HOYA INTEGRATED REPORT 2020

We strive daily to
be a company thatsociety cancontinue to rely on.

HOYA INTEGRATED REPORT 2020HOYA as an Investment

Portfolio Management

Source of Our Strengths: Business Portfolio Management
HOYA’s portfolio management aims to secure profitability, stability, and growth potential of the Group as a whole by operating
multiple businesses with different characteristics in terms of business model, sensitivity to economic cycles, etc., to diversify risk.
We examine each business to determine its stage in the lifecycle and allocate more management resources to areas with higher
growth potential. We construct our business portfolio based on the survival of the fittest principle by, for example, withdrawing
from a business that has lost its competitive edge.
The present two business areas for portfolio management are “Life Care” and “Information Technology.”Life Care

Information
Technology

HOYA Group’s
Sales by Segment

65%

34%

Mar. 2020

Eyeglass lenses

Mask blanks for semiconductor
manufacturing

Contact lens retail sales
Photomasks for FPD manufacturng
Intraocular lenses
Glass substrates for HDDs
Endoscopes
Imaging

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The HOYA Management System
BBased on the idea that “the accumulation of short-term results will produce long-term growth,” we conduct rapid-cycle reviews and improvement activities on a quarterly basis.
After receiving explanations on growth strategy and operating results from each business division, executive officers make decisions on the allocation of management resources to each business as well as any business downscaling or withdrawal decisions,which is the foundation of our business portfolio management.

Board of Directors✓ Distribute
management resource✓ Determine
downscaling,
withdrawal

Executive Officers✓ Business strategy✓ Medium-term plan
✓ Annual and quarterly
plan

Rapid Cycle PDCA (Quarterly Review)

Division A

Division B

Division C

Division D

Execute and verify

Execute and verify

Execute and verify

Execute and verify

Areas of Focus over the Next 10 Years
We will continue to rebalance our business portfolio on an ongoing basis without being constrained by what we are now tofoster budding growth areas for the next 20 to 30 years.
Accelerating growth in the Life Care businessAlong with the aging global population and growth of the middle-class population derived particularly from economic growthin emerging countries, demand is increasing for adapting medical infrastructure to improve the quality of life (QOL). In viewof this background, we regard the Life Care business as a growth engine and will actively develop competitive products andundertake bolt-on acquisitions (i.e., acquisitions designed to supplement the functions of existing businesses) in this business.
Revitalizing the Information Technology business
The Information Technology business maintains product groups with high market share and has been a mature business withlimited room for further growth. However, we are now beginning to identify certain areas that can be revitalized as a result oftechnological breakthroughs and have resumed investment in such areas. More specifically, we have identified two businessareas of particular importance: mask blanks that are compatible with next-generation EUV lithography technologies in semiconductor manufacturing and glass substrates for data center HDDs, the market of which is expected to grow in response to theincreasing volume of data creation. We will make investments in these areas in terms of technology and production capacity
to achieve growth in sales and profit.
Creating new business areas
As the renewal of the business portfolio is becoming a potential problem, we will strive to rebalance it as appropriate by acquiring new businesses through M&A. We are currently considering “medical services” and “semiconductors” as major themes
and will try to enter specific niche segments within these areas where we are likely to secure a leading position to achievesustainable growth.

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Milestones in Our Growth

Persisting in Profitability
Since its listing on the First Section of the Tokyo Stock Exchange, HOYA has never reported a loss. This is due to our “businessportfolio management” and our strategic byword, to be “a big fish in a small pond.” We keep adjusting our business portfolio
through investment allocation decisions according to the needs of the time. We also acquire and maintain high shares in nichemarkets, which we develop by exploiting our strengths, to maximize profits.

HOYA´s continued net profit since the TSE listing in 1973
HOYA has never reported a loss since its TSE listing.

Net profit(Millions of yen)

150,000

120,000

90,00060,00030,000

0
Mar.
1973

Mar.
1980

Mar.
1990

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Mar.
2000

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Mar.
2010

Mar.
2020

HOYA INTEGRATED REPORT 2020

1962

Began production of eyeglass lenses.

1972

Began production of contact lenses.

1973

Listed on the First Section of the Tokyo Stock Exchange.

1974

Began production of photomask substrates for semiconductors.

1983

Began production of semiconductor photomasks.

1986

Constructed the R&D Center.

1987

Began production of intraocular lenses and glass mold lenses.

1991

Began sales of glass disks for HDDs.

1995

Invited the first outside director.

1997

Completed the establishment of the area HQs for Europe, North America, and Asia.

2003

Shifted to a company with Committees system. Independent directors represented the
majority of the Board of directors.

2008

Merged with PENTAX Corporation.

2009

Terminated the Crystal Glass business.

2010

Sold the hard disk glass media manufacturing operation.

2011

Sold the PENTAX Imaging Systems business.

2013

Acquired the eyeglass lens development and manufacturing business from Seiko Epson
Corporation.

2014

Acquired a stake in Seiko Optical Products (engaged in sale of eyeglasses and related
products) and made it a consolidated subsidiary.

2017

Concluded a contract to acquire Performance Optics, LLC. (engaged in manufacture andsale of eyeglass lenses).

2019

Acquired U.S.-based Mid Labs and Germany-based Fritz Ruck (manufacture and sales ofophthalmic medical devices)*HOYA has prepared its consolidated financial statements in accordance with IFRS since the fiscal year ended March 31, 2011 in lieu of the Japanese standard.

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Market GrowthMarket Growth and HOYA’s Potential
The Life Care business is expected to grow on the basis of the global aging population and improved living standards in emerging countries. The Information Technology market shows some signs of having matured in terms of growth cycles, but still has
promising areas in technology advancement. We are determined to continue investing in such growth areas.

Life Care
Market growth, driven by global aging population and improving living standards in emerging countries

World aging population (65 and over) andold-age dependency ratio

Aging global population expands market
The aging global population is expected to boost demand foreyeglasses due to normal deterioration of vision by aging. Demand for medical flexible endoscopes is also anticipated torise as a result of policies to restrain an increase in government

11.7%(Billions)

1.0

Europe3% CAGR
0.8

medical expenditures, through preventive screening.

North
America

9.1%

Latin
America

0.6

Asia Pacific

0.4
0.2

Africa

0
2019

2030

(Year)

Source: United Nations, World Population Ageing 2019HOYA INTEGRATED REPORT 202005

Copyright ©2020 HOYA GROUPHOYA INTEGRATED REPORT 2020

Emerging countries’ improving living standards expands
the market

World Middle-Class Population

Middle-income populations are increasing on the basis of eco-2030

nomic growth of emerging countries. More people will have

4.9

opportunities to buy eyeglasses or receive medical treatment,
which means expansion of business opportunities for HOYA.

billion2020

3.2 billion
2015

2.4 billion
Source: Organisation for Economic Co-operation
and Development (OECD)

Increase in the elderly and middle-class population
expands the market

World Eyeglass Lens Market

Demand for eyeglass lenses is increasing worldwide, due to aging
of populations, higher purchasing power supported by emerging
countries’ economic growth, rising health consciousness, and im-$10.0
billion

3%

CA

GR

pairment of vision caused by use of computers and smartphones
for long hours.

2018

2030

(Year)HOYA’s estimate

More demand for minimally invasive medical procedures
drives growth in the endoscope market

World Medical Endoscope Market

Medical expenses are increasing worldwide, along with aging
of populations. Governments are promoting disease prevention
and early detection of diseases, as well as minimally invasive
medical treatment. In particular the importance of the latter$30

billion

3%

CA

GR

is rising in popularity, as part of the trend of reducing invasive
medical treatment. Medical flexible endoscopes, which allow
physicians to diagnose and treat the patient in a less-invasive
way help to fulfill such needs.
2018

2030

(Year)HOYA’s estimate

Market Growth Drivers■ Aging population■ Desire for improvement of QOL and minimally invasive■ Increase in cancer rate
■ Initiatives for disease prevention

diagnosis and treatment devices■ Improved medical infrastructure in emerging countries

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Information Technology
Market growth, driven by technological advancement and expansion of application areas

The market of the Information Technology business as a whole is in a matured stage, but a closer look at each of our products
reveals potential growth sub-segments.
Mask blanks for EUV lithography
EUV lithography is a technology used to transfer semiconductor circuit pattern to a substrate using extreme ultraviolet light. It isa potential key for advanced miniaturization of semiconductor circuits. HOYA understands client needs accurately and precisely,and properly responds to technological requirements with the underlying objective of being a leader in the market of mask
blanks for EUV lithography.
Nearline server application of glass disks for HDDs
A nearline server is a server used for backups and archiving. The market of nearline servers is expected to grow significantly inresponse to a global surge in data volume. Memory storage capacity per server needs to be increased to realize more efficient
server space within data centers. HOYA responds to such needs by providing customers with thinner disks, enabling an increasein the number of disks per server. This is helping us to increase disk shipment volume.
In-vehicle camera lenses
In-vehicle camera lenses are expected to be used in sensors that are indispensable for self-driving technology, and their market
is expected to grow rapidly. Leveraging high-value-added glass materials and aspherical glass lenses, which are our strengths,
we will capitalize on the market growth.

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Maximizing Shareholder Value

Advanced Corporate Governance Structure
To ensure the effective functioning and objectivity of the management supervisory function, five out of six directors in total are
independent outside directors. The fact that all independent directors are corporate executives is another feature of HOYA´sgovernance. Diversity in their experiences and backgrounds is contributing to raising management quality.
Independent Director

Independent Director

Mitsudo Urano

Yukako Uchinaga

Leader Independent Director
Chairperson of the Nomination Committee

Chairperson of the Audit Committee

Biography

Biography

25P

Independent Director

26P

Independent Director

Shuzo Kaihori

Takeo Takasu
Chairperson of the Compensation Committee

Biography

Biography

26P

27P

Independent Director

Hiroshi Suzuki

Hiroaki Yoshihara
Biography

Biography

27P

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28P

HOYA INTEGRATED REPORT 2020

Pursuing Capital Efficiency
Return to shareholders and capital efficiency are among the key management considerations at HOYA.

Major management indicators and return to shareholders

Dividend per Share

ROE and EPS

(Yen)

(Yen)

100

500

¥ 90

EPS

（%）

25

ROE

18.0 %

80

400

60

300

¥ 303.27
15

40

200

10

20

100

5

0

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

0

Mar.
2020

Mar.
2016

Mar.
2017

Share Buyback(Billions of yen)

150

100

¥ 44.3 billion

50

0
Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Mar.
2020

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Mar.
2018

Mar.
2019

Mar.
2020

20

0

HOYA INTEGRATED REPORT 2020

Highlights of the Year under Review

Financial
Sales

Sales Breakdown
OthersImaging

1%

6%

+1.9%

Information
Technology

34%

576.5billion yen

Electronics

28%

Health Care48%

Life Care

65%

Medical17%

The HOYA Group’s consolidated sales revenue reached a record high in the fiscal year ended March 31, 2020, increasing
1.9% year on year, to 576,546 million yen. The Information Technology segment, which enjoyed an increase in sales ofsemiconductor mask blanks for EUV lithography, etc., contributed to higher sales.

Pretax Profits+1.8%

Pretax Profit Breakdownby Segment

Information
Technology

58％

147.3billion yen

Life Care

42%

Pretax profits rose 1.8% year on year, to 147,268 million yen. Pretax profits also reached record highs, mainly due to higher
profits associated with sales growth in the Information Technology segment and the expansion of sales of high-value-added products, among others.

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Product Sales/Profit
Margins/Sales Growth Rate

35
30
25

Photomasks for
FPD manufacturing

Sales growth rate (%)

20
15

Mask blanks
Intraocular lenses

10

Contact
lenses5

Endoscopes

0

Glass
substrates
for HDDs

Artificial bones, etc.
Eyeglass
lenses5-10Imaging

-15
-20

Low

Profit margins

Note: The growth rates of sales are after exclusion of the effects of fluctuations in foreign currency exchange rates

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Sales in the Life Care Segment+0.4%
3,750 billion yen

Sales in the Life Care segment amounted to 375,049 million yen, on par with the previous fiscal year’s level. In the segment
as a whole, sales were boosted by such factors as the increase in sales due to M&A relating to intraocular lenses and thepositive effects of new products, as well as the increase in new customers brought about by enhancements made to existing stores and new shop openings for retail sales of contact lenses, in addition to more value-added products being sold,and higher sales attributable to the release of new endoscope products. However, primarily due to the sales of eyeglass
lenses being impacted by foreign exchange and the novel coronavirus (COVID-19), the Life Care segment’s overall sales
turned out to be equivalent to the previous fiscal year’s level.
The effective sales growth rate of the Life Care segment as a whole was +3.5%, excluding the impact of foreign exchange
and M&A.

Life Care Sales Breakdown

Like-for-Like* Sales Revenue Growth
Rate of Products in the Life Care Segment

Others（%）

8

Intraocularlenses6

Endoscopes

4Eyeglass lenses
2

Contaclenses0Life Care
total

Eyeglass
lensesContact
lensesEndo- Intraocularscopeslenses* Year-on-year comparison on the same basis as the previous period,
adjusted to eliminate the effect of changes in exchange rates or
M&A activities.

Pretax Profits in the Life Care Segment-10.2%
62.2 billion yen

Pretax profits in the Life Care segment decreased 10.2% year on year to 62,230 million yen. Pretax profits fell from theprevious fiscal year due to such factors as the impact of the lump-sum payment incurred in the settlement reached with
the U.S. Department of Justice in the endoscope case (4.7 billion yen), the impact of foreign exchange on eyeglass lenses
sales and the one-off expenses incurred in launching a new plant in Vietnam.

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Sales in the
Information Technology Segment+4.9%
196.7 billion yen

Sales in the Information Technology segment rose 4.9% from the previous fiscal year, to 196,731 million yen. A significant
contributing factor was the dramatic increase in sales of semiconductor mask blanks driven by increasing development
demand for products compatible with next-generation EUV lithography. In addition, sales revenue of photomasks for FPD
panel manufacturing and HDD glass substrates increased steadily. On the other hand, sales of imaging related products
decreased from the previous fiscal year, as a result of the continued decline in sales of lenses for cameras due to competition from smartphones, etc.

Information Technology Sales Breakdown
Mar. 2019

Like-for-Like* Sales Revenue
Growth Rate of Products in the
Information Technology Segment

Mar. 2020（%）

30

Imaging

ImagingMaskblanks20

Mask
blanks10

Glass
substrates
for HDDs

PhotomasksGlasssubstrates
for HDDs

Photomasks

0-10

Information Mask
Technology blanks
total

Photomasks

Glass
Imaging
substrates
for HDDs* Year-on-year comparison on the same basis as the previous period,
adjusted to eliminate the effect of changes in exchange rates or
M&A activities.

Pretax Profits in the
Information Technology Segment+9.4%
88.1 billion yen

Pretax profits increased significantly, rising 9.4% from the previous fiscal year, to 88,135 million yen. A significant contributing factor was the growth in semiconductor mask blanks driven by increasing development demand for products
compatible with next-generation EUV lithography.

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ESG
Proportion of Independent Directors

83.3%(5 of 6)HOYA appointed its first independent director in 1995, when corporate governance was barely discussed in Japan. In 2003,
the Articles of Incorporation were amended to stipulate that more than half of directors be outside directors. Currently,
83% of HOYA’s directors are outside directors, an extremely high level even by global standards.
*As of the end of June 2020

Corporate Management Experience of Independent Directors

100%(5 of 5)

While many companies appoint lawyers, accountants, or academics as outside directors, all of HOYA’s outside directors are
persons with extensive experience in corporate management. The diverse fields of experience among HOYA’s five outside
directors includes electronics, IT services, education, and the food-related industry. This diversity makes for lively discussion
at meetings of the Board of Directors.

Number of Employees by Region
Americas

Japan

EuropeAsia/Oceania

More than 90% of HOYA’s employees work in locations outside Japan. Major manufacturing centers in Asia producing
eyeglass lenses and HDD substrates account for the greatest proportion, with around 70% of employees in this region.

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Proportion of Female Employees
Japan

Overseas*

26.0%

57.4%

1.3 percentage points YoY

UpFemaleemployeesMale
employees

Femaleemployees

Male employees

The proportion for total HOYA (domestic + international) is

53.4%.

Proportion of Female Leaders
Japan

Overseas*

10.8%

27.5%

1.5

Up
percentage points YoY YoY—Higher than the manufacturingindustry average (6.1%)
Female leaders

Femaleleaders

Male managers

Male managers

The proportion for total HOYA (domestic + international) is

20.2%.

HOYA is increasing the proportion of female employees and leaders as part of its “Minkatsu” diversity project to create afriendly work environment for everyone. In addition to expanded recruitment and occupational fields for women, HOYA
holds career advancement seminars for female employees, and promotes cross-divisional exchange.
* Based on an internal survey of 25,708 overseas employees

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Proportion of Local Employees in Top Management Positions at
Overseas Subsidiaries*

94.1%

Proportion of
local employees in
top management
positions

HOYA actively recruits diverse personnel of different races, ethnic groups, nationalities, and religions in order to gain accessto exceptional global talent and generate new ideas and value. Local employees are regularly appointed to top management positions at overseas subsidiaries.
* As of the end of June 2019HOYA INTEGRATED REPORT 2020

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Milestones in Our Growth
Net Income by Fiscal Year

1941–1981

Business Portfolio

1941
Optics

Products and Technologies

History

1941
HOYA founded
Production of optical glass

1941
The brothers Shoichi and
Shigeru Yamanaka
established an optical glass
production plant in the city of
Hoya, Tokyo (a part of today’s
Nishi-tokyo).

1941
1945
Production of crystal
stemware

1950

1960
Optics Crystal

1962
Production ofeyeglass lenses

1960

1960
Showa Factory (currently,
the Akishima Factory)
establishedCompany name changed to
Hoya Lens Corporation
1961
Listed on the Second
Section of the Tokyo
Stock Exchange

1970
1972
Production ofcontact lenses
1974
Production of photomask
substrates forsemiconductors

Electronics
OpticsEye Care1980

Crystal

1979

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1973
Listed on the First Section of
the Tokyo Stock Exchange

HOYA INTEGRATED REPORT 2020

Net Income by Fiscal YearBusiness Portfolio

1982‒2019

Products and Technologies

1983
Production ofphotomasks forsemiconductors

1987
Production of
intraocular lens forcataracts

History

1984
Company name changed
to Hoya Corporation
1986
R&D Center building
established

Production ofmolded glass lenses

1990

1991
Launch of HDD glass disks

1995
Introduction of outside
director system

Electronics
Optics1997
Introduction of
the Company System

CrystalEye Care

2000

1998

2003
Shift to a company with
Committees structure(currently, a company with
Nomination Committees, etc.)
Majority of Board of Directors
members outside directors

2009
Withdrawal fromthe crystal business

2010

2010
Sale of HDD glass disk media
business

OpticsHealth Care

Electronics

2011
Sale of PENTAX
digital camera
business

Medical2018

2010
Voluntary adoption of IFRS

2017
Acquisition of
Performance Optics,
LLC (manufacture andsales of eyeglass lenses)
2019
Acquisition of Mid Labs andFritz Ruck (manufacture andsales of ophthalmic medical
devices)

2020

HOYA INTEGRATED REPORT 2020

2008
Merger with PENTAX
Corporation

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Interview with the CEO

Through a profit-driven corporate culture
and optimization of individual businesses,
we aim to further strengthen HOYA’s
business portfolio—one that is capableof rapidly responding to changes in theoperating environment.

Hiroshi Suzuki
President & CEO

recap the Company's operating performance for the fiscal year
Q Please
ended March 31, 2020, and provide a summary of key points for eachof your main businesses.
In the fiscal year ended March 31, 2020, the Company achieved a new record high for sales. However, owing to
the impact of such factors as the COVID-19 pandemic and a fine totaling $43 million paid to the United States
Department of Justice as part of a settlement related to the medical endoscope business, profit decreased.
Based on actual performance excluding these irregular factors, we achieved increases in both sales and profit.
In addition to a sound performance by the Life Care business—underpinned by such factors as an expansionof its sales network—the Information Technology business drove growth, with particularly robust expansion by
extreme ultraviolet (EUV) mask blanks and glass substrates for data center hard disk drives (HDDs). During the
fiscal year ended March 31, 2020, we also carried out an aggressive program of plant and equipment investment
to expand manufacturing capacity for EUV mask blanks and HDD substrates in response to rising demand.

the CEO interview for this report in 2019, you talked about how
Q InHOYA’s
essential strength is a portfolio-driven management style that
focuses on retaining strong businesses. Please explain in more detail thebasis of this approach—HOYA’s system for nurturing strong business.
At HOYA, what we mean by a “strong business” can be summed up by the metaphor, “a large fish in a small
pond.” In other words, the business holds a dominant market share in a niche market. Hence, we aim for businesses that boast a high level of profitability. Since our objective is to be the top player in niche markets, we are
not necessarily concerned with expanding the scale of a business or its sales. Consequently, the most importantfactor in the development of a strong business is market selection. If the pond already has a big fish, or there
are a lot of fish swimming in the pond, or the pond is too large, the probability of success in such a market islowered. In almost all cases, success or failure is determined at the point that the business domain is chosen. If
one chooses the wrong market, no matter how skilled the management team might be, it will not proceed well.
With the assumption that an appropriate business domain has been selected, two key points are essential in nurturing a strong business. The ultimate objective of a business is to generate profits. Hence, the first point is that
there must be a corporate culture focused on understanding the essence of the business quantitatively. This applies to everything that we do, whether it be analyzing the market or evaluating the business. We do not make

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decisions based on vague goals. The goals for each business unit are applied to each operational location, suchas factory, as well as at the department and section level. As a result, we have developed a firmly establishedculture in which each employee focuses on profitability. The second point is that our system prioritizes optimization on a business-unit basis, through the substantial delegation of authority and responsibility to each businessdivision. Each business faces a very different competitive environment, and there are large differences in businesscharacteristics. There are few instances in which a single prescription can be applied across the board. Fundamentally, the managers who are fully versed in the details of each business are responsible for the execution ofthat business. Executive officers, including myself, generally limit our involvement to matters that require major
investment, or occasions on which progress of the business is lackluster. At such times, we make appropriate
decisions and give instructions to managers. Based on this structure, each business is able to respond rapidly tochanges in its operating environment, building up their strength as part of this process.

last year’s interview you also mentioned medical services and
Q Insemiconductors
as business areas that you wanted to newly add to
HOYA’s business portfolio. What progress has been made in theseareas?
If the business portfolio is neglected, each business will reach the mature stage of the business life cycle, andthe Company will end up losing its vitality. Bringing new blood into the business portfolio to rejuvenate it is absolutely essential for the maintenance of long-term growth. However, rather than entering a business area thatis completely different from our existing businesses, it is more efficient to enter an adjacent business domain inwhich we can utilize the Company's management resources. Based on this philosophy, our current merger andacquisition (M&A) activities have adopted themes relating to medical services and semiconductors.
In the short-term, the semiconductor sector is affected by cyclicality*. However, we believe that the semiconductor sector will continue to grow in the long-term. In December 2019, HOYA issued a notice regarding a plannedcommencement of tender offer for semiconductor equipment manufacturer NuFlare Technology, Inc. However,since the Company's offer was not taken up by shareholders of NuFlare Technology, Inc., the acquisition bid was
unsuccessful. In the future, we intend to execute M&A transactions in fields where we expect synergies to begenerated with our existing businesses, including semiconductor equipment and components. In the medical
field, against a backdrop characterized by population aging globally and increased opportunities for people toaccess medical services and healthcare, the market has high growth potential. Through M&A, HOYA will look to
expand its business in this domain, in fields not limited to upstream products but also including midstream anddownstream fields.
* Cyclicality: refers to the economic cycle. In the semiconductor sector, one business cycle, often called “the silicon cycle,” generally lasts approximately four years.

outline the impact of the COVID-19 pandemic on HOYA’s
Q Please
operating performance. Furthermore, in the “post-COVID-19” world,
how do you envisage the business environment developing?
ICOVID-19 is greatly affecting final demand in the Life Care business. Within this, the eyeglass lens industry has a
low ratio of online sales meaning that it is still substantially dependent on sales at brick-and-mortar retail stores.
Consequently, there has been a significant decrease in revenues for eyeglass lenses worldwide as economic
activities have been restricted and lockdowns have been implemented. With regard to medical-related products
too, including endoscopes and intraocular lenses, sales have been poor owing to such factors as operations
and treatments that use these products being classified as elective procedures at hospitals and clinics. However,demand is now beginning to gradually recover as there are patients who require intraocular lenses and otherproducts, and restrictions on activities are starting to be relaxed.
In a “post-COVID-19” world, or in a world where we must learn to coexist with this novel virus, we will continue
to prioritize the health and safety of employees, business partners and other stakeholders. At the same time, we

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expect changes will become necessary to the style in which business is conducted. Even within this changing
environment, we recognize the need to become even more proactive in our adoption of digital technologies. I
believe that there is the potential to realize business development that achieves higher efficiency than in the “preCOVID-19” world.

regard to environmental, social, and corporate governance (ESG)
Q Withissues, please provide an overview of your main initiatives.
Underpinned by the HOYA Corporate Mission—“Dedicated to innovation in information technology, lifestyles
and culture, HOYA envisions a world where all can enjoy the good life, living in harmony with nature”—we think
about solutions to environmental and social issues integrally, without uncoupling such issues from expansion ofbusiness profitability.
In the area of environmental issues, since HOYA is in the manufacturing sector, we prioritize the monitoring ofenergy-derived CO2 emissions and volume of wastewater generated during the glass manufacturing process.
With regard to CO2 emissions, taking the fiscal year ended March 31, 2015, as the base year, from the fiscal year
ended March 31, 2017, through the fiscal year ending March 31, 2021, we have set a goal of reducing emissions
by 5%. By the fiscal year ended March 31, 2020, the Company reduced CO2 emissions in Japan by 28.4%.
However, outside Japan—owing to such factors as the expansion of overseas manufacturing facilities—emissions increased 13.0%. Hence, on a global basis, total CO2 emissions rose 4.4%. During this period, since sales
revenues increased 18%, efficiency improved in terms of emissions per unit of sales. However, after reviewing
the results from this period, we intend to set a new target.
In the area of social issues, problems relating to racism are currently receiving substantial attention. HOYA is committed to respecting fundamental human rights. The HOYA Business Conduct Guidelines make clear the Company’s commitment in all of its business activities to eliminating all forms of discrimination and harassment based onsuch factors as race, nationality, gender, religion, belief, birthplace, age, or sexual orientation. Our commitment is
not limited to the HOYA Group. We require product and service suppliers and vendors to comply with the HOYA
Supplier Code of Conduct, which asks suppliers to protect fundamental human rights, and maintain legal compliance and ethical practices.
With regard to ESG-related issues, including the points I have already mentioned, after ascertaining the current
situation the Board of Directors holds discussions from such perspectives as generation of business opportunities
and risk recognition. From the perspective of business continuity, the Company has prepared a business continuity plan (BCP) to deal with such contingencies as the current COVID-19 pandemic.

reference to your cash allocation policy, what message do
Q Including
you wish to convey to shareholders and investors?
I believe that the COVID-19 pandemic will continue to affect the operating environment for the foreseeable future. As provisional measures in this unpredictable situation, while maintaining stable dividends, we will suspend
execution of our share buyback program, as part of efforts to ensure stable cash flows. Meanwhile, the situation
may also be seen as a potential opportunity as the possibility arises that valuations of M&A targets may decline.
Hence, we intend to take an aggressive stance toward acquisitions. Once the sense of uncertainty is dispelled toa certain extent, our intention is to return to our former approach of returning excess cash to shareholders. The
COVID-19 pandemic has had a significant short-term impact, and we have little choice but to adapt ourselves tocoexistence with this new virus. However, there is no major change to the Company’s long-term growth scenario. Based on the many realizations brought about by the current situation, we intend to build an even stronger
business structure. In these endeavors, we look forward to your ongoing support.

HOYA INTEGRATED REPORT 2020

21

Copyright ©2020 HOYA GROUPHOYA INTEGRATED REPORT 2020HOYA Value Creation ModelManagement capitalBusiness activities

Products and services

Human capital

Employees:

Healthcare

36,795(end of 2020/3)

Businessplanning

50

R&D

More than
production
bases around the world
Capital investment

Financial capital
Cash flow generation ability
Stable financial condition（

AA R&I)

Feedback from customers

30

of around ¥billionper year

Life Care business

Manufactured capital

Manufacturing

7,878

Sales

R&D expenses of28around ¥billionper yearSocial capital

Customers, suppliers, etc.

HOYA
MANAGEMENTSYSTEM

Electronics

Information Technology businessIntellectual capital

Contribution to the health ofpeople around the world

Support the vision ofpeople around the world
with such products as
eyeglass lenses, contactlenses, intraocular lenses
for cataract surgery, andeyeglasses to support the
scotopic vision of people
suffering from night
blindness.
Contribute withendoscopes to minimallyinvasive treatment, asurgical procedure
designed to minimize
incisions to the patient’s
body.

Partnering

Marketing

Patents:

MedicalSocial value

Contribution to the creationof the basis fortechnological innovation
Provide mask blanks thatare indispensable forsemiconductor
manufacturing with higher
efficiency and lower power
consumption.

Imaging

Business portfolio management,
rapid cycle PDCA, etc.

Provide glass substrates for
HDDs with a larger storage
capacity and lessenvironmental load
Provide in-vehicle camera
lenses that realize safer
driving

A corporate governance structure that is among the most advanced in Japan(83% of directors are independent outside directors with corporate management experience, serving as members of 3 committees)

Corporate mission + Management principles

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HOYA’s ESG Approach
Amid the growing interest in Environment, Social and Governance (ESG) among stakeholders, the HOYA Group established the
ESG Committee headed by the CEO in August 2019, with the aim of identifying items that contribute to the long-term growthof the HOYA Group (i.e., material issues), promoting their disclosure and pushing ahead with ESG activities.
In the fiscal year ended March 31, 2020, we investigated what had been deemed as material issues in each business division,
built a system to collect information on ESG-related activities conducted in each business division, and analyzed an external
agency’s assessment of the Company’s ESG approach, among others.
From the fiscal year ending March 31, 2021, we will exchange opinions with our stakeholders on candidate material issues
based on the information we have collected to date and promote the identification of material issues (subject to approval by
the management).

Examination status of material issues
The Company’s material issues are examined by selecting those deemed as material issues by the Company from the SASB (Sustainability Accounting Standards Board) Materiality Map.
As a result of the examination by the ESG Committee, Product Quality & Safety, Employee Engagement, Diversity & Inclusion andBusiness Ethics were chosen as candidate material issues.

Material issue
according to HOYA's
ESG Committee

Material issue
according to SASB
Medical Equipment &Supplies

General Issue Category

HardwareCompany
as a whole〇

GHG Emissions
Air Quality

Environment

Energy Management〇

Water & Wastewater Management〇

Waste & Hazardous Materials Management〇

Ecological Impacts〇

Human Rights & Community Relations
Customer Privacy〇

Data Security

Social Capital

Access & Affordability〇

Product Quality & Safety〇〇

Customer Welfare〇

Selling Practices & Product Labeling
Labor Practices

Human Capital〇

Employee Health & Safety〇

Employee Engagement, Diversity & Inclusion
Product Design & Lifecycle Management

Business Model& Innovation

〇

〇

〇

〇

〇

Business Model Resilience
Supply Chain Management〇

Materials Sourcing & Efficiency〇

Physical Impacts of Climate Change〇

Business Ethics

Leadership &Governance〇Competitive Behavior〇

Management of the Legal & Regulatory Environment
Critical Incident Risk Management
Systemic Risk Management

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Corporate Governance
Basic views
HOYA promotes management with the aim of maximizing its corporate value based on the recognition that corporate governance is a matter of utmost importance for management. As the basis of taking a fair approach to stakeholders, to prevent
management from being conducted based solely on in-house logic, we have set forth in the Articles of Incorporation that a majority of directors consist of independent directors, who actively supervise management by executive officers and provide advice
in order to improve corporate value from an objective and broad perspective. HOYA also gives executive officers the authority
and responsibility for the execution of operations, in order to accelerate decision making and improve management efficiency.
The Company has established HOYA Corporate Governance Guidelines at the meeting of the Board of Directors, and intends
to enhance corporate governance structure and to introduce better governance systems by revising the guidelines.

Structure
HOYA employs a company with Nomination Committee, etc. management system. Under a company with Nomination Committee, etc. management system, by giving executive officers authority to manage business, business decision makings are accelerated. At the same time, three committees—the Nomination Committee, the Compensation Committee, and the Audit Committee—were established, with a majority of the members being independent directors (at HOYA, the committees are composed
exclusively of independent directors), to ensure the effectiveness of management supervision by the Board of Directors. Adopting
a company with Nomination Committees, etc. management system enables us to clearly separate the execution and supervisionof corporate management, whereas this was not possible with the previous company with Auditors system. Through this system,
we aim to ensure efficient management and improve the overall soundness and transparency of management.

Corporate governance structure (As of the end of June 2020))

General meeting of shareholders
Election

Board of Directors

Executive officer system(Management Supervision)

Executive Officers

Board of Directors
Election

2 Representative
Executive Officers:
1 of them serving concurrently
as an Internal Director

Supervision &Advice2 Executive Officers

5 Independent Directors
1 Internal Director:
serving concurrently
as an Executive Officer
Nomination Committee
5 Independent Directors

Compensation Committee
5 Independent Directors

Audit Committee
5 Independent Directors

Nomination Committee
Secretariat

Compensation
Committee
Secretariat

Audit Committee
Secretariat

HOYA INTEGRATED REPORT 2020

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Divisions

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Board of Directors
Our Board of Directors comprises five independent directors and one internal director, for a total of six directors. The Board
holds 10 regular Board meetings per year. At these meetings, directors have a lively discussion, and independent directors draw
on their ample management experience and international perspectives to supervise and offer advice to the executive officers in
the execution of their duties from a wide range of viewpoints. Also at the meetings, besides approving major business plans,detailed information is provided to independent directors through such means as presentations by division managers regarding
products and the competitive environment.
HOYA conducts an annual questionnaire survey of independent directors for the purpose of evaluating the effectiveness of theBoard of Directors as well as identifying any related issues.
Resultsof evaluationof thequestionnaire
Board of Directors
HOYA
conducts
an annualsurvey of independent directors for the purpose of evaluating

the effectivenessof theBoard ofmeetings
Directors
as identifying
anyrelated“Boardof Directors’
hadas
an well
atmosphereof openness
andactivelyissues.。
exchanged opinions.”
Good
Good

“Independent directors expressed questions and opinions from various angles on executive officers’ proposals.”

Good“There was no issue with regard to the effectiveness of its supervisory functions.”

Average“Deliberations on ESG and risk management issues need to be deepened further.”

Average“Discussions on medium- to long-term portfolio reshuffling policies need to be deepened.”

Average“Promotion of management's succession planning needs to be enhanced”

At HOYA, directors are required to maintain an attendance ratio at meetings of the Board of Directors at or above 75% as oneof the preconditions for reappointment as a director. For the fiscal year ended March 31, 2020, the attendance ratio of five
directors was 100% and one director was 90%, and there was no problem with regard to the number of positions of othercompanies that were held concurrently by any of the directors.

Board Member profiles
Independent Director, Lead Director,
Chairperson of the Nomination Committee,
Member of the Compensation Committee,Member of the Audit Committee

Mitsudo Urano(Born on Mar. 20, 1948)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

7 years

5,000 shares

9/10 times (90%)

Apr. 1971 Joined Nippon Reizo Kabushiki Kaisha (present Nichirei Corporation)
Jun. 1999 Director and General Manager, Strategic Planning Division of Nichirei Corporation
Jun. 2001 Representative Director and President of Nichirei Corporation
Jan. 2005 Representative Director and President of Nichirei Corporation, and Representative Director and President of Nichirei Foods Inc.
Apr. 2007 Representative Director and President of Nichirei Corporation, and Director and Chairman of Nichirei Foods Inc.
Jun. 2007 Representative Director and Chairman of Nichirei Corporation, and Director and Chairman of Nichirei
Foods Inc.
Jun. 2013 Advisor of Nichirei Corporation (retired in March 2018)
Jun. 2013 Director of the Company (present post)

Important positions of other companies
concurrently helds
Outside Director of Resona Holdings, Inc.
Outside Director of Hitachi Transport System,
Ltd.

Reason for the selection for Director
He focused on capital efficiency from the early stage in Nichirei Corporation, a leading Japanese frozen food manufacturer, anddeveloped efficient management through company split-ups and informatization. He particularly has extensive experience and solid
achievements on management informatization. In addition to the achievements in Nichirei Corporation, the Company’s Nomination
Committee expects that he will make a great contribution to enhance management efficiency and transparency through giving advice and proposals on overall company management with his deep insight and extensive experience as management having served
as an outside director and outside corporate auditor in other companies listed on the First Section of the Tokyo Stock Exchange.

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Independent Director,
Chairperson of the Audit Committee,
Member of the Compensation Committee

Yukako Uchinaga(Born on Jul. 5, 1946)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

7 years

1,000 shares

10/10 times (100%)

Jul. 1971 Joined IBM Japan, Ltd.
Apr. 1995 Director in charge of Asia Pacific Products of IBM Japan, Ltd.
Apr. 2000 Managing Director and Head of Tokyo Software Development Laboratory of IBM Japan, Ltd.
Apr. 2004 Director and Senior Executive Officer in charge of Development & Manufacturing of IBM Japan, Ltd.
Apr. 2007 Technical Advisor of IBM Japan, Ltd. (retired in March 2008)
Apr. 2007 Board Chair of Japan Women’s Innovative Network (J-WIN) (present post)
Jun. 2007 Director of Benesse Corporation
Apr. 2008 Director and Vice Chairman of Benesse Corporation
Apr. 2008 Representative Director, Chairman of the Board, President & CEO of Berlitz Corporation
Oct. 2009 Director and Executive Vice President of Benesse Holdings, Inc. (retired in June 2013)
Apr. 2013 Honorary Chairman of Berlitz Corporation (retired in June 2013)
Jun. 2013 Director of the Company (present post)
Sep. 2013 President & CEO of Globalization Research Institute Co., Ltd. (present post)
Apr. 2014 Board Chair of Japan Diversity Network Association (retired in January 2019)

Important positions of other companies
concurrently helds
Board Chair of J-WIN, Non-Profit Organization
Outside Director of Teijin Limited

Reason for the selection for Director
Ms. Uchinaga is a pioneer of female executive officers as she was promoted to the first female director of IBM Japan, Ltd. Then,as CEO of Berlitz Corporation under Benesse Holdings, Inc., she established a brand of a “global human resource development
enterprise” and achieved superior results as the English language school at which Japanese management personnel are educatedand trained so as to survive global economic competition. In addition, for many years, she has devoted herself to activities for promoting the active participation of women by corporations and has also provided the Company with advice on promoting diversity.
The Company’s Nomination Committee expects she will even more greatly contribute to the effective use of IT for management
purposes, the globalization of human resources, and diversity management in the Company,

Independent Director,
Chairperson of the Compensation Committee,
Member of the Nomination Committee,

Takeo Takasu(Born on Jun. 24, 1945)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

6 years

2,800 shares

10/10 times (100%)

Apr. 1968 Joined The Sanwa Bank, Ltd. (Present MUFG Bank, Ltd.)
Oct.1993 Branch Manager, Los Angeles Branch of Sanwa Bank (retired in March 1996)
Apr. 1996 Member, Corporate Planning of Bandai Co., Ltd.
Jun. 1996 Representative Director of Bandai Holdings Corporation in U.S.
Mar.1999 President and Representative Director of Bandai Co., Ltd.
Jun. 2005 Chairman and Representative Director of Bandai Co., Ltd.
Sep.2005 President and Representative Director of Bandai Namco Holdings Inc.
Apr. 2009 Chairman and Representative Director of Bandai Namco Holdings Inc.
Feb.2010 Chairman and Director of Bandai Namco Holdings Inc.
Jun. 2011 Advisor and Director of Bandai Namco Holdings Inc. (retired in June 2013)
Jun. 2014 Director of the Company (present post)

Important positions of other companies
concurrently helds
Outside Director of Bell-Park Co., Ltd.
Outside Director of KADOKAWA CORPORATION

Reason for the selection for Director
After first serving at the former Sanwa Bank, Ltd., he accumulated experience in various industries including a Malaysian securities
firm and DDI Corporation (Present KDDI Corporation) soon after its establishment. He then moved to Bandai Co., Ltd. (Present Bandai
Namco Holdings Inc.) where he improved the company’s performance by heightening the unification of employees through his fast
decision-making and strong explanatory capability as president. He also demonstrated management abilities in the successful business integration with Namco Limited. The Company’s Nomination Committee expects that he will make proposals from different andmulti-angle perspectives through insights developed in the banking industry and management experience in the toy industry with different characteristics from that of the Company, as well as based on this experience as an outside director of other companies.

HOYA INTEGRATED REPORT 2020

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Copyright ©2020 HOYA GROUPHOYA INTEGRATED REPORT 2020

Independent Director,
Member of the Nomination Committee,
Member of the Compensation Committee, Member of the Audit Committee

Shuzo Kaihori

Apr. 1973
Apr. 2005
Apr. 2006
Jun. 2006
Apr. 2007
Apr. 2013
Apr. 2015
Jun. 2015
Jun. 2016(Born on Jan. 31, 1948)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

5 years

1,000 shares

10/10 times (100%)

Joined Yokogawa Electric Works Ltd. (Present Yokogawa Electric Corporation)
Vice President, Head of IA Business Headquarters of Yokogawa Electric Corporation
Senior Vice President, Head of IA Business Headquarters of Yokogawa Electric Corporation
Director and Senior Vice President, Head of IA Business Headquarters of Yokogawa Electric Corporation
Representative Director, President and Chief Executive Officer of Yokogawa Electric Corporation
Representative Director, Chairman and Chief Executive Officer of Yokogawa Electric Corporation
Director, Chairman of Yokogawa Electric Corporation
Director of the Company (present post)
Director and Chairman of the Board of Yokogawa Electric Corporation (retired in June 2018)

Important positions of other companies
concurrently helds
Outside Director of Eisai Co., Ltd.

Reason for the selection for Director
He assumed the presidency of Yokogawa Electric Corporation, which operates a test and measurement business and industrial automation and control business, in 2007 when the company faced difficult business conditions, then was committed to turning aroundthe company and achieved a surplus by changing the business model from hardware to software and promoting the globalization. The
Company’s Nomination Committee expects that he will contribute greatly to the Company’s management from his performance that
he boldly responded to changes in the business environment and achieved results and by giving advice on strengthening of software
business, which is a challenge for the Life Care segment, an area expected to grow, based on his extensive experience.

Independent Director,
Member of the Nomination Committee,
Member of the Compensation Committee, Member of the Audit Committee

Hiroaki Yoshihara

Nov.1978Jul. 1996
Oct.1997
Oct.2003
Jun. 2018(Born on Feb. 9, 1957)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

2 year0 shares10/10 times (100%)

Joined Peat Marwick Mitchell & Co.
National Managing Partner, the Pacific Rim Practice of KPMG LLPThe Board Member of KPMG LLP
Vice Chairman and Global Managing Partner of KPMG International (retired in April 2007)
Director of the Company (present post)

Important positions of other companies
concurrently helds
Outside Director of Hitachi, Ltd

Reason for the selection for Director
He has long-term experience as an expert in finance and accounting as well as management experience gained as Global Managing
Partner of an international accounting firm. He also has a track record of participating in the M&A of many companies from a professional standpoint. The Company’s Nomination Committee expects that he will contribute to the improvement of the supervisory function of
the Board of Directors of the Company and at the same time provide plenty of advice in regard to M&A, an important measure in the
Company’s business strategy,

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Director, Representative Executive Officer
President & CEO
Chairperson of the Board of Directors

Hiroshi Suzuki

Apr. 1985
Jun. 1993
Jun. 1997
Apr. 1999
Jun. 1999
Jun. 2000
Jun. 2003
Dec.2011(Born on Aug. 31, 1958)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

27 years

942,080 shares

10/10 times (100%)
Important positions of other companies
concurrently helds

Joined the Company
Director of the Company
Managing Director of the Company
Managing Director of the Company, President of Electro Optics Company
Executive Managing Director of the Company
Representative Director, President & CEO of the Company
Director, Representative Executive Officer, President & CEO of the Company (present post)
Chief Representative of Singapore Branch of the Company (present post)

Outside Director of KIOXIA Holdings Corporation (Former Toshiba Memory Holdings Corporation)

Reason for the selection for Director
He serves as the driving force of the management of the HOYA Group as Director and Representative Executive Officer President & CEO,and gives appropriate explanations and reports on strategies based on portfolio management at the meetings of the Board of Directors. He also supervises the execution of operations by other Executive Officers and adequately fulfills his role as Executive Officer andDirector. In consideration of his achievements as Director to date, the Company’s Nomination Committee expects that he will continue
to endeavor to enhance the corporate value of the Company.

Independent directors’ skills matrix
Corporate
management

Globalbusiness

Mitsudo
Urano

●

●

YukakoUchinaga●●

Takeo Takasu

●

●

Shuzo
Kaihori●●

Hiroaki
Yoshihara●●

HOYA INTEGRATED REPORT 2020

Finance/accounting

Technology

M&A

Developmentof human
resources/
diversity
●

●
●

●
●

●

●

28

●

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Executive Officers
At HOYA, candidates for Chief Executive Officer (CEO); Chief Financial Officer (CFO); Executive Officer, Chief Legal Officer (CLO)and Head of Corporate Development and Affairs; Executive Officer, Chief Technology Officer (CTO) are nominated by the Nomination Committee and appointed at a Board meeting (CEO serves concurrently as an internal director). They manage businessexecution of the HOYA Group according to the division of responsibility designated by the Board of Directors and decisions are
made promptly. In regards to day-to-day business operations in each business, significant power is delegated to each division
manager and executive officer’s direct division managers to create and execute specific measures based on a business policy
decided at a Board meeting.

Hiroshi Suzuki
Director, Representative Executive Officer
President & CEO

Ryo Hirooka
Representative Executive Officer & CFO

Eiichiro Ikeda
Executive Officer, Chief Technology Officer (CTO)

Augustine Yee
Executive Officer, Chief Legal Officer (CLO) andHead of Corporate Development and Affairs

HOYA INTEGRATED REPORT 2020

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Committees
As internal organizations of the Board of Directors, we have the Nomination Committee, Compensation Committee, and Audit
Committee; each of which is composed exclusively of independent directors.

Nomination Committee
The Nomination Committee fairly and rigorously selects candidates for directors, ensuring said candidates possess knowledge,
expertise, and capabilities suited to HOYA’s business environment, based on the “Standard for Election of Candidates for Director,” and proposes the candidates to the General Meeting of Shareholders for voting. The Committee also fairly and rigorously
selects candidates for executive officers and the representative executive officer, based on the “Standard for Election of Candidates for Executive Officer,” and proposes the candidates to the Board of Directors for voting. In cases that meet the criteria
for dismissal, the Committee makes decisions to propose the dismissal of directors to the General Meeting of Shareholders andthe dismissal of executive officers to the Board of Directors for voting.
The Committee has set out independence criteria for director candidates that are stricter than the rules of the Tokyo Stock
Exchange to ensure the effective functioning of independent directors’ overseeing executive officers.
The outline of the Standard for Election of Candidates for Director is as follows:[For both internal and independent director candidates]
Those with appropriate personalities and insights as director
Those with no health problems in performing their duties[For internal director candidates]
Those with a high level of knowledge and ample experience in our business
Excellent business decision-making ability and business execution ability[For independent director candidates]
Those with extensive experience as business managers
Or those who are in positions as professionals in law, accounting, finance, or similar fields
Those who are able to participate in at least 75% of the HOYA Group’s Board meetings
Those who have no significant interests in the HOYA Group and are able to maintain their independence

Independence criteria for independent director candidates
To ensure the independence of candidates for independent directors, candidates must not fall under any of the categories below.
<Those who are related to the HOYA Group>•

Those who previously worked for the HOYA Group•

Those who have a family member (spouse, child, or relatives by blood or by affinity within the second degree) who have held
the position of director, executive officer, corporate auditor, or management employee of the HOYA Group in the past five years<Major shareholder>•

Those who are major shareholders (10% or more) of the HOYA Group, or those who are directors, executive officers, corporate
auditors, or employees of companies that are major shareholders of the HOYA Group or those who have a family member who
holds a top management position at such companies•Those who execute operations of a company of which a major shareholder is the HOYA GroupHOYA INTEGRATED REPORT 2020

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<Those who are related to major business partners>•

Those who are operating directors, executive officers, or employees of any important business partner, either for the HOYA Groupor the corporate groups which the candidates come from, the sales to which business partner comprises 2% or more of theconsolidated net sales of the HOYA Group or the company groups for either of the past three years, or those who have a family
member who is a top management of such business partner<Those who provide professional services (lawyers, certified public accountants, certified tax accountants, patent
attorneys, judicial scriveners, etc.)>•

Those who have received remuneration of 5 million yen or more per year or those who have a family member who have received
remuneration of 5 million yen or more per year, from the HOYA Group in the past three years•

When the organization that the candidate belongs to, such as a company and association, has received cash, etc., from the HOYA Group,
the amount of which exceeds 100 million yen per year or 2% of consolidated net sales of the said organization, whichever is higher<Donation, etc.>•

When the association or organization which the candidate belongs to as director or operating officer has received donations or
grants in the past three years, the amount of which exceeds 10 million yen per year or 30% of the said organization’s averageannual total costs, whichever is higher, or when the association or organization which the candidate’s family member belongs to
has received donations or grants equivalent to the aforementioned amount<Others>•

When directors are exchanged•

When the candidate has any other important interest in the HOYA GroupThe Nomination Committee held eight meetings during the fiscal year ended March 31,
2019, with 100% attendance of all members, and deliberated mainly on the following matters:
The Nomination Committee held eight meetings during the fiscal year ended March 31, 2020, in which the attendance ratio offour directors was 100% and one director was 87.5%, and deliberated mainly on the following matters:
Future composition of the Board of Directors
Qualifications and skills required of future independent director candidates
Succession plans of executive officers∟Clarification of required qualifications and skills amid medium- to long-term future changes in the business environment
and the business portfolio∟Identification of candidates based on the clarification above

Compensation Committee
The objective of the Compensation Committee is to establish a remuneration system that incentivizes directors and executive officers and to contribute to improved financial performance for HOYA by undertaking appropriate evaluations of theirperformance. The Compensation Committee decides on a remuneration package for each director and executive officer inaccordance with the following policies:
The Compensation Committee held five meetings during the fiscal year ended March 31, 2020, with 100% attendance of all
members, and deliberated mainly on the following matters:
Policy concerning remuneration for Directors
The remuneration of Directors consists of a fixed salary and a medium- and long-term incentive (stock options). The fixed salaries
consist of a basic compensation and compensation for being a member or a chairperson of the Nomination, Compensation, or Audit Committee. The compensation levels are set appropriately by taking into consideration such factors as the Company’s businessenvironment and the levels set by other companies as determined by a survey conducted by an outside professional organization.
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Furthermore, fixed numbers of stock options are granted to newly appointed and reappointed officers in order that they may
hold a common viewpoint with shareholders regarding the share price and share interests with shareholders on a medium- tolong-term basis. A reasonable number of stock options, which is calculated to be commensurate with the number of stock
options granted at the time of new appointment, are also granted annually on an ongoing basis in consideration of the exercise
price at the time of granting (the market price one day prior to the resolution regarding the grant), fluctuations in the shareprice during the exercise period, and fixed annual salaries.
[Composition ratio of compensation for directors]
Fixed salary: Medium- and long-term incentive (stock options) = Approximately 1:0.3–0.6(Note) The ratio of the above medium- and long-term incentive shall fluctuate with changes in the Company’s share price and other factors.

Policy concerning remuneration for Executive Officers
The remuneration of Executive Officers consists of a fixed salary, an annual incentive (performance-based bonuses), and a
medium- and long-term incentive (Performance Share Unit). For fixed salaries, basic compensation is set appropriately according to the office and responsibility of each Executive Officer (Representative Executive Officer, CFO, etc.) and by taking into
consideration such factors as the Company’s business environment and the levels set by other companies as determined by asurvey conducted by an outside professional organization. Other than basic compensation described above, benefits granted
to expatriates (such as housing) are also set at appropriate levels in consideration of the Company’s business environment andthe levels set by other companies as determined by a survey conducted by an outside professional organization.
The annual incentive is determined according to quantitative results and qualitative evaluations and varies within the range
roughly from 0% to 200%. As indicators of quantitative results, net sales, profit attributable to owners of the Company, andbasic earnings per share (EPS) stated in the Consolidated Financial Statements of the Company have been adopted.
As a medium- and long-term incentive, the Company introduced the Performance Share Unit.
Performance Share Unit
The Company has introduced the Performance Share Unit (PSU) in place of the existing stock option plan since the fiscal year
ended March 31, 2020. The PSU is a system for granting shares at a number that is in proportion to the level of achievementof the predetermined performance conditions. The payment ratio that corresponds to the level of achievement of the performance targets will range from 0 to 200%, based on performance during three fiscal years. The Company has selected sales,
basic earnings per share (EPS) and return on equity (ROE) in the Consolidated Financial Statements as indicators of performance
during three fiscal years.
The objective of the new plan is to further increase the motivation and drive of the Company’s Executive Officers to medium- tolong-term business performance goals and enhance the corporate value of the HOYA Group, and also to serve as mechanism
for retention of highly talented human resources by setting a competitive compensation level.
Basic deliverable number of shares
Position/responsibilities

Medium- to long-term performance targets

Basic deliverable
number of shares

Indicator

CEO

6,000

Net sales

610 billion yen HOYA Group in the domestic and overseas markets.

CFO

2,000

Other Executive
Officers

1,700

Earnings per
share (EPS)

350 yen from the same perspective as shareholders.

ROE

18.00% has generated return on shareholders’ investment effectively.

Target(consolidated)

Reason for the selection of the indicator
Selected as an indicator to measure growth potential of theSelected as an indicator to measure growth of the Company
Selected as an indicator to measure whether the Company

The targets above are set in consideration of, among others, the Company’s business environment
and market consensus and do not constitute the Company’s financial forecasts. The targets above
represent average values over the three fiscal years covered.

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Under this plan, after determining the basic deliverable number of shares according to the position and responsibilities of eacheligible recipient (CEO, CFO, and others), the Company grants compensation in an amount equivalent to the market price of
the Company’s shares according to the degree of achievement of the medium- to long-term performance targets shown in thetable below.
The Company also plans to issue new PSU covering the next three fiscal years in the following fiscal year onwards.
Total amount of remuneration, etc., Directors and Executive Officers for the fiscal year under review(before the introduction of PSU)

Directors

Total amount of remuneration by type

Number ofpayeesTotal amountof remuneration, etc.

Fixed salary

Performancebased bonuses

Stock options

Independent

6 persons

89 million yen

53 million yen-

36 million yen-

Internal

1 person

8 million yen

8 million yen

-

-

-

Classification

PSU

Total

7 persons

97 million yen

61 million yen-

36 million yen-

Executive Officers

4 persons433 million yen

258 million yen

83 million yen

61 million yen

31 million yen

Total

11 persons

530 million yen

319 million yen

83 million yen

97 million yen

31 million yen(Notes) 1. At the end of the fiscal year under review, there were six Directors and four Executive Officers. One of the four Executive Officers served concurrently as Internal Director. The reason for thediscrepancy with the number of Directors in the above table is because the above table includes one Director who retired at the closing of the 81th Ordinary General Meeting of Shareholders.
2. The total amount of remuneration includes remuneration paid to one Executive Officer who retired as of the conclusion of the 81th Ordinary General Meeting of Shareholders.
3. Fixed salary for Executive Officers includes overseas Executive Officer’s benefit as expatriate of 103 million yen.
4. For the stock options, fair values of stock acquisition rights were calculated and the table above shows amounts to be recorded as expenses for the fiscal year under review. For
Executive Officers, no new stock options were granted in the fiscal year under review due to the introduction of PSU in place of the stock option plan from the fiscal year underreview. The table above shows stock options granted in past fiscal years in amounts to be recorded as expenses for the fiscal year under review.
5. For PSU, the table above shows amounts to be recorded as expenses for the fiscal year under review based on the share price at the time of the granting of shares.

Amount of consolidated remuneration for each Director (CEO)Name

Hiroshi Suzuki
Representative Executive Officer
President & CEO

Executiveclassification

Total amount

Fixed salary

Performancebased bonuses

Stock options

Director

8 million yen

8 million yen

–

–

–

Representative
Executive Officer

160 million yen

95 million yen

24 million yen

24 million yen

17 million yen

PSU(Notes) Only those with remuneration totaling 100 million yen or more

Audit Committee
The Audit Committee formulates the audit policies and audit plans for each fiscal year and verifies financial statements, etc.,
based on the quarterly reports, year-end reports, and timely reports received from the accounting auditor according to suchpolicies and plans. It also interviews the Audit Department and the Internal Control Department to obtain the results of operational audits, and verifies the soundness, legality, efficiency, etc., of management. All important matters are reported to theBoard of Directors, and countermeasures are taken as necessary.
Audit Committee meetings were convened nine times in the fiscal year under review, in which the attendance ratio of four
directors was 100% and one director was 88.9%.
The Committee discussed mainly the following agenda items:
Agreement on the accounting auditor of the HOYA Group and its remuneration
Resolution on the audit report of the Audit Committee
Review reporting from the accounting auditor (five times in total per year)
Quarterly reporting from the Internal Audit Department and the Help Line
Deliberations during the fiscal year under review also focused on reports from the accounting auditor, the Audit Department, and the Internal Control Department, while providing advice and suggestions to the executive team withregard to any issues that came to light.

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Copyright ©2020 HOYA GROUPHOYA INTEGRATED REPORT 2020HOYA Group Environmental, Occupational Safety and Health Philosophy
and Fundamental Environmental Occupational Safety and Health Policies
The HOYA Group established its “Environmental Philosophy” and “Fundamental Environmental Policies” in 1993 and “Safety
and Health Philosophy” and “Fundamental Safety and Health Policies” in 2002. Under these guidelines, the Group has beenpromoting the environmental, occupational safety and health activities at all its business facilities both inside and outside Japan.
In 2012, the environmental, occupational safety and health management systems of the individual facilities were reviewed thoroughly in the process of obtaining a global multisite certification for those systems. Since then, the Group has been operating
all its environmental protection, occupational safety and health activities in a globally integrated manner.

HOYA Group Environmental Philosophy
It is our earnest desire to preserve the global environment in a pristine form and pass it to the next generation.
Therefore, we, the HOYA Group and its employees, are united in our commitment to project the environment, conserve resources, and ensure that all our corporate activities are conducted with adequate concern
for the global environment.

Fundamental Environmental Policies
1. We recognize the importance of environmental conservation, thereby passing on the global environment in the best possible
condition to the future generations. We make certain future generations. We make certain that all our corporate activities
are conducted in a well-balanced manner for people, society, and the natural environment.
2. We establish and operate a Group-wide system of environmental conservation activities by enlisting the cooperation of all
the Group companies around the world.
3. We comply with all laws and regulations relating to environmental impacts, such as waste generated by business activities,
and make consistent efforts toward reducing these environmental impacts.
4. We carry out resource saving activities by pursuing greater efficiency in resource use, reduction of energy consumption, andrecycling.
5. We maintain a keen interest in environmental issues throughout the Group and ensure that all the employees are thoroughly
aware of the HOYA Group Environmental Philosophy and Fundamental Policies. By introducing environmental education
programs and promoting internal communications.

HOYA Group Safety and Health Philosophy
We believe that a healthy mind and body of each employee is essential for the enrichment of all the employee is essential for the enrichment of all employees’ individual lives and the perpetual development of the
HOYA Group companies.
We are therefore committed to maintaining and improving the employees’ health and creating safe andpleasant conditions for all the employees of the group companies.

Fundamental Safety and Health Policies
1. We maintain and improve the employees’ health and safety at workplaces through the collective efforts of the company andthe employees.
2. We observe applicable laws and regulations concerning workplace health and safety in creating safe and pleasant working
conditions for the employees.
3. The company establishes effective organizations to measure workplace health and safety and promotes schemes to improve
such organizations systematically.
4. The company gives priority to implementing measures to prevent accidents at workplaces over investing in production facilities.
5. The employees exercise care for the maintenance and promotion of their own health while incorporating the assistance fromthe company.

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Environmental Protection and Occupational Safety and Health System
In October 2008, the Group´s environmental protection organization and the occupational safety and health organization weremerged with each other.
Since then, with the new structure supervised by the HOYA Group Director for Environmental Protection, Occupational Safety
and Health, the Group has been carrying out various activities of environmental protection and occupational safety and health.
sources, and ensure that all our corporate activities are conducted with adequate concern for the global environment.
HOYA Group Environmental Protection and Occupational Safety and Health Organization

Chief Executive Officer (CEO)HOYA Group Director for Environmental
Protection, Occupational Safety and HealthStrategic Business Units (Divisions)

The person in charge ofOccupational Safety and Health of Division
The person in charge ofEnvironmental Protection of Division

Plants and facilities (Including local subsidaries)

The person in charge ofOccupational Safety and Health of Facility
The person in charge ofEnvironmental Protection of Facility

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Environmental

Climate Change

Greenhouse Gas
HOYA strategy for CO2 reduction
The HOYA Group is globally conducting its environmental protection activities, in which attempts are being made to reduce
CO2 emissions by paying special attention to its “energy consumption.”

CO2 reduction targets
The HOYA Group also sets the following Group-wide reduction target for CO2 emissions and is directing its environmental
protection activities toward accomplishing it. That is, the HOYA Group aims to achieve a 5-percent reduction of CO2 emissions
from the fiscal year ended March 31, 2017 by the fiscal year ending March 31, 2021 (compared with the level of the fiscal year
ended March 31, 2015).

CO2 emissions
The CO2 emissions of the HOYA Group in fiscal year ended March 31, 2020 were 418,466 tons of CO2. (Scope 1 and 2 emissions)
The reduction of CO2 emissions was 28.4 percent in Japan from the level of the fiscal year ended March 31, 2015. CO2 emissions increased by 13.0 percent overseas. As a result, CO2 emissions increased by 4.4% globally. (Net sales increased by 17.7%
during the same period.)
Consequently, the HOYA Group was able to reduce CO2 emissions per unit of net sales by 11.3%. We will continue to makeefforts to reduce total CO2 emissions.
We will also look into setting a target for the fiscal year ending March 31, 2022 and beyond.
CO2 emissions of the HOYA Group (t-CO2 equivalent)
Scope 1 and2 emissions

Unit

Mar.
2015
(Base year)

Japan

t-CO2

Overseas% Change fromthe fiscal year
ended March
31, 2015

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2020

Mar.
2020

82,83585,261

69,992

71,37566,82459,304-28.4%

t-CO2

317,976

332,206

328,124

337,960

338,946

359,162

13.0%

Total

t-CO2

400,811

417,467

398,116

409,335

405,770

418,466

4.4%

CO2
emissions
per unit of
net salest-CO2 perbillion
yen

818

826

831

764

717

726

-11.3%

Note that CO2 emissions are calculated, for each of the production bases*, from electric power and fuel consumptions as determined by the summation formulas standardized for the whole HOYA Group.
* Some non-production bases are included

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Energy-saving and power-saving activities
As part of the actions for energy saving and power saving, each of the facilities is pushing ahead with the replacement oflighting fixtures and air conditioning equipment with those of the energy-saving type. At each of the Group’s production bases,
efforts are being made for energy saving by devising more efficient modes of operation and replacing existing equipment withenergy-saving type equipment in an appropriate order.
Examples of energy-saving and power-saving initiatives
Efforts to reduce greenhouse gas emissions at overseas offices using Joint Crediting Mechanism (JCM) (HOYA expects to cut
its annual CO2 emissions by 618 tons.)
In 2016, we introduced a heat recovery heat pump at the eyeglass lens plant in Vietnam. It is used to save energy and reduce
CO2 emissions by using the heat that used to be exhausted to the outside air when cold heat was supplied as a source ofcold heat for the production process and as an auxiliary heat source for heating the water used in the manufacturing process.
Before introducing the heat recovery heat pump, we used only electric heaters to obtain the desired temperature.

Heating process

Cooling process

Deionizer

Process chiller

Heat recovery heat pumpToshiba CAONS
Heat
exchanger

10℃

30℃

63℃

59℃

10℃

65℃

15℃

15℃

Cooling
water tank

Electric heater

10℃

Heating

80℃
Manufacturing process

15℃

Manufacturing process

At the eyeglass lens plant in Vietnam, one of the existing centrifugal chillers was replaced with a highly efficient inverter
centrifugal chiller. By using the new chiller for regular operation and the old one as backup equipment, we achieved a lower
introduction cost, improved energy efficiency, and reduced CO2 emissions at the same time.

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Environmental

Water

Initiatives to effectively utilize water resources
The HOYA Group endeavors to effectively utilize water resources by reusing water and reducing water usage on a global scale,in accordance with its Fundamental Environmental Policies.

Water usage reduction targets
The HOYA Group has set numerical targets in each of its business segments and manages its progress in achieving the targets.

Water usage
In the fiscal year ended March 31, 2019, water usage in the HOYA Group was 17,429,000 cubic meters.
Compared to the fiscal year ended March 31, 2015, we managed to maintain our global water usage at a level on par with thefiscal year ended March 31, 2015. (Net sales increased by 15.5% during the same period.)
The HOYA Group was able to reduce water usage per unit of net sales by 13.0%. We will continue to make efforts to effectively utilize water resources.
Water usage in the HOYA Group (1,000 cubic meters)
Mar.
2015
(Base year)

Unit

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

% changefrom the base
year

Japan

Thousand cubic
meters

1,185

1,183

1,098

1,008

1,071

-9.6%

Overseas

Thousand cubic
meters16,16916,336

15,871

16,36016,357

1.2%

Total

Thousand cubic
meters17,354

17,51916,96917,36817,4290.4%

Thousand cubic
Water usage per meters per billion
unit of net sale
yen

35.4

34.6

35.4

32.4

30.8

-13.0%

Note: There has been a delay in updating the data for the fiscal year ended March 31, 2020, due to the impact of the COVID-19 pandemic.

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Environmental

Pollution and Waste

Hazardous substance discharges and waste
Soil pollution control measures, underground water pollution control measures, andhazardous substance leak control measures
In March 2010, the Group issued the HOYA Group Standard for Environmental Facilities designed to help the Group to prevent
any hazardous impact on the environment inside and outside the HOYA Group facilities.

Waste
In entrusting contracted disposal of factory waste, individual facilities select contractors after carefully checking their businesslicenses.
Also, through consignment contracts with appropriate disposal contractors, the Group promotes the recycling of industrial
waste, creation of monetary values out of waste, and reduction of waste emissions.
Waste emissions (t)
Mar.
2015

Japan

Overseas

Global

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Total
emissions

2,656

3,462

3,362

3,478

3,144

Recycling
rate

79.0%

60.1%

66.1%

62.6%

65.9%

Total
emissions

43,992

43,76049,88856,35456,766

Recycling
rate

61.0%

66.5%

66.3%

68.4%

69.1%

Total
emissions

46,64847,22253,25059,832

59,911

Recycling
rate

62.0%

66.1%

66.3%

68.1%

68.9%

Note: There has been a delay in updating the data for the fiscal year ended March 31, 2020, due to the impact of the COVID-19 pandemic.

Chemical substances
Based on the HOYA Group Chemical Substances Management Standard, the HOYA Group manages chemical substances usedin its business activities using common indicators that are used across all business activities of the HOYA Group.

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SocialHuman Capital

Labor Management
Basic approach
The HOYA Business Conduct Guidelines stipulate the basic guidelines to be complied with when performing operations basedon the basic policies and values of the HOYA Group. The Business Conduct Guidelines clarify that basic human rights are to
be respected and that all forms of discrimination and harassment in connection to race, nationality, gender, religion, belief,birthplace, age, or disabilities are to be eliminated in all corporate activities.
Human rights of employees
We aim to create a safe and healthy workplace that allows employees to feel secure while they work. The Company will provide
equipment, systems, and working conditions so that each and every employee respects and cooperates with each other as theCompany strives to create a workplace that is easy to work in.

Modern Slavery Statement
In accordance with the UK Modern Slavery Act 2015 legislation, the HOYA Group publishes a statement on the steps it has
taken to identify and eradicate slavery and human trafficking within its business and supply chains.
http://www.hoya.co.jp/english/csr/pdf/HOYAGroupModernSlaveryStatement2019_fin.pdf

Diversity
Equal opportunities for men and women
At the HOYA Group we work to achieve fair employment At the HOYA Group, we work to achieve fair employment opportunities and benefits for both genders.
At the HOYA Group in Japan, currently 125 women (10.8% of total employees) are active as women leaders.* In addition,
as of the end of June 2020, one of the independent directors is a woman (16.7% of total directors). We do not discriminate
based on gender in hiring, promotions, or pay increases, and instead focus on actively employing human resources with highly
specialized capabilities and morals.
In order to increase the women in management percentage in Japan going forward, we will promote the development of aworking environment that allows the women working at HOYA to feel reassured in their continual employment. Specifically, torealize our goal of increasing the percentage of women in managerial positions to at least 15% by the end of March 2021, we
will conduct female leadership training, managerial training, lectures by role models, and networking activities to help foster
female leaders.
*Women leaders: Subsectional chief equivalent to or above section and highly skilled professionals

Utilizing people with disabilities
The HOYA Group actively utilizes people with disabilities, for example in the operation of its Ichikawa Challenge Office that
supports eco projects.

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Utilizing global human resources
The HOYA Group implements sales and production at optimal locations on a global level. In addition, efforts are being madeto globalize the entire Group by promoting the localization of top management of subsidiaries through actively promoting andcreating opportunities for high-quality local human resources. The HOYA Group will work to provide equal opportunities tolarge numbers of high-quality human resources going forward.
In addition, as of the end of June 2020, at HOYA Corporation we have promoted a non-Japanese to the position of executive,
and five non-Japanese are engaged as division managers in our global business.

Respecting individuals
1. Preventing sexual harassment and power harassment
The HOYA Business Conduct Guidelines clearly state that the diverse values, individuality, and privacy of individuals are to berespected and clearly prohibits discretionary language, acts of violence, sexual harassment, and power harassment in connection to race, nationality, gender, religion, belief, birthplace, age, or disabilities.
Activities to promote the awareness of the Guidelines are conducted through means such as training classes in Japan.
2. Establishment of an employee whistleblowing and consultation system
As part of our internal control systems, the HOYA Group established the HOYA Help Line in 2003 as a whistleblowing andconsultation system for the Group. This is a framework that protects whistleblowers when there have been violations of laws,
regulations, or the HOYA Business Conduct Guidelines so that problems can be known at an early stage and smoothly communicated to top management in an aim to ensure the soundness of the entire Group through quick and appropriate responses
to such issues.

Development of Human Resources
Enhancement and development of human rights
Basic approach
At the HOYA Group, we provide a work environment that respects individuality and diversity and promotes the growth ofindividuals while giving consideration to the safety and health of employees. Furthermore, each and every employee works to
improve the knowledge and skills and we provide the innovative value sought by society. In this manner, we aim to create afree-spirited work environment.
Human resource development
People differ in terms of things such as values, how they live, personality, and individual capabilities. There are also a wide variety of stances toward jobs and ways of working. For this reason, organizational management in the current era needs to provide frameworks that leverage the individuality of employees and allow employees to increase their capabilities in environmentsthat match individual aptitudes. The new ideal employee environment sought by HOYA is one in which all employees can fully
exploit their capabilities and contribute to the organization and business through friendly competition.
In response to the wide variety of capacity development needs of employees and in order to learn the specialized knowledge
and skills required for the industry, the HOYA Group individually deploys the employee educational programs that are mostsuitable for each business division and region.
HOYA Prize
The HOYA Prize is an award system that has been established for all employees with the aim of recognizing and rewarding thedaily hard work and efforts of employees in order to communicate a spirit of gratitude toward employees that always do their
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utmost amidst a difficult business environment. The award system does not stipulate any detailed standards, but winners arerather decided on by the CEO based on recommendations received by the President from the managers of each business andhuman resources representatives.

Occupational Safety and HealthOccupational safety and health activities
The HOYA Group is pushing for the creation of a pleasant workplace environment where every one of the employees can workin good health and safely. The Group believes that such a work environment is essential for a fulfilling life of each of the employees and a lasting development of our enterprise.

Structuring of a global management system for its environmental and occupationalsafety and health management system
The HOYA Group has been structuring a globally-operated management system based on ISO (International Organization forStandardization) 14001 and 45001 with the purpose of promoting environmental protection activities by employees and ensuring the safety and health of employees.
In February 2013, the certification of the Group switched to a global multisite certification.
In March 2020, the certification is applied to 52 sites in 18 countries.

Reduction of risks using risk assessment
All hazardous factors are constantly being checked by risk assessment in accordance with the HOYA Group Risk Management
Guidelines for Occupational Safety and Health. As well, effective safety measures are being taken in order of priority for risk
reduction.

Strengthening of chemical substances management
Based on the HOYA Group’s common index HOYA Group Chemical Substances Management Standard, we are managing
chemical substances used in our business activities and working to prevent occupational accidents and diseases caused bychemical substances.

Assurance of safety of machines and equipment
The safety of machines and equipment is a matter of greater importance in achieving occupational safety. Various measures
for the safety of machines and equipment (reduction of risks) are being taken from the design stage on according to the HOYA
Group Standard for the Safety of Machines and Equipment to prevent machine-related accidents.

OSH Audit (Occupational safety and health)At all the Group’s business facilities inside and outside Japan, the environment, occupational safety and health personnel andspecialized staff conduct internal audits periodically. After the audits, they give necessary advice and guidance to respective
sections to improve their observance of laws and regulations and performance of occupational safety and health.

Training in HOYA Group safety and health
The facility environment, occupational safety and health personnel conference is held twice a year. The HOYA Group foremen
training is held twice a year. The intra-Group consulting program for guidance and training is held several times a year mainly

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for the overseas production bases. These are all designed to enhance the performance of the occupational safety and healthactivities within the HOYA Group.
Go to Occupational Accidents at HOYA Facilities page
http://www.hoya.co.jp/english/csr/accidents.html

Health promotion activities
CEO message on the health of our employees
Based on the recognition that “health promotion efforts are business investments,” the HOYA Group aims to maintain andpromote the health of employees through organizational support and self-help efforts by employees themselves. In April 2015,
the CEO issued a message to employees on 10 items that employees are encouraged to adhere to for the promotion of health.

White 500 certification for health and productivity management organizations
The HOYA Group has been certified under the METI’s White 500 certification program for outstanding health and productivity
management organizations every year since the start of the program in 2017 (as of April 1, 2020). This program is administeredby the Ministry of Economy, Trade and Industry jointly with Nippon Kenko Kaigi and in coordination with insurers to certify
and announce companies practicing excellent health and productivity management. HOYA is practicing health and productivity
management on a daily basis.

Mental health promotion
HOYA provides mental health education by industrial physicians for managers and general employees to deepen their understanding of mental healthcare. HOYA has also established the HOYA Group Mental Healthcare Guidelines to ensure sufficientline care by managers and to clarify the roles of the manager, the person in charge of personnel affairs, and the industrial physician in the introduction of treatment and reinstatement responses to ensure efficient coordination among them. In addition,
HOYA is making continued efforts to improve the work environment using the results of organizational analysis of stress checks.

Overwork prevention
HOYA has established the HOYA Group Standard for the Prevention of Overwork-related Health Problems, which is in compliance with industrial safety and health laws and regulations, and has implemented it at all HOYA Group companies. Workers
with long working hours are required to have an interview with an industrial physician, and a system has been put in place toensure the person in charge of personnel affairs, the manager, and the industrial physician work together to slash long working hours from the perspectives of both labor management and health management. In addition, as part of workstyle reform,
HOYA is strengthening efforts to steadily improve the utilization rate of annual paid leave.

Smoking control
To prevent passive smoking, indoor smoking has been prohibited in principle in all facilities located in Japan and overseas
since April 2008. HOYA has also established a standard for the designation of outdoor smoking spaces to prevent any passive
smoking by passersby or people taking a break. Furthermore, we have adopted stricter rules to prevent passive smoking in
April 2018 to ensure that for parties, diners, etc., hosted by HOYA, a venue that is entirely non-smoking or provides a separatesmoking area will be selected. HOYA introduced rules to totally prohibit smoking at all facilities inside and outside Japan during
the regular working hours from the fiscal year ending March 31, 2021. HOYA aims to create a comfortable work environment
at the workplace where employees spend a significant part of their living hours.

Specific Health Checkups and Specific Health Guidance
As part of efforts to prevent metabolic syndrome, HOYA has provided health guidance focusing on the prevention of lifestylediseases of employees (lifestyle improvement program) in coordination with the health insurance association since 2002 before
the start of the national Specific Health Guidance program. The scope of the health guidance has been expanded to cover

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employees less than 40 years old (for the groups less than 25, 30, and 35 years old) for the early detection and treatment oflifestyle-related disease. We also monitor the participation rate and the achievement rate of Specific Health Checkups and Specific Health Guidance annually and are considering the introduction of a program to improve the participation rate.

Improving medical support at overseas facilities
At the HOYA Group, industrial physicians make regular visits to overseas facilities to support the coordination between local
medical institutions and each facility. Under this arrangement, the coordination between local medical institutions and the facility enables both local employees and Japanese expats to receive appropriate and prompt medical services in the event of an
emergency situation and for the management of chronic diseases.

Improving emergency medical care and first aid responses
We have established the HOYA Group Standard for Emergency Medical Care and First Aid to provide appropriate emergency
medical care and first aid in the event of a workplace accident or an emergency situation and thereby to minimize healthdamage of employees. Based on this Standard, we work to ensure the proper installation and management of first aid
equipment and to ensure that all employees ultimately receive lifesaving training to prepare for emergencies. Some of the
facilities are equipped with AED on condition that at least two workers who have completed lifesaving training are assigned
to each work shift.

Collaboration with Supply Chain Partners
Supplier Code of Conduct
HOYA seeks to apply a high level of legal compliance and ethical practices consistent with its legal and social responsibilities
and duty to protect the basic human and worker rights of everyone in the organization.
We have also established the HOYA Supplier Code of Conduct that applies to all suppliers providing products and services to us.
The Code requires our suppliers to adopt the same level of legal compliance and ethical practices as HOYA, and all our suppliers
are asked to accept and comply with it before conducting business with HOYA.
The HOYA Supplier Code of Conduct is available on our website through the following links.
HOYA Supplier Code of Conduct -English (148KB)
http://www.hoya.co.jp/english/csr/pdf/Supplier_CoC2018.pdf
HOYA Supplier Code of Conduct -Chinese (205KB)
http://www.hoya.co.jp/english/csr/pdf/Supplier_CoC_CN.pdf
HOYA Supplier Code of Conduct -Thai (129KB)
http://www.hoya.co.jp/english/csr/pdf/Supplier_CoC_TH.pdf
HOYA Supplier Code of Conduct -Vietnamese (290KB)
http://www.hoya.co.jp/english/csr/pdf/Supplier_CoC_VN.pdf
HOYA Supplier Code of Conduct -Korean (322KB)
http://www.hoya.co.jp/english/csr/pdf/Supplier_CoC_KR.pdf

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Social

Product Safety and Quality

Product Safety Assurance Policy and Structure
Product safety assurance policy
Legal compliance
Each company in the HOYA Group complies with the standards required of products in Japan and elsewhere around the world.
We also comply with laws, regulations, and other standards related to product quality and safety.
Collecting and responding to product incident information
Each company in the HOYA Group collects information from customers and other sources related to product incidents and/or malfunctions. When necessary, we provide legally mandated reports to regulatory agencies and appropriate information tocustomers and others. We enact measures to recall products and repair products, in addition to taking other actions regarding
any product-related issues.
Ensuring product safety
Each company in the HOYA Group provides, where appropriate, user training, up-to-date user guides and documents, productwarning labels, and other information for the effective, safe use of our products. We continue to seek opinions from users of
our products and reflect this feedback in future products.
Training and educational systems to improve product safety and quality
Each company in the HOYA Group strives to improve product safety and quality. To accomplish this goal, we conduct ongoingeducation and training activities. At the same time, each Group company performs reviews and updates to product safety andquality management organizations and systems.

Product safety assurance structure
At the HOYA Group, under the supervision of the executive officer in charge, each business division has product safety assurance functions. For businesses falling under the Life Care segment, which handles medical products, we have established adivision in charge of regulations, quality, and government affairs across these businesses.

Board of Directors

Executive Officer, CLO

Division in charge of regulations, quality
and government affairs
Life Care businesses

Person in charge of product liability
at each Information Technology business

Plants and facilities (including local subsidiaries)

Plants and facilities (including local subsidiaries)

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Social

Product Safety and Quality

Responses to Conflict Minerals
Conflict minerals policy
The HOYA Group cooperates with its suppliers to ensure that it does not use any minerals produced in the Democratic Republicof Congo or its neighboring countries that are defined as conflict minerals in Section 1502 of the U.S. Dodd-Frank Act.

Social Opportunities

Efforts to Meet Unmet Needs to Improve QOL
Efforts to Meet Unmet Needs to Improve QOL
Development of products that meet needs to improve QOL
We launched “HOYA MW10 HiKARI,” eyeglasses to support the scotopic vision of people suffering from night blindness, in
2018, and the product has received high customer evaluation.
See the special website below for further information. (In Japanese only)
https://hmwpj.com/

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Review of Operations

Life Care Segment

Impact of the COVID-19 Pandemic• Demand has dramatically fallen since March 2020 due to COVID-19, but business is expected to return to normal as the
spread of the virus comes to an end.
Medium- to long-term growth forecasts remain unchanged.
• While the future business impact of COVID-19 is unknown at this point in time, the pace at which retail chains are being
formed might accelerate among eyeglass lens and contact lens retail stores.
• Eyeglass lens and contact lens retailers are expected to make gradual progress in shifting to online sales, due to restrictions by
medical regulations, etc. in each country.

Eyeglass lenses

Customer demand

Production has
been adjusted
to adapt to fallin demand

Demand has plummeted
due to closure of retailstores in association withlockdown and restrictions
on outings.

Demand is expected to recover to normal levels in
July-September as activities resume (demand returned to normal in China and South Korea in May).
Deferred demand is expected to be small.

—Sales opportunities havedecreased due to businesses refraining fromoperating and people
refraining from going out
voluntarily.

Demand is expected to recover to normal levels in
July-September as activities resume. Deferred demand is expected to be small as contact lenses are
not being used while users stay at home.

Production
has not been
impacted ingeneral.

Demand has increased for
pulmonology products.
Number of non-urgent
endoscopic examinations
has decreased.

Resumption of activities has led to recommencement of operating activities targeted at hospitals
and other customers of the Company which had
been suspended; it is expected to take two to threemonths for demand to return to normal.

Production has
been adjusted
to adapt to fallin demand.

Demand has decreased
due to fall in number ofcataract surgeries that areclassified as elective procedures performed.

Cataract surgery will resume as risk of patientsgetting infected with COVID-19 diminishes. Demandis expected to temporarily increase due to deferreddemand.

Contact lenses

Endoscopes

Intraocularlenses

Prospects for recovery in demand after relaxation ofactivity restrictions

Manufacturing

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Health Care
(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please referto this section for further information.)

Eyeglass Lenses
Business Overview
HOYA conducts research and development, manufacturing, and sales of eyeglass
lenses.
Our product lineup includes single-vision lenses that possess a single corrective function for each lens, as well as progressive lenses (varifocal lenses) that offer wide visual
fields and a seamless transition between near, intermediate, and far distances in asingle lens.
By geographical region, a significant amount of sales, approximately 87%, takes
place in markets outside Japan.
Supply Chain

Lens material
manufacturer

Lens manufacturer

OpticianMarket Conditions
From March 2020, demand decreased due to the stagnation of economic activities asa result of people’s movement being restricted in countries by their governments in
response to COVID-19, which has turned into a global pandemic since March 2020.
While it remains difficult to accurately forecast demand in light of fluid COVID-19
restrictions country by country, demand has been shown to strongly return once
restrictions are lifted and economies can reopen. From a medium- to long-term
perspective, eyeglass lens demand is expected to continue increasing globally due
to such factors as the increasing aging population worldwide, enhanced purchasing
power owing to the economic growth of emerging countries, increased awarenessof health, and long hours of PC and smartphone use that leads to deterioration ofvision. It will also be necessary to move our businesses forward by building a strategy
while identifying changes in the market brought about by COVID-19.
Globally, the rate of growth was around 3% in value terms before the COVID-19
pandemic, although the pace of growth varied from region to region, as is seen inmature markets of Japan and Europe, and growth markets in the Americas as well as
Asia. The global market is expected to grow at a similar pace once demand recovers
after the pandemic comes to an end.
While there are variations from region to region, the emergence of giant retail store
chains through consolidation and the resulting fall in unit sales prices are becoming a

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worldwide trend. The impact of COVID-19 could accelerate this trend, giving rise toMarket Share (Mar. 2019)the need to keep a close eye on the situation.
Given this, the key to growth for lens manufacturers will be to reduce production costs
and to increase sales of value-added products, such as those with different varieties of

OthersA Company

surface coatings (anti-glare coatings and anti-scratch coatings) and progressive lenses.

B Company
HOYA Position and Market ShareHOYA stands at the No. 2 position in the industry, and, in addition to organic growth, has
expanded its share of the market through M&A initiatives, including the 2013 acquisitionof SEIKO’s eyeglass lens unit, and U.S.-based Performance Optics, LLC. in 2017.

HOYA
No. 2
(HOYA estimate on a value basis)

HOYA Outlook
Eyeglass lens products account for over 50% of Life Care business sales, and area growth driver for Life Care business expansion.
In the Americas, we have already established a strong presence in the channelof independent eyeglass stores, while there is still much room for market share
expansion in the channel of chain stores, on which we will continue to focus. In

Sales Composition Ratio
by Sales Channel
in the U.S. (Mar. 2019)

addition, we will strengthen sales activities also in Asia, especially China, as wellOther

as in South America, where markets continue to grow. This is how we aim toDept. stores
Massmerchants

achieve worldwide organic growth of 5% per year. On top of that, we will also
pursue M&A opportunities to boost growth.
To respond to the increasing demand, we completed the construction of our

ChainsIndependents

second plant in Vietnam in November 2019. However, while preparations for
production launch were underway, demand fell due to the impact of COVID-19,
resulting in the delay of production launch. Having commenced production at theplant in July 2020, we plan to raise its operating rate in steps.

(HOYA estimate on a value basis)

Contact Lenses
Business Overview
In Japan, we are expanding Eyecity outlets, HOYA’s contact lens specialty retail store
chain.
At Eyecity, we offer consulting and sales, making product recommendations ideallysuited to the needs of individual customers, and, leveraging our strength, we provide
a wide lineup sourced from major manufacturers throughout the world
Stores are established in convenient locations, in close proximity to train stations,inside shopping centers, and other areas.
Market Conditions
The contact lens market in Japan is valued at approximately 400 billion yen. On accountof such factors as a growing level of nearsightedness among the younger generation, therising age of those wearing contact lenses due to the growing prevalence of multifocal
contact lenses, and a rise in average sales price reflecting the rising sales of high value-added lens products, we expect an ongoing market expansion, albeit slight.

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By sales channel, sales through the contact lens specialty store channel—which accounts
for the largest share of total value—are expected to continue to grow steadily, driven byongoing share expansion.

Sales Composition Ratio
by Sales Channel (Mar. 2020)

Eyeglasses stores
Onlinechannels

HOYA Position and Market ShareHOYA holds the top share in the retail channel for sales made through brick-andmortar stores.
On top of sales growth from existing stores based on, among others, the promotion

Ophthalmologists

OthersContac lens
specialty storesof high value-added products, we are working to expand sales through new stores.
We also provide an online sales service in the form of “Ouchi Ni Todoku EyeCity”(meaning EyeCity delivered to your home) to adapt to Internet shopping, which has
been expanding in recent years.
Sales per Customer(Presented as an index with Mar. 2015 as 100)

Number of Eyecity Stores in Japan

120

400

HOYA
No. 1

336
300

110

257

273

276

289

Mar.
2017

Mar.
2018

Mar.
2019

HOYA Market Shareat Contact Lens Specialty Stores(HOYA estimate on a value basis)

200
100
100
90
Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Mar.
2020

0

Mar.
2016

Mar.
2020

HOYA Outlook
Looking forward, HOYA is seeking to achieve a sustained sales growth rate at the
5% level by boosting sales at existing stores together with aggressively establishing
new stores.
For new stores, HOYA will conduct detailed analyses of an area’s contact lens-wearing
population, market growth rate, and competitive situation, and will establish stores
mainly in city centers, regional cities, and large shopping centers. We will also strive
to increase efficiency by relocating stores within the same marketing area as appropriate. In addition, we will work to accelerate growth by actively exploiting M&A
opportunities targeting contact lens specialty stores that have a strong position in
their respective local markets.

Medical(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please referto this section for further information.)

Medical Endoscopes
Business Overview
In this field, HOYA conducts research and development, manufacturing, and sales of
medical endoscopes used in diagnosis and treatments of disorders associated withthe ear, nose, and throat, the respiratory tract, and the digestive system.

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The endoscope field comprises scopes and processors.

Supply Chain

Sales by Region (Mar. 2020)
Component manufacturer

PENTAX (HOYA)
Endoscope manufacturer

Customer: Hospital,
joint purchasing organization, agency

Japan

Sales by Region
By geographical region, overseas sales account for a large portion of total sales.

Americas

Asia/
Oceania

Market Conditions
Medical expenses are increasing worldwide in line with the aging of society.

Europe, Middle-East,
AfricaTo keep medical expenses in check, governments in countries across the globe arepromoting the early detection of disease and minimally invasive medical procedures.
In particular, needs for the latter are increasing as part of the trend of reducing invasive medical treatment. As a result, demand for endoscopes is increasing as products
to satisfy these needs.
The rate of growth is steady in the markets of developed countries and regions—Japan, the U.S., Europe, and others. However, in Asia, which is at a stage where endoscopes are becoming more prevalent, the growth rate continues to be high. Globally,
we estimate that growth has continued at a rate of approximately 5%.
Mainly in North America, customer transactions are increasing through a joint purchasing organization, and building a sales system that responds to this kind of change
can lead to sales growth.
With regard to products, overseas manufacturers of disposable endoscopes havebeen working to establish themselves. At the present time, however, they are stillsome way away from replacing conventional endoscopes. However, we predict thatthe presence of disposable endoscopes will rise in the medium to long term.

Market Share (Mar. 2020)HOYA Position and Market ShareWith its strengths lying in high image quality, ultrasonic endoscopes and small-diam-

B Company

eter endoscopes that strike a balance between image quality, exterior diameter, and

HOYA
No.2

channel size, HOYA holds the No. 2 position in the industry.
HOYA Outlook

A Company

HOYA continues to secure stable earnings in Europe, which accounts for about 50%
of total sales, and strives to achieve growth by boosting sales activities in APAC andthe Americas.
(HOYA estimate on a value base)

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While steadily engaging in products for gastrointestinal devices, the main battlefieldin the flexible endoscope market, we will also seek product differentiation by developing treatment instruments that can be used in combination with endoscopes anddisposable endoscopes.

Intraocular Lenses for Cataract Surgery
Business Overview
In this field, we perform research and development, manufacturing, and sales of intraocular lenses (IOLs) for cataract surgeries and ophthalmic medical devices.
Cataracts are very likely to occur in people of advanced years, and are the largest
cause of vision loss in people around the world. IOLs are manmade medical devices
implanted inside the eye to replace the eye’s natural lens when it is removed duringcataract surgery. This surgery makes it possible to recover clear eyesight that has been
lost due to cataracts.
At HOYA, together with a foldable intraocular lens that can be inserted with a small
incision of around 2.0 mm, we conduct R&D, manufacturing, and sales of injector
systems and ophthalmic medical devices that make for safe cataract surgeries thatcan be performed smoothly.
Supply Chain

Component manufacturer

Lens manufacturer

Customer: Hospital, agency

Sales by Region
By region, sales in Japan are close to 50%.

Sales by Region (Mar. 2020)

AmericasMarket Conditions
In line with the aging of society in locations throughout the world, rising needs forminimally invasive medical treatments and other factors, the market is, on a volume
basis, maintaining a growth rate in the lower half of the single-digit range.

Europe,Middle East,
AfricaOn a monetary basis, growth in high-end products—such as for corrective lenses for
astigmatism and progressive lenses to correct presbyopia—are driving overall expansion in the market, which continues to undergo mid-single-digit growth.
HOYA Position and Market Share
Owing to the product competitiveness of Vivinex™ (introduced in the market in2015), a product with few side effects that is easily implanted into the eye and hasreceived high post-surgery evaluations, our sales in Europe continues to grow at apace that is significantly above the market.
HOYA is steadily increasing its market share and currently holds the No. 3 place inglobal terms.
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Asia/
OceaniaJapan

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Market Share (Mar. 2020)HOYA Outlook
We will expand customer reach by bolstering the sales workforce in regions in which
we already have sales bases, while entering into new regions one by one, whether
directly or indirectly (collaboration with sales agents), and aggressively launch new

Otherproducts in pursuit of higher sales and earnings.

A Company

We will also seek to generate synergies with U.S.-based Mid Labs and Germany-based
Fritz Ruck acquired in January 2019, whose product lineups cover devices used in cataract surgeries, etc.

C Company
HOYA
No. 3

B Company

Furthermore, in China, where the market is expected to expand in the future, weestablished a joint venture company with our existing partner and distribution agent
GeMax in May 2020, to further increase sales by steadily absorbing demand in China.

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HOYA INTEGRATED REPORT 2020

Review of Operations

Information Technology Segment

Impact of the COVID-19 Pandemic• There has been no significant impact of COVID-19 on demand.
• There is a possibility of an increase in demand for mask blanks for semiconductors and substrates for hard disk drives (HDDs)
due to an increase in investments related to 5G and data centers driven by society’s accelerated shift to the online world
Prospects for recovery in demand after
relaxation of activity restrictions

Manufacturing

Customer demand

Preprocessing plant in Malaysia was temporarily closed.
(Already operating.)

Demand for final products
targeting the consumer
market has declined, but
demand for development ofleading-edge products has
been steadyNo impact.
Strong growth is expected.

Photomasks for
FPD/LSI

Production has not been
impacted in general.

Demand has not been impacted and is steady.

No impact.
Steady growth is expected.

Demand for 3.5-inch substrates has increased at data
centers due to remote work,etc.

No impact.
Steady growth is expected.

Substrates for
HDDs

New plant in Laos had been
temporarily closed due tolockdown but already resumed operating.
Disruptions in supply chain
for HDDs for PCs have been
observed.
Production has not been
impacted in general, despite
temporary closure of a plantin China.

Demand for lenses for digital
cameras, single-lens reflex
cameras and mirrorless cameras has decreased due tofewer opportunities to takephotos.

Demand is expected to recoveralong with resumption of travel,
events, etc.

Mask blanks forsemiconductors

Imaging-related
products

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Electronics(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please referto this section for further information.)

Mask Blanks for Semiconductors
Business Overview
In this business, we perform research and development, manufacturing, and sales ofmask blanks for semiconductors.
Critical in the semiconductor fabrication process, photomasks are the master plates
used to transfer a semiconductor’s intricate and complex circuit pattern onto a semiconductor wafer, and mask blanks are the raw material used for photomask manufacturing.
Because photomasks are created for each individual circuit pattern, mask blanks are
essential to new products developed by semiconductor manufacturers, foundries,
and other HOYA customers, and in the R&D stage of new manufacturing technologies such as those of extreme ultraviolet (EUV) lithography.
Supply Chain

Raw material
manufacturer

Mask blanks manufacturer

Semiconductor manufacturer,
foundry

Note: In some cases product goes via photomask manufacturer.

Market Conditions
The semiconductor market, which experienced negative growth as a whole in 2019
due to falling memory prices, is on a recovery trend. In 2020, the market is expected
to grow on the back of such factors as the full-fledged roll-out of 5G and the recovery
of investments in data centers, but caution needs to be paid to the situation given
the impact of COVID-19 and the rising tension in U.S.–China relations, among others.
On the other hand, semiconductor manufacturers and foundries are conducting active research and development activities focusing on the further miniaturization ofelectronic circuits using extreme ultraviolet (EUV) lithography, a next-generation manufacturing technology.

Market Share (Mar. 2020)

Sales of blanks are primarily driven by the research and development demand of customers as they are necessary for each different circuit design.

Other

HOYA Position and Market Share
Putting to use our core technologies of glass polishing and thin film technology has

A Company

enabled us to capture a large share of the market over the long term.

HOYA No. 1
Moreover, we have continued to conduct EUV blanks research for nearly 20 years,
and have demonstrated a firm presence in this field which has exceptionally highhurdles to clear for entry.

(HOYA estimate on a value base)

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For HOYA, opportunities will continue to rise as we advance EUV lithography technology and expand market share.
HOYA Outlook
Along with the advance of miniaturization in semiconductors, it appears that demand
for mask blanks for EUV lithography will continue to be strong in the fiscal year ending March 31, 2021 and beyond.
Sales of HOYA mask blanks for EUV lithography
and number of EUV scanners installed (volume)

Semiconductor Market and HOYA's Growth Rate（%）

HOYA BLANKSINSTALLED SCANNER

30

20

10

0

-10
2015

2016

2017

2018

2019

2020
(Year)

2016

Rate of growth in the semiconductor market

2017

2019
(Year)

HOYA
Reference: World Semiconductor Trade Statistics

Mask blank sales are difficult to accurately predict due to the dramatic fluctuations
that occur in line with customers’ development speeds, and also because they are
not consumables and are not necessarily linked to movements in the semiconductor
industry as a whole. However, sales of products for EUV applications are expected to
grow at a rate of around 50%.
Based on this demand forecast, we expanded the manufacturing line for mask blanks
for EUV lithography and launched the operation of a new manufacturing line in
2020.

Photomasks for FPD Manufacturing
Business Overview
HOYA conducts research and development, manufacturing, and sales of photomasks
used for manufacturing FPDs*1 such as LCD*2 and OLED*3.
When manufacturing FPDs for TVs, smartphones, laptop computers, and other devices, photomasks for FPD manufacturing are used as the master plates to transfer thecircuit pattern onto the substrate.
*1 FPD: Flat Panel Display*2 LCD: Liquid Crystal Display*3 OLED: Organic Light-Emitting Diode

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Supply Chain

Raw material manufacturer

Photomask blanks andphotomasks manufacturer

Panelmanufacturer

HOYA sources the substrate from raw materials manufacturers, and on that substrateperforms polishing, deposition, and resist applications (blanks manufacturing). Whenthe manufacture of the blanks is completed, HOYA conducts circuit pattern drawing,developing, etching, and resist stripping and cleaning, and delivers it to panel manufacturers (photomask manufacturing).

Sales Composition
by Application (Mar. 2020)

Sales Composition by Application
The ratio of sales by application is stated as follows. The end-product market for
smartphone applications continues to grow, and this seems to have come to accountfor the largest proportion.
In addition, sales for automotive applications are expanding, it became the propor-

OthersSmartphonetion next to TVs.

Automotive

Market Conditions

TV

In the fiscal year ended March 31, 2020, the market of photomasks for FPD manufacturing as a whole expanded owing to the growth in the sixth generation for
smartphones (LTPS-OLED/LCD), mainly in China.
Market expansion is expected to continue going forward, driven by the operationof Gen.6 for the manufacturing of high-resolution panels (resolution over 300 ppi)

Market Share (Mar. 2020)

mainly for smartphones, as well as Gen.10.5.
With regard to regions, it appears that continued expansion will occur in the ChineseOthermarket where new factory construction is ongoing.
HOYA Position and Market ShareHOYA possesses expertise in high-precision products, and holds the top-class market share.
HOYA Outlook

C Company

HOYA

A Company

B Company

We will strive for steady business growth focusing on high-precision Gen.6 products
where there are future prospects for growth and on the Chinese market in term of(HOYA estimate on a value basis)

geographic region.

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Panel Generations
FPD (LCD, OLED, etc.) manufacturing lines are categorized by generation, which corresponds to mother glass size. Every year, the size of mother glass becomes progressively larger due to the upsizing of FPD in line with increasingly big screens, mainly
for TVs, and, in order to enhance productivity, because it is effective to increase thenumber of panel configurations per one sheet of mother glass.

Glass Substrates for HDDs
Business Overview
In this area, HOYA conducts research and development, manufacturing, and salesof glass substrates for hard disk drives (HDDs). HDDs are used as recording media in
laptop computers and servers.
Since HOYA’s full-scale entry into the 3.5-inch market for near-line servers in the fiscal
year ended March 31, 2018, production numbers have rapidly grown.
Supply Chain

Raw material
manufacturer

Substrate manufacturer

Media manufacturer

HDD manufacturer

From raw materials manufacturers, HOYA sources substrate raw materials, which we
process in ways such as making it into a disc shape, enhancing its shock resistance,and polishing. After processing, we deliver this substrate to the media manufacturer
where magnetic film is applied, among other film-forming processes, and it undergoes burnishing (final polishing) and other treatments before being shipped. In harddisk manufacturing, the HDD manufacturer assembles the hard disk, head, and othercomponents, tests the completed product, and then ships.
* Hard disks may also be manufactured by the HDD manufacturer.

2.5-Inch Substrates Sales Composition by Application
The sales composition ratio of our 2.5-inch substrates, by application, is as the rightfigure.

2.5 Inch Substrates
Sales Composition by Application(Mar. 2020)

Other
From the fiscal year ended March 31, 2018, we commenced mass production of
3.5-inch glass substrates, as these are expected to see an expansion of demand in
the future.
The 3.5-inch substrates we produce are used in HDDs for near line (NL) servers that
perform such functions as backup in data centers.
Sales of the 3.5-inch substrates are steadily growing, and by the fourth quarter of the
fiscal year ended March 31, 2020 had expanded to 39% of business overall.

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Games
Mission criticalservers

Laptopcomputers

External
HDDs

HOYA INTEGRATED REPORT 2020

Market Conditions
In the fields of laptop computers, mission critical servers, and other products, the2.5-inch HDD market is being replaced by solid state drives (SSDs), which have fasterdata read/write speeds. SSDs were used in about 70% of the notebook PCs shippedin the fiscal year ended March 31, 2020, and the percentage of SSDs is expected tocontinue to increase steadily in the future.
On the other hand, in the 3.5-inch HDD market, NL servers, having a comparatively
low access frequency with backup applications, predominantly use HDDs due to theircost advantages over SSDs. Although investments in facilities associated with data
centers by large-scale cloud service vendors fluctuate significantly even in the shortterm, a significant market expansion is expected in the long term as data generation
volumes expands throughout the world.
HOYA Position and Market Share
Currently, all 2.5-inch substrates are made of glass. As the sole glass substrate manufacturer in the market, HOYA supports the HDD industry behind the scenes.
In the 3.5-inch substrate segment, products made of aluminum used to completely
dominate the market based on their price advantage. However, our glass substrate

3.5-inch Substrates for
HDDs Market Share (Mar. 2020)

HOYA(glass)products are now being adopted for HDDs as they are highly rigid and can increase
the number of mounting disks by thinning the disks, and their market share in volume terms has risen to 20% (and 30% speaking only of our shares for HDDs usedin NL servers). As the storage capacity of HDDs expands, our market share is also
expected to expand.
HOYA Outlook

Aluminum
A社
substrates
manufacturers(HOYA estimate on a value base)

Although we expect solid demand for external HDDs, sales of 2.5-inch substrate
products, primarily for laptop computers, mission critical servers, and game consoles,
are expected to decline by being replaced by solid state drives (SSDs).
For 3.5-inch substrate products, an increase in the adoption of HDDs equipped withHOYA products by cloud service providers is expected to lead to sales growth.
In the medium to long term, we anticipate growth of 3.5-inch substrate products that
more than compensate for the contraction of 2.5-inch substrate products. We will
utilize the new plant in Laos that manufactures 3.5-inch substrate products to meetthe increase in demand.
Potential for glass substrates in the 3.5-inch market
In response to the expansion of data volume and the storage volume generated
worldwide, HDD manufacturers are continually introducing in the market new products with higher data capacity per HDD.
The increase in data capacity per HDD has been realized by increasing the recording
density or area of the disk, but, at present, the development of technologies designed
to improve recording density is stagnating, and the expansion of the recording area
remains key to capacity expansion.
In the 3.5-inch market, the disk material is now mainly aluminum alloy. However,

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since a further increase in area can be realized by increasing the number of mounting
disks by thinning the disks, it is becoming necessary to use glass instead of aluminumalloy as the former has higher rigidity and allows for more thinning. More specifically,
after the point where the number of disks mounted in an HDD reaches 10 (substrate
thickness: 0.5 mm), glass substrates are required (rigidity of glass and aluminum alloyin terms of Young’s modulus are 95 GPa and 71 GPa, respectively).
In the event that HAMR (Heat-Assisted Magnetic Recording) is realized and commercialized, glass substrates, which have excellent heat-resistance characteristics, would
be the only option because HAMR would entail heat at the production process ofmagnetic film (the heat resistant temperature of glass is 691 degrees Celsius, whereasthat of aluminum alloy is 290 degrees Celsius).

Imaging-related Products(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please referto this section for further information.)

Imaging-related Products(Including optical glass, optical lenses, camera lens units, and lasers)
Business Overview
In this area, we conduct research and development, manufacturing, and sales of opticallenses for a variety of cameras, as well as for optical glass materials.
Supply Chain

Raw material
manufacturer

Manufacturer

Lens manufacturer

Cameramanufacturer

HOYA sources materials from optical glass material manufacturers, conducts compound and solution treatments, manufactures lens materials and lens products, anddelivers to lens and camera manufacturers.

Optical glass materials/
optical lenses

Sales Composition by Application
The ratio of sales by application is as the right figure.
Digital camera-related items for compact digital cameras and for interchangeable
lenses that had previously made up the majority of sales are trending down, and now
account for no more than 40% of total sales.
As for products for security cameras, which is a new area of application, the sales
composition increased from the previous fiscal year since demand for aspherical glass
lenses is increasing due to the increasing adoption of higher-pixel imaging.

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Sales Composition by Application(Mar. 2019)60

Copyright ©2020 HOYA GROUP

Compact
Optical filters digital cameras
and laser
oscillators Interchangeable
lensesfor SLRs
OthersSecuritycamerasCar-mounted
camerasHOYA INTEGRATED REPORT 2020

Market Conditions
Compact digital cameras are increasingly being replaced by smartphones, and theirdecline is ongoing.
The market for interchangeable lenses is also shrinking due to the decrease in salesof interchangeable-lens cameras.
The market for security cameras is growing steadily, especially in China. Lately, the
COVID-19 pandemic has given rise to a new trend to utilize security cameras for disease control, so demand is expected to expand.
HOYA Position and Market Share
From research and development of optical glass composition to manufacturing offinished products of lenses, HOYA takes a consistent approach to its activities while

Share of Aspherical
GMO lenses(Digital Camera-Related)(Mar. 2019)building a structure that makes possible the mass production of an array of products.
HOYA maintains a high market share with its exceptional skills in aspherical glass
molded (GMO) lenses.
GMOs are formed by directly pressing optical glass that has been subjected to high

Other

HOYA

temperatures to make it malleable. These are optical lens products that require nopolishing, and possess an excellent ability to correct distortions. Enabling a high angle
design, the number of lenses used in optical systems can be reduced, and this contributes to compact, lightweight, and highly functional end-product cameras.
HOYA Outlook
As for products for digital cameras, the fall in sales of products for compact digital
cameras and interchangeable-lens cameras is expected to continue, as higher-quality/
multi-lens imaging is increasingly realized by smartphone cameras.
On the other hand, products for security cameras, which are new applications, areexpected to grow steadily due to the increasing adoption of higher-pixel imaging andthe increasing number of security cameras installed.
On top of this, we are enhancing our sales activities for the adoption of HOYA products in advanced driver assistance systems (ADASs), facial authentication for mobile
devices and Augmented Reality (AR) applications. In particular, their potential in themarket of car-mounted cameras for image recognition in ADASs looks promising;we expect them to make a significant contribution to our business results when thepractical application of this technology goes into full swing in a few years’ time.

HOYA INTEGRATED REPORT 2020

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Copyright ©2020 HOYA GROUP(HOYA estimate on a value base)

HOYA INTEGRATED REPORT 2020

Financial Review

Scope of Consolidation
As of March 31, 2020, the HOYA Group consisted of the HOYA CORPORATION, 145 consolidated subsidiaries (9 of which aredomestic and 136 overseas) and 18 affiliates (4 of which are domestic and the other 14 overseas).
The HOYA Group has adopted a business management structure where the Life Care and Information Technology business segments control subsidiaries around the world based on their respective responsibilities. Regional headquarters in the Americas,
Europe and Asia support business operations by strengthening relationships with countries and areas in the respective regions,such as by providing legal support and conducting internal audits. The HOYA Group has its Financial Head Quarters (FHQ) at its
Europe Regional Headquarters (Netherlands).

Adoption of the International Financial Reporting Standards
Beginning with the fiscal year ended March 31, 2011, the HOYA Group prepares its consolidated financial statements andother documents in compliance with the International Financial Reporting Standards (IFRS) pursuant to paragraph (1), Article
120 of the Ordinance on Company Accounting. With respect to reportable segments presented in the overview of operation
by business category, the HOYA Group divides its business into three reportable segments, based on IFRS. These segments are
Life Care, Information Technology, and Other Businesses.
The Life Care segment deals in health care related products such as eyeglass lenses and contact lenses, as well as medical
related products such as intraocular lenses and medical endoscopes. The Information Technology segment handles electronics
related products used for the production of semiconductors, liquid crystals and hard disk drives (HDDs), and imaging related
products such as digital camera lenses. The Other Businesses segment offers mainly information system services.

HOYA INTEGRATED REPORT 2020

62

Copyright ©2020 HOYA GROUPHOYA INTEGRATED REPORT 2020

Review of Performance in the Fiscal Year Ended March 31, 2020
Sales for the consolidated fiscal year under review amounted toSales

576,546 million yen, a 1.9% increase year on year.
(Billions of yen)

Profit before income tax increased compared to the preceding consolidated fiscal year by 1.8% to 147,268 million yen, and profit for
the year decreased by 6.1% to 114,587 million yen. The profit before tax ratio was 25.5%, equivalent to the ratio of 25.6% in thepreceding consolidated fiscal year.

600
500

535.6

565.8

576.5

Mar.
2019

Mar.
2020

478.9

400
300

Sales in the Life Care segment were level compared to the preceding
consolidated fiscal year at 375,049 million yen. Segment profit decreased by 10.2% to 62,230 million yen.

200
100
0
Mar.
2017

Sales of eyeglass lenses in Japan decreased due to a drop in sales

Mar.
2018

brought about by recoiling demand subsequent to the consumption
tax hike having gone into effect. The Company’s sales overseas werePretax profit, Net profit attributableto owners of the company

adversely affected by a situation where respective European governments have been placing restrictions on economic activity since Marchwith the aim of curbing the infectious spread of COVID-19. Prior to(Billions of yen)

144.7

150

that, however, sales were on par with the preceding consolidated fiscal
year due to our having managed to achieve growth surpassing that

124.2
120

cy basis. On a yen basis, sales decreased compared to the preceding
consolidated fiscal year due to adverse effects of foreign exchange.
Sales of contact lenses increased compared to the preceding consolidated fiscal year as a result of our having captured last-minute

114.4

99.5

of the market. As a result, the business secured overall sales on parwith those of the preceding consolidated fiscal year on a local curren-

122.1

110.8

147.3

86.7

90

60

30

0

demand ahead of the consumption tax hike, in addition to factors

Mar.
2017

Mar.
2018

Mar.
2019

that included an increase in new customers caused by enhancements

Pretax profit

made to existing “Eyecity” retail stores, along with higher sales of

Net profit attributable to owners of the company

Mar.
2020

value-added products and new store openings.
Sales of medical endoscopes in Japan remained on par with those ofProfit margins

the preceding consolidated fiscal year. Meanwhile, sales overseas in-(%)

creased due to strong results largely attributable to positive effects of30

new products. Overall sales in the business increased on a local currency basis, but decreased on a yen basis compared to the preceding

25.6

25.5

25

consolidated fiscal year due to adverse effects of foreign exchange.

23.2

23.1

21.6

Intraocular lenses for cataracts achieved strong sales in Japan as aresult of having launched new products. Sales were also strong over-

19.8

20
18.1

seas given the contribution to sales of our highly competitive prod-

18.6

uct Vivinex and positive effects of business acquisition. As a result,overall sales in the business increased substantially compared to thepreceding consolidated fiscal year.

15

Mar.
2017

Pretax profit ratio

Sales in the Information Technology segment increased by 4.9%
HOYA INTEGRATED REPORT 2020

63

Net profit ratio

Copyright ©2020 HOYA GROUP

Mar.
2018

Mar.
2019

Mar.
2020

HOYA INTEGRATED REPORT 2020

compared to the preceding consolidated fiscal year to 196,731 million
yen, and segment profit increased by 9.4% to 88,135 million yen.

Efficiency(%)

25

Sales of mask blanks for semiconductors increased substantially com21.2

pared to the preceding consolidated fiscal year as a result of customer’s active R&D and having captured demand for embarking on mass

19.2

20

production of leading-edge products including mask blanks for EUV

18.0

17.3

(Extreme Ultraviolet) lithography.

17.3

15.1

15

14.6

With regard to photomasks for flat-panel-displays and semiconductors, sales of photomasks for semiconductors decreased due to astagnating market for external sales of photomasks. However, sales

12.5
10

Mar.
2017

of photomasks for flat-panel-displays increased as a result of ourhaving captured demand in the still-growing Chinese market. As a

ROE

Mar.
2018

Mar.
2019

Mar.
2020

ROA

result, overall sales in the business increased compared to the preceding consolidated fiscal year.
Regarding glass substrates for HDDs, sales of 2.5-inch substrates
decreased amid a progressive shift to SSDs (solid state drives) from
HDDs (hard disk drives) used with respect to laptop computers andother finished products. We achieved a substantial increase in salesof 3.5-inch substrates, which are poised for substantial growth going forward, as a result of having made progress in adopting such
substrates for use in nearline server applications by data center end
users. As a result, overall sales in the business increased compared tothe preceding consolidated fiscal year.
Sales of lenses for cameras decreased compared to the preceding
consolidated fiscal year as competition from smartphones continued
to bring about a decline in sales of both lenses for compact digital
cameras and interchangeable lenses .
(For further information on performance by product, please refer to the Review ofOperations section.)

Financial Position
Total assets at March 31, 2020 increased by 47,093 million yen

Total assets, Equity attributableto owners of the company

from the end of the preceding consolidated fiscal year to 811,008(Billions of yen)million yen.

1,000

Non-current assets increased by 34,035 million yen to 289,836 million yen. This is primarily due to an increase of 41,225 million yen
in property, plant and equipment-net despite a decrease of 4,512

763.9

800
659.6
600

650.6

510.9

623.2

811.0
645.0

526.2

million yen in intangible assets.
400

Current assets increased by 13,058 million yen to reach 521,171
million yen. This is primarily due to an increase of 24,584 million
yen in cash and cash equivalents despite a decrease of 7,507 million yen in trade and other receivables.

200

0

Mar.
2017

Total assets

HOYA INTEGRATED REPORT 2020

64

Copyright ©2020 HOYA GROUP

Mar.
2018

Mar.
2019

Mar.
2020

Equity attributable to owners of the company

HOYA INTEGRATED REPORT 2020

Total equity increased by 1,558 million yen to 629,265 million yen.
This is primarily due to an increase of 58,599 million yen in retained
earnings despite decreases of 20,329 million yen in non-controlling

Ratio of equity attributableto owners of the Company
(%)

100

interests, 19,644 million yen in acquisition of treasury shares, and16,074 million yen in accumulated other comprehensive income.

90

Equity attributable to owners of the Company increased by 21,886
million yen to 645,042 million yen.

80

Liabilities increased by 45,535 million yen to 181,743 million yen.

70

80.9

81.6

Mar.
2018

Mar.
2019

79.5

77.5

This is primarily due to increases of 13,568 million yen in interest-bearing long-term debt due to an increase in lease liabilities and12,986 million yen in other long-term financial liabilities.

60

Mar.
2017

Mar.
2020

The ratio of equity attributable to owners of the Company to total
assets at March 31, 2020 decreased by 2.1 percentage points fromthe end of the preceding consolidated fiscal year and reached to79.5%.

Cash Flow
Cash and cash equivalents at the end of the fiscal year ended March
31, 2020 increased by 24,584 million yen (including the effect ofchanges in exchange rates of 5,930 million yen) from the end of
the previous fiscal year to 317,982 million yen.

Cash flow(Billions of yen)

200

163.4

146.6

135.5

150
107.7

Net cash provided by operating activities increased by 16,777 million

100

yen from the previous fiscal year to 163,366 million yen. This was

50

mainly attributable to profit before tax of 147,268 million yen (anincrease of 2,611 million yen in inflow from the previous fiscal year),0

depreciation and amortization of 34,374 million yen in (an increase-50

of 7,958 million yen in inflow), an increase of 4,186 million yen in-100

trade and other accounts receivable (an increase of 7,252 million yen
in inflow), and an increase of 5,152 million yen in trade and otheraccounts payable (a decrease of 167 million yen in outflow).

-150

-27.5
-64.3

-32.8
-68.5

Mar.
2017

Operating cash flow

Net cash used in investing activities decreased by 22,760 million yen
from the previous fiscal year to 47,383 million yen. This was mainly
attributable to purchase of property, plant and equipment of 45,177
million yen (an increase of 18,505 million yen in outflow from theprevious fiscal year), payments for time deposits of 2,367 million yen(a decrease of 15,856 million in outflow).
Net cash used in financing activities increased by 52,676 million yen
from the previous fiscal year to 85,468 million yen. This was mainly
attributable to payments for purchase of treasury shares of 44,283
million yen (an increase of 44,281 million yen in outflow from theprevious fiscal year) and dividends paid of 34,042 million yen (a decrease of 99 million yen in outflow).
65

-47.4
-85.5

-117.3Financing cash flow

HOYA INTEGRATED REPORT 2020

-70.1

Copyright ©2020 HOYA GROUP

Mar.
2018

Mar.
2019
Investing cash flow

Mar.
2020

HOYA INTEGRATED REPORT 2020

Capital Expenditures/Depreciation and Amortization
The total capital expenditures of all operations of the HOYA Group

Capital expenditures,
Depreciation and amortization

amounted to 54,148 million yen during the consolidated fiscal year
ended March 31, 2020, an increase of 24,944 million yen over the(Billions of yen)60

preceding consolidated fiscal year.

54.1

50

In the consolidated fiscal year under review, investment in the Life Carebusiness increased 30.5% to 24,944 million yen year on year, and investment in the Information Technology business increased 191.3%

45

34.5
30.1

30

to 28,939 million yen year on year, which account for 46.1% and

22.9
20

53.4%, respectively, of the total capital expenditures by the Group.

34.7
29.2

27.5

19.3

10

The investment was covered by internally generated funds.
0

During the consolidated fiscal year under review, in the Life Carebusiness, the HOYA Group invested in production facilities particu-

Mar.
2017

Mar.
2018

Capital expenditures

Mar.
2019

Mar.
2020

Depreciation and amortization

larly of its second plant in Vietnam with the aims of increasing capacity of production plants primarily for eyeglass lenses, enhancing
efficiency, and optimization.
In the Information Technology business, the HOYA Group madeinvestments mainly in production facilities for products occupying
growth areas such as mask blanks for semiconductors for EUV lithography and glass substrates for HDDs used in data centers.
Depreciation and amortization (including impairment losses) for the
fiscal year under review was 34,674 million yen, 26.0% higher thanin the previous fiscal year.

Policy Concerning Decisions on Appropriation of Retained Earnings, etc.
The HOYA Group aims to maximize its corporate value by develDividend per share, Payout ratio

oping businesses globally and changing the business portfolio toconform to the changing times and environments.
With respect to capital policy, our basic policy is to adopt decisions
that strike the optimum balance between enhancing internal reserves for the future growth of the HOYA Group and returning

(Yen)

(%)

100

50

80

40

60

30

40

20

20

10

profits to shareholders, while pursuing the optimum capital structure for the Hoya Group that includes financial soundness and capital efficiency.
In addition, by promoting management that gives priority to capitalefficiency by realizing maximum profitability from the assets entrusted to us by the shareholders, and taking further steps toward
management that gives priority to SVA (Shareholder Value Added),

0

Mar.
2017

Dividend per share

which is measured as the profit generated by the Hoya Group minus the cost of capital, i.e., the profit expected by shareholders, we
aim for “Maximization of Corporate Value.”
HOYA INTEGRATED REPORT 2020

66

Mar.
2018

Copyright ©2020 HOYA GROUP

Mar.
2019
Payout ratio

Mar.
2020

0

HOYA INTEGRATED REPORT 2020

With respect to internal reserves for future growth, resources will be
preferentially appropriated to investment in the growing businesses for market share expansion, entry into untapped markets, andnurturing and obtaining new technologies. In addition to growthof existing businesses, we will also proactively pursue possibilities
including mergers and acquisitions to further enrich our businessportfolio. As for the Information Technology segment, which has
been positioned as a steady earnings business, we will continue tomake capital investment that further reinforces the technologicalabilities that become the source of competitiveness, and development investment that will contribute to developing next-generation
technologies and new products.
With respect to returning profit to shareholders, our policy is toproactively return profit to shareholders through using excess cash
for dividends and the share repurchases while giving comprehensive consideration to the operating performance in the consolidated fiscal year under review, level of internal reserves, and the medium to long term demand for funds and capital structure, among
other factors.
The annual dividend, including the interim dividend of 45 yen per
share that was already paid, was 90 yen per share. The consolidated dividend payout ratio was 29.7.
In addition, we repurchased a total of 46,700 million yen in treasury
stock between May 2019 and April 2020.

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67

Copyright ©2020 HOYA GROUP