DONNELLEY R R & SONS CO, 10-K, 1996-03-11

DONNELLEY R R & SONS CO
10-K, 1996-03-11
COMMERCIAL PRINTING

Previous: DETROIT EDISON CO, 8A12BEF, 1996-03-11

Next: OMNICOM GROUP INC, S-4, 1996-03-11

<PAGE>

================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1995

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
---------- ----------

COMMISSION FILE NUMBER 1-4694

R. R. DONNELLEY & SONS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 36-1004130
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

77 WEST WACKER DRIVE,
CHICAGO, ILLINOIS 60601
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)

REGISTRANT'S TELEPHONE NUMBER--(312) 326-8000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
----------------------------- --------------------------------------------
COMMON (PAR VALUE $1.25) NEW YORK, CHICAGO AND PACIFIC STOCK
PREFERRED STOCK PURCHASE RIGHTS EXCHANGES
NEW YORK, CHICAGO AND PACIFIC STOCK
EXCHANGES

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO THE
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
------- -------

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATE-
MENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT
TO THIS FORM 10-K. [_]

AS OF MARCH 1, 1996, 154,005,326 SHARES OF COMMON STOCK WERE OUTSTANDING, AND
THE AGGREGATE MARKET VALUE OF THE SHARES OF COMMON STOCK (BASED ON THE CLOSING
PRICE OF THESE SHARES ON THE NEW YORK STOCK EXCHANGE--COMPOSITE TRANSACTIONS ON
MARCH 1, 1996) HELD BY NONAFFILIATES WAS APPROXIMATELY $5,412,903,000.

DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT DATED FEBRUARY
20, 1996 ARE INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.

================================================================================
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
--------- ------------ ----
<C> <S> <C>
Part I
Item 1. Business.......................................... 3
Item 2. Properties........................................ 5
Item 3. Legal Proceedings................................. 8
Item 4. Submission of Matters to a Vote of Security
Holders.......................................... 9
Executive Officers of R. R. Donnelley & Sons
Company.......................................... 9
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.............................. 10
Item 6. Selected Financial Data........................... 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 12
Item 8. Financial Statements and Supplementary Data....... 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 15
Part III
Item 10. Directors and Executive Officers of the
Registrant....................................... 16
Item 11. Executive Compensation............................ 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................... 16
Item 13. Certain Relationships and Related Transactions.... 16
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.............................. 17
Signatures................................................... 18
Index to Financial Statements and Financial Statement Sched-
ules........................................................ F-1
Index to Exhibits............................................ E-1
</TABLE>

2
<PAGE>

PART I

ITEM 1. BUSINESS

R. R. Donnelley & Sons Company (the company), incorporated in the state of
Delaware in 1956 as the successor to a business founded in 1864, is a world
leader in distributing, managing and reproducing print and digital information
for the publishing, retailing, merchandising and information technology markets
worldwide. The company is the largest commercial printer headquartered in North
America. It is a major supplier in the United Kingdom and also provides
services in Latin America, other locations in Europe and in Asia. Services
provided to customers include presswork and binding, including on-demand
customized publications; conventional and digital pre-press operations,
including desktop publishing and filmless color imaging necessary to create a
printed image; software manufacturing, marketing and support services (through
Stream International Holdings Inc.); list development, list enhancement,
marketing database, personalization printing and lettershop and reference
services (provided through Metromail Corporation); design and related creative
services (provided through Coris Inc. (formerly Mobium)); electronic
communication networks for simultaneous worldwide product releases; digital
services to publishers; and the planning for and fulfillment of truck, rail,
mail and air distribution for products of the company and its customers, as
well as third parties.

In April, 1995, Stream International Holdings Inc. (formerly Stream
International Inc., hereinafter referred to as Stream International or Stream)
was formed from the merger of the company's Global Software Services business
unit with Corporate Software Inc. Stream International is approximately 80%
owned by the company and is the world's largest software manufacturer, marketer
and technical support and services provider.

The company provides its services to publishers of consumer and trade
magazines, books and telephone and other directories; direct mail (catalog) and
in-store merchandisers; software publishers and computer hardware
manufacturers; financial institutions; corporate users of software products and
related services; and other firms requiring substantial amounts of printing and
other related information services. Due to the range of services it provides,
the company believes it is uniquely positioned to meet the information and
communication needs of its customers.

The relative contribution of each of the company's major product areas to its
total sales for the five-year period ended December 31, 1995, is presented in
the table below.

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUE BY PRODUCT TYPE
Catalogs, Inserts and Specialty Products............... 27% 31% 32% 35% 39%
Software Products and Services......................... 23 14 12 10 8
Magazines.............................................. 16 18 18 17 17
Directories............................................ 12 12 14 16 16
Books.................................................. 11 13 13 11 11
Financial.............................................. 4 5 6 5 4
Other.................................................. 7 7 5 6 5
</TABLE>

In January, 1996, the company announced a reorganization of its business
groups to include the following operating units and subsidiaries:

Commercial Print Sector, which includes catalogs, retail advertising
circulars, direct mail products, and consumer and trade magazines.

Global Commercial Print Sector, which includes the company's commercial print
operations outside the United States--in Europe, Latin America and Asia.

Information Management Sector, which includes Telecommunications, Book
Publishing Services and Financial Services, as well as the Metromail
subsidiary, the company's Digital Division, the company's venture-capital fund,
creative design and communication services and a variety of information
services.

3
<PAGE>

Stream International Holdings Inc., the world's largest software
manufacturer, marketer and technical-support and services provider,
approximately 80% owned by the company, formed in April 1995 from the merger of
the company's Global Software Services business with Corporate Software Inc.

At December 31, 1995, the company's operating units, subsidiaries, and global
network of majority- and minority-owned companies were organized into these
principal business groups, which accounted for the following sales results:

Commercial Print, which included catalogs, retail advertising circulars and
direct-mail products ($1.3 billion, 20% of 1995 consolidated sales); consumer
and trade magazines ($1.2 billion, 19% of 1995 consolidated sales); and
directories ($631 million, 10% of 1995 consolidated sales).

Networked Services, which included Book Publishing Services ($783 million,
12% of 1995 consolidated sales) (juvenile and trade books; elementary, high-
school and college textbooks; professional and reference books; religious
books; and book-club and mail-order books); Financial Services ($334 million,
5% of 1995 consolidated sales) (financial printing, electronic information
storage and retrieval, and specialized printing); and international commercial
print operations in Latin America, Europe and Asia ($345 million, 5% of 1995
consolidated sales).

Stream International Holdings Inc. ($1.4 billion, 22% of 1995 consolidated
sales), which is the world's largest software manufacturer, marketer and
technical-support and services provider.

Information Resources, which included the Metromail subsidiary ($247 million,
4% of 1995 consolidated sales); the company's Digital Division, the company's
venture-capital fund, and creative design and communication services ($167
million, 3% of 1995 consolidated sales).

For the fiscal year ended December 31, 1995, international operations
represented approximately 16% of consolidated net sales. See "Geographic
Segments" in the Notes to Consolidated Financial Statements for further
information.

A significant portion of the company's sales are made pursuant to term
contracts with customers, with the remainder being made on a single-order
basis. For some customers, the company prints and provides related services
for several different publications under different contracts. The company's
contracts with its larger customers normally run for a period of years (usually
three to five years, but longer in the case of contracts requiring significant
capital investment) or for an indefinite period subject to termination on
specified notice by either party. Such sales contracts generally provide for
timely price adjustments to reflect price changes for materials, wages and
utilities. No single customer has a relationship with the company that
accounted for 5% or more of the company's sales in 1995. The company's
dependence for sales from its ten largest customers has declined in the past
ten years to approximately 20% of sales in 1995, from 29% of sales in 1985.

The various phases of the information industry in which the company is
involved are highly competitive. While the company has contracts with many of
its customers as discussed above, there are numerous competing companies and
renewal of such contracts is dependent, in part, on the ability of the company
to continue to differentiate itself from the competition. Differentiation
results, in part, from the company's broad range of value-added services, which
include: conventional and digital prepress, computerized printing,
Selectronic(R) imaging and gathering and sophisticated pool shipping and
distribution services for printed products; information content repackaging
into multiple formats, including print, magnetic and optical media; fulfillment
and returned books inventory management; software manufacturing, marketing and
support services; list development, list enhancement, marketing database,
personalization printing and lettershop and reference services; reprographics
and facilities management; and graphic design and editorial services. Although
the company believes it is the largest commercial printer in the United States,
it estimates that its revenues represent approximately 8% of the total sales in
the industry. Although the company's plants are well located for the global,
national or regional distribution of its products, competitors in some areas of

4
<PAGE>

the United States have a competitive advantage in some instances due to such
factors as freight rates, wage scales and customer preference for local
services. In addition to location, other important competitive factors are
price and quality as well as the range of available services.

The primary raw materials used by the company are paper and ink. In 1995, the
company spent approximately $3.2 billion on raw materials. The company is a
large purchaser of paper and leverages its volume requirements to improve
materials management and materials performance for its customers and believes
this is a competitive advantage. The company negotiates with leading suppliers
to maximize its purchasing efficiencies, but does not rely on any one supplier.
The company has existing paper supply contracts (at prevailing market prices)
to cover substantially all of the company's requirements through 1996, and
management believes extensions and renewals of these purchase contracts will
provide adequate paper supplies in the future. Ink and ink materials are
currently available in sufficient amounts, and the company believes that it
will have adequate supplies in the future. Purchasing activity at both the
local plant and corporate levels are coordinated to increase economies of
scale. Plant inventories were a focus in 1995 and the company has increased
utilization of existing inventories by successfully managing and tracking those
inventories.

The company estimates that its capital expenditures in 1996 and 1997, to
comply with federal, state and local provisions for environmental controls, as
well as expenditures, if any, for the company's share of costs to clean
hazardous waste sites that have received waste from the company, will not have
a material effect upon its earnings or its competitive position.

The company employed an average of approximately 40,000 persons in 1995
(41,000 persons at December 31, 1995), of whom more than 12,800 had been with
the company for more than 10 years and over 2,600 for 25 years or longer. As of
December 31, 1995, the company employed approximately 34,000 people in the
United States, approximately 1,600, or 5%, of whom were covered by collective
bargaining agreements. In addition, the company employed approximately 7,000
people in its foreign operations, the majority of whom were covered by
collective bargaining agreements, as is customary in those markets.

ITEM 2. PROPERTIES

The company's corporate office is located in leased facilities in Chicago,
Illinois. Production facilities leased by the company and its subsidiaries are
listed in the chart beginning on page 7. Printing and other plants that are
owned and operated by the company (or through subsidiaries) are listed below
and continuing on the next page.

5
<PAGE>

<TABLE>
<CAPTION>
DATE OF
DATE OF ACQUISITION LATEST SQUARE PRINCIPAL PRODUCTS
OWNED LOCATION(S) OR OPERATIONS BEGAN ADDITION FEET OR SERVICES
----------------- ------------------- -------- --------- --------------------
<S> <C> <C> <C> <C>
Dwight, IL 1968 1995 434,000 Directories,
Catalogs, Inserts,
Magazines
Glasgow, KY 1970 1994 591,000 Magazines
Gallatin, TN 1975 1987 528,000 Catalogs, Inserts,
Magazines
York, England 1978 1985 291,000 Directories,
Magazines, Catalogs
Torrance, CA 1978 1994 252,000 Magazines, Inserts
Harrisonburg, 1980 1994 620,000
VA Books
Spartanburg, SC 1980 1995 713,400 Catalogs, Inserts,
Magazines
Gateshead, En- 1983 1989 189,000
gland Directories
Danville, KY 1985 1993 548,000 Magazines, Catalogs,
Inserts
Portland, OR 1986 1989 250,000 Directories,
Software Products
and Services
Greeley, CO 1986 1995 283,000 Directories
Reno, NV 1987 1995 502,000 Catalogs, Inserts
Pittsburgh, PA 1987 -- 70,000 Financial
Lincoln, NE 1987 1988 233,000 Lettershop, Data
Center
Rutland, VT 1987 1987 113,000 Lettershop
Mt. Pleasant, 1987 -- 211,000
IA Lettershop
Seward, NE 1987 -- 161,000 Lettershop
Thorp Arch, En- 1989 -- 146,000 Software Products
gland and Services
South Daytona, 1990 1993 237,000 Magazines, Catalogs,
FL Inserts
Des Moines, IA 1990 -- 627,000 Magazines, Catalogs,
Inserts
Lynchburg, VA 1990 1993 504,000 Catalogs, Inserts
Newton, NC 1990 -- 455,000 Catalogs, Inserts,
Magazines
Casa Grande, AZ 1990 -- 316,000 Catalogs, Inserts
Reynosa, Mexico 1990 -- 260,000 Books
Singapore 1990 1994 221,000 Software Products
and Services
Houston, TX 1991 -- 41,000 Financial
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
SQUARE
LEASED LOCATIONS FEET
- ---------------- ---------
<S> <C>
Amsterdam, The Netherlands........................................... 15,000
Apeldoorn, The Netherlands........................................... 54,000
Arlington, VA........................................................ 16,000
Beaverton, OR........................................................ 112,000
Bridgetown, Barbados................................................. 31,000
Canton, MA........................................................... 129,000
Cary, NC............................................................. 108,000
Chicago, IL.......................................................... 28,000
Chuo, Chiba-City 260................................................. 3,000
Columbus, OH......................................................... 5,000
Crawfordsville, IN................................................... 381,000
Cumbernauld, Scotland................................................ 53,000
Dallas, TX........................................................... 248,000
Dublin, Ireland...................................................... 103,000
Elgin, IL............................................................ 77,000
Fremont, CA.......................................................... 275,000
Glasgow, KY.......................................................... 57,000
Gresham, OR.......................................................... 122,000
Houston, TX.......................................................... 21,000
Hudson, MA........................................................... 150,000
Kildare, Ireland..................................................... 97,000
Lancaster, PA........................................................ 62,000
Lehigh Valley, PA.................................................... 3,800
Les Aubrais, France.................................................. 22,000
Lindon, UT........................................................... 338,000
Lombard, IL.......................................................... 128,000
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
SQUARE
LEASED LOCATIONS FEET
- ---------------- -------
<S> <C>
London, England........................................................ 10,000
Lynchburg, VA.......................................................... 120,000
Mexico City, Mexico.................................................... 15,000
Middlesex, England..................................................... 35,000
Munich, Germany........................................................ 65,000
New South Wales, Australia............................................. 80,000
New York, NY........................................................... 92,000
Norwood, MA............................................................ 98,000
Orleans, France........................................................ 75,000
Portland, OR........................................................... 90,000
Preston, WA............................................................ 66,000
Raleigh, NC............................................................ 108,000
Richmond, CA........................................................... 72,000
Santa Clara, CA........................................................ 8,000
Scranton, PA........................................................... 97,000
Seattle, WA............................................................ 22,000
Shelby, OH............................................................. 250,000
Sungnam-si, Kyungki-do Korea........................................... 11,000
Torrance, CA........................................................... 45,000
Vinhedo, Brazil........................................................ 21,000
Westwood, MA........................................................... 208,000
Wheeling, IL........................................................... 110,000
Willowbrook, IL........................................................ 55,000
</TABLE>

The company has historically followed the practice of adding capacity to meet
customer requirements, and has retained a substantial portion of its earnings
for reinvestment in plant and equipment for this purpose. Management believes
that growth in 1996 will be financed in large part by internally-generated
funds. The amount of capital expenditures in future years will depend upon the
requirements of the company's existing and future customers.

ITEM 3. LEGAL PROCEEDINGS

In January, 1995, an administrative complaint by the U.S. Environmental
Protection Agency Region V seeking $304,500 in penalties was filed against the
company's Warsaw, Indiana facility alleging violations of the Resource
Conservation and Recovery Act. The complaint alleges that filtercake from
wastewater treatment operations was mischaracterized by the company as non-
hazardous waste. The complaint originally also alleged failure of the company
to give certain land disposal restriction notices, but the administrative law
judge granted a motion to dismiss these allegations, reducing the penalties now
sought by the complaint to $210,000.

8
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter
ended December 31, 1995.

EXECUTIVE OFFICERS OF R. R. DONNELLEY & SONS COMPANY

<TABLE>
<CAPTION>
NAME, AGE AND OFFICER BUSINESS EXPERIENCE DURING
POSITIONS WITH THE COMPANY SINCE PAST FIVE YEARS(1)
- -------------------------- ------- --------------------------
<S> <C> <C>
J. R. Walter 1985 Management responsibilities as Chairman of the
49, Director, Board and Chief Executive Officer. Prior manage-
Chairman of the Board ment responsibilities as Chief Executive Officer
and Chief Executive Offi- and President.
cer(2)
J. R. Donnelley 1983 Management responsibilities as Vice Chairman of
60, Director, Vice Chairman the Board. Prior management responsibility for
of the Board Corporate Development.
S. J. Baumgartner 1993 Management responsibilities for R. R. Donnelley
44, Executive Vice Presi- Europe, R. R. Donnelley Latin America, Editorial
dent and Sector President, Lord Cochrane, Asia Operations, Human Resources,
Global Commercial Print Corporate Affairs and Compensation and Benefits.
Sector(1)(2) Prior management responsibilities for Strategy,
Technology and Information Systems. Prior expe-
rience as a co-owner and member of board of di-
rectors of FRC Management, Inc., a provider of
retirement, consulting and real estate invest-
ment services, and as a Senior Vice President,
Human Resources and Public Affairs at Rhone-
Poulenc Rorer/Rorer Group, Inc., a pharmaceuti-
cal manufacturer.
R. J. Cowan 1988 Management responsibilities as Executive Vice
43, Executive Vice President of R. R. Donnelley & Sons Company and
President, R. R. Donnelley Chief Executive Officer of Stream International
& Sons Company and Chief Holdings Inc. Prior management responsibilities
Executive Officer, Stream for Metromail Corporation, Information Services,
International Holdings Technology, Database Technology Services, Infor-
Inc.(2) mation Systems, Book Publishing Services, Finan-
cial Services and Global Software Services.
B. L. Faber 1989 Management responsibilities as Chairman of
48, Chairman, Metromail Metromail Corporation. Management responsibili-
Corporation and President, ties for Coris,
Information Services(2) R. R. Donnelley Business Services, R. R.
Donnelley Digital Division, 77 Capital Corpora-
tion and Information Services Sales Group. Prior
management responsibility for Corporate Develop-
ment.
C. A. Francis 1995 Management responsibilities for corporate devel-
42, Executive Vice Presi- opment, planning and strategy, investor rela-
dent tions, treasury, financial reporting and ac-
and Chief Financial counting, real estate, internal audit and taxes.
Officer(1)(2) Prior management responsibilities for purchas-
ing. Prior experience as Treasurer at FMC Corpo-
ration, a diversified manufacturer of chemicals
and machinery.
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE AND OFFICER BUSINESS EXPERIENCE DURING
POSITIONS WITH THE COMPANY SINCE PAST FIVE YEARS(1)
- -------------------------- ------- --------------------------
<S> <C> <C>
T. J. Quarles 1995 Management responsibilities for legal services
46, Senior Vice President and office of the corporate secretary. Prior
and General Counsel(1)(2) management responsibilities for Government Rela-
tions and Environmental Affairs. Prior experi-
ence as Vice President and Associate General
Counsel at Ameritech Corporation, a provider of
full-service communications services, and as
Vice President and General Counsel at Ameritech
Publishing, Inc., a publisher of yellow page di-
rectories.
W. E. Tyler 1989 Management responsibilities for Information
43, Executive Vice Presi- Services, Technology, Information Systems, Envi-
dent ronmental Affairs, Financial Services, Telecom-
and Sector President, munications, Book Publishing Services and
Information Management(2) Metromail Corporation. Prior management respon-
sibilities for Global Software Services,
R. R. Donnelley Europe, R. R. Donnelley Latin
America, Editorial Lord Cochrane and Asia Opera-
tions; prior sales and manufacturing responsi-
bility for Global Software Services.
J. P. Ward 1991 Management responsibilities for Retail Services,
41, Executive Vice Presi- Specialized Publishing Services, Catalog Servic-
dent es, Consumer Magazine Services, Sterling Group,
and Sector President, Manufacturing Support and Purchasing. Prior man-
Commercial Print Sector(2) agement responsibilities for Telecommunications;
prior sales and manufacturing responsibility for
Merchandise Media and Financial Services.
</TABLE>

(1) Each officer named has carried on his principal occupation and employment
in the company for more than five years with the exception of S. J.
Baumgartner, C. A. Francis and T. J. Quarles as noted in the above table.

(2) Member of the company's management committee.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common stock is listed and traded on the New York Stock Exchange, Chicago
Stock Exchange and Pacific Stock Exchange.

As of March 1, 1996 there were approximately 11,300 stockholders of record.
Information about the quarterly prices of the common stock, as reported on the
New York Stock Exchange-Composite Transactions, and dividends paid during the
two years ended December 31, 1995, is contained in the chart below:

<TABLE>
<CAPTION>
COMMON STOCK PRICES
-------------------------------
DIVIDENDS
PAID 1995 1994
------------- --------------- ---------------
1995 1994 HIGH LOW HIGH LOW
------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter..................... $0.160 $0.140 $35 7/8 $28 7/8 $31 3/4 $27 5/8
Second Quarter.................... 0.160 0.140 37 3/8 32 5/8 29 7/8 26 7/8
Third Quarter..................... 0.180 0.160 41 1/4 35 7/8 31 1/4 27 1/2
Fourth Quarter.................... 0.180 0.160 41 35 7/8 32 1/2 27 3/8
Full Year......................... 0.680 0.600 41 1/4 28 7/8 32 1/2 26 7/8
</TABLE>

10
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA
(NOT COVERED BY AUDITORS' REPORT)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $6,511,786 $4,888,786 $4,387,761 $4,193,072 $3,914,828
Earnings from
operations*............ 559,409 459,431 325,607 405,501 363,128
Net income from
operations before
cumulative effect of
accounting changes..... 298,793 268,603 178,920 234,659 204,919
Net income**............ 298,793 268,603 109,420 234,659 204,919
PER COMMON SHARE:***
Net income from
operations before
cumulative effect of
accounting changes..... 1.95 1.75 1.16 1.51 1.32
Net income**............ 1.95 1.75 0.71 1.51 1.32
Dividends............... 0.68 0.60 0.54 0.51 0.50
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $5,384,810 $4,452,143 $3,654,026 $3,410,247 $3,206,826
Noncurrent liabilities.. 2,081,266 1,671,924 1,124,594 949,537 940,544
</TABLE>
- --------
* 1993 earnings from operations includes the one-time adjustment for a
restructuring charge ($90 million).
** 1993 net income and net income per common share include one-time adjustments
for the restructuring charge ($60.8 million or $0.39 per share); the net
cumulative effect of accounting changes ($69.5 million or $0.45 per share);
and the deferred income tax charge related to the federal income tax rate
increase ($6.2 million or $0.04 per share).
*** Reflects the 2-for-1 stock split effective September 1, 1992.

11
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

Highlights 1995--R.R. Donnelley's 1995 net income rose to $299 million, or
$1.95 per share, compared to 1994 net income of $269 million, or $1.75 per
share. Operating results in the fourth quarter included net income of $95
million, up 9 percent from 1994's fourth quarter, and earnings per share rose
to $0.62.

The company's 1995 fourth-quarter performance improved despite the effects of
higher paper prices, a sluggish fourth-quarter retail environment, and a number
of developments that affected the performance of Stream International, notably
the slower-than-expected corporate demand for new systems and software, as well
as software price competition.

Highlights 1994--The company's 1994 net income of $269 million, or $1.75 per
share, was 9 percent higher than 1993 net earnings of $246 million, or $1.59
per share, excluding the one-time effect of accounting changes, a restructuring
charge and a deferred income tax charge, all reflected in 1993.

NET SALES

1995 Compared to 1994--Net sales increased 33% to $6.5 billion, reflecting
acquisitions and mergers, higher paper prices, continued growth in foreign
operations and strong demand across most business units. Approximately 37%, or
$606 million, of the revenue increase was due to acquisitions and mergers,
primarily Stream International, while higher paper prices accounted for
approximately 28%, or $460 million, of the gain. Excluding acquisitions and
higher paper prices, the 11% increase in net sales was the result of continued
growth in foreign operations and strong demand across most business units.
Significant increases from the prior year were primarily in the manufacturing
and servicing side of Stream International--reflecting the release of Microsoft
Corporation's Windows(R) 95; Telecommunications--reflecting new business with
Southwestern Bell Yellow Pages Inc., and other affiliates of SBC
Communications, Inc.; and Specialized Publishing Services (trade magazines),
Book Publishing Services and Catalog Services--reflecting higher volume from
new and existing customers.

Net sales from foreign operations represented approximately $1.0 billion, or
16% of total net sales in 1995, up 84% from $553 million, or 11% of total net
sales in 1994. The growth in foreign sales reflected acquisitions (primarily
Stream International) and volume increases from established operations in Latin
America, Central Europe and Asia.

1994 Compared to 1993--Net sales increased 11% to $4.9 billion, reflecting
increased global demand and volume growth across most product categories, new
products and services, new customers and acquisitions. Net sales from foreign
operations increased 42% to $553 million, and represented over 11% of
consolidated net sales in 1994. The growth in foreign sales was the result of
volume increases realized from expansions and start-up operations in Europe,
Asia, and Latin America, including the acquisition of Chile-based Editorial
Lord Cochrane, S.A. (then 51% owned by the company), which was consolidated in
operating results beginning July 1, 1994.

EXPENSES

1995 Compared to 1994--Gross profit increased 27%, to $1.2 billion due to the
increase in sales and the impact of favorable by-product prices. This increase
was lower than the sales growth rate due to the impact of the change in revenue
mix associated with the Stream International merger, an increase in the LIFO
provision of $10 million before taxes, or $0.04 per share after taxes, and
higher paper costs (which are generally recovered, but at low margins). In
1995, the company changed its method of calculating its LIFO provision from the
double-extension method of valuing LIFO inventories to the external-index
method. The external-index method includes a blend of several indices and takes
into account the effects of productivity

12
<PAGE>

improvements in the company's cost of sales. Had the company not made this
change in accounting method, the 1995 LIFO provision would have been $37
million higher before taxes, or $0.15 per share after taxes.

Selling and administrative expenses increased 32%, to $650 million,
reflecting volume increases and expenses associated with acquisitions and
mergers (primarily Stream International) and new operations. The ratio of
selling and administrative expenses to net sales, at 10% in 1995, remained
unchanged from 1994. Interest expense increased $56 million, reflecting both
higher average interest rates and higher average debt balances associated with
capital spending, acquisitions and increased working capital needs driven by
higher paper quantities and prices.

1994 Compared to 1993--Gross profit grew 9%, to $950 million, slightly lower
than the growth in net sales, as the volume increases were partially offset by
higher paper costs (which are generally recovered, but at low margins),
depreciation, amortization and start-up costs. Selling and administrative
expenses increased 8%, to $491 million, primarily resulting from volume-related
increases. The ratio of selling and administrative expenses to net sales, at
10% in 1994, was unchanged from 1993. Interest expense increased $8 million,
due to higher interest rates and higher debt levels to fund acquisitions and
expansions. Other expense was $7 million above 1993, reflecting lower
investment income and higher minority interest expense. The effective income
tax rate of 32% in 1994 was lower than the 1993 rate, resulting from tax
credits for affordable housing investments and the one-time impact on the
deferred income tax provision in 1993, related to the federal tax rate
increase.

LIQUIDITY AND CAPITAL RESOURCES

1995 Compared to 1994--Working capital continues to be closely controlled and
monitored. Working capital increased $226 million from December 31, 1994, due
to increased accounts receivable, the impact of the tight paper market,
business growth and acquisitions and mergers (primarily Stream International).
For 1995, operating cash flow (net income plus depreciation and amortization)
was $697 million, up 20% from 1994. Management believes that the company's cash
flow and borrowing capacity are sufficient to fund current operations and
growth.

Capital expenditures during 1995 totaled $456 million, including purchases of
equipment to meet the growing needs of present and new customers and expansions
of manufacturing plants. This capital investment reflects the company's
continued program to expand and upgrade operations, targeting specific markets
in the United States, Europe, Asia and Latin America. Along those lines, the
company increased its ownership interest in January of 1996 in Chile-based
Editorial Lord Cochrane, S.A. to 55.3%, up from 51% at year-end 1995.
Management anticipates 1996 capital expenditures to be between $500 million and
$550 million.

At December 31, 1995, the company had an unused revolving credit facility of
$550 million with a number of banks. This credit facility provides support for
the issuance of commercial paper and other credit needs. In addition, certain
subsidiaries of the company had credit facilities with unused borrowing
capacities totaling approximately $100 million at December 31, 1995.

1994 Compared to 1993--In 1994, operating cash flow was $582 million, an
increase of $61 million, or 12%, from 1993 (excluding the restructuring charge
and the deferred income tax charge relating to the increase in the federal
statutory income tax rate recorded in 1993). Working capital increased by $127
million from December 31, 1993, primarily from increased receivables and
inventory reflecting acquisitions and volume increases, partially offset by
higher accounts payable and accrued compensation. The increase in goodwill and
other intangibles reflected acquisitions and costs ($257 million in 1994)
associated with acquiring long-term print contracts and volume guarantees.
Proceeds from debt issuances were used to fund capital expansion, acquisitions
and costs associated with long-term print contracts and volumes.

Capital expenditures during 1994 totaled $425 million ($307 million in 1993)
and an additional $120 million ($178 million in 1993) was invested in
acquisitions and joint ventures.

13
<PAGE>

OTHER INFORMATION

Human Resources--As of December 31, 1995, the company employed approximately
34,000 people in the United States, approximately 1,600, or 5%, of whom were
covered by collective bargaining agreements. In addition, the company employed
approximately 7,000 people in its foreign operations, the majority of whom were
covered by collective bargaining agreements, as is customary in those markets.

Technology--Over the past several years, the company has made significant
investments in advanced technology to reduce operating costs, increase
productivity and expand its service range and revenue streams. At year-end
1995, the company had completed 36 computer-to-plate installations at its web-
offset facilities and 20 New Klisch Interface (NKI) installations at its
gravure plants, which the company believes represents approximately 50% of the
U.S. printing industry's total investment in these technologies. At the end of
the year, the company also had six installed M-3000 presses, which the company
believes represents more than 25% of the total number of M-3000 presses
installed in the U.S. In addition to providing added value to customers by
reducing production cycle times and speeding time to market, these investments
will reduce the company's variable production costs going forward.

Investments in digital technologies, including four-color Xeikon presses,
also are helping the company enter new businesses, such as demand printing
through R.R. Donnelley's Digital Division and Title Life ManagementSM in Book
Publishing Services. In many cases, the company cooperates with technology
vendors to develop proprietary processes and customize technologies to create
competitive advantages. At the end of 1995, the company held unexpired patents
on more than 100 proprietary printing and binding technologies.

Purchasing and Raw Materials--The primary raw materials used by the company
are paper and ink. In 1995, the company spent approximately $3.2 billion on raw
materials. The price of paper is volatile and in periods of rising prices and
tight supply, similar to those conditions affecting the industry in 1995, the
company's revenues tend to increase as costs of paper are recovered, but at low
margins. In addition to paper consumed in the manufacturing process, the
company is also affected by the price of by-product paper which it sells. In
the first half of 1995, the price of by-product paper rose substantially, which
benefited the company's financial results. By-product prices declined to 1994
levels during 1995's fourth quarter.

The company is a large purchaser of paper and leverages its volume
requirements to improve materials management and materials performance for its
customers and believes this is a competitive advantage. The company negotiates
with leading suppliers to maximize its purchasing efficiencies, but does not
rely on any one supplier. Purchasing activity at both the local plant and
corporate levels are coordinated to increase economies of scale. Plant
inventories have been a growing focus in 1995 and the company has increased
utilization of existing inventories by successfully managing and tracking those
inventories.

OUTLOOK AND SUBSEQUENT EVENT

The commercial printing business in North America (the company's primary
geographic market) is highly competitive in most product categories and
geographic regions. Industry analysts consider most commercial print markets to
have excess capacity. Competition is largely based on price, quality and
servicing the special needs of customers.

Management believes the company's prospects in 1996 are good. The company's
primary printing markets are relatively strong going into the new year. There
is substantial capacity committed under long-term contracts and the outlook for
advertising seems positive, since 1996 is a major election year and the United
States is hosting the 1996 Olympics. These events tend to increase advertising,
resulting in higher demand for printed materials. Despite slower than expected
corporate demand for software and software price discounting late in 1995, the
company believes Stream International should see improved sales and profits in
1996.

14
<PAGE>

The company is a large consumer of paper, acquired for and by customers. As
in 1995, the cost and supply of certain paper grades consumed in the
manufacturing process will continue to affect the company's financial results.
However, management believes that the industry will experience stable paper
prices and balanced supplies in 1996, as signs of price discounting have
surfaced in the first quarter of the year.

There has recently been, and there is likely to be in the future, proposed
legislation before the United States Congress to initially reduce and
eventually eliminate the deduction for interest on loans borrowed against
corporate-owned life insurance (COLI). The company has used this deduction for
several years and is carefully watching any changes in legislation that will
reduce or eliminate it going forward.

On March 7, 1996, the company announced that its Metromail subsidiary had
filed a registration statement with the Securities and Exchange Commission for
a proposed initial public offering of common stock of Metromail. All of the
shares would be offered by Metromail with net proceeds being used to repay
certain indebtedness owed to the company. The company would use the payment
from Metromail to pay down its debt and for general corporate purposes. The
company will retain a significant minority ownership interest in Metromail
following the offering. The company expects that this transaction, if
consummated, will result in a one-time gain, recorded in the company's 1996
income statement.

In summary, the company's competitive strengths of world-wide geographic
coverage, strategic raw materials purchasing (primarily paper and ink),
comprehensive service offerings, technology advantage and economies of scale
should result in strong sales and earnings growth in 1996.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial information required by Item 8 is contained in Item 14 of Part
IV and listed on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

15
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning the directors and officers of the company is contained
on pages 2-6 and 8 of the company's definitive Proxy Statement dated February
20, 1996 and is incorporated herein by reference. See also the list of the
company's executive officers and related information under "Executive Officers
of R. R. Donnelley & Sons Company" at the end of Part I of this Report.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation for the year ended December 31,
1995, and, with respect to certain of such information, prior years, is
contained on pages 8-15 of the company's definitive Proxy Statement dated
February 20, 1996 and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning the beneficial ownership of the company's common stock
is contained on pages 6-8 of the company's definitive Proxy Statement dated
February 20, 1996 and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions for the
year ended December 31, 1995, is contained on pages 5 and 15 of the company's
definitive Proxy Statement dated February 20, 1996 and is incorporated herein
by reference.

16
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)1. Financial Statements
The financial statements listed in the accompanying index (page F-1) to
the financial statements are filed as part of this annual report.
2. Financial Statement Schedule
The financial statement schedule listed in the accompanying index (page
F-1) to the financial statements is filed as part of this annual
report.
3. Exhibits
The exhibits listed on the accompanying index to exhibits (pages E-1
through E-2) are filed as part of this annual report.
(b)Reports on Form 8-K
None
(c)Exhibits
The exhibits listed on the accompanying index (Pages E-1 through E-2)
are filed as part of this annual report.
(d)Financial Statements omitted--
Separate financial statements of the parent company have been omitted
since it is primarily an operating company and the minority interest
and indebtedness to persons other than the parent of the subsidiaries
included in the consolidated financial statements are less than 5% of
total consolidated assets.

Certain schedules have been omitted because the required information is
included in the consolidated financial statements or notes thereto or
because they are not applicable or not required.

17
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 11TH DAY OF
MARCH, 1996.

R. R. DONNELLEY & SONS COMPANY

/s/ Peter F. Murphy
By __________________________________
Peter F. Murphy,
Vice President and Controller

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED, ON THE 11TH DAY OF MARCH, 1996.

SIGNATURE AND TITLE SIGNATURE AND TITLE

/s/ John R. Walter
- ------------------------------------- -------------------------------------
John R. Walter Thomas S. Johnson
Chairman of the Board, Director
Chief Executive Officer and Director

(Principal Executive Officer)
-------------------------------------

/s/ Cheryl A. Francis M. Bernard Puckett
- ------------------------------------- Director
Cheryl A. Francis

Executive Vice President and /s/ John M. Richman
Chief Financial Officer -------------------------------------
(Principal Financial Officer) John M. Richman
Director

/s/ Peter F. Murphy
- ------------------------------------- /s/ William D. Sanders
Peter F. Murphy -------------------------------------
Vice President and Controller William D. Sanders
(Principal Accounting Officer) Director

/s/ Martha Layne Collins /s/ Jerre L. Stead
- ------------------------------------- -------------------------------------
Martha Layne Collins Jerre L. Stead
Director Director

/s/ James R. Donnelley /s/ Bide L. Thomas
- ------------------------------------- -------------------------------------
James R. Donnelley Bide L. Thomas
Director Director

/s/ Charles C. Haffner III /s/ H. Blair White
- ------------------------------------- -------------------------------------
Charles C. Haffner III H. Blair White
Director Director

/s/ Judith H. Hamilton /s/ Stephen M. Wolf
- ------------------------------------- -------------------------------------
Judith H. Hamilton Stephen M. Wolf
Director Director

18
<PAGE>

ITEM 14(A). INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
Consolidated Statements of Income for each of the three years ended
December 31, 1995..................................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1994.............. F-3
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1995..................................................... F-4
Consolidated Statements of Shareholders' Equity for each of the three
years ended December 31, 1995......................................... F-5
Notes to Consolidated Financial Statements............................. F-6
Report of Independent Public Accountants............................... F-16
Interim Financial Information.......................................... F-17
Report of Independent Public Accountants on Financial Statement
Schedule.............................................................. F-18
Financial Statement Schedule
II--Valuation and Qualifying Accounts................................ F-19
</TABLE>

F-1
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

THOUSANDS OF DOLLARS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................... $6,511,786 $4,888,786 $4,387,761
Cost of sales................................ 5,302,394 3,938,494 3,518,168
---------- ---------- ----------
Gross profit................................. 1,209,392 950,292 869,593
Selling and administrative expenses.......... 649,983 490,861 453,986
Restructuring charge......................... -- -- 90,000
---------- ---------- ----------
Earnings from operations..................... 559,409 459,431 325,607
Interest expense............................. 109,759 53,493 45,436
Other expense--net........................... 10,118 10,934 3,609
---------- ---------- ----------
Earnings before income taxes and cumulative
effect of accounting changes................ 439,532 395,004 276,562
Income taxes................................. 140,739 126,401 97,642
---------- ---------- ----------
Net income from operations before cumulative
effect of accounting changes................ 298,793 268,603 178,920
Cumulative effect of change in accounting
for:
Postretirement benefits other than pensions
(net of $80.1 million in tax benefits).... -- -- (127,700)
Income taxes............................... -- -- 58,200
---------- ---------- ----------
Net Income............................... $ 298,793 $ 268,603 $ 109,420
========== ========== ==========
Income (charge) per common share:
Operations before cumulative effect of
accounting changes........................ $ 1.95 $ 1.75 $ 1.16
Cumulative effect of change in accounting
for:
Postretirement benefits other than pensions
(net of tax benefits)..................... -- -- (0.82)
Income taxes............................... -- -- 0.37
---------- ---------- ----------
Net Income per Share of Common Stock..... $ 1.95 $ 1.75 $ 0.71
========== ========== ==========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-2
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
THOUSANDS OF DOLLARS

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Assets
Cash and equivalents................................. $ 33,122 $ 20,569
Receivables, less allowances for doubtful accounts of
$25,311 in 1995 and $19,168 in 1994................. 1,466,159 987,520
Inventories.......................................... 380,078 311,237
Prepaid expenses..................................... 28,600 34,004
---------- ----------
Total Current Assets............................... 1,907,959 1,353,330
Net property, plant and equipment, at cost, less
accumulated depreciation of $2,111,461 in 1995 and
$1,852,084 in 1994.................................. 2,008,988 1,856,760
Goodwill and other intangibles, net of accumulated
amortization of $178,997 in 1995 and $114,932 in
1994................................................ 1,024,954 887,071
Other noncurrent assets.............................. 442,909 354,982
---------- ----------
Total Assets....................................... $5,384,810 $4,452,143
========== ==========
Liabilities
Accounts payable..................................... $ 601,814 $ 422,703
Accrued compensation................................. 126,483 107,167
Short-term debt...................................... 50,000 32,400
Current and deferred income taxes.................... 86,737 46,912
Other accrued liabilities............................ 265,340 192,668
---------- ----------
Total Current Liabilities.......................... 1,130,374 801,850
---------- ----------
Long-term debt....................................... 1,560,960 1,212,332
Deferred income taxes................................ 300,840 286,904
Other noncurrent liabilities......................... 219,466 172,688
---------- ----------
Total Noncurrent Liabilities....................... 2,081,266 1,671,924
---------- ----------
Shareholders' Equity
Common stock at stated value ($1.25 par value)
Authorized shares: 500,000,000; Issued: 158,608,800
in 1995 and 1994.................................... 330,612 330,612
Retained earnings, net of cumulative translation
adjustments of $29,031 in 1995 and $18,235 in 1994.. 1,994,098 1,802,777
Unearned compensation................................ (9,297) --
Reacquired common stock, at cost..................... (142,243) (155,020)
---------- ----------
Total Shareholders' Equity......................... 2,173,170 1,978,369
---------- ----------
Total Liabilities and Shareholders' Equity........... $5,384,810 $4,452,143
========== ==========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-3
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THOUSANDS OF DOLLARS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income from operations before cumulative
effect of accounting changes............... $ 298,793 $ 268,603 $ 178,920
Depreciation................................ 330,579 285,446 249,124
Amortization................................ 67,619 28,017 25,680
Net change in assets and liabilities........ (294,067) (355,934) (4,342)
Other....................................... (15,679) (38,586) 3,241
--------- --------- ---------
Net Cash Provided By Operating Activities. 387,245 187,546 452,623
--------- --------- ---------
Cash flows used for investing activities:
Capital expenditures........................ (455,662) (425,190) (306,512)
Other investments including acquisitions,
net of cash acquired....................... (34,756) (120,461) (177,743)
--------- --------- ---------
Net Cash Used For Investing Activities.... (490,418) (545,651) (484,255)
--------- --------- ---------
Cash flows from (used for) financing
activities:
Net increase in borrowings.................. 227,774 500,951 143,286
Disposition of reacquired common stock...... 37,857 20,585 19,693
Acquisition of common stock................. (34,429) (57,363) (47,513)
Cash dividends paid......................... (104,364) (92,352) (83,465)
--------- --------- ---------
Net Cash From Financing Activities........ 126,838 371,821 32,001
--------- --------- ---------
Effect of exchange rate changes on cash and
equivalents.................................. (11,112) (3,863) (2,001)
--------- --------- ---------
Net Increase (Decrease) in Cash and
Equivalents.................................. 12,553 9,853 (1,632)
Cash and Equivalents at Beginning of Year..... 20,569 10,716 12,348
--------- --------- ---------
Cash and Equivalents at End of Year........... $ 33,122 $ 20,569 $ 10,716
========= ========= =========

The changes in assets and liabilities, net of balances assumed through
acquisitions, were as follows:

<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Decrease (Increase) in Assets:
Receivables--net............................ $(342,899) $(125,001) $ 5,835
Inventories--net............................ (41,833) (53,214) (32,156)
Prepaid expenses............................ 47,142 (601) (8,463)
Other assets................................ (70,577) (275,759) 31,609
Increase (Decrease) in Liabilities:
Accounts payable............................ 17,958 97,439 41,988
Accrued compensation........................ 19,316 28,603 (3,146)
Current and deferred income taxes........... 41,378 6,095 4,773
Other accrued liabilities................... 27,926 (15,448) (1,110)
Noncurrent deferred income taxes............ 20,459 13,574 9,725
Other noncurrent liabilities................ (12,937) (31,622) (53,397)
--------- --------- ---------
Net Change in Assets and Liabilities...... $(294,067) $(355,934) $ (4,342)
========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-4
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THOUSANDS OF DOLLARS

<TABLE>
<CAPTION>
REACQUIRED UNEARNED
COMMON STOCK COMMON STOCK COMPENSATION
-------------------- --------------------- RESTRICTED RETAINED
SHARES AMOUNT SHARES AMOUNT STOCK EARNINGS TOTAL
----------- -------- ---------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... 158,608,800 $330,612 (3,579,982) $ (84,036) $ -- $1,602,401 $1,848,977
Net income before
cumulative effect of
accounting changes..... 178,920 178,920
Cumulative effect of
change in accounting
for:
Other postretirement
benefits, net of tax
benefits............. (127,700) (127,700)
Income taxes.......... 58,200 58,200
Treasury stock
purchases.............. (1,601,296) (47,513) (47,513)
Cash dividends.......... (83,465) (83,465)
Cost of common shares
issued under stock
programs............... 730,511 15,255 4,438 19,693
Translation adjustments. (3,121) (3,121)
----------- -------- ---------- --------- ------- ---------- ----------
Balance at December 31,
1993................... 158,608,800 330,612 (4,450,767) (116,294) -- 1,629,673 1,843,991
Net income.............. 268,603 268,603
Treasury stock
purchases.............. (1,958,193) (57,363) (57,363)
Cash dividends.......... (92,352) (92,352)
Cost of common shares
issued under stock
programs............... 885,478 18,637 1,948 20,585
Translation adjustments. (5,095) (5,095)
----------- -------- ---------- --------- ------- ---------- ----------
Balance at December 31,
1994................... 158,608,800 330,612 (5,523,482) (155,020) -- 1,802,777 1,978,369
Net income.............. 298,793 298,793
Treasury stock
purchases.............. (996,464) (34,429) (34,429)
Cash dividends.......... (104,364) (104,364)
Cost of common shares
issued under stock
programs............... 1,863,685 47,206 (9,297) 7,688 45,597
Translation adjustments. (10,796) (10,796)
----------- -------- ---------- --------- ------- ---------- ----------
Balance at December 31,
1995................... 158,608,800 $330,612 (4,656,261) $(142,243) $(9,297) $1,994,098 $2,173,170
=========== ======== ========== ========= ======= ========== ==========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation--The consolidated financial statements include the
accounts of the company and its majority-owned subsidiaries. Intercompany items
and transactions are eliminated in consolidation.

Nature of Operations--The company provides a wide variety of print and print-
related products and services for specific customers, virtually always under
contract. Some contracts provide for progress payments from customers as
certain phases of the work are completed; however, revenue is not recognized
until the earnings process has been completed in accordance with the terms of
the contracts. Some customers furnish paper for their work, while in other
cases the company purchases and sells the paper.

Cash and Equivalents--The company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.

Inventories--Inventories include material, labor and factory overhead and are
stated at the lower of cost or market. The cost of approximately 66% and 85% of
the inventories at December 31, 1995 and 1994, respectively, has been
determined using the Last-In, First-Out (LIFO) method. This method reflects the
effect of inventory replacement costs in earnings; accordingly, charges to cost
of sales reflect recent costs of material, labor and factory overhead. The
remaining inventories are valued using the First-In, First-Out (FIFO) or
specific identification methods.

Foreign Currency Translation--Gains and losses arising from the translation
of the company's international subsidiaries' financial statements are reflected
in Retained Earnings.

Net Income Per Share of Common Stock--Net income per share is computed on the
basis of average shares outstanding during each year. No material dilution
would result if effect were given to the exercise of outstanding stock options
and the vesting of stock units.

Benefit Plans--The company's Retirement Benefit Plan (the Plan) is a non-
contributory defined benefit plan covering substantially all domestic
employees. Normal retirement age is 65 but provision is made for earlier
retirement. As required, the company uses the projected unit credit actuarial
cost method to determine pension cost for financial reporting purposes. In
conjunction with this method, the company amortizes deferred gains and losses
(using the corridor method), prior service costs and the transition credit (the
excess of Plan assets plus balance sheet accruals over the projected
obligation, as of January 1, 1987) over 19 years, representing the average
remaining service life of its active employee population. For tax and funding
purposes, the attained age normal actuarial cost method is used. Compared to
the projected unit credit method, the attained age normal method attributes a
greater proportion of the total retirement obligation to an employee's early
years of service.

Capitalization, Depreciation and Amortization--Property, plant and equipment
are stated at cost. Depreciation is computed principally on the straight-line
method based on useful lives of 15 to 33 years for buildings and 3 to 15 years
for machinery and equipment. Maintenance and repair costs are charged to
expense as incurred. Major overhauls are capitalized as reductions to
accumulated depreciation. When properties are retired or disposed, the costs
and accumulated depreciation are eliminated and the resulting profit or loss is
recognized in income. Goodwill ($691 million and $558 million, net of
accumulated amortization, at December 31, 1995 and 1994, respectively) is
amortized over periods ranging from 10 to 40 years. Other intangibles represent
primarily the cost of acquiring print contracts and volume guarantees and are
amortized over the periods in which benefits will be realized.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-6
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

ACQUISITIONS

Effective April 1, 1995, the company merged its Global Software Services
business (GSS) with Corporate Software Inc. (CSI) to form Stream International
Inc. (Stream), a software manufacturer, distributor and technical support
organization. The company owns approximately 80% of the capital stock of
Stream, which is not a publicly traded corporation. The remaining 20% is owned
by the former owners of CSI and management. No gain or loss was recognized on
the merger as the book value of GSS approximated its fair market value on the
date of the transaction.

The Stream transaction has been accounted for using the purchase method.
Accordingly, amounts assigned in the accompanying Consolidated Balance Sheets
to the assets and liabilities of CSI were based on their estimated fair market
values. The cost in excess of net assets acquired of $120 million is being
amortized on a straight-line basis over 15 years. The results of operations of
CSI are included in the accompanying Consolidated Income Statements from the
date of the merger.

Certain officers and employees of Stream hold options to buy up to 9% of
Stream at formula-based prices which approximate, on a per share basis, the
book value of the company's investment in Stream. The Stream shares not owned
by the company and the shares to be sold under the aforementioned option
agreements are subject to certain put and call arrangements whereby the company
would acquire the shares based on a multiple of Stream's earnings, as defined.
If all such shares were put to the company at December 31, 1995, the aggregate
purchase price would be less than the minority interest liability recorded in
the accompanying Consolidated Balance Sheets.

The company made several other acquisitions, joint venture and equity
investments in 1995, 1994 and 1993, none of which, either individually or in
the aggregate, were material to the company's financial statements. The
acquisitions were accounted for using the purchase method; accordingly, the
assets and liabilities of the acquired entities have been recorded at their
estimated fair values at their respective dates of acquisition.

Liabilities incurred and assumed in connection with acquisitions totaled
$386.8 million, $87.2 million and $24.1 million for the years ended December
31, 1995, 1994 and 1993, respectively.

RESTRUCTURING CHARGE

On January 25, 1993, Sears, Roebuck and Co., a customer, announced its
decision to discontinue catalog operations during 1993. In response to Sears'
announcement, the company incurred a one-time charge of $60.8 million (net of
the associated tax benefit) in the first quarter of 1993. The charge primarily
covered the costs associated with closing the company's manufacturing facility
in Chicago, Illinois, where the company produced the Sears catalogs.

INVENTORIES

The components of the company's inventories as of December 31, 1995 and 1994,
were as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
THOUSANDS OF
DOLLARS
<S> <C> <C>
Raw materials and manufacturing supplies.............. $230,694 $185,527
Work in process....................................... 213,741 208,553
Finished goods........................................ 34,041 5,821
Progress billings..................................... (47,549) (45,523)
LIFO reserve ......................................... (50,849) (43,141)
-------- --------
Total............................................. $380,078 $311,237
======== ========
</TABLE>

F-7
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The company's cost of sales was increased by LIFO provisions of $7.7 million
in 1995 (and decreased in 1994 by $2.3 million). In the third quarter of 1995,
the company changed from the double-extension method of valuing LIFO
inventories to the external-index method. The company believes that this change
will result in a better measurement of operating results by properly reflecting
the effect of productivity improvements in the company's cost of sales. Because
the cumulative effect of this change on periods prior to 1995 cannot be
determined, the impact has been reflected in current operations. This
accounting change was adopted effective January 1, 1995; however, the effect of
the change on the first two quarters of 1995 was immaterial, and the financial
statements for those periods have not been restated. Net income for 1995 was
approximately $22 million ($0.15 per share) higher than it would have been had
the change not been made.

VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATIONS

The company maintains two Voluntary Employees' Beneficiary Associations
(VEBAs), one to fund employee welfare benefits and one to fund postretirement
medical and death benefits. The balances of the VEBAs (net of associated
liabilities) are recorded in the accompanying Consolidated Balance Sheets,
classified as current or noncurrent depending on the ultimate expected payment
date of the underlying liabilities. As of December 31, 1995 and 1994, the
company had a net current liability of $16.3 million and a net current asset of
$11.3 million, respectively, representing the current position of the company's
employee welfare benefit plans funded by one of the VEBAs. The VEBA established
to partially fund the company's liability for postretirement medical and death
benefits ($191 million at December 31, 1995 and $156 million at December 31,
1994) is included in Other Noncurrent Liabilities as an offset to the related
liability. For additional information, refer to the notes on "Other Retirement
Benefits."

PROPERTY, PLANT AND EQUIPMENT

The following table summarizes the components of property, plant and
equipment (at cost) as of December 31, 1995 and 1994:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C>
Land................................................ $ 44,438 $ 38,430
Buildings........................................... 622,326 595,460
Machinery and equipment............................. 3,453,685 3,074,954
---------- ----------
Total........................................... $4,120,449 $3,708,844
========== ==========
</TABLE>

COMMITMENTS AND CONTINGENCIES

As of December 31, 1995, authorized expenditures on incomplete projects for
the purchase of property, plant and equipment totaled $198.4 million. Of this
total, $123.5 million has been contractually committed. The company has a
variety of commitments with suppliers for the purchase of paper, ink and other
materials for delivery in future years at prevailing market prices.

The company has operating lease commitments totaling $422.2 million extending
through various periods to 2009. The lease commitments total $76.3 million for
1996, range from $33.4 million to $64.3 million in each of the years 1997-2000
and total $158.8 million for years 2001 and thereafter.

The company is not exposed to significant accounts receivable credit risk,
due to the diversity of industry classification, distribution channels and
geographic location of its customers. In addition, the company is a party to
certain litigation arising in the ordinary course of business which, in the
opinion of management, will not have a material adverse effect on the
operations of the company. The company also has future annual commitments
totaling $102.6 million to invest in various affordable housing limited
partnerships which provide annual tax benefits and credits in amounts greater
than the annual investments.

F-8
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

RETIREMENT BENEFIT PLAN

Net pension credits included in operating results for the Retirement Benefit
Plan (the Plan) were:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Service cost..................................... $ 23,393 $ 28,158 $ 25,097
Interest cost on the projected benefit
obligation...................................... 54,524 51,604 47,295
Actual (return) loss on Plan assets.............. (217,662) 3,858 (106,595)
Amortization of excess Plan net assets at
adoption of SFAS No. 87 and deferrals--net...... 120,698 (97,293) 20,306
-------- -------- --------
Total........................................ $(19,047) $(13,673) $(13,897)
======== ======== ========
</TABLE>

The actuarial computations that derived the above amounts assumed a discount
rate on projected benefit obligations of 7.25% (8.5% at December 31, 1994 and
7.5% at December 31, 1993), an expected long-term rate of return on Plan assets
of 9.5% and annual salary increases of 4% for 1995 and 1994 and 5% for 1993.

Plan assets include primarily government and corporate debt securities and
marketable equity securities, and, to a lesser extent, commingled funds, real
estate and a group annuity contract purchased from a life insurance company.
The funded status and prepaid pension cost (included in Other Noncurrent Assets
on the accompanying Consolidated Balance Sheets) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
THOUSANDS OF DOLLARS
<S> <C> <C>
Fair value of Plan assets............................ $1,113,505 $ 935,847
---------- ---------
Actuarial present value of benefit obligations:
Vested............................................. 733,920 574,839
Non-vested......................................... 11,726 9,354
---------- ---------
Total accumulated benefit obligations................ 745,646 584,193
Additional amounts related to projected wage
increases........................................... 86,378 80,098
---------- ---------
Projected benefit obligations for services rendered
to date............................................. 832,024 664,291
---------- ---------
Excess of Plan assets over projected benefit
obligations......................................... 281,481 271,556
Unrecognized net deferrals........................... 4,221 4,948
Unrecognized net excess Plan assets to be amortized
through the year 2005............................... (98,497) (108,347)
---------- ---------
Prepaid Pension Costs................................ $ 187,205 $ 168,157
========== =========
</TABLE>

In the event of Plan termination, the Plan provides that no funds can revert
to the company and any excess assets over Plan liabilities must be used to fund
retirement benefits.

OTHER RETIREMENT BENEFITS

In addition to pension benefits, the company provides certain health care and
life insurance benefits for retired employees. Substantially all of the
company's domestic, full-time employees become eligible for those benefits upon
reaching age 55 while working for the company and having ten years continuous
service at retirement. The company funds a portion of the liabilities
associated with these plans through a tax-exempt trust. The trust is invested
in various assets, primarily life insurance covering some of the company's
employees.

Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS 106 requires

F-9
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
companies to charge to expense the expected costs of postretirement health care
and life insurance (and similar benefits) during the years that the employees
render service. Previously, such costs were expensed as actual claims were
paid. The company elected to immediately recognize the transition obligation
for future benefits to be paid related to past employee services, resulting in
a noncash charge of $207.8 million before deferred income tax benefits ($127.7
million after-tax or $0.82 per share) that represents the cumulative effect of
the change in accounting for the years prior to 1993.

The net accrual-basis expense for postretirement benefits during 1995, 1994
and 1993 included the following components:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Service cost................................ $ 9,492 $ 11,807 $11,580
Interest cost on the projected benefit
obligations................................ 17,319 18,532 17,486
Actual return on assets..................... (34,626) (1,296) (5,545)
Deferrals--net.............................. 16,503 (11,113) (3,832)
-------- -------- -------
Total................................... $ 8,688 $ 17,930 $19,689
======== ======== =======
</TABLE>

The above table does not include a $23 million charge for postretirement
medical benefits associated with the closing of the company's Chicago
manufacturing facility; such amount was included in the 1993 restructuring
charge (see separate note above).

The liability (included in Other Noncurrent Liabilities on the accompanying
Consolidated Balance Sheets) for postretirement benefits, net of the partial
funding, is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
THOUSANDS OF DOLLARS
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees........................................... $ 152,981 $ 136,854
Fully eligible active plan participants............ 4,856 7,056
Other active plan participants..................... 93,048 65,595
--------- ---------
Total accumulated benefit obligations................ 250,885 209,505
Fair value of Plan assets............................ (191,042) (156,416)
Unrecognized net deferrals........................... 20,596 37,542
--------- ---------
Excess of Accumulated Benefit Obligations Over Plan
Assets.............................................. $ 80,439 $ 90,631
========= =========
</TABLE>

The actuarial computations assumed a discount rate of 7.25% (8.5% at December
31, 1994) to determine the accumulated postretirement benefit obligation, an
expected long-term rate of return on plan assets of 9.0% and a health care cost
trend rate of 8.0% initially, declining gradually to 5.5% in 2023 and
thereafter, to measure the accumulated postretirement benefit obligation.

Effective January 1, 1993, certain features of the plan were amended. For
future retirees, the company introduced retiree cost-sharing and implemented
programs intended to stem rising costs. Also, the company has adopted a
provision which limits its future obligation to absorb health care cost
inflation. The features of the new plan provisions have been reflected in the
assumed health care cost trend rate disclosed above. However, a one percentage
point increase in the assumed health care cost trend rate would increase the
1995 postretirement benefit expense (service cost and interest cost) by $2.1
million and the accumulated postretirement benefit obligation as of December
31, 1995 by $17.6 million.

INCOME TAXES

Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS
109 requires, among other things, the application of current statutory income
tax rates in computing deferred income tax balances. In the first quarter of
1993,

F-10
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the company recognized the cumulative effect, through January 1, 1993, of the
accounting change, reflecting the difference between current statutory tax
rates and the generally higher rates that were used to establish the deferred
income tax balances, resulting in noncash income of $58.2 million (equivalent
to $0.37 per share).

Cash payments for income taxes were $98.1 million, $101.6 million and $75.2
million in 1995, 1994 and 1993, respectively. The components of income tax
expense for the years ending December 31, 1995, 1994 and 1993, were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Federal
Current....................................... $ 85,225 $ 79,483 $72,049
Deferred*..................................... 31,230 23,218 7,339
State........................................... 24,284 23,700 18,254
-------- -------- -------
Total....................................... $140,739 $126,401 $97,642
======== ======== =======
</TABLE>
- --------
*The 1993 deferred income tax expense includes $6.2 million for the one-time
adjustment of previously recorded deferred taxes due to the increase in the
U.S. statutory rate.

The significant deferred tax assets and liabilities at December 31, 1995 and
1994, were as follows:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation......................... $ 210,564 $ 206,338
Investments in safe harbor leases................ 23,362 37,234
Pensions......................................... 69,869 60,611
Other............................................ 89,584 64,438
---------- ----------
Total deferred tax liabilities................. 393,379 368,621
---------- ----------
Deferred tax assets:
Postretirement benefits.......................... 32,176 36,000
Accrued liabilities.............................. 21,614 24,521
Other............................................ 54,971 37,263
---------- ----------
Total deferred tax assets...................... 108,761 97,784
---------- ----------
Net Deferred Tax Liabilities....................... $ 284,618 $ 270,837
========== ==========
</TABLE>

The following table outlines the reconciling differences between the U.S.
statutory tax rates and the rates used by the company in the determination of
net income:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate....................................... 35.0% 35.0% 35.0%
State and local income taxes, net of U.S. federal income tax
benefit..................................................... 3.6 3.9 4.3
Goodwill amortization........................................ 1.7 1.3 2.0
Benefits resulting from corporate-owned life insurance
programs.................................................... (5.8) (4.7) (5.5)
Affordable housing investment credits........................ (3.9) (3.1) (2.5)
Other........................................................ (1.4) (0.4) (0.2)
---- ---- ----
Subtotal..................................................... 32.0 32.0 33.1
Adjustment of deferred taxes for the increase in the U.S.
federal statutory income tax rate........................... -- -- 2.2
---- ---- ----
Total.................................................... 32.0% 32.0% 35.3%
==== ==== ====
</TABLE>

F-11
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DEBT FINANCING AND INTEREST EXPENSE

The company's debt at December 31, 1995 and 1994, consisted of the following:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C>
Commercial paper......................................... $ 314,264 $ 484,061
Medium-term notes due 1997-2005 at a weighted average
interest rate of 6.93%.................................. 500,000 200,000
9.125% debentures due December 1, 2000................... 199,646 199,574
8.875% debentures due April 15, 2021..................... 149,665 149,652
7.0% notes due January 1, 2003........................... 109,725 109,686
Subsidiary revolving line of credit...................... 162,000 --
Other.................................................... 175,660 101,759
---------- ----------
Total................................................ $1,610,960 $1,244,732
========== ==========
</TABLE>

Based upon the interest rates currently available to the company for
borrowings with similar terms and maturities, the fair value of the company's
debt exceeds its book value at December 31, 1995 by approximately $98 million.
The company's notes and debentures are not actively traded and contain no call
provisions.

At December 31, 1995, the company had an available credit facility of $550
million with a group of domestic and foreign banks that expires December 21,
1999. The credit arrangement provides support for the issuance of commercial
paper and other credit needs. Borrowings under the facility (none during the
past two years) bear interest at various rates not exceeding the banks' prime
rates. The company pays an annual fee of 0.07% on the total unused credit
facility.

At December 31, 1995, a subsidiary of the company had an available line of
credit of $200 million with a group of domestic and foreign banks that expires
April 21, 2000. Borrowings under this facility amounted to $162 million at
December 31, 1995 and bear interest at various rates not exceeding the banks'
prime rates. The subsidiary pays an annual fee of 0.10% on the total unused
credit facility.

At December 31, 1995, the company had $599 million of commercial paper and
short-term debt outstanding, of which $50 million represents management's
current estimate of the 1996 net repayment. The remaining $549 million is
classified as long-term since the company has the ability and intent to
maintain such debt on a long-term basis. The weighted average interest rate on
all commercial paper debt outstanding during 1995 was 5.87% (5.93% at December
31, 1995). Annual maturities of long-term debt (excluding commercial paper and
short-term debt) are as follows: 1997--$123 million, 1998--$47 million, 1999--
$107 million, 2000--$236 million, and thereafter $499 million.

The following table summarizes interest expense included in the Consolidated
Statements of Income:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Interest incurred................................. $120,658 $ 63,726 $51,922
Amount capitalized as property, plant and
equipment........................................ (10,899) (10,233) (6,486)
-------- -------- -------
Total......................................... $109,759 $ 53,493 $45,436
======== ======== =======
</TABLE>

Interest paid, net of capitalized interest, was $101.9 million, $51.8 million
and $42.9 million in 1995, 1994 and 1993, respectively.

F-12
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

STOCK AND INCENTIVE PROGRAMS FOR MANAGEMENT EMPLOYEES

Restricted Stock Awards--At December 31, 1995 and 1994, the company had
outstanding 461,000 and 328,000, respectively, restricted shares granted to
certain officers. These shares are registered in the names of the recipients,
but are subject to conditions of forfeiture and restrictions on sale or
transfer for five to seven years from the grant date. Dividends on the
restricted shares are paid currently to the recipients and, accordingly, the
restricted shares are treated as outstanding shares. The expense of the grant
is recognized evenly over the vesting period.

The value of the restricted stock awards was $18.1 million and $10.0 million
based upon the closing price of the company's stock at each year end ($39.375
and $29.50 at December 31, 1995 and 1994, respectively). Charges to expense for
this stock plan were $1.0 million, $1.5 million and $1.1 million in 1995, 1994
and 1993, respectively.

Stock Purchase Plan--The company has a stock purchase plan for selected
managers and key staff employees. Under the plan, the company is required to
contribute an amount equal to 70% of participants' contributions, of which 50%
is applied to the purchase of stock and 20% is paid in cash. The number of
shares required for the plan for the year 1995 will depend upon the extent to
which eligible participants subscribe during the subscription period in the
first quarter of 1996 and the price of the stock on March 18, 1996. Amounts
charged to expense for this plan were $6.2 million, $6.1 million, and $6.2
million in 1995, 1994 and 1993, respectively.

Incentive Compensation Plans--The company has incentive compensation plans
covering selected officers. Amounts charged to expense for supplementary
compensation ($4.3 million in 1995, $3.3 million in 1994 and $2.6 million in
1993), are determined from the level of achievement of performance measures
related to earnings, margins and returns applied to the participants' base
salaries. Similar incentive and gain sharing compensation plans exist for other
officers, managers, supervisors and production employees.

Stock Options--The company has granted stock options annually from 1983 to
1995. The employee options vest from three to nine and one-half years and may
be exercised, once vested, up to ten years from the date of grant. Under
authorized Stock Incentive Plans, a maximum of 5.7 million shares were
available for future grants of stock options and restricted stock awards as of
December 31, 1995. Information relating to stock options, which includes 2.3
million and 2.4 million shares granted in 1995 and 1994, respectively, under a
broad base stock option program for non-management employees, is shown below.

Other Information--Under the stock programs, authorized unissued shares or
treasury shares may be used. If authorized unissued shares are used, not more
than 11.3 million shares may be issued in the aggregate. The company intends to
reacquire shares of its common stock to meet the stock requirements of these
programs in the future.

<TABLE>
<CAPTION>
1995 1994
--------------------------- ---------------------------
NUMBER OF PER SHARE OPTION NUMBER OF PER SHARE OPTION
SHARES ON DATE OF GRANT SHARES ON DATE OF GRANT
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Stock options granted... 4,979,450 $30.44 to $57.70 4,016,500 $28.44 to $30.94
Stock options canceled
or expired............. 551,730 $15.95 to $35.44 274,220 $19.63 to $31.38
Stock options exercised. 1,238,326 $15.66 to $31.38 370,627 $11.44 to $23.94
At end of year:
Stock options
outstanding.......... 14,246,152 $15.66 to $57.70 11,056,758 $15.66 to $31.38
Stock options
exercisable.......... 4,831,856 $15.66 to $31.38 4,764,756 $15.66 to $31.38
</TABLE>

F-13
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

EMPLOYEE STOCK OWNERSHIP PLAN

Contributions to the company's Employee Stock Ownership Plan were
discontinued in response to the change in tax law that eliminated the
previously available tax credit. Under this plan, 1.2 million shares are held
in trust as of December 31, 1995, for formerly eligible employees. There are no
charges to operations for this plan, except for certain administrative
expenses.

PREFERRED STOCK

The company has two million shares of $1.00 par value preferred stock
authorized for issuance. The Board of Directors may divide the preferred stock
into one or more series and fix the redemption, dividend, voting, conversion,
sinking fund, liquidation and other rights. The company has no present plans to
issue any preferred stock. One million of the shares are reserved for issuance
under the Shareholder Rights Plan discussed below.

SHAREHOLDER RIGHTS PLAN

The company maintains a Shareholder Rights Plan (the Plan) designed to deter
coercive or unfair takeover tactics, to prevent a person or group from gaining
control of the company without offering fair value to all shareholders and to
deter other abusive takeover tactics which are not in the best interest of
shareholders.

Under the terms of the Plan, each share of common stock is accompanied by
one-quarter of a right; each full right entitles the shareholder to purchase
from the company, one one-hundredth of a newly issued share of Series A Junior
Preferred Stock at an exercise price of $225.

The rights become exercisable ten days after a public announcement that an
acquiring person (as defined in the Plan) has acquired 20% or more of the
outstanding common stock of the company (the Stock Acquisition Date) or ten
days after the commencement of a tender offer which would result in a person
owning 30% or more of such shares. The company can redeem the rights for $.05
per right at any time until twenty days following the Stock Acquisition Date
(the 20-day period can be shortened or lengthened by the company). The rights
will expire on August 8, 1996 unless redeemed earlier by the company.

If, subsequent to the rights becoming exercisable, the company is acquired in
a merger or other business combination at any time when there is a 20% or more
holder, the rights will then entitle a holder to buy shares of the acquiring
company with a market value equal to twice the exercise price of each right.
Alternatively, if a 20% holder acquires the company by means of a merger in
which the company and its stock survives, or if any person acquires 30% or more
of the company's common stock, each right not owned by a 20% or more
shareholder would become exercisable for common stock of the company (or, in
certain circumstances, other consideration) having a market value equal to
twice the exercise price of the right.

F-14
<PAGE>

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

GEOGRAPHIC SEGMENTS

The following table summarizes the company's results of operations and
identifiable assets, as of and for the years ended December 31, 1995, 1994 and
1993:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Net sales:
Domestic.................................. $5,502,566 $4,343,477 $3,999,367
Foreign................................... 1,018,524 553,395 390,282
Less transfers between geographic areas... (9,304) (8,086) (1,888)
---------- ---------- ----------
Total................................... $6,511,786 $4,888,786 $4,387,761
========== ========== ==========
Earnings from operations:
Domestic*................................. $ 580,410 $ 497,120 $ 362,364
Foreign................................... 19,928 4,118 (598)
Corporate and other expenses--net......... (40,929) (41,807) (36,159)
---------- ---------- ----------
Total................................... $ 559,409 $ 459,431 $ 325,607
========== ========== ==========
Identifiable assets:
Domestic.................................. $4,442,825 $3,719,974 $3,186,229
Foreign................................... 674,387 541,614 307,727
Investment in unconsolidated affiliates... 91,221 80,580 74,188
Corporate and other....................... 176,377 109,975 85,882
---------- ---------- ----------
Total................................... $5,384,810 $4,452,143 $3,654,026
========== ========== ==========
</TABLE>
- --------
*1993 domestic earnings from operations includes a $90 million restructuring
charge recorded during the first quarter of 1993 related primarily to the
closing of the company's Chicago manufacturing facility.

Sales to affiliates are at negotiated prices based on specific market
conditions. Earnings from operations is net sales less cost of sales, selling
and administrative expenses, assessments to operating units for various
corporate expenses and goodwill amortization. In computing earnings from
operations, none of the following items has been added or deducted: interest
expense, income taxes and equity in income from unconsolidated investees.
Identifiable assets are those assets of the company that are identified with
the operations in each geographic area. Corporate and other assets are
principally investments.

SUBSEQUENT EVENT

F-15
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
R. R. Donnelley & Sons Company:

We have audited the accompanying consolidated balance sheets of R. R.
Donnelley & Sons Company (a Delaware corporation) and Subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years ended December
31, 1995. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R. R. Donnelley & Sons Company
and Subsidiaries as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years ended December 31,
1995, in conformity with generally accepted accounting principles.

As explained in the Notes to Consolidated Financial Statements, effective
January 1, 1995, the company changed its method of accounting for LIFO
inventories and, effective January 1, 1993, the company changed its method of
accounting for postretirement benefits other than pensions and its method of
accounting for income taxes.

Arthur Andersen LLP

Chicago, Illinois
January 25, 1996 (except with
respect to the matter
discussed in the Subsequent
Event footnote, as to which
the date is March 7, 1996)

F-16
<PAGE>

UNAUDITED INTERIM FINANCIAL INFORMATION

THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1995
Net sales............... $1,318,089 $1,490,633 $1,704,793 $1,998,271 $6,511,786
Gross profit............ 229,815 278,132 338,746 362,699 1,209,392
Net income.............. 46,842 64,461 92,057 95,433 298,793
Net income per common
share.................. 0.31 0.42 0.60 0.62 1.95
1994
Net sales............... $1,070,877 $1,117,338 $1,242,973 $1,457,598 $4,888,786
Gross profit............ 193,853 217,819 255,046 283,574 950,292
Net income.............. 42,796 58,338 80,070 87,399 268,603
Net income per common
share.................. 0.28 0.38 0.52 0.57 1.75
</TABLE>

F-17
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULE

To the Shareholders of R. R. Donnelley & Sons Company:

We have audited, in accordance with generally accepted auditing standards,
the financial statements included in the Company's Annual Report to
Shareholders included in this Form 10-K, and have issued our report thereon
dated January 25, 1996 (except with respect to the matter discussed in the
Subsequent Event footnote, as to which the date is March 7, 1996). Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index to the financial statements and
financial statement schedules is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Arthur Andersen LLP

Chicago, Illinois
January 25, 1996

F-18
<PAGE>

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Transactions affecting the allowances for doubtful accounts during the years
ended December 31, 1995, 1994 and 1993 were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Allowance for trade receivable losses:
Balance, beginning of year................ $ 19,168 $ 14,795 $ 17,745
Balance, acquired companies at acquisi-
tion..................................... 3,761 5,257 312
Provisions charged to income.............. 22,615 14,047 22,658
-------- -------- --------
45,544 34,099 40,715
Uncollectible accounts written off, net of
recoveries............................... (20,233) (14,931) (25,920)
-------- -------- --------
Balance, end of year...................... $ 25,311 $ 19,168 $ 14,795
======== ======== ========
</TABLE>

F-19
<PAGE>

INDEX TO EXHIBITS*

DESCRIPTION EXHIBIT NO.
----------- -----------
<S> <C>
Certificate of Incorporation(9)................................ 3(i)(a)
Certificate of Stock Designation filed as Exhibit A to the
Rights Agreement dated July 24, 1986 between R. R. Donnelley
& Sons Company and Morgan Shareholder Services Trust Compa-
ny(2)......................................................... 3(i)(b)

By-Laws........................................................ 3(ii)(a)
Amendment to By-Laws adopted January 25, 1996.................. 3(ii)(b)
Form of Rights Agreement, dated as of July 24, 1986 between R.
R. Donnelley & Sons Company and Morgan Shareholder Services
Trust Company(2).............................................. 4(a)

First Amendment to Rights Agreement, dated as of March 24,
1988 between R. R. Donnelley & Sons Company and Morgan Share-
holder Services Trust Company(4).............................. 4(b)

Instruments Defining the Rights of Security Holders(1)......... 4(c)

Indenture dated as of November 1, 1990 between the Company and
Citibank, N.A. as Trustee(7).................................. 4(d)

Credit Agreement dated December 21, 1994 among R. R. Donnelley
& Sons Company, the Banks named therein and Citibank, N.A.,
as Administrative Agent(11)................................... 4(e)

Directors' Retirement Benefit Plan, as amended(5)**............ 10(a)

Directors' Deferred Compensation Agreement(10)**............... 10(b)

Donnelley Shares Stock Option Plan, as amended................. 10(c)

1993 Stock Ownership Plan for Non-Employee Directors(8)**...... 10(d)

Senior Management Annual Incentive Plan, as amended(7)**....... 10(e)

Form of Severance Agreement for Senior Officers, as amend-
ed(10)**...................................................... 10(f)

1993 Stock Purchase Plan for Selected Managers and Key Staff
Employees, as amended**....................................... 10(g)

1986 Stock Incentive Plan, as amended**........................ 10(h)

1991 Stock Incentive Plan, as amended**........................ 10(i)

1995 Stock Incentive Plan, as amended**........................ 10(j)

Form of premium priced option agreement with certain executive
officers(11)**................................................. 10(k)

Unfunded Supplemental Benefit Plan(7)**........................ 10(l)

Amendment to Unfunded Supplemental Benefit Plan adopted on
April 25, 1991(6)**........................................... 10(m)

Agreement with John R. Walter for 1988 award of stock
units(3)**.................................................... 10(n)

Employment Agreement among Stream International Holdings Inc.
(formerly Stream International Inc.), R. R. Donnelley & Sons
Company and Rory Cowan(12)**.................................. 10(o)

Retirement and Release agreement with F. R. Jarc(12)**......... 10(p)

Agreement with F. R. Jarc(13)**................................ 10(q)

Statement of Computation of Ratio of Earnings to Fixed
Charges....................................................... 12

Letter regarding change in accounting principles(13)........... 18

Subsidiaries of R. R. Donnelley & Sons Company................. 21

Consent of Independent Public Accountants dated March 11,
1996.......................................................... 23

Financial Data Schedule........................................ 27
</TABLE>

E-1
<PAGE>

- --------
*Filed with the Securities and Exchange Commission. Each such exhibit
may be obtained by a shareholder of the Company upon payment of $5.00
per exhibit.
**Management contract or compensatory plan or arrangement.

(1) Instruments, other than that described in 4(d) and 4(e), defining
the rights of holders of long-term debt not registered under the
Securities Exchange Act of 1934 of the registrant and of all
subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed are being omitted pursuant to
paragraph (4)(iii)(A) of Item 601 of Regulation S-K. Registrant agrees
to furnish a copy of any such instrument to the Commission upon
request.

(2) Filed as Exhibit with Form SE filed on July 31, 1986, and
incorporated herein by reference.

(3) Filed as Exhibit with Form SE filed on March 24, 1988, and
incorporated herein by reference.

(4) Filed as Exhibit with Form SE filed on May 10, 1988, and
incorporated herein by reference.

(5) Filed as Exhibit with Form SE filed on March 25, 1991, and
incorporated herein by reference.

(6) Filed as Exhibit with Form SE filed on May 9, 1991 and incorporated
herein by reference.

(7) Filed as Exhibit with Form SE filed on March 26, 1992 and
incorporated herein by reference.

(8) Filed as Exhibit with Form SE filed on March 30, 1993 and
incorporated herein by reference.

(9) Filed on May 14, 1993 as Exhibit to Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1993.

(10) Filed on March 28, 1994 as Exhibit to Annual Report on Form 10-K
for the year ended December 31, 1993.

(11) Filed on March 27, 1995 as Exhibit to Annual Report on Form 10-K
for the year ended December 31, 1994.

(12) Filed on August 11, 1995 as Exhibit to Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1995.

(13) Filed on November 13, 1995 as Exhibit to Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995.

E-2

<PAGE>

Exhibit 3(ii)(a)

As Amended through January 25, 1996

BY-LAWS OF
R. R. DONNELLEY & SONS COMPANY

ARTICLE I
---------

SECTION 1.1. PRINCIPAL OFFICE. The principal office in the State of
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware, and the name of the resident agent in charge thereof is The
Corporation Trust Company.

SECTION 1.2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.

ARTICLE II
----------

Meetings of Stockholders
------------------------

SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders shall
be held on the fourth Thursday in March of each year for the purpose of electing
Directors of the class for which the term expires on that date and for the
transaction of such other business as may properly be brought before the
meeting. Such meeting shall be held at eight o'clock in the morning or such
other time during normal business hours as may be fixed by the Board of
Directors and stated in the notice of the meeting. If the day fixed for the
annual meeting shall be a legal holiday, the Board of Directors may, subject to
the provisions of Article X hereof, designate another day on which such meeting
shall be held. If the election of Directors shall not be held on the date
designated for any annual meeting, or any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as conveniently may be.

Except as otherwise provided by statute or the certificate of incorporation,
the only business which properly shall be conducted at any annual meeting of the
stockholders shall (i) have been specified in the written notice of the meeting
(or any supplement thereto) given as provided in Section 2.4, (ii) be brought
before the meeting by or at the direction of the Board of Directors or the
officer of the corporation presiding at the meeting or (iii) have been specified
in a written notice (a "Stockholder Meeting Notice") given to the corporation,
in accordance with all of the following requirements, by or on behalf of any
stockholder who is entitled to vote at such meeting. Each Stockholder Meeting
Notice must be delivered personally to, or be mailed to and received by, the
Secretary of the corporation at the principal
<PAGE>

executive offices of the corporation in the City of Chicago, State of Illinois,
not less than 60 days nor more than 90 days prior to the annual meeting;
provided, however, that in the event that less than 75 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs. Each Stockholder Meeting Notice shall set
forth: (i) a description of each item of business proposed to be brought before
the meeting and the reasons for conducting such business at the annual meeting;
(ii) the name and record address of the stockholder proposing to bring such item
of business before the meeting and the reasons for conducting such business at
the annual meeting; (iii) the class and number of shares of stock held of
record, owned beneficially and represented by proxy by such stockholder as of
the record date for the meeting (if such date shall then have been made publicly
available) and as of the date of such Stockholder Meeting Notice and (iv) all
other information which would be required to be included in a proxy statement
filed with the Securities and Exchange Commission if, with respect to any such
item of business, such stockholder were a participant in a solicitation subject
to Section 14 of the Securities Exchange Act of 1934. No business shall be
brought before any annual meeting of stockholders of the corporation otherwise
than as provided in this Section; provided, however, that nothing contained in
this Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting. The officer of the
corporation presiding at the annual meeting of stockholders shall, if the facts
so warrant, determine that business was not properly brought before the meeting
in accordance with the provisions of this Section and, if he should so
determine, he should so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted. (Amended 10/27/94)

SECTION 2.2. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chief Executive Officer,
President, or the Chairman of the Board, and shall be called by the Secretary
pursuant to a resolution duly adopted by the affirmative vote of a majority of
the whole Board of Directors. Such call shall state the purposes of the proposed
meeting. Business transacted at any special meeting shall be limited to the
general objectives stated in the call. (Amended 12/15/88)

SECTION 2.3. PLACE OF MEETING. All meetings of stockholders for the
election of Directors shall be held in the City of Chicago, County of Cook,
State of Illinois and the Board of Directors is authorized to fix the place
within the City of Chicago for the holding of such meeting. Meetings of
stockholders for any other purpose may be held at such place, within or without
the State of Delaware, and time as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof. (Amended

2
<PAGE>

1/9/57)

SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the Board of Directors, the
Chief Executive Officer, the Chairman of the Board or the President, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail in a
sealed envelope addressed to the stockholder at his address as it appears on the
records of the corporation, with postage thereon prepaid. (Amended 12/15/88)

SECTION 2.5. CLOSING TRANSFER BOOKS OR FIXING RECORD DATE. The Board of
Directors may close the stock transfer books of the corporation for a period not
exceeding fifty (50) days preceding the date of any meeting of stockholders, or
the date for payment of any dividend, or the date for the allotment of rights or
the date when any change, or conversion or exchange of capital stock shall go
into effect or for a period of not exceeding fifty (50) days in connection with
obtaining the consent of stockholders for any purpose. In lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding fifty (50) days preceding the date of any meeting of the
stockholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change, or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of and to vote at, such
meeting and any adjournment thereof, or to receive payments of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.

SECTION 2.6. VOTING LIST. At least ten days before every election of
Directors, a complete list of the stockholders entitled to vote at such
election, arranged in alphabetical order with the residence of and the number of
voting shares held by each, shall be prepared by the Secretary. Such list shall
be open at the place where said election is to be held for ten days, to the
examination of any stockholders, and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.

3
<PAGE>

SECTION 2.7. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at any meeting of stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.

SECTION 2.8. PROXIES. At all meetings of stockholders a stockholder may
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.

SECTION 2.9. VOTING. When a quorum is present at any meeting of
stockholders, the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall decide any question brought before such meeting, unless
the question is one upon which, by express provision of the statutes, the
certificate of incorporation or these by-laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question. Every stockholder having the right to vote shall be entitled to vote
in person, or by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than eleven months prior to voting,
unless such instrument provides for a longer period. Every such stockholder
shall have one vote for each share of stock having voting power registered in
his name on the books of the corporation. Except where the transfer books of
the corporation shall have been closed or a date shall have been fixed as a
record date for the determination of its stockholders entitled to vote, no share
of stock shall be voted on at any election for Directors which has been
transferred on the books of the corporation within twenty days next preceding
such election of Directors. (Amended 1/28/93)

SECTION 2.10. VOTING OF STOCK OF CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe or, in the
absence of such provision, as the Board of Directors of such corporation may
determine. Shares standing in the name of a deceased person may be voted by
executor or administrator of such deceased person, either in person or by proxy.
Shares standing in the name of a guardian, conservator or trustee may be voted
by such fiduciary, either in person or

4
<PAGE>

by proxy, but no such fiduciary shall be entitled to vote shares held in such
fiduciary capacity without a transfer of such shares into the name of such
fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledger or on the books of the
corporation, he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent the stock and vote thereon.

SECTION 2.11. TREASURY STOCK. The corporation shall not vote shares of its
own stock directly or indirectly; and such shares shall not be counted in
determining the total number of outstanding shares.

SECTION 2.12. ELECTION OF DIRECTORS. When a quorum is present at any
meeting of stockholders, directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at such meeting of
stockholders and entitled to vote on the election of directors. (New Section
10/22/92)

ARTICLE III
-----------

Directors
---------

SECTION 3.1. GENERAL POWERS. The property and business of the corporation
shall be managed by its Board of Directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders. (Amended 9/28/90)

Without limiting the generality of the foregoing, it shall be the
responsibility of the Board of Directors to establish broad objectives and the
general course of the business, determine basic policies, appraise the adequacy
of overall results, and generally represent and further the interests of the
Company's stockholders and insure the most effective use of the Company's
assets.

Several examples of the responsibilities of the Board are as follows:

1. Establish broad Company objectives and basic policies and maintain
overall control of the business.

2. Make necessary revisions of the by-laws (in accordance with Article X).

3. Determine dividend action (in accordance with Article VIII).

5
<PAGE>

4. Authorize necessary action with respect to issuance of new securities and
listing securities for trading on exchanges.

5. Fix time and place and take other necessary action with respect to
stockholders meetings (in accordance with Article II).

6. Approve issuance of stock certificates to replace those lost or destroyed
(in accordance with Section 7.2).

7. Fill Vacancies in the Board of Directors (in accordance with Section
3.8).

8. Elect the officers of the corporation (in accordance with Section 4.2.)
and appraise their performance.

9. Determine the basic organization structure of the business.

10. Authorize any necessary action with respect to loans and pledging of
assets (in accordance with Section 6.2.).

11. Designate officers authorized to buy or sell corporate investment
securities.

12. Designate persons authorized to execute contracts and other documents
requiring signatures of officers or specific individuals (in accordance
with Section 6.1).

13. Select, or designate those authorized to select, depositaries for
corporate funds and investment securities and designate check signatories
and persons authorized to have access to safe deposit boxes (in
accordance with Sections 6.3 and 6.4).

14. Approve proposals to convey corporate-owned land or buildings or
designate those authorized to take such action.

15. Designate the person or persons authorized to appoint proxies to vote
stock in subsidiary and other concerns in which the corporation has a
significant interest and the person or persons authorized to determine
who shall serve as Directors in representing the parent corporation in
such concerns.

16. Designate stock transfer agents, registrars, and paying agents with
respect to corporate securities and other special purpose agents.

17. Procure special professional services required by and for the Board.

6
<PAGE>

18. Provide for issuance of an annual report to stockholders and such other
reports and notices as the Board deems advisable.

19. Employ, upon recommendation of the Audit Committee (in accordance with
Section 3.13), public accountants to audit the corporation's financial
statements.

20. Review and approve new employee benefit plans and major revisions of
employee stock incentive plans.

21. Review and approve the actions of the Executive Committee as reported in
the minutes of their meetings.

22. Approve the annual operating budget.

23. Review and approve the annual capital budget.

24. Direct the manner of handling matters outside the ordinary course of
business of the corporation.

SECTION 3.2. NUMBER, ELECTION AND TERM. The number of Directors which shall
constitute the whole Board shall be fourteen (14) of whom five (5) shall be
Directors of the First Class, five (5) shall be Directors of the Second Class
and four (4) shall be Directors of the Third Class. The term of office of each
class shall be three years, with the term of one class expiring in each year,
and the successors to the class of Directors whose terms shall expire shall be
elected at each annual election or adjournment thereof. Each Director shall
hold office until his successor shall be elected and shall qualify or until his
earlier resignation or removal. Directors need not be residents of Delaware or
stockholders. (Amended 9/29/95)

SECTION 3.3. MEETINGS. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
such place as may from time to time be determined by the Board. Special
meetings of the Board of Directors may be called by or at the request of the
Chief Executive Officer, the Chairman of the Board, a Vice Chairman, President,
or any two directors. (Amended 12/15/88)

SECTION 3.4. NOTICE. Notice of any special meeting of the Board of
Directors stating the place, date and hour of the special meeting shall be given
in writing to each director, either personally, or by mail, telex, telegram or
cable, addressed to the director's residence or usual place of business, not
less than two days before the date

7
<PAGE>

of such meeting, or by such other means, whether or not in writing, and within
such lesser period, as circumstances require in the reasonable judgment of the
person calling the meetings. If mailed, such notice shall be deemed to be given
at the time when it is deposited in the United States mail with first class
postage prepaid. Notice by telegram or cable shall be deemed given when the
notice is delivered to the telegraph or cable company; notice by telex shall be
deemed given when the notice is transmitted by telex. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice at such meeting, except where the director attends
the meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting, unless otherwise provided by statute, the Certificate of Incorporation
or these By-Laws. (Amended 6/24/76)

SECTION 3.5. QUORUM. A majority of the Board of Directors shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors, provided, that if less than a majority of the Directors are present
at said meeting, a majority of the Directors present may adjourn the meeting
from time to time without further notice. (Renumbered 6/24/76)

SECTION 3.6. MANNER OF ACTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. (Renumbered 6/24/76)

SECTION 3.7. USE OF COMMUNICATIONS EQUIPMENT. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting. (New Section
6/24/76)

SECTION 3.8. VACANCIES AND ADDITIONAL DIRECTORS. Any director may resign at
any time upon written notice to the corporation. If any vacancy occurs in the
Board of Directors caused by death, resignation, retirement, disqualification or
removal from office of any Director, or otherwise, or if any new directorship is
created by any increase in the authorized number of Directors, a majority of the
Directors then in office, though less than a quorum may choose a successor or
fill the newly created directorship; and a Director so chosen shall hold office
until the next annual election at which Directors of the class to which he was
chosen are elected and until his successor shall be duly elected and shall
qualify or until his earlier resignation or removal. (Amended 3/26/70)

8
<PAGE>

SECTION 3.9. COMPENSATION. Directors who are not full-time employees of the
Company shall receive a stated salary and may receive options to purchase shares
of the Company's stock as provided under the Company's stock plans, for their
services, and, in addition thereto, shall receive a fixed fee and expenses, if
any, for attendance at each regular or special meeting of the Board of Directors
from time to time. Directors who are full-time employees of the Company shall
not receive any compensation for their services as such; provided that nothing
herein contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation thereof. (Amended
3/28/91)

SECTION 3.10. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate not fewer than three nor
more than seven Directors to constitute an Executive Committee. The Chairman of
the Executive Committee shall be the Chief Executive Officer. The Executive
Committee shall have and exercise all of the authority of the Board of Directors
in the management of the corporation, except that such Committee shall not have
the power to take specific actions which have been delegated to other committees
of the Board and shall not be empowered to take action with respect to:
declaring dividends; issuing bonds, debentures, or the borrowing of moneys
except within limits expressly approved by the Board of Directors; amending by-
laws; filling vacancies and newly created directorships in the Board of
Directors; removing Directors of the corporation; mergers or consolidations; the
sale, lease or exchange of all or substantially all of the assets of the
corporation; dissolution; or any other action requiring the approval of
stockholders. The designation of such Committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors or any member
thereof of any responsibility imposed upon it or him by law. (Amended 9/28/90,
10/26/95)

SECTION 3.11. FINANCE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate not fewer than three nor
more than seven Directors, a majority of whom shall not be employees of the
Company, to constitute a Finance Committee, which Committee is charged with
reviewing the overall financial policies of the Company and making
recommendations to the Board regarding the Company's financial condition and
requirements for and disposition of funds, including: capital structure, raising
long-term capital, dividend policy, and material changes in the Company's
financial position with respect to cash, investments, debt and accounts
receivable. The Committee shall review the performance and management of the
Company's Retirement Benefit Plan including the investment policy, the
performance of the Investment Trustee on a regular periodic basis, the
reasonableness of the actuarial assumptions in relation to investment
performance, the funding status of the Plan and shall make recommendations with
respect to the selection of one or more investment trustees or other investment
agencies, and undertake such other studies and make such other recommendations
to the Board as it may deem desirable with respect to the Investment Trust of
the

9
<PAGE>

Retirement Benefit Plan. (Amended and Renamed 9/28/90, 10/26/95)

SECTION 3.12. HUMAN RESOURCES COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate not fewer
than three nor more than seven Directors who are not employees of the Company,
to constitute a Human Resources Committee. The Human Resources Committee shall
determine the annual salary, bonus and other benefits of selected senior
officers and key management employees of the Company and review, as appropriate,
performance standards under compensation programs for key employees. The Human
Resources Committee shall also recommend to the Board candidates for election as
corporate officers.

The Human Resources Committee shall recommend new employee benefit plans and
changes to stock incentive plans to the Board, approve amendments to the non-
stock employee benefit plans of the Company and oversee the administration of
all of the Company's employee benefit plans. The Human Resources Committee may
delegate to one or more officers of the Company the power to approve any
amendment of any non-stock employee benefit plan of the Company or the Donnelley
Tax Credit Stock Ownership Plan which in the reasonable opinion of such officer
will not materially affect the costs to the Company of, or benefits under, such
plans. (Amended 7/22/93, 10/26/95, 1/25/96)

SECTION 3.13. AUDIT COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate not fewer than three nor
more than seven Directors who are not employees of the Company to constitute an
Audit Committee, which Committee shall review on behalf of the stockholders of
the Company: the qualifications and services of the independent public
accountants employed by the Company from time to time to audit the books of the
Company, the scope of their audits, the adequacy of their audit reports, and
recommendations made by them. The Committee may also make such reviews of
internal financial audits and controls as the Committee considers desirable.

The Audit Committee will recommend to the Board the selection of the
independent public accountants.

The Audit Committee shall review the Company's financial disclosure
documents, management perquisites, significant developments in accounting
principles and significant proposed changes in financial statements. The Audit
Committee shall also review and monitor the Company's codes of conduct to guard
against significant conflicts of interest and dishonest, unethical or illegal
activities. The Audit Committee shall review periodically the performance of
the Company's accounting and financial personnel, and shall review material
litigation and regulatory proceedings and other issues relating to potentially
significant corporate liability. (Amended 9/28/90,

10
<PAGE>

10/26/95)

SECTION 3.14. NOMINATING AND GOVERNANCE COMMITTEE. The Board of Directors,
by resolution adopted by a majority of the whole Board, may designate not fewer
than three nor more than seven Directors to constitute a Nominating and
Governance Committee, which Committee shall recommend to the Board nominees for
election to the Board of Directors in connection with any meeting of
stockholders at which directors are to be elected and persons for appointment to
fill any Board vacancy which the Board of Directors is authorized under the By-
Laws to fill. The Committee may also recommend to the Board policies or
guidelines concerning criteria for Board membership, the structure and
composition of Board Committees, the size and composition of the Board and the
selection, tenure and retirement of Directors and matters related thereto.
(Amended 9/28/90, 10/26/95, 1/25/96)

SECTION 3.15. OTHER COMMITTEES. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate two or more Directors to
constitute committees other than the Executive Committee, Finance Committee,
Human Resources Committee, Audit Committee and Nominating and Governance
Committee, which committees shall have and exercise such authority as may be
provided for in the resolution creating such committee. (Amended 9/28/90,
1/25/96)

SECTION 3.16. HONORARY DIRECTORS. The Board of Directors may select from
time to time, and for such periods of time as it may deem appropriate, one or
more past Chairmen of the Board, Presidents or Chief Executive Officers elected
a Director prior to September 28, 1990, to serve as Honorary Directors.
Honorary Directors shall be entitled to receive notice of and to attend all
meetings of the Board of Directors, to receive copies of all reports or other
communications made to the Board of Directors, to give counsel and advice on any
subject, to receive such fees and expense reimbursements as may be provided from
time to time by the Board of Directors. The Board of Directors, Chief Executive
Officer, Chairman of the Board or President may invite an Honorary Director to
attend meetings of any committee of the Board of Directors or to undertake
temporary assignments, but this shall not preclude any other arrangements,
consulting or otherwise, between the corporation and an Honorary Director. The
presence or absence of an Honorary Director shall not be counted for purposes or
determining the existence of a quorum. Honorary Directors shall not have the
right to vote on any matters voted on by the Board of Directors or any of the
rights, duties, privileges, or responsibilities of Directors of the corporation.
(Amended 9/28/90)

SECTION 3.17. NOMINATION OF DIRECTORS. Except as otherwise fixed pursuant
to the certificate of incorporation relating to the rights of the holders of any
one or more classes or series of Preferred Stock issued by the corporation,
acting separately by class or series, to elect, under specified circumstances,
directors at a meeting of

11
<PAGE>

stockholders, nominations for the election of directors may be made by the Board
of Directors or a committee appointed by the Board of Directors pursuant to
Section 3.14 or by any stockholder entitled to vote in the election of directors
generally. However, any stockholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors
at a meeting at which directors are to be elected only if written notice of such
stockholder's intent to make such nomination or nominations has been delivered
personally to, or been mailed to and received by, the Secretary of the
corporation at the principal executive offices of the corporation in the City of
Chicago, State of Illinois, not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that, in the event that less than 75 days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. Each such notice shall set forth: (i) the name
and record address of the stockholder who intends to make the nomination; (ii)
the name, age, principal occupation or employment, business address and
residence address of the person or persons to be nominated; (iii) the class and
number of shares of stock held of record, owned beneficially and represented by
proxy by such stockholder and by the person or persons to be nominated as of the
record date for the meeting (if such date shall then have been made publicly
available) and of the date of such notice; (iv) a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (v) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such stockholder; (vi) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the Securities
Exchange Act of 1934 and the proxy rules of the Securities and Exchange
Commission; and (vii) the consent of each nominee to serve as a director of the
corporation if so elected. The corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the corporation
to determine the eligibility of such proposed nominee to serve as a director of
the corporation. The officer of the corporation presiding at the annual meeting
of stockholders shall, if the facts so warrant, determine that a nomination was
not made in accordance with the provisions of this Section, and if he should so
determine, he should so declare to the meeting and the defective nomination
shall be disregarded. No person shall be eligible for election as a director of
the corporation unless nominated in accordance with the procedures set forth
herein. (Added 3/24/88)

ARTICLE IV
----------

12
<PAGE>

Officers of the Corporation
---------------------------

SECTION 4.1. OFFICERS AND NUMBER. The officers of the corporation shall be
a Chief Executive Officer, a Chairman of the Board, one or more Vice Chairmen, a
President, one or more Executive Vice Presidents, one or more Sector Presidents,
one or more Business Unit Presidents, one or more Senior Vice Presidents, one or
more Vice Presidents, a Secretary, a Treasurer, a Controller, a General Counsel,
one or more Assistant Secretaries, one or more Assistant General Counsels, one
or more Assistant Treasurers and one or more Assistant Controllers. Any two or
more offices may be held by the same person except the offices of President and
Secretary. The Chief Executive Officer shall be either the Chairman, a Vice
Chairman or the President, as designated by the Board of Directors. The Board
of Directors may elect one or more Vice Chairmen of the Board and one or more
Executive Vice Presidents. The Board of Directors may elect an Honorary
Director to the office of Honorary Chairman of the Board. (Amended 1/27/94)

SECTION 4.2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. (Adopted 10/21/60)

SECTION 4.3. REMOVAL. Any officer elected by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best interests of
the corporation would be served thereby. (Amended 12/15/88)

13
<PAGE>

SECTION 4.4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term. (Adopted 10/21/60)

SECTION 4.5. SALARIES. No officer shall be prevented from receiving a
salary for his services as an officer by reason of the fact that he is also a
Director of the corporation.

SECTION 4.6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
have overall supervision of, and responsibility for, the business, and shall
direct the affairs and policies of the corporation. (Adopted 12/15/88)

SECTION 4.7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the stockholders and Board of Directors. The Chairman of the
Board shall perform such other duties and responsibilities as may be assigned to
him by the Board of Directors. (Amended 9/28/90)

SECTION 4.8. VICE CHAIRMEN OF THE BOARD. The Vice Chairmen of the Board
shall, in the absence of the Chairman of the Board (in the order prescribed by
the Board), preside at all meetings of the stockholders and Board of Directors,
and shall perform such other duties as may be assigned to them by the Board of
Directors. (Amended 12/15/88)

SECTION 4.9. HONORARY CHAIRMAN OF THE BOARD. The Honorary Chairman of the
Board shall consult with the Chief Executive Officer and other officers of the
corporation, as he or they shall determine, with respect to the general policies
and affairs of the corporation, and shall have such authority and perform such
duties as from time to time may be prescribed by the Board of Directors or as
may be granted by the Chief Executive Officer. (Renumbered 9/28/90)

SECTION 4.10. PRESIDENT. Subject to the supervision and direction of the
Chief Executive Officer, the President shall have responsibility for such of the
operations and other functions of the corporation as may be assigned to him.
The President shall perform such other duties and responsibilities as may be
assigned to him by the Chief Executive Officer. In the absence of the Chairman
of the Board and Vice Chairmen of the Board, the President shall preside at
meetings of the stockholders and Board of Directors. (Renumbered and Amended
9/28/90)

SECTION 4.11. VICE PRESIDENTS. Each Vice President shall have such
corporate powers, if any, as may be assigned to him from time to time by the
Board of Directors, Chief Executive Officer, Chairman of the Board or the
President. (Renumbered 9/28/90)

14
<PAGE>

SECTION 4.12. SENIOR VICE PRESIDENTS. Each Senior Vice President shall have
such corporate powers, if any, as may be assigned to him by the Board of
Directors, Chief Executive Officer, Chairman of the Board or the President.
(Renumbered 9/28/90)

SECTION 4.13. SECTOR PRESIDENTS. The Board of Directors may from time to
time designate as Sector President one or more of the individuals who occupies
the position of senior officer heading a Sector consisting of one or more
business units and to whom one or more of the Business Unit Presidents reports.
(Amended 1/27/94)

SECTION 4.14. BUSINESS UNIT PRESIDENTS. The Board of Directors may from
time to time designate as Business Unit President one or more of the individuals
who occupies the position of senior officer heading a business unit consisting
of one or more divisions and one or more sales units and who reports to one or
more of the Sector Presidents or other senior officers of the corporation.
(Added 1/27/94)

SECTION 4.15. EXECUTIVE VICE PRESIDENTS. The Board of Directors may
designate as an Executive Vice President the officer to whom one or more other
senior officers of this corporation reports. (Amended and Renumbered 1/27/94)

SECTION 4.16. ORDER OF SUCCESSION. Such of the directors of the corporation
as shall be designated by resolution of the Board of Directors, and in the order
of such designation, shall in the absence of the Chairman of the Board perform
the duties of the Chairman of the Board and shall have all of the powers and
shall be subject to any restrictions imposed upon the Chairman.

Such of the officers of the corporation as may be designated by resolution of
the Board of Directors, and in the order of such designation, shall in the
absence of the Chief Executive Officer, perform the duties of the Chief
Executive Officer and when so acting shall have all the powers of and be subject
to any restrictions imposed upon the Chief Executive Officer.

Such of the officers of the corporation as may be designated by resolution of
the Board of Directors, and in the order of such designation, shall in the
absence of the President perform the duties of the President and when so acting
shall have all the powers of and be subject to any restrictions imposed upon the
President. (Renumbered 1/27/94)

15
<PAGE>

SECTION 4.17. SECRETARY. The Secretary shall keep the minutes of all
meetings of the stockholders and Board of Directors of the corporation, shall
have charge of the corporate records and the corporate seal, and shall have the
power to attach the seal to all instruments which shall require sealing after
the same shall have been signed as authorized by the Board of Directors.
(Renumbered 1/27/94)

SECTION 4.18. TREASURER. The Treasurer shall be responsible for the
receipt, custody and disbursement of all funds of the corporation in the form of
both cash and securities. He may delegate the details of his office to someone
in his stead, but this shall nowise relieve him of the responsibilities and
liability of his office. The Treasurer shall have the power to attach the seal
to all instruments which shall require sealing after the same shall have been
signed as authorized by the Board of Directors. (Renumbered 1/27/94)

SECTION 4.19. CONTROLLER. The Controller reports to the Chief Executive
Officer directly or through such other management executives as the Chief
Executive Officer may direct. The Controller, however, may directly submit any
matter to the Board of Directors for their consideration. The Controller shall
maintain adequate records of all assets, liabilities, and transactions of the
corporation, and in conjunction with other officers and department heads, shall
initiate and enforce measures and procedures whereby the business of the
corporation shall be conducted with the maximum of safety, efficiency and
economy. He shall attend that part of the meetings of the Board of Directors
which is concerned with the review of the financial and operating reports of the
business, except when, in the discretion of the Board, he shall be asked not to
attend. (Renumbered 1/27/94)

SECTION 4.20. GENERAL COUNSEL. The General Counsel shall be the chief legal
officer of the corporation and have legal responsibility for all aspects of the
business. The General Counsel shall have the power to attach the seal to all
instruments which shall require sealing after the same shall have been signed as
authorized by the Board of Directors. (Renumbered 1/27/94)

SECTION 4.21. ASSISTANT TREASURERS. The Assistant Treasurers shall in the
absence of the Treasurer perform all functions and duties of the Treasurer and
in addition shall perform such functions and duties as the Treasurer may
delegate, but this shall in nowise relieve the Treasurer of the responsibilities
and liability of his office. (Renumbered 1/27/94)

16
<PAGE>

SECTION 4.22. ASSISTANT SECRETARIES. The Assistant Secretaries shall in the
absence of the Secretary perform all functions and duties of the Secretary and
in addition shall assume such functions and duties as the Secretary may
delegate, but this shall in nowise relieve the Secretary of the responsibilities
and liability of his office. (Renumbered 1/27/94)

SECTION 4.23. ASSISTANT GENERAL COUNSELS. The Assistant General Counsels
shall in the absence of the General Counsel perform all functions and duties of
the General Counsel and in addition shall assume such functions and duties as
the General Counsel may delegate, but this shall in nowise relieve the General
Counsel of the responsibilities and liabilities of his office. (Renumbered
1/27/94)

SECTION 4.24. ASSISTANT CONTROLLERS. The Assistant Controllers shall in the
absence of the Controller perform all functions and duties of the Controller and
in addition shall assume such functions and duties as the Controller may
delegate, but this shall in nowise relieve the Controller of the
responsibilities and liabilities of such office. (Renumbered 1/27/94)

ARTICLE V
---------

Appointed Officers
------------------

The Chief Executive Officer may appoint officials assigned to a particular
Sector or other business unit as such officers of such Sector or business unit
and having such titles as he shall deem appropriate. Any such officer appointed
by the Chief Executive Officer may be removed by the Chief Executive Officer
whenever in his judgment the best interests of the corporation would be served
thereby. The term of office, compensation, powers and duties and other terms of
employment of appointed officers shall be such as the Chief Executive Officer
may from time to time deem proper, and the authority of such officers shall be
limited to acts pertaining to the business of such Sector or business unit.
(Amended 1/27/94)

ARTICLE VI
----------

Contracts, Loans, Checks and Deposits
-------------------------------------

SECTION 6.1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.

17
<PAGE>

SECTION 6.2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors (or a resolution of a
committee of Directors pursuant to authority conferred upon that committee).
Such authority may be general or confined to specific instances.

SECTION 6.3. CHECKS, ETC. All checks, demands, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers or such
agent or agents of the corporation, and in such manner, as may be designated by
the Board of Directors or by one or more officers of the corporation named by
the Board of Directors for such purpose.

SECTION 6.4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies and other depositaries as the Board of Directors may
select.

(Entire Article Renumbered 6/28/84)

ARTICLE VII
-----------

Certificates of Stock and Their Transfer
----------------------------------------

SECTION 7.1. CERTIFICATES OF STOCK. Certificates of stock of the
corporation shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the
corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the Chief Executive Officer, Chairman of the
Board or President or a Vice President and by the Secretary or Assistant
Secretary or the Treasurer or an Assistant Treasurer. If any stock certificate
is signed manually (a) by a transfer agent other than the corporation or its
employee or (b) by a registrar other than the corporation or its employee, any
other signature on the certificate may be a facsimile.

In case any officer, transfer agent, or registrar who has signed or whose
facsimile has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may nevertheless be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
All certificates properly surrendered to the corporation for transfer shall be
cancelled and no new certificates shall be issued to evidence transferred shares
until the former certificate for at least a like number of shares shall have
been surrendered and cancelled and the corporation reimbursed for any applicable

18
<PAGE>

taxes on the transfer, except that in the case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms, and with such
indemnification (if any) to the corporation, as the Board of Directors may
prescribe specifically or in general terms or by delegation to a transfer agent
for the corporation. Certificates shall not be issued representing fractional
shares of stock. (Amended 12/15/88)

SECTION 7.2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.

SECTION 7.3. TRANSFERS. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Transfers of shares shall be made only on the books
of the corporation by the registered holder thereof or by his attorney thereunto
authorized by power of attorney and filed with the Secretary or transfer agent
of the corporation.

SECTION 7.4. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.

(Entire Article Renumbered 6/28/84)

19
<PAGE>

ARTICLE VIII
------------

Dividends
---------

SECTION 8.1. DECLARATION. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.

SECTION 8.2. RESERVE. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
such other purposes as the Directors shall think conducive to the interest of
the corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
(Entire Article Renumbered 6/28/84)

ARTICLE IX
----------

Miscellaneous
-------------

SECTION 9.1. FISCAL YEAR. Unless otherwise fixed by the resolution of the
Board of Directors, the fiscal year of the corporation shall be the calendar
year.

SECTION 9.2. SEAL. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal, Delaware." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.

SECTION 9.3. BOOKS. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at the
offices of the corporation at Chicago, Illinois, or at such other place or
places as may be designated from time to time by the Board of Directors.

(Entire Article Renumbered 6/28/84)

20
<PAGE>

ARTICLE X
---------

Amendment
---------

These by-laws may be altered or repealed at any regular meeting of the Board
of Directors or at any special meeting of the Board of Directors if notice of
such alteration or repeal be contained in the notice of such special meeting,
provided that no amendment of these by-laws shall conflict with the provisions
of the Certificate of Incorporation, whether relating to the number of Directors
which shall constitute the whole Board or the number of Directors of any class
or otherwise. (Renumbered 6/28/84)

<PAGE>

Exhibit 3(ii)(b)

R.R. DONNELLEY & SONS COMPANY
AMENDMENT TO BY-LAWS
ADOPTED JANUARY 25, 1996

RESOLVED, that Sections 3.12 and 3.15 of the Company's By-Laws be and hereby are
amended, effective immediately, to substitute "Human Resources Committee" for
the term "Compensation Committee" wherever it appears in the aforesaid Sections;
and

RESOLVED, that Sections 3.14 and 3.15 of the Company's By-Laws be and hereby are
amended, effective immediately, to substitute "Nominating and Governance
Committee" for the term "Nominating Committee" wherever it appears in the
aforesaid Sections.

<PAGE>

Exhibit 10(c)

DONNELLEY SHARES STOCK OPTION PLAN

(as amended on July 18, 1994, January 25, 1996)

1. Plan. The purpose of this Donnelley Shares Stock Option Plan (the "Plan") is
to provide incentives to employees through rewards based upon the ownership and
performance of the common stock of R. R. Donnelley & Sons Company (the
"Company"). The Committee hereinafter designated shall grant options to purchase
shares of common stock, par value $1.25 per share, of the Company (the "Common
Stock") to eligible employees on the terms and subject to the conditions stated
in the Plan.

2. Eligibility. All employees (other than officers) of the Company and all of
its direct or indirect wholly-owned subsidiaries (the "Employers") shall be
eligible, upon selection by the Committee, to receive options under the Plan;
provided, however, that an otherwise eligible employee whose terms and
conditions of employment are covered by a collective bargaining agreement shall
be eligible to receive options under the Plan only if expressly provided for in
a collective bargaining agreement or supplemental letter of understanding signed
by such employee's Employer and the recognized representative of the collective
bargaining unit in which the employee is a member; provided further, that the
preceding proviso shall not apply to employees who are not subject to the United
States labor laws. An employee granted an option pursuant to the Plan shall be
referred to herein from time to time as an "Optionee".

3. Limitation on Shares Available. Subject to adjustment as provided in Section
5 of the Plan, the maximum number of shares of Common Stock available for all
grants made under the Plan shall be 6,000,000. Shares of Common Stock subject to
grants made hereunder which, by reason of the expiration, cancellation,
forfeiture or other termination of such grants prior to purchase, are not
purchased shall again be available for future grants.

Shares of Common Stock to be delivered may be authorized and unissued
shares of stock, treasury stock or a combination thereof. The Company reserves
the right to purchase shares of Common Stock for the Plan in the open market.

4. Administration of the Plan. The Plan shall be administered by a committee
(the "Committee") designated by the Board of Directors of the Company (the
"Board"). Except as otherwise set forth in the Plan, the Committee shall,
subject to the terms of the Plan, select groups of eligible employees for
participation in the Plan and, with respect to such groups of eligible
employees, shall determine the number of shares of Common Stock subject to each
option granted hereunder, the terms and conditions of exercise of such option
and all other terms and conditions of such option. The Committee shall, subject
to the terms of the Plan, have the authority to interpret the
<PAGE>

Plan, establish rules and regulations for the administration of the Plan and
impose, incidental to the grant of an option, conditions with respect to the
grant. All such rules, regulations and interpretations adopted by the Committee
shall be conclusive and binding on all parties. The Committee may delegate its
authority to interpret all or part of the Plan to designated officers of the
Company.

5. Adjustments for Changes in Capitalization. The Committee shall make
appropriate adjustments to the number of shares available under the Plan, the
option exercise price and the number of shares subject to any option granted
hereunder in order to give effect to any stock split, stock dividend, merger,
consolidation, reorganization, spin-off, liquidation or other similar change in
capitalization or event that occurs after the effective date of the Plan, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price. If any adjustment would result in a fractional
security being available under the Plan or subject to a grant under the Plan,
such fractional security shall be disregarded.

6. Effective Date and Term of Plan. The Plan shall become effective on January
27, 1994 (the "Effective Date"). The Plan shall terminate five (5) years after
the Effective Date unless terminated prior thereto by action of the Board. No
further grants shall be made under the Plan after termination, but termination
shall not affect the rights of any Optionee under any grants made prior to
termination.

7. Amendments. The Plan may be amended or terminated by the Board in any
respect and at any time, provided that such action shall not adversely affect
any rights or obligations with respect to any outstanding grants under the Plan.

8. Grants. (a) Options to purchase 100 shares of Common Stock shall be granted
on March 24, 1994 to eligible employees employed on such date who had completed
at least two (2) years of continuous service with any one or more of the
Employers as of December 31, 1993; provided, however, that employees who, as of
March 24, 1994, are members of a collective bargaining unit shall be deemed
eligible employees for purposes of this paragraph 8(a) only if a collective
bargaining agreement or supplemental letter of understanding providing for the
receipt of such options by such employees was fully executed by such employee's
Employer and the recognized representative of the collective bargaining unit
prior to March 1, 1994; and provided further, that eligible employees who are
not employed in the United States of America as of March 24, 1994 shall not
receive such options. All options granted on March 24, 1994 shall become
exercisable in full on December 31, 1996.

(b) Additional options may be granted, in the sole and absolute discretion
of the Committee, to groups of eligible employees at any time.

-2-
<PAGE>

(c) The option price per share of Common Stock purchasable upon the
exercise of any option granted pursuant to the Plan shall be the fair market
value of a share of Common Stock on the date of grant of such option. For
purposes of the Plan, the fair market value shall be determined by reference to
the average of the high and low transaction prices in trading of the Common
Stock as reported in the New York Stock Exchange-Composite Transactions on the
date of grant.

(d) All options granted hereunder shall be evidenced by a certificate
substantially in the form of Exhibit A hereto. Each certificate shall be dated
and signed by an officer of the Company as of the date of the grant.

9. Terms of Options. (a) No option shall be exercisable earlier than one (1)
year, nor more than ten (10) years, after the date of grant. Each option granted
hereunder shall become exercisable in full on the third anniversary of the date
of the grant, unless otherwise determined by the Committee and except as
otherwise set forth in Section 8(a). Notwithstanding the foregoing, if an
Optionee is no longer employed by at least one of the Employers for any reason
(including due to death or long-term disability but excluding due to termination
of employment upon retirement at normal retirement age or early retirement at or
after age 55 with the consent of the Company), each option held by such Optionee
which is not exercisable on the date of termination of employment shall
terminate automatically on such date. Options held by an Optionee who retires at
normal retirement age or who takes early retirement at or after age 55 with the
consent of the Company, regardless of whether or not such options are
exercisable at the date of retirement, shall not terminate as a result of such
retirement but shall continue to remain outstanding and subject to the terms and
conditions of the Plan; provided, however, that in the event that such an
Optionee dies, each option held by such Optionee which is not exercisable on the
date of death of such Optionee shall terminate automatically upon the death of
such Optionee. Additionally, after an option held by an Optionee has become
exercisable, if such Optionee is no longer employed by at least one of the
Employers for any reason (other than retirement at normal retirement age or
early retirement at or after age 55 with the consent of the Company or for any
of the reasons specified in Section 9(c)) and/or such Optionee dies, then such
Optionee (or in the case of death, such Optionee's executor, administrator,
personal representative, beneficiary or similar person) may exercise such
exercisable option until ninety (90) days from the date of such termination of
employment and/or the date of death, as the case may be, or until the expiration
of the term of such option, whichever is earlier.

(b) No option hereunder shall be transferable other than by will, the laws
of descent and distribution or pursuant to the beneficiary designation
procedures approved by the Committee. Each option shall be exercisable during
the Optionee's lifetime only by the Optionee or the Optionee's guardian, legal
representative or similar person, provided that evidence of such person's
identity and rights with respect to such exercise are acceptable to the
Committee. Except as permitted by the first sentence of Section 9(b) of the
Plan, no option hereunder shall be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Any

-3-
<PAGE>

such attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any option hereunder shall be null and void and no person
shall be entitled to any rights hereunder by virtue of any attempted execution,
attachment or similar process. In the event of the death of an Optionee, any
unexercised portion of an option that, but for the death of the Optionee, would
have been exercisable on the date of such Optionee's death by such Optionee may
be exercised by the executor, administrator, personal representative,
beneficiary or similar person of such deceased Optionee within ninety (90) days
of the death of such Optionee, but not after the expiration of the term of the
option; provided that evidence of such person's identity and rights with respect
to such exercise are acceptable to the Committee.

(c) Notwithstanding anything contained herein to the contrary, in the event
the Committee shall determine that an Optionee's employment was terminated by
the Optionee's Employer on account of (i) an unauthorized disclosure of
confidential information or trade secrets of any Employer, (ii) unlawful trading
in the securities of the Company or any customers of any of the Employers, or
(iii) fraud, theft or embezzlement with respect to any of the Employers or any
breach of the Optionee's duties to the Optionee's Employer or any of the other
Employers, then such Optionee shall forfeit all rights to the unexercised
portion of any option held by the Optionee under the Plan, and all such options
shall automatically terminate.

(d) Options must be exercised in full. No partial exercise is permitted.
No shares of Common Stock may be purchased under any option granted under the
Plan unless prior to or simultaneously with the purchase, the Optionee shall
have delivered by such means as have been identified by the Committee notice to
the Company, accompanied by payment therefor in full of the option price, any
brokerage fees associated with the exercise of the options (the "Brokerage
Fees"), and any local, state, federal or other taxes required to be withheld and
paid over to governmental taxing authorities by the Company due to such exercise
("Taxes") (or arrangement made for such payment to the satisfaction of the
Company). Upon exercise, the option price, the Brokerage Fees and the Taxes may
be paid according to procedures established by the Committee as follows: (i) in
cash or (ii) by electing to sell, through an agent or broker designated by the
Company, whole shares of Common Stock issuable upon exercise of the option
having a fair market value determined on the date of exercise as close as is
practicable to the sum of (A) the option price for shares of Common Stock
subject to such exercise, (B) the Brokerage Fees associated with such exercise
and (C) the Taxes associated with such exercise, provided that the number of
whole shares sold shall be sufficient to pay in full the option price, the
Brokerage Fees and the Taxes. No option may be exercised by an Optionee through
any agent or broker other than an agent or broker designated by the Company.
Notwithstanding the foregoing, in the event that an Optionee has notified the
Company through the Company's electronic system that such Optionee is exercising
an option and is paying cash for the option price and the Taxes and such cash is
not received within 30 calendar days following such notice, then the Company may
automatically order the sale, through the designated agent or broker, of whole
shares of Common Stock to pay in full the option price, the Brokerage Fees and
the Taxes and deliver any whole shares of Common Stock not so applied to the
Optionee, plus any cash owed in lieu of fractional shares. The Committee shall
have sole discretion to disapprove of an election pursuant to clause

-4-
<PAGE>

(ii). No shares of Common Stock shall be delivered to the Optionee until the
full option price, the Brokerage Fees and the Taxes have been paid. Optionees
shall be required to receive all shares acquired under an option in the form of
stock certificates; cash shall not be paid to an Optionee in lieu of the
delivery of stock certificates upon the exercise of any option, except to the
extent necessary to compensate for fractional shares.

(e) Optionees shall be entitled to the privilege of ownership with respect
to shares of Common Stock subject to options granted hereunder only as to shares
of Common Stock purchased and delivered to an Optionee upon exercise of an
option.

10. Miscellaneous.
-------------

(a) Effect of Leaves of Absence. Leaves of absence for periods and
purposes conforming to the personnel policies of the Company and approved by the
Employer shall not be deemed terminations of employment or interruptions of
continuous service.

(b) Restrictions on Shares. Notwithstanding any provision of the Plan to
the contrary, unless a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), is in effect as to the shares purchasable
under any option granted under the Plan, no shares of Common Stock may be
purchased under such option. In addition, notwithstanding any provision of this
Plan to the contrary, any option granted under the Plan is subject to the
condition that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, the consent or approval of
any regulatory body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of the shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company.

(c) No Right to Employment. Neither the Plan nor the grant of options
hereunder shall be construed as giving any employee any right to be retained in
the employ of any Employer.

(d) Governing Law. The Plan shall be governed by and interpreted in
accordance with the laws of the State of Delaware.

(e) Nature of Option. The options granted under the Plan shall not be
treated as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.

11. Acceleration of Options Upon a Change in Control. If while any option
remains unexercised and outstanding under the Plan:

-5-
<PAGE>

(a) any "person", as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
modified and used in Section 13(d) and 14(d) thereof (but not including (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company)
(hereinafter a "Person") is or becomes the beneficial owner, as defined in
Rule 13d-3 of the Exchange Act, directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its affiliates)
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or

(b) during any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into any
agreement with the Company to effect a transaction described in clause (a),
(c) or (d) of this Section) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or

(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, at least 50% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or

(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets;

-6-
<PAGE>

complete liquidation or an agreement for the sale of the Company's assets as
described above occurs (the applicable date being hereinafter referred to as the
"Acceleration Date"), all such outstanding and unexercised options, whether or
not then exercisable, shall be fully and immediately exercisable.

-7-
<PAGE>

Exhibit A

Donnelley Shares

STOCK OPTION PLAN

This is to certify that

(OPTIONEE NAME)

was granted on (DATE), an option to purchase

(NUMBER)

SHARES
of R. R. Donnelley & Sons Company common stock at a fixed
option price of (PRICE) per share. This option is subject to the
terms and conditions of the Donnelley Shares
Stock Option Plan.

This certificate has been

[logo] RR Donnelley executed as of (DATE),
& Sons Company
on behalf of R. R. Donnelley
& Sons Company by
(FACSIMILE SIGNATURE)
John R. Walter
Chairman and
Chief Executive Officer

-8-

<PAGE>

Exhibit 10(g)

R. R. DONNELLEY & SONS COMPANY
1993 STOCK PURCHASE PLAN FOR SELECTED MANAGERS AND KEY STAFF EMPLOYEES
(AS AMENDED ON SEPTEMBER 22, 1994, OCTOBER 26, 1995 AND JANUARY 25, 1996)

1. Purpose.

The purpose of the Stock Purchase Plan (the "Plan") of R. R. Donnelley &
Sons Company (the "Company") is to align the interests of the Company's
stockholders and selected managers and key staff employees of the Company and
its majority-owned subsidiaries eligible to participate in the Plan by granting
incentives to such managers and key staff employees to increase their
proprietary interest in the Company's growth and success.

2. Administration.

The Plan will be administered by a Committee (the "Committee") of three or
more directors designated by the Board of Directors of the Company (the "Board).
No member of the Committee, during the one year prior to service on the
Committee or during service on the Committee, shall have been or be granted or
awarded shares of common stock, par value $1.25 per share, of the Company
("Common Stock"), options to purchase shares of Common Stock or other equity
securities of the Company pursuant to the Plan or any other plan of the Company
or any affiliate of the Company, except for any grant or award which would not
result in such member ceasing to be a "disinterested person" within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Committee may adopt such rules and regulations and make
such determinations and interpretations and provide for all terms and conditions
of the Plan and participation thereunder as it shall deem desirable and not
inconsistent with the limitations herein provided. All such rules, regulations,
determinations and interpretations relating to the Plan adopted by the Committee
shall be conclusive and binding upon all parties.

3. Eligibility.

(a) The Committee shall determine the classes (or portions thereof) of
managers and key staff employees of the Company and any of its subsidiaries that
are eligible to participate in the Plan (each such class determined to be so
eligible being referred to herein as an "Eligible Class"); provided that the
Committee may direct that the determination of such classes (or portions
thereof) be made by the Chief Executive Officer, either alone or together with
one or more designated officers of the Company, except that the determination of
the eligibility of any class in which there is an "officer" within the meaning
of Rule 16a-1 under the Exchange Act shall be made by the Committee. The
determination of Eligible Classes shall remain in effect unless and until
changed in accordance with the following. No elimination of an Eligible Class
or portion thereof may be made with respect to any calendar year after February
1 of such year. Additions of Eligible Classes or portions thereof may be made at
any time by the
<PAGE>

Committee, or by the Chief Executive Officer, either alone or together with one
or more designated officers of the Company, if the Committee has delegated the
authority to determine such Eligible Classes to the Chief Executive Officer.

(b) An employee of the Company or a subsidiary of the Company who either
(i) is employed in an Eligible Class on a Purchase Date (as hereinafter
defined), or (ii) was employed in an Eligible Class on the December 31 next
preceding a Purchase Date and who retired at age 55 or over on or after such
December 31 and on or prior to such Purchase Date, shall be eligible to purchase
shares of Common Stock in accordance with the Plan on such Purchase Date (each
such employee being referred to herein as an "Eligible Employee"); provided that
any Eligible Employee who disposes of Common Stock purchased under the Plan in
contravention of Section 7 hereof shall not be an Eligible Employee (and
therefore not entitled to purchase shares of Common Stock under the Plan) on
either of the two Purchase Dates next following the date on which the Company
becomes aware of the most recent such disposition and with respect to which the
condition set forth in Section 4(c) is satisfied.

4. Eligible Employee's and Company's Contributions for Purchase of Shares of
Common Stock.

(a) Subject to subsection (c) below, each Eligible Employee may, with
respect to each Purchase Date, contribute up to 5% of the Compensation (as
hereinafter defined) of such Eligible Employee for the calendar year next
preceding such Purchase Date; provided that the amount, if any, contributed by
an Eligible Employee (the "Eligible Employee's Contribution Amount") shall in no
event be less than $100. The Eligible Employee's Contribution Amount shall,
subject to the conditions contained herein, be applied, together with a Company
contribution equal to 50% of the Eligible Employee's Contribution Amount, to the
purchase of Common Stock as provided in Section 5. The Company will contribute
an additional amount equal to 20% of the Eligible Employee's Contribution
Amount, which amount will be paid in cash to the Eligible Employee in the last
pay period in the month of April next following the Purchase Date.

(b) The election of an Eligible Employee to contribute with respect to a
Purchase Date and the designation by such Eligible Employee of such Eligible
Employee's Contribution Amount for such Purchase Date must be made no later than
the March 15 next preceding such Purchase Date; provided that in the case of an
Eligible Employee who is subject to Section 16 of the Exchange Act, such
election and designation with respect to a Purchase Date shall be made no later
than the September 15 next preceding such Purchase Date and shall be irrevocable
after such September 15. An Eligible Employee shall pay such Eligible
Employee's Contribution Amount in full on or before the March 15 next preceding
a Purchase Date.
<PAGE>

(c) No Eligible Employee may make a contribution under the Plan following
any calendar year of the Company, unless the consolidated net earnings of the
Company for such year, before provision for Federal, state and other income
taxes, shall equal or exceed 6.5% of the consolidated net sales of the Company,
as determined in accordance with generally accepted accounting principles as in
effect for such year (the "Performance Threshold"); provided, however, that the
Committee may, in its sole discretion exercised at any time, exclude from the
calculation of the Performance Threshold for any year the effect of any
extraordinary, non-recurring or unusual charge or credit, any change in
accounting policy or any other factors (including, without limitation,
acquisitions or dispositions) deemed by the Committee to warrant such exclusion
or change the Performance Threshold as it deems appropriate.

(d) The "Compensation" of an Eligible Employee for a calendar year shall
mean the sum of (i) the base pay (before reduction on account of any election by
the Eligible Employee pursuant to a "qualified cash or deferred arrangement," as
defined in Section 401(k) of the Internal Revenue Code of 1986 (the "Code")), or
pursuant to a "cafeteria plan," as defined in Section 125 of the Code), and
overtime paid to such Eligible Employee by the Company and its subsidiaries
during such calendar year and (ii) the annual incentive compensation amount paid
to such Eligible Employee by the Company and its subsidiaries during such
calendar year, prorated, if necessary, for the portion of such calendar year
during which such employee was in an Eligible Class. Notwithstanding the
foregoing, Compensation shall not include expatriate benefits paid under the
Company's expatriate policy (as amended from time to time), including, without
limitation, any foreign service or hardship premium.

5. Purchase of Shares of Common Stock.

The Eligible Employee's Contribution Amount and the Company contribution
equal to 50% of such Eligible Employee's Contribution Amount shall be applied on
the first trading day following March 15 in any year when purchases may be made
(a "Purchase Date") to the purchase from the Company of whole shares of Common
Stock for the Eligible Employee's account at the average of the high and low
transaction prices reported in the New York Stock Exchange Composite
Transactions report for such Purchase Date. Any amount in excess of the amount
so applied to the purchase of whole shares of Common Stock shall be paid to the
Eligible Employee.

6. Certificate or other evidence of ownerships Representing Shares of Common
Stock.

Shares purchased under the Plan for the account of an Eligible Employee
will be represented by a certificate or other evidence of ownership registered
in the name of such Eligible Employee or, if such Eligible Employee shall so
specify, in the name of such Eligible Employee and such Eligible Employee's
spouse as joint tenants, and the certificate or other evidence of ownership
shall be delivered to the Eligible Employee as soon as practicable following the
Purchase Date.
<PAGE>

7. Disposition of Shares of Common Stock.

An Eligible Employee who purchases shares of Common Stock under the Plan
may sell, assign, transfer or otherwise dispose of such shares at any time;
provided that the sale, assignment, transfer or other disposition of any shares
of Common Stock which are purchased under the Plan within three years of the
date of purchase of such shares under the Plan (other than a transfer into the
name of the Eligible Employee and such employee's spouse as joint tenants or a
transfer from joint tenancy into the name of the Eligible Employee individually)
shall automatically terminate the right of such Eligible Employee to participate
in the Plan on the two Purchase Dates next following the date on which the
Company becomes aware of the most recent such disposition and with respect to
which the condition set forth in Section 4(c) is satisfied. An Eligible Employee
who transfers shares to a trust or brokerage account may restore such Eligible
Employee's right to participate in the Plan by re-registering such shares in
such Eligible Employee's name (or registering such shares in joint tenancy with
such Eligible Employee's spouse) within three months of notice from the Company
and delivering a copy of the certificate representing such re-registered shares
to the Compensation and Employee Benefits department of the Company.

8. Number of Shares of Common Stock.

The maximum number of shares of Common Stock available for purchase under
the Plan shall be 7,000,000 shares of Common Stock; provided that such maximum
number shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a split-up or
consolidation of shares or like capital adjustment or the payment of any stock
dividend or other increase or decrease in the number of such issued shares
effected without receipt of consideration by the Company. Shares of Common Stock
purchased under the Plan shall, at the election of the Company, be authorized
and unissued shares of Common Stock or shares of Common Stock held as treasury
shares or a combination thereof.

9. Effective Date.

The Plan shall be submitted to the stockholders of the Company for approval
at the 1993 annual meeting of stockholders and, if approved, shall become
effective as of January 1, 1993.

10. Termination and Amendment.

The Plan shall terminate with respect to Compensation paid to employees
after December 31, 2002 unless terminated earlier by the Board. The Board may
suspend the Plan at any time. Any termination or suspension shall not affect the
rights of an Eligible Employee with respect to shares of Common Stock
theretofore purchased under the Plan. The Board may amend the Plan at any time,
but no amendment may be made without the approval of stockholders if such
amendment would increase the Company's total
<PAGE>

contribution to a percent greater than 70% of an Eligible Employee's
Contribution Amount, increase the maximum percentage to more than 5% of an
Eligible Employee's Compensation, reduce the purchase price of shares of Common
Stock under the Plan, or increase the aggregate number of shares of Common Stock
which may be purchased under the Plan.

<PAGE>

Exhibit 10(h)

R. R. DONNELLEY & SONS COMPANY
1986
STOCK INCENTIVE PLAN

(As amended on April 24, 1986, July 27, 1989,
September 28, 1989 and January 25, 1996)

I. GENERAL

1. Plan. To provide incentives to management through rewards based
upon the ownership and performance of the common stock of R. R. Donnelley & Sons
Company (the "Company"), the Committee hereinafter designated, with the approval
of the Board of Directors, may grant stock bonus awards, stock options, stock
appreciation rights, or combinations thereof, to eligible officers and other key
management personnel, on the terms and subject to the conditions stated in this
Plan.

2. Eligibility. Officers and other key management employees of the
Company, its subsidiaries, and any other entity designated by the Board of
Directors or the Committee in which the Company has a direct or indirect equity
interest, shall be eligible, upon selection by the Committee, to receive stock
bonus awards, stock options or stock appreciation rights, either singly or in
combination, as the Committee, in its discretion, shall determine. For purposes
of the Plan, references to employment by the Company also mean employment by a
majority-owned subsidiary of the Company and employment by any other entity
designated by the Board or the Committee in which the Company has a direct or
indirect equity interest.

3. Limitation on Shares to be Issued. The maximum number of shares of
common stock, par value $1.25 per share, to be issued pursuant to all grants
made under the Plan shall be 3,200,000 of which no more than 1,200,000 shares
shall be issued pursuant to stock bonus awards granted under the Plan. Shares
awarded pursuant to grants which, by reason of the expiration, cancellation or
other termination of the grants prior to issuance are not issued, shall again be
available for future grants.

Shares of common stock to be issued may be authorized and unissued
shares of common stock, treasury stock or a combination thereof.

4. Administration of the Plan. The Plan shall be administered by a
Committee designated by the Board of Directors (the "Committee"). No member of
the Committee shall be eligible to participate in, or within one year prior to
appointment to the Committee have participated in, this Plan or any other stock
purchase, stock bonus, stock option, stock appreciation rights or other stock
incentive plan of the Company. The Committee shall, within the limits of the
Plan and subject to the approval of the Board of Directors, establish selection
guidelines; select eligible persons for participation; and determine the form of
grant, either as stock bonus, stock option or stock appreciation rights or
combination thereof, determine the form

1
<PAGE>

of stock option, the number of shares subject to the grant, the fair market
value of the common stock when necessary, the time and conditions of vesting or
exercise, and all other terms and conditions of the grant. The Committee may
establish rules and regulations for the administration of the Plan, interpret
the Plan, and impose, incidental to a grant, conditions with respect to
competitive employment or other activities not inconsistent with or conflicting
with the Plan. All such rules, regulations, and interpretations relating to the
Plan adopted by the Committee shall be conclusive and binding on all parties.

5. Adjustments for Changes in Capitalization. Appropriate adjustments
shall be made by the Committee in the maximum number of shares to be issued
under the Plan, the maximum number of shares to be issued pursuant to stock
bonus awards, and in the number of shares the subject of any grant, to give
effect to any stock splits, stock dividends and other relevant changes in
capitalization occurring after the effective date of the Plan.

6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 1986 annual meeting scheduled to
be held on March 27, 1986, and if approved shall become effective on that date.
The Plan shall terminate five years after it becomes effective unless terminated
prior thereto by action of the Board of Directors. No further grants shall be
made under the Plan after termination, but termination shall not affect the
rights of any participant under any grants made prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board of
Directors in any respect except that no amendment may be made without
stockholder approval if such amendment would

(a) increase the maximum number of shares available for issuance under
the Plan or stock bonus awards;

(b) modify the class of eligible employees; or

8. Prior Plans. Upon the effectiveness of this Plan, no further grants
shall be made under the Company's 1976 Stock Option Plan, as amended, and the
1981 Stock Incentive Plan, as amended, except that stock appreciation rights may
be granted with respect to options previously granted and outstanding under
these Plans. Bonuses awarded under the 1981 Stock Incentive Plan, as amended,
and options granted under the 1976 Stock Option Plan, as amended, and the 1981
Stock Incentive Plan, as amended, prior to the effectiveness of this Plan shall
continue in accordance with their terms.

2
<PAGE>

II. STOCK BONUS AWARDS

1. Form of Award. Stock bonus awards, whether Performance Awards or
Fixed Awards, may be made to eligible officers and other key management
personnel in the form of stock units, each of which is the equivalent of a share
of common stock but for the power to vote and the entitlement to current
dividends, or in the form of shares of common stock issued to the employee but
forfeitable and with restrictions on transfer in any form as hereinafter
provided.

2. Performance Awards. Awards may be made in terms of a stated
potential maximum number of units or shares, with the actual number to be
determined by reference to the level of achievement of corporate, group,
division, individual or other specific objectives over a period of not less than
three nor more than ten years. No rights or interests of any kind shall be
vested in an individual receiving a performance award until the conclusion of
the period and the determination of the level of achievement specified in the
award, and the time of vesting thereafter shall be as specified in the award.

3. Fixed Awards. Awards may be made which are not contingent on the
performance of objectives, but are contingent on the participant's continuing in
the Company's employ for a period to be specified in the award, which period
shall be not less than five nor more than ten years from the date of award.

4. Rights with Respect to Restricted Shares. If shares of restricted
common stock are issued pursuant to an award, the participant shall have the
right to vote the shares and to receive dividends thereon from the date of
issuance, unless and until forfeited.

5. Rights with Respect to Stock Units. If stock units are credited to
a participant pursuant to an award, amounts equal to dividends otherwise payable
on a like number of shares of common stock after the crediting of the units
shall be credited to an account for the participant and held until the award is
forfeited or paid out. Interest shall be credited on the account annually at a
rate equal to the return on five year U.S. Treasury obligations.

6. Vesting and Resultant Events. The Committee may, in its discretion
provide for early vesting of an award in the event of the participant's death,
permanent and total disability or retirement. At the time of vesting, the award,
if in units, shall be paid to the participant either in shares of common stock
equal to the number of units, in cash equal to the fair market value of such
shares, or in such combination thereof as the Committee shall determine, and the
participant's account to which dividends and interest have been credited shall
be paid in cash. Shares of restricted common stock issued pursuant to an award
shall, at the time of vesting, be released from the restrictions.

3
<PAGE>

7. Acceleration Upon Change in Control. If while any Performance Award
or Fixed Award remains outstanding under this Plan--

(a) any "person," as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act"), as modified and used
in Section 13(d) and 14(d) thereof (but not including (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) (hereinafter a
"Person") is or becomes the beneficial owner, as defined in Rule 13d-3 of
the Exchange Act, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates)
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or

(b) during any period of two (2) consecutive years (not including any
period prior to the execution of this Amendment), individuals who at the
beginning of such period constitute the Board and any new director (other
than a director designated by a Person who has entered into any agreement
with the Company to effect a transaction described in Clause (a), (c) or
(d) of this Section) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a majority
thereof; or

4
<PAGE>

(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets,

any of such events being hereinafter referred to as a "Change in Control") then
from and after the date on which public announcement of the acquisition of such
percentage shall have been made, or the date on which the change in the
composition of the Board set forth above shall have occurred, or the date of any
such stockholder approval of a merger, consolidation, plan of complete
liquidation or an agreement for the sale of the Company's assets as described
above occurs (the applicable date being hereinafter referred to as the
"Acceleration Date"), (i) with respect to such Performance Awards, all levels of
achievement specified in the award shall be deemed met and the award shall be
immediately and fully vested, and (ii) with respect to such Fixed Awards, the
period of continued employment specified in the award upon which the award is
contingent shall be deemed completed and the award shall be immediately and
fully vested.

III. STOCK OPTIONS

1. Grants. Options to purchase shares of common stock of the Company
may be granted to such eligible officers and other key management personnel as
may be selected by the Committee and approved by the Board of Directors. These
options may, but need not, constitute "incentive stock options" under Part II of
subchapter D of the Internal Revenue Code of 1986, as amended, or any other form
of option under the Code as hereafter amended.

2. Terms of Options. No option shall be exercisable less than one nor
more than ten years after the date of grant. The per share option price shall be
not less than 100% of the fair market value at the time the option is granted.
Upon exercise, the option price may be paid in cash, in shares of common stock
of the Company having a fair market value equal to the option price, or in a
combination thereof. Options shall not be transferable, except that in the event
of the death of an optionee during employment or within a period not in excess
of five years after termination of employment by reason of retirement or total
and permanent disability or within ninety days after termination of employment
for any other reason, outstanding options may be exercised by the executor,
administrator or personal representative of such deceased optionee within ninety
days of the death of such optionee. Options may be exercised during the
individual's continued employment with the Company and for a period not in
excess of ninety days following termination of employment and only within the
original term of that option; provided, however, that if employment of the
optionee by the Company and its subsidiaries shall have terminated by reason of
retirement or total and permanent disability, then the option may be exercised
for a period not in excess of five years following termination of employment but
not after the expiration of the term of the option.

5
<PAGE>

3. Withholding Tax. An option may provide that the optionee may elect
to deliver to the Company (or authorize the Company to retain from the shares
purchased upon such exercise) whole shares of common stock of the Company to
satisfy the Company's obligation, if any, to withhold federal, state and local
income tax required to be withheld in respect of such exercise, provided,
however, that in the case of an optionee who is an officer or director of the
Company (within the meaning of Section 16 of the Securities Exchange Act of
1934), such election may not be made during the six-month period beginning on
the date of grant of such option (except in the case of the death or disability
of such optionee) and must be made either (i) at least six months prior to the
date on which the amount of such withholding tax is determined or (ii) during
the ten business day period beginning on the third business day following each
release of the Company's quarterly or annual summary of sales and earnings. Any
such election shall be irrevocable, but subject to disapproval by the Committee.

4. Acceleration of Stock Options Upon a Change in Control. If while
any stock option granted pursuant to this Article III of the Plan remains
unexercised and outstanding, a Change in Control (as defined in Article II,
Section 7, above) occurs, then from and after the Acceleration Date (as defined
in Article II, Section 7, above) all such outstanding and unexercised options,
whether or not then vested, shall be fully and immediately exercisable.

IV. UK STOCK OPTION SUB-PLAN

1. GENERAL

(a) Sub-Plan. The UK Stock Option Sub-Plan ("the Sub-Plan") has been
established in order to vary the terms on which options may be given to officers
and key management personnel who are employed in the United Kingdom by the
Company or any of its subsidiaries. Stock options granted under the Sub-Plan
shall be deemed granted under this Stock Incentive Plan and shall comply in all
respects with the terms and conditions applicable to options granted under
Article III of this Stock Incentive Plan.

(b) Definitions. In the Sub-Plan the following terms shall have the
following meanings:

"the Subsidiaries" shall mean all companies which are controlled by the
Company (as defined in Section 534 of the Income and
Corporation Taxes Act 1970) and which are an affiliate
controlled by the Company directly or indirectly through
one or more intermediaries for the purposes of rule 12b -2
of the U.S. Securities Exchange Act of 1934;

"the Group" shall mean the Company and the Subsidiaries;

6
<PAGE>

"Associated Company" shall have the meaning attributed to it in section 302
of the Income and Corporation Taxes Act 1970;

"the Committee" shall mean the committee designated to administer
this Stock Incentive Plan;

"Full Time Employee" shall mean any director or employee of the Group who
is required to devote to his duties not less than 25
hours (or in the case of an employee who is not a
director of any company in the Group, 20 hours) per
week (excluding meal breaks) and is not precluded by
paragraph 4(1)(b) of Schedule 10 from participating in
the Sub-Plan;

"Relevant Emoluments" shall have the meaning which the term bears in sub-
paragraph (2) of paragraph 5 of Schedule 10 by virtue
of sub-paragraph 5 of that paragraph;

"Year of Assessment" shall mean a year beginning on any 6 April and ending
on the following 5 April;

"Market Value" shall mean on any day the average of high and low
transaction prices in trading in the common stock of
the Company as reported on the New York Stock
Exchange - Composite Transaction compiled by
Associated Press or if no trading occurred on such
date then on the next preceding date on which such
trading occurred;

"Schedule 10" shall mean Schedule 10 of the United Kingdom Finance
Act of 1984.

"Share" or "Shares" shall mean a share or shares of common stock of par
value $1.25 which satisfy the conditions specified in
Paragraphs 7 to 11 inclusive of Schedule 10.

(c) Sub-Plan. The Committee, with the approval of the Board of Directors of
the Company, may grant stock options to officers and other key management
personnel eligible to participate in the Sub-Plan on the terms and subject to
the conditions stated in this Sub-Plan.

7
<PAGE>

(d) Eligibility. Full time employees who are officers or key management
personnel employed by the Group in the United Kingdom under selection guidelines
to be established by the Committee, shall be eligible, upon selection by the
Committee, to receive stock options.

(e) Shares to be Issued. Shares to be issued shall be authorized and
unissued shares of common stock, treasury stock or a combination thereof. The
issue of shares of common stock, par value $1.25 per share shall be subject to
the maximum specified in this Stock Incentive Plan.

(f) Administration. The Sub-Plan shall be administered by the Committee in
accordance with the provisions set out in this Stock Incentive Plan.

(g) Effective Date and Term of the Sub-Plan. The Sub-Plan shall be
submitted to the stockholders of the Company for approval at the 1986 annual
meeting scheduled to be held on March 27, 1986, and if approved shall become
effective on that date. The Sub-Plan shall terminate five years after it becomes
effective unless terminated prior thereto by action of the Board of Directors.
No further grants shall be made under the Sub-Plan after termination but
termination shall not affect the right of any participation under the grants
made prior to termination.

(h) Amendments. The Sub-Plan may be amended or terminated by the Board of
Directors subject to the conditions specified in this Stock Incentive Plan. No
amendment may be made which will put the Sub-Plan in breach of conditions for
approval set out in Schedule 10 and no amendment to the Sub-Plan or any
provision in this Stock Incentive Plan which applies to options granted under
the Sub-Plan shall be made without prior approval of the Board of UK Inland
Revenue.

2. STOCK OPTIONS

(a) Grants. Options to purchase shares of common stock of the Company may
be granted to such eligible officers and eligible key management personnel as
may be selected by the Committee and approved by the Board of Directors.

(b) Variations in Options. Variations may not be made to options granted
under the Sub-Plan pursuant to Article I clause 5 of this Stock Incentive Plan
without prior consent of the Board of UK Inland Revenue.

(c) Terms of Options. No options shall be exercisable less than one nor
more than ten years after the date of the grant. The per share option price
shall be stated at the time the option is granted and shall be not less than
100% of the Market Value of the share on the date on which the optionee is
offered options under the Sub-Plan. Upon exercise, the option price shall be
paid in cash. Options shall not be transferable except that such options may be
exercised by the personal representative of a deceased optionee within ninety
days of the death of the optionee. Options may be exercised during the
individual's continued employment with the Group and for a period not in excess
of ninety days following termination of employment. No option may be exercised
by

8
<PAGE>

an individual at any time when he is precluded by Paragraph 4(1)(b) of Schedule
10 from participating in the Sub-Plan.

(d) Exercise of Option. An option may be exercised by delivery of written
notice to the Company specifying the number of shares to be purchased and
accompanied by payment in full of the option price for the number of shares so
purchased. The Company shall within 30 days post to the optionee certificates
representing the number of shares specified, and shall pay all original issue or
transfer taxes and all other fees and expenses incidental to such delivery.

(e) Limits on Options. No person shall be granted options under this Sub-
Plan which would, at the time that they are obtained, cause the aggregate Market
Value of the shares which he may acquire in pursuant of rights obtained under
the Sub-Plan or under any other scheme established by the Group or by any
Associated Company of the Company and approved by the Revenue under Schedule 10
(and not exercised) to exceed or further exceed the greater of:

(1) 100,000 British Pounds Sterling or

(2) Four times the Relevant Emoluments of the optionee for the current or
preceding Year of Assessment (whichever of those years gives the greater
amount) or if there were no Relevant Emoluments for the preceding Year
of Assessment four times the amount of the Relevant Emoluments for the
period of twelve months beginning with the first day during the current
Year of Assessment in respect of which there are Relevant Emoluments.
For the purposes of this clause the Market Value of the shares shall be
converted from US Dollars to sterling at the middle rate for the buying
and selling of that amount of sterling for US Dollars as quoted by the
Barclays Bank PLC at the opening of business on the day on which the
optionee is offered options under the Sub-Plan.

V. STOCK APPRECIATION RIGHTS

1. Grants. Rights entitling the grantee to receive cash or shares of
common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock of the Company from the date
of grant, or in the case of rights granted in tandem with or by reference to a
stock option granted prior to the grant of such rights, from the date of grant
of the related stock option to the date of exercise may be granted to such
eligible officers and other key management personnel as may be selected by the
Committee and approved by the Board of Directors.

9
<PAGE>

2. Terms of Grant. Such rights may be granted in tandem with or with
reference to a related stock option, in which event the grantee may elect to
exercise either the option or the right, but not both, as to the same share of
common stock subject to the option and the right, or the right may be granted
independently of a related stock option. In either event, the right shall be
exercisable not more than ten years after the date of grant. Stock appreciation
rights shall not be transferable, except that in the event of the death of a
grantee during employment or within a period not in excess of five years after
termination of employment by reason of retirement or total and permanent
disability or within ninety days after termination of employment for any other
reason, outstanding rights may be exercised by the executor, administrator or
personal representative of such deceased grantee within ninety days of the death
of such grantee. Stock appreciation rights may be exercised during the
individual's continued employment with the Company and for a period not in
excess of ninety days following termination of employment and only within the
original term of that grant; provided, however, that if employment of the
grantee by the Company and its subsidiaries shall have terminated by reason of
retirement or total and permanent disability, then the grant may be exercised
for a period not in excess of five years following termination of employment but
not after the expiration of the term of the grant.

3. Payment on Exercise. Upon exercise of a right, the grantee shall be
paid the excess of the then fair market value of the number of shares to which
the right relates over the fair market value of such number of shares at the
date of grant of the right or of the related stock option, as the case may be.
Such excess shall be paid in cash or in shares of common stock having a fair
market value equal to such excess or in such combination thereof as the
Committee shall determine.

<PAGE>

Exhibit 10(i)

R.R. DONNELLEY & SONS COMPANY
1991 STOCK INCENTIVE PLAN

(as amended on September 1, 1992 and January 25, 1996)

I. GENERAL

1. Plan. To provide incentives to management through rewards based upon the
ownership or performance of the common stock of R.R. Donnelley & Sons Company
(the "Company"), the Committee hereinafter designated, may grant cash or stock
bonus awards, stock options, stock appreciation rights, or combinations thereof,
to eligible officers and other key management employees, on the terms and
subject to the conditions stated in this Plan. In addition, to provide
incentives to members of the Board of Directors ("Board") who are not employees
of the Company ("non-employee directors"), such non-employee directors are
hereby granted options on the terms and subject to the conditions set forth in
this Plan.

2. Eligibility. Officers and other key management employees of the Company,
its subsidiaries, and any other entity designated by the Board or the Committee
in which the Company has a direct or indirect equity interest, shall be
eligible, upon selection by the Committee, to receive cash or bonus awards,
stock options or stock appreciation rights, either singly or in combination, as
the Committee, in its discretion, shall determine. Non-employee directors shall
receive stock options on the terms and subject to the conditions stated in the
Plan. For purposes of the Plan, references to employment by the Company also
mean employment by a majority-owned subsidiary of the Company and employment by
any other entity designated by the Board or the Committee in which the Company
has a direct or indirect equity interest.

3. Limitation on Shares to be Issued. The maximum number of shares of common
stock, par value $1.25 per share, to be issued pursuant to all grants made under
the Plan shall be 3,600,000. Shares awarded pursuant to grants (other than
shares of restricted common stock) which, by reason of the expiration,
cancellation or other termination of the grants prior to issuance, are not
issued, shall again be available for future grants.

Shares of common stock to be issued may be authorized and unissued shares of
common stock, treasury stock or a combination thereof.

4. Administration of the Plan. The Plan shall be administered by a Committee
consisting of two or more members of the Board of Directors designated by the
Board of Directors (the "Committee"). No member of the Committee, during the one
year prior to service on the Committee or during such service, shall have been
or be granted
<PAGE>

or awarded shares of common stock, options to purchase shares of common stock,
or other equity securities of the Company pursuant to the Plan or any other plan
of the Company or any affiliate of the Company, except as provided in Article
III, Section 1(b) and except for a grant or award which would not result in such
member ceasing to be a "disinterested person" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall, subject to the terms of the Plan, establish selection
guidelines; select eligible officers and key management employees for
participation; determine the form of grant, either as a bonus award, or as stock
option or stock appreciation rights or combination thereof; and determine the
form of stock option, the number of shares subject to the grant, the fair market
value of the common stock when necessary, the time and conditions of vesting or
exercise, and all other terms and conditions of the grant. The Committee may
establish rules and regulations for the administration of the Plan, interpret
the Plan, and impose, incidental to a grant, conditions with respect to
competitive employment or other activities not inconsistent with or conflicting
with the Plan. All such rules, regulations, and interpretations relating to the
Plan adopted by the Committee shall be conclusive and binding on all parties.
All grants and awards under this Plan shall be evidenced by written instruments
delivered by the Company to the participants, and no such grant or award shall
be valid until so evidenced.

Notwithstanding the foregoing, neither the Board nor the Committee shall
have any discretion to alter the number of shares granted to non-employee
directors pursuant to Article III, Section 1(b) or the terms or conditions under
which such shares are granted.

5. Adjustments for Changes in Capitalization. Appropriate adjustments shall be
made by the Committee in the class and maximum number of shares to be issued
under the Plan, the class and maximum number of shares to be issued pursuant to
bonus awards, and the class and number of shares the subject of any grant and
the option price therefor, if applicable, to give effect to any stock splits,
stock dividends and other relevant changes in capitalization occurring after the
effective date of the Plan.

6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 1991 annual meeting scheduled to
be held on March 28, 1991, and if approved shall become effective on that date.
The Plan shall terminate five years after it becomes effective unless terminated
prior thereto by action of the Board. No further grants shall be made under the
Plan after termination, but termination shall not affect the rights of any
participant under any grants made prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board in any
respect, except that (i) no amendment may be made without stockholder approval
if such amendment would increase the maximum number of shares available for
issuance under the Plan or otherwise require stockholder approval, (ii) Article
III, Section 1(b) shall not be amended more than once every six months, other
than amendments to
<PAGE>

comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations thereunder, and (iii) notwithstanding the foregoing clause (ii), no
amendment may be made without stockholder approval if such amendment would
change the number of shares to be granted, pursuant to stock options, to non-
employee directors.

8. Prior Plans. Upon the effectiveness of this Plan, no further grants shall
be made under the Company's 1981 Stock Incentive Plan, as amended, and the 1986
Stock Incentive Plan, as amended, except that stock appreciation rights may be
granted with respect to options previously granted and outstanding under such
Plans. Bonuses awarded under the 1986 Stock Incentive Plan, as amended, and
options granted under the 1981 Stock Incentive Plan, as amended, and the 1986
Stock Incentive Plan, as amended, prior to the effectiveness of this Plan shall
continue in effect in accordance with their terms.

II. BONUS AWARDS

1. Form of Award. Bonus awards, whether Performance Awards or Fixed Awards,
may be made to eligible officers and other key management employees in the form
of (i) cash, whether in an absolute amount or as a percentage of compensation,
(ii) stock units, each of which is substantially the equivalent of a share of
common stock but for the power to vote and the entitlement to current dividends,
(iii) in the form of shares of common stock issued to the employee but
forfeitable and with restrictions on transfer in any form as hereinafter
provided or (iv) any combination of the foregoing.

2. Performance Awards. Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with the actual such amount, percentage or number to be determined by reference
to the level of achievement of corporate, group, division, individual or other
specific objectives over a performance period of not less than one nor more than
ten years, as determined by the Committee. No rights or interests of any kind
shall be vested in an individual receiving a Performance Award until the
conclusion of the performance period and the determination of the level of
achievement specified in the award, and the time of vesting, if any, thereafter
shall be as specified in the award.

3. Fixed Awards. Awards may be made which are not contingent on the
performance of objectives, but are contingent on the participant's continuing in
the Company's employ for a period to be specified in the award, which period
shall be not less than one nor more than ten years from the date of award.
<PAGE>

4. Rights with Respect to the Restricted Shares. If shares of restricted
common stock are issued pursuant to an award, the participant shall have the
right to vote the shares and to receive dividends thereon from the date of
issuance, unless and until forfeited.

5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, amounts equal to dividends otherwise payable
on a like number of shares of common stock after the crediting of the units
shall be credited to an account for the participant and held until the award is
forfeited or paid out. Interest shall be credited on the account annually at a
rate equal to the return on five year U.S. Treasury obligations.

6. Vesting and Resultant Events. The Committee may, in its discretion, provide
for early vesting of an award in the event of the participant's death, permanent
and total disability or retirement. At the time of vesting, (i) the award, if in
units, shall be paid to the participant either in shares of common stock equal
to the number of units, in cash equal to the fair market value of such shares,
or in such combination thereof as the Committee shall determine, and the
participant's account to which dividends and interest have been credited shall
be paid in cash, (ii) the award, if a cash bonus award, shall be paid to the
participant either in cash, or in shares of common stock with a then fair market
value equal to the amount of such award, or in such combination thereof as the
Committee shall determine and (iii) shares of restricted common stock issued
pursuant to an award shall be released from the restrictions. A Bonus Award is
not transferable other than by will or the laws of descent and distribution.

7. Withholding Tax. A Performance Award or a Fixed Award may provide that the
participant may elect to deliver to the Company (or authorize the Company to
retain from any shares of common stock of the Company to be delivered in payment
thereof) whole shares of common stock of the Company to satisfy the Company's
obligation, if any, to withhold federal, state, local or other taxes required to
be withheld in respect of such award; provided, however, that in the case of a
participant who is an officer or director of the Company (within the meaning of
Section 16 of the Exchange Act), such election and the execution thereof shall
be in compliance with Rule 16b-3 under the Exchange Act.

8. Acceleration Upon Change in Control. If while any Performance Award or
Fixed Award remains outstanding under this Plan--

ownership of stock of the Company) (hereinafter a "Person") is or becomes
the beneficial owner, as defined in Rule 13d-3 of the Exchange Act,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 50% or more of
the combined voting power of the Company's then outstanding securities; or

(b) during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into any
agreement with the Company to effect a transaction described in Clause (a),
(c) or (d) of this Section) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or

(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets,

Awards, the period of continued employment specified in the award upon which the
award is contingent shall be deemed completed and the award shall be immediately
and fully vested.

III. STOCK OPTIONS

(b) Options for Non-Employee Directors. An option to purchase 2,000 shares
of common stock of the Company shall be granted on March 28, 1991 and,
thereafter, annually on the date of the Company's annual meeting of stockholders
to each individual who immediately following such meeting on such date is a non-
employee director.

2. Terms of Options. No option shall be exercisable earlier than one, nor more
than ten years after, the date of grant. The per share option price shall be not
less than 100% of the fair market value of a share of common stock of the
Company at the time the option is granted; provided that options granted to non-
employee directors shall be 100% of the fair market value of a share of common
stock of the Company at the time the option is granted. Upon exercise, the
option price may be paid in cash, in shares of common stock of the Company
having a fair market value equal to the option price, or in a combination
thereof. Options may be exercised during the individual's continued employment
with the Company or service on the Board, as the case may be, and for a period
not in excess of ninety days following termination of employment or service on
the Board and only within the original term of that option; provided, however,
that if employment of the optionee by the Company and its subsidiaries or
service on the Board, as the case may be, shall have terminated by reason of
retirement or total and permanent disability, then the option may be exercised
for a period not in excess of five years following termination of employment or
service on the Board, but not after the expiration of the term of the option.
Options shall not be transferable, except that in the event of the death of an
optionee (i) during employment or service on the Board, as the case may be, (ii)
within a period not in excess of five years after termination of employment or
service on the Board, as the case may be, by reason of retirement or total and
permanent disability or (iii) within ninety days after termination of employment
or service on the Board, as the case may be, for any other reason,
<PAGE>

outstanding options may be exercised by the executor, administrator or personal
representative of such deceased optionee within ninety days of the death of such
optionee.

3. Withholding Tax. An option may provide that the optionee may elect to
deliver to the Company (or authorize the Company to retain from any shares of
common stock of the Company to be delivered in payment thereof) whole shares of
common stock of the Company to satisfy the Company's obligation, if any, to
withhold federal, state, local or other taxes required to be withheld in respect
of such award; provided, however, that in the case of an optionee who is an
officer or director of the Company (within the meaning of Section 16 of the
Exchange Act), such election and the execution thereof shall be in compliance
with Rule 16b-3 under the Exchange Act.

4. Acceleration of Stock Options Upon a Change in Control. If while any stock
option granted pursuant to this Article III of the Plan remains unexercised and
outstanding, a Change in Control (as defined in Article II, Section 8, above)
occurs, then from and after the Acceleration Date (as defined in Article II,
Section 8, above) all such outstanding and unexercised options, whether or not
then vested, shall be fully and immediately exercisable.

IV. UK STOCK OPTION SUB-PLAN

1. GENERAL

(a) Sub-Plan. The UK Stock Option Sub-Plan ("the Sub-Plan") has been
established in order to vary the terms on which options may be given to officers
and other key management employees who are employed in the United Kingdom by the
Company or any of its subsidiaries. Stock options granted under the Sub-Plan
shall be deemed granted under this Stock Incentive Plan and shall comply in all
respects with the terms and conditions applicable to options granted under
Article III of this Stock Incentive Plan.

(b) Definitions. In the Sub-Plan the following terms shall have the following
meanings:

"the Subsidiaries" shall mean all companies which are controlled by the
Company (as defined in Section 840 of the Income and
Corporation Taxes Act 1988) and which are affiliates
controlled by the Company directly or indirectly
through one or more intermediaries for the purposes of
rule 12b-2 of the U.S. Securities Exchange Act of
1934;
<PAGE>

"the Group" shall mean the Company and the Subsidiaries;

"Associated Company" shall have the meaning attributed to it in Section
416(1) of the Income and Corporation Taxes Act 1988;

"the Committee" shall mean the committee designated to administer this
Stock Incentive Plan;

"Full Time Employee" shall mean any director or employee who is employed by
the Group in the United Kingdom and who is required to
devote to his duties not less than 25 hours (or in the
case of an employee who is not a director of any
company in the Group, 20 hours) per week (excluding
meal breaks) and is not precluded by paragraph 8 of
Schedule 9 from participating in the Sub-Plan;

"Relevant Emoluments" shall have the meaning which the term bears in sub-
paragraph (2) of paragraph 28 of Schedule 9 by virtue
of sub-paragraph (4) of that paragraph;

"Year of Assessment" shall mean a year beginning on any 6 April and ending
on the following 5 April;

"Market Value" shall mean on any day the average of high and low
transaction prices in trading in the common stock of
the Company as reported on the New York Stock
Exchange--Composite Transaction compiled by Associated
Press or if no trading occurred on such date then on
the next preceding date on which such trading
occurred;

"Schedule 9" shall mean Schedule 9 of the United Kingdom Income and
Corporation Taxes Act 1988.

"Share" or "Shares" shall mean a share or shares of common stock of par
value $1.25 which satisfy the conditions specified in
Paragraphs 10 to 14 inclusive of Schedule 9.

(c) Sub-Plan. The Committee may grant stock options to officers and other key
management employees eligible to participate in the Sub-Plan on the terms and
subject to the conditions stated in this Sub-Plan.
<PAGE>

(d) Eligibility. Full Time Employees who are officers or other key management
employees employed by the Group in the United Kingdom under selection guidelines
to be established by the Committee, shall be eligible, upon selection by the
Committee, to receive stock options.

(e) Shares to be Issued. Shares to be issued shall be authorized and unissued
shares of common stock, treasury stock or a combination thereof. The issue of
shares of common stock, par value $1.25 per share, shall be subject to the
maximum specified in this Stock Incentive Plan.

(f) Administration. The Sub-Plan shall be administered by the Committee in
accordance with the provisions set out in this Stock Incentive Plan and varied
by the terms of this Sub-Plan.

(g) Effective Date and Term of the Sub-Plan. The Sub-Plan shall be submitted to
the stockholders of the Company for approval at the 1991 annual meeting
scheduled to be held on March 28, 1991, and if approved shall become effective
on that date. The Sub-Plan shall terminate five years after it becomes effective
unless terminated prior thereto by action of the Board. No further grants shall
be made under the Sub-Plan after termination but termination shall not affect
the right of any participation under the grants made prior to termination.

(h) Amendments. The Sub-Plan may be amended or terminated by the Board subject
to the conditions specified in this Stock Incentive Plan. No amendment may be
made which will put the Sub-Plan in breach of conditions for approval set out in
Schedule 9 and no amendment to the Sub-Plan or any provision in this Stock
Incentive Plan which applies to options granted under the Sub-Plan shall be made
without prior approval of the Board of UK Inland Revenue.

2. STOCK OPTIONS

(a) Grants. Options to purchase shares of common stock of the Company may be
granted to such eligible Full-Time Employees as may be selected by the
Committee.

(b) Variations in Options. Variations may not be made to options granted under
the Sub-Plan pursuant to Article I clause 5 of this Stock Incentive Plan without
prior consent of the Board of UK Inland Revenue.

optionee within ninety days of the death of the optionee. Options may be
exercised during the individual's continued employment with the Group and for a
period not in excess of ninety days following termination of employment and only
within the original term of the option. No option may be exercised by an
individual at any time when he is precluded by Paragraph 8 of Schedule 9 from
participating in the Sub-Plan.

(d) Exercise of Option. An option may be exercised by delivery of written
notice to the Company specifying the number of shares to be purchased and
accompanied by payment in full of the option price for the number of shares so
purchased. The Company shall within thirty days post to the optionee
certificates representing the number of shares specified, and shall pay all
original issue or transfer taxes and all other fees and expenses incidental to
such delivery.

(e) Limits on Options. No person shall be granted options under this Sub-Plan
which would, at the time that they are obtained, cause the aggregate Market
Value of the shares which he may acquire in pursuance of rights obtained under
the Sub-Plan or under any other scheme established by the Group or by any
Associated Company of the Company and approved by the Board of U.K. Inland
Revenue under Schedule 9 (and not exercised) to exceed or further exceed the
greater of:

(1) 100,000 British Pounds Sterling or

(2) Four times the Relevant Emoluments of the optionee for the current
or preceding Year of Assessment (whichever of those years gives the greater
amount) or if there were no Relevant Emoluments for the preceding Year of
Assessment four times the amount of the Relevant Emoluments for the period
of twelve months beginning with the first day during the current Year of
Assessment in respect of which there are Relevant Emoluments. For the
purposes of this clause the Market Value of the shares shall be converted
from US Dollars to sterling at the middle rate for the buying and selling
of that amount of sterling for US Dollars as quoted by the Barclays Bank
PLC at the opening of business on the day on which the optionee is offered
options under the Sub-Plan.

(f) Withholding Tax. Article III Clause 3 of this Stock Incentive Plan shall
not apply to the Sub-Plan.

V. STOCK APPRECIATION RIGHTS

rights granted in tandem with or by reference to a stock option granted prior to
the grant of such rights, from the date of grant of the related stock option to
the date of exercise may be granted to such eligible officers and other key
management employees as may be selected by the Committee.

2. Terms of Grant. Such rights may be granted in tandem with or with reference
to a related stock option, in which event the grantee may elect to exercise
either the option or the right, but not both, as to the same share of common
stock subject to the option and the right, or the right may be granted
independently of a related stock option. In either event, the right shall be
exercisable not more than ten years after the date of grant. In the case of a
participant who is an officer or director of the Company (within the meaning of
Section 16 of the Exchange Act), the election to exercise a stock appreciation
right, and the exercise of such stock appreciation right, shall be in compliance
with Rule 16b-3 under the Exchange Act. Stock appreciation rights shall not be
transferable, except that in the event of the death of a grantee during
employment or within a period not in excess of five years after termination of
employment by reason of retirement or total and permanent disability or within
ninety days after termination of employment for any other reason, outstanding
rights may be exercised by the executor, administrator or personal
representative of such deceased grantee within ninety days of the death of such
grantee. Stock appreciation rights may be exercised during the individual's
continued employment with the Company and for a period not in excess of ninety
days following termination of employment and only within the original term of
that grant; provided, however, that if employment of the grantee by the Company
and its subsidiaries shall have terminated by reason of retirement or total and
permanent disability, then the grant may be exercised for a period not in excess
of five years following termination of employment but not after the expiration
of the term of the grant.

3. Payment on Exercise. Upon exercise of a right, the grantee shall be paid the
excess of the then fair market value of the number of shares to which the right
relates over the fair market value of such number of shares at the date of grant
of the right or of the related stock option, as the case may be. Such excess
shall be paid in cash or in shares of common stock having a fair market value
equal to such excess or in such combination thereof as the Committee shall
determine.

4. Withholding Tax. A stock appreciation right may provide that the holder
thereof may elect to deliver to the Company (or authorize the Company to retain
from any shares of common stock of the Company to be delivered in payment
thereof) whole shares of common stock of the Company to satisfy the Company's
obligation, if any, to withhold federal, state, local or other taxes required to
be withheld in respect of such award; provided, however, that in the case of a
holder who is an officer or director of the Company (within the meaning of
Section 16 of the Exchange Act), such election and the execution thereof shall
be in compliance with Rule 16b-3 under the Exchange Act.
<PAGE>

5. Acceleration Upon on Change in Control. If while any stock appreciation
right granted pursuant to this Article V of the Plan remains unexercised and
outstanding, a Change in Control (as defined in Article II, Section 8, above)
occurs, then from and after the Acceleration Date (as defined in Article II,
Section 8, above) all such outstanding and unexercised stock appreciation
rights, whether or not then vested, shall be fully and immediately exercisable.

<PAGE>

Exhibit 10(j)

R.R. DONNELLEY & SONS COMPANY
1995 STOCK INCENTIVE PLAN

(AS AMENDED ON JANUARY 25, 1996)

I. GENERAL

1. Plan. To provide incentives to management through rewards based upon the
ownership or performance of the common stock of R.R. Donnelley & Sons Company
(the "Company"), the Committee hereinafter designated, may grant cash or bonus
awards, stock options, stock appreciation rights ("SARs"), or combinations
thereof, to eligible officers and other key management employees, on the terms
and subject to the conditions stated in the Plan. In addition, to provide
incentives to members of the Board of Directors ("Board") who are not employees
of the Company ("non-employee directors"), such non-employee directors are
hereby granted options on the terms and subject to the conditions set forth in
the Plan. For purposes of the Plan, references to employment by the Company also
mean employment by a majority-owned subsidiary of the Company and employment by
any other entity designated by the Board or the Committee in which the Company
has a direct or indirect equity interest.

3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 7,500,000 shares of common stock, par value $1.25
per share ("common stock"), shall be available under the Plan, reduced by the
aggregate number of shares of common stock which become subject to outstanding
bonus awards, stock options and SARs which are not granted in tandem with or by
reference to a stock option ("free-standing SARs"). Shares subject to a grant or
award which for any reason are not issued or delivered, including by reason of
the expiration, termination, cancellation or forfeiture of all or a portion of
the grant or award or by reason of the delivery or withholding of shares to pay
all or a portion of the exercise price or to satisfy tax withholding
obligations, shall again be available for future grants and awards; provided,
however, that for purposes of this sentence, stock options and SARs granted in
tandem with or by reference to a stock option granted prior to the grant of such
SARs ("tandem SARs") shall be treated as one grant. For the purpose of complying
with Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, the maximum number of shares
of common stock with respect to which options or SARs or a combination thereof
may be granted during any three-year period to any person shall be 1,000,000,
subject to adjustment as provided in Section 5 of this Article I. The maximum
number of shares of common stock with
<PAGE>

respect to which fixed awards in the form of restricted stock may be granted
hereunder is 500,000 in the aggregate, subject to adjustment as provided in
Section 5 of this Article I.

Shares of common stock to be issued may be authorized and unissued shares
of common stock, treasury stock or a combination thereof.

4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors (the "Committee"). Each member of the
Committee shall be (i) an "outside director" within the meaning of Section
162(m) of the Code, subject to any transitional rules applicable to the
definition of outside director, and (ii) a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Committee shall, subject to the terms of the Plan, select
eligible officers and key management employees for participation; determine the
form of each grant and award, either as cash, a bonus award, stock options or
SARs or a combination thereof; and determine the number of shares or units
subject to the grant or award, the fair market value of the common stock or
units when necessary, the time and conditions of vesting, exercise or
settlement, and all other terms and conditions of each grant and award,
including, without limitation, the form of instrument evidencing the grant or
award. The Committee may establish rules and regulations for the administration
of the Plan, interpret the Plan, and impose, incidental to a grant or award,
conditions with respect to competitive employment or other activities not
inconsistent with the Plan. All such rules, regulations, interpretations and
conditions shall be conclusive and binding on all parties. Each grant and award
shall be evidenced by a written instrument and no grant or award shall be valid
until an agreement is executed by the Company and the recipient thereof and,
upon execution by each party and delivery of the agreement to the Company, such
grant or award shall be effective as of the effective date set forth in the
agreement.

The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems 8appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the selection for
participation in the Plan of (A) an employee who is a "covered employee" within
the meaning of Section 162(m) of the Code or who, in the Committee's judgment,
is likely to be a covered employee at any time during the period a grant or
award hereunder to such employee would be outstanding or (B) an officer or other
person subject to Section 16 of the Exchange Act or (ii) decisions concerning
the timing, pricing or amount of a grant or award to such an employee, officer
or other person.

A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.

5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of common stock other than a regular cash
dividend, the number and class of securities available under the Plan, the
number and

-2-
<PAGE>

class of securities subject to each outstanding bonus award, the number and
class of securities subject to each outstanding stock option and the purchase
price per security, the number of securities subject to each stock option to be
granted to non-employee directors pursuant to Article III and the terms of each
outstanding SAR shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding stock options and SARs without
a change in the aggregate purchase price or base price. If any such adjustment
would result in a fractional security being (i) available under the Plan, such
fractional security shall be disregarded, or (ii) subject to an outstanding
grant or award under the Plan, the Company shall pay the holder thereof, in
connection with the first vesting, exercise or settlement of such grant or
award, in whole or in part, occurring after such adjustment, an amount in cash
determined by multiplying (i) the fraction of such security (rounded to the
nearest hundredth) by (ii) the excess, if any, of (A) the fair market value on
the vesting, exercise or settlement date over (B) the exercise or base price, if
any, of such grant or award.

6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 1995 annual meeting of
stockholders and, if approved, shall become effective on January 1, 1995. The
Plan shall terminate on December 31, 1999 unless terminated prior thereto by
action of the Board. No further grants or awards shall be made under the Plan
after termination, but termination shall not affect the rights of any
participant under any grants or awards made prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board in any
respect except that no amendment may be made without stockholder approval if
stockholder approval is required by applicable law, rule or regulation,
including Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, or
such amendment would increase (subject to Section 5 of this Article I) the
maximum number of shares available under the Plan; provided, however, that
subject to Section 5 of this Article I, the number of shares subject to stock
options granted to non-employee directors, the purchase price therefor, the date
of grant of any such option, the termination provisions relating to such options
and the category of persons eligible to be granted such options shall not be
amended more than once every six months, other than to comply with changes in
the Code or the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations thereunder. No amendment may impair the rights of a
holder of an outstanding grant or award without the consent of such holder.

8. Prior Plans. Upon approval of the Plan by the stockholders of the Company,
no further grants or awards shall be made under the Company's 1981 Stock
Incentive Plan, as amended (the "1981 Plan"), the 1986 Stock Incentive Plan, as
amended (the "1986 Plan"), or the 1991 Stock Incentive Plan, as amended (the
"1991 Plan"), except that SARs may be granted with respect to options previously
granted and outstanding under such Plans. Grants and awards made under the 1981
Plan, the 1986 Plan and the 1991 Plan prior to approval of the Plan by the
stockholders of the Company shall continue in effect in accordance with their
terms.

-3-
<PAGE>

II. BONUS AWARDS

1. Form of Award. Bonus awards, whether performance awards or fixed awards,
may be made to eligible officers and other key management employees in the form
of (i) cash, whether in an absolute amount or as a percentage of compensation,
(ii) stock units, each of which is substantially the equivalent of a share of
common stock but for the power to vote and, subject to the Committee's
discretion, the entitlement to an amount equal to dividends or other
distributions otherwise payable on a like number of shares of common stock,
(iii) shares of common stock issued to the employee but forfeitable and with
restrictions on transfer in any form as hereinafter provided or (iv) any
combination of the foregoing.

2. Performance Awards. Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with the actual such amount, percentage or number to be determined by reference
to the level of achievement of corporate, sector, business unit, division,
individual or other specific objectives over a performance period of not less
than one nor more than ten years, as determined by the Committee. No rights or
interests of any kind shall be vested in an individual receiving a performance
award until the conclusion of the performance period and the determination of
the level of achievement specified in the award, and the time of vesting, if
any, thereafter shall be as specified in the award.

3. Fixed Awards. Awards may be made which are not contingent on the
achievement of specific objectives, but are contingent on the participant's
continuing in the Company's employ for a period specified in the award.

4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that a distribution with
respect to shares of common stock, other than a regular quarterly cash dividend,
shall be deposited with the Company and shall be subject to the same
restrictions as the shares of common stock with respect to which such
distribution was made.

During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder's name and may bear a
legend, in addition to any legend which may be required under applicable laws,
rules or regulations, indicating that the ownership of the shares of common
stock represented by such certificate is subject to the restrictions, terms and
conditions of the Plan and the agreement relating to the restricted shares. All
such certificates shall be deposited with the Company, together with stock
powers or other instruments of assignment (including a power of attorney), each
endorsed in blank with a guarantee of signature if deemed necessary or
appropriate, which would permit transfer to the Company of all or a portion of
the shares of common stock subject to the award in the event such award is
forfeited in whole or in part. Upon termination of any applicable restriction
period, including, if applicable, the satisfaction or achievement of applicable
objectives, and subject to the Company's right to

-4-
<PAGE>

require payment of any taxes, a certificate or certificates evidencing ownership
of the requisite number of shares of common stock shall be delivered to the
holder of such award.

5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee's discretion,
amounts equal to dividends and other distributions otherwise payable on a like
number of shares of common stock after the crediting of the units (unless the
record date for such dividends or other distributions precedes the date of grant
of such award) shall be credited to an account for the participant and held
until the award is forfeited or paid out. Interest shall be credited on the
account annually at a rate equal to the return on five year U.S. Treasury
obligations.

6. Vesting and Resultant Events. The Committee may, in its discretion, provide
for early vesting of an award in the event of the participant's death, permanent
and total disability or retirement. At the time of vesting, (i) the award, if in
units, shall be paid to the participant either in shares of common stock equal
to the number of units, in cash equal to the fair market value of such shares,
or in such combination thereof as the Committee shall determine, and the
participant's account to which dividend equivalents, other distributions and
interest have been credited shall be paid in cash, (ii) the award, if a cash
bonus award, shall be paid to the participant either in cash, or in shares of
common stock with a then fair market value equal to the amount of such award, or
in such combination thereof as the Committee shall determine and (iii) shares of
restricted common stock issued pursuant to an award shall be released from the
restrictions.

III. STOCK OPTIONS

1. Grants. (a) Options for Officers and Key Management Employees. Options to
purchase shares of common stock of the Company may be granted to such eligible
officers and key management employees as may be selected by the Committee. These
options may, but need not, constitute "incentive stock options" under Section
422 of the Code or any other form of option under the Code. To the extent that
the aggregate fair market value (determined as of the date of grant) of shares
of common stock with respect to which options designated as incentive stock
options are exercisable for the first time by a participant during any calendar
year (under the Plan or any other plan of the Company, or any parent or
subsidiary) exceeds the amount (currently $100,000) established by the Code,
such options shall not constitute incentive stock options.

(b) Options for Non-Employee Directors. An option to purchase 4,000 shares
of common stock of the Company shall be granted on the date of the 1995 annual
meeting of stockholders and, thereafter, annually on the date of the Company's
annual meeting of stockholders to each individual who immediately following such
meeting on such date is a non-employee director. An option granted to a non-
employee director pursuant to this Section 1(b) (a "Director Option") shall
become exercisable in whole or in part on the earlier to occur of (i) the date
which is the first anniversary of the date the Director Option is granted (the
date of grant being hereafter referred to as the "Option Date") or (ii) the day
immediately preceding the date of the first annual meeting of stockholders of
the Company next following the Option Date; provided, however, that the date

-5-
<PAGE>

of such annual meeting is at least three hundred fifty-five (355) days after the
Option Date, and Director Options shall not be exercisable more than ten years
after the Option Date.

2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option; provided further, that if an incentive stock option
shall be granted to any person who, on the date of grant of such option, owns
capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
subsidiary) (a "Ten Percent Holder"), the purchase price per share of common
stock shall be the price (currently 110% of fair market value) required by the
Code in order to constitute an incentive stock option; and provided further,
that the purchase price per share of common stock subject to a Director Option
shall be 100% of the fair market value of a share of common stock on the date of
grant of such option.

3. Exercise of Options. The period during which options granted hereunder
(other than options granted to non-employee directors) may be exercised shall be
determined by the Committee; provided, however, that no incentive stock option
shall be exercised later than ten years after its date of grant; provided
further, that if an incentive stock option shall be granted to a Ten Percent
Holder, such option shall not be exercisable more than five years after its date
of grant. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an option or to
the exercisability of all or a portion of an option. The Committee shall
determine whether an option shall become exercisable in cumulative or non-
cumulative installments and in part or in full at any time. An exercisable
option, or portion thereof, may be exercised only with respect to whole shares
of common stock.

An option may be exercised (i) by giving written notice to the Company
specifying the number of whole shares of common stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) either (A) in cash, (B) in previously owned whole
shares of common stock (which the optionee has held for at least six months
prior to delivery of such shares or which the optionee purchased on the open
market and for which the optionee has good title free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (C) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (D) a combination of (A) and (B),
(ii) if applicable, by surrendering to the Company any SARs which are cancelled
by reason of the exercise of the option and (iii) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(D) and, in the case of
an optionee who is subject to Section 16 of the Exchange Act, the Company may
require that the method of making such payment be in compliance with Section 16
and the rules and regulations thereunder. Any fraction of a share of common
stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the optionee. No
certificate representing common stock shall be delivered until the full purchase
price therefor has been paid.

-6-
<PAGE>

4. Termination of Employment or Service. An option may be exercised during the
optionee's continued employment with the Company or service on the Board, as the
case may be, and, unless otherwise determined by the Committee as set forth in
the agreement relating to the option, for a period not in excess of ninety days
following termination of employment or service on the Board and only within the
original term of the option; provided, however, that if employment of the
optionee by the Company or service on the Board, as the case may be, shall have
terminated by reason of retirement or total and permanent disability, then the
option may be exercised to the extent set forth in the agreement relating to the
option for a period not in excess of five years following termination of
employment or service on the Board, but not after the expiration of the term of
the option. In the event of the death of an optionee (i) during employment or
service on the Board, as the case may be, (ii) within a period not in excess of
five years after termination of employment or service on the Board, as the case
may be, by reason of retirement or total and permanent disability or (iii)
within ninety days after termination of employment or service on the Board, as
the case may be, for any other reason, outstanding options held by such optionee
at the time of death may be exercised to the extent set forth in the agreement
relating to the option by the executor, administrator, personal representative,
beneficiary or similar persons of such deceased optionee within ninety days of
the date of death.

IV. UK STOCK OPTION SUB-PLAN

1. GENERAL

(a) Sub-Plan. The UK Stock Option Sub-Plan ("the Sub-Plan") has been
established in order to vary the terms on which options may be given to officers
and other key management employees who are employed in the United Kingdom by the
Company or any of its subsidiaries. Stock options granted under the Sub-Plan
shall be deemed granted under the Plan and shall, unless otherwise stated or
implied in this Article IV, comply in all respects with the terms and conditions
applicable to options granted under Article III of the Plan. Articles II and V
and Clause 2 of Article VI shall not apply to options granted under the Sub-
Plan.

(b) Definitions. In the Sub-Plan the following terms shall have the following
meanings:

"the Group" shall mean the Company and the Subsidiaries;

"Associated Company" shall have the meaning attributed to it in Section
416(1) of the Income and Corporation Taxes Act 1988;

"the Committee" shall mean the committee designated to administer the
Plan;

-7-
<PAGE>

"Relevant Emoluments" shall have the meaning which the term bears in sub-
paragraph (2) of paragraph 28 of Schedule 9 by virtue
of sub-paragraph (4) of that paragraph;

"Year of Assessment" shall mean a year beginning on any 6 April and ending
on the following 5 April;

"Market Value" shall mean on any day the average of high and low
transaction prices in trading in the common stock of
the Company as reported on the New York Stock
Exchange--Composite Transactions compiled by Associated
Press or if no trading occurred on such date then on
the next preceding date on which such trading occurred;

"Schedule 9" shall mean Schedule 9 of the United Kingdom Income and
Corporation Taxes Act 1988;

"Share" or "Shares" shall mean a share or shares of common stock of par
value $1.25 which satisfy the conditions specified in
Paragraphs 10 to 14 inclusive of Schedule 9.

(e) Shares to be Issued. Shares to be issued shall be authorized and unissued
shares of common stock, treasury stock or a combination thereof. The issue of
shares of common stock shall be subject to the maximum specified in the Plan.

(f) Administration. The Sub-Plan shall be administered by the Committee in
accordance with the provisions set out in the Plan and varied by the terms of
the Sub-Plan.

-8-
<PAGE>

(g) Effective Date and Term of the Sub-Plan. The Sub-Plan shall be submitted to
the stockholders of the Company for approval at the 1995 annual meeting of
stockholders and, if approved, shall become effective on January 1, 1995.
Options shall not be granted until the Sub-Plan has been approved by the Board
of UK Inland Revenue under the provisions of paragraph 1 of Schedule 9. Any
change required to be made to the Plan by the Board of UK Inland Revenue in
order to obtain its approval may be made without stockholder approval, except as
otherwise provided in Clause 7 of Article I. The Sub-Plan shall terminate on
December 31, 1999 unless terminated prior thereto by action of the Board. No
further grants shall be made under the Sub-Plan after termination, but
termination shall not affect the rights of any participant under the grants made
prior to termination.

(h) Amendments. The Sub-Plan may be amended or terminated by the Board subject
to the conditions specified in the Plan. No amendment may be made which will put
the Sub-Plan in breach of conditions for approval set out in Schedule 9 and no
amendment to the Sub-Plan or any provision in the Plan which applies to options
granted under the Sub-Plan shall be made without prior approval of the Board of
UK Inland Revenue.

2. STOCK OPTIONS

(a) Grants. Options to purchase shares of common stock may be granted to such
eligible Full-Time Employees as may be selected by the Committee. No variation
shall be made in relation to a spin-off nor to any class of securities available
under the Sub-Plan.

(b) Variations in Options. Variations may not be made to options granted under
the Sub-Plan pursuant to Article I clause 5 of the Plan without prior consent of
the Board of UK Inland Revenue.

(c) Terms of Options. Terms attaching to options shall be contained in a stock
option agreement, the form of which must be approved in advance by the Board of
UK Inland Revenue. If any performance targets are attached to the exercisability
of an option, these shall be objectively determined and subject to the prior
approval of the Board of UK Inland Revenue. No option shall be exercisable more
than ten years after its date of grant. The per share option price shall be
stated at the time the option is granted and shall be not less than 100% of the
Market Value of the share on the date on which the optionee is offered options
under the Sub-Plan. Upon exercise, the option price shall be paid in cash. The
provisions in Clause 3 of Article III for the exercise of options by payment in
whole shares of common stock or in cash by a broker-dealer to whom the optionee
has submitted an irrevocable notice of exercise will not apply for the purposes
of the Sub-Plan unless, in the case of the latter, approved by the Board of UK
Inland Revenue. Options shall not be transferable except that such options may
be exercised by the personal representative of a deceased optionee or a
beneficiary of such deceased optionee who has been designated pursuant to
beneficiary designation procedures approved by the Company, in each case within
ninety days of the death of the optionee. Options may be exercised during the
individual's continued employment with the Group and for a period not in excess
of ninety days following termination of employment and only within the original
term of the option. No option may be

-9-
<PAGE>

exercised by an individual at any time when he is precluded by Paragraph 8 of
Schedule 9 from participating in the Sub-Plan.

(d) Exercise of Option. An option may be exercised by delivery of written
notice to the Company specifying the number of shares to be purchased and
accompanied by payment in full of the option price for the number of shares so
purchased. The Company shall within thirty days post to the optionee
certificates representing the number of shares specified, and shall pay all
original issue or transfer taxes and all other fees and expenses incidental to
such delivery.

(e) Limits on Options. No person shall be granted options under the Sub-Plan
which would, at the time that they are obtained, cause the aggregate Market
Value of the shares which such person may acquire in pursuance of rights
obtained under the Sub-Plan or under any other scheme established by the Group
or by any Associated Company of the Company and approved by the Board of UK
Inland Revenue under Schedule 9 (and not exercised) to exceed or further exceed
the greater of:

(1) 100,000 British Pounds Sterling or

(2) Four times the Relevant Emoluments of the optionee for the current or
preceding Year of Assessment (whichever of those years gives the greater
amount) or if there were no Relevant Emoluments for the preceding Year of
Assessment four times the amount of the Relevant Emoluments for the period of
twelve months beginning with the first day during the current Year of
Assessment in respect of which there are Relevant Emoluments. For the purposes
of this clause the Market Value of the shares shall be converted from US
Dollars to sterling at the middle rate for the buying and selling of that
amount of sterling for US Dollars as quoted by the Barclays Bank PLC at the
opening of business on the day on which the optionee is offered options under
the Sub-Plan.

V. STOCK APPRECIATION RIGHTS

1. Grants. Free-standing SARs entitling the grantee to receive cash or shares
of common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock from the date of grant to the
date of exercise of such SARs, or in the case of tandem SARs, from the date of
grant of the related stock option to the date of exercise of such tandem SARs,
may be granted to such eligible officers and other key management employees as
may be selected by the Committee. The holder of a tandem SAR may elect to
exercise either the option or the SAR, but not both.

2. Number of SARs and Base Price. The number of SARs subject to a grant shall
be determined by the Committee. Any tandem SAR related to an incentive stock
option shall be granted at the same time that such incentive stock option is
granted. The base price of a tandem SAR shall be the purchase price per share of
common stock of the related option. The base price of a free-standing SAR shall
be determined by the Committee; provided, however, that such base price shall

-10-
<PAGE>

not be less than 100% of the fair market value of a share of common stock on the
date of grant of such SAR.

3. Exercise of SARs. The agreement relating to a grant of SARs may specify
whether such grant shall be settled in shares of common stock (including
restricted shares of common stock) or cash or a combination thereof. Upon
exercise of an SAR, the grantee shall be paid the excess of the then fair market
value of the number of shares of common stock to which the SAR relates over the
fair market value of such number of shares at the date of grant of the SAR or of
the related stock option, as the case may be. Such excess shall be paid in cash
or in shares of common stock having a fair market value equal to such excess or
in such combination thereof as the Committee shall determine. The period during
which SARs granted hereunder may be exercised shall be determined by the
Committee; provided, however, that no tandem SAR shall be exercised if the
related option has expired or has been cancelled or forfeited or has otherwise
terminated. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a tandem SAR, only with respect to whole shares of
common stock and, in the case of a free-standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for restricted shares of common
stock, a certificate or certificates representing such restricted shares shall
be issued in accordance with Section 4 of Article II and the holder of such
restricted shares shall have such rights of a stockholder of the Company as
determined pursuant to such Section. Prior to the exercise of an SAR for shares
of common stock, including restricted shares, the holder of such SAR shall have
no rights as a stockholder of the Company with respect to the shares of common
stock subject to such SAR.

A tandem SAR may be exercised (i) by giving written notice to the Company
specifying the number of whole SARs which are being exercised, (ii) by
surrendering to the Company any options which are cancelled by reason of the
exercise of such SAR and (iii) by executing such documents as the Company may
reasonably request. A free-standing SAR may be exercised (i) by giving written
notice to the Company specifying the whole number of SARs which are being
exercised and (ii) by executing such documents as the Company may reasonably
request. In the case of the holder of an SAR who is subject to Section 16 of the
Exchange Act, the Company may require that the exercise of an SAR be in
compliance with Section 16 and the rules and regulations thereunder.

4. Termination of Employment. An SAR may be exercised during the grantee's
continued employment with the Company and, unless otherwise determined by the
Committee as set forth in the agreement relating to the SAR, for a period not in
excess of ninety days following termination of employment and only within the
original term of the SAR; provided, however, that if employment of the grantee
by the Company shall have terminated by reason of retirement or total and
permanent disability, then the SAR may be exercised to the extent set forth in
the agreement relating to the SAR for a period not in excess of five years
following termination of employment but not after the expiration of the term of
the SAR. In the event of the death of a holder of an SAR (i) during employment,
(ii) within a period not in excess of five years after termination of

-11-
<PAGE>

employment by reason of retirement or total and permanent disability or (iii)
within ninety days after termination of employment for any other reason,
outstanding SARs held by such holder at the time of death may be exercised to
the extent set forth in the agreement relating to the SAR by the executor,
administrator, personal representative, beneficiary or similar persons of such
deceased holder within ninety days of the date of death.

VI. OTHER

1. Non-Transferability of Options and Stock Appreciation Rights. No option or
SAR shall be transferable other than (i) by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act
as determined by the Committee and set forth in the agreement relating to such
option or SAR. Each option or SAR may be exercised during the participant's
lifetime only by the participant or the participant's guardian, legal
representative or similar person. Except as permitted by the second preceding
sentence, no option or SAR may be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any option or SAR, such award and all rights thereunder
shall immediately become null and void.

2. Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of common stock or the payment of any cash
pursuant to a grant or award hereunder, payment by the holder thereof of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the "Tax
Date"), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, (C) authorizing the Company to withhold whole shares of common stock which
would otherwise be delivered having an aggregate fair market value determined as
of the Tax Date or withhold an amount of cash which would otherwise be payable
to a holder, (D) in the case of the exercise of an option, a cash payment by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C);
provided, however, that the Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (B)-(E) and that in the case of a
holder who is subject to Section 16 of the Exchange Act, the Company may require
that the method of satisfying such an obligation be in compliance with Section
16 and the rules and regulations thereunder. An agreement relating to a grant or
award hereunder may provide for shares of common stock to be delivered or
withheld having an aggregate fair market value in excess of the minimum amount

-12-
<PAGE>

required to be withheld, but not in excess of the amount determined by applying
the holder's maximum marginal tax rates. Any fraction of a share of common stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the holder.

3. Acceleration Upon Change in Control. If while (i) any performance award or
fixed award granted under Article II is outstanding or (ii) any stock option
granted under Article III or IV of the Plan or SAR granted under Article V of
the Plan is outstanding --

(a) any "person," as such term is defined in Section 3(a)(9) of the
Exchange Act, as modified and used in Section 13(d) and 14(d) thereof (but not
including (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company) (hereinafter
a "Person") is or becomes the beneficial owner, as defined in Rule 13d-3 of
the Exchange Act, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates, excluding an acquisition
resulting from the exercise of a conversion or exchange privilege in respect
of outstanding convertible or exchangeable securities) representing 50% or
more of the combined voting power of the Company's then outstanding
securities; or

(b) during any period of two (2) consecutive years (not including any
period prior to the effective date of the Plan), individuals who at the
beginning of such period constitute the Board and any new director (other than
a director designated by a Person who has entered into any agreement with the
Company to effect a transaction described in Clause (a), (c) or (d) of this
Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or

(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or

-13-
<PAGE>

(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets,

(any of such events being hereinafter referred to as a "Change in Control"),
then from and after the date on which public announcement of the acquisition of
such percentage shall have been made, or the date on which the change in the
composition of the Board set forth above shall have occurred, or the date of any
such stockholder approval of a merger, consolidation, plan of complete
liquidation or an agreement for the sale of the Company's assets as described
above occurs (the applicable date being hereinafter referred to as the
"Acceleration Date"), (i) with respect to such performance awards, the highest
level of achievement specified in the award shall be deemed met and the award
shall be immediately and fully vested, (ii) with respect to such fixed awards,
the period of continued employment specified in the award upon which the award
is contingent shall be deemed completed and the award shall be immediately and
fully vested and (iii) with respect to such options and SARs, all such options
and SARs, whether or not then exercisable in whole or in part, shall be fully
and immediately exercisable.

4. Restrictions on Shares. Each grant and award made hereunder shall be
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of common stock subject
thereto upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery of
shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of common stock
delivered pursuant to any grant or award made hereunder bear a legend indicating
that the sale, transfer or other disposition thereof by the holder is prohibited
except in compliance with the Securities Act of 1933, as amended, and the rules
and regulations thereunder.

5. No Right of Participation or Employment. No person (other than non-employee
directors to the extent provided in Article III) shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to continued employment by the Company,
any subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.

6. Rights as Stockholder. No person shall have any right as a stockholder of
the Company with respect to any shares of common stock or other equity security
of the Company which is subject to a grant or award hereunder unless and until
such person becomes a stockholder of record with respect to such shares of
common stock or equity security.

7. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

-14-
<PAGE>

8. Approval of Plan. The Plan and all grants and awards made hereunder shall
be null and void if the adoption of the Plan is not approved by the affirmative
vote of a majority of the shares of common stock present in person or
represented by proxy at the 1995 annual meeting of stockholders.

-15-

<PAGE>

Exhibit 12

R.R. DONNELLEY & SONS COMPANY

STATEMENT OF COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
Twelve months ended
12/31/95
-------------------
<S> <C>
Earnings
Earnings before Income Taxes $439,532
Interest Expense 109,759
Interest factor in operating leases (1) 16,400
Amortization capitalized interest 6,731
--------
Earnings available for fixed charges $572,422
========
Fixed Charges
Interest expense $109,759
Capitalized interest 10,899
--------
Interest incurred 120,658
Interest factor in operating leases (1) 16,400
--------
Total fixed charges $137,058
========
Ratio of earnings to fixed charges 4.18
========
</TABLE>

(1) Management estimates one-third of current year operating lease payments
to be the interest factor in such rentals.

<PAGE>

Form 10-K
Year-Ended 12/31/95
Exhibit 21

SUBSIDIARIES OF R. R. DONNELLEY & SONS COMPANY
(As of March 7, 1996)

Subsidiaries of Place of
R. R. Donnelley & Sons Company Incorporation
------------------------------ -------------

77 Capital Corporation Delaware

77 Capital Partners L.P. Delaware

Allentown S.H. Leasing Company Delaware

C & E Transport, Inc. Delaware

CWH Supply Company Delaware

Caslon Incorporated Delaware

Chemical Equipment S.H. Leasing Company Delaware

Coris Inc. Delaware

Customer Insight Company Delaware

DPA Printing Company, SP. Zo.o. Poland

Donnelley Caribbean Graphics, Inc. Delaware

Donnelley Enterprise Solutions, Inc. Delaware

Donnelley Holdings, Limited Delaware

Donnelley International, Inc. Delaware

Donnelley Satellite Services, Limited Delaware

Donnelley Satellite Graphics, Limited Delaware

Editorial Lord Cochrane, S.A. Chile

European-American Ink Sales Corporation Iowa

FFH Corporation Delaware

HCI Holdings Delaware

Haddon Craftsmen, Inc. Delaware

Heritage Preservation Corporation South Carolina

Impresora Donneco Internacional, S.A. de C.V. Mexico

Kittyhawk S.H. Leasing Company Delaware

Laboratorio Lito Color S.A. de C.V. Mexico
<PAGE>

Page 2
Form 10-K
Year-Ended 12/31/95
Exhibit 21

Subsidiaries of Place of
R. R. Donnelley & Sons Company Incorporation
------------------------------ -------------

Lombard Information Resources Incorporated Delaware

M/B Companies, Inc. Iowa

Metromail Corporation Delaware

Mailing List Research of Canada, Limited Canada

Pan Associates L.P. Delaware

R. R. Donnelley Far East, Limited Delaware

R. R. Donnelley Deutschland GmbH Frankfort

R. R. Donnelley Printing (France) SARL France

R. R. Donnelley International, Inc. Delaware

R. R. Donnelley Financial(Hong Kong) Limited Hong Kong

R. R. Donnelley Limited United Kingdom

R. R. Donnelley Mendota, Inc. Delaware

R. R. Donnelley Marketing Services Group Limited United Kingdom

R. R. Donnelley Nederland B.V. The Netherlands

R. R. Donnelley Norwest Inc. Oregon

R. R. Donnelley Printing Company Delaware

R. R. Donnelley Printing Company L.P. Delaware

R. R. Donnelley Receivables, Inc. Nevada

R. R. Donnelley Sales Corporation Barbados

R. R. Donnelley Seymour, Inc. New Jersey

R. R. Donnelley U.K. Marketing Services Limited United Kingdom

R. R. Donnelley (Canada) Limited Ontario

R. R. Donnelley (Chile) Holdings, Inc. Delaware

R. R. Donnelley (Europe) Limited Delaware

R. R. Donnelley (India) Pvt Ltd India

R. R. Donnelley (Mauritius) Holdings Ltd Mauritius

R. R. Donnelley (Mexico) S.A. de C.V. Mexico

R. R. Donnelley (Santiago), Inc. Delaware

R. R. Donnelley (U.K.) Limited United Kingdom

Shenzhen Donnelley Bright Sun Printing Co. Republic of China
<PAGE>

Page 3
Form 10-K
Year-Ended 12/31/95
Exhibit 21

Subsidiaries of Place of
R. R. Donnelley & Sons Company Incorporation
------------------------------ -------------

Siegwerk Sales & Services L.P. Delaware

Wyoming Avenue Holdings, Inc. Delaware

Winfield Avenue Holdings, Inc. Delaware

Stream International Holdings Inc. Delaware

Software Holdings, Inc. Delaware

Stream International Inc. Delaware

Software Intermediate Holdings, Inc. Delaware

Corporate Software Limited K.K. Japan

Corporate Software Integration Virginia
Services, Inc.

Corporate Software Securities Corporation Massachusetts

800 Software, Inc. California

Stream International Canada Ltd Canada

Corporate Software GmbH Germany

Corporate Software Limited United Kingdom

International Software Limited United Kingdom

Corporate Software Europe B.V. Netherlands

Corporate Software SA France

Stream International Limited United Kingdom

Stream International Ltda. Brazil

R. R. Donnelley Japan Co., Ltd. Japan

Stream International S.A. de C.V. Mexico

R. R. Donnelley Holdings (Australia) Limited Delaware

R. R. Donnelley Australia PTY Ltd Australia

Donnelley Korea Korea

Stream International K.K. Japan
<PAGE>

Page 4
Form 10-K
Year-Ended 12/31/95
Exhibit 21

Subsidiaries of Place of
R. R. Donnelley & Sons Company Incorporation
------------------------------ -------------

Stream International PTE LTD. Singapore

Donnelley Documentation Services (Ireland) Delaware
Limited

R. R. Donnelley Leinster Unlimited British Virgin Islands

R. R. Donnelley (Ireland) Limited Delaware

Stream International Ireland (Holdings) Ireland

Stream International Dublin Ireland

Stream International Kildare Ireland

Disk Duplicating Ireland Ireland

Stream International Language Solutions Ireland

Fulfill: Plus PTE LTD Singapore

Stream International Fulfillment Services Ireland
Europe

Eurotel Marketing Ireland

Stream International B.V. Dutch

R. R. Donnelley Language Solutions Dutch
International B.V.

R. R. Donnelley Deutschland Gmbh Germany

R. R. Donnelley Language Solutions Belgium Belgium
N.V.

R. R. Donnelley Language Solutions France France
Sarl

Ink Nederland B.V. Netherlands

R. R. Donnelley France, S.A. France

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated January 25, 1996 (except with respect to the
matter discussed in the Subsequent Event Footnote, as to which the date is March
7, 1996) included in this Annual Report of R. R. Donnelley & Sons Company on
Form 10-K for the year ended December 31, 1995, into the Company's previously
filed Registration Statements on Form S-8 (File Nos. 33-19803, 33-43632,
33-49431, 33-49809, 33-52805 and 33-61387), Form S-3 (33-57807) and previously
filed post-effective amendments thereto.

Chicago, Illinois,
March 11, 1996

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 33,122
<SECURITIES> 0
<RECEIVABLES> 1,491,470
<ALLOWANCES> 25,311
<INVENTORY> 380,078
<CURRENT-ASSETS> 1,907,959
<PP&E> 4,120,449
<DEPRECIATION> 2,111,461
<TOTAL-ASSETS> 5,384,810
<CURRENT-LIABILITIES> 1,130,374
<BONDS> 1,560,960
<COMMON> 330,612
0
0
<OTHER-SE> 1,842,558
<TOTAL-LIABILITY-AND-EQUITY> 5,384,810
<SALES> 6,511,786
<TOTAL-REVENUES> 6,511,786
<CGS> 5,302,394
<TOTAL-COSTS> 5,952,377
<OTHER-EXPENSES> 10,118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,759
<INCOME-PRETAX> 439,532
<INCOME-TAX> 140,739
<INCOME-CONTINUING> 298,793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 298,793
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 0

</TABLE>