Manager
Development Division
Living Space Operations

DNP
AnnualReport2017

24

Polyolefin is a kind of plastic that turns into mainly water andcarbon dioxide when burned completely, with no hydrogenchloride or dioxin released. However, polyolefin film wasproblematic in that it is less durable than PVC film. By
employing EB technology, it became possible to use polyolefin
as PVC-free decorative flooring that resists scratches,abrasion, and dirt. According to our research, DNP currently
controls about 60% of the Japanese market for composite
flooring sheet made with PVC-free surface material.
Composite flooring—consisting of decorative sheet laminatedonto the surface of a base material (generally plywood orlaminated timber)—is less susceptible to the sunburn orcracking that may appear in natural wood floors as they age.
Choosing composite flooring also makes it possible to obtaina desired quantity of flooring with a consistent color andpattern.
Demand for this type of environmentally conscious flooringmaterial is now growing in parts of the world where there is astrong awareness of the need to preserve the global

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

environment. However, flooring developed to Japanese
specifications will not necessarily pass muster in other parts of
the world. Especially in places like Europe or North America,
where people wear shoes inside the house, a higher degree ofresistance to scratching and wear is required compared towhat suffices in Japan, where people generally do not wear
shoes inside their homes. With that in mind, DNP first studied
living environments and lifestyles in Germany and other European
countries, investigated flooring material requirements, andemployed EB technology to meet the flooring quality standards
established by the European Union. As a result, in 2015 a
number of European companies began to use DNP’s PVCfree decorative sheet for flooring, and today it is sold in every
European country. Sales of DNP’s EB products are also growing
within Asia, and the distribution area is expanding. For example,
EB products were introduced for sale in South Korea in 2016.

■ With full attention to both functionality and■ aesthetics, we ventured into Europe,■ the land of cutting-edge interiors
In order for our highly durable, environmentally conscious
decorative sheet to be accepted all over the world, we need
continuous technological innovation along with novel ideas formaking wood grain and other aesthetic designs. People tend
to choose flooring materials based first of all on appearance.
DNP’s surface design experts work the surface of the natural
wood that we use as our “original manuscript” until it issmooth and polished, coat it, scan it, and use that data as thebasis for designing natural wood grain patterns that evoke apleasant sense of rhythm and balance in the eye of the viewer.
Even among wood grain patterns, there are fashion cycles
and fads. A few years ago, flashy designs with large knots
were popular, whereas more recently lacy, elegant patterns
are in favor. One of DNP’s specialties is the fabrication ofnatural wood-like textures ranging from delicate, smoothsurfaces to uneven surfaces with relief features.
DNP attaches a good deal of importance to the European
market as a leader in global design trends. Adoption of our
products in Europe gives us a good foothold from which toenter other international markets. Going forward, we plan toexpand our lineup of more specialized designs with nichemarket appeal that European manufacturers are not equipped
to handle, such as stone-like or metallic-looking textures foruse in high-end products. In order to expand our PVC-freedecorative sheet and other Living Spaces businesses, DNP
will continue to build the brand value of its products and takeon the challenge of entering world markets.

Electron beam exposure (illustration)

25

Businesses that DNP created by applying and developing technologies

Film Technologies for
OLED Displays
DNP technologies support organic light-emitting diode (OLED) displays—the next-generation electronic display
OLED displays offer excellent color reproduction compared to liquid crystal displays. Also, because they are basedon self-luminescent organic substances that can deliver high-performance from a simple structure, many people consider
them to be innovative components that will enable production of lighter, thinner, more energy-efficient devices.
Another reason OLED displays are attracting attention as the next-generation display is the expectation thatin the future they will enable the production of bendable and curveable products.
Metal masks supplied by DNP are essential to the production of an OLED display’s core. DNP also
produces and sells specialized films with optical functions that make OLED displays even more
appealing to the eye. To make these optical films with their specialized functions, DNP employs the liquid
crystal coating technologies that it developed by synergizing materials technologies with
precision coating technologies that it has cultivated over the course of many years.

■ Expansion of the OLED display market■ and the new value that DNP provides
OLED displays are being heralded as the next-generation
display to follow liquid crystal displays.
Because these innovative displays can emit their own red,green, and blue light by means of special elementscomposed of an organic substance, they can deliver muchbetter color reproduction and contrast compared to displays
made with the currently prevalent liquid crystal technology.

Koichi
Mikami
General Manager
5th Development Division
Fine Optronics Operations

DNP
AnnualReport2017

26

Because of these advantages, usage of OLED displays isincreasing in a wide variety of settings, from digital signage
seen on street corners to large-scale televisions, smartphones
and even small wearable devices.
With OLED displays already in use in advanced smartphones
worldwide, the global market for OLED panels made forsmartphones is expected to reach 18.6 billion U.S. dollars in
2018, representing a 75% increase over 2015 and exceeding
the 17.6 billion U.S. dollars forecast for the 2018 LCD
smartphone panel market according to research by IHS Inc.
OLED displays also have disadvantages: their contrast
can decline markedly as a result of reflected sunlight or otherexternal light, and the colors they display appear differently
when viewed from a diagonal position. To eliminate thesedrawbacks, DNP has developed a special optical film. DNP

2 Synopsis
Synopsis ofof
Performance
Performance
6 MessagetoMessage toShareholders
Shareholders
Feature14 Special
Special Feature
30 DNP in Brief
Brief
40 Segment
Segment
Information
Information
DNP Works
Works toto
54 How DNP
Achieve
Sustainable
Achieve Sustainable
Development
Development
72 Financial
Financial Section
Section
108 Appendix
Appendix

first made this film—called “retardation film” for OLED
displays—by using a special liquid crystal material developed
in-house together with DNP’s proprietary precision coating
technologies. Today, DNP’s retardation film is used in a large
number of international brand smartphones and televisions.

■ Making the most of our strengths in■ various printing technologies to support■ the future evolution of OLED displays

Preventing reflection of external light from an OLED display

Surface material
Polarizer

Liquid crystal-coated retardation film

EL layer

EL layerLight
cannotpass
throughthepolarizer

OLED display

Circular polarization plate

Based on the various technologies we have cultivatedthrough our printing business, DNP has developed products
aimed at helping make OLED displays more popular.
Manufacturing OLED displays involves lining up lightemitting elements made of organic material to form ultrafine
patterns. Essential to this process are ultrahigh-precision
products called “metal masks,” which are made using DNP’sproprietary microfabrication technologies. After weundertook to develop these metal masks in 2001, it took
many years of trial and error before we were able tointroduce metal masks that can support the highperformance of today’s OLED displays.
From the beginning of the 2000s, we continued to refine
the specialized coating technologies required in order touniformly align liquid crystal on film. We were first able toshow the value of this type of specialized film in the
manufacturing of 3D liquid crystal televisions. Later, with the
emergence of OLED displays, we developed our liquid
crystal coating technology even further, leading to thesuccessful production of our retardation film.

In addition to OLED displays’ high performance in terms ofcolor reproduction capabilities, there are also expectations
that in the future it will be possible to develop applications
requiring flexible displays that can be bent or curved. Towardthat end, the displays will need a high degree of flexibility anddurability while remaining thin and lightweight. In order tomake a reality of this type of “display of the future,” DNP willfurther refine the technologies that we have been cultivating
all along, and continue working to provide new value.

EL layer

Reflective electrodeHigh contrast can be maintained by having an electrode inside the
OLED display absorb reflected sunlight or other external light27

Businesses that DNP created by applying and developing technologies

Medical Information
Processing Technologies
Developing businesses and technologies withmedical doctors and technicians in mind——Applying printing-based technologies in
response to demand for medical information services
Amid today’s “ultra-aging” society, DNP has undertaken to develop products and services that support consumers’
health maintenance.
We aim to synergize our P&I strengths with other technologies, including biotechnology, in order to expand our life
science businesses.
● Life science businesses that DNP is developing:

Medical supplies

Medical image processing■ Expanding businesses related to■ medical information systems
As one of the life science business fields that DNP isdeveloping, medical image processing makes use ofadvanced information processing technologies that DNP has
developed in its printing business. We have formed a capitaland business alliance with PSP Corp., a major player inJapanese medical imaging management systems, with whom
we are collaborating especially to promote a picture archiving
and communication system (PACS).

Yasunori
Kurima, Ph.D.
Deputy General Manager
1st Business Development Unit
3rd Division
Advanced Business Center

DNP
AnnualReport201728

Preventative medicine

Regenerative medicine

PACS performs total management of all of the digital
images recorded in hospitals, whether by X-ray, CT, MRI orother equipment, and makes the images available to all of thehospital’s departments. In particular, radiologists need to beable to view a large number of these types of images within ashort time, in order to make timely diagnoses. A PACS
supports doctors in making image-based diagnoses by
providing a wide variety of image processing functions.

■ Using image processing technologies■ developed through printing to create■ support functions for image-based diagnosis
To date, DNP has made use of its strengths in image
processing technologies to develop image processing LSIs
capable of reproducing natural-looking colors that are gentle
on the eyes and can correct distorted images. In addition, we
have been collaborating with Tokyo Medical and Dental
University to research and develop image analysis
technologies for using MRI images of eyeballs to investigate
causes of pathologic myopia, which is common among
Japanese people.
We plan to further develop these technologies in order tocreate computer-aided diagnosis (CAD) systems to support
diagnosis of breast cancer and other diseases byautomatically analyzing image data obtained from X-ray, CT
or MRI, etc. As we progress in this development, we also
intend to work to improve the accuracy of automatic analysis
by adding 3D imaging, artificial intelligence, and machinelearning functions.

2 Synopsis
Synopsis ofof
Performance
Performance
6 MessagetoMessage toShareholders
Shareholders
Feature14 Special
Special Feature
30 DNP in Brief
Brief
40 Segment
Segment
Information
Information
DNP Works
Works toto
54 How DNP
Achieve
Sustainable
Achieve Sustainable
Development
Development
72 Financial
Financial Section
Section
108 Appendix
Appendix■ Remote medical imaging diagnostic■ support services that contribute■ to regional medical care
In the field of community medical care, CAFI (Center for
Advanced Functional Imaging in medicine) Corporation, a
DNP subsidiary, that is developing a remote medical imaging
diagnostic support business. The background of thisbusiness is that there is a shortage of radiologists throughout
Japan, and the number of images to be checked has been
growing dramatically as diagnostic imaging equipment has
become faster and more advanced, thus increasing pressure

on image-based diagnosis systems.
Our remote medical imaging diagnostic support business
uses information technology to help relieve this pressure bytransmitting images recorded in local hospitals and clinics toradiology specialists in remote locations and then returning
diagnostic reports. By handling patients’ very important andconfidential information through our DNP Kashiwa Data
Center, which has advanced information security functions
and a highly secure network environment, we ensure thesafety of data exchanges between local medical facilities andradiologists and provide specialized environments for thereading of image data by radiologists.

CT

Mammography

MRI

Picture archiving andcommunication system(PACS)

Hospital

X-ray

Database

Endoscopy

ViewerRemote diagnostic
image serverRadiologist

29

DNP
in Brief

CONTENTS

DNP
AnnualReport
2017

30

32

DNP at a Glance34

Our Products and Services

36

Evolution of DNP’s Businesses

38

Investor Information

Exact reproduction of the 1867 Japan-Denmark Treaty of Friendship, Commerce and Navigation, produced by DNP

DNP at a Glance
ProfileBusiness Portfolio■■

A business portfolio that is balanced
in terms of stability, profitability,■ growth potential, and business risks

A comprehensive printing company
that creates new value by means of“P&I innovations” that make use of strengths
related to printing (P) and information (I)DNP is a comprehensive printing company that provides a variety
of products and services in a wide range of business fields toconsumers and some 30,000 corporate clients in Japan andaround the globe. Since its founding in 1876, the Company has
branched out from book, magazine and commercial printing into
diverse fields including packaging, decorative materials, display
components, and electronic devices, and has developed many
products for which it holds the world’s largest market share.
Today, DNP is committed to creating “new value” to help solve
society’s challenges with a focus on four growth areas and its “P&I
innovations” business vision. The four growth areas are Knowledge
and Communication, Food and Healthcare, Lifestyle and Mobility,
and Environment and Energy. “P&I innovations” means refining andcombining our strengths related to printing (P) and information (I) in
order to create innovative new value.
From early in its development, DNP set about boosting theefficiency of the overall Group’s management by promoting overall
optimization and working to boost profitability and make effective
use of management resources, etc. We have been working toincrease corporate value by undertaking a variety of structuralreforms. For example, we consolidated a number of functions suchas project planning, sales, research and development within our
corporate headquarters, and distributed manufacturing divisions
and specific technology development units among Group
companies.
As of March 31, 2017, the DNP Group employed 38,808 people
and had 38 sales bases and 61 production plants in Japan.
Overseas, the Group has 28 sales bases in 15 countries and aregion, and 16 production plants in seven countries and a region.
Overseas sales contributed 14.4% of the Group’s overall net sales
in the fiscal year ended March 2017.

■

DNP has two main businesses: Printing, which contributes about
96% of consolidated net sales, and Beverages, which generates
about 4% of the Group’s sales through Hokkaido Coca-Cola
Bottling Co., Ltd. Armed with this business portfolio, DNP aims tocontinue expanding its businesses and increasing its corporate
value by striving to solve problems faced by corporate clients,
consumers, and society.
Printing: Especially by making use of DNP’s strengths in printing
and information technologies, we have established a wide variety ofbusinesses that solve problems for companies of various formats
working in diverse industries, as well as for individual consumers
and society as a whole. Within Printing, the Information
Communication segment consists of publishing-related businesses
including the printing of books and magazines where DNP got its
start; Information Innovation businesses including commercial
printing and other marketing-related businesses as well as smart
cards and information security; and Imaging Communication
businesses that handle everything to do with images. The Lifestyleand Industrial Supplies segment supplies a wide range of products
and services including packaging products, decorative materials forresidential buildings, interior and exterior products for automobiles
and trains, and energy-related components. The Electronics
segment focuses on the development of products like display
components, optical films, and electronic devices. These threesegments cooperate with each other and form a business portfoliothat is well-balanced from the standpoints of stability, profitability,
growth potential, and risks.
Beverages: In addition to taking advantage of the strong CocaCola brand and developing original DNP products, this division is
working to expand its business, for example by promoting
production and procurement in cooperation with bottlers in otherparts of Japan.

Three Well-Balanced Business Segments

Information Communication
Publishing

Information Innovation

Imaging Communication

The Three
Segments of
DNP’s Printing
Business
DNP
AnnualReport2017

32

Lifestyle and Industrial Supplies
Packaging

Living Spaces

Industrial Supplies

Electronics
Display Components

Electronic Devices

Information Communication

Net Salesby Segment(Year ended March 31, 2017)

Net Sales
Sales
Net
Net Sales

Beverages
4.0%Electronics
12.0%

Information
Communication
56.6%

Operating Income
Income (¥(¥ billion)
billion)OperatingOperating Income (¥ billion)(Net sales)
sales)(Net(Net
sales)
1,000
1,000
1,000
800
800
800

(Operating income)income)(Operating(Operating income)
100
100
100
801.2
801.2
80
80
801.2
80

821.6
821.6
821.6

789.7
789.7
789.7

600
600
600
400
400
400

Lifestyle andIndustrial Supplies
27.4%

200
200
200
0
0
0

15
15

(Year ended March 31, 2017)

Net Sales
Net Sales

Beverages
4.6%
Information
Communication
36.2%

400
400
400

20
20
20

200
200
200

00
0

00
0

17
17
17

(Depreciation)(Depreciation)(Depreciation)
100
100
100
876.0
876.0
876.0
80
80
80

893.0
893.0
893.0

60
60
60

15
15
15

27.7
27.7
27.7

27.5
27.5
27.5

25.7
25.7
25.7

16
16
16

17
17
17

40
40
40
20
20
20
00
0

800
800
800

600
600

60
60
60

600
600
600

40
40
40

400
400
400

20
20
20

200
200
200

00
0

00
0

388.6
388.6

Beverages

388.2
388.2
388.2

382.6
382.6
382.6
13.7
13.7

12.6
12.6
12.6

15
15

16
16

14.4
14.4
14.4

17
17
17

Depreciation (¥(¥billion)
billion)Depreciation
Depreciation (¥ billion)(Assets)(Assets)(Assets)
1,000
1,000
1,000

80
80
80

0
0

Lifestyle andIndustrial Supplies
27.6%

AssetsAssetsAssets(Operating income)income)(Operating(Operating income)
100
100
100

200
200

(Depreciation)(Depreciation)(Depreciation)
100
100
100
80
80
80

450.6
450.6
450.6

441.8
441.8
441.8
17.6
17.6
17.6

15
15
15

60
60
60

439.3
439.3
439.3

17.0
17.0
17.0

16
16
16

40
40
40
17.0
17.0
17.0

17
17
17

20
20
20
00
0

Electronics
Net Sales
Net Sales

Operating Income (¥ billion)(Net sales)(Operating income)
3

80

2.4
58.1

56.6
2

40
1.1

16

17

Depreciation
Depreciation (¥(¥billion)
billion)Depreciation (¥ billion)(Assets)(Assets)(Assets)
1,000
1,000
1,000

(Depreciation)(Depreciation)(Depreciation)
100
100
100

80
80
80

800
800
800

80
80
80

600
600

60
60
60

600
600
600

60
60
60

40
40
40

400
400
400

20
20
20

200
200
200

00
0

00
0

200
200
0

AssetsAssetsAssets(Operating(Operating income)income)(Operating income)
100
100
100

800
800

1

0

Operating Income
Income (¥(¥ billion)
billion)Operating Income (¥ billion)(Net sales)(Net sales)
1,000
1,000

400
400

1.0

20

15

40
40
40

800
800

400
400

59.6

600
600
600

Income (¥(¥ billion)
billion)Operating Income
Operating Income (¥ billion)(Net sales)(Net sales)
1,000
1,000

Electronics
31.6%

60

16
16

18.9
18.9
18.9

60
60
60

Depreciation (¥(¥billion)
billion)Depreciation
Depreciation (¥ billion)

Lifestyle and Industrial Supplies

Operating Income
by Segment

Net Sales

29.4
29.4
29.4

22.2
22.2
22.2

AssetsAssetsAssets(Assets)(Assets)(Assets)
1,000
1,000
895.8
1,000 895.8
895.8
800
800
800

0
0
0

230.3 25.9
230.3 25.9

15
15

199.4
20.5
199.4 20.5
199.4 20.5

16
16

169.4
169.4 16.5
16.5
169.4 16.5

17
17
17

310.3
310.3
310.3
18.4
18.4
18.4

15
15
15

273.4
273.4
273.4
15.0
15.0
15.0

16
16
16

40
40
40

258.1
258.1
258.1
12.1
12.1
12.1

17
17
17

20
20
20
00
0

33

Our Products and Services
Information Communication
Publishing● Publishing & Media Services [1] Books and magazines[2] Hybrid bookstore network “honto”● Education and Publications Distribution[3] Maruzen & Junkudo Bookstore in Shibuya (Tokyo)
Information Innovation● Marketing [4] Flyers and catalogs [5] Point-of-purchase advertising[6] Electronic paper [7] Energy-efficient digital signage● BPO (Business Process Outsourcing)[8] DNP’s Kamiya Solutions Center● Information Security [9] Personalized mail[10] Smart cards and magnetic cards [11] SIM card[12] Cloud payment services [13] Transparent hologram ribbon
Imaging Communication[14] Dye-sublimation thermal transfer printing media and thermal masstransfer printing media[15] Dye-sublimation photo printer [16] Ki-Re-i ID photo kiosk

［1］

［3］
［9］

Lifestyle and Industrial Supplies● Packaging[17] Packaging [18] Barrier film for packages[19] Biobased packaging materials[20] PET plastic bottles (left and center) and preforms (right)[21] Aseptic filling systems for PET plastic bottles[22] Comprehensive packaging evaluation services[23] Medicine packaging for daily behavior monitoring systems● Living Spaces[24] Residential interior materials (floor coverings)[25] Residential interior materials (wall coverings)[26] Exterior materials for buildings[27] Automotive interior materials[28] Interior coverings for railway cars (Hokuriku Shinkansen)● Industrial Supplies[29] Photovoltaic module component[30] Bus line sheet used in photovoltaic cells[31] Lithium-ion battery components［2 ］［ 24 ］［ 10 ］

［ 11］

［ 17］

［ 18 ］［ 25 ］［ 26 ］

Electronics［ 32 ］［ 33 ］［ 34 ］［ 40 ］［ 41］［ 42 ］● Display Components[32] Color filter for liquid crystal display[33] Large-scale photomask [34] Touch panel sensor[35] Optical films used for displays[36] Electrode film for capacitive touch panels[37] Digital shelves● Electronic Devices[38] Semiconductor photomask[39] Master template for nanoimprinting[40] Hard disk drive suspension[41] Lead frame for compact semiconductor package[42] Metal substrate for LED light[43] Camera module[44] Image enhancement LSI[45] NFC (near field communication) module[46] Electronic paper display system[47] MEMS (micro electro mechanical systems) products

Note: Numbers in square brackets correspond to photographs on pp. 34-35.

34

［4］

［5］

［6］

［8］

［ 7］
［ 12 ］［ 14 ］［ 15 ］［ 16 ］［ 13 ］［ 19 ］［ 20 ］［ 21］［ 22 ］［ 23 ］［ 27］［ 28 ］［ 29 ］［ 30 ］［ 31］［ 35 ］［ 36 ］［ 37］［ 38 ］［ 39 ］［ 43 ］［ 44 ］［ 45 ］［ 46 ］［ 47］

35

Evolution of DNP’s Businesses
1876〈 Founding 〉

1950

1960

Printing

1970

1980

Comprehensive Printing▶1876 Founding of Shueisha, DNP’s

Information Processing▶1935 Merger of Shueisha and Nisshin Printing to form Dai Nippon Printing

predecessor; start of letterpress printing▶1949 Listed shares on

Information Communication▶1987 Began shifting focus to“comprehensive
information processing”▶1963 Establishment of Hokkaido Coca-Cola Bottling Co., Ltd.

Tokyo Stock Exchange▶1951 Began promoting “expansion printing”▶1944 Launch of DNP’s Technical Research Laboratory (now called the Research and Development Center)

Publishing▶1877 Produced first Western-style

book in Japan, revised edition of“Self-Help” by Samuel Smiles▶1882 Began sales of printing type

▶1912 Completion of DNP’s original Shueitai font

▶1972 Began development of▶1985 Development of world’s first
Computer Typesetting System (CTS)
electronic dictionary on CD-ROM▶1975 Began digital processing of image data

▶1925 Received order to print 740,000 copies of the inaugural edition of “King” magazine▶1956 Printed the inaugural edition of “Shukan Shincho,”

the first weekly magazine issued by a publishing company

Marketing▶1885 Start of lithographic printing▶1971 Developmentof scented printing▶1981 Establishment of

new video printing
system technology▶1989 Constructionof global
network system

Information Security▶1898 Began printing of securities▶1954 Start of carbon-backed ledger printing▶1973-74

Full-scale production of magnetic plastic cards and magnetic passbooks▶1983 Development of smart cards▶1965 Began mass production of OCR ledgers▶1945 Began printing new Bank of Japan notes

after being designated to do so by Japanese Ministry of FinanceImaging Communication▶1984-85

Lifestyle and Industrial Supplies

Development of thermal massand dye-sublimation thermaltransfer printing media

Packaging▶1951 Full-scale entry into

▶1961 Started production of▶1975 Began producing retort pouches
paper container businessblow-molded bottles▶1976 Development of aseptic filling system▶1962 Began producing paper cups
▶1983 Development of technology for▶1951 Began printing on vinyl
drawing on molded plastic goods
and other non-paper materials▶1969 Began producing laminated tubes▶1984 Began producing PET
plastic beverage bottles

Living Spaces▶1951 Began developing decorative paper for melamine resin plate
▶1961

▶1974

Began printing directly onto steel plate

Introduction of Curlfit technology for printing on curved surfaces▶1977 Development of stainless decorative sheet

Industrial Supplies(Optical films development)
transferred to Electronics segment

Electronics
Display Components▶1958 Succeeded in prototyping of

shadow masks for color televisions▶1973 Development of color filters▶1985 Development of LCD color filter

production technology▶1978 Development of new type of

shadowmasks (flat masks)

Electronic Devices▶1958 Succeeded in developing semiconductor photomasks▶1964 Began lead frame production

Optical Films▶1983 Started producing

projection screens

DNP
AnnualReport
2017

36

1990

2000

2010

Information Communication

2017

P&I Solutions▶2001 Announcement of DNP Group Vision▶2015 Announcement offor the 21st Century(125th anniversary of DNP’s founding)▶2008-10▶1997 Start of online publishing business▶1992 Development of Shueitai True Type font

DNP Group Vision 2015

Make use of our strengths inprinting (P) and information (I)technologies to generateinnovative new value

Alliances with Maruzen Co., Ltd., Junkudo Co., Ltd. andBunkyodo Group Holdings Co., Ltd., etc.

▶2010 Startup of “honto” e-book sales service▶2015 Began digitizing books

using high-speed book scanner

Hybrid bookstore network “honto”▶2001 Began Orikomio! e-flyer service▶1995 Began Internet service “Media Galaxy”▶1993 Production of contactless smart cards

Promote BPO business▶2008 Launch of digital signage project▶1997 Began e-commerce service

Develop content andcopyright-related businesses

Expand total security solutions
Settlement-linked marketing▶2004 Began Card Data Management Service (CDMS)▶1999 Launch of IC tag project▶2013 Established DNP Kashiwa Data Center▶2005 Establishment of “SSFC”▶2017 Expanded nationwide BPO

office security consortium

center network to 13 locations▶2005 Began development of “PrintRush”

Expand business
related to the imaging market▶2015 Began offering “My Number”

self-service printing system

citizen ID card applications
via Ki-Re-i ID photo kiosks▶1997 Began selling aseptic PET plastic bottle-filling systems using preforms▶2007 Development of packaging for Japanese-style space food▶2013 Established plant in Vietnam▶2016 Agreed to tie up with

▶1998 Development of transparent “innovative barrier film (IB film)”

SIG Combibloc Group AG,
a leading carton manufacturer▶1996 Began producing decorative sheet with EB coating▶2014 Established research facility“DNP Sumai Mirai Lab” concerned withpleasant future living▶1999 Commercialized pouches for lithium-ion rechargeable batteries▶2015 Began selling DNP Agri Film

▶2003 Development of photovoltaic module components

Expand environmentally conscious
products & services
Develop new products usingmaterials with more advanced
functionality
Develop for the global market: safe,
reliable packaging; materials that
support pleasant, comfortable living
spaces; industrial supplies▶2015 Began selling DNP Lighting Film▶2005 Development of fuel cell components▶2007 Development of printed organic photovoltaic cells▶2001 Development of flexible OLED displays▶2016 Announced expanded production

capacity of metal masks used
for OLED displays▶2003 Development of full-color organic EL panels▶2006 Mass production of color filters

using inkjet method▶1995 Launched multilayer wiring formation technology▶2011 Development of the world’s▶1999 Entered semiconductor package substrate field

thinnest (0.28mm) printed board▶2001 Began MEMS (micro electro mechanical systems) processing under contract▶2002 Completed production line for “B 2it” high-density build-up boards▶1996 Establishment of anti-glare film technology for LCDs

▶2014 Development of ultra-low reflection film

Display products:
Shift emphasis to growth areas
and expand new product lineup
Electronic devices:
Develop cutting-edge technologies
and expand overseas business
Optical films:
Use basic technologies to expand
into new markets▶2004 Development of “JETBLACK” front projection screens

New Businesses
Life Science (Regenerative Medicine, etc.)▶2004 Successful formation ofcapillary patterns▶2014

Business and capital tie-up with PSP,a major player in medical imaging
management systems

Promote research and development
aimed at business creation▶2008 Development of cell pattern culture substrate▶2008 Established production technology

for cell sheet culture film used in regenerative medicine

37Investor Information(as of March 31, 2017)

Dai Nippon Printing Co., Ltd.

Major Stock Indices in which DNP is a Constituent:Head Office:Nikkei Stock Average

1-1, Ichigaya-Kagacho 1-chome, Shinjuku-ku,

TOPIX Mid400

Tokyo 162-8001, Japan

S&P/TOPIX 150
Dow Jones Sustainability Indices

Established: 1876

FTSE4Good Global Index
MSCI Global Sustainability Indexes
ETHIBEL Investment Register

Number of Employees (consolidated): 38,808

Morningstar Socially Responsible Investment Index
Paid-in Capital: ¥114,464 million

Stock Code: 7912
Administrator of Shareholder Register:

Number of Common Stocks:

Mizuho Trust & Banking Co., Ltd.

Authorized: 1,490,000,000 shares
Issued:Stock Transfer Agency Department

663,480,693 shares

2-1, Yaesu 1-chome, Chuo-ku,* With the cancellation of 15 million treasury shares on May 26, 2017,
the total number of outstanding shares stood at 648,480,693.

Tokyo 103-8670, Japan
American Depositary Receipts:

Number of Trading Unit Shareholders (own 1,000 or more shares):

Ratio (ADR:ORD): 1:1
Exchange: OTC (Over-the-Counter)

22,650

Symbol: DNPLYStock Exchange Listing: Tokyo Stock Exchange

CUSIP: 233806306
Major Shareholders:Shares (thousands) Percentage (%)

Depositary:
The Bank of New York Mellon

The Master Trust Bank of Japan, Ltd. (Trust Account)

48,989

7.96

Japan Trustee Services Bank, Ltd. (Trust Account)

31,091

5.05

The Dai-ichi Life Insurance Co., Ltd.

25,941

4.21

Mizuho Bank, Ltd.

18,413

2.99

U.S. toll free: 888-269-2377 (888-BNY-ADRS)

Employees’ Shareholding Association

15,738

2.56

URL: http://www.adrbnymellon.com/

Japan Trustee Services Bank, Ltd. (Trust Account 5)

10,598

1.72

Nippon Life Insurance Company

9,471

1.54

State Street Bank And Trust Company 505225

8,681

1.41

Japan Trustee Services Bank, Ltd. (Trust Account 1)

7,804

1.27

Japan Trustee Services Bank, Ltd. (Trust Account 2)

7,796

1.27

Notes: 1. The number of treasury shares (47,741,362) is excluded from the figures above.
2. The ownership stakes are based on the total number of shares outstanding lesstreasury shares (615,739,331).

101 Barclay Street, 22 West,
New York, NY 10286, U.S.A.
Telephone: (201) 680-6825

Annual Meeting of Shareholders:
The annual meeting of shareholders of DNP is
normally held in June each year in Tokyo, Japan.
Investor Relations:
Dai Nippon Printing Co., Ltd.
Corporate Communication Division
Investor Relations Office
1-1, Ichigaya-Kagacho 1-chome, Shinjuku-ku,
Tokyo 162-8001, Japan
Tel: +81-3-6735-0124
Fax: +81-3-5225-8239

DNP
AnnualReport201738

Web Site:
http://www.dnp.co.jp/eng/Share Price Evolution (Tokyo Stock Exchange)

2 Synopsis of
Performance(between April 1, 2014 and March 31, 2017)DNP Stock Price (yen)

1,500

Increase (%)*

－ DNP

50

－ Nikkei Average

45－ TOPIX

14 Special Feature

40

30 DNP in Brief

35

40 Segment
Information

30
25
1,200

6 Message toShareholders

20
15

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

10
5
0
–5
900

–10

15

16

17

Number of Stocks (stocks)

Number of Voting Rights (rights)

Voting RightsType(as of March 31, 2017)

Stocks with no voting rights––

Stocks with limited voting rights (treasury stocks, etc.)––

Stocks with limited voting rights (other)––

Stocks with voting rights (Treasury held stocks)(treasury stocks, etc.)(Mutually held stocks)

Common stocks
Common stocks

47,741,000
1,085,000––

Stocks with voting rights (other)

Common stocks

612,858,000

612,857

Stocks with less than trading units

Common stocks

1,796,693–

Outstanding shares
Total voting rights of stockholders

663,480,693––

612,857

Treasury Stocks
Holder*Index 100 = March 31, 2014(as of March 31, 2017)

No. of Stocks Held

Percentage of Holding to No. of Outstanding Shares

Dai Nippon Printing Co., Ltd.

47,741,000

Kyoiku Shuppan Co., Ltd.

1,085,000

0.16

Total

48,826,000

7.36

7.20

Change in Number of Shares per Unit and Share Consolidation
DNP will change the number of shares per share unit from 1,000
shares to 100 shares and implement a share consolidation in which
two shares are consolidated into one share effective October 1,
2017 to achieve an investment unit level that is preferred by stock
exchanges. This share consolidation will decrease the number ofshares owned by shareholders by half, but because the company’s
assets and capital will not change, asset value per share will
double. The asset value of stock owned by shareholders will notchange*, apart from other factors such as stock market trends.
Concerning dividends, DNP expects to pay an interim dividend of¥16 per share, the same as the previous year, for the number ofshares owned as of September 30, 2017 (number of shares before
the share consolidation), and a year-end dividend of ¥32 per share(without the share consolidation this would be ¥16, the same as
the previous year) for the number of shares owned as of March 31,2018 (number of shares after the share consolidation).
* DNP will provide notification about the number of shares owned after theshare consolidation in the middle of November. For shareholders who own
a fractional 0.5 share as a result of the share consolidation, DNP will sell
all of these fractional shares and distribute the proceeds to shareholders inearly December (this will apply to shareholders who own an odd number ofshares as of September 30, 2017).

39

Segment
Information

CONTENTS
42

46

50
DNP
AnnualReport201740

Information Communication
42

Business Strategies

44

Financial Results

Lifestyle and Industrial Supplies
46

Business Strategies

48

Financial Results

Electronics
50

Business Strategies

52

Financial Results

DNP performed 3D digitization for Bibliothèque nationale de France’s “Globes in Motion” exhibit. ©David Paul Carr / BnF

Information
Communication

Left: DNP cloud payment services for smart devices Right: Books and magazines

Business Strategies

DNP
AnnualReport201742

As information becomes increasingly digitized and networked,
and information media become increasingly diverse,
consumers’ values and lifestyles have been undergoing majorchanges. Rather than just reacting to those changes, DNP isdeveloping a wide range of businesses that enable us togenerate changes ourselves by “delivering the information that
consumers want, when they want it, in optimal media
formats.”
The Information Communication segment includes
businesses related to Publishing & Media Services, Marketing,Information Security, Education and Publications Distribution,and Imaging Communication, with the latter addressing all
aspects of imaging.
Our Marketing unit has begun sales activities in the form of
consulting aimed at solving the problems of client companies
from the consumer’s point of view. In October 2016, weestablished a new company, DNP Communication Design
Co., Ltd., by integrating planning and production functions
that had been operating separately within multiple business
units. In April 2017, we launched DNP Digital Solutions Co.,
Ltd., which specializes in system integration. We intend to
make effective use of these planning, production, and othersystems as we work to solve various problems.

Our Business Process Outsourcing (BPO) businesscomprehensively handles business processes outsourced byclient companies. After establishing two new operating
locations in June 2017, we now have 13 BPO centersthroughout Japan that will serve as the main venues fromwhich we will work to further expand this business. We plan to
do the groundwork for a new business offering new types ofsettlement services, including international brand prepaid
cards and cloud payment services. We will also provide newvalue through businesses like our “honto” hybrid bookstore
network that offers both paper and electronic media, and by
developing diverse services that combine photographic prints
with information services.
In addition, we will promote dynamic structural reforms
aimed at expanding earnings, for example by constructing aunified system for supervising our manufacturing operations
throughout Japan.

Main Policies
1■

Generate value by expanding business,
primarily in growth areas

Of the four growth areas in which DNP has decided to concentrate,
the Information Communication segment will focus particularly on
creating new value and resolving social issues in the area of“Knowledge and Communication.” With digital networks reaching
the entire globe and information services becoming moresophisticated in recent years, security measures that protect against
various third-party threats have become very important. DNP uses
the phrase “Internet of secure things” (IoST) to express its
commitment to making the Internet of things (IoT) safe as well as
highly convenient, and we plan to develop businesses that makeuse of our strengths in information security.
Generate new value in areas such as publishing and media,
publications distribution, and educational information andcommunication technology (ICT)
Increase sales by the “honto” hybrid bookstore network thatlinks online sales of e-books and paper books through the honto
website with sales at bricks-and-mortar stores operated by
MaruzenJunkudo Bookstores Co., Ltd. and Bunkyodo Group
Holdings Co., Ltd.
In addition to producing printed materials, expand businesses
that are peripheral to publishing, for example reader services
and marketing that makes use of magazine brands and/or
published content.
Provide comprehensive solutions for linked production of paper
books and e-books, and for on-demand printing of small lots,etc.
In addition to providing an electronic library system, promote
community-building, for example by combining bookstores withlibraries in order to create venues where people can get
together.
Provide all types of textbooks and specialized books in hybrid(paper/electronic) form, in order to promote adoption of
information and communication technologies in educationalsettings.
Promote various businesses that make full use of DNP’s solid
information security technologies and infrastructure
Make use of our 13 business process outsourcing (BPO)
centers in Japan in our effort to expand DNP’s BPO business.
Examples of these operations include market research andproblem analysis; design, construction and implementation of
optimal business processes; operation of customer service
centers; and production and shipping of promotional materials.
Use DNP Kashiwa Data Center to develop international brandpre-paid cards and debit settlement services, etc. in response todiversifying needs related to settlement methods and information
security. Provide unique settlement services that can be easily
adopted by a wide range of industries such as those engaged infinance or distribution.
Expand DNP’s business value from consumers’ point of view,by taking advantage of big data and helping both inbound andoutbound travelers
Use multilingual translation platforms and focus on stimulating
communication between consumers and companies in various
countries and regions.

Expand various services that enliven outlying regions in responseto the growing number of foreign visitors to Japan (inboundtravelers) and Japanese going overseas (outbound travelers).
Expand Imaging Communication operations, which makebusinesses out of everything to do with imaging
Focus on expanding the scale of operations of the DNP Imaging
Mall, which engages in printing and sales of images recorded at
sporting or other events.
Uncover new value in Japanese and/or overseas photo imaging
markets that people experience as fun, happy, entertaining,easy, or convenient, etc., and offer it in the form of products andservices.
Provide digital marketing services
Use consulting, settlement data, and client analysis based on
DNP’s original systems in order to address corporate clients’marketing issues and propose plans for optimal sales
campaigns, including promotions that use smartphones or tablet
computers.

2

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix■ Provide value to the global market

Develop publishing-related businesses in Japan and overseas
by increasing cooperation with publishers; planning, producing,
distributing and selling all types of publications; making use ofcontent and magazine brands; and promoting copyrightprocessing, etc.
Boost the competitiveness of the smart card businesses that we
operate in Southeast Asia together with major Indonesian and
Vietnamese card manufacturers with whom we have businessand capital alliances.
Further strengthen global manufacturing, sales and service
systems related to Imaging Communications, and expand
businesses connected to all aspects of imaging—in addition to
ink ribbons and other print media. Also, respond rapidly to thegrowing worldwide trend toward digitization of commercial
photo printing systems, and strive to maintain and expand ourshare of the market for related supplies.

3■

Increase corporate value by means of
all kinds of structural reforms

Following on the integration of multiple marketing-related andinformation security-related business divisions in April 2016,
create new value by facilitating advances in technology andexpertise and synergistic combinations of each unit’s strengths,
and improve operational efficiency in order to boost profitability.
Accelerate construction of new business models by integrating
marketing and settlement services, and by strengthening
collaboration between our information and communication
technology (ICT) and business process outsourcing (BPO)
businesses. We already began this process by consolidatingplanning and production functions that were formerly divided
among units within Dai Nippon Printing Co., Ltd. and several
Group companies, and by launching DNP Communication
Design Co., Ltd. to handle marketing-related operations and
DNP Digital Solutions Co., Ltd. to handle operations related tosystem development.
Conduct a thorough review of the locations, scale, and otherattributes of DNP Group book stores, and work to improve
profitability by implementing a scrap-and-build strategy.

43

Information
Communication
Financial Results

Financial Highlights(¥ billion, %)Net sales

2015.32016.32017.3¥ 789.7¥ 821.6¥ 801.2

22.2

29.4

18.9

2.8%

3.6%

2.4%

Operating income

Fiscal Term through March 2017:
Business Environment andSummary of Financial Results■ Publishing & Media Services;■ Education and Publications Distribution

In the fiscal year ended March 2017, Japanese publishing industry
sales declined by 4.2% from a year earlier to 1,441.0 billion yen.
Magazine sales fell 5.8% to 715.9 billion yen due to a decrease in
the number of copies sold combined with an increase in the number
Net Sales
Operating Income (¥ billion)
AssetsDepreciation (¥ billion)of magazines that ceased publication, while book sales declined by(Assets)(Net sales)(Depreciation)(Operating income)
2.5% to 725.1 billion
yen. In other words, magazines sales volume fell
1,000
100
1,000
100
895.8
893.0the level
below
of876.0 book sales for the first time in decades. At the same
821.6
801.2
789.7
time, the domestic market
800
80 for e-books expanded greatly in calendar
800
802016 relative to the previous year, growing by 27.1% to 190.9
600
60
600
60
billion yen (Source: ResearchInstitute for Publications, the All
Japan Magazine and Book Publishers’ and Editors’ Association).
400
40
400
40
DNP 27.5
managed to
29.4
27.7secure roughly the same level of book sales
25.7
22.2
18.9
as the previous year due20to aggressive marketing activities, but
200
200
20
magazine sales fell sharply, so overall sales from Publishing &0000Media Services declined compared
to a year earlier.
15
16
17
15
16
17 Publications Distribution, we worked on
In Education
andexpanding our “honto” hybrid bookstore network, which
combines sales through bookstores, online mail order and e-bookdownload services. In October 2016, we launched our “Book Tree”［ Net Sales ］
web service whereby authors, bookstore employees and others
Although Information Security and Marketing continued toserve as “curators” who select books related to a theme of theirperform solidly, sales from Education and Publications
choosing and display them to readers who have indicated an
Net Sales
Operating Income (¥ billion)
AssetsDepreciation (¥ billion)
Distribution, Publishing & Media Services and Imaging
interest in that theme. In addition, our library support business(Net sales)(Assets)(Depreciation)(Operating
income) billion
Communication
declined, resulting in a dropof 20.42
yen,picked up new client
libraries and brought in more sales revenue
1,000
100
1,000
100
or 2.5%, in net sales for the segment as a whole compared to thethan the previous year, but the Education and Publications
previous fiscal800
year.
Distribution unit posted lower
sales overall compared to a year
80
800
80
earlier due to the significant impact of the transfer in October［ Operating600
60
600
Income ］
2016 of some shares in 60
Bunkyodo Group Holdings Co., Ltd. to
450.6
441.8 Shuppan
439.3 Hanbai Inc., and the change of Bunkyodo’s
Businesses that contributed
toprofitsthroughincreasedsales
Nippon
388.2
388.6
382.6
400
40
400
40
included SIM cards for smartphones, smart cards for managing
status to equity-method affiliate.
electronic money,
creditcards,
andinformation
processing
Going
forward,DNP
aims
to revitalize the publishing market,
17.6
17.0
17.0
200
20
200
20
14.4
13.7
12.6
services (IPS) such as personal mailing services tailored to thefurther increase cooperation with publishers, and promote all
0 institutions. Nevertheless, the segment’s
00
needs of financial
kinds of publishing-related0 businesses including project planning,
15 by decreased
16
17 from Imaging
15 production,
16
17
bottom line was affectedsales
distribution
and sales of various types of publications,
Communications, due mainly to appreciation of the yen, indevelopment of content for overseas consumption, and handling
addition to increased outlays to fund retirement benefits andof copyrights for secondary usage of content.
upfront investments related to new business start-ups. As a
Marketingresult, operating income decreased by 35.7%, or 10.48 billion
yen, from the previous fiscal term. The segment’s operating
According to a Japanese Ministry of Economy, Trade and Industry
income margin decreased by 1.2 points to 2.4%, from 3.6% in
study, overall domestic corporate advertising expenses in the
Net Sales
Operating Income (¥ billion)
AssetsDepreciation (¥ billion)
the previous fiscal year.
fiscal year ended March 2017 inched up by 2.1% over the(Net sales)(Assets)(Operating income)(Depreciation)
previous year. Expenditures
for direct mail and other printed
1,000
100
1,000
100
advertisements declined, but spending on Internet advertising
Operating income margin■

DNP
AnnualReport
2017

44

800

80

800

80

600

60

600

60

400

40

400

310.3

40

increased, while spending on advertising in newspapers,
magazines, television and radio was roughly unchanged from theprevious year.
Despite a drop in flyer sales, DNP’s Marketing-related sales
increased over the previous year thanks to stronger sales ofcatalogs, pamphlets, and point-of-purchase (POP) and otherpromotional tools for retail and other distributors.
In the future, we will provide total marketing solutions that startwith consulting and other services aimed at improving clients’business processes and marketing, including everything fromplanning and implementing sales campaigns to all types of studies
and analyses and production and delivery of POP tools andleaflets, etc. Also, following the inauguration of DNP
Communication Design Co., Ltd. in October 2016 and the launchof DNP Digital Solutions Co., Ltd. in April 2017, we intend toaccelerate the construction of new business models by integrating
marketing and settlement services and by strengthening
collaboration in the information and communication technology(ICT) and business process outsourcing (BPO) fields.

■ Information Security
In Japan, major financial institutions and other large organizations
are increasingly electing full outsourcing of the production ofvarious notices to consumers. Issuance of SIM cards fortelecommunications carriers, and of credit cards and other smart
cards is also on the rise. Official “My Number” citizen ID smart
cards became available in January 2016, and we expect issuanceto gradually increase following the start of full-scale operation of
the My Number portal site planned for October 2017.
In the fiscal year ended March 2017, DNP’s sales of SIM cards
for smartphones and smart cards for financial institutions andelectronic money applications increased over the previous fiscal
term. In IPS-related business, solid demand for services
outsourced by financial institutions also helped overall Information
Security sales exceed the previous year.
DNP’s business processing infrastructure, including the DNP

Kashiwa Data Center and 13 domestic BPO bases, is protectedby advanced information security measures. We will take fulladvantage of this environment and also strengthen collaboration
with Nihon Unisys, Ltd. Through these measures, we intend toprovide a variety of value-added services such as a digitalmarketing service that integrates international brand prepaid cards
and settlement-linked marketing services, and BPO operations
that efficiently execute business processes on behalf of client
corporations.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief■ Imaging Communication

40 Segment
Information

DNP is developing businesses that target the overall imaging
market—i.e. everything to do with images. In addition to
responding to consumers’ growing demand for products like
photo prints and photo albums, we offer new services that makeuse of information and communication technologies to connect
companies and consumers. For example, our “DNP Imaging Mall”
is a cloud-based image sales solution that provides one-stop
service starting with data storage and including website
construction and image processing, printing and delivery.
Demand for photographic prints has been decreasing
worldwide due to the proliferation of digital cameras, smartphones
and photo sharing services. However, as photo print providers
switch from the conventional silver halide photo development
method, we see growing demand for the dye-sublimation thermaltransfer printing systems (both equipment and supplies) in which
DNP has a strong advantage. In Japan, our photo book businessis also growing, as personalized photo books are becoming
increasingly popular as gifts.
Sales of dye-sublimation thermal transfer printing media (color
ink ribbons and receiver paper) in the fiscal year ended March2017 declined from the previous year, largely due to the strong
yen and the end of a round of printer replacements in the North
American market. Sales of thermal mass transfer printing media,
mainly used for printing expiration dates on food packages andbar codes on all types of packaging, also fell below the previousyear level, as did overall Imaging Communication sales.

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

TOPICS■ We expanded our network of■■

BPO centers and responded todevelopments in digital marketing.

In June 2017, in response to growing demand for business process
outsourcing (BPO) services, DNP opened a new BPO center inBusinesses
andorganizations

DNP’s Businesses Process Outsourcing Services
Advertise・Catalogs and brochures
・Web site construction

Deliver
Execution
divisionsTokyo’s Shinjuku Ward, and another in Fukuoka City, Fukuoka
Prefecture, giving DNP a total of 13 BPO operating locationsin Japan. We intend to offer BPO services in a wider range ofbusiness fields, including digital marketing services that enhancethe effectiveness of sales promotions by using the Internet to deliver
optimally tailored information to consumers at optimal times.

・Direct mail・Preprinted application forms

Collect
・Document reception centers・Contact centers

Notify・Invoices and notifications・Electronic issuanceTotal support
for all types ofprocesses
Determine・Confirmation ofentered information
・Identity checking

Issue
・Issuance of all types of cards
・Issuance of vouchers andgift certificatesStore・Data centers
・Secure warehousing

Society/Consumers

Register・Image scanning・Data input

45

Lifestyle& Industrial Supplies

Left: PET plastic bottles and preforms Right: Residential interior materials (wall covering)

Business Strategies

DNP
AnnualReport
2017

46

The Lifestyle and Industrial Supplies segment is composed ofthree business divisions: Packaging, Living Spaces, and Industrial
Supplies. The segment provides many familiar products andservices that play important roles in the daily lives of consumers.
Our Packaging business creates many of the packages that
consumers use in daily life, including packaging for foods,
beverages and pharmaceutical products. We propose a wide
variety of packaging solutions, beginning with helping clients tochoose materials (paper or plastic, etc.), design package
structure, select functionalities (e.g. long-term preservation ofcontents), and plan an exterior design, etc. Living Spaces handles
a wide variety of products that shape the spaces in which people
live, including residential interior and exterior materials such as
floor and wall coverings, and interior products for automobiles
and railway cars. These products offer a wide variety of special
qualities such as a broad choice of artistic designs (including
wood grain or stone-like textures), resistance to soiling andscratching, and the ability to reflect light efficiently. Products
provided by Industrial Supplies include components used inlithium-ion rechargeable batteries and photovoltaic cells.
Products and services that are indispensable to comfortableliving must also contribute to people’s safety and sense of
security. We develop products with consideration for “universal

design” and “inclusive design” principles so that our products will
be easy for most consumers to use. In addition to focusing onenergy conservation and adopting cleaner types of energy at our
production sites, DNP strives to conserve biodiversity andminimize stress on the environment caused by the use anddisposal of our products. Our strategy for the Lifestyle andIndustrial Supplies segment is to anticipate the diverse needs ofbusinesses and consumers in Japan and overseas and to create
new value that enriches people’s lives while fulfilling all of theabove criteria.
DNP has identified four growth areas where we see potential
to develop new value beyond our existing business unit
boundaries: Knowledge and Communication; Food and
Healthcare; Lifestyle and Mobility; and Environment and Energy.
We aim to speed up business creation by making full use oftechnologies and expertise cultivated within our segment and bypromoting collaboration both within and outside of the DNPGroup, including by actively seeking alliances with companies
and research institutes that have relevant strengths.

Main Policies
1■

Generate value by expanding business,
primarily in growth areas

Combine technologies and expertise cultivated in each businessfield and create new value that will help solve social issues in the“four growth areas.” In particular, use DNP’s proprietary coating(precision coating) and converting (material processing)technologies to develop advanced products and services both inJapan and overseas.
Actively develop environmentally conscious products
and services that minimize stress on the environmentand help conserve biodiversity
Expand our lineup of advanced packaging products such astransparent vapor deposition film (IB film), which is highly
transparent and has excellent barrier properties, and our“Biomatech PET” series of plastic films that are made partiallyfrom plant-based materials in order to help reduce petroleum
usage. IB film has excellent gas and moisture barrier
properties, along with high transparency. It has been wellreceived by the market as a more environmentally conscious
alternative to aluminum foil. Going forward, we will expand
industrial applications in addition to food-related applications.
Make use of DNP’s proprietary Electron Beam (EB) coating
technology to promote the development of interior andexterior decorative materials and similar products with strong
scratch and soil resistance and other outstanding
characteristics including weatherability.
Expand sales of new products with superior functions, like
“DNP Lighting Film,” which brightens an entire room byeffectively reflecting and diffusing light, thereby conserving
electric power.
Focus on developing back sheets, encapsulants, and otherphotovoltaic module components that help increase theconversion efficiency and reliability of photovoltaic cells.
Consider consumers’ point of view in the developmentof products and services that are comfortable andeasy to use for many types of people
In Packaging, study and analyze consumers’ awareness andusage habits related to food products, beverages and alltypes of household items. In Living Spaces, too, we will
maintain a grasp of consumers’ changing values andpreferences from DNP’s unique viewpoint, analyze latentneeds and sensitivities, and reflect that understanding in avariety of businesses that seek to increase consumers’
comfort in everyday life, including measurement andassessment of living environments, living space designs
including designs based on Kansei (sensitivity) engineering,and the development of easy-to-implement construction
techniques.
Promote “inclusive design” which, from an early stage of
product development, respects people’s diversity andconsiders the needs of all types of people including theelderly, people with disabilities, and people who live in
different countries or speak different languages, etc.
Use advanced image processing and printing technologies todevelop products with strong aesthetic appeal.

Provide new value for the automotive and othermarkets
Bolster cooperation with partners in addition to developing
products like decorative films for auto interiors, “DNP ultra
weather-resistant hard-coat transfer film” used on resin glassthat helps reduce auto body weight, and “DNP adhesive
films” that form a strong bond between different materials
such as metal and carbon fiber-reinforced plastic.
Accelerate development of automotive products thatcombine decorative technologies and functional film
technologies cultivated by DNP with the superior molding andresin forming technologies of DNP Tamura Plastic Co., Ltd.
DNP Tamura is a leading provider of visors attached to theside windows of automobiles.
Take advantage of DNP’s strength as the world’s number
one supplier of pouches for lithium-ion batteries to expand
applications beyond mobile devices to include, for example,
electric vehicles and household-use storage batteries.
Expand business through our partnership with SIG
Combibloc Group AG, a major manufacturer of paper cartonsfor foods and beverages that produces some 10,000 varietiesof products worldwide. The company makes unusual
containers rarely found in Japan—such as a carton that has are-sealable spout and can be filled with solid foods which canhelp Japanese companies make their products stand out on
store shelves.

2

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix■ Provide value to the global market

Use our Packaging division’s presence in Indonesia andVietnam, where it is already working to enhance production
systems in order to expand market share in Southeast Asia,
as a base from which to increase sales in neighboring
countries.
In Living Spaces, make full use of our global businessnetwork to increase our market share in Europe, the U.S.,and emerging markets. In addition, boost overseas sales ofArttec decorative aluminum plate for interior and exterior use,
as well as automobile interior materials.
Work steadily to promote global expansion in sales ofpouches for lithium-ion rechargeable batteries in order toexpand our share of this market.

3

corporate value by means of
all kinds of structural reforms■ Increase

Review the DNP Group’s production systems from thestandpoint of overall optimization, and promote
improvements in production efficiency.
Further improve profitability and production efficiency,
especially in Packaging, now that we are making progress
toward establishing a system for supervising domestic sales
and manufacturing functions on a nationwide scale andreorganizing paper package manufacturing bases.
Concerning business outside Japan, respond more flexibly tofluctuations in exchange rates and raw material supplies, anduse hedging and other risk management tools to minimize
any adverse effects of such fluctuations on our bottom line.

47

Lifestyle& Industrial Supplies
Net Sales

Operating Income (¥ billion)

Financial Results(Net sales)
1,000

800

821.6

789.7

801.2

600

Financial400Highlights 29.4
22.2

200

18.9

1,000

895.8

876.0

800

80

60

600

60

40

400

40
Fiscal27.5Term 27.7
through
March 2017:
Business Environment
and20
Summary of Financial Results

25.7
20

200 %)(¥ billion,0

2017.30

2016.317382.6¥ 388.2

13.7

12.6

14.4

3.5%

3.3%

3.7%

Operating income

893.0(Depreciation)
100

80

2015.3¥

Depreciation (¥ billion)(Assets)¥15 388.616

0

Net sales

Assets(Operating income)
100

0

15

16

17

■ Packaging

Production value of domestic packaging printing in the year
ended March 2017 increased by 2% over the previous year
(according to Japan’s Ministry of Economy, Trade and Industry),
but market conditions remained very tough due to such factors
as fluctuations in sales of seasonal products stemming fromNet Sales
Operating Income (¥ billion)
AssetsDepreciation (¥ billion)
unseasonable weather, and escalating price competition. Despite(Net sales)(Assets)(Operating income)this environment, (Depreciation)
DNP’s Packaging business exceeded the
1,000
100
1,000
100
previous year’s sales thanks to a big increase in sales of aseptic
PET plastic bottle filling systems
and strong sales of paper
800
80
800
80
cups—especially those used as food containers.
600
60
600
DNP aims to expand 60
its share of the global packaging market,
450.6
441.8
particularlyin439.3
Southeast Asia. We are using our factories in
388.2
388.6
382.6
400
40
400
40
Indonesia and Vietnam, along with other operating locations in
17.6the region
17.0 to20provide high-added value products and
17.0in our effort
200
20
200
14.4
13.7
12.6
services for Japanese and international companies doing00
0
0 to boost our competitive position, webusiness overseas. In order
16
17
15
16
17
15 are working
to improve
production efficiency by implementing
restructuring and overall optimization of our manufacturing bases
throughout Japan.
In product development, we apply universal design principles［ Net Sales ］
so our products will be easy for all types of people to use. We are
Our Packaging business enjoyed strong sales of paper cups,
also promoting the development of environmentally conscious
mainly for use as food containers, and a large increase in sales of
products and services, and packaging products related to the
Net Sales
Operating Income (¥ billion)
AssetsDepreciation (¥ billion)
aseptic systems for filling polyethylene terephthalate (PET) plastic
fields of medical care, healthcare and industrial supplies.
(Net sales)(Operating
income)sales (Assets)(Depreciation)bottles. Living
Spaces, which focused on
expanding
of
1,000
100
1,000
100
Living Spaces
automotive-related products and environmentally conscious
products suchas flooring made with electron beam
Domestic housing starts80in the fiscal term ended March 2017
800
80 (EB) coating
800
technology, achieved a similar level of sales as the previous year.
increased by 5.8% compared with the previous term according
600
60
600
60
In Industrial Supplies,
sales of components for photovoltaic
cells
to Japan’s Ministry of Land,
Infrastructure, Transport andwere weak both in Japan and overseas.
Tourism. However, construction starts of rental units (which use
400
40
400
40
Overall segment sales totaled 388.2 billion yen, an increase of 310.3 less273.4
decorative
material on average) increased by 11.4%, while258.1
230.3 25.9
1.4% over the200
previous fiscal199.4
year.20.5 169.4 16.5 20
18.4starts of occupant-owned
200
20 condominiums (which use more
15.0
Operating income margin

■

12.1

［ Operating Income
］
0

0

0

15
16
Thanks to factors including
decreased
raw17
material and energy
costs and increased revenue from Packaging, the segment’s
operating income grew by 14.6% from a year earlier to 14.43
billion. The operating income margin rose 0.4 percentage point to
3.7%, from 3.3% in the previous term.

DNP
AnnualReport201748

decorative material) decreased by 5.1%, so domestic demand fordecorative materials rose0only slightly. Among the environmentally
15 conscious
16 products
17 that DNP makes using our proprietary
electron beam (EB) coating technology, our EB floor coverings
have been praised particularly highly due to their high scratch
resistance, and have sold well. As a result, overall sales from
Living Spaces increased slightly.
In the fiscal year through March 2017, we focused on
developing and marketing more environmentally conscious
products, for example by enhancing the energy efficiency ofvarious products, and by working to expand the market share of
products made with EB coating technology. We also stepped up

efforts to market our highly aesthetic Arttec decorative aluminum
plates for interior and exterior use, automotive interior materials,
and other decorative materials to manufacturers outside ofJapan. In addition to supplying automobile and railway car interior
and exterior products with excellent durability and functionality,
we worked to develop new automotive-related products bycombining electronics-related technologies with resin forming,
functional film, and other technologies.

■ Industrial Supplies
Domestic shipments of photovoltaic cells in the fiscal term
through March 2017 (in terms of power generation capacity)
decreased by 11% from a year earlier to 6,341 megawatts,
according to the Japan Photovoltaic Energy Association. The
drop was part of an ongoing decline in domestic demand forphotovoltaic cells, especially for residential use, as revisions toJapan’s feed-in tariff (FIT) system, which sets purchase prices for
power generated from renewable sources, have resulted in lower
prices for solar power. Sales of DNP’s encapsulants, back sheets

and other photovoltaic cell components declined year on year
due to the slump in the Japanese market, lower module prices
overseas, and other factors.
DNP is one of the world’s top suppliers of pouches for lithiumion rechargeable batteries, which are lighter in weight and easierto process than conventional alternatives. In the fiscal year ended
March 2017, the number of pouches used in mobile information
terminals increased, but unit prices declined. These trends,
combined with a slight increase in pouches used for automotive
applications, resulted in a slight decrease in DNP’s overall battery
pouch sales.
In the fiscal term ended March 2017, in addition to working to
make more advanced components for photovoltaic cells andlithium-ion rechargeable batteries, DNP applied its proprietaryconverting (materials processing) technologies to efforts aimed atdeveloping highly reliable new products. We are also working on
expanding our advanced materials business, including highadded value barrier films for industrial use.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

TOPICS■ A new challenge for Packaging:■ Creating the PET plastic bottle of the future
In 2016, some 2 billion polyethylene terephthalate (PET) plastic
bottles containing beverages were produced in Japan, and about
one third of them were produced using DNP’s inline aseptic fillingsystems.
DNP began selling inline aseptic filling systems using PET bottle
preforms in 1997 by emphasizing their environmental appeal.
Because the test tube-shaped preforms are only formed into bottles
after arriving at the beverage plant, their transport to the plant isabout seven times more efficient than the transport of fully formed,
empty PET bottles, making it possible to reduce fuel expenses andcarbon dioxide emissions related to bottle transport. Also, because
the bottles are filled in a sterile environment, they can be madethinner than bottles used in conventional systems where prolonged
sterilization at high temperatures was necessary. In 2015, we
introduced a 14.6-gram preform bottle for tea-based beverages

Aseptic filling system for PET plastic bottles

and sports drinks. At the time, it was the lightest bottle in its classand has since been adopted to hold many types of soft drinks.
There is a trend toward replacing glass bottles with PET bottles
in consideration of the plastic bottles’ lighter weight. However,
because coloration of PET plastic bottles is prohibited in Japan inorder to facilitate recycling, it is extremely difficult to use them forbeer or other beverages that must be protected from the effects oflight. To address this problem, DNP developed the “DNP FunctionalFilm Complex PET plastic bottle” by covering a conventional
preform with special colored film all the way to the bottom andforming the bottle together with the film. In addition to blocking out
light, the film also shuts out oxygen and gives the bottle a more
pleasing appearance, making this next-generation plastic bottle awinner in terms of both form and function. Because the bottle is stilltransparent after the film is removed, it can be easily recycled.
DNP will further enhance its market presence by combining
original technologies that it has cultivated throughout its history withthe advantages of lightweight, breakage-resistant plastic bottles.

Sample Complex Bottles

49

Electronics

Left: Inspecting optical film Right: Master template for nanoimprinting

Business Strategies

DNP
AnnualReport2017

50

Modern life has become richer and more convenient due to
growing use of digital household appliances, high-definition
display products and mobile information terminals including
smartphones and tablet PCs. We have reached the point
where a huge amount of information circulates in societies
where each consumer has a personal information terminal,
allowing people to exchange information without being limitedby time or space. As a result, demand for easy-to-use
electronic devices that make use of cutting-edge technologies
is becoming increasingly sophisticated and diverse.
DNP’s Electronics segment includes Display Components
and Electronic Devices, primarily aimed at the electronicequipment market. The segment refines and combines
existing DNP technologies and works to create new coretechnologies in order to provide products, services, andsystems that anticipate changes in the needs of businesses
and consumers. In addition, we strive to provide completely
new value in fields related to automobiles, smart homes,
medicine and health care, the environment and energy, andother new fields by combining multiple technologies such as
ultrafine etching and world-class, high-definition patterningtechnologies.

The segment’s market is broadly international andcharacterized by intense competition over technologicaldevelopment. Nowadays it has become extremely difficult tosecure stable profits unless we keep research, development,
and capital spending up to date. That is why we keep our eye
on next-generation trends in electronic products as we work
to develop new products with high added value andexceptional functionality. At the same time, we seek
opportunities to speed up business development by actively
collaborating with corporate clients and/or companies thathave specialized strengths.
In addition to refining and multiplying our existing
technologies, we will continue to consider technology
licensing-based alliances and to actively develop royalty
businesses and similar types of partnerships.
In order to improve profitability, we will continue to minimize
costs and improve efficiency, for example by selecting andconcentrating on the most promising products in our lineup as
we pursue global development that makes the best use of our
production bases in Japan and overseas.

Main Policies
1■

Generate value by expanding business,
primarily in growth areas

Generate new value that leads to the resolution of social
problems by deepening cooperation among business units withrespect to our “four growth areas.” Amid developments in the“Internet of things” (IoT) and artificial intelligence, we note
particularly strong increases in demand for products such as
more advanced, easier-to-use information devices and sensors,and for higher definition, clearer displays. In response, we intend
to collaborate with DNP’s Information Communication andLifestyle and Industrial Supplies segments and to refine andmultiply the technologies and expertise that we have cultivated in
our own businesses (Display Components, Optical Films andElectronic Devices) in order to continue building new products,
services, and business models. As we do so, we plan to actively
anticipate consumers’ needs and market trends, to support
higher-definition displays that offer a wide range of colors, and tokeep pace with diverse and sometimes conflicting demands asvarious electronic devices become larger, smaller, thinner, lighter,more energy-efficient and provide more advanced functionalities.
Develop various products for use in OLED displays
OLED displays are attracting attention as next-generation
displays with the potential to be adapted to curved surfaces.
Researchers are also working on related innovations, such as
foldable products. We will work to maintain and expand ourshare of the OLED display market by boosting production
capacity for metal masks used in EL display production, bydeveloping products that support higher resolutions, and byenhancing our production systems so we can offer a morestable supply. In addition to metal masks, we will continue
working to develop other components used in OLED display
production, such as retardation film and other optical films.
Pioneer new fields by refining and multiplying coretechnologies
Regarding liquid crystal color filters, we will focus on areas
where demand is expected to grow, such as automotive andmedical applications, while we respond to demand for evenhigher definition small- and medium-sized products.
We will promote development of automotive-oriented
products, such as viewing angle control film that prevents
light emitted from car navigation or other in-vehicle displays
from being reflected onto the windshield.
Concerning electronic devices, we will accelerate
development of next-generation semiconductor photomasks,
provide global support for each client company’s production
systems, and endeavor to standardize manufacturing
processes. In addition, we aim to expand not only by selling
more individual products, such as lead frames and hard disk
drive components, but also by increasing solutions-oriented
business based on design technologies.
Refine and apply nanoimprinting technologies
We will focus on manufacturing master templates used innanoimprint* lithography, a technology for making productsthat are expected to be in greatly increasing demand, suchas 3D NAND flash memories. We will also accelerate

development of “nanoimprinting solutions” for businesses that
require microfabrication of non-semiconductor products. In
addition to focusing on business development related tosensing, a field that is indispensable to furthering IoT and
automation, we will work to develop other new products not
related to semiconductors, such as materials used in various
types of electronic products including light-emitting diodes,
OLED displays and photovoltaic cells, as well as materials
related to life science.

2■ Provide value to the global market

DNP’s Electronics segment serves a broadly international
market centered in China and including East Asia, Europe,and North America. As basic technologies rapidly transition
from liquid crystal to OLED, we are proceeding carefully withtechnological development and capital spending while closely
watching developments overseas.
Regarding liquid crystal display-related products, since
manufacturers in China and other parts of Asia are
increasingly inclined to do more production in-house, we
intend to increase collaboration not only by supplying
materials and components but also by licensing technology
related to liquid crystal color filters. In Electronic Devices, wewill develop more global business by cooperating with othercompanies to establish shared production bases aimed atmeeting Chinese demand, and by making good use ofEuropean production bases.

3

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

corporate value by means of
all kinds of structural reforms■ Increase

Capital investment aimed at production innovation
Now that advances in the miniaturization of semiconductor
products have made the ability to draw circuit patterns withline widths of less than 10nm an essential requirement, weplan to achieve a high level of productivity and enhance ournext-generation semiconductor photomask production
systems by introducing electron multi-beam mask writers that
greatly reduce drawing time.
Promote structural reforms aimed at expanding
business
The electronics business environment changes rapidly. We
aim to concentrate allocation of management resources andsharpen our focus on the development of products, services,and systems that can be expected to continue to grow. In
addition, we will reconsider our traditional investment
recovery-oriented business model according to which we
made large-scale capital investments followed by supplying alarge number of components. Going forward, we aim todeepen collaboration with customers, suppliers and partners
and concentrate on developing process solution services that
address overall supply chains, including the supply ofmaterials, designs, and equipment.
* Nanoimprinting: microfabrication technology used for reliably transferring
patterns with line widths measured in microns (μm = 1 millionth of a meter)or nanometers (nm = 1 billionth of a meter) by pressing templates onto resincoated substrates or other surfaces

51

22.2

200

18.9

0

15

16

200

0

0

27.7

27.5

25.7
20

20
0

15

17

16

17

Electronics
Financial
Results
Net Sales
Operating Income(Net sales)
1,000

800

600

60

600

52

80
60
450.6

388.2

40

400

14.4

20

200 %)(¥ billion,

2015.32016.302017.30¥15 230.316

17
199.4

¥ 169.4

13.7

0

Net sales(Depreciation)
100

1,000

80

200

12.6

¥

Depreciation (¥ billion)(Assets)

800

388.6
382.6
Financial400Highlights

DNP
AnnualReport2017

Assets(¥ billion)(Operating income)100

Operating income

25.9

20.5

16.5

Operating income margin

11.2%

10.3%

9.7%

441.8

439.3

40
Fiscal Term throughMarch 2017:
Environment
and17.6Business
17.0
17.0
20
Summary of Financial Results
0

15

16

17

■ Display Components

In calendar 2016, despite an increase in demand for highdefinition liquid crystal display (LCD) televisions in emerging
markets—primarily in Asia—overall worldwide shipments offlat-panel displays were little changed from the previous year, atabout 240 million units. Shipments of tablet PCs were also little
Net Sales
Operating Income (¥ billion)
AssetsDepreciation (¥ billion)changed from 2015, at around 200 million units, while shipments(Net sales)(Assets)(Operating income)(Depreciation)of personal computers
fell about 6% year on year to 260 million
1,000
100
1,000
100
units. More widespread use of smartphones led to an increased
sense of market saturation:
800
80
800
80 roughly 1.47 billion units wereshipped worldwide, which indicates that the pace of increase is
600
60
600
60
slowing. Amid these market
trends, major LCD manufacturers
are hard pressed to turn profits and some have announced
400
40
400
40
310.3
production
line closures or even withdrawal from LCD television
273.4
258.1
230.3 25.9
199.4 20.5
but also in China, South Korea,
18.4production. Not only in Japan,
169.4 16.5
200
20
200
20
15.0
12.1
and other Asian countries, significant changes in manufacturing000systems are occurring. At0 the same time, the industry is moving
16using OLED
17 displays in smartphones, and it has become
15
16
17
15 towarddifficult to predict demand for various types of optical films andother components related to LCD and OLED displays.
Given this situation, DNP focused LC color filter production on［ Net Sales ］
its 8th-generation manufacturing lines, which make large-scale
DNP enjoyed strong sales of metal masks used in the manufacture
panels used in 4K ultra HD televisions, but sales of large filters fellof OLED displays, which are expected to outperform liquid crystal
below previous-year levels along with medium-sized and small
displays (LCDs) in the future. However, sales of color filters usedproducts. Regarding optical films, sales of our mainstay antiin LCDs declined: both small- and medium-sized products usedreflection films used for televisions and smartphones declined
in smartphones and tablet PCs, and large products used inrelative to a year earlier. Meanwhile, spurred by growing demand
televisions. Sales of film for polarizing plates, the mainstay of ourfor OLED displays, we enjoyed year-on-year growth in sales of
optical film business, also declined, and sales of photomasks
metal masks used in their production, and maintained a large
used for making semiconductors were sluggish both overseas
share of the market for these products which make use of DNP’sand in Japan.
proprietary advanced photolithography and etching technologies.
Overall, Electronics segment sales declined 15.0% from the
By the end of fiscal 2017 we plan to transfer color filter
previous year to 169.41 billion yen.
manufacturing equipment from our Mihara Plant in Hiroshima
Prefecture to a manufacturer in China that makes glass for LCDs.
［ Operating Income ］
Going forward, we will continue to benefit from business
opportunities presented by growth in the Chinese LCD market byDepreciation and amortization expenses declined year on year byproviding technical and other types of support.
2.92 billion yen, mainly due to decreased large-scale capital
We will also focus on developing new products and work tospending and sales of surplus equipment. However, operating
expand such businesses as LCD color filters that combine highincome decreased 19.6% from a year earlier to 16.48 billion yen
brightness with energy efficiency, components for high-definition,
due partly to smaller net sales and lower unit prices resulting fromhigh-end smartphones, and various products used in in-vehicle
increased competition. The segment’s operating income margin
displays. Regarding OLED displays, we intend to maintain anddecreased by 0.6 point, from 10.3% a year earlier to 9.7%.
expand our dominant share of this market by boostingproduction capacity for metal masks in response to growing
demand.

■ Electronic Devices
The global semiconductor market in calendar 2016 grew by
1.1% over the previous year, to a record high of 338.9 billion
dollars. Demand increased mainly in the U.S. and China, invarious fields including smartphones and othertelecommunications equipment, digital appliances, andautomobiles.
In the fiscal year through March 2017, DNP’s Electronic
Devices business was affected by an increasing tendency among
manufacturers—mainly overseas semiconductor
manufacturers—to produce photomasks in-house. In Japan,
demand for photomasks used for flash memories fell short ofinitial forecasts, and we were not able to achieve full-scale mass
production.
Going forward, we expect to see further progress in the“Internet of things” (IoT), which will link many physical objects via
the Internet. Automobiles are turning into information terminals
that can receive all types of services, and automated driving

technology is advancing, opening up new pathways for the
expansion of DNP’s advanced photomasks and various
electronic device businesses. We will work on technologicaldevelopment with an emphasis on providing state-of-the-art
photomasks for flash memories and other applications.
Concerning the use of nanoimprinting technologies in ultrafine
processing, we are especially keen to offer nanoimprinting
innovations that comprehensively support every aspect of
production, including planning and development of applications
and products, design and production of dies and prototypes, andmass production. We also plan to develop new products outsideof the semiconductor arena, such as medical materials and otherproducts in the field of life science.
Regarding lead frames, as trends in the IoT and in-vehicle
fields affect the semiconductor package market, we will focus
especially on boosting our share of compact quad-flat no-leads
packages (QFNs) that meet the market’s demands for increasing
miniaturization and density and decreasing thickness.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

TOPICS■ Applying nanoimprinting technology:
of volume production of■ Startup
optical elements■

DNP plans to start applying nanoimprinting* technology to the mass
production of diffractive optical elements (DOEs) for compact lightsources used in such applications as vein authentication systems intablet PCs.
Demand for more sophisticated sensing and information security
has been increasing in recent years in line with growing use of network
services and the “Internet of things (IoT).” Infrared radiation—which
has longer wavelengths than light that is visible to the human eye—has become particularly widely used in various sensing and biometricauthentication applications. Radiating infrared light in specific shapes
increases the efficiency and performance of sensors’ readings, etc.,
but in order to design and regulate the light’s direction, intensity andoptical illumination patterns, it is necessary to narrow the pitch of
the optical element’s concavo-convex pattern and to fabricate thestaircase patterns. It is very difficult to create the required deep, thin andstaircase shapes, so it is necessary to use advanced nanoimprinting
technologies for template processing and mass production. In order tomeet these challenges and enable mass production of optical elementswith the desired properties, DNP employed proprietary nanoimprinting
technologies that we developed ourselves.

Diffractive
OpticalElements(DOEs)
Diffractive
OpticalElements(DOEs)

DNP entered the semiconductor photomask business in thelatter half of the 1950s. By applying high-precision patterningtechnologies that we cultivated through that business, we began
research and development of nanoimprinting in the early 2000s.
After that, we succeeded in developing and owning relevant basic
technologies, to the point that we can now optimally design the fullgamut of manufacturing processes including mold, nanoimprinting,and material design. In addition, we own the optical design
technologies necessary for creating the various optical illumination
patterns that client companies request each time we develop a new
optical element. By enhancing and synergizing these technologies,
DNP enables the design and manufacture of optical elements
compatible with various light sources including lasers and LEDs. By
starting optical element mass production that uses nanoimprinting
technology, we will be responding to a number of needs including
demand for miniaturization as well as for improving the performanceand efficiency of all types of optical sensing devices and lighting
equipment.
* Nanoimprinting: a microfabrication technology for reliably transferring
ultrafine, concavo-convex patterns with line widths measured in units
ranging from nanometers (nm, one billionth of a meter) to micrometers(μm, one millionth of a meter) from a template to a resin-coated or othersubstrate by pressing the template against the substrate as if pressing
a rubber stamp

Vein Sensor
Light Light
SourceVein Sensor
SourceInfrared(IR) light
Infrared(IR) light

Infrared
DOE DOE
InfraredIR light IR
shapedintolight shaped
intodesireddesired
pattern patternLight bends
in different
ways dependingonLight bends
in different
ways dependingon
the light’s
and theand
DOE’spatternpattern
pitch pitch
the wavelength
light’s wavelength
the DOE’s

Infrared
light source
Infrared
light source

53

How DNP Works
to Achieve
Sustainable
Development

Corporate
Governance

CSR
DNP’s Three Corporate
Responsibilities—Remaining a company that is trusted by society—

DNP
AnnualReport201754

DNP aims to remain a company that can always be fully trusted by
its various stakeholders. In order to achieve that goal, we will work
toward complete fulfillment of our “three corporate responsibilities:”
value creation, integrity of conduct, and transparency (accountability).

Based on DNP Group Vision 2015, DNP has endeavored to
improve corporate governance by establishing and operating
systems that facilitate accurate and coordinated managerial
decision-making, appropriate and prompt business execution
based on management decisions, and supervision and auditing of
the above processes.

CONTENTSCONTENTS

56

Compliance with Laws and Social Ethics

60

Corporate Governance

56

Construction of Systems that
Support Business Continuity

71

Board of Directors, Statutory
Auditors and Corporate Officers

57

Contributing to Social Development

58

Information Security

59

Environmental Conservation andRealizing a Sustainable Future

1

2 Synopsis of
Performance

DNP ’s Three Corporate Responsibilities

Value Creation

A company’s first and most fundamental social responsibility
is to provide value for society. We must realize theconnection between offering products and services
necessary to the sustainable development of society and2

6 Message toShareholders
14 Special Feature
30 DNP in Brief

achieving growth for the company. By making our Business
Vision a reality, DNP will continue to provide a high degree ofvalue that helps resolve social problems.

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

DNP ’s Three Corporate Responsibilities

Integrity ofConduct

The second responsibility is practicing fairness and impartiality
during the value creation process. Regardless of how superior or
useful to society the value produced may be, that value will becompromised if, for example, the environment is damaged or laws
are broken in the process of creating it. DNP seeks to fulfill its
responsibilities by ensuring that all of its employees always act withintegrity in accordance with the DNP Group Code of Conduct.

3

Contributing to social development● Research and development● Creation of intellectual property, etc.

Respect for humandignity and diversity

Creating safe and Ensuring the safety andvibrant workplaces quality of products andservices

Promoting social
Environmental
responsibility
conservation andthroughout the supply
realizingchain
a sustainable future

Information
security

Contributing tosociety as a good
corporate citizen

DNP ’s Three Corporate Responsibilities

Transparency

Proper disclosure of information(Accountability)

The third corporate responsibility is to achieve accountability
and be a highly transparent company. DNP achieves
accountability by having all employees, during the course ofPrerequisites for fulfilling
our three responsibilities

their daily work, engage in dialogue with stakeholders; thisentails both listening to stakeholders’ opinions and providing
correct information.

Compliance withlaws and social
ethicsConstruction ofsystems that
support business
continuity

55

Prerequisites for fulfilling our three responsibilities

Compliance with Laws and Social Ethics
Rather than simply having each of our employees comply
with laws and regulations in the execution of DNP’s businessactivities, we believe that DNP can win society’s trust by
maintaining even higher ethical standards than society
expects and by consistently remaining fair and equitable as

we help to maintain and develop orderly, free andcompetitive markets. In order to be able to act in ways thatmeet society’s expectations, DNP works to imbue corporate
ethics throughout the DNP Group.

Systems for Promoting Absolute Corporate Ethics
Head Office

Operating UnitsManagement-by-objectives
evaluation system
Compliance assessment system
Corporate ethics training

Corporate
EthicsCommittee

Management-by-objectives
evaluation system

Examination
・Guidance・
Education

Autonomous examination ofrules and laws

Corporate
EthicsCommittee

Regular training sessions according toemployee level● Self-directed corporate ethics training● Training related to individual themes●

Do

ActionCheck

Corporate ethics training

ReportingOpen Door Room

Plan

●

Supplier Hotline●

Regular training sessions according toemployee level
Self-directed corporate ethics training

Prerequisites for fulfilling our three responsibilities

Construction of Systems that Support Business Continuity
In the event that an emergency situation should compromise
the continuity of DNP’s business operations, any interruption
in our operations would affect not only DNP but ourcustomers, suppliers, their employees and a variety of
stakeholders. DNP has prepared a business continuity planin order to build a strong corporate structure that can

Central Disaster Prevention Council

Disaster prevention system
during normal times

Basic DNP Group
DisasterPrevention Plan

Human resources subcommittee

Disasterprevention
systemduringemergency

56

Business Unit and Group Affiliate Disaster Prevention Councils
Business Operations
Plan for Disaster
Prevention

Facilities subcommittee
Chairperson

DeputyChairperson

Asset preservation subcommittee

Chairperson

Disaster Prevention
Manager
Fire Prevention
Manager

DeputyChairperson

Human resources coordinator
Facilities coordinator
Asset preservation coordinator

Business activities subcommittee
Secretariat

Business activities coordinator
Secretariat

Public relations subcommittee
Community subcommittee

Public relations coordinator
Community coordinator

In-house firefighting organizationIfdisaster occurs,
the Central Disaster
Prevention Council
begins to function as
Disaster Response
Headquarters

DNP
AnnualReport2017

continue operating under crisis conditions and quickly
restore operations in the event of an interruption. We
maintain a proper awareness of disaster risk in the course ofour daily operations, and we implement employee training
and other measures aimed at enabling us to cope
appropriately in extreme situations.

Central Disaster Response Headquarters

Regional Disaster Prevention Councils
Chairperson

DeputyChairperson

Secretariat

Business Unit and Group Affiliate
Disaster Response Headquarters
Regional Disaster Response Headquarters

Our 1st responsibility

2 Synopsis of
PerformanceContributing to Social Development: Research and development
Given that DNP has expanded its fields of business bydeveloping applications for printing and information
technologies, research and development are extremely
important to us. In today’s rapidly changing world, we needto take consumers’ point of view, look carefully at what ishappening in society, and be quick to discern existing

problems and the technologies that are needed to solve
them. Having done so, we then develop our own originaltechnologies while also actively pursuing alliances with othercompanies that have special strengths in order to speed up
technological development.

Business Unit

Business unit’s development
framework

Publishing & Media Services

Development Headquarters

Information Innovation

Development Headquarters

Imaging Communication

Development Headquarters

Packaging

Development Headquarters

Living Spaces

Development Headquarters

Fine Optronics

Development Headquarters

Lifestyle and Industrial Supplies
Electronics
New Business

Head office research anddevelopment framework

Technology
Development
CenterResearchandDevelopment
CenterSupervisionCorporate R&D Division

Information Communication

14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development

Controlled by Head OfficeField

6 Message toShareholders

72 Financial Section
108 Appendix

Advanced Business Center

Medium-term
development(less than 3 years)

Short-term development (less than 1 year)

Long-term
development(3 years or more)

Our 1st responsibility

Contributing to Social Development: Intellectual property
In our view, intellectual property initiatives provide a basic
underpinning for a wide range of business activities and are
indispensable as we work to differentiate DNP fromcompetitors. Because the competitive standing of ourintellectual property greatly affects DNP’s business, we workat generating high-quality patents and making maximum useof our intellectual property in our business operations.

Number of Japanese patents held (As of March 31, 2017)(case)

14,00012,00010,000
8,000
6,000
4,000
2,000
0

13

14

15

16

17

57

Our 2nd responsibility

Information Security
Information security and the protection of personal
information have become more important than ever.
Because DNP handles a large volume of personal informationand other information assets, proper management andprotection of information assets are critical tasks that caneven be called part of our social mission. DNP positions
information security initiatives among management’s toppriority concerns as we work to strengthen our information
security-related frameworks and educate employees aboutprotecting information.

■ The DNP Group’s Basic Policy on Information Security, and Personal Information Protection Policies
It is obvious to us that we have a responsibility to protect
personal information, data entrusted to us by corporateclients, and other information assets. We have establishedpolicies related to information security and personal

information protection. We maintain strict and continuous
control by strengthening related systems and educating
employees, etc.

■ Information Security Management Framework
Head office

Operational Divisions and Group Companies

DNP Group Information Security Committee
Chief, Personal information protection manager,
Committee members

Information Security Committee
Chief, Personal information protection manager(General manager of division or president of Group company)

Person responsible for inspection
Information Security Promotion Office Manager
Information Security Headquarters

Information Security Manager
Person responsible for education
Person responsible for security area measures
Person responsible for public relations measures
Person responsible for information system measures

TOPICS■ Strengthening■

DNP
AnnualReport201758

cyber-security measures

Now that cyber attacks are becoming increasingly artful andcomplex, it is no longer sufficient to rely solely on conventional
border protection measures aimed at not allowing threats to entera company’s computer systems. DNP is using the technologies
and expertise that it has cultivated through its businesses toconstruct multilayered countermeasures that combine—in addition
to the conventional “entrance measures” that address things likesystem vulnerabilities and keeping out viruses—“inside measures”
for preventing and/or containing damage in the event that an
intruder does manage to infiltrate the system, and “exit measures”
that prevent information from being illicitly transmitted outside thesystem. DNP promotes “security by design,” whereby protectivefunctions are built into a computer system from the design anddevelopment stages, as well as measures for counteracting new
threats, such as periodic inspection of systems already in use tocheck for vulnerabilities.
DNP is also focusing on developing human resources capableof contributing to cyber security, for example by implementing
training for its own employees through DNP Group company Cyber
Knowledge Academy Co. Ltd., which provides educational programsfor training personnel to counter cyber attacks.

In addition, we belong to the Nippon CSIRT Association, whose
many corporate members aim to cooperate and share information
regarding instances when information security has been breached.
Through efforts like these, DNP is further fortifying its security
systems in order to resist increasingly sophisticated cyber attacks,
and is preparing to quickly detect and defuse attacks should theyoccur.

A class at Cyber Knowledge Academy, which trains personnel to countercyber attacks

Our 2nd responsibility

2 Synopsis of
Performance

Environmental Conservation and Realizing a Sustainable Future
As a manufacturer, DNP always considers how to coexist
with the Earth’s environment. The most urgent problem
facing humanity in the 21st century (sometimes called “theenvironment century”) is how to coexist with nature andpreserve its gifts so that we can pass them on to the next
generation. One of the values set forth in the DNP Group

Code of Conduct is to help realize a sustainable society sothat we can pass on an abundant Earth to future
generations. The entire DNP Group is working to achievethat goal, for example by preventing global warming,
protecting biodiversity, and using resources efficiently.

Global warming prevention
Reducing negative environmental
impact of transport

14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development■ Environmental Targets to Achieve by the Fiscal Term through March 2021
Environmental issue

6 Message toShareholders

72 Financial Section

Target for fiscal term through March 2021

108 Appendix

Reduce greenhouse gas emissions by 10% worldwide compared to fiscal term ended March 2006
Reduce per-unit fuel usage for transport (amount of transport fuel/net sales) by 1% per year;
reduce by 10% compared to term ended March 2011

Reduce all VOC (except methane) emissions by 35% relative to fiscal term ended March 2011
Volatile organic compounds (VOCs)

Industrial waste reduction

Outside Japan, prepare to reduce VOC emissions by introducing helpful technologies and reducing emissions
as much as possible in addition to complying with local laws
Reduce per-unit waste generation (amount of waste generated/production amount) by 20% worldwide compared tofiscal term ended March 2011

Maintain zero waste generation for DNP Group within Japan
Water conservation

Reduce per-unit water usage (amount of water used/net sales) by 25% worldwide compared to fiscal term ended March 2011

Development and sales ofenvironmentally conscious
products and services

Achieve 600 billion yen in sales of environmentally conscious products and services

Environmental conservation

Maintain air, water, odor, noise and vibration pollution at no more than 70% of the permitted levels

Office environment

Wastepaper sorting and recovery rate of at least 70% relative to general waste

TOPICS■ DNP receives the 26th Grand Prize for■■

Global Environment Award,
Japan Business Federation Chairman’s Prize

When applied to window glass, DNP Lighting Film effectively reflects
and diffuses sunlight to make room interiors brighter. In recognitionof the film’s contribution to reducing electric power consumption
and making living spaces more pleasant, DNP was awarded the26th Grand Prize for Global Environment Award, Japan Business
Federation Chairman’s Prize.
DNP makes two types of this film, one for sandwiching between
two sheets of glass during the manufacturing of laminated glass,and another for applying to window glass that is already in place in abuilding. After we applied DNP Lighting Film to laminated glass usedin windows installed on the northern side of a building where there
was little sunlight, brightness in the room roughly doubled*1, and thecost of electricity required for lighting decreased by about 13%*2.
DNP Lighting Film makes use of optical design andmicrofabrication technologies that DNP cultivated while making
optical films for display products. By optimizing the opticalcharacteristics and structure of the material used for this product,
we designed it to efficiently take in sunlight all year round. Because
effective use of natural light leads to reduced power consumption
and more pleasant living spaces, more and more homes, offices,

shops and hospitals, etc. are adopting this type of lighting film.
Since DNP positions Environment and Energy as one of ourtargeted growth areas, we are working to develop new products
and services that simultaneously enable economic growth andenvironmental preservation. Moreover, since we benefit from thebounty of nature throughout our business activities, from procurementof raw materials to product manufacturing and disposal, we areconstantly considering how to coexist with the global environment.
We mobilize our entire corporate Group to engage in environmental
activities aimed at building a sustainable society.
*1 Study conducted by DNP: maximum values measured between 9 am			and 6 pm on June 5, 2015
*2 Study conducted by DNP: measured between 9 am and 6 pm on July 2,
			
2015

April 10, 2017 award
ceremony: Prince andPrincess Akishino
sitting at table,
DNP Executive Vice
President Yoshinari
Kitajima at left

59

Corporate
Governancepreparing an environment to allow directors to boldly pursue
various business opportunities based on a healthy
entrepreneurial spirit and to effectively supervise business
operations, primarily in the four growth areas of “Knowledge
and Communication,” “Food and Healthcare,” “Lifestyle andMobility,” and “Environment and Energy.” We recognize thatto increase our business competitiveness in the future, wemust fulfill our corporate social responsibilities (CSR) andwin the trust of our various stakeholders, including
shareholders, customers, consumers, and employees. To
this end, we regard improvement in corporate governance,
including internal control systems, as a top management
priority. We establish and operate systems that enableprecise managerial decision-making, prompt andappropriate business execution based on these decisions,and supervision and auditing of these processes. We also
conduct thorough training and education to improve each
employee’s awareness of compliance issues and we strive
to improve our overall corporate governance.

“DNP” refers to Dai Nippon Printing Co., Ltd. in this section.
(As of June 29, 2017)

1. Corporate Governance■ Fundamental philosophy
DNP seeks to improve earning power and capital efficiency
in order to support sustained growth and increase
enterprise value over the medium to long term. We
established DNP Group Vision 2015, which states our
corporate philosophy as: “The DNP Group connects
individuals and society, and provides new value.” We are■ DNP’s corporate governance■ structure
DNP’s corporate governance and internal control system
will have the following structure from June 29, 2017.

<Structure diagram>
General Meeting of Shareholders
Audit

Audit

Board of Directors
Advisory Committee

Management Committee

President and Directors in Charge

Corporate Ethics Committee
Open Door Room

ReportingInformation Disclosure Committee

Information Security Committee
Invention Compensation Committee
Central Disaster Prevention Council

Group companies

Audit
Guidance

Legal and other main divisions
Audit
Guidance
Training(Autonomous implementation,
inspection, review, improvement)

Audit
Guidance
Reporting

DNP
AnnualReport2017

60

Coordination

ReportingAssistance

Audit Unit

(CSR & Environment Department,
Employee Relations Department,
Technical & Engineering Division,
Finance & Accounting Division,
Corporate Planning &Control Department,
Intellectual Property Division,
Corporate Communication Division,
Legal Affairs Department, etc.)

Audit

Board of Statutory Auditors

CSR & Environmental Committee

Auditing Department

Head Office

Operating Units

Accounting Auditors

Divisions(Oversight of internal controls)

Directors andcorporate officers
in charge

Audit

ReportingManagement and business execution
structure, audit structure
・ DNP’s organization is designed to allow directors withspecialized expertise and experience in a wide range ofbusiness fields to participate in management decisions, totake responsibility and authority as they execute their work,and to supervise the work of other directors. We areworking to enhance our decision making and supervisory
capabilities from a company-wide perspective byappointing directors in charge of each management
function. Independent outside directors also participate indecision-making in order to facilitate prompt and precise
management decisions and smooth execution of thosedecisions, and to further strengthen proper supervisory
functions. Corporate officers appointed by the Board of
Directors have the responsibility and authority to executebusiness decided by the Board of Directors.
・ In order to nimbly construct optimal management systems
for responding to changes in the business environment,
and to further clarify management responsibility for eachfiscal year, we set the term of office for directors andcorporate officers at one year.
・ The Board of Directors consists of 12 directors, including
two independent outside directors, and the Board ensuresthat meetings are run appropriately based on the Board of
Directors Regulations. The Board meets once a month, inprinciple, to discuss and decide on important businessmatters. Corporate officers may also attend meetings asneeded to provide reports. To speed up the Company’s
activities and make them more efficient, DNP has alsoestablished a Management Committee consisting of
directors at the senior managing director level and above.
The committee meets once a month, in principle, to review
and discuss management policies, strategies, andimportant business matters. Decisions about director
compensation, designation of director candidates, andother such matters are made in light of the advice andopinions of an Advisory Committee comprised ofindependent outside directors in an effort to increase thetransparency of the decision making process.
・ DNP has in place a Board of Statutory Auditors thatconsists of five auditors, including one auditor withconsiderable knowledge of finance and accounting andthree outside auditors. In accordance with auditors’prescribed audit criteria and responsibilities, the statutory
auditors conduct audits of the directors’ management of
day-to-day operations and, as necessary, seek informationfrom the directors and corporate officers regarding
business operations.
・ DNP provides in its Articles of Incorporation for the ability toconclude limited liability agreements based on laws andregulations in order to allow directors (excluding executive
directors, etc.) and statutory auditors to adequately fulfill
their expected roles and to ensure useful personnel in the
future. DNP and its directors (excluding executive directors,etc.) and statutory auditors have concluded agreementsthat limit the directors’ and auditors’ liability for damages
within the parameters set forth in Article 423, Paragraph 1of Japan’s Companies Act, so long as they perform theirduties in good faith and without serious negligence.

Reasons for choosing this structure
We ensure that the Board of Directors acts appropriately,
agilely, and flexibly by adopting the organizational structureof a company with a Board of Statutory Auditors, as noted
above, by introducing an independent outside director andcorporate officer system, and by establishing and operating
discretionary committees. We believe that adopting thiscorporate governance structure will allow the Company tosustain growth and increase enterprise value over the
medium to long term.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information

Internal control and risk management
systems

54 How DNP Works to
Achieve Sustainable
Development

The following provides an overview of the various systems
that we have established to ensure appropriate businessconduct at DNP and the corporate group comprising DNP
and DNP subsidiaries (DNP Group), and an overview of theoperation of these systems.

72 Financial Section
108 Appendix(1) System for ensuring that directors and employees of
DNP and DNP subsidiaries perform their duties incompliance with laws and regulations and the Articles
of Incorporationa. We established the DNP Group Code of Conduct togovern the conduct of all employees (including
directors). We distribute this code to all employees of
the DNP Group and conduct training and take otheraction to promote a full understanding of this code.
〔Summary of operation〕
We promote a full understanding of the DNP Group
Code of Conduct through various training sessions
and other activities carried out mainly by DNP’s
Corporate Ethics Committee.
b. In principle, the Board meets once a month. Basedon the Company’s Board of Directors Regulations,the directors ensure that meetings are appropriately
run and supervise each other in day-to-day
operations. We appoint independent outside directors
to ensure that the Board of Directors performs its
duties in compliance with the law. Executive directors
exercise their authority according to the Organization
Rules, Work Authority Regulations, Proposal System
Regulations, and other internal company rules; andthey prevent acts in violation of laws, regulations, and
the Articles of Incorporation by supervising thebusiness execution of the corporate officers andgeneral managers responsible for DNP’s variousorganizational units.
DNP is a company with a Board of Statutory
Auditors. Statutory auditors, including independent
outside statutory auditors, audit the performance of
duties by directors according to the audit criteria andresponsibilities prescribed by DNP’s Board of
Statutory Auditors.
〔Summary of operation〕
The Board of Directors met 10 times during the fiscal
year ended March 2017. The Board held discussions,
made decisions, and took appropriate actions onimportant matters based on the Board of Directors
61

Regulations. Executive directors exercise theirauthority according to various rules and regulations,and they supervise the business execution of thecorporate officers and general managers responsible
for DNP’s various organizational units. DNP’s two
independent outside directors supervise the businessexecution of directors.
Statutory auditors audit the performance of duties
by directors according to the audit criteria andresponsibilities prescribed by DNP’s Board of
Statutory Auditors.
c. DNP’s Corporate Ethics Committee is responsible forestablishing and operating systems and othermechanisms to ensure appropriate business conduct
within the DNP Group, based on the DNP Group’s
Basic Compliance Management Regulations.
〔Summary of operation〕
DNP’s Corporate Ethics Committee meets once amonth to oversee the establishment and operation ofsystems and other mechanisms to ensure appropriate
business conduct within the DNP Group.
d. Under the general oversight of DNP’s Corporate Ethics
Committee, the Information Disclosure Committee,
CSR & Environmental Committee, Information Security
Committee, Invention Compensation Committee,
Central Disaster Prevention Council, and various head
office organizations responsible for specific laws andregulations conduct reviews, provide guidance, andoffer training in their areas of specialty to otherorganizational units and Group companies.
〔Summary of operation〕
The various special committees, Central Disaster
Prevention Council, and various head officeorganizations responsible for specific laws andregulations conduct reviews, provide guidance, andoffer training as appropriate through field inspections,group training sessions, and other means to otherorganizational units and Group companies.

DNP
AnnualReport2017

62

e. The general managers of DNP’s various organizational
units independently determine, implement, check,evaluate, and improve the systems and procedures
required for their own units, based on the DNPGroup’s Basic Compliance Management Regulations
and in light of the specific operations of their unit.
〔Summary of operation〕
DNP’s various organizational units independently
determine and implement the systems and procedures
required by their unit. Each organizational unit confirms
the operation of these systems and procedures. Each
unit compiled the results of its independent checks,
evaluations, and improvements made through the endof the fiscal year ended March 2017 into a Unit
Confirmation Report, and provided the report to DNP’s
Corporate Ethics Committee. The Corporate Ethics
Committee conveyed these results to relevant head
office organizations, and these head officeorganizations confirmed conditions and provided

guidance and training as needed.
f. DNP’s Auditing Department is independent fromoperating units, and based on the Internal Audit
Regulations, it conducts internal audits and provides
guidance to DNP’s various organizational units andgroup companies regarding the establishment andoperation of systems and other mechanisms to ensure
appropriate business conduct.
〔Summary of operation〕
DNP’s Auditing Department is independent fromoperating units and conducts internal audits andprovides guidance to DNP and DNP Group
companies, in accordance with an audit plan. The
results of the Auditing Department’s internal audits
and guidance are reported to DNP’s President,
statutory auditors, and accounting auditors.
g. DNP’s Corporate Ethics Committee established theOpen Door Room as an internal and external
whistleblowing forum for the DNP Group. It alsoestablished the Supplier Hotline as a means to receive
information from material suppliers and contractors. It
uses these to obtain information about legal violations
and other such actions by employees and to respondto this information (including by not providing unfair
treatment to whistleblowers).
〔Summary of operation〕
We seek to publicize and gain widespread recognitionof this whistleblower system and to use it
appropriately.
h. We establish, operate, evaluate, and report on internal
controls for financial reporting based on the Basic
Policy and Basic Plan for Establishing, Operating, andEvaluating Internal Controls for Financial Reporting, as
stipulated by DNP’s Board of Directors. We thereby
ensure compliance with laws and regulations andreliability in financial reporting.
〔Summary of operation〕
DNP works to ensure compliance with laws andregulations and reliability in financial reporting by
establishing internal controls for DNP and DNP Group
companies and evaluating their operation based on
the Basic Policy and Basic Plan for Establishing,
Operating, and Evaluating Internal Controls for
Financial Reporting.
i. To sever relations with antisocial forces, we stipulate in
the DNP Group Code of Conduct that the Company
shall not engage in any activities with antisocial forces.
In addition to complying with this stipulation, we workwith our various business partners to create an
arrangement enabling a severing of relations in theevent that a business partner is found to be anantisocial force. The DNP Group will also strengthenties with outside organizations, including the police
and law offices, to guard against inappropriate
demands made by antisocial forces.

〔Summary of operation〕
DNP actively seeks to sever relations with antisocial
forces, and we make ongoing efforts with our various
business partners to create an arrangement enabling asevering of relations in the event that a business
partner is found to be an antisocial force. We are also
working to strengthen ties with outside organizations,
including the police and law offices, to gather
information about antisocial forces and to guard
against inappropriate demands made by antisocial
forces.
(2) Regulations and other systems for managing the riskof losses at DNP and DNP subsidiaries
To manage risks that could have a serious impact on
the business of the DNP Group, including those related
to compliance, information security, environment,
disasters, product safety, insider trading, and export
control, DNP’s Corporate Ethics Committee, various
special committees, and other head officeorganizations establish regulations and conduct
training in an effort to prevent risks from occurring.
When risks do occur, we respond quickly to avoid or
minimize losses to the DNP Group. Additionally, under
the general oversight of DNP’s Corporate Ethics
Committee, we regularly take inventory of risks anddesignate organizations and responsible directors toquickly respond to any new risks that could have aserious impact on our business.
〔Summary of operation〕
DNP’s Corporate Ethics Committee, various special
committees, and other head office organizations
identify risks that could have a serious impact on ourbusiness and designate organizations and responsible
directors to respond to these risks. Special
committees and head office organizations evaluate
compliance in relation to these risk and work toprevent risks from occurring. We report the details ofthese activities to DNP’s Corporate Ethics Committee.
(3) System for ensuring that directors of DNP and DNP
subsidiaries perform their duties efficiently
a. The Board of Directors meets once a month, inprinciple, and also holds meetings as needed,
providing a basic system for ensuring that directors
perform their duties efficiently. Additionally, tocontribute to fair and efficient decision making, weestablished the Advisory Committee comprised ofindependent outside directors to provide advice andopinions on important matters, including director
compensation and designation of director candidates.
The Management Committee comprised of senior
managing and higher directors meets once a month,in principle, to examine and discuss importantbusiness matters.
〔Summary of operation〕
In addition to the operation outlined above in (1) b.,
our Advisory Committee held discussions and offeredadvice and opinions about important matters,

including director compensation and designation of
director candidates. Additionally, the Management
Committee met 19 times during the fiscal year ended
March 2017 to examine and discuss importantbusiness matters.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Featureb. We seek to improve the efficiency of businessexecution by allowing executive directors to performtheir duties based on decisions by the Board of
Directors by appropriately delegating authority to thecorporate officers and general managers responsible
for DNP’s various organizational units, within thescope provided for in the Organization Rules, Work
Authority Regulations, Proposal System Regulations,and other internal company rules.
〔Summary of operation〕
DNP seeks to enhance the efficiency of businessexecution by preparing various rules to appropriately
delegate the authority of executive directors to thecorporate officers and general managers responsible
for DNP’s various organizational units.

30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

c. To ensure that directors at Group companies performtheir duties efficiently, we seek to enhance theefficiency of business execution by providing guidance
to enable Group companies, accounting for their sizeand other specific attributes, to independently hold
Board of Directors meetings at their discretion basedon the Board of Directors Regulations, and to
appropriately delegate authority based on the
Organization Rules, Work Authority Regulations,
Proposal System Regulations, and other internal
company rules.
〔Summary of operation〕
Group companies are working to enhance theefficiency of business execution by directors by
establishing appropriate rules in light of their businessportfolio, size, and other attributes.
(4) System for storing and managing information related
to the performance of duties by DNP’s directors
We record information related to the performance of
duties by directors in the Board of Directors meeting
minutes, special committee meeting minutes, proposal
documents, other paper documents, and electronic
documents. Additionally, in accordance with the Basic
Information Security Rules, Document Control
Standards, and Electronic Data Control Standards, weappropriately and safely store and manage in an easily
searchable format the paper and electronic documents
in which this information is recorded for a period oftime stipulated in these rules and standards.
〔Summary of operation〕
We record information related to the performance of
duties by directors in paper and electronic documents,
and appropriately store and manage these documentsin the responsible organization according to various
regulations.

63

(5) System for ensuring appropriate business conduct by
the corporate Group comprising DNP and DNP
subsidiaries
a. To ensure appropriate business conduct in the DNPGroup, we undertake training and other activities sothat all DNP Group employees (including directors) gaina full understanding and perform their work according
to the DNP Group Code of Conduct. Concerning theestablishment and operation of systems and othermechanisms to ensure appropriate business conduct,
we established the DNP Group’s Basic ComplianceManagement Regulations and the Affiliated Company
Management Regulations, and provide guidance toGroup companies to help them establish their own
rules and regulations based on the above.
〔Summary of operation〕
In addition to the operation outlined above in (1) a.,
Group companies establish their own rules andregulations under the direction of relevant head officeorganizations and based on the DNP Group’s Basic
Compliance Management Regulations and the AffiliatedCompany Management Regulations.
b. We confirm that Group companies, based on thepolicies outlined in the preceding item, independently
establish various rules and regulations, including
Proposal System Regulations, that stipulate mattersrequiring prior consultation or subsequent reportingwith the parent company, accounting for eachcompany’s size and other specific attributes; that they
establish and operate reporting systems to report to
DNP about important business execution by directors
and other employees of Group companies; and that
this business execution complies with laws, regulations,and the Articles of Incorporation and is carried out
efficiently. We also provide guidance to help Group
companies make independent decisions about thesystems and procedures they need in light of theirbusiness portfolio, size, and other attributes; and to
implement, check, evaluate, and improve their systems
and procedures.
〔Summary of operation〕
Group companies establish various rules andregulations, including Proposal System Regulations,that stipulate matters requiring prior consultation orsubsequent reporting with DNP; and establish
appropriate systems in light of their business portfolio,size, and other attributes. Group companies confirmed
the operation of these rules, regulations, and systems;
compiled a Unit Confirmation Report by the end of the
fiscal year ended March 2017; and reported to DNP’s
Corporate Ethics Committee. The Corporate Ethics
Committee conveyed these results to relevant head
office organizations, and these head officeorganizations confirmed conditions and provided
guidance and training as needed.
DNP
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64

c. DNP’s Auditing Department, Corporate Ethics
Committee, various special committees, and otherhead office organizations conduct audits and checks
and provide guidance and training in relation to theimplementation of the preceding two items.
〔Summary of operation〕
DNP’s Auditing Department, Corporate Ethics
Committee, various special committees, and otherhead office organizations conduct audits and checks
and provide guidance and training in relation to thesystems of Group companies.
(6) System for employees who assist DNP’s statutory
auditors in the performance of their duties and mattersrelated to the independence of these employees fromdirectors
a. DNP’s Board of Statutory Auditors established the
Audit Unit and appoints dedicated staff member toassist DNP’s statutory auditors in the performance of
their duties. To ensure the effectiveness of the
instructions given by DNP’s statutory auditors to theirstaff, we grant their staff the authority to appropriately
conduct checks and gather information.
〔Summary of operation〕
DNP appoints one dedicated staff member to assist its
statutory auditors. We grant this staff member theauthority to appropriately conduct checks and gather
information to ensure the effectiveness of his or her
work.
b. Audit Unit staff perform their duties under the directionof DNP’s statutory auditors. Any personnel evaluation,transfer, reprimand, or other such actions related tothis staff requires the consent of DNP’s Board of
Statutory Auditors.
〔Summary of operation〕
Audit Unit staff are independent from the direction of
directors and perform their duties under the directionof DNP’s statutory auditors. Any personnel evaluation,transfer, reprimand, or other such actions related tothis staff are taken with the consent of DNP’s Board of
Statutory Auditors.
(7) System for directors and employees of DNP and DNP
subsidiaries to report to DNP’s statutory auditors;
policy for expenses incurred as statutory auditors
perform their duties; system for other reporting tostatutory auditors; and system for ensuring effective
auditing by statutory auditors
a. DNP’s statutory auditors at any time deemednecessary can request that directors and employeesof the DNP Group provide a report on the performanceof their duties; and the directors, employees, or
persons receiving reports from these persons willreport promptly when requested by DNP’s statutory
auditors.
〔Summary of operation〕
Statutory auditors are independent from the directionof directors, and have the authority to request as
needed that directors and employees provide reports
on business execution at DNP and DNP Groupcompanies. DNP Group directors and employees
respond promptly when requested to report by DNP’s
statutory auditors.
b. If a DNP director discovers a legal violation or othermatter that could significantly damage the DNP Group,
the director will report this matter immediately to
DNP’s statutory auditors.
〔Summary of operation〕
We endeavor to make DNP directors fully aware of
their reporting obligations to statutory auditors as
stipulated in the Companies Act.
c. DNP’s Auditing Department and Corporate Ethics
Committee provide regular reports to DNP’s statutory
auditors about the details of auditing of the DNPGroup and the establishment and operation ofsystems and other mechanisms to ensure appropriate
business conduct in the DNP Group.
〔Summary of operation〕
During the fiscal year ended March 2017, DNP’s
Auditing Department and Corporate Ethics Committee
held meetings with DNP’s statutory auditors andprovided timely reports to these statutory auditors.
d. DNP’s statutory auditors convene liaison meetings andexchange opinions with statutory auditors at Group
companies.
〔Summary of operation〕
The statutory auditors of DNP and DNP Group
companies convene liaison meetings at their discretionand exchange information and opinions.
e. DNP bears the costs deemed necessary for its
statutory auditors to perform their duties, and DNP’s
Board of Statutory Auditors can request these costs
from DNP both before and after the fact.
〔Summary of operation〕
DNP bears costs related to the work of its statutory
auditors within a scope that it deems necessary.
f. DNP’s President conducts regular exchanges of
opinion with DNP’s Board of Statutory Auditors.
〔Summary of operation〕
During the fiscal year ended March 2017, DNP’s
President held meetings and exchanged opinions with
DNP’s Board of Statutory Auditors.

■ Internal controls and auditor’s■ auditing
In order to maintain a structure that allows for precise
management decision-making, appropriate and prompt
execution of business, and inspection and monitoring ofthese functions, the Corporate Ethics Committee, as the
body in charge of internal control, inspects and guides
DNP’s operating units according to the DNP Group’s Basic
Compliance Management Regulations, and regularly reports
to statutory auditors regarding management conditions. In
addition, the Auditing Department (consisting of 12

employees) ensures the propriety of operations byconducting accounting and operational audits based on
Internal Audit Regulations and by providing progress reports
to the statutory auditors and the accounting auditor.
The statutory auditors hold regular meetings of the Boardof Statutory Auditors, work with other statutory auditors to
perform their audit duties, and closely cooperate with theaccounting auditors by receiving from them an explanation of
the audit plan at the start of the fiscal year, assessing audit
operations during the fiscal year as appropriate, andreceiving a report of audit results at the end of the fiscal year.

■ DNP’s outside directors and■ outside statutory auditors
DNP has two outside directors and three outside statutory
auditors. Outside directors and statutory auditors do nothave any particular personal relationships, capital
relationships, transactional relationships, or other interests
with DNP.
The role of outside directors is to supervise inside directors
and contribute to improving the transparency andaccountability of the Board of Directors by providing
management advice based on their judgment. The role ofoutside statutory auditors is to enhance the propriety ofaccounting and operational audits and to supervise
management.
・ Outside director Tadao Tsukada can participate inbusiness decision making from an objective standpointthat is independent from the Company’s management
team that executes its business, based on keen insightand broad experience as a distinguished academic. Mr.
Tsukada owns 2,000 shares of DNP stock.
・ Outside director Tsukasa Miyajima can participate inbusiness decision making from an objective standpointthat is independent from the Company’s management
team that executes its business, based on keen insightand broad experience as a legal professional. Mr. Miyajima
owns 2,000 shares of DNP stock.
・ Outside statutory auditor Shin-ichi Ikeda is designated as
an independent officer and can help bolster auditing basedon a broad knowledge gained from business experience atother companies. Mr. Ikeda owns 2,000 shares of DNP
stock.
・ Outside statutory auditor Makoto Matsuura is designatedas an independent officer and can help bolster auditing
based on his legal expertise as an attorney.
・ Outside statutory auditor Kuniaki Nomura can help bolster
auditing based on his legal expertise as an attorney.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

DNP established its own Independence Standards for
Independent Officers with reference to stock listing rules andother material in order to avoid conflicts of interest withgeneral shareholders when appointing outside directors andoutside statutory auditors. These standards are presented
below, and we designate all of our outside directors andoutside statutory auditors as independent officers as a resultof satisfying these standards.

65

DNP’s independence standards
for independent officers
Independent officers must have a neutral position that is
independent from DNP’s management team; none of thefollowing conditions may apply.
(1) An executive of DNP or DNP affiliated company(hereinafter, DNP Group) (person to whom this applies
during the past 10 years. Persons who have served as a
non-executive director or auditor of the DNP Group during
the past 10 years may include those who have served as
an executive during the 10-year period prior to their
appointment as a director or auditor)(2) A major supplier of the DNP Group (supplier group [entity
belonging to the consolidated group of the direct supplier] thatprovides products or services to the DNP Group for which thetransaction value of the products or services provided to the
DNP Group accounts for over 2% of the supplier group’s
annual consolidated sales or gross revenues in the mostrecent fiscal year) or an executive thereof(3) A major customer of the DNP Group (customer group thatreceives products and services from the DNP Group forwhich the transaction value of the products and services
provided to the customer group from the DNP Groupaccounts for over 2% of the DNP Group’s annual
consolidated sales in the most recent fiscal year) or an
executive thereof(4) A major lender to the DNP Group (lender providing loans
accounting for over 2% of the DNP Group’s total consolidated
assets in the most recent fiscal year) or an executive thereof(5) A consultant, accounting professional, or legal
professional (in the case of an organization, a person
belonging to said organization) who receives a large
amount of monetary or other consideration other than
executive compensation from the DNP Group (person
who receives consideration other than executive
compensation in excess of the larger of an annual amountof ¥10 million or 2% of the person’s sales or grossrevenues in the most recent fiscal year)(6) A major shareholder of DNP (direct or indirect ownershipof 10% or more of total voting rights) or an executive
thereof( 7) An executive at an entity in which the DNP Group is amajor investor (direct or indirect ownership of 10% ormore of total voting rights)(8) A person belonging to an auditing company that
performs statutory audits for DNP(9) A person to whom items (2) through (8) have recently
applied (within one year)(10) A relative (within second degree of kinship) of a person(excluding insignificant persons) to whom any of items (1)through (5) apply(11) An executive at an entity with mutual appointments ofoutside officers (person to whom this applies during thepast 10 years)(12) An entity that receives donations from DNP (average
donation during the past three fiscal years that is the higherof an annual amount of ¥10 million or 2% of the recipient’s
annual gross revenues) or an executive thereof (person towhom this applies during the past 10 years)■ Compensation paid to directors and statutory auditors(1) Total compensation paid by DNP, by category of director/statutory auditor, total compensation by type,
and the number of directors and statutory auditors covered
Total compensation by type (¥ million)

Category of director/
statutory auditor

Total compensation(¥ million)

Base compensation

Bonus

Number of directors
and statutory
auditors covered

Directors

1,033

855

178

16

Statutory auditors

58

58

—

2

Outside directors
and auditors

110

110

—

5

(excluding outside directors)(excluding outside auditors)

Notes: 1. Bonuses are provisions for bonuses for directors and statutory auditors for the fiscal year ended March 2017.
2. There were 10 internal directors, two internal statutory auditors and five outside directors as of the end of the fiscal year ended March 2017.

(2) Company directors and total compensation
Name(director type)
Yoshitoshi Kitajima(Director)

Koichi Takanami(Director)

Masayoshi Yamada
DNP
AnnualReport2017

66(Director)

Total compensation(¥ million)

Company

Total compensation by type (¥ million)
Base compensation

Bonus

326

Dai Nippon Printing Co., Ltd.

276

50

129

Dai Nippon Printing Co., Ltd.

105

23

129

Dai Nippon Printing Co., Ltd.

105

23

Notes: 1. Total compensation is shown only for those with compensation of at least 100 million yen.
2. Bonuses of Dai Nippon Printing Co., Ltd. are the amounts expected to be paid as bonuses for the fiscal year ended March 2017.

(3) Policies regarding the determination ofcompensation for directors and statutory auditors
Compensation for directors is calculated within the limits
on directors’ compensation approved at a general
meeting of shareholders; is reviewed and discussed by
the Management Committee in light of the advice andopinions of the Advisory Committee comprised ofindependent outside directors; and is deliberated anddecided on by the Board of Directors.
Compensation for each director is determined basedon a broad range of factors, including the operations
they are in charge of, their responsibilities, achievements,
and contributions.
Compensation for statutory auditors is calculated
within the limits on statutory auditors’ compensation, andthe compensation of each statutory auditor is determinedbased on discussions with the statutory auditor.

■ Accounting auditing
The names of the certified public accountants who
performed the accounting audits, the audit firms they are
employed by, and their assistants in the audit work are as
follows:

・ Certified public accountants who performed theaccounting audits
Atsushi Sasayama, Hirofumi Nikaido,
Reiji Yonekura, Yurika Kimura
・ Audit firm
ARK MEIJI AUDIT & Co.
・ Number of accounting audit assistants
22 certified public accountants, 4 others■ Matters for resolution by■ the general meeting of■ shareholders that can be resolved■ by the Board of Directors

resolution of the Board of Directors, in accordance with
Article 426, Paragraph 1 of Japan’s Companies Act, be
exempted from liabilities in Article 423, Paragraph 1 ofJapan’s Companies Act so that the statutory auditors
can sufficiently carry out their expected responsibilities.
(4) Interim dividend
DNP’s Articles of Incorporation specify that the Company
may, by a resolution of the Board of Directors, pay amonetary dividend stipulated in Article 454, Paragraph 5of Japan’s Companies Act to shareholders of record asof September 30 of each year and shareholders withactual stock certificates, so that profits can be flexibly
passed on to shareholders.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development■ Number of directors

72 Financial Section

DNP’s Articles of Incorporation specify that the number ofregular members on the Board of Directors shall be no morethan 16.

108 Appendix■ Requirements for shareholder■ approval of director nominees
DNP’s Articles of Incorporation specify that the approval of
director nominees requires the attendance of at least one
third of shareholders with voting rights and a majority of thevotes of these shareholders, and does not depend on
cumulative votes.

■ Requirements for shareholder■ approval of special resolutions
DNP’s Articles of Incorporation specify that the approval of
special resolutions stipulated in Article 309, Paragraph 2 ofJapan’s Companies Act requires the attendance of at least
one third of shareholders with voting rights and at least two
thirds of the votes of these shareholders, so that theshareholders’ meetings can run smoothly.

(1) Share buybacks
DNP’s Articles of Incorporation specify that the Company
may buy back its shares in the open market, in
accordance with Article 165, Paragraph 1 of Japan’sCompanies Act, upon approval by the Board of
Directors, in accordance with Article 165, Paragraph 2 ofJapan’s Companies Act, to allow the Company to use
capital more efficiently and implement a flexible capital
structure policy in response to changes in businessconditions.
(2) Exemption of directors from liability
DNP’s Articles of Incorporation specify that directors(including former directors) may, by a resolution of theBoard of Directors, in accordance with Article 426,
Paragraph 1 of Japan’s Companies Act, be exemptedfrom liabilities in Article 423, Paragraph 1 of Japan’sCompanies Act so that the directors can sufficiently carryout their expected responsibilities.
(3) Exemption of statutory auditors from liability
DNP’s Articles of Incorporation specify that statutory
auditors (including former statutory auditors) may, by a67

■ Stockholdings(1) Stocks held for reasons other than for pure investment purposes
No. of stocks: 348
Total on the balance sheet: 322,871 million yen(2) Holding category, company name, number of shares, amount recorded on the balance sheet,and holding purpose of stocks held for reasons other than for pure investment purposes(Fiscal year ended March 2016)
Stocks held for reasons other than pure investment purposes
Amount recordedon balance sheet

Company name

Number ofshares

Recruit Holdings Co., Ltd.

35,700,000

122,629

Enhance business relationship

Ezaki Glico Co., Ltd.

1,614,656

9,316

Enhance business relationship

The Dai-ichi Life Insurance Co., Ltd.

6,606,600

9,001

Enhance business relationship

Holding purpose(¥ million)

Terumo Corporation

2,202,000

8,885

Enhance business relationshipAsahi Group Holdings, Ltd.

1,860,029

6,523

Enhance business relationship

Taisho Pharmaceutical Holdings Co., Ltd.

692,700

6,178

Enhance business relationship

Meiji Holdings Co., Ltd.

564,400

5,107

Enhance business relationship

NISSIN FOODS HOLDINGS CO., LTD.

898,711

4,754

Enhance business relationshipMizuho Financial Group, Inc.

27,134,319

4,561

Enhance business relationshipLion Corporation

3,140,665

3,985

Enhance business relationship

YAMATO HOLDINGS CO., LTD.

1,660,600

3,731

Enhance business relationship

YAKULT HONSHA CO., LTD.

701,000

3,494

Enhance business relationship

Dexerials Corporation

3,125,000

3,475

Strengthen business allianceToyo Suisan Kaisha, Ltd.

794,980

3,211

Enhance business relationship

Aica Kogyo Co., Ltd.

1,293,743

3,058

Enhance business relationship

FUJIFILM Holdings Corporation

685,965

3,053

Enhance business relationship

Daikin Industries, Ltd.

300,000

2,523

Enhance business relationship

Hakuhodo DY Holdings Inc.

1,720,000

2,193

Enhance business relationship

Sapporo Holdings Limited

3,796,388

2,125

Enhance business relationship

NSK Ltd.

1,814,000

1,868Strengthen business alliance

SMK Corporation

3,200,000

1,849

Enhance business relationshipShiseido Co., Ltd.

677,619

1,702

Enhance business relationship

MORINAGA & CO., LTD.

2,965,000

1,698

Enhance business relationship

Ajinomoto Co., Inc.

630,931

1,602

Enhance business relationship

Kobayashi Pharmaceutical Co., Ltd.

157,054

1,551

Enhance business relationship

Mitsubishi Electric Corporation

1,300,000

1,533

Enhance business relationship

Kikkoman Corporation

350,940

1,298

Enhance business relationshipKDDI Corporation

426,600

1,282

Enhance business relationship

ROHM Co., Ltd.

269,474

1,277

Enhance business relationship

PILOT CORPORATION

297,400

1,275

Enhance business relationship

Mitsubishi UFJ Financial Group, Inc.

2,399,760

1,251

Enhance business relationship

NuFlare Technology, Inc.

250,000

1,246

Strengthen business allianceTosoh Corporation

2,609,000

1,234Strengthen business alliance

Stocks held in trust or other legal entity while retaining voting rights or voting instruction rights

DNP
AnnualReport2017

68

Company name

Number ofsharesAmount recordedon balance sheet

Holding purpose

Terumo Corporation

3,861,000

15,579Hold voting instruction rights for shares in retirement benefit trust

TV Asahi Holdings Corporation

4,030,000

8,136

Hold voting instruction rights for shares in retirement benefit trust

Japan Tobacco Inc.

1,000,000

4,690

Hold voting instruction rights for shares in retirement benefit trust

Astellas Pharma Inc.

2,284,000

3,418

Hold voting instruction rights for shares in retirement benefit trust(¥ million)

Note: Specified stocks and stocks held in trust with voting rights are not added together when selecting stocks with the largest amounts as recorded in the balance sheet.

(Fiscal year ended March 2017)
Stocks held for reasons other than pure investment purposes

2 Synopsis of
Performance

Company name

Number ofsharesAmount recordedon balance sheet

Holding purpose(¥ million)

Recruit Holdings Co., Ltd.

23,700,000

134,616

Enhance business relationship

The Dai-ichi Life Insurance Co., Ltd.

6,606,600

13,190Enhance business relationship

Ezaki Glico Co., Ltd.

1,615,185

8,721

Enhance business relationshipAsahi Group Holdings, Ltd.

1,860,029

7,827

Enhance business relationshipLion Corporation

3,140,665

6,287

Enhance business relationship

Taisho Pharmaceutical Holdings Co., Ltd.

692,700

6,262

Enhance business relationship

NISSIN FOODS HOLDINGS CO., LTD.

898,711

5,545

Enhance business relationship27,134,319

5,535

Enhance business relationship564,400

5,231

Enhance business relationshipMizuho Financial Group, Inc.
Meiji Holdings Co., Ltd.
YAKULT HONSHA CO., LTD.

701,000

4,332

Enhance business relationship

YAMATO HOLDINGS CO., LTD.

1,660,600

3,873

Enhance business relationship
Enhance business relationship

Aica Kogyo Co., Ltd.

1,293,743

3,793

Dexerials Corporation

3,125,000

3,437

Strengthen business alliance

Daikin Industries, Ltd.

300,000

3,355

Enhance business relationshipToyo Suisan Kaisha, Ltd.

794,980

3,295

Enhance business relationship

FUJIFILM Holdings Corporation

685,965

2,982

Enhance business relationship

MORINAGA & CO., LTD.

593,000

2,929

Enhance business relationship

NSK Ltd.

1,814,000

2,887

Strengthen business allianceTosoh Corporation

2,609,000

2,551

Strengthen business alliance

Sapporo Holdings Limited

759,277

2,285

Enhance business relationship

Hakuhodo DY Holdings Inc.

1,720,000

2,270

Enhance business relationship

Mitsubishi Electric Corporation

1,300,000

2,076

Enhance business relationship

ROHM Co., Ltd.

270,178

1,999

Enhance business relationshipShiseido Co., Ltd.

677,619

1,985

Enhance business relationship

Kobayashi Pharmaceutical Co., Ltd.

315,274

1,699

Enhance business relationship

Mitsubishi UFJ Financial Group, Inc.

2,399,760

1,679

Enhance business relationship

Mitsubishi Chemical Holdings Corporation

1,799,790

1,550

Enhance business relationship

TAKARA HOLDINGS INC.

1,200,000

1,441

Enhance business relationship

Ajinomoto Co., Inc.

630,931

1,385

Enhance business relationship

Mitsubishi Pencil Co., Ltd.

243,350

1,357

Enhance business relationship

PILOT CORPORATION

297,400

1,354

Enhance business relationship

SMK Corporation

3,200,000

1,267

Enhance business relationshipKDDI Corporation

426,600

1,246

Enhance business relationship

Senshukai, INC.

1,511,663

1,212

Enhance business relationship

SINFONIA TECHNOLOGY CO., LTD.

3,664,000

1,190

Strengthen business alliance

Eidai Co., Ltd.

2,237,000

1,178

Enhance business relationship

TOTO LTD.

279,000

1,173

Enhance business relationship

Kikkoman Corporation

350,940

1,166

Enhance business relationship

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Stocks held in trust or other legal entity while retaining voting rights or voting instruction rights
Company name

Number ofsharesAmount recordedon balance sheet

Holding purpose(¥ million)

Terumo Corporation

3,861,000

14,922

Hold voting instruction rights for shares in retirement benefit trust

TV Asahi Holdings Corporation

4,030,000

8,479

Hold voting instruction rights for shares in retirement benefit trust

Japan Tobacco Inc.

1,000,000

3,618

Hold voting instruction rights for shares in retirement benefit trust

Astellas Pharma Inc.

2,284,000

3,348

Hold voting instruction rights for shares in retirement benefit trust

Note: Specified stocks and stocks held in trust with voting rights are not added together when selecting stocks with the largest amounts as recorded in the balance sheet.

(3) Stocks held for pure investment purposes
None

69

2. Compensation Paid to Accounting Auditors■ Compensation paid to accounting auditors
Fiscal year ended March 2016
Compensation foraudit certification (¥ million)

Compensation forother services (¥ million)

Dai Nippon Printing Co., Ltd.

96

Consolidated subsidiaries

125

Total

221

Fiscal year ended March 2017
Compensation foraudit certification (¥ million)

Compensation forother services (¥ million)

—

96

—

—

124

—

—

220

—

■ Other material compensation details
None■ Compensation paid to accounting auditors for services other than
■ auditing work provided to DNP
None■ Determination of compensation for audit services
DNP’s compensation for auditing services is determined based on a variety of factors, including the number of expecteddays for the audit and the company size.

DNP
AnnualReport2017

70

Board of Directors, Statutory Auditors
and Corporate Officers

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature(As of June 29, 2017)30 DNP in Brief
40 Segment
Information

President

Yoshitoshi Kitajima

Managing Directors

Motoharu Kitajima
Takashi Saito

Executive Vice Presidents

Koichi Takanami
Masayoshi Yamada
Yoshinari Kitajima

Satoru Inoue

Senior Executive Corporate
Officers

Sakae Hikita
Kouichi Hashimoto
Masato Koike
Masato Yamaguchi

Directors

Tadao Tsukada*
Tsukasa Miyajima*

Senior Managing Directors

Senior Corporate Officers

Corporate Officers

Kazuhiko Takada

72 Financial Section

Ryota Chiba

108 Appendix

Nobuyuki Asaba
Mitsuru Tsuchiya
Hirofumi Hashimoto
Kazuhiko Sugita

Shigemi Furuya

Masafumi Kuroyanagi

Ryuji Minemura

Toru Takamatsu

Masahiko Wada

Standing Statutory Auditors

Tetsuji Morino

Kazunari Tanaka

Morihiro Muramoto

Satoshi Kubota

Tokuji Kanda

Naoki Hoshino

Kenji Miya

Souichiro Nishitani

Shin-ichi Ikeda*

Toshiki Sugimoto

Yoshiki Numano

Naohiko Sugimoto

Osamu Nakamura

Kiyotaka Nakagawa

Kazuhisa Kobayashi

Statutory Auditors

Makoto Matsuura*
Kuniaki Nomura*

Yoshinari Kitajima

Tetsuji Morino

Koichi Takanami

54 How DNP Works to
Achieve Sustainable
Development

Daiji Suzuki* Outside director or auditor

Masahiko Wada

Yoshitoshi Kitajima

Tokuji Kanda

Masayoshi Yamada

71

Financial
Section

CONTENTS
74 Management’s Discussion and Analysis
84 Selected Financial Data (unaudited)
DNP
AnnualReport2017

72

86 Consolidated Financial Statements
107

Independent Auditors’ ReportLarge-scale digital signage using an OLED display, at DNP Gotanda BuildingManagement’s Discussion and Analysis

Operating Results■ Business Environment
Japan’s economy gradually recovered during the fiscal year through March
2017, with employment and income conditions improving as a result of theeconomic policies of the Japanese government and the monetary easing policiesof the Bank of Japan. However, the economy has still not reached a full-fledged
recovery, due partly to a stronger yen, sluggish consumer spending, andoverseas economic slowdowns in China and elsewhere.
The printing industry continued to face a tough business environment as aresult of lower demand for printed media, including published printed materials,
and lower order prices due to stiffer competition. A discussion of the businessenvironment affecting each of DNP’s business segments in the current fiscal year
is provided below.
Information Communication
・ In the Publishing & Media Services business, publication sales in Japan fell by
4.2% year on year to ¥1,441.0 billion in the fiscal year through March 2017,
according to Japan’s Research Institute for Publications. Publication sales
have decreased by about 45% from a peak of ¥2,656.3 billion in 1996. Within
this, book sales fell 2.5% year on year to ¥725.1 billion, and magazine sales
slumped 5.8% to ¥715.9 billion on a decline in circulation and increase indiscontinued publications. The sales value of magazines fell below the sales
value of books.
・ In the Education and Publications Distribution business, the sale of publishedmaterials continues to decline, and the number of bookstores also continues
to decline at an annual rate of around 3% from a peak of roughly 22,000
stores in 1999. Meanwhile, the domestic e-book market expanded
substantially by 27.1% year on year to ¥190.9 billion in the fiscal year throughMarch 2017, according to Japan’s Research Institute for Publications.
・ In the Marketing business, domestic advertising demand showed modest
overall growth of 2.1% in the fiscal year through March 2017, according toJapan’s Ministry of Economy, Trade and Industry. Direct mail advertisingdecreased from the previous year, but internet advertising expanded, andadvertising in the four media of newspapers, magazines, television, and radio
was generally on par with the previous year.
・ In the Information Security business, major financial institutions expanded theiroutsourcing of a full range of operations to other companies, including various
notifications. There was also growth for SIM cards used in smartphones andfor smart cards used by financial institutions and for electronic money.
・ In the Imaging Communication business, the volume of photo printing is
declining worldwide, due partly to the spread of photo sharing services thatcan be accessed using smartphones and other devices. However, the market
for dye-sublimation thermal transfer printing media for photo printers continued
to expand as a result of demand shifting from silver halide printing.

DNP
AnnualReport201774

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature

Lifestyle and Industrial Supplies
・ In the Packaging business, production value in the domestic package printing
industry rose 2% year on year in the fiscal year through March 2017,
according to Japan’s Ministry of Economy, Trade and Industry. However, themarket environment remained difficult, as sales of seasonal products
fluctuated due to unseasonable weather and price competition intensified.
・ In the Living Spaces business, domestic new housing starts increased by
5.8% year on year during the fiscal year through March 2017. However, rental
housing that uses a low amount of construction material per unit increased by
11.4% while condominiums that use a large amount of construction material
decreased by 5.1%. As a result, domestic demand for construction material
showed only modest growth, according to Japan’s Ministry of Land,
Infrastructure, Transport and Tourism.
・ In the Industrial Supplies business, domestic shipment volume of photovoltaic
cells (as converted to power generation capacity) fell by 11% year to year to
6,341 megawatts in the fiscal year through March 2017, according to theJapan Photovoltaic Energy Association. This reflects a decrease in purchaseprices for photovoltaic energy as a result of revisions to Japan’s feed-in tariff(FIT) scheme for electric power generated from renewable energy sources.
Domestic demand for photovoltaic cells continued a downward trend, primarily
for residential use. Overseas, photovoltaic module inventories increased on
account of FIT scheme revisions in China, resulting in a decline in module
prices in the overall global market. However, markets related to lithium-ion
batteries showed firm growth.

30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Electronics
・ In the LCD panel market, volume rose slightly for panels used in TVs.
Notebook PC and monitor displays have reached a mature period in the
product life cycle, and tablet displays have also slowed sharply as a result ofcompetition with smartphones. Automotive displays were firm, but growthslowed for smartphone displays. The organic light-emitting diode (OLED) panel
market was brisk, and smartphones that use OLEDs as a high-value-added
product among small- and medium-sized displays were strong in terms ofboth volume and display area.
・ In the Electric Devices business, there is a noticeable trend toward the inhouse production of photomasks by semiconductor manufacturers, andproducts made internally by manufacturers accounted for over 60% of theoverall market in 2016. Accordingly, conditions remain difficult for outside
manufacturers of photomasks.
Beverages
・ The soft drink industry continued to face a tough market environment as aresult of manufacturers competing hard for market share and competition
between national brands and private brands heating up.

75

■ Overview
DNP has identified the four growth areas of “Knowledge and Communication,”“Food and Healthcare,” “Lifestyle and Mobility,” and “Environment and Energy,”
and focused on creating new value to help solve various social issues in Japanand overseas based on P&I innovations that combine its strengths in printing andinformation.
○ In Knowledge and Communication, DNP launched a joint initiative in April
2016 with Cybertrust Japan Co., Ltd., which excels in electronic
authentication, to provide various authentication services with the aim of
expanding online identity authentication services that are safe, secure, andconvenient. Additionally, DNP formed a capital and business alliance with
Future Link Network Co., Ltd. in September 2016 to fully enter a regional
revitalization business using community information portal sites andcommunity currency points.
○ In Food and Healthcare, DNP concluded an agreement with SIG Combibloc
Group AG, a major global manufacturer of paper containers for food andbeverages, to cooperate in the Japanese market.
○ In Lifestyle and Mobility, DNP pursued the development of new productswith superior functionality, including non-electric dimming blind glass thatworks by sliding two sheets of glass manually to switch between transparent
and dim views; and curved surface resin glass for automobiles that islightweight and demonstrates excellent weather and wear resistance.
○ In Environment and Energy, DNP focused on developing a variety of
products and services that contribute to reducing burdens on theenvironment. As part of these efforts, DNP Lighting Film, which helps reduce
power consumption by effectively reflecting and dispersing natural light from
windows in a room, was awarded the 26th Grand Prize for Global Environment
Award, Japan Business Federation Chairman’s Prize, in February 2017.
Net Sales by Segment(Year ended March 31, 2017)
Beverages
4.0%Electronics
12.0%

Lifestyle andIndustrial Supplies
27.4%

Information
Communication
56.6%

In addition to initiatives in these growth areas, DNP also implemented
groupwide structural reforms to bolster business competitiveness, including thereorganization and consolidation of business divisions and Group companies.
Despite these activities, consolidated net sales fell 3.1% year on year to¥1,410,173 million during the fiscal year through March 2017. Consolidated
operating income fell 30.9% to ¥31,411 million, and the consolidated operating
income margin decreased by 0.9 percentage points to 2.2%. By segment, theoperating income margin decreased by 1.2 percentage point to 2.4% in
Information Communication, increased by 0.4 percentage point to 3.7% in
Lifestyle and Industrial Supplies, decreased by 0.6 percentage point to 9.7% inElectronics, and increased by 2.6 percentage points to 4.3% in Beverages.
		2017.3		2016.3		2015.3
Net sales (¥ million)

DNP
AnnualReport2017

76¥

1,410,173¥

1,455,916¥

1,462,118

Gross profit margin (%) 		

18.9%		

19.4%		 19.1%

Operating income margin (%)		

2.2%		

3.1%		

3.3%

Ordinary income margin (%)		

2.6%		

3.6%		

3.7%

Net income margin (%)		

1.8%		

2.3%		

1.8%

Net income per share (¥)

¥

40.79

¥

53.10

¥

41.82

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature■ Net Sales

30 DNP in Brief

Net sales totaled ¥1,410,173 million in the current fiscal year, down 3.1%, or¥45,743 million, from the previous year.

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development

Information Communication
In the Publishing & Media Services business, book sales were on par with theprevious year, aided by aggressive sales activities, but magazines decreased andoverall sales were below the previous year.
In the Education and Publications Distribution business, the number ofoutsourcing libraries in the library outsourcing business showed strong growth,rising by 115 libraries year on year to 1,206 libraries at the end of March 2017.
However, overall sales in this business decreased, due to the large impact ofBunkyodo Group Holdings Co., Ltd. becoming an equity-method affiliate as aresult of transferring a portion of its stock to Nippon Shuppan Hanbai Inc. in
October 2016.
In the Marketing business, sales decreased for advertising flyers, but overallsales increased from the previous year on growth for catalogs, pamphlets, andsales promotion tools such as point-of-purchase (POP) materials for retailers.
In the Information Security business, overall sales increased on growth for SIM
cards used in smartphones and smart cards used by financial institutions and forelectronic money, and firm outsourcing demand from financial institutions for
Information Processing Services (IPS).
In the Imaging Communication business, sales decreased on a winding downof printer replacement demand in the North American market and large impact ofa strong yen.
Overall segment sales fell 2.5% year on year to ¥801,204 million.
Lifestyle and Industrial Supplies
In the Packaging business, sales increased from the previous year on strong
sales of paper cups, mainly for food applications, and sharply higher sales for
PET plastic bottle aseptic filing systems.
In the Living Spaces business, overall sales rose slightly, buoyed by strong
sales for EB floor coverings, which are well regarded for scratch resistance andare one of the environmentally conscious products that use DNP’s propriety
electron beam (EB) coating technology.
In the Industrial Supplies business, sales of photovoltaic module components
decreased from the previous year as a result of lower volume in the domestic
market and decline in module prices in overseas markets. For lithium-ion battery
components, volume increased for mobile device applications, but due to adecrease in prices for mobile device applications and only modest growth inautomotive applications, overall sales were down slightly.
Overall segment sales grew 1.4% year on year to ¥388,195 million.

72 Financial Section
108 Appendix

DNP’s Overseas Sales(¥ billion)
250

216.5
200

230.2

234.6
202.5

195.6

150

100

50

0

Electronics
LCD color filter sales decreased on declines for both small- and medium-sized
filters for smartphones and tablets and large filters for TVs. For metal masks usedin the production of OLED displays, which have attracted attention as nextgeneration displays, sales increased on high demand for smartphone
applications. For optical films, sales decreased for smartphone polarizing plate
applications. In the Electric Devices business, sales decreased from the previous
year for semiconductor photomasks, affected by a slump in the domestic
semiconductor market and by foreign exchange. Sales also decreased for lead

13

14

15

16

17

77

frames amid poor sales for high-value-added products used in mobile devices insupport of miniaturization.
Overall segment sales fell 15.0% year on year to ¥169,408 million.
Beverages
Sales of unsweetened teas increased, but sales to other group bottlers
decreased, and were also down for the Coca-Cola brand.
Overall segment sales fell 2.5% year on year to ¥56,620 million.

Gross Profit Margin
(%)
25

20

18.0

18.8

19.1

19.4

18.9

14

15

16

17

15

10

5

0

13

SGA Expenses to Net Sales
20

16

15.4

15.8

16.3

The cost of sales totaled ¥1,143,164 million, down 2.6%, or ¥30,039 million,
from the previous year. The gross profit margin was 18.9%, down 0.5
percentage point from 19.4%.
Global crude oil prices continued a gradual upward trend during the current
fiscal year after bottoming out in March 2016, and petroleum product prices also
increased at a time lag of three to six months from the rise in crude oil prices.
However, DNP was not affected by higher prices. Additionally, domestic demandfor printing paper continued to contract, and prices also trended downward. As
a result of these factors, the impact of higher raw material prices was just around¥500 million in the current fiscal year, down sharply from ¥3.3 billion in theprevious year. Moreover, DNP was able to negotiate with corporate customers topass on the entire impact of higher raw material prices.

■ Selling, General and Administrative Expenses

(%)

15.5

■ Cost of Sales

16.7

12

Selling, general and administrative expenses totaled ¥235,598 million in thecurrent fiscal year, down 0.7%, or ¥1,643 million, from the previous year. Selling,
general and administrative expenses equated to 16.7% of net sales, up 0.4
percentage point from the previous year.

■ Operating Income

8

Operating income totaled ¥31,411 million in the current fiscal year, down 30.9%,
or ¥14,061 million, from the previous year. The operating income margin was
2.2%, down 0.9 percentage point from 3.1% in the previous year.

4
0

13

14

15

16

17

Operating Income Margin
(%)
4

3.5
3

3.3

3.1

2.5

Information Communication
Operating income benefited from higher sales of SIM cards used in smartphones,
smart cards used by financial institutions and for electronic money, andInformation Processing Services for financial institutions. However, operating
income was affected by higher costs related to retirement benefits and upfront
investment in new business, and by a stronger yen, especially in the Imaging
Communication business. Segment operating income totaled ¥18,884 million,
down 35.7%, or ¥10,480 million, from the previous year. The operating income
margin was 2.4%, down 1.2 percentage point from 3.6% in the previous year.

2.2

Lifestyle and Industrial Supplies
Segment operating income totaled ¥14,434 million, up 14.6%, or ¥1,837 million,
from the previous year, aided by higher sales in the Packaging business andlower costs for raw materials, energy, and other items. The operating income
margin was 3.7%, up 0.4 percentage point from 3.3% in the previous year.

2

1

DNP
AnnualReport
2017

78

0

13

14

15

16

17

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief

Electronics
Segment operating income totaled ¥16,484 million, down 19.6%, or ¥4,025
million, from the previous year, due to a decline in overall segment sales. The
operating income margin was 9.7%, down 0.6 percentage point from 10.3% in
the previous year.

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section

Beverages
Segment operating income totaled ¥2,430 million, up 145.1%, or ¥1,439 million,
from the previous year, due to rigorous cost-cutting efforts, mainly a reduction incost of sales, and to changing the depreciation method for vending machinesfrom declining balance depreciation to straight-line depreciation and extending
the service life from 5–6 years to nine years. The operating income margin was
4.3%, up 2.6 percentage points from 1.7% in the previous year.

108 Appendix■ Nonoperating Income (Expenses) and■ Extraordinary Income (Losses)
Nonoperating income totaled ¥13,678 million in the current fiscal year, down
7.3%, or ¥1,073 million, from the previous year; and nonoperating expenses
totaled ¥8,349 million, up 10.3%, or ¥778 million. As a result, net nonoperating
income totaled ¥5,329 million, down from ¥7,180 million in the previous year.
Ordinary income totaled ¥36,740 million, down 30.2%, or ¥15,911 million,
from the previous year.
Extraordinary income totaled ¥49,631 million, up ¥33,140 million from theprevious year, as gain on sales of investment securities increased to ¥46,205
million from ¥15,111 million in the previous year. Extraordinary losses totaled¥46,541 million, up ¥32,240 million from the previous year, as repair costs andrepair reserve provisions increased to ¥37,738 million from ¥7,672 million in theprevious year. As a result, net extraordinary income totaled ¥3,090 million, up
from ¥2,190 million in the previous year.
As a result of the above, income before income taxes and non-controllinginterests totaled ¥39,831 million, down 27.4%, or ¥15,010 million, from theprevious year.

■ Net Income Attributable to Parent Company Shareholders
Net income attributable to parent company shareholders totaled ¥25,226 million
in the current fiscal year, down 24.9%, or ¥8,362 million, from the previous year.
Net income per share was ¥40.79, down ¥12.31 from the previous year.

ROE
(%)
4

3.2
3

2.8

2.7

14

15

2.5

2.2
2

1

0

13

16

17

79

Liquidity and Capital Resources■ Cash Flow		
2017.3		
2016.3		
2015.3
Cash flow fromoperating activities¥

71,945

Cash flow from
14,012
investing activities		

¥

72,629¥(60,883)

85,731(50,540)

Free cash flow		 85,957 		
11,746 		
35,191

Interest-bearing Debt toCash Flow Ratio(¥ million)(times)
3.0

2.6
2.5

2.3

2.4

2.2

2.0
1.5

1.5

1.0
0.5
0

13

14

15

16

17

Net cash provided by operating activities totaled ¥71,945 million, down 0.9%, or¥684 million, from the previous year.
Net cash provided by investing activities totaled ¥14,012 million, versus ¥60,883
million in net cash used in the previous year, due mainly to a decrease of ¥14,385
million in payments for purchases of property, plant and equipment and an increaseof ¥40,928 million in proceeds from sales of investment securities.
Net cash used in financing activities totaled ¥45,223 million, down ¥1,943 million
from ¥47,166 million in the previous year.
As a result of these activities, cash and cash equivalents at the end of the fiscal
year totaled ¥214,564 million, up 22.2%, or ¥39,051 million, from the previous year.
Free cash flow—i.e., the total net cash provided by operating activities andinvesting activities—was ¥85,957 million, up ¥74,211 million from ¥11,746 million in
the previous year.

■ Capital Expenditures; Depreciation; Research and■ Development Expenditures, etc.

Capital Expenditures andFree Cash Flow(¥ billion)
97.3

100

86.0

88.3
75

63.5 61.7

57.1

55.0
50

35.2
27.9
25

11.7
0

13

14

Capital expenditures

DNP
AnnualReport
2017

80

15

16

Free cash flow

17

Capital expenditures this fiscal year consisted mainly of streamlining investment andtotaled ¥57.1 billion, down 41.3%, or ¥40.2 billion, from the previous year. By
segment, capital expenditures in the Information Communication segment were
¥28.7 billion, down ¥23.8 billion from the previous year and accounting for 50% of
total capital expenditures. The Lifestyle and Industrial Supplies segment was ¥12.6
billion, down ¥10.7 billion and accounting for 22%. The Electronics segment was¥7.7 billion, down ¥5.5 billion and accounting for 14%. The Beverages segment
was ¥3.8 billion, down ¥2.0 billion and accounting for 7%. Adjustment was ¥4.2
billion, up ¥1.8 billion and accounting for 7%.
Depreciation totaled ¥61.5 billion, down 5.9%, or ¥3.8 billion, from the previous
year. By segment, depreciation in the Information Communication segment was¥27.7 billion, up ¥0.2 billion from the previous year and accounting for 45% of total
depreciation. The Lifestyle and Industrial Supplies segment was ¥17.0 billion,
unchanged and accounting for 28%. The Electronics segment was ¥12.1 billion,
down ¥2.9 billion and accounting for 19%. The Beverages segment was ¥2.4
billion, down ¥1.5 billion and accounting for 4%. Adjustment was ¥2.3 billion, up¥0.5 billion and accounting for 4%.
Research and development expenditures totaled ¥31.4 billion, down 1.4% from
¥31.8 billion in the previous year.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief■ The Balance Sheet

40 Segment
Information

		2017.3		 2016.3		2015.3
Total assets (¥ million)¥

1,741,904¥ 1,718,636¥ 1,809,462

Current ratio (%)		
178%

170%

175%

54 How DNP Works to
Achieve Sustainable
Development

Working capital/net sales (%)		

23%

20%

22%

72 Financial Section

Debt-to-equity ratio (%)		

16%

19%

17%

Net assets per share (¥)¥

1,680.55¥

1,618.66¥

108 Appendix

1,675.63

DNP’s total assets at the end of this fiscal year amounted to ¥1,741,904 million, up
1.4%, or ¥23,268 million, from the previous year.
Among current assets, cash and cash equivalents and time deposits totaled¥215,455 million, up 21.9%, or ¥38,761 million, from the previous year. Trade
receivables totaled ¥341,805 million, down 1.9%, or ¥6,780 million. Inventories ofmerchandise and finished products, work in process, raw materials and supplies
totaled ¥137,313 million, down 11.9%, or ¥18,634 million. As a result, current
assets totaled ¥737,140 million, up 2.1%, or ¥15,415 million.
Among long-term assets, property, plant and equipment totaled ¥497,167 million,
down 3.1%, or ¥15,990 million, from the previous year. Intangible assets totaled¥34,436 million, down 3.8%, or ¥1,366 million. Investments and other assets totaled¥473,160 million, up 5.6%, or ¥25,208 million. As a result, long-term assets totaled¥1,004,764 million, up 0.8%, or ¥7,852 million.
Current liabilities totaled ¥415,199 million, down 1.9%, or ¥8,115 million, from theprevious year. Long-term liabilities totaled ¥245,419 million, up 5.7%, or ¥13,339
million. As a result, total liabilities amounted to ¥660,618 million, up 0.8%, or ¥5,224
million.
Additionally, net assets totaled ¥1,081,286 million, up 1.7%, or ¥18,044 million.
As of March 31, 2017, the number of treasury shares totaled 48,287,110, or
7.28% of total shares outstanding of 663,480,693 shares. Treasury shares
decreased by 3,632,467 shares from the previous year, reflecting an increase of
13,222,000 shares from the purchase of treasury shares based on a resolution by
the Board of Directors, an increase of 112,066 shares from the purchase of shares
held by untraceable shareholders, an increase of 32,154 shares from the purchaseof odd-lot shares, an increase of 1,313 shares from changes in equity ownershiprates of equity-method affiliates, and a decrease of 17,000,000 shares from thecancellation of treasury shares based on a resolution by the Board of Directors.

Current Ratio
(%)
200

164

178

175

175

170

14

15

16

17

59.2

59.6

59.2

59.4

14

15

16

17

150

100

50

0

13

Equity Ratio
(%)
80

60

56.6

40

20

0

13

81

Business Risks
DNP’s earnings performance and other aspects of its business could possibly be significantly affected by a variety of factorsthat might arise in the future. DNP recognizes these potential risk factors and works to minimize their impact.
DNP considers the following factors to be key risks, as of the publication date of this annual report.

■ Japanese and overseas economies and■ consumption trends■ Strategic business and capital alliances and■ corporate acquisitions

DNP engages in a wide range of businesses with anextremely large number of corporate customers, and it
pursues stable business activities supported by a businessbase that does not rely on specific customers. DNP does
most of its business in the Japanese market, but if consumer
spending and other components of domestic demand
slump, owing to domestic economic fluctuations inconnection with global economic trends, its performance
could be affected by a drop in order volume, decline in unit
prices, and other factors.
Additionally, DNP could be directly or indirectly affected bymarket trends in various industries in Japan or overseas. In
particular, electronics-related industries are susceptible tochanges in production and demand in emerging markets andto global declines in unit prices, and DNP’s performance
could be affected by major changes in market trends.

DNP engages in strategic business and capital alliances andcorporate acquisitions, and its performance could be
affected if it is unable to achieve initially expected synergies
and results due to deterioration in the business environment
affecting the companies and businesses involved in these
alliances and acquisitions.

■ Overseas business activities
DNP conducts overseas business activities mainly in the
U.S., Europe, Southeast Asia, and elsewhere, and these
activities face risks including social and political turmoil
caused not only by economic factors such as unexpectedchanges in laws and regulations, stricter laws and regulations
related to the environment and other areas, fragility ofindustrial infrastructure, and difficulty of hiring and securingpersonnel, but also by terrorism, war, and other factors.
DNP’s performance could be affected if its overseas
business activities are obstructed as a result of these risksmaterializing.

■ Development of new products and services

DNP
AnnualReport201782

DNP leverages its strengths in printing, information, andother fields to develop products and services that solve
social problems and deliver new value to companies andconsumers. These development efforts face an accelerating
pace of technological innovation and diversification of needs.
Going forward, amid expectations for developmentcompetition to intensify in Japan and overseas, DNP’sperformance could possibly be affected by a greater-thanexpected shortening of product life cycles and by changes inmarket trends.

■ Fluctuations in raw materials procurement
DNP works to secure stable volume and maintain optimal
pricing in procuring raw materials, including by purchasing
printing paper and film materials from multiple suppliers inJapan and overseas. However, there is risk of imbalances
between supply and demand due to sharp fluctuations inpetroleum prices, sudden surges in demand from emerging
markets, the impact of major disasters, the depletion ofnatural resources, and climate change. DNP will respondduring such times by negotiating with client companies andbusiness partners, but its performance could be affected if
raw materials procurement becomes extremely difficult, ifpurchasing prices rise sharply, or if other such events occur.

■ Currency fluctuations
Amid the aggressive pursuit of global business expansion,
DNP expects the impact of foreign exchange to steadily
increase. DNP uses foreign exchange forward contracts andother means to hedge against the risk of fluctuations incurrency markets, but its performance could be seriously
affected in the event of sharp volatility in foreign exchange
rates.

■ Environmental protection and■ stricter environmental regulations
DNP’s business is affected by legal regulations in Japan andother countries related to energy conservation, climatechange prevention (e.g., reduction of greenhouse gas
emissions), reduction of the use of harmful substances, air
pollution prevention, water quality protection, waste
treatment, and product recycling. These regulations could
conceivably be strengthened or changed in the future. DNP’sperformance could be substantially affected by responding
to these types of conditions and by a strengthening of
measures to reduce environmental loads.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature■ Disasters

30 DNP in Brief

Global computer networks and information systems havebecome essential tools for conducting business, and there
are now greater risks of software and hardware defects,
global cyberattacks, computer virus infections, and personal
data leaks. DNP regards information security and personal
data protection as a top management priority, and is making
every effort to maintain and manage systems and data bystrengthening its organization and training employees.
However, its business activities could be affected in theevent of a malicious cyberattack, accident, or other such
events.

DNP takes steps to protect production equipment and othermajor facilities from fires and earthquakes, seeks todecentralize and reorganize production facilities, and has
prepared a Business Continuity Plan (BCP) to minimize any
production shutdowns and product supply disruptions
caused by disasters. DNP also uses various types of
insurance to transfer risk. Nevertheless, DNP’s performance
could be substantially affected in the event of major
earthquakes, natural disasters such as rainstorms or flooding
caused by climate change, disease outbreaks, or otherunexpected events that cause production shutdowns or
significantly damage or impair social infrastructure.

40 Segment
Information■ Response to changes in legal regulations■ Lawsuits and fines

DNP conducts its business based on strict compliance withlaws and social ethics. It is subject to a variety of legal
regulations in Japan and overseas, including product liability
laws, antimonopoly laws, personal data protection laws,
patent laws, tax regulations, and import and export rules.
These regulations could conceivably be strengthened in the
future. On the other hand, market and industry trends couldchange substantially as a result of deregulation. In this event,
DNP’s business activities could be affected by greater
limitations on its business activities and a prospective
increase in the burden and cost of responding to regulatorychanges.

DNP seeks to establish corporate ethics throughout theGroup, and works to earn the trust of society by each andevery employee complying with laws and regulations in
conducting business activities, maintaining higher ethicalstandards than required by society, and contributing tomaintaining and advancing orderly and freely competitivemarkets with a consistently fair attitude. Nevertheless, DNP’sperformance could be affected in the event of being subject
to lawsuits and resulting fines in Japan or overseas.

■ Information security and■ personal information protection

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

83Selected Financial Data (unaudited)
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

2017

2016

2015

2014

Statements of Operations Data (¥ million)
Net sales¥

1,410,173¥

1,455,916¥

1,462,118¥

1,448,550

Cost of sales

1,143,164

1,173,203 		 1,182,954 		 1,176,077

Gross profit

267,009282,713 		 279,164 		 272,473

Selling, general and administrative expenses

235,598

237,241 		 230,990 		 222,374

Operating income

31,41145,472 		

48,174 		

50,099Ordinary income

36,74052,651 		

53,759 		

53,285

Income (loss) before income taxes and non-controlling interests

39,831

54,841 		

51,062 		

48,608Net income (loss) attributable to parent company shareholders

25,22633,588 		

26,924 		

25,642

Balance Sheet Data (¥ million)
Total assets¥

1,741,904¥

1,718,636¥

1,809,462¥

1,574,754

Property, plant and equipment—net

497,167

513,157 		 512,791 		 528,538

Long-term liabilities

245,419

232,080 		 249,965 		 179,946

Total liabilities

660,618

655,394 		 685,370 		 598,369

Stockholders’ equity

884,829894,752 		 902,217 		 892,110

1,081,286

1,063,242 		 1,124,092 		 976,385

Total net assets
Other Selected Data (¥ million)
Capital expenditures¥

57,085¥97,265¥55,024¥63,465

Depreciation expenses

61,461

65,310 		

67,034 		

73,459R&D expenditures

31,376

31,827 		

31,749 		

30,820

53.10

41.82

39.82

Common Share Data (¥, shares)
Earnings (loss) per share—primary

¥

40.79

¥

¥

¥

Earnings (loss) per share—fully diluted

40.78

53.07 		41.44 		39.65Dividends paid per share

32.00

32.00 		32.00 		32.00Book value per share
No. of common shares outstanding (exc. treasury shares)

1,680.55

1,618.66 		 1,675.63 		 1,447.96

615,193,583

628,561,116 		643,833,079 		643,893,863
		Financial Ratios (%)

				

As a percentage of net sales:

DNP
AnnualReport2017

		 Gross profit

18.93%

19.42%

		 19.09%				 Selling, general and administrative expenses

16.71

16.29

		 15.80

		 15.35

		 Operating income

2.23

3.12

		 3.29

		 3.46

		 Income (loss) before income taxes and non-controlling interests

2.82

3.77

		 3.49

		 3.36

		 Net income (loss) attributable to parent company shareholders

1.79

2.31

		 1.84		 1.77

Return on equity

2.46

3.20

		 2.67		 2.81

Current ratio

178

170

		

175

		

175

D/E ratio

16

19

		

17		
		

20

		
84

18.81%

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature

2013

¥

1,446,607

2012¥

1,507,228

2011¥

1,589,373

2010¥

1,583,383

2009¥

1,584,844

2008¥

1,616,053

		 1,186,558

		 1,246,878 		 1,287,581

		 1,286,682

		 1,324,522

		 1,327,872

		 260,049

		 260,350 		

301,792

		 296,701

		 260,322

		 288,181

		 224,269

		 226,335 		

233,973

		 230,187

		 214,145

		 201,077

		

35,780		

34,015 		

67,819		

66,514

		

46,177

		87,104

		

40,318

		

36,843 		

62,786

		68,841

		

47,390		

86,502

		

35,152

		

2,673 		52,696

		

49,496

		(27,842)

		

88,469		

19,218		(16,356) 		

25,033

		23,278

		

(20,933)

		

45,172¥

1,578,976¥¥

1,649,784¥

1,618,854¥

1,536,557¥

1,601,193

		 538,455

		 579,567 		

614,827

		 616,848

		 604,904

		 639,343

		 184,136

		 251,414 		

249,575

		 190,045

		 126,671

		 106,691

		 641,921

		 694,593 		

697,343

		 661,990

		 596,471

		 561,058

		 887,194

		 888,650 			925,702

		 921,775

		 917,348

		 990,122

		 937,055

		 914,213 				 956,864

		 940,086

		 1,040,135

1,608,806

952,441¥

96,156¥102,173¥

119,063		

95,829 		

97,977

		

91,695

		 106,883

		 109,902

30,820		

31,690 		

33,147

		

33,850		

34,112

		

35,556

¥

29.84

¥

(25.39)

¥

38.86

¥

36.13

¥

(32.35)

¥

67.08

		

29.79

		

— 		

—

		

—

		

—

		

—

		

32.00

		

32.00 		

32.00

32.00

		

32.00

		

36.00

		 1,386.86

		 1,352.71 		

1,410.44

1,422.34

		 1,393.91

		 1,516.35

		643,990,364

		644,062,928

644,142,530

		644,238,930

		644,357,076

		661,366,377

		

		

		

		

		

88,315¥

		

80,200		

98,189

		 17.98%

		 17.27%

18.99%

		18.74%

		 16.43%

		 17.83%

		 15.50

		 15.02

14.72

		

14.54

		 13.51

		 12.44

		 2.47

		 2.26

4.27

		

4.20

		 2.91		 5.39		 2.43		 0.18

3.32

		

3.13

		 -1.76

		 5.47		 1.33

		 -1.09

1.57

		

1.47

		 -1.32

		 2.80

		 2.18

		 -1.84

2.74

		

2.57

		 -2.20

		 4.35

		

164

		

177

177

		

157

		

144

		

157

		

25

		

26

25

		

18

		

14

		

8

		

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

116,139¥¥

30 DNP in Brief		85Consolidated Financial Statements
Consolidated Balance Sheets
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
March 31, 2017 and 2016

2017

2017

2016

AssetsCurrent assets:
Cash and cash equivalents (Notes 4 and 15)
Time deposits (Note 15)
Trade receivables (Notes 10 and 15)
Allowance for doubtful receivables
Inventories (Note 6)
Prepaid expenses and other current assets (Notes 5, 10 and 13)
Total current assets¥

Investments and advances:Non-consolidated subsidiaries and associated companies(Notes 10 and 15)
Investment securities (Notes 5 and 15)
Other (Notes 10 and 15)
Total investments and advances

Property, plant and equipment, at cost (Note 7):Land
Buildings and structures
Machinery and equipment
Leased assets
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment

Other assets
Net defined benefit asset (Note 8)
Other (Notes 7 and 13)
Total other assets

Total assets

DNP
AnnualReport2017

86¥

214,564
891
341,805(1,628)137,313
44,195
737,140¥

175,513
1,181
348,585(1,349)155,947
41,848
721,725$

1,915,750
7,955
3,051,830(14,536)
1,226,009
394,599
6,581,607

54,217
326,950
4,670
385,837

57,246306,190
6,555
369,991

484,0812,919,196
41,6963,444,973

155,115567,662
873,636
24,324
18,326
1,639,063(1,141,896)
497,167

155,532
584,014888,329
24,644
14,946
1,667,465(1,154,308)
513,157

1,384,955
5,068,411
7,800,321
217,179
163,625
14,634,491(10,195,500)
4,438,991

57,08964,671
121,760

45,844
67,919113,763509,723
577,420
1,087,143

1,741,904¥

1,718,636$

15,552,714

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
March 31, 2017 and 2016

2017

2017

2016

Liabilities and Net Assets
Current liabilities:
Short-term bank loans (Notes 7 and 15)
Current portion of long-term debt (Notes 7 and 15)
Trade payables (Notes 10 and 15)
Accrued expenses (Note 10)
Income taxes payable (Note 13)
Reserve for repair
Other current liabilities (Notes 7, 10 and 13)
Total current liabilities¥

Long-term liabilities:
Long-term debt (Notes 7 and 15)
Net defined benefit liability (Note 8)
Other long-term liabilities (Notes 7 and 13)
Total long-term liabilities

43,036
7,800
247,562
40,713
7,153
18,68050,255415,199¥

55,316
8,755
255,586
45,735
6,014–
51,908423,314$384,250
69,6432,210,375
363,509
63,866
166,786
448,705
3,707,134

118,299
35,14991,971
245,419

125,750
34,167
72,163232,080

1,056,241
313,830
821,170
2,191,241

114,464
144,280
695,721

114,464
144,283
717,030

1,022,000
1,288,214
6,211,795(69,636)884,829(81,025)
894,752(621,750)
7,900,259

149,575(3)(2,220)1,683
149,035–
47,422
1,081,286

123,478(7)
3,051(3,850)122,672
16
45,802
1,063,242

1,335,491(27)(19,821)
15,0271,330,670–
423,4109,654,339

30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Contingent liabilities (Note 17)
Net assets
Stockholders’ equity
Common stock Authorized: 1,490,000,000 shares;
Issued: 663,480,693 shares;
Capital surplus (Note 9)
Retained earnings (Note 9)
Treasury stock, at cost
48,287,110 shares in 2017 and 51,919,577 shares in 2016 (Note 9)
Total stockholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans (Note 8)
Total accumulated other comprehensive income
Stock acquisition rights
Non-controlling interests
Total net assets

Total liabilities and net assets¥

1,741,904¥

1,718,636$

15,552,714

The accompanying notes are an integral part of these consolidated financial statements.

87Consolidated Statements of Income
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Net sales (Note 18)
Cost of sales (Note 18)
Gross profit
Selling, general and administrative expenses (Notes 11 and 18)
Operating income

2017¥

Other income (expenses) (Note 12):Interest and dividends income
Interest expenses
Equity in earnings of affiliates
Foreign exchange transaction gain (loss)
Net loss on sale or disposal of property, plant and equipment
Net gain on sales of investment securities
Loss on devaluation of investment securities
Production restructuring costs
Repair costs
Repair reserve provisions
Other

Income before income taxes and non-controlling interests
Income taxes (Note 13):
Current
Deferred
Net income
Net income attributable to non-controlling shareholders
Net income attributable to parent company shareholders
The accompanying notes are an integral part of these consolidated financial statements.

DNP
AnnualReport2017

88¥

1,410,173
1,143,164
267,009
235,598
31,411

2017

2016
¥

1,455,916
1,173,203
282,713237,241
45,472$

12,590,830
10,206,821
2,384,009
2,103,554
280,455

5,105(2,202)
3,015(585)(4,906)
46,205(162)–(5,793)(31,945)
(312)
8,420

5,227
(2,439)3,696(497)(1,609)15,111(924)(2,265)(7,672)
–
741
9,369

45,580(19,661)
26,920(5,223)(43,804)
412,545(1,446)–(51,723)(285,223)(2,786)75,17939,831

54,841355,634

13,541(974)
12,56727,264
2,038
25,226

13,3496,788
20,137
34,704
1,116
33,588120,901(8,696)112,205
243,429
18,197225,232¥$

2 Synopsis of
Performance
6 Message toShareholders

Consolidated Statements of Comprehensive Income

14 Special Feature
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in associates
accounted for using the equity method
Total other comprehensive income
Comprehensive income
Attributable to:Parent company shareholders
Non-controlling shareholders

2017
¥

¥

2017

2016

27,264¥34,704$

243,429

26,073(1)(3,874)
6,892(24,502)22(5,236)(26,118)

232,794(9)(34,589)
61,536(3,019)26,07153,335

1,325(54,509)(19,805)(26,955)
232,777
476,206

51,596
1,739¥(20,351)546$

30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

460,679
15,527

U.S. dollars (Note 3)

Yen

2017

2017

2016

Net assets per common share¥

1,680.55¥

1,618.66$

15.00

Net income per common shareprimary

¥

40.79

¥

53.10

$

0.36

Net income per common share
fully diluted

¥

40.78

¥

53.07

$

0.36

The accompanying notes are an integral part of these consolidated financial statements.

89

Consolidated Statements of Changes in Net Assets
Millions of yen

Dai Nippon Printing Co., Ltd. andConsolidated Subsidiaries
Years ended March 31, 2017 and 2016

Balance at March 31, 2015
Changes of items during the period
Net income attributableto parent company shareholders
Cash dividends paid
Purchases of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Changes in valuation difference
on available-for-sale securities
Changes in deferred gains (losses)on hedges
Changes in foreign currencytranslation adjustments
Changes in remeasurementsof defined benefit plans
Changes in non-controlling interests
Other
Total changes of items during the period
Balance at March 31, 2016
Balance at April 1, 2016
Cumulative effects of changes
in accounting policies
Restated balance at April 1, 2016
Changes of items during the period
Net income attributableto parent company shareholders
Cash dividends paid
Change of scope of consolidation
Purchases of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Changes in valuation difference
on available-for-sale securities
Changes in deferred gains (losses)on hedges
Changes in foreign currencytranslation adjustments
Changes in remeasurementsof defined benefit plans
Changes in share acquisition rights
Changes in non-controlling interests
Other
Total changes of items during the period
Balance at March 31, 2017

Stockholders’ equity

Accumulated other comprehensive income
Valuation
Foreign
RemeasureNet deferreddifference on
currency
ments of defined
gains (losses)
available-for-saletranslation
benefiton hedges
securities
adjustments
plans

Number ofsharesissued(in thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost700,480

114,464

144,898

737,241(94,386)

147,914

(0)

7,247

–
–
–
–
(20,000)

–
–
–
–
–

–
–
–
–
–

33,588(20,376)–(1)(33,422)––(20,067)2
33,422

–
–
–
–
–

–
–
–
–
–

–

–

–

–

–

(24,436)

–

–

–

–

–

–

–

–

–

–
–
–
(20,000)
680,480
680,480––––
114,464
114,464

–
(615)
–
(615)
144,283
144,283

680,480

114,464–––––(17,000)

Stockacquisitionrights

Noncontrollinginterests

21,45016

45,248

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–

–

–

–

–

–

(7)

–

–

–

–

–

–

–

(4,196)

–

–

–

–
–
–
(20,211)717,030
717,030––
4
13,361(81,025)(81,025)–––(24,436)
123,478
123,478

–
–
–
(7)
(7)
(7)

–
–
–
(4,196)
3,051
3,051

(25,300)––(25,300)(3,850)(3,850)

–
–
–
–
16
16

–
554
–
554
45,80245,802

144,28327
717,057(81,025)

123,478

(7)

3,051

(3,850)16

145,803

–
–
–
–
–
–

–
–
–
–
–
–

25,226(19,919)(78)––(26,565)–––(15,174)–
26,565

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–

–

–

–

–

26,097

–

–

–

–

–

–

–

–

–

–

–

4

–

–

–

–

–

–

–

–

–

–

–

(5,271)

–

–

–

–
–
–
(2)
11,389(69,636)––––
26,097
149,575

–
–
–
–
4
(3)

–
–
–
–
(5,271)(2,220)

5,533
–
–
–
5,533
1,683

–
(16)
–
–
(16)
–

–
–
1,619
–
1,619
47,422Stockacquisitionrights

Noncontrollinginterests––––(17,000)
663,480–––––
114,464

–
–
(3)
–
(3)
144,280––––(21,336)
695,721

Thousands of U.S. dollars (Note 3)

Balance at April 1, 2016
Cumulative effects of changes
in accounting policies
Restated balance at April 1, 2016
Changes of items during the period
Net income attributableto parent company shareholders
Cash dividends paid
Change of scope of consolidation
Purchases of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Changes in valuation difference
on available-for-sale securities
Changes in deferred gains (losses)on hedges
Changes in foreign currencytranslation adjustments
Changes in remeasurementsof defined benefit plans
Changes in share acquisition rights
Changes in non-controlling interests
Other
Total changes of items during the period
Balance at March 31, 2017

Stockholders’ equity
Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost680,480

1,022,000

1,288,241

6,402,054(723,438)

1,102,482(63)

27,241(34,375)

143

408,946

680,480

1,022,000

1,288,241

241
6,402,295(723,438)

1,102,482(63)

27,241(34,375)143

9408,955–––––(17,000)

–
–
–
–
–
–

–
–
–
–
–
–

225,232(177,848)(696)––(237,188)–––(135,482)–
237,188

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–

–

–

–

–

–

233,009

–

–

–

–

–

–

–

–

–

–

–

36

–

–

–

–

–

–

–

–

–

–

–

(47,062)

–

–

–

–
–
–
–
(17,000)
663,480–––––
1,022,000

–
–
(27)
–
(27)
1,288,214––––(190,500)
6,211,795

–
–
–
(18)
101,688(621,750)––––
233,009
1,335,491

–
–
–
–
36
(27)

–
–
–
–
(47,062)(19,821)49,402–––
49,402
15,027

–
(143)
–
–
(143)
–

–
–
14,455–
14,455423,410DNP
AnnualReport2017 The accompanying notes are an integral part of these consolidated financial statements.

90

Accumulated other comprehensive income
Valuation
Foreign
RemeasureNet deferreddifference on
currency
ments of defined
gains (losses)
available-for-saletranslation
benefiton hedges
securities
adjustments
plans

Number ofsharesissued(in thousands)

2 Synopsis of
Performance

Consolidated Statements of Cash Flows
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

2017

2017

2016

6 Message toShareholders
14 Special Feature
30 DNP in Brief

Cash flows from operating activities :Income before income taxes and non-controlling interests
Adjustments to reconcile income before income taxes andnon-controlling interests to net cash provided by operating activities:
Depreciation
Impairment loss on fixed assets
Allowance for doubtful receivables
Net defined benefit asset (net)
Net defined benefit liability (net)
Equity in earnings of affiliates
Amortization of goodwill
Interest and dividends income
Interest expenses
Net gain on sales of investment securities
Loss on devaluation of investment securities
Net loss on sale or disposal of property, plant and equipment
Repair costs
Repair reserve provisions
Changes in assets and liabilities
Trade receivables
Inventories
Trade payables
Other assets and liabilities
Sub-total
Payments for repair costs
Extra retirement payments
Payments of income taxes
Net cash provided by operating activities
Cash flows from investing activities :Net decrease in time deposits
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for purchases of intangible assets
Payments for acquisition of subsidiaries’ shares, resulting in consolidation scope change
Proceeds from acquisition of subsidiaries’ shares, resulting in consolidation scope changeInterest and dividends received
Other investing
Net cash provided by (used in) investing activities
Cash flows from financing activities :Net increase in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of debentures
Payments for redemption of debentures
Interest paid
Dividends paid
Dividends paid to non-controlling shareholders
Payments for purchases of treasury stocks
Payments for purchase of stock in subsidiaries not resulting
in a change in the scope of consolidation
Other financing
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from change of scope of consolidation
Cash and cash equivalents at end of year¥¥

39,831¥

54,841$355,634

61,461896(1,560)(1,537)
1,242(3,015)2,317(5,105)2,202(46,205)
162
4,970
5,793
31,94565,310110(1,393)(15,312)(8)(3,696)2,201(5,227)2,439(15,111)
924
1,665
7,672
–

548,759
8,000(13,929)(13,723)
11,089(26,920)
20,688(45,580)
19,661(412,545)
1,446
44,37551,723285,223

4,444
3,257
(99)
6,909
107,908(23,149)(104)(12,710)71,945

17,881(10,532)(4,726)(3,912)
93,126(3,582)(991)(15,924)
72,62939,67929,080(884)
61,688963,464(206,688)(929)(113,482)
642,365241(50,031)
4,991
(692)
60,878(11,213)
–
1,289
7,953
596
14,012

38(64,416)
2,792(5,664)
19,950(8,702)(8,981)–
6,179(2,079)(60,883)2,152(446,705)
44,563(6,179)543,554(100,116)–
11,50971,0095,321
125,108(6,961)
6,680(6,983)
3,933(555)(2,209)(19,919)(338)(15,182)

2,131
5,803
(10,553)
4,718(1,050)(2,436)(20,381)(453)(20,068)(62,152)
59,643(62,348)
35,116(4,955)(19,723)(177,848)(3,018)(135,554)–(3,689)(45,223)(1,702)39,032
175,513
19
214,564(152)(4,725)(47,166)(1,829)(37,249)
212,762–
175,513–(32,938)(403,777)(15,196)348,500
1,567,080
170
1,915,750¥$

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

The accompanying notes are an integral part of these consolidated financial statements.

91Notes to Consolidated Financial Statements
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2017 and 2016

1. Basis of Presenting the Consolidated Financial Statements
Dai Nippon Printing Co., Ltd. (hereinafter referred to as the “Company”) and its domestic subsidiaries maintain their books of account and prepare their financial statements inconformity with accounting principles and practices generally accepted in Japan (“Japanese GAAP”), and its foreign subsidiaries in conformity with the Company’s groupaccounting policies based on International Financial Reporting Standards (“IFRS”) or accounting principles generally accepted in the United States of America (“US GAAP”).
The accompanying consolidated financial statements have been compiled from the consolidated financial statements filed with the Financial Services Agency of Japan as requiredby the Financial Instruments and Exchange Act of Japan. Certain reclassifications of accounts and modifications have been made in the accompanying consolidated financial
statements to facilitate understanding by readers outside Japan. Certain reclassifications have also been made in the 2016 financial statements to conform with current
classifications. In addition, the notes to the consolidated financial statements include additional information which is not required for disclosure under accounting principles andpractices generally accepted in Japan.
2. Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant majority-owned subsidiaries. All significant intercompany
accounts and intercompany transactions have been eliminated in consolidation.
Consolidated financial statements include the accounts of the Company and 106 consolidated subsidiaries. Some subsidiaries are consolidated with their fiscal year ends thatdiffer from that of the Company. Significant transactions that took place between their fiscal year ends and the Company’s fiscal year end are reflected in the consolidated
financial statements.
Investments in non-consolidated subsidiaries are stated at cost and, for valuation of such investments, the equity method has not been applied since these investments are
considered immaterial in the aggregate. However, investments are devalued if the decline in value is judged to be other than temporary.
Investments in 20% to 50% associated companies are principally accounted for by the equity method.
The differences between costs and underlying net assets at the date of investment in consolidated subsidiaries are included in other assets and are amortized over a period
mainly for five years.
Translation of foreign currency accounts
Monetary assets and liabilities denominated in foreign currencies of the Company and its domestic subsidiaries are translated into Japanese yen at the exchange rates at thebalance sheet date. Revenues and expenses denominated in foreign currencies are translated at the exchange rates prevailing during the year. The resulting translation gains(or losses) are included in other income (or expenses).
The translation of foreign currency financial statements of foreign consolidated subsidiaries into Japanese yen has been made for consolidation purposes in accordance withthe translation method prescribed in the accounting standard for foreign currency transactions. The balance sheet accounts of the foreign consolidated subsidiaries aretranslated at the exchange rates in effect at the balance sheet date, except for common stock and capital surplus, which are translated at historical rates. Revenue andexpense accounts are translated at the average exchange rates during the year. The resulting translation adjustments are presented as “foreign currency translation
adjustments” and “non-controlling interests” as reported in a separate component of accumulated other comprehensive income in the consolidated balance sheets.
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, that are readily convertible to known amounts of cash
and are so near maturities that they present insignificant risk of changes in value because of changes in interest rates.
Inventories
Inventories are stated at cost which is determined substantially by the average method being written-down to reflect the decline of profitability.
Marketable securities and investment securities
Debt securities that are held to maturity with positive intent and ability (“held-to-maturity debt securities”) are stated at amortized cost. Available-for-sale securities with available
fair market values are stated at fair value. Unrealized gains and losses on available-for-sale securities, net of applicable taxes, are reported in a separate component ofaccumulated other comprehensive income in the consolidated balance sheets.
Non-marketable securities are stated at cost determined by the average method. For other than temporary declines in fair value, investment securities are reduced to net
realizable value by a charge to income.
Property, plant and equipment and depreciation
The Company and its domestic consolidated subsidiaries mainly use the declining-balance method.
However, depreciation of buildings (excluding facilities attached to buildings) acquired on or after April 1, 1998 and of facilities attached to buildings and structures acquired on orafter April 1, 2016 are computed by the straight-line method.
Assets with an acquisition cost of ¥100,000 ($893) or more but less than ¥200,000 ($1,786) are depreciated equally over three years.
Foreign consolidated subsidiaries mainly use the straight-line method.
The estimated useful lives are summarized as follows:
Buildings and structures 3 to 50 years
Machinery and equipment 2 to 13 years
DNP
AnnualReport201792

2 Synopsis of
Performance

Leased assets
Leased assets with transfer of ownership are depreciated using the same depreciation method applied to owned fixed assets.
Finance leases which do not transfer ownership are capitalized. Depreciation for leased assets is computed on a straight-line basis over the lease period with a residual value ofzero.
Intangible assets
Intangible assets included in other assets are carried at cost less accumulated amortization calculated by the straight-line method over their estimated useful lives. Software
for internal use included in intangible assets are amortized by the straight-line method over five years.
Impairment of fixed assets
The Company and its subsidiaries review fixed assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected
to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of
the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling priceat disposition.

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Employees’ retirement benefits
The Company and domestic significant consolidated subsidiaries applied the accounting standard for employees’ retirement benefits. Under the accounting standard, accrued
pension and liability for employees’ retirement benefits has been provided based on the estimated amounts of projected pension and severance obligation and fair value of plan
assets at the end of the fiscal year. Benefit formula basis is applied for the method of attributing expected retirement benefits to periods. Prior service cost is being amortized
as incurred by the straight-line method over the period within the average remaining service periods (primarily 6 years) of the eligible employees. Actuarial gains and losses
have been amortized from the following fiscal year by the declining-balance method over the periods within the average remaining service periods (primarily 9 years) of theeligible employees.
Research and development expenses
Research and development expenses are charged to income as incurred.
Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
Derivatives and hedging activities
The Company and certain consolidated subsidiaries use derivative financial instruments (“derivatives”) for foreign currency forward contracts, interest rate swaps and currency
swaps to manage the risk arising from fluctuation in foreign currency exchange rate and interest rates. The Company and its subsidiaries do not enter into derivatives contracts
for speculative purposes.
Derivatives are carried at fair value and changes in fair value are recognized as gains or losses, unless the derivatives are used for hedging purposes.
If derivatives meet certain hedging criteria, recognition of gains or losses resulting from changes in the fair value of derivatives is deferred until the related gains or losses onhedged items are recognized.
In cases where foreign currency forward contracts or currency swap contracts meet certain hedging criteria, the hedged items are stated by the contracted rates (“alternative
method”). In addition, if interest rate swap contracts meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contracts is added to or
deducted from interest on the assets or liabilities for which the interest rate swap contracts were executed (“exceptional accrual method”).
Net assets and income per common share
Net assets per common share were computed based on the number of shares outstanding after deducting treasury stock at March 31, 2017 and 2016, respectively.
Net income per share was computed based on the average number of shares of common stock outstanding after deducting treasury stocks during each year. Necessary
adjustments were made on the net income or the number of shares for diluted net income per share in order to reflect dilutive effects.
Change in accounting policies(Application of the Implementation Guidance on Recoverability of Deferred Tax Assets)
Effective from the consolidated fiscal year ended March 31, 2017, the Company has applied the “Implementation Guidance on Recoverability of Deferred Tax Assets”(Accounting Standards Board of Japan (hereinafter, “ASBJ”) Guidance No. 26, March 28, 2016 (hereinafter, “Implementation Guidance” )). As a result, accounting treatment
related to the recoverability of deferred tax assets has been partially revised.
With respect to application of the Implementation Guidance, the transitional treatment as stipulated in Paragraph 49 (4) of the Implementation Guidance was applied, anddifference between deferred tax assets and deferred tax liabilities calculated by applying Paragraph 49 (3) Section 1 through 3 of the Implementation Guidance, and deferred
tax assets and deferred tax liabilities as of March 31, 2016 has been added to retained earnings as of April 1, 2016.
The effect of this change on the consolidated financial statements as of April 1, 2016 is immaterial.
(Application of the Practical Solution on a Change in Depreciation Method due to Tax Reform 2016)
Effective from the consolidated fiscal year ended March 31, 2017, the Company and certain domestic consolidated subsidiaries have applied the “Practical Solution on a
Change in Depreciation Method due to Tax Reform 2016” (ASBJ Practical Issue Task Force No. 32, June 17, 2016 (hereinafter, “Practical Solution” )) in conjunction withchanges in corporation tax laws. As a result, the depreciation method of facilities attached to buildings and structures acquired on and after April 1, 2016 has been changed
from the declining-balance method to the straight-line method.
The effect of this change on the consolidated financial statements for the year ended March 31, 2017 is immaterial.

933. Basis of Translating Financial Statements
The consolidated financial statements are expressed in Japanese yen in accordance with accounting principles generally accepted in Japan. The Japanese yen amounts have beentranslated into U.S. dollar amounts, solely for the convenience of the readers, at the rate of ¥112=U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange Market
at March 31, 2017. Such translations should not be construed as representations that the Japanese yen at that or any other rate could be converted into U.S. dollars.
4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2017 and 2016 were comprised of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Cash and deposits (excluding time deposits with a maturity over three months)

¥

2017

2016

214,564¥

175,513$

1,915,750

5. Marketable Securities and Investment Securities
The carrying amount and aggregate fair value of marketable and investment securities classified as held-to-maturity debt securities as of March 31, 2017 and 2016 were as
follows:

Millions of yen

Carrying amountMarch 31, 2017¥

Others201

Fair value¥

201

Difference¥(0)

Thousands of U.S. dollars (Note 3)

Carrying amountMarch 31, 2017$

Others

1,795

Fair value
$

1,795

Difference$(0)Millions of yen

Carrying amountMarch 31, 2016

Others¥201

Difference

Fair value
¥

201

¥

(0)

The acquisition cost and aggregate fair value of marketable and investment securities classified as available-for-sale securities including those with no fair value as of March 31,2017 and 2016 were as follows:

Millions of yen

Acquisition cost

March 31, 2017

StocksOthersTotal¥¥

114,279168
114,447

Unrealized gains¥¥

Unrealized losses¥

214,887
14
214,901

2,599
–
2,599

¥

Fair value¥¥

326,567
182
326,749

Thousands of U.S. dollars (Note 3)

Acquisition cost

March 31, 2017

StocksOthersTotal$$

1,020,348
1,500
1,021,848

Unrealized gains$$

Unrealized losses$

1,918,634
125
1,918,759$

23,205–23,205

Fair value$$

2,915,777
1,625
2,917,402

Millions of yen

Acquisition cost

March 31, 2016

DNP
AnnualReport2017

94

StocksOthersTotal¥¥

130,399249
130,648

Unrealized gains¥¥

179,660
14
179,674

Unrealized losses
¥
¥

4,324
0
4,324

Fair value¥¥

305,735263
305,998

Thousands of U.S. dollars (Note 3)

Acquisition cost

March 31, 2017

StocksOthersTotal$$

1,020,348
1,500
1,021,848

Unrealized gains$$

Unrealized losses$

1,918,634
125
1,918,759$

23,205–23,205

Fair value$$

2,915,777
1,625
2,917,402

2 Synopsis of
Performance
6 Message toShareholders

Millions of yen

Acquisition cost

March 31, 2016

StocksOthersTotal¥¥

130,399249
130,648

Unrealized gains¥¥

14 Special Feature

Unrealized losses¥

179,660
14
179,674

¥

4,324
0
4,324

Fair value¥¥

305,735263
305,998

The proceeds from sales of available-for-sale securities for the years ended March 31, 2017 and 2016 were ¥59,966 million ($535,411 thousand) and ¥19,632 million,
respectively. The gross realized gains on these sales for the years ended March 31, 2017 and 2016 were ¥44,915 million ($401,027 thousand) and ¥15,136 million, respectively,
and the gross realized losses on these sales for the years ended March 31, 2017 and 2016 were ¥979 million ($8,741 thousand) and ¥1 million, respectively.
The redemption schedules for securities with maturities at March 31, 2017 and 2016 were as follows:

30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Millions of yen

March 31, 2017

Corporate bonds

Due in one year or lessDue after one year
through five years

¥

¥

–

201

Over five years¥

80

Thousands of U.S. dollars (Note 3)

March 31, 2017

Corporate bonds

Due in one year or lessDue after one year
through five years

$

$

–

1,795

Over five years$

714

Millions of yen

March 31, 2016

Corporate bonds

Due in one year or lessDue after one year
through five years

¥

¥

48

201

Over five years¥

80

6. Inventories
Inventories at March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Merchandise and finished products
Work in process
Raw materials and supplies¥¥

84,28629,13023,897
137,313

2017

2016
¥

¥

101,240
29,68625,021
155,947$$

752,554
260,089
213,366
1,226,009

95

7. Short-term Bank Loans and Long-term Debt
Short-term bank loans at March 31, 2017 and 2016 were represented by bank loans and bank overdrafts, etc., bearing interest at an average rate of 0.35% per annum for 2017
and 0.62% per annum for 2016.
Long-term debt at March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Unsecured debentures
0.100 ~0.390% due 2022
0.150 ~1.358% due 2021
0.100 ~1.705% due 2020
0.150 ~0.460% due 2019
0.150 ~0.340% due 2018
0.320 ~0.790% due 2017¥

Mortgage loans, maturing 2018~2023
Unsecured loans, maturing 2018~2023
Current portion of long-term debt
¥

2017

2016

3,520
52,44051,440
2,240
240
–
3,491
12,728126,099(7,800)118,299¥–
52,48051,680
2,650
750
990
11,131
14,824
134,505(8,755)
125,750¥$$

31,429468,214459,286
20,0002,142–
31,170113,643
1,125,884(69,643)
1,056,241

Finance lease obligations at March 31, 2017 and 2016 which are included in other long-term liabilities consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Finance lease obligations
Current portion of lease obligations¥¥

16,226(5,027)
11,199

2017

2016
¥
¥

14,343(3,972)
10,371$$

144,875(44,884)
99,991

The assets pledged as collateral for the Company and its consolidated subsidiaries’ indebtedness, such as property, plant and equipment and other assets, were ¥7,531 million($67,241 thousand) and ¥9,879 million at March 31, 2017 and 2016, respectively.
Interest rates on mortgage loans ranged from 0.20% to 2.56% per annum for 2017 and from 0.47% to 2.86% per annum for 2016, while interest rates on unsecured loans
ranged from 0.40% to 2.00% per annum for 2017 and from 0.47% to 2.00% per annum for 2016.
The aggregate annual maturities of long-term debt after March 31, 2017 were as follows:

2018
2019
2020
2021
2022
2023 and thereafterThousands of
U.S. dollars (Note 3)

Millions of yen

Years ending March 31

¥

¥

7,800
6,303
53,482
54,411
3,929
174
126,099$$

69,64356,277477,517
485,81335,0801,554
1,125,884

The aggregate annual maturities of finance lease obligations after March 31, 2017 were as follows:

DNP
AnnualReport
2017

96

2018
2019
2020
2021
2022
2023 and thereafterThousands of
U.S. dollars (Note 3)

Millions of yen

Years ending March 31

¥

¥

5,027
4,550
3,568
834
539
1,708
16,226$$44,884
40,62531,857
7,446
4,813
15,250144,875

2 Synopsis of
Performance

8. Retirement Benefits
The Company and its subsidiaries have several retirement plans covering all of their employees, i.e. defined benefit corporate pension plan, a governmental welfare contributory
pension plan, lump-sum retirement plan and defined contribution pension plan. Upon retirement or termination of employment for reasons other than the cause of dismissal,
employees are entitled to lump-sum payments based on the current rate of pay, length of services and accumulated number of points determined based on the employment
services.
Under the Defined Benefit Pension Plan Law, the Company has established new defined benefit pension plans on March 1, 2005 under which most of the retirement benefit
liability of the Company and its subsidiaries is covered by the employees’ pension fund.
The reconciliation of beginning and ending balance of the projected benefit obligation at March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2017

Change in projected benefit obligation:

Balance at the beginning of year
Service cost
Interest cost
Actuarial gain/loss
Benefits paid
Prior service cost
Change of scope of consolidation
Increase due to change from simplified method to principle method
Other
Balance at the end of year

¥

¥

2017

2016

248,945
14,196
1,092(1,858)(8,066)
146
(649)
–
(24)
253,782¥¥

225,153
12,678
1,667
15,230(8,359)
2,543
143
209
(319)
248,945$$

2,222,723
126,750
9,750(16,589)(72,018)
1,304(5,795)–(214)
2,265,911

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

The reconciliation of beginning and ending balance of the plan assets at March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2017

Change in plan assets:

Balance at the beginning of year
Expected return on plan assets
Actuarial gain/loss
Contributions by the employer
Benefits paid
Other
Balance at the end of year

¥

¥

2017

2016

260,622
6,564
6,152
9,057
(6,702)
29
275,722¥¥258,736
6,494(13,401)
14,945(6,261)
109
260,622$$2,326,982
58,60754,92980,866(59,839)259
2,461,804

The reconciliation of projected benefit obligation and plan assets to net defined benefit liability and asset recognized in the consolidated balance sheets as of March 31, 2017 and2016 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Funded projected benefit obligation
Plan assets
Unfunded projected benefit obligation
Net amount of liabilities and assets recognized in consolidated balance sheets
Net defined benefit liability
Net defined benefit asset
Net amount of liabilities and assets recognized in consolidated balance sheets¥¥

219,605(275,722)(56,117)34,177(21,940)¥

35,149(57,089)(21,940)

2017

2016
¥

¥

215,598(260,622)(45,024)
33,347(11,677)¥

34,167(45,844)(11,677)$$

1,960,759(2,461,804)(501,045)
305,152(195,893)$

313,830(509,723)(195,893)

97

The components of net periodic benefit costs for the years ended March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2017Service cost
Interest cost
Expected return on plan assets
Actuarial gain/loss
Amortization of prior sevice cost
Amortization due to change from simplified method to principle method
Net periodic benefit costs of the defined benefit plan

¥

¥

2017

2016

14,178
1,092(6,564)807
656–
10,169¥¥12,626
1,667(6,494)(7,038)
880
208
1,849

$

$

126,589
9,750(58,607)
7,205
5,857
–
90,794Remeasurements of defined benefit plans, before income-tax effect, recorded under accumulated other comprehensive income at March 31, 2017 and 2016 consisted of:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Unrecognized actuarial gain/loss
Unrecognized prior service cost
Total

¥
¥

4,147
(1,966)
2,181

2017

2016
¥
¥

(4,687)(2,443)( 7,130)$$

37,027(17,554)
19,473The major categories of plan assets as of March 31, 2017 and 2016 were as follows:

Bonds
StocksAlternative
Other
Total

2017

2016

19%
46%
26%
9%
100%

22%
45%
22%
11%
100%

2017

2016

0.8%
mainly 2.5%

0.6%
mainly 2.5%

Assumptions used for the years ended March 31, 2017 and 2016 were set forth as follows:

Discount rateLong-term expected rate of return on plan assets

9. Net Assets
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting
matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the stockholders meeting. For
companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term ofservice of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors of such company may declare
dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all the above
criteria. However, its articles of incorporation have not stipulated that the Board of Directors may declare dividends at any time during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to stockholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies
Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to thestockholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
Cash dividends of ¥16.00 ($0.1) per share, aggregating ¥9,852 million ($87,964 thousand) were approved at the general stockholders’ meeting held in June 29, 2017 withrespect to the year ended March 31, 2017.
DNP
AnnualReport201798(b) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in
capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without

2 Synopsis of
Performance

limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among
the accounts under certain conditions upon resolution of the stockholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury
stock purchased cannot exceed the amount available for distribution to the stockholders which is determined by a specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of net assets.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented
as a separate component of net assets or deducted directly from stock acquisition rights. At present, the Company has not issued such stock acquisition rights.
Upon approval by the resolution of the Board of Directors, the Company purchased 13,222 thousand shares of common stocks at an aggregate cost of ¥15,000 million($133,929 thousand) during the year ended March 31, 2017. Furthermore, the Company retired 17,000 thousand shares of common stocks at an aggregate cost of ¥26,565
million ($237,188 thousand) during the year ended March 31, 2017.
10. Accounts with Non-consolidated Subsidiaries and Associated Companies
Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2017 and 2016 were summarized as follows:

Trade receivables
Other current assets
Investment securities
Long-term loan receivables
Other investments
Trade payables
Accrued expenses
Other current liabilities¥

30 DNP in Brief
40 Segment
Information
54 How DNP Works to
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Development
72 Financial Section

Thousands of
U.S. dollars (Note 3)

2017

2016

4,319
154
53,374
180
663
4,180
391
991

14 Special Feature

108 Appendix

Millions of yen

2017

6 Message toShareholders

¥

5,133
230
56,464
180
602
4,420
579
973

$

38,563
1,375
476,554
1,607
5,920
37,321
3,491
8,848

11. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Salaries and allowances
Accrued bonuses
Provision for retirement benefits
Depreciation
Research and development expenses
Other

¥

¥

2017

2016

68,346
6,141
2,390
16,062
31,376111,283
235,598¥¥

68,621
6,048(616)
15,88031,827
115,481
237,241$$

610,232
54,831
21,339143,411
280,143993,598
2,103,554

12. Other Income (Expenses)
The following types of income (expenses) from non-consolidated subsidiaries and associated companies were included in other income.
Thousands of
U.S. dollars (Note 3)

Millions of yen

2017Interest and dividends income
Rent income on facilities
Rent expense

¥

2017

2016
45
137
(28)

¥

76
148
(114)

$

402
1,223
(250)

13. Income Taxes
The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which, in the aggregate, resulted in a normal effective
statutory tax rate of approximately 30.9% and 33.1% for the years ended March 31, 2017 and 2016, respectively.
The actual effective tax rate reflected in the accompanying consolidated statements of income differs from the normal effective statutory tax rate primarily due to the effect ofpermanently non-deductible expenses, current operating losses and different tax rates applicable to foreign subsidiaries, etc.

99

No reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate for the year ended March 31, 2017 was shown because thedifference was less than five percent of the statutory tax rate, although the difference for 2016 was shown as follows.

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Amortization of consolidation goodwill
Change in valuation allowance
Equity in earnings of affiliates
Loss on business integration
The effective income tax rate change
Other
Actual effective tax rate

2017

2016

–
–
–
–
–
–
–
–
–

33.1%
3.4
0.9
(0.3)
(2.2)
–
1.8
0.0
36.7%

Net deferred tax assets (liabilities) at March 31, 2017 and 2016, resulting from temporary differences between the carrying amounts and the tax bases of assets and liabilities
were reflected on the accompanying consolidated balance sheets under the following captions:Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Prepaid expenses and other current assets
Other assets
Other current liabilities
Other long-term liabilities
Net deferred tax assets (liabilities)

¥

¥

2017

2016

15,3157,286(16)(66,147)(43,562)¥¥

10,744
6,732(20)(48,884)(31,428)$$

136,741
65,054(143)(590,598)(388,946)

Significant components of deferred tax assets and liabilities at March 31, 2017 and 2016 were as follows :Thousands of
U.S. dollars (Note 3)

Millions of yen

2017
Deferred tax assets:
Net defined benefit liability
Loss on devaluation of investment securities
Excess provision for doubtful receivables
Accrued bonuses
Loss on write-down of inventories
Operating loss carryforwards
Impairment loss on fixed assets
Other
Total deferred tax assets
Less: valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Reserve for special depreciation
Undistributed earnings of subsidiaries
Net defined benefit asset
Other
Total
Net deferred tax assets (liabilities) :DNP
AnnualReport
2017

100

¥

14,281
2,967
2,044
5,323
1,068
35,062
10,356
18,64589,746(51,858)
37,888$$¥(52,409)(90)(806)(14,028)(1,983)(69,316)$(564,223)(607)(7,143)(155,973)(15,089)(743,035)¥(31,428)$(388,946)

15,083
2,802
1,331
5,247
1,201
31,2409,735
22,18888,827(49,169)
39,658¥¥¥(63,193)(68)(800)(17,469)(1,690)(83,220)¥(43,562)

¥

¥

2017

2016

¥

$

134,670
25,018
11,884
46,848
10,723278,929
86,920
198,106
793,098(439,009)
354,089

2 Synopsis of
Performance
6 Message toShareholders

14. Leases
Operating Leases
The amounts of outstanding future payments under non-cancelable operating leases as of March 31, 2017 and 2016 were also summarized as follows:

14 Special Feature

Millions of yen

2017

Future lease payments:

One year or lessMore than one year

¥
¥

2016

5,268
15,924
21,192¥¥

5,107
16,08821,195$$

Thousands of
U.S. dollars (Note 3)

30 DNP in Brief

2017

40 Segment
Information

47,036142,179
189,215

15. Financial Instruments
1. Management policy
The Company and its consolidated subsidiaries manage fund surpluses through financial assets that have high levels of safety, and raise funds through bank loans and bondissuances. The Company and its subsidiaries also utilize derivative financial instruments to hedge the risk of exchange rate and interest rate fluctuations and do not enter into
derivatives for trading or speculative purposes.
The trade receivables are exposed to credit risk of customers and the Company and its subsidiaries minimize the credit risk in accordance with internal customer credit
management rules.
Long-term investments are mainly equity securities. Listed stocks are stated at fair value based on market prices quarterly.

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

2. Fair value of financial instruments
Fair value and difference compared to the carrying amounts reported in the consolidated balance sheets as of March 31, 2017 and 2016 were as follows:
Millions of yen

March 31, 2017

Carrying amounts
reported in the
consolidatedbalance sheet(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securities(4) Long-term loan receivables
Allowance for doubtful receivables*1¥

Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1] Hedge accounting is not applied[2] Hedge accounting is applied
Total

¥
¥

¥
¥
¥

Fair value

215,455
341,805
330,263
4,390
(453)
3,937
891,460
247,562
43,036
126,099
416,697

¥

(107)
(14)
(121)

¥

¥
¥

¥

¥

215,455
341,805
347,403
4,359
4,359
909,022
247,562
43,036130,261
420,859
(107)
(14)
(121)

Differences
¥

¥
¥

¥

–
–
17,140422
17,562
–
–
4,162
4,162

¥

–
–
–

¥

Thousands of U.S. dollars (Note 3)

March 31, 2017

Carrying amounts
reported in the
consolidatedbalance sheet(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securities(4) Long-term loan receivables
Allowance for doubtful receivables*1$

Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1] Hedge accounting is not applied[2] Hedge accounting is applied
Total

$
$

$
$
$

Fair value

1,923,705
3,051,830
2,948,777
39,197(4,045)35,152
7,959,464
2,210,375
384,250
1,125,884
3,720,509

$

(955)
(125)
(1,080)

$

$
$

$

$

1,923,705
3,051,830
3,101,813
38,92038,9208,116,268
2,210,375
384,250
1,163,045
3,757,670
(955)
(125)
(1,080)Differences
$

$
$

$
$
$

–
–
153,036

3,768
156,804––
37,161
37,161–––

101

Millions of yen

Carrying amounts
reported in the
consolidatedbalance sheet

March 31, 2016

(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securities(4) Long-term loan receivables
Allowance for doubtful receivables*1¥

Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1] Hedge accounting is not applied[2] Hedge accounting is applied
Total

¥
¥

¥
¥
¥

Fair value

176,694
348,585
305,589
6,793(1,080)5,713
836,581
255,586
55,316
134,505
445,407

¥

700
(17)
683

¥

¥
¥

¥

¥

176,694
348,585
319,048
6,772
6,772
851,099
255,586
55,316140,170451,072
700
(17)
683

Differences¥––
13,4591,059
14,518
–
–
5,665
5,665

¥
¥

¥
¥

–
–
–

¥

*1. Allowance for doubtful receivables associated with long-term loan receivables is deducted.
*2. Derivative assets and liabilities are on a net basis.
Note A: Fair value of financial instruments, marketable securities and derivatives
Assets(1) Cash and deposits and (2) Trade receivables
The carrying amounts approximate fair value because of the short maturities of these instruments.
(3) Marketable and investment securities
The fair values of equity securities are measured at the quoted market price of the stock exchange and the fair values of debt securities are measured at the quoted price provided
by financial institutions.
(4) Long-term loan receivables
The fair values of long-term loans are mainly determined based on the present value of the future cash flows discounted by government bonds rates plus certain credit risk
premiums by categories according to the internal ratings.
Liabilities(1) Trade payables and (2) Short-term bank loans
The carrying amounts approximate fair value because of the short maturities of these instruments.
(3) Long-term debts
The fair values of bonds issued by the Company and its subsidiaries are measured based on market price, if available. The fair values of bonds without market price are measured
at the present value of total principal and interest discounted by using a rate which reflects its remaining period and credit risk.
The fair values of long-term debts are based on the present value of total principal and interest discounted by using the current borrowing rate for similar debt.
Derivatives
Information about the fair value for derivatives is included in Note 16.
Note B: Financial instruments whose fair value is extremely difficult to measure

March 31, 2017

Unlisted equity securities
Other

Millions of yen

Thousands of
U.S. dollars (Note 3)

Carrying amounts

Carrying amounts¥$

49,944
117445,929
1,045

Millions of yen

March 31, 2016

DNP
AnnualReport2017102

Unlisted equity securities
Other

Carrying amounts¥

The above are not included in “(3) Marketable and investment securities” because there is no market value and it is extremely difficult to measure the fair value.

56,934140

2 Synopsis of
Performance

16. Derivative Financial Instruments
Nature of Derivative Financial Instruments:
The Company and certain consolidated subsidiaries enter into derivatives for foreign currency forward contracts, currency swap contracts, and interest rate swaps to manage therisk arising from fluctuation in foreign currency exchange rates and interest rates. Derivatives related to currency are utilized to hedge foreign exchange risks associated withcertain accounts receivable, accounts payable and other debts, including forecasted transactions, denominated in foreign currencies. Interest rate swaps are utilized to hedge
interest rate risks on interest-bearing debts. The Company and its subsidiaries do not hold derivatives for speculative purposes.
Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to major international financial institutions, the Company andits subsidiaries do not anticipate any losses arising from credit risks. The Accounting Department controls and executes derivatives based on the internal policies of the Company.

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development

Fair value of derivatives:
The contracted amount and fair value of derivatives at March 31, 2017 and 2016 were as follows:

72 Financial Section

Derivative transactions to which the Company and its subsidiaries did not apply hedge accounting
108 Appendix
Millions of yen

March 31, 2017

Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Contracted amount¥

Payables:U.S. dollars¥

17,3451,859

24
19,228Fair value

¥

¥

(108)
1

(0)
(107)

Unrealized gain (loss)

¥

¥

(108)
1

(0)
(107)

Thousands of U.S. dollars (Note 3)

March 31, 2017

Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Contracted amount$

Payables:U.S. dollars$

154,866
16,598215
171,679

Fair value

$

$

(964)
9

(0)
(955)

Unrealized gain (loss)

$

$

(964)
9

(0)
(955)

Millions of yen

March 31, 2016

Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Contracted amount¥

Payables:U.S. dollars¥

19,8051,605

182
21,592

Fair value

¥

¥

690
10

0
700

Unrealized gain (loss)

¥

¥

690
10

0
700

103

Derivative transactions to which the Company and its subsidiaries applied hedge accounting

Millions of yen

March 31, 2017

Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars
Sterling pound
Euro
Japanese yen

Interest rate swaps
Receive floating and pay fixed

Hedged items

Contracted amount

Trade receivables
Trade receivables

¥

¥

(0)
0

¥

1,481
2
164
67
1,914

¥

(13)
(0)
(1)
0
(14)

¥

70

¥

–

Trade payables
Trade payables
Trade payables
Trade payables

Long-term loan payables

192
8

Fair value

Thousands of U.S. dollars (Note 3)

March 31, 2017

Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars
Sterling pound
Euro
Japanese yen

Interest rate swaps
Receive floating and pay fixed

Hedged items

Contracted amount

Trade receivables
Trade receivables

$

$

(0)
0

$

13,22318
1,464
598
17,089

$

(116)
(0)
(9)
0
(125)

$

625

$

–

Trade payables
Trade payables
Trade payables
Trade payables

Long-term loan payables

1,714
72

Fair value

Millions of yen

March 31, 2016

Foreign currency forward contracts
Receivables:
U.S. dollars
Payables:U.S. dollars
Sterling pound
Euro

Interest rate swaps
Receive floating and pay fixed

Hedged items

Contracted amount

Trade receivables

¥

131

¥

–

¥

2,220
92
331
2,774

¥

(13)
(3)
(1)
(17)

¥

5,202

¥

–

Trade payables
Trade payables
Trade payables

Long-term loan payables

Fair value

The fair values of foreign currency forward contracts and currency swap contracts subject to alternative method are included in trade receivables, trade payables and long-termloan payables as hedged items. The fair values of interest rate swap contracts subject to exceptional accrual method are included in long-term loan payables as hedged items.
Fair value of derivatives is based on forward exchange rates or information provided by financial institutions at the end of the fiscal year.

DNP
AnnualReport2017104

2 Synopsis of
Performance

17. Contingent Liabilities
The Company and its consolidated subsidiaries were guarantors of bank loans of other companies, amounting to approximately ¥3 million ($27 thousand) and ¥7 million at March
31, 2017 and 2016, respectively. It is common practice in Japan for companies, in the ordinary course of business, to receive promissory notes in settlement of trade accounts
receivable and to subsequently discount such notes at banks. At March 31, 2017 and 2016, the Company and its consolidated subsidiaries were contingently liable on trade notes
discounted in the amount of ¥626 million ($5,589 thousand) and ¥628 million, respectively.
18. Segment Information
Outline of reportable segments:
The Company and its consolidated subsidiaries' reportable segments are components of the group whose operating results are regularly reviewed by the Board of Directors tomake decisions about resources to be allocated to the segments and assess their performance, for which discrete financial information is available. The group's reportablesegments consist of Information Communication, Lifestyle and Industrial Supplies, Electronics, and Beverages, based on a classification by commonality in manufacturing andmarketing method of products.
Information on sales and profit, identifiable assets and other items by reportable segment

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

Millions of yen
Reportable segment

For 2017 :Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets
OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Increase in property, plant and equipment
and intangible assets

Information
Communication

Lifestyle andIndustrial
Supplies

Electronics¥

797,047
4,157
801,204
18,884875,999¥

387,143
1,052
388,195
14,434439,303¥

27,661
1,104
834

¥

17,028
1,213
–

¥

¥

¥

¥

28,735¥

12,619Beverages

169,4026
169,408
16,484
258,120¥

12,083
–
61

¥

¥

7,729

Total

Adjustment

Consolidated¥ 1,410,173–
1,410,173
31,411¥ 1,741,904

56,581
39
56,6202,430
47,526¥ 1,410,173
5,254
1,415,427
52,232¥ 1,620,948¥¥2,367–
1¥¥

59,139
2,317
896

¥

–
(5,254)(5,254)(20,821)
120,956

2,322
–
–

¥

61,461
2,317
896

4,197

57,085Adjustment

Consolidated$ 12,590,830
46,911
12,637,741
466,357$ 14,472,750$–(46,911)(46,911)(185,902)$ 1,079,964$ 12,590,830–
12,590,830
280,455$ 15,552,714

$

$

$

3,805

52,888

Thousands of U.S. dollars (Note 3)
Reportable segment

For 2017 :Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets$ 7,116,491
37,116
7,153,607
168,607$ 7,821,420$ 3,456,633
9,393
3,466,026
128,875$ 3,922,348$ 1,512,518
54
1,512,572
147,179$ 2,304,643

$

$

$

$

$

OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Increase in property, plant and equipment
and intangible assets

246,973
9,857
7,446
256,563

152,036
10,831–
112,670

107,884–545

Beverages$

69,009505,188348
505,536
21,696424,339

21,134–
9

Total

33,973528,027
20,6888,000

20,732––548,759
20,6888,000

37,473509,688

Adjustment

Consolidated¥ 1,455,916–
1,455,916
45,472¥ 1,718,636

472,215

Millions of yen
Reportable segment

For 2016 :Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets
OthersDepreciation and amortization
Amortization of goodwill
Impairment loss

Information
Communication

Lifestyle andIndustrial
Supplies

Electronics¥

816,875
4,747
821,622
29,364
892,969¥

381,648
999
382,647
12,597441,761¥

27,514
1,593
102

¥

17,026
607
–

¥

¥

¥

¥

¥

Beverages

199,33020
199,350
20,509273,403¥

15,008
–
–

¥

¥

Total

58,06332
58,095991
45,800¥ 1,455,916
5,798
1,461,714
63,461¥ 1,653,933

¥

3,941
1
8

¥

¥

63,489
2,201
110

¥

–
(5,798)(5,798)(17,989)
64,703

1,821
–
–

¥

65,310
2,201
110

105

Segment assets
OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Increase in property, plant and equipment
and intangible assets$ 7,821,420$ 3,922,348$ 2,304,643$

424,339$ 14,472,750$ 1,079,964$ 15,552,714

$

$

$

$

21,134
–
9

$

$

$

246,973
9,857
7,446
256,563

152,036
10,831–
112,670

107,884–545
69,00933,973528,027
20,6888,000

20,732––548,759
20,6888,000

37,473509,688

Adjustment

Consolidated¥ 1,455,916–
1,455,916
45,472¥ 1,718,636

472,215

Millions of yen
Reportable segment

For 2016 :Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets
OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Increase in property, plant and equipment
and intangible assets

Information
Communication

Lifestyle andIndustrial
Supplies

Electronics¥

816,875
4,747
821,622
29,364
892,969¥

381,648
999
382,647
12,597441,761¥

27,514
1,593
102

¥

17,026
607
–

¥

¥

¥

¥

52,537

23,277¥

Beverages

199,33020
199,350
20,509273,403¥

15,008
–
–

¥

¥

Total

58,06332
58,095991
45,800¥ 1,455,916
5,798
1,461,714
63,461¥ 1,653,933

¥

3,941
1
8

¥

¥

13,277

5,781

63,489
2,201
110

¥

94,872–(5,798)(5,798)(17,989)
64,703

1,821
–
–

¥

65,3102,201
11097,265

2,393[Related information]								Information by geographic area				Millions of yen

Japan

For 2017 :Net sales¥

1,207,680

Asia¥

126,210

Other region¥

76,283

Total¥

1,410,173$

12,590,830

Thousands of U.S. dollars (Note 3)

Japan

For 2017 :Net sales$

10,782,857

Asia$

1,126,875

Other region$

681,098

Total

Millions of yen

Japan

For 2016 :Net sales

DNP
AnnualReport
2017

106

¥

1,221,330

Asia¥

146,925

Total

Other region¥

87,661¥

1,455,916

Independent Auditors’ Report

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature

To the Board of Directors of Dai Nippon Printing Co., Ltd.:30 DNP in Brief

Report on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Dai Nippon Printing Co., Ltd. and consolidated subsidiaries as of March 31, 2017 and the related consolidated
statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information (all expressed in Japanese yen).
Management’s Responsibility for the Consolidated Financial Statements

40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section

Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with accounting principles generally accepted inJapan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.

108 Appendix

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in conformity with auditing standards generally
accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dai Nippon Printing Co., Ltd. andconsolidated subsidiaries as of March 31, 2017, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis
stated in Note 3 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

ARK MEIJI AUDIT & Co.
Tokyo, Japan
June 29, 2017107

Major Subsidiaries and Affiliates(As of March 31, 2017)

Printing
DNP Hokkaido Co., Ltd.
DNP Tohoku Co., Ltd.
DNP Chubu Co., Ltd.
DNP Nishi Nippon Co., Ltd.
DNP Shikoku Co., Ltd.

Capital(¥ million)

General affairs, accounting work and other business services
General affairs, accounting work and other business services
General affairs, accounting work and other business services
General affairs, accounting work and other business services
Film making, printing, bookbinding; production and sale of packaging

Ownership ratioof voting rights (%)

350
350
350
400
50

100.0
100.0
100.0
100.0
97.0

Investment in operating companies
3,000
Sale of books, creation of data, library operation support, and consulting
266
Education and academic businesses; retail stores; publishing; commercial facility/store interiors, etc.
100
Publishing
50
Sale of books, magazines, and stationery
50
Used bookstore operation; development and operation of new/used goods businesses; management guidance for affiliated stores 3,652
Investment in operating companies
2,035
Production, agency and sale of digitized books, magazines, and other published materials
500
Development, sale, and maintenance of computer software
435
Offset printing and bookbinding
200
Film making
180
Editing and sale of books and magazines
100
Electronic publishing and distribution platform services; e-book distribution service
100
Editing and sale of textbooks and educational materials
60
50
Research and policy planning aimed at activating Japan s publications distribution markets
Printing and bookbinding
49
Film making, printing and bookbinding(S$1,000)
4,600

53.0
53.0
53.0
53.0
53.0
15.6
23.7
80.5
86.7
100.0
100.0
99.8
63.4
48.2
50.0
100.0
100.0

INTELLIGENT WAVE INC.
DNP Art Communications Co., Ltd.
DNP Graphica Co., Ltd.
DNP Communication Design Co., Ltd.
DNP Data Techno Co., Ltd.
DNP Digital Solutions Co., Ltd.
DNP SP Tech Co., Ltd.
NBC Co., Ltd.*DNP Social Links Co., Ltd.
DNP Media Support Co., Ltd.
MK Smart Joint Stock Company

Development and maintenance of software
Planning, production and sale of artistic images and videos
Printing and bookbinding
Planning, production, film making and plate making
Production and sale of business forms and plastic cards
Planning, design, maintenance and operation of information systems
Planning and production of promotional materials
Mailing of printed matter, etc.
Planning, development and operation of online advertising and computer systems, etc.
Production and sale of all types of printed matter
Production and sale of plastic cards and business forms

50.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.0
36.3

PT. Wahyu DNP Bureau

Card-issuing services

Information Communication

Publishing

Maruzen CHI Holdings Co., Ltd.
Toshokan Ryutsu Center Co., Ltd.
MARUZEN-YUSHODO Company, Limited
MARUZEN PUBLISHING CO., LTD.
MaruzenJunkudo Bookstores Co., Ltd.
BOOKOFF CORPORATION LIMITED
Bunkyodo Group Holdings Co., Ltd.
2Dfacto, Inc.
VISUALJAPAN Inc.*DNP Book Factory Co., Ltd.
DNP Media Art Co., Ltd.
SHUFUNOTOMO Co., Ltd.
MobileBook.jp Inc.
Kyoiku-Shuppan Co., Ltd.
Publishing Marketing Innovation Japan Co., Ltd.
Oguchi Book Binding & Printing Co., Ltd.
Tien Wah Press (Pte.) Ltd.
Information Innovation

DNP Information and Services (Shanghai) Co., Ltd. Planning and production of electronic media

843
300
100
100
100
100
80
20
10
10
(VND 1,000,000)
100,000(US$1,000)
2,000(CNY 1,000)
1,000

45.0
100.0
(100.0)

Imaging Communication

DNP Imagingcomm Co., Ltd.
DNP Photo Imaging Japan Co., Ltd.
DNP ID System Co., Ltd.
DNP Imagingcomm Asia Sdn. Bhd.

Production and processing of thermal mass transfer media and dye-sublimation media
Sale of photo-related products; operation of ID photo booths and automated commemorative photo booths
Sale of equipment and media for making driver licences
Production, processing and sale of thermal mass transfer media and dye-sublimation media; sale of photo-related products

DNP Imagingcomm America Corporation

Production, processing and sale of thermal mass transfer media and dye-sublimation media; sale of photo-related products

Foto Fantasy, Inc.

Development, production and operation of automated commemorative photo booths

DNP Photo Imaging Europe SAS

Sale of photo-related products

DNP Imagingcomm Europe B.V.

Processing and sale of thermal mass transfer media and dye-sublimation media

100
100
60
(RM 1,000）
190,000(US$1,000)
71,980(US$1,000)
10(Euro 1,000)
2,408(Euro 1,000)
1,000

100.0
100.0
100.0
100.0
100.0
(100.0)100.0(100.0)
100.0
100.0

Lifestyle and Industrial Supplies

Packaging

Lifescape Marketing Co., Ltd.
DNP Technopack Co., Ltd.
Sagami Yoki Co., Ltd.
Aseptic Systems Co., Ltd.
DNP Hoso Co., Ltd.
DNP Field Eyes Co., Ltd.
DNP Vietnam Co., Ltd.
PT DNP Indonesia

Research, compilation and provision of various kinds of information about purchasing and consumption of foods and beverages
430
Production, printing and processing of packaging materials
300
Production of plastic tubes
200
Manufacturing and sale of aseptic filling systems, and related consulting
100
Filling and processing of packages
80
Marketing research and consulting
50
Production and sale of packaging materials(US$1,000)
31,500
Production and sale of packaging materials(US$1,000)
26,000

84.0
100.0
90.0
100.0
100.0
100.0
100.0
(20.0)
51.0

Sale of decorative products
Printing and processing of steel, aluminum and other metals
Production, printing and processing of decorative products
Manufacturing and sale of automotive accessories

300
300
200
60

100.0
50.0
100.0
100.0

Production of lithium-ion battery components

200

100.0

Living Spaces

DNP Lifestyle Materials Marketing Co., Ltd.
DNP Ellio Co., Ltd.
DNP Living Space Co., Ltd.
DNP Tamura Plastic Co., Ltd.
Industrial Supplies

DNP High-performance Materials Co., Ltd.

108

（53.0）（53.0）（53.0）（53.0）

（9.4）
（0.7）

(15.1）

Capital(¥ million)

Ownership ratioof voting rights (%)

Electronics

Display Components

DNP Color Techno Kameyama Co., Ltd.
DNP Precision Devices Himeji Co., Ltd.
DNP Denmark A/S

Production and sale of semiconductor color filters for LCDs
Production of display-related components
Production and sale of precision electronic components

2,500
400
(Dkr 1,000)
135,000

100.0
100.0
100.0

DT Fine Electronics Co., Ltd.
DNP Fine Optronics Co., Ltd.
DNP LSI Design Co., Ltd.
Photronics DNP Mask Corporation

Production and sale of precision electronic components
Production of precision electronic components
Design and production of drawings used in semiconductor production
Production and sale of semiconductor photomasks

65.0
100.0
100.0
49.9

DNP Photomask Europe S.p.A.

Production and sale of semiconductor photomasks

490
300
100
(NT 1,000)
2,198,185(Euro 1,000)
47,200
5,483
2,000
100
1,199
626
500
379
100
100
100
70
50
40
40
32
30
30
10
(US$1,000)
62,164(US$1,000)
100(US$1,000)
420(S$1,000)
2,000

20.6
100.0
100.0
31.8
100.0
33.4
20.1
100.0
100.0
94.3
100.0
99.8
100.0
92.5
51.1
66.6
20.0
50.0
100.0
(7.1)
100.0
(100.0)
100.0

350
100
100
90
33
30
20

100.0
100.0
100.0
100.0
88.8
100.0
100.0

(Krw 1,000)
500,000(THB 1,000)
200,000(NT 1,000)
10,000(US$1,000)
5,400(US$1,000)
100(S$1,000)
350(Euro 1,000)
92(A$1,000)
70

100.0

Electronic Devices

80.5

Other

Nihon Unisys, Ltd.
DNP Fine Chemicals Co., Ltd.
DNP Fine Chemicals Utsunomiya Co., Ltd.
All About Inc.
DNP Logistics Co., Ltd.
DIC Graphics Corporation
PSP Corporation
DNP Engineering Co., Ltd.
DNP Multi Print Co., Ltd.
DNP Trading Co., Ltd.
CYBER KNOWLEDGE ACADEMY Co., Ltd.
My Earth Projects LLC*
DNP HyperTech Co., Ltd.
CP Design Consulting Co., Ltd.*CAFI Corporation*
At Table Co., Ltd.*
M s Communicate Co., Ltd.*DNP Dexerials Consulting Co., Ltd.
DNP Corporation USA

Development and sale of software; computer system support services
Production and sale of chemical products
Manufacturing and sale of pharmaceutical products
Operation of comprehensive information website based on "expert guides; " Internet advertising
Packing, shipping, freight forwarding and warehousing operations
Production and sale of printing ink
Planning, research, development, sales and maintenance of internal information systems for hospitals and clinics
Manufacturing, repair and sale of printing equipment and other machinery
Film making, printing and bookbinding
Buying and selling of printing paper and various other types of merchandise
Operation of academy for training and developing personnel to defend against targeted cyber attacks
Planning, production and sale of trading cards
Production and sale of computers and peripheral devices; development, production and sale of software
Personal information protection and risk management consulting
Remote diagnostic imaging service
Research, consulting and planning related to production and sales promotions for supermarkets and other retailers
Consulting and intermediary services related to customer membership services
Business planning and proposals
Investment in operating companies

DNP Holding USA Corporation

Investment in operating companies

DNP Business Consulting（Shanghai) Co., Ltd.*

Study of Chinese market and business feasibility

DNP Asia Pacific Pte. Ltd.

Coordination of DNP business operations in the Southeast Asia/Oceania region(100.0)100.0

Personal Welfare, Facility Service and Others

DNP Facility Services Co., Ltd.
DNP Information Systems Co., Ltd.
Metro Systems Co., Ltd.
DNP Human Services Co., Ltd.
Uzumine Country Club Co., Ltd.*DNP Accounting Services Co., Ltd.
DNP Techno Research Co., Ltd.*

Building maintenance, cleaning and security; operation of sports and welfare facilities
Design, development and maintenance of information systems; production and sale of software
Planning, design, development, maintenance and support operations for information systems
Planning and management related to personnel plans
Management of golf courses
Accounting agency and consulting services
Studies related to patents; preparation of contracts（90.0）

Overseas Sales

DNP Korea Co., Ltd.*Sale of precision electronic components

Dai Nippon Printing (Thailand) Co., Ltd.*Sale of packaging supplies and precision electronic components

DNP Taiwan Co., Ltd.

Sale of precision electronic components

DNP International Trading (Shanghai) Co., Ltd.*Sale of printed matter and photo-related products, etc.

DNP America, LLC

Sale of printed matter, precision electronic components, and decorative materials

DNP Singapore Pte. Ltd.*Sale of precision electronic components and decorative materials

DNP Europa GmbH*

Sale of printed matter and decorative materials

Dai Nippon Printing Co. (Australia) Pty. Ltd.*Sale of printed matter

100.0
100.0
100.0
100.0
(100.0)
100.0
100.0
100.0

Beverages
Beverages

Hokkaido Coca-Cola Bottling Co., Ltd.

Production and sale of soft drinks

2,935

59.9

(6.4)

Notes: 1. Voting rights ownership ratios (in brackets) indicate the percentage of shares owned through DNP’s subsidiaries or affiliates.
2. Companies with an asterisk are neither consolidated nor accounted for by the equity method.

109

DNP’s Main Proprietary Technologies

Information
Processing

With the digitization of printing, DNP has been developing a wide range of original information
processing technologies including image processing, language processing, information security
and networking technologies. We are also pursuing research and development in fields likecomputer vision, regenerative medicine, and artificial intelligence.

Image Processing and Recognition Technologies
TECHNOLOGIESImage processing and recognition technologies apply appropriate information processing techniques to still or moving images in order to extract useful
information. They enable information media to perform sophisticated information processing tasks that only humans were able to accomplish in the past.
Sometimes these technologies even make it possible to see information that humans cannot recognize without help. Since DNP began digitizing thetext and image data that we handle in our printing businesses, we began research and development in fields such as color reproduction, in which wehave continued to develop related technologies. We are now developing applications in a wide range of fields including security, energy conservation,
education, medical care, and entertainment. We are working at a variety of levels from developing our own algorithms to developing architecture.
PRODUCTS & SERVICES

Real-time image analysis system
We developed a system for perceiving the danger of a potential accident
or disaster by analyzing images from surveillance cameras in real timeand quickly discovering anomalies. As an example, the system can help
prevent people from being accidentally trapped in automated parking
lots by detecting the presence of someone still inside at closing time.
To supplement the use of motion detectors, DNP has developed a newtechnology that we call “stationary object detection,” for perceiving a person
who has fallen. In order to capture the movement of people and objects,
DNP’s original algorithm makes distinctions according to changes in lighting,shadows and reflections, and initiates follow-up processing based on
information about colors and shapes. Parameters for this processing canbe set according to the requirements of each environment. One importantfeature of this system is the ability to configure it very specifically in order toderive the most useful analysis.

◉ Motion Detection◉ Stationary object detection

Information Security Technologies
TECHNOLOGIESDNP has three core types of technologies related to this area: smart card OS and application development technologies; smart card issuing technologies; andnetwork server system development and operation technologies. In addition to manufacturing and issuing smart cards, we can develop a variety of products
and services such as IC software and peripheral smart card-based systems by refining these three types of technologies.
PRODUCTS & SERVICES

Smart cards
A smart card contains a microchip with non-volatile memory capableof storing a large amount of data, and a CPU. Smart cards may becontact-type cards, contactless, or dual interface cards that combine
contact-type and contactless functions. DNP maintains one of theleading shares of the Japanese smart card market, supplying every
type of card—from credit cards, cash cards and transportation cards
to electronic money cards—used by a variety of business types andbusiness formats.
DNP
AnnualReport2017110

Microfabrication

DNP has cultivated highly precise processing technologies through making masters (printing
plates) as part of the printing process. By applying those technologies to electronics, we havecreated a large number of micro-processed products including semiconductor photomasks
and color filters for liquid crystal displays. We continue to explore the limits of the microscopic
world through our cutting-edge technologies.

2 Synopsis of
Performance
6 Message toShareholders
14 Special Feature
30 DNP in Brief

Photolithography

40 Segment
Information

TECHNOLOGIES

Photolithography is a technology for forming patterns by shining light on the surface of a substrate coated with photosensitive material. The pattern
forms because some areas are exposed and some are not. DNP has honed its photolithography technologies through the production of masters used
for printing. We apply these technologies to the manufacture of products like photomasks and color filters.

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section

PRODUCTS & SERVICES

Photomasks

108 Appendix

A photomask is a master used for forming semiconductor
circuits. In order to make cutting-edge semiconductors, weneed to use various special techniques in order to makephotomasks that can produce circuits whose lines havethe necessary resolution of 14 to 28nm*. DNP contributes
to the miniaturization of semiconductor product line widths
by providing photomasks that control not only the intensity
but also the phase and polarity of the light that passes
through them.
* nm (nanometer): one billionth of a meter
PRODUCTS & SERVICES

Color filters◉ Color filters

We have developed high quality color filters—an importantcomponent of liquid crystal displays—by developing
new coloring materials and using pigment miniaturizationand dispersion techniques along with photolithography
technologies for patterning of colored layers. In responseto the trend toward multi-colored layers, we havealso developed multicolor filters with expanded color
reproduction ranges of four or five colors.

Close-up photographof a color filter

Nanoimprinting
TECHNOLOGIES

Nanoimprinting is a method that enables the transfer of patterns with line width of 20nm or less by pressing a template against a resin-coatedsubstrate. The development of nanoimprinting makes use of knowledge and skills from a wide range of fields, including clarification of the mechanisms
by which polymers react when exposed to light or to an electron beam, a good grasp of a material’s behavior at its interface, and simulation
technologies in addition to microfabrication and precision measuring techniques. Based on the technologies we have cultivated through our photomask
business, we have been pursuing development in collaboration with materials and equipment manufacturers.
PRODUCTS & SERVICES

Development of various products
Nanoimprinting is expected to be useful in fields like nextgeneration semiconductor lithography, ultrahigh density
HDD media manufacturing, and optical elements. Quartz
or silicon is generally used for making master and replica
templates (dies), and dry etching is used for forming aconcavo-convex shape on the template surface. DNP
has developed a replica template by using nanoimprinting
lithography and a master template made with electron
beam lithography. We plan to supply this next-generation
technology to a wide variety of corporate clients.

Transparent
template
Light-sensitive
resin
Substrate

Contact andUV exposure

Replica
templateon whichpattern has
been formed

Release(replica)

111Precision
Coating

Precision coating refers to processing that covers a surface by causing a film to adhere to it uniformly.
By combining material design technologies with film thickness control, multi-layering, surface
processing and other technologies, we can bestow diverse functions such as optical properties,
barrier properties, and heat resistance.
With extremely broad possibilities for application, this is one of DNP’s core technologies and we
make use of it across business unit boundaries.

High-speed Thin Film Coating Technology
TECHNOLOGIESDNP has coating technologies that we employ in the manufacture of ink ribbons
for dye-sublimation thermal transfer printers that print digital images, whichenable us to apply various functional materials in a uniform layer about 1μm*
thick onto ultrathin film only about 5μm thick, at a speed of several hundred
meters per minute. We have also developed materials such as coloring agentsthat are exceptionally well suited for thin film coating and overcoat materials,
enabling us to succeed at high-speed thin-film coating in terms of bothprocessing and materials.
* μm (micrometer): one millionth of a meter◉ Dye-sublimation thermal transfer

Ink ribbon(ultrathin film)

Heat-resistantlayer
Base film
Magenta dyestuff
layer
Yellow dyestuff
layer

Receiverpaper

Image-receiving
layer

Cyan dyestuff
layer
Protective
layer

Thermalhead

Substrate

PlatenrollerPRODUCTS & SERVICES

Dye-sublimation thermal transfer printing media
Printers that use dye-sublimation thermal transfer printing media form images by transferring dyestuffs from ink ribbons to receiver paper. Controllingheat energy in the printer’s thermal head makes it possible to adjust the concentration of dyestuffs in each dot. Because they can reproduce some
16,700,000 colors in a single dot, these printers can produce high quality images. In addition to manufacturing and selling ink ribbons and receiverpaper, DNP is further expanding and evolving its photo print business by developing new printing systems and providing a variety of solutions thatmake use of its systems.

Precision Thin Film Clean Coating Technology
TECHNOLOGIESThis technology is based on a printing technique that involves applying a filmof liquefied polymeric material while very precisely controlling film thickness.
The manufacturing processes that allow sub-micron film thickness control andsimultaneous application of multiple layers are performed in a high-level clean
environment. By combining material design and optical design technologies that
DNP has accumulated through years of printing experience, we will continue
to supply functional optical films with both desirable optical characteristics andhigh-quality appearance.
PRODUCTS & SERVICES

Anti-reflection films◉ Main types of anti-reflection films

Anti-glare (AG) film
External
light

Scattered light

Low-reflection (LR) film
Fineparticles

External
lightLight reflectedfrom surface
Light reflectedfrom interface
Low-reflection layer

Antiglare layers

Film substrate

Film substrate

Unevenness of the surface of thefilm causes light to scatter, making
glare less noticeable. It has a mattesurface.

Glare is reduced because reflected
light waves are canceled due tointerference. The surface is shiny.

Anti-reflection films for displays—used to suppress glare from fluorescent or other types of light—were developed as a result of applying DNP’s
precision thin film clean coating technology. DNP’s anti-reflection films hold one of the top shares in the world market for anti-reflection films used on
liquid crystal displays. One of the reasons for the films’ popularity is the multi-layer thin film coating used in DNP’s films, which makes more effective
use of optical interference compared to single-layer coatings.

Vapor Deposition
TECHNOLOGIES

Vapor deposition is a coating technology whereby a gasified substance forms a coating on aplastic film within a vacuum. Alumina and silica are used in vapor deposition, with silica being
used particularly in a method called “chemical vapor deposition.” In chemical vapor deposition,
because silica is deposited on the film surface at the molecular level, it is possible to forma minute layer with strong barrier properties despite its thinness. DNP creates a variety of
products by continuously performing chemical vapor deposition on flexible plastic film.

◉ Transparent gas barrier film

Watermolecules

Inorganic oxides (silica or alumina)
Plastic film (polyethylene terephthalate (PET), nylon, etc.)

PRODUCTS & SERVICES

Barrier films
DNP
AnnualReport2017

Barrier films are used to package goods such as foods and medical supplies in order to prevent oxidation or drying,
and to keep out moisture. Unlike aluminum foil and aluminum-based vapor deposition films, DNP’s transparent vapor
deposition film (IB* film) can be used in a microwave oven and is amenable to detection of metallic impurities. Also, IB
film is an environmentally conscious product whose production consumes less energy than that of aluminum foil.
* Innovative Barrier

112

Oxygenmolecules

Postprocessing

Starting with bookbinding and processing of paper products and moving on to film packaging,plastic forming and aseptic bottle filling systems, DNP has developed one post-printing
processing technology after another.
We have also acquired advanced technologies through testing, measuring, and analyzing avariety of products.

6 Message toShareholders
14 Special Feature
30 DNP in Brief

Aseptic Filling

40 Segment
Information

TECHNOLOGIESDNP has developed aseptic systems for filling sterilized packaging materials with food or beverages in a sterile environment, thereby contributing to
improving food safety and decreasing the burden placed by packaging materials on the environment. In addition to food preservation and sterilization
technologies, we make use of a wide variety of technologies in the development of these systems, including filling machinery design, control, sensing
technologies, and packaging materials design technologies.
PRODUCTS & SERVICES

2 Synopsis of
Performance◉ Aseptic filling system for PET (polyethylene terephthalate) bottles

Aseptic filling systems

54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

DNP’s aseptic filling systems can be adapted for various packaging formats and fillingvolumes and can be used for high-quality filling. One aseptic filling system for pastasauce, noodle broth or other liquid foods can be used to fill any amount from 10 to
1,000ml; in other words, it can manufacture anything from a single-portion package to
a commercial use product. Furthermore, DNP’s system allows the supply of productsthat were difficult to process by conventional retort methods because those methods
required heating for longer time periods, which tended to break down the contents.
Because DNP’s aseptic PET plastic bottle filling systems enable filling at room
temperature, unlike conventional systems that required filling at high temperatures, it
is possible to use lighter, thinner bottles that are good for reducing the burden placedon the environment.

Assessment and Analysis Technologies
TECHNOLOGIESAssessment and analysis technologies are indispensable to strengthening and developing manufacturing in today’s changing market environment. In
our product development, DNP combines the latest analysis and measuring equipment and theories, identifies materials that can form product value,and explicates the mechanisms by which those materials express their functionality. We bring visualizing and sensing technologies into each factory
and analyze its production processes in order to stabilize quality and boost productivity. We endeavor to improve working environments so as to add
further protection to workers and solve all types of problems that arise on the factory floor.
PRODUCTS & SERVICES

Analyzing breaking strength based on drop test of packaging cup
The market wants packaging cups made of thinner resin in order to minimize weight and cost,
but without sacrificing strength. In conventional strength testing, cups are actually dropped andtheir strength is evaluated based on observation of broken cups, but by this method it is difficult todetermine the specific point at which breakage was triggered. Therefore, we began using a highspeed camera to enable detailed analysis of breakdown behavior. By capturing the breaking point,
we were able to select the most suitable resin and design optimal manufacturing processes.

Breaking point

Machinery and Equipment Design Technologies
TECHNOLOGIES

Some of DNP’s equipment requires a high level of precision and quality that existing equipment manufacturers cannot provide. In addition to making
use of mechatronics, for the past 20 years DNP has been using structural analysis technologies in its design processes rather than relying exclusively
on the experience and intuition of veteran designers. Moreover, we continually work to make our equipment more reliable based on vibration analysis
and equipment maintenance information generated in-house.
PRODUCTS & SERVICES

Printer frame deformation analyzer
Because the printers that make books, packaging materials and other products have precisionprocessed cylindrical plates that rotate with a high degree of precision, they must be assembled to ahighly accurate margin of error of less than 50μm. Also, because the paper or other print stock thatgets pushed onto the plate can weigh more than 500kg, it is important that the machine be designed
to prevent deformation of its frame and reduce resulting effects on printed matter. DNP uses a
scaled-down model for experimentation as well as strength and vibration analysis in order to predict
characteristic number of vibrations and amount of frame deformation.

Graphic illustration showing where a machinery frame
will be subject to stress

113

Glossary
1. DNP-related Terms■ DNP Group Vision 2015

The DNP Group’s basic management
policies. A revised version of the “DNP
Group Vision for the 21st Century” thatwas drawn up in 2001, DNP Group
Vision 2015 was officially adopted in
October 2015. The vision is comprisedof three main elements, the first ofwhich is central: Corporate Philosophy,
Business Vision, and Guiding
Principles.

■ Corporate Philosophy

The DNP Group connects individuals
and society, and provides new value.

■ Business Vision

Use P&I innovations to expand
business, primarily around four growthareas.
● “P&I innovations” means thecreation of new value—somethingthat did not exist before—in theform of innovative concepts,
products, or services, etc. madeby combining DNP’s strengths (inprinting (P) and information (I), in
technology, sales, project planning,etc.) with the strengths of our many
partners.
● The four growth areas are
Knowledge and Communication,
Food and Healthcare, Lifestyleand Mobility, and Environment andEnergy. Of the social issues that
DNP analyzed, we designated as
growth areas those areas where
we can likely solve problems byapplying new value generated
through P&I innovations, and where
we can increase DNP’s corporate
value and contribute to society bysolving those problems.

■

DNP
AnnualReport2017

114

Guiding Principles:
Taiwa (dialogue) and cooperation● Each and every DNP employee
should become a professional in his
or her field and generate innovative
products and services as a resultof actively engaging in “taiwa andcooperation” within and outside of
DNP.

■ The DNP Group Code of Conduct

A set of codes underlying all types ofactivities aimed at achieving our Group
Vision. All DNP employees must obey
these codes.
・Contributing to the development ofsociety・Social contribution as a good
corporate citizen
・Compliance with the laws and social
ethics・Respect for human dignity anddiversity
・Environmental conservation and therealization of a sustainable society
・Realization of a “universal society”
・Ensuring the safety and quality of our
products and services
・Ensuring information security
・Proper disclosure of information
・Realization of a safe and vibrantworkplace

2. Information Communication■ Augmented reality (AR)A technology for displaying text,
images, or other virtual information
superimposed on or otherwise
integrated into the scene or objects
found in a person’s actual physicalenvironment, enabling the expressionof an enhanced or augmented
experience of reality. For example,
when someone uses a webcam
or mobile phone-mounted camera
to photograph an actual scene
together with an identifying symbol
or image, the photograph will appear
as a synthesis, with a 3D computergenerated image or other preregistered information integrated into
the surrounding environment.

A picture book using augmented reality(with a 3D illustration of a fish)■ Big data

A general term for massive amountsof data of various types. Big data
is attracting attention for providing
indicators that are affecting how
companies do business. For example,
companies may refer to information
service usage trends or productpurchasing histories when predicting
consumers’ preferences or buying
patterns.

■

Business Process Outsourcing(BPO)
Commissioning of some or all of theprocesses that make up a business’s
various activities to be performedby an outside company that has
specialized expertise, an advanced
information security environment, andoperational infrastructure. A special
feature of DNP’s BPO business is its
comprehensive nature. Rather thansimply performing secretarial functions,
we start from scratch and design
optimal business processes, prepare
an operational framework, build systems
and/or operate them according to eachbusiness’s characteristics and needs.

■ Card-linked offers (CLOs)

CLOs use knowledge of individual
credit card holder’s personal attributes
and purchasing history to selectcard holders who are likely to buy aparticular product. Information about
relevant special offers is distributed
directly by smartphone or email,etc., directing customer traffic toparticipating merchants and promoting
use of the credit card.

■ Digital signage

An information medium that usuallyuses large, ﬂat-panel displays linked
to an information network in orderto deliver advertisements or otherinformation tailored to a particulartime and place. It is installed in stores,
public institutions, train stations,airports and other public spaces, andmay have a variety of built-in functions.
For example, it may enable consumers
to obtain specific information by using
a touch panel or mobile terminal, etc.

2 Synopsis of
Performance■ Electronic library

A service that lends electronic books
to libraries and provides the content toreaders via the Internet after the publisher
or other rights holder has authorized
distribution. The system is expected toprovide new opportunities for making useof published content. Many Japaneselibraries are already participating.

■ Hybrid bookstore network “honto”

A service offered by DNP that sells
both paper and electronic books
by integrating DNP’s e-book sales
service, online mail-order bookstore,
and physical bookstores operatedby MaruzenJunkudo, Bunkyodo, andsome stores of Keirindo-syoten. The
service provides such features as a“recommend function” that suggests
books a customer might like based on
previous purchasing history, a “point
service” program that allows customers
to combine loyalty points regardlessof which formats they use, and an“electronic bookshelf function” that candisplay a single list of all of a customer’s
paper and electronic book purchases
together. Full-fledged operation of“honto” began in June 2012.

■ International brand prepaid cards

An electronic settlement method thatallows customers who do not have acredit card to use settlement terminals
that belong to international credit card
brands like Visa or Mastercard. The
prepaid cards can generally be used bycustomers of any age, at businesses
that accept major credit cards. Because
they are prepaid, there are no worries
about overspending. DNP is alsooffering international brand debit cards,
whereby payments are immediately
deducted from the customer’s bankaccount, as part of its focus onelectronic settlement services involving
international credit card brands.

■ Lippmann hologram

A type of hologram, which is a threedimensional image recorded using a
split laser beam. Lippmann holograms
are excellent for expressing verticaland horizontal three dimensionality anda sense of depth. They are extremely
hard to counterfeit because theirproduction requires special equipment.
These holograms have garneredpraise around the world for providing ahigh level of security and potential foroutstanding designs.

existing font and development of new
fonts. We created a digital version in
the 1970s and have been licensing its
use since 2001.

6 Message toShareholders
14 Special Feature
30 DNP in Brief
40 Segment
Information
54 How DNP Works to
Achieve Sustainable
Development
72 Financial Section
108 Appendix

3. Lifestyle and Industrial Supplies■ Biomass material“Biomass” may refer to the total quantityof organisms living in a particular area, or
it may mean organic resources derived
from living things other than petroleum orother fossil resources. Biomass material
is made from resources of biologicalorigin, such as vegetable resins or natural
fibers. Biomass material has attracted
attention as a material that puts relatively
little strain on the environment due to theidea that CO2 absorbed by plants during
their growing process cancels out theCO2 emitted when the material is burned.
Since biomass material is a renewable
resource, supplies are expected to bestable.

■ Electron Beam (EB) technologies

Maruzen’s main bookstore inTokyo’s Marunouchi district■ Information Processing Services (IPS)

DNP’s own term for our uniquely broadmenu of services including inputting
and safely transmitting massive
amounts of personal information andother data, editing and processing,
printing, producing, mailing and/ortransmitting invoices, statements, andother forms of personalized mail—all inenvironments protected by advanced
information security systems.

■ Shueitai

EB technologies use electron beam
exposure to instantly provide advanced
functionality to resins and coating
films. Depending on the type of resin
and EB exposure conditions, somematerials may take on extra functionality
not exhibited by normal resins. The
technology is environmentally conscious
since production processes do not
require the use of solvents, andconsume less energy and generate less
CO2 than conventional coating methods.

DNP’s original font, which we havebeen developing since the Meiji Era
that began in the late 1860s. The sleek
and graceful font elicits high praisefrom book publishers and readers forbeing beautiful as well as easy to read.
From 2005 to 2012 we carried out amajor project involving renewal of our

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■ Photovoltaic module components■ Regenerative medicine

A therapeutic method using artificiallycultivated cells or tissues to restore or
recover the function of tissue or organs
lost through disease or accident.

■ Universal design (UD)The term “universal design” is said tohave been coined by North Carolina
State University professor Ronald
Mace, who defined it as “the designof products and environments to beusable by all people, to the greatest
extent possible.” Unlike the term
“barrier-free,” which refers to removing
obstacles for people with physicaldisabilities, UD proposes that products,
services, all types of facilities and living
environments should be designed
so that most people can enjoy themnot only whether or not they havea disability, but also regardless ofdifferences in age, gender, nationality
or personal abilities.

Array
An arrangement ofmultiple modules■ Lead frame

A metal component inside asemiconductor package that supports
the semiconductor chip or chips andtransmits electric signals.

Structure of an array of photovoltaic cells (solar cells)
Encapsulants
Sunlight

Surface glass

Wiring, etc.

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MEMS (Micro Electro Mechanical
System)An electronic device that integrates
components like IC chips, sensors
and electronic circuits into a threedimensional structure mounted on abase, which is usually a silicon wafer.

■ OLED display

Metal frame, etc.

A sheet of material that seals thecell and protects it from theelements, i.e. rain, wind, snow,
and temperature changes

Cell
Back sheet
Weatherproof film that protects the back of thephotovoltaic module from the roof or othersurface that it rests on

A component of a touchscreen displaythat receives, in the form of a signal,
the location where a user’s finger
has touched a display. Touchscreensallow intuitive operation of devices
like smartphones, tablets, and digital
signage, making it possible to enlargeor shrink images, to turn pages or
select information, etc. by touching
the screen with one or more fingers.
In order to supply touch panel
manufacturers with sensors, DNP
uses its patterning technologies togive sensory function to glass or film
by forming a minute electrode patternalong its length and breadth.

4. Electronics■

ModuleA unit that is packaged in special
material to maintain the photovoltaic
cells’ electrical efficiency and to allow
them to withstand harshenvironmental conditions■ Touch panel sensor

front surface of display (direction in which light moves)

Structure of an array of photovoltaic cells (solar cells)
Photovoltaic cell
The smallest unit that functions as aphotovoltaic battery; in crystalline
photovoltaic modules, a cell consistsof a silicon wafer

plastic or other flexible materials thatcan withstand bending and curling,
OLED displays are attracting attention
as a next-generation alternative to
LCDs.

Organic electroluminescence is aphenomenon that occurs when avoltage is applied to certain organic
compounds, whereby the compoundemits light while producing almost
no heat. An organic light-emitting
diode (OLED) is a product that takes
advantage of this phenomenon. Unlike
liquid crystal displays (LCDs), OLED
displays do not require a backlightbecause they use self-luminescent
OLEDs. This means they can bethinner, lighter and consume lesselectric power. Since they also offer the
possibility of using substrates made ofcover glass
touch panel
polarizer
glass (CF) side
glass (TFT) sidepolarizer

light guide plate

Example of a touch panel
combined with a liquid crystal display panel

liquid crystal display panel

Back sheets are weatherproof films
that protect photovoltaic modules
from external elements. They
prevent precipitation from entering
modules, making it possible to usethem outdoors for a long periodof time. Back sheets must be very
durable and moisture proof, andhave good electrical insulating
properties.
● Encapsulants are protective sheets
used to secure photovoltaic cells
and their peripheral wiring in place,and to form photovoltaic modules.
An encapsulant forms a strong
bond between a module’s backsheet and its front glass.
● Bus line sheet is a sheet configured
with electrode circuit patterns usedin photovoltaic cells. DNP’s bus
line sheet configures electrodes
by attaching them to the back ofa (back-contact) photovoltaic cell.
Since electrodes positioned at
the back of the cell do not block
sunlight exposure, “shadow loss”
is reduced and power generation
efficiency is increased.
●Sources of Information about DNPWeb Site (English: http://www.dnp.co.jp/eng/)
Our web site introduces our operations in a format that is easy to understand. In addition
to disclosing information at appropriate times and in appropriate ways, we are continuously
improving the site. The following publications and reports are also available as PDF files thatcan be downloaded from the web site.

Publications■ Annual Report (Japanese and English versions)
Each year around the end of July, we release Japanese and English versions. This
comprehensive report contains various types of information, including reports aboutbusiness activities based on our Group Vision, financial information and non-financial
information, all pertaining to a particular fiscal year.

グラフィックエレメント A（ヨコ）■ Data Book

(Bilingual: Japanese/English; available only as PDF file for download from web site)

DNP English Web Site
(http://www.dnp.co.jp/eng/)

株主通信

DNP Report Vol.90（証券コード：7912 ）第123期 決算のご報告
平成28年4月1日〜平成29年3月31日

Issued near the end of July every year, the Data Book contains values from financial
statements of the past 10 years, and financial analysis values in the form of tables andgraphs, etc. Financial statement values are taken from securities reports.
■ “DNP Report” Report to Shareholders (in Japanese)
This report is delivered quarterly to shareholders. Aimed mainly at individual investors, its
contents include summaries of financial results, special features about business activities,
and introductions to various technologies.

ペットボトル用無菌充填システム“DNP Report” to shareholders■ DNP Group CSR Report (in Japanese)(English version; available only as PDF file for download from web site)

We report about DNP’s role in society from the standpoint of its business activities andrelevant processes. We release Japanese and English versions around July or August.
■ DNP Group Environmental Report(Japanese and English versions; available only as PDF files for download from web site)

This report explores in detail the environmental management activities that are among
DNP’s CSR initiatives. We release Japanese and English versions around July or August.
■ DNP Corporate Profile (Corporate Brochure: Japanese and English versions)This publication introduces each segment’s products and services, operating locations inJapan and around the world, company history, a summary of our activities, and other basic
information about DNP.

DNP Group CSR Report

Reports■ “Yuho” Annual Securities Report, etc. (in Japanese)
In accordance with Article 24 of the Securities Exchange Law, DNP submits quarterly reports to the Finance Ministry in August,November, and February. In June, DNP submits a quarterly report combined with a “Yuho” annual securities report. These arebroad-ranging reports that include consolidated financial statements with auditing reports attached, non-consolidated financial
statements, performance reviews, information about shares and corporate directors, etc.
■ “Tanshin” Earnings Release (Japanese and English versions)
In accordance with Tokyo Stock Exchange rules, we prepare earnings releases for each quarter. In addition to consolidated financial
statements, we report on the status of sales, etc.
Note: Trademarks mentioned in this annual report in connection with DNP products or services are used or registered in Japan.

About the Cover Illustration
Our design reflects the corporate philosophy espoused in DNP Group Vision 2015: “The DNP Group connects individuals andsociety, and provides new value.” We illustrated how DNP uses P&I innovations to create unexpected new results, primarily inthe areas of Knowledge and Communication; Food and Healthcare; Lifestyle and Mobility; and Environment and Energy.

Design by groovisions
Design studio established in 1993. Primarily focused on graphics and video, groovisions works in a wide variety of media including music,
print, product and interior design, fashion and the Web. Main projects include stage visuals for PIZZICATO FIVE, editorial design for Metro Min.
magazine and other publications, motion graphics for EXPO 2005 AICHI JAPAN, Maison Hermès shop window direction, and ggg’s (Ginza
Graphic Gallery’s) 301st exhibition.

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