Printing & Beyond

DNP Annual Report 2005
Year ended March 31, 2005

Ta b l e o f C o n t e n t s

Message to Our Shareholders
DNP in Brief

28Electronics
Business Strategies

58
58

Financial Results

61

Topics63

Outline10

Key Figures for 2005

12

Sustainable Development

DNP At a Glance

14

Legal Compliance and Corporate Ethics

68

DNP Solutions Businesses

16

Product Safety

70

Major Events of the Fiscal Year Ended March 2005

18

Information Security

71

Corporate Governance

20

Managing Intellectual Property

72

Board of Directors, Statutory Auditors and Corporate Officers 23

Approach to Research & Development

74

Investor Information

Environmental Protection

75

Special Feature:

Printing & Beyond

224

26

Expansion of Printing Technology

28

The History of DNP’s Business Development

29

Printing Processes and Expansion Printing

30

Technologies and Their Applications

32

The Limitless Possibilities of Expansion Printing

40

Segment Information

42

Information Communication

44

Business Strategies

44

Financial Results

46

Topics48

Lifestyle & Industrial Supplies
Business Strategies

66

Creating Lively Workplaces

76

Contributing to Art & Culture

79

Financial Section

80

Management’s Discussion and Analysis

82

Selected Financial Data

92

Consolidated Financial Statements

94

Notes to Consolidated Financial Statements

99

Report of Independent Certified Public Accountants

114

Major Subsidiaries and Affiliates

115“Ukiyo-e” Woodblock Prints Usedin the DNP 2005 Annual Report

117

52
52

Financial Results

54

Topics56

Ukiyo-e: The Starting Point of Japanese Printing
The roots of today's printing, with its lines drawn to nanometer-level precision, can be found in the Ukiyo-e
woodblock prints that first appeared during the Edo Period (1603-1867). The single-minded craftsmanship thatwas expressed in each strand of human hair and each streak of rain lives on today in modern Japanese printing.
Printing technology has already developed far beyond what anyone could have imagined in the past. With theadvent of an emergent society, the possibilities for the future are infinite.

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

Yoshitoshi Kitajima
Chairman of the Board
President and Chief Executive Officer2

F i s c a l Ye a r R e s u l t s

Higher revenues and profits in every
segment

Record high sales, operating profitsand net profits

This year’s positive results included higher
sales and profits in every segment. In
Information Communication, sales of printed
materials like books and periodicals weresluggish, but commercial printing, such as
flyers and pamphlets, increased as economic
recovery stimulated advertising activity.
Among business form-related items, ledger
sales were slow, but we gained an
overwhelming share of the smart-card market
by making the most of our best-in-theindustry expertise and providing sophisticatedsecurity technologies such as biometric identification. Also, our information processing
services (IPS) business did well. As a result,the Information Communication segment’s
net sales grew 1.7% from the previous year, to640.7 billion yen, while operating income
grew 13.0% to 49.4 billion yen.

Despite a difficult business environment,
we are very happy to be able to report that
DNP achieved growth to record levels notjust in sales, but also in operating and net
profits. We believe this shows that our efforts
toward expanding our business under the“P&I Solutions” vision, whereby we combine
printing and information technologies tooffer customers unique solutions, have begun
to pay off in a variety of ways.
This fiscal year, DNP’s net sales rose 5.2%
over the previous year to 1,424.9 billion yen,marking a record high for the second year ina row. Operating income (up 17.7% to 120.5
billion yen) and net income (up 13.1% to59.9 billion) all rose for the third consecutive
term and reached record levels.

Message to Our Shareholders

Message to Our Shareholders

3In the packaging sector of Lifestyle &Industrial Supplies, sluggish personal
consumption and other factors resulted in flatsales of paper containers. However, for the
fourth consecutive term, several beverage
manufacturers adopted our aseptic fillingsystems for PET bottles, so we enjoyed agreat increase in sales of preform bottles.
Sales of film packaging and paper cups also
increased. In decorative materials, we
succeeded in expanding our market share,both domestically and overseas, of healthy
and environmentally friendly decorative
sheets for building interiors. In Industrial
Supplies, sales grew greatly thanks to a boost
in the production capacity of functional
optical films used for displays. Sales of ink
ribbons for plain-paper fax machinesdeclined, but ink ribbons for color printerssold well, thanks to an expanded market for
printing photos taken with digital cameras. As
a whole, the Lifestyle & Industrial Supplies
segment’s net sales increased by 5.6% yearon-year to 450.0 billion yen, while operating
income grew 11.0% to 36.0 billion yen.
In the Electronics segment, unit prices for
LCD color filters declined, but there was stilla sharp rise in revenues from manufacturersof computer monitors and home televisions,partially due to the start-up of a new fifthgeneration production line at our Mihara
plant in Hiroshima. Sales of shadowmasksalso increased greatly, mainly for use in home
televisions. Partly due to a boost in production in Italy as of October 2003, photomask
sales were good, with demand focusing on
leading-edge products in Japan and overseas.
Overall, we achieved major increases in sales
and profits in our Electronics segment: sales

4

grew 14.0% to 269.6 billion yen, andoperating income climbed 20.2% to 39.7
billion yen.
Meanwhile, in the Beverages segment, we
worked actively to promote sales throughvarious campaigns, but the market was
sluggish in the Hokkaido region, and sales
volume declined, in part due to the effects ofan unusually severe typhoon. Given thissituation, we set about to improve our costcompetitiveness and profitability potential,
based on our medium-term business plancalled “Rebirth 2006.” This included a review
of our labor-force structure, the reorganizingof our sales systems by sales channel, consolidating our vending machine-operating
subsidiaries, and closing our Obihiro plant.
As a result, Beverages sales grew 4.7% to 73.0
billion yen. Operating income was 1.6 billion
yen, compared to an operating loss of 372
million yen the previous year.

Medium-term Vision“P&I Solutions” Focus Has Begun
Contributing Greatly to Profits
In May 2001, the DNP Group declared our
new corporate philosophy to “contribute to
the intellectually active, prosperous, evolving
society of the 21st century.” By “emerging”
we mean a situation whereby mutual stimulation between individuals results in thecreation of new values, and that the new value
acts upon the whole to uplift the individuals.
In an “emerging society,” people who hold avariety of values stimulate each other andcreate new values.
In this type of society, how DNP uses its

recipient. This type of service delivers
optimal message contents to each consumer,
which is very important in customer relationship management (CRM) communications.
To prepare for the enforcement of the
Personal Information Protection Act in April
2005, companies that send direct mail worked
actively to put information security measuresin place. DNP responded by taking ironclad
measures such as obtaining Privacy Markcertification not only for our IPS divisions,but for all divisions that handle personal
information. In order to increase information
security, we also offer smart card-protected
services and data storage systems. We intend
to continually and strongly promote the kindof high-added-value solutions-based
businesses that only DNP can offer.

Message to Our Shareholders

technologies to create new values and how werealize sustainable growth are questions that
underpin our corporate vision – the ideas thatindicate the direction in which the company
should move. Our vision is to be a “P&I
Solutions” provider. In other words, tocombine the printing technology (P) that we
fostered since our company’s establishmentwith the information technology (I) that webegan to accumulate from the first part of the
1970s, and use that blend to solve a variety ofproblems for our customers.
In the four years since adopting this vision,
we have been offering P&I Solutions in theawareness that the source of our revenues lies
in solving our customers’ problems. Twoconcrete examples of this are cards and information processing services, and these havebeen steadily producing results.
Demand for cards is soaring due to theneed to prevent card forgeries. DNP
currently produces almost all of the cards
issued by Japanese megabanks. Not only is
this due to the highly sophisticated manufacturing technology that supports our trackrecord, but also because of our ability todevelop solutions for all operating systems,
including Java, MULTOS, and FeliCa, and touse new technologies such as biometricidentification. In addition this is due to theorganizational strength that enables us tooperate cards after they are issued and ourability to propose new services and solutions
based on our comprehensive strengths.
In the IPS field, also, our comprehensive
strengths and ability to propose solutions has
led to expanded business. IPS is a genericname for data processing services whereby
different information is directed to eachAccelerating Our P&I Solutions
Businesses
The printing industry depends on receiving
orders from customers. DNP provides books,
periodicals, pamphlets and other basic
printed materials that are customized for eachof our regular customers. Since our founding
129 years ago, we have visited customers
frequently. We ask about their various needs
and respond with concrete solutions.
The aim of P&I Solutions is to get a good
grasp of what customers need and want, andmobilize DNP’s comprehensive corporate
power to offer new, customized solutions that
extend beyond traditional printed materials,
possibly to include software and services.
DNP has customers in every industrial sector,
and as society changes, their needs change invarious ways. We have already been working
for some time on realizing P&I Solutions, but

5given the diverse values in the emerging
society of the 21st century, DNP will face
increasingly sophisticated demands.
When we look at the changes that haveoccurred in the business environment thepast few years, at societal trends, or at ourcustomers’ needs, we feel sure that we havechosen the right path. We intend to keep
exploring possibilities for developing our
P&I Solutions businesses in the future.

In our new businesses, we will strongly
promote the development of advanced,
unique technologies and products, with afocus on fields like information security, IC
tags, biometrics, and energy. We will findways to speed up the commercialization of
new projects. As part of our business structure reform, we intend to actively pursue
alliances and M&As with companies thathave special strengths, whether they arebased in Japan or abroad.

Issues We are Addressing

Concerning cost structure reform, ourLooking ahead, we expect that businesscorporate constitution has grown steadily

conditions will remain very difficult, andstronger over the past three years thanks tothat individual consumption, the world

the “Production 21” activities that we beganeconomy, crude oil prices and other funda-

implementing in April 2002. We will

mental factors will remain unpredictable.

continue to use these activities to promote

We expect the business climate to remain

shared awareness of our corporate goals, toharsh in the printing industry, too, as

strengthen our core technologies, to imple-

lackluster growth in the existing market

ment integrated manufacturing and system-

stimulates intensified competition. Other

atic maintenance, and to boost quality

concerns include rising materials’ prices.

improvement and cost competitiveness.

In this climate, DNP intends to work
harder than ever at business structure reform

To w a r d S u s t a i n a b l e G r o w t h

and cost structure reforms at the same timethat we promote various projects in the
pursuit of our 21st-century vision.
By “business structure reform,” we mean a

6

As a Corporation That Fulfills Its
Social Responsibilities

dramatic review of all our existing opera-

We believe that in order to improve ourtions from the standpoint of profitability.

corporate competitiveness, it is essential that

We will make concentrated allocations of

we fulfill our social responsibilities as amanagement resources in highly profitable,

corporation that finds new values for society

strategic areas, and will concentrate on

and earns the trust of all stakeholders,offering products and services where we can

including shareholders, customers,

make the most of our corporate strengths.

consumers, and employees. We view theWe will respond quickly to customer needs,

fulfillment of our corporate social responsi-

continually create highly functional products

bilities as one of our most importantand services that outshine existing ones, andmanagement concerns. While it goes

strive to create new added values.

without saying that we observe the law andestablish strong corporate governancemaintain integrity in our corporate activi-

systems. We strive to build a comprehensive

ties. This includes coexisting in the global

corporate governance framework thatenvironment, respecting human rights, andsupports appropriate corporate decision-preserving social harmony. In October 2004

making, prompt execution of those

we established a new Corporate Social

decisions, and the construction of manage-

Responsibility Committee and a Corporate

ment systems that can be properly audited

Social Responsibility Office to strengthen

and monitored, while also providing

our management structure.

thorough training and education to each

To protect the environment, we have taken
active steps to conserve energy and reduce
industrial waste. Also, we strive to develop

employee in order to raise awareness of legal
compliance.
We want to listen carefully and earnestly

products with strong consideration forto each of our corporate clients andenvironmental efficiency at every phase,

individual consumers, to unite printing

from product design to distribution to final

technologies, which we fostered over the

disposal. This term, as usual, we establishedcourse of our long corporate history, withDNP Group environmental goals aimed at

information technologies, and to offer

helping to prevent global warming andleading-edge solutions. We are continuallybuilding a sustainable, recycling-oriented

working to strengthen legal compliance andsociety. We have been steadily implementing

to address the various issues that confront

this plan, which includes reductions in theus. We will do everything in our power togeneration of industrial waste and toxic

keep aiming for sustainable growth and to

substances.

maximize values for all of DNP stake-In recognition of our CSR efforts, thisMessage to Our Shareholders

corporate ethics, we have also tried toholders.

February, DNP received the 3rd Annual
Grand Prize for “Key Firm of IntegrityAward 2005” as sponsored by Sankei
Newspaper and the management consulting
company, Kfi. For our environmental
efforts, we won the Minister ofEnvironment’s Award as part of the 14th
Global Environment Awards sponsored by
the Fujisankei Business Group.

Corporate Governance and Corporate
CultureIn order to fulfill DNP’s social responsi-

Yoshitoshi Kitajima
Chairman of the Board
President and Chief Executive Officer

bilities and to develop continuously alongwith society, we believe it is essential that we

7

DNP in Brief

DNP in Brief

10

12

14

16

OutlineKey Figures for 2005

DNP At a Glance

DNP Solutions Businesses

18

20

23

24

Major Events of the Fiscal

Corporate Governance

Board of Directors,
Statutory Auditors andCorporate Officers

Investor Information

Year Ended March 2005

9Outline

ProfileShueisha, the forerunner of Dai Nippon Printing Co., Ltd., was established in 1876 asJapans first full-scale printing company. The company later branched out into a variety offields, including commercial printing, business forms, packaging, decorative materials, industrial supplies, and electronics. Today, DNP has established itself as the leader in the world in
the field of comprehensive printing.
Currently, DNP employs about 35,000 people. In Japan, DNP has 24 division offices inmajor cities, 48 sales bases, and 36 production plants, while overseas it has another 19 sales
offices and seven production plants. The DNP includes 124 consolidated subsidiaries and 3
affiliated companies that are accounted for by the equity method.
In this annual report, DNP refers to the entire DNP Group, and “we” refers to DNP, or to the DNP management team.

Corporate Philosophy
The DNP Group contributes tothe intellectually active,
prosperous, evolving society of
the 21st century.
We expect that progressive computerization will make the 21st century an active one
in which people hold diverse values, respect
each other’s values, and stimulate each otherto create even more new values.
We expect that the resulting new type ofsociety will influence its members to create
still more new values. This cycle will feeditself, causing society and individuals to
evolve and develop. We call this an“emergent” situation.
For us, “emergent” means that individual
and individual as well as individuals andsociety will stimulate each other to generate
new values. In this kind of situation, 1+1 canequal three — or even four or five.

10

Business Vision
We are keenly aware of our mission and our
responsibility as a business partner to ourcustomers. We intend to keep solving all kindsof problems for our customers by providing
valuable products and services, and by offering
unique business models as Manufacturing
Solutions and Business Design Solutions.

Manufacturing Solutions
In partnership with our customers, we solve
their problems by offering products or a combination of products and services that assist
customers in their manufacturing processes.
Business Design Solutions
We solve problems for consumers and forcorporate customers by designing diverse
business models that provide new value.

Business Concept

P&I Solutions DNP(P = Printing Technology, I = Information Technology)

We have been solving a wide variety ofproblems for our customers by integrating “P”
and “I.” By making the most of our knowledge
and expertise, we intend to continue to provide
solutions that generate new value for the
evolving society of the 21st century.

After DNP developed world-class technologies needed to support our printing business, thecompany further developed aspects of each printing process until we could use these expanded
technologies to enlarge our field of business in a variety of directions. As a result, DNP has not
only become a world leader in the printing industry, but has also established a number one
position in many fields, including electronics and information security.
Today, DNP has two main businesses. One is Printing, which is further divided into threestrategic segments: Information Communication, Lifestyle and Industrial Supplies, andElectronics, and the other is Beverages.

DNP in Brief

DNP’s Businesses

Printing
Information Communication
Our Information Communication segment iscomposed of three sub-segments: the printing ofbooks and periodicals, which has been one of ourcore businesses since DNP’s founding, commercial
printing, and business forms. This segment covers
a wide variety of media, including both paper andelectronic media such as internet and DVD
publishing, satellite broadcasting, and services
designed for mobile telephones. In addition tooffering basic printed material, we combine
services like marketing analysis, planning andproduction, system development, media content
creation and distribution, and data security
management, so that we can provide our customers
with solutions for distributing their information by
the most effective media and methods.
Lifestyle and Industrial Supplies
The Lifestyle and Industrial Supplies segment
comprises three sub-segments: packaging,decorative materials, and industrial supplies. Allof these operations handle a large number of
products that are closely connected with ordinary
people’s lives. Starting with printing on non-papermaterials like film or steel, we use coating andetching technologies and other basic printing
skills to make products like optical film used inelectronic displays. DNP is the world’s largest
supplier of a number of products, including ink
ribbons for facsimile machines and barcode
printers, and color ribbons for printing photos
from digital cameras.

Electronics
DNP’s Electronics segment uses the world’s
most advanced micro-processing technology toprovide a large number of electronics products,
including photomasks (original plates used insemiconductor production), and color filters thatallow LCDs to display color images. Ever since
DNP became the first in Japan to succeed atmaking a prototype shadow mask for use in acolor television, the company has developed
electronic devices and display-related productsthat we successfully commercialized one after
another. In this way, we steadily built up a solid
position for ourselves in the electronics sector.
Becoming the first vendor of various products has
given us an edge in the market. In today’s world of
information devices, DNP electronics components are the key to progress.

Beverages
DNP operates a beverages business throughits subsidiary, Hokkaido Coca-Cola BottlingCo., Ltd.

11

Key Figures for 2005

Consolidated Financial Highlights
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2005 and 2004
Yen in millions except per share amounts

2005

Dollars in thousands
except per share amounts% change

2005

2005/2004

13,317,224

5.2%

2004

Fiscal Year¥Net sales

1,424,943¥

1,354,101$

Operating income

120,528

102,438

1,126,430

17.7%

Income before income taxes

107,686

93,137

1,006,411

15.6%

Net income

59,93752,971

560,159

13.1%

0.77

15.5%

—

—

Per Share Data (in yen)
Net income¥

Primary

82.56

Fully diluted

Cash dividends

¥

71.49

—

—

24.00

21.00

$

14.3%

At Year-end¥

Total stockholders’ equity

1,007,944
1,600,129

Total assets¥

978,736$

1,513,734

9,420,037

3.0%

14,954,477

5.7%

Note: The Japanese yen amounts have been translated into U.S. dollar amounts, solely for the convenience of the reader, at the rate of ¥107=U.S. $1, the approximate
exchange rate at the Tokyo Foreign Exchange Market on March 31, 2005.

Net Sales

Operating Income(in billions of yen)(in billions of yen)

1,500

1,342.0 1,311.9 1,309.0 1,354.1

1,424.9

100

1,200

120.5

120
102.4

900

89.9

85.9

80

72.2

60
600

40

300
0

20
01

02

03

04

0
05

Income Before Income Taxes(in billions of yen)

80

02

03

04

05

Net Income
107.7

100

01

(in billions of yen)

59.9

60

93.1

53.0
50

69.1
40

60

33.4
28.8

30

42.2
40

20

26.2
20
0

12

15.6

10
0

01

02

03

04

05

01

02

03

04

05

Employees by Segment

Net Income per Share(persons)

(¥)

82.56
80

Beverages
1,336

71.49

70

Electronics
4,171

60
37.80

40
30

20.55

20

Lifestyle &Industrial Supplies
11,18810
0

Information
Communication
17,246

43.99

01

02

03

04

DNP in Brief

50

Corporate
998

05

Net Sales by Segment

Operating Income by Segment(in billions of yen)(in billions of yen)

0

100

200

300

400

500

600

Information
Communication

700
640.7

Lifestyle &Industrial Supplies

450.0
269.6

Electronics

20

30

40

Information
Communication

50
49.4

Lifestyle &Industrial Supplies

36.0
39.7
1.6

Beverages

Total Stockholders’ Equity

Total Assets(in billions of yen)

1,000

10

Electronics

73.0

Beverages0(in billions of yen)

939.4

947.0

942.1

978.7

1,007.9

800

2,000

1,500

1,489.9 1,432.5 1,450.0 1,513.7

1,600.1

600

1,000
400

500

200
0

01

02

03

04

05

0

01

02

Research and Development Expenditures

Capital Expenditure(in billions of yen)(in billions of yen)

03

04

05

103.1
30
25

100
24.7

23.4

24.1

26.1

26.4

20

86.1

85.1
80

73.8

69.8

60

15
40

10

20

5
0

01

02

03

04

05

0

01

02

03

04

05

13

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

Information Communication
Net Sales (in billions of yen)
619.9

629.8

Books and
Periodicals

Operating Income (in billions of yen)
640.7

600

120

500

100

400

80

300

60

200

40

100

20

0

40.1

43.7

03

04

49.4

0
03

04

05

05

Lifestyle & Industrial Supplies

Packaging

Net Sales (in billions of yen)

Operating Income (in billions of yen)

600

120

500
420.2

426.1

450.0

80

300

60

200

40

100

20

0

32.4

36.0

04

05

28.6

0
03

04

05

03

Electronics

Displays

Net Sales (in billions of yen)

Operating Income (in billions of yen)

600

120

500

100
80

400
269.6

300
208.4

236.4

60
40

33.0

39.7

04

05

28.3

20

100
0

0
03

14

Printed packaging
products for food andbeverages, cosmetics, andpharmaceuticals, andenvironmentally friendly
containers, aseptic fillingsystem

100

400

200

Books, magazines,
dictionaries, textbooks,
graphic art collections,
corporate histories,
historical reviews, andother published materials

04

05

03

Color filters for LCDs,
screens for rear-projectionTVs, shadowmasks, backplates for plasma displays,
inorganic and organic EL
displays, hologram screensInformation Communication 44.5%

Lifestyle and Industrial
Supplies 31.5%

Electronics 18.9%

Beverages 5.1%

Net Sales(%)

Information Communication 39.0%

Lifestyle and Industrial
Supplies 28.4%

Electronics 31.3%

Beverages 1.3%

Operating Income(%)

Commercial
Printing

Business Forms

Catalogs, advertising
flyers, pamphlets, posters,
calendars, point-ofpurchase and event
advertising materials

Decorative
Products

DNP in Brief

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

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

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

Electronic Devices
Photomasks, lead frames,
package substrates, ICtags, on-chip color filtersand other chemical
etching products* All figures in this section are before elimination or corporate.

15

DNP Solutions Businesses
Solutions Business Themes
DNP uses the knowledge and skills we have accumulated over the years to offer flexible solutions toproblems that our corporate clients face. For example, “How can we make our daily operations more

Solutions By Segment
Information Communication(Books & Periodicals; Commercial Printing; Business Forms)

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

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

Personalized DM – Catalogs

On-demand publishing

Cross-media solutions

Administrative Operations
Intellectual property rights support
Purchasing systems
ID issuing and management
On-line accounting systems
Computerization of corporate information

Public Relations
Corporate communication support
Archiving of corporate information
IR solutions

Training-related Operations
Computerized training programs
Educational materials production support
Editing of curriculum information

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

Product tracing systems

Online system for team package
design editing

Aseptic container-fillingsystems

Decorative materials environmental
impact assessment system

Food and beverage-related
market research

Sales Promotion Operations
Product development support
Enhancement of sales methods
Marketing and research
Promotional strategy proposals
Boosting the efficiency of sales tool production
Presentation support tools
Management of customer data

Electronics(Displays; Electronic Devices)
Virtual plant solutions allow customers to use the world-classelectronics processing technologies of DNP’s manufacturing facilities
as if they were inside the customer’s own factory. Every process fromordering to delivery can be easily confirmed. We also provide turnkey
business solutions that handle everything from semiconductor circuitdesign to the production of final, packaged products. In other words,
we offer high value-added services that go far beyond manufacturing.
LSI design
Virtual plant systems

16

Turnkey businessesefficient?” “How should we compile data that will help us effectively promote sales?” “What makes asales promotion scheme appealing?” “What should we do to protect our corporate data and ourcustomers’ personal information?”

Digital Solutions
Network/Data Base Solutions
DNP offers a variety of solutions using applications and networked
systems.

Smart Card Solutions
DNP doesn’t just manufacture cards, we also propose anddevelop operating systems and applications.

DNP chip migration program

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

Contact smart cards Native OS MULTOS Java Card™
Non-contact smart cards Types A&B FeliCa®
Hybrid cards Dual-interface cards

Smart Card Issuance Service

DNP in Brief

Smart Card Introduction Support & Consulting
Providing Functionality for Websites

Smart Card Software Development
Frameworks for Content Sales
Distribution platforms
Protection from unauthorized content distribution
Issuance of content IDs
Copyright protection system

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

Native OS MULTOS Java Card™
Desktop applications Drivers

Smart Card Peripheral Sales
Writing/reading devices; card issuance systems; gate systems, etc.

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

Applications Development
Operation of Information Sites
Digital content sales
Map information
Shopping guides for mobile phones
Incentive Marketing

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

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

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

Acquisition of Privacy Mark, ISO, etc., IP rights protection and software development, hardware enhancement, etc.

Internet data center

Data centers to support website operations; hosting and housing support; Can also be used to provide smart card data services

Database management

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

Distribution platforms

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

Agency Functions DNP is prepared to perform a variety of tasks on behalf of clients, in order to help them get their business done
Project management
Creative support
Fulfillment support

Market research, project proposals, construction of frameworks for running campaigns, etc., total support for all kinds of projects
Production support for all kinds of media, including Internet, printed materials, and animation
Back-end support through order centers, customer centers, logistics, payment collection, campaign office management, etc.

17

Major Events of the Fiscal Year Ended March 2005

May
DNP and DT Circuit-Technology succeededin miniaturizing a fingerprint recognition
module by using printed circuit-board
technology with build-in parts. The module isintended for use in financial institution cards
and similar applications. It reads fingerprint
data quickly and accurately.
We also succeeded in developing a new front
projection screen for use in projectors that candeliver clear, crisp images even in a brightroom. We will actively push this product inareas where the projection screen market isexpanding, which are primarily overseas.

June
DNP and Altech ADS Co., Ltd. agreed tojointly acquire a controlling share in Pixel Magic
Imaging. DNP is the world’s top player in dye
sublimation media, while Altech ADS has aproven track record in photo-printer marketing.
Through participation in Pixel Magic, we intend
to enhance its services to its North American
clients and expand its market share.
DNP signed an alliance agreement with
ProMOS Technologies Inc., which operates theworld’s fifth-largest DRAM-only foundry. The
main objectives of the alliance are to provide
steady supplies of advanced photomasks under
180 nm, and to conduct the joint developmentof optimal leading-edge photo masks required
for wafer processes below 90 nm.

July
DNP and a research group from Tokyo
Medical and Dental University succeeded informing capillary blood vessel patterns. DNP
developed patterning substrates for cell culture18

by making use of such printing technologies asplate-making and lithographic plating. The
objective is to use artificially cultivated cells totreat patients who have lost organs or tissue due
to illness or accident.
DNP and its overseas subsidiary, Tien Wah
Press (PTE) LTD. completed construction ofa new plant in Malaysia to meet the growing
demand for printing in Asia.

August
DNP announced that it will construct a
new plant in Kurosaki, Kita-Kyushu, toproduce 6th-generation color filters for use
in LCD televisions, which are expected tosee further increases in demand. The twostory steel structure will take up 14,630
square meters on a 52,000 square-meter site,
and will have 28,060 square meters of floor
space. The total investment allocated forbuilding the new plant is 30 billion yen. The
new plant will be able to produce up to
60,000 6th-generation-size glass base-plates
per month, with production to begin in thesecond quarter of 2005.

September
DNP joined the Cosmos Alliance — a
global organization (headquartered in theUS) aimed at commercializing advanced biotechnologies — and invested $500,000 ineach of three biotech ventures that belong to
the alliance: Acucela, Inc., Cangen
Biotechnologies, Inc., and Panacea
Pharmaceuticals, Inc. In the future, DNP
intends to continue to acquire technologies
held by important biotech venture companies and advance its own participation in thefield of biotechnology.

DNP established a Corporate Social
Responsibility (CSR) Committee and a CSR
Promotion Office. The CSR Committee
promotes social responsibility-related activities horizontally among group companies.
The CSR Task Force evaluates eachdivision’s activities from the standpoint of
CSR, identifies issues to be dealt withhorizontally among all group companies, andreports its findings to the public. DNP
intends to further enhance its CSR activities
and actively address CSR issues on a companywide basis.

November
We consolidated our sales and manufacturing
companies in the Hokkaido and Tohoku
regions, Hokkaido Dai Nippon Printing Co.,
Ltd. and Tohoku Dai Nippon Printing Co.,
Ltd. and formed two new companies: DNP
Hokkaido Co., Ltd. and DNP Tohoku Co., Ltd.
Our aim is to provide better service throughefficient operations that integrate every stage
from manufacturing to sales.
We began a mass production service as partof our Micro Electro Mechanical System(MEMS) foundry business, using microprocessing technology. We can now offer a fullservice covering every step from design to mass
production. DNP became the first company inJapan to provide volume production of 8-inch
wafers using MEMS dedicated equipment.

December
In February 2003, we began purchasingtreasury stocks. This fiscal year, we purchased
10.47 million of our own shares. On December

7, we canceled shares for the first time: 9
million shares at 12.8 billion yen. In the future,
we intend to continue acquiring and cancelingtreasury stocks in order to boost shareholder
value, to the extent that we can in light of suchfactors as share price trends and our corporate
funding needs.

January

DNP in Brief

October

DNP and Matsushita Battery Industrial Co.,
Ltd. established a joint venture to manufactureand sell electrodes for lithium-ion rechargeable
batteries. The two companies aim to expand
their business in lithium secondary batteries,
which are used to power mobile phones,
notebook computers, digital cameras, and otherelectronic goods that are expected to be targets
of continued increasing demand.

February
DNP and several other manufacturers ofoffice equipment and office automation equipment jointly established a corporate alliancecalled Shared Security Formats Cooperation(SSFC), aimed at achieving high-security officeenvironments. The alliance held its first general
meeting in February. The group intends tounify data format to introduce high-level data
security systems that link a single smart card to
all security-related devices and office equipment in offices.
DNP received the Grand Prize in the 3rd
annual “Key Firm of Integrity Award 2005”
sponsored by Sankei Newspaper and Kfi, in
recognition of our fulfillment of corporatesocial responsibilities. DNP also won the
Minister of Environment’s Award, part of the
14th Global Environment Awards sponsoredby the Fujisankei Business Group.

19Corporate Governance(as of June 29, 2005)

Fundamental Philosophy
DNP recognizes that fulfilling its corporate
responsibilities to society as a corporation thatfinds new values for society and being trusted byits shareholders, customers, consumers,
employees and other stakeholders is critical to
improving the competitiveness of the company.
Toward this end, we regard corporate governance as a top management priority. We havestrived to establish an organizational structurethat allows for appropriate managerial decisionmaking, prompt execution based on thedecisions made, and proper supervision andsurveillance; strengthen education and training
to improve each employees’ awareness ofcompliance issues; and enhance our overall
corporate governance.

Progress on Corporate
Governance Measures
1. The organizational structure formanagerial decision-making, execution,and supervision, and other aspects ofthe corporate governance structure
Organizational details
DNP has a board of auditors in place and isorganized around operating divisions so as to beable to adapt quickly to changes in businessconditions. The objective of having a structurethat allows directors with specialized expertiseand experience in various business areas toparticipate in decision-making and have responsibility and authority in managing day-to-day
operations, and other directors to supervise themanagement of operations is to improve thequality of the company’s management. The
Board of Directors consists of 26 directors,
including one outside director. In principle, theboard meets once a month. The board of statutory auditors consists of five auditors, including
three outside auditors. The auditors cooperate
closely as they execute their duties by sharing
auditing of the head office, operational
divisions, and subsidiaries.
The internal audit system and supervision
DNP has an internal auditing system
conducted by the operations audit committee,
audit division and other head office divisions, aswell as auditing system conducted by the statutory auditors and the accounting auditors. The
operations audit committee, which was newly
established in 2003 and is made up of three
directors, deliberates and approves the auditing
department’s audit plans and results in accordance with internal audit regulations to ensurethat appropriate internal audits are conducted.
The auditing department, which is independent
from the operating divisions, performs DNP’s
accounting and operational audit from an

20

Progress on other corporate governancemeasuresThrough the DNP Group Corporate Pledge(established in 1992, revised in 2002) and a DNPGroup Employee Code, DNP has set down codesof conduct and specific guidelines for behavior
for employees to follow, so as to ensure compliance with the laws and fair and appropriate
corporate activity. The company also has established a Corporate Ethics Committee, part of thegroupwide organization, and conducts both live
and Intranet training sessions every year toestablish our ethics guidelines more widely anddeeply in the company. In October 2002, in orderto enhance DNP’s compliance further, we established an Open Door Room as a place where
employees can feel free to air concerns.

Progress on the development of a riskmanagement structure
DNP has established various corporategroups, including an Environmental Committee,
Product Safety Committee, Information
Security Committee, Central Disaster
Prevention Council, and an Overseas Safety

DNP in Brief

Promotion Office, to be responsible for riskrelated preemptive and response measures intheir respective areas.

objective perspective and based on the annual
audit plan approved by the operations audit
committee, points out problems, proposes
improvements, and follows up. The Corporate
Ethics Committee and other head office divisions
conduct regular internal audits of their respective
areas. Each statutory auditor regularly exchanges
information with the auditing department, andclosely cooperates with the accounting auditors
by receiving an explanation of the audit plan at
the start of the fiscal year from the accounting
auditors, assessing audit operations during the
fiscal year as appropriate, and receiving a reportof audit results at the end of the fiscal year.

General Meeting of Shareholders
Audit

Board of Directors

Approval/ Deliberation
Coordination

Audit

Executive Directors

Internal Audit

Accounting Auditors

Operations Audit Committee

Representative Director

Auditing Department
Corporate Social Responsibility Committee
Corporate Ethics Committee

Corporate Officers
Environmental Committee

Direction/ Command

Product Safety Committee

Business Divisions

Information Security Committee

Audit

Board of Statutory Auditors

Supervision

Other Head Office Division
Coordination

21

Compensation paid to directors and auditors(in millions of yen)Compensation
based on articles ofincorporation and Bonuses based on
resolutions at
profitgeneral meeting ofshareholders

Directors’ retirement benefits
based onresolutions at
general meeting ofshareholders

767

210

42

Auditors

81

—

—

Total

849

210

42

Directors

Compensation paid to Meiji Audit
Corporation (accounting auditor)(in millions of yen)

22

Compensation for services in accordance with
Article 2-1 of the Certified Public Accountants Law

56

Compensation for other services

—

Total

56

2. Interests between DNP and its outside
director and outside auditors
Neither the outside director nor the threeoutside auditors have an interest in DNP.

3. Progress on corporate governancemeasures in the current fiscal year
We established a Corporate Social
Responsibility Committee and a Corporate
Social Responsibility Office in October 2004 topromote corporate social responsibility initiatives across the entire group. In light of societal
trends, these units work with other committees
to pinpoint and deal with corporate social
responsibility issues within DNP.
In June 2005, we introduced a corporate
officer system. The corporate officers arechosen by the Board of Directors and are
responsible for executing decisions made by the
Board of Directors. They have the responsibility and the authority to decide and to executeissues that have been entrusted to them by the
Board of Directors. DNP hopes that close
communication between the corporate officers
and directors will help management to benefit
from the ideas and perspective of those whowork on the front lines of our business.

Board of Directors, Statutory Auditors
and Corporate Officers(as of June 29, 2005)

President and Chief Executive Officer

Directors

Managing Directors

Yoshitoshi Kitajima (photo 1)

Noriaki Nakamura

Kenji Noguchi

Hiromitsu Ikeda

Yoshiaki Nagano

Kenzo Isumi

Motoharu Kitajima

Koichi Takanami (photo 2)

Toshio Kawada

Tadao Tsukada* 1

Satoshi Saruwatari (photo 3)

Kazumasa Hiroki

Masayoshi Yamada (photo 4)

Yujiro Kuroda

Mitsuhiko Hakii (photo 5)

Tatsuya Nishimura

Jitsuo Okauchi

Osamu Tsuchida (photo 6)

Itsuo Totsuka

Minoru Yoneda

Teruomi Yoshino (photo 7)

Masahiko Wada

Shizen Sasaki* 2

Kosaku Mori (photo 8)

Tetsuji Morino

Yoshinari Kitajima (photo 9)

Takashi Toida

Standing Statutory Auditors
DNP in Brief

Senior Managing Directors

Statutory Auditors

Shigeru Kashiwabara

Yasuchika Negoro* 2

Kunikazu Akishige

Kuniaki Nomura* 2

Hidenori Nokubo

Tatsuo Komaki

Taketsugu Yabuki

Tadashi Okubo

Akira Ogura

Koichi Hashimoto

Junjiro Inoue

Tatsuro Kitayuguchi

Takao Shimizu*1 Outside Director*2 Outside Auditors

Corporate Officers

9

6

5

2

1

3

4

7

8

23

Investor Information(as of March 31, 2005)

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

Tr a n s f e r A g e n t :Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan
Phone: +813-5213-5213

Established:
1876

Annual Meeting of Shareholders:
The annual meeting of shareholders of DNP is normallyheld in June each year in Tokyo, Japan

Number of Employees (consolidated):
34,514Paid-in Capital:¥114,464 million

Investor Relations:
Dai Nippon Printing Co., Ltd.
Press and Public Relations
1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku,
Tokyo 162-8001, Japan
Phone: +813-5225-8220
Facsimile: +813-5225-8239
E-mail: info@mail.dnp.co.jp

Number of Common Stocks:
Authorized 1,191,000,000 shares
Issued750,480,693 shares
Number of Shareholders:(more than 1,000 shares)
23,800We b S i t e A d d r e s s :http://www.dnp.co.jp/

Stock Exchange Listings:
Tokyo, Osaka
Major Shareholders:
The Master Trust Bank of Japan, Ltd.

6.28%

The Dai-Ichi Mutual Life Insurance Co.

4.62%

Japan Trustee Services Bank, Ltd.

4.29%

State Street Bank and Trust Company

3.75%

Nippon Life Insurance Co.

2.43%

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

2.08%

Mizuho Corporate Bank, Ltd.

2.03%

Mizuho Bank, Ltd.

1.66%

Employees’ Stock-holding Association

1.40%

Mellon Bank, N.A. as agent for its client
Mellon Omnibus U.S. Pension

1.19%

Other than above, DNP holds 34,708,297 of its own shares.
While the registered owner of these shares is Dai Nippon Printing Co., Ltd.,
1,000 of the shares are in effect not owned by the company.

24

S h a r e P r i c e E v o l u t i o n ( To k y o S t o c k E x c h a n g e )(between April 1, 2002 and March 31, 2005)
DNP Stock Price (yen)Increase (%)*
0.15

1,800

0.05
1,600
0.00

1,500

DNP in Brief

0.10
1,700

-0.05

-0.10

1,400

-0.15
1,300
-0.20

−DNP

1,200

-0.25

−Nikkei Average
1,100

-0.30

−TOPIX

-0.35
1,000
03

04

05

*Index 100 = March 31, 2002

Vo t i n g R i g h t s(as of March 31, 2005)

Type

Number of stocks (stocks)

Number of voting rights (rights)

Stocks with no voting rights――

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

Stocks with limited voting rights (other)――

Stocks with voting rights (treasury stocks, etc.)

Common stocks

36,154,000―

Stocks with voting rights (other)

Common stocks

711,143,000

711,143

Stocks with less than trading units

Common stocks

3,183,693―

Outstanding shares
Total voting rights of stockholders

750,480,693――

711,143

Tr e a s u r y S t o c k s
Holder(as of March 31, 2005)

No. of Stocks Held

Percentage of Holding to No. of Outstanding Shares

Dai Nippon Printing Co., Ltd.

34,707,000

4.62

Kyoiku Shuppan Co., Ltd.

1,435,000

0.19

12,0000.00

36,154,000

4.82

Cat Co., Ltd.
Total

25

Feat ur e:
Printing & Beyond

S pecial

Printing & Beyond
Starting with printing technology as its core, DNP has expanded its
business field immensely. Currently, our printing technology extends
even to the nano level, and we have established ourselves in adominant position in the various fields where we participate.
Moreover, a ubiquitous society has developed rapidly since the start ofthe 21st century, and this gives DNP the opportunity to make themost of the information technology that is our other inherent strength.
The printing industry is fundamentally a custom-order business. It
demands close communication with customers and much working together.
Through communication with our 30,000 client businesses, we have gained
a good grasp of what their various concerns are. By combining the printing
technologies and information technologies that we have cultivated over theyears to create useful ideas that address those concerns, we aim to expand
our printing business more than ever.

28

29

30

32

40

Expansion of

The History ofPrinting Processes

Technologies and

The Limitless

Printing Technology

DNP’s Businessand Expansion

Their Applications

Possibilities ofDevelopment

Printing

Expansion Printing27

E x p a n s i o n o f P r i n t i n g Te c h n o l o g yPrinting As Part of Life
Nowadays printing products can be found in every
facet of our daily life. For example, it's easy to seethat books, magazines, posters, and flyers are printed
material. Besides these paper materials, DNP makes
things like candy wrappers, toothpaste tubes, smart
cards, and ribbons for digital photo printers. In addition, our electronic components like color filters,
shadowmasks, photomasks, and lead frames play animportant role in improving the functionality ofelectronic devices.

In other words, the printing industry is deeply
involved in an extremely wide variety of products,
and our lives would not be the same without them.
Because printing companies do not put a brandname on their products, most people have little
awareness of who the printer is. Nevertheless, it isprobably safe to say that there is no one in Japan
who gets through a single day without using a DNP
product or service.

SemiconductorRelated Decorative andProducts Building Materials
Display-Related
High-Function
Products
Packaging
Energy-Related Materials
Optical Films
Books and Periodicals

Commercial Printing

Digital Contents

System Solutions

Food Packaging

Information
processing
technologies

Patterningtechnologies

Industries and products
supported byprinting technologies

Post-processing
technologies

InternetMall

28

Beverage Packaging

Industrial Supplies/
Carrier Tapes

Coating &transferring
technologies

Product/
Distribution Management

Database
Management
Telecommunications/
Broadcasting
Mobile Phone
Shopping Mall

Toiletry Containers

Credit Cards/
Tickets and CertificatesAuti-Counterfeit/
SecurityT h e H i s t o r y o f D N P ’s B u s i n e s s D e v e l o p m e n t

As its business fields expanded, DNP transformed
itself from a printing company that prints on paper to
a comprehensive printing company, an information
processing industry, and now, an information communication industry. As of 2001, we have been blending printing technology (P) and information technology (I) to come up with new solutions for our customers under the slogan P&I Solutions DNP.
DNP has a large number of technologies that canbe applied to a wide range of fields. In recent years,
we have even expanded into the fields of energy andtissue engineering.
By further mining the depths of our printing
technologies, we believe we can expand into an evenwider range of fields in the future.

DNP got its start in 1876 as Japan’s first full-scale
printing company. For the first 75 years or so of its
existence, DNP's main business was printing books
and magazines. In the 1950s, DNP adapted its
expansion printing policy and began applying printing technologies to new types of businesses.
In 1951, DNP entered the fields of packaging anddecorative materials, and in 1958 the Company
succeeded in developing shadowmasks, which opened
the door to the electronics field. In the early 1970s,
DNP was among the first to get involved in thedigitization of text and images, and with the start ofthe 1980s, the company entered new media fields
like processing information for use in CD-ROMs or
high-definition television programming.

1876

1950

1960

Printing

1970

1980

1990

Information
Processing

Comprehensive Printing

2000

Information
Communication

Printing & Beyond

Rapid Development Based on Our Expansion Printing Policy

2010

P&I
Solutions DNP

Start of Expansion Printing
Lifestyle & Industrial Supplies■Packaging

1994 aseptic filling system for PET bottles

1951 paper
1957 flexible packaging 1968 laminates
1976 aseptic filling system
containers
1957 plastic containers
1970 retort pouches■Decorative Materials
1996 lithium-ion rechargeable batteries■Decorative Materials
1951 decorative sheet with 1960 steel plate printing
wood grain pattern
1961 cloth printing

1978 Curlfit■Industrial Supplies
1989 thermal transfer recording media

Information Communication■Printing and Publishing■Commercial Printing■Business Forms

1973 magnetic cards

1955 ledgers

1967 plastic cards■Digital Media

1983 smart cards
1989 satellite broadcasting1972 digitization of text and images 1985 CD-ROMs

Electronics■Displays
1958 shadowmasks■Semiconductor Products

1984 projection screens1988 color filters

1959 photomasks
1964 lead frames29Printing Processes and Expansion Printing

B a s i c Te c h n o l o g i e s a n d A d v a n c e d P r o d u c t s T h a t G r e w O u t O f
Them: Process by Process
Printing can be defined as a generic term for techniques of transferring ink from an image on a form
plate to another object in order to reproduce theoriginal image. It entails five main processes:
1) planning, 2) film making, 3) plate making, 4)
printing and 5) binding/post-processing. Throughthese five main processes, we have cultivated a truly
wide range of skills and expertise.

First, planning: this requires an amalgamation ofknowledge and skills related to various fields,
including marketing, media selection, planning, andthe collection, editing, and processing of information. The preparation of form plates, including film
making and platemaking, requires skills like sophisticated digital image processing, color management,
optics, and micro-processing. The actual printing

step 1step 2step 3

Planning

Film making

Platemaking

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

In this step, we make a film based on
the text, images, and patterns, etc. in
the copy. In the analog methods ofthe past, a camera was used tomake the film. Today, however,
we use digital methods whereby
data is output directly on filmby an imagesetter.

In this process we make the platethat is set on the printing
machine to do the actual
printing. The plate is made byburning the image from the film
onto a plate, which is usually
made of metal or resin.

Prepare copy to be printed

Make printing plate
Process text andphoto images

Precision/micro-fabrication

Information Processing
Technologies

Patterning Technologies• Digital Contents• Internet Mall
• Mobile Phone Services• Database Management• Fraud Prevention• Security Applications• Telecom/ Broadcasting Contents• System Solutions, etc.

30

• Display Components• Electronic Devices/
Semiconductor-related Products, etc.

production, and the formation of cups and plastic
bottles.
As the reader can see, printing is a complex process with both soft and hard aspects. It requires theintegration of content, all types of media, materials,
and control of mechanical systems.

step 4step 5

Printing

Binding/
post-processing

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

Printing
Select and develop materials

Forming the final productDevelop application methods

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

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

Printing & Beyond

process entails skills and knowledge related to paper,
film, or other material to be printed, ink and a wide
range of other materials, application techniques for
fixing ink, and the mechanical skills required for thesmooth operation of printing presses. Binding andpost-processing involves skills needed to finish avariety of printed products, including bound-in
sleeves, CD-ROM bindings, packaging material• Ink Ribbons• Electrode Material for
Lithium-Ion Rechargeable
Batteries• Image Receiving Paper for
Digital Photos, etc.

Add functionality and value

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

31Technologies andTheir Applications

Information
Processing
Technologies

Tr e a t i n g Te x t a n d I m a g e s a s I n f o r m a t i o n a n d
P r o c e s s i n g i t F l e x i b l y t o S u i t Va r i o u s M e d i a
Before actual printing begins, we must prepare the text, photos,
illustrations, etc. that make up the material to be printed. As part of thisprepress process, we consider the printing method, size, materials, andmethods of expression that will convey the material clearly, legibly, andmost effectively. We then process the material according to the mosteffective mode of expression. Our job includes organizing and storing theprocessed information so that it can be revised and re-used in the future, as
is often done with dictionaries and contact lists.
DNP’s information processing skills are not limited to the domain of
paper printing, but have evolved to include all kinds of media. The range offields that we deal with expanded particularly suddenly in the 1970s, withthe digitalization of printing processes.
Information processing technologies include image processing
techniques, such as those aimed at optimizing the colors, outline, contrast,
or coloration used in an image, data conversion techniques (e.g. converting
the language, format, or size of a data file to fit paper, CD-ROM, Internet,
or other media), and data-basing techniques for organizing, storing, andmanaging information.
We have expanded our range of services to include information
processing services (IPS), whereby we input data, print, and send personalized mail on behalf of business clients. We also offer digital archiving,which means digitizing cultural assets like pictures and other art objects andcreating databases that are easy to search and use, as well as secure data
center operations.
Most recently, in light of the new demand for personal data protection,
anti-counterfeit, and product traceability, DNP’s information processing
technology has become more advanced than ever. The information that ourcustomers ask us to print is valuable material. Thanks to a corporate climatethat allows us to take good care of that information, and thanks to our trackrecord for taking good care of highly confidential printed matter such as
bankbooks, bank cards and stock certificates, we have earned a high degreeof trust from our customers. By combining hardware in the form of smart
cards and IC tags with software applications, we are expanding into areas of
information processing that other industries have not entered.

32

E x a m p l e s o f I n f o r m a t i o n P r o c e s s i n g Te c h n o l o g y A p p l i c a t i o n s
DNP has used its digital information processing expertise to address a variety of electronic media,
including the Internet, DVDs, and telecommunications. We have expanded our business to prepare for afull-fledged ubiquitous society — in which necessary information is accessible anywhere, anytime — and tomeet the demand for personal data protection.

Developing user-oriented media

As a result of rapid computerization, consumers andcorporations now exchange information in numerous ways. In
order to deliver information to consumers effectively,
businesses must use the communication styles that best matchthe consumers they target.
DNP began using computerized typesetting in the 1970s,
and in 1995 we began offering comprehensive Internet
services, becoming one of the first Japanese companies to join
the digital revolution.
For us, printing is not just a set of techniques for applying
ink to paper. In our view, printing means knowing how toprocess materials so as to communicate contents in ways thatare easy to see and easy to access. We use whatever media best
suits the end user, which might mean using paper, digital dataprocessed in various ways, television or other databroadcasting, web sites, or mobile phones, etc.

Printing & Beyond

Application Example 1

One more step forward for information processing technology
Application Example 2

Information Security Guard “TranC’ert”

Today's society demands better data protection andmanagement systems such as those that prevent leakageof personal data. DNP has developed a system called
TranC’ert to improve the security of information
systems.
The system provides a variety of functions by
preventing leakage of corporate secrets and alteration or
destruction of data. These include computer startup
control, data scrambling, identification-based user
restriction, write protection to other media such as
floppy disks, and network access control using
electronic certification and secret codes.

33

Technologies andTheir Applications

Patterning
Technologies
Exposure, Development, and Etching: thePrinciples Are the Same Whether the Product
I s Te x t o r S e m i c o n d u c t o r s
Patterning is the art of making images on form plates to be used in thefilm making process that is part of the overall printing process. The image
to be created on the form plate may consist of text, pictures, or a pattern.
Before the advent of full digitalization, the process of film making
involved photographing camera-ready masters or original photos andexposing the images onto film to make positive film or negative film. Colorphotographs were separated into four colors: with tiny dots of yellow,
magenta, cyan and black fixed onto four sheets of film.
The precisely drawn form plate image that was transferred from the filmusing patterning technology was then exposed onto a printing plate, usually
made of resin or metal. Specifically, the image on the form plate was
exposed onto a plate (usually made of resin or metal) that was coated with aphotosensitizing agent. This is called photolithography. After exposing only
the necessary parts of the resin or metal, a corrosive agent like acid wasused to engrave the image. This was then washed off to make a gravure
plate. This process is called etching.
As we refined this technology to the point that we now possess the mostprecise printing technology in the world, DNP developed its own
production equipment and systems. Today, high-quality printing uses 2,400
dpi (dots per inch); each dot is just over one hundredth of a millimeter indiameter.
DNP took the ultra-fine patterning, photolithography, and etching skills
that we accumulated in our printing work, and began applying these microprocessing technologies to the manufacture of electronic components. The
first electronics-related product that we addressed was shadowmasks.
Shadowmasks guide electron beams to a luminant; they are essential forgiving color to images. A shadowmask is a thin steel plate, only 0.2 mm
thick, containing over millions of ultra-microscopic holes. It is said to be
impossible to achieve the necessary precision by punching, but it is possible
to quickly mass-produce shadowmasks using printing technology.
Today, DNP’s patterning technology has entered the realm of nanotechnology used for manufacturing photomasks, which serve as original plates in
the manufacture of semiconductors. DNP’s expansion into the field ofelectronics highlights the limitless possibilities of printing technologies.

34

E x a m p l e s o f A p p l i c a t i o n s f o r P a t t e r n i n g Te c h n o l o g i e s
DNP has continued to hold the world’s largest share of the shadowmask market, and has gone on toclaim winning positions in other global markets such as photomasks, which serve as original plates formaking semiconductor circuits, and color filters used in liquid crystal displays (LCDs). DNP’s Electronics
business currently contributes 17% of consolidated net sales and 33% of operating income. As its
importance approaches that of our mainstay Information Communication business, we view it as a corebusiness that is essential to our overall corporate development.

Display Products/ Color Filters for LCDs

LCD color filters consist of red, green andblue pigments arranged in an orderly array on
glass substrates. Light from a backlight passes
through the liquid crystals, and when it passes
through the color filter, it creates a variety ofcolors.
Color filter quality is determined by theformation of millions of pixels precisely inpredetermined locations. This requires
extremely sophisticated patterning technology.

Polarizer
Glass

Color filter
Transparent electrode

Liquid crystal
TFT(Thin-film transistor)

Printing & Beyond

Application Example 1

Transparent electrode

Glass
Polarizer

White light from backlight

Application Example 2

Electronic Devices/ Photomasks

Photomasks consist of highly precise circuit patterns, of
submicron or nanometer order, formed on a glass substrate.
They are essential to the manufacture of LSIs and ICs because
they are the original plates used for printing circuits onto thesurface of silicone wafers.
In recent years, as semiconductors have become increasingly
highly integrated and larger in capacity, the line width requiredfor high-end products has become smaller and smaller.
Already, mass production is underway for products with 90 nm
lines, and developers are working on ultra-advanced productswith line width of 65 to 45 nm. Ever since DNP began
producing photomasks, we have always worked at the leadingedge of micro-processing technology and have remained at theforefront of technological development.

35

Technologies andTheir Applications

Coatings/
Transferring
Technologies

Te c h n o l o g i e s f o r A p p l y i n g F u n c t i o n a l C o a t i n g s
a n d Tr a n s f e r r i n g I m a g e s
Coating technologies are to apply and fix ink from the image on a form
plate to a material like paper or film. In other words, coating meanstransferring ink to the object that is to be printed. This is the process ofprinting in its narrowest sense. It goes without saying that DNP has
developed basic technologies for improving image reproduction andaccuracy by adjusting the amount of ink and printing pressure. We have also
found ways to improve functions like coloration and durability by coating
the paper surface with varnish or pigments, and have gone on to developtransfer technologies that support embossing, decorate printing and othertypes of texturing, as well as foil printing and other techniques that enhance
the aesthetic effect of the end product.
With these types of technologies as a basis, we have expanded ourbusiness field to include printing on film used for packaging, magnetic tapeused in bankbooks and cash cards, floor and wall coverings, wood-grain
printing and other decorative materials for buildings and automotive
interiors. By addressing a wide range of functions, like friction and abrasion
resistance, lubrication, conductivity control, static or heat resistance, heatshielding and photocatalytic properties, we achieved a high level offunctionality that led us to make major contributions in various fields. With
the expansion of the market for displays in recent years, there has been a
big jump in demand for functional films that reduce glare or reflection, andelectro-magnetic wave shield-film for use in plasma display panels (PDPs).
These developments have also created new business fields that present
opportunities for DNP.
Besides the processes described above, there are also other printing
processes whereby ink is applied first to a film or other material before
being transferred by heat or other means to the material to be printed.
Beginning with ink ribbons for fax machines, thermal transfer recording
materials were later used in the instant photo-sticker booths that became
wildly popular among young Japanese from the early 1990s. Demand forthese materials soared, as did demand for thermal transfer fax receiving
paper. The market for these materials is still growing, with the focus now
on ink ribbons for digital photo printers.

36

Examples of Coating and Transferring Technology Applications
Having cultivated coating technologies over the years, DNP began to apply them to the production ofsophisticated, commercial-use printed products like magnetic tape coatings for cash cards and functional
optical films, and to a wide range of products including film packaging materials used in everyday life, anddecorative materials like floor and wall coverings. We hold a large share of all of these markets.
We use our transferring technologies for making ink ribbons used in instant photo-sticker booths anddigital photo printers, as well as for Curfit which uses water pressure to transfer patterns. These
technologies are also used for the spot printing of automotive interior parts and formed plastic products.

High-function Optical Film

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

Application Example 2

Printing & Beyond

Application Example 1

Ink Ribbons for Digital Photo Printers

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

37Technologies andTheir Applications

Post-processing
Technologies
Refining the Final Shape and Making a
Convenient Product: in Pursuit of Greater
Usability
Even after printing has been completed, our job is not yet finished. In thecase of books and magazines, it’s only after we have completed the binding
processes — folding the printed pages, fixing them together, cutting off
unnecessary parts and cleaning up the edges — that we have a finishedproduct.
The single word “bookbinding” comprises a large number of types ofprocessing that we do in order to create a finished product. Depending on
the number of pages and the purpose for which a document is to be used,
we may use an expensive type of binding that yields a product with aluxurious feel or a less expensive method suited to high-volume products:
options include saddle-stitching, side-stitching, burst binding and “perfectbinding.”Ever since DNP’s founding, we have kept coming up with ideas forprocessing our final products so that they meet our customers’ specificneeds. In the early 1950s, with our entry into the packaging business, webegan developing one post-processing technology after another. We started
with three-dimensional processing of paper containers and went on todevelop processes like sealing film packages and forming plastic. Eventually,
we ended up developing and improving forming technologies for a variety
of materials, including laminated tubes and plastic bottles.
In these processes, we must pay as much attention to the functionality ofthe end product as we do to the aesthetics of the printing. We must think
not only about durability and other types of strength, but also about ease ofuse. When we are binding a very thick book like a computer manual, we
must bind it very firmly. At the same time, we find a way to allow the
manual to stay open at the desired page even when the reader has both
hands on the computer. Because we seek maximum functionality in thearena of daily life, our post-processing technologies must also reflect
consideration for aspects like environmental impact and universality ofdesign.
The products that we make by applying these post-processing
technologies are the result of matching DNP’s technological strengths withwhat it is that our customers’ want.

38

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

Designing in Functionality and Comfort

A large amount of packaging material is used in everyday life. It is developed
according to design principles calling for minimal environmental impact andmaximum functionality.
For example, consumers don't see how much thought was given behind thescenes to designing the aluminum lid of a yogurt cup, which must be attachedfirmly enough to completely prevent leakage but not so firmly that people withlittle strength have trouble opening it. As another example, we considered theuser's comfort in our design of a cup, making it double-sided so that theoutside won't be hot to the touch even when the cup is filled with hot water.

Application Example 2

Printing & Beyond

Application Example 1

Aseptic Filling System That Does Not Harm Delicate Flavors

DNP established its aseptic filling technology in 1976 with thedevelopment of containers that can preserve their contents at room
temperature for a long period of time. These containers are used as
portion packs for coffee cream and as packaging for prepared foods
like stew or pasta sauce.
In recent years, DNP has also won high praise for its bottle
filling system, which makes use of this same aseptic filling
technology for packaging a variety of beverages.
Under this system, bottles are filled in an aseptic environment,so the contents are not damaged by thermal sterilization. This
makes it possible to seal in the delicate flavors of beverages like
Japanese green tea or black tea. Also, we provide parisons, or testtube-like primary formed products. These are formed into bottles
only immediately before filling, so their transportation entails lesscost and less emission of CO2. In recognition of how effective thissystem is at reducing the negative impact on the environment,
DNP received an award from the LCA (Life Cycle Assessment)
Japan Forum in December 2004.

39

The Limitless Possibilities of Expansion Printing

D e v e l o p m e n t o f P r i n t i n g Te c h n o l o g i e s A w a i t e d b y
the Next Generation
After decades of expanding its field of business by applying basic printing technologies,
DNP today has a business structure unlike thatof any other printing company in the world.
This is a testimony to the depth and breadth ofprinting technologies.
Another factor behind DNP’s unique businessexpansion is our connection with over 30,000
business clients. In principle, all printing products are custom ordered. Therefore, creating
the products that our customers want requires
an enormous amount of communication. We ask
customers what they want, express that on
paper, ask for confirmation, make revisions, andproduce the final product. The communication

Information Processing
Technologies

that takes place between DNP and customers
during this process is accumulated as anextremely important asset for DNP.
DNP’s corporate culture is one of responding
to customer needs — sometimes predicting
those needs — and working together with thecustomer to create products. This culture, combined with diverse printing technologies, iswhat led us to expand our business.
We will continue to add new links to ourchain of printing technologies, and join forces
with our customers to expand our field of business even into areas that appear to have nothing
to do with printing.

Smart Cards That Use Biometric Identification

In 1948, DNP began printing stock and bond certificates for the
securities industry. Through printing stock certificates, we refined ouranti-counterfeiting technology by applying very fine engraving and using
special printing techniques.
Smart cards developed as an extension of this type of printing. DNP
began working on the smart cards some 20 years ago, but the source of ourcompetitiveness is not only in our card manufacturing technology. It alsolies in our development of operating systems and a variety of software
applications designed for smartcard chips.
DNP developed a multi-application operating system (MULTOS) for
the smart cards, and established a smart card data center to provide instantcard issuing services. We also have received much praise for our biometricand other high-level security technologies. Our information processing
technology is greatly contributing to the development of thesetechnologies and services. Based on our track record, we have received
orders to make smart cash cards not only for major banks, but for almost
every bank in Japan.

40

Smart card with biometric identification functions

Using Printing Technology to Enter the Field ofTissue Engineering

In a joint development effort, DNP and Tokyo Medical and Dental
University succeeded in forming blood vessel patterns, a feat that was
declared to be very difficult. DNP put its printing technologies to work in a
blood vessel regeneration method whereby endocapillary cells are formed,
then transferred to medium culture to form a network of capillary bloodvessels with exactly the same structure as the originals. DNP developed
patterning substrates for cell culture based on patterning technology using
photocatalytic reactions, while Tokyo Medical and Dental University
developed technology for transferring the patterned, cultivated cells andgetting them to form hollow blood vessels.
DNP has an endowed chair in tissue engineering, “Nano-Medicine DNP,”
at Tokyo Medical and Dental University, and plans to continue to contributeto the medical field.

Patterning Technologies

Micro-Machines: a Symbol of Micro-Processing Technology

Expanding on the ultra-microfabrication processing technologies that it
uses for products like photomasks, DNP has succeeded in developing
micro electro mechanical systems (MEMS) and has begun mass
production. MEMS are three-dimensional structures made by concentrating mechanical elements, sensors, and electronic circuits on a single
silicon wafer. DNP uses multi-layer precision etching to manufacture
MEMS.
MEMS are expected to be used in a wide variety of fields, including
telecommunications devices and medicine. They are expected to be a basic
technology in the next generation of industrial products.

Coating Technologies

Capillary blood vessels after being transferred

Printing & Beyond

Patterning Technologies

Three-dimensional accelerator sensor chip of about 0.9mm square

Solar Battery Modules Play a New Role in the Energy Field

DNP has already applied its coating technologies to the development of
products like lithium-ion rechargeable batteries. Now, DNP has succeeded
in developing a new type of filling sheet for solar battery modules used insolar power generation systems, which are expected to be adopted
increasingly widely in the future.
Solar power generation modules consist of various elements, such as
surface glass, filling sheets, power generation cells, and back cover film. In
theory, the surface glass can be used for a hundred years, but during themodule manufacturing process, conventional filling sheets emit a gas thatspeeds up deterioration of the module as a whole, so in practice it isdifficult to reuse the glasses and the cells.
DNP succeeded in developing a filling sheet that makes it possible torecycle the module materials, thereby reducing the burden on theenvironment. The coating technologies that DNP cultivated through the
manufacture of packaging materials and other products are being put touse in a new area of the energy sector.

Detached solar battery(from left) cell, glass, filling sheet

41

Information Communication

Segment Infor mation

44

52

58

Information Communication

Lifestyle & Industrial Supplies

Electronics

44

Business Strategies

52

Business Strategies

58

Business Strategies

46

Financial Results

54

Financial Results

61

Financial Results48

Topics56

Topics63

Topics43

DNP AR 05

Information Communication

Business Strategies
Along with the development of an emerging society and rapid changes in the information infrastructure, information distribution has become more important than ever.
As media formats become increasingly diverse, dealing with paper media alone is nolonger enough. We must also be able to handle electronic media, including Internetbased media. We see this trend as a huge opportunity. We can make the most of DNP’scorporate strengths by fusing Printing Technology with the Information Technologythat DNP has always cultivated. By redefining the scope of our business to include theentire framework of information distribution, we can expand it into a new, solutionsbased business that benefits consumers and corporate clients.

Fusion of Printing Technology and Information Technology
We will combine the printing technologies that DNP has cultivated since our founding withinformation technology that we have acquired since the 1970s, to offer unique solutions tocorporate customers and consumers. When necessary, we will use M&As or corporate alliances
to obtain the resources we need to provide such solutions, or to speed up the commercialization of new businesses.

Production Solutions and Business Design Solutions
On the Production Solutions side, we will enhance our ability to process and distributeinformation in formats that are optimized for each type of media, and solve our customers’
problems by combining auxiliary services with the production of diverse media.
On the Business Design Solutions side, we will use DNP’s IT and project planning skills tocreate essential systems for running clients’ businesses and operate those systems on theclients’ behalf.
Our goal is to make DNP an irreplaceable partner from our clients’ perspective.

Developing New IT Technology and Ensuring the Security of Information
Through our printing business, we acquired expertise in handling massive amounts of data anda strong awareness of the importance of maintaining tight security when handling sensitive information. We plan to use these capabilities as a springboard for developing a new business domain
in which we offer information management solutions that include developing new IT technologies, streamlining customers’ information-related operations, assisting sales promotions, andmaintaining data security.

44

Major Policies

By strengthening ties between productsectors, we can target each customer’s
entire value chain
From now on, we will focus on strengthening
ties among our various business sectors, so that we
can offer operations and solutions tailored to eachcustomer’s particular industry, and so we candevelop systems that will allow us to offer
comprehensive services. By providing products likeIC tags, information processing services (IPS), andsmart cards, we aim to expand businesses that target
each customer’s entire value chain, from production
through distribution to account settlements.
In addition, we will actively offer solutions forproblems that transcend industry boundaries, suchas issues related to operational control ormanagement streamlining.

Total sales promotion solutions
We will expand our participation in the sales
promotion (SP) and direct marketing markets bysupporting our customers’ promotions andcustomer relationship management (CRM) througha combination of such services as data processing
and on-demand functions using digital printers.
We will also actively engage in new areas ofbusiness outsourcing based on support for backoffice operations.
In addition, we will work on developing nextgeneration communication methods that use tools
like IC tags and electronic paper.
Security solutions
Backed by our long history of cultivating
security-related technology, we will offer moresecurity solutions that involve the use of TranC’ert
and other smart-card technologies in theconstruction of security systems for computer
networks or for entering/exiting rooms. We can also
work through affiliates like CP Design Consulting
Co., Ltd., which builds privacy protection systemfor personal data and helps companies get Privacy
Mark certification, to provide total solutions for ourcustomers’ security needs.

Information Communication

Expanding our business through P&I
solutions
Until recent years, production was our main
business. Now we are developing that business one
step further and expanding our solutions-based
business by combining our core technologies –Printing and Information – so that we can offer
unique solutions that no other company canprovide.
In this segment, we have come up with a variety
of solutions that increase the added-value of our
products, including project planning, design, andmarketing strategies. In the future, we will boost
our capacities for system development as well as
for sales, planning and proposing. We will do thisby actively investing management resources in ourplanning department, where most of this activity
takes place, not just in the form of additional
personnel, but also funds and equipment. This will
enable us to better respond to our customers’
problems with comprehensive solutions centeredon DNP products and services like IC tags, ondemand publishing, and personalized direct mail,and to actively offer solutions that create newframeworks for our customers’ enterprises.
Going forward, we aim to expand the proportionof our revenues that comes from solutions-based
businesses.

Developing new markets through new
products and global expansion
In this segment, as in others, DNP takes a global
view of markets and is working to develop newmarkets. For example, we started new solutionsbased businesses like our Total Sign Business (signservice). In Johor Bahru, Malaysia, our affiliate Tien
Wah Press (Pte.) Ltd. completed construction of asecond plant, and we have been using our global
production network, which we call GMM (global
metamedia), to optimize overseas production.

45

DNP AR 05
Information Communication

Financial Results
Business Environment

Financial Highlights(in billions of yen, %)March 2005

March 2004

March 2003

¥640.7¥629.8¥619.9Operating income

49.4

43.7

40.1

Operating income margin

7.7%

6.9%

6.5%

Net sales

Japanese domestic publishing sales rose 0.7%
year-on-year in calendar 2004, marking the firstsuch increase in eight years, and advertisingexpenditures have remained on the rise since
September 2003. However, material costs havebeen increasing while intensified competition has
put pressure on unit prices, causing a very toughprinting industry environment.

Summary of Financial Results■ Net sales (left)■ Operating income (right)(in billions of yen)

600

120

500

100

400

80

300

60

200

40

100

20

0

0
03

04

05

The business environment affecting this division
remained harsh, with competition for orders
leading to lower unit prices while higher paper
prices pushed up costs. We responded by working
aggressively to increase sales. In books andperiodicals, magazines continued the slump, andsales for the whole year fell below the previousyear level. In commercial printing, sales were goodas orders for flyers, pamphlets, and point-ofpurchase (POP) materials increased with therecovery in demand for advertising. The business
forms sector fared well due to big increases in sales
of IC cards and information processing services(IPS). Overall, the segment’s net sales grew 1.7%
over the previous year, to 640.7 billion yen.
Operating income was affected by higher
material costs, but as a result of aggressive costcutting measures and the contribution of highadded-value items like smart cards and IPS,
operating income increased 13.0% from the year
before to 49.4 billion yen, and the operating
income margin rose 0.8 point to 7.7%.
The division contributed 44.5% of DNP’s total
net sales, and 39.0% of operating income.

Books and Periodicals
The monetary value of publishing sales fromJanuary to December 2004 increased 0.7% from theprevious year, to 2,242.8 billion yen, marking thefirst year-on-year rise in eight years. Book sales grewfor the first time in two years, by 4.1% to 924.9
46

Commercial Printing
While actively soliciting sales aimed at solving
our customers’ problems and supporting their sales
promotion activities, we cut costs by boosting the
productivity of our own facilities. This entailed
shortening lead times and conducting systematic
equipment maintenance as well as strengthening
our cooperative framework by offering technicalguidance and consulting to outsourcing providers.
As a result, net sales increased from the previous
year, and profits rose even after absorbing an
increase of some 400 million yen in papers costs.
We enjoyed particularly large growth in theprinting of flyers for specialized mass retailers andpamphlets for the non-life insurance industry.
Also, orders increased for mail-order catalogs andPOP materials for cosmetics retailers andconvenience stores.
In addition to taking printing orders, we also
actively proposed sales promotion support solutions
that make effective use of digital data.
At the end of the term, net sales of commercial

printing amounted to 328.4 billion yen, 4% morethan the previous term.

Business Forms
This term, sales of ledgers continued theirshrinking trend due to corporate cost-cutting andledger consolidation, but we still achieved increased
sales and profits in the Business Forms subsegment. There were big gains in sales of smart
cards and IPS. The Personal Information
Protection Act led to a demand for insurancecompanies to revise their ledgers. Also, sales wereboosted by orders related to the mergers of major
non-life insurance companies, automobile recycling
certificates, and stock certificates whose issuancewere increased by the steady stock market.
Last year, new competitors entered the market
for IPS, which entails handling large amounts ofpersonal information as well as processing, printing
and sending information. DNP fought back in two
ways. First, we promoted new applications for IPS,
using our ability to propose solutions that make themost of our Information Communication division’scomprehensive strengths. Also, we boosted
production efficiency by implementing our original
grid computing system for production processes.
DNP holds a roughly 40% share of the Japanesesmart card market. This market grew, mainly
because of the increased use of credit cards andother financial applications, and increased telecommunications applications, such as SIM cards.
DNP’s superior, comprehensive technologicalability to make smart cash cards has been duly
recognized. We came out ahead in the competition
to receive orders and we succeeded in winningorders from every major Japanese bank. We cameclose to monopolizing order receipts from all banksplanning to issue cash cards this fiscal year.
There were 70 million smart cards issued inJapan in fiscal 2004 (through March 2005), and weestimate there will be 99 million issued in fiscal
2005, 159 million in fiscal 2006, and 175 million in
fiscal 2007. The estimated volume of smart cash
card issuance is 3.6 million in fiscal 2005, 5 million
in fiscal 2006, and 7 million in fiscal 2007.

Information Communication

billion yen, partly due to the emergence of seventitles that sold more than a million copies each.
However, sales were adversely affected by thediversification of information media, includingInternet-based media, and by the shrinking
population of young people, who are an importantcustomer base.
Magazine sales fell 1.7% to 1,299.8 billion yen,marking the eighth consecutive year-on-year
decline. During the year from April 2004 to March
2005, 224 magazines were published in Japan, an
increase of 11 from a year earlier. DNP received
orders to print 21% of these, or 48, compared to 45
the previous year. On the other hand, 203 magazines
discontinued publication during the year, an increaseof 65. DNP had been printing 40 of these, or 20%.
Periodicals, which account for about 60% ofJapanese publishing sales, have been experiencing along-term slump that shows no sign of abating.
Therefore, we have been working on securing
profits by boosting in-house production capacity,by improving productivity and by expanding the
proportion of our in-house production.

47

DNP AR 05
Information Communication

TopicsDeveloping New Businesses
U s i n g I C Ta g s
Starting experimentation with food traceability systems
Lately, the average citizens’ faith in the safety of
their food supply has been shaken by diseases like
BSE and avian flu. There have been many big
changes in the environment surrounding therestaurant industry: for example, the beef
traceability law began to be applied to domestic
beef as of December 2004.
In response, DNP together with Mos Food
Services, Inc. operated an experimental traceability
system for foreign beef (used in hamburger
patties).
The general outline of this experimental
traceability system worked as follows. First, as beef
arrived in containers shipped from overseas, eachcase was labeled with an IC tag at the plant inJapan where it was processed into patties. After
that, the data on the tag was read whenever thebeef was moved in or out of a warehouse, and when
it was shipped to or received by a retail outlet. Alldata concerning movements of the beef was stored
in the head office’s data control server, making it
possible to accurately record the production
history of beef used at each outlet.
We plan to actively engage in research and development aimed at eventually using IC tags to track
not just beef, but all food ingredients in the future.

Delivery case labeled with IC tag, and reader

48

Boosting our food traceability business
DNP created an R&D center dedicated toresearch into IC tags. There we consolidated foodtraceability operations that we have alreadyproven through testing or launched as commercial
businesses, and we started full-scale businessdevelopment.
In the future, we aim to combine IC tags withIC cards and various other types of certification
technologies, including biometrics, in order tobuild more reliable tracing mechanisms. Also, we
intend to develop traceability systems that are
tailored to the environments in which individual
items are used, such as agricultural or marine
products, and to promote the development oftraceability systems that we previously offeredseparately into ASP-based businesses.
Food traceability businesses are expected to growgreatly due to an increased demand for trust andsafety regarding food, and dramatic growth is also
expected in the IC tag business. By linking these two
fields, we intend to develop high added-value,comprehensive food tracing services that we
anticipate will bring in 20 billion yen in sales in2010.

Further Evolution in Smart Cards
Development of new smart cards that have
two interfaces: contactless and contact
DNP has developed a dual-interface card thatuses both contactless FeliCa technology and acontact interface.
In the past, it was necessary to install two IC
chips in order to get a single card that could
function as both FeliCa and JavaCard. With our
new card, we succeeded in installing both
functions on a single chip. The card can be used
for FeliCa applications through a contact
interface, and for JavaCard applications through acontactless FeliCa interface.
A standard feature in the ROM of this newShortening the lead time for smart cash
card issuance, and cutting start-up costsin half
DNP manufactures and issues almost all of thesmart cash cards currently issued in the name ofJapanese megabanks. Based on the technology,
expertise and card-issuance systems that we havealready built, we have optimized the processes
used in issuing cash cards and have createdstandard packages.
Now, financial institutions that issue smart cash
cards will be able to use this kind of a standard
package to reduce the standard lead time for card
issuance to seven months, and to cut start-up costs
for new card issuance to about half of what they
were before.
The standard package offers a choice of
JavaCard or MULTOS for about the same price as
what it now costs for a cash-card-only smart card.
In addition to the features required in a smart
cash card – compatibility with the JBA’s cash card
application and biometric identification
technology – new applications can be added after
the card has been issued, such as fund transfer andpassbook functions. Clients can choose abiometric identification method that uses vein
patterns in the palm or in a finger. Issuing a
MULTOS card requires a financial institution to
perform certain burdensome operations, but DNP
can also provide issuance agency services designed
to reduce this burden. In other words, DNP canoffer comprehensive support to card-issuing
institutions.

Aiming to Improve
Information Security Systems
Establishment of a SSFC corporate alliancethat realizes a high-security office environment
In both the public and private sectors,
establishment of information security systems thatprevent the leakage of personal data has become
an urgent task since Japan’s new Personal
Information Protection Act and e-Document Law
took effect this April. In response, DNP and 21
other companies have begun to take action after
agreeing to form a corporate alliance called
Shared Security Formats Cooperation (SSFC),
aimed at realizing high-security officeenvironments.
SSFC’s main activity will be to draw up acommon format for smart cards used for suchapplications as employee identity cards. This
format will only be disclosed to manufacturersthat belong to SSFC. At first, the format will be
geared toward FeliCa. In the future, the groupplans to gradually apply it to other card standards.
Starting with the second version, the group also
intends to incorporate biometrics.
SSFC member companies will develop a variety
of products that are compatible with the format,
including various security-related devices (such as
gate systems), office equipment (printers and copy
machines, etc.), office furniture (such as lockers),
and smart cards. The group expects to launchthese products within one year.

Information Communication

dual-interface card is a smart cash card applicationthat meets the specifications of the Japanese
Bankers Association (JBA) and is compatible with
VSDC, the credit application used by VISAInternational. In addition, we developed adedicated application for biometric identification
technology, which is very likely to be favored byfinancial institutions in the future.

Smart cash card

49

DNP AR 05
Information Communication

The market for information systemconstruction for government agencies, municipalities, private companies and SOHOs that
handle sensitive information is estimated at over
100 billion yen. SSFC member companies plan todevelop products jointly and create a unified
system environment.

D N P ’s S t a r t i n g P o i n t :the Shueitai Font
Publication of “Shueitai Research” inhonor of our anniversary
DNP will celebrate its 130th anniversary in
2006. As part of the celebrations, in December
2004, we published “Shueitai Research,” acompilation of the history of Shueitai, DNP’soriginal font.
Shueisha, the predecessor of Dai Nippon
Printing, began to develop Shueitai in 1882 for use
in letterpress printing. Throughout its long history,
it has been recognized as an elegant, beautiful, andeasy-to-read font, and it is still used today in many
publications. Professor Jiro Katashio, the foremost
authority on the history of Japanese typography
and printing, helped edit the book.

Archiving Business Growing
Steadily
Making the most of the latest printing
technology, we reproduced the slidingdoor paintings of Maruyama Okyo
DNP and DNP Media Create Kansai Co. havejointly developed printing technology forreproducing art works that use gold foil, including
sliding doors, hanging scrolls and door paintings.
This type of printing reproduction was always
considered to be very difficult in the past.
This new technology was used in the process oftransferring important artworks owned by Daijoji
Temple*1 (in the town of Kasumi, Kinosaki
County, Hyogo Prefecture) to new storage
facilities in order to preserve them for future
generations. The artworks were created by

50

Maruyama Okyo*2 and his clan, and have been
designated as important cultural properties by thenational government. Daijoji Temple owns 165
wall and door paintings done by Maruyama Okyo
and 12 of his students. DNP and DNP MediaCreate helped to restore a total of 46 of these,
under the supervision of Yoshimoto Hiroshi,
honorary professor at Aichi Prefectural University
Of Fine Arts and Music.
*1 A temple that belongs to the Koyasan Shingon Mission, established by
Gyoki in 745*2 A popular painter in Kyoto in the Edo Era

M o r e N e w I n - H o u s e Ve n t u r e s
DNP started two new ventures, our thirdand fourth in-house ventures
At Table Co., Ltd. supports supermarkets intheir sales promotion activities through services
like sales promotion planning and sales promotion
tool design based on marketing data analysis.
Mobile Impulse Co., Ltd. manages online
shopping websites designed for access frommobile phones.
DNP had already started mobile shopping malls
called “Westgate” and “Oshare Life,” for which it
created the necessary web pages and provided
services like mail distribution and various kinds ofaccount settlements. This time, the leader of the
Mobile Impulse project suggested a new type ofbusiness model based on DNP’s in-house venturesystem. DNP recognized the project’s potential, andit was established as DNP’s fourth in-house venture.
Publication of books related to the new
Personal Information Protection Act
Since April, a DNP subsidiary, CP Design
Consulting Co., Ltd., has published three books
Reproduction of a hanging scroll by Maruyama Okyo

New Services for Cellular Phones
A new service adds credit card function
to cellular phones
Since November 2004, we have been serving
credit card companies, banks, retailers, and otherbusinesses that issue credit cards by helping themto add a credit card function to their customers’
mobile phones. All the card issuer has to do isprovide DNP with the necessary customer
information, and DNP can register members’
mobile phones, at the same time as their credit
cards are issued.
New “Mobile Modern Terminology”
service allows i-mode users to search andbrowse reference materials like “Basic
Knowledge of Modern Terminology”
onlineDNP and Jiyukokuminsha have jointly started a
website called “Mobile Modern Terminology,”
which allows users to search reference materials
like Jiyukokuminsha’s “Basic Knowledge ofModern Terminology” (an annual compilation of
new words and basic terms) through i-mode,
Virtual catalog created using DNP’s “plug-in free” for Baycrew’s Co., Ltd.

NTT DoCoMo Inc.’s Internet connection service
for mobile phones.
The contents offered on this site were alreadyavailable on CD-ROM and through a normal
website since 1987. For the new site, which is
specifically designed for access by mobile phones,
Jiyukokuminsha handled the overall planning andediting while DNP developed the computer
systems, formatted the data, and handles
information distribution and site operation.

Digitizing Dictionaries andCatalogs
Selling contents for use with Babylon“one-click” dictionary software
DNP collaborated with Babylon Ltd. and
Altech ADS Co., Ltd to start using Babylon’s“one-click” dictionary software as a platform forselling contents. Babylon is a resident application
for Windows-based PCs. When a user clicks aword or phrase on a computer screen, Babylon
activates a pop-up window that allows the user tochoose a translation between English andJapanese, or definition of the selected words in
English or Japanese. We have already introduced“Babylon-Pro 5.0 2004,” “ Japan Company
Handbook 2004 for Babylon,” “Mypedia for
Babylon,” and “Nanzando Medical Dictionary(18th Edition) for Babylon.”

Information Communication

related to the Personal Information Protection
Act. They are called “All About Personal Data
Protective Measures and Leak Prevention,” “It’s
Not Too Late! Emergency Measures forCompliance With the Personal Information
Protection Act,” and “The Personal Information
Protection Act Handbook.”
CP Design Consulting was DNP’s first in-house
venture. Its consulting services include thediagnosis of corporate measures for personal dataprotection.

Virtual catalogs for Spick and Span and
JOURNAL STANDARD
Mail-order marketer Baycrew’s Co., Ltd. asked
DNP to digitize 11 catalogs, covering all of its 15
brands (including “Spick and Span” and “JournalStandard”). DNP used new “plug-in free”
technology to reproduce the catalogs electronically so that users can view them online, nomatter what their computing environment, using
only standard Web-browser functions – i.e.
without having to install any special plug-in. The
catalogs appear with the same formats and pagelayouts as the print versions. When a user moves
to the next page of the catalog, an animated imageof page-turning makes it look as if the user isactually leafing through a paper catalog.
51

DNP AR 05

Lifestyle & Industrial Supplies

Business Strategies
In DNP’s Lifestyle & Industrial Supplies segment, we keep in mind three mainconcepts as we develop businesses aimed at realizing the more comfortable society of the
future: functionality, environmental responsiveness, and greater added value. We areworking on boosting sales with this segment both in Japan and overseas. For the
packaging and decorative materials sectors, our aim is to secure stable growth by developing products that focus on functionality and environmental concerns. In the recording
media and industrial supplies sectors, DNP aims to actively develop new categories of
products and products with high added value, in order to develop new markets.

Functionality and Environmental Responsiveness
Guided by the concepts of universal design and environmental responsiveness, we willcontinue to develop functional, environmentally friendly products that meet consumers’desires for more safety and comfort, better health, and greater convenience.

Adding Greater Value; Shifting into Growth Fields
Coating technologies have already transformed and expanded DNP’s business. Using theseas core technologies, we will further explore potential uses for printing technologies andactively develop products and services that have high added value. At the same time, we will
also shift our emphasis toward fields with future growth potential.

Developing New Businesses in Industrial Supplies and Related Fields
We will take a broader view of the market and create new businesses by developing unique,advanced technologies and products in growing fields like electronics, energy, and recording
media. At the same time, we will continue to create new business models that make use of
corporate alliances.

52

Major Policies

Reinforcing our lineup of functional,
environment-friendly packaging products
There is little chance of an increase in theJapanese population, so we don’t foresee any
significant growth in demand for our packaging
products, which consist mainly of food packaging.
However, increasing concern over environmental
conservation and food safety are spurring demand
for new types of functionality in packages, which
in turn creates new business opportunities for us.
We have enjoyed steady growth in demand for
products designed to use less plastic, and forsystems that allow our client companies to savemoney or reduce environmental burdens in their
manufacturing processes. And in response to
consumer concerns about food safety, we offer
tracing services, whereby we build databases tomanage information about ingredients, processing
and distribution.
In the future, we aim to continue to respondflexibly to market needs like these, and to shift

toward higher value-added products in order toboost our competitiveness.
Another area of technical strength for DNP is
aseptic container-filling systems. We plan to increase
our facilities for producing plastic bottle pre-forms*
to expand our business.
*Tube-shaped molds used as intermediate material in PET bottle production

Decorative materials business to focus on
eco-friendly, high value-added products
Because we are unlikely to see a sharp increase indemand for residential construction in Japan, ourdecorative materials business will seek to secure
profits by adding more value. We will expand ourSuper Egos line of highly scratch-resistant, soilresistant, environmentally friendly decorative
sheets, and our Ecostandard WS Safmare line of
non-PVC decorative sheets for residential interiors.
Also, we will work hard to boost sales in overseas
markets where there is strong demand fordecorative sheets used for covering furniture, etc.
We intend to further enhance our product lineup
while keeping the focus on environmentallyfriendly, high value-added products, and to actively
market our products in the United States, Europe
and the rest of the world.
In addition, we opened a living space analysis
center in our Okayama plant, where we havebegun offering measurement and assessment of
the quality of living environments as part of ourplan to increase solutions-based businesses in thefield of residential environments.

Lifestyle & Industrial Supplies

DNP’s industrial supplies business will
actively invest in display-related fields
Our industrial supplies business will greatly
increase its capacity for producing high-function
optical film used in displays, as we expect to see
rapid growth in this market in the future. DNP is
already the world’s largest producer of this type offilm. By May 2005, we intend to invest 5 billion
yen to add a fourth production line at DNP’s main
production base in Okayama. This new line,
together with the third line that we started
operating in February 2004, will give us four times
the production capacity that we had in 2003.
Through this investment, we will further solidify
our prospects for securing about 80% share of theworld market for this type of film.
As part of our expansion of dye-sublimationtransfer film products, we will start a worldwide
BtoC digital photo business.

Developing new markets through global
expansion
Starting with the establishment of a joint
venture for the post-processing of ink ribbons inFrance, we have been expanding our overseas
presence and building optimal production
networks aimed at worldwide markets.

53

DNP AR 05
Lifestyle & Industrial Supplies

Financial Results
Business Environment

Financial Highlights(in billions of yen, %)March 2005

March 2004

March 2003

¥450.0¥426.1¥420.2

36.0

32.4

28.6

8.0%

7.6%

6.8%

Net sales
Operating income

Operating income margin■ Net sales (left)

In 2004, although convenience store sales
increased 2.3% over the previous year, department
store and supermarket sales declined by 1.6%.
While overall commercial sales increased 2.5%,
overall retail sales declined 0.1% and individual
consumption remained stagnant.
Housing starts rose for the second consecutive
year by 2.5% from a year earlier, but because thefuture remains unpredictable, improvements inthe employment and income pictures were minor.

Summary of Financial Results■ Operating income (right)(in billions of yen)

600

120

500

100

400

80

300

60

200

40

100

20
0

0
03

04

05

Overall, the business environment remained
tough as personal consumption lagged and higher
petroleum prices increased materials costs ingeneral. Sales of packaging and decorative
materials were strong while sales of industrial
supplies also rose nicely. Overall, net sales for thedivision increased by 23.9 billion yen, or 5.6%, to450.0 billion yen.
Operating income was affected by the increasein materials costs, but the segment’s operating
income increased 11.0%, or 3.6 billion yen, from ayear earlier to 36.0 billion yen thanks to increased
sales of high-function, added-value environmentally friendly products and industrial supplies,
and to the success of cost-cutting measures. The
operating income margin rose 0.4 point to 8.0%.
The division contributed 31.5% of DNP’s total
net sales and 28.4% of operating income.

Packaging
Sales of paper containers remained flat from theprevious year, but sales of flexible packaging
materials, paper cups and pre-formed PET bottles
increased. The increase in the latter was particularly big, because beverage makers introduced
five new, large-scale aseptic bottle-filling systems,

54Decorative Materials
Sales of decorative materials grew nicely due tothe popularity of eco-friendly materials andincreased exports to North America, Europe andelsewhere.
Profits also rose due to aggressive cost-cutting
measures and the contribution of environmentfriendly products with high added value.
Eco-friendly products use non-PVC materials,
which do not emit dioxin. DNP developed its own
method of surface processing using electron
beams, so we use absolutely no solvents that cancause sick-house syndrome. The market has
responded very favorably since our sheeting is also
harder and more soil-resistant than normal
coating resins. This makes it especially popular for
use as flooring . For most of our products,
demand is greater for use in single-family homes
than in condominiums. The breakdown of demand
by application is 39% for fittings, 11% forresidential equipment, 7% for wall coverings, 5%each for furniture and flooring, and 4% forstorage facilities.

increased sharply due to the expanded demand forprinting photos taken with digital cameras andcellular phones.
DNP also supplies ink ribbons for home-use,
dye-sublimation photo printers on an OEM basis,
as well as for high-speed self printers.
Among optical films, sales of anti-reflective film
used in LCDs grew sharply, and demand is also
continuing to grow for electromagnetic wave
shield-film for PDPs.
We transferred our lithium-ion rechargeable
battery operations to Panasonic Battery ElectrodeInc., the joint venture company that weestablished in January 2005 with Matsushita
Battery Industrial Co., Ltd.
We have been working on developing large
lithium batteries and fuel components for fuelcells, using microprocessing and technology for
uniformly coating a pattern of catalyst material
that causes hydrogen and oxygen to react. Eightcompanies are working together with Keio
University to develop large-scale lithium batteries.
Within two years, the group aims to reduce
production costs and produce a low-cost standard
battery that can be used in a wide range ofapplications including electric automobiles andpower for homes and buildings. For fuel cells, wehave already used our printing/coating and metalprocessing technologies to develop related
components. In the future, we intend to engage injoint developments with automakers and electricalequipment manufacturers to establish cost
reductions and mass production technology sothat we can begin commercial operations in 2007.

Lifestyle & Industrial Supplies

adding to the demand for pre-formed bottles.
DNP’s aseptic filling systems have won highacclaim. They eliminate the need for sterilization
using high heat that detracts from the flavor ofbeverages, and they reduce distribution costs andthe need for storage space since the beverage
plants fill pre-forms rather than finished bottles.
We have already received orders for three moresuch filling lines to be installed in the next fiscal
year. As of the end of fiscal year 2004, we had solda total of 18 aseptic filling lines.

Industrial Supplies
This term we enjoyed significant growth inboth sales and profits in our industrial supplies
sub-segment, where the main products are ink
ribbons, optical film, and electromagnetic wave
shield-film for PDPs.
Sales of ink ribbons for facsimile machinesdeclined, but sales of ribbons for color printers

55

DNP AR 05
lifestyle & Industrial Supplies

TopicsFurther Refining Packaging
Materials and Developing Solutions
that Meet Consumers’ Needs
The development of highly functionaltransparent film
DNP developed a transparent vacuum-coatedfood-wrapping film (IB-PET-PUB) with cuttingedge oxygen-barrier and moisture-barrier
functions. The ability to protect contents byshutting out moisture and oxygen is an importantfeature in food wrapping materials. Demand isincreasing for transparent films that allow
consumers to see package contents and heat themin a microwave oven. DNP developed its IB filmin 1998. Today, we hold a roughly 50% share of
the market for small packets used for sauces andsoups sold with noodles. With the developmentof our newest film, we intend to expand our shareof the market for packaging materials used forother foods and snacks.
Package usability studies and analysis
service
DNP has started a consulting service called
Package Usability Research which supports
product and packaging designers by incorporating
the idea of usability from the consumer’s point ofview. This service combines DNP’s uniquetheories with the principles underlying generalusability engineering, and applies this blend ofideas to packaging. It entails observation andanalysis of the conditions under which consumers
actually use products, and the identification ofproblems by experts in the field. DNP set up its
own usability test laboratory and has establishedthe various systems required for providing thisservice.

56

Developing Businesses in the
Energy Field
Lithium-ion rechargeable batteries andfuel cells
In January 2005, DNP and Matsushita Battery
Industrial Co., Ltd. established a new company
that deals in plates for lithium-ion rechargeable
batteries. Lithium-ion rechargeable batteries arewidely used to power mobile phones, notebook
computers, digital cameras and other electronic
devices. The demand for them has been
increasing. By combining DNP’s coating andinking technologies with Matsushita Battery
Industrial’s battery and battery plate design
technologies, we intend to lead the market.
In the field of fuel cells, DNP has used its
coating, metal processing and other technologies
to develop related components. Fuel cells haveattracted a great deal of attention as a nextgeneration power source. DNP plans to start fullscale joint development with automakers andelectric equipment manufacturers with the goal ofcommercialization by 2007.

Gearing Up for the Spread of
Digital Cameras
Investing in Pixel Magic Imaging
DNP and Altech ADS Co., Ltd. have jointly
acquired a controlling share in Pixel Magic
Imaging (PMI), a major US digital photo printing
system and print materials marketing company.
PMI is a rapidly growing venture company thatplaces photo print terminals in major drugstore
chains throughout North America. By bringing
on board DNP, the world’s top player in printmaterials, and Altech ADS, which has a proventrack record in photo-printer marketing, thegroup aims to expand PMI’s market share.

The start-up of new production line forelectromagnetic wave-shielding film
Responding to the expansion of the market forplasma televisions, we added new production
equipment at our plant in Saitama Prefecture,
allowing us to make electromagnetic waveshielding film for displays of up to 80 inches. We
started operating the new line in October,allowing us to supply film for every size of plasma
television.
Electromagnetic wave-shielding film is used on
the frontal filter of plasma televisions to shut out
electromagnetic waves emitted by the actual panel.

M o r e F i e l d Te s t s o f I C Ta g
Te c h n o l o g y
Use of IC tags led to recognition of morethan 99.9% of containers
DNP, in collaboration with NTT Comware
Corp. and Sun Microsystems K.K., conducted
logistics management field trials using IC tagtechnology and EPC, the next-generation productcode, to track containers loaded with beverage-use
PET bottles. The trials produced very favorable
results: a container recognition rate of over
99.9%. It is possible to achieve 100% recognitionby having workers manually enter data for IC tags
that could not be read automatically.
The testing of logistics management
container by container
DNP’s Kashiwa Plant (in Kashiwa City, Chiba
Prefecture) manufactures pre-formed bottles used
to make PET beverage bottles. The pre-forms aredelivered to beverage bottlers in speciallydesigned collapsible containers. In these fieldtrials, an IC tag was attached to each containerdelivered to the Kirin Beverage Shonan Plant via
an intermediate warehouse operated by the
TOYO Warehouse CO., LTD. Each container
was assigned an individual ID, using the EPC
global next-generation product code. The grouptested logistics management on an individual
container basis. Data pertaining to each container
was stored on an online server.

Universal Design: Book withTa c t i l e I l l u s t r a t i o n s H e l p s
the Visually Impaired Learn
about Health Care
Publication of “The Touch and Learn
Book of Tooth Brushing”
DNP and Lion Corp. together published “TheTouch and Learn Book of Tooth Brushing.” Basedon universal design, the book has “tactile
illustrations” to help the visually impaired learn
about health care. In addition to distributing thebook to schools for the blind, Braille libraries, andrehabilitation facilities throughout Japan. The
Lion Foundation for Dental Health uses it in the“Tooth Care Seminars For the Visually Impaired”
that it has been conducting since 1994.
We aimed to make the book useful for people
with visual impairments by augmenting the text
portions with Braille letters and using “tactile
illustrations” to show things like “how dental
caries and gum disease progress” and “how tobrush your teeth.” We used large letters for thenormal text, and chose a color scheme that makes
it easy to find the most important sections.
We used a special type of silkscreen technology
to raise the ink to form Braille letters. The ink is atransparent resin that hardens under ultraviolet
light, so it doesn’t interfere with the regular text.

Kuki Plant

Lifestyle & Industrial Supplies

Reinforcing Production
Facilities in Response to
Expanded Demand for Plasma
Te l e v i s i o n s

Electromagnetic wave-shielding film
for plasma display televisions

57

DNP AR 05

Electronics

Business Strategies
By continually refining our advanced technology, DNP always stays ahead of thecompetition. Despite the rapid pace of change in this market, DNP has secured its
position as a top vendor. We strive to maintain a good balance between a defensive
portfolio that covers a wide range of product areas where demand is likely to grow, andan aggressive business strategy entailing technological development and active expansionof manufacturing equipment.

Emphasis on Technological Development
Supported by world class advanced technology, DNP electronics products in many fields
have been acclaimed as No.1 in the world. In order to maintain and further strengthen our
reputation, we will concentrate even more on research and development, and search out newtechnological possibilities in the realms of both quality control and micro-fabrication.

Rapid Response to Change
We aim to keep our eyes on every step from materials supply to modularization, and torespond appropriately to drastic changes in the market and in customers’ needs as we expand
our business.

Concentrated Allocation of Management Resources
While giving ample consideration to potential changes in product life cycles and otherbusiness risks, we aim to concentrate our management resources in order to achieve highprofitability.

Faster Business Startups
In order to speed the development of new ventures, we will always consider possibilities for
M&As or other alliances, and expand our businesses efficiently.

58

Major Policies

Flexible business models focused on
profitability
As liquid crystal panel substrates grow larger
with the advent of 5th, 6th, and 7th-generation
products, we will need to construct businessmodels for our color filter production that enable
us to respond flexibly to our customers’ needs andconcerns.
In order to cope with growing product board
size, we strengthened the prodution capacity of

the 5th-generation production line at our Mihara
Plant, and added a 6th-generation line at our new
plant in Kitakyushu. We are also taking more
flexible measures, including the construction of
byplant facilities adjacent to a customer’s
manufacturing facility, an inplant facility built
right into a customer’s production line, as well as
the establishing of joint ventures with ourcustomers. We aim to steadily solidify ouroperating base by selecting appropriate businessmodels from profitability perspectives.

Using strong US projection screen sales
as a springboard for meeting the MD
challenge
There has been increasing demand for large,
thin projection screen displays of 40 - 60 inches,particularly in the North American market. Thisis a niche market, with an annual demand
estimated at 6 million units per year. DNP has
three production bases — in Japan, Denmark, andthe US — and has won a 55% share of the world
market.
In the past, CRT-type screens dominated themarket, but recent years have seen the emergenceof LCD, DLP, and LC OS-type displays, andthere has been increasing demand for microdisplay (MD) screens. DNP is responding to thechange in demand structure by reinforcing
production of MD-type screens in addition toexisting CRT production.

Electronics

Adjustment to product life cycles andreadiness to supply a wide variety of
products at the right time
As technological competition rapidly intensifies,
various new types of products appear in theelectronic display market, and product life spans
have grown shorter. Manufacturers need toaccurately predict which product will dominate
the next generation and when the change will
occur. They must quickly gear up to produce thenew products on time. Our basic strategy avoids
the risk of depending excessively on a single
product by maintaining a full product lineup. In
this way, we can respond to the need for various
types of displays, in every size from small tolarge.
Meanwhile, our sales strategy focuses on
securing revenues by maintaining a steady streamof orders, which we achieve by watching the
global market and engaging in wide-ranging tradewith customers all over the world, in order todisperse risk.
We work as fast as possible to research anddevelop new technologies and products related tonext-generation displays like the organic EL,
inorganic EL, and field emission display, in orderto develop the world’s most advanced technologies
and secure our dominant position in themarketplace.

59

DNP AR 05
Electronics

Aiming to improve profitability throughcost-cutting in the stable shadowmask
marketWe expect demand for shadowmasks used in
PCs to keep falling as the market shifts toward
using LCDs. However, demand for use in home
televisions, currently estimated at 160 million
units per year, is expected to remain strong. We
have already finished consolidating and reorganizing shadowmask production facilities, so by
cutting costs and taking advantage of ouroverwhelming market dominance, we intend tobring in stable revenues.
Remaining No. 1 in the world in
photomasks, thanks to superior
technology
DNP’s photomasks have a longstanding
reputation for outstanding quality. We haveremained the world’s largest supplier. Our selling
point is a degree of technological superiority thatno competitor can touch. More than half of
DNP’s photomask sales consist of cutting-edge
products with line widths of under 130 nm. In theultra-advanced class with line widths of 90 nm,
DNP has captured more than half the market.
Going forward, we plan to use the results ofdevelopment conducted jointly with one of ourcustomers to accelerate the development of 65 nm
and 45 nm products ahead of the conventional
technological roadmap. By being the first to put
these products on the market, we intend to lock in
our top share of the world market.

Cultivating new core businesses for ourElectronic Device Operations, andbuilding a stronger operational
constitution
We will work hard to expand sales not only ofphotomasks, but of other products that use microfabrication technology, such as semiconductor

60

packages, on-chip color filters, and build-up
substrates, with the aim of cultivating new corebusinesses. In addition, by strengthening
solutions-based businesses like turnkey deliveries
involving circuit design or IC tag businesses
connected to the development of application
software, we will build a flexible and strong
operational constitution that can be largely
unaffected by the ups and downs of the semiconductor market.

Financial Results
Business Environment(in billions of yen, %)March 2005

March 2004

March 2003

¥269.6¥236.4¥208.4

Operating income

39.7

33.0

28.3

Operating income margin

14.7%

14.0%

13.6%

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

600

120

500

100

400

80

300

60

200

40

100

20

0

0
03

04

05

In 2004, production of information-communication equipment which is closely linked to thisdivision, fell for the first time in two years, by
14.3% compared to the previous year. Sluggish
demand for new mobile phones was a factor in thisdecline. This reflects the sharp rise in demand theprevious year as users replaced existing phones
with models equipped with a camera, so that theownership rate is already very high. On the other
hand, production of electrical equipment for
private-sector use rose 8.3% year-on-year, thethird consecutive yearly increase. This is because
corporate and individual domestic computer sales
have grown, causing production to grow for the
first time in four years, by 2.9%. Also domestic
demand increased for digital cameras, carnavigation systems and LCD televisions, andstrong exports bolstered overall results.

Summary of Financial Results

Electronics

Financial Highlights

The division enjoyed strong sales of LCD color
filters for use in both computer monitors andhome-use televisions. Shadow mask sales grewsignificantly, mainly for use in televisions.
Our overseas production of photo masks
increased, and sales were good both in Japan andoverseas.
As a result of these favorable factors, net sales
grew 14.0% from the previous year to 269.6
billion yen, and operating income increased
20.2% to 39.7 billion yen. The operating income
margin rose to 14.7%, an increase of 0.7 point.
The division contributed 18.9% of DNP’s total
net sales, and 31.3% its of operating income.
We faced heavy pressure from our main clientindustries to lower the prices of LCD color filters,
which are display-panel components, because the61

DNP AR 05
Electronics

display panel prices dropped sharply. In October
2004 we cut unit prices by about 10%. Although
we were largely able to maintain existing pricelevels after that, the price cut had a serious effecton income when combined with the increased
depreciation burden related to our new 5thgeneration production line. At the same time,
demand recovered nicely, and the new line thatstarted up in the second half of the term went intofull production, so net sales grew sharply.
Projection screens did well in the first half, but
the second half was very difficult as special
demand related to the Olympic Games came to ahalt and plasma display prices fell. Micro-display(MD)-type rear-projection TVs’ share of the
projection television (PTV) market grew to 30%,
but demand for CRT-type PTVs fell as they were
replaced by MDs. Overall, PTV-related demandfell below the previous-year level.
Shadowmask sales surged as a competitor’s
withdrawal from the market left us with a bigger
share and we won new orders for consumer-use
televisions.

DNP’s Share in the Color Filter Market (monetary base)
(%)

31%

2005

DNP's Share in Shadowmasks(monetary base, excluding internal productions)
(%)

40

30

20

10

0
03

In the photomask market, we received moreorders for the most advanced products with 90 nm
or other very small line widths from both
domestic and overseas customers, and the averageorder’s unit price increased. Sales by DNP
Photomask Europe S.p.A., which started
production in Italy in October 2003, grew andremained strong.
Sales of lead frames became sluggish after thethird quarter due to adjustments of semiconductor
inventories, and fell below the previous-year level.

0405

Forecasted Size of the Photomask Market(in billions of yen)

350
300
250
200
150
100
50
0
97 98 99 00 01 02 03 04 05 06 07 08 09■ Other companies, under 90 nm

62■ DNP, under 90 nm

Topics■ Lead Frames
Tie-up on lead frames that are both
environmentally friendly andstandardizable
DNP and Renesas Technology Corp have begun
collaborating in the manufacture and sale of leadfree solder*1-compatible lead frames, which are
ideal for use in environmentally friendly semiconductor packages. The alliance allows DNP to
manufacture and sell SDP lead frames*2 and HQFP
lead frames*3 developed and patented by Renesas
Technology.
The special features of these lead frames are thatthey can be mounted with lead-free solder and thatthey can support chips of various sizes. Lead-freesoldering is desirable because lead used in conventional soldering is toxic to humans. DNP andRenesas plan to actively promote these lead frames
as an environmentally friendly industry standard.
*1 Includes tin-bismuth alloys; alloys of tin, silver, and gold; and tin with theaddition of palladium.
*2 A type of lead frame in which the die pad (on which the IC chip rests) issmaller than the IC chip itself.
*3 A type of lead frame in which the die pad also functions as a heat sink.

■ Modules
Development of a compact camera board
DNP developed and began selling a compact
camera board (CB4100B) equipped with an
MPEG-4 module. The new board is 65 mm longand 73 mm wide. It has everything it needs,
including an MPEG-4 data compression anddecompression module, an SD card socket, and a
LAN connector, to allow incorporation in a
network camera system or virtually any other kindof imaging device.
Success in making a more compact,
fingerprint identification module
We succeeded in creating a compact fingerprint
identification module using embedded circuitboard technology. The module has a microprocessor, flash memory, and SDRAM mounted on a
printed circuit board (PCB), with fingerprint
identification software embedded in the flash
memory. We made this module 20% smaller thanprevious versions by densely concentrating the 59
passive components that were formerly arrangedon the surface of the PCB, moving them inside an
8-layer random-build-up B2it PCB.

Electronics

Spread of Electronic Devices■ Printed Circuit Boards
Doubling production capacity for highprecision, plated lead frames for use insmall packages
DNP added a new line of manufacturing
equipment for the production of high-precisionplated lead-frames for use in small semiconductor
packages, in order to be able to respond in a steadyand timely manner to the strong demand for suchpackages. The new equipment doubled monthly
production capacity to 300 million units.

Development of bendable printed circuitboards (PCBs)
DNP developed a rigid flex printed circuitboard, I-B2it, that boasts greater packaging density
and a more flexible circuit design than its
predecessors. Rigid flex printed circuit boards do
Bendable printed circuit boards(left) when bended (right) when expanded

63

DNP AR 05
Electronics

not require separate connectors for eachconnection, so they can be used with thin or
bendable packaging. Demand for them isincreasing, mainly for use in cell phones. However,these PCBs are relatively expensive, and previously
it was not possible to make connections between
their densely packed layers. DNP’s new board
reduces the cost by more than 20%, doubles thecircuit density, and greatly increases the flexibilityof circuit design.

Development of metal pin material thatenables the manufacture of ultra-thinsemiconductor packages, only 0.3 mm
thick
DNP has developed a new metal pin material
that reduces the cost of assembling a semiconductor
package by 15-30%, and makes it possible toproduce semiconductor packages with a thickness of
only 0.3mm. In the past, it was considered to be
impossible to make a package thinner than 0.7mm.
The newly developed material is formed into a
pin pattern by laminating a copper base withmetallic film made of metals like copper, nickel,
palladium, and gold, etc.

■ I C Ta g s
Development of active multi-sensor tagswith heat, humidity, and light sensors
DNP has added high added-value multi-sensor
tags to its ACCUWAVE® series of original IC tags.
For the first time, a single IC tag can detect three
types of data: heat, humidity, and light. In addition
to bolstering the company’s IC tag product lineup,in October 2004, we commenced marketing our
ACCUWAVE® Starter Kit, which can be put to use
immediately. Besides the conventional IC tag
functions of tracing the production, processing, anddistribution of foods, the multi-sensor tags make itpossible to monitor the products’ storage
conditions. The new tags can also be used in avariety of other applications that demand quality
control, such as shipping or the storage of art works
or other precious objects.

64■ Photomasks
Alliance with ProMOS Technologies Inc.
of Taiwan, in the field of advanced
photomasks
Under DNP’s alliance with ProMOS
Technologies Inc., (ProMOS), the world’s number
five dedicated DRAM foundry, we will provide astable supply of leading-edge photomasks below
180 nm, and the two companies will jointly
develop optimal specifications for leading edge
photomasks required by ProMOS in wafer
processing below 90 nm.
More alliances for our photomask
division
Since DNP’s photomask division first made analliance with Intel in January 1998 for the joint
development of next-generation photomasks, wehave actively pursued alliances with major
semiconductor manufacturers and secured our
position as number one in the photomask industry.
For example, in October 1999, we acquired
Hitachi Ltd.’s photomask division. In March
2000, we established a photomask manufacturing
joint venture with Toshiba. In May of that year,
we formed a photomask alliance with Fujitsu, andin December, we formed a business partnershipwith a major Taiwanese semiconductor foundry,
United Microelectronics Corporation (UMC). In
July 2001, DNP and Xilinx, Inc. of the US, theworld leader in terms of FPGA (Field
Programmable Gate Arrays), agreed to cooperate.
In May 2002, DNP and STMicroelectronics
formed a strategic alliance for the development
and supply of high-end photomasks. Through ourmost recent alliance with ProMOS Technologies
Inc., we should be able to expand our share of thephotomask market more than ever, and increase
the market’s faith in our technological strength.
Alliance with MIPS Technologies, Inc. toprovide SOC design services
DNP and MIPS Technologies formed analliance for providing System On Chip (SOC)Development of NextGeneration Products for the
Growing Display Market■ Color Filters
Construction of a new color filter plantfor 6 th -generation LCDs
DNP is building a new factory in Kurosaki,
Kita-Kyushu, to produce color filters for use in
6th-generation LCD televisions, which are
expected to see further increases in demand.
The site of the new plant is adjacent to thelocation where Advanced Colortech, Inc. (ACTI, a
DNP affiliate) is producing color filters for fourthgeneration LCDs. The new plant will be able toturn out 1,500mm x 1,850mm sixth-generation
glass base-plates. It will have a maximum monthly
production capacity of 60,000 sheets of 6thgeneration glass size, and is on line from June 2005.
When the new facility starts up, together with a
5th-generation line that began operation at DNP’s
Mihara Plant in the autumn of 2004, the overallcolor filter production capacity of the DNP(including Otone, Mihara, the new Kurosaki line,
ACTI, SinTek, and South Sintek Photronic) willbe 6.9 million units per month (based on a 14 inch

liquid crystal panel equivalency).

■ Projection Screens
Development of three types of screensfor MD projection TVs
DNP has developed three types of screens foruse in Micro-Display (MD)-type rear-projection
TVs (PTVs). DNP already holds a world-leading
share of approximately 55% of the global market
for PTV screens (CRT and MD types). We
decided to start selling a new type of screen for
MD-type PTVs, in light of expectations forincreased demand, in order to maintain ourdominant position in the PTV screen market. The
three new screens are a low-priced, high-quality
MD-type PTV screen, a one-piece glass screen,
and a screen with improved vertical viewing angle.
All three are aimed at making MD-type PTVs
more competitive by meeting the consumers’
demand for even lower prices, better picture
quality, and better overall quality.
Successful development of new front
projection screens for projectors
DNP has developed a new kind of front
projection screen for projectors. We found a way
to manufacture two types of front-projection
screens (reflective and transparent) by using rollto-roll coating technology to make cholestericliquid crystal (CLC) film. CLC film is an opticalfilm that has a polarization beam splitting
function that makes it possible for a reflective
screen to deliver images with approximately fivetimes the contrast of existing matte screens in abright room, and with about ten times thecontrast of existing matte screens if polarizationcontrolled light is used in the room. The
transparent screen is similar to existing hologram
screens used to view transfer imaging, but using
the roll-to-roll production method makes it easy
to produce the screens in large sizes, which wasdifficult with traditional hologram screens.

Electronics

design services, under which DNP acquired alicense to use 32-bit and 64-bit MIPS processors
and cores. MIPS is a world leader in industry
standard processors, architecture, and cores usedin the fields of digital information appliances,
telecommunications, and office equipment.
DNP obtained a license to use five types of
MIPS processors and cores: MIPS32® 4KEcTM and
4KEmTM processors, and MIPS32® 4KEpTM,
MIPS64® 5KcTM and 5Kf TM cores. DNP will use
these highly marketable MIPS CPU cores as abase for LSI design and prototype services,
providing manufacturers of semiconductors, sets,
and systems with turnkey SOC solutions thatradically reduce development time for things likeleading-edge consumer applications and officeautomation, helping them get to market faster.

65

Sustainable Development

Based on our corporate philosophy of contributing to the intellectually active, prosperous, evolving
society of the 21st century, we established the DNP Group Corporate Pledge to specify our employees’
mission and responsibilities, and the DNP Group Vision for the 21st Century to indicate the kindof company we want to be and the direction we want our businesses to take in the future.
We believe that actualizing our corporate philosophy — by acting in good faith in accordance with— will contribute to the sustainable development of DNP and of society as a whole.

68

70

71

72

Legal Compliance andProduct Safety

Information Security

Managing Intellectual

Corporate Ethics

Sustainable Development

our Action Charter and by actively creating new values according to our Vision for the 21st Century

Property

74

75

76

79

Approach to Research &Environmental Protection

Creating Lively Workplaces

Contributing to Art &Development

CulturePlease refer to “DNP Group CSR Report 2005” for the details of this section.

67

Legal Compliance and Corporate Ethics

In 1992, the DNP Group established the Dai Nippon Printing Group Corporate Pledge, which clarifies ourcommitment to operate in compliance with all laws and social ethics. We also established Corporate Ethics
Committees in all of our Group organizations to promote the establishment and spread of corporate ethics. The
members of the Corporate Ethics Committee, which is made up of Directors in charge of each department at
headquarters, meet at regular monthly meetings to determine policies concerning business ethics. There are also
separate committees for dealing with important individual themes, such as the environment and information
security.

Corporate Ethics Committee
Open Door RoomCorporate Ethics Committee of eachdepartment at headquarters

Corporate Ethics Committeeof each operational divisionCorporate Ethics Committeeof each Group company

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

The practice of corporate ethics requires that every single employee have an adequate understanding of theimportance of ethical behavior and links that understanding to action in everyday business. In order to establish
corporate ethics more firmly than ever, we believe it is important not only to persistently and continuously
explain the importance of ethics, but also to build systems and mechanisms into our management structure thatprevent people from reverting to old ways. Below are examples of some of the things we have done to enhanceawareness of corporate ethics.

■ Systematization of Corporate Ethics Training
We systematized our corporate ethics training in the following ways, making it possible for employees
to receive corporate ethics training many times, in order to continually remind each employee that he or
she must actively participate in corporate ethics.

1. Training Tailored to Specific Organizations
If employees are to perceive corporate ethics as an issue that affects them personally, the content oftraining sessions must address questions that affect the specific division in which they work. Realizingthat this was the case, in November 2003 we began having Directors in charge of business units andother top executives hold independent training sessions in corporate ethics, to explain face-to-face thepolicies and decisions that each division has taken regarding important issues. Every DNP divisionholds training sessions like these.

682. Regular Training Sessions According to Employee Level
We included corporate ethics in the curriculum for training sessions given to new employees and to
employees who have been newly promoted to the management level. In this way, we ensure that every
employee receives training in corporate ethics at various stages of his, her career, and will realize theimportance of ethical behavior.

3. Training Sessions Given by the Head Office
In order to supplement the training sessions described above, the sections in charge from the head
office hold training sessions at various business units to discuss important topics as necessary.

■ Open Door RoomDNP Group employees can take their problems and questions related to corporate ethics to the
Corporate Ethics Committee, where a full-time staff member handles such issues promptly. We
augmented our consulting framework by establishing the Open Door Room, a place where employees canturn when it is difficult to consult with a supervisor or with coworkers. We take great care to protect theanonymity of employees who use the Open Door Room and preserve the secrecy of their consultations, sothat they will not suffer any negative consequences in their workplace.

■ Management by Objective System
The DNP Group has incorporated elements of corporate ethics in its management-by-objective system.
Through meetings between supervisors and their subordinates, during which each employee sets action
targets and reviews the results of those actions a half-year later, we confirm that each and every employee
is acting in an ethical way.

■ Voluntary Review of Laws and Regulations

DNP’s Corporate Ethics Committee has encouraged every business unit to perform this kind ofvoluntary check twice a year, based on a checklist prepared by the sections in charge, and to make
improvements as necessary. Each section in charge compiles the results of these reviews relative to various
themes, and the Headquarters Corporate Ethics Committee ties these together and promptly reflects theresults in companywide policies.

Sustainable Development

In order to establish a corporate culture of legal and regulatory compliance, we expect every unit of ourorganization to have the courage to voluntarily check its business operations relative to existing laws andregulations in order to be sure it is not guilty of any infringements, and to take swift corrective measures ifnecessary.

In addition, we have adopted a system that we call a priority execution plan. Rather than having all
business divisions address a single set of issues with the same degree of urgency, we get better results byhaving each division assign priority levels to issues according to the division's particular circumstances.

One of the DNP’s management policies is to act with integrity. What we mean by integrity here is not simply
honesty or conscientiousness, but high-quality management that includes elements such as self-monitoring, asense of accountability, sound morals, faithfulness to principles, and a solid awareness of goals. Our objective is tocreate an organization that is thoroughly self-monitoring and has a strong awareness of its purpose and responsibilities. An organization with this kind of solid ethical constitution will be one that supports free communication,
is full of life, and wins the trust of society. Because this is the kind of organization that the DNP Group wants tobe, we take a positive attitude toward embracing corporate ethics.

69

Product Safety

Product safety is one of DNP’s top priorities, along with environmental protection. We created a unified
product liability management system that is shared by the entire DNP Group, so the whole Group can work
together to make our products as safe as possible.

■ Basic Policy■ PL Management System

It goes without saying that our products must meet all
relevant legal and regulatory standards. Our goal is tofulfill our corporate social responsibility by manufacturing products that exceed customers’ demands andexpectations regarding product safety.

Managing product liability is not a one-time event,but an ongoing effort. We run a PL risk check whenever
we develop a new product or receive a complaint, andonce a year we check all existing products.
If we find that a product design or production
technology might result in the production of defective
products, we change the design or improve thetechnology in order to eliminate the risk, and document
these changes in our product safety standards.

■ Framework
In November 1994, we established a Product Safety
Committee in our headquarter, and in each operational
division and group affiliate, as the framework throughwhich we promote product safety.

■ Defining Product Safety
The Product Safety Committee of each division andeach Group company sets general standards for productsafety assurance, as well as individual safety standards foreach product, based on guidelines established by theheadquarter’s Product Safety Committee.

Product Safety Framework and Guidelines■ PL Training Seminars
We have been conducting PL training seminars since
1994. In 2000, we began using our Intranet system forthis training. As of the end of March 2005, 10,670
employees had completed the online seminar.

PL Management System

When developing
a new productHeadquarter Product
Safety Committee

Operational Division Product
Safety Committees

Group Company Product
Safety Committees

70

Product Safety
Guidelines

When a complaint
has been received
Once a year for
all products

Product safety assurance
standards

PL risk check

Products
design revision;
production
technology
improvement

Ongoing
improvement

Product safety standards
for individual products
Manufacturingaccording to
written standards

Creation of
written productsafety standards

Information Security

Many companies and organizations entrust DNP with personal information and request us to provide all kindsof services that involve the transmission of information to consumers. We also offer our own services that makeeffective use of personal information while transmitting information to companies and organizations.
While it goes without saying that we want to offer outstanding products and services, it is also important to us toreinforce our information security measures even further, and ensure thoroughly reliable personal data protection.

■ Personal Information Protection Policies
1. Comply with laws and regulations related to personal information protection; strive to protect personal data.
2. Take reasonable safety precautions to prevent illegitimate access to personal information, and to prevent loss,
destruction, falsification or leakage of such personal data. In the event that such a problem should occur, takeprompt measures to correct the situation.
3. Specify reasons for using personal information; acquire, use, and provide personal information in fair andappropriate ways.
4. Respond appropriately to anyone whose personal information we hold if that person lodges a complaint, inquiry, ora request regarding their own personal information, such as a request to disclose, correct, or stop using theinformation.
5. When the performance of services on behalf of a client company involves the handling of personal information, use
the information only within the scope of the requested services.
6. Establish in-house regulations concerning the handling of personal information; build, maintain, and continuously
improve related systems.

■ Framework for Promoting Information
Security

DNP Information Security Committee

We established the DNP Group Information Security andPrivacy Protection Promotion Committee as a companywideorganization. We also established information security
committees within each operational division and affiliatedcompany. Committee members were given responsibility forspecific tasks, such as developing educational plans based on
our basic principles, defining security areas, or devisingcomputer security measures.

Framework for Promoting Information Security Within
Operational Divisions and Group Companies■ Events Promoting Privacy Protection

Information Security Manager

Committee Chief of information security, Person
responsible for managing personal information(General managers of operations and presidents of groupcompanies)
Person responsible for auditing and inspection

In the arena of direct mail and invoice issuance, we haveestablished technical policies based on our own expertise indata printing and envelope stuffing and sealing, which enables
us to do thorough quality control. In the e-business arena, weoperate a high-security Internet data center (IDC), from which
we provide support for web sites and e-commerce sites.
“Network Learning” Online Employee Education Programs• By May 2004, some 10,500 employees participated Privacy Protection
Training (Part 1).
• By Feb 2004, about 10,000 employees participated Privacy Protection
Training (Part 2).
• By Sept 2004, about 18,000 employees participated Information Security
Training.

E-Business Emergency Response Training (Lectures and Practice)• Begun in March 2003, attended by about 2,000 employees from the Marketing
Planning Division

Information Security Training for Technicians• Feb 2004 Privacy Protection Training; about 20 local pre-press techniciansparticipate

Privacy Protection Training for Nationwide Sales and PlanningStaff (Lectures and Practice)• Begun in Feb 2005, attended by about 1,400 employees from the Marketing
Planning Division

Person responsible for education
Person responsible for security area measures
Person responsible for public relations
Person responsible for information system measures

Sustainable Development

Information Security Promotion Office Manager

Production of In-house Education Tools• In March 2005, we distributed handbooks on personal data protection toabout 10,000 employees.

National Conferences Related to Information Security• May, June 2004 Explanation of Policies on Reinforcing Privacy Protection; forrelevant staff and presidents of affiliated companies• Sept-Dec 2004 (monthly) Explanation of Specific Measures for Reinforcing
Privacy Protection; for relevant staff• Feb 2005 Explanation of Revised Personal Information Protection
Regulations and Japan Federation of Printing Industries’ Guidelines on
Personal Information Protection; for relevant staff

Using Smart Cards to Identify Employees• October 2004 to April 2005 Hybrid dual cards with both contact-type andcontactless-type functions including personal ID, gate access, and accountsettlement functions

Establishment of a Security Management System• As of April 2004, 12 divisions had acquired privacy mark certification; four
divisions BS 7799, ISMS

71

Managing Intellectual Property■ Basic Policy
In order to make intellectual property (IP) a major source of corporate revenues, each of DNP’s operating divisions
has formulated an independent IP strategy and has drafted a business strategy that includes the development and use ofpromising IP.
DNP is providing thorough education and training for all employees to facilitate more efficient development ofintellectual property at every stage from idea generation to the acquisition of rights. In this way, we are cultivating a
corporate culture of fairness in which we both assert our rights when appropriate and respect the rights of othercompanies. In order to maximize the value of DNP’s intellectual property, we have been identifying inventions, ideas,
and designs that we created, and are working on acquiring rights to them and negotiating licenses to make use of thoserights as well as conducting research aimed at avoiding violation of the IP rights of other companies. In addition, we are
active in the business of IP-related consulting and planning.

■ IP Management Activities
This is what DNP has been doing with regard to IP in order to help make P&I Solutions a reality.
1)

We have been cultivating a good environment for generating innovative and creative IP — an environment
where every employee can participate in creative activities. We encourage creative activities in each division, andare creating appropriate evaluation and reward systems.

2)

We have been analyzing DNP’s IP position within our technological domain, and have been building a networkof rights.

3)

We have been actively working to maximize use of IP, for example through IP-based market controls, licensing,and acquisition of rights through alliances.

4)

We support the generation and use of IP by concentrating our resources in growing fields, including leadingedge technological development, product development that predicts the needs of consumers and corporateclients, and development of new business models.

5)

In order to boost R&D efficiency and speed up development, we have enhanced the infrastructure supporting
our patent information management system.

6)

When developing a business or forming an alliance, we provide legal opinions and advice from an IP standpoint.
We are establishing systems for promoting legal compliance in this area.

7)

In order to make the most of DNP's intellectual property, we are keeping an eye on legal revisions and working
to get a grasp of how other companies manage intellectual property.

■ Framework for Promoting IP Rights
DNP’s IP-protection framework consists of three sections and employs six in-house attorneys. The Patented
Technology Section addresses IP related to basic research and DNP’s main business divisions: Information
Communication, Lifestyle and Industrial Supplies, and Electronics. The Licensing Section handles contracts and legal
issues related to IP, and the Planning Management Group publishes information related to IP and operates a system for
managing patent information.
In addition, an IP representative is assigned to each development base in Japan, so that our IP activities can be closely
linked to our business operations. So that we may promptly handle IP issues in the US, we have a representative at a
Los Angeles law firm who deals with the International Trade Commission (ITC), researches patents and contracts with
US companies, and gathers information about IP-related matters in the US.

72

IP Framework
Patented Technology Section
In-house attorneys (6)Information Communication
Lifestyle and Industrial Supplies
Representative staff

Electronics① Discover patents, utility models, and designs; acquire rights ② Promote use of IP in
business activities ③ Handle IP-related problems that arise in the course of doing business(patents, utility models, designs, etc.), patent research, treatment of other companies’
patents, support for business activities ④ Public relations related to patents, etc.

Basic Research

R&D Center
Technology Development Center
Operational divisions

Protect and make use of innovations that resulted from research and development activities① Support creation of IP in line with our R&D strategy ② Support creation of R&D patentportfolio ③ Educate employees about R&D-related IP issues

Overseas representatives

Licensing Section① Handle IP-related contracts (draft, review, etc.) ② Support all types of businessactivities related to IP: trademarks, designs, copyrights, prevention of unfair competition,
Law for Preventing Unjustifiable Extra or Unexpected Benefit and Misleading
Representation, etc. ③ Apply for trademarks, acquire and manage rights, research othercompanies’ rights ④ Consult, negotiate, handle disputes related to every aspect of IP

Planning Management Section① Propose IP strategy; disseminate information ② Create patent research system/operate patent
management system/create infrastructure to support research and development activities ③ Serve
as secretariat for promoting IP business strategies ④ Run clerical operations related to IP■ Number of Patent Disclosure and Trademark Applications and Number of Patents, Utility
Models, Design Rights and Trademarks Held in Japan during the Past Three Years
1) Number of patent disclosure
applications

2) Number of patents and utility
model rights held

800

2,500

3) Number of design rights held
600

687
689

608
522

538
440

523

500

2,000

400
1,500

463

400

300
246

233

1,000
200

183

200

110

94

72

0

500

100
0

0
02

03

Information Communication
Electronics

04

02

Lifestyle and Industrial Supplies

Basic ResearchInformation Communication

Other

Electronics

4) Number of trademark applications

03

04
Lifestyle and Industrial Supplies

Basic Research

Other

02

03

Information Communication
Electronics

Basic Research04
Lifestyle and Industrial Supplies

Sustainable Development

600

615

Other

5) Number of trademarks held
1,500

120
100

1,200

80
900
60
600

40

300

20

0

0
02

03

Information Communication
Electronics

Basic Research04
Lifestyle and Industrial Supplies
Other

02

03

Information Communication
Electronics

Basic Research04
Lifestyle and Industrial Supplies
Other

73

Approach to Research & Development

DNP’s corporate philosophy is to contribute to an evolving society through P&I solutions that combine
printing technologies (P) with information technologies (I). In today’s evolving society, information exchangeis active at various levels. The role of Research and Development is to use printing technologies as a corefrom which to develop innovative new technologies and materials that facilitate every process involved in
information exchange, from data input to storage and output. The goal is to achieve this quickly — before
other companies do. By quickly responding to market changes and always staking out positions in new
business developments, we can continue to offer new solutions to consumers and businesses alike.

■ Research & Development Framework
DNP’s research and development framework consists of four basic research laboratories, with our Research &Development Center at the core, and six specialized laboratories that focus on each business sector. These researchfacilities constitute the driving force behind actualizing the concept of DNP as a P&I Solutions provider, and it isthrough their organic synthesis that we can create new products, technologies, and systems.
The research facilities are also linked with the technical departments of the various DNP production facilities, sothat they can help resolve issues on the front line of production. We take advantage of the technology and expertise that
we have accumulated in this way, by using it to develop original DNP production equipment that allows us to offer
increasingly effective manufacturing technologies.

Controlled by Head Office
Production
Development technologies;
equipment
supportdevelopment

Controlled by Operations

R&D for new products
and technologies

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

Books and magazines
Commercial printing

Information media supplies
Display productsTechnical section of each operations

Industrial supplies

Media Technology Research Center

Decorative materials

Lifestyle andIndustrial Supplies

Nano Science Research Center

PackagingResearch & Development Center

Communication and Information

Technology Development Center

Business forms
Information Processing Services

Advanced Technology & Business
Development Division

Information
Communication

Packaging Laboratory
Decorative Interiors Laboratory
Advanced Industrial Supplies Laboratory
Information Media Supplies Laboratory
Display Components Laboratory

Electronics
Electronic components

Electronic Devices Laboratory

Commercialization projects

New Business Fields

Functions and Time Frames of R&D Facilities
R&D facility
Headquarter
Research Centers

Development term

Does Basic R&D and development of new technologies related to new business creation

Nano Science Research Center

Conducts basic, applied, and commercial-level research and development related to materials andprocesses; analyzes products

Media Technology
Research Center

Develops core technologies for the information communication field; develops and refines
technologies, products, and services

Technology Development Center

Develops production technologies

Packaging Laboratory

Packaging materials and technologies, freshness preservation technologies

Decorative Interiors Laboratory

Develops surface materials for interior and exterior building décor

Advanced Industrial Supplies
Laboratory
Information Media Supplies
Laboratory

Develops new products and technologies to support all kinds of industrial supplies
Develops all kinds of information media

Display Components Laboratory

Develops all kinds of displays and components

Electronic Devices Laboratory

Advanced photomasks, mounting components, LSI circuit design

Medium to long term(less than five years)

Medium term(less than three years)

New Product Development

Division Laboratories

74

Function

Research & Development Center

Short term(less than one year)

Environmental Protection

By working to develop products that put the least possible strain on the environment, and by working to generatedemand for such products, every DNP employee contributes to making a sustainable, recycling-oriented society a
reality. In 1972, the DNP became the first Japanese printing company to establish an environment department, and in
1993 we built our unique Eco-Report System for our environmental management. In 2000, we created the DNP
Environmental Committee, which has worked proactively to promote sales of eco-friendly products, reduce industrial
waste, prevent global warming, and reduce generation of harmful substances.

■ Development and Sales of
Eco-friendly Products

DNP Group’s Environmental Management System

DNP adopted guidelines for developing environmentally conscious products, based on principles(revised June 12, 2001) propounded by Japan’s Green
Purchasing Network, which advises consumers topurchase products and services that are designed todamage the environment as little as possible over theentire product life cycle. We used these guidelines todevelop and sell eco-friendly products. In fiscal 2004,
our sales of such products amounted to 164.0 billion
yen, up 16.8% from the previous year, and far above
our target.

President
DNP Environmental Committee
Promotion office
Each operational division’s environmental committee
Promotion office
Technical/industrial group

Eco-friendly products
development group

Regional action group

Environmental preservation/
PRTR group

Office/labor environment group

Industrial waste reduction group
Energy conservation group

Operational divisions

57 sites■ Assessment of Past Performance and Future Goals Related to Environmental Protection
Based on our environmental policies, DNP has established environment-related goals that are appropriate for ourbusiness activities, and we have been steadily improving our environmental performance. Below are the goals that ourEnvironmental Committee adopted in March 2004 for fiscal year ending March 2005, along with actual results.
Results for fiscal 2004 (year ending March 31, 2005)
Reduce carbon dioxide emissions ratio (CO2 emissions
volume divided by production value) by 20% from fiscal
1990 level (by fiscal 2010)
Compared to fiscal 1990: down 7.8%

Reduce environmental impact
from transport

Reduce carbon dioxide emissions ratio (CO2 emissions
volume divided by production value) by 5% from fiscal 2000
level (by fiscal 2010)
Compared to fiscal 2000: down 34%

TargetDevelopment and Increase the ratio of eco-friendly product sales relative tosale of eco-friendly total sales by 10% year on year (every year)
products
Compared to fiscal 2003: up 16.8%
Green purchasing

Reduce the amount of fuel consumed for transport (amountof fuel consumed / sales) by 20% from the fiscal 2000 level(by fiscal 2010)
Compared to fiscal 2000: down 6%
Volatile organic
compounds

Reduce Group-wide total emissions of toluene into theatmosphere, to 500 tons/year (by fiscal 2004)
Compared to fiscal 2000: down 86%
Reduce release and transport volumes of chemical substances(other than toluene) designated as Class 1 under the PRTR
Law to 50% of fiscal 2000 levels (by fiscal 2004)
Compared to fiscal 2000: down 55%

Office environment Maintain separated collection of used paper above 65% ofgeneral wastes (every year)
Fiscal 2004 collection rate: 73.8%
Reduce industrial
waste

Reduce industrial waste output ratio (volume of industrial
waste / production value) by 40% compared to fiscal 2000
level (by fiscal 2005)
Compared to fiscal 2000: down 35.3%

Results for fiscal 2004 (year ending March 31, 2005)
Achieve a recycling rate (amount of waste recycled /amountof waste generated) of 80% (by fiscal 2005)
Fiscal 2004 recycling rate: 79.5%

When purchasing general supplies (office supplies and equipment, etc.) increase the ratio of products that are officiallyrecognized as being environmentally friendly (Eco-markproducts, etc.) relative to overall purchases, by 3.0% year on
year (every year)
Compared to fiscal 2002: up 4.5%
Increase the ratio of “green” (per standards set by DNP purchasing headquarters) raw materials costs relative to the cost of
all raw materials purchased, by 2.5% year on year (every year)
Compared to fiscal 2003: up 0.7%

Environmental
preservation

Keep the maximum concentration of gases subject to emissions regulations within 70% of legal limit (from fiscal 2005)
Fiscal 2004 achievement rate (of our own standard): 96%
Keep the maximum concentration of substances subject towastewater regulations within 70% of legal limit (from fiscal
2005)
Fiscal 2004 achievement rate (of our own standard): 96%
At production site boundaries, keep maximum noise levels
within 95% of the legal limit (from fiscal 2005)
Fiscal 2004 achievement rate (of our own standard): 56%

Reduce overall waste generation by 25% compared to fiscal
2000 level (by fiscal 2005)
Compared to fiscal 2000: down 18.3%

Keep maximum vibration levels at production site boundaries
within 95% of the legal limit (from fiscal 2005)
Fiscal 2004 achievement rate (of our own standard): 100%

Achieve zero emissions at 20 sites (by fiscal 2005)
Achieved at 10 sites

At production site boundaries, keep maximum odor levels
within 70% of the legal limit (from fiscal 2005)
Fiscal 2004 achievement rate (of our own standard): 92%

Reduce waste generation ratio (total volume of waste / total
volume of materials used) by 20% compared to fiscal 2000
level (by fiscal 2005)
Compared to fiscal 2000: down 22.0%

Sustainable Development

TargetPrevent global
warming75

C r e a t i n g L i v e l y Wo r k p l a c e s

Our aim is for each of our employees to feel accountable and confident as an independent professional, towork at growing and realizing his or her own potential, and to meet challenges proactively and courageously.
The company shall provide environments and mechanisms that support each employee’s growth and selfdevelopment, and cultivate an emergent evolutional corporate culture that allows each employee to use his or her
abilities as a professional.

■ Transparent and Fair Hiring Practices
We provide opportunities equally to anyone who shares our corporate vision and wants to work with us to realize hisor her potential. We use evenhanded methods to select and hire employees. We also actively participate in internshipprograms.
Explanation

Results

New hiring

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

Fiscal 2004 new hires
Regular employees: 100(70 men, 30 women)
Technical staff: 155(110 men, 45 women)

Mid-career hiring

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

Fiscal 2004 mid-career hires: 48

Internships (arranged
jointly with affiliatedcompanies)

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

Fiscal 2004: 73 interns accepted
August-September, in 44
categories

Type of Hiring■ Cultivating Independent Professionals
We believe it is important for each employee to work at self-development, consider his or her own career path,decide what kind of work he or she wants to do, and expand his or her own field of work. In order to support these
efforts by individual employees, we have established personnel systems that allow them to choose the kind of work theywant to do, as well as education, evaluation, and compensation systems that encourage employees to acquire specialized
knowledge and skills.

Self-reporting system

Training system/
self-development support

76

Acceptability of evaluations; confirmationof performance goal levels

Acceptability of compensation levels;
confirmation of skill development goals

Confirmation of career goals; confirmationof individual situations

Advancing each individual’s career andimproving skills

Independent Professionals

Job grade system

Sharing goals, improving leadership, skill
development
Support and Guidance for Leaders

Employees’ Effort and Self-Development

Employee evaluation
systemEnhancement and continuation of
dialogue

Management-byobjective system

1. Personnel System
SystemDescription

Results

In-house recruiting
systemWe advertise positions requiring specialized knowledge and positions in new businesses or new product development. Anyone
with ability, experience, and the desire to be challenged is free toapply. Discovery of talented employees and realization of theirpotential

As of March 2005, 244 employees have beentransferred

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

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

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

This system was adopted as a result of a suggestion that emerged from employee training
Each participant's job skills were improved

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

Increased the number of employees who are certified for specialized knowledge or skills related
to IT or other areas pertinent to their work

Mastership recognition
program

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

A total of 44 employees recognized as of March
2005

Special skills
recognition program

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

As of March 2005, 12 employees had been recognized

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

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

Expanded the scope of application to almost all
employees

Self-reporting system

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

2004: 334 employees participated in self-reportinterviews; 24 of them changed positions

Employees design their own careers, with each one aiming to become an accountable, self-confident autonomous
professional in a particular field, with the ability to collaborate smoothly with others inside and outside the company.
The company supports employees’ career designs by arranging practical and diverse training programs that offer basicor specialized knowledge required in various fields, as well as development of people skills and conceptual skills, etc.

■ Free, Open, and Pleasant Working Environments

1. Respecting Diversity
We believe that in order to contribute to society by realizing a free, open, and dynamic corporate culture, it is importantthat all employees respect each other and help create a pleasant working environment. Toward this end, we think it isimportant for everyone to realize their potential and to their best without worrying about gender, age, or disabilities.
SystemDescription

Results

Hiring people withdisabilities

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

Fiscal 2004: disabled employee
rate 1.87%

Hiring seniors

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

Fiscal 2004: about 60% of
eligible employees chose towork as senior staff

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

From June 2003 to March
2005: 1,572 managers
participated in training about
supporting women’s careers

Sustainable Development

2. Training for Employees Who Want to Advance Their Career77

2. Flexible Work Styles
If every employee is to reach their full potential as a professional, it is important that consideration be given to
individual career plans and life plans, and that working time be balanced with ample time for self-development and private
life. It is equally important that coworkers respect each other’s precious time.
We are building systems to assist self-efforts of employees in order to promote their physical and mental health andtheir families’.
Description

Results

Childcare leave• until April 30 of the child's second year, or until a child is 18 months old
Revised April 2005

Fiscal 2004: 71 employees
took leave under this system

Family nursing care leave• up to 366 days per eligible family member; no limit on the number of times
Revised April 2005

Fiscal 2004: two employees
took leave under this system

Life Plan Consulting
Center

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

Fiscal 2004: 1,330 consultations

Career Consulting Center

Provides counseling and guidance regarding career development

Fiscal 2004: 138 employees
used the center

System

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

Results

Creation ofguidelines

Management and employees together established a Central
Safety and Hygiene Committee within the head office.
Each operational division and group company has a similarsystem for discussing and promoting safety and hygienerelated activities. We have also created company-widestandards and guidelines related to these topics.

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

Improving skills

The safety and hygiene committees play the leading role in Promoted certification of hygiene managers, work
promoting activities that are tailored to each workplace,supervisors, chemical substance handlers, etc.
and in improving employees' skills when necessary to allow • Increased the number of psychological counselors to 71 as
the committees to function effectively.
of March 2004
• Increased the number of special training seminars for
restricted work operations; Jan - Dec 2004: 261 employees
received training• Conducted safety and hygiene training for line managers
and new employees; Jan - Dec 2004: 1,407 employees
received training

Accident prevention

We analyze potential hazards and take steps to prevent
accidents involving revolving machinery, which is a major
cause of industrial accidents. Concerning non-stationary
and other high-risk operations, we review our operating
standards, practice safe operating procedures, and strive toensure that mishaps are never repeated.

System

DNP's accident rate is low compared to the all-industry
average and even compared to the average for all types ofprinting industries
Jan - Dec 2004: Industrial accident rate (the number of
employees who missed work due to a work-related accident
divided by the total number of hours worked in units of 1
million hours): 0.49%

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

78

Contributing to Art & Culture

Printing is based on the art of making reproductions, which DNP views as a new kind of creative technologythat can contribute to the development of art and culture. That’s why DNP’s unique brand of corporate
philanthropy centers on supporting graphic arts.

ggg exhibits creative works byindividuals and groups, from Japanand abroad, with a focus on graphic
design and printing. The gallery also
holds lectures and presentations byartists. Ten years after the gallery’sfounding, in 1996, it was recognizedwith a Mainichi Design Awards Special Prize. That same
year, ggg celebrated its 10th anniversary with a special
exhibit on the history of Japanese graphic arts. The
exhibit was very well received, and earned the gallery the
Mecenat Award for Outstanding Popularization of theArts. To date, the gallery has held 226 exhibits, whichwere visited by 680,000 people.
Location: 7-7-2 Ginza, Chuo Ward, Tokyo, Japan 104-0061
Telephone: 03-3571-5206
Open 11:00 – 19:00 (till 18:00 on Saturdays); closed Sundays andholidays
Admission free of charge

ddd Gallery
Opened in 1991
Located in the Kansai district, ddd
Gallery specializes in graphic design.
It mainly hosts exhibits of spiritedgraphic designers from overseas. To
date, the gallery has held 138 exhibits,
attended by 196,000 visitors.
Location: Dojima Axis Bldg., 2-2-28 Dojimahama, Kita Ward, Osaka,
Japan 530-8208
Telephone: 06-6347-8780
Open 10:00 – 18:00; closed Saturdays, Sundays and holidays
Admission free of charge

The Center forContemporary Graphic Art
Opened in 1995
The Center forContemporary Graphic Art isthe home of the Tyler
Graphics Archive Collection,
produced at the renowned
U.S. contemporary block print studio, Tyler Graphics
Ltd. In addition to holding regular showings of its
permanent collection, the Center also introduces a wide
variety of modern art. It has hosted 35 special exhibits
and received 50,000 visitors.
Location: 1 Miyata, Shiota, Sukagawa-shi, Fukushima, Japan 962-0711
Telephone: 0248-79-4811
Open 10:00 to 17:00 (Admission until 16:45); closed Mondays (unless
Monday is a public holiday), the day after public holidays, (except
when this falls on Saturday or Sunday), and exhibit changes, between
late December and the end of February
Admission: ¥300; ¥200 for students (free for children 12 and under,
seniors over 65, and handicapped-certificate holders)
There may be an extra admission charge for special exhibits.

The Ginza School
This is an event that DNP organizes around the theme,“Let’s Enjoy Thinking about Communication.” Guest
speakers from various circles address an audience of male andfemale participants of all ages, in an entertaining format.
Admission is 500 yen. Located in DNP's Ginza Annex, theevent has been held 48 times since 1995, with a total of 4,000
people attending.

Movies for Everyone - in GinzaAt DNP’s Ginza Annex, we show movies (digital images),
mainly from the 1950s and 60s, for older visitors to the
Ginza district. Admission is 1,500 yen. We began in 2003,
with two screenings per year, for a total of four screenings sofar, attended by about 1,000 people.

Sustainable Development

Ginza Graphic Gallery (ggg)
Opened in 1986

Musées de France Conference
Maison des Musées de France (MMF) is a wholly-owned
subsidiary of DNP that provides information about French
art galleries, museums, and fine arts, and sells related items
such as CD-ROMs, videos, and printed material. The
conference was first held in 2002, and has been held 11 times
since, at irregular intervals, at DNP's Ginza Annex. Eachtime, conference organizers invite speakers to address
different themes of interest to art museum curators, critics,
and researchers. So far, about 900 people have participated.

79

82

92

94

Management’s Discussion

Selcted Financial Data

Consolidated

and Analysis

Financial Statements

99

114

Notes to Consolidated

Report of Independent Certified

Financial Statements

Public Accountants

Financial Section

Financial Section81

M a n a g e m e n t ’s D i s c u s s i o n a n d A n a l y s i s

O P E R AT I N G R E S U LT S

Consolidated Segments(%)

Beverage
5.1%
Electronics
18.9%

Lifestyle andIndustrial Supplies
31.5%

82

Information
Communication
44.5%

Business Environment
This fiscal year, the Japanese economy as a whole continued its steadyrecovery, as corporate earnings improved and private-sector capital investment
and exports showed strength.
Nonetheless, business conditions for the printing industry remained very
challenging this fiscal year, due to such factors as sluggish demand for printing,higher materials costs, and a lower average order as a result of intensifiedcompetition. Sales of books expanded after a decline in the last year, but salesof magazines fell for the eighth straight year owing to competition from theInternet and a decline in the population of young people. The value of sales ofpublications industrywide rose 0.7% from the previous year. As a result of an
improvement in corporate earnings, corporate advertising and promotional
activity grew at a 5% year-on-year pace since December 2004. The rapidly
growing markets for information processing services and smart cards fueled
demand in the business forms business.
In the Lifestyle & Industrial Supplies segment, sales of packaging weredisappointing amid sluggish personal consumption. However, in theconstruction market, demand was solid for environmental products and fromoverseas markets. In industrial supplies, sales of ink ribbons for fax machines
contracted, but overall sales rose sharply, thanks to the growing demand forcolor ink ribbons, which was fueled by the popularity of digital cameras and theassociated surge in digital printing, and the burgeoning demand for reflective
film and EMI shielding film, which was boosted by the booming sales of LCDs
and PDPs.
In the Electronics segment, the display market as a whole grew, thanks to the
popularity of consumer electronics and office automation equipment. While
increased competition drove down unit prices, sales increased substantiallyoverall. Semiconductor-related sales were strong, owing to the high reliabilityof the company’s advanced photomasks and the expansion of production at its
overseas plants.

Overview
The business environment remains challenging, with the value of orders
declining as a result of general deflation and costs for raw materials, especially
petrochemical products, rising. Nonetheless, DNP managed to increase its
sales and profits for the fourth straight year, with net sales, operating income,and net income all reaching record levels.
We achieved sales and profit growth in all of our business segments on aconsolidated basis, and total net sales increased 5.2% over the previous fiscal
year. Growth at two key income levels exceeded 10%: Operating income rose
17.7%, and net income was up 13.1%. Also particularly noteworthy was thesignificant improvement in profit margins.
The DNP has set about expanding a solutions-based business that combines
printing technology (P) with information technology (I) and promoting the
growth of high-added-value businesses. This concept, which we call P&I
Solutions DNP, is based on the Vision for the 21st Century that DNP drew up
in 2001. This fiscal year, we began to see results from this effort in a number ofbusinesses.
Thanks to our Action for Production 21 campaign, which we initiated in
April 2002, we made good progress in improving our cost structure andstrengthening our financial condition. This also contributed substantially tothe boost in margins.

Net sales (in millions of yen)

2005.3

2004.3

2003.3¥ 1,424,943¥ 1,354,101¥ 1,309,002

Gross profit margin (%)

21.3%

20.8%

20.3%

Operating income margin (%)

8.5%

7.6%

6.9%

Net income margin (%)

4.2%

3.9%

2.2%

Net income Primary (in yen)
per share
Fully diluted (in yen)

¥

82.56

¥

71.49

¥

37.80

¥

37.67

Net Sales
Net sales rose 70.8 billion yen, or 5.2%, over the previous fiscal year to
1,424.9 billion yen, marking a second straight year of record high sales. In
addition, net sales were higher in all business divisions. Net sales rose 1.7% in
Information Communication, 5.6% in Lifestyle and Industrial Supplies, 14.0%
in Electronics, and 4.7% in Beverages.
With deflation easing somewhat but still persisting, the average order value
continued to decline and net sales slipped by roughly 2%, or 24 billion yen.
A breakdown of net sales by division shows that the sales of books andFinancial Section(in millions of yen, yen, percent)83periodicals in the Information Communication segment were lackluster. In thecommercial printing business, sales promotion efforts directed at customers
paid off, and orders of leaflets, pamphlets and point-of-purchase materials rose.
In the business forms business, ledgers were weak, but sales of smart cards and
IPS (information processing services) were sharply higher.
In Lifestyle and Industrial Supplies, sales of flexible packaging, primarymolded preforms for PET bottles, and large-scale sterile filling systems were
buoyant. In decorative materials, sales of environmental products were strong
and exports were higher. In industrial supplies, sales of ink ribbons for color
printers and optical films for displays rose dramatically.
In the Electronics segment, sales of color filters, photomasks, and shadowmasks
were higher.

Gross Profit Margin
(%)

25
20
15
10
5
0
01

02

03

04

05

Cost of Sales
The cost of sales increased 48.3 billion, or 4.5%, over the previous fiscal
year to 1,121.4 billion yen. The gross margin improved by 0.5 points, from
20.8% to 21.3%.
This fiscal year, costs increased by roughly 4.3 billion yen because of rising
prices of films, resins, paper and other raw materials.
With fuel costs rising, paper makers demanded price hikes and took ahardline stance, going as far as refusing to ship paper if their demands were notmet. As a result, in December 2004, we were forced to accept price hikes ofroughly 5%, which increased our costs by 400 million yen in the four months
since December.
In response to these rising costs, we aggressively promoted our Action for
Production 21 campaign, which we launched in April 2002. We worked to cut
costs by improving process efficiency, improving yields, eliminating material
losses, and reducing lead times. We also strove to raise standards for the
manufacturing division as a whole.
Furthermore, we installed in our factories a grid computing system, which
we developed ourselves. This system was applied to the massive data processing
tasks entailed by IPS and catalog production. It is used as a control system tomonitor the operational status of equipment and progress in production, withthe goal of improving efficiency.
Thanks to these activities, this fiscal year we were able to reduce manufacturingcosts by 26.2 billion yen, far in excess of the initial target of 24.5 billion yen.
Selling, General and Administrative Expenses
Selling, general and administrative expenses this fiscal year increased 4.5
billion yen, or 2.5%, to 183.0 billion yen. Thanks to the increase in net sales,
the percentage of SG&A relative to sales fell from 13.2% to 12.8%. Factors
behind this change included a reduction in retirement benefit costs due to thereturn of the substitution portion of the employee pension fund and improved

84investment results over the previous fiscal year, as well as other cost savings.
To reduce costs, DNP focused on cutting personnel costs by trimming
overtime hours and taking other measures to boost operating efficiency, andalso focusing on indirect expense reductions by promoting the use of
information technology and strengthening budget management. We succeededin cutting personnel expenses by 2.0 billion yen, more than the initial target of
1.9 billion yen, and indirect expenses by 2.8 billion yen, more than the initial
target of 2.2 billion yen, for a total of 4.8 billion yen in cost cuts.

SGA Expenses to Net Sales
(%)

15
12
9
6

Operating Income
This fiscal year, DNP’s operating income rose 18.1 billion yen, or 17.7%, to120.5 billion yen. We were able to offset the decline in the average order value
and the rise in raw materials costs by reducing manufacturing and SG&A
expenses. Accordingly, the operating income margin improved from 7.6% in
the previous fiscal year to 8.5%.
The breakdown by segment is as follows. Operating income rose 5.7 billion
yen, or 13.0%, to 49.4 billion yen in Information Communication. It was up
3.6 billion yen, or 11.0%, to 36.0 billion yen in Lifestyle and Industrial
Supplies and up 6.7 billion yen, or 20.2%, to 39.7 billion yen in Electronics. In
Beverages, which incurred a loss in the previous fiscal year, operating income
rose 2.0 billion yen to 1.6 billion yen.

3
0
01

02

03

04

05

04

05

Operating Income Margin
(%)

8
7
6
5
4
3
2
1
0
01

02

03

Financial Section

Other Income (Expenses)
This fiscal year, net other expenses totaled 12.8 billion yen, up 3.5 billion
yen, or 38.1%, from the previous fiscal year. The main factors behind theincrease in net other expenses were the absence of gains on an exemption fromthe future pension obligation of the governmental program, which totaled 6.1billion yen in the previous fiscal year; a decline of 4.0 billion yen, or 95.5%, in
the amount of net gains from the sale of marketable securities and investment
securities; an increase of 2.0 billion yen, in payments of special retirement
benefits related to the reorganization of a subsidiary of Hokkaido Coca-Cola
Bottling Co., Ltd.; the absence of contribution income from the restructuringof joint venture businesses, which amounted to 1.7 billion yen in the previous
fiscal year; and 1.0 billion yen in provisions for doubtful receivables, versus
none in the previous fiscal year.
Factors that minimized the increase in net other expenses included a
reduction of 3.0 billion yen, or 67.5%, in other expenses; a decrease of 2.0
billion yen, or 67.6%, in losses on discontinued businesses; a decline of 1.7
billion yen, or 84.9%, in equity in losses of associated companies thanks to anearnings improvement at DAP Technology, a joint venture with Asahi Glassthat produces PDP back plates; and 3.7 billion yen in gains from the reversal ofreserves for retirement benefit liabilities, versus none in the previous fiscal
year, as a result of Hokkaido Coca-Cola Bottling Co., Ltd.’s termination of its

85

traditional pension plan in favor of a new one.
As a result of the above, income before income taxes and minority interests
was 107.7 billion yen, representing an increase of 15.6% over the previous
fiscal year.

ROE
(%)

6

Net Income
Net income accordingly totaled 59.9 billion yen, up 13.1%, or 7.0 billion
yen, from the previous fiscal year and amounted to 82.56 yen per share, up
from 71.49 yen.

5
4
3
2
1
0
01

02

03

04

05

Capital Expenditures, Research & Development Expenditures, etc.
Capital expenditures totaled more than 100 billion yen a year from the fiscal
year ended March 1997 to the fiscal year ended March 2001. Starting in thefiscal year ended March 2002, however, we reduced capital expenditures,
focused investments on strategic areas, and tried to effectively use existing
capital equipment.
In this fiscal year, a number of major investments in strategic areas resulted
in capital expenditures increasing by 16.2 billion yen from the previous fiscal
year to 86.1 billion yen. This figure is 24.0 billion yen less than the initialbudget of 110.0 billion yen because of a change in the startup time of capital
equipment. The main capital investment project was a new 5th-generation line
at the Mihara Plant for producing strategic LCD color filters. A second line,
following the first line, which started up in the summer of the previous year,
was originally scheduled to start up in December 2004, but started up in April
2005 because of shifts in demand. As a result, capital expenditures in this fiscal
year fell short of the originally planned amount.
Research & development expenditures totaled 26.4 billion yen, 0.3 billion
yen higher than the 26.1 billion yen in the previous fiscal year.

L I Q U I D I T Y A N D C A P I TA L R E S O U R C E S
DNP believes that the steady expansion of cash flow generated throughvigorous operating activities, along with concentrated investment in strategicareas, are important for the expansion of our business. In addition, we believethat a sound financial constitution is indispensable to stable growth in themedium and long terms, so we have worked hard to enhance our company’s
financial position.

86

Cash Flow
Free cash flow is cash flow that DNP can actively invest in fields that havethe potential of propelling the company forward. It also is the source ofcorporate value. This fiscal year, DNP managed to generate a free cash flow of
52.1 billion yen.
2005.3

2004.3

2003.3

Cash flows from operating activities¥ 178,342¥ 161,487¥ 197,413

Cash flows from investing activities

126,229

94,74087,392

66,747¥ 110,021

Free cash flow¥

52,113¥(in millions of yen)

Financial Section

This fiscal year, cash flows provided by operating activities increased by
10.4%, or 16.9 billion yen, from the previous fiscal year to 178.3 billion yen.
Although trade receivables increased by 11.3 billion yen, and inventories rose
by 6.6 billion yen, income before income taxes and minority interests reached107.7 billion yen. In addition, depreciation totaled 80.4 billion yen and trade
payables rose by 28.8 billion yen.
Cash flows used in investing activities increased by 33.2%, or 31.5 billion
yen, to 126.2 billion yen. The main factors included proceeds of 6.7 billion yen
from the sale of marketable securities and 5.3 billion yen from the sale ofinvestment securities, a net increase of 29.8 billion yen in time deposits, andexpenditures of 73.7 billion yen for purchases of property, plant and equipment
as well as 22.4 billion yen for purchases of investment securities.
Finally, cash flows used in financing activities increased 67.3%, or 16.3
billion yen, to 40.6 billion yen. Major uses of cash included expenditures of
18.1 billion yen for purchases of treasury stocks and 16.5 billion yen for
dividend payments. Although cash provided by financing activities declined
substantially this fiscal year, the decline stemmed from the absence of last year’s
proceeds from a bond offering.
Because of these activities, DNP’s cash and cash equivalents at the end of the
fiscal year increased by 5.0%, or 14.0 billion yen, to 293.4 billion yen.
At DNP, we are mindful of consistently maintaining appropriate liquidity sothat we can proactively carry out our strategies and flexibly deal with changes
in the business environment. Our approximate target is to have liquidity that isequivalent to about two months’ worth of sales. We have instituted a cash
management system to manage and streamline the use of the Group’s funds.

87

The Balance Sheet
We always try to optimize our capital structure to suit the businessenvironment and to increase our asset efficiency so that we can increase ourcorporate value.

2005.3

2004.3

2003.3¥ 1,600,129¥ 1,513,734¥ 1,450,027

Current ratio (%)

186

197

171

Working capital-to-net sales (%)

27

28

23

Debt/equity ratio (%)

7

7

6

¥ 1,409.18¥ 1,348.40¥ 1,270.81

Total assets (in millions of yen)Book value per share (in yen)(in millions of yen, yen, percent)Current Ratio(times)

2.0

1.5

1.0

0.5

0.0
01

88

02

03

04

05

DNP’s total assets at the end of this fiscal year amounted to 1,600.1 billion
yen, up 5.7%.
Among current assets, cash and cash equivalents increased by 5.0%, or 14.0
billion yen over the previous fiscal year, to 293.4 billion yen, while time deposits
increased by 30.1 billion yen to 30.1 billion yen. Trade receivables increased by
3.4%, or 13.5 billion yen, to 413.6 billion yen. Marketable securities holdings
increased by 1.5%, or 97 million yen, to 6.8 billion yen. Inventories increased by
10.1% to 77.0 billion yen. As a result, total current assets increased by 8.7%
over the previous year to 838.7 billion yen.
Among long-term assets, property, plant and equipment, net of accumulated
depreciation, increased by 2.9%, or 14.8 billion yen, to 528.0 billion yen. The
primary reasons for this increase were an increase of 15.9 billion yen, or 149.3%,
in construction in progress and an increase of 3.5 billion yen, or 3.0%, in land
assets. Other long-term assets declined by 10.9%, or 7.8 billion yen, to 63.2
billion yen.
Also, total investments and advances rose by 7.9%, or 12.5 billion yen, to170.2 billion yen, as a decline of 2.7 billion yen, or 21.9%, in investments in
non-consolidated subsidiaries and associated companies was offset by an increaseof 14.3 billion yen, or 9.9%, in investment securities and a rise of 936 million
yen, or 124.3%, in other investments and advances.
As a result, long-term assets increased 2.6%, or 19.6 billion yen, from theprevious fiscal year to 761.4 billion yen.
On the liabilities side, total current liabilities at the end of this term were up
15.1%, or 59.3 billion yen, from a year earlier to 451.0 billion yen. Underlying
factors include an increase in trade payables by 8.7%, or 24.4 billion yen, to302.7 billion yen as net sales increased, a rise in short-term bank loans by
54.7%, or 4.4 billion yen.

Equity Ratio
(%)

80

60

40

20

0
01

02

03

04

05

Financial Section

Long-term liabilities decreased by 2.9%, or 3.5 billion yen, compared to theend of the previous year, to 115.8 billion yen due to a decline in long-term bankloans by 31.5%, or 2.9 billion yen. The outstanding amount of bonds remained
the same from the previous year at 50.0 billion yen.
In all, total liabilities increased by 10.9%, or 55.8 billion yen, to 566.8 billion
yen.
This fiscal year, DNP continued to repurchase its shares, as it has been doing
since February 2003. We repurchased 10,477,000 shares for 17.8 billion yen. In
December 2004, we retired some shares for the first time, 9 million sharesvalued at 12.8 billion yen. The 9 million shares amounted to 1.19% of total
outstanding shares before retirement, and after they were retired, the total
number outstanding came to 750,480,693. As a result, the amount of treasury
stock increased by 11.4%, or 5.3 billion yen, from 46.4 billion yen at the end oflast fiscal year to 51.6 billion yen, a factor behind the decline in stockholders’equity. By contrast, retained earnings increased by 4.2%, or 31.3 billion yen, to774.6 billion yen, a factor that increased stockholders’ equity.
As a result of the above factors, our total stockholders’ equity at the end of
this fiscal year increased by 3.0%, or 29.2 billion yen, to 1,007.9 billion yen.

89

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

The Japanese economy and consumption trends
DNP engages in a wide range of businesses with an extremely large number ofcustomers. We conduct our business so as not to be overly dependent on specificcustomers. The primary market where we do business is centered on theJapanese domestic market, whereas our overseas sales constitute about 16% of
net sales. Therefore, if individual consumption and other aspects of domestic
demand should slow down due to fluctuations in the Japanese economy, ourcorporate performance could be affected by decreased orders, lower unit saleprices, or other effects of such a downturn.
Changes in the electronics market
We expect our electronics segment to be highly profitable and we believe it
has good growth potential. We position it as a strategic sector which we aim to
expand in the future. We intend to secure steady profits from it by focusing on
building business strategies based on a careful compilation of information andthe development of highly competitive, high-added-value products. However,
the market for displays and semiconductor-related products is subject to suddenchanges. It is possible that DNP’s performance could be affected by suddenchanges affecting products that we handle, such as dramatic fluctuations indemand or a plunge in unit prices.
Fluctuations in raw material procurement
We procure raw materials such as printing paper and film from multiple
suppliers in Japan and overseas. We work hard to secure stable supplies andmaintain optimal prices. However, there is some potential for temporary
imbalances between supply and demand due to factors like spikes in petroleum
prices or sudden surges in demand from the Chinese market. We intend to copewith such instances by negotiating with our customers. However, if it should
become extremely difficult to secure supplies, or if prices rise markedly, it ispossible that our corporate performance could be affected.
Development of new products and technologies
DNP adapts printing technologies in order to develop new products andtechnologies that meet the needs of our customers and the market. We provide
products and services to a wide range of industrial sectors. In recent years, thepace of technological innovation has become faster than ever, and customers’
90needs have been rapidly diversifying. We believe that in the future, competitionin the area of product development will become more intense than ever before,
and it is possible that our performance could fluctuate significantly due tounforeseeable changes in market trends or a shortening of product life cycles.

Currency fluctuations
Particularly in such fields as electronics, we are expanding our dealings in
products and services with customers, suppliers, and others overseas. Because we
expect the effects of currency rates to gradually become more important, we use
such means as foreign exchange forward contracts to hedge the risks of market
fluctuations. Nevertheless, it is possible that radical swings in currency values
could have a more serious effect on our corporate performance.
Legal regulations, etc.
We conduct our business based on strict compliance with the law. Wherever
we operate, in Japan or overseas, we are subject to a wide variety of legal
regulations and restrictions, including laws related to product liability, environmental protection and recycling, anti-monopoly prohibitions, patents, taxes,
imports and exports, etc. We can imagine that in the future such regulations
could become even more restrictive. If that should occur, it is possible that
DNP’s business performance could be affected by limitations on our businessactivities or increased costs.

Disaster
We take steps to protect our production equipment and other major facilities
from being damaged by disasters like fires or earthquakes. In addition, we divide
our work among multiple production bases and make every effort to prevent
disaster from causing production stoppages or disturbances in our ability tosupply products. However, it is possible that our business performance could beseriously affected in the event of unforeseeable situations, such as production
stoppage or massive damage to or destruction of our corporate infrastructure
resulting from an event such as a huge earthquake or terrorist attack.

Financial Section

Information system security
Now that the Internet and other computer networks and information systems
are playing an increasingly large role in business, the construction of
information systems and security measures that protect them have become
indispensable to the continuation of business activities. In recent years, DNP has
become increasingly vulnerable to computer-related risks, such as the possibility
that information systems could be shut down by software or hardware trouble,
computer viruses, etc., or that customer information could be leaked outside thecompany. DNP takes every possible measure to maintain and control computer
systems and data through increasingly sophisticated security and employee
education. However, in the unlikely event that an accident should occur, it ispossible that our business activities could be affected.

91

Selected Financial Data (unaudited)

2005

2004

2003

2002

Income Statement Data (in millions of yen)
Net Sales¥

1,424,943¥

1,354,101¥

1,309,002¥

1,311,934

Cost of sales

1,121,374

1,073,118

1,043,456

1,071,163

Gross profit

303,569

280,983

265,546

240,771

Selling and administrative expenses

183,041

178,545

175,665

168,529

Operating income

120,528

102,438

89,881

72,242

Income before income taxes and minority interests

107,686

93,13742,244

26,150Net income

59,93752,971

28,774

15,609Balance Sheet Data (in millions of yen)
Total assets¥

1,600,129¥

1,513,734¥

1,450,027¥

1,432,458

Property, plant and equipment-net

528,009513,175

540,874

543,962

Long-term liabilities

115,801

119,277

66,82179,013

Total liabilities

566,796

510,970

484,581460,691

1,007,944

978,736

942,083

946,998

Stockholders’ equity
Other Selected Data (in millions of yen)
Capital expenditures¥

86,057¥

69,834¥73,789¥85,096

Depreciation expenses

80,44085,182

89,23994,870R&D expenditures

26,386

26,05024,09723,367

Common Share Data (in yen, shares)
Earnings per share - primary

¥

82.56

Earnings per share - fully diluted

¥

71.49

¥

37.80

¥

20.55

-

-

37.67

20.53

24.00

21.00

19.00

18.00

1,409.18

1,348.40

1,270.81

1,246.99

750,480,693

759,480,693

759,480,693

759,480,693

21.30%

20.75%

20.29%

18.35%

Selling, general and administrative expenses

12.85

13.19

13.42

12.85

Operating income

8.46

7.57

6.87

5.51

Income before income taxes and minority interests

7.56

6.88

3.23

1.99

Net income

4.21

3.91

2.20

1.19

Return on equity

6.03

5.52

3.02

1.65

Current ratio

186

197

171

181

7

7

6

7

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

Debt-to-equity ratio

92

¥

¥

¥

¥

1,342,035

2000¥

1,286,703

1999¥

1,269,543

1998¥

1,336,604

1997¥

1,310,100

1996¥

1,245,300

1,091,386

1,039,006

1,033,926

1,056,962

1,028,614

983,301

250,649

247,697

235,617279,642

281,486

261,999

164,708

161,811

166,008

172,824

170,298

161,60985,941

85,886

69,609106,818

111,188

100,390

69,116

79,19977,703

100,634

107,394

98,10333,40939,03430,49356,53956,16552,974

1,489,871¥

1,451,700¥

1,445,293¥

1,450,709¥

1,410,138¥

1,336,689

561,017561,898

570,860

536,364

501,622461,158

86,012

77,637

100,695

100,214

97,340106,792

522,105

495,541

518,323

538,113553,172

532,451

939,441925,646

898,646

885,507831,262

780,484

103,050¥

113,858¥

119,372¥

111,341¥

113,656¥

93,654

94,312

94,58882,80073,90867,58362,424

24,664

23,571

n.a.

n.a.

n.a.

n.a.

43.99

¥

51.40

¥

40.15

¥

74.49

¥

74.52

¥

70.63

43.45

50.47

39.54

72.53

72.15

68.19

18.00

18.00

18.00

18.00

17.00

16.00

1,236.96

1,218.79

1,183.24

1,165.94

1,102.56

1,040.49

759,480,693

759,480,693

759,480,693

759,480,693

753,940,533

750,110,275

18.68%

19.25%

18.56%

20.92%

21.49%

21.04%

12.27

12.58

13.08

12.93

13.00

12.98

6.40

6.67

5.48

7.99

8.49

8.06

5.15

6.16

6.12

7.53

8.20

7.88

2.49

3.03

2.40

4.23

4.29

4.25

3.58

4.28

3.42

6.59

6.97

6.98

165

160

159

165

160

162

8

9

10

10

12

14

Financial Section

2001

93

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

Millions of yen

2005

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2005 and 2004

2004

2005

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

293,356
30,123
6,803
413,566(6,935)77,044
24,778
838,735¥

279,36829
6,706
400,112(4,846)69,992
20,541
771,902$2,741,645
281,523
63,5793,865,103(64,813)720,038
231,570
7,838,645

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

9,685
158,841
1,689
170,215

12,401
144,576753
157,730

90,514
1,484,495
15,785
1,590,794

Property, plant and equipment, at cost (Note 7) :Land ..........................................................................................................................
Buildings ...................................................................................................................
Machinery and equipment .......................................................................................
Construction in progress..........................................................................................
Total.......................................................................................................................
Accumulated depreciation ........................................................................................
Net property, plant and equipment ......................................................................

120,526
410,656
899,281
26,516
1,456,979(928,970)
528,009

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

1,126,411
3,837,907
8,404,495
247,813
13,616,626(8,681,962)
4,934,664

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

63,17070,927590,374

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

¥ 1,600,129¥ 1,513,734$ 14,954,477

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

94¥

Thousands of
U.S. dollars (Note 3)

Millions of yen

2005

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2005 and 2004

2004

2005

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

¥

12,425
4,030
302,667
36,37131,01864,484450,995

¥

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

116,12137,664
2,828,664
339,916
289,888602,6544,214,907

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

56,40059,060341
115,801

59,342
59,573
362
119,277

527,103551,9633,187
1,082,253

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

25,38924,028237,280

Contingent liabilities (Note 16)

Common stock Authorized : 1,200,000,000 shares;
Issued : 750,480,693 shares in 2005 and 759,480,693 shares in 2004 (Note 9) ..
Capital surplus (Note 9) ...........................................................................................
Retained earnings (Note 9) ......................................................................................
Unrealized gain on available-for-sale securities ......................................................
Foreign currency translation adjustments ...............................................................
Treasury stock, at cost 35,403,863 shares in 2005 and 33,803,271 shares in 2004
(Note 9) .................................................................................................................
Total stockholders' equity .....................................................................................

114,464
144,905
774,653
30,441(4,891)

114,464
144,901
743,39327,273(4,935)

1,069,757
1,354,252
7,239,748
284,495(45,710)(51,628)
1,007,944(46,360)
978,736(482,505)
9,420,037

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

¥ 1,600,129¥ 1,513,734$ 14,954,477

Financial Section

Stockholders' equity :95

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

Millions of yen

2005

2004

2005

¥ 1,424,943
1,121,374
303,569
183,041
120,528¥ 1,354,101
1,073,118
280,983
178,545
102,438$ 13,317,224
10,480,131
2,837,093
1,710,663
1,126,430

2,368(1,232)(298)(7,603)191(1,077)(1,985)(976)(3,501)
3,719
-

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

22,131(11,514)(2,785)(71,056)
1,785(10,065)(18,552)(9,121)(32,720)
34,757-(1,016)(1,432)(12,842)
107,686

6,132(4,405)(9,301)
93,137(9,495)(13,384)(120,019)
1,006,411

43,072
3,194
46,26661,42035,086
3,257
38,34354,794

402,542
29,850432,392
574,019(1,483)(1,823)(13,860)

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2005 and 2004

Net sales (Note 17)....................................................................................................
Cost of sales (Notes 11, 14 and 17).........................................................................
Gross profit ...........................................................................................................
Selling, general and administrative expenses (Notes 11, 14 and 17) .................
Operating income .................................................................................................
Other income (expenses) (Note 12) :Interest and dividend income...................................................................................
Interest expenses.......................................................................................................
Equity in losses of associated companies .................................................................
Net loss on disposal of property, plant and equipment ...........................................
Net gain on sales of marketable securities and investment securities.....................
Loss on devaluation of investment securities...........................................................
Payments of special retirement benefits .................................................................
Loss on discontinued business ................................................................................
Amortization of transitional obligation for retirement benefits (Note 8) ..............
Issuance cost of debentures ......................................................................................
Reversal of liability for retirement benefits .............................................................
Contribution income from restructuring of joint venture business........................
Gain on exemption from future pension obligation of the governmental program(Note 8) .................................................................................................................
Provision for doubtful receivables ...........................................................................
Other.........................................................................................................................
Income before income taxes and minority interests ............................................
Income taxes (Note 13):
Current .....................................................................................................................
Deferred....................................................................................................................

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

¥

59,937¥52,971yen

Net assets per common share..................................................................................
Net income per common share:
Primary .....................................................................................................................

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

96¥

1,409.18

82.56

¥

$

560,159

U.S. dollars (Note 3)

1,348.40

71.49

$

13.17

0.77

Consolidated Statements of Stockholders' Equity
Thousands of
U.S. dollars (Note 3)

Millions of yen

2005

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2005 and 2004

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

2005

¥
¥

114,464
114,464¥¥

114,464
114,464$$

1,069,757
1,069,757¥

144,901
4
144,905¥

144,8983
144,901$

1,354,215
37
1,354,252

743,393
59,937(15,942)(231)
280(12,784)774,653¥705,099
52,971(14,466)(211)
743,393

$

¥

¥

¥

¥

¥

$

$

6,947,598
560,159(148,990)(2,159)2,617(119,477)
7,239,748

Financial Section

Retained earnings :Balance at beginning of year ....................................................................................
Net income ...............................................................................................................
Cash dividends (Note 9)...........................................................................................
Bonuses to directors .................................................................................................
Increase resulting from change in consolidation scope...........................................
Disposal of treasury stocks .......................................................................................
Balance at end of year...............................................................................................

2004

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

97

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

Millions of yen

2005

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2005 and 2004

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

107,686¥

93,137

2005$

1,006,411

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 gain on sales of marketable securities and investment securities.....................
Loss on devaluation of investment securities...........................................................
Net loss on disposal of property, plant and equipment ...........................................
Increase in trade receivables.....................................................................................
(Increase) decrease in inventories ............................................................................
Increase in trade payables.........................................................................................
Other.........................................................................................................................
Sub-total ................................................................................................................
Payments of special retirement benefits ..................................................................
Payments of income taxes .......................................................................................
Net cash provided by operating activities .......................................................

80,440
5,647
(842)
298
1,669
(2,368)
1,232
(191)
1,077
7,603
(11,342)(6,635)28,751
1,745
214,770(1,985)(34,443)
178,342

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

751,776
52,776(7,869)2,785
15,598(22,131)
11,514(1,785)
10,06571,056(106,000)(62,009)268,701
16,3082,007,196(18,552)(321,897)
1,666,747

Cash flows from investing activities :Net (increase) decrease in time deposits..................................................................
Payments for purchases of marketable securities ....................................................
Proceeds from sales of marketable securities...........................................................
Payments for purchases of property, plant and equipment .....................................
Proceeds from sales of property, plant and equipment ...........................................
Payments for purchases of investment securities.....................................................
Proceeds from sales of investment securities...........................................................
Interest and dividend received .................................................................................
Other.........................................................................................................................
Net cash used in investing activities ................................................................

(29,753)(11)
6,706(73,715)980(22,414)
5,282
2,753
(16,057)(126,229)65(6,703)
50(66,684)
3,307(18,744)
11,563
2,453(20,047)(94,740)(278,065)(103)
62,673(688,925)
9,159(209,477)
49,36425,729(150,065)(1,179,710)

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

(1,736)
1,033(4,130)(1,233)(16,451)(18,093)42(40,568)(1,275)
5,100(6,731)49,745(29,663)(1,156)(14,823)(26,135)
694(24,244)(16,224)
9,654(38,598)(11,523)(153,748)(169,093)
392(379,140)

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

(21)
11,524(2,031)40,472(196)
107,701

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

279,368
2,464
293,356

238,896
279,368

2,610,916
23,0282,741,645

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

98

¥

2004

¥

¥

$

Notes to Consolidated Financial Statements

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2005 and 2004

1. Basis of Presenting the Consolidated Financial Statements
Dai Nippon Printing Co., Ltd. (hereinafter referred to as the “Company”) and its domestic subsidiaries maintain their booksof account and prepare their financial statements in conformity with accounting principles and practices generally acceptedin Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements filedwith the Financial Services Agency of Japan as required by the Securities and Exchange Law of Japan. Certain
reclassifications of accounts and modifications have been made in the accompanying consolidated financial statements tofacilitate understanding by readers outside Japan. Certain reclassifications have also been made in the 2004 financial
statements to conform with current classifications. In addition, the notes to the consolidated financial statements include
additional information which is also not required for disclosure under accounting principles and practices generally acceptedin Japan.

2. Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant majorityowned subsidiaries. All significant intercompany accounts and intercompany transactions have been eliminated inconsolidation.
The fiscal year-end of the consolidated subsidiaries is the same as that of the Company except for twenty four 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 are devalued
if the decline in value is judged to be other than temporary.
Investments in 20% to 50% associated companies are accounted for by the equity method.
The differences between costs and underlying net assets at the date of investment in consolidated subsidiaries are included
in other assets or other long-term liabilities and are amortized over a period not exceeding five years.
Translation of foreign currency accounts

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 forforeign currency transactions. The balance sheet accounts of the foreign consolidated subsidiaries are translated at theexchange rates in effect at the balance sheet date, except for common stock and capital surplus, which are translated athistorical 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 componentof stockholders’ equity in the consolidated balance sheets.

Financial Section

Monetary assets and liabilities denominated in foreign currencies of the Company and its domestic subsidiaries aretranslated 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).

99

Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less,that are readily convertible to known amounts of cash and are so near maturities that they present insignificant risk ofchanges in value because of changes in interest rates.
Inventories
Inventories are stated at cost which is determined substantially by the average method.
Marketable securities and investment securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: i) 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.
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 ($935) or more per unit and less than ¥200,000 ($1,869) 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.
Intangible assets
Intangible assets included in other assets are carried at cost less accumulated amortization calculated by the straight-line
method over their estimated useful lives. Software development costs for internal use included in intangible assets areamortized by the straight-line method over five years.
Liability for retirement benefits
Effective April 1, 2000, the Company and several domestic significant consolidated subsidiaries applied a new accounting
standard for employees’ retirement benefits and accounted for the liability for retirement benefits based on projected benefit
obligations and plan assets at the balance sheet date.
The transitional obligation determined as of April 1, 2000 is being amortized over five years. The transitional obligation
was a net amount after deducting the contributed securities to the employees’ retirement benefits trust from the grossamount of transitional projected benefits obligation determined as of April 1, 2000.

100

Research and development expenses
Research and development expenses are charged to income as incurred.
Accounting for leases
Finance leases other than those which are deemed to transfer the ownership of the leased assets to lessees are accounted forin the same manner as operating leases under generally accepted accounting principles in Japan.
Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. 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 accounting standard if the forward contracts qualify for hedge accounting.
The forward contracts for forecasted transactions such as export sales and import purchases are measured at the fair value,
but the unrealized gains/losses are deferred until the underlying transactions are completed.
Net assets and income per common share
Net assets per common share were computed based on the number of shares outstanding after deducting treasury stock at
March 31, 2005 and 2004, respectively.

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 ¥107=U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange
Market at March 31, 2005. Such translations should not be construed as representations that the Japanese yen at that or any
other rate could be converted into U.S. dollars.

Financial Section

Primary amounts of net income per share were computed on the average number of shares of common stock outstanding
after deducting treasury stocks during each year. Fully diluted net income per share is not disclosed because the Company
has not issued any dilutive securities.

1014. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2005 and 2004 were comprised of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Cash and cash equivalents(excluding time deposits with a maturity over three months) ....................................

¥

2004

293,356¥

279,3682005$ 2,741,645

5. Marketable Securities and Investment Securities
The acquisition cost and aggregate fair value of marketable and investment securities classified as available-for-sale securities
as of March 31, 2005 and 2004 were as follows:
Millions of yen

March 31, 2005

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

Acquisition cost

Unrealized gains

Unrealized losses

¥

¥

¥

¥

57,37827,777
85,155¥53,491
71
53,562

¥

2,025
20
2,045

Fair value¥¥

108,844
27,828
136,672

Thousands of U.S. dollars (Note 3)

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

Acquisition cost

Unrealized gains

Unrealized losses

$

$

$

$

536,243
259,598
795,841$

499,916663
500,579$

18,925
187
19,112

Fair value$ 1,017,234
260,074$ 1,277,308

Millions of yen

March 31, 2004

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

Acquisition cost

Unrealized gains

Unrealized losses

¥

¥

¥

¥

54,713
20,90375,616¥47,76331
47,794

¥

1,591
1,591

Fair value¥¥

100,885
20,934
121,819

The proceeds from sales of available-for-sale securities for the years ended March 31, 2005 and 2004 were ¥1,243 million($11,617 thousand) and ¥9,433 million, respectively. The gross realized gains on these sales for the years ended March 31,
2005 and 2004 were ¥465 million ($4,346 thousand) and ¥4,707 million, respectively, and the gross realized losses on thesesales for the years ended March 31, 2005 and 2004 were ¥275 million ($2,570 thousand) and ¥433 million, respectively.

102

The following summarizes carrying amounts of securities with no fair value as of March 31, 2005 and 2004:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2005

2004

2005

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

¥

3,000
11

¥

3,000
23

$

28,037
103

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

¥

25,92635¥

26,361
16$

242,299327

The redemption schedules for securities with maturities classified as held-to-maturity debt securities and other securities at
March 31, 2005 and 2004 are as follows:
Millions of yen

Due in one
year or lessMarch 31, 2005

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

¥¥

Due after one year Due after five years
through five years through ten years

6,791
11
6,802

¥

¥

16,976
5
16,981

¥

¥

30
7,000
7,030

Thousands of U.S. dollars (Note 3)

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

$$

63,467
103
63,570Due after one year Due after five years
through five years through ten years$$

158,65447
158,701$$280
65,42165,701Millions of yen

March 31, 2004

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

¥

¥

6,699
6
1
6,706

Due after one year Due after five years
through five years through ten years¥¥

14,17016
14,186

¥

¥

3,000
3,000
Financial Section

Due in one
year or less103

6. Inventories
Inventories at March 31, 2005 and 2004 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Finished products.........................................................................................................
Work in process ...........................................................................................................
Raw materials ...............................................................................................................

¥

¥

2004

31,752
29,607
15,68577,044¥

31,171
25,63013,191
69,992

¥

2005
$

$

296,748276,701
146,589
720,038

7. Short-term Bank Loans and Long-term Debt
Short-term bank loans at March 31, 2005 and 2004 were represented by bank loans and bank overdrafts, etc. bearing interest
at an average rate of 2.11 % per annum for 2005 and 2.18% per annum for 2004.
Long-term debt at March 31, 2005 and 2004 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Unsecured debentures
1.67% due 2014 ........................................................................................................

¥

50,000

¥

3,983
6,447
60,430(4,030)56,400Mortgage loans, maturing 2005-2010........................................................................
Unsecured loans, maturing 2005-2010 ......................................................................
Current portion of long-term debt .............................................................................

2004

¥

50,000¥1,303
12,072
63,375(4,033)59,342

2005$

467,290$

37,22460,253564,767(37,664)
527,103

Mortgage loans were secured by property, plant and equipment amounting to ¥6,390 million ($59,720 thousand) and¥1,681 million at March 31, 2005 and 2004, respectively.
With minor exceptions, interest rates on mortgage loans ranged from 0.99% to 4.04% per annum for 2005 and from
0.89% to 2.54% per annum for 2004, while interest rates on unsecured loans ranged from 0.60% to 2.04% per annum for2005 and from 0.58% to 2.18% per annum for 2004.
The aggregate annual maturities of long-term debt after March 31, 2005 were as follows:
Millions of yen

Thousands of
U.S. dollars (Note 3)

Year ending March 31
2006 .........................................................................................................................................................
2007 .........................................................................................................................................................
2008 .........................................................................................................................................................
2009 .........................................................................................................................................................
2010 .........................................................................................................................................................
2011 and thereafter .................................................................................................................................

¥

¥

104

4,030
3,319
1,814
908
359
50,00060,430$$37,66431,01916,9538,486
3,355
467,290564,767

8. Retirement Benefits
The Company and its domestic subsidiaries have several defined benefit retirement plans covering all of their employees, i.e.
a governmental welfare contributory pension plan, corporate pension plan, tax-qualified non-contributory pension plan andlump-sum retirement plan. 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, length of services and accumulated numberof points determined based on the employment services.
During the year ended March 31, 2004, in accordance with the Defined Benefit Pension Plan Law enacted in April 2002,
the Company and one of its domestic subsidiaries applied for an exemption from obligation to pay benefits for future
employee services related to the substitutional portion which would result in the transfer of the pension obligations andrelated assets to the government upon approval. The Company and the subsidiary obtained approval for exemption from thefuture obligation by the Ministry of Health, Labor and Welfare on June 1, 2003 and January 30, 2003, respectively andrecognized a gain on exemption from the future pension obligation of the governmental program in the amount of ¥6,132
million for the year ended March 31, 2004.
For the year ended March 31, 2005, the Company and the subsidiary applied for transfer of the substitutional portion of
past pension obligations to the government and obtained approval by the Ministry of Health, Labor and Welfare on March
1, 2005 and June 1, 2004, respectively. Under the Defined Benefit Pension Plan Law, the Company has established new
defined benefit pension plans on March 1, 2005 under which ninety percent of the retirement benefit liability of theCompany is covered by the employees’ pension fund. The prior service costs of ¥1,922 million ($17,963 thousand) resulting
from application of the revised benefit plan is amortized over six years from the fiscal year ended March 31, 2005.
The subsidiary has also established new defined benefit pension plans on June 1, 2004 under which total of the retirement
benefit liability is covered and the projected benefits obligation has substantially decreased. The effect of decrease in theliability for retirement benefit was to increase net income by ¥2,245 million ($20,981 thousand).
The liability for employees’ retirement benefits at March 31, 2005 and 2004 consisted of the following:Thousands of
U.S. dollars (Note 3)

2005
Projected benefits obligation.......................................................................................
Fair value of plan assets ...............................................................................................
Unrecognized transitional obligation..........................................................................
Unrecognized actuarial loss.........................................................................................
Unrecognized prior service cost..................................................................................
Prepaid pension cost ....................................................................................................
Net liability ..................................................................................................................

¥¥

131,792(62,197)(9,452)(1,637)554
59,0602004¥¥

132,256(54,565)(3,522)(14,596)
59,5732005$ 1,231,701(581,280)(88,336)(15,299)
5,177$
551,963

Financial Section

Millions of yen

105

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

Millions of yen

2005
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 ..........................................................................................
Reversal of liability for employees' retirement benefits .............................................
Gain on exemption from future pension obligation of the governmental program ..
Total .............................................................................................................................

¥

¥

6,590
2,928
(920)
3,501
2,070
322
14,491(3,719)10,772

2004
¥

¥

6,659
3,134
(803)
3,886
7,026
(141)
19,761(6,132)
13,6292005$$

61,58927,364(8,598)32,72019,346
3,009
135,430(34,757)
100,673

Assumptions used for the years ended March 31, 2005 and 2004 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 .................................................................................................

2005

2004

2.5%
2.1%
11 years
5 years
6 years

2.5%
2.0%
11 years
5 years
6 years

9. Stockholders’ Equity
Japanese companies are subject to the Japanese Commercial Code (the ‘‘Code’’).
Under the Code, at least 50 % of the issue price of new shares is required to be recorded as common stock and theremaining net proceeds as additional paid-in capital, which is included in capital surplus. The Code permits Japanesecompanies, upon approval of the Board of Directors, to issue shares to existing stockholders without consideration as a stock
split. Such issuance of shares generally does not give rise to changes within the stockholders’ accounts.
The Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain otherappropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated as 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 be available fordividends by resolution of the stockholders. In addition, the Code permits the transfer of a portion of additional paid-in
capital and legal reserve to the common stock by resolution of the Board of Directors.
The Code allows Japanese companies to repurchase treasury stock and dispose of such treasury stock by resolution of theBoard of Directors. The repurchased amount of treasury stock cannot 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.
Upon approval by the resolution of the Board of Directors, the Company repurchased 10,477 thousand shares of common

106stocks at aggregate cost of ¥17,847 million ($166,794 thousand) and disposed of 9,000 thousand shares of common stocks ataggregate cost of ¥12,784 million ($119,477 thousand) during the year ended March 31, 2005.
In addition to the provision that requires an appropriation for a legal reserve in connection with the cash payment, theCode imposes certain limitations on the amount of retained earnings available for dividends. The amount of retained
earnings available for dividends under the Code was ¥546,492 million ($5,107,402 thousand ) as of March 31, 2005, based on
the amount recorded in the parent company’s general books of account.
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, 2005
and 2004 represented dividends paid out during those periods and related appropriations to this reserve. The accompanying
consolidated financial statements did not include the semi-annual dividend of ¥13.50 ($0.13) per share, aggregating ¥9,662
million ($90,299 thousand) and the related appropriation to legal reserve of the Company, which were approved at thegeneral stockholders’ meeting held in June 2005 with respect to the year ended March 31, 2005.

10. Accounts with Non-consolidated Subsidiaries and Associated Companies
Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2005 and 2004 weresummarized as follows:
Thousands of
U.S. dollars (Note 3)2005
Trade receivables..........................................................................................................
Other current assets.....................................................................................................
Investment securities (stock)........................................................................................
Long-term loans ..........................................................................................................
Other investments........................................................................................................
Trade payables..............................................................................................................
Accrued expenses .........................................................................................................
Other current liabilities ...............................................................................................

¥

10,075
864
2,737
5,357
545
2,393
1,291
1,656

2004
¥

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

2005$

94,1598,075
25,57950,065
5,093
22,364
12,065
15,477

Financial Section

Millions of yen

10711. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2005 and 2004 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Transportation expenses ..............................................................................................
Provision for doubtful receivables...............................................................................
Salaries and allowances ................................................................................................
Accrued bonuses ..........................................................................................................
Provision for retirement benefits ................................................................................
Depreciation ................................................................................................................
Research and development expenses ...........................................................................
Other ............................................................................................................................

¥

¥

2004

17,1582,975
51,021
6,293
4,833
9,986
24,141
66,634
183,041¥¥

16,830381
49,588
5,464
7,575
10,91923,80963,979178,5452005$

160,355
27,804
476,832
58,81345,16893,327
225,617622,747$ 1,710,663

Total research and development expenses (including manufacturing costs) amounted to ¥26,386 million ($246,598
thousand) and ¥26,050 million for 2005 and 2004, respectively.

12. Other Income
The following types of income from non-consolidated subsidiaries and associated companies were included in other income.
Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Interest and dividend income ......................................................................................
Leasing fees..................................................................................................................

¥

95
917

2004
¥

207
1,048

2005
$

888
8,570

13. Income Taxes
The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which,in the aggregate, resulted in a normal effective statutory tax rate of approximately 40.7% and 42.0% for the years ended
March 31, 2005 and 2004, respectively.
On March 31, 2003, a tax reform law concerning enterprise tax was enacted in Japan which changed the normal effective
statutory tax rate from 42.0% to 40.7%, effective for years beginning on or after April 1, 2004.
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 ofsubsidiaries and different tax rates applicable to foreign subsidiaries, etc.
The following is a reconciliation of the difference between the normal effective statutory tax rate and the actual effective

108

tax rate for the year ended March 31, 2005, although no reconciliation for 2004 was shown because the difference was not
more than five percent of the statutory tax rate.

2005
Normal effective statutory tax rate .......................................................................................................................................
Expenses not deductible for income tax purposes.............................................................................................................
Operating losses of subsidiaries-net ..................................................................................................................................
Special tax credit ................................................................................................................................................................
Undistributed earnings of foreign subsidiaries .................................................................................................................
Other ..................................................................................................................................................................................
Actual effective tax rate .........................................................................................................................................................

40.7%
2.0
(2.1)
(2.1)
4.4
0.1
43.0%

Net deferred tax assets and liabilities at March 31, 2005 and 2004, resulting from temporary differences between the
carrying amounts and the tax bases of assets and liabilities, were reflected on the accompanying consolidated balance sheets
under the following captions :Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Prepaid expenses and other current assets ..................................................................
Other assets ..................................................................................................................

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

¥

2004
¥

¥

13,15818,50931,667

¥

317

2005
$

¥

12,262
25,38137,643$

122,972
172,981295,953

¥

277

$

2,963

Significant components of deferred tax assets at March 31, 2005 and 2004 were as follows :Thousands of
U.S. dollars (Note 3)

2005
Current:
Excess provision for doubtful receivables ................................................................
Accrued bonuses .......................................................................................................
Enterprise tax payable ..............................................................................................
Other.........................................................................................................................
Total.......................................................................................................................
Non-current:
Excess provision for retirement benefits..................................................................
Loss on devaluation of investment securities...........................................................
Other.........................................................................................................................
Total.......................................................................................................................

¥

¥

¥

¥

2004

1,364
6,296
2,351
3,147
13,158¥22,46916,808(20,768)
18,509

¥

¥

¥

2005

1,293
5,407
1,804
3,758
12,262$

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

12,74858,841
21,972
29,411
122,972

209,991
157,084(194,094)
172,981

Financial Section

Millions of yen

10914. Leases
Where finance leases do not transfer ownership of the leased property to the lessee during the lease terms, the leased
property is not capitalized and the related lease expenses are charged to income in the period incurred, as per the statement
issued by the Business Accounting Deliberation Council of Japan.
Pro forma information such as acquisition cost, accumulated depreciation and net book value of the leased properties forsuch finance lease purposes was as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Acquisition cost............................................................................................................
Accumulated depreciation ...........................................................................................
Net book value.............................................................................................................

¥
¥

2004

34,006(18,807)
15,199¥¥39,297(22,002)
17,295

2005$$

317,813(175,766)
142,047

Lease expenses on finance lease contracts without ownership-transfer amounted to ¥8,610 million ($80,467 thousand) and¥10,759 million for the years ended March 31, 2005 and 2004, respectively.
The amounts of outstanding future payments under finance leases due on March 31, 2005 and 2004, including the portionof interest thereon, were summarized as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Future lease payments:
One year or less ........................................................................................................
More than one year ..................................................................................................

¥
¥

2004

6,588
8,611
15,199¥¥7,086
10,20917,295

2005$$

61,57080,477142,047

The amounts of outstanding future payments under operating leases due on March 31, 2005 and 2004 were also
summarized as follows:

Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
Future lease payments:
One year or less ........................................................................................................
More than one year ..................................................................................................

¥
¥

734
2,676
3,410

2004

¥
¥

579
1,155
1,734

2005

$
$

6,860
25,00931,86915. Derivative Financial Instruments
Nature of Derivative Financial Instruments:
The Company and certain consolidated subsidiaries enter into derivative financial instruments (“derivatives”) for foreign
currency forward contracts to hedge foreign exchange risks associated with certain accounts receivable and accounts payable,
including forecasted transactions, denominated in foreign currencies. The Company and its subsidiaries do not holdderivatives for speculative purposes.
Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to majorinternational financial institutions, the Company and its subsidiaries do not anticipate any losses arising from credit risks.
The basic policies for the use of derivatives are established in the Company’s internal regulations and the execution and

110control of derivatives are controlled by the Accounting Department.
Fair value of Derivative Financial Instruments:
The contracted amount and fair value of derivatives for foreign currency forward contracts at March 31, 2005 and 2004
were as follows:
Millions of yen

Contracted
amount2005

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

¥
¥

Fair
value

12,095486
12,581¥¥

12,499492
12,991

Unrealized
loss

¥
¥

404
6
410

Thousands of U.S. dollars (Note 3)

Contracted
amount2005

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

$$

113,037
4,542
117,579

Fair
value

$
$

116,813
4,598
121,411

Unrealized
loss

$
$

3,776
56
3,832

Millions of yen

Contracted
amount2004

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

¥¥

11,756463
12,219

Fair
value

¥
¥

11,587455
12,042

Unrealized
loss

¥
¥

169
8
177

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, 2005 and 2004 and were assigned to theassociated assets and liabilities or deferred until completion of the forecasted transactions were excluded from disclosure of
the above fair value information.

The Company was guarantor of bank loans of an other company, amounting to approximately ¥92 million ($860 thousand)and ¥90 million at March 31, 2005 and 2004, respectively. It is common practice in Japan for companies, in the ordinary
course of business, to receive promissory notes in settlement of trade accounts receivable and to subsequently discount such
notes at banks. At March 31, 2005 and 2004, the Company and its consolidated subsidiaries were contingently liable ontrade notes discounted in the amount of ¥1,150 million ($10,748 thousand) and ¥1,150 million, respectively. Notes
discounted were accounted for as sales.

Financial Section

16. Contingent Liabilities

17. 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.

111

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, 2005 and 2004 and for theyears then ended.
Millions of yen

Printing

For 2005 :Net sales :Outside customers....
Inter-segment ...........
Total ......................
Costs and expenses ......
Operating income ....
Assets, depreciation andcapital expenditures :Assets ........................
Depreciation.............
Capital expenditures ....

Information
Communication

Lifestyle and Industrial
Supplies¥¥¥

633,499
7,157
640,656
591,305
49,351¥¥¥

499,407
19,33818,122

Electronics¥¥

448,832
1,134
449,966
413,947
36,019¥¥¥420,395
22,914
21,119Beverages

Total

Elimination and/or corporate¥ 1,424,943
8,291
1,433,234
1,306,571¥
126,663¥¥

72,986
72,986
71,383
1,603

¥
¥
¥

43,8973,796
2,895¥ 1,277,508¥
79,117¥
81,143¥¥

269,626
269,626
229,936
39,690¥¥¥313,809
33,06939,007

Consolidated¥(8,291)(8,291)(2,156)(6,135)¥ 1,424,943
1,424,943
1,304,415¥
120,528¥¥¥

322,621
1,323
4,914

¥ 1,600,129¥
80,440¥86,057

Elimination and/or corporate

Consolidated

Thousands of U.S. dollars (Note 3)

Printing

For 2005 :Information
Communication

Lifestyle and Industrial
Supplies

Electronics

Net sales :Outside customers....
Inter-segment ...........
Total ......................
Costs and expenses ......
Operating income ....

$ 5,920,551
66,8885,987,439
5,526,215$
461,224$ 4,194,692
10,5984,205,290
3,868,664$
336,626$ 2,519,869
2,519,869
2,148,934$
370,935$

Assets, depreciation andcapital expenditures :Assets ........................
Depreciation.............
Capital expenditures ....

$ 4,667,355$
180,729$
169,365$ 3,928,925$
214,150$
197,374$ 2,932,795$
309,056$
364,551

Beverages

Total$ 13,317,224
77,486
13,394,710
12,210,944$ 1,183,766$$

682,112682,112667,131
14,981(77,486)(77,486)(20,150)(57,336)$ 13,317,224
13,317,224
12,190,794$ 1,126,430$$$

410,252
35,477
27,056$ 11,939,327$
739,412$758,346$ 3,015,150$
12,364$45,925$ 14,954,477$
751,776$804,271

Total

Elimination and/or corporate

Consolidated$

Millions of yen

Printing

For 2004 :Net sales :Outside customers....
Inter-segment ...........
Total ......................
Costs and expenses ......
Operating income ....
Assets, depreciation andcapital expenditures :Assets ........................
Depreciation.............
Capital expenditures ....

112

Information
Communication

Lifestyle and Industrial
Supplies¥¥¥

622,466
7,350
629,816
586,147
43,669¥¥¥489,455
22,19913,726

Electronics¥¥

425,523543
426,066
393,623
32,443¥¥¥

395,580
24,154
19,777

Beverages¥¥

236,40224
236,426
203,399
33,027¥¥¥

291,353
33,056
31,578¥ 1,354,101
7,917
1,362,018
1,253,251¥
108,767¥¥

69,71069,71070,082
(372)

¥
¥
¥

46,782
4,330
4,176¥ 1,223,170¥
83,739¥69,257¥(7,917)(7,917)(1,588)(6,329)¥ 1,354,101
1,354,101
1,251,663¥
102,438¥¥¥

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

Information by geographic area:
Disclosure of information by geographic area was not required as domestic sales and assets exceeded 90% of consolidated
sales and assets, respectively, before elimination, for all segments for the years ended March 31, 2005 and 2004.
Overseas sales:
Overseas sales of the Company and its consolidated subsidiaries for the years ended March 31, 2005 and 2004 are as follows :Thousands of
U.S. dollars (Note 3)

Millions of yen

2005
AmountOverseas sales(a)Asia ..........................................................................
Other ......................................................................
Total ........................................................................
Consolidated net sales(b)¥¥158,373
74,665233,038¥ 1,424,943

2004

Ratio:(a)/(b)

11.1%
5.2%
16.4%

Amount2005

Ratio:(a)/(b)¥201,368$ 1,480,121
697,804
14.9% $ 2,177,925¥

1,354,101$ 13,317,224¥

Financial Section

Overseas sales for Asia was separately disclosed for the year ended March 31, 2005 because the sales amount exceeded 10%of the consolidated net sales.

113Independent Auditors’ Report

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

We have audited the accompanying consolidated balance sheets (expressed in Japanese yen) of Dai Nippon Printing Co.,
Ltd. and consolidated subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of income,stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements basedon our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Dai Nippon Printing Co., Ltd. and consolidated subsidiaries as of March 31, 2005 and 2004, and the results of
their operations and cash flows for the years then ended in conformity with accounting principles generally accepted inJapan.
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 to the consolidated financial statements. Such U.S.
dollar amounts are presented solely for the convenience of readers outside Japan.

Tokyo, Japan
June 29, 2005

114

Major Subsidiaries and Affiliates
Printing
DNP Hokkaido Co., Ltd.
DNP Tohoku Co., Ltd.
DNP Tokai Co., Ltd.
DNP Kyushu Co., Ltd.
DNP Shikoku Co., Ltd.

Capital
Ownership ratio(Millions of yen)(%)

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

350
350
120
380
50

100.0
100.0
100.0
100.0
97.0

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

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Planning, production, photoengraving and bookbinding
Printing and bookbinding
Planning, designing, photoengraving and printing
Photoengraving, printing and bookbinding
Warehouseing and packing of commercial printing

200
100
100
100
50

100.0
100.0
100.0
100.0
100.0

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

100
100
80
25
20

100.0
100.0
100.0
100.0
100.0

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

1,796
100
100
100
100
90
60
50
50
40
30
30

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

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

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

100.0
100.0
100.0
100.0
100.0
90.0
100.0
100.0
100.0
100.0
51.0

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

300
200

50.0
100.0

Printing of TTRs and ST materials
Production and sales of optical films for displays

100
100

100.0
100.0

Information Communication
Books and Perioclials
DNP Offset Co., Ltd.
DNP Seihon Co., Ltd.
DNP Total Process Ichigaya Co., Ltd.
DNP Total Process Maebashi Co., Ltd.
DNP Art Co., Ltd.
DNP Techtas Ichigaya Co., Ltd.
DNP Uniprocess Co., Ltd.
DNP Total Process Nagaoka Co., Ltd.
DNP Butsuryu Systems Ichigaya Co., Ltd.
Tien Wah Press (Pte.) Ltd.

Offset printing
Bookbinding
Photoengraving
Photoengraving
Production of drafts for photoengraving
Bookbinding
Photoengraving
Photoengraving
Warehousing and packaing of books and magazines
Photoengraving, printing and book binding

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

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

Communicaion and Information
MyPoint.com Japan Co., Ltd.
DNP Archives.com Co., Ltd.*DNP AV Center Co., Ltd.*DNP Digitalcom Co., Ltd.
DNP Space Design Inc.*
Mobile Impulse Co., Ltd.*
Maison de DNP Ginza Co., Ltd.*DNP Corporate History Center Co., Ltd.*
Trans Art Inc.*CP Design Consulting Co., Ltd.*
M's Communicate Co., Ltd.*At Table Co., Ltd.*

Lifestyle and Industrial Supplies
Packaging
DNP Technopack Tokai Co., Ltd.
DNP Techno Film Co., Ltd.
DNP Technopack Co., Ltd.
DNP Technopack Kansai Co., Ltd.
DNP Technopack Yokohama Co., Ltd.
Sagami Yoki Co., Ltd.
Aseptic Systems Co., Ltd.
DNP Techno Polymer Co., Ltd.
DNP Cup Techno Co., Ltd.
DNP Hoso Co., Ltd.
PT DNP Indonesia

Decorative Materials
DNP Ellio Co., Ltd.
DNP Kyushu Co., Ltd.

Industrial Supplies
DNP IMS Co., Ltd.
DNP Advanced Industrial Supplies Co., Ltd.

115

Capital
Ownership ratio(Millions of yen)(%)
Pixel Magic Imaging, Inc.

Sales of digital photo printing systems(US$1,000)
44,852(51.0)
51.0

DNP IMS America Corporation

Processing of TTR barcode and facsimile ribbons(US$1,000)
20,000(100.0)100.0Compagnie de Découpe de l’Ouest - CDO SAS

Small-roll processing of ink-ribbons for facsimiles(Euro1,000)
3,040

23.4

DNP IMS France SAS*

Sales of TTR barcode and facsimile ribbons(Euro 1,000)
300

100.0

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

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

5,000
3,000
400
(Dkr1,000)
135,000

80.0
50.0
100.0

DNP Electronics America, LLC

Manufacturing and sales of projection screens

DNP Display Technology Taiwan Co., Ltd.

Sales of display components and technological consultation(US$1,000)
15,045(NT$1,000)
30,000(100.0)100.0(99.0)
100.0

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

65.0
100.0
100
100.0

2,000
626
100
100
96
80
60

83.3
100.0
100.0
94.3
55.0
100.0
48.3

250
200
100
100
90
33
30
20

100.0
99.6
100.0
100.0
100.0
88.8
100.0
100.0

100.0

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

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

80.6

OthersThe Inctec Inc.
DNP Logistics Co., Ltd.
D.N.K. Co., Ltd.
DNP Trading Co.,Ltd.
Direc Co.,Ltd.
DNP SP Tech Co., Ltd.
Kyoiku Shuppan Co., Ltd.

Development and sales of ink, vanish, pigments and dyes
Packing, shipping operations and warehouse management
Manufacturing and sales of printing equipment and machine tools
Sales of paper and other products
Sales of publishing and educational equipment
Planning and production of promotional material
Publishing of educational books

P e r s o n n e l We l f a r e , F a c i l i t y S e r v i c e , a n d O t h e r s
Dai Nippon Kaihatsu Co., Ltd.
Shiobara Green Village Co., Ltd.*DNP Facility Services Co., Ltd.
DNP Information Systems Co., Ltd.*DNP Human Services Co., Ltd.*
Uzumine Country Club Co., Ltd.*DNP Accounting Services Co., Ltd.
DNP Techno Research Co., Ltd.*Real estate sales
Management of leisure facilities
Management and operations of buildings and welfare facilities
Planning, designing, development, management and operation of information systems
Planning, management and data processing activities related to personnel plans
Management of golf courses
Accounting and consulting services
Studies related to patents and the preparation of contracts

Overseas Sales
DNP America, LLC

Sales of printing solutions, electronic components and decorative materials(US$1,000)
100(100.0)100.0

DNP Corporation USA

Holding company(US$1,000)
44,685(10.0)
100.0

DNP Holding USA Corporation

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

DNP Europa GmbH*

Sales of displays, semiconductor components and decorative materials(Euro1,000)
92

100.0

DNP UK Co., Ltd.*Sales of decorative materials(£1,000)
120

100.0

Dai Nippon Printing Co. (Australia) Pty. Ltd.*Sales of printing solutions(A$1,000)
70

100.0

DNP Singapore Pte. Ltd.*Sales of displays, semiconductor components and decorative materials(S$1,000)
350

100.0

DNP Korea Co., Ltd.*Sales of displays and semiconductor components(Krw1,000)
500,000

100.0

DNP Taiwan Co., Ltd.

Sales of displays and semiconductor components(NT1,000)
10,000

100.0

2,935

(3.8)
61.4

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

Manufacturing and sales of soft drinks

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

116

“Ukiyo-e” Woodblock Prints Used in the DNP 2005 Annual Report“Actor Otani Oniji 3rdas the yakko Edobei”“Actor Ichikawa Ebizo as
Takemura Sadanoshin”“Three Beauties of Edo”

by Toshusai Sharaku

by Toshusai Sharaku

Part of the Tokyo National Museum collection

Part of the Tokyo National Museum collection

Part of the Tokyo National Museum collection

Image:TNM Image Archives
Source:http://TnmArchives.jp/

Image:TNM Image Archives
Source:http://TnmArchives.jp/

Image:TNM Image Archives
Source:http://TnmArchives.jp/

by Kitagawa Utamaro“Okazaki” from “The
Fifty-three Stations of
the Tokaido”
by Utagawa Hiroshige
Part of the Tokyo National
Museum collection
Image:TNM Image Archives
Source:http://TnmArchives.jp/“Shop of Santo Kyoden”
by Utagawa Toyokuni
Part of the Tokyo National“The poet Ki no Tsurayuki
at Aridoshi Shrine”

Museum collection
Image:TNM Image Archives
Source:http://TnmArchives.jp/

by Suzuki Harunobu
Part of the Tokyo National Museum collection
Image:TNM Image Archives
Source:http://TnmArchives.jp/

DNP Archives.com Co., Ltd. uses a wide variety of IT-related skills, such as high-definition digitization,
database construction, security management, network operation, and media conversion technology, to buildand commercialize digital archives of artworks and cultural assets. DNP Archives.com manages the copyrights
to the ukiyo-e prints used in this 2005 Annual Report.

117

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

Printed using soy-oil-inks.
©2005 Printed in Japan.