HOYA REPORT2014
CEO and COOs talk about

HOYA today and tomorrow

HOYA REPORT 2014

There is no end to our quest
for HOYA’s ideal portfolio
President & CEO Hiroshi Suzuki

Increase in sales and profit in real terms in fiscal 2013
During fiscal 2014 (from April 1, 2013 to March 31, 2014), the HOYA Group increased its sales
and profit in real terms and made further progress inadjusting its business portfolio to emphasize the Life Caresegment. At the same time, in my view, fiscal 2014 was theyear when we sharply defined the issues we face forachieving what we aim to be in the future.
HOYA´s consolidated sales amounted to ¥427.6 billion, up
15% year-on-year, while profit before tax decreased by 6% to ¥85.5 billion and net profit
decreased by 17% to ¥60.1 billion. Operating profit from regular sales activities actually increased
by 38% y-o-y, excluding one-time profits, such as ¥32.2 billion insurance income relating to theflood damage in Thailand and ¥2.2 billion gain on step acquisitions, associated with theacquisition of shares of an eyeglass lens manufacturing and sales subsidiary in Brazil, present
Optotal HOYA Limitada.
The Life Care segment, which is designated as a growth sector for HOYA, recorded sales of¥265.5 billion, up 27% year-on-year. The Eyeglass Lens division reported a large increase insales, supported by the recovery from the impact of the floods in Thailand and the transfer ofbusiness from Seiko Epson Corp. In addition, segment sales grew strongly due to the
combination of growth in sales of contact lenses and endoscopes and the impact of yen
depreciation. Segment pretax profit amounted to ¥49.7 billion, marking a decline of 23% due toa reaction to the booking of extraordinary profit a year earlier, but profit from regular sales
activities increased by 55% and the segment profit margin improved to 19.3% from 15.8% in theprevious year.
Meanwhile, the Information Technology segment recorded sales of ¥159.3 billion, down 1%.
While sales of products for smartphones and tablet PCs were firm, sales of products for notebook
PCs and digital cameras decreased as demand for those final products was sluggish.
Nevertheless, as a result of our speedy structural reform in anticipation of the market shrinkage,
segment pretax profit amounted to ¥35.9 billion (up 13%) and profit from regular sales activities
increased by 18%, improving the segment profit margin to 22.5% from 18.8% in the previous year.
Please refer to the messages of segment COOs for further detail on segment results.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
The Life Care segment has overcome challenges
and aim to accelerate growthIn fiscal 2014 the Life Care segment achieved 27% sales growth. I personally feel that we
could have achieved higher growth. That is, the Eyeglass Lens division, which wassignificantly affected by the massive flooding in Thailand, and the Intraocular Lens (IOL)
division, which suspended shipments of some products and voluntarily recalled them, haveovercome their respective challenges and are on a recovery path. Looking at the overall Life
Care segment, however, I recognize that we have not made as much progress as plannedin terms of coverage (geographical and market), which is one of our major issues.
For example, the Eyeglass Lens division focused so much on recovering the capacity
utilization rate, which dropped as a result of the flood, that it failed to adopt initiatives for thegrowth. We need to swiftly expand further in emerging markets with significant growthpotential. In case of the Medical Endoscope division, some growth was achieved, which,however, was partly attributable to the market growth and the impact of yen depreciation. In
terms of expansion of coverage, I feel that we could have done it more speedily. In the midstof technological innovation in endoscopic capabilities with its focus being shifted from thediagnostic area to the therapeutic area, endoscopes have high growth potential as an
imaging platform. In addition, the Intraocular Lens (IOL) division has just begun to expand
globally. Each of the Life Care divisions has merely a 10-20% global share. By broadening
our coverage in markets and customer segments that have been untapped, we intend to
give high priority to add to our top-line growth.

The Information Technology segment has become astable profit generator
In our view, the Information Technology segment has passed a turning point of growth andhas entered a long, mature stage. With regard to mask blanks for semiconductors andphotomasks for liquid crystal displays, for example, we may continue to experience sometechnological shift or innovation, such as a change in the structure of a chip, but I must saythat the industry itself has become matured.
Despite such a situation, substrates for HDDs or optical lens will never lose their critical role.
For many years, we have rigorously taken initiatives in enhancing competitiveness in the
Information Technology segment. I firmly believe that this segment will be secure as a stableprofit generator.

M&A activities complement coverage expansion
Having identified M&A as one of the effective tools to enhance our business portfolio, we are
aggressive in studying potential M&A targets, particularly in the Life Care segment, an area ofgrowth for HOYA. In the existing businesses, we look for M&A opportunities to expand
coverage into untapped markets, expand market shares, and acquire new products or new
technologies in the peripheral areas. This is because HOYA has not yet established a strong
position in the Life Care market, where growth can be reliably projected. We thus need firstand foremost to expand our shares and coverage. We believe that M&A activities would allow
us to accomplish that more speedily. Our M&A accomplishment in fiscal 2014 includes
making Wassenburg Medical Devices, a leading firm in automated endoscope reprocessors

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
(AERs), and Seiko Optical Products Co., Ltd. HOYA´sconsolidated subsidiaries. Both companies are expected toTargeted M&A Opportunities

greatly contribute to reinforcing our existing businesses.
Let me add that the mature markets of the Information

Expand coverage in
untapped markets

Technology segment also present M&A opportunities for us toraise market shares and enhance businesses.

Expand market share in
existing markets

In fiscal 2014, we could not accomplish as much in M&A as we
initially planned in the Life Care segment, partly because
valuations were obstacles. From the viewpoint of investing shareholders' capital in areas

Acquire new products or
new technologies

which would definitely generate return, we remain diligent and careful in considering M&A
opportunities now and will be so in the future.

Aim to be “a big fish in a small pond”
HOYA aims at sustainable growth by changing business formats in response to changes inthe times and the environment and by reinventing itself. Nevertheless, there is one thing wehave not changed since our foundation: Namely, our philosophy of being "a big fish in asmall pond." We focus on niche markets or products where we have special strength, workto establish a dominant advantageous position in each of them, and thereby maximize
profits. The Life Care segment may appear to be engaged in an immense market. However,segmentation into small slices has enabled us to select niche markets matching ourstrength (= small ponds) and become big in those niche areas (= acquire high market
shares). Globally, countries and regions may have different market structures, which may
require us to adapt business models accordingly. I believe that the HOYA Group is morethan ever required to accurately comprehend the environment and areas where we canprevail, and to accordingly execute our "a small fish in a big pond" strategy. In contrast, in
the Information Technology segment, we have already become a big fish in somebusinesses and can be able to survive even if the pond itself may shrink.

Further progress in the corporate governance structure
Enhancement of a corporate governance structure is another theme, which we haveemphasized for many years. At the Ordinary General Meeting of Shareholders of June 2014,

Board of Directors(Approved at the Ordinary General Meetingof Shareholders of June 18, 2014)

Mr. Yuzaburo Mogi (Honorary CEO and Chairman of the Board of Kikkoman Corporation),

Director(Independent)

Yukiharu Kodama

resigned as an outside member of our Board of Directors. Since 2001 when he assumed the

Director(Independent)

Itaru Koeda

post, he became chair of the Nomination Committee and had took a leading role in the Board.

Director(Independent)

Yutaka Aso

I am immensely appreciative of his enormous contribution of many years. HOYA has adopted

Director(Independent)

Yukako Uchinaga

the “company with committees” management system. The Nomination Committee,

Director(Independent)

Mitsudo Urano

comprised of six outside directors, selects candidates for director posts and submits

Director(Independent)

Takeo Takasu

Director

Hiroshi Suzuki

nominations to the General Meeting of Shareholders for approval. In order to enable theBoard to make an impact on the company, candidates for outside directors are required to bepersons who can express their valuable opinions on management issues and make an impact
thereby, on the basis of extensive experience in business management. One such person is
Mr. Takeo Takasu, former President and Representative Director of Namco Bandai Holdings
Inc., who was nominated and approved by our General Meeting of Shareholders in 2014. We
look forward to Mr. Takasu´s contributions to raising HOYA´s corporate value.

Copyright 2014 © HOYA CORPORATION

6 Outside Directors
1 Internal Director

HOYA REPORT 2014
Rewarding shareholders through dividend
hikes and share repurchase
As CEO, I recognize that an effective use of the cash component of our balance sheet is an
important challenge. In the past several years, we have actively but cautiously consideredvarious M&A opportunities, as M&A is one of the ways to grow our business. However, thehigh valuation of targeted companies tends to be a major obstacle and has caused us toachieve far less success than anticipated. In the coming years, we will keep looking forpossibilities and wish to fill in gaps in our business portfolio one by one.
There is no need to keep accumulating more cash than needed. In fiscal 2014, we raised theannual dividend from 65 yen in the previous year to 75 yen and executed a share repurchaseprogram with a maximum of 10 million shares and ¥30 billion. We forecast that the HOYA
Group´s amount of capital expenditures will be far less than the amount of depreciation in theforeseeable future, as the Life Care segment, due to the nature of its products, requires only
about one-third of the amount of capital expenditures of the Information Technology segment,
where we will minimize capital investments mainly for the purpose of maintaining advanced
technologies. Moreover, the Life Care segment is expected to generate stable and growing
sales and profit, which will allow us to remain cash-rich for some years. We plan to actively
allocate resources in M & A opportunities and R & D investments. Further, we intend to use
excess cash to reward shareholders, with appropriate timing.

Concluding message

HOYA has achieved many years of growth by constantly modifying its business portfolio andoffering products and services which satisfy the needs of the times. In fiscal 2014, the profit
which was steadily generated in the Information Technology segment was injected into theLife Care segment, which then became better prepared to expand coverage and accelerate
global growth. I feel strongly that our business portfolio has become closer to how it ought tobe. I am determined to keep managing the HOYA Group with a sense of speed.
HOYA is able to maintain its youthfulness and adapt to changes in the environment by keeping eachbusiness segment in as good condition as possible and by constantly shuffling and optimizing its
business portfolio. In this sense, there is no end to our quest for HOYA´s ideal portfolio.
As a person who was entrusted the precious assets of our shareholders, I am determined tomake my utmost efforts in managing the company. I thank you for your continuing support andunderstanding.
Hiroshi SUZUKI
President & CEO

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014

I am confident that
we can increase our businessgrowth potential
Executive Officer and Life Care COO

Girts Cimermans

Life Care businesses achieved revenue
and profit growth in real terms
The Life Care segment recorded revenue of ¥265.5 billion (up 27% year-on-year). The
eyeglass lenses business reported a large increase in revenue, supported by the recovery
from the impact of the floods in Thailand and the transfer of the business from Seiko Epson
Corp. In addition, segment revenue grew strongly due to the combination of growth in salesof contact lenses and endoscopes and the impact of yen depreciation.
Segment pretax profit amounted to ¥49.7 billion, marking a decline of 23% due to a reaction
to the booking of unusual profit a year earlier, but profit from regular sales activities
increased by 55%.

We expect steady long-term growth,underpinned by expansion of the global market
HOYA Life Care is well positioned to meet the needs of bothmature and emerging markets. The population in the mature
markets is aging. The middle class in emerging markets
expands, and drives demand for improved access tohealthcare as well as provides more spending power for highend products and services. Each of the Life Care divisions
provides a portfolio of products that meet the specificdemographic development and is thus helping patientsworldwide to lead healthy and comfortable lives.
The Life Care divisions work mainly in two care areas. In
particular, needs for products associated with eyes, namely,
eyeglass lenses, contact lenses and intraocular lenses, are likely to grow steadily with theincrease of aging population. In emerging markets improvement in the disposable income
allows more people to buy eyeglasses, or to buy more sophisticated eyeglasses that
better meet their vision correction needs. The population that requires vision correction is
projected to increase from 4.1 billion at present to 5.1 billion in ten years. Furthermore, as
the middle-income class population in emerging markets is estimated to grow from 1.8
billion to 4.9 billion by 2030, the worldwide population that requires vision correction is
projected to increase from here on.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
In the field of minimally invasive surgery, while the aging population drives demand for
healthcare, governments in many countries have started to take measures to reduce
medical expenditures as a part of overall drive to curb public spending. HOYA´sendoscopy products and intraocular lenses will contribute simultaneously to theenhancement of medical services and a reduction in medical costs, as a form of minimallyinvasive medical treatment. They are also generating strong expectations about
possibilities in the future. For example, early endoscopic diagnosis and early treatment
can significantly improve positive outcome of the treatment at a significantly lower costthan late stage intervention. Going forward, we believe the enhancement of the quality of
medical services and the reduction of medical costs as well as the ability to achieve these
two factors simultaneously will become increasingly important, and will further drive thedevelopment of minimally invasive surgery.

Aiming to grow at a higher rate than the market
for eyeglass lenses
The eyeglass lenses business posted an increase in revenue compared to the previous year
due to the recovery from the floods in Thailand in October 2011, the acquisition of new
customers, the effect of higher sales from the acquired Seiko Epson Corp. in February
2013, and the impact of the weaker yen. In contrast, pretax profit declined but this was
because, in the previous fiscal year, HOYA posted insurance income of ¥32.2 billion relating
to the flood damage in Thailand and one-time profits such as a ¥2.2 billion gain on step
acquisitions, associated with the acquisition of shares of an eyeglass lens manufacturing
and sales subsidiary in Brazil. Actual profit based on normal business activities increased
compared to the previous year.
The global eyeglass lens wholesale market is estimated to be growing at a rate of several
percent, but in the fiscal year under review, HOYA´s eyeglass lenses business achieved
sales growth that substantially outpaced this. This growth was driven by overseas
markets, which account for 80% of sales, including Europe, Asia, the United States, andSouth America.
The rate of profit growth, which temporarily declined due to the flooding in Thailand,
improved steadily throughout the year. This is mainly attributable not only to the recovery ofcustomers that were lost due to the Thai floods but also the maintenance of high factory
utilization rates through the second half of the year amid a sharp increase in transaction
volume stemming from the start of trading with new customers.
The global eyeglass lens market has become polarized between high-end products, suchas progressive lenses (PAL) that utilize advanced design technology and customized lenses
that are made to suit individual life styles, on one hand, and low-priced eyeglasses,
especially single-focus lenses, on the other. HOYA´s excellent optical design technologies
and coating technologies display strong competitiveness, particularly in the high-end
market. Moreover, by raising productivity in the manufacturing of progressive lenses tosingle-focus lenses, we are delivering products efficiently to customers around the world. In
the fiscal year ended March 31, 2015, we plan to construct a mass production plant(capacity expansion). In anticipation of demand growth associated with the global aging
population and economic growth in emerging markets, we intend to accelerate sales
expansion globally.

Copyright 2014 © HOYA CORPORATION

Ayutthaya plant in Thailand

HOYA REPORT 2014
Acquisition of eyeglass lens development
and manufacturing business from Seiko Epson
In February 2013, HOYA acquired an eyeglass lens development and manufacturingbusiness from Seiko Epson. At the same time, we progressively acquired shares of
Seiko Optical Products Co., Ltd., which sells Seiko brand eyeglass lenses, completed
the acquisition of a 50% shareholding as of March 31, 2014, and turned it into a
consolidated subsidiary of HOYA. Going forward, we will make use of HOYA´s global
manufacturing and sales network to expand sales of Seiko brand eyeglass lenses,
which have high worldwide recognition, into a global market. In manufacturing anddevelopment as well, there is great potential to combine each other´s technologies anddevelop them into new products.

Going forward, we will focus on expanding coverage
HOYA´s strengths in eyeglass lenses are its unique optical design technologies andworld´s top-class coating technologies. Another strength is our sales network, which has
global reach, and our efficient production system that supports it. In the Japanesemarket, we have displayed these strengths and already acquired a high market share, but
in overseas markets there are still many untouched markets such as Central and SouthAmerica and Eastern Europe. There is still also plenty of room to increase our market
share in developed countries. Going forward, while developing a direct sales organizationin untapped markets, primarily in overseas markets, we intend to expand our coveragewith the aim of acquiring new customers and boosting market share in developed
countries. Sustaining organic growth is one of our key priorities for this division.

Eyecity, HOYA’s chain ofcontact lens specialty stores, continues to growIn the contact lens business, sales volume increased due to the opening of new
Eyecity stores and stronger sales promotion at existing stores, while revenue grew
year-on-year in March owing partly to rush demand prior to the consumption tax
increase.
Japan´s contact lens retail market itself is not growing due to the low birth rate andaging population but HOYA has continued to expand its market share. A rise in the
average unit price per customer resulting from the development of high-value-added
products and services, including efficient advertising, sales promotion, the opening ofstores in good locations, and the introduction of the regular delivery service “Eyepassport”, contributed to the increase in revenue. We are also looking into expanding
into specialty stores, catering to the needs of a specific customer group. We haveopened, for example, a store aimed at women who are particular about their life styleand fashion in Kichijoji, an exclusive residential area in the suburbs of Tokyo.
Profitability is also showing a steady trend by benefiting from the reinforcement ofsales of high-value-added products and economies of scale, being a chain of contact
lens specialty stores with the largest number of customers in Japan.
The challenge going forward is to accelerate store openings in regional cities andsuburban areas of Japan where our coverage is low. Even in Japan, we believe there
are still sufficient areas to open new stores. In the fiscal year ended March 31, 2014,

Copyright 2014 © HOYA CORPORATION

Eyeglass lenses business of Seiko Epson Corp.

HOYA REPORT 2014
we opened 19 new stores on an annual basis, and this fiscal year, we plan to open
even more. While leveraging our No. 1 brand power in Japan and high market share,
we will focus on further expanding our store network by also considering mergers andacquisitions.

Medical endoscopy focused on the global market
In the medical endoscopy business, revenue increased year-on-year due in part to favorable
sales of new high-end products that were launched in the fall of 2012 and the impact of theweaker yen. The entire global medical endoscope market is said to be growing at a rate ofseveral percent, and HOYA achieved growth that surpassed the market in the year underreview. Nevertheless, as we are aiming for annual sales growth of 10% in this business, thisbusiness has by far not exhausted it´s potential.
Looking back on sales by region, the United States achieved sales growth of more than
10%. Sales of endoscopy systems and scopes, especially the mainstay EPK-i 5010 fordigestive endoscopy use, grew favourably. In Europe, sales were buoyant in major markets
such as the United Kingdom, Germany, and the Netherlands, but owing to decrease in

Top: EPK-i 7000

healthcare spending in Russia last year, sales in Europe as a whole remained flat year-on-

Under: Retro View (EC-3490TLi)

year. In the Asia-Pacific region, revenue rose on the back of brisk sales in China, South
Korea, and India. We established direct presence in China in 2012, and this investment
started to yield return. Our share in Japan is small, but in the fiscal year under review, we
adjusted out go-to-market strategy and achieved strong results.

Wassenburg Medical Devices
In November 2013, HOYA acquired majority share in Wassenburg Medical Devices, a Dutch
firm specializing in automated endoscope reprocessors (AERs). This allows us to provide
customers with a broader range of excellent products for the endoscopy field. We also
expect this tie-up to generate synergies in marketing and product development.

Catering to global needs
HOYA is the only endoscope manufacturer with a global R&D network. Working throughR&D centers of excellence in Japan, USA, and Germany, we are well positioned to take
into account the customers' specific needs, and also leverage the R&D talentworldwide. The coming few years will bring an array of new products that are the resultof global team work.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
Intraocular lenses for cataract treatment
In the intraocular lens (IOL) business, as higher than expected rates of inflammation and/or endophthalmitis were reported in the market for some products, we suspended
shipments of the products concerned in January 2013 to put the greatest priority on
ensuring patients' health and safety. In the following February, we also carried out avoluntary recall as an additional measure. Subsequently, we conducted an investigation
to determine the cause and made changes to manufacturing and quality processes, andresumed sales in August 2013 in major countries of Europe and Asia. In Japan, in
December 2013, with the acceptance of the administration and relevant organizations, welaunched trials at limited facilities in advance of normal marketing activities from 2014
onward. In regard to this matter, we would like to take this opportunity to sincerely
apologize for causing anxiety and inconvenience to many customers. We will continue to
strive to supply safe, high-quality products while putting priority on patients´ health.
Intraocular lenses are artificial lenses that are implanted after surgically removing lenses
that have become cloudy due to cataracts. The global market is worth more than $2.9
billion and is projected to continue to expand in response to worldwide aging andpopulation growth.
In the Japanese market, which has been strongly influenced by the voluntary recall, we
intend to steadily promote full-fledged sales of mainstay products and focus maximum
efforts on restoring the trust of doctors. Outside Japan, we will invest in the organizationand distribution in order to improve our coverage and make our products available tomore patients worldwide.

The strategic focus areas
in order to achieve this,are the following:

The role of the COO
My role as the Life Care segment COO is to draw
up and execute the strategy of the entire
segment beyond business boundaries. As therespective divisional heads bear responsibility forthe performance of each business, my role as
COO is to ensure the clarification of targets foreach business within the direction of Life Care asa whole, monitor progress against those targets,and provide leadership to enable steady achievement. I also play the role of accelerating
the speed of growth by identifying opportunities for synergies among businesses andefficiency improvements.
In my career so far, I have dared to set high targets in sectors that I have been in chargeof. In regard to HOYA´s Life Care segment as well, we aim to be a ¥500 billion businessby 2020.

In mature markets, to accelerateorganic growth that exceeds
1 market growth by reinforcing
marketing competencies andstronger salesmanshipIn emerging markets, to achieve
high growth by broadening our

2 coverage and expanding the
HOYA footprint

To attract and retain the besttalent in the market, through3 talent management systems andmanaged career developmentplans
To maintain HOYA´s technology
leadership by developing and4 acquiring new technologies thatwill help us fulfil unmet customerneeds
To embrace the concept ofcontinuous improvement and5 continuously optimize ourbusiness processes
To identify, leverage, and realize

6 cross divisional, cross functional,
and cross country strengths.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
Potential for organic growth
We are among the top players in each market segment where we compete, our market

To realize this, we arefocusing on the following
three core strategies:

share nevertheless still allows us to grow organically. Key opportunites for organic growth
lie in our sales and marketing as well as coverage.

Be a global company, at the same

The historical strength of HOYA is our technological prowess and product appeal. In the

1 time acting locally, catering to the
local needs

years to come, we shall aim to complement this strength with strategic marketing, andtransition from a “Product” company to a “Product & Marketing” company, making it easierfor our customers to see the benefits our products provide to them and their patients.
Similarly, there are still many areas around the world where customers have limited accessto HOYA products. Improving our reach in both developed countries such as the UnitedStates and various European countries and emerging markets such as Central and SouthAmerica and Eastern Europe is another strong source of organic growth.

Conclusion

As I previously mentioned, I believe that the stance of aiming for even higher targets thanthose one believes can be achieved fosters qualities that are indispensable to theachievement of our goals, namely, a spirit that is focused on success, speed, and creativity.
In the Life Care segment, where growth can be reliably projected, I am convinced that we
can further enhance the growth potential of businesses by implementing several bestpractices that I have learned from past experiences.
I look forward to the ongoing support and understanding of our shareholders.
Girts CIMERMANS
Executive Officer & COO, Life Care

ProfileGirts CIMERMANS
After serving in high-level management positions mainly in the European market at medical
equipment manufacturers such as GE Healthcare and KaVo Dental GmbH, Girts Cimermans
took up the post of President EMEA at Pentax, HOYA´s Endoscope Division, in July 2011.
Subsequently, he was appointed COO in charge of Life Care in June 2013. He aims toestablish Life Care segment as the growth engine of HOYA.

Copyright 2014 © HOYA CORPORATION

Reinvest the savings generated
through ongoing review of
2 operational efficiency, and crossdivisional synergies into sales andmarketingStrengthen our marketing
competencies to evolve from a3 “Product” company to a “Product& Marketing” company

HOYA REPORT 2014

Aiming for
top global market sharefor all products
Executive Officer & COO, Information Technology

Eiichiro Ikeda
Profit growth achieved in fiscal 2013 due toeffects of restructuring
In fiscal 2014 (from April 1, 2013 to March 31,2014), the Information Technology segment
recorded sales of ¥159.3 billion, down 1.2%
year-on-year. Sales of semiconductor related
products, LCD related products, and glass
disks for hard disk drives (HDDs) were strong,but digital camera related products posted
weak sales due to sluggish demand. In contrast,

as HOYA actively undertook restructuring measures in the face of a shrinking market
outlook, the earnings structure improved further and segment profit (profit before tax)
reached ¥35.9 billion, up 12.7%, and the segment profit margin improved 2.8 basis points
to 22.5% from 19.7% in the previous year.

Information Technology businesses operate inmature markets
Markets for HOYA´s major products in the Information Technology segment are
tending to contract, as these products depend on the final products of notebook PCs
and digital cameras and demand in these final markets is shifting toward smartphones
and tablets. On the other hand, semiconductor related products are maintaining
stable earnings because HOYA has high market share and the same applies to LCD
related products thanks to abundant development demand in the 4K and large TV
domains. Nevertheless, we expect growth to slow or the size of markets to tend tocontract, as these markets are mature, and sales are therefore likely to continue todecline in the Information Technology segment in the near term. As HOYA´s
Information Technology businesses operate in such markets, we have focused on
creating a structure that can generate stable cash flow over the long term by further
improving our competitiveness while both curbing investment and cutting costs. The
results of this endeavor have already become apparent in fiscal 2014, and I intend todirect this business segment by continuing to focus on the “maximization of cashflow” from the current fiscal 2015 onward.

Copyright 2014 © HOYA CORPORATION

Strategic policies
Aim for stable earnings inmature markets
Maintain dominant leadingedge technological
1 capability andcompetitiveness
Expand earnings through2 exhaustive cost cutting
Concentration and

3 selection

4 Maximize cash flow

HOYA REPORT 2014
Semiconductor related products
In fiscal 2014, sales of semiconductor related products increased due to a rise in sales
volume for products used in smartphones and tablets combined with the effect of a
weaker yen. The semiconductor market is growing at a moderate pace, but we do not
expect substantial market growth for mask blanks for semiconductor production becauseof limited leading-edge development activities at semiconductor makers, which are themain earnings driver. However, HOYA is maintaining stable earnings by virtue of its strong

Mask blanks and photomasks for the
production of semiconductor chips

technological capabilities and high market share, and in fiscal 2014 as well, we achieved
high earnings through product development in cutting-edge fields and continued costcutting measures.

LCD related products
LCD related products also recorded an increase in sales, driven by continued demand forsmall and medium-sized photomasks with high precision and high resolution for
smartphones and tablets as well as demand for large photomasks used for 4K andlarge-screen TVs. At present, as panel makers in Japan, South Korea, Taiwan and China
are all promoting the development of high-resolution panels, there is an increasing
tendency to demand photomasks with unprecedented high quality. By leveraging ourLarge-sized photomasks for the production of
LCD panels

expertise in the production and development of semiconductor photomasks, we arefocusing on providing unrivalled high-value-added masks, and in fiscal 2014, we also
sharply boosted profitability by raising productivity at manufacturing plants.

Glass disks for HDDs
Although the market for notebook PCs equipped with HDDs is declining in tandem withgrowing demand for tablets, sales of glass disks for HDDs (substrates) were supported
by replacement demand for Windows XP in the corporate sector, and sales related to
non-notebook PC applications, such as next-generation game consoles and servers,
were robust. In fiscal 2014, our market share rose further due to the progress of industry
reorganization, and profit increased year-on-year, as we rapidly promoted consolidation of

Glass disks for HDDs (substrates)

our production bases to cope with market contraction.

Imaging related products
The markets for compact digital cameras and interchangeable lenses are shrinking rapidly
mainly due to growing demand for smartphones and a slump in sales stemming from
China´s economic slowdown. HOYA´s business performance was weighed down inparticular by a substantial drop in sales of molded lenses and lens modules for compact
digital cameras. Faced with such an environment, we stepped up efforts to boost sales ofhigh-value-added glass materials and high-end medium- and large-diameter lenses for
SLR cameras and high-end compact cameras. Moreover, although we endeavored to
expand sales of optical products for products other than digital cameras, namely, carmounted cameras, sports cameras and smartphones, we were unable to offset thedecrease in digital camera related sales, and overall sales of imaging related products
consequently declined. In terms of profit, however, as we rapidly reduced costs toaddress the rapidly shrinking market, we managed to maintain the level of profit.

Copyright 2014 © HOYA CORPORATION

Optical glass

Lens modules

HOYA REPORT 2014
The role of COO in the
Information Technology segment
In regard to the Information Technology segment, my role isto generate stable earnings in mature markets, as part of
HOYA´s business portfolio management, and I aim to increase
the profitability of each product and maximize cash flow. As
many existing products have entered a mature phase in their
growth cycle, we need to continue to be “a big fish in a small
pond.” by further strengthening our competitiveness or
achieving differentiation from our competitors. To that end, as
the Information Technology COO, I am promoting firstly
expansion of market share, secondly restructuring, and thirdly
the use of existing technologies in growth areas.
Regarding the first objective of expanding market share, inorder to reap the benefit of being a survivor in mature markets, we need to have high market
share. At present, in each business in the Information Technology segment, we are drawing
up business strategies focused on becoming “a big fish in a small pond.” Specifically, we arepromoting the kind of initiatives that will put HOYA far ahead of its competitors in all areas,such as technology, quality, cost, and delivery. There are some businesses where we havehigh market share of 80% or 90%, but there are also businesses where even the top market
share is at a level of 30%, so we intend to continue to make efforts there.
I experienced the sale of a business while I was head of the HDD Glass Media Strategic
Business Unit (SBU) (the business transfer to US-based Western Digital Corporation in2009). I think this was a reasonable decision from the viewpoint of the entire HOYA Group,
but as an interested party of the business, I still regret the fact that we were unable to acquire
top global market share before the sale. Based on this experience, I will manage all the
products that remain in our Information Technology businesses with the aim of achieving top
global market share.
Regarding the second objective of restructuring, we have attempted to shift to a structure
where we can maintain profitability, even while markets are contracting and sales are
declining, through selection and concentration. As a result, sales have decreased by 27%
from ¥218.4 billion in fiscal 2010, but the segment profit margin has risen from 21.3% at thetime to 22.5%. In fiscal 2014, we strove to improve profitability in the HDD substrate andimaging related businesses, in particular, mainly by consolidating overseas production bases
and reducing the cost of sales. As for restructuring, we have almost managed to realize thetargets we advocated when I was appointed a year ago.
In the case of the third objective of using existing technologies in growth areas, we will seekbusiness opportunities in new markets that we have not ventured into yet by applying theadvanced technologies that HOYA possesses. Products that we are specifically considering
at present include lens units for smartphones, lenses for security cameras, car-mounted
camera lenses, and HDD glass disks for servers. They are all large markets, but I believe
there are areas in these markets where we can display HOYA´s strengths. In the short term, I
do not think these products will compensate for the decline in sales of mature products, but
in the long term, we intend to boldly take on the challenge of these markets with the aim ofstrongly nurturing these products into core earnings sources.

Copyright 2014 © HOYA CORPORATION

To improve profitability
and maximize cash flow:
Expand market share
Beat the competition in all

1 areas, such as technology,
quality, cost, and delivery
Restructuring
Consolidate production

2 bases and reduce cost ofsales
Use existing technologies
in growth areas
3 Develop new markets andnew applications

HOYA REPORT 2014
Strengths of HOYA’s Information Technology segment
The strengths of HOYA´s Information Technology businesses are the technologies that havebeen cultivated since the Company´s foundation and the high market share that isunderpinned by these technologies. By narrowing down the target to fields where we candisplay our high technological capability and its strengths, we will be able to become “alarge fish in a small pond” that has an overwhelming competitive edge in niche markets. I
think it is fair to say that this way of thinking has permeated to the extremity of eachbusiness division. In terms of the culture within the segment, I believe that an environmentthat raises the motivation of employees is also a strength; this includes the attitude of hiring
talented people regardless of their age or nationality and adopting good proposals
regardless of the position of the proposer. I also gained management experience from when
I was young and experienced working overseas for 18 years from 1996, but at HOYA there
is no sense of doing business only with Japanese people. We have many people that wererecruited in mid-career and we are becoming an increasingly globalized company. I think
this has become a great strength in terms of global expansion and the diversity of ideas.

Concluding message
Finally, in fiscal 2015 ending March 31, 2015, as well, we intend to undertake restructuringwhile remaining vigilant in the Information Technology segment, based on the recognition
that raising profitability and increasing cash flow will lead to a rise in HOYA´s corporate value(equivalent to shareholder value) in the medium to long term. Furthermore, instead oflimiting our operations to shrinking markets, I intend to create more robust Information
Technology businesses by cultivating new markets and establishing an advantageous
position by leveraging HOYA´s outstanding technological capability.
I look forward to the ongoing support and understanding of our shareholders.
Eiichiro IKEDA
Executive Officer & COO, Information Technology

ProfileEiichiro IKEDA
Eiichiro Ikeda joined HOYA in 1992. After working at the R&D Center, in the MD Business
Division, and the Optical Lens SBU, he was appointed Information Technology COO in June
2013. For many years, he was in charge of production technology at overseas production
bases and played a leading role in production efficiency and quality control. In addition, he is
not only knowledgeable about technology but also has a successful track record in businessexecution and management of overseas employees, such as concluding the sale of the HDD
glass media business to Western Digital Corporation.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014

Financial Review

Scope ofConsolidation

As of March 31, 2014, the HOYA Group consisted of the HOYA CORPORATION, 121consolidated subsidiaries (10 of which are domestic and 111 overseas) and 8 affiliates (4 of which
are domestic and the other 4 overseas).
The HOYA Group is operated and managed through global consolidated group management.
The independent management teams of business segments, including Information Technology,
and Life Care, are responsible for executing management strategies.
Regional headquarters in the Americas, Europe and Asia support business operations bystrengthening relationships with countries and areas in the respective regions, such as byproviding legal support and conducting internal audits. In particular, the HOYA Group has its
Financial Head Quarters (FHQ) in the Netherlands.

Adoption of theInternational Financial
Reporting Standards

Beginning with the 73rd fiscal year, the HOYA Group has prepared its consolidated financial
statements and other documents in compliance with the International Financial ReportingStandards (IFRS) pursuant to the first paragraph, Article 120 of the Ordinance on Accounting ofCompanies. With respect to reportable segments presented in the overview of operation bybusiness category, the HOYA Group divides its business into three reportable segments, basedon IFRS. These segments are Information Technology, Life Care, and Other Businesses.
The Information Technology segment handles electronics related products used for the productionof semiconductors, liquid crystals and hard disk drives (HDDs), and imaging related products suchas digital camera lenses. 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 endoscopes. The Other Businesses segment offers mainly information system services.

Sales

During the consolidated fiscal year under review, the global economy remained caught in a stateof uncertainty. This was reflected in the fact that while the U.S. economy posted a gradual
recovery and Europe turned around to start to pick up, though moderately, there were fears of
economic slides arising from continued civil wars in the Middle East and a slowdown of growth inChina and other emerging countries. The Japanese economy shared a gradual recovery as
economic measures taken by the government and others led to corrections of the appreciation of
the yen and rising stock prices and hence a steady improvement in business confidence.
As for the HOYA Group, in the Information Technology segment, products related to smartphones
and tablet computers performed well. However, there was a conspicuous slowdown in products
related to laptop computers and digital cameras, which are undergoing a slump in demand. These
products had driven the performance of the HOYA Group and consequently sales of this segment

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
declined. On the other hand, in the Life Care segment, eyeglass products posted a dramatic
growth in sales due to the recovery from the impact of the flooding in Thailand and the addition ofsales from the eyeglass lenses business absorbed from Seiko Epson Corporation. Sales of thesegment climbed significantly also because of solid performance by the contact lens andendoscope businesses and the positive impact of the depreciation of the yen.
As a result, sales of continuing operations for the fiscal year under review amounted to 427,575
million yen, a 14.8% increase year on year.

ProfitProfit before tax was 85,486 million yen; while profit for the year was 60,140 million yen. This
represented a significant drop of 6.3% and 16.9% compared to the previous consolidated
fiscal year. These are a result of extraordinary profits being recorded, including 32,187
million yen in insurance proceeds related to the handling of damages from the flooding in
Thailand in the previous consolidated fiscal year and 2,238 million yen tied to gains related
to the stop acquisition of sharesin OPTOTAL HOYA LIMITADA. Without these provisional
revenues, there were real increases in profits.
The ratio of profit before tax to sales was 20.0%, a 4.5 percentage point decrease from thepreceding consolidated fiscal year’s 24.5%.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
Outline of
consolidated resultsby business segment

Information Technology segment
Electronics related products
Sales of semiconductor related products increased over the preceding consolidated fiscal
year due to the expansion of the sales volume of leading-edge products and middle tolow-end products for smartphones and tablet computers, as well as to the impact of thedepreciation of the yen.
As for liquid crystal related products, small and medium-sized high precision and highresolution masks for smartphones and tablet computers experienced continued demand.
Further, there was also increased demand for large photomasks for 4K and large screenTVs. Consequently, sales of liquid crystal related products grew over the preceding
consolidated fiscal year.
On the other hand, glass disks for HDDs (substrates) experienced an increase in sales overthe preceding consolidated fiscal year. This is because while the expanding demand fortablet computers led to a decrease in demand for laptop computers with hard disk drives,
corporate demand for replacement of Windows XP offset the negative factor, while sales forapplications other than laptop computers such as next generation game machines andservers were robust.
Imaging related products
There has been a large decrease in sales unit in the compact digital camera market andinterchangeable lens markets due to the market encroachment by smartphones and sales
slumps caused by the economic slowdown in China. Under these conditions, the HOYA
Group endeavored to expand sales of high value added glass materials, high-end mid tolarge diameter lenses and products for applications other than digital cameras. Despite
these efforts, sales of imaging related products decreased overall from the preceding
consolidated fiscal year.
As a result, the Information Technology segment posted sales of 159,333 million yen, a
1.2% decrease over the preceding consolidated fiscal year. However, the segment profit
increased by 12.7% from the preceding consolidated fiscal year to 35,854 million yen.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
Life Care segment
Health Care related products
Sales of eyeglass lenses posted a large increase from the preceding consolidated fiscal
year. This was due to the recovery in sales from the impact of the flooding in Thailand in
October 2011, the additional sales from the eyeglass business acquired from Seiko Epson
Corporation during the fourth quarter of the preceding consolidated fiscal year, thedepreciation of the yen and the last-minute demand before the rise in consumption tax rate.
On the other hand, HOYA posted a large drop in profit before tax, as a result of the factors
in the preceding consolidated fiscal year, which include extraordinary profits of 32,187
million yen from insurance proceeds for the flood damages in Thailand and 2,238 million
yen in gains related to the step acquisition of shares of subsidiary. These were recorded in
the profit before taxes as extraordinary profit and therefore, profits in real terms increased
from the preceding consolidated fiscal year.
Sales of contact lenses increased due to new store opening of “Eyecity” specialty storesand reinforcing promotional campaigns at existing stores. Last-minute demand toward therise in consumption tax rate helped boost sales above those of the preceding consolidated
fiscal year.

Conclusion of an Agreement on Transfer ofEyeglass Lens Manufacture Business and Alliance in Marketing
On November 16, 2012, HOYA Corporation concluded an agreement with Seiko Epson
Corporation to transfer Seiko Epson's eyeglass lens development and manufacture businessto HOYA, and on February 1, 2013, executed the transfer of the business as planned.
At the same time, HOYA concluded an agreement with Seiko Holdings Corporation (hereinafterreferred to as "Seiko"), with the aim of a global strategic alliance in the marketing business ofeyewear-related products between the two companies, to acquire 30% of the shares in Seiko
Optical Products Co., Ltd., which engages in the said business as a wholly-owned subsidiaryof Seiko, on February 1, 2013 and an additional 20% on March 31, 2014.
It must be noted that the originally scheduled share transfer on February 1, 2013 was delayed
as greater than expected time was needed to conduct the Anti-Trust Act review in the Peoples Republic of China. Upon completion of the review, HOYA received 30% of the shares onJune 1, 2013 and the additional 20% on the originally scheduled March 31, 2014. As a result,Seiko Optical Products Co., Ltd. is now a consolidated subsidiary of HOYA.
This will bring together the expertise of the three companies for developing, producing andmarketing eyeglass lenses and eyewear-related products, which has been accumulated
separately, and we will endeavor to enhance the products and services to satisfy ourcustomers and dealers around the world.

Medical related products
Sales of medical related products trended favorably to post an increase from the preceding
consolidated fiscal year thanks to sales growth of new high-end series products, which waslaunched in the fall of 2012, as well as the depreciation of the yen. While sales were strong
in major advanced countries in Europe, overall sales in Europe dropped due mainly to sales
erosion in Russia, which extended sales in the preceding consolidated fiscal year. On theother hand, sales in the Asia Pacific did well, particularly with strong sales in China andSoutheast Asia. In the North American market, sales grew considerably over the preceding
consolidated fiscal year for video colonoscopy processors and scopes.
During the fourth quarter of the preceding consolidated fiscal year, production of someintraocular lens (IOL) products was suspended and a voluntary recall of the product was

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
conducted. Production of the IOLs resumed in the second quarter of the consolidated fiscal
year under review and full-fledged sales activities resumed in overseas markets during thethird quarter of the consolidated fiscal year under review. Approval of sales was thenobtained for the Japanese market, a key market, and sales were gradually re-launched.
However, a cautious approach to the market led to a decline in annual sales below thepreceding consolidated fiscal year.
As a result, the Life Care segment reported sales of 265,470 million yen, a 27.0% increaseover the preceding consolidated fiscal year. The segment profit before tax was 49,689
million yen, a significant decrease by 22.6% from the preceding consolidated fiscal year
due to reporting the before-mentioned extraordinary profits in the preceding consolidated
fiscal year.

Other
The Other businesses segment mainly consists of information system services offered to
the HOYA Group and outside customers as well as new business development. Revenues
from this segment stood at 2,739 million yen, which is equal to a rise in revenue of 20.7%
from the previous year. The segment´s profit totaled 602 million yen, a decrease of 27.5%
compared with the previous year.

Dividend Policy

The Company manages group businesses from a global perspective and aims tomaximize corporate value by promptly adapting business portfolios to address changes
in the era and environment. As for the paying out of retained earnings as dividends, ourbasic policy is to determine what we will do after considering the performance during thecurrent fiscal year, demand for capital in the medium to long term and the balance
between returning profits to shareholders and the need for a rich balance of retained
earnings to enable future corporate growth.
With respect to internal reserves, resources will be preferentially appropriated to investmentin the Life Care business field, which we have positioned as a growth business, for market
share expansion, entry into untapped markets, and nurturing and obtaining newtechnologies. In addition to growth of existing businesses, the Company will also proactively
pursue possibilities including mergers and acquisitions to further enrich our businessportfolio and to speedily expand business operations. As for the Information Technology
business field, which has been positioned as a steady earnings business, we will continue

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
to make capital investment that further reinforce the technological abilities that become thesource of competitiveness, and development investment that will contribute to developing
next-generation technologies and new products.
As a result of this thinking, the Company set the end-of-year dividend for the consolidated
fiscal year under review at 45 yen per share, a 10 yen increase from the preceding fiscal
year. Coupled with the interim dividend of 30 yen per share already paid, the annual
dividend will be 75 yen per share. The consolidated dividend payout ratio is 55.4%.

Financial Position

Total assets at the end of the fiscal year under review increased by 86,199 million yen fromthe end of the preceding fiscal year to 704,283 million yen. Non-current assets decreased
by 6,356 million yen to 189,571 million yen. This is primarily due to goodwill increasing 2,595
million yen from the acquisition of a subsidiary, etc., an increase in intangible assets by
4,758 million yen and a decrease in property, plant and equipment by 11,234 million yen
due to depreciation and amortization and impairment.
Current assets increased by 92,555 million yen to reach 514,712 million yen. This is primarily
due to a rise in cash and cash equivalents by 82,198 million yen. Total equity increased by
72,101 million yen to 542,648 million yen.
This is primarily due to an increase in retained earnings of 30,407 million yen and theoccurrence of other comprehensive income totaling 34,091 million yen. Equity attributableto owners of the company increased by 65,793 million yen to reach 536,526 million yen.
Liabilities increased by 14,098 million yen to 161,635 million yen.
The ration of equity attributable to owners of the company to total assets as of the end of
the consolidated fiscal year under review reached 76.2%, unchanged from the end of thepreceding consolidated fiscal year.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014
Cash Flow

Cash and cash equivalents at the end of fiscal 2014 increased by ¥82,198 million from theend of the previous year to ¥331,094 million, including the effects of exchange rate changesof ¥28,204 million.
Net cash provided by operating activities amounted to ¥102,670 million, an increase of¥13,680 million from the end of the previous year. This was mainly attributable to profit
before tax from continuing operations of ¥85,486 million (down ¥5,718 million year-on-year),depreciation and amortization of ¥33,891 million (up ¥3,019 million), and decrease ininventories of ¥11,785 million (down ¥6,755 million), which were partly offset by factors suchas an increase in trade and other receivables of ¥4,548 million (up ¥3,669 million) and adecrease of trade and other payables of ¥2,171 million (down ¥5,521 million).
Net cash used in investing activities amounted to ¥20,882 million, an increase of ¥19,934
million in capital outflow compared with the end of the previous year. The capital inflow
stemmed from proceeds from sales of property, plant and equipment of ¥950 million (down¥6,623 million) and other factors, while the capital outflow included payments for acquisitionof property, plant and equipment of ¥16,546 million (down ¥26,504 million) and net cash
outflow on acquisition of subsidiary of ¥6,390 million (down ¥3,737 million).
Net cash used in financing activities amounted to ¥27,794 million, a decrease of ¥41,203
million from the end of the previous year. This was mainly due to ¥28,101 million in dividends
paid (up ¥29 million).

Capital Expenditures /Depreciation
and Amortization

The total capital expenditures of all operations of the HOYA Group amounted to 16,838
million yen during the consolidated fiscal year under review, a decrease of 28,173 million
yen over the preceding consolidated fiscal year.
In the consolidated fiscal year under review, investment in the Information Technology
business amounted to 8,735 million yen and investment in the Life Care businessamounted to 7,834 million yen, which account for 51.9% and 46.5%, respectively, of thetotal capital expenditures by the Group.
The investment was covered by internally generated funds.
Capital investment was made in the consolidated fiscal year under review in the
Information Technology business to heighten the efficiency of the production systemand to improve productivity so that changes in the market environment can be dealt
with swiftly. Capital investment was also conducted to diversify production bases, aneed that was keenly felt following the Great East Japan Earthquake of March 2011,
and to heighten competitiveness in cutting-edge areas. As for the Life Care business,and in particular the eyeglass lenses business, investment to reinforce capabilities at

Copyright 2014 © HOYA CORPORATIONHOYA REPORT 2014lens manufacturing plants around the world, including the mainstay plants in Thailand,
was conducted to resolve tight production conditions that have developed due to asolid growth in demand. During the previous consolidated fiscal year, significant
investments were made into the Thai plants to completely replace all production
facilities for eyeglasses that were flooded and consequently forced to shut down due tothe great flooding that hit Thailand in October 2013. However, capital investment wasmuch smaller in the consolidated fiscal year under review than the previous
consolidated fiscal year since the massive investment of the preceding consolidated
fiscal year was completed.
Depreciation and amortization (including impairment loss) for the fiscal year underreview increased 20.8%, to ¥38,661 million. Both the Information Technology segment
and the Life Care segment spent about one-half each of the total amount.

Copyright 2014 © HOYA CORPORATIONHOYA REPORT2014