DNP
Annual Report
2007
Year ended March 31, 2007

Imprint
Im
print for Innovation
Innovation

no

tnirp

Table of Contents
2
4
12

Key Figures for 2007

14
17

DNP’s History of Imprinting and Innovation

Message to Our Shareholders
Special Feature: Imprint for Innovation
The Continually Expanding Fields in Which DNP Applies Printing
and Information Technologies

18

Division Managers’ Interviews

18
22
26
30

34
36
40
42
44
46
48
53
54

56
58

66

72

78
80
82
84
86
87
88
91
94

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

Publication Printing Business
Solutions Business
Lifestyle Materials Business
Display Components Business

20
24
28
32

Smart Card and IC Tag Business
Packaging BusinessPhoto Print BusinessElectronic Devices Business

DNP in Brief
Overview
DNP at a Glance
DNP Solutions Businesses
Major Events of the Fiscal Year Ended March 2007
Code of Conduct/DNP Group Guidelines for Conduct
Corporate Governance
Board of Directors, Statutory Auditors and Corporate Officers
Investor Information

Segment Information
Information Communication
58 Financial Results
60 Business Strategies
62 Topics
Lifestyle and Industrial Supplies
66 Financial Results
68 Business Strategies
70 Topics
Electronics
72 Financial Results
74 Business Strategies
76 Topics

Sustainable Development
Legal Compliance and Corporate Ethics
Information Security
Managing Intellectual Property
Research and Development
Product Safety
Environmental Protection
Creating Lively Workplaces
Contributing to Society

96

Financial Section

98
108
110
115

Management’s Discussion and Analysis

127

Independent Auditors’ Report

128
134
136

Appendix: Printing Processes and Expansion Printing

Selected Financial Data
Consolidated Financial Statements
Notes to Consolidated Financial Statements

Major Subsidiaries and Affiliates
Sources of Information About DNPKey Figures for 2007

Key Figures for 2007

Consolidated Financial Highlights
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2007, 2006 and 2005

Yen in millions except per share amounts

2007

Dollars in thousands
except per share amounts% change

2007

2007/2006

2005

2006

Fiscal Year¥Net sales

1,557,802¥

1,507,506¥

1,424,943$ 13,201,712

3.3%

Operating income

96,145

120,670

120,528

814,788-20.3

Income before income taxes

98,950114,640

107,686

838,559-13.7

Net income

54,842

65,18859,937464,763-15.9

Per Share Data (in yen)¥Primary

78.10

Net income
Fully diluted
Cash dividends

¥

91.23

¥

82.56

$

0.66

-14.4%

—

—

—

—

—

32.00

26.00

24.00

0.27

23.1

At Year-end¥

Total net assets

1,099,439
1,700,250

Total assets¥

1,063,309¥

1,007,944$

1,600,129

1,662,377

9,317,280

3.4%

14,408,898

2.3

Note:
U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥118=U.S.$1, the approximate Tokyo foreign exchange market rate as of March 31, 2007.

Net Sales

Operating Income(¥ Billion)(¥ Billion)

05

06

96.1

120.7

89.9

120

120.5

140

102.4

1,557.8

1,507.5

1,354.1

1,309.0

1,500

1,424.9

2,000

100
80

1,000
60
40

500

20
0

0

03

04

05

06

07

114.6

07

(¥ Billion)

54.8

100

65.2

60

59.9

70

53.0

99.0

107.7

93.1

120

04

Net Income

Income Before Income Taxes(¥ Billion)

03

50

42.2

60

40

28.8

80

30
40
20
20

10

0

0

03

2

04

05

06

07

03

04

05

06

07

Net Income per Share

Employees by Segment(¥)(persons)

Corporate
Beverages
998
1,282

78.10

91.23

71.49

82.56

100

Electronics
4,902

80

37.80

60

Information
Communication
18,33540

Lifestyle &Industrial Supplies
12,223

20

0

03

04

05

06

07

Net Sales by Segment

Operating Income by Segment(¥ Billion)(¥ Billion)

0

100

200

300

400

500

600

700

Information
Communication

668.8

Lifestyle &Industrial Supplies

532.7

Electronics

74.1

Beverages

20

10

50

36.3

14.9

0.6

04

1,700.303

1,600.1

1,513.7

1,750

1,450.0

1,099.4

1,007.9

978.7

942.1

1,063.3(¥ Billion)

1,662.4

Total Assets(¥ Billion)

40

51.0

Lifestyle &Industrial Supplies

Beverages

Total Net Assets

30

Information
Communication

Electronics

291.9

1,200

0

06

07

1,500

1,000

1,250
800
1,000
600
750
400
500
200

250
0

0

03

04

05

06

07

05

*As of the year through March 2007,
figures show net assets instead of total stockholders’ equity

Capital Expenditures(¥ Billion)(¥ Billion)

30.1

28.7

26.1

150
125

73.8

69.8

100

03

04

20

86.1

24.1

26.4

136.1

175

40

30

162.9

Research and Development Expenditures

75
50

10

25
0

0

03

04

05

06

07

05

06

07

Includes capital expenditures for intangible fixed assets

DNP Annual Report 20073

One hundred thirty years have passed since the birth of DNP. From the beginning we have worked
at expanding our business through continuous technological innovation. That’s why DNP’s products
and services have now come to reach every corner of daily life, to the point that it is said that there isno one in Japan who doesn’t come across at least one of our products some time during each day.
At this juncture, our 130th anniversary, we have announced the start of a new era in which we aim
to achieve 2 trillion yen in net sales. The key to our success will be our strengths in printing
technolog y and information technolog y, which we refer to as P&I, the DNA of DNP, supported byour research, development, planning and manufacturing capabilities. We feel certain that the driving
force behind strong, long-term growth in the printing market will be “P&I Solutions,” which we comeup with by blending our two world-class technologies, P and I, in ways that are carefully tailored toaddress our customers’ problems.
In the fiscal year ended March 2007 and the beginning of the following year, we opened many new
facilities, including research and development facilities in addition to a P&I Solutions base and advanced
product manufacturing plants. We intend to invest all the collective strengths of the DNP Group intodeveloping outstanding products and services that our customers want, and push ahead to forge a new era.
The business environment surrounding DNP is becoming harsher than ever. This fiscal year we
posted record-high net sales for the fourth term in a row, but net profit declined for the first time infive years, largely because of a slump in the electronics division. In order to find a way out of this toughsituation, we intend to boldly embark on even more reforms to our cost and management structures.
We aim to work hard to boost DNP’s corporate value in order to meet the expectations ofshareholders and other stakeholders. In addition, we intend to continue to be a conscientious company
that fulfills its social responsibilities and is trusted by the public, and to do our utmost to achievesustainable growth while offering new value to society.

4

5

Yosh itosh i K itajima President

To Our Shareholders■

F i s c a l Ye a r R e s u l t s■

a s e s u m m a r i z e DN P ’s r e s u lt s f or t h i s f i s c a l
Q 1 Pleye a r, a n d e va lu ate t h e m a s t h e pr e s id e nt o f DN P.

Electronics

Q 2 pTahritsicf ui slcaarll yyei na r,t hsea leE les acnt rdonpricosf its es gdme ec ntl i n. e d
Ple a s e e x pl a i n t h e r e a s on s f or t h i s a n d you re x p e c t at ion s f or t h e s e g m e nt ’s f ut u r e.

We aggressively expanded smart cards and other value-added
businesses, but despite achieving a fourth consecutive year ofsales growth, profits declined due to weak ness in theElectronics segment.
Consolidated net sales increased by 3.3% over the previous
year to 1.56 trillion yen, but operating income declined by
20.3% to 96.1 billion yen and net income declined 15.9% to 54.8
billion yen.
The printing industry continued to face a tough businessenvironment. For example, increased competition pushed unit
order prices down and material costs up. Despite this situation,
we worked hard to expand value-added businesses based on our
technological strength and our ability to propose solutions, andwe succeeded in winning a larger market share and theconfidence of our customers. We feel certain that we were able
to do this because we were correct in pursuing a corporate
vision centered around the “P&I Solutions” that we have beenpromoting to date.
Of our value-added businesses, smart cards and IPS inparticular have been growing steadily year by year. We feelsatisfied with our success in meeting the increasingly diverse
needs of our customers. Sales of products such as ink ribbons
for color printers and optical films also increased sharply. As aresult, net sales in the Information Communication segment
grew by 1.0% to 668.8 billion yen, and Lifestyle & Industrial
Supplies sales increased 11.0% to 532.7 billion yen. On the other
hand, sales in the Electronics segment declined by 291.9 billion
yen, or 1.6%. Operating income in this segment slid 60.6% or
14.8 billion yen, leading to the decline in DNP’s overall results.
On the cost-cutting front, meticulous efforts such as
improving yields and shortening lead times, primarily in
manufacturing divisions, allowed us to reduce costs by a total ofroughly 23 billion yen.
(¥ Million, %)Net sales
Operating income
Operating income margin (%)
Net income
ROE (%)

6

2008.3 (est.)

2007.32006.32005.3¥1,660,000¥1,557,802¥1,507,506¥1,424,943

87,00096,145

120,670

120,5285.2%¥49,500–

6.2%¥54,8425.1%

8.0%¥65,188
6.3%

8.5%¥59,937
6.0%

The LCD (liquid crystal display) color filter market, ourmainstay, is expected to continue to expand in the future.
The slump in our Electronics segment’s performance thisfiscal year was primarily due to a downturn in display-related
products. Photomasks and other semiconductor-related
products generally did well.
The LCD color filter market, our mainstay, is expected tocontinue to grow sharply due to rapidly expanding demand fortelevisions and computer monitors. However, this fiscal term
the order price for color filters fell by an average of about 15%
due to sharp drops in liquid crystal panel prices.
A lso, in the first half of the term, panel manufacturers began
production adjustments that lasted a long time, so ordervolumes dropped suddenly and factory capacity utilization
rates fell. From the second half, order volumes picked up as the
production adjustments ended, and production stabilized. A lso
during the second half, in October 2006, we began supplying
Sharp Corp. with eighth-generation color filters using the
inkjet-based mass production technolog y that we succeeded inestablishing.
In the future, as more televisions and computers use liquid
crystal monitors, the color filter market is expected to grow.
We plan to make focused allocations of management resources
toward expanding production capacity and developing newtechnologies and new products in this area.
Our major capital investments this fiscal year included
establishing a new production line for sixth-generation color
filters in Kurosak i, Kita-Kyushu in May 2005, and aneighth-generation production line using inkjet production
technolog y, which we began operating within Sharp Corp.’s
Kameyama Plant No. 2 in October 2006. In the future, we
intend to aggressively invest in plant and equipment, including
a sixth-generation inkjet line and an eighth-generation line at
the Kurosak i plant.

■

G o a l s f o r t h e Fu t u r e

l l t h i s “ ye a r on e o f a n e w e r a” a s you a i m
Q 3 toYoub eccaome a 2 t r i l l ion -ye n c om p a n y.
Ple a s e e x pl a i n w h at you m e a n b y t h i s .

Regarding photomasks, we plan to add a production line that
can handle circuits with line widths of 45 nm at our Kyoto
plant, with startup scheduled for January 2008. In May 2008,
we plan to begin mass production of photomasks in Taiwan.
We already have a plant in Italy, so the Taiwan plant will be oursecond overseas photomask production facility. It is aimed at
expanding our market share in the Taiwan region, where
semiconductor factories are going up one after another.
We plan to make optimal use of our sophisticated technolog y inorder to expand this business. We will focus on the productionof high-end products with line widths of less than 45nm inJapan, and make general-purpose products at the new Taiwan
plant.

World’s Display-Related Production(in millions of units)

300

Liquid crystal TVs
Liquid crystal PCs
Plasma TVs

250

200

150

100

50

0

05
Source: DNP estimates

06

07

08

We intend to be a leader in the market for solution-basedvalue-added products by combining Printing technolog y andInformation technolog y.
October 2006 marked the 130th anniversary of the foundingof DNP. We view this as an important milestone, and havedesignated fiscal 2007 (through March 2008) as “year one of a
new era” in which we will aim for 2 trillion yen in sales.
During our 130-year history, we have accumulated some of
the world ’s most advanced technologies. We have continued todevelop these technologies and have cultivated personnel who
are capable of using them effectively. We have built up a wealthof valuable assets, tangible and intangible, including 30,000
corporate customers along with the rest of our stakeholders.
When we talk about starting a new era, we mean that we intend
to take a completely fresh look at our assets and use them tocreate new value.
In order to realize this, we are work ing on building new
business bases, signing a “Joint Declaration by Labor andManagement” to help us push forward to accomplish the visionthat we share with our employees, and promoting research anddevelopment. But we believe the most important thing is that
we change qualitatively.
Printing businesses generally operate by tak ing orders from
customers. If we think that our job is finished once we receive
an order and deliver it, it’s easy to fall into a passive mindset.
But it’s important that we operate more actively, as asolutions-based business that actively solves customers’
problems. From the beginning, as a custom-order business, ourtraditional way of work ing has been to exchange ideas withcustomers in order to discover their fundamental problems andwork together to find solutions. When we applied our unique
technologies related to printing and information (what we callour “DNA”) to other fields, completely new markets for highvalue-added products and services emerged, allowing us toexpand the scope of our business.
In order to further develop these new markets, we need totransform DNP into a solutions-oriented company that
proposes the most appropriate solutions through taiwa* withour customers. Ever since we clarified this stance in our 2001
“21st Century Vision,” the effects have been consistently
evident in our fiscal results. We designated 2007 as “year one ofa new era” because we want to accelerate this trend full speed.

*“Taiwa” is a process that entails identifying problems and finding solutions through the exchange of viewpoints and ideas.

DNP Annual Report 2007

7

To Our Shareholders■

F i s c a l Ye a r R e s u l t s B r i n g i n g U s C l o s e r t o o u r G o a l s

h at pr o g r e s s d id you m a k e t h i s f i s c a l ye a r
Q 4 Wtowa
rd t r a n s f or m i n g i nto a n a c t i ve,■

P& I S o l u t i o n s

r e you r e a l i z i n g you r 2 1 s t C e nt u r y Vi sion of
Q 5 A“ P&I S olut ion s ? ”

s olut ion s - or ie nte d c om p a n y?

This term we built many business bases and actively pursued
business tie-ups.

We are developing proactive policies aimed at building ourportfolio of success stories.

During the fiscal year through March 2007, we focused on“the year in which we begin to build a new history,” so we weremore active than usual in areas such as the construction ofvarious business bases and the forming of alliances. Below is alist of major examples of these activities. These newundertak ings are the concrete results of “P&I Solutions” thatwere created by blending printing and information technologies
and were supported by progress in research and development.

As we mentioned earlier, we have been promoting “P&I
Solutions” since 2001. We have had some notable successstories, but not at all as many as we would like. In order tobroaden the k inds of successes we have, we analyzed ourprevious P&I Solutions and divided them into the following
four categories:
1. Creative combination of products and services to support
customers’ business processes (Multicolor on-demandteaching materials, etc.)

Segment
Information
Communication

A lliance with RTT of Germany for production of 3-Dcomputer graphics
Established Japan’s first company specializing in in-store
advertisement development
Increased ownership share of electronic book distributor,
MobileBook.jp

2. Optimal combination of core technologies, materials andsoftware(Development, manufacture and issuance of multifunction
smart cards, etc.)

Established in-store marketing specialist, Dentsu RetailMarketing Inc.
Teamed up with RSA Security in single-use password business
A lliance with Digital Domain of Holly wood to make 3-Dcomputer graphics
Lifestyle &Industrial Supplies

3. Design of client’s business processes(Development and supply of PrintRush photo-print k iosks,
etc.)

Konica Minolta agreed to transfer to DNP its ID photobusiness, etc.
Overhauled dwelling materials business, including establishment
of DNP Lifestyle Materials Manufacturing

4. Design social basis for stimulating emergent evolution(Development and digitalization of Shueitai font, etc.)

Opened new production base for antiglare film used in thin display
Developed biomass packaging materials made of plastics
derived from vegetable matter
Established company to develop large-scale lithium-ion
batteries, by allocating new shares to a third party
Began selling first DNP brand photo-related productsElectronics

Samsung Electro-Mechanics agreed to lease rights to DNPbuild-up board manufacturing technolog yBegan supplying Sharp with inkjet-based production
technolog y for 8th-generation color filters
Joint development of leading-edge photomasks with Brion
Technologies
Added 45nm photomask mass production line at Kyoto plant（Jan 2008 startup）
NEC agreed to transfer to DNP its semiconductor photomask
business
Construction of new photomask plant in Taiwan(May 2008 startup)
Received Intel ’s “Preferred Quality Supplier” AwardDNP Group as a whole

Opened “print shop” pavilion at Kidzania Tok yo“edutainment town”
Opened P&I Solutions Base in DNP Gotanda Building
Refurbished DNP IC Tag R&D Laboratory
Opened Louvre - DNP Museum Lab with Musée du Louvre

8

The types of solutions that are starting to make major
contributions to DNP’s revenues are businesses like smart
cards, IC tags (R F ID) and IPS (information processing
services), which have the power to change customers’ businessprocesses by combining various technologies, and those like thephoto-print business, whereby we design and implement a new
business model. The fourth type requires a good deal of time tobear fruit, since it entails designing new social bases, but we are
already seeing major revenues and profits from the first three
types. We opened a “P&I Solutions Base” at the DNP Gotanda
Building that we finished building in October 2006.

■Issues and Countermeasurese x p e c t to f a c e i n t h e
Q 6 fWuthuatr ekai nn dd wo fhiats s umeesads uo ryou
e s d o you pl a n to t a k e tod e a l w it h t h e m ?

We plan to push ahead with R&D, which is the driving force
behind our business expansion, and resolve every one of theseissues.
We need to succeed at P&I Solutions in order to be able tocontinue to realize long-term, stable growth. That’s one reason
why it is vital for us to promote research and development.
We plan to direct our energies into research and development
related to Information Communication, Lifestyle & Industrial
Supplies, Electronics as well as new business fields, with a focus
on further mining our printing and information technologies,
which are already among the most advanced in the world.
This fiscal year we spent 30.1 billion yen on research anddevelopment. In the fiscal year ending March 2008, we plan toincrease that amount by 9.6% to 33.0 billion yen. We aim tobeat the competition at developing innovative new technologies
and materials, and increase our ability to develop new productsthat anticipate customers’ changing needs.
In the medium term, some of the areas where we intend toconcentrate especially are regenerative medicine, including
artificial cell-cultivation techniques using printing technolog y,and energ y-related products, including the development ofcomponents used in solar battery modules. We will also focus
on security-related businesses using authentication technolog y,and on eco-friendly products and services.
Our most pressing short-term task is getting our Electronics
segment back on track. We feel certain that we will be seeing
more growth in the markets for leading-edge photomasks andboth liquid crystal and f lat plasma displays. While keeping aclose eye on the trend toward lower prices as the market
expands, we will strive to improve our competitiveness bydeveloping technologies that allow us to improve quality while
reducing costs, and by developing new products withoutstanding functionality.

■

Protecting Personal Information

In February and March 2007, it was discovered that a
Q 7 former
employee of a subcontractor had stolen personal
information. Please explain what happened, and how
you will prevent such incidents from happening again.

We fulfilled our duty by publicly explaining what happened,
and are work ing on rebuilding trust by introducing an outside
security auditor as part of a thorough oversight systemdesigned to prevent recurrence.
With cooperation from investigating authorities, we worked
on our own to get a thorough picture of what happened and wemade that information public. In brief, personal informationthat we had received from customers in order to create direct
mail and other printed materials was stolen by a former
employee of a DNP subcontractor. Some of that information
was sold to a fraud ring running an Internet mail order business.
We are very sorry for the considerable trouble and worry that
this caused to the people whose information was sold as well as
to other related parties.
We take this matter very seriously. After doing acomprehensive inspection of our systems for managing personal
information, we took steps to prevent any recurrence, including
the involvement of an outside security auditor. We intend to
steadfastly implement these measures and take the utmost care
to protect the security of personal information. We want torebuild the trust of our trading partners and never allow
personal information to be leaked again.
In connection with this incident, we posted an extraordinary
loss this term of approximately 3.3 billion yen as compensation
for damages. Virtually all expenses related to this incident wereposted within the same fiscal year.

Measures to Prevent Leakage of Personal Information
1. Restrict access to memory storage media to a minimal
number of people, employees only
2. Take steps to prevent writing onto memory storage
media, reinforce check ing mechanisms
3. Take steps to prevent removal of memory storage media
4. Take care to maintain preventative measures, educate staff
5. Conduct information security audits by a third party(See P. 82 - 83 for details)

DNP Annual Report 2007

9

To Our Shareholders■

Returns to Shareholders■

Corporate Social Responsibilityr e you r p ol ic ie s r e g a rd i n g r e t u r n s to
Q 8 Ws h ahratehaolders?

r id e a s a b out c or p or ate
Q 9 Ls oacsital ly,r ewshpatonasri bie youl it y?

For five consecutive years we have increased dividends andactively repurchased our own shares.

DNP has been highly praised for our progressiveness in termsof CSR. We will work hard to make sure that this continues tobe the case.

We believe it is important that returns to shareholders be
stable over the long term. We think we can best fulfill
shareholders’ expectations by improving our financial results
and increasing corporate value.
In order to increase corporate value in a sustainable fashion, wemust continue to generate new value in every business in which
DNP engages. In order to achieve that, we think it is important tominimize the cost of funds through appropriate fiscal strategies,
make strategic investments in highly profitable businesses thatgenerate added value, and maximize long-term cash f low.
We are aware that in order to implement appropriate fiscal
strategies, we must exercise comprehensive management thatentails constantly maintaining a long-term perspective, allocating
funds as necessary for plant and equipment, research anddevelopment, and mergers and acquisitions, etc., as well as
maintaining a sufficiently liquid balance sheet and a strong credit
rating. Based on this awareness, this term we proceeded to disposeof some of the securities that we had been holding in order toboost the liquidity of our assets and increase capital efficiency.
At DNP, we consider returning profits to shareholders to be
an important management responsibility. DNP has increased
dividend payouts each year since the year ended March 2003. In
the fiscal year ended March 2007, we raised our cash dividends
by 6 yen per share to 32 yen, bringing the dividend payout ratio
for the term to about 41% on a consolidated basis. We increased
our cash dividends by 14 yen during the five years since the fiscal
term ended March 2002, when we paid 18 yen per share. Based on
our goal of making steady dividend payments, we consider
corporate performance, payout ratio, and other factors when
determining dividends.
Regarding repurchasing of our own shares, in the past five
years we repurchased 63,527,000 shares for 103.1 billion yen.
While keeping an eye on our funding needs and market trends,
we will continue to consider repurchasing DNP shares as part ofour commitment to returning profits to shareholders.

In the past several years, corporate social responsibility(CSR) has become an important buzzword in Japan. But even
before CSR gained so much attention, DNP always worked
proactively to fulfill its social responsibilities. We remain
constantly aware that society as a whole is a stakeholder in ourcompany, through our corporate clients and through theconsumers who are our clients’ customers. As a manufacturer,
we have been actively addressing our responsibility to preserve
the environment. Our efforts in areas like these have been
ack nowledged publicly in various ways. For example, in 2005,
we received the Grand Prize in the “Key Firm of IntegrityAward ” competition, as well as a Global Environment Award
from the Minister of the Environment. In 2006, we were ranked
third in Nik kei Inc.’s survey of the best places to work.
The basis of DNP’s sense of CSR is the value that we place on
contributing to the development of society, which is whatmakes sustainable growth possible. We feel that the first step
we must take in that direction is to aspire to be a company that
deals fairly and honestly with all its stakeholders.
Based on these ideas, DNP has already introduced outside
directors and strengthened internal controls in various ways,
starting with the establishment of a Corporate Ethics
Committee and an Open Door Room*. Through systems likethese, we want to achieve optimal utilization of management
resources, establish transparent management, and realize
long-term, sustainable growth while creating value that
contributes to society so that we can continue returning profits
to all of our stakeholders.
*See “DNP Group CSR Report 2007” for details.

Number of Shares Repurchased over the Past Five Years, and Their Monetary Value

10

F i s c a l Ye a r

Nu m b e r o f s h a r e s

A p r i l ‘ 02 - M a r c h ‘ 03

17, 0 0 0 , 0 0 0

Mi l lions of yen

A p r i l ‘ 03 - M a r c h ‘ 0 4

15 , 3 9 2 , 0 0 0

2 4 , 4 25

April ‘04 - March ‘05

10 , 47 7, 0 0 017, 8 47

April ‘05 - March ‘06

10 , 0 0 0 , 0 0 0

2 0 , 4 85

Apri l ‘06 - March ‘07

10 , 65 8 , 0 0 019, 475

Five-yea r tota l

6 3 , 52 7, 0 0 0¥ 10 3 ,14 2¥

2 0 , 910

Yoshitoshi Kitajima
President

Special Feature:

Imprint for Innovation

12

For 130 years, DNP has been making its imprint throughtechnology and creating new value through innovation.
Today, DNP starts a new history.
Shueisha, the predecessor to Dai Nippon Printing Co., Ltd., was established on theprinciple of “running a civilized business.” It was shortly after the 1868 Meiji
Restoration of political power to Japan’s Emperor, a time that was conspicuous for
progress in Japanese civilization. Throughout the 130 years since then, we have kept
this “aspiration to contribute to the development of society” imprinted in our hearts,
where it remains to this day.
During this time, DNP refined its printing and information technologies toworld-class levels and dramatically expanded the range of fields to which it applies
those technologies. In doing so, we won our customers’ trust to the point that our
products and services now reach every corner of the globe. Our printing andinformation technologies are truly assets that each one of us has “imprinted” during
the course of DNP’s growth, as if they were the DNA of DNP.
We can also view DNP’s history as a continuous series of innovations. As we
expanded our field of business with increasing speed for 130 years, we were able toaccumulate the wealth of achievements that we did only because we constantly
anticipated the needs of customers and markets and constantly “innovated” the newvalue that we provide.
Now, in 2007, DNP is making a fresh start. We have declared this to be the year inwhich we start a new history, aiming for net sales of 2 trillion yen. As a mature
Japanese company, we know that in order to grow further we need to not only
strengthen our existing businesses, but also to continue expanding the fields in which
we do business. So far, our history has been built on “imprinting” and “innovation.” So
the core of our new history will be these “imprinted” aspirations and technologies,
and it will be important for us to “innovate” value to provide to society through all ofour businesses. In this way, we intend to expand our business and increase revenues.

DNP Annual Report 200713

Special Feature:

Imprint for Innovation

DNP’s History of Imprinting and Innovation
Since its founding in 1876, DNP has
worked in a wide variety of fields related toprinting of publications and commercial
printing, through which we refined ourprinting technologies to a world-classlevel. DNP printed the biggest best-sellerof the Meiji era, the “Revised Edition of
Saigoku Risshi (Self-Help Revised
Edition),” which stirred up young people allover the country. It was also DNP thatprinted “King,” the magazine that was thebiggest selling publication in pre-war
1876

Japan, with 1.5 million copies in circulation.
From the 1950s, DNP adopted a policy of“expansion printing,” which meantdeveloping the printing technologies it had
cultivated since the company’s founding
and applying them to various fields inorder to expand its business.
In 1951, DNP developed and applied its
coating and transfer technologies to thefields of packaging and decorative building
materials. Later, in response to a growing
awareness of environment and health1950

issues, we increased the functionality ofthese products. We then brought in postprocessing technologies to develop aseptic
filling systems for plastic bottles and supply
preformed bottles for use in such systems,
among other businesses.
In 1958, DNP succeeded in thedevelopment of shadow masks, which
opened the door to our participation in theelectronics field. There we made use ofultra high-precision microfabrication
technologies such as patterning,

1960

1970

Printing

Comprehensive Printing

Information Communication
Books and Magazines
Commercial Printing
1971 holograms

Business Forms
1967 plastic cards
1964 OCR ledgers

1955 ledgers

Digital Media
1972

Lifestyle & Industrial Supplies
Packaging1962 paper cups
1961 plastic containers

1951 paper containers
1951 flexible packaging

1970 retort pouches
1969 laminate tubes

Lifestyle Materials
1965 transferring printing on cloth
1961 steel plate printing

1951 decorative sheetwith wood grain pattern
1951 rayon cloth printing

Electronics
Display Components
1958 shadowmasks

Electronic Devices
1959 photomasks

14

1964 lead framesphotolithography and etching to generatea large number of products including color
filters, photomasks and lead frames.
Currently, DNP has grown to the point that
we hold the top share in many markets,
not only in Japan but worldwide.
From the beginning of the 1970s, wewere among the first to start digitizing text
and images. In response to rapid
developments in information technology,
we reflected the needs of corporate clientsand consumers through planning andproduction using the cutting-edge mediaof each era, and we also got involved insuch endeavors as reforming our clients’operational processes. In 1985, we madethe world's first electronic dictionary on a
CD-ROM. After that, as we refined our
information technologies, we got involvedin a broad range of businesses like highdefinition and digital broadcasting, andInternet services aimed at PC and mobile
phone users.
Throughout its development, DNP has

1980

1990

Information Processing

continued to take the initiative to“innovate,” and has transformed itself froma “printing company” to a “comprehensive
printing company” to an “information
processing industry” and then to an“information communication industry.”
Today, DNP is accelerating thedevelopment of businesses that make useof its “imprinted” strengths to pursue its
corporate vision of providing new “P&I
Solutions” that combine printing andinformation technologies.
2000

2010

P&I Solutions DNPInformation Communication

1997 use of soy-oil ink
2000 contactless IC tags
1974 magnetic cards

1983 development of smart cards
1989 satellite broadcasting /high-vision gallery

digitization of text and images

1985 electronic dictionary
on CD-ROM

1999 promotion of
IPS business2005 SSFC established1997 online publishing business1992 development of Shueitai fonts

1982 PET bottles
1976 aseptic portion packages

1997 IB films
1994 aseptic filling system for PET bottles

Opto-Materials/Industrial Supplies
1995 anti-glare films
1989 thermal transfer recording media
1974 printing techniques
for curved surfaces(Curlfit)

1982 mass production of Curlfit

1999 environmentally friendly decorative papers
1995 non-vinyl chloride products
1996 lithium-ion rechargeable batteries

1985 LCD color filters
1983 projection screens
1995 multi-layered wiringforming techniques

2001
development offlexible organic ELs

2006
mass production ofcolor filters using
inkjet method

2003 organic solar battery module2001 MEMS
1999 semiconductor package boards
2004 regenerative medicine(formation of capillary patterns)

2005 fuel cell parts
DNP Annual Report 200715

Special Feature:

Imprint for Innovation

Energy-RelatedMaterials(Solar Battery
Modules, etc.)

Display-Related
Products

Electronic Devices
SemiconductorRelated Products
MEMS
Lifestyle Materials

Optical Films

Books
and
Magazines

Packaging for
Food and Beverage

Material
Technologies

Patterning
Technologies

Commercial Printing

Converting
Technologies

Holograms

PT (Printing Technologies)
CRM
Consulting

Quality Control &Security
Technologies

Production
Technologies

Print-related
Products

IT (Information Technologies)
Industrial Supplies/
Carrier Tapes

Digital Contents

Information
Processing
Technologies
SystemSolutions

HMI
Technologies
Product/
Distribution
Management

Information
Security
Technologies
Web sites
Shopping Mall
(PC andMobile Phone)

Smart Cards
IC Tags (RF ID)

Database
Management

Anti-Counterfeit/
Security
Telecommunications/
Broadcasting

16

Regenerative
Medicine

The Continually Expanding Fields in Which DNP Applies Printing
and Information TechnologiesI

DNP Technology —an Integral Part of Daily Life

The range of ways in which we apply
printing and information technologies hasgrown due to technological innovations. As
a result, DNP products and services can beseen in many areas of our daily lives.
Our product line started with printed
materials such as books, magazines,
posters, pamphlets and snack foodpackages, etc., and broadened to include
plastic bottles, credit and cash cards,
employee IDs, safe and convenient smart
cards used in mobile phones and otherdevices, as well as IC tags and ink ribbons
for printing photographs. There are manyother DNP products that perform
important roles although consumers don’t
touch them directly. These include color
filters used in liquid crystal televisions,
optical films used in plasma display TVs,
photomasks that are indispensable to the
production of semiconductors used incomputers, and electronic components
made with lead frames.
Today, DNP’s products and services
have come to reach every corner of daily
life, to the point that it is said that there isno one in Japan who doesn’t come acrossat least one of our products or services
some time during each day.
The future holds virtually unlimited
possibilities for applying printing andinformation technologies. For example, we
can apply patterning technologies used inprinting to the regeneration of capillaries in
the regenerative medicine field, or we canapply micro-processing techniques tomicromachining, or coating technologies
to the development of components used insolar battery modules.

I

The DNP of the Future: Fusing Printing and Information Technologies
and Developing a Variety of Solutions-based Businesses

DNP has already grown to be a unique,comprehensive printing company, with abusiness structure unmatched by any othercompany in the world. This growth wasmade possible by the depth and breadth of
our printing and information technologies.
Another driving force behind the
expansion of our field of business has beenour 30,000 corporate clients. Because
printing products are essentially all customordered, we need to engage in a hugeamount of taiwa* with customers in order
to be able to produce precisely the kind of
products they want. We listen to whatcustomers want, express this in concrete
form, check and confirm, and repeatedly
make corrections before we make the final
product. The content of the taiwa that takes
place between DNP and our customers
during this process gets passed on as animportant corporate resource.
This corporate culture of working together
with customers to create products while
responding to or anticipating our customers’
needs developed into DNP’s P&I solutions
business, whereby we combine printing andinformation technologies in a variety of ways
and come up with new ideas in situations
where existing products and services alone
will not solve a customer’s problem.
By fusing printing and information technologies, we intend to continue innovating
value that we can provide to society. We willachieve sustainable growth by expanding
our field of business while solving customers’ problems, and by providing solutions through repeated dialogue with customers, even in fields that have no readily
apparent connection to printing.

Technologies That Support P&I Solutions

PT = Printing Technologies
Core technologies that give form to informationor functions, based on product design
specifications.
• Materials technologies: techniques forsynthesizing new materials, or dispersing or
mixing materials. Includes design or productionof inks, adhesives, photosensitive materials,
coatings etc.
• Patterning techniques: formation of letters,
images or patterns, etc. on a base material.
Includes machine/press plate, typography,
offset, or gravure printing techniques, as well as
plateless printing techniques like lithography or
inkjet.
• Converting techniques: materials processing
technologies that change a material's shape orcompound materials etc. Includes techniques
for processing materials such as paper or film,
including film formation, coatings, lamination,
molding, photography, cutting and polishing,bag-making, forming, or bookbinding, etc.

IT = Information Technologies
Core technologies that enrich communication
between people.
• Data processing technologies: technologies
related to data input or output, conversion,synthesis, accumulation or transmission.
Includes processing text or images, editing,database creation, computer graphics andnetwork technologies.
• Human Media Interaction (HMI): technologies
related to interaction between humans andinformation. Includes expressive technologies
such as font design or color matching, screen
design or other interface technologies, andnatural language processing technologies.
• Information security technologies: techniques
for assuring that information is accuratelytransmitted to the correct target and stored
while preventing improper usage. Includes
encrypting techniques, personal information
processing and management technologies,
copyright management techniques, andbiometric technology etc.
* Taiwa is a process that entails identifying problems and finding
solutions through the exchange of viewpoints and ideas.

DNP Annual Report 200717

Special Feature:

Imprint for Innovation

Publication Printing Business

Developing the Growing Electronic Publishing Market andInternational Content
Although the publication printing market has been continuing on a slight declining trend, we serve the overall content
industry, and we intend to revitalize it by offering a full range of services that make use of DNP's technological andcomprehensive strengths. These services include providing solutions that add more value to our customers' products andservices, actively serving the rapidly growing electronic publishing field, and supporting the international development ofcontent. As we provide these services, we aim to expand our fields of business and achieve stable growth.
Business Outline
Publication printing has been DNP's corebusinesses since its founding in 1876. So far,expansion of our business has been supported bydevelopment expertise that enabled us to refine
our printing technologies until they are among themost advanced in the world. In the 1970s, we wereamong the first in Japan's publishing industry to
begin digital processing of text and images and to
start using a computerized typesetting system.
These advances formed the basis for our fusion of
printing and information technologies. In 1985, wedeveloped the world's first CD-ROM dictionary as
well as other conversion technologies that allowed
us to make use of digital data prepared for printing
in various information media.
After that, as society enhanced its network infrastructure, we began combining printing and information technologies in even more sophisticatedways. In 1994, we expanded our business to include
web sites for personal computers, and in 1999 to
information services for mobile phones.

Strengths

The Market and DNP's Position• Printing and information technologies cultivatedover our 130-year history, along with the R&D
capacity and comprehensive strengths that havesupported those technologies• Support systems for boosting publishingcompanies' operational efficiency, including theability to develop support systems for editing andproduction. Full-service mass production
systems, including printing, binding, and shipping,that aid magazine businesses in their constantfight against time.
• Book production systems that give customers thevalue they want, through integrated managementof production processes and various types of
support including color management and bookdesign by printing directors who participate fromthe planning and editing stages.
• Ability to develop and implement total solutions
to the problems that our customers face in their
publishing businesses. This includes everythingfrom planning support to sales promotion, andproposals for new businesses involving collaboration across industry lines.

Managing Director

Tatsuya Nishimura

18

The domestic publishing market is said to be worth
about 2,150 billion yen per year. Although bookpublishing remains solid, the rapid rise of Internet
and various other media have led to a slight decline
in magazine publishing.
Meanwhile, the electronic publishing market, which
was estimated at 1 billion yen in 2002, surged to 18
billion yen four years later, in 2006. Rather thanlimiting ourselves to the paper media that has always
been our core business, we are actively participating
in a variety of media as we target the overall content
market — a market that includes telecommunications, broadcasting, and packaged media like CDs
and DVDs, and is said to be worth 14 trillion yen.

I

Future Business Development

Expanding the Electronic Publishing Field by
Building Turnkey Systems for Everythingfrom Content Production to Operation ofSales Sites

The Growing Electronic Publishing Market(¥ Billion)

40

Mobile phones
PCs/PDAs

30

20

10

Our involvement in electronic publishinggoes back to the 1980s. Over the pastquarter-century, we have kept up with thechanges at the cutting edge of this media,
and have always provided industry-leading
technology.
The electronic publishing market has
exploded in the past few years, and not only
the publishing industry but consumers also
expect this trend to continue into the future.
Young people in particular have become
accustomed to consuming information
through new media, and mobile phones havebeen supporting growth in the market as themost important media.
In July 2006, we increased our ownershipshare of electronic book distributor
MobileBook.jp to 34.7%, becoming the leadshareholder, and began actively developing
an electronic publishing platform business(agency). In addition, we have built acomprehensive support system so that we
can offer a full range of services tocustomers in every stage of the electronic
publishing business, including content
planning and production, provision of sales
platforms, marketing, and sales promotion.

Greater Added Value and Overall
Optimization

0

00 01 02 03 04 05 06 07 08 09 10
Sources: 2000-2006: 2006 Report on Electronic Books Business,
published by Impress R&D
2007-2010: DNP estimates

Enhancing Support for International
Content Development
Ever since DNP’s founding, we havebeen expanding our business as we
contributed to Japanese culture throughour publication printing business. In recent
years, not only is content from abroad
being introduced into the Japanesemarket, but there has been increasing
exportation of Japanese content —particularly comic books, literary works,
and fashion magazines — to overseas
markets. This trend toward
internationalization is expected toaccelerate even further. We plan toactively participate in the international
development of the publishing and content
businesses.
By collaborating with media partners inJapan and abroad, we intend to support
DNP’s own internationalization as well as
the internationalization of our customers’content by providing such assistance asmulti-language editing services that
operate with a deep understanding of local
languages and cultures, multi-language
prepress systems connected tointernational networks, and optimization of
production locations.

DNP does not simply deliver printed
material based on orders from publishinghouses or other customers. We areworking to build up our solutions-based
business, which means we uncoverproblems faced by companies andindividuals and create the value that they
truly seek.
Some examples of how we actively
provide solutions that add value to ourcustomers’ products and services include
building a mail-order web site linked to a
magazine article; providing full businesssupport services ranging from order-taking
and customer management to shipping;planning and executing mobile phonebased sales campaigns; and bundlingDVDs or product samples with magazines.
In addition, we propose collaborative
ventures with publishing companies orother companies that hold rights tovaluable content, brand names, or popularcharacters.
On the production side, we are working
on streamlining production processes andreducing costs, as well as further
digitization of pre-press processes andfuller integration of post-processes. As
printing professionals, we intend to engage
in even closer taiwa* with our customers,
and to provide them with products andservices that deliver a high level ofcustomer satisfaction in terms of both
quality and cost by actively offeringsolutions that aim at overall optimizationof every stage from planning and productdesign to production and delivery.
* Taiwa is a process that entails identifying problems and finding
solutions through the exchange of viewpoints and ideas.

DNP Annual Report 200719

Special Feature:

Imprint for Innovation

Smart Card and IC Tag Business

Smart Card and IC Tag (RF ID) Solutions that Deliver
Safety, Peace of Mind, and Convenience
Due to society’s increased demand for security and convenience, use of smart cards has spread rapidly and is becoming
part of the infrastructure that supports business and personal life. As Japan’s top vendor, we not only provide the best
quality cards but also make the most of our technological and comprehensive strengths to offer solutions that allow users
to experience safety, peace of mind and convenience, while we expand our field of business at the same time.
Furthermore, we aim to boost revenues by developing high added-value solutions that combine smart cards and IC tags.
Business Outline

The Market and DNP's Position

Since the 1970s, DNP has been Japan’s leading
company in the production of magnetic stripe
cards for financial institutions, and in 1981 began
development related to smart cards. What makes
DNP different from other manufacturers is thatinstead of just manufacturing cards, we also offer awide range of services including the developmentof operating systems, applications and othersoftware for smart cards, data management, card
issuance (which entails encoding data on the ICchip), and development of peripheral technologies.
Recently we became the first in the world tosucceed in the development of a smart card using
vein authentication, and we have already begun
marketing this technology.
Meanwhile, we began developing IC tags in 1999,
and in 2001 became the first Japanese company tojoin the AUTO-ID Center (now AUTO-ID Lab) in the
United States. Today we are involved in a numberof projects aimed at promoting wider use of IC
tags, including some sponsored by the Japanese
government. We have received high praise frommany industries for our concrete successes.

Managing Director

Hiromitsu Ikeda

20

In 2006, the worldwide market for smart cards was
2.4 billion cards. Of these, 75% were used as SIM
cards in mobile phones. The Japanese market was
about 150 million cards, reflecting the growth ofabout 30% over the previous year. Use of contact
smart cards grew about 17% from the previous year,
while use of contactless cards grew by more than
60%. Unlike the rest of the world, 80% of the cards
issued in Japan are used outside of mobile phones.
Japanese cards are used for a wide variety of
purposes in areas such as finance and transportation. DNP’s share of the domestic smart card
market is about 40%, making us Japan’s top
provider. In the finance sector, we hold an about 60%
share.
Meanwhile, in order to improve supply-chain
efficiency through the use of IC tags, each industry
has been creating a common framework. DNP has
been playing a central role in many experiments andprojects and is working to create practical examplesof the successful use of IC tag functions.

Strengths• Mass production system addressing every stepfrom card manufacture to issuance, within a tightsecurity framework• Ability to develop smart card operating systems,
applications and other software including encoding(for example, the world’s first financial settlement
application based on vein authentication)• Development and supply of various solutions tocustomers’ problems using smart cards and IC tags
• Ability to provide full customer support for the
introduction of smart cards or IC tags, including
consulting, set up of an experimental environment,
and post-introduction follow-upI

Future Business Development

Establishing a Strategic Footholdin the IC Tag Market

Full Support for Introduction of Smart
Cards That Enable Consumers to Enjoy
Safety, Peace of Mind and Convenience
So far most of the growth in the domestic
smart card market has been from thedemand for credit cards and mobile phone
SIM cards. In the future, we expect to see
steady, although not rapid, growth. At thesame time, we believe there will be
expansion in the use of smart cards for such
purposes as electronic money, employee IDs
and other types of IDs, as tools of daily lifeand for business that allow the user toexperience safety, peace of mind andconvenience. We expect that in the future
there will be demand for performing multiple
functions with a single card, and we are
already addressing this demand. We will
provide comprehensive services, including
peripheral businesses such as consulting tohelp clients prepare for a smart card
introduction and network services that makeit possible to securely revise applications
after cards have been issued.
We are also working on developing
innovative technology that will revolutionize
the card manufacturing process. Once weachieve this, we expect that smart cards
will be used in a wider array of industries
than was previously imagined.

Number of Smart Cards Sold in Japan(in millions of cards)

250

Meeting Growing Demand for ID Cards
That Support Office Security
In recent years, management of personal
information and the strengthening ofinternal controls related to financial
reporting have become important issues.
To address these issues, DNP establisheda corporate alliance called Shared Security
Formats Cooperation (SSFC) to link smart
cards and various types of devices using
shared formats. For example, SSFC is
working on improving office security
through such means as controlling
permission to use computers, printers,
lockers and other equipment based on
entrance/exit records created by linking
smart employee ID cards with a gate
system or surveillance camera. DNP
serves as the secretariat to the highly
acclaimed SSFC, which has more than 130
corporate members.
In addition to providing cards, DNP also
makes instant card-issuing printers andother peripheral equipment, as well as PKI*
electronic authentication, computer
management programs and other software,and provides comprehensive solutions inpartnership with corporate allies.
* PKI (Public Key Infrastructure): a system that uses public key
information to encrypt messages, verify digital signatures andauthenticate identities. A reliable certificate authority issues
digital certificates to certify the identity of public key users.

200

150

IC tags are attracting attention due totheir potential for boosting efficiency inJapanese supply chains. Each industry is
carrying out experimental projects in orderto create shared frameworks. As full-scalecommercialization is about to start, there
is a steadily growing stream of casehistories of successful IC tag usage in suchareas as process and material management in the manufacturing sector, anddocument and uniform management in
the security sector. In addition to using
micro-processing technology to develop
and manufacture IC tags, DNP also isdeveloping a wide range of IC tag-related
businesses.
One of DNP’s important advantages isthe fact that we are actively involved inboth smart cards that identify people andIC tags that identify objects. In addition tousing this advantage in corporate businessprocesses such as supply chain management and office security, we intend to use
it to expand our business, for example bycreating new sales promotion methods
that link IC-tagged products with credit
cards, electronic money or other settlement methods.

“IC Tag Experiment Station,” where companies can bring in theirproducts to experience firsthand the benefits of using IC

100

50

0

01

02

03

04 05 06

07

08 09

10

Source: DNP estimates

DNP Annual Report 200721

Special Feature:

Imprint for Innovation

Solutions Business

A Growing Business:
Solving Customers’ Problems through the Combination of
Printing and Information Technologies
As times change, consumers’ needs are becoming more diverse. We intend to accurately read these changing needs andcombine printing and information technologies in order to offer our corporate clients new solutions in areas like sales promotion, electronic commerce and business process management. By doing so, we intend to achieve dramatic growth inour business and improve profitability.
Business Outline
In the 1960s, DNP began to strengthen its planning
functions, which are part of the process of preparing
for printing and manufacturing, and are an importantfactor in winning orders. We began making active
proposals in areas like product planning and development and sales promotion programs. Later, as
product sales and advertising promotion channels
began to branch out from stores into mail-order sales
and further to Internet commerce and electroniccommerce, clients began asking us to provide more
effective and efficient plans, tools and services thattake advantage of various types of media to promote
their sales. DNP is currently transforming itself into acomprehensive problem-solving business that can help
corporate clients with a wide range of tasks fromstrategic planning to the development of computer
systems, development, design and production ofcontents and information media, maintenance of
operations, and development of Customer
Relationship Management systems.

The Market and DNP's Position“P&I Solutions” describes the kind of company that
DNP aspires to be. We aim to solve customers’
problems in every area of business. If we understandthe solutions market in a broad sense, our 30,000
corporate clients’ businesses become our business. This
includes their strategic planning, development,planning, and design of products, advertising,production of all types of sales tools, and provision ofservices. In 2002, we established a C&I (communicationand information) division specializing in activities likeconsulting, market analysis and the development ofappropriate contents and information media as part ofour development of a broad-based solutions business.

Strengths• Ability to offer comprehensive support services
including everything from proposing strategies andplans to developing and manufacturing specificproducts, and even sales promotion and operation of
all types of services.
• Ability to provide an optimal packages by effectively
combining various types of media, including print,
DVDs and other package media, Internet and othertelecommunications media, and broadcast media.
• Ability to offer a standardized solution menu as wellas customized solutions for individual needs bybuilding a history of successes in solving problems for
consumers and 30,000 corporate customers.

22

Managing Director

Kunikazu Akishige

I

Future Business Development

Developing Promotional Methods Basedon Analysis of Hybrid Consumers with
Strong Information Gathering Skills
We pay attention to changes incommunication patterns between
corporations and consumers. With thepenetration of Internet access into daily
life in addition to television, magazines andother media, it has become easier to get
information about products and tocompare various options. We use the term
“hybrid consumer” to refer to a consumer
who uses different media and distribution
channels as “communication channels”
depending on the time and situation. We
are working on identifying issues that lie
ahead by analyzing behaviors and changes
in the information-gathering habits of suchconsumers. We view the needs of eachindividual consumer as a business
opportunity worthy of attention. Our focus
includes the enhancement of EC-related
solutions, promotional methods that link
multiple media such as print and mobile
phones, and the development of various
solutions that generate new value throughconnections between corporations andconsumers, corporations and corporations,and consumers and consumers.

Developing Specialized Staff and Focusing
on Business Process Management
Corporations need to respond promptly
to changes in individual consumers’
lifestyles. Our corporate clients also needto review their various business processes.
In particular, there is a growing need tocompile reactions from consumers who
have actually purchased products or used
services in order to reflect their opinions
when establishing new business goals,
formulating strategies, and developing
plans, etc. We are addressing these needsin their entirety by cultivating specialists
who are well-versed in various industry
trends, proposing optimal solutions basedon an up-to-date analysis of business
operations, and even by designing andoperating systems for improving businessefficiency. In many cases, these efforts
have turned into major projects that we
implemented jointly with the client
corporation. In an increasing number ofcases, DNP serves as the nerve center for
consulting and project management.

Increasing the Added Value of the Entire
DNP Group — Standardizing andCustomizing
Assuming every company has 10
problems, 100 companies will need 1,000
types of solutions. We have established a
track record by responding attentively toindividual problems, and are now
compiling our accumulated expertise intoa menu of effective and efficient solutions.
By carefully tailoring items from this menu
to individual needs, we can provide evenhigher-quality services.
For example, we created a varied
solutions menu that includes supporting
the introduction of corporate customer
management or loyalty point systems,
CRM solutions entailing the compilation
and analysis of customer data as a basis
for formulating new strategies, sales
promotion solutions whereby we handle
everything from campaign planning to
office management, the use of IC tags andsmart cards, and the construction andoperation of EC web sites. We thencustomize these solutions according toeach customer’s needs. Furthermore, weestablished a company-wide Solutions
Business Promotion Committee, and areworking to enhance added value throughthe synergistic effects of having specialists
from different fields work together.

I Opening of DNP Gotanda Building as Our
Solutions Business Headquarters
In October 2006, we opened the DNP Gotanda Building asa central base for generating specific P&I solutions.
Based on the idea of a “building-wide showroom” wecreated a facility for exhibiting, introducing and presenting
DNP’s wide range of products and services. We also
gathered the sales, planning and development divisions ofsystems and services that make use of information
technology, as well as related subsidiaries. We intend to
expand our business by strengthening interdivisional ties
and coming up with timely solutions that respond to
customers’ needs.

DNP Annual Report 200723

Special Feature:

Imprint for Innovation

Packaging BusinessEco-awareness and Changing Lifestyles to
Drive Packaging Business Expansion
We recognize that environmental conservation, changing lifestyles and universal design will be important themes in the
packaging industry of the future. We will expand revenues by making the most of our aseptic filling systems, transparent
vapor-deposition barrier film, and other products that are supported by DNP’s strongest technologies. At the same time,
we will aim to expand our business in a sustainable fashion by working aggressively to increase sales overseas.
Business Outline
DNP made its debut in the packaging business in1951. We started out manufacturing paper
containers and flexible packaging; today we havebuilt a comprehensive system of packaging-related
businesses that encompasses, among other things,
packaging design, development of packaging
materials, filling plant design and the planning ofsales promotions.
We got an early start in the field of aseptic fillingsystems. In 1976, we became the first Japanesecompany to succeed at developing “portion packs”
that allow coffee whitener to be kept at room
temperature for long periods of time. In theenvironment-friendly category, we are focusing ontransparent vapor-deposition “IB (innovative
barrier) film” that is highly effective as a barrier
against moisture and oxygen but does not
generate toxic gas like dioxin when burned since
the film is not chlorine-based. We are working to
expand our market by creating new value andfunctions that meet the needs of consumers andbusinesses.

The Market and DNP's Position
In the fiscal year through March 2007, the domestic
market for polyethylene terephthalate (PET) plastic
bottles was estimated at 16.5 billion bottles, up 5%
from the previous year. PET bottles used with aseptic
filling systems currently account for about 30% of thetotal, and that percentage is expected to grow in the
future, now that we are able to reduce the cost of
materials and do a better job of preserving the flavorof bottle contents. DNP entered the aseptic fillingsystem business early, and holds the top share in thisgrowing market.
Meanwhile, demand has been growing for IB film forpharmaceutical, medical, food, industrial and otheruses, as a replacement for aluminum foil or films that
contain organic chlorine compounds. DNP is the only
company in the world that uses a chemical vapor
deposition (CVD)*1 method to mass produce this typeof film. We are working on developing even highergrade products using the CVD method, in order toexpand sales further.

Strengths

Director

Taketsugu Yabuki

24• Capacity for technological development and plantdesign at a level that maintains DNP as Japan’s
top supplier of aseptic filling systems• Product development strength (especially our
specialized planning staff and researchlaboratory), design and planning expertise• Capacity for universal design, based on technology cultivated through our printing business.

Rule

1
Easy-to-understandexplanation ofnecessary information

DNP’s Approach to Universal Design

I

Future Business Development

Packaging designed to be as easy as possible
for anyone to use

Responding to Needs Related toEnvironmental Conservation, Changing
Lifestyles and Universal Design
The Japanese people’s eating habits havebeen powerfully influenced by major social
trends such as a growing awareness of theneed for environmental conservation, adeclining birth rate and increasing averageage, declining household size, increasing
participation by women in work outside thehome, and a growing concern with healthmaintenance. After more than half a century
of making packaging products that are partof people’s everyday lives, we view thesechanges in recent years as a business
opportunity. We have adjusted every aspectof our packaging business in response tothese social changes, for example bydeveloping easier-to-use package designs
and materials, building manufacturing
processes that include the development of
packaging machines, and planning andpromoting products. In the future we will betaking an even harder look at how we canrespond to evolving trends.
Regarding the environment, we plan toexpand the scale of our business byproviding eco-friendly products and systems
with an emphasis on five principles:“Reduce, Reuse, Recycle, Sustainability, andLife-cycle Assessment.” We also devoteenergy to universal design, for example byestablishing the “Five Universal Design
Rules” illustrated at the top of this page.
We intend to keep producing packages thatcan be used with ease, not only by children,
the elderly, and people with disabilities, but
by everyone.
*1 Chemical vapor deposition (CVD) is a thin film formation
technique that makes use of chemical vapor deposition. DNP
was the first company in the world to adopt this technology
for commercial production of packaging materials. The film isformed by causing a chemical reaction with a gas that is theraw material of the film. Thin film formed by this method canwithstand a good deal of stretching and folding.
*2 Physical vapor deposition (PVD) is a thin film formation
technique that makes use of a group of surface-coating
technologies including ion plating.

Rule

5

Rule

2
Simple andintuitive to use

DNP’s Five
Universal Design
Rules

Rule

3
Opens easily, without
excessive force orextreme movements

Rule

Flexible andsafe to use

4
Appropriate
size and weight

Form and expression that emphasize
product’s appeal

OPTION1

OPTION

2 Ease of trash separation and disposal

Strategy for Using our Strength in Aseptic
Filling Systems in Order to Expand Market
Share

Increasing Market Share through Our
Superior-quality IB Film Made Using the
CVD Method

DNP began developing aseptic fillingsystems for food and beverage containers in
the 1970s, long before society was asconcerned as it is today with food safety andenvironmental conservation. DNP currently
holds the top market share in the domestic
market for aseptic PET bottle filling systems.
We have continually improved our system sothat it handles every step from sterilizing thebottle contents, forming the bottles, fillingthem, and getting them ready for shipment in
the best possible ways.
Because we can fill bottles at room temperature, there is no need for bottles that can
resist heat. This means the bottles can bethinner, which reduces the cost of materials.
Also, because the flavor and aroma of thecontents are unlikely to be damaged by heat,
we expect that these bottles will be adopted
for use as milk containers, which is a hugemarket. Furthermore, supplying pre-formed
bottles rather than fully formed bottles allows
us to reduce both shipping costs and carbon
dioxide emissions from the trucks that transport the bottles. Currently, some 70% of thecontainer filling market consists of hot-packtype systems. We intend to focus ourmarketing efforts on beverage bottlers who are
getting ready to replace existing equipment,
and we believe we can get them to switch inview of the many merits of our system.

There is increasing demand fortransparent vapor-deposition barrier filmthat blocks the passage of moisture andoxygen while allowing contents to be seen.
Unlike aluminum foil, it can be heated in a
microwave oven. In addition to producing
this film by the conventional physicalvapor deposition (PVD)*2 method, we are
the only company in the world to produce
it commercially by the CVD method. Filmmade by the CVD method is very flexible.
It can maintain its barrier properties evenunder harsh usage conditions, and ishighly formable. We plan to enhance thedevelopment and sales of materials thatmake use of these properties in the
medical, pharmaceutical and industrial
fields as well as in foods.
We see a very profitable market for thisproduct as a replacement for aluminum
foil in areas where strong barrier
properties are required. We are aiming todouble our market share by 2010. On thestrength of our leading position in CVD
technology, we will work to expand sales
overseas as well, primarily in North
America and Europe, for use with food andmedical products.

DNP Annual Report 200725

Special Feature:

Imprint for Innovation

Lifestyle Materials BusinessResponding to the Growing “Ecology and Health” Markets,and to Demand for High-Performance, High-Quality Designs
The lifestyle materials market is currently undergoing big changes amid concerns about the environment and health.
DNP is seizing this opportunity to take advantage of our overwhelming technological strength (including EB coating*technology) and our capacity for coming up with outstanding designs, in order to develop a broad range of solutions
related to dwelling spaces. We aim to increase revenues by actively expanding into overseas markets and into areas like
offices, hospitals, commercial facilities, and automobiles, in addition to residential space.
Business Outline
In 1951, DNP became the first company in Japan tosucceed in developing technology for printing“endless” wood grain patterns with no seams. After
that, DNP went on to expand its product field bydeveloping technology in 1961 for direct color
printing on steel plates, in collaboration with Nippon
Steel Corp., and in 1974 developed “Curlfit”
technology for printing on curved surfaces. Today,
DNP’s original EB coating technology, which wedeveloped ahead of the rest of the industry in the
1980s, supports our overwhelmingly superior
position in a market marked by growing demand forenvironmentally responsible products.
We currently offer a wide range of products thatdeliver a luxurious lifestyle, such as interiormaterials, fixtures and storage products, plumbing
products, exterior materials, and materials used in
automobile and railroad car interiors. We sell
original products developed in-house, like our “WS(Woody Series)” PVC wood-grain decorative
material for residential use, and Ellio decorative
steel sheets. DNP provides products and services
related to “lifestyle materials,” a business sector that
addresses all types of spaces that people inhabit,
and develops “dwelling space solutions” that meet
consumers’ needs and solve technical problems
related to construction.

Strengths• EB coating technology; overwhelmingly superior,industry-leading capacity for technological development; capacity for developing new products byapplying various technologies• Ability to implement comprehensive proposals for
all types of dwelling areas by taking advantage ofour diverse product line, which boasts excellent
functionality and rich expressiveness thanks to thedesign expertise that we cultivated through ourprinting business• Ability to propose new value and solve problems
based on our broad network of customers

The Market and DNP's Position
New housing starts have been stagnant due todemographic factors such as Japan’s declining
birthrate and aging population, but there has been
growing demand for eco-friendly, health-friendly
products that are highly aesthetic and functional
There is also increasing demand for products andconstruction methods that can help bring down costs
or otherwise streamline the construction of large-scale
developments like office buildings, hospitals, orcommercial centers. DNP’s dwelling material products
have been well received by the market because they
address these needs. For example, DNP holds the top
market share, 60-70%, for fixtures and storage
products, and about 60% of printed flooring material,
which has been the target of significantly higher
demand in recent years.
Meanwhile, amid strong demand for comfort and highperformance in automobiles, DNP holds an about
70% share of the domestic market for automotive
interior materials. Even overseas, we are looking toincrease the roughly 30% share that we already hold.
Examples of high-profile use of DNP materials in railroad interiors include Taiwan’s new High-Speed Rail
(Taiwanese bullet train), which began operations inJanuary 2007, and the new N700 Japanese bullet
train cars scheduled to come into use in the summerof 2007.

26

Director

Masaki Tsukada* EB (Electron Beam) coating technology: unique DNP nextgeneration, eco-friendly technology for hardening resins by
exposing them to an electron beam. Compared to products coatedwith urethane or UV resin, EB coated products have greater
surface hardness, light resistance and stability, and better quality.
The manufacturing method uses less energy, reduces carbon
dioxide emissions, and does not require the use of solvents.

Specific Dwelling Space Solutions Related
to Environment and Health

I

Future Business Development

Taking Advantage of DNP’s Original
Technologies and Expanding Our
Business to All Types of Dwelling Spaces
We are working on “dwelling spacesolutions” that provide eco-friendly,
healthy and pleasant dwelling spaces. We
offer a complete line of products for every
type of space that people inhabit, andsolutions that meet customers’ needs andsolve technical problems related toconstruction methods.
In Japan, there are predictions for bigchanges in the housing market due todemographic trends such as the declining
birthrate, aging population and declining
household size. In the future, there will
likely be less demand for single-family
housing, more condominiums and rental
housing, and greater demand forrenovation work. We are aware that in thistype of market, the key to expanding ourbusiness will be to establish environmentand health protection as bases from which
we add value to our products and services.

Concerning the environment, we areaccelerating the introduction of non-PVC
olefin resin film, and are actively
promoting the use of water-based inks.
We have developed a large number ofhealthy products that do not use volatileorganic compounds (VOCs) likeformaldehyde, toluene and xylene.
Furthermore, we help protect forests byusing more eco-friendly base materials
such as recycled materials and plywood
made from reforested lumber.
At the same time, in our manufacturing
plants, we were among the first in theindustry to introduce solvent processing
facilities and have taken active measures
to protect the environment through our
production processes. In 2002, webecame the first Japanese company to beawarded ISO/IEC17025 certification, fordeveloping our small-chamber method of
measuring VOCs. We established a“living-space analytical evaluation center”
dedicated to measuring VOCs emitted
from construction materials. The center
not only measures VOCs emitted from
DNP’s own products, but also takes orders
for measuring on behalf of outside clients.
In the future, we plan to continue tofocus on developing products andtechnologies that address environmental
and health issues, and actively participate
in new business fields.

Strongly Pushing Sales in Japan and
Abroad, with Focus on Eco-Friendly
Products
We offer our clients high-quality spatial
designs and high-performance productsthat we design ourselves, and in doing so
we meet a variety of needs. In particular,
we have been using our world-class ecofriendly technology as a basis for
expanding sales from Japan to the rest of
the world. Despite our success to date, we
believe the vast overseas market still holds
important business opportunities.
Given the whole world’s concern withenvironmental issues today, we feelcertain that our EB coating products, with
their overwhelming competitive advantage
as eco-friendly products, have thepotential for great growth in sales andprofits all over the world. We plan todevelop this potential through broadbased sales promotion efforts in the
United States and elsewhere, includingSouth Korea, China, and Europe.

Part of the wide range of “lifestyle materials” provided by DNP

DNP Annual Report 200727

Special Feature:

Imprint for Innovation

Photo Print Business

Creating New Markets and Developing the Global Market
Through a “Kakushashin*” Strategy
We are using the strengths that we have built up through our photo print business as a core from which we will further
expand the business, including the creation of new markets and the development and application of our core strengths toa variety of business fields. We call this strategy “kakushashin.” We expect to achieve lasting and stable growth thanks toour strong points — the comprehensive strength of the DNP Group with its close connections to a variety of businessfields, the technology that sustains our top share of the rapidly growing market for dye-sublimation thermal transfer
ribbons, and our ability to develop global markets with a potential for long-term growth.
Business Outline
DNP began its Information Media Supplies
Operations in the late 1980s, after successfully
developing two types of thermal transfer printing
media — mass transfer and dye-sublimation — by
applying coating and other technologies that we
cultivated through our printing business. Fusion-type
media were used in such products as ink ribbons forbar-code printers and plain-paper fax machines,
while dye-sublimation was used primarily as a color
media for printing photographs. The division’s sales
have been growing.
In addition, DNP acquired the Konica Minolta
Group’s ID photo business and photography-related
product manufacturing and sales businesses in2006, allowing us to respond to the demand forboth silver halide and dye-sublimation methods ofprinting. DNP calls its basic strategy, “Kakushashin,”which means actively expanding markets byapplying and developing photo printing in various
business sectors and building an integrated systemthat offers everything customers need, fromsolution proposals to products and services.

The Market and DNP's Position
In recent years, demand has been rapidly growing
for prints of photos taken with digital cameras andmobile phone cameras. In today’s market, some 85
billion photos are printed each year worldwide. Of
those, a little more than 20 billion are digital photos.
This market is growing by double digits every year
and is expected to reach more than 50 billion in2010. DNP is the top supplier of dye-sublimation
thermal transfer ribbons used for the rapidly
growing digital photo print market.
In addition to leading the promising photo print
market, we are speeding up development of newmarkets through our “Kakushashin” strategy.

DNP's Strengths• Proprietary technology that supports our various
products, including the top market share in dyesublimation thermal transfer ribbons• High-quality silver halide photographic printing
paper business acquired from Konica Minolta
Group• Capacity to develop and provide solutions thatcan be applied to a wide range of applications,such as ID cards• Manufacturing and sales systems that allow us todevelop global markets.

* “Kakushashin” is a strategy whereby DNP expands its existing
businesses while creating new markets by using our strength inphoto printing and an abundance of printing technologies todevelop businesses that provide a variety of products andservices.

Managing Director

Shigeru Kashiwabara

28

Number of Digital Photographs Printed Worldwide(in billions of prints/month, on 4 x 6-inch basis)I

Future Business Development
6

5

Expanding Our Digital Photo Print
Business

4

3

The digital photo print market is rapidly
growing. Due to the spread of digital
cameras and mobile phones equippedwith cameras, the number of pictures
people are taking has increased
dramatically, and the demand for printing
photos is also increasing. Demand forprinting at camera shops had begun to
decline at one point due to the spread ofhome-use printers, but it has begun tosurge again thanks to improvements inareas like print longevity, coloration quality,and printing speed.
In order to meet this need, DNP offers
dye-sublimation (dry) NEXLAB1000
minilabs and other printing systems
designed for drug chain stores in North
America, along with support services forthese products. In Japan, we also
developed PrintRush self-service photoprinting kiosks and established PrintRushCo., Ltd. to sell them. PrintRush terminals
are very popular because they can print a
photo in only three seconds. We areworking on increasing the number ofkiosks in operation.

2

Enhancing Our Manufacturing, Sales andService Systems in Japan and Abroad0

So far we have built manufacturing,sales and service systems not only inJapan, but also overseas, primarily inNorth America and Europe. In the future,
we will be building an even stronger
business structure as, in addition to DNP’s
own sales channels, we continue to serve
customers of the Konica Minolta Group,
whose photo-related businesses weacquired in 2006.
In the various countries of the world,
customers’ photo printing requirements
have come to differ depending on suchfactors as the degree to which
digitalization has progressed and the kindsof corporate support that are available. We
consider our ability to develop worldwide
business to be one of our strengths. We
expect to see the digital photo print
market spread even more widely in the
future, and we will be working to expand
DNP’s market share on a global scale.

Dye-Sublimation Thermal Transfer Ribbon Production and Sales BasesSales
DNP IMS France

1

Sales
DNP (Information Media
Supplies Division)
DNP PrintRush
DNP Photo Marketing
DNP ID Imaging

Manufacturing
DNP IMS America

Manufacturing
CDO
Manufacturing
DNP IMS (Sayama andOkayama Plants)
DNP IMS Odawara
DNP Fine Chemical

Sales
DNP Photo Imaging
America

03

04

05

06

07

08

09

10

Source: DNP estimates

Creating New Markets Through“Kakushashin” Strategy
Our photo print business is uniquely
positioned relative to the world market.
For one thing, we can handle both wet(silver halide) and dry (dye-sublimation)
methods. For both these methods, we
provide not only print media, but also color
management technology and services.
Other factors supporting our uniqueposition are our “Kakushashin” strategy andthe comprehensive strength of DNP, which
we can use to implement that strategy.
“Kakushashin” is aimed at creating newmarkets and expanding our photo print
business more than ever by applying anddeveloping the core strengths that we havealready cultivated through our photo print
business to a variety of business fields. For
example, by promoting a broader use ofphoto ID cards — a market in which DNP
holds the top share — we can increase theaccuracy of personal identification and boost
security at offices and various types offacilities. There are many additional
possibilities to develop, such as providing
photo gift cards for promotional use or
producing photo albums linked with editing
and publishing functions. We can do things
like this only because DNP is the world’s
leading comprehensive printing company
and has ties with client companies in avariety of industries, and has built an
integrated system of planning,
manufacturing, selling and operating. We
plan to continue developing original products
and services that only we can provide, and tocontinue creating new markets.

DNP Annual Report 200729

Special Feature:

Imprint for Innovation

Display Components Business

Boosting Competitiveness in the Flat-Screen Display
Market and Developing Next-Generation Displays
In our quest for greater profitability in the growing flat-screen display market, we will focus on two goals: expanding ourcustomer base by touting the superiority of the inkjet method for color filter production, and expanding our revenue baseby developing peripheral components that contribute to high performance and low costs. We will also work to expand ourfield of business into the arena of next-generation displays, with a special focus on organic EL displays.
Business Outline
DNP’s involvement in the display industry began in1958 with our successful development of shadow
masks for making television picture tubes. Today
we make a variety of products including color
filters and antiglare films for LCDs (liquid crystal
displays), back plates for plasma displays, andprojection screens. In addition, we have started
supplying products used in new growth areas suchas next-generation organic EL displays.

The Market and DNP's Position
The market for liquid crystal, plasma and other flatscreen displays is continuing to grow by about 2030% per year. The market for color filters used in
LCDs is worth about 1 trillion yen. DNP controls some
40% of the roughly one third of the market that isopen to outside suppliers. The market for back panels
used in plasma displays is worth about 200 billion
yen per year, and DNP holds about 30% of theroughly one quarter of that market that is sourced
from outside. In the future, demand for flat-screen
displays is expected to grow even more, with LCDs
being used primarily in televisions, laptop computers,
mobile terminals, and monitors mounted in motor
vehicles, and plasma displays being used in televisions with screens 50 inches or larger.
DNP also provides antiglare films, electromagnetic
interference shielding film, and other optical films. We
service the entire range of display components,
including actively addressing the market for organic
EL displays, which is expected to balloon to 200
billion yen in 2010.

Strengths

Managing Director

Masahiko Wada

30

• Micro-processing techniques honed through ourprinting business, color management technology,
quality control technology, and the ability todevelop new technologies and new products• Integrated systems and comprehensive organizational strength that support technological anddevelopmental strengths, and manufacturing
platforms that can generate high-quality products• The above strengths allow us to produce higherperformance products more efficiently, and makeit possible to meet customers’ diversifying needs
in rapidly changing markets.

I

Future Business Development

Aggressively Expanding Our Customer
Base by Making the Most of Our Superior
Inkjet Method

We believe that there are many business
opportunities in the display field, related toraising the performance and lowering thecost of panels.
DNP already supplies a large number of
peripheral components. For example, wehave a 70% share of the market for antireflection films used in LCDs, and virtually
100% of the market for contrast
improvement film used in plasma displays.
In the LCD photomask sector, as morecompanies begin to use DNP’s halftone
masks, especially for large panels, we aim tocontrol 25% of that market within one year.
We are also working to fulfill panel makers’
needs by continuing to improve
performance and reduce costs. For example,
we integrated multiple back light peripheral
components into a single piece andcombined one multi-function film to replace
multiple layers of functional films.
At DNP’s Nano Science Research Center,
we are developing high-performance
products that combine printing process
technology with advanced nano-materials
technology. Through research into a broad
range of advanced fields, we are developing
even higher-performance new materials andcomponents as we work to expand ourrevenue base.

Organic EL displays are widely expected
to take over as the next generation of
displays. We will be able to supply a broad
range of products in this area. We alreadysupply color filters that modulate light todisplay more natural colors, and masks
used in the production process. In the
future, we plan to develop lens film thatwill improve light-emitting efficiency.
Organic EL displays are expected to be
adopted for a wide range of uses becauseof their simple construction and because
their self-luminescence makes them easyon the eyes. The market for these displays
is expected to outstrip the market for
LCDs. We are actively developing products
in order to take advantage of theopportunities offered by the opening of
this new field, based on a different
business model in which we offer modular
panels and other more complex products,
rather than simply providing components
like color filters. In the future we will befurther strengthening our ties with thevarious manufacturers and building new
production systems.

(¥ Billion)

2007 >>>

OLED（¥100）

2010

50
40
30

PDP
（¥1,300）

20

0

OLED

Market forback plates,
electromagnetic
interference
shielding films, etc.

（¥200）

1 5%

LCD

PTV

（¥1,165.7）

Market for color filters,
anti-reflection films, etc.

20%（¥300.2）

14%（¥1,301.5）

Projection screen market
Projection screen market

6%（¥22.2）-20

6%（¥15）PTV
TV
V（¥250）

Shadowmask market

Shadowmask market

7%（¥39.2）

7%

LCD（¥9,730）

CPT （¥21）

CPT

-40

PDP
（¥1,560）（¥8,100）（¥370）-10Market forback plates,
electromagnetic
interference
shielding films, etc.

Market for color filters,
anti-reflection films, etc.

20%（¥253.8）

10-30
CDT ： Cathode Ray Tube for PC
CPT ： Cathode Ray Tube for TV
LCD ： Liquid Crystal Display
OLED ： Organic Light Emitting Diode(Organic EL)
PDP ： Plasma Display Panel
PTV ： Projection TV

Gearing up for Organic EL Displays Basedon a New Business Model

Display Market Growth

Growth rate

The color filter market is approaching amajor turning point. As 8th-generationand larger sizes become the latest
mainstream products, it will be necessary
to switch to the inkjet production method,and manufacturers will need moresophisticated technology than ever before.
Panel makers who until now had been
making their own color filters by
conventional methods will have to choose
between developing new inkjet technology
or buying their color filters from outside
suppliers.
In view of this change, we will work to
broaden our customer base by touting thesuperiority of the inkjet method, which so
far only DNP has succeeded in adopting
for mass production. The inkjet method
has multiple major advantages. For
example, the initial investment required forsetting up a new manufacturing facility isrelatively small. It is also cost competitive
because rather than using a large mask,
materials are applied only to areas where
they are necessary. The materials used in
the inkjet method yield truer colors, and its
more advanced color management
technology processes multiple colors at
one time. Furthermore, the inkjet method
can be flexibly adopted on an in-plant orby-plant basis, etc. to suit the particularneeds of each panel manufactured.
We also aim to improve our profit
margin and respond to pressure for lower
prices by increasing our products’ added
value, for example by integrating a color
filter, compensation film, and polarizing
plate as one piece.

Expanding Our Revenue Base by Developing
Peripheral Components that Contribute toHigh Performance and Low Cost（¥297）（¥560）

Shadowmask market

Shadowmask market

8%（¥6.4）

8%（¥1）

-50
CDT

（¥80）

Overall market:

1 1 trillion yen

CDT
（¥12）

Overall market:

1 2 trillion yen

Source: DNP estimates *Size of circle indicates size of market. The center of each circle shows the market’s growth rate.

DNP Annual Report 200731

Special Feature:

Imprint for Innovation

Electronic Devices Business

Building New Bases in Taiwan and Japan;
Focus on 45nm Mass-Production Technology andDevelopment of 32nm Manufacturing Technology
As the semiconductor market continues to enjoy stable growth, DNP holds an overwhelming share of the market for
cutting-edge photomasks. In the future, we will be focusing our energies especially on preparing supply systems that canhandle the surge in demand that is expected in the Asian market, and on mass producing 45nm products and developing
32nm products, with the goal of growing faster than the overall market.
Business Outline

The Market and DNP's Position

In 1958, DNP succeeded in developing shadow
masks made with the photolithograpy technologythat we cultivated through our printing business. In
1959, we also succeeded in making photomask
prototypes using this technology. Ever since theinvention of integrated circuits in 1959, DNP playeda part in the pioneering days of the semiconductor
industry. Later, in the 1990s, DNP rose to thechallenge when Intel and the world’s other major
semiconductor manufacturers globalized theirproduction bases and began outsourcing
production. DNP played an active role that
included collaborating with these major semiconductor makers and building overseas production
bases. Today, DNP has established an
overwhelming dominance in the photomask
market, thanks to its technological leadership.

In 2006, the worldwide photomask market wasestimated at about 320 billion yen (including an
outsourcing market of about 220 billion yen). In the
future the market is expected to grow by 5-6% peryear in terms of monetary value. Currently 90nm
products are most common, but from the second
half of 2007, demand for 65nm products is expected
to reach full stride, and in 2008, mass production of
45nm products is expected to begin. Meanwhile,development of 32nm products is already underway.
DNP’s market share is estimated at more than 20%of the total photomask market and 31-32% of theoutsourcing market. In the market for 65nm
products, DNP currently controls
about 70% of the outsourcing
market (according to DNP
estimates), and plans to further
increase sales in the future.

Managing Director Yoshiaki Nagano

32

Strengths• The printing technology that we call “the DNA of
DNP” supports our photomask business• Skilled people who can deliver the accuracy andstable quality required for drawing, processcontrol, inspection etc., as well as micro-fabrication and other technological strengths• Business expansion strategy that has kept us astep ahead of the competition, including active
capital investment in the mass production of
cutting-edge products• Creation of market trends through active ties withsemiconductor manufacturers, device manufacturers and R&D institutes, etc.

I

Future Business Development

We intend to expand revenues throughthree main strategies: strengthening ourtechnological development capacity,
expanding globally, and forming allianceswith other companies.
Strengthening Technological
Development: Aiming for Further
Miniaturization and Developing NextGeneration Technologies
So far, we have done all of ourtechnological development related tophotomasks in Japan, taking advantage of
our strength in such technologies as
micro-fabrication, and in systems
development. In the future, we intend tocontinue developing technologies used inleading-edge fields.
Especially, most recently we have been
focusing on establishing mass-production
technology for 45nm products anddeveloping products that are 32nm or
smaller. Mass production of 45nm
products is expected to start in 2008. We
have already succeeded at processdevelopment for mass productions andhave started shipping samples. With aprojected startup in 2008, we are building
a state-of-the-art manufacturing line in
our Kyoto Plant to handle mass productionof cutting-edge 45nm photomasks. To
prepare for mass production, we aim toestablish systems and technologies thatwill allow us to provide products of reliable
quality.
In the 32nm field, a combination of ArF
immersion and double exposure is apromising candidate to be our nextgeneration photolithography technique. In
the future, use of ArF immersion scanners
is expected to spread, and 32nm
photomasks are expected to be in great
demand. We plan to resolve technologicalhurdles such as improving the accuracy ofsuperposition for double exposure.

Expanding Globally: Establishment of
New Manufacturing Base in Taiwan
As Western semiconductor
manufacturers increasingly move awayfrom doing their own fabrication, thephotomask market is shifting to Asia, andto Taiwan in particular. Taiwan has aconcentration of semiconductor plantsthat can produce the latest 300 mm
wafers, especially major foundries. It has
become a major world production basethat is even active in investments in stateof-the-art products. We expect thedemand for advanced photomasks willcontinue to grow in this area. DNP alreadyholds an overwhelming share of themarket for cutting-edge 65nm
photomasks. We began supplying
Taiwanese foundries with 65nm products
before other companies did, and haveestablished long-term supply contracts.
We are currently building a cutting-edge
photomask manufacturing plant in Taiwan,
which we aim to start operating in May of2008. This new base will allow us toprovide stable supplies to even more
semiconductor manufacturers and to meettheir demand for quick turnaround times.
The new base will also help further solidify
our position as a leader in the world
market, because it will allow us to provide
better customer service and sales
activities more closely tailored to ourcustomers’ needs.

Photomask Market(¥ Billion)

40

30

20

10

0

03

04

05

06

07

08

09

10

Source: DNP estimates

Forming Alliances: Joint Developmentwith Manufacturers of Chips, Devices andMaterials
We plan to continue our ongoing joint
development with manufacturers ofsemiconductors, devices and materials,
while proactively considering possibilities
for alliances with other companies.
We have long been partners with Intel inthe joint development of cutting-edgemask technology, and we will continue tomaintain good relations with Intel as ourcustomer and partner. In January 2006,
DNP and Intel extended our photomask
development collaboration to photomasks
used in the production of semiconductors
with line widths of 32nm and less,including the development of extreme
ultraviolet (EUV) lithography.
We will also actively strengthen
relationships with foundry manufacturers
in Taiwan, as we assume this will be
important in the future.

DNP Annual Report 2007

33

DNP in Brief

Contents

Overview
DNP at a Glance
DNP Solutions Businesses
Major Events of the Fiscal Year Ended March 2007
Code of Conduct/DNP Group Guidelines for Conduct
Corporate Governance
Board of Directors, Statutory Auditors and Corporate Officers
Investor Information

36
40
42
44
46
48
53
54

DNP in Brief

Overview

I

ProfileIn October 2006, DNP celebrated the 130th anniversary of its
founding.
Shueisha, the forerunner of Dai Nippon Printing Co., Ltd., wasestablished in 1876 as Japan’s first full-scale printing company.
Shueisha’s motto, “Running a Civilized Business” expressed thecompany’s aspiration to contribute to the development of society,and we have maintained this aspiration ever since. After startingout as a printing company, the company later branched out into avariety of fields, including commercial printing, business forms,
packaging, lifestyle materials, industrial supplies and electronics.
Today, DNP has established itself as the world’s largest
comprehensive printing company.
Currently, DNP employs about 38,000 people. In Japan, DNP has
20 division offices in major cities, 48 sales bases and 58 production
plants, while overseas it has another 21 sales offices and 7
production plants. The DNP Group includes Dai Nippon Printing
Co., Ltd., 96 consolidated subsidiaries and 1 1 affiliated companies
that are accounted for by the equity method.
In this annual report, “DNP” refers to the entire DNP Group, and “we” refers to DNP or the DNP
management team.

36

The Shueisha building circa 1890

I

Corporate Philosophy

Management Principle

Business Vision

P&I Solutions

The DNP Group contributes tothe emergently evolving
society of the 21st century.

In an emergently evolving society, we intend to discover
the problems and issues that consumers and clientcompanies face, and solve them by fusing printing
technologies (PT) and information technologies (IT).

We believe that in 21st-century society, interaction between
autonomous and diverse individuals and organizations will cause
unexpected phenomena to occur, which in turn will cause society tochange. This change will affect individuals and organizations andgenerate new unexpected phenomena, resulting in a rapidlychanging society that will require people to make adjustments inorder to adapt.
We call this type of society an “emergently evolving society,” andwe have made contributions to its development our management
creed. While keeping in view the changing times, we intend toactively lead evolutionary development, further expand ourbusinesses, and fulfill our social responsibilities.

■

In an emergently evolving society, markets and consumers’ needschange in unpredictable ways. Telecommunications networks,
financial and distribution systems, education, food clothing andshelter, and other social infrastructure are constantly changing. As
corporations and consumers increasingly wonder how they will
cope amid such changes, we can discover business opportunities
for DNP in the need to solve their problems.
We believe that by noticing signs of change before others do,coming up with possible solutions for problems, and getting a headstart on making proposals, we can develop our business andcontribute to society. We can make the most of these business
opportunities by making use of the PT and IT that we havecultivated in order to offer various products and services, and by
developing new solutions and becoming involved in the building of
new infrastructure.

Creation of Value by DNP

DNP
Marketing/
Planning

Autonomousand diverse
individuals andorganizations

Taiwa*
R&D

Production
Interactivity

Creation of
new value

Emergently
evolving
society

Influence on
individuals andorganizations

Products/Services
Printing
Technology

P&I
Information
Solutions Technology

Unforeseen
phenomena* “Taiwa” is a process that entails identifying problems and finding solutions through the exchange of viewpoints and ideas.

DNP Annual Report 2007

37

DNP in BriefI

DNP’s Businesses

Business Portfolio and Segments
DNP has two main businesses: our Printing business, which hasdeveloped through the application of printing and information
technologies, and our Beverages business, which is handled by
Hokkaido Coca-Cola Bottling Co., Ltd.
We divide our Printing business into three segments: Information
Communication, Lifestyle and Industrial Supplies, and Electronics.
The three Printing segments account for about 95% of DNP’sconsolidated net sales. We have constructed a business portfoliothat is well-balanced from the standpoints of stability, growthpotential and risk.

● Printing
Information Communication
Our Information Communication segment is composed of three subsegments: the printing of books and magazines, which has been a corebusiness since DNP’s founding; commercial printing; and business forms.
This segment covers a wide variety of media, including both paper andelectronic media such as the Internet (via PCs and mobile phones) DVDsand digital broadcasting. In addition to offering all types of printed
materials, we combine services like marketing analysis, customer
relationship management, planning, systems design and development,
media content creation and distribution, and data security management,in order to offer unique DNP solutions that expand our business.

■

Lifestyle and Industrial Supplies
The Lifestyle and Industrial Supplies segment contains three subsegments: packaging, lifestyle materials and opto-materials/industrial
supplies. All of these operations handle a large number of products thatare closely connected with ordinary people’s lives. Starting with printing
on non-paper materials like film or steel, we use coating and etching
technologies and other basic printing skills to make products like opticalfilm used in electronic displays. DNP is the world’s largest supplier of anumber of products, including color ribbons for printing photos fromdigital cameras, and we continue to expand our field of business into a
broad range of areas including electrodes for lithium-ion rechargeable
batteries used in mobile phones.

Three Well-Balanced Strategic Segments

Electronics
DNP’s Electronics segment uses the world’s most advanced microprocessing technologies to provide a large number of electronics products,
including photomasks (original plates used in semiconductor production),and color filters used in LCDs (liquid crystal displays). Ever since DNPInformation
Communication
A core business that provides
stable revenues; deals in a wide
variety of information media,
including printed materials,
smart cards, IPS and networks

The 3 Sub-Segmentsof DNP’s Printing
Lifestyle andSegment

Industrial Supplies
The force that drives expansion of
our business fields; we haveapplied printing technologies to
new fields such as packaging,dwelling materials, opto-materials
and industrial supplies

38

became the first company in Japan to succeed at making shadow masks
for domestic color televisions about a half-century ago in 1958, thecompany has made use of advanced technology to develop electronic
devices and display-related products one after another. By winning ourcustomers’ trust and being better than the competition as a manufacturer,
we steadily established a solid basis for our electronics business. Today,

Electronics

Our growth driver; we haveachieved overwhelming market
share and high growth potential
in display components andelectronic devices

DNP electronics components hold the key to progress in many
information-related devices.

● Beverages
DNP operates a beverages business through its subsidiary, Hokkaido
Coca-Cola Bottling Co., Ltd. By taking advantage of the strengths of our
Coca-Cola plant, we develop new products that are unique to Japan. We
are working to strengthen our business base through such means as
coordinating production and procurement with regional bottlers in Japan.

ISpecial Characteristics of DNP’s Structure

DNP as a Comprehensive Printing Company
Because we expanded into new business fields
while keeping printing technologies at the core ofour business, DNP has developed into acomprehensive printing company engaged in a
broad variety of fields ranging from book andmagazine publishing, commercial printing, business
forms, packaging, building materials, optomaterials/industrial supplies and display
components to electronic devices. By going a stepfurther and combining printing technologies withinformation technologies, we are accelerating our
expansion into new fields. Our comprehensive
printing company format is a business model notseen elsewhere in the world, and this uniqueness is
one of DNP’s strengths.
DNP doesn’t merely develop and offer products
and services. Rather, we hold repeated dialogues
with our customers in our capacity as a coordinator,
and work to find solutions to a variety of problems.
Because we dynamically link various functions
including research and development, production,
sales, planning and management, we can actively“create” orders that extend to auxiliary operations inaddition to a main product or service.

■

DNP’s Business Grows Through “Comprehensive Orders”

Work Flow at DNP
Toward the next project

Planning

Data
processing

Design/development

Production/
Manufacturing

Products
delivery/serviceprovision

Evaluationof results

Receive comprehensive orders that include
supplementary services■

Cross-media
development

Text
processing

DB construction
and management

Serveroperation

Distribution
management

Research

Promotionplanning

Production ofstill andvideo images

Programdevelopment

Information
security

Implementation/
operationof plans

Marketing

Product
planning

Intellectual
property
management

Systemdevelopment

Customer
information
management

Customer
service center

Alliances

A Group Structure That Enables Efficient Operation

Group company

DNP’s Group Structure
As the head office of the DNP Group, Dai Nippon
Printing Co., Ltd. (DNP) handles functions likeplanning, research and development, and sales, andalso maintains close relations with the production
and technical sections of the Group companies inorder to support the Group’s cohesive structure. The
head office and Group companies concentrate on
their respective roles in order to increase theefficiency and profitability of business operations.

Group company

Dai Nippon
Printing Co., Ltd.
Planning

Research

Development

SalesGroup company

Group company

Group company

Group company

Group company

Group company

DNP Annual Report 2007

39

DNP in Brief

DNP at a Glance

DNP’s main businesses consist of three segments: Information Communication, Lifestyle & Industrial Supplies and Electronics. Together,
they contribute 95.3% of the group’s net sales. The company also has the Beverages business segment, which generates 4.7% of net sales.

Information Communication

1

Books andMagazines

Net Sales

Operating Income(¥ Billion)(¥ Billion)

51.0

51.0

60

49.4

668.8

662.5

640.7

800

Books, magazines, comics [1][2], dictionaries [3], CD-ROM[3], textbooks, graphic art
collections, corporate
histories, historical reviews,
and other published materials

50
600
40
400

2

3

30
20

200
10
0

0

05

06

07

05

06

07

Lifestyle & Industrial Supplies
Net Sales

Operating Income(¥ Billion)(¥ Billion)

800

Printed packaging products
and eco-friendly containers(for beverages [13], food [14][15], household products [16],and cosmetics andpharmaceuticals, etc.), aseptic
filling systems,
PET bottles and preformed
bottles [17]

60

36.3

37.6

50

36.0

532.7

480.0

450.0

600

13

Packaging

40

400

15

16

30
20

200
10
0

0

05

06

07

05

06

07

Electronics

26

Display Components

Net Sales

Operating Income(¥ Billion)(¥ Billion)

800

LCD color filters [26], backplates for plasma display
panels [27], hologram screens[28], shadowmasks [29],projection TV screens [30],organic EL displays [31], andprojector screens [32]

60

37.8

39.7

50
600
40

291.9

296.8

29

30

14.9

269.6

400

20
200
10
0

0

05

40

06

07

05

06

07

30

Information Communication 42.7%

Lifestyle and Industrial
Supplies 34.0%

Electronics 18.6%

Beverages 4.7%

Net Sales(%)

Information Communication 49.6%

Lifestyle and Industrial
Supplies 35.3%

Electronics 14.5% Beverages 0.6%

Operating Income
(%)

4

7

8

9

10

11

12

21

22

23

24

25

33

34

35

37

38

39

Commercial Printing
Catalogs [4], flyers,
pamphlets, posters andcalendars [5], point-ofpurchase materials [6], andprinted materials advertising
events, etc.

IPS/Business Forms

5

6

Smart cards [7], plastic cards,
bankbooks and continuous
ledger forms for computerizedaccounting (delivery slips, etc.
[8]), IPS (information
processing services) [9],direct mail, stock and othersecurities certificates, gift
certificates [10], checks, allkinds of tickets, digital pens[11], hologram products [12]1418

Lifestyle Materials
Auto interior materials [18],decorative materials for stores,
offices and homes (including
coverings for walls, floors,
furniture surfaces, modular
bath interiors, and exteriors)[19], and functional films usedin electronic appliances [20]

17

19

27

28

Opto-Materials/
Industrial Supplies
Optical film for displays [21][22], transfer ribbons for color
printers and fax machines[23], digital photo printers[24], electrodes for lithium-ion
rechargeable batteries, carrier
films for electronic
components [25]20Electronic Devices
Photomasks [33], lead frames[34], system modules [35],package substrates [36], HDD
suspension components [37],IC tags [38], MEMS [38],other chemically etched
products

31

32

36

DNP Annual Report 2007

41

DNP in Brief

DNP Solutions Businesses

DNP offers flexible solutions to a variety of problems facedby corporate clients, based on the knowledge and skills that wehave accumulated throughout our long corporate history.
These problems include, “How can we make our daily
operations more efficient?” “How should we compile data tohelp us develop a new market?” “How can we increase theeffectiveness of our sales promotions?” “How should we guard
access to corporate and personal information?”

Solutions by Operating Processes

Solutions by Segment
Information Communication(Books & Magazines; Commercial Printing; IPS/Business Forms)
Not only does DNP process information using new types of media, we
handle every step from planning and content creation through the deliveryof finished products. We offer more effective, 21st-century information andmarketing strategies that ease the burden on customers in a wide variety ofindustries and help deliver their messages to consumers with greater
speed. In order to establish strong security systems for protecting personaldata, we offer a large number of security solutions using smart cards.

Editorial support systems

Personalized DM/Catalogs

On-demand publishing

Cross-media solutions

Solutions for Sales Promotion
Product development support
Enhancement of sales methods
Marketing and research
Promotional strategy proposals
Production of sales promotion tools and improving operational efficiency
Presentation support tools
Management of customer data

Solutions for Production & Distribution
Boosting efficiency in receiving/placing orders for materials
Databasing of product information
Production line control systems
Delivery and distribution systems
Payment collection systems
Boosting the efficiency of manufacturing operations

Solutions for Administrative Management
Various types of operational support related tointellectual properties
Purchasing systems ID issuing and management
Online accounting systems
Computerization of corporate information

Solutions for Public/IR Relations
Corporate communication support
Archiving of corporate information
IR solutions

Lifestyle & Industrial Supplies(Packaging; Lifestyle Materials; Opto-materials/Industrial Supplies)
DNP has been finding new uses for printing technologies in thedevelopment of products that become an intimate part of modern daily life
and are indispensable to the development of industry. Our reliable
manufacturing technologies also serve as a base from which we develop avariety of solutions to make life more convenient and safe. In addition toenvironment-oriented solutions, these include product development,
design, machinery design, system engineering and sales promotion.
Packaging design systems

Product tracing systems

Online systems for teampackage design editing

Aseptic container-fillingsystems

Lifestyle materials
environmental impact
assessment systems

Food and beverage-related
market researchElectronics(Displays; Electronic Devices)
Virtual plant solutions allow customers to use the world-class electronics
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, we offer high value-added
services that go far beyond manufacturing.

Solutions for Training
LSI design
Computerized training programs
Educational materials production support
Editing of curriculum information

42

Virtual plant systems

Turnkey businesses

Digital Solutions
Network/Data Base Solutions

Smart Card Solutions

DNP offers a variety of solutions by developing applications and networked
systems.

DNP doesn’t just manufacture cards. We also develop operating systems
and applications, provide ASP services, and build smart card systems, etc.

Providing Functionality for Websites

Smart Card Introduction Support & Consulting

Development and setup of all kinds of active server
pages (ASP) services
Electronic form system development e-statement issuance
Measurement of Web functions
Recommendation systems
Account settlement functions, etc.

DNP chip migration program, etc.

Smart Card Issuance Service
Contact smart cards (Native OS MULTOS™ JavaCard™)
Contactless smart cards (Types A&B FeliCa®)
Hybrid cards Dual-interface cards, etc.

Smart Card Software Development and ASP Services

Frameworks for Content Sales
Distribution platforms
Protection from unauthorized content distribution
Issuance of content IDs
Copyright protection system, etc.

Database & Customer Relationship Management Solutions

OS Native OS MULTOS™ JavaCard™
Authentication systems Desktop applications Drivers, etc.

Smart Card Peripheral Sales
Writing/reading devices Card issuance systems Gate systems, etc.

IC Tag Solutions

Various kinds of CRM support (e.g. analysis of loyalty points)
Data mining
Marketing information mapping, etc.

Because DNP manufactures books and food packages, we are in the best
position to attach IC tags to individual products.

Operation of DNP’s Information Sites

Applications Development

Digital content sales
Map information services
Shopping sites for mobile phones
Incentive Marketing, etc.

Product distribution management Tracing systems
Admissions systems (conferences, events, concerts, etc.)
Electronic notification when children leave school Electronic posters, etc.

IC Tag Peripheral Sales
Navigation carts

Backup Systems
Security systems
Internet data centerIC tag reader/writers, etc.

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

Acquisition of certifications such as Privacy Mark, ISO, etc.; software development and hardware enhancement, etc. for IP rights protection and security
Data centers to support network services; 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 planning 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

DNP is ready to provide support and perform a variety of tasks on behalf of corporate clients in order to establish the best possible
processes for their businesses.

Market research, project proposals, construction of frameworks for running campaigns, total support for all kinds of projects

Creative support

Production support for all kinds of information media, including printed materials, web sites (PCs and mobile phones), CD, DVD and animation

Fulfillment support

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

DNP Annual Report 2007

43

DNP in Brief

Major Events of the Fiscal Year Ended March 2007

April 2006

July 2006• DNP entered into a strategic alliance withGerman 3-D computer graphics (CG)software provider Realtime Technology
AG (RTT AG) to produce 3-D CGs from
CAD data. (See P. 63)• DNP established two new companies
based on businesses that it took overfrom Konica Minolta Holdings, Inc. DNPID Imaging Co., Ltd. offers ID photographs and DNP Photo Marketing Co.,
Ltd. engages in domestic sales of photorelated products. In addition, DNP
agreed to acquire Konica Minolta’s
Odawara plant for manufacturing silver
halide color photographic paper.
(See P. 71)

May 2006• DNP opened the “IC Tag SCM Solution
Test Center,” a facility for experimenting
with logistics management using IC tags.
(See P. 63)• DNP agreed to license its patent rights tothe technology used in manufacturing
DNP’s build-up board “B2it™” toSamsung Electro-Mechanics Co. Ltd.
(See P. 77)

June 2006• Newsweek Japan ranked DNP No. 35
overall in the world, and No. 3 in Japan
overall, in its 2006 rankings of theworld’s 500 top corporations. In terms of
CSR, Newsweek ranked DNP No. 28
worldwide.
• The Society for Information Display
granted its “2006 Display Component of
the Year Gold Award” to DNP for the”Crystal Illusion Screen” transparent
projection screen that DNP developedand is now marketing.

44• DNP increased its stake in the ownershipof MobileBook.jp to 34.7%, becoming thelead shareholder and marking DNP’s fullfledged entry into the electronic bookproduction, distribution and licensing
businesses. (See P. 64)• DNP became the first Japanese printing
company to join the United Nations
Global Compact.

August 2006
• Mitsui and Co., Asatsu-DK Inc. and DNP
jointly established Japan’s first comprehensive retail media solutions company
specializing in in-store advertising.
• DNP and Brion Technologies of the U.S.
began joint development aimed at
improving productivity and precision in
the manufacture of cutting-edge
photomasks. (See P. 77)• Part of DNP’s building materials sector
and the building materials sales divisionand some regional offices of subsidiary
Dai Nippon Shoji Corp. were spun off andcombined to form a new company, DNP
Lifestyle Materials Marketing Company,
to handle the development, manufacturing and sales of building materials.
(See P. 70)• DNP was ranked third out of 252 companies studied in Nikkei Inc.’s survey of thebest places to work.

September 2006
• The Japan Packaging Institute chose DNP
to receive a technical packaging award aspart of the 30th Annual KinoshitaAwards, in recognition of DNP’soutstanding achievement in the researchand development of packaging
technology.
• The Japan Automatic Identification
Systems Association awarded DNP the
8th Annual Automatic Identification
Systems Award for DNP’s fabric bolt
management system using contactless IC
tags for the identification of individual
bolts of fabric used for clothing
production.
• The Confederation of Danish Industries
awarded DNP its Product of the Year2006 award for DNP’s Supernova
Screen™ (sold under the name
JETBLACK™ in Japan) projector screenthat displays clear images even in abrightly lit room.

October 2006
• DNP established technology for mass
producing 8th-generation color filters
using inkjet-based technology, and began
supplying Sharp Corp. with the filters at
its Kameyama No. 2 Plant on an in-plantbasis. (See P. 76)• DNP and the Musée du Louvre jointly
opened the Louvre-DNP Museum Lab to
explore new ways of enjoying art.
(See P. 95)• DNP opened P&I Solutions Base as theheadquarters of its solutions-based
business, in the new DNP Gotanda
Building in Tokyo’s Shinagawa Ward.
(See P. 23)• DNP announced the addition of a
cutting-edge production line to its Kyoto
Plant to handle the mass production of
the most advanced 45nm photomasks,
with startup scheduled for January 2008.
(See P. 77)

November 2006
• DNP established a new company, Dentsu
Retail Marketing Inc., to provide
marketing support services including help
with negotiations between manufacturers
and retailers, in-store sales promotions,and merchandise control.
• DNP showed its seriousness about
participating in the research, development and commercialization of largescale lithium-ion batteries by increasing
its stake in Ellie Power Co., Ltd. through athird-party allocation of shares.

• DNP teamed up with RSA Security in asingle-use password business and begansuch operations as selling authentication
server ASP services and small devices.

• DNP was ranked No. 6 out of 272
companies in Nikkan Kogyo Shimbun’s
third annual survey of “Corporate Power
Rankings.”• DNP has been repurchasing its own
shares since February 2003. Between
November 2006 and January 2007, wepurchased 10 million shares for 18.26
billion yen.

• DNP’s “Trailcatch” distribution history
management system received the 2006
Nikkei Superior Products and Services
Award for Excellence and the Nikkei
Business Daily Award.

• On November 21, 2006, DNP retired 10
million shares at a cost of 16.5 billion yen.

March 2007

December 2006
• DNP tied up with special effects and CG
studio Digital Domain, Inc. of California,
and began a business producing
Hollywood film-quality 3-D computer
graphics imagery based on Computer
Aided Design (CAD) data. (See P. 63)

January 2007
• In order to strengthen its supply systemin the Asian region where demand issurging, DNP announced the construction of a new cutting-edge photomask
plant in Taiwan, primarily for 65nm
products, with startup planned for May
2008. (See P. 77)• DNP received a letter of thanks from the
UN High Commissioner for Refugees(UNHCR) for donating a portion ofrevenues from pretend shops that DNP
opened at the “DNP Family Festa in
KANSAI” and the “8th Annual DNPGroup Field Day” to UNHCR.

• DNP received Intel’s “Preferred Quality
Supplier” Award, which is presented tocompanies that make major contributions by providing products and/or
services to Intel Corp.
• Our Board of Directors decided to repurchase up to 25 million DNP shares at a
cost of up to 54.0 billion yen through theTokyo Stock Exchange between March 23
and July 31 2007.
Based on this decision, we repurchased
658,000 shares on March 23, at a costof 1,214 million yen.
• DNP won Nikkan Kogyo Shimbun’s fourthannual “Monozukuri Components
Award” in the electronic components
category for developing a printed circuitboard with integrated passive
components.

DNP Annual Report 2007

45

DNP in Brief

Code of Conduct/DNP Group Guidelines for Conduct

I

Code of Conduct

1. Engage in taiwa* with all kinds of people
Through taiwa, we uncover the hopes and dreams of ourcustomers and corporate clients, and even find problems that we
hadn’t been aware of ourselves. We will expand taiwa with people
in various DNP divisions concerning problems that we are aware of,and find solutions to those problems.

I

DNP Group Guidelines for Conduct

We have established the following guidelines for conduct that
underly all of the activities through which we realize DNP’s
management principles. The guidelines are to be observed by all
DNP Group employees.

1. Contribute to the development of society
2. “Be independent, collaborate” in order to solve problems
Acquiring specialized knowledge and skills and being
independent enables us to notice problems and issues that surface
here and there within taiwa. Based on these discoveries, we
collaborate to propose solutions that can satisfy our customers,
while remaining aware of each other’s roles and values.

2. Observe laws and social ethics
3. Respect human dignity and diversity
4. Protect the environment and realize a recycling-oriented
society
5. Realize a universally accessible society
6. Disclose information appropriately

3. Be quick to take on challenges, even in the face of difficulties
As professionals, we are aware that the more difficult a problem
is, the more is expected of us. We approach difficult problems
proactively, with a spirit of challenge, and use difficulties asopportunities to polish our professional skills.
4. Always act with integrity, fairness, and impartiality
Of course we must obey laws and social codes. In the same way,
we must treat others with consideration, speak honestly, and act
with integrity. This kind of conduct will generate sympathy andtrust from society, and will increase the value that we provide tosociety.
5. Take responsibility for our own decisions and actions
Each of us must take responsibility for our own decisions andactions. Not only will this increase our coworkers’ trust in us, but it
will allow us to objectively and appropriately evaluate the processes
by which we implemented our work, and will help us to make great
strides at our next opportunity.

* Taiwa is a process that entails identifying problems and finding solutions through the exchange ofviewpoints and ideas.

46

7. Ensure the security of information
8. Ensure the safety and quality of products and services
9. Create safe and vibrant workplaces
10. Contribute to society as a corporate citizen

DNP Annual Report 2007

47

DNP in Brief

Corporate GovernanceI

Fundamental Philosophy

DNP has established a management
concept of contributing to the emergently
evolving society of the 21st century, andrecognizes that fulfilling its corporate
responsibilities to society as a corporation
and being trusted by its shareholders,customers, consumers, employees andother stakeholders is critical to improving
the competitiveness of the company.
Toward this end, we regard
corporate governance, including aninternal control system, as a top
management priority. We have strived toestablish and manage an organizational
structure that allows for precise
managerial decision-making, prompt andappropriate execution based on thedecisions made, and proper supervisionand surveillance; strengthen education andtraining to improve each employee’s
awareness of compliance issues; andenhance our overall corporate governance.

48

I

Progress on Corporate Governance Measures

1. The organizational structure formanagerial decision-making,execution, supervision and otheraspects of the corporate
governance structure(1) Organizational details
DNP’s organization is designed to allow
the Directors with specialized expertiseand experience in a wide range of businessfields to participate in management
decisions, to take responsibility andauthority as they execute their work, andto supervise the work of other Directors.
Also, so as to promptly make precise
management decisions, smoothly act
based on the decisions, and further
strengthen proper supervisory functions,
corporate officers named by the Board of
Directors execute the decisions made by
the Board of Directors, and have theresponsibility and authority to decide uponand carry out those matters delegated by
the Board. Working in close
communication with the Directors and inclose proximity to the workplace, theirfunction is to ensure that the views of
those on the front lines are reflected inmanagement.
At the general shareholders’ meeting
held June 28, 2007, DNP revised the termof office for the Directors from two years
to one year, in order to have more
flexibility to construct a management
system best suited to responding to thebusiness environment, and in order tofurther clarify management responsibility
for each fiscal year. Also, in order tostrengthen our corporate governance andmanagement systems, we revised ourmanagement structure to have the Boardof Directors appoint four representative
directors, consisting of one President andthree Executive Vice Presidents.
The Board of Directors consists of 28
directors, including one outside director. In
principle, the Board meets once a month.
Based on the Company’s Board of
Directors Regulations, the Directors ensurethat operations are appropriately run andmutually supervise day-to-day operations.
The Directors and corporate officers holdexecutive committee meetings once amonth to exchange information that is
helpful for efficient decision-making.
DNP has in place a Board of Statutory
Auditors that consists of five statutory
auditors, including three outside statutory
auditors. In accordance with auditors’prescribed audit criteria andresponsibilities, the statutory auditors
conduct audits of the Directors’
management of day-to-day operations
and, as necessary, seek information fromthe Directors and employees regarding
business operations.

(2) Internal controls and auditing
In order to maintain a structure thatallows for precise management decisionmaking, appropriate and prompt executionof business, and inspection and monitoringof these functions, the Corporate Ethics
Committee, as the body in charge ofinternal control, inspects and guides DNP’s
executive departments according to the
DNP Group’s Basic ComplianceManagement Regulations.
The Auditing Department ensures the
propriety of operations by conducting
accounting and operational audits basedon internal audit regulations and providing
progress reports to the statutory auditors.
The statutory auditors hold regularmeetings of the Board of Statutory
Auditors, work with other statutory
auditors to perform their audit duties, andclosely cooperate with the accounting
auditors by receiving from them an
explanation of the audit plan at the start of
the fiscal year, assessing audit operations
during the fiscal year as appropriate, andreceiving a report of audit results at theend of the fiscal year.

The names of the certified public
accountants who performed theaccounting audits, the audit firm they are
employed by, and their assistants in theaudit work are as follows:• Certified public accountants who
performed the accounting audits(Continuous audit years)
Senior partner, managing partner
Atsushi Sasayama (5 years),
Kiyohisa Horie (2 years)
Managing partner
Koichiro Kita (2 years)• Audit firm

Meiji Audit Corporation• Number of accounting audit assistants

7 certified public accountants, 8 junioraccountants, 1 other(3) Development of a risk management
structure
To manage risks related to compliance,
the environment, disasters, product safety,
information security and export
management, the Corporate Ethics
Committee, other special committees, andother head office divisions develop rules
and conduct training as part of risk-related
preemptive efforts, and respond promptly
to avert or minimize losses to the DNPGroup. Certain organizational units anddirectors are promptly established andappointed for responding to risks that have
newly developed.

(4) Progress on other corporate
governance measures
Through the DNP Group Corporate Pledge(established in 1992, revised in 2002), the
DNP Group Employee Code of Conduct(established in 1993, revised in 1998) andthe DNP Group Guidelines for Conduct(established in 2007), DNP has set down
codes of conduct and specific guidelines for
conduct for employees to follow, so as tocontribute to the prosperity and solid
development of society, promote fair andappropriate corporate activity, protect theenvironment, contribute to society, andestablish a free and lively corporate culture.
Among the stipulations is that DNP, as an
emergently evolving company, fulfill its
corporate responsibilities to society as acorporation, respect its shareholders,customers, consumers, employees and otherstakeholders, and act in a way that earns
trust. The DNP Group CSR Report details not
only the DNP Group’s business activities but
also efforts to address social issues andprotect the environment, and aims toenhance understanding and deepen
confidence and trust throughcommunication with various stakeholders.
In order to establish a system for ensuring
the reliability of financial reports and thetimely and appropriate disclosure ofcorporate information, DNP established an
Information Disclosure Committee in May
2006. In October of that year, we adopted
Information Disclosure Regulations in orderto clarify the committee’s role. We willcontinue to work on the appropriate
disclosure of corporate information in orderto help win the trust and proper
appreciation of the DNP Group by its
shareholders, investors, customers,

DNP Annual Report 2007

49

DNP in Brief

A diagram of the corporate governance structure is shown below.

General Meeting of Shareholders
Audit

Audit
Board of Directors

Representative Director

ReportingCorporate Ethics Committee
Open Door Room
ReportingInformation Disclosure Committee

Director in charge

Audit

Information Security Committee
Environmental Committee
Complaint Handling Committee
Central Disaster Prevention Council

Audit

Group companies

Audit
Legal and other main divisions

Guidance
Training(Environmental Safety Division, Labor Division,
Technology Division, Accounting Division, Management
Division, IP Division, Legal Affairs Division, etc.)

Guidance
Training

Auditing Department

Business divisions

Product Safety Committee

Oversight of internal controls

Head office

Operating units

Accounting Auditors

Corporate officers

ReportingBoard of Statutory Auditors

Audit

Assistance

Corporate Social Responsibility Committee

Guidance
Training

Audit unit

Audit
(Autonomous implementation, inspection,
review, improvement)

Coordination(5) Compensation paid to directors and auditors
The details of compensation DNP paid to directors and statutory
auditors are as follows:
Compensation based on
articles of incorporation
and resolutions at
general meeting ofshareholders

Bonuses based on profit

Directors’ retirement
benefits based on
resolutions at general
meeting of shareholders

persons¥ million

persons¥ million

persons¥ million

26

669

26

265

—

—

(Of which, outside
directors)

(1)

(21)

(1)

(0)

(—)

(—)

Auditors

5

104

—

—

—

—

Total

31

773

26

265

—

—

Directors(6) Compensation paid to Meiji Audit Corporation(accounting auditor)
The details of compensation DNP paid to Meiji Audit Corporation
are as follows:(¥ Million)

Compensation for services in accordance with Article 2-1 of the Certified Public
Accountants Law (Law No. 103, 1948)

70

Compensation for other services

—

Total

70

Note: Figures less than ¥1 million have been rounded down.

Notes: 1. Figures less than ¥1 million have been rounded down.
2. In addition to the above, bonuses of ¥22 million were paid to employee directors.
3. There were 26 directors and five auditors as of the end of the fiscal year.
As of the end of the general shareholders’ meeting held June 28, 2007, DNP abolished the practice of giving retirement bonuses to members of the Board and to auditors. In order to introduce a compensation systemthat is linked to DNP’s medium- to long-term growth and to its share price, the Board decided to allot a portion of each full-time director’s monthly compensation, as of July 2006, to the monthly purchase of DNP
shares through the DNP Directors’ Shareholding Association.

50

consumers and other stakeholders.

2. Interests between DNP and its
outside director and outside
statutory auditors
Neither the outside director nor theoutside statutory auditors have personal,
financial or business relationships or otherinterests with DNP.

3. Measures for enhancing DNP’scorporate governanceIn accordance with a resolution by the
Board of Directors at a May 10, 2006
meeting, DNP has establishedarrangements for ensuring the propriety ofoperations, encompassing the following
aspects:

Arrangements for ensuring that theexecution of operations by the Directors
and employees complies with the laws
and the Articles of Incorporation
1) The DNP Group has establishedguidelines for conduct for all
employees (including the Directors)
and conducts training to familiarize
employees with it.
2) Directors with day-to-day business
responsibilities preempt acts inviolation of laws or the Articles ofIncorporation by supervising the
conduct of the heads of the various
operating units, including corporate
officers.
3) To establish and manage arrangements
for ensuring the propriety of operationsin the DNP Group, the Group has

established Basic ComplianceManagement Regulations, revised theduties of the Corporate Ethics
Committee, which consists of the
Directors in charge of head officedivisions, and made the committee
responsible for overseeing the Group’s
internal controls based on the rules
and regulations.
4) Under the oversight of the Corporate
Ethics Committee, including an
Environmental Committee, Product
Safety Committee, Information
Security Committee, Complaint
Handling Committee, Central Disaster
Prevention Council, and each head
office division in charge of specificlaws and regulations, conduct reviews,
provide guidance, and offer training for
operating units and Group companies
in their areas of responsibility.
5) DNP has newly established an
Information Disclosure Committee fordeveloping arrangements for ensuring
the reliability of the Company’s
financial reports and for the timely
disclosure of appropriate company
information. Under the oversight of the
Corporate Ethics Committee, it is
responsible for properly disclosing
information on DNP and consolidated
Group companies in a timely manner.
6) As for internal audit, the Auditing
Department, which is independent of
the operating units, conducts internal
audits, provides guidance, and offers
training to the operating units andGroup companies regarding theestablishment and management of
arrangements for ensuring the
propriety of operations.

7) The heads of the operating units
autonomously determine, implement,
inspect, review and improve therequired arrangements and proceduresfor their divisions, based on the DNPGroup’s Basic ComplianceManagement Regulations of the DNPGroup and in light of the specificoperations of each division.
8) The Open Door Room, a gateway forinternal notifications within the DNPGroup established within the
Corporate Ethics Committee, receives
and responds to reports from Group
employees concerning legal violations.

Rules and other arrangements for
managing the dangers of losses
To manage risks related to compliance,
the environment, disasters, product safety,
information security and export
management, the Corporate Ethics
Committee, other special committees andother head office divisions develop rules
and conduct training as risk-related
preemptive efforts, and respond promptly
to avert or minimize losses to the DNPGroup. Certain organizational units anddirectors are promptly established andappointed for responding to risks that have
newly developed.

DNP Annual Report 2007

51

DNP in Brief

Arrangements for ensuring that the execu-

Arrangements for ensuring proper busi-

Arrangements for ensuring effectivetion of operations by directors is efficientness operations

audits by the statutory auditors

1) The Board of Directors meets once amonth and at other times as needed.
Executive committee meetings are held
once a month for efficient decisionmaking and the sharing of management
information.
2) Those responsible for carrying out
operations based on decisions by the
Board of Directors do so within theirauthority and in accordance withorganizational regulations, position
authority rules, collective decisionmaking rules, and other internal rules.

1) To ensure the propriety of its
operations, the DNP Group has
established guidelines for conduct for
all employees (including the Directors),
and conducts training to familiarize
employees with it. The Group has alsoestablished Basic ComplianceManagement Regulations concerning
the establishment and management of
arrangements for ensuring the
propriety of operations, and based onthem, Group companies implement
the regulations.
2) The Group companies autonomously
determine, implement, inspect, review,
and improve the required arrangements
and procedures for their divisions,based on the policies written in 1)
above and in light of the details andscale of their businesses.
3) The Auditing Department, theCorporate Ethics Committee, the otherspecial committees, and other head
office divisions audit or review, provide
guidance, and offer training on the
progress made as specified in 1) and 2)
above.

1) The Audit unit with a dedicated staff
assists statutory auditors with theirwork. The Audit unit staff performs
operations under the direction of thestatutory auditors.
2) The Auditing Department and the
Corporate Ethics Committee regularly
report to the statutory auditors on theestablishment and management of
arrangements for ensuring the
propriety of audits and operations.
3) The Representative Director regularly
exchanges views with the Board of
Statutory Auditors.

Arrangements concerning the maintenanceand management of information relating todirectors’ execution of operations
Information on the Directors’ execution ofoperations is registered or recorded in theform of minutes of Board of Directors
meetings, minutes of various committee
meetings, approval documents (ringi) andother documentation, or electronic
documentation. This information registeredor recorded as paper or electronic
documents is appropriately and safely
retained and stored in easily searchable
condition for at least 10 years, in accordancewith basic regulations on information
security, document management standards,
and electronic record-keeping standards.

52

4. Summary of limitation of liability
contract
DNP and its outside director and outside
auditors concluded an agreement that
limits directors’ and auditors’ liability fordamages within the parameters set forthin Article 423, Paragraph 1 of Japan’s
Corporate Law, so long as they execute
their duties in good faith and without
serious negligence.

5. Number of directors
DNP’s articles of incorporation specify
that the number of regular members on
the Board of Directors shall be no morethan 28.

Board of Directors, Statutory Auditors and Corporate Officers(as of June 28, 2007)

Managing Directors

President

Yoshitoshi Kitajima
Executive Vice Presidents

Koichi Takanami
Satoshi Saruwatari
Masayoshi Yamada
Senior Managing Directors

Mitsuhiko Hakii
Osamu Tsuchida
Teruomi Yoshino
Yoshinari Kitajima

Satoshi Saruwatari

Directors

Hiromitsu Ikeda
Toshio Kawada
Kazumasa Hiroki
Yujiro Kuroda
Tatsuya Nishimura
Masahiko Wada
Tetsuji Morino
Takashi Toida
Shigeru Kashiwabara
Kunikazu Akishige
Kenji Noguchi
Yoshiaki Nagano
Motoharu Kitajima

Yoshitoshi Kitajima

Koichi Takanami

Tatsuo Komaki
Taketsugu Yabuki
Takao Shimizu
Akira Yokomizo
Yoshiki Nozaka
Masaki Tsukada
Tadao Tsukada *Standing Statutory Auditors

Minoru Yoneda
Noriaki Nakamura
Kiyoshi Yuzawa *Statutory Auditors

Yasuchika Negoro *Kuniaki Nomura **Outside director or auditors

Corporate Officers

Junjiro Inoue
Akira Oguri
Tatsuro Kitayuguchi
Koichi Hashimoto
Masanori Akada
Fujio Yamazaki
Takashi Saito
Shigemi Furuya
Katsuhisa Fudouta
Yoshio Nishida
Jun-ichi Tsuchiya
Kensuke Nakamura
Tokuji Kanda
Yoji Yamakawa
Takashi Wada
Sakae Hikita
Ryuji Minemura

Masayoshi Yamada

DNP Annual Report 2007

53

DNP in Brief

Investor Information(as of March 31, 2007)

Dai Nippon Printing Co., Ltd.
Head Office:Administrator of Shareholder Register:

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

Mizuho Trust & Banking Co., Ltd.

Tokyo 162-8001, Japan

2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan
Tel: +813-5213-5213

Established:

1876
Annual Meeting of Shareholders:

The annual meeting of shareholders of DNP is normally

Number of Employees (consolidated):

held in June each year in Tokyo, Japan

37,740Paid-in Capital:

Investor Relations:¥114,464 million

Dai Nippon Printing Co., Ltd.
Press and Public Relations
1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku,

Number of Common Stocks:

Authorized

1,490,000,000 shares

Tokyo 162-8001, Japan

Issued730,480,693 shares

Tel: +813-5225-8220
Fax: +813-5225-8239
E-mail: info@mail.dnp.co.jp

Number of Shareholders: (more than 1,000 shares)

22,998Web Site Address:

http://www.dnp.co.jp/

Stock Exchange Listings:

Tokyo, Osaka
Major Shareholders:

Percentage(%)

The Master Trust Bank of Japan, Ltd. (Trust A/C)

46,044

6.30%

The Dai-ichi Mutual Life Insurance Co.

34,646

4.74%

Japan Trustee Services Bank, Ltd. (Trust A/C)

23,444

3.2 1 %UBS AG London-IPB Segregated Client Account23,1 7 93.17 %

State Street Bank and Trust Company 505103

21,0502.88%

NATS CUMCO

19,6442.69%

Mizuho Corporate Bank, Ltd.

15,242

2.09%

Nippon Life Insurance Co.

14,3491 .96%

Mizuho Bank, Ltd.

12,47 1

1 .7 1 %Employees’ Shareholding Association

9,934

1 .36%

Other than above, DNP holds 35,563,002 of its own shares.
While the registered owner of these shares is Dai Nippon Printing Co., Ltd.,
1,000 of the shares are in effect not owned by the company.

54

Shares(thousands)

Share Price Evolution (Tokyo Stock Exchange)(between April 1, 2005 and March 31, 2007)
DNP Stock Price (yen)Increase (%)*
60

­ DNP

50

­ Nikkei Average

2,500­ TOPIX
40

30

20
2,000

10

0

-10
1,500

-20

05

06

07
*Index 100 = March 31, 2004

(as of March 31, 2007)

Voting Rights
Type

Number of Stocks (stocks)

Number of Voting Rights (rights)

Stocks with no voting rights

̶̶

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

Stocks with limited voting rights (other)̶̶

Stocks with voting rights (treasury stocks, etc.)

Common stocks

36,997,000

̶

Stocks with voting rights (other)

Common stocks

690,543,000

690,543

Stocks with less than trading units

Common stocks

2,940,693

̶

Outstanding shares
Total voting rights of stockholders

730,480,693

̶̶

690,543

Treasury Stocks
Holder(as of March 31, 2007)

No. of Stocks Held

Percentage of Holding to No. of Outstanding Shares

Dai Nippon Printing Co., Ltd.

35,562,000

4.87

Kyoiku Shuppan Co., Ltd.

1 ,435,000

0.20

Total

36,997,000

5.06

DNP Annual Report 2007

55

SEGMENTINFORMATION

Information Communication

Lifestyle and Industrial Supplies

Electronics

Financial Results

58

Business Strategies

60

Topics62

Financial Results

66

Business Strategies

68

Topics70

Financial Results

72

Business Strategies

74

Topics76

Segment Information

INFORMATION COMMUNICATION

Financial Results
Financial Highlights(¥ billion, %)2007.32006.32005.3¥668.8¥662.5¥640.7

Operating income

51.0

51.0

49.4

Operating income margin

7.6%

7.7%

7.7%

Net sales■Net sales (left)■Operating income (right)(¥ billion)

700

600

120

500

100

400

80

300

60

200

40

100

20

0

0

05

06

07

Business Environment
In the fiscal year through March 2007,
demand for printing, as measured by
Japanese domestic publishing sales, declined
2.8% year on year, resuming a downward
trend that had been interrupted two years
ago. In commercial printing, sales by advertising companies increased by 1.6%, continuing the previous year’s rise, but the growth
was weak owing to a string of months in thesecond half in which sales declined year on
year. Factors that squeezed profits — suchas increasing material costs and a downward
pressure on unit prices from intensifiedcompetition — were more prominent thanever, and made the industry environment
even more challenging.

58

Summary of Financial
Results
In books and magazines, sales of freenewspapers and magazines increased, but
the publishing market remained weak andsales of magazines of weak genres declined.
In commercial printing, net sales increased
by about 5%, with orders for flyers,
pamphlets and premium products growing
as companies waged vigorous sales promotion campaigns. In the business forms
sector, revenue growth was strong for information processing services (IPS), which
covers everything from data input to theprinting and shipment of personal mail, andsales of smart cards, mainly to banks,
increased substantially. As a result, net sales
from Information Communication grew by
6.4 billion yen, or 1.0%, to 668.8 billion yen.
Despite aggressive cost-cutting measures,operating income was heavily affected byhigher material costs and lower unit prices
and declined by 58 million yen, or 0.1%,
from the year before to 51.0 billion yen. The
segment’s operating income margin was
7.6%, down 0.1 percentage point from theprevious year.
Information Communication contributed
43% of DNP’s total net sales and 50% of its
operating income.
Books and Magazines
The monetary value of publishing sales
from January to December 2006 declined
again in Japan, by 2.0% from the previous
year to 2,152.5 billion yen. Book sales rose
for the first time in two years, by 1.4% to932.6 billion yen, thanks to titles that sold amillion or more copies and new educational
books, but magazine sales declined by 4.4%
in value terms to 1.22 trillion yen and by

6.1% in volume terms owing to a decline in
the number of new magazines. Sales of freenewspapers and magazines increased solidly,with contributions from an increase in thenumber of publications.
From April 2006 to March 2007, 179 newmagazines were launched in Japan, a declineof 19 from the same period a year earlier.
DNP received orders to print 30% of these,or 54, an increase of seven over the previous
year. On the other hand, 170 magazines, or
53 fewer than the previous year, discontinued publication during the year. DNP
had been printing 35 of these, or 21%.
Although stepped-up marketing efforts
resulted in new business for the publicationof new magazines, net sales of books andmagazines declined 3% from the previous
year because of the weak market. At theoperating income level, cost reductions
through an increased proportion of inhouse printing and lower distribution costs
were insufficient to offset a decline in sales
volume.
Commercial Printing
Advertising-related sales in the fiscal year
through March 2007 increased for the third
straight year, by 1.6% from the previous
year. Corporate spending on advertising wasstrong in the first half of the year, thanks to
the Turin Winter Olympic Games and thesoccer World Cup, but declined in thesecond half owing to a slowdown in corporate earnings growth. Spending on advertising in the four major types of media —TV, radio, newspapers and magazines —declined, but online advertising spendingrose again by a solid 29%.
Net sales in the commercial printing
sector increased 5% from the previous year
thanks to growth in orders for flyers,pamphlets and premium products anddespite a slight decline in orders for catalogs.
However, competition was intense andthe business environment was even harsher
than before. In our effort to secure profits,
the cost-cutting measures we implemented
included a reduction in lead times, improvements in yield, a strengthening of ourcooperative framework by offering technicalguidance and consulting to outsourcing
providers, and inventory reductions in order
to cut outside warehousing fees.
Business Forms
Sales of ledgers increased thanks to lifeand non-life insurance companies’ changes
to documents explaining important matters,some non-life insurance companies’ apologies to policyholders, and a wholesale uptake
through a printing management company
structure. In the IPS business, price compe-

tition heated up, but orders increased for theissuing of bills and other forms and also as aresult of proposals to customers to handle a
package of related back-office operations.
Thanks to good growth in IPS and smart
card sales as a result of these efforts, overall
net sales in the Business Forms area
increased 9% year on year.
Major applications for which we havedeveloped IPS include billing statements formobile phones, credit cards, transport services, non-life insurance certificates andapplication forms, bank and securities company customer statements and documents,
direct mail for correspondence courses, andticket issuance. DNP has tried to differentiate itself with a traceability system for eachpiece of mail, using a 2-dimensional code.
We have a roughly 40% share of theJapanese smart card market. We became thenumber one player in the industry by
developing the MULTOS™ operating

system and various types of application
software. We have more than a 90% share of
the market for smart cards for banks thanks
to our vein-based biometric technology, a
60% share of the market for financial
institutions’ smart credit cards, a 40% shareof the market for mobile phone SIM cards,
a 50% share of the market for electronic tollcollection smart cards, a 15% share of themarket for railway smart cards, and a 40%
share of the market for IC-embedded
employee/member ID cards.

DNP Annual Report 200759

Segment Information

INFORMATION COMMUNICATIONBusiness Strategies
Due to the advance of the emergently evolving society, there is constant change in all types of social infrastructure, including telecommunications
networks, financial and distribution mechanisms, educational systems, and everyday culture related to food, clothing and shelter. These changes
give businesses and consumers a lot to think about: “What kind of business should we develop?” “What do I need to do now?”
By being among the first to foresee such changes, making use of DNP’s corporate strengths, proposing hypotheses and coming up with solutions,and by getting involved in creating the emerging new infrastructure, we gain many business opportunities that allow us to expand our business.

P&I Solutions

We will combine the Printing Technologythat DNP has cultivated since our founding
with the Information Technology that wehave been accumulating since the 1970s andoffer our corporate customers andconsumers unique solutions related to
information communication. We view
information distribution as a whole as ourbusiness field, and we develop businesssolutions that are useful in an emergently
evolving society.

60

Growing to
Accommodate
DiverseCommunication
Formats

Today’s consumer uses a combination ofvarious information media, including theInternet (via personal computer and mobile
phone) and digital broadcasting, in addition
to printed media. Along with thisbroadening of communication formats, wewill develop technologies that best suit eachtype of information media and provide
unique DNP solutions that combine
multiple media in order to solve theproblems of consumers and corporateclients.

Outsourcing ofCustomers’ Overall
Communication
Activities

Based on the technologies and expertisethat we cultivated through our printing
business with regard to processing massive
amounts of information, including
knowledge and skills connected withmaintaining the tight security required forhandling important information, we are
actively encouraging customers to
outsource services from us for theircommunication activities, such as surveys,
analysis, consulting, planning andproduction of contents, on demand andother types of printing, distribution,
network delivery, and operation of customer
support centers.

Major Policies
Expanding our Business throughP&I Solutions
We have evolved beyond the productionthat used to be our main business, and arecontinuing to expand our solutions-based
business, which means we combine our coretechnologies — printing and information —and offer original solutions that only DNP
can provide to solve customers’ problems.
In the Information Communication
segment, we come up with a variety of
proposals for increasing the added value of
products, including plans, designs andmarketing strategies. In response to thecorporate demand for direct marketing, we
handle every phase of the business from thematching of personal information with sales
promotional information to digital printing
and distribution. We are also coordinating
our account settlement solutions businesssuch as smart cards and electronic forms
with other DNP products and services likeIC tags (RF ID), on-demand printing, andpersonal DM, so as to increase our ability toprovide comprehensive solutions tocustomers’ problems. At the same time, we
aim to actively offer solutions that will
spawn new ways for our customers to dobusiness.
Keeping our eyes on how the businessenvironment is changing as information
media diversify, we are developing businesses
related to digital content like electronic
book and music distribution. We aim to
expand revenues by increasing the proportion of our business that comes fromproviding solutions which take advantage ofchanges before the competition does.

Expanding Solutions Business byStrengthening Ties between Business
Divisions
We will use the new bases that wecompleted in 2006, such as the DNP
Gotanda Building (in Tokyo’s Shinagawa
Ward) and the DNP Kamiya Solutions
Center (in Tokyo’s Kita Ward) tostrengthen ties with other businessdivisions. In addition to specific solutions
for specific customers or industries, we will
prepare the ground to be able to solve
problems that cross industry lines.
At our Gotanda Building, we opened
space for diverse types of presentations
based on the idea of a “building-wide
showroom.” We also gathered various
divisions such as sales, planning, production
and R&D in order to boost operational
efficiency. We will use the facility as a place
for coming up with new ideas, including
reducing our customers’ problems anddevising solutions for them. We will alsocollaborate with various other companies.
We began operating our Kamiya Solutions
Center as a “manufacturing base” where we
realize new business models that are mostappropriate for our client customers.

management (CRM) through a combination of services like data processing and ondemand functions using digital printers.
We will also strengthen our outsourcing
business by forming alliances or M&As asnecessary, in order to speed up the establishment of new businesses or gain newtechnologies or expertise, etc.
Developing New Markets throughGlobal Expansion
In addition to developing the Asianmarket through the local subsidiary that we
set up in Shanghai in 2005, we intend tostrengthen our response to demand foroverseas printing. For example, we will use
our network to develop the global networkthat we call GMM (Global Metamedia),
which sends data ready to be printed toprinting companies all over the world inorder to produce in the optimal location.

Gearing up to Promote Our Outsourcing
Supply BusinessIn the future, we will focus on businesses
that entail gaining a deep understanding of
our clients’ business processes, improving
those processes, and actively taking on
outsourced work on behalf of ourcustomers.
To date, we have actively engaged in backoffice support activities like data
input/output, data center operation, andprovision of secretarial functions in our
settlement-related solutions field. In the
future, we will expand our field of businessto front-office operations like proposing
sales promotion plans for customers andsupporting their customer relationship

DNP Annual Report 2007

61

Segment Information

INFORMATION COMMUNICATION

TopicsPromoting smart cards anddeveloping new uses in order toexpand business
Since DNP got involved in smart cards in
1981, we helped add a great deal of value tobusiness and personal lifestyles by developing
operating systems for multi-purpose smart
cards and application software, and by
developing and manufacturing smart cards.
DNP currently holds roughly 40% of thedomestic market for smart cards. We
manufacture and issue more than 90% of thesmart cash cards offered by Japanese banks,
including megabanks. We also control about
50% of the market for contactless smartcards,
which are increasingly in demand for suchapplications as employee IDs, transportation
passes, and electronic money. In the future, we
expect that contactless smartcards will be usedin even wider applications such as public
facilities and amusement parks.
As demand increases for new types of cards,
such as smart cards that combine contact withcontactless functions, we intend to continue tolead the smart card market and expand ourbusiness more than ever.

Development of smart cash cards compatible
with two forms of biometric authentication
In May 2006, DNP became the first company
in Japan to develop smart cash cards that use
two forms of biometric authentication: finger
and palm veins. Consumers had been asking for asingle smart card that could be used with
automatic teller machines (ATMs) operated bymultiple financial institutions, whether they use
finger or palm vein authentication. DNP
developed the new cards after the Japanese
Bankers Association ( JBA) revised its IC Cash
Card specifications in March 2006 to allow theuse of multiple biometric authentication
methods on a single card. The new card isavailable in a dual interface format that carries
both contact and contactless functions on asingle chip, as well as in MULTOS™ and
JavaCard™ formats. Several financial institutions
have already decided to introduce the card, and
DNP plans to expand marketing activities tofinancial institutions throughout Japan, aimingfor 5 billion yen in sales within three years.

62

Improving ATM security through secondgeneration encryption keys
When a customer uses an ATM, dataexchanged between the smart cash card and theATM’s internal security card is encrypted andverified using an encryption key. In order toimprove security, encryption keys have been
modified from the first-generation 1024-bit typeto an 1152-bit second generation. This makes it
important for the security card to be able to do
faster arithmetic processing.
To meet this need, in June 2006 DNP beganselling security cards that have a secondgeneration encryption key and can do faster
arithmetic processing. In addition, we madetemplates that make it easy to issue security cards
and smart cash cards with second-generation
encryption keys, and we began offering “secondgeneration key packs” with card-issuing softwarethat can be used by multiple financial
institutions. DNP currently supplies some 200
financial institutions with smart cash cards, andsupplies almost all Japanese ATM manufacturers
with security cards. As of June 2006, we hadalready received orders for second-generation
key packs from about 80 financial institutions. By
making the most of our existing market share andour strength in software development, we aim toachieve 40 billion yen in related sales within five
years.

functions, such as contactless electronic moneyor point service applications, can be added asneeded. For example, it is possible to use asmart cash card in an ATM to charge electronicmoney against a bank account. DNP has begun
marketing the card to financial institutions,aiming for approximately 8.0 billion yen in sales
in the next three years.

Creating a new market by developing 50-yen
contactless smart cards
In March 2007, DNP developed a low-cost,
contactless smart card that meets the (ISO)IEC14443 Type A international standard. By
limiting the card’s memory (48 bytes rewritable
memory, separate, non-rewritable IDs 7 bytes)
and by making the card out of paper orpolyethylene terephthalate (PET), DNP
succeeded in producing the cards more cheaply
than ever before, at a cost of only 50 yen per
card for a set of 100,000 paper cards. By
promoting the cards for such uses as train or
bus tickets, patient information cards,
merchandise coupons, or employee IDs, DNP
aims for 5 billion yen in sales within three years.

Development of low-cost FeliCa® compatible
dual interface card
Low-cost, contactless smart card that meets
ISO/IEC14443 Type A standard

Leading the booming IC tag market as
growth in full-scale usage accelerates
Sample of FeliCa® compatible dual interface card, native version

In July 2006, DNP developed a low-cost,
FeliCa ® compatible dual interface card thatprovides access to multiple services using asingle card. The new product is a native OS
card, meaning that it comes preloaded withapplication software. DNP was able to produce
the cards economically by including only basic
functions necessary for contact-type smart
credit cards and/or smart cash cards. Additional

Huge growth is expected in the IC tag
market. DNP has been establishing standards
for various types of use, creating IC tag-friendly
environments, and developing applications topromote the expansion of its tag solutions
vending business. By working closely with client
firms and participating as a partner in experimental projects, DNP aims to not only revolutionize product distribution but also to offer
solutions that help make life safer and moreconvenient for consumers.

Development of active IC tag-based
traceability systems for perishable foods
DNP has developed a traceability systemusing active IC tags equipped with temperatureand location sensors and a mobile telephone
module.
Due to growing concerns about the safety offood, particularly regarding frozen andperishable foods, there is a need to appropriately
manage product temperatures during the distribution process in order to avoid deterioration inquality. DNP’s system makes it possible toaccess a mobile phone module implanted in the
IC tag attached to a carton of merchandise inorder to get temperature and location information and to confirm delivery. Accessing thisinformation makes it possible to respond quickly
to changes in temperature and to accurately
predict delivery time. DNP’s distribution
history management system, “Trailcatch,”received the 2006 Nikkei Superior Products andServices Award for Excellence and the Nikkei
Business Daily Award. In the future, we plan todevelop sensors that can measure conditions likehumidity, illumination, pressure and speed, andstep up our marketing efforts.

Trailcatch

Expansion of facility for displaying,demonstrating and testing IC tag-related
products
DNP IC Tag R&D Laboratories in Tokyo
and Osaka were established to help clientcompanies understand the basic functions of IC
tags and explore possibilities for adopting asystem from both the hardware and service
angles. In October 2006, we updated the Tokyo
facility and, in addition to exhibition anddiscussion space, established an area whereclients can actually try attaching IC tags totheir own products and carry out various tests
to see what kind of a system would be mostsuited to their particular logistics environment.
In May 2006, we opened another facility forexperimenting with IC tag-based distribution
management, the IC Tag SCM Solution
Center. In some usage environments, obstacles
may arise that prevent the accurate reading of
IC tag information. The goal of this new facility
is to minimize the ill effects of such obstacles

and support the smooth introduction of IC tagsby simulating each client company’s logistics
environment and conducting tests to establish
environmental conditions, the reader and thebest equipment settings to use for each client.

IC Tag SCM Solution Test Center

Start of mass production of UHF-band IC tags;
annual production capacity target of 100
million tags in fiscal year ending March 2008
In June 2006, DNP began the mass
production of UHF-band IC tags, starting withseveral hundred thousand tags per month.
During the fiscal year ending March 2008, weplan to boost our annual production capacity to
100 million tags.
Because they are capable of long-distancetransmissions, UHF-band IC tags make it possible for data to be read within a large area, andhave already been adopted for full-scale use bymajor distribution chains in Europe and theUSA, primarily for logistics management. Due torevisions to the Japanese Radio Law in April 2005
and January 2006, it is now possible to make fulluse of UHF-band IC tags in Japan as well. Some
major appliance retailers have already decided to
introduce the use of UHF-band IC tags, andmore companies are expected to follow suit.
DNP has established facilities for mass production in anticipation of increasing demand. We
plan to sell label-type UHF-band IC tags at 40
yen per unit, and aim for 5 billion yen in sales ofUHF-band IC tags and related peripherals andsystems by the fiscal year ending March 2009.

UHF band IC tag

Accelerating development of solutions
as our new business base
Popular software uses photo of bride’s faceto personalize wedding simulations
DNP has developed Tri-V DESIGNER for
Bridal, a computer program that combines afacial portrait of a bride with various wedding
gowns, reception venues, and other elements tosimulate a choice of wedding scenarios. By
displaying a picture of the bride with various
hairstyles, bouquets, and even tablecloths andnapkins, etc., she can get an idea of what her
wedding day will look like before the fact.
DNP also developed a mobile version, “Tri-V
DESIGNER for Mystyle,” that allows users tosend a photo taken with a mobile phone camera
to simulate different wedding styles throughclient companies’ mobile sites.
DNP intends to increase sales of its products
by marketing to a variety of industries including
wedding planners, the apparel industry, hairsalons, and various types of mobile sites.

Screen image of “Tri-V DESIGNER for Bridal”

Expanding our business by building
on expressive technology
Tie-ups with two Western firms to produce
3-D computer graphics from CAD data
DNP has formed business tie-ups with twocompanies, one in Germany and one in the USA,for using CAD (computer-aided design) data to
produce 3-dimensional, photo-realistic computer
graphics (CG) imagery of products like
automobiles, transport machinery and otherheavy equipment, appliances etc. forpromotional use in a variety of media formats.
Many manufacturers that use CAD systems todesign and develop their products had been
wanting to be able to use this CAD data inpromotional activities even before their products
were ready for sale. DNP enables manufacturers
to increase the effectiveness of their advertisingand reduce costs, by using CAD data to produce
high-quality, 3-D, CG images .
In April 2006, DNP entered into a strategic
alliance with Realtime Technology AG (RTT)DNP Annual Report 2007

63

Segment Information

INFORMATION COMMUNICATION

of Germany. The partners began producing 3-D
CG images for use in catalogs, and interactive
contents using RTT’s technology. In December
2006, DNP tied up with special effects and CG
studio Digital Domain, Inc. of California, andbegan producing Hollywood film-quality 3-Dcomputer graphics imagery. By fiscal 2010
(through March 2011), DNP plans to expand its
CG business with these two partners to 20
billion yen in sales.

corporate exhibition facilities or museums, tosupport their display of high color digital
images. The service will include production ofhigh color digital image contents, and theselection, construction and installation of image
projection and display systems. Using image
processing technology that DNP cultivatedthrough its printing business and expertise from
more than 20 years of providing high color
imaging contents and systems to museums andother public facilities throughout Japan, DNP
will offer a complete support service. We canproduce contents in any imaging format andprovide display equipment that is appropriate
to a particular environment, including rearprojection screens and our JETBLACK™
screens that can display clear images even in abrightly lit room.

3-D digital animation images produced using CAD data

Development of holograms that appear to beanimated
DNP has developed a new type of realisticlooking 3-D hologram that appears to move likean animated image, and has begun marketingthe holograms as a way to fight against
counterfeiting certificates and brand-namemerchandise.
Because specialized equipment andtechnology is required for the production ofholograms, they are often used as an anticounterfeiting measure on credit cards, tickets,
vouchers, and other valuable certificates, as wellas in brand protection seals. However, imitations of holograms that have relatively simple
designs have been appearing on the market.
Because the 3-D, animated imagery ofholograms make it easy for store clerks andconsumers to recognize the authentic version,
imitations can instantly be detected at the pointof sale. Because the images require extremely
sophisticated technology to produce, theywould be tremendously difficult to copy. DNP
aims for sales of 1 billion yen over the next three
years, primarily for use as an anti-counterfeiting measure.

Example of a high color digital imaging system

Web solutions based on printing andinformation technologies
Development of content for mobile phones,
displaying the same format as printed versions
DNP has developed a service that displays
content on mobile phone screens in the sameformat as a printed version. Users of “Mobile
Digital Page Media™” can view catalogs andpamphlets, and other multi-page materials, inthe same easy-to-see format as printed versions.
The mobile content can be produced from data
used for printing, or the time and cost requiredfor introducing the system can be reduced byusing DNP’s ASP service. DNP aims to step up
sales of this service to publishers and mail-orderbusinesses, etc. in order to reach sales of 500
million yen in three years.

Full participation in the electronic bookproduction and distribution licensing
business
In July 2006, DNP increased its percentage
of investment in MobileBook.jp to become theleading shareholder. As of October, DNP dispatched personnel and strengthened its cooperative relationship in other ways in order toaccelerate development of the electronic bookproduction and distribution licensing business.
In the past several years, the electronic bookmarket has been surging thanks to the spread ofbroadband Internet access and enhancements
to the functioning of mobile phone handsets.
DNP views the expansion of this market as abusiness opportunity; we are working to build
this business by making use of the digitalcontent production expertise that we havecultivated to date, and by using our close ties
with publishing companies. In fiscal 2007, weplan to sign contracts with more than 100
publishing companies and more than 100
electronic book sites to sell 20,000 titles,
amounting to 2 billion yen in sales.

Launching of ASP service for distributing
maps using “one-segment broadcasting”
DNP has tied up with Zenrin DataCom Co.,
Ltd. to provide an application service for
distributing detailed maps of locations
throughout Japan using “one-segment
broadcasting” (digital terrestrial broadcasting
to mobile phones). In one-segment
broadcasting, a mobile phone or car navigation
screen displays a television program on the top
part of the screen and text, still images, or otherbroadcast data on the bottom part of thescreen. The new application service allows
broadcasters to display maps as part of the datathat they broadcast, in response to requests
from viewers who want to know the location ofa store, tourist attraction or event that was
introduced during the program. Zenrin
DataCom offers digitized versions of about
1,300 street maps of major Japanese cities, inaddition to nationwide roadmaps, in a format
that is optimized for digital broadcasting.

Launching of high color digital imaging
system for large-screen presentations
Image on mobile phone display

DNP plans to start offering turnkey service
for facilities with large-screen displays, such as

64

Sample page images displayed on mobile phone screens

DNP Annual Report 2007

65

Segment Information

LIFESTYLE & INDUSTRIAL SUPPLIESFinancial Results
Financial Highlights(¥ billion, %)2007.32006.32005.3¥532.7¥480.0¥450.0Operating income

36.3

37.6

36.0

Operating income margin

6.8%

7.8%

8.0%

Net sales■Net sales (left)■Operating income (right)(¥ billion)

600

120

500

100

400

80

300

60

200

40

20

100

0

0

05

66

06

07

Business Environment

Packaging

Regarding domestic consumption incalendar 2006, although the year-on-year
growth rate of convenience store sales
slowed to 0.5%, the amount of net sales
continued growing. Department store andsupermarket sales declined by 0.9%, but
overall retail sales increased by 0.1%.
Housing starts rose for the fourth consecutive year, by 2.9% from a year earlier.
However, the earnings environment
remained very challenging because competition to win orders was still intense and pricesof petrochemical-based products increased.

Packaging sales slipped 2% from theprevious year. Although sales of pre-formed
bottles and flexible packaging increased,sales of paper containers and paper cups
declined. Sales volumes of preformed
bottles — test tube-shaped primary
products used for making PET bottles —have been growing in conjunction with theincreasing use of aseptic bottle-fillingsystems. DNP sold two large aseptic bottlefilling systems during the year. Operating
income in the sector was weak again becauseof higher costs for film, resin and othermaterials.

Summary of Financial
Results

Lifestyle Materials

Net sales in this sector increased 52.7
billion yen, or 11.0%, year on year to 532.7
billion yen thanks to contributions fromphoto-related businesses acquired from
Konica Minolta Holdings.
Although sales of environmentallyfriendly lifestyle material products andoptical films increased, operating income
declined 1.3 billion yen, or 3.6%, to 36.3
billion yen because of increases in material
costs and a decline in unit order prices. The
operating income margin dipped 1.0
percentage point year on year to 6.8%.
The segment contributed 34% of DNP’s
total net sales, and 35% of its operating
income.

Sales of lifestyle materials grew by 1%
over the previous year. Strong sellers
included eco-friendly, health-friendly“Safmare” decorative sheets and other ecofriendly products for condominiums andrental homes. Exports, primarily North
America-bound, also did well.
DNP’s eco-friendly products use aproprietary EB coating technology andnon-PVC base materials, which do not emit
dioxin during disposal. DNP developed its
own method of surface processing that does
not use solvents that can cause sick-house
syndrome. These products have been very
well received by the market.

Opto-materials/Industrial Supplies
Sales of electromagnetic interference
shielding film for plasma display panels
declined year on year because of production
cutbacks owing to weak PDP sales, but
overall sales in the sector increased 12%
thanks to strong growth for anti-reflection
film for LCDs (liquid crystal displays), a key
product for optical film, and color printerink ribbons, demand for which has been
growing thanks to an expanding digital print
market.
DNP supplies all polarizing film
manufacturers and has roughly a 70% shareof the market for anti-reflection film for
LCDs. DNP has the top share of themarket for etching mesh-type
electromagnetic interference shielding film
for PDPs, which has superior
electromagnetic wave shield performance.
Sales of monochrome ink ribbons for

facsimile machines and other devices
declined substantially, but sales of ribbons
for consumer and business digital color
printers increased considerably. The
installed base of PrintRush self-serve
photo-printing kiosk systems reached 900
units as of the end of March 2007, as thesystem was well received by the market for
its high-speed, finely detailed prints andmade steady inroads with leading consumer
electronics retailers.
To strengthen the long-standing photo
printing business, DNP acquired Konica
Minolta’s ID photo and photographic
product sales businesses and its Odawara
color photographic paper plant in 2006.
Our efforts to expand the photo printing
business include expansion into the supply ofdye-sublimation thermal transfer printing
materials and silver halide photographic
paper.

DNP Annual Report 200767

Segment Information

LIFESTYLE & INDUSTRIAL SUPPLIESBusiness Strategies
DNP’s Lifestyle and Industrial Supplies segment aims to realize an emergently evolving society by developing products and services with anemphasis on functionality, environmental responsibility, and adding greater value. We are working on boosting sales from this segment both inJapan and overseas.
In the packaging and lifestyle materials sectors, our goals are stable growth and improved profitability, which we intend to achieve by
developing products that focus on functionality and environmental concerns, and by providing solutions to our customers’ problems. In the
opto-materials and industrial materials sectors, we aim to actively develop products with high added value and new categories of products,
in order to develop new markets.

Functionality andEnvironmental
Responsibility
Adding greater value;
Shifting into
Growth Fields
We will be guided by the goals of universal
design and environmental responsibility as
we develop functional and environmentallyfriendly products that meet consumers’
demands for better health, greater safety,
and more comfort and convenience.

68

Developing
New Businesses in
Opto-materials andIndustrial Supplies
Coating technologies have already sparked
significant change and expansion in DNP’sbusiness. Using these as core technologies,
we will explore additional uses for printing
technologies and step up the developmentof products and services with high added
value. At the same time, we will shift ouremphasis toward fields with good potential
for future growth.

We will take a broader view of our market
and create new businesses by developing
advanced and differentiated technologies
and products in growing fields like energy,
life sciences and materials-related areas. At
the same time, we will continue to create
new business models that make use of
corporate alliances.

Major Policies
Packaging:
Reinforcing our Lineup of Functional,
Environmentally Friendly Products
Given the influence of Japan’s declining
birthrate, aging population and otherdemographic trends, we cannot expect
major growth in the sales of food packaging
products in terms of number of units sold.
However, increasing concern over environmental preservation and food safety are
spurring demand for new types of functionality, which in turn is creating new business
opportunities for us. We are actively
engaged in development to meet thedemand for products made with less plastic,
and for systems that allow client companies
to save money or reduce environmental
impact in their manufacturing processes. In
response to growing consumers’ concerns
about food safety, we can expect to see
growth in tracing services, i.e. managing
databases that store information about foodproducts’ ingredients, processing and distribution, as a new business.
In the future, we aim to continue torespond flexibly to market needs like theseand shift toward providing high-added value
products with even more outstanding
functionality, in order to boost our competitiveness.
Lifestyle Materials:
Enhancing our Product Lineup with a
Focus on Eco-Friendly, High ValueAdded Products
With new housing starts lagging, ourlifestyle materials business’ strategy will beto add more value in order to securerevenues. We developed great-looking,highly functional products with an eye
toward preserving the environment andhuman health, starting with “Grandmode,” awoodgrain decorative material made with
DNP’s original EB coating technology and“Ellio Steel Plates WS Selection” decorative woodgrain steel sheets also made withoriginal DNP technology, for use inconstruction interiors. We are actively
promoting sales of this type of product for
non-residential uses such as offices, hospitals and commercial facilities. We are also
working aggressively to boost sales inoverseas markets where there is strong
demand for decorative sheets used forcovering furniture, etc. Meanwhile, at the
Living Space Analysis Center that we established in 2002, we measure volatile organic
compounds (VOCs) emitted from building
materials, among other activities.
We aim to expand our business through“dwelling space solutions” that solve avariety of problems related to every type ofspace that people inhabit. By enhancing our
product lineup and keeping the focus onenvironmentally friendly, high value-added
products, we aim for stable growth andgreater profitability.
Opto-materials:
Active Investment in Optical Films
In the opto-materials sector, we will
actively invest in greatly expanding ourcapacity for producing optical films used indisplays, which is a market where we expect
to see great growth. This past fiscal year, wedoubled our production capacity by
investing some 7.0 billion yen in a new plantin Mihara, Hiroshima Prefecture, to operate
in conjunction with our existing Okayama
plant. DNP currently controls about 70%of the world market for anti-reflection films
used in LCDs (liquid crystal displays). We
intend to maintain our lead in the future
through such moves as the introduction of a
new type of film with improved
functionality.

Recording Materials:
Aiming for Major Expansion throughEffective Use of Resources Acquired
From Konica Minolta
In 2006, DNP acquired Konica Minolta
Holdings’ ID imaging business, domestic
photography-related product sales business,and other photo-related operations, inorder to bolster our photo print business.
We are already Japan’s top supplier of dyesublimation thermal transfer media, and weplan to use sales channels acquired from theKonica Minolta Group to further boost
sales of these products. In addition, byinstalling PrintRush self-serve photoprinting kiosks and ID photo booths next toeach other, we intend to expand both of our
photo print terminal businesses in Japan.
Developing New Markets throughGlobal Expansion
We intend to develop new markets forboth our packaging and lifestyle materials
businesses by using domestic production
bases as launch pads from which to meetdemand from East Asia and other overseas
locations. Concerning recording materials,
we established a joint venture in France forassembling ink ribbons, and a subsidiary in
the United States for selling dye-sublimation print materials. From these bases, we
aim to build an optimal production and sales
framework for serving the global market.

DNP Annual Report 200769

Segment Information

LIFESTYLE & INDUSTRIAL SUPPLIES

TopicsBold quest for futuristic packaging
materials

First in the world: transparent vapordeposition barrier film made by chemical
vapor deposition

First in Japan: development of packaging forJapanese-style space meals

DNP was the first company in the world todevelop a transparent vapor-deposition barrier
film for packaging that is made using chemical
vapor deposition (a thin-film formation
technique). The new product, called “IB-PETXB,” is highly effective as a barrier against
moisture and oxygen, and is very durable, evenwhen stretched or folded. DNP plans toactively market the material as a substitute foraluminum foil for products that require highly
durable packaging material with goodpreservative properties, such as foods, medical
supplies and pharmaceuticals, and electronic orother industrial components.

DNP has developed the first space meal
packaging designed for Japanese-style food anddeveloped in Japan.
The Japan Aerospace Exploration Agency( JAXA) is developing Japanese-style space
meals for use in the Japanese Experiment
Module “Kibo,” which was designed to dockwith the International Space Station. DNP wasrecognized as a top-class domestic packaging
materials maker with exceptional productdevelopment capacities, and since 2002 hasbeen helping to draw up criteria and develop
packaging materials for Japanese-style space
meals. In February 2007, DNP succeeded indeveloping packaging that is strong enough towithstand space travel, able to preserve food,and is also easy to heat and to eat or drink fromin zero gravity conditions. The packaging isdesigned for freeze-dried foods. The contents
can be restored with cold or hot water in order
to be ready for eating or drinking. As of the endof March 2007, DNP was the only company
that had met JAXA’s certification standards
and was designated as a manufacturer of the
new packaging. With JAXA expected to start
using Japanese-style space meals in fiscal 2007,
DNP will supply the necessary packaging forthem and supply prototype packages so thatfood manufacturers can test flavor andfreshness preservation. These are just some ofthe steps that DNP is taking to develop futureoriented markets.
Package for Japanese-stylespace foodNozzle for drinking (left), injection unit (right)

70

Transparent vapor deposition film IB-PET-XB

Expanding building materials
business to encompass all types ofspace, while closely monitoringchanges in market structure
Complete overhaul of manufacturing andsales systems aimed at expanding target
markets
In August 2006, DNP spun off part of its
decorative materials manufacturing divisionand combined it with the decorative materials
sales division and some regional branches of thesubsidiary Dai Nippon Shoji Corporation toform DNP Lifestyle Materials Marketing
Company, a new company that develops,
processes and sells decorative materials.
Since 1951, DNP has been supplying a varietyof dwelling space-related products, including
high-performance decorative sheeting used in
fixtures and storage systems, floors andkitchens, etc., decorative steel plates used as
entranceway doors etc., and high-performancewall coverings. Some of these products use

exclusive DNP printing technologies, such as
DNP’s proprietary electron beam coating
technology, and have won a large share of thedomestic market thanks to their superiority interms of eco-friendliness, aesthetic appeal andfunctional performance.
However, Japan’s residential housing market is
expected to undergo major changes in the future
due to demographic changes including a decline
in overall population, falling birth rate, rising
average age, and declining number of members
per household. In response to these changes,
DNP seeks to further expand its business byaddressing not just residential dwelling spaces,
but also offices, hospitals, shopping centers andpublic halls, etc. By integrating manufacturing
and sales into a single company under this new
system, we will speed up management decisionmaking, strengthen inter-divisional ties, andimprove our capacities for product development
and customer service. Furthermore, by unifying
purchasing and control systems, we can reap
other benefits such as efficient distribution andinventory control systems at the nationwide
level and more advanced quality control, which
in turn will help us to boost sales and profits.

Launch of PIAFORTE mirror-finish
decorative sheet
In recent years, mirror-finish decorative
materials have become increasingly popular fordoors used in modular kitchen cabinets,
furniture and interior doors etc. Conventional
products coated with materials like urethane or
ultraviolet-cured resins were easily scratchedand difficult to clean.

PIAFORTE sample books

A door covered with PIAFORTEWe developed the PIAFORTE mirror-finish
decorative sheet by using DNP’s proprietary
electron beam (EB) coating technology,
allowing us to start selling a product that is
highly scratch-resistant and easy to clean. Using
electron beams to cure surface resin yields a
product that is more resistant to dirt andsunlight, and is exceptionally durable. This
technology is also suitable for next-generation,eco -friendly products because it uses lessenergy in the manufacturing process, produces
less carbon dioxide, and eliminates the need for
applying solvents.
In the future, we intend to actively market
this product to builders and architects, in order
to increase orders not only for residential
interiors where a sense of luxury is desired, but
for a wide variety of uses including nonresidential applications.

Expanding photo print business,developing new B-to-C markets
In the late 1980s, DNP began producing dyesublimation thermal transfer recording media
used for printing photographs, and captured the
top global market share. In 2004, DNP
purchased Pixel Magic Imaging of United States,
and in 2005 began operating PrintRush self-serve
digital photo-printing kiosks in Japan. In 2006,
DNP further strengthened its photo print
business by taking over Konica Minolta GroupID photo business, photography-related
products business, and the Odawara facility
where Konica Minolta manufactured silver
halide color photographic paper. This gives DNP
the ability to respond to the demand for silver
halide printing as well as dye sublimation
printing, and DNP plans to use this advantage toexpand its photo print business more than ever.

Active response to the growing market
for thin televisions

Completed transfer of two businesses andOdawara plant from Konica Minolta Group

Startup of new antiglare film plant

DNP acquired two businesses from theKonica Minolta Group, and in July 2006 established DNP ID Imaging Co. Ltd., which deals
in passport and other ID photos, and DNP
Photo Supplies Marketing Co. Ltd., which sells
photography-related products in Japan. DNP
also acquired Konica Minolta Group’s color
photographic paper manufacturing business,
including land and facilities in Odawara,
Kanagawa Prefecture, and in October 2006
established DNP IMS Odawara Co., Ltd.
DNP intends to expand its photo print
business by offering a comprehensive range ofrelated products and services, including the
manufacture of print media, development ofprint systems, and sales.

Responding to the surge in demand for liquid
crystal and plasma televisions, DNP has
completed a new facility for manufacturing
antiglare film used in flat-panel displays, in the
Mihara Seibu Industrial Park in Mihara,
Hiroshima Prefecture. Operations began in
October 2006. DNP already has factories
making LCD color filters, projection TV
screens, picture tube shadowmasks, and various
other display components in the same industrial
park, where DNP has been manufacturing since1993. The new plant is situated on a 53,000 m2
lot adjacent to the park, with a gross floor spaceof 17,000 m 2 . The three-story, steel framebuilding has an earthquake-resistant structureand 7200 m 2 of floor space. The total cost,
including manufacturing and ancillaryequipment, will come to about 15.0 billion yen
over three years. Antiglare film production
capacity will be 5,000,000 m2 per month initially,
to be increased to 10,000,000 m2 per month by
2008, in accordance with market expansion.

Launch of first DNP brand photographyrelated products
In March 2007, DNP Photo Marketing
began selling several types of “CENTURIA
PAPER” for color photo printing and new
types of inkjet paper for photo printing.
The “CENTURIA PAPER” series consistsof silver halide color photographic paper
manufactured at the Odawara plant that DNP
acquired from Konica Minolta Group. It isbeing sold as a new DNP brand product.

DNP brand inkjet paper

DNP brand color film

New advertising business using photographholders
DNP and DNP PrintRush jointly developed
a new business using paper photograph holders
as an advertising medium. As more people own
digital cameras, self-service photo printing
systems are being installed in stores and otherpublic locations, allowing consumers to easily
print their own photos. DNP PrintRush has
begun supplying envelopes imprinted withadvertisements next to the PrintRush terminals
that it operates exclusively throughout Japan,
providing an opportunity to make a strong
appeal to consumers.

Photograph holders imprinted with advertisements
Mihara Plant

DNP Annual Report 200771

Segment Information

ELECTRONICS

Financial Results
Financial Highlights(¥ billion, %)Net sales2007.32006.32005.3¥291.9¥296.8¥269.9

14.9

37.8

39.7

5.1%

12.7%

14.7%

Operating income
Operating income margin■Net sales (left)■Operating income (right)(¥ billion)

600

120

500

100

400

80

300

60

200

40

100

20

0

0

05

72

06

07

Business Environment
In 2006, worldwide shipments of flatpanel TVs stayed strong, with LCD (liquid
crystal display) TV shipments increasing
24.4 million year on year to 46.4 million andplasma TV shipments rising 3.4 million to
9.2 million.
The global semiconductor market in2006 remained sound, as it was in 2005,
rising 8.9% year on year to US $247.7
billion, led by demand for use in mobile
phones, digital music players and otherconsumer electronic products. In the AsiaPacific region, including China but
excluding Japan, the market grew 12.7%.
Worldwide shipments of PCs increased
7% to 235 million units and those of mobile
phones reached 1,018.8 million, up 25% andtopping 1 billion for the first time ever.

Summary of Financial
Results
Although sales of semiconductor
products were strong, sales of LCD color
filters and other display components wereheavily affected by panel manufacturers’
production cutbacks, which followed major
capacity increases in the previous year.
As a result, the segment’s net sales fell
1.6% from the previous year to 291.9 billion
yen. Operating income declined 22.9 billion
yen, or 60.6%, to 14.9 billion yen because ofa decline in unit order prices for color filters
and increased depreciation stemming from
capital investments.
The segment contributed 19% of DNP’s
total net sales, and 15% of its operating
income.

Display Components

Electronic Devices

Profits on LCD color filters were heavily
affected by a temporary decline inutilization of the Mihara Plant’s fifthgeneration color filter line, stemming from asubstantial decline in order volume
following panel manufacturers’ production
cutbacks. However, line utilization
improved after demand from panel
manufacturers rebounded sharply in thesecond half and order volume increased
considerably. The average sales pricedeclined 15%, owing to strong demandthroughout the year for lower prices.
Order volume for projection screensincreased thanks to new orders and abottoming out of demand in the North
American market, despite a decline in unit
order prices for MD-type*1 models. Sales of
CRT-type*2 models declined considerably
because of a notable weakness in demandfor end products.

In photomasks, we had expected demand
to shift in 2006 from the 90nm productsthat have been the mainstay of the market
to cutting-edge 65nm products. However,overall demand was stagnant, and growth insales was slight. Demand for 65nm
photomasks is forecast to grow very strongly
in the fiscal year ending March 2008.

*1 MD: Micro-display (digital)*2 CRT: Cathode ray tube (picture tube)

DNP Annual Report 200773

Segment Information

ELECTRONICS

Business Strategies
By accurately assessing market needs and continually refining our advanced technology, DNP maintains its position as industry leader in thedisplay components and electronic device sectors, and remains a top vendor in these rapidly changing markets.
There are various stages in a product’s life cycle — development, growth, maturity, and decline. We believe it’s important to remain aware ofthese cycles and maintain an aggressive but balanced business strategy of aggressively investing in facilities and equipment while always
working on developing next-generation products.

Emphasizing
Technological
Development

With top-class advanced technology as ourgreatest strength, DNP’s electronics
products have been acclaimed as No.1 in theworld in many fields. In order to maintainand further sharpen this competitive edge,
we will concentrate more than ever on
research and development, and develop new
products by achieving new heights in quality
control and micro-fabrication.

Rapid Response to
ChangeWe will expand our business by responding
appropriately to rapidly changing markets
and customer needs. This means building
flexible production systems that can operate
on an in-plant, by-plant, or other basis andcan handle every format from component
supply to modularization.

Concentrated
Allocation ofManagement
Resources

While giving ample consideration topotential changes in product life cycles andother business risks, we aim to concentrate
our management resources on strategicallyimportant products and enhance overseas
production systems in addition to domestic,
cutting-edge mother factories, in order toachieve high profitability.

74

Speeding Up
Business Startups

In order to speed the development of new
ventures, we will always consider
possibilities for M&As or other alliancesthat facilitate cooperation between strong
partners, and do our best to expand ourbusinesses efficiently.

Major Policies
Ready to Supply a Wide Variety of
Products Quickly Enough to Take
Advantage of Product Life Cycles
Due to fast-paced technological development, product life spans have grown shorterin the electronic display market, where new
types of products are always appearing.
Manufacturers need to accurately predict
which product will dominate the next
generation and when the change will occur,and must quickly gear up to prepare formass production. DNP avoids the risk ofdepending excessively on a single product by
maintaining a full product lineup and theability to respond regardless of which
product becomes most sought after. Ourbasic strategy is to be prepared to meetdemand for all types of displays of every
size. Our sales strategy is geared toward
global markets; we seek to disperse risk byengaging in wide-ranging trade withcustomers all over the world, and to securerevenues by maintaining a steady stream oforders.
Flexible Business Models Focused on
Profitability
As liquid crystal panel substrates growlarger with the advent of 6th and 8th-generation products, we need to constructbusiness models for our color filter production that enable us to respond flexibly to
our customers’ needs and concerns. In orderto keep up with growing substrate size, we
intend to continue to respond flexibly tocustomers’ needs. This may include
installing new equipment, like the 6thgeneration production line that we added at
our plant in Kitakyushu, or adopting aflexible business model according to eachcustomer’s situation, like the establishmentof joint ventures with customers to build“by-plants” adjacent to their manufacturing
facilities or “in-plants” directly connected
to a customer’s production line. We plan tosteadily strengthen our operating base bygiving priority to profitability as we choose
from a wide array of business models such as
M&As, corporate alliances and royalty
businesses.

ular, DNP controls more than half of theworld market. In the future, we intend to
take advantage of the results of joint development with clients to accelerate the supply
and development of 45 nm products aheadof technological roadmap targets, in orderto maintain our top share of the global
market.

Introducing the World’s First Inkjet
Method for Producing LCD Color Filters

Cultivating New Mainstays inElectronic Device Business, Building a
Strong Business Constitution

In collaboration with Sharp Corp., DNP
introduced the world’s first inkjet-methodcolor filter production when we began
supplying 8th-generation color filters at
Sharp’s Kameyama No. 2 Plant in
Kameyama, Mie Prefecture. The inkjet
method makes it very easy to reduce
manufacturing costs and allows more
efficient expansion of production capacity.
It also makes it possible to reproduce highpurity colors that cannot be obtained using
conventional photolithography methods.
DNP will strive to supply LCD (liquid
crystal display) color filters that contributeto the development of the industry byfurther developing technology like theinkjet method, which makes it possible todeliver both low cost and high quality, andby being among the first to set up production frameworks that meet our clients’needs and respond to the rapidly changing
market.

In addition to photomasks, DNP aims tocultivate new core businesses by developing
and aggressively pushing sales of productsthat use micro-fabrication, such as semiconductor packages, build-up boards and fuelcells. Furthermore, we intend to build aflexible and sound business constitutionthat is not highly vulnerable to the ups anddowns of the semiconductor market, bybuilding up our solutions-based business.
For example, this could mean developing IC
tag enterprises linked with application
development in order to solve the problemsof corporate clients and consumers.
LCD Glass Substrate Size by Generation
（mm）
2,160

8th Generation
1,870

7th Generation
1,500

6th Generation
1,100

5th Generation
730

4th Generation

Maintaining our Top Share of theWorld Photomask Market by Virtue ofTechnological Strength
Backed by advanced technology that nocompetitor can come close to matching,
DNP photomasks have been highly
acclaimed for their exceptionally highquality. Currently, more than half of thephotomasks supplied by DNP have line
widths of less than 90 nm. For cutting-edge
products with 65 nm line widths in partic-

550
3rd Generation

370
300

400 470 650 920

1,300

1,800 2,200 2,400

Note: Precise sizes vary by manufacture.

DNP Annual Report 200775

Segment Information

ELECTRONICS

TopicsExpanding color filter products andstimulating market demandFirst in the world: supplying Sharp’s
Kameyama Plant with 8th-generation color
filters made by inkjet method
DNP became the first company in the world
to establish mass production technology for
8th-generation color filters based on an inkjet
method. In October 2006, we began producing
these filters within Sharp’s Kameyama No. 2
Plant on an in house supply basis.
Using the inkjet method means that only
necessary materials are applied only to necessary
areas, which makes it possible to restrain initial
equipment and running costs to relatively low
levels. Furthermore, thanks to DNP’s expertisein color management and other technologies, we
succeeded in producing reliably high-quality
filters. This project is a global first both for using
the inkjet method to mass produce 8thgeneration color filters, and for producing thefilters inside our customers’ plant.
DNP is reinforcing its ability to supply liquid
crystal panel makers by adding new productionlines that use the inkjet method to make 6thgeneration and 8th-generation filters. By
actively embracing the inkjet method, which is
expected to become the world standard
technology of the future, DNP is striving to
expand its share of the color filter market andincrease profitability.

Development of Multi Primary Color filter thatdelivers more beautiful images
In order to significantly expand the color
reproduction range available in LCDs (liquid
crystal displays), DNP has developed a Multi
Primary Color filter that adds yellow and cyan(bright blue) to the conventional three primarycolors (red, green and blue).
The market for LCDs has continued to growin the past few years. As people increasingly use
personal computers for watching TV programs
and DVDs, and as mobile phones increasingly
display one-segment broadcasting, demand forrealistic color reproduction is stronger thanever. DNP’s new Multi Primary Color filter
makes it possible to vividly display colors that
had been difficult to reproduce in the past, suchas yellow, gold and aqua. The company began76

mass production in the fall of 2006, andanticipates more than 10 billion yen in sales infiscal 2007. By combining this developmentwith DNP’s original inkjet-method color filter
production technology, we will go on to reduce
costs even further and reproduce even truer
colors.

Image displayed using 4-color filter

Using 3-color filter

Actively addressing the nextgeneration of “organic EL” displays
Development of long-life, high-intensity,
high-definition “organic EL” displays
DNP, in partnership with the Yamagata
Promotional Organization for Industrial
Technology’s Research Institute for Organic
Electronics, has developed a high-intensity,
high-definition organic EL display with a long
operating life.
The new organic EL display has a highefficiency, multi-photon structure withmultiple luminous layers arranged serially on asubstrate of glass or other material. Its
operating life is about 10 times longer thanconventional products. Because it is capable ofhigh-intensity display, it offers high visibility
even outdoors or in brightly lighted places.
Moreover, compared to the LEDs that are
currently widely used in electronic billboards
and signboards, the organic EL can provide
higher-definition displays. DNP has beendeveloping applications for organic ELs withflexible substrates, and aims to expand their use
in advertising media, such as electronic
signboards displayed in trains, stores, and otherpublic places.

Using core technologies to capture
diverse sectors of the electronics
business
Using printing techniques to achieve world’s
highest conversion efficiency for organic
solar cells
Reducing the weight and cost of solar
batteries is the key to further spreading theirusage. Developers have been focusing on theuse of film as a more lightweight substratecompared to glass or silicon, but film does nothave good heat resistance and is not suited forforming active layers, which requires hightemperature processing, so there was a need forbetter production technology to solve thisproblem.
DNP recently found a way to make use of its
unique transfer printing technology in theformation of power generation layers used indye-sensitization-type solar batteries thatcombine titanium dioxide, organic pigment andan electrolyte solution. As a result DNP
achieved the world’s highest solar power
conversion rate on a film substrate, 7% (asmeasured by DNP). DNP is working oncommercializing solar cells with a film
substrate. Besides making solar cells lighter andcheaper, DNP is increasing their aesthetic value
by using organic pigments to form designs ofvarious colors, and developing brand-new
applications, such as incorporating the cells inindoor wallpaper.

Dye-sensitization solar battery module

Development of single-layer ultra-highbarrier transparent film with potential for
low-cost production
There has been growing demand for more
flexible materials to replace conventional glass
substrates in order to reduce the thickness andweight of organic EL and LCDs. In response tothis demand, progress has been made in
developing flexible organic EL and plastic
liquid crystals, but in order to make themcommercially viable there must be a flexible,
transparent thin film that is highly impermeable
to water vapor and oxygen. Conventional films
were made to be impermeable by building themup into four to six layers through vacuum
deposition. Problems with this method include
the high cost of the complex manufacturing
process and insufficient transparency due to themultiple layers.
DNP addressed these problems by using ion
plating technology to develop a low-cost filmthat is highly flexible and transparent, andhighly impermeable although it consists of onlya single layer. DNP is now developing
technology for mass producing this film, and is
promoting the application of the product toflexible organic light emitting diode (organicELs), plastic liquid crystals and organic solar
cells. We aim to ship samples by the end of
March 2008 and achieve 800 million yen insales in the fiscal year through March 2011.

Agreement with Samsung Electro-Mechanics
licensing patent rights to DNP’s “B2it™”
build-up board*
DNP has agreed to license to Samsung
Electro-Mechanics Co. Ltd. (SEM) patentrights related to manufacturing technology
used for DNP ’ s “B 2 it™” build-up board*.
“B 2it™” is currently used in Japan in printed
wiring boards in products like 3rd-generation
mobile phones with sophisticated functions.
The two companies will engage in development
activities aimed at increasing the density andlowering the cost of the next generation ofbuild-up boards, and will cooperate to supply
world markets with build-up boards.
* A build-up board is a printed wiring board laminated with
dielectric layers and wiring layers, built up one on top of another.
“B2it™” is a manufacturing technology, developed by DNP, whichapplies printing technology to next-generation build-up wiringboards. By using screen printing to form current-conducting
layers, the need for a core board is eliminated, allowing the buildup board to be thinner and more dense, and giving more freedom
to designers since there is more area available for mounting
components.

Using our strength as the industry
leader to further develop thephotomask market
Ever since DNP succeeded in developing a
prototype photomask in 1959, we have constantly

been engaged in developing leading- edge
micro-processing technology. Currently wehold the top share of the market for 65nm and90nm photomasks. In response to semiconductor manufacturers’ demands for higher performance, lower energy consumption and smaller size, we have been making even tinier andmore highly integrated circuit patterns and are
moving ahead with mass production of cuttingedge products.

Building cutting-edge photomask
manufacturing facilities in Japan and abroad
DNP is building new manufacturing facilities
in Japan and Taiwan in response to the growing
demand for photomasks. The earthquake-proof
structure of the new plants is designed tohandle micro-vibrations, and each is equippedwith a leading-edge, Class 1 clean room.
The new Japanese line is scheduled to start
operation in January 2008, on the grounds of
our Kisshoin Plant in Kyoto Prefecture. It will
be a cutting-edge facility able to mass produce
the most advanced photomasks, with line
widths of 45 nm. DNP will invest a total of 16
billion yen in the building, equipment andincidental facilities. The new plant is aimed atmeeting the growing demand for the mostadvanced products, and at preparing against
the possibility of a major earthquake in Japan.
Our new overseas factory will make cuttingedge photomasks, mainly 65 nm, in the Hsinchu
Science Park in Hsinchu, Taiwan, with startup
planned for May 2008. The goal of this facility is
to achieve a stable supply and short delivery
times for the booming semiconductor manufacturing business in Taiwan and the rest of the
Asian region, by moving production and support
closer to customers. DNP will invest a total of
20 billion yen in the building, manufacturing
facilities and incidental equipment.
These new plants will augment the manufacturing capacity of DNP’s four existing facilities
located in Japan (Kamifukuoka in Saitama,
Kisshoin in Kyoto, Kawasaki in Kanagawa, andKitakami in Iwate), and will add a new overseas
facility to complement the Agrate factory in
Italy. By broadening our worldwide photomask
supply base, we aim to expand our share of what
we expect to be a growing market for 45nm and
65nm photomasks.

Corporation and its wholly-owned subsidiary
NEC Fabserve. DNP began operating thebusiness on June 1, 2007 under a newly formed
company, DNP Fine Electronics Sagamihara
Co., Ltd. DNP, NEC Electronics, and NEC
Fabserve will continue to collaborate inphotomask development and manufacturing.
By taking over NEC Electronics’ photomask
business, DNP aims to enhance its own
photomask development and manufacturing
capabilities, improve volume efficiency, andlower overall production costs as its photomask
business expands. The new company will supply
its photomasks to NEC Electronics and othersemiconductor manufacturers through DNP.
DNP and Takumi Technology Corporationof the USA have begun co - developing an
automated photomask inspection system inorder to meet the precise quality requirementsof semiconductor manufacturers. By developing
an automated inspection system that connects
the photomask maker with its client semiconductor manufacturer, DNP and Takumi
Technology intend to improve the production
process and help lower costs and speed delivery
times for photomask manufacturers. The
partners plan to complete development andbegin operating the system by March 2008.
DNP and Brion Technologies of the USA
have begun a joint development program aimed
at improving productivity and product quality in
cutting-edge photomask manufacturing. Brion
Technologies is the developer of the Tachyon
system, which conducts high-precision
photolithography simulation of an entire
photomask at a very high speed. DNP installed
the Tachyon system in its facilities and is using it
to simulate photomask pattern data provided bysemiconductor makers and identify any circuit
patterns that might cause problems during
semiconductor manufacturing. By checking inthis way, DNP aims to make higher quality, more
precise photomasks, prevent defects and boost
productivity in the industry as a whole.

Active pursuit of alliances related tophotomask business and development
In December 2006, DNP agreed to purchase
NEC Fabserve’s photomask manufacturing andsales business from NEC Electronics
DNP Annual Report 2007

77

Sustainable Development

Based on our management concept of contributing to theemergently evolving society of the 21st century, weestablished the DNP Group Guidelines for Conduct to specify
our employees’ mission and responsibilities, and the DNPGroup Vision for the 21st Century to indicate the kind ofcompany we want to be and the direction we want ourbusinesses to take in the future.
We believe that actualizing our management concept — byacting in good faith in accordance with our DNP Group
Guidelines for Conduct and by actively creating new values
according to our Vision for the 21st Century — will contributeto the sustainable development of DNP and of society as awhole.

Contents

Legal Compliance and Corporate Ethics
Information Security
Managing Intellectual Property
Research and Development
Product Safety
Environmental Protection
Creating Lively Workplaces
Contributing to Society

80
82
84
86
87
88
91
94

Sustainable Development

Legal Compliance and Corporate Ethics

The DNP Group takes active steps to remain a company of integrity that is trusted by society. We are aware that in order tocomply strictly with laws and social ethics, each and every employee must have a strong sense of purpose and responsibility, andmust take independent and continuous action that will also result in growth for DNP.
In 1992, DNP established its Corporate Ethics Committee and the Dai Nippon Printing Group Corporate Pledge. We provide
guidance and conduct checks in order to continue promoting fair and just corporate activities.
In the fiscal year through March 2007, the revised Japanese Corporate Law that took effect in May 2006 requires companies
to prepare “systems aimed at establishing proper operations,” i.e. internal controls systems. DNP responded by adopting “Basic
Compliance Management Regulations,” which positioned the Corporate Ethics Committees as the body in charge of internal
controls. The new Financial Instruments and Exchange Law that was promulgated in June 2006 calls for “securing the reliabilityof financial reports,” and here too, DNP responded by building internal systems to verify the appropriateness of the operational
processes that form the basis of our financial reports. We have already begun operating some of these systems.

I

Broadening and Deepening the Practice of Corporate Ethics

1. Corporate Ethics Committee
The Corporate Ethics Committee is composed of representatives from the various departments of the head office. It holds
regular meetings once a month and additional meetings as needed. Each operational division and Group company also establishes
a corporate ethics committee in order to promote a broader and deeper practice of corporate ethics.
As the body in charge of internal controls, the Corporate Ethics Committee receives regular reports from the corporate ethics
committees of the operational divisions and affiliated companies, and takes necessary steps such as formulating new plans andpolicies in order to promote corporate ethics.
2. Management-by-Objective and Evaluation System
The good-faith actions that each employee takes every day are what sustain ethical corporate behavior. Based on this idea, the
DNP Group has incorporated elements of corporate ethics in its management-by-objective and evaluation system. When each
employee sets action targets and reviews the results of those actions in discussion with his or her supervisor six months later, we
use those discussions as opportunities to confirm that each and every employee is acting with integrity.
3. Self-checking of Compliance with Laws and Regulations
In 1997, DNP introduced a self-checking system to make sure that corporate activities comply with laws and regulations.
Each operational division performs a self-check once a year, based on a checklist prepared by the Lead Department of the head
office, and proactively makes improvements. The results of these checks are compiled relative to various themes, reported to the
Headquarters Corporate Ethics Committee, and later reflected in companywide policies. We continually review our methods ofchecking and the items on the checklist in light of trends in legislation; in the fiscal year ended March 2007, we revised ourchecklist once more. In 2004, we introduced a “priority execution plan,” based on the idea that we can get better results by having
each division prioritize checklist items according to its own characteristics, rather than by having all divisions approach all itemswith the same degree of urgency.
4. Compliance Assessment System
In order to eliminate disparities in the level of legal compliance between operational divisions, and raise the level of the Group asa whole, in 2005 we initiated a compliance assessment system by which the Lead Department of the head office measures andobjectively assesses each unit’s degree of compliance. Twice a year, assessment results are compiled and reported to the
Headquarters Corporate Ethics Committee, and announced to the entire Group. In the fiscal year ended March 2007, we reviewed
our assessment methods and shifted the emphasis from relative assessment to absolute assessment in order to make theassessment results more objective.

80

5. Systematization and Implementation of Corporate Ethics Training
We systematized our corporate ethics training in the following ways, making it possible for
employees to receive corporate ethics training repeatedly, in order to continually remind each
employee that he or she must be an active participant in corporate ethics.
(1) Regular training sessions according to employee level
We included material designed to make employees realize the importance of ethical behavior
in the curriculum for training sessions given to new employees, employees who have been
newly promoted to the management level, and to employees at other junctures in theircareers.
(2) Division-level corporate ethics training
We introduced this type of training in 2003 in order to discover and resolve problems related
to the particular characteristics of each operational division. The head of each division speaks
to subordinates in his or her own words about issues and policies related to corporate ethics,
resulting in a type of training that promotes the independence of each employee.
(3) Group-wide training sessions given by the Head Office Lead Department
The Head Office Lead Department conducts training sessions for each operational division in
turn, to address themes that were not adequately covered in the first two categories oftraining sessions.

I

Consulting/ Problem Reporting System and the Open Door RoomDNP marked the start of the DNP Group’s consulting/problem reporting system in October 2002,
with the establishment of its Open Door Room as an address for employees who have doubts orconcerns related to corporate ethics.
In April 2006, we established the “DNP Group Open Door Room Regulations,” which we madeknown throughout the Group. These rules spell out how the Open Door Room is to be operated so as
to protect the anonymity of employees who use the Open Door Room and preserve the secrecy of
their consultations, so that they will not suffer any negative consequences in their workplace. In thefiscal year through March 2007, because we used DNP’s intranet and company newsletter topublicize the system, more employees took advantage of the system compared to past years,
although we did not verify any problems that affected our business operations. Today, the Open
Door Room has become an established part of the DNP Group and functions effectively to support
our internal controls.

Framework for Establishing Corporate
Ethics and Transparency
Headquarters
1. Corporate Ethics Committee of eachdepartment at headquarters
Open Door Room

2. Management-by-Objective and Evaluation System
4. Compliance Assessment System
5. Corporate Ethics Training(1) Regular training by employee level(2) Division-level corporate ethics training(3) Group-wide training by the head officeInspection, guidance,
education

ReportingOperational divisions
1. Corporate Ethics Committee of each operational
division or Group company
2. Management-by-Objective and Evaluation System
3. Self-checking ofcompliance with laws
and rules, priority
execution plan

Plan

Do

ActionCheck

5. Corporate Ethics Training(1) Regular training by employee level(2) Division-level corporate ethics training

DNP Annual Report 2007

81

Sustainable Development

Information Security

DNP’s clients entrust us with various types of personal information because we play an
indispensable role in generating new services and systems that benefit both corporations andindividual consumers. We are striving to increase information security and better protect personal
data as one of our top-priority management tasks.

I

Personal Information Protection Policies

A variety of companies and organizations entrust DNP with personal information so that we canhelp them provide all types of services and products for consumers. In addition, we have developed
various types of services and products that make effective use of personal information in businesses
that DNP operates itself. Through these various businesses, we have become well aware of theimportance of personal information and it is obvious to us that we are obligated to provide
appropriate protection for such information.
We will handle personal information appropriately, in line with DNP’s Personal Information
Protection Policies.

Framework for Promoting
Information Security
Head Office
DNP Group Information Security Committee
Chief, Personal information protection manager,
Committee members
Information Security Headquarters

Operational Divisions and Group Companies
Information Security Committee Chief,
Personal information protection manager,
Committee members (General manager ofdivision orpresident of group company)
Person responsible for auditing andinspection
Information Security Promotion Office
Manager
Information Security Manager
Person responsible for education
Person responsible for security
area measures
Person responsible for public
relations measures
Person responsible for information
system measures82

1. Strictly comply with laws, national government guidelines, and other regulations related topersonal information protection; strive to protect personal data.
2. Take necessary and appropriate safety precautions to prevent leakage, loss or destruction of
personal data. In the event that a problem should occur, take prompt measures to correct thesituation.
3. Specify reasons for using personal information; acquire, use and provide personal information infair and appropriate ways. Take measures to prevent personal information from being used for any
purpose other than the specific purpose for which it was acquired.
4. Respond appropriately to a request for disclosure from someone whose own personal information
is being held by the Company.
5. When the performance of services on behalf of a client company involves the handling of personal
information, use the information only within the scope of the requested services.
6. Establish in-house regulations concerning the handling of personal information; build, maintainand continuously improve related systems.
7. Respond appropriately to complaints or questions from someone whose personal information is
being held by the Company regarding DNP’s handling of personal information or our systems forprotecting personal information.

I

Framework for Promoting Information Security

We established the DNP Group Information Security and Privacy Protection Promotion
Committee as a companywide organization. We also established information security committees
within each operational division and affiliated company. Committee members are assigned specificresponsibilities based on our basic principles, such as developing educational plans, defining security
areas, or devising computer security measures, and implementing thorough quality control.

I

Educational Programs

We used various methods of education and training to improve the awareness of each and every employee, including
distributing handbooks, holding lectures and conferences, and offering “Network Learning” online education programs. In the year
through March 2007, we held nationwide conferences and lectures/seminars for our employees on the following subjects:“Introduction to Personal Information Protection,” “Personal Information Protection Management System (PMS),” “ Personal
Information Protection Crisis Management Plan,” “Privacy Statement Disclosure and Acquiring Consent Related to Use of Personal
Information,” and “Information Security Seminar.”I

Establishment of Management System

We are making sure that every workplace that handles personal information complies thoroughly with relevant laws, and we areestablishing a personal information management system that meets the personal information protection standards establishedunder JISQ15001 (a Japanese Industrial Standard). As of June 2007, we had obtained Privacy Mark certification for 19 operational
divisions, and ISMS BS7799 certification for four operational divisions.

I

Physical Means of Protecting Information

Measures we are taking to prevent data theft include using biometric identification to control access to data processing rooms inorder to prevent entry by unauthorized people, installing security cameras to discourage illicit acts, and having employees wear
uniforms with no pockets to prevent data or other theft. In the fiscal year ended March 2007, we stepped up these efforts andinstalled more equipment. We are also increasing information security by separating locations where data can be copied onto
recording media, and by conducting inspections using metal detectors.

I

Technological Response to Information Security

We are keeping access logs for data processing rooms. We have decreased the number of workers who can copy data onto
recording media, and only allow this to be done by DNP Group employees. We are also increasing control over the copying of databy more frequently checking the logs that record the copying of data onto recording media.

Further Strengthening Information Security to Prevent Leakage of Personal Information
DNP cooperated with investigative authorities and voluntarily uncovered the full truth regarding an incident in which someof the personal information that a customer gave to DNP for the purpose of producing direct mail and other printed
materials was stolen by a former employee of a DNP subcontractor and sold to an Internet mail order fraud ring. In March
2007, we publicly disclosed our findings. DNP took this situation extremely seriously. After undertaking a comprehensive
review of our information security measures, we inspected and fortified all of our personal information protection systems,
and implemented tougher measures than we had in the past, in order to prevent any further information leakage.
1. Restrict access to memory storage media to a minimal number of people, employees only
2. Take steps to prevent writing onto memory storage media, reinforce checking mechanisms
3. Take steps to prevent removal of memory storage media
4. Take care to maintain preventative measures, educate staff
5. Conduct information security audits by a third party

DNP Annual Report 2007

83

Sustainable Development

Managing Intellectual Property

I

Basic Policy

In order to make intellectual property (IP) a major source of corporate revenues, each of DNP’s operating divisions has
formulated an independent IP strategy and has drafted a business strategy that includes the development and use of promising IP.
DNP generates and cultivates IP through P&I Solutions and through research and development efforts, improves the “quality” of its
technological and commercial value, and makes maximum use in DNP’s business activities of IP for which we have establishedrights. At the same time, we actively offer IP-related consulting and legal support services.
Furthermore, by providing all employees with education and training related to intellectual property, DNP has cultivated a
corporate culture of fairness in which we both assert our own rights when appropriate and respect the rights of others. We foster a
corporate climate where intellectual property laws are respected, and are establishing systems for ensuring legal compliance.

I

IP Management Activities

1 ) In order to enhance our skills regarding the generation and use of IP, we have established an IP training system and have been
operateing it.
2) We encourage employees to create and use IP by maintaining an appropriate system of IP bonuses.
3) In order to avoid infringing on the rights of others when generating IP, we will investigate existing technologies and prepare toproperly use existing data.
4) We evaluate the quality of inventions and consider the need for investigation requests and pre-disclosure supplementation
concerning important applications. Also, we will assess the performance of outside offices, and make efficient use of them.
5) We will create and use systems for appropriately managing rights that we have acquired.
6) We will strengthen each important invention by evaluating and organizing DNP’s intellectual property, and use it to help eachbusiness division achieve its goals.
7) Formulate and implement strategies related to the securement of IP rights in line with each operating division’s strategies.
8) We will implement measures that promote the construction of patent portfolios related to themes connected to each businessfield, with the intention of gaining advantages over competitors.
9) When a business shifts into a new, unknown field, we will identify potential risks and conduct guidance and training to reduce
those risks.
10) We are supporting the businesses of our client companies, by holding lectures concerning IP-related laws that regulate matters such as copyrights, truth in advertisement and trademarks.
1 1) We provide a variety of services for client companies, including trademark studies.
12) We help the business divisions make contracts, and give guidance about observing contracts. For example, we present roughdrafts of all types of contracts that are compatible with each division’s business activities.
13) We dispatch representatives to various IP-related associations (Japan Intellectual Property Association, the Japan Fair Trade
Commission, and Licensing Executives Society Japan), where they actively make proposals to the industry and work to build abusiness environment that is favorable to the industry.

84

I

Framework for Promoting IP Rights

DNP’s IP-protection framework consists of four sections and employs seven in-house attorneys. The Patented Technology
Section addresses IP issues related to basic research and DNP’s main business segments: Information Communication, Lifestyleand Industrial Supplies, and Electronics. The Licensing Section handles contracts and legal issues related to IP. The KansaiIntellectual Property Section handles both patent and license-related functions for Kansai and the rest of western Japan, combining
the functions of the first two sections. The Planning Management Section proposes IP strategy and operates DNP’s patent information management system.
In addition, an IP representative is assigned to each development base in Japan, so that our IP activities can be closely linked toour business operations.
IP Management Framework
Patented Technology Section
In-house attorneys (7)Electronics

Lifestyle and Industrial Supplies(1) Discover and acquire rights for patents, utility models, and designs (2) Promote use of IP in business activities (3) Handle IP-related issues (patents,
utility models, designs, etc.) that arise in the course of doing business; support business activities through patent research, handling of other companies’
patents, etc. (4) Public relations related to patents, etc.

Basic ResearchProtect and make use of innovations that resulted from research and development activities(1) Support creation of IP in line with our R&D strategy (2) Support creation of R&D patent portfolios(3) Educate employees about R&D-related IP issues

IP Representatives

Information Communication

R&D Center
Technology Development Center
Operational divisions

Licensing Section(1) Handle IP-related contracts (draft, review, etc.) (2) Support all types of business activities related to IP, such as trademarks, copyrights, prevention of
unfair competition, Premiums and Representation Law, etc. (3) Apply for trademarks, acquire and manage rights, research other companies’ rights (4)Consult, negotiate, handle disputes related to every aspect of IP

Kansai Intellectual Property Section
Handle functions of both Patented Technology Section and Licensing Section for western Japan

Planning Management Section(1) Propose IP strategies (2) Create patent research systems, operate patent management systems, enhance and maintain infrastructure that supports
research and development activities (3) Run clerical operations related to IP

Applications for Patent Disclosures and Trademarks, and Rights Held (Patents, Utility Models,
Designs and Trademarks) by DNP in Japan (2004 - 2006)
1) Number of patent disclosures

2) Number of patents and utility model rights held

3) Number of design rights held

800

2,000

600

600

1,500

500
400
400

1,000

200

500

0

0

300
200
100

04

05

Information Communication
Basic ResearchElectronics

06
Lifestyle and Industrial Supplies
Other4) Number of trademark applications

0
04

06

04

Lifestyle and Industrial Supplies
Other

Information Communication
Electronics
Basic Research

05

Information Communication
Electronics
Basic Research

05

06

Lifestyle and Industrial Supplies
Other5) Number of trademarks held
1,500

120
100

1,200

80
900
60
600
40
300

20
0

0
04

05

Information Communication
Electronics
Basic Research

06
Lifestyle and Industrial Supplies
Other

04

05

Information Communication
Electronics
Basic Research

06
Lifestyle and Industrial Supplies
Other

Notes regarding Graphs 4) and 5): (1) Until the end of October
2005, we filed single-classification applications, meaning that
we filed one application for each classification when filing asingle name under multiple classifications; since November
2005, we have been using multiple-classification applications,
so one application covers multiple classifications. This
explains why there were sharp drops in the number of
trademark applications and the number of trademark rights
held between fiscal 2005 and 2006. (2) The figures include
some trademark rights held by affiliated companies.

DNP Annual Report 2007

85

Sustainable Development

Research and Development

DNP’s management principle is to help create an emergently evolving, 21st-century society by providing P&I Solutions basedaround printing technologies (PT) and information technologies (IT). An emergently evolving society stimulates various modes ofcommunication, so our Research and Development section needs to use printing technologies and information technologies andmove quickly — before other companies do — to develop innovative new technologies and materials that facilitate every process
involved in information exchange, from data input to storage, processing, formatting and output. By quickly responding to market
changes and always staking out positions in new businesses, we can continue to offer new solutions to client companies andconsumers.

I

Research & Development Framework

DNP’s research and development framework has five basic research laboratories with the Research & Development Center at its
core, and six specialized laboratories belonging to the each operational division. These laboratories constitute the driving force thatallows us to actualize DNP’s “P&I Solutions” concept. By organically connecting these laboratories, we can generate new products,
technologies and systems.
The research facilities are also connected to the technical departments of DNP’s various production facilities, where they help resolve
problems at the front lines at production sites. We have made use of technology and expertise accumulated through these relationships
in order to develop original DNP production equipment that allows us to offer even more effective manufacturing technologies.
Controlled by Head Office
Production
Development technologies;
equipment
supportdevelopment

Controlled by Operations

R&D for new products
and technologies

Improvement of existing products and technologies/
Development of products and technologies
for the division

Books and Magazines

Technical section of each operations

Display Components

Electronics

Media Technology Research Center

Information Media Supplies

Nano Science Research Center

Opto-Materials/Industrial Supplies

Research & Development Center

Lifestyle andIndustrial Supplies

Technology Development Center

Packaging
Lifestyle Materials

Advanced Technology & Business
Development Division

IPS/Business Forms
Communication and Information

Electronic Module Development Center

Commercial Printing

Information
Communication

Packaging Laboratory
Lifestyle Materials Laboratory
Opto-Materials Laboratory
Information Media Supplies Laboratory
Display Components Laboratory
Electronic Devices Laboratory

Electronic Devices

Commercialization projects

New Business Fields

Functions and Time Frames of R&D Facilities
FunctionR&D facility
Research & Development Center

Headquarters
Research Centers

Electronic Module Development
CenterDevelops technologies, products and services related to electronic modules

Nano Science Research CenterMedia Technology
Research Center

Conducts basic, applied, and commercial-level research and development related to materials andprocesses; analyzes products
Develops core technologies for the information communication field; develops and refines
technologies, products, and services

Technology Development Center

Researches and develops production technologies

Medium to long term

Packaging Laboratory

Develops packaging materials and technologies, freshness preservation technologies

Lifestyle Materials Laboratory

Develops surface materials for interior and exterior building décor

Opto-Materials Research Center

Researches and develops optical materials

Information Media Supplies
Laboratory

Develops all kinds of information media

Display Components Laboratory

Researches and develops all kinds of display devices and components

Electronic Devices Laboratory

Conducts research and development related to cutting-edge photomasks, mounting components
and LSI design(less than five years)

Medium term(less than three years)

New Product Development

Division Laboratories

86

Development term

Conducts research and development related to new products and new production processes

Short term(less than one year)

Product Safety

DNP views product safety as one of its top priorities. We created a single product liability management system that is shared by
the entire DNP Group, and we all work together to make sure our products are safe.

I

Product Safety Management System

It goes without saying that our products must meet all relevant legal and regulatory standards. Our basic policy is to fulfill our
corporate social responsibilities by offering products that exceed customers’ needs and expectations regarding product safety.
Efforts to maintain product safety must be continual. We conduct risk assessments on all of our products twice each year. In linewith the results, we make any design changes or technical improvements that are necessary for ensuring safety. We produce a
product safety standard from these improvements, and follow up on implementation.
We have been conducting product liability training since 1994. In 2000, we began using our corporate Intranet system for thistraining. To date, 14,058 employees have completed these “Network Learning” seminars.

I

Further Safety Measures for Products Used in Daily Life

The revised version of the Consumer Products Safety Law that took effect in May 2007 is aimed at preventing the recurrence ofaccidents by requiring collection and disclosure of information regarding accidents that involve consumer products used ineveryday life. We established the DNP Group Product Safety Committee as the body in charge of DNP Group product safety, andwe have a system in place for compiling all relevant information in the unlikely occurrence of an accident involving one of our
products. We have also established “DNP Group Product Safety Regulations” to facilitate the establishment of an accident
response headquarters, disclosure of information, and the rapid implementation of other measures to prevent the spread ofdamages should the need arise.
The DNP Group uses its product safety management systems to ensure the safety of not just consumer products, but of all our
products.

Product Safety Management System
Product design changes,
Production technology
improvements

During new product development

When a complaint is received

Risk assessment

Continual
improvements

Creation of productsafety standards
document

Twice each year, for every product
Manufacturing
based on standards
document

DNP Annual Report 2007

87

Sustainable Development

Environmental Protection

The DNP Group contributes to making a sustainable, recycling-oriented society a reality by developing products that put theleast possible strain on the environment, and by working to generate demand for such products. In 1972, DNP became the firstJapanese printing company to establish an environment department, and in 1993 we built our unique Eco-Report System ofmanaging progress related to environmental protection. In 2000, we created the DNP Group Environmental Committee, which has
worked proactively at such tasks as promoting sales of eco-friendly products, reducing industrial wastes, preventing global
warming, and reducing emission of harmful substances.

I

Development and Sales of Eco-friendly Products

In order to reduce environmental burden throughout product lifecycles, DNP adopted guidelines for developing environmentallyconscious products based on principles (revised June 12, 2001) propounded by Japan’s Green Purchasing Network, and we use
these guidelines to develop and sell eco-friendly products.
In the fiscal year ended March 2007, our sales of such products amounted to 265.8 billion yen, an increase of 4% over theprevious year.

I

Assessment of Past Performance and Future Goals Related toEnvironmental Protection

Based on our environmental policies, DNP has established environment-related goals that are appropriate for our businessactivities, and we have been steadily achieving these goals. The table on page 89 shows the goals that the DNP Group’s
Environmental Committee adopted for the fiscal year ended March 2007, along with actual results.

DNP Group’s Environmental Management System
President
DNP Group Environmental Committee
Environmental protection promotion officeEnvironmental Committees of each business division
Environmental protection promotion office
Technical/industrial group
Eco-friendly products development group
Environmental preservation/PRTR group
Industrial waste reduction group
Energy conservation group
Regional action groups
Office/labor environment group
Business division groups: 57 locations

88

Category
テーマ

Goals (target year for completion) and achievements in the year through March 2007 (fiscal 2006)
目標（目標達成年度）と2006年度実績

Global warming prevention

Reduce carbon dioxide emissions (CO2 emissions volume/production volume) by 15% from fiscal 1990 level (by fiscal 2010)
Compared to fiscal 1990: down 8.7% (Achieved)

Reduction of environmental
damage from transportation

Reduce carbon dioxide emissions (CO2 emissions volume/tonnage transported/distance transported) by 40% from fiscal
2000 level (by fiscal 2010)
Compared to fiscal 2000: down 26% (Achieved)
Reduce amount of fuel consumed for transport (amount of fuel consumed/net sales) by 20% from fiscal 2000 level(by fiscal 2010)
Compared to fiscal 2000: down 6% (Achieved)

Volatile organic compounds(VOCs)

Reduce amount of VOCs (except methane) released into atmosphere Group-wide by 70% from fiscal 2002 level(by fiscal 2008)
Compared to fiscal 2002: down 47.3%

Reduction of industrial waste

Reduce industrial waste output (volume of industrial waste/production value) by 50% compared to fiscal 2000 level(by fiscal 2010)
Compared to fiscal 2000: down 39.4%
Reduce generation of general waste by 35% compared to fiscal 2000 level (by fiscal 2010)
Compared to fiscal 2000: down 28.8%
Achieve recycling rate (volume of waste recycled/total volume of general waste generated) of 98% by processing wastefrom main raw materials (by fiscal 2010)
Fiscal 2006 recycling rate: 99.9% of paper, 94.5% of plastic wastes, 99.2% of waste metals and 76.1% of glass wastes
Achieve zero emissions throughout the DNP Group (by fiscal 2010)
Fiscal 2006 final disposal site usage rate: 1.9 %Development and sale ofeco-friendly products

Increase net sales of eco-friendly products by 10% over previous year, to reach 300 billion yen (by fiscal 2010)
Fiscal 2006 net sales of eco-friendly products: 265.8 billion yen (Achieved)

Green purchasing

Increase the ratio of “green” (per standards set by DNP purchasing headquarters) raw materials costs relative to the cost of
all raw materials purchased to 40% (by fiscal 2010).
Fiscal 2006: 37.4% (Achieved)
Increase ratio of amount spent on products that are officially recognized as being environmentally friendly (Eco-markproducts, etc.) relative to total amount spent for general supplies (office supplies and equipment, etc.) to 50% (by fiscal 2010)
Fiscal 2006: 43.3% (Achieved)

Office environment

Collect at least 70% of used paper relative to general waste (every year)
Fiscal 2006 collection rate: 71.2% (Achieved)

Environmental preservation

Keep maximum concentration of gases subject to atmospheric emissions regulations to within 70% of legal limit
Fiscal 2006 achievement rate (relative to DNP’s own standard): 98% (Achieved)
Keep maximum concentration of substances subject to wastewater regulations to within 70% of legal limit
Fiscal 2006 achievement rate (relative to DNP’s own standard): 96% (Achieved)
Keep maximum noise levels at production site boundaries within 95% of legal limit
Fiscal 2006 achievement rate (relative to DNP’s own standard): 64% (Achieved)
Keep maximum vibration levels at production site boundaries within 95% of legal limit
Fiscal 2006 achievement rate (relative to DNP’s own standard): 100% (Achieved)
Keep maximum odor levels at production site boundaries within 70% of legal limit
Fiscal 2006 achievement rate (relative to DNP’s own standard): 98% (Achieved)

DNP Annual Report 2007

89

90

Creating Lively Workplaces

Each DNP Group employee works at growing and realizing his or her own potential in order to be a responsible, confident andindependent professional who meets challenges proactively and courageously.
DNP cultivates an emergently evolving corporate culture and provides environments and mechanisms that support each
employee’s growth and self-development, so that each employee can make the best use of his or her abilities as a professional.

I

Transparent and Fair Hiring Practices

We provide equal opportunities to anyone who shares our corporate vision and wants to work with us to realize his or her
potential, and we use fair and equitable methods of selecting and hiring employees. We also participate actively in internshipprograms.
Type of Hiring

Description

Results

New hiring

We inform candidates of the type of person we are looking for, the steps in our hiring
process, the timing of each step, and what we are looking for in each interview.
In order to avoid mismatches, we assign young employees as recruiting partners togive candidates a real-life picture of our company.

Fiscal 2006 new hires
Regular employees: 150(100 men, 50 women)
Technical staff: 260(210 men, 50 women)

Mid-career hiring

We advertise broadly via the Internet, with no age restrictions. We explain clearly andspecifically the job duties of the positions we seek to fill.

Fiscal 2006 mid-career hires: 65

Internships (arranged
jointly with Group
companies)

In response to requests from schools and students seeking experience in the working
world, we provide students with opportunities to gain work experience. These opportunities do not necessarily lead to regular employment.

Fiscal 2006: 105 interns accepted
July-September, in 74 categories

I

Cultivating Independent Professionals

We believe it is important for each employee to work at self-development, consider his or her own career path, decide what kindof work he or she wants to do, and expand his or her own field of work. In order to support these efforts, we have establishedpersonnel systems that allow employees to choose the kind of work they want to do, as well as education, evaluation andcompensation systems that encourage employees to acquire specialized knowledge and skills.
21st-century Vision
People who aspire to be professionals capableof working independently and cooperatively

Management creed↓
Business vision/Guidelines for Conduct

Each employee’s effort/self-development
１．企業倫理行動委員会

Respect for diversity
Flexible working styles
Safe and hygienic workplaces
Training systems and mechanisms

Career Consulting Center

Certification support program

In-house venture system

Open recruiting system

Management-byobjective andevaluation system

Support and guidance from leaders

Employee evaluation
systemJob grade system

Collective
training,
Network
Learning

Self-reporting
systemCollective
training,
internships

Cultivation
through placement
and transfers

Outsideseminars

Correspondence
coursesOn-the-job
training

Training sponsoredby head office

Career change
training
Appointee training

Training sponsored by operational
division or Group company

Personnel/organizations/systems/measures……

Continuation and enhancement of dialogue

Professional staff capableof working independently andcooperatively

Emergently evolvingorganizational climate/corporate culture

Free and open work
environment

Realization of our 21st-century Vision

DNP Annual Report 2007

91

Sustainable Development

1. Personnel System
SystemDescription

Results

Open recruiting
systemWe advertise positions requiring specialized knowledge and positions
in new businesses or new product development. Anyone with ability,
experience and the desire to be challenged is free to apply. Discoveryof talented employees and realization of their potential.

Fiscal 2006:
Number of positions offered
Number of employees reassigned

In-house venturesystemWe provide training, financing and other types of support for employees
who have entrepreneurial aspirations and want to start an independent
new business. Generally, we appoint the person who proposed the idea
for a new company to be its president.

April 2002: CP Design Consulting Co., Ltd.
Sept 2003: M’s Communicate Co., Ltd.
Sept 2004: At Table Co., Ltd.
Jan 2005: Mobile Impulse Co., Ltd.
Jan 2006: YouToo Co., Ltd.

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

Fiscal 2006: 3 employees

Certification support
programThis program pays incentives to employees who acquire specialized
knowledge, skills or certifications needed for their job (covers about 90
types of certification, up to 100,000 yen).

Increased the number of employees who are certified
for specialized knowledge or skills related to IT orother areas pertinent to their work
Fiscal 2006: 593 employees certified

Mastership recognition
program

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

A total of 47 employees recognized as of March
2007

Special skills
recognition program

Employees with advanced specialties, whose talents are recognizedparticularly widely both inside the company and outside, receive special compensation.

Fiscal 2006: 3 employees recognized
As of March 2007, 16 employees had been recognized

Evaluation / compensation
systems (management-byobjective system, etc.)

At regular intervals, employees sit down with their supervisors to set
future performance targets and evaluate past performance. Employees
and supervisors increase mutual understanding through discussion andcounseling. Evaluation results are directly reflected in salaries andbonuses.

Expanded the scope of application to almost all
employees by October 2003
Expanded feedback of evaluation results to include
general employees, as of 2005 winter bonus
payment timeSelf-reporting system

We ask employees whether they want to change positions or workplaces in order to further their careers, and any other requests they
may have related to their life plans. When the company and theemployee agree, steps are taken to realize the employee’s wishes.

Fiscal 2006: 302 employees participated in selfreport interviews; 120 of them changed positions

120
051

2. Training for Employees Who Want to Advance Their Career
Each employee sketches his or her own career path, envisioning how they want to be in the future and considering the skills they
will need to acquire in order to reach their goals. Each one aims to be able to collaborate smoothly with others inside and outside
the company, as an accountable, self-confident and autonomous professional in their own field. DNP helps employees achieve
their career goals by providing practical and diverse training programs that support the acquisition of basic or specialized
knowledge required in various fields, or the development of people skills (including self-control and interpersonal skills) orconceptual skills for handling information and concepts, etc.

I

Free, Open and Pleasant Working Environments

1. Respecting Diversity
We believe that in order to contribute to society by realizing a free, open and emergently evolving corporate culture, it is importantthat all of our employees achieve self-realization and express their potential. Toward this end, we think it is important for employees torespect each other and create pleasant working environments without regard for such factors as gender, age or disabilities.

92

SystemDescription

Results

Hiring people withdisabilities

We achieved the legally mandated ratio of disability employment, based on the premisethat people with disabilities should be able to function normally in society. We educate
workplace leaders so they can understand employees’ special needs.

As of March 2007: disabled
employee rate 1.87%

Hiring seniors

Employees who want to continue working as seasoned professionals after reaching mandatory retirement age may be hired as “senior staff.”

Fiscal 2006: 65.8% of eligible
employees chose to work as
senior staff

Eliminating gender bias
from the workplace• We conducted training seminars for managers about supporting women’s careers.
• We expanded career opportunities for women.
• We sent female managers to outside training seminars.

From June 2003 to March 2007:
1,825 managers participated intraining about supporting
women’s careers2. Flexible Working Styles
If every employee is to reach his or her full potential as a professional, it is important that consideration be given to the enhancementof personal lives, individual career plans and life plans, and that working time be balanced with ample time for self-development and a
private life. It is equally important that coworkers respect the value of each other’s time.
In addition, we have established a Group-wide “Total Health Support System” to promote the physical and mental health of
employees and their families. This system supports employees’ own efforts to maintain the best possible physical and mental condition.
SystemDescription

Results

Childcare leave• Until April 30 of the child’s second year, or until a child is 18 months old• Up to twice per child, within the period in which childcare leave is allowed
Revised April 2005

Fiscal 2006: 77 employees took leave under
this system(Dai Nippon Printing Co., Ltd.)

Support Program for
Employees Returning to the
Workplace after Childcare
Leave

A system aimed at creating environments that allow employees to feel secure
about taking leave to accommodate birth and childcare, to smoothly return to
the workplace, and to make the most of their potential while working and raising a family

As of March 2007, there were 54 people registered with our online “wiwiw” program
As of January 2007, the “Kangaroo Club” had
27 members in Tokyo and 10 members in
Osaka

Life Plan Consulting
Center

Provides information about pensions, employment insurance, motivation forliving , lifelong education, etc. to assist individuals with planning for life after
retirement

Fiscal 2006: 718 consultations

Career Consulting Center

Provides counseling and guidance regarding career development

Fiscal 2006: 136 employees used the center

3. Creating Safe and Pleasant Workplaces
All of our employees want to work in a safe and pleasant environment, so they take action to maintain safety and hygiene. Our basic policy
is to support the creation of comfortable and pleasant working environments and working styles that make room for family life. Accordingly,
we created a system of safety and hygiene activities for all employees to participate in, and we attach great importance to this system.
SystemDescription

Results

Creation ofguidelines

The Central Safety and Hygiene Committee determines safety
and hygiene-related policies each year. Each operational divisionand group company then determines its own policies, based on
the central committee’s policies and taking into account thecharacteristics of each workplace.

<Major standards and guidelines>
1) Workplace environment improvement
Workplace environment standards, guidelines for preventing noisein the workplace, guidelines for tobacco smoking
2) Preventing work-related accidents
Guidelines for preventing industrial accidents caused bymachinery, etc.

Improving skills

The safety and hygiene committees play the leading role inpromoting activities that are tailored to each workplace, and in
improving employees’ skills when necessary to allow thecommittees to function effectively.

We encouraged employees to become certified as hygiene
managers, work supervisors, chemical substance handlers, etc.
The figures below show the number of employees as of March 31,
2007.
385
Certified hygiene managers
Certified work supervisors
2,367
6,051
Completed training in restricted operations
1,955
Completed special educational seminar

Accident prevention

Analyze potential causes of accidents, identify risk factors that
contribute to workplace accidents, develop activities that
promote evaluation and reduction of those risks.

DNP’s accident rate is low compared to the all-industry average
and even compared to the average for all types of printing
industries.
Jan - Dec 2006: Industrial accident rate (the number of employees
who missed work due to a work-related accident divided by the
total number of hours worked in units of 1 million hours): 0.44

4. Secure Working Environments (Disaster Prevention Framework)
DNP has created an earthquake response outline and a central disaster prevention basic plan in order to secure employees’safety, restore functioning to workplaces, and support employees’ families and local residents in the event of a disaster. We
established “Disaster Prevention Councils” in the operating divisions at our headquarters and in outlying areas, and at Group
companies. In the event of an earthquake, these councils are prepared to automatically begin functioning as response
headquarters. Six action teams are to take specific disaster prevention measures and earthquake response measures, with eachteam taking responsibility for the rescue of victims, care of buildings, asset protection, business operations, PR or community aid.

DNP Annual Report 2007

93

Sustainable Development

Contributing to Society

I

Promoting Cultural Activities

Printing is based on the art of making reproductions, which DNP sees as a new kind of creative technology that can contribute to
the development of art and culture. DNP is engaged in highly original cultural activities centered around supporting graphic arts.

Our two galleries — one in Tokyo and one in Osaka — holdexhibitions of creative works that highlight graphic design
and/or printing, by artists and groups from Japan and abroad.
In January and February of 2007, we commemorated the 20th
anniversary of ggg’s opening by holding an exhibition called“EXHIBITIONS,” which explored developments in graphic
design over the past 20 years.

Ginza Graphic Gallery (ggg)
Opened in 1986

URL: http://www.dnp.co.jp/gallery/ggg/• Number of events held: 250• Aggregate number of visitors: 815,000
Location: DNP Ginza Bldg. 1F, 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

ddd Gallery

The Center for Contemporary
Graphic Art
Opened in 1995

http://www.dnp.co.jp/gallery/ccga/
The Center for Contemporary
Graphic Art is the home of the Tyler
Graphics Archive Collection,
produced at the renowned U.S.
print workshop, Tyler Graphics Ltd.
In addition to holding regularshowings of its permanentcollection, the Center also introduces a wide variety ofcontemporary graphic art.
• Number of exhibitions held: 41• Aggregate number of visitors: 59,000
Location: 1 Miyata, Shiota, Sukagawa-shi, Fukushima, Japan 962-0711
Telephone: 0248-79-4811
Open 10:00 – 17:00 (Admission until 16:45); closed Mondays (unless Monday is a
public holiday), the day after public holidays, (except when this falls on Saturday or
Sunday), and exhibit changes, between late December and the end of February
Admission ¥300; ¥200 for students (free for children 12 and under, seniors over 65,
and handicapped-certificate holders)

Opened in 1991

URL: http://www.dnp.co.jp/gallery/ddd/• Number of events held: 152• Aggregate number of visitors: 220,000
Location: Nanba SS Bldg., 1-17-28 Minamihorie,
Nishi Ward, Osaka, Japan 550-8508
Telephone: 06-6110-4635
Open 11:00 - 19:00 (till 18:00 on Saturdays);closed Sundays, Mondays and holidays
Admission free of charge

Maison des Musées de France(MMF)
Opened in 2003

URL: http://www.museesdefrance.org/
DNP established MMF as a venue forenjoying French arts and culture. It serves
as an information center, boutique andgallery, providing information about
French art museums and artworks, andselling merchandise from French
museums. MMF invites museum
curators, critics and researchers to giveseminars from time to time.
• Total number of visitors to information center: 21,000• Total number of seminars given: 34• Total number of seminar participants: 1,531
Location: DNP Ginza Annex 7-7-4 Ginza, Chuo Ward, Tokyo, Japan 104-0061
Telephone: 03-3574-2384
Open 11:00 – 19:00, closed Sundays

94

Web site
DNP Museum Information
Japan artscape
URL: http://www.dnp.co.jp/artscape/News and information about
exhibitions at art museums
throughout Japan and other artrelated events is updated twice amonth and broadcast as a Web
Magazine.
DNP received the 2005 “MécénatAward for Information
Communication Culture of theArts” for continuing to provide
specific information on the arts. In 2006, we added an Englishlanguage version.
• Updated: twice monthly• Hits: about 1.5 million page views per month
A museum information site, Museum information Japan (MIJ), which was
eastablished in 1995, is the predecessor of Artscape.

[The Louvre - DNP Museum Lab]
URL：http://www.museumlab.jp
The Louvre - DNP Museum Lab is a joint project between the Musée du Louvre and Dai Nippon Printing that has been exploring
new approaches to art appreciation since October 2006. The project combines DNP’s expertise in information technology andstate-of-the-art digital imaging with the Louvre’s expertise in educating the public about cultural assets. Between 2006 and 2009,
the Museum Lab is scheduled to hold six exhibitions at DNP’s Gotanda Building, with each exhibition lasting around five months.
The facility is open to the general public. Visitors are given a ticket containing an IC tag and a PDA system that allows them to get
information about the works of art on display and the artists who created them, according to pre-registered preferences such as
language (Japanese, French or English) and method of viewing.

First exhibition: A Carabineer, by Théodore Géricault
October 30, 2006 to March 10, 2007

©Photo DNPSecond exhibition: Tanagras, Female Figures of Ancient Greece
April 26, 2007 to September 8, 2007

©Photo DNP

Location: DNP Gotanda Bldg. 1F, 3-5-20 Nishi-Gotanda, Shinagawa Ward, Tokyo, Japan 141-8001 Telephone: 03-5435-0880
Open 17:00-20:30 on Mondays, Tuesdays and Thursdays, 17:00-20:30 on Wednesdays and Fridays, 11:00-17:30 on Saturdays; closed Sundays and holidays
Admission free of charge[Kidzania Tokyo, DNP Pavilion (Print shop)]
URL：http://www.dnp.co.jp/kidzania/index.html
Kidzania Tokyo is Japan’s first “Edutainment Town,” giving children the chance to experience various kinds of work normally reserved for
adults. It opened October 5, 2006 in Toyosu, Koto Ward. DNP opened a “Print shop” pavilion where children can try their hand at graphic
design by producing posters.
The children use computers to compose their own designs, which may include text, photographs and illustrations, etc. The children can printout their poster and take it home.
This activity is designed to make children aware of printing’s role in “communicating information to people,” and to allow them to practiceself-expression and design that is appropriate for a particular purpose. Since March 2007, thechildren have been producing “eco-posters” that promote conservation of the Earth’s
environment using Kidzania Tokyo’s “Six Principles of Children’s Eco-Action.”
By passing on technology and expertise that DNP has cultivated through printing, and by
opening up possibilities for children’s futures, DNP contributes broadly to society.

“Six Principles of Children’s Eco-Action”
1. Set air-conditioning no cooler than 28℃ andheat no higher than 20℃.
2. Carry my own chopsticks and bag. Tell the
cashier “I don’t need a bag.”
3. Turn off lights when I leave the room.
4. Use pencils, pens, erasers and paper carefully,
without wasting.
5. Treat animals and plants with respect.
6. Tell adults to reduce carbon dioxide
emissions.

DNP Annual Report 200795

Financial Section

Contents

Management's Discussion and Analysis
Selected Financial Data
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Independent Auditors’ Report

98
108
1 10
1 15
127

Financial Section

Management’s Discussion and Analysis

OPERATING RESULTS
Net Sales by Consolidated Segments(%)

Beverage
4.7 %Electronics
18.6 %

Lifestyle andIndustrial Supplies
34.0%

98

Information
Communication
42.7%

Business Environment
In the fiscal year ended March 2007, greater capital spending linked with improved
corporate profits and a solid trend in personal consumption were among the indicators thatshowed the Japanese economy’s continued gradual recovery.
However, the business environment surrounding the printing industry remained harsh, due
to such factors as soaring crude oil prices that pushed up materials prices and intensifiedcompetition causing unit prices to fall.
In Information Communication, the publishing industry saw an increase in free newspapers
and magazines, but there was a decline in the number of new magazines launched and a big
drop in magazine circulations. Overall publishing industry sales declined 2.8% from theprevious year, falling below the previous-year level for the ninth consecutive year. On theother hand, advertising-related sales from April 2006 until March 2007 rose 1.6% year on
year, marking three consecutive terms of a year-on-year increase. Advertising sales rose in
the first half of the year due to the Soccer World Cup and other favorable events, but in thesecond half corporate profits turned lackluster and advertising expenses declined. In thebusiness forms sector, we enjoyed increased demand related to IPS (information processing
services) such as invoice issuing, while the smart card market expanded well thanks to abroader demand for smart cash cards that verify the user’s identity by checking vein patterns
in a palm or fingertip.
In Lifestyle and Industrial Supplies, demand for paper food containers and paper cups
declined, but demand for flexible packaging materials increased, helped by solid domestic
personal consumption. Amid a good deal of interest in sterilization technology, we found newcustomers for our large aseptic beverage bottle-filling systems. Meanwhile, the number ofhousing starts increased by 2.9% over the previous year, rising for the fourth year in a row.
Sales of eco-friendly lifestyle materials increased, and there was solid demand for building
materials from overseas markets as well as in Japan. In Industrial Supplies, growth in the flat
display market supported expansion in the market for functional optical films such as antiglare film used in LCDs (liquid crystal displays). Also, more widespread use of digital
cameras resulted in a strong demand for ink ribbons for digital color printers.
In the Electronics segment, there was continued growth in the display market, especiallythe market for flat-panel televisions. However, the environment was less conducive to
profitability due to such factors as a glut of LCD panels that led to major production cutbacks
and sharp drops in panel prices.

Overview
The DNP Group strove to secure good results by engaging in dynamic sales activities toprovide products and services developed in response to customer needs, and by making agroup-wide push to implement “Production 21” cost-cutting measures. Consolidated net
sales increased 3.3% over the previous year. By segment, net sales from Information
Communication rose 1.0% as increases in sales from commercial printing and business
forms outweighed a decline in publishing-related sales. In Lifestyle and Industrial Supplies,
packaging sales declined, but building materials and industrial materials increased. Partly due
to the addition of the photography-related businesses newly acquired from Konica Minolta
Holdings, this segment’s sales increased sharply, by 11.0%. In Electronics, net sales slumped
1.6% due to poor sales of LCD color filters and other display components. The Beverages
segment’s sales suffered from intensified competition, and declined 3.0% from the previous
year.
Operating income declined 20.3% from a year earlier. This difficult situation resulted fromdecreased order volumes, unit price declines resulting from intensified competition andcustomer demands, higher material prices and increased depreciation expenses.
Operating income margin declined 1.8 percentage points to 6.2%.
As can be seen from the above, this fiscal year’s results reflect a very harsh situation. Net
income also declined, by 15.9% from a year earlier.

2007.3

Net sales (in millions of yen)¥

1,557,802

2006.3¥

1,507,506

2005.3¥

1,424,943

Gross profit margin (%)

18.6%

20.3%

21.3%

Operating income margin (%)

6.2%

8.0%

8.5%

Net income margin (%)

3.5%

4.3%

4.2%

Net income per share (yen)

¥

78.09

¥

91.23

¥

82.56
(¥ Million, ¥, %)DNP Annual Report 200799

Financial Section

Net Sales
Net sales this term increased by 50.3 billion yen, or 3.3%, to 1,557.8 billion yen, renewing
the Group’s record high for the fourth year in a row. On the other hand, the decline in unit
prices was even more severe than the previous year due to intensified competition. Lower
unit prices cost us about 21.6 billion yen in net sales.
Looking at net sales by segment, in Information Communication, the publishing of freenewspapers and magazines increased, but the publishing of books and magazines declined.
Sales of commercial printing were strong, with increased orders for pamphlets and otherkinds of promotional materials. In the business forms sector, sales of smart cards and IPS(information processing services) were also good.
Lifestyle and Industrial Supplies enjoyed increased sales of flexible packaging for foodrelated use. Amid good reviews of DNP’s aseptic technology, we sold large aseptic bottlefilling systems for the fifth year in a row. Sales of preformed bottles for aseptic filling also
grew. In the lifestyle materials sector, we enjoyed strong sales of eco-friendly materials forresidential use. In Industrial Supplies, sales of antiglare film for LCDs increased sharply, as did
sales of ink ribbons for color printers thanks to the expansion of the digital photo print
market.
In Electronics, LCD panel production adjustments and price cuts led to a decline in sales ofcolor filters and other display-related products. Demand for cutting-edge (65 nm)
photomasks was stagnant.
Gross Profit Margin
(%)

20.8

21.3

20.3

03

04

05

06

18.6

20.3

25

20

15

10

5

0

07

SGA Expenses to Net Sales
(%)

12.9

04

05

12.4

13.2

03

12.3

13.4

15

06

07

12

9

6

3

0

100

Cost of Sales
DNP’s cost of sales increased by 65.9 billion yen, or 5.5%, over the previous fiscal year to
1,268.1 billion yen. The gross margin declined by 1.7 points, from 20.3% to 18.6%.
Prices of raw materials such as petrochemicals and printing paper rose this fiscal term, as
they did last term. This increased our costs by roughly 9.7 billion yen. Compared to theimpact of materials cost increases in the previous year, this year’s effect was bigger by 3.7
billion yen, or 61.7%.
In order to counter the effects of materials cost increases, since April 2002 DNP has been
focusing on “Production 21” cost-cutting measures such as improving process efficiency,
improving yields, reducing material losses, and shortening preparation and lead times. Thisterm, we applied successful measures horizontally throughout the Group, and strove to raise
standards for the manufacturing division as a whole. Thanks to these activities, this fiscal
year we reduced production costs by 22.2 billion yen compared to what they would havebeen had we not taken any cost-cutting measures.

Selling, General and Administrative Expenses
Selling, general and administrative expenses this fiscal year increased by 89.1 billion yen, or4.8%, to 193.6 billion yen. The percentage of these expenses relative to sales rose 0.1 pointfrom 12.3% to 12.4%.
Our continued efforts at containing costs, for example by using information technology toboost operational efficiency and by improving budget management in order to reduce
variable costs, resulted in 800 million yen worth of savings. Added to the 22.2 billion yen in
manufacturing costs that we saved, cost reductions amounted to a total of 23.0 billion yen.

Operating Income Margin
(%)

8.0

05

06

7.6

6.2

8

8.5

10

6.9

Operating Income
This fiscal year, DNP’s operating income was strongly affected by lower unit prices andincreased raw material costs. Operating income declined by 24.5 billion yen, or 20.3%, to96.1 billion yen. We were able to pass on to customers about 50% of roughly 9.7 billion yen
in raw materials cost increases, but the remainder took a significant bite out of our income.
As a result, our operating income margin dropped sharply, from 8.0% in the previous fiscal
year to 6.2%.
By segment, operating income from Information Communication sagged 0.1%, or 58
million yen, to 51.0 billion yen. In Lifestyle and Industrial Supplies, it declined 1.3 billion yen, or
3.6%, to 36.3 billion yen. In Electronics, operating income fell 22.9 billion yen, or 60.6%, to14.9 billion yen. In Beverages, operating income surged by 352 million yen, or 122.5%, to 640
million yen.

6

4

2

0

03

04

07

Other Income (Expenses)
This fiscal year, the net balance of other income and expenses was income of 2.9 billion
yen, up 8.8 billion yen from the previous year.
The main reasons for this included an increase of 4.4 billion yen in gains on the sale ofmarketable securities and investment securities, and a decline of 6.1 billion yen in impairment
losses on fixed assets, which together made up for a 3.2 billion-yen increase in losses on thedisposal of property, plant and equipment.
As a result of the above, income before income taxes and minority interests was 99.0
billion yen, representing a decrease of 15.7 billion yen or 13.7% from the previous fiscal year.
Net Income
Net income totaled 54.8 billion yen, down 15.9%, or 10.3 billion yen, from the previous
fiscal year. Net income per share dropped sharply, to 78.10 yen, compared to 91.23 yen a
year earlier.

ROE
(%)

6.3
5.1

5.5

6.0

7
6
5

3.0

4
3
2
1
0

03

04

05

06

07

DNP Annual Report 2007

101

Financial Section

Capital Expenditures, Research and Development Expenditures, etc.
For five fiscal years in a row, from the year ended March 1997 to the year ended March
2001, DNP invested more than 100 billion yen per year in capital expenditures. For the next
four fiscal years, however, from April 2001 until March 2005, we reduced capital
expenditures and worked at concentrating investments on strategic areas and making themost effective use of existing facilities and equipment. From the fiscal year ended March
2006, we reviewed this policy and resumed active investment in plants and equipment inorder to respond to increased demand accompanying economic recovery and to prepare forthe expanding markets of the future. In addition to boosting production capacity forstrategically important products like color filters, optical films and smart cards, we built the
DNP Gotanda Building as a base for promoting P&I Solutions and reviewed further
investment in printing machines in our existing businesses.
In the fiscal year through March 2007, we invested actively in strategically important
products, including the acquisition of a liquid crystal color filter production line from Sharp
Corporation at its Kameyama No. 2 Plant, installation of a new optical film line at our Mihara
Plant in Hiroshima, and further investment in the updating of printing machines. In all, capital
investment this fiscal year amounted to 162.8 billion yen, representing an increase of 26.8
billion yen, or 19.7%, over the previous year’s final figure of 136.0 billion yen.
By segment, capital spending for Information Communication increased 14.5 billion yen
over the previous year to 41.1 billion yen, constituting 25% of our overall capital spending.
Capital spending for Lifestyle and Industrial Supplies amounted to 39.9 billion yen, up 11.1
billion yen year on year, also 25% of the total. For Electronics, we invested 76.0 billion yen,
an increase of 1.3 billion yen, and 47% of the total. Capital spending for other businesses
declined by 100 million yen from the previous year to 5.8 billion yen, representing 3% of thetotal.
Research and development expenditures totaled 30.1 billion yen, an increase of 1.4 billion
yen or 4.9% from the previous fiscal year.

102

LIQUIDITY AND CAPITAL RESOURCES
In order to expand our business, DNP’s management believes that it is important tosteadily expand cash flow generated through aggressive operating activities, and toconcentrate investment in strategic areas. In addition, we believe that a sound financial
constitution is indispensable to stable growth in the medium and long terms, so we haveworked hard to enhance our company’s financial position.
Cash Flow2007.3

Cash flows from operating activities¥¥(150,717)

Cash flows from investing activities
Free cash flow

123,0112006.3¥(27,706)

141,673

2005.3¥(151,781)¥(10,108)

178,342(126,229)¥

52,113)(¥ Million)

This fiscal year, cash flows generated by operating activities decreased by 13.2%, or 18.7
billion yen, from the previous fiscal year to 123.0 billion yen. The main reasons for thisdecrease were that larger net sales resulted in an increase of 34.2 billion yen in tradereceivables, an increase of 14.5 billion yen from the previous year’s change, while theincrease in inventories was 18.0 billion yen, or 19.6 billion yen more than the previous year’schange.
Cash flows used in investing activities decreased by 0.7%, or 1.1 billion yen, to 150.7 billion
yen.
Cash flows used in financing activities decreased 8.8%, or 4.1 billion yen, to 42.6 billion
yen. Major uses of this cash included expenditures of 19.7 billion yen for purchases oftreasury stocks and 19.1 billion yen for dividend payments.
As a result of these activities, DNP’s cash and cash equivalents at the end of the fiscal year
amounted to 170.5 billion yen, down 68.7 billion yen, or 28.7%, from a year earlier.
This fiscal year, free cash flow — i.e. cash flow generated by operating activities minus
cash flow used in investment activities — was -27.7 billion yen, mainly because we invested
aggressively in facilities and equipment for strategically important products like color filters,
optical film, IPS and smart cards, which are expected to be the targets of great demand in the
future.

DNP Annual Report 2007

103

Financial Section

Current Ratio
(%)

166

178

186

197

171

200

The Balance Sheet
Since our mission is to increase DNP’s corporate value, we try to maintain the liquidity that
we need while increasing capital efficiency in order to implement our business strategies in a
flexible manner and respond promptly to changes in the business environment.

150

100

Total assets (in millions of yen)

50¥

2007.32006.31,700,250¥ 1,662,377

2005.3¥1,600,129

Current ratio (%)

166%

178%

186%

Working capital-to-net sales (%)

20%

23%

27%

Debt-to-equity ratio (%)

6

6

7

0

03

04

05

06

07

Book value per share (in yen)¥

1,544.02¥

1,507.90¥

1,409.18(¥ Million, ¥, %)DNP’s total assets at the end of this fiscal year amounted to 1,700.3 billion yen,representing an increase of 37.9 billion yen, or 2.3%, over the previous fiscal year.
Looking at current assets, cash and cash equivalents decreased by 28.7%, or 68.7 billion
yen, from the previous fiscal year, to 195.6 billion yen. Trade receivables increased by 9.4%,
or 40.8 billion yen, to 477.2 billion yen. Marketable securities holdings increased by 47.0%,
or 3.2 billion yen, to 10.0 billion yen. Inventories increased by 18.8 billion yen, or 24.5%, to95.2 billion yen. As a result, total current assets decreased by 4.9 billion yen, or 0.6%, to800.3 billion yen.
Looking at investments and advances, investment securities decreased by 30.4 billion yen,or 13.7%, to 190.9 billion yen. Accounts with non-consolidated subsidiaries and associatedcompanies declined by 3.2 billion yen, or 27.8%, to 8.2 billion yen. Overall, investments andadvances decreased by 34.8 billion yen, or 14.8%, to 200.5 billion yen.
Property, plant and equipment increased by 11.7%, or 66.8 billion yen, to 635.8 billion yen.
The main factors behind this increase were year-on-year increases in the value of buildings(by 39.1 billion yen or 9.2%), machinery and equipment (56.3 billion yen, 5.9%), landholdings (5.5 billion yen, 4.6%) and construction in progress (3.6 billion yen, 11.8%). Other
assets increased by 10.7 billion yen, or 20.2%, to 63.7 billion yen.
As of the end of the fiscal year, current liabilities were up by 29.5 billion yen, or 6.5% year
on year, to 482.4 billion yen. The main reasons for this increase were the facts that trade
payables increased in conjunction with larger sales, rising by 26.0 billion yen, or 8.4%, to337.6 billion yen, although at the same time income taxes payable declined by 10.1 billion
yen, or 36.0%, to 18.0 billion yen.
Under long-term liabilities, long-term debt increased by 2.9 billion yen, or 5.3% from theprevious year, while our liability for retirement benefits decreased by 3.2 billion yen to 55.3
billion yen. In all, long-term liabilities increased by 150 million yen, or 0.1%, to 118.4 billion
yen. The balance of outstanding corporate bonds was unchanged from the previous year at
50.0 billion yen.
Total liabilities increased by 29.6 billion yen, or 5.2% from the previous year, to 600.8
billion yen.
DNP has been repurchasing its shares since February 2003. This fiscal year, we purchased104

Equity Ratio
(%)

64.7

63.0

64.0

63.0

80

65.0

10,650,000 shares for 19.5 billion yen, bringing the cumulative total to 63,527,000 sharesworth 103.1 billion yen. This term we also retired 10 million shares on November 21, 2006, for16.5 billion yen, bringing the cumulative total of retired shares to 29 million shares worth 44.1
billion yen.
As a result, this fiscal year’s reduction in treasury stock increased by 3.1 billion yen over theprevious year’s 57.5 billion yen to 60.6 billion yen, which was a factor that reduced net
assets. On the other hand, retained earnings increased by 2.8%, or 22.3 billion yen, to 828.7
billion yen, which helped boost net assets.
As a result of the above factors, DNP’s total net assets at the end of the fiscal year
increased by 7.5%, or 8.2 billion yen, to 1,099.4 billion yen.

03

04

05

06

07

60

40

20

0

DNP Annual Report 2007

105

Financial Section

RISK MANAGEMENT
The performance and the results of DNP could be significantly affected by a variety offactors and circumstances that might 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, the following are the major factors that the
DNP management views as risks.
The Japanese Economy and Consumption Trends
DNP engages in a wide range of businesses with an extremely large number of customers.
We conduct our business so as not to be overly dependent on specific customers. The
primary market where we do business is centered on the Japanese domestic market,
whereas our overseas sales constitute about 17% of net sales. Therefore, if individual
consumption and other aspects of domestic demand should slow down due to fluctuations in
the Japanese economy, our corporate performance could be affected by decreased orders,lower unit sale prices, or other effects of such a downturn.
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 basedon a careful compilation of information and the development of highly competitive, highadded-value products. However, the market for display components and electronic devices issubject to sudden changes. It is possible that DNP’s performance could be affected bysudden changes affecting products that we handle, such as dramatic fluctuations in demandor a plunge in unit prices.
Fluctuations in Raw Material Procurement
We procure raw materials such as printing paper and film from multiple suppliers in Japanand 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 in petroleum prices or sudden surges in demand from the Chinese market. We
intend to cope with such instances by negotiating with our customers. However, if it should
become extremely difficult to secure supplies, or if prices rise markedly, it is possible that our
corporate performance could be affected.
Development of New Products and Technologies
DNP adapts printing technologies in order to develop new products and technologies thatmeet the needs of our customers and the market. We provide products and services to awide 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 believethat in the future, competition in the area of product development will become more intensethan ever before, and it is possible that our performance could fluctuate significantly due tounforeseeable changes in market trends or a shortening of product life cycles.

106Currency Fluctuations
Particularly in such fields as electronics, we are expanding our dealings in products andservices with customers, suppliers and others overseas. Because we expect the effects ofcurrency 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 thatradical swings in currency values could have a more serious effect on our corporate
performance.
Legal Regulations, etc.
We conduct our business based on strict compliance with the law. Wherever we operate,in Japan or overseas, we are subject to a wide variety of legal regulations and restrictions,
including laws related to product liability, environmental protection and recycling, antimonopoly prohibitions, patents, taxes, imports and exports, etc. We can imagine that in the
future such regulations could become even more restrictive. If that should occur, it is possiblethat 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 and information systems are playing
an increasingly significant role in business, the construction of information systems andsecurity measures that protect them have become indispensable to the continuation ofbusiness activities. In recent years, DNP has become increasingly vulnerable to computerrelated risks, such as the possibility that information systems could be shut down bysoftware 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 and data through increasingly sophisticated security and employee
education. However, in the unlikely event that an accident should occur, it is possible that ourbusiness activities could be affected.
Disaster
We take steps to protect our production equipment and other major facilities from being
damaged by disasters such as fires or earthquakes. In addition, we divide our work among
multiple production bases and make every effort to prevent disasters from causing
production stoppages or disturbances in our ability to supply products. However, it ispossible that our business performance could be seriously affected in the event of
unforeseeable situations, such as production stoppage or massive damage to or destructionof our corporate infrastructure resulting from an event such as a huge earthquake or terrorist
attack.

DNP Annual Report 2007107

Financial Section

Selected Financial Data (unaudited)

2007

2006

2005

2004

Income Statement Data (¥ Million)
Net sales¥

1,557,802¥

1,507,506¥

1,424,943¥

1,354,101

Cost of sales

1,268,072

1,202,160

1,121,374

1,073,118

Gross profit

289,730

305,346

303,569

280,983

Selling and administrative expenses

193,585

184,676

183,041

178,545

Operating income

96,145

120,670

120,528

102,438

Income before income taxes and minority interests

98,950114,640

107,686

93,137

Net income

54,842

65,18859,93752,971

Balance Sheet Data (¥ Million)
Total assets¥

1,700,250¥

1,662,377¥

1,600,129¥

1,513,734

Property, plant and equipment - net

635,784

568,966

528,009513,175

Long-term liabilities

118,437

118,287

115,801

119,277

Total liabilities

600,811571,170

566,796

510,970-

1,063,309

1,007,944

978,736

1,099,439---

Stockholders’ equity
Total net assets
Other Selected Data (¥ Million)
Capital expenditures¥

162,886¥

136,059¥

86,057¥

69,834

Depreciation expenses

100,161

87,26480,44085,182R&D expenditures

30,112

28,692

26,386

26,050Common Share Data (¥, Shares)
Earnings per share - primary
Earnings per share - fully diluted
Dividends paid per share
Book value per share
No. of common shares outstanding - primary

¥

78.10

¥

91.23

¥

82.56

¥

71.49

-

-

-

-

32.00

26.00

24.00

21.00

1,544.02

1,507.90

1,409.18

1,348.40

694,226,171

704,972,101

715,076,830

725,677,422

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

18.60%

20.26%

21.30%

20.75%

Selling, general and administrative expenses

12.43

12.25

12.85

13.19

Operating income

6.17

8.00

8.46

7.57

Income before income taxes and minority interests

6.35

7.60

7.56

6.88

Net income

3.52

4.32

4.21

3.91

Return on equity

5.14

6.29

6.03

5.52

Current ratio

166

178

186

197

6

6

7

7

Debt-to-equity ratio

108

2003

¥

¥

¥

¥

2002

1,309,002¥

2001

1,311,934¥

2000

1,342,035¥

1999

1,286,703¥

1998

1,269,543¥

1,336,604

1,043,456

1,071,163

1,091,386

1,039,006

1,033,926

1,056,962

265,546

240,771

250,649

247,697

235,617279,642

175,665

168,529

164,708

161,811

166,008

172,824

89,881

72,242

85,941

85,886

69,609106,818

42,244

26,15069,116

79,19977,703

100,634

28,774

15,60933,40939,03430,49356,5391,450,027¥

1,432,458¥

1,489,871¥

1,451,700¥

1,445,293¥

1,450,709

540,874

543,962

561,017561,898

570,860

536,364

66,82179,01386,012

77,637

100,695

100,214484,581460,691

522,105

495,541

518,323

538,113942,083

946,998

939,441925,646

898,646

885,507

-

-

-

-

-

-

73,789¥85,096¥103,050¥

113,858¥

119,372¥

111,341

89,23994,87094,312

94,58882,80073,90824,09723,367

24,664

23,571

n.a.

n.a.

37.80

¥

20.55

¥

43.99

¥

51.40

¥

40.15

¥

74.49

37.67

20.53

43.45

50.47

39.54

72.53

19.00

18.00

18.00

18.00

18.00

18.00

1,270.81

1,246.99

1,236.96

1,218.79

1,183.24

1,165.94

741,161,150

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

20.29%

18.35%

18.68%

19.25%

18.56%

20.92%

13.42

12.85

12.27

12.58

13.08

12.93

6.87

5.51

6.40

6.67

5.48

7.99

3.23

1.99

5.15

6.16

6.12

7.53

2.20

1.19

2.49

3.03

2.40

4.23

3.02

1.65

3.58

4.28

3.42

6.59

171

181

165

160

159

165

6

7

8

9

10

10

DNP Annual Report 2007109

Consolidated Balance Sheets
Financial Statements
Millions of yen

2007

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2007 and 2006

Thousands of U.S. dollars (Note 3)

2006

2007

AssetsCurrent assets :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¥

Investments and advances :Non–consolidated subsidiaries and associated companies (Note 10)
Investment securities (Note 5)
Other (Note 10)
Total investments and advances

Property, plant and equipment, at cost (Notes 7 and 14) :Land
Buildings
Machinery and equipment
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
Other assets (Notes 13 and 14)

Total assets

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

110¥

170,489
25,107
9,992
477,157(5,210)95,24627,493
800,274¥

239,222
30,113
6,798
436,331(7,118)76,48623,295805,127$

1,444,822
212,771
84,6784,043,703(44,153)
807,169
232,993
6,781,983

8,197
190,857
1,424
200,478

11,355221,253
2,674
235,282

69,466
1,617,432
12,068
1,698,966

124,916
463,864
1,015,758
34,125
1,638,663(1,002,879)
635,784

119,400
424,734
959,494
30,532
1,534,160(965,194)568,966

1,058,610
3,931,051
8,608,119
289,195
13,886,975(8,498,975)
5,388,000

63,71453,002539,949

1,700,250¥

1,662,377$

14,408,898

Millions of yen

2007

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2007 and 2006

Thousands of U.S. dollars (Note 3)

2006

2007

Liabilities and Net Assets
Current liabilities :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)
Reserve for compensation for damage losses
Other current liabilities (Notes 10 and 13)
Total current liabilities¥

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

9,512
3,121
337,590
40,33618,0342,400
71,381
482,374¥

11,654
2,620
311,567
37,85028,170–61,022452,883$

80,61026,4492,860,932
341,831
152,831
20,339604,923
4,087,915

56,59755,276
6,564
118,437

53,72058,4486,119
118,287479,636
468,441
55,626
1,003,703

114,464
144,898
828,708

114,464
144,909806,447

970,034
1,227,949
7,022,949(60,595)
1,027,475(57,451)
1,008,369(513,517)
8,707,415

41,332(4)
3,094
44,422
27,542
1,099,439

55,489–(549)
54,94027,8981,091,207

350,271(34)
26,221
376,458
233,4079,317,280

Contingent liabilities (Note 17)
Net assets
Stockholders’ equity
Common stock –Authorized : 1,490,000,000 shares;
Issued : 730,480,693 shares in 2007 and 740,480,693 shares in 2006 (Note 9)
Capital surplus (Note 9)
Retained earnings (Note 9)
Treasury stock, at cost
36,254,522 shares in 2007 and 35,508,592 shares in 2006 (Note 9)
Total stockholders’ equity
Valuation and translation adjustments
Net unrealized gains on available–for–sale securities
Net deferred losses on derivatives
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority interests
Total net assets

Total liabilities and net assets¥

1,700,250¥

1,662,377$

14,408,898

DNP Annual Report 2007111

Consolidated Statements of Income
Financial Statements
Millions of yen

2007

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2007 and 2006
Net sales (Note 19)
Cost of sales (Notes 11, 15 and 19)
Gross profit
Selling, general and administrative expenses (Notes 11, 15 and 19)
Operating income
Other income (expenses) (Note 12):Interest and dividend income
Interest expenses
Equity in gains (losses) of associated companies
Net loss on disposal of property, plant and equipment
Net gain on sales of marketable securities and investment securities
Loss on devaluation of investment securities
Payments of special retirement benefits
Compensation for damage losses
Provision for retirement benefits (Note 8)
Impairment loss on fixed assets (Note 14)
Other

¥

Income before income taxes and minority interests
Income taxes (Note 13):
Current
Deferred

Minority interests
Net income¥

Thousands of U.S. dollars (Note 3)

2006

1,557,802
1,268,072
289,730
193,585
96,145¥

1,507,506
1,202,160
305,346
184,676
120,670

2007
$

3,785
(1,307)(100)(5,136)
8,043
(385)
–
(3,324)–(1,283)2,512
2,805
98,9502,727(1,324)442(1,898)3,680(1,651)(717)–(1,810)(7,346)
1,867(6,030)114,640

32,076(11,076)(847)(43,525)
68,161(3,263)–(28,169)–(10,873)
21,287
23,771
838,559

36,8586,150
43,00855,94247,550515
48,06566,575

312,355
52,119364,474
474,085(1,100)54,842¥(1,387)65,188$Yen

Net income per common share:
Primary

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

112¥

1,544.02

78.10(9,322)464,763

U.S. dollars (Note 3)

2007
Net assets per common share

13,201,712
10,746,373
2,455,339
1,640,551
814,7882006¥

1,507.90

91.23

2007
$

13.08

0.66

Consolidated Statements of Changes in Net Assets
Financial Statements
Millions of yen
Stockholders’ equity

Dai Nippon Printing Co., Ltd. andConsolidated Subsidiaries
Years ended March 31, 2007 and 2006

Number ofsharesissued(in thousands)

Commonstock

Capitalsurplus

Balance at March 31, 2005
Changes of items during the period
Net income
Cash dividends paid
Bonuses to directors and corporate auditors
Net increase resulting from changes
in consolidated subsidiaries
Purchases of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Changes in unrealized gains
on securities available–for–saleChanges in deferred losses on derivatives
Changes in foreign currency translation adjustments
Changes in minority interests
Other
Total changes of items during the period
Balance at March 31, 2006
Changes of items during the period
Net income
Cash dividends paid
Bonuses to directors and corporate auditors
Net increase resulting from changes
in consolidated subsidiaries
Purchases of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Changes in unrealized gains
on securities available–for–saleChanges in deferred losses on derivatives
Changes in foreign currency translation adjustments
Changes in minority interests
Other
Total changes of items during the period
Balance at March 31, 2007

750,480

114,464–––

Valuation and translation adjustments

Retainedearnings

Treasurystock,
at costNet unrealized
gains onavailable–for–salesecurities

144,905

774,653(51,628)

30,441

–
–
–

–
–
–

65,188(18,252)
(271)

–
–
–

–
–
–
(10,000)

–
–
–
–

–
–
4
–

–
–
–
(14,871)–––––(10,000)
740,480

–
–
–
–
–
–
114,464

–
–
–
–
–
4
144,909

–
–
–

–
–
–

–
–
–
(10,000)–––––(10,000)
730,480

Foreigncurrencytranslation
adjustments

Minority
interests–(4,891)

25,389

–
–
–

–
–
–

–
–
–

–
–
–

–
(20,711)16
14,871

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–
–
31,794806,447––––
1(5,823)(57,451)

25,048––––25,04855,489

–
–
–
–
–
–
–

–
–
4,342
–
–
4,342
(549)

–
–
–
2,509
–
2,509
27,898–––54,842(19,052)
(283)

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–
–

–
–
2
(13)

3,236
–
–
(16,482)–(19,663)
24
16,495

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–
–
–
114,464

–
–
–
–
–
(11)
144,898–––––
22,261
828,708–––––(3,144)(60,595)(14,157)––––(14,157)
41,332

–
(4)
–
–
–
(4)
(4)

–
–
3,643
–
–
3,643
3,094

–
–
–
(356)
–
(356)
27,542Net
deferred
losses onderivatives

Thousands of U.S. dollars (Note 3)
Stockholders’ equity

Balance at March 31, 2006
Changes of items during the period
Net income
Cash dividends paid
Bonuses to directors and corporate auditors
Net increase resulting from changes
in consolidated subsidiaries
Purchases of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Changes in unrealized gains
on securities available–for–saleChanges in deferred losses on derivatives
Changes in foreign currency translation adjustments
Changes in minority interests
Other
Total changes of items during the period
Balance at March 31, 2007

Number ofsharesissued(in thousands)

Commonstock

Capitalsurplus740,480970,034–––

Valuation and translation adjustments

Retainedearnings

Treasurystock,
at costNet unrealized
gains onavailable–for–salesecurities

1,228,042

6,834,297(486,873)

470,246

–
–
–

–
–
–

464,763(161,458)(2,398)

–
–
–

–
–
–
(10,000)

–
–
–

–
–
17
(110)

27,423––(139,678)

–
–
–
–
–
(10,000)
730,480

–
–
–
–
–
–
970,034

–
–
–
–
–
(93)
1,227,949

–
–
–
–
–
188,652
7,022,949

Net
deferred
losses onderivatives

Foreigncurrencytranslation
adjustments

Minority
interests–(4,653)

236,424

–
–
–

–
–
–

–
–
–

–
–
–

–
(166,635)
203
139,788

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–
–
(26,644)(513,517)(119,975)––––(119,975)
350,271

–
(34)
–
–
–
(34)
(34)

–
–
30,874––30,874
26,221–––(3,017)–(3,017)
233,407

DNP Annual Report 2007113

Consolidated Statements of Cash flows
Financial Statements
Millions of yen

2007

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2007 and 2006

Cash flows from operating activities :Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority interests to
net cash provided by operating activities:
Depreciation
Impairment loss on fixed assets
Provision for doubtful receivables (net)Provision for retirement benefits (net)
Equity in losses (gains) of associated companies
Amortization of consolidation goodwill (net)
Interest and dividend income
Interest expenses
Net gain on sales of marketable securities and investment securities
Loss on devaluation of investment securities
Net loss on disposal of property, plant and equipment
Increase in trade receivables(Increase) 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
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
Cash flows from financing activities :Net decrease in short–term bank loans
Proceeds from long–term debt
Repayments of long–term debt
Interest paid
Dividend paid
Payments for purchases of treasury stocks
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year

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

114

¥

¥

98,950Thousands of U.S. dollars (Note 3)

2006

¥

114,640

2007$

838,559

100,161
1,283(1,036)(4,708)100
1,476(3,785)
1,307(8,043)385
5,136(34,238)(18,043)
15,211
16,220170,376–(47,365)
123,01187,264
7,346(1,060)
(971)
(442)
1,080
(2,727)
1,324(3,680)1,651
1,898(19,696)
1,547
5,670
(1,540)
192,304(717)(49,914)141,673

848,822
10,873(8,780)(39,898)847
12,508(32,076)
11,076(68,161)
3,263
43,525(290,153)(152,907)
128,907
137,459
1,443,864–(401,398)
1,042,466

5,008
(502)
7,202
(153,995)
2,140(13,887)
16,988
3,917(17,588)(150,717)

18
–
6,711
(129,472)
4,978(32,157)
5,093
3,043
(9,995)(151,781)

42,441(4,254)61,034(1,305,042)
18,136(117,686)
143,966
33,195(149,053)(1,277,263)(3,266)
4,731(4,365)(1,311)(19,686)(19,663)970(42,590)(1,309)585(4,998)(1,333)(18,962)(20,710)
15(46,712)(27,678)
40,093(36,992)(11,110)(166,831)(166,635)
8,221(360,932)

1,493(68,803)239,22270
170,489

2,686(54,134)
293,356–
239,222

12,653(583,076)
2,027,305
593
1,444,822¥$

Notes to Consolidated Financial Statements

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2007 and 2006
1. Basis of Presenting the Consolidated Financial Statements
Dai Nippon Printing Co., Ltd. (hereinafter referred to as the “Company”) and its domestic subsidiaries maintain their books of account and prepare their financial
statements in conformity with accounting principles and practices generally accepted in Japan, and its foreign subsidiaries in conformity with those of thecountries of their domicile.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements filed with the Financial Services Agencyof 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 to facilitate understanding by readers outside Japan. Certain reclassifications have also been made in the 2006 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 accepted in Japan.

2. Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant majority–owned subsidiaries. All significant
intercompany accounts and intercompany transactions have been eliminated in consolidation.
The fiscal year–end of the consolidated subsidiaries is the same as that of the Company except for twenty five 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 theseinvestments are considered immaterial in the aggregate. However, investments are devalued if the decline in value is judged to be other than temporary.
Investments in 20% to 50% associated companies are 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 inaccordance 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 aretranslated 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 of valuation and translation adjustments in the
consolidated balance sheets.
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, that are readily convertible to known
amounts of cash and are so near maturities that they present insignificant risk of changes in value because of changes in interest rates.
Inventories
Inventories are stated at cost which is determined substantially by the average method.
Marketable securities and investment securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: i) held–to–maturity debt securities, which
are expected to be held to maturity with the positive intent and ability to hold to maturity, are reported at amortized cost and ii) available–for–sale securities arereported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of valuation and translation adjustments.
Non–marketable securities are stated at cost determined by the average method. For other than temporary declines in fair value, investment securities are
reduced to net realizable value by a charge to income.
Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost. Major renewals and additions are capitalized, while minor renewals, maintenance and repairs are charged toincome when incurred. Interest expenses on capital expenditures during the construction stage are not capitalized.
Depreciation of property, plant and equipment is principally computed by the declining–balance method at rates based on estimated useful lives. However,depreciation of buildings acquired on or after April 1, 1998 is computed by the straight–line method.
The estimated useful lives for depreciation purposes range as follows:

Buildings
Machinery and equipment

3 to 50 years
2 to 13 years

DNP Annual Report 2007115

Assets with an acquisition cost of ¥100,000 ($847) or more per unit and less than ¥200,000 ($1,695) per unit, acquired on or after April 1, 1998, aredepreciated over three years on a straight–line basis, whereby one–third of such acquisition cost may be taken as depreciation expense each year.
Intangible assets
Intangible assets included in other assets are carried at cost less accumulated amortization calculated by the straight–line method over their estimated useful
lives. Software development costs for internal use included in intangible assets are amortized by the straight–line method over five years.
Impairment of fixed assets
In August 2002, the Business Accounting Council of Japan issued a Statement of Opinion, Accounting for Impairment of Fixed Assets, and in October 2003 the
Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Guidance No.6, Guidance for Accounting Standard for Impairment of Fixed Assets. These newpronouncements are effective for fiscal years beginning on or after April 1, 2005.
The Company and its subsidiaries review fixed assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or
asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the net selling price at disposition.
Liability for retirement benefits
The Company and several domestic significant consolidated subsidiaries applied the accounting standard for employees’ retirement benefits. Under theaccounting standard, accrued pension and liability for employees retirement benefits has been provided based on the estimated amounts of projected pension
and severance obligation and fair value of plan assets at the end of the fiscal year. Prior service cost is being amortized as incurred by the straight–line method
over the period within the average remaining service periods of the eligible employees. Actuarial gains and losses have been amortized from the following fiscal
year by the declining balance method over the periods within the average remaining service periods of the eligible employees.
Research and development expenses
Research and development expenses are charged to income as incurred.
Accounting for leases
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 operatingleases under generally accepted accounting principles in Japan.
Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary
differences.
Income taxes on undistributed earnings have been provided for foreign subsidiaries, but not for domestic companies, as such earnings, if distributed in the formof dividends, are not taxable under the current Japanese tax laws.
Derivatives and hedging activities
The Company and certain consolidated subsidiaries use derivative financial instruments (“derivatives”) for foreign currency forward contracts to manage their
exposures to fluctuations in foreign exchange associated with certain accounts receivable and payable, including forecasted transactions, denominated in foreign
currencies. The Company and its subsidiaries do not enter into derivatives contracts for speculative purposes.
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 the related 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 byforeign currency forward contracts are translated at the contracted rates because such treatment 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 aredeferred until the underlying transactions are completed.
Net assets and income per common share
Net assets per common share were computed based on the number of shares outstanding after deducting treasury stock at March 31, 2007 and 2006,
respectively.
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 net income per share is not disclosed because the Company has not issued any dilutive securities.

116

New accounting pronouncements
Accounting Standard for Presentation of Net Assets in the Balance Sheet“Accounting Standard for Presentation of Net assets in the Balance Sheet”; ASBJ Statement No. 5 issued on December 9, 2005 and “Guidance on AccountingStandard for Presentation of Net Assets in the Balance Sheet”; ASBJ Guidance No. 8 issued on December 9, 2005 have been adopted effective this fiscal year.
Under this accounting standard, certain items which were previously presented as liabilities are now presented as components of net assets. Such items include
stock acquisition rights, minority interests, and any deferred gain or loss on derivatives accounted for under hedge accounting. The amount that corresponds toformer stockholders’ equity is ¥1,071,900 million ($9,083,898 thousand). The consolidated balance sheets as of March 31, 2007 and 2006 are presented in linewith this new accounting standard.
Accounting standard for directors’ bonuses
The ASBJ issued a new accounting standard for bonuses to directors and corporate auditors, ASBJ Statement No. 4 “Accounting standard for Directors’
bonuses” on November 29, 2005. Under the new accounting standard, bonuses to directors and corporate auditors must be expensed and are no longer allowed
to be directly charged to retained earnings. The effect of adoption of the new accounting standard for directors’ bonuses was to decrease income before income
taxes and minority interests for the year ended March 31, 2007 by ¥297 million ($2,517 thousand).

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 the convenience of the reader, at the rate of ¥118=U.S. $1, the approximate
exchange rate on the Tokyo Foreign Exchange Market at March 31, 2007. Such translations should not be construed as representations that the Japanese yen atthat or any other rate could be converted into U.S. dollars.

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2007 and 2006 were comprised of the following:
Millions of yen

Cash and deposits(excluding time deposits with a maturity over three months)
Other short–term investment¥

2007
170,489¥–
170,489

Thousands of U.S. dollars (Note 3)¥

2006
238,222$2007
1,444,822¥

1,000
239,222$–
1,444,822

5. Marketable Securities and Investment Securities
The acquisition cost and aggregate fair value of marketable and investment securities classified as available–for–sale securities as of March 31, 2007 and 2006
were as follows:
Millions of yen

March 31, 2007
StocksOthers
Total

Acquisition cost¥
70,63334,049104,682¥

Unrealized gains¥
71,703
11
71,714¥

March 31, 2007
StocksOthers
Total

Acquisition cost
598,585$
288,551$
887,136

Unrealized gains
607,653$93$
607,746

March 31, 2006
StocksOthers
Total

Acquisition cost¥
66,92740,864¥
107,791

Unrealized gains¥
95,95846¥
96,004

Unrealized losses
¥
1,785
156
1,941
¥

¥
¥

Fair value
140,551
33,904
174,455

Thousands of U.S. dollars (Note 3)

Unrealized losses
15,128$
1,322$
16,450$$Fair value
1,191,110
287,322
1,478,432

Millions of yen

Unrealized losses
¥
2,020
325
¥
2,345

¥
¥

Fair value
160,865
40,585
201,450DNP Annual Report 2007

117

The proceeds from sales of available–for–sale securities for the years ended March 31, 2007 and 2006 were ¥14,770 million ($125,169 thousand) and ¥5,057
million, respectively. The gross realized gains on these sales for the years ended March 31, 2007 and 2006 were ¥10,162 million ($86,119 thousand) and ¥3,713
million, respectively, and the gross realized losses on these sales for the years ended March 31, 2007 and 2006 were ¥2,121million ($17,975 thousand) and ¥33
million, respectively.
The following summarized carrying amounts of securities with no fair value as of March 31, 2007 and 2006:
Millions of yen

2007
Held–to–maturity debt securities–
Non–listed foreign securities
Available–for–sale securities–
Non–listed equity securities
OthersThousands of U.S. dollars (Note 3)

2006

2007

¥

3,000

¥

3,000

$

25,424¥23,262
133¥

23,56041$

197,136
1,127

The redemption schedules for securities with maturities classified as held–to–maturity debt securities and other securities at March 31, 2007 and 2006 wereas follows:
Millions of yen

March 31, 2007
Government bonds
Corporate bonds
Other bonds

Due in one
year or less
¥
9,997
–
–
¥
9,997

March 31, 2007
Government bonds
Corporate bonds
Other bonds

Due in one
year or less$
84,720––$84,720Due after one year
through five years$
85,093––$85,093

March 31, 2006
Government bonds
Corporate bonds
Other bonds

Due in one
year or less
¥
6,700
–
–
¥
6,700

Due after one year
through five years¥
20,00060–¥
20,060Due after one year
through five years¥
10,041––¥
10,041

Due after five years
through ten years¥–
30
12,000¥12,030Thousands of U.S. dollars (Note 3)

Due after five years
through ten years$–
254
101,695$
101,949

Millions of yen

Due after five years
through ten years¥–
30
12,000¥12,0306. Inventories
Inventories at March 31, 2007 and 2006 consisted of the following:
Millions of yen

Finished products
Work in process
Raw materials

¥

¥

118

2007
34,16735,47225,607
95,246¥¥

Thousands of U.S. dollars (Note 3)

2006
30,45927,427
18,60076,486$$

2007
289,551
300,610217,008
807,169

7. Short–term Bank Loans and Long–term Debt
Short–term bank loans at March 31, 2007 and 2006 were represented by bank loans and bank overdrafts, etc. bearing interest at an average rate of 1.54% perannum for 2007 and 2.90% per annum for 2006.
Long–term debt at March 31, 2007 and 2006 consisted of the following:
Millions of yen

2007
Unsecured debentures
1.67% due 2014¥

50,000

¥

4,073
5,645
59,718(3,121)
56,597Mortgage loans, maturing 2007–2012
Unsecured loans, maturing 2007–2013
Current portion of long–term debt

Thousands of U.S. dollars (Note 3)

2006¥

50,000

¥

3,375
2,965
56,340(2,620)53,7202007$

423,729$

34,517
47,839506,085(26,449)
479,636Mortgage loans were secured by property, plant and equipment amounting to ¥7,143 million ($60,534 thousand) and ¥7,010 million at March 31, 2007 and2006, respectively.
With minor exceptions, interest rates on mortgage loans were 6.31% per annum for 2007 and ranged from 0.99% to 5.64% per annum for 2006, whileinterest rates on unsecured loans ranged from 0.44% to 1.30% per annum for 2007 and from 0.86% to 1.18% per annum for 2006.
The aggregate annual maturities of long–term debt after March 31, 2007 were as follows:Year ending March 31
2008
2009
20 1 020 1 1
20 1 220 1 3 and thereafter

Millions of yen

¥

¥

3,121
2,795
1,667
1,007
638
50,49059,718

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

26,44923,687
14,1278,534
5,407
427,881506,085

8. Retirement Benefits
The Company and its domestic subsidiaries have several defined benefit retirement plans covering all of their employees, i.e. corporate pension plan,tax–qualified non–contributory pension plan, a governmental welfare contributory pension plan and lump–sum retirement plan. Upon retirement or terminationof employment for reasons other than the cause of dismissal, employees are entitled to lump–sum payments based on the current rate of pay, length of services
and accumulated number of points determined based on the employment services.
Under the Defined Benefit Pension Plan Law, the Company has established new defined benefit pension plans on March 1, 2005 under which ninety percent of
the retirement benefit liability of the Company is covered by the employees’ pension fund.
Several subsidiaries have also participated in the new defined benefit pension plans on April 1, July 1 and October 1, 2006. The prior service costs of ¥1,779
million ($15,076 thousand) is amortized over the period of six years beginning in the fiscal year ended March 31, 2007.
The liability for employees’ retirement benefits at March 31, 2007 and 2006 consisted of the following:
Millions of yen

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

¥

¥

2007
156,427(95,896)
2,280(9,174)
1,639
55,276¥¥

Thousands of U.S. dollars (Note 3)

2006
148,799(79,756)(2,816)(8,605)826
58,448$$2007
1,325,653(812,678)
19,322(77,746)
13,890468,441

DNP Annual Report 2007

119

The components of net periodic benefit costs were as follows:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Actuarial loss
Amortization of prior service cost
Loss on change of calculation basis for retirement benefits
Net periodic benefit costs

¥

¥

2007
9,249
3,693
(2,014)350
2,292–
13,570¥¥Thousands of U.S. dollars (Note 3)

2006
7,614
3,215
(1,410)
1,281
1,783
1,810
14,293$$

2007
78,381
31,297(17,068)
2,966
19,424–
115,000

Assumptions used for the years ended March 31, 2007 and 2006 were set forth as follows:

Attribution method of estimated benefits to periods of services
Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain/loss
Amortization period of prior service cost

2007
Straight–line method
2.5%
2.5%
9 years
6 years

2006
Straight–line method
2.5%
2.1%
11 years
6 years

9. Net Assets
On and after May 1, 2006, Japanese companies are subject to a new corporate law of Japan (the “Corporate Law”), which reformed and replaced theCommercial Code of Japan (the “Code”) with various revisions that are, for the most part, applicable to events or transactions which occur on or after May 1,
2006 and for the fiscal years ending on or after May 1, 2006. The significant changes in the Corporate Law that affect financial and accounting matters are
summarized below;(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the year–end dividend upon resolution at thestockholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Boardof Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation,
the Board of Directors of such company may declare dividends (expect for dividends in kind) at any time during the fiscal year if the company has prescribed soin its articles of incorporation. The Company meets all the above criteria. However, its articles of incorporation have not stipulated that the Board of Directors
may declare dividends at any time during the fiscal year.
The Corporate Law permits companies to distribute dividends–in–kind (non–cash assets) to stockholders subject to a certain limitation and additional
requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company sostipulate. The Corporate Law provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as
the amount available for distribution to the stockholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
Cash dividend of ¥19.00 ($0.16) per share, aggregating ¥13,203 million ($111,890 thousand) were approved at the general stockholders’ meeting held in June2007 with respect to the year ended March 31, 2007.
(b) Increases /decreases and transfer of common stock, reserve and surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as
additional paid–in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of
aggregate amount of legal reserve and additional paid–in capital equals 25% of the common stock. Under the Corporate Law, the total amount of additional
paid–in capital and legal reserve may be reversed without limitation. The Corporate Law also provides that common stock, legal reserve, additional paid–incapital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the stockholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The
amount of treasury stock purchased cannot exceed the amount available for distribution to the stockholders which is determined by specific formula.
Under the Corporate Law, stock acquisition rights, which were previously presented as a liability, are now presented as a separate component of net assets.
The Corporate Law also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights
are presented as a separate component of net assets or deducted directly from stock acquisition rights. At present, the Company has not issued such stockacquisition rights.
Upon approval by the resolution of the Board of Directors, the Company repurchased 10,658 thousand shares of common stocks at aggregate cost of ¥19,475
million ($165,042 thousand) and 10,000 thousand shares at ¥20,485 million during the year ended March 31, 2007 and 2006 respectively. Furthermore theCompany retired of 10,000 thousand shares of common stocks at aggregate cost of ¥16,495 million ($139,788 thousand) and 10,000 thousand shares at¥14,871 million during the year ended March 31, 2007 and 2006 respectively.

120

10. Accounts with Non–consolidated Subsidiaries and Associated Companies
Account balances with non–consolidated subsidiaries and associated companies as of March 31, 2007 and 2006 were summarized as follows:
Thousands of U.S. dollars (Note 3)

Millions of yen

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

¥

2007
8,680
72
3,340
4,631
226
205
304
464

¥

2006
10,882
233
3,250
6,504
–
2,732
1,488
1,978

$

2007
73,559610
28,30539,246
1,915
1,737
2,576
3,932

11. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2007 and 2006 consisted of the following:
Millions of yen

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

¥

¥

2007
20,20554,529
6,743
3,476
9,150
27,78571,697
193,585¥¥

Thousands of U.S. dollars (Note 3)

2006
18,162
53,187
6,454
4,326
8,728
26,45067,369184,676$$2007
171,229
462,110
57,14429,45877,542
235,466
607,6021,640,551

Total research and development expenses (including manufacturing costs) amounted to ¥30,113 million ($255,195 thousand) and ¥28,692 million for 2007
and 2006, respectively.

12. Other Income
The following types of income from non–consolidated subsidiaries and associated companies were included in other income.
Millions of yen

2007
Interest and dividend income
Leasing fees¥

Thousands of U.S. dollars (Note 3)

2006
55
367

¥

87
1,195

2007
$

466
3,110

13. Income Taxes
The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2007 and 2006, respectively.
The actual effective tax rate reflected in the accompanying consolidated statements of income differs from the normal effective statutory tax rate primarily due
to the effect of permanently non–deductible expenses, current operating losses of subsidiaries and different tax rates applicable to foreign subsidiaries, etc.

DNP Annual Report 2007

121

The following is a reconciliation of the difference between the normal effective statutory tax rate and the actual effective tax rate for the year ended March 31,
2007, although no reconciliation for 2006 was shown because the difference was not more than five percent of the statutory tax rate.
2007
40.7%
1.7
1.9
1.1
0.9
(2.9)
0.1
43.5%

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Change in valuation allowance
Amortization of consolidation goodwill
Undistributed earnings of foreign subsidiaries
Special tax credit
Other
Actual effective tax rate

Net deferred tax assets at March 31, 2007 and 2006, resulting from temporary differences between the carrying amounts and the tax bases of assets andliabilities, were reflected on the accompanying consolidated balance sheets under the following captions:
Millions of yen

Prepaid expenses and other current assets
Other assets¥

Other current liabilities
Other long–term liabilities
Net deferred tax assets

¥
¥

2007
14,2178,448(19)(5,547)
17,099¥¥¥Thousands of U.S. dollars (Note 3)

2006
13,334
6,510–(6,117)
13,727

$

$
$

2007
120,483
71,593(161)(47,008)
144,907

Significant components of deferred tax assets at March 31, 2007 and 2006 were as follows:
Millions of yen

2007
Deferred tax assets:
Excess provision for retirement benefits
Loss on devaluation of investment securities
Excess provision for doubtful receivables
Accrued bonuses
Operating loss carryforwards
Intercompany profits
Enterprise tax payable
Impairment loss on fixed assets
Other
Total deferred tax assets
Less: valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available–for–sale securities
Undistributed earnings of subsidiaries
Other
Total
Net deferred tax assets :122¥

23,00813,743
4,965
6,537
7,533
2,113
1,458
2,724
5,777
67,858(11,772)
56,086¥¥¥(28,465)(9,049)(1,473)(38,987)¥

17,099¥¥Thousands of U.S. dollars (Note 3)

2006

¥

22,972
16,383
6,275
5,821
5,555
2,218
2,184
2,907
4,298
68,613(7,328)61,285

2007$$

194,983
116,466
42,07655,39863,83917,907
12,35623,085
48,958575,068(99,763)475,305$¥(38,106)(8,180)(1,272)(47,558)$(241,229)(76,686)(12,483)(330,398)¥

13,727$

144,90714. Impairment Loss on Fixed Assets
The Company and its consolidated subsidiaries reviewed the fixed assets for impairment for the years ended March 31, 2007 and 2006. Fixed assets were, in
principle, grouped at the business unit for impairment testing purposes. Idle assets were grouped in each assets. Loss on impairment of fixed assets for the year
ended March 31, 2007 was recognized as an amount of ¥1,283 million ($10,873 thousand) including the losses on impairment of assets of a U.S. subsidiary. The
losses on impairment of fixed assets for the years ended March 31, 2007 and 2006 were as follows:
Millions of yen

2007
Land
Machinery and equipment
Buildings
Goodwill and other intangible assets
Others
Total

¥

¥

–
–
–
1,256
27
1,283

¥

¥

Thousands of U.S. dollars (Note 3)

2006
4,395
1,861
1,050
–
40
7,346

2007
$

$

–
–
–
10,644229
10,873

15. 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 relatedlease 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 for such finance lease purposes was asfollows:
Millions of yen

Acquisition cost
Accumulated depreciation
Net book value

¥
¥

2007
42,186(19,814)
22,372¥¥Thousands of U.S. dollars (Note 3)

2006
32,718(16,514)
16,204$$

2007
357,508(167,915)
189,593

Lease expenses on finance lease contracts without ownership–transfer amounted to ¥10,439 million ($88,466 thousand) and ¥8,430 million for the years
ended March 31, 2007 and 2006, respectively.
The amounts of outstanding future payments under finance leases due on March 31, 2007 and 2006, including the portion of interest thereon, weresummarized as follows:
Millions of yen

2007
Future lease payments:
One year or lessMore than one year¥¥

Thousands of U.S. dollars (Note 3)

2006

8,493
13,87922,372

¥
¥

6,318
9,886
16,204

2007$$

71,974
117,619
189,593

The amounts of outstanding future payments under operating leases due on March 31, 2007 and 2006 were also summarized as follows:
Millions of yen

2007
Future lease payments:
One year or lessMore than one year

¥
¥

756
2,747
3,503

Thousands of U.S. dollars (Note 3)

2006
¥
¥

584
2,799
3,383

2007
$
$

6,406
23,28029,686DNP Annual Report 2007123

16. 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 hold derivatives for speculative purposes.
Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to major international financial institutions,the Company 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 of derivatives are controlled by the Accounting Department.
Fair value of Derivative Financial Instruments:
The contracted amount and fair value of derivatives for foreign currency forward contracts at March 31, 2007 and 2006 were as follows:
Millions of yen

2007
Receivables:
U.S.dollars
Euro

Contracted
amount
¥
¥

8,785
602
9,387

Fair
value
¥
¥

8,832
608
9,440

Unrealized
loss
¥

47
6
53

¥

Thousands of U.S. dollars (Note 3)

2007
Receivables:
U.S.dollars
Euro

Contracted
amount
$$74,4495,102
79,551

Fair
value
$
$

74,847
5,153
80,000

Unrealized
loss
$

398
51
449

$

Millions of yen

2006
Receivables:
U.S.dollars
Euro

Contracted
amount¥¥10,063824
10,887

Fair
value
¥
¥

10,166843
11,009Unrealized
loss
¥
¥

103
19
122

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, 2007 and 2006 and were assigned to the associated assets and liabilities or deferred until completion of theforecasted transactions were excluded from disclosure of the above fair value information.

17. Contingent Liabilities
The Company was guarantor of bank loans of an other company, amounting to approximately ¥100 million ($847 thousand) and ¥103 million at March 31,
2007 and 2006, respectively. 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, 2007 and 2006, the Company and its consolidated subsidiaries were
contingently liable on trade notes discounted in the amount of ¥820 million ($6,949thousand) and ¥820 million, respectively. Notes discounted were
accounted for as sales.

18. Subsequent Events
On May 11, 2007, the Board of Directors of the Company resolved to abolish providing retirement and severance benefits to directors and corporate statutory
auditors as of the stockholders’ meeting on June 28, 2007. At that stockholders’ meeting, the Company approved payment of the accumulated retirement andseverance benefits accrued until June 28, 2007 to the directors and the corporate statutory auditors upon their retirement in the future.

19. Business Segment Information
Industry segments:
The Company and its consolidated subsidiaries’ 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, impairment loss andcapital expenditures regarding the Company’s industry segments at March 31, 2007 and 2006 and for the years then ended.

124

Millions of yen
Printing
Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Net sales :Outside customers
Inter–segment
Total
Costs and expenses
Operating income¥ 662,887
5,955
668,842
617,884¥ 50,958¥ 528,918
3,795
532,713496,461¥ 36,252¥ 291,911
5291,916
277,024¥ 14,892¥

Assets, depreciation, impairment loss andcapital expenditures :AssetsDepreciation
Impairment loss
Capital expenditures¥ 539,222
20,862–
41,107¥ 522,162
24,733
1,283
39,919¥ 438,746
49,633–75,996¥

For 2007 :Beverages

¥

Total

Elimination
and/orcorporate

Consolidated– ¥ 1,557,802–(9,791)
1,557,802(9,791)
1,461,657(3,194)
96,145(6,597) ¥74,08636
74,12273,482640¥ 1,557,802 ¥
9,791
1,567,593
1,464,851¥
102,742 ¥

41,354
3,569
–
3,131

¥ 1,541,484 ¥ 158,766
98,797
1,364
1,283
–
160,153
2,733¥ 1,700,250
100,161
1,283
162,886

Thousands of U.S. dollars (Note 3)
Printing
Elimination
and/orcorporate

Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Net sales :Outside customers
Inter–segment
Total
Costs and expenses
Operating income$5,617,686
50,466
5,668,152
5,236,305$ 431,847$4,482,356
32,161
4,514,517
4,207,297$ 307,220$2,473,822
43
2,473,865
2,347,661$ 126,204$ 627,848
305
628,153622,729$
5,424$ 13,201,712 $
82,975
13,284,687
12,413,992$
870,695 $Assets, depreciation, impairment loss andcapital expenditures :AssetsDepreciation
Impairment loss
Capital expenditures$4,569,678
176,796–348,364$4,425,102
209,602
10,873
338,297$3,718,186
420,619–
644,034$ 350,458
30,246–
26,534$ 13,063,424 $1,345,474
837,263
11,55910,873–
1,357,229
23,161For 2007 :Beverages

Total

Consolidated– $ 13,201,712–(82,975)
13,201,712(82,975)
12,386,924(27,068)
814,788(55,907) $$ 14,408,898
848,822
10,873
1,380,390

Millions of yen
Printing
Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Net sales :Outside customers
Inter–segment
Total
Costs and expenses
Operating income¥ 655,974
6,501
662,475
611,460¥ 51,015¥ 478,368
1,615
479,983
442,392¥ 37,591¥ 296,767–
296,767
258,955¥ 37,812¥

Assets, depreciation, impairment loss andcapital expenditures :AssetsDepreciation
Impairment loss
Capital expenditures¥ 522,421
19,298–26,601¥ 436,190
23,211
13
28,818¥ 366,247
39,516
1,861
74,655¥

For 2006 :Beverages

¥

Total

Elimination
and/orcorporate

Consolidated– ¥ 1,507,506–(8,171)
1,507,506(8,171)
1,386,836(2,135)
120,670(6,036) ¥76,39755
76,452
76,164288¥ 1,507,506 ¥
8,171
1,515,677
1,388,971¥
126,706 ¥41,562
3,858
64
4,483

¥ 1,366,420 ¥ 295,957
85,883
1,381
1,938
5,408
134,557
1,502¥ 1,662,377
87,264
7,346
136,059

DNP Annual Report 2007

125

Information by geographic area:
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, 2007 and 2006.
Overseas sales:
Overseas sales of the Company and its consolidated subsidiaries for the years ended March 31, 2007 and 2006 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 3)

2007
AmountOverseas sales (a)
Asia
Other
Total
Consolidated net sales (b)

126

¥
¥

177,71378,567
256,280¥

1,557,802

2006
Ratio:(a)/(b)
11.4%
5.1%
16.5%

Amount
¥¥190,514
68,968259,482¥

1,507,506

2007
Ratio:(a)/(b)
12.6%
4.6%
17.2%

$
$

1,506,042
665,8222,171,864$

13,201,712

Independent Auditors’ Report

To the Board of Directors of
Dai Nippon Printing Co., Ltd.
We have audited the accompanying consolidated balance sheets (expressed in Japanese yen) of Dai Nippon Printing Co., Ltd. andconsolidated subsidiaries as of March 31, 2007 and 2006, and the related consolidated statements of income, changes in net assets,
and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts 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 as of March 31, 2007 and 2006, and the results of their operations andcash flows for the years then ended in conformity with accounting principles generally accepted in Japan.
As noted in significant accounting policies, the Company and its consolidated subsidiaries applied the accounting standard for
directors’ bonuses in the year ended March 31, 2007. This application was made in accordance with the new accounting standard,
which is effective for fiscal years ending on or after May 1, 2006.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made in conformity with the basis stated in Note 3 to the consolidated financial statements. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.

Tokyo, Japan
June 28, 2007

MEIJI AUDIT CORPORATIONDNP Annual Report 2007127

Appendix

Printing Processes and Expansion Printing

I

Basic Technologies and Advanced Products that Grew Out of Them: Process by Process

Printing can be defined as a generic term
for techniques of transferring ink from animage on a form plate to another object inorder to reproduce the original image. It
entails five main processes:
1) planning, 2) film making, 3) platemaking, 4) printing and 5) binding/post-processing. Through these five mainprocesses, we have cultivated a truly wide
range of skills and expertise.
First, planning: this requires an amalgamation of knowledge and skills related to various
fields, including marketing, media selection,planning and the collection, editing andstep 1step 2step 3

Planning

Film making

Platemaking

These pre-press processes start with deciding
the general direction of what the customer
wants. Then we prepare, design, edit, and lay
out text and photographs, etc. to be printed.

Prepare copy to be printed

In this step, we make a film based on the text,
photographs, and illustrations, etc. in the copy.
In the analog methods of the past, a camera
was used to make the film. Today, however,
we use digital methods whereby data is output
directly on film.

In this process we make the plate that is set on
the printing machine to do the actual printing.
The plate is made by burning the image fromthe film onto a plate, which is usually made ofmetal or resin.

Make printing plate
Process text and photo images

Precision/micro-fabrication

Information Processing
Technologies

Patterning Technologies• Digital Contents• Web sites/EC (PCs/Mobile Phones)• Database Management• Fraud Prevention• Security Applications• System Solutions, etc.

128

processing of information. The preparation ofform plates, including film making andplatemaking, requires skills like sophisticateddigital image processing, color management,
optics and micro-processing. The actual
printing process entails skills and knowledge
related to paper, film or other material to be• Display Components• Electronic Devices/
Semiconductor-related Products, etc.

printed, ink and a wide range of othermaterials, application techniques for fixing ink,
and the mechanical skills required for thesmooth operation of printing presses. Binding
and post-processing involves skills needed tofinish a variety of printed products, including
bound-in sleeves, CD-ROM/DVD bindings,

packaging material productions, and theformation of cups and PET bottles.
As the reader can see, printing is a complex
process with both soft and hard aspects. It
requires the integration of content, all types of
media, materials and control of mechanicalsystems.

step 4step 5

Printing

Binding/
post-processing

In this process, we set the plate on the printing
machine and apply ink. The ink from the plateis transferred and fixed onto paper or film.

Printing
Select and develop materials

Forming the final productDevelop application technologies

Coating/ Transferring Technologies• Film Packaging Materials• Paper Containers• Steel Exterior Materials• Woodgrain Building Materials• Wall Coverings• Modular Bathroom Interiors• High-function Optical Film
• Components of Solar Battery Modules, etc.

This step entails a number of processes after
printing. Besides binding, which means
forming printed pages into books or
pamphlets, we do whatever processes arenecessary to create the final products.

• Ink Ribbons• Electrode Material for Lithium-Ion
Rechargeable Batteries• Image Receiving Paper for
Digital Photos, etc.

Add functionality and value

Post-Processing Technologies• Book Binding• Pop-Up Picture Books• Point of Purchase Materials• Paper Cups
• Plastic Containers• All Types of Packages• Beverage Cartons• Plastic Bottles• Laminated Tubes, etc.

DNP Annual Report 2007

129

Appendix

Technologies and Their Applications

I

Information Processing Technologies

Treating Text and Images as Information and Processing Them Flexibly to Suit Various Media
Before we begin to actually print something,
there are preparatory processes in which we
handle the text, photos, illustrations or othermaterial to be printed as information. As part ofthis prepress process, we consider the printing
method, size, materials and methods of expressionthat will convey the material clearly, legibly andmost effectively. We then process the material
according to the most effective mode of expression. Our job includes organizing and storing theprocessed information so that it can be revised andre-used in the future, as is often done with dictionaries, contact lists and product catalogues.
DNP’s information processing skills are notlimited to the domain of paper printing, but have
evolved to include all kinds of media. The range offields that we deal with expanded particularly
suddenly in the 1970s, with the digitalization of

printing processes.
Information processing technologies include
image processing techniques, such as those aimed
at optimizing the colors, outline, contrast orcoloration used in an image, data conversion
techniques (e.g. converting the language, format,
or size of a data file to fit paper, CD-ROM/DVD,
Internet, digital broadcasting or other media), anddata-basing techniques for organizing, storing, andmanaging information.
We expanded into such businesses as information processing services (integrated data input,
printing and shipping) that support products likepersonalized mail; digital archiving, which entails
creating digital versions of cultural assets like paintings and other art works and organizing them into
data bases that can be searched and used in othernovel ways; and operation of data centers that offer

a high-security environment, including the infrastructure necessary to maintain security.
Most recently, in light of the new demand for
personal data protection, anti-counterfeit andproduct traceability, DNP’s information processing
technology has become more advanced than ever.
The information that our customers ask us to print
is valuable material. Thanks to a corporate climatethat allows us to take good care of that information, and thanks to our track record for taking goodcare of highly confidential printed matter such as
bankbooks, bank cards and stock certificates, wehave earned a high degree of trust from ourcustomers. By combining hardware in the form ofsmart cards and IC tags with software applications, we are expanding into areas of information
processing that other industries have not entered.

Examples of Information Processing Technology Applications
DNP has used its digital information processing expertise to address a variety of electronic media, including CD-ROMs, DVDs, the Internet and broadcasting.
We have expanded our business to prepare for a full-fledged ubiquitous society — in which necessary information is accessible anywhere, anytime — and tomeet the demand for personal data protection.
Application Example 1

Development of User-Oriented Media

Responding to the Need for Advanced Information Security

With the rapid progress of computerization, information interfaces between consumers
and corporations are becoming more and more diverse. In order to transmit information
more effectively, it is important to understand how a target group of consumers uses
information, and to develop media that is most suited to their information usage style.
DNP set about computerizing its typesetting operations in the 1970s. This included
digitizing the original font, Shueitai, that we developed in the early 1900s. In 1985, we
produced the world's first electronic dictionary on CD-ROM, after which we were quick
to begin Internet (via PCs and cell phones) and digital broadcasting. In 2005, we madeour Shueitai font compatible with JIS standards 3 and 4, and adapted it for use in word
processing software. In 2006, we developed a version of Shueitai that is easier to read on
digital displays.
DNP has refined its information processing technologies in order to make informationeasy to read and easy to communicate. Going forward, we intend to continue expanding
our business along with developments in information media.

Demand for information security is rapidly increasing, due partly to the passage ofJapan's Personal Information Protection Act and Law Concerning Electronic Signatures
and Certification Services, as well as measures aimed at preventing corporate dataleakage. There is especially strong demand for the reinforcement of systems that protect
and manage important information.
Since its founding, DNP has carefully guarded the manuscripts that it received from
corporate clients. Through this careful handling, we honed our information processing
skills. We developed technologies for organizing information into databases, forefficiently reusing information, and for building more secure network systems andproducts with improved anti-counterfeiting functions.
Recently, we have been building systems with such functions as a smart cardcontrolled computer boot-up, data encoding, restricted device access requiring personalauthentication, and room entry/exit control. DNP also serves as the secretariat for Shared
Security Formats Cooperation (SSFC), a corporate alliance aimed at creating standards
for office security. These are some of the ways in which DNP is responding increasingly
broadly to today's demand for sophisticated information security.

Left: Traditional Shueitai font130

Application Example 2

Right: Shueitai font adapted for easy reading on digital display

I

Patterning Technologies

Exposure, Development and Etching: the Principles are the Same Whether the Product is Text or Semiconductors
Patterning is the art of making images on form
plates to be used in the film making process that ispart of the overall printing process. The image tobe created on the form plate may consist of text,
pictures or illustrations.
Before the advent of full digitalization, theprocess of film making involved photographingcamera-ready masters or original photos andexposing the images onto film to make positive film
or negative film. Color photographs were separated
into four colors: with tiny dots of yellow, magenta,
cyan and black fixed onto four sheets of film.
An image that is microscopically etched onto
the film using patterning technology is then burned
onto a printing plate, consisting of a plate made ofresin or metal, etc. Specifically, the image on theform plate was exposed onto a plate (usually madeof resin or metal) that was coated with a photo-

sensitizing agent. This is called photolithography.
After exposing only the necessary parts of theresin or metal, a corrosive agent like acid was used
to engrave the image. This was then washed off tomake a gravure plate. This process is calledetching.
As we refined this technology to the point that
we now possess the most precise printing
technology in the world, DNP developed its own
production equipment and systems. Today, each
dot in high-quality printing is just over one
hundredth of a millimeter in diameter.
DNP took the ultra-fine patterning, photolithography and etching skills that we accumulated in
our printing work and began applying these microprocessing technologies to the manufacture ofelectronic components. The first electronicsrelated product that we addressed was shadow-masks. Shadowmasks guide electron beams to aluminant; they are essential for giving color to TV
images. A shadowmask is a thin steel plate, only
0.2 mm thick, containing millions of ultra-microscopic holes. It is said to be impossible to achieve
the necessary precision by punching, but it ispossible to quickly mass-produce shadowmasks
using advanced printing technology.
DNP has already refined its patterning technologies to accommodate the realm of nanotechnology
necessary for manufacturing photomasks, which
serve as original plates in the manufacture ofsemiconductors. We have built a record of successin the techniques that are indispensable to the
pursuit of ultra-miniaturization, and the industry
looks to us to build on this record in the future.

Examples of Applications for Patterning Technologies
DNP has continued to hold the world’s largest share of the shadowmask market, and has gone on to claim winning positions in other global markets such as
photomasks, which serve as original plates for making semiconductor circuits, and color filters used in LCDs (liquid crystal displays).
Application Example 1

Application Example 2

Display Components/Color Filters for LCDs

Electronic Devices/Photomasks

An LCD color filter consists of the three primary colors in light — red, green and blue —arranged in an orderly array on a glass substrate. Light from a backlight passes throughthe liquid crystals, and when it passes through the color filter, it creates a variety ofcolors. Color filter quality is determined by the formation of millions of pixels precisely inpredetermined locations. This requires extremely sophisticated patterning technology.

Photomasks consist of highly precise circuit patterns, of submicron or nanometer order,
formed on a glass substrate. They are essential to the manufacture of LSIs and ICs
because they are the original plates used for printing circuits onto the surface of silicone
wafers.
In recent years, as semiconductors have become increasingly highly integrated andlarger in capacity, the line width required for high-end products has become smaller andsmaller. Already, mass production is underway for products with 65 nm lines, anddevelopers are working on ultra-advanced products with a line width of 45 to 32 nm.
Ever since DNP began producing photomasks, we have always worked at the leadingedge of micro-processing technology and have remained at the forefront oftechnological development.

In 2006, we developed a multi-primary color filter with yellow and cyan (brightblue) added to the three primary light colors, thereby enhancing the quality of color
reproduction.

Polarizer
Glass

Color filter
Transparent electrode

Liquid crystal
TFT(Thin-film transistor)

Transparent electrode
Glass
Polarizer

White light from backlight

DNP Annual Report 2007131

Appendix

Technologies and Their Applications

I

Coatings/Transferring Technologies

Technologies for Applying Functional Coatings and Transferring Images
Coating technologies are used to apply and fix
ink from the image on a form plate to a material
like paper or film. In other words, coating meanstransferring ink to the object that is to be printed.
This is the process of printing in a broad sense. It
goes without saying that DNP has developed basic
technologies for improving image reproduction andaccuracy by adjusting the amount of ink andprinting pressure. We have also found ways toimprove functions like coloration and durability bycoating the paper surface with varnish or
pigments, and have gone on to develop transfer
technologies that support embossing, decorative
printing and other types of texturing, as well as foil
printing and other techniques that enhance theaesthetic effect of the end product.

With these types of technologies as a basis, wehave expanded our business field to include
printing on film used for packaging, magnetic tapeused in bankbooks and cash cards, and various
lifestyle materials such as floor and wall coverings,
wood-grain printing and automotive interiors. By
giving these products a wide range of functions
such as friction or abrasion resistance, lubrication,
electrical conductivity control, static or heat resistance, and heat shielding or photocatalytic properties, we increased their market value. With the
expansion of the market for displays in recent
years, there has been a big jump in demand forfunctional films that reduce glare or reflection, andelectromagnetic interference shielding film for use
in plasma display panels (PDPs). These develop-

ments have also created new business fields that
present opportunities for DNP.
Rather than printing directly onto the target
material, there are other important transfer
technologies whereby ink is first applied to film orsome other material and then transferred to thematerial to be printed by using heat or othermeans. Beginning with ink ribbons for fax
machines, thermal transfer materials were later
used in the instant photo-sticker booths that
became wildly popular among young Japanesefrom the early 1990s. Demand for these materials
soared, as did demand for thermal transfer fax
receiving paper. The market for these materials is
still growing, with the focus now on ink ribbons for
digital photo printers.

Examples of Coating and Transferring Technology Applications
Having cultivated coating technologies over the years, DNP began to apply them to the production of sophisticated, commercial-use printed products likemagnetic tape coatings for cash cards and functional optical films, and to a wide range of products including film packaging used in everyday life, and lifestylematerials like floor and wall coverings. We hold a large share of all of these markets.
We also make use of our transferring technologies in the ink ribbons used in instant photo-sticker booths and digital photo printers, as well as in our unique“Curlfit” technology, which uses water pressure to transfer patterns for printing on curved surfaces such as automotive interiors or molded plastic products.

Application Example 1

132

Application Example 2

High-function Optical Film

Ink Ribbons for Digital Photo Printers

The surface of the polarizing plate at the very front of an LCD is covered with a special,
functional film, called anti-reflection film. This film makes it easier to see the images on
the screen by protecting the surface from scratches and by limiting the reflection ofincident light such as fluorescent lights. A special anti-glare film is also used on front
filters – the glass surface at the very front of PDPs.
By making the most of the coating technologies that are among our core printing
technologies and providing optical films that facilitate viewing and prevent eyestrain,
DNP has captured an overwhelming share of the market for surface functional films.

Ink ribbons used for digital photo printers consist of a base film coated with yellow,
magenta, cyan and black inks to precisely controlled thicknesses. A certain amount ofeach color of ink is sublimated and transferred onto special receiving paper, dependingon the amount of energy in the printer's thermal head. This method makes it possible toexpress very subtle variations in color and to produce prints that are very close to thequality obtained with silver halide photography.
As digital cameras and mobile phones with built-in cameras have rapidly gained
popularity, there has been increasing demand for printing photos taken with thesedevices. In addition to the demand for supplying home-use printers, there has also beena surge in commercial demand, including printing services at major mass retail shops.

I

Post-processing Technologies

Refining the Final Shape and Making a Convenient Product: in Pursuit of Greater Usability
Even after printing has been completed, our job
is not yet finished. In the case of books andmagazines, it’s only after we have completed thebinding processes — folding the printed pages,
fixing them together, cutting off unnecessary partsand cleaning up the edges — that we have afinished product.
The single word “bookbinding” comprises alarge number of types of processing that we do inorder to create a finished product. Depending on
the number of pages and the purpose for which adocument is to be used, we may use an expensive
type of binding that yields a product with aluxurious feel or a less expensive method suited tohigh-volume products: options include saddlestitching, side-stitching, burst binding and“perfect binding.”
Ever since DNP’s founding, we have kept coming
up with ideas for processing our final products sothat they meet our customers’ specific needs. In
the early 1950s, with our entry into the packaging
business, we began developing one postprocessing technology after another. We started
with the three-dimensional processing of paper
containers and went on to develop processes likesealing film packages and forming plastic.
Eventually, we ended up developing and improving
forming technologies for a variety of materials,
including laminated tubes and PET bottles.
In these processes, we must pay as much attention to the functionality of the end product as we
do to the aesthetics of the printing. We must think

not only about durability and other types ofstrength, but also about the ease of use. When weare binding a very thick book like a computer
manual, we must bind it very firmly. At the sametime, we find a way to allow the manual to stay
open at the desired page even when the reader has
both hands on the computer. Because we seek
maximum functionality in the arena of daily life,
our post-processing technologies must also reflect
consideration for aspects like environmental
impact and universality of design.
The products that we make by applying these
post-processing technologies are the result ofmatching DNP’s technological strengths with what
it is that our customers want.

Examples of Post-Processing Technology Applications
The development of our post-processing technologies began with bookbinding. In recent years, regulations governing magazine supplements have been easedso that today we encounter supplements like clothing, cosmetic samples, accessories and other items that were unheard of in the past. Because of this trend,
DNP’s development of new post-processing techniques has proceeded very rapidly. Our post-processing technology must always anticipate changes in the social
environment and in consumers’ desires, and respond quickly.
In the packaging business, which we entered in the 1950s, we are currently responding not only to changes in demand for functions like convenience anddurability, but also to changes related to a growing concern for the environment and Japan’s aging society.
Application Example 1

Application Example 2

Designing in Functionality and Comfort

Aseptic Filling System that Does Not Harm Delicate Flavors

A large amount of packaging material is used in everyday life. It is developed according
to design principles calling for minimal environmental impact and maximum functionality. For example, consumers do not see how much thought was given behind thescenes to designing the aluminum lid of a yogurt cup, which must be attached firmly
enough to completely prevent leakage but not so firmly that people with little strength
have trouble opening it. As another example, we considered the user’s comfort in ourdesign of cups for cup noodles, making it double-sided so that the outside will not be hot
to the touch even when the cup is filled with hot water. We are also working on making
thinner, lighter drinking cups.

DNP established its aseptic filling technology in 1976 with the development ofcontainers that can preserve their contents at room temperature for a long period oftime. These containers are used as portion packs for coffee cream and as packaging for
prepared foods like stew or pasta sauce. In recent years, DNP has also won high praisefor its bottle filling system, which makes use of this same aseptic filling technology for
packaging a variety of beverages.
Under this system, bottles are filled in an aseptic environment, so the contents are notdamaged by thermal sterilization. This makes it possible to seal in the delicate flavors ofbeverages like Japanese green tea or black tea. Also, we provide parisons, or test-tubelike primary formed products. These are formed into bottles only immediately before
filling, so their transportation entails less cost and less emission of CO2. In recognitionof how effective this system is at reducing the negative impact on the environment,
DNP received an award from the LCA (Life Cycle Assessment) Japan Forum in
December 2004.

DNP Annual Report 2007

133

Major Subsidiaries and Affiliates

Capital(¥ Million)

Printing
DNP Hokkaido Co., Ltd.
DNP Tohoku Co., Ltd.
DNP Tokai Co., Ltd.
DNP Nishinippon Co., Ltd.
DNP Shikoku Co., Ltd.
Information Communication
Books and Magazines
DNP Offset Co., Ltd.
DNP Seihon Co., Ltd.
DNP Total Process Ichigaya Co., Ltd.
DNP Total Process Maebashi Co., Ltd.
DNP Art Co., Ltd.
DNP Techtas Ichigaya Co., Ltd.
DNP Uniprocess Co., Ltd.
DNP Total Process Nagaoka Co., Ltd.
DNP Butsuryu Systems Ichigaya Co., Ltd.
Tien Wah Press (Pte.) Ltd.
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.
DNP Total Process Warabi Co., Ltd.
NexantiS Corporation*
DNP Techtas Warabi Co., Ltd.
DNP France SAS*
Communication and Information
DNP Archives.com Co., Ltd.
DNP AV Center Co., Ltd.
DNP Digitalcom Co., Ltd.
DNP Space Design Co., Ltd.
Mobile IMPULSE Co., Ltd.*
Maison de DNP Ginza Co., Ltd.*DNP Corporate History Center Co., Ltd.
Trans Art Inc.*
YouToo Co., Ltd.*CP Design Consulting Co., Ltd.*
M’s Communicate Co., Ltd.*At Table Co., Ltd.*
MyPoint.com Japan Co., Ltd.
Lifestyle and Industrial Supplies
Packaging
DNP Technopack Tokai Co., Ltd.
DNP Techno Film Co., Ltd.
DNP Technopack Co., Ltd.
DNP Technopack Kansai Co., Ltd.
DNP Technopack Yokohama Co., Ltd.
Sagami Yoki Co., Ltd.
Aseptic Systems Co., Ltd.
DNP Techno Polymer Co., Ltd.
DNP Cup Techno Co., Ltd.
DNP Hoso Co., Ltd.
PT DNP Indonesia
Lifestyle Materials
DNP Lifestyle Materials Marketing Co., Ltd.
DNP Ellio Co., Ltd.
DNP Lifestyle Materials Co., Ltd.
Industrial Supplies
DNP Photo Imaging Co., Ltd.
DNP IMS Odawara Co., Ltd.
DNP PrintRush Co., Ltd.
DNP IMS Co., Ltd.
DNP OptoMaterials Co., Ltd.
DNP Fine Chemical Co., Ltd.
DNP Photo Marketing Co.,Ltd.
DNP ID Imaging Co., Ltd.

134

Photoengraving, printing, bookbinding, production and sales of packaging
Photoengraving, printing, bookbinding, production and sales of packaging
Photoengraving, printing, bookbinding and production of packaging
Photoengraving, printing, bookbinding, production and sales of packaging
Photoengraving, printing, bookbinding, production and sales of packaging

Ownership ratio
(%)

350
350
120
400
50

100.0
100.0
100.0
100.0
97.0

200
200
100
100
80
80
80
50
40
(S$1,000)
4,600

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

200
100
100
100
50

100.0
100.0
100.0
100.0
100.0

100
100
80
25
20
(Euro 1,000)
37

100.0
100.0
100.0
100.0
100.0
100.0

100
100
100
100
90
60
50
50
50
40
30
30
10

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
92.5
95.0
95.0
83.0

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 for 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 products

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

Sales of lifestyle products
Printing and processing of steel and other metal plates
Photoengraving and production of lifestyle products

300
300
200

100.0
50.0
100.0

Holding company
Production and sales of photographic materials
Sales of digital photo printing systems and photographic materials
Production and sales of TTRs and ST materials
Manufacturing of optical products for displays
Production and sales of chemicals for photography
Sales of photo-related products
ID photographing and sales of ID photographs

5,100
300
300
100
100
100
100
50

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

Offset printing
Bookbinding
Photoengraving
Photoengraving
Production of drafts for photoengraving, and photoengraving
Bookbinding
Photoengraving
Photoengraving
Warehousing and packaging of books and magazines
Photoengraving, printing and bookbinding

Planning, production, photoengraving, printing and bookbinding
Printing and bookbinding
Planning, designing and photoengraving
Photoengraving, printing and bookbinding
Warehousing and packing of commercial printing
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 smartcard related software and products
Enclosing, sealing, and logistics for business forms related products
Smart card and security business research

Planning, producing and sales of art objects and contents
Planning, production, editing and sales of TV broadcasting, movies and video software
Planning and production of digital media contents
Planning and designing shops, exhibition booths and other commercial spaces
Website management for mobile online shops
Sales of Maison des Musées de France art products
Planning and production of corporate history archives
Procurement and sales of art objects
Provision of information over the Internet and mobile phones
Consultation for privacy protection and crisis management
Consultation for customer relationship management
Research, consulting and planning for sales promotions for grocery supermarkets
Marketing system planning and operations for Internet advertisements

Capital(¥ Million)
DNP Photo Imaging America, Inc.

Sales of digital photo printing systems and photographic materials

DNP IMS America Corporation

Production and sales of TTRs and ST materials

Compagnie de Découpe de l’Ouest SAS

Production and sales of TTRs and ST materials

DNP IMS France SAS*

Sales of TTRs and ST materials

Electronics
Display Components
DAP Technology Co., Ltd.
DNP Color Techno Kameyama Co., Ltd.
DNP Precision Devices Co., Ltd.
Advanced Colortech Inc.
DNP Denmark A/S

Production and sales of PDP back plates
Production and sales of color filters for LCDs
Production of display related components
Sales of color filters for LCDs
Manufacturing and sales of projection screens

DNP Electronics America, LLC

Manufacturing and sales of projection screens

DNP Display Technology Taiwan Co., Ltd.

Sales of display components and technological consultation

Electronic Devices
DT Fine Electronics Co., Ltd.
DNP Fine Electronics Co., Ltd.
DNP LSI Design Co., Ltd.
DNP Micro Technica Co., Ltd.
DNP Photomask Europe S.p.A.

Production and sales of components for manufacturing of semiconductor components
Production and sales of components for manufacturing of semiconductor components
Logical circuit designs for ICs and LSIs and layout designs
Inspection and packing of semiconductor components
Manufacturing and sales of photomasks

DNP Photomask Technology Taiwan Co., Ltd.

Manufacturing and sales of photomasks

OthersThe Inctec Inc.
DNP Logistics Co., Ltd.
D.N.K. Co., Ltd.
DNP Trading Co., Ltd.
Direc Co., Ltd.
DNP SP Tech Co., Ltd.
Kyoiku Shuppan Co., Ltd.
Personnel Welfare, Facility Service and Others
Dai Nippon Kaihatsu Co., Ltd.
Shiobara Green Village Co., Ltd.*DNP Facility Services Co., Ltd.
DNP Information Systems Co., Ltd.
DNP Human Services Co., Ltd.
Uzumine Country Club Co., Ltd.*DNP Accounting Services Co., Ltd.
DNP Techno Research Co., Ltd.*
Overseas Sales
DNP America, LLC

Development and sales of ink, varnish, pigments and dyes
Packing, shipping operations and warehouse management
Manufacturing, sales and repair of printing equipment and machine tools
Sales of paper and other products
Sales of publishing and educational equipment
Planning and production of promotional material
Publishing of educational books
Sales of real estate and maintenance of buildings and parking facilities
Management of leisure facilities
Management and operation of buildings and welfare facilities
Planning, designing, development, management and operation of information systems
Planning, management and data processing activities related to personnel plans
Management of golf courses
Accounting and consulting services
Studies related to patents and the preparation of contracts
Sales of printing solutions, electronic components, and lifestyle materials

DNP Corporation USA

Holding company

DNP Holding USA Corporation

Holding company

DNP Europa GmbH*

Sales of displays, semiconductor components and lifestyle materials

DNP UK Co., Ltd.*Sales of lifestyle materials

Dai Nippon Printing Co. (Australia) Pty. Ltd.*Sales of printed materials and building materials

DNP Singapore Pte. Ltd.*Sales of displays, semiconductor components and lifestyle materials

DNP Korea Co., Ltd.*Sales of displays and semiconductor components

DNP Taiwan Co., Ltd.

Sales of displays and semiconductor components

DNP International Trading (Shanghai) Co., Ltd.*Sales of printing solutions and packaging products

Ownership ratio(%)(US$1,000)
45,172(US$1,000)
47,920(Euro 1,000)
3,040(Euro 1,000)
300(84.0)
84.0(100.0)
100.0
23.4

9,000
2,500
450
350
(Dkr1,000)
135,000(US$1,000)
15,045(NT 1,000)
30,000

65.0
100.0
100.0
100.0
100.0

100.0

(100.0)100.0(99.0)
100.0

490
300
100
40
(Euro 1,000)
47,200(NT 1,000)
448,000

65.0
100.0
100.0
100.0
80.6
(3.3)
100.0

2,000
626
100
100
96
80
60

83.4
100.0
100.0
94.3
55.0
100.0
48.3

250
200
100
100
90
33
30
20

100.0
99.6
100.0
100.0
100.0
88.8
100.0
100.0

(US$1,000)
100(US$1,000)
52,212(US$1,000)
100(Euro 1,000)
92(£1,000)
120(A$1,000)
70(S$1,000)
350(Krw1,000)
500,000(NT 1,000)
10,000(US$1,000)
2,000(100.0)
100.0
(8.5)
100.0
(100.0)
100.0
100.0

2,935

(3.8)
57.0

100.0
100.0
100.0
100.0
100.0
100.0

Beverages
Beverages
Hokkaido Coca-Cola Bottling Co., Ltd.

Manufacturing and sales of soft drinks
Notes:

1. Ownership ratios(in brackets) indicate the percentage of shares owned through DNP’s subsidiaries of affiliates.
2. Companies with an asterisk are neither consolidated nor accounted for under the equity method.

DNP Annual Report 2007135

Sources of Information About DNP

I

Reports“Yuho” Annual Securities Report (Japanese)
Submitted twice a year to the Finance Ministry in accordance with Article 24 of the Securities
Exchange Law (half-year report submitted in December, full year report submitted in June). We
submit a wide range of information, including consolidated financial statements with an attachedauditor’s report, non-consolidated financial statements, summary of financial results, and information on outstanding shares and directors, etc.
“Tanshin” Earnings Release (Japanese, partially in English)
In accordance with Tokyo Stock Exchange rules, we prepare earnings releases for each quarter.
(We began making quarterly releases after the rules were amended in March 2003.) In addition to
consolidated and non-consolidated financial statements, we report on the status of sales, etc.

I

Publications

Annual Report (Japanese, English)
Around August or September every year, we release a Japanese version and an English version. In
addition to consolidated financial statements, the report contains a message from the president,
business strategies, summaries of financial results, news from each business sector, financial analysis, etc. The Japanese version contains the same financial statement and notes as the securities
report, without the auditor’s report. The English version contains financial statements with anattached auditor’s report.
“DNP Report” Report to Shareholders (Japanese)
This report is issued quarterly, in September, December, March and June, and is mailed to shareholders. Examples of its content include summaries of business reports, interviews with management, information about new businesses, and information about shares.
Data Book (bilingual: Japanese and English)
Issued around August or September of every year, the Data Book contains values from financial
statements of the past 10 years, financial analysis values presented in the form of tables andgraphs, etc. Financial statement values are taken from securities reports.
DNP Group CSR Report (Japanese, English version available as PDF file)
Issued around August or September of every year, the report covers corporate social responsibility
from the standpoint of the economy, society and environment. Since we issued our “Eco-report” in
1998, we have continued to report under different names such as “Environment Report” or“Sustainability Report.”
Corporate Information (Japanese, English)
In order to give the public a better understanding of our operations, we published a pamphlet about
our company. It introduces each division and addresses aspects like products, services, sales, planning, research and development, production facilities, company history, and a summary of ouractivities.

136

I

Web site

English: http://www.dnp.co.jp/index_e.html
We maintain a web site as a portal for communication with a large number of stakeholders. In addition to general corporate information and news updates, we also offer PDF versions of various
reports and publications, introduce products, services and bases of operations in Japan and overseas, and receive inquiries via e-mail. The site also has links to DNP Group companies.
Major features of our web site
• News releases• Information for investors: Financial high lights, bonds and rating report,
disclosure policy, share information, etc.
• PDF files: Annual “Yuho” Securities Reports, “Tanshin” Earnings Releases, “Koukoku”
Public Notices of Account Settlement, Annual Reports, DNP Reports, Data Books,
DNP Group CSR Reports, Corporate Information, etc.
• Introduction to each division’s business: Lists of products and services• Personal information protection• Materials procurement• Hiring information• Events and gallery information• Contact information, etc.

Index of Photographs
P. 1 1 top: DNP “infopark” showroom
P. 1 1 bottom: DNP Movable Type Monument
P. 34-35: DNP’s original Shueitai font
P. 47 top: Louvre-DNP Museum Lab
P. 47 bottom: Video Imaging StudioP. 56: Hologram production
P. 59 top left, top right, bottom right: Shueitai Font Display
P. 59 bottom left: Smart card
P. 65 top: Photo print related products

P. 67 left: VOX ART (Beaux-Art) Lifestyle materials
presentation space
P. 67 right: Aseptic filling system for PET plastic bottles
P. 73 left: Camera module substrate
P. 73 top right: MEMS (Micro Electro Mechanical
Systems) products
P. 73 bottom right: Back plate for plasma display
P. 78-79: Security gates
P. 90, P. 96-97: DNP Gotanda Building

P. 65 bottom: Thin television and antiglare film

*Any DNP product or service trademarks mentioned in this annual report are registered in Japan.

DNP Annual Report 2007137

Dai Nippon Printing Co., Ltd.
1-1-1, Ichigaya-Kagacho, Shinjuku-ku, Tokyo 162-8001, Japan

Printed using soy inks.
FSC certified paper is used for the main body of this annual report.
©2007 Printed in Japan.