Management
Concept

The DNP Group will contributeto the emergently evolving
society of the 21st century.

Business
VisionWe will identify and solve the problems andissues that consumers and corporate clients
face within the emergently evolving society byfusing our Printing Technologies (PT) andInformation Technologies (IT).

Guiding
Principles

1. Engage in Taiwa* with all persons concerned.
2. Work with an independent and collaborative mind-set in orderto solve problems.
3. Challenge courageously, even in the face of difficult issues.
4. Act with integrity, fairness, and impartiality, at all times.
5. Be responsible for your own decisions and conduct.

Management
concept
The DNP Group willcontribute to theemergently evolving
society of the
21st century.

Business vision

Guiding Principles

P&I Solutions

Five Principles

Concept Phrase [P&I Solutions DNP]

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

CONTENTS

2

To Our Shareholders

8

DNP in Brief

22

10

Synopsis of Performance

14

DNP at a Glance

16

Our Products

18

Timeline of DNP s Technological
Development and Business Expansion

20

Major Events of This Fiscal Year76

Corporate Governance68

Corporate Governance

75

Board of Directors, Statutory Auditors
and Corporate Officers

Financial Section
78

Management s Discussion andAnalysis88

Selected Financial Data

90

Consolidated Financial Statements

Special Feature: Lifestyle and Industrial Supplies

Expanding Business by
Increasing Added Value

38

67

98

Appendix
110

Technology-Centered Business
Development

111

Technologies that Support P&I
Solutions112

Technologies and Products

116

Investor Information

118

Major Subsidiaries and Affiliates

Segment Information

120

Glossary

40

123

Sources of Information about DNP

25

Packaging Operations

30

Overseas Operations

32

Lifestyle Materials Operations

34

Research & Development

52

60

Information Communication

40

Business Strategies

42

Financial Results

43

Portrait of Divisions

46

Topics49

Strategic Focus

Lifestyle and Industrial Supplies

52

Business Strategies

54

Financial Results

55

Portrait of Divisions

58

Topics59

Strategic Focus

Electronics

60

Business Strategies

62

Financial Results

63

Portrait of Divisions

65

Topics66

Strategic Focus

This annual report is aimed at providing information about DNP’sbusinesses, management vision, and business results. Opinions andforecasts contained in the report were based on the best judgment ofmanagement at the time the report was prepared, so we cannot
guarantee that all information contained in the report is completely
infallible.
In this annual report, “DNP” refers to the entire DNP Group, and “we”
refers to DNP or the DNP management team.
(In the section on Corporate Governance (pp 67-75), “DNP” refers to Dai
Nippon Printing Co., Ltd.)DNP Annual Repor t 20 10

1

To Our Shareholders
Yoshitoshi Kitajima President

In the fiscal year through March 2010,
we improved performance by restructuringbusiness operations
We achieved far better results than we expected at the beginning of the
fiscal year ended March 2010.
During the fiscal term, the global economy experienced continued
slow growth thanks to emergency economic measures taken by various
countries and intense efforts on the part of corporations. However, theJapanese economic picture remained harsh, with continued stagnation in
consumption and high levels of unemployment. Due to such factors as aprotracted slump in the publishing market and corporations’ containmentof their advertising expenses, our Information Communication segment
was hit particularly hard by the economic situation. On the other hand,
we saw a clear recovery trend, particularly in Electronics, where arecovery in demand for liquid crystal display (LCD) panels supported thesegment’s return to the black, and in Lifestyle and Industrial Supplies,
where sales of packaging and optical films were solid.
Our response was to review production systems and manufacturing
facilities, and to strengthen our profit-generating base throughexhaustive cost reductions. As a result, we were able to rapidly
improve our results compared to the fiscal term ended March 2009,
when worldwide financial crisis had an extremely severe impact on ourbottom line.

Major initiatives in the fiscal years
through March 2010 and March 2011
In the fiscal year ended March 2010, we conducted a thorough review
of manufacturing facilities and consolidated production systems.
In addition, we involved the entire DNP Group in cost reductions andsucceeded in achieving significant results. We also boosted production
capacity appropriately, in line with market demand.
As part of these changes, we integrated the domestic printing ink
business of DNP subsidiary The Inctec Inc. with that of the leading
player in the industry, DIC Corp., and established a joint venture called
DIC Graphics Corp. Through these moves, we improved our operational
efficiency and strengthened our corporate constitution.

2

DNP Annual Repor t 20 103Especially in the market for LCD panels, where demand has recovered
dramatically, we are increasing our production capacity for LCD color
filters and optical films from the fiscal year through March 2010 into
the following fiscal year. We are working increasingly closely withcorporate clients as we expand our LCD color filter business. Following
the October 2009 start-up of a new 10th-generation plant in Sakai City,
Osaka Prefecture, we also opened a new 8th-generation plant in Himeji
City, Hyogo Prefecture in April 2010. Photomasks are expected to beaffected by changes in the semiconductor market; in addition to boosting
competitiveness by developing the very latest technologies, we will meetoverseas demand for photomasks through a new plant in Taiwan, which
we started up at the beginning of the fiscal year through March 2011.
During the fiscal term through March 2010, we worked harderthan ever on projects aimed at revitalizing the publications market.
In February 2010, we merged Maruzen Co., Ltd. and TRC, Inc., andestablished an intermediate holding company, CHI Group Co., Ltd.
Together with Junkudo Co., Ltd. which joined the DNP Group in March
2009, we have been promoting activities such as the development of
in-store sales promotions using digital signage and the introduction oftools such as smart cards and IC tags to facilitate book distribution, inorder to strengthen our Books and Magazines business. We are also
reinforcing planning, production and distribution functions for digitalcontent aimed at the electronic book market and actively working to
expand our information security business through such moves as tying
up with Intelligent Wave Inc., a security system developer that became
a DNP subsidiary in April 2010.

Corporate value enhancement andbusiness strategies aimed at sustained
growthWe are pursuing our “P&I Solutions” business vision aimed atbuilding DNP’s corporate value in the long-term and achieving
continuous growth. As our key strategies aimed at realizing
our vision, we are working on establishing a strong profitgenerating structure and developing new businesses.
In order to implement our business vision, it is essentialthat we notice changes in society and in markets, and that
we be quick to discover issues that companies and evenconsumers are not aware of. We intend to expand our businessby finding solutions to these issues through persistent taiwa*
with corporate directors and managers, consumers, and otherrelevant parties within and outside the DNP Group.
*Taiwa is a process of identifying problems and fi nding solutions through theexchange of viewpoints and ideas.

4

To Our Shareholders

To Our Shareholders

P&I Solutions
DNP’s Business Vision is to provide “P&I Solutions” – meaningthat we will make use of the unique Printing Technologies (P) andInformation Technologies (I) that are DNP’s strengths to provide
products and services that solve various problems. By doing so,
we hope to contribute to society.
One measure that we have undertaken with the aim of further
promotion of P&I Solutions and future business development is
the redevelopment of Tokyo’s Ichigaya district in February 2010.
Ever since 1886, when Shueisha, the forerunner of DNP, opened
its Ichigaya publishing Plant in what is now Tokyo’s Shinjuku Ward,
this area has been the locus of our expansion into a wide variety ofbusiness fields. The redevelopment plan calls for concentrating in
Ichigaya both head office functions and the planning, development
and sales functions of various operating divisions that are currently
dispersed in suburban Tokyo. The aim is not only to increase
synergistic benefits and develop new businesses, but also to review
manufacturing and distribution systems and consolidate production
bases, etc. with an eye toward overall optimization. The project isscheduled for completion in 2018.

Establishing a strong profit-generating structure
We are establishing a strong profit-generating structure by having
each and every employee maintain a profit-oriented awareness,and by working to boost productivity through such initiatives as
streamlining processes and reviewing operations, primarily in
manufacturing divisions. The Production 21 activities that welaunched in 2002 have been steadily producing results. Aimed at
mobilizing the entire DNP Group to increase productivity and basedon the idea of overall optimization, Production 21 activities smooth
the workflow between processes and between operating divisions,and promote the construction of efficient production systems fromwhich we thoroughly eliminate waste.
In Information Communication, we will reinforce ourcomprehensive oversight of manufacturing processes, coordinate
the wide variety of processes such as pre-press, printing, andpost-processing so as to eliminate waste from production systems,
improve distribution efficiency, and otherwise continue to strengthen
our profit-generating structure. We already conducted a major
review of the organization of our Commercial Printing business,
which operates in both the Kanto and Kansai areas, and systemicallyreformed it by consolidating and reorganizing.

DNP Annual Repor t 20 10

5Development of new businesses
We believe that the development of new businesses and the creationof new operating divisions is an important strategy for future growth.
We have already developed products and technologies that cangrow into new businesses, such as products related to photovoltaic
modules and lithium-ion rechargeable batteries in the environment/
energy field, and products that address regenerative medicine,
medicine, or healthcare in the life sciences field.
Our hope is that by developing these new businesses, we will solve
more problems for corporate clients and consumers based on DNP’sstrength in printing and information technologies. We believe thatmaking the most of our strengths and promoting businesses in orderto solve problems is the essence of contributing to society.
In order to make these business strategies more effective, we needto enlist not only the unique technologies of the DNP Group, but also
to cooperate with other companies that have special abilities. Basedon this policy, we have already implemented mergers and acquisitions
and formed strategic ties with a large number of companies, startingwith the fields of electronic products, digital photos, and educational
publications distribution. In the future, we will continue to actively
seek partners both inside and outside Japan.

Holding high aspirations, we will run a civilized
21st-century business
The motto of Shueisha, the corporate predecessor of DNP, was ”Runa civilized business.” This motto, coined immediately after the Meiji
Restoration amid major political and social upheaval throughout Japan,
expresses the avid desire of the company’s founders to contributebroadly to the development of Japanese society. Throughout the
134 years that have elapsed since then, we have maintained thisaspiration.
Since the beginning of the 1950s, we have focused on “expansion
printing” initiatives that broaden our fields of business by applying
and developing the printing technologies that we have cultivatedsince DNP’s founding. As a result, we have succeeded in creatingproducts like food packages, decorative materials, display-related
products, and photomasks used in semiconductor production.
In addition to Information Communication, we have established
Lifestyle and Industrial Supplies and Electronics as pillars of ourbusiness. By expanding these three business divisions in a balanced
way, we succeeded in building a stable management base with arobust business portfolio. Today, DNP products and services reach6

To Our Shareholders

To Our Shareholders

every corner of daily life in Japan and provide indispensable support
for our comfortable and convenient lifestyles. There are very few
examples in the world of “comprehensive printing companies” like
DNP that have expanded their fields of business by refining printing
technologies to the degree that we have.
Today’s world demands even more innovative changes. Based on theaspirations that we have maintained since DNP’s founding, we wantto continue contributing to society by quickly noticing social changes
and moving ahead of our corporate clients to make proposals andsolve problems from the consumer’s perspective. We feel sure thatthe actions we take to realize our “P&I Solutions” Business Vision willamount to “running a civilized business” in the 21st century.

Toward even better relations with ourshareholders
We view the return of profits to shareholders as an importantmanagement policy.
Our basic policy regarding allocation of profits is to pay stabledividends to shareholders, with consideration for such factors as
business performance and dividend payout ratio. At the same time,
we support future business expansion by using retained earnings
to enhance our financial constitution, and by strengthening ourmanagement base.
We will allocate internal reserves for investments in research anddevelopment of new products and technologies, capital investment
for the development of new businesses, and strategic tie-ups,
including M&As. We believe that these types of investment help build
corporate value in the medium and long term, and also contribute toreturning profits to shareholders.
At DNP, we value taiwa with all of our various stakeholders. In orderto stimulate livelier taiwa through which we can discover and resolve
new issues, we disclose appropriate information in a timely fashion
and work hard to achieve accountability. Furthermore, we view themaintenance of appropriate corporate governance as an importantmanagement responsibility. We intend to build, maintain, and operatemonitoring systems that adequately support transparent, appropriate,and quick decision-making and business execution.
In order to gain the trust of shareholders and all other stakeholders,the management of DNP will continue to increase corporate value
through our business activities. We look forward to your continued
support and cooperation.

Yoshitoshi Kitajima, President

DNP Annual Repor t 20 107

8DNP in Brief
CONTENTS
10 Synopsis of Performance
14 DNP at a Glance
16 Our Products
18 Timeline of DNP s Technological
Development and Business Expansion

20 Major Events of This Fiscal YearDNP Annual Repor t 20 10

9Synopsis of Performance

Grand Summary of Financial Results

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries

Years ended March 31

change

2010

2009

2008

2010/2009¥ 1,616,053- 0.1%

Statements of Operations (¥ million)
Net sales¥

1,583,383¥ 1,584,844

Operating income

66,514

46,177

87,10444.0%

Ordinary income

68,84147,39086,502

45.3%

Income (loss) before income taxes

49,496(27,842)

88,469–Net income (loss)

23,278(20,933)

45,172–940,086¥ 1,040,135

1.8%

Balance Sheets (¥ million)
Total net assets¥

Interest-bearing debt
Total assets

956,864¥

166,751

124,263

80,10434.2%

1,618,854

1,536,557

1,601,193

5.4%

157,283

6.8%

Cash Flow Statements (¥ million)
Cash flows from operating activities¥

140,574¥

131,569¥

Cash flows from investing activities(120,684)(100,726)(122,523)-19.8%Cash flows from financing activities

13,126(33,952)(73,728)–

Free cash flow*

19,89030,84334,760- 35.5%Per Share Data** (¥)
Net income (loss)
Net assets

¥

36.13

¥

(32.35)

¥

67.08

–

1,422.34

1,393.91

1,516.35

32

32

36

–

Cash dividend

2.0%

Profit Margins (%)
Operating income margin

4.20

2.91

5.39

1.29

EBITDA margin

9.07

5.09

12.36

3.98

Net income (loss) to net sales

1.47

-1.32

2.80

2.79

ROE (%)

2.57

-2.20

4.35

4.77

ROA (%)

1.48

-1.33

2.74

2.81

Financial Ratios

D/E ratio (%)

18

14

8

–

29.50

30.22

70.09

–

PER (times)

34.97

–

23.64

–

PBR (times)

0.89

0.64

1.05

–

EV/EBITDA (times)

5.77

7.19

4.94

–

Interest coverage raio (times)
Valuations (against share prices on March 31)

PCFR (times)

7.08

6.74

6.76

–

Dividend yield (%)

2.53

3.56

2.27

-1.03

–

26,55058,312

–

88.6

–

53.7

–

AA (stable)

AA (stable)

AA＋ (stable)

–

25.38

23.63

29.53

–

Return to Shareholders
Value of shares repurchased (¥ million)
Dividend payout ratio (%)
OthersLong-term credit rating (R&I)
Foreign ownership (%)* Cash flows from operating activities - cash flows from investing activities

10** No diluting securities outstandingDNP in Brief ▶ Synopsis of Performance■ We achieved large increases in operating income and net income.
■ We focused on performance recovery by means of thorough cost
DNP in Brief

reductions and reviewing production frameworks and equipment.
■ Profits grew primarily from Lifestyle and Industrial Supplies,
thanks to greater demand for high added value products.
■ We expanded production capacity for strategic products like LCD
color filters and optical films.

Net Sales

Operating Income

Net Income (Loss)(¥ billion)(¥ billion)(¥ billion)

2,000

150

1,507.5

1,557.8

1,616.1

80

65.2
1,584.8

1,583.4

120.7

54.8

60

120

45.2

1,500

96.1

40

87.1

90

23.3

1,000

66.5
60

46.2

20

–20.9

0

500
30

0

-20

0

06

07

08

09

10

-40

06

07

08

09

10

06

Net Income (Loss) per Share

ROE

ROA

(¥)

(%)

(%)

07

08

09

10

4.0
100

7

91.23

3.3

6

78.10

80

4

6.3
5.1
4.4

5

67.08

4

60

36.13

40

2.6

3
2

20

2.7

3

2

1.5

1

1

−32.35

0

0

0
–1

–20

–1

–2

-2.2

-1.3

–3

–40

06

07

08

09

10

–2

06

07

08

09

10

06

07

08

09

10

DNP Annual Repor t 20 10

11Income (Loss) Before Income Taxes

EBITDA(¥ billion)(¥ billion)

120

114.6

250

99.0

100

203.2

88.5

200.4

200

199.7

80
60

49.5

143.6

150

40
100

20

80.7

–27.8

0

50
–20
–40

0

06

07

08

09

10

06

07

08

Total Net Assets*

Net Assets per Share(¥ billion)

(¥)

1,200

1,063.309

10

1,393.9

1,422.3

09

10

2,000

1,099.4
1,040.1

1,000

940.1

956.9

1,507.9

1,544.0

1,516.4

1,500
800

1,000

600

400
500
200

0

0

06

07

08

09

10

06

07

08

* Figure for 2006 shows total stockholders' equity.

Interest-bearing Debt

Total Assets(¥ billion)(¥ billion)

200

2,000

166.8
150

1,662.4

1,700.3
1,601.2

1,536.6

1,618.9

1,500

124.3
100

1,000

80.1
67.9

69.2

50

500

0

0

06

07

08

09

10

06

07

08

09

PER (Price Earnings Ratio)*

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

35

1.5

10

1.41

34.97
1.20

30
25

23.35

23.74

1.05

23.64
1.0

0.89

20
15

0.64

0.5
10
5
0

0

06

07

08

09

* The fiscal year through March 2009 is not shown
because there was a net loss that year.

12

10

06

07

08

09

10

DNP in Brief ▶ Synopsis of Performance

Capital Expenditures*

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

200

40

35.6
162.9
150

28.7

30

136.1

33.8

09

10

119.1

116.1
96.2

100

34.1

30.1

20

50

10

DNP in Brief

0

0

06

07

08

09

10

06

07

08

*Figures include capital expenditures for intangible fixed assets.

Depreciation Expense

Free Cash Flow*(¥ billion)(¥ billion)

120

109.9

80

106.9

100.2

100

60

91.7

87.3
80

40

60

20

40

0

20

–20

0

34.8

30.8
19.9

–10.1

–27.7

06

07

–40

06

07

08

09

10

08

09

10

* Free cash flow = Net cash from operating activities –* Net cash from investing activities

Net Sales by Segment

Operating Income by Segment(¥ billion)(¥ billion)

Information
Communication

739.7

Lifestyle &Industrial Supplies

257.5

0

43.7

8.3

Electronics

62.8

Beverages

23.5

Lifestyle &Industrial Supplies

536.6

Electronics

Information
Communication–0.6

Beverages

200

400

600

800

0

10

20

Capital Expenditures by Segment

Employees by Segment(¥ billion)(persons)

Information
Communication

23.8

Lifestyle &Industrial Supplies

22.8

Beverages
1,179Electronics
4,498

30

40

50

Corporate
1,403

Information
Communication
19,83368.0

Electronics

Lifestyle &Industrial Supplies
12,730

4.5

Others

0

20

40

60

80

DNP Annual Repor t 20 10

13

DNP at a Glance

ProfileBusiness Portfolio

With printing and information
technologies at its core, DNP is acomprehensive printing company that is
the world’s top supplier of many products

A business portfolio that is well-balanced
from the standpoints of stability,
profitability, growth potential and risk

DNP is one of the world’s largest comprehensive printing
companies. It provides diverse products and services in awide range of fields to about 30,000 corporate clients and to
consumers in Japan and around the world. On the strengthof the printing and information technologies that DNP has
cultivated since its founding in 1876, DNP has not only
branched out from publishing and commercial printing tosuch fields as packaging, decorative materials, display-related
products, and electronic devices, but has become the world’s
top supplier of a large number of products. Today, DNP
continues to take on the challenge of expanding into new
business fields, including those related to the environment,
energy, and life science. We aim to provide solutions to avariety of problems, by enhancing taiwa with businesses andindividuals and by developing and combining technologies.
The DNP Group employs about 40,000 people. In
Japan, DNP has 45 sales bases and 60 production plants.
Overseas, the Group has 21 sales offices in 13 countries
and 10 production plants in eight countries. Overseas sales
contributed 12.2% of the Group’s overall net sales in thefiscal year ended March 2010.

DNP has two main businesses: Printing, which contributes
96% of the Group’s net sales, and Beverages, which
generates 4% of net sales through Hokkaido Coca-Cola
Bottling Co., Ltd.
Printing consists of an assortment of businesses that DNP
developed by applying printing and information technologies
and adopting a variety of business types and formats as we
expanded strategically into diverse fields.
We divide our Printing business into three segments
according to the types of products and services provided:
Information Communication, Lifestyle and Industrial Supplies,
and Electronics. Together, these segments comprise abusiness portfolio that is well-balanced from the standpointsof stability, profitability, growth potential, and risk.
In our Beverages business, we take advantage of the
Coca Cola brand strength while also developing original
DNP products. We are working on bolstering our beverages
business base, for example by promoting production andprocurement in liaison with bottlers in other parts of Japan.

Three Well-Balanced Strategic Segments

Information Communication
A core business that provides stable revenues
by dealing in a wide variety of information media
in the fields of Books and Magazines,
Commercial Printing, and Business Forms

The 3 Segmentsof DNP’s Printing
Business

14

Lifestyle and Industrial Supplies

Electronics

A growing segment that applies printing
technologies in order to generate high added value
products and services in the fields of Packaging,
Lifestyle Materials, and Industrial Supplies

A strategic segment that secures high growthby developing cutting-edge technologies
in the fields of Display Products andElectronic Devices

DNP in Brief ▶ DNP at a Glance

Information Communication
Net Sales

Operating Income (¥ billion)(Operating income)

800

679.9

120

739.7

718.4

Depreciation (¥ billion)(Assets)(Depreciation)

120

800

100

Net Salesby Segment

600

100

619.1
600

592.7

557.5

80

60

400

DNP in Brief(Net sales)

Assets

80

60

400

43.1

Beverages
Electronics

3.9%

Information
Communication

40

31.7
200

16.1%

40
200

23.5

46.3%

25.2

23.3

24.9

20

0

0

08

09

20

0

0

10

08

09

10

Lifestyle and Industrial Supplies
Lifestyle andIndustrial Supplies

Net Sales

33.6%

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

120

800

AssetsDepreciation (¥ billion)(Assets)(Depreciation)

120

800

100
600

555.8

551.8

100
600

536.6
80

Operating Income
by Segment*

60

400

80

60

400

40

31.9

11.0%

522.3

513.1

43.7
200

Electronics

532.2

Information
Communication

31.1%

0

09

27.7

20

0

08

40

29.5

28.6

200

19.9

20

0

0

10

08

09

10

Electronics
Net Sales
Lifestyle andIndustrial Supplies

57.9%

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

120

800

AssetsDepreciation (¥ billion)(Assets)(Depreciation)

120

800

100
600

100
600

80

80

427.4
60

400

400

322.3
257.5

256.0
200

51.7

329.0

60

46.0

40

33.4

40

200

19.8

20

2.6

0

09

20

8.3

0

08

397.0

10

0

0

08

09

10

DNP Annual Repor t 20 10

15Our Products

Information Communication
●

［1］

［2］

［3］

［9］

［ 10 ］［ 16 ］［ 17 ］［ 18 ］［ 23 ］［ 24 ］［ 25 ］［ 31 ］［ 32 ］

Books and Magazines[1] Magazines [2] Books [3] Dictionaries[4] Electronic book-reading software (Magazine Viewer)●

Commercial Printing[5] Catalogs [6] Calendars[7] Everybody’s Book Production Site – “DreamPages”[8] Augmented reality (AR)[9] Digital Signage “Tall Vison”●

Business Forms[10] Personalized mail[11] Smart cards[12] SIM cards [13] IC tags for books[14] Digital pens
[15] Hologram

Lifestyle and Industrial Supplies●

Packaging[16] Packaging for foods [17] Packaging for toiletries andpharmaceutical products [18] Easy-to-open universal
design products [19] Packages made of IB film[20] PET plastic bottles and preform[21] Aseptic filling systems for PET plastic bottle●

Lifestyle Materials[22] Residential interior materials [23] Automotive interiormaterials [24] Interior coverings for railway cars (celings;
side ceilings)●

Industrial Supplies[25] Optical film for displays [26] Projector screens[27] Dye-sublimation thermal transfer materials[28] Thermal-resin type transfer materials[29, 30] PrintRush PhotoBook

Electronics●

Display Components[31, 32, 33] LCD color filters[34] Large-scale photomasks●

Electronic Devices[35] Semiconductor photomasks[36] Lead frames for semiconductor packages[37] Inner component substrate[38] Camera modules[39] Reader/writer modules [40] IC tags[41] Ultracompact IC tags[42] MEMS (micro electro mechanical systems) products

Note: Numbers in square brackets correspond to photographs on p.16 -17.

16

［ 37 ］

DNP in Brief ▶ Our Products

［5］

［6］

［7］

［8］

［ 11 ］［ 12 ］［ 13 ］［ 14 ］［ 15 ］［ 19 ］［ 20 ］［ 21 ］［ 22 ］［ 30 ］［ 26 ］［ 27 ］［ 28 ］［ 29 ］［ 33 ］［ 34 ］［ 35 ］［ 38 ］［ 39 ］［ 40 ］

DNP in Brief［4］［ 36 ］［ 41 ］［ 42 ］DNP Annual Repor t 20 10

17Timeline of DNP’s Technological Development andBusiness Expansion
Founding of Shueisha, the predecessor of DNP

1876 <Founding> Start of letterpress printing

1950

1960

Printing
1878 Determine Company rules

Information Communication

1970
Comprehensive Printing

1935 Merger of Shueisha and Nisshin Printing to form Dai Nippon Printing
1949 Listed shares on Tokyo Stock Exchange
Promotion of “Expansion Printing”

Books and Magazines1877 First Western-style book produced in Japan
Print revised edition of “Self-Help”
by Samuel Smiles

1972 Begin1909 Completion of DNP’s original size 5 Mincho Shueitai
1925 Receive order to print 740,000 copies of the inaugural edition of “King” magazine
1956 Print the inaugural edition of “Shukan Shincho,” the first weekly

1882 Begin sales of printing types

digitalizationof text andimages(CTS)

magazine issued by a publishing company

Commercial Printing
1885 Start of lithographic printing

1971 Developmentof scented printing

Business Forms
1954 Start of carbon-backed ledger printing
1965 Begin mass production of1898 Printed Osaka City Harbor-Construction Bonds
OCR ledgers(Begin printing of securities)
1946 Begin printing new Bank of Japan notes after being designated to do
so by Japanese Ministry of Finance1974
Full-scale
production ofmagnetic plastic
cards

Lifestyle and Industrial Supplies
Packaging1951 Full-scale entry into paper

1961 Start production ofcontainer business

1951 Begin in-house production of1969 Begin producing laminated tubes

blow-molded bottles

1962 Begin producing paper cups

flexible packaging

Lifestyle Materials
1951 Development of1961 Begin printing directly onto steel plates

specialized printing
methods for vinyl,cellophane, cloth, and otherdecorative materials

1974
Introductionof Curlfit
technology
for printing
on curved
surfaces

Electronics
Display Components
1958 Successful prototyping of shadowmasks

1973 Begin research anddevelopment ofcolor filters

Electronic Devices
1959 Successful prototyping of photomasks
1964 Begin lead frame production

18

DNP in Brief ▶ Timeline of DNP’s Technological Development and Business Expansion

1980

1990

2000

Information
Processing

2010

Information
Communication

P&I Solutions
2001 Commemorate the 125th anniversary of DNP’s founding by announcing the“DNP Group’s 21st Century Vision”

1981 Establishment of new
video printing systemtechnology

DNP in Brief

1985 Development of world‘s first electronic publication on CD-ROM
1989 Production of High-Definition Gallery System
1992 Begin development of “Shueitai” font
1993 Introduction of desktop publishing1997 Start of online publishing business2008 Alliances with TRC Inc. and Maruzen Co., Ltd.
2009 Alliance with Junkudo Co., Ltd.
2010 Founding of CHI Group, intermediateholding company for TRC andMaruzen1989 Construction of global network system
2001 Launch “Orikomio!” web site for Internet flyers
1990 Start communication satellite uplink
2007 Launching of digital signage project
1993 Establishment of J.League Data Center
1995 Begin operation of “Media Galaxy” Internet service
1997 Commercialization of soy-based ink
1997 Establishment of “EC Galaxy” electronic commerce

1983 Start smart card development
1999 Promotion of IPS business/Launch of IC tag project
2000 Production of contactless IC tags
1984 Development of rainbow holograms
2004 Card Data Management Service (CDMS)
1990 Development of “S-Mail” peel-off postcards
2005 Establishment of “SSFC” office security consortium1993 Production of contactless smart cards
2007 Begin providing dual biometric smart cash cards
2008 Start of personal authentication service for
credit card payments

1992 Development of aseptic plastic bottle filling system
2007 Development of packaging for Japanese-style space food1975 Begin producing retort pouches
and preform method
1976 Development of aseptic filling system for single-portion containers
1983 Development of “Thermoject” technology for simultaneous
1998 Development of transparent barrier film (IB Film)
plastic molding and printing

1984 Begin producing PET plastic bottles

1977 Development of stainless decorative sheet

1995 Begin producing sheet with EB coating

Industrial Supplies
1983 Start producing projection screens1984 Development of thermal-resin type transfer
materials

1996 Establishment of anti-glare
film technology for LCDs

2004 Development of “JETBLACK” front projection screens2005 Begin development of “PrintRush” self-service printing system
2008 Establishment of DNP Fotolusio Co., Ltd.

1985 Development of dye-sublimation thermal transfer materials

1978 Development of new type shadowmasks (flat masks)
2002 Development of flexible organic EL displays
1983 Start production of rear-projection TV screens
2003 Development of full-color organic EL panels
1985 Development of LCD color filter production technology (production started 1987)
2006 Mass production of color filters using inkjet method

1995 Launch multilayer wiring formation technology
1999 Enter semiconductor package substrate field
2001 Begin MEMS (micro electromechanical systems) processing under contract
2002 Complete production line for “B2 it” high-density build-up boards
2007 Development of ultra-compact IC tags
2007 Development of bio-MEMS

New Businesses

2003 Development of photovoltaic module components
2004 Regenerative medicine: Successful formation ofcapillary patterns

2005 Development of fuel cell components
2007 Printing method for organic photovoltaic cells
2008 “CytoGraphTM” cell pattern culturing
technology

2008 Cell sheet culture film2009 Established Energy Systems Operations

DNP Annual Repor t 20 1019Major Events of This Fiscal Year20

DNP in Brief ▶ Major Events of This Fiscal YearDNP in Brief

DNP Annual Repor t 20 10

21Special Feature: Lifest yle and Industrial Supplies

Expanding Business by
Increasing Added Value
In Japan, everyone probably uses at least one DNP product or service every day. The Lifestyleand Industrial Supplies segment provides a particularly large number of products and services
that are an integral part of people’s everyday lives. Food and beverage packages, wall and floor
coverings for homes and offices, anti-reflection films for flat-panel displays used in televisions
and personal computers, and ink ribbons used for photo printers are among the products of thissegment that enrich people’s lives or are indispensable to business activities.

22

Today’s society makes increasingly diverse demands of the segment, due to factors like
Japan’s shrinking birthrate/ aging society and growing concern for reducing the burden on theenvironment and improving quality of life. Our strategy is to increase added value — for example
in the form of new functionality or greater ease of use — as we fully satisfy these demands andthereby expand our business.
DNP organizes printing technologies into three categories: patterning technologies (usedfor making printing plates), materials technologies (for developing materials with particularproperties or functions), and converting technologies (for processing materials by coating ortransferring, etc.). The Lifestyle and Industrial Supplies segment applies these technologies toprovide products and services marked by world-leading high quality and advanced functionality.
This Special Feature will discuss the technologies that have underpinned Lifestyle and Industrial
Supplies’ development as the segment continually sought to build added value, and explain
the directions in which we aim to take our business as well as prospects for future growth.

25 Packaging
Operations

II 30

CONTENTS
Overseas
Operations

II 32

Lifestyle Materials
Operations

II 34

Research &Development

DNP Annual Repor t 20 10

23Advanced technical capabilities
are the key to business expansion
Osamu Tsuchida Senior Managing Director
We create new products and services that adequately respond totrends like Japan’s shrinking birth rate/ aging society, growing
concern for reducing the burden on the environment andimproving quality of life. We will continue making the most of
our world-leading printing and information technologies in orderto actively expand our business.

Q 1 What is your strategy for domestic expansion?
We will aim for future growth by focusing
on how we can contribute to comfortable
and convenient lifestyles while
simultaneously reducing the burden on theenvironment as we expand our business inJapan.
For example, DNP is the world leader
in electron beam (EB) coating technology.
Our EB products are highly acclaimed dueto the relatively low environmental load
imposed in the manufacturing process,outstanding product durability, and ease ofmaintenance – resulting in our winning a
growing share of the market for decorative
materials in general, and wall and floor
coverings in particular. We are beginningto take advantage of the superiority of thistechnology by developing new markets,
such as photovoltaic module components
and other products for the energy systems
field and automotive interiors.
Meanwhile, Japan’s shrinking birthrate and rising average age are expectedto spark major changes in the nation’ssocial structure. DNP stands to benefit
from increasing demand for new typesof packaging arising from such factors
as changing eating habits, including a
growing number of solitary diners, andconcerns about the safety and reliabilityof food. We will press on with thedevelopment of highly functional products
like containers that seal very tightly yet
are easy to open.
As DNP takes up the challenge of
expanding its business, we are equippedwith a wealth of capabilities including
the ability to pick up on changes insociety and the needs of consumers
and corporate clients, and the ability
to provide corporate customers with
Business Process Outsourcing solutions— from market analysis to planning,
design, production, promotion and sales.

Q 2 What are your policies regarding overseas expansion?
The Lifestyle and Industrial Supplies
segment’s largest overseas production
and sales base is PT DNP Indonesia,
which has been in business for almost
40 years. Indonesia plays an importantrole in Southeast Asia. As its economy
develops, there are more double-income
households, and more families haverefrigerators. As a result of changes
like these in the national lifestyle, thepackaging business has grown rapidly inrecent years. Some say that packaging
consumption is a measure of modern
culture. Going forward, we plan to expand

24

into neighboring countries, using DNPIndonesia as our packaging operations’largest base in Southeast Asia.
Overseas demand is also increasing,primarily in high-growth, newly
developing countries, for lifestylematerials including interior and exteriormaterials for homes and offices, andindustrial supplies such as anti-reflection
films for liquid crystal displays and color
ink ribbons. By working even moreclosely with overseas corporate clients,
we intend to strengthen our overseas
business base.

Special Feature: Lifestyle and Industrial Supplies ▶ Packaging Operations

Packaging Operations

Innovation: The Key to Our
Packaging Business’s Future
Toshiyasu Miyano Deputy General Manager, Packaging Operations

In order to realize a sustainable society and enrich consumers’
lives, we will keep developing new value by means of constantinnovationof preserving package contents thanks tooutstanding impermeability to moistureand oxygen, and the establishment of our“Human Research Lab,” which analyzes
consumer behavior to facilitate thedevelopment of optimal packaging.
Going forward, we will continue to workon the development of even more newfunctions and eco-friendly products, andto be involved not only in providing a wide
variety of packaging products, but in all of
our corporate clients’ business processes
from product planning to manufacturing
and sales. We intend to further expand our
packaging business by earning the trustof our corporate clients as a partner whosees things from the consumers’ pointof view, and by providing solutions thatgenerate new value.

Osamu Tsuchida
Senior Managing Director

Toshiyasu Miyano
Deputy General Manager, Packaging Operations

DNP Annual Repor t 20 10

25Special Feature:

Lifestyle and Industrial Supplies

We began our Packaging Operations in1951 as the first step in the “Expansion
Printing” initiative whereby we expanded
our fields of business by applying anddeveloping printing technologies. We
started by developing and producing
packages made of paper or plastic film.
We went on to design and manufacture
aseptic filling systems for filling PET
plastic bottles or other containers in an
aseptic environment. In addition to thefood and beverage products that are
essential to everyday living, we expanded
this business into a wide range of fields
including medical supplies, electronic
components, and food for flights into
outer space.
Printing is generally considered
to be an order-based industry, but
DNP’s business is not based solely onreceiving orders from corporate clients,
nor is it based solely on manufacturing
in response to orders. We also takethe initiative to look at the world fromconsumers’ point of view, to work withcorporate clients to improve ease-of-use
and increase added value, and to promote
the adoption of universal design based on
our own proposals. We can take credit fora wide variety of innovations. Examples
include the development of advanced
packaging materials that do a better job

Packaging Operations

Expanding Packaging Operations by Developing
Eco-Friendly Products and New Package Functions
Atsushi Saiki General Manager, Development Division, Packaging Operations

Acting on our concern
for the environment

Atsushi Saiki
General Manager, Development Division, Packaging Operations

26

In recent years, there has been increasingsocial awareness of global environmental
problems. In 1995, DNP’s Packaging
Operations became the first player in
the Japanese industry to adopt Life
Cycle Assessment (LCA), a methodof objectively assessing a product’s
environmental impact through each stageof its life cycle, including manufacture,transport, sale, use, and disposal. DNP
takes LCA results into account whendeveloping products, and has offered avariety of products that help reduce theburdens that modern life places on theenvironment.
One such product is an aseptic fillingsystem for PET plastic bottles. The systemblows up preforms, turning them into PET
plastic bottles, then washes them withsterilized water in an aseptic environment
before filling. Before filling, the preform
is a small, test tube-shaped item. It ismuch more economical and ecologicalto transport preforms than to transport
full-sized bottles. This aseptic fillingsystem reduces CO 2 emissions by 54%
in the raw material, manufacturing, andtransport stages, compared to traditional
PET plastic bottle manufacturing. DNP
was the first company in Japan tosuccessfully commercialize this methodof inflating preforms as they are filled,
and went on to capture the largest shareof the Japanese market for aseptic fillingsystems.
Another idea that has been attracting
attention around the world in recent years
is the water footprint, which assesses theamount and quality of water used in the
manufacture and distribution of products.
We have taken a variety of initiatives inthis area, including the development ofan aseptic filling system that uses only
one sixth as much water as previous
systems used for washing plastic bottles.
We are working to reduce our impact on
the environment in other ways as well,for example by making use of biomass
materials and by actively developing
paper containers.

Special Feature: Lifestyle and Industrial Supplies ▶ Packaging Operations

Providing new value
through innovation

Space food packages

Focusing on growthareas
So far we have developed our businessmainly around paper and plastic
packaging. We have come to hold the
top share of the Japanese market for
paper containers and flexible packaging.
Going forward, we will concentrate on
developing Indonesia and other overseas
markets, and will enter new fields that wehave not yet addressed.
For example, in recent years we havebeen hearing about the problem of foodwaste resulting from supermarkets andconvenience stores’ disposal of chilled
foods that are past their expiration
dates. We can help reduce food waste
by developing food packages that better
preserve chilled foods, thus extending
their shelf life. In addition, by developing
highly oxygen-absorbent plastic thatis highly effective at blocking light as
an alternative to the metal cans andglass bottles currently in use, DNP
can enter markets in which it neverparticipated before. As we develop ourbusiness, we will also keep in mind life
science fields, such as medical care andpharmaceuticals, which are expected to
grow steadily.

DNP Annual Repor t 20 10

27Special Feature:

Lifestyle and Industrial Supplies

DNP’s Packaging Operations
contributes to more comfortable
lifestyles by developing packages
that serve various functions and that
consumers can use safely and withpeace of mind.
In the past, aluminum foil or aluminum
vapor deposition was used to provide
the impermeability to oxygen and water
vapor that is necessary to make food andpharmaceutical packages more effective
in preserving contents. Now, however,there is greater demand for nonmetallic
material that is both transparent andhighly impermeable, both for theconvenience of being microwaveable,
and from the standpoint of safety, as
contents can be checked visually or witha metal detector. To meet that demand,
we developed “Innovative Barrier (IB)
Film.” Moreover, we developed chemical
vapor deposition (CVD) technology
for chemically attaching material that
increases impermeability, so that thecoating remains unbroken even whenthe material is bent to form a package.
Our competitors use physical vapor
deposition (PVD) to attach materials, but
this does not hold up against bending.
DNP is the only manufacturer in theworld that uses CVD in mass production.
Our new IB film-based aseptic fillingand packaging system fills packages
with one to 10 liters of content underaseptic conditions. It can makepackages highly efficiently from rollsof plastic film. Going forward, we will
step up sales of this system to food
manufacturers and other industrial
clients. We are developing manyother innovative products as well,including new functional food pouches
for microwave use, and space foodpackaging in collaboration with theJapan Aerospace Exploration Agency.
These innovative products are backed
by the variety of technologies –including technologies for converting,materials development, microbe control
and filling systems – that we havecultivated in the 60 years since DNP’s
packaging business was established in1951.

Packaging Operations

Promoting “human-centered marketing”
that scientifically analyzes consumption behavior
from the consumer’s point of view
Taku Furuta General Manager, Planning Division, Packaging Operations

Packaging Operations’ corporate clients, mainly food
manufacturers, are looking for more effective marketingmeasures amid structural changes in distribution and Japan’s
progressively falling bir thrate and rising average age. DNP has
responded by promoting ‘human-centered marketing’ thatconsiders consumption from the consumer’s point of view. In
addition to offering new solutions to corporate clients, we
strive to improve consumers’ lifestyles and satisfaction level.

DNP’s Human Research Lab –on the front lines of “humancentered marketing”“Human-centered marketing” positions“humans” in the spotlight as it strives,by scientifically analyzing consumers’
awareness and actual circumstances,
to increase the real value that corporateclients and consumers seek. In orderto promote this effort, we establisheda Human Research Lab in Tokyo anda Packaging Usability Laboratory inOsaka. We ask consumers to use our
products and services at these facilities
so that we can scientifically evaluate
the effectiveness of package designs
and advertising. Toward this end, weanalyze consumers’ behavior, including

Product placement simulation28

unconscious behavior, for example byusing an eye tracking system to measureeye movements. Another importantanalysis tool is the “Image Basket”
purchasing behavior simulation system.
This online research system displays avirtual store on a computer screen andenables an interactive experience of theprocess by which a consumer views
products in the store, considers them,and makes purchases. Compared to
traditional research methods using real
shelves of products, the virtual version
makes it possible to use more researchsubjects and to acquire behavioral data ina shorter time and at a lower cost.
We use these data to plan and propose
effective marketing strategies with which
we support our corporate clients’ sales
promotions and other business activities.

Eye movement tracking system

Special Feature: Lifestyle and Industrial Supplies ▶ Packaging Operations

Our “UD Smile-up” campaign
aims to make consumers
smile by enriching their lives“Shoku-MAP”* is an analytical systemthat uses consumers’ actual dining tables
to represent the market. It is operated by
Lifescape Marketing Corp., a joint venturecompany established by DNP, NTT Data
Corp. and Video Research Ltd. Under
the Shoku-MAP system, we distributebarcode readers to 360 households inthe metropolitan Tokyo area and collectdetailed information about their eating
habits, including what foods are purchased
where and by whom, how those foods
are prepared, when and by whom they
are eaten, and whether they are eaten at
home, at work, or at a restaurant, etc. We
have already compiled more than 10 years
worth of data on households consisting ofmarried couples. In November 2008, welaunched “Singles Shoku-MAP” to gather
similar data for single households.
In addition to using Shoku-MAP tosupport our corporate clients’ marketing
efforts, we sell the results of our data
analysis as well as selling the system itself
under contract. Currently, we only collectdata in the Tokyo metropolitan area. In
the future, however, we plan to expand
data collection to other areas.

As consumers become increasingly awareof environmental issues, there is growing
demand for planning and developmentof environmentally friendly products
and packaging. DNP’s Environmental
Research Program responds to thatdemand by analyzing the connection
between consumers’ environmental
awareness and their consumption
behavior. Examples include using our
Human Research Lab to conduct surveys
of consumer awareness of productdisposal, and surveying our Shoku-MAP
households about their awareness ofenvironmental issues.
In addition to using the results of thisanalysis for planning and sales promotionof our corporate clients’ eco-friendly
products, we use it to increase added
value in other ways, such as linking
the analysis results to the “Persona”**
consumer behaviour profiling service that
we began providing in November 2009.

*MAP stands for market analysis and planning.

** “Persona” is a marketing service that uses a database of
consumer values and lifestyles to provide, quickly and at
low cost, an image of a business’s typical target customer
and information about that customer’s purchasing habits.

Taku Furuta
General Manager, Planning Division, Packaging Operations

DNP Annual Repor t 20 10

29Special Feature:

Our environmental
research program connects
consumers and businesses

Lifestyle and Industrial Supplies

Shoku-MAP® watches
consumers’ dining tables
365 days a year

Universal design (UD) is anotherimportant theme related to “humancentered marketing.” In our Packaging
business, we determined that ourapproach to UD would be to make“packaging that is designed to be aspleasant as possible for anyone to use,”
and the proposals that we make to clientcompanies are formulated with this inmind. In recent years, we have beenable to put the UD expertise that wehave cultivated thus far to good use in
preventing accidents that stem frommistaken product recognition in the
medical care and pharmaceutical fields.
Our current involvement with UD ismostly related to package development,
but in the future we intend to enhance
our UD consulting business.
We use the slogan “UD Smile-up”
to remind ourselves to pay adequate
attention to UD in our packaging
development and to keep manufacturing
products that are easier to use and inspire
more appreciation from consumers.

Overseas Operations

Steady expansion of our global business into
the ASEAN region, with Indonesia as our baseShuichi Kobayashi President , PT DNP Indonesia

In 1972, DNP founded PT DNP Indonesia and entered theIndonesian market. Ever since, DNP Indonesia has led theIndonesian packaging industr y while pursuing its mission of
spreading ‘packaging culture’ in Indonesia. DNP Indonesia
is currently staffed by 12 Japanese and about 2,000 local
employees, and ser ves as the base for DNP’s entr y into the
ASEAN market.

Shuichi Kobayashi
President , PT DNP Indonesia

Supplying laminated tube
material and paper containers
for major global companies
Since its founding 38 years ago, DNP
Indonesia has aimed for full in-houseproduction, meaning every process
is performed in-house. In addition to
introducing outstanding basic technologies
for making flexible packaging and printing
equipment from DNP’s head office, wehave built quality control systems on thesame level as those used in Japan.
As a result, the company has secured
a roughly 90 percent share of the market
for laminated materials used in toothpaste
tubes and is supplying increasing
quantities to the world’s major toothpaste
manufacturers. DNP Indonesia has also
won more than 60 percent of the market
for packaging materials used for coffee
and powdered milk, and for stand-up
pouches used for liquid detergents andfoods. It also supplies paper containers
made with high-grade offset printing tomajor global golf ball manufacturers andmajor global cosmetics manufacturersthat hold a large share of the Southeast
Asian market. DNP Indonesia has clearly
carved out a solid position as a printing
company in Indonesia, and is achieving
stable business results.

DNP Indonesia’s strengthlies in its ability to provide
the same quality as DNP in
Japan, because it performs
every process in-housecan be easily opened by anyone. Anotherimportant advantage of DNP Indonesia
is that it uses the latest Japanese-madeprinting and processing machinery, with
an image inspection function that allows
the company to provide the same level ofquality control and quality assurance thatDNP delivers in Japan.
Armed with these advantages, DNP
Indonesia aims to solidify its position
as the No. 1 packaging processor inSoutheast Asia, and to continue providing
world-class quality products based on
advanced technical capabilities.

Our strength lies in the fact that we
perform every process in-house. Becauseof this, we can make the most of DNP’soriginal basic technology for making
flexible packaging. This in turn allows us
to propose packaging products that meet
corporate clients’ needs, which may
include packages in a variety of shapes
and sizes, or with high impermeability tooxygen and moisture, or packages that
Karawan Factory, PT DNP Indonesia

30Special Feature: Lifestyle and Industrial Supplies ▶ Overseas Operations

Main issues: developing
local human resources andstrengthening productdevelopment and sales
capabilities

Laminated products

materials procurement and working on
building an in-house system for optimizing
materials procurement. DNP Indonesia
plans to further strengthen its profit baseby optimizing inventory levels of materials
such as polyester film used in packaging.
In recent years, Indonesia’s politicalsituation has stabilized, and the country
is on track to achieve long-term stableeconomic growth, with the government
actively inviting investment from abroad.
Indonesia’s flexible packaging market has
been growing by 5-6% per year, and weare working to expand our business evenfurther in this growing market.

Responding to the ACFTA
by promoting localizationof strategic products andservices

states of the Association of Southeast
Asian Nations (ASEAN), includingIndonesia, and the People’s Republic ofChina from January 2010, eliminating
most import tariffs within the region.
This should help expand DNP Indonesia’s
exports, but at the same time it meansthat low-priced competing products willflow into Indonesia from other ASEAN
nations and from China. Given thissituation, we will use the overall strengthof the DNP Group to increase added value
and functionality, for example by tailoring
our strategic products – retort pouches
and IB film – to the needs of Southeast
Asian markets. Responding meticulously
to corporate clients’ needs, for example
by supplying the products they need ina timely manner, and exporting to China
and ASEAN nations are two of the waysthat DNP Indonesia aims to promote
penetration of the DNP brand.

The ASEAN–China Free Trade Area
(ACFTA) took effect among member

DNP Annual Repor t 20 10

31Special Feature:

Lifestyle and Industrial Supplies

DNP Indonesia currently views thecultivation of locally hired humanresources as one of the issues thatmanagement needs to address. As
members of the global DNP businessfamily, we believe that all DNP Indonesia
employees must broaden theirperspectives and increase their processcontrol skills as the scale of production
increases. Toward that end, the company
is working on improving the abilities of
its local employees by sending them toJapan and/or to outside organizations
within Indonesia for training.
Another issue is the enhancementof product development and marketing
capabilities. Because DNP Indonesia has
many global companies as its customers,
it is in a good position to grasp the needsof the international market. In addition
to introducing to Indonesia the latest
technologies, DNP Indonesia also does
its own technological development so
it can meet the expectations of theinternational market. In order to further
boost competitiveness in the future, DNP
Indonesia will focus on marketing basedon analysis of market trends and workon even further enhancing its productdevelopment and marketing capabilities.
As an example of enhancing
competitiveness, the company isimproving its methods of tracking

Lifestyle Materials Operations

Making pleasant living spaces
possible through innovative
printing technologies
Masaki Tsukada Director

DNP’s original EB (electron beam) coating technology has no rival
anywhere in the world.
Its range of applications has grown to include areas we never thoughtof when we first star ted developing this technology. Going for ward,
we will actively develop even more new uses.

Masaki Tsukada
Director

Development of advanced
lifestyle products based on
EB coating technology
DNP began its Lifestyle Materials
business in 1951, as part of its“Expansion Printing” initiative. The
business was driven by technology forcontinuous and seamless printing of
patterns like wood grain or marble, onmaterials like paper, plastic film or metal.
In order to meet the high durability
requirements of decorative materials forhousing, DNP then honed its materials
technology skills to develop products
like coating materials. As we expanded
this business from residential interiors
and exteriors to include decorative
materials aimed at other environments,
such as offices, medical and nursing

32

care facilities, and automotive interiors,
we also refined converting technologies
that we had been using for processing
materials and used them to develop
products with a wide range of functions.
Today, EB coating serves as the coreof our Lifestyle Materials business. EB
coating technology entails exposing
coating material that has been applied
to a film or other substrate to electron
beam radiation. Upon exposure, thecoating material immediately hardens
and forms a dense polymerized
structure. The technique was developedby improving on previous technologies
that used heat or ultraviolet light toharden coatings. Compared to thoseprevious technologies, products madewith EB coating are far superior in terms
of properties like abrasion resistance,
soil resistance, and durability.

DNP floor coverings made with EB
coating are used in about 60% of newapartments built in the metropolitan
Tokyo area, and are being used
increasingly in single-family homes andrented accommodations. In addition to
floor coverings, products made with
EB coating are used in a wide variety ofother interior products, including wallcoverings and storage cabinets, sliding
partitions, and kitchen components. In
addition, they are being used increasingly
in exterior doors and other exterior
products. In the roughly 30 years since
DNP began researching EB coatings,
we have filed some 800 related patentapplications, making it extremely difficult
for any competitor to enter the field. We
are using our expertise in EB coatings tobuild a strong foundation for competingin the Lifestyle Materials market.

Special Feature: Lifestyle and Industrial Supplies ▶ Lifestyle Materials Operations

coating resin

high cross-linkage

Making ArtTech the world
standard for railroad cars
Developing a wide range ofapplications for EB coatings
EB coating technology, makes products
highly weather resistant, and keeps dirt
from adhering to product surfaces. Goingforward, we plan to apply this technology
to develop the market for outdoor products
like advertising signs, displays, and glaze
materials.
With the expected spread of electricvehicles that will have to carry heavy
batteries, there is a need to develop
lightweight yet strong auto body materials.
It is therefore expected that a greater
proportion of auto bodies will be made ofplastic, and we plan to use EB coatings inthis area as well, to reinforce and increasefunctionality of plastic materials.
We are also developing a variety of floor
coverings from the standpoint of universal
design. Examples include using EB
coatings to produce no-wax floors, which
do not require waxing because of theirhigh resistance to abrasion and dirt. These
properties also make our floor coverings
desirable for pet owners, as pets can walkwithout slipping yet without scratching
the floor.

DNP decorative materials are usedin railroad cars in Japan and abroad.
“ArtTech” is a line of aluminum panelingfor interior decorative use, introduced forsale in 2000. DNP uses original technology
to form a special layer on aluminum
sheet, resulting in a product that is highly
nonflammable and durable yet easily
bendable. By printing directly onto thealuminum, we deliver more stable color
qualities such as color tones and shades.
ArtTech is used in about 70% of railway
cars manufactured in Japan. For example,
it is used on the ceilings and side ceilingsof N700 series railway cars running on the
Tokaido Bullet Train and new cars on the
new Narita Express line.
Amid increasing worldwide awarenessof the need for environmental preservation,
Japan’s rail system, a type of social
infrastructure that is supported by its
advanced technology, is attracting attention
as a low-carbon made of transportation.
Even the Japanese government has gotten
involved in promoting Japanese-styletransportation infrastructure overseas.
Development of overseas railway businesshas become active, partly as a national
undertaking. ArtTech has already been
put to use in Taiwan’s high-speed railway,
and in railway cars running on high-speed

How Electron Beam (EB) Coating Works
Liquid resin is applied to a sheet of base material, which is thenpassed under an electron beam that comes down like a curtainof rain. Exposure to the electron beam lasts only about one
second, but the exposure causes some of the electrons in theresin molecules to fly off. This changes the bonds between themolecules, instantly resulting in a very hard film.

lines in the U.K. Going forward, we willconcentrate on overseas sales wherever
there are major railway construction
projects around the globe, with the aimof making ArtTech the global standard forrailway car interior materials.
As you can see, our Lifestyle Materials
business holds a great deal of promise.
In particular, we expect the range ofapplications for our core EB coating
technology to grow exponentially fromwhat it is today. Furthermore, we expect
to see a rapid increase in the number ofconsumers seeking comfortable living
spaces in line with economic developmentin emerging nations. DNP will view thefull range of “human dwelling spaces”
as its field of business, and develop
this promising market by using theoverwhelming superiority of our coretechnology, and by implementing proactive
and flexible business strategies such as
expanding our network to include the wide
range of companies and organizations that
address the overall supply chain.

DNP Annual Repor t 20 10

33

Special Feature:base sheet

Lifestyle and Industrial Supplies

electronbeamradiation

Research & Development

A wide range of technologies derived fromprinting techniques support Lifestyle andIndustrial Supplies
Takashi Wada Corporate Officer

Takashi Wada
Corporate Officer

34

DNP’s Lifestyle and Industrial Supplies
segment operates a wide variety ofbusinesses, including Packaging for foods
and beverages, pharmaceuticals andmedical supplies; Lifestyle Materials forbuildings, and automotive interiors, etc;
Opto-Materials such as anti-reflection film
used in LCD displays; color ink ribbons
and other Information Media Supplies;
and photovoltaic module components
and other products related to Energy
Systems. The diverse products provided
by this business segment are an integral
part of people’s everyday lives andare important and often indispensable
components of our corporate clients’products. By being quick to pick up on
the needs and problems of companies
and consumers, and by applying anddeveloping various types of printing
technologies – i.e. materials, patterning,and converting technologies – we havecreated a variety of products that meetthose needs and lead to resolution of
those problems.
DNP started out printing on paper.
We then expanded our printing targets
to include other materials, such as film
and metal. Next we developed ourbusiness upstream by designing anddeveloping films and other materials, anddownstream by laminating things we
had printed, molding them into particularshapes, and processing them into final
products. This process led to the diverse
product portfolio of the Lifestyle andIndustrial Supplies segment, which

has grown to be one of the importantbusiness divisions that support DNP’ssuccess. As a result of our “Expansion
Printing” policy of diversification throughthe application and development ofprinting technologies, we have expanded
the Information Communication, Lifestyleand Industrial Supplies, and Electronics
segments in a well-balanced way which
has in turn supported DNP’s sustained
growth.
Today, we view the resolution ofsocial problems as an important topic
for Lifestyle and Industrial Supplies toaddress. Our challenge is to provide moreconvenient, more advanced productsthat support more comfortable and safer
lifestyles while limiting burden on the
global environment.
It is also important to consider universal
design. For example, we are developing
packages that can be opened easily withjust a small amount of strength, floor
coverings that discourage both slippingand stumbling, and wall coverings that
purify the air. We are also working
to enhance services that combine
printing technologies with information
technologies, such as the developmentof “human-centered marketing” andanalysis of market trends. Without
limiting the possibilities of printing, weare taking advantage of the expertiseand technologies that we have cultivatedthus far and constantly daring to enter
new fields as we expand the scope of ourbusiness.

Special Feature: Lifestyle and Industrial Supplies ▶ Research & Development

Packaging Products andTechnologies

DNP started its packaging business in 1951 with the manufacture ofpaper containers. We then expanded the business to include printing onplastic film and the manufacture and processing of bags and containers.
Our main customers were manufacturers of foods and beverages,
toiletries and household articles, and pharmaceuticals and medical
supplies. We developed a large number of advanced products that makeuse of DNP’s original technologies.

DNP developed its first aseptic packaging
system almost 40 years ago, in 1972. In
1976, we developed an aseptic system forfilling single-portion containers of coffee
whitener. In 1992, we were the first in theindustry to develop a system for forming
PET plastic bottles in a low-temperature,
aseptic environment and filling them withbeverages or other liquids. This system
was highly acclaimed for preserving theflavor of beverages and even preserving
the quality of milk-based drinks, leading to
its adoption in production lines overseas
as well is in Japan.

In order to prevent the deteriorationof contents, packaging materials must
minimize permeation of oxygen and water
vapor. In the past, aluminum deposition
film was often used for wrapping foods
when impermeability was important.
However, this film rendered the package
contents invisible and made recycling
difficult because the aluminum could
not be separated from the plastic. In
1998, DNP developed aluminum-free,transparent plastic “IB film” that shuts
out oxygen and water vapor. In 2006,
we used chemical vapor deposition tocommercialize a type of IB film that canbend without cracking. We did this byactivating a chemical reaction within avacuum so as to cause gasified material toform a thin film on top of a plastic film.

DNP Annual Repor t 20 10

35Special Feature:

Aseptic Filling Systems

Lifestyle and Industrial Supplies

IB (Innovative Barrier) Film

Lifestyle Materials Products
and Technologies

In 1951, DNP became the first company inJapan to develop technology for “endlessly”
printing wood grain patterns without a seam.
We went on to develop technology for
printing on steel plate in 1961, and to develop“Curlfit” technology for printing on unevensurfaces in 1974. Today, we have developed
a wide range of products for all types ofliving spaces, including decorative interiormaterials, storage and partition products,
bath and kitchen products, decorative
exterior materials, and interior materials
for automobiles and railway cars. These
products address consumers’ needs while
also resolving technical problems for builders.

EB Coatings
In the 1980s, DNP became the firstcompany in its industry to develop original
EB coating technology. This technology
entails hardening a coat of resin byexposing it to an electron beam, resulting
in a product with extremely high surface
hardness. Because the resulting products
resist deterioration caused by abrasion,
dirt, or sunlight, etc., and because theproduction process requires less energy,
generates less CO 2 and does not require
solvents, they have become highly
acclaimed as the de facto standard fordecorative materials, especially for interiormaterials used in homes and offices.

36

Industrial Supplies Products
and Technologies

Information Media
Supplies
After successfully developing two typesof thermal transfer recording media –thermal-resin type and dye-sublimation,
we established our Information Media
Supplies business in the latter half ofthe 1980s. The thermal-resin type isgenerally used in monochrome ink
ribbons for printing bar codes, while thedye-sublimation type is mainly used incolor ink ribbons for printing photographs.
DNP holds the world’s top share of themarket for dye-sublimation thermaltransfer materials, partly because we
supply printer manufacturers on an OEM
basis. Dye-sublimation thermal transfer
materials transfer yellow, magenta, and/or cyan ink to special receiver paper toform color images. Its use is expanding
because it can express smooth color
tones and deliver almost the same quality
images as silver halide photography.

Special Feature: Lifestyle and Industrial Supplies ▶ Research & Development

As of the 1980s, when DNP decided toapply the power of its technologies tosolve problems faced by corporate clientsand consumers, we began to expand
our business fields more than ever. For
example, we used various technologies –including coating technologies that allow
us to form a thin film of material withspecific properties depending on usage
requirements, laminating techniques bywhich we join together multiple typesof film, and materials technologies thatenable us to design and develop optimal
materials – to start up our Information
Media Supplies and Opto-Materials
businesses in the 1980s and our Energy
Systems business in the first decade ofthis century.

DNP Annual Repor t 20 10

37Special Feature:

Special, functional film is used on thesurface of an LCD’s polarizing plate to
make it easier to see the images on thescreen by reducing reflection of incidental
light and by protecting the surface fromscratches.DNP holds a 70% share of
the world market for this type of antireflection film.
It was in 1996 that DNP establishedtechnology for designing anti-reflection
films used in LCD. Since then, we havetaken advantage of the highly acclaimed
coating, materials, and clean converting
technologies that we cultivated throughprinting to succeed in mass producing
high-quality products and expanding ourmarket share.

DNP began researching and developing
photovoltaic module components morethan 10 years ago, and in 2003 wecame out with commercially viable backsheets and encapsulants. In response
to expansion of the market, we began
producing these products at a dedicatedfactory in January 2009. Encapsulants areadhesive, protective sheets that securea photovoltaic module’s electricitygenerating cells and wiring. DNP
developed encapsulants which is madeprimarily of olefin resin and delivers
better sealant and durability performance
than previous products. Back sheets
are made of weather-proof film andprotect photovoltaic modules fromexternal elements. By developing backsheets made of hydrocarbon film, DNP
simultaneously improved the safety andlowered the cost of its back sheets.
Also in the energy field, we arefocusing on the manufacture of lithiumion battery packages. In order to makethe batteries lighter, there is demand formaking battery packages from plastic
rather than the aluminum that was mostcommonly used in the past. DNP will
enlist technologies and expertise that it
cultivated in its packaging business tomake an active entry into this market, andwork to get our products adopted in avariety of electronic devices and electricautomobiles.

Lifestyle and Industrial Supplies

Opto-Materials

Energy Systems

38

Segment Information
CONTENTS
40 Information Communication
40 Business Strategies
42 Financial Results
43 Portrait of Divisions
46 Topics
49 Strategic Focus
52 Lifestyle and Industrial Supplies
52 Business Strategies
54 Financial Results
55 Portrait of Divisions
58 Topics
59 Strategic Focus
60 Electronics
60 Business Strategies
62 Financial Results
63 Portrait of Divisions
65 Topics
66 Strategic Focus

DNP Annual Repor t 20 10

39

In f or ma tion Communica tion

BUSINESS STRATEGIESOur Information Communication segment constitutes a stable revenue base composed of three businessdivisions: Books and Magazines, which has been a core business since DNP’s founding, Commercial Printing,and Business Forms. The segment covers a wide variety of media, beginning with paper and including
electronic media such as the Internet and digital broadcasting. We intend to expand these businesses by
providing original solutions that capitalize on our strengths in software development for smart cards andsimilar media, consumption behavior analysis, customer relationship management and other forms ofmarket analysis, and information security.

■ Basic Strategies
Consumers have changed their consumption behavior with the development of information networks;
today’s consumers use a variety of communication channels to gather the information they want and toactively express their opinions. Because of these changes, it has become important for businesses to geta good grasp of the needs of individual consumers and to establish closer communication with them. At
the same time, as individual consumers reveal more personal information to companies, the companies
must be absolutely sure to maintain the security of personal data and other sensitive information.
DNP’s Information Communication segment has responded to these circumstances by constructing astrong information security framework and offering information processing services that edit and process
information that consumers want into the formats they want, as well as by making possible a variety ofcommunication styles. We intend to focus more than ever on providing diverse solutions, including market
analysis and consulting services aimed at reflecting consumers’ opinions in corporate business activities,
development of sales promotion plans, and providing back office functions on an outsourced basis.

40

Expanding Our Business by
Promoting P&I Solutions

Since this segment is strongly focused on interpersonal communication,
we aim to develop unique solutions that combine printing and information
technologies in order to resolve problems that our corporate clients andconsumers face in the area of information communication.

Developing Diverse
Communication Styles

Some of the ways that we will work to solve problems for corporate clientsand consumers are creating optimal combinations of media and content,
building easy-to-use communication infrastructure, and generating new
products and services.

Providing Comprehensive
Business Process Solutions
for Corporate Clients

DNP has become proficient in maintaining the advanced information security
required for editing and processing massive amounts of data and for handling
important information. Based on this expertise and other strengths, we aim
to actively encourage businesses to outsource services from us in order tosolve problems that they face in their overall business processes.

Generating New Businesses
through Global Expansion
and Business Tie-ups

We intend to develop new business fields, mainly by using our networkof overseas bases to develop global businesses and by collaborating withcompanies that excel in a specific area.

Segment Information ▶ Information Communication ▶ BUSINESS STRATEGIES■ Major Policies

Expanding Solutions-based Business throughCooperation between Business Segments
By improving cooperation among DNP's business divisions
and making effective use of our business bases, we intend toprovide more effective services aimed at solving problems forcorporate clients and consumers.
In addition to enhancing showrooms at our major businessbases, we have been presenting a variety of solutions throughdemonstrations and exhibits, at the DNP Gotanda Building(in Tokyo’s Shinagawa Ward) and the Namba SS Building (inOsaka’s Nishi Ward). We also use these facilities for working
with corporate clients to identify problems and hammer out
optimal solutions.
In order to further promote P&I solutions and ensure their
future development, we have begun redeveloping the Ichigaya
area of Tokyo, which has served as the primary locus for
DNP's expansion into a variety of business fields ever since
we opened our Ichigaya Plant in 1886. Our redevelopment
plan calls for concentrating in the Ichigaya area the planning,development and sales functions of the various business
operations, which are currently dispersed in various suburban
Tokyo locations, along with head office functions.

Segment Information

Promoting P&I Solutions by Expanding SolutionsOriented BusinessWe intend to move beyond the production-centered businessof our past and further expand our solutions-based business,
which offers original solutions combining printing andinformation technologies in ways that only DNP can. We intend
to accomplish this by concentrating on the following areas:• Providing solutions that address all of a manufacturer’sbusiness processes – both upstream and downstream –including sales promotion planning, product and service
development, market research, and customer relationshipmanagement• Facilitating direct communication between companies andconsumers by providing advanced information security• Creating new businesses that provide comprehensive
solutions to customers’ problems by linking smart cards
and other security solutions with various media such as
electronic forms, IC tags, print-on-demand services, andpersonalized direct mail• Expanding our online distribution business and theplanning and production of digital content, including books,
magazines, and images, for publication in a variety of media
formats• Developing information services tailored to customers’
needs, and strategic business alliances aimed at enlivening
various industry sectors, including publishing, distribution,and manufacturing

Promoting Sales of Outsourcing-Based Services
We aim to use the technologies and expertise that we havecultivated over the years, and the good relationships that wehave built with corporate clients, to support improvement andboost efficiency in our clients’ overall business processes. Our
aim is to provide services that address the full range of businessprocesses – from product or service planning to production,
sales promotion, distribution, and customer support – in waysthat are meticulously tailored to the different needs of different
types of business and industries yet improve efficiency throughstandardization.
For example, we take responsibility for implementing
advanced security measures when handling information
received from corporate clients and consumers, so we canprocess large amounts of information safely and accurately.
We will concentrate on getting orders for outsourcing-based
services by providing corporate customers with comprehensive
solutions that include a variety of services. Examples include
development tasks such as conducting surveys and analyzing
results, consulting, or sales promotion planning; operationof online data centers, customer support centers, or sales
campaign offices; providing back-office functions suchas mailing; and printing-on-demand of information that isindividually tailored communications.
Promoting Global Expansion and Business Tie-ups inOrder to Create New Businesses
We will take advantage of our overseas production bases inlocations like Singapore and Indonesia and use our networkof printing companies in 50 countries to promote our Global
Meta-Media (GMM) system for transmitting printing data for
production in optimal locations. We will respond proactively tooverseas printing demand and aim to expand our businesses
on a global scale, by using our multilingual translation service,
which can handle some 60 languages, and by focusing on
developing the Asian market through the Shanghai subsidiarythat we established in 2005.
To bolster our Education and Publications Distribution
business, we established CHI Group Co., Ltd. as an intermediateholding company on February 2010, through a joint transferof shares by consolidated subsidiaries Maruzen Co., Ltd.
and TRC, Inc. By combining the DNP Group's products andservices with the expertise of our various Group companies,
including a consolidated subsidiary Junkudo Co., Ltd., we aim toenhance sales promotion measures at bookstores and promoteadvancements such as the introduction of smart cards and IC
tags at public and university libraries.
DNP actively seeks to resolve the problems of the overallpublishing and printing industries, including the growing market
for electronic books. In addition to taking a leading role instimulating the educational publications distribution market,
we will work to strengthen DNP’s core Books and Magazine

business.
DNP Annual Repor t 20 10

41

In f or ma tion Communica tion

FINANCIAL RESULTS■ Financial Highlights■ Business Environment(¥ billion, %)2008.32009.3¥ 679.9

Net sales¥ 718.4 ¥ 739.7

Operating income

43.1

31.7

23.5

Operating income margin

6.3%

4.4%

3.2%

Net Sales

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

800

120

739.7

718.4

679.9

100
600
80

60

400

43.1
40

31.7
200

23.5
20

0

0

08

42

2010.3In the fiscal year ended March 2010, total domestic sales
from the publishing of books and magazines declined year on
year for the fifth term in a row since 2005. Since 1997, theonly break in the long-term downtrend of the Japanese bookand magazine market was in 2004. In every other year, sales
declined relative to the previous year. At the same time, there
were pronounced cutbacks in corporate advertising outlays,
as a result of the downturn in corporate performance. This
had a significant impact on areas like commercial printing andmagazine advertising, with advertising-related companies
seeing their net sales decline. In business forms, demandfor ETC (Electronic Toll Collection) cards grew in responseto economic stimulus measures, but overall demand wasstagnant due to such factors as limitations on credit card
issuance and corporate cost-cutting. In addition to stagnationin these types of demand, unit prices declined in response
to intensified competition, and the economic environment
surrounding the Information Communication segment
remained as harsh as ever.

09

10■ Summary of Financial Results
In Books and Magazines, sales of both books and magazines
declined due to the prolonged slump in the publications
market. In Commercial Printing, sales of advertisements
such as flyers, pamphlets and point-of-purchase materials
declined because of cutbacks in corporate advertisingbudgets. In Business Forms, sales of ETC cards grew
sharply, but the overall rise in net sales from smart cards
was slight. Sales of information processing services alsorose from the previous year, but ledger sales fell sharply
year on year.
Due to the addition of sales from newly consolidated
subsidiaries in the Education and Publications Distribution
business, total segment sales increased by 21,260 million
yen, or 3.0% from the previous fiscal year, to 739,685
million yen. Operating income, affected by decreased
net sales in areas such as Books and Magazines andCommercial Printing as well as by lower unit prices,
declined by 8,224 million yen, or 25.9 %, from the previous
fiscal year to 23,466 million yen. The operating income
margin also declined, by 1.2 points to 3.2%.
The segment contributed 46.3% of the DNP Group’s
total net sales (compared to 45.0% the previous year), and31.1% (down from 58.2%) of its operating income.

Segment Information ▶ Information Communication ▶ PORTRAIT OF DIVISIONSPORTRAIT OF DIVISIONS

Books and Magazines
Main Businesses
In addition to printing books and magazines, we handle
a broad range of information, including planning andproduction of digital content, network-based distribution,
sales and promotions aimed at mobile terminals, andanalysis of consumer trends. In addition to conventional
publishing companies, our customers include a variety ofcontent holders in Japan and abroad. We are expanding
our business by providing products and services basedon editing and processing customers’ content into themost appropriate formats in order to resolve customers'
problems.

Market Trends and Summary of Financial Results

Strategic Opportunities and Future Development
The Japanese market for electronic publishing wasestimated at 1 billion yen in the year through March
2003, grew 35% year on year to 46.4 billion in theyear through March 2009, and is expected to exceed
100 billion yen within a few years. Currently, about
80% of this market consists of content distributed tomobile phones, most of which is comics. Given thediversity of information terminals on the market and thechangeability of consumer needs, DNP wants to remain
open to various ways of thinking and various frameworks,
rather than restricting itself to a particular standard. In
practice, this means driving market growth and expanding
our business by taking advantage of the network of
publishing companies that we have built up, constructing
and operating a platform for content distribution andaccounting, and providing solutions that support clients'
marketing and sales promotion activities, in addition toplanning and producing digital content.
Japanese content has become very popular outsideof Japan, especially animation, comics, and fashion
magazines. We will work with publishing companies totake advantage of the strength of Japanese brands todevelop the global market for Japanese content.

Segment Information

Estimated domestic sales of books and magazines in thefiscal term ended March 2010 declined by 3.8% froma year earlier, to 1.919 trillion yen. Book sales declined
by 4.1% from a year earlier to 840.9 billion yen, andmagazines sales fell 4.4% to 1.780 trillion yen.
In calendar 2009, book and magazine sales were
estimated at 1.936 trillion yen, falling below 2 trillion for
the first time in 21 years. No end is yet in sight for the
long-term slump in publishing sales: book sales havedeclined for three years in a row since 2007 and magazine
sales have declined for 12 years in a row, since 1998.
There were 78, 555 new books published in 2009, an
increase of 2.9% over the previous year, but only 717.81
million books were sold during the year, representing adecline of 4.5% to the level of 1977 sales. There were
only two books that became million-sellers in 2009,
compared to seven the previous year. Although some
women's magazines attracted attention when they werebundled with merchandise in collaboration with popular
fashion brands, the overall magazine market did notrecover. The number of magazine titles issued fell by 74
titles, or 2.0% from the previous year, to 3,539.
The return rate for books increased 0.5 percentage
point to 40.6%, while the return rate for magazines
decreased 0.3 point to 36.2%. Book publishers tend
to try to ride out the slow market by issuing more newbook titles, but magazine publishers responded to falling
advertising revenues by publishing fewer copies, thus thelower return rate.
As a result of this difficult market – in which publishers
issued fewer copies, responded to falling advertising
revenues by reducing the number of magazine pages andreconsidering publishing cycles, and demanded lower
unit prices -- DNP's overall net sales from Books andMagazines declined 14% from the previous fiscal term.
Of the 152 new magazines that were launched from April
2009 to March 2010, DNP printed 32, or 21%.

Maruzen Tall Vision

DNP Annual Repor t 20 10

43

Information C ommunic ation

Commercial Printing
Main Businesses

Strategic Opportunities and Future Development

Commercial Printing provides a wide variety of products
and services related to corporate sales promotions. For
example, in addition to printing promotional materials
like catalogs and pamphlets, we also handle in-store
and Internet-based sales promotions, plan and develop
sales campaigns, provide marketing support, and operate
promotional gift mailing centers and customer service
centers. The division serves corporate customers invarious industries, including manufacturers, distributors,
and advertisers. We strive to help our clients increase theirsales and find ways to reduce costs and administrative
burden.

As use of personal computers and mobile phones becomesincreasingly common and Internet usage has become
an integral part of daily life, most companies have cometo take Internet advertising seriously. Many consumers
now base their purchasing decisions on multiple forms of
information media, including user comments posted on
web sites, point-of-purchase media and digital signage, in
addition to paper media such as flyers and catalogs. These
trends present DNP with opportunities.
Based on the idea of providing “total sales promotion
solutions,” we are developing sales promotion programs
that combine traditional advertising methods with direct
approaches tailored to the needs of individual consumers
and in-store approaches that work directly on consumers
at the point of purchase. So after starting with a businessmodel focused on printing and manufacturing, we now
seek to expand our business by shifting to a businessmodel that supports clients' sales promotion efforts
through comprehensive solutions that connect companies
and consumers.

Market Trends and Summary of Financial Results
Corporate sales promotion strategies have changed in
response to prolonged economic stagnation and thediversification of consumers' needs. Whereas in thepast companies mainly advertised through mass media,
advertising expenses are now being allocated increasingly
to Internet-based advertising, personalized mail, and othermethods of approaching consumers directly to stimulate agreater response.
Economic recession triggered by the worldwide
financial crash in the second half of 2008 led to a sharp
decline in Japanese advertising budgets, which in turnaffects DNP's Commercial Printing Operations. Japanese
advertising outlays in the fiscal term ended March 2010
dropped 13% from the previous year to 4.631 trillion yen.
Spending on television, newspaper, and other mass media
advertising declined for the fifth year in a row, and are
expected to remain tight for the foreseeable future. On
the other hand, although the pace of growth has slowed,
Internet advertising expenses have continued to groweven amid harsh economic conditions, suggesting thatcompanies have high hopes for this more cost-effective
method of advertising.
As a result of these circumstances, Commercial
Printing’s net sales of flyers, catalogs, and other printed
matter declined along with sales from campaign andevent operation. Overall, net sales declined 11% fromthe previous year. By industry, sales from the insurance,
automotive, and personal care industries increased
relative to a year earlier, while sales from the advertising,
service, and consumer credit sectors declined sharply.

“Machireco ®” “in-town” information distribution service for iPhones ®

44

Segment Information ▶ Information Communication ▶ PORTRAIT OF DIVISIONSBusiness Forms
Main Businesses
DNP’s Business Forms Operations, in addition to
printing ledgers, bank books, and gift certificates,
etc., manufactures and issues smart cards, develops
various types of computer systems, develops IC tagrelated services, and offers comprehensive information
processing services (IPS) – such as entering individually
tailored data into personalized mail, then printing
and mailing it. Every company that handles personal
information or other important information is a potential
customer. Based on our advanced information security
framework, we are actively developing business process
outsourcing (BPO) services that handle client companies’
business processes.

Market Trends and Summary of Financial Results

Strategic Opportunities and Future Development
Going forward, demand for information security is
expected to grow. DNP will aggressively expand its
business with a focus on smart cards, an area in which
we hold a large share of the market. The market is looking
for integrated management of multiple areas at schoolor work through a single smart card: for example, thecard may be used upon entering or exiting facilities,
logging on to computers, and tracking printer usage. DNP
serves as the secretariat for the Shared Security Formats
Cooperation (SSFC), and will continue to focus on theactivities of this corporate alliance that aims to create
uniform standards for office security.
In the IPS field, we want to make the most of ourbusiness opportunities by offering services with highadded value. For example, we will take advantage of
our expertise in customer relationship management,
including analysis of consumers' purchasing behavior, togenerate more effective advertisements that are tailored
to individual recipients based on analysis of their spending
patterns, and mail them together with invoices or othercorporate communications.

Segment Information

Demand for credit cards, cash cards, and other smart
cards issued by financial institutions has remainedsluggish, while demand for SIM cards also declined due
to slower sales of mobile phones. Sales of ETC (electronic
toll collection) cards increased sharply thanks to economic
stimulus measures, but their growth has slowed since theautumn of 2009.
Meanwhile, corporate clients and consumers are callingincreasingly loudly for advanced security for their personaland other information. There is more and more demandfor high added value services capable of processing large
amounts of information securely and reliably. In view ofthis increasing demand, we expect that the number ofsmart cards issued annually in Japan will increase fromthe current 170 million to 200 million within a few years.
Corporate clients and customers also have increased
expectations for smart card solutions that bolster security
while improving convenience and customer satisfaction.
In the IPS market, the shrinkage in advertising budgets
translated to fewer mailings of enclosed flyers, among
other cutbacks. Nevertheless, sales remained solid due todemand for advanced information security.
Regarding IC tags, we are building frameworks tailoredto each type of business in order to boost supply chain
efficiency.
In the term ended March 2010, sales of ETC cards and
IPS increased. Net sales for Business Forms Operations
as a whole increased by 1% over the previous term.
Operating income also increased relative to a year earlier,
thanks to cost-cutting measures that included adopting

lower-cost chips in smart cards, boosting manufacturing
efficiency, and reviewing materials procurement.

Lippmann hologram card

DNP Annual Repor t 20 1045

In f or ma tion Communica tion

TOPICS

Expanding our Books andMagazines business
Stimulating the publishing■ marketSince DNP’s founding, DNP has beenclosely connected to the Japanesepublishing industry through our printing
business. In recent years, that industry
has been floundering. We have been
actively working to reinvigorate theindustry, for example by working to
reduce the roughly 40% book returnrate, building a business models that is
not dependent on magazine advertisingalone, creating digital content standards in
response to the development of electronic
books, and streamlining production costs
and processes.

Press conference announcing establishment of
CHI Group Co., Ltd.

In the fiscal year ended March 2010,
we formed a business and capital alliancewith Shufunotomo Co., Ltd. Shufunotomo
and DNP are jointly producing content
that is compatible with a variety of media
formats and emphasizes the customer's
point of view.
In order to achieve continuous growth
not only in the new publishing market but
also in the secondary distribution market,
DNP joined TRC, Inc., Maruzen Co., Ltd.
and publishers Kodansha Ltd., Shueisha
Inc. and Shogakukan Inc. in investing in
Bookoff Corp., a chain of secondhand
bookstores with some 1,000 outlets
throughout Japan.
In February 2010, we merged DNP
subsidiaries Maruzen Co., Ltd. and TRC,
Inc. and established an intermediateholding company, CHI Group Co., Ltd.
Going forward, DNP will work with CHIGroup and Junkudo Co., Ltd. to implement
in-store promotional measures, enhance
the Group's marketing capabilities, andpromote innovations like the introductionof smart cards and IC tags in libraries.
.

Specialized IC tags and high-46

mounting technology for■■ speedbooks

In January 2010, DNP developed a 10mmwide IC tag especially designed for
mounting on the spine of a book, alongwith high-speed mounting technology.
The mounting technology makes it
possible to attach 12,000 tags per hour,
matching the speed of comic book andpaperback book binding processes.
Specialized IC book tags came into use
in 2008, originally as a way to monitor
sales trends between two distribution
methods. The traditional method usedby the Japanese publishing industry wascommissioned sales, whereby bookstoresstock books for a limited time period but
can return unsold merchandise to the
publisher. In recent years, outright sales
are becoming more common, meaning
bookstores order books on their own
responsibility and strive to sell every
copy. Using IC tags enables bookstores
to compare sales trends and book return
rates between the two sales methods.
The tags are also expected to improvethe efficiency of inventory control andprevent shoplifting. The development of
IC tags and a mounting method speciallydesigned for books is expected to spurthe use of IC tags on books. DNP aims for
6.0 billion yen in annual sales of IC booktags by the fiscal year through March2014.

of quick-delivery, small-lot
book production■ StartIn response to publishing companies’
need to quickly reprint small lots of books,
DNP installed a new production line that
integrates printing and bookbinding at its
Shiraoka Plant in Saitama Prefecture. The
new line began operation in October 2009.
DNP is now well prepared to executesmall-lot orders. In addition to integrating
printing and binding processes within
a single plant to shorten transfer time
between processes, DNP also found ways
to shorten pre-production preparation
time, for example by using a system that
automatically calculates the amount of ink
to load based on analysis of the text and/or
images to be printed. The new line can also
accommodate printed materials in a variety
of sizes, and can provide polyurethane
reactive (PUR) bindings, which are easy toopen and very durable. DNP aims for net
sales of 1.0 billion yen in the year throughMarch 2011, and is prepared to add moresuch production lines in the future if
demand warrants doing so.

Expanding our information
security businessfor further progress inhigh-security, advanced-function,■■ Aiming
low-priced smart cards

Since DNP began its smart card businessin 1981, we have continuously led
the Japanese market in areas such as
operating system and application softwaredevelopment, card manufacture, and card
issuance. DNP currently holds roughly
40% of the overall smart card market
in Japan, around 90% of the market for
smart cash cards, and about 50% of therapidly growing market for contactless
smart cards used as transportation cards
and electronic money. In the fiscal year
through March 2010, we made use of ourstrength in this area to develop even more
new products and services.
In June 2009, we began selling low-priced
biometric smart cash cards with credit
card and other functions.
The Japanese Bankers Association is
promoting a shift to a system whereby asmart card’s authenticity is verified by thefinancial institution’s server rather than by
an ATM. All Japanese financial institutions
will have to make this transition by May
of 2012. Because system development
and other preparations for the transition
will entail large outlays, the market iscalling loudly for lower-priced smart cards.
DNP’s new low-priced card is designed
to be compatible with the new system
and reduces the price of a smart card by
about 20% compared to existing smart
cards. To assist financial institutions inmaking the transition, DNP developed apackage of support services including asmart cash card authentication testing
service, and cards and encryption keys foruse in testing. DNP began offering these
services in June 2009.
DNP hopes that the launch of its lowpriced smart cash card will lead to theadoption of smart cards in 30% of new
card issuances by 2012. We aim for 3.0
billion yen in sales of the new cards bythat time. In addition, we expect 6.0 billion
yen in sales of support packages by 2011.
In November 2009, DNP developed theworld’s first microSD card integrated withan IC chip running a highly secured smart
card operating system called MULTOS.
Installing the new microSD card in a
mobile device allows the device to be
used for authentication and payment

Segment Information ▶ Information Communication ▶ TOPICS

functions with greater security. DNP aims
for 5.0 billion yen in microSD card-related
sales by the fiscal year through March2013.

One-time password card

Security Formats
Cooperation (SSFC): promoting■■ Shared
office security-related business
MicroSD card with MULTOS operating system

Plastic smart credit card made from a bio-based polymer

In March 2010, DNP completeddevelopment of Japan’s first cash cardthat displays a one-time password (OTP)
on its surface to prevent illicit use bysomeone other than the cardholder, andbegan sales of the new card. A onetime password is valid only for a single
login session or transaction; OTPs areprimarily used for personal authentication
for Internet banking transactions using
a personal computer or mobile terminal.
DNP reduced the cost and improved
the convenience of modern banking by
combining OTP generation and display
functions with cash card functions.

Segment Information

DNP also collaborated with Mitsubishi
Plastics, Inc. and Sony Corp. to develop
the world’s first smart credit card madeprimarily from a bio-based polylactate.
In November 2009, the card received
approval for usage from MasterCard
Worldwide. Bio-based polymers havebeen attracting attention for their potential
as an eco-friendly replacement forplastic. DNP and its partners needed tocreate a bio-based polylactate that could
withstand manufacturing processes likethe embedding of magnetic stripes andembossing, and make it durable andreliable enough to meet international
credit card standards.

DNP has been promoting the improvementof workplace security as secretariat of
the Shared Security Formats Cooperation(SSFC), a group of companies that aims
to create a system for using smart cards
to achieve a high degree of security forcorporate information. An SSFC-compliant
security system was adopted for use in alarge-scale building complex for the firsttime in February 2010, when operation of
the system began in Shinjuku Park Tower,a high-rise complex owned and operatedby Tokyo Gas Urban Development Co.,Ltd.
In April 2010, DNP completeddevelopment and began sales of asystem that allows an employee to pay
for beverages from a vending machineby using an SSFC-compliant smart
employee ID card to have the price ofthe drink deducted from the employee’s
next salary. This system is convenient
for employees because it allows them tomake a purchase from a vending machine
without pre-charging, and it helps
beverage manufacturers and vending
machine operators by reducing lost sales
opportunities. DNP aims for 1.0 billion
yen from sales of this system by the fiscal
year through March 2013.

holograms. DNP is currently one of only
two companies in the world that has thetechnology to mass produce Lippmann
holograms, so we are developing ourhologram business as a world-leading
player.
DNP and Nippon DOM Co., Ltd. jointly
developed heat-transfer holographic labelsthat can be attached to fabric products
such as clothing, bags, and shoes, andthat can withstand laundering and dry
cleaning. The two companies beganselling the new “Holotrans” labels in May
of 2009. Use of these cloth labels on avariety of products is aimed at preventing
counterfeiting by enabling consumers to
distinguish between genuine and imitation
goods.
In November 2009, DNP developed
the world’s first transparent Lippmann
hologram transfer foil for use in passports.
Lippmann holograms are more difficult
to forge than the embossed holograms
that are currently most commonly usedin passports, and it is easy to tell if a
Lippmann hologram is genuine or fakejust by looking. To make it possible totake advantage of these qualities, DNP
improved the transfer properties of its
foil material and refined its manufacturing
processes to enable continuous
lamination that covers a passport’s entire
data page. DNP plans to commercialize
the new product in collaboration withcompanies that are involved in passportissuing operations both in Japan andoverseas, targeting sales of approximately
500 million yen by the year ending March2013.

has enhanced its lineupof hologram products■ DNP

Holograms are images that appear
to be three-dimensional. Because they
are very difficult to forge, they are
increasingly in demand as a means ofpreventing counterfeiting of credit cards,
cash cards, identification cards, vouchersand other documents where a high degreeof security is needed, and as a means ofauthenticating brand-name merchandise.
DNP began developing hologram
products in 1972 and succeeded inmass producing embossed holograms in
1981. In 2001 we began mass producing
Lippmann holograms, which are much
more difficult to produce than embossed“Holotrans” heat transfer hologram labels

DNP Annual Repor t 20 10

47

In f or ma tion Communica tion

Developing new methods ofadvertising■“Tall Vision” large-scale digital
signage system

DNP developed a digital signage systemthat coordinates images displayed on
12 large (42-inch) LCD panels to display
advertisements or other digital content.
The system is called “Tall Vision.”The
Tall Vision system costs less to set up
than a single display screen of the same
size. It can be used in combination withvarious other advertising media, suchas information terminals with touch
panels for browsing information, racks ofpamphlets, and/or billboards that display
traditional posters. DNP will market thesystem as a highly effective system for
distributing information to consumers, tobe used in large public facilities like train
stations, airports, and shopping malls.

& Speaking Posters”
combining organic EL, inorganic■■ “Shining
EL, and panel speakers

Electro Luminescence (EL) can beprocessed into a thin, soft plastic-likematerial that can be made into a bendable
panel which can be attached to a pillar
or other curved surface. Because it has
a wide viewing angle, it allows a large
number of people to view informationfrom various angles at once. DNP madeuse of these characteristics to develop
the "Shining & Speaking Poster," which
combines organic EL panels that display
textual information, inorganic EL panels
that make images on the poster appear
to be animated, and a panel speaker thatemits sound from the entire poster.
During the fiscal term ended March
2010, DNP conducted a test exhibition,with cooperation from Rakuten BaseballInc., of a shining poster depicting glowing
images of the Tohoku Rakuten Golden
Eagles (professional baseball team) homestadium and logo. DNP also received
cooperation from Vegalta Sendai Co.,
Ltd. to conduct a test exhibition of aposter featuring the lit-up emblem of theVegalta Sendai professional soccer team,accompanied by the sound of the teamsong. In the spring of 2010, DNP beganoffering "Shining & Speaking Posters"
as a new service on its print-on-demandmenu.

Tall Vision

In July 2009, DNP and East Japan
Marketing & Communications, Inc., began
test operation of the Tall Vision system
at JR Sendai Station. In the test, theTall Vision system displays information
about JR-East merchandise and imagesof popular railcars. Passersby can use an
information terminal equipped with a touch
panel to access details about the products
and railcars introduced on the big display,and other information such as timetables
and a map of the area around station. In
September 2009, Ryohin Keikaku Co.,
Ltd. became the first corporate customer
to introduce the Tall Vision system on apermanent basis when it reopened its
Mujirushi Ryohin IKEBUKURO SEIBU
store after remodeling. DNP expects 1.0
billion yen in sales related to Tall Vision in
the year through March 2011.

48

Shining & Speaking Poster

netflyer, and we also launched a netsuperconstruction support service. We arepromoting this service to corporate
customers in tandem with Yamato System
Development Co., Ltd.’s netsuper system.

New products and services(transmitting
traditional beauty):■■ Denshobiof the Ōkyoand Rosetsu art space within■■ Reproduction
Muryou-Ji Buddhist
temple, as it was at the time of■■ Kinkozan
the temple’s reconstruction

In 1999, DNP began developing“Denshobi” digital replicas of all types of
expressive techniques, including sliding
door paintings, wall paintings, ceiling
paintings, decorative screens, and scroll
paintings. The project made use of theimage reproduction expertise that DNP
has cultivated over many years as well as
cutting-edge digital technologies.
In October 2009, we completed thedigital reproduction of 55 shohekiga room
partition paintings, including ryuukozu paintings of dragons and tigers by
Maruyama Okyo and Nagasawa Rosetsu,
two renowned artists of the late 18th
century. Their works are preserved in thecollection of Kinkozan Muryo-ji Temple
in Kushimoto, Wakayama Prefecture.
We took great care to make these
reproductions faithful to the originals,
for example by creating a special color
chart in order to manage the color tones,
density and harmony of the Indian ink.
We used ultra-high definition printing
on a dedicated printer and used special
handmade Japanese paper developed by
DNP to last about 100 years. In addition,
we used light-resistant ink to enable thelong-term preservation of the paintings’
beauty despite their being continually on
display.

of “netsuper”
construction support service■ Startup

In recent years, there has been growing
demand for “netsuper” services thatdeliver merchandise ordered frome-commerce sites to the purchaser's
home. Since 2001, DNP has been
providing a “netflyer” service thatpublishes digital advertising fliers on
corporate customers’ web sites. In
October 2009, we developed a systemthat allows users to order goods froman e-commerce site simply by clicking
on product information viewed on a

Tiger painting by Nagasawa Rosetsu, at Kinkozan
Muryo-ji Temple in Kishu

Segment Information ▶ Information Communication ▶ TOPICS / STRATEGIC FOCUS

Strategic Focus

1

With the launch of the CHI Group, we aim to
reinvigorate publications distribution

In 2008, DNP welcomed Japan’s largest bookseller, Maruzen Co. Ltd., and major library service provider TRC Inc. into the DNP Group. In
February 2010, we formed CHI Group Co., Ltd. by integrating the managements of Maruzen and TRC. We asked Senior Corporate Officer
Tatsuya Nishimura to explain the objectives and the business strategy behind the founding of CHI Group.

Why did you choose the name “CHI”?

Segment Information“Chi” means knowledge in Japanese. The name “CHI Group”
expresses our vision of being a corporate group that brings
innovation to the formation and distribution of knowledge,
with “knowledge is the basis of society” as our management
concept. Although the company name was derived from theJapanese word for knowledge, we pronounce it according to
the English letters C-H-I.
CHI Group combines two operational companies, Maruzen
and TRC. In addition to being a DNP corporate officer, I serve
as vice chairman of CHI Group. Maruzen and TRC are bothstrong brands in their respective fields, so we are operating
their distinctive businesses under their original names. In
order to make the very most of their strengths, we decided tointegrate the companies moderately.
Tatsuya Nishimura

Senior Corporate Officer

In what direction does CHI Group want to takeits business?
The most important thing we want to achieve throughour operations is to innovate publications distribution. We
recognize the following three issues in domestic publications
distribution and we are working on finding solutions for them.
1. High book return rate
Most books and magazines are distributed on acommissioned sales basis, and in recent years the book
return rate has risen to about 40%. This level means big
losses for publishing companies, and must be reduced.
In order to lower the book return rate, we need to hone
our marketing skills and understand “what books to offer,in what ways, through which sales channels.” I think
there’s still a lot of room for new ideas at bookstore sales
floors, like creating event corners or using digital signage.
It would probably also be effective for bookstores andpublishers to share marketing information including new
book introductions, questionnaires, and grapevine-stylecommunication about Internet bookstores. Two of theways that we will work on reducing book return rates aretrying an "outright sales" system and introducing plannedsales.
2. Lost sales opportunities
When the book that a reader wanted is not in thebookstore, not only is the customer's time wasted, but
the bookstore has lost an opportunity to make a sale.
First, a point-of-sale system for sharing information
between bookstore and publisher about hot sellers,marketing and inventories can help optimize the numberof books printed and improve the effectiveness ofinventory control. Also, we can respond flexibly tosales trends by reprinting when necessary. In addition
to high-speed printing in quantities of hundreds ofthousands or millions, DNP is also equipped to print
small lots using dedicated book-printing lines or printon-demand facilities. Flexible book manufacturing andinventory control can create a situation where “no bookis unavailable,” thereby reducing lost sales opportunities.

DNP Annual Repor t 20 10493. Digitalization of content
With electronic book readers and other devices appearing
on the market along with cell phones and personal
computers, we expect to see a sharp increase in theamount of digital content being distributed. Almost allof DNP’s magazine and book production processes canbe digitalized. We are working on bringing down otherpublishing companies’ digitalization costs, for example bycreating a common platform for content digitalization.
In the future, publications distribution will most likely
take place through three formats: real bookstores,
Internet bookstores that sell publications via a web site,and digital content distribution services. Within the DNPGroup, CHI Group operates real bookstores throughMaruzen and an Internet bookstore, “bk1,” through TRC,
while DNP was quick to launch a for-profit digital content
distribution service. There are very few entities in theworld that combine these three formats as DNP does,
and we are convinced that this gives us an important
advantage.

executing library operations on a contract basis and sellingbooks and magazines to libraries. TRC has a strong customer
base and business expertise among public libraries, while
Maruzen has a strong customer base and business expertiseamong university libraries. Both have a wealth of experiencein library-related business. One example of how we planto achieve concrete results is by using online training andother tools to share both companies’ strengths concerning
employee training, which is important to library operations.
Regarding the sale of books and magazines, we want tofurther refine and standardize “TRC MARC,” Japan’s largest
book and magazine database, and TRC’s weekly catalog of
new publications, both of which TRC makes widely available
to libraries and other institutions, in order to increase theireffectiveness in promoting sales. In addition to covering
almost all new domestic publications, TRC MARC also covers
past publications. It contains some 3 million entries, with each
including such information as publication name, author name,price, and table of contents. We plan to apply this system toother operations, including Maruzen’s, in order to promotesales.

What synergistic beneﬁts do you expect fromthe collaboration between Maruzen and TRC?

Ever since DNP’s founding, we have grown along with the
publishing industry through our printing business. Throughthe activities of the CHI Group, we want to contribute to therevitalization of the overall publishing industry and at the sametime support fresh styles of Japanese “chi,” or knowledge.

First of all, we will increase the benefits of collaboration inlibrary-related business. Library-related business consists ofStrategic Focus

2

Singapore’s Tien Wah Press (Pte.) Ltd.
Building a global business, starting with pop-up
books, etc.

Tien Wah Press (Pte.) Ltd. is a wholly-owned subsidiary of DNP that is based in Singapore and does business worldwide. The company's
strengths lie in the production of hardcover and pop-up books. Its main clients are major European publishing companies.

Tien Wah Press won the trust of publishers throughsuccesses like its “Star Wars” pop-up book
Tien Wah Press was founded in 1935 in Singapore. Its main
business was commercial printing of pamphlets and otheradvertising materials. By the 1960s, it had become one ofSingapore’s largest printing companies. In 1970, DNP acquired
a 20% stake and Mitsubishi Corp. acquired 10% of Tien Wah
Press, and with technical support from DNP, it began to publish
books. DNP then began gradually buying more shares in Tien
Pop-up book50

Segment Information ▶ Information Communication ▶ STRATEGIC FOCUS

Wah Press until it became a wholly owned subsidiary in 2003.
Tien Wah Press began producing pop-up books in 1978.
In 1980, the company made a pop-up book based on themovie, "Star Wars" and received acclaim for the sophisticatedtechnology required to mass produce a book with suchelaborate pop-ups. As a result, Tien Wah won the trust andrespect of publishing companies.
In addition to establishing sales offices in the U.S., U.K.,
France, and Australia, in 1984 the company started up a newfactory in Johor Bahru, Malaysia, marking the start of its
full-fledged overseas expansion. Besides publications that
require intricate hand processing, such as pop-up books andhardcover cookbooks, Tien Wah Press manufactures a large
number of picture books, among other publications. Exports
accounted for about 95% of Tien Wah’s net sales for the year
ended March 2010, with 44% going to Europe and 35% to
the U.S. The company has earned the strong confidence ofmany corporate clients, including major publishing houses
like Scholastic Inc. and Random House, Inc. and media andentertainment giant The Walt Disney Company.

Australia
4%
Asia
17%

United States
35%

Roughly 95%
exports
The rest ofEurope25%

United Kingdom
19%

Tien Wah’s Strengths● Sales offices in the U.S., U.K., France andAustralia
Segment Information

Supporting DNP’s overseas development by serving
as our Southeast Asian manufacturing hub

Year ended March 2010 Net Sales
from Printing, by Region● Long-standing trust-based relationships withmajor publishers
By aggressively investing in the latest equipment andupgrading employees’ skills through systematic training, Tien
Wah Press has prepared itself to offer high-quality printing
services even when turnaround time is short. By answering
the needs of the world’s largest publishing companies andraising the quality of its products and services, Tien Wah has
cultivated brand strength that will be an important asset as itpromotes the global expansion of its business.
Singapore is among the world’s most important economic
centers. Its international logistics infrastructure andbusiness connections, etc. are highly developed. In addition,
governmental measures that promote the printing industry andsupport international marketing contribute to making Singapore
a favorable business environment. Given these favorable
conditions, we expect Tien Wah Press to broaden its fieldsof business beyond the printing of books and magazines, andexpand DNP’s international business by serving as our printing
production hub in Southeast Asia.

● High name recognition among Western

publishing companies● Up-to-date printing equipment and high-quality

service● Region-leading information processing

technologies; offset and other printing andprocessing technologies

Strategies for the Future● Improve quality and enhance production

control systems; differentiate Tien Wah fromcompetition, which is mainly in China● Reinforce research and development; increase
added value of products and services● Offer high-end products and strengthen
collaboration with DNP s Books and Magazines
Operations in Japan in order to become aproduction base for the Japanese market● Take advantage of DNP s technology andexpertise to move into businesses other thanprinting and publishing● Make use of production bases in Singapore

and Malaysia to enhance ability to offer rapiddelivery, low-cost services
Front entrance of Tien Wah Press

DNP Annual Repor t 20 1051

Lifest yle and Industrial Supplies

BUSINESS STRATEGIESThe Lifestyle and Industrial Supplies segment is composed of three business divisions: Packaging, Lifestyle
Materials, and Industrial Supplies, with the latter being further divided into Information Media Supplies,
Opto-Materials, and Energy Systems. The segment plays vital roles in corporate clients’ manufacturing
processes and provides products that are important in the daily life of consumers. By applying anddeveloping printing technologies, this segment continuously takes up the challenge of entering new fields
like environmental preservation, energy, and life sciences.

■ Basic Strategies
In recent years, consumers have begun to insist that their lifestyles include more consideration
for the global environment – including restraints on excessive energy consumption – and more
safety and peace of mind regarding food, clothing, and housing. In order to satisfy these types ofdemands from corporate clients and consumers, DNP has been focusing on developing products that
address concerns such as food safety and convenience, and reducing the environmental burden of
manufacturing processes.
DNP’s Lifestyle and Industrial Supplies segment continuously develops environmentally friendly,
high added value products with advanced functionality that are useful not only to consumers but also
to our corporate clients. Starting with packaging products and decorative materials made from nonpaper materials like film or steel, we supply a variety of advanced, high-quality products in Japan andabroad by applying basic printing technologies. DNP has even become the world’s largest supplierof some of these products, including optical films used in flat-panel displays and dye-sublimation
thermal transfer materials for digital photo printers.

52

Enhancing our Lineup of Ecofriendly Products with Advanced
Functionality

Responding to concern for “universal design” (making products easy
for anyone to use) and the need to reduce the impact of modern life on
the environment, we will continue to develop eco-friendly products withadvanced functionality that meet consumers’ demand for good health,safety, comfort, and convenience.

Increasing Added Value andShifting into Growth Fields

We will further explore the potential of printing technologies and stepup the development of high added value products and services thatprecisely satisfy the demands of consumers and corporate clients.
In particular, we will concentrate on businesses with good prospects for
future growth, such as lifestyle materials made with electron beam (EB)coating technology, functional films used for packaging, and various typesof optical films and dye-sublimation thermal transfer materials.

Actively Developing New
Business Fields

We will take a broader view of the printing business and provide cuttingedge, original products that also address areas of increasing social
concern, such as environmental preservation, energy, and life sciences. As
we create new businesses, we will actively develop alliances with a large
number of corporations and research institutes, in addition to applying ourown original technologies.

Segment Information ▶ Lifestyle and Industrial Supplies ▶ BUSINESS STRATEGIES■ Major Policies
Packaging: Focusing on Solutions; Starting with
Consideration for the Environment
DNP understands the mission of its Packaging Operations
as “realizing a sustainable society and wealth of life.” We
intend to enhance our lineups of eco-friendly products andproducts with new types of advanced functionality.
In 1995, we were among the first in Japan to begin using
the Life Cycle Assessment method of assessing
environmental impact and reflecting the results in productdevelopment. In our aseptic PET plastic bottle filling systembusiness, we succeeded in reducing CO 2 emissions by
54% in the processing of materials, manufacturing, andtransport phases. In 2010, we launched our latest system,
which was designed with consideration for its water
footprint, a measure of the amount and quality of waterused in product manufacturing. We intend to develop newmarkets and broaden the range of applications for our
Innovative Barrier (IB) Film, a transparent packaging filmwith excellent barrier properties. In addition to foodproducts, we will market IB film for packaging medical
supplies, pharmaceuticals, and industrial materials.
In addition, we will enhance our “human-centeredmarketing” framework for scientifically analyzing consumerawareness and product usage, etc., in order to promote thecreation of the real value that today’s consumers seek.

Segment Information

Lifestyle Materials: Expanding DNP’s Original EB
Coated Products
Our Lifestyle Materials business supports healthy andcomfortable living spaces, and will concentrate on thedevelopment of high added value products that make use of
DNP’s original and highly acclaimed electron beam (EB)coating technology. EB coated products display exceptionalabrasion resistance, soil resistance, and durability. In
addition to interior and exterior products for homes andoffices, we are expanding application of EB products toinclude areas such as automotive and Tokaido Bullet Traininteriors. We are taking advantage of the strength of original
DNP-brand products like “WS Safmare” by joining forces
with housing equipment and decorative materials
manufacturers to approach residential developers andgeneral contractors from the planning and design stages, inorder to develop a broad-based business that addresses theentire building industry supply chain. We are also expandinga variety of solutions-based businesses, including
measurement and assessment of residential environments
through DNP’s Living-space Analytical Evaluation Center.
Focusing mainly on environmentally friendly products andproducts with advanced functionality, we are developing awide range of markets related to living environments, fromsingle-family homes, condominiums, and other forms of
housing, to office, hotels, shopping centers and othercommercial facilities, medical and nursing care facilities,
rental housing and remodeling projects, and evenautomobiles and railway cars. In addition, we will actively
promote sales in overseas markets, including Europe andnewly developing countries.

Industrial Supplies: Aiming for medium to long-term
growth by supplying a variety of products
In the Opto-Materials field, we supply various types of
optical films used in flat-panel displays for devices such as
televisions, personal computers, and mobile phones. At thecore of this business are clean converting technologies that
apply and develop technologies like coating, lamination, andpatterning. DNP controls roughly 70% of the world market
for anti-reflection films used in LCDs. We aim to build on
this strength in order to supply advanced products for use intouch-activated interactive displays including electronic
paper and touch panels, which are expected to be used
more widely in the future.
In the field of Information Media Supplies, we are broadly
expanding our photography business based on our “morethan just a photo” initiative. Regarding dye-sublimation
thermal transfer materials (color ink ribbons and receiverpapers), we will take advantage of our comprehensive
manufacturing and sales framework to bolster sales of
FOTOLUSIO brand products and increase DNP’s share of
the market for dry printing, which is replacing the silver
halide method of photo printing. In addition to developing
and operating PrintRush self-service printing systems andKi-Re-I photo ID kiosks, we launched a photo bookproduction service, and will work on expanding our overallbusiness by generating synergistic benefits from greater
sales of thermal transfer materials. Regarding thermal-resin
type transfer materials (monochrome ink ribbons) for
bar-code printers, we will implement thorough cost-cutting
measures and promote the development of products thatmeet the market’s needs.
In January 2009, our Energy System Operations started
up a new, dedicated facility for manufacturing photovoltaic
module components such as back sheets and encapsulants.
In October of the same year, we established amanufacturing subsidiary called DNP Energy Systems Co.,
Ltd. As this market grows, we intend to expand ourbusiness by constructing a unified framework for researchand development, manufacturing and sales related to clean
energy. We will work to increase the functionality of backsheets and encapsulants for photovoltaic modules while
focusing on cost reduction and the development of productsthat meet corporate clients’ needs. Meanwhile, DNP’s
package film (electrolyte encapsulating film) for lithium-ion
rechargeable batteries has received high acclaim from themarket. We are promoting its use in mobile devices such ascell phones and notebook computers, and in electricbicycles and automobiles.
Developing New Markets through Global Expansion
So far in Packaging and Lifestyle Materials Operations, wehave done most of our manufacturing and sales in Japan,
but going forward, we will actively promote thedevelopment of Asia and other overseas markets. In
Information Media Supplies, we will bolster sales in global
markets by working out of overseas bases including our ink
ribbon manufacturing and sales companies in France andthe U.S. Our Opto-Materials and Energy Systems
Operations will focus on boosting business in newly
developing countries and the European market.

DNP Annual Repor t 20 1053Lifest yle and Industrial Supplies

FINANCIAL RESULTS■ Financial Highlights■ Business Environment(¥ billion, %)2008.32009.3¥ 555.8

Net sales¥ 551.8 ¥ 536.6

Operating income

31.9

19.9

43.7

Operating income margin

5.7%

3.6%

8.1%

Net Sales

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

120

800

100
600

555.8

551.8

536.6
80

60

400

43.7
40

31.9
200

19.9

20

0

0

08

54

2010.3

Lifestyle and Industrial Supplies continued to be affected bystagnation in personal consumption during the term ended
March 2010, and the surrounding business environment
remained harsh. Although Japan's consumer confidence
index (based on surveys conducted by the Cabinet Office)bottomed out and began to rise, the number of housing
starts in the fiscal term ended March 2010 declined by
25.4% year on year to 770,000 units, falling below 800,000
for the first time since 1964. Despite a recovery trend insales of various industrial products like automobiles andelectrical equipment, the harsh business environment wasevidenced by such indicators as stalled employment andshrinking capital spending. On the other hand, sales of
optical film products were solid, buoyed by a rapid recovery
in the market for flat-panel displays.

09

10■ Summary of Financial Results
In the fiscal year ended March 2010, sales of anti-reflection
films for use in LCDs grew sharply thanks to a rapid
recovery in the market. However, sales of aseptic PET
plastic bottle filling systems declined and Lifestyle
Materials sales were lackluster due to the prolonged slump
in domestic housing demand. As a result, overall segment
sales declined by 2.8%, or 15,183 million yen, from theprevious fiscal year to 536,638 million yen. Sales of aseptic
PET plastic bottle filling systems, EB coated decorative
materials, and ink ribbons were sluggish. However, asharp increase in order volumes for anti-reflection film
used in LCDs, which was sparked by booming demand fortelevisions, along with highly effective cost reductions inPackaging Operations, gave a huge boost to the segment's
overall operating income, so that it increased by 119.5%
over the previous term.
The segment contributed 33.6% of DNP’s total net sales
and 57.9% of the Group’s operating income.

Segment Information ▶ Lifestyle and Industrial Supplies ▶ PORTRAIT OF DIVISIONSPORTRAIT OF DIVISIONS

Packaging
Strategic Opportunities and Future Development

DNP’s Packaging Operations offers comprehensive
packaging-related services, including development offilms and other materials with specialized functions,design and manufacture of aseptic filling systems, andthe planning, development and manufacture of a varietyof packaging products through our flexible frameworkthat has production bases all over Japan. Manufacturersof foods, beverages, medical supplies, pharmaceuticals,
electronic components – and any other company that hasa need to “wrap things”– are all potential customers. We
plan to expand this business by making products easy for
consumers to use and by precisely meeting the needs ofclient companies.

In our view, the changes that are occurring in people’s
lifestyles and awareness present DNP’s Packaging
Operations with important business opportunities.
For example, in response to increased concern for
reducing the burden on the environment, we developed
packaging that uses less material and is easier torecycle. For the increasing number of people who live
alone or in households where both spouses work, wedeveloped single-portion packaging that enables longerterm preservation of package contents. In addition, weestablished guidelines relating to universal design, and weare developing packaging with these guidelines in mind.
We also have a proven track record in the development of
products like transparent barrier films that shut out water
vapor and oxygen in order to protect package contents,
and aseptic filling systems that preserve the flavors andaromas of container contents.
As part of our product development process, we
propose a variety of solutions that make use of tools like“human-centered marketing” to formulate product andmarketing strategies, and data from our Shoku-MAP
system of monitoring consumers’ eating habits.
DNP addresses the challenging demands of corporateclients and consumers by creating more efficient, more
eco-friendly manufacturing processes and by developing
products that are designed to be easy to use.

Market Trends and Summary of Financial Results
In recent years, lifestyles have become more diverse due
to such factors as growing awareness among consumersof health and environmental issues, the declining birthrate, aging society, and women’s increasing participationin the world outside the home. The economic situationin Japan remains tough, as evidenced by sluggishness
in the job market and consumer spending. Amid
this environment, the facilitation of comfortable andconvenient lifestyles is an important management
issue, along with resource conservation and reducing
environmental burden. Businesses and consumers
increasingly choose products that were designed withconsideration for human health and the environment – atrend that is only expected to keep growing in the future.
DNP was quick to pick up on this trend, and set to work
using its advanced technical capabilities and wealth ofexpertise to develop packaging-related technologies andproducts that address these needs.
In the fiscal year through March 2010, our Packaging
Operations sold more plastic containers than in theprevious year, including PET plastic bottle preforms
for use with aseptic filling systems, but sales of paper
containers and flexible packaging declined, as did sales oflarge-scale aseptic filling systems*. In sum, net Packaging
sales decreased by 4% from a year earlier, but the division
made a major contribution in terms of profits as a result of
thorough cost-cutting and improved production efficiency.

Segment Information

Main Businesses*Aseptic filling systems:
A system for filling sterilized containers with sterilized beverages or food in
an aseptic environment. The first example in Japan was developed by DNP in
1976 for single portions of coffee whitener. In 1992, DNP was first in Japanto develop an aseptic system for filling PET plastic bottles with beverages.
We went on to improve these systems – for example by making higher-speed
models and by introducing compact preform bottles that are expanded to fullsize at the time of filling – and to take the top share of the Japanese market for
aseptic filling systems.

Microwaveable heat-insulated container (D-COUPLE)DNP Annual Repor t 20 1055

Lifest yle and Industrial Supplies

Lifestyle Materials
Main Businesses

Strategic Opportunities and Future Development

Lifestyle Materials Operations supplies a wide rangeof products including interior and exterior materials forhomes, offices, and commercial facilities, fittings andstorage products, and interior materials for automobiles
and railroad cars. These products are highly acclaimed byour corporate clients and consumers alike. Any company
that deals in “comfortable dwelling spaces” is a potential
customer, whether in Japan or abroad.Backed by thestrength of DNP’s original EB coating technology, we
provide a large number of advanced, eco-friendly productsthat have been very well received by corporate clientsand consumers. Lifestyle Materials also works with thebuilding industry to provide solutions to problems related
to construction methods.

DNP’s superior EB coated products provide exceptionalabrasion resistance, soil resistance, and durability.
Because they make maintenance easier, they have wonhigh praise from builders and consumers and are capturing
an increasing share of the market. There is also increasing
demand for products that use water-based inks andcontain non-vinyl chloride base materials (olefin) insteadof vinyl chloride base materials that emit toxic gas whenburned or volatile organic compounds like formaldehyde,
which are said to cause sick house syndrome. DNP
views this increased demand for eco-friendly products as
an important business opportunity, and plans to step up
sales efforts overseas as well as in Japan, mainly in newly
developing nations.
Meanwhile, DNP’s aluminum interior panel isincreasingly being used in railroad cars. For example, it
was used on the ceilings and side ceilings of railway cars
running on the Tokaido Bullet Train and cars on the new
Narita Express line. In addition to being selected for use
in about 70% of new railway cars manufactured in Japan,
it is also being used in Taiwan High Speed Rail cars. In
the future, not only do we intend to take the top share of
the world market for automotive interiors, but we will also
promote DNP lifestyle materials as the global standard forrailway car interiors.

Market Trends and Summary of Financial Results
Due to the lackluster domestic economy, the number ofhousing starts in 2009 declined by 25.4% year on year to770,000 units, falling below 800,000 for the first time in
45 years. This year-on-year drop was the second largest
on record, following the plunge that occurred from 1973
to 1974 as a result of the 1973 oil crisis.
Despite the continued harshness of the economic
picture, demand remained steady for specialized products,
such as those designed with health or the environment
in mind, and high added value products with exceptional
design appeal or functionality. DNP has also met demand
for streamlining construction processes of large-scale
projects like office buildings, hospitals, and commercial
facilities, for example by reducing overall costs andproviding lighter-weight decorative materials.
The fiscal year through March 2010 saw increased
sales of environmentally friendly wall and floor coverings
using DNP’s original EB coating technology.* Our EB
coated floor coverings made a strong showing in adifficult market; they account for a growing share of thefloor covering market and are on their way to becoming
the market standard. However, growth in floor coverings
did not make up for stagnant demand for other products,
including decorative paper coverings in general. As aresult, net sales declined by 12% from a year earlier.

*Electron beam (EB) coating technology:
A technique for making resin harden by exposing it to an electron beam, whichcauses the resin’s molecules to polymerize. EB coated products display greater
surface hardness than products coated with urethane or ultraviolet cured resin.
The technology makes it possible to provide products with superior resistanceto abrasion, soil and sunlight, and with excellent durability and stability.
Moreover, the eco-friendly EB manufacturing process uses less energy,
generates less carbon dioxide, and does not require the use of solvents,
making it suitable for widespread use in the future.

EB fl ooring56

Segment Information ▶ Lifestyle and Industrial Supplies ▶ PORTRAIT OF DIVISIONS

Industrial Supplies
Strategic Opportunities and Future Development

Industrial Supplies Operations provides many productsof which DNP is the world’s top supplier, including antireflection film used in LCDs and dye-sublimation thermaltransfer materials (color ink ribbons and receiver papers)
used in ink ribbons for printing photos. Although thedivision’s main customers are appliance manufacturers
and electronics companies in Japan and overseas, ourphoto print business provides DNP’s own brand of
products and services directly to consumers. In the
Energy System, we supply components for the promising
photovoltaic module market, and packages for lithium ion
rechargeable batteries.

Japan is scheduled to switch all of its terrestrial television
broadcasting to digital in 2011. This is expected tostimulate brisk demand for LCDs, together with otherfactors like China’s economic stimulus measures anda trend toward replacing CRT televisions in newly
developing nations. DNP will work to sell more antireflection film in anticipation of the expected increase
in LCD panel demand. We will also concentrate on
supplying other products, like surface films that protect
touch panels from scratches and dirt, in order to achieve
growth in our functional optical films business.
Demand for digital photo printing is increasing. We
expect to see growth in demand for dye-sublimation
thermal transfer materials, which enable much fasterprinting and much more durable prints, among otheradvantages. We intend to expand this business bypromoting the installment of more KIOSK self-service
printing systems and expanding the business to serve
commercial and industrial users.
In the photovoltaic module field, we intend to apply
advanced coating technologies, materials technologies,
and various converting technologies to improve backsheets and other components, and to boost the market
share of DNP products by promoting development inline with market demand to lower manufacturing costs,
prevent deterioration, and boost the power generation
efficiency of photovoltaic module panels.

Market Trends and Summary of Financial Results
Recovery in the market for LCD panels led to steadydemand for anti-reflection film that improves picture
quality by preventing glare from incident lights on LCD
screens. Although electromagnetic interference shielding
film used in plasma display panels (PDPs) was affectedby lackluster consumer spending, our overall optical filmsales rose sharply, led by strong sales of anti-reflection
film.
In Information Media Supplies, demand for dyesublimation thermal transfer materials declined in thefirst half of the term. Although it recovered in the second
half, primarily due to demand from the entertainment
and medical fields, sales for the entire term still fell
below the previous-year level. A recovery in corporate
profits was accompanied by increased distribution, which
boosted demand for thermal-resin type transfer materials(monochrome ink ribbons) used for printing barcodes.
However, demand for facsimile ribbons decreased, andsales for the entire term declined relative to the year
before.
DNP supplies back sheets, encapsulants and otherphotovoltaic module components. In the first half of the
fiscal term through March 2010, sales were slow dueto the worldwide financial crisis. Demand picked up in
the second half and has remained solid, but despite anincrease in sales of packages for lithium ion rechargeable
batteries, the downturn in the first half resulted in a
decline in overall sales of battery components.
Overall, net sales from Industrial Supplies increased
17% over the previous term.

Segment Information

Main Businesses

Dye-sublimation thermal transfer materials

DNP Annual Repor t 20 1057

Lifest yle and Industrial Supplies

TOPICS

Packaging Operations
Kinoshita Award forstand-up■■ microwaveable
pouches

In July 2009, DNP and House Foods
Corp. received the Japan Packaging
Institute’s 33rd annual Kinoshita Awardin the “Packaging Idea” category, formicrowaveable packaging they developed
jointly for House Foods’ “Dekitatezukuri”
series of retort foods. The awards are
given to entities that achieve notable
results in packaging technology researchand development, or in streamlining orotherwise improving packaging.
The package combines a transparent
stand-up retort pouch with an outerbox. Both can be heated in a microwave
oven, which is now found in more than
95% of Japanese homes. In addition
to a package’s traditional functions ofprotecting its contents, displaying productinformation, and improving transport
efficiency, this package won praise for its
universal design-based ease of use andability to be heated by microwave.

Energy Systems Operations
Major improvement inefficiency of■■ conversion
large-scale organic thin film
■ photovoltaic (PV) cells

In June 2009, DNP developed an organic
thin film PV cell that converts energy
highly efficiently even when made on alarge scale.
Silicon-based PV modules are currently
the most common type of photovoltaic
modules on the market, but the highcost of manufacturing them is a problem.
The market has been looking forward to
the large cost reductions that could beachieved by switching to organic thin film
cells, which are made by applying printing
technology, but until recently, their energy
conversion efficiency dropped sharply
when they were made in large sizes. By
applying DNP’s original photoetching
technology, we achieved a high energy
conversion efficiency rate of more than
4% for a cell as large as 50mm square.
DNP aims to develop technology for mass
producing organic thin film PV cells andstart marketing them by the fiscal term
through March 2016.

58

back sheets
for PV modules with even■■ Developing
durability and atlower cost
■ greater

DNP has been researching and developing
PV module components since the 1990s.
In 2003, we used printing technologies todevelop back sheets and encapsulants,
and in January 2009 we started
production at a new plant in Izumizaki,
Fukushima Prefecture.
Because PV modules generally stayoutside for years, back sheets that protect
PV modules from the outside environment
must be highly weather-resistant andimpermeable to water vapor. In orderto preserve this function, back sheets
are generally made of multiple layersof aluminum foil. However, aluminum
foil must be insulated to prevent it from
causing electrical problems if it comes
into contact with the module's wiring.
The need to insulate the foil posed a
problem because of the burdens placedon the manufacturing process. In orderto solve this problem, DNP developed
a low-cost back sheet that does notuse aluminum foil, by using inorganicoxide vapor deposition film that is highly
impermeable to water vapor, with a highly
weather-proof adhesive. DNP beganshipping samples in June 2009, and aims
to achieve about 5.0 billion yen in sales by
the fiscal term through March 2013.
In July 2009, we completeddevelopment of back sheets using Asahi
Glass Co. Ltd.’s ETFE fluororesin andbegan shipping samples. ETFE has ahigh melting point compared to existing
fluorine films, which contributes togreater durability. Other reasons forchoosing it include its track record of use
in decorative materials, stable supplies,
and competitive cost. We are marketingit primarily to overseas manufacturers of
PV modules, and aim for about 5.0 billion
in sales by the fiscal term through March2012.
In addition, in November 2009 webegan shipping samples of a product that
integrates a back sheet and encapsulants
into one unit. We used two of DNP’s coretechnologies – lamination processing andfilm formation processing – to supply asingle product that serves the functionof both back sheets and encapsulants,
thereby reducing component costs and PV
module production costs. We also beganoffering a service whereby we combine
DNP’s back sheets with the customer’s
encapsulants. We intend to achieve some
3.0 billion yen in sales by supplying theseproducts and services by the fiscal term
through March 2012.

Photo print businessexpansion of
PrintRush PhotoBook■■ Full-fledged
do-it-yourself photo books

Thanks to the spread of digital cameras,
there is a rapidly growing market for photobooks commemorating events like family
trips or weddings, etc., both for personalenjoyment and as gifts. In September
2009, DNP’s wholly owned subsidiary
DNP Fotolusio Co., Ltd. launched thePrintRush PhotoBook service, Japan’s first
do-it-yourself printing system that allows
customers to easily produce a photo bookat a retail outlet. The user inserts themedia that contains their photos into thePrintRush PhotoBook system, uses themenu on the terminal’s screen to selectthe photos and backgrounds they want,
and as little as five minutes later can enjoya high-quality, highly original, 10-page
photo book. Over the next three years, weplan to install more than 500 PhotoBook
systems, primarily in major appliancestores and camera specialty shops.
In March 2010, wholly owned subsidiary
DNP DreamPages Co. Ltd. began offering
consumers the opportunity to edit andorder printing of original books via its
website. Users can make use of DNP’soriginal Shueitai font, which is used forprinting books that are sold commercially.
The finished book is delivered to whateveraddress the user specifies.

Self-service PrintRush PhotoBook terminal

Segment Information ▶ Lifestyle and Industrial Supplies ▶ STRATEGIC FOCUS

Strategic Focus

3

DNP’s market-leading anti-reflection films
for liquid crystal displays

The advantages of DNP’s anti-reﬂection ﬁlms
● A wealth of manufacturing expertise andtechnical patents acquired in the course ofdevelopment● A production framework that can provide
stable supplies of high-quality products andrespond rapidly when demand grows● A broad product lineup that meets clientsneeds● DNP’s anti-reflection film production bases
October 2001

Okayama Plant establishedFebruary 2004

Okayama Plant production line added

May 2005

Okayama Plant production line added

October 2006

Mihara Plant establishedMay 2009

Okayama Plant production line added

Segment Information

Demand for flat-panel displays is growing worldwide, backed
by various countries’ economic stimulus measures, thedigitalization of broadcasting, and the shift away from CRT
televisions. Liquid crystal displays (LCDs) are particularly
advantageous in terms of low energy consumption,light weight, potential for manufacture in large sizes, andadaptability to a wide range of applications, so demand forthem for use in televisions is growing rapidly all over the world.
DNP holds the largest share – some 70% – of the world
market for anti-reflection films that protect the outermost
surface of an LCD from dirt and scratches while reducing
glare from artificial or natural light. We have strengthened thisbusiness by winning praise for assembling a diverse productlineup and meeting customers’ needs precisely, and byacquiring a large number of related patents.
Predicting a bright future for the flat-panel display market, in1990 DNP established technology for designing anti-reflection
films. At that time, dry coating methods such as vapor
deposition and sputtering were the main technologies for film
formation, but they were not satisfactory from the standpoints
of production efficiency or cost. So DNP made use of someof the converting technologies that it had cultivated for many
years – i.e. coating technologies for applying thin, uniform
layers of functional materials – and in 2001 developed a
wet coating production method for anti-reflection film. Thismethod provides the same level of anti-reflective protection
as previous products, but makes it possible to sharply reduce
costs and greatly improve productivity even when applying
multiple layers of thin film.
In May of 2002, before the flat-panel display market began
to take off, we launched our Industrial Supplies Operations(currently called Opto-Materials Operations) and strengthened
our framework for developing and producing all types of opticalfilms. In addition to anti-reflection film used in LCDs, wehave developed back light film, electromagnetic interference
shielding film and contrast improvement film for use inplasma display panels (PDPs) and a wide range of optical film
products, in response to the diverse needs of this growing
market. We intend to continue leading this market by making
the most of our technical strengths and stably supplying highquality products that meet our customers’ specifications at
optimal prices.

backlight film
color filter

anti-reflection film for LCDs

DNP products used in a LCD

Production line

Okayama Plant

Mihara Plant

DNP Annual Repor t 20 1059Electronics

BUSINESS STRATEGIES

DNP’s Electronics segment applies the world’s most advanced printing techniques, including
microfabrication and patterning technologies, to supply a wide variety of display-related products andelectronic devices that support today’s information society. The segment has developed a stream ofproducts tailored to the needs of client companies, such as photomasks (masters for making LSI circuits),
multilayer printed wiring boards, and color filters used in liquid crystal displays (LCDs). As markets for theseproducts expand, we aim to secure stable profitability.

■ Basic Strategies
Our daily lives have become more convenient due to the widespread use of a variety of electronic
devices, starting with information devices like televisions, personal computers, and mobile phones, andincluding household appliances. Despite the expectation that these devices be continually upgraded withnew functions and greater ease of use, it is important that they be priced affordably for consumers.
In order to meet these needs, we must seek both advanced functionality and lower prices as we develop
and manufacture electronic products.
More than half a century ago, in 1958, DNP became the first company in Japan to develop shadow
masks for color televisions, and in 1959 we succeeded in developing photomasks used in semiconductor
manufacturing. Ever since, DNP has remained an industry leader by continually refining its technologies,
and has secured its position as the world’s top provider of many products despite the electronics
market’s vulnerability to sudden changes. In addition to developing cutting-edge technologies andactively deploying the latest equipment, we also speed up our business development through mergers,
acquisitions, and corporate alliances with various companies.

60

Emphasizing Technological
Development

Bolstered by world-class advanced technology, DNP’s electronics
products have won acclaim for being No. 1 in the world in many fields.
In order to maintain and further sharpen this competitive edge, we willplace even more emphasis on research and development, and develop
new products by perfecting our quality control and microfabrication skills.

Rapid Response to Change

We aim to achieve medium to long-term business growth by responding
quickly to sudden changes in market conditions or customer needs. We
will do this by building a flexible production framework that includes“inplant” and “by-plant” manufacturing, by providing manufacturing
technologies and other forms of support for our business partners.

Concentrated Allocation ofManagement Resources

While giving ample consideration to potential changes in product life
cycles and other business risks, we aim to concentrate our management
resources on strategically important products with high growth potential inorder to secure stable profitability.

Accelerating Business Startups

We intend to quickly pick up on sudden changes in marketplace requirements
and speed up development of new technologies and businesses. Toward that
end, we aim to expand our businesses efficiently, which includes exploring
possibilities for mergers, acquisitions or other alliances that facilitate ongoingcooperation between partners that have complementary strengths.

Segment Information ▶ Electronics ▶ BUSINESS STRATEGIES■ Major Policies
Quick Response to Market Needs and Comprehensive
Optimization of Production Systems

Flexible Business Models Focused on Profitability
As LCD panel substrate sizes increase, we need to createbusiness models that can respond flexibly to the problems
and concerns of our color filter business’s corporate clients.
DNP responds quickly to changes in manufacturing
processes, with ample consideration for return on investment(ROI)*. This sometimes leads us to solutions like building a
new facility as a “byplant” adjacent to a customer’s factory oran “in-plant” directly connected to a customer’s production
line. We will also work to expand our own business byflexibly meeting customers’ needs in overseas markets aswell is in Japan. As we choose from a wide array of businessmodels, including corporate tie-ups with related companies
and royalty businesses based on providing or supporting
the licensing of technology, we will always giving due
consideration to models with emphasis on ROI.

Building a Strong Business Constitution by Cultivating
New Mainstays for the Electronic Device Business

Segment Information

DNP concentrates management resources on boostingproduction capacity and developing new technologies andproducts so that we can respond rapidly to sudden changes
in the demands of electronic device markets.
For example, DNP has the special advantage of being
the only company in the world to succeed in mass
producing color filters for LCDs with both inkjet-based andphotolithographic methods. We intend to make the most of
this advantage in the future as we take steps like improving
productivity and thoroughly eliminating waste in orderto further strengthen our profitability base and increase
competitiveness. Parallel with the startups of large-scaleassembly lines by LCD panel makers, we will establish new
manufacturing bases and optimize our overall production
framework, including existing bases.
We will strive to expand our business by enhancing our
new product lineup, both by increasing the added value ofexisting products by advancing functionality – for example
by adding touch-panel functionality – and by focusing
on research and development for components of nextgeneration products like organic EL displays.

close to matching. More than half of DNP’s photomask
sales come from advanced products with line widths of lessthan 65nm**. As one example of how we are expanding
our business in response to the demand for increasing
miniaturization, DNP controls more than half of the world
market for cutting-edge photomasks with line widths of
45nm or less.
In addition to the Agrate Brianza Plant that we openedin Italy in 2002, we opened a second overseas production
base in April 2010 in Taiwan’s Hsinchu Science Park, where
we began mass producing photomasks. The new plant willserve as our base for supplying advanced photomasks in
the Asian region, the site of sharp growth in demand forsemiconductors.
Going forward, we aim to increase collaboration withcustomers and make use of the results of joint development
to move ahead of our technological roadmap targets in
preparing a framework for developing and supplying productsthat require line widths of 32nm, 28nm, and even smaller. In
this way, we aim to solidify our hold on the top share of theworld photomask market.

We intend to apply microfabrication and other printing
techniques to the active development of a wide range of
products including components for hard disk drives, highdensity build-up wiring boards, and MEMS*** products. Weview electronic modules as a particularly promising growtharea, in which we intend to concentrate management
resources.
In addition, we will build a flexible and strong businessconstitution that is not overly dependent on thesemiconductor market. The steps we take to accomplish thiswill include expanding LSI design and other solutions-based
businesses, and developing our IC tag business in conjunction
with application development.
* ROI (return on investment) : the ratio of profit returned relative to the amount invested** nm (nanometer) : one billionth of a meter*** MEMS (micro electro mechanical system) : a group of components 1-100
micrometers in size, made with semiconductor device microfabrication technologies

Maintaining Our Top Share of the World Photomask
Market by Virtue of World-Class Technology
DNP has established a solid reputation for outstanding
photomask quality, particularly regarding our most advanced
products, to the point that we have secured the top sharein the global photomask market apart from in-houseproduction by semiconductor manufacturers. What makes
our photomasks stand out is our capacity for advanced
technological development, which no competitor can come

DNP Annual Repor t 20 10

61

Electronics

FINANCIAL RESULTS■ Financial Highlights■ Business Environment(¥ billion, %)2008.32009.3¥ 322.3

Net sales¥ 256.0 ¥ 257.5

Operating income

19.8

2.6

8.3

Operating income margin

6.1%

1.0%

3.2%

Net Sales

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

120

800

100
600
80

60

400

322.3
257.5

256.0
200

40

19.8

20

2.6

8.3

0

0

08

62

2010.309

10

Looking at 2009 worldwide shipments of electronic
devices that make use of products from our Electronics
segment, shipments of LCD televisions grew 37% overthe previous year to 145 million units, compared to 34%
year-over-year growth in 2008. Shipments of personal
computers amounted to 358 million units, up just 1% for
all of 2009, but up 22% year over year if we look just at the
October-December quarter, when PC shipments displayed
their biggest growth spurt in seven years. Mobile phone
shipments declined by about 4% from the previous year,
but in the October-December quarter they resumed yearon-year increase for the first time since July-September
2008. This growth trend continued unabated into 2010.
Examples of robust demand in the first quarter of 2010
include PC shipments growing 23% year on year and LCD
televisions growing 50%.

■ Summary of Financial Results
Although net sales for the term ended March 2010 wereaffected by slow recovery of the photomask market and theresulting decline in photomask sales relative to the previous
year, as well as by the January 2009 cessation of sales ofback panels for plasma displays, sales were bolstered bya recovery in color filters in the second half and by strong
sales of components for hard disk drives. Net sales for theElectronics segment amounted to 257,503 million yen, littlechanged from the previous term. The fourth quarter of theJapanese fiscal year is generally a period of low demand.
However, net sales grew steadily after bottoming out in the
fourth quarter of the fiscal year ended March 2009, backed
in part by continued strong demand, mainly for color filters.
Operating income shot up by 222.7% to 8,316 million
yen thanks to strong sales of color filters, especially fromthe third quarter, and thanks to benefits from structuralreforms such as improved productivity and decreased fixed
costs resulting from the posting of impairment losses in theprevious term. If we look at operating income on a quarterly
basis, following a loss of 1.1 billion yen in the first quarter,
the segment posted operating income of 2.3 billion yen in
the second quarter and then continued to recover nicely.
The Electronics segment contributed 16.1% of DNP’s
total net sales, almost unchanged from the previous year’s
16.0%. Its operating income contribution, however, jumped
from 4.7% of the previous fiscal year to 11.0%.

Segment Information ▶ Electronics ▶ PORTRAIT OF DIVISIONSPORTRAIT OF DIVISIONS

Display Components
Strategic Opportunities and Future Development

DNP’s Display Components Operations started out morethan half a century ago, in 1958, with the first successful
development of shadowmasks for CRT televisions inJapan.
Today, Display Components focuses on manufacturingcolor filters for liquid crystal displays (LCDs), which are
now the main type of display used in personal computers
and televisions. The division supplies products mainly
to Japanese manufacturers, but meets the global needsof manufacturers in South Korea, China, Taiwan, andelsewhere. As display panel size grew, we brought ourcolor filter production facilities closer to client companies’
LCD panel plants. In addition to strengthening ourpartnership with customers, we developed an inkjetbased production method and other new technologies
as part of our efforts to improve quality and bolster costcompetitiveness. We are strengthening our ties withclients both in Japan and overseas by providing color
filter manufacturing technologies and other types of
support. We are also actively engaged in creating new
sources of revenue, such as sensors for touch panels andcomponents for organic EL displays.

Demand for LCDs is expected to keep growing due tocontinued replacement of CRT televisions and the spreadof devices like tablet PCs with touch panels. In addition
to existing trends toward lower prices and larger sizes,
LCDs will keep gaining added value through the adoptionof LED backlights, lower power consumption, and 3-Dcompatibility, etc.
However, the increased investment burdens imposedby factory expansion and larger substrate size present
a challenge to panel manufacturers. Especially as largescreen LCD televisions become the norm, the market
is looking increasingly favorably at the inkjet production
method because it allows the construction of new
manufacturing lines with relatively little initial investment
and is highly cost competitive. At the same time, there is
still demand for products with the properties that result
from manufacture by photolithography. DNP is the only
company in the world that mass produces color filters
using both inkjet-based and photolithographic methods
and we intend to make the most of this unique position,
along with our superior production capacity and strength
in technological development, to expand our business.
In the future, we intend to further expand our businessby participating appropriately in organic EL displays andother next-generation products, and by adding greater
value to our color filters. We can accomplish the latter byimproving light transmission rates, or by adding colors,
like yellow or cyan (bright blue) to the three colors now
generally used in color filters: red, green, and blue (RGB),
in order to greatly expand the range of colors that can be
reproduced.

Market Trends and Summary of Financial Results
In 2008, the world market for LCD panels suddenly
lost steam when manufacturers adjusted production
in response to an oversupply of products. In 2009,
worldwide sales of LCD televisions picked up speed anddemand for LCD panels recovered quickly thanks to an
economic recovery mainly spurred by economic stimulus
measures enacted by various governments and economic
growth in the newly developing nations. Demand
became especially strong from the summer of 2009,
with production of large-size panels becoming particularly
active. Order volumes for DNP color filters increased,
and we began producing filters in all sizes, including 6thgeneration and 8th-generation, at full capacity. In October
2009, we started up our new 10th-generation color filter
plant in Sakai City, Osaka Prefecture. In the year ended
March 2010, net sales for the operating division grew by
15% over the previous fiscal term.

Segment Information

Main Businesses

Color filters

DNP Annual Repor t 20 10

63

Electronics

Electronic Devices
Main Businesses
In 1959, DNP succeeded in developing photomasks(masters for making semiconductors) and started up its
Electronic Devices Operations. We applied the patterningand etching technologies that we cultivated in our printing
business to photomask manufacture, which entails
forming minute semiconductor circuit patterns on glass
substrates. In 1964, we succeeded in developing leadframes used for wiring semiconductors. Since then, we
have increased collaboration with manufacturers in Japanand overseas in order to provide a variety of products thatare indispensable to electronic devices. In recent years,
we have been focusing on the development of highprecision, advanced products that require finer microprocessing, such as build-up wiring boards and MEMS
products.

Market Trends and Summary of Financial Results
Due to the effects of worldwide economic recession, theglobal semiconductor market shrank in calendar 2008
compared to the previous year. The decline continued incalendar 2009, with semiconductor sales falling 9% fromthe previous year to 226.3 billion dollars. However, in thesecond half of 2009, shipments of products like personal
computers, mobile phones, and electric appliances
began to increase. As of the start of 2010, the market
is expected to continue to grow on the strength of new
demand for electronic devices from newly developing
countries and replacement demand in developed
countries.
Due to depressed prices for middle and low-end
products and lackluster sales of advanced products,
DNP’s sales of photomasks for the entire term ended
March 2010 declined compared to a year earlier. In
the second half of the term, however, semiconductor
manufacturers renewed capital spending aimed at further
miniaturization. DNP responded by working to develop
cutting-edge photomask production technology andby starting up a plant in Taiwan in early 2010, thereby
enhancing our production framework’s ability to adapt
appropriately to overseas demand.
Looking at etched products, sales of lead frames
declined from the previous year, but increased demand fornetbook and notebook computers led to large increases
in the number of suspensions and other hard disk drive
components sold by DNP.

64

There was a significant drop in sales of high-density buildup wiring boards, primarily used in camera modules formobile phones, due to shrinkage in demand for productswith advanced functionality.

Strategic Opportunities and Future Development
As the semiconductor market recovers, chip makers
are stepping up investment in miniaturization. We aim
to increase our share of the market for cutting-edge
photomasks as circuit line widths decrease. Now thatdemand for 45nm products has begun to grow in earnest,
we plan to begin mass production. A combination of
ArF immersion and double exposure has become themost likely next-generation photolithography techniquefor making 32nm and 28nm products. We will make themost of our strength as the world leader in these andother micro-processing technologies to take advantageof the business opportunities presented by increasing
miniaturization. At the same time, we will respondcautiously to such trends as reorganization among chip
manufacturers and increased outsourcing to foundries in
Taiwan and other countries.
There is growing demand for thin, compact, highdensity semiconductor packages. Going forward, we will
use our strength in microfabrication to increase our shareof the market for etched products. We will also actively
develop non-semiconductor applications for etched
products, such as hard disk drive suspensions.

Lead frameSegment Information ▶ Electronics ▶ TOPICSTOPICS

alternate insulating and conductive layers). It leaves
a large amount of space for mounting components,
affording a great deal of design freedom because
electrical connections can be placed anywhere on alayer.

Focus on developing newtechnologies andstrengthening our supply
frameworks■■

Installation of new high-density
printed wiring board production
line in China

In July 2009, DNP and Molecular
Imprint Inc. of the U.S. agreed to form a
strategic alliance to develop nanoimprint
lithography systems for mass producing
semiconductors with line widths of 22nm
and less. Making semiconductors using
nanoimprint technology entails pressing
a template against a resin-coated siliconwafer so that the pattern on the templateis transferred to the resin. The aim of
the alliance with Molecular Imprint is
to establish technology for reproducing
nanoimprint templates by the end of 2011,
then shorten production lead time andbring down costs in order to start mass
production of templates for semiconductor
memories and other applications in 2012.

DNP opened a new plant in Taiwan’s
Hsinchu Science Park to manufacture
cutting-edge photomasks in April
2010. We established manufacturingsubsidiary DNP Photomask Technology
Taiwan Co., Ltd., which started out
mass producing 65nm products.
From the summer of 2010, we plan
to have the new company also mass
produce cutting-edge 40nm products.

b
DNP Photomask Technology TaiwanndaMaster template for nanoimprinting

New production line for making high-density printed
wiring boards in China* B2it (pronounced be-square-it) technology:
An original DNP technology that uses screen
printing to form “bumps” of electrically conductive
paste that serve as interlayer connections on a buildup board (a printed wiring board made by piling up

Segment Information

DNP and Unimicron Technologies
Corp. installed a new production line in
Unimicron’s Kunshan Plant in Jiangsu
Province, China, to manufacture highdensity printed wiring boards using DNP’soriginal B2it wiring board manufacturing
technology. The partners shipped samples
in May 2009 and started mass productionin July. B2it is a technology that answers
the market’s demand for thinner, morecompact wiring boards for use inelectronic devices like mobile phones anddigital cameras. Another advantage is that
it affords a great deal of freedom in wiringboard design. As demand increases, we
expect to add additional production linesat Unimicron’s Kunshan Plant until wereach monthly production capacity of
about 10,000 square meters and annual
sales of approximately 18.0 billion yen by
the fiscal term through March 2013.

on next-generation
nano-imprint technology■ Tie-up

our overseas
supply framework by■■ Strengthening
a cutting-edge
photomask production base■■ establishingin Taiwan

DNP controls the largest share of theworld’s photomask market than any othermanufacturer. It has four manufacturing
plants in Japan and a plant in Agrate
Brianza, Italy. DNP built the new plantin order to establish a stable photomask
supply system for the South East
Asian region. Taiwan, where growth insemiconductor demand is particularly
rapid, is to be the system’s hub. The newplant will initially supply cutting-edge
photomasks to Taiwanese semiconductor
makers, with an eye toward later
expanding its customer base to include
semiconductor manufacturers throughout
South East Asia as well as in Japan.

DNP develops the world’s first software to simulate printing ink movement
In June 2009, DNP Fine Chemicals Co., Ltd., a DNP subsidiary,
and the "Earth Surface Dynamics and its Predictive ModelingResearch Team" (part of the Japan Agency for Marine-Earth
Science and Technology’s Institute for Research on Earth
Evolution) led by Hide Sakaguchi jointly developed a prototypeof the world’s first computer software for simulating thecomplex movement of ink. It had been difficult to simulate themovement of ink with a method that had been tried in the past,using numerical fluid dynamics. DNP Fine Chemicals intends
to use the new software to prevent printing equipment failures
and to develop inks that enable clearer printing. The company
will also apply the technology to a wide range of other uses,
such as simulating movements of the earth's crust and mantle.

DNP Annual Repor t 20 1065Strategic Focus

4

Startup of 10th-generation color filters for LCD panelsand expansion of large-size color filter production
capacity

In 1958, DNP applied its printing technologies to develop
the first made-in-Japan shadow masks for color televisions.
Ever since, DNP has been responding to market trends andcustomer needs by developing a variety of display-related
products. In recent years, the flat-panel display market hascontinued growing by almost 20% a year. The spread oflarge-size liquid crystal displays (LCDs) for televisions has
proceeded at an especially astonishing pace, and DNP has
been increasing the size of the color filters that it supplies inline with increasing display size.
In order to efficiently manufacture large color filters, weneed to use large glass substrates referred to as 8th-generationor 10th-generation substrates. DNP has developed techniquesand expertise for handling and precisely processing glass
sheets that are more than 3m long on each side and extremely
thin – only 0.7mm thick – without breakage. Furthermore, weare the only manufacturer in the world that mass produces

Advantages of DNP's Color Filter Business● DNP has established its own mass production

technologies for color filters that can beused with any type of LCD driver, including
VA (Vertical Alignment) and IPS (In-Plane
Switching)● DNP is the only manufacturer in the world tooffer two methods of color filter production:
inkjet, which DNP was the first in the world
to establish as a mass production method in
2006, and photolithography, in which we havesome 25 years worth of accumulated expertise● Outstanding cost-cutting capacity due to inhouse manufacture of high quality color resists

color filters using both inkjet and photolithography methods
and meets the needs of all LCD panel manufacturing clients,
although they use different methods.
By accumulating color filter production technology andexpertise, DNP has continued to supply high-quality products
and earn the solid trust of LCD panel manufacturers.
In October 2009, we started up our new Sakai Plant, theworld's first 10th-generation color filter plant, within Sharp
Corp.'s industrial complex in Sakai City, Osaka Prefecture. In
2006, DNP commenced mass production of 8th-generation
color filters using the inkjet method at Sharp’s Kameyama
Plant No. 2. It was because of Sharp' s high regard for our
performance there that DNP became the first vendor of 10thgeneration color filters. In April 2010, DNP started up an 8thgeneration color filter plant adjacent to the Himeji factory of
IPS Alpha Technology, Ltd., an LCD panel-manufacturing joint
venture of Panasonic Corporation and Hitachi, Ltd. The startupof these two new facilities gives DNP the world’s largest
production capacity for color filters used in large-scale LCD
panels.
We intend to continue expanding this business bystrengthening our ties with all LCD panel manufacturers,
increasing production capacity in general and of color filters forlarge-size displays in particular, boosting production efficiency,
and creating added value.

Sakai Plant● Timeline of DNP’s Color Filter Business Development
1989

Started at Kuki Plant (1st- generation)

1994

Otone Plant (2nd- to 4th- generations)

Himeji Plant

Glass Substrate Sizes by Generation（ mm ）

2,850

10th-generation

2001 – 2004 Mihara Plant (4.5 - to 5th- generations)
2,160

2002

Kurosaki Plant (3rd- to 4.5th- generations)8th-generation
1,870

170 cm tall

7th-generation2005 – 2006 Kurosaki Plant (6th- generation)
1,500

2006

6th-generation

Kameyama Plant (8th-generation)

2008

Kurosaki Plant (8th- generation)

2009

Sakai Plant (10th- generation)

2010

Himeji Plant (8th- generation)

1,100

5th-generation
730
550
370
300

4th-generation
3rd-generation

400 470 650 920

1,300

1,800 2,200 2,400

3,050（ mm ）Note: Precise sizes vary by manufacturer.

66

Corporate Governance
CONTENTS
68 Corporate Governance
75 Board of Directors, Statutory
Auditors and Corporate Officers

Segment Information

DNP Annual Repor t 20 1067Corporate Governance1. Corporate Governance■ 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 tosociety as a Group and being trusted by its shareholders,customers, consumers, employees and other stakeholders
is critical to improving the competitiveness of the Group.
Toward this end, we regard corporate governance, including
an internal control system, as a top management priority.
We have strived to establish and manage an organizational
structure that allows for precise managerial decision-making,prompt and appropriate execution based on the decisions
made, and proper supervision and surveillance; strengthen
education and training to improve each employee’s
awareness of compliance issues; and enhance our overall
corporate governance.

■ Progress on Corporate Governance Measures(1) Corporate governance structure
DNP’s organization is designed to allow the directors
with specialized expertise and experience in a wide
range of business fields to participate in management
decisions, to take responsibility and authority as they
execute their work, and to supervise the work ofother directors. Also, so as to promptly make precise
management decisions, smoothly act based on thedecisions, and further strengthen proper supervisory
functions, independent directors participate in decisionmaking, and corporate officers named by the Board of
Directors execute the decisions made by the Board of
Directors, and have the responsibility and authority to
decide upon and carry out those matters delegated by
the Board. Working in close communication with thedirectors and in close proximity to the workplace, theirfunction is to ensure that the views of those on thefront lines are reflected in management.
At the general shareholders’ meeting held June 28,
2007, DNP revised the term of 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 the business environment;
to further clarify management responsibility for eachfiscal year; and to increase opportunities to earn theconfidence of shareholders.
The Board of Directors consists of 24 directors(as of June 29, 2010), including one independent
outside director. In principle, the Board meets once amonth. Based on the Company’s Board of Directors
Regulations, the directors ensure that operations

68

are appropriately run and mutually supervise dayto-day operations. The directors and corporate
officers hold executive committee meetings oncea month to exchange information that is helpful for
efficient decisionmaking. To speed up the Company’s
activities and make them more efficient, DNP has alsoestablished a Management Committee consistingof directors at the senior managing director level
and above. The committee meets once a month, inprinciple, to review and discuss management policies,
strategies, and important business matters.
DNP has in place a Board of Statutory Auditors thatconsists of five auditors, including one auditor withconsiderable knowledge of finance and accounting andthree outside auditors (one of which is independent). In
accordance with auditors’ prescribed audit criteria andresponsibilities, the statutory auditors conduct auditsof the directors’ management of day-to-day operations
and, as necessary, seek information from the directors
and employees regarding business operations.
With such a corporate governance structure, theBoard of Directors can make appropriate decisions
efficiently.

(2) Internal controls and auditing
In order to maintain a structure that allows for precise
management decision-making, appropriate and prompt
execution of business, and inspection and monitoring ofthese functions, the Corporate Ethics Committee, as the
body in charge of internal control, inspects and guides
DNP’s operating units according to the DNP Group’s
Basic Compliance Management Regulations, andregularly reports to auditors on management conditions.
In addition, the Auditing Department (consisting of
19 employees) ensures the propriety of operations byconducting accounting and operational audits basedon internal audit regulations and by providing progress
reports to the statutory auditors and the accounting
auditor.
The statutory auditors hold regular meetings of theBoard of Statutory Auditors, work with other statutory
auditors to perform their audit duties, and closelycooperate with the accounting auditors by receivingfrom them an explanation of the audit plan at the startof the fiscal year, assessing audit operations during the
fiscal year as appropriate, and receiving a report of audit
results at the end of the fiscal year.
The names of the certified public accountants who
performed the accounting audits, the audit firms they
are employed by, and their assistants in the audit work
are as follows:Corporate Governance ▶ Corporate Governance(4) Progress on other corporate governancemeasures●Certified public accountants who performed theaccounting audits (Continuous audit years)
Senior partner, managing partner
Hirofumi Nikaido (1 year), Kazuhiko Terada (3 years),
Tsuguhiro Tsukakoshi (1 year)
Managing partner
Junko Shima (3 years)●Audit firm
Meiji Audit Corporation●Number of accounting audit assistants
11 certified public accountants, 9 others

DNP set down the DNP Group Code of Conduct for
employees to follow, so as to contribute to the prosperity
and solid development of society, promote fair andappropriate corporate activity, protect the environment,
contribute to society, and establish a free and lively
corporate culture. Among the stipulations is that DNP,
as an emergently evolving company that does not dobusiness with antisocial elements, fulfill its corporate
responsibilities to society as an emergently evolving
corporation, respect its shareholders, customers,
consumers, employees and other stakeholders, and act
in a way that earns trust. The DNP Group CSR Report2010 details not only the DNP Group’s business activities
but also efforts to address social issues and protect theenvironment, and aims to enhance understanding anddeepen confidence and trust through communication
with various stakeholders.

(3) Development of a risk management structure
To manage risks related to compliance, information
security, the environment, disasters, product safety,
insider trading and export management, the Corporate
Ethics Committee, other special committees, and otherhead office divisions develop rules and conduct training
as part of risk-related preemptive efforts, and respondpromptly to avert or minimize losses to the DNP Group.
Certain divisions and directors are promptly establishedand appointed for responding to risks that have newly
developed.

(5) A diagram of the corporate governance structure illustrating points (1)-(4) above is shown below.
General Meeting of Shareholders
Audit

Audit

Board of Directors
Management Committee

Corporate Governance

Representative Directors

Corporate Ethics Committee

ReportingOpen Door Room
Directors in charge

ReportingInformation Disclosure Committee

Group companies

Audit
Information Security Committee
Product Safety Committee
Environmental Committee
Complaint Handling Committee
Central Disaster Prevention Council

Audit
Guidance

Auditing Department

Divisions

Oversight of internal controls

Head office

Operating units

Accounting Auditors

Corporate officers

Audit

ReportingBoard of Statutory Auditors

Insider Trading Prevention Committee

Assistance

Audit
Legal and other main divisions

Guidance
Training

Audit unit

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

Corporate Social Responsibility Committee(Autonomous implementation, inspection,
review, improvement)

Audit
Guidance
Reporting

Coordination

DNP Annual Repor t 20 1069

(6) Interests between DNP and its outside director
and outside statutory auditors
Neither the outside director nor the outside statutory
auditors have personal, financial or business relationships
or other interests with DNP. Outside director Tadao
Tsukada and outside auditor Yasuchika Negoro havebeen designated as independent directors because they
do not fall under requirements set forth in “a” through “e”
of Article 211, Paragraph 6, Item 5 of the Enforcement
Rules for Securities Listing Regulations, and they haveno conflicts of interest with general shareholders infulfilling their roles.
Outside director Tadao Tsukada owns 2,000 sharesof DNP, outside statutory auditor Kiyoshi Yuzawa 2,000
shares, and outside statutory auditor Yasuchika Negoro
3,000 shares.

Measures for Enhancing DNP’s Corporate
GovernanceRegarding the development of arrangements for ensuring
the propriety of operations decided based on the Japan’sCompanies Act and the Enforcement Regulations of
the Japan’s Companies Act for ensuring the proprietyof operations, based on subsequent developments, thearrangements were revised as follows and approved at a
Board of Directors meeting held on March 17, 2010.

1.

Arrangements for ensuring that the executionof operations by the directors and employees
complies with the laws and the Articles ofIncorporation(1) The Group provides all employees (including directors)
with a copy of DNP Group Code of Conduct which DNP
established as a rule of behaviors and conducts training
to familiarize them with it.
(2) The Board of Directors meets once a month, in principle.
Based on the Company’s Board of Directors Regulations,the directors ensure that operations are appropriately
run and mutually supervise day-to-day operations. By
naming independent outside directors, the Company
has established a way to ensure that the work of
directors is in compliance with the laws and the Articles
of Incorporation. In addition, directors with day-to-day
business responsibilities preempt acts in violation oflaws or the Articles of Incorporation by exercising theirauthority in accordance with organizational regulations,
position authority rules, collective decision-making rules,
and other internal rules, and supervising the conduct of
the heads of the various divisions, including corporate
officers.
DNP has in place a Board of Statutory Auditors that70

consists of auditors, including outside statutory auditors.
In accordance with auditors’ prescribed audit criteria
and responsibilities, the statutory auditors including
independent outside auditors conduct audits of thedirectors’ management of day-to-day operations.
(3) The Corporate Ethics Committee, which consists of thedirectors of various divisions of the head office, oversees
the establishment and management of arrangements
for ensuring the propriety of operations in the DNPGroup according to the DNP Group’s Basic ComplianceManagement Regulations.
(4) Under the oversight of the Information Disclosure
Committee, Insider Trading Prevention Committee,
Information Security Committee, Product Safety
Committee, Environmental Committee, Complaint
Handling Committee, Central Disaster Prevention
Council, and various basic organizational units of thehead office in charge of specific laws and regulations
conduct reviews, provide guidance, and offer training forother basic organizational units and Group companies intheir areas of responsibility.
(5) The heads of the various divisions autonomously
determine, implement, inspect, review and improve
the required arrangements and procedures for theirdivisions, based on the DNP Group’s Basic ComplianceManagement Regulations and in light of the specificoperations of each division.
(6) Based on internal audit regulations, the Auditing
Department, which is independent of the operating
units, conducts internal audits and provides guidance
to the various divisions and Group companies regarding
the establishment and management of arrangements for
ensuring the propriety of operations.
(7) The Corporate Ethics Committee has established an
Open Door Room, a gateway for whistleblowing within
the DNP Group, as well as a Supplier Hotline, a gateway
for information from materials suppliers and service
providers, to receive reports and information concerning
employees’ legal violations and to respond accordingly.
(8) Responses regarding the development and management
as well as evaluation and reporting of internal controls on
financial reporting are based on the Basic Policies andFiscal-Year Plan Regarding Internal Controls on Financial
Reporting set by the Board of Directors to ensure legal
compliance and the reliability of the Company’s financial
reports.
(9) To establish a structure with no ties with anti-social
elements, the DNP Group Code of Conduct specifies
that no business activity shall be conducted with antisocial elements and calls for compliance with this rule. At
the same time, the DNP Group develops arrangementswith companies that it works with to cut off ties in theCorporate Governance ▶ Corporate Governanceevent that the counterparty company is discovered to
be an anti-social element. The DNP Group also works
to develop ties with the police, law firms, and otherexternal professional entities to prepare for unreasonable
demands from anti-social elements.

2. Rules and other arrangements for managing
the dangers of losses
To manage risks that could have a material impact
on business, such as those related to compliance,
information security, the environment, disasters, productsafety, insider trading and export management, theCorporate Ethics Committee, other special committees
and other divisions of the head office develop rules andconduct training as risk-related preemptive efforts, andrespond promptly when risks arise to avert or minimize
losses to the DNP Group. In addition, under the oversightof the Corporate Ethics Committee, risks are regularly
inventoried. For any new risks that could have a material
impact on business, units and directors are designated torespond properly.

3. Arrangements for ensuring that the executionof operations by directors is efficient

4. Arrangements concerning the maintenanceand management of information relating todirectors’ execution of operations
Information on the directors’ execution of operations isregistered or recorded in the form of minutes of Boardof Directors’ meetings, minutes of various committee
meetings, approval documents and other documentation,

5. Arrangements for ensuring proper business
operations in the Group, made up of the joint
stock corporation, the parent company, andsubsidiaries(1) To ensure the propriety of its operations, the DNP Grouphas established DNP Group Code of Conduct for all
employees (including the directors) and conducts training
to familiarize employees with them. The Group has alsoestablished Basic Compliance Management Regulations
concerning the establishment and management of
arrangements for ensuring the propriety of operations,and based on them, Group companies implement theregulations.
(2) The Group companies autonomously determine,
implement, inspect, review, and improve the required
arrangements and procedures for their divisions, basedon the policies written in (1) above and in light of thedetails and scale of their businesses.
(3) The Auditing Department, the Corporate Ethics
Committee, other special committees, and otherdivisions of the head office audit or review, provide
guidance, and offer training on the progress made as
specified in (1) and (2) above.
Corporate Governance(1) The Board of Directors meets once a month and at othertimes as needed, as one fundamental arrangement for
ensuring that the execution of operations by directors
is efficient. The Management Committee, consistingof directors at the senior managing director level andabove, meets once a month, in principle, to contributeto efficient decision-making and to review and discuss
important business matters. In addition, the Executive
Committee meets once a month to share management
information among the directors.
(2) Those responsible for carrying out operations basedon decisions by the Board of Directors do so within
their authority and in accordance with organizational
regulations, position authority rules, collective
decisionmaking rules, and other internal rules. Also,
directors with day-to-day business responsibilities try to
do their work more efficiently by delegating appropriate
authority to the heads of the various divisions, including
corporate officers.

or electronic documentation. This information registeredor recorded as paper or electronic documents isappropriately 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.

6. Arrangements concerning employees who
assist auditors with their work and mattersrelated to the independence of such employees
from the directors(1) The Audit unit with a dedicated staff assists auditorswith their work.
(2) The Audit unit staff performs operations under the
direction of the statutory auditors. Reviews andreassignments of and disciplinary actions against staff
require the consent of the Board of Statutory Auditors.

7. Arrangements for directors’ and employees’
reports to statutory auditors, arrangements
regarding reports to other auditors, andarrangements for ensuring that statutory
auditors conduct their audits effectively(1) The statutory auditors may request reports on day-today operations from the directors and employees asnecessary, and DNP Group directors and employees are

DNP Annual Repor t 20 1071

to promptly provide such reports when requested to doso.
(2) The directors are to promptly report to the statutory
auditors any facts that come to light that are in violationof laws or might seriously hurt the Group.
(3) The Auditing Department and the Corporate Ethics
Committee regularly report to the statutory auditors on
the establishment and management of arrangements for
ensuring the propriety of audits and operations.
(4) The Representative Director regularly exchanges views
with the Board of Statutory Auditors.

Summary of Limitation of Liability Contract
DNP and its outside director and outside statutory auditors
concluded an agreement that limits directors’ and auditors’
liability for damages within the parameters set forth in
Article 423, Paragraph 1 of Japan’s Companies Act, solong as they execute their duties in good faith and without
serious negligence.

DNP’s Articles of Incorporation specify that directors(including former directors) may, by a resolution of theBoard of Directors, in accordance with Article 426,
Paragraph 1 of Japan’s Companies Act, be exemptedfrom liabilities in Article 423, Paragraph 1 of Japan’sCompanies Act so that the directors can sufficiently
carry out their expected responsibilities.

(3) Exemption of auditors from liability
DNP’s Articles of Incorporation specify that statutory
auditors (including former statutory auditors) may, by aresolution of the Board of Directors, in accordance with
Article 426, Paragraph 1 of Japan’s Companies Act, be
exempted from liabilities in Article 423, Paragraph 1 ofJapan’s Companies Act so that the statutory auditors
can sufficiently carry out their expected responsibilities.

(4) Interim dividend

DNP’s Articles of Incorporation specify that the number ofregular members on the Board of Directors shall be no morethan 25.

DNP’s Articles of Incorporation specify that theCompany may, by a resolution of the Board of
Directors, pay a monetary dividend stipulated in
Article 454, Paragraph 5 of Japan’s Companies Act toshareholders of record as of September 30 of each year
and shareholders with actual stock certificates, so thatprofits can be flexibly passed on to shareholders.

Requirements for Shareholder Approval of Director
Nominees

Requirements for Shareholder Approval of Special
Resolutions

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

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

Number of Directors

Matters to Be Resolved at the Meeting of
Shareholders that Can Be Resolved by the Board of
Directors(1) Share buybacks
DNP’s Articles of Incorporation specify that theCompany may buy back its shares in the open market,
in accordance with Article 165, Paragraph 1 of Japan’sCompanies Act, upon approval by the Board of Directors,in accordance with Article 165, Paragraph 2 of Japan’sCompanies Act, to allow the Company to use capital
more efficiently and implement a flexible capital structure
policy in response to changes in business conditions.

72(2) Exemption of directors from liability

Corporate Governance ▶ Corporate GovernanceCompensation paid to directors and statutory auditors(1) Total compensation paid by DNP, by category of director/statutory auditor, totalcompensation by type, and the number of directors and auditors covered
Category of director/
statutory auditor
Directors(excluding outside directors)

Statutory auditors(excluding outside auditors)

Outside directors
and auditors

Total compensation by type (¥ million)
Base compensation

Bonus

Number of directors
and statutory
auditors covered

1,968

1,758

210

25

80

80

─

2

91

91

─

4

Total compensation(¥ million)

Notes: 1. Bonuses are provisions for bonuses for directors and statutory auditors for the fiscal year.
2. There were 24 directors (excluding outside directors), two statutory auditors (excluding
outside auditors), and four outside directors and auditors as of the end of the fiscal year.

( 2) Company directors and total compensation
Name(director type)

Yoshitoshi Kitajima(Director)

Koichi Takanami(Director)

Satoshi Saruwatari(Director)

Masayoshi Yamada(Director)

Total compensation(¥ million)

Total compensation by type (¥ million)
Company
Base compensation

Bonus

Dai Nippon Printing
Co., Ltd.

710

29

Hokkaido Coca-Cola
Bottling Co., Ltd.

48

–

127

Dai Nippon Printing
Co., Ltd.

112

14

119

Dai Nippon Printing
Co., Ltd.

105

14

127

Dai Nippon Printing
Co., Ltd.

112

14

787

Corporate GovernanceNotes: 1. Total compensation is shown only for those with compensation of at least 100 million yen.
2. The portion of base compensation accounted for by Hokkaido Coca- Cola Bottling Co.,
Ltd. includes a portion corresponding to bonuses, as the company combines bonuses into
annual compensation.
3. DNP’s bonuses are the amounts expected to be paid as bonuses for the current fiscal year.

( 3 ) Policies regarding the determination of compensation for directors and statutory
auditorsCompensation for directors is calculated within the limits on directors‘ compensation
approved by shareholders at a general meeting, reviewed and discussed by the Management
Committee, and deliberated and decided on by the Board of Directors.
The compensation of each of the directors is determined based on a broad range of factors,
including the operations they are in charge of, their responsibilities, achievements, andcontributions.
Compensation for statutory auditors is calculated within the limits on statutory auditors‘
compensation, and the compensation of each of the statutory auditors is determined based on
discussions with the statutory auditors.

Stockholdings(1) Stocks held for reasons other than for pure investment purposes
No. of stocks
450
Total on the balance sheet
112,509 million yen

DNP Annual Repor t 20 1073

( 2) Of the publicly traded stocks held for reasons other than for pure investment purposes, those thatamount to more than 1% of shareholders’ equity on the balance sheet for the current fiscal year

Company name

Number ofsharesAmount recordedon balance sheet(¥ million)

Holding purpose

Terumo Corporation

1,081,000

5,383

Enhance business relationship

Taisho Pharmaceutical Co., Ltd.

2,309,000

3,925

Enhance business relationship

Ezaki Glico Co., Ltd.

3,215,751

3,508

Enhance business relationshipAsahi Breweries, Ltd.

1,860,029

3,260

Enhance business relationshipMizuho Financial Group, Inc.

15,501,000

2,867

Enhance business relationshipNissin Foods Holdings Co., Ltd.

898,7112,826

Enhance business relationshipFujifilm Holdings Corporation

685,965

2,208

Enhance business relationshipToshiba Corporation

4,547,000

2,196

Strengthen business alliance

Yamato Holdings Co., Ltd.

1,660,600

2,182

Enhance business relationshipToyo Suisan Kaisha, Ltd.

794,980

1,922

Enhance business relationship

ROHM Co., Ltd.

265,101

1,850

Enhance business relationship

Mitsubishi Chemical Holdings Corporation

3,598,790

1,720

Strengthen business alliance

Nippon Steel Corporation

4,594,768

1,686

Strengthen business alliance

SMK Corporation

3,200,000

1,536

Enhance business relationshipLion Corporation

3,140,665

1,479

Enhance business relationshipShiseido Co., Ltd.

677,619

1,375

Enhance business relationship

AICA Kogyo Co., Ltd.

1,293,743

1,348

Enhance business relationship

Nihon Seiko Co., Ltd.

1,814,000

1,338Strengthen business alliance

10,0001,232Strengthen business alliance

Sharp Corporation

1,011,140

1,182

Enhance business relationship

Mitsubishi UFJ Financial Group, Inc.

2,399,760

1,175

Enhance business relationship

Daikin Industires, Ltd.

300,000

1,147

Enhance business relationship

NuFlare Technology, Inc.

2. Compensation Paid to Accounting Auditor(1) Compensation paid to accounting auditor
Previous fiscal year
Category

Current fiscal year

Compensation foraudit certification

Compensation forother services

Compensation foraudit certification

Compensation forother services(¥ million)(¥ million)(¥ million)(¥ million)

Dai Nippon Printing Co., Ltd.

91

—

91

—

Consolidated subsidiaries

92

—

106

—

Total

183

—

197

—

(2) Other material compensation details
None(3 ) Compensation paid to accounting auditor for services other than audit work provided to
the DNP Group.
None(4) Determination of compensation for audit services
The Company’s compensation for audit services is determined based on a variety of factors,
including the number of expected days for the audit and the size of the Company.

74

Corporate Governance ▶ Board of Directors, Statutory Auditors and Corporate Officers

Board of Directors, Statutory Auditors
and Corporate Officers(As of June 29, 2010)

President

Managing Directors

Standing Statutory Auditors

Corporate Officers

Yoshitoshi Kitajima

Kazumasa Hiroki

Noriaki Nakamura

Akira Oguri

Tetsuji Morino

Minoru Yoneda

Masanori Akada

Executive Vice Presidents

Shigeru Kashiwabara

Kiyoshi Yuzawa*

Katsuhisa Fudouta

Koichi Takanami

Kunikazu Akishige

Satoshi Saruwatari

Kenji Noguchi

Statutory Auditors

Jun-ichi Tsuchiya

Masayoshi Yamada

Yoshiaki Nagano

Yasuchika Negoro*Kensuke Nakamura

Yoshinari Kitajima

Motoharu Kitajima

Kuniaki Nomura*

Tokuji Kanda

Yoshio Nishida

Takao Shimizu

Yoji Yamakawa
Senior Corporate Officers

Takashi Wada

Mitsuhiko Hakii

Tatsuya Nishimura

Ryuji Minemura

Osamu TsuchidaDirectors

Tatsuro Kitayuguchi

Masato Koike

Teruomi Yoshino

Tatsuo Komaki

Koichi Hashimoto

Masato Yamaguchi

Yujiro Kuroda

Akira Yokomizo

Fujio Yamazaki

Yasuo Takeda

Masahiko Wada

Masaki Tsukada

Takashi Saito

Jun-ichi Funatsu

Sakae Hikita

Shigemi Furuya

Morihiro Muramoto

Senior Managing Directors

Yoshiki Nozaka

Tadao Tsukada*

Kenji Miya
Yoshio Ogawa*Outside director or auditors

Toshiki Sugimoto

Corporate Governance

Masayoshi Yamada

Koichi Takanami

Yoshitoshi Kitajima

Satoshi Saruwatari

Yoshinari Kitajima

DNP Annual Repor t 20 10

75

76

Financial Section
CONTENTS
78 Management s Discussion and Analysis
88 Selected Financial Data
90 Consolidated Financial Statements

DNP Annual Repor t 20 1077

Management’s Discussion and Analysis

OPERATING RESULTS
Business Environment
Economic conditions in Japan were very challenging in thecurrent fiscal year. Although there were some signs of recovery
from government economic stimulus measures and a rebound indemand in emerging countries, capital investment weakened andemployment remained sluggish because of the delayed recovery of
the global economy.
The business environment surrounding the printing industry
worsened, due to such factors as weak demand and unit prices
declines stemming from intensified competition.
The Information Communication segment faced challenging
conditions. In the books and magazines market, estimated salesof publications in Japan in the year ended March 2010 declined
3.8% year over year, extending a downtrend that started in 1997.
In the magazine business, the number of discontinued magazines
exceeded the number of new magazines launched because of
cutbacks in corporate advertising budgets and a decline in sales
volume. In the commercial printing business, a deteriorationin corporate earnings led to cutbacks in advertising budgets;advertising-related companies’ sales in the year ended March2010 declined 12.5%; and advertising in all types of media, except
online advertising, declined year over year. In the business forms
business, conditions remained weak overall. Although there weresome signs of improvement, including a rise in sales from theprinting of electronic toll cards spurred by economic stimulus
policies, sales from the printing of credit cards, cash cards, andother financial smart cards slumped.
In the Lifestyle and Industrial Supplies segment, the packaging
business was weak overall owing to deflation and a slump in
consumer spending in Japan’s market. In the lifestyle materials
business, conditions remained weak. Demand in the housing
market continued to slump, as indicated by the number of new
housing starts in Japan in the year ended March 2010, whichfell below 800,000 for the first time in 45 years. In the industrial
supplies business, demand for anti-reflection film used in liquid
crystal displays (LCDs) rebounded sharply, along with demand for
LCD TVs, thanks to government economic stimulus policies and ashift to digital broadcasting around the world.
Business conditions for the Electronics segment were favorable.
In 2009, worldwide shipments of LCD TVs increased 37% year
over year to 145 million units, and shipments of PCs increased 1%
to 305.8 million. Shipments of mobile phones declined about 4%.
Production of mobile phones had been declining since the fall of
2008, although demand did rebound in October–December 2009.

78

Financial Section ▶ Management’s Discussion and Analysis

Overview

Financial Section

Under such conditions, the DNP (Dai Nippon Printing Co., Ltd.)Group has been aggressively developing its business and providing
products, services, and solutions that meet customer needs, basedon a business vision of ”P&I Solutions” (P&I stands for “printing
technology” and “information technology”). In addition, DNP has
made groupwide efforts through its “Production 21” activities toestablish a solid production structure in terms of all aspects, suchas quality, cost, and turnaround times, and has worked hard tomaintain positive performance.
DNP’s net sales for the year ended March 2010 declined 0.1%
from the previous year to 1,583.4 billion yen. Overall sales in the
Information Communication segment increased 3.0%. Sales were
weaker than in the previous fiscal year for Books and Magazines
and Commercial Printing, but the inclusion of new consolidated
subsidiaries in the Education and Publications Distribution business
contributed to the overall growth. Overall sales in the Lifestyleand Industrial Supplies segment decreased 2.8%. In the Industrial
Supplies business, sales of anti-reflection film rose sharply toabove the year-ago level, thanks to a sharp rebound in demand for
LCDs. However, sales of Packaging declined, owing to a slump in
consumer spending, and sales of Lifestyle Materials decreased
because domestic housing demand remained in a long-term slump.
Sales in the Electronics segment inched up 0.6% over the previous
year. Color filter sales have been strong since July 2009, thanks toa sharp rebound in demand for LCDs, and semiconductor market
conditions recovered. Sales in the Beverages segment declined
12.4% owing to weak consumer spending.
Consolidated operating income increased 44.0% from theprevious year. Operating income in the Information Communication
segment remained weak because of a slump in the publications
market and cutbacks in corporate advertising budgets. However,operating income in the Electronics and Lifestyle and Industrial
Supplies segments improved because of a rebound in demand forflat-panel displays. In addition, DNP’s group efforts to cut costs
generated solid results.
The consolidated operating income margin rose 1.3 percentage
points to 4.2%, and the ordinary income margin also increased 1.3
percentage points to 4.3%. The consolidated operating income
margin slipped 1.2 percentage points to 3.2% in the Information
Communication segment but rose 4.5 percentage points to 8.1%
in the Lifestyle and Industrial Supplies segment and increased
2.2 percentage points to 3.2% in the Electronics segment. The
Beverages operations incurred an operating loss.
Net income totaled 23.3 billion yen, a 44.2 billion yen
improvement from the year-ago net loss of 20.9 billion yen.

DNP Annual Repor t 20 1079Net sales (¥ million)

2010.32009.32008.3¥ 1,583,383¥1,584,844¥ 1,616,053

18.7%

16.4 %

17.8%

Operating income margin (%)

4.2%

2.9 %

5.4%

Ordinary income margin (%)

4.3%

3.0 %

5.4%

Net income margin (%)

1.5%

–

2.8%

Gross margin (%)

Net income (losses) per share (¥)

36.13

¥

(32.35)¥67.08

Net Sales

Net Sales by Segment(year ended March 2010)

Beverages
3.9%Electronics
16.1%

Lifestyle andIndustrial Supplies
33.6%

80

Information
Communication
46.3%

Net sales slipped 0.1%, or 1.5 billion, from the previous year
to 1,583.4 billion yen. Demand for lower unit prices was strong
throughout the year because of intense competition and adeterioration in corporate customers’ earnings owing to theeconomic downturn.
In the Information Communication segment, sales from Books
and Magazines declined because of a prolonged slump in the
publications market. In the Commercial Printing business, sales
decreased year over year because of cutbacks in advertisingbudgets, stemming from a slump in corporate earnings, hurt orders
for flyers, catalogs, and other printed matter as well as demandfor campaign and event planning. In the Business Forms business,overall sales rose slightly. Sales from the printing of electronic
toll cards increased thanks to economic stimulus policies, andsales of IPS (information processing services) were higher thanin the previous year because of direct mail growth and a switch
to full-color notices and application forms. However, sales offorms declined. Net sales in the Information Communication
segment rose with help from the inclusion of sales of consolidated
subsidiaries in the Educational Publications Distribution business.
In the Lifestyle and Industrial Supplies segment, Packaging sales
were lower year on year because of a decline in sales of flexible
packaging, paper containers, and aseptic filling systems for PET
plastic bottles. In the Lifestyle Materials business, DNP focusedon increasing sales of eco-friendly products that make use of its
proprietary electron beam (EB) coating technology, but overall sales
remained weak because of a prolonged slump in housing demand.
In the Industrial Supplies business, sales of ink ribbons and receiverpaper for photo printers as well as back sheets for photovoltaic
modules decreased, but sales of anti-reflection film used in flatpanel displays increased sharply. Net sales in the Lifestyle andIndustrial Supplies segment increased year over year.
In the Electronics segment, sales rose year over year thanks
to growth in the volume of LCD color filter orders, in conjunction
with a rise in demand for LCD panels. The startup of a new 10thgeneration LCD color filter plant in Sakai, Osaka Prefecture, also
helped. In the semiconductor-related business, some indicationsof a rebound in demand started to become apparent, but sales ofphotomasks contracted because of weak demand for cutting-edge
products. Sales of high-density build-up circuit boards fell, but salesof etched products for hard drive suspensions increased. Net sales

Financial Section ▶ Management’s Discussion and Analysis

in the Electronics segment increased year over year.
In the Beverages segment, DNP faced a slump in consumer
spending and intensified sales competition, but focused onincreasing sales of Coca-Cola Zero and Georgia, both coreproducts, and I LOHAS, a new brand of water that uses “ecoru
Bottle Shiboru,” Japan’s lightest PET plastic bottle. Sales ofcarbonated beverages and mineral water increased, but sales oftea and coffee drinks decreased, resulting in an overall decline in
net sales year over year.

Cost of Sales
The cost of sales slipped 2.9%, or 37.8 billion, from the previous
year to 1,286.7 billion yen. The gross margin improved 2.3
percentage points from 16.4% to 18.7%.
During the year, prices of film, resins, and other petrochemical
products increased, following increases in crude oil and naphtha
prices since late 2008. Prices of paper had held up because
paper producers temporarily reduced output in response to
weak domestic printing demand, but then prices softened partly
because of inflows of cheap imported paper. Trends in material
costs roughly offset each other, resulting in almost no overall
cost increases.
DNP has been focusing groupwide since April 2002 on“Production 21” activities, such as making production processes
more efficient, improving yields, reducing material losses, andshortening production preparation and lead times. In the fiscal
year, DNP successfully applied measures horizontally throughout
the Group and strove to cut production costs. As a result, DNP
was able to reduce production costs for the entire fiscal year by
45.8 billion yen, 10.3 billion yen above the previous year’s figureof 35.5 billion yen.

Gross Profit Margin
(%)
25

20.3
18.6

20

18.7

17.8
16.4

15

10

5

0

06

07

08

09

10

Selling, General and Administrative Expenses

SGA Expenses to Net Sales
(%)

14.5

15

13.5
12.3

12.4

12.4

06

07

08

Financial Section

With thorough cost-reduction efforts in the fiscal year, DNP
was able to cut personnel and indirect costs by a total of 7.4
billion yen. However, as a result of increases in sales promotion
costs and personnel costs, the latter owing to new consolidated
subsidiaries, overall selling, general and administrative expenses
increased 7.5%, or 16.0 billion, to 230.2 billion yen, or 14.5% of
net sales, up 1.0 percentage point from the previous year.

12

9

6

3

0

09

10

DNP Annual Repor t 20 1081

Operating Income

Operating Income Margin
(%)
10

8.0
8

6.2
6

5.4
4.2

4

2.9

2

0

06

07

08

09

10

Operating income for the year increased 44.0%, or 20.3 billion yen,
to 66.5 billion yen. Unit prices declined, but growth in demand
substantially boosted productivity and cost reductions exceeded
the targets. The operating income margin improved 1.3 percentage
points from 2.9% to 4.2%.
By segment, operating income from Information Communication
declined 25.9%, or 8.2 billion yen, to 23.5 billion yen. In theLifestyle and Industrial Supplies segment, it rose 119.5%, or
23.8 billion yen, to 43.7 billion yen. In the Electronics segment,
operating income increased 222.7%, or 5.7 billion yen, to 8.3 billion
yen. In the Beverages business, it deteriorated 0.9 billion yen toan operating loss of 0.6 billion yen because of intensified sales
competition owing to the slump in consumer spending.

Nonoperating Income (Expenses) and Extraordinary
Income (Losses)

ROE
(%)
7

6.3

6

5.1
4.4

5
4

2.6

3
2
1
0
–1
–2

This fiscal year, nonoperating income totaled 12.4 billion yen, up 0.7
billion yen, or 6.3%, and nonoperating expenses 10.0 billion yen,down 0.4 billion yen, or 3.6%, from the previous year. As a result of
the above, net nonoperating income totaled 2.3 billion yen, above
the previous year’s 1.1 billion yen.
Extraordinary gains totaled 1.3 billion yen, up 0.2 billion yen, or
17.7%, and extraordinary losses 20.7 billion yen, down 55.7 billion
yen, or 72.9%, from the previous year. Net extraordinary losses
totaled 19.3 billion yen, versus net extraordinary losses in theprevious fiscal year of 75.2 billion yen.
As a result of the above, income before income taxes andminority interests totaled 49.5 billion yen, a turnaround from lossesof 27.8 billion yen the previous fiscal year.

-2.2
–3

06

07

08

09

10

Net Income (Losses)
As a result of the above, net income totaled 23.3 billion yen, aturnaround from losses of 20.9 billion yen the previous fiscal year.
Net income per share was 36.13 yen, versus the year-ago net
loss per share of 32.35 yen.

82

Financial Section ▶ Management’s Discussion and Analysis

LIQUIDITY AND CAPITAL RESOURCES
In order to expand our business, DNP’s management believes that
it is important to steadily expand cash flow generated throughaggressive operating activities and to concentrate investments instrategic areas. DNP continued to strive for stable, longer-term
growth, which is crucial for strengthening the company’s financial
condition.

Cash Flow
2010.3
Cash flow from operating activities
Cash flow from financing activities
Free cash flow¥

140,574

2009.3¥

131,569（ 120,684 ）（ 100,726 ）

19,89030,8432008.3¥

157,283（ 122,523 ）

34,760（ ¥ million ）This fiscal year, cash flow generated by operating activities
increased 6.8% to 140.6 billion yen mainly because of a swing fromlosses before income taxes and minority interests of 27.8 billion
yen in the previous fiscal year to income before income taxes andminority interests of 49.5 billion yen.
Cash flow used in investing activities totaled 120.7 billion yen
largely because of 108.6 billion yen of investments in additional
plant and equipment for LCD color filters and opto materials.
Cash flow from financing activities improved from the 34.0 billion
yen of cash flow used in financing activities in the previous year to
13.1 billion yen because of 50.0 billion yen of funds raised through abond offering.
As a result of these activities, DNP’s cash and cash equivalents at
the end of the fiscal year amounted to 151.8 billion yen, up 29.4%,
or 34.6 billion yen, from a year earlier.
This fiscal year, free cash flow – i.e., cash flow provided byoperating activities minus cash flow used in investing activities—
was 19.9 billion yen, down 11.0 billion yen from 30.8 billion yen in
the previous year.

Interest-bearing Debt to Cash Flow Ratio(times)
1.5

1.2

0.9

1.0

0.6
0.5

0.5

0.5

0

06

07

08

09

10

Financial Section

DNP Annual Repor t 20 1083Capital Expenditures, Research and Development
Expenditures, etc.
Capital Expenditures and Free Cash Flow(¥ billion)
200

162.9
150

136.1
119.1

116.1
96.2

100

50

34.8

30.8

19.9

0

-10.1
-27.7
-50

06

07

Capital expenditures

08

09

10

Free cash flow

DNP has focused its capital expenditures mainly on strategic areas,so as to gain a competitive edge, and on improvements to existing
plant and equipment. Capital expenditures totaled 119.1 billion yen,
an increase of 23.8%, or 22.9 billion yen, from the previous year.
Key capital investments during the fiscal year included a new
10th-generation LCD color filter plant in Sakai, Osaka Prefecture,
and additional opto-material clean coaters for the Okayama plant.
By segment, capital expenditures for Information Communication
decreased 4.2 billion yen from the previous year to 23.8 billion
yen, or 20% of overall capital expenditures. Capital expenditures
for Lifestyle and Industrial Supplies decreased 7.0 billion yen
over the previous year to 22.8 billion yen, or 19% of the total. For
Electronics, we invested 68.0 billion yen, an increase of 33.7 billion
yen and 57% of the total. Capital expenditures for other businesses
increased 0.4 billion yen from the previous year to 4.5 billion yen, or
4% of the total.
Depreciation totaled 91.7 billion yen, down 14.2%, or 15.2
billion yen, from the previous year. By segment, depreciation for
Information Communication decreased 0.3 billion yen over theprevious year to 24.9 billion yen, or 27% of overall depreciation.
Depreciation for Lifestyle and Industrial Supplies decreased 1.8
billion yen over the previous year to 27.7 billion yen, or 30% of
the total. Depreciation for Electronics totaled 33.4 billion yen, adecrease of 12.7 billion yen and 36% of the total. Depreciation forother businesses fell 0.5 billion yen from the previous year to 5.7
billion yen, or 6% of the total.
Research and development expenditures totaled 33.8 billion yen,a decrease of 0.3 billion yen, or 0.8%, from the previous fiscal year.

The Balance SheetDNP has strived to use capital more efficiently, increase the valueof the company, and maintain the liquidity necessary to promptly
adapt to changes in the business environment.

Total assets (¥ million)

Current Ratio(%)

2010.32009.32008.3¥ 1,618,854¥1,536,557¥ 1,601,193

157 %

144 %

157%

Working capital/net sales (%)

17 %

13 %

16%

Debt-to-equity ratio (%)

18 %

14 %

8%

Current ratio (%)

200

178
166

157

157
144

150

Net assets per share (¥)¥

1422.34¥ 1,393.91¥

1,516.35

100

50

0

06

84

07

08

09

10

DNP s total assets at the end of this fiscal year amounted
to 1,618.9 billion yen, an increase of 82.3 billion yen, or 5.4%,
from the previous fiscal year.
Among current assets, cash, cash equivalents, and time
deposits increased by 23.3%, or 28.8 billion yen, from theprevious fiscal year to 152.4 billion yen. Trade receivables
increased by 10.6%, or 43.1 billion yen, to 449.0 billion

Financial Section ▶ Management’s Discussion and Analysis

yen. Inventories of finished products, work in process, rawmaterials, and supplies decreased 1.8 billion yen to 118.8
billion yen. As a result of the above, total current assets
increased by 63.8 billion yen, or 9.4%, to 740.0 billion yen.
Among long-term assets, property, plant and equipment
increased by 2.0%, or 11.9 billion yen, to 616.8 billion yen.
Intangible assets decreased by 28.9%, or 14.1 billion, to 34.7
billion. Investments and other assets increased 9.6%, or 19.8
billion yen, to 225.7 billion yen. As a result of the above, longterm assets increased by 2.1%, or 17.6 billion yen, to 877.3
billion yen.
Current liabilities increased by 2.1 billion yen, or 0.5%, to471.9 billion yen.
Long-term liabilities increased by 63.4 billion yen, or 50.0%,
to 190.0 billion yen mainly because the amount of bonds
increased 50.2 billion to 101.2 billion yen.
As a result of the above, total liabilities increased by 11.0%,
or 65.5 billion yen, to 662.0 billion yen.
Net assets for the fiscal year increased by 1.8%, or 16.8
billion yen, to 956.9 billion yen.
DNP bought back a total of 112.86 million of its shares inthe six years from February 2003 to June 2008 and retired 59
million treasury shares in the five years from 2004 to 2008.
As of March 31, 2010, the number of treasury shares totaled
55.71 million, or 7.95% of the 700,480,693 total shares
outstanding.

Equity Ratio*
(%)
80

64.0

63.0

62.6

60

58.5

56.6

09

10

40

20

0

06

07

08

* Figure for 2006 is calculated using total stockholders' equity.

Financial Section

DNP Annual Repor t 20 1085

Business Risks
The performance and the results of DNP Group could be significantly affected bya variety of factors and circumstances that might arise in the future. Because theGroup is aware of these risk factors, its policy is to strive to minimize their potential
effects.
The following are the major factors that the Group views as risks, as of the
publication date of this annual report.

The Japanese economy and consumption trends
The Group engages in a wide range of businesses with an extremely large numberof customers. It conducts business so as not to be overly dependent on specificcustomers. The Company does business mostly in the Japanese domestic
market; overseas sales constitute only about 12% of net sales. Nevertheless, if
the domestic economy weakens in sympathy with global economic trends andconsumer spending and other components of domestic demand slump, thendeclines in order volume and unit prices may affect its performance.

Changes in the electronics market
The Electronics segment remains a strategic one that the Company intends tocontinue to strive to expand. The Company aims to secure steady profits fromit by focusing on building business strategies based on a careful compilationof information and the development of profitable, high-added-value products.
However, the market for display components and semiconductor products is
subject to sudden changes. It is possible that the segment’s performance could be
affected by sudden changes affecting products that the Company handles, such as
dramatic fluctuations in demand or a plunge in unit prices.

Fluctuations in raw material procurement
The Company procures raw materials such as printing paper and film frommultiple suppliers in Japan and overseas. The Company works hard to securestable supplies and maintain optimal prices.However, there is some potential for
imbalances between supply and demand due to factors like spikes in petroleum
prices or sudden surges in demand from emerging markets. The Company intends
to cope with such instances by negotiating with customers and business partners.
However, if it should become extremely difficult to secure supplies, or if prices risemarkedly, DNP’s performance could be affected.

Development of new products and technologies and services
The DNP Group uses its printing and information technologies to develop andprovide to a broad range of industries products, technologies, and services thatmeet the needs of corporate clients and consumers. In recent years, the paceof technological innovation in these areas has become faster than ever, andcustomers’ needs have been rapidly diversifying. The Company believes that in
the future, competition in the area of product development will become more
intense than ever before, and it is possible that DNP’s performance could fluctuatesignificantly due to unforeseeable changes in market trends or a shortening ofproduct life cycles.

86

Financial Section ▶ Management’s Discussion and Analysis

Currency fluctuations
Particularly in fields such as Electronics, and Lifestyle and Industrial Supplies,
the Company is expanding its business with customers overseas. Because
the Company expects the effects of currency rates to gradually become more
important, it uses such means as foreign exchange forward contracts to hedge
the risks of currency fluctuations. Nevertheless, it is possible that radical swings incurrency values could have a more serious effect on the Company’s performance.

Legal compliance
The Company conducts business based on strict compliance with the law andsocial ethics. Wherever it operates, in Japan or overseas, it is subject to a wide
variety of legal regulations and restrictions, including laws related to productliability, monopoly prohibitions, the protection of personal information, patents,
taxes, imports and exports, etc. The Company expects that in the future such
regulations could become even more restrictive. Market and industry trends maychange substantially as a result of deregulation. If that should occur, it is possiblethat the Company’s business activities could be affected by limitations on its
business activities, the burdens of adapting to the changes, or increased costs.

Environmental protection and stricter regulations
The Group is affected by laws and regulations in Japan and other countries
regarding energy conservation, the use of harmful substances, the prevention of
air pollution, water quality protection and waste treatment, and product recycling.
Such regulations may be strengthened because of the impact of global climate
trends. In addition, if soil is contaminated by harmful substances and the Company
is faced with the situation of being responsible for assessing and cleaning up
the environmental pollution, then the Company’s business could be substantiallyaffected.

Information system security
With computer networks and information systems playing an ever-greater rolein keeping business activity going, the risks of information system malfunctions,breaches of personal information, and other events, owing to software andhardware problems and viruses, have risen. The Group regards the protectionof data and personal information as a top priority. It is doing all it can to protect
and maintain systems and data by strengthening its organization and training
employees, but if problems arise in these areas, then its business activity could be
affected.
Financial Section

Disasters
The Company takes steps to protect its production equipment and other major
facilities from being damaged by disasters such as fires or earthquakes. In
addition, the Company divides its work among multiple production bases andmake every effort to prevent disasters from causing production stoppages or
disturbances in its ability to supply products. The Company also uses various typesof insurance to transfer risk. Nevertheless, if major earthquakes, terrorist attacks,
outbreaks of infectious diseases, and other unexpected developments arise andlead to production stoppages or major damage or interference with the social
infrastructure, then its performance could be substantially affected.

DNP Annual Repor t 20 1087Selected Financial Data (unaudited)
2010

2009

2008

2007

Statements of Operations Data (¥ million)
Net sales¥

1,583,383¥

1,584,844¥

1,616,053¥

1,557,802

Cost of sales

1,286,682

1,324,522

1,327,872

1,268,072

Gross profit

296,701

260,322

288,181289,730

Selling, general and administrative expenses

230,187

214,145

201,077

193,585

Operating income

66,514

46,177

87,104

96,145

Ordinary income

68,84147,39086,502

101,348

Income (loss) before income taxes and minority interests

49,496(27,842)

88,46998,950Net income (loss)

23,278(20,933)

45,172

54,842

Balance Sheet Data (¥ million)
Total assets¥

1,618,854¥

1,536,557¥

1,601,193¥

1,700,250

Property, plant and equipment ̶ net

616,848

604,904

639,343635,784

Long-term liabilities

190,045

126,671

106,691

118,437

Total liabilities

661,990

596,471

561,058

600,811

–

–

–

–

Stockholders’ equity

921,775

917,348

990,122

1,027,475

Total net assets

956,864

940,086

1,040,135

1,099,439

Total stockholders’ equity

Other Selected Data (¥ million)
Capital expenditures¥

119,063¥

96,156¥116,139¥

162,886

Depreciation expenses

91,695

106,883

109,902100,161

R&D expenditures

33,85034,11235,55630,113

Common Share Data (¥, shares)
Earnings (loss) per share ̶ primary
Earnings (loss) per share ̶ fully diluted
Dividends paid per share
Book value per share
No. of common shares outstanding (exc treasury shares)

¥

36.13

¥

(32.35)

¥

67.08

¥

78.10

–

–

–

–

32.00

32.00

36.00

32.00

1,422.34

1,393.91

1,516.35

1,544.02

644,238,930

644,357,076

661,366,377

694,226,171

Financial Ratios (%, times)
As a percent of net sales:

88

Gross profit

18.74%

16.43%

17.83%

18.60%

Selling, general and administrative expenses

14.54

13.51

12.44

12.43

Operating income

4.20

2.91

5.39

6.17

Income (loss) before income taxes and minority interests

3.13

-1.76

5.47

6.35

Net income (loss)

1.47

-1.32

2.80

3.52

Return on equity

2.57

-2.20

4.35

5.14

Current ratio

157

144

157

166

D/E ratio

18

14

8

6

Financial Section ▶ Selected Financial Data

2006
¥

¥

¥

¥

2005

1,507,506¥

1,424,943

2004
¥

2003

1,354,101¥

2002

1,309,002¥

2001

1,311,934¥

1,342,035

1,202,160

1,121,374

1,073,118

1,043,456

1,071,163

1,091,386

305,346

303,569

280,983

265,546

240,771

250,649

184,676

183,041

178,545

175,665

168,529

164,708

120,670

120,528

102,438

89,881

72,242

85,941

124,715

120,485

97,276

88,177

74,77592,349114,640

107,686

93,13742,244

26,15069,116

65,18859,93752,971

28,774

15,60933,4091,662,377¥

1,600,129¥

1,513,734¥

1,450,027¥

1,432,458¥

1,489,871

568,966

528,009513,175

540,874

543,962

561,017

118,287

115,801

119,277

66,82179,01386,012

571,170

566,796

510,970

484,581460,691

522,105

1,063,309

1,007,944

978,736

942,083

946,998

939,441

–

–

–

–

–

–

–

–

–

–

–

–

136,059¥

86,057¥

69,834¥73,789¥85,096¥103,050

87,26480,44085,182

89,23994,87094,312

28,692

26,386

26,05024,09723,367

24,664

91.23

¥

82.56

¥

71.49

¥

37.80

¥

20.55

¥

43.99

–

–

–

37.67

20.53

43.45

26.00

24.00

21.00

19.00

18.00

18.00

1,507.90

1,409.18

1,348.40

1,270.81

1,246.99

1,236.96

704,972,101

715,076,830

725,677,422

741,161,150

759,480,693

759,480,693

21.30%

20.75%

20.29%

18.35%

18.68%

12.25

12.85

13.19

13.42

12.85

12.27

8.00

8.46

7.57

6.87

5.51

6.40

7.60

7.56

6.88

3.23

1.99

5.15

4.32

4.21

3.91

2.20

1.19

2.49

6.29

6.03

5.52

3.02

1.65

3.58

178

186

197

171

181

165

6

7

7

6

7

8

DNP Annual Repor t 20 10

Financial Section

20.26%

89

CONSOLIDATED FINANCIAL STATEMENTS

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

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
March 31, 2010 and 2009

2010

2009

2010

AssetsCurrent assets:
Cash and cash equivalents (Notes 4 and 16)
Time deposits (Note 16)
Securities (Notes 5 and 16)
Trade receivables (Notes 10 and 16)
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 (Notes 5 and 16)
Other (Note 10)
Total investments and advances

Property, plant and equipment, at cost (Notes 7 and 14):Land
Buildings
Machinery and equipment
Leased assets
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
Other assets (Notes 7, 13, 14 and 16)

Total assets¥

151,710706
9449,020(4,328)118,820
24,014739,951

117,200
6,370
9
405,877(5,280)120,647
31,327676,150$

1,631,290
7,591
97
4,828,172(46,538)
1,277,634
258,216
7,956,462

23,359124,715
1,988
150,062

11,396
107,975
1,547
120,918

251,172
1,341,022
21,376
1,613,570

135,485
508,518
1,006,219
26,30951,434
1,727,965(1,111,117)
616,848

132,889
491,603
1,016,535
10,06157,756
1,708,844(1,103,940)
604,904

1,456,828
5,467,935
10,819,559
282,892
553,055
18,580,269(11,947,495)
6,632,774

111,993

134,585

1,204,226

1,618,854

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

90

¥

¥

1,536,557$

17,407,032

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
March 31, 2010 and 2009

2010

2009

2010

Liabilities and Net Assets

Current liabilities:
Short-term bank loans (Notes 7 and 16)
Current portion of long-term debt (Notes 7 and 16)
Trade payables (Notes 10 and 16)
Accrued expenses (Note 10)
Income taxes payable (Note 13)
Other current liabilities (Notes 7, 10 and 13)
Total current liabilities¥

Long-term liabilities:
Long-term debt (Notes 7 and 16)
Liability for retirement benefits (Note 8)
Other long-term liabilities (Notes 7 and 13)
Total long-term liabilities

50,547
4,240
308,630
35,566
15,62357,339471,945¥

59,876
2,999
290,871
34,715
7,892
73,447
469,800$

543,516
45,591
3,318,602
382,430
167,989
616,549
5,074,677

112,186
43,23034,629190,045

61,491
41,452
23,728
126,671

1,206,301
464,839
372,355
2,043,495

114,464
144,898
756,430

114,464
144,898
751,870

1,230,796
1,558,043
8,133,655(94,017)921,775(93,884)
917,348(1,010,935)
9,911,559

8,060
(11)
(13,499)(5,450)40,539956,864(3,883)(5)(15,285)(19,173)
41,911
940,086

86,667(118)(145,151)(58,602)435,903
10,288,860

Contingent liabilities (Note 18)
Net assets
Stockholders’ equity
Common stock Authorized : 1,490,000,000 shares;
Issued : 700,480,693 shares;
Capital surplus (Note 9)
Retained earnings (Note 9)
Treasury stock, at cost
56,241,763 shares in 2010 and 56,123,617 shares in 2009 (Note 9)
Total stockholders’ equity
Valuation and translation adjustments
Net unrealized gains (losses) 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¥

1,618,854¥

1,536,557$

17,407,032
Financial Section

DNP Annual Repor t 20 1091

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

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2010 and 2009

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

2010¥

Other income (expenses) (Note 12):Interest and dividend income
Interest expenses
Equity in losses of associated companies
Foreign exchange transaction loss
Net loss on disposal of property, plant and equipment
Net gain on sales of marketable securities and investment securities
Loss on revision of retirement benefits plan (Note 8)
Loss on devaluation of investment securities
Impairment loss on fixed assets (Note 14)
Amortization of consolidation goodwill
Other

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

Minority interests
Net income (loss)

¥

2009

2010

1,584,844
1,324,522
260,322
214,145
46,177$ 17,025,624
13,835,291
3,190,333
2,475,129
715,204

3,197(2,363)(103)(117)(6,086)40–(1,200)(378)(11,063)
1,055(17,018)

4,164(1,666)(1,247)(2,003)(6,740)370(144)(13,947)(50,690)(1,859)(257)(74,019)

34,376(25,409)(1,108)(1,258)(65,441)430–(12,903)(4,065)(118,957)
11,346(182,989)

49,496(27,842)532,215

22,062
3,700
25,762
23,734

15,375(20,857)(5,482)(22,360)

237,226
39,785
277,011
255,204¥

1,583,383
1,286,682
296,701
230,187
66,514(456)
23,278¥

1,427(20,933)$

Yen

U.S. dollars (Note 3)

2010

2009

2010

Net assets per common share¥

1,422.34¥

1,393.91$

15.29

Net income (loss) per common shareprimary

¥

36.13

¥

(32.35)$

0.39

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

92(4,903)250,301

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets
Millions of yen

Dai Nippon Printing Co., Ltd. andConsolidated Subsidiaries
Years ended March 31, 2010 and 2009

Balance at March 31, 2008
Changes of items during the period
Net loss
Cash dividends paid
Purchases of treasury stock (Note 9)
Disposal of treasury stock
Changes in unrealized losses
on available-for-sale securities
Changes in deferred losses
on derivatives
Changes in foreign currencytranslation adjustments
Changes in minority interests
Other
Total changes of items during the period
Balance at March 31, 2009
Changes of items during the period
Net income
Cash dividends paid
Net increase resulting from changes
in consolidated subsidiaries
Increase due to stock transfer
Purchases of treasury stock
Disposal of treasury stock
Changes in unrealized gains
on available-for-sale securities
Changes in deferred losses
on derivatives
Changes in foreign currencytranslation adjustments
Changes in minority interests
Total changes of items during the period
Balance at March 31, 2010

Stockholders’ equity

Valuation and translation adjustments
Net unrealized
Foreign
Net deferredgains (losses) on
currency
gains (losses)
available-for-saletranslation
on derivatives adjustments
securities

Number ofsharesissued(in thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost700,480

114,464

144,898

797,317(66,557)

10,6107

2,121

37,275

–
–
–
–

–
–
–
–

–
–
–
–

(20,933)(24,849)
–
(28)

–
–
(27,425)
90

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–

–

–

–

–

(14,493)

–

–

–

–

–

–

–

–

–

(12)

–

–

–
–
–
–
700,480––––
114,464––––
144,898––363(45,447)
751,870––8(27,327)(93,884)–––(14,493)(3,883)

–
–
–
(12)
(5)

(17,406)––(17,406)(15,285)

–
4,636
–
4,636
41,911

–
–

–
–

–
–

23,278(19,345)

–
–

–
–

–
–

–
–

–
–

–
–
–
–

–
–
–
–

–
–
–
–

192
442
–
(7)

–
–
(154)
21

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–

–

–

–

–

11,943

–

–

–

–

–

–

–

–

–

(6)

–

–

–
–
–
700,480–––
114,464–––
144,898––
4,560
756,430––(133)(94,017)––
11,943
8,060

–
–
(6)
(11)

1,786
–
1,786
(13,499)–(1,372)(1,372)40,539Valuation and translation adjustments
Net unrealized
Foreign
Net deferredgains (losses) on
currency
gains (losses)
available-for-saletranslationonderivatives
securities
adjustments

Minority
interests(54) (164,355)

450,656

Minority
interests

Thousands of U.S. dollars (Note 3)
Number ofsharesissued(in thousands)

Commonstock

CapitalsurplusTreasurystock,
at costRetainedearnings

700,480 1,230,796 1,558,043 8,084,624 (1,009,505)(41,753)

–
–

–
–

–
–

250,301(208,012)

–
–

–
–

–
–

–
–

–
–

–
–
–
–

–
–
–
–

–
–
–
–

2,064
4,753
–
(75)

–
–
(1,656)
226

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–

–

–

–

–

128,420

–

–

–

–

–

–

–

–

–

(64)

–

–

–
–
–
–
–
–
–
–
–
–
49,031(1,430)–––700,480 1,230,796 1,558,043 8,133,655 (1,010,935)––
128,420
86,667–
19,204––(64) 19,204(118) (145,151)–(14,753)(14,753)435,903

Financial Section

Balance at March 31, 2009
Changes of items during the period
Net income
Cash dividends paid
Net increase resulting from changes
in consolidated subsidiaries
Increase due to stock transfer
Purchases of treasury stock
Disposal of treasury stock
Changes in unrealized gains
on available-for-sale securities
Changes in deferred losses
on derivatives
Changes in foreign currencytranslation adjustments
Changes in minority interests
Total changes of items during the period
Balance at March 31, 2010

Stockholders’ equity

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

DNP Annual Repor t 20 1093Consolidated Statements of Cash Flows
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2010 and 2009

Cash flows from operating activities:
Income (loss) before income taxes and minority interests
Adjustments to reconcile income (loss) before income taxes andminority 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 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) decrease in trade receivables
Decrease in inventories
Increase (decrease) in trade payables
Other
Sub-total
Payments of income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Net (increase) decrease in time deposits
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 increase (decrease) in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of unsecured debentures
Interest paid
Dividend paid
Payments for purchases of treasury stocks
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year

2010

¥

¥

49,496¥(27,842)2010$

532,215

91,695
378
(80)
2,263
103
16,220(3,197)
2,363
(52)
1,200
6,086
(39,672)
1,970
17,8992,775
149,447(8,873)
140,574

106,883
50,690(522)(3,111)
1,247
6,407(4,164)
1,666(373)
13,947
6,740
56,8274,370(42,200)(4,038)
166,527(34,958)
131,569

985,968
4,065(860)
24,333
1,108
174,409(34,376)
25,409(559)
12,90365,441(426,581)
21,183
192,461
29,838
1,606,957(95,409)
1,511,548

6,130–(108,596)
2,557(13,456)
7,048
3,163
(17,530)(120,684)(14)
10,980(95,556)
3,307(8,201)
1,388
4,173(16,803)(100,726)

65,914–(1,167,699)
27,495(144,688)
75,78534,011(188,495)(1,297,677)(10,119)
3,340(3,702)50,000(2,201)(19,684)(155)(4,353)
13,126889
33,905
117,200
605
151,710

23,324
4,961(6,664)–(1,650)(25,253)(27,435)(1,235)(33,952)(10,386)(13,495)
130,695–
117,200(108,806)
35,914(39,806)
537,634(23,667)(211,656)(1,667)(46,806)
141,140
9,559
364,570
1,260,215
6,505
1,631,290

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

94

2009

¥

$

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

Notes to Consolidated Financial Statements

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2010 and 2009
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 ofaccount and prepare their ﬁnancial statements in conformity with accounting principles and practices generally accepted inJapan, and its foreign subsidiaries in conformity with the Company’s group accounting policies based on International Financial
Reporting Standards ( “IFRS”) or accounting principles generally accepted in the United States of America ( “US GAAP”).
The accompanying consolidated ﬁnancial statements have been compiled from the consolidated ﬁnancial statements ﬁled
with the Financial Services Agency of Japan as required by the Financial Instruments and Exchange Act of Japan. Certain
reclassiﬁcations of accounts and modiﬁcations have been made in the accompanying consolidated ﬁnancial statements tofacilitate understanding by readers outside Japan. Certain reclassiﬁcations have also been made in the 2009 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 mostly the same as that of the Company. There are twenty-nine
subsidiaries whose ﬁscal years end December 31 and twenty-three subsidiaries whose ﬁscal years end January 31. Signiﬁcanttransactions between their ﬁscal year end and the Company’s ﬁscal year end are reﬂected in the consolidated ﬁnancial
statements.
Investments in non-consolidated subsidiaries are stated at cost and, for valuation of such investments, the equity method has
not been applied since these investments are considered immaterial in the aggregate. However, investments are devalued if
the decline in value is judged to be other than temporary.
Investments in 20% to 50% associated companies are principally accounted for by the equity method.
The differences between costs and underlying net assets at the date of investment in consolidated subsidiaries are included
in other assets 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 otherincome (or expenses).
The translation of foreign currency ﬁnancial statements of foreign consolidated subsidiaries into Japanese yen has been
made for consolidation purposes in accordance with the translation method prescribed in the accounting standard for foreign
currency transactions. The balance sheet accounts of the foreign consolidated subsidiaries are translated at the exchange
rates in effect at the balance sheet date, except for common stock and capital surplus, which are translated at historicalrates. 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 valuationand 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, thatare readily convertible to known amounts of cash and are so near maturities that they present insigniﬁcant risk of changes invalue because of changes in interest rates.
Inventories
Inventories are stated at cost which is determined substantially by the average method being written-down to reﬂect the
decline of proﬁtability.
Financial Section

Marketable securities and investment securities
Marketable and investment securities are classiﬁed and accounted for, depending on management’s intent, as follows: i) heldto-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity,
are reported at amortized cost and ii) available-for-sale securities are reported at fair value, with unrealized gains and losses,
net of applicable taxes, reported in a separate component of valuation and translation adjustments.
Non-marketable securities are stated at cost determined by the average method. For other than temporary declines in fairvalue, investment securities are reduced to net realizable value by a charge to income.
Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost. Major renewals and additions are capitalized, while minor renewals,
maintenance and repairs are charged to income when incurred. Interest expenses on capital expenditures during theconstruction stage are not capitalized.
Depreciation of property, plant and equipment is principally computed by the declining-balance method at rates based on estimateduseful lives. However, depreciation of buildings acquired on or after April 1, 1998 is computed by the straight-line method.

DNP Annual Repor t 20 1095

The estimated useful lives for depreciation purposes range as follows:
Buildings
Machinery and equipment

3 to 50 years
2 to 13 years

Assets with an acquisition cost of ¥100,000 ($1,075) or more per unit and less than ¥200,000 ($2,151) per unit are depreciatedover three years on a straight-line basis, whereby one-third of such acquisition cost may be taken as depreciation expense eachyear.
Leased assets
Finance leases which do not transfer ownership were accounted for as operating leases prior to 2009 but are capitalized since2009. Depreciation for leased assets is computed on a straight-line basis over the lease period with a residual value of zero.
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 thestraight-line method over ﬁve years.
Impairment of ﬁxed assets
The Company and its subsidiaries review ﬁxed assets for impairment whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying
amount of an asset or asset group exceeds the sum of the undiscounted future cash ﬂows expected to result from the continued
use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which thecarrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash ﬂows from the continued
use and eventual disposition of the asset or the net selling price at disposition.
Liability for retirement beneﬁts
The Company and several domestic signiﬁcant consolidated subsidiaries applied the accounting standard for employees’
retirement beneﬁts. Under the accounting standard, accrued pension and liability for employees’ retirement beneﬁts has been
provided based on the estimated amounts of projected pension and severance obligation and fair value of plan assets at the endof the ﬁscal year. Prior service cost is being amortized as incurred by the straight-line method over the period within the averageremaining service periods of the eligible employees. Actuarial gains and losses have been amortized from the following ﬁscal yearby 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.
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 byapplying currently enacted tax laws to the temporary differences.
Derivatives and hedging activities
The Company and certain consolidated subsidiaries use derivative ﬁnancial instruments (“derivatives”) for foreign currency
forward contracts, interest rate options and interest rate swaps to manage the risk arising from ﬂuctuation in foreign currency
exchange rate and interest rates. The Company and its subsidiaries do not enter into derivatives contracts for speculative
purposes.
Derivatives are carried at fair value with change in unrealized gains or losses charged or credited to operations, except for thosewhich meet the criteria for deferral hedge accounting under which an unrealized gain or loss is deferred as an asset or a liability.
The trade accounts receivable and payable denominated in foreign currencies of the Company and domestic subsidiaries which
are individually covered by foreign currency forward contracts are translated at the contracted rates because such treatment is also
allowed to be elected under the accounting standard if the forward contracts qualify for hedge accounting.
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, 2010 and 2009, 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 notissued any dilutive securities.
3. Basis of Translating Financial Statements
The consolidated ﬁnancial statements are expressed in Japanese yen in accordance with accounting principles generally acceptedin Japan. The Japanese yen amounts have been translated into U.S. dollar amounts, solely for the convenience of the readers,at the rate of ¥93=U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange Market at March 31, 2010. Suchtranslations should not be construed as representations that the Japanese yen at that or any other rate could be converted into U.S.
dollars.

96

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2010 and 2009 were comprised of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen¥

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

2010
151,710¥

2009
117,200$

2010
1,631,290

5. Marketable Securities and Investment Securities
The acquisition cost and aggregate fair value of marketable and investment securities classiﬁed as available-for-sale securities
including those with no fair value as of March 31, 2010 and 2009 were as follows:
Millions of yen

March 31, 2010
StocksOthers
Total

Acquisition cost¥
100,741
10,295¥
111,036

Unrealized gains¥
21,452
4¥
21,456

Unrealized losses
¥
7,762
6
¥
7,768

¥
¥

Fair value
114,431
10,293
124,724

Thousands of U.S. dollars (Note 3)

March 31, 2010
StocksOthers
Total

Acquisition cost$
1,083,236
110,699$
1,193,935

Unrealized gains$
230,66743$
230,710

Unrealized losses$
83,462
65$
83,527$$

Fair value
1,230,441
110,677
1,341,118

Millions of yen

March 31, 2009
StocksOthers
Total

Acquisition cost¥
97,332
14,289¥111,621

Unrealized gains
¥
9,816
–
¥
9,816

Unrealized losses¥
13,272
182¥
13,454¥¥

Fair value
93,876
14,107
107,983

The proceeds from sales of available-for-sale securities for the years ended March 31, 2010 and 2009 were ¥163 million ($1,753
thousand) and ¥1,185 million, respectively. The gross realized gains on these sales for the years ended March 31, 2010 and 2009were ¥46 million ($495 thousand) and ¥374 million, respectively, and the gross realized losses on these sales for the years ended
March 31, 2010 and 2009 were ¥5 million ($54 thousand) and ¥1 million, respectively.
The redemption schedules for securities with maturities classiﬁed as held-to-maturity debt securities and other securities at March
31, 2010 and 2009 were as follows:

Millions of yen

Due in one
year or lessMarch 31, 2010
¥

–
–
–

¥

Due after five years
through ten years

¥

¥

¥

180
–
180

¥

–
5,000
5,000

Financial Section

Corporate bonds
Other bonds

Due after one year
through five years

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

Due in one
year or lessMarch 31, 2010
Corporate bonds
Other bonds

$
$

–
–
–

Due after one year
through five years

Due after five years
through ten years

$

$

$

1,935
–
1,935

$

–
53,76353,763DNP Annual Repor t 20 10

97

Millions of yen

Due in one
year or lessMarch 31, 2009
Corporate bonds
Other bonds

¥

–
–
–

¥

Due after one year
through five years

Due after five years
through ten years

¥

¥

150
–
150

¥

30
9,000
9,030

¥

6. Inventories
Inventories at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

Finished products
Work in process
Raw materials

¥

¥

2010
71,341
29,722
17,757
118,820¥¥

2009
73,37329,70817,566
120,647$$2010
767,108
319,591
190,935
1,277,634

7. Short-term Bank Loans and Long-term Debt
Short-term bank loans at March 31, 2010 and 2009 were represented by bank loans and bank overdrafts, etc. bearing interest at an
average rate of 1.41% per annum for 2010 and 1.27% per annum for 2009.

Long-term debt at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2010
Secured debentures
1.05% due 2014
1.05% due 2013
0.78〜1.13% due 2012
0.78〜1.13% due 2011
Unsecured debentures
1.705% due 2020
1.67% due 2014
1.04% for 2009 and 1.75% for 2010 due 2012
0.96% due 2010

2009

2010

¥

40
40
87
220

¥

–
–
–
–

$

430
430
935
2,366

¥

50,00050,000
1,000
–

¥

–
50,000
1,000
100

$

537,635
537,635
10,753–Mortgage loans, maturing 2010-2023
Unsecured loans, maturing 2010-2017
Current portion of long-term debt
¥

5,146
9,893
116,426(4,240)112,186¥

3,117
10,27364,490(2,999)61,491

55,333
106,375
1,251,892(45,591)
1,206,301$

Finance lease obligations at March 31, 2010 which are included in other long-term liabilities consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

Finance lease obligations
Current portion of lease obligations

¥
¥

98

2010
22,192(6,237)
15,955

¥
¥

2009
8,686
(2,282)
6,404

$
$

2010
238,624(67,065)
171,559

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

Mortgage loans were secured by property, plant and equipment and other assets amounting to ¥9,784 million ($105,204 thousand)and ¥7,350 million at March 31, 2010 and 2009, respectively.
With minor exceptions, interest rates on mortgage loans ranged from 0.73% to 2.86% per annum for 2010 and ranged from
2.72% to 3.02% per annum for 2009, while interest rates on unsecured loans ranged from 0.54% to 2.86% per annum for 2010 andfrom 0.77% to 2.07% per annum for 2009.
The aggregate annual maturities of long-term debt after March 31, 2010 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

Years ending March 31
2011
2012
2013
2014
2015
2016 and thereafter

¥

4,240
3,929
5,699
50,933695
50,930116,426¥$$

45,591
42,24761,280547,6677,473
547,634
1,251,892

The aggregate annual maturities of ﬁnance lease obligations after March 31, 2010 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

Years ending March 31
2011
2012
2013
2014
2015
2016 and thereafter

¥

¥

6,237
5,665
3,355
1,269
622
5,044
22,192$$

67,06560,91436,075
13,645
6,688
54,237
238,624

8. Retirement Beneﬁ ts
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, lump-sum
retirement plan and deﬁned contribution pension plan. Upon retirement or termination of employment for reasons other thanthe cause of dismissal, employees are entitled to lump-sum payments based on the current rate of pay, length of services andaccumulated 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.
The liability for employees’ retirement beneﬁts at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

¥

¥

2010
176,040(123,243)(11,490)(2,181)
4,104
43,230¥¥2009
171,672(94,009)(36,694)(4,523)
5,006
41,452$$

2010
1,892,903(1,325,193)(123,548)(23,452)
44,129464,839DNP Annual Repor t 20 10

Financial Section

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

99

The components of net periodic beneﬁt costs were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Actuarial gain/loss
Amortization of prior service cost
Gain/loss on revision of retirement benefit plan
Other
Net periodic benefit costs

¥

¥

2010
9,627
4,094
(2,355)
7,712
2,356
–
108
21,542

¥

¥

2009
9,613
3,897
(2,498)
1,931
2,322
144
89
15,498$$

2010
103,516
44,022(25,323)
82,92525,333–
1,161
231,634

Assumptions used for the years ended March 31, 2010 and 2009 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

2010

2009

Straight-line method
2.5%
2.5%
9 years
6 years

Straight-line method
2.5%
2.5%
9 years
6 years

9. Net Assets
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The signiﬁcant provisions in the Companies
Act that affect ﬁnancial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the ﬁscal year in addition to the year-end dividend
upon resolution at the stockholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2)having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribedas 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 so in its articles ofincorporation. The Company meets all the above criteria. However, its articles of incorporation have not stipulated that the Boardof Directors may declare dividends at any time during the ﬁscal year.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to stockholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends
or the purchase of treasury stock. The limitation is deﬁned as the amount available for distribution to the stockholders, but theamount of net assets after dividends must be maintained at no less than ¥3 million.
Cash dividends of ¥16.00 ($0.2) per share, aggregating ¥10,316 million ($110,925 thousand) were approved at the generalstockholders’ meeting held in June 2010 with respect to the year ended March 31, 2010.
(b) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a componentof 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 Companies Act, the total amount of additional paid-in capital and legal reserve may bereversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, othercapital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of thestockholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to thestockholders which is determined by speciﬁc formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of net assets.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of net assets or deducted directly from stock acquisitionrights. At present, the Company has not issued such stock acquisition rights.

100

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

Upon approval by the resolution of the Board of Directors, the Company purchased 17,231 thousand shares of common stocks
at aggregate cost of ¥27,425 million during the year ended March 31, 2009.
10. Accounts with Non-consolidated Subsidiaries and Associated Companies
Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2010 and 2009 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

¥

2010
4,484
329
17,667
5,416
275
4,965
263
855

¥

2009
5,082
236
5,474
5,647
275
433
195
604

2010
48,215
3,538
189,968
58,2372,957
53,387
2,828
9,194

$

11. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

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

¥

¥

2010
65,3655,804
7,183
10,85731,063109,915230,187¥¥

2009
59,578
5,516
4,010
10,15931,097103,785
214,145$$2010
702,849
62,40977,237116,742
334,0111,181,881
2,475,129

Total research and development expenses (including manufacturing costs) amounted to ¥33,850 million ($363,978 thousand) and¥34,112 million for 2010 and 2009, respectively.
12. Other Income
The following types of income from non-consolidated subsidiaries and associated companies were included in other income.
Thousands of
U.S. dollars (Note 3)

Millions of yen

Interest and dividend income
Leasing fees

¥

2010
120
262

¥

2009
¥112
178

$

2010
1,290
2,817

DNP Annual Repor t 20 10

Financial Section

13. Income Taxes
The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which, in theaggregate, resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2010 and 2009,
respectively.
The actual effective tax rate reﬂected in the accompanying consolidated statements of operations differs from the normal
effective statutory tax rate primarily due to the effect of permanently non-deductible expenses, current operating losses anddifferent tax rates applicable to foreign subsidiaries, etc.
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, 2010, although no reconciliation for 2009 was shown because of loss before income taxes andminority interests.

101

2010
40.7 %
3.0
12.6
(1.8)
(2.0)
(0.5)
52.0 %

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

Net deferred tax assets at March 31, 2010 and 2009, resulting from temporary differences between the carrying amounts and thetax bases of assets and liabilities were reﬂected on the accompanying consolidated balance sheets under the following captions:Thousands of
U.S. dollars (Note 3)

Millions of yen

Prepaid expenses and other current assets
Other assets¥

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

¥
¥

2010
9,775
40,575(13)(2,711)
47,626

¥

¥
¥

2009
10,27950,015(11)(3,352)56,931

$

$
$

2010
105,108436,290(140)(29,150)
512,108

Signiﬁcant components of deferred tax assets at March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2010
Deferred tax assets:
Excess provision for retirement benefits
Loss on devaluation of investment securities
Excess provision for doubtful receivables
Accrued bonuses
Loss on write-down of inventories
Operating loss carryforwards
Impairment loss on fixed assets
Unrealized loss on available-for-sale securities
Other
Total deferred tax assets
Less: valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Reserve for special depreciation
Undistributed earnings of subsidiaries
Other
Total
Net deferred tax assets :

¥

2009

20,276
5,016
5,573
6,515
1,046
36,363
15,506–
14,868105,163(41,259)
63,904¥¥¥(5,554)(5,524)(1,480)(3,720)(16,278)¥

47,626¥¥

2010

19,356
4,873
5,691
6,431
1,045
31,267
24,342
1,505
10,983
105,493(43,307)62,186

$

$

¥

–
–
(1,190)(4,065)(5,255)$(59,720)(59,398)(15,914)(40,000)(175,032)¥

56,931$

512,108¥$

218,02253,93559,92570,054
11,247
391,000
166,731–
159,871
1,130,785(443,645)
687,140

14. Impairment Loss on Fixed Assets
The Company and its consolidated subsidiaries reviewed the ﬁxed assets for impairment for the years ended March 31, 2010 and2009. Fixed assets were, in principle, grouped at the business unit for impairment testing purposes. Idle assets were grouped ineach asset. Loss on impairment of ﬁxed assets for the years ended March 31, 2010 and 2009 were recognized in the amount of¥378 million ($4,065 thousand) and ¥50,690 million, respectively due to a signiﬁcant decline in proﬁtability.

102

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

15. Leases
Finance Leases
Effective the year ended March 31, 2009, the Company and its domestic subsidiaries adopted “Accounting Standard for Lease
Transactions.” Under this standard, ﬁnance lease transactions without ownership-transfer whose inception date is on or before
March 31, 2008 are still allowed to be accounted for as operating leases. Pro forma information such as acquisition cost,
accumulated depreciation and net book value of the leased properties for such ﬁnance lease transactions was as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

Acquisition cost
Accumulated depreciation
Accumulated impairment losses
Net book value

¥

¥

2010
34,032(25,494)
(349)
8,189

¥

¥

2009
46,882(28,233)(1,305)
17,344$$2010
365,936(274,129)(3,753)88,054

The amounts of lease expenses, reversal of allowance for impairment loss on leased assets and lease impairment losses undersuch ﬁnance leases for the years ended March 31, 2010 and 2009 were as follows:

Thousands of
U.S. dollars (Note 3)

Millions of yen

Lease expenses
Reversal of allowance for impairment loss on leased assets
Lease impairment losses

¥

2010
8,564
1,046
93

¥

2009
11,724
–
1,102

$

2010
92,086
11,247
1,000

The amounts of outstanding future payments under such ﬁnance leases due on March 31, 2010 and 2009, including the portion ofinterest thereon, were summarized as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2010
Future lease payments:
One year or lessMore than one year

¥
¥

2009

4,686
3,852
8,538

¥
¥

10,578
8,111
18,6892010$$

50,38741,41991,806

Operating Leases
The amounts of outstanding future payments under non-cancelable operating leases as of March 31, 2010 and 2009 were also
summarized as follows:

Thousands of
U.S. dollars (Note 3)

Millions of yen

2010
¥
¥

4,527
27,58032,107

2009
¥
¥

2,656
16,89919,555

2010$$

48,678296,559
345,237

Financial Section

Future lease payments:
One year or lessMore than one year

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

DNP Annual Repor t 20 10103

2. Fair value of ﬁnancial instruments
Fair value and difference compared to the carrying amounts reported in the consolidated balance sheet as of March 31, 2010
were as follows:
Millions of yen

Carrying amounts reported
in the consolidatedbalance sheet(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securies(4) Long-term loan receivables
Allowance for doubtful receivables*1
Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1] Hedge accounting is not applied[2] Hedge accounting is applied
Total

¥

¥

152,416
449,020
104,232
1,741
(108)
1,633
707,301
308,630
50,547
116,426475,603

Fair value
¥

(221)
(16)
(237)

152,416
449,020
104,233
1,676¥

Difference
¥

–
–
1

1,676
707,345
308,630
50,547
118,692
477,869

43
44
–
–
2,266
2,266

(221)
(1)
(222)

–
15
15

¥

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

Carrying amounts reported
in the consolidatedbalance sheet(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securies(4) Long-term loan receivables
Allowance for doubtful receivables*1
Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1] Hedge accounting is not applied[2] Hedge accounting is applied
Total

$

$

1,638,881
4,828,172
1,120,774
18,720(1,160)17,5607,605,387
3,318,602
543,516
1,251,892
5,114,010(2,376)(172)(2,548)Fair value$

1,638,881
4,828,172
1,120,785
18,022Difference
$

–
–
11

18,022
7,605,860
3,318,602
543,516
1,276,258
5,138,376

462
473
–
–
24,36624,366(2,376)(11)(2,387)

–
161
161

$

$

*1. Allowance for doubtful receivables associated with long-term loan receivables is deducted.
*2. Derivative assets and liabilities are on a net basis.
Note A: Fair value of ﬁnancial instruments, marketable securities and derivatives
Assets(1) Cash and deposits and (2) Trade receivables
The carrying amounts approximate fair value because of the short maturities of these instruments.
(3) Marketable and investment securities
The fair values of equity securities are measured at the quoted market price of the stock exchange and the fair values of debt
securities are measured at the quoted price provided by ﬁnancial institutions.

104Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS(4) Long-term loan receivables
The fair values of long-term loans are mainly determined based on the present value of the future cash ﬂows discounted bygovernment bonds rates plus certain credit risk premiums by categories according to the internal ratings. (Long-term loan
receivables are included in other assets in the consolidated balance sheet.)
Liabilities(1) Trade payables and (2) Short-term bank loans
The carrying amounts approximate fair value because of the short maturities of these instruments.
(3) Long-term debts
The fair values of bonds issued by the Company and its subsidiaries are measured based on market price, if available. The fairvalues of bonds without market price are measured at the present value of total principal and interest discounted by using a rate
which reﬂects its remaining period and credit risk.
The fair values of long-term debts are based on the present value of total principal and interest discounted by using the current
borrowing rate for similar debt.
Derivatives
Fair values of forward-exchange contracts are based on the foreign exchange forward market rates. Fair values of interest rate
swaps are based on those provided by ﬁnancial institutions.
Note B: Financial instruments whose fair value is extremely difﬁcult to measure.
Thousands of
U.S. dollars (Note 3)

Millions of yen

Unlisted equity securities
Other

Carrrying amounts
20,403¥89

Carrrying amounts
219,387957$

The above are not included in “ (3) Marketable and investment securities” because there is no market value and it is extremely
difﬁcult to measure the fair value.
17. 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 and interest rate swaps to manage the risk arising from ﬂuctuation in foreign currency exchange rates andinterest rates. Foreign currency forward contracts are utilized to hedge foreign exchange risks associated with certain accounts
receivable and accounts payable, including forecasted transactions, denominated in foreign currencies. Interest rate swaps
are utilized to hedge interest rate risks on interest-bearing debts. The Company and its subsidiaries do not hold derivatives for
speculative purposes.
Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to majorinternational ﬁnancial institutions, the Company and its subsidiaries do not anticipate any losses arising from credit risks. The basic
policies for the use of derivatives are established in the Company’s internal regulations and the execution and control 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, 2010 and 2009 were as
follows:
Financial Section

DNP Annual Repor t 20 10105Derivative transactions to which the Company and its subsidiaries did not apply hedge accounting.
Millions of yen

March 31, 2010
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Contracted amount

¥
¥

8,987
1,504
10,491

Fair value

¥

9,266
1,446
10,712¥

Unrealized gain (loss)

¥
¥

(279)
58
(221)

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

March 31, 2010
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Contracted amount$$

96,634
16,172
112,806

Fair value$

99,634
15,548115,182$

Unrealized gain (loss)$$(3,000)624(2,376)

Millions of yen

March 31, 2009
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Interest rate swaps
Receive floating and pay fixed:

Contracted amount

Fair value

¥

¥

5,250
1,698
6,948

¥

13,800¥

Unrealized gain (loss)

¥

¥

5,494
1,780
7,274

¥

244
82
326

¥

(76)

¥

76

Derivative transactions to which the Company and its subsidiaries applied hedge accounting.
Millions of yen

March 31, 2010
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars

Interest rate swaps
Receive floating and pay fixed

Hedge items

Trade receivables
Trade receivables

Contracted amount

¥

¥

1,645
1,372

¥

37
3,051

¥

38
3,055

¥

3,172

¥

(104)

Trade payables

Long-term loan payables

1,599
1,415

Fair value

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

March 31, 2010
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars

Interest rate swaps
Receive floating and pay fixed

106

Hedge items

Trade receivables
Trade receivables

Contracted amount$$

17,68814,753$398
32,806$408
32,849$34,108$(1,118)Trade payables

Long-term loan payables

17,193
15,215

Fair value

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

Fair value of derivatives were, in principle, determined based on the market rates.
Foreign currency forward contracts which qualiﬁed for hedge accounting was assigned to the associated assets and liabilities ordeferred until completion of the forecasted transactions.
18. Contingent Liabilities
The Company and its consolidated subsidiaries were guarantors of bank loans of other companies, amounting to approximately ¥78
million ($839 thousand) and ¥93 million at March 31, 2010 and 2009, respectively. It is common practice in Japan for companies,
in the ordinary course of business, to receive promissory notes in settlement of trade accounts receivable and to subsequently
discount such notes at banks. At March 31, 2010 and 2009, the Company and its consolidated subsidiaries were contingently liable
on trade notes discounted in the amount of ¥670 million ($7,204 thousand) and ¥670 million, respectively. Notes discounted were
accounted for as sales. One of the consolidated domestic subsidiaries securitized deposits for its leased property and sold them tothird parties for ¥358 million ($3,849 thousand) and ¥370 million at March 31, 2010 and 2009, respectively.
19. Business Segment Information
Industry segments:
The Company and its consolidated subsidiaries’ primary business industries principally consist of Printing and Beverage operations.
The Printing business includes 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 and capital expenditures regarding the Company’s industry segments at March 31, 2010 and 2009
and for the years then ended.
Millions of yen
Printing
Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Beverages

Total

Elimination
and/orcorporate

Consolidated

For 2010:
Net sales:
Outside customers
Inter-segment
Total
Costs and expenses
Operating income (loss)¥ 732,709 ¥ 530,401 ¥ 257,479 ¥
6,976
6,237
24
739,685536,638
257,503716,219492,924
249,187¥
23,466 ¥43,714 ¥
8,316 ¥

62,794 ¥ 1,583,383 ¥
35
13,27262,8291,596,655
63,405
1,521,735(576) ¥
74,920 ¥– ¥ 1,583,383–(13,272)
1,583,383(13,272)
1,516,869(4,866)
66,514(8,406) ¥Assets, depreciation, impairment loss andcapital expenditures:
AssetsDepreciation
Impairment loss
Capital expenditures¥ 592,670 ¥ 522,335 ¥ 397,007 ¥24,91327,73633,373264
2–23,80022,763
67,953

43,169 ¥ 1,555,181 ¥3,398
89,420
112
378
3,173
117,689

63,672 ¥ 1,618,853
91,6952,275
378–
119,063
1,374

Thousands of U.S. dollars (Note 3)
Printing
Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Beverages

Total

Elimination
and/orcorporate

Consolidated$ 7,878,592 $ 5,703,237 $ 2,768,591 $ 675,204 $17,025,624 $– $17,025,624
75,011
67,065258
376–(142,710)
142,710
7,953,603 5,770,302
2,768,849
675,580 17,168,334(142,710) 17,025,624
7,701,280 5,300,259
2,679,430
681,774 16,362,743(52,323) 16,310,420$ 252,323 $ 470,043 $
89,419 $(6,194) $ 805,591 $ (90,387) $ 715,204

Assets, depreciation, impairment loss andcapital expenditures:
AssetsDepreciation
Impairment loss
Capital expenditures$ 6,372,796 $ 5,616,505 $ 4,268,892 $ 464,183 $16,722,376 $ 684,646 $17,407,022
267,882
298,237
358,849
36,538985,968
24,462
961,506
2,839
22
–
1,204
4,065
–
4,065
255,914244,764
730,677
34,1181,280,247
14,774
1,265,473

DNP Annual Repor t 20 10

Financial Section

For 2010:
Net sales:
Outside customers
Inter-segment
Total
Costs and expenses
Operating income (loss)

107

Millions of yen
Printing
Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Beverages

Total

Elimination
and/orcorporate

Consolidated

For 2009:
Net sales:
Outside customers
Inter-segment
Total
Costs and expenses
Operating income¥ 711,276 ¥ 545,916 ¥ 255,967 ¥
7,150
5,906
8
718,426
551,822
255,975
686,736
531,905
253,398¥
31,690 ¥19,917 ¥2,577 ¥

71,685 ¥ 1,584,844 ¥
46
13,11071,731
1,597,954
71,4081,543,447
323 ¥
54,507 ¥– ¥ 1,584,844–(13,110)
1,584,844(13,110)
1,538,667(4,780)46,177(8,330) ¥Assets, depreciation, impairment loss andcapital expenditures:
AssetsDepreciation
Impairment loss
Capital expenditures¥ 619,080 ¥ 513,092 ¥ 329,042 ¥25,20429,51346,0391,799
48
48,692
27,98829,71834,271

43,394 ¥ 1,504,608 ¥
3,507
104,263
151
50,6902,835
94,812

31,949 ¥ 1,536,557
106,883
2,620
50,690–96,156
1,344

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, 2010 and 2009.
Overseas sales:
Overseas sales of the Company and its consolidated subsidiaries for the years ended March 31, 2010 and 2009 were as follows :Thousands of
U.S. dollars (Note 3)

Millions of yen

2010
Overseas sales
Asia
Other
Total

Ratio:(a)/(b)¥130,836
62,308
193,144

8.3%
3.9%
12.2%

¥

1,583,383

2010

AmountRatio:(a)/(b)¥134,108
76,303
210,411

8.5%
4.8%
13.3%

¥

1,584,844(a)Consolidated net sales (b)

108

2009

Amount¥¥$$1,406,839
669,978
2,076,817$

17,025,624

Financial Section ▶ CONSOLIDATED FINANCIAL STATEMENTS

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. and consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements ofoperations, 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 plan and perform the audit to obtain reasonable assurance about whether the consolidated ﬁnancial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts 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, theﬁnancial position of Dai Nippon Printing Co., Ltd. and consolidated subsidiaries as of March 31, 2010 and 2009, andthe results of their operations and cash ﬂows for the years then ended in conformity with accounting principles
generally accepted in Japan.
We have also audited the management’s report on internal control over ﬁnancial reporting of Dai Nippon Printing
Co., Ltd. as of March 31, 2010. The Company’s management is responsible for designing and operating effective
internal control over ﬁnancial reporting and for preparing its report on internal control over ﬁnancial reporting. Our
responsibility is to express an opinion on the management’s report on internal control over ﬁnancial reporting basedon our audit. There is a possibility that misstatements may not be completely prevented or detected by internal
control over ﬁnancial reporting.
We conducted our internal control audit in accordance with auditing standards for internal control over ﬁnancial
reporting generally accepted in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the management’s report on internal control over ﬁnancial reporting is free ofmaterial misstatement. An internal control audit includes examining, on a test basis, representation on the scope,
procedures and results of the assessment of internal control over ﬁnancial reporting made by management, as well
as evaluating the overall presentation of management’s report on internal control over ﬁnancial reporting. We believethat our internal audit provides a reasonable basis for our opinion.
In our opinion, the management’s report on internal control referred to above, which represents the internal control
over ﬁnancial reporting of Dai Nippon Printing Co., Ltd. as of March 31, 2010 is effectively maintained, presents fairly,
in all material respects, the assessment of internal control over ﬁnancial reporting in conformity with assessment
standards for internal control over ﬁnancial reporting generally accepted in Japan.

Financial Section

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 are presented solely for the convenience of readers outside Japan.

MEIJI AUDIT CORPORATIONTokyo, Japan
June 29, 2010

DNP Annual Repor t 20 10109

Appendix

Technology-Centered Business Development

The history of DNP’s business growth is the history of theevolution and application of our two core technologies –printing and information. Since its founding in 1876, DNP
has refined these technologies to world-class levels.
Based on the concept of “Expansion Printing,” our efforts
to expand our fields of business around core technologies
began to bear fruit all at once in the 1950s.
First, we expanded the range of materials to which weapplied our printing techniques to materials other thanpaper. We gained the ability to print on plastic film, cloth,
metal, and other materials, and entered the packaging anddecorative materials businesses in 1951.
Later, we expanded on technologies like laminationand coating, created products such as dye-sublimation
thermal transfer materials and anti-reflection film forflat-panel displays, and established our Lifestyle andIndustrial Supplies segment. In 1958, DNP became thefirst Japanese company to succeed in the developmentof shadowmasks for domestic color television production,
and we established our Electronics segment. This required
making millions of ultramicroscopic holes in copper plate
only 0.2mm thick, a technology that we developed byapplying photolithography and other micro-processing
techniques used for making printing films. After developing
photomasks for making semiconductors in 1959, we went
on to provide a variety of electronic devices such as color
filters for liquid crystal displays (LCDs), and lead frames.

Meanwhile, we continued to develop the “information
technologies” that we had cultivated since the company’s
founding as part of our quest for the most comfortableand pleasant ways of expressing text and images.
We worked on a wide variety of projects, including
development of DNP’s original Shueitai font, which wehave continued since the early 1900s, as well as color
management systems and design development. In theearly 1970s, we began digitizing information. By nimbly
adapting to the rapid trend toward digitalization andnetworking – for example by developing the world’s firstelectronic dictionary – we accumulated the technologies
and expertise that allowed us to build the digital content
business that we have today. Furthermore, we createdinfrastructure to support advanced information security,and developed a comprehensive business ranging fromsoftware development for smart cards and information
processing services (IPS) to the manufacture of smart
cards and related products.
Today, DNP aims to continue broadening its business andcontributing to society by combining printing technologies
and information technologies in order to solve problems
for corporate clients and consumers – a business visionthat we call “ P&I Solutions.” This has been taking us into
all kinds of business fields where problems can be solved
by applying DNP technology, starting with photovoltaic
module components and other energy-related areas, andlife science fields like the formation of capillary bloodvessel patterns and cell sheet engineering.

Feedback

Planning

Information
processing

FilmmakingPlate making

Printing

Processing

ProductdeliveryMeasurementof effectiveness

PT = Printing Technologies
Materials technologies

Patterning technologies

Converting technologies

IT = Information Technologies
Information processing
technologies

110

Human Media Interaction(HMI) technologies

Information security technologies

Technologies That Support P&I Solutions

Printing Technologies

Information Technologies○ Materials technologies:
Technologies for synthesizing new materials, ordispersing and mixing materials, including design& production techniques for inks, adhesives,photosensitive materials, coatings, etc.

○ Information processing technologies:
Technologies related to the conversion, accumulationand transmission of data, including techniques for text
processing, color separation and editing texts & images,raster vector conversion and digital-to-analog conversion
technologies, as well as database design, server
management and network technologies.

○ Patterning technologies:
The formation of letters, images and patterns, etc., ona base material, including plate-making technologies,
letterpress, offset, and gravure printing techniques, aswell as plateless printing techniques such as lithography,
inkjet, etc.

○ Human Media Interaction (HMI) technologies:
Technologies related to the interaction of humans andinformation, including expressive technologies such as
font design, color matching, tone reproduction, industrial
design planning, photo-realistic CG as well as interface
design technologies such as screen design, natural
language processing and cognitive engineering, etc.

○ Converting technologies:
Materials processing technologies for changing theform of a material and for compounding materials, etc.,
including techniques for processing paper and film
materials such as film formation, coatings, lamination,
molding, transferring, cutting and polishing, bag-making,forming, bookbinding, etc.

○ Information security technologies:
Technologies for ensuring that information is accuratelytransmitted to the correct destination, properly stored,
while preventing improper use of information, including
technologies for encrypting, personal data processing &management, copyright management technologies andbiometrics, as well as information technologies related
to smart cards.

Strategies for promoting
commercialization of technologicaldevelopments
Three axes of technological development;
Combining them to create new businesses
Recommendation engine

g

sin

ces

Information filtering
Data mining

s in

Ad

Network security

m
for

in

IC tag systems
MEMS

Lead frames

Organic EL

Color filters

Photomasks
Biomaterials
Photovoltaic module
components

Ultra-hard films
Ultra-barrier film forelectronic devices

gen

elli

kin

t
g in

Ma

ials

ter

a
tm

Digital photo materials

High-function optical films
Eco-friendly decorative materials

Packaging materials
that are impermeable to gases

Creating new businesses

Appendix

Information
Technologies
(IT)

f
ing

eas

r
Inc

Fuel cellcomponents

Printing
Technologies
(PT)

nes

ine

Printedwiring boards

ns

ter

pat

f
so

DVD

Combinationsof PT and IT

MPEG4moduleSmart cards

IPS

Emergently
evolving society

o

ati

ce
van

ro
np

s %NERGY BUSINESSs ,IFE 3CIENCE BUSINESS
s %NVIRONMENT RELATED BUSINESSs /THER NEW BUSINESSESDNP Annual Repor t 20 10111

Appendix

Technologies and Their Applications

Information Technologies(Information Processing, HMI, and Information Security Technologies)
Making communication pleasant by handling information safely and securely via all
kinds of media
In the prepress stage, we use a variety of methods toprocess text, photographs, illustrations and other content.
In order to present the content most effectively and makeit clear and easy to read, we consider the most appropriate
printing method, size, paper quality, and methodsof expression, etc., before we edit and process theinformation. The prepress process also includes digitizing
the information, and organizing, storing and managing it sothat it can be updated or revised in the future, as is often
done with dictionaries and product catalogues.
DNP's information processing skills are not limited tothe domain of paper printing, but have evolved to include
all kinds of information media. Our information processing
technologies include image processing techniques aimed

at optimizing qualities used for expressing an image, suchas colors, outline, contrast or coloration; data conversion
techniques for converting the format or size of a data file
to suit paper, DVD, Internet or other media; databasetechnologies for organizing, storing, and managing
information; and server management and networking
technologies.
We have expanded our information-related business by
combining these information processing technologies withhuman media interaction (HMI) techniques aimed at making
it pleasant for people to interact with information, and withinformation security technologies to ensure that informationis handled safely and securely.

Examples of Information Processing Technology Applications
Example1

Digitalization of DNP’s original
Shueitai fon t

DNP set about computerizing its typesetting operations in the
1970s. This included digitizing our original Shueitai font, which
we began developing in the early 1900s. After we produced theworld’s first electronic dictionary on CD-ROM in 1985, we werequick to begin Internet and other forms of digital broadcasting. In
2005, we made our 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 the font that was easier to read on anelectronic display. In 2009, Morisawa & Company, Ltd. beganmarketing Shuei Hoso (Light weight) Ming-cho for use withdesktop publishing systems. In the fall of 2010 we plan to startsales of three more Shuei Ming-cho fonts: Chuu (Regular) Mingcho, Futo (Bold) Ming-cho, and Shuei Shogo Ming-cho.

Shuei Shogo
Ming-cho112

Shuei Futo (bold)
Ming-cho

Shuei Chuu (regular)
Ming-choExample2

Providing advanced information security

Since its founding, DNP has been honing its information security
technologies in the process of strictly controlling and carefully
handling the information it receives from corporate clients. We
developed techniques for organizing information in databasesand efficiently reusing information, for constructing more secure
network systems, and for providing products with improved anticounterfeiting functions.
In recent years, we have been providing systems that use smart
cards to authenticate personal identification, control computerboot-up access, encode data, and control room or gate entry
and exit. DNP also serves as the secretariat for Shared Security
Formats Cooperation (SSFC), a corporate alliance aimed atcreating common standards for office security. Through thesekinds of activities, DNP will continue to broaden its business as wemeet demand for increasingly sophisticated information security.

Smart cards

Technologies and Their Applications

Printing Technologies(Patterning Technologies)
Exposure, development, etching — the principles are the same whether the object istext or semiconductors
Patterning is the art of forming images – of text,
photographs, illustrations or other content – on form plates
that are used in the film making stage of printing.
Before the advent of the digital era, the film making
process involved using a process camera to photographthe layout of a page of text and/or photographs or otherillustrations, and burning the image onto a negative or
positive film. Color photographs were separated into fourcolors, resulting in four sheets of film with tiny dots ofyellow, magenta, cyan or black affixed to each one.
An image that is finely drawn on the form plate using
patterning technology is then developed onto a printing
plate made of resin, metal, or some other material. Thisis done by developing the image from the form plate ontoa plate (usually made of resin or metal) coated with aphotosensitizing agent, exposing only the required parts of
the resin or metal and using acid to corrode it, then washingit to form a relief plate. This process is called etching.
DNP developed its own production equipment andmanufacturing systems and has refined these techniques
to the point that it achieved one of the highest levels of
precision in the world. We began to apply these ultrafine patterning skills to the development of electronic
products, in addition to traditional printing. Today, DNP
has refined its patterning technologies so much that it canhandle the nanometer-level microfabrication necessary for
manufacturing photomasks, which serve as masters in the
manufacture of semiconductors. These technologies havebecome indispensable to electronics manufacturers as they
strive to further miniaturize their products.

Examples of Patterning Technology Applications
Example1

Display components (color filters)

An LCD color filter consists of phosphors in the three primary
additive colors— red, green and blue — arranged in an orderly arrayon a glass substrate. Only when light passes through the color
filter is a color image formed. The formation of millions of pixels
precisely in predetermined locations on the color filter is what
determines picture quality. This requires extremely sophisticatedpatterning technology, a requirement that DNP fulfills.
Not only can DNP provide color filters that work with all of thevarious methods that client companies use for manufacturing LCD
panels, we are the only company in the world that mass produces
filters by both the inkjet and photolithographic methods.

2Electronic devices (photomasks)

Photomasks consist of glass substrates on which highly precise
circuit patterns are formed, with accuracy at the submicron or
nanometer level. 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 and smaller. DNP remains at the forefrontof technical development in this area; we already mass produce
products with 45nm and 32nm lines, and are developing ultraadvanced products, including those with line widths of 20-10nm.

Appendix

Basic structure of an LCD panel

ExamplePhotomask for making semiconductors

DNP Annual Repor t 20 10113

Appendix

Technologies and Their Applications

Printing Technologies(Materials + Converting [Coating and Transferring] Technologies)
Technologies for painting on functionality and transferring “a look”

Coating technologies involve taking ink that was applied
to a printing plate, and applying or affixing it to a material
like paper or film. Of course DNP has developed basic
technologies for improving image reproduction and accuracy
by controlling the amount of ink and printing pressure. We
also went on to develop techniques for improving colorationand durability by coating the paper surface with varnish or
pigment.
Using these types of technologies as a foundation, we
expanded our fields of business by refining our skill at
printing materials other than ink onto materials other thanpaper. In addition to packaging made from film, and coatedmagnetic tape used in bankbooks and cash cards, we use
materials technologies and coating technologies in various

lifestyle materials such as floor and wall coverings, woodgrain printing, and automotive interiors. In tandem with rapid
expansion of the market for flat-panel displays in recent
years, there has been a big jump in demand for functionalfilms that reduce the reflection of light from electronic
displays or block out electromagnetic waves emitted fromplasma display panels (PDPs). DNP has cultivated theseareas as new business fields.
Transferring techniques are another important type ofprinting technologies. An example is using heat to transfer
ink that has been applied to film onto a base material. Twoof our main products that involve transfer technologies are
monochrome ink ribbons for barcode printers and color ink
ribbons for digital photo printers.

Examples of Materials + Converting (Coating / Transferring) Technology Applications
Example1

Optical films for flat-panel displays

The surface of the polarizing plate at the very front of an LCD
or other type of display is covered with special, functional film,
usually anti-reflection film. This film protects the surface of thescreen from abrasion and makes it easier to see the images on thescreen by reducing glare from incidental light or fluorescent lights.
Special films are also used on PDPs, such as electromagnetic
wave shielding film.
By applying the coating technologies that are among our core
printing technologies, we provide optical films that improve thevisibility of electronic displays and prevent eyestrain. DNP has
captured an overwhelming share of the market for these types offilms.

Optical films for fl at-panel displays

114

Example2

Color ink ribbons for digital photo printers

Ink ribbons used in digital photo printers consist of a base film
coated with four colors of ink: yellow, magenta, cyan and black.
Depending on the amount of energy in the printer’s thermal head,an appropriate amount of each color of ink is sublimated andtransferred onto special receiving paper. This method makes it
possible to express very subtle variations in color and to produce
high-quality prints that come very close to the results obtainedwith silver halide photography.
As use of digital cameras and mobile phones with built-in
cameras has spread rapidly, users increasingly want to print theimages that they captured with these devices. Demand for color
ink ribbons is growing not only for use in home-use printers,
but also for use by printing services offered through electricalappliance mass retailers and camera shops.

Color ink ribbons

Technologies and Their Applications

Printing Technologies(Materials + Converting [Post-Processing] Technologies)
In pursuit of more sohisticated functionality: tweaking shapes and improving ease of use

Even after we finish printing on paper or film, we still
don’t have a finished product. In the case of books andmagazines, it is only after we complete the binding
processes — folding the printed pages, binding them
together, trimming off extra paper and cleaning up theedges — that we are done with our work.
These binding processes are supported by materials andpost-processing technologies that make all the differencein the final product according to whether we use a hardcover binding that gives the final product a luxurious feel,or a standard binding that allows us to mass produce lowpriced products, and whether we use saddle stitching, sidestitching, or adhesive binding.
Ever since DNP’s founding, we have kept coming up
with ideas for processing our final products to make themmeet our customers’ various needs. In the packaging
business, we developed one post-processing technology
after another, starting with three-dimensional processing of
paper containers and other paper products, and including
techniques for sealing plastic film packages and forming
plastic. We also developed forming technologies for avariety of materials, enabling us to make laminated tubes
and PET plastic bottles.
In our approach to these processes, we consider
improving the functionality of the end product to be asimportant as the beauty of our printing. Because we provide
products that consumers actually use in their daily lives,
it is imperative that we pay attention to environmental
preservation and universal design.

Examples of Materials + Converting (Post-Processing) Technology Applications
Example1

Designing in functionality and comfort

A large amount of packaging is used in everyday life. We develop
our products according to design guidelines geared toward
improving functionality in addition to the obvious concern with
reducing negative impact on the environment. For example, weseal the aluminum lid of a yogurt cup tightly enough to keep thecontents from leaking out, yet take care to enable even people
with little strength to open it easily. As another example, we
considered the user’s comfort when designing a container for
instant noodles, making it double-sided so that the outside would
not be too hot to the touch even when it is filled with boiling water.
We are also working on making thinner, lighter drinking cups.

Example2

More than 30 years of experience withaseptic filling

DNP established aseptic filling technology in 1976 and developed
containers that make it possible to preserve their contents
for a long period of time at room temperature. We offer thesecontainers in the form of single-portion packages for coffee
whitener and packaging for prepared foods like stew or pastasauce. We also make use of aseptic filling technology to offer ourhighly acclaimed aseptic systems for filling PET plastic bottles
with a variety of beverages. Our system uses compact, test tubeshaped bottle “preforms” that are formed into full-size bottles only
immediately before they are filled, thereby reducing the costs andCO 2 emissions involved in transporting them to the bottling plant.

Microwaveable heat-insulated container (D-COUPLE)

Appendix

Aseptic filling system for PET plastic bottles

Left:

preform, before
being formed into bottle
Right: PET plastic bottle
after forming

DNP Annual Repor t 20 10115Appendix

Investor Information(as of March 31, 2010)

Dai Nippon Printing Co., Ltd.
Major Stock Indices in which DNP is a Constituent:Head Office:1-1, Ichigaya-Kagacho 1-chome, Shinjuku-ku,

Nikkei Stock Average

Tokyo 162-8001, JapanTOPIX Large70
MSCI World Index
S&P/TOPIX 150

Established:

Dow Jones Sustainability Indexes

1876

Morningstar Socially Responsible Investment
Number of Employees (consolidated):
Stock Code:39,6437912
Paid-in Capital:
Administrator of Shareholder Register:¥114,464 million

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,

Number of Common Stocks:

Tokyo 103-8670, Japan

Authorized 1,490,000,000 shares
Issued700,480,693 shares
Annual Meeting of Shareholders:
The annual meeting of shareholders of DNP is

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

normally held in June each year in Tokyo, Japan

22,865Investor Relations:

Stock Exchange Listings:

Dai Nippon Printing Co., Ltd.

Tokyo, Osaka

IR Group, Press and Public Relations
Major Shareholders:Shares (thousands) Percentage (%)

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

37,398

5.80

Tokyo 162-8001, JapanThe Dai-ichi Mutual Life Insurance Co.

30,882

4.79

Tel: +813-5225-8220

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

29,063

4.51

Fax: +813-5225-8239

The BNYM as Depositary Bank for DR Holders

26,665

4.14

Mizuho Corporate Bank, Ltd.

15,242

2.36

Nippon Life Insurance Co.

14,3492.23

Mizuho Bank, Ltd.

12,471

1.93

Employees’ Shareholding Association

11,462

1.78

Japan Trustee Services Bank, Ltd. (Trust A/C 9)

7,958

1.23

State Street Bank and Trust Company 505225

7,595

1.18

Notes: 1. The number of treasury shares (55,718,118) is excluded from the figures above.
2. The ownership stakes are based on the total number of shares outstanding lesstreasury shares (644,762,575).
3. The Dai-ichi Mutual Life Insurance Company demutualized and became
The Dai-ichi Life Insurance Company, Limited on April 1, 2010.

116

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

Web Site Address:
http://www.dnp.co.jp/eng/Share Price Evolution (Tokyo Stock Exchange)(between April 1, 2007 and March 31, 2010)DNP Stock Price (yen)Increase (%)*
10

2,000
0

-10

-20

1,500

-30

-40

1,000

-50

-60

-70
500

08

09

10
*Index 100 = March 31, 2007(as of March 31, 2010)

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

56,803,000—

Stocks with voting rights (other)

Common stocks 641,152,000

641,152

Stocks with less than trading units

Common stocks

Outstanding shares
Total voting rights of stockholders

2,525,693—

700,480,693——

641,152

Treasury Stocks
Holder(as of March 31, 2010)

No. of Stocks Held

Percentage of Holding to No. of Outstanding Shares

55,718,000

7.95

Kyoiku Shuppan Co., Ltd.

1,085,000

0.15

Total

56,803,000

8.11

Appendix

Dai Nippon Printing Co., Ltd.

DNP Annual Repor t 20 10117Appendix

Major Subsidiaries and Affiliates

Printing
DNP Hokkaido Co., Ltd.
DNP Tohoku Co., Ltd.
DNP Tokai Co., Ltd.
DNP Nishi Nippon Co., Ltd.
DNP Shikoku Co., Ltd.
Information Communication
Books and Magazines
DNP Seihon Co., Ltd.
DNP Offset Co., Ltd.
DNP Media Art Co., Ltd.
DNP Total Process Maebashi Co., Ltd.
DNP Uniprocess Co., Ltd.
DNP Total Process Nagaoka Co., Ltd.
OGUCHI BOOK BINDING & PRINTING CO., LTD.
Tien Wah Press (Pte.) Ltd.
Commercial Printing
DNP Media Create Kansai Co., Ltd.
DNP Graphica Co., Ltd.
DNP Media Create Co., Ltd.
DNP Multi Print Co., Ltd.
Business Forms
DNP Data Techno Co., Ltd.
DNP Data Techno Kansai Co., Ltd.
DNP Total Process Warabi Co., Ltd.
NexantiS Corporation*
DNP France SAS*

Photoengraving, printing, bookbinding; production and sale of packaging
Photoengraving, printing, bookbinding; production and sale of packaging
Photoengraving, printing, bookbinding; and production of packaging
Photoengraving, printing, bookbinding; production and sale of packaging
Photoengraving, printing, bookbinding; production and sale of packaging

Bookbinding
Offset printing
Photoengraving
Photoengraving
Photoengraving
Photoengraving
Printing and bookbinding
Photoengraving, printing and bookbinding

Planning, production, photoengraving, printing and bookbinding
Printing and bookbinding
Planning, designing and photoengraving
Photoengraving, printing and bookbinding
Production of plastic cards
Production of business forms and plastic cards
Photoengraving and machine plate activities
Sale of smart card related software and products
Smart card and security business research

Others (Planning, production and venture businesses, etc.)
DNP AV Center Co., Ltd.
Planning, production and sale of TV programs, movies and video softwares
DNP Digitalcom Co., Ltd.
Website planning, production and delivery
DNP Dream Pages Co., Ltd
Production and sale of photobooks
am3 Inc.*
Planning, production and sale of images, contents, etc.
DNP Art Communications Co., Ltd.
Planning, production and sale of artistic images and videos
DNP Corporate History Center Co., Ltd.
Planning, editing and production of history archives for corporations and groups
YouToo Co., Ltd.*
Provision of information over the Internet and mobile phones
CP Design Consulting Co., Ltd.*
Consultation for privacy protection and crisis management
M’s Communicate Co., Ltd.*
Consultation and mediation for customer relationship management
At Table Co., Ltd.*
Research, consulting and planning for sales promotions for grocery supermarkets
MyPoint.com Japan Co., Ltd.
Direct marketing services
Lifestyle and Industrial Supplies
Packaging
DNP Technopack Tokai Co., Ltd.
Production, printing and processing of packaging
DNP Technopack Co., Ltd.
Production, printing and processing of packaging
DNP Technopack Yokohama Co., Ltd.
Production, printing and processing of packaging
DNP Technopack Kansai Co., Ltd.
Production, printing and processing of packaging
Sagami Yoki Co., Ltd.
Production of laminated tubes
Aseptic Systems Co., Ltd.
Productions, sale and consultation for aseptic systems
DNP Techno Polymer Co., Ltd.
Molding, processing and printing of plastic containers
DNP Hoso Co., Ltd.
Filling and processing of packages
LIFESCAPE MARKETING CORPORATION
Various types of information services and surveys
PT DNP Indonesia
Production and sale of packaging products
DNP Plastic Molding (Shanghai) Co., Ltd.

118

Molding, printing, processing and sale of plastic containers

Lifestyle Materials
DNP Lifestyle Materials Marketing Co., Ltd.
DNP Ellio Co., Ltd.
DNP Lifestyle Materials Co., Ltd.
Opto-Materials/Industrial Supplies
DNP Photo Imaging Co., Ltd.
DNP IMS Odawara Co., Ltd.
DNP IMS Co., Ltd.
DNP OptoMaterials Co., Ltd.
DNP Fotolusio Co., Ltd.
DNP ID System Co., Ltd.
DNP Energy System Co., Ltd.
DNP Fine Chemicals Fukushima Co., Ltd.
DNP Denmark A/SInvestment in operating companies
Production and sale of photographic materials
Production of ink ribbons for thermal transfer printers and for thermal-resin type printers
Manufacturing of optical products for displays
ID photo business and sale of photo materials and accessories
Sale of equipment for making driver licenses and ID photos
Production of photovoltaic module components
Production and sale of photographic chemicals
Manufacturing and sale of precision electronic components

DNP Electronics America, LLC

Manufacturing and sale of precision electronic components

DNP Photo Imaging America Corporation

Sale of digital photo printing systems and photographic materials

DNP Photo Imaging Corporation SAS

Investment in operating companies

DNP Photo Imaging Europe SAS

Sale of photo-related products

Sale of decorative products
Printing and processing of steel and other metal plates
Photoengraving and production of material products

Capital(¥ million)

Ownership ratio
(%)

350
350
120
400
50

100.0
100.0
100.0
100.0
97.0

350
200
180
100
80
50
49
(S$1,000)
4,600

100.0
100.0
100.0
100.0
100.0
100.0
84.9 (15.2)
100.0

200
100
100
100

100.0
100.0
100.0
100.0

100
100
80
25
(Euro 1,000)
37

100.0
100.0
100.0
100.0
100.0

100
100
400
340
300
50
50
40
30
30
10

100.0
100.0
100.0
82.8
100.0
100.0
100.0
92.5
95.0
95.0
83.0

430
300
280
200
200
100
100
80
430
(US$1,000)
26,000(US$1,000)
6,350

100.0
100.0
100.0
100.0
90.0
100.0
100.0
100.0
50.7
51.0

300
300
200

100.0
50.0
100.0

9,680
300
100
100
450
60
200
100
(Dkr1,000)
135,000(US$1,000)
15,045(US$1,000)
45,898(Euro 1,000)
50(Euro 1,000)
2,422

100.0
100.0
100.0
100.0
100.0 (33.3)
100.0 (100.0)
100.0
100.0 (100.0)
100.0

100.0

(100.0)100.0(99.9)
99.9(66.0)
66.0(66.0)
66.0

Capital(¥ million)
DNP IMS America Corporation(US$1,000)
71,980
Production and sale of ink ribbons for thermal transfer printers and for thermal-resin type printers (Euro 1,000)
3,040
Production and sale of ink ribbons for thermal transfer printers and for thermal-resin type printers (Euro 1,000)
1,000(100.0)100.0
23.4

Electronics
Display Components
DNP Color Techno Kameyama Co., Ltd.
DNP Precision Devices Co., Ltd.
DNP Precision Devices Himeji Co., Ltd.
DNP Color Techno Sakai Co., Ltd.
DNP Display Technology Taiwan Co., Ltd.

Production and sale of color filters for LCDs
Production of display related components
Production of color filters for LCDs
Production of color filters for LCDs
Sale of display components and technological consultation

2,500
450
400
400
(NT$1,000)
30,000

100.0
100.0
100.0
100.0
(99.0)
100.0

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 sale of semiconductor components
Production of semiconductor components
Planning and production of drawings used in semiconductor production
Inspection, processing and loading of precision electronic parts
Manufacturing and sale of photomasks

65.0
100.0
100.0
100.0
80.6

DNP Photomask Technology Taiwan Co., Ltd.

Manufacturing and sale of photomasks

490
300
100
40
(Euro 1,000)
47,200(NT$1,000)
5,170,617

(0.3)
100.0

2,000
500
3,000
5,821
626
266
2,111
2,564
1,435
39
100
100
96
80
60
50

100.0
33.4
52.3
52.3 (52.3)
100.0
52.3 (52.3)
56.7
16.5 (9.9)
20.4 (20.4)
51.0
100.0
94.3
55.0
100.0
48.3
99.8

350

100.0

100
90
33
30
20

100.0
100.0
88.8
100.0
100.0

(US$1,000)
100(US$1,000)
62,164(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
(7.2)
100.0
(100.0)
100.0
100.0

2,935

(6.5)
57.5

Compagnie de Découpe de l’Ouest·CDO SAS
DNP IMS Netherlands B.V.

OthersDNP Fine Chemicals Co., Ltd.
DIC Graphics Corporation
CHI Group Co., Ltd.
Maruzen Co., Ltd.
DNP Logistics Co., Ltd.
TRC, Inc.
SHUFUNOTOMO Co., Ltd.
BOOKOFF CORPORATION LIMITEDBUNKYODO GROUP HOLDINGS CO., LTD.
Junkudo Co., Ltd.
D.N.K. Co., Ltd.
DNP Trading Co., Ltd.
Direc Co., Ltd.
DNP SP Tech Co., Ltd.
Kyoiku Shuppan Co., Ltd.
My Earth Projects LLC *Personnel Welfare, Facility Service and Others
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

Production and sale of ink ribbons for thermal transfer printers and for thermal-resin type printers

Ownership ratio(%)

Development and sale of ink, varnish, pigments and dyes
Production and sale of printing ink
Investment in operating companies
Sale of books, magazines and stationaries
Packing, shipping operations and warehouse management
Sale of books and creation of data
Publishing
Sale of books
Sale of books
Sale of books
Manufacturing, sale and repair of printing equipment and machine tools
Sale of paper and other products
Sale of publishing and educational equipment
Planning and production of promotional material
Editing and sales of textbooks and educational materials
Planning, production and sale of trading cards
Building management, cleaning and security; operation of public health andrecreation facilities
Design, development and maintenance of information systems; production and sale of software
Planning and management related to personnel plans
Management of golf courses
Accounting and consulting services
Studies related to patents and the preparation of contracts
Sale of printing materiais, electronic precision parts, and decorative materials

DNP Corporation USA

Investment in operating companies

DNP Holding USA Corporation

Investment in operating companies

DNP Europa GmbH*

Sale of electronic precision parts and decorative materials

DNP UK Co., Ltd.*Sale of decorative materials

Dai Nippon Printing Co. (Australia) Pty. Ltd.*Sale of printed materials and decorative materials

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

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

DNP Taiwan Co., Ltd.

Sale of electronic precision parts

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

100.0

100.0
100.0
100.0
100.0
100.0
100.0

Appendix

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

Manufacturing and sale of soft drinks

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

DNP Annual Repor t 20 10

119Appendix

Glossary

From General Terms,
Product and Service
Names■ Anti-reﬂection ﬁlm (AR ﬁlm)

Film applied to the surface of thedisplay screen in devices likecomputers and televisions, in order toprevent outside light or interior lightfrom causing glare. AR films includeanti-glare (AG), low reflection (LR),and other types of AR films. DNP
supplies a variety of these products
by applying thin, uniform coatings oflight-diffusing materials to rolls ofbase film.
■ Aseptic ﬁlling system

A system for filling sterilized PETplastic bottles or other containers
with sterilized beverages or food in an
aseptic environment. DNP has
designed and developed a variety of
aseptic filling systems, including
systems for filling single-portion
containers (for coffee whitener, etc.),
retort pouches that can contain solid
food, and PET plastic beveragebottles without impairing the flavor of
the contents.
■ Augmented reality (AR)A technology for synthesizing images,
text, or other virtual information thatis not really present, together with ascene or object directly experienced
by the user, so as to create a richer
expression. A web cam or mobile
phone-mounted camera records
printed images, identification codes,
and images of the surrounding
environment, all of which aresynthesized and displayed withrelated information such as preregistered 3-D computer graphics.
■ Biomass material

Biomass refers to the total quantity ofliving organisms living in a particulararea. The word is also used to meanorganic resources derived from living
things, excluding petroleum and otherfossil resources. Biomass material ismade from resources of biologicalorigin, such as vegetable resins or
natural fibers. Because the CO2
absorbed by plants during theirgrowing process is believed to cancel

120

out the CO2 emitted when biomass
material is burned, it has attracted
attention as a material that imposes
little negative impact on theenvironment. Since biomass material
is a renewable resource, supplies are
expected to be stable.

■ Ink ribbon

Outsourcing）
Contracting out the execution of someof a company’s business processes toan outside provider that has specialized
technology or expertise.

A rolled strip of film to which a thin,uniform layer of ink has been applied,
used in thermal transfer printers. In
thermal–resin type printers, ink ismelted and transferred to paper
according to the amount of heat in theprinter's thermal head, while indye-sublimation type printers, the ink
is vaporized and transferred to paper.
Most of the thermal–resin type color
ink ribbons that DNP provides are
monochrome ribbons used forbarcode printers, while most of thesublimation type are used for photo
printing. Dye-sublimation thermaltransfer materials developed by DNP,
consisting of ribbons in the three
primary printing colors (yellow,
magenta, and cyan – or YMC) andspecial receiving paper, is capable ofexpressing very smooth color tones.

■ CRM (customer relationship■ Lead frame

management)
A method of building positive long-term
relationships with a company's
customers by planning and providing
products and services that meet their
particular needs, based on eachcustomer's preferences andcharacteristics.

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

■ Book return rate

In Japan, this refers to the proportionof books and magazines that werereturned unsold to a publisher, relative
to the number that were delivered tobookstores or other retail outlets forsale on consignment.
■ BPO（Business Process■ Digital signage

A new advertising medium that
distributes very up-to-date information
suited to a particular time and placeby linking large flat-panel displays
installed in stores, train stations, orother public facilities to an information
network. It may include interactive
communication functions that allow
consumers to display the information
they need by using a touch panel, amobile phone, etc.
■ IC (integrated circuit) tag; also

called RFID (radio frequency
identiﬁcation) tag
An electronic device that combines an
IC chip with a miniature antenna.
Radio communication between an IC
tag and a dedicated reading device
makes it possible to distinguish eachindividual item that has an IC tag
attached to it. IC tags are made invarious formats, including labels,
cards, and disks.

■ Liquid crystal display (LCD) colorﬁlter
A component used to colorize LCDs.
It has colorization layers consisting of
pigments in the three primary colors– RGB or red, green, and blue –arrayed in particular patterns on glass
substrates. Colored images can be seen
when light passes through the color
filter. Some color filters have yellow
and cyan layers in addition to RGB.
There are two methods of formingcoloration layers: thephotolithographic method, whichforms patterns by exposing
substrates coated with photosensitive
material to light, and the inkjet
method, which sprays ink directly
onto the substrate through nozzles
with tiny holes. DNP is the only
company in the world that mass
produces color filters by bothmethods.
There are also different methods ofaligning liquid crystal molecules whenmanufacturing LCD panels. For
example, there is the verticalalignment (VA) method and the
InPlane Switching (IPS) method. LCDs
display images by using variations involtage to change the orientation of
the liquid crystal molecules, andthereby controlling the amount of lightthat passes through. With the VA
method, the liquid crystal molecules
are arranged vertically, whereas with
the IPS method, they are arranged
horizontally. DNP provides color filtersthat suit the characteristics of LCD
panels manufactured by bothmethods.

DNP provides are encapsulants, backsheets, and a single unit thatcombines the two components.
Sunlight
Front glass

Encapsulants
Solar cells
Back sheet■ MEMS (micro electro mechanicalsystem)A device that integrates tiny
components like IC chips, sensors orelectronic circuits into a threedimensional structure on a siliconwafer or similar base.
■ Organic EL (electroluminescent)display
A display based on an organic
compound that emits light whenelectricity is passed through it. It issuperior to other types of displays invarious ways, for example because of
its wider viewing angle and greater
contrast.

■ Prepress

The parts of the overall printing
process that must be done before
actual printing. These include
digitalization, editing and layout, andmanufacturing of printing plates.
Thanks to the development ofdesktop publishing (DTP), mostprepress operations can now be doneby computer.

■ Photovoltaic module components

A therapeutic method of using
artificially cultivated cells or tissues torestore or recover the function oftissue or organs lost through diseaseor accident.
■ Roll to rollA technique for printing on rolled
printing media (such as paper) andre-rolling the media immediately after
printing. This method is well suited tomass production because it reduces
the number of times that materialmust be supplied, and enables highspeed production with stable quality.
■ Semiconductor photomask

A photomask is an original plate used
for forming semiconductor circuits.
It consists of minute circuit patterns
drawn on a glass substrate. Most
semiconductors are made by using
light to transfer the circuit patterns toa wafer coated with a photosensitive
resist, and then using etching or asimilar process to embed the patternin the wafer. Since electronic devices
have continued to shrink in size inrecent years, DNP is developing
nano-imprint technology fortransferring patterns by pressing
templates with nanometer-level
patterns into resin-coated wafers, inaddition to improving existing
methods.

■ SSFC (Shared Security Formats

Cooperation)
A consortium of companies,
established in 2005, aimed atachieving a high degree of workplacesecurity by using smart cards. DNP
serves as its Secretariat. By agreeing
on data formats, the group promotes
the establishment of a unified control
system that can grant access tovarious locations or functions
throughout a company, school orother institution – including room
entry and exit, and use of facilities
such as personal computers, printers,
or lockers, etc. – by means of a single
smart card. As of June 2010, thegroup had some 207 corporate
members, including office equipment
manufacturers and system
integrators, most of whom havealready adopted SSFC-compliant data
formats.
■ Universal design

According to the International
Association for Universal Design(IAUD), universal design means todesign, from the start, equipment, abuilding, or living space so that it will
be utilized by as many people aspossible.

DNP Annual Repor t 20 10

Appendix

Encapsulants are an adhesive,protective sheet used to secure
photovoltaic cells and their peripheral
wiring in place, and to form aphotovoltaic module. A back sheet
protects a photovoltaic module fromexternal elements, preventing
precipitation from entering the cell.
Because it is used outdoors for a long
period of time, it must be very durable
and moisture-proof, and haveelectrical insulating properties. The
encapsulants bind the back sheet
strongly to the front glass, whichtakes in sunlight. The main
photovoltaic module components that

A card that contains one or more IC(integrated circuit) chips enabling data
input, output and computing. Smartcards that use technologies likebiometrics or encryption to provide
advanced user authentication
functions are widely used in a broad
range of applications including cash
cards, credit cards, electronic money,
transportation cards, and employee ID
cards. SIM (subscriber identity
module) cards are a type of smart
card issued by mobile phone service
providers, and contain subscriber
information. DNP entered the smart
card business in the 1980s. In
addition to developing software forsmart cards, including the MULTOS
operating system and various
applications, we provide a wide
variety of services such as smart card
manufacture and issue and operationof online security services.

■ Regenerative medicine■ Photolithography

A technology for exposing part of thesurface of a substrate coated withphotosensitive material to light, sothat the exposed areas andunexposed areas form a particularpattern. DNP applies its
photolithographic skills, which it has
honed through the production oforiginal plates used for printing, to the
manufacture of color filters and othertypes of electronic devices.

■ Smart card

121

Appendix

DNP Product and Service
Names■ B2it (B-square-it)

A buildup board (a printed board madeby piling up insulating layers and wiring
layers) made with DNP’s proprietary
technology for connecting the layers
through bumps of conductive paste
formed by means of screen printing.
■ CDMS (Card Data Management

Service)
A service that provides comprehensive,
online management of informationentered on smart cards. CDMS
enables immediate smart card
issuance at customer service counters,
PIN code revision at ATMs, “mobile
bureau” distribution of applications andpersonal data to mobile phone chips,
and identity authentication for online
shopping. DNP began offering theservice in 2004.
■ EB (Electron Beam) coating

technology
DNP’s original technique for hardening
a coat of resin by exposing it toelectron beams, which causes themolecules to polymerize. EB
technology makes it possible to form
films with greater surface hardness
than products coated with urethane or
UV-cured resin. It also makes it
possible to provide products withsuperior abrasion and soil resistance,
photo-resistance, durability, andstability. The eco-friendly
manufacturing process uses lessenergy, generates less carbon dioxide,and does not require the use ofsolvents, making it a suitable nextgeneration manufacturing method.
■ “Expansion Printing” and “P&I

Solutions”“Expansion Printing” expresses DNP’spolicy of expanding our business bydeveloping the printing technologies
that we have cultivated since thefounding of the company and applying
them to a variety of fields. As examples
of how we have implemented thispolicy, we entered the packaging anddecorative materials businesses in
1951, started making shadowmasks in

122

1958, and entered the electronics field
in 1959 after successfully developing
photomasks.
“P&I Solutions” is the business visionthat we spelled out in the “DNP Group
Vision for the 21st Century.” It entails
combining printing and information
technologies to discover and resolve
problems faced by corporate clientsand consumers. Based on the “P&I
Solutions” vision, we are now actively
developing new businesses in fields
such as energy and life sciences.

■ IPS (Information Processing

Service)
DNP offers a broad menu of uniquebusiness services including inputting
massive amounts of personal
information and other data, editing andprocessing, printing, producing, mailing
and/or distributing invoices,
statements, and other forms of
personalized mail – all in environments
where information security is strongly
protected.
■ Production 21 Activities■ Human Research Lab

A platform for assessment andanalysis, primarily of the effects thatposters, commercials, and otheradvertising and sales promotion media,
including POP media and packaging,
exercise on consumers’ awareness,purchasing, and selection processes.
The lab uses an eye movement
tracking system to measure andanalyze physiological reactions ofconsumers, as a means ofunderstanding unconscious behavior.
It was established in February 2009, inTokyo.

A program based on Total Productive
Maintenance (TPM), consisting ofactivities aimed at creating aframework for flexibly and quickly
responding to customer requirementsby returning to our manufacturing roots
and implementing ongoing
improvements that further eliminate
waste, reduce costs, and improve
quality and efficiency. The goal is toestablish production frameworks thatare robust from a variety ofstandpoints, including quality, cost, anddelivery speed.
■ PUL (Packaging Usability■ IB (Innovative Barrier) ﬁlm

Packaging film that is highly
impermeable to water vapor andoxygen, highly transparent, and highly
heat-resistant. Produced by DNP, it isused mainly for wrapping foods,
medical supplies and pharmaceuticals,and electronic components.
It is made by forming a thin, uniform
coating of a material that boosts
impermeability on a transparent basefilm. In the past, such films wereusually formed through physical vapor
deposition (PVD), whereby the coating
material was vaporized by heat. DNP
made it possible to mass produce filmusing chemical vapor deposition (CVD),
whereby film is formed as a result of achemical reaction between the coating
material and the base film. Because
the CVD method results in a strong
bond between the coating material andbase film, the coating does not breakeasily even when the final product isbent.

Laboratory)
A platform that simulates a typical
kitchen and other real-life
environments, primarily for assessing
and analyzing consumers’ use of
packaging from a universal design
standpoint, including how consumers
handle products, and how easy theyfind specific packages to use.
The laboratory makes it possible toquantify consumer psychology andbehavior using such tools as recordings
from depth interviews and dome
cameras. It was established in
February 2006, in Osaka.
■ Shueitai

An original font that DNP has beendeveloping since the end of the 19th
century. This beautiful, easy-to-read
font with graceful, sleek lines has wonhigh praise from book publishers andreaders. We created a digital version in
the 1970s and began licensing its use
as of 2001. In 2006, we undertook aproject called “Heisei no Dai Kaikoku”(engraving improvement project), which
is aimed at improving the existing
digital font and developing new fonts.

Sources of Information about DNPWeb Site (English: http://www.dnp.co.jp/eng/)
Our web site introduces DNP’s three main business segments in a format that is easy to understand.
Improvements such as an easier-to-use search function and seasonal renewal of the top page have been wellreceived, and traffic at the site is increasing. The following publications and reports are also available as PDF
files that can be downloaded from the web site.

Publications■

Annual Report (Japanese and English versions)
Near the end of July every year, we release a Japanese version and an English version. In addition to amessage from the president, the report contains features, consolidated financial statements, businessstrategies, summaries of financial results, news from each business sector, and financial analysis, etc.

■

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

Data Book (Bilingual: Japanese/English; available only as PDF ﬁle for download from web site)
Issued near the end of July every year, the Data Book contains values from financial statements ofthe past 10 years, and financial analysis values in the form of tables and graphs, etc. The Data Book is
published in PDF format on DNP’s Investor Relations site. Financial statement values are taken fromsecurities reports.

■“DNP Report” Report to Shareholders (in Japanese)
This report is issued quarterly, in September, December, March and June, and is mailed to shareholders.
Examples of its content include summaries of financial results, interviews with management, information
about new businesses, and information about shares.

■“DNP Report” to shareholders

DNP Group CSR Report (Japanese and English versions; English version available only as
PDF ﬁle for download from web site)
It introduces each operations and addresses aspects like products, services, sales, planning, research anddevelopment, production facilities, company history, and a summary of our activities.

■

Corporate Information (Japanese and English versions)
It introduces each operation and addresses aspects like products, services, sales, planning, research anddevelopment, production facilities, company history, and a summary of our activities.

Publications■“Yuho” Annual Securities Report (in Japanese)

DNP Group CSR Report

In accordance with Article 24 of the Securities Exchange Law, DNP submits quarterly reports to the
Finance Ministry in August, November, and February. In June, DNP submits a quarterly report combinedwith a "Yuho" annual securities report. These are broad-ranging reports that include consolidated financial
statements with auditing reports attached, non-consolidated financial statements, performance reviews,
information about shares and corporate directors, etc.
■

“Tanshin” Earnings Release (Japanese and English versions)
In accordance with Tokyo Stock Exchange rules, we prepare earnings releases for each quarter. In addition
to consolidated and non-consolidated financial statements, we report on the status of sales, etc.

■ About the Cover of This Annual Report
Designer s Profile

Kenjiro Sano, Art Director
Born in Tokyo in 1972. Creative Director of Mr. Design Inc. Designs for a wide variety ofcommunication media in Japan and abroad. Major works include the design of popularcharacters such as “LISMO!” for telecommunications carrier au by KDDI Corporation,“T Boo S!” for major broadcaster Tokyo Broadcasting System Television, Inc., and “NyanMage” for Edo Wonderland; packaging, such as for cosmetics manufacturer Shiseido Co.,
Ltd.’s “The Collagen” and Mizkan Group Corp.’s “Torotto” brand of fermented soybeans(natto); CD jackets for popular singers Hikaru Utada and Yosui Inoue, and rock band
Remioromen; advertisements for Lumine Co. Ltd.'s department stores and Benesse Corp.’s
educational courses for high school students; and T-shirts featuring the Rolling Stones orJohn Lennon.

Message in the CoverI designed the cover of this reportby repeating the a of annual,like papers coming out of a printing
machine one after another.
It ’s always exciting to print something new.
I hope that the coming year will be evenbetter than the last one.

www.mr-design.jp
Appendix* Trademarks mentioned in this annual report in connection with DNP products or services are registered in Japan.
Through participation in Japan Natural Energy Co. Ltd.’s Green Power
Certification System, DNP is supporting the spread of eco-friendly power
generation equivalent to the 600 kWh of electricity used in the production ofthis report.

DNP Annual Repor t 20 10123