c1-4 04.7.23 3:59 PM ページ 2

Excitement of

Discovery

ANNUAL REPORT 2004

ドキュメント1 04.7.23 3:56 PM ページ 1

HOYA Corporation is engaged in two main fields of business: Information Technology, supporting cutting-edge global
technologies, and Eye Care, helping people regain clear sight.
The Information and Technology field includes products used in digital consumer electronics, and components
indispensable in manufacturing processes. Primary examples are optical lenses used in digital cameras, glass disks forthe hard disk drives (HDDs) used in computers and portable music players, mask blanks and photomasks essential in
the manufacture of semiconductors, and large-scale photomasks necessary to produce liquid crystal display (LCD)
panels. Hoya’s IT products support cutting-edge technologies.
The Eye Care field encompasses the manufacture and wholesale of eyeglass lenses and frames, development
and retail sales of contact lenses, and the development and manufacture of intraocular lenses (IOLs) used in cataract
operations. From everyday life to medical applications, Hoya’s high-quality products help people regain clear sight.
Hoya also produces crystal products, standing alongside Eye Care in helping to define the Hoya brand. Though
this area of the business was reduced in size under business restructuring, it continues to offer products that add colorand comfort to everyday life, and has achieved a high level of consumer acceptance.

Cautionary Statements with Respect to Forward-Looking Statements
Statements made in this annual report with respect to plans and future performance that are not historical fact are forward-looking statements. These statements
are based on management’s assumptions and beliefs in light of the information currently available to it. Hoya cautions that a number of factors could cause actual
results to differ materially from those discussed in the forward-looking statements. Such factors include but are not limited to foreign exchange rates, market trends
and economic conditions.

Hoya’s fiscal year ends on March 31. In this annual report, references to years indicate the period ended March 31 of the year indicated.

HOYA 2004-e 入稿用0705 04.7.22 7:57 PM ページ 2

Consolidated Financial Highlights(Years ended March 31)

2003

2004

Net sales (Millions of Yen)

246,293

271,444

Operating income (Millions of Yen)

52,983

68,167

Ordinary income (Millions of Yen)

50,87466,554

Net income (Millions of Yen)

20,03839,549Total assets (Millions of Yen)

274,289

289,887

Total shareholders’ equity (Millions of Yen)

224,219

218,979

Net income

171.10350.96

Diluted net income

171.08350.56

Cash dividends applicable to the year

50.00

100.00Price earnings ratio (Times)

41.79

28.92

Price cash flow ratio (Times)

20.83

17.61

Per share data (Yen)Price book value ratio (Times)

3.68

5.16

Stock price at year-end (Yen)

7,150

10,150Contents

To Our Stakeholders
Our Businesses

2
6

Information Technology

8Electro-Optics

8

Eye Care

14

Vision Care

14

Health Care18

Lifestyle Refinement

20

Crystal

20

R&D and New Businesses

22

Environmental Efforts

24

Financial Section and Corporate Data

27

Note on segment data:
In addition to the review of operations by segment found on pages 8 through 21 ofthis annual report, segment-specific data can be found on pages 34 through 36, inthe financial section.

1

HOYA 2004-e 入稿用0705 04.7.22 7:57 PM ページ 3

One of the most notable developments of the past year has been the recovery in corporate performance, particularly in the
manufacturing sector, led by digital consumer electronics. Hoya was able to benefit from this trend during fiscal 2004
(ended March 31, 2004) by focusing intently on responding to the needs of its customers.

Digital Consumer Electronics and Hoya
Hoya’s Information Technology products are essential to digital consumer electronics. For example, as digital cameras
become more compact, lightweight and offer more features, designing these products would be extremely difficult without high-precision glass aspherical lenses. Device mobility has also progressed in recent years, and there is growing
demand for such products as notebook computers. As a result, Hoya has experienced increased demand for shock-resistant glass disks used in notebook computer HDDs. Hoya’s cutting-edge technology development, high-quality and highprecision products, and reliable supply system have helped it establish strong, trusting relationships with clients for thephotomasks and mask blanks that are an integral part of the manufacturing process of increasingly miniaturized semiconductors, and for the large-scale photomasks used to make liquid crystal display panels for LCD televisions.

Initiatives During Fiscal 2004
During fiscal 2004 Hoya continued to develop and produce high-precision, high-quality products, but the extraordinaryrise in the scale of the digital consumer electronics market resulted in a flood of orders and requests that exceeded theCompany’s production capacity. In response we formulated a plan to increase capacity through equipment purchases, staff
increases and new production facilities, while running existing facilities at full capacity. However, demand greatly exceeded our expectations in terms of speed and volume, and our supply was unable to keep pace in certain areas. I would liketo take this opportunity to apologize to customers inconvenienced by our inability to fill all requests.
Regarding the establishment of manufacturing facilities, we consider it a priority to maintain a structure that is able
to supply customers from nearby locations, as well as one that can provide goods appropriate to future demand andmarket scale, while bearing in mind the need for a quick response to customer needs. Accordingly, we decided, after

To O u r S ta k e h o l d e r s

2

HOYA 2004-e 入稿用0705 04.7.22 7:57 PM ページ 4

much consideration, to make investments in new manufacturing plants. Specifically, we have begun construction on an
optical lens plant in China, following the manufacturers of finished products that are our customers as they shift production to overseas plants in China and Asia. We have also broken ground on a manufacturing plant in Taiwan for large-scale
LCD photomasks, in order to more quickly respond to the robust demand from Taiwanese LCD manufacturers, who haverecently reported rapid growth. In anticipation of growing demand in the HDD glass disk business following the diversification of applications from notebook computers to include portable music players and other devices, Hoya acquired theglass disk business of Nippon Sheet Glass Co., Ltd. In addition, we began work on a manufacturing plant in Singapore thatwill produce soft IOLs, a business that we are looking to strengthen in overseas markets.
Another notable aspect of fiscal 2004 was the SARS outbreak, which delayed the planning and construction of theabove-mentioned manufacturing plants in China and Asia. Construction has since proceeded smoothly, and we expect tobegin full-scale operations at the IOL plant in Singapore, the optical lens plant in China, and the large-scale LCD photomask
plant in Taiwan during the second half of fiscal 2005.
In the Eye Care field, which has experienced a rapid contraction of the Japanese market in recent years, the direct
effects from the positive movement in digital consumer electronics was minimal, but improvement in the general economy
stemmed the fall in retail prices being caused by deflation. Amid these circumstances, the contact lens business, which
operates retail stores in Japan, undertook a scrap-and-build program to proactively open new stores and increase convenience to customers, and sought to differentiate itself from discount retailers by offering service with high degrees ofadded value. The eyeglass business, which is developing worldwide, strengthened its processing capability by expanding
its laboratory (processing facility) in Spain, and established a laboratory in Shanghai to serve China, a market that is
expected to grow rapidly. Also, in the robust European market, several new products were introduced as a means ofimproving the brand and increasing market share, and a number of these have garnered a fair amount of interest.
On the whole, the fiscal year under review was one of earnestly trying to adapt to the radical changes in the external environment brought on by the upswing in demand for digital consumer electronics. As a result, though we achieved
record performance, change happened faster than we anticipated, and our production capacity was stretched to its limit.

Hiroshi Suzuki, President and CEO

3

HOYA 2004-e 入稿用0705 04.7.22 7:57 PM ページ 5

I do not think we were able to achieve all we could have in terms of customer satisfaction, or in making preparations forthe future.
However, I would like to express my appreciation to the employees who worked extremely hard, adapting flexibly
to changing circumstances in order to meet demand that exceeded our production capacity. I feel that we achieved astructure built of a small but highly efficient team.

Review of Fiscal 2004 Results
Looking at results by segment, sales rose 19.0% in the Information Technology field, due to the rapid expansion of thedigital consumer electronics market, and greater orders for high-precision products brought on by rising demand from
customers for new development.
In the Eye Care field sales rose 4.5%. The domestic market for eyeglass lenses remained difficult despite the trend
toward recovery, but in overseas markets, our strategies to strengthen sales with high-value-added products proved effective. The contact lens business benefited from a restructuring of the business model, and strong sales of IOLs.
Combined sales from these two major segments offset declines in sales in other areas, resulting in a rise in consolidated net sales of 10.2%.
Operating income rose 28.7% from the previous fiscal year due to a greater volume of orders for high-precision
products to meet customers’ specific needs, along with increased profitability realized from strengthening high-valueadded products. Ordinary income rose 30.8%, despite the increase in exchange loss due to the rise in the value of theeuro against the dollar. Net income nearly doubled, rising 97.4% from the previous fiscal year, despite an extraordinary
loss of ¥12.0 billion for amortization of goodwill. Sales, operating income, ordinary income and net income all reached
new highs.
Cash dividends for the fiscal year were increased ¥50 over the previous year for a total of ¥100 per share.

4

HOYA 2004-e 入稿用0705 04.7.22 7:57 PM ページ 6

Corporate Governance
Hoya adopted the company-with-committees system in June 2003. The Board of Directors, of which outside directors makeup more than half the members, regularly solicits detailed and precise reports from the operating officers. These officers
are responsible for strict oversight, as well as reporting, a system that provides timely and efficient management.
Outside directors sit on every committee, which we feel allows for impartial judgments from an external perspective.

Outlook
For the Hoya Group to achieve further growth on a consolidated basis, it must respond flexibly to changes in the market,
utilize management resources effectively, and create new businesses.
Hoya’s business interests stretch across a wide range of fields. To respond flexibly and quickly to trends related tocustomers, markets, products and competitors, we must be able to accurately grasp what our customers need, form strategies to stay ahead of the competition, and implement effectively. We would also like to quickly develop business in rapidly
growing overseas markets, expanding the business worldwide and making full use of the global management capabilitiesof the Group.
M&A investment forecast at the beginning of fiscal 2004 was terminated, so we returned the excess to investors in
the form of treasury stock acquisitions and an increase in cash dividends. Also, more than just capital and dividend initiatives, I believe that we must shift to a portfolio different from that of our traditional earnings structure, so that investment
in business to meet customers’ needs over the medium to long term will not be forestalled. To do this it is necessary to
uncover and acquire new businesses. Going forward, we will concentrate on addressing this longstanding issue.
The Hoya Group seeks to acquire and maintain leading shares in world markets, and through the proper mixing ofmanagement resources utilize its drive, as well as its competitive, technological and development capabilities to theirfullest extent, maximizing corporate value. I offer my sincerest appreciation to all our shareholders and customers, and ask
for their continued support.

Hiroshi Suzuki, President and CEO

5

HOYA 2004-e 入稿用0705 04.7.22 7:58 PM ページ 7

Our Businesses

6HOYA 2004-e 入稿用0705 04.7.22 7:58 PM ページ 8

H o y a ’s m a i n b u s i n e s s f i e l d s a r e I n f o r m a t i o n Te c h n o l o g y a n d E y e C a r e .
Hoya continually strives to increase growth and profitability for the Group,and to maximize cor porate value.

7

HOYA 2004-e 入稿用0705 04.7.22 7:58 PM ページ 9

Information
Technolog y
There seem to be no limits to the evolution of technology—the crystallization of human wisdom.
The microscopic world that has been developed by cutting-edge technology, however,is also a part of the natural world. Technology, therefore,
is in a certain sense a meeting of the man-made and natural worlds.

Electro-Optics
MASK BLANKS, SEMICONDUCTOR PHOTOMASKS AND LCD PHOTOMASKS
Mask blanks are precisely polished glass plates coated with a thin, metallic light-sensitive film. Etching circuit patterns inthese blanks with an electron beam produces a photomask.
In fiscal 2004, sales of digital consumer electronics such as digital cameras and LCD televisions grew significantly,
demand for mobile telephones and personal computers was strong, and there was a boost in investment at client companies
aimed at development of next-generation products.

8

HOYA 2004-e 入稿用0705 04.7.22 7:59 PM ページ 10

T h e I n f o r m a t i o n Te c h n o l o g y f i e l d a c c o u n t s f o r a p p r o x i m a t e l y
h a l f o f t h e H o y a G r o u p ’s s a l e s . A l l t h e p r o d u c t s a r e i n t e r mediary device materials, those used in the production process.
These products are essential to the manufacture of digital cons u m e r e l e c t r o n i c s a n d o t h e r I T- r e l a t e d d e v i c e s i n c o r p o r a t i n g
c u t t i n g - e d g e t e c h n o l o g y.

9

HOYA 2004-e 入稿用0705 04.7.22 7:59 PM ページ 11

In the market for semiconductor mask blanks, demand was strong for phase shift mask blanks, in which Hoya’s highprecision products hold a leading share, and sales increased. At the same time, the need for more precise technologies isalso increasing. Currently, the most common light source used in the steppers to expose circuit patterns onto silicon wafers
is krypton fluoride (KrF, wavelength 246nm* 1), but it is becoming clear that as greater precision is required, argon fluoride(ArF, wavelength 193nm) will be used for next-generation products.

COMPETITIVENESS OF
H OYA’ S M A S K B L A N K S

The principal factor underpinning the competitiveness of Hoya’s mask blanks is the rigorous quality management employed throughout the production process. Technicians at
the Nagasaka Plant in Yamanashi Prefecture use state-of-the-art equipment to achieve ahigh level of technical expertise in polishing of the glass materials, and applying themetallic film and resist coatings.

In semiconductor photomasks, although Hoya’s market share is not large, the synergistic effect realized fromcutting-edge development assessment in mask blanks and LCD mask technologies is significant, making it an importantbusiness for the Company. In terms of more high-precision products, Hoya has begun manufacturing masks following 90nm
design rules* 2, and is currently working to implement mass production. Development has also been started on products
following 65nm design rules. Expansion of sales overseas was a priority issue during fiscal 2004, and Hoya’s products havebeen highly praised by overseas customers.
Large-scale LCD photomasks are the master plates used in the manufacture of display panels found in LCD televisions, PC monitors and mobile handset screens. Recovery in the PC market, shifting demand from CRT (Braun tube) to LCD
monitors, the increasing size of LCD monitors and expansion of the LCD television market all resulted in growing sales ofthese photomasks.
Because Hoya’s production capacity was unable to keep pace with the rapid growth of the market, the Company ispressing forward with the establishment of a production plant in Taiwan to add to its current facility in Kumamoto, Japan.
This new plant is scheduled to begin operating in the second half of fiscal 2004. A plant in Korea is also being planned as a
response to market expansion and optimization of production facilities. Large-scale masks for LCDs are becoming evenlarger as LCD televisions increase in size and customers strengthen their cost competitiveness. Currently, the main sizes ofglass panels in production are the fifth* 3 and sixth* 4 generations. Certain manufacturers are planning to begin productionof the seventh* 5 generation in 2005, and are planning to build production lines for the eighth* 6 generation for some time10

HOYA 2004-e 入稿用0705 04.7.22 7:59 PM ページ 12

around late 2006 to 2007. Hoya’s technical development capabilities have been well regarded in the display panel industry,
and we will continue to strive to achieve closer relationships with our customers, and develop the next generations of largescale masks.

Notes:*1. A nanometer (nm) equals one billionth of a meter.
*2. Design rules are restrictions set on LSIs at the design stage to ensure conformity with the manufacturing process.
*3. Fifth generation refers to a glass size of 1,100mm x 1,300mm.
*4. Sixth generation refers to a glass size of 1,500mm x 1,850mm.
*5. Seventh generation refers to a glass size of 1,870mm x 2,200mm.
*6. Eighth generation refers to a glass size of 2,120mm x 2,320mm.

LCD PHOTOMASKS

Large-scale photomasks are necessary for efficient production with the seventh andeighth generation glass panels that are over two meters in length. As the leading company
working with large-scale photomasks, Hoya is employing its technical skill to meet customer expectations, and maintain competitiveness.

GLASS DISKS FOR HDDS
Glass disks are used in the HDDs that are the memory devices in computers and other devices. Hoya handles the manufacturing process from melting of the glass to the final processing, producing both substrates (glass substrates, the polishedglass disks) and media (glass substrates coated with a magnetic layer).
During fiscal 2004, sales of both substrates and media increased. The bulk of substrate sales was for 2.5-inch products. These are employed in infrastructures such as wireless LANs, driven by the shift in office computers from desktop to
notebook styles. Shock-resistant glass disks are routinely used in notebook computers and other mobile devices, anddemand increased to a point that exceeded supply. In terms of facilities, in March 2004 Hoya took over the substrate business of Nippon Sheet Glass Co., Ltd., further enhancing its position in the market.
In media products, sales of 40GB type disks are growing steadily, developing into a stable business. Performance wasalso boosted by increasing demand for 1.8-inch and 1.0-inch glass disks, due to the growing popularity of portable music
players. Currently, Hoya retains an advantage as the only company with production technology for 1.0-inch substrates, andis focusing on producing even smaller products.

11

HOYA 2004-e 入稿用0705 04.7.22 7:59 PM ページ 13

Looking ahead, Hoya is expanding its production structure and increasing efficiency in the line processes of theplants it acquired, working to eliminate shortfalls in supplies of substrates and ensure that it will be able to fulfill its supply
responsibilities to customers. In terms of technology development, Hoya has developed practical applications for a recording
method known as perpendicular magnetic recording, which will allow for greater compactness and precision. Compared toaluminum media, there are fewer restrictions on coating, high-temperature processing is possible, and there is greatershock resistance, raising expectations for glass media. These products allow Hoya to take full advantage of its technologies
and expertise, and are expected to be one of the areas that will nourish the Company in the future.

PRODUCTION OF
GLASS DISKS

The glass disk production process is spread throughout Asia. Research and development,along with melting of the glass and forming of the substrate, is done in Japan. Precision
polishing of the substrate is performed in Thailand, and in the Philippines at facilities
acquired from Nippon Sheet Glass Co., Ltd. Application of the magnetic coating, andpreparation of the finished product (media) is done in Singapore.

OPTICAL GLASS
Hoya’s lineup of optical glass products includes the molded and polished lenses used in digital cameras and video recorders,
as well as glass materials for LCD projectors and interchangeable lenses.
Hoya is the only manufacturer in Japan that handles all aspects of production, from glass materials and lenses to lensdevices, and holds a significant advantage in terms of quality, cost and delivery time. The benefit to customers is that Hoya
is able to produce glass materials tailored to the specifications of each company, and develop a consistent strategy in termsof design, production and supply. Sales rose during fiscal 2004, owing to brisk business in the market for finished products
employing optical lenses, mainly digital cameras. The rapid rise in demand outstripped capacity, however, and the Company
was not able to adapt sufficiently.

12

HOYA 2004-e 入稿用0705 04.7.22 7:59 PM ページ 14

ASPHERICALGLASS LENSES

Because aspherical lenses have less aberration, give greater precision to optical devices,
and allow the number of lenses used to be reduced, they serve a vital role in making optical devices smaller and lighter. They are also more environmentally friendly, as they are
manufactured with mold forming, and do not need to be polished.

Looking ahead, Hoya expects an expansion of the market for finished products, owing to greater pixel density andmore widespread use of single-lens reflex lenses in digital cameras, and more camera-equipped mobile telephones. In particular, it is expected that the plastic lenses commonly used in camera-equipped mobile telephones will be replaced byaspherical glass lenses in the future, a development that will allow Hoya to utilize its competitive advantage. Moreover, themarket for these products will not be limited to Japan, but will grow worldwide as well.

P RO D U C T I O N FAC I LI T Y
FOR OPTICAL PRODUCTSIN

SUZHOU, CHINA TO
B E G I N O P E R AT I O N S

The optical products plant that was under construction in Suzhou, China has been completed, and trial operations have begun. Full-scale operations are planned for October
2004. A similar facility in Thailand is already operating at full capacity, and the additionof this plant will allow for stable production of high-quality products overseas, increasing
cost competitiveness as well as customer satisfaction.

13

HOYA 2004-e 入稿用0705 04.7.22 8:00 PM ページ 15

Eye CareAs sight is commonly regarded as one of the most important of the five senses,
good eye care helps improve the conduct of everyday life.
Hoya helps people maintain their eyesight through vision correction,
conducting research from the varying perspectives of customers, developing and offering new products.

Vision Care
The Vision Care division handles eyeglass lenses to correct the sight of people afflicted with near-sightedness, astigmatism,
far-sightedness or presbyopia, and helps improve comfort by minimizing many of the negative factors involved in wearing
eyeglasses.
One concern of eyeglass wearers is the distortion that occurs around the edge of the lens due to the viewing angle
or thickness of the lens. Also, to people looking at the wearer, the eyes seem larger with lenses for far-sightedness, smallerwith lenses for near-sightedness, and the cheekbones appear distorted. Factors such as these give a negative image toward
wearing glasses. To eliminate these drawbacks, Hoya has developed high-value-added products such as progressive lenses,
high-refraction lenses, aspherical lenses, and bi-aspheric lenses, providing a natural comfort to vision.

14

HOYA 2004-e 入稿用0705 04.7.22 8:00 PM ページ 16

The Eye Care field encompasses the manufacture and wholesale of lenses and frames for eyeglasses, development and retailsale of contact lenses, and development and manufacture of
IOLs, providing high-quality products to help people maintain good vision.

15

HOYA 2004-e 入稿用0705 04.7.22 8:00 PM ページ 17

Hoya manufactures and sells eyeglasses throughout the world, with production, processing, and technical development that is meticulously tailored to the needs of varied customers in particular regions and markets. Beyond this, however,
Hoya pursues a wide range of initiatives, conducting research and analysis of each region to ensure proper assessment ofeach market, working to maintain cost competitiveness, and uncovering latent demand.
The characteristics of each of Hoya’s main markets (Japan, Europe, the United States and Asia), and measures being
pursued are as follows:
The Japan market is characterized by strong demand for high-value-added products such as bi-aspheric single visionlenses that reduce distortion around the lens edges, double surface progressive lenses for the seniors market that correct
both near- and far-sightedness, and lenses with special scratch-resistant coatings. During fiscal 2004, the economy began
to improve overall, and demand returned for eyeglass lenses, stymieing the fall in prices. Amid this market trend, Hoya
continued to develop and sell high-value-added products, particularly progressive lenses.

COAT I N GTECHNOLOGIES

Hoya’s eyeglass lenses are highly regarded in terms of development, design and quality.
Revolutionary coating technologies in particular—the processing of the surface of thelenses—have established Hoya’s reputation. It is the coating that results in variety ofvalue-added lenses. SFT coating, which Hoya recently developed and launched, not only
resists smudging, but also is smoother than ever before possible, creating a special kind of
scratch-resistant lens. Combining these coatings produces a highly functional, highvalue-added lens.

In Europe, people are conscious of eyeglasses, and high-value-added products such as multifocal lenses for seniors
have been well received. Notable events during the fiscal year under review included a surge in demand in Germany prior toa change in insurance policy to exclude the purchase of eyeglasses, as well as the transfer and expansion of a laboratory(processing facility) in Spain, one of Hoya’s principal markets, that strengthened the Company’s processing ability. As aresult, the European market provided the highest performance in the Vision Care division. Looking ahead, Hoya will seek toenhance its brand image and expand its share through strengthened sales of high-value-added products to fill strong
demand for special orders.

16

HOYA 2004-e 入稿用0705 04.7.22 8:00 PM ページ 18

In the United States, although the acquisition of a U.S. company in 2000 quickly expanded the number of retaillocations, the introduction of Hoya’s unique sales system and management style is still only half completed, and theCompany is handicapped by low brand awareness. Looking ahead, in addition to the shock-resistant lenses that are one of
the Company’s leading products in this market, Hoya will introduce products with high degrees of technical sophistication
to appeal to the market, heightening brand awareness and increasing sales through expanded marketing.
In Asia, high-value-added products such as progressive lenses are extremely popular. During fiscal 2004, strong sales
growth was seen in China and Australia. Compared to other regions, Asia holds more promise, with increases in personal
income and the completion of a laboratory in Shanghai in February 2004 driving strong demand for Hoya’s high-valueadded products.
In terms of production, a mass-production facility serving the Japanese market and one of Hoya’s four Japaneselaboratories were transferred from Japan to Thailand. These measures are part of an ongoing revision of the production
structure that seeks to transform the production system and achieve optimum production.

EYEGLASS FRAMES

Drawing on the accumulated expertise of a specialist eyeglass lens manufacturer, Hoya
has launched a line of practical, functional and fashionable products that have won
acclaim from many wearers.

17

HOYA 2004-e 入稿用0705 04.7.22 8:00 PM ページ 19

Health Care
The Health Care division handles business related to IOLs and contact lenses.
IOLs are artificial lenses used to replace the clouded natural crystalline lenses in cataract patients, allowing them torecover their sight. Hoya has been conducting research and development in this field for some time, and is strengthening its
sales operations in Japan and Europe.
Hoya began selling IOLs in Europe in September 2003, after obtaining a CE Marking* 1, and sales are being expanded
through the conclusion of marketing contracts with prominent distributors in each country. All of these distributors havestrong networks in their respective countries, and sales are growing steadily.
In the United States, clinical trials* 2 have begun, with the aim of receiving FDA* 3 certification and launching a product in 2007.

IOL DEVELOPMENT

Many long months and years have already been spent in the development of IOLs.
Manufacturers have used feedback from the medical community to improve materials,
design, processing and surgical instruments, bringing the industry to the level it has
achieved today. Hoya’s IOLs have been developed using direct feedback from ophthalmologists. They have been highly praised for their ease of insertion during surgery andcontrol of secondary cataracts, and have also been launched in Europe. Hoya consistently
pursues development in the spirit of innovation, in order to stand out in the market.

Fiscal 2004 was a year in which Hoya was able to gain a foothold in Europe and the U.S. for international development of the IOL business.
In terms of products, a redesigned lens effective for secondary cataracts was launched in May 2003. An injector used
to insert IOLs during surgery was launched in January 2004, and has been highly praised by ophthalmologists for its ease ofuse. Looking ahead, Hoya plans to introduce yellow IOLs, with a lens color that more closely matches the actual color of thenatural lens of the eye, as well as an injector cartridge that permits a smaller incision during surgery.
The contact lens business is not expected to experience rapid growth like the IOL business, but it remains extremely

18

HOYA 2004-e 入稿用0705 04.7.22 8:00 PM ページ 20

stable, and is the earnings pillar of the Health Care division, accounting for more than 80% of sales. The number of Eye
City locations, Hoya’s contact lens retail chain in Japan, totaled 111 stores as of March 31, 2004. While pursuing a programof scrap-and-build the Company plans an aggressive increase in the number of stores to 150 locations by fiscal 2007.
The division recorded increases in both sales and earnings in fiscal 2004, the result of new store openings in carefully considered locations and store development appropriate to Eye City, with attention to such points as product lineups
tailored to the type of customer common to each store, meticulous attention to customer needs, and a level of service thatdifferentiates Eye City from the competition.

IOL PLANTIN SINGAPORE

All production lines at the plant established in Singapore are ready for operation, andtests are currently being conducted. This plant is expected to obtain CE Marking certification in September 2004, and will soon begin full-scale operations to supply theEuropean market.

Looking ahead, Hoya will develop its business along with growing demand for high-value-added products such as
multifocal lenses, and toric lenses for astigmatic eyes, while maintaining a balance between purchased products and Hoyadeveloped products.
Hoya seeks to be the leading company in the IOL business. In the contact lens business as well, Hoya is pursuing
greater possibilities for customer satisfaction in terms of both stores and products, and is developing a business that willcontribute to the work of ophthalmologists.

Notes:*1. CE Marking is a product certification for compliance with the relevant safety standards of the European Union (EU).
*2. Clinical trials are tests to ensure the effectiveness and safety to humans of drugs and devices that have been developed.
*3. The FDA (Food and Drug Administration) is the U.S. authority responsible for approving clinical trials and reviews of medicinesand foods.

19

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 21

CrystalThe Crystal division produces high-quality tableware, interior ornaments such as vases and clocks, and crystal jewelry.
The gift market for crystal is shrinking each year due to the economic slowdown, with demand in the corporate
market having a particularly significant impact. In response to this condition, Hoya implemented a number of proactive
measures to more quickly respond to changes in the market. These included a decisive reduction in the scale of the business, along with an expansion in the lineup of high-quality items, a move that more accurately reflects the dramatic shifts in
consumer needs, and enhances the Hoya brand.
Though the corporate market is shrinking, by targeting individual customers with products to add color and tranquility to their lives, Hoya has invigorated the market and has begun to garner greater support. This has not been enough toequal the decline in corporate demand, however, and the market situation is expected to remain difficult.

LifestyleRefinement
Glass melted at high heat is transformed by the hand of a skilled craftsman,finding new life as a variety of objects. As these objects are carefully cut,they are reborn as glittering works of art that bestow a moment of tranquility on our everyday lives.

20

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 22

The Lifestyle Refinement field consists of the Cr ystal division and other services. Hoya cr ystal is the symbol of the corporate brand, and remains highly regarded. Each product is a
first-class piece, praised both in Japan and around the world
for quality and design. Though the business has been restructured to be more in line with market trends, Hoya continues
to provide products with pride.

21

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 23

R&D and New Businesses

The Hoya Group invests in R&D and business development in order to achieve sustainable growth through a continual
strengthening of business competitiveness and the securing of new growth capabilities.

Group R&D expenses, following a reorganization of the R&D structure in fiscal 2002, have grown slowly to equal approximately 4% of consolidated net sales. Three-quarters of this total was used for technological development in existing businesses, while the remaining 25% was directed toward new businesses. Principal areas of research in existing businesses
were aimed at further growth in the Electro-Optics division, expansion of the high-value-added eyeglass lens business in
Europe and the United States, and fostering of the Health Care division in expectation of growth in the field of ophthalmology. Research is currently focused on hardware, but taking a long-term perspective Hoya is also continuing with research insoftware and services.

Specific areas of R&D for existing businesses include photomask technologies for next-generation lithography, new products
and innovation in glass molded lens technology, greater density in glass memory disks, more advanced eyeglass lenses, andtreatments for cataracts. Hoya’s Electro-Optics division receives many requests from customers and users for joint development of cutting-edge technologies. These projects are not only short- to medium-term new product development, but also
pioneer new possibilities in electro-optics, and present future business opportunities for Hoya.
Research in new business fields includes single-crystal silicon carbide (SiC) semiconductors and devices, optical
network technology, and applications for specific kinds of light, such as excimer and ultraviolet.

In the field of lithography, essential for miniaturization of LSIs, research is being conducted on two next-generation radiation sources-electron beams, and extreme ultraviolet (EUV), which offers an even smaller wavelength than that of argon
fluoride (ArF), the current leading technology. Hoya is continuing development of photomask applications for these newradiation sources, in order to ensure a bright future for our mask blank and photomask businesses. In 2003 we succeededin producing prototypes of multilayer blanks and masks for EUV, as well as electron projection lithography (EPL) membrane

22

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 24

R&D Expenses and Their Ratio to Net Sales(Billions of Yen)
10.0

2000

2001

2002

2003

2004

[％]
4.0

7.5

3.0

5.0

2.0

2.5

1.0

0

0

R&D expenses

7.7

7.3

7.3

8.7

9.8

Ratio to net sales

3.8

3.1

3.1

3.5

3.6

masks and low-energy electron proximity projection lithography (LEEPL) stencil masks for electron beams. Hoya considers
these efforts to be a huge step toward practical application of next-generation lithography technology.
SiC substrates, because they can handle higher voltage and power with low loss compared to previous silicon semiconductor devices, are widely expected to be used in electric automobiles, power generation, industrial machinery anddigital consumer electronics, where they can vastly reduce electricity loss. Building on the crystal cultivation technology it
has developed, Hoya established a development venture company in May 2002, which has begun mass-producing andselling crystal substrates for incorporation into electronic devices.
Hoya continues to develop leading technologies that will help form next-generation products, while at the same time
actively pursuing M&A that will compensate for the limits of the Company’s management resources, and ensure growthover the medium to long term.

Hoya M&A interests are threefold. The first is a large-scale business that could join Electro-Optics and the Eye Care divisions
to become a third pillar of the Company’s business. The second is businesses related to Hoya’s current business fields, buteither upstream or downstream. For example, the acquisition of eyeglass lens laboratories in Europe and the United States,
and the acquisition of the glass disk business from Nippon Sheet Glass Co., Ltd. fall into this category. Third is new businesses founded on innovative technologies. Hoya is currently exploring a number of opportunities in electro-optics. Optical
networks in particular will be an important field for Hoya in the future, considering that the Company is deeply involved inpursuing the potential of light. Through M&A activity that generates synergy with its in-house technologies, Hoya is looking
to create business underpinned by a unique technical competitive capability.

Through greater management efficiency, as well as growth in new products from existing businesses such as FPD masks anddigital camera lenses, Hoya has increased its corporate value. Building on this reinforced management foundation, theCompany will explore further possibilities for new growth, and strive to achieve it.

23

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 25

Environmental Efforts

Environmental issues are increasingly becoming a management priority at many companies. Hoya established pollution
countermeasure committees at each of its factories in 1976, and since that time has made ongoing efforts toward environmental protection.
Hoya published its second environmental report, outlining the Company’s environmental initiatives, in 2002. During
fiscal 2004, Hoya worked to improve its environmental performance, as outlined below.

REDUCINGTHE

BURDENON THEENVIRONMENT

Hoya has focused on four areas in which continuous efforts are made to reduce the environmental burden per unit of net
sales.

1. ENERGY CONSUMPTION
Hoya has implemented a thorough energy conservation program encompassing all of its business divisions. At thefacilities level, buildings have been properly insulated, while pumps and clean room air-conditioning motors havebeen converted to energy-efficient inverter types. Energy conservation has also been extended to the human envi ronment, with temperature controls and more efficient lighting systems. As a result, the ratio of energy consump tion to net sales in fiscal 2004 declined by approximately 8% from the previous fiscal year.

2. WATER USAGE
Although we increased water recycling and water conservation efforts, which served to decrease the amount ofwater usage approximately 53,000m 3 , its ratio to net sales was held to approximately 1% compared with previous
fiscal year.

3. WASTE VOLUME
The recycling of concrete sludge, the thermal recycling of waste plastic, and the reuse of organic solvents resulted
in a decline in the ratio of waste volume to net sales of approximately 27% from the previous fiscal year.

4. VOLUME OF PACKAGING MATERIALS
A review of packaging methods and reuse of the cardboard boxes used to ship products led to a decline in theratio of packaging material volume to net sales of approximately 15% from the previous fiscal year.

24

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 26

Waste Volume and Its Ratio to Net Sales

Energy Consumption (Oil Conversion*) and
Its Ratio to Net Sales(Oil Conversion kl)

2000

2001

2002

[Ratio to Net Sales(1999=100)]

2003

2004

[Ratio to Net Sales(1999=100)]

(Ton)

125

2000

2001

2002

2003

2004

100

125

100

80,000

75

6,000

75

40,000

50

3,000

50

0

25

0

25

Energy consumption

79,068 81,034 74,961 67,879* 61,903

Ratio to net sales

101.1

86.8

89.7

73.2

67.6

Waste volume

4,241

4,400

2,911

2,697* 1,951

Ratio to net sales

74.3

64.6

47.8

39.8

29.2

*Based on the oil conversion factor of the Energy Consumption Law (law regarding
rationalization of energy consumption) .

Water Use and Its Ratio to Net Sales

Packaging Materials and Their Ratio to Net Sales[Ratio to Net Sales(1999=100)](km 3 )

2000

2001

2002

2003

2004

[Ratio to Net Sales(1999=100)]

(Ton)

125

2000

2001

2002

2003

2004

125

100

100

2,000

75

2,000

75

1,000

50

1,000

50

0

25

0

25

Water use

2,498

2.399

2,103

2,039

1,986

Packaging materials

2,130

1,858

1,423

1,216

1,021

Ratio to net sales

100.9

81.2

79.6

69.1

68.4

Ratio to net sales

88.3

64.6

55.4

43.8 *

37.4

ISO 14001 Certification Status (As of March 31, 2004)
Company Name (Location)

Site (Date of Certification)

Notes:
1.Ratio to net sales is indicated based on 1999=100.
2.Statistics of the 10 domestic production sites
Hoya Corporation: Nagasaka, Hachioji, Kumamoto, Akishima, Nagano, Lens
Technology Center, Minakuchi, Kofu, Musashi
Hoya Health Care Corporation: Kodama
3.*Modified due to business integration and other factors.

25

HOYA 2004-e 入稿用0705 04.7.22 8:01 PM ページ 27

INTRODUCTION OF AN ENVIRONMENTAL MANAGEMENT SYSTEM (ISO 14001 CERTIFICATION)
Hoya announced its intention to adopt an environmental management system in line with ISO 14001 international standardsin October 1996, and by the end of fiscal 2001 nearly all mass-production facilities had obtained this certification. Hoya hascontinued to work systematically toward certification throughout the Group, and five more sites were certified during the
fiscal year under review. Four sites were decertified, however, due to plant closures or structural changes, bringing theCompany’s total number of certified sites as of March 31, 2004 to 34.
ISO 14001 Certification Status (As of March 31, 2004)

Information Technology
Eye CareSite (Date of Certification)

Kumamoto Plant (Dec. 12, 1998)
Nagasaka Plant (Jan. 27, 1999)
Akishima Plant (Jan. 29, 1999)
Hachioji Plant (Feb. 22, 1999)
Yokkaichi Plant (Feb. 12, 1999)
Singapore (Mar. 3, 2000)
Lamphun (Nov. 24, 2000)

HOYA LENS DEUTSCHLAND GmbH (Germany)
HOYA LENS DEUTSCHLAND GmbH (Germany)
HOYA LENS DEUTSCHLAND GmbH (Germany)
HOYA CORP. Vision Care Company (Japan)
HOYA CORP. Vision Care Company (Japan)
HOYA HEALTHCARE CORP. (Japan)
HOYA LENS THAILAND LTD. (Thailand)
HOYA LENS U.K. LTD. (United Kingdom)
HOYA LENS ITALIA S.P.A. (Italy)
HOYA LENS THAILAND LTD. (Thailand)
HOYA LENS GUANGZHOU LTD. (China)
MALAYSIAN HOYA LENS SDN. BHD. (Malaysia)
HOYA LENS NEDERLAND B.V. (Netherland)
HOYA LENS MANUFACTURING HUNGARY RT. (Hungary)
HOYA LENS AUSTRALIA PTY. LTD. (Australia)
HOYA LENS AUSTRALIA PTY. LTD. (Australia)
HOYA LENS KOREA CO., LTD. (Korea)
HOYA LENS TAIWAN LTD.
HOYA CORP. Vision Care Company (Japan)
HOYA LENS IBERIA S.A.
HOYA LENS SWEDEN AB

Müllheim (Dec. 4, 1997)
Mönchengladbach (Dec. 4, 1997)
Hamburg (Dec. 4, 1997)
Lens Technology Center (Feb. 20, 1998)
Hamura Lab. (Apr. 30, 1998)
Kodama R&D Lab. (Dec. 2, 1998)
Patumthani (Jul. 8, 1999)
Wrexham (Dec. 24, 1999)
Milano (Dec. 29, 1999)
Ayuttaya (Jan. 20, 2000)
Guangzhou (Nov. 9, 2000)
Kuala Lumpur (Apr. 9, 2001)
Uithoorn (Nov. 1, 2001)
Mateszalka (Jun. 10, 2002)
Sydney (Sep. 16, 2002)
Perth (Sep. 16, 2002)
Seoul (Nov. 4, 2002)
Hshin - Chu (May 19, 2003)*
Kyushu Lab. (Aug. 28, 2003)*
Madrid (Oct. 16, 2003)*
Malmo (Feb. 3, 2004)*

Other

Company Name (Location)

HOYA CORP. (Japan)
HOYA CORP. (Japan)
HOYA CORP. (Japan)
HOYA CORP. (Japan)
NH TECHNO GLASS CORP. (Japan)
HOYA MAGNETICS SINGAPORE PTE LTD. (Singapore)
HOYA GLASS DISK (THAILAND) LTD. (Thailand)
HOYA CANDEO OPTRONICS CORP.
HOYA CORP. (Japan)
HOYA CORP. (Japan)
HOYA OPTICS (THAILAND) LTD. (Thailand)
HOYA OPTO-ELECTRONICS QINGDAO LTD.
HOYA CANDEO OPTRONICS CORP.

HOYA CORP. Crystal Company (Japan)

Musashi Plant (Dec. 4, 1998)

Headquarters, Maebashi, Kyushu (Dec. 20, 2000)

Nagano Plant (Jan. 5, 2001)
Kofu Plant (Jan. 5, 2001)
Lamphun (Feb. 21, 2001)
Qingdao (Feb. 17, 2004)*
Iruma Factory (May 10, 2001) **Notes: 1. *Indicates site that attained the certification during the fiscal year under review.
2. **Reattained the certification according to the change from HOYA Optics Corp.
Iruma Plant.
3. The Akishima Plant includes the R&D center located on its grounds.

26

Financial Section andCorporate Data27

Te n - Ye a r S u m m a r y
1995

1996

1997

1998

¥151,470¥167,106¥193,402¥193,473

Operating income (Millions of yen)

21,03826,22932,936

26,395

Ordinary income (Millions of yen)

21,001

27,37635,086

26,759Net income (Millions of yen)

8,812

11,05615,30012,348Selling, general and administrative expenses/net sales (%)

29.9

29.6

27.7

28.2

Return on assets (%)

4.8

5.7

7.1

5.3

Return on equity (%)

7.6

9.0

11.4

8.5

Inventory turnover (Months)

3.5

3.2

3.2

3.4

Financial leverage (Times)

1.6

1.6

1.7

1.6

Capital expenditures (Millions of yen)

9,304

19,43932,31819,504

Depreciation, amortization and other* (Millions of yen)

13,56513,01815,705

17,570

4.0

4.5

6.0

7.5

74.12

93.32

129.70104.51————

192.70207.31267.00257.64

Shareholders’ equity

1,024.29

1,082.54

1,220.70

1,270.68

Price earnings ratio (Times)

32.38

39.43

42.71

36.36

Price cash flow ratio (Times)

12.45

17.75

20.75

14.75

Price book value ratio (Times)

2.34

3.40

4.54

2.99

Stock price at year-end (Yen)

2,400

3,680

5,540

3,800

Net sales (Millions of yen)

Research and development expenses (Billions of yen)
Per share data (Yen):
Net income
Diluted net income
Cash flow* Amounts include depreciation, amortization of goodwill and loss on impairment of long-leved assets.

28

1999

2000

2001

2002

2003

2004

¥201,290¥201,110¥236,802¥235,265¥246,293¥271,444

Net sales

31,726

34,68845,12843,89852,983

68,167

Operating income

33,61235,484

48,18445,77450,87465,554

Ordinary income

17,837

20,716

21,86023,741

20,03839,549Net income

26.4

25.4

23.8

24.2

24.4

22.3

SG&A expenses / net sales

7.8

8.9

8.6

8.7

7.3

14.0

Return on assets

11.6

12.4

11.8

11.5

9.0

17.8

Return on equity

3.2

3.3

3.1

3.2

2.9

2.8

Inventory turnover

1.4

1.4

1.4

1.3

1.2

1.3

Financial leverage

13,654

17,77039,673

19,585

15,94830,659

Capital expenditures

18,234

16,051

32,138

20,105

19,792

25,328Depreciation, amortization and other*

7.8

7.7

7.3

7.3

8.7

9.8

R&D expenses
Per share data:

151.10176.26

186.60203.15171.10350.96

Net income

—

—

—

—

171.08350.56

Diluted net income

310.61

316.61464.99377.57343.31576.45

Cash flow

1,362.24

1,506.21

1,680.45

1,886.20

1,945.16

1,967.60

Shareholders’ equity

44.47

55.03

43.73

44.50

41.79

28.92

Price earnings ratio

21.63

30.64

17.55

23.94

20.83

17.61

Price cash flow ratio

4.93

6.44

4.86

4.79

3.68

5.16

Price book value ratio

6,720

9,700

8,160

9,040

7,150

10,150Stock price at year-end

29

Management ’s Discussion and Analysis

Scope of Consolidation

Net Sales

The Hoya Group (the "Group") includes Hoya Corporation and its

Consolidated net sales for fiscal 2004, ended March 31, 2004,

55 consolidated subsidiaries (six domestic and 49 overseas), as welltotaled ¥271,444 million, an increase of 10.2% compared withas five domestic affiliates, one of which is accounted for by thethe previous fiscal year. This was due mainly to rising sales in all

equity method.

major divisions. In the Information Technology field, the Electro-

The number of consolidated subsidiaries increased by three

Optics division recorded a significant rise of 21.2% in sales, whileduring the year under review. This was the net result of thein the Eye Care field sales increased 4.0% in the Vision Careestablishment of new companies, acquisition of companies anddivision and 6.2% in the Health Care division.

reapportionment of voting rights that increased the number by

Domestic sales increased 7.5% year on year to ¥148,325

eight, while mergers into Hoya Corporation, liquidation and sales

million, and overseas sales rose 13.7% to ¥123,119 million. Thisof business reduced the number by five. The number of affiliates

represents a domestic share of 54.6% of total net sales, and adecreased by one from the previous fiscal year, as one equity-

45.4% share from overseas. The overseas share increased 1.4

method affiliate became a consolidated subsidiary following

percentage points, as the previous year's ratios were 56.0% forreapportionment of voting rights.

domestic and 44.0% for overseas.

(Millions of yen)
300,000

2000

2001

2002

2003

2004

201,110

236,802235,265

246,293

271,444

2000

2001

2002

2003

2004

44.9

47.4

43.1

45.3

3.6

2.8

3.1

2.2

35.7

36.4

9.7
5.2
0.9

8.5
4.2
0.7

9.8
3.7
0.7

10.9
2.7
0.6

10.4
1.6
0.5

90,174112,341

101,496

111,461

135,071

225,000

Net Sales

150,000

75,0000

Net sales (Millions of yen)(% of total)
100

75

Sales
by Business Segment

50

25

0

Electro-Optics (Millions of yen)

30

39.6

38.3

49.8

1.5

36.2

Photonics (Millions of yen)

7,248

6,534

7,157

5,485

4,116

Vision Care (Millions of yen)

71,75486,19893,184

94,38898,203

Health Care (Millions of yen)

19,541

20,13023,106

26,71728,381

Crystal (Millions of yen)

10,516

9,942

8,788

6,719

4,322

Service (Millions of yen)

1,877

1,657

1,534

1,523

1,351

Hoya converts financial results of overseas subsidiaries from local

companies when compared with the previous term. The euro ratecurrencies to Japanese yen using the average rate applicable to theof 132.65 yen to 1 euro, however, reflected a depreciation of theperiod under review. When compared with the results fromyen of 9.2%, swelling results from European subsidiaries. The

previous periods, the calculation will be affected by the difference

resulting effect on net sales due to exchange rate differences wasin the exchange rate. The U.S. dollar rate used for fiscal 2004 wasa slight increase of ¥97 million, which had little effect on the112.76 yen to 1 U.S. dollar, reflecting an appreciation of the yen

overall growth rate of 10.2%.

of 7.0% and pushing down results for the U.S.-based Group(% of total)
100

2000

2001

2002

2003

2004

73.4

71.3

67.8

67.5

69.4

3.7
10.5

4.2

4.8

4.0

4.6

12.3

13.2

13.8

11.1

14.5

15.7

14.5

12.2

Japan (Millions of yen)

147,553

168,856

159,368

166,178

188,441

Asia (Millions of yen)

8,076

8,792

9,948

11,705

12,404

Europe (Millions of yen)

23,10924,94428,964

32,63937,486

North America (Millions of yen)

22,372

34,21036,98535,771

33,113

2000

2001

2002

2003

2004

63.1

57.9

56.2

56.0

54.6

11.6

10.7

13.3

16.5

15.2

16.2

15.8

14.8

11.0

15.3

16.9

14.9

14.1

Japan (Millions of yen)

126,844

137,211132,248

138,006

148,325

Asia and Other Areas (Millions of yen)

24,326

27,53725,12732,80644,668Europe (Millions of yen)

27,84135,87038,14438,78940,168

North America (Millions of yen)

22,09936,18439,746

36,69238,28375

Sales by Region

50(Based on the locationof the Company’s offices)
25

11.5
0

(% of total)
100

75

Sales to DomesticandForeign Customers(Based on the locationof customers)

50

25

12.1
13.8

0

31

Net Income
Cost of sales rose 7.1% compared with the previous fiscal year, to

Net income nearly doubled, rising 97.4% year on year to¥142,683 million, reflecting the increase in net sales. However,¥39,549 million. A major factor in this increase was the reduction

this rise of 7.1% was modest compared with the 10.2% increasein other expenses—net to ¥12,671 million, including amortizationin net sales, and the gross profit margin rose to 47.4%, fromof goodwill, compared with ¥24,240 million in fiscal 2003, which

45.9% for the previous fiscal year. Selling, general and adminis-

included additional expenses in connection with the dissolution of

trative expenses rose 0.9% to ¥60,594 million. This increase was

the Group's pension fund.

fairly small compared with the rise in net sales, and SG&A

Net income per share rose ¥179.86 to ¥350.96, compared withexpenses as a percentage of sales fell to 22.3% from 24.4%.

¥171.10 for fiscal 2003. Along with total net sales, this was a new

As a result, operating income increased 28.7% year on year torecord high for the Group.

¥68,167 million, while the operating income ratio rose 3.6

Return on assets (ROA) rose 6.7 percentage points to 14.0%, andpercentage points to 25.1%. By quarter, the operating income

return on equity (ROE) increased 8.8 percentage points to 17.8%.

ratio was 22.7% in the first quarter of fiscal 2004, 24.2% in the

Cash dividends for the year doubled, from ¥50 per share in thesecond, 25.7% in the third and 27.5% in the fourth.

(Millions of yen)
80,000previous fiscal year to ¥100 per share.

2000

2001

2002

2003

2004

Operating income (Millions of yen)

34,68845,12843,89852,983

68,167

Ordinary income (Millions of yen)

35,484

48,18445,77450,87466,554

Net income (Millions of yen)

20,716

21,86023,741

20,03839,54960,000Operating Income,Ordinary Income
and Net Income

40,00020,0000(Millions of yen)
20,0002003-1Q

2003-2Q

2003-3Q

2003-4Q

2004-1Q

2004-2Q

2004-3Q

2004-4Q

Operating income (Millions of yen)

12,59913,951

13,43313,00014,536

16,40017,67919,552

Ordinary income (Millions of yen)

10,84814,17912,435

13,412

14,757

15,63817,091

19,068Net income (Millions of yen)

6,869

7,977

-2,125*

7,317

9,795

9,129

10,41910,20615,00010,000Quarterly Profits
1st quarter of 2003
to 4th quarter of 2004

5,000

0

-5,000* Additional expense of ¥14,949 million for compensation resulting from the dissolution of the Group’s employees’ funded pension plan was recorded during the third quarter of fiscal 2003,
resulting in a net loss for the quarter of ¥2,125 million.

32

(%)
30.0

2000

2001

2002

2003

2004

Operating income ratio (%)

17.2

19.1

18.7

21.5

25.1

Ordinary income ratio (%)

17.6

20.3

19.5

20.7

24.5

Return on sales (%)

10.3

9.2

10.1

8.1

14.6

22.5

Profit Ratios

15.0

7.5

0

(%)
30.0

2003-1Q

2003-2Q

2003-3Q

2003-4Q

2004-1Q

2004-2Q

2004-3Q

2004-4Q

Operating income ratio (%)

20.6

22.6

21.8

21.1

22.7

24.2

25.7

27.5

Ordinary income ratio (%)

17.7

23.0

20.2

21.8

23.1

23.1

24.9

26.8

12.9

-3.4*

11.9

15.3

13.5

15.2

14.4

20.0

Quarterly Profit Ratios

10.0

1st quarter of 2003
to 4th quarter of 2004
0

-10.0

Return on sales (%)

11.2* Additional expense of ¥14,949 million for compensation resulting from the dissolution of the Group’s employees’ funded pension plan was recorded during the third quarter of fiscal 2003,
resulting in return on sales for the quarter of -3.4%.

(%)
30

2000

2001

2002

2003

2004

Return on equity [ROE](%)

12.4

11.8

11.5

9.0

17.8

Ordinary income/total assets (%)

15.3

19.0

16.8

18.4

23.6

Return on assets [ROA](%)

8.9

8.6

8.7

7.3

14.0

24

18

Profitability
12

6

0

33

Review by Segment(Millions of yen)
150,000

Information Technology (Electro-Optics Division)

2002

2003

2004

(%)
40.0

Net sales in the Electro-Optics division increased 21.2% year on year to¥135,071 million. Sales of mask blanks for semiconductors rose, due to120,000

20.0

the need for greater precision in the semiconductor market in general,along with strong demand for high-precision products such as Hoya's

90,000cutting-edge phase shift mask blanks. Sales of photomasks also rose0significantly. Sales of semiconductor photomasks were strong, driven

60,000from an upswing in the semiconductor market on the back of strong
sales of digital consumer electronics, while sales of LCD photomasks rose

30,000due to growing demand for LCD televisions and the establishment of0

new production lines by manufacturers. In glass disks for HDDs, demand
increased due to a recovery in sales of personal computers and a
growing market for 1.0-inch and 1.8-inch small-diameter disks, leading
to a rise in sales. In optical products, the market for digital cameras andother digital consumer electronics products expanded significantly during
the year, and sales of the Company's aspherical molded lenses and otheroptical lenses rose, leading to an overall increase in sales.
Operating income for the Electro-Optics division rose 31.3% toNet sales

101,496 111,461 135,071

Operating income

27,78934,41445,170Operating income ratio*

27.3%

30.8%

33.4%

Assets111,806 114,877 132,240

Depreciation

12,687

13,12913,205

Capital expenditures

13,28010,444

22,247* The operating income ratio above is calculated using net sales plus intersegment sales.
Please refer to details on page 60 Segment Information.

¥45,170 million. This increase was due to greater sales of high-valueadded products, and production plants operating at extremely highcapacity in response to the favorable market. The operating income ratio
for the Electro-Optics division was 32.8% in the first quarter, 32.6% in
the second, 34.7% in the third, and 33.4% in the fourth, each quarter
representing a year-on-year increase. For the full fiscal year, theoperating income ratio rose to 33.4% from 30.8%.

moved to the right along the horizontal axis (representing the operating

The Electro-Optics division's net sales growth rate increased signifi-

income ratio), due to the 2.6 percentage point increase in the operatingcantly during the term, to 21.2% from 9.8% for the previous year. The

income ratio. The gains in both sales and profitability can be clearly seen.

graph labeled "Sales Growth and Profitability by Business Segment"

Capital expenditures for the Electro-Optics division increasedshows that the circle representing this segment has moved up thesignificantly compared with the previous fiscal year, to ¥22,247 million.

vertical axis (representing the net sales growth rate) to a level above theThis was mainly due to investment in equipment for development ofGroup's net sales growth rate of 10.2%. The area of the circle has

next-generation products, and further purchases of equipment toincreased due to the rise in operating income, while the circle has also

manufacture mask blanks and photomasks.

Size of circle shows the volume of operating income.

Sales Growth andProfitability by
Business Segment
Fiscal year ended March 31, 2004
(Compared with the previous fiscal year)

20

10

0

Sales Growth Ratio (%)

30

Consolidated Basis

40

Health Care
Consolidated BasisElectro-Optics
Vision Care

-10

10

20

30

Operating Income Ratio (%)

34

40

(Millions of yen)
100,000

2002

2003

2004

(%)
20.0

Eye Care ( Vision Care Division)
Net sales in the Vision Care division rose 4.0% year on year to ¥98,203
million. The domestic market for eyeglass lenses is slightly recovering,

75,00010.0

50,0000

but the business environment remains difficult. Overseas, sales of highvalue-added products such as progressive refractive lenses were strong in
all regions, while sales were also given a boost by the rising euro.
Operating income for the division increased 13.6% to ¥17,496

25,000

million. The operating income ratio by quarter was 14.8% in the firstand 17.0% in the second, both down against corresponding quarters of0

the previous year, but 18.1% in the third and 21.3% in the fourth,
represent year-on-year increases as a result of improvements to theearnings structure, such as the steady transfer of manufacturing facilities
overseas. The ratio for the fiscal year increased to 17.8% from 16.0%.
The net sales growth rate for the division increased to 4.0% from
1.3% for the previous year, as represented by the rising position of its
circle on the segment graph. The circle's area has increased because
operating income rose, and the circle has shifted to the right along thehorizontal axis as a result of the 1.8 percentage point increase in the

Net sales

93,184

94,38898,203Operating income

14,414

15,39817,496

Operating income ratio*

15.5%

16.0%

17.8%

Assets92,30998,07792,082

Depreciation

5,516

5,578

5,735

Capital expenditures

5,259

3,935

6,916

*The operating income ratio above is calculated using net sales plus intersegment sales.
Please refer to details on page 60 Segment Information.

division's operating income ratio.
Capital expenditures in the division increased significantly to ¥6,916
million, due to the establishment of new laboratories overseas, and thetransfer of Japanese manufacturing facilities to Thailand.

Eye Care (Health Care Division)(Millions of yen)
30,000Net sales in the Health Care division rose 6.2% compared with theprevious fiscal year, to ¥28,381 million. Contact lens sales increased as

2002

2003

2004

(%)
30.0

the Group differentiated itself from the competition through strengthened marketing of such high-value-added products as multifocal contact

22,50015.0

15,0000lenses and system products, aggressive new-store openings, andimproved customer service drawing on expert knowledge. Moreover, theGroup's soft-type IOL continued to be well received, and sales increased.
The strong launch of this product in Europe through well-established7,500

distributors in major countries also contributed to the increase in sales.
Operating income for the division rose 23.3% to ¥6,273 million. The
operating income ratio reached record levels in the first half of the fiscal

0year, hitting 21.9% in the first quarter and 23.2% in the second.
Net sales

23,106

26,71728,381another new record was set in the fourth quarter, at 24.0%. For the full

Operating income

3,429

5,089

6,273

year, the operating income ratio increased 3.1 percentage points, toOperating income ratio*

14.3%

19.0%

22.1%

22.1% from 19.0%.

Assets15,816

16,447

18,873Though there was a slight falloff during the third quarter to 19.2%,

Depreciation

554

571

532

the corresponding circle for this division on the segment graph has moved

Capital expenditures

687

426

1,201

downward. This was due to stabilization of sales of soft-type IOLs, which*The operating income ratio above is calculated using net sales plus intersegment sales.
Please refer to details on page 60 Segment Information.

The net sales growth rate for the division fell to 6.2% from 15.6%, so

had grown rapidly during the previous term. The area of the circle
representing this division on the graph has increased due to the rise inoperating income. The circle has also moved to the right along thehorizontal axis, due to the rise in the division's operating income ratio of
3.1 percentage points. Though the sales growth ratio has fallen compared

Capital expenditures in the division increased sharply to ¥1,201

with the previous term, the division is growing steadily, and the increase inmillion, due to the establishment of a new IOL manufacturing plant inboth operating income and the operating income ratio is evident.

Singapore, and aggressive opening of retail outlets for contact lenses.
35

(Millions of yen)
10,000Lifestyle Refinement (Crystal Division)

2002

2003

(%)
12.0

2004

Net sales in the Crystal division fell 35.7% year on year to ¥4,322
million, due mainly to the business reform measures aimed at

7,500

6.0

5,000

0

2,500

-6.0

0

-12.0

restructuring the brand, and the decline in individual consumption
and social gift giving resulting from the economic slowdown.
The division recorded an operating loss for the year of ¥496
million. Although expenses were reduced through restructuring,
this was insufficient to cover the falloff in sales resulting from thecontraction of the market scale and the languishing market.
The Group reviewed its long-lived assets for impairment for
fiscal 2004, and an impairment loss of ¥2,040 million was

Net sales

recorded for this division. Because this division continued to show

Operating income

poor results, the value of its assets was reduced on the Group'sbooks to a recoverable amount, and the amount of this reduction
was recorded as a loss on impairment of long-lived assets.

8,788

6,719

4,322

-1

-12

-496

Operating income ratio*

-0.0%

-0.2%

-11.3%

Assets

8,684

8,409

2,805

Depreciation

498

302

352

Capital expenditures

254

776

224

*The operating income ratio above is calculated using net sales plus intersegment sales.
Please refer to details on page 60 Segment Information.

Consolidated Basis

40
Size of circle shows the volume of operating income.

20

Sales Growth andProfitability byGeographical Segment

10

Fiscal year ended March 31, 2004
(Compared with the previous fiscal year)
0

Sales Growth Ratio (%)

30

Asia
EuropeConsolidated
Basis

North America
Japan

-10

0

5

10

15

Operating Income Ratio (%)

36

20

25

30

(Millions of yen)
40,000

2000

2001

2002

2003

2004

17,77039,673

19,585

15,94830,659

2000

2001

2002

2003

2004

30,00020,000Capital Expenditures

10,0000Capital expenditures (Millions of yen)(Billions of yen)
10.0

Research andDevelopment Expenses

7.5

3.0

5.0

2.0

2.5

1.0

0

0

R&D expenses (Billions of yen)

7.7

7.3

7.3

8.7

9.8

R&D expenses/net sales (%)

3.8

3.1

3.1

3.5

3.6

2000

2001

2002

2003

2004

27.4

24.7

22.5

48.2

52.4

15.4

15.8

14.8

12.2

11.3

10.3

7.3

10,651

12,966

13,311

14,02318,092

Japan

3,595

3,553

3,282

3,150

3,023

Asia

4,579

5,838

6,411

7,346

11,925

Europe

2,055

2,000

2,102

2,082

1,821

422

1,575

1,516

1,445

1,323

(% of total)
10075Group Employees
by Region

(%)

4.0

33.8

50
45.0

16.7

65.9

43.0
25
19.3
0

Total

North America

3.9

10.1

37

Financial Position
Cash and cash equivalents rose 6.3% to ¥80,425 million, while

payable. Total long-term liabilities fell 3.1% to ¥1,934 million.

notes and accounts receivable increased 15.5% to ¥69,598million.

Total liabilities increased 40.7% to ¥70,186 million.

These were the primary factors in the 8.5% increase in total

The Group's degree of indebtedness edged down 0.6 percent-current assets, to ¥193,279 million. Together with the 0.5%

age points to 0.2%, as interest-bearing debt was reduced byincrease in noncurrent assets, to ¥96,608, total assets at March¥1,805 million to ¥487 million.

31, 2004 stood at ¥289,887 million, up 5.7% from a year earlier.

Shareholders' equity declined ¥5,240 million to ¥218,979

Total current liabilities rose 42.5% from the previous fiscal year-

million, despite a 14.3% increase in retained earnings, as a result

end to ¥68,252 million, the result of a 33.9% increase in notesof a ¥32,451 million increase in treasury stock. The shareholders'and accounts payable and a 451.9% jump in income taxes

equity ratio fell 6.2 percentage points, to 75.5% from 81.7%.

(Millions of yen)
300,000

2000

2001

2002

2003

2004

250,000

(%)
85

80

200,000

Total Assets,
Shareholders’ Equity andShareholders’ Equity Ratio

75
150,000
70
100,000
65

50,0000Total assets (Millions of yen)

239,341

267,611

278,068

274,289

289,887

Shareholders’ equity (Millions of yen)

175,146

195,333

219,180

224,219

218,979

73.2

73.0

78.8

81.7

75.5

Shareholders’ equity ratio (%)

3860

Cash FlowsNet cash provided by operating activities totaled ¥78,744 million, aElectro-Optics division for investment related to products for the

year-on-year increase of ¥40,354 million. This was primarily

next fiscal year.

composed of income before income taxes and minority interests of

Net cash used in financing activities totaled ¥42,853 million, a¥55,496 million (an increase of ¥26,753 million), depreciation andyear-on-year increase of ¥28,305 million. The main uses of cash

amortization of ¥19,988 million (an increase of ¥196 million), andwere payments for purchases of treasury stock totaling ¥32,921¥6,880 million in income taxes paid (a decrease of ¥4,629 million).

million (an increase of ¥25,885 million), and dividends paid of

Net cash used in investing activities was ¥28,339 million, a year-¥8,588 million (an increase of ¥2,775 million).

on-year increase of ¥14,756 million. The principal factor affecting

As a result, cash and cash equivalents at the end of the fiscal

cash was purchases of property, plant and equipment totaling

year totaled ¥80,425 million, an increase of ¥4,731 million from

¥23,212 million (an increase of ¥8,999 million), mainly in thethe beginning of the fiscal year.

(Millions of yen)
70,000

2000

2001

2002

2003

2004

Depreciation, amortization and other (Millions of yen)

16,051

32,138

20,105

19,792

25,328Net income (Millions of yen)

20,716

21,86023,741

20,03839,549Cash flows (Millions of yen)

36,76753,99843,846

39,83064,87760,00050,00040,000Cash Flows

30,00020,00010,0000Note: Depreciation, amortization and other includes depreciation, amortization of goodwill, and loss on impairment of long-leved assets.

(Millions of yen)
25,0002003-1Q

2003-2Q

2003-3Q

2003-4Q

2004-1Q

2004-2Q

2004-3Q

2004-4Q

20,00015,000Quarterly Cash Flows

10,000

1st quarter of 2003
to 4th quarter of 2004

5,000

0
-5,000Depreciation, amortization and other (Millions of yen)

4,823

4,887

5,021

5,061

4,645

5,018

5,027

10,638Net income (Millions of yen)

6,869

7,977

-2,125

7,317

9,795

9,129

10,41910,206

Cash flows (Millions of yen)

11,692

12,864

2,896

12,37814,44014,147

15,446

20,844

Note: Depreciation, amortization and other includes depreciation, amortization of goodwill, and loss on impairment of long-leved assets.

39

(Times)
100

2000

2001

2002

2003

(Yen)
12,000

2004

80

9,600

60

7,200

40

4,800

20

2,400

0

0

Stock Price Data

Price earnings ratio (Times)

55.03

43.73

44.50

41.79

28.92

Price cash flow ratio (Times)

30.64

17.55

23.94

20.83

17.61

Price book value ratio (Times)

6.44

4.86

4.79

3.68

5.16

Stock price at fiscal year-end (Yen)

9,700

8,160

9,040

7,150

10,150Stock price (Yen)
12,000Common Stock Price Range
and Trading Volume

FY2003

Trading volume(Thousands of shares)

FY200418,00010,00015,0008,000

12,000

6,000

9,000

4,000

6,000

2,000

3,000

0

0

4

5

6

7

8

9 10 11 12 1

2

3

4

5

6

7

8

9 10 11 12 1

2

3(Month)

(Yen)
100

2000

2001

2002

2003

2004

Period-end dividend (Yen)

19.00

30.00

25.00

25.00

50.00

Interim dividend (Yen)

16.00

20.00

25.00

25.00

50.00

Total dividend (Yen)

35.00

50.00

50.00

50.00

100.008060Dividend Per Share
40

20

0

40

Independent Auditors’ Report41Consolidated Balance Sheets
Hoya Corporation and Subsidiaries
March 31, 2004 and 2003

Thousands of
U.S. Dollars(Note 1)Millions of Yen

ASSETS

2004

2003

2004

¥ 80,425¥ 75,694$ 758,726

CURRENT ASSETS:
Cash and cash equivalents
Notes and accounts receivable:
Associated companies (Note 14)
Other—trade

163

720

1,538

67,174

58,776

633,717

Other

3,608

2,054

34,038

Allowance for doubtful receivables(1,347)(1,299)(12,708)

32,87832,361

Income taxes refund receivable (Note 11)
Inventories (Note 5)

3,900
310,170

Deferred tax assets (Note 11)

7,066

3,970

66,660Prepaid expenses and other current assets (Note 14)

3,312

1,978

31,246

193,279

178,154

1,823,387

9,219

9,326

86,972

Total current assets
PROPERTY, PLANT AND EQUIPMENT:Land
Buildings and structures

53,35352,520503,330

Machinery and vehicles

140,876

140,620

1,329,019

Furniture and equipment

20,421

20,782

192,651

Construction in progress

5,276

2,636

49,773229,145

225,884

2,161,745(150,826)(148,647)(1,422,887)

78,31977,237

738,858

504

787

4,755

Investments in and advances to associated companies (Note 7)

5,701

4,977

53,783

Goodwill

1,358

1,744

12,811

Software

2,645

2,385

24,953

Rental deposits

2,482

2,438

23,415

Total
Accumulated depreciation
Net property, plant and equipment

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 4)

Deferred charges

162

412

1,528

Deferred tax assets (Note 11)

3,012

3,211

28,415

Other assets

2,913

4,655

27,482

Allowance for doubtful receivables(488)(1,711)(4,604)

18,28918,898172,538¥289,887¥274,289$2,734,783

Total investments and other assets

TOTAL
See notes to consolidated financial statements.

42

Thousands of
U.S. Dollars(Note 1)Millions of Yen

LIABILITIES AND SHAREHOLDERS’ EQUITY

2004

2003

2004

CURRENT LIABILITIES:
Short-term bank loans (Note 8)
Current portion of long-term bank loans (Note 8)

¥

336

¥

2,251

$

3,170

151

34

1,425

24

38

226

Other—trade

25,747

20,368242,896

Construction and other

10,016

6,311

94,491

Notes and accounts payable:
Associated companies (Note 14)

Income taxes payable (Note 11)

14,3982,609

135,830

Accrued bonuses to employees

3,723

3,512

35,123

Accrued expenses

12,641

10,937

119,255

Other current liabilities (Note 14)

1,216

1,829

11,472

Total current liabilities

68,25247,889643,888

LONG-TERM LIABILITIES:Long-term bank loans, less current portion (Note 8)

7

Liability for retirement benefits (Note 9)316

Reserve for periodic repairs

358

264

3,377

Other long-term liabilities

1,576

1,410

14,868

1,934

1,997

18,245

722

184

6,811

Total long-term liabilities
MINORITY INTERESTSCONTINGENT LIABILITIES (Notes 13 and 15)
SHAREHOLDERS’ EQUITY (Notes 10 and 17):
Common stock—authorized, 320,000,000 shares;
6,264

6,264

59,094

Capital surplus

issued, 116,124,405 shares

15,89915,899149,990

Retained earnings

247,176

216,272

2,331,849

(30)

15

(283)

(10,826)(7,178)(102,132)(39,504)(7,053)(372,679)

218,979

224,219

2,065,839¥289,887¥274,289$2,734,783

Net unrealized gain (loss) on available-for-sale securities
Foreign currency translation adjustments
Treasury stock—at cost,
4,857,867 shares in 2004 and 951,050 shares in 2003 (Note 18)
Total shareholders’ equity
TOTAL

43

Consolidated Statements of Income
Hoya Corporation and Subsidiaries
Years Ended March 31, 2004, 2003 and 2002

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2004

2003

2002

2004

NET SALES (Notes 13 and 14)¥271,444¥246,293¥235,265$2,560,792

COST OF SALES (Notes 12, 13 and 14)

142,683

133,275

134,258

1,346,066

128,761

113,018

101,007

1,214,726

60,59460,035

57,109571,641

68,16752,98343,898643,085558(189)(2,900)
59
523

624
(374)
(1,252)
109
725
488
(7)
(111)
(1,947)

490
(617)
1,033
137
336

5,264
(1,783)(27,358)
556
4,934

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 12, 13 and 14)
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Foreign exchange gains (losses)—net
Gain on sales of investment securities
Gain on sales of property, plant and equipment and other assets
Gain on transfer of business (Note 3)
Loss on sales of investment securities
Loss on write-down of investment securities
Loss on disposal of property, plant and equipment
Loss on impairment of long-lived assets (Note 6)
Equity in earnings of associated companies
Amortization of goodwill
Additional expense incurred to dissolve the contributory
funded pension plan
Additional expense incurred to abolish the unfunded
retirement benefit plan
Additional retirement benefits paid to employees
Temporary plant closure expenses
Other income (expenses)—net(619)(1,900)(2,040)1,700(3,300)(888)

418(3,118)(479)(1,529)(5,840)(17,925)(19,245)
16,038(31,132)

533
(469)

(14,949)(8,377)(2,585)(351)(3,691)(463)(3,459)(1,996)(778)
147(24,387)(12,671)(24,240)(6,310)(119,538)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

55,49628,74337,588523,547

INCOME TAXES (Note 11):
Current
Deferred

18,574(2,775)

5,648
3,029

12,002
1,745

175,226(26,179)

Total income taxes

15,7998,677

13,747

149,047

(148)

(28)

(100)

(1,396)¥ 39,549¥ 20,038¥ 23,741$ 373,104

Other expenses—net

MINORITY INTERESTS IN NET INCOME
NET INCOME(1,090)(10,283)Yen

PER SHARE OF COMMON STOCK (Note 17):
Basic net income
Diluted net income
Cash dividends applicable to the year
See notes to consolidated financial statements.
44

U.S. Dollars

2004

2003

2002

¥ 350.96
350.56100.00¥ 171.10
171.0850.00¥ 203.15
50.00

2004

$

3.31
3.31
0.94

Consolidated Statements of Shareholders’ Equity
Hoya Corporation and Subsidiaries
Years Ended March 31, 2004, 2003 and 2002

Millions of Yen
Outstanding Numberof Sharesof Common Stock

CommonStockCapitalSurplusRetained
Earnings

BALANCE, APRIL 1, 2001
Adjustment of retained earnings
for merger of unconsolidated
subsidiaries (Note 3)
Adjustment of retained earnings
for accounting changes
at foreign subsidiaries
Net income
Appropriations:
Cash dividends, ¥55.00 per share
Bonuses to directors
Repurchase of treasury stock
Disposal of treasury stock
Net increase in unrealized gain on
available-for-sale securities
Net increase in foreign currencytranslation adjustments

116,124,375¥ 6,264¥ 15,899¥ 184,361

BALANCE, MARCH 31, 2002
Adjustment of retained earnings
for merger of unconsolidated
subsidiaries (Note 3)
Net income
Appropriations:
Cash dividends, ¥50.00 per share
Bonuses to directors
Repurchase of treasury stock
Net decrease in unrealized gain on
available-for-sale securities
Net decrease in foreign currencytranslation adjustments

116,122,346

BALANCE, MARCH 31, 2003
Net income
Appropriations:
Cash dividends, ¥75.00 per share
Bonuses to directors
Repurchase of treasury stock
Disposal of treasury stock
Net decrease in unrealized gain on
available-for-sale securities
Net decrease in foreign currencytranslation adjustments

115,173,355

BALANCE, MARCH 31, 2004

111,266,538

Net Unrealized
Foreign Currency
Gain (Loss) on Available- Translation
for-Sale Securities
Adjustments

¥

(516)

TreasuryStock¥ (10,675)

667

66
23,741(6,387)(193)(3,429)
1,400

¥

(28)
11

626
5,344
6,264

15,899202,255

110(5,331)(17)(66)
20,038(5,806)(149)(948,991)(7,036)(95)(1,847)
6,264

15,899216,272
39,54915(7,178)(7,053)(8,440)(169)(3,962,711)
55,894(32,905)
454

(36)
(45)
(3,648)¥ 6,264¥ 15,899¥ 247,176¥(30)¥(10,826)¥ (39,504)

45

Thousands of U.S. Dollars (Note 1)
CommonStockRetained
Earnings

BALANCE, MARCH 31, 2003
Net income
Appropriations:
Cash dividends, $0.71 per share
Bonuses to directors
Repurchase of treasury stock
Disposal of treasury stock
Net decrease in unrealized gain on
available-for-sale securities
Net decrease in foreign currencytranslation adjustments$ 59,094 $ 149,990 $ 2,040,302
373,104

BALANCE, MARCH 31, 2004

$ 59,094 $ 149,990 $ 2,331,849

See notes to consolidated financial statements.

46

CapitalSurplus

Foreign Currency
Net Unrealized
Gain (Loss) on AvailableTranslation
for-Sale Securities
Adjustments$

142

TreasuryStock$ (67,717) $ (66,538)(79,623)(1,594)(310,424)
4,283

(340)
(425)
(34,415)$ (283)$ (102,132) $ (372,679)

Consolidated Statements of Cash F lows
Hoya Corporation and Subsidiaries
Years Ended March 31, 2004, 2003 and 2002

Thousands of
U.S. Dollars(Note 1)Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes—paid
Income taxes—refunded
Depreciation and amortization
Amortization of goodwill
Reversal of allowance for doubtful receivables
Provision for (reversal of) accrued bonuses to employees
Reversal of accrued retirement benefits
Provision for (reversal of) reserve for periodic repairs
Loss on write-down of investment securities
Gain on sales of investment securities
Gain on sales of property, plant and equipment and other assets
Loss on sales of investment securities
Loss on disposal of property, plant and equipment
Loss on impairment of long-lived assets
Foreign exchange loss (gain)
Bonuses to directors
Equity in earnings of associated companies
Gain on transfer of business
Other
Changes in assets and liabilities:
Decrease (increase) in notes and accounts receivable
Decrease in inventories
Decrease (increase) in interest and dividend receivable
Decrease (increase) in other current assets
Increase (decrease) in notes and accounts payable
Increase in interest payable
Increase (decrease) in other current liabilities

2004

2003

2002

2004

¥ 55,496¥ 28,743¥ 37,588$ 523,547(6,880)3,900
19,9883,300(1,169)
191
(293)
94
619
(59)
(523)

(11,509)(15,395)

19,792

19,636469(1,530)(191)(1,193)
243
479
(137)
(336)
3,118
1,529

(64,906)
36,792
188,566
31,132(11,028)
1,802(2,764)
887
5,840
(556)
(4,934)

1,900
2,040
1,209
(169)
(1,700)(6)(360)(7,256)
(367)
111
(109)
(725)
7
1,947

(305)
(195)
(533)

566

706
(150)
(418)
(488)
842

17,925
19,245
11,406(1,594)(16,038)

632

5,340

(4,997)222
101(1,961)
5,116
34
1,719

628
3,208
(80)
2,060
555
12
1,247

(915)
2,861
194
272
(4,180)1(1,089)(47,142)2,094
953(18,500)
48,264320
16,217

Total adjustments

23,248

9,647

3,435

219,321

Net cash provided by operating activities

78,74438,39041,023742,868

102
(379)
814
(23,212)2,169(2,475)(3,300)660(2,718)

321
(346)
2,254
(14,213)
111
(216)

1,631
(119)
480
(19,001)
284
(125)

452
(2,840)894

273(3,077)962(3,575)
7,679(218,981)
20,462(23,349)(31,132)
6,226(25,641)(28,339)(13,583)(19,654)(267,349)(1,738)(1,265)(16,396)(44)419(32,921)(8,588)19(434)(7,036)(5,813)(1,722)
91
(126)
11
(28)
(6,412)(14,548)(8,186)INVESTING ACTIVITIES:
Proceeds from sales of investment securities
Purchases of investment securities
Proceeds from sales of property, plant and equipment
Purchases of property, plant and equipment
Collection of loans
Payment of loans
Purchase of goodwill
Decrease in other assets
Increase in other assets
Proceeds from transfer of businessNet cash used in investing activities
FINANCING ACTIVITIES:Net decrease in short-term borrowings
Proceeds from long-term bank loans
Repayments of long-term bank loans
Proceeds from sales of treasury stock
Payments for purchases of treasury stock
Dividends paid
Other
Net cash used in financing activities(42,853)

(415)
3,953
(310,576)(81,019)179(404,274)

47

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2004

2003

2002

2004

NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARY, AT THE DATE OF CHANGE
CASH AND CASH EQUIVALENTS INCREASED BY MERGED
UNCONSOLIDATED SUBSIDIARIESFOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

¥ 7,552¥10,259¥13,183$ 71,245

CASH AND CASH EQUIVALENTS, END OF YEAR
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in assets and liabilities due to consolidationof a subsidiary previously unconsolidated:
Assets (primarily accounts receivable, inventory and property)
Liabilities (primarily trade payables)
Increase in assets and liabilities due to merger of
unconsolidated subsidiaries:
Assets (primarily inventory and property)
Liabilities (primarily trade payables)
ADDITIONAL INFORMATION:
Decrease in assets and liabilities due to transfer of business:
Assets (primarily property and rental deposits)
Liabilities (primarily deposit recieved)
See notes to consolidated financial statements.

48

378

3,566
41

290

(3,199)75,694(927)
66,321

1,150
51,698(30,179)
714,094¥ 80,425¥75,694¥66,321$ 758,726¥ 2,607(870)$ 24,594(8,208)

¥

0

82
(37)

434
28

¥ 1,168(196)

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No»1

The differences between the cost and underlying net equity of

BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS

investment in consolidated subsidiaries and associated companies

The accompanying consolidated financial statements have beenaccounted for by the equity method are charged to income when

prepared in accordance with the provisions set forth in the

incurred.

Japanese Securities and Exchange Law and its related accounting

All significant intercompany balances and transactions haveregulations, and in conformity with accounting principles generally

been eliminated in consolidation. All material unrealized profits

accepted in Japan, which are different in certain respects as toincluded in assets resulting from transactions within the Group are

application and disclosure requirements of International Financial

eliminated.

Reporting Standards.

b.

In preparing these consolidated financial statements, certain

Cash Equivalents—Cash equivalents are short-term invest-

ments that are readily convertible into cash and that are exposed

reclassifications and rearrangements have been made to theto insignificant risk of changes in value. Cash equivalents include

consolidated financial statements issued domestically in order totime deposits, certificate of deposits, commercial paper and mutual

present them in a form which is more familiar to readers outside

funds investing in bonds, all of which mature or become due

Japan.

within three months of the date of acquisition.

The consolidated financial statements are stated in Japanesec.

Inventories—Inventories are primarily stated at cost, costyen, the currency of the country in which Hoya Corporation (thebeing determined principally by the average method.

"Company") is incorporated and operates. The translations ofd.

Japanese yen amounts into U.S. dollar amounts are included solely

available-for-sale securities and are reported at fair value, withfor the convenience of readers outside Japan and have been madeunrealized gains and losses, net of applicable taxes, reported in aat the rate of ¥106 to U.S.$1, the approximate rate of exchange at

separate component of shareholders' equity. The cost of securities

March 31, 2004. Such translation should not be construed assold is determined based on the moving-average method.

representations that the Japanese yen amounts could be converted

Non-marketable available-for-sale securities are stated at cost

into U.S. dollars at that or any other rate.

determined by the moving-average method. For other than

Certain reclassifications have been made in the 2003 andInvestment Securities—Investment securities are classified as

temporary declines in fair value, investment securities are reduced

2002 consolidated financial statements to conform to the classifi-

to net realizable value by a charge to income.

cations used in 2004. These reclassifications had no effect one.

previously reported net income.

ment are stated at cost. Depreciation of property, plant andProperty, Plant and Equipment—Property, plant and equip-

equipment of the Company and its domestic subsidiaries is

No»2
a.

S UMMARY OF SIGNIFICANT ACCOUNTING POLICIESConsolidation—The consolidated financial statements as ofcomputed substantially by the declining-balance method at rates
based on the estimated useful lives of the assets, while theMarch 31, 2004 include the accounts of the Company and its 55

straight-line method is applied to buildings of the Company and its(52 in 2003 and 51 in 2002) subsidiaries (together, the "Group").

domestic subsidiaries, and to all property, plant and equipment ofUnder the control or influence concept, those companies in

consolidated foreign subsidiaries. The net book value of tangible

which the Company, directly or indirectly, is able to exercise control

fixed assets depreciated by the straight-line method was approxi-

over operations are fully consolidated, and those companies overmately 45.1% of total tangible fixed assets in 2004 and 44.6% in

which the Group has the ability to exercise significant influence are

2003. The ranges of useful lives are from 10 to 50 years foraccounted for by the equity method.

buildings and structures and from 5 to 10 years for machinery andInvestment in one (two in 2003 and 2002) associatedvehicles.

company in 2004 is accounted for by the equity method. Invest-f.

ments in the remaining associated companies are stated at cost. If

Council issued a Statement of Opinion, "Accounting for Impairment

the equity method of accounting had been applied to the invest-of Fixed Assets", and in October 2003 the Accounting Standards

ments in these companies, the effect on the accompanying

Board of Japan ("ASB") issued ASB "Guidance No.6, Guidance forconsolidated financial statements would not be material.

Accounting Standard for Impairment of Fixed Assets". These new

Long-Lived Assets—In August 2002, the Business Accounting

49

pronouncements are effective for fiscal years beginning on or after

The annual provision for accrued retirement benefits forApril 1, 2005 with early adoption permitted for fiscal years ending

directors and corporate auditors of the Company and its domesticon or after March 31, 2004.

subsidiaries was also calculated to state the liability at the amount

The Group adopted the new accounting standard for
impairment of fixed assets for the year ended March 31, 2004.
The Group reviews its long-lived assets for impairmentthat would be required if all directors and corporate auditors
retired at each balance sheet date. The provisions for the retirement benefits are not funded.

whenever events or changes in circumstance indicate the carrying

For the year ended March 31, 2004, the Company and its

amount of an asset or asset group may not be recoverable. An

domestic subsidiaries abolished the retirement benefit plan for

impairment loss would be recognized if the carrying amount of an

directors and corporate auditors.

asset or asset group exceeds the sum of the undiscounted futurei.

cash flows expected to result from the continued use and eventual

ment expenses are charged to income when incurred.

disposition of the asset or asset group. The impairment loss wouldj.

be measured as the amount by which the carrying amount of theUnder Japanese accounting standards for leases, finance leases

asset exceeds its recoverable amount, which is the higher of thethat deem to transfer ownership of the leased property to thediscounted cash flows from the continued use and eventual

lessee are to be capitalized, while other finance leases aredisposition of the asset or the net selling price at disposition.

permitted to be accounted for as operating lease transactions if

The effect of adoption of the new accounting standard for

Research and Development Expenses—Research and developLeases—All leases are accounted for as operating leases.

certain "as if capitalized" information is disclosed in the notes to

impairment of fixed assets was to decrease income before income

the lessee's consolidated financial statements.

taxes and minority interests for the year ended March 31, 2004 byk.

¥2,040 million ($19,245 thousand).

based on the pretax income included in the consolidated state-g.

ments of income. The asset and liability approach is used to

Intangible Assets—Intangible assets are carried at cost less

Income Taxes—The provision for income taxes is computed

accumulated amortization, which is calculated by the straight-line

recognize deferred tax assets and liabilities for the expected future

method. Amortization of software is calculated by the straight-

tax consequences of temporary differences between the carrying

line method over 5 years. Goodwill recognized under the Japaneseamounts and the tax bases of assets and liabilities. Deferred taxes

Commercial Code (the "Code") is fully charged to income whenare measured by applying currently enacted tax laws to theincurred.

temporary differences.

h.

l.

Retirement Benefits—The Company and certain subsidiaries

Appropriations of Retained Earnings—Appropriations of

had a contributory funded pension plan and an unfunded retire-

retained earnings at each year end are reflected in the consoli-

ment benefit plan which covered substantially all of their employees.

dated financial statements for the following year upon sharehold-

Effective April 1, 2000, the Company and domestic subsidiar-ers' approval or resolution of the Board of Directors.

ies adopted a new accounting standard for employees' retirementm.

benefits and accounted for the liability for retirement benefits

monetary receivables and payables denominated in foreign

based on projected benefit obligations and plan assets at thecurrencies are translated into Japanese yen at the exchange rates

balance sheet date. The transitional obligation of ¥3,166 million,at the balance sheet date. The foreign exchange gains and losses

determined as of April 1, 2000, was being amortized over 15 years

from translation are recognized in the statements of income to theand presented as other expense in the consolidated statements ofextent that they are not hedged by forward exchange contracts.

income.

n.

For the year ended March 31, 2003, the contributory funded

Foreign Currency Transactions—All short-term and long-term

Foreign Currency Financial Statements—The balance sheet

accounts of the consolidated overseas subsidiaries and associatedpension plan was dissolved and the unfunded retirement benefit

companies are translated into Japanese yen at the current

plan was abolished. The remaining balance of transitional

exchange rates as of the balance sheet dates except for sharehold-obligation at the dissolution of the contributory funded pension

ers' equity, which is translated at historical exchange rates.

plan and the abolishment of the unfunded retirement benefit plan

Differences arising from such translation are shown as "Foreign

was charged to income.

currency translation adjustments" in a separate component ofshareholders' equity.

50

Revenue and expense accounts of the consolidated overseas

Diluted net income per share reflects the potential dilution

subsidiaries and associated companies are translated into Japanesethat could occur if the outstanding stock options were exercised

yen at the monthly average exchange rates.

into common stock. Diluted net income per share of common

o. Derivatives and Hedging Activities—The Group uses derivative

stock assumes full exercise of the outstanding stock options at thefinancial instruments to manage its exposures to fluctuations in

beginning of the year (or at the time of grant). Basic net income

foreign currency exchange rates. Foreign exchange forwardand diluted net income per share for the years ended March 31,

contracts are utilized by the Group to reduce foreign currency

2004, 2003 and 2002 are computed in accordance with the new

exchange risks. The Group does not enter into derivatives forstandard.

trading or speculative purposes.

Cash dividends per share presented in the accompanying

Derivative financial instruments and foreign currency transac-

consolidated statements of income are dividends applicable to thetions are classified and accounted for as follows: (a) all derivatives

respective years including dividends to be paid after the end of theare recognized as either assets or liabilities and measured at fairyear.

value, and gains or losses on derivative transactions are recognizedin the statements of income and (b) for derivatives used forhedging purposes, if derivatives qualify for hedge accountingNo»3

because of high correlation and effectiveness between the(1) Reorganization of Subsidiaries

hedging instruments and the hedged items, gains or losses on

On September 30, 2001, the Company purchased the minority

derivatives are deferred until maturity of the hedged transactions.

interest of Hoya Optikslip AB (“HOSL“) in Sweden for ¥384 million

The foreign exchange forward contracts employed to hedge
foreign currency exchange rate exposures for export sales aremeasured at the fair value and the unrealized gains/losses are

REORGANIZATION

to become a wholly owned consolidated subsidiary. Previously,
HOSL had been accounted for by the equity method.
On October 1, 2001, Welfare Corporation, which had been arecognized in income. Forward contracts applied for forecasted

wholly owned unconsolidated subsidiary of the Company, was(or committed) transactions are also measured at the fair value but

merged into Hoya Healthcare Corporation (“HHC“). On January

the unrealized gains/losses are deferred until the underlying

1, 2002, Welfare Corporation was then split up from HHC.

transactions are completed.
Long-term debt denominated in foreign currencies for which
foreign exchange forward contracts are used to hedge the foreign
currency fluctuations are translated at the contracted rate if theforward contracts qualify for hedge accounting.
Interest rate swaps which qualify for hedge accounting andmeet specific matching criteria are not remeasured at market value

On March 31, 2002, the Company increased its ownership ofThai Hoya Lens Ltd. to become a consolidated subsidiary, which
had been accounted for by the equity method.
On June 30, 2003, the Company acquired the voting rights of
Hoya Candeo Optronics Corporation ("HCOC," former HoyaSchott Corporation) to become a consolidated subsidiary, which
had been accounted for by the equity method.

but the differential paid or received under the swap agreements(2) Merger of the Company with Subsidiaries

are recognized and included in interest expense or income.

On March 1, 2003, the Company merged with Hoya Technop.

Process Corporation and two other companies, which had been

Per Share Information—Effective April 1, 2002, the Company

adopted a new accounting standard for earnings per share ofwholly owned unconsolidated subsidiaries of the Company.

common stock issued by ASB. Under the new standard, basic net(3) Transfer of Businessincome per share is computed by dividing net income available to

On March 31, 2003, a part of the hearing aid business in the eye

common shareholders, which is more precisely computed thancare field was transferred to a third party.

under previous practices, by the weighted-average number ofcommon shares outstanding for the period, retroactively adjusted
for stock splits.

51

No»4

INVESTMENT SECURITIESInvestment securities as of March 31, 2004 and 2003 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Marketable equity securities
Non-marketable equity securities

¥230
274

¥171
616

$2,170
2,585

Total

¥504

¥787

$4,755The carrying amounts and aggregate fair values of marketable equity securities at March 31, 2004 and 2003 were as follows:
March 31, 2004
Millions of Yen

Available-for-sale—Equity securities

Cost

Unrealized
Gains

¥160

¥70

Unrealized
LossesFair Value¥230

March 31, 2003
Millions of Yen

Available-for-sale—Equity securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value

¥145

¥39

¥13

¥171

March 31, 2004
Thousands of U.S. Dollars

Available-for-sale—Equity securities

Cost

Unrealized
Gains$1,509$661

Unrealized
LossesFair Value$2,170Available-for-sale securities whose fair value was not readily determinable as of March 31, 2004 and 2003 were as follows:
Carrying amountMillions of Yen

Equity securities

Thousands of
U.S. Dollars

2004

2003

2004

¥274

¥616

$2,585

Proceeds from sales of available-for-sale securities for the years ended March 31, 2004, 2003 and 2002 were ¥102 million ($962 thousand),¥321 million and ¥1,631 million, respectively. Gross realized gains and losses on these sales, computed on the moving average cost basis,
were ¥59 million ($556 thousand) and nothing, respectively, for the year ended March 31, 2004, ¥109 million and ¥7 million, respectively,
for the year ended March 31, 2003 and ¥137 million and ¥3,118 million, respectively, for the year ended March 31, 2002.

52

No»5

INVENTORIESInventories at March 31, 2004 and 2003 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Finished products and merchandise
Semi-finished products and work in process
Raw materials
Supplies¥14,088
7,357
5,347
6,086

¥14,201
7,713
5,675
4,772

$132,906
69,40650,44357,415

Total¥32,878¥32,361$310,170

No»6

L ONG- L I V E D A S S E T S

The Group reviewed its long-lived assets for impairment as of the year ended March 31, 2004 and, as a result, recognized an impairment
loss of ¥2,040 million ($19,245 thousand) as other expense for a decline in value of the property and other of the Crystal division of theMusashi Plant and other due to a continuous operating loss of that unit. The carrying amount of the relevant machinery was written down
to the recoverable amount. The recoverable amount of that machinery group was measured at its value in use and the discount rate used
for computation of the present value of future cash flows was 5%.

No»7

I NVESTMENTS IN AND ADVANCES TO ASSOCIATED COMPANIESInvestments in and advances to associated companies at March 31, 2004 and 2003 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Investments
Advances (Long-term loan receivable)¥5,68912¥4,95324$53,670
113

Total¥5,701¥4,977$53,783

No»8SHORT-TERM BANK LOANS AND LONG-TERM BANK LOANS

Short-term bank loans at March 31, 2004 and 2003 consisted of notes to banks and bank overdrafts. The annual interest rates applicableto the short-term bank loans ranged from 2.70% to 4.98% and 2.70% to 5.36% at March 31, 2004 and 2003, respectively.
Long-term debt at March 31, 2004 and 2003 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004

1.54% unsecured yen-denominated loans, due through 2005
6.89% unsecured Euro-denominated loans, due through 2005
Other loans
Total
Less current portionLong-term bank loans, less current portion

2003

¥150

2004

$1,415

1

¥ 38
3

10

151
(151)

41
(34)

1,425
(1,425)

7

(0

¥

(0

Annual maturities of long-term bank loans as of March 31, 2004 were as follows:Year Ending March 31

2005

Millions of Yen

Thousands of
U.S. Dollars¥ 151$1,425,53

NO»9RETIREMENT BENEFITS AND PENSION PLANS

The Company and certain domestic subsidiaries had two types of pension plans for employees; an unfunded retirement benefit plan and acontributory funded pension plan. The Company and certain domestic subsidiaries had retirement benefit plans for directors and corporate auditors.
For the year ended March 31, 2003, the contributory funded pension plan was dissolved and the unfunded retirement benefit plan was
abolished.
The components of net periodic benefit costs for the years ended March 31, 2004, 2003 and 2002 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2004

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss
Amortization of transitional obligation
Total
Additional expense incurred to dissolve the contributory fundedpension plan
Additional expense incurred to abolish the unfunded retirement
benefit plan
Additional retirement benefits paid to employees
Net periodic benefit costs

0

2003

2002

¥ 1,695
1,234(1,523)
(122)
1,781
(157)

¥ 1,667
1,879(2,194)
(163)
1,021
(210)

2,908

2,000

2004

0

¥ 888

14,949$ 8,377

1,090

351
3,691

1,996

10,283¥1,978¥21,899¥ 3,996$18,660

Additional expenses incurred to dissolve the contributory funded pension plan were loss incurred on the dissolution of the plan for theyear ended March 31, 2004 and the remaining liability exceeding liability for retirement benefit at the dissolution of the plan for the year
ended March 31, 2003.
Additional expense incurred to abolish the unfunded retirement benefit plan was equal to the difference between retirement benefits
paid to employees due to abolishment and the recorded liability for retirement benefits.
Assumptions used for the years ended March 31, 2003 and 2002 were set forth as follows:

Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial gain/loss
Amortization period of transitional obligation

0.00.0%00 years
00 years
00 years

2003

2002

5.5%
12 years
12 years
15 years

2.5%
5.5%
12 years
12 years
15 years

Remaining balances of prior service cost, actuarial gain/loss and transitional obligation were charged to income when the contributory
funded pension plan was dissolved and the unfunded retirement benefit plan was abolished in the year ended March 31, 2003.
Accrued retirement benefits for directors and corporate auditors of the Company and its domestic subsidiaries are paid subject toapproval of the shareholders in accordance with the Code. Accrued retirement benefits recorded in the accompanying consolidatedbalance sheets at March 31, 2003 represents the accrued retirement benefits for directors and corporate auditors. The Company and its
domestic subsidiaries abolished the retirement benefit plan for directors and corporate auditors for the year ended March 31, 2004.

54

N o » 10

SHAREHOLDERS’ EQUITY

Japanese companies are subject to the Code to which certain

additional paid-in capital or legal reserve to be reduced in the caseamendments became effective from October 1, 2001.

where such reduction was resolved at the general shareholders

The Code was revised whereby common stock par value waseliminated resulting in all shares being recorded with no par value

meeting.
The amount of retained earnings available for dividends under

and at least 50% of the issue price of new shares is required to be

the Code was ¥119,888 million ($1,131,019 thousand) as ofrecorded as common stock and the remaining net proceeds as

March 31, 2004, based on the amount recorded in the Company's

additional paid-in capital. The Code permits Japanese companies,

general books of account. In addition to the provision thatupon approval of the Board of Directors, to issue shares to existing

requires an appropriation for a legal reserve in connection with theshareholders without consideration as a stock split. Such issuancecash payment, the Code imposes certain limitations on theof shares generally does not give rise to changes within theamount of retained earnings available for dividends.

shareholders' accounts.
The revised Code also provides that an amount at least equal to

The general shareholders meeting held in June 2003 approved
the introduction of the Committees System stipulated in the Code.

10% of the aggregate amount of cash dividends and certain other

Before the Committees System was introduced, dividends had

appropriations of retained earnings associated with cash outlays

been approved by the general shareholders meeting held subse-

applicable to each period shall be appropriated as a legal reserve (aquent to the fiscal year to which the dividends were applicable.

component of retained earnings) until such reserve and additional

After introducing the Committees System, dividends may be paid

paid-in capital equals 25% of common stock. The amount of total

upon resolution of the Board of Directors, subject to certain

additional paid-in capital and legal reserve that exceeds 25% oflimitations imposed by the Code. Semiannual interim dividends

the common stock may be available for dividends by resolution of

may also be paid upon resolution of the Board of Directors, subject

the shareholders. In addition, the Code permits the transfer of ato certain limitations imposed by the Code.

portion of additional paid-in capital and legal reserve to thecommon stock by resolution of the Board of Directors.

On June 20, 2003 and June 21, 2002, the Company's shareholders approved a stock option plan for the Group's directors and

The revised Code eliminated restrictions on the repurchase andkey employees. Under the plan, 1,066 thousand options wereuse of treasury stock allowing Japanese companies to repurchase

granted to them to purchase shares of the Company's common

treasury stock by a resolution of the shareholders at the generalstock during the exercise period from October 1, 2004 to Septem-

shareholders meeting and dispose of such treasury stock by

ber 30, 2008 or from October 1, 2003 to September 30, 2007.

resolution of the Board of Directors beginning April 1, 2002. The

The options were granted at an exercise price of ¥9,750, ¥7,670

repurchased amount of treasury stock cannot exceed the amountor ¥6,690.

available for future dividend plus amount of common stock,55

N o » 11

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 41.7% for the years ended March 31, 2004, 2003 and 2002.
The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at March
31, 2004 and 2003 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Current:
Deferred tax assets:
Accrued bonuses to employees
Amortization of goodwill
Inventories—intercompany unrealized profits
Accrued enterprise taxes
Other
Total

2004

2003

2004

¥1,4101,493,
1,604
1,201
1,358

¥1,361
1,265
830
77
772

$13,302
14,085
15,132
11,33012,811

7,066

4,305

66,660

Deferred tax liabilities:
Enterprise taxes refund receivable

335

Total

335

Net deferred tax assets¥7,066¥3,970$66,660

Non-current:
Deferred tax assets:
Amortization of goodwill and property, plant and equipment
Loss on impairment of long-lived assets
Allowance for doubtful receivables
Other¥2,069824
182
859¥2,503
401
1,383$19,519
7,773
1,717
8,104

3,934

4,287

37,113

756
166

894
182

7,132
1,566

922

1,076

8,698

¥3,012¥3,211$28,415

Total
Deferred tax liabilities:
Reserves for special depreciation and other
Other
Total
Net deferred tax assets

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statements of income for the years ended March 31, 2004, 2003 and 2002 was as follows:

56

2004

2003

2002

Normal effective statutory tax rate
Lower income tax rates applicable to income in certain foreign countries
Expenses not permanently deductible for income tax purposes
Per capita portion
Non-taxable dividend income
Intercompany cash dividend and transactions
Special tax credit on experiment and research expenses
Adjustments of deferred tax assets and liabilities due to change
the normal effective statutory tax rate
Other—net

41.7%(12.4)
0.7
0.2
(2.1)
1.6
(1.1)

41.7%
(13.5)
0.6
0.4
(2.1)
2.1

41.7%
(5.2)
0.5
0.3
(3.9)
3.8

(0.1)

0.7

(0.6)

Actual effective tax rate

28.5%

30.2%

36.6%

0.3

On March 31, 2003, a tax reform law was enacted in Japan which changed the normal effective statutory tax rate from approximately
41.7% to 40.4%, effective for years beginning April 1, 2004. The effect of this change on deferred taxes in the consolidated statements
of income for the year ended March 31, 2003 was a decrease of approximately ¥94 million.

N o » 12RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses charged to income for the years ended March 31, 2004, 2003 and 2002 were ¥9,847 million($92,896 thousand), ¥8,681 million and ¥7,289 million, respectively.

N o » 13LEASES

Income from equipment leases for the year ended March 31, 2002 was ¥4 million.
The Group leases certain machinery, computer equipment, office space and other assets. Total rental expenses for the years ended
March 31, 2004, 2003 and 2002 were ¥6,748 million ($63,660 thousand), ¥7,967 million and ¥8,739 million, including ¥1,297 million($12,236 thousand), ¥1,344 million and ¥1,413 million of lease payments under finance leases, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under finance lease, depreciation expense of finance leases that do not transfer ownership of the leased property to the lessee on an "as if capitalized" basis for theyears ended March 31, 2004 and 2003 was as follows:
Millions of Yen

2004
MachineryandVehiclesThousands of U.S. Dollars

2003

FurnitureandEquipment

Total

MachineryandVehiclesFurnitureandEquipment

2004
Total

MachineryandVehiclesFurnitureandEquipment

Total

Acquisition cost
Accumulated depreciation
Loss on impairment¥4,064
2,037¥3,2772,201
276¥7,341
4,238
276¥3,571
1,904¥3,305
2,025¥6,876
3,929$38,340
19,217$30,915
20,7642,604$69,255
39,981
2,604

Net leased property¥2,027¥ 800¥2,827¥1,667¥1,280¥2,947$19,123$ 7,547$26,670

The imputed interest expense portion as lessee is included in the above acquisition cost.
Obligations under finance leases:
Millions of Yen

Thousands of
U.S. Dollars

2004

2003

2004

Due within one year
Due after one year

¥ 962
1,865

¥1,191
1,756$ 9,076
17,594

Total¥2,827¥2,947$26,670

Loss on impairment of long-lived assets was recognized for ¥276 million ($2,604 thousand) against leased property for the year ended
March 31, 2004. The equivalent amount of the loss was excluded from the obligations under finance leases as of March 31, 2004.
The imputed interest expense portion as lessee is included in the above obligations under finance leases.
Depreciation expense for lessee, which is not reflected in the accompanying consolidated statements of income, computed by thestraight-line method was ¥1,297 million ($12,236 thousand), ¥1,344 million and ¥1,413 million for the years ended March 31, 2004,
2003 and 2002, respectively.
Depreciation expense for lessor, which is reflected in the accompanying consolidated statements of income, computed by the straight-

57

line method was ¥3 million for the year ended March 31, 2002.
The minimum rental commitments under noncancelable operating leases at March 31, 2004 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Due within one year
Due after one year

¥

Total

¥ 1,137

N o » 14

99
1,038

$

934
9,792

$ 10,726

RELATED PARTY TRANSACTIONSTransactions of the Group with associated companies for the years ended March 31, 2004, 2003 and 2002 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Sales
Purchases
Selling, general and administrative expenses
Other income—net

2004

2003

2002

2004

¥436
37

¥530
337

$4,113
349

115

109

¥1,029
536
36
217

1,085

The balances due to or from these associated companies at March 31, 2004 and 2003 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Notes and accounts receivable
Other current assets
Notes and accounts payable
Other current liabilities

2004

2003

2004

¥ 163
1
24

¥720
1
38
4

$1,5389226Transactions of the Group with a director, his immediate family and two related companies as of and for the years ended March 31,
2004, 2003 and 2002 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Selling, general and administrative expenses

N o » 15

2004

2003

2002

2004

¥1

¥7

¥7

$9

CONTINGENT LIABILITIESAt March 31, 2004, the Group had the following contingent liabilities:

58

Millions of Yen

Thousands of
U.S. Dollars

2004

2004

Guarantees of borrowings and lease obligations for customers
Guarantees of borrowings for the Group’s employees

¥869
14

$8,198
132

Total

¥883

$8,330N o » 16

DERIVATIVESThe Group enters into foreign currency forward contracts to hedge foreign currency exchange risk associated with certain assets andliabilities denominated in foreign currencies.
All derivative transactions are entered into to hedge foreign currency exposures incorporated within its business. Accordingly, market
risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities.
Because the counterparties to these derivatives are limited to major international financial institutions, the Group does not anticipate
any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorizationand credit limit amount.
Foreign currency forward contracts which qualify for hedge accounting for the years ended March 31, 2004 and 2003 and suchamounts which are assigned to the associated assets or liabilities and are recorded on the balance sheets at March 31, 2004 and 2003, arenot subject to disclosure of market value information.

N o » 17NET INCOME PER SHARE

Reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended March 31, 2004, 2003 and2002 is as follows:Year ended March 31, 2004:
Basic EPS
Net income available to common shareholders

Millions of Yen

Thousands ofSharesNet Income

Weighted-Average
Shares¥39,500

112,545

Effect of dilutive securities
Stock options
Diluted EPS
Net income for computation
Year ended March 31, 2003:
Basic EPS
Net income available to common shareholders

Yen

U.S. Dollars
EPS¥350.96

$3.31

$3.31

129
¥39,500

112,674¥350.56¥19,851

116,014¥171.10

Effect of dilutive securities
Stock options

14

Diluted EPS
Net income for computation
Year ended March 31, 2002:
Basic EPS
Net income available to common shareholders¥19,851

116,028¥171.08¥23,591

116,123¥203.1559

N o » 18

SUBSEQUENT EVENTS(1) Appropriations of Retained Earnings
The following appropriations of retained earnings for the year ended March 31, 2004 were resolved by the Company’s Board of Directors
on May 27, 2004:

Year-end cash dividends, ¥50.00 ($0.47) per share

Millions of Yen

Thousands of
U.S. Dollars¥5,563$52,481

In addition to the cash dividends described above, the Company paid interim cash dividends of ¥5,560 million ($52,452 thousand,¥50.00 ($0.47) per share) on November 26, 2003 to shareholders of record as of September 30, 2003, based on a resolution of the Boardof Directors.
(2) Retirement of Treasury StockOn May 27, 2004, the Board of Directors of the Company made a resolution to retire 3,775 thousand shares of treasury stock, amounting
to ¥30,702 million ($289,642 thousand), effective as of June 1, 2004.
(3) Stock Option PlanAt the Company's shareholders meeting held on June 18, 2004, the following stock option plan for the Group's directors and key
employees was approved. The plan provides for granting options to the Group's directors and key employees to purchase up to 300
thousand shares of the Company's common stock in the period from October 1, 2005 to September 30, 2009. The options are granted at
an exercise price at the fair value at the previous date of the option grant. The Company plans to issue acquired treasury stock upon
exercise of the stock options.

N o » 19

SEGMENT INFORMATION

Information about industry segments, geographical segments and sales to foreign customers of the Company and subsidiaries for theyears ended March 31, 2004, 2003 and 2002 was as follows:(1) Industry Segments
a. Sales and Operating Income
Millions of Yen
2004
Information Technology

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)

60

LifestyleRefinement

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService¥ 135,071
81¥ 4,116¥ 98,20318¥ 28,381¥ 4,32262¥ 1,351
5,804

135,152
89,982

4,116
4,193

98,22180,72528,381
22,108

4,384
4,880

7,155
6,547

(77)

¥ 17,496

6,273¥ (496)¥ 45,170

¥

¥

¥

608

Total

Eliminations
and Corporate

Consolidated¥ 271,444¥ 271,444
5,965 ¥ (5,965)
277,409
208,435¥

68,974 ¥(5,965)(5,158)271,444
203,277(807) ¥ 68,167

b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Millions of Yen
2004
Information Technology

AssetsDepreciation
Loss on impairment oflong-lived assets
Capital expenditures

LifestyleRefinement

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService

Total

Eliminations
and Corporate

Consolidated¥132,240
13,205¥1,74859¥92,082
5,735¥18,873532¥2,805352¥2,79730¥250,545
19,913¥39,34275¥289,887
19,98822,247

36

6,916

1,201

2,040
224

14

2,040
30,63821

2,040
30,659Eliminations
and Corporate

Consolidated

a. Sales and Operating Income
Thousands of U.S. Dollars
2004
Information Technology

Sales to customers
Intersegment sales

Electro-Optics

Photonics

Vision Care

Health Care

Crystal$ 1,274,255
764$ 38,830$ 926,443
170$ 267,745$ 40,774
585

1,275,019
848,887

38,83039,557926,613761,556

267,745
208,566

41,35946,03867,50061,764(727) $ 165,057$ 59,179$ (4,679)$ 5,736 $Total sales
Operating expenses
Operating income (loss)

LifestyleRefinement

Eye Care$426,132$

Service

Total$ 12,745 $ 2,560,792$ 2,560,792
54,75556,274 $(56,274)
2,617,066
1,966,368(56,274)(48,661)

650,698 $ (7,613) $2,560,792
1,917,707
643,085b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Thousands of U.S. Dollars
2004
Information Technology

AssetsDepreciation
Loss on impairment oflong-lived assets
Capital expenditures

Electro-Optics

Photonics$ 1,247,547
124,575$ 16,491
556

209,878

340

LifestyleRefinement

Eye Care
Vision Care

Health Care

$ 868,698 $ 178,047
54,104
5,019

65,245

11,330

Crystal$ 26,462
3,321

Service

Total

Eliminations
and Corporate

Consolidated$ 26,387 $ 2,363,632 $371,151 $ 2,734,783
283
187,858708
188,566

19,2452,113

132

19,245
289,038

198

19,245289,236

a. Sales and Operating Income
Millions of Yen
2003
Information Technology

LifestyleRefinement

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService

Total

Eliminations
and Corporate¥111,461
207¥ 5,485¥94,388
1,988¥26,717¥6,71935¥1,523
3,025¥246,293
5,255¥(5,255)

Total sales
Operating expenses

111,668
77,254

5,485
6,073

96,37680,97826,717
21,628

6,754
6,766

4,548
4,309

251,548
197,008(5,255)(3,698)

246,293
193,310

Operating income (loss)¥034,414¥ (588)¥15,398¥05,089¥0 , (12)¥0,239¥054,540¥(1,557)¥052,983

Total

Eliminations
and Corporate

Consolidated¥242,940 ¥31,349
19,69795
15,744204¥274,289
19,792
15,948

Sales to customers
Intersegment sales

Consolidated¥246,293b. Assets, Depreciation and Capital Expenditures
Millions of Yen
2003
Information Technology

AssetsDepreciation
Capital expenditures

Eye CareLifestyleRefinement

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService¥114,877
13,12910,444¥2,69884
151¥98,077
5,578
3,935

¥16,447571
426¥8,409302
776¥2,43233
1261

a. Sales and Operating Income
Millions of Yen
2002
Information Technology

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)

LifestyleRefinement

Eye CareEliminations
and Corporate

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService

Total¥ 101,496
481¥ 7,157¥ 93,184
29¥ 23,106811¥ 8,78835¥ 1,534
3,110¥ 235,265
4,466¥(4,466)

101,977
74,188

7,157
7,624

93,21378,79923,917
20,488

8,823
8,824

4,644
4,392

239,731
194,315(4,466)(2,948)235,265
191,367¥ 27,789¥ (467)¥ 14,414

45,416 ¥ (1,518)¥ 43,898

Eliminations
and Corporate

Consolidated¥ 236,575 ¥41,493
19,519117
19,53451¥ 278,068
19,636
19,585

¥

3,429

¥

(1)

¥

252

¥

Consolidated¥ 235,265b. Assets, Depreciation and Capital Expenditures
Millions of Yen
2002
Information Technology

AssetsDepreciation
Capital expenditures

Eye CareLifestyleRefinement

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService¥ 111,806
12,687
13,280¥ 4,515227
53¥ 92,309
5,516
5,259

¥ 15,816554
687¥ 8,684498
254¥ 3,445
37
1

Total

Notes: 1. The Company and subsidiaries primarily engage in the manufacture and sale of products in six major segments grouped on the basis of similarities in the types, nature andmarket of the products. The six segments, namely, Electro-Optics, Photonics, Vision Care, Health Care, Crystal and Service, consist primarily of the following products:
Electro-Optics: Photomasks and mask blanks for semiconductors, masks for liquid-crystal display (LCD), liquid-crystal devices, glass disks for hard disk drives (HDDs), opticallenses, optical glasses, electronic glass, optical communication related products, etc.
Photonics:
Laser equipment, etc.
Vision Care: Eyeglasses, eyeglass frames, ophthalmic equipment, etc.
Health Care: Contact lenses and related accessories, intraocular lenses, hearing aids, etc.
On March 31, 2003, hearing aids business was transferred to a third party.
Crystal:Crystal glass products
Service:
Design of information systems, placement of temporary staff, etc.
2. Corporate operating expenses consist primarily of the administration expenses of the Company and foreign holding companies, which are not allocated to industry segments.
Corporate operating expenses for the years ended March 31, 2004, 2003 and 2002 were ¥2,424 million ($22,868 thousand), ¥2,052 million and ¥1,981 million, respectively.
3. Corporate assets consist primarily of cash, time deposits, investments securities and administrative assets of the Company and the foreign holding companies. Corporate assets
as of March 31, 2004, 2003 and 2002 were ¥52,594 million ($496,170 thousand), ¥51,571 million and ¥51,632 million, respectively.
4. Consolidated operating expenses are equal to the total of cost of sales and selling, general and administrative expenses shown in the accompanying consolidated statements ofincome.

62

(2) Geographical Segments
The geographical segments of the Company and subsidiaries for the years ended March 31, 2004, 2003 and 2002 are summarized asfollows:
Millions of Yen
2004
Eliminations
and Corporate

Japan

North America

Europe

Asia

Total

Consolidated

Sales to customers
Interarea transfers¥188,441
16,790¥33,11391¥37,486
849¥12,404
60,196¥271,444
77,926¥(77,926)

Total sales
Operating expenses

205,231
167,669

33,204
31,39038,33529,29472,60054,693349,370
283,046(77,926)(79,769)

Operating income¥037,562¥ 1,814,¥ 9,041¥17,907¥ 66,324¥ 1,843 ¥ 68,167

Assets¥161,336¥19,059¥26,691¥66,338¥273,424¥16,463 ¥289,887¥271,444
271,444
203,277

Thousands of U.S. Dollars
2004
Japan

Sales to customers
Interarea transfers

North America

Europe

Asia

Total

Eliminations
and Corporate

Consolidated$ 1,777,745 $312,387 $ 353,641 $117,019 $2,560,792$2,560,792
158,396858
8,010 567,887
735,151 $ (735,151)

Total sales
Operating expenses

1,936,141
1,581,783

313,245
296,132

361,651
276,358

684,906
515,972

3,295,943
2,670,245(735,151)(752,538)

354,358 $ 17,113 $ 85,293 $168,934 $ 625,698 $2,560,792
1,917,707

Operating income$

Assets$ 1,522,038 $179,802 $ 251,802 $625,830 $2,579,472 $ 155,311 $2,734,783

17,387 $ 643,085

Millions of Yen
2003
Total

Eliminations
and Corporate

Japan

North America

EuropeAsia

Sales to customers
Interarea transfers¥166,178
17,343¥35,77173¥ 32,639
1,891¥11,705
44,514¥246,293¥246,293
63,821 ¥(63,821)

Total sales
Operating expenses

183,521
148,960

35,84434,89834,53028,411

56,21945,282

310,114257,551

Operating income¥034,561¥00,946¥ 6,119¥10,937¥052,563 ¥

420¥052,983

Assets¥139,012¥19,505¥ 34,970¥59,156¥252,643¥21,646¥274,289

Total

Eliminations
and Corporate

Consolidated(63,821)(64,241)

Consolidated

246,293
193,310

Millions of Yen
2002
Japan

North America

EuropeAsia

Sales to customers
Interarea transfers¥159,368
14,964¥36,985
113¥28,964
1,196¥09,948
40,330¥235,265¥235,265
56,603 ¥ (56,603)

Total sales
Operating expenses

174,332
143,426

37,09835,13930,16025,91850,278
43,109291,868
247,592

Operating income¥030,906¥01,959¥04,242¥07,169¥044,276 ¥Assets¥138,963¥21,000¥30,356¥55,412¥245,731 ¥ 32,337(56,603)(56,225)

235,265
191,367(378) ¥043,898¥278,068

Notes: 1. The Company and subsidiaries are summarized in four segments by geographic area based on the countries where the Group is located. The segments consisted of thefollowing countries:
North America: United States of America, Canada, etc.
Europe:Netherlands, Germany, United Kingdom, etc.
Asia:
Singapore, Thailand, China, Republic of Korea, Taiwan, etc.
2. Corporate operating expenses consist primarily of the administration expenses of the Company and one foreign holding company, which are not allocated to segments bygeographic area. Corporate operating expenses for the years ended March 31, 2004, 2003 and 2002 were ¥2,074 million ($19,566 thousand), ¥1,813 million and ¥1,771
million, respectively.
3. Corporate assets consist primarily of cash, time deposits, investments securities and administrative assets of the Company and one foreign holding company. Corporate assets
as of March 31, 2004, 2003 and 2002 were ¥47,511 million ($448,217 thousand), ¥40,280 million and ¥48,342 million, respectively.
4. Consolidated operating expenses are equal to the total of cost of sales and selling, general and administrative expenses shown in the accompanying consolidated statements ofincome.

63

(3) Sales to Foreign Customers
The sales to foreign customers of the Company and subsidiaries for the years ended March 31, 2004, 2003 and 2002 are summarized asfollows:
Millions of Yen
2004

Overseas sales (A)Consolidated sales (B)(A)/(B)

North America

Europe

Asia

Other

Total

¥ 38,283¥40,168¥ 44,656

¥12

14.1%

14.8%

16.5%

0.0%

¥ 123,119
271,444
45.4%

Thousands of U.S. Dollars
2004
North America

Overseas sales
Consolidated sales

Europe$361,160 $378,944

Asia

Other

Total

$421,283$113$1,161,500
2,560,792

Millions of Yen
2003

Overseas sales (A)Consolidated sales (B)(A)/(B)

North America

Europe

Asia

Other

Total

¥36,692¥38,789¥32,773

¥33

14.9%

15.8%

13.3%

0.0%

¥108,287
246,293
44.0%

Millions of Yen
2002

Overseas sales (A)Consolidated sales (B)(A)/(B)

North America

Europe

Asia

Other

Total

¥39,746¥38,144¥25,080

¥ 47

16.9%

16.2%

10.7%

0.0%

¥103,017
235,265
43.8%

Note: The Company and subsidiaries are summarized in four segments by geographic area based on the countries where the customers are located. The segments consisted of thefollowing countries:
North America: United States of America, Canada, etc.
Europe:Netherlands, Germany, United Kingdom, etc.
Asia:
Singapore, Thailand, Republic of Korea, Taiwan, etc.
Other:
Saudi Arabia and Brazil, etc.

64Corporate Data
(As of March 31, 2004)

EstablishedDirectors and Executive Officers (As of June 18, 2004)

November 1, 1941
Directors
Paid-in Capital

Takeo Shiina (Senior Advisor of IBM Japan, Ltd.)¥6,264,201,967

Naotaka Saeki (Senior Advisor of UFJ Bank Ltd.)
Yuzaburo Mogi (President & CEO of Kikkoman Corporation)*

Number of Employees

Yoshikazu Hanawa (Advisor and Honorary Chairman of Nissan Motor Co., Ltd.)

2,983

Eiko Kono (Chairperson of the Board of Recruit Co., Ltd.)(decreased 306 from the end of the previous fiscal year)

Hiroshi Suzuki

Average age:

39.9

Kenji Ema

Average years of service:

13.0

Hiroaki Tanji

Total number of employees in the Hoya Group:

18,092

Executive Officers
Date for the Settlement of Accounts

Hiroshi Suzuki (President & CEO)March 31

Kenji Ema (Chief Financial Officer)
Hiroaki Tanji (Strategy & Business Development)

General Shareholders’ Meeting*Mr. Mogi is going to be inaugurarted as the Chairman of the Board & CEO of Kikkoman Corporation

June

on June 25, 2004.

HOYA Group (As of March 31, 2004)

Global Headquarters(Formulating group strategy)

Information
Technology

Eye CareCrystal(Area)

Supporting Legal and Financial Operations

Japan

Asia

(Holding Company)

North America(Holding Company)

EUROPE(Holding Company,
Financial Headquarters)

Global Business Expansion

65Investor Information(As of March 31, 2004)

Listing of the Company’s Shares

Breakdown of Shareholders

First Section of the Tokyo Stock Exchange
Ownership >>Number of Shareholders >>Number of Shares of Common Stock
Authorized: 320,000,000 ( ※ )Issued: 116,124,405 ( ※ )Individuals, Other
15.88%

Financial institutions
32.08%

Foreigninvestors
50.45%

Trading Unit
100 shares

Other corporate
investors
1.59%

Financial institutions
2.52%

Other corporate
investors
2.05%

Individuals,
Other88.04%

Foreign investors
7.39%

Number of Shareholders
7,660※ As of June 1, 2004, the Company retired 3,775,400 shares of its treasury stock, thereby reducing the numberof shares of common stock authorized and issued.

Acquisition, Disposal and Ownership by
the Company of Its Own Shares:

Principal Shareholders
Shareholders

Acquisition of shares
Common stock:
Aggregate acquisition price

3,962,711 shares¥32,905,737 thousand

Disposal of shares
Common stock:
Aggregate loss in disposal

55,894 shares¥418,700 thousand

Number of shares owned by the Company at the endof the fiscal year under review
Common stock:4,857,867 shares(Note) As of March 31, 2003, the Company owned 951,050
shares of its common stock.

Shareholdings

Percentage
of totalshares issued

1

State Street Bank and Trust Company

9,925,863

8.54

2

Japan Trustee Services Bank, Ltd. (Trust Account)

7,952,900

6.84

3

The Chase Manhattan Bank N.A. London

7,084,580

6.10

4The Master Trust Bank of Japan, Ltd. (Trust Account)

7,053,400

6.07

5The Dai-ichi Mutual Life Insurance Company

5,765,300

4.96

6The Chase Manhattan Bank N.A. London SL Omnibus Account4,861,752

4.18

7

HOYA Corporation (Treasury stock)4,857,867

4.18

8

Nippon Life Insurance Company

4,139,847

3.56

9

Mellon Bank Treaty Clients Omnibus

2,510,904

2.16

10

Mamoru Yamanaka

2,254,829

1.94

56,407,242

48.57

Above total

Issuance of New Share Subscription Rights
Following the approval at the 65th Ordinary General Meeting of Shareholders, in connection with theCommon Stock Price Range

resolution of the Board of Directors, the Company issued new share rights on November 27, 2003 as

2003

stock option. Details are disclosed as below:

High

Jan.–Mar.

Third issue of new subscription rights for common stock(Resolved by the Board of Directors on November 27, 2003)
1. Number of new share subscription rights
the Company granted:
1,755 rights
2. Class and number of new shares to beissued upon exercising of new sharesubscription rights:

of charge
4. Paid-in amount per share upon exercisingof a new share subscription right: ¥9,750
5. New share subscription period: From
October 1, 2004 to September 30, 2008

175,500 shares of common stock of theMaximum percentage of new share

Company

subscription rights exercisable during each(100 shares for each new share subscrip-

period is fixed separately.

tion right)

66

3. Price of a new share subscription right: Free

2004
Low

High

Low

¥ 8,620 ¥ 6,860 ¥10,890 ¥ 9,580

Apr.–June

8,450

July–Sept.

9,550

6,690
8,150

Oct.–Dec.

10,5508,610Transfer Agent of Common Stock
Handling Office
UFJ Trust Bank Ltd.
Corporate Agency Department
7-10-11 Higashisuna, Koto-ku,
Tokyo 137-8081, Japan
Tel. 03-5683-5111

Hoya’s Timeline(As of March 31, 2004)

1941
November

1994
An optical glass production plant was established in the city of
Hoya, in metropolitan Tokyo, and production of optical glass
was initiated.

1944
AugustJune

Crystal products were introduced.

August

The manufacture of optical glass BK7 resumed.

November

The Optics Division’s Showa Plant (currently Akishima Plant)
was completed in Tokyo. The Company merged with three
affiliates.

1997

1960
November

April

1961
October

Hoya was listed on the Second Section of the Tokyo Stock
Exchange.

1962
May
October

The manufacture of eyeglass lenses commenced.
Hoya was listed on the Second Section of the Nagoya Stock
Exchange.

May

1963
May

The Crystal Division’s Musashi Plant was completed.

December

The Vision Care Division launched sales of progressive
multifocal lenses.

1998

1967
April

April

1972
DecemberSales of soft contact lenses began.

1973
February

The Company’s listings were advanced to the First Section of
the Tokyo and Nagoya Stock Exchanges.

1974
January

The Electronics Division’s Nagasaka Plant was completed, andthe production of IC substrates began. Hoya’s on-line network
to handle eyeglass lens orders was introduced in the Vision
Care Division.

February
September

January

April

July

The construction of the Hachioji Plant in the Electronics
Division was completed, and the production of IC photomasks
commenced.

1984
AugustOctober

April

October

The Kodama Plant was completed for medical-related
production and research.

August

The R&D Center was completed in the city of Akishima.
The production of intraocular lenses (IOLs) commenced.
The production of aspherical molded-glass lenses commenced.

1989
April

Hoya Europe B.V. of the Netherlands (currently Hoya Holdings
N.V.) and Hoya Corporation USA were established.

1991
March

Glass disks for HDDs were launched.

1993
October

Hoya Group’s Philosophy of Environment was established.

All major domestic plants received ISO 14001 certification.
Hoya acquired Belgian eyeglass manufacturer Buchmann
Optical Industries N.V.
Hoya acquired Optical Resources Group, Inc. (ORI), a processor
and marketer of eyeglasses in the United States(Integrated into Hoya Corporation in March 2001).
Hoya acquired the semiconductor photomask production
division of Oki Electric Industry Co., Ltd.
Hoya began marketing HOYALUX Summit Pro and NuLux
lenses that use EYRY, a high-index, plastic lens material.
Hoya began manufacturing soft intraocular lenses.

2002
May

Manufacture and sale of 3C-SiC, a new substrate material for
semiconductors, begun by a new subsidiary.
Technical alliance formed with Dai Nippon Printing Co., Ltd. tojointly develop mask blanks for next-generation semiconductors.

2003
January

1987
June
NovemberMay
October1986

Hoya began the quarterly release of consolidated financial
results.
The Vision Care Company’s Itsukaichi Plant became theGroup’s first domestic facility to receive ISO 14001 certification.

2001

The current Head Office was completed.
Hoya Lens Corporation and Hoya Crystal Corporation mergedwith the parent company.

1985

Hoya introduced its “internal company system,” reorganizing
Group operations centered on two internal companies(Electro-Optics and Vision Care) and three subsidiaries (Hoya
Photonics, Inc., Hoya Healthcare Corporation, and Hoya
Crystal Corporation).
Hoya implemented ERP R/3, an enterprise resource planningsystem developed by SAP AG of Germany.
Hoya Holdings Asia Pacific Pte Ltd. was established as thethird regional holding company after Hoya Holdings N.V. andHoya Holdings, Inc., the holding companies for Europe andNorth America, respectively.
Hoya Lens Deutschland GmbH became the first Group
company to receive ISO 14001 certification.

2000

Hoya Electronics Co., Ltd., merged with the parent company.

1983

Hoya formed an alliance with IBM to develop a nextgeneration glass disk for HDDs.
Kumamoto Plant commenced operations as a photomask
manufacturing plant.

1999

1982
October

Hoya introduced an outside director system.

1996

1952
February

The Hoya Group was reorganized with the establishment of
the Electro-Optics Division, the Vision Care Division and theCrystal Division.

1995
The plant was incorporated with capital of ¥1.2 million.

1945
October

April

March
June
July

Company delisted from the first section of the Nagoya Stock
Exchange.
Subsidiaries Hoya Crystal Corp. and Hoya Crystal Shop Corp.
merged with Hoya Corporation.
Hoya established a company-with-committees system.
Global financial management operations were transferred to aholding company in Europe.

2004
February
March

Subsidiary Hoya Optics Corp. was merged with Hoya
Corporation.
Hoya acquired the HDD glass disk business of Nippon Sheet
Glass Co., Ltd.

67

Hoya’s Director y(As of March 31, 2004)

HOYA CORPORATIONOVERSEAS BRANCHES

2-7-5 Naka-Ochiai,
Shinjuku-ku, Tokyo
161-8525, JapanTEL 03-3952-1151<Blanks Division>

HARTFORD FACILITY
580 Nutmeg Rd. N, S. Windsor,
CT 06074-2458, U.S.A.
TEL 860-289-5367

EUROPE BRANCH
Bilton House, 54/58 Uxbridge Road,LARGO FACILITY

Ealing, London, W5 2ST, U.K.

12345-B Starkey Rd., Largo, FL 33773, U.S.A.

TEL 020-8579-6939

TEL 727-531-8964<Vision Care Company>

MODESTO FACILITY

Business Development Division
3-3-1 Musashino, Akishima-shi,
R&D Center Building
Tokyo 196-8510, JapanTEL 042-546-2701

1400 Carpenter Lane, Modesto, CA 95351
HOYA VISION CARE, NORTH AMERICA

U.S.A.

HEADQUARTERS

TEL 209-579-7739

651E, Corporate Drive, Lewisville,
TX 75057-6403, U.S.A.

PORTLAND FACILITYTEL 972-221-4141

3880 S.E. 8th Ave., Portland,
OR 97202-3704, U.S.A.

CLEVELAND FACILITYTEL 503-233-6211

94 Pelret Parkway, Berea, OH 44017, U.S.A.
TEL 440-239-0692

SAN DIEGO FACILITY
4255 Ruffin Road, San Diego, CA 92123 U.S.A.

DALLAS FACILITYTEL 858-309-6050

651E, Corporate Drive, Lewisville,
TX 75057-6403, U.S.A.

SEATTLE FACILITYTEL 972-221-4141

2330 S. 78th Street, Tacoma, WA 984099051, U.S.A.

DAYTON FACILITYTEL 253-475-7809

777 Zapata Drive Fairborn, OH 45324, U.S.A.
TEL 937-878-0055

ST. LOUIS FACILITY
301 Vision Dr., Columbia, IL 62236, U.S.A.

EUGENE FACILITY
1370 S. Bertelsen Rd., Eugene, OR 97402,
U.S.A.
TEL 541-683-3898

68

TEL 618-281-3344

DOMESTIC SUBSIDIARIES AND
AFFILIATESOVERSEAS SUBSIDIARIESHOYA OPTICAL (ASIA) CO., LTD.
Suite 3101-2, Tower 6, The Gateway,

Asia and Oceania<Information Technology>

9 Canton Road, Tsim Sha Tsui, Kowloon,
Hong Kong

HOYA HOLDINGS ASIA PACIFIC PTE LTD.

TEL 2723-6883

HOYA CANDEO OPTRONICS CORPORATION

138 Cecil Street, #08-03 Cecil Court,

3rd Floor, 711 Building,Singapore 069538

VISION CARE COMPANY ASIA

7-11-8 Shinjuku, Shinjuku-ku,

TEL 6323-1151

HEADQUARTERS

Tokyo 160-0023, JapanTEL 03-3369-6911

Payatai Plaza 23rd Floor, 128/251-256
HOYA OPTO-ELECTRONICS QINGDAO LTD.

Phyathai Road,

South Side, Mid-Section of Songhuajiang

Thung-Phyathai, Rajthavee, Bangkok 10400,

HOYA PHOTONICS CORPORATION

Road,Qingdao Economic & TechnologicalThailand

3-5-24 Hikawa-cho, Toda-shi,

Development Zone, Qingdao City, Shandong

TEL 02219-3581

Saitama 335-0027, Japan

Province, China

TEL 048-447-6050

TEL 532-6760997

HOYA ADVANCED SEMICONDUCTORHOYA MAGNETICS SINGAPORE PTE LTD.

TaiwanTECHNOLOGIES CO., LTD.

#3 Tuas, Link2, Singapore 638552

TEL 02-2567-3481

1-17-16 Tanashioda, Sagamihara-shi,

TEL 6863-2911

HOYA LENS TAIWAN LTD.
3rd Floor, No.146, Sung Chiang Road, Taipei,

Kanagawa 229-1125, Japan

HOYA LENS AUSTRALIA PTY. LTD.
HOYA GLASS DISK (THAILAND) LTD.

44-54 Bourke Road, Alexandria, Sydney,

Northern Region Industrial Estate 60/26

N.S.W. Australia 2015

NH TECHNO GLASS CORPORATION*1

Moo 4 Tambol Banklang, Amphur Muang,

TEL 02-9698-1577

6th Floor, Keihin Tatemono Daiichi Building,Lamphun, 51000 Thailand

2-12-20 Shin-Yokohama, Kohoku-ku,

TEL 53-581-314

TEL 042-777-5404

TEL 045-475-2905<Eye Care>
HOYA HEALTHCARE CORPORATION

THAI HOYA LENS LTD.
Payatai Plaza 23rd Floor, 128/251-256

Yokohama, Kanagawa 222-0033, Japan
HOYA GLASS DISK PHILIPPINES, INC.*2

Phyathai Road,

111 East Main Avenue, Special ExportThung-Phyathai, Rajthavee, Bangkok 10400,

Processing Zone (SEPZ) Laguna Technopark

Thailand

Binan, Laguna Philippines

TEL 02219-3972

TEL 049-541-2730
HOYA LENS THAILAND LTD.

2-7-5 Naka-Ochiai, Shinjuku-ku,
Tokyo 161-8525, Japan

HOYA GLASS DISK MALAYSIA SDN, BHD.*2

392/1 Moo 2 Phaholyothin RD., Prachatipat,

TEL 03-3950-6011

Lot 28 & 29, Phase 1, Jalan Hi-Tech 4,Thanyaburi, Patumthani 12130, Thailand

Kulim Hi-Tech Park, 09000 Kulim, Kedah,

TEL 02-901-2021<Others>

Malaysia
TEL 4-403-3118

HOYA LENS HONG KONG LTD.
16/F, Unison Industrial Centre,

HOYA SERVICE CORPORATION
10th Floor, HOYA Marketing Building,

HOYA OPTICS (THAILAND) LTD.

27-31 Au Pui Wan Street, Fo Tan,

1-29-9 Takadanobaba, Shinjuku-ku,

Northern Region Industrial Estate 60/31

N.T. Hong Kong

Tokyo 169-8661, Japan

Moo 4 Tambol Banklang, Amphur Muang,

TEL 2556-5266

TEL 03-3232-7671

Lamphun, 51000 Thailand
TEL 53-552-413

HOYA LENS KOREA CO., LTD.
3rd Floor of Yunil Building, 1443-15 Seocho-

WELFARE CORPORATION
8th Floor, HOYA Marketing Building,

HOYA OPTICAL TECHNOLOGY (SUZHOU)

Dong, Seocho-gu, Seoul, 137-865, Korea

1-29-9 Takadanobaba, Shinjuku-ku,

LTD.

TEL 02-585-1911

Tokyo 169-8661, Japan

Xin Gang Da Sha Room No.610, 88 Jin Shan

TEL 03-3232-1019

Road, Suzhou New District, 215011, China

HOYA LENS GUANGZHOU LTD.

TEL 0512-6841-0171

Zhicheng Dong Road, Guangzhou Economic &Technological Development District,
Guangzhou, 510730, China
TEL 020-8222-3999

69

HOYA LENS SHANGHAI LTD.

HOYA LENS U.K. LIMITEDHOYA CORPORATION USA

SHANGHAI HEAD OFFICE

Industrial Estate, Wrexham, LL13 9UA,

101 Metro Drive, Suite 500, San Jose,

3F (W.), No.10 Lane 561, Nujiang Rd. (N.),

United Kingdom

CA 95110, U.S.A.

Shanghai, 200333, China

TEL 01978-663150

TEL 408-441-3300

TEL 021-5281-9663
HOYA LENS IBERIA S.A. Unipersonal

HOYA PHOTONICS, INC.

MALAYSIAN HOYA LENS SDN. BHD.

Paseo de las Flores, 23, 28820-Coslada,

3150 Central Expressway, Santa Clara, CA

No.6 Jalan 7/32A, Off 6 1/2 Miles, Jalan

Madrid, Spain

95051, U. S. A.

Kepong, 52000 Kuala Lumpur, Malaysia

TEL 091-6603511

TEL 408-727-3240

TEL 03-6258-8977
HOYA LENS ITALIA S.P.A.

HOYA LENS OF AMERICA, INC.

HOYA LENS (S) PTE LTD.

Via Bernadio Zenale, 27, 20024 Garbagnate,(doing business as HOYA VISON CARE,

315 Outram Road, #02-05 Tan Boon Liat

Milanese, Milan, Italy

NORTH AMERICA Bethel Facility)

Building, Singapore 169074

TEL 02-99071371

13 Francis J. Clarke Circle Bethel,TEL 6221-0055

CT 06801-2846, U.S.A.
HOYA LENS DEUTSCHLAND GMBH

TEL 203-790-0171

HOYA LENS PHILIPPINES, INC.

Hoya-Lens Strasse 1, D-79379 Müllheim/

10th Floor, Sterling Centre, cor, Ormaza & Dela

Baden, Germany

EAGLE OPTICS, INC.

Rosa Sts, Legaspi Village, Makati City,

TEL 07631-1860(doing business as HOYA VISION CARE,

Philippines
TEL 02-751-7174

NORTH AMERICA Atlanta Facility)
HOYA LENS DANMARK A/S

591-F Thornton Road, Lithia Springs,

H ø rskaetten 28, 2630 Taastrup, Denmark

GA 30122, U.S.A.

EuropeTEL 4355-8200

TEL 770-944-1800

HOYA HOLDINGS N.V.

HOYA LENS POLAND SP. Z.O.O.

HOYA LENS OF CHICAGO, INC.

Amsterdamseweg 29, 1422 AC Uithoorn,ul. Olkuska 9,02-604 Warsaw, Poland(doing business as HOYA VISION CARE,

P.O. Box 250, 1420 AG Uithoorn,

TEL 022-6461200

NORTH AMERICA Chicago Facility)

The Netherlands
TEL 0297-514-356

3531 Martens Street, Franklin Park,
HOYA LENS BELGIUM N.V.

IL 60131, U.S.A.

Lieven Gevaertstraat 15, B-2950 Kapellen,

TEL 847-678-4700

HOYA LENS NEDERLAND B.V.

Belgium

Amsterdamseweg 29, 1422 AC Uithoorn,

TEL 03-660-0100

P.O. Box 535, 1420 CA Uithoorn,

HOYA LENS MEXICO S.A. DE C.V.
Madero #32-201, Col. Centro Deleg

The Netherlands

HOYA LENS HUNGARY RT.

Cuauhtemoc, Mexico DF, CP06000, Mexico

TEL 0297-514-202

Telek. U. 3, H-1152 Budapest, Hungary

TEL 555-518-1582

TEL 01-30-585-19
HOYA LENS FRANCE S.A.

HOYA LENS CANADA, INC.

ZA Pariest Rue Willy Brandt, 77184

HOYA LENS MANUFACTURING

21-3330 Ridgeway Drive, Missisauga, Ontario,

Emerainville, France

HUNGARY RT.

Canada L5L 2Z9

TEL 01-6037-7253

18, Ipari ut, H-4702 Mateszalka, Hungary

TEL 888-258-4692

TEL 044-418 200
HOYA LENS FINLAND OY
Mikkolantie 1, FIN-00640 Helsinki, Finland

HOYA CRYSTAL, INC.

North America

TEL 09-72884100

41 Madison Ave. 9th Floor, New York,NY 10010, U.S.A.

HOYA HOLDINGS, INC.
HOYA LENS SWEDEN AB

101 Metro Drive, Suite 500, San Jose,

Scheelegatan 15, SE-212 28 Malmö, Sweden

CA 95110, U.S.A.

TEL 040-6802200

TEL 408-441-0400

TEL 212-679-3100*1 Equity-method affiliate*2 Company name changed from HOYA SCHOTT CORP.
as of June 1, 2004.

70

ドキュメント2 04.7.23 3:58 PM ページ 1

For additional information about theCompany, contact:
Investor Relations

2-7-5 Naka-Ochiai,
Shinjuku-ku, Tokyo 161-8525, JapanTEL (03) 3952-1160
FAX (03) 3952-0726
URL http://www.hoya.co.jp/

c1-4 04.7.23 3:59 PM ページ 1

2-7-5 Naka-Ochiai, Shinjuku-ku, Tokyo 161-8525, Japan

This annual report is printed on recycled paper.
Printed in Japan