Business Overview│ Performance in Fiscal 2015
Sales: 505.7 billion yen, Profit before tax: 119.0 billion yen│ Life Care
Sales: 322.6 billion yen, Profit before tax: 57.7 billion yen

Copyright ©2016 HOYA GROUP

-

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

Eyeglass Lenses
Performance in the Year Ended March 31, 2016

Sales of eyeglass lenses expanded at rates in the first half of the single-digit range compared with the previous fiscal year.
(After the exclusion of the eﬀects of foreign currency fluctuations, sales expanded in the middle of the single-digit range.) In
the Japanese market for retail sales of eyeglass lenses, the decline in sales has become more moderate compared to thepast, but declines in sales prices have continued. Trends in HOYA’s sales have been influenced by the market movements,
and, although sales in unit terms were slightly above the previous fiscal year, sales in value terms decreased slightly from theprevious year as a result of a decline in average unit prices. In Europe, sales expanded smoothly to both independent small
and medium-sized eyeglass stores and large eyeglass retail chains. Sales of SEIKO lenses, which are positioned as apremium brand, were also firm in Europe. Sales in Europe expanded in the middle of the single-digit range (on a local
currency basis, which excludes the eﬀects of foreign currency fluctuations). In the Americas, HOYA has placed special
emphasis on developing customers among large retail chains in the United States and has strengthened its sales systems
for these eyeglass retailers. As a result, sales of large chain retailers expanded by a relatively large margin and contributed tosales growth in the region. Also, as a result of firm sales in independent small and medium-sized eyeglass stores, rates ofgrowth of sales in the Americas rose in the latter half of the single-digit range (on a local currency basis, which excludes theeﬀects of foreign currency fluctuations). In the Asia/Oceania region, sales were at about the same level as in the previous
fiscal year (on a local currency basis, which excludes the eﬀects of foreign currency fluctuations). In production, HOYA took
initiatives to increase production capacity through growth investments that anticipated future expansion in demand. HOYA’s
plant in the Philippines went into full operation.
During the fiscal year under review, Europe and the Americas drove performance, and HOYA was able to attain stable
growth. In these two regions, HOYA will continue to implement marketing activities closely tailored to customer channels andwork to expand market share. Expansion in sales of high-value-added products, such as progressive lenses, will bring
continued improvement in the product mix. Also, along with the expansion in the volume of sales through further market
development, HOYA will increase its rates of capacity utilization and improve profitability.

Sales in the Americas
accounted for about 25%.

No. 2 globally inmarket share

Sales in Europe accounted
for about 40%.

Copyright ©2016 HOYA GROUP

Global Network
HOYA’s eyeglass lens business covers 60 countries and has a direct sales system in 38 of those countries.

Contact Lenses
Performance in the Year Ended March 31, 2016

During the fiscal year under review, Eyecity, HOYA’s contact lenses specialist retail store chain, actively opened new stores inurban areas and took initiatives to strengthen is sales promotion activities at existing stores. At the end of the fiscal year,
Eyecity had 257 stores in Japan. Sales expanded at rates in the 10%-to-15% range compared with the previous year, whensales were adversely impacted by the increase in the consumption tax rate in April 2014 which resulted in a reactionary
decline in sales. Even if we compare sales in the latter half of the previous fiscal year, which were not adversely aﬀected by
the reactionary decline, year-on-year sales growth was still in the latter half of the single-digit range. Sales growth rates in
the first half of the single-digit range at existing stores (in business for one year or more), combined with contributions fromnewly opened stores, indicate that stable growth in this business is continuing. Eyecity oﬀers a consulting-type sales
approach, and employees interview customers about their lifestyles as well as their hopes and uncertainties about wearing
contact lenses, and then make recommendations. We think that, as a result of this approach, Eyecity wins the trust ofcustomers and, thus, has become the No. 1 contact lenses specialist store in terms of users and has secured a high market
share.
As a result of detailed market research by region, including the examination of the status of the contact lens user population,competition, and Eyecity’s network, we have concluded that there is considerable further room for expanding the Eyecity
store network. HOYA will, therefore, aim for stable growth through the continued active opening of new stores.

Copyright ©2016 HOYA GROUP

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

Medical Endoscopes
Performance in the Year Ended March 31, 2016

Overall sales of endoscopes decreased at rates in the first half of the single-digit range (Even after the exclusion of theeﬀects of foreign currency fluctuations, sales declined at rates in the first half of the single-digit range). In Japan, amid highly
competitive conditions, sales for the fiscal year decreased at rates in the latter half of the single-digit range. In Europe, sales
were firm in Germany and Spain; and in Russia, the Middle East, Eastern Europe, and other emerging countries, progress
was made in market development. On the other hand, in the United Kingdom and Northern Europe, sales declined slightly as
this corresponded to a period just before the introduction of new products. In Italy, as a result of government fiscal restraints
on hospital budgets, sales were weak. In the European area as a whole, sales were at about the same level as in theprevious fiscal year (on a local currency basis, which excludes the eﬀects of foreign currency fluctuations). In the Americas,
HOYA gave priority in the United States to responding to inspections by the Food and Drug Administration (FDA), which is
the regulatory authority for endoscopes, and sales decreased. In addition, sales in Central America and South America were
influenced by sudden currency fluctuations as well as political and economic uncertainties. In the Americas as a whole, sales
decreased in the 10%-to-15% range (local currency basis, which excludes the eﬀects of foreign currency fluctuations). On
the other hand, in the Asia/Oceania region, in the Chinese sphere, including mainland China and Taiwan, HOYA achieved
stable growth, and fiscal 2016 was a year for securing footholds for increasing HOYA’s presence in the region. In other areas,
HOYA reported major increases in sales in India and the surrounding countries, and progress was made in establishing abeachhead in the countries of Southeast Asia. As a consequence, in the Asia/Oceania region as a whole, sales expanded
about 10% over the previous fiscal year (on a local currency basis, which excludes the eﬀects of foreign currency
fluctuations. In the endoscopes business as a whole, in addition to a decline in sales, expenses related to quality assurance
and responding to regulations increased, and, compared with the previous year, profitability deteriorated.
In the fiscal year under review, performance of endoscopes as a whole weakened as a result of lower sales in the UnitedStates. At present, HOYA is working to develop systems for continuing to launch new products with appropriate timing and,to this end, is taking initiatives to strengthen its systems for responding to regulatory and quality assurance standards. In
addition, along with R&D related to endoscopes to meet the needs of the medical workplace, HOYA is focusing on R&D infields peripheral to endoscopes, such as treatment devices, where growth is expected. The market for endoscopes is
expected to grow in the long term, and there have been no changes in HOYA’s policy of aiming for growth in this market andreturning this business to a growth path.

Sales in the Americas
account for about 30%.

Sales in Asia/Oceania
account for about 20%.

No. 2 in terms ofglobal market share

Sales in Europe accountfor about 40%.

Copyright ©2016 HOYA GROUP

Intraocular Lenses
Performance in the Year Ended March 31, 2016

During the first quarter of the fiscal year under review, HOYA introduced aspherical intraocular lenses in the major markets,
including Japan and Europe, made of “Vivinex,” a newly developed hydrophilic acrylic material. By using HOYA’s original
surface reforming treatment on lenses made from new material “Vivinex,” these intraocular lenses are expected to restrain
the appearance of Posterior Capsule Opacification (PCO). Sales of intraocular lenses during the fiscal year under review
expanded more than 20% over the previous fiscal year. (Even after the exclusion of the eﬀects of foreign currency
fluctuations, the rate of expansion was about the same.) In Japan, after a voluntary recall in 2013, HOYA resumed the regularmarketing of these lenses in August 2014, and, subsequently, sales have steadily recovered. In addition, as a result of thefavorable performance of these lenses, sales expanded 30% over the previous fiscal year. In Europe, these lenses are driving
performance in markets where they have been introduced, including France and Germany, and sales are quite favorable. In
Asia/Oceania, market development has proceeded smoothly, mainly in China. In both Europe and Asia/Oceania regions,sales expanded more than 10% over the previous year (on a local currency basis, which excludes the eﬀects of foreign
currency fluctuations). In addition, profitability improved substantially compared to the previous fiscal year. HOYA’s
intraocular lenses made of “Vivinex” will undergo a series of clinical evaluation to gain additional trust from patients, and we
think they will contribute to expansion in this business.
During fiscal 2017, HOYA is working to expand its production lines to meet the expected rise in demand. In the Japanesemarket, HOYA has targeted capturing the No. 1 position in terms of market share and aims to further strengthen its
presence. On the other hand, in global markets, HOYA’s market share is still only in the single-digit range, and it does nothave a high market profile. In all regions, HOYA plans to implement optimal marketing activities and accelerate its global
growth.

Sales in Europe account for between
20% to 25% of sales.

Sales in Japan account for
about 50% of sales.

Sales in Asia account for between
20% to 25% of sales.

│ Information Technology
Sales: 178.7 billion yen, Profit before tax: 65.4 billion yen

Copyright ©2016 HOYA GROUPElectronics-(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please refer to this section for further information.)

Mask Blanks for Semiconductors
Performance in the Year Ended March 31, 2016

Although the semiconductor market was stagnant, with conditions deteriorating especially from the second half of the fiscal
year, HOYA’s mask blanks are used not only in the volume production processes for semiconductors but also at the R&D
stage. For the fiscal year as a whole, HOYA captured firm R&D demand for cutting-edge semiconductors, and sales
continued to be favorable, mainly for high precision products. As a result, sales of mask blanks rose over the same period of
the previous year at rates in the middle of the single-digit range. (After exclusion of the eﬀects of foreign currency
fluctuations, sales expanded in the first half of the single-digit range.) Sales of high margin, high precision mask blanks
expanded, and, as a result of successful activities to reduce expenses, profitability improved. Regarding the composition of
the product mix for mask blanks, high-precision products accounted for about 40% of the total, and the ratio of theseproducts increased compared with the previous year. Accompanying the further miniaturization of semiconductor circuits,
customer requests have become increasingly demanding for greater smoothness and flatness as well as absence of flaws,
higher exposure resolution, and durability. By responding to these technical requirements of customers, we are able to move
forward with obtaining customers’ qualifications, and, by responding to development demand for cutting-edge products, weare able to continue stable business growth. In addition, in the semiconductor industry, expectations of EUV (extreme
ultraviolet) wavelengths of 13.5nm exposure are rising substantially, and development is proceeding for movement to volume
production of cutting-edge units in the near future. HOYA has supplied mask blanks for EUV R&D use for several years.
During the fiscal year under review, the percentage of total mask blank sales accounted for by mask blanks for EUV
development was small, standing only in the middle of the single-digit range; however, the value of EUV mask blank sales
expanded substantially over the previous year.
Continuing as in the previous fiscal year, we think that the demand for high precision blanks accompanying the further
miniaturization of semiconductors will remain firm. By continuing to respond to the technical requests of customers, we will
aim to realize stable business growth.

The share of high precisionmask blanks in total sales ofmask blanks is about 40%.

Copyright ©2016 HOYA GROUP

No. 1 in world market sharePhotomasks for LCDs
Performance in the Year Ended March 31, 2016

In the photomasks for LCDs business, photomasks are used not only in the mass production process of LCDs but also in
the R&D process. Accompanying the trends toward higher precision and higher resolution, the demand for photomasks
continued to be firm. During the fiscal year under review, high precision photomasks were the growth driver, and sales
expanded over the previous year in the middle of the single-digit range (after the exclusion of the eﬀects of foreign currency
fluctuations, sales expanded in the first half of the single-digit range). By region, sales to Taiwan, South Korea, and China
expanded. During the fiscal year, photomasks for TVs and smartphones accounted for more than 70% of overall sales ofphotomasks for LCDs.
In the LCDs for TVs business, manufacturers’ development activities focused not only on LCDs for 4K TVs (3,840 (orapproximately 4,000) pixels) but also on developing large-scale screens. Moreover, along with the development of 4K
displays for smartphones, manufacturers were active in expanding their product lineups along with the growth in thesmartphone market. In addition, in the near future, a shift is forecast away from LCDs to OLEDs (organic light emitting diodedisplays), and OLEDs will become the mainstream products. Accordingly, display manufacturers are emphasizing thedevelopment of OLEDs.
HOYA also supplies photomasks for OLEDs, and about 10% of HOYA’s photomasks for LCDs are used to make OLEDs.
HOYA’s strengths in the photomasks for LCDs business are its capabilities for the in-depth understanding of thetechnological needs of its customers, which has been gained from close communication with them and HOYA’s
technological capabilities, which are reflected in its speedy development of products to customer needs. Drawing on thesestrengths, HOYA has been able to skillfully capture customers’ demand for LCD development.
During the fiscal year, as a result of the fact that more than half of HOYA’s LCD photomasks were of the high-precision type,
HOYA’s product mix improved, and profitability compared with the previous year rose.
The trend toward high precision LCDs, mainly for TVs and smartphones, will continue, and, along with this, we think demandfor high-precision type photomasks will remain firm. By responding to customers’ technological needs and meeting theirschedules for delivery, HOYA will aim to maintain stable growth.

The share of high precision
photomasks in total sales of
LCD photomasks is morethan 50%.

Copyright ©2016 HOYA GROUP

No. 1 in world
market share

Glass Substrates for HDDs Business
Performance in the Year Ended March 31, 2016

Conditions in the HDD market were not favorable during the fiscal year under review. HOYA supplies glass substrates for
2.5-inch HDDs, but demand for the use of these substrates slipped about 30% from the previous year. Reasons for this were
the stagnation in demand for notebook PCs, which are the main use for HDDs, and the rising percentage of solid statedrives (SSDs) installed on notebook PCs. Although demand for other uses of HDDs is rising, including external HDDs,
performance enterprise (PE) servers, and game consoles, this increase in demand for these uses was not suﬃcient to coverfor the decline in demand for notebook PC use. Sales of glass substrates for HDDs declined from the previous fiscal year at
rates in the middle of the single-digit negative range. (After the exclusion of the eﬀects of foreign currency fluctuations, thedecline in sales was in the 10%-to-15% range.) According to HOYA’s estimates for the fiscal year under review, about 40%of these 2.5-inch substrates were used in notebook PCs, about 30% in external HDDs, and 20% in PE servers. Comparedwith the previous fiscal year, the share of usage in notebook PCs decreased about 10 percentage points, while the shareused in PE servers rose about 10 percentage points. However, as a result of activities to integrate and consolidate
production locations, HOYA’s earnings structure enables it to maintain profitability through flexible adjustments to market
conditions. In addition, as a consequence of successful activities to reduce costs and other measures, profitability improved
from the previous fiscal year.
In fiscal 2017 and later years, severe conditions are forecast to continue in the 2.5-inch HDD market, and the outlook is forfurther declines in demand for glass substrates as a result of the adverse eﬀect of the wider use of SSDs on demand for
notebook PCs and PE servers. At present, HOYA has more than a 70% market share in the market for 2.5-inch substrates
and will aim to capture more market share. In addition, HOYA is taking initiatives to develop sales in markets that it does not
supply at present. Currently, HOYA is aiming to enter the market for 3.5-inch substrates that are installed in near line servers
used in cloud data centers and is developing substrates suited for this market.

Usage in PE servers
has increased about 20%.
Usage in PCs has declined
to about 40%.
No. 1 in world
market share
Usage in external disks
has increased about 30%.

Copyright ©2016 HOYA GROUP

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

Imaging Related Products (Including optical glass, optical lenses, camera lens modules, opto-devices, and lasers)
Performance in the Year Ended March 31, 2016

The market for digital cameras, which are the main uses of HOYA’s imaging related products, includes primarily optical glass,
optical lenses, and camera lens modules, is expected to continue shrinking. Amid this severe operating environment, HOYA
has taken initiatives to develop the markets for products other than digital cameras and has focused on surveillancecameras, car-mounted cameras, and smartphones. Sales of products for uses other than digital cameras are expanding,especially surveillance cameras. However, growth in these other uses has not fully covered the decline in digital cameras.
Overall sales of imaging related products expanded 0.8%, in part because of the eﬀects of foreign currency fluctuations.
(After the exclusion of these eﬀects, sales decreased 3.4%.) Within the sales of products for use in digital cameras, sales of
products for compact digital cameras decreased at rates in the middle of the 10%-to-20% range. However, despite theshrinkage in the market, the sales of lenses for single-lens reflex cameras were at about the same level as in the previous
fiscal year as a result of HOYA’s strategy of shifting to high-value-added products. In the surveillance camera market as awhole, sales expanded more than 20%, as sales in the high end of the market, where image recognition and image analysis
capabilities are required, grew, and sales of low-priced, smart home cameras also increased. In the market for car-mounted
cameras, sales are expanding smoothly, and were up substantially over the previous year. In the products for smartphones
business, the lens units featuring triple zoom functions developed by HOYA have been adopted for use in one type ofsmartphone, and this has generated sales.
Profitability in this business improved over the previous year as a result of initiatives begun in prior years to optimize
production locations and increase production yields.
We assume that the market for digital cameras will continue to shrink. On the other hand, the markets for surveillancecameras and car-mounted cameras are forecast to expand. HOYA’s strengths are in high-value-added glass materials andaspherical glass lenses. In addition, HOYA is able to provide its customers with proposals for lenses units that meet their
specific needs. Drawing on these strengths, HOYA is accelerating the development of new markets.

Other includes optodevices,various types of laser
oscillators, and other items.

Sales of products for use indigital cameras account forjust over 50% of imaging
related products.

Sales of products for surveillancecameras account for about 10% of
imaging related products.

Copyright ©2016 HOYA GROUP

Optical glass,
Optical lenses,
Camera lensmodules-│ Report on Results for the Fiscal Year Ended March 31, 2016
Revenues of the HOYA Group for fiscal 2016 (ended March 31, 2016) amounted to ¥505,714 million, an increase of
3.2% from the previous fiscal year. Profit before tax was ¥119,099 million, an increase of 0.7% year on year, andprofit amounted to ¥93,317 million, an increase of 0.4% over the previous fiscal year.
In the Life Care field, stable growth is continuing overall, mainly eyeglass lenses, contact lenses, and intraocularlenses, and both revenues and profits expanded. In the Information Technology field, sales declined from theprevious year because of shrinkage in the glass substrates for hard disk drives (HDD), lenses for digital cameras,
and other businesses. On the other hand, due to expansion in each product in sales of high-value-added products
and success in reducing fixed costs, the segment secured an increase in profit.
HOYA is placing a priority on its rapidly expanding Life Care segment and is proactively making forward-looking
investments to capture such accelerating growth. Looking ahead, we will realize the results of our investments andboost gains in our principal businesses, spanning eyeglass lenses, contact lenses, endoscopes, intraocular lenses,
and artificial bones. And in our Information Technology segment’s glass substrate for HDDs and digital camera
businesses, we consolidated manufacturing operations as a platform designed to circumvent the eﬀects of acontinuing downtrend in the overall market and to thereby squarely assure profitability.

Performance in Fiscal 2016
(Millions of yen)

FY2015FY2016Growth Rate

Consolidated Sales

489,961505,714+3.2%

Consolidated Profit before Tax

118,249

119,099+0.7%

Profit from Ordinary Operating Activities

110,282

118,912+7.8%* “Profit from Ordinary Operating Activities” excludes financial income/costs, share of profit (loss) of associates, foreign exchange gains or losses, and other nonrecurring gains or losses from profit before tax.

Copyright ©2016 HOYA GROUP│ Conversion of HOYA’s Business Portfolio
There has been no change in our policy of having growth in the Life Care field drive the growth of the HOYA Group
as a whole. Within the Life Care field, HOYA’s global market shares in eyeglass lenses and endoscopes are only inthe middle of the 10%-to-20% range and HOYA’s share of intraocular lenses is only in the single-digit range. We
will redouble our eﬀorts to achieve stronger growth in regions and customer segments where we have notpenetrated significantly in the past. For example, in the eyeglass lenses business, our market share in the UnitedStates is lower than in other overseas regions, but we are working to strengthen sales systems there and conduct
marketing activities that are carefully tailored to customers’ needs. As a result, sales in the U.S. market expanded
substantially during the fiscal year.
On the other hand, in the Information Technology field, I believe the markets are on a declining trend. However, themission of this business is generating stable profits and remains unchanged. If businesses within the segment can
expect growth in the future, then we will invest in them. In the mask blanks for semiconductors business, we think
the next-generation photolithographic technology, extreme ultraviolet (EUV), will present promising business
opportunities. In the optics business also, we think that products for use in surveillance cameras and car-mouted
cameras are going to be main applications in the future.
By growing the Life Care field, without doubt, the conversion in portfolios to Life Care will undergo substantial
transition. In today’s fast-changing world, for HOYA to continue to develop well into the future, from theperspective of dispersing risk, we think it will be necessary to take initiatives in a diverse range of businesses. If welook at other companies around the world, there are examples of companies in Asia and elsewhere that have beenaware of their business portfolio and have gone through substantial change. To aim for continued growth throughdynamic portfolio management, we must have a diverse business portfolio internally, and our view is that it isimportant to have management capabilities to manage this portfolio appropriately.
It is vital for management to make decisions not only from a corporate perspective, but also to see matters fromthe customer’s point of view. The way we assess the value we provide is based on earning a profit from the value
our customers attach to our solutions.

Copyright ©2016 HOYA GROUP-

-│ Cash Allocation and M&A
Of the uses of the cash HOYA generates, growth investments in growth markets and domains have a high priority.
During the fiscal year under review, HOYA took initiatives to expand production capacity in eyeglass lenses andintraocular lenses where future growth in demand is expected. In the eyeglass lenses, endoscopes, intraocularlenses, and other areas, HOYA invested aggressively in product development and in sales and marketing todevelop additional markets, and in the contact lens business, HOYA opened 24 new stores. In the Information
Technology business, cash was allocated mainly to the development of cutting-edge technology development andcapital investments for high-value-added products.
We think that M&A should play a complementary role in attaining
growth. M&A targets are in the Life Care field, but, among
possible M&A candidates, important conditions are that thebusiness to be acquired is expandable globally and that thecompanies should be in niche businesses where theircompetitiveness can be forecast to some degree. Our stance on
M&A opportunities is to assess how much cash the business will
generate in the future, to determine whether there are synergies
with our existing businesses, and then to proceed with the deal
when we are confident we can secure the required return. In
addition, as we make investments for growth on the one hand, and, on the other, when funds remain, we want to
pay returns to shareholders with appropriate timing.

-│ Governance as the Base for Creating Corporate Value
The objective of a corporation is to create corporate value in themedium-to-long term and continue to operate core businesses.
To accomplish this, the corporation must generate profits as it
expands, and we think that corporate governance is the base forthis to happen. The role of the directors, as the representativesof the shareholders, is to ensure that the corporation is
managed to maximize profit for the shareholders. We think that
how to create structures that enable the directors to accomplish
this is the issue of corporate governance.
Members of HOYA’s Board of Directors, with the exception ofmyself, are all outside directors. When the Executive Oﬃcers
manage the Company in ways that damage the interests of theshareholders, my view is that the work of the Board should be to
put a stop to it and exclude decision making that does notrespect the interests of the shareholders. To make this happen,
we have settled on the current governance framework toachieve more-eﬀective oversight functions.

Board of Directors (As of June 21, 2016)
Independent
Directors

Attendance at
Directors’ Meetings

Itaru Koeda

10 of 10 (100%)

Yukako Uchinaga

10 of 10 (100%)

Mitsudo Urano

9 of 10 (90%)

Takeo Takasu

10 of 10 (100%)

Shuzo Kaihori*

8 of 8 (100%)

Internal Director
Hiroshi Suzuki
Independent
Directors

10 of 10 (100%)
5Internal
Director

1* Newly elected at the General Meeting of
Shareholders held on June 19, 2015

Hiroshi Suzuki
President & CEO

Copyright ©2016 HOYA GROUP

│ The Mission of the CTO-

HOYA, in the Life Care field and the Information Technology field, has established development centers globallythat conduct R&D activities. The Life Care field is endeavoring to attain growth in sales, and the Information
Technology field is working to secure stable earnings. To realize HOYA’s management directions, my role as CTO isto set directions for our R&D departments in each product area and to see that they are implemented.

│ R&D in HOYA’s Businesses
In the Life Care business, HOYA is conducting its R&D activities
R&D of the Life Care Segmentwith a focus mainly on the eye-related business domain and theminimally invasive medical products business. To capture
Eyeglass lenses
growth in these domains, R&D is under way at HOYA to develop► Progressive lenses corresponding to
products to increase market share in each of these areas. In theindividual needs
eyeglass lens business, HOYA’s strengths include optical design
Intraocular lenses
technology related to progressive design and deposition► Developing based on new material
technology related to coating. Even thus far, HOYA has“Vivinex” through leveraging opticalexpanded its oﬀerings of special function lenses, such as
design technology
progressive designs to suit individual lifestyles, and developed
Endoscopes
higher-value-added products making use of various types of► High-performance endoscope withcoatings. Going forward also, HOYA will further evolve andcompact high-resolution image device,small-diameter scope that minimizes the
expand its product lineup that applies these technologicalburden on the patient
strengths. In the intraocular lens business, HOYA introduced an
intraocular lens made of a new acrylic material during the fiscal
year under review, and this material is expected to restrain theappearance of Posterior Capsule Opacification (PCO) which isan adverse event after surgery. Using the same material, HOYA is drawing on its optical design technology todevelop new products based on optical design for toric (astigmatic) and multifocal correction. In the endoscopebusiness, HOYA is working on a number of developments, including more compact, high resolution photographic
devices, image processing technology that will prevent overlooking even extremely small diseased areas,
technology for making it easier for endoscopes to enter the digestive tract, and the development of treatment
devices that can remove lesions completely.

Copyright ©2016 HOYA GROUP-

In the Information Technology field as a whole, the market
appears to be mature, but, in reality, even within the various
businesses, there are still activities where growth is expected. To
give some examples, in the mask blanks for semiconductors
business, such mask blanks compatible with EUV exposuretechnology, LCD photomasks for high precision photo masks for
OLED flat panel displays, and certain other areas are growthbusinesses. To capture this growth, HOYA is conducting R&D inthese businesses. In the glass substrates for hard disksbusiness, HOYA is placing maximum priority on thedevelopment of products for the near line server market, which
is a market where expansion is forecast but HOYA has not yet
entered. In the imaging related product market, HOYA is
allocating resources to developing products that can be used in
car-mounted cameras. In this field, including those businesses
that HOYA has not entered, I believe it is important to conduct
R&D in growth fields to continue launching new products

R&D of the Information Technology
Segment
Semiconductor mask blanks► Mask blanks meeting requirements for
EUV exposure technology
Photomasks for LCDs
► High precision photomasks for FPD use(Including for OLED use)
HDD glass substrates► Products for near line servers
Imaging related products► Car-mounted cameras│ Technology Synergies in the Information Technology and Life Care Businesses
In HOYA’s various businesses today, its core technologies are glass formation and melting, polishing, molding,cleaning, and deposition. HOYA combines a number of technologies to create value-added products. There arecertain technologies used in common in the Information Technology and Life Care business fields, such aspolishing and optical design technology, and we think it is possible to realize synergies in domains that havecommon characteristics.
As regards production technology, there are many businesses
in the Information Technology field that boast high levels of
production technology, and this has resulted in high levels of
profitability in these businesses. An important measure will beapplying this know-how to businesses in the Life Care field toimprove their production technology.
In addition, in view of the Companywide policy of growing theLife Care businesses, I am aware that one of my roles is toallocate the resources of the Information Technology field,
including technical personnel, to the Life Care businesses.
Recently, we have converted a portion of a plant producing
glass substrates for HDDs to the production of intraocularlenses. The objective of this realignment was to make the bestuse of production technology and technical personnel in the
HDD glass substrates business, which has been adversely aﬀected by the shrinkage in the HDD market, andreallocate these resources to the production of intraocular lenses, where demand is expanding.

Copyright ©2016 HOYA GROUP-

-│ Sources of Growth
The source of HOYA’s growth is its technological capabilities,
and the bearers of this technology are HOYA’s technology
personnel. For this reason, we select highly capable people
and, by putting them in responsible positions without regard tonationality, gender, or age, we wish to accelerate growth in thenumber of technology personnel.

Eiichiro Ikeda
Executive Oﬃcer & COO,
Information Technology and Chief Technology Oﬃcer

Copyright ©2016 HOYA GROUP│ HOYA’s Board of Directors
I have served on HOYA’s Board of Directors for seven years now. From the time I joined the Board until today, theatmosphere has not changed, and all Directors need to express their opinions actively. I believe it is a special
atmosphere that was created by the outside directors who have gone before us. As the Lead Independent Director,
I make sure that there is understanding among the Directors, while also, as I perform my role of overseeing the
conduct of business activities by the Executive Oﬃcers, I remain aware of the need to prevent any collusion
among them.
All the Outside Directors on HOYA’s Board are corporate managers or former corporate managers, and I believe
personally this is a desirable Board makeup. As the Outside Directors go about performing their roles of overseeing
management, their experience in confronting and overcoming diﬃculties is useful to HOYA management.
Regarding that point, as the chairman of the Nomination Committee, I keep this in mind when we selectcandidates for Outside Director.

│ Fostering Human Resources in the Context of Globalization
Previously, after an inspection tour of HOYA’s Singapore plant, I noticed that the members of management of thisplant were all non-Japanese. In developing its manufacturing bases overseas, HOYA actively fosters personnel
from the host countries, delegates authority to them, and appoints them to important positions.
Looking to the future, I believe it will be necessary to foster personnel who have a record of accomplishments
overseas and a good understanding of the Company, and then appoint them to major positions not only overseas
but also in the Head Oﬃce and in our businesses. And, I think that, when fostering and appointing non-Japanese
to important positions, whether the personnel selected for these positions perform their roles and responsibilities
as planned and whether the Executive Oﬃcers can follow up in detail in dialogues with these non-Japanesemanagers will be important.

│ Address Issues with an Eye to the Future
An issue in the Board of Directors to be addressed in the long term is fostering a successor to CEO Suzuki. A
requirement for HOYA top management will be to delegate the day-to-day conduct of operations to the
management of business divisions and have the management abilities to make decisions on the direction of
HOYA’s overall business portfolio management. It will take the time I believe that fostering and grooming CEO
candidates not only from among Executive Oﬃcers but also management of business divisions and external
persons will be extremely important.
Taking account of the awareness of this issue among Board members, CEO Suzuki himself has taken the initiativein recent years to delegate authority to other Executive Oﬃcers and management of business divisions and is
working to give them opportunities to grow as senior managers.

Itaru Koeda
Outside Director

Copyright ©2016 HOYA GROUP│ My Impression of HOYA’s Board of Directors Since My Election Last YearMy impression over the one year that has passed since my election to the HOYA Board of Directors is that, underthe “company-with-nomination committees” management system that HOYA has adopted, Board members focus
on overseeing the execution of business by the Executive Oﬃcers. Another impression I have is that the Board ismade up of individuals with a wide range of experience. This diversity of experience of Board members stimulates
active discussion and results in healthy conduct of Board meetings that concentrate on substance rather thanformalities.

│ HOYA’s Strengths
HOYA operates a wide range of businesses, ranging from contact lenses, which is a B to C (business to customer)
activity, to mask blanks for semiconductors, which is a B to B (business to business) activity. Another feature of
HOYA is that, in all its businesses, it has the full range of functions from strategy formulation to manufacturing andmarketing, while, at the same time, it is developing each of its businesses around the world. Based on thedelegation of authority to each business, all these businesses are pursuing global development suited to theenvironment surrounding their respective business. I think this is one of HOYA’s important strengths as it works tomake its businesses stronger. Also, HOYA’s Head Oﬃce organization is small and flexible, and I feel this makes it
possible for the Executive Oﬃcers to make rapid decisions. When decisions are to be made, such as the entry into
new businesses, it is important do so with the right timing. My impression is that HOYA takes the initiative with asense of speed.

│ Proposal for Growth Going Forward
To give you one example of an issue that the HOYA Group should understand is important for its future growth andshould be addressed is that, in each of its businesses, quality must be in line with high standards. Within the Life
Care business, which HOYA has positioned as a growth area, one business is medical related products. HOYA’s
responsibilities in this business are particularly heavy because its products aﬀect human lives and health. For thisreason, as the HOYA Group develops this business globally, Group companies must work together and innovate asleaders. HOYA Group companies must also always be ahead of changes in standards and ways of thinking about
quality, and respect these to an ever higher degree. In particular, as HOYA looks to further growth, in cases where
it must take initiatives in new businesses as an outsider and integrate these into the HOYA Group, initiatives of thiskind will become substantially more important. To some degree, I think it will be eﬀective for the Head Oﬃce totake the leadership and raise the level of governance in each business. Looking ahead, my proposal for growth isthat, when major changes occur, rather than continuing to conduct business along the same lines as in the past,
we should stop and review the current status and then decisively introduce new initiatives to move in the directionthat HOYA should go.

Shuzo Kaihori
Outside Director

Copyright ©2016 HOYA GROUP

Financial Review│ Scope of Consolidation-

As of March 31, 2016, the HOYA Group consisted of HOYA CORPORATION, 119 consolidated subsidiaries (11 ofwhich are domestic and 108 are overseas), and 9 aﬃliates (4 of which are domestic and the other 5 overseas).
Under global consolidated Group management, the independent management teams of the Information
Technology and Life Care segments take responsibility for executing their respective management strategies andoverseeing subsidiaries in various part of the world. The regional headquarters in the Americas, Europe, and Asia
provide support to promote business operations by strengthening relationships with countries and areas in theirrespective regions, such as providing legal support and conducting internal audits. The HOYA Group has its
Financial Headquarters (FHQ) in the Netherlands.

│ Adoption of the International Financial Reporting Standards-

Beginning with the fiscal year ended March 31, 2011, the HOYA Group has prepared its consolidated financial
statements and other documents in compliance with the International Financial Reporting Standards (IFRS)
pursuant to the first paragraph, Article 120 of Ordinance on Account of Companies. Accompanying this, the HOYA
Group divides its businesses into three reportable segments, based on IFRS. These are Information Technology,
Life Care, and Other Businesses.
The Information Technology segment handles electronics-related products used for the production ofsemiconductors, liquid crystals, and hard disk drives (HDDs), and imaging-related products, such as digital camera
lenses. The Life Care segment deals with health care related products, such as eyeglass lenses and contactlenses, as well as medical-related products, such as intraocular lenses and endoscopes. The Other Businesssegment oﬀers mainly information system services.

│ Review of Performance in Fiscal 2016
In fiscal 2016, ended March 31, 2016, both sales and profit before
tax expanded. The Life Care segment is continuing stable growth,and it accounted for 64% of total consolidated net sales. HOYA is
moving forward with market development for each of the productsin this business, and initiatives are under way to increase
production capacity in eyeglass lenses and intraocular lenses
where expansion is forecast. Our view is that steady progress isbeing made toward having the Life Care business drive theCompany’s overall growth as it should. In the Information
Technology segment, especially in the latter half of the fiscal year,
the business environment became severe as a result of the impactof the appreciation of the yen and deterioration in market
conditions. However, as a result of structural reforms begun inprevious years to optimize our production bases and otherinitiatives, we have already transitioned to a structure where
profitability can be maintained. During the fiscal year under review,

Copyright ©2016 HOYA GROUP-

the segment profit ratio of the Information Technology segment as
a whole was 36.5%, which was 4.7 percentage points higher thanin the previous fiscal year.
Turning to the performance of the HOYA Group as a whole,
consolidated sales amounted to ¥505,714 million, representing an
increase of 3.2% over the previous fiscal year. The Group reported
a gain on foreign currency of ¥11.8 billion in the previous fiscal
year, but a loss of ¥2.6 billion during the year under review. Due inpart to this, profit before tax was ¥119,099 million, up 0.7% fromthe previous fiscal year, and net profit amounted to ¥93,317
million, 0.4% higher year on year. The ratio of profit before tax tosales was 23.6%, which was 0.5 percentage point lower than the
24.1% reported in the previous fiscal year.
The Life Care segment recorded sales of ¥322,673 million, 5.2%
higher than the previous fiscal year. Segment profit was ¥57,747
million, representing an increase of 9.1%. The segment profit ratio
was 17.9% (an improvement of 0.6 percentage point over theprevious year). In the eyeglass lenses business, as a result of
expansion in sales in overseas markets, principally Europe and theAmericas, earnings on sales were favorable. In the contact lenses
business and intraocular lens business, although a substantial
increase in sales was recorded, growth in endoscopes was weak.
Although results for the fiscal year showed that the increases insales and profits of the Life Care segment were generally firm,
there were regions and products where sales were weak, including
sales of eyeglass lenses in China and intraocular lenses in North
America. In addition, in the eyeglass lenses business where
expansion in demand is expected, operations began in earnest,
following a preparatory period, at the Philippines factory. In theintraocular lenses business, work on expansion of production
capacity for new products launched for this first time this fiscal
year proceeded. In the endoscopes business, new products werelaunched in the latter half of the fiscal year in Japan and Europe.

In the Information Technology segment, sales amounted to¥178,749 million, down 0.8% from the previous fiscal year.
Segment profit was influenced by the sale of tangible fixed assets
during the period, the losses incurred in the liquidation of a
subsidiary, and other factors and amounted to ¥65,491 million, an
increase of 14.3%. The ratio of segment profit to sales was 36.5%,
representing a 4.7 percentage point increase improvement.
Overall, in the midst of a business environment where major
growth cannot be expected, performance in the first half was firm
due mainly to the eﬀects of a weakening of the yen, but, in thelatter half, as a result of the deceleration in the market and theappreciation of the value of the yen, the operating environment
became tougher. Sales of semiconductor-related products and
LCDs rose above the previous fiscal year, and imaging-related
product sales were about the level of the previous year. However,
HDD glass substrates experienced diﬃculty because of the stagnation in the PC market and the encroachment ofsolid state drives (SSDs) into the HDD market; thus, sales declined from the previous fiscal year. For the businessas a whole, growth in sales of high-value-added products and reductions in fixed costs helped to improvemargins in this segment, and HOYA was able to secure an increase in profit.
(For further information on performance by product, please refer to the Business Overview Section.)

Copyright ©2016 HOYA GROUP│ Financial Position
Total assets at the end of the fiscal year under review decreased¥94,724 million from the previous fiscal year-end, to ¥639,007
million. Non-current assets decreased ¥15,080 million, to ¥165,086
million. This decrease was mainly due to depreciation, thedecrease in value of assets due to the appreciation of the yen, andother factors, which resulted in a decrease of ¥19,440 million intangible assets and a decline of ¥3,344 million in intangible assets.
Current assets decreased ¥79,644 million, to ¥473,922 million.
This was primarily the result of a decline in cash and cash
equivalents of ¥62,527 million due to the payment of dividends,
buybacks of the Company’s own shares, and other factors.
Total equity decreased ¥97,921 million, to ¥498,174 million. Thiswas primarily due to an increase in treasury shares, which istreated as a deduction from equity, of ¥28,701 million. Retained
earnings decreased ¥36,375 million, and accumulated othercomprehensive income declined ¥30,453 million.
Equity attributable to the owners of the Company decreased¥96,749 million, to ¥493,265 million.
Total liabilities increased ¥3,196 million, to ¥140,834 million.
The ratio of equity attributable to the owners of the Company’s
total assets at the end of the fiscal year was 77.2%, which was 3.2
percentage points lower than the 80.4% at the previous fiscal yearend.

Copyright ©2016 HOYA GROUP-│ Cash Flow-

Cash and cash equivalents at the end of fiscal 2016, inclusive of¥17,737 million due to fluctuations in foreign currency rates, were¥286,292 million, a decrease of ¥62,527 million from the end of theprevious fiscal year.
Net cash generated from operating activities was ¥131,889 million(representing an increase in net cash generated from operating
activities of ¥16,509 million compared with the previous fiscal
year). Factors contributing to cash from operating activities
included profit before tax of ¥119,099 million (an increase of ¥850
million in pretax income compared with the previous fiscal year),depreciation and amortization of ¥33,524 million (a decrease indepreciation and amortization of ¥1,328 million compared with theprevious fiscal year), a decrease in trade and other receivables of¥2,741 million (an increase of ¥3,478 million compared with theprevious fiscal year), an increase in trade and other payables of¥355 million (a decrease of ¥669 million compared with theprevious fiscal year), and other factors. On the other hand, factors resulting in cash outflow included an increase ininventories of ¥2,758 million (an increase of ¥2,057 million compared with the previous fiscal year) and income
taxes paid of ¥23,206 million (a decrease in income taxes paid of ¥4,148 million compared with the previous fiscal
year).

│ Capital Expenditures/Depreciation and Amortization
Capital expenditures of the HOYA Group in all businesses amounted to ¥20,328 million, representing an increaseof ¥144 million over the previous fiscal year.
Capital investments in the Information Technology segment were ¥9,358 million, or 46.0% of the Group’s total
capital investments. Capital investments in the Life Care segment amounted to ¥10,756 million, or 52.9% of thetotal.
These investments were funded from internal sources.
The principal objectives of these capital investments in the
Information Technology segment were the acquisition of
manufacturing equipment and facilities for production of highvalue-added products and investments for increasing productivity.
In the Life Care segment, investments were made in the eyeglass
lenses business, where HOYA is aiming to accelerate its growth inglobal markets. Investments were made in production facilities inThailand, the Philippines, and elsewhere for increasing andoptimizing capacity as well as for expansion in markets that HOYA
has newly entered. In the intraocular lenses for the treatment ofcataracts business, sales of products launched at the beginning of
the fiscal year are expanding, and investments were made in
expansion of production facilities in this business in response torising demand.
Depreciation and amortization (including impairment losses) for the
fiscal year under review were ¥34,504 million, 1.8% lower than in the previous fiscal year.

Copyright ©2016 HOYA GROUP-│ Policy Regarding Retained Earnings and Dividends
The HOYA Group is expanding its business activities globally and changes its business portfolio in accord withtransitions in the times and the business environment, with the objective of maximizing its corporate value.
HOYA’s capital policy pursues the optimal capital composition to maintain its financial soundness and capitaleﬃciency, while, at the same time, building retained earnings to finance the Company’s future growth andmaintaining an optimal balance with returning profits to shareholders.
Moreover, HOYA’s management stance is to emphasize return on capital and generate as much profit as possible
through the eﬃcient use of the capital that shareholders have invested in the Company. Going beyond this, HOYA
practices Shareholder Value Added (SVA) management and works to raise return on invested capital as high above
the cost of capital as possible and aim for maximizing corporate value.
Regarding retained earnings, resources will be preferentially allocated to investment in the Life Care business,
which HOYA has positioned as a growth business. These resources are being used for increasing market share,
entry into untapped markets, and developing as well as acquiring new technologies. In addition to growing existing
businesses, HOYA proactively pursues various possibilities, including mergers and acquisitions, to further enrich its
business portfolio and expand its business operations. In the Information Technology business field, which has
been positioned as a steady source of earnings, we will continue to make capital investments that further reinforce
the technological capabilities that are the source of competitiveness and investments that will contribute to thedevelopment of next-generation technologies and new products.
In determining return to shareholders, HOYA’s bases for judgment
are performance results and the level of retained earnings for theperiod, funding needs in the medium-to-long term, and thecomposition of capital from an overall perspective. HOYA thenactively distributes dividends to shareholders and conducts sharebuybacks.
For fiscal 2016, HOYA declared a dividend of ¥75 per share. At aconsequence, its consolidated dividend payout ratio was 33.3%.
Also, in line with the dividend policy previously described, HOYA
decided to conduct a share buyback program totaling ¥135.0
billion.

Copyright ©2016 HOYA GROUP-