C ONTENTS
2

Synopsis of Performance

6

To Our Shareholders

12

Special Feature:
DNP’s Growth Strategies

26

14

DNP’s Growth Strategies

16

Imagine and Create “what everyone
will take for granted in the future”

60

70

Corporate Governance62

Corporate Governance69

Board of Directors, Statutory
Auditors and Corporate Officers

How DNP Works to Achieve
Sustainable Development
72

Research and Development / Intellectual Property

74

Compliance with Law and Social Ethics

18

Main Themes for Realizing “what everyone
will take for granted in the future”

75

Safety and Quality Assurance ofProducts and Services

20

Achievements and Growth Strategies
for “what everyone will take for grantedin the future”

76

Information Security

77

Business Continuity

78

Environmental Conservation andExpansion of Eco-Business

82

Brand Management

83

Topics22

Going Global with This Idea

24

Major Events of this Fiscal Year
Specific efforts for “what everyone
will take for granted in the future”

DNP's Businesses
28

DNP at a Glance30

Our Products

32

Information Communication

42

54

32

Business Strategies

34

Financial Results

36

Presentation of Growth Businesses
and Strategic Businesses

84

122

Financial Section
86

Management’s Discussion and Analysis

96

Selected Financial Data

98

Consolidated Financial Statements

121

Independent Auditors’ Report

Appendix122

Investor Information

Lifestyle and Industrial Supplies

124

Major Subsidiaries and Affiliates

42

Business Strategies

126

Glossary

44

Financial Results

131

Sources of Information about DNP

46Presentation of Growth Businesses
and Strategic Businesses

Electronics

54

Business Strategies

56

Financial Results

58

Presentation of Growth Businesses
and Strategic Businesses

This annual report is aimed at providing information about
DNP’s businesses, management vision, and business results.
Opinions and forecasts contained in the report were basedon 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.
In this annual report, “DNP” refers to the entire DNP Group,and “we” refers to DNP or the DNP management team.
(In the section on Corporate Governance (pp 60-69), “DNP”
refers to Dai Nippon Printing Co., Ltd.)Synopsis of Performance

Grand Summary of Financial Results

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries

2012

2011

Years ended March 31

change2010

2012/2011

Statements of Operations (¥ million)
Net sales¥ 1,507,228¥ 1,589,373¥ 1,583,383-5.2%

Operating income

34,01567,81966,514-49.8%

Ordinary income

36,84362,786

68,841-41.3%

Income before income taxes

2,673

52,69649,496-94.9%(16,356)

25,03323,278–Net income (loss)
Balance Sheets (¥ million)
Total net assets¥

Interest-bearing debt
Total assets¥

952,441¥

956,864-4.0%

229,664

229,140

166,7510.2%

1,608,806

1,649,784

1,618,854-2.5%

140,574-22.5%(120,684)–

914,213

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

108,603¥

140,053¥

Cash flows from investing activities(80,126)

Cash flows from financing activities(32,833)

15,186

13,126–

Free cash flow*

28,47757,491

19,890-50.5%

36.13–(82,562)

Per Share Data** (¥)
Net income (loss)
Net assets¥(25.39)

¥

38.86

¥

1,352.71

1,410.44

1,422.34

32

32

32

–

2.26

4.27

4.20

-2.01

EBITDA margin

6.76

9.65

9.07

-2.89

Net income (loss) to net sales

-1.09

1.57

1.47

-2.66

ROE (%)

-1.84

2.74

2.57

-4.58

ROA (%)

-1.00

1.53

1.48

-2.53

26

25

18

–

10.95

25.65

29.50

–

PER (times)

–

26.07

34.97

–

PBR (times)

0.63

0.72

0.89

–

Cash dividend-4.1%

Profit Margins (%)
Operating income margin

Financial Ratios

D/E ratio (%)
Interest coverage ratio (times)
Valuations (against share price on March 31)

EV/EBITDA (times)

5.46

4.29

5.77

–

PCFR (times)

6.86

5.30

7.08

–

Dividend yield (%)

3.78

3.16

2.53

0.62

Return to Shareholders
Value of shares repurchased (¥ million)

–

–

–

–

Dividend payout ratio (%)

–

82.3

88.6

–

AA

AA

AA

–

23.20

24.54

25.38

–

OthersLong-term credit rating (R&I)
Foreign ownership (%)* Cash flows from operating activities - cash flows from investing activities

2** No diluting securities outstandingSynopsis of
Performance
To Our Shareholders■ Operating income decreased due to a slump in the advertising market
and slowdown in the LCD market.
■ We recorded about 24.7 billion yen in impairment losses as part ofbusiness structure reforms in the Electronics segment.

Special Feature:
DNP's Growth Strategies■ We pursued strategic capital investment and business creation
research and development to achieve sustained growth.

Operating Income

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

2,000

150

80

1,584.8

1,583.4

1,589.4

1,507.2

60

120

90

45.2
40

87.1

23.3

1,000

66.5
60

25.0

20

67.8

46.2

–20.9

0

–16.4

34.0

500

30

– 20

08

09

10

11

– 40

08

12

09

10

11

12

08

Net Income (Loss) per Share

ROE

ROA

(¥)

(%)

(%)

67.08

5

3

4.4

4
36.13

40

38.86

2.6

3

1.5

1.5

12

2.7

2

2.7

1

2
20

11

4

6

60

10

Financial Section

7

100

09

How DNP Works to
Achieve Sustainable
Development

0

0

80

Corporate Governance

1,616.1
1,500

DNP's Businesses

Net Sales1−32.350−25.39

0

0

–1

–2
– 2.2

–3

–40

08

09

10

11

12

– 1.8

08

09

10

11

12

–1.0

–1.3

–2

08

09

Appendix

–1

–20

10

11

12

DNP Annual Report 2012 〉Synopsis of Performance3

Income (Loss) Before Income Taxes

EBITDA(¥ billion)(¥ billion)

120

250

100

88.5

200

80
60

49.5

52.7

199.7

143.6

150

153.4

40

101.9

100

20

2.7

–27.8

0

80.7

50

– 20
0

– 40

08

09

10

11

12

08

09

10

11

12

Net Assets per ShareTotal Net Assets(¥)(¥ billion)

2,000

1,200
1,040.1
1,000

940.1

956.9

952.4

914.2

1,516.4

1,500

1,393.9

1,422.3

1,410.4

09

10

11

12

1,618.9

1,649.8

1,608.8

10

11

12

1,352.7

800
1,000

600
400

500

200
0

0

08

09

10

11

08

12

Interest-bearing Debt

Total Assets(¥ billion)(¥ billion)

250

229.1

229.7

1,601.2

200

1,536.6

1,500

166.8
150

100

2,000

124.3

1,000

80.1
500

50

0

0

08

09

10

11

12

08

09

PER (Price Earnings Ratio)*

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

35

1.5
34.97

30
25

1.05

23.64

26.07

1.0

0.89

20

0.72
0.63

15
0.64

0.5

10
5
0

0

08

09

10

11

* Figures for the fiscal years through March 2009
and March 2012 are not shown because there
were net losses in these years.

4

12

08

09

10

11

12

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

120

119.1

116.1

40
102.2

96.2

100

Synopsis of
Performance

Capital Expenditures*

35.6

34.1

98.2

33.8

33.1

10

11

31.7

30

60

To Our Shareholders

80
20

40
10
20
0

0

08

09

10

11

12

08

09

12
Special Feature:
DNP's Growth Strategies*Figures include capital expenditures for intangible fixed assets.

Depreciation Expense

Free Cash Flow*(¥ billion)(¥ billion)

120

109.9

80
106.9

100

98.0

91.7

95.8
57.5

60

80
40

34.8

30.8

40

DNP's Businesses

60

28.5
19.9

20
20
0

0

08

09

10

11

12

08

09

10

11

12

Net Sales by Segment (Year ended March 31, 2012)

Operating Income (Loss) by Segment (Year ended March 31, 2012)(¥ billion)(¥ billion)

Information
Communication

714.6

Lifestyle &Industrial Supplies

522.8

224.8

Electronics

31.8

–4.6

Electronics

57.1

Beverages

15.5

1.3

Beverages

0

200

400

600

800

-10

0

10

20

30

Employees by Segment (Year ended March 31, 2012)(¥ billion)(persons)
Beverages
1,050Electronics
4,241

29.9

50

Corporate
1,611

Information
Communication
19,796

39.5

Appendix

Lifestyle &Industrial Supplies

40

Financial Section

Capital Expenditures by Segment (Year ended March 31, 2012)

Information
Communication

How DNP Works to
Achieve Sustainable
Development

Lifestyle &Industrial Supplies

Information
Communication

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

23.5

Electronics

Lifestyle &Industrial Supplies
13,288

5.3

Others

0

10

20

30

40

50

DNP Annual Report 2012 〉Synopsis of Performance5

To Our Shareholders
Yoshitoshi Kitajima President

C re a t i n g w h a t e v e r y o n e w i l lt a k e f o r g r a n t e d i n t h e f u t u re
As we go about our business, we at DNP havealways considered how we can contribute tosociety by asking ourselves, "What can we do tohelp society? How can we make society better?"Japanese society is currently in the process ofrecovering from the massive damages causedby the Tohoku-Paciﬁc Ocean Earthquake. At
the same time, we face a mountain of ongoingproblems at the global level, including stagnant
economies and environmental and energy
concerns. We believe that the path to growthfor both society and DNP lies in squarely
confronting each one of these problems andcreating new value by offering ﬁtting solutions.
DNP was established in 1876, based on theentrepreneurial spirit of its founders and themost advanced technology of the time —letterpress printing. Ever since, DNP has
continued to generate innovative mechanisms
and original new products and services thatnever existed before. The company's original
motto, "Run a civilized business," expressed thestrong desire of DNP's founders to contribute to
the development of society as well as their belief
that by contributing to society, DNP, too, would
be able to grow. That desire has been passed
on to us as what we call "the DNP spirit."
DNP's technologies and expertise were
instrumental in the creation of many productsthat are taken for granted today, such as weekly
magazines, electronic dictionaries, smart cards
and holograms. DNP products are indispensable
to the manufacturing of many items that we use
as an integral part of our daily lives, including
advanced packages that safely guard food6

products, wallpaper that is indistinguishable
from natural wood grain, scratch-resistant ﬂoor
coverings, and smart phones with thin, lightliquid crystal displays. Our insatiable appetite forchallenge has driven us to continually develop
our strengths—mainly, innovative printing andinformation technologies—and apply them to thecreation of new things that people come to takefor granted.
Most of DNP's business to date has been
focused on satisfying the needs of corporate
customers, i.e. "business to business" or B to
B. In the future, however, we believe it will be
important for DNP to play a more direct role inidentifying and solving problems on behalf ofconsumers and society, not only in Japan but
throughout the world.
Simply put, the new products and services that
we strive to develop are solutions to problems
faced by businesses, consumers and society.
By providing precisely what individuals andsociety are seeking, we intend to increase ourown proﬁtability and achieve sustainable growth
despite today's harsh business environment.
"Create what everyone will take for granted in
the future."
As we work steadily to fulﬁll this mission,society places greater trust in DNP, which
increases our corporate value.

Yoshitoshi Kitajima
President

Interview with Management
Q &

Q

A

President Kitajima Explains How DNP Is Working to Achieve Sustainable Growth

What do you think of DNP'sperformance in the past fiscal year?

In the ﬁscal year ended March 2012, we took
a fresh look at the business activities we
had been engaged in so far, and decided
to change direction signiﬁcantly in order to achieve
growth. So we can say that this past year was a turning
point. Most Japanese businesses became aware of
weak links in their international supply chains as aresult of the Tohoku-Paciﬁc Ocean Earthquake andthe ﬂooding in Thailand, and were forced to reorganize
their systems in light of the need for business continuity
plans. At DNP, we also set about to thoroughly reform
our business structure, to develop new businesses
with an eye toward what consumers want and needas well as what is good for society, and to expand ourbusiness from a global point of view.
When we look back at the previous ﬁscal term, we
see that the Japanese economy gradually recoveredfrom the effects of the Tohoku-Paciﬁc Ocean
Earthquake, but overall the year was still very toughbecause of factors like the economic slowdown
overseas and higher crude oil prices. The printing
industry also continued to struggle; our challenges
included the slow recovery of advertising budgets,
which were cut in the aftermath of the earthquake,sluggish personal spending, and lower unit sale prices.
In particular, LCD color ﬁlters and other display
products were the object of major production
adjustments due to the worldwide slump in sales of
LCD televisions. Some of our major customers pared
their business down signiﬁcantly and changed theiroperating policies, which caused a sharp deterioration
in DNP's business environment. In response to thissituation, we hurried to shift our focus in two directions:
toward the small- and medium-size products usedin wildly popular smart phones and tablet PCs,
and toward developing new products, especiallythose aimed at higher-resolution displays. As partof a thorough structural overhaul, we consolidated
production bases, reevaluated our color ﬁlter production
equipment based on projected future cash ﬂow, andposted some 24.7 billion yen in impairment losses.
At the end of the term, consolidated net sales for theﬁscal term amounted to 1,507.2 billion yen (down 5.2%
from the previous term), consolidated operating income
was 34.0 billion yen (down 49.8%), and consolidated

ordinary income fell 41.3% year on year to 36.8 billion
yen. We posted a consolidated net loss of 16.4 billion
yen for the term, compared to net income of 25.0 billion
yen a year earlier.

A

8

Q

What are DNP's medium- andlong-term policies
aimed at achieving growth?

The overseas economic slowdown is likely
to affect even emerging markets. In Japan,
we expect several negative factors tocontinue to be of concern, including deﬂation, higher
unemployment, unstable electric power supplies, andhigher electricity rates. Despite this harsh businessenvironment, our "P&I Solutions" business visioncalls for the achievement of continuous growthand increasing corporate value in the medium andlong terms. The idea is that if we use our printing
technologies, information technologies, and ourother skills and strengths to solve problems faced bybusinesses, consumers and society, society and
DNP can grow and develop together.
Based on this vision, we have identiﬁed threestrategies that we believe will lead us to concrete
results: (1) development and promotion of new
products and new businesses, (2) acceleration of
global expansion, and (3) thorough structural reformof business operations.
We have already generated new businesses in theenergy and life science ﬁelds by expanding on our
printing technologies. As society becomes moredigitized and more multi-functionalized, we feel certainthat there is limitless potential for developing andapplying printing technologies.

AInterview with Management
Synopsis of
Performance

How DNP Is Working to Achieve Sustainable Growth

In 2011, Japan did not have enough electric power
to meet demand, so we were forced to set our airconditioners to higher temperatures during the peak of
the hot summer. At that time, we saw many examplesof people turning crisis into opportunity, for example bydeveloping energy-efﬁcient household appliances oroffering cooling products.
As I said earlier, creating new products and services
that are good for society is one of DNP's priorities.
So in the future, we will also concentrate on developing
socially oriented businesses related to themes likeenvironment, energy, education, aging society, anduniversal design.

New products and services that make the most of
our existing businesses

Promoting research and development aimed atbusiness creation

DNP's Information Communication segment engages
in the optimal expression of information using diverse
media formats in line with the needs of corporateclients and consumers, and provides a wide variety ofsolutions that are integral to our customers' businessprocesses. The segment is building up new typesof businesses, including products and services thattake advantage of our strong foundation in information
security, "hybrid production solutions" that combine
paper and electronic media, and a "hybrid bookstore
network."
The Lifestyle and Industrial Supplies segmentprovides products and services that precisely meet thediverse needs of companies and consumers, including
products designed with universal design principles
and/or environmental conservation in mind. We viewareas like energy and life science, where there is strongsocial need, as suitable areas for DNP to start new
businesses, through which we will develop advanced
and original products.

At DNP, we have expanded our business bydeveloping and applying printing technologies. We
intend to work harder than ever at the developmentof new products and services, which will continue tobe DNP's mainstay. In light of the rapid changes thatmark today's society, we attach special importanceto research and development aimed at creating new
businesses that provide clear-cut solutions based on
approaching problems from consumers' point of view.
We will keep thinking outside the box and working to
generate new businesses through products, services
and innovative business models based on fresh ideas,
and we will take care to properly manage and makeuse of the intellectual property that is created throughthese efforts.

Special Feature:
DNP's Growth Strategies

Although our Electronics segment faces a harshbusiness environment, we will continue to respondto rapidly changing markets and customer needs by
pursuing thorough cost reductions and developing
advanced products backed by our strength in worldclass technologies like patterning and microfabrication.

Amidst all the big changes that are taking placein the world these days, we feel it is difﬁcult forcompanies and consumers to foresee whatissues they will face and how to go about solving theirproblems. Since our corporate vision is to be a providerof solutions, it is important for us to quickly notice alltypes of changes, propose hypotheses, and stay one
step ahead of businesses and consumers in making
suggestions.
When we make a point of interacting with society
and markets and looking at the world from our own
standpoint as consumers, we get an understandingof societal changes that will increase the accuracy of
our hypotheses and proposals, and lead to effective
solutions for businesses and consumers. Not just sales
and project planning departments, but manufacturing,
research and development, and every part of the entire
DNP Group will emphasize the customer's point ofview as we develop new products and services, review
existing businesses, and establish and quickly launch
new business models.

A

To Our Shareholders

Q

Please explain the three growth strategies you just mentioned.
First of all, in what direction do you intend to take "development of new products andnew services"?

Building up businesses that solve social problems

DNP's Businesses
Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 To Our Shareholders

9

Q

What are the aims of your next
strategy, "global development"?

Ever since we opened an ofﬁce in Hong Kongin 1964, we have been actively developing ouroverseas business with the aim of meeting
local demand. Our focus as we promote DNP's global
strategy is to "make the most of our strengths." We
are not just going overseas because that's what othercompanies are doing. What's important is our desire
to use DNP's strengths to solve problems faced bybusinesses and consumers not only in Japan, but
all over the world. In recent years, DNP products
and services have drawn higher praise than ever inoverseas markets, and our business has become brisk
throughout the world. In order to further accelerate thistrend and successfully develop our overseas business,in April 2012 we created a new organization to oversee
DNP's overseas businesses.
Under this new framework, we aim to optimize
product manufacturing, sales, and development

A10

according to the needs of each region. Optimization ofqualities and functions in line with the needs of various
localities is particularly important in categories likepackaging, decorative materials, information media
supplies, and other businesses handled by our Lifestyleand Industrial Supplies segment. Since DNP has
worked hard to provide the high degree of convenienceand comfort required for satisfying the exacting
demands of Japanese consumers, we can provide
products that consumers all over the world really need.
In 1972, DNP's Packaging Operations establisheda production base in Indonesia amid expectations for
growth in Southeast Asian markets. Ever since, we havecontinued to work at providing appropriate solutions
for local markets, and have increased our share ofsales in those markets. DNP Indonesia has grown to
be Indonesia's No. 1 packaging company. We intend tobuild on our success there by opening another plant in
Vietnam in April 2013. We aim to expand our businessby providing high-quality products to global companies
in response to growing demand for packaging for foods
and household goods.

Interview with Management

Q

How do you plan toreturn profits to shareholders?

DNP's Businesses
Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section

We view the return of proﬁts to shareholders
as an important management policy. Our basic
approach is to distribute proﬁts to shareholders
through stable dividend payments, with consideration
for business performance, dividend payout ratio,
and other relevant factors. At the same time, we
support future business development by applying
retained earnings to the enhancement of our ﬁnancial
constitution and strengthening of our managementbase.
We allocate retained earnings to fund investment
in research and development of new products andtechnologies, capital investment in the development of
new businesses, and strategic alliances and M&As.
We believe that these types of investment help build
corporate value in the medium and long terms, andultimately help us return proﬁts to shareholders.
DNP values taiwa* with all of our various stakeholders.
In order to stimulate livelier taiwa through which we
can discover and resolve new issues, we disclose
appropriate information in a timely fashion and work
hard to achieve accountability.
Furthermore, we view corporate governance as animportant management responsibility. We intend tobuild, operate and maintain monitoring systems that
adequately support accurate, appropriate, and quick
decision-making and business execution.
In order to earn the trust of our shareholders andall other stakeholders, the management of DNP willcontinue to increase the Group's corporate value
through our business activities. We look forward to yourcontinued support and cooperation.

A

Special Feature:
DNP's Growth Strategies

Appendix

We intend to boost efﬁciency and minimize
costs by reviewing our business processes
in order to establish strongly proﬁt-oriented
production systems. In the ﬁscal year through March
2012, we worked on improving proﬁtability throughsuch means as posting impairment losses — largely oncolor ﬁlter production equipment— and consolidating
operating locations.
For example, in April 2011 we combined divisions
that handled manufacturing and sales in Japan's
Chubu region (centered around Aichi Prefecture) toform DNP Chubu Co., Ltd. Our aim is to improve
productivity, in addition to expanding our business by
responding meticulously to local needs and further
strengthening ties to local communities. In October
2011, we consolidated four Group companies that
handle prepress operations in order to streamline
plate making operations, even out workﬂow between
locations, consolidate redundant functions, andimprove productivity through sharing of technologies
and expertise.
In addition to the Production 21 activities that wehave continued since 2002, we will work to boost
product quality and cost competitiveness by building
efﬁcient, waste-free production systems based on theconcept of "overall optimization," i.e. smoothing theﬂow of operations between business processes andunits, at every step from order intake to delivery. As
part of this effort, during the ﬁscal year through March2012 we established a production control center for the
Information Communication segment, and another for
Packaging operations, in order to optimize production
locations so as to make the most effective use of DNP'sproduction equipment throughout Japan.
We also adopted the "DNP Group Basic Code forDisaster Response" and began implementing disasterprevention and preparedness measures on a daily
basis in order to make the DNP Group as "disasterproof" as possible. After the Tohoku-Paciﬁc Ocean
Earthquake, we reviewed our business continuity
plans (BCPs) and worked to minimize the effects a
disaster might have on DNP's business operations byredistributing production bases in Japan and overseas,
and by organizing logistics and alternative producers
with an eye toward disaster-prooﬁng our overall supplyA

chain. In order to deal with power shortages and higher
electric power costs, we took steps like reducing power
consumption wherever possible and installing in-house
power generators.

To Our Shareholders

Q

Your third strategy is
structural reform of operations.
How are you going about that?

Synopsis of
Performance

How DNP Is Working to Achieve Sustainable Growth* Taiwa is a process that entails identifying problems andﬁnding solutions through the exchange of viewpoints and ideas.

DNP Annual Report 2012 〉 To Our Shareholders

11Special
Feature“Creating What Everyone
will Take for Grantedin the Future”
DNP’s Growth Strategies

12Currently, DNP is mainly pursuing three growth strategies: (1) development and promotion of
new products and new businesses, (2) acceleration of global expansion, and (3) thoroughstructural reform of business operations. We believe that by pursuing these initiatives, we cangenerate a variety of devices, products, and services that society will seek in the future, andthat we can solve a large number of problems faced by companies, consumers, and society.
For example, in Japan and in the world, there is still plenty of room for improvement inmechanisms for facilitating pleasant communication, convenient and easy-to-understandsystems that support next-generation education, universal design products that are easy foreveryone to use, social systems that contribute to improving quality of life even as society ages,
and other aspects of modern life.
We believe that society and modern life will be enriched only when these kinds of products,
services, and systems are readily available for everyone to use freely—in other words only whenpeople come to take their availability for granted.
We express this idea through the phrase “creating what everyone will take for granted in the
future.” We believe that creating this kind of future and extending it to the entire world willcontribute to the development of a sustainable society and lead to DNP's own growth.
CONTENTS
14

DNP’s Growth Strategies

16

Imagine and Create“what everyone will take for granted in the future”

18

Main Themesfor Realizing “what everyone will take for granted in the future”

20

Achievements and Growth Strategies
for “what everyone will take for granted in the future”

22

Going Global with This Idea

24

Major Events of this Fiscal Year
Specific efforts for“what everyone will take for granted in the future”

13

DNP’s Growth Strategies

Development and Promotion of New Products and New Businesses

01

New Businesses

io

mu

nic

nic

s

om
Information C

Increasing added value from the consumer’s point of view

Supplies

t ro

Sales
Ability todevelopcustomers

strialec

Production
Quality
Control

ndu

El

Human
Resources

Needs of corporations,consumers, and society&I

Planning
MarketingPrinting
Technologies

Taiwa*

yle

at

st

Experience
Knowhow

Patents
Intellectual
Property

02

DNP’s strengths

fe

n

Li

nd construculate a
t bu
sine
form
o
t
sse
y
t
i
l
i
s
b
A

Promoting R&D with an orientation toward creating new businesses
Reinforcing businesses that solve social problems

Information
Technologies

Financial
base

Be

v

a
er

ge

s

Acceleration of Global Expansion○ Taking a global point of view, DNP will use its strengths to solve the problems ofcorporations, consumers, and society in general, whether in Japan or abroad.
○ In April 2012, we prepared a new system for promoting overseas businesses,
in order to accelerate DNP's global expansion.

03

Thorough Structural Reform of Business Operations○ Establishment of production frameworks based on a strong awareness of profitability○ Thorough elimination of waste as a step toward overall optimization○ Realization of a “disaster-proof DNP Group” throughour business continuity plan (BCP)

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

“Creating What Everyone
will Take for Grantedin the Future”
Contribute to society through our corporate activities.

Pleasant communication

Optimal content, media, and information security

Solve corporations' problems.
Solve consumers' problems.

Special Feature:
DNP's Growth Strategies[ Problems that need to be solved ]Education; cultivationof a new generation

to whom we can entrust our future

Solve society's problems.

Sustainable

environment and clean energy
Universal design productsthat are easy for everyone to use

Solve problems at the global level.

Quality-of-life improvementsthat are helpful even in an aging society

Global developmentof meticulous problem resolution

Establish a solid management base.

Becominga trusted company
that fulfills its social
responsibilities

15

“Creating What
Everyone will
Take for Grantedin the Future”

Imagine and Create“what everyone willtake for granted in the future”

Quality-of-life improvements

Improving
quality of life throughregenerative medicine

that are helpful even in an aging society
Online, at-homemedical consultations
will become the norm

Global developmentof meticulous
problem resolution

Saving energy
through the use oflight-diffusing
wall paneling
Advanced films forpreserving the freshnessof packaged foods

Technologies and expertisethat support smart houses
and smart cities
Rooftop gardening
will provide comfortabletemperature control andsafe food supplies

Universal
designproducts
that are easy
for everyone
to useDisplaying producer andproduction location information
on adhesive information
terminals and IC tags

Navigating systems
with augmented
reality (AR)-based concierges

Signage shopsthat display different
merchandise
depending on the viewer

Electric carsthat run ona small amountof energy

Using the roof andwalls of an office
to produce
its electric supply
Pleasant communication of
information all the time,
everywhere

Wireless technology
enables secure gate control
without people having tohold up their ID card

Pleasant
communication

Office security systemprovides peace of mind
regarding room entry/exit
and equipment usage

Optimal content, media, and information security
16

Education;

There are so many possible scenarios of what the future might
be like; it's impossible to predict the future exactly. However,
we can look at the world and identify problems from thestandpoint of consumers, a particular society, or the world asa whole. By coming up with proper solutions to those problems,
we can realize the kind of future that many people look forward
to, and we ourselves can have a share in the future.
DNP is currently exploring the nature of “what everyone willtake for granted in the future” and focusing on applying anddeveloping our strengths in printing technologies and otherareas in order to create that future. As part of that process, wehave established some central themes like the ones below, inorder to increase the effectiveness of the various solutions
that we find.

cultivation of a new generation towhom we can entrust our future

Creation of
new value throughglobal-level exchangeof wisdom

Electronic blackboards
that display each student's
ideas in turn

Education;cultivation of a new generation to whom we can entrust our future

Individuallycustomized
electronic textbooks

Special Feature:
DNP's Growth Strategies

Pleasant communication
Optimal content, media, and information security

Sustainable

environment and clean energy
Universal design productsthat are easy for everyone to use

Quality-of-life improvementsthat are helpful even in an aging society
The libraries of the future
will enable people
to view information
any time in any form

Global development

Infrastructurethat supports
the healthof future generationsof meticulous problem resolution

Greater familiarity
with plants and animals
through electronic
picture books
Comfortable
dwelling spacesthat are well-lit whether
above ground or below

Crisp images
without glare

A sustainable society
coexisting with
the natural world

Sustainable

environment andclean energy

The illustration to the left is just one possible scenario fromamong the many versions of the future that we can imagine.
For example, as Japanese people live longer and have fewer
children, we might see increased demand for regenerative
medicine and remote diagnosis as well as for enhanced
educational environments for cultivating global humanresources. Universal design products that can be used withoutstrain by the maximum number of people, and advanced
information security measures that allow safe and worry-freeexchange of information will also be indispensable. So thatpeople can continue to lead fulfilling lives all over the world,
we must not neglect to take care of our planet's environmentor to strive to lighten the burdens that we place on it throughenergy consumption.
By making the most of its strengths, DNP can offer optimal
solutions to these problems and others like them. Besides thebooks and magazines that have long been taken for granted,
DNP has continuously provided products and services thathave already become taken for granted in our modern world,
including smart cards, holograms, safe packaging for foods
and household items, and interior and exterior decorative
materials for comfortable homes and offices. Going forward,
we will continue to contribute to society by creating"necessities" that everyone will come to take for granted invarious arenas of business and personal life.

DNP Annual Report 2012 〉Special Feature: “Creating What Everyone will Take for Granted in the Future”

17

“Creating What
Everyone will
Take for Grantedin the Future”

for Realizing “What Everyone will
Take for Granted in the Future”

Pleasant communication

Education;

Optimal content, media,
and information security

cultivation of a new generation towhom we can entrust our future

As social network services become
more widely used, a growing numberof consumers are more frequently
dispatching information, andinternational exchange of information
has become very lively. There isincreasing demand on the part ofboth consumers and corporations
for the ability to exchange desirable
content safely and securely via themost appropriate information media.
DNP facilitates pleasantcommunication by making use of
our ability to accommodate "hybrid"
paper and digital media and content,
as well as the strengths that we havecultivated in information security
through making related products likesmart cards and holograms.

Cultivation of the young people whowill lead in the next generation is an
important topic in every generation,
but today's children in particular willneed to acquire skills and strengths
that will enable them to survive in anenvironment of global competition.
At the same time, as our society
progressively grows older, high-quality
lifelong education has become more
important.
DNP offers a variety of educational
solutions including personalized
textbooks made by digitizing learningmaterials and adapting them to thelevel of individual students. We intend
to continue offering a wide rangeof tools to support the education of
future generations, including electronic
library services that make use of our
network, in addition to digital pens andelectronic blackboards.

Amid efforts to reduce energy
consumption along with increasing
demand for alternatives to fossil
fuels, it is becoming more important
than ever to reduce the burden that
we humans place on our planet's
environment.
As a manufacturer, DNP is always
thinking about how to coexist with
the Earth's environment. Besides
striving to minimize the burden thatwe place on the environment throughmanufacturing, we will also continue
to provide eco-friendly products ina number of product categories. In
addition, we will continue to makecomponents for photovoltaic cells
and lithium-ion batteries and use
decorative materials, etc., that can beadapted for use in smart cities andsmart houses, etc.

Smart card with Lippmann hologram

Electronic library services

Highly antireflective, light-diffusing panels

DNP makes a smart card even more difficult tocounterfeit by inserting a Lippmann hologram, which
can only be made with specialized materials andmanufacturing processes.

We serve the educational and academic markets­–
i.e. public and university libraries–by providing hybrid
publications distribution, including electronic bookcontent distribution and sales.

A special matte treatment applied to wall surfaces
diffuses light from fluorescent or LED light sourcesand delivers light to every corner of a room, thereby
saving energy.

DNP stands for Dai Nippon Printing. But the"Printing" in our name does not refer only to thekind of printing that entails attaching ink topaper. The printing technologies that have
driven DNP's business expansion hold broad
possibilities for application. Based on our great
capacity for developing those possibilities, wehave generated a large number of products andservices that are indispensable to the daily livesof consumers and the business processes of ourcorporate clients.
For example, expanding the range of materials
on which we print, from paper to plastic film andmetals, allowed us to participate in industries

like packaging and decorative materials, throughwhich we have been responding to strong
demand in recent years for eco-friendly productswith advanced functionality.
DNP is one of the world's very few"comprehensive printing companies" that have
expanded their field of business extremely
broadly from a base of core printing technologies.
In the future, we intend to continue solving avariety of problems as we expand our field of
business even further, into areas like battery
components and other energy-related products,
and materials used in regenerative medicine andother bioscience-related areas.

Printing Technologies
that Support“What Everyone will
Take for Grantedin the Future”

18

Main Themes

Sustainable

environment andclean energy

Universal design productsthat are easy for everyone to use

Next-generation
digital signage
DNP's original, next-generation digital signage display
based on universal design principles enables touchscreen operation by people in wheelchairs.

D N P'ss t r e ngths

to
ility
Ab

nd construculate a
t bu
form
sin
ess
es

Experience
Knowhow

Planning
Marketing

Patents
Intellectual
Property

Printing
Technologies

Human
Resources

Information
Technologies

Production
Quality
Control

Not only in Japan, but in many
countries the average age is rising. At
the same time, explosive population
growth is expected in developing
countries. Beginning with health andmedical issues, improving quality oflife is becoming increasingly important
all over the world.
DNP makes use of its technologies
such as the information technologies
it has cultivated in order to provide
solutions that support new types of
medical care, including electronicclinical chart maintenance systems
and remote diagnosis. We are also
expanding into the field of life sciencethrough businesses like capillary
vessel regeneration and cell patterning
culture substrates.

All of the issues that we mentioned to
the left are important issues that await
resolution not only in Japan, but in therest of the world as well. Moreover,there is a need for solutions thatproperly fit the various circumstances
found in different regions.
DNP has operating locations aroundthe world. Through taiwa , we intend to
identify the specific needs of people
in various locations and provide
them with products and services of
optimized quality and functionality.
In April 2012, we strengthened ourframework for promoting overseas
problem resolution by establishing
Global Strategic Business Planningand Control Division. In the future,
we will actively develop and expand
our global business, for example
by strengthening our packaging
operations in Southeast Asia,
where the rate of growth has beenremarkable.

CytoGraph technology
CytoGraph cell pattern culturing film applies printing
technologies to the field of regenerative medicine. The
product is made by forming patterns on a glass surface
using material that does not allow cells to adhere to theglass, thereby controlling cell reproduction.

"Expansion printing" describes how wecontinually expand our field of business byapplying and developing printing and othertechnologies as we contribute to society by

Sales
Ability todevelopcustomers

Financial
base

Global developmentof meticulous problem resolution

Special Feature:
DNP's Growth Strategies

In a society that recognizes diversity,
we need to create environments
where different types of people canlive in safety and comfort. It otherwords, we must adopt universal
design principles.
DNP has established "Five Universal
Design Principles," such as "clear,easy-to-understand expression ofrequired information" and "simple,
intuitive utility."
We always consider how we canenable the largest number andthe most types of people to safely
and easily use DNP's products
and services. For example, we use
color universal design principles
in recognition of the different ways
people perceive color, and we makepackages that are easy to open forpeople with little physical strength.

Quality-of-life
improvements that are helpfuleven in an aging society

resolving the problems of corporations,consumers, and society based on our
corporate vision of becoming a provider of"P&I Solutions."

Resolving
the problems ofcorporations,consumers,
and society

DNP Annual Report 2012 〉Special Feature: “Creating What Everyone will Take for Granted in the Future”

19

“Creating What
Everyone will
Take for Grantedin the Future”
1876 <Founding>Achievements and
Growth Strategies
for “what everyone willtake for granted in the future”

1950

1960

Pri n ti n g▶1876Founding of Shueisha, DNP’spredecessor; start of letterpress printing

1970

1980
In fo rma tio n
Pro c e s s in g

C om preh en s iv e Prin t in g
▶1935 Merger of Shueisha and Nisshin Printing to form Dai Nippon Printing▶1949 Listed shares on Tokyo Stock Exchange

Information Communication
Books and Magazines▶1972 Begin digitalization of text and images (CTS)▶1877 Produced first Western-style book in Japan, revised edition of “Self-Help” by Samuel Smiles▶1912 Completion of DNP’s original Shueitai font
▶1925 Receive order to print 740,000 copies of the inaugural edition of “King” magazine▶1882 Begin sales of printing types▶1956 Print the inaugural edition of “Shukan Shincho,” the first weekly magazine issued by a publishing company

Commercial Printing
▶1885

▶1971

Start of lithographic printing

Developmentof scented printing▶1981

Establishment of new video printing
system technology

Business Forms▶1898

Begin printing of securities▶1946▶1974 Full-scale production of magnetic plastic cards
Start of carbon-backed ledger printing▶1983 Development of smart card
▶1965 Begin mass production of OCR ledgers
Begin printing new Bank of Japan notes after being designated to do so by Japanese Ministry of Finance▶1954

Lifestyle and Industrial Supplies
Packaging
▶1951
▶1951

▶1961

Full-scale entry into
paper container business
Begin printing on vinyl andother non-paper materials

Start production of blow-molded bottles

▶1962

▶1975

Begin producing retort pouches▶1983

Begin producing paper cups
▶1969 Begin producing laminated tubes

Development oftechnology for drawing
on molded plastic goods▶1984

Begin producing
PET plastic bottles

Lifestyle Materials▶1951

Begin developing decorative paper for melamine resin plate▶1974▶1961 Begin printing directly onto steel plates

Introduction of Curlfit technology for printing on curved surfaces▶1977 Development of stainless decorative sheet

Industrial Supplies▶1983

Start producing
projection screens▶1984−85
Development of thermal resin-typeand dye sublimation thermaltransfer printing media

Electronics
Display Components▶1958

Successful prototyping of shadowmasks▶1973

Electronic Devices
▶1959

20

Successful prototyping of photomasks▶1964 Begin lead frame production

Begin research and development of color filters▶1978 Development of new type of
shadowmasks (flat masks)

DNP's Growth Strategies
Develop and promote new
products and businesses
Accelerate global expansion
Thorough structural reform ofbusiness operations

1990

2000

2010

Information Communication

P&I Solu t ion s▶2001 Announcement of DNP Group Vision for the 21st Century(125th anniversary of DNP's founding)▶1985

Development of world’s first electronic dictionary on CD-ROM▶1992 Development of Shueitai True Type font
▶1997 Start of online publishing business

▶1989

▶2008

Alliances with Maruzen Co., Ltd., Junkudo Co., Ltd.
and Bunkyodo Group Holdings Co., Ltd.
▶2010

Startup of “honto” e-booksales service

Construction of global network system▶2001 Begin Orikomio! e-flyer service▶1995 Begin Internet service “Media Galaxy”▶2007 Launching of digital signage project▶1997 Begin e-commerce service

Growth strategies ofeach business that will create“what everyone will take for
granted in the future”

Hybrid production solutions
Hybrid bookstore network
DNP-brand B to C business
Cross media communications
business
Promotion of BPO business

▶1993

▶1992

Production of contactless
smart cards▶1999▶2004 Card Data Management Service (CDMS)
Launch of IC tag project▶2005 Establishment of “SSFC” office security consortium

Development of aseptic plastic bottle filling systemand preform method▶2007

Expansion of security solutions

Development of packaging forJapanese-style space food▶1998 Development of transparent barrier film (IB Film)

Expand eco-friendly products
Develop new products usingmaterials with more advanced
functionality▶1995

Begin producing sheet with EB coating

▶1996

▶1985

Establishment of anti-glare film technology for LCDs
▶2004 Development of “JETBLACK” front projection screens▶2005 Begin development of “PrintRush” self-service printing system

Development of LCD color filter production technology(production started 1987)▶2002 Development of flexible organic EL displays▶2003 Development of full-color organic EL panels▶2006 Mass production of color filters using inkjet method▶1995 Launch multilayer wiring formation technology▶1999 Enter semiconductor package substrate field▶2001 Begin MEMS (micro electro mechanical systems) processing under contract▶2002 Complete production line for “B 2 it” high-density build-up boards

Expand safe, reliable packaging,a variety of living spacesolutions, and industrial
materials businesses worldwide

Display products: shift to areas
with greater growth potential;
provide higher resolution andmore advanced functionality
Electronic devices: concentrateon high-end products and expand
overseas business

New Businesses
Energy Systems▶1999 Commercialization of “soft packs” for lithium-ion batteries▶2003 Development of photovoltaic module components▶2005 Development of fuel cell components▶2007 Development of printed organic
photovoltaic cells

Life Science (Regenerative Medicine, etc.)▶2004 Successful formation of capillary patterns▶2008 Development of cell patternculture substrates▶2008 Development of cell sheet culture film

Promote businesscreation-oriented research anddevelopment
Reinforce businesses that solve
social problems; especiallydevelop businesses related tothemes like:environment and energy; aging
society; education; universal
design.
DNP Annual Report 2012
〉 Special Feature: “Creating What Everyone
will Take for Granted in the Future”

21“Creating What
Everyone will
Take for Grantedin the Future”

Going Global
with This Idea

Using our strengths to solve global problems
principles are important all over the world.
Rather than taking products designed for the Japanesemarket overseas and trying to sell them just as they are,we use plenty of taiwa to clarify the issues faced by people
in various regions. We aim to expand our business by
optimizing the functions and qualities sought by people invarious locations, in order to solve their problems.

DNP sees the entire world as its target market. We aim
to "make the most of our strengths" in order to provide
products and services that precisely meet the needs ofpeople in different areas.
In particular, challenges like reducing the burden thatwe place on the environment, using energy efficiently,
and designing products according to universal design

DNP's half-century of overseas development
Ever since DNP opened an office in Hong Kong in 1964,
we have been actively developing our overseas business.
Currently, the DNP group has 13 overseas manufacturing
plants and 24 overseas offices staffed by a total of some
5,000 employees, mainly in Europe, Asia, North Americaand Australia. We manufacture and sell a wide variety of
products in these regions, including pop-up and otherbooks, magazines, flyers, catalogs, and other commercial
printed matter, packaging and building materials, opticalfilms used in electronic displays, color ink ribbons forprinting photos, and photomasks used for manufacturing
semiconductors.
In recent years, we have focused on expanding ourbusiness in Southeast Asia, which is a growing market.

Badhoevedorp(Holland)London(UK)

After establishing representative offices in Ho Chi Minh
City and Bangkok, in April 2012 we established a company
in the suburb of Ho Chi Minh City to manufacture and sellsoft packaging. Our information media supplies business,
which primarily makes color ink ribbons, took over Sony
Corp.'s digital photo printing business, thereby gaining us
a global sales network that takes advantage of operating
locations in places like the United States, France, and theNetherlands.
In the fiscal term through March 2012, overseas sales
amounted to 192.2 billion yen, representing 12.8% of
DNP's consolidated net sales, up 0.4 point from a year
earlier. Of these overseas net sales, the Asian region
contributed 69%, or 133.4 billion yen.

Karlslunde(Denmark)
Düsseldorf (Germany)

Dinan (France)

Agrate (Italy)

Beijing

Paris (France)

China

Seoul (South Korea)
Tokyo
Shanghai

Pittsburgh
Santa Clara
Los Angeles
Chula Vista

U.S.A.

New York
Concord

San Marcos

Bangkok(Thailand)
Ho Chi Minh
(Vietnam)

Hsinchu(Taiwan)Taipei (Taiwan)

Australia
SydneyJohor Bahru(Malaysia)

PT DNP Indonesia

Singapore

Jakarta (Indonesia)

DNP Electronics America, LLC

22

DNP IMS Netherlands B.V.

DNP’s Overseas Sales

DNP’s Overseas Sales to Net Sales(¥ billion)

（%）

300

20

250
15

192.2

200
150

12.8

10

100
5
50
0

0

02

03

04

05

06

07

08

09

10

11

12

02

03

04

05

06

07

08

09

10

11

12

One of our strategies for future overseas businessexpansion is to make our main target the Asian region,
which is expected to experience remarkable economic
growth. Rising incomes in Southeast Asia and newly
industrializing countries like India are accompanied by
rapid changes in information media and lifestyles, whichspell great potential for the products and services that DNP
provides. In order to quickly seize this growing business
opportunity, we established a regional control company inSingapore in June 2012. This is our third regional control
company, following the establishment of DNP Corporation
USA and DNP Business Consulting (Shanghai) Co., Ltd.,
which oversee business in the US and China respectively.
In addition to promoting business expansion in Southeast
Asia, DNP Singapore aims to boost the efficiency of DNP's

Southeast Asian businesses by standardizing accounting
operations, and to increase added value by optimally
allocating human resources within the region.
In addition, in April 2012 we established Global
Strategic Business Planning and Control Division, in orderto formulate an overall medium- to long-term plan for
DNP's overseas businesses, to coordinate new productdevelopment, and to control overseas management risks.
This office will cooperate with regional control companies
and promote optimal management suited to the situationin each region. We are determined to achieve sustainablegrowth by formulating and implementing global strategies
that make the most of DNP's various technologicaldevelopments and other strengths.

Special Feature:
DNP's Growth Strategies

Future initiatives and issues

Global Development Timeline
1964
1968
1969
1970
1972
1974
1989
1990
1991
1994
1998
2000
2001
2002
2005
2006
2008
2010
2011
2012

Establishment of Hong Kong representative office
Establishment of New York representative office
Establishment of representative offices in Sydney and Frankfurt
Establishment of DNP Europe GmbH in Germany, to sell decorative materials and packaging products
Establishment of PT DNP Indonesia to manufacture and sell mainly packaging products in Indonesia
Establishment of DNP Corporation America to sell books, commercial printed matter, building materials, and electronics-related components
Establishment of DNP Denmark A/S to manufacture and sell rear projection screens, etc.
Acquisition of management rights to Tien Wah Press (Pte.) Ltd. (Singapore), which manufactures and sells books and commercial printed matterfor the Singapore market
Establishment of DNP Singapore Pte. Ltd., which sells mainly decorative materials and electronics-related components
Establishment of DNP UK Co., Ltd. to sell decorative materials
Establishment of DNP IMS America Corporation to produce and sell ink ribbons for thermal transfer printers and for thermal-resin type printers
Establishment of DNP Taiwan Co., Ltd., which sells electronics-related components
Establishment of DNP Korea Co., Ltd., which sells electronics-related components
Establishment of DNP Electronics America, LLC to manufacture and sell precision electronic components
Establishment of photomask manufacturing company DNP Photomask Europe S.p.A. in Italy
Establishment of DNP International Trading (Shanghai) Co., Ltd. to sell commercial printed matter in Shanghai and the rest of China
Establishment of photomask manufacturing company, DNP Photomask Technology Taiwan Co., Ltd.
Establishment of DNP IMS Netherlands B.V. to manufacture thermal-resin transfer ink ribbons
Establishment of Ho Chi Minh representative office
Establishment of Bangkok representative office
Creation of Global Strategic Business Planning and Control Division

Establishment of Singapore regional control company
2013 (Planned) Establishment of soft packaging plant in the suburb of Ho Chi Minh City, Vietnam

DNP Annual Report 2012 〉Special Feature: “Creating What Everyone will Take for Granted in the Future”

23“Creating What
Everyone will
Take for Grantedin the Future”

Major Events ofthis Fiscal Year
Specific efforts for “what everyone willtake for granted in the future”

Cultivating fields with growth potential through active investment● Startup of "mother plant" for energy-related components · ·············································[ April 2011 ]Photovoltaic cell

DNP controls the No. 1 share of the world market
for soft packs used in lithium-ion batteries.
In April 2011, we started up a new plant in
Kitakyushu, Fukuoka Prefecture, for making softpacks along with photovoltaic cell components
such as back sheets and encapsulants. Amid
growing demand for non-fossil fuel energy

sources, this new "mother plant" triples DNP'sconventional capacity for producing energyrelated components. Its products will be
supplied to manufacturers all over the world,
including China and other developing countries,
and Europe.

● Startup of eco-friendly plant for producing advanced packaging products ········ [ November 2011 ]New building of Tanabe Plant

In November 2011, DNP started up a new facility
for making packages from highly functional film,using designs optimized for foods, household
items, and medical products, etc. The newfacility is on the grounds of DNP's paper
container plant in Kyotanabe, Kyoto Prefecture.

The eco-friendly new plant makes efficient use ofthermal energy and recycles solvents. In addition
to paper products, DNP is developing "hybrid
products" that combine the advantages of both
paper and film.

● Expanding new product output by increasing production capacity

for advanced optical films ································································································ [ November 2011 ]Mihara Plant

In November 2011, we inaugurated a new
facility and new production lines at our plant in
Mihara, Hiroshima Prefecture, where we makehigh-performance anti-reflection films for use
in flat-panel displays. In addition to working to

improve quality and productivity by automatingproduction processes, we will actively develop
and manufacture a variety of new products
related to advanced optical films, such ascomponents for 3D displays and touch panels.

Business development through collaboration with other companies● Expansion of photo print operations through acquisition of Sony's business ·············[ April 2011 ]DS-RX1 digital photo printerIn order to strengthen our digital photo print
business, in April 2011 we took over Sony
Corp.'s commercial-use digital photo printerbusiness. This meant also taking over Sony's
worldwide customer base. We intend to increase

the volume of dye-sublimation thermal transfer
media supplies (color ink ribbons and receiverpaper) that we supply to instant photo print
systems and ID photo printers installed by Sony.

TOPICS
New soft packaging plant in Vietnam······································································································ ·[ Startup scheduled for April 2013 ]Concept drawing of Vietnamese plant

24

DNP plans to build a factory in the suburb of
Ho Chi Minh City, Vietnam, for the productionof soft packages, including pouches andtubes made of film for foods and household
items, with startup scheduled for April 2013.
DNP has experience in Southeast Asia
through PT DNP Indonesia, which it
established in 1972. By supplying productsthat meticulously respond to local needs,
DNP Indonesia has become the No. 1
packaging manufacturer and sales company
in the region, and we have been exporting

packaging products to Vietnam fromIndonesia. As a result of continuous strong
economic growth, Vietnam has attracted
attention as a distribution hub of the Indochina
Peninsula. Establishing a new production
base there will allow us to shorten delivery
times and disperse risk by having morethan one production base. We will work on
expanding our business by using the newplant to provide high-quality products, mostly
to global companies.

● Collaboration with ASKUL Corp. providing online mail-order printing service

for small- and medium-size businesses ······································································· [ November 2011 ]DNP has joined forces with ASKUL Corp.,
which operates an Internet-based mail-orderprinting service, to offer comprehensive printing
services including planning and production ofpromotional materials, such as flyers, pamphlets,and posters. By combining ASKUL's customer

base of small- and medium-size businesses
with DNP's printing technologies, production
framework, and other strengths, the twocompanies intend to reap synergistic benefits
and expand the business by uncovering latentdemand.
"All About"● Capital and business tie up with All About, Inc. ························································· [ December 2011 ]The site attracts about 18 million visitors and
120 million page views per month. Throughthe alliance, DNP aims to strengthen its own
media services aimed at consumers, suchas the "honto" hybrid bookstore network andOrikomio! e-flyer distribution service.

Structural reforms aimed at improving profitability"honto" hybrid bookstore network web
page

Special Feature:
DNP's Growth Strategies

In December 2011, DNP formed a capital andbusiness alliance with All About, Inc., which
operates a general information website called"All About" that answers a variety of consumer
information needs. The All About website
distributes more than 100,000 articles written
by experts referred to on the site as "guides."● Reorganization of businesses in the central part of Honshu, Japan;

launch of DNP Chubu Co., Ltd.··································································································[ April 2011 ]In April 2011, DNP integrated manufacturing
and sales divisions that handle business inJapan's Chubu region, and established DNP
Chubu Co., Ltd. The new company will work to

improve productivity and to increase businessby cooperating more closely than ever with local
customers and responding meticulously to theirindividual needs.

● Strengthening our competitive edge by merging prepress divisions ························ [ October 2011 ]In October 2011, we merged four Group
companies in the Information Communication
segment that handle pre-press operations suchas data production and plate making. The idea
is to increase competitiveness by boosting
operational efficiency, evening out workflows,

consolidating redundant equipment, and sharing
technologies and expertise. The new company will
promote optimization of production equipment,
optimal assignment of specialized humanresources, and other forms of optimization.

"Orikomio!" e-flyer service● Transfer of Sakai plant's color filter business to Sharp subsidiary

In the fiscal year through March 2013, we plan
to transfer the LCD color filter business at our
Sakai plant to Sharp Corp. subsidiary Sakai
Display Products Corp. (SDP). SDP's integrated
production system handles every step fromcomponent procurement to assembly offinished LCD panels. The company intends
to improve its international competitivenessby achieving stable production and reducing
costs. DNP aims to boost the competitivenessof its color filter business by taking a 9.54％
stake in SDP.

TOPICS
Aiming to maximize profits through "overall optimization" ············································································· [ Fiscal year through March 2012 ]Based on the idea of "overall optimization" of its manufacturingbases throughout the world, DNP intends to improve"vertical work flow" from project planning to manufacturing
and delivery, and "horizontal cooperation" among multiple
operating locations to allow us to boost production efficiency
and in-house production rates.
In order to optimize "vertical work flow," we will work onemphasizing "designing profit," improving cooperation between
manufacturing, sales, and planning divisions, and streamlining
business processes. In addition, we will smooth flows between
processes and between divisions, and construct efficient
production systems that thoroughly eliminate waste.

Regarding "horizontal cooperation," we established a generalproduction control center for the Information Communication
segment and a packaging production control center for our
Packaging operations, in order to optimize production locations
so that we can make efficient use of production equipment
throughout Japan. For example, if a client wants a flyer to be
distributed nationwide, we would boost efficiency by receiving
the entire order in Tokyo and distributing production of the
products to plants in each region, close to delivery points. By
making efficient use of production equipment throughout thecountry, we will increase our in-house production rate andboost profits.

DNP Annual Report 2012 〉Special Feature: “Creating What Everyone will Take for Granted in the Future”

25

DNP’s Businesses
CONTENTS28

DNP at a Glance30

Our Products

32

Information Communication

42

54

32

Business Strategies

34

Financial Results

36

Presentation of Growth Businesses
and Strategic Businesses

Lifestyle and Industrial Supplies
42

Business Strategies

44

Financial Results

46

Presentation of Growth Businesses
and Strategic Businesses

Electronics
54

Business Strategies

56

Financial Results

58

Presentation of Growth Businesses
and Strategic Businesses

DNP at a Glance01

Profile02

We solve the problems ofbusinesses, consumers, and society
in order to create what everyone willtake for granted in the future.

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

DNP is one of the world's largest comprehensive printing
companies. We provide a variety of products and services
in a wide range of business fields to consumers and some
30,000 corporate clients in Japan and around the world.
DNP's main strengths are the printing and information
technologies that it has cultivated since its founding in
1876. The Company has branched out from publishing andcommercial printing into diverse fields including packaging,decorative materials, display components, and electronic
devices. DNP has even grown to be the world's largest
supplier of many products in these areas, and we continue totake on the challenge of expanding into new business fields,such as environment, energy, and life sciences.
From early in its development, DNP set about boosting theefficiency of the overall Group's management by promoting
overall optimization, greater profitability, and effective useof management resources. We work hard to manage thecompany efficiently, for example by concentrating functions
such as planning, sales, and research and development inour head office while positioning manufacturing divisions
and specific technology development divisions within various
Group companies.
As of March 31, 2012, the DNP Group employed 39,986
people. The Group had 47 sales bases and 60 production
plants in Japan, 24 offices in 15 countries and a region, and13 overseas production plants in 10 countries and a region.
Overseas sales contributed 12.8% of the Group's overall net
sales in the fiscal year through March 2012. In April 2011, weestablished a Group company to coordinate sales, planning,and manufacturing functions for Japan's Chubu region, as
we have already done for the Hokkaido, Tohoku, and Nishi
Nippon regions, to help us respond appropriately to theparticular needs of each region.
3 Well-Balanced
Strategic Segments

Business Portfolio

DNP has two main businesses: Printing, which contributes
about 96% of consolidated net sales, and Beverages,
which generates about 4% of the Group's sales through
Hokkaido Coca-Cola Bottling Co., Ltd.
Printing consists of an assortment of businesses
through which DNP applies and develops printing andinformation technologies in order to solve problems for
consumers, and for client companies who operate in all
types of business fields and in diverse formats. We divide
our Printing business into three segments: (1) Information
Communication, which includes the book and magazine
publishing and commercial printing businesses where DNP
got its start, (2) Lifestyle and Industrial Supplies, which
supplies a wide range of products including packaging
products, decorative materials, optical films and color
ink ribbons, and energy-related components, and (3)Electronics, which supplies display components andelectronic devices, among other products. These threesegments cooperate with each other and form a businessportfolio that is well-balanced from the standpoints ofstability, profitability, growth potential, and risk.
Our Beverages business takes advantage of the strengthof the Coca Cola brand while also developing original DNP
products. We are working on bolstering our beverages
business base, for example by promoting production andprocurement in liaison with bottlers in other parts of Japan.
Armed with this business portfolio, DNP aims to expand
its overall business and increase its corporate value
by striving to solve problems for corporate clients andconsumers.

Information Communication
Books and Magazines

Commercial Printing

Business Forms

The 3
Segments of
DNP’s Printing
Business

Lifestyle and Industrial Supplies
Packaging

28

Lifestyle Materials

Industrial Supplies

Electronics
Display Components

Electronic Devices

Net Sales
by Segment (Year ended March 31, 2012)

Electronics
14.8%

Beverages
3.8%

Information Communication
Information
Communication
47.0%

Net Sales

Operating Income (¥ billion)(Net sales)

800(Operating income)

739.7

722.0

Depreciation (¥ billion)(Assets)

120

714.6

Assets(Depreciation)

800

600

600

120
100

620.6

610.5

592.7

80

80

60

400

60

400

40

Lifestyle andIndustrial Supplies
34.4%

200

23.5

18.1

15.5

10

11

24.0

24.0

20

20

0

0

0

0

12

10

11

12

Lifestyle and Industrial Supplies

Operating Income
by Segment (Year ended March 31, 2012)

Net Sales

Beverages
2.8%

40

24.9

200

Information
Communication
31.8%

Operating Income (¥ billion)(Net sales)

AssetsDepreciation (¥ billion)(Assets)(Operating income)

800(Depreciation)

800

120

120
100

100
600

536.6

531.7

600

522.8

80
60

400

43.7

522.3

565.4

518.3

80
60

400

46.8
31.8

200

40

27.7

200

26.1

25.5

0

0

Lifestyle andIndustrial Supplies
65.4%

10

Beverages
Operating Income (Loss)(Net sales)(Operating income)

80

2

63.0

60

57.1
1.2

1.3

Net Sales(¥ billion)(Operating income)

800

120

11

12

80

400

60

286.3

257.5

0

0

224.8

40

200

8.3

20

12.2

0

– 0.6

Depreciation (¥ billion)(Depreciation)

800

120
100

600
80
400

397.0

387.9
33.4

60

41.9

288.0
40.4

10

11

12

– 20

40

200
20

0

– 4.6

–1

12

Assets(Assets)

100

600

20

11

10

Operating Income (Loss)(Net sales)

1

40

10

0

0

12

Electronics(¥ billion)

62.8

11

40
20

20

Net Sales

Special Feature:
DNP's Growth Strategies

100

0

0

10

11

12

DNP Annual Report 2012 〉 DNP's Businesses 〉DNP at a Glance29

Our Products

Information Communication
●

［1］

［2］

［3］

［8］

［9］

［ 10 ］［ 15 ］［ 16 ］［ 17 ］［ 23 ］［ 24 ］［ 25 ］［ 30 ］［ 31 ］［ 37 ］［ 38 ］

Books and Magazines[1] Magazines [2] Books (Pop-up books) [3] Dictionaries[4] Hybrid bookstore network "honto" membership card (left);"My Bookshelf" display (right)●

Commercial Printing[5] Catalogs [6] Calendars[7] Augmented reality (AR)[8] Orikomio! e-flyer service[9] Digital signage (integrated into furniture) “Monitana”●

Business Forms[10] Personalized mail[11] Smart cards[12] SIM cards [13] Lippmann hologram[14] OpenSTAGETM digital pen-based presentation system

Lifestyle and Industrial Supplies●

Packaging[15] Packaging for foods [16] Packaging for toiletries andpharmaceutical products [17] Universal design products[18] Packages made of IB film[19] PET plastic bottles and preform[20] Aseptic filling systems for PET plastic bottle●

Lifestyle Materials[21] Residential interior materials [22] Automotive interiormaterials [23] Interior coverings for railway cars (Tohoku
Shinkansen Hayabusa Reserved "Green" Car)●

Industrial Supplies[24] Optical film for displays [25] Projector screens[26] Soft pack for lithium-ion battery[27] Dye-sublimation thermal transfer printing media[28] Barcode label[29] Self print terminal "PrintRush"Electronics●

Display Components[30, 31] LCD color filters[32] Large-scale photomasks[33] Touch panel sensors●

Electronic Devices[34] Semiconductor photomasks[35] Template for nanoimprinting[36] Hard disk drive suspension[37] Lead frames for semiconductor packages[38] Metal substrate for LED light[39] Camera modules[40] Reader/writer modules [41] IC tags[42] Ultracompact IC tags[43] MEMS (micro electro mechanical systems) products

Note: Numbers in square brackets correspond to photographs on p.30-31.

30

Synopsis of
Performance

［6］

［7］

［ 13 ］［ 18 ］［ 19 ］［ 20 ］［ 26 ］［ 27 ］［ 28 ］［ 32 ］［ 33 ］［ 34 ］［ 35 ］［ 36 ］［ 39 ］［ 40 ］［ 41 ］［ 42 ］［ 43 ］［ 14 ］［ 21 ］［ 22 ］［ 29 ］

Corporate Governance［ 12 ］

DNP's Businesses［ 11 ］

Special Feature:
DNP's Growth Strategies［5］

To Our Shareholders［4］

How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 DNP's Businesses 〉Our Products

31

Information
Communication

Business Strategies

Our Information Communication segment is composed
mainly of Books and Magazines, Commercial Printing,Business Forms, and Education and Publication
Distribution. The segment combines individual strengths tosolve communication-related problems for businesses andconsumers.
Progress in digitalization and networking technologies iscreating new opportunities for expanding our businesses
worldwide. With the printing technologies as our corestrengths, we will continue to take the customer's pointof view as we develop diverse businesses across various
boundaries, including those related to information media
and business processes, regions and languages, people
and organizations.

Basic Strategies
In order to enable consumers to enjoy abundant andpleasant communication, we will continue to create new,consumer-oriented business opportunities by combining
the strengths that we have cultivated through our various
businesses.
For example, we can use published content to add value
to sales campaigns and catalogs. Also, we apply advanced
information security techniques that we developed for ourBusiness Forms operations to the improvement of customer
confidence in other areas, such as customer information
management in B to C businesses and market research.
By making use of strengths like these that we havecultivated over the course of many years, we can continue
providing original products and services that no one
else can offer. Furthermore, by increasing cooperation
with Group-affiliated bookstores, we can use consumer
preferences and behavior as a basis for implementing more
effective measures that will induce readers to come intobookstores and create opportunities for them to come into
contact with books
DNP's focus is on solving problems in order to increase
the comfort, safety, reliability, and global reach ofcommunication from one business to another, between
businesses and consumers, and from consumer toconsumer.

32

Synopsis of
Performance■ Hybrid Production Solutions and■Hybrid Bookstore Networks

Page 36■ Communications Businesses

Page 37■ Communication Channels

Page 38■ Business Process Outsourcing■ (BPO) Businesses

Page 40

personal media like direct mail and notifications in order
to lighten our customers' load in such areas as ondemand printing and all types of back-office operations
including market research, planning and development,

In October of 2011, we consolidated four Group
companies that handle pre-press operations likedata production and plate making. We will boost ourcompetitiveness through increasing each plant's
operational efficiency and evening out its work volume,
integrating redundant functions, and achieving synergistic
benefits by sharing technologies and expertise. In
addition, we will optimize the allocation of production
equipment and specialized human resources as needed.
Boost profitability through optimization of production
control systems

Aiming for overall optimization, we will work on optimizing
our "vertical work flow" by addressing every operationfrom planning and production to delivery, at Information
and Communication production bases throughout
Japan. We aim to improve efficiency, boost in-houseproduction rates, and increase profitability by optimizing
production sites through such steps as reinforcing thefunctioning of our production control center, which
provides comprehensive oversight for production systems
throughout the DNP Group, and uniformly managing
the allotment and/or concentration of production jobs
according to each plant's capabilities and conditions.

DNP Annual Report 2012 〉 DNP's Businesses 〉Information Communication

Appendix

DNP is focusing on winning comprehensive orders forproviding the entire spectrum of corporate businessprocesses. Our goal is to use the technologies andknowhow that we cultivated through the handling of

Boost competitiveness through such measures as
consolidation of pre-press units

Financial Section

DNP is reinforcing information services that directly approachthe consumer. In addition to operating "Elne" customer loyalty
point service and "Orikomio!" e-flyer service, in December
2011 we formed a capital and business tie-up with All About,Inc. DNP compiles and analyzes consumer information on
its own and links this information to corporate customers'
products and services to offer solutions that are beneficial toboth the senders and receivers of information.

■ Structural Reforms

How DNP Works to
Achieve Sustainable
Development■ Develop and Expand Unique DNP

DNP leads the market in many security-related areas,such as smartcard production and issuance, andthe development of smartcard operating systems
and applications. We intend to enhance our uniquesecurity solutions, which make use of our strengthin smartcards. We are stepping up our involvementwith the international standards for Near Field
Communication (NFC) that are likely to be used
increasingly widely in smart phones. DNP aims to join
forces with various companies and offer a growing
number of NFC-based services, as part of ourbroader goal of supporting safe and secure lifestyles
by providing advanced information security solutions.

Corporate Governance

We are reinforcing cross media communications businesses
that respond to the increasing diversification of information
media, including the rapidly growing areas of social media
and digital signage. In the case of our electronic catalog
production/distribution system, DNP is increasing thesynergistic benefits of handling both paper and electronic
media by constructing optimized data bases and automatingproduction processes so as to shorten lead times andreduce costs.

Page 41

DNP's Businesses■ Develop Cross Media■ Security Solutions including NFC

Special Feature:
DNP's Growth Strategies

In order to vitalize the publishing market, DNP does not
limit its viewpoint to that of a manufacturer (i.e. a printing
company) but also focuses on such areas as improving
efficiency in marketing, sales, and distribution, and on
bolstering customer service. We are promoting "hybrid
production solutions" that integrate the production of various
formats such as paper books, electronic book content, andprint-on-demand books, and a "hybrid bookstore network"that links physical bookstore chains with an online bookstore
that sells printed books and an online e-book retail service.

content production, operation of data centers andcustomer service centers, and promotional material
envelope-stuffing and mailing.

To Our Shareholders

Main Policies

33

Financial Results

Financial Highlights

Fiscal Term through March 2012:
Business Environment and Summary of
Financial Results(¥ billion, %)					 2010.3		 2011.3		 2012.3¥ 739.7¥ 722.0¥ 714.6

Operating income

23.5

18.1

15.5

Operating income margin

3.2%

2.5%

2.2%

Net sales

Net Sales

Operating Income (¥ billion)(Net sales)

800(Operating income)

739.7

722.0

120

714.6

100
600
80
60

400

40
200

23.5

18.1

15.5

20
0

0

10

Net Sales

11

12

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

800

120
100

600

536.6

531.7

522.8

80
60

400

43.7

46.8
31.8

40

200
20
0

0

10

34

11

12

DNP's Books and Magazines business was affected by theongoing slump in the publishing market. Magazines were hit
particularly hard, with sales falling below 1 trillion yen in thefiscal year ended March 2012. DNP made the most of its
integrated manufacturing line and succeeded in increasing
book sales for the second year in a row. Magazine sales,
however, declined.
Commercial Printing was affected by big drops
in corporate advertising budgets in the wake of the
Tohoku–Pacific Ocean Earthquake. Recovery was slow,
and companies were reluctant to hold sales promotion
campaigns or events out of consideration for victims of thedisaster. Overall, sales of pamphlets, flyers, and catalogs,
etc. were lackluster.
Our Business Forms division enjoyed increased
sales of smart cards and other products used intelecommunications, transportation, and electric money
applications. On the other hand, as businesses send moreof their notifications electronically and make headway
toward reducing costs, we have seen less demand for
information processing services (IPS) that handle every stepof customer communication from data input of personalized
mail to printing and mailing.
Our Education and Publications Distribution businessposted higher net sales, thanks largely to the previous
term's addition of Bunkyodo Group Holdings Co., Ltd. as aconsolidated subsidiary, and thanks to measures that madegood use of Japan's largest book-selling network.
Overall, the business environment surrounding theInformation Communication segment remained harsh, withsluggish personal consumption leading to more intensecompetition and lower unit prices. The segment posted
714.6 billion yen in net sales, which was down by 7.3 billion
yen, or 1.0%, from the previous term. Operating income was
15.5 billion yen, reflecting a drop of 2.7 billion yen or 14.6%.
The operating income margin decreased by 0.3 point, from
2.5% in the previous term to 2.2%.

Synopsis of
Performance■ Business Forms

Appendix

DNP Annual Report 2012 〉 DNP's Businesses 〉Information Communication

Financial Section

The environment surrounding business forms was grim
given that corporations were cutting expenses, shifting
customer notifications to the Internet, and seeking smaller
numbers and fewer types of products in this category.
On the bright side, the need for information security is
increasing, not only in Japan but all over the world.
DNP has long led the market in smart card technology
and authentication technologies. We combine thisadvantage with our strength as a manufacturer of products
like holograms in order to develop safe, reliable andconvenient security solutions. We also intend to cooperatewith relevant companies in order to expand services using
the near field communications (NFC) international standard
that is expected to be increasingly widely used in smart
phones and other devices. Now that information networks
reach beyond national borders, DNP will also promote its
security-related businesses worldwide.

How DNP Works to
Achieve Sustainable
Development

Japanese advertising expenses declined in the fiscal term
ended March 2012 due to the effects of the Tohoku-Pacific
Ocean Earthquake. Advertising outlays recovered for a whilearound the summer, but slumped again and failed to reachfull recovery due to slowdowns in overseas economies,
a stronger yen, major flooding in Thailand, and other factors.
Sales by DNP's Commercial Printing business also
declined relative to the previous year, but began tosteadily recover in the second half of the term. Amidst
this environment, we are promoting a "cross media
communication" business that uses a variety of media
formats to give consumers the information they want at thetimes when they want it.
Furthermore, we are strengthening cooperation between
business units and addressing digital signage and social
media in addition to paper media as we focus on winningorders for business process outsourcing (BPO) whereby
we handle a full range of business services on customers'
behalf, including marketing and content production,
operation of data centers, and performance of back office
functions.

Corporate GovernanceAs the slump in the publications market continued,
domestic sales of books and magazines in the fiscal term
ended March 2012 declined by 3.2% from a year earlier, to
1,797.2 billion yen (according to the Research Institute for
Publications). Although book sales were very close to theprevious-year level (820.7 billion yen) thanks to the releaseof a large number of strong sellers, magazine sales dropped
by 5.9%, falling below the 1-trillion level to 976.5 billion yen.
Not only was there a drop in the number of magazines sold,but the number of magazines that ceased publication far
outstripped the number of new titles.
Meanwhile, now that the Japanese market for electronic
publications has grown to 63 billion yen per year,
a Japanese government body called Innovation Network
Corporation of Japan joined forces with some 300 major
publishing and printing companies to form Digital Publishing
Initiatives Japan Co., Ltd. in April 2012. This represents theestablishment of a framework necessary for the promotionof electronic publishing businesses such as digitalizing
published materials, distributing them to electronic bookstores, managing copyrights, etc. DNP intends to cooperatewith these moves towards digitalization and will promote
the spread of electronic books. In May 2012, we began
operating a "hybrid bookstore network" that links physicalbookstores chains including Maruzen CHI Holdings Co.,
Ltd., Junkudo Co., Ltd. and Bunkyodo Group Holdings
Co., Ltd., with our "honto" e-book sales service and "bk1,"
an Internet-based mail-order bookstore. We are working
to revitalize the long-languishing magazine industry by
producing electronic magazine content and developing
various types of systems, and by using magazine brands tocultivate business overseas.

DNP's Businesses■ Commercial Printing

Special Feature:
DNP's Growth Strategies■ Books and Magazines

To Our Shareholders

Portrait of Divisions

35

01

Expanding Hybrid Production Solutions and
DNP's “Hybrid Bookstore Network”

Rather than approaching the market only from thestandpoint of a manufacturer, DNP offers total support as
the Japanese publishing industry's "No. 1 partner." This
includes helping with the planning of marketing projects,
sales and distribution of both electronic and paper books,
and customer service. DNP began digitizing its printing
processes as far back as the early 1970s. Our aim is tomake the most of our wealth of experience as we focus
on hybrid production solutions that offer one-stop service
related to content production for paper and electronic
books, and on-demand printing of small lots of publications.
We are also developing a "hybrid bookstore network"that combines three sales formats: an e-book sales

service, Internet-based mail-order bookstore, and physicalbookstores. In 2010, DNP launched "honto," an e-booksales service that delivers content to smart phones andtablet PCs, offering Japan's largest selection of e-booktitles in a variety of genres including comic books, literature,and nonfiction. In 2012, we integrated our online bookstore,"bk1," and began serving as a genuine hybrid bookstore
network with links to physical bookstores.
Partly in response to growth in the market for electronic
books, DNP aims to create a service that makes consumers"certain to find a book they want to read" and "able to readthe book they want in the format they want."

DNP

Readers

Hybrid production solutions

Authors

Publishers

ExamplesEditing and data
production
for printing

Printing and binding

Data production
for electronic
publishing

Electronically published content

Hybrid bookstore
network
Physicalbookstores

Printing on demand

Digital data
production(shared bases for distribution and sales)

Onlinebookstores
E-booksales services

・ Books
・ Magazines

Readers
・ Mobile phones
・ Smart phones
・ PCs
・ E-book readers・ Multifunctional
information
terminals

Starting up a full-fledged hybrid bookstore network

In June 2012, 2DFacto Inc., a joint-venture company establishedby DNP, NTT DoCoMo, Inc. and Maruzen CHI Holdings Co., Ltd.,launched a common point service for customers of its "honto" hybrid
bookstore network and physical bookstores operated by Junkudo
Co., Ltd., Maruzen Co., Ltd., and Bunkyodo Group Holdings
Co., Ltd. The result of the integration of Japan's largest physicalbookstore network, which is operated by the DNP Group, withhonto, which sells both electronic and paper books online, is Japan's
first full-fledged hybrid bookstore service.
By offering the following services, we intend to bolster both theelectronic and paper publishing markets.

① "Hybrid point service" that enables customers to receive customer

loyalty points whether they buy through the honto website or at aphysical bookstore② Hybrid "My Bookshelf" program that automatically records customers'purchases whether they are made through honto or a physicalbookstore③ "Hybrid Bestseller List," Japan's largest sales trend tracking service,
combines results from honto and physical bookstores④ E-mailed information about each customer's favorite bookstores;"honto" website information on book reviews by bookstore employees
and point-of-purchase displays at the physical bookstores

honto point card

Home page of DNP's "honto" e-book sales
service's website

36

Maruzen's main bookstore in Tokyo's Marunouchi district

02

Cross Media Communications Business

DNP's Commercial Printing business produces promotional
materials including flyers, catalogs, websites, point-ofpurchase advertising, and event and campaign-relatedmaterials. The business environment surrounding this field
has changed dramatically due to Japanese demographic
trends (such as increasing average age and decreasing
birth rate), the shift from mass media to Internet-based
corporate advertising, and other factors. At the same time,
information media has become more diverse while use of
Exampleshighly interactive social media has spread rapidly, resulting
in much more active communication from consumers' side.
DNP uses multiple, diverse communication channels
to develop its "Cross Media Communications Business,"which provides consumers with optimal content at optimal
timing. By combining information media including printed
matter (paper), websites, and digital signage, we improved
the efficiency and lowered the cost of delivering high-quality
business-to-consumer communication.

DNP's new "Mikata" system efficiently produces and distributes electronic
catalogs by taking advantage of DTP data formatted for printing
can be produced in half the time required when using conventional
methods, and costs can be reduced by about one third.
Corporate clients can use DNP's cloud service for distributing
electronic catalogs via the Internet, which relieves them of the needto set up their own server, thereby reducing initial costs. Other
features include a multi-functional viewer that supports multiple
devices (e.g. for viewing on smart phones or tablet PCs) and various
sales support functions that link catalog data to corporate orderingsystems.
DNP will continue to use Mikata to develop its electronic catalog
business as part of our Cross Media Communications Business,
which combines paper and digital media to deliver optimized content
with optimized timing.

DNP's Businesses

In recent years, we have seen growing demand from manufacturers
and distributors for the production of electronic catalogs that areeasily searchable, offer voice and video explanations, and can be
downloaded to devices like smart phones and personal computers.
However, the adoption of electronic catalogs was hindered by thehigh cost and technical challenges involved in constructing huge
product databases and developing convenient features such as
easy searchability and management of browsing history.
DNP has applied the expertise and original information
technologies that we cultivated in our long years of catalog
production to the development of our "Mikata" system for efficiently
producing and distributing electronic catalogs. Mikata makes it
possible to efficiently produce both paper and electronic catalogs byautomatically creating a database of product information—text andimages— during the production of desktop publishing (DTP) data
used for printing on paper.
Mikata automatically generates meta-tags that facilitate
management of various types of merchandise-related content, suchas text, images, video and audio files, used in the production of all
kinds of promotional tools. By assigning the same meta-tags fordata used in both DTP files and electronic catalog files, catalogs

left:
Multi-functional viewer
support multiple
devicesright:
Orders can be placed
directly from pageview

Advantages of using DNP's "Mikata" system for producing and distributing electronic catalogs

Conventional
Production Flow

Copywriting

DTP
production

Platemaking

Printing
Catalogs
Dataextraction

Data
conversion

HTML
production
Authoring

Adaption tovariousdevices

Websiteconstruction
Digitalcatalogs

Lead time: reduced by 1/2

Mikata Production Flow

Copywriting

DTP
production
Assignment ofmeta-tags

Platemaking

Pre-media server

Conversion
outputSmartphonesTablet PCs

No more time lag between
release of paper and digital catalogs

Printing
Catalogs

Function
selection

PCs

Cost: reduced by 1/3

PCs
Smart
phonesTablet PCs

DNP Annual Report 2012 〉 DNP's Businesses 〉Information Communication

37

03

Development and Expansion of Unique DNP Communication Channels

Among DNP's media businesses are an Internet-based
point service "Elne," an information site "OTOJO.JP" thatprovides off-line experiences for women in their twenties
and thirties, and a shopping support service "Orikomio!"that mainly provides information from advertising flyers.
In December 2011, DNP formed a capital and businessalliance with All About, Inc. and began enhancing services
offered through its "All About" web-based general
information service. The site offers authoritative content
provided by "guides" who have specialized information andexperience related to a variety of topics.
DNP views these services as channels for communication
with consumers. Given the continual appearance of new

types of information media and the spread of social network
services and other forms of communication, it has become
very difficult for corporations to know how consumers
are contacting information. DNP makes use of its various
communication channels to increase communication
with consumers, allowing us to promote more effective
marketing and to partner with corporations in deepening
our understanding of consumers.
In the future, we will develop comprehensive solutions
that combine Internet-based services with printed matterand other forms of content as well as in-store events andother sales promotional activities.

Elne is a "point service" website operated by
DNP affiliate DNP Social Link Co., Ltd. thatis used by over 1.3 million members. Elnelinked smart phone applications have been
appearing in rapid succession.

"All About" is a comprehensive information site that
debuted in 2001. While Internet services place greatvalue on word-of-mouth information, this site offers
authoritative content provided by "guides" who havespecialized information and experience. It has provento be popular with consumers and businesses.

"OTOJO.JP" information site forwomen in their twenties and thirties
supports corporate marketing efforts
by organizing off-line events.

38

Example

Orikomio! shopping support service mainly provides informationfrom advertising flyers via the Internet
purchase items directly from a flyer, "Shopping Link Flyer" brings
consumers and businesses closer together.
Orikomio! is compatible not only with personal computers but alsowith rapidly spreading smart phones and other mobile devices, and
DNP has developed an application that enables use of the service
outside the home or office. The application uses the GPS function
on a smart phone or other mobile device to search for stores near
the consumer's current location and deliver their flyer content withdirections for each store. We have also added convenient featuresthat allow users to register "favorite shops" and to easily accessshops that came up in recent searches.
We intend to keep improving Orikomio! to make it even easier andmore pleasant to use, and to add features that support consumers'
shopping. For example, we will coordinate with physical stores tooffer new services and provide forums through which users can
exchange information with each other.

Orikomio! shopping support service

Consumer

Use witha personal computer
Service provision

Supportedby DNP

Encourage store visit

Shops/Businesses

DNP

Easily search advertising flyers andstores wherever you are● Easily purchase items from an Internet
supermarket by clicking items on theflyer (not available everywhere)● View recipes, conservation tips, andother useful information●●●

Planning, management, and operationof portal sites
Planning and production of electronic
flyersHome center

Upload content to flyers

Advantages for consumers

Find and view flyer
and store information

or with a smart phone

DNP's Businesses

DNP's advertising flyer service, which offers flyer content inboth electronic form via the Internet and in stores, in addition toconventional paper flyers, is meeting increasing demand from shops
and other businesses that seek cost-effective sales promotion tools.
Since DNP launched it in 2001, Orikomio! meets that demand byhelping consumers with their shopping, mainly by allowing themto use the Internet to easily search and view information fromadvertising flyers from all over Japan.
By simply entering a ZIP code, consumers can access informationfrom flyers from the nearest supermarkets, drugstores, home centers
and appliance stores. In September 2011, we launched a "Shopping
Link Flyer" service that allows users to easily purchase an item
viewed in an Internet flyer by clicking on the item, thereby opening
a link to an Internet supermarket. In the past, it was necessary toeither go to a physical store or log on to a mail-order site in orderto purchase an item viewed in an Internet flyer. By allowing users to

Drugstore
Supermarket
Advantages for stores and businesses
Increase effectiveness of advertising
flyers and boost customer traffic atstore● Increase sales opportunities, forexample by drawing customers to an
Internet supermarket● Improve efficiency of electronic flyer
production●

Simple and easy-to-use electronic
advertising flyer viewer works with smart
phones and other mobile devices as wellas personal computers

DNP Annual Report 2012 〉 DNP's Businesses 〉Information Communication

39

Expanding Business Process Outsourcing (BPO)—a Business Based on Corporate Clients' Trust in DNP

04

As points of contact with consumers have expanded, companies have come to handle an enormous amount of information,
including personal information. This information must be appropriately managed and output in optimal formats. DNP seeks
to meet these needs by offering comprehensive business process outsourcing (BPO) services that take on a portion of
corporate clients' business processes. By making the most of DNP's comprehensive corporate strength, we can provide
companies with a full complement of indispensable services including processing of massive amounts of data, production of
output in various formats, envelope-stuffing, mailing, and customer service center operation.
We are expanding DNP's BPO business mainly by combining the following five types of service:① Printing: providing personal information in printed form
② Supply: storing printed matter; selecting material and mailing in response to individual requests③ Documentation: collecting and digitizing consumer information from application forms, etc., and providing it to businesses④ Card services: producing and issuing smart cards in a highly secure environment⑤ Networking: supporting communication between businesses and consumers, as well as information-sharing

within a single business

DNP can meet the rigorous quality standards that are especially important to financial institutions including banks,
insurance companies, and credit card companies, as well as telecommunications companies and distribution companies.
We aim to expand our BPO business on the strength of the track record that we have established by producing large lots
and many orders of direct mail, monthly statements, and other personalized media.

Printing

SupplyDocumentation

Card Services

Networking

Advertise
Mail

NotifyIssue

Collect

Store
DecideOptimization of
Entire Business Process

ExampleRecordSeamless Operation

Insurance Company: Full outsourcing of printing operations

Insurance companies are saddled with an obligation that grows
heavier year by year—to produce and mail massive amounts ofprinted matter that is personalized for each policyholder, such as
insurance certificates and policies. More and more companies arechoosing full outsourcing to DNP in order to make these operations
Examplemore efficient and less costly. DNP's BPO services have received
high marks for offering good quality and advanced information
security based on DNP's cutting-edge technologies, along with thesame degree of flexibility that an insurance company would have if it
handled these operations in-house.

Bank: Outsourcing of all processes related to opening new accounts

A growing number of banks are outsourcing to DNP the full range
of operations needed for opening new accounts without interfacingwith a bank teller. This full range of services includes everything frommailing blank application forms in response to a consumer's request,
receiving completed application forms and checking identity, etc.,

40

Realization of Traceability

entering data from application forms and issuing and mailing cash
cards, all the way to operating customer call centers. By having one
provider for all the entire process, an applicant's traceability can beverified before opening the account.

Security Solutions and Near Field Communication (NFC)05

Recent years have seen strong demand for safer, more appropriate handling of sensitive corporate information and consumers'
personal information. DNP began to develop smart cards more than 30 years ago, in 1981, and has always been the leader in
the Japanese smart card market. We have actively promoted the development and use of operating systems and application
software for smart cards, data encrypting and authentication systems, and other information network-related systems.
We have also worked to strengthen security from the manufacturing side, primarily through secure printing of holograms
and other devices aimed at preventing counterfeiting of valuable items such as stock certificates, vouchers, and various
types of cards. There are only a few companies in the world besides DNP that are capable of producing Lippmann
holograms, which are extremely effective at preventing counterfeiting.
DNP's unique "hard" (manufacturing-related) and "soft" (information processing-related) technologies help us develop
better security solutions for Japan, Asia, Europe, and the rest of the world.

ExampleUsing NFC＊ to provide smart card/smart phone hybrid servicesof services such as smart phone-based transaction settlement,
including application of coupons and loyalty points, and we aredeveloping platform services that support related operations.
At home, refrigerators, televisions, health appliances and otherdevices can be fitted with NFC reader/writers so that consumers
can obtain useful information by holding their smart phone up to thedevice. For example, when an NFC-enabled smart phone is held
near an NFC tag (contactless IC tag) attached to a refrigerator, it canread information from the tag, access relevant websites, and receive
maintenance service.
DNP will team up with telecommunications carriers, credit cardcompanies, and other relevant parties to develop NFC-based
services and related business in Japan and abroad.

DNP's Businesses

Near Field Communication (NFC) is an international standard thatis expected to be used increasingly widely in Japan and elsewhere.
Use of smart phones is spreading rapidly, and now that more smart
phones have NFC functionality, we expect that the infrastructure
for using NFC will be put in place within a short time. In addition toelectronic transaction settlement, NFC-enabled smart phones canbe used for various types of promotional and marketing purposes.
DNP intends to make the most of the technologies and expertisethat we gained through our smart card business, along with ourstrength in NFC technology, to provide consumers with smart card/
smart phone hybrid services. For example, by holding an NFCenabled smart phone near a poster or digital signage on the street
or in a store, a consumer can obtain relevant coupons or information
about bargains. We also offer uniform management of a variety

DNP's Future Smart Card/Smart Phone Hybrid Services
Membershipcard services

Smart town
services

Gift card
services

Health careservices

Account
opening
services

Smart Phone/Smart Card
Hybrid Ser vices

Transaction
settlement
services

Online game
services

Product

DNP solutions

Service provider

Bank

Platform

NFC tag

Reader/writer module

Remote personalized services

Reader/writer

Promotion terminal

Credit

NFC plug

Middleware

Smart poster

Credit card company

Distributor or retailer

Health care provider

Wallet service
Cash
CouponLocal businessor association

Entertainment provider＊ Near Field Communication（NFC）is an ISO (International Standards Organization) standard which defines a technology for enabling wireless communication that

operates at 13.56 MHz over short distances. It is compatible with the FeliCa technology that is widely used in Japan for electronic money and transportation
cards, etc., Japanese smart cards, ISO/IEC14443 Type A/B proximity cards that are widely used for governmental applications in Japan and abroad, including
Japanese identity cards and driver licenses.

DNP Annual Report 2012 〉 DNP's Businesses 〉Information Communication

41

Lifestyle and Industrial
Supplies

Business Strategies

The Lifestyle and Industrial Supplies segment is composedof three business divisions: Packaging, Lifestyle Materials,
and Industrial Supplies (which is further divided into
Information Media Supplies, Advanced Optics, and Energy
Systems). The segment plays a vital part in our corporateclients' manufacturing processes and provides productsthat are important in the daily life of consumers. DNP willcontinue to apply and develop printing technologies inorder to work on developing new fields like environmental
preservation, energy, and life sciences, which have thepotential to help resolve social problems.

Basic Strategies
In recent years, consumers have become concernedthat their lifestyles be environmentally friendly, at thesame time that they insist on safety and peace of mind
regarding their food, clothing, and housing. Conservationof energy and resources, supporting clean energy, andadopting universal design principles that make products
easy to use for the maximum number of people are allimportant considerations. In response to the diverse
needs of corporate clients and consumers, the Lifestyleand Industrial Supplies segment will continue to develop
and supply a wide range of products that are important topeople's daily lives and products that are indispensable tothe manufacturing processes of our corporate clients. In
addition to ensuring safety and ease of use, we will reduce
negative impact on the environment and energy supplies
throughout each product's life cycle, including manufacture,use, and disposal.
DNP takes a very broad view of the "printing" field.
We have designated areas of great social concern, suchas environmental preservation, energy, and life sciences,as new fields in which we intend to provide cutting-edge,
original products. We will speed up the development ofthese new businesses by making use of DNP's originaltechnologies and by actively forming alliances withcompanies and research institutes that have relevant
strengths.

42

Synopsis of
Performance
To Our Shareholders

Main Policies

Information Media Supplies :Page 48

Page 52

Advanced Optics provides products with diverse functions,with a special focus on anti-reflection films for LCD andother optical films for flat-panel displays. The division's coretechnology is optical design. It provides a wide range of
products and solutions for controlling optical properties
by using "clean converting" technologies that are madepossible by the application and development of techniquessuch as patterning or high-precision, thin film coating.
In response to recent trends in the display market, suchas increasing resolution, multi-functionality, and energy
efficiency, we have been focusing on developing new
products with greater added value, such as 3D display
components and ultra-low reflection film.
Energy Systems:

Page 53

DNP Annual Report 2012 〉 DNP's Businesses 〉Lifestyle and Industrial Supplies

Appendix

Due to increased demand for clean sources of energy, there
is a growing market for lithium-ion batteries, photovoltaic
cells, and similar products. DNP is actively promoting its
energy-related business in the world market.
In April 2011, we opened a plant in Kitakyushu, Fukuoka
Prefecture, where we make soft packs for lithium-ion
batteries and photovoltaic module components,
thereby tripling our conventional production capacity forthese products. We are working on improving thefunctionality and lowering the cost of back sheets andencapsulants used in photovoltaic cells. Although DNP
is already the world's largest provider of soft packs forlithium-ion batteries, we intend to expand our business by
supplying more components for batteries used in mobile
devices, electric cars, and home-use storage batteries.

Financial Section

The Lifestyle Materials division addresses every type of"living space" where people conduct their lives, including
homes, offices, medical and nursing care facilities,
commercial facilities, hotels, automobiles, and trains, etc.,
for which we offer comprehensive solutions. With DNP'soriginal EB (electron beam) coating technology among its
strengths, the division strives to realize the durability that isa basic function of living spaces. In other words, it works
to improve ease of maintenance and deliver long-lasting
beauty.
Lifestyle Materials pursues a wide range of businesses
that address the entire living space supply chain from thedesign phase. These include measuring and assessing
living environment quality, analyzing, evaluating, andproposing space designs based on considerations like
Kansei (emotional) engineering, and developing original
construction techniques. In addition to developing new
products such as metal paneling that reduces electricity
usage by effectively reflecting and diffusing light, we will also
make use of our global sales network to promote expansionof our businesses overseas, especially to Europe anddeveloping countries.

Advanced Optics (Optical Films):

How DNP Works to
Achieve Sustainable
Development

Materials:■ Lifestyle
Realizesolutions■ "living spaces" for all types of■Page 50

We aim to broadly expand this sector with a focus onphoto print-related businesses. In dye-sublimation thermaltransfer printing media (color ink ribbons and receiverpaper), we want to use our coherent global framework
for manufacturing and sales to boost sales of DNP brandproducts and to increase our share of the world market.
We will also focus on developing, operating, and expanding
PrintRush self-service printing systems and Ki-Re-i photo ID
kiosks.

Corporate Governance

Aiming to realize a sustainable society along with anabundant consumer lifestyle, we intend to enhance ourlineup of eco-friendly and highly functional products, and todevelop our businesses not only in Japan but around theworld. We will also concentrate on analyzing consumers'
awareness and usage of packaging for foods andhousehold items in order to continue creating the value that
consumers demand.
We consider our Innovative Barrier (IB) film, a transparent
film with excellent barrier properties, to be a strategic
product that we will develop not only for food packaging,but also for medical and pharmaceutical products as well
as for industrial materials. In addition, we will concentrate on
developing other eco-friendly products, like the world's firstpolyethylene terephthalate (PET) film made from sugar canederived material, which we introduced in 2011, and productsthat are sensitive to other types of social awareness, suchas packaging products based on universal design.

■ Realize sustainable growth by■ providing diverse products

DNP's Businesses■ Industrial Supplies:

Special Feature:
DNP's Growth Strategies■ Packaging:
global business with focus on advanced,■ Expandeco-friendly
products■
Page 46

43

Financial Net
Results
Sales
Operating Income(Net sales)

800(¥ billion)(Operating income)

739.7

722.0

120

714.6

100
600
80
60

400

40

200
Financial
Highlights
23.5

18.1

15.5

Fiscal Term through March 2012:
Business Environment andSummary of Financial Results

20
0

0

10

11

12
(¥ billion, %)					 2010.3		 2011.3		 2012.3¥ 536.6¥ 531.7¥ 522.8

Operating income

43.7

46.8

31.8

Operating income margin

8.1%

8.8%

6.1%

Net sales

Net Sales

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

800

120
100

600

536.6

531.7

522.8

80
60

400

43.7

46.8
31.8

40

200
20
0

0

10

11

Net Sales

12

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

800

120
100

600
80
400

60

286.3

257.5

224.8

40

200

8.3

20

12.2

0

0

– 4.6
– 20

10

44

11

12

In the fiscal year ended March 2012, we still saw significant
impact from the Tohoku–Pacific Ocean Earthquake despitea gradual recovery in personal consumption. Market
conditions remained severe, due to factors like concerns
about the reliability of power supplies, higher prices for films
and other raw materials, deflation, and a strong yen.
Our Packaging business gave priority to supplying dailyuse items like foods and household items, while tending
to refrain from launching new products. Demand for paper
containers and cups declined. On the other hand, we saw
increased demand in some areas, such as aseptic PET
plastic bottle filling systems, the bottle preforms used insuch systems, and packaging made with functional films.
Lifestyle Materials got a boost from a second consecutive
year of growth in housing starts. In addition, increased
demand for eco-friendly products made with DNP's unique
EB coating technology helped this sector exceed theprevious year's sales.
Industrial Supplies saw growth in sales of energy-related
products, such as soft packs for lithium-ion batteries
and back sheets for photovoltaic modules, and in dyesublimation thermal transfer recording media (color ink
ribbons and receiver paper) for photo printers. Because ofa worldwide slump in sales of large LCDs used primarily in
televisions and resulting production adjustments by LCD
panel makers, we registered a big drop in sales of antireflection films used on displays.
Net sales for the Lifestyle and Industrial Supplies segment
as a whole declined by 1.7%, or 8.9 billion yen, from theprevious fiscal year to 522.8 billion yen. Operating income
for the segment fell by 15.0 billion yen or 32.0% from theprevious term to 31.8 billion yen. This was due to higher
prices for raw materials— especially petroleum products likefilms and resins— in addition to the drop in sales of opticalfilms. The operating income margin fell 2.7 points from theprevious year's 8.8%, to 6.1%.

Synopsis of
Performance

In Japan and abroad, consumers are becoming more awareof issues like the endangered environment, shrinking energy
supplies, food safety, health, and medical care. There isstrong demand for eco-friendly, healthful, and very safe
products, and we expect this trend to become even more
pronounced in the future.
DNP was quick to respond to this trend, and we willcontinue to concentrate on developing eco-friendly
products like biomass plastic packaging made with plantderived material, as well as products that incorporate
universal design principles. The new environmentallyfriendly plant building that we started up in Tanabe, Kyoto
Prefecture in November 2011 uses heat pump technology
to reduce CO2 emissions and energy usage. Together
with our plant in Fukushima Prefecture, we will continue tostrengthen our supply system, including consideration forbusiness continuity plans.

Information Media Supplies

The environment surrounding these products remained
harsh, with a worldwide slump in demand for flat-panel
displays, including LCD and PDP (plasma display panel)
televisions, leading to prolonged production adjustments
by LCD panel makers. The fiscal term through March2012 was marked by sluggish demand for display-related
products in general, including anti-reflection films for LCDs,
contrast improvement films for PDPs, and projection screen
components, and sales fell below previous-year levels.
In the future, in addition to maintaining our large market
share on the strength of outstanding technology, we will
focus on developing new products that make use of clean
converting techniques, with original optical design methods
as our core technology.

DNP Annual Report 2012 〉 DNP's Businesses 〉Lifestyle and Industrial Supplies

Appendix

Government subsidies led to increased demand forphotovoltaic cells, and we sold more photovoltaic module
components to both domestic and Chinese manufacturers.
Sales of soft packs for lithium-ion batteries remainedsolid, with demand growing mainly for smart phones andother mobile products. In the future, we expect increasing
demand for electric cars. We will take the consumer's
viewpoint of energy-related issues and continue to develop
products and applications aimed at resolving problems
faced by corporate clients, consumers, and society as awhole.

Financial Section

Energy Systems

How DNP Works to
Achieve Sustainable
Development

Helped by tax incentives and other government policies
that led to increased sales of Tokyo-area condominiums,
housing starts in the year ended March 2012 increased 2.7%
year on year to around 840,000 units, marking a second
consecutive year of growth. There is growing demandfor eco-friendly, health-friendly decorative materials andother high-added value products with excellent design andfunctional properties.
Amid this business environment, DNP will continue todevelop and expand its share of the market for floor andwall coverings, room dividers, residential equipment,
entry doors, exterior products, and other high-added value
products. We intend to further expand our Lifestyle Materials
business by entering the market of housing for the elderly,
actively developing the home-improvement market, adding
to our lineup of external products, taking our automotive
electron beam (EB) coating products to the global market,
and reinforcing sales of Ellio steel plate for railway cars.

Advanced Optics (Optical Films)
Corporate Governance■ Lifestyle Materials

In the fiscal term through March 2012, this business wasaffected by a downturn in domestic demand for photo
prints and by the yen's appreciation on world currency
markets, which hampered exports. Nevertheless, sales ofdye-sublimation thermal transfer printing media increased
relative to the previous fiscal term, partly thanks to ouracquisition of Sony Corp.'s commercial printer business.
Demand also increased for exports of monochrome
ribbons for printing bar codes (thermal resin-type transfer
printing media). Going forward, we will expand this businessby using our global, uniform framework for developing,producing, and selling media and systems in order to solve
problems for corporate clients and consumers.

DNP's Businesses■ Industrial Supplies

Special Feature:
DNP's Growth Strategies■ Packaging

To Our Shareholders

Portrait of Divisions

45

01

Packaging: Creating New Value Centered around Environmental

Preservation and Advanced Functionality

DNP participates from the earliest stages of planning all kinds of packaging products, and actively provides ideas fordesigning packages with various qualities such as ease of use, good label legibility, durability, protection of contents,
and ability to attract attention on a store shelf. DNP's comprehensive packaging business makes use of our flexible
manufacturing framework with production bases in Japan and overseas to supply products on a just-in-time basis, to design
and manufacture aseptic filling systems, and even to develop functional films and other specialized materials.
Manufacturers of foods, beverages, medical supplies, pharmaceuticals, electronic components—and any other company
that has "things to wrap"—are all potential customers. We are expanding this business by making products easy for
consumers to use and by meticulously meeting the needs of client companies.

Examples of DNP's packaging products (left: for the Japanese market, right: for non-Japanese markets)

Focus

Take advantage of the opportunities presented by changing lifestyles

In Japan and elsewhere, recent years have brought major changes inpeople's awareness and behavior in their daily lives. Manufacturers
and distributors are faced with the urgent task of responding tothese changes. DNP offers a variety of services— like our "ShokuMAP" system of analyzing marketplace trends by monitoring
consumers' actual eating habits—that analyze consumer behavior
and awareness as a basis for formulating product and marketingstrategies. Since we base our engagement in every aspect ofthe packaging business, from planning and design to research,development and production, on findings from these analyses,changes in consumer lifestyles represent major opportunities toexpand our business.
In our development of packaging products, we aim for advanced
functionality in areas like content preservation and durability, andat the same time we take care to provide optimal functionality thatmeets the needs of people in each country and locality where theproducts will be used. We also focus on applying "universal design"principles in order to make products comfortable and easy to use foras many people as possible, and on minimizing the burden that our
packaging products place on the environment.
On the "advanced functionality" front, we are working to expand
the market for our Innovative Barrier (IB) film®, a transparent vapor
deposition film that prevents the permeation of moisture andoxygen. Concerning universal design, we have established ourown guidelines and are working on product development that may
lead to the formation of industry standards. We have also beenvery successful in commercializing aseptic packaging systems that46

can preserve package contents for long periods of time without
damaging their flavor or aroma, as well as eco-friendly products likepackaging material made of biomass (plant-derived) plastic.
Going forward, we will speed up development of packaging
applications that respond to Japan's increasingly aging society,such as packaging for medical and pharmaceutical products withconsideration for functionality, universal design, and environmental
impact. We will also build on our success in making our local DNP
subsidiary, the No.1 packaging manufacturer in Indonesia, in orderto accurately grasp the needs of developing markets and respond totheir growing demand, primarily in Asia.

Biomatek ® packaging products madewith material derived from plants

Packages made with
IB film®, a material
that serves as an
excellent barrier
against oxygen andmoisture

Start up of a new cutting-edge, eco-friendly soft packaging plant in Kyoto■ Focus also on developing paper and film hybrid products that take advantage of the best qualities of both materials

and soft packaging, the new production framework willallow us to focus on making "hybrid products" that offer thebest properties of both paper and film.

DNP's Businesses

At the new plant that we started up in Tanabe, Kyoto
Prefecture in November 2011, we have begun manufacturing"soft packaging" made of film with outstanding functional
properties. Because DNP's soft packaging prevents thepermeation of moisture and oxygen and safely preservescontents for a long time, it is widely used for packaging
toiletries, daily household items, and medical andpharmaceutical products in addition to juices, sake, andother beverages, and foods including snacks, ice cream,and instant foods.
DNP has long manufactured paper containers for solids
and liquids at the Tanabe Plant. With the opening of the
new facility in Tanabe, we will be using paper and film at
the same site, which will allow us to efficiently provide thebest quality products. While DNP was already making drink
packs that require technologies for both paper containers

New factory in Kyoto Prefecture■ Reducing CO2 emissions, energy consumption, and other forms of negative environmental impact

As consumers become more concerned with protecting
the Earth's environment, DNP has formulated a concrete
plan and is taking active steps to preserve the environment.
As part of that effort, our new plant uses heat pump＊1
technology as a source of thermal energy. By integrating
thermal media produced by heat pumps into drying

equipment that DNP designed and manufactured itself, wewere able to reduce usage of petroleum, natural gas, andelectric power at the plant, leading to significant reductions
in CO2 emissions. This is the first case of heat pumptechnology being applied to drying equipment on printing
machines in Japan.
Aiming for a recycling-oriented factory, we also adopted
cutting-edge equipment for collecting and reusing volatileorganic compounds released by solvents during the printing
process. We use some of the collected chemicals as fuel,which we burn in a special boiler that allows us to recycle
the heat that it produces. This is one example of how we
aim to minimize the burden that our business activities placeon the environment, including from the standpoint of Life
Cycle Assessment.＊2
The establishment of this new plant gives us a major basein western Japan for the production of paper containers,
including paper containers for liquid, and soft packaging.
We made a business continuity plan (BCP) to strengthen our
supply system in coordination with our plants in Izumisaki,
Fukushima Prefecture, and elsewhere.
＊1： Heat pump: a device commonly used in refrigerators and air conditioners;

Cutting-edge production equipment in the new factoryheat pumps extract naturally occurring thermal energy as if by pumping, i.e.
by repeating "evaporate→ compress → condense → expand cycles＊2： Life Cycle Assessment: a method of assessing an industrial product's
environmental impact by measuring resource consumption and waste volume
at every phase of its life cycle, including production, usage, and disposal

DNP Annual Report 2012 〉 DNP's Businesses 〉Lifestyle and Industrial Supplies

47

02

Lifestyle Materials: Developing Solutions for Every Kind of Living Space

DNP's Lifestyle Materials Operations develops and supplies a wide range of products and services for any company,
whether in Japan or abroad, that deals in "dwelling spaces," which includes homes, offices, medical or nursing care facilities,
automobiles and railroad cars. As we develop this business, we keep in mind a number of concepts that are indispensable
to the development of living styles and living spaces for the future. These include environmental and energy conservation,
safety and security, health and comfort, aging, dependability, computerization, and online connectedness.
DNP has filed more than 900 patent applications related to our proprietary EB (electron beam) coating technology, andthe advanced, eco-friendly products that we make with this technology have inspired high praise from both corporate clientsand consumers. By networking with a large number of firms involved in living spaces, we provide total solutions that address
every step from living space design to evaluation and inspection, as well as development and problem resolution related toconstruction methods and systems.

Hotel interior decor using Ellio products

Focus

Developing highly reliable products

DNP's EB products have been greatly appreciated in themarketplace for their overwhelmingly superiority in many respects,
including scratch resistance, soil resistance, outstanding durability,and ease of maintenance. They have set a new de facto standard forinterior materials including wall and floor coverings.
In February 2011, we began full-fledged sales of "EB cloth" wallcovering by emphasizing its many advantages. Besides the superiorscratch and soil resistance that all EB-coated products share, EB
cloth's particular advantages include ultra-low content of volatileorganic compound (VOCs) and easy workability due to light weight(40% lighter than DNP's vinyl chloride wall coverings). In addition, EB
cloth strongly resists cracking even when the wall beneath it moves.
The new material has won high praise from throughout the supply
chain, including consumers, builders, and distributors, and has
already been established as a new genre of wall coverings.
We have also applied EB coating technology to the developmentof air-cleaning products that promote health and comfort, andenergy-saving products like "High-reflective, Light-diffusing Ellio"material that efficiently reflects and diffuses natural and artificial light.
DNP views today's increased concerns about the global environment
and energy supplies as opportunities to be seized as we expand ourLifestyle Materials-related business fields in Japan and overseas.

48

Residential interior using DNP products

EB (Electron Beam) coating technology
EB coating technology uses the safe, environmentally friendly energy ofelectron beam exposure to impart enduring functionality to resin. The
technology makes it possible to provide products with superior abrasion andsoil resistance, photo-resistance, durability, and stability. EB coating is an
eco-friendly, next-generation technology that, during the produc tion process,uses relatively little energy, reduces CO 2 emissions, and produces coatings
without the use of solvents.

"Ellio" coated steel plates, stainless, and aluminum products by direct printing are
gaining popularity■ Ellio metal products that bestow design and functional benefits
Examples of Ellio products in use

DNP's Businesses

Ellio products— part of the wide assortment of DNP productsthat contribute to comfortable dwelling spaces— are the resultof combining special steel plate developed by Nippon SteelCorporation with DNP's printing technologies. In addition to steel
plate, Ellio produces a variety of directly printed metal products
including stainless steel and aluminum.
These products display authentic-looking wood or other textureswith a luxurious feel, while preserving the fire resistance and otherbenefits of metal. Ellio decorative metal products have come to
be used in a wide variety of applications including residential front
doors, kitchen and modular bath wall panels, decorative interiors
for hotels, office buildings and elevators, railway interiors in Japanand overseas, and exterior panels for refrigerators and furniture.
Structure of a typical Ellio productPrinted layer

Clear coat layer

Base coat layer
Primer layer

Substrate

Improving product development by fusing substrate (metal sheet)development with advanced printing technologies
We use DNP's proprietary methods of directly coating/printing on
steel plate, stainless steel, aluminum and other metals to develop andmanufacture products with high added value.

Upper left: Interior of reserved ("Green") car on Tohoku Shinkansen Hayabusa
bullet train; upper right: entrance door; bottom: building exterior■ New energy-saving products
In recent years, office buildings and other large public buildings have been designed
to be increasingly active in their use of natural light as a way of reducing the amountof energy required for lighting. In response to demand for energy conservation,
DNP developed functional metal paneling that we began marketing in June 2012 as"High-reflective, Light-diffusing Ellio." The product is used on walls and/or ceilings
where it effectively reflects natural or artificial light and diffuses this indirect light toevery corner of a space, thereby reducing the amount of energy required to produce
sufficient illumination.
In the future, we intend to make efficient use of the sun's light and heat and othersources of natural energy to develop decorative materials that provide excellent
insulation from heat and light.

High-reflective, Light-diffusing Ellio (right)
compared with standard room divider Ellio (left)
By scattering indirect light into every corner ofa space, a greater degree of illumination can beachieved under the same lighting conditions.

DNP Annual Report 2012 〉 DNP's Businesses 〉Lifestyle and Industrial Supplies

49

Information Media Supplies:

03

Global Expansion Centered around Photo Print Business

DNP began manufacturing and selling information media supplies in the 1980s, after applying coating technologies
that we cultivated through our printing business to the successful development of two types of thermal transfer printing
media ― dye-sublimation and thermal resin. DNP holds the largest share of world markets for both dye-sublimation
media (primarily color ink ribbons for photo printers, card printers, etc.) and for thermal resin-type media (mainly
monochrome ribbons for printing barcodes).
We have been expanding DNP's worldwide Information Media Supplies business, partly by actively pursuing M&As
that provide synergistic benefits through the combination of our own strengths with those of other companies. In 2006,
we acquired the Konica Minolta Group's ID photo business and photography-related product manufacturing and sales
businesses. In July 2008, we acquired Sony Chemical & Information Device Corp.'s barcode printing business, and in
April 2011 we acquired Sony Corp.'s commercial-use digital photo printer business, as part of the global expansion of
our business.

Thermal resin-type transfer
printing media
Dye-sublimation thermal transfer printing media

Focus

We are actively expanding this business by making the most of ourworldwide, integrated production and sales framework

Due to the increasing popularity of smart phones and digital
cameras, there has been a dramatic increase in the number ofphotos taken by consumers. As a result, demand for photo printing
has been growing. Both at home and at print kiosks in retail stores,
photo printers that use dye-sublimation thermal transfer printing
media (color ink ribbons and receiver paper) have won high praise for
their excellent speed and the durable prints that they produce. This
type of printer is also more affordable to buy and maintain comparedto photo printers that use silver halide.
Based on our "more than just a photo" concept, we are working
DNP's Information Media Supplies GroupWorldwide Operating Locations

to expand our photo print business primarily by applying anddeveloping technologies and by creating new markets.
The market for barcodes is also expected to gradually expand. Inorder to build up business in this area, we are working on increasing
our solutions-based business in addition to providing products andservices by making the most of our overseas production bases.
In order to meet growing worldwide demand for both photo
printing and barcodes, including in emerging markets, DNP intends
to continue to respond meticulously to the needs of corporateclients and consumers by taking advantage of our uniform, global
framework for developing, manufacturing, and selling related
products and services.

Sales Manufacturing

Sales Manufacturing

Amsterdam
DNP IMS Netherlands

Sales
Manufacturing
Dinant
CDO

Shanghai
DNP Business
Consulting (Shanghai)

Sales

Sales

Paris
DNP Photo Imaging Europe

Singapore
DNP Singapore

Sales Tokyo

DNP (Information Media
Supplies Operations)

DNP Fotolusio
DNP ID System

Manufacturing DNP IMS● Sayama Plant● Okayama Plant● Shiga Plant● Odawara Plant

50

DNP IMS America● Concord Plant● Pittsburgh Plant● Texas Office

The development of printing systems

In response to demand for photo printing in emerging markets
marked by rapid economic growth, we developed the DS-RX1
printer, which offers the same characteristics as dye-sublimation
thermal transfer printers at a far lower cost. We also developed
media especially for use with this printer, and began selling theprinter and dedicated media in May 2011.
The DS-RX1 can use dedicated software and a dedicated input
terminal that allow it to output ID-sized photos and all types ofphotos that meet the needs of emerging markets.
DNP will develop sales of its DS-RX1 not only in emerging
markets, but also in other markets around the world.

DNP's Businesses

DS-RX1
DS-RX1 Features
・ High resolution, high cost performance
・ 30% reduction in electric power usage during printing (compared toexisting printers)
・ Dedicated software for use by multi-print services can add frames,
make collages, produce ID photos, etc.
・ Can be used with dedicated order terminal■ We launched two Snap Lab photo printers,
each with 10 interface languages
In October 2011, DNP began selling two models of Snap Lab photo
printers that make photo printing a snap, not only at camera shops
but at event venues and a variety of other locations.
Snap Lab's compact size makes it easy to install anywhere. This
multifunctional digital photo printer can quickly handle every stepfrom reception of image data and instructions to delivery of output
with no need for connection to a computer. Its 10 interface languages
include Japanese, English, French, German, and Chinese. Users canchoose print sizes according to how they plan to use their photos.
We intend to establish a market for this easy-to-use, high-quality
photo printing service mainly in North America, Europe, and Japan,
by gradually introducing the machines to amusement facilities, event
venues, major appliance stores, and supermarkets, etc., in addition
to camera shops.

Snap Lab DS-SL10

Snap Lab DS-SL20

Snap Lab Features: Models DS-SL10 and DS-SL20
・ One compact, simple-to-operate unit handles every step from order-taking to output
・ Multiple print size options
・ Operable in 10 languages: Japanese, English, French, German, Italian, Spanish,
Turkish, Greek, Chinese (simplified characters) and Korean. A maximum of six ofthese languages can be offered on the screen at any given time.
・ Image correction feature enables automatic correction of facial complexion tonatural skin tones
・ Full selection of added-value prints, including matte finish, watermark, etc.

■ Easily print images from smart phones and tablet PCs
DNP now enables consumers in Japan toinstantly print images from their smart phone ortablet PC, using PrintRush self-service printing
systems generally found at major appliancestores and other retail stores. In addition toaccepting data from conventional recording
media, and by means of infrared or other wirelesstransmissions, since April 2011 PrintRush
systems have been able to receive image datatransmissions from devices that use iOS (iPhone
and iPad), and since November 2011, they canalso receive from smart phones using an Android
OS. Smart phone users can download a free
application developed by DNP that allows themto easily print photos from their phone using
PrintRush. The application for iOS devices isavailable from Apple Inc.'s App Store, and theAndroid version is available from Google Inc.'s
Google Play.
DNP will continue to work to introduce printing
systems that offer new added value and greater
convenience.

*iOS: The operating system used in mobile terminals made by Apple Inc., including iPhone, iPad, and iPod touch.
*Android OS: The operating system used in mobile phones first released by Google Inc. in November 2007.

PrintRush self-service printing system

DNP Annual Report 2012 〉 DNP's Businesses 〉Lifestyle and Industrial Supplies

51

Advanced Optics (Optical Films): Providing Products and Solutions for Controlling04

Optical Properties through the Use of "Clean Converting Technologies"

DNP provides all types of optical films for use in flat-panel displays built into televisions, personal computers, and mobile
terminals, etc. These films make use of clean converting technologies, particularly optical design technologies, that we
cultivated through the design and development of a variety of materials and manufacturing processes. DNP controls thelargest share of the worldwide market for anti-reflection films used on the outermost surface of electronic displays to guard
against reflections from both interior and external light and thus make the displays easier to see. In the future, we intend tofurther expand our display-related business and make use of DNP's extensive manufacturing know-how and proprietary
technology, etc. to develop new products and branch out into even wider fields of business.
DNP optical films used in a liquid crystal display
Backlight film

Anti-reflection film

Anti-reflection films

Focus

Entering a variety of markets by developing products from a new perspective

While flat-panel display prices have been falling in recent years, there
is growing demand for higher definition, better picture quality, multifunctionality including touch panels and 3D image displays, andenergy-saving models. In answer to this demand, we built a new
facility at our Mihara Plant in Hiroshima Prefecture, which we began
operating in November 2011.
In addition to using a new production line to produce high-performance anti-reflection films that enable the display of sharper
images, the new facility also manufacturers film components for3D displays, for which there is increasing demand, and a variety ofadvanced optical films including highly scratch-resistant and soilresistant optical films for touch panels.
We intend to continue making good use of the original DNP
optical designs that we have accumulated, as well as precision thinfilm coating, patterning, and other technologies in order to provide
people-friendly components and solutions in a variety of markets,
starting with environment and energy.

●

Mihara Plant in Hiroshima Prefecture

52

History of DNP's Production Bases for Anti-reflection Film
October

2001

Opened Okayama Plant

February

2004

Added production lines to Okayama Plant

May

2005

Added production lines to Okayama Plant

October

2006

Opened Mihara Plant

May

2009

Added production lines to Okayama Plant

November 2011

Added production lines to Mihara Plant

05

Energy Systems: Providing Diverse Products and Services in Responseto the Growing Market for Clean Energy

DNP positions energy as one of its new mainstay businesses in response to growing demand for clean sources of energythat replace fossil fuels, and in response to expansion in related markets.
DNP's main photovoltaic cell-related products are back sheets that prevent wind and rain from penetrating photovoltaic
panels, and encapsulants that secure photovoltaic cells (power generation elements) and power collection wiring, andprotect them from the outside environment. Our focus is on product development that will satisfy our clients' needs byadvancing functionality and reducing costs.
We also offer lightweight, exceptionally durable "soft pack" external coverings for lithium-ion batteries made with flexible,easy-to-process multiplex film. These products have already captured the top share of world markets, and we intend tofurther expand this business through such applications as smart phones, tablet PCs, and other mobile devices, batteryassisted bicycles, electric cars, and home-use storage batteries.
In April 2011, we tripled our capacity to produce battery-related products by opening a new plant in Kitakyushu, Fukuoka
Prefecture. By creating a very clean environment at the new plant, we increased the reliability of our products, and because
we manufacture soft packs and photovoltaic cell components on the same production lines, we can flexibly adjust
production in line with demand trends.

DNP's Businesses

Soft pack used in lithium-ion batteries;
lithium-ion battery module

Focus

Photovoltaic cell

Development of new products that improve the power generation efficiencyof photovoltaic cells

The problem with solar power generation is that it is so much more
expensive than combustion and other conventional methods. This
problem can be solved by improving power generation efficiency,
and one way to do that is to use rear-contact photovoltaic cells,
which are designed with all of the electrodes on the back of the unit.
Conventional photovoltaic cells have power-collecting electrodes
on both the front and back. Concentrating them on the back sideof the cell increases the area available for sunlight reception, thus
improving power generation efficiency.
In order to resolve the difficulties involved in forming tiny electrodeson the back side of each photovoltaic cell, DNP has been producing"bus-line sheet" by forming electrode circuits on film for use inrear-contact photovoltaic modules. After reviewing our production
framework, we increased the production of bus-line sheet in July
2012. This simplifies the production process for photovoltaic module
manufacturers, allowing them to form electrodes by simply applying
bus-line sheet to an array of cells lined up to fit the size of the module.
Meanwhile, another problem that has been in the spotlightis potential-induced degradation (PID), which causes a type ofdegradation in power generation performance. PID can occur
when improved power generation efficiency leads to the generationof higher voltages and a leakage current is generated under hot
and humid conditions. The properties of the encapsulants used inphotovoltaic modules, especially moisture permeability and gas
generation, are said to affect the modules' susceptibility to PID.
The water vapor barrier properties of DNP encapsulants havelong been about ten times as strong as those of standard productson the market. For this reason and because DNP's encapsulants
do not generate acidic gas, they have been attracting attention as
outstanding encapsulants for preventing PID.
For the future, we will work
actively to improve power
generation efficiency bydeveloping products like anall-in-one bus-line sheet andback sheet combination, andother products that meet themarket's demands.
Bus-line sheet

DNP Annual Report 2012 〉 DNP's Businesses 〉Lifestyle and Industrial Supplies

53

Electronics

Business Strategies

The Electronics segment applies the most advanced
printing technologies in the world, including microfabricationand patterning technologies, in order to provide a variety of
key components for display products and electronic devices
that sustain today's information society. We will carefully
watch the rapidly changing business environment andconstruct optimized systems in order to develop productsthat meet the needs of clients and consumers in suchproduct categories as color filters for liquid crystal displays(LCDs), photomasks (masters for making LSI circuits), andmultilayer wiring boards.

Basic Strategies
A variety of household appliances and information devices
like smart phones and tablet PCs have become widely used
in today's world. When selecting these types of electronic
devices, consumers seek convenience and new features
based on cutting-edge technologies, so it is importantfor manufacturers to develop the newest technologies in
response to the market's needs, and to establish stablesupply frameworks.
The Electronics segment's basic strategy regarding
product development is to work at developing newtechnologies with an eye toward next-generation products,
and to supply the market with high-added value productswith superior functionality. These cutting-edge products
will primarily be developed and manufactured at our motherplant in Japan, but we will take a global point of view andflexibly consider the best locations, including overseas
locations, for production of other products. We will also
actively engage in collaboration with companies that haveparticular strengths in order to speed up our businessdevelopment.

＊1: nm (nanometer): one billionth of a meter＊2: Extreme ultra-violet (EUV) exposure: a technique for using ultraviolet rays withextremely short wavelengths to burn minute circuit patterns onto a wafer＊3: Nano-imprinting: a semiconductor manufacturing process that entails

physically transferring a minute, nanometer-level pattern by pressing atemplate against a resin-coated silicon wafer＊4: MEMS（Micro Electro Mechanical System): a group of minute components

made with semiconductor device microfabrication technologies

54

Synopsis of
Performance
To Our Shareholders

Main Policies

In the LCD market, LCD televisions have transitioned
from the growth phase to a mature phase of their productlifecycle, so we can no longer expect the kind of major
growth in this market that we saw in the past. Especially inthe case of large-screen televisions, there is a strong feelingthat panel production capacity is excessive. Prices havebeen falling, and the profit picture has been getting grimmer.
At the same time, demand is still increasing for displays
used in smart phones and tablet PCs, so we will continue
to shift our color filter business toward small- and mediumsized products. We will make the most of the technicalstrengths and customer trust that we have cultivated over
the years as we work to stabilize our business by focusing
on providing the high resolution, high-quality products thatare in demand for use in small- and medium-sized devices.

DNP's semiconductor photomasks have established areputation for outstanding quality and have continuously
controlled a large share of the global photomask market.
More than half of DNP's photomask sales come fromcutting-edge products with line widths of 45nm or less. 1
DNP's excellent capacity for technological development
has earned us the solid trust of our customers, and we will
focus on expanding this business in line with future demand
for miniaturization.
Given the harsh market environment surrounding
electronic devices, we will actively address demand
overseas as well as in Japan. As overseas photomask
production bases, we built a factory in Italy, where we havea business alliance with a major customer, followed by the
opening of a new overseas plant in Taiwan during the fiscal
term ended March 2011. We are increasing production in
Taiwan, which will serve as our base for supplying advanced
photomasks to the entire Asian region.
In response to increasing miniaturization of semiconductor
products, we aim to make the most of our industry-leading
technology development capabilities and the results ofjoint development with corporate clients in order to preparea framework for developing and supplying cutting-edge
photomasks with line widths of 22nm or less. We will
also keep working on commercializing next-generation
semiconductor lithography technologies such as extreme
ultraviolet (EUV) exposure 2 and nano-imprinting. 3

Enhance product lineup with entries like touch panel
components

We will make the most of DNP's strengths as we promote
the development of organic EL displays and other new
products for markets where growth is likely. DNP alreadyenjoys a large share of the market for metal masks used in
the production of organic EL displays. We will also focus ondeveloping new products, for example by providing touch
panel sensors that contribute to the production of thinner,
lighter smart phones and other devices.

＊

＊

＊

Optimize production systems related to color filters
Strengthen our business constitution by developing new
products

We intend to apply microfabrication, patterning, etching,and other technologies to the active development of a wide
range of products in addition to photomasks, including
components for hard disk drives, metal bases for LEDs,
printed wiring boards with embedded components, andMEMS 4 products. Our aim is to identify and concentrate
management resources on future growth areas, suchas various types of electronic modules used in image
processing, in order to construct a business framework thatwill allow us to secure profits regardless of fluctuations inthe semiconductor market.

Financial Section＊

DNP Annual Report 2012 〉 DNP's Businesses 〉Electronics

Appendix

In order to stabilize our display-related business, we willcontinue to work on optimizing production systems, which
includes consolidation of production bases. Specifically,
we will strengthen our profit base by moving color filter
production equipment from our plant in Otone, Saitama
Prefecture, to our Mihara Plant in Hiroshima Prefecture,
thereby concentrating production of small- and mediumsized products at the Mihara Plant.
In the fiscal year through March 2013, we plan to integrate
the color filter business at our Sakai Plant in Hyogo
Prefecture into Sakai Display Products Corp. (SDP). By
creating a coherent production framework that will handle
everything from components to complete LCD panels,
SDP will stabilize production, lower costs, and improve its
international competitiveness.

How DNP Works to
Achieve Sustainable
Development

Expand overseas semiconductor photomask business anddevelop cutting-edge technologies

Corporate GovernanceConcentrate on the growing market for small- andmedium-sized products, and on higher resolution

DNP's Businesses■ Electronic Devices

Special Feature:
DNP's Growth Strategies■ Display Components

55

Financial Net
Results
Sales
Operating Income(Net sales)(¥ billion)(Operating income)

800

120
100

600

536.6

531.7

522.8

80
60

400

43.7

46.8
31.8

Financial
Highlights
200

40

Fiscal Term through March 2012:
Business Environment andSummary of Financial Results

20
0

0

10

11

12

(¥ billion, %)					 2010.3		 2011.3		 2012.3¥ 257.5¥ 286.3¥ 224.8

Operating income

8.3

12.2

-4.6

Operating income margin

3.2%

4.3%

Net sales

Net Sales

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

800

120
100

600
80
60

400

286.3

257.5

224.8

40

200

8.3

20

12.2

0

0

– 4.6
– 20

10

56

11

12

–

According to one research company's figures for worldwide
shipments of electronic devices in calendar 2011, shipmentsof LCD televisions to emerging countries such as China
and Central and South America continued to grow, but the
number of units shipped to developed countries decreased.
In Japan, there was an especially sharp drop from theprevious year due to the end of the government's "ecopoint" program for promoting eco-friendly appliances anda winding down of replacement buying as part of the shift
toward digital terrestrial broadcasting. Personal computer
shipments inched up by 0.5% year on year, to 350 million
units, while shipments of mobile phones increased 11%
over the previous year, mainly due to the popularity of smart
phones.
Given these trends, large LCD panels used in televisions
remained in oversupply, leading to decreased profits forJapanese panel makers who were forced to implement
large cutbacks in production. Although DNP continued
to enjoy strong sales of small- and medium-sized color
filters for smart phones and tablet PCs, there were big
drops in value and unit price for large-size products used in
televisions, as panel makers reduced production and LCD
television prices declined.
Meanwhile, growth in the semiconductor market in
the year ended March 2012 was limited to 0.4% from theprevious year—a sharp decrease from the previous year's
32% growth— due to such factors as the Tohoku–Pacific
Ocean Earthquake, major flooding in Thailand, and a
downturn in the world economy. In Japan, the situation was
exacerbated by a sharp rise in the yen's value, and sales
declined relative to a year earlier.
DNP's Electronic Devices business worked hardto increase its share of the domestic market and to
take advantage of overseas demand, but net sales ofphotomasks declined from the previous year. Sales of highdensity build-up wiring boards used in devices such as
smart phones increased, but partly due to supply chain
disruptions resulting from flooding in Thailand, there were
declines in sales of suspensions and other hard disk drive
components, and lead frames, etc.
As a result, the Electronics segment's net sales amounted
to 224.8 billion yen, representing a decrease of 21.5 %(61.5 billion yen) from a year earlier. The segment posted an
operating loss of 4.6 billion yen, a drop of 16.9 billion yen
compared to the previous year's operating income of 12.2
billion yen.

Synopsis of
Performance
How DNP Works to
Achieve Sustainable
Development

Financial Section

The semiconductor market is expected to see gradual
recovery as manufacturers implement structural reforms
and step up investment in further miniaturization. In recent
years, as electronic devices have become more compact
and sophisticated, ever more advanced technologies are
required for creating the extremely fine circuit lines neededin the manufacture of today's semiconductors.
As line widths decrease, we aim to increase our shareof the market for cutting-edge photomasks used for
producing semiconductors, not only in Japan but also at
our Taiwanese plant and other overseas operating locations.
Besides moving ahead with mass production of 45nm
products, which are the targets of increasing demand, we
will also support photolithography techniques for making
ultra-advanced under-40nm and under-30nm products,
including a method that combines double patterning
and ArF immersion. In addition, we are working withsemiconductor manufacturers to speed up research anddevelopment of next-generation semiconductor lithography
technologies like extreme ultraviolet (EUV) lithography andnano-imprinting.
Amid growing demand for thin, compact semiconductor
packages that enable high-density mounting of internal
components, we aim to expand DNP's share of themarket for etched electronic components, backed by suchstrengths as our unique B2it buildup board technology.
We will also actively pursue development of new
products including metal LED substrates, hard disk drive
components, electronic modules for image processing andother applications, and MEMS products.

Corporate Governance

Demand for LCD televisions is expected to continue togrow, particularly in developing countries, and LED-backlit
televisions and 3D models are expected to become more
widely used. However, downward pressure on retail prices
is increasing, and growth rates are slowing. On the other
hand, the market for small- and medium-sized panels
is expected to continue its smooth growth, supportedby the spread of smart phones and tablet PCs. In thesmall- and medium-sized market, it is essential to keep
up with demand not only for greater production volume,
but also for higher definition. In view of demand for new
technologies like touch panels and organic EL displays, themarket is counting on Japanese LCD panel manufacturers'
excellent capacity for technological development. Panel
manufacturers in Korea, Taiwan, and China, as well as inJapan, are stepping up efforts to adjust production so as tooptimize the supply-demand balance for LCD panels of all
sizes.
DNP's color filter business is concentrating on thegrowing market for small- and medium-sized displays. We
will continue to respond with cutting-edge technologies tomeet demand for higher definition, greater brightness, andthinner displays, etc.
Regarding our manufacturing framework, we consolidated
operating locations through measures like relocatingproduction equipment from our Otone Plant in Saitama
Prefecture to the Mihara Plant in Hiroshima Prefecture.
Among other structural reforms, we integrated the color
filter business at our plant in Sakai, Osaka Prefecture into
Sakai Display Products Corp.
We are also working to stabilize our display products
business by enhancing our lineup of display products
besides color filters. Specifically, we are concentrating on
developing new products like metal masks used in organic
EL display production and static electricity sensors for
touch panels.

DNP's Businesses■ Electronic Devices

Special Feature:
DNP's Growth Strategies■ Display Components

To Our Shareholders

Portrait of Divisions

Appendix

DNP Annual Report 2012 〉 DNP's Businesses 〉Electronics

57

DNP Electronics Products—a Part of Everyone's Everyday LifeDNP Products and Technologies Support Smart Phones and Tablet PCs
For more than half a century, DNP has been supplying awide variety of electronic products, backed by our strength
in printing technologies like photolithography and etching.
DNP products and systems support many of the smart
phones that have rapidly become popular in recent years,
as well as other information devices that we consider to bea vital part of our lives.
DNP's various products and systems contribute toimproving the operation and functionality of all types ofdevices. For example, we supply high-definition color filters
for small- and medium-sized liquid crystal displays, touch
panel components, metal masks used in the manufactureof organic EL displays, photomasks and lead frames usedin cutting-edge semiconductor products, and modules
used in digital cameras.

Optical film
for display

Soft pack forlithium-ion battery
Smart card

58

High-definition color filters for small- and medium-sized LCDs
In order to display more beautiful images on the small screens of smart
phones and tablet PCs, it is necessary to improve display resolution andbrightness. DNP's color filters meet the market's demands for higherdefinition, brighter, thinner, lighter displays, and the color filters we havesupplied for smart phones and similar devices are winning high praise.
Going forward, we will continue to provide high-performance color filters in
response to increasing demand for portable information terminals and othersmall and medium size devices.

High-definition color
filterTouch panel components
DNP's Businesses

Because a growing number of information terminals use touch panels thatcan be operated by touching the screen with a finger, there is increasing
demand for touch panel sensors that sense finger movement. As information
terminals take on increasingly sophisticated functions, keeping them thin andlight has become more of a challenge. DNP's touch panel sensors contributeto the production of thinner, lighter devices by dispensing with the usualglass or film substrate, thereby limiting its thickness and weight.
Touch panel sensor

Metal masks for manufacturing organic EL(electroluminescent) displays
Organic EL displays, which offer advantages like a wider viewing angle andhigher contrast, are being used increasingly widely, primarily in smart phones
and other portable information devices. DNP supplies metal masks used in
the vapor deposition method of manufacturing EL displays. DNP controls alarge share of the market for the metal masks, which are indispensable to thevapor deposition process wherein colored organic EL elements (for example,
RGB or red/green/blue) are applied separately.

Enlarged photo of metal masks used formaking organic EL displays

Electronic devices
DNP makes use of printing technologies like microfabrication, patterning, andetching to provide a variety of products that meet the market's demand forthinner, more compact communication devices with improved functionality.
Photomasks are masters for making system LSIs, flash memories, andother semiconductor products. In addition to producing cutting-edge 20nm
photomasks, we are focusing on developing nanoimprinting and other nextgeneration technologies. We have also developed lead frames, which hold
IC chips onto printed wiring boards and transmit electric signals, that are
only 0.15mm thick, or one twentieth the thickness of conventional products.
And we use DNP's unique B2it (pronounced B-square-it) technology torealize even more compact, even higher-density printed wiring boards withembedded components for use in camera modules, motherboards, andother electronic devices.

Photomask used formaking semiconductors

Lead frame

Printed wiring board
with embedded
components (forcamera module, etc.)

Motherboard for asmart phone

DNP Annual Report 2012 〉 DNP's Businesses 〉Electronics

59Corporate
Governance
CONTENTS
62 Corporate Governance
69 Board of Directors, Statutory Auditors and Corporate Officers

Corporate Governance"DNP" refers to Dai Nippon Printing Co., Ltd. in this section.

1

Corporate Governance■ Fundamental Philosophy
DNP has established a management concept of contributing
to the emergently evolving society of the 21st century, andrecognizes that fulfilling its corporate responsibilities tosociety as a Group and being trusted by its shareholders,customers, consumers, employees and other stakeholders
is critical to improving the competitiveness of the Group.
Toward this end, we regard corporate governance as a top
management priority. We have strived to establish andmanage an organizational structure that allows for precise
managerial decision-making, prompt and appropriate
execution based on the decisions made, and proper
supervision and surveillance; strengthen education andtraining to improve each employee’s awareness ofcompliance issues; and enhance our overall corporate
governance.

■ Progress on Corporate Governance Measures(1) Corporate governance structure
DNP's organization is designed to allow the directors withspecialized expertise and experience in a wide range ofbusiness fields to participate in management decisions, totake responsibility and authority as they execute their work,and to supervise the work of other directors. Also, so as topromptly make precise management decisions, smoothly
act based on the decisions, and further strengthen proper
supervisory functions, independent directors participate indecision making, and corporate officers named by the Boardof Directors execute the decisions made by the Board of
Directors, and have the responsibility and authority to decideupon and carry out those matters delegated by the Board.
Working in close communication with the directors and inclose proximity to the workplace, their function is to ensurethat the views of those on the front lines are reflected inmanagement.
The term of office for the directors is one year, in order tohave more flexibility to construct a management system best
suited to responding to the business environment; and tofurther clarify management responsibility for each fiscal year.
The Board of Directors consists of 20 directors including
one independent outside director. In principle, the Board
meets once a month. Based on the Company's Board of
Directors Regulations, the directors ensure that operations
are appropriately run and mutually supervise day-to-day
operations. The directors and corporate officers holdexecutive committee meetings three times a month toexchange information that is helpful for efficient decision

62

making. To speed up the Company's activities and makethem more efficient, DNP has also established aManagement Committee consisting of directors at the senior
managing director level and above. The committee meetsonce a month, in principle, to review and discuss
management policies, strategies, and important businessmatters.
DNP has in place a Board of Statutory Auditors thatconsists of five auditors, including one auditor withconsiderable knowledge of finance and accounting andthree outside auditors. In accordance with auditors'prescribed audit criteria and responsibilities, the statutory
auditors conduct audits of the directors' management of
day-to-day operations and, as necessary, seek informationfrom the directors and employees regarding business
operations.
With such a corporate governance structure, the Board of
Directors can make appropriate decisions efficiently.

(2) Internal controls and auditor's auditing
In order to maintain a structure that allows for precise
management decision-making, appropriate and prompt
execution of business, and inspection and monitoring ofthese functions, the Corporate Ethics Committee, as the
body in charge of internal control, inspects and guides
DNP's operating units according to the DNP Group's Basic
Compliance Management Regulations, and regularly reports
to auditors on management conditions.
In addition, the Auditing Department (consisting of 17
employees) ensures the propriety of operations byconducting accounting and operational audits based oninternal audit regulations and by providing progress reports
to the statutory auditors and the accounting auditor.
The statutory auditors hold regular meetings of the Boardof Statutory Auditors, work with other statutory auditors to
perform their audit duties, and closely cooperate with theaccounting auditors by receiving from them an explanationof the audit plan at the start of the fiscal year, assessing
audit operations during the fiscal year as appropriate, andreceiving a report of audit results at the end of the fiscal year.
The names of the certified public accountants who
performed the accounting audits, the audit firms they are
employed by, and their assistants in the audit work are as
follows:

Synopsis of
Performance

minimize losses to the DNP Group. Certain divisions anddirectors are promptly established and appointed for
responding to risks that have newly developed.

(3) Development of a risk management structure
To manage risks related to compliance, information security,
the environment, disasters, product safety, insider tradingand export management, the Corporate Ethics Committee,
other special committees, and other head office divisions
develop rules and conduct training as part of risk-related
preemptive efforts, and respond promptly to avert or(5) A diagram of the corporate governance structure illustrating points (1) – (4) above is shown below.
General Meeting of Shareholders
Audit

Audit

Board of Directors

Corporate GovernanceManagement Committee
Representative Directors
ReportingCorporate Ethics Committee
Open Door Room
Directors in charge

ReportingInformation Disclosure Committee

Environmental Committee
Complaint Handling Committee

Assistance

Audit unit

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

Corporate Social Responsibility Committee

Financial Section

Guidance

Legal and other main divisions

Guidance
Training(Autonomous implementation, inspection,
review, improvement)

Audit

Central Disaster Prevention Council

Reporting

How DNP Works to
Achieve Sustainable
Development

Audit

Product Safety Committee

Board of Statutory Auditors

Group companies

Audit

Information Security Committee
Auditing Department

Divisions

Insider Trading Prevention Committee

Oversight of internal controls

Head office

Operating units

Accounting Auditors

Corporate officers

Audit

DNP's Businesses(4) Progress on other corporate governance measures
DNP set down the DNP Group Code of Conduct for
employees to follow, so as to contribute to the prosperity
and solid development of society, promote fair andappropriate corporate activity, protect the environment,
contribute to society, and establish a free and lively
corporate culture. Among the stipulations is that DNP, as an
emergently evolving company that does not do businesswith antisocial elements, fulfill its corporate responsibilities tosociety, respect its shareholders, customers, consumers,
employees and other stakeholders, and act in a way thatearns trust.

Special Feature:
DNP's Growth Strategies

accounting audits
Senior partners and managing partners
Hirofumi Nikaido, Kazuhiko Terada,
Tsuguhiro Tsukakoshi, Junko Shima● Audit firm
Meiji Audit Corporation● Number of accounting audit assistants
11 certified public accountants, 9 others

To Our Shareholders● Certified public accountants who performed the

Audit
Guidance
ReportingAppendix

Coordination(6) Interests between DNP and its outside directors andoutside statutory auditors
DNP has one outside director and three outside statutory
auditors. The role of outside directors is to supervise insidedirectors and contribute to improving the transparency andaccountability of the Board of Directors by providing
management advice based on their judgment. The role of

DNP Annual Report 2012 〉 Corporate Governance63

outside statutory auditors is to enhance the propriety ofaccounting and operational audits and to supervise
management.
DNP does not have any standards of independence forappointing outside directors and outside statutory auditors,
but to avoid conflicts of interest with general shareholders, it
references the standards of independence for independent
officers as stipulated by financial instruments exchanges.
Outside director Tadao Tsukada is designated as anindependent officer and can apply his expertise as an
academic to the business activities of DNP and participate inmanagement decision making from an objective standpoint
as an outside director. Mr. Tsukada owns 2,000 shares of
DNP stock. Mr. Tsukada was a professor at Meiji University.
DNP contributes to support the research of Meiji University
and is contracted by Meiji University to produce printed
material and other items. However, in light of the limited
scale and nature of this business and the limited frequency
and amount of these contributions, DNP believes thatindependence is not affected and that there is no risk ofaffecting the decisions of shareholders and investors.
Outside statutory auditor Shin-ichi Ikeda is designated as
an independent officer and can help bolster auditing basedon a broad knowledge gained from business experience atother companies. Mr. Ikeda owns 2,000 shares of DNP
stock. Mr. Ikeda was previously employed at The Dai-ichi Life
Insurance Co., Ltd. DNP is contracted by The Dai-ichi Life
Insurance Co., Ltd. to produce printed material and otheritems, but in light of the scale and nature of this business,
DNP believes that independence is not affected and that
there is no risk of affecting the decisions of shareholders andinvestors.
Outside statutory auditor Makoto Matsuura is designatedas an independent officer and can help bolster auditing
based on legal expertise as an attorney. Mr. Matsuura waspreviously affiliated with the National Offenders Rehabilitation
Commission, and although DNP does business with theJapanese government, it does not have a business
relationship with the commission and Mr. Matsuura does nothave any direct interests. Consequently, DNP believes thatindependence is not affected and that there is no risk ofaffecting the decisions of shareholders and investors.
Outside statutory auditor Kuniaki Nomura can help bolster
auditing based on legal expertise as an attorney. DNP pays
advisory and other fees to a law firm to which Mr. Nomura
previously belonged (currently, Yanagida & Partners), but as
Mr. Nomura does not have any direct interests and in light of
the nature of this business, DNP believes that there is no riskof affecting the decisions of shareholders and investors.
DNP and its outside director and outside statutory
auditors have concluded agreements that limit the director

64

and auditors' liability for damages within the parameters set
forth in Article 423, Paragraph 1 of Japan's Companies Act,so long as they execute their duties in good faith and without
serious negligence.

(7) Number of directors
DNP's Articles of Incorporation specify that the number ofregular members on the Board of Directors shall be no morethan 20.
(8) Requirements for shareholder approval of director
nominees
DNP's Articles of Incorporation specify that the approval of
director nominees requires the attendance of at least one
third of shareholders with voting rights and a majority of thevotes of these shareholders, and does not depend on
cumulative votes.
(9) Matters to be resolved at the meeting of shareholders
that can be resolved by the Board of Directors
1) Share buybacks
DNP's Articles of Incorporation specify that the Company
may buy back its shares in the open market, in accordancewith Article 165, Paragraph 1 of Japan's Companies Act,
upon approval by the Board of Directors, in accordance with
Article 165, Paragraph 2 of Japan’s Companies Act, to allow
the Company to use capital more efficiently and implement a
flexible capital structure policy in response to changes inbusiness conditions.
2) Exemption of directors from liability
DNP's Articles of Incorporation specify that directors(including former directors) may, by a resolution of the Boardof Directors, in accordance with Article 426, Paragraph 1 ofJapan's Companies Act, be exempted from liabilities in
Article 423, Paragraph 1 of Japan's Companies Act so thatthe directors can sufficiently carry out their expected
responsibilities.
3) Exemption of auditors from liability
DNP's Articles of Incorporation specify that statutory
auditors (including former statutory auditors) may, by aresolution of the Board of Directors, in accordance with
Article 426, Paragraph 1 of Japan's Companies Act, be
exempted from liabilities in Article 423, Paragraph 1 ofJapan's Companies Act so that the statutory auditors cansufficiently carry out their expected responsibilities.
4) Interim dividend
DNP's Articles of Incorporation specify that the Company
may, by a resolution of the Board of Directors, pay amonetary dividend stipulated in Article 454, Paragraph 5 ofSynopsis of
Performance■ Compensation Paid to Directors and Statutory Auditors(1) Total compensation paid by DNP, by category of director/statutory auditor, total compensation
by type, and the number of directors and statutory auditors covered
Category of director/
statutory auditor(excluding outside directors)

Base compensation

Bonus

Number of directors
and statutory
auditors covered

1,397

1,247

150

23

77

77

–

3

89

89

–

6

Statutory auditors(excluding outside auditors)

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

Total
compensation

Company(¥ million)

Total compensation by type (¥ million)
Base compensation

Bonus

287

Dai Nippon Printing Co., Ltd.

266

21

Koichi Takanami

122

Dai Nippon Printing Co., Ltd.

110

11

Satoshi Saruwatari

121

Dai Nippon Printing Co., Ltd.

109

11

Masayoshi Yamada

122

Dai Nippon Printing Co., Ltd.

110

11

(Director)(Director)(Director)

Financial Section(Director)

How DNP Works to
Achieve Sustainable
Development

Yoshitoshi Kitajima

Corporate GovernanceNotes: 1. Bonuses are provisions for bonuses for directors and statutory auditors for the fiscal year.
2. There were 19 internal directors, two internal statutory auditors, one outside director and three outside auditors as of theend of the fiscal year.

DNP's Businesses

Directors

Total compensation by type (¥ million)(¥ million)

Total compensation

Special Feature:
DNP's Growth Strategies(10) Requirements for shareholder approval of special
		resolutions
DNP's Articles of Incorporation specify that the approval of

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

To Our Shareholders

Japan's Companies Act to shareholders of record as of
September 30 of each year and shareholders with actual
stock certificates, so that profits can be flexibly passed on toshareholders.

Notes: 1. Total compensation is shown only for those with compensation of at least 100 million yen.
2. Bonuses of Dai Nippon Printing Co., Ltd. are the amounts expected to be paid as bonuses for the current fiscal year.

DNP Annual Report 2012 〉 Corporate GovernanceAppendix(3) Policies regarding the determination of compensation for directors and statutory auditors
Compensation for directors is calculated within the limits on directors' compensation approved byshareholders at a general meeting, reviewed and discussed by the Management Committee, anddeliberated and decided on by the Board of Directors.
Compensation for each director is determined based on a broad range of factors, including theoperations they are in charge of, their responsibilities, achievements, and contributions.
Compensation for statutory auditors is calculated within the limits on statutory auditors'
compensation, and the compensation of each statutory auditor is determined based on discussions withthe statutory auditor.

65

■ Stockholdings(1) Stocks held for reasons other than for pure investment purposes
No. of stocks: 424
Total on the balance sheet: 115,632 million yen(2) Holding category, company name, number of shares, amount recorded on the balance sheet,and holding purpose of stocks held for reasons other than for pure investment purposes(Previous fiscal year)
Stocks held for reasons other than pure investment purposes
Company name
The Dai-ichi Life Insurance Co., Ltd.

Number ofsharesAmount recordedon balance sheet(¥ million)

Holding purpose

66,066

8,291

Enhance business relationship

Terumo Corporation

1,081,000

4,740

Enhance business relationship

Taisho Pharmaceutical Co., Ltd.

2,309,000

4,156

Enhance business relationshipMizuho Financial Group, Inc.

25,385,680

3,503

Enhance business relationship

Ezaki Glico Co., Ltd.

3,218,348

3,108

Enhance business relationshipNissin Foods Holdings Co., Ltd.

898,7112,635

Enhance business relationshipAsahi Breweries, Ltd.

1,860,029

2,572

Enhance business relationship

Yamato Holdings Co., Ltd.

1,660,600

2,142

Enhance business relationship

Mitsubishi Chemical Holdings Corporation

3,598,790

1,882

Strengthen business allianceToshiba Corporation

4,547,000

1,850

Strengthen business allianceFujifilm Holdings Corporation

685,965

1,767

Enhance business relationshipToyo Suisan Kaisha, Ltd.

794,980

1,435

Enhance business relationship

Aica Kogyo Co., Ltd.

1,293,743

1,410

Enhance business relationship

ROHM Co., Ltd.

265,706

1,384

Enhance business relationship

NuFlare Technology, Inc.

10,0001,355Strengthen business alliance

Lion Corporation

3,140,665

1,328

Enhance business relationship

NSK Ltd.

1,814,000

1,300

Strengthen business alliance

Mitsubishi Electric Corporation

1,300,000

1,276

Enhance business relationship

SMK Corporation

3,200,000

1,235

Enhance business relationship

Nippon Steel Corporation

4,594,768

1,222

Strengthen business alliance

Sapporo Holdings Limited

3,796,388

1,176

Enhance business relationshipShiseido Co., Ltd.

677,619

975

Enhance business relationship

Kurita Water Industries Ltd.

387,000

951

Strengthen business alliance

Meiji Holdings Co., Ltd.

282,200

943

Enhance business relationship

Ushio Inc.

572,957

932

Strengthen business allianceSinfonia Technology Co., Ltd.

3,664,000

923

Strengthen business alliance

Stocks held in trust or other legal entity while retaining voting rights or voting instruction rights

Note:

66

Company name

Number ofsharesAmount recordedon balance sheet(¥ million)

Terumo Corporation

1,930,500

8,465

TV Asahi Corporation

40,3005,234

Astellas Pharma Inc.

913,770

2,814Japan Tobacco Inc.

5,000

1,502

Holding purpose
Hold voting instruction rights forshares in retirement benefit trust
Hold voting instruction rights forshares in retirement benefit trust
Hold voting instruction rights forshares in retirement benefit trust
Hold voting instruction rights forshares in retirement benefit trust

Specified stocks and stocks held in trust with voting rights are not added together when selecting stocks with the largest
amounts as recorded in the balance sheet.

Synopsis of
Performance
To Our Shareholders(Current fiscal year)
Stocks held for reasons other than pure investment purposes
Company name

Number ofsharesAmount recordedon balance sheet(¥ million)

Holding purpose

The Dai-ichi Life Insurance Co., Ltd.

66,066

7,551

Enhance business relationship

4,870

Strengthen business alliance

4,648

Enhance business relationship

Terumo Corporation

1,101,000

4,354

Enhance business relationshipMizuho Financial Group, Inc.

27,134,319

3,663

Enhance business relationshipAsahi Breweries, Ltd.

1,860,029

3,409

Enhance business relationship

Ezaki Glico Co., Ltd.

3,221,314

3,198

Enhance business relationshipNissin Foods Holdings Co., Ltd.

898,711

2,781

Enhance business relationship

Yamato Holdings Co., Ltd.

1,660,600

2,123

Enhance business relationshipToyo Suisan Kaisha, Ltd.

794,980

1,708

Enhance business relationship

1,655

Strengthen business alliance

3,598,790

1,590

Strengthen business alliance

Aica Kogyo Co., Ltd.

1,293,743

1,536

Enhance business relationshipLion Corporation

3,140,665

1,488

Enhance business relationshipFujifilm Holdings Corporation

685,965

1,331

Enhance business relationship

Sapporo Holdings Limited

3,796,388

1,161

Enhance business relationship

NSK Ltd.

1,814,000

1,155

Strengthen business alliance

Yakult Honsha Co., Ltd.

393,000

1,118

Enhance business relationship

ROHM Co., Ltd.

266,501

1,088

Enhance business relationship

CALBEE, Inc.

258,200

1,088

Enhance business relationship

Nippon Steel Corporation

4,594,768

1,043

Strengthen business alliance

Meiji Holdings Co., Ltd.

282,200

1,020

Enhance business relationship

Mitsubishi UFJ Financial Group, Inc.

2,399,760

988

Enhance business relationshipShiseido Co., Ltd.

677,619

967

Enhance business relationship

Mitsubishi Electric Corporation

1,300,000

951

Enhance business relationship

SMK Corporation

3,200,000

918

Enhance business relationship

How DNP Works to
Achieve Sustainable
Development

4,547,000

Corporate GovernanceToshiba Corporation
Mitsubishi Chemical Holdings Corporation

DNP's Businesses

10,000692,700

Special Feature:
DNP's Growth Strategies

NuFlare Technology, Inc.
Taisho Pharmaceutical Co., Ltd.

Stocks held in trust or other legal entity while retaining voting rights or voting instruction rights
Amount recordedon balance sheet(¥ million)

Holding purpose

Terumo Corporation

1,930,500

7,635

Hold voting instruction rights forshares in retirement benefit trust

TV Asahi Corporation

40,3005,436

Hold voting instruction rights forshares in retirement benefit trust

Astellas Pharma Inc.

913,770

3,106

Hold voting instruction rights forshares in retirement benefit trust

Japan Tobacco Inc.

5,000

2,330

Hold voting instruction rights forshares in retirement benefit trust

Specified stocks and stocks held in trust with voting rights are not added together when selecting stocks with the largest
amounts as recorded in the balance sheet.

Appendix

Number ofsharesFinancial Section

Note:

Company name(3) Stocks held for pure investment purposes
None

DNP Annual Report 2012 〉 Corporate Governance672Compensation Paid to Accounting Auditors(1) Compensation paid to accounting auditors
Previous fiscal year
Compensation foraudit certification(¥ million)

Current fiscal year

Compensation forother services(¥ million)

Compensation foraudit certification(¥ million)

Compensation forother services(¥ million)

Dai Nippon Printing Co., Ltd.

83

–

83

–

Consolidated subsidiaries

130

–

126

–

Total

213

–

209

–

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

68Board of Directors, Statutory Auditors and Corporate Officers
Synopsis of
Performance(As of June 28, 2012)

Standing Statutory Auditors

Senior Corporate Officers

Kazumasa Hiroki

Kenji Noguchi

Tatsuya Nishimura

Tetsuji Morino

Minoru Yoneda

Tatsuo Komaki

Executive Vice Presidents

Kunikazu Akishige

Shin-ichi Ikeda*

Tatsuro Kitayuguchi

Koichi Takanami

Motoharu Kitajima

Masayoshi Yamada

Takao Shimizu

Statutory Auditors

Shigemi Furuya

Yoshinari Kitajima

Yoshiki Nozaka

Makoto Matsuura*

Ryuji Minemura

Masaki Tsukada

Kuniaki Nomura*

Masato Koike

Senior Managing Directors

Sakae Hikita

Mitsuhiko Hakii

Fujio Yamazaki

Osamu Tsuchida

Tokuji Kanda

Takashi Saito

Masato Yamaguchi
Corporate Officers

Yujiro Kuroda

Director

Morihiro Muramoto

Masahiko Wada

Tadao Tsukada*

Kenji Miya
Yoshio Ogawa
Toshiki Sugimoto

Corporate Governance*Outside director or auditors

DNP's Businesses

Yasuo Takeda

Teruomi Yoshino

Special Feature:
DNP's Growth Strategies

Managing Directors

Yoshitoshi Kitajima

To Our Shareholders

President

How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

Yoshinari Kitajima

Koichi Takanami

Yoshitoshi Kitajima

Masayoshi Yamada

DNP Annual Report 2012 〉 Corporate Governance 〉 Board of Directors, Statutory Auditors and Corporate Officers

69How DNP Works to Achieve
Sustainable Development
CONTENTS
72 Research and Development / Intellectual Property
74 Compliance with Law and Social Ethics
75 Safety and Quality Assurance of Products and Services
76 Information Security
77 Business Continuity
78 Environmental Conservation and Expansion of Eco-Business
82 Brand Management
83 Topics

Through its business activities, DNP solves problems faced by corporations, consumers, andsociety as a whole in order to realize sustainable growth as a company that has the public’s
trust. Toward that end, DNP strives to simultaneously fulfill three corporate responsibilities:
providing society with new value (i.e. useful products and services), acting in good faith (i.e.
executing business processes fairly and equitably), and demonstrating a high degree oftransparency and accountability.
DNP’s business activities constitute social contributions in and of themselves. We work at
expanding our business based on the premise that the products and services that we supply willlead to the resolution of a variety of problems. As we do so, in addition to developing products
and services, we strive to increase corporate value while keeping in mind a number of important
themes such as research and development, creation of intellectual property, compliance withthe law and social ethics, ensuring the safety and quality of products and services, information
security, ensuring business continuity, human resource development, environmental
preservation, and brand management. Our efforts in these areas have attracted publicrecognition as evidenced by the inclusion of DNP shares in several major socially responsible
investment indices. Below is a list of those that included DNP shares as of May 2012.
○ Dow Jones Sustainability Indexes○ FTSE4Good○ ETHIBEL PIONEER & EXCELLENCE○ Morningstar Socially Responsible Investment Index

70

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

71Research and Development / Intellectual Property

Research and development are extremely important for DNP since our business vision entails providing P&I Solutions and expanding
our business by applying and developing printing and information technologies. Especially in today’s rapidly changing world, we needto take a consumers’ point of view, look carefully at what is happening in society, and be quick to discern where and what problems
exist and which technologies are needed to solve them. In order to accelerate technological development, we actively pursue
alliances with other companies that have special strengths rather than relying solely on DNP’s original technologies. In addition toinventing products and services, DNP also innovates new business models. It is important to secure and manage our rights to theresulting intellectual property so that we can benefit appropriately.
We will further strengthen our research and development and intellectual property management functions in order to increase
DNP’s corporate value when we bring to market, before other companies do, the products and services sought by corporate clients,
consumers and society.

Investment in Research and Development
DNP conducts many types of research and development,
including new business creation, new product and service
development, and production technology development.
Continuous investment in research and development isimportant for increasing DNP’s corporate value in the medium
and long term. In the fiscal year through March 2012, DNP
invested 31.7 billion yen (compared to 33.1 billion yen in theprevious fiscal term), or roughly 2% of consolidated net sales, inresearch and development. These funds are used to support afull range of research and development activities including
long-term (up to five years) basic research, medium-term (up to
three years) production technology development, and shortterm (up to one year) development of new products andtechnologies.

Research and Development Expenditures(¥ billion)
40

30

20

10

0

03

04

05

06

07

08

09

10

11

12

Intellectual Property Strategies
In order to raise the DNP Group's overall level of skills related tointellectual property generation and use, we conduct training
sessions that cover every aspect of intellectual property frombasic knowledge to application. At the same time that we
promote the acquisition of our own strong rights, we foster a
corporate culture of fairness that also respects the rights ofothers, and a corporate climate of compliance with legal
regulations and social ethics.
Among other efforts aimed at increasing the value ofintellectual property to DNP's business, we work to enhance
Number of Patent Disclosures

Number of Patents and Utility Model Rights Held(case)(case)

800

4,000

700

3,500

(3)

600

(3)

3,000

(1)

500

2,500

(1)
(2)

2,000

400
■

300

■

200

(2)
(4)

100

(5)

■

0

■

■

07

72

DNP’s patent portfolio, pursue the strategic filing of patentapplications, improve the quality of patent specifications, andfulfill relevant legal obligations.
In addition to sending representatives to an intellectual
property-related association where we actively make proposals,
DNP also offers proactive support to our clients through suchactivities as sponsoring seminars or proposing projects related
to copyrights, premiums and representations, and/or trademark
laws, etc.

08

09

10

11

(1) Basic Research(2) Information Communication(3) Lifestyle and Industrial Supplies(4) Electronics(5) Other(calendar year)

1,500
1,000

(4)

500

(5)

■

■

■

0

■

■

08

09

10

11

12

(1) Basic Research(2) Information Communication(3) Lifestyle and Industrial Supplies(4) Electronics(5) OtherSynopsis of
Performancelaboratories of DNP's head office: Research and Development
Center, Electronic Systems Center, Technology Development
Center, and Hub of Social Innovation. In their effort to create
new value, the laboratories cooperate closely not only withlaboratories and technical units within each operating segment,
but also with sales, planning, and manufacturing units.

Controlled by Head OfficeControlled by Business Units

Books and Magazines
Information
Communication

Commercial Printing

Lifestyle andIndustrial Supplies

Advanced Optics
Information Media Supplies

Fine Electronics

Packaging Laboratory
Lifestyle Materials Laboratory
Advanced Optics Laboratory
Information Media Supplies Laboratory
Energy Systems Laboratory

Commercialization projects

New Business Fields

Functions and Time Frames of R&D Facilities
R&D facility

Function

Corporate Governance

Energy Systems
Electronics

Hub of Social Innovation

Packaging
Lifestyle Materials

Electronic Systems Center

IPS/Business Forms

DNP's Businesses

Technology Development Center

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

Technical section of each operations

Corporate R&D Division

R&D for new products
and technologies

Research and Development Center

Development
supportProduction
technologies;
equipment
development

Special Feature:
DNP's Growth Strategies

DNP’s research and development section develops originaltechnologies that lead to the resolution of a variety of problems
in a wide range of fields. In addition to building up new
businesses around these original technologies, we have createda flexible framework that leaves room for forming alliances withother companies that possess technological strengths.
Specifically, this framework consists mainly of four

To Our Shareholders

Framework for Research and Development

Development term

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

Electronic Systems Center

Develops technologies, products and services related to electronic systems

Hub of Social Innovation

Research and development of value-creating businesses that will lead to solving social problems

Technology Development Center

Researches and develops production technologies

Medium to long term(less than three to five years)
Medium term(less than three years)

Researches and develops surface materials for interior and exterior building décor

Advanced Optics Laboratory

Researches and develops optical materials

Information Media Supplies Laboratory

Researches and develops all kinds of information media

Energy Systems Laboratory

Researches and develops energy-related components

Short term(less than one year)

Financial Section

Develops packaging materials technologies, and freshness preservation technologies

Lifestyle Materials Laboratory

New ProductDevelopment

Business Unit
Laboratories

Packaging Laboratory

How DNP Works to
Achieve Sustainable
Development

Head Office
Research Centers

Research and Development Center

Appendix

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

73

Compliance with Law and Social Ethics

Over the years, the DNP Group has cultivated a reputation for reliability and integrity in the communities that surround it. In order toestablish that reputation even more solidly, we make a point of constantly reviewing and steadily implementing initiatives aimed atmaintaining corporate ethics.
Each and every employee's conscientious behavior makes it possible for DNP to win the trust of the surrounding society. We impress
upon our employees the importance of corporate ethics and urge them to take responsibility for their own actions from a positive
perspective, by emphasizing that the DNP Group can develop in a sustainable manner only if it is trusted.
The entire DNP Group shares the same basic stance toward maintaining corporate ethics, a stance that is expressed in three simple
terms: continuity, autonomy, and positivity.

Key concepts underlying DNP's compliance-related activities
Continuity

Legal and ethical compliance is part of the fabric of our normal business operations; something we keep working at every day

AutonomyCompliance is not "someone else's problem"; each one of us actively takes upon ourselves responsibility for legal and ethical action

Positivity

In order to be trusted by society, we take a positive, active stance toward legal and ethical behavior, which we view as essential to our
corporate GroupDNP has established a "Corporate Ethics Committee,"composed of Directors and executive officers in charge of ourhead office and each business unit. This committee is in chargeof disseminating and instilling corporate ethics throughout the

DNP Group.
Each business unit and Group company also has its own
corporate ethics committee, so that the entire Group can work
together to promote ethical corporate behavior.

Systems for Promoting Absolute Corporate Ethics
Head Office
Corporate Ethics Committee
5. Open Door RoomOperating Units
Examination
・Guidance・
Education

6. Supplier Hotline

3. Compliance assessment system(1) Regular training sessions according toemployee level(2) Self-directed corporate ethics training(3) Training related to individual themes74

1. Management-by-objectives
evaluation system
examination of rules
2. Autonomousand laws

1. Management-by-objectives
evaluation system

4. Corporate ethics training

Corporate Ethics Committee

Reporting

Plan

Do

ActionCheck

4. Corporate ethics training(1) Regular training sessions according toemployee level(2) Self-directed corporate ethics training

Management-by-objectives
evaluation system

In order to increase the awareness of each and every employee, we included corporate ethics as one of the selfassessment categories in our "management-by-objectives evaluation system" (evaluation-based compensation
system).

Autonomous examination ofrules and laws

Each business unit and Group company does its own examination and assessment according to a checklist preparedby the relevant section of the head office, and devises its own improvement measures as needed. We have beenusing this system since 1997, based on the idea that people should guard their own organization by themselves.

Compliance assessment
systemIn 2005 we adopted a system whereby the relevant section of the head office evaluates each business unit andGroup company according to standards shared by the entire DNP Group. These evaluations are conducted regularly,
twice a year.

Corporate ethics training

We believe that our corporate ethics initiatives will be more certain to succeed when each and every employee has
a strong awareness and correct understanding of the issues involved. Therefore, we organize various occasions foreducation and training.

Open Door Room

We established the Open Door Room in 2002 as a way for employees to bring questions and reports related tocorporate ethics. We established "DNP Group Open Door Room Operating Standards" to ensure that employees canconsult and report without fear of repercussions.

Supplier Hotline

In 2009, we established our "Supplier Hotline" to give suppliers an avenue for providing information in the event thatin their dealings with the DNP Group, they become aware of any illicit acts (or behavior that suggests the possibilityof illicit action) on the part of an employee or someone else connected with DNP.

Safety and Quality Assurance of Products and Services
Synopsis of
Performance

Quality Improvement Measures

DNP Group
Quality Policy

1. Based on the catchphrase, "P&I Solutions DNP," we combine printing technologies and information
technologies to provide products and services of world-class quality that solve our customers' problems.
By maintaining and improving the quality of our products and services, we gain our customers' trust.
2. We make it our mission to provide products and services that are safe to use and gentle on the environment.
Through a variety of corporate activities, we aim to minimize the burden that we place on the environment.

4. In order to meet these goals, all of our employees work together and engage in regular taiwa , both witheach other and with people outside the Company. By "looking carefully, listening carefully, and thinking
carefully," we intend to maintain and continuously improve the quality assurance systems that enable us tosatisfy our customers on an ongoing basis.

DNP's Businesses

3. We develop the world's most advanced manufacturing technologies and construct production systems thatmeet the world's highest standards for efficiency.

Special Feature:
DNP's Growth Strategies

The DNP Group provides safe and reliable products and services that meet the world's highest standards for quality. In order tomaintain and improve the quality of our products and services, DNP established a "Quality Policy" in 2005.

To Our Shareholders

Because DNP is responsible for the quality and safety of the goods and services that we supply to society, we are aware of theimportance of measures that ensure quality and safety. The entire DNP corporate group works together to provide society with products
and services that are safe and easy for consumers to use.

Production 21 Activities
At the same time that we encourage activities aimed at improving
manufacturing, we aim for overall optimization of the customer's
experience, from order placement to delivery. To achieve this, we
focus on improving every business unit, from those that receive
input from customers (planning and development, sales, etc.) tothose that deliver output (manufacturing, logistics, etc.), always
basing our activities on the customer's point of view.

DNP Group Product Safety Policy
We established the DNP Group Product Safety Policy in 1994, in order to provide products that exceed our customers' expectations for
product safety, and we have been working ever since to ensure the safety of our products.

Manufacturing process design
Compilation of product safety proceduresConstruction of mechanisms for
ensuring safety

Product design changes

Review of product safety procedures

DNP Group
Product Safety
Regulations

Review of mechanisms for ensuring
product safety
Examination of mechanisms for
ensuring product safety

Risk assessment of product lineup

Manufacturing andcontrol basedon product safety procedures

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

Appendix

Improvement of manufacturing processes

The DNP Group Product Safety Committee establishes
rules and guidelines concerning product safety, andinforms the Group about them. The Product Safety
Committees in each operation and Group company thenestablish product safety control systems based uponthese rules and guidelines, and conduct safety efforts.
Given the importance of continuous product safety
efforts, we conduct regular (twice annual) checks ofthe product safety systems, and risk evaluations of
all product lines. Based upon the results, we makerevisions to the control system, alter product design,
or make improvements to the manufacturing processes,
so as to ensure a greater level of safety.

Financial Section

Product Safety Control System
Product design

How DNP Works to
Achieve Sustainable
Development

Measures to Ensure Product Safety

Corporate GovernanceEvery employee in every DNP Group business unit participatesin "Production 21 Activities" in order to create a lean, toughmanufacturing constitution capable of adapting to structural
market changes. By quantifying goals related to quality, cost,
turnaround time, environmental activities, and performanceindicators, and by communicating these numerical goals to every
employee, we aim to eliminate waste and achieve our goals.

75

Information Security

It goes without saying that every company is responsible forappropriately managing consumers' personal information andclient companies' important information in the course of its
business operations. Because DNP views complete information
security as one of its most important management priorities, we
maintain continuous and strict control over information assets.
As a framework for managing information security, the DNPGroup Information Security Committee in our head officecreated a Personal Information Protection Office and had each
operating unit (business unit or Group company) establish its
own information security committee. DNP has also been active in
gaining official recognition for its information protection systems,
for example by establishing a personal information management
system based on Japanese Industrial Standards' "Personal
Information Protection Management Systems-Requirements"
Information Security Management System
Head office(JISQ15001), and by acquiring and maintaining Privacy Markcertification for workplaces that handle sensitive information. In
addition to organizing group training sessions and online courses
to teach each one of our employees to be more aware of security
maintenance, DNP also actively employs cutting-edge security
equipment to guard information. For example, we have introduced
security gates that work with smart employee ID cards, as well as
access control systems that use those same smart employee ID
cards to control access to personal computers.
Through initiatives like these, DNP has accumulated a gooddeal of expertise in the area of information security. We havebuilt up our security solutions business by developing a variety
of security-related products and services that we provide tocorporate clients.

The Most Up-To-Date Security Equipment
Level 5High-security Zone

Level 4Work ZoneDNP Group Information
Security Committee

Level 3

Employee Commons
Zone

Level 2
Guest Zone

Level 1
Outdoor Zone

Chairperson, Personal Information Protection Coordinator,
Committee members

Information Protection Office

Framework for promoting information security
within Group companies and business units⑤Terminals with sealed media
output ports⑥Labeling of terminals withrestricted media output②Biometric entry/exit
control system

Information Security Committees
Chairperson, Personal Information Protection Coordinator(Business unit directors, Group company presidents)

Inspectors
Information Security Headquarters Director③Revolving gate
①Security gate
system④Dedicated portal for
media transfer

Information Security Managers
Trainers
Security zone protection coordinators
Public relations officer
Information Systems Security Coordinator

Smart employee
ID card required
Surveillancecameras76

Entry/exit
control

Human detection
sensors

Fax/copy machineuser control
Magnet sensors;
glass breakage
sensors

Humansecurity
guard

Infrared sensors

Business Continuity
Synopsis of
Performance

Basic Approach and Organization

Review and Improvement
In the aftermath of the Tohoku-Pacific Ocean Earthquake, we took a fresh look at how to ensure the safety of DNP employees, securestable supplies of electrical power, and maintain business continuity, etc. As a result, we took the following steps in 2011.

Preventive measures● Inspection and reinforcement of buildings and equipment ● Stocked up on equipment and supplies, including helmets,
emergency food, and drinking water● Secured emergency power supplies; promoted the use of● Backed up information systems and IT networks;
emergency earthquake warnings, etc.
prepared alternative systems, etc.

Improved education andtraining● Distributed disaster preparedness handbooks for both workplace and home use ● Practiced using an "emergency call system"
for confirming the safety of each employee● Conducted all types of emergency drills at each workplace● Held disaster preparedness seminars, with participation from about 650 employees

DNP Group Central Disaster Prevention Council

2010

DNP Group Basic Code for Disaster Response
DNP Group Basic Plan for Disaster Response
DNP Group main measures for responding tomajor earthquakes

Reinforcement of disaster preparedness systems
and management

Earthquake response and recovery measures
Response to disaster prevention issues
that emerged as a result of the earthquake

Company-wide
emergency
communication training"Tokyo Epicentral Earthquake and Corporate Disaster Prevention"

Emergency operating plans
and BCPs for fiscal year
through March 2012

Establishment of disaster response headquarters● Analysis of casualties and damages resulting

from Tohoku-Pacific Ocean Earthquake;

Earthquake measures aimed at minimizing losses
Response ● Comprehensive examination of disaster risks● Preparation and implementation of emergency
CouncilAutonomous inspection ofdisaster preparedness in fiscal term
through March 2012

Distribution of "Disaster Preparedness Handbook"
Improve in-house disaster prevention
measures in line with national orregional governments' damage estimatesor revised emergency measures

Disaster
preparedness
seminar"Future earthquake countermeasures
based on the lessons of
the Tohoku-Pacific Ocean Earthquake"

Emergency operating plans
and BCPs for fiscal year
through March 2013

Inspection andreinforcement ofbuildingsand equipment

Company-wide drill topractice confirming
employee safety

Stocking up on
emergency supplies
and equipment

Comprehensive
disaster prevention
training

Appendix

operating plans

Implementation of
preventative measuresaccording to plan

● Review of BCPs

2012

Comprehensive
disasterprevention training

Disaster management

Financial Section

Revision of disaster prevention mechanisms

Central Disaster Response Headquarters
activities

2011

Disaster Prevention Council of each business unit and Group company

Disaster preparedness seminar:

March 11 Tohoku-Pacific Ocean Earthquake

How DNP Works to
Achieve Sustainable
Development● Confirmed existence of disaster response headquarters ● Reviewed each disaster response headquarters' action plan
● Put in place satellite telephones or other methods of emergency communication and systems for confirming
the safety of DNP employees

Corporate Governance

Enhanced emergency
response systems

DNP's Businesses

Our experiences with the Tohoku-Pacific Ocean Earthquake
renewed our awareness of the importance of having up-todate business continuity plans (BCPs). In the course of our daily
operations, we take appropriate preventative measures based ona correct awareness of the possibility that disaster could strike.
Our basic approach is (1) to give priority to measures aimed atensuring human safety in the event of an emergency, and (2) toincrease the company's ability to cope with and recover fromdisastrous events.

Special Feature:
DNP's Growth Strategies

We established the DNP Group Central Disaster Prevention
Council to create and promote basic disaster prevention
measures for the entire DNP Group. Each business unit andGroup company has established its own disaster prevention
council to promote measures that suit its own particularcharacteristics and circumstances. We also established regional
disaster councils to promote cooperative measures within eachgeographical region. Each of these councils has prepared plans
and measures for coping with emergency situations.

To Our Shareholders

In order to increase the DNP Group's overall disaster preparedness, we established the "DNP Group Basic Code for Disaster
Response." Aiming for a "disaster-proof DNP Group," we implement disaster prevention and preparedness measures on a daily basis
in line with our disaster prevention plan. We also prepared a business continuity plan (BCP) to help us restore operations as quickly as
possible in the event of a major disaster.

Regularlife-saving courses

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

77Environmental Conservation and Expansion of Eco-Business

Establishment and Operation of Environmental Management Systems
As a company that provides products and services to solve
the problems of businesses, consumers, and society, DNP
views coexisting with the Earth's environment as an importantmanagement task. Our mission is to coexist with nature andpass on the Earth to the next generation without wasting its
limited resources. We implement specific measures in Japan andoverseas in line with our basic environmental policies—"preserve
the Earth's environment," and "use resources effectively." DNP
reduces the negative effects of its business activities on theenvironment to the absolute minimum. In addition to using
resources effectively, we are working harder than ever on thedevelopment of eco-friendly products.
DNP's environmental management framework consists of
the DNP Group Environmental Committee, which establishesGroup-wide environmental policies and plans and monitors
progress towards the achievement of goals, and each business
unit's environmental committee, which takes specific actions inaccordance with the characteristics of its field of business.

DNP provides diverse products and services. The main raw materials that we use are paper, film, resins, metals including steel andaluminum, and ink. Following are the special characteristics of each of our business segments.
Information Communication

Manufactures printed materials including magazines, books, commercial printed matterand business forms, primarily using offset printing; uses a large amount of printing paper.

Lifestyle and Industrial Supplies

Manufactures packaging and decorative materials, optical films and color ink ribbons, etc.,
using such processes as gravure printing, coating, and lamination; uses large quantities ofplastic films and solvents, etc.

Electronics

Manufactures products like LCD color filters and semiconductor photomasks by applying
etching and photolithography technologies; uses a large amount of water for washingproducts.

President
DNP Group Environmental Committee

13 members
Promotion Office

27 members

Each business unit’s
environmental committee

298 members
Promotion Office

142 members(1) Determines Group-wide environmental policies, goals, and plans(2) Approves policies, goals, and plans made by each business unit's environmental committee(3) Monitors implementation of plans and achievement of goals by each business unit's environmental
committee(1) Proposes environmental policies, goals, and plans for the DNP Group; reports to the Committee(2) Communicates the environmental policies, goals, and plans determined by the DNP Group
Environmental Committee to each business unit's environmental committee; monitors each unit's progressand supports their activities(3) Reports to the DNP Group Environmental Committee regarding progress (results, implementation ofpolicies, etc.) achieved by each business unit's environmental committee(1) Discusses and determines the business unit's own environmental policies, goals, and plans(2) Monitors implementation of the business unit's own plans and achievement of its goals(3) Convenes regular committee meetings(1) Drafts environmental policies, targets, and plans and submits them to the business unit's environmental
committee(2) Communicates environmental policies, goals, and plans determined by the committee to all workplaces;monitors implementation(3) Reports to its committee regarding progress (results, progress of the measures, etc.) being achieved by all
workplaces
Technical / Production Group

Eco-friendly Product Development GroupRegional Action Group

Environmental Preservation / VOC Group

Office / Working Environment Group

Industrial Waste Reduction Group
Energy-Saving Group

Each business unit’s workplaces78

Total: 964 members

Synopsis of
Performance

Code of Conduct

DNP's Businesses

Management Concept

1996. Our EMS is the basis for the environmental management
activities that we perform every six months in the form of"Plan-Do-Check-Action" cycles.
In order to further increase the effectiveness of our EMS,
in 1996 we began conducting Eco-Audits. In the event that anaudit reveals the need for corrective action, the DNP Group
Environmental Committee sends a written request to therelevant operational base and receives a written response.
Through activities such as Eco-audits and regular issuance of"Eco-Reports," DNP keeps its business activities in line with
relevant laws and regulations. We have also established and do
our best to strictly observe our own voluntary standards (for air
quality, water quality, noise, vibration, and odor generation), andvoluntary guidelines (for chemical substance management andsoil contamination measures), which exceed legal requirements.

Special Feature:
DNP's Growth Strategies

DNP was among the first Japanese printing companies to takeaction to protect the environment. In 1972, we became the firstcompany in our industry to establish a special section toaddress environmental issues (currently the Environmental
Safety Department), and to initiate antipollution measures andtaiwa with residents of local communities. From 1990 on,
we have also focused on global-level environmental issues.
We created our own environmental management system (EMS)
in 1993, even before the International Organization forStandardization published its ISO14001 EMS standards in

To Our Shareholders

Environmental Management System

DNP

DNP Group Environmental Committee
Environmental Vision

Man

PLAN

ACTIONDNP Group
Eco-Report

Environmental committee foreach workplace (60 workplaces)

DO

Give instructions
for improvement

Workplaceenvironmental
committee
implementation
report

CHECK
Submissionof workplace
Eco-Reports

PLAN

ACTION

Workplace
Eco-Report

CHECK
Approval ofcommittee head

Explanation of Eco-Reports

DO

Workplace
Eco-Reportenvironmental
goals

Environmental
activities

D
m
Impl

Compilation ofenvironmental
regulations

Workplaceeco-report:
Monthlyreport ofworkplace
activities

Internal environmental audits (Eco-Audits)

Financial Section

Approval ofCommittee
ChairmanSet goals forworkplace

Workplace
Eco-Report
evaluation;planning fornext fiscal term

Protecting Biodiversity
greening" and "procuring raw materials" as important themesthat are highly dependent on, and at the same time have asignificant impact on, ecological systems, and we are taking
concrete steps to address these areas.

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

Appendix

In the fiscal year ended March 2012, we gave new thought to theconnection between biodiversity and all of our business activities,
including product development, materials procurement,
manufacturing, sales, and even the usage and disposal of DNP
products by customers. As a result, we designated "workplaceCo

How DNP Works to
Achieve Sustainable
Development

Give instructions
for improvement

Corporate Governance

Workplace
Eco-Report
Action Plan

• Set Group-wide environmental goals• Determine workplace Eco-Report formats

79Conserving Energy by Making Consumption "Visible"
DNP has helped make energy consumption "visible" by meansof a system that we introduced in 2009. As part of our efforts to
reduce the amount of energy consumed through production
activities, to extract energy wastage and to optimize
manufacturing conditions, DNP has installed devices formonitoring power usage by production equipment at about 70
of its operating locations throughout Japan.
We used the results that we had achieved as of August 2011

to develop a comprehensive energy consumption management
system that covers every step from planning an operating
location's energy-saving measures to verifying the effectivenessof adopted measures. The system is designed to support
Plan-Do-Check-Action (PDCA) cycles for improving energysaving activities. By implementing more effective measures at
each operating location, we constructed a system for efficiently
promoting energy conservation.

DNP's Total Energy Conservation Management System:
Four Subsystems

PLAN

Management Displays 350 energy-saving measures inorder of their effectiveness; management is implemented
by selecting appropriate measures and inputting progress
at relevant intervals
Analysis Identifies energy wastage points based on
analysis (measurement, etc.) of energy consumption;suggests optimal countermeasures tailored to each factoryor piece of production equipment

Set
SelectExtract
numerical measures to measurestargets implement

ACTIONeach operating location
Reconsider
measures

Visibility Compiles energy usage data gathered frommonitoring devices installed on production equipment;
analyzes results in relation to operating conditions, etc.

DO
Energy-saving activities at

Consideradditional
measures

Simulation Calculates the effectiveness of various
measures, such as switching to more efficient machineryor changing operating conditions, and determines which
are most appropriate(PDCA cycle)

Predict effectiveness of measures▼

Implement measures

CHECK

Confirm
status ofprogress

Input andmanage progressstatusFiscal year ended March 2012: DNP receives a special award as part of the Energy Conservation Grand Prize
The Energy Conservation Center,
Japan sponsors an Energy
Conservation Grand Prize whereby
each year it recognizes companies,
governments, schools and otherinstitutions for outstanding energy
conservation activities or advances inenergy-saving products based ontechnological developments, etc.
DNP achieved major reductions inenergy usage after developing asystem for reducing energy
consumption in laser lithography, oneof the processes used on the80

semiconductor photomask productionlines at our Kamifukuoka Plant inFujimi, Saitama Prefecture. In
recognition of this achievement, wewere awarded a special prize for
Excellent Energy Conservation
activities as part of the Energy
Conservation Grand Prize program forthe fiscal year ended March 2012.
DNP will apply this award-winningenergy-saving system to its otherphotomask production plants, and willcontinue to actively engage inminimizing energy consumption.

Synopsis of
Performance

Product Development Guidelines" amounted to 336.0
billion yen, compared with 318.0 billion yen a year earlier.
By increasing our efforts in this area, we plan to boost
sales of eco-friendly products and services to 400.0 billion
yen in the fiscal term through March 2016.

Special Feature:
DNP's Growth Strategies

DNP is working to reduce the burden that our products
place on the environment in every phase of their life cycle:
from design and development to manufacturing,
distribution, consumption, disposal, and recycling. In thefiscal year through March 2012, sales of products
developed according to DNP's "Environmentally Conscious

2 Conserving resources and energy

3 Use of sustainable materials

Energy-saving products and systems; reducing
consumption of metal resources and fossil fuels

Sustainable use of natural resources

Example ● Resin Black Matrix Color Filters

Example ● Elbow Pouch

Example ● Biomatek PET, PE

We make LCD color
filters using film insteadof heavy metal forthe black matrix.
By developing thisproduct, we reduced
negative impact on
the environment andlowered costs at thesame time.

A refill pouch that iseasier to open andeasier to pour from.
Conserves resources
used for making
products containers;
collapses after use for
efficient disposal.

Part of the raw material
in this product is derived
from plants. In addition
to helping reduce
emissions of CO 2, which
is a greenhouse gas, it
can also reduce usageof petroleum, which isan exhaustible resource.

4 Enabling long-term use

5 Reusability

6 Recyclability

Supporting long-term product use by simplifying repairs
and parts replacement, offering long-term maintenanceand repair services, allowing for expansion of functionality,etc.

In the case of parts, consideration for ease ofdisassembly, washing, refilling etc; establishment of
convenient collection and reuse systems

Making products from easy-to-recycle materials,
designing them for ease of disassembly and sorting into
different materials, or creating collection and recycling
systems that are easy for consumers to use

Example ● Safmalle

Example ● Easily removable shipping labels

Example ● Eco-friendly calendar

DNP's original olefinbased decorative sheet
for use in carpentry
work including homefittings such as door andwindow frames provides
a solution to consumers'
need for healthy, clean,safe living spaces.

Shipping labels thatstick well to paper or
cardboard packaging but
come off easily. Singleply shipping labels save
paper, leave no marks
when removed, facilitating
reuse of boxes and otherpacking materials.

Calendars made ofrecycled paper and ecofriendly ink. Because
the calendars areprocessed without theuse of metal or plastic,
they do not need to betaken apart and sorted
after use.

7 Use of recycled materials

8 Ease of processing and disposal

Products made with a significant amount of recycled orreused materials or parts

Placing minimal burden on waste incinerators and landfills

150

Example ● Magazines and pamphlets

Example ● IB (Innovative Barrier) film

120

Sales of DNP’s Eco-friendly Products(¥ billion)(2)

Financial Section

(3)

90
60

(4)
(1)

30

Appendix

Transparent, moistureproof packaging film ismade without chemicals
that contain chlorine, so
it does not emit dioxins
when burned. It is used to
package a large numberof food products, toiletries
and everyday items that
require good barrier
protection.

How DNP Works to
Achieve Sustainable
Development

Printed materials
made of recycled
paper, containing
used magazines ornewspapers, etc. We
are also using moreenvironmentally friendly
inks, such as soy ink
and non-VOC ink.

Corporate Governancemade of recycled paper

DNP's Businesses

1 Reducing environmental pollutants
Eliminating ozone-depleting substances, heavy metals,
and organic chlorides; reducing the release of substances
like nitrogen oxides into the environmentBM

To Our Shareholders

Development of Environmentally Conscious Products

0

08

09

10

11

12

■

(1) Information Communication■(3) Electronics■(2) Lifestyle and Industrial Supplies■(4) Other

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

81Brand Management

Improving Corporate Value by Making the Most of Branding
DNP operates businesses in Japan and abroad, based on our
corporate vision of providing "P&I Solutions." In addition to sellingto corporate clients, we also engage in "B to C" business thatinvolves communicating directly with consumers. Therefore it has
become increasingly important to increase the value of the DNP

corporate brand as well as the brands of products and services
that we offer. We will continue to work to strategically cultivate
DNP's brand strength, based on our belief that building brands
that are supported by corporate clients and consumers will resultin increased corporate value.

Examples of DNP's B to C Businesses"honto"hybrid bookstore network"Orikomio!"
e-flyer service

Internet-based point service"Elne"

Photobook compilation service"DreamPages"

Self-service printing systems"PrintRush"

DNP's Corporate Brand and "DNPenguin"
The DNP corporate brand applies to every business activity that
we engage in. In order to increase the value of the products andservices that we offer, the DNP brand must make its way into theawareness of corporations and consumers.
We launched a new corporate mascot called "DNPenguin,"with the goal of increasing contact with consumers and raising
our corporate brand value. We will make effective use of thischaracter in newspaper and television advertising, on our
website, and elsewhere, in an effort to express the appeal of our
DNP corporate brand.

Launched a corporate image advertising campaign featuring a friendly new mascot (May 2012)

A friendly new mascot that we call
"DNPenguin" (dee en penguin), which
introduces DNP's products, services, andcorporate activities in easy-to-understandterms. Besides using this character innewspaper and television advertising,
DNPenguin will introduce "DNP Topics" on
our website, and will amuse consumers
through original products like DNPenguin
wallpaper.

Further Initiatives
We devised four "brand policies" aimed at winning support from corporate clients and consumers to help DNP continue growing in thelong term.
● Enhance brand management● Create category brands applied horizontally across business divisions● ● Identify criteria for bestowing brands● ● Develop brand-related communication
Based on these policies, we intend to increase the value of our corporate brand, and that of brands attached to our products andservices.

82Topics
Synopsis of
Performance

In our view, advanced printing technologies are new creative techniques that contribute to the development of arts andcultures. DNP engages in highly original cultural activities, primarily focused on supporting graphic art.
ggg's 25th anniversary

A place where people can experiencethe mysterious result of collaboration:
printing x graphic design

How DNP Works to
Achieve Sustainable
Development

ggg has organized a variety of activities related to themes
like "Close Encounters with Graphic Design" or "Preserving andPassing on the Sensibilities of a Generation." Exhibitions that allow
one to feel the power of an entire room full of original works, or torelish the precision of details viewed from up close; "gallery talks"(also broadcast via the Internet) that reveal an artist's personal
points of view; more than 100 gggBooks collections (paperand e-books) of the works of single artists, each brimming withoriginality. In addition to these types of projects, we feel that an
important aspect of ggg's mission is to collect, and to preserve as
cultural assets for the future, works that express a particular era
or artist. Besides offering the public opportunities to re-experience
these works, we will pass them on to future generations.

Corporate GovernanceOut of our desire to have people look at genuine examplesof this type of outstanding work and experience the greatnessof graphic design, in 1986 DNP established Japan's first gallery
devoted solely to graphic design in Tokyo's Ginza district. We callit "ggg (Ginza Graphic Gallery, pronounced 'three-gee')."By continuing to provide a broad array of opportunities and forums
where people can meet artists and creative, diverse works fromany country and any time period, we want to contribute to thecultivation of sensitive people who accept diverse cultures.

In 2011, ggg celebrated the 25th anniversary of its founding.
To date, we have held more than 300 original exhibitions, generally
at the rate of one per month, and have welcomed a total of morethan 1 million visitors.

DNP's Businesses

Since graphic design is expressed through posters, pamphlets,
books, magazines, and other printed materials, it is an inseparable
partner of printing. Printing technologies evolve in response to
the imaginative ideas of designers, and those evolved printing
technologies further stimulate designers' creativity. Productsthat are born of the interchange between a generation's mostadvanced sensibilities with its most advanced technology garnerhigh praise as works of art.

what we have valued for 25 years
what we want to pass on in the next 25 years

Special Feature:
DNP's Growth Strategies

What is ggg?

To Our Shareholders

DNP Supports Graphic Design Development through "Close Encounters"—25th Anniversary of Opening of ggg

Financial Section

F ro m I k k o Ta n a k a E x h i b i t i o n :"Graphic Art Botanical Garden,"1990

From "Shueitai 100," 2011

From Alexander Rodchenko
Exhibition: "Innovator of theRussian Avant-Garde," 2012

Appendix

From Shigeo Fukuda Exhibition:"ILLUSTRICK 412," 1986

Posters can offer a taste of different eras; those above were designed by (from left) Shigeo Fukuda, Ikko Tanaka, Dainippon Type Organization, Kijuro Yahagi

DNP Annual Report 2012 〉 How DNP Works to Achieve Sustainable Development

83

Financial Section
CONTENTS
86 Management’s Discussion and Analysis
96 Selected Financial Data
98 Consolidated Financial Statements

Special Feature:
DNP's Growth Strategies

Management’s Discussion and Analysis

Operating Results
Business Environment
Economic conditions in Japan remained challenging during the current fiscal
year. Despite a gradual recovery from the impact of the Tohoku–Pacific
Ocean Earthquake, the economy was affected by overseas economic
downturns, higher crude oil prices, and concerns about worsening
domestic employment conditions. The printing industry continued to face a
difficult business environment. Corporate advertising expenditures wereslow to recover from a sharp drop after the earthquake, consumer spending
was sluggish, and order prices declined as a result of stiffer competition.
A discussion of the business environment affecting each of DNP'sbusiness segments during the current fiscal year is provided below.
In the Information Communication segment, the books and magazines
market has continued a downward trend since 1997, with estimated sales ofpublications in Japan falling 3.2% year on year during the year ended March
2012. In particular, magazine sales dropped 5.9% year on year as thenumber of discontinued publications was far higher than the number of new
publications. However, book sales benefitted from many hit titles and wereon par with the previous year, and the electronic publishing market
expanded to around ¥63 billion. In the Commercial Printing business,domestic advertising expenditures were low throughout the year due to aslow recovery in corporate earnings, affected by the earthquake, overseas
economic slowdowns, and strong yen. Sales at advertising-relatedcompanies rose 1.7% year on year in the year ended March 2012. Internet
advertising rose 10.8% and direct mailing was up 3.1%, but television
advertising edged down 0.5%, newspaper advertising fell 1.5%, andmagazine advertising dropped 5.6%. Conditions in the Business Forms
business remained difficult, affected by the production of fewer forms anddecrease in circulation due to cutbacks in corporate expenditures, and by ashift to online notifications.
In the Lifestyle and Industrial Supplies segment, the Packaging business
was firm as demand for foods, beverages, and daily goods recovered froma temporary decline caused by the earthquake. In the Lifestyle Materials
business (includes decorative materials), sales rose 2.7% year on year as
domestic housing starts totaled roughly 840,000 between April 2011 andMarch 2012. However, in the Industrial Supplies business, demand foranti-reflection films and other LCD-related products was weak, affected bysluggish global sales of LCD TVs and production cutbacks by panel makers.
The photovoltaic cell market faced tough conditions. Although sales volume
increased, prices fell sharply as a result of stiffer global competition.
In the Electronics segment, for worldwide LCD shipment volume, LCD
TVs surpassed 200 million units in 2011, and PC shipments totaled 350
million units, recording only modest growth. However, mobile phone
shipments rose 11% year on year, due partly to growth for smart phones.
Nevertheless, the domestic LCD TV market contracted sharply during thesecond half of the fiscal year, reversing demand growth through the first half
driven by the switch to terrestrial digital broadcasting. Panel maker earnings
fell sharply, due partly to stiffer competition with overseas companies, andalthough domestic panel makers moved forward with production cutbacks

86Synopsis of
Performance
To Our Shareholders

and business structure reforms, conditions were extremely difficult.
Electronic devices were weak, as evidenced by a decline in hard disk
production due to the impact of flooding in Thailand.

Overview

DNP's Businesses
Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Management’s Discussion and Analysis

Special Feature:
DNP's Growth Strategies

DNP sought to aggressively develop its business and deliver products andservices tailored to the needs of its customers, based on its P&I Solutions
business vision. It also pursued Production 21 activities to establish a robust
production structure in all facets of production, including quality, cost, anddelivery time, and it worked to secure earnings.
In particular, in the Information Communication segment, although thebusiness environment has changed significantly as a result of changes in
consumer behavior, expansion of social media, and greater information
security needs, DNP worked to leverage its printing and information
technologies to build a new business model. Additionally, to enhance
production efficiency, DNP has pursued business structure reforms from thestandpoint of overall optimization, including the integration of groupcompanies and reorganization of the cross-regional production
management structure.
Display-related product earnings have deteriorated sharply, seriously
affected by changes in business policies at main customers, including
substantial production cutbacks in response to weak global LCD TV sales
and surplus inventories at panel makers, as well as a decrease in the scaleof production. To quickly respond to these changes in the orderenvironment, DNP has pursued business structure reforms for LCD color
filters and other display-related products, including the consolidation of
production facilities and shift to products with growth potential. It also
revalued these facilities based on future cash flow and recorded impairment
losses of around ¥24.7 billion.
As a result, DNP's consolidated net sales fell 5.2% year on year to¥1,507.2 billion in the year ended March 2012. Sales in the Information
Communication segment fell 1.0%, due partly to a slump in the publications
market and to lower sales of flyers, catalogs, and information processing
services as a result of cutbacks in corporate expenditures and advertising.
In the Lifestyle and Industrial Supplies segment, packaging sales rose above
year-ago levels on higher sales of aseptic filling bottling systems for PET
bottles, and decorative materials increased on a boost from firm housing
starts. However, optical films for flat-panel displays fell sharply, resulting inoverall segment sales declining 1.7%. Electronics segment sales dropped
21.5% on a sharp decline for color filters caused by the earthquake andglobal slump in LCD TV sales, and declines for photomasks and lead frameson account of weakness in the semiconductor market and the impact offlooding in Thailand. In the Beverages segment, although mineral waters
increased, overall sales fell 9.5%.
Consolidated operating income fell 49.8% year on year, affected bysubstantially lower sales for display-related products on a sharp downturn inthe business environment, and by a decrease in order prices and increase in
raw material prices in all business segments. The consolidated operating
income margin was 2.3%, down 2.0 percentage points. The consolidated
ordinary income margin was 2.4%, down 1.6 percentage points. DNP incurred a87net loss of ¥16.3 billion due partly to impairment losses on display-related
product manufacturing equipment and other items.
Looking at the operating income margins in each business segment, theInformation Communication segment was 2.2%, down 0.3 percentage points,
as lower sales and unit prices eroded profitability. The Lifestyle and Industrial
Supplies segment was 6.1%, down 2.7 percentage points, due to higher
prices for films, resins, and other raw materials and lower sales of antireflection films for flat-panel displays. The Electronics segment posted an
operating loss as a result of lower LCD color filter volume and decrease in unit
prices. The Beverages segment was 2.3%, up 0.3 percentage points.

Net sales (¥ million)

2012.32011.3¥ 1,507,228¥ 1,589,373

Gross margin (%) 		
Operating income margin (%) 		

Net Sales by Segment(year ended March 2012)

Beverages
Electronics
14.8%

Information
Communication
47.0%

¥

Corporate
Beverages
		 0,000
19.0%		17.3%0,000Electronics
4.3%		
2.3%
0,000 		Ordinary income margin (%)		

2.4% 		Net income margin (%)		

– 		

Net income (loss) per share (¥)

3.8%

2010.3¥(25.39)Lifestyle&
Industrial Supplies
0,000

Net sales¥

1,583,383
18.7%
4.2%

Information
4.0%		
Communication
0,000

1.6%		
38.86

¥

4.3%
1.5%

36.13

Beverages
3.9%

Net sales totaled ¥1,507.2 billion in the current fiscal year, down 5.2%, orInformation
Electronics¥82.1 billion, from the previous year.
Communication
16.1%
46.3%

Lifestyle andIndustrial Supplies
34.4%

Information Communication
In the Books and Magazines business, the publications market continued toslump, and although book sales increased on a contribution from bolstering
Lifestyleand decreased. In the Commercial Printing
book production lines, magazine
sales
Industrial Supplies
business, sales decreased year on year
as a slow recovery in corporate
33.6%
advertising expenditures resulted in generally weak sales of flyers, pamphlets,
catalogs, and other products. In the Business Forms business, smart cardsales were strong, including SIM cards, transportation cards, and electronicmoney, but overall sales decreased year on year on a decline for information
processing services (ranging from data entry to printing and shipment of
personal mail and other items). In the Education and Publications Distribution
business, sales rose above year-ago levels, due partly to making Bunkyodo
Group Holdings Co., Ltd. and Yushodo Co., Ltd. consolidated subsidiaries
during the previous fiscal year. As a result, overall segment sales declined 1.0%.

Lifestyle and Industrial Supplies
In the Packaging business, sales increased year on year, driven by growth for
PET bottle aseptic filling systems, PET bottle preforms, and flexible packaging
that uses high-performance films. In the Lifestyle Materials business (includes
decorative materials), sales increased year on year on growth for eco-friendly
products that use DNP’s proprietary Electron Beam coating technology.
In the Industrial Supplies business, despite growth for energy-related
products, including lithium-ion battery soft packages and photovoltaic
module back sheets, and for dye-sublimation thermal transfer printing media

88

Synopsis of
Performance
To Our Shareholders

for photo printers (color ink ribbons and receiver paper), overall sales
decreased year on year on a decline for anti-reflection films used in flatpanel displays. As a result, overall segment sales declined 1.7%.

Electronics

Special Feature:
DNP's Growth Strategies

In the LCD color filter business, sales of small and medium-sized filters for
smart phones and tablets were strong, but overall sales were down sharply
year on year as both volume and unit prices decreased for large filters usedin TVs, due to a global slump in the LCD TV market. In the Electronic
Devices business, amid tough conditions in the global semiconductor
market, sales increased for high-density build-up wiring boards, but
decreased for etched products, including photomasks and hard drive
suspensions. As a result, overall segment sales declined 21.5%.

Gross Profit Margin(%)

DNP's Businesses

Beverages

25

Amid tough market conditions, characterized by weak consumer spending
and stiffer sales competition, DNP worked to expand sales of Coca-Colaand Georgia, both core products, and I LOHAS, a brand of mineral waterthat uses "ecoru Bottle Shiboru," Japan's lightest PET bottle. As a result,although mineral waters increased, coffees and other products declined,
and overall segment sales fell 9.5%.

20

17.8

18.7

19.0
17.3

16.4

15

10

09

10

11

12

SGA Expenses to Net Sales
(%)

15

13.5
12.4

14.5

14.7

15.0

15

12

9

9

6

6

3

3

0

0

08

09

10

11

Appendix

12

Financial Section

DNP worked to reduce variable costs during the year by using information
technology to enhance efficiency and by strengthening budget
management. As selling costs also decreased as a result of lower sales,
selling, general and administrative expenses totaled ¥226.3 billion, down
3.3%, or ¥7.6 billion, from the previous year. However, selling, general andadministrative expenses accounted for 15.0% of net sales, up 0.3
percentage points from the previous year.

08

How DNP Works to
Achieve Sustainable
Development

Selling, General and Administrative Expenses

15

Corporate Governance0

The cost of sales totaled ¥1,246.9 billion, down 3.2%, or ¥40.7 billion, fromthe previous year. The gross margin was 17.3%, down 1.7 percentage points
from 19.0%.
Naphtha prices rose by about 30% year on year due to a surge in crude
oil prices from the outset of 2011, and prices increased sharply for
petrochemical products, including films, resins, inks, and solvents.
Consequently, higher prices for raw materials, mainly petrochemical
products, had a ¥6.9 billion impact during the year. About 50% of this
impact was passed through to product prices based on negotiations withcustomers.
The entire DNP Group has also been pursuing Production 21 activities
since April 2002, working to reduce manufacturing costs while prioritizing
efforts to enhance production efficiency, improve yields, reduce material
losses, and shorten production preparation and lead times. As a result,
DNP cut costs by ¥27.9 billion during the year.

20

10

5

Cost of Sales

25

12

DNP Annual Report 2012 〉 Financial Section 〉 Management’s Discussion and Analysis

89

5

0

Operating Income Margin

Operating Income(%)

Operating income totaled ¥34.0 billion, down 49.8%, or ¥33.8 billion, from the10previous
year, affected by sharply lower profits in the Lifestyle and Industrial
Supplies segment and the Electronics segment due to a slump in the LCD
8market.
The operating income margin was 2.3%, down 2.0 percentage points
from 4.3% in the previous year.
6
The Information Communication segment had operating income of ¥15.5
billion,down 14.6%, or ¥2.7 billion, from the previous year, due to lower sales
4
and unit prices on a decline in corporate advertising expenditures.
The2 Lifestyle and Industrial Supplies segment had operating income of ¥31.8
billion, down 32.0%, or ¥15.0 billion, due to higher prices for films, resins, and0 raw materials and lower sales of anti-reflection films for flat-panel
otherdisplays. The Electronics segment had an operating loss of ¥4.6 billion, down
¥16.9 billion, due to lower volume and unit prices for color filters on
deterioration in the market environment.

10

8

6

5.4
4.2

4.3

4
2.9

2

2.3

0

08

09

10

11

12

Nonoperating Income (Expenses) and Extraordinary Income(Losses)
ROE
(%)

7
6
5

4.4

4
2.6

3

2.7

2
1
0
–1
–2

– 1.8

– 2.2

–3

08

09

10

11

Nonoperating income totaled ¥11.0 billion, up 14.0%, or ¥1.4 billion, from theprevious year; and nonoperating expenses totaled ¥8.2 billion, down 44.3%,
or ¥6.6 billion. As a result, net nonoperating income was ¥2.8 billion.
Ordinary
income totaled ¥36.8 billion, down 41.3%, or ¥25.9 billion, from7.00
the5.75
previous year.
Extraordinary
income totaled ¥2.4 billion, down 46.1%, or ¥2.0 billion, from4.50
the previous year; and extraordinary losses totaled ¥36.6 billion, up 152.0%,
3.25
or ¥22.0 billion, due partly to recording impairment losses of ¥24.7 billion,
2.00
mainly for display-related product manufacturing equipment. As a result, net
0.75
extraordinary losses totaled ¥34.2 billion, versus losses of ¥10.1 billion in the-0.50
previous
year.
-1.75
As
a result of the above, income before income taxes and minority interests-3.00 ¥2.7 billion, down 94.9%, or ¥50.0 billion, from the previous year.
totaled

12

Net Income (Losses)
As a result of the above, net losses totaled ¥16.4 billion, down ¥41.4 billion
from income of ¥25.0 billion in the previous year.
Net losses per share were ¥25.39.

90

Synopsis of
Performance
To Our Shareholders

Liquidity and Capital Resources

Special Feature:
DNP's Growth Strategies

To expand its business, DNP considers it important to steadily increase cash
flow through aggressive operating activities and to prioritize investment instrategic areas. DNP also believes that strengthening its financial position isessential to sustain stable medium- to long-term growth, and it worked
toward this goal during the current fiscal year.
Cash Flow
2012.3
Cash flow from operating activities¥

108,603

2011.3¥（ 80,126 ）		

Free cash flow 		

28,477 		

¥

140,574（82,562）		 （120,684）
57,491		

19,890(¥ million)

Interest-bearing Debt to Cash Flow Ratio(times)

2.5
2.1
2.0
1.6
1.5

Corporate GovernanceNet cash provided by operating activities totaled ¥108.6 billion, down 22.5%
from the previous year.
Net cash used in investing activities totaled ¥80.1 billion, down 2.9%, or¥2.4 billion, from ¥82.6 billion in the previous year.
Net cash used in financing activities totaled ¥32.8 billion, down ¥48.0 billion
from net cash provided of ¥15.2 billion in the previous year, due partly to a
decline in proceeds from the issuance of unsecured debentures of ¥52.5 billion.
As a result of these activities, cash and cash equivalents at the end of the fiscal
year totaled ¥216.3 billion, down 2.6%, or ¥5.8 billion, from the previous year.
Free cash flow—i.e., net cash provided by operating activities minus net
cash used in investing activities—was ¥28.5 billion, down ¥29.0 billion from¥57.5 billion in the previous year.

DNP's Businesses

Cash flow from investing activities		

140,053

2010.3

1.2
0.9

1.0
0.5
0.5

0

08

09

10

11

12
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Management’s Discussion and Analysis

91

Capital Expenditures; Depreciation; Research and Development
Expenditures, etc.
Capital Expenditures and Free Cash Flow(¥ billion)

200

150
119.1

116.1

102.2

96.2

100

98.2

57.5
50

34.8

30.8

28.5

19.9

0

08

09

Capital expenditures

10

11

12

Free cash flow

DNP focuses capital expenditures on strategic areas and upgrading existing
facilities to ensure competitive advantages. Capital expenditures this fiscal
year totaled ¥98.2
billion, down 3.9%, or ¥4.0 billion, fromthe previous year.
200
200
Key capital expenditures included construction of: the Tobata Plant inFukuoka Prefecture
to make lithium-ion battery soft packages,
photovoltaic
150
150
module back sheets, and other energy-related products;
100 in Kyoto Prefecture to make high-performance100
the Tanabe Plant
packaging;
and a new building at the Mihara Plant in Hiroshima Prefecture for flat-panel
50
display surface films. By segment, capital expenditures in 50
the Information
Communication segment were ¥29.9 billion, up ¥9.0 billion from the previous
00year and accounting for 31% of total capital expenditures. The Lifestyle andIndustrial Supplies segment was ¥39.5 billion, up ¥19.5 billion
and accounting-50
for 40%. The Electronics segment was ¥23.5 billion, down ¥33.0 billion andaccounting for 24%. Other businesses were ¥5.3 billion, up ¥0.6 billion andaccounting for 5%.
Depreciation totaled ¥95.8 billion, down 2.2%, or ¥2.1 billion, from theprevious year. By segment, depreciation in the Information Communication
segment was ¥24.0 billion, roughly on par with the pervious year andaccounting for 25% of total depreciation. The Lifestyle and Industrial Supplies
segment was ¥25.5 billion, down ¥0.5 billion and accounting for 27%.
The Electronics segment was ¥40.4 billion, down ¥1.4 billion and accounting
for 42%. Other businesses were ¥5.8 billion, down ¥0.2 billion andaccounting for 6%.
Research and development expenditures totaled ¥31.7 billion, down 4.4%,
or ¥1.5 billion, from the previous year. DNP focuses on "business creation"
research and development to find proper solutions to problems from thestandpoint of consumers and pursues appropriate management of theseresults as intellectual property.

The Balance Sheet
DNP is working to enhance capital efficiency, raise enterprise value, andmaintain the liquidity required to quickly respond to changes in the businessenvironment.

Current Ratio

Total assets (¥ million)(%)

2011.32010.3¥ 1,608,806¥ 1,649,784¥ 1,618,854

Current ratio (%) 		 200

200
177
157

177

157
144

150

Working capital/net sales (%)		
Debt-to-equity ratio (%) 		
Net assets per share (¥)

100

50

0

08

92

2012.3

09

10

11

12

150

177% 		

177%		

157%

23% 		

22%		17%

26% 		

25%		18%

¥ 1,352.71
100¥

1,410.44¥

1,422.34

DNP's total assets at the end of this fiscal year amounted to ¥1,608.8 billion,
50
down 2.5%, or ¥41.0 billion, fromthe previous year.
Among current assets, cash, cash equivalents, and time deposits totaled
0¥217.5 billion, down 2.8%, or ¥6.3
billion, from the previous year. Trade
receivables totaled ¥385.1 billion, down 4.7%, or ¥18.9 billion. Inventories offinished products, work in process, raw materials, and supplies totaled ¥151.1

Synopsis of
Performance
To Our Shareholders

Equity Ratio
(%)

80

80
62.6
60

70

58.5

56.6

55.1

54.2

Special Feature:
DNP's Growth Strategies

60
50
40

40

30
20

20

10
0

0

08

09

10

11

12

DNP's Businesses

billion, up 9.0%, or ¥12.5 billion. As a result, current assets totaled ¥783.0
billion, down 1.0%, or ¥8.0 billion.
Among long-term assets, property, plant and equipment totaled ¥579.6
billion, down 5.7%, or ¥35.3 billion, from the previous year. Intangible assets
totaled ¥38.0 billion, up 5.9%, or ¥2.1 billion. Investments and other assets
totaled ¥207.4 billion, up 0.3%, or ¥0.5 billion. As a result, long-term assets
totaled ¥825.0 billion, down 3.8%, or ¥32.6 billion.
Current liabilities totaled ¥443.2 billion, down 1.0%, or ¥4.6 billion, from theprevious year. Long-term liabilities totaled ¥251.4 billion, up 0.7%, or ¥1.8
billion. As a result, total liabilities amounted to ¥694.6 billion, down 0.4%, or¥2.8 billion.
Additionally, net assets totaled ¥914.2 billion, down 4.0%, or ¥38.2 billion.
DNP repurchased about 112.86 million of its shares between February
2003 and June 2008 and retired 59 million treasury shares during the five
years from 2004 to 2008. As a result, as of March 31, 2012, the number oftreasury shares totaled 55.89 million shares, or 7.98% of total shares
outstanding of 700,480,693 shares.

Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Management’s Discussion and Analysis

93

Business Risks
The performance and the results of DNP could be significantly affected by a variety offactors and circumstances that might arise in the future. Because the Company is aware ofthese risk factors, its policy is to strive to minimize their potential effects.
The Company considers the following factors to be key risks, as of the publication date ofthis annual report.

The Japanese economy and consumption trends
DNP engages in a wide range of businesses with an extremely large number of customers.
It conducts business so as not to be overly dependent on specific customers. The Company
does most of its business in the Japanese market and overseas sales account for about
13% of net sales. Nevertheless, if the domestic economy weakens in sympathy with global
economic trends and consumer spending and other components of domestic demand
slump, then declines in order volume and unit prices may affect its performance.

Changes in the electronics market
The Electronics segment is a strategic segment and the Company aims to secure stableprofits by focusing on creating business strategies based on rigorous data collection,
establishing a highly profitable production structure, and developing high-value-added
products that are competitive in the market. However, it is possible that earnings in thissegment could be affected by changes in the global markets for display and semiconductor
products, including sharp fluctuations in demand and declines in unit prices.

Fluctuations in raw material procurement
The Company procures raw materials such as printing paper and film from multiple
suppliers in Japan and overseas. The Company works hard to secure stable supplies andmaintain optimal prices. However, there is some potential for imbalances between supply
and demand due to factors like sharp volatility in petroleum prices, sudden surges indemand from emerging markets, and major disasters. The Company intends to cope withsuch instances by negotiating with customers and business partners. However, if it should
become extremely difficult to secure supplies, or if prices rise markedly, DNP'sperformance could be affected.

Development of new products and technologies and services
DNP uses its printing and information technologies to develop and provide to a broad
range of industries products, technologies, and services that meet the needs of corporateclients and consumers. In recent years, the pace of technological innovation in theseareas has become faster than ever, and customers' needs have been rapidly diversifying.
The Company believes that in the future, competition in the area of product development
will become more intense than ever before, and it is possible that DNP's performance
could fluctuate significantly due to unforeseeable changes in market trends or ashortening of product life cycles.

94

Synopsis of
Performance

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

Environmental protection and stricter regulations

Corporate Governance

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

DNP's Businesses

The Company's business conduct is based on strict compliance with the law and social
ethics. Both in Japan and overseas, our business is subject to a wide variety of laws andrestrictions, including regulations related to product liability, monopolies, protection of
personal information, patents, taxes, and international trade. It is possible that in the future,these regulations may become even more restrictive than they are now. At the same time,
we expect that in some areas deregulation will lead to dramatic changes in markets andindustry trends. Whether regulations are tightened or loosened, DNP's business activities
may be affected by direct and/or indirect costs resulting from the need to adapt to suchchanges.

Special Feature:
DNP's Growth Strategies

Legal compliance

To Our Shareholders

Currency ﬂuctuations

Information security and protection of personal information

DNP Annual Report 2012 〉 Financial Section 〉 Management’s Discussion and Analysis

Appendix

The Company takes steps to protect its production equipment and other major facilities
from being damaged by disasters such as fires or earthquakes. In addition, the Company
divides its work among multiple production bases and makes every effort to prevent
disasters from causing production stoppages or disturbances in its ability to supply
products. The Company also uses various types of insurance to transfer risk. Nevertheless,its performance could be substantially affected in the event of major earthquakes or othernatural disasters, terrorist attacks, infectious disease outbreaks, or other unexpected
events that cause production stoppages or major damage or interference with social
infrastructure.

Financial Section

Disasters

How DNP Works to
Achieve Sustainable
Development

With computer networks and information systems playing an ever-greater role in keeping
business activity going, the risks of information system malfunctions, breaches of personal
information, and other events, owing to software and hardware problems and viruses, haverisen. The Company regards the protection of data and personal information as a toppriority. It is doing all it can to protect and maintain systems and data by strengthening its
organization and training employees, but if problems arise in these areas, then its businessactivity could be affected.

95

Selected Financial Data (unaudited)
Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

2012

2011

2010

2009
¥ 1,584,844

Statements of Operations Data (¥ million)
Net sales¥ 1,507,228¥

1,589,373¥

1,583,383

Cost of sales		

1,246,878

		

1,287,581

		

1,286,682

		

1,324,522

Gross profit		260,350

		

301,792		

296,701		

260,322

Selling, general and administrative expenses

		

226,335

		

233,973		

230,187		

214,145

Operating income		

34,015

		

67,819		

66,514

		

46,177

Ordinary income		

36,843

		62,786

		68,841

		

47,390

Income (loss) before income taxes and minority interests 		

2,673

		

52,696

		

49,496

		(27,842)		

(16,356)

		

25,033

		23,278

		

(20,933)¥ 1,608,806¥

1,649,784¥

1,618,854

Net income (loss)
Balance Sheet Data (¥ million)
Total assets¥ 1,536,557

Property, plant and equipment – net

		579,567		

614,827

		

616,848		

604,904

Long-term liabilities

		

251,414		

249,575		

190,045

		

126,671

Total liabilities		

694,593		

697,343		

661,990		

596,471

Total stockholders’ equity

		

–

		

–

		

–

		

–

Stockholders’ equity

		888,650

		

925,702		

921,775		

917,348

Total net assets

		914,213

		

952,441		

956,864		

940,086¥

98,189¥102,173¥

119,063¥

96,156

Depreciation expenses

		

95,829		

97,977

		

91,695

		

106,883

R&D expenditures		

31,690		

33,147

		

33,850		

34,112¥(25.39)

¥

38.86

¥

36.13

¥

(32.35)

Earnings (loss) per share—fully diluted

		

–

		

–

		

–

		

–

Dividends paid per share

		

32.00

		

32.00

		

32.00

		

32.00

Book value per share		

1,352.71

		

1,410.44

		

1,422.34

		

1,393.91

Other Selected Data (¥ million)
Capital expenditures

Common Share Data (¥, shares)
Earnings (loss) per share—primaryNo. of common shares outstanding (exc. treasury shares) 		644,062,928

644,142,530

		 644,238,930

		644,357,076

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

17.27%

18.99%

		18.74%

		16.43%

		 Selling, general and administrative expenses

		

15.02

14.72

		

14.54

		

13.51

		 Operating income

		

2.26

4.27

		

4.20

		

2.91

		 Income (loss) before income taxes and minority interests

		

0.18

3.32

		

3.13

		

-1.76

		 Net income (loss)

		

-1.09

1.57

		

1.47

		

-1.32

Return on equity

		

-1.84

2.74

		

2.57

		

-2.20

Current ratio

		

177

177

		

157

		

144

D/E ratio

		

26

25

		

18

		

14

		

96

Synopsis of
Performance

2007

2006

2005

2004

2003

¥ 1,616,053¥ 1,557,802¥ 1,507,506¥ 1,424,943¥ 1,354,101¥ 1,309,002

1,327,872

		

1,268,072

		

1,202,160

		

1,121,374

		

1,073,118

		

1,043,456

		

288,181		

289,730		

305,346		

303,569

		

280,983		

265,546

		

201,077		

193,585

		

184,676

		

183,041

		

178,545

		

175,665		

87,104

		

96,145

		120,670		

120,528		

102,438		

89,881

		

86,502

		

101,348

		

124,715

		

120,485		

97,276

		

88,177

		

88,469		

98,950		

114,640

		

107,686

		

93,137

		42,244

		

45,172

		

54,842

		

65,188

		

59,937

		

52,971

		

28,774¥ 1,601,193¥ 1,700,250¥ 1,662,377¥ 1,600,129¥ 1,513,734¥ 1,450,027

635,784		

568,966		

528,009		

513,175

		

540,874		

106,691		

118,437

		

118,287

		

115,801		

119,277

		

66,821

		

561,058		

600,811

		

571,170		

566,796		

510,970		

484,581

		

–

		

–

		

1,063,309

		

1,007,944

		

978,736		

942,083		

990,122		

1,027,475

		

–

		

–

		

–

		

–

		

1,040,135

		

1,099,439

		

–

		

–

		

–

		

–

¥

116,139¥

162,886¥

136,059¥

86,057¥

69,834¥73,789		

109,902		

100,161		87,264

		

80,440		

85,182

		

89,239		

35,556

		30,113

		28,692

		

26,386

		

26,050		

24,097

¥

67.08

¥

78.10

¥

91.23

¥

82.56

¥

71.49

¥

37.80

		

–

		

–

		

–

		

–

		

–

		

37.67

		

36.00

		

32.00

		

26.00

		

24.00

		

21.00

		

19.00

		

1,516.35

		

1,544.02

		

1,507.90

		

1,409.18

		

1,348.40

		

1,270.81

		661,366,377

		694,226,171

		704,972,101

		715,076,830

		725,677,422

How DNP Works to
Achieve Sustainable
Development

		Corporate Governance639,343

DNP's Businesses		Special Feature:
DNP's Growth Strategies		

To Our Shareholders

2008		741,161,150

		

18.60%

		

20.26%

		21.30%

		20.75%

		

20.29%

		

12.44

		

12.43

		

12.25

		

12.85

		

13.19

		

13.42

		

5.39

		

6.17

		

8.00

		

8.46

		

7.57

		

6.87

		

5.47

		

6.35

		

7.60

		

7.56

		

6.88

		

3.23

		

2.80

		

3.52

		

4.32

		

4.21

		

3.91

		

2.20

		

4.35

		

5.14

		

6.29

		

6.03

		

5.52

		

3.02

		

157

		

166

		

178

		

186

		

197

		

171

		

8

		

6

		

6

		

7

		

7

		

6

DNP Annual Report 2012 〉 Financial Section 〉 Selected Financial Data

Appendix

17.83%

Financial Section		97Consolidated Financial Statements

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

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
March 31, 2012 and 2011

2011

2012

2012

AssetsCurrent assets:
Cash and cash equivalents (Notes 4 and 16)
Time deposits (Note 16)
Trade receivables (Notes 10 and 16)
Allowance for doubtful receivables
Inventories (Note 6)
Prepaid expenses and other current assets (Notes 10 and 13)
Total current assets¥

216,280
1,239
385,102(3,704)
151,119
32,921
782,957¥222,057
1,791
403,986(6,995)
138,607
31,497790,943$2,637,561
15,1104,696,366(45,171)
1,842,915
401,475
9,548,256

Investments and advances:Non-consolidated subsidiaries and associated companies(Notes 10 and 16)
Investment securities (Notes 5 and 16)
Other (Notes 10 and 16)
Total investments and advances

21,186
118,992
2,191
142,369

22,104
114,438
2,334
138,876

258,366
1,451,122
26,7191,736,207

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

142,150542,222975,517
39,10735,411
1,734,407(1,154,840)
579,567

138,650
531,440
1,028,119
33,51647,037
1,778,762(1,163,935)
614,827

1,733,537
6,612,463
11,896,549
476,915
431,841
21,151,305(14,083,415)
7,067,890

103,913105,138

1,267,232

Other assets (Notes 7, 13, 14 and 16)

Total assets¥

1,608,806

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

98

¥

¥

1,649,784$

19,619,585

Synopsis of
Performance

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
March 31, 2012 and 2011

2011

2012

2012

Liabilities and Net Assets¥¥

51,403
11,019275,525
37,952
10,487
61,382447,768$

631,81776,9273,370,171
433,659
104,854787,194
5,404,622

172,208
33,23045,976
251,414168,323
39,261
41,991
249,575

2,100,098
405,244560,682
3,066,024

114,464
144,898
723,460

114,464
144,898
760,453

1,395,902
1,767,049
8,822,683(94,172)888,650(94,113)925,702(1,148,439)
10,837,195

4,370
(15)
(21,776)(17,421)16
42,968914,213833(12)(18,000)(17,179)
16
43,902
952,441

53,293(183)(265,561)(212,451)
195
524,000
11,148,939

DNP's Businesses

Long-term liabilities:
Long-term debt (Notes 7, 10 and 16)
Liability for retirement benefits (Note 8)
Other long-term liabilities (Notes 7 and 13)
Total long-term liabilities

51,8096,308
276,354
35,5608,598
64,550443,179

Special Feature:
DNP's Growth Strategies

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

To Our Shareholders

Thousands of
U.S. dollars (Note 3)

Millions of yen

Contingent liabilities (Note 18)

1,608,806¥

1,649,784$

19,619,585

Financial Section¥

How DNP Works to
Achieve Sustainable
Development

Total liabilities and net assets

Corporate GovernanceNet assets
Stockholders' equity
Common stock Authorized : 1,490,000,000 shares;
Issued : 700,480,693 shares;
Capital surplus (Note 9)
Retained earnings (Note 9)
Treasury stock, at cost
56,417,765 shares in 2012 and 56,338,163 shares in 2011 (Note 9)
Total stockholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Net deferred losses on hedges
Foreign currency translation adjustments
Total accumulated other comprehensive income
Share acquisition rights
Minority interests
Total net assets

Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

99

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

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2012 and 2011

Net sales (Note 19)
Cost of sales (Notes 11, 15 and 19)
Gross profit
Selling, general and administrative expenses (Notes 11, 15 and 19)
Operating income¥¥

1,507,228
1,246,878
260,350
226,335
34,015

Other income (expenses) (Note 12):Interest and dividend income
Interest expenses
Equity in earnings (losses) of affiliates
Foreign exchange transaction loss
Net loss on disposal of property, plant and equipment
Net gain on sales of investment securities
Loss on devaluation of investment securities
Impairment loss on fixed assets (Note 14)
Other

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

2011

2012

$

3,353
(2,775)(413)(1,672)
(904)
694
(436)
(1,685)(11,285)(15,123)

42,305(41,756)
4,207
(195)
(34,805)451(14,024)(305,037)(33,365)(382,219)

2,673

52,69632,59817,2102,301
19,511(16,838)

20,027
8,003
28,03024,666

209,878
28,061
237,939(205,341)¥

367
25,033$

5,878(199,463)

U.S. dollars (Note 3)

Yen

2011

2012

2012

Net assets per common share¥

1,352.71¥

1,410.44$

16.50

Net income (loss) per common shareprimary¥(25.39)

¥

38.86

$

(0.31)

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

100

18,380,829
15,205,829
3,175,000
2,760,183
414,817

3,469(3,424)345(16)(2,854)37(1,150)(25,013)(2,736)(31,342)482(16,356)¥

1,589,373
1,287,581
301,792
233,973
67,8192012

Synopsis of
Performance

Consolidated Statements of Comprehensive Income¥¥(16,838)¥

24,666

2012$(205,341)

3,697
(2)
(4,196)(7,108)(2)(5,023)45,085(24)(51,171)(1)(502)(17,340)(59)(12,192)
12,474(12)(6,122)(211,463)(16,596)(744)¥

13,302(828)$(202,390)(9,073)Special Feature:
DNP's Growth Strategies

Net income (loss) before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Net deferred losses on hedges
Foreign currency translation adjustments
Share of other comprehensive income in associates
accounted for using the equity method
Total other comprehensive income
Comprehensive income
Attributable to:Shareholders of parent company
Minority interests

2011

2012

To Our Shareholders

Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2012 and 2011

The accompanying notes are an integral part of these consolidated financial statements.
DNP's Businesses
Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

101

Consolidated Statements of Changes in Net Assets
Millions of yen

Dai Nippon Printing Co., Ltd. andConsolidated Subsidiaries
Years ended March 31, 2012 and 2011

Balance at April 1, 2010
Changes of items during the period
Net income
Cash dividends paid
Purchases of treasury stock
Disposal of treasury stock
Changes in valuation difference
on available-for-sale securities
Changes in deferred losses on hedges
Changes in foreign currencytranslation adjustments
Changes in share acquisition rights
Changes in minority interests
Other
Total changes of items during the period
Balance at March 31, 2011
Changes of items during the period
Net loss
Cash dividends paid
Purchases of treasury stock
Disposal of treasury stock
Changes in valuation difference
on available-for-sale securities
Changes in deferred losses on hedges
Changes in foreign currencytranslation adjustments
Changes in minority interests
Total changes of items during the period
Balance at March 31, 2012

Stockholders’ equity

Accumulated other comprehensive income
Valuation
Foreign
Net deferreddifference on
currency
lossesavailable-for-saletranslation
on hedges
securities
adjustments

Number ofsharesissued(in thousands)

Commonstock

CapitalsurplusRetainedearnings

700,480

114,464

144,898

756,430(94,017)

8,060

(11)

–
–
–
–

–
–
–
–

–
–
–
–

25,033(20,632)
–
(8)

–
–
(118)
22

–
–
–
–

–
–

–
–

–
–

–
–

–
–

–
–
–
–
–
700,480–––––
114,464–––––
144,898

–
–
–
(370)
4,023
760,453

–
–
–
–

–
–
–
–

–
–
–
–

–
–

–
–

–
–
–
700,480–––
114,464

Share
acquisitionrightsMinority
interests(13,499)–

40,539

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

(7,227)
–

–
(1)

–
–

–
–

–
–

–
–
–
–
(96)
(94,113)––––(7,227)
833

–
–
–
–
(1)
(12)

(4,501)–––(4,501)(18,000)

–
16
–
–
16
16

–
–
3,363
–
3,363
43,902(16,356)(20,629)
–
(8)

–
–
(76)
17

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–

–
–

–
–

3,537
–

–
(3)

–
–

–
–

–
–

–
–
–
144,898––(36,993)
723,460––(59)(94,172)

–
–
3,537
4,370

–
–
(3)
(15)

(3,776)–(3,776)(21,776)

–
–
–
16

–
(934)
(934)
42,968

ShareacquisitionrightsMinority
interests

Treasurystock,
at costThousands of U.S. dollars (Note 3)
Number ofsharesissued(in thousands)

Balance at April 1, 2011
Changes of items during the period
Net loss
Cash dividends paid
Purchases of treasury stock
Disposal of treasury stock
Changes in valuation difference
on available-for-sale securities
Changes in deferred losses on hedges
Changes in foreign currencytranslation adjustments
Changes in minority interests
Total changes of items during the period
Balance at March 31, 2012

Stockholders’ equity
Treasurystock,
at cost700,480 1,395,902 1,767,049

9,273,817(1,147,720)

10,159(146)(219,512)195

535,390

Capitalsurplus

–
–
–
–

–
–
–
–

–
–
–
–

(199,463)(251,573)
–
(98)

–
–
(927)
208

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–

–
–

–
–

–
–

–
–

43,134
–

–
(37)

–
–

–
–

–
–

–
–
–
–
(719)
(451,134)
8,822,683 (1,148,439)––
43,13453,293

–
–
(37)
(183)

(46,049)–(46,049)(265,561)

–
–
–
195

–
(11,390)(11,390)524,000

–
–
–
–
–
–
–
–
–
700,480 1,395,902 1,767,049

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

102

Accumulated other comprehensive income
Valuation
Foreign
Net deferreddifference on
currency
lossesavailable-for-saletranslation
on hedges
securities
adjustments

Retainedearnings

CommonstockSynopsis of
Performance

Consolidated Statements of Cash Flows

2,673

¥

52,696$32,598539(74,673)
5,999(2,468)277
4,003(13,803)(80,126)(171)(89,846)
7,059(2,156)
11,095
3,502(12,045)(82,562)

6,573(910,646)
73,159(30,098)
3,378
48,817(168,329)(977,146)

678
7,025
(6,260)1,189(2,603)(3,270)(21,062)(77)(8,453)(32,833)(1,717)(6,073)222,057296(12,447)
14,699(9,786)53,700(306)(2,660)(21,094)(118)(6,802)
15,186(2,458)70,219151,710–

8,268
85,671(76,341)
14,500(31,744)(39,878)(256,854)(939)(103,085)(400,402)(20,940)(74,061)
2,708,012
3,610

¥

128
222,057$–
2,637,561

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

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

Appendix–
216,280

Financial Section

1,168,646
305,037(102,781)(66,451)(4,208)40,671(42,305)
41,756(488)
14,02435,232
228,378(143,390)
34,48833,561
1,574,768(11,500)(238,841)
1,324,427

How DNP Works to
Achieve Sustainable
Development

97,9781,685
1,146(4,177)413
2,554(3,353)
2,775
(694)
436
904
48,851(7,135)(36,477)
4,781
162,383–(22,330)
140,053

Corporate Governance

95,82925,013(8,428)(5,449)(345)
3,335(3,469)
3,424
(40)
1,150
2,889
18,727(11,758)
2,828
2,752
129,131(943)(19,585)
108,603

DNP's Businesses

¥

¥

2012

Special Feature:
DNP's Growth Strategies

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes
and minority interests to net cash provided by operating activities:
Depreciation
Impairment loss on fixed assets
Provision for doubtful receivables (net)Provision for retirement benefits (net)
Equity in (earnings) losses of affiliates
Amortization of consolidation goodwill (net)
Interest and dividend income
Interest expenses
Net gain on sales of investment securities
Loss on devaluation of investment securities
Net loss on disposal of property, plant and equipment
Decrease in trade receivables(Increase) in inventories
Increase (decrease) in trade payables
Other
Sub-total
Payments of extra retirement payments
Payments of income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Net (increase) decrease in time deposits
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sales of investment securities
Interest and dividend received
Other
Net cash used in investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of unsecured debentures
Payments for redemption of unsecured debentures
Interest paid
Dividend paid
Payments for purchases of treasury stocks
Other
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents of newly consolidated subsidiaries
Increase in cash and cash equivalents resulting from merger with
non-consolidated subsidiaries
Cash and cash equivalents at end of year

2011

2012

To Our Shareholders

Thousands of
U.S. dollars (Note 3)

Millions of yen

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2012 and 2011103

Notes to Consolidated Financial Statements

Dai Nippon Printing Co., Ltd. and Consolidated Subsidiaries March 31, 2012 and 2011
1. Basis of Presenting the Consolidated Financial Statements
Dai Nippon Printing Co., Ltd. (hereinafter referred to as the “Company”) and its domestic subsidiaries maintain their books of accountand prepare their financial statements in conformity with accounting principles and practices generally accepted in Japan (“Japanese
GAAP”), and its foreign subsidiaries in conformity with the Company’s group accounting policies based on International Financial
Reporting Standards (“IFRS”) or accounting principles generally accepted in the United States of America (“US GAAP”).
The accompanying consolidated financial statements have been compiled from the consolidated financial statements filed with the
Financial Services Agency of Japan as required by the Financial Instruments and Exchange Act of Japan. Under Japanese GAAP, aconsolidated statements of comprehensive income is required from the fiscal year ended March 31, 2011 and has been presented
herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet and the consolidated
statements of changes in net assets. In addition, “net income before minority interests” is disclosed in the consolidated statements ofincome from the year ended March 31, 2011. Certain reclassifications of accounts and modifications have been made in theaccompanying consolidated financial statements to facilitate understanding by readers outside Japan. Certain reclassifications havealso been made in the 2011 financial statements to conform with current classifications. In addition, the notes to the consolidated
financial statements include additional information which is also not required for disclosure under accounting principles and practices
generally accepted in Japan.
2. Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant majority-owned
subsidiaries. All significant intercompany accounts and intercompany transactions have been eliminated in consolidation.
The fiscal year-end of the consolidated subsidiaries is mostly the same as that of the Company. There are twenty-five subsidiaries
whose fiscal years end December 31 and twenty-five subsidiaries whose fiscal years end January 31. Significant transactions thattook place between their fiscal year ends and the Company’s fiscal year end are reflected in the consolidated financial statements.
Eight subsidiaries whose fiscal years end August 31, one subsidiary whose fiscal year ends June 30 and one subsidiary whose fiscal
year ends September 30 are consolidated based on their additionally prepared financial statements as of and for the period ended
March 31.
Investments in non-consolidated subsidiaries are stated at cost and, for valuation of such investments, the equity method has notbeen applied since these investments are considered immaterial in the aggregate. However, investments are devalued if the decline invalue is judged to be other than temporary.
Investments in 20% to 50% associated companies are principally accounted for by the equity method.
The differences between costs and underlying net assets at the date of investment in consolidated subsidiaries are included in otherassets or other long-term liabilities and are amortized over a period not exceeding five years.
Translation of foreign currency accounts
Monetary assets and liabilities denominated in foreign currencies of the Company and its domestic subsidiaries are translated into
Japanese yen at the exchange rates at the balance sheet date. Revenues and expenses denominated in foreign currencies aretranslated at the exchange rates prevailing during the year. The resulting translation gains (or losses) are included in other income (orexpenses).
The translation of foreign currency financial statements of foreign consolidated subsidiaries into Japanese yen has been made forconsolidation purposes in accordance with the translation method prescribed in the accounting standard for foreign currencytransactions. The balance sheet accounts of the foreign consolidated subsidiaries are translated at the exchange rates in effect at thebalance sheet date, except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the year. The resulting translation adjustments are presented as “foreign
currency translation adjustments” which is shown as a separate component of accumulated other comprehensive income in the
consolidated balance sheets.
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, that arereadily convertible to known amounts of cash and are so near maturities that they present insignificant risk of changes in value
because of changes in interest rates.
Inventories
Inventories are stated at cost which is determined substantially by the average method being written-down to reflect the decline ofprofitability.
Marketable securities and investment securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: i) held-tomaturity 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 applicabletaxes, reported in a separate component of valuation and translation adjustments.
Non-marketable securities are stated at cost determined by the average method. For other than temporary declines in fair value,
investment securities are reduced to net realizable value by a charge to income.
Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost. Major renewals and additions are capitalized, while minor renewals maintenance104

Synopsis of
Performanceand repairs are charged to income when incurred. Interest expenses on capital expenditures during the construction stage are notcapitalized.
Depreciation of property, plant and equipment is principally computed by the declining-balance method at rates based on estimateduseful lives. However, depreciation of buildings acquired on or after April 1, 1998 is computed by the straight-line method.
The estimated useful lives for depreciation purposes range as follows:
3 to 50 years
2 to 13 years

Assets with an acquisition cost of ¥100,000 ($1,220) or more per unit and less than ¥200,000 ($2,439) per unit are depreciated overthree years on a straight-line basis, whereby one-third of such acquisition cost may be taken as depreciation expense each year.
Leased assets
Finance leases which do not transfer ownership were accounted for as operating lease prior to 2009 but are capitalized since 2009.
Depreciation for leased assets is computed on a straight-line basis over the lease period with a residual value of zero.

Research and development expenses
Research and development expenses are charged to income as incurred.
Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.

By this change, deferred tax assets net of deferred liability decreased by 3,823 million, deferred income taxes increased by 4,165
million and net unrealized gains on available-for-sale securities increased by 342 million, respectively.

Appendix

Derivatives and hedging activities
The Company and certain consolidated subsidiaries use derivative financial instruments (“derivatives”) for foreign currency forward
contracts, currency options, interest rate swaps and currency swaps to manage the risk arising from fluctuation in foreign currency
exchange rate and interest rates. The Company and its subsidiaries do not enter into derivatives contracts for speculative purposes.
Derivatives are carried at fair value with change in unrealized gains or losses charged or credited to operations, except for thosewhich meet the criteria for deferral hedge accounting under which an unrealized gain or loss is deferred as an asset or a liability.
The trade accounts receivable and payable denominated in foreign currencies of the Company and domestic subsidiaries which areindividually covered by foreign currency forward contracts are translated at the contracted rates because such treatment is also
allowed to be elected under the accounting standard if the forward contracts qualify for hedge accounting.

Financial Section

From April 1, 2012 to March 31, 2015: 38.0%
On and after April 1, 2015:
35.6%

How DNP Works to
Achieve Sustainable
Development

Change of deferred tax assets and deferred tax liability by the change of effective statutory tax rate
“Act on the Partial Revision of the Income Tax Act for the Establishment of a Taxation System Responding to Structural
Transformation of Economy and Society” and “Act on Special Measures for Securing Financial Resources Needed to Implement
Measures to Recover From the Great East Japan Earthquake” were promulgated on December 2, 2011. By these acts, the effective
statutory tax rate, which is used to calculate deferred tax assets and liabilities for the current year was changed from 40.7%, which
was used as of March 31, 2011, to reduced rates. The new effective tax rates will be as follows, depending when the temporary
difference will be realized.

Corporate Governance

Liability for retirement benefits
The Company and several domestic significant consolidated subsidiaries applied the accounting standard for employees’ retirement
benefits. Under the accounting standard, accrued pension and liability for employees’ retirement benefits have been provided basedon the estimated amounts of projected pension and severance obligation and fair value of plan assets at the end of the fiscal year.
Prior service cost is being amortized as incurred by the straight-line method over the period within the average remaining service
periods of the eligible employees. Actuarial gains and losses have been amortized from the following fiscal year by the decliningbalance method over the periods within the average remaining service periods of the eligible employees.

DNP's Businesses

Impairment of fixed assets
The Company and its subsidiaries review fixed assets for impairment whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amountof an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use andeventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying
amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.

Special Feature:
DNP's Growth Strategies

Intangible assets
Intangible assets included in other assets are carried at cost less accumulated amortization calculated by the straight-line method
over their estimated useful lives. Software development costs for internal use included in intangible assets are amortized by thestraight-line method over five years.

To Our Shareholders

Buildings			
Machinery and equipment

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, 2012 and 2011, respectively.

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

105

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 of net loss in 2012.
Change in accounting policies
Application of “Accounting Standard for Accounting Changes and Error Corrections”
The Company applied the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No.24, December
4, 2009) and “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No.24, December
4, 2009) to accounting changes and corrections of prior period errors made on and after the beginning of the year ended March 31,
2012.
3. Basis of Translating Financial Statements
The consolidated financial statements are expressed in Japanese yen in accordance with accounting principles generally accepted inJapan. The Japanese yen amounts have been translated into U.S. dollar amounts, solely for the convenience of the readers, at therate of ¥82=U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange Market at March 31, 2012. 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.
4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2012 and 2011 were comprised of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

2011

2012
Cash and deposits(excluding time deposits with a maturity over three months)¥¥

216,280

222,057

2012$

2,637,561

5. Marketable Securities and Investment Securities
The acquisition cost and aggregate fair value of marketable and investment securities classified as available-for-sale securities including
those with no fair value as of March 31, 2012 and 2011 were as follows:
Millions of yen

March 31, 2012
StocksOthers
Total

Acquisition cost
111,684392¥
112,076¥

Unrealized gains
20,196
1¥
20,197¥

Unrealized losses
13,263
9¥
13,272¥¥¥

Fair value
118,617384
119,001

Thousands of U.S. dollars (Note 3)

March 31, 2012
StocksOthers
Total

Acquisition cost
1,362,000
4,781$
1,366,781$

Unrealized gains
246,29312$
246,305$

Unrealized losses
161,744110$
161,854$$$

Fair value
1,446,549
4,683
1,451,232

Millions of yen

March 31, 2011
StocksOthers
Total

Acquisition cost
112,167411¥
112,578¥

Unrealized gains
14,7342¥
14,736¥

Unrealized losses
12,8598¥
12,867¥¥¥

Fair value
114,042405
114,447

The proceeds from sales of available-for-sale securities for the years ended March 31, 2012 and 2011 were ¥166 million ($2,024
thousand) and ¥946 million, respectively. The gross realized gains on these sales for the years ended March 31, 2012 and 2011 were ¥79
million ($963 thousand) and ¥696 million, respectively, and the gross realized losses on these sales for the years ended March 31, 2012
and 2011 were ¥42 million ($512 thousand) and ¥2 million, respectively.
The redemption schedules for securities with maturities classified as other securities at March 31, 2012 and 2011 were as follows:
Millions of yen

March 31, 2012
Corporate bonds

Due in one
year or less¥150

Due after one year
through five years¥

30Over five years¥

100

Thousands of U.S. dollars (Note 3)

March 31, 2012
Corporate bonds

Due in one
year or less
$

1,829

Due after one year
through five years$

366Over five years
$

1,220

Millions of yen

106

March 31, 2011
Corporate bonds

Due in one
year or less–Due after one year
through five years¥

180

Over five years¥

100March 31, 2012
Corporate bonds

year or less
150¥

Over five years

through five years
¥

30

¥

100

Thousands of U.S. dollars (Note 3)

Due in one
year or lessDue after one year
through five years

1,829

$

$

366

Over five years
$

1,220

Millions of yen

March 31, 2011
Corporate bonds

Due in one
year or lessDue after one year
through five years

–

¥

¥

180

Over five years¥

100

Thousands of
U.S. dollars (Note 3)

Millions of yen

¥

¥

¥

2011
87,446
31,585
19,576
138,607$$2012
1,120,878
479,951
242,086
1,842,915

7. Short-term Bank Loans and Long-term Debt
Short-term bank loans at March 31, 2012 and 2011 were represented by bank loans and bank overdrafts, etc. bearing interest at an
average rate of 0.75% per annum for 2012 and 0.74% per annum for 2011.
Long-term debt at March 31, 2012 and 2011 consisted of the following:

2012
Secured debentures
1.05% due 2014
1.05% due 2013
0.66~1.13% due 2012

2012

¥

40
40
–

¥

40
40
87

$

488
488
–

¥

50,00050,000
240
580
1,580
50,620620–¥

50,00050,000–340
1,340
51,380
380
1,516

$

609,756
609,756
2,927
7,073
19,268617,317
7,561–

Current portion of long-term debt¥

10,613
14,183
178,516(6,308)172,208¥

3,262
20,957
179,342(11,019)
168,323$

129,427
172,964
2,177,025(76,927)
2,100,098

Finance lease obligations at March 31, 2012 and 2011 which are included in other long-term liabilities consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

¥
¥

2012
26,165(7,987)
18,178¥¥

2011
23,120(7,662)
15,458$$

2012
319,085(97,402)
221,683

Financial Section

Finance lease obligations
Current portion of lease obligations

How DNP Works to
Achieve Sustainable
Development

Mortgage loans, maturing 2012-2024
Unsecured loans, maturing 2012-2018

Corporate GovernanceUnsecured debentures
1.358% due 2021
1.705% due 2020
0.59~0.79% due 20170.59~0.79% due 2016
0.55~0.79% due 2015
0.59~1.67% due 2014
0.59~1.35% due 2013
0.65~1.75% due 2012

2011

DNP's Businesses

Thousands of
U.S. dollars (Note 3)

Millions of yen

Special Feature:
DNP's Growth Strategies¥

2012
91,91239,356
19,851
151,119

To Our Shareholders

6. Inventories
Inventories at March 31, 2012 and 2011 consisted of the following:

Finished products
Work in process
Raw materials

Synopsis of
Performance

March 31, 2012
Corporate bonds

Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

107Mortgage loans were secured by property, plant and equipment and other assets amounting to ¥7,037 million ($85,817 thousand)and ¥14,985 million at March 31, 2012 and 2011, respectively.
With minor exceptions, interest rates on mortgage loans ranged from 1.11% to 2.86% per annum for 2012 and ranged from 1.34% to2.25% per annum for 2011, while interest rates on unsecured loans ranged from 0.64% to 2.35% per annum for 2012 and from 0.64%
to 2.35% per annum for 2011.
The aggregate annual maturities of long-term debt after March 31, 2012 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

Years ending March 31
2013
2014
2015
2016
2017
2018 and thereafter

6,308
55,794
10,162
4,616
1,054
100,582
178,516

¥

¥

$

$

76,926680,415
123,927
56,293
12,8541,226,610
2,177,025

The aggregate annual maturities of finance lease obligations after March 31, 2012 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

Years ending March 31
2013
2014
2015
2016
2017
2018 and thereafter

¥

¥

7,987
5,953
3,567
1,251
848
6,559
26,165$$97,402
72,59843,50015,256
10,341
79,988319,085

8. Retirement Benefits
The Company and its domestic subsidiaries have several defined benefit retirement plans covering all of their employees, i.e.
corporate pension plan, tax-qualified non-contributory pension plan, a governmental welfare contributory pension plan, lump-sum
retirement plan and defined contribution pension plan. Upon retirement or termination of employment for reasons other than the causeof dismissal, employees are entitled to lump-sum payments based on the current rate of pay, length of services and accumulated
number of points determined based on the employment services.
Under the Defined Benefit Pension Plan Law, the Company has established new defined benefit pension plans on March 1, 2005
under which ninety percent of the retirement benefit liability of the Company is covered by the employees’ pension fund.
The liability for employees’ retirement benefits at March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

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

¥

¥

2012
191,217(144,647)(14,341)(1,918)2,919
33,230¥¥2011
186,008(132,698)(16,010)(1,526)
3,487
39,261$$2012
2,331,915(1,763,988)(174,890)(23,391)
35,598405,244

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

Millions of yen

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

108

¥

¥

2012
10,253
4,478(3,297)
3,281
574
999
135
16,423¥¥

2011
10,227
4,291(3,177)
2,084
2,147
–
142
15,714$$2012
125,036
54,610(40,207)
40,012
7,000
12,183
1,646
200,280

Synopsis of
Performance

Assumptions used for the years ended March 31, 2012 and 2011 were set forth as follows:
2011
Straight-line method
2.5%
2.5%
9 years
6 years

9. Net Assets
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies
Act that affect financial and accounting matters are summarized below;

¥

2012
8,369
450
17,712
2,884
640
6,060
195
610

¥

2011
5,396
538
16,355
5,159
590
4,102
269
724

$

2012
102,061
5,488
216,000
35,171
7,805
73,9022,378
7,439

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

Appendix

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

Financial Section

Thousands of
U.S. dollars (Note 3)

Millions of yen

How DNP Works to
Achieve Sustainable
Development

10. Accounts with Non-consolidated Subsidiaries and Associated Companies
Account balances with non-consolidated subsidiaries and associated companies as of March 31, 2012 and 2011 were summarized
as follows:

Corporate Governance(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to thestockholders which is determined by specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of net assets.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of net assets or deducted directly from stock acquisitionrights. At present, the Company has not issued such stock acquisition rights.

DNP's Businesses(b) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon
the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of thecommon stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without
limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus andretained earnings can be transferred among the accounts under certain conditions upon resolution of the stockholders.

Special Feature:
DNP's Growth Strategies(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend
upon resolution at the stockholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors,(2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors isprescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors of suchcompany may declare dividends (expect for dividends in kind) at any time during the fiscal year if the company has prescribed soin its articles of incorporation. The Company meets all the above criteria. However, its articles of incorporation have not stipulated
that the Board of Directors may declare dividends at any time during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to stockholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends
or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the stockholders, but theamount of net assets after dividends must be maintained at no less than ¥3 million.
Cash dividends of ¥16.00 ($0.2) per share, aggregating ¥10,313 million ($125,768 thousand) were approved at the generalstockholders’ meeting held in June 2012 with respect to the year ended March 31, 2012.

To Our Shareholders

2012
Straight-line method
2.5%
2.5%
9 years
6 years

Attribution method of estimated benefits to periods of services
Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain/loss
Amortization period of prior service cost109

11. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars (Note 3)

Millions of yen

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

¥

¥

2012
67,6595,265
4,907
12,64429,318106,542
226,335¥¥

2011
66,754
5,980
4,515
11,21330,619114,892
233,973$$2012
825,110
64,207
59,841
154,195
357,537
1,299,293
2,760,183

Total research and development expenses (including manufacturing costs) amounted to ¥31,690 million ($386,463 thousand) and¥33,147 million for 2012 and 2011, 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

2011

2012
Interest and dividend income
Leasing fees

¥

74
191

¥

2012
103
203

$

902
2,329

13. Income Taxes
The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which, in theaggregate, resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2012 and 2011,
respectively.
In addition, the statutory tax rate would change from approximately 40.7% to 38.0% effective for the fiscal years beginning on orafter April 1, 2012 through March 31, 2015 and to 35.6% afterwards. These changes were caused by the revision of Income Tax Act
in 2011. (Refer to 2. Significant Accounting Policies: Income taxes)
The actual effective tax rate reflected in the accompanying consolidated statements of operations differs from the normal effective
statutory tax rate primarily due to the effect of permanently non-deductible expenses, current operating losses 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 tax rate forthe year ended March 31, 2012 and 2011, respectively.
2011
40.7 %
(0.7)
1.3
11.7
1.6
–
(1.4)
53.2 %

2012
40.7%(14.0)
30.8
591.5
(1.7)
155.9
(73.2)
730.0%

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

Net deferred tax assets at March 31, 2012 and 2011, resulting from temporary differences between the carrying amounts and thetax bases of assets and liabilities were reflected on the accompanying consolidated balance sheets under the following captions:Thousands of
U.S. dollars (Note 3)

Millions of yen

110

Prepaid expenses and other current assets
Other assets¥

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

¥
¥

2012
8,692
34,580(19)(1,963)
41,290

¥

¥
¥

2011
10,41537,196(8)(2,628)44,975

$

$
$

2012
106,000
421,707(232)(23,939)
503,536

Synopsis of
Performance

Significant components of deferred tax assets at March 31, 2012 and 2011 were as follows :Thousands of
U.S. dollars (Note 3)

Millions of yen

2012

$

$

¥

(329)
(5,142)(1,610)(5,112)(12,193)$(19,817)(46,988)(19,281)(50,988)(137,074)¥

44,975$503,536¥¥¥(1,625)(3,853)(1,581)(4,181)(11,240)¥

41,290¥¥$185,866
51,92723,512
69,012
17,524560,220
157,439
224,365
1,289,865(649,255)
640,610

Thousands of
U.S. dollars (Note 3)

Millions of yen

¥

¥

2012
7,266
8,584
8,987
176
25,013

¥

¥

2011
1,575
–
–
110
1,685

$

$

2012
88,610104,683
109,598
2,146
305,037

Thousands of
U.S. dollars (Note 3)

Millions of yen

Acquisition cost
Accumulated depreciation
Accumulated impairment losses
Net book value

¥

¥

2012
11,075(8,716)
(325)
2,034

¥

¥

2011
20,526(15,785)
(235)
4,506

$

$

2012
135,061(106,293)(3,963)24,805

Financial Section

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

How DNP Works to
Achieve Sustainable
Development

Buildings and structures
Machinery and equipment
Construction in progress
Others
Total

Corporate Governance

14. Impairment Loss on Fixed Assets
The Company and its consolidated subsidiaries reviewed the fixed assets for impairment for the years ended March 31, 2012 and2011. Fixed assets were, in principle, grouped at the business unit for impairment testing purposes. Idle assets were grouped in each
asset. Loss on impairment of fixed assets for the years ended March 31, 2012 and 2011 were recognized in the amount of ¥25,013
million ($305,037 thousand) and ¥1,685 million, respectively due to a significant decline in profitability. The recoverable amounts ofthe business assets were measured at their value in use which was calculated by discounting future cash flows. The discount rate
was mainly 10%. The recoverable amounts of the idle assets were measured at the net selling value. The carrying amounts of the idle
assets were devalued to the nominal amount since calculation of its net selling value was difficult to measure and its future cash flows
were negative. The losses on impairment of fixed assets for the years ended March 31, 2012 and 2011 were as follows:

DNP's Businesses

Net deferred tax assets:

18,919
5,883
5,955
6,686
986
36,9499,641
18,078103,097(45,929)
57,16815,241
4,258
1,928
5,659
1,437
45,93812,91018,398105,769(53,239)
52,530¥2012

Special Feature:
DNP's Growth Strategies

Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Reserve for special depreciation
Undistributed earnings of subsidiaries
Other
Total

¥

2011

To Our Shareholders

Deferred tax assets:
Excess provision for retirement benefits
Loss on devaluation of investment securities
Excess provision for doubtful receivables
Accrued bonuses
Loss on write-down of inventories
Operating loss carryforwards
Impairment loss on fixed assets
Other
Total deferred tax assets
Less: valuation allowance
Total

Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

111

The amounts of lease expenses, reversal of allowance for impairment loss on leased assets and lease impairment losses undersuch finance leases for the years ended March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

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

¥

2012
2,147
102
6

¥

2011
4,041
113
2

$

2012
26,183
1,244
73

The amounts of outstanding future payments under such finance leases due on March 31, 2012 and 2011, including the portion ofinterest thereon, were summarized as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2011

2012
Future lease payments:
One year or lessMore than one year

¥
¥

1,017
1,155
2,172

¥
¥

2,153
2,589
4,742

2012
$
$

12,40314,08526,488Operating Leases
The amounts of outstanding future payments under non-cancelable operating leases as of March 31, 2012 and 2011 were also
summarized as follows:
Thousands of
U.S. dollars (Note 3)

Millions of yen

2011

2012
Future lease payments:
One year or lessMore than one year

¥
¥

5,658
26,86932,527¥¥

3,935
16,86520,8002012$$

69,000327,671396,671

16. Financial Instruments
1. Management policy
The Company and its consolidated subsidiaries manage fund surpluses through financial assets that have high levels of safety, andraise funds through bank loans and bond issuances. The Company and its subsidiaries also utilize derivative financial instruments
to hedge the risk of exchange rate and interest rate fluctuations and do not enter into derivatives for trading or speculative
purposes.
The trade receivables are exposed to credit risk of customers and the Company and its subsidiaries minimize the credit risk inaccordance with internal customer credit management rules.
Long-term investments are mainly equity securities. Listed stocks are stated at fair value based on market prices quarterly.
2. Fair value of financial instruments
Fair value and difference compared to the carrying amounts reported in the consolidated balance sheet as of March 31, 2012 and2011 were as follows:112

Synopsis of
Performance

Millions of yen¥

217,519
385,102100,805
1,765
(219)
1,546
704,972
276,354
51,809178,516
506,679
(514)
(20)
(534)

¥

217,519
385,102100,806
1,606¥

Difference
¥

–
–
1

1,606
705,033
276,354
51,809184,233
512,396

60
61
–
–
5,717
5,717

(514)
(81)
(595)

–
(61)
(61)

¥

Special Feature:
DNP's Growth Strategies

Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1]Hedge accounting is not applied[2]Hedge accounting is applied
Total

¥

Fair value

To Our Shareholders

March 31, 2012
(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securities(4) Long-term loan receivables
Allowance for doubtful receivables*1

Carrying amounts
reported in the
consolidatedbalance sheet

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

2,652,671
4,696,366
1,229,329
21,525(2,671)
18,854
8,597,220
3,370,171
631,817
2,177,025
6,179,013(6,268)(244)(6,512)$2,652,671
4,696,366
1,229,341
19,585Difference
$

–
–
12

19,585
8,597,963
3,370,171
631,8172,246,744
6,248,732

731
743
–
–
(69,719)(69,719)(6,268)(988)(7,256)

–
(744)
(744)

$

$

How DNP Works to
Achieve Sustainable
Development

Millions of yen¥

223,848
403,986
96,356
1,990
(203)
1,787
725,977
275,525
51,403
179,343506,271
(217)
(20)
(237)

¥

¥

223,848
403,986
96,3581,967

Difference
¥

–
–
2

1,967
726,159
275,525
51,403
182,745509,673

180
182
–
–
3,402
3,402

(217)
(26)
(243)

–
(6)
(6)

¥

Appendix

Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1]Hedge accounting is not applied[2]Hedge accounting is applied
Total

¥

Fair value

Financial Section

March 31, 2011
(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securities(4) Long-term loan receivables
Allowance for doubtful receivables*1

Carrying amounts
reported in the
consolidatedbalance sheet

Corporate Governance

Assets(1) Trade payables(2) Short-term bank loans(3) Long-term debts
Liabilities
Derivatives*2[1]Hedge accounting is not applied[2]Hedge accounting is applied
Total

$

Fair value

DNP's Businesses

March 31, 2012
(1) Cash and deposits(2) Trade receivables(3) Short-term and long-term investment securities(4) Long-term loan receivables
Allowance for doubtful receivables*1

Carrying amounts
reported in the
consolidatedbalance sheet*1. Allowance for doubtful receivables associated with long-term loan receivables is deducted.
*2. Derivative assets and liabilities are on a net basis.

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

113

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

March 31, 2012
Unlisted equity securities
Other

March 31, 2011
Unlisted equity securities
Other

Millions of yen

Thousands of
U.S. dollars (Note 3)

Carrying amounts
18,024¥172

Carrying amounts
219,805$
2,098

Millions of yen

Thousands of
U.S. dollars (Note 3)

Carrying amounts
17,907¥
184

Carrying amounts
215,747$
2,217

The above are not included in “(3) Marketable and investment securities” because there is no market value and it is extremely
difficult to measure the fair value.
17. Derivative Financial Instruments
Nature of Derivative Financial Instruments:
The Company and certain consolidated subsidiaries enter into derivative financial instruments (“derivatives”) for foreign currency
forward contracts, currency swap contracts, currency option contracts and interest rate swaps to manage the risk arising fromfluctuation in foreign currency exchange rates and interest rates. Derivatives related to currency are utilized to hedge foreignexchange risks associated with certain accounts receivable, accounts payable and other debts, including forecasted transactions,denominated in foreign currencies. Interest rate swaps are utilized to hedge interest rate risks on interest-bearing debts. The
Company and its subsidiaries do not hold derivatives for speculative purposes.
Derivatives are subject to market risks and credit risks. Because the counterparties to those derivatives are limited to majorinternational financial institutions, the Company and its subsidiaries do not anticipate any losses arising from credit risks. The basic
policies for the use of derivatives are established in the Company’s internal regulations and the execution and control of derivatives
are controlled by the Accounting Department.

114

Synopsis of
Performance

Fair value of Derivative Financial Instruments:
The contracted amount and fair value of derivatives at March 31, 2012 and 2011 were as follows:
Derivative transactions to which the Company and its subsidiaries did not apply hedge accounting

March 31, 2012
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Currency option contracts
Buying Euro
Selling Euro

Fair value

¥

¥

7,405
2,044
9,449

¥

¥

¥

¥

Unrealized gain (loss)

¥

¥

(268)
(100)
(368)

¥

(268)
(100)
(368)

1,200

¥

(124)

¥

(124)

169
169
338

¥

(7)
(14)
(21)

¥

(7)
(14)
(21)

¥

¥

Special Feature:
DNP's Growth Strategies

Currency swap contracts
Receive U.S. dollars, and pay Japanese yen:Contracted amountTo Our Shareholders

Millions of yen

Thousands of U.S. dollars (Note 3)

Currency swap contracts
Receive U.S. dollars, and pay Japanese yen:$

Fair value$$(3,268)(1,219)(4,487)$(3,268)(1,219)(4,487)

14,634$(1,512)$(1,512)

2,061
2,061
4,122

$

(85)
(171)
(256)

$

(85)
(171)
(256)

$

$

90,30524,927
115,232$$$

Unrealized gain (loss)$$

Millions of yen

Currency swap contracts
Receive U.S. dollars, and pay Japanese yen:¥

Fair value

¥

¥

(61)
(85)
(146)

¥

(61)
(85)
(146)

1,464

¥

(47)

¥

(47)

215
215
430

¥

(11)
(13)
(24)

¥

(11)
(13)
(24)

¥

¥

6,114
1,836
7,950

¥

¥
¥

Unrealized gain (loss)¥¥

Financial Section

Currency option contracts
Buying Euro
Selling Euro

Contracted amountHow DNP Works to
Achieve Sustainable
Development

March 31, 2011
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Corporate Governance

Currency option contracts
Buying Euro
Selling Euro

Contracted amount

DNP's Businesses

March 31, 2012
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro

Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

115

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

March 31, 2012
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars
Japanese yen

Hedged items

Trade receivables
Trade receivables

Contracted amount¥

Trade payables
Trade payables¥

Currency swap contracts
Receive Japanese yen, and pay Danish krone:
Receive U.S. dollars, and pay Japanese yen:

Trade payables
Long-term loan payables

Interest rate swaps
Receive floating and pay fixed

Trade receivables
Trade receivables

Long-term loan payables
and corporate bonds

44
233
1,887

¥

¥

(47)
(31)
0
(8)
(86)

43
585
628

¥

¥

¥

42
53
95

¥

2
(1)
1

¥

4,275

¥

–

¥
¥

Currency option contracts
Buying U.S. dollars:
Selling U.S. dollars:

1,048
562

Fair value

¥

3
–
3

¥

Thousands of U.S. dollars (Note 3)

March 31, 2012
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars
Japanese yen

Hedged items

Trade receivables
Trade receivables

Contracted amount$

Trade payables
Trade payables$

Currency swap contracts
Receive Japanese yen, and pay Danish krone:
Receive U.S. dollars, and pay Japanese yen:

Trade payables
Long-term loan payables

Interest rate swaps
Receive floating and pay fixed116

Trade receivables
Trade receivables

Long-term loan payables
and corporate bonds

537
2,841
23,013

$

$

(573)
(378)
0
(98)
(1,049)

524
7,134
7,658

$

$

$

512
646
1,158

$

24
(12)
12

$

52,134$–$$Currency option contracts
Buying U.S. dollars:
Selling U.S. dollars:

12,781
6,854

Fair value

$

$

37
–
37

Synopsis of
Performance

Millions of yen

Interest rate swaps
Receive floating and pay fixed

Hedged items

Contracted amount

Trade receivables
Trade receivables

¥

¥

0
(24)

¥

11
32
1,672

¥

0
(2)
(26)

¥

4,425

¥

–

Trade payables
Trade payables

Long-term loan payables
and corporate bonds

1,175
454

Fair value

DNP's Businesses

18. Contingent Liabilities
The Company and its consolidated subsidiaries were guarantors of bank loans of other companies, amounting to approximately ¥56
million ($683 thousand) and ¥75 million at March 31, 2012 and 2011, respectively. It is common practice in Japan for companies, in theordinary course of business, to receive promissory notes in settlement of trade accounts receivable and to subsequently discount such
notes at banks. At March 31, 2012 and 2011, the Company and its consolidated subsidiaries were contingently liable on trade notes
discounted in the amount of ¥704 million ($8,585 thousand) and ¥704 million, respectively. Notes discounted were accounted for as
sales. One of the consolidated domestic subsidiaries securitized deposits for its leased property and sold them to third parties for ¥807
million ($9,841 thousand) and ¥891 million at March 31, 2012 and 2011, respectively.

Special Feature:
DNP's Growth Strategies

The fair values of currency swap contracts subject to alternative method and interest rate swaps subject to exceptional accrual
method are included in the fair values of hedged items, long-term debts, because such hedging instruments are embedded in thecorresponding hedged items.
Fair value of derivatives were, in principle, determined based on the market rates.
Foreign currency forward contracts which qualified for hedge accounting was assigned to the associated assets and liabilities ordeferred until completion of the forecasted transactions.

To Our Shareholders

March 31, 2011
Foreign currency forward contracts
Receivables:
U.S. dollars
Euro
Payables:U.S. dollars
Japanese yen

Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements11719. Business Segment Information
Outline of reportable segments:					The Company and its consolidated subsidiaries’ reportable segments are components of the group whose operating results are regularly
reviewed by the Board of Directors to make decisions about resources to be allocated to the segments and assess their performance,
for which discrete financial information is available. The group’s reportable segments consist of Information Communication, Lifestyleand Industrial Supplies, Electronics, and Beverages, based on a classification by commonality in manufacturing and marketing methodof products.										Information on sales and profit (loss), identifiable assets/liabilities and other items by business segment.
Millions of yen
Segment report

For 2012:
Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets
OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Tangible/intangible fixed assets increased

Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Beverages

Total¥ 708,531 ¥ 516,818 ¥ 224,810 ¥
6,106
6,025
2
714,637
522,843
224,812
15,48831,839(4,647)¥ 620,616 ¥ 565,398 ¥ 287,957 ¥

57,069 ¥ 1,507,228 ¥3
12,13657,072
1,519,364
1,334
44,01445,660 ¥ 1,519,631 ¥¥

3,436 ¥
1
5
3,865

24,041 ¥
1,586
235
29,90525,532 ¥
1,672–
39,52040,442 ¥168
24,77323,50393,451 ¥3,427
25,013
96,793

Consolidated

Adjustment– ¥ 1,507,228–(12,136)
1,507,228(12,136)
34,015(9,999)89,175 ¥ 1,608,806

2,378
–
–
1,396

¥

95,8293,427
25,01398,189Thousands of U.S. dollars
Segment report
Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Beverages

Total

Consolidated

Adjustment

For 2012:
Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets$ 8,640,622 $ 6,302,659 $ 2,741,585 $ 695,963 $18,380,829 $– $ 18,380,829
74,46373,47624
37–(148,000)
148,000
8,715,085
6,376,135
2,741,609
696,000 18,528,829(148,000) 18,380,829
188,878
388,281(56,671)
16,268414,817(121,939)
536,756$ 7,568,488 $ 6,895,098 $ 3,511,671 $ 556,828 $18,532,085 $ 1,087,500 $ 19,619,585

OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Tangible/intangible fixed assets increased$ 293,183 $ 311,366 $ 493,195 $
19,342
20,390
2,049
2,866
–
302,110364,695
481,951
286,622

41,902 $ 1,139,646 $
12
41,79361
305,037
47,134
1,180,402

29,000––17,025$ 1,168,646
41,793305,037
1,197,427

Millions of yen
Segment report

For 2011:
Net sales and operating income
Net sales
Outside customers
Intersegment
Total
Segment income
Segment assets
OthersDepreciation and amortization
Amortization of goodwill
Impairment loss
Tangible/intangible fixed assets increased

118

Information
Communication

Lifestyle andIndustrial
Supplies

Electronics

Beverages

Total¥ 715,519 ¥ 524,529 ¥ 286,286 ¥
6,461
7,185
10
721,980
531,714286,296
18,145
46,79012,223¥ 610,457 ¥ 518,259 ¥ 387,890 ¥

63,039 ¥ 1,589,373 ¥
6
13,662
63,045
1,603,035
1,249
78,40744,377 ¥ 1,560,983 ¥¥

3,351 ¥–
19
3,471

24,036 ¥
1,408
225
20,93926,070 ¥1,293–
20,06841,878 ¥161
1,441
56,49895,335 ¥
2,862
1,685
100,976

Adjustment

Consolidated– ¥ 1,589,373–(13,662)
1,589,373(13,662)
67,819(10,588)
88,801 ¥ 1,649,784

2,642
–
–
1,197

¥

97,9772,862
1,685
102,173

Information regarding regions
Millions of yen

For 2012 :Net salesJapan¥

1,314,934

Asia¥

133,477¥

Other region
58,817

Total

Other region
717,281$

18,380,829

Other region
62,963¥

1,589,373

Thousands of U.S. dollars (Note 3)

For 2012 :Net salesJapan$

16,035,780

Asia$

1,627,768

$

Total

Millions of yen

For 2011 :Net salesJapan¥

1,391,676¥

Asia
134,734¥

Total

DNP's Businesses

1,507,228

Special Feature:
DNP's Growth Strategies¥

To Our Shareholders[Relative information]

Synopsis of
Performance(Note)
Effective for the year ended March 31, 2011, the Company adopted the “Accounting Standard for Segment Information” (ASBJ
statement No.17, March 27, 2009) and “Guidance on Accounting Standard for Segment Information” (ASBJ Guidance No. 20, March
21, 2008).
						

Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Consolidated Financial Statements

119Independent Auditors’ Report
To the Board of Directors of
Dai Nippon Printing Co., Ltd.
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Dai Nippon Printing Co., Ltd. and consolidated
subsidiaries as of March 31, 2012 and the related consolidated statements of income, comprehensive income, changes
in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information (all expressed in Japanese yen).
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inconformity with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in conformity with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of therisks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Dai Nippon Printing Co., Ltd. and consolidated subsidiaries as of March 31, 2012, andthe consolidated results of their operations and their cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 3. Such U.S. dollar amounts are presented solely forthe convenience of readers outside Japan.
Report on Internal Control
We have audited management’s report on internal control over financial reporting of the consolidated financial statementsof Dai Nippon Printing Co., Ltd. as of March 31, 2012.
Management’s Responsibility for Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the
preparation and fair presentation of its report on internal control in conformity with assessment standards for internal
control over financial reporting generally accepted in Japan. There is a possibility that misstatements may not becompletely prevented or detected by internal control over financial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our audit. We conducted
our internal control audit in conformity with auditing standards for internal control over financial reporting generally
accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether management’s report on internal control is free from material misstatement.

120

Synopsis of
Performance

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion

MEIJI AUDIT CORPORATION

Special Feature:
DNP's Growth Strategies

In our opinion, management’s report on internal control referred to above, which represents that the internal control
over financial reporting of the consolidated financial statements of Dai Nippon Printing Co., Ltd. as of March 31, 2012 iseffectively maintained, presents fairly, in all material respects, the results of the assessment of internal control over financial
reporting in conformity with assessment standards for internal control over financial reporting generally accepted in Japan.

To Our Shareholders

An internal control audit involves performing procedures to obtain audit evidence about the results of the assessment ofinternal control over financial reporting in management’s report on internal control. The procedures selected depend on theauditor’s judgment, including the significance of effects on reliability of financial reporting. An internal control audit includes
examining representations on the scope, procedures and results of the assessment of internal control over financial
reporting made by management, as well as evaluating the overall presentation of management’s report on internal control.

DNP's Businesses

Tokyo, Japan
June 28, 2012

Corporate Governance
How DNP Works to
Achieve Sustainable
Development

Financial Section
Appendix

DNP Annual Report 2012 〉 Financial Section 〉 Independent Auditors’ Report121Investor Information(as of March 31, 2012)

Dai Nippon Printing Co., Ltd.
Major Stock Indices in which DNP is a
Constituent:
Nikkei Stock Average
TOPIX Large70
MSCI World Index
S&P/TOPIX 150
Dow Jones Sustainability Indexes
FTSE4GoodETHIBEL PIONEER & EXCELLENCE

Head Office:1-1, Ichigaya-Kagacho 1-chome, Shinjuku-ku,
Tokyo 162-8001, Japan
Established:
1876
Number of Employees (consolidated):
39,986Morningstar Socially Responsible Investment Index

Paid-in Capital:¥114,464 million

Stock Code:
7912

Number of Common Stocks:
Authorized 1,490,000,000 shares
Issued700,480,693 shares

Administrator of Shareholder Register:Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan

Number of Shareholders (more than 1,000 shares):25,254
Stock Exchange Listings:
Tokyo Stock Exchange
Major Shareholders:Shares (thousands) Percentage (%)

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

40,123

6.22

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

31,244

4.85

The Dai-ichi Life Insurance Co., Ltd.

30,882

4.79

The Bank of New York Mellon as Depositary

26,7884.16

Mizuho Corporate Bank, Ltd.

15,242

2.36

Nippon Life Insurance Co.

14,3492.23

Employees' Shareholding Association

13,646

2.12

SSBT OD05 OMNIBUS ACCOUNT – TREATY CLIENTS

12,843

1.99

Mizuho Bank, Ltd.

12,471

1.93

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

7,437

1.15

Bank for Depositary Receipts Holders

Notes: 1. The number of treasury shares (55,894,120) is excluded from the figures above.
2. The ownership stakes are based on the total number of shares outstanding lesstreasury shares (644,586,573).

American Depositary Receipts:
Ratio (ADR:ORD): 1:1
Exchange: OTC (Over-the-Counter)
Symbol: DNPLYCUSIP: 233806306
Depositary:
The Bank of New York Mellon
101 Barclay Street, 22 West, New York,NY 10286, U.S.A.
Telephone: (201) 680-6825
U.S. toll free: 888-269-2377 (888-BNY-ADRS)URL: http://www.adrbnymellon.com/
Annual Meeting of Shareholders:
The annual meeting of shareholders of DNP is
normally held in June each year in Tokyo, Japan.
Investor Relations:
Dai Nippon Printing Co., Ltd.
Corporate Communication Head Office
IR Group, Press and Public Relations
1-1, Ichigaya-Kagacho 1-chome, Shinjuku-ku,
Tokyo 162-8001, Japan
Tel: +81-3-5225-8220
Fax: +81-3-5225-8239
Web Site Address:
http://www.dnp.co.jp/eng/122

Synopsis of
Performance(between April 1, 2009 and March 31, 2012)DNP Stock Price (yen)Increase (%)*

To Our Shareholders

Share Price Evolution (Tokyo Stock Exchange)

−

1,500

50

−

40

1,300

30
1,200

10
1,000
0

DNP's Businesses

20
1,100

Special Feature:
DNP's Growth Strategies

−
1,400

900
– 10
– 20

700
– 30

600

10

11

12

Corporate Governance

800*Index 100 = March 31, 2009Type

(as of March 31, 2012)

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)––

Common stocks

56,979,000–

Stocks with voting rights (other)

Common stocks 641,288,000

641,287

Stocks with less than trading units

Common stocks

Outstanding shares
Total voting rights of stockholders

2,213,693

Financial Section

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

700,480,693––

641,287

Treasury Stocks
Holder

How DNP Works to
Achieve Sustainable
Development

Voting Rights(as of March 31, 2012)

No. of Stocks Held

Percentage of Holding to No. of Outstanding Shares

55,849,000

7.98

Kyoiku Shuppan Co., Ltd.

1,085,000

0.15

Total

56,979,000

8.13

DNP Annual Report 2012 〉 Appendix 〉 Investor Information

Appendix

Dai Nippon Printing Co., Ltd.

123

Major Subsidiaries and Affiliates(As of March 31, 2012)

Printing
DNP Hokkaido Co., Ltd.
Film making, printing, bookbinding; production and sale of packaging
DNP Tohoku Co., Ltd.
Film making, printing, bookbinding; production and sale of packaging
DNP Chubu Co., Ltd.
Film making, printing, bookbinding; production and sale of packaging
DNP Nishi Nippon Co., Ltd.
Film making, printing, bookbinding; production and sale of packaging
DNP Shikoku Co., Ltd.
Film making, printing, bookbinding; production and sale of packaging
Information Communication
Books and Magazines
DNP Book Factory Co., Ltd.
Film making, printing and bookbinding
DNP Media Art Co., Ltd.
Film making
OGUCHI BOOK BINDING & PRINTING CO., LTD.
Printing and bookbinding
Tien Wah Press (Pte.) Ltd.
Film making, printing and bookbinding		Commercial Printing
DNP Media Techno Kansai Co., Ltd.
Planning, production, film making, printing and bookbinding
DNP Graphica Co., Ltd.
Printing and bookbinding
DNP Media Create Co., Ltd.
Planning, production and film making
DNP Multi Print Co., Ltd.
Film making, printing and bookbinding
Business Forms
INTELLIGENT WAVE, INC.
Credit card security; security systems construction
DNP Data Techno Co., Ltd.
Production of plastic cards
DNP Data Techno Kansai Co., Ltd.
Production of business forms and plastic cards
DNP Total Process Warabi Co., Ltd.
Film making and plate making
NBC Co., Ltd.*Shipping
DNP Media Support Co., Ltd.
Production and sale of business forms
OthersDNP Dream Pages Co., Ltd.
Production and sale of photobooks
DNP Art Communications Co., Ltd.
Planning, production and sale of artistic images and videos
DNP AV Center Co., Ltd.
Planning, production and sale of TV programs, movies and video softwares
DNP Digitalcom Co., Ltd.
Website planning, production and delivery
YouToo Co., Ltd.*
Provision of information over the Internet and mobile phones
CP Design Consulting Co., Ltd.*
Consultation for privacy protection and crisis management
M’s Communicate Co., Ltd.*
Consultation and mediation for customer relationship management
At Table Co., Ltd.*
Research, consulting and planning for sales promotions for grocery supermarkets
DNP Social Links Co., Ltd.
Direct marketing services
Lifestyle and Industrial Supplies
Packaging
DNP Technopack Tokai Co., Ltd.
Production, printing and processing of packaging
LIFESCAPE MARKETING CORPORATION
Various types of information services and surveys
DNP Technopack Co., Ltd.
Production, printing and processing of packaging
DNP Technopack Yokohama Co., Ltd.
Production, printing and processing of packaging
DNP Technopack Kansai Co., Ltd.
Production, printing and processing of packaging
Sagami Yoki Co., Ltd.
Production of laminated tubes
Aseptic Systems Co., Ltd.
Productions, sale and consultation for aseptic systems
DNP Techno Polymer Co., Ltd.
Molding, processing and printing of plastic containers
DNP Hoso Co., Ltd.
Filling and processing of packages
DNP Field Eyes Co., Ltd.
Survey and provision of various information
FREPS Co., Ltd.*
Advertizing
PT DNP Indonesia
Production and sale of packaging products		
DNP Plastic Molding (Shanghai) Co., Ltd.
Molding, printing, processing and sale of plastic containers		Lifestyle Materials
DNP Lifestyle Materials Marketing Co., Ltd.
Sale of decorative products
DNP Ellio Co., Ltd.
Printing and processing of steel and other metal plates
DNP Lifestyle Materials Co., Ltd.
Production, printing, processing of decorative materials
Industrial Supplies
DNP Photo Imaging Co., Ltd.
Investment in operating companies
DNP ID System Co., Ltd.
Sale of equipment for making driver licenses and ID photos
DNP Fotolusio Co., Ltd.
ID photo business and sale of photo materials and accessories
DNP Energy Systems Co., Ltd.
Production of photovoltaic module components
DNP IMS Co., Ltd.
Production of ink ribbons for thermal transfer printers and for thermal-resin type printers
DNP OptoMaterials Co., Ltd.
Manufacturing of optical products
DNP IMS America Corporation
Production and sale of ink ribbons for thermal transfer printers and for thermal-resin type printers
		
DNP Electronics America, LLC
Manufacturing and sale of precision electronic components		Compagnie de Découpe de l’Ouest-CDO SAS
Production and sale of ink ribbons for thermal transfer printers and for thermal-resin type printers
		
DNP Photo Imaging Europe SAS
Sale of photo-related products		
DNP IMS Netherlands B.V.
Production and sale of ink ribbons for thermal transfer printers and for thermal-resin type printers
		
DNP Denmark A/S
Manufacturing and sale of precision electronic components		124

Capital(¥ million)

Ownership ratio
(%)

350
350
350
400
50

100.0
100.0
100.0
100.0
97.0

200
180
49
(S$1,000)
4,600

100.0
100.0
84.9 (15.2)
100.0

200
100
100
100

100.0
100.0
100.0
100.0

843
100
100
80
20
10

50.6
100.0
100.0
100.0
100.0 (100.0)
95.0

400
300
100
100
50
40
30
30
10

100.0
100.0
100.0
100.0
100.0
92.5
95.0
51.0
100.0

430
430
300
280
200
200
100
100
80
50

100.0
50.7
100.0
100.0
100.0
90.0
100.0
100.0
100.0
100.0

25

98.0

(US$1,000)
26,000(US$1,000)
6,350

51.0
100.0

300
300
200

100.0
50.0
100.0

100
60
450
200
100
100
(US$1,000)
71,980(US$1,000)
15,045(Euro 1,000)
3,040(Euro 1,000)
2,408(Euro 1,000)
1,000(Dkr1,000)
135,000

100.0
100.0 (100.0)
100.0 (33.3)
100.0
100.0
100.0
(100.0)100.0(100.0)100.0
23.4(66.0)
66.0
100.0
100.0

490
300
100
40
(Euro 1,000)
47,200(NT$1,000)
5,170,618

65.0
100.0
100.0
100.0
80.6
(0.3)
100.0

3,000
4,821
50
50
266
50
39
35
2,564
2,111
2,035
2,000
100

53.0
53.0 (53.0)
53.0 (53.0)
53.0 (53.0)
53.0 (53.0)
53.0 (53.0)
53.0 (53.0)
53.0 (53.0)
16.5 (9.9)
56.7
45.3 (14.0)
100.0
100.0 (100.0)

1,169

32.1

Packing, shipping operations and warehouse management
Production and sale of printing ink

626
500

100.0
33.4

mobilebook.jp, Inc.

Electronic publishing and distribution platform services (agency)

497

49.0

2Dfacto, Inc.

Development of e-books and terminals

490

60.0 (9.0)

VISUAL JAPAN. INC.*

Development, sale, and maintenance of computer softwares

435

86.8

100
100
80
60
50
(US$1,000)
420

100.0
94.3
100.0
48.3
99.8
100.0

350
100
90
33
30
20

100.0
100.0
100.0
88.8
100.0
100.0

(US$1,000)
62,164(US$1,000)
100(US$1,000)
100(Euro 1,000)
92(£1,000)
120(A$1,000)
70(S$1,000)
350(Krw1,000)
500,000(NT$1,000)
10,000(US$1,000)
5,400

(7.2)
100.0
(100.0)100.0(100.0)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Appendix

Beverages
Beverages
Hokkaido Coca-Cola Bottling Co., Ltd.
Manufacturing and sale of soft drinks
2,935
			

Financial Section

D.N.K. Co., Ltd.
Manufacturing, sale and repair of printing equipment and machine tools
DNP Trading Co., Ltd.
Sale and purchase of paper and other products
DNP SP Tech Co., Ltd.
Planning and production of promotional material
Kyoiku Shuppan Co., Ltd.
Editing and sales of textbooks and educational materials
My Earth Projects LLC *Planning, production and sale of trading cards
DNP Business Consulting (Shanghai) Co., Ltd.*
Study and analysis of Chinese market and business feasibility
		Personal Welfare, Facility Service and Others
DNP Facility Services Co., Ltd.
Building management, cleaning and security; operation of public health and recreation facilities
DNP Information Systems Co., Ltd.
Design, development and maintenance of information systems; production and sale of softwares
DNP Human Services Co., Ltd.
Planning and management related to personnel plans
Uzumine Country Club Co., Ltd.*Management of golf courses
DNP Accounting Services Co., Ltd.
Accounting and consulting services
DNP Techno Research Co., Ltd.*
Studies related to patents and the preparation of contracts
Overseas Sales
DNP Corporation USA
Investment in operating companies
		
DNP America, LLC
Sale of printing materiais, electronic precision parts, and decorative materials
		
DNP Holding USA Corporation
Investment in operating companies
		
DNP Europa GmbH*
Sale of electronic precision parts and decorative materials
		
DNP UK Co., Ltd.*Sale of decorative materials
		
Dai Nippon Printing Co. (Australia) Pty. Ltd.*Sale of printed materials and decorative materials
		
DNP Singapore Pte. Ltd.*Sale of electronic precision parts and decorative materials
		
DNP Korea Co., Ltd.*Sale of electronic precision parts		
DNP Taiwan Co., Ltd.
Sale of electronic precision parts		
DNP International Trading (Shanghai) Co., Ltd.*Sale of printing solutions and packaging products
		

How DNP Works to
Achieve Sustainable
Development

Operation of general information website and Internet advertising

DNP Logistics Co., Ltd.
DIC Graphics Corporation

Corporate Governance

All About, Inc.

DNP's Businesses

100.0
100.0
100.0
100.0

Special Feature:
DNP's Growth Strategies

2,500
450
400
400

To Our Shareholders

Electronics
Display Components
DNP Color Techno Kameyama Co., Ltd.
Production and sale of color filters for LCDs
DNP Precision Devices Co., Ltd.
Production of display related components
DNP Precision Devices Himeji Co., Ltd.
Production of color filters for LCDs
DNP Color Techno Sakai Co., Ltd.
Production of color filters for LCDs
Electronic Devices
DT Fine Electronics Co., Ltd.
Production and sale of semiconductor components
DNP Fine Electronics Co., Ltd.
Production of semiconductor components
DNP LSI Design Co., Ltd.
Designing and production of drawings used in semiconductor production
DNP Micro Technica Co., Ltd.
Inspection, processing and loading of precision electronic parts
DNP Photomask Europe S.p.A.
Manufacturing and sale of photomasks		
DNP Photomask Technology Taiwan Co., Ltd.
Manufacturing and sale of photomasks
		
OthersMaruzen CHI Holdings Co., Ltd.
Investment in operating companies
Maruzen Co., Ltd.
Sale of books, magazines and stationery
Maruzen Bookstores Co., Ltd.
Sale of books, magazines and stationery
MARUZEN PUBLISHING CO., LTD.
Publishing
TRC, Inc.
Sale of books and creation of data
honto Book Services Co., Ltd.
Development of e-publishing contents
Junkudo Co., Ltd.
Sale of books
Yushodo Co., Ltd.
Sale of books
BOOKOFF CORPORATION LIMITED
Sale of books
SHUFUNOTOMO Co., Ltd.
Publishing
BUNKYODO GROUP HOLDINGS CO., LTD.
Investment in operating companies
DNP Fine Chemicals Co., Ltd.
Development and sale of ink, varnish, pigments and dyes
DNP Fine Chemicals Fukushima Co., Ltd.
Production and sale of photographic chemicals

Ownership ratio(%)

Synopsis of
Performance

Capital(¥ million)

(6.5)
57.5

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

DNP Annual Report 2012 〉 Appendix 〉 Major Subsidiaries and Affiliates

125

Glossary

1.Terms Related to the DNPGroup■ Management Concept

The DNP Group will contribute to theemergently evolving society of the 21st
century.
■ Business Vision "P&I Solutions

DNP"

We will identify and solve the problems
and issues that consumers andcorporate clients face within theemergently evolving society by fusing
our Printing Technologies (PT) andInformation Technologies (IT).
■ Guiding Principles

Actions DNP should take in order toachieve our business vision and realize
our management concept
1. Engage in Taiwa * with all persons
concerned.
2. Work with an independent andcollaborative mind-set in order tosolve problems.
3. Challenge courageously, even in theface of difficult issues.
4. Act with integrity, fairness, andimpartiality, at all times.
5. Be responsible for your own decisions
and conduct.
■ The DNP Group Code of Conduct

A set of codes underlying all types ofactivities that express DNP's corporate
ethics. All DNP Group employees mustobey these codes.
● Contributing to the development ofsociety● Social contribution as a good
corporate citizen● Compliance with the law and social
ethics● Respect for human dignity anddiversity● Environmental conservation and therealization of a sustainable society● Realization of a 'universal society'● Ensuring the safety and quality of our
products and services● Ensuring information security● Proper disclosure of information● Realization of a safe and vibrantworkplace126■ DNP Group's CSR

CSR (Corporate Social Responsibility) is
generally defined as "the responsibilities
of a corporation to society," but we at
the DNP Group go further, viewing CSR
as "being a company that is trusted bysociety."
By simultaneously meeting the threevital corporate responsibilities—"Value
Creation," "Integrity In Conduct," and"Transparency (Accountability)"—
we seek to continue being a trusted
company.
1. Value Creation:
Providing new value to society
2. Integrity in Conduct:
Practicing fairness and impartiality inthe value creation processes
3. Transparency (Accountability):
Being a company that is accountable
and highly transparent

2.Information Communication■ Augmented reality (AR)A technology for synthesizing images,
text, or other virtual information with anactual scene or object in the physicalpresence of the user, so as to createa rich expression that augments theexperience of reality. For example, a
web cam or mobile phone-mounted
camera may record images or
identification codes along with imagesof the surrounding environment, all ofwhich are synthesized and displayed
together with preregistered informationsuch as 3D computer graphics.

■ Business Process Outsourcing(BPO)

Contracting out the execution of someof a company's business processes toan outside provider that has specialized
technology or expertise.
■ CDMS (Card Data Management

Service)

A service that provides comprehensive,
online management of informationentered on smart cards. CDMS enables
immediate smart card issuance at
customer service counters, PIN
code revision at ATMs, distributionof applications and personal data
to mobile phone chips, and identity
authentication for online shopping. DNP
began offering the service in 2004.
■ Digital signage

An advertising medium that uses
large, flat-panel displays linked to
an information network in order tobroadcast up-to-the-minute, highly
localized information in stores, train
stations, or other public spaces. Digital
signage may include an interactive
component that enables consumers
to display the specific information theyneed by using a touch panel or mobile
phone, etc.

"Tall Vision" display consisting of 12 linked panels

A picture book using augmented reality

Synopsis of
Performance■ Hybrid bookstore network■ IC tag; also called RFID (radio

frequency identification) tag

An electronic device combining a
miniature antenna with an IC chipthat records information. Radio
communication between an IC tag anda dedicated reading device makes it
possible to distinguish the individual
item that has a particular IC tag
attached to it. IC tags take a variety
of forms, including labels, cards, andcoins.

■ Lippmann hologram

DNP's Businesses■ Information Processing Services(IPS)■ Hybrid production solutions

Personalized mailA set of international standards for
short-range wireless communication
technology that is expected to be
adopted in infrastructure which will
be used in many countries. NFC iscompatible with IC tags (ISO 15693)
as well as three types of contactlesscommunication: FeliCa type which has
been widely used in Japan for sometime, Type B which is used for Japanese
government-issued ID cards, and Mifare(Type A) which is most widely usedworldwide. Because of the possibility
for two-way communication between
devices that both have NFC capability,
NFC is expected to be widely used in
the future.

How DNP Works to
Achieve Sustainable
Development

Financial Section

Comprehensive services, mainly aimed
at publishing companies, including
printing of paper books, print on
demand (POD) of small-lot publications,and production of content for electronic
publishing and distribution. These
services make use of the technologies
and expertise that DNP has accumulated
as a company that began digitizing
printing production processes in theearly 1970s, produced the world’s firstelectronic dictionary on CD-ROM in
1985, and currently porduces content
for personal computers and mobile
phones.

■ Near Field Communication (NFC)
Corporate GovernanceMaruzen's main bookstore inTokyo's Marunouchi district

DNP offers a uniquely broad menu
of business services including
inputting massive amounts of personal
information and other data, editing andprocessing, printing, producing, mailing
and/or distributing invoices, statements,and other forms of personalized mail—all in environments protected byadvanced information security.

Special Feature:
DNP's Growth Strategies

A type of hologram, which is a threedimensional image recorded using a
split laser beam. Lippmann holograms
are excellent for expressing vertical andhorizontal three dimensionality and asense of depth. In addition, they are
extremely hard to counterfeit because
their manufacture requires special
equipment. These holograms havegarnered praise around the world forproviding a high level of security andpotential for outstanding designs.

To Our Shareholders

A ser vice that sells both paper andelectronic books by integrating
DNP's "honto," e-book sales
ser vice, "bk1" online bookstore
for printed books, and physicalbookstore chain operators
Maruzen, Junkudo and Bunk yodo.
The ser vice provides such features
as a "recommend function" thatsuggests products a customer
might like based on their previous
purchase histor y from all threesales formats, a shared customer
loyalty "point ser vice" that allows
customers to accumulate hybrid
points regardless of which sales
format they use, and an "electronic
book shelf function" that displays
all of the paper books ande-books a par ticular customer has
purchased. The ser vice has been
fully operating since May 2012.

Appendix

DNP Annual Report 2012 〉 Appendix 〉 Glossary127■ Pre-press

The parts of the overall printing
process that are done before actual
printing, including digitalization of text,
photographs, and illustrations, etc.,
editing and layout, and film and platemaking. Thanks to the development ofdesktop publishing (DTP), most prepress operations can now be done bycomputer. Parts of the overall printing
process that are done after printing,such as bookbinding and processing,are called post-press.
■ Shueitai

An original font that DNP has beendeveloping since the early 1900s.
This beautiful, easy-to-read font witha graceful, sleek design has wonhigh praise from book publishers andreaders. We created a digital version in
the 1970s and began licensing its use
as of 2001. In 2005, we undertook aproject called "Heisei no Dai Kaikoku"(engraving improvement project), which
is aimed at improving the existing digital
font and developing new fonts.

such as smart card manufacture andpersonalization, and provision of online
security services.

Smart card using Lippmann hologram

3.Lifestyle and Industrial Supplies■ Anti-reflection (AR) film

Film applied to the surface of display
screens in devices like computers or
televisions in order to prevent outside
light or interior light from reflecting off
the screen. There are various types ofAR films including anti-glare (AG) andlow reflection (LR) films. DNP supplies
a variety of these products by making
use of coating and other technologies
to apply thin, uniform coatings of lightdiffusing materials to rolls of base film.
■ Aseptic filling system■ Smart card

A card that contains one or more IC(integrated circuit) chips enablingdata input, output and computing.
Smart cards that employ advanced
methods of user authentication, suchas biometrics or encryption, are widelyused in a broad range of applications
including cash cards, credit cards,
electronic money, transportation cards,
and employee ID cards. Compact SIM(Subscriber Identity Module) cards
that identify mobile phone subscribers
are also a type of smart card. DNP
entered the smart card business in the
1980s. In addition to developing the
MULTOS operating system and various
software applications for smart cards,
we provide a wide variety of services

128

A system for filling sterilized PETplastic bottles or other containers
with sterilized beverages or food in an
aseptic manufacturing environment(aseptic chamber). DNP supports every
aspect of aseptic filling operations, fromdesigning systems to manufacturing,
installing and maintaining equipment
and supplying bottle preforms.
Examples of applications for which wehave designed and built filling systems
include single-portion containers (forcoffee whitener, etc.), retort pouches
that can contain solid food, and PETplastic beverage bottles that do not
impair the flavor of their contents.

①① Primary preform② Aseptic filling system③ PET plastic bottle②③■ Biomass material"Biomass" may refer to the total
quantity of organisms living in aparticular area, or it may mean organic
resources derived from living thingsother than petroleum or other fossil
resources. Biomass material is madefrom resources of biological origin, suchas vegetable resins or natural fibers.
Biomass material has attracted attention
as a material that puts relatively little
strain on the environment due to theidea that CO2 absorbed by plants
during their growing process cancels
out the CO2 emitted when the material
is burned. Since biomass material isa renewable resource, supplies are
expected to be stable.
■ EB (Electron Beam) coating

technology

DNP's original technique forhardening a coat of resin byexposing it to electron beams.
EB technology makes it possible
to form films with greater sur facehardness than products coatedwith urethane or UV-cured resin.
It also makes it possible toprovide products with superiorabrasion and soil resistance,
photo-resistance, durability, andstability. In addition, the EB coating
technique uses less energy,
generates less carbon dioxide, andenables coating without the use ofsolvents, making it an eco-friendly,
next-generation manufacturingmethod.

EB Coating (an image)Synopsis of
Performance■ Ink ribbon

heattransfer
film

receiving layer

receiver paper

pigment

substrate■ "Soft pack" for lithium-ion battery

Space food packaging■ Photovoltaic module components

Back sheets are weatherproof films
that protect photovoltaic modules
from external elements. They prevent
precipitation from entering modules,
making it possible to use themoutdoors for a long period of time.
Back sheets must be very durable
and moisture-proof, and have goodelectrical insulating properties.
● Encapsulants are protective sheets
used to secure photovoltaic cells
and their peripheral wiring in place,and to form photovoltaic modules.
An encapsulant forms a strong bond
between a module’s back sheet andits front glass.
●

A laminated packaging film that seals inbattery materials such as electrolytes
and separators. Compared toconventional metal can-type packaging,a soft pack allows greater freedom
in designing a battery's shape anddimensions and can help reduce its
weight and cost. Another advantage
is that the soft pack releases pressure
from inside the battery, preventing
deformation from excess heat.

"soft pack"

4.Electronics

transfer printing media

Structure of an array of photovoltaic cells (solar cells)■ IB (Innovative Barrier) film

ModuleA unit that is packaged in special material tomaintain the photovoltaic cells’ electricalefficiency and to allow them to withstandharsh environmental conditions

Array
An arrangement of multiple
modules

Structure of an array of photovoltaic cells (solar cells)
Encapsulants
Metal frame, etc.

Sunlight

Surface glass■ Lead frame

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

Cell
Back sheet
Weatherproof film that protects the back of thephotovoltaic module from the roof or other surface
that it rests on

Financial Section

Wiring, etc.

A sheet of material that seals the celland protects it from the elements, i.e.
rain, wind, snow, and temperaturechanges

DNP’s proprietary technology forconnecting layers in a buildup board
by using bumps of conductive paste
formed by means of screen printing. A
buildup board is a printed board madeby alternating insulating layers andwiring layers.

How DNP Works to
Achieve Sustainable
Development

Appendix

Packaging film made by DNP that is
highly impermeable to water vaporand oxygen, highly transparent, andhighly heat-resistant. It is used mainly
for wrapping foods, medical supplies
and pharmaceuticals, and electronic
components. IB film is made by forminga thin, uniform coating of a material that
boosts impermeability on a transparent
base film. In the past, such films wereusually formed through physical vapor
deposition (PVD), whereby the coating
material was vaporized by heat. DNP
made it possible to mass produce
highly impermeable film using chemical
vapor deposition (CVD), whereby film
is formed as a result of a chemical
reaction between the coating material
and the base film. Because the CVD
method results in a strong bondPhotovoltaic cell
The smallest unit that functions as aphotovoltaic battery; in crystalline photovoltaic
modules, a cell consists of a silicon wafer■ B 2 it (pronounced "bee-square-it")Corporate GovernancerollerDye-sublimation
type thermaltypetransferrecording media
Dye-sublimation
thermalA therapeutic method using artificiallycultivated cells or tissues to restore or
recover the function of tissue or organs
lost through disease or accident.

DNP's Businesses

colored ink
layerbase film■ Regenerative medicine

Special Feature:
DNP's Growth Strategies

thermal head

between the coating material and basefilm, the coating does not break easily
even when the final product is bent.

To Our Shareholders

A rolled strip of film to which a thin,uniform layer of ink has been applied;
used in thermal transfer printers. There
are two types of thermal transfer
printers. Heat from the thermal head ofa thermal-resin type printer transfers
ink from the ribbon by melting it, while
dye-sublimation-type printers vaporize
ink in order to transfer it to paper.
Most of the thermal-resin ink ribbons
that DNP provides are monochrome
ribbons used for barcode printers, whilemost of the dye-sublimation type arecolor ribbons used for photo printing.
DNP has developed a lineup of dyesublimation thermal transfer printing
media consisting of ink ribbons in thethree primary printing colors (yellow,
magenta, and cyan, or YMC) andspecial receiver paper. These products
make it possible to express very smoothcolor tones.

DNP Annual Report 2012 〉 Appendix 〉 Glossary129

■ Liquid crystal display (LCD) color

filterA component needed for colorizing
LCDs. It consists of pigments in thethree primary colors of light—red,
green, and blue (RGB)—arrayed in apattern on a glass substrate. Passing
light through the color filter causes
colored images to be displayed.
There are also different methods ofaligning liquid crystal molecules whenmanufacturing LCD panels: the verticalalignment (VA) method and the InPlane
Switching (IPS) method. LCDs display
images by using variations in voltage tochange the orientation of liquid crystal
molecules, thereby controlling theamount of light that passes through.
With the VA method, the liquid crystal
molecules are arranged vertically,
whereas with the IPS method, they arearranged horizontally. DNP provides
color filters that suit the characteristics
of LCD panels manufactured by bothmethods.

■ Nano-imprinting■ Photolithography

Nanoimprinting is a manufacturing
process used to make next-generation
semiconductor products. Making
semiconductors by nanoimprinting
entails pressing a template against a
resin-coated silicon wafer so that theminute, nanometer-level pattern on thetemplate is physically transferred to theresin. Because nanoimprinting uses
relatively simple production equipment
compared to the complicated opticalequipment required for conventional
methods, it can bring down the cost of
manufacturing.

■ Semiconductor photomask

Master template for nano-imprinting

(mm)
2,850

10th-generation■ Organic EL (electroluminescent)
2,160
1,870

730
550
370
300

170 cm tall

7th-generation

1,500

1,100

display

8th-generation

6th-generation
5th-generation
4th-generation
3rd-generation

400 470 650 920

1,300

1,800

2,200

2,400

3,050

(mm)

Relative
Sizes of Glass
Used
in LC Panels
RelativesizesSubstrates
of glass
substrates

used in LCD panels

A photomask is a master used forforming semiconductor circuits. It
consists of minute circuit patterns drawn
on a glass substrate. Semiconductors
are made by passing light through a
photomask in order to transfer circuit
patterns onto a wafer coated with aphotosensitive resist, and then using
etching or a similar process to embed
the pattern in the wafer.

A display based on an organic
compound that emits its own lightwhen electricity is passed through it.
It is superior to other types of displays
in various ways, for example becauseof its wider viewing angle and greater
contrast.

light source
lensphotomask
projection lenssiliconwafer

Light emission■ MEMS (Micro Electro Mechanicalsubsrate
positive
electrodehole transport
layer
light-emitting
layerelectron transport
layer
negative
electrode

System)An electronic device that integrates
components like IC chips, sensors
and electronic circuits into a threedimensional structure mounted on abase, which is usually a silicon wafer.

A technology for exposing the surface ofa substrate coated with photosensitive
material to light, so that the exposed
areas and unexposed areas form aparticular pattern. DNP has honed its
photolithographic techniques throughthe production of masters used
for printing. Today, we apply thesetechnologies to the manufacture ofcolor filters and various other typesof electronic devices. In recent years,
we have been developing the nextgeneration photolithography techniques
using extreme ultraviolet (EUV) rays as a
new light source.

Photolithography machine for making semiconductors

Photolithography machine for making
semiconductors

An example of basic structure of organic EL display

About the Illustration on the Cover of this Report
Lots of color and diversity is a good
way to sum up a year's worth of
DNP's business activities. I wrote"ANNUAL REPORT" in letters madeof simple shapes broken up by avariety of colors. The design reflects
DNP's current stance: looking backon the past year and at the sametime pushing forward into a newround of day-to-day business.

130

Kenjiro Sano, Art Director
Born in Tokyo in 1972. Became Creative Director of Mr. Design Inc. after working
for major Japanese advertising company Hakuhodo Inc. Notable works include thedesign of television commercials and graphic art for Toyota Motor Corp.'s "ReBORN
Doraemon" series of commercials and Suntory Holdings Ltd.'s "Green Dakara"
beverages and BOSS "Zero no Choten" canned coffee, character design promoting"LISMO!" music service for mobile phones by telecommunications carrier au byKDDI Corporation, "T Boo S!" for major broadcaster Tokyo Broadcasting System
Television, Inc., and "Nyan Mage" for Edo Wonderland, and packaging for Mizkan
Group Corp.'s "Torommame" brand of natto fermented soybeans.

www.mr-design.jp

Sources of Information about DNP
Synopsis of
Performance

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

To Our Shareholders

Our web site introduces our Printing segment's three main operations in a format thatis easy to understand. In addition to disclosing information at appropriate times and in
appropriate ways, we are continuously improving the site. The following publications andreports are also available as PDF files that can be downloaded from the web site.

Publications■

Annual Report (Japanese and English versions)

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

Special Feature:
DNP's Growth Strategies■

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

Data Book (Bilingual: Japanese/English; available only as PDF file for 		
download from web site)

Issued near the end of July every year, the Data Book contains values from financial
statements of the past 10 years, and financial analysis values in the form of tables
and graphs, etc. The Data Book is published in PDF format on DNP’s Investor
Relations site. Financial statement values are taken from securities reports.

■“DNP Report” to shareholders"DNP Report" Report to Shareholders (in Japanese)■

DNP's Businesses

This report is issued quarterly, in September, December, March and June, and is
mailed to shareholders. Examples of its content include summaries of financial
results, interviews with management, information about new businesses, andinformation about shares.

DNP Group CSR Report (Japanese and English versions; English version
available only as PDF file for download from web site)

Each year around the end of June, we issue a yearly report about DNP’s corporatesocial responsibilities. We also have been issuing an annual "Eco-Report" since theﬁrst issue appeared in 1998.

Corporate Information (Japanese and English versions)

It introduces each operation and addresses aspects like products, services, sales,planning, research and development, production facilities, company history, and asummary of our activities.

DNP Group CSR Report

Reports■"Yuho" Annual Securities Report, etc. (in Japanese)"Tanshin" Earnings Release (Japanese and English versions)

In accordance with Tokyo Stock Exchange rules, we prepare earnings releases for each quarter. In addition to consolidated financial
statements, we report on the status of sales, etc.

How DNP Works to
Achieve Sustainable
Development

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

■

Corporate Governance■Note: Trademarks mentioned in this annual report in connection with DNP products or services are registered in Japan.

DNP Annual Report 2012 〉 Appendix 〉 Sources of Information about DNPAppendix

A product’s carbon footprint (CFP) is the CO 2 equivalent of the amount of greenhouse gases emitted during
the product’s entire life cycle from raw materials procurement through disposal and recycling. The Carbon
Footprint Mark is an easy-to-understand format for displaying a product’s CFP. DNP is one of the firstcompanies to participate in the Japanese government’s carbon footprint labeling system. In addition to
calculating and displaying the CFP of its own publications, DNP works to promote widespread participation in
the CFP labeling program.

Financial Section

DNP calculated and displayed the carbon footprint of the Japanese edition of this annual report.

131