DNP
Annual Report
2002
Year ended March 31, 2002

E m e rg e n t E vo lu t i o nSociety undergoing emergent evolution
What is "emergent evolution," you say? It is a term widely used in the world of physics, biology, philosophy, sociology andinformation science. In all those fields, the common meaning of emergent evolution is "the appearance of entirely newproperties greater than the sum of individual elements that constitute the whole, resulting from the repeated interaction
between the individual elements and the unexpected properties of the whole generated by the interaction among individual
elements." The two words sum up DNP's new corporate philosophy for a new era.
We have begun taking steps into the 21st century, an age in which people's values and tastes have further diversified through the amazing
progress of information technology, such as the Internet, digital and next-generation media. We live in an information network society. Today,
we can anticipate people with different values getting together, accepting their differences and stimulating each other to create entirely newvalues. Such a new society in turn will stimulate people to create even more values. The repetition of this process will cause society andpeople to evolve and develop, in short, causing emergent evolution. Simply put, emergent evolution is the creation of new values throughmutual stimulation between people and people and people and society.
Emergent evolution is a positive concept with unknown potentials where 1 + 1 is greater than 2. The DNP of the 21st century aims to be acompany in a state of emergent evolution. We believe that our society from now on requires the company to undergo emergent evolution inorder for it to continue creating values for society. For a company to continue to undergo emergent evolution, the imagination of eachindividual in the company must be left to expand to the fullest, to bounce off of each other and to stimulate one another. For society to begin
its emergent evolution, DNP can offer a diversified range of products, services and business models. By creating such a society ourselves, we
can continue to keep growing as a unique company indispensable in the 21st century.

Fu s i o n

We have strengths like no other.
We have knowledge and technologies that no one else has. That, we believe, is where the key to all solutions lies. At DNP, we
provide P&I Solutions, a fusion of printing technology and information technology. Our solutions create new values for society,born of knowledge, technologies and strengths like no other, proven to solve issues faced by varied industries.
Today, the economic trend and business structures are drastically changing. Businesses are caught in a cutthroat survival game in which theymust respond promptly and precisely to the diversified needs of consumers with different tastes and values. For companies today, it isInformation Technology

imperative that they focus their management resources in the field of their core competencies. At DNP, we have invaluable management
resources not found in other companies: printing technology that has changed and enriched people's lives through our 125-year history of
printing expansion, and information technology essential for contributing to the emergent evolution of the 21st century. We call them P&I
Solutions.
P&I Solutions

The fusion of our printing technology and information technology has resulted in our information processing technology, which was realized
about 30 years ago in the form of computer typesetting. Since then, DNP has accumulated a wealth of knowledge and experience throughthe digitization of numerous processes and application of the digitized processes. As information technology began changing the world at anaccelerated pace in the 1980's, we experimented with new media and launched Internet businesses, developing our own businesses
centered on printing technology. By using our technology and know-how cultivated through such experiences as our management resources,
we are building our unique strengths. DNP is now evolving from an info-communications company to the P&I Solutions Provider, DNP. We will

DNP

lead this age of rapid changes as we move forward armed with our unique knowledge and technologies.

125-year Tradition

New Technology

Printing TechnologyVe r s a t i l i t y

A Company that creates values from diversity, instead ofshunning changes.
In the past, the most pressing demand of the consumer world was for the manufacturer to provide the client with exactly what
they wanted, and in large volumes. In such a time, we helped generate numerous new services as we earned a solid reputation

e-Business
Development

for our superior quality and productivity. In today's changing times, however, we cannot survive as a company in a competitive
e-Commerce
Business

Media Security

market if we simply continue with our conventional ways of producing and selling our products. The responsibility society
demands of us is to be a true partner for our clients in guiding them to success, and to further expand our fields of business.

Electronic Form
Solutions

Until now, our business was mainly to provide products that meet the individual needs of our corporate clients. You could say that it was anactivity to keep our production facilities busy. Likewise, our proposals of new business projects for our clients were for securing producte-Business
Operations

orders. Today, however, as the market matures, competition has grown fierce with the pressure to provide the best quality, cost and delivery
Digital Content
Business

Smart Card Security

time. At the same time, the lifecycle of products has shortened so significantly that it has become increasingly difficult to generate profits
simply by providing products. To be a winner in today's new business world, we will concentrate on our strengths and specialties and build
strong partnerships with other companies to become a versatile company that promptly responds to changing times and to changes in themarket place. As our client's essential partner, DNP plans to combine products and services in various forms to meet the detailed needs ofour client and to provide the best possible solutions. For example, the flow of business at a company begins with a market survey andProduction andLogistics Solutions

DNP Total Solutions

Web Solutions

product planning, followed by procurement, manufacturing, delivery and sales, as well as customer support, payment collections and accountsettlement. Parts of the process for which we can provide efficient solutions using DNP’s strengths can be outsourced to us in its entirety.
What’s profitable for our clients, we believe, is also profitable for DNP.

Training Solutions
DNP CRM Solutions

Intellectual Property
Support Solutions

DNP Marketing
SolutionsPublic Relations
Solutions
Sales Promotion
Solutions
Business Support
SolutionsImagineBeginning with the vivid imagination of the individual.
In the 21st century, businesses will expand faster and be more competitive by focusing their management resources on theareas of their expertise and by building an alliance with companies with their own strengths. Having strengths with which to

GROWTH

attract potential allies can accelerate a company’s business expansion. This is why it is all the more important today to produce
original business models beyond the conventional business style. What we need is the vivid imagination of the individual to
upset old conventions.
At DNP, we offer Business Design Solutions: solutions for consumers and corporate clients using a variety of new-value-creating businessmodels designed and operated by DNP. To put together Business Design Solutions, we have the knowledge and technologies that have
solved the issues of a wide range of clients. To promote the Solutions, we must not simply sell existing products but create new values withwhich we can secure our “unique sources of income.”
Unique sources of income are entirely different from our conventional sources of income, which were through the sale of products. They arelicensing fees, transaction revenues and other sources of income stemming from our creativity. With the smart card business for examples,
until now, the conventional thinking was that to gain a competitive edge in this business, we had to work on our card-manufacturing ability
and the card’s physical functions such as durability and superior design. In today’s way of thinking, however, it does not matter who manufactures the smart cards as long as we develop the smart cards’ operation system and applications. Our advantage will be that we will haveguaranteed income through royalties and licensing fees. In the future, this thinking can extend to websites through which application software
for smart cards can be uploaded or downloaded. We intend to operate such support sites on the Internet and charge fees for services andtransactions. As such, every one of us at DNP is encouraged to freely expand our imagination in our areas of expertise to transform ideas intoa strategic business model, and to a specific operation model.

TimeE xe r tion

Brave actions of the individual create values for the new society.
Where are Japanese businesses headed today? The severity of the Japanese economy is increasing with stagnant capital
investment and consumer spending, decreasing corporate profits and an increasing unemployment rate. To secure our No. 1
place in the industry, we make sure we take aggressive actions while also calmly assessing the market. When the market
Valuedemands goods and services, we provide them in a new form but at the right price. We aim to establish a new standard for acustomer-first policy.
To develop and grow in a healthy manner in a society undergoing emergent evolution, each one of us at DNP will maintain a keen awarenessof being a member of such an evolving society. To contribute to society, we will create values that clients and consumers truly seek. If theSocietyvalues we create are truly helpful to clients and consumers, they will contribute further to our corporate growth. That is why we put our efforts
into getting an accurate and quick understanding of what the market wants. Only by watching and listening in the actual fields, can we begin
to understand what that demand is. After understanding the market demand, we also stress the importance for each one of us at DNP tocollaborate with a high awareness of being an independent, responsible professional. This is because respecting and accepting each other’sTimeideas created in an open environment builds a strong bond and trust among the individuals.
When a society is undergoing emergent evolution, everything goes through rapid changes. Anything may happen. At DNP, we have the ability
to plan, operate, manufacture, research and develop to handle any changes. It is an ability we have been cultivating throughout our long
history. We are a company with unrelenting endurance that has beaten the odds, and has a persevering spirit that welcomes challenges. As aleading company in a state of emergent evolution, DNP will continue to create new, unconventional values as each one of us sets a goal andtakes action with strong determination and responsibility.

Technology

Shueisha, the predecessor of today’s Dai Nippon Printing Co., Ltd.
(DNP), was founded in 1876 as Japan’s first full-scale printing
company. Celebrating its 125th year of being in business last
October, the Company got its start in publication printing but has
since diversified its operations to include commercial printing,business forms, packaging, decorative materials, electronics andinformation media supplies. Today, the DNP Group of companies has
approximately 35,000 employees and is the world’s largest corporategroup with comprehensive printing operations. In Japan, the DNPGroup maintains 17 division offices, 52 sales offices and 33 plants inmajor cities, as well as 16 sales offices and eight plants overseas.
Amid growing demand for information, the DNP Group, backed by its
position of leadership in Japan’s information industry, is continuing to
expand its businesses by exploring new technological and marketing
possibilities in the world of printing.

C o n t e n t s
Financial Highlights

21

DNP’s Printing Segment at a Glance22

Hot Off the Press

26

Message to Our Shareholders

28

Developments and Activities in this Fiscal Year
Information Media

35

Lifestyle Products

47Electronic Components & Information Media Supplies

51

Board of Directors

58

Financial Section

59

Management’s Discussion and Analysis

60

Environmental Accounting

72

Selected Financial Data (unaudited)74

Consolidated Financial Statements

76

Notes to Consolidated Financial Statements

81

Report of Independent Certified Public Accountants

94

DNP’s Business Flow95

Major Subsidiaries and Affiliates

96

Investor Information

98

Financial Highlights
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002 and 2001

Dollars inthousands except
per share amounts

Yen in millions except per share amounts

2002

2001

% change

2002

2002/2001

21

FOR THE YEAR¥

1,311,934

1,342,035$

9,864,165-2.2 %

Operating income

72,242

85,941

543,173-15.9

Income before income taxes

26,15069,116

196,617-62.2

Net income

15,60933,409117,361-53.3

Financial Highlights

Net sales

Per share data:
Net income
Primary

¥

20.55

¥

43.99

$

0.15

-53.3 %

Fully diluted

20.53

43.45

0.15

-52.8

Cash dividends

18.00

18.00

0.14

0.0

AT YEAR-END
Total stockholders’ equity
Total assets¥

946,998¥

1,432,458

939,441
1,489,871$

7,120,286

0.8 %

10,770,361

-3.9

Note:
U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥133=U.S.$1, the approximate Tokyo foreign exchange market rate as of March 31, 2002.

Net Sales

Operating Income

Net Income(¥ Billion)(¥ Billion)(¥ Billion)

1,400

1,200

120

60

100

50

80

40

60

30

40

20

20

10

1,000

600

400

200

0

0

98

99

00

01

02

0

98

99

00

01

02

98

99

00

01

02

DNP Annual Report 2002

800

DNP’s Printing Segment
at a Glance
DNP’s consolidated segments consist of Printing Segment and Beverage Segment. Printing Segment, which
accounted for 94.4% of consolidated net sales this fiscal year, is further subdivided into three non-consolidated
divisions: Information Media, Lifestyle Products, and Electronic Components and Information Media Supplies.

22

600

Sales of Business Forms were strong as financial institutions began issuing more smart
cards, which led to substantial growth in smart card sales. Likewise, IPS products, such as

500

personalized mail, saw double-digit growth as financial institutions, in a rush of mergers, sentout notices to their customers.
On the other hand, sales of books and publications decreased due to the harsh businessenvironment in which the publishing market experienced negative growth for the fifth

Sales*:

614.2 billion yen

Change*:(-3.4%)

Books andMagazines

Commercial
Printing

Books, magazines,
dictionaries, textbooks,
graphic collections,commemorative books
and other publications

Catalogs, leaflets,
pamphlets, posters,
calendars, point-ofpurchase (POP) goods,
promotional publications
for events and related
services

400

Business Forms
Continuous preprinted
forms for PC output,
transfer slips for parcel
delivery and othercompanies, direct mail,stocks, bonds, gift
certificates, bank notes,
various kind of tickets,bank accountpassbooks, plastic
cards, smart cards,
hologram products andinformation processing
services (IPS)

300

200

consecutive year. Since October, however, the drop in sales seems to have bottomed out assales of magazines have slightly increased.

100

Commercial printing also declined in sales as the nation spent 0.9% less than the previous
0

year on advertising.

98

99

00

01

02

Lifestyle Products Division

Packaging
Printed packages forconfectioneries, foods,
beverages, toiletries andpharmaceuticals, andfunctional films andmaterials for industrial
use

600

The result of DNP’s efforts to develop and promote environmentally friendly packaging
products was increased sales of refill containers for plastic containers and bottles. Soft500

packaging for food and snack products grew despite slow consumer spending and theeffects of deflation. Overall sales, however, decreased from the previous year as sales ofgeneral paper and plastic containers declined.
Meanwhile, despite strong exports to the United States, sales of decorative materials

Sales*:

296.1 billion yen

Change*:(-3.8%)

24
DNP’s Printing Segment at a Glance

DNP’s Printing Segment at a Glance

Information Media Division400

Decorative
Materials
Functional films andinterior and exterior
decorative materials forhomes, stores, offices,automobiles, electric
appliances and furniture

300

200

also decreased overall due to a decline in housing starts in Japan.

1000Electronic Components & Information Media
Supplies Division

98

99

00

01

02

600

500

Sales of electronic components decreased overall due to a slump in the sales of personal
computers and recession in the semiconductor industry putting a damper on the electronic

211.5 billion yen

Change*:(-3.3%)

component market. Sales of shadowmasks and lead frames decreased substantially.
However, along with strong sales of photomasks and projection screens, sales of color filters

400

300

200

also increased significantly due to DNP’s newly established OEM system in Taiwan meeting
the rapidly growing demands.

100

Information media supplies, such as lithium-ion rechargeable batteries, showed doubledigit growth. Overall sales, however, decreased due to shrinking ink-ribbon sales caused by0

a declining demand for printers.
*non-consolidated figures

98

99

00

01

02

Information Media
Supplies

Shadowmasks, color
filters for LCDs, rearprojection televisionscreens, plasma display
panels, photomasks,
lead frames and related
products

Sublimation transfer
materials for color
printers and ribbons forplain-paper facsimile
machines, barcode
printers and otherproducts, andelectrodes for lithium-ion
rechargeable batteries

DNP Annual Report 2002

DNP Annual Report 2002

Sales*:

Electronic
Components

Sales by Division*

18.9%

26.4%

54.7%

* Non-consolidated figures

Hot Off the Press
Here is a look at some of DNP’s products and services introduced in the media this year. From services that help bringclassic works of art closer to people to products that revolutionize the way business is conducted, DNP’s wide-ranging
operations that spun out of printing continue to help enrich people's lives by also contributing to preserve the environment.

26

27
Hot Off the Press

Hot Off the Press
Announced the development of Ecofit Smart Card i-Type,a smart card produced with injection molding, realizing
small-lot production, expedient deliveries, environmental
friendliness and enhanced heat resistance. (see page 38)

The IC portion of the card, or UIM, can be removed andinserted into any FOMA terminal, so that the new terminal
becomes available for immediate use by the subscriber.
(see page 38)

Secure Image, a holographic label used to verify authenticity. The label applies Lippman holographic technology, inwhich production procedures and visual effects differ fromthe widely used embossed holograms. (see page 50)

Developed an information distribution system by applying
contactless IC tags to mobile phones. Users, for example,
can reserve trips and concert seats by holding up theirmobile phones to displays. (see page 50)

Began a full-scale research on product packaging with IC
tags extending to all sorts of product packaging. (seepage 50)

DNP aunnoced that it will launch Dplats, a digital content
distribution platform business. (see page 41)

Developed the low-cost Light Edition of the customer loyalty card management system for smaller businesses byselecting minimum requirement functions for CRM.
(see page 44)

EX-Pad, a versatile platform designed to support many
aspects of education, including general education, continuing education, vocational training and certification, andhuman resources training. (see page 44)

D.T. Circuit Technology, a joint venture between DNP and
Toshiba, developed a collaborated multiplayer B 2it (C-m-B)
printed circuit board. (see page 52)

In California, DNP established a new production base forprojection screens, which enjoy strong sales mainly in North
America. (see page 55)

The new plant under construction will have the capacity to
produce 65-inch plates, responding to growing demands
for larger PTV screens, and the annual production capacity
will reach 700,000 units for 42-inch plates. (see page 55)

DNP launched a licensing business called Artist Touch,developing digital design by extracting portion of worldrenowned paintings. (see page 46)

DNP Archives.com announced that it will add images ofChinese calligraphic works, paintings, artworks and excavations to DNP Archives.com. (see page 46)

DNP Archives.com launched TNM Image Archives thatprovides licensing and rental services of image data fromthe Tokyo National Museum. (see page 46)

Announced plans to begin selling an electromagnetic wave
shielding film for plasma display panels (PDP).
The film greatly enhances electromagnetic wave shielding
capacity and light permeability. (see page 57)

DNP and Asahi Glass Co., Ltd. announced to establish a
JV to produce and market back plates for plasma display
panels (PDP). (see page 57)

Created an efficient, multi-color display, called organic EL
displays, for low-priced, extremely thin mobile devices suchas PDAs, electronic books and luminous POP/posters.
(see page 57)©Cultural Relics Data Center of China

DNP Annual Report 2002

DNP Annual Report 2002

Became the first company to acquire certification for asmart ATM card application from the IC Cashcard TypeApproval Council (ICTAC). (see page 38)

28
Message to Shareholders

Message to
Our Shareholders

DNP’s Reform Concept: Emergent Evolution
Today, amid all the substantial changes sweeping over Japanese society, a new kind of
evolution is taking place.
It is an evolution with a 21st century twist. The changes we are going through are theincredulous rapid advances in information technology, the serious drop in consumer
spending, capital investment and corporate earnings. There are uncertainties lurking in thenation’s financial system and in the employment situation. People are beginning to realizethat Japan’s economy has remained in a recession far longer than anyone can remember.
As the nation began to question the traditional, standardized ways of conducting
business, people started exploring a diversity of values. The changes today are shaping up
to be qualitative changes in response to new values embraced by people, and to new
systems adopted by society. At DNP, we believe that our society is undergoing an “emergent
evolution” in the 21st century.
Emergent evolution is a term used in natural science to mean “the appearance of entirely
new properties greater than the sum of individual elements that constitute the whole,
DNP Annual Report 2002

resulting from the repeated interaction between the individual elements and the unexpected
properties of the whole generated by the interaction among individual elements.”
To be fit to survive the drastically changing times, we see emergent evolution as the key
words for our reform. Our aim is to evolve DNP into a solutions provider by integrating ourprinting technology and information technology. To do so, we have established our 21stCentury Vision that involves building new business models.

Yo s h i t o s h i K i t a j i m a
Chairman of the Board
President and Chief Executive Officer

Message to Shareholders

21st Century Vision – P&I Solutions DNP
P&I Solutions DNP. These are the words that capture our plan to increase DNP’s longterm corporate value in the 21st century. It is a plan to use our time-tested strengths as we
respond to the changing times, under the concept of emergent evolution. With “P” for printing
technology, which is our core competency, and “I” for information technology, P&I Solutions
represent DNP’s determination to integrate the two technologies to provide new solutions that
only DNP can offer. We plan to become a creative source of value.
During DNP’s long history spanning 125 years, we have expanded our paper-printing
operation into a multi-operation involving a variety of fields in which our printing technology isapplied, including packaging and decorative materials that have become a part of people’s
lives and electronic products such as semiconductors and displays that require cutting-edge
micro-processing technology. In recent years in which electronic networking has made rapid
progress, we have aggressively expanded into new media such as the Internet, using our
experience and expertise of having been one of the first to employ information technology in
our operations. DNP has thus evolved into a printing company unlike any other in the world,having both printing and information technologies to significantly expand its field of printing
operations and develop a variety of businesses.
Today, we intend to help our customers solve a wide range of issues by providing
solutions that organically combine printing and information technologies. Our aim is to realize
the concept of our 21st century vision: P&I Solutions DNP.

margin and royalty income. By further advancing our world-leading printing technology and31

its applied technologies, we plan to expand the range of our Production Solutions.

Message to Shareholders

30

Our other business model is Business Design Solutions. We aim to solve issues facedby consumers and corporate clients by designing and operating a variety of business models
that in themselves create new values. We must seize the opportunity while society isundergoing emergent evolution. By creating new business systems, our possibilities will
increase. Instead of simply selling existing products, we will be able to explore the field for
new needs for our services and products.
For example, until now, we insisted on using our technology at our company to provide
products and services to our customers. With our business design solutions, however, we
provide the business model itself. It means that we can now consider an entirely new sourcesof income for DNP such as license fees and transaction fees as we provide solutions that areconvenient for customers and consumers.
Let us say that a publisher who has never engaged in the actual sales of goods decided
to join the e-commerce market, or that a beverage manufacturer wanted to launch a sales
campaign using a new method that utilizes mobile devices. DNP will provide solutions thatbring customers success by designing a business model – especially information distribution
system – that takes advantage of DNP’s technology and expertise in media production,system structuring and security all of which have built a solid reputation over the years. By
being a one-stop provider of back-end services such as system operations and fulfillment
not handled by ordinary system integraters, we, as our customer’s partner, support ourcustomer in realizing a new business model.

Building New Business Models
Under the vision of DNP as a P&I Solutions provider, we will promote the building of
two new business models.
One is our Production Solutions.
Companies that will come out winners in the new era are versatile companies that
respond quickly to the changing times and market situations by focusing on their strengths
and properties, while building a strong partnership with other companies. As our customers’
essential partner, we will respond to the detailed needs of our customers by providing DNP’sstrong products and services in an array of combinations. By doing so, we will effectively

turing of the cards themselves is the core of the business. We plan to aggressively develop
operation systems and applications, as well as customer-and-consumer-friendly services
and systems, to increase our income from royalties and transaction fees.

Results of this Fiscal Year
It is our aim to always increase corporate and shareholder values, establish a solid
business foundation and secure a long-term, steady growth.
This fiscal year, however, we regret not being able to present you results that meet yourexpectations. In Japan, which is our primary market, the economy continued to remain

The key is to be involved in our customer’s goods production from the very first step ofsluggish, with capital investment by the private sector and consumer spending being weakplanning, and to aggressively work on product development to enable our customer tolowering domestic demand. In addition, the slowdown of the U.S. economy and the effects

produce something it never could have before, without our support. Compared to ourof the terrorist attacks caused corporate earnings to significantly decline, deepening theprevious method of passively receiving orders, this method allows us to enjoy a higher profit

Japanese economy’s troubles. As a result, Japan’s real GDP growth rate for the fiscal year
ended March 2002 is estimated to be a negative growth of about 1.3%.

DNP Annual Report 2002

DNP Annual Report 2002

solve our customer’s goods production issues, and expand our sources of income.

In addition, even in the growing smart card business, we do not believe the manufac-

32

The business environment for the printing industry also remained harsh due to intense
In such a situation, we engaged in vigorous sales activities and proposed effective plans
to help increase our customers’ sales. The results, however, did not meet our expectations

Meanwhile, in our Lifestyle Product field, we worked to improve environmentally friendly
products and product functions. Our priority is to provide products that win the admiration of
consumers by being quick to grasp the needs of the public and utilizing DNP’s superior
technology and ability to develop products.

and we were forced to revise our projections downward at the end of the first half of thisIn the field of Decorative Materials, Pre Armor, the environmentally friendly decorative

fiscal year. We also put company-wide efforts into cutting down costs, such as significantly

sheet that we developed using zero volatile organic compounds, received good reviews as

reducing capital investment and cutting back on the number of staff, as well as formulatinga very effective solution for the “sick-house syndrome” seen in newly built condominiums

cost-cutting measures in our indirect operations and manufacturing operations.

in which tenants complain of eye irritation and headaches. In the field of Packaging

Such efforts paid off in our operating income, which exceeded our revised target,

Materials, we worked to develop filling systems founded on DNP’s advanced sterilization

although our final result showed decreases in both sales and net income. The cost-cutting

technology. In addition to developing DynAsept, an aseptic filling system for pouches to fillmeasures we implemented in the second half of the fiscal year yielded results exceeding thesoup and other liquids, we successfully expanded the sales of our aseptic filling system for

initial target, and our electronics division made a rapid recovery.

PET bottles to several beverage manufacturers and Coca-Cola bottlers. Three filling lines

As a result, our consolidated net sales this fiscal year decreased 2.2% from the previous
year to 1,311,934 million yen, and our operating income decreased 15.9% from the previous
year to 72,242 million yen.

33
Message to Shareholders

Message to Shareholders

competition caused by a declining printing demand and dropping order unit prices.

are scheduled to be sold the next fiscal year.
On the other hand, in the field of Electronic Components and Information Media
Supplies, demand rapidly dropped. To improve our performance, we retired a substantial
amount of our property, plant and equipment related to shadowmasks and lead frames
whose profitability deteriorated. In our attempt to increase our operation rate, we also

Measures Taken this Fiscal YearIn our Information Media field this fiscal year, armed with our strength in technology
development and our large market share, we strived to increase orders for smart cards,
whose demand is expected to grow significantly in the future.

secured a volume of the demand for shadowmasks for use in consumer TVs to offset thedrop in the demand for shadowmasks for use in computer displays.
Meanwhile, sales of photomasks, color filters and projection screens saw a double-digit
growth thanks to enhancement in all of their production capacities.

In particular, DNP displayed its superior position in developing basic operation systems

While the semiconductor market experienced a worldwide slump, DNP’s advanced

and application software, overwhelming competitors and becoming the world’s only card

technology in photomasks prompted an increase in the number of orders for cutting-edge,

manufacturer to own MULTOS and JAVA, two basic operation systems for multi-function

high-value-added products. Especially in the first half of the fiscal year, we received asmart cards. As a result, DNP gained a high reputation for its track record of developing

concentration of orders from overseas as our overseas competitors failed to keep up withapplication software.

our technology. As a result, DNP’s photomask operations generated a sales increase of 10%

For example, we became the first company in Japan to acquire certification from the IC

from the previous year, further securing its No.1 share in the world.

Cashcard Type Approval Council for DNP’s smart ATM cards, successfully winning a

As for color filters, we have licensed Taiwan’s Sintek Corporation to supply us monthly

dominant share of the smart ATM card market. We also have secured double-digit sales

with 500,000 OEM products, raising our supply capacity. This has increased our monthly

growth in our information processing service (IPS) operations in which we process andproduction capacity to 1.8 million units, including the domestically produced 1.3 million units.

output individual information as personalized mail, and by working to expand usage in theSales increased almost 50%.
In anticipation of the popularization of PDP (plasma display panels) in the near future, we

In the fields of electronic networks, we developed and began providing services tojoined forces with Asahi Glass to establish a joint venture called DAP Technology Co., Ltd.

convert information on paper-printed flyers into information that is distributed on the

We plan to supply back plates to meet the market demand when it is a fully blown market,

Internet. We also developed and provided services using Dplats, which provides functions

and are building a new plant slated to begin operating in the fall of 2002. Asahi Glass is a top

such as controlling copyrights, charging fees, authentication and data editing related to the

manufacturer of glass products used in materials for PDP. We believe combining its expertise

distribution of a variety of digital contents including music, video and entertainment.

with DNP’s manufacturing technology will greatly increase our competitiveness. Also

DNP Annual Report 2002

DNP Annual Report 2002

insurance and distribution industries, in addition to the communications industry.

34

promising as the flat display of the future is the organic EL display, currently under

Message to Shareholders

development. It was DNP that applied its printing technology to establish a method tomanufacture paper-like full-color organic EL displays. Sales of this display are expected to
grow in the future.
We therefore have a promising item at every phase of the product’s lifecycle. No matter
what shape the future of displays, we will maintain our position as a company that can always
supply the essential parts for the product.

Establishing DNP Brands to Create“Only DNP” values
To continue creating new values in the 21st century and generate value for all DNP
stakeholders, we believe that it is imperative to build business models to uncover new needs.
To do so, we also must establish DNP brands – with DNP’s technological strength, gained
over many years, at the core – in preparation for meeting the diversified needs of society.
We firmly believe that for DNP, whose printing technology and information technology arestrong at a world level, the new concept of a DNP as P&I Solutions provider is the most
reasonable choice that can be made. No matter how difficult the business environment, we
intend to put all our efforts into realizing this concept.
We are certain that the comprehensive strength already possessed by DNP is the mostimportant starting point for reaching this goal. We will be fit to survive in this society of ours
undergoing emergent evolution.

Yo s h i t o s h i K i t a j i m a
Chairman of the Board
President and Chief Executive Officer

DNP Annual Report 2002

Information Media

36
Information MediaA growing web of communications
surpasses media
DNP’s Information Media Division, which had previously focused primarily on printing materials, will relaunch itself as adivision to provide tailored solutions for all information communication needs. By utilizing its varied content andinformation infrastructure, DNP will develop its existing information media business into a production solutions businessthat combines a number of media production methods and related services using DNP’s information-processing or
manufacturing function, information distribution function, and information communication consulting function. In
addition, DNP will venture into a new field of business it calls business-design solutions. In this business, DNP will
increase profits by taking advantage of its networking and information-security expertise to create business structures
for customers involving information communications. In addition, by newly developing its own business model, DNP
aims to secure new sources of income such as licensing and transaction fees.

Smart Cards: Manufacturing cards is one of DNP’sproviding encryption functions such as key management, digitalstrengths. But we cannot call ourselves a smart-card

signature creation, hashing and encoding/decoding. Applying

vendor without developing operating systems,

encryption functions to the server-client architecture with security

applications and systems to make the use of these cards

measures incorporated into W indows 2000 is hailed as aeven more convenient.

promising countermeasure against cyber terrorism. By inserting

In September, DNP announced the acquisition of Bull KK,

the smart card into a PC connected reader/writer, users can gain

the former Japanese subsidiary of the European-based

access to digital certificates and private keys via the smart card

computer company, Bull SA, and the establishment of NexantiS,

logon function, further strengthening Windows 2000 network

a new company aiming to provide information technology

security. DNP plans to expand sales and provide various smart

solutions using security-related software and smart cards. DNP

card solutions to enterprises looking into employing PKI (publicbegan developing smart cards in 1981 and has since supplied

key infrastructure) solutions, for which demand is expected tosmart cards, as well as provided a variety of solutions using

increase due to Electronic Signature Laws.

DNP Annual Report 2002

smart cards. With trends such as e-commerce and third-

From July through August, DNP, NTT Communications

generation mobile phones, more and more smart card

Corporation, Hitachi, Ltd., Fujitsu Limited and MULTOS

applications will require software using smart cards in relation to

Promotion Association conducted demonstration tests using a

network security, or software embedded in smart cards. The goal

system they developed to download new applications via theof DNP in creating NexantiS is to have a software and services

Internet to already-issued smart cards. The experiment wasarm with strong connections to DNP smart card activities, and to

conducted on smart cards that used the operating system,

provide integrated solutions for customers while broadening

MULTOS. The newly developed system is unique in that the

DNP’s access to new markets.

issuer of the smart card and the provider of the application neednot be the same, allowing the separation of business, which

Developing applications and software for smart cards

facilitates the development of businesses using the smart card.

In June, DNP announced the development of MULTOS Card

In addition, using the Internet to add or delete applications from

Driver Software, which enables smart logon to enhance network

the smart card significantly increases convenience for users.

security. The Windows-operated MULTOS Card Driver Software

The companies aim to develop their system as the world

corresponds to the MULTOS multi-application smart cards,

standard for downloading MULTOS applications.

Manufacturing cards is one of DNP’s strengths. But we cannot call ourselves a smart-card vendor without developing operating
systems, applications and systems to make the use of these cards even more convenient. Through our smart-card technology,
we provide a lineup of features for credit, ATM and ID cards, as well as a help enhancement network and building security. And,of course, we did not forget to make these cards environmentally friendly.

38

environmental friendliness and enhanced heat resistance. Whilequantities, MULTOS smart cards that enable smart-card logon to

Network Businesses: Content and applications comethree or four vinyl chloride sheets are laminated and heat-

networks built using Microsoft Windows 2000 and XP. In such

together via a network to expand new business

Association specifications, and in February 2002, became the firstpressed in producing a conventional smart card, followed by

networks, to enable the use of file servers and network printers, apossibilities.

company to acquire certification from the IC Cashcard Typecutting dies, forming cavities and embedding chips, the newly

user must input the user name, password and domain name

In May, DNP and Tokyu Sports Oasis Inc. began operating a

Approval Council (ICTAC). The application was adopted by Fuji

developed card adopts an injection molding process in whichusing a keyboard. The new smart card, which DNP has enabled

lesson-reservation system using Inter net-enabled mobile

Bank, Dai-ichi Kangyo Bank, Fujigin Credit and Dai-ichi Kangin

melted resins are poured into a mold. The new production

to be issued fast and in large quantities, allows the user to log onphones, a first in the fitness-club industry. A patent is pending

Card who together are issuing the Mizuho IC Spark Card, Japan’s

method does not require the heat-pressing process, which

to a Microsoft W indows 2000 network based on a digitalfor this business model. By registering in the lesson-reservation

first smart card that combines credit and ATM card functions. By

allows the use of non-vinyl chloride materials such as ABS

certificate, simply by inserting the smart card into a smart card

system, members of Tokyu Sports Oasis can use their mobile

employing MULTOS, the smart ATM card application can beresins, realizing enhanced heat resistance. Furthermore, small

reader/writer connected to the PC, and typing in the smart card’s

phone and a password to access information on lesson

configured to include just ATM features, a combination of ATM

lot production and expedient time-to-market are made possible

PIN. After logging on, if the smart card is taken out of the smart

schedules at the fitness club, lesson reservations, changes inand online debit features, or a combination of ATM, online andsince the new smart cards are produced by simply printing thecard reader/writer, the screen lock is activated. As such, security

lesson instructors, and discount sales at the club’s shops.

offline debit features according to each financial institution’s need.

surface and embedding the chip on a prepared card substrate.

is enhanced for users and groups in the Active Directory. DNPLesson schedules no longer need to be confined to paper; theOther applications such as electronic ticket and point applications

DNP forecasts annual sales of 100 million yen in product sales,

projects sales of about 1 billion yen in the next three years fromlatest schedule can be sent in real time to the member’s mobile

can also be downloaded via the Internet. DNP has also developedand 3 billion yen in the solutions business.

the manufacture and issuing process of smart card logon cards.

phone screen. For the fitness club management, being able toanalyze the access log allows for the planning of more effective

secure application module (SAM) cards for sale to financial

In September, DNP, together with NTT DoCoMo, announced

institutions and ATM terminal manufacturers. Installed in smart-

the development of the FOMA Card, a universal identity module

card compatible ATM terminals, SAM cards are used to authen-(UIM) that supports FOMA, NTT DoCoMo’s third-generation

In September, DNP announced the development of an on-

In July, DNP, along with NTT and Sharp, began joint

ticate smart cards and ATM terminals.

mobile phone service. DNP is the only smart card vendor indemand smart card printing and issuing system. Allowing the

research to create a market for services on an optical network,

In October, DNP announced adding the world’s first Java

Japan to provide the FOMA Card. The credit-card-sized smart

printing of picture designs, photos and text onto the card

utilizing the ultra-high speed and broadband features of light. It

smart card supporting the Visa open platform to its smart card

card will be loaned to FOMA subscribers by NTT DoCoMo. The

surface, the system also integrates the network authenticationis pioneering joint research for companies who are leaders in

product lineup. Production of the card for Daiei OMC has alreadyIC portion of the card, or UIM, can be removed and inserted into

technology of digital certificates and private keys, generated by

the field of content, network and terminals, respectively. At

begun. The new Java smart card, approved by Visa International

any FOMA terminal, so that the new terminal becomes available

the certificate authority. The structure of the new system consists

periodically held events, the companies demonstrated actual

Service Association as part of its low-cost open platform cardfor immediate use by the subscriber, whose information such asof a card printer CX-710 and card-issuing software. A full-color

optical services and promoted building business models utilizing

series, has an EEPROM capacity of 16KB suitable for credit-

telephone number is recorded in the smart chip. DNP will

printer, a DNP original, enables high quality printing on the entire

their latest technologies and content. The joint research includes

card-only use while DNP’s original Java Card has an EEPROM

manufacture the FOMA cards and enter initial data on the cards

card by dye-sublimation thermal transfer methods, and storesthe evaluation of image-quality conversion technologies andcapacity of 32KB for multiple applications. DNP projects sales ofat its smart-card production plant in Ibaraki, under heavy security

digital certificates and private keys within the smart chip using a

image-reproduction abilities by transmission speed, distributing

10 billion yen from card production, application development,

control. The cards will be supplied to NTT DoCoMo. DNP aims tobuilt-in smart-card encoder. DNP plans to expand system sales

DNP’s high-definition images and videos via NTT’s opticalcard issuance and other solutions in the next three years.

maintain over 60% of the domestic market share for smart cards

and aims at 100 users in the next three years. Sales of 1 billion

network onto Sharp’s high-definition displays through Sharp’s

by aggressively marketing smart cards for mobile phones.

yen are forecast from cards and peripheral solutions.

home optical link.

In March, DNP developed killer applets for popularization

Smart card system development

scheduling to better serve the members.

In January 2002, DNP announced adding a function to

In February 2002, DNP, Omron Corporation and Yamatake

Also in July, DNP and DNP Digitalcom Ltd. developed the IR

PKI. The PKI applet for MULTOS cards enables the program size

process PKCS (public key cryptographic standard) #12 data at

Building Systems Co., Ltd. announced the development of aHomepage Creation System, an innovative web-based service

to be about 0.8KB while the PKI applet for Java Cards enables

a smart-card issuing line at DNP’s smart-card plant. By doing

physical access management system by integrating biometrics

to provide easy, secure distribution of investor relations

the program size to be about 2KB. DNP also developed two PKI

so, DNP has established a system for promptly issuing a large

a n d c o n t a c t l e s s s m a r t c a rd s . T h e n e w s y s t e m m e r g e s

information. JASDAQ Market Inc. selected the new system todrivers (CSP driver and PKCS#11 driver) dedicated for use involume of smart cards with private keys and digital certificatescontactless smart cards and facial image technology to securere - d e v e l o p i t s w e b s i t e , h t t p : / / w w w. j a s d a q . c o . j p . D N P

combination with these PKI applets. PKI applets for smart cards

imported in them for network authentication, which is effective

access to restricted areas by integrating the FaceKey facial

Digitalcom and DNP are in charge of developing, structuring andare programs that are embedded in smart chips for MULTOS,

against cyber terrorism. DNP has established this system inrecognition system developed by Omron with the entrance/exit

operating such systems as stock price information and theJava and other cards. The PKI applets for smart cards developed

response to the growing market for employee ID smart cards

management system developed by Yamatake Building Systems.

charting of about 900 listed companies, formatting financial

by DNP were significantly reduced in size to meet the demandequipped with network authentication, fueled by concerns about

DNP will provide contactless smart cards for the new system.

information by extracting company data from recent financial

for embedding PKI in smart credit and ATM cards, which will becyber terrorism and interest in information security management

Compared to traditional biometric systems, the new system isstatements, and performing information searchs by query items,

in full use in 2003 in Japan.

systems. Tens and thousands of smart cards for network

more efficient and flexible, encrypting and storing the user’s

such as sales and revenues.

authentication are expected to be issued by companies thatbiometric data onto a smart card. The system is planned forprovide lifeline utility services, and by government organizations.

release by the end of 2002.

In July, DNP announced the development of the Ecofit

DNP expects sales of 1 billion yen in the next three years.

Also in July, DNP developed a web-based 3-D computer
graphic viewer by extending the functions of DRARE (DNP
Realtime Advanced Rendering Engine), a three-dimensional, real-

Smart Card i-Type, a smart card produced with injection

In March 2002, DNP, Microsoft Corporation and VeriSigntime, computer graphic rendering engine for multi-media titles.

molding, realizing small-lot production, expedient delivery,

Japan K.K. established a framework to issue, fast and in large

Integrating the viewer with a web browser enables the display of

DNP Annual Report 2002

DNP Annual Report 2002

among smart cards, allowing lower-priced smart cards to utilize

Manufacturing smart cards

39
Information MediaInformation MediaIn September, DNP announced the development of a smart
ATM card application that complies with Japanese Bankers

Japanese households, will have access to broadband Internet

Internet. Through this development, DNP expects an increase inservices by 2005. With this widespread diffusion of broadband

orders for Internet-based multimedia titles utilizing 3-D computer

services, content distribution methods are becoming diverse,graphics.

including PCs, mobile electronics and information electronics.

Also in July, DNP joined forces with Hiroshima Prefecture

While users demand secure, value-added contents for theseand TAO of Japan to conduct a high-definition image datavarious applications, content distributors face a number oftransfer experiment on ultra high-speed networks. The collabo-

challenges, such as processing technology acquisitions,ration was the first in Japan in which high-definition still images

developing channels for wider distribution, protecting content

were publicly released over a nationwide, high-speed network.

and managing capital expenditures for content distribution.

Digital artworks held by DNP, from France’s Reunion desD p l a t s w i l l p ro v i d e s e r v i c e s s u c h a s c o n t e n t p l a n n i n g ,Musées Nationaux, were used in the experiment. The images

application development, marketing, CRM and business model

were shown to the public in the underground lobby of thedevelopment, as well as content management, distribution,

Hiroshima Prefectural Art Museum. Objectives of the research

infrastructure, copyright protection, payment systems and data

were to structure and examine client server network systems

editing/processing.

that can transfer and replay high-definition still image data over

In November, DNP and Visionaire Inc. announced the launcha network; examine the quality and interoperability of high-of study-aid production and operation services utilizing thedefinition image data transfers over a high-speed network;

Internet and DVD videos for after-school learning centers andexamine the operation of the transfer history memory; andcorrespondence-study businesses. The services include high-collect public responses/opinions and use the gatheredquality, high-volume visual and sound study aids with a web

information for future applications.

browser using DVDs that can be unlocked via the Internet by

In August, DNP, Meiji Seika Kaisha Ltd. and Tomy Company

providing the proper ID, password and an additional fee

Inc. joined forces with two companies to develop an “electronic

payment. The program takes advantage of Visionaire’s DVD-

giveaway’’ promotion system. The system allows users to play

Magic technology, which can also use existing video and visualan Internet game by using the product ID numbers of purchased

study aids to create DVD videos for use with the web browser.

products. DNP developed and commercialized a system for theStudents get the best of both worlds: interaction withhigh-speed printing of ID numbers used in the game, and is in

instructors and updates via the Internet, and a high-quality

charge of overall system structuring and operations, including

visual-and-sound study aid on DVD.

issuing ID numbers.

Also in November, DNP developed an Inter net-based

Also in August, DNP announced the development of a“recommendation engine” that analyzes end-user product andcopyright protection system that securely distributes still images

information preferences, based on web usage data. DNP

of art works, celebrities and characters. Use of a pictures without

developed the recommendation engine as an effective andthe creator’s or copyright owner’s permission is increasing as

personalized one-on-one marketing tool. Functions include theelectronic image distribution becomes prevalent. DNP developed

automatic extraction of online articles or product description

a copyright protection system by applying a technology that

contents through keyword analysis; projection of user preferences;prevents the illegal use of digital contents. DNP will implement

web usage data updated in real time; and selection and display

this copyright service to the back-end systems of DNP Internetof information and products that best suit user preferences.

services, Media Galaxy and the Inter net Data Center.

Unlike traditional engines, product recommendations areCharacteristics of the new system include compliance to multiple

provided by multiple online shopping sites.

security policies. Users also can choose and combine several

In December, MyPoint.com Japan Co. Ltd., a joint venture

copyright protection technologies, including digital image

between DNP and MyPoints.com Inc., announced the launch ofprotection, off-line use restriction, reversible digital watermark

the MyPoints Global Network. The Internet advertising service isembedding, and a digital watermark for copyright information.

a collaboration with My Points.com Inc. and MyPoints Europe

In September, DNP announced that it would launch Dplats,Ltd. of England. MyPoint.com Japan plans to expand thea digital content distribution platform business in early 2002. It is

network to other European and Asian countries. The MyPoints

estimated that 10 million households, or one-third of all

Global Network will produce and distribute advertisements,

DNP Annual Report 2002

DNP applies its information technologies to develop and provide solutions forcustomers. We listen to every detail of our customers’ wishes, understand theirconcerns and produce products tailored to their needs. We know the most effective
and efficient way to deliver our customers’ messages to consumers. We have themeans to find out consumer demand and market information, and know how best to
utilize such information. We have the answers – because we understand the problems.

41
Information Media

high-resolution, three-dimensional computer graphics via theSettlement Service and the Inter Debit Settlement Service withreach North American and English consumers and conduct e-

DNP’s OrderLine, an ASP service that supports e-commerce sites

commerce entirely by the Internet and e-mail. MyPoint.com

for processing and electronic settlement management. EC Credit

Japan is an incentive marketing service company, and provides

Settlement Service is a unit of Japan Card Network Co., Ltd., afree services to its registered members. Members can earn

subsidiary of JCB, and Inter Debit Settlement Service is a unit ofreward points by clicking through banner advertisements,

Payment First Corp., a subsidiary of Oki Electric Industry Co. Ltd.

making Internet purchases, participating in online surveys and

The newly added credit card settlement utilizes SSL (Secure

requesting information. Members can then exchange theSockets Layer) encryption technology from EC Credit Settlement

acquired points for products provided by incentive partners.

Service. While most conventional and basic SSL credit card

In February 2002, DNP announced that it had extended its

settlement systems use the Internet to connect stores andcopyright protection system to support Content ID Forumsettlement agencies, DNP has established exclusive lines withspecifications. The system will undergo independent-validation

JCN’s EC Credit Settlement Service and OrderLine to provide atesting with the Digital Content Association of Japan. In line withsafer and more stable credit card settlement at a low price.

the rising commercial value of digital contents and the growing

In September, DNP announced that OrderLine will expand toneed to securely manage and protect the distribution of digital

include e-commerce credit-card settlement services for Internet-

contents, DNP developed the secure system by applying

enabled mobile phones. With the increase in the number oftechnologies that curb illegal content use. By combining

websites designed specifically for mobile phones, the need istechnologies such as complete data copy protection, download

rising for a safe and reliable e-commerce system to manage

restrictions and browse-only restrictions, copyright holders willorders and enable electronic payment to accommodate the sales

be able to prevent the illegal use of digital contents. Initially, a fullof products. The added service will allow companies using DNP’s

set of the content copyright information will need to be stored in

hosting service, Mobile Galaxy, to offer credit-card payment

an Intellectual Property Rights Database (IPR-DB). Content ID

options safely and securely over the Internet-enabled mobile

Forum is promoting global standardization by Content IDs. A

phone, using 128-bit encryption SSL. DNP initially expects tounique Content ID is embedded into each digital content using

have 10 e-commerce users and 50 million yen in sales.

digital watermarks, and users will be able to easily search
propriety information through the IPR-DB.

43
Information Media

allowing Japanese companies without foreign sales sites to

In October, DNP announced the development of market
survey packages for local banks and credit associations. DNP
will provide integrated services for survey planning as well as©Cultural Relics Data Center of China

research and analysis to tap into the liberalized financial sector

information technologies to develop and provide solution

where competition for financial services has intensified. Many of

packages for customers.

these financial institutes have deployed CRM (Customer

In April, DNP developed a sales promotion system that

Relationship Management) systems to manage customer

analyzes sales data according to individual stores, produces

information. However, CRM systems have been applied to unify

product sales forecasts for the upcoming week, and allows

sales channel management or credit analysis. Since the focus ofstore managers to use such information to prepare and produce

analysis is based on transaction records of existing customers,

POP advertisements, leaflets, web screens and price cards. The

it neglects to offer analyses of potential customer needs. Theresystem allows the distribution industry, including retail stores, toare only a few financial institutions that actually conduct thesedevelop efficient sales promotion activities by utilizing a variety

surveys. DNP’s new packages provide survey plans and forms,of media. Media content is produced based on the analysis of

based on the expected needs of each financial institution.

POS data and forecasts. The content allows each store to
produce original leaflets or web promotions. Currently, thesystem is designed for electronic appliances and goods, but
applications will be customized for the grocery and apparelindustries. DNP forecasts sales of 5 billion yen for the initial yearand 20 billion yen for 2003, including material printing orders.
Also in April, DNP announced the integration of the EC Credit

DNP Annual Report 2002

Armed with DNP’s superior image-information
processing technology, DNP aims to create digitalarchives of cultural assets to expand its cross-media
operations. Some images in the form of positive
films, digital data and literary materials will beavailable for commercial use, allowing the generalpublic a chance to appreciate rare works of art.
Application possibilities include producing museum
art goods, apparels, stationery and other products.

ASP/Solution Packages: DNP will apply its

Books may not always come in paper form. Our job
is to convey wisdom and information using the mostdesirable medium. Sometimes the information is put
into print in books, magazines, catalogues andleaflets. Sometimes it resides in cyberspace, to be
retrieved by those seeking information. Whatever the
medium, our customers are sure to receive qualitythat speaks of our 125-year history.

44
Information Media

Marketing Solutions: Building a CRM system is only

Co., Ltd., launched the DNP Custom Document Service, ahalf the job. Marketing strategies must include effective

business ASP service that produces original catalogues, leaflets

use of collected data.

and sales promotion plans. As consumer trends diversify, there

In August, DNP announced the development of Light Edition,is an increasing demand for fine-tuned document production

a low-cost customer loyalty card management system thatand distribution services. The DNP Custom Document Service

allows small- and medium-sized retail stores and chain stores toallows companies to easily produce original printed materials by

enjoy the benefits of customer relationship management (CRM).

sorting and processing necessary data stored in the DNP server

As larger companies in the distribution, food service andin PDF format. DNP provides page collation and parts insertion

entertainment industries employed CRM to collect and analyze

functions, with enhanced PDF file production capacities. DNP

c u s t o m e r d a t a a n d p l a n p ro m o t i o n a l a c t i v i t i e s , s m a l l e r

also will provide an order service to produce a large number ofbusinesses with 50,000 or fewer customers also expressed theirprinted materials based on the data. DNP forecasts sales of 500

need for a quickly deployable, low-cost CRM. As the provider ofmillion yen in the initial year.

a full range of CRM services, DNP developed the low-cost Light

Also in October, DNP announced the development of DIGI-

Edition for such smaller businesses by selecting minimum

DEMIA, a device that corresponds to CTP technology andrequirement functions for CRM.

greatly increases efficiency in color control in multicolor offset

In September, DNP, jointly with NTT Data Corporation,

printing. Traditional offset lithography requires the final typeset

Mitsubishi Corporation and Mitsui & Co., Ltd., established NTT

to be transferred onto film before being chemically transferred toData Lifescape Marketing Corporation, a total marketing service

printing plates. With CTP technology, digital information iscompany for the food industry. The new company begantransferred directly onto printing plates using laser imaging. Due

operating in October, engaging in the collection and sale of data

to its effect on color tones, multicolor offset printing adjusts ink

obtained through 300 homemakers participating as monitors foramounts during the initial stage. With DIGI-DEMIA, by inserting

Shoku Map, a former NTT Data company now part of NTT Dataa floppy disk containing the data into a printing press, ink

Lifescape Marketing Corporation. The company also uses theamounts are automatically set improving color-control efficiency.

Shoku Map data to provide total marketing services. In five

DNP forecasts sales of 50 units of DIGI-DEMIA in the initial year.

years, the market is projected to grow to 30-billion yen, of which

In December, DNP announced a new system for tailoring

NTT Data Lifescape Marketing Corporation aims to gain about auniversity course registration handbooks for each student. With

5% share, or 1.6 billion yen in sales.

detailed information on annual course schedules, references andgrading policies, these handbooks are important tools for bothPublishing, Printing and Electronic Publishing:

instructors and students. DNP can customize the university

Books may not always come in paper form. Our job is tohandbook for each student. DNP already provides customized

convey intelligence and information using the mostproducts, such as travel brochures and correspondence course

desirable medium.

materials. By utilizing personalization knowledge, structuring

DNP Annual Report 2002

In September, DNP began licensing the digitized form of theuniversity databases and providing web-based registration

Shueitai font, the beautiful font widely loved and used in books

handbooks to nationwide universities, DNP was able to plan andand dictionaries today, originally developed by DNP near the

produce the customized handbook system. DNP has alreadyend of the Meiji Era. The font was digitized in the late 1960’s asreceived orders for customized university handbooks from Meisei

DNP began developing its computerized typesetting system.

University for the 2002 school year. DNP will also provide a CD-

Today, publishers and commercial printers expressed their need

ROM, containing information on all departments, allowing users

for the Shueitai font to be available for use in a DTP

to confirm course information.

environment. The first company to be licensed with this font is

In January 2002, DNP joined forces with Toshiba Corp. andMorisawa & Company, Ltd., who plans to install the font in its

Takara Co. Ltd. to establish Toshiba TD Education Co. Ltd., a

DTP font packages for direct sales to companies and for sale incompany dedicated to the development and promotion of ancomputer stores. DNP plans to expand its licensing business

innovative education platform supporting educational programs forand projects sales of 100 million yen in the next three years.

all age groups and in many varied subjects. Toshiba, Takara andIn October, DNP, in collaboration with DNP Digitalcom

DNP have combined their diverse know-how to create the EX-Pad,

46
Information Mediaa versatile platform designed to support many aspects ofp ro v i d i n g a b o u t 5 0 p a t t e r n s b a s e d o n p a i n t i n g s b y s i x

education, including general education, continuing education,

Impressionists: Monet, Cezanne, Pissarro, Renoir, Gogh, andvocational training and certification, and human resources training.

Gauguin. In addition to these 50 patterns, DNP will customize

In March 2002, DNP became a representative in thedesigns based on customer needs, utilizing more than 1,000

establishment of Japan B2B Content Consortium, an electronic

artworks by Impressionists. DNP plans to expand the productcatalogue business planning consortium for electronic transactions

line by including Japanese paintings.

between businesses. The consortium, consisting of DNP, SAP

In January 2002, DNP Archives.com, a wholly owned

Japan, NTT Data, Compaq Computer, Sun Microsystems, Japansubsidiary of DNP, announced that it will add images of Chinese

IBM, Japan Unisys and Fujitsu, will promote categorizing, andcalligraphic works, paintings, artworks and excavations to DNP

standardizing the data of, several million "indirect material

Archives.com. The company will lend positive films, digital data,

products" such as tools, equipment, security materials andvideos and reference materials of the Chinese antiquities. DNP

consumables used in plants, as well as measuring instruments,

Archives.com also will provide professional services for newlaboratory instruments and wares, and reagents used in research

photo production, software production support and production

and development. There is a great need for MRO (maintenanceplanning for related goods. Working closely with the Cultural

repair operations) for plants and research centers. The consortium

Relics Publishing House, DNP Archives.com will lend about

intends to be active at the most for about six months, and has

300,000 items. DNP Archives.com holds photo rights to popularvisions of establishing a company soon afterwards.

antiquities, such as the terra cotta soldiers, San Xing Dui andAlso in March 2002, DNP, in collaboration with Koubo-Guide

three-color-glaze Tang Ware. DNP Archives.com will lend aboutsha CORP., built and began the operation of an unprecedented

1,700 digitally stored data held by the Digital Image Data &system that covers the entire process of producing a magazine

Publishing Center of Chinese Cultural Relics.

from the information-gathering and editing process of the

In March 2002, DNP Archives.com launched TNM Image

publisher to DNP’s media production process, using an Internet-

Archives that provides licensing and rental services for image

based network. The system was realized by combining thedata from the Tokyo National Museum. The images in the form oflatest digital processing technology, database and PDF withpositive films, digital data and literary materials will be available

DNP’s long-standing technology of automated typesetting forfor commercial use for the first time, opening many possibilities

magazines. Using this system, a magazine article can be laid

for applications such as producing museum art goods, kimono

out in its final form in a matter of minutes, or the wholeand other apparel, stationery and other products. In addition,

magazine in about 30 minutes. Information magazines that haveimages can be used in TV programs and commercials as well as

an established layout format such as job placement magazines,

on web sites. Other usages include using the images inhousing information magazines and used-car sales information

advertisements inside and outside trains and busses, and inmagazines can greatly benefit from this system that allows up-

magazines. DNP projects sales of 10 million yen from licensing

to-the-minute information to be printed efficiently.

sales, or sales of 100 million yen including related products.

Digital Processing and Data Archives: Armedwith DNP’s superior image-information processing
technology, DNP aims to create digital archives of cultural
assets to expand its cross-media operations.
In September, DNP announced the development of digital
DNP Annual Report 2002

designs by extracting portions of world-renowned paintings.
DNP launched a licensing business for digital designs calledA r t i s t To u c h , s t a r t i n g O c t . 1 . A r t i s t To u c h s e a m l e s s l y
restructures the extracted sections by digital processing.
Regardless of shape or size, the reproductions can be applied
to a wide range of products, including stationery, garments,
wallpaper, floor materials and interior fabrics. DNP will start byL i f e s t y l e P ro d u c t s

48Lifestyle Products

Foresight and technology are key tosurvival in the market
Instead of aiming for a quantitative expansion by increasing the variety of existing products, DNP plans to expand its
Lifestyle Products into high-growth markets. Using converting technology at the core of DNP’s plan to expand on
printing, DNP will demonstrate its superiority over the competition in the research and development of highperformance products with new-functions. DNP is building a system to provide solutions for production in existing
fields and in new, promising fields. For example, in a field in which containers and labels were manufactured, DNP will
widely expand its business by developing an aseptic filling system for PET bottles, introducing the system, supplying
materials for the PET bottle, providing operational support and supplying the labels. DNP aims to increase profits byfocusing on not only packaging and building materials but also the entire lifestyle and industrial materials market. The
company will keep overseas customers and markets in mind as it expands its target, focus on profitable fields andmake a substantial shift to growth fields.

Packaging: At DNP, we don’t just manufacture

taste or losing nutritional value. One of the significant character-packages. We provide systems that help our client’s

istics of the new system lies in the filling nozzle, which prevents

manufacturing business run with greater efficiency.

contents from sticking and greatly improves system

In September, DNP developed DynAsept, an aseptic liquid

performance. DNP developed the world’s first aseptic pouch

pouch packaging system. DNP’s aseptic filling systems

packaging system for solid consumer foods. DNP forecasts sales

incorporate an aseptic chamber, in which sterilized foods areof 500 million yen in the initial year by marketing DN-ACP tofilled into clean packaging materials. Robust sales of preparedfood, soup and seasoning producers.

foods and box lunches in convenience stores, supermarkets anddepartment stores have fueled demand for liquid pouches, used

Environmentally Friendly Products: Protecting theto house sauces and soups. With DynAsept, rolled film isenvironment with environmentally friendly products also

sterilized and molded as a pouch in the aseptic chamber before

brings us new business opportunities.

pasteurized seasonings and soups are filled and sealed in a

In May, DNP developed environmentally friendly decorativesterilized environment. DNP developed the more hygienic,

laminate sheeting for “healthy houses.’’ The sheeting does notefficient filling system in response to consumer tendencies

include any of the 12 volatile organic chemicals identified bytoward foods that not only are tasty and convenient but also

authorities as causing “sick house syndrome,” a phenomenon in

healthy and natural, as well as to company concerns on environ-which residents of new houses suffer from pungent gases andmental effects, sanitation, expiration dates and product liabilities.

allergic contaminants that are in construction materials.

DNP Annual Report 2002

In October, DNP developed DN-ACP, an aseptic pouch

Manufacturers of decorative laminates used in housing

packaging system for consumer foods. With DN-ACP, high-decoration and fur niture have been trying to reduce theviscosity foods including sauces, stews and curry areapplication of VOCs by substituting safer materials. DNP

pasteurized at ultra-high temperatures for a short length of time,developed the environmentally friendly decorative laminate

and then are poured into clear packaging materials before

sheeting, Pre-armor, by utilizing the company’s original coating

sealing. Pasteurization at ultra-high temperatures for a shorttechnology. Pre-armor’s hard surface is scratch resistant inlength of time realizes high product quality, without deterioratingprocessing and transporting overcoming an obstacle in

Ubiquitous computing for getting the information anytime and anywhere: DNP is researching and developing IC
tags to complement existing product bar codes with their ability to be rewritten and to store high-volume
information. We are looking to apply this technology to all sorts of product packaging, such as paper
containers, soft-packaging, PET bottles and plastic containers.

50
Lifestyle Products

traditional colored plywood. Its irregular pattern allows thetransparent hologram and a hologram that includes a reflective

uneven plywood surface to become inconspicuous improving

layer to make holograms more visible. Overlapping thedesign quality and flexibility.

transparent type to a photo on an ID card that will prevent card

In November, DNP developed a safe and environmentallycounterfeiting and ID photo tampering.

friendly insulation material for flexible flat cables. The
halogen/phosphorous-free insulation material was provided to

IC Tags: Ubiquitous computing for getting thecable makers in Japan and abroad. Flat cables are applied in

information anytime.

various products, including office automation equipment

In September, DNP developed an information distribution(printers and scanners), computers, video equipment, audio

system by applying contactless IC tags to mobile phones. Users,

systems, robots and ultrasonic diagnosis equipment. Flexible

for example, can reserve trips and concert seats by holding up

flat cables are composed of conductors laid in parallel, andtheir mobile phones to displays. The new system will increase thelaminated between insulation materials. Although conventional

effectiveness of advertisements by allowing consumers to apply

cables comply with safety standards, they can generate

for promotional campaigns and request information in real time.

poisonous gases such as halogen if they catch fire causing

The procedure for using the system is as follows: 1) Users holdphosphorous elution and equipment corrosion. DNP’s newup their mobile phones close to an advertisement display; 2) An

insulation material is a safe alternative. Annual sales of 1.5 billion

antenna reads information stored within strap-shaped,

yen is forecast in the next three years, and DNP plans to further

contactless IC tags; 3) The PC connected to the display sends

expand its share of the electric cable component market.

registration information to a server; 4) The servers send confirmation e-mails to the users’ mobile phones; and 5) To confirm

Hologram: DNP’s holograms provide beautiful security.

the registration information, the user sends an e-mail. DNP plans

In May, DNP came out with All Image Gold Type, the firstto provide mobile solutions utilizing this new information distri-magnetic card in Japan with holograms that are processed onto

bution system to about 500 companies participating in

the entire surface of a credit card. The unique translucency is eye-MediaGalaxy, DNP’s Internet service, and MobileGalaxy, DNP’scatching, and is not available with other cards. A highly durable,

mobile phone service.

original protection layer was adopted to maintain high-quality

In February 2002, DNP began full-scale research on productdesigns for long periods of time. Transparent holograms help

packaging with IC tags. The research extends to all sorts of

prevent credit-card counterfeiting. Hologram brands of interna-

product packaging, from paper containers and soft packaging totional credit card companies can be processed onto the

PET bottles and plastic containers, covering the development oftransparent hologram. DNP is the first company in Japan to

IC tags, actual applications on product packaging, environment-

develop this technology. The card has been adopted for Capriccio

proofing, data structure, data input and data management

Gold MasterCard, which was launched in April and is targeted

methods. As part of this effort, DNP became the first Japanese

exclusively at women. Through sales expansion, DNP forecasts

company to join the Auto-ID Center headquartered at thesales of approximately 500 million yen in the next three years.

Massachusetts Institute of Technology in Cambridge,

In February 2002, DNP developed Secure Image, aMassachusetts to research and develop an electronic productholographic label used to verify authenticity. The label applies

code (EPC). IC tags are part of the research, and will

Lippman holographic technology, in which production procedures

complement the existing product bar codes with their ability toand visual effects differ from the widely used embossed

be rewritten and to store high-volume information, which enables

holograms. The label also has anti-counterfeiting features. Today,

each individual product item to be tracked and managed.

DNP Annual Report 2002

many brand-name products, machine tools and electronic
components are illegally copied and distributed throughout theworld, resulting in enormous profit losses, damaging brand image
and sometimes leading to product liability issues. DNP developed
Secure Image to prevent the production and distribution ofcounterfeit products, and to prevent counterfeiting and tamperingwith ID cards. DNP will provide two types of Secure Image: a

E l e c t ro n i c C o m p o n e n t s &Information Media Supplies

52
Electronic Components & Information Media Supplies

The source of exceptional
competitive power and superiority
DNP’s Information Electronics Division covers the overall electronics market from parts to devices, with its microprocessing technology at the core. The key to increasing profits in this field is the ability to continuously update theproduct lineup in response to the short lifecycle of products in this powerfully growing market. Backed by DNP’sinnovative R&D, DNP will aggressively introduce high-performance products with new functions in the field ofsemiconductor products to promote its production business. In particular, DNP aims to provide solutions for its highdensity mounting business (such as build-up boards and multi-chip modules), its PDP display module/device
business, and its organic EL display module/device business. To expedite business expansion and ensure superiority
over the competition, DNP also will aggressively promote in-house research and development while building an
alliance with companies who are leaders in their respective fields.

Electronics/semiconductors: The difference is in

is able to apply patterning, etching and plating technologies

our technology, sought after by semiconductor manufac-

accumulated from lead frame and shadowmask production, in

turers of the world. Our business grows steadily, rarely

addition to technologies acquired from producing highly precise

affected by the economy.

semiconductor photomasks. In conjunction with the launch of

In July, DNP entered into a business agreement with Xilinx,

DNP’s silicon micro-machine processing services, DNP willInc., the world’s No.1 FPGA (Field Programmable Gate-Array)provide consulting and design evaluation services. DNP

manufacturer, to provide Xilinx with a steady supply of

forecasts sales of 100 million yen in the first year and about 4

photomasks for FPGA and to conduct joint research on

billion yen by 2003.

photomasks that are 0.10-micrometer and smaller. SuchIn November, DNP established a production line for on-chip

photomasks are said to be of the fourth generation in semicon-

color filters at its photomask production plant in Minami-ku,

ductor process technology with the current 0.18-micrometer

Kyoto. With the development of imaging devices, CCD (charge-

photomasks quickly being replaced by 0.15- and 0.13-

coupled devices) and CMOS (complimentary mental-oxide

micrometer photomasks. The agreement will secure Xilinx asemiconductor), image sensors have been applied to a wide

steady supply of cutting-edge photomasks while further

range of equipment including PCs, mobile phones, mobile

expanding DNP’s share in the photomask market. For DNP, theterminals and vehicle-mounted cameras. Since these image

agreement is consistent with its efforts to build an alliance withsensors are monochrome sensors, it is necessary to laminate

the top manufacturers in the semiconductor industry, which havecolor separation filters or microlenses to produce higher

so far included alliances with Intel, Toshiba, Fujitsu and UMC.

sensitivity on a wafer sensorfor full-color display. Dramatic

DNP Annual Report 2002

In August, DNP announced its joining in the silicon wafer

market expansion in this area is expected, as an increasing

processing business. Research and development for micro-

number of semiconductor makers are making inroads andmachines have grown in applications for medical devices,demand for on-chip color filter processing is growing. The newtelecommunications equipment, industrial plants, automobiles,

production line uses technologies adopted by manufacturers ofaerospace equipment and measuring/analytical instruments. By

semiconductors. With a total investment of about 1 billion yen,

applying micro-fabrication technologies of semiconductors, theproduction began in January 2002.

three-dimensional silicon micro-machines are used for nozzles,

In January 2002, D.T. Circuit Technology, a joint venture

motors or gears of inkjet printers and acceleration sensors. DNP

between DNP and Toshiba, established a production line in

The difference is in our technology, sought after by semiconductor manufacturers of the world. Our business grows steadily, rarely affected by the
economy. As the world’s largest manufacturer of photomasks, which are a key component of semiconductor manufacturing, we continue to be on thelookout for future trends. Our wide-ranging technologies also enable us to produce silicon wafers, on-chip color filters, multi-layered printed circuitboards and other high-precision products for our discriminating clients.

54

on-chip designs based on SH-4 architecture, and to act as aclear picture quality with LED back lights — a response to theand costs. With this backdrop, DNP developed the new wet

layered printed circuit boards. DTCT was established in Octoberworldwide licensing agent for SuperH’s core products. In return,growing demand for LCD TVs and monitors. The new filter

processed anti-reflection film by fully utilizing its accumulated

2001 as a joint venture between DNP and Toshiba Corp., andSuperH was able to expand its licensing business in Japan. The

achieves superior picture quality and is more environmentally

precision coating and material designing technologies.

incorporates DNP’s fine lithography technology and Toshiba’s B2it

move will make DNP’s design center increasingly influential infriendly than traditional CCFL systems. Although higher clarity

technology to build a core business foundation in printed circuit

the rapidly growing market for digital consumer convergenceand color reproducibility is in demand, it has been difficult toboards and electronic modules. The new production line wills o l u t i o n s i n f i e l d s r a n g i n g f ro m a u t o m o t i v e t o h o m eimprove both brightness and clarity with conventional CCFL

In August, DNP announced the development of a high-become the focus of a B2it development consortium. The newentertainment. DNP will be able to expand its design services(Cold Cathode Fluorescent Tube) back lights. DNP succeeded inresolution screen for rear-projection televisions that improvesline will produce build-up printed circuit boards with stacked via

both to systems used by companies wishing to use SuperH

developing the new color filter with high colorimetric purity bycontrast by 20%. DNP started mass production of 40- to 72-

configurations of over 3-N-3; build-up printed circuit boards

cores in embedded electronic devices and to semiconductor

improving color filter pigments and optimizing the blendinginch screens at the Mihara plant in Hiroshima Prefecture incorresponding to CSP of 0.65mm /0.5mm pitch; build-up printed

companies that intend to license SuperH, Inc. technology.

system by applying original pigment data and simulation

January 2002, and plans to target the screens to projection

technologies. The LED back-light system was developed to

television manufacturers that comply with digital broadcasting.

Electronics/displays : The color filter may not always

replace the CCFL system as an environmentally friendly,

The aim is to serve the exploding DVD market. Currently, DNP

be the driving force it is in the display market. At DNP, we

mercury-free system that realizes superior clarity, low powercommands more than a 50% market share in projection

layer B2it (C-m-B) printed circuit board. The newly structured B2it

are prepared with a full lineup of third-generation

consumption, long life and simple color adjusting.

screens, which consist of fresnel and lenticular lenses. The newprinted circuit board merges DNP’s ultra-fine pattern etchingdisplays.

circuit boards with all B2it (all layers random via / stacked via)configuration; and B2it printed circuit board evaluation kits.
Also in January 2002, DTCT developed a collaborated multi-

Projection Screens

In December, DNP’s monthly production of TFT-LCD color

screen was developed for CRT projection TVs, which accounted

filters exceeded 2.2 million units, thanks to a deal with Taiwan-

for more than 98 % of the worldwide projection TV market

based SinTek Photronic Co. The deal called for setting up a(approximately 2.5 million units) in 2001. The results of an

In July, DNP boosted its monthly production of color filters

production line in summer 2002. DNP has provided techno-enhanced lens design are improved color uniformity, clarity andminiaturization to 70 microns. C-m-B is a combination ofby establishing a Taiwan-based production system in collabo-

logical support for SinTek since May 2000, and in July of that

purity in brightly lit rooms. DNP forecasts sales of 1 billion yen in

Toshiba’s bump-printing technology and DNP’s bump-etchingration with SinTek Photronic Corp., a Taiwanese maker of LCD

year started receiving OEM product orders from Taiwanese

the initial year by promoting sales in North America, Europe,

technology. C-m-B production begins with half-etching on one

color filters. The move made DNP the first Japanese company

manufacturers. The production capacity of the new line will

Japan, China and Korea.

side of the copper substrate (a thickness of 100 to 150 microns),

to produce, provide and service color filters in Taiwan. The

reach 500,000 units, and total production capacity will approxi-

In November, DNP established a U.S. subsidiary, DNP

followed by bump printing. After press lamination, bump etchingcollaboration doubled DNP’s production capacity by 1 million

mately double to 900,000 units. Combined with DNP’s monthly

Electronics America LLC, to make screens for rear-projection

is processed on both sides to establish a stacked via configu-

units. DNP established a local production system by supporting

Japanese production capacity of 1.3 million units, total

televisions. The subsidiary, located in Chula Vista, Calif.,

ration, which is then copper plated.

a new SinTek production line, and provided production-process

production capacity of the DNP Group will surpass 2.2 million

produces Fresnel screens. Annual capacity is expected to reachAlso in January 2002, DNP, the world’s largest photomask

technology, know-how, management and quality control. The

u n i t s ( c a l c u l a t e d i n 1 2 - i n c h u n i t s ) . A s S i n Te k i s a c o reabout 500,000 units, boosting DNP’s total production capacity

manufacturer, and Ericsson Technology Licensing, the leader in

new plant adds an estimated monthly production capacity of

production site in Taiwan, DNP plans to increase shareholding toof rear-projection television screens to more than 3 million units.

p ro m o t i n g B l u e t o o t h ™ w i re l e s s t e c h n o l o g y, s i g n e d a

500,000 units to DNP’s monthly Japanese production capacity

10% and further strengthen its partnership, while corresponding

So far, approximately 2 billion yen has been invested, withmemorandum of understanding for the world’s first Bluetoothof 1.3 million units, totaling 1.8 million units (calculated by 12-

to the changing needs of Taiwan manufacturers. Locally, DNP

further investments expected to increase along with market

chip design partnership. By providing DNP with its Bluetoothinch units). Taiwan is rapidly becoming a large production site

will increase production capacity, improve product quality andexpansion. The worldwide demand for rear-projection televisions

chip core circuit license, Ericsson Technology Licensing will be

for PCs and PC components.

reduce costs to meet growing demand.

has grown from 1.9 million units in 1999, to 2.5 million in 2000

technology with Toshiba’s B2it technology, while maintaining B2it’s
low cost and high design flexibility by interconnection andrandom via configuration. Bump etching allows C-m-B to realize

Color Filters

In September, DNP boosted its production capacity for

Also in October, DNP developed a low-cost, anti-reflection

and 3 million in 2001. The figure is expected to reach 5 million

d u c t o r m a n u f a c t u re r s a n d s e t m a n u f a c t u re r s . E r i c s s o n

specialized color filters by 150 percent. The highly functionalfilm for flat displays by applying precision wet coating. The film

units in 2005. The U.S. market shows increasing demand, andTechnology Licensing will also develop an alliance with several

color filters integrate cell-gap control functions, and are a

reduces reflections from external light sources, achieving highdouble-digit annual growth is forecast, as digitization and large-

LSI design houses to establish a network for providing system-

response to the rapid growth in the large, high-resolution, LCD

contrast and clear images. The anti-reflection film also can bescreen displays become commonplace.

on-chip design technology and to support OEM businesses.

market. DNP started to develop enhanced color filters with cell-processed to resist scratches and stains. The newly developed

In March 2002, DNP developed a technology to mass-

With the Ericsson Technology Licensing’s Bluetooth core circuit

gap control functions in 1990, and beat the competition by first

film has the anti-reflection properties of conventional films withproduce high-resolution, ultra-large screens for rear-projection

license, DNP will enhance its LSI design services as part of its

selling them in 1999. These enhanced color filters, which

dry coating, but slices costs in half. Anti-reflection processing

TVs. These ultra-contrast screens can be extremely large –efforts to support clients in the rapidly growing wirelessaccount for about 35% of DNP’s color filter production, place

has already been applied to high-quality TVs and CRT monitors.

between 70 inches and 200 inches – due to the increased

communications industry.

spacers on specific locations by applying photolithography

Accompanied by the diversification of flat display applications,accuracy and strength in adhering the ends of the panels that

Also in January 2002, DNP agreed to become the first

technology, thus eliminating spacer beads dispersion problems

including LCDs and plasma displays, there are increasing needs

make up a single screen. DNP will enhance sales of these

Japanese partner of SuperH Inc., a world leader in 32-bit andcaused by conventional spacer beads. Color filters produced

for displays with clear-image capacities. Although anti-reflection

screens for use in computer-aided designing and education, as

64-bit embedded RISC microprocessor solutions. DNP beganwith cell-gap control functions are essential for large LCD

film is a promising component to meet these needs, conven-well as for replacing surveillance multi-screens. In addition,d e s i g n w o r k o n t h e c o re o f t h e n e w S u p e r H T M R I S C

monitors used in desktop PCs and TVs.

tional production methods (dry coating with deposition andbecause DNP’s new high-resolution, ultra-large screens are

sputtering) have proved unsatisfactory in terms of productivity

significantly stronger, they can be shipped overseas, which, until

microprocessor. The pact enabled DNP to expand into system-

In October, DNP developed a color filter that realized bright,

DNP Annual Report 2002

DNP Annual Report 2002

drastically saving time for DNP in designing circuits for semicon-

55
Electronic Components & Information Media Supplies

Electronic Components & Information Media Supplies

Fuchu, Tokyo, and launched the production of B 2itT™ multi-square meters with 26,000 square meters of total floor space.

billion yen through aggressive sales in the Asian market,

The plant will have the capacity to produce 65-inch plates,

including China, where demand for large, high-resolution

responding to growing demands for larger screens, and annual

screens is on the rise.

production capacity will reach 700,000 units for 42-inch plates.
Total investment will reach approximately 10 billion yen. The

Plasma Display Panels (PDP)In April, DNP announced plans to begin selling an electro-

plant is expected to be running by October 2002, with sales of
15 billion yen forecast in 2003.

magnetic wave shielding film for plasma display panels (PDP).
The film greatly enhances electromagnetic wave shielding
capacity and light permeability. Because PDP use is expected to

In April, DNP announced the development of a lightweight,

grow along with the expansion of the large household TV

thin and flexible electroluminescent (EL) display for electronic

market, there is an increasing need to contain the electro-

products. Currently, thinner and lighter luminous displays are themagnetic waves transmitted by the displays. Effective methods

focus of attention, and DNP has succeeded in developing anof containing electromagnetic waves include integrating a circuit

efficient manufacturing technology for multi-color luminous

in the panel to suppress wave occurrence and placing anlayers by applying barrier film packaging technology. DNP has

opaque metal membrane layer on the display surface. With thecreated a more efficient, multi-color display for low-priced,

metal membrane layer method, it is important not to degrade

extremely thin mobile devices such as PDAs, electronic books

the PDP picture quality while securing a sufficient electro-

and luminous POP/posters. So-called organic EL displays havemagnetic shielding capacity. Conventionally, manufacturers

been the focus of DNP’s research since 1998, and the research

strived to produce extremely thin, semi-transparent layers or

w a s e v e n t u a l l y a p p l i e d t o a p ro j e c t c a l l e d “ R e s e a rc hvery fine mesh layers. DNP was able to take advantage of its

Development Program for University-Industry Alliances — A

strength in highly detailed processing technology to create aMatching Funds Approach,’’ in 2000. Since then, DNP has

thin, mesh copper film layer over clear film, which improves light

conducted R&D funded by the New Energy and Industrial

permeability by 30% over other types of film while still retaining

Technology Development Organization (NEDO). The new

a superior electromagnetic wave shielding capacity. The film

technology has marked a strong advance in displays that havealso cuts down on mass-production costs. DNP targets sales ofmulti-color, luminous layers.

5 billion yen in 2003.

In October, DNP announced plans to develop with Idemitsu

Also in April, DNP announced with Asahi Glass to establish

Kosan Co. color-conversion boards for full-color, organica joint-venture company for manufacturing and marketing backelectroluminescence displays. Idemitsu was the world’s firstplates used in plasma display panels (PDP). A vital component,

company to develop a full-color EL display prototype in 1997 by

the PDP back plate consists of electrodes, barrier ribs andtransforming blue emissions into green and red. The two

phosphors that are arranged on a transparent glass substrate.

companies will establish a test production line within DNP’s

The joint venture is aimed at tapping into the growing market for

Research and Development Center in Kashiwa, Chiba, andflat panel displays ---a market expected to grow rapidly for suchprovide sample products. Full-scale production is expected to

products as TVs, and for commercial applications in airports

start in 2003. More companies are developing organic EL

and stores. Thought of as the most promising flat panel display,

displays for such products as mobile devices including cell

PDP will help support the coming digital network age.

phones, PDAs and vehicle-mounted units. DNP, with many

Worldwide PDP production is projected to expand from 900,000

achievements in LCD color filter plate production, and Idemitsu,

units in 2001 to 4 million in 2005. For the past 20 years, DNP

with years of experience in developing color conversion

has accumulated technologies and patents in back platematerials, decided on the collaboration to improve materials andproduction, and has supplied PDP manufacturers with sample

develop new processing technologies for display applications.

products and parts. For the joint venture, construction of a newplant for the production of PDP back plates in the Asahi Glass
Kitakyushu complex is scheduled to be completed in June
2002. The two-story, steel-frame facility will total about 14,000

DNP Annual Report 2002

DNP not only is boosting its production capacity of color
filters, but continues to develop better quality, moreenvironmentally friendly color filters to meet increasingly
diversifying demand for displays used in PCs, TVs andmobile phones. We are also prepared with a full lineup of
third-generation displays, including digital paper.

Organic EL

57
Electronic Components & Information Media Supplies

now, was not possible. DNP expects a sales increase of about 1

Board of Directors(As of July 1, 2002)

58
Board of Directors

Kosaku Mori

Osamu Tsuchida

Kuniaki Kamei

Teruomi Yoshino

Noriaki Nakamura

Hiromitsu Ikeda

Managing Director

Managing Director

Managing Director

Managing Director

Managing Director

Managing Director

Minoru Suzuki

Masakazu Sato

Mitsuhiko Hakii

Satoshi Saruwatari

Masayoshi Yamada

Senior Managing Director

Managing Director

Managing Director

Senior Managing Director

Senior Managing Director

Taira Takahashi

Ryozo Kitami

Yoshitoshi Kitajima

Kenichi Nakamura

Koichi Takanami

Senior Managing Director

Senior Managing Director

Chairman of the Board
President and Chief Executive Officer

Senior Managing Director

Senior Managing Director

Directors

Standing Statutory Auditors

DNP Annual Report 2002

Hironori Kato

Chugen Kakuno

Itsuo Totsuka

Jitsuo Okauchi

Kenzo Isumi

Yukio Togano

Masahiko Wada

Minoru Yoneda

Toshio Kawada

Junjiro Inoue

Tetsuji Morino

Shizen Sasaki

Makoto Isshiki

Kazumasa Hiroki

Takashi Toida

Hidenori Nokubo

Yujiro Kuroda

Tadao Tsukada

Tadashi Okubo

Tatsuya Nishimura

Yoshiyuki Nakagawa

Yoshinari Kitajima

Statutory Auditor

Akira Fujishima

Financial Section

Management’s Discussion
and Analysis
Unless otherwise noted, all financial information contained in this section is based on the consolidated financial statements of Dai
Nippon Printing Co., Ltd. (“DNP”) included in this annual report. The consolidated financial statements were prepared in accordancewith generally accepted accounting principles in Japan.

Management’s Discussion and Analysis

DNP is a comprehensive provider of solutions that use printing and information technolo-

Our Commitment
The goal of the management is to guide DNP into a long-term growth and steadily increasecash flow to raise DNP’s corporate and shareholder values.

gies. We offer products and services in a wide range of areas including printing, information

This goal cannot be met without creating new customer values so that we can constantly

media, industrial materials and electronic components. With them, we serve customers far andgenerate values for our society and all DNP stakeholders. Above all, we believe that the goal

wide, from Japan to the rest of the world. Currently, we are the world’s number one comprehen-

can be achieved by developing outstanding technology that is useful to society, providing

sive printing company in terms of sales.

original products and services, and aiming to contribute to social prosperity and the happinessof all people with whom we are involved.
However, for DNP to experience another growth spurt in the dramatically changing world of

The following are DNP’s three main fields of business:the 21st century, we also need new business strategies fit for the times. We need to make acompany-wide resolution to embrace diversity and use different values to help us grow. This isInformation Media:
In this field, we provide services in printing, digital media and content production, or in
combinations of the three. No matter what the medium, we offer the most effective andwhy we, the DNP management, believe in the fusion of the two technologies that we have

61
Management’s Discussion and Analysis

INTRODUCTION

60

cultivated and lead the world in – printing and information. We will develop technologies that
others can only dream of, and provide our customers with a wide array of solutions.

efficient solution for our clients to deliver information to their customers.
Lifestyle Products

Net Sales by
Consolidated Segments(%)

Beverages
5.6%

Our Principle on Corporate Governance

DNP has the talent to develop superior technologies. In this field, we apply that talent to

In implementing our business strategies, we believe it is of utmost importance to properly

make and sell decorative materials and lifestyle products that are environmentally friendly.

disclose information related to providing our shareholders with steady profit returns, as well as

This is another field where DNP has gained acclaim for helping to enrich people’s lifestyles

information on our business activities. At the same time, we will see to it that our employees aretoday and into the future.

secure in their employment and that their livelihood is stable.
As we look at corporate relationships with customers and the public today, there have been

Electronic Components and Information Media Supplies
DNP applies the world’s most advanced micro-fabrication technology to make and sella variety of electronic products, including photomasks, which are a key component insemiconductor manufacturing, and color filters for liquid-crystal displays. Other products wemanufacture include ink ribbons for facsimile and electrodes for lithium-ion rechargeable
Printing
94.4%

batteries. Many of our products enjoy a top market share in the world.

numerous corporate scandals that have rocked public confidence not only in Japan but also inother parts of the world. At DNP, we formulated the DNP Group Action Charter in 1992 torealize fair corporate activities. In the Charter, we declare that we will act in full compliance withlegal and ethical standards and also strive to maintain free and fair competition with fair andopen activities. Our aim is to create a company that is trusted by the public as a good
corporate citizen.
To fulfill our corporate roles and responsibilities, we, the management, take the spirit of ourIn this Management’s Discussion and Analysis section, “DNP” refers to our entire Groupconsisting of Dai Nippon Printing Co., Ltd., 60 consolidated subsidiaries and 10 affiliatedcompanies included in this annual report. “We,” “us” and “our” refer to DNP or the DNP
management.
Words used in this annual report such as “believe,” “anticipates,” “estimates,” “expects”

Action Charter to heart at our board meetings where we consistently make a sincere effort as
responsible directors to eliminate and prevent any unfair practices in executing our business. In
addition, to enhance our management supervisory functions, we have elected two out of the four
auditors from outside the company. We will further elect a director from outside the company inthe next fiscal year as part of our efforts to improve our corporate governance.

and variations of these words or similar expressions, as well as all numbers for future
earnings, are forward-looking statements that make use of all information available to the
management at the time of the creation of this annual report and management’s best
judgment. The statements are not historical facts. Our actual earnings in the future may
differ greatly from these estimates and forecasts due to uncertainties in the environment
These forward-looking statements were deemed reasonable by the management at thetime of the creation of this report; sufficient caution must be exercised in making investment
decisions on the basis of these statements. In addition, we have no responsibility to update
information relating to these forward-looking statements in the future with the newest
information or to publicly announce revisions.

Business Environment
The Japanese economy this fiscal year remained in an extremely harsh situation. Reduced
capital investment and sluggish consumer spending have resulted in a decline in domestic
demand. Added to that were the U.S. economy slowdown and the September 11 terrorist attacks
which significantly affected corporate earnings.
The business environment of our core operation, printing, also remained difficult due to a declining
demand for printing and dropping unit prices caused by fierce competition among companies.

DNP Annual Report 2002

DNP Annual Report 2002and various risks that are mentioned later in this annual report.

RESULTS OF OPERATIONS

62

63

results this fiscal year were lower than the previous year due not only to a weakened domestic

Overview

economy caused by sluggish consumer spending, an overall decline in demand resulting from thedifficult business environment. To address the very real possibility of a global environmental

slow U.S. economy, but also to a drop in the sales of commercial printing caused by the negativechange in the future, the DNP management has formulated the DNP Group’s 21st Century Vision.

growth in domestic advertising spending, lackluster performance in packaging and decorative

This fiscal year, we created two types of solutions based on the DNP Group’s 21st Century

Management’s Discussion and Analysis

Management’s Discussion and Analysis

As we mark our 125 years of being in business today, we find ourselves in an unusuallymaterials, and a slight decline in the sales of soft drinks due to the unfavorable weather.

Vision: Production Solutions and a Business Design Solutions. Applying the two solutions, webegan to reform our business structure to provide our customers with new values and profits,
To bounce back from our unfavorable first half results, we implemented measures to reduce
our costs, such as a major cutback in capital investment and a reduction of labor costs and

Net Sales(¥ Billion)

percentage, meanwhile, increased slightly from the previous year’s 81.3% to 81.6%.
This fiscal year, particularly in the first half, the cost ratio tended to be higher due to an
overall drop in unit order prices, including a price drop in soft drinks. In the second half, however,other expenses.

1,400

Cost of Sales
Cost of sales this fiscal year decreased ¥20,223 million, or 1.9%, to ¥1,071,163 million. The

and continued to strongly reexamine existing operations and reform cost structures.

In handling capital investments, we conducted an overall reexamination of the investments

we were able to reduce our cost of sales by cutting back on capital spending to reduce depreci-of our entire Group from the perspective of utilizing existing facilities and distributing resources

ation costs, and by cutting the costs of our manufacturing division. We estimate that we haveefficiently. We focused our investments in strategic fields and eliminated unnecessary investments

saved about ¥8.5 billion in the cost of sales through our cost-cutting measures.

SGA Expenses to Net Sales(%)

which were not immediate. The attempt to cut back on the amount of investments resulted in

1,200

an actual ¥24.9 billion reduction from the initially projected investment of ¥110 billion, making

1,000

the final figure ¥85.1 billion. This has allowed us to post ¥2.2 billion less in our depreciation
800

Selling, General and Administrative Expenses
Selling, general and administrative expenses this fiscal year increased ¥3,821 million, or

14

12

2.3%, over the previous fiscal year to ¥168,529 million. Their percentage to net sales also

costs, which came to be ¥94.9 billion.

10
600

400

200

We are also putting a hold on most new hires to reduce the consolidated number of ourincreased from 12.3% to 12.8%. While the major contributing factor of the increased expenses

employees by 2,000 by March 31, 2003 from the September 30, 2001 figure. As of March

was the increased cost of sales promotions for our soft-drinks manufacturing operations, the2002, we had reduced the number of our employees by about 1,150, saving ¥1.4 billion in

result reflects our cost cutback efforts such as the cut in labor costs and indirect operationlabor costs.

expenses. We estimate that we have saved about ¥2.7 billion in selling, general and administra-

Because these measures yielded greater results than originally anticipated, and because the
0

98

99

00

01

02

tive expenses through such cost-cutting measures.

sales of our electronic products made a dramatic recovery starting in January 2002, we were able

8

6

4

2

Operating Income

to secure results that exceeded our revised goals, which we announced mid-term.

Our operating income this fiscal year was affected by the slump in our printing operations

0

98

99

00

01

02

and the income decline in our soft-drinks manufacturing operations. Thus, despite our stream-

As a result, our operating income margin declined 0.9 points to 5.5%.

lining measures implemented in the second half of the fiscal year and the rapid recovery of the
March 2002

Net Sales

Gross Profit Margin¥

1,311,934

March 2001¥

March 2000

1,342,035¥

1,286,703

sales of electronics products after January, our operating income declined 15.9% to ¥72,242
million, while our operating income margin fell from 6.4% to 5.5%.

(%)

(%)

Gross Profit Margin

18.4%

18.7%

19.3%

Operating Income Margin

5.5%

6.4%

6.7%

Income Before Income Taxes

20

Net Income
EPS¥

26,15015,609¥69,11633,409¥79,19939,034– Primary

20.55

43.99

51.40

– Fully diluted

20.53

43.45

50.47

Other Income and Expenses
This fiscal year, we recorded net other expenses of ¥46,092 million. The amount ofexpenses increased ¥29,267 million over the previous year.

10

Major factors that contributed to the increase in other expenses include the ¥30,806 million
in valuation losses in investment securities posted as part of the mark-down process of the8listed stocks we own, the ¥11,186 million loss in sales and the retirement of fixed assets posted

15

10

as part of the rebuilding of our production system for shadowmasks and lead frames, and the¥6,065 million annual amortization amount for the introduction of a new retirement benefit
accounting system in the previous year. This fiscal year was the second of the total amortization

Net Sales
This fiscal year, due to the overall slow sales growth, a drop in unit order prices and a5

drastic decline in shadowmask sales in the electronics division, our sales decreased 2.2% to¥1,311.9 billion.
98

99

00

01

02

Despite a dramatic recovery in the sales of our electronic products after January, our final

6

4

period of five years in which the transitional obligation is amortized equally.
Due to the above factors, our income before income taxes this fiscal year decreased a2significant 62.2% compared with the previous year to ¥26,150 million.
0

98

99

00

01

02

DNP Annual Report 2002

DNP Annual Report 2002

(Yen in millions, except EPS)

0

Operating Income Margin

ROE
(%)

64

65

Income Taxes
year to ¥10,335 million. The effective tax rate decreased from 49.6% to 39.5%.

7

Information Media Division

Management’s Discussion and Analysis

Management’s Discussion and Analysis

Our income taxes for this fiscal year dropped by 69.9% compared with the previous fiscal

With the growing uncertainty of the future of the world economy’s and the recovery of
the Japanese economy not yet in sight, consumer spending continued to be sluggish and

6

Net Income

order prices dropped. As a result, we found ourselves in a severe business environment

As a result of the above, our net income decreased 53.3% from the previous year to5¥15,609 million. This also led to a decline in our ROE from 3.58% to 1.65%.

4

in books and publications and commercial printing slowed down, resulting in an overall net

Our net income per share also decreased from ¥43.99 in the previous fiscal year to ¥20.55,

sales decrease in the Information Media Division by 3.4% to ¥614.2 billion.

and the diluted net income per share also decreased from ¥43.45 to ¥20.53.

3Books and Publications

2

This fiscal year, the Japanese publishing industry did not do well as sales declined

SEGMENT INFORMATION

10

this fiscal year. Despite increased earnings in our business form operations, our businesses

2.6% for books and 3.3% for magazines. The rapid popularization of the Internet, mobile
phones and video games, as well as the increase in the number of almost-new book stores

98

99

00

01

02

Our consolidated segments consist of 1) our printing operations in which we conduct
printing and contingent businesses, as well as apply printing technology to develop andmanufacture products and 2) our soft-drinks manufacturing operations in which weand recycled book stores, affected the already-harsh market to continue its fifth
consecutive year of shrinking sales.
In this business situation, we made aggressive marketing efforts and obtained printing
orders for new books such as cookbooks, game books and health-related books to

manufacture and sell soft drinks in Hokkaido in northern Japan.
The printing operations consists of three divisions according to products: information

Sales by Division*
Electronic
Components
andInformation Media
Supplies
18.9%

(%)

increase our book printing sales, however slightly. Magazine printing sales, on the other
hand, were significantly affected by the rise in the number of discontinued publications

media, lifestyle products, and electronic components and information media supplies.

Information
Media
54.7%

such as the well-known Japanese photo-journal magazine, Focus. Our printing sales ofboth weeklies and monthlies decreased from the previous year. Although, as the need forPrinting

the network distribution of contents increased, we received more website orders by such

Lifestyle
Products
26.4%

publishing houses as Shueisha and Kodansha, overall sales of books and publications
Printing

decreased by 1.5% from the previous fiscal year.
March 2002

Net sales¥

1,238,835

March 2001¥

1,268,415

March 2000¥

1,210,028* Non-consolidated figures

The number of new magazines published this fiscal year was 165, a decrease of 40
magazines from the previous year’s 205. However, we obtained orders for 35% of the newmagazines, which was an increase from the previous year’s 29%. Meanwhile, the number

Operating Income
Operating Income Margin

71,667
5.8%

82,546
6.5%

79,931
6.6%(yen in millions)

1,400

were our accounts affected and reduced our sales more this fiscal year.

This fiscal year, our consolidated net sales in our printing operations decreased overall by

believe that the recovery in the number of new publications and other signs indicate that the

2.3% to ¥1,238,835 million. Our operating income also decreased by 13.2% to ¥71,667 million,

industry has bottomed out and sales will level off for the time being. Despite the stagnantion

while the operating income margin decreased from 6.5% to 5.8%.

in sales growth, we intend to secure our income by promoting cost-cutting measures.

The printing operations are a segment that comprises 94.4% of net sales and 99.2% of theoperating income in DNP’s consolidated statement this fiscal year. The printing operations

1,200

This fiscal year, advertising expenses in Japan decreased to ¥6,058 billion, which isfor these operational divisions, we can only disclose non-consolidated figures. However, the

99.1% of the previous year’s advertising expenses. The decline became particularly steep

difference between the non-consolidated figures and the consolidated figures of the divisions inafter August.

the printing operation is minimal.

600

400

All of the following information on the three divisions of our printing operations – Information
Media Division, Lifestyle Products Division and Electronic Components and Information Media

increase our number of orders through vigorous marketing activities. Although orders for

Supplies Division – are non-consolidated, Dai Nippon Printing Co., Ltd. information and were200

provided as supplementary material for our readers.
98

99

00

01

02

Accordingly, we continued to remain in a tough business environment as competition
for orders intensified and the demand for reducing unit prices grew stronger. We strove tocatalogs increased over the previous year, the slump in the retail and mail-order industries
caused sales of flyers, pamphlets, POP (point of purchase) and premiums to decline.

DNP Annual Report 2002

DNP Annual Report 2002

800

Commercial Printing

include three independent operation divisions. Because we do not compile consolidated figures
1,000

0

Compared with the previous year, the increased number of discontinued magazines that
While we cannot expect or foresee a major expansion in the publishing industry, we

Sales in Printing Operation(¥ Billion)of magazines discontinued this fiscal year was 140, of which 39% were our accounts.

66

for beverages, which utilizes our original technology. As a result, we have secured orders

direct-mail notices, also died down. As a result, our overall sales in commercial printing

for three lines in the next fiscal year for companies such as the Coca-Cola Group. This isdecreased 5.7% from the previous year.

expected to boost next year’s sales.

Business Forms

Decorative Materials

Sales this fiscal year in our business-forms printing operations increased by about

Housing starts for the fiscal year ended March 2002 decreased by 4.67% from the

1.5% over the previous fiscal year. While sales of prepaid cards decreased from theprevious year to 1.174 million units, falling below the 1.2 million mark for the first time inprevious year, sales of IPS (Information Processing Services) such as personalized direct

three years. This was due to employment insecurity and fears of assets deflation in Japan,

mail services, as well as smart cards, grew significantly.

which prompted an increase in the number of rental housing while putting a hold on the

IPS orders increased for direct-mail notices related to the integration of financial institu-

construction of new condominiums, which had thus far continued to grow steadily. With

tions, share allotment letters accompanying the demutualization of life insurance

the added drawback of the drop in the construction of public-financed houses, Japan’s

companies, and statements for credit companies. As for smart cards, which are quickly

building materials market did not fare well this year.

gaining momentum as the future in bank, credit and other financial cards, we handle
application software for banks, having developed an operation system called MULTOS.

67
Management’s Discussion and Analysis

Management’s Discussion and Analysis

Demand for last year’s strong items, such as trading cards and the one-time MYLINE

Our exports, meanwhile, experienced a steady growth with the increase in housing
starts in the United States and a strong sales growth in Europe.

This puts us at an advantage for receiving smart card orders as our involvement with the

As awareness for environmental protection grew, so did the need for environmentally

system has earned us the honor of being the first company to be authorized by thefriendly housing material replacements. We responded by striving to expand the sales ofJapanese Bankers Association. Currently, we practically hold a 100% share in the smart

our non-vinyl-chloride products.

debit card market for banks that have indicated their intention to replace their current debit

Overall, despite our growth in exports buoyed by the weak yen and the introduction ofcards with smart debit cards. In the fiscal year ended March 2002, there was a demand for

new brands, the drop in the housing demand at home affected us significantly; our net

about 40 million smart cards. In the fiscal year ending March 2003, that demand issales decreased by 7.2% from the previous fiscal year.

expected to grow to about 60 million, with increases in demand for smart credit cards,
smart debit cards, smart employee ID cards and cards for mobile phones. We have thus
far gained a share of more than 50% in the multi-function smart card market.
As smart cards become more multi-functional, the two basic operation systems thatwill be employed are MULTOS and JAVA. As DNP is the only company in the world thatdeveloped the two operation systems, we intend to use that advantage to promote orders
and expand our royalty business.

Electronic Components and Information Media Supplies DivisionThis fiscal year, sales of electronic components and information media supplies
decreased 3.3% from the previous year to ¥211.5 billion, due to a slump in the sales of
personal computers and recession in the semiconductor industry.
Electronic Components

We also plan to increase our production system from the current 1.5 million cards a monthThis fiscal year, the slump in the sales of personal computers and recession in theto 5 million cards a month in the fiscal year ending March 2004. This is based on our mid-term

semiconductor industry put a damper on the electronic component market. While sales ofprojection that the demand for smart cards will almost double between the fiscal year endingcolor filters, projection screens and photomasks increased, sales of lead frames andMarch 2004 and the fiscal year ending March 2005, from 160 million cards to 210 million cards.

shadowmasks drastically decreased, resulting in a slow year overall. In the first half, thesales decrease was steep, at 7.7%. In the second half, however, sales bounced back to an

Lifestyle Products Division
Sales of our lifestyle products were ¥296.1 billion, a decrease of 3.8% from theincrease of 3.3% over the same period the previous year due to a substantial increase in
the sales of color filters and an apparent end to the falling sales of shadowmasks. Sales forprevious fiscal year.

the year overall thus settled at a 2.4% decrease.

Packagingin the sales of personal computers and the rapid replacement of conventional displays bySales of shadowmasks for personal computer displays fell drastically due to the slump
liquid-crystal displays. We, however, secured orders for consumer TVs in the second half ofthe year, reducing the sales decrease to about 30% from the first half’s 40%. The overall

deflation. Despite a sales increase in flexible packaging for food and snack products, sales

sales decrease for the fiscal year thus stands at 35%. We have also taken drastic

of general paper and plastic containers decreased.

measures to scrap some production facilities to reduce our monthly production capacity

Meanwhile, our efforts to develop and sell environmentally friendly products forfrom 7.2 million units to 4.5 million units. Having shifted to this higher-efficiency production

recycling and preserving the environment have resulted in increased sales of refill packages

system to improve our profit margin, we now have the prospect of securing earnings forfor plastic containers and bottles. We also promoted the sales of our asceptic filling system

the next fiscal year and beyond. The ratio of our shadowmask sales for use in personal

DNP Annual Report 2002

DNP Annual Report 2002

This fiscal year, sales of our packaging products decreased by 2.6%. This is due to themarket slump caused by a drop in consumer spending and lower selling prices owing to68computers and consumer TVs was 80:20 as of March 2001. By March 2002, the69

Beverages

Management’s Discussion and Analysis

Management’s Discussion and Analysis

percentage of consumer TVs had increased to 40%. We plan to raise this percentage to
Beverages

50% or more by March 2003.
Meanwhile, sales of our color filters dramatically increased. Despite being affected by thedrop in unit prices, our insightful measures to meet the rapidly growing demand for color filters
by expanding our production capacity and establishing an OEM system with Taiwan’s Sintek
Corporation resulted in a 70% increase in production volume and a 49% increase in sales.
As for projection screens, we gained a 50% worldwide share as our sales continued toMarch 2002

Net sales¥

73,099Operating Income

575

Operating Income margin

0.8%

March 2001¥

73,620March 2000

¥

3,395

76,675
5,956

4.6%

7.8%
(yen in millions)grow strong by a 15% increase over the previous year.
We were able to secure a 10% increase in the sales of our photomasks despite thecontinuing slump among Japan’s semiconductor-related manufacturers and stagnant

This fiscal year, sales were weak in our soft-drinks manufacturing operations despite steady

growth in overseas orders in the second half of the year. Despite only a slight increase in thesales in tea beverages. The negative factors were the price competition led by large retailers,sales volume, we increased our sales by raising the percentage of our cutting-edge masks,

intense sales promotion competition, serious economic recession in Hokkaido where corporate

which resulted in higher unit prices. As for lead frames, the fall of their sales volume came tobankruptcies were numerous, and bad weather during the high season.

a halt as semiconductor production recovered in the second half of the year. As a result, thedecrease in sales took a slight turn for the better, as the sales decrease came to 35%.
Overall, we are beginning to see a brighter future in the growth of electronic
components as sales of personal computers recover and the once-plunging semiconductor market stabilizes. We have recorded a positive growth in the second half of theyear, as our monthly performance after January also shows a double-digit growth.

In such an environment, we introduced new products and new packages to meet
consumers’ diversified needs, as well as launched advertising campaigns and sales promotions
as part of our aggressive sales activities.
We also strove to improve our productivity and energy efficiency. We also were first amongbottlers to employ production equipment for paper-pack products.
As a result, sales in our soft-drinks manufacturing operation decreased 0.7% to ¥73,099
million. Operating income decreased 83.1% to ¥575 million.

DNP’s Global Market Share in Electronic Operations

Global Market Share (%)

FY ended
March 2002

Products

Shadowmasks

Color filters

CDT+CPT (Excluding house-manufactured products)40

CDT (Excluding house-manufactured products)

45

Excluding house-manufactured products

Projection screens

27
53

Photomasks

Including house-manufactured products

19

Leadframes

Etching type

36

CDT= Masks for PCs; CPT= Masks for TVs

Information Media Supplies
This fiscal year, despite growing sales in lithium-ion rechargeable batteries, overallsales of information media supplies decreased 6.8% from the previous fiscal year due to

LIQUIDITY AND CAPITAL RESOURCES
We believe that the foundation of our financial strength and an important factor inin the fiscal year ending March 2003, we will continue to secure sufficient liquidity needed for120

DNP to maintain and expand its business.

100

Cash Flows
Free cash flow is cash flow that we can invest freely in fields that contribute to DNP’s

60

free cash flow of ¥35,875 million.

40

slow to sell are high-price-range personal printers for digital cameras utilizing our
sublimation transfer ribbons. Until the price for such personal printers comes down, we
expect a growth in demand for commercial-use printers for DPE and convenience stores.

March 2002

Cash flows provided by operations¥

133,830

March 2001¥

116,728

March 2000¥

122,809

Business reinvestment(97,955)(72,879)(108,058)

Free cash flow

35,87543,84914,751(yen in millions)This fiscal year, cash flows from operating activities increased 14.7% over the previous fiscal
year to ¥133,830 million. Factors for this increase include this fiscal year’s lower inventories.

20

0

98

99

00

01

02

* Includes capital expenditures forintangible fixed assets

DNP Annual Report 2002

DNP Annual Report 2002

increase, demand for color printers decreased 6.6% over the previous year. Particularly

80

advancement. It is also a source of corporate value. This fiscal year, we were able to generate aordinary-paper facsimile and sublimation transfer ribbons for color printers.
The number of digital cameras sold in Japan between January and December of 2001(¥ Billion)

to enable us to continue investing in growth areas. We, the management, remain convinced that

our inventory adjustment which caused a sales decline in liquid-thermal transfer ribbons forgrew a whopping 43% over the same period last year to 14.8 million. Despite such an

Capital Expenditure

enhancing our value as a corporation is our ability to generate cash from our operating activities

70

term bank loans to ¥10,943 million due to the improved status of funds at some subsidiaries,

the previous fiscal year to ¥79,563 million. This decrease was due primarily to a reduction in

the 44% reduction in income taxes payable to ¥12,475 million, and the ¥21,769 million, or(¥ Billion, %)short-term investments.

25.4%, reduction in other current liabilities to ¥64,012 million.

Meanwhile, the cash flows we used in our financing activities this fiscal year decreased
13.66% from the previous fiscal year to ¥25,594 million.
25

2.0

1.5

obligation and the ¥3.2 billion that resulted mainly from the amortization of deferred actuarial

fiscal year increased by 20.7% to ¥189,615 million.

losses and prior service costs.

business strategies in a flexible manner and to respond to changes in our businessenvironment. As a rule, we take care to always retain cash at hand for an amount equivalent to

10

1.0

two months of our monthly sales. We are aware that maintaining liquidity is particularly
important in light of the instability of today’s financial institutions and the trend of the primary5

0.5

Total Assets

market of corporate bonds.

(¥ Billion)¥44,335 million due primarily to the ¥6 billion annual five-year amortization of transition

cash from newly consolidated subsidiaries, our cash and cash equivalents at the end of theWe, the management, make certain we maintain sufficient liquidity to implement our15

Our long-term liabilities this fiscal year decreased by 8.1% to ¥79,013 million. The factors
for this included the ¥11,730 million, or 36%, increase of provisions for retirement benefits to

Because of the ¥30,639 million increase due to these activities and the ¥1,898 million in

20

71
Management’s Discussion and Analysis

Management’s Discussion and Analysis

Cash and the cash equivalents we used in our investing activities decreased by 32.9% from
Research and Development
Expenditures

1,500

The factors also included the ¥19,181 million, or a 39.3% decrease, of convertible bonds
outstanding to ¥29,663 million due to their transfer to current liabilities.

1,250

As a result of the above, our total liabilities at the end of this fiscal year decreased by 11.8%
1,000

to ¥460,691 million.
Meanwhile, our total stockholders’ equity at the end of this fiscal year increased by 0.8% to750¥946,998 million due primarily to our net income this fiscal year.
500

0

98

99

00

01

02

0

The Balance Sheet
So that DNP can increase its corporate value, we, the management, always keep in mind

% to net sales (right scale)* Non-consolidated figuresarranging our capital composition to suit the business environment and to minimize our cost of capital.

RISK MANAGEMENT
Under the normal course of business, we are exposed to various market risks arising from

250

0

98

99

00

01

02

01

02

fluctuations in foreign exchange rates, interest rates and stock markets. For example, this fiscal
March 2002
Total Stockholders' Equity
and Equity Ratio

Total assets (million yen)¥

1,432,458

March 2001¥

1,489,871¥

March 2000

year, about 11.5% of our net sales consisted of overseas sales, and to that extent, we were1,442,307

exposed to risks in currency market fluctuations. To totally eliminate or reduce some of the risks(¥ Billion, %)

1,000

65

800

60

from foreign exchange rates, we mainly use forward exchange contracts.

Current ratio

1.81x

1.65x

1.60x

Working capital-to-net sales

0.23x

0.21x

0.20x

Debt/equity ratio

0.08x

0.09x

0.08x

the balance sheet of the DNP Group. Also, although we hold various listed and unlisted stocks

Leverage ratio

1.51x

1.59x

1.56x

for strategic holding and investment purposes, and thus are exposed to stock price fluctuation

Book value per share (yen)¥1,246.99¥

1,236.96¥

1,218.79

For interest risks arising from our investing and day-to-day cash management activities,
however, we do not enter into hedging transactions as these risks have only a minor impact on

Current Ratio

risks, we do not hedge these equity positions.

(times)

We do not enter into derivative transactions for purposes other than to avoid such risks.
600

55

400

50

200

45

DNP’s total assets at the end of this fiscal year decreased 3.9% from the previous year to¥1,432,458 million.
Total current assets decreased by 4.3% to ¥690,010 million due to factors such as tradereceivables decreasing by 5.1% to ¥411,336 million and inventories decreasing by 11.1% to¥76,401 million.
Investments and advances at the end of the fiscal year decreased by 13.7% to ¥133,678

0

98

99

00

01

% equity ratio (right scale)02

40

million due primarily to the ¥21,796 million decrease in investment securities that resulted fromThus, these transactions are not at all for investment purposes or short-term trading purposes.
All exposures from any transactions of derivative financial instruments that we engage in are
We also maintain a strict control system in which it is necessary to obtain our company
director’s prior approval to engage in transactions of the said instruments. Our Accounting
derivative transactions within the range set forth in our internal rules.

¥15,409 million increase this fiscal year due to deferred tax assets which resulted fromare accompanied by the credit risks of the counter-party banks. However, all transactions weinvestment securities write-downs and provisions for retirement benefits which were notengage in are with banks of high credit standing. Hence we assume that we run a negligible risk

recognized as losses for tax purposes.

of bearing losses from such credit risks.

Meanwhile, in liabilities, our current liabilities at the end of this fiscal year decreased by
12.5% from the previous year to ¥381,678 million. The main factors for this were the ¥33,787
million, or 11.4%, decrease in trade payables to ¥261,920 million, the 35.1% decrease in short-

Besides such risks, we may be exposed to non-financial or imponderable risks during our
day-to-day operations. These risks include country risks, credit risks and legal risks. Because
they are unpredictable, we did not describe them in this Annual Report. As for legal actions, we
did not have any pending as of the end of the fiscal year under review.

1.0

0.5

0

98

99

00

DNP Annual Report 2002

DNP Annual Report 2002

In addition, because all our derivative transactions are over-the-counter transactions, they

Property, plant and equipment decreased 3.0% to ¥543,962 million due to a hold on capital

1.5

Division and others control and execute methods and limit transactions related to all our

introducing current-value accounting and posting valuation losses. Otherwise there was ainvestments in the second half of the fiscal year.

2.0

offset by reciprocal risks of assets or liabilities held on our balance sheet.

Environmental Accounting(For details, please refer to DNP Group Environmental Annual Report 2002.)
Environmental conservation benefits(*Years ended March 31)

At DNP, we promote highly effective environmental conservation activities through environmental accounting.
Details of benefits

Category of index showing benefits

Purpose:
1. To utilize environmental accounting as an environmental management
tool for the entire DNP Group.
● Compile and categorize expenses incurred on environmental conservation,
as well as their results, and use them as reference to evaluate and verify theeffectiveness of environmental conservation activities.
● Use environmental accounting as reference to determine individual environmental conservation measures, and for determining Group-wide environmental conservation expenses and investments.
● In an effort to continuously improve environmental performance, use
environmental accounting as reference to verify the results and theachievement levels of the year’s environmental conservation activities.

72

Environmental conservation cost(yen in millons)

2002*

Details of major efforts

Antipollution costs

2,697

2,267

651

1,313

Global environmental
conservation costs

1,255

924

1,226

256

Controlling room temperature and lighting, using inverter-power and introducing cogeneration systems

Resource recycling costs

3,801

3,163

129

79

Sort-and-recycle; zero-emission (using RPF as cement material)(Total costs at the businesspremises)

7,753

6,354

2,006

1,648

(2) Up/downstream costs

267

195

Designing environmentally friendly products; bearing container and packaging recycle
costs(3) Management activity costs

1,147

2,044

Cost of ISO14001 judging and registration fees; environmental measurement costs; costof preparing environmental reports(4) R&D costs

2,501

1,704

Research and development of environmentally friendly products and production
methods

12(6) Environmental damage
costs

0

0

11,761

10,309Total

Supplied main raw
materials (paper,
plastic, metal, etc.)*(including ¥1 million for WWF and ¥40,000 for GPN)
(yen in millons)

Acquired priceBook value

7,074

4,075

2,999

Antipollution equipment

Major environmental conservation equipment
Dust collector, wastewater processor, oily water separator, deodorizing equipment,
solvent recovery equipment

Global environmental
conservation equipment

4,971

2,828

2,143

Cogeneration system, inverter, ice thermal storage system

Resources recycling
equipment

4,308

2,778

1,530

Exhaust heat waste incinerator, waste can press machine, dust collector for recovering
paper dust

Total

16,353

9,681

6,672

Environmental conservation costs to total costs ratio
Details of major environmental conservation costs

Category

Consolidated
total costs

Environmental
conservation
costs

Amount invested during thesaid period

85,096

1,648

1.94%

Solvent and exhaust gas recovery and refining equipment, oily water separation tank,deodorizing equipment, etc.

R&D costs during the said
period23,367

1,704

7.29%

Non-vinyl chloride decorative sheets, non-aluminum packaging materials, waterbased ink, etc.

Details

Antipollution
efforts

Globalenvironmental
conservation

Recycling
resources

Total amount

Depreciation expense for the year ended
March 31, 2002

646

524

384

1,554

Of the above, amount appropriated as investment
prior to the year ended march 31, 2001

492

497

378

1,367

Of the above, amount appropriated as
investment in the year ended March 31, 2002

154

27

6

187

Personnel costs for full-time workers are calculated at cost while personnel costs for workers holding two or moreposts are calculated at 1/10 or 1/5 the average personnel cost per person, depending on the worker’s assigned duty.
R&D costs are the total cost incurred at 10 R&D centers on researching and developing products and manufacturing
equipment that have minimal negative environmental impact.

4.40

4.21

-0.19

0.19TJ was reduced per added value of 100 million yen.

14,343

-972

3.57

3.23

-0.34

Supplied amount (in thousands of tons)

2,481

2,469

-12

Including raw materials for ink and beverages

Amount of unwanted materials
generated/supplied amount (%)

17.7

15.4

-2.2

Excluding unwanted materials that do not correspond with themain raw materials

SOx emission (tons)

77.2

74.5

-2.7

Calculated from fuel usedNOx emission (tons)

621.6

620.4

-1.2

Calculated from supplied energy

Emissions of negative environmental impact
substances (354 PRTR substances) (t)

8,936

5,115

-3,821

340 tons were reduced per added value of 100 million yen.

Amount of transported negative environmental
impact substances (354 PRTR substances) (tons)
Emissions of greenhouse- gasses (1,000 tons CO2)
Added-value unit consumption for the above(Ton/100 million yen)

Total of 10 substances subject to be reported

22.6

32.3

9.7

Calculated from the amount of discharged water and average
concentration

0

9.6

9.6

One substance (Hydrazine)

646.1

519.4

-126.7

133.8

105.0

-28.8

0.312

0.236

-0.07673

Including unwanted materials other than from the main raw
materials

76kg of generated waste materials were reduced per addedvalue of 1 million yen.

71.9

74.2

2.3

Including heat recovered on site

1,672

2,400

728

Total of 23 substances subject to be reported

837.4

833.7

-3.7

Including amounts emitted by incinerators and drying furnaces.

195.4

187.7

-7.7

7.7 tons of emissions were reduced per added-value of 100
million yen.

480.5

402.3

-78.2

1.69

1.56

-0.13

0.13 tons of CO2 emissions were reduced per 1 ton of products.

6,069

5,272

-797

CO2 emissions were reduced by 797 tons.

114

95

-19

19 tons of CO2 were reduced per million ton-km.

(2) Benefits of up/downstream costs
Benefits related to goods produced by business activities
CO2 emissions at the CO2 emissions (1,000 tons - CO2)
time of disposing ofproducts
CO2 emissions/product shipment volume(3) Other environmental conservation benefits(6) Calculation basis for environmental conservation benefits
DNP uses consumption per added-value as indicator for the volume of resources (energy and water) spent on
business activities, as well as for the volume of waste materials and CO 2 emissions. The added-value amount iscalculated at the same standards as the “Management Analysis of Japanese Corporations” issued by the Ministry ofInternational Trade and Industry.
The recycle rate of waste materials represents the percentage of the weight of unwanted plant-generated materials
that were recycled on- and off-site.
Benefits of up/downstream costs are the benefits of reduced CO 2 emissions at the time of the disposing of containerand packaging products.
Benefits related to negative environmental impact during transportation are the benefits of reduced CO 2 emissions at
the time of product transportation by the distribution company that is included in DNP’s consolidated accounting.
(7) Calculation basis for the economic benefits of environmental conservation measures
Cost-saving benefits were calculated by the formula:(Energy consumption per added-value amount or waste processing cost per added value of benchmark period –those of this period) x value-added amountFor the benchmark period, the consumption or cost per value is the overall average of the three years prior to thisfiscal year. However, in calculating unit consumption for the benchmark period, the energy cost was adjusted to thisfiscal year’s price level due to dramatic price fluctuations.
While we showed economic benefits for each of our efforts such as “Energy-conservation benefits by cogeneration”
and “Benefits of exhaust heat usage by incinerators” for fiscal year 2000, for fiscal year 2001, we complied with theEnvironment Agency’s “Guidelines for the year 2002” and depicted economic benefits as the amount of cost savings
adjusted by the business activity amount.

CO2 emissions during product transportation(ton)
CO2 emissions during transportation/(Transportation weight x Transportation
distance)(ton/million ton-km)

Economic benefits of environmental conservation measures(yen in millons)(*Years ended March 31)

Amount in yen

Details of benefits

Remarks

2000*

2001*

Difference

63,03275,731

12,699

1,140

919

-221

Saleable unwanted materials decreased.

Saving energy costs by energy conservation

-551

1,049

1,600

Energy cost unit consumption dramatically improved.

Saving waste-materials processing costs by
resource conservation

618

917

299

(1) Increased sales
Economic benefits of R&D costs
Sales of environmentally friendly products

20.1% increase from fiscal year 2000

(2) Increased income
Benefits of resource recycling costs
Business income from recycling unwantedmaterials(3) Cost savings
Benefits of global environmental conservation and resource recycling costs

Environmental conservation costs and environmental conservation measures
While the amount invested in environmental conservation equipment decreased 17.8%, or 358 million yen, from theprevious year, about 1.3 billion yen, or 80% of the entire amount, was spent on antipollution measures such as
deodorizing equipment and solvent recovery equipment.
While environmental conservation costs such as costs at the business premises and R&D costs were generally
reduced, environmental management activity costs were increased.
Environmental conservation benefits
All benefits related to supplied resources such as energy, water and main raw materials were improved.
Indexes related to negative environmental impacts such as the atmosphere, waste materials and greenhouse gasses
are steadily improving.
While we reduced emissions of PRTR (Pollutant Release and Transfer Register) substances to the atmosphere by
42.8%, the volume of materials transported as waste materials increased due to materials recycled under inverse
onerous contracts.

Processing cost unit consumption improved by reducing thevolume of waste generated.

Economic benefits of environmental conservation measures
Sales of environmentally friendly products increased 20.1% from the fiscal year 2000, meeting the DNP Group’s goalof a 10% increase from the previous year.
The sales of environmentally friendly products accounted for 5.8% of consolidated sales, up from 4.7% in the fiscal
year 2000.
Income from recycling unwanted materials decreased 221 million yen due to the reduction in saleable unwantedmaterials, especially wastewater and waste metals.
Benefits of cost reduction are calculated by (7) under Basic matters upon calculating environmental accounting
information in the preceding page.
In the fiscal year 2001, despite the added-value amount increasing 9.0% from the benchmark period (three-year
average between fiscal 1998 and fiscal 2000), we gained economic benefits of substantial cost reductions due to unit
consumptions improving in both energy consumption and generated waste materials.

DNP Annual Report 2002

DNP Annual Report 2002

Basic matters upon calculating environmental accounting information:(1) Period covered: April 1, 2001 through March 31, 2002 (Environmental conservation equipment is that appropriated asof March 31, 2002)(2) Companies covered: Of the companies included for consolidated accounting purposes, all manufacturing companies inJapan (37 companies and 53 sites), one distribution company and one in-house meal providing company, excluding six
trading, real estate sales, teaching material sales, software development and other companies.
(3) Unit: All monetary figures are in millions of yen (Rounded off to the nearest millions)(4) Announcement format: The format has been changed to the Comprehensive Benefits Comparison Format in the
Ministry of the Environment “Guidelines for the year 2002.” Thus, the previously shown details of environmental
conservation costs are not shown this year. However, environmental conservation equipment and sales of environmentally friendly product are shown.
(5) Calculation basis for environmental conservation costs
The environmental conservation costs include depreciation expenses for investments. Depreciation is implemented inaccordance with corporate tax law regulations.

All energy used was converted into average calorific values.

Benefits related to negative environmental impact during transportation(yen in millons)

Percentage ofenvironmental
conservation costs-143

15,315

Recycle rate (%)

Emissions ofgreenhousegasses

1,648

Accumulated
depreciation

18,702

Added-value unit consumption for the above(1,000 ton/100 million yen)

Water usage (in thousands of tons)

Discharges to water COD discharge (ton)areasDischarges of negative environmental impact
substances (354 PRTR substances) (t)Generated unwanted materials (in thousands
Discharge of waste of tons)
materials
Discharged waste materials (in thousands of
tons)
Added-value unit consumption for the above(1,000 ton/1 million yen)

Planting trees and greenery outside the plant premises; supporting activities of environmental conservation organizations*

2,006

Energy consumption (TJ)
Added-value unit consumption for the above(TJ/100 million yen)

Changing fuel (to LPG), adding an oily water separation tank and deodorizing equipment

Environmental conservation equipment
Category

Supplied energy

Emissions to theatmosphere93

18,845

Benefits related to supplied resources

Benefits related to negative environmental impacts(1) Costs at the businesspremises(5) Community activity costs

Difference

Environmental Accounting

Environmental Accounting

2001*

Investment
2001*
2002*

Remarks

2001*(1) Benefits of costs at the business premises

Supplied water(*Years ended March 31)

ExpenseCategory

2. To utilize environmental accounting as a communication tool with the public.
● Use environmental accounting as reference to publicize DNP Group’s
environmental conservation efforts and results.
● Use environmental accounting as reference material to solicit commentsfrom shareholders, customers and local residents, and to get feedback for
DNP’s environmental conservation activities.

Index value
2000*

Selected Financial Data (unaudited)(For details, please refer to DNP Data Book 2002.)

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries

2001

2002

74

2000

1999

1998

1997

1996

1995

1994

Income Statement Data (¥ million)¥

1,311,934¥

1,342,035¥

1,286,703¥

1,269,543¥

1,336,604¥

1,310,100¥

1,245,300¥

1,192,827¥

1,145,535

Cost of sales

1,071,163

1,091,386

1,039,006

1,033,926

1,056,962

1,028,614

983,301

945,570918,386

Gross profit

240,771

250,649

247,697

235,617279,642

281,486

261,999

247,257

227,149

Selling and administrative expenses

168,529

164,708

161,811

166,008

172,824

170,298

161,609

156,536

147,180

Operating income

72,242

85,941

85,886

69,609106,818

111,188

100,390

90,721

79,969

Income before income taxes and minority interests

26,15069,116

79,19977,703

100,634

107,394

98,103

101,542

82,980Net income

15,60933,40939,03430,49356,53956,16552,97449,20040,80875
Selected Financial Data (unaudited)

Selected Financial Data (unaudited)

Net Sales

Balance Sheet Data (¥ million)
Total assets¥

1,432,458¥

1,489,871¥

1,451,700¥

1,445,293¥

1,450,709¥

1,410,138¥

1,336,689¥

1,274,581¥

1,213,125

Property, plant and equipment-net

543,962

561,017561,898

570,860

536,364

501,622461,158434,809417,868

Long-term liabilities

79,01386,012

77,637

100,695

100,214

97,340106,792

113,295

118,029

Total liabilities

460,691

522,105

495,541

518,323

538,113553,172

532,451

514,117494,544

Total Stockholders’ equity

946,998

939,441925,646

898,646

885,507831,262

780,484

738,243

699,860

93.65

n.a.

n.a.

Other Selected Data (¥ billion)
Capital expenditures

¥

85.10

¥

103.05¥113.86¥119.37¥111.34¥113.66¥R&D expenditures

23.37

24.66

23.57

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Depreciation expenses

94.87

94.31

94.59

82.80

73.91

67.58

62.42

n.a.

n.a.

65.63

¥54.45Per Common Share Data (¥, shares)
Earnings per share - primary

¥

20.55

¥

43.99

¥

51.40

¥

40.15

¥

74.49

¥

74.52

¥

70.63

¥

Earnings per share - fully diluted

20.53

43.45

50.47

39.54

72.53

72.15

68.19

n.a.

n.a.

Dividends paid per share

18.00

18.00

18.00

18.00

18.00

17.00

16.00

15.00

14.00

1,246.99

1,236.96

1,218.79

1,183.24

1,165.94

1,102.56

1,040.49

984.61

933.63

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

753,940,533

750,110,275

749,779,633

749,613,920

Book value per share
No. of common shares outstanding - primary
Financial Ratios (%, times)
As a percent of net sales:

18.35%

18.68%

19.25%

18.56%

20.92%

21.49%

21.04%

20.73%

19.83%

Selling, general and administrative expenses

12.85

12.27

12.58

13.08

12.93

13.00

12.98

13.12

12.85

Operating income

5.51

6.40

6.67

5.48

7.99

8.49

8.06

7.61

6.98

Income before income taxes and minority interests

1.99

5.15

6.16

6.12

7.53

8.20

7.88

8.51

7.24

Net income

1.19

2.49

3.03

2.40

4.23

4.29

4.25

4.12

3.56

Return on equity

1.65

3.58

4.28

3.42

6.59

6.97

6.98

6.84

5.96

Current ratio

1.81x

1.65x

1.60x

1.59x

1.65x

1.60x

1.62x

1.65x

1.63x

Debt-to-equity ratio

0.04x

0.06x

0.06x

0.08x

0.08x

0.09x

0.11x

0.12x

0.14x

DNP Annual Report 2002

DNP Annual Report 2002

Gross profit

Financial Statements

Consolidated Balance Sheets
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2002 and 2001

76

Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

2001

2002

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2002 and 2001

AssetsLiabilities and Stockholders' Equity

Current assets:

Current liabilities:¥

189,615298
3,165
411,336(5,806)
76,401
15,001
690,010¥

157,078 $
32,3802,020
433,417(5,806)85,931
16,327
721,347

1,425,677
2,240
23,797
3,092,752(43,654)574,444112,789
5,188,045

Short-term bank loans (Note 7) ...................................................................................
Current portion of long-term debt (Note 7)...................................................................
Trade payables (Note 10) ............................................................................................
Accrued expenses (Note 10) .......................................................................................
Income taxes payable (Note 13) ..................................................................................
Other current liabilities .................................................................................................
Total current liabilities ...............................................................................................

2002

¥

10,943
19,959261,920
32,26012,47544,121
381,678

2001¥

16,8701,101
295,707
34,53022,27865,607436,093

2002$

82,278150,068
1,969,323
242,556
93,797331,737
2,869,759

Long-term liabilities:
Investments and advances:Non-consolidated subsidiaries and associated companies (Note 10)...........................
Investment securities (Note 5)......................................................................................
Other...........................................................................................................................
Total investments and advances ..............................................................................

11,651
121,008
1,019
133,678

10,486
142,804
1,568
154,858

87,602909,834
7,662
1,005,098

Property, plant and equipment, at cost (Note 7):

33,73044,335948
79,01353,34032,605
67
86,012

253,609333,346
7,128
594,083

Minority interests .........................................................................................................

24,76928,325

186,233

Common stock Authorized : 1,200,000,000 shares;
Issued :759,480,693 shares in 2002 and 2001 (Notes 7 and 9) ..........................
Capital surplus (Note 9) ...............................................................................................
Retained earnings (Note 9) ..........................................................................................
Unrealized gain on available-for-sale securities ............................................................
Foreign currency translation adjustments ....................................................................
Treasury stock, at cost 54,838 shares in 2002 and 2,484 shares in 2001 ...................
Total stockholders' equity ........................................................................................

114,464
144,898
688,491
1,625(2,409)(71)
946,998

114,464
144,898
685,760(5,678)(3)
939,441

860,632
1,089,459
5,176,624
12,218(18,113)(534)
7,120,286

Total liabilities, minority interests and stockholders' equity ........

¥ 1,432,458¥ 1,489,871$ 10,770,361

Contingent liabilities (Note 16)

Land ...........................................................................................................................
Buildings .....................................................................................................................
Machinery and equipment ...........................................................................................
Construction in progress .............................................................................................
Total.........................................................................................................................
Accumulated depreciation...........................................................................................
Net property, plant and equipment...........................................................................

114,096
396,194
864,072
9,327
1,383,689(839,727)
543,962

105,176
391,616
866,836
6,873
1,370,501(809,484)
561,017857,865
2,978,902
6,496,782
70,128
10,403,677(6,313,737)
4,089,940

Other assets (Note 13) .................................................................................................

64,80852,649487,278

Total assets .............................................................................................

¥ 1,432,458¥ 1,489,871$ 10,770,361

Stockholders' equity:

DNP Annual Report 2002

DNP Annual Report 2002

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

Long-term debt (Note 7)..............................................................................................
Liability for retirement benefits (Note 8) .......................................................................
Other long-term liabilities (Note 13)..............................................................................
Total long-term liabilities ...........................................................................................

77
FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Cash and cash equivalents (Note 4) ............................................................................
Time deposits ............................................................................................................
Securities (Note 5) .......................................................................................................
Trade receivables (Note 10).........................................................................................
Allowance for doubtful receivables ..............................................................................
Inventories (Note 6) .....................................................................................................
Prepaid expenses and other current assets (Notes 10 and 13) ...................................
Total current assets..................................................................................................

Thousands of
U.S. dollars (Note 3)

Millions of yen

Financial Statements

Consolidated Statements of Income

78

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2002 and 2001

2002

Net sales (Note 17) .......................................................................................................
Cost of sales (Notes 11, 14 and 17) ............................................................................
Gross profit ..............................................................................................................
Selling, general and administrative expenses (Notes 11, 14 and 17) ........................
Operating income.....................................................................................................

¥ 1,311,934
1,071,163
240,771
168,529
72,242

Income before income taxes and minority interests ..................................................

Income taxes (Note 13):
Current........................................................................................................................
Deferred......................................................................................................................

¥

2001

¥

1,342,035
1,091,386
250,649
164,708
85,941

Net income per common share:
Primary ...........................................................................................................
Fully diluted.....................................................................................................

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2002 and 2001

9,864,165
8,053,857
1,810,308
1,267,135
543,173

Common stock:
Balance at beginning of year .......................................................................................
Balance at end of year ................................................................................................

¥¥

114,464
114,464¥¥

114,464
114,464$$

Capital surplus:
Balance at beginning of year .......................................................................................
Balance at end of year ................................................................................................

¥¥

144,898
144,898¥¥

144,898
144,898$ 1,089,459$ 1,089,459¥

685,760
15,609(13,670)
(223)
(130)
1,145
688,491¥

666,287
33,409(13,670)
(230)
(49)
13
685,760$ 5,156,090
117,361(102,782)(1,677)(977)
8,609$ 5,176,624

3,103(1,499)128(5,897)430(3,344)(684)(2,526)
11,317(6,058)(15,432)(3,222)
6,859(16,825)

19,526(10,962)(1,579)(80,617)(4,233)(231,624)(1,459)1,158(45,601)(1,662)
10,497(346,556)

26,15069,116

196,617

25,472(15,137)
10,335
15,81537,077(2,784)34,29334,823

191,519(113,812)
77,707
118,910(206)
15,609 ¥(1,414)33,409 $(1,549)117,361

1,246.99

20.55
20.53

¥

Retained earnings:
Balance at beginning of year .......................................................................................
Net income .................................................................................................................
Cash dividends (Note 9) ..............................................................................................
Bonuses to directors ...................................................................................................
Decrease resulting from change in consolidation scope ............................................
Increase resulting from change in consolidation scope ...............................................
Increase resulting from change in scope of equity accounting ....................................
Balance at end of year ................................................................................................

2002

2001

2002

860,632
860,632

79¥¥

U.S. dollars (Note 3)

1,236.96

43.99
43.45 .

$

9.38

0.15
0.15

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

DNP Annual Report 2002

DNP Annual Report 2002

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

¥

Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

2,597
(1,458)(210)(10,722)(563)(30,806)(194)
154(6,065)(221)
1,396(46,092)

yen

Net assets per common share........................................................................

$

Consolidated Statements of Stockholders' Equity

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Other income (expenses) (Note 12):Interest and dividend income.......................................................................................
Interest expenses ........................................................................................................
Equity in (losses) earnings of associated companies....................................................
Net loss on disposal of property, plant and equipment ..............................................
Net (loss) gain on sales of marketable securities and investment securities.................
Loss on devaluation of investment securities ...............................................................
Payments of special retirement benefits .....................................................................
Gain (loss) on liquidation of subsidiaries.......................................................................
Gains on contributions of securities to employees' retirement benefits trust (Note 8) ...
Amortization of transitional obligation for retirement benefits (Note 8) ..........................
Contribution of securities to employees' retirement benefits trust (Note 8) ...................
Loss on devaluation of inventories...............................................................................
Other ..........................................................................................................................

Minority interests .........................................................................................................
Net income ..............................................................................................................

Thousands of
U.S. dollars (Note 3)

Millions of yen

Financial Statements

Consolidated Statements of Cash Flows
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2002 and 2001

Cash flows from operating activities:
Income before income taxes and minority interests .....................................................

80

Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

2001

2002

Notes to Consolidated Financial Statements
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2002 and 2001

1. Basis of Presenting the Consolidated Financial Statements¥

26,150¥69,116$

196,617

Dai Nippon Printing Co., Ltd. (hereinafter referred to as the “Company”) and its domestic subsidiaries maintain their books ofaccount and prepare their financial statements in conformity with accounting principles and practices generally accepted inJapan, and its foreign subsidiaries in conformity with those of the countries of their domicile.

94,312(2,380)
6,618
(128)
55
(3,103)
1,499
(430)
3,344
5,897
4,115
(36,266)(8,454)
3,035
17,462
154,692(684)(37,280)
116,728

713,308
18,08387,7891,579(301)(19,526)
10,962
4,233
231,624
80,617
194,481
80,790(297,857)(29,489)
1,272,910(1,459)(265,210)
1,006,241

Cash flows from investing activities:
Net decrease (increase) of time deposits .....................................................................
Payments for purchases of marketable securities ........................................................
Proceeds from sales of marketable securities..............................................................
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 ..............................................................
Interest and dividend received .....................................................................................
Other ..........................................................................................................................
Net cash used in investing activities ......................................................................

32,082(179)
1,922(100,385)
2,430(15,210)
4,116
2,597
(6,936)(79,563)(30,642)(220)275(74,225)
1,346(7,225)
1,776
2,117(11,762)(118,560)

241,218(1,346)
14,451(754,774)
18,271(114,361)
30,947
19,526(52,150)(598,218)

Cash flows from financing activities:
Net increase (decrease) in short-term bank loans ........................................................
Proceeds from long-term debt ....................................................................................
Repayments of long-term debt....................................................................................
Redemption of convertible debentures ........................................................................
Interest paid ................................................................................................................
Dividend paid ..............................................................................................................
Payments for purchases by subsidiaries of their treasury stocks..................................
Other ..........................................................................................................................
Net cash used in financing activities ......................................................................

(6,619)313(1,122)(1,457)(14,125)(2,516)(68)(25,594)

3,674
3,754
(1,549)(19,896)(1,493)(14,137)
4(29,643)(49,767)
2,353(8,436)(10,955)(106,203)(18,917)(511)(192,436)

The translation of foreign currency financial statements of foreign consolidated subsidiaries into Japanese yen has been
made for consolidation purposes in accordance with the translation method prescribed in the accounting standard for foreign
currency transactions. The balance sheet accounts of the foreign consolidated subsidiaries are translated 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 and expense accounts are translated at the average exchange rates during the year. The resulting translation
adjustments are presented as “foreign currency translation adjustments” which is shown as a separate component ofstockholders’ equity in the consolidated balance sheets.

Effect of exchange rate changes on cash and cash equivalents ..............................
Net increase (decrease) in cash and cash equivalents ...........................................

1,966
30,639734(30,741)

14,781
230,368

Cash and cash equivalents at beginning of year .......................................................
Cash and cash equivalents of newly consolidated subsidiaries ...............................
Cash and cash equivalents at end of year .................................................................

157,078
1,898
189,615

187,321498
157,078

1,181,038
14,271$ 1,425,677

Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, thatare readily convertible to known amounts of cash and are so near maturities that they present insignificant risk of changes invalue because of changes in interest rates.

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

¥¥

The accompanying consolidated financial statements have been compiled from the consolidated financial statements filedwith the Ministry of Finance of Japan as required by the Securities and Exchange Law of Japan. Certain reclassifications ofaccounts 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 2001 financial statements toconform with current classifications. In addition, the notes to the consolidated financial statements include additional
information which is also not required for disclosure under accounting principles and practices 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.
The fiscal year-end of the consolidated subsidiaries is the same as that of the Company except for seventeen in 2002 andeight in 2001 subsidiaries whose fiscal years end December 31. Significant transactions between December 31 and March 31
are reflected in the consolidated financial statements.

81

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 aredevalued if the decline in value is judged to be other than temporary.
Investments in 20% to 50% associated companies are 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 or other long-term liabilities and are amortized over a period not exceeding 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 the balance 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).

Cash and cash equivalents

DNP Annual Report 2002

DNP Annual Report 2002

94,8702,405
11,676210(40)(2,597)1,458
563
30,806
10,722
25,866
10,745(39,615)(3,922)
169,297(194)(35,273)
133,830

Notes to Consolidated Financial Statements

FINANCIAL STATEMENTS

Adjustments to reconcile income before income taxes and minority interests to
net cash provided by operating activities:
Depreciation.............................................................................................................
Provision for doubtful receivables (net)......................................................................
Provision for retirement benefits (net)........................................................................
Equity in losses (earnings) of associated companies.................................................
Amortization of goodwill (net)....................................................................................
Interest and dividend income....................................................................................
Interest expenses .....................................................................................................
Net loss (gain) on sales of marketable securities and investment securities...............
Loss on devaluation of investment securities ............................................................
Net loss on disposal of property, plant and equipment .............................................
Contribution of securities to employees' retirement benefits trust, at cost................
Decrease (increase) in trade receivables ...................................................................
Decrease (increase) in inventories.............................................................................
Increase (decrease) in trade payables.......................................................................
Other .......................................................................................................................
Sub-total ...............................................................................................................
Payments of special retirement benefits ...................................................................
Payments for income taxes .....................................................................................
Net cash provided by operating activities ..............................................................

82

Inventories

Research and development expenses

Inventories are stated at cost which is determined substantially by the average method.

Research and development expenses are charged to income as incurred.

Marketable securities and investment securities

Accounting for leases

Effective April 1, 2001, the Company and its domestic subsidiaries adopted a new accounting standard for the marketable
and investment securities, which requires reporting available-for-sale securities at fair value.

Finance leases other than those, which are deemed to transfer the ownership of the leased assets to lessees, are accounted
for in the same manner as operating leases under generally accepted accounting principles in Japan.

Non-marketable securities are stated at cost determined by the average method. For other than temporary declines in fairvalue, investment securities are reduced to net realizable value by a charge to income.
Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost. Major renewals and additions are capitalized, while minor renewals,
maintenance and repairs are charged to income when incurred. Interest expenses on capital expenditures during theconstruction stage are not capitalized.
Depreciation of property, plant and equipment is principally computed by the declining-balance method at rates based on
estimated useful lives. However, depreciation of buildings acquired on or after April 1, 1998 is computed by the straight-line
method.
The estimated useful lives for depreciation purposes range as follows:
Buildings

3 to 50 years

Machinery and equipment

2 to 13 years

Assets with an acquisition cost of ¥100,000 ($752) or more per unit and less than ¥200,000 ($1,504) per unit, acquired on orafter April 1, 1998, are depreciated over three years on a straight-line basis, whereby one-third of such acquisition cost may
be taken as depreciation expense each year.

83
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. Deferredtaxes are measured by applying currently enacted tax laws to the temporary differences.
Income taxes on undistributed earnings have been provided for foreign subsidiaries, but not for domestic companies, assuch earnings, if distributed in the form of dividends, are not taxable under current Japanese tax laws.
Derivatives and hedging activities
The Company and certain consolidated subsidiaries use derivative financial instruments (“derivatives”) for foreign currency
forward contracts to manage their exposures to fluctuations in foreign exchange associated with certain accounts receivableand payable, including forecasted transactions, denominated in foreign currencies. The Company and its subsidiaries do notenter into derivatives contracts for speculative purposes.

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows:i)held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold tomaturity, are reported at amortized cost and ii) available-for-sale securities, which are not classified as either of theaforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a
separate component of stockholders’ equity for 2002 and are carried at cost determined by the average method for 2001.

While the trade accounts receivable and payable denominated in foreign currencies of the Company and domestic
subsidiaries which are comprehensively covered by foreign currency forward contracts are translated at the exchange rate at
the balance sheet date, such forward contracts are recognized as assets or liabilities and measured at fair value, and therelated gains or losses are currently recorded in the statement of income.
The trade accounts receivable and payable denominated in foreign currencies of the Company and domestic subsidiaries
which are individually covered by foreign currency forward contracts are translated at the contracted rates because suchtreatment is also allowed to be elected under the standard if the forward contracts qualify for hedge accounting.
The forward contracts for forecasted transactions such as export sales and import purchases are measured at the fair value
but the unrealized gains/losses are deferred until the underlying transactions are completed.
Net assets and income per common share

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 development costs for internal use included in intangible assets areamortized by the straight-line method over 5 years.

Net assets per common share were computed based on the number of shares outstanding at March 31, 2002 and 2001,
respectively.
Primary amounts of net income per share were computed on the average number of shares of common stock outstanding
during each year. Fully diluted amounts of net income per share were based on the assumption that all convertible bonds
were converted into common stock at the beginning of the year.

Liability for retirement benefits
Effective April 1, 2000, the Company and several domestic significant consolidated subsidiaries applied a new accounting
standard for employees’ retirement benefits and accounted for the liability for retirement benefits based on projected benefit
obligations and plan assets at the balance sheet date.
The transitional obligation determined as of April 1, 2000 is being amortized over 5 years. The transitional obligation was a
net amount after deducting the contributed securities to the employees’ retirement benefits trust from the gross amount oftransitional projected benefits obligation determined as of April 1, 2000.

3. Basis of Translating Financial Statements
The consolidated financial statements are expressed in Japanese yen in accordance with accounting principles and practices
generally accepted in Japan. The Japanese yen amounts have been translated into U.S. dollar amounts, solely for theconvenience of the reader, at the rate of ¥133=U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange
Market at March 31, 2002. These translations should not be construed as representations that the yen amounts actually
represent, or have been or could be converted into U.S. dollars.

DNP Annual Report 2002

DNP Annual Report 2002

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2002 and 2001 comprised the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

84

Cash and deposits(excluding time deposits with a maturity over three months).............................
Other short-term investment .............................................................................

¥¥¥

155,079
1,999
157,078

Millions of yen
Due in one year or less2002

$ 1,425,677$ 1,425,677

Corporate bonds ................................................................................................
Other bonds .......................................................................................................

¥
¥

5
3,160
3,165

Due after one year
through five years

¥

6
11
17

¥

Due after five years
through ten years¥¥

12,00012,000Thousands of U.S.dollars (Note 3)
Due in one year or lessCorporate bonds ................................................................................................
Other bonds .......................................................................................................

5. Marketable Securities and Investment Securities$

The acquisition cost and aggregate fair value of marketable and investment securities classified as available-for-sale securities
as of March 31, 2002 were as follows:
Millions of yen
Acquisition cost

Stocks ........................................................................................
Others ........................................................................................
Total ........................................................................................

¥¥

83,818
252
84,070

Unrealized gain¥¥

17,982
17,982

Unrealized loss¥¥

15,143102
15,245$38
23,75923,797

Due after one year
through five years

$
$

45
83
128

Due after five years t
hrough ten years$$

90,22690,226

Fair value¥¥

86,657150
86,807

6. Inventories
Inventories at March 31, 2002 and 2001 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

2001

2002

85
Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements¥

189,615
189,615

2001

The redemption schedule for securities with maturities classified as held-to-maturity debt securities and other securities at
March 31, 2002 is as follows:

Thousands of U.S. dollars (Note 3)
Acquisition cost

Stocks ........................................................................................
Others ........................................................................................
Total ........................................................................................

$$

630,211
1,894
632,105

Unrealized gain$$

135,203
135,203

Unrealized loss$$

113,858766
114,624

Fair value$$

651,556
1,128
652,684

The proceeds from sales of available-for-sale securities for the year ended March 31, 2002 were ¥1,022 million ($ 7,684
thousand). The gross realized gains on these sales for the year ended March 31, 2002 were ¥ 336 million ($ 2,526 thousand)and the gross realized losses on those sales for the year ended March 31, 2002 were ¥771 million ($ 5,797 thousand).

Finished products ...................................................................................................
Work in process......................................................................................................
Raw materials .........................................................................................................

¥¥

34,10928,907
13,38576,401¥¥

34,27935,812
15,84085,931$$

256,459
217,346
100,639
574,444

7. Short-term Bank Loans and Long-term Debt
Short-term bank loans at March 31, 2002 and 2001 were represented by bank loans and bank overdrafts, etc. bearing
interest at an average rate of 3.74% per annum for 2002 and 3.50% per annum for 2001.

The following summarizes carrying amounts of securities with no fair value as of March 31, 2002:
Millions of yen

Thousands of
U.S. dollars (Note 3)Long-term debt at March 31, 2002 and 2001 consisted of the following:
Yen

Held-to-maturity debt securitiesNon-listed foreign securities ........................................................................................................
Others.........................................................................................................................................
Available-for-sale securitiesNon-listed equity securities .........................................................................................................
Others.........................................................................................................................................

¥¥

13,0002,182$$

97,744
16,406¥¥22,093
81$$

166,113
609

Thousands of
U.S. dollars (Note 3)

Millions of yen

Conversion price

2002

2001

2002

Unsecured convertible debentures
1.5% due 2003 .......................................................................
1.8% due 2004 .......................................................................

¥

2,027.00
2,677.40¥

Mortgage loans, maturing 2002-2005 ..........................................
Unsecured loans, maturing 2002-2005 ........................................
Current portion of long-term debt............................................
¥

19,181
29,663
2,922
1,923
53,689(19,959)
33,730¥¥19,181
29,6633,564
2,033
54,441(1,101)
53,340$$144,218
223,030
21,97014,459403,677(150,068)
253,609

DNP Annual Report 2002

DNP Annual Report 2002

Mortgage loans were secured by property, plant and equipment amounting to ¥1,799 million ($13,526 thousand) and ¥1,880
million at March 31, 2002 and 2001, respectively.

With minor exceptions, interest rates on mortgage loans ranged from 1.01% to 3.30% per annum for 2002 and from 1.01%
to 3.30% per annum for 2001, while interest rates on unsecured loans ranged from 1.68% to 4.12% per annum for 2002 andfrom 1.68% to 8.60% per annum for 2001.
The aggregate annual maturities of long-term debt after March 31, 2002 were as follows:
Millions of yen

86

Thousands of
U.S. dollars (Note 3)

Year ending March 31¥¥

19,95933,570160
53,689$$150,068
252,406
1,203
403,677

The above convertible debentures are currently convertible into approximately 20,541,783 shares of common stock.

3.0%
3.2%
11 years
5 years
6 years

3.5%
3.4%
11 years
5 years-

In September 2000, the Company contributed certain marketable securities with a fair value of ¥15,432 million to theemployees’ retirement benefits trust for the contributory pension plans and recognized a non-cash gain of ¥11,317 million.
The securities held in this trust were qualified as plan assets.

Japanese companies are subject to the Japanese Commercial Code (the ‘‘Code’’) to which certain amendments became
effective from October 1, 2001.

The Company and one of its domestic subsidiaries have contributory defined benefits retirement plans covering substantiallyall of their employees. Most of the other domestic subsidiaries have non-contributory defined benefits retirement plans. 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 and length of services. Thirty percent of the retirement benefit liability of theCompany and the total of such liabilities of one of the domestic subsidiaries are covered by the employees’ pension fundwhich is established in accordance with the Welfare Pension Law.
The employees’ pension fund also includes the portion representing the governmental social security welfare pension which
is funded equally by employees and employers in accordance with the welfare pension regulations.
The liability for employees’ retirement benefits at March 31, 2002 and 2001 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

¥

204,084(101,799)(18,197)(44,026)
4,240
33¥
44,335

2001

2002

186,593(106,494)(24,232)(23,285)23¥
32,605$ 1,534,466(765,406)(136,820)(331,023)
31,880249$
333,346¥

The components of net periodic benefits costs were as follows:

Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

¥

¥

7,625
6,237
(3,169)
6,065
4,134
(848)
20,044

2001

¥

¥

7,879
5,818
(3,799)6,058
15,432
31,388

2002$$

57,331
46,895(23,827)
45,601
31,083(6,376)
150,707

Prior to October 1, 2001, the Code required at least 50% of the issue price of new shares, with a minimum of the par value
thereof, to be designated as stated capital as determined by resolution of the Board of Directors. Proceeds in excess ofamounts designated as stated capital were credited to capital surplus. Effective October 1, 2001, the Code was revised andcommon stock par values were eliminated resulting in all shares being recorded with no par value.

87

Prior to October 1, 2001, the Code also provided that an amount at least equal to 10% of the aggregate amount of cash
dividends and certain other cash payments which are made as an appropriation of retained earnings applicable to each fiscal
period shall be appropriated and set aside as a legal reserve until such reserve equals 25% of stated capital. Effective
October 1, 2001, the revised Code allows for such appropriations to be set aside as a legal reserve until the total capitalsurplus and legal reserve equals 25% of stated capital. The amount of total capital surplus and legal reserve which exceeds
25% of stated capital can be transferred to retained earnings by resolution of the stockholders, which may be available fordividends. The Company’s legal reserve amount, which is included in retained earnings, totals ¥23,300 million ($ 175,188
thousand) and ¥22,590 million as of March 31, 2002 and 2001, respectively. Under the Code, companies may issue newcommon shares to existing stockholders without consideration as a stock split pursuant to a resolution of the Board of
Directors.
Prior to October 1, 2001, the amount calculated by dividing the total amount of stockholders' equity by the number ofoutstanding shares after the stock split could not be less than ¥50. The revised Code eliminated this restriction.
Prior to October 1, 2001, the Code imposed certain restrictions on the repurchase and use of treasury stock. Effective
October 1, 2001, the Code eliminated these restrictions allowing companies to repurchase treasury stock by a resolution of
the stockholders at the general stockholders’ meeting and dispose of such treasury stock by resolution of the Board of
Directors after March 31, 2002. The repurchased amount of treasury stock cannot exceed the amount available for future
dividends plus amount of stated capital, capital surplus or legal reserve to be reduced in the case where such reduction was
resolved at the general stockholders’ meeting.
The Code permits companies to transfer a portion of capital surplus and legal reserve to stated capital by resolution of theBoard of Directors. The Code also permits companies to transfer a portion of unappropriated retained earnings, available fordividends, to stated capital by resolution of the stockholders.
Dividends are approved by the stockholders at a meeting held subsequent to the fiscal year to which the dividends areapplicable. Semi-annual interim dividends may also be paid upon resolution of the Board of Directors, subject to certain
limitations imposed by the Code.
Cash dividends and appropriations to legal reserve charged to retained earnings during the years ended March 31, 2002
and 2001 represented dividends paid out during those periods and related appropriations to this reserve. The accompanying
consolidated financial statements did not include the semi-annual dividend of ¥9.0 ($0.07) per share, aggregating ¥6,834
million ($51,383 thousand) and the related appropriation to legal reserve of the Company, which were approved at the generalstockholders’ meeting held in June 2002 with respect to the year ended March 31, 2002.
During the years ended March 31, 2002 and 2001, there were no issuance of common stock by the Company inconnection with conversion of debentures.

DNP Annual Report 2002

DNP Annual Report 2002

Service cost............................................................................................................
Interest cost............................................................................................................
Expected return on plan assets...............................................................................
Amortization of transitional projected benefits obligation .........................................
Contribution to plan assets by marketable securities...............................................
Actuarial loss ..........................................................................................................
Amortization of prior service cost ...........................................................................
Net periodic benefits costs .....................................................................................

2001

9. Stockholders’ Equity

8. Retirement Benefits

Projected benefits obligation ...................................................................................
Fair value of plan assets..........................................................................................
Unrecognized transitional obligation........................................................................
Unrecognized actuarial loss ....................................................................................
Unrecognized prior service cost ..............................................................................
Prepaid pension cost ..............................................................................................
Net liability ..............................................................................................................

Discount rate..................................................................................................................................
Expected rate of return on plan assets ...........................................................................................
Recognition period of actuarial gain/loss ........................................................................................
Amortization period of transitional obligation...................................................................................
Amortization period of prior service cost.........................................................................................

2002

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2003 ..........................................................................................................................................
2004 ..........................................................................................................................................
2005 ..........................................................................................................................................

Assumptions used for the years ended March 31, 2002 and 2001 were set forth as follows:10. Accounts with Non-consolidated Subsidiaries and Associated Companies

13. Income Taxes

Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2002 and 2001 weresummarized as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

88

¥

5,747
269
5,923
5,451
277
5,600
3,549

¥

5,479
441
5,954
4,255
277
6,296
3,110

2002

$

43,211
2,023
44,53440,985
2,083
42,105
26,684

11. Selling, General and Administrative Expenses

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 of permanently non-deductible expenses, current operating losses of subsidiaries
and different tax rates applicable to foreign subsidiaries, etc.
Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate was as follows:
2002

Normal effective statutory tax rate ..................................................................................................
Expenses not deductible for income tax purposes ......................................................................
(Utilization of ) or valuation allowance for operating losses of subsidiaries-net..............................
Other ..........................................................................................................................................
Actual effective tax rate ..................................................................................................................

2001

42.0%
2.3
(3.5)
(1.3)
39.5%

42.0%
0.9
7.4
(0.7)
49.6%

Selling, general and administrative expenses for the years ended March 31, 2002 and 2001 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

Transportation expenses.........................................................................................
Provision for doubtful receivables............................................................................
Salaries and allowances..........................................................................................
Bonuses paid..........................................................................................................
Accrued bonuses....................................................................................................
Provision for retirement benefits ..............................................................................
Depreciation ...........................................................................................................
Amortization of goodwill..........................................................................................
Research and development expenses ....................................................................
Other ......................................................................................................................

¥

¥

2001

15,3593,017
42,974
8,974
3,814
6,412
11,514
18,44958,016
168,529¥¥

15,832
1,750
42,087
9,703
5,304
3,815
11,65855
19,86554,639164,708

2002

115,481
22,684
323,11367,474
28,677
48,211
86,571
138,714436,210$ 1,267,135

Net deferred tax assets and liabilities at March 31, 2002 and 2001, 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 ofMillions of yen

2002

$

Prepaid expenses and other current assets ............................................................
Other assets ...........................................................................................................

Other long-term liabilities.........................................................................................

¥

¥
¥

162

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

Millions of yen

2002

Interest and dividend income ..................................................................................
Leasing fees ...........................................................................................................

¥

94
1,665

2001

¥

108
1,431

2002

$

707
12,519

2002

$

¥

9,048
14,38823,436$57,165224,038
281,203

¥

67

$

1,218

Significant components of deferred tax assets at March 31, 2002 and 2001 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2002

Total research and development expenses (including manufacturing costs) amounted to ¥23,367 million ($175,692 thousand)and ¥24,664 million for 2002 and 2001, respectively.

U.S. dollars (Note 3)

2001

7,603
29,79737,400¥89
Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Trade receivables....................................................................................................
Other current assets ...............................................................................................
Investment securities (stock) ...................................................................................
Long-term loans .....................................................................................................
Other investments...................................................................................................
Trade payables .......................................................................................................
Accrued expenses ..................................................................................................

2001

The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 42% for the years ended March 31, 2002 and2001, respectively.

Current:
Enterprise tax payable..........................................................................................
Excess provision for doubtful receivables .............................................................
Loss on devaluation of inventories........................................................................
Excess accrued expenses....................................................................................
Other ...................................................................................................................
Total ..................................................................................................................
Non-current:
Excess provision for retirement benefits ...............................................................
Loss on devaluation of investment securities ........................................................
Other ...................................................................................................................
Total ..................................................................................................................

¥

¥

¥

¥

2001

1,060
2,217
2,460
1,866
7,603

¥

16,49313,099205
29,797

¥

¥

¥

2002

1,573
2,731
2,601
2,143
9,048

$

12,048
1,791
549
14,388

$

$

$

7,970
16,66918,496
14,03057,165

124,008
98,4891,541
224,038

DNP Annual Report 2002

DNP Annual Report 2002

14. Leases

Fair value of Derivative Financial Instruments:

Where finance leases do not transfer ownership of the leased property to the lessee during the lease terms, the leased
property is not capitalized and the related lease expenses are charged to income in the period incurred, as per the statement
issued by the Business Accounting Deliberation Council of Japan.

90

Pro forma information such as acquisition cost, accumulated depreciation and net book value of the leased properties forsuch finance lease purposes was as follows:
Thousands ofMillions of yen

Acquisition cost ......................................................................................................
Accumulated depreciation ......................................................................................
Net book value .......................................................................................................

¥
¥

¥
¥

2002
Receivables:
U.S.dollars .............................................................................................................
Euro.......................................................................................................................

¥

2002

53,331(31,108)
22,223$$

PayablesU.S.dollars .............................................................................................................
¥

410,015(252,060)
157,955

11,169
9Fair value¥

11,39410(202)
10,976 ¥(198)
11,206

Unrealized gain

¥

225
1

Lease expenses on finance lease contracts without ownership-transfer amounted to ¥11,124 million ($ 83,639 thousand) and¥10,648 million for the years ended March 31, 2002 and 2001, respectively.
The amounts of outstanding future payments under finance leases due on March 31, 2002 and 2001, including the portion ofinterest thereon, were summarized as follows:
Thousands ofMillions of yen

¥

4
230

Thousands of U.S. dollars (Note 3)

2002

2002

Contracted amount

U.S. dollars (Note 3)

2001

54,532(33,524)
21,008Millions of yen

Receivables:
U.S.dollars .............................................................................................................
Euro.......................................................................................................................

Contracted amount$

PayablesU.S.dollars .............................................................................................................
$

83,977
68

Fair value$

85,66975(1,519)82,526 $(1,489)84,255

Unrealized gain

$

$

1,692
7
30
1,729

U.S. dollars (Note 3)

2001

91
Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2002

The contracted amount and fair value of derivatives for foreign currency forward contracts at March 31, 2002 and 2001 wereas follows:

2002
Millions of yen

Future lease payments:
One year or less ..................................................................................................
More than one year .............................................................................................

2001
¥
¥

9,475
11,53321,008¥¥

9,237
12,98622,223

The amounts of outstanding future payments under operating leases due on March 31, 2002 and 2001 were also
summarized as follows:
Millions of yen

2002

Future lease payments:...........................................................................................
One year or less ..................................................................................................
More than one year .............................................................................................

¥
¥

578
955
1,533

$
$

¥

Receivables:
U.S.dollars .............................................................................................................
Deutsche mark ......................................................................................................

¥

PayablesU.S.dollars .............................................................................................................
¥

Thousands of
U.S. dollars (Note 3)

2001

¥

71,241
86,714
157,955

Contracted amount

12,254
4

Fair value¥

13,0745(57)
12,201 ¥(58)
13,021

Unrealized (gain)/loss

¥

¥

(820)
(1)
1
(820)

2002

323
665
988

$
$

4,346
7,180
11,526

Fair value was determined based on the foreign currency forward exchange market rates. Foreign currency forward contracts
which qualified for hedge accounting for the years ended March 31, 2002 and 2001 and were assigned to the associatedassets and liabilities or deferred until completion of the forecasted transactions were excluded from disclosure of the above
fair value information.

16. Contingent Liabilities
15. Derivative Financial Instruments
Nature of Derivative Financial Instruments:
The Company and certain consolidated subsidiaries enter into derivative financial instruments (“derivatives”) for foreign
currency forward contracts to hedge foreign exchange risks associated with certain accounts receivable and accounts
payable, including forecasted transactions, denominated in foreign currencies. The Company and its subsidiaries do not holdderivatives for speculative purposes.

DNP Annual Report 2002

DNP Annual Report 2002

Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to majorinternational financial institutions, the Company and its subsidiaries do not anticipate any losses arising from credit risks. The
basic policies for the use of derivatives are established in the Company’s internal regulations and the execution and control ofderivatives are controlled by the Accounting Department.

The Company was guarantor of bank loans of an other company, amounting to approximately ¥108 million ($812 thousand).
It is common practice in Japan for companies, in the ordinary course of business, to receive promissory notes in settlement oftrade accounts receivable and to subsequently discount such notes at banks. At March 31, 2002 and 2001, the Company
and its consolidated subsidiaries were contingently liable on trade notes discounted in the amount of ¥1,686 million ($12,677
thousand) and ¥1,690 million, respectively. Notes discounted were accounted for as sales.

17. Business Segment Information

Information by geographic area:

Industry segments:

Disclosure of information by geographic area was not required as domestic sales and assets exceeded 90% of consolidated
sales and assets, respectively, before elimination, for all segments for the years ended March 31, 2002 and 2001.

The Company's primary business industries consist of printing and beverage operations.
The following tables present certain financial information, including net sales, costs and expenses,operating income, assets,
depreciation and capital expenditures regarding the Company's industry segments at March 31, 2002 and 2001 and for theyears then ended.

92

Millions of yen

Printing

Beverage

Net sales:
Outside customers ............................................... ¥Inter-segment .......................................................
Total................................................................
Costs and expenses.............................................
Operating income............................................ ¥1,238,835
549
1,239,384
1,167,717
71,667¥

Assets, depreciation and capital expenditures:
Assets ................................................................. ¥Depreciation ......................................................... ¥Capital expenditures............................................. ¥1,381,484
91,13680,867

Total

¥

¥

73,09973,09972,524575¥¥¥

51,5073,734
4,229

Elimination¥¥

1,311,934
549
1,312,483
1,240,241
72,242¥¥¥

1,432,991
94,87085,096

Consolidated

¥

(549)
(549)
(549)
-

¥

1,311,934
1,311,934
1,239,692
72,242

¥
¥
¥

(533)
-

¥
¥
¥

1,432,458
94,87085,096¥

Thousands of U.S. dollars (Note 3)

Printing

Net sales:
Outside customers ............................................... $Inter-segment.......................................................
Total................................................................
Costs and expenses.............................................
Operating income............................................ $9,314,549
4,128
9,318,677
8,779,827
538,850

Assets, depreciation and capital expenditures:
Assets ................................................................. $ 10,387,098
Depreciation ......................................................... $685,233
Capital expenditures............................................. $608,023

Beverage$

Total

Elimination$

9,864,165
4,128
9,868,293
9,325,120
543,173$$

549,616549,616545,293
4,323

$
$
$

387,271
28,07531,797$ 10,774,369$
713,308$
639,820$

Overseas sales of the Company and its consolidated subsidiaries for the years ended March 31, 2002 and 2001 were as
Thousands offollows:
Millions of yen
U.S. dollars (Note 3)

Consolidated$$(4,128)(4,128)(4,128)-$$$(4,008)-$ 10,770,361$
713,308$
639,820$

2002

Overseas sales
Consolidated net sales
Ratio(a) .....................................................................
(b).....................................................................
(a)/(b) ................................................................

¥

2001

2002

150,816¥ 140,810$1,133,955
1,311,934
1,342,035
9,864,165
11.5%
10.5%
11.5%

93
Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

For 2002 :Overseas sales:

9,864,165
9,864,165
9,320,992
543,173

Millions of yen

For 2001 :Printing

Beverage

Net sales:
Outside customers ............................................... ¥Inter-segment.......................................................
Total................................................................
Costs and expenses.............................................
Operating income............................................ ¥1,268,415
592
1,269,007
1,186,461
82,546¥

Assets, depreciation and capital expenditures:
Assets ................................................................. ¥Depreciation ......................................................... ¥Capital expenditures............................................. ¥1,437,308
90,611
99,352

Total

¥

¥

73,62073,62070,225
3,395

¥
¥
¥

52,6503,701
3,698

Elimination¥¥

1,342,035
592
1,342,627
1,256,686
85,941¥¥¥

1,489,958
94,312103,050

Consolidated

¥

¥

(592)
(592)
(592)
-

¥

1,342,035
1,342,035
1,256,094
85,941

¥
¥
¥

(87)
-

¥
¥
¥

1,489,871
94,312103,050DNP Annual Report 2002

DNP Annual Report 2002

Report of Independent Certified Public Accountants
To the Board of Directors of
Dai Nippon Printing Co., Ltd.

94
Notes to Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets (expressed in Japanese yen) of Dai Nippon Printing Co.,
Ltd. and its consolidated subsidiaries as of March 31, 2002 and 2001, and the related consolidated statements of income,stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Dai
Nippon Printing Co., Ltd. and its consolidated subsidiaries at March 31, 2002 and 2001, and the results of their operations
and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.
As discussed in Note 2, effective April 1, 2001, the consolidated financial statements have been prepared in accordancewith new accounting standards for the valuation of available-for-sale securities.
Our audits 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. Such U.S. dollar amounts are presented
solely for the convenience of readers outside Japan.

Tokyo, Japan
June 27, 2002

MEIJI AUDIT CORPORATIONDNP Annual Report 2002

DNP’s Business Flow
■ Beverages

Customers<Manufacturing/Sales>

Products

Hokkaido Coca-Cola Bottling Co., Ltd.

■ Printing Operation

Products

Products

Dai Nippon Printing Co., Ltd.

*Affiliated companies accounted for the equity method

Products

Planning/Composing/Plate Processing

95<Manufacturing>

Dai Nippon Art Co., Ltd.
Dai Nippon Total Process Ichigaya Co., Ltd.
Dai Nippon Total Process BF Co., Ltd.
Dai Nippon Uni Process Co., Ltd.
DNP Digitalcom Co., Ltd.
DNP Media Create Co., Ltd.

Products

Printing

DNP’s Business Flow

<Manufacturing/Sales>

I.M.S Dai Nippon Co., Ltd.
F.D.P.Dai Nippon Co., Ltd.
Dai Nippon Printing Kenzai Co., Ltd.
Dai Nippon Printing Technopack Co., Ltd.
Dai Nippon Printing Technopack Kansai Co., Ltd.
Dai Nippon Printing Technopack Yokohama Co., Ltd.
Dai Nippon Printing Fine Electroics Co., Ltd.
Dai Nippon Printing Precision Device Co., Ltd.
DNP Data Techno Co., Ltd.
DNP Media Create Kansai Co., Ltd.
D.T.Circuit Technology Co., Ltd.
DT Fine Electronics Co., Ltd.
Hokkaido Dai Nippon Prinitng Co., Ltd.
Tohoku Dai Nippon Prinitng Co., Ltd.
Tokai Dai Nippon Printing Co., Ltd.
Shikoku Dai Nippon Printing Co., Ltd.
Kyusyu Dai Nippon Printing Co., Ltd.
DAP Technology Co., Ltd.*<Manufacturing/Sales>

Dai Nippon IMS (America) Corp.
Dai Nippon Printing Co. (Hong Kong) Ltd.
DNP America, LLC
DNP Electronics America, LLC
DNP Denmark A/S
P.T.Dai Nippon Printing Indonesia
Tien Wah Press (Pte.) Ltd.

Products
Continuous Production

Overseas<Manufacturing>

Dai Nippon Offset Co., Ltd.
Multi Print Co., Ltd.
DNP Graphica Co., Ltd.

Products

Bookbinding<Manufacturing>

Dai Nippon Seihon Co., Ltd.
Dai Nippon Techtas Ichigaya Co., Ltd.

Products

Other Processing<Manufacturing>

SP Dai Nippon Co., Ltd.
Dai Nippon Cup Co., Ltd.
Dai Nippon Hoso Co., Ltd.
Dai Nippon Ellio Co., Ltd.
Sagami Yoki Co., Ltd.
Dainippon Jyushi Co., Ltd.
Dai Nippon Polymer Co., Ltd.

Related Business<Services/Sales>

Services
DNP Logistics Co., Ltd.
Direc Co., Ltd.
MyPoint.com Japan Co., Ltd.
Dai Nippon Kaihatsu Co., Ltd.
DNP Facility Service Co., Ltd.

OthersMaterials/
Machines

DNP Annual Report 2002

The Inctec Inc. <Production and sales of ink>
D.N.K Co., Ltd.
<Manufacturing and sales of Printing Machines>
DNP Tradng Co., Ltd.
<Sales of paper and other products>
DNP Corporation USA<Holding Company>
DNP Holding (USA) Corporation<Holding Company>

Major Subsidiaries and Affiliates
Printing

96

Capital(Millions of yen)

Ownership ratio(%)

Production of drafts for photoengraving

80

100.0

DNP Graphica Co., Ltd.

Printing and bookbinding

100

100.0

Dai Nippon Cup Co., Ltd.

Molding and processing of paper containers

80

100.0

Dai Nippon Ellio Co., Ltd.

Printing and processing of steel and other metal plates

300

50.0

Dai Nippon Hoso Co., Ltd.

Filling and processing of packages

80

100.0

DNP Information Systems Co., Ltd.*

Planning, designing, development, management,
and operations of information systems

100

100.0

Dainippon Jushi Co., Ltd.

Production and processing of composite resins

380

100.0

Dai Nippon Kaihatsu Co., Ltd.

Real estate sales

250

100.0

Dai Nippon LSI Design Co., Ltd.*

Logical circuit designs for ICs and LSIs and layout designs

100

100.0

DNP Data Techno Co., Ltd.

Production and sales of plastic cards with magnetic stripes,
IC chips and others

100

100.0

Dai Nippon Offset Co., Ltd.

Offset printing

200

100.0

Dai Nippon Polymer Co., Ltd.

Molding, processing and printing of plastic containers

100

100.0

Dai Nippon Printing Accounting System Co., Ltd.*

Accounting and consulting services

30

100.0

Dai Nippon Printing Fine Electronics Co., Ltd.

Production of high-precision components

300

100.0

Dai Nippon Printing Precision Device Co., Ltd.

Production of high-precision components

300

100.0

DT Fine Electronics Co., Ltd.

Production and sales of semiconductor related components

490

65.0

D.T.Circuit Technology Co., Ltd.

Development and production of semiconductor related components

1,000

51.0

F.D.P. Dai Nippon Co., Ltd.

Production of display related components

100

100.0

DAP Technology Co., Ltd.

Production and sales of PDP back plates

3,000

50.0

DNP Corporate History Center Co., Ltd.*

Planning and production of corporate hisotory archives

50

100.0

Dai Nippon Printing Technopack Co., Ltd.

Photoengraving, printing and binding

300

100.0

Photoengraving, printing and binding

200

100.0

Dai Nippon Printing Technopack Yokohama Co., Ltd.

Photoengraving, printing and binding

200

100.0

Dai Nippon Seihon Co., Ltd.

Bookbinding

200

100.0

DNP Facility Service Co., Ltd.

Management and operations of buildings and welfare facilities

100

100.0

DNP Trading Co., Ltd.

Sales of paper and other products

100

94.3

Dai Nippon Techtas Ichigaya Co., Ltd.

Bookbinding

80

100.0

Dai Nippon Total Process BF Co., Ltd.

Photoengraving and machine plate activities

80

100.0

Dai Nippon Total Process Ichigaya Co., Ltd.

Photoengraving

100

100.0

Dai Nippon Uni Process Co., Ltd.

Photoengraving

80

100.0

DNP Logistics Co., Ltd.

Packaging, shipping operations and warehouse management

626

100.0

Direc Co., Ltd.

Sales of publishing and educational equipment

96

55.0

D.N.K. Co., Ltd.

Manufacturing and sales of printing equipment and machine tools

100

100.0

DNP AV Center Co., Ltd.*

Planning, production, editing and sales of movies

100

100.0

DNP Digitalcom Co., Ltd.

Planning and production of digital media contents

100

100.0

DNP Human Service Co., Ltd.*

Planning, management and data processing activities related
to personnel plans

30

100.0

DNP Media Create Co., Ltd.

Planning, production, photoengraving and machine plate activities

100

100.0

DNP Media Create Kansai Co., Ltd.

Planning, production, photoengraving and machine plate activities

200

100.0

DNP Space Design Co., Ltd.*

Planning, design and creation of shops, exhibition booths
and other commercial spaces

100

100.0

Ownership ratio(%)

DNP Techno Research Co., Ltd.*

Studies related to patents and the preparation of contracts

20

100.0

MyPoint.com Japan Co., Ltd.

Marketing system planning and operations for Internet advertisements

940

85.2

Dai Nippon Printing Kenzai Co., Ltd.

Photoengraving, printing and processing

200

100.0

I.M.S. Dai Nippon Co., Ltd.

Printing of TTRs and ST materials

100

100.0

Kyoiku Shuppan Co., Ltd.

Publishing

60

48.3

Hokkaido Dai Nippon Printing Co., Ltd.

Photoengraving, printing, bookbinding and production related
to packaging

93

97.0

Tohoku Dai Nippon Printing Co., Ltd.

Photoengraving, printing, bookbinding and production related
to packaging

82

99.7

Tokai Dai Nippon Printing Co., Ltd.

Photoengraving, printing, bookbinding and production related
to packaging

120

100.0

Photoengraving, printing, bookbinding and production related
to packaging

380

100.0

Shikoku Dai Nippon Printing Co., Ltd.

Photoengraving, printing and production related to packaging

50

97.0

Multi Print Co., Ltd.

Photoengraving, printing and bookbinding

100

100.0

Sagami Yoki Co., Ltd.

Production of laminated tubes

200

90.0

Shiobara Green Village Co., Ltd.*Management of leisure facilities

200

99.6

SP Dai Nippon Co., Ltd.

Planning and production of promotional materials

80

100.0

NexantiS Corporation*

Sales of security related software and products

The Inctec Inc.

Production and sales of ink, varnish, pigments and dyes

Trans Art Inc.*DNP Archives.com Co., Ltd.*

Kyushu Dai Nippon Printing Co., Ltd.

25

100.0

2,000

59.8

Procurement and sales of art objects

50

100.0

Planning, producing and sales of art objects and contents

200

100.0

Uzumine Country Club Co., Ltd.*Management of golf courses

33

88.8

Dai Nippon Printing Co. (Hong Kong) Ltd.

Photoengraving, printing and bookbinding(HK$1,000)
225,000

(2.4)
99.5

DNP America, LLC

Sales of publications and precision electronic
components, decorative interiors(US$1,000)
100(100.0)100.0

DNP Electronics America, LLC.

Manufacturing and sales of precisionelectronic components(US$1,000)
15,000(100.0)100.0

DNP Denmark A/S

Manufacturing and sales of precisionelectronic components(DKr1,000)
135,000

100.0

P.T. Dai Nippon Printing Indonesia

Photoengraving, printing, bookbinding andproduction related to packaging and sales(US$1,000)
26,000

51.0

Tien Wah Press (Pte.) Ltd.

Photoengraving, printing and bookbinding(S$1,000)
4,140

(6.0)
100.0

DNP Corporation USA

Holding company(US$1,000)
32,067(13.8)
100.0

DNP Holding (USA) Corporation

Holding company(US$1,000)
100(100.0)100.0

Dai Nippon IMS (America) Corp.

Processing of TTRs

(US$1,000)
20,000(100.0)
100.0

2,935

(3.2)
58.6

Beverages
Hokkaido Coca-Cola Bottling Co., Ltd.

Manufacturing and sales of soft drinks*Non-consolidated subsidiary or affiliate

97

DNP Annual Report 2002

DNP Annual Report 2002

Dai Nippon Printing Technopack Kansai Co., Ltd.

Capital(Millions of yen)

Major Subsidiaries and Affiliates

Major Subsidiaries and Affiliates

Dai Nippon Art Co., Ltd.

Printing

Investor Information(as of March 31, 2002)

Dai Nippon Printing Co., Ltd.
Head Office:Stock Exchange Listings:

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

Tokyo, Osaka, Nagoya, Luxembourg, Amsterdam

Tokyo 162-8001, Japan98

Tr a n s f e r A g e n t :Investor Information

Established:

Mizuho Trust & Banking Co., Ltd.

1876

5-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8240, Japan

Number of Employees:

Phone: +813-3240-7000

34,868Annual Meeting of Shareholders:
Paid-in Capital:

The annual meeting of shareholders of DNP is normally heldin June each year in Tokyo, Japan¥114,464 million

Investor Relations:

Number of Common Stocks:
Authorized 1,200,000,000 shares

Dai Nippon Printing Co., Ltd.

IssuedPress and Public Relations

759,480,693 shares

1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku,
Number of Shareholders:Tokyo 162-8001, Japan(more than 1,000 shares)

Phone:+813-5225-8220

Facsimile:+813-5225-8239

E-mail:info@mail.dnp.co.jp

27,930Major Shareholders:

Web Site Address:
The Dai-Ichi Mutual Life Insurance Co.

5.07%

The Industrial Bank of Japan, Limited

4.72

Japan Trustee Services Bank, Ltd.

4.68

The Fuji Bank, Limited

4.33

The Mitsubishi Trust & Banking Corporation

3.37

Nippon Life Insurance Co.

3.19

UFJ Trust Bank Limited

1.99

Sumitomo Mitsui Banking Corporation

1.79

Morgan Grenfell and Co., Ltd.

1.44

http://www.dnp.co.jp/

Mitsui Asset Trust and Banking Company, Limited 1.42

C o m m o n S t o c k P r i c e R a n g e ( To k y o S t o c k E x c h a n g e )(For the years ended March 31, 2000, 2001 and 2002)
DNP Annual Report 2002

2000

2001

2002

High

Low

High

Low

High

Low

1st Quarter¥2,030¥1,765¥1,970¥1,690¥1,730¥1,420

2nd Quarter

2,130

1,790

1,935

1,605

1,503

1,090

3rd Quarter

2,120

1,630

1,750

1,535

1,412

1,147

4th Quarter

1,920

1,586

1,731

1,315

1,569

1,154

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