DNP Annual Report 2004

Display

1-1-1, Ichigaya-Kagacho, Shinjuku-ku, Tokyo 162-8001, Japan

Printed on recycled paper using soy-oil-inks.
©2004 Printed in Japan.

Year ended March 31, 2004

Dai Nippon Printing Co.,Ltd.

D N P Annua l R e por t 2004
Ye a r e n d e d M a r c h 3 1, 2 0 0 4

Special Feature:

DNP’s Display Business

DisplaySpecial Feature:

DNP’s Display Business

DNP started cultivating its printing technologies withthe company’s founding, and today its printing skills
are among the most advanced in the world. DNP thenbuilt on this printing expertise and succeeded in
manufacturing shadow masks, a major component ofcathode ray tube (CRT) displays and a field where DNP
remains the world’s top supplier to this day.
At the same time, DNP was quick to notice growing
demand for flat panel displays (FPDs) in the field ofelectronics, where technological innovation progresses
so rapidly. The company has devoted an enormous
amount of effort to research and development in thisfield. The market is full of a wide variety of displays
used in various areas of modern life, in televisions,computer monitors, mobile phones, PDAs, video
cameras, digital cameras, car navigation systems,
computer games, etc. DNP aims to efficiently expand
its business and appropriately meet the market’s
needs by providing products related to all kinds ofdisplays, including televisions with liquid crystal
displays (LCD TVs) – an area where DNP expects tosee growth – and plasma display panels (PDPs), rearprojection TVs (PTVs), organic and inorganic
electroluminescence (EL), field emission displays(FEDs), etc.

Special Feature:

DNP’s Display Business

Summary of Display Business Strategies

DNP is building a portfolio of the display products that fit best with product life cycles, based on
thorough analysis of the world’s rapidly changing display market. We are developing flexible businessstrategies aimed at maximizing profits while at the same time taking adequate steps to hedge risks.

Basic Strategy

We are proud of our world class printing technologies, including precision nano-coating and microfabricaton technologies. Due to our unique capacity for developing new applications for thesetechnologies, along with our manufacturing expertise, we are building a display business that nocompetitor can imitate. We make sure that we take full advantage of our insistence on conveying
information quickly, beautifully, and accurately, in our display business as in other areas. DNP’s fieldsof business are expanding further than ever.

Predict the future of the changing market, and build a portfolio of

1 all-round products

Put together a portfolio of all-round products that can work with all types of displays and respondquickly and flexibly to the dramatically changing, continually diversifying display market.

Basic Strategy

2 Actively approach overseas markets, with market expansion in mind
In order to build production and sales systems that keep pace with the changes, keep an eye on
the overall, worldwide display market, as well as on trends in each country’s market. Actively
expand overseas while covering risks as much as possible.

04

Basic Strategy

Printing

Data processing

3 Gain a dominant position and develop unique technology
Use DNP’s world class printing technologies to develop innovative new products as well as
production and material technologies, in order to minimize initial costs and secure a dominant edgein the market.

4 Pursue strategic alliances and M&As

Dry coatings

Precision coatings

PDP backplatesHolograms

Micro-fabrication

Hologramreflectors

Color changing
media substrates

Organic EL

New materials
for FEDs

Electromagnetic
wave shields

Organic EL
masks

Color filters

Projection
screens

Shadowmasks

From the standpoint of building a global business, explore unions with strong partners that can be
expected to provide synergistic benefits. Provide competitive products while flexibly pursuing
strategic alliances and mergers or acquisitions.

Basic Strategy

6 Promote intellectual property strategies at the global level
Pursue intellectual property strategies at the global level, in order to make our rights totechnological dominance more secure.

Micro-reproduction

Materials

5 Foster new businesses using flexible business models
Foster new businesses by enhancing R&D, developing new components for displays, and focusing
on expanding from components to modules and devices.

Films

Anti-reflective
film
Color management

Basic Strategy

Photolithography

Plating
Etching

05
DNP AR04

DNP AR04

Basic Strategy

DesignSpecial Feature:

DNP’s Display Business

Development Cycles and Generational Change in the Display Business

Development Phase

Development

Early Growth Phase

Early Growth
Phase

Phase

Latter Growth Phase

LatterGrowthPhase

Mature Phase

Declining Phase

Mature Phase

Declining Phase

Laptop LCD monitors• Color filters• Anti-reflective film

Organic and inorganic EL• Development of devices, etc.
LCD TVs• Color filters (CFs)• Anti-reflective film
FED
• Development of new materials

06

Electronic paper• Exploration of methods• Exploration of needs

Film displays• Development of low-temperaturepolysilicone, etc.

Number of companies
Size of market

Projection TVs – CRT type
• Projection screensFresnel lenses
Lenticular lenses• High-contrast screens

07
DNP AR04

DNP AR04

Small and mediumsize LCD monitors• Semitransparent
color filters

LCD monitors fordesktop computers• Color filters• Anti-reflective film

CRT monitors for personal
computers• Shadow masks• Hard coatings

Plasma displays• Back plates• Electromagnetic wave shielding film
Next-generation projection TVs – MD type• Thin projection screens
New Fresnel lenses for ultra-thin displays
Thin lenticular lenses• High-contrast screens

CRT monitors for TVs• Shadow masks (SM)• Hard coatings

Displays are becoming the new “stars” of the digital age
A great deal of attention is focused on the display market by the electric appliance industry andelsewhere. The display market is now coming to a major turning point.
In December 2003, terrestrial digital broadcasting began in Japan, ushering in an era of interactive
television that delivers high-quality images and sounds. In 2005, digital broadcasting to cellular
telephones is scheduled to begin. The necessary information infrastructure is rapidly being put inplace in order to realize a full-scale “ubiquitous society” where people will be able to get the images
they want to see and the information they want to access, without regard for time or place.

As part of these changes, there is a rapidly expanding market for thin, lightweight, energy-efficient flat
panel displays (FPDs). The CRT displays that were by far the most common for a long time are now
moving from the Mature Phase to the Declining Phase. Currently, liquid crystal displays (LCD) are themost popular. In the market for consumer-use televisions with screens larger than 40-50 inches, weare starting to see plasma display panels (PDPs) and rear-projection TVs (PTVs). Inorganic EL,
organic EL, and field emission displays (FEDs) have entered the stage one after another, as the starsof the next generation.

Special Feature:

DNP’s Display Business

Diversification

Diversification of Display Methods

As technology advances, people’s lifestyles are changing day by day. In offices and homes, each person uses
multiple displays: in televisions, computers, cell phones, PDAs, GPS devices, mini-games, digital cameras and asvideo camera monitors. The number of ways to use displays is growing rapidly, and different types of displays arebeing developed to suit each application.
Television display types, too, are becoming increasingly compartmentalized according to size. A high proportionof mid-sized and smaller TVs use cathode ray tubes or LCDs, but among large TVs with screens of 40 inches or
more, PDPs and rear-projection types are dominant.

Type/Size in inches

Under 6 inches

Outdoor advertising screens/
POP/Centralized control/
Price tags, etc.

LCD segment

6-9 inches

10-19 inches

20-29 inches

30-39 inches

40-69 inches

70 inches plus

Indoor

PTV

LED

PDP
CRT

TVs

Home

TVs
PCs
Large-screen
projection TVs

PCs
Plasma display
projectors

Monitors (including commercial)
OfficeLCD−TFT
Laptop and handheld PCs
Electronic paper/
Mobile data terminals/
Car devices/Digital cameras

08

LCD
−STN

09

DNP AR04

Mobile phones, etc.

Organic
EL

Wearable• Wristwatch-type data
terminals• Eyeglass-type
displays

Personal

MobileChanges in Display Types Used for Various Applications

Entertainment• Large-screen
projection TVs• Large-screen plasma
displays• LED displays for
exhibitions• Mobile data terminals• Mobile telephones• Paperlike displays

Public

Type/Size in inches

Under 6 inches

Outdoor advertising screens/
POP/Centralized control/
Price tags, etc.

LCD segment
LCD-STN

6-9 inches

10-19 inches

20-29 inches

30-39 inches

40-69 inches

70 inches plus

Organic EL
LED
Electrophoresis, etc.

PDP
CRT

TVs

FED Inorganic EL

Monitors (including commercial)

PTV

LCD−TFT

Outdoor

Laptop and handheld PCs
Electronic paper/
Mobile data terminals/
Car devices/Digital cameras
Mobile phones, etc.

Organic EL

LCD
−STN

Electrophoresis,
etc.
InorganicEL

2006

In the PC monitors market, LCDs have become overwhelmingly widespread. There are signs suggesting thatsystem displays that enable users to enjoy television programs and DVDs may become especially popular.
Meanwhile, the range of available types of displays is growing wider. For example, organic EL is becoming more
popular in sub-displays for mobile phones and digital cameras, because of its light weight and flexibility of design.

DNP AR04

2004

System displays

Special Feature:

DNP’s Display Business

Expansion

Trends and Expansion in the Display Market

Market growth rate

85%
80%

2005

FED
¥1 blnPS market
6% (¥64 bln)EL
¥36 bln

75%
70%
30%

PDP
¥110 bln

PTV¥1,070 bln

CF market
12%(¥720 bln)

FED
¥10 blnEL¥150 bln

2007

PDP¥330 bln

CF market
12%(¥888 bln)

25%
20%

Generational change
and diversification

Color LCDs
¥6,000 bln

15%

PS market
6% (¥64.2 bln)

10%5%

SM market
6% (¥80 bln)LED
¥75 bln

CPT¥1,280 bln

0%

LED
PTV
Color LCDs
¥72 bln ¥1,150 bln¥7,400 bln
SM market
8% (¥80 bln)
CPT¥1,000 bln-5%

SM market
8% (¥32 bln)

-10%
-15%

010

Exchange rates
Price slashing

Share of total

Market size:

SM market
8% (¥14 bln)

¥8.8 trln

CDT¥170 bln Market size: ¥10.9 trln

CF market
12%(¥1,250 bln)EL¥1,000 bln
PDP
Color LCDs
¥1,000 bln¥9,600 bln
LED
PS market¥80 bln
6% (¥70 bln)
PTV
¥1,090 bln
SM market
6% (¥36.2 bln)
CPT
¥603 bln
SM market 6% (¥2.3 bln)
CDT
¥38 blnMarket size: ¥13.6 trln
CRT=CPT+CDT

11
As the use of high-speed telecommunications networks becomes increasingly widespread thanks to terrestrial digital broadcasting and broadband internet connections, we expect to see a vast increase in the amountof information being distributed, especially in the formof video images. In addition, we expect that an expanded range of applications for displays and the diversification of available types will cause the overall market for
displays to grow. We believe it will continue to grow atmore than 20% per year for the next few years.
Based on DNP’s assumptions, we expect the display market to be worth 8.8 trillion yen in 2005 andgrow to 10.9 trillion in 2007. We expect the LCD market, which is currently the most active area, to grow to
7.4 trillion yen. Regarding CRTs, we think that demandshould remain solid until 2007, mainly in the emerging
BRIC economies (Brazil, Russia, India and China), so
we expect to be able to maintain current levels of production and sales without experiencing a sharp drop.
In the 42-inches-and-up category, the PDPs that
already have a cost advantage over LCDs will also
widen their lead in terms of response time, width ofviewing angle, brightness and other technical specifications. We expect the PDP market to keep growing
smoothly until it reaches about 330 billion yen in 2007.
Rear-projection TVs are a relatively low-cost option
among large-screen displays. As development of the

new MD-type progresses and the screens become
even thinner and picture quality improves, we expect
this price advantage to become even more attractive.
In the next few years, we predict that the market for
MD-type rear-projection TVs will grow by about 300%in terms of units sold, and around 200% in terms ofmonetary value. On the other hand, because some ofthis increase will be cancelled by shrinkage in the market for CRT-types, we expect the projection TV market
to grow from 1,070 billion yen in 2005 to 1,150 billion in2007.
In addition, organic ELs have attracted attention as a
new type of display, and are already entering the market, beginning with products that feature small displays.
Besides looking at overall market trends like these,
DNP also analyzes market characteristics that we needto consider for each region of the world. In theJapanese market, we predict that consumers will continue to buy products that are technically superiorrather than ones that are low-priced, whereas in the
United States we foresee greater demand for large,
low-priced flat panel displays of more than 50 inches.
In Asia and South America, we expect that use of CRTs
will spread as the information infrastructure is mademore widely available.

DNP AR04

DNP AR04

Increasingly
borderlesscompetition

Globalization ofmarkets

CDT¥400 bln

2010
FED¥200 bln

Special Feature:

DNP’s Display Business

Strategies

Basic Strategies for Our Display BusinessIn order to always provide solutions that our customers can say are “the best,” DNP aims to stabilize
and increase revenues from the dramatically changing display market through the following basic
strategies.

Basic Strategy

Build a portfolio of all-round products

Respond to overseas markets

Promote strategic alliancesand M&As

In addition to scrupulously analyzing the technicalinnovations that occur at such a dizzying rate in theworld of flat panel displays (FPDs), DNP is putting inplace systems for developing all-round products to help
disperse risk and allow us to thrive regardless of which
type of display dominates the next generation of
products.
For many years, DNP has maintained the world’s top
share of the market for shadow masks used in CRT
displays. At the same time, we noticed early on that
FPDs would be the next big wave in the electronics
industry, where the pace of innovation is very fast. We
continued research and development this field andstarted full-scale mass production of color filters for
LCDs in 1988. Today, too, we are gearing up to beready for the commercialization and full-scale spread of
products related to various types of displays that arelikely to grow in the future, including PDPs, PTVs, EL,
and FEDs.
Because we are aware that the display market islikely to keep changing more dramatically than ever, wemove proactively to ascertain the market’s needs andallocate our resources efficiently. By supplying products
for all kinds of displays, we aim to develop a profitoriented business and at the same time maintain stable
growth by responding flexibly to market changes.

Foster new businesses
Basic Strategy

2 Respond to overseas markets

Protect intellectual property rights
The world display market is churning with change,
and with global-level competition. At DNP, we consider
the overall world market as we build production andsales systems that can keep pace with the changes in
global demand.
We work through our sales bases in Europe,
America, Korea and Taiwan to gather the information
we need in order to maintain a grasp of local needs ineach market. In February 2004, we opened a new sales
office in Shanghai in order to get an early foothold fromwhich to respond to the Chinese market, where rapid
growth is expected.
On the production side, too, we are boosting ouroverseas supply capacity and enhancing our ability torespond immediately to changes in local needs.
We increased our share of the Taiwanese market for
LCD color filters by licensing technology to multiple

manufacturers in Taiwan and enhancing our frameworkfor supplying OEM products. For fifth-generation
products, we invested in South Sintek Photronic, a joint
venture with a local Taiwanese company, and set up a
new production line.
Meanwhile, sales of rear-projection TV screens aregood in the United States. We aim to boost production
capacity at DNP Electronics America, our California
plant, and maintain a grasp of market conditions in realtime as we develop new products that meet customers’
needs, in order to secure at least 50% of the worldwide
market.
Because Japan and South Korea are the mainmarkets for PDPs, we plan to continue to supply related
components such as back plates and electromagnetic
wave shields from Japan, in order to meet market
demands efficiently.

13
DNP AR04

Develop distinctive technology thatgives us an edge in the market

1 Build a portfolio of all-round products

Special Feature:

DNP’s Display Business
Basic Strategies for Our Display Business

Basic Strategy

3 Develop distinctive technologies that give us an edge in the market

It is important to always stay on top of the market.
Currently, DNP has a top-class share of the global
market for every display-related product that we make,including color filters, projection screens, shadow
masks and PDP back plates. We intend to further
strengthen the technological development capacity that
supports this group of products, and make our
products and production technology more distinctive
than ever. There is a tendency toward shorter andshorter product life cycles among all display-related
products, so the keys to expanding businessthroughout this field are to make our products standout from the rest, and to increase cost competitiveness.
Development of efficient manufacturing technology isparticularly important for success in the market for color
filters used in LCD TVs, because the production
process is so complex and product yields are an issue.
In order to hold down initial costs, we maintain ahigh level of productivity and we are working on
improvements like more cost-effective materials andspinless coating technology that can reduce pigment
loss. Also, we are currently developing an inkjet-based
production process that we hope will give us a highlevel of productivity and yields that far exceed existing
industry standards. We will continue to focus ondeveloping unique DNP production technologies thatgive us higher quality and lower costs.

Basic Strategy

5 Foster new businesses

Far from shunning change, we are prepared to bean agent of change ourselves as we embark on new
business ventures. Change happens at a dizzying pacein the display market. In order to keep up, we strive toactively develop products related to whichever new
type of display will be the star of the next generation.
DNP’s integrated R&D organization is aimed atquickly commercializing new products. It consists of a
Research & Development Center, which performs basic
research into next-generation products and researches
specialized materials, a Display Components

Laboratory that works to commercialize specificproducts and improve processes, a Manufacturing
Technology Laboratory that develops effective
production technologies and equipment, and otherspecialized laboratories. All of them work together witha sales team that keeps a sharp eye on market trends,
in order to speed up the launch of new businesses.
In the future, we plan to go beyond the manufactureof display products and materials, and explore
possibilities for flexible business models, including
alliances that can develop modules or devices, etc.

1415

4 Promote strategic alliances and M&As

Our objective is to make the most of eachcompany’s particular strengths and collaborate as wemove toward the same goal and win. DNP will actively
develop a variety of business models and seek out
alliances with strong partners when we can expect
mutual benefit from a global point of view. When
moving into new overseas markets, we can disperse
risk and start up local production bases more quickly
and efficiently through joint investment with overseas
partners. In the case of color filters, we licensed
technology to SinTek Photronic and procured OEM
products from them. We are also building a new fifthgeneration production line through joint investment with
South Sintek Photronic.
Within Japan, too, we can supply more competitive
products by joining forces with companies that excel invarious fields. In October 2002, we purchased a color
filter manufacturer, Advanced Colortech, Inc. (ACTI),

from its two founders, Asahi Glass Co., Ltd., which
supplies glass substrates for LCDs, and Mitsubishi
Chemical Corporation., which supplies highperformance materials like color resists. We alsocollaborated with Asahi Glass to found a PDP backplate manufacturer, DAP Technology Co., Ltd.
In addition, we formed a technical tie-up with iFire
Technology Inc. – a Canadian company that holds
many patents related to Thick Film Dielectric Inorganic
EL – through which we are developing manufacturing
technology to allow us to mass produce nextgeneration inorganic EL displays at 30-40% less thanthe cost of conventional FPDs.
As we move forward, we will freely select optimalbusiness models, keeping in mind possibilities for
M&As, joint investments, technical license agreements,
etc., in order to contribute to the development of theindustry.

Basic Strategy

DNP AR04

DNP AR04

Basic Strategy

6 Protect intellectual property rights

In order to better secure the technological dominance that supports our top share of world markets,
we are taking active steps to acquire and protect intellectual property (IP) in order to promote product development at the global level.
Currently, DNP holds 658 display-related patents inJapan and the rest of the world. The number of patentapplications we have filed overseas has grown steadilyalong with the size of the display market: in the five
years from 2000 to 2004, it increased by 45% to 296.
Color filters:
We are focusing our IP strategy on Asia, in order to
respond to challengers that rise up within the Asian
region. In the past five years, we applied for ten times
as many patents as we did in the previous five-year
period. Of those applications, 56% were filed within
Asia excluding Japan.

Rear-projection screens:
We have received 56 patents in the U.S., which has
been the main market for PTVs so far. Since demand
has also been growing in China in recent years, in thepast five years we have applied for about the same
number of patents in China as in the U.S.
Shadow masks:
We have worked actively to develop our rights worldwide, and as a result we have received 131 patents
that protect DNP’s market share and rights.
Overseas patent applications (filed outside Japan)(number of applications)
300

296
250

200

205

150

127

100

50

32
0
1985〜1989

1990〜1994

1995〜1999

2000〜2004

Special Feature:

DNP’s Display Business

Strategies for Specific Display Products

CF: COLOR FILTERS
Among flat panel displays, LCDs are especially thin,light, and energy-efficient. A color filter is thecomponent that gives color to an LCD; it consists of anarray of red, green, and blue elements on a glass
substrate.
Until about 2010, demand for LCDs is expected tosteadily increase as they are used in mobile phones,
PDAs, GPS, and everything from little laptop computers
to desktop PCs and large-screen televisions. We
predict that the market for LCDs used in PCs will
expand steadily, and there will be major growth in themarket for television LCDs.

Optical wavegide
Crystalline orientation filter
TFT array
Liquid crystal filter

Color filter
Crystalline orientation filter

16

DNP
34%

6th generation (left)/5th generation (right)

Choose flexible strategies, for survival beyond the
7th generation
So far, DNP has taken advantage of our transporttechnology and our superior production technology to
avoid excessive dependence on specific panel makers.
We intend to maintain this policy even for 6th generation
products. But in the 7th generation, when the panel size
will be 1820 X 2200mm, transport will pose aformidable problem. We expect that most suppliers willbuild “in-plants” inside their clients’ factories or “byplants” adjoining them. So we believe that in the future
we will need to choose flexible and nimble strategies
such as cooperative manufacturing involving alliancebased technology licensing or in-plants, by-plants, etc.

Develop an inkjet method to respond to demand forlarger screens
In order to distinguish our products from thecompetition, we developed color filters with columnar
spacers, and high-performance filters that can expressa broad range of colors. By shortening our customers’
production processes, these products helped them tolower costs and improve picture quality. As panel sizes
grow larger, reducing production costs and improving
yields is becoming more and more important.
DNP is working on achieving the required production
efficiency by developing an inkjet production methodthat is completely different from conventional methods.
Our goal is to improve productivity and cut costs byusing this method to decrease the number ofmanufacturing processes and reduce material loss andother inefficiencies.
Support clients’ in-house manufacturing throughsuperior production technology and low prices
Among display panel manufacturers, the in-houseproduction rate for color filters is about 40%. We
expect it will remain around that level into the future. Asan outsourcing manufacturer, we have earned areputation for outstanding quality and costcompetitiveness. We expect to continue to contributeto the FPD industry by providing products that meet
panel makers’ needs.

17
DNP AR04

DNP AR04

Color Filter Market Share

Supply to a broad customer base — even 5th and 6th
generation filters
The substrates used for LC panels have gradually
gotten larger, and now 5th generation products (1100 X
1300mm) dominate the market. The color filters that fit
this size are over one meter square, less than 0.7mm
thick, and made of glass. The technology fortransporting these products is extremely important toour color filter business strategy. Due to a trend within
the industry toward building color filter production lines
inside client companies’ factories, it seems that theincreasing size of the substrates may pressure theindustry to adopt new business models.
DNP has developed transport technology for the 5th
generation and is within sight of developing transporttechnology for the 6th generation. So we are currently
fine-tuning our production technology in order tocontinue supplying color filters by transporting themfrom our production base to our customers’ plants.
As with earlier products, we expect to supply abroad market with 5th and 6th generation products. We
intend to meet the needs of our customers in Japan,
South Korea, Taiwan, and China, without being overly
dependent on specific clients.

Increase production capacity and disperse risk
We currently have five production bases for color
filters. In Japan we have our Mihara plant in Hiroshima
Prefecture, the Otone plant in Saitama Prefecture, andAdvanced Colortech, Inc. (ACTI) in Fukuoka Prefecture.
In Taiwan, there is SinTek Photronic and South Sintek
Photronic. With the addition of 5th generation productionlines to our Mihara plant in April and November 2004,
we will have the world’s largest production capacity,with a total capacity equivalent to 5.7 million filters permonth, calculated on a 14-inch basis.
In Taiwan we produce color filters primarily for use in
PC monitors, while in Japan we make more
technologically advanced products.
By spreading our production bases in this way, we
not only reduce risk but also strengthen our frameworkfor offering stable supplies to the whole world.

Special Feature:

DNP’s Display Business
Strategies for Specific Display Products

PS: PROJECTION SCREENS
Fresnel lensLenticular lenses
MirrorMirror

MD

18

SM: SHADOW MASKS

Microdisplay’s (MD’s) Projected Share of PTV Market
(%)
50

48%
3.64 mln
units

40

25%
1.55 mln
units

20

10

0

CRT
4.66 mln units

36%
2.49 mln
units

30

2004

MD
1.60 mln units

Total PS Market
62.6 mln units

35%
55%

10%
0.54 mln
units
2003

DNP’s Projected Share of CRT and MD Markets in 2004

2005

2006

50%

Shadow mask
Red, green, and blue phosphors
Panel

Electron guns
Neck

Shadow Mask Market Share

DNP
36%

Shadow masks are a component of CRT color
monitors. A shadow mask has many holes or slits thatguide an electron beam (shot from an electron gun) toaccurately hit a particular group of phosphors on thefront glass panel. A shadow mask is made of a sheet ofnickel alloy or some other metal, and must be formed
precisely, to within a few microns.

Secure steady revenues by specializing in shadow
masks for TVs, and by boosting costcompetitivenessFor almost 30 years, “color display” always meant
the kind of cathode ray tube (CRT) that was used for solong in home televisions. DNP was the first entity inJapan to develop a shadow mask, which is a key
component of CRT monitors. Since then, we havesupported the CRT industry as the top player in theworld market.
Now that many personal computer manufacturers
have switched to using LCDs, demand for CRT
monitors for use in PCs has dropped sharply. From2001 to 2002, DNP boldly reorganized its shadow
mask production lines, scrapping 40% of theequipment and concentrating the rest at the Mihara
plant in Hiroshima Prefecture.
At the same time, we shifted the bulk of our
production, which until then had been aimed at CRT
monitors for PCs, toward shadow masks for home
televisions. In April 2001, only 20% of our shadow
masks were used in televisions, whereas today wehave raised that percentage to 70%. We expect
demand for shadow masks to be stable for some time
to come, especially outside of Japan, as television
ownership spreads among the BRICs (Brazil Russia,
India and China). We expect the market to amount to
160 million masks per year. From now on, we intend tosecure profits by concentrating on the production ofhigher added-value shadow masks for TVs, and by
expanding orders and lowering costs.

19
DNP AR04

DNP AR04

Enhance MD screen business
Projection screens combine a Fresnel lens that
focuses light from projected images and a lenticularlens that adjusts the focused light to a specific viewpoint. This type of screen is used with a rear projector.
DNP is the only screen maker in the world that manufactures both Fresnel and lenticular lenses. We haveoutstanding technology for making dies used in lensmanufacture, as well as superior expertise in precision
forming. Rear-projection TVs are relatively low-priced
among large-screen TVs, and are steadily gaining popularity, especially in the United States. In 2001, DNP
launched a production base in the U.S. – the world’s
biggest PTV market – giving us a base each in Japan,
the U.S., and Europe.
Until recently, the market was dominated by projection TVs that use a CRT (cathode ray tube) light source
to display images in the form of scan lines. In the future,
we expect to see a surge in demand for MD-type(microdisplay) PTVs that use a digital optical engine anddisplay a dot matrix, thereby delivering higher-precision
images.
DNP has succeeded in reducing the roughness of its
MD-type screens and developing an ultra-fine pitch 65micrometer screen suitable for viewing digital broadcasts. In the future, we will further enhance our foundation in the PS market and boost our sales strength.
DNP holds a 55% share of the worldwide market for
CRT-type projection screens, but we predict that asownership of MD-type screens spreads, the fiscal 2004
market and our share of it will change as shown in thepie charts below.

Special Feature:

DNP’s Display Business
Strategies for Specific Display Products

PDP: PLASMA DISPLAY-RELATED PRODUCTS
Rear glass substrate
Address electrode
Dielectric layer
Barrier rib
Phosphors
Sealing
Front substrate

20

The back plates that DNP manufactures for use inplasma displays are important components that consistof electrodes, barrier ribs and phosphors arranged in a
regular pattern on a glass substrate. Together with afront substrate fitted with electrodes, this makes up thecore of a plasma display panel (PDP).

Develop production technology aimed at full-scalemass production
Some of the distinguishing features of inorganic EL
displays are that they are self-luminous, wide-angle,
quick-responding, and robust to environmental
conditions. Because their structure is simple, they canbe made thinner and lighter than conventional FPDs.
They are attracting a good deal of attention as apromising display for the future.
Since March 2003, DNP has been developing
inorganic EL displays jointly with iFire Technology Inc.
of Canada, and we have already succeeded indeveloping a 34-inch display. We are currently working
on developing production technology in hopes ofstarting mass production in 2006.

Glass substrate

Electrode
Thick film dielectric layer
Phosphors
ITO electrode
Color correction layer
Display panel

21

OEL: ORGANIC ELECTRO-LUMINESCENT DISPLAYS
Metal electrodeLuminescent layer
Hole transport layer
Transparent electrode
Substrate

Consider alliances aimed at developing electronic
paper
Organic EL displays appear to be very promisingbecause they are self-luminous, wide-angle, quickresponding, energy-efficient, and because it is possible
to mass produce large displays of this type at a
relatively low cost. The technology for producing themis an extension of printing technology. Unlike
conventional displays, they can be made to be portableand flexible, like a paper poster, and present all kinds of
new possibilities.
The key to commercializing this format is to makethem more resistant to humidity and extend the
product’s lifespan. Technological breakthroughs are
already occurring rapidly, and OEL displays are starting
to be used as sub-displays in devices like mobile
phones and digital cameras.
DNP is pushing ahead with development by forming
alliances with companies around the world. For
example, we licensed technology from Cambridge
Display Technology, a UK start-up, in order to speed
development of flexible organic EL displays.

DNP AR04

DNP AR04

Establish new markets for back plates and opticalfilms
As progress is made toward achieving greaterbrightness and precision, and solutions are found for
sticking points concerning energy consumption andcosts, the market for PDPs appears to be ready to start
growing. It is expected to amount to 7 million units
worldwide in 2006. LCDs are also popular flat panel
displays, but because PDPs are currently superior interms of cost and picture quality in the 40-50 inch size
range, we expect that the market will gradually diverge
according to size.
In July 2001, DNP set up a subsidiary with Asahi
Glass Co., Ltd., which holds a 90% share of the market
for glass substrates for PDPs. The subsidiary, DAP
Technology Co., Ltd., started manufacturing backplates for plasma display panels in the summer of2003. The first PDP manufacturers made their own
back plates in house, but as the market grew, they
increased their dependence on outsourcing
manufacturers like DAP. In the future, we intend toconcentrate on providing products that make the mostof both partners’ strengths, and increase our share of
the market.
In addition, our Industrial Supplies segment is
responding to the sudden growth in the LCD and PDP
markets by taking advantage of our precision coating
technology to develop and manufacture a variety ofhigh-performance films such as high-function opticalfilm for polarizers, anti-glare optical film, andelectromagnetic wave shielding film.

IEL: INORGANIC ELECTRO-LUMINESCENT DISPLAYS

Dai Nippon Printing Co., Ltd. was established as a full-scale, Japanese printing

Consolidated Financial Highlights

company in 1876, under the name Shueisha. The company started out printing

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

for the publishing industry and later branched out into a variety of fields,
including commercial printing, business forms, packaging, decorative materials,
In millions of yen (except per-share amounts)

and electronics. The DNP Group has become the world’s largest corporate

2004

FOR THE YEAR

group engaging in comprehensive printing operations. DNP currently employs

Net sales

some 35,000 people. In Japan, the DNP Group has 24 division offices in major
cities, 44 sales offices, and 38 production plants, while overseas it has another% change

2003

2004/2003¥ 1,354,101¥ 1,309,002

Operating income

102,438

89,881

14.0

Income before income taxes

93,13742,244120.5

Net income

52,971

28,774

84.1

37.80

89.1%

18 sales offices and seven production plants. At DNP, we continue to expand

Per Share Data:

our businesses even further by pursuing new possibilities for technologies and

Net income¥

Primarymarketing in the world of printing.

71.49

¥

3.4%

Fully diluted

—

37.67

—

Cash dividends

21.00

19.00

10.5

AT YEAR-END¥

Total stockholders’ equity
22

Summary of Display Business Strategies

0004Development Cycles and Generational Change
in the Display Business

06

Electronics
Business Strategy

942,0833.9%

1,450,027

4.4

56

Summary of Results

58

Hot Topics

60

Sustainable Development

08

Trends and Expansion in the Display Market

10

Improving Corporate Governance

Basic Strategies for our Display Business

12

Board of Directors

65

Strategies for Specific Display Products

16

Maintaining Product Safety

66

Profile, Table of Contents

22

Maintaining Information Security

67

Consolidated Financial Highlights

23

Environmental Protection

68

Message to Our Shareholders

24

Human Resources Management

69

DNP @ a Glance30

Corporate Philanthropy

72

Financial Section

1,513,734

Total assets

54

Diversification of Display Methods

63
64

Net Sales by Consolidated Segment

33

DNP Solutions Businesses

34

Management’s Discussion and Analysis

74

Information Communication

36

Consolidated Financial Data

82

Business Strategy

38

Consolidated Financial Statements

84

Summary of Results

40

Notes to Consolidated Financial Statements

89

Hot Topics

42

Report of Independent Certified Public Accountants 102

73
Net sales

Operating Income

Net income(in billions of yen)(in billions of yen)(in billions of yen)

1,500

120

60

100

50

80

40

60

30

40

20

20

10

1,200

Lifestyle & Industrial Supplies¥

DNP AR04

DNP AR04

Special Feature: DNP’s Display Business

978,736

23

Contents

46

Subsidiaries and Affiliates

103

Business Strategy

48

Investor Information

105

Summary of Results

50

Hot Topics

52

This annual report is aimed at providing information about DNP’s businesses, management vision, and business results. Opinions and forecasts contained in the report werebased on the best judgment of management at the time the report was prepared, so we cannot guarantee that all information contained in the report is completely infallible.

900

600

300

0

0
00

01

02

03

04

0
00

01

02

03

04

00

01

02

03

04

Message to Our Shareholders

P&I Solutions: Actions and Results“P&I Solutions” Combine DNP’s Two Greatest
Strengths

24

Chairman of the Board
President and Chief Executive Officer

This fiscal year, the DNP Group’s net sales reached a record high of 1,354.1 billion yen. Operating income also grewsignificantly over the previous term, to 102.4 billion yen, as did net income, to 52.9 billion yen.
We chose the slogan “DNP: P&I Solutions Provider” to represent our vision for the 21st century, and the entire company is working together to realize this vision. Our goal is to create new values and profits by blending the Printing
Technology (P) that we have cultivated since our company’s founding with Information Technology (I) in order to provide solutions to problems faced by our clients and consumers.
I believe the results we achieved this fiscal year demonstrate that the direction we chose for our 21st century vision
is correct. We will continue to pursue this strategy in the future, as we aim for long-term, sustainable growth.

Our IPS Business, Still Growing by Double Digits
One of the solutions businesses that we are developingin line with our 21st century vision is IPS (information processing services).
Around 1970 we started making magnetic cards used
as cash cards or credit cards, etc. As a result of laterchanges in this industry, we were authorized by credit cardcompanies to start issuing cards that each contained different information. The technologies that we developed inorder to allow us to handle different information for eachindividual consumer evolved into our IPS business, wherein we issue things like bills for mobile phone services andcredit card statements. In this business, we handle thewhole billing process on behalf of our client companies,
including printing out statements, matching each statement with the correct address label, and mailing them out.
These operations require a high degree of security andaccuracy.
At that point we started thinking from the point of viewof marketing, and we began sending direct mail tailored to
specific types of customers. Today we have developed tothe point that we can propose the best life insurance or
car insurance policies based on individuals’ life circumstances. This service realizes the desire of our client companies to communicate effectively with consumers
through information that has greater appeal.
The market for these IPS businesses has grown thanks
to a general trend among corporations to do more outsourcing. Along with that growth, DNP’s technologies andexperience have won the trust of our client companies. In
recent years these businesses have performed extremely
well, and profits are continuing to grow by more than 10%
per year.

25
DNP AR04

DNP AR04

Yoshitoshi Kitajima

In May of 2001, as we neared the 125th anniversary of
DNP’s founding, we asked ourselves two questions. How
can we contribute to the emerging 21st-century society,while people’s values are becoming increasingly diverse
amidst dramatic social changes? And how can we create
new value? In response, we formulated a vision for the
21st century with the aim of establishing long-term growthstrategies. We based this vision on the concept of “DNP:
P&I Solutions Provider.”DNP has two core competencies: the printing technology that we have fostered since our company’s establishment, and the information technology that we began toacquire in the 1970s by using computerized typesetting
and digital image processing. I believe it is becoming
increasingly important for us to take a fresh look at thestrengths that we have as a unique company, to blend
those strengths at a higher level, and to add to that mixture our capacity for planning and technological development so that we can create new values by offering comprehensive solutions that serve our customers and society
better than ever.
Throughout our history, DNP has listened to what it isthat customers want, and has formed and re-worked
things to fit the customer’s needs. In the process of doing
so, we have grown to be a company that is capable ofproposing solutions to the problems of customers in all
kinds of industries.

Message to Our Shareholders

Results This Fiscal Year
We Achieved Record High Sales and a Large Increasein Profits Despite a Harsh Business Environment
Providing Comprehensive IC Tag/RFID Solutions for
What We Expect to be a Huge Market

Our Rapidly Growing Smart Card Business

26

Situation by Segment
Looking at individual segments, we see increased revenues and profits in three: Information Communication,
Lifestyle & Industrial Supplies, and Electronics.
The Information Communication segment benefited
from an increase in orders related to commercial printing
partly due to a pickup in advertising expenses in the second half of the fiscal year. Thanks to cost-cutting activities,
this segment was able to absorb the effects of lower unit
prices and higher paper prices and post higher profits notjust for commercial printing but also for publishing andbusiness form-related items. In order to reorganize ouroverseas production bases, we liquidated our publishingproduction subsidiary in Hong Kong, and moved its production work to subsidiaries in Indonesia, Malaysia, andSingapore. As a result, the segment’s net sales grew 1.6%
over the previous year, to 629.8 billion yen. Operating
income was 43.7 billion yen, representing a large increaseof 9.0% over the year before, and the operating income
margin rose by 0.4 point to 6.9%.

27
DNP AR04

DNP AR04

In our smart card business, too, DNP offers comprehensive solutions. So far, we have controlled an overwhelming share of the Japanese market for magnetic cash
cards and credit cards. We aim to use our dominance inthis market to take advantage of the shift to smart cards inorder to further expand our market share. DNP began
developing operating systems for smart cards 20 years
ago. We also have abundant experience in developing
applications. DNP is the only company in the world capable of supplying general-purpose, multi-application OS
cards for both MULTOS and Java systems.
As part of our overall card business, we started a “Card
Data Management Service” (CDMS). It offers efficient solutions that include the instantaneous issuing of smart cards
followed by reliable management of related data while
guarding the security of cardholders’ personal information.
As the overall smart card market has grown, DNP’ssmart card business has shown a rapid expansion insales. This is a result of our providing our corporate customers with a comprehensive service that goes beyond
simply manufacturing cards to offer application development and complete business solutions.

IC tags were designed to be the next-generation product management tool. They are expected to be useful in awide variety of ways. This is a field that is expected todevelop into a huge market, and we have high hopes for
DNP’s participation.
As use of IC tags spreads, it is likely that the MIT AutoID Labs in the U.S. will play a leading role. In 2002, DNP
became the first Japanese company to participate in its
forerunner, the Auto-ID Center that was headquartered at
MIT. In Japan, too, DNP has been working on standardization and other tasks by supporting the activities of the
Ubiquitous ID Center here.
In addition, we are developing a variety of applications
by promoting effective collaboration with customers andother industry players. For example, in November 2003,
we collaborated with DoCoMo Systems Inc. to develop"Kids in Feel," a service that contacts parents by cell
phone to inform them that their child has left school orcram school if the child flashes a non-contact IC tag nearan IC reader at the classroom door.
In the IC tag business as in other businesses, we will
not just focus on manufacturing tags. Rather, we will
actively offer comprehensive solutions that include making
use of collected data, managing security, and developing
applications that address customers’ concerns about features like traceability.
In order to allow client companies to experienceadvanced systems using IC tags, DNP established “IC Tag
Experimental Workshops” in Tokyo and Osaka in October
2003. As of this writing, we have commenced negotiations
for joint development with more than 550 companies.
I think DNP’s real strength will be evident when we
make maximum use of our talent for discovering and fulfilling customers’ needs, by developing a variety of systems
and services. We aim to increase our profits by providing
useful solutions to customers, and by strengthening oursolutions businesses based on the idea that “leading customers to success is our business.”

There were some fairly encouraging signs in theJapanese economy this term, such as a recovery in corporate profits and increased capital spending in the private
sector, but because of the dearth of domestic demand,
there was nothing to stop deflation. With personal consumption and housing construction still floundering, we
can’t yet call this a full economic recovery. In the printing
industry, it was a very tough year, as orders were slow andunit prices sagged while the cost of paper and othermaterials rose.
Given this business environment, we tried to achieve
good results by working actively to boost sales in our
existing printing businesses and expand our business inthe electronics sector while also striving to cut costs wherever possible. As a result, we posted record high consolidated net sales of 1,354.1 billion yen, an increase of 3.4%
over the previous year. Operating income increased greatly, by 14.0% to 102.4 billion yen, and net income surged
84.1% to 52.9 billion yen.
All told, we achieved favorable results, so we increased
our annual dividend payout by two yen to 21 yen. Last
year we increased the dividend by one yen, so this was
the second year in a row that we raised it. In the past,also, our basic policy has been to make stable dividend
payments with increases when our performance allowed,
and we intend to uphold this policy in the future. We also
repurchased treasury stock this year for the second year ina row. This year we bought back 15,392,000 shares for
24,425.3 million yen. In the past two years, we acquired atotal of 32,392,000 treasury shares, or 4.2% of all outstanding shares.
Obviously, our most important duty as corporate managers is to return profits to all of our shareholders. We
work first and foremost to improve corporate performanceand secure large profits, while at the same time strengthening our financial constitution and maximizing corporate
value.

Message to Our Shareholders

DNP in the Future
Our Foundation is Solving Our Customers’ Problems

28

As I said at the outset, in the future we will continue toactively pursue a solutions-based business that combines
printing and information technologies in line with our 21st
century vision. Rather than focusing on what we sell, ourfocus will be on what problems we solve for our customers. We will implement the following strategies as wework to increase revenues.
Sales strategy
Recognizing that the source of our profits lies in discovering and solving our customers’ problems, we will
pursue a business model in line with this idea. We willfurther strengthen ties among segments and take themto an even higher level.
Development strategy
We will position advanced technologies, development capabilities, and other intellectual property as animportant source of revenues, and concentrate ourenergies on developing three things: technologies,
products, and businesses. Taking into account the
speed at which we need to develop new businesses,
we will actively pursue alliances with corporations inJapan or overseas as needed.
Manufacturing strategy
We will improve our manufacturing efficiency by
reducing inventories, works in progress, material waste,and lead time. We will also bolster maintenance andimprovement of facilities, and make efficient capital
investments.
Operational efficiency-boosting strategy
We will establish model workplaces for each business area, and build rational operational systems fromscratch. In this way, we will foster a review of actual
operations and aim for total operational efficiency.

Computerization strategy
We will make maximum use of the information technology that is one of DNP’s strengths, take a fresh lookat the overall picture of information distribution in ourbusiness, including customers and affiliated companies,
and build systems that benefit society as a whole. Also,
we will bolster our security-related technology and bethorough in legal compliance.
Aiming for Sustainable Increase in Shareholder Value
While Fulfilling Social Responsibilities
We sincerely intend to resolve the various management
issues that confront us, fulfill DNP’s social responsibilities
as a corporate citizen, and guide the company onto a sustainable growth track. In order to accomplish this, we feel
it is essential that each DNP employee acts in accordancewith the law and social ethics, and pursues our corporate
activities from a comprehensive point of view that considers the environment, economy, and society.
Based on this belief, we have already established committees to address such issues as corporate ethicalbehavior, environmental concerns, product safety, information security, and the protection of personal information.
We are continually working to strengthen legal complianceand address these various issues. We will do everything in
our power to keep aiming for sustainable growth and to
maximize value for all of DNP’s stakeholders.

Yoshitoshi Kitajima
Chairman of the Board
President and Chief Executive Officer

29
DNP AR04

DNP AR04

The Lifestyle & Industrial Supplies segment continued
to experience a very tough business environment,
dragged down by factors like sluggish personal consumption, but there were big increases in net sales of new products such as asceptic bottle-filling systems, optical film,and electrodes for lithium-ion rechargeable batteries.
Increased revenues and profits by packaging-related production subsidiaries and increased sales related to industrial supplies helped boost the performance of this segment. In order to support expansion in our rapidly growing
optical film business, we doubled production capacity at
our Okayama plant. As a result, the segment’s net sales
increased by 1.4% year-on-year to 426.1 billion yen, andoperating income grew 13.5% to 32.4 billion yen. The
operating income margin rose by 0.8 point to 7.6%. In thefiscal year that ended in March 2002, this segment’s operating income margin was 4.9%, but it increased by 2.7
points over two years thanks to smooth progress in costcutting in existing areas and steady growth in highly profitable industrial materials.
The biggest news in the Electronics segment is the
rapid growth in the display market backed by a strong
demand for liquid crystals, as discussed in the special
section at the beginning of this annual report. We received
more orders for color filters because we expanded thenumber of added-value products that we offer and reinforced our production systems. This led to unexpectedly
strong growth in this area. In addition, there was a recovery in projection screens in the second half, contributing todouble-digit growth in both sales and operating income in
the Electronics segment. This year Electronics accounted
for 17.5% of the net sales and 32.3% of the operating
income reported in our consolidated financial results.

Also, we made focused investments in strategic areas
like expanding new production lines for fifth-generation
color filters. As a result, sales in the Electronics segment
increased 13.5% from the previous year to 236.4 billion
yen. Operating income increased 16.6% to 33.0 billion
yen, with an operating income margin of 14.0%.
On the other hand, in the Beverages segment, net
sales and income at Hokkaido Coca-Cola Bottling Co.,
Ltd. fell below previous-year levels. The company has
been struggling for the past few years, and this year it
again suffered from a relatively cold summer and fromsevere price competition. Net sales fell 3.0% from the previous term to 69.7 billion yen, resulting in an operating lossof 372 million yen. We are working to get this segment
back into the black quickly, by formulating a medium-termbusiness plan called “Rebirth 2006” and by implementing
radical reforms in order to promote reconstruction.

Environmental strategy
From society’s point of view, protecting the environment has already become a mandatory condition of
corporate existence. Based on a deep awareness of
this fact, we will promote things like the development ofenvironmentally-friendly products, use of environmental
labels, and the purchase of green chemicals. In our factories, we will work actively to reduce waste, carbon
dioxide emissions, and toxic chemical emissions.

DNP @ a Glance

DNP’s main businesses consist of three consolidated segments: Information Communication, Lifestyle &Industrial Supplies, and Electronics. Together, they contribute 94.9% of the Group’s net sales. The company
also has a beverages sector, which generates 5.1% of net sales.

Information Communication
Net sales (left)
Operating income (right)

Books and Periodicals(in billions of yen)

The publishing of books and magazines was affected by the prolonged slump in the publishing industry.
Sales of books and periodicals declined. In the commercial printing business, our aggressive sales efforts
helped achieve a rise in orders for printing of items like advertising flyers and catalogs. And in the business
forms area, we had good success with information processing services like personalized direct mail, as well aswith smart cards, but sales of bank passbooks and ledgers were sluggish.
In the end, the segment’s net sales grew 1.6% over the previous year, to 629.8 billion yen. Operating

600

60

400

40

200

20

Net sales: 629.8 billion yen
Change:Books, magazines,
dictionaries, textbooks,
graphic art collections,
corporate histories, historicalreviews, and other publishedmaterials

Commercial Printing
Catalogs, advertising flyers,
pamphlets, posters,
calendars, point-of-purchase,
event advertising materials

Business Forms
Continuous ledger forms foruse with computerizedaccounting systems, packing
and delivery slips for parcel
deliveries, direct mail, stock
certificates, gift certificates,
all kinds of tickets, bankpassbooks, plastic cards,
smart cards, hologram
products, IPS (information
processing services)

1.6%

Operating income: 43.6 billion yen
Change:income rose 43.6 billion yen, or 9.0%, from the year before, and the operating income margin rose to 6.9%,

9.0%

from 6.5%.
0

0
03

30

04

Lifestyle & Industrial Supplies

32(in billions of yen)

The Lifestyle & Industrial Supplies segment was affected by factors like sluggish personal consumption. In
our packaging materials business, there was a drop in sales of paper dishes and paper cups, but sales of plastic beverage bottle preforms surged, and sales of film packaging materials also increased. Among decorative
materials, products designed with environmental or health concerns in mind enjoyed bigger sales, but overall
this sector was weaker than the previous year. On the industrial supplies side, sales of ink ribbons for plainpaper fax machines declined, but sales of ink ribbons for color printers increased. Also, there were big increas-

600

60

400

40

200

20

Net sales: 426.0 billion yen
Change:Packaging

Industrial Supplies

Printed packaging products
for food and beverages,
cosmetics, pharmaceuticals,
environmentally friendly
containers

Transfer ribbons for color
printers and fax machines,
optical film for displays,electrodes for lithium-ion
rechargeable batteries

1.4%

Operating income: 32.4 billion yen
Change:es in sales of various types of optical film and electrodes for lithium-ion rechargeable batteries.

13.5%

Decorative Materials
Functional films for use instores, offices, automobiles,
home appliances, furniture,
wall and door coverings

Overall, the segment’s net sales increased by 1.4% year-on-year to 426.0 billion yen, and operating income
grew 13.5% to 32.4 billion yen. The operating income margin rose to 7.6%, from 6.8%.

0

0
03

04

Electronics
Net sales (left)
Operating income (right)

Displays(in billions of yen)In this segment, sales of shadow masks declined amid sluggish demand in the PC monitor market. Exportsof photomasks were also slow. On the other hand, sales of projection screens grew amid increased demand
for their use in televisions. There was a big increase in orders for color filters for use in both PC monitors andtelevisions.
As a result, net sales by the Electronics segment increased 13.5% from the previous year to 236.4 billion
yen. Operating income increased 16.6% to 33.0 billion yen, and the operating income margin rose to 14.0%
from 13.6%.

600

60

400

40

200

20

Net sales: 236.4 billion yen
Change:Color filters for LCDs,
screens for rear-projectionTVs, shadow masks, backplates for plasma displays,
inorganic and organic EL
displays, hologram screens

13.5%

Operating income: 33.0 billion yen
Change:16.6%

Electronic Components

0

0
03

04

Photomasks, lead frames,
package substrates, IC tags,
on-chip color filters, otherchemical etching products

DNP AR04

DNP AR04

Net sales (left)
Operating income (right)

DNP Solutions Businesses

Net Sales By Consolidated Segment

Solutions Business Themes
DNP uses the knowledge and skills we have accumulated over theyears to offer flexible solutions to problems that our corporate clients
face. For example, “How can we make our daily operations more
efficient?” “How should we compile data that will help us effectively
promote sales?” “What makes a sales promotion scheme
appealing?” “What should we do to protect our corporate data andour customers’ personal information?”

5.1%
Beverages

17.5%

Production & Distribution Operations

Information Communication

Network/ Data Base Solutions

Smart Card Solutions(Books & Periodicals; Commercial Printing; Business Forms)

We offer a variety of solutions using applications and networked systems.

DNP doesn’t just manufacture cards, we also propose and develop
operating systems and applications. We provide total solution support,
from concept to operation.

Not only does DNP process information using new types of
media, we handle every step from planning and content
creation through the delivery of finished products. We offer
more effective, 21st-century information and marketingstrategies that ease the burden on customers in a wide variety
of industries and help deliver their messages to consumers withgreater speed.
In order to protect personal data in today’s information society,we need to establish strong security systems. We offer a large
number of security systems using smart cards

Providing Functionality for Websites

Smart Card Introduction Support & Consulting
DNP chip migration program

Development and setup of all kinds of active server pages (ASP)
Electronic application services/ e-statement issuance
Measurement of Web functions
Recommendation systems

Smart Card Issuance Service
Contact smart cards

Native OS

Non-contact smart cards

Account settlement functions

MULTOS
Types A&B

Java Card™
FeliCa®

Hybrid cards
Dual-interface cards

Databasing of product information
Production line control systems

Editorial support systems

Personalized DM – Catalogs

Frameworks for Content Sales

Delivery and distribution systems

On-demand publishing

Cross-media solutions

Distribution platforms
Protection from unauthorized content distribution
Issuance of content IDs
Copyright protection system

Payment collection systems
Boosting the efficiency of manufacturing operations

Lifestyle & Industrial Supplies

DNP AR04

Intellectual property rights support

Information Communication

Purchasing systems
ID issuing and management
On-line accounting systems
Computerization of corporate information

Lifestyle & Industrial Supplies

Public Relations
Corporate communication support
Archiving of corporate information
IR solutions

DNP has been finding new uses for printing technologies in thedevelopment of products that become an intimate part ofmodern daily life and are indispensable to industry. Our reliable
manufacturing technologies also serve as a base from which
we develop a variety of solutions to make life more convenientand safe. In addition to environment-oriented solutions, theseinclude product development, design, machinery design,
system engineering, and sales promotion.
Packaging design system/s
Online System for Team Package
Design Editing

Asceptic container-fillingsystems

Decorative materials environmental
impact assessment system

Food and beverage-related
market researchTraining-related Operations
Computerized training programs
Educational materials production support
Editing of curriculum information

Sales Promotion Operations
Product development support
Enhancement of sales methods
Marketing and research

Product tracing systems

Electronics(Displays; Electronic Devices)

Virtual plant solutions allow customers to use the world-classelectronics processing technologies of DNP’s manufacturing
facilities as if they were inside the customer’s own factory.
Every process from ordering to delivery can be easily
confirmed. We also provide turnkey business solutions that
handle everything from semiconductor circuit design to the
production of final, packaged products. In other words, weoffer high value-added services that go far beyond
manufacturing.

Promotional strategy proposals
Boosting the efficiency of sales tool production

LSI design

Management of customer data
2

Virtual plant systems

Turnkey businesses

Native OS

MULTOSJava Card™

Desktop applications
Drivers

Writing/reading devices; card issuance systems; gate systems, etc.

Database & Customer Relationship Management Solutions
CRM support for loyalty point cards
Marketing data mining
Marketing information mapping

IC Tag Solutions
Because DNP manufactures books and food packages, we are in thebest position to attach IC tags to individual products.

Operation of Information Sites

Applications Development

Digital content sales
Map information
Shopping guides for mobile phones
Incentive Marketing

Product distribution management/ tracing systems
Admissions systems for conferences & concerts
Electronic notification when children leave school
Electronic posters

IC Tag Peripheral Sales
Navigation carts; IC tag reader/writers

Backup Systems
Security systems
Internet data center

DNP has created powerful backup systems that allow us to offer a variety of solutions

From acquisition of Privacy Mark, ISO, etc., IP rights protection and software development, hardware enhancement, etc.
Data center/s to support website operation; hosting and housing support; Can also be used to provide smart card data services

Database management

Analysis and processing of purchasing histories and response data, for use in sales promotions and customer strategies

Distribution platforms

Platforms for clients who run e-businesses or content distribution, etc.; includes copyright protection, accounting, authentication functions

Agency Functions
Project management

Presentation support tools

OS

Smart Card Peripheral Sales(Packaging; Decorative Materials; Industrial Supplies)

Administrative Operations

Smart Card Software Development

DNP is prepared to perform a variety of tasks on behalf of clients, in order to help them get their business done

Market research, project proposals, construction of framework for running campaigns, etc., total support for all kinds of projects

Creative support

Production support for all kinds of media, including Internet, printed materials, and animation

Fulfillment support

Back-end support through order centers, customer centers, logistics, payment collection, campaign office management, etc.

35
DNP AR04

46.0%
31.4%

Digital Solutions

Boosting the efficiency of receiving/placing orders for materials

Electronics

33

Solutions By Segment

Information
Communication
Contents
Business Strategy

38

Summary of Results

40

Hot Topics

42

ProfileThe Information Communication segment consists of three sub-segments: the printingof books and periodicals, which has been one of our core businesses since DNP’sfounding, commercial printing, and business forms. This segment covers a wide variety
of media, including both paper and electronic media, such as Internet and DVD
publishing, satellite broadcasting, and services designed for mobile telephones. We put
together solutions that combine our own expertise in market research, project planning,system development, media content production and distribution, data security
management, etc., in order to help our clients use the most effective media andmethods for delivering information.

Information Communication

Business Strategy

With society’s information infrastructure changing as
rapidly as it is today, information distribution has become
more important than ever. As media formats become
increasingly diverse, dealing with paper media is no longer
enough. We must also be able to handle electronic media,
including Internet-based media.
Rather than seeing this trend as a threat to our business,
we see it as a huge opportunity. We can make the most of
DNP’s corporate strengths by fusing Information Technology
together with the Printing Technology that DNP has cultivatedsince the birth of our company. By redefining the scope of ourbusiness to include the entire framework of information
distribution, we can expand it into a new, solutions-based
business that benefits consumers and corporate clients.

Major Policies
38

We will combine the Printing Technology that DNP has cultivated since our founding with theInformation Technology that we have built up since the 1970s, in order to offer unique solutions
to our customers.

Production Solutions and Business Design Solutions
On the “Production Solutions” side, we will increase our ability to process and distributeinformation in formats that are optimized for each medium, and offer solutions to ourcustomers’ problems by combining the production of diverse media with auxiliary services. On
the “Business Design Solutions” side, we will use DNP’s IT and project planning skills to create
essential frameworks for our clients’ businesses. In our relationships with clients, our goal is toestablish DNP as an irreplaceable partner.

Developing New IT Technology and Making Information
SecureThrough our printing business, we acquired expertise in handling massive amounts of information, along with a strong awareness of the importance of maintaining tight security whenhandling sensitive information. Using these assets as a starting point, we will develop a new
business domain that offers information management solutions, including the development of
new IT technologies, the streamlining of customers’ information-related operations, andservices related to information security.

39
DNP AR04

DNP AR04

Fusion of Printing Technology and Information Technology

Expanding our business through P&I Solutions
Until recent years, production was our main business.
Now we are moving beyond production in order to further
expand our solutions-based business. We can accomplish
this by combining our core technologies – Printing andInformation – so that we can create unique solutions that
only DNP can offer.
In this segment, we have come up with a variety ofideas aimed at increasing the added-value of our
products, including project planning, design, andmarketing strategies. In the future, we will increase theworkforce in our planning department, where most of thisactivity takes place, and boost our capacities for sales,planning and proposing, and system development. This
will enable us to better respond to our customers’
problems with comprehensive solutions centered on DNP
products and services like IC tags, on-demand publishing,and personalized direct mail. It will also allow us to actively
offer solutions that create new frameworks for ourcustomers’ enterprises.
Going forward, we aim to expand our revenues by
increasing the proportion of the solutions-based businessthat we do.

By strengthening ties among product sectors, we cantarget our customers’ entire value chains
From now on, we will be focusing on strengthening ties
among our various business sectors, so that we can offer
operations and solutions tailored to each customer’s
particular industry, and so we can develop systems thatwill allow us to offer comprehensive services. By providing
products like IC tags, information processing services(IPS), and smart cards, we can expand businesses thattarget each customer’s entire value chain, from production
through distribution to account settlements.
In addition, we will also actively offer solutions forproblems that transcend industry boundaries, such as
issues related to operational control or the streamlining ofmanagement.

Information Communication

Summary of Results

Financial Highlights

Business Environment(in billions of yen, %)Net sales

2004.3

2003.3

2002.3¥629.8¥619.9¥659.2

43.6

40.0

49.0

6.9%

6.5%

7.4%

Operating income
Operating income margin

Net sales (left)
Operating income (right)(in billions of yen)

600

60

400

40

40
20

0

0

Financial Summary
02

03

04

Trend in Value of Shipments and Added Value for Printing andRelated Industries (For manufacturing establishments with fouror more employees)(in billions of yen)
10,000

8,000

6,000

4,000

2,000

0
98

99

00

01

02

Ministry of Economy, Trade and Industry: Preliminary Reports of Industrial Statistics

Despite tough environmental conditions, such as an
overall sluggishness of demand for printing, lower unit
prices, and higher paper prices, we worked actively atboosting sales. This was an uphill battle in the arena ofbooks, periodicals, and business forms, but in the field ofcommercial printing, our efforts bore fruit. As a result, net
sales for the Information Communication segment this fiscal
year grew 1.6% over the previous year to 629.8 billion yen.
Thanks to the success of aggressive cost-cutting activities and to an increase in more profitable businesses suchas IPS, the segment’s operating income increased by
9.0% to 43.7 billion yen, and its operating income marginrose to 6.9%, from 6.5% a year earlier.
Books and Periodicals
Due to the prolonged slump in the publishing market,
net sales of books and periodicals (including weekly andmonthly publications) fell below previous-year levels.
An estimated 239 new periodicals were launched inJapan in 2003, compared to 201 the previous year. DNP
won contracts for printing 54 of the new periodicals, or23%. Also during 2003, the number of periodicals that
stopped publishing was 149, compared to 147 the previous year. Of these, 29, or 19% were printed by DNP.
In order to boost orders, we worked on developing new

Commercial Printing
On the whole, corporate advertising expenditures havebeen low. But they did show signs of recovery in the second half of the fiscal year, suggesting that they may havefinally hit bottom. Due to the poor environment, we actively
worked at supporting the promotional activities of our best
customers. Sales of things like leaflets, catalogs, andpoint-of-purchase items increased, raising total sales inthis area above the previous-year level. We enjoyed strong
sales in catalogs for the mail-order industry, leaflets for
specialty shops and real estate agencies, and promotional
materials related to automobiles and cosmetics. These
areas contributed most to the growth in sales.
We also had good results from using IT in the production of promotional materials. For example, we received
high marks for the efficient production system that weconstructed by creating databases of product images andusing our own corporate network to send data electronically. Mass retailers of electric appliances adopted oursystem for printing their large newspaper inserts.

Business Forms
In the Business Forms sub-segment, we saw good
growth in personalized mail and other information processing services (IPS), and in new products like smart
cards, but sales of other products, such as ledgers, stock
certificates, and date books, declined due to factors likeshrinkage in expense accounts and a trend toward paperless data management. Sales in this sub-segment were
smaller than the previous year.
In the IPS area, billing statements and direct mail for thetelecommunications sector increased thanks to strong
sales of third-generation mobile phones. Now that banks
have started offering insurance and securities-related
products, the banking industry has been ordering more
promotional materials. In recent years, the public has
become more aware of the need for protecting the privacyof personal information, so security has gained importancein the IPS field, which involves the handling of personal
data. The extent to which a company can be trusted tokeep data secure has become an important criterion for
deciding whether or not to place an order. This fiscal year,
one of the efforts we made to reinforce the already tightsecurity of our information management systems was toearn the “Privacy Mark Certification.”
In addition, we worked on expanding our share of thesmart card market, which we already dominate in Japan.
Based on our ability to develop our own operating systems and application software, we have developed cards
for all kinds of uses, including credit cards and other financial applications, railway, highway tolls, and other transportation-related cards, and cards for telecommunications
services such as mobile phones and digital broadcasting.
In March 2004, we opened our “Card Data Management
Service” and began offering related services, such as smart
card issuance and reliable data management.

Publishing Industry Sales

Advertising Industry Sales(in billions of yen)(in billions of yen)

3,000

6,000

2,500

5,000

2,000

4,000

1,500

3,000

1,000

2,000

500

1,000
0

0
01

02

03

03

All Japan Magazine and Book Publisher's and Editor’s Association:
Publishers’ Research Institute

04

01

02

03

Ministry of Economy, Trade and Industry: Survey on Selected Service Industries

41
DNP AR04

DNP AR04

200

There were some encouraging signs in the Japanese
economy this term, such as recovery in corporate profits
and increased capital spending in the private sector, but
because of lingering problems like stagnant personal
consumption, the economy has not yet reached a fullrecovery. For the printing industry, like other industries, theenvironment remained harsh due to such factors as sluggish orders, sagging unit prices due to intensified competition, and higher materials costs.
While it was already struggling because of this environment, in 2003 the Japanese publishing industry was also
hit by trends like more widespread access to the Internet,
increased use of libraries, and expansion of new markets
for used books. Therefore, gross sales fell 3.6% comparedto the previous year. Although advertising expendituresbegan to climb after the summer, they were still low in
general, and ended up 0.3% below the previous-yearlevel. Sales of business forms dropped, mainly due to a
decline in ledger sales.

customers and winning printing contracts for new publications. And as publishers strengthened their Internet businesses, DNP promoted sales of website construction anddatabase systems. In the realm of eBooks, DNP worked
to promote more a widespread distribution of e-books andother digital contents. We were among the founders of theElectronic Book Business Consortium created in October2003 to distribute digital contents for the “Sigma Ebook”
reader developed by Matsushita Electric Industrial Co.
A month later, DNP joined Kodansha Ltd., ShinchoshaCo., and other publishers as a capital participant in
Publishing Link Ltd., which sells content for Sony Corp.’se-Book reader, “LIBRIé.”Information Communication

Hot Topics

42

Smart Card Security Solutions fora World of Ubiquitous Networking

Making the most of proprietary IT and ties withpublishers
DNP is an active participant in the electronic
publishing market, which is growing as society becomesincreasingly networked. DNP joined 14 other companies, including Sony Corp. and major Japanesepublishers Kodansha Ltd. and Shinchosha Co., inestablishing “Publishing link Ltd.” in the spring of 2004.
This new company began offering the rental of content
provided by authors, copyright holders, and publishers.
Users access the content via the Internet.
On its own, DNP offers On-demand Books, as wellas electronic books and other content that can bepurchased and downloaded through the DNP website’s“Web Library.” As of February 2004, we began selling
regular books this way. These new services allow ourcustomers to purchase the books they want in theformats they want. By making full use of DNP’s proprietary information technology and long-standing ties withpublishers, we have been able to actively advance ourelectronic publishing business.

Pioneering a new type of service: Making smart
card issuance easy while maintaining data security
Since April 2004, DNP has been operating its new“Card Data Management Service,” which handles cardissuing operations and the management of the data
recorded on cards, on behalf of companies that issue
smart cards. DNP’s service makes it possible to issue
cards instantaneously and quickly replace lost cards,
while maintaining adequate security. By controlling thecard issuer’s information, cardholders’ information,
passwords and other verification data, etc., DNP
lightens the operational burden on card-issuing clients.
In other words, rather than just manufacturing smart
cards, DNP offers total smart card solutions.

EBook reader

DNP puts smart cards to work in data storage
and wireless LAN security systems
As corporations become more and more consciousof the importance of protecting the security of their data,
DNP has developed a data storage system called“TranC’ert DNA” which divides electronic files forstorage, encodes them, and stores them in separate
pieces. The conditions for restoring the divided files andkeys for decoding them are stored on smart cards
whose internal memory cannot be accessed even by
the cardholders themselves.
In order to address security weaknesses that havebeen found in wireless LAN systems, DNP developed aversion of TranC’ert that controls access to communications devices and encodes transmission contents toprevent eavesdropping. By developing these types ofsmart cards and applications that use electronic verification technologies, DNP has helped raise the level of
information security.

Focusing on the Development ofIT-centered Solutions

Development of security tools for Authenticating
specific people
Today, authentication technology that uses biometrics is said to be the most advanced security tool in theworld. In collaboration with silex technology, Inc., DNP
developed Japan’s first portable authentication tool andreader/writer designed specifically for use with auniversal identity module (UIM) containing a fingerprint
sensor. Because the program and fingerprint data are
stored on IC chips, the device completely prevents theuse of certificates, etc., by anyone other than the fingerprint owner. Its small size and portability are also pluses.
In addition, DNP also developed the first smart cardbased voice authentication system in Japan, in cooperation with Animo Ltd. DNP plans to continue using
alliances with other companies to actively develop
distinctive, security-related products.

Portable authentication tool

Offering new solutions using IT for the cosmetics
and beauty industries
In March 2004, DNP developed two systems for thecosmetics and beauty industries: one that combines
smart cards and networking technology to display simulated use of various cosmetic products on a computer
screen, and another that manages customer data.
Customers are issued a “smart” member’s card thatallows their data to be shared among all outlets
connected to a corporate group. No matter which outlet
the customer visits, employees can immediately viewthe customer’s purchasing history, color preferences,and other information. Photos of the customer’s face,taken with a digital camera, are registered with DNP’s
Card Data Management Service. The customer canfreely access these photos in order to try simulated
applications of various cosmetic products.
DNP also developed a hair color simulation systemusing mobile phones. Going forward, DNP will continue
to develop diverse solutions that take advantage of ourclose ties with a wide variety of industries.

43
DNP AR04

DNP AR04

Active Participation in the Launchof Electronic Publishing
Businesses

Information Communication
Hot Topics

Developing New Business Models
Using IC Tags, an Area with
Enormous Potential for Growth44

DNP: actively creating IT solutions in a variety of fields
DNP is actively developing IT solutions from a variety
of approaches. In January 2004, we released two new
systems for sending coupons to cell-phone users in theform of bar codes. One system is designed for shopping
malls and commercial districts, and the other is aninteractive service designed for digital television
broadcasters.
Under the “Cell Phone-Based Two-Dimensional Code
Coupon System,” consumers can use their cell phones
to register via a web site and receive coupons. They
then display the coupon bar code at the point of sale inorder to receive various premiums. With the televised
system, consumers use their cell phone’s camera to
photograph a coupon code displayed on their televisionscreen. This allows them to easily access a related
website, using the cell phone’s Internet access. Thissystem is perfect for encouraging viewers to access a“gift site” while a program is being broadcast.
In March 2004, DNP and Anoto Nippon K.K. together
released an educational support system using a digitalpen. As a teacher uses this pen to mark students’
responses to test questions with an “O” (correct), “X”(incorrect) or ∆ (partially correct), the pen automaticallygenerates digital data in real time, compiling each
student’s individual results as well as digitizing the
response data for each question across the student
body. DNP developed the application for this project
and also produces the test answer sheets.
That same month, DNP also began marketing “ADPowers®,” a computer grid configuration program. The
system detects which computers in an office are notbeing used, and allocates their computing power for use
in complex computing operations that are speeded up
by being spread over multiple computers.

Developing more solutions using IC tags
DNP has been building a large number of new business models that employ IC tags – the bar codes of thenext generation. In March 2004 we began providing aservice called “KIDS IN FEEL,” which we developed incollaboration with DoCoMo Systems Inc. Under thissystem, children carry a non-contact IC tag. When they
pass an IC reader at their school’s exit, the system automatically alerts their guardian’s mobile phone with thetime that the child left school. Due to a rise in violent
crime, parents are increasingly concerned about thesafety of their children as they move between school,
home, and extracurricular activities. We plan to expand
this system by gaining the cooperation from railroad
operators, so parents can be informed not only when
their children leave school or after-school activities, butalso when they pass through train stations.
DNP has also developed a “navigation cart” forsupermarkets, consisting of a computer-equipped
shopping cart. The computer receives information via
wireless LAN about products that the store carries andwhere they are located.

In February 2004, we commenced marketing our“ACCUWAVE® Starter Kit.” The kit includes a label
printer that can encode IC tag information, and everything needed to easily start managing incoming andoutgoing shipments and inventories of merchandise or
materials.
In October 2003, we established “IC Tag
Experimental Workshops” in Tokyo and Osaka as part ofour effort to expand the IC tag market. In addition toserving as venues for negotiating new contracts, theseare forums where we can make presentations to potential client companies and exchange information. In the
future, we intend to increase our revenues by actively
engaging in sales promotion activities and application
development aimed at specific clients, in order topromote the corporate use of IC tags.

IC Tag Experimental
Workshop

Navigation cart

45
DNP AR04

DNP AR04

Providing mail order sales systems and editing
support tools for publishers
DNP developed “CommerceLine,” a comprehensive
system for supporting mail order sales operations, inorder to improve the efficiency of existing operations
and to support businesses that plan to enter the mailorder sales business. DNP made the systemcommercially available as of March 2004. The systemprovides comprehensive support for the growing mailorder market, and responds to increasingly diverse sales
channels and methods. It manages every aspect of amail order business, including order processing,customer record maintenance, account settlements,
merchandise control, and distribution management.
DNP’s total operational support even helps with things
like business and marketing planning, and customer
royalty management.
In April 2003, we released “EdiPlanner 2100,” aneditorial support system for publishing companies. The
system allows publishers to monitor the progress of prepress production operations in real time, through the
DNP website. It is especially helpful for publishers of
periodicals whose publishing deadlines are very strict,because it allows the printer and publisher to stay on
top of each other’s progress solely through online
communication. In the future, DNP plans to further
enhance editorial support services, for example byexpanding its capacity for electronic document
submission and revision, upgrading digital support forphotography and design, databasing DNP data, andsupporting secondary uses of printed content. Our
ultimate aim is to establish a fully digitized work flow for
publishing and printing operations.

Lifestyle &Industrial Supplies
Contents
Business Strategy

48

Summary of Results

50

Hot Topics

52

ProfileThe Lifestyle & Industrial Supplies segment contains three sub-segments: Packaging,
Decorative Materials, and Industrial Supplies. All of these operations handle a large
number of products that are closely connected with ordinary people’s lives. Startingwith printing on non-paper materials like film or steel, we use coating and etching
technologies and other basic printing skills to make products like optical film used inelectronic displays. DNP is the world’s largest supplier of a number of products,
including ink ribbons for facsimile machines and bar code printers, and color ribbons
for printing photos from digital cameras.

Lifestyle & Industrial Supplies

Business Strategy

At DNP’s Lifestyle & Industrial Supplies segment, there arethree main concepts that we keep in mind as we develop
businesses aimed at realizing a more comfortable society:functionality, environmental responsiveness, and greater
added value. This segment is working on boosting sales bothin Japan and overseas. Our aim for the packaging anddecorative materials sectors is to secure stable growth bydeveloping products with a strong focus on functionality andenvironmental concerns. For the industrial supplies sector,
DNP aims to actively develop new categories of products andproducts with high added value, in order to develop newmarkets.

48

Guided by the concepts of universal design and environmental responsiveness, wewill continue to develop functional, environmentally friendly products that meet theconsumers’ desire for greater safety, better health, more comfort, and greater
convenience.

Adding Greater Value
Coating technologies have already transformed and expanded DNP’s business. With
these technologies as a center, we will further explore potential uses for printing technologies and actively develop products and services with high added value.

Developing New Businesses in Industrial Supplies
and Related Fields
We will take a broader view of our market and create new businesses by developing
advanced and unique technologies and products in growing fields like electronics,
energy, and recording materials.

Major Policies
Industrial supplies business to actively invest inelectronics
In our industrial supplies business, we will actively
invest in increasing production capacity of high-function
optical film for the display market, which we expect togrow rapidly in the future. DNP is already the world’s
largest producer of this type of film. By May 2005, we
intend to invest 5 billion yen to add a fourth production line
at DNP’s main production base in Okayama. This newline, together with the third line that we started operatingin February 2004, will give us four times the production
capacity that we had in 2003. Through this investment, weare further solidifying our prospects for winning 75-80% of
the world market for this product.
Reinforcing our lineup of functional, environmentfriendly packaging products
There is little chance of a dramatic increase in theJapanese population, so we don’t believe we can expect
a significant rise in demand for our packaging products,
which consist mainly of food packaging. However,increasing concerns about environmental preservation andfood safety are giving rise to a demand for new functionality in packages, and thereby creating new business
opportunities for us. There is a steadily growing demandfor products that are designed to use less plastic, and forsystems that allow our client companies to save money or

Decorative materials business to focus onenvironment-friendly, high value-added products
Because we are unlikely to see a sharp increase indemand for residential construction in Japan, our decorative materials business will seek to secure profits byadding more value. We will expand our “Super Egos” lineof highly scratch-resistant, soil-resistant, environmentfriendly decorative sheet, and our “Ecostandard WS
Safmare” line of non-PVC decorative sheet for residential
interiors. Also, we will actively work to boost sales in overseas markets where there is strong demand for cosmetic
sheet used to cover furniture, etc.
We intend to further enhance our portfolio while
keeping our focus on environmentally friendly, high valueadded products, and actively market our products in the
United States and the rest of the world.
In addition, we opened a “living space analyticalevaluation center” in our Okayama plant, and beganproviding measurements and assessment services of living
environments as part of our plan to increase solutionsbased business in the field of residential environments.

49
DNP AR04

DNP AR04

Functionality and Environmental Responsivenessput less of a burden on the environment as they manufacture their products. And in response to consumer
concerns about food safety, we are providing tracing
services whereby we manage information about ingredients, processing and distribution by building databases.
Going forward, we aim to flexibly respond to these kindsof market needs, and shift more toward high value-added
products to boost our competitiveness.

Lifestyle & Industrial Supplies

Summary of Results

Business Environment

Financial Highlights(in billions of yen, %)Net sales
Operating income
Operating income margin

2004.3

2003.3

2002.3¥426.1¥420.1¥410.9

32.4

28.5

19.9

7.6%

6.8%

4.9%

Net sales (left)
Operating income (right)

Japanese convenience store sales increased somewhat this term, but department store and supermarket
sales continued to decline. In fiscal 2003 as a whole,overall personal consumption only grew about 1.6% overthe previous year.
At the same time, due to uneasiness about employment and future economic prospects, housing starts
increased only 2.6% from a year earlier.

(in billions of yen)

Financial Summary
600

60

400

40

200

20

50
0
02

03

04

New Construction Starts of Dwellings, by Owner Occupant Relation(in thousands of units)

2,000

1,500

1,000

500

0
94

95

96

97

98

99

00

01

02

Ministry of Land, Infrastructure and Transport: Preliminary Report on Construction Starts

03

Decorative Materials
We enjoyed good sales of eco-friendly, non-PVC materials for residential interiors, but exports to North America
declined to below the previous-year level. We expanded
our "Ecostandard WS Safmare" line of environmentfriendly decorative sheeting, and improved its functionality
by enhancing qualities like scratch and stain resistance.
Also, we opened a “living space analytical evaluation
center” in our Okayama plant, and began providing residential environment measurement and assessment
services.

51
DNP AR04

DNP AR040

Overall, the business environment remained tough, as
prices slumped amid slack personal consumption andincreased competition. Sales of decorative materials andrelated products declined, but packaging sales were
good. In the industrial supplies area, sales picked up forhigh-function optical film used in LCDs. Sales for thesegment as a whole amounted to 426.1 billion yen, an
increase of 1.4% over the previous year.
Thanks to cost-cutting benefits at packaging-related
manufacturing subsidiaries and increased sales of industrial supplies, the segment’s operating income increased
13.5% to 32.4 billion yen, and its operating income marginrose to 7.6%, up 0.8 point from a year earlier.

PackagingWith personal consumption basically flat, sales of paper
dishes and paper cups declined, but there were solid
sales of film packaging and plastics. Like last year, three
more beverage manufacturers adopted our asceptic fillingsystem, which led to a large year-on-year increase in salesof preformed containers.
Our asceptic technology has won high acclaim, and wehave now sold a total of 16 asceptic filling lines. In addition, sales of IB film increased, as this product has been
adopted as a more environmentally friendly replacement
for vinyl chloride in small pouches for sauces, etc.
Industrial Supplies
Ink ribbons are the mainstay of this sub-segment. Salesof ribbons for facsimile machines declined, but sales of
those used in digital camera printers increased sharply.
Sales of electrodes for lithium-ion rechargeable batteries
doubled. We also enjoyed a sharp increase in sales ofhigh-function optical film, especially anti-reflective film
used in polarizing plates on LCDs.
In order to meet the big increase in demand for highfunction optical film, we doubled production capacity at
our Okayama plant and reinforced our supply systems.
In July 2003, DNP and SAGEM SA, France’s second
largest communications equipment maker, jointly established a company called Compagnie de Découpe del’Ouest-CDO SAS to assemble thermal-transfer ink
ribbons used in facsimile machines. As a result, DNP
improved its position for supplying these ribbons to theEuropean market.

Lifestyle & Industrial Supplies

Hot Topics

Expanding Revenues ThroughEnvironment Strategy

52

Developing a diversity of eco-friendly productsThis fiscal term, the most important eco-friendly
products that we developed for the decorative materials
market were “HT Floor/Hyperfloor,” an environmentallyfriendly, high-function decorative sheet used for flooring,
and an updated version of our original eco-friendly
decorative sheet for residential interiors, “Ecostandard
WS Safmare.”Environmentally friendly HT Floor/Hyperfloor is madefrom a non-polyvinyl chloride base, and printed with inkthat is free of harmful substances. What’s more, thisflooring is highly resistant to dirt and abrasion. This easeof maintenance is achieved without using solvent-based
coatings, thanks to DNP’s unique electronic beam hardening technology.

The new version of Ecostandard WS Safmare makes
this product more environmentally friendly than ever. It is
made from a non-PVC base, and does not contain anyof the 13 VOCs subject to Ministry of Health, Labor andWelfare guidelines, or any of the five VOCs for which the
Ministry of Land, Infrastructure and Transport has established threshold values. It is the first product to earn
DNP’s ECO mark, which adheres to ISO 14021 standards. We intend to keep the total picture of health,environment, and safety in mind as we continue todevelop businesses related to living environments.
DNP dye sublimation thermal-transfer ribbons
accredited for Type III environmental label EPD ®
DNP is the world’s largest manufacturer of dye sublimation thermal-transfer ribbons. The Swedish Board for
Accreditation and Conformity Assessment (SWEDAC)
accredited our product as meriting the world’s mostadvanced declaration of environmental responsibility:
environmental label Type III EPD®. DNP is the firstprinting company in the world to receive this accreditation. The certification process involves quantifying the
product’s environmental impact over its entire life cycle,
using procedures for Life Cycle Assessment (LCA) that
conform with ISO14040 standards. In other words, it isan objective guarantee based on high-quality, internationally recognized LCA data.
As the world’s largest supplier of dye sublimation
thermal-transfer materials, DNP is demonstrating
through this certification that we take environmental
preservation seriously and are actually doing something
about it. At the same time, we are using the LCA feedback to help us make our environmental management
systems even more effective.

DNP develops a solar battery filler sheet that rises
to the challenge of a recycling-oriented society
About 80% of the total weight of a solar-battery
module consists of glass and the cells that actually
generate power. These materials are bonded strongly tothe rest of the battery, which is a problem when the timecomes for recycling or reusing. DNP has developed a
new type of filler sheet for solar battery modules, whichmakes it possible to completely separate glass andsolar cells from the rest of the module in used solar
power generation systems, so that these parts can bereused. In October 2003, DNP established massproduction systems for the new filler sheet.
The filler sheet developed by DNP does not generate
toxic gas during manufacturing processes or combustion, and allows complete separation at the time ofdisposal. This makes it possible to reuse the solar cells
after separation.

For the rapidly growing display market: boosting film
production capacity and developing new products
The market for electronic displays is growing rapidly
with the spread of “ubiquitous society.” DNP producescore materials used in displays, including 40% of thevarious high-function optical films used worldwide toprotect display surfaces and prevent glare. In March
2004, we invested about 2 billion yen in our Okayama
plant, where we installed a third production line formaking PDP film and anti-reflective film used in polarizing
plates on LCDs. In May 2005, we plan to invest around 5
billion yen to install a fourth production line there. This will
give us the capacity to produce 40 square kilometers permonth, or four times our 2003 capacity, and we plan toexpand our market share to 75-80%. Also, in October
2003, DNP and Fuji Photo Film Co., Ltd. completed thejoint development of a high-function anti-glare film for
LCDs. These are examples of how DNP is taking flexible
measures like boosting production capacity and forming
alliances, in order to respond to rapid growth in the electronic display market.

Production line for highfunction optical film at
Okayama plant

53
DNP AR04

DNP AR04

Distinguishing itself from competitors throughsophisticated environmental evaluation
technologies
As society becomes increasingly sensitive to environmental concerns in general, the media has raised theissue of sick house syndrome and other problems with
air quality in modern living environments. Accordingly,
demand has been sharply rising for products andservices related to eco-friendly building materials.
Against this background, DNP became the first inJapan to receive ISO17025 certification for processes
used to measure volatile organic compounds (VOCs)
released by construction materials. Our certified technology uses a heat-desorbing gas chromatograph tomeasure five substances including toluene, xylene, andethylbenzene, and to quantify total volatile organic
compounds (TVOC). DNP plans to apply for expandedcertification to include measurement of formaldehyde
and acetaldehyde using high performance liquid chromatography. Through these environmental evaluation
technologies, DNP is distinguishing itself from competitors and increasing the speed at which we can develop
environment-friendly products.

Reinforcing High-function Optical
Film for Displays, and Developing
New Businesses

Electronics
Contents
Business Strategy

56

Summary of Results

58

Hot Topics

60

ProfileEver since DNP became the first in Japan to succeed at making a prototype shadow
mask for use in a color television, the company has been a leader in the development ofsemiconductor lead frames, photomasks, and other electronic components. By
launching one successful product after another, we steadily established a solid position
for ourselves in the electronics sector. Becoming the first vendor of a product gives us
an edge in the market, and we have continued to hone our technological edge to makeit impossible for companies to catch up with us when they enter the market later.
Through technological innovations, DNP electronics components hold the key toprogress in today’s world of information devices.

Electronics

Business Strategy

Major Policies
By continually refining our advanced technology, DNP
always stays ahead of the competition. Despite the rapid
pace of change in this market, DNP has secured its position
as a top vendor. We strive to maintain a good balance
between a defensive portfolio that covers a wide range of
product areas where demand is likely to grow, and an
offensive business strategy entailing technologicaldevelopment and the active use of manufacturing equipment.

56

Supported by world class advanced technology, DNP electronics products havebeen acclaimed as No. 1 in the world. In order to make them better than ever, we will
put even more weight on research and development, and will search for possibilities in
the realms of both quality control and micro-fabrication technology.

Rapid Response to Change
As we expand our business, we will respond to sudden changes in the market and in
our customers’ needs, keeping in mind every step from material supply tomodularization.

Concentrated Allocation of Management Resources
While giving ample consideration to the potential for changes in product life cycles
and other business risks, we aim to concentrate our management resources in order tosecure a high rate of profitability.

Accelerated Startup of New Businesses
In order to accelerate the development of new ventures, we will always consider
possibilities for M&As or other alliances, and develop our businesses efficiently.

Flexible color filter business model that emphasizes
profitability
As liquid crystal panel substrates grow in size with theadvent of 5th, 6th, and 7th-generation products, we will needto construct a business model for our color filter productionthat responds flexibly to our customers’ needs and concerns.
At the same time that manufacturing is changing, for example
with the introduction of byplants that adjoin a customer’s manufacturing facility and inplants built right into the customer’s
production line, business relations with customers are also
becoming closer through joint ventures and other types of collaboration. We predict that we will have to form alliances inorder to survive as a winner. We will have to choose from awide range of business formats including M&As, alliances, androyalty businesses and establish business models that emphasize profitability.
Using strong US projection screen sales as a springboard
for responding to the MD method
DNP manufactures projection screens in Japan, the UnitedStates, and Denmark, and holds a 55% share of the world market. Rear-projection TVs (PTVs) use lenses to project enlarged
images. Because this method’s benefits are most apparent inlarge screens of at least 40 inches, PTVs sell best in North
America, where more people live in spacious homes. As themarket has expanded, the price has come down to under two

Aiming for greater profitability through cost-cutting in thestable shadow mask market
We expect shadow mask demand to keep declining as PC
manufacturers continue their shift toward using LCDs.
Nevertheless, we predict that demand for home-use televisions, currently estimated at 160 million units per year, willremain strong. We have already completed the consolidation
and reorganization of our production facilities, and will cut
costs and take advantage of our overwhelming dominance ofthe market to secure stable revenues.
57

Remaining No. 1 in the world in photomasks, thanks toexcellent technology
DNP’s photomasks have a longstanding reputation for outstanding quality, and we have remained the world’s largest
supplier. Our selling point is a high degree of technologicalsuperiority that no competitor can touch. More than half of
DNP’s photomask sales consist of cutting-edge products withline widths of under 130nm. In the ultra-advanced class withline widths of 90nm, DNP has captured more than half themarket. Going forward, we plan to use the results of joint
development with one of our customers and accelerate development of 65nm and 45nm products ahead of our customer’s technology roadmap. By being the first to put theseproducts on the market, we intend to lock in our chance tomaintain the top share of the world market.
Cultivating new core businesses for our Electronic Device
Operations, and building a stronger operational
constitution
We will work actively to expand sales not only of photomasks, but of other products that use micro-processing
technology, like semiconductor packages, on-chip color filters, and build-up substrates, in order to cultivate new corebusinesses. In addition, by building up solutions-based business like turnkey deliveries involving circuit design or IC tagbusinesses connected to the development of application software, we will build a flexible and strong operational constitution that is less vulnerable to the ups and downs of the semiconductor market.

DNP AR04

DNP AR04

Emphasis on Technological Development

Systems for supplying a wide variety of products when
they are needed, in synch with product life cycles
As technology progresses, a variety of new types of electronic displays are always appearing in the market, shortening
the lifespan of existing products. It is essential to accurately
predict which product will take over the next generation andwhen that change will occur, and to quickly gear up production
facilities to be ready for each change. DNP avoids the risks ofexcessive dependence on a single product. Rather, we maintain a full product lineup so we can respond regardless of whatkind of product takes center stage at a given time. We are prepared to participate in the production of any kind of display,from the smallest to the largest.
Meanwhile, our sales strategy is aimed at securing revenues
by looking at the global market and engaging in wide-ranging
trade with customers all over the world, in order to disperse risk
and receive steady orders. We are working as fast as we can toresearch and develop new technologies and products related
to next-generation displays like organic EL, inorganic EL, andFED, in order to develop the world’s most advanced technologies and secure our dominant position in the marketplace.

dollars per square inch, and the ownership rate is increasing.
DNP is focusing on expanding sales in the Korean andChinese markets, which have started to grow, along with the
U.S., where sales are already strong. At the same time, weare responding to the rapid shift toward MD-type PTVs which
deliver dramatically better picture quality on a far thinner
screen. In addition to boosting MD production capacity, weare engaging in sales activities that make the most of the factthat so far we hold the top market share.

Electronics

Summary of Results

Business Environment

Financial Highlights(in billions of yen, %)2004.3

2003.3

2002.3¥236.4¥208.3¥176.9Operating income

33.0

28.3

8.5

Operating income margin

14.0%

13.6%

4.9%

Net sales

Net sales (left)
Operating income (right)(in billions of yen)

300

60

200

40

In 2003, growth in the sales of personal computersslowed due to concerns about the future of the economy
and a slowdown in corporate IT investment. However,there was strong demand for liquid crystal panels, to thepoint that supplies were sometimes tight.
In the semiconductor industry, intensified competition
resulted in a major reorganization, complete with spin-offs
and mergers.
Demand for semiconductors remained strong, thanks
to growth in sales of digital cameras and digital household
appliances.

Financial Summary
20

100

58

02

03

04

Forecasted Size of the Semiconductor Market(in trillions of yen)

30
25
20
15
10
5
0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

Forecasted Size of the Photomask Market(in billions of yen)
Other companies, under 130nm

DNP, under 130nm

350
300
250
200
150
100
50
0
97

98

99

00

01

02

03

04

05

06

59

In the photomask market, we received more orders foradvanced products with very small line widths like 90nm
or 130nm, aimed at domestic research and development.
But there was no growth in orders for use in mass
production overseas, and sales fell year on year. Sales oflead frames declined in the first half, but the numbers
increased in the second half and the decline was small forthe year as a whole.
We moved ahead with the development of production
technology for mass producing advanced 90nm
photomasks, and with the development of photomasks forthe next generation of semiconductors, under 65nm.
In October 2003, we started operating our first
European production base for photomasks, DNP
Photomask Europe S.p.A., which we set up in partnershipwith STMicroelectronics. We concluded the basic agreement with our partner in May 2002, then built the plantright next door to STMicroelectronics’ manufacturing
facility in Italy. In addition to serving our partner, thisventure will simultaneously supply other European semiconductor makers. We have high hopes that this will help
us expand our share of the European market.

DNP AR04

DNP AR04

00

Thanks to a strong LCD demand, color filter sales grewsignificantly, as did projection screen sales. The segment
achieved big gains in both sales and profits: sales grew
13.5% over the previous year to 236.4 billion yen, andoperating income increased 16.6% to 33.0 billion yen. The
operating income margin rose to 14.0%, a rise of 0.4 point.
DNP greatly increased its group-wide capacity for
producing color filters, by purchasing Advanced
Colortech, Inc. (ACTI) from its founders, Asahi Glass Co.,
Ltd. and Mitsubishi Chemical Corporation., and byincreasing its investment in South Sintek Photronic Corp.
in Taiwan. As a result of these moves, the DNP Group’s

capacity almost doubled, from the equivalent of 1.8 million
units per year (on a 14-inch basis) to 3.1 million. Thisterm’s big increase in sales was also due to an increase of
the proportion of orders for high added-value, wide-angle
products like IPS and MVA, and to the fact that prices
remained stable.
Meanwhile, demand for shadow masks for televisions
increased in the second half of the term. But demand
aimed at personal computers waned, resulting in a big
drop from the previous year. In the projection screen
sector, demand was sluggish for the CRT-type that dominated until recently, but in the second half there wasincreased demand for microdisplays (MDs) for new lightsources (LCD and DLP). Overall demand exceeded theprevious-year level.

Electronics

Hot Topics

The Booming Display Market andDevelopment of Next-generation
Products

60

Screens for projection TVs (PTVs): Greater
production capacity; shift to the MD-type
DNP supplies screens for PTVs from three bases:
Japan, the U.S., and Europe. We hold roughly 60% of
the world market. Since this market is growing at morethan 20% per year, we aim to increase our production
capacity.
We will add a fresnel lens line at our production basein the U.S., and boost our PTV screen production
capacity to 1.5 million per year, bringing our worldwide
production capacity to about 4.5 million screens per
year. By 2005, we will also add a production line inJapan, so that we can supply a total of 7 million per
year.
Meanwhile, demand has increased for high-definition,flat-screen micro-display (MD) projection televisions
using a digital optical engine. DNP added a new line at
our Mihara plant and established systems to support
mass production. The market for MD-type screens is
expected to grow to 2.5 million per year in 2005. We
plan to keep a close eye on this market and continue toexpand production facilities.

Organic and inorganic EL: Stepping up development
in order to create a market
In April 2003, DNP combined dry coating and wet
coating technologies to develop a high barrier plastic
film for use in flexible organic electroluminescent (EL)and other display substrates. The film made it possible
to produce lighter, thinner, more shock-resistantdisplays. Because the new film can be produced by the
low-cost roll-to-roll method, it should also make a big
contribution to lowering the retail prices of EL displays.
In May 2003, DNP succeeded in making the world’s
first prototype of an organic EL panel using photosensitivity technology. Using conventional vapor deposition
and ink jet methods limited the number of pixels that
could be obtained, so these methods were unsuitablefor use with large screens. DNP’s photosensitivity
method made it possible to produce high-precision
substrates larger than one meter square.
In addition, DNP acquired permission to use thepatented polymer organic EL technology of Cambridge
Display Technology, a UK start-up, in order to speed
development of flexible organic EL displays. DNP also
concluded a financing agreement with iFire Technology
Inc. of Canada, which has succeeded in developing a
34-inch inorganic EL thin panel with manufacturing
technology that makes it possible to produce multi-color
luminous layers from a mono-color phosphor. The two
firms aim to start mass production in 2006.

Production line forprojection screen at
Mihara plant

Inorganic EL Display

Expanding photomask production into Europe
In October 2003, we started up our first overseas
production base for photomasks, near Milan, Italy. The
new plant was built by a joint venture between DNP and
STMicroelectronics, the world's second largest independent semiconductor supplier. The goal of the venture isto speed up delivery of photomasks to STM's semiconductor plants in France and Italy. For the time being, thenew plant will supply STM and the Crolles2 Alliance (ajoint R&D venture between STMicroelectronics, Royal
Philips Electronics, and Motorola, Inc.), but eventually
we hope to supply chip makers all over Europe. With
this new plant as our base in Europe, we intend to
expand our share of the growing market for cuttingedge photomasks.

61
DNP AR04

DNP AR04

Color filters for LCDs: Actively boosting production
capacity
Amid surging demand for LCD color filters, DNP aims
to greatly increase production capacity by building new
facilities, expanding existing ones, and forming alliances,in order to give us the world’s largest production
capacity.
At our Mihara plant in Hiroshima Prefecture, weinvested 15 billion yen in new manufacturing facilities for
fifth-generation LCD color filters, which were scheduled
for completion in the spring of 2004. However, because
demand grew even faster than we predicted, we areinvesting an additional 25 billion yen to add anotherproduction line to be completed in autumn 2004.
We also increased our investment in South Sintek
Photronic Corp., a joint venture that is building a newcolor filter plant in Tainan, Taiwan, so we can support
Korean and Taiwanese LCD panel makers who are
rapidly gearing up to produce fifth-generation LCDs. Allof our new production lines are slated to come on lineby the end of fiscal 2004, which will give the DNP Group
total production capacity of 5.7 million filters per month(calculated on a 14-inch basis) and make us the world’s
number one producer. We will also start mass
producing new products including high-function color
filters that deliver greatly improved picture quality, sothat we can compete in terms of quality as well as
quantity.

Expansion of Electronic Devices

Electronics
Hot Topics

Keeping pace with increasing miniaturization
In February 2004, DNP concluded an agreement with
ASML MaskTools and Photronics Inc. of the U.S.
concerning chromeless phase lithography (CPL)technology that enables further miniaturization ofsemiconductors. Because CPL technology makes it
possible to resolve patterns smaller than the wavelengthof the light source used for exposure, it is seen as
indispensable to the formation of microscopic patterns
on semiconductor gates. Because resolution can be
improved with only one exposure, this technology
makes it possible to significantly improve production
efficiency and lower costs.
62
DNP AR04

Reinforcing design solutions with an eye toward aturnkey businessIn August 2003, DNP became the first Japaneseorganization to conclude a ServiceNet Gold partnershipagreement with Artisan Components, Inc., a leading
provider of physical intellectual property (IP) components for the design of complex system-on-a-chip integrated circuits. The agreement allows DNP to give LSI
design clients direct access to the Artisan IP library. This
supports our efforts to build an LSI design solutions
business by enhancing a turnkey business that covers
everything from semiconductor design to production.

Enhancing our electronic device business bydeveloping next-generation circuit boards
As semiconductors and other electronic devices
used in portable devices continue to get tinier and tinier,
DNP has developed “Hyper B 2 it TM,” a high-density, ultrathin circuit board. We succeeded in reducing the thickness of the insulating layer from 70mu/m to 50mu/m,and decreasing the weight by 18%. We started mass
production in July 2004, in time for the take-off in thirdgeneration cellular phone sales.
In July 2003, we released the world’s smallest integrated MPEG-4 module for embedded systems, with abuilt-in interface for SD memory cards.
Then in January 2004, we came out with a modulethat is compatible with the MPEG-4 module standard
for compressing animated images and can be used with
network devices. Because this module has a built-in
peripheral interface for connecting with the Internet or
LAN systems, as well as an interface for storing moving
images and sounds on SD memory cards, users caneasily put together systems for storing and playing
moving images.
DNP will continue to offer a wide range of systemmodules with a focus on images, authentication, andcommunication. We aim to make this a new mainstay of
our electronic devices business.

Sustainable Development

Contents
Improving Corporate Governance

64

Board of Directors

65

Maintaining Product Safety

66

Maintaining Information Security

67

Environmental Protection

68

Human Resources Management

69

Corporate Philanthropy720Hyper B 2 it TM ultra-thincircuit board

Improving Corporate Governance

Board of Directors

DNP aims to behave in accordance with the law and social ethics, to contribute to society as agood corporate citizen, and to realize our management philosophy. In order to accomplish these goals,
we believe that improving corporate governance must be a management priority.
Our board of directors consists of 35 directors, including one outside director. In addition to making
executive decisions on key business issues, the board oversees the execution of each director’s
duties. In principle, the board meets once a month.
Our board of auditors consists of four auditors, including two outside auditors. Auditing of the head
office, operational divisions, and subsidiaries is divided among the four auditors. They cooperate
closely among themselves as they execute their duties. Neither the outside director nor the outside
auditors have an interest in our company.
In 1992, DNP established the Dai Nippon Printing Group Action Charter as a code of behavior for
employees. In June 2002, we revised the charter and renamed it the DNP Group Action Charter. In
addition, we have various corporate committees that respond to particular issues so we can be acompany that is trusted by society. Among them are the Corporate Ethics Action Committee,
Environmental Committee, Product Safety Committee, and the Information Security and Privacy
Protection Promotion Committee. We continuously work at establishing social ethics more widely anddeeply among group employees. Every year we conduct both live and Intranet training sessions.

64

Yoshitoshi Kitajima

Ryozo Kitami

Kenichi Nakamura

Taira Takahashi

Koichi Takanami

President and Chief
Executive Officer

Senior Managing Director

Senior Managing Director

Senior Managing Director

Senior Managing Director

Satoshi Saruwatari

Masayoshi Yamada

Mitsuhiko Hakii

Masakazu Sato

Kuniaki Kamei

Senior Managing Director

Senior Managing Director

Senior Managing Director

Managing Director

Managing Director

65
DNP AR04

DNP AR04

In October 2002, in order to enhance DNP’s legal compliance, we established our Open Door Roomas a place where employees can feel free to air concerns. In May 2003, we strengthened our auditing
system by establishing an operational monitoring committee within our head office in order to further
improve transparency and fairness in our day-to-day business and management. This involved adding
members to our auditing staff and having them communicate closely with our statutory auditors.

Osamu Tsuchida

Noriaki Nakamura

Teruomi Yoshino

Hiromitsu Ikeda

Kosaku MoriManaging Director

Managing Director

Managing Director

Managing Director

Managing Director

Hidenori Nokubo

Yujiro Kuroda

Tatsuo Komaki

Director

Director

Director

Tadashi Okubo

Tatsuya Nishimura

Shigeru Kashiwabara

Director

Director

Director

Yoshiyuki Nakagawa

Itsuo Totsuka

Kunikazu Akishige

Director

Director

Director

Yukio Togano

Masahiko Wada

Kenji Noguchi

Director

Director

Director

Kenzo Isumi

Yoshinari Kitajima

Toshio Kawada

Junjiro Inoue

Tetsuji Morino

Tadao Tsukada*Managing Director

Managing Director

Managing Director

Director

Director

Director

Kazumasa Hiroki

Takashi Toida

Director

Director

Jitsuo Okauchi

Minoru Yoneda

Shizen Sasaki*

Yasuchika Negoro*Standing Statutory Auditor

Standing Statutory Auditor

Standing Statutory Auditor

Statutory Auditor* Outside director or auditors

Maintaining Product Safety

Maintaining Information Security

Product safety is one of DNP’s top priorities, along with environmental protection. We created a single productliability management system that is shared by the entire DNP Group, and the whole Group works together tomake our products as safe as possible.

The DNP Group has a long history of handling and processing important information on behalf of clients andconsumers. In the course of offering various services and products, we have increased our own awareness of
information security and have cultivated unique expertise in this area.
In addition to providing high quality products and services, we strive to protect the security of the information
we handle, and to respond to society’s need for privacy protection. We intend to continue offering P&I Solutions
that have a basis in rigorous personal data protection and other forms of information security.

1. Basic Policy

4. PL Management

Information Management Structure

Needless to say, our products must meet all relevant legal
and regulatory standards. But we fulfill our social responsibility
by going beyond that to manufacture products that exceed
customers’ demand and expectations regarding product safety.

Managing product liability is not a one-time event, but an
ongoing effort. We run a PL risk check whenever we develop a
new product or receive a claim. We also do this once a year for
all existing products.
When we suspect that a product design or production technology may lead to instances of defective products, we change
the design or improve the technology in order to eliminate therisk, and we document these changes in our product safety
standards. We currently have 402 such standards on file, which
we put into practice to assure product safety.

In April 2002, we established the DNP Group
Information Security and Privacy Protection
Promotion Committee, and have been developing our
information management structure, including those of
our subsidiaries, in order to establish information
security management systems.

2. Framework
In November 1994, we established a product safetycommittee in our head office, and in each operational divisionand group affiliate, as the framework through which we
promote product safety.

DNP Group Information Security and Privacy Protection
Promotion Committee
System for protecting data within business divisions andaffiliated companies
Info Security Officer; Privacy Protection Officer(division chief or affiliate president)
Auditing & Inspection Officer
Chief of Info Security/Privacy Protection Promotion Office
Info Security Manager; Privacy Protection Manager

5. PL Training

3. Defining Product Safety

Education Officer

We have been conducting PL seminars since 1994. In
2000, we began using our Intranet system for this training. Asof the end of March 2004, 3,660 employees had completed
the online seminar.

Regional Security Measures Officer

DNP AR04

External Operations Officer

67

Information System Measures Officer

DNP AR04

66

Based on guidelines for product safety measures set forth
by the head office’s product safety committee, the productsafety committee in each division and each group company
establishes general standards for product safety assurance,
and individual safety standards for each product.

Results of Efforts

DNP Group Product Safety Measures

PL Management System

Basic Policy on Product
Safety Measures
Product safety basics

During productdevelopment

Conduct PLrisk check

PLP 1, PLD 2

Change productdesignImprove producttechnology

When claim is
made

Network Learning Employee Education Programs• May 2000
Privacy Protection Training (Part 1) begins;some 10,000 employees participate• Feb 2002
Privacy Protection Training (Part 2); some
9,400 employees participate• Sept 2002
Information Security Training begins, about
17,000 employees participate

Product Safety Standards
Product safety assurance
standards

Product safety standards foreach product

Framework for Responding to
Product Liability Law

Head office product safetycommittee
Divisional product safetycommittee
Group companies’ productsafety committee

All products
Once a year

E-Business Emergency Response Training (Lectures andPractice)

Product Safety
Assurance• Since March 2003
Attended by about 2,000 employees from
Business Planning Division
Information Security Training for Technicians

Manufacture
according to
writtenstandards

Create written
product safety
standards• Feb 2004

Privacy Protection Training; about 20 local
pre-press technicians participate

Nationwide Conferences on Information Security• July 2003

1 Product Liability Prevention
2 Product Liability Defense• Nov 2003
• Dec 2003
• Mar 2004

Explanation of Law Concerning theProtection of Personal Information; forrelevant staff
Conference on Privacy Protection; forrelevant staff
Conference on introduction of centrally controlled antivirus software; for relevant staff
Conference on Privacy Protection; forrelevant staff

Actions Aimed at Privacy Protection• April 1999
• Dec 1999

• Jan 2000

Establishment of Privacy Protection
Promotion System
Establishment of company rules based on
JISQ15001, privacy protection standards,
and guidelines for the above
Sections handling personal data begin establishing CPs and acquiring Privacy Marks

Certifications
Divisions that acquired the Privacy Mark• Dai Nippon Printing Co., Ltd. Business Form Operations• Dai Nippon Printing Co., Ltd. IPS Operations• Dai Nippon Printing Co., Ltd. C&I Operations• DNP Digitalcom Co., Ltd.
• DNP Logistics Co., Ltd.
• Dai Nippon Uniprocess Co., Ltd.
• DNP Media Create Kansai Co., Ltd.
• Tokai Dai Nippon Printing Co., Ltd.
• DNP Information Systems Co., Ltd.
Divisions acquiring BS7799 and ISMS certification• DNP Facility Service Co., Ltd.
• DNP Information Systems Co., Ltd.
• DNP Digitalcom Co., Ltd. (ISMS only)Human Resources Management

Environmental Protection

By working to develop products that put the least possible strain on the environment, and by working to
generate demand for such products, every DNP employee contributes to making a sustainable, recycling-oriented
society a reality. In 1972, the DNP Group became the first Japanese printing company to establish an environment
department, and in 1993 we built our unique “Eco-Report System” of environmental management. In 2000, we
created the DNP Group Environmental Committee, which has actively addressed issues like promoting sales of
eco-friendly products, reducing industrial waste, preventing global warming, and the reduction of harmful
substances. As a result of our efforts, we have achieved significant improvements in the form of increased sales of
eco-friendly products and higher recycling ratios for industrial waste. In particular, we succeeded in reducing
emissions of toluene – a substance that is a big problem in the printing industry and must be reported in Japan’s
PRTR (Pollutant Release and Transfer Register) – from 10,000 tons in fiscal 1999 to 2,000 tons in fiscal 2003. We
intend to continue our proactive promotion of group-wide Production 21 Activities that eliminate all kinds of waste
and loss from production processes.
Development and Sales of Eco-friendly Products
Sales of Environmentally Oriented Products

PRTR

Environmental
Preservation

Reduce Group-wide total toluene emissions to 500
tons/year (fiscal 2004)
Fiscal 2003 emissions: 2,003 tons (down 76%
compared to fiscal 2000)

Prevention of
Global Warming

Reduction of Industrial Reduce industrial waste output ratio (volume ofindustrial waste / production value) by 40%
Waste
compared to fiscal 2000 level (fiscal 2005)
Compared to fiscal 2000: down 35.3%
Achieve zero emissions at 20 sites (fiscal 2005)
Achieved at 7 sites
Reduce waste generation ratio (total volume ofwaste / total volume of materials used) by 20%
compared to fiscal 2000 level (fiscal 2005)
Compared to fiscal 2000: down 16.4%
Compared to fiscal 2002: down 2.0%
Achieve a recycling rate (amount of waste recycled /amount of waste generated) of 80% (fiscal 2005)
Fiscal 2003 recycling rate: 78.8%

Students and schools have been expressing a desire for realworld experience, and DNP has responded by offering
opportunities for students to gain work experience. This
experience does not directly result in employment.

August-September 2003
78 interns accepted to pursue 39
themes

35.6

101.9
13.7

19.5
15.3

46.4

52.9

57.5

5.8

9.1

9.6

75.7

80

63.0
10.8

29.9
26.9
3.0

99

00

Information Communication
Affiliated companies

16.0

74.6

01

02

14.2

03

Lifestyle & Industrial Supplies
Electronics

Targets (Year when target is to be achieved) and Fiscal
2003 Results

Keep the maximum concentration of gases subject toemissions regulations within 70% of legal limit (fiscal
2005)
Fiscal 2003 achievement rate (of our own standard):95%

At production site boundaries, keep maximum vibration levels within 95% of the legal limit (fiscal 2005)
Fiscal 2003 achievement rate (of our own standard):
100%

Reduce carbon dioxide emissions ratio (CO 2
emissions volume divided by production value) by
20% from fiscal 1990 level (fiscal 2010)
Compared to fiscal 1990: down 5.6%

Internships (conductedjointly with affiliates)

140.4
120

Keep the maximum concentration of substances
subject to wastewater regulations within 70% of legal
limit (fiscal 2005)
Fiscal 2003 achievement rate (of our own standard):
92%

Reduce release and transport volumes of chemical
substances (other than toluene) designated as Class
1 under the PRTR Law to 50% of fiscal 2000 levels(fiscal 2004)
Compared to fiscal 2000: down 42%

Track record

At production site boundaries, keep maximum odor
levels within 70% of the legal limit (fiscal 2005)
Fiscal 2003 achievement rate (of our own standard):
90%
Environmental Impactof Offices

Separate and recycle at least 65% of waste paper(every year)
Fiscal 2003 separation and recyling ratio: 68.4%

Green Purchasing

Increase the ratio of “green” (per standards set by
DNP purchasing headquarters) raw materials costs
relative to the total cost of raw materials purchased,by 2.5% year on year (every year)
Compared to fiscal 2002: up 5.7%

Reducing
Environmental Impactof Transport

Reduce the carbon dioxide emissions rate (CO 2 emissions volume / cargo volume / distance transported)
by 5% from the fiscal 2000 level (fiscal 2010)
Compared to fiscal 2000: down 31%
Reduce the amount of fuel consumed for transport(amount of fuel consumed / sales) by 20% from thefiscal 2000 level (fiscal 2010)
Compared to fiscal 2000: down 6%

In above calculations, we use the total value of added value as the production value(amount of business activity)[The Importance of Dialogue]
We believe that in order to contribute to today’s changing
society, it is important for each employee to grow as anautonomous professional, and to participate in mutual
stimulation with other employees. In order to realize this ideal,
employees must be able to engage in free and frank dialogue.
We support this process by providing spaces and environments in which they can do so.

Even our human resources management systems are
structured with an emphasis on dialogue. For example, in orderto encourage employees to engage in mutual stimulation
through free dialogue, in 2002 we abolished our old, ladder-like
corporate officer system.
69[Specific Policies]

Performance
management system

Personnel evaluations

Job grade system

Self-reporting system

Training system/
Self-development support

Sharing of goals; enhancement of
guidance; progress

Acceptability of evaluations;confirmation of performance goal levels

Acceptability of compensation levels;
confirmation of goals for advancement

Confirmation of career goals;
confirmation of individual situations

Autonomous professionals

Development and Sales Increase sales of environmentally consciousof Environmentally
products by 10% per year (every year)
Conscious ProductsCompared to fiscal 2002: up 38%

Category

Details

Support and guidance from leaders

Targets (Year when target is to be achieved) and Fiscal
2003 Results

Policy160

20

their potential, and we will select and hire employees in areasonable and unbiased manner. In addition, we will actively
participate in internship programs.

DNP AR04

DNP AR04

Category

We will provide open and fair opportunities to people whoshare our corporate vision and want to work together to realize

Enhancement / continuation of dialogue

68

Based on our environmental policies, DNP has established environment-related
goals that are appropriate for our business activities, and we have been steadily
improving our environmental performance. Below are the goals that our Environmental
Committee adopted in March 2002 for fiscal 2003, along with actual results.

1. Cultivating a Dynamic Corporate Culture[Hiring](in billions of yen)0

Past Successes and Future Goals Related to Environmental Protection

and to work at growing and realizing his or her own potential in order to meet challenges proactively and courageously.
The company shall provide environments and mechanisms that support each employee’s growth and self-development
and cultivate a dynamic corporate culture that allows each employee to use his or her abilities as a professional.

Each individual’s effort / Self-development

DNP has determined guidelines for developing environmentally conscious products, based on one of the principles established by Japan’s Green Purchasing
Network (revised June 12, 2001), which advises consumers to purchase products
and services designed to reduce various environmental impacts over the entire
product life cycle. We used these guidelines to develop and sell eco-friendly products, and in fiscal 2003, our sales of such products amounted to 140.4 billion yen, up
37.8% from the previous year and well exceeding our target.

Human Resources Management Policies
Our aim is for each of our employees to feel a sense of responsibility and confidence as an independent professional,

Advancing each individual’s career

2. Cultivating Autonomous Professionals
We believe it is important for each employee to engage inself-development, consider his or her own career path, decide
what kind of work he or she wants to do, and expand his or her
own field of work. In order to support these individual efforts byemployees, we have established personnel systems that allow
them to choose the kind of work they want to do, as well as
education, evaluation, and compensation systems that
promote the acquisition of specialized knowledge and skills.

2) Creating safe and pleasant workplaces[Specific Measures – Personnel Systems]

70

Description

Results

In-house recruiting system

Positions requiring specialized knowledge, or positions in new businesses orthe development of new products, are advertised within the DNP Group. Any
employee with the required ability, experience, and desire to take onchallenges is free to apply.

Discovery of talented employees and realizationof their potential
As of March 2004, a cumulative total of 169
employees were transferred

In-house venture system

We recruit people with entrepreneurial spirit to start independent corporations(funded at least 51% by DNP). This program is coordinated with a company
educational program that accepts about 20 trainees per year.

April 2002
Sept 2003

In-house apprenticeshipsystemIn order to improve skills related to their position, employees may work as anapprentice in a different section for a limited term, and then return to their
original job.

Employees’ job skills were improved bysystematically adopting suggestions born out of
in-house apprenticeships

Certification acquisition
support programThis program pays incentives to employees who acquire specialized
knowledge, skills, or certifications needed for their job. (covers about 80 typesof certification, up to 100,000 yen)

Increase in the number of employees who are
certified for specialized knowledge or skills
related to IT or other aspects of their work

Mastership recognition
program

Employees with valuable production skills are designated as “Meisters” andare encouraged to acquire additional specialized skills and cultivate
successors by passing on their talents. Meisters receive a certificate ofrecognition from the president, and are paid a special allowance.

Cumulative total of 41 employees recognized asof March 2004

Special skills recognition
program

Employees with advanced specialties, who are especially highly esteemedboth inside the company and outside, receive special compensation.

March 2004 10 employees recognized

Job grade / wage systems

A job grade is assigned to each employee based on an evaluation of current
role and performance. This grade is linked to monthly salary and bonus
calculation criteria, which are no longer determined by seniority.

Evaluation / compensation
systems (Performance
management system, etc.)

At fixed times, employees sit down with their supervisors to set future
performance targets or evaluate past performance. Employees andsupervisors increase mutual understanding through discussion andcounseling. Evaluation results are directly reflected in salaries and bonuses.

Career development
advisory officeThis office provides counseling and guidance to help employees evaluate their October 2003 – March 2004 74 employees
career and devise strategies for meeting future career goals. (established
October 2003)[Specific Measures – Training Systems to Support
Employees Who Aspire Toward Career Advancement]
Employees each design their own career and aim tobecome independent professionals who take responsibility andhave self-confidence in their particular field of work, and who
work cooperatively with others inside and outside the company.
The company supports employees’ career designs byarranging practical and diverse training programs that offer

CP Design Consulting Co., Ltd.
M’s Communicate Co., Ltd.

System expanded in October 2003 to coveralmost all employees

basic or specialized knowledge required in various fields, suchas people skills, conceptual skills, etc.
For managers and supervisors, we provide practical training
aimed at improving communication and collaboration skills andincreasing understanding of personnel/training systems andcareer development, so they can help subordinates make themost of their abilities.

and pleasant workplaces and living environments that include
families. Accordingly, we have created a system of safety andhygiene activities for all employees to participate in, and we
promote this as an important measure.

[Specific Measures]
MeasureDescription

Results

Framework

Management and employees together established aCentral Safety and Hygiene Committee within the head
office. Each operational division and group company
has a similar system for discussing and promoting
safety and hygiene-related activities. We have also
created company-wide standards and guidelines
related to these topics.

We determined DNP’s annual safety and hygiene action policy. Divisions andgroup companies determined their own plans for each workplace, based on
the head office’s policy and taking into account the special characteristics ofeach workplace.
<Major standards and guidelines>
1) Workplace environment improvement• Workplace environment standards• Guidelines for preventing noise in the workplace• Guidelines for handling tobacco smokers
2) Preventing work-related accidents• Guidelines for preventing industrial accidents caused by machinery, etc.

Upgrading skills

The safety and hygiene committees play the leadingrole in promoting activities tailored to each workplace,in addition to promoting the enhancement of skills that
employees need in order to make the committees
function effectively.

• Promote certification of hygiene managers, work supervisors, chemical
substance managers, etc.
• Increase the number of psychological counselors as of March 2003: 37• Increase the number of training seminars and employees receiving special
training for restricted work operations Jan - Dec 2003: 168 people
received training• Safety and hygiene management training for line managers; new employee
education Jan - Dec 2003: 729 people received training

Accident prevention
activities

We analyze potential hazards and take steps to prevent
accidents involving revolving machinery, which is amajor cause of industrial accidents. Concerning nonstationary and other high-risk operations, we review ouroperating standards, practice safe operatingprocedures, and strive to ensure that mishaps are neverrepeated.

Industrial accident rate is low relative to industries in general, and even relative
to the entire printing industry.
Jan - Dec 2003: Industrial accident rate: the number of employees who missed
work due to work-related accident divided by total number of hours worked (inunits of 1 million hours): 0.66%

Industrial Accident Rate (Absence Rate)
(%)
2.0
1.72

1.80

1.82

1.79

1.77

1.10

1.12

1.06

1.15

0.59

0.52

0.57

00

01

1.78

1.5
1.10
1.0
0.5

0.58

0.71

1.03

0.66

0

98
All industries

3. Free, Frank, and Pleasant Working Environments
1) Creating workplaces that are easy to work in
We believe that in order to contribute to society by realizing a free, frank and dynamic corporate culture, it is important for each employee to respect his or her co-workers andhelp create an environment where it is pleasant to work.
Toward this end, we think it is important to that everyone
realizes their potential and makes the most of their abilities
without worrying about things like gender, age, or disabilities.

[Specific Measures – Improving the Workplace Environment]
SystemDescription

Results

Hiring physicallychallenged people

We achieved the legally mandated employment rate, based on the premisethat physically challenged people should be able to function normally insociety. When necessary, we educate workplace leaders about workers’
special needs.

Fiscal 2003 Employment rate 1.82%

Senior hiring

Employees who want to continue their workplace activity as experienced
professionals after reaching mandatory retirement age may consult with thecompany and work as “senior staff.”

Fiscal 2003 44% of eligible employees chose towork as senior staff

Child care; nursing care
support systems

We provide more than the legally required support, and are consideringenhancing support services even further.

Fiscal 2003 42 employees used this system

99

All printing industries

02

03

DNP Group3) Secure working environments(Disaster Prevention Framework)
DNP has created an earthquake response outline and acentral disaster prevention basic plan, with the aim of securing
employees’ safety, restoring workplaces, and supporting families and local residents in the event of a destructive earthquake.
Based on these policies, we have promoted earthquake
preparedness measures through disaster prevention councils
set up in central and outlying divisions and affiliates. In theevent of an earthquake, these councils will automatically begin
functioning as response headquarters. Specific disaster71
DNP AR04

DNP AR04

SystemIn order to create safe and pleasant workplaces for all of ouremployees, we conduct our own safety and hygiene activities.
Our basic policy is to support the maintenance of comfortable

prevention measures or earthquake response measures are to
be taken by six action teams, with each responsible for humanrescue, care of buildings, asset protection, business operations, PR, or community aid.
Also, thanks to the enhancement of our emergency
telecommunications network (emergency wireless links at 29
offices in the Kanto district, and satellite telephone connectionsat 42 locations nationwide), we should be able to give quick
help not only to the affected workplace, but also to surrounding
residents and businesses.

Corporate Philanthropy

Printing is based on reproduction technology, which DNP views as a new kind of creative technology that cancontribute to the development of art and culture. That’s why DNP’s unique brand of corporate philanthropy
centers on supporting graphic arts.
Ginza Graphic Gallery (ggg)
Opened in 1986
ggg exhibits creative works by individuals and groups, from Japan and abroad,with a focus on the themes of graphic
design and printing. The gallery also
holds lectures and presentations byartists. Ten years after the gallery’sfounding, in 1996, it was recognized witha Mainichi Design Awards Special Prize.
That same year, ggg celebrated its 10th anniversary with a
special exhibit on the history of Japanese graphic arts. The
exhibit was very well received, and earned the gallery the
Mecenat Award for Outstanding Popularization of the Arts.
As of July 2004, the gallery had held 218 exhibits, whichwere visited by 651,294 people.
In fiscal 2003, it held 12 exhibits that drew 40,801 visitors.

72

Location: 7-7-2 Ginza, Chuo Ward, Tokyo, Japan 104-0061
Telephone: 03-3571-5206
Open 11:00 – 19:00 (till 18:00 on Saturdays); closed Sundays and holidays
Admission free of charge

The Center for Contemporary
Graphic Art
Opened in 1995
The Center for Contemporary
Graphic Art is the home of the Tyler
Graphics Archive Collection,
produced at the renowned U.S.
contemporary block print studio,
Tyler Graphics Ltd. In addition toholding regular showings of its permanent collection, the Center
also introduces a wide variety of modern art. As of June 2004,
it had hosted 32 special exhibits and received 48,201 visitors.
In fiscal 2003, it held four special exhibits, drawing 4,002
attendees.

Location: 1 Miyata, Shiota, Sukagawa-shi, Fukushima, Japan 962-0711
Telephone: 0248-79-4811
Open 10:00 to 17:00 (Admission until 16:45); closed Mondays and the day
after public holidays
Admission: ¥300; ¥200 for students; free for children 12 and under, seniors
over 65, and handicapped-certificate holders

DNP AR04

The Ginza School; since 1995
ddd Gallery
Opened in 1991
One of very few galleries in the Kansai
district that are devoted to graphic
design, ddd Gallery hosts exhibits andlectures. Exhibits focus on spiritedgraphic designers from overseas. As of
September 2004, the gallery had held
131 exhibits, attended by 182,730
visitors.
In fiscal 2003, it held 11 exhibits, which were viewed by
17,659 people.

Location: 2-2-28 Dojimahama, Kita Ward, Osaka, Japan 530-8208
Telephone: 06-6347-8780
Open 10:00 – 18:00; closed Saturdays, Sundays and holidays
Admission free of charge

This is an event that DNP organizes four or five times eachyear, based on the theme “Let’s Enjoy Thinking about
Communication.” Participants
explore the joys and pitfalls ofcommunication along with guest
speakers. The event has been held
42 times, with a total of 3,021
people attending.
Mainichi Publishing Culture Awards: Kitajima Award
The Mainichi Newspapers Co. established the Mainichi
Publishing Culture Award in 1947. Ever since it has been
awarded each year to outstanding figures in writing or
publishing. As a printing company, DNP has strong ties to the
publishing industry, and in 1997, we established the Kitajima
Award as a special business partner to Mainichi.
In 2003, the award was given
for five Japanese works, including“Hayashi Emiko’s Showa” by
Kawamoto Saburo, and “Baka no
Kabe/Wall of Idiots,” by Yoro
Takeshi.

Financial Section
Contents
Management’s Discussion and Analysis

74

Consolidated Financial Data

82

Consolidated Financial Statements

84

Notes to Consolidated Financial Statements

89

Report of Independent Certified Public Accountants

1020Management’s Discussion and Analysis

INTRODUCTION
Dai Nippon Printing Co., Ltd. (DNP) is built around a coreof printing and information technologies. We offer a variety of
products and services to customers in a wide range ofindustries in and outside of Japan, in the fields of information
communication, lifestyle and industrial supplies, electronics,
and beverages. Not only does DNP lead the world as its
largest printing company, we have also establishedourselves as No. 1 in the world in various other fields,
including areas of electronics and security that make use of
printing technologies.
Our most important areas of business are printing, which
consists of three main segments, and beverages.

Consolidated segments(% contribution to total sales)
Beverages
5.1

74

Electronics
17.5

Lifestyle and Industrial Supplies:
In this segment, we use DNP’s outstanding capacity fortechnological development to provide environmentallyfriendly packaging and decorative materials, and a variety
of industrial supplies. This is yet another field where DNP
has won acclaim for helping to make people’s lifestyles
more comfortable, convenient, and safe. We have developed products with sophisticated functionality, such as
printer ribbons and optical films for liquid crystal displays.
For many of these products, we hold the largest market
share in the world.
Electronics:
In this segment, DNP applies the world’s most sophisticated micro-fabrication technology in order to supply alarge number of electronic products, including thephotomasks that are key components in the manufactureof semiconductors, and color filters, which are major
components of liquid crystal displays (LCDs).
[Beverages]
DNP has a subsidiary, Hokkaido Coca-Cola BottlingCo., Ltd., that operates a beverages business.

OPERATING RESULTS
Business Environment
The environment surrounding the printing industry
remained harsh this fiscal year, due to such factors as sluggish demand for printing, higher materials costs, and lower
unit sale prices as a result of intensified competition.
This fiscal year, which ended in March 2004, was a badyear for the publishing industry, which shrank for the seventh
year in a row. Sales (in monetary terms) of both books andmagazines fell below previous-year levels. On the other
hand, overall Japanese advertising outlays began to increase
as of October, and the commercial printing sector enjoyedsolid demand for printing of promotional items like newspaper inserts and catalogs.
In the Lifestyle & Industrial Supplies segment, sales of
packaging — consisting mostly of food packaging – weredisappointing amid sluggish personal consumption.
However, demand for high-function optical film and otherindustrial supplies rose sharply.
In the Electronics segment, the display and semiconductor industries did well thanks to strong sales of equipment like personal computers and mobile phones. In particular, sales of LCD-related products continued to increase
sharply.

March 2004

March 2003

March 2002

Gross profit margin

20.8%

20.3%

18.4%

Operating income margin

7.6

6.9

5.5

Ordinary income margin

7.2

6.7

5.7

Net income margin– Primary

Net income
per share– Fully diluted

3.9

2.2

1.2

¥ 71.49¥ 37.80¥ 20.55

−

37.67

20.53
（%, Yen）

Net Sales
This fiscal year, DNP’s net sales increased by 45.1 billion
yen, or 3.4%, over the previous fiscal year to a record highof 1,354.1 billion yen. This was because of increases in sales
by three segments: Information Communication, Lifestyle &Industrial Supplies, and Electronics. In the latter segment,
sales grew sharply, by 13.5%.
Net Sales(in billions of yen)

1,500

75
1,200

DNP AR04

DNP AR04
Lifestyle &Industrial Supplies
31.4

Information
Communication
46.0[Printing]Information Communication:
In addition to printing on paper, this segment offers avariety of tools such as digital media, content production,and combinations of these services. Regardless of what
medium is chosen, DNP offers its clients optimal solutions
that allow them to deliver information to their customers by
the most effective and efficient means.

900

600

300

Overview
The DNP has set about expanding a solutions-based
business that combines printing technology (P) with theinformation technology (I) that we began accumulating in thelate 1970s. This concept is based on the Vision for the 21stCentury that DNP drew up in 2001, and we express it in thephrase “P&I Solutions DNP.”
Despite the harsh business environment surrounding theprinting industry this fiscal year, we managed to increase
revenues and profits. DNP posted record high consolidated
net sales of 1,354.1 billion yen (up 3.4% from a year earlier),
operating income of 102.4 billion yen (up 14.0% year onyear), and net profit of 52.9 billion yen (up 84.1%).

0
00

01

02

03

04

Cost of Sales
Our cost of sales this fiscal year was 1,073.1 billion yen.
Although this was 29.7 billion yen, or 2.8%, more than theprevious year, our cost-to-sales ratio improved by 0.5 point,
from 79.7% to 79.2%. Among the environmental factors thatworked against us this term was the continued strong
impact of lower unit prices resulting from general deflation,
while at the same time material costs increased.
We met these challenges by working hard at cutting
costs and securing income in line with the “Action of
Production 21st” campaign that we launched in April 2002.
This fiscal year, we succeeded in shaving 19.1 billion yen offof our manufacturing costs. We accomplished this mostly
through the horizontal (Group-wide) adoption of cost-cutting

Management’s Discussion and Analysis

measures that had already produced concrete results inareas where they had been tried, resulting in improved
yields, shortened lead times, and further reductions in inventories of finished products and works in progress.
Gross Profit Margin
(%)

25

20

By segment, operating income from Information
Communication increased by 3.6 billion yen to 43.7 billion;
from Lifestyle and Industrial Supplies it increased by 3.8
billion yen to 32.4 billion, and from the Electronics segment it
grew by 4.7 billion yen to 33.0 billion. In the beverages
segment, there was an operating loss that increased by 206
million yen, resulting in a loss of 372 million yen.
DNP’s operating income margin increased significantly,
from 6.9% last term, to 7.6%.
Operating Income Margin

15

(%)
10
8
5

Meanwhile, we posted a loss of 3.0 billion yen for the disposal of underperforming businesses, mainly due to thewithdrawal of Dai Nippon Printing Co. (Hong Kong) Ltd. fromthe Hong Kong market.
As a result of the above, net income before income taxes
this term was 93.1 billion yen, representing a huge increaseof 120.5% over the previous term

mandatory retirements, etc. At the end of the fiscal term, ourlabor force consisted of 34,514 employees, a decrease of668 compared to a year earlier, resulting in a saving of 3.1
billion yen.
Capital Expenditures(in billions of yen)120

Net Income
DNP’s net income for fiscal 2003 increased by 84.1% overthe previous year to 53.0 billion yen. Return on equity rose to
5.5%, from 3.0%.
In addition, net income per share rose sharply, from 37.80
yen in the previous fiscal year, to 71.49 yen.

100
80
60
40
20

6
0
00

01

02

03

76

(%)

15

12

9

6

3

0
00

01

02

03

04

Operating Income
DNP’s operating income this fiscal year was affected bydeclines in unit prices and increases in the cost of film andother raw materials. But thanks to the success of our costcutting measures and increased net sales, we still achieved
a big increase in profit. Our operating income grew by 12.6
billion yen, or 14.0%, to 102.4 billion yen.

01

02

03

04

Includes investment in intangible fixed assets
6

2

R&D Expenditures5(in billions of yen, %)
0

4
00

01

02

03

04

30

2.0

77

3
25
1.5

2
20

Other Income (Expenses)
This term, the balance of non-operating income andexpenses resulted in a net expense of 9.3 billion yen. This
represents a big decline of 38.3 billion yen compared to theprevious year’s net non-operating expense.
The main reason for the decrease in non-operating
expenses was that in the previous term we posted 30.3
billion yen in losses from the devaluation of investment securities in connection with accounting for impairment losses,
but this term that amount decreased to 1.4 billion yen
because share prices were relatively firm.
Also, on Jan. 30, 2003, Hokkaido Coca-Cola BottlingCo., Ltd. was granted an exemption from its obligation to
make future payments related to the substitution portion of
its employee pension fund. Dai Nippon Printing Co., Ltd.
received the same type of exemption on June 1, 2003. DNP
posted 6.1 billion yen in extraordinary income in connection
with these exemptions. Because of this, the 6.0 billion yen
per year that DNP had been amortizing as an extraordinary
loss from the transitional obligation that we incurred with ourintroduction of retirement benefit accounting decreased by
2.1 billion to 3.9 billion yen. This was another major reason
for the decline in the non-operating expense.

1
15

1.0

0
00

01

02

03

04

10
0.5
5

Capital Expenditures, Research & Development
Expenditures, Etc.
We continued the previous year’s policy of active capital
investment in strategic fields. In other areas, we made effective use of existing facilities our top priority and focused oninvesting in rationalization. We reduced capital expendituresfrom 73.7 billion yen to 69.8 billion. By encouraging the
reduction of depreciation expenses through these policies,
depreciation expenses this term amounted to 85.1 billion
yen, or 4.1 billion less than the previous year’s figure of 89.2
billion yen.
We continued a wide range of R&D activities, fromcreating new businesses and developing new products todeveloping production technologies. R&D expenditures were26.0 billion yen, or 2.0 billion more than the previous year’s
24.0 billion yen.
We did not actively reduce our labor force throughmeasures like early retirement inducements, but we did trimit by restricting new hiring and allowing natural attrition from

0

0.0
00

01

02

03

Ratio to net sales (figures on right)

04

DNP AR04

DNP AR04

Selling, General and Administrative Expenses to Net Sales

00

(%)

4

Selling, General and Administrative Expenses
Selling, general and administrative expenses this fiscal
year were 178.5 billion yen, an increase of 2.9 billion yen or
1.6% over the previous fiscal year. However, the percentage
relative to net sales declined from 13.4% to 13.2%. Of
course, this improvement was the result of successful costcutting measures.
In indirect divisions, we trimmed 3.4 billion yen off ofexpenses by using IT to boost operational efficiency and byimplementing thorough cost management.

0

ROE

04

Management’s Discussion and Analysis

Because of these activities, DNP’s cash and cash equivalents at the end of the fiscal year increased by 16.9% or 40.4
billion yen over the previous year, to 279.4 billion yen.

LIQUIDITY AND CAPITALRESOURCES
We believe that the steady expansion of cash flow generated through vigorous operating activities, along withconcentrated investment in strategic areas, are important for
the expansion of our business. In addition, we believe that asound financial constitution is indispensable to stable growthin the medium and long terms, so we have worked hard toenhance our company’s financial position.

Total assets(in millions of yen)

Cash Flow
Free cash flow is cash flow that DNP can actively invest in
fields with the potential to move the company far forward . It
is also a source of corporate value. This fiscal year, DNP
managed to generate free cash flow of 66.7 billion yen.

March 2004

Cash flow from operating
activities

78

The Balance SheetAt DNP, we always try to optimize our capital composition to suit the business environment, and to minimize ourcost of capital so that we can increase DNP’s corporate
value.

March 2003

March 2002

March 2004

March 2003

¥ 1,513,734¥ 1,450,027

Current ratio (%)

197%

March 2002

¥

171%

1,432,458
181%

Working capitalto-net sales (%)

28

23

24

Debt/equity ratio (%)

7

6

7

Book value per share(in yen)¥

1,348.40¥

1270.81¥1246.99（in millions of yen, %, yen）¥

161,487¥

197,413¥ 133,830
Total Assets(94,740)(87,392)(79,563)(in billions of yen)Free cash flow

66,747110,02154,2672,000（in millions of yen）
1,500

This fiscal year, cash flow from operating activities
decreased by 18.2% from the previous fiscal year, to 161.5
billion yen. Underlying factors included the posting of 93.1
billion yen in income before income taxes, 85.2 billion yen in
depreciation expenses, and an increase of 12.2 billion yen in
trade payables despite an increase of 17.5 billion yen in tradereceivables and payment of 39.2 billion yen in income tax.
Cash flow used in investing activities increased by 8.4%
from a year earlier, to 94.7 billion yen. The main factors
behind this change included expenditures of 66.7 billion yen
to acquire fixed assets and 18.7 billion yen to acquire investment securities, despite 11.6 billion yen in income from saleof investment securities.
Meanwhile, cash flow used in financing activities declined
by 61.0% from a year earlier, to 24.2 billion yen. This term,
we obtained 49.7 billion yen by issuing straight corporate
bonds, mainly for capital spending in fields like electronics.
However, we also used 29.7 billion yen to redeem convertible bonds, 24.6 billion yen to buy back DNP shares, and14.5 billion yen for dividend payments.

1,000

500

0
00

01

02

03

04

DNP’s total assets at the end of this fiscal year amounted
to 1,513.7 billion yen, up 4.4%.
Among current assets, cash and cash equivalents
increased by 16.9% or 40.5 billion yen over the previous
fiscal year to 279.4 billion yen. Trade receivables increased
by 4.3% or 16.5 billion yen to 400.1 billion yen. Inventories
decreased by 6.3% to 70.0 billion yen. As a result, total
current assets increased by 7.9% over the previous year to771.9 billion yen.
In investments and advances, investment securities holdings increased 55.4% or 51.6 billion yen from the previous
term to 144.6 billion yen.

On the liabilities side, total current liabilities as of the endof this term were down by 6.2% or 26.1 billion yen from ayear earlier, to 391.7 billion yen. Major changes in current
liabilities included an increase in trade payables of 3.9% or
10.4 billion yen over the previous fiscal year to 278.3 billion
yen due to the increase in net sales, while at the same there
was a decrease of 29.7 billion yen thanks to the redemptionof convertible bonds due within one year.
Long-term liabilities increased by 78.5% or 52.5 billion
yen compared to the end of the previous year, to 119.3
billion yen, due to the issue of 50 billion yen worth of corporate bonds.
In all, total liabilities increased by 5.4%, or 26.4 billion yen,
to 511.0 billion yen.
This fiscal year, DNP continued repurchasing shares, as
we did last year. As a result, treasury stocks increased from
21.8 billion yen at the end of last fiscal year to 46.4 billion
yen at the end of this term. This was a factor that decreased
stockholders’ equity. On the other hand, stockholders’equity was increased by these factors: 1) since net income
amounted to 53.0 billion yen, retained earnings grew by 38.3
billion yen to 743.4 billion yen, and 2) unrealized gain on
available-for-sale securities increased by 24.7 billion yen,
thanks to this term’s solid domestic share prices.

Repurchasing of DNP’s own shares was conducted inline with the decision at the June 2003 general shareholders’meeting to repurchase up to 30 million shares, at a cost of
up to 40 billion yen, in order to return profits to shareholders.
Between November 2003 and February 2004, DNP spent a
total of 24.4 billion yen to repurchase 15,392,000 shares,
which are being held as treasury stocks. Combined with the
17 million shares purchased in the previous term, thisamounts to 32,392,000 shares, or 4.3% of outstanding
shares.
As a result of the above factors, our total stockholders’equity as of the end of this fiscal year increased by 3.9% or
36.7 billion yen to 978.7 billion yen.
Also, as mentioned above, on Sept. 25, 2003 we issued
a total of 50 billion yen worth of 10-year, unsecured corporate bonds at 1.67%. These bonds received a rating of AA+
from Rating and Investment Information, Inc.

Total Stockholders’ Equity and Stockholders’ Equity Ratio(in billions of yen, %)

80

1,000

800
60
600
40
400
20
200

0

0
00

01

02

03

Stockholders’ Equity Ratio (figures on right)

04

79
DNP AR04

DNP AR04

Cash flow frominvesting activities

On the other hand, property, plant and equipment
decreased by 5.1% or 27.7 billion yen from the previous
term to 513.2 billion yen. One reason for this decline wasthat this term there was nothing in particular to cause anincrease. Also, machinery and equipment shrank by 3.2
billion yen and construction in progress fell by 1.8 billion yen,while we posted large depreciation expenses.
Other assets decreased by 18.8% or 16.5 billion yen to70.9 billion yen. This was mainly because deferred tax
assets declined by 47.1% or 22.6 billion yen to 25.4 billion
yen. The result was that overall fixed assets increased by
1.0%, or 7.3 billion yen, over the previous term to 741.8
billion yen.

Management’s Discussion and Analysis

RISK MANAGEMENT
The performance and the results of DNP could be significantly affected by a variety of factors and circumstances thatmight arise in the future. Because DNP is aware of these risk
factors, our policy is to strive to minimize their potential
effects.
As of the time that we issue this annual report, thefollowing are the major factors that DNP management views
as risks.

80

Changes in the electronics market
We expect our electronics segment to be highly profitable
and we believe it has good growth potential. We position it
as a strategic sector which we aim to expand in the future.
We intend to secure steady profits from it by focusing on
building business strategies based on a careful compilationof information and the development of highly competitive,
high-added-value products. However, the market for
displays and semiconductor-related products is subject tosudden changes. It is possible that DNP’s performance
could be affected by sudden changes affecting productsthat we handle, such as dramatic fluctuations in demand or
a plunge in unit prices.

Development of new products and technologies
The DNP adapts printing technologies in order to develop
new products and technologies that meet the needs of ourcustomers and the market. We provide products andservices to a wide range of industrial sectors. In recent
years, the pace of technological innovation has become
faster than ever, and customers’ needs have been rapidly
diversifying. We believe that in the future, competition in thearea of product development will become more intense thanever before, and it is possible that our performance could
fluctuate significantly due to unforeseeable changes inmarket trends or the shortening of product life cycles.
Currency fluctuations
Particularly in such fields as electronics, we are
expanding our dealings in products and services withcustomers, suppliers, and others overseas. Because we
expect the effects of currency rates to gradually become
more important, we use such means as foreign exchange
forward contracts to hedge the risks of market fluctuations.
Nevertheless, it is possible that radical swings in currency
values could have a more serious effect on our corporate
performance.

Legal regulations, etc.
We conduct our business based on strict compliancewith the law. Wherever we operate, in Japan or overseas,
we are subject to a wide variety of legal regulations andrestrictions, including laws related to product liability, environmental protection and recycling, anti-monopoly prohibitions, patents, taxes, imports and exports, etc. We canimagine that in the future such regulations could become
even more restrictive. If that should occur, it is possible thatthe DNP’s business performance could be affected by limitations on our business activities or increased costs.
Information system security
Now that the Internet and other computer networks andinformation systems are playing an increasingly large role inbusiness, the construction of information systems and security measures that protect them have become indispensable
to the continuation of business activities. In recent years,
DNP has become increasingly vulnerable to computerrelated risks, such as the possibility that information systems
could be shut down by software or hardware trouble,
computer viruses, etc., or that customer information could
be leaked outside the company. DNP takes every possible
measure to maintain and control computer systems anddata through increasingly sophisticated security andemployee education. However, in the unlikely event that an
accident should occur, it is possible that our business activities could be affected.
Disaster
We take steps to protect our production equipment andother major facilities from being damaged by disasters likefire or earthquake. In addition, we divide our work among
multiple production bases and make every effort to prevent
disaster from causing production stoppages or disturbancesin our ability to supply products. However, it is possible thatour business performance could be seriously affected in theevent of unforeseeable situations, such as production stoppage or massive damage to or destruction of our corporate
infrastructure resulting from an event such as a huge earthquake or terrorist attack.

81
DNP AR04

DNP AR04

The Japanese economy and consumption trends
The DNP engages in a wide range of businesses with anextremely large number of customers. We conduct our business so as not to be overly dependent on specificcustomers. The primary market where we do business iscentered on the Japanese domestic market, whereas ouroverseas sales constitute about 15% of net sales. Therefore,
if individual consumption and other aspects of domestic
demand should slow down due to fluctuations in theJapanese economy, our corporate performance could be
affected by decreased orders, lower unit sale prices, or othereffects of such a downturn.

Fluctuations in raw material procurement
We procure raw materials such as printing paper and film
from multiple suppliers in Japan and overseas. We work
hard to secure stable supplies and maintain optimal prices.
However, there is some potential for temporary imbalances
between supply and demand due to factors like spikes inpetroleum prices or sudden surges in demand from the
Chinese market. We intend to cope with such instances bynegotiating with our customers. However, if it should
become extremely difficult to secure supplies, or if prices risemarkedly, it is possible that our corporate performance
could be affected.

SELECTED FINANCIAL DATA (unaudited)

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Income Statement Data (¥ million)
Net Sales¥

1,354,101¥

1,309,002¥

1,311,934¥

1,342,035¥

1,286,703¥

1,269,543¥

1,336,604¥

1,310,100¥

1,245,300¥

1,192,827

Cost of sales

1,073,118

1,043,456

1,071,163

1,091,386

1,039,006

1,033,926

1,056,962

1,028,614

983,301

945,570

Gross profit

280,983

265,546

240,771

250,649

247,697

235,617279,642

281,486

261,999

247,257

Selling and administrative expenses

178,545

175,665

168,529

164,708

161,811

166,008

172,824

170,298

161,609

156,536

Operating income

102,438

89,881

72,242

85,941

85,886

69,609106,818

111,188

100,390

90,721

Income before income taxes and minority interests

93,13742,244

26,15069,116

79,19977,703

100,634

107,394

98,103

101,542

Net income

52,971

28,774

15,60933,40939,03430,49356,53956,16552,97449,200

Balance Sheet Data (¥ million)
Total assets

82¥

1,513,734¥

1,450,027¥

1,432,458¥

1,489,871¥

1,451,700¥

1,445,293¥

1,450,709¥

1,410,138¥

1,336,689¥

1,274,581

Property, plant and equipment-net

513,175

540,874

543,962

561,017561,898

570,860

536,364

501,622461,158434,809

Long-term liabilities

119,277

66,82179,01386,012

77,637

100,695

100,214

97,340106,792

113,295

Total liabilities

510,970

484,581460,691

522,105

495,541

518,323

538,113553,172

532,451

514,117

Total stockholders' equity

978,736

942,083

946,998

939,441925,646

898,646

885,507831,262

780,484

738,243

Other Selected Data (¥ million)¥

69,834¥73,789¥85,096¥103,050¥

113,858¥

119,372¥

111,341¥

113,656¥

93,654n.a.

Depreciation expenses

85,182

89,23994,87094,312

94,58882,80073,90867,58362,424n.a.

R&D expenditures

26,05024,09723,367

24,664

23,571

n.a.

n.a.

n.a.

n.a.

n.a.

Common Share Data (¥, shares)
Net income per share - fully diluted
Net income per share - primary
Dividends paid per share
Net assets per share
No. of common shares outstanding - primary

¥

71.49

¥

37.80

¥

20.55

¥

43.99

¥

51.40

¥

40.15

¥

74.49

¥

74.52

¥

70.63

¥

65.63

-

37.67

20.53

43.45

50.47

39.54

72.53

72.15

68.19

n.a.

21.00

19.00

18.00

18.00

18.00

18.00

18.00

17.00

16.00

15.00

1,348.40

1,270.81

1,246.99

1,236.96

1,218.79

1,183.24

1,165.94

1,102.56

1,040.49

984.61

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

753,940,533

750,110,275

749,779,633

Financial Ratios (%)
As a percent of net sales:
Gross profit

20.75%

20.29%

18.35%

18.68%

19.25%

18.56%

20.92%

21.49%

21.04%

20.73%

Selling, general and administrative expenses

13.19

13.42

12.85

12.27

12.58

13.08

12.93

13.00

12.98

13.12

Operating income

7.57

6.87

5.51

6.40

6.67

5.48

7.99

8.49

8.06

7.61

Income before income taxes and minority interests

6.88

3.23

1.99

5.15

6.16

6.12

7.53

8.20

7.88

8.51

Net income

3.91

2.20

1.19

2.49

3.03

2.40

4.23

4.29

4.25

4.12

Return on equity

5.52

3.02

1.65

3.58

4.28

3.42

6.59

6.97

6.98

6.84

Current ratio

197

171

181

165

160

159

165

160

162

165

7

6

7

8

9

10

10

12

14

15

Debt-to-equity ratio

DNP AR04

DNP AR04

Capital expenditures83

F I N A N C I A L

S T A T E M E N T S

Financial Statements
Consolidated Balance Sheets
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2004 and 2003

2004

2003

2004

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2004 and 2003

AssetsLiabilities and Stockholders' Equity

Current assets :Current liabilities :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..................................................................................................

¥

279,36829
6,706
400,112(4,846)69,992
20,541
771,902¥

238,896 $95
50
383,576(5,173)74,702
23,363
715,5092,635,547
274
63,264
3,774,642(45,717)660,302
193,781
7,282,093

Thousands of
U.S. dollars (Note 3)

Millions of yen

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 (Note 10)..................................................................................
Total current liabilities ...............................................................................................

2004

¥

8,034
4,033
278,315
34,38020,96445,967
391,693

2003¥

10,55836,070267,874
31,14825,05947,051
417,760

2004$

75,792
38,0472,625,613
324,340
197,774
433,651
3,695,217

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

12,401
144,576753
157,730

12,54093,006711
106,257

116,991
1,363,924
7,104
1,488,019

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

59,342
59,573
362
119,277

8,700
57,812309
66,821559,830
562,009
3,416
1,125,255

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

24,02823,363

226,679

Property, plant and equipment, at cost (Note 7) :84

Contingent liabilities (Note 16)
117,050
408,241
890,706
10,636
1,426,633(913,458)
513,175

116,505
408,097
893,942
12,422
1,430,966(890,092)
540,874

1,104,245
3,851,330
8,402,887
100,340
13,458,802(8,617,528)
4,841,274

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

70,92787,387669,123

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

¥ 1,513,734¥ 1,450,027$ 14,280,509

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

85
DNP AR04

DNP AR04

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

Stockholders' equity :Common stock Authorized : 1,200,000,000 shares;
Issued : 759,480,693 shares (Note 9).......................................................................
Capital surplus (Note 9) ...............................................................................................
Retained earnings (Note 9) ..........................................................................................
Unrealized gain on available-for-sale securities ............................................................
Foreign currency translation adjustments ....................................................................
Treasury stock, at cost 33,803,271 shares in 2004 and 18,319,543 shares in 2003 ...
Total stockholders' equity ........................................................................................

114,464
144,901
743,39327,273(4,935)(46,360)
978,736

114,464
144,898
705,099
2,581(3,200)(21,759)
942,083

1,079,849
1,366,991
7,013,142
257,292(46,558)(437,358)
9,233,358

Total liabilities, minority interests and stockholders' equity¥ 1,513,734¥ 1,450,027$ 14,280,509

F I N A N C I A L

S T A T E M E N T S

Financial Statements
Consolidated Statements of Stockholders' Equity

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

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2004 and 2003

2004

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.....................................................................................................

¥ 1,354,101
1,073,118
280,983
178,545
102,438

Other income (expenses) (Note 12) :Interest and dividend income.......................................................................................
Interest expenses ........................................................................................................
Equity in losses of associated companies....................................................................
Net loss on disposal of property, plant and equipment ................................................
Net gain (loss) on sales of marketable securities and investment securities..................
Loss on devaluation of investment securities ...............................................................
Payments of special retirement benefits ......................................................................
Loss on discontinued business ..................................................................................
Amortization of transitional obligation for retirement benefits (Note 8) ..........................
Issuance cost of debentures .......................................................................................
Special provision for doubtful receivables for membership rights .................................
Contribution income from restructuring of joint venture business .................................
Gain on exemption from future pension obligation of the governmental
program (Note 8).......................................................................................................
Other ..........................................................................................................................
86

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

Minority interests .........................................................................................................
Net income ..............................................................................................................

¥¥

1,309,002
1,043,456
265,546
175,665
89,881

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

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

¥

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2004 and 2003

$ 12,774,538
10,123,755
2,650,783
1,684,387
966,396

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

2,287(1,171)(1,976)(7,540)4,239(1,385)(15)(3,010)(3,886)
(255)
(86)
1,684

2,279
(1,061)(655)(7,118)(196)(30,253)(1,688)(6,033)(395)-

21,575(11,047)(18,642)(71,132)
39,991(13,066)(142)(28,396)(36,660)(2,406)(811)
15,887

6,132(4,319)(9,301)
93,137(2,517)(47,637)
42,244

57,849(40,745)(87,745)878,651

35,086
3,257
38,34354,79434,240(20,477)
13,76328,481331,000
30,726
361,726
516,925(1,823)

293(17,199)

52,971¥

28,774Yen

Net assets per common share........................................................................

2004

1,348.40

71.49
-

¥

$

Capital surplus :Balance at beginning of year .......................................................................................
Gain on sales of treasury stocks..................................................................................
Balance at end of year ................................................................................................

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 ................................................
Balance at end of year ................................................................................................

37.80
37.67

$

2003

2004

¥
¥

114,464
114,464¥¥

114,464
114,464$ 1,079,849$ 1,079,849¥

144,8983
144,901¥

144,898
144,898$ 1,366,963
28$ 1,366,991

688,491
28,774(13,668)
(199)
(119)
1,820
705,099$ 6,651,877
499,726(136,472)(1,989)$ 7,013,142

¥

¥

¥

705,099
52,971(14,466)(211)
743,393

¥

¥

¥

87

499,726

U.S. dollars (Note 3)

1,270.81

2004

DNP AR04

DNP AR04

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

2003

Thousands of
U.S. dollars (Note 3)

Millions of yen

12.72

0.67
-

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

N O T E S

T O

C O N S O L I D A T E D

F I N A N C I A L

S T A T E M E N T S

Financial Statements
Notes to Consolidated Financial Statements

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

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2004 and 2003

Cash flows from operating activities :Income before income taxes and minority interests .....................................................

2004

2003

2004

1. Basis of Presenting the Consolidated 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 of associated companies.................................................................
Amortization of consolidation 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 .............................................
Decrease (increase) in trade receivables ...................................................................
Decrease in inventories ............................................................................................
Increase in trade payables........................................................................................
Other .......................................................................................................................
Sub-total ...............................................................................................................
Payments of special retirement benefits ...................................................................
Payments of income taxes ......................................................................................
Net cash provided by operating activities .........................................................

93,137¥85,182
2,276
1,761
1,976
1,133
(2,287)
1,171(4,239)1,385
7,540(17,519)
4,085
12,24812,820200,669(15)(39,167)
161,487

42,244

89,2392,069
12,865655
369(2,279)1,061
196
30,253
7,118
38,841
3,331
1,947(6,929)220,980(1,688)(21,879)
197,413$878,651803,604
21,472
16,61318,642
10,689(21,575)
11,047(39,991)
13,066
71,132(165,274)
38,538
115,547
120,943
1,893,104(142)(369,500)
1,523,462

88

65(6,703)
50(66,684)
3,307(18,744)
11,563
2,453(20,047)(94,740)

299
(50)
3,160
(65,554)1,331(24,141)
9,409
2,279
(14,125)(87,392)

613(63,236)472(629,094)
31,198(176,830)
109,085
23,142(189,124)(893,774)

Cash flows from financing activities :Net decrease in short-term bank loans........................................................................
Proceeds from long-term debt ....................................................................................
Repayments of long-term debt....................................................................................
Proceeds from issuance of unsecured debentures ......................................................
Redemption of convertible debentures ........................................................................
Interest paid ................................................................................................................
Dividend paid ..............................................................................................................
Payments for purchases of treasury stocks .................................................................
Other ..........................................................................................................................
Net cash used in financing activities ....................................................................

(1,275)
5,100(6,731)49,745(29,663)(1,156)(14,823)(26,135)
694(24,244)(1,349)6,000(11,289)(19,181)(1,165)(14,108)(21,694)656(62,130)(12,028)
48,113(63,500)
469,292(279,840)(10,906)(139,839)(246,556)
6,547(228,717)

Effect of exchange rate changes on cash and cash equivalents ..............................
Net increase in cash and cash equivalents ..........................................................

(2,031)40,472(645)
47,246(19,160)
381,811

Cash and cash equivalents at beginning of year .......................................................
Cash and cash equivalents of newly consolidated subsidiaries ...............................
Cash and cash equivalents at end of year .................................................................

238,896
279,368

189,615
2,035
238,896

2,253,736$ 2,635,547¥¥

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.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements filedwith the Financial Services Agency of Japan as required by the Securities and Exchange Law of Japan. Certain
reclassifications of accounts and modifications have been made in the accompanying consolidated financial statements tofacilitate understanding by readers outside Japan. Certain reclassifications have also been made in the 2003 financial
statements to conform 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 acceptedin 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 sixteen subsidiaries
whose fiscal years end December 31. Significant transactions between December 31 and March 31 are reflected in the
consolidated financial statements.
Investments in non-consolidated subsidiaries are stated at cost and, for valuation of such investments, the equity method
has not been applied since these investments are considered immaterial in the aggregate. However, investments 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).
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.
Cash and cash equivalents
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.

89
DNP AR04

DNP AR04

Cash flows from investing activities :Net decrease in 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..................................................................

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

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2004 and 2003

N O T E S

T O

C O N S O L I D A T E D

F I N A N C I A L

Inventories

Accounting for leases

Inventories are stated at cost which is determined substantially by the average method.

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.

S T A T E M E N T S

Marketable securities and investment securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows:i) heldto-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity,
are reported at amortized cost and ii) available-for-sale securities are reported at fair value, with unrealized gains and losses,
net of applicable taxes, reported in a separate component of stockholders’ equity.

Income taxes

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.

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 the current Japanese tax laws.

Property, plant and equipment and depreciation

Derivatives and hedging activities

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.

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.

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
90

3 to 50 years

Machinery and equipment 2 to 13 years

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 accounting 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

Net assets per common share were computed based on the number of shares outstanding after deducting treasury stock at
March 31, 2004 and 2003, respectively.

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 five years.

Primary amounts of net income per share were computed on the average number of shares of common stock outstanding
after deducting treasury stocks during each year. Fully diluted amounts of net income per share were based on theassumption 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 five 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.
Research and development expenses
Research and development expenses are charged to income as incurred.

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 ¥106 =U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange
Market at March 31, 2004. 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.

91
DNP AR04

DNP AR04

Assets with an acquisition cost of ¥100,000 ($943) or more per unit and less than ¥200,000 ($1,887) per unit, acquired on
or after 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.

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.

N O T E S

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2004 and 2003 were comprised of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

Cash and cash equivalents(excluding time deposits with a maturity over three months)..................................

¥

2003

279,368¥

238,8962004$ 2,635,547

T O

C O N S O L I D A T E DMillions of yen

March 31, 2004

Due in one year or lessGovernment bonds.............................................................................................
Corporate bonds ................................................................................................
Other bonds .......................................................................................................

¥

6,699
6
1
6,706

¥

¥

Due in one year or less

The acquisition cost and aggregate fair value of marketable and investment securities classified as available-for-sale securities
as of March 31, 2004 and 2003 were as follows:
Millions of yen
March 31, 2004

Acquisition cost¥¥

54,713
20,90375,616

Unrealized gain¥¥

47,76331
47,794

Unrealized loss

¥

1,591
1,591

¥

Fair value¥¥

Government bonds.............................................................................................
Corporate bonds ................................................................................................
Other bonds .......................................................................................................

Thousands of U.S. dollars (Note 3)
Acquisition cost$$

516,160
197,198
713,358

Unrealized gain$$

450,594293
450,887

Unrealized loss$

15,00915,009$Fair value

14,17016
14,186

Due after five years
through ten years

¥

3,000
3,000

¥

¥
¥

59,187
109
59,296

Unrealized gain¥¥

11,675
11,675

¥

7,314
7,314

Fair value¥¥

63,548109
63,657

Thousands of
U.S. dollars (Note 3)

Millions of yen

Available-for-sale securitiesNon-listed equity securities ..................................................................................
Others .................................................................................................................

¥

¥

3,000
23

26,361
16

2003

¥

¥

$

28,30228,302$

Corporate bonds ................................................................................................
Other bonds .......................................................................................................

¥

50
50

¥

Due after one year
through five years

¥

82
1
83

¥

Due after five years
through ten years

¥
¥

5,000
5,000

93

5,000
51

24,251
97

Inventories at March 31, 2004 and 2003 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

Finished products ...................................................................................................
Work in process......................................................................................................
Raw materials .........................................................................................................

¥

¥

2003

31,171
25,63013,191
69,992¥¥

2004

35,101
26,283
13,31874,702$$

294,066
241,793
124,443
660,302

7. Short-term Bank Loans and Long-term Debt

The following summarizes carrying amounts of securities with no fair value as of March 31, 2004 and 2003:

Held-to-maturity debt securitiesNon-listed foreign securities .................................................................................
Others .................................................................................................................

$

133,679
151
133,830

6. Inventories

The proceeds from sales of available-for-sale securities for the years ended March 31, 2004 and 2003 were ¥9,433 million($88,991 thousand) and ¥138 million, respectively. The gross realized gains on these sales for the years ended March 31,
2004 and 2003 were ¥4,707 million ($44,406 thousand) and ¥50 million, respectively, and the gross realized losses on thesesales for the years ended March 31, 2004 and 2003 were ¥433 million ($4,085 thousand) and ¥97 million, respectively.

2004

$

Due after five years
through ten years

Millions of yen

951,745
197,491$ 1,149,236

Unrealized loss¥

Due after one year
through five years

2004

$

$

Short-term bank loans at March 31, 2004 and 2003 were represented by bank loans and bank overdrafts, etc. bearing
interest at an average rate of 2.18 % per annum for 2004 and 2.73% per annum for 2003.
Long-term debt at March 31, 2004 and 2003 consisted of the following:Yen

28,302
217

248,689
151

Conversion priceUnsecured convertible debentures
1.8% due 2004 ..........................................................................

¥

2,677.40

Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

¥

Unsecured debentures
1.67% due 2014 ........................................................................
Mortgage loans, maturing 2004-2007 ..........................................
Unsecured loans, maturing 2004-2010 ........................................
Current portion of long-term debt...............................................
¥

2003

-

¥

2004

29,663$-50,000-471,698

1,303
12,072
63,375(4,033)59,342

2,310
12,79744,770(36,070)
8,700

12,292
113,887
597,877(38,047)
559,830¥$

DNP AR04

DNP AR04

Stocks ........................................................................................
Others ........................................................................................
Total ........................................................................................

Acquisition cost

63,19857
963,264Due in one year or less$Millions of yen

March 31, 2003$$

100,885
20,934
121,819

March 31, 2003

92

Due after one year
through five years

Thousands of U.S.dollars (Note 3)

5. Marketable Securities and Investment Securities

Stocks ........................................................................................
Others ........................................................................................
Total ........................................................................................

S T A T E M E N T S

The redemption schedules for securities with maturities classified as held-to-maturity debt securities and other securities at
March 31, 2004 and 2003 are as follows:¥

Stocks ........................................................................................
Others ........................................................................................
Total ........................................................................................

F I N A N C I A L

N O T E S

The aggregate annual maturities of long-term debt after March 31, 2004 were as follows:
Thousands of
U.S. dollars (Note 3)

Year ending March 31
¥

¥

4,033
3,876
3,063
1,538
640
50,22563,375$$38,04736,56628,896
14,5096,038
473,821597,877

In accordance with the Defined Benefit Pension Plan Law enacted in April 2002, the Company and the subsidiary applied foran exemption from obligation to pay benefits for future employee services related to the substitutional portion which would
result in the transfer of the pension obligations and related assets to the government upon approval. The Company and thesubsidiary obtained approval for exemption from the future obligation by the Ministry of Health, Labor and Welfare on June 1,
2003 and January 30, 2003 respectively and recognized a gain on exemption from the future pension obligation of thegovernmental program in the amount of ¥6,132 million ($57,849 thousand) for the year ended March 31, 2004. The
substitutional portion of the plan assets which will be transferred to the government in the subsequent year is measured to bea approximately ¥58,161 million ($548,689 thousand) as at March 31, 2004.
The liability for employees’ retirement benefits at March 31, 2004 and 2003 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

¥

¥

132,256(54,565)(3,522)(14,596)
59,573

2003¥¥

229,674(93,528)(12,068)(69,677)
3,392
19
57,812

S T A T E M E N T S

Service cost............................................................................................................
Interest cost............................................................................................................
Expected return on plan assets...............................................................................
Amortization of transitional projected benefits obligation .........................................
Actuarial loss ..........................................................................................................
Amortization of prior service cost ...........................................................................
Net periodic benefits costs .....................................................................................
Gain on exemption from future pension obligation of the governmental program.....
Total .....................................................................................................................

¥

¥

6,659
3,134
(803)
3,886
7,026
(141)
19,761(6,132)
13,6292004$ 1,247,698(514,764)(33,227)(137,698)$
562,009

2003

¥

¥

8,062
5,866
(2,507)
6,033
7,825
(848)
24,431
24,431

2004$

62,821
29,566(7,575)36,66066,283(1,330)186,425(57,849)
128,576$

Assumptions used for the years ended March 31, 2004 and 2003 were set forth as follows:
2004

2003

2.5%
2.0%
11 years
5 years
6 years

2.5%
2.9%
11 years
5 years
6 years95

9. Stockholders’ Equity
Japanese companies are subject to the Japanese Commercial Code (the ‘‘Code’’) to which various amendments havebecome effective since October 1, 2001.
The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded with no parvalue and at least 50% of the issue price of new shares is required to be recorded as common stock and the remaining net
proceeds as additional paid-in capital, which is included in capital surplus. The Code permits Japanese companies, upon
approval of the Board of Directors, to issue shares to existing stockholders without consideration as a stock split. Suchissuance of shares generally does not give rise to changes within the stockholders’ accounts.
The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends andcertain other appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriatedas a legal reserve (a component of retained earnings) until such reserve and additional paid-in capital equals 25% of common
stock. The amount of total additional paid-in capital and legal reserve that exceeds 25% of the common stock may beavailable for dividends by resolution of the stockholders. In addition, the Code permits the transfer of a portion of additional
paid-in capital and legal reserve to the common stock by resolution of the Board of Directors.
The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies torepurchase treasury stock by a resolution of the stockholders at the general stockholders meeting and dispose of suchtreasury stock by resolution of the Board of Directors beginning April 1, 2002. The repurchased amount of treasury stockcannot exceed the amount available for future dividend plus amount of common stock, additional paid-in capital or legal
reserve to be reduced in the case where such reduction was resolved at the general stockholders meeting.
The amount of retained earnings available for dividends under the Code was ¥551,206 million ($5,200,057 thousand) as ofMarch 31, 2004, based on the amount recorded in the parent company’s general books of account. In addition to theprovision that requires an appropriation for a legal reserve in connection with the cash payment, the Code imposes certain
limitations on the amount of retained earnings available for dividends.
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.

DNP AR04

DNP AR04

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 Insurance Law and includes a substitutional portion of thegovernmental pension program managed by the Company and the subsidiary on behalf of the government and a corporate
portion established at the discretion of the Company and the subsidiary.

Projected benefits obligation ...................................................................................
Fair value of plan assets..........................................................................................
Unrecognized transitional obligation........................................................................
Unrecognized actuarial loss ....................................................................................
Unrecognized prior service cost ..............................................................................
Prepaid pension cost ..............................................................................................
Net liability ..............................................................................................................

2004

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.........................................................................................

8. Retirement Benefits

94

F I N A N C I A L

Thousands of
U.S. dollars (Note 3)

Millions of yen

With minor exceptions, interest rates on mortgage loans ranged from 0.89% to 2.54% per annum for 2004 and from 0.88%
to 3.30% per annum for 2003, while interest rates on unsecured loans ranged from 0.58% to 2.18% per annum for 2004 andfrom 0.35% to 4.15% per annum for 2003.

2005 ...........................................................................................................................................
2006 ...........................................................................................................................................
2007 ...........................................................................................................................................
2008 ...........................................................................................................................................
2009 ...........................................................................................................................................
2010 and thereafter ....................................................................................................................

C O N S O L I D A T E D

The components of net periodic benefits costs were as follows:Mortgage loans were secured by property, plant and equipment amounting to ¥1,681 million ($15,858 thousand) and¥1,732 million at March 31, 2004 and 2003, respectively.

Millions of yen

T O

N O T E S

Cash dividends and appropriations to legal reserve charged to retained earnings during the years ended March 31, 2004
and 2003 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 ¥11.50 ($0.11) per share, aggregating ¥8,353
million ($78,802 thousand) and the related appropriation to legal reserve of the Company, which were approved at the generalstockholders’ meeting held in June 2004 with respect to the year ended March 31, 2004.

Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2004 and 2003 weresummarized as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

¥

2003

8,437
1,391
3,986
8,433
457
2,898
1,646
11,517

¥

7,271
5,859
4,133
8,390
366
4,216
1,621
6,965

2004

$

79,594
13,12337,60479,557
4,311
27,34015,528
108,651

96

S T A T E M E N T S

13. Income Taxes
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 42.0% for the years ended March 31, 2004 and2003.
On March 31, 2003, a tax reform law concerning enterprise tax was enacted in Japan which changed the normal effective
statutory tax rate from 42.0% to 40.7%, effective for years beginning on or after April 1, 2004.

¥

¥

2003

16,830381
40,737
8,851
5,464
7,575
10,91923,80963,979178,545¥¥

15,946990
43,337
9,728
4,766
8,864
11,691
20,66459,679175,665

2004

158,774
3,594
384,31183,50051,547
71,462103,009
224,613603,577$ 1,684,387

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

207
1,048

2003

¥

Normal effective statutory tax rate .............................................................................................................................
Expenses not deductible for income tax purposes .................................................................................................
Valuation allowance for operating losses of subsidiaries-net...................................................................................
Other .....................................................................................................................................................................
Actual effective tax rate .............................................................................................................................................

2004

227
1,223

Prepaid expenses and other current assets ............................................................
Other assets ...........................................................................................................

$

12. Other Income

¥

2003

Millions of yen

Total research and development expenses (including manufacturing costs) amounted to ¥26,050 million ($245,755 thousand)and ¥24,097 million for 2004 and 2003, respectively.

2004

No reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate for the year
ended March 31, 2004 was shown because the difference was less than five percent of the statutory tax rate, although thedifference for 2003 was shown as follows:

Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

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.

2004

$

42.0%
1.7
(13.7)
2.6
32.6%

1,953
9,887

Other current and long-term liabilities......................................................................

¥

U.S. dollars (Note 3)

2003

¥

12,262
25,38137,643

¥

277

¥

2004

$

¥

9,891
47,98957,880$115,679
239,443
355,122

¥

267

$

2,613

Significant components of deferred tax assets at March 31, 2004 and 2003 were as follows :Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

Current:
Excess provision for doubtful receivables .............................................................
Loss on devaluation of inventories........................................................................
Accrued bonuses.................................................................................................
Enterprise tax payable..........................................................................................
Other ...................................................................................................................
Total.................................................................................................................
Non-current:
Excess provision for retirement benefits ...............................................................
Loss on devaluation of investment securities ........................................................
Other ...................................................................................................................
Total.................................................................................................................

¥

¥

¥

¥

2003

1,293
644
5,407
1,804
3,114
12,262¥

23,99821,195(19,812)25,381

¥

¥

¥

2004

960
1,227
4,228
1,552
1,924
9,891

$

22,14524,677
1,167
47,989$$$12,1986,075
51,00917,01929,378
115,679

226,396
199,953(186,906)
239,44397
DNP AR04

DNP AR04

Selling, general and administrative expenses for the years ended March 31, 2004 and 2003 consisted of the following:

Interest and dividend income ..................................................................................
Leasing fees ...........................................................................................................

F I N A N C I A L

Net deferred tax assets and liabilities at March 31, 2004 and 2003, resulting from temporary differences between the
carrying amounts and the tax bases of assets and liabilities, were reflected on the accompanying consolidated balance sheets
under the following captions:Thousands of

11. Selling, General and Administrative Expenses

Transportation expenses.........................................................................................
Provision for doubtful receivables............................................................................
Salaries and allowances..........................................................................................
Bonuses paid..........................................................................................................
Accrued bonuses....................................................................................................
Provision for retirement benefits ..............................................................................
Depreciation ...........................................................................................................
Research and development expenses ....................................................................
Other ......................................................................................................................

C O N S O L I D A T E D

The deferred tax assets and liabilities which will realize on or after April 1, 2004 are measured at the effective tax rate of 40.7%
as at March 31, 2004.

10. Accounts with Non-consolidated Subsidiaries and Associated Companies

Trade receivables....................................................................................................
Other current assets ...............................................................................................
Investment securities (stock) ...................................................................................
Long-term loans .....................................................................................................
Other investments...................................................................................................
Trade payables .......................................................................................................
Accrued expenses ..................................................................................................
Other current liabilities.............................................................................................

T O

N O T E S

T O

C O N S O L I D A T E D

F I N A N C I A L

S T A T E M E N T S

14. Leases
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.
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 of
U.S. dollars (Note 3)

Millions of yen

2004

2003

2004

Fair value of Derivative Financial Instruments:
The contracted amount and fair value of derivatives for foreign currency forward contracts at March 31, 2004 and 2003 wereas follows:
Millions of yen

2004
Receivables:
U.S.dollars .............................................................................................................
Euro.......................................................................................................................

Contracted amount¥¥

Acquisition cost ......................................................................................................
Accumulated depreciation ......................................................................................
Net book value .......................................................................................................

¥¥

39,297(22,002)
17,295¥¥43,181(23,289)
19,892$$

370,726(207,566)
163,160

Lease expenses on finance lease contracts without ownership-transfer amounted to ¥10,759 million ($101,500 thousand)and ¥12,391 million for the years ended March 31, 2004 and 2003, respectively.

11,756463
12,219Fair value¥¥

Thousands of
U.S. dollars (Note 3)

2004

98

Future lease payments:
One year or less ..................................................................................................
More than one year .............................................................................................

¥

7,086
10,20917,295¥¥

7,977
11,91519,892

2004$$

The amounts of outstanding future payments under operating leases due on March 31, 2004 and 2003 were also
summarized as follows:
Millions of yen

2004

Future lease payments:
One year or less ..................................................................................................
More than one year .............................................................................................

¥
¥

579
1,155
1,734

Thousands of
U.S. dollars (Note 3)

2003

¥
¥

371
1,430
1,801

66,84996,311
163,160

2004

$
$

5,462
10,896
16,358

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.
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.

169
8
177

¥

2004
Receivables:
U.S.dollars .............................................................................................................
Euro.......................................................................................................................

$$

110,906
4,368
115,274

Fair value$$

109,311
4,292
113,603

Unrealized gain

$
$

1,594
75
1,669

Millions of yen

2003
Receivables:
U.S.dollars .............................................................................................................
Euro.......................................................................................................................

Contracted amount¥

Payables:U.S.dollars .............................................................................................................
¥

11,12912

Fair value¥(35)
11,106 ¥11,22413

Unrealized gain

¥

95
1

(35)
11,202 ¥96

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, 2004 and 2003 and were assigned to theassociated assets and liabilities or deferred until completion of the forecasted transactions were excluded from disclosure of
the above fair value information.

16. Contingent Liabilities
The Company was guarantor of bank loans of an other company, amounting to approximately ¥90 million ($849 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, 2004 and 2003, the Company
and its consolidated subsidiaries were contingently liable on trade notes discounted in the amount of ¥1,150 million ($10,849
thousand) and ¥1,400 million, respectively. Notes discounted were accounted for as sales.

99
DNP AR04

DNP AR04

¥

2003

¥

Thousands of U.S. dollars (Note 3)

Contracted amountThe amounts of outstanding future payments under finance leases due on March 31, 2004 and 2003, including the portionof interest thereon, were summarized as follows:
Millions of yen

11,587455
12,042

Unrealized gain

N O T E S

17. Business Segment InformationT O

C O N S O L I D A T E D

F I N A N C I A L

S T A T E M E N T S

Information by geographic area:

Industry segments:

The Company's primary business industries principally consist of Printing and Beverage operations. The Printing businessincludes three segments : Information Communication, Lifestyle and Industrial Supplies, and Electronics.
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, 2004 and 2003 and for theyears then ended.

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, 2004 and 2003.
Overseas sales:
Overseas sales of the Company and its consolidated subsidiaries for the years ended March 31, 2004 and 2003.
Thousands of
U.S. dollars (Note 3)

Millions of yen

Millions of yen

2004

Printing

For 2004:

Information
Lifestyle andCommunication Industrial Supplies

Net sales:
Outside customers ...................... ¥Inter-segment ..............................
Total .......................................
Costs and expenses .......................
Operating income ................... ¥622,466
7,350
629,816
586,147
43,669¥Assets, depreciation and capital
expenditures:
Assets ........................................ ¥Depreciation ................................ ¥Capital expenditures .................... ¥489,455
22,19913,726

Electronics¥¥

425,523543
426,066
393,623
32,443¥¥¥

395,580
24,154
19,777

Beverages

Total

Elimination and/or corporate¥¥

236,40224
236,426
203,399
33,027¥

69,710 ¥ 1,354,101 ¥
7,917
69,7101,362,018
70,082
1,253,251(372) ¥ 108,767 ¥¥¥¥291,353
33,056
31,578¥¥¥46,782
4,330
4,176¥ 1,223,170 ¥¥
83,739 ¥¥69,257 ¥Consolidated- ¥ 1,354,101(7,917)(7,917)
1,354,101(1,588)1,251,663(6,329) ¥ 102,438

290,5641,443
577¥ 1,513,734¥
85,182¥
69,834

Elimination and/or corporate

Consolidated

Overseas sales
Consolidated net sales
Ratio(a) .....................................................................
(b).....................................................................
(a)/(b) ................................................................

¥

2003

2004

201,368¥ 183,996$ 1,899,698
1,354,101
1,309,002
12,774,538
14.9%
14.1%
14.9%

Thousands of U.S. dollars (Note 3)

Printing
Information
Lifestyle andCommunication Industrial Supplies

100

Electronics

Beverages

Total$ 4,014,368
5,123
4,019,491
3,713,425$ 306,066$ 2,230,208
226
2,230,434
1,918,858$ 311,576$$

657,641 $ 12,774,538 $
74,689657,641
12,849,227
661,151
11,823,123(3,510) $ 1,026,104 $Assets, depreciation and capital
expenditures:
Assets ........................................ $ 4,617,500
Depreciation ................................ $ 209,425
Capital expenditures .................... $ 129,491$ 3,731,887$ 227,868$ 186,575$ 2,748,613$ 311,849$ 297,906$$$

441,340
40,84939,396- $12,774,538(74,689)(74,689) 12,774,538(14,981) 11,808,142(59,708) $ 966,396$ 11,539,340 $ 2,741,169$
789,991 $
13,613$653,368 $5,443$14,280,509$ 803,604$ 658,811

Millions of yen

Printing

For 2003:

Information
Lifestyle andCommunication Industrial Supplies

Net sales:
Outside customers ...................... ¥Inter-segment ..............................
Total .......................................
Costs and expenses ....................
Operating income ................... ¥611,754
8,170
619,924
579,851
40,073¥

Assets, depreciation and capital
expenditures:
Assets ........................................ ¥Depreciation ................................ ¥Capital expenditures .................... ¥484,957
24,173
16,941

Electronics¥¥

417,2772,890
420,167
391,572
28,595¥¥¥

382,773
26,333
17,170Beverages¥¥

208,138
242
208,380
180,063
28,317¥¥¥

270,647
32,94030,575

Total

Elimination and/or corporate

Consolidated¥¥

71,833 ¥ 1,309,002
2
11,304
71,835
1,320,306
72,001
1,223,487(166) ¥
96,819¥- ¥ 1,309,002(11,304)
1,309,002(11,304)
1,219,121(4,366)89,881(6,938) ¥¥¥¥53,990
3,707
7,172

¥
¥
¥

257,660
2,086
1,931

¥ 1,192,367¥
87,153¥71,858¥ 1,450,027¥
89,239¥73,789DNP AR04

DNP AR04

Net sales:
Outside customers ...................... $ 5,872,321
Inter-segment ..............................
69,340Total ....................................... 5,941,661
Costs and expenses .................... 5,529,689
Operating income ................... $ 411,972

101

Subsidiaries and Affiliates

Report of Independent Certified Public Accountants

We have audited the accompanying consolidated balance sheets (expressed in Japanese yen) of Dai Nippon Printing Co.,
Ltd. and consolidated subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of income,stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements basedon our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Dai Nippon Printing Co., Ltd. and consolidated subsidiaries at March 31, 2004 and 2003, and the results of theiroperations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.

102

Capital
Ownership ratio(Millions of yen)(%)

Printing

To the Board of Directors of
Dai Nippon Printing Co., Ltd.

Photoengraving, printing, bookbinding and production related to packaging
Photoengraving, printing, bookbinding and production related to packaging
Photoengraving, printing, bookbinding and production related to packaging
Photoengraving, printing, bookbinding and production related to packaging
Photoengraving, printing, bookbinding and production related to packaging

93
82
120
380
50

99.5
99.7
100.0
100.0
97.0

200
200
100
100
80
80
80
50
40
(S$1,000)
3,892

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Planning, production, photoengraving and bookbinding
Printing and bookbinding
Planning, production, photoengraving and machine plate activities
Photoengraving, printing and bookbinding
Warehousing and packing of commercial printings

200
100
100
100
50

100.0
100.0
100.0
100.0
100.0

Production and sales of plastic cards with magnetic stripes, IC chips and others
Production of business forms and plastic cards
Photoengraving and machine plate activities
Sales of security related software and products
Enclosing, sealing, and logistics for business forms related products

100
100
80
25
20

100.0
100.0
100.0
100.0
100.0

Marketing system planning and operations for Internet advertisements
Planning, producing and sales of art objects and contents
Planning, production, editing and sales of movies
Planning and production of digital media contents
Planning and designing shops, exhibition booths and other commercial spaces
Sales of Maison des Musées de France art products
Planning and production of corporate hisotory archives
Procurement and sales of art objects
Consultation for the privacy protection
Consultation for the customer relationship management

1,796
100
100
100
100
60
50
50
40
30

83.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
92.5
95.0

Photoengraving and production of packaging
Production and processing of composite resins
Photoengraving and production of packaging
Photoengraving and production of packaging
Photoengraving and production of packaging
Production of laminated tubes
Sales and consultation of aseptic systems for beverages
Molding, processing and printing of plastic containers
Molding and processing of paper containers
Filling and processing of packages
Production and sales of packaging

430
380
300
200
200
200
100
100
80
80
($1,000)
26,000

100.0
100.0
100.0
100.0
100.0
90.0
100.0
100.0
100.0
100.0
51.0

Printing and processing of steel and other metal plates
Photoengraving, printing and processing

300
200

50.0
100.0

100
(US$1000)
20,000(Euro1,000)
3,040(Euro 1,000)
300

100.0
(100.0)100.0■Information Communication
Books and Periodicals
Dai Nippon Offset Co., Ltd.
Dai Nippon Seihon Co., Ltd.
Dai Nippon Total Process Ichigaya Co., Ltd.
Dai Nippon Total Process Maebashi Co., Ltd.
Dai Nippon Art Co., Ltd.
Dai Nippon Techtas Ichigaya Co., Ltd.
Dai Nippon Uni Process Co., Ltd.
Dai Nippon Total Process Nagaoka Co., Ltd.
DNP Butsuryu Systems Ichigaya Co., Ltd.
Tien Wah Press (Pte.) Ltd.

Offset printing
Bookbinding
Photoengraving
Photoengraving
Production of drafts for photoengraving
Bookbinding
Photoengraving
Photoengraving
Warehousing and packing of books and magasines
Photoengraving, printing and bookbinding

Commercial Printing
DNP Media Create Kansai Co., Ltd.
DNP Graphica Co., Ltd.
DNP Media Create Co., Ltd.
Multi Print Co., Ltd.
DNP Butsuryu Systems Shouin Co., Ltd.

Business Forms
DNP Data Techno Co., Ltd.
DNP Data Techno Kansai Co., Ltd.
Dai Nippon Total Process BF Co., Ltd.
NexantiS Corporation
DNP Techtas BF Co., Ltd.

Others
MyPoint.com Japan Co., Ltd.
DNP Archives.Com Co., Ltd.
DNP AV Center Co., Ltd.
DNP Digitalcom Co., Ltd.
DNP Space Design Co., Ltd.
Maison de DNP Ginza
DNP Corporate History Center Co., Ltd.
Trans Art Inc.
CP Design Consulting Co., Ltd.
M’s Communicate Co., Ltd.

Tokyo, Japan
June 29, 2004

■Lifestyle and Industrial Supplies
Packaging

MEIJI AUDIT CORPORATIONDNP Technopack Tokai Co., Ltd.
Dainippon Jushi Co., Ltd.
Dai Nippon Printing Technopack Co., Ltd.
Dai Nippon Printing Technopack Kansai Co., Ltd.
Dai Nippon Printing Technopack Yokohama Co., Ltd.
Sagami Yoki Co., Ltd.
Aseptic Systems Co., Ltd.
Dai Nippon Polymer Co., Ltd.
Dai Nippon Cup Co., Ltd.
Dai Nippon Hoso Co., Ltd.
PT DNP Indonesia

Decorative Materials
Dai Nippon Ellio Co., Ltd.
Dai Nippon Printing Kenzai Co., Ltd.

Industrial Supplies
I.M.S. Dai Nippon Co., Ltd.
DNP IMS America Corporation

Printing of TTRs and ST materials
Processing of TTR barcode and facsimile ribbons

Compagnie de Découpe de l’Ouest - CDO SAS

Small-roll processing of ink-ribbons for facsimiles

DNP IMS France SAS

Sales of TTR barcode and facsimile ribbons

23.4
100.0

103
DNP AR04

DNP AR04

Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 3. Such U.S. dollar amounts are presented solely for theconvenience of readers outside Japan.

Hokkaido Dai Nippon Printing Co., Ltd.
Tohoku Dai Nippon Printing Co., Ltd.
Tokai Dai Nippon Printing Co., Ltd.
Kyushu Dai Nippon Printing Co., Ltd.
Shikoku Dai Nippon Printing Co., Ltd.

Investor Information(as of March 31, 2004)

Capital
Ownership ratio(Millions of yen)(%)

■Electronics
Displays
Advanced Colortech, Inc
DAP Technolgy Co., Ltd.
Dai Nippon Printing Precision Device Co., Ltd.
DNP Electronics America, LLC

Production and sales of color filters for LCDs
Production and sales of PDP back plates
Production of high-precision components
Manufacturing and sales of projection screens

DNP Denmark A/S

Manufacturing and sales of projection screens

Dai Nippon Printing Co., Ltd.
Head Office:Stock Exchange Listings:

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

Tokyo, Osaka, Nagoya, Luxembourg, Amsterdam

5,000
3,000
400
(US$1,000)
15,045(Dkr1,000)
135,000

80.0
50.0
100.0
(100.0)
100.0

862
490
300
100
40
(Euro1,000)
47,200

85.8
65.0
100.0
100.0
100.0

Number of Employees:

Paid-in Capital:

The annual meeting of shareholders of DNP is normally held in June

80.6

¥114,464 million

each year in Tokyo, Japan

2,000
626
100
100
100
96
80
60
30
20

83.3
100.0
100.0
100.0
94.3
55.0
100.0
48.3
100.0
100.0

Number of Common Stocks:

Investor Relations:

Authorized

1,200,000,000 shares

Dai Nippon Printing Co., Ltd.

759,480,693 sharesPress and Public Relations

250
200
100
90
33

100.0
99.6
100.0
100.0
88.8

(US$1,000)$100(US$1,000)$34,806(US$1,000)$100(NT1,000)
10,000(Euro1,000)
92(GBP1,000)
120(A$1,000)
70(S$1,000)
350(Krw1,000)
500,000(100.0)100.0(12.8)
100.0(100.0)
100.0
100.0

100.0

Tokyo 162-8001, Japan
Transfer Agent:
Established:

Mizuho Trust & Banking Co., Ltd.

1876

2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan

Electronic Devices
D.T.Circuit Technology Co., Ltd.
DT Fine Electronics Co., Ltd.
Dai Nippon Printing Fine Electronics Co., Ltd.
Dai Nippon LSI Design Co., Ltd.
Dai Nippon Micro Technica Co., Ltd.
DNP Photomask Europe S.p.A.

Development and production of semiconductor related components
Production and sales of semiconductor related components
Production of high-precision components
Logical circuit designs for ICs and LSIs and layout designs
Inspection and packing of semiconductor components
Manufacturing and sales of photomasks

Phone: +813-5213-5213

34,514
Annual Meeting of Shareholders:■Others
The Inctec Inc.
DNP Logistics Co., Ltd.
D.N.K Co., Ltd.
DNP Information Systems Co., Ltd.
DNP Trading Co., Ltd.
Direc Co., Ltd.
SP Dai Nippon Co., Ltd.
Kyoiku Shuppan Co., Ltd.
Dai Nippon Printing Accounting System Co., Ltd.
DNP Techno Research Co., Ltd.

Production and sales of ink, varnish, pigments and dyes
Packaging, shipping operations and warehouse management
Manufacturing and sales of printing equipment and machine tools
Planning, designing, development, management, and operation of information systems
Sales of paper and other products
Sales of publishing and educational equipment
Planning and production of promotional materials
Publishing
Accounting and consulting services
Studies related to patents and the preparation of contracts

Issued1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku,
Number of Shareholders:(more than 1,000 shares)

Tokyo 162-8001, Japan
Phone:+813-5225-8220

25,115

Facsimile:+813-5225-8239

E-mail:info@mail.dnp.co.jp■Personnel Welfare, Facility Service, and Others
104

Real estate sales
Management of leisure facilities
Management and operations of buildings and welfare facilities
Planning, management and data processing activities related to personnel plans
Management of golf courses■Overseas Sales
DNP America, LLC

Sales of printing solutions, electronic components and decorative materials

DNP Corporation USA

Holding company

DNP Holding USA Corporation

Holding company

DNP Taiwan Co.,Ltd.

Sales of displays and semiconductor components

DNP Europa GmbH

Sales of displays, semiconductor components and decorative materials

DNP UK Co.,Ltd.

Sales of decorative materials

Dai Nippon Printing Co. (Australia) Pty.Ltd.

Sales of printing solutions

DNP Singapore Pte.Ltd.

Sales of displays, semiconductor components and decorative materials

DNP Korea Co.,Ltd.

Sales of displays and semiconductor components

105

Major Shareholders:(non-consolidated)
The Master Trust Bank of Japan, Ltd.

6.90%

Japan Trustee Services Bank, Ltd.

5.49%

The Dai-Ichi Mutual Life Insurance Co.

4.56%

Mizuho Bank, Ltd.

2.97%

Nippon Life Insurance Co.

2.91%

State Street Bank and Trust Company

2.70%

The Chase Manhattan Bank, N.A. London
S.L. Omnibus Account

2.47%

100.0

Mizuho Corporate Bank, Ltd.

2.01%

100.0

Morgan Grenfell & Co., Ltd

1.66%

Mellon Bank Treaty Clients Omnibus

1.40%

DNP AR04

DNP AR04

Dai Nippon Kaihatsu Co., Ltd.
Shiobara Green Village Co., Ltd.
DNP Facility Service Co., Ltd.
DNP Human Service Co., Ltd.
Uzumine Country Club Co., Ltd.

Web Site Address:
http://www.dnp.co.jp/

100.0
100.0
100.0

Other than above, DNP holds 33,107,705 of its own shares. While theregistered owner of these shares is Dai Nippon Printing Co., Ltd., 1,000 of
the shares are in effect not owned by the company.

Beverages
Common Stock Price Range (Tokyo Stock Exchange)
Hokkaido Coca-Cola Bottling Co., Ltd.

Manufacturing and sales of soft drinks

2,935

(3.8)
61.4

(For the years ended March 31, 2002, 2003 and 2004)
2002

Ownership ratios (in brackets) indicate the percentage of shares owned through DNP's subsidiaries or affiliates.

2003

2004

High

Low

High

Low

High

Low

1st Quarter¥1,730¥1,420¥1,762¥1,436¥1,340¥1,007

2nd Quarter

1,503

1,090

1,660

1,227

1,678

1,266

3rd Quarter

1,412

1,147

1,469

1,125

1,745

1,339

4th Quarter

1,569

1,154

1,340

1,113

1,759

1,455