C o n t e n t s

Shueisha, the predecessor of today’s Dai Nippon Printing Co., Ltd. (DNP), wasfounded in 1876 as Japan’s first full-scale printing company.

Financial Highlights

8

Message to Our Shareholders

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DNP @ a Glance

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Products

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DNP Business Solutions

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Ubiquitous DNP

The Company got its start in publication printing but has since diversified its
operations to include commercial printing, business forms, packaging,decorative materials, electronics and information media supplies.
Today, the DNP Group of companies has approximately 35,000 employees

20Interview with the President

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Smart Cards

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Electronic Form26

IC Tags/RFID

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Information Distribution

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Hots Off the Press32

and is the world’s largest corporate group with comprehensive printing

Information Communication

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operations. In Japan, the DNP Group maintains 22 division offices,

Lifestyle and Industrial Supplies

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Electronics

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Governance48

52 sales offices and 33 plants in major cities, as well as 15 sales offices
and eight plants overseas.

Improving Corporate Governance48

Boad of Directors

49

Amid growing demand for information, the DNP Group, backed by its position

Major Subsidiaries and Affiliates

50

of leadership in Japan’s information industry, is continuing to expand

Financial Section

52

Management’s Discussion and Analysis

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its businesses by exploring new technological and marketing possibilities in

Selected Financial Data66

the world of printing.

Consolidated Financial Statements

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Notes to Consolidated Financial Statements

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Report of Independent Certified Public Accountants

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Investor Information

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Welcome to the world of ubiquitous networking, where people, things, everything in space and space itself become information terminals.
It is a world brought close together through a network that keeps people
connected, along with the things we use and the space in which we live.
It is not too much to say that in this world, people communicate with things,
and the space around us carries messages to us.
Ubiquitous networking is always accessible,
and everywhere in this world is DNP.
The keyword, here, is “individuation.”With DNP, you hold the key to the world of ubiquitous networking.

Financial H ighl i ghts

M essag e to Our Shareho ld er s

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003 and 2002

Dollars in
Yen in millions except per share amounts
per share amounts

2003

thousands except

2002% change

2003

2003/2002
A N e w Wo r l d

FOR THE YEAR
Net sales

1,309,002¥ 1,311,934

10,908,350-0.2 %

Operating income¥

89,881

72,242$

749,008

24.4

Income before income taxes

42,244

26,150352,033

61.5

Net income

28,774

15,609239,783

84.3

Today, ubiquitous computing is about to change theways of our world.
It is a new world in which the ability to gather anddispatch information is available wherever, whenever, towhomever, without people even having to think about

Per share data:

computers. It is an era in which people can use networks
to connect computers, information appliances, car naviga-

Net income
Primary

¥

37.80

¥

20.31

$

0.32

86.1 %

tion systems, automatic vending machines, game

Fully diluted

37.67

20.28

0.31

85.7

machines and a host of other devices, and use a mere

Cash dividends

19.00

18.00

0.16

5.6

mobile phone to operate such things remotely. Until
recently, this kind of society existed only in people’s
dreams, but now it is about to become reality. The society

AT Y E A R - E N D
Total stockholders’ equity¥

Total assets

942,083¥

1,450,027

946,998$

1,432,458

7,850,692-0.52 %

12,083,558

1.23

we live in is moving forward in a wave of changes.
In the business world, too, innovative minds havebegun to make moves in anticipation of the ubiquitous
networking society. Computers, telecommunications,

Notes:
1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥120=U.S.$1, the approximate Tokyo foreign exchange market rate as of March 31, 2003.

electric appliances, finance, automobiles, distribution, andapparel…just about any business in Japan, in fact, hasseized business opportunities in its own way, and has
begun to benefit from ubiquitous computing.
It may surprise you to hear that DNP, which until now
has grown through the application of world-class printing
technologies, also has a unique, inimitable position when it
comes to ubiquitous computing. DNP’s roots lie in printing
on paper – a technology that revolutionized the world at

Photograph by ©Jean-Baptiste Huynh

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

the time of its invention for delivering information on pieces
of ubiquitous paper. Thus, the businesses related to theupcoming ubiquitous networking society are completely inline with what DNP has always been doing.
Now that information is often presented in digital
Net Sales

Operating Income

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

formats, DNP has added information technologies fortexts, images and sounds to its traditional technologies

1500

100

50

1200

80

40

900

60

30

600

40

20

300

20

10

centered on the physical aspects of printing. In this way

mining, data processing, as well as security and softwaredevelopment from the standpoint of conducting information transactions.

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2 0 0 3
D N P

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R e p o r t

built up a track record related to fields such as data

A n n u a l

new dimensions. We have now accumulated expertise and

D N P

A n n u a l

R e p o r t

2 0 0 3we have succeeded in rapidly expanding our business into

89

M e s s a g ecustom-oriented business: We ask our clients what they

individuals and society, and that this will generate newwant and make entirely different products for each client.

values. In other words, it will be a society marked by

The way we have grown is by listening to our customers’“emergent evolution.” What will make the realization ofwishes, trans-coding customers’ information according tosuch a society possible is the ability to freely exchange

their desired methods or even better methods, andopinions between individuals, and between individuals andproposing information solutions with high added value.

society – an ability made possible through ubiquity.

Through such proposals, we were able to understandestablished ourselves in a position to make various

aimed at expanding our corporate value over the longproposals for every phase of the business flow. This

term. Under the slogan concept phrase, “DNP: P&I

position is a strong one when it comes time to introduce

Solutions Provider,” we have undertaken a variety of

IC tags; it allows us to display our prowess in consulting

business strategies in which “P” stands for printingthat is on target from the client’s point of view.

technology and “I” stands for information technology. DNP
aims to blend these two technologies, which are our corecompetencies, and provide solutions that only we canoffer our customers. By doing so, we hope to contribute toa society that benefits from emergent evolution. Indeed,

Based on the fusion of P&I, DNP provides total client
support starting with IC tag design and manufacturing,consulting about IC tag introduction, and even with theeffective use of collected data in marketing applications.
The integration of these two technologies makes it

the term “DNP: P&I Solutions Provider” is also the key topossible for DNP to propose solutions that produce the

DNP’s participation in the ubiquitous networking society.

maximum benefits. No other company can propose such

Perhaps the easiest way to explain this is to use theexample of IC tags, also known as Radio Frequency

effective solutions.
The phrase “P&I Solutions” means integrating the

Identification Devices (RFID). These tags are said to be thetechnologies and know-how that already exist within DNP

bar codes of the future, and have attracted attention

and providing them to clients in a comprehensive form. For

because of their ubiquitous nature. IC tags are attached to
products or other objects to be controled. Given that DNP

DNP, the advent of a ubiquitous society gives us an
opportunity to show off the effectiveness of our P&I

has worked with bar codes in the past, they definitely fall

Solutions. It is a golden opportunity to take a giant step

within the parameters of our business. There are develop-

into the next dimension for our company.

ments underway that will allow the functions of IC tags to
be printed directly onto products in the future. In addition,
by applying printing technologies that we have alreadydeveloped, we can make these tags in various formats
2 0 0 3depending on the purpose for which they are to be used.

R e p o r tantennae for contactless smart cards and our etchingA n n u a lsuch as cards, adhesive labels and plastic formations,manufacture antennae for IC tags in the shapes that our

D N P

clients’ supply chains from one end to the other andof DNP’s founding, we formulated a 21st-century VisionThis is DNP’s forte. Thanks to our experience in designingtechnology used for shadowmasks and other productsthat require extreme care, we are able to design andclients desire. While we have simply extended our printing
technology up to this point, we will expand our IC tag

It may surprise you to hear that DNP,
which until now has grown through the application ofworld-class printing technologies,
also has a unique, inimitable position
when it comes to ubiquitous computing.
P e r f o r m a n c e o f T h i s F i s c a l Ye a rof our business to everything related to communication.
This division is central to the promotion of solution-

Japan’s prolonged recession has been hard on theoriented business aimed at fulfilling our Vision for the 21stdomestic printing industry; growth has been negative

century. In addition to strengthening our systems forevery year starting with 1998. Recently announced

planning and developing for all types of media, we also

industrial statistics reveal that shipments for the fiscal year

strengthened technological development and manufac-

ended March 2002 were 7,970.7 billion yen, down 2.1%

turing systems with a focus on such areas as strategic

from the previous year. The picture remained bleak in the

products, including smart cards and IPS (information

fiscal year ended March 2003, due to such factors asprocessing service) operations that process and output

sluggish demand for printing, intensified competition,individual pieces of information.

dropping order unit prices and higher paper costs.
Resuming growth would have been difficult.

In the smart cards sector, DNP developed an original
operating system that gave us an edge and helped firmly

Under these conditions, we at the DNP Group aimed

establish our company as the number one player in Japan,

to realize our Vision for the 21st century. We strengthened

particularly for financial applications such as credit cards.

our existing printing operations and expanded ourIn addition, we developed a reader-writer specifically forelectronics division, while engaging in group-wide cost-small smart cards, called “Ubinetpass.” It combines a

cutting efforts and succeeding in greatly reducing costs.

variety of functions such as personal individuation,

As a result, although consolidated sales declined 0.2%

account settlement and downloading of ticket information.

year-on-year to 1,309 billion yen, operating income surged

Concerning IC tags, which are expected to play an

24.4% to 89.8 billion yen, and net income soared 84.3%

important role in a ubiquitous computing world, DNP wasto 28.7 billion yen.

an active participant at centers such as the Auto-ID Center

Below is a breakdown of results by division. As of thisprogram at MIT (Massachusetts Institute of Technology) infiscal year, in order to improve our disclosure practices andthe United States, and the Ubiquitous ID Center in Japan.

deliver timely, appropriate, and accurate information to our

The centers are working on solving issues to standardize

shareholders, we have separated our business into four

IC tag protocols so that the tags may be ready for applica-

new divisions: Information Communications, Lifestyle andtions in all types of industries.
DNP has also worked hard to improve the support
frameworks for network security and convenience. We
developed a system for encoding moving picture andsound files so they can be safely distributed over theInternet without being subject to illicit copying or illicit
distribution. DNP also developed a system that allows

Industrial Supplies, Electronics and Beverages.
Looking first at what used to be called the Information
Media division – which consisted of Books andMagazines, Commercial Printing, and Business Forms –we have changed the name of this division to Information
Communications as we intend to further expand the scope

2 0 0 3mutual stimulation among individuals, and between

In October 2001, in celebrating the 125th anniversary

10Ever since our founding, we have always been aR e p o r t

information technology.
I believe that in the 21st century society, there will be

S h a r e h o l d e r s

A n n u a lbusiness through the fusion of printing technology and

O u r

D N P

Ubiquitous DNP

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Our Strategic Emphasis
In order to realize stable growth in the 21st century, the
DNP Group continues to work on operational structuralreform and cost structure reform.
In terms of operational structure, we will strengthen theprinting business that has its roots in manufacturing, whileat the same time moving ahead with the “select and focus”
process from the standpoint of boosting asset efficiency todeal with unprofitable sectors and products with little
added value. In addition, we will strive to expand oursolutions-oriented business based on our Vision for the
21st century.
“DNP: P&I Solutions Provider” is the catchphrase
concept phrase underlying our solutions-oriented business.
At the DNP Group, we will combine the printing technologythat we cultivated since the company’s founding with theinformation technology that we have accumulated since webegan digitizing in the early 1970s, and offer unique solutions
to both corporate clients and consumers. We hope that thisfusion of technologies will generate new values and profits.
In addition to the basic printing business that is the
DNP Group’s foundation, we will make the most of ourcomprehensive strengths and capacity for coordination toprovide broad-based support for our clients’ businessprocesses. Furthermore, we will use our expertise fromthe printing business and our information technologies topropose new business models and systems for ourcustomers.
In our Research & Development sector, to aptly
respond to changes in the market environment, we will
strengthen technical development systems in cutting-edge
fields and strive to be quick to commercialize new
businesses and products.
The DNP Group will establish new business domains
by expanding its solutions-oriented business anddeveloping new businesses and products. At the sametime, we will elicit synergistic effects from our existing
printing business and shift toward a business structure thatgenerates even more added value.
In order to thoroughly cut costs in our manufacturingsector, in April of 2002 we launched “Production 21” activities and improved yields, reduced lead time and decreased
inventories. Regarding capital investment, our top priority inexisting fields is to make efficient use of our assets while weconcentrate investment in strategic areas. In that way, we
can reduce our total capital spending and contain depreciation costs. In terms of labor costs, we will strive to use
information technology to increase operational efficiency inindirect departments, strictly limit new hiring, and allow
natural attrition through mandatory retirement to streamline
our workforce. In these and other ways, we will work to raisemanagement efficiency and boost our cost competitiveness.
D N P ’s F u t u r e a s a P & I S o l u t i o n s P r o v i d e rEver since its founding, DNP has continued togenerate new value by using its research and development
capabilities to respond to people’s needs throughchanging times. In fact, the company-wide reforms that weare vigorously undertaking today are aimed at carrying
over this very tradition, fostered by DNP throughout its 125
year history, into the 21st century so that we may continue
to create new value for the public as we generateshareholder and corporate values for DNP.
As was mentioned earlier, we have expressed our basic
business concept in the phrase “DNP: P&I Solutions
Provider.”Based on this concept, we aim to guide DNP into new
business dimensions that fit in the 21st century andcontinue to generate value for individuals, society,shareholders, our business partners and employees, andfor all stakeholders who are involved in our company, sothat we may continue to be an essential company for allparts of society.
We appreciate the confidence that you have continued
to place in us, and the commitment you all continue tomake to DNP. Your confidence and commitment are major
driving forces that allow DNP, in partnership with all of you,to create value for a new society.

2 0 0 3its labor force by about 100 employees through early
retirement incentives. Still, with increased sales promotion
expenses coming on top of floundering sales volumes,
both sales and income declined.

S h a r e h o l d e r s

R e p o r ttrends to narrow our product lines and scale back production systems involving products with little added value.
Color filters for liquid crystal displays are one of themain products of this division. In anticipation of increased
demand for liquid crystal televisions, we developed a color
filter that delivers the same level of brightness and picture
quality as televisions with cathode-ray tubes. We beefed up
our manufacturing framework so that we can keep pacewith surging demand. In addition to expanding our OEM
manufacturing capabilities in Taiwan through Sintek Corp.,
to which we provided manufacturing technology, we alsoacquired 80% of shares in Advanced Colortech Inc., a joint
venture between Asahi Glass Co. and Mitsubishi Chemical
Corp. The venture is the number three producer of color
filters in Japan. These moves have increased the DNPGroup’s supply capacity by 1.3 million units to 3.1 million
per month, an enormous leap in production capacity. Thishas contributed to growth in sales.
Meanwhile, in our photomask business, we tied up
with Intel Corp. of the United States and other semiconductor makers to jointly develop cutting-edge
technologies, and succeeded in mass-producing
photomasks for 90-nanometer chips. We also agreed with
Hoya Corp. to jointly develop photomask blanks for nextgeneration semiconductors, and speeded the pace of ourtechnological development. On the manufacturing side, weboosted capacity at our Kyoto plant and last May weformed a strategic alliance with STMicroelectronics for theoverall development and supply of photomasks. As part of
the alliance, we founded DNP Photomask Europe S.p.A. in
Agrate, a suburb of Milan, Italy as a supply base in Europe.
On the other hand, we responded to sudden changes
in the markets for shadowmasks and lead frames last fiscal
year by sharply reducing our equipment and narrowing our
product lines. Nevertheless, we did well at capturing
demand for shadowmasks for use in household televisions
this fiscal year, and succeeded in boosting income byspecializing in hyperfine processing of lead frames.
In our Beverages Division, Hokkaido Coca-Cola
Bottling Co. continued to face a challenging businessenvironment. This time it was hard-hit by a drop in
demand resulting from cool weather during the summer,
which should have been the company’s peak sales time.
In order to cut costs, Hokkaido Coca-Cola implemented
such measures as tying up with other bottlers forpurchasing, consolidating distribution bases, and cutting

O u r

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

A n n u a lconsumers to use the Internet to conveniently view andsearch various kinds of information that were generally
sent by mail, such as phone usage statements andproduct catalogs. Using this system, we have started aservice called Dpost.
We are also working on obtaining the Privacy Mark
from a third-party certifying body in order to strengthen our
security systems and give better protection to the personal
data that we handle. In addition to our Business Forms and
IPS sections which have already obtained Privacy Marks,
this fiscal year, the Communication & Information Operations
became the first planning division to get the Mark.
DNP reorganized its Lifestyle and Industrial Supplies
Division, adding new industrial products – such as
information media supplies that share converting
technology, optical film for displays, and electrode material
for lithium ion rechargeable batteries – to existing
packaging and decorative materials products. This divisionfocused on developing products with improved functioningor a high degree of environment-friendliness. The industrial
supplies field is expected to grow rapidly in the near future,so we made this sector an independent business division.
We also founded DNP Advanced Industrial Supplies Inc. tohandle the manufacturing side, thus boosting not only thebusiness system but also the manufacturing system.
In the packaging field, our anti-bacterial aseptic
technology has won strong praise. Five beverage manufacturers have adopted our PET bottle-filling system. In thissystem, DNP delivers PET bottles in a preformed (semiformed) state. Beverage makers then use the in-line
forming sterilized filling system developed and sold by DNP
to finish forming the bottles and fill them. Not only does thissystem enable clients to offer a safe and high-quality
product, it also lessens the burden on the environment.
In the building materials area, DNP strove to expand
sales of its non-polyvinyl chloride cosmetic sheet forresidential interiors, Ecostandard WS Safmare, which was
the first product to bear DNP’s own ECO mark. The DNPGroup established the in-house environmental standard
this fiscal year based on ISO 14021.
DNP’s electronics sector consists of display products
and semiconductor products. From the standpoint ofusing micro processing as our core technology to provide
everything from components to devices, we developed
cutting-edge technology and improved our supply
systems. At the same time, we carefully assessed market

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D N P

A n n u a l

R e p o r t

2 0 0 3M e s s a g e

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D N P@a

G l a n c e

DNP @ a Glance
Products

DNP’s principle business consists of three consolidated segments: Information Communication, Lifestyle and Industrial Supplies andElectronics. Together, they constitute 94.5% of net sales. As this is the first year we started compiling financial data for these segments on
a consolidated basis, and Information Media Supplies were moved from Electronics (formerly Electronic Components & Information Mediapurposes, however, last year’s figures are provided below on the same accounting base as this year.
In addition to these three segments, we have another segment, Beverages, which accounts for 5.5% of our net sales. This segment is notincluded here but discussed in the Management’s Discussion and Analysis section.

Supplies) to Lifestyle and Industrial Supplies (formerly Lifestyle Products), we do not have historical data for these segments. For comparison

Information Communication

Net Sales (left scale)Operating Income (right scale)Books andMagazines(¥ Billion)

Sales related to books and publications decreased due to the prolonged harsh business environment of the publishing market.
Commercial printing also declined in sales as companies produced fewer POPs, catalogs andfliers due to their reduced advertisement budgets.
In business forms, we saw a remarkable increase in smart cards and IPS products, such as
personalized mail, though other business forms decreased.

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Sales: 619.9 billion yen
Change: -6.0%

Change: -18.3%

Lifestyle and Industrial Supplies

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

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Net Sales (left scale)Operating Income (right scale)

Packaging(¥ Billion)

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Sales: 420.2 billion yen
Change: 2.2%

Business Forms

002

Printed packages for
snacks, foods, beverages,
toiletries and pharmaceuticals, and environmentallyfriendly containers

Decorative Materials

Industrial Supplies

Functional films and interior
and exterior decorative
materials for homes, stores,
offices, automobiles, andelectronic appliances andfurniture

Transfer ribbons for color
printers and facsimile, optical films for displays, andelectrodes for lithium-ion
rechargeable batteries

Operating income: 28.6 billion yen
Change: 43.3%

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Electronics

03

Net Sales (left scale)Operating Income (right scale)

Displays(¥ Billion)

Sales of photomasks were strong overseas especially in high-end products, while sales of liquid
crystal color filters increased as demand for the filters for use in PC monitors expanded. Overseas
demand for projection TV screens was strong, resulting in sharp growth in sales. Sales of shadowmasks also rose due to increased sales of large TV sets.

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

Operating income: 40.1 billion yen

0

Our marketing activities for large-aseptic filling systems for PET (polyethylene terephthalate) bottles boosted the sales of our packaging products, despite a decline in the sales of paper containers and packages. Performance increased greatly with soft packaging also higher than the previous year.
Meanwhile, despite strong exports to the United States, sales of decorative materials
decreased overall domestically.
Among Industrial Supplies, sales of ink-ribbons for facsimiles and color printers both decreased
while sales of optical films for LCD films, such as polarizing plates, and electrode materials for lithium-ion rechargeable batteries increased sharply.

Books, magazines,
dictionaries, textbooks,
graphic collections, commemorative books and otherpublications

Commercial Printing

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Sales: 208.4 billion yen
Change: 17.8%

Color filters for LCDs, rearprojection television screens,shadowmasks, back panels
for plasma displays, andorganic and inorganic EL
displays

Operating income: 28.3 billion yen
Change: 229.7%

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Electronic
Components
Photomasks, etching leadframes, package substrates,on chip color filter for imageing sensors, IC tag and otherchemical etching products

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D N P@a

G l a n c e

D N P

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G l a n c eBusiness Solutions

Solutions for Different Types of Businesses and Industries

Business Efficiency Solutions

Network and Database Solutions

Smart Card Solutions

Providing Functions to Web Sites

Consultations and Support for Introducing Smart Cards

ASPs

Issuing Smart Cards

Net Sales by Consolidated Segments

Information Communication
Books and Magazines, Commercial Printing, Business Forms

DNP is involved not only in engineering information using new media but also
in the entire process of information communication, from planning projects
and creating content to delivering the products. In addition, DNP proposes
effective information marketing strategies for the network age, reducing theload of customers in all industries, and providing prompt support for distributing information to individuals. Moreover, DNP also provides security solutions
using a smart-card-based system to meet the needs in today's informationsociety to protect private and corporate information with a solid security system.

B e v e r a ge s
5.5%

Editorial Supporting System

Elect ron ic s
1 5 .9 %Custom Flyer System

Electronic applications and issuing electronic statements
Web performance and function measurement service
Recommendation system

Contactless, contact, hybrid, dual-access and SIM cards

Developing Smart Card Software

Payment functions

For IC Chip implementation:
MULTOS/Java/MultiPocket

Solutions for Organizational Management

Content Sale Functions

For PCs

Support for intellectual property rights

Distribution platform

Information management and security

Materials procurement system

System for preventing the illegal distribution of contents

Middle Ware

Issuing and managing IDs

Issuing content IDs

Internal electronic form system

Payment systems

Solutions for Public Relations

Database/CRM Solutions

Corporate communications support

CRM support for point cards

Sales of Smart Card Peripherals

On demand PublishingI n f o r ma ti o n
C o mmu n i c a ti o n
46.7%

Lifestyle and Industrial Supplies

Corporate information archive
IR solutions

Packaging, Decorative Materials, Information Media Supplies

DNP has applied its printing technologies to develop products that havebecome a part of people's lives and products that have become essential
items in industries. In these fields, DNP has developed a wide variety of solutions to make the world a more convenient and safer place — including solutions for environmental needs, product development, product design,
machinery design, systems engineering and sales promotion — founded on
DNP's solid manufacturing technologies.
Package Designing Systems

Lif es t yle a nd
I ndus t ri a l Supplie s
3 1 .9 %Food Traceability Systems

Proof Circular System for Packaging

Aseptic Filling Systems

Construction Material Environmental Evaluation Systems

Developing Applications
Solutions for Studying and Training

Operating Information Web Sites

Network training program

Selling digital content

Product distribution management
Conference/concert entrance/exist tracking system

Support for producing training materials

Map information

Loyalty point system

Curriculum information

Shopping web sites for mobile phones

Developing smart package systems

Incentive marketing web sites

Solutions for Sales Promotion

Sales of Smart Card Peripherals

Marketing and research

Smart card reader/writer

Proposing promotion strategies
Efficient production of sales promotion tools
Tools for presentation support
Customer data management

Solutions for Production and Logistics

Electronics
Display, Electronics Devices

Delivery and logistics system

R e p o r t

2 0 0 3The Virtual Plant provides customers the virtual use of DNP's manufacturing
division as their own plant, allowing them to take advantage of DNP's worldleading, sub-micron-level electronics processing technology. It is a systemwith which the entire process of the manufacturer's business can bechecked, from ordering to delivery. DNP also offers high-added-value service
in addition to manufacturing, such as the turn-key business that allows theconsistent manufacturing of products from the circuit design of semiconductors to the final package.

A n n u a l

LSI Designing

Creating product information databases
Management system for production lines
Bill collecting systems

Graphic designing, digital archiving, event

Order centers, customer centers, logistics,

planning, video and still image produciton

payment collection, campaign officeTurn-key Business

D N P

Virtual Plant System

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U b i q u i t o u s

D N P

U biquit ous DNPKey Concepts

Our “individuation” technology holds the key to ubiquitous computing.

What exactly is “individuation”?

developing our smart-card business.

At DNP, our business started with our printing technology to display information on
ubiquitous pieces of paper. Having since been involved in the business of putting
information on a variety of media, we make a seamless advancement into ubiquitous
computing.

Imagine a world where ubiquitous computing has

solutions for our corporate clients who engage inallowed a high volume of people and information tobusinesses involving different spaces and areas such as

We intend to be a business partner and provide

connect on a network at the same time. Due to thethe office, medicine, traffic organizations and the inside oftremendous volume of information being exchanged, there

cars and homes.

needs to be a mechanism to identify each piece of
information as to the sender, time and place. We call such

Keyword: individuationa system to accurately identify and individualize each pieceof information “individuation.”

DNP is a printing company. How did it come to
be involved in ubiquitous computing?

H o w i s D N P, a p r i n t i n g c o m p a n y,

D N P ’s a d v a n t a g e s : h u g e c u s t o m e rbase, customized solutions, securityt e c h n o l o g y, c o r p o r a t e c u l t u r e a n d
exceptional ability to develop
technology

involved in this individuation system?
I understand why it would seem that DNP, whichbooks and magazines, printed products include posters,

the more numerous because we are a printing company.

calendars, food packaging, beverage cartons, plastic drink

This, I believe, is primarily due to our business having

bottles, wood-grain flooring materials and wallpaper, bills

originated with the printing technology, which put informa-and credit cards. Today, most of these products areFirst, we are advantaged for the fact that we alreadytion on a ubiquitous medium during the Middle Ages,

processed electronically as they are manufactured. In

provide printing services and solutions to a vast number ofknown as paper. Since then, the printing technology has

addition, they are electronically managed during distribu-

clients in the field of information communications. We

revolutionized society, and in the 20th century, DNP used ittion through the use of barcodes and other means after

already have these clients’ huge product data and content

as a starting point to expand into various media. At DNP,

they are delivered to clients and are subsequently

in the DNP computer. When a client switches its informa-

our corporate culture centered on printing technology

purchased by consumers. It is the printing company’s jobtion medium from paper to the Internet for example, orseamlessly expands beyond conventional businesses to

to attach barcodes to each and every product. It has

implements updates or revisions, a significant amount of

new areas. From that viewpoint, it is only natural for us toalways been the printing company’s job as the card

time and effort will be needed to make the moves. For the

be a key operator in the 21st century where information

vendor to equip conventional magnetic cards withclient, it certainly makes sense to let DNP handle

can be utilized anytime in a variety of forms throughmagnetic stripes. When such information contained in theeverything as DNP already has the client’s data and canubiquitous computers. Thanks to our experience handlingbarcodes or magnetic stripes needed to be linked to each

get the job done much faster, easier and cheaper. As you

information in many forms, we can make innovative

product, again, it was the printing company who built up

can see, customer loyalty is very strong in this business. It

businesses happen. DNP already has the infrastructure to

the expertise on the required encoding for such linkage.

is our very valuable asset.

handle information in a variety of new ways because

As you can see, no one is better equipped than DNP

almost all information handled by a printing company

to code every ubiquitously existing item for identification.

today is electronically processed. This makes it ready for aubiquitous network.
As ubiquitous computing becomes the way of theworld, one of the keywords in our belief in our ability toHere again, we have the fact that we are basically acompany that started as a printer, as well as fouradvantages founded on our corporate culture.

Our second advantage is the expertise we havegained by being a customized solution provider for morethan 125 years. That is, as an organization, we are

Having adopted “individuation” asperfectly suited to and fully competent in developing

your keyword, how are you going topersonalized solutions. While most manufacturers focus

relate it to your businesses?

on making profits by producing standardized products inprovide core technologies in the new era is “individuation.”large numbers, DNP, having dealt with printing – which is
It is not DNP’s aim to monopolize its involvement

after all a business of customization – is culturallywith products and services in a specific field in

structured to propose and provide customized solutions

ubiquitous computing. On the other hand, I believe thatbest suited for its clients.

there is great potential for our business if we were to be a

Our third advantage is the information security

partner for our clients by taking care of crucial elements intechnologies that we have fostered to date, and the hightheir flow of business, such as the service we provide inmorale among the staff when it comes to keeping

2 0 0 3Chairman of the Board
President and Chief Executive Officer

businesses. The fact is that our business potentials are all

R e p o r t

Yo s h i t o s h i K i t a j i m a

related to ubiquitous computing?

places you may not be aware of. In addition to

A n n u a l

nothing to do with ubiquitous computing or related

What are DNP’s strengths in businesses
Printed materials are ubiquitous in our lives in many

D N P

originally started as a printing company, would have21

U b i q u i t o u s

confidentiality. DNP is very sensitive about information

DNP and the market for ubiquitous computing

We believe that by working together as partners withsecurity. Sometimes, several automakers’ catalog data are

our clients in businesses involving ubiquitous computing,stored in our computers before the cars are publicly

we will both be gaining profit.

D N P

introduced. Our daily work involves frequently exchanging
such data with our clients. For this reason, assigning

L a s t l y, w h a t a r e s o m e b u s i n e s s e sidentifications to data and content, creating databases andrelated to ubiquitous computing thatencrypting data to prevent outsiders from accessing

you already handle?

clients’ data or systems have always been part of our job.
In the case of paper media as well, we have always had

As I mentioned earlier, there are many businessstrict standards in the morals of each of our employees

potentials when “individuation” is the keyword.

from sales to plants to keep our clients’ confidentiality

Some of the businesses we already handle include smart

amid the high volume of confidential data we have on

cards, electronic forms, IC tags/RFID and information

paper in our company.

distribution.

Market for
Ub i q u i t o u s Co m p u t i ng

Our fourth advantage, without a doubt, is our researchand development ability. Every year, we allocate over 20
billion yen for research and development. We are sure thatfew printing companies in the world can match our annual
research and development expenses. Our emphasis on

I n d i vi d u a t i o nresearch and development began in the late 1950s when
Japan first developed color TV.
Inside color TV is a component called shadowmask
that controls the colors on the screen. When it waslearned that printing technology was used to manufacture
this shadowmask in the United States, we, who alreadyhad a research facility at the time, were contacted, andD N P’s ad v an t ag es i n t h e mar ket
fo r u b i q u i t o u s co mp u t i n g

succeeded in manufacturing it. The key in manufacturing
shadowmasks, we found, was to apply our plate-making
technology used in printing. This success became ourE xcep t i o n al ab i l i t y t o d ev el o p t ech n o l ogy

springboard into the world of electronics, where we havegrown to be a world-class manufacturer of photomasksthat serve as the original plate for ultra LSI (large-scale
integration) today. As such, it was DNP that provided acore technology for producing TV sets, which, at firstglance, seemed to have nothing to do with printing

H u g e cu st o merb ase

C u st o mi z ed
so l u t i o n s

Inf orm ati on
secu ri ty

technology. Since then, we have always led the world inprinting technologies and their applied technologies.
Another important advantage of DNP is its corporate

already building businesses with companies in a wide
range of fields. This puts us in an excellent position also
from the standpoint of working together with othercompanies, which is considered key to success in a world

2 0 0 3
D N P

of ubiquitous computing.

S o l i d b ase i n b u si n ess p r i n t i n g

R e p o r t

As you can see from DNP’s advantages, we are

A n n u a lon its solid, traditional technologies.

D N P

A n n u a l

R e p o r t

2 0 0 3

culture to continuously develop new technologies based

22

23

U b i q u i t o u s

Smart Cards

Leading the fast-growing market of smart cards.
Having issued the majority of magnetic-stripe cards in Japan, it was only natural for
DNP to assume the job of developing smart cards for the next step in solutions. Our
dominance in this industry is firmly founded on our ability to develop original operation
systems and our highly advanced security system.
We d o m i n a t e t h e m a r k e t i n t h e s a l e sof smart cards.

little behind schedule. What is your view?

potential for new services as they are loaded with functions
such as domain lease (in which a single card can be sharedby several service providers), digital certification (identifica-

For credit cards, the switchover to smart cards
began in 2001, and is rapidly spreading. In 2003, astion on network), electronic payment and digital data

many as 40 million smart credit cards are expected to be

storage (customized data storage). DNP is offering

issued. In addition to credit cards, public transportation

solutions with the aim of creating business models thatcards, electronic-toll collection cards, digital broadcasting

What are DNP’s strengths and business

utilize the smart cards’ potential. One such solution is the

cards, Basic Resident Register cards, employee ID cards

domains in the field of smart cards?

smart-card data center. The center will manage the lifecycle

and student ID cards are also being made with smartof smart cards that are becoming even more complex due

cards. Smart terminals for credit cards are being installed

DNP’s strength is in software technology as itto the card’s many functions and advances post-issuance,starting this year. In the metropolitan areas of Tokyo andbusiness in the first place?

expands its smart-card business with security at its

which is the distribution of applications to cardholders. In

Osaka, public transportation cards are about to becore. We have some of the best technologies andaddition, the center will serve as a platform for new smart-introduced. Starting next year, public authentication

At DNP, we have a long history of handling printing

expertise in the world with which to develop platform

card solutions that will be an essential part of the card

services will be launched, in which smart cards will bematerials related to money, such as bankbooks,

operation systems such as the leading MULTOS andissuer’s customer service strategy, and generate value-

used for electronic applications under the e-Government

securities and gift certificates. As new media were

JavaCard, operating systems for next-generation mobile

added services for smart-card issuers and service

concept. Once the service spreads in the market, homes

introduced, we continued to serve our clients by manufac-

phones, operating systems for dual-interface cards,

providers. The smart-card data center is packed withwill have the infrastructure for smart cards, paving the way

turing and developing magnetic-stripe cards such as debit

software for issuing smart cards, driver software for

DNP’s expertise, including its expertise in consulting

for a full-scale utilization of smart cards in a networkand credit cards. These security products require foresightcontrolling smart cards, and security software, among

services, platform operation systems, next-generation

environment.

and advanced technologies, as well as security-control

others. Our desktop security system, featuring functions

mobile-phone operation systems, security software andexpertise during the manufacturing process. At DNP, wesuch as smart-card logon, screen lock, application startup

software for issuing smart cards.

are armed with technologies and know-how fostered bycontrol, encryption of important files and user restriction, isyears of manufacturing and developing security products.

fit to be used as an enhancement to an information

computers are connected via a network and anyone canAt the core of our smart-card business is security.

In a ubiquitous networking society where all types of

security management system. For solutions to prevent

access information anywhere at anytime, risk of spoofing,

Having gained a major market share of magnetic-

spoofing, hacking and leaks in today’s information network

hacking and information leaks increases. To fully enjoy the

stripe cards issued in Japan, our involvement with cards

society, we provide comprehensive PKI (public key infras-

services ubiquitous networking has to offer, it is crucial forheld by the individual goes deep. It was about 20 years

tructure) services and products, including smart cards foreveryone to be able to join the network safely andago that we began our research and development of

PKI, PKI applets to be embedded in MULTOS andsecurely. For that reason, the smart card has become ansmart cards, which are slated to become the card solution

JavaCards, PKI drivers, services to handle a bulk order of

essential tool for identification. DNP’s smart-cardof the next-generation. Smart cards are embedded with adigital certificates, and small-number card printers with atechnology, backed by many years of experience, will

microcomputer, and require not only conventional

function to issue PKI-compatible smart cards, all of which

support the safety, reliability and convenience of a ubiqui-

manufacturing and processing technologies but also

were developed by DNP.

tous networking society.

knowledge and complex work than are required fordeveloping smart cards, and its technologies havemagnetic-stripe cards. At DNP, we provide consulting andadvanced to the top of the world. Ten years ago, we

project management services through our DNP Chipestablished a joint-venture company called SPOM Japan

Migration Program, which features a menu our customers

2 0 0 3

with France’s Bull, which holds many patents including

can choose from. Taking advantage of our expertise andbasic patents for smart cards. Having thus promoted

experience in software development and project handling,R e p o r t

smart cards in Japan, DNP currently dominates the smart

our smart-card introduction consulting services meet thecard market in Japan: While 28 Japanese credit-carddiversified needs of our customers who are considering

companies issue, or plan to issue, smart cards, 26 choseusing smart cards in their business, or are looking into

A n n u a lIntroducing smart cards requires significantly moreworked on software technology since it initially began

to adopt cards made by DNP.

smart card services.

D N P

It seems the popularization of smart cards is a

Why did you got involved in the smart-card

software technology for operating computers. DNP has

24

While most smart cards in use today were adopted fortheir security or convenience, smart cards also offer

Hidenori Nokubo
Director

D N P

U b i q u i t o u s

D N PElectronic Forms

we became the first in the industry to help corporate

and what is its future business potential?

are said to hold the key to network
security. What is your view on this?

At DNP, we provide electronic-form solutions by
integrating our know-how and track record of having

One of the advantages of DNP’s electronic forms is

manufactured conventional printed forms with our know-that they can be linked to identification devices such

how of network solutions. We already have an establishedas smart cards.
While the electronic forms provide easy data entry andrecord of digitizing forms in a diversity of fields including
financial, communications, manufacturing and government

viewing for convenient, fully digital applications andfields. In our efforts to provide not just user interface but

procedures, data distribution over the Net still poses

comprehensive solutions, we have built alliances withWeb for users to enter information. It is a program with achallenges in terms of security. To prevent such security

powerful partners that include electronic-form venders,variety of functions to make the viewing and entering ofrisks, the industry has been eying PKI, or public key infras-

system venders and content venders. The business of

information easy for the user. Even users with low IT

tructure. PKI provides security for electronic information byelectronic forms includes sales from custom-designing

Electronic forms are an element of the information

literacy can be assured of accurately entering their data.

using public key cryptography, which is used for digitalforms, loyalty on peripheral programs and applications,system; they provide solutions to ensure and secure

Once the electronic form is archived in a database, it cansignatures and individuation. Together with the powerfullicensing, and transaction fees in accordance with theapplications and filings in a network environment.

be downloaded using the Web, or sent using e-mail to thetool, smart card, form and data individuation functions that

number of times the electronic forms are transmitted. Our

Ubiquitous computing allows information on numerous

user. The content of the applications and proceduresare built in as modules on electronic forms play anintellectual property in the range of electronic-form techno-

products and systems to be exchanged via a network, but

entered in the obtained form may be sent back as digital

important role in PKI.

logical elements and business models includes more thanclients digitize their various forms.
Electronic forms are not simply an interface on the

What are electronic forms?

100 patent applications.

data to the original sender, or printed locally by the user.

Currently, DNP is developing electronic forms aspurchases or applications are made based on the informa-

The form can thus be signed and mailed like any otherindependent program modules equipped with various

The market capacity of electronic forms is big, but wetion. While such entries were conventionally made on

printed material, or be kept as evidence.

reviewing information is not an end in itself. In the end,

intelligent functions. We believe that the tool that will

will need more time for the entire public to be able to enter

In Japan, there are said to be about 9 million types ofguarantee the validity of data entered by the electronic

data using electronic forms. By 2007, the market may

application forms. As a printing company in Japan, DNP

forms is the smart card. By opening the application andreach 8 billion yen, if that. By 2010, however, I believe thatnaturally has accumulated the knowledge and skills to

downloading document forms, a user can receive

the number will change significantly.

produce such application and other forms. We handle

guidance and run an error check. At the time of filing theeverything from designing electronic forms to developing

application, the smart card can be used to attach a digitalis being built in many fields. Electronic forms, which areprograms, as well as sending and managing electronic

signature – the digital alternative to the physical signature –mostly handled on PCs today, will soon be multi-device

form files on our customers’ behalf.

to the electronic form to prevent data alteration and tofriendly. For example, what I hold promising are new input

In addition, as an extension of our electronic form

conduct personal identification. What’s more, the user canmedia such as terrestrial-digital broadcasting andbusiness, we are aiming to establish a business to provide

even be selective in extracting information from the smart

electronic pens. The business model using an electronic

support with procedures involving forms. More specifically,card, and choose to fill out just his name and address on

pen is a solution that we can provide taking full advantage

we plan to target contents that are often used by thethe form.

of DNP’s strengths, integrating our electronic forms withindividual and digitize them into electronic forms. We will

Hidenori Nokubo
Director

The switchover from paper to electronic forms may be

Currently, the infrastructure for ubiquitous networking

our expertise in the designing and manufacturing ofthen build and operate a safe and convenient platforma long-term process. DNP, however, will be able to support

conventional printed forms. Although information

where content users will visit.

the process all the way through as the electronic forms

technology has not spread widely among the older

can be operated both in digital and paper formats as

population with more disposable income, ubiquitous

previously mentioned.

computing will suddenly take off when TVs become an IT

For example, moving one’s residence is a process that
may require dozens of applications and change-of-address
notices to the municipal offices, public institutions, utility

tool and electronic pens become popular. There is also a

services, banks and other entities. After the forms are

new business opportunity when IT services are added toobtained from each entity, they must be filled and submitted

conventional TVs: New services inevitably mean newproperly. At DNP, we aim to build a platform business thatcharges and payments, and security solutions will bewill provide a service model for a one-stop shop that takesneeded for the monetary transaction. I believe this iscare of everything from obtaining the necessary documents

another area in which we at DNP can make use of ourto completing the procedures.

long-held expertise in electronic forms and security.

2 0 0 3

paper in the form of applications and agreements, at DNP,

function of smart cards, electronic forms

R e p o r t

Making the 9 million existing application
and request forms available in a
network environment.

What are DNP’s strengths in this field,

A n n u a l

DNP provides printing and information technologies (P&I) as strategic solutions for the
21st century. One solution is electronic forms that verify payments and agreements
made in a ubiquitous networking society.

Along with the personal identification

D N P

Perfecting network security for digital payments and agreements.

27

U b i q u i t o u s

IC Tags/RFID

Issuing the source of ubiquitous computing that will revolutionize distribution.

expand DNP’s business domain as a solution provider.
Because DNP is there at the beginning of the productIC tags are seen as the device to revolutionize distribution in a ubiquitous networking
society. The ID business, which replaces barcodes, falls perfectly into DNP’s domain.

supply chain, we will be processing smart cards upon

I believe more and more mass merchandisers will begin
managing inventory visually, using pallets and reusable
transport cases with IC tags attached to them.

issuing them as we have with barcodes. For example, for
IC tags that will be attached to the final product such as

Which field do you think will be thepackages and groceries, we will encode them withbiggest market?

designated IDs and provide linkage to a variety ofmade using an entirely new manufacturing method, one indatabases. We may also provide encode processing

which printing technology is applied. For example, theservices at our customers’ plants, making use of ourantennas, which are currently being made using an etchingexperience building filling and packaging systems. This willcosmetic and drug product. Under the current distribution

technology, are about to be made by printing. In the end,

be another area in which DNP’s creative thinking andsystem, it is easy to be overstocked or out of stock whenW h y i s D N P, a p r i n t i n g c o m p a n y,part of the electronic circuit may be replaced by printed

expertise for customized products will be fully utilized.

the whereabouts of inventory items are completely blocked

leading the IC tag development in Japan?

circuits, which is obviously a core business for a printing

In dealing with the IC tag itself, we will be sure tofrom view during the transitory stage of distribution, such ascompany. As such, we are developing technologies eying

respond to every market and application that will beat the wholesalers, in backyards, or on trucks. Also, I hear

Printing companies have always printed barcodes

the future. Perhaps in a few years, printing companies may

created as the cost of the tags decreases. One example ofthat a vast amount of products are returned or discardedon products according to customer demand. The

start making computers, which include IC tags.

a field soon to be opened to IC tag application is thewhen a new product is introduced, replacing an old one.

percentage of products on which we print barcodes at our

Recently, I have begun visualizing the concept ofmanagement of pallets and reusable transport cases used

When the corporate participants of the Auto ID Center

plants has increased every year, with about 98% of foodubiquitous computing with the word, “visibility.” This is

in logistics. In this field, we will strive to secure appropriate

calculated the number of packages they ship annually, thepackaging products bearing the barcode today. In the

because the IC tag, equipped with a wireless antenna, will

suppliers and obtain the know-how by building an alliancecombined total was an astonishing several trillions of items.

future when IC tags are attached to products, it will be themake everything a network terminal once the tags arewith businesses overseas. In regards to IC tags of the next-

Even at DNP alone, I suspect the number of packages weprinting company’s social obligation, as well as the public’s

attached to all things. We will be able to find wheregeneration and beyond, we will be flexible in building

manufacture is at least several billion a year. One day, all of

expectation of us, to take care of this process. One of theeverything is. It will be a world where we will be able to see

partnerships with other companies so that we may develop

them will have IC tags.

biggest purposes of our having joined a consortium at ansomething we want to see, without being there. I believe

methods to mount IC tags on different high-priced

early stage to conduct demonstrative experiments andthe role of the printing company is steadily increasing to

products and all products. In that way, we will be able towill carry its own information such as production andindustry standardization was to share information withrealize such a world.

provide solutions for every new application.

shipment information. This will revolutionize supply chain

C u s t o m i z a t i o n i s a p r i n t i n g c o m p a n y ’s
business, which is convenient when
attaching IDs to all material things.

W h a t i s D N P ’s b u s i n e s s d o m a i n i n

W h a t i s t h e I C t a g ’s m a r k e t

the field of IC tags?

potential?

company is to create a customized plate according to a

At DNP, we are improving the foundations of all ofWhich came first: the chicken or the egg? Thisclient’s order, make reproductions (or prints), and deliver

our operations in preparation for the development

When mounting IC tags on various media, the ability to2005 or 2006, IC tags will be attached to every

By mounting IC tags on every product, each productmanagement, marketing and customer relationshipcompanies that were shaping the way of the world’s IC-tagbusiness.

The grocery business, of course. It is plausible that bymanagement.

freely customize becomes crucial. The job of a printing

them. So even if attempts to attach IC tags on someof IC tags in the future. Potential businesses include

products fail due to problems in shape or size, a printing

software development, reader/writer development andout of a situation in which the prohibitive cost of IC tags

company has the ability to attach them to any package

management of the enormous amount of information thatprevented the market from being created. More and more

and product, using IC tags that are customized in every

will be generated by IC tags, such as information on

applications for IC tags are being developed that are

Kuniaki Kamei
Managing Director

production and shipment.

feasible at what the tags currently cost. For example, theyway – the design of the antenna, size and shape. In that

This business field called data mining will be an

are beginning to be used in the fashion industry, where thevital role in the future when IC tags complement, andimportant key in the future to streamline and optimize

product unit prices are relatively high and the product cycle

eventually replace, barcodes.

overall supply-chain management, allowing DNP to use IC

is short. By using IC tags to manage production andAnother ability that comes into play is our ability totags to provide back-end support in the distribution

shipment information, sales information in terms of productrespond to the need to cut costs. The key for all products

system. Furthermore, a look at the database from themodel numbers, sizes and colors can be visually managed

to adopt IC tags is to reduce the cost of the tags. I have nostandpoint of individuation reveals business opportunities toon a computer screen, allowing prompt replacement of

doubt that the infrastructure built by a printing company toprovide reliable network delivery services to deliver

out-of-stock items and increasing customer satisfaction.

produce a high volume of products at high speed will serve

necessary information to only those who are authorized to

D N P

A n n u a l

R e p o r t

2 0 0 3sense, our creative thinking as a printing company plays a28rhetorical question was often heard when discussing
the IC tag market. Fortunately, I believe that we are coming

There are also movements to begin using IC tags alongas the base for low-cost mounting of the tags. What’s

access such information, or to provide traffic control forthe supply chain of general consumables. Specifically, themore, it is said that the next-generation IC tags will bedata transmitted over a network. Such opportunities willtags are being attached to pallets for transporting merchandise to retailers. This is useful for inventory management, as

D N P

U b i q u i t o u s

D N PInformation Distribution

payment systems. Recently, more and more customers

DNP has been producing interactive content for data

have been introducing point cards and electronic coupons

broadcasting and other media. By combining that expertisefor their businesses. At DNP, we already offer a variety ofwith our network-content producing technologies,

solutions to meet such demands. Points and electronic

knowledge and expertise gained from our work with thecoupons can be viewed as information with electronic

aforementioned MEDIAGALAXY™, we will be able to“value” in much the same way as electronic money has

provide high-quality, appealing content as never before

value. In the near future, we can expect such different

made possible. For example, in the future, a viewer

W h a t i s D N P ’s b u s i n e s s d o m a i n i n t h evalues to be mutually exchanged and to gain currency. I

watching a TV program may at the same time browse

field of information distribution?

believe therein lies a new business in which we can utilize

information on the outfit and jewelry worn by the TV

our technologies, knowledge and expertise gained in our

personality, and order them for purchase.

between businesses can be categorized into thebusinesses to date.
Finally, in the flow of “Meta information,” a type of

We are already providing localized digital flyers called
Orikomio! via Internet TV, which has already been

W h a t a r e D N P ’s s t r e n g t h s i n t h efollowing: “Logistics” involving product delivery,

information that complements the “Finance” andintroduced for sale. Viewers can now use a household TV

information distribution field?

“Commerce” involving negotiation and agreement,“Commerce” flows is sales promotion information. Today,

to easily view localized flyers. In the future, we will be able

“Finance” involving payment, and “Meta information” that

we are beginning to build a foundation for distributing

to provide advanced services by interactively coordinating

To expand in the information distribution business, acontrols or complements all of the above. At DNP, we haveinformation on products and sales promotion. Specifically, it

the content with TV programs.

company needs to have competencies in three areas.

been involved in all four types of information flow in theis a business to store, manage and distribute product and

The first two are competencies DNP has always held as amany years we have worked with the paper media. Today,sales promotion information on behalf of our customers,

W h a t w i l l b e D N P ’s m a j o r p r o j e c t

printing company: ability to edit and process information, or

the flow is being replaced by digital media, which, mostusing a platform called DYNAGALAXY™. Our server serves

when the ubiquitous networking

what we call transcoding, and the ability to store and archive

importantly, serve as a foundation to seamlessly integrate

as a library of sales promotion information where we store

society goes into the next phase?

information for retrieval anytime. The third is the ability to

the different types of flow. At DNP, we are responding to

product information and image data for use by customers

distribute information to anyone or any space throughsuch changes as we expand our business in all four areasin the form they want, when they want it. We already have aappropriate media. We have also expanded our technolo-

in the digital era.

number of customers using this service.

gies, knowledge and expertise in this third area starting withFirst, in the digital world, where content itself is

We are betting on the many potentials of theelectronic paper. The electronic paper gets as close

What is important is that the four different areas of

as electronically possible to your ordinary piece of paper,

our abilities cultivated handling paper media and, throughdistributed over networks, “Logistics” is no longer physicalbusiness develop together, seamlessly combined, and that

reproducing a still image – not the flickering image on thethe operation of our Internet hosting service,

but digital. In such a field of digital-content distribution, wethe paper media and digital media be used effectively

ordinary display. In the future, the electronic paper will be

MEDIAGALAXY™ and other network media. Only by

have started a business called DPlats™-AnyStyle™ toaccording to time, place and occurrence. For example,

able to display full-color, and even video images.

combining competencies in the areas of editing, storing anddistribute and sell digital content over networks. DPlats™

when payment is made upon the sale of a digital content,

Our focus is on how big a change the introduction of

distribution – each backed by advanced technology,

is the name of the overall business and AnyStyle™ is thea paper receipt sometimes becomes necessary. At DNP,

this electronic paper can make in what field. For example,

knowledge and expertise – can a company provide

Net shop set up in DPlats™– it is like a retail consignment

we can provide solutions that make use of our strengths

at kiosks and in bookstores, we will one day be able tohigh-quality information-distribution services.

store that provides content holders with a place to sell

as a printing company in every field, and combine them toextract only the information one wants from newspapers

their goods.

provide original services no competitor can copy, in a form

and magazines and have it downloaded on electronic

our customer wants, whether by being an ASP (application

paper, using wireless communication functions andBehind the success of DNP in the information distribution business, which may be

For flows involving “Commerce” we are making use of

considered a new field for a printing company, is

our expertise gained by developing and operating

service provider), system provider or by meeting themaking an electronic payment. Such a mechanism may

its unique corporate culture. It is in our nature tobusiness forms and electronic payment systems tocustomers’ BPO (business process outsourcing) needs.

greatly shift the nature of publishing into an on-demand,develop solutions by actively applying the

prepare the way for seamlessly digitizing electronic

technologies, knowledge and expertise we havepayment, invoices and receipts involved in business

Are there any other new possibilities inused as advertisements typically hung inside trains, whose

cultivated as a printing company to new media.

transactions. For example, while currently, mobile phone

the field of information distribution?

content may be programmed to change according to

Another nature of ours is to be creative instatements are already being switched over to network-

planning solutions for our customers’

based distribution, at DNP, we are developing an

Today, the integration of broadcasting and communi-

be sure that such functions will significantly increase thediversified communication needs. The twoelectronic bill presentation and payment (EBPP) businesscations has begun. The launching of digital terrestrialad’s appeal, and lead to great changes in the field of salesqualities serve as strong supports inthat links Dpost™, which will be a platform for sending

broadcasting by the end of the year will further speed up

building this new business domain.

invoices and statements such as those of banks, utility

the integration process. The fusion of communications

and communication services, and Order Line™, which iscontent as represented by the Internet and broadcastingplaying a very important role in editing, storing andan electronic payment system.

content as represented by TV will provide viewers with

distributing a variety of appealing content for viewing on

more advanced, appealing contents. For sometime now,

electronic paper.

Kunikazu Akishige
Director

In dealing with the flow of “Finance,” we are focusing
on a variety of network-based electronic money andpersonalized business. The electronic paper may also be

different hours of the day, and may even be video. You canpromotion.
We anticipate that in the coming future, DNP will be

2 0 0 3Generally, the flow of information exchanged

R e p o r t

Proposing information solutions of ahigher dimension, based on solutions
we have provided to our manycustomers over the years.

A n n u a lWorking in the information distribution field has made DNP naturally good atdeveloping solutions. DNP leads the world of information distribution in every way,
including technology, culture and performance.

D N P

DNP makes ubiquitous networking seamless.

31

I n f o r m a t i o n

Hot

Off

the

C o m m u n i c a t i o n

PressInformation Communication

Information Communication

DNP’s media solutions provide support
for new systems and diverse modes of
information distribution.

program was aired to commemorate the 30th anniversaryof normalized diplomatic ties between China and Japan.
Another type of program that we, together with ourwholly owned subsidiary DNP Digital.com Co., Ltd., areproducing is storable data programs tailored to the ep
services that were launched in July 2002. The ep services

Department, our mission is to deliver

are broadcast via a communications satellite (CS), which

necessary information to the target, withseamlessly integrates digital broadcasting, data storage

precision. Our trans-coding technology

and Internet access. The ep station is a BS digital/110 CS

gives us at an advantage as media

digital broadcasting tuner. We have acquired a stake in ep

become more and more diversified – from

Corporation when ep increased its capital back in March

the Internet and the mobile phone to CS

of 2002, and will support it in all operation aspects,

digital broadcasting. Because we know

including copyright management, content provision, andeach medium as our own, we are able tothe development of interactive programs.

develop and offer solutions from aWith DNP Media Create Kansai Co., Ltd., a wholly

variety of angles, featuring just theowned subsidiary of DNP, we launched West Gate, ap e r f e c t i n t e r f a c e f o r e f f i c i e n c y, s e c u r i t yvirtual mobile-Internet shopping mall that offers consumers

and desired functions

products and services from the Kansai region. In Japan,
the surge in mobile Internet popularity has created a new

Creating and managing content

mobile commerce market, which is estimated to grow tomore than 2 trillion yen by 2005. West Gate will allow theIn May 2002, together with Nihon Tsushin Kyoiku

10.36 million J-Sky mobile Internet subscribers toRenmei, Inc., we introduced Silk Road, which follows

purchase, in a highly secure environment, selected

Buddha Statue’s Prayers as the two companies’ second

products and services provided by a wide range ofjoint high-definition visual content production. Shooting for

Kansai-based companies and retailers. Affiliate stores will

the content took 18 months along the Silk Road, fromalso be able to apply West Gate to increase sales by

Xian, China to Buddha Gaya, India, accumulating 130

combining conventional tools such as catalogs and leaflets

hours of high-definition footage that captured the region’s

while allowing customers to order and make payments

scenery, towns, people and invaluable cultural relics.

using their mobile phones.

Much, including the high-definition images of the Tomb of

Also in Kansai, women now have access to a fashion-

Qin Shi Huangdi and terra cotta soldiers, have never beenable site that fits in the palm of their hands. Called Osharereleased before. We plan to promote a wide variety ofLife, the first official J-Sky mobile Web site to target womencontent applications, including printed materials,

in the Kansai region was launched by DNP and DNP Media

packaged media (VHS, DVD), TV broadcasting, BS

Create Kansai Co., Ltd., providing a wide range of informa-(Broadcasting Satellite) broadcasting, broadband content,tion on fashion, cosmetics, gourmet restaurants andvarious events and TV commercials. A video series has

electronic coupons. The J-Phone service is especiallyalready been released, and a special BS digital high-vision

popular among women in their teens and 20s, and theKansai has selected an all-woman team to plan andmanage the Oshare Life service. It is also affiliated with
West Gate to enable trendy Kansai women to purchasefashion goods and brand-name products in their region.
We also sell “electronic books” through our Web
Shosai e-commerce site (http://www.shosai.ne.jp). ThisR e p o r ttion from a woman’s perspective, DNP Media Create

A n n u a lfemale users. In addition, to provide women with informa-

2 0 0 3company has consistently aimed to enrich its content for its

D N P

When we celebrated DNP’s 125 years in business, we established our 21st Century
Vision. Our corporate philosophy is to be a company that contributes to society
undergoing emergent evolution. Such a society, we believe, will see an unprecedented
surge in demand for info-communication, along with continued media diversification.
While DNP’s Information Media grew this far with its media-oriented business, werealize that we cannot develop further in a market that has little room for growth. We
have thus expanded into the Information Communication business that covers theentire mechanism of info-communication.
By taking advantage of DNP’s information technology, planning ability andmanufacturing technology, we can provide solutions for our customers and create
the very mechanism of business. As we develop such new business fields, we will
also introduce our customers to the products we offer through our existing
manufacturing business.

A t D N P ’s I n f o r m a t i o n C o m m u n i c a t i o n33DualChives Corporate History Archives in April 2002. The

Developing Internet features for thecontent publishing site not only to allow the use of existing

to produce leaflet data and send leaflet orders to a printing

ASP service will manage corporate historical materials

consumer for proposal to our clients

PDF data with Adobe® Acrobat® eBook Reader™ but also

company over the Internet. Gone are the days when all

through digitization and database construction to dramati-

to provide a high-security function for copyright protection.

Enedo! stores used identical promotional leaflets, only tocally improve the business use of corporate information

Moreover, in addition to some 1,700 titles we have alreadyhave the product prices corrected at each store. Now each

assets. As we have already provided comprehensive

sold in two product formats – On-demand Books that are

store can utilize a database of about 400 Toho Gas

support in archiving corporate history and materials for

manufactured and shipped to order from a single volume,

products to produce its original leaflets, using pre-produced

about 1,500 companies, we now provide DualChives

and Electronic Books that can be downloaded via thetemplates for easy customization. We plan to expand

Corporate History Archives to a number of companies not

Internet in the form of digitalized publishing content – wefunctions of the new system to support the production of

only as an Intranet system, but as an ASP service by

are now introducing some 400 book titles from themarketing tools such as POP, direct mail and envelopes, as

adding systems structuring in an Internet environment. The

publisher, Chuo Koron Shinsha, and three study-software

well as area marketing and CRM development.

new service will allow users to easily utilize the database

titles from Soiku Co., Ltd. We plan to increase our titles ofsimplify the integration of a corporation’s internal informa-system for catalogs and other commercial printed

tion while improving efficiency in information archiving. In

Support system for creating materials

materials. The system includes services such as digital

addition, the service ensures advanced security withefficiently

photographing to the color management of products, theserver installation within our own Internet Data Center

configuration of product databases, and facilitating(IDC) and the use of Secure Sockets Layer (SSL)

production of printing materials in the optimal location for

protocols.

To support franchise stores producing original
marketing tools for their specific regions or clientele, DNP

maximum efficiency by transferring product data, and DTPInformation Systems Co., Ltd., a wholly owned subsidiarydata to remote locations.

of DNP, launched Self-Print (http://www.self-print.com/).

system that automatically converts university course

developed and marketed the DG Catalog Supporter forsyllabus data into XML format. Such converted information

function that fully integrates branch offices and franchise

DTP. The software designed to facilitate smooth pagination

can be applied to multiple media, including the Internet,

stores with their headquarters by processing orderand page layout design operations aims to cut lead time

CD-ROM and printed materials. Already in use at the Jikei

requests and tracking costs. Self-Print allows stores toand simplify the overall catalog production process by

University School of Medicine, the new system helps

produce ads, pamphlets, direct mail materials andadopting DNP’s DynaGalaxy, our successful merchandise

distribute the syllabi – including annual course schedules,

coupons tailored to their own region and clientele without

information database system, and taking advantage of ourreferences and grading policies – through the university’s

the prohibitive cost, while still appealing to the public withcatalog production know-how. We aim to continue aiding

Intranet and CD-ROM. As the Ministry of Education,

franchise brand names by using pre-approved templatesclient sales-promotion activities by developing systems to

Culture, Sports, Science and Technology promotes theto maintain a franchise conformity. Because real-time

simplify listing production, which constitute the heaviest

active use of university syllabi for education reform, theinformation is shared between headquarters, franchise

workload in the entire catalogue production process, andnew system will also support the anticipated diffusion of anstores, offices and sales agencies, the resulting

providing data-based oriented solutions.

inter-university credit exchange system.

managed.
We also collaborated with DNP Digitalcom Co., Ltd. to

2 0 0 3

To provide support for the DTP editing of catalogs, we

Providing service not only to the corporate world, we,along with Optimum Systems Co., Ltd. jointly developed a

The ASP service also includes a workflow management

customized market tools continue to be centrally

R e p o r t

without added new equipment costs, and will greatly

Media Create, has developed a fully digitized production

new and existing books each month.

And, to keep the history of businesses that benefit

When college students need a little break from theirfrom such services in order, our wholly owned subsidiary,studies, we also help provide comic relief. In March 2003,

DNP Corporate History Center Co., Ltd., launchedin conjunction with our wholly owned subsidiary Dai Nippon

develop a new system for leaflet production and online

Uni Process, we succeeded in constructing a fully digitalorder management. Introduced in July 2002 to some 140

production system for comic books compatible with a full

Enedo! stores that retail gas products for Toho Gas Co.,array of client production environments, including various
data formats, production software and fonts. As a result,
we are now able to switch the entire production of comic
books to a digital format, as well as construct a pre-press
system with a capacity double that of existing systems in
response to orders for new issues of comics, in either
magazine or book-form. The fully digital production will help
meet the growing demand for secondary use of comic-

D N P

book contents for overseas versions and electronic media.

D N P

A n n u a l

In addition to leaflets, DNP, in conjunction with DNPIn May 2002, we introduced Dpost, a total solution
service that allows the online viewing of phone, credit andother statements, as well as of investment reports byfinancial institutions. What is unique about our service is thatthe electronic document is prepared in the same format as
the printed version familiar to the consumer. In addition, theonline version can easily be enhanced with an electronic
leaflet that differs for each consumer, without the difficulty
involved in doing the same for the printed version. Dpost
also offers different applications suited for the corporate
sales person or customer service centers.
We, together with the U.S.-based Object Publishing
Software, Inc. and KGT Inc., also launched a new Webbased service that produces and distributes customized
catalogs. Businesses will now be able to target, personalize
and produce catalogs over the Internet prior to distribution.
Once product data are uploaded to the data storage
available with our service, branch stores and offices will beable to use the service from any Internet-ready location.
The service will also be extremely scalable, allowing
businesses to execute large quantity printing and individual
catalog production alike. Three companies have varying
roles in providing the service, with OPS providing “Object
Publisher,” a system that produces and distributes
customized catalogs over the Internet, KGT providing
technical support, system structuring and management,
Web screen designs and rule editing, and DNP structuringand managing all product information databases.
During the Christmas Season, we introduced a presentcampaign system utilizing contactless IC tags and mobile
phones. Developed with the cooperation of Direkt Planet,
the system enables the application, registration and datadistribution of gift campaigns through giveaway contactless
IC tags that attach in the form of a strap to consumers’
mobile phones. Adopted by Tokyo FM Broadcasting Co.
Ltd. in a high-profile radio campaign held at a popular plazain Tokyo’s Shibuya Mark City where a Christmas Tree stoodnext to a reception terminal embedded with a reader-writerunit for the contactless IC tag, the system allowed thecampaign registration and distribution process to go on
efficiently. The system works by sending immediate e-mailresponses to consumers’ mobile phone, which thenbecomes a marketing tool for our clients as well as a tool for
notifying the campaign winners.

2 0 0 3

Ltd., the DNP Custom Document Service allows each store

R e p o r t

year, we enhanced the product data format at our online

C o m m u n i c a t i o n

A n n u a l

I n f o r m a t i o n

3435

I n f o r m a t i o n

for supporting network businesses

promotions of DGSmart to foodstuff makers, convenience
goods makers, small and medium-sized manufacturers,
and individual divisions at major companies.

communication protocol based Platform for Omnipresent

marketing activities. We aim to expand our businesses by

In December, together with DNP Digitalcom Co., Ltd.,

has created problems of its own. One is the security ofWorkers without Expensive Resources) is a distributed

combining SAS’s advanced data mining and analysis

we commenced our Web Performance Survey Service tovideo and audio content distributed over the Internet ascomputing platform we developed to exploit idle PC clients

technologies with our marketing knowledge and customer

support the steady operation of our clients’ Web sites. The

businesses face the increased risk of redistribution throughto perform at the speed of supercomputers or dedicatedbase of about 30,000 businesses. The new partnershipnew consultant service conducts performance tests,

illegal copying. Others are the added expense in copyright

PC clusters. While supercomputers and dedicated PC

allows the efficient structuring of a CRM environment as weanalysis and evaluations on Web sites that have now

protection services and the difficulty in introducing compat-

clusters require large investments, high maintenance costs

also join the SAS Alliance to become a vendor of SAS

become part of the corporate basic infrastructure. In

ible encryption software. To address such issues, we haveand MPI engineers for application development, as well as

products and related services. It also offers an effective

addition, we provide content and campaigns that can becollaborated with DNP Digitalcom Co., Ltd. to initiate anhave problems with scalability during processing, AD-solution for SAS clients, as well as increasing profitability for

effectively employed on those sites. The Web Performance

evaluation test of real-time content data encryption through

POWERs requires minimum investments to improve totalclients that implement our CRM/DBM solutions that embed

Survey Service is a new menu item for DNP’s comprehen-

BB Galaxy, a streaming video and audio distribution service

computation processing speed by dividing large tasks into

SAS’s advanced analysis technologies.

sive Internet site Media Galaxy

that is part of DNP’s Media Galaxy. The test service was(http://info.mediagalaxy.co.jp/) and Web sites using ourdeveloped by incorporating IPCypher, developed by theInternet Data Center.

Seattle, Washington-based Widevine Technologies, in

In October 2002, we launched Network Learning, an

many computers running simultaneously on a network.

ASP service for “e-learning” that enables employees toAfter the tasks are processed, the data is transmitted backundertake company training and education via the Internet

to a central server, which assembles the results. The

As high speed and high volume are rapidly becoming
the standard in Internet connection, the broadband market

To help our clients show appreciation for their

which we have an investment. The system prevents illegal

or intranet. Adopted by Kyoiku Shuppan Co., Ltd., itshareholders, we, in conjunction with three companies

copying on a network or client PC by encrypting data inapplication can be developed using C language, and canincreases the study effect and reduces costs asfrom the Isola Group – Isola Communications Co., Ltd.,

real-time and eliminating the need for secure data

be distributed in the DLL (Dynamic Linking Library)employees receive training and education on their own

Isola Barrier Free Co., Ltd. and Advanced Intelli Space –processing before data streaming. Users are able to use

protocol to MasterWorker, a central server that dissemi-schedules and the training administrators’ workload is

jointly developed a shareholder perks system utilizing IC

the system by installing the plug-in software. The newnates tasks and assembles the results, and SlaveWorker, a

reduced. Clients are able to adopt e-learning with a shorttags and the Internet. In February 2003, it was firstevaluation test will further structure DNP’s copyright

network of PCs that processes tasks. DNP’s distributed

lead time and at low cost, as there is no need to purchaseadopted by Tokyo Theatres Co., Inc. Companies adopting

management business of video and audio data streaming.

computing software is implemented by installing thea server, and/or administration software. Because we

the system forward the Shareholder Perks Card, equipped

Security is also a concern in using e-mail, now thesoftware onto multiple hard disks. When active, aundertake the actual operation as per consultations with

with an inbuilt IC tag and bearing the shareholder’s namepreferred mode of communication for many. Focusing

dedicated screen saver appears on the screen.

the client, the system will free the training administrator toand card number, to their shareholders to whom points areprimarily on e-mail marketing, which in Japan has been

devote more time to monitoring students’ progress.

allotted in proportion to the number of shares they hold.

plagued with problems of personal information leaks, oursettlement ASP for mail order businesses, with Japan Card

Numerous companies have expressed interest in adopting

Shareholders can use their points for various services on

wholly owned subsidiary CP Design Consulting Co., Ltd.,

Network Co., Ltd. Developed by applying our experience ofthe system, and the market is expected to grow to around

offer by the company, where card readers are installed andand Current, Inc. have agreed to jointly launch a consulta-

running the OrderLine operation, the InterCat service

200 billion yen by 2005.

points are automatically deducted from the server whention business for protecting personal information in e-mailtargets all mail order services, online shopping sites, andTo meet the increased need for companies toused. To check the status of the points on the Shareholder

marketing. Current, which has obtained the Privacy Mark

companies providing membership services. InterCat greatly

construct merchandise information data bases that can

Perks Card and other information, the shareholder need

two years ago, will combine its expertise with that of CP

improves credit settlement efficiency by enabling Web-

distribute information not only in the form of printed

only check the Web site. With the development of the

Design Consulting, which has a solid reputation in

based credit settlement without Credit Authorization

catalogs and pamphlets but also over the Internet, in CD-

shareholder perks system, companies will be able toproviding consultations and education on protecting

Terminals or a dedicated line, saving time and effort in

ROM and DVD-ROM, we are now offering a rental service

increase the levels of convenience provided topersonal information. As our first joint project, we held acredit referencing and eliminating manual procedures infor such a system. Called DGSmart, the system consists

shareholders while making use of usage-data from theseminar titled, “Current Status and the System ofprocessing sales transactions, and allowing the use of theof the main functions we already provide in DynaGalaxy.

Shareholder Perks Card in their marketing activities.

Protecting Personal Information in E-Mail Marketing” in

The new rental system allows the database to beconstructed and operated at a higher speed and lower

D N P

D N P

cost. We expect the package rental for the basic set over

October 2002.

2 0 0 3launched statistical analysis and data mining services in an
Database Marketing solutions that optimize client-

In August 2002, we jointly launched InterCat, a credit

2 0 0 3Developing security solutions essential

costs, and are looking to conduct aggressive sales

effort to provide Customer Relationship Management andmany smaller tasks, all of which are disseminated to theR e p o r t

36 months to be 80,000 yen per month, excluding initial

2003, our AD-POWERs (Autonomous Decentralized

Introduced in June 2002 and commercialized in March

A n n u a l

Joining hands with SAS Institute Japan Ltd., we

R e p o r tclients’ business efficiency

CSV format when uploading data to the InterCat server.

A n n u a l

Developing systems to enhance ourC o m m u n i c a t i o n

3637

I n f o r m a t i o nparts used to process PC data on smart cards that can beat SI companies, utilizing Standard-9, the general-purpose

Developing peripheral equipment andcalled up from software developed by the Microsoft®

smart card produced by DNP, we have now developed

systems

VisualBasic® development system and Microsoft® VisualC++®

FeliCa-compatible TranC’ert for use with Windows® PCs,

development system. Because Formericc Library allows

using the FeliCa contactless smart card technology

programmers with little knowledge of smart cards to develop

developed by Sony Corporation. FeliCa, which can be

A t D N P, w e h a v e b e e n i n v o l v e d i n t h esoftware that utilizes smart cards, the middleware is usefulused to control access to specific areas or when adopting

systems, using our just-released CX210 full-color carddevelopment of smart cards at a very

when switching company ID cards and student ID cards toa cashless system at company kiosks and cafeterias, isprinter as a platform. The new series will support threee a r l y s t a g e , a n d s u c c e e d e d i n J a p a n ’ssmart cards, introducing membership smart cards for use

being increasingly adopted by companies as a corporate

contact card specifications (Standard9, MULTOS™ Card,

first smart card experiment in 1984.

with points systems at specific shopping malls, and adopting

ID card. We have thus added the new FeliCa-compatible

and Java Car) and three contactless card specifications

Having developed our own OS andsmart cards for authentication purposes in e-Government.

TranC’ert to our TranC’ert series in response to expressed(Mifare®, Type-B, and FeliCa), making DNP the first in

designed our own IC-chip modulation and

We believe the adoption of Formericc Library will lead to aneeds, and plan to market it starting June 2003.

Japan to develop a series of issuing systems thatsmart-card issuing processes, we domore rapid diffusion of smart cards.

supports six major smart card specifications. The carddeveloped include a PKCS#11 driver and CSP. In the caseprinter will print pictures, photos and letters, while datamuch more than simply manufacture theAnd, as smart cards become more popular, securityc a rd s . We p ro v i d e s m a r t - c a rd s o l u t i o n s

issues also arise. To prevent illicit use by third parties, weof the application software on Windows® PCs, either aprocessing the smart cards. Incorporating both contact

for our clients by getting involved fromhave developed DNP Standard-9 Advance-FP, a smart

PKCS#11 driver or CSP is necessary to select and utilize

and contactless functions will allow the issuing of hybrid

the initial development of our clients’card capable of authenticating fingerprints inside its IC chip.

the private key or electronic certification stored in thesmart cards. By developing this smart card issuingsystem. Being the only card vendor in the

While smart card functions are normally restricted, requiring

smart card, encrypt the SSL two-way authentication or

platform, we aim to accelerate customer needs in issuingworld to offer three OS versions of smart

a PIN code input from a PC keyboard, there is no stopping

electronic mail, and attach an electronic signature. Such aemployee ID smart cards. The system will be sold for

d e b i t c a r d s – M U LT O S , J a v a C a r d a n dillicit use once the PIN code is obtained. Existing fingerprint

PKCS#11 driver or CSP, however, were not available forapproximately 4 million yen, and we forecast sales of

Native – we have the resources to create

authentication processes also face the risk of the fingerprint

FeliCa – a problem that will be solved when our products

2,700 units in the next three years.

the perfect smart card for any client.

features being leaked when the IC-chip-stored features are

become available in the summer of 2003.
Card-manufacturing technology

read by the fingerprint sensor and processed on PCs or
In collaboration with Hitachi, Ltd., we developed two

terminals for import into the chip, where they are verified.

issuing software require complicated operations to handle
many functions, the combination of the software and CX210

In March 2003, we developed a FeliCa-compatible

will allow ID-card issuing systems to be built easily at a

new MULTOS cards in April 2002: 32K MULTOS Card

The fingerprint features cannot be extracted from thecontactless smart card that allows as many as four lines ofreasonable price. The system we offer will be the lowest

equipped with a robust EEPROM (Electrically erasabletamper-proof smart card, and the leakage of the fingerprint

text and numbers to be embossed over. Currently, only wepriced in Japan for an IC-card issuing system utilizing a dye

programmable read-only memory) memory capacity andfeatures via wiretapping and other means is totally

at DNP have that technology. Embossing that many lines –sublimation re-transfer printer for high-quality prints, at a2Way MULTOS Card incorporating contact/contactlessprevented. We have been granted an exclusive domestic

typical for a credit card – was considered difficult on a

total price of less than 2 million yen for the software, CX210,

interface on a single chip. The new cards boast a 16 bit

license covering the internal IC chip fingerprint verification

smart card without the risk of damaging the built-in IC chip

PC and flatbed scanner. We expect demand for our system

CPU core for high-speed processing and over 32KB ofsystem utilizing the Minutia type algorithm fromor antenna for wireless communication. We have applied

as companies and schools switch to issuing ID cards in-

EEPROM – more than 2 times the conventional MULTOSTechnoimagia Co., Ltd.

unique antenna design technology and simulation

house rather than ordering them from the outside.

card – and provide sufficient storage for multiple and large

Corporate data leaks seen in recent years are not sotechnology to develop a new antenna to produce a FeliCa

memory consuming applications. The new cards willmuch due to an external attack on the network as they arecard that loses none of its functionality or performancefurther expand applications and possibilities of multifunc-

to the illicit removal of data by insiders. Addressing sucheven when embossed over four-lines. Manufacturing smart

Many companies have adopted network security

tional MULTOS cards. For example, a person who

problems requires an enhancement in internal corporatecards that are completely compatible with the embossing

measures utilizing PKI (Public Key Infrastructure) in such

purchases an electronic ticket on the Internet (data issecurity administration systems. Having introduced

specifications of international brand-name credit cards isareas as file encryption, network access control and PC

stored with contact interface for ensured security) can

TranC’ert as a desktop security software aimed exclusively

now made possible by DNP.

activation control, and store electronic certification andenter a concert hall by holding the smart card in close
proximity to a card reader. The additions of 32K MULTOS
Card and 2Way MULTOS Card allow DNP to provide wider
solutions that meet varying customer needs.
To increase efficiency in the development of PC
software that utilizes smart cards, we developed middleware
called Formericc Library for OEM sales aimed at system

D N P

D N P

integrator firms. The middleware is a collection of program

Reader-writer

2 0 0 3

FP eliminates such fears by having the fingerprint features

In addition, we developed a card-issuing software for
CX210. While most of the existing, expensive ID-card

R e p o r t

Developing software and applications

2 0 0 3We launched a new series of smart card issuing

Other FeliCa-compatible network security software weread and verified on terminals. DNP Standard-9 Advance-R e p o r t

Printers

A n n u a lBusinesses Involving Smart Card, an
Essential Tool for Today’s Ubiquitous
ComputingA n n u a l

C o m m u n i c a t i o n

3839

I n f o r m a t i o npersonal data on corporate IDs integrated into a smart

product for sale, however, will be nearly as small as thelaunched the Pushkin State Museum Image Archives to

pixels for full PC screen viewing. We plan to provide thecard. While using a separate reader-writer independent of

current UbiNetPass TM after we develop devices specifi-

lend positive films, digital data and reference materials ofcontent to educational organizations and Internet

the PC as connecting the cables with each use cancally for the model.

cultural properties held by the Russian museum. DNP

providers, and the contents will also be sold by Rakuchu

Archives.com will also promote its digital archiving business

Rakugai (http:// www.anystyle.jp/rakuchu/), an on-line

Our smart-card technology is also applied to entertain-

developed a small, stick-type smart card reader-writer toment as in the case of electronic tickets for concerts andin collaboration with the museum. The new business isstore within our content marketing Web site, AnyStyle

facilitate convenience in the use of smart cards. Our smart

sports events. DNP, together with Tamura Electric Works

based on an October 2001 agreement between DNP and(www.anystyle.jp).

reader-writer is only 58x17x8.5mm in size, and at about 9Ltd., developed a contactless reader system for eTRON,

the Pushkin State Museum, and aims to structure digitalgrams, can be dangled from the neck by a strap. Also, thewhich is a micro card for installment in domestic informa-archives and promote effective applications of the

an image-licensing business overseas in an aim to promote

low-cost reader-writer has become exceptionally easy totion appliances and mobile data terminals using T-engine

museum’s assets. DNP archives.com is now engaged in

the efficient use of global cultural assets that have been

use as there is no need for a cable, and as it is recognizedarchitecture. eTRON undertakes such security operations

licensing and rental services with approximately 250

digitized by DNP in collaboration with various content

merely by connecting it to a USB port even when awayas performing two-way authentication between machines,

images (positive films and digital data) from the museum.

holders. We will initially provide digital content of artworks

from one’s desk. We have supplied security solutions,

shutting-out unauthorized control and making charges for

Our archive business also includes developing andheld by RMN to the Chinese market. Digital Image Data &combining smart cards, the reader-writer and related

the use of paid-for contents. It also carries a function

selling a digital learning tool for art classes in Japan’s

Publishing Center of Chinese Cultural Relics was

software to many clients, and are looking to market these

allowing for the safe and sure transfer of value-data, suchelementary, junior high and high school. Called Miru Art,established by DNP in 1999 to promote exposure of

as a security solution, mainly to domestic users and SI

as electronic tickets and electronic money between

the CD-ROM contains digital images of artworks held byChinese antiquities, and in 2002, our Chinese Antiquities

companies involved in network security solutions.

different eTRONs. As one concrete application, we

famous museums such as the Louvre and Musee

Image Archives began lending positive films, digital data,envisage the use of mobile data terminals to access ticketd’Orsay, and are distributed by Japan’s largest publisher

videos and reference materials of Chinese calligraphic

writer for micro-sized smart cards, this time mounted withsales sites, download electronic tickets for concerts orof art textbooks, Nihon Bunkyo Shuppan Inc. We

works, paintings, artworks and excavations. We plan towireless communication functions. The superior USB

sports events, and store them in eTRON before extracting

developed Miru Art by integrating a digital database ofdevelop our image licensing business overseas, which wasreader-writer is compact and light – 67x21x11mm and 13

them for use at the event venue.

300 world-famous paintings held by France’s Reunion desmade possible by years of our experience in the image

grams – and is used with an internally stored GSM/3GPP

Musees Nationaux (RMN). The learning tool applies aarchiving business and solid relationships with content

standard UIM size smart card (15x25x0.8mm). The systemuser-friendly format, in which students can search images

holders.

configured so that the antenna connects with reserved
terminals (C4, C8) stored within the smart card – enabling

Archives of world history and cultures
made possible by the highest digital
information processing technology

the use of the smart card merely by passing it over the

upload student artworks in the program. We plan togious organization Reunion des Musées Nationaux

aggressively market Miru Art to nationwide schools to(RMN), we have successfully opened Maison des Musées

sales of 20 million yen in the initial year.

de France(MMF) in Tokyo’s Ginza District. MMF aims atdomestic Japanese users and to SI companies while Jujothan just the storage of image

Electronics will mainly market the systems in China.

i n f o r m a t i o n . We p ro m o t e t h e e ff e c t i v eration with RMN and the Louvre Museum, launched The

museums, as well as providing broad-based information

We have also developed a concept model for ause of copyrights, act as an agent for

Louvre Museum Streaming Gallery, a service thaton French fine arts. The first business development

copyright licensing and provide

distributes high-definition still images. The service consists

dealing in French cultural assets set up outside France will
be managed by our new, wholly owned subsidiary,
Maison de DNP Ginza.

In July 2002, DNP Archives.com Co., Ltd., in collabo-

consultations. It is our goal to developof 20 titles and illustrates the reflection of artworks to thecard. It will be the latest model in our UbiNetPass

products and utilize online services tochanging times. Images and audio commentary on 165(Ubiquitous Network Passport) TM series of UIM-sizes h a r e o u r w o r l d ’s c u l t u r a l a s s e t s o n a

artworks and 47 reference items will allow users to enjoy

equipment for smart cards. Featuring a USB connector,

global scale, fit for the digital era.

the collections held by the Louvre Museum. While digital

wireless communication adapter, liquid crystal display and2 0 0 3de France (DMF), and in partnership with the most presti-

D N P ’s a r c h i v i n g b u s i n e s s p r o m o t e s m o r e

an internally stored GSM/3GPP standard UIM size smart

R e p o r t

Finally, with the support of the Direction des Musées

viewing, compare different artworks, bookmark, andreader-writer. We will market these systems mainly tomobile, multi-function UIM-smart card reader-writer withintroducing and promoting French art galleries and

Hi-Vision (1,920 x 1,035 pixels) content also supports
DNP Archives.com Co., Ltd. is our wholly owned

devices and is slightly larger than a credit card. The actualsubsidiary that specializes in digital content. In April 2002, it

high-definition large-screen displays and BS digital
broadcasting, the images are converted into 960 x 518

D N P

a fingerprint sensor, the concept model combines existing

D N P

A n n u a l

by genre and keywords, enlarge images for up-close

2 0 0 3

with a built-in antenna for wireless communication isR e p o r t

Again with Jujo Electronics, we developed a reader-

DNP and DNP Archives.com Co., Ltd. have developed

A n n u a lbecome cumbersome, DNP and Jujo Electronics have

C o m m u n i c a t i o n

4041

L i f e s t y l e

a n d

I n d u s t r i a l

S u p p l i e s

Press

Lifestyle and Industrial Supplies

Today, the individual doesn’t simply look to fulfill his or her needs for food, shelterand clothing, but pursues true fulfillment in ensuring that materials are environmentallyfriendly and people-friendly. To realize an emergent evolution and fulfillment in society,we at DNP are always working with our technologies built on the art of printing toprovide environmentally friendly products and services for the individual’s better
health, safety and comfort. Along the way, high-precision film products associatedwith information, communication and electronics were added to our line of Lifestyle
Products. The former business field of packaging and decorative materials is now
referred to as Lifestyle and Industrial Supplies.

In Japan, where many types of food such as curry andpasta sauce come in ready-to-heat retort pouches,
consumers had long wished that they could microwave thepouches directly instead of having to heat them in boilingwater or empty the contents into another container for
microwaving. Because these retort pouches were generally
made using aluminum, however, they were not suitable formicrowaving for fear of generating sparks. At DNP, we havefinally found the solution in the form of Un-touch Thru Wing
Retort Pouch. Despite using see-through, non-aluminummaterials, our new pouch protects the contents to retain theirfreshness and quality for a long period. What’s more, thepouch is designed with a special wing-shaped seal that
retreats when heated to reveal a vent for steam. In addition to
curry and pasta sauces, the pouch can be used to pack stew,
shark’s fin soup, egg flower soup and other liquid food aswell. Demand for such food in a microwavable retort pouch is
growing along with the number of working women in Japan.
We aim to expand the sales of Un-Touch Thru Wing Retort
Pouch to 300 million yen a year.
For foods such as candy, sugar, grains and flour thatgenerally are not microwaved, there is another problem: pests
that get into the food by penetrating the packaging or after the
consumer opens the package. In conjunction with Meiho Art,
we also solved this issue by developing a food package that isharmless to the human body but repels pests. Unlike insecticides that can be harmful to humans or conventional repellentsthat have a strong odor, our newly developed Bioprint uses avolatile repellent based on natural food additives and envelopes
them in hollow porous micro-capsules made from silica. The
effect lasts for about six months as the insect repellent isgradually secreted from micro-capsules, which suppress theodors of the repelling food additives. DNP’s printing technology
was fully utilized to disperse Bioprint by way of printing ink andsurface coating agents. We are also working to develop a
repellent that lasts longer, from the time the food is in distribution to the time it sits in the pantry at home.
In October, we added two items to our family of zippered
packaging products: V-zip System, the first packaging andfilling machine made in Japan that attaches zippers inline, andKochakku Pouch, a uniquely shaped zippered packaging. Vzip System was built domestically applying our originaltechnology, based on a license granted by U.S.-based ZipPak. Aimed at food manufacturers hoping to cut costs by
taking on more of the packaging process at their own plants,
the V-zip System is expected to generate 350 million yen insales revenue over the next three years. Kocchaku Pouch, on
the other hand, is a pouch with a zippered spout that can be
filled using general filling machines at food manufacturers. We
expect Kochakku Pouch to bring in 600 million yen in sales

over the next five years.
As a step toward further enhancing our packaging
operation, we acquired Ace Package Co., Ltd., a wholly
owned subsidiary of Ajinomoto Co., Inc., in March 2003. The
addition of Ace Package into the DNP family secures
packaging manufacturing facilities for gravure printing, alongwith highly skilled technical-staff.
In addition to addressing building-relatedillness concerns and environmental issues,
our Decorative Materials businesspromotes unique designs and ideas.
In Japan where interior designs are typically monochromewith no colorful patterns, we, together with DNP Archivecom,
succeeded in developing and marketing wallpaper andcurtains bearing works of art by Pissarro, Renoir, Monet andSeurat, laid out in digital-design patterning. The housingmaterials, called Artist Touch, feature the portion of worldfamous works of art that most fully represents the artist’s
unique touch. They are now available at Penta-kun Home
Department Store, a home-improvement store managed by
Painthouse Co., Ltd. By introducing Artist Touch, which fully
exploits DNP’s decorative materials, printing technology andexpertise and DNP Archivecom’s featured artworks, we hopeto add a little more color and design to Japanese homes.
Our film processing technology has now
expanded to a new business field:
Industrial Supplies.
As demand for big-screen LCD TVs and PDP TVs is
expected to surge, we have developed a new type of lowcost anti-reflective film for such screens. Until now, theanti-reflective film used in big-screen high-definition TVs andPC monitors consisted of several layers of film, using dry
coating over the base film which in turn was hard-coated toprevent scratches. The complexity of the entire process madethe finished product expensive. To address this issue, we
extended our gravure printing technology to fine technology,
developed original ink and established the revolutionary wetcoating process to accomplish the difficult feat of creating ahigh-performance anti-reflective film at about one-third thecost of existing film. We expect sales of 2 billion yen for the
first year of marketing this film, followed by 8 billion yen for the
fiscal year ending 2006.
2 0 0 3The keywords in packaging are “environment” and “universal design.” DNP
develops technologies to meet consumer
needs with precision.

R e p o r t

theA n n u a l

Off

D N P

Hot

43

E l e c t r o n i c s

Hot

Off

the

Press

Electronics

We respond to the rapid changes in thesemiconductor product market througha select-and-prioritize process.
In our photomask business, we have

We a i m t o e x p a n d o u r e x i s t i n g p r i n t e d circuit business by modularizing theboards, and create new markets throughnew technologies.
A new essential item at DNP in the semiconductor

secured corporate partners that arecircuit business is the ultra-thin high-density buildup

leaders in their fields.

substrate for cutting-edge semiconductor packages.
Despite featuring an even higher-density circuit, thesubstrate we developed is less than 1/5 the thickness ofGeneva-based STMicroelectronics for the development

existing buildup substrates, making it a perfect candidate

and supply of leading-edge and high-end photomasks,

for semiconductor package interposers. We were able towhich are critical components in the manufacture of siliconrealize the significant reduction in board thickness by

integrated circuits. Through this agreement, we will be

adopting a unique coreless structure in which only thecreating a new company called DNP Photomask Europe inbuildup layers were used, after removing the metal boards

Italy. In addition, we will be STMicroelectronics’ primaryon which they were initially formed. We will continue

photomask supplier, developing new photomasks that willdeveloping even thinner substrates as mobile devices thatbe seamlessly integrated into ST’s wafer fabrication

adopt semiconductors require more chips and pins inprocesses. The alliance will also greatly strengthen oursmaller spaces.

presence in the worldwide photomask market. The new

Two technologies we developed in the past year

plant will be DNP’s first photomask production site outside

include patterning technologies, both of which utilize

Japan and it will not only optimize delivery of photomasks

photocatalytic characteristics to decompose organic

to ST production sites in France and Italy, but will also

matters. Thanks to these technologies, micro-detailed

position DNP to better serve Europe’s high-end

patterns can now be formed on glass circuit boards in aphotomask market.

short period, exposing it to ultraviolet ray using a

Domestically, we have formed a partnership with Hoya

photomask. There is a wide range of applications for these

Corporation to develop photomask blanks for next-

technologies, including color filters and micro lenses, as

generation semiconductors. The partnership allows DNP,

well as DNA and chemical chips that are expected to drop

the world’s largest photomask maker, to establish ain prices in the near future.

system that provides the global semiconductor market
with photomasks that have incorporated leading-edgemask blanks from Hoya. We plan to provide photomasks
according to Hoya’s technology roadmap, and expand ourleading-edge photomask business in a market set to

A n n u a l

R e p o r t

2 0 0 3

rapidly expand.

D N P

In a society undergoing emergent evolution, the information electronics industry
provides the hardware for growing info-communication needs. At DNP, we havemastered the field of display and semiconductor products and taken it to a newheight by taking advantage of our microfabrication technology fostered through ourprinting business. In the field of semiconductors, we provide high-performance, newfunction products using our nano-patterning technology. Our aim is to create a newmarket through technology synergy. In the field of display products, we keep a close
watch on the market, responding quickly and accurately to the rapidly diversifying
product usage.

In May 2002, we formed a strategic alliance with45

E l e c t r o n i c s

We keep a close eye on the market
trend of Display Products. Our response
is quick and accurate as reflected in ourequipment adaptation and newtechnology developments.

We also developed a color filter that significantly
boosts the brightness and image-quality of liquid crystal
displays. This was achieved after much trial and error. In
order to achieve purer color, it was originally necessary toincrease the thickness of the color filter’s color film.
However, this produced the problem of reduced contrast

The collaboration of DNP’s worldleading hologram technology andinformation communication technology
has set the stage for the next generationin presentations.

positioning that cannot possibly exist in real space.
VirtualGram is perfect as a counterfeit-prevention tool for
cash vouchers, credit cards, ID cards and certificates, inaddition to being an anti-piracy measure for brandproducts, and an enhancement in the branding of gamesoftware, CDs and printed materials.

and brightness. We have successfully overcome theseconflicting problems by developing a revolutionary color

Hologram screens, displayed on clear, glass surfaces,

In July 2002, DNP Electronics America’s new California

material from scratch – the pigments. The merits of using

have recently become the projection system of choice forplant began operating at full-scale to produce rear-projec-

the new color filters that employ the purer spectral color

many when giving presentations and in showrooms,

tion TV screens. Demand for rear-projection TV screens ismaterial include achieving a 100% reproduction of thesimply for the elaborate, mysterious image it creates with

rapidly growing at a global scale, including not only incolor range established by National Television System

the illusion of floating in mid-air. To add even more of a

North America but also China, South Korea and otherCommittee, 10% improvement in brightness and 20%

distinguished air to the hologram images, we at DNPAsian regions except for Japan. The addition of our

improvement in contrast when compared to our existingdeveloped the Holo-Screen System with Sensor. Using our

American plant to our screen plants in Japan andcolor filters. The sample shipments of the color filters using

system, a presenter can interactively “touch” theDenmark brings our total annual production capacity to

the new color material began in spring 2003.

holographic image – using a reflector panel discreetly
touch panel in mid-air to operate the images. This ismarket, which currently stands at 60%.

ible for use in the large LCD panel assembly process

break-through technology as existing hologram screenscalled the one-drop-fill process, which has made panel-

use a short-distance sensor that required a frame around

manufacturing lines highly efficient. The new color filter has

the screen to interact with the images, which, of course,

We succeeded in developing a new LCD color filter

high elastic deformation columnar spacers with improved

take away the feeling of the image floating in mid-air.

that can accurately reproduce all 928 colors prescribed inproperties, realizing the ideal, rigid yet elastic spacer. In

Consisting of a hologram screen, a long-distance sensor

ISO12642. By enabling color reproduction on LCD

fact, the elastic deformation rate of the new spacer is 1.4

utilizing infrared-light-emitting diode, a PC for control and ascreens at levels equivalent to printed matter, the newtimes higher than existing spacers while its plastic

projector, the Holo-Screen System with Sensor iscolor filter can expand the market in fields using highdeformation is limited to less than 1/4 the existing ones. In

scheduled to be priced at 6 million yen for a 60-inch

resolution displays, such as e-commerce, content produc-

addition, the new color filter is significantly more reliabletion support, digital archives, remote health-care andwith liquid-crystal materials and is compatible with high-education. Apart from being able to reproduce existing

speed-response liquid-crystal materials. We have applied

natural shades, the new color filter also makes it possible

for patents in Japan and abroad for the new color filter.

screen and equipment.
Naturally, after the hologram screen, we took
holograms to the next dimension: 3D. We developed theworld’s first technology for recording computer-generated
three-dimensional graphics in a three-dimensional
hologram format. Branded VirtualGram, the holograms
created in this process have been marketed since April
2003. Unlike existing holograms that use dedicatedgraphic equipment to optically film three-dimensional
objects and create a negative, VirtualGram is a threedimensional image created using computer graphics,
which enables the hologram recordings of threedimensional objects with complicated figurations or

2 0 0 3

In October 2002, we agreed to make an 80% invest-

seen in computer graphics. We are proud to have cooper-

ment in Advanced Colortech Inc. (ACTI), the third largest

ated with Stanley Electric Co., Ltd., a maker of backlights,

company in the LCD color filter manufacturing and sales

to incorporate its technology on color and optical control

industry. ACTI’s original color-filter manufacturingwith DNP color design and pigment distribution

technology is the most promising technology in thetechnology. Collaborating on our common technology inindustry, where products continue to increase in size. Bycolor and light design, we were able to develop an epochmaking our investment, we have added ACTI to ourmaking color filter in answer to the need for across-the-corporate family, in the process becoming the company

board color reproduction.

with the highest manufacturing capacity of 3.5 generationor later large color filters. The investment also has put us
at a technological advantage in developing newer generations of color filters. We aim to be a leading company inthe industry by expediting technological developments for

D N P

D N P

larger and high-performance LCD color filters.

2 0 0 3

with high elastic deformation columnar spacers, compat-

to faithfully reproduce the kind of synthesized hues often

R e p o r t

attached to the fingertip or a pointer – as if there were aincrease our share of the world’s rear-projection TV

Color Filters

A n n u a l

Another color filter we successfully developed is one

R e p o r tmore than 3 million screens. This will allow us to further

A n n u a l

Rear-projection TV Screens46

47

G o v e r n a n c e

GovernanceImproving Corporate Governance

Board of Directors (as of July 1, 2003)

We believe improving corporate governance is a management priority in order for the
DNP Group to act in accordance with the law and social ethics, contribute to society
as a good corporate citizen and realize our management philosophy.
Our board of directors consists of 36 directors, including an outside director. In
addition to making executive decisions on key business issues, the board oversees
the status of duties as executed by each director, and meets once a month inprinciple.

Yoshitoshi Kitajima

Ryozo Kitami

Kenichi Nakamura

Taira Takahashi

Koichi Takanami

Chairman of the Board
President and Chief Executive
Officer

Senior Managing Director

Senior Managing Director

Senior Managing Director

Senior Managing Director

Satoshi Saruwatari

Masayoshi Yamada

Mitsuhiko Hakii

Masakazu Sato

Kuniaki Kamei

Senior Managing Director

Senior Managing Director

Senior Managing Director

Managing Director

Managing Director

Osamu Tsuchida

Noriaki Nakamura

Teruomi Yoshino

Hiromitsu Ikeda

Kosaku MoriManaging Director

Managing Director

Managing Director

Managing Director

Managing Director

Hironori Kato

Yukio Togano

Masahiko Wada

Director

Director

Director

Toshio Kawada

Jyunjiro Inoue

Tetsuji Morino

Director

Director

Director

Hidenori Nokubo

Kazumasa Hiroki

Takashi Toida

Director

Director

Director

Tadashi Okubo

Yujiro Kuroda

Tatsuo Komaki

Director

Director

Director

Yoshiyuki Nakagawa

Tatsuya Nishimura

Shigeru Kashiwabara

Director

Director

Director

Chugen Kakuno

Itsuo Totsuka

Kunikazu Akishige

Director

Director

Director

Kenzo Isumi

Yoshinari Kitajima

Managing Director

Managing Director

Tadao Tsukada

Shizen Sasaki

Director, outside of the company
former Tokyo Institute of Technology Professor
Meiji University, School of Science & Technology Professor

Standing Statutory Auditor, outside of the company
The Dai-Ichi Mutual Life Insurance Company
Corporate Planning Department
General Manager

Jitsuo Okauchi
Minoru Yoneda

Statutory Auditor, outside of the company
Tokyo High Public Prosecutor's Office
Former Superintending Prosecutor
The Fair Trade Commission
Chairman

D N P

Standing Statutory Auditor

Yasuchika Negoro

D N P

A n n u a lStanding Statutory Auditor

R e p o r t

R e p o r t

2 0 0 3This fiscal year, as part of our commitment to establish a system in which we proactively
incorporate outside views in the management of our business, we elected an outsideadviser for the first time, in addition to electing an outside director. In June 2002, werevised our Dai Nippon Printing Group Action Charter formulated in 1992 to reflect thecontents of our 21st Century Vision, and renamed it the DNP Group Action Charter.
Furthermore, in our aim to improve our legal compliance system, in October 2002, weestablished the Open Door Room to encourage our employees to discuss issues.

A n n u a l

Our committees such as the Corporate Ethics Action Committee, Environmental
Committee, Product Safety Committee, Information Security and Privacy Protection
Promotion Committee respond to their respective issues in our aim to become acompany trusted by the public. In addition, the committees are involved in providing
DNP employees with group training and network-based compliance education todrive home the virtues of legal compliance.

2 0 0 3

Our board of auditors consists of four auditors, including two outside auditors.
Auditors are present at every meeting of the board of directors. Neither the outside
director nor the outside auditors have an interest in our company.

48

49

M a j o r

S u b s i d i a r i e s

a n d

A ff i l i a t e s

Capital(Millions of yen)

Ownership ratio(%)

Dai Nippon Art Co., Ltd.

Production of drafts for photoengraving

80

100.0

Dai Nippon Printing Kenzai Co., Ltd.

Photoengraving, printing and processing

200

100.0

DNP Graphica Co., Ltd.

Printing and bookbinding

100

100.0

I.M.S. Dai Nippon Co., Ltd.

Printing of TTRs and ST materials

100

100.0

Dai Nippon Cup Co., Ltd.

Molding and processing of paper containers

80

100.0

DNP Advanced Industrial Supplies Co.,Ltd.

Production and sales of optical films for displays

100

100.0

Dai Nippon Ellio Co., Ltd.

Printing and processing of steel and other metal plates

300

50.0

Kyoiku Shuppan Co., Ltd.

Publishing

60

48.3

Dai Nippon Hoso Co., Ltd.

Filling and processing of packages

80

100.0

Hokkaido Dai Nippon Printing Co., Ltd.

DNP Information Systems Co., Ltd.*

Planning, designing, development, management,
and operation of information systems

Photoengraving, printing, bookbinding and production related
to packaging

93

99.5

100

100.0

Tohoku Dai Nippon Printing Co., Ltd.

Dainippon Jushi Co., Ltd.

Production and processing of composite resins

380

100.0

Photoengraving, printing, bookbinding and production related
to packaging

82

99.7

Tokai Dai Nippon Printing Co., Ltd.

Photoengraving, printing, bookbinding and production related
to packaging

Dai Nippon Kaihatsu Co., Ltd.

Real estate sales

250

100.0

120

100.0

Dai Nippon LSI Design Co., Ltd.

Logical circuit designs for ICs and LSIs and layout designs

100

100.0

Kyushu Dai Nippon Printing Co., Ltd.

DNP Data Techno Co., Ltd.

Production and sales of plastic cards with magnetic stripes,
IC chips and others

Photoengraving, printing, bookbinding and production related
to packaging

380

100.0

100

100.0

Shikoku Dai Nippon Printing Co., Ltd.

Photoengraving, printing and production related to packaging

50

97.0

Dai Nippon Offset Co., Ltd.

Offset printing

200

100.0

Multi Print Co., Ltd.

Photoengraving, printing and bookbinding

100

100.0

Dai Nippon Polymer Co., Ltd.

Molding, processing and printing of plastic containers

100

100.0

Sagami Yoki Co., Ltd.

Production of laminated tubes

200

90.0

Dai Nippon Printing Accounting System Co., Ltd.*

Accounting and consulting services

30

100.0

SP Dai Nippon Co., Ltd.

Planning and production of promotional materials

80

100.0

25

100.0

Dai Nippon Printing Fine Electronics Co., Ltd.

Production of high-precision components

300

100.0

NexantiS Corporation*

Sales of security related software and products

Dai Nippon Printing Precision Device Co., Ltd.

Production of high-precision components

300

100.0

The Inctec Inc.

Production and sales of ink, varnish, pigments and dyes

D.T. Fine Electronics Co., Ltd.

Production and sales of semiconductor related components

490

65.0

Trans Art Inc.*

D.T. Circuit Technology Co., Ltd.

Development and production of semiconductor related components

1,000

50.0

Advanced Colortech, Inc

Production and sales of color filters for LCDs

5,000

80.0

DAP Technology Co., Ltd.

Production and sales of PDP back plates

3,000

DNP Corporate History Center Co., Ltd.*

Planning and production of corporate hisotory archives

50

Dai Nippon Printing Technopack Co., Ltd.

Photoengraving and production of packaging

300

100.0

2,000

83.3

Procurement and sales of art objects

50

100.0

DNP Archives.com Co., Ltd.*

Planning, producing and sales of art objects and contents

200

100.0

Maison de DNP Ginza Co., Ltd.*Sales of Maison des Musées de France art products

60

100.0

50.0

Uzumine Country Club Co., Ltd.*Management of golf courses

33

88.8

100.0

Shiobara Green Village Co., Ltd.*Management of leisure facilities

200

99.6

DNP Holding (USA) Corporation

Holding company(US$1,000)
100(100.0)100.0

DNP Corporation USA

Holding company(US$1,000)
33,581(13.3)
100.0

DNP America, LLC

Sales of publications and precision electronic
components, decorative interiors(US$1,000)
100(100.0)100.0

Dai Nippon IMS (America) Corp.

Processing of TTRs

(US$1,000)
20,000(100.0)100.0

DNP Electronics America, LLC.

Manufacturing and sales of precisionelectronic components(US$1,000)
15,045(100.0)100.0

DNP Denmark A/S

Manufacturing and sales of precisionelectronic components(DKr1,000)
135,000

100.0

DNP Photomask Europe S.p.A.

Production and sales of hi-precision components(Euro1,000)
25,00081.0

Dai Nippon Printing Technopack Kansai Co., Ltd.

Photoengraving and production of packaging

200

100.0

Dai Nippon Printing Technopack Yokohama Co., Ltd.

Photoengraving and production of packaging

200

100.0

DNP Technopack Tokai Co., Ltd.

Photoengraving and production of packaging

430

100.0

Dai Nippon Seihon Co., Ltd.

Bookbinding

200

100.0

DNP Facility Service Co., Ltd.

Management and operations of buildings and welfare facilities

100

100.0

DNP Trading Co., Ltd.

Sales of paper and other products

100

94.3

Dai Nippon Techtas Ichigaya Co., Ltd.

Bookbinding

80

100.0

Dai Nippon Total Process BF Co., Ltd.

Photoengraving and machine plate activities

80

100.0

Dai Nippon Total Process Ichigaya Co., Ltd.

Photoengraving

100

100.0

Dai Nippon Uni Process Co., Ltd.

Photoengraving

80

100.0

DNP Logistics Co., Ltd.

Packaging, shipping operations and warehouse management

626

100.0

Direc Co., Ltd.

Sales of publishing and educational equipment

96

55.0

D.N.K. Co., Ltd.

Manufacturing and sales of printing equipment and machine tools

100

100.0

DNP AV Center Co., Ltd.*

Planning, production, editing and sales of movies

100

100.0

DNP Digitalcom Co., Ltd.

Planning and production of digital media contents

100

DNP Human Service Co., Ltd.*

Planning, management and data processing activities related
to personnel plans

Dai Nippon Printing Co. (Hong Kong) Ltd.

Photoengraving, printing and bookbinding(HK$1,000)
225,000

(2.4)
99.5

Dai Nippon Printing (Taiwan) Co., Ltd.

Sales of display and semiconductor related components(NT$1,000)
10,000

100.0

100.0

P.T. Dai Nippon Printing Indonesia

Photoengraving, printing, bookbinding andproduction related to packaging and sales(US$1,000)
26,000

51.0

90

100.0

Tien Wah Press (Pte.) Ltd.

Photoengraving, printing and bookbinding

Planning, production, photoengraving and machine plate activities

100

100.0

(S$1,000)
4,140

(6.0)
100.0

DNP Media Create Kansai Co., Ltd.

Planning, production, photoengraving and machine plate activities

200

100.0

DNP Space Design Co., Ltd.*

Planning, design and creation of shops, exhibition booths
and other commercial spaces

100

100.0

DNP Techno Research Co., Ltd.*

Studies related to patents and the preparation of contracts

20

100.0

2,935

(3.2)
58.6

MyPoint.com Japan Co., Ltd.

Marketing system planning and operations for Internet advertisements

1,520

85.6

DNP Media Create Co., Ltd.

Beverages
Hokkaido Coca-Cola Bottling Co., Ltd.

Manufacturing and sales of soft drinks*Non-consolidated subsidiary or affiliate

R e p o r t

Printing

A n n u a l

2 0 0 3R e p o r t
A n n u a l
D N P

50

Ownership ratio
(%)

D N P

Capital(Millions of yen)

Printing

2 0 0 3Major Subsidiaries and Affiliates

51

Management’s Discussion and Analysis

INTRODUCTION[Beverages]

GeneralCola Bottling Co., Ltd.

We engage in the business of the Hokkaido CocaDNP is a comprehensive provider of solutions that uses
printing and information technologies. We offer products

In this Management's Discussion and Analysis section,and services in a wide range of areas including printing,“DNP” refers to our entire Group consisting of Dai Nippon

information media, industrial supplies and electronic

Printing Co., Ltd., 72 consolidated subsidiaries and 8 affili-components. With them, we serve customers far and wide,

ated companies included in this annual report. “We,” “us”

from Japan to the rest of the world. Currently, we are theand “our” refer to DNP or the DNP management.

world’s No. 1 comprehensive printing company in terms ofsales, and a leader in a variety of fields that use printing
technology, such as electronics and security.
The following are DNP’s three consolidated segmentsin the printing business, as well as its beverages business.

Forward-looking Statements
Words used in this annual report such as “believe,”“anticipates,” “estimates,” “expects” and variations ofthese words or similar expressions, as well as all numbers
for future earnings, are forward-looking statements that

Consolidated Segments

make use of all information available to the management at(%)

the time of the creation of this annual report and manage-

Beverages
5.5%Electronics
15.9%

ment’s best judgment. The statements are not historical
Information
Communication
46.7%

facts. Our actual earnings in the future may differ greatly
from these estimates and forecasts due to uncertainties inthe environment and various risks that are mentioned later

Lifestyleand Industrial
Supplies
31.9%

in this annual report.
These forward-looking statements were deemed
reasonable by the management at the time of the creationof this report; sufficient caution must be exercised in[Printing]making investment decisions on the basis of these

Information Communication: In this segment, westatements. In addition, we have no legal requirement toprovide services in printing, digital media and content

update information relating to these forward-looking

production, or in combinations of the three. No matterstatements in the future with the newest information or towhat the medium, we offer the most effective and efficientpublicly announce revisions.

solution for our clients to deliver information to theirthat talent to make and sell decorative materials and lifestyle
products that are environmentally friendly. This is anotherfield where DNP has gained acclaim for helping to enrichpeople’s lifestyles today and into the future. We produce adiversified line of products including printer ribbons andoptical films for liquid-crystal displays, and have the world’s
top market share for many of these products.
Electronics: DNP in this segment applies the world’s

raise DNP’s corporate and shareholder values.
This goal cannot be met without creating newcustomer values so that we can constantly generatevalues for our society and all DNP stakeholders. Above all,we believe that the goal can be achieved by developing
outstanding technology that is useful to society, providing
original products and services, and aiming to contribute tosocial prosperity and the happiness of all people withwhom we are involved.

most advanced micro-fabrication technology to make andHowever, for DNP to experience further growth in thesell a variety of electronic products, including photomasks,

dramatically changing world of the 21st century, we also

which are a key component in semiconductor manufac-

need new business strategies fit for the times. We need toturing, and color filters for liquid-crystal displays.

make a company-wide resolution to embrace diversity and2 0 0 3develop superior technologies. In this segment, we apply

The goal of the management is to guide DNP into
long-term growth and strategically increase cash flow to

R e p o r tLifestyle and Industrial Supplies: DNP has the talent to

Our Principles

A n n u a lcustomers.

D N P

Financial Section

53

M a n a g e m e n t ’s

technologies that we have cultivated and lead the world inages alliances between the companies.

– printing and information. We will build technologies that

Last fiscal year, the DNP management establishedothers can only dream of, and provide our customers with

“DNP: P (Printing Technology) & I (Information Technology)

a wide array of solutions.

Solutions” as the phrase that conceptualizes the DNPGroup’s Vision for the 21st Century. We are clearly defining
our future as one that can be achieved through a

RESULTS OF OPERATIONS

switchover into the business of providing solutions.
Meanwhile, we began implementing emergency cost-

Business Environment

reduction measures beginning in the latter half of the

The Japanese economy this fiscal year remained in aprevious fiscal year. This fiscal year, despite being affectedharsh condition with no signs of a recovery. In addition to

by 800 million yen due to a 10% increase in the prices ofthe sluggish consumer spending and reduced capitalraw materials for printing paper, we were able to achieve a

investment, deflation continued to advance.

cost reduction total of 34.2 billion yen consisting of 5.6

which consists of information communication, lifestyle andcosts, 4.3 billion yen in personnel expenses and 22.4

This fiscal year, due to weakened demand and a drop

industrial supplies, and electronics, the business environ-billion yen in manufacturing costs, far exceeding ourin unit order prices caused by intense competition, our net

ment continued to be a challenging one due to a drop in

annual projected reduction of 27.5 billion yen.
As for capital investment, while we aggressively
invested in our strategic fields such as equipment forphotomasks and projection TV screens, as a rule, we only
invested to renew equipment as we promoted the use ofexisting equipment in other fields. As a result, we wereable to reduce capital investment significantly.
Our capital investment this fiscal year amounted to73.7 billion yen, down 11.3 billion yen from the previous
year. In addition, our depreciation costs also dropped by
5.6 billion yen to 89.2 billion yen.
In continuing on our staff reduction plan launched lastyear, we do not encourage early retirement but reduce
staff naturally by putting a hold on new hires and throughage-based mandatory retirement.
Although the number of our employees on a consolidated base increased by 314 from the previous year due
to an alliance with another company in the electronics field
and a newly established Internet-business company, thenumber of staff in our existing fields dropped by 975,
meeting our goal.
Our target for staff reduction was 2,000 by March
2003 from the September 2001 figure of 34,089. We wereable to reduce a total of 2,118 employees from ourexisting fields by March 2003, having reduced 1,143 byMarch 2002 and 975 by March 2003. This resulted in acost reduction of 1.9 billion yen this fiscal year.
Our overhead costs were reduced by 4.3 billion yen
due to our continued efforts at work efficiency using

sales decreased 2.9 billion yen, or 0.2%, from the previous

2003.3

Net Sales (in millions)¥ 1,309,002

2002.3¥ 1,311,934

2001.3¥ 1,342,035

Gross Profit Margin

20.3%

18.4%

18.7%

Operating Income Margin

6.9%

5.5%

6.4%

Income Before Income
Taxes (in millions)¥

Net Income (in millions)
EPS

Primary
Fully diluted

42,244¥

28,774
¥

37.80
37.67

26,150¥15,609¥20.55

69,11633,409

¥

20.53

43.99
43.45

We view the 21st century as an era of “Emergent
Evolution” in which people with diversified values stimulate
each other in an energizing process to create new values.
To build a corporate culture of emergent evolution, we
have formulated the DNP Group’s Vision for the 21st

D N P

A n n u a l

R e p o r t

2 0 0 3

Century to clearly define our business vision and action

54

guidelines, and continued to further reform our businessand structures.
We applied two types of solutions — production
solution and business design solution — to reform ourbusiness structure with the aim of expanding our businessfield and providing new values and profits for ourcustomers. The solutions were based on the DNP Group’s
Vision for the 21st Century to create a new form of businessthat tactfully offers goods and services demanded by the

1200

900

600

300

0
99

00

01

02

03

Cost of Sales
Cost of sales this fiscal year decreased 27.7 billion

billion yen in depreciation costs, 1.9 billion yen in labor

Overview

1500

As a result, our operating income margin increased 1.4
points to 6.9%.

In the business of printing, our strategic operation,

overall printing demand and declines in unit prices.

(¥ Billion)

Net Sales

year to 1,309 billion yen.

yen, or 2.6%, to 1,043.5 billion yen. Cost of sales to net
sales also decreased, from the previous year’s 81.6% to79.7%.
Reasons for the decrease include the reduction in
depreciation costs and manufacturing costs, as mentioned

Despite a significant increase in the sales of smart

earlier. Launched this fiscal year to reform our costcards and IPS (information processing service) such as

structure, The Action of Production 21st raised thepersonalized direct mail and bills, net sales this fiscal year

awareness of those engaged in manufacturing to makefor our information communication segment decreased

profits and to avoid waste.

6.0% from the previous year due to a decline in the sales

The Action pushed to improve production technologyof periodical magazines, points of purchase forthrough a joint effort between the research center andcompanies, catalogs, flyers, pamphlets and forms. In oureach manufacturing division to implement a drastic costlifestyle and industrial supplies segment, however, sales

reduction.

increased by 2.2% over the previous year despite thelackluster sales of paper containers and cups, ink ribbons

Gross Profit Margin(%)

and decorative materials for domestic shipment. Thosethat contributed to the sales increase for the segment
were decorative materials for export, large sterile filling25

20

system for beverages, pre-forms for manufacturing PET(polyethylene telephthalate) bottles, soft packaging
materials, optical films for liquid-crystal displays such as

15

10

films for deflecting plates and electrodes for lithium-ion
rechargeable batteries. Sales increased 17.8% over the5

previous year in our electronics segment due to0photomasks, liquid-crystal color filters, projection screens

99

00

01

02

03

and shadowmasks being in good demand. In ourbeverages segment, sales decreased by 1.7% from theThrough this Action, we not only improved our produc-previous year due to unfavorable weather in Hokkaido

tion yield and cut down on lead time, but also reduced

during the high-demand season.

inventory of products and inventory assets to raise our

As a result of this significant increase, overall net sales
at DNP remained at about the same level, decreasing everso slightly from the previous year.

competitiveness.
For decorative materials, we shut down one plant outof the three and consolidated production at the remaining

2 0 0 3of strength and by cultivating an environment that encour-

Net SalesR e p o r t

DNP management, believe in the fusion of the two

information technology, and cutting back on variable
expenses through enhanced budget management.
Our achievement in reducing manufacturing costs was
especially remarkable this fiscal year. Due to our commitment to our Action of Production 21st launched by theentire DNP Group last April to reduce unutilized materials,
work in progress, inventory and time spent on arrangements and adjustments, as well as to our improved
production efficiency accomplished by downscaling
production facilities for decorative materials andelectronics such as shadowmasks, we were able toreduce 22.4 billion yen in manufacturing costs.

A n a l y s i s

A n n u a lmarket by focusing each company’s resources in its areas

a n d

D N P

use different values to help us grow. This is why we, theD i s c u s s i o n55

M a n a g e m e n t ’s

two plants. In our electronics segment, we scaled backNet Income

Operating Income Margin(%)

the facilities for shadowmasks and lead frames to improve
production efficiency.

(¥ Billion)

1500

also led to an increase in our return on equity, from1200

6

1.65% to 3.02%.

4

in the previous fiscal year to 37.80 yen, and diluted net

reduce costs while the electronics segment increased

Our net income per share also increased from 20.55 yen

costs by 22.4 billion yen, which directly reflected on our
cost of sales.

A n a l y s i s

Sales in Printing Operation

84.3% from the previous year to 28.8 billion yen. This8

earnings. Overall, DNP was able to cut manufacturinga n d

As a result of the above, our net income increased

A look by segment reveals that the lifestyle andindustrial supplies segment was able to dramaticallyD i s c u s s i o n

900

600

income per share also jumped, from 20.53 yen to 37.67 yen.
2

300

ROE
(%)

0

0
99

00

01

02

03

Selling, general and administrative expenses this fiscal
year increased 7.1 billion yen, or 4.2%, over the previous

billion yen, or 3.4%, over the previous year.
Primary reasons for this fiscal year’s increased otherexpenses include the 29.9 billion yen in devaluation losses
in investment securities posted as part of the mark-downfrom the previous year. The extraordinary loss was the
major banks. Meanwhile, our 7.3 billion yen loss on sales

3

0
99

00

01

02

03

Operating Income
Our operating income this fiscal year increased 17.6
billion yen, or 24.4%, over the previous year to 89.9 billion
yen due to the recovery of our profitable electronics
segment and the cost of sales reduction achieved throughour cost-cutting measures which absorbed our selling,

2 0 0 3

general and administrative expenses increase. As such,

R e p o r t

Operating Income
1

Operating Income Margin

99

00

01

02

our operating income margin recovered significantly, fromthe previous year’s 5.5% to 6.9% this fiscal year.

40,07349,050

6.5%

7.4%

03

Net sales in our information communication segment
decreased 6.0% to 619.9 billion yen. Operating income

SEGMENT INFORMATION
Previously, we had two consolidated segments: theprinting operation in which we conduct printing andment expenses decreased by 3.9 billion yen, or 34.6%,

contingent businesses, as well as manufacture printing

from the previous year. This fiscal year which was the third

technology application products, and the soft-drinks

of a five-year amortization of the transitional obligation of

manufacturing operation in which we manufacture and sell

the retirement benefit accounting introduced in the fiscal

soft drinks in Hokkaido in northern Japan. Starting thisyear ended March 2001, was 6 billion yen. Employees’

fiscal year, however, we have further divided our printing

yen mainly because of the preferred early retirement

2002.3¥ 659,2410

and retirement of fixed assets posted as equipment retire-

special retirement benefits this fiscal year were 1.7 billion

2003.3¥ 619,924(yen in millions)devaluation losses in the investment securities of four6

A n n u a l

Net Saleslosses, however, decreased by 890 million yen, or 2.9%,

9

D N P

Information Communication2

process of the listed stocks we own. The devaluation

12

56

3

operation into three consolidated segments.
The three segments are information communication,system we set up at Hokkaido Coca-Cola to balance out

which consists of books, publications, commercial

the age disparity among the employees and to establish a

printing, business forms and their related products; lifestylestaff of an appropriate number.

and industrial supplies, which consists of packaging

Our income before income taxes this fiscal year

products, decorative materials and industrial materials;

increased a significant 61.5% over the previous year toand electronics, which consists of displays, electronic

42.2 billion yen due to the amount of losses in othercomponents and their related products. Industrial

income and expenses only increased slightly whenmaterials such as ink ribbons and other recording

compared with our growth in operating income.

materials, as well as optical-function films, are included in
the lifestyle and industrial supplies segment due to their
sharing packing, decorative materials and coating
technologies with lifestyle and industrial supplies.
Our beverages segment remains the same with ourbusiness at Hokkaido Coca-Cola Bottling Co., Ltd.

also decreased, by 18.3% to 40.1 billion yen. The
operating income margin declined from 7.4% to 6.5%.
Sales were weak in publishing, commercial printing
and business forms. As a result, overall net sales for thesegment decreased by 39.3 billion yen, and operating
income decreased by 9 billion yen.
Books and Publications
This fiscal year, the Japanese publishing industry
experienced its sixth consecutive year of shrinking sales
when sales dropped 0.6% from the previous year. Whilebook sales increased 0.4%, the actual number of books
issued declined by 1.3%. Likewise, magazine sales
decreased by 1.3% while the actual number of magazines
issued declined by 2.1%.
Reasons behind the sales decline include the lowbirthrate, increased selling and buying at the “new” usedbook market, more library use, and changes in the way
people gather information, such as via the Internet andmobile phones.
While sales of books remained at about the samelevel, our sales of books and publications decreased 3%from the previous year due to the decline in the number ofpublications issued.

2 0 0 3This fiscal year, we recorded net other expenses ofand development expenses, to 24 billion yen.

15

03

Information Communication

4

47.6 billion yen. The amount of expenses increased 1.5

(%)

02

Other Income and Expenses

accounting, and to the 700 million yen increase in research

SGA Expenses to Net Sales

01

R e p o r tlabor cost as affected by the retirement benefit

00

A n n u a lyear to 175.7 billion yen. This was due to the increase in

99
5

D N P

Selling, General and Administrative Expenses57

M a n a g e m e n t ’s

Solution-type businesses we engaged in this fiscal

Our electronic forms that promise growth wereyear include building customer databases for publishers,

employed to good results when communication-businessbuilding Internet sites and licensing character designs forapplication forms and bills turned electronic.
Lifestyle and Industrial Supplies

Although housing starts in Japan continued to drop

In the area of displays, sales of shadowmasks

increased imports. In the end, sales of decorative materials

increased 5% over the previous year due to our efforts

decreased 2%.

such as the retirement of production facilities and theconsolidation of production at the Mihara Plant, and theSales of exports were strong thanks to the newly
Lifestyle and Industrial Supplies

Meanwhile, the number of discontinued magazines was

Net Sales

145, of which 47 were our accounts. This was fewer than

Operating Income

last year’s 55.

Operating Income Margin

2003.3

2002.3¥ 420,167¥ 410,940

28,595

19,9496.8%

4.9%(yen in millions)shift from providing shadowmasks for PCs to shadow-

added pattern designs and improved functions.

masks for consumer TVs. Thanks to the steady

Our original, Woody Series of wallpapers forcondominiums enjoyed a 14% increase in sales due to thesecurement of production volume, we were able to reduce

public’s heightened awareness for environmental issues.

fixed expenses and increase our operation rate, which led

Non-PVC housing materials also increased in sales, by 11%.

to a significant improvement in our income.

Industrial Supplies

drop in unit prices, the increase in demand caused by the

While liquid-crystal color filters had to withstand a 10%

Commercial Printing
our lifestyle and industrial supplies segment saw increased

additional sales at ACTI, which we acquired from Asahi Glass

pamphlets, points of purchase and premiums did not doyen, or 2.2%, increase over the previous year due to

ink ribbons overall. Ink ribbons for color printers, however,and Mitsubishi Chemical, resulted in a 30% increase in sales.

well overall due to fierce competition for orders.

bigger sales of packaging and industrial materials.

grew in sales by 1%.

As a result, sales from orders placed with us decreased
Solution-type businesses we promoted this fiscal year
included catalog production and web site production by

Operating income also increased by 8.6 billion yen, or

using character designs.

Sales projection screens increased by a big 35% due

Sales of electrodes for lithium-ion rechargeable batteries
and optical films for liquid-crystal displays, including films forSouth Korea and China in addition to the main market, theprevious year’s 4.9% to 6.8% thanks to our cost-cutting

deflecting plates, increased more than 50%.

United States.

Electronics

photomasks increased 15% due to more orders being

effects.

In the area of semiconductors, sales of our

Packaging
Despite slow consumer spending and a drop in theplaced for our highly profitable cutting-edge products,
Electronics

2003.3

2002.3sales of paper containers and paper cups, sales of

Net Sales¥ 208,380¥ 176,914

packaging increased overall by 2% due to the increased

Operating Income

28,3178,590

while sales of forms decreased, resulting in an overallsales of soft packaging and the sales of our sterile filling

Operating Income Margindecrease in sales.

system.

Business Forms
This fiscal year, sales of IPS and smart cards surged

to the expansion of the projection screen TV market in

43.3%, while operating income margin improved from thebuilding a product database, and a licensing business

which raised our average unit price by about 10% and oursales volume by 5%.
Sale of lead frames, meanwhile, remained at the same

4.9%

level as the previous year despite more being sold for use(yen in millions)in small packages. This was due to the drop in unit prices.

13.6%

We recorded a significant increase this fiscal year in

We received orders from three cola bottlers and two

the sales of IPS, including the issuance of bills for mobile

soft-drinks makers for five large sterile filling systems forphones, issuance of non-life insurance certificates for non-PET bottles. Along with the sales of these systems camelife insurance companies, investment reports by banks,

an increase in the sales of pre-forms that are used inshadowmasks that struggled in the previous year

Beverages

2003.3

2002.3bills for credit-card companies, direct mail for educational

manufacturing PET bottles.

increased by over double digits in the latter half of the year.

Net sales¥ 71,835¥ 73,099

(166)

575

We received orders for environmentally friendly

Electronics

Beverages

This fiscal year among our display products, sales ofIn the end, sales recovered to a 5% increase over the

Operating Income

catalogs and direct mail that are effective sales promotion

products such as the disposable retort-pouch we

previous year. Sales of color filters and projection screens

Operating Income margin

tools for our customers.

developed to replace pet-food cans, and the insulated

also increased considerably. Among semiconductor-

paper cup we offered to replace plastic cups for miso

related products, sales of lead frames remained the same

soup and other products.

as the previous year while the sales of photomasks

organizations and the shipment and processing of

Although smart cards are not yet widely used as bankissued ATM cards, their number is steadily increasing among
2 0 0 3drop in the price of liquid-crystal panels coupled with the

4% over the previous year despite a decrease in sales of

8% from the previous year.

credit cards. Our share of the smart cards in Japan is about

Sales of our PVC-free barrier film (product name: IB–

0.8%(yen in millions)

Our beverage operation this fiscal year continued tonotched a double-digit increase. Due to such factors, theexperience extremely harsh market conditions, not only

50% in terms of sales. Among high-function cards forFilm) that provides a perfect solution for dioxin problems

segment as a whole saw a sales increase of 17.8%, orwith the decline in sales volume in the entire soft-drinks

financial institutions, our share is even higher, at about 65%.

also grew.

31.5 billion yen, over the previous year to 208.4 billion yen.

industry but also with the unfavorable weather in Hokkaido

Due not only to the increased sales but also to theduring the high-season, which led to a decline in demand.

application software developments and information

include “unique number campaigns” in which applicants

cutback in fixed expenses implemented through the

A n n u a lWith our original MULTOS operation system, otherSome solution-type businesses we are promoting

processing as our strengths, we are aggressively marketing

use a mobile phone and a unique number printed on aconsolidation of production plants for shadowmasks andoperating income fell 741 million yen to an operating loss

ourselves in highly profitable areas other than card

product package to enter a contest, and sales promotion

lead frames, as well as to the strong sales of highlyof 166 million yen.

manufacturing, such as software licensing fees and issue-

sites on the Internet.

profitable, cutting-edge photomasks, our operating income

D N P

R e p o r t

This fiscal year, sales of industrial supplies increased

sales overall to 420.2 billion yen, which was a 9.2 billion

Our commercial printing, including flyers, catalogs,

processing businesses, and are steadily increasing sales.

58

this fiscal year increased 19.7 billion yen to 28.3 billion yen.

Sales decreased 1.3 billion yen to 71.8 billion yen, andDespite implementing measures such as taking part ina joint-procurement system for bottlers to cut costs,

2 0 0 3

5.9% from the previous year to 5,703.2 billion yen.

Despite a decline in the sales of decorative materials,

R e p o r t

Advertising expenses in Japan this fiscal year decreased

the previous year’s 4.9% to 13.6%.

this fiscal year, signs of recovery were also apparent with

A n n u a lorders remain roughly the same as the previous year.

A n a l y s i s

D N P

Of the 201 newly published magazines this fiscal year,
55 orders were placed with us. Thus, the number of newa n dOperating income margin also recovered substantially from

Decorative Materials

businesses.

D i s c u s s i o n59M a n a g e m e n t ’s

consolidating distribution bases, establishing a multi-story

This fiscal year, cash flows from operating activities

flexible manner and to respond to changes in our businessautomated warehouse at the headquarters plant, andincreased 47.5% over the previous fiscal year to 197.4

environment. As a rule of thumb, we take care to retain

reducing staff by 98 employees through a preferred earlybillion yen. Factors for this increase include the 16.1 billion

cash at hand for the amount equivalent to about two

retirement system, the downturn in both sales and income

yen increase in income before income taxes and minority

months of our monthly sales. We are aware thatwas the result of slow sales volume growth and aninterests, and the 13 billion yen more in decrease in trademaintaining liquidity is particularly important in light of theincrease in sales promotion expenses.

receivables, which means that we had less accounts

instability of today’s financial institutions and the trend ofreceivable.

the primary market of corporate bonds.

LIQUIDITY AND CAPITAL RESOURCES
We believe that the foundation of our financial strengthand an important factor in enhancing our value as a

20
200

So that DNP could increase its corporate value, weshort-term investments, as well as to the reduction ofalways keep in mind arranging our capital composition to

payments for purchases of property, plant and equipment.

suit the business environment and to minimize our cost of(¥ Billion)

120

Total Assets

100

2002.3

2001.3fields that contribute to DNP’s advancement. It is also a¥ 1,450,027 ¥ 1,432,458 ¥ 1,489,871

40Equity Ratio

ment benefits which were not recognized as losses for tax

0.23x

0.23x

0.21x

purposes. Meanwhile, due to a total of 29.9 billion yen in

Debt-to-Equity Ratio

0.06x

0.07x

0.08x

investment securities valuation losses, our investment

Leverage Ratio

1.54x

1.51x

1.59x

securities at the end of this fiscal year decreased by

1270.81 ¥1246.99 ¥1236.96

01

02

03

DNP’s total assets at the end of this fiscal year increased
1.2% over the previous year to 1,450 billion yen.
Among current assets, cash and cash equivalents(¥ Billion, %)Meanwhile, cash flows we used in our financial activi-

while trade receivables decreased 6.7%, or 27.8 billion

year to 62.1 billion yen.

yen, to 383.6 billion yen. Inventory assets also decreased,

increase in repayments of long-term debt, the 19.2 billion
1.0increased 25.8%, or 49.1 billion yen, to 239 billion yen

ties this fiscal year increased 142.8% over the previous
This increase was due primarily to the 10.2 billion yen

15

by 2.2% to 74.7 billion yen. As a result, current assets
increased 3.7% to 715.5 billion yen.

the 21.6 billion yen increase in payments for the purchases
February 18, 2003 at 1,230 yen a share for a total of 20.9
0billion yen, or 17 million shares.

(¥ Billion)

effective means to return profit to our shareholders.
2001.3

Because of the 47.3 billion yen increase in cash andyen in cash from the newly consolidated subsidiaries, our¥ 133,830¥ 116,728

Business Reinvestment(64,223)(97,955)(72,879)

cash and cash equivalents at the end of the fiscal year

Free Cash Flow

133,190

35,87543,849increased by 26.0% to 238.9 billion yen.
We, the management, make certain we maintainthe end of this fiscal year increased by 9.5% to 417.8
billion yen. This was caused partly by the 723.5% increase

Our long-term liabilities decreased 15.4% this fiscal
1200

year to 66.8 billion yen. This was due primarily to the entire
29.7 billion yen in convertible debentures being transferred900

to the convertible debentures redeemable in a year as partof current liabilities.

600

As a result of the above, our total liabilities at the end of300

this fiscal year increased by 5.2% to 484.6 billion yen.
Meanwhile, our stockholders’ equity at the end of this

0
99

00

01

02

03

fiscal year decreased by 0.5% to 942.1 billion yen due tothe increase in our treasury stocks.

D N P

sufficient liquidity to implement our business strategies in a

Meanwhile, among liabilities, our current liabilities at

D N P(yen in millions)a result of our holding back on such investments.

taxes payable and the 2.3% increase in trade payables.

1500

cash equivalents due to these activities and the 2 billion¥ 197,413

investment such as machinery, equipment and vehicles as

in a year, as well as by the 100.9% increase in income

We believe that this purchase of treasury stocks is an% to net sales

Property, plant and equipment decreased 0.6% to540.9 billion yen due to the 2.2% decrease in capital

the 54.6% increase in convertible debentures redeemable

Total Assetsof treasury stocks. The treasury stocks were purchased on
03

our investments and advances this fiscal year decreasedin our current portion of long-term debt, which includes

yen increase in redemption of convertible debentures and105

23.5%, or 29.8 billion yen, to 97.1 billion yen. As a result,
6.5% to 164.9 billion yen.

00

Research and Development Expenditures20

investment securities write-downs and provisions for retire-

Working Capital-to-Net Sales(yen in millions, except BPS)

99

2.0

increased 18.2 billion yen this fiscal year due primarily to

1.65x

20

* Includes capital expenditures for intangible fixed assets

2 0 0 303

1.81xBook Value per Share (yen) ¥0

generate a free cash flow of 133.2 billion yen.

R e p o r t

02

1.71x

source of corporate value. This fiscal year, we were able to

A n n u a l01

2 0 0 3

Free cash flow is cash flow that we can invest freely in

Cash Flows Provided byOperations

00

Current Ratio

60

Cash Flows

2002.3099

In investments and advances, deferred tax assets
2003.380

2003.30Capital Expenditureand expand its business.

02

60
600

R e p o r t

to secure sufficient liquidity needed for DNP to maintain

01

800

A n n u a lthat in the fiscal year ending March 2004, we will continue

00

80

40

The Balance Sheet

growth areas. We, the management, remain convinced0(¥ Billion, %)capital.

operating activities to enable us to continue investing in

25

A n a l y s i s400

was due primarily to the reduction in the net decrease incorporation is our ability to generate cash from oura n dStockholders’ Equity and Equity Ratio

1000

Cash and cash equivalents we used in our investing
activities increased 9.8% to 87.4 billion yen. This increase

D i s c u s s i o n6061

Environmental Accounting

employees’ pension fund is expected to be exempt fromDNP practices environmental accounting, a highly effective tool for promoting and evaluating the effects of environmental

our future payment obligations to the Health, Labour andconservation activities

We are exposed to various market risks arising from

Welfare Minister when our application is accepted on Junefluctuations in foreign exchange rates, interest rates and1, 2003. The amount affected by the above is specified in

Objectives

stock markets. To eliminate or reduce some of the risks

the Subsequent Event in our financial statements.

1. Environmental accounting as an environmental management tool
(1) Environmental accounting produces a breakdown of environmental conservation costs as that can be used as a reference
for determining the effectiveness of environmental conservation
activities.
(2) Environmental accounting data is used to determine the cost of
individual environmental facilities, the Group’s overall budget forenvironmental conservation, and the amount of investment inenvironmental activities.
(3) Environmental accounting is used to monitor and evaluate theeffects and achievements of activities performed throughout
the year in order to ensure continual improvement in ourenvironmental performance.

from foreign exchange rates, we mainly use forward

the risks of currency market fluctuation. To eliminate or
reduce some of these risks, we use forward exchange
contracts.
We do not enter into derivative transactions forpurposes other than to avoid such risks. Thus, thesetransactions are not at all for investment purposes or
short-term trading purposes. We also maintain a strict
control system in which it is necessary to obtain ourassigned company director's prior approval to engage intransactions of the said instruments. Our Accounting
Division controls and executes methods and limits oftransactions related to all our derivative transactions within
the range set forth in our internal rules.
All forward exchange contracts that we engage in are
over-the-counter transactions, thus they are accompaniedby the credit risks of the counter-party banks. However, as
they are with banks of high credit standing, we areassuming that we run a negligible risk of bearing losses
from such credit risks.
For interest risks arising from our investing and day-today cash management activities, we do not enter intotransactions that offset interest risks as these risks have
only a minor impact on the balance sheet of the DNPGroup.
Also, we are exposed to stock price fluctuation risks
as we hold various listed and unlisted stocks for strategic
holding and investment purposes.
Besides these risks, we may be exposed to non2 0 0 3

not describe them in this Annual Report. As for legal

D N P

A n n u a loperations. These risks include country risks, credit risks

R e p o r tfinancial or imponderable risks during our day-to-day

62

and legal risks. Because they are unpredictable, we didactions, we did not have any pending as of the end of the
fiscal year under review.
Our retirement benefit system, meanwhile, is experiencing a fund shortage due to the worsening investment
environment. Of the above, the substitute portion of theAt DNP, under our environmental declaration topreserve the global environment and to effectively use
resources to protect the prosperity and future of mankind,we put in company-wide efforts to address global environmental issues. In 1995, we received recognition with the
Global Environmental Grand Prize awarded by the Ministerof International Trade and Industry.
In 1993, we introduced our unique eco-management
system, the Eco Report System, as part of our efforts topreserve the environment. In 1999, we employed environmental accounting, which compiles capital investment onenvironmental equipment, the energy consumption
amount and value, waste discharge volume, the cost of
consigning waste disposal and the value of recyclable
resources sold. The accounting helps us evaluate andverify the effectiveness of environmental management, anddetermine the priority of issues we need to address. We
made these accounting statements public by the end of
2001.
Currently, we are in the process of obtaining
ISO14001 certification, having already been certified atfive of our locations. We plan to continue staying abreastof all environmental standards, and believe that suchactivities will not have a significant negative impact on our
financial position.

Basis for the calculation of environmental accounting information(1) Period covered
April 1, 2002 through March 31, 2003 (Environmental conservation facilities are those considered as of March 31, 2002)(2) Scope of coverage
Environmental accounting was applied to the companies
designated for consolidated accounting purposes, including thegroup’s domestic manufacturing companies (43 companies and54 sites), one distribution company and one meal catering
company, but excluding ten other companies, including thoserelated to trading, real estate sales, teaching material sales andsoftware development. Furthermore, we excluded one
company that has yet to begin production and two othercompanies purchased during the term, as the system forcollecting data and the companies is still under preparation andthe companies are deemed to be insignificant at this stage. The
two companies will be included in our environmental accounting
report next fiscal year. (Please refer to pages 4 and 5).
(3) Monetary unit
All monetary figures are expressed in millions of yen, rounded
off to the nearest million.
(4) Announcement format
The format for presentation this fiscal year is theComprehensive Benefits Comparison Format as set forth in the
Ministry of the Environment’s “Environmental Accounting
Guidelines, Fiscal 2002.” Environmental conservationequipment and sales of environmentally sound products arealso shown.
(5) Basis for the calculation of costs of environmental conservation activities➀ The environmental conservation costs include depreciation
expenses for investments. Depreciation is applied inaccordance with corporate tax law regulations.
➁ Personnel costs for full-time workers were calculated at the
average labor costs per person, while personnel costs forworkers holding two or more posts were calculated at 1/10
or 1/5 the average personnel cost per person, dependingon the worker’s assigned duty.
➂ R&D costs are the total costs incurred by our 11 R&D centers(10 in fiscal 2000 and 2001) in the development of environmentally sound products and manufacturing equipment.

(6) Basis for the calculation of benefits of environmental
conservation activities➀ DNP uses consumption per added-value as an indicator forthe volume of resources (energy and water) spent on
business activities, as well as for the volume of wastematerials and CO2 emissions. Furthermore, the DNP Group
uses the added-value total of the company concerned as
an indicator of the volume of business activities, given thatcompanies within the group perform product transactions.
The added-value amount is calculated pursuant to the“Management Analysis of Japanese Corporations” issued
by the Ministry of the Economy, Trade and Industry.
➁ The recycle rate of waste materials represents thepercentage of the weight of unwanted plant-generated
materials that were recycled on- and off-site.
➂ Benefits of up/downstream costs are the effects of reduced
CO2 emissions when disposing of containers or packaging.
➃ Benefits of environmental impact of transportation are thebenefits of reduced CO2 emissions during the transportationof products by the distribution companies included in DNP’sconsolidated accounting.
(7) Basis for the calculation of economic benefits of environmental conservation measures➀ We have calculated the benefits of energy- and resourcesaving efforts using the following formula:(Energy consumption per added-value amount or waste
processing cost per added value of benchmark period –those of this period) x value-added amount➁ Calculation of the business activity amount was made using
the added-value amount indicated in (6)➀➂ For unit consumption, we used energy costs/the addedvalue amount and waste disposal costs/the added value
amount.
➃ For the benchmark period, the consumption or cost per value
is the overall average of the three years prior to this fiscal year.
In calculating unit consumptions for the benchmark period,
however, the energy cost was adjusted to this fiscal year’s
price level due to dramatic price fluctuations.

2 0 0 3of overseas sales, and to that extent, we were exposed to

PROTECTING THE ENVIRONMENT

R e p o r t

This fiscal year, about 14% of our net sales consisted

A n n u a lexchange contracts.

2. Environmental accounting as a tool for communicatingwith society(1) Environmental accounting provides the means for public
release of our environmental conservation efforts and theirresults.
(2) The reception of our environmental accounting reports byshareholders, clients, and local communities is used as areference for improving our approach to environmental conservation.

D N P

RISK MANAGEMENT

63

E n v i ro n m e n t a lEnvironmental conservation cost(¥ millions)

Investment

Details of benefits

Details of major efforts
Year 2002*

Year 2001*¥ 2,267

Changing fuel (to LPG), adding deodorizing equipment and waste treatment facilities

256

1,332

924

1,000

Controlling room temperature and lighting, adding inverters to electrical equipment andimplementing co-generation systems

79

382

3,163

3,076

Sort-and-recycle; zero-emission (to RPF as cement material) Use of recycled water

1,648

2,377

6,354

6,343
194
2,014

(4) R&D costs

Designing environmentally friendly products; bearing container and packaging recycle
costs
Cost of ISO14001 audit and registration fees; environmental measurement costs; cost of
preparing environmental reports

1,704

1,872

12

14

Planting trees and landscape gardening outside the plant site; supporting activities ofenvironmental conservation organizations(6) Environmental
remediation costs

0

0

None

¥2,377¥10,309

Research and development of environmentally friendly products and production methods

18,069-50

Consolidated total
costs¥ 73,789
24,097

Environmental
conservation costs

¥

2,377

3.22%

1,872

7.78%

Evaluation of environmental accounting performance data for fiscal
2002
Environmental conservation costs and measures➀ Year-on-year investments in environmental conservation equipment
increased by 44.2%, or ¥729 million. New large-scale facilities included awater-recycling system and a co-generation system, both of which
accounted for 60% of this amount.
➁ Regarding environmental conservation costs while environmental productR&D costs stood at ¥168 million, a year-on-year increase of 9.9%.
Upstream/downstream costs stood at ¥194 million, of which ¥190 was paid
to the Japan Container & Packaging Recycling Association in recycling fees.

In fiscal 2002, the added-value amount increased 6.0% from the benchmark
period (Average for three-years between fiscal 1999 and fiscal 2001).
Furthermore, we achieved substantial cost reductions due to reductions inenergy consumption and waste emissions as well as an improvement in theunit consumption. It should be noted, however, that the savings in waste
treatment expenditure were lower as the improvement in unit consumption forthe benchmark period was less than the previous year.

-857

Year-on-year reduction of 6.0%

-0.29

Water reduced by 290m3 per 100 million yen.

2,465

2,473

8

Total weight of paper, plastic, ink and metals

15.4

15.1

-0.3

Ratio of unwanted materials that are main raw
materials

SOx emission (tons)

74.5

56.5

-18.0

Calculated from fuel usedNOx emission (tons)

620.4

626.7

6.3

Calculated from fuel used

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

5,115

3,521

-1,594

Total of 10 substances subject to be reported by law

COD discharge (ton)

32.3

41.1

8.8

Calculated from the amount of discharged water andaverage concentration
One substance discharged in fiscal 2001 (Hydrazine)

Emissions totheatmosphere

Discharges towater areas

Discharges ofwastematerials

Discharges of environmentally hazardous
substances (354 PRTR substances) (t)Generated unwanted materials (in thousandsof tons)
Discharged waste materials (in thousands of
tons)
Added-value unit consumption for the above(1,000 ton/1 million yen)

9.6

0

-9.6

519.4

506.1

-13.3

105.0

96.8

-8.2

0.236

0.211

-0.025

Amount of pollutants transferred or released (of354 substances subject to PRTR Law) (tons)
Emissions of greenhouse- gasses (1,000 tons
Emissions of- CO2)
greenhouseAdded-value
unit consumption for the above
gasses(Ton/100 million yen)
(2) Benefits of upstream/downstream costs
Benefits related to goods produced by business activities
CO2 emissions
CO2 emissions (1,000 tons - CO2)
at the time of
product
2 emissions / volume of products shippedCO
disposal.
(3) Other environmental conservation benefits
Improvements in environmental impact of transportation
CO2 emitted during product transportation(tons)
CO2 emitted during transportation: CO2/(Transportation weight x Transportation
distance)(ton/million km)

Including unwanted materials other than main raw
materials
Total waste subcontracted to waste disposal
company
Waste materials reduced by 25kg per million yen in
added value.
Including heat recovered on site

74.2

77.6

3.4

2,400

2,290

-110

850

843

-7.0

191.3

183.6

-7.7

579.5

384.0

-195.5

2.24

1.48

-0.76

5,350

4,730

-620

CO2 emissions reduced by 620 tons.

96

85

-11

CO2 emissions reduced by 11 tons for each ton of
goods transported 1 million km.

Recycle rate (%)

Total for 21 substances reported by law
Including amounts emitted by waste incinerators anddrying furnaces.
7.7 tons of emissions reduced per 100 million yen in
added value.

Emissions of used containers and packages for waste
incineration and recycling
CO2 emissions per ton of products reduced by 0.76
ton.

Economic benefits of environmental conservation activities(¥ millions)

Amount in yen
Details of benefits

FY 2001

FY 2002

Year on year
Difference¥75,731¥101,926¥ 26,195

Remarks(1) Increased sales
Economic benefits of R&D costs

2 0 0 3Future issues➀ In order to reduce the atmospheric emissions of toluene to 500t/year or
less, it will be necessary to implement solvent recovery and removal
equipment.
➁ Further improve the eco-efficiency by conducting “Production 21” activities,
which bring about the overall optimization to the production line.

-0.14

Added-value unit consumption for the above(1,000 ton/100 million yen)(2) Increased income

R e p o r tEnvironmental benefits of environmental conservation activities➀ In fiscal 2001, we made a ¥1.3 billion investment in solvents recovery andremoval facilities, which resulted in a 1,594t reduction in the atmosphericrelease of substances subject to the PRTR Law.
➁ SOx emissions were reduced by 24.2% following our conversion to LNG
fuel.
➂ All benefits related to supplied resources such as energy, water and main
raw materials improved.
➃ Efforts toward reduction and recycling began to produce results. Unwantedmaterials fell by 13,300t, waste fell by 8,200t, and waste fell by 25kg forevery million yen in added value.

Economic benefits of environmental conservation activities➀ Sales of environmentally friendly products increased 34.6% greatly
exceeding the target increase of 10%.
➁ Year-on-year income from recycling unwanted materials increased by ¥161
million.
➂ Benefits of cost reduction are calculated according to “(7) Basis for calculation of economic benefits of environmental conservation measures” on thepreceding page.

3.94
13,486
2.94

Details of major environmental conservation costs

Co-generation system, solvent and exhaust gas recovery and refining
equipment, water recycling system, etc.
Non-vinyl chloride decorative sheets, de-chlorinating barrier film, biodegradable plastic, non-aluminum packaging materials, water-based ink, etc.

4.08
14,343
3.23(¥ millions)

Percentage ofenvironmental
conservation costs

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

All consumed energy was converted into averagevalue in calories.
Energy reduced by 0.14TJ per 100 million yen in
added value.

Supplied main
Supplied amount (in thousands of tons)
raw materials(paper, plastic,
Amount of unwanted materials
metal, etc.)
generated/supplied amount (%)
Improvements in environmental impacts¥10,437

Environmental conservation costs to total costs ratio

Energy consumption (TJ)

Water usage (in thousands of tons)
Supplied water(5) Social activity costs¥ 1,648

SuppliedenergyBenefits of resource recycling costs
Business income from recycling unwantedmaterials(3) Cost savings

Sales of environmentally friendly products

919

1,080

34.6% increase from fiscal year 2001

161

Saleable unwanted materials increased

454

Energy cost unit consumption substantially improved.

-267

Processing cost unit consumption improved by
reducing the volume of waste generated.

Benefits of global environmental conservation and resource recycling costs
Saving energy costs by energy conservation

1,049
917

¥

1,503
650

¥

D N P

¥

D N P

Saving waste-materials processing cost by resource conservation

2 0 0 3

¥ 2,267

R e p o r t

663(*Years ended March 31)

A n n u a l18,119RemarksA n n u a l¥

195

Amount invested during
the said period
R&D costs during thesaid period

FY 2002

Benefits arising from supplied resources¥ 1,313

2,044

Category

Year on year
Difference

FY 2001(1) Benefits of costs incurred at the area of business(3) Administration costs

Total

Category of index showing benefits

Year 2002*(1) Business area costs
Pollution prevention
costs
Global environmental
conservation costs
Resource recycling
costs(Total business area
costs)(2) Up/downstream
costs

Environmental benefits of environmental conservation activities
Index value

ExpenseCategory
Year 2001*

A c c o u n t i n g

6465

S e l e c t e d

F i n a n c i a l

D a t aSelected Financial Data (unaudited) (For details, please refer to DNP Data Book 2003.)

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
2003

2002

2000

2001

1999

1998

1997

1996

1995

Income Statement Data (¥ million)
Net Sales¥

1,309,002¥

1,311,934¥

1,342,035¥

1,286,703¥

1,269,543¥

1,336,604¥

1,310,100¥

1,245,300¥

1,192,827

Cost of sales

1,043,456

1,071,163

1,091,386

1,039,006

1,033,926

1,056,962

1,028,614

983,301

945,570

Gross profit

265,546

240,771

250,649

247,697

235,617279,642

281,486

261,999

247,257

Selling, general and administrative expenses

175,665

168,529

164,708

161,811

166,008

172,824

170,298

161,609

156,536

Operating income

89,881

72,242

85,941

85,886

69,609106,818

111,188

100,390

90,721

Income before income taxes and minority interests

42,244

26,15069,116

79,19977,703

100,634

107,394

98,103

101,542

Net income

28,774

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

Balance Sheet Data (¥ million)
Total assets¥

1,450,027¥

1,432,458¥

1,489,871¥

1,451,700¥

1,445,293¥

1,450,709¥

1,410,138¥

1,336,689¥

1,274,581

Net property, plant and equipment

540,874

543,962

561,017561,898

570,860

536,364

501,622461,158434,809

Long-term liabilities

66,82179,01386,012

77,637

100,695

100,214

97,340106,792

113,295

Total liabilities

484,581460,691

522,105

495,541

518,323

538,113553,172

532,451

514,117

Total Stockholders’ equity

942,083

946,998

939,441925,646

898,646

885,507831,262

780,484

738,243

93.65

n.a.

Other Selected Data (¥ billion)
Capital expenditures

¥

73.79

¥

85.10

¥

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

24.10

23.37

24.66

23.57

n.a.

n.a.

n.a.

n.a.

n.a.

Depreciation expenses

89.24

94.87

94.31

94.59

82.80

73.91

67.58

62.42

n.a.

Per Common Share Data (¥, shares)
Net income per common share - primary

¥

37.80

¥

20.55

¥

43.99

¥

51.40

¥

40.15

¥

74.49

¥

74.52

¥

70.63

¥

65.63

Net income per common share - fully diluted

37.67

20.53

43.45

50.47

39.54

72.53

72.15

68.19

n.a.

Dividends paid per share

19.00

18.00

18.00

18.00

18.00

18.00

17.00

16.00

15.00

1,270.81

1,246.99

1,236.96

1,218.79

1,183.24

1,165.94

1,102.56

1,040.49

984.61

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

759,480,693

753,940,533

750,110,275

749,779,633

Net assets per common share
No. of common shares outstanding - primary
Financial Ratios (%, times)

66

18.68%

19.25%

18.56%

20.92%

21.49%

21.04%

20.73%

Selling, general and administrative expenses

13.42

12.85

12.27

12.58

13.08

12.93

13.00

12.98

13.12

Operating income

6.87

5.51

6.40

6.67

5.48

7.99

8.49

8.06

7.61

Income before income taxes and minority interests

3.23

1.99

5.15

6.16

6.12

7.53

8.20

7.88

8.51

Net income

2.20

1.19

2.49

3.03

2.40

4.23

4.29

4.25

4.12

Return on equity

3.02

1.65

3.58

4.28

3.42

6.59

6.97

6.98

6.84

Current ratio

1.71x

1.81x

1.65x

1.60x

1.59x

1.65x

1.60x

1.62x

1.65x

Debt-to-equity ratio

0.06x

0.07x

0.08x

0.09x

0.10x

0.10x

0.12x

0.14x

0.15x

2 0 0 318.35%

R e p o r t

20.29%A n n u a lGross profit

D N P

D N P

A n n u a l

R e p o r t

2 0 0 3As a percent of net sales:67

C o n s o l i d a t e d

F i n a n c i a l

S t a t e m e n t s

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, 2003 and 2002

2003

2002

2003

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002

AssetsLiabilities and Stockholders' Equity

Current assets:

Current liabilities:

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

¥

238,89695
50
383,576(5,173)74,702
23,363
715,509¥

189,615 $298
3,165
411,336(5,806)
76,401
15,001
690,010

1,990,800
792
417
3,196,467(43,108)
622,517
194,690
5,962,575

Thousands of
U.S. dollars (Note 3)

Millions of yen

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

2003

¥

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

2002¥

10,943
19,959261,920
32,26012,47544,121
381,6782003$

87,983
300,583
2,232,283
259,567
208,825
392,092
3,481,333

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

12,54093,006711
106,257

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

104,500
775,050
5,925
885,475

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

8,700
57,812309
66,82133,73044,335948
79,01372,500481,767
2,575
556,842

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

23,36324,769194,691

Common stock Authorized : 1,200,000,000 shares;
Issued : 759,480,693 shares (Notes 7 and 9) ...........................................................
Capital surplus (Note 9) ...............................................................................................
Retained earnings (Note 9) ..........................................................................................
Unrealized gain on available-for-sale securities ............................................................
Foreign currency translation adjustments ....................................................................
Treasury stock, at cost 18,319,543 shares in 2003 and 54,838 shares in 2002 ..........
Total stockholders' equity ........................................................................................

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

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

953,867
1,207,483
5,875,825
21,508(26,666)(181,325)
7,850,692

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

¥ 1,450,027¥ 1,432,458$ 12,083,558

Property, plant and equipment, at cost (Note 7):
Contingent liabilities (Note 16)
114,096
396,194
864,072
9,327
1,383,689(839,727)
543,962

970,875
3,400,808
7,449,517
103,517
11,924,717(7,417,434)
4,507,283

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

87,38764,808728,225

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

¥ 1,450,027¥ 1,432,458$ 12,083,558

R e p o r t
D N P

A n n u a l

R e p o r t

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

D N P

A n n u a l

Stockholders' equity :2 0 0 3

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

2 0 0 3

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

68

69

C o n s o l i d a t e dConsolidated Statements of Income
Thousands of
U.S. dollars (Note 3)

2003

Net sales (Note 18) .......................................................................................................
Cost of sales (Notes 11, 14 and 18) ............................................................................
Gross profit ..............................................................................................................
Selling, general and administrative expenses (Notes 11, 14 and 18) ........................
Operating income.....................................................................................................

¥ 1,309,002
1,043,456
265,546
175,665
89,881Other income (expenses ) (Note 12):Interest and dividend income.......................................................................................
Interest expenses ........................................................................................................
Equity in losses of associated companies....................................................................
Net loss on disposal of property, plant and equipment ................................................
Net loss on sales of marketable securities and investment securities ...........................
Loss on devaluation of investment securities ...............................................................
Payments of special retirement benefits ......................................................................
Gain on liquidation of subsidiaries ...............................................................................
Amortization of transitional obligation for retirement benefits (Note 8) ..........................
Loss on devaluation of inventories...............................................................................
Special provision for doubtful receivables for membership rights .................................
Other ..........................................................................................................................

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

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

¥

2002

¥

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

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

¥¥

114,464
114,464¥¥

114,464
114,464$$

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

¥¥

144,898
144,898¥¥

144,898
144,898$ 1,207,483$ 1,207,483¥

688,491
28,774(13,668)
(199)
(119)
1,820
705,099¥685,760
15,609(13,670)
(223)
(130)
1,145
688,491$ 5,737,425
239,783(113,900)(1,658)(992)
15,167$ 5,875,825

18,992(8,842)(5,458)(59,317)(1,633)(252,108)(14,067)(50,275)(3,292)(20,975)(396,975)

42,244

26,150352,033

34,240(20,477)
13,76328,481

25,472(15,137)
10,335
15,815285,333(170,642)
114,691
237,342(206)
15,609 $2,441
239,783¥

1,270.81¥

2003

953,867
953,867

U.S. dollars (Note 3)

1,247.87

20.31
20.28

$

10.59

0.32
0.31

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

D N P

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

D N P

A n n u a l

¥

2002

R e p o r t

37.80
37.67

¥

Retained earnings:
Balance at beginning of year .......................................................................................
Net income .................................................................................................................
Cash dividends (Note 9) ..............................................................................................
Bonuses to directors ...................................................................................................
Decrease resulting from change in consolidation scope ..............................................
Increase resulting from change in consolidation scope ................................................
Balance at end of year ................................................................................................

2003

A n n u a l

2 0 0 3

$ 10,908,350
8,695,467
2,212,883
1,463,875
749,008

R e p o r t

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

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2003 and 2002

2,597
(1,458)(210)(10,722)(563)(30,870)(194)
154(6,065)
(221)
(391)
1,851
(46,092)

yen

¥

2003

2,279
(1,061)(655)(7,118)(196)(30,253)(1,688)(6,033)(395)(2,517)(47,637)

293
28,774

Thousands of
U.S. dollars (Note 3)

Millions of yen

2 0 0 3

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2003 and 2002

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

S t a t e m e n t s

Consolidated Statements of Stockholders' Equity
Millions of yen

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

F i n a n c i a l

7071

Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements
Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2003 and 2002

42,244¥

26,150$352,033

94,8702,405
11,676210(40)(2,597)1,458
563
30,87010,722
25,866
10,745(39,615)(3,986)
169,297(194)(35,273)
133,830

743,658
17,242
107,208
5,458
3,075(18,992)
8,842
1,633
252,108
59,317
323,675
27,76016,225(57,742)
1,841,500(14,067)(182,325)
1,645,108

Cash flows from investing activities :Net decrease of time deposits..................................................................................
Payments for purchases of marketable securities .....................................................
Proceeds from sales of marketable securities...........................................................
Payments for purchases of property, plant and equipment.......................................
Proceeds from sales of property, plant and equipment.............................................
Payments for purchases of investment securities .....................................................
Proceeds from sales of investment securities ...........................................................
Interest and dividend received..................................................................................
Other .......................................................................................................................
Net cash used in investing activities ...................................................................

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

32,082(179)
1,922(100,385)
2,430(15,210)
4,116
2,597
(6,936)(79,563)

2,492
(417)
26,333(546,283)
11,092(201,175)
78,40818,992(117,709)(728,267)

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

(1,349)6,000(11,289)(19,181)(1,165)(14,108)(21,694)656(62,130)(6,619)313(1,122)(1,457)(14,125)(2,584)(25,594)(11,242)
50,000(94,075)(159,842)(9,708)(117,566)(180,783)
5,466(517,750)

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

(645)
47,246

1,966
30,639(5,374)
393,717

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

189,615
2,035
238,896

157,078
1,898
189,615

1,580,125
16,958$ 1,990,800

2. Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant majority-owned
subsidiaries. All significant intercompany accounts and intercompany transactions have been eliminated in consolidation.
The fiscal year-end of the consolidated subsidiaries is the same as that of the Company except for seventeen subsidiaries
whose fiscal years end December 31. Significant transactions between December 31 and March 31 are reflected in the
consolidated financial statements.
Investments in non-consolidated subsidiaries are stated at cost and, for valuation of such investments, the equity method
has not been applied since these investments are considered immaterial in the aggregate. However, investments aredevalued if the decline in value is judged to be other than temporary.
Investments in 20% to 50% associated companies are accounted for by the equity method.
The differences between costs and underlying net assets at the date of investment in consolidated subsidiaries are included
in other assets or other long-term liabilities and are amortized over a period not exceeding five years.
Translation of foreign currency accounts
Monetary assets and liabilities denominated in foreign currencies of the Company and its domestic subsidiaries are translated
into Japanese yen at the exchange rates at the balance sheet date. Revenues and expenses denominated in foreign
currencies are translated at the exchange rates prevailing during the year. The resulting translation gains (or losses) are
included in other income (or expenses).
The translation of foreign currency financial statements of foreign consolidated subsidiaries into Japanese yen has been
made for consolidation purposes in accordance with the translation method prescribed in the accounting standard for foreign
currency transactions. The balance sheet accounts of the foreign consolidated subsidiaries are translated at the exchange
rates in effect at the balance sheet date, except for common stock and capital surplus, which are translated at historical rates.
Revenue and expense accounts are translated at the average exchange rates during the year. The resulting translation
adjustments are presented as “foreign currency translation adjustments” which is shown as a separate component ofstockholders’ equity in the consolidated balance sheets.
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, thatare readily convertible to known amounts of cash and are so near maturities that they present insignificant risk of changes invalue because of changes in interest rates.

D N P

¥

The accompanying consolidated financial statements have been compiled from the consolidated financial statements filedwith the Financial Services Agency of Japan as required by the Securities and Exchange Law of Japan. Certain reclassificationsof accounts and modifications have been made in the accompanying consolidated financial statements to facilitate
understanding by readers outside Japan. Certain reclassifications have also been made in the 2002 financial statements toconform with current classifications. In addition, the notes to the consolidated financial statements include additional
information which is also not required for disclosure under accounting principles and practices generally accepted in Japan.

D N P

¥

Dai Nippon Printing Co., Ltd. (hereinafter referred to as the “Company”) and its domestic subsidiaries maintain their books ofaccount and prepare their financial statements in conformity with accounting principles and practices generally accepted inJapan, and its foreign subsidiaries in conformity with those of the countries of their domicile.

2 0 0 3¥89,2392,069
12,865655
369(2,279)1,061
196
30,253
7,118
38,841
3,331
1,947(6,929)220,980(1,688)(21,879)
197,413

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

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002

R e p o r t

2 0 0 3R e p o r t

2003

1. Basis of Presenting the Consolidated Financial Statements

Adjustments to reconcile income before income taxes and minority interests to
net cash provided by operating activities:
Depreciation..........................................................................................................
Provision for doubtful receivables (net) ..................................................................
Provision for retirement benefits (net).....................................................................
Equity in losses of associated companies..............................................................
Amortization of consolidation goodwill (net) ...........................................................
Interest and dividend income ................................................................................
Interest expenses ..................................................................................................
Net loss on sales of marketable securities and investment securities .....................
Loss on devaluation of investment securities .........................................................
Net loss on disposal of property, plant and equipment ..........................................
Decrease in trade receivables................................................................................
Decrease in inventories .........................................................................................
Increase (decrease) in trade payables....................................................................
Other ....................................................................................................................
Sub-total ............................................................................................................
Payments of special retirement benefits ................................................................
Payments for income taxes ..................................................................................
Net cash provided by operating activities ...........................................................

A n n u a l

2002

A n n u a l

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

2003

72

73

Notes to Consolidated Financial Statements

Inventories

Research and development expenses

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

Research and development expenses are charged to income as incurred.

Marketable securities and investment securities

Accounting for leases

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

Finance leases other than those which are deemed to transfer the ownership of the leased assets to lessees are accounted
for in the same manner as operating leases under generally accepted accounting principles in Japan.

Non-marketable securities are stated at cost determined by the average method. For other than temporary declines in fairvalue, investment securities are reduced to net realizable value by a charge to income.
Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost. Major renewals and additions are capitalized, while minor renewals,
maintenance and repairs are charged to income when incurred. Interest expenses on capital expenditures during theconstruction stage are not capitalized.
Depreciation of property, plant and equipment is principally computed by the declining-balance method at rates based on
estimated useful lives. However, depreciation of buildings acquired on or after April 1, 1998 is computed by the straight-line
method.
The estimated useful lives for depreciation purposes range as follows:
Buildings

3 to 50 years

Machinery and equipment

2 to 13 years

Assets with an acquisition cost of ¥100,000 ($833) or more per unit and less than ¥200,000 ($1,667) per unit, acquired on orafter April 1, 1998, are depreciated over three years on a straight-line basis, whereby one-third of such acquisition cost may
be taken as depreciation expense each year.

Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferredtaxes are measured by applying currently enacted tax laws to the temporary differences.
Income taxes on undistributed earnings have been provided for foreign subsidiaries, but not for domestic companies, assuch earnings, if distributed in the form of dividends, are not taxable under the current Japanese tax laws.
Derivatives and hedging activities
The Company and certain consolidated subsidiaries use derivative financial instruments (“derivatives”) for foreign currency
forward contracts to manage their exposures to fluctuations in foreign exchange associated with certain accounts receivableand payable, including forecasted transactions, denominated in foreign currencies. The Company and its subsidiaries do notenter into derivatives contracts for speculative purposes.
While the trade accounts receivable and payable denominated in foreign currencies of the Company and domestic
subsidiaries which are comprehensively covered by foreign currency forward contracts are translated at the exchange rate at
the balance sheet date, such forward contracts are recognized as assets or liabilities and measured at fair value, and therelated gains or losses are currently recorded in the statement of income.
The trade accounts receivable and payable denominated in foreign currencies of the Company and domestic subsidiaries
which are individually covered by foreign currency forward contracts are translated at the contracted rates because suchtreatment is also allowed to be elected under the standard if the forward contracts qualify for hedge accounting.
The forward contracts for forecasted transactions such as export sales and import purchases are measured at the fair value
but the unrealized gains/losses are deferred until the underlying transactions are completed.

Intangible assets

3. Basis of Translating Financial Statements
The consolidated financial statements are expressed in Japanese yen in accordance with accounting principles and practices
generally accepted in Japan. The Japanese yen amounts have been translated into U.S. dollar amounts, solely for theconvenience of the reader, at the rate of ¥120=U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange
Market at March 31, 2003. These translations should not be construed as representations that the yen amounts actually
represent, or have been or could be converted into U.S. dollars.

D N P

D N P

A n n u a l

R e p o r t

2 0 0 3

The transitional obligation determined as of April 1, 2000 is being amortized over 5 years. The transitional obligation was a
net amount after deducting the contributed securities to the employees’ retirement benefits trust from the gross amount oftransitional projected benefits obligation determined as of April 1, 2000.

Primary amounts of net income per share were computed on the average number of shares of common stock outstanding
after deducting treasury stocks during each year. Fully diluted amounts of net income per share were based on theassumption that all convertible bonds were converted into common stock at the beginning of the year.

2 0 0 3

Effective April 1, 2000, the Company and several domestic significant consolidated subsidiaries applied a new accounting
standard for employees’ retirement benefits and accounted for the liability for retirement benefits based on projected benefit
obligations and plan assets at the balance sheet date.

Net assets per common share were computed based on the number of shares outstanding after deducting treasury stock at
March 31, 2003 and 2002, respectively.

R e p o r t

Liability for retirement benefits

Net assets and income per common share

A n n u a lIntangible assets included in other assets are carried at cost less accumulated amortization calculated by the straight-line
method over their estimated useful lives. Software development costs for internal use included in intangible assets areamortized by the straight-line method over 5 years.

74

75

Notes to Consolidated Financial Statements

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2003 and 2002 were comprised of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

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

¥

2002

238,896¥

189,6152003$ 1,990,800

The redemption schedules for securities with maturities classified as held-to-maturity debt securities and other securities at
March 31, 2003 and 2002 are as follows:
Millions of yen

March 31, 2003

Due in one year or lessCorporate bonds ................................................................................................
Other bonds .......................................................................................................

¥

50
50

¥

Due after one year
through five years

¥

82
1
83

¥

Due after five years
through ten years

¥

5,000
5,000

¥

Thousands of U.S.dollars (Note 3)

5. Marketable Securities and Investment Securities

Due in one year or less

The acquisition cost and aggregate fair value of marketable and investment securities classified as available-for-sale securities
as of March 31, 2003 and 2002 were as follows:
Millions of yen¥

59,187
109
59,296¥¥

11,675
11,675

Unrealized loss

¥

7,314
7,314

¥

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

$$

493,225908
494,133

Unrealized gain$$

97,292
97,292¥¥

Unrealized loss$

60,95060,950

$

$

683
8
691

63,548109
63,657Due in one year or less

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

¥¥

83,818
252
84,070

Unrealized gain¥¥

17,982
17,982

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

$$

529,567908
530,475¥¥

Fair value

5
3,160
3,165

¥

6
11
17

¥

¥

15,143102
15,245

2003

Fair value¥¥

86,657150
86,807

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

¥¥The proceeds from sales of available-for-sale securities for the years ended March 31, 2003 and 2002 were ¥138 million($1,150 thousand) and ¥1,022 million, respectively. The gross realized gains on these sales for the years ended March 31,
2003 and 2002 were ¥50 million ($417 thousand) and ¥336 million, respectively, and the gross realized losses on those sales
for the years ended March 31, 2003 and 2002 were ¥97 million ($808 thousand) and ¥771 million, respectively.

2003

Thousands of
U.S. dollars (Note 3)

2002

¥
¥

13,0002,182

24,251
97¥¥

22,093
81

35,101
26,283
13,31874,702¥¥

34,10928,907
13,38576,401Long-term debt at March 31, 2003 and 2002 consisted of the following:

2003

Yen

$
$

41,667
425

2003

$

$

292,508
219,025
110,984
622,517$$

202,092
808

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

2002

2003

Unsecured convertible debentures
1.5% due 2003 .......................................................................
1.8% due 2004 .......................................................................

¥
¥

2002

¥

2,027.00
2,677.40¥

Mortgage loans, maturing 2003-2004 ..........................................
Unsecured loans, maturing 2003-2010 ........................................
Current portion of long-term debt............................................
¥

29,663
2,310
12,79744,770(36,070)
8,700

¥

¥

19,181
29,663
2,922
1,923
53,689(19,959)
33,730$$247,192
19,250106,641
373,083(300,583)
72,500

D N P

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

5,000
51

Thousands of
U.S. dollars (Note 3)

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

Conversion price¥¥¥

12,00012,000

D N P

A n n u a l

R e p o r t

2 0 0 3

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

¥

Short-term bank loans at March 31, 2003 and 2002 were represented by bank loans and bank overdrafts, etc. bearing
interest at an average rate of 2.73% per annum for 2003 and 3.74% per annum for 2002.

The following summarizes carrying amounts of securities with no fair value as of March 31, 2003 and 2002:
Millions of yen

Due after five years
through ten years

6. Inventories
Millions of yen

Unrealized loss¥$

Due after one year
through five years

Inventories at March 31, 2003 and 2002 consisted of the following:
Acquisition cost

41,667
41,667

Millions of yen

March 31, 2002

Millions of yen

March 31, 2002$

Fair value

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

2 0 0 3¥

Unrealized gain

417
417

R e p o r t

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

Acquisition cost$

Due after five years
through ten years

A n n u a lMarch 31, 2003

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

Due after one year
through five years

76

77

Notes to Consolidated Financial Statements

Mortgage loans were secured by property, plant and equipment amounting to ¥1,732 million ($14,433 thousand) and ¥1,799
million at March 31, 2003 and 2002, respectively.
With minor exceptions, interest rates on mortgage loans ranged from 0.88% to 3.30% per annum for 2003 and from 1.01%
to 3.30% per annum for 2002, while interest rates on unsecured loans ranged from 0.35% to 4.15% per annum for 2003 andfrom 1.68% to 4.12% per annum for 2002.
The aggregate annual maturities of long-term debt after March 31, 2003 were as follows:

Millions of yen

Thousands of
U.S. dollars (Note 3)

Year ending March 31
2004 ...........................................................................................................................................
2005 ...........................................................................................................................................
2006 ...........................................................................................................................................
2007 ...........................................................................................................................................
2008 ...........................................................................................................................................
2009 and thereafter ....................................................................................................................

¥¥

36,070
2,553
2,397
1,885
1,000
865
44,770$$300,583
21,275
19,975
15,7088,333
7,208
373,083

The above convertible debentures are currently convertible into approximately 11,079,031 shares of common stock.

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

Millions of yen

2003

Service cost............................................................................................................
Interest cost............................................................................................................
Expected return on plan assets...............................................................................
Amortization of transitional projected benefits obligation .........................................
Actuarial loss ..........................................................................................................
Amortization of prior service cost ...........................................................................
Net periodic benefits costs .....................................................................................

¥

¥

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

2002

¥

¥

7,625
6,237
(3,169)
6,065
4,134
(848)
20,044

2003$$

67,184
48,883(20,891)
50,27565,208(7,067)
203,592

Assumptions used for the years ended March 31, 2003 and 2002 were set forth as follows:

Discount rate..................................................................................................................................
Expected rate of return on plan assets ...........................................................................................
Recognition period of actuarial gain/loss ........................................................................................
Amortization period of transitional obligation...................................................................................
Amortization period of prior service cost.........................................................................................

2003

2002

2.5%
2.9%
11 years
5 years
6 years

3.0%
3.2%
11 years
5 years
6 years

8. Retirement Benefits

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

¥

204,084(101,799)(18,197)(44,026)
4,240
33¥
44,335$ 1,913,950(779,400)(100,567)(580,642)
28,267
159$
481,767¥

The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies torepurchase treasury stock by a resolution of the stockholders at the general stockholders meeting and dispose of suchtreasury stock by resolution of the Board of Directors beginning April 1, 2002. The repurchased amount of treasury stockcannot exceed the amount available for future dividend plus amount of common stock, additional paid-in capital or legal
reserve to be reduced in the case where such reduction was resolved at the general stockholders meeting.
The amount of retained earnings available for dividends under the Code was ¥567,538 million ($4,729,483 thousand ) as ofMarch 31, 2003, based on the amount recorded in the parent company’s general books of account. In addition to theprovision that requires an appropriation for a legal reserve in connection with the cash payment, the Code imposes certain
limitations on the amount of retained earnings available for dividends.
Dividends are approved by the stockholders at a meeting held subsequent to the fiscal year to which the dividends areapplicable. Semi-annual interim dividends may also be paid upon resolution of the Board of Directors, subject to certain
limitations imposed by the Code.
Cash dividends and appropriations to legal reserve charged to retained earnings during the years ended March 31, 2003
and 2002 represented dividends paid out during those periods and related appropriations to this reserve. The accompanying

D N P

¥

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

2003

The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends andcertain other appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriatedas a legal reserve (a component of retained earnings) until such reserve and additional paid-in capital equals 25% of common
stock. The amount of total additional paid-in capital and legal reserve that exceeds 25% of the common stock may beavailable for dividends by resolution of the stockholders. In addition, the Code permits the transfer of a portion of additional
paid-in capital and legal reserve to the common stock by resolution of the Board of Directors.

D N P

A n n u a l

R e p o r t

2 0 0 3

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

2002

The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded with no parvalue and at least 50 % of the issue price of new shares is required to be recorded as common stock and the remaining net
proceeds as additional paid-in capital, which is included in capital surplus. The Code permits Japanese companies, upon
approval of the Board of Directors, to issue shares to existing stockholders without consideration as a stock split. Suchissuance of shares generally does not give rise to changes within the stockholders’ accounts.

2 0 0 3The liability for employees’ retirement benefits at March 31, 2003 and 2002 consisted of the following:

Japanese companies are subject to the Japanese Commercial Code (the ‘‘Code’’) to which certain amendments became
effective from October 1, 2001.

R e p o r t

The employees’ pension fund also includes the portion representing the governmental social welfare pension program which
is funded equally by employees and employers in accordance with the welfare pension regulations.

9. Stockholders’ Equity

A n n u a l

The Company and one of its domestic subsidiaries have contributory defined benefits retirement plans covering substantiallyall of their employees. Most of the other domestic subsidiaries have non-contributory defined benefits retirement plans. Upon
retirement or termination of employment for reasons other than the cause of dismissal, employees are entitled to lump-sum
payments based on the current rate of pay and length of services. Thirty percent of the retirement benefit liability of theCompany and the total of such liabilities of one of the domestic subsidiaries are covered by the employees’ pension fundwhich is established in accordance with the Welfare Pension Insurance Law.

78

79

Notes to Consolidated Financial Statements

consolidated financial statements did not include the semi-annual dividend of ¥10.0 ($0.08) per share, aggregating ¥7,418
million ($61,817 thousand) and the related appropriation to legal reserve of the Company, which were approved at the generalstockholders’ meeting held in June 2003 with respect to the year ended March 31, 2003.
During the years ended March 31, 2003 and 2002, there were no issuance of common stock by the Company in connection
with conversion of debentures.

10. Accounts with Non-consolidated Subsidiaries and Associated Companies
Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2003 and 2002 weresummarized as follows:

2002

¥

5,747
269
5,923
5,451
277
5,600
3,549

2003

$

60,592
48,82534,442
69,9173,050
35,133
13,508

2003

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

2002

42.0%
1.7
(13.7)
2.6
32.6%

Net deferred tax assets and liabilities at March 31, 2003 and 2002, resulting from temporary differences between the carrying
amounts and the tax bases of assets and liabilities, were reflected on the accompanying consolidated balance sheets under
the following captions:Thousands ofMillions of yen

2003

11. Selling, General and Administrative Expenses

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

Selling, general and administrative expenses for the years ended March 31, 2003 and 2002 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

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

¥

¥

2002

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

15,3593,017
42,974
8,974
3,814
6,412
11,514
18,44958,016
168,529

2003

132,883
8,250
361,142
81,06739,71773,86797,425
172,200
497,324$ 1,463,875

2 0 0 3

12. Other Income

R e p o r t

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

¥

U.S. dollars (Note 3)

2002

¥

9,891
47,98957,880

¥

267

¥

2003

¥

7,603
29,79737,400$82,425399,908
482,333

¥

162

$

2,225

$

$

Total research and development expenses (including manufacturing costs) amounted to ¥24,097 million ($200,808 thousand)and ¥23,367 million for 2003 and 2002, respectively.

Significant components of deferred tax assets at March 31, 2003 and 2002 were as follows :Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

Current:
Excess provision for doubtful receivables .............................................................
Loss on devaluation of inventories........................................................................
Excess accrued expenses....................................................................................
Other ...................................................................................................................
Total ..................................................................................................................
Non-current:
Excess provision for retirement benefits ...............................................................
Loss on devaluation of investment securities ........................................................
Other ...................................................................................................................
Total ..................................................................................................................

¥

¥

¥

¥

2002

960
1,227
5,780
1,924
9,891

¥

22,14524,677
1,167
47,989

¥

¥

¥

2003

1,060
2,217
2,460
1,866
7,603

$

16,49313,099205
29,797

$

$

$

8,000
10,225
48,167
16,03382,425

184,542
205,6429,724
399,908

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

2003

¥

227
1,223

¥

94
1,665

2003

$

1,892
10,192

D N P

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

2002

On March 31, 2003, a tax reform law concerning enterprise tax was enacted in Japan which changed the normal effective
statutory tax rate from 42% to 40.5%, effective for years beginning on and after April 1, 2004. The effect of this change wasto decrease deferred tax assets –non-current and income taxes-deferred by ¥1,527 million ($12,725 thousand) and ¥1,591
million ($13,258 thousand), respectively, and to increase unrealized gain on available-for-sale securities by ¥63 million ($525
thousand) in the consolidated financial statements for the year ended March 31, 2003.

D N P

A n n u a l

42.0%
2.3
(3.5)
(1.3)
39.5%

2 0 0 3

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

Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate was as follows:R e p o r t¥

The actual effective tax rate reflected in the accompanying consolidated statements of income differs from the normal effective
statutory tax rate primarily due to the effect of permanently non-deductible expenses, current operating losses of subsidiaries
and different tax rates applicable to foreign subsidiaries, etc.

A n n u a lTrade receivables....................................................................................................
Other current assets ...............................................................................................
Investment securities (stock) ...................................................................................
Long-term loans .....................................................................................................
Other investments...................................................................................................
Trade payables .......................................................................................................
Accrued expenses ..................................................................................................

The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 42% for the years ended March 31, 2003 and2002, respectively.

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

13. Income Taxes

80

81Notes to Consolidated Financial Statements

14. Leases
Where finance leases do not transfer ownership of the leased property to the lessee during the lease terms, the leased
property is not capitalized and the related lease expenses are charged to income in the period incurred, as per the statement
issued by the Business Accounting Deliberation Council of Japan.

Fair value of Derivative Financial Instruments:
The contracted amount and fair value of derivatives for foreign currency forward contracts at March 31, 2003 and 2002 wereas follows:
Millions of yen

2003
Pro forma information such as acquisition cost, accumulated depreciation and net book value of the leased properties forsuch finance lease purposes was as follows:
Thousands ofMillions of yen

2003

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

¥¥

U.S. dollars (Note 3)

2002

43,181(23,289)
19,892¥¥54,532(33,524)
21,008

2003$$

359,842(194,075)
165,767

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

Contracted amount¥

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

11,12912

Fair value¥

11,22413(35)
11,106 ¥(35)
11,202

Unrealized gain

¥

95
1
96

¥

Thousands of U.S. dollars (Note 3)

2003
Lease expenses on finance lease contracts without ownership-transfer amounted to ¥12,391 million ($ 103,258 thousand)and ¥11,124 million for the years ended March 31, 2003 and 2002, respectively.
The amounts of outstanding future payments under finance leases due on March 31, 2003 and 2002, including the portion ofinterest thereon, were summarized as follows:
Thousands ofMillions of yen

2003

(292)
92,550 $(292)
93,349

$

$

792
8
800

¥
¥

9,475
11,53321,008$$66,47599,292
165,767

¥
¥

371
1,430
1,801

¥

Receivables:
U.S.dollars .............................................................................................................
Deutsche mark ......................................................................................................

578
955
1,533

¥

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

U.S. dollars (Note 3)

2002

¥

2002

Contracted amount

11,169
9Fair value¥

11,39410(202)
10,976 ¥(198)
11,206

Unrealized gain

¥

¥

225
1
4
230

2003

$
$

3,092
11,91615,008

15. Derivative Financial Instruments
Nature of Derivative Financial Instruments:
The Company and certain consolidated subsidiaries enter into derivative financial instruments (“derivatives”) for foreign
currency forward contracts to hedge foreign exchange risks associated with certain accounts receivable and accounts
payable, including forecasted transactions, denominated in foreign currencies. The Company and its subsidiaries do not holdderivatives for speculative purposes.

16. Contingent Liabilities
The Company was guarantor of bank loans of an other company, amounting to approximately ¥94 million ($783 thousand). It
is common practice in Japan for companies, in the ordinary course of business, to receive promissory notes in settlement oftrade accounts receivable and to subsequently discount such notes at banks. At March 31, 2003 and 2002, the Company
and its consolidated subsidiaries were contingently liable on trade notes discounted in the amount of ¥1,400 million ($11,667
thousand) and ¥1,686 million, respectively. Notes discounted were accounted for as sales.

17. Subsequent Event

D N P

The Company and one of its domestic subsidiaries have contributory defined benefits pension plans. These plans, which areestablished under the Welfare Pension Insurance Law, cover substitutional portion of the governmental social welfare pension
program managed by the Company and the subsidiary on behalf of the government and corporate portion established at thediscretion of the Company and the subsidiary. According to the enactment of the Defined Benefit Pension Plan Law in April
2002, the Company and the subsidiary had applied for exemption from obligations to pay benefits for future employee

D N P

Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to majorinternational financial institutions, the Company and its subsidiaries do not anticipate any losses arising from credit risks. The
basic policies for the use of derivatives are established in the Company’s internal regulations and the execution and control ofderivatives are controlled by the Accounting Department.

Fair value was determined based on the foreign currency forward exchange market rates. Foreign currency forward contracts
which qualified for hedge accounting for the years ended March 31, 2003 and 2002 and were assigned to the associatedassets and liabilities or deferred until completion of the forecasted transactions were excluded from disclosure of the above
fair value information.

2 0 0 3

7,977
11,91519,8922003

2 0 0 393,533108

R e p o r t¥Millions of yen

R e p o r t

$

2003

The amounts of outstanding future payments under operating leases due on March 31, 2003 and 2002 were also summarized
as follows:
Thousands of

A n n u a l$

92,742100

Unrealized gain

Millions of yen¥

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

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

U.S. dollars (Note 3)

2002

$

Fair value

A n n u a l

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

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

Contracted amount82

83

Notes to Consolidated Financial Statements

services related to the substitutional portion which would result in the transfer of the pension obligations and related assets to
the government by another subsequent application. The Company obtained an approval of exemption from future obligations
by the Ministry of Health, Labor and Welfare on June 1, 2003 and the subsidiary, whose fiscal year end is December 31,
obtained such approval on January 30, 2003, respectively. As a result of these exemptions, the Company determined torecognize gain on exemption from future pension obligations of the governmental program in the amount of approximately¥6,100 million ($50,833 thousand) in accordance with a transitional measurement of the accounting standard for employees’
retirement benefits in the consolidated financial statements for the fiscal year ending March 31, 2004.

18. Business Segment Information
Industry segments:

The Company's primary business industries principally consist of Printing and Beverage operations. The Printing businessincludes three segments : Information Communication, Lifestyle and Industrial Supplies, and Electronics.
The following tables present certain financial information, including net sales, costs and expenses, operating income, assets,
depreciation and capital expenditures regarding the Company's industry segments at March 31, 2003 and for the year thenended.

Information
Lifestyle andCommunication Industrial Supplies

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

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

Electronics¥¥

208,138
242
208,380
180,063
28,317

Beverages

¥

¥

Total

Millions of yen

Printing

For 2002 :Information
Lifestyle andCommunication Industrial Supplies

Net sales :Outside customers ...................... ¥Inter-segment ..............................
Total .......................................
Costs and expenses ....................
Operating income ................... ¥651,216
8,025
659,241
610,191
49,050¥Assets, depreciation and capital
expenditures :Assets ........................................ ¥Depreciation ................................ ¥Capital expenditures .................... ¥498,624
27,351
29,070Electronics¥¥

410,705
235
410,940
390,991
19,949¥¥¥377,060
27,734
17,833

Beverages¥¥

176,914
176,914168,324
8,590

¥
¥
¥

230,591
33,75031,426

Total¥ 1,311,934
8,260
1,320,194
1,242,030¥
78,164¥¥73,09973,09972,524575¥¥¥

51,507
3,734
4,229¥ 1,157,782¥
92,569¥82,558¥¥¥Elimination and/or corporate

71,833 ¥ 1,309,002 ¥2
11,304
71,835
1,320,306
72,001
1,223,487(166) ¥
96,819 ¥Consolidated

484,957
24,173
16,941¥¥¥

382,773
26,333
17,170¥¥¥270,647
32,94030,575¥¥¥53,9903,707
7,172

Consolidated- ¥ 1,311,934(8,260)(8,260)1,311,934(2,338)1,239,692(5,922) ¥72,242¥

274,676
2,301
2,538

¥ 1,432,458¥
94,870¥85,096- ¥ 1,309,002(11,304)(11,304)
1,309,002(4,366)
1,219,121(6,938) ¥89,881

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, 2003 and 2002.
Overseas sales:
Overseas sales of the Company and its consolidated subsidiaries for the years ended March 31,2003 and 2002.

¥ 1,192,367 ¥¥
87,153 ¥¥71,858 ¥257,660
2,086
1,931

¥ 1,450,027¥
89,239¥73,789Elimination and/or corporate

Consolidated

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

Assets, depreciation and capital
expenditures :Assets ........................................ ¥Depreciation ................................ ¥Capital expenditures .................... ¥Elimination and/or corporate

Information by geographic area:

Millions of yen

Printing

For 2003 :According to the revised classification of industry and revised allocation of basic research and development expenses, etc. theindustry segment information for the year ended March 31,2002 was as follows :Overseas sales
Consolidated net sales
Ratio(a) .....................................................................
(b).....................................................................
(a)/(b) ................................................................

¥

2002

2003

183,996¥ 150,816$ 1,533,300
1,309,002
1,311,934
10,908,350
14.1%
11.5%
14.1%

Thousands of U.S. dollars (Note 3)

Printing

Net sales :Outside customers ...................... $ 5,097,950
Inter-segment ..............................
68,083
Total ....................................... 5,166,033
Costs and expenses .................... 4,832,092
Operating income ................... $ 333,941$ 3,477,309
24,0833,501,392
3,263,100$ 238,292$ 1,734,483
2,017
1,736,500
1,500,525$ 235,975$$

598,608 $ 10,908,350 ¥17
94,200598,625
11,002,550
600,008
10,195,725(1,383) $806,825 $Assets, depreciation and capital
expenditures :Assets ........................................ $ 4,041,308
Depreciation ................................ $ 201,442
Capital expenditures .................... $ 141,175$ 3,189,775$ 219,442$ 143,083$ 2,255,392$ 274,500$ 254,792$$$

449,91730,891
59,767- ¥10,908,350(94,200)(94,200) 10,908,350(36,383) 10,159,342(57,817) $ 749,008$ 9,936,392 $ 2,147,166$
726,275 $
17,383$598,817 $
16,091$12,083,558$ 743,658$ 614,908

D N P

Effective April 1, 2002, according to the newly established Company Group's Vision for the 21st Century, the Company changed
the classification of industry segments from two segments, Printing and Beverage, to the above four segments. Also, the basic
research and developments expenses and the Company's investing fund and the assets related to the basic research anddevelopment division, which had been fully charged to the Printing industry segment for 2002, were stated under the elimination
and/or corporate column for 2003 because such items could not reasonably be allocated to each four segment.

2 0 0 3Total

R e p o r t

Beverages

A n n u a lElectronics

D N P

A n n u a l

R e p o r t

2 0 0 3

Information
Lifestyle andCommunication Industrial Supplies

84

85

Investor Information

Report of Independent Certified Public Accountants(as of March 31, 2003)

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

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, 2003 and 2002, and the related consolidated statements of income,stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Dai Nippon Printing Co., Ltd. and consolidated subsidiaries at March 31, 2003 and 2002, and the results of
their operations and their cash flows for the years then ended in conformity with accounting principles generally acceptedin Japan.

Head Office:Stock Exchange Listings:

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

Tokyo, Osaka, Nagoya, Luxembourg, Amsterdam

Tokyo 162-8001, Japan
Transfer Agent:
Established:

Mizuho Trust & Banking Co., Ltd.

1876

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

Number of Employees:

Annual Meeting of Shareholders:
Paid-in Capital:

The annual meeting of shareholders of DNP is normally held

¥114,464 million

in June each year in Tokyo, Japan

Number of Common Stocks:

Investor Relations:

Authorized

1,200,000,000 shares

Dai Nippon Printing Co., Ltd.

759,480,693 sharesPress and Public Relations

IssuedAs discussed in Note 18, the Company changed the classification of industry segments and the method of allocating basic
research and development expenses, and assets to each segment in the segment information.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 3. Such U.S. dollar amounts are presented solely forthe convenience of readers outside Japan.

Phone: +813-5213-5213

35,182

1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku,
Number of Shareholders:Tokyo 162-8001, Japan(more than 1,000 shares)

Phone:

26,709+813-5225-8220

Facsimile:+813-5225-8239

E-mail:info@mail.dnp.co.jp

Major Shareholders:(non-consolidated)Tokyo, Japan
June 27, 2003

MEIJI AUDIT CORPORATION

Japan Trustee Services Bank, Ltd.

5.66%

The Master Trust Bank of Japan, Ltd.

5.57

The Dai-Ichi Mutual Life Insurance Co.

4.56

Mizuho Corporate Bank, Ltd.

4.04

Mizuho Bank, Ltd.

2.97

Nippon Life Insurance Co.

2.92

Dai Nippon Printing Co., Ltd.

2.32

Euroclear Bank S.A./N.V

1.69

State Street Bank and Trust Company

1.65

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

1.53

Web Site Address:
http://www.dnp.co.jp/86

2 0 0 3

2002

2003

Low

High

Low

High

Low

1st Quarter¥1,970¥1,690¥1,730¥1,420¥1,762¥1,436

2nd Quarter

1,935

1,605

1,503

1,090

1,660

1,227

3rd Quarter

1,750

1,535

1,412

1,147

1,469

1,125

4th Quarter

1,731

1,315

1,569

1,154

1,340

1,113

R e p o r t

2001

High

A n n u a l(For the years ended March 31, 2001, 2002 and 2003)

D N P

D N P

A n n u a l

R e p o r t

2 0 0 3

Common Stock Price Range (Tokyo Stock Exchange)

87