ANNUAL REPORT2011

For the year ended 31 March, 2011

Onwards and Upwards

HOYA Corporation

HOYA is striving to become a sustainable company bycontinuously providing definite value to society based on an
unwavering management philosophy and a portfolio strategy
that is both unique and timely.
Hiroshi Suzuki
President and CEO
The fiscal year ended March 2011 was witness to a string of economic events, from theEuropean financial crisis to a persistently strong yen, the rise of emerging countries, and further
deflation in Japan. And, in March, Japan was hit with a disaster of unprecedented proportions,
the Earthquakes and Tsunami. It was therefore simultaneously a year of momentous change in
HOYA's operating environment.
Despite navigating such rough waters, HOYA pursued a management strategy of capturing
value in Information Technology and concentrating management resources in Life Care toaccelerate growth.
Reviewing the past year, I will provide an overview of the year and report on prospects for the
future.

Initiatives and Achievements: Review of Fiscal 2011HOYA is pursuing calls for maintaining our competitive edge with the aim of capturing a certain
level of revenues in Information Technology, which pivots on our exceptional optical technology,
and accelerating growth in Life Care by injecting management resources on a priority basis. In
Life Care, there was marked growth in the global market and among the emerging market
countries in particular.
As a result of the above, in the fiscal year under review we achieved consolidated net sales of¥413,349 million from continuing operations, an increase of 2.7% over the previous year, andincome before income taxes and minority interests of ¥63,758 million, a year-on-year increase of
26.2%. The hard disk glass media manufacturing business was transferred, so it is classified asa discontinued operation. We recorded a gain on transfer of ¥10,343 million, and income fromdiscontinued operations totaled ¥9,873 million. As a result, net income for the HOYA Groupoverall was ¥59,579 million, a year-on-year increase of 43.5%.

Fundamentals and Future Prospects: A Roadmap to Growth
Since its establishment in 1941 as Japan's first optical glass manufacturer, HOYA has pursued abasic business strategy of being "a big fish in a small pond." The "pond" is the market and the"fish" is the share of that market. This expresses the basic strategy of gaining a dominantposition by capturing the top market share in limited niche markets. We believe that finding manysmall ponds and creating our own new ponds will translate into sustained growth for the HOYA
Group as a whole.
To put it another way, subdividing otherwise large markets on the basis of different axes (region,
product and technology), selecting segments that allow us to leverage our strengths, andfocusing energy and resources in them makes it possible to gain an overwhelming presence inthose segments. As a school of big fish in small ponds, we will continue striving for a balanced
form of management while maintaining our competitiveness.
Globalization is also an important concept that speaks to the future of HOYA.
In 1974 we established our first overseas production site in Thailand and subsequently
established regional headquarters in Europe, North America and Asia, as we actively worked to
globalize the organization. Although we are still only halfway there in terms of globalization in thetrue sense. True globalization goes beyond production and sales; it means having head office
functions and decision-making for development and the like spread out all over the world. We
firmly believe that making optimal management decisions quickly from a global perspective will
ensure sustained corporate growth over the long term.
With the spotlight on health and medicine continuing to get brighter, it is expected that themarket itself will continue to steadily grow in a way that is relatively impervious to economic ups
and downs. HOYA intends to apply the optical technology it has cultivated to the field of
medicine and raise its presence in businesses related to health and medicine. The Groupstrongly believes that by providing enduring solutions that meet needs in areas closely
connected to people's lives, such as the areas we are currently involved in, endoscopes,
eyeglass lenses and intraocular lenses, it will be able to bring about changes in the quality of
those lives. Moreover, HOYA will continually search for the seeds of new businesses in which it
can leverage its strengths and conduct focused investment for growth.

To Our Shareholders
Reconstruction in the aftermath of the Great East Japan Earthquake will be without a doubt amajor task for Japan, as well as for industry and commerce at the global level. The first steps are
already being taken. As a member of the industrial community, HOYA is fully committed to therecovery and reconstruction of the affected regions.
Optical Technology comprises the DNA of HOYA. With this DNA as our core competence, we
intend to provide value to society in various forms to make our presence even stronger.
We thank our shareholders and customers for their ongoing support and understanding.

HOYA Annual Report 2011

We will build a solid business continuity plan to become aneven stronger global competitor.
Hiroshi Hamada
Chief Operating Officer
With burgeoning signs of a recovery in the global economy, in the fiscal year ended March 2011HOYA actively carried out operations in target markets in its various business sectors. Having
converted to a lean, muscular organization in the global financial crisis, the Company promoted
five initiatives aimed at further growth. Going forward HOYA will reformulate its business
continuity plan, the lifeline of any corporation, based in part on its experience with the Great East
Japan Earthquake.

We Achieved Healthy Growth in Our Businesses
Despite being subjected to an entirely unforeseen situation at the end of the term in the form of
the Great East Japan Earthquake, we were able to make fiscal 2011 a year of healthy growth,even compared to our competitors.
Information Technology
In the Information Technology segment, prices for digital devices dropped at a faster rate as
market players consolidated, and the market itself began to contract. In the area of mask
blanks for semiconductor production, we were able to stay a step ahead of the competition
with products compatible with extreme ultraviolet (EUV) lithography. In addition, we sold off
our hard disk media manufacturing operation and devoted management resources to our HDD
glass substrate business. We made a bold decision to invest in the Philippines to construct a
new factory, which gave us a framework for accommodating rising demand, while striving to
win the fierce price wars.
In the area of PENTAX brand digital cameras, our unique, new SLR camera available in 100
color variations strongly appealed to consumers and gave birth to a new group of PENTAX
enthusiasts. The brand's mid-range and medium-format digital SLR cameras delivered the
PENTAX legacy in quality and performance and received glowing reviews from the core groupof PENTAX loyalists, both professionals and amateurs. The segment returned to operating
profit for the full year, thanks in part to promptly implemented structural reforms.

Life CareIn the Life Care segment HOYA achieved growth in overseas markets.
The eyeglass lens business saw the domestic market start to recover as Japan's deflationary
economy began to bottom out. We aggressively entered emerging markets, and the businessgrew faster than the market average.

In the Eyecity contact lens specialty store business, we succeeded in capturing a new customer
segment by focusing on online promotions. With a product lineup that takes advantage of thechain's top share of the retail market, Eyecity proved to be overwhelmingly effective at acquiring
customers.
In the area of intraocular lenses used in cataract surgery, new pre-loaded products enjoyedsteady growth, and we increased our share even in our main market of Japan. We were also
successful in steadily expanding market share in the U.S. and emerging market countries.
In endoscopes for medical use, sales slowed temporarily due to the impact of medical reforms in
the U.S., but signs of a recovery became apparent in the second half. There was marked growthin emerging market countries, and we were able to build a foundation for regional development
going forward.

Five Initiatives for Restructuring Got Off to a Good Start
In 2010, HOYA formulated five restructuring initiatives as a strategy for future growth.
Specifically, the strategy consists of enhancing our core competencies in globalization
technological prowess and accelerating HOYA's growth through 1) human resource training anddiversification, 2) IT infrastructure upgrades, 3) market-driven business expansion, 4) faster
penetration of emerging markets, and 5) efforts to enhance customer satisfaction.
None of the initiatives are meant to be completed in a single fiscal year; they are intended to be
carried out over the medium-to-long term. Our achievements in the fiscal year ended March 31,
2011, however, showed competence and we got off to a good start.
As a case in point in human resource diversification, the intraocular lens business relocated its
global headquarters to Singapore for reasons that include a diverse talent pool, as well as
infrastructure stability. Globalization was also promoted in the endoscope business by hiring
talented people from countries around the world.
To upgrade the Group’s IT infrastructure, a new officer in charge of IT was appointed, and webegan globally integrating our IT infrastructure. Upgrades to IT infrastructure will be accelerated
at the global level from the standpoint of business continuity planning as well.
As mentioned earlier, we made steady progress penetrating the emerging markets during theyear under review. We will continue to build on this success, not only in Asia, but in a broader
spectrum of emerging markets.

New Priorities to Create Even More Definitive Value
In addition to the above initiatives, we identified two new priorities for the fiscal year ending
March 31, 2012: 1) formulate a more in-depth business continuity plan, and 2) develop
innovative products.

1) Build a more in-depth business continuity plan
Fortunately, HOYA’s personnel and facilities were mostly kept out from harm’s way of theGreat East Japan Earthquake. This was in part one of the benefits of having globalized andhaving dispersed our business strongholds throughout the world, rather than having
concentrated them in one place. Some of our customers and suppliers, however, sufferedmajor damage from the disaster itself and the subsequent power shortages, and we had our
supply chain disrupted temporarily. Based on this experience, we intend to formulate a morein-depth business continuity plan.

2) Develop innovative products
To continue to facilitate the growth of businesses in the Life Care segment, we will focus ondeveloping innovative new products by investing in new technologies and partnering withother companies, while also considering M&A deals at the global level.
In the Information Technology segment, the other of our two business drivers, we havecontinually maintained a high share of our markets, but many of those markets have matured
and industry players are being reshuffled worldwide. To survive this reshuffling and remain apowerful competitor, HOYA put its advanced technical capabilities to good use, to create
value and provide customer satisfaction that consistently exceeds market expectations.
Guided by these priorities, I believe that the initiatives we take in the year ending March 31,
2012 will lead, also, to an increase in corporate value from the perspective of ourshareholders and our other stakeholders at large. Thank you for your continuing support andunderstanding.

HOYA Annual Report 2011

Advances in semiconductor
performance and circuit miniaturization
Hoya’s contribution to progress in the semiconductor industry
Semiconductors are vital to the operation of products
large and small that we rely on for our daily activities.
These chips control everything from PCs, mobile
phones and digital cameras to home appliances andautomobiles.
Moore’s Law symbolizes the remarkable speed ofadvances in semiconductor performance. The law
states that transistor density on semiconductor chips
will double approximately every 18 months.
Semiconductor devices are made by using ultraviolet

Clean room in Nagasaka plantlight to project circuit patterns on the surface of siliconwafers. Hoya used its decades of expertise in optical technology to start a lithography businessin the 1970s for semiconductor manufacturing equipment. By fabricating the mask blanks used
to make semiconductor photomasks, Hoya has played an important role in the rapid advances insemiconductor devices expressed by Moore’s Law.

Miniaturization is now measured in molecules and even atoms
Advances in scaling down design rules (the width ofcircuit lines) have been critical to making
semiconductor devices with greater circuit density.
In the past, line width was measured in microns, whichis short for micrometer (one thousandth of amillimeter). Today, semiconductor makers use
nanometers (one millionth of a millimeter) instead. The
switch to nanometers, which are used to express thesize of molecules and atoms, demonstrates theexacting demands now placed on semiconductor miniaturization.

HOYA Annual Report 2011

Why miniaturization is so important
EUV – The ultimate lithography technology
Lithography is the process by which circuit patterns
with line width measured in nanometers are formed on
semiconductor wafers. This field, which is critical toprogress in semiconductor miniaturization, is Hoya’s
greatest strength.
Lasers are used as the light source in steppers, which
are machines that project microscopic circuitry on
wafers. The most advanced technology is ArF laser
immersion lithography, which uses a wavelength of
193nm. This technology can form lines only 40nm to
30nm wide, a level no other type of lithography canmatch.
The accelerating pace of progress in circuit density isplacing increasing demands on the equipment used to
manufacture semiconductor devices. Only limited
potential remains for more progress with ArF laser
technology. To move on to the next step, theMo/Si multilayer for EUV lithography

semiconductor industry has turned its attention to EUV,
which is regarded as the ultimate lithography technology.
Extreme ultraviolet (EUV) light is the section of the ultraviolet spectrum with an extremely shortwavelength. In fact, the EUV wavelength of only 13.5nm is less than one-tenth the wavelengthsof ArF lasers.
Using light with this remarkably short wavelength opens the way to fabricating semiconductors
with an even higher density. Products that incorporate these chips will be faster, smaller andmore versatile.

Taking on the challenging of achieving a breakthroughMany problems must be solved before manufacturers
can use EUV lithography on their production lines.
Interest in EUV first emerged more than 20 years ago.
The fact that this technology has not genuinely
reached the practical, mass productions stage shows
how high the technological barriers are.
Photomasks are instrumental to the transfer of circuit
patterns to silicon wafers. To make a photomask, theMask blanks for semiconductor
production

pattern is placed on a glass substrate called a mask
blank. Unlike ArF lithography in which light istransmitted through a transmission mask, EUV
lithography reflects light off of a defect-free reflection
mask to expose the circuit pattern. This is achieved
through light reflected by interlayer interference andrequires an ultra-multilayer membrane comprised ofseveral tens in alternating layers of molybdenum andsilicon. Each paired molybdenum-silicon layer is only
7.0nm thick, with a tolerance in precision of no morethan 0.01 nm. Precision membrane formation

technology is vital to achieving this level of accuracy. Moreover, the substrate’s flatness cannot
vary by more than 30nm. This is about four times more exacting than for conventional
photomask blanks. Furthermore, precision control is required for both sides of an EUV substrate.
Defects are not allowed: Imperfections on the blank will be transferred to the wafer. EUV
lithography uses light with a wavelength more than one order of magnitude smaller than withconventional lithography. As a result, even imperfections with a height more than 20 times lessthan the maximum permissible defect size for conventional lithography will become a phase shiftdefect that is transferred to the wafer with EUV technology. This is why the blank can have no
defects larger than 30nm. As a frame of reference, a particle of tobacco smoke measures 1 μm
(micron) or smaller. This means a defect 1/30th the particulate size of tobacco smoke may not
be tolerable, which offers some idea of how microscopic and almost none-existent the defects
must be.
In relative terms, this would be the equivalent of not allowing a defect the size of single pollen on
a flat surface the size of a soccer field.
Until recently, it was this daunting nature of those many challenges that held progress in thecommercialization of EUV lithography back.

HOYA Annual Report 2011

The future for EUV and Hoya’s goals
Our mission as the leading manufacturer of mask blanks
The most advanced semiconductors that are madetoday require a design rule of 40nm to 30nm. But theindustry is now on the verge of the 20nm (generally
referred to as 2Xnm) era. That means EUV lithography
will probably move from research facilities to
production facilities at last.
As the world’s largest supplier of mask blanks, Hoyalong ago began EUV research activities. Over theyears, Hoya steadily moved closer to commercializing
this technology by surmounting one hurdle after
another. Mass-production EUV equipment will probably
appear after a few more years. Hoya is determined toretain its position as the leading mask blankmanufacturer as the semiconductor industry makes thetransition to EUV lithography.
This commitment reflects HOYA’s mission of

IBD System

contributing to the semiconductor industry in a
supporting role by keeping pace with progress with design rules, no matter how fine circuit
patterns become.
Semiconductor devices are a vital part of many products, and mask blanks in turn are an
essential part of the production of these devices. Recognizing the importance of these blanks,
Hoya is firmly dedicated to fulfilling its mission of supplying blanks regardless of the associatedrisks.

The vital role of semiconductor technology
Only 20 years ago, personal computers were large,
heavy and slow. Mobile phones were just a distant
dream. Today’s notebook computers are far superior toeven the large computers that were used two decadesago. Mobile phones, smartphones, tablet computersand other sophisticated IT products have been an
indispensable part of our lives.
Micro fabrication

Advances in semiconductor technology have been
critical to the emergence of these new IT products. In a few years, semiconductor companies willtake another step forward by using EUV lithography for mass production. This will undoubtedly
trigger a new phase of progress among manufacturers of electronic devices and many othertypes of products.

Aiming for even more ambitious goals
Micro electro-mechanical systems (MEMS) are tiny integrated devices or systems that combine
semiconductor and mechanical components, usually on a single silicon substrate. Making MEMS
even smaller will create many potential applications. For instance, much potential exists in thehealth care field. MEMS may be used in artificial hearts, inner ears and other organs. As part ofa smart grid, MEMS could create a system that precisely oversees power consumption ofindividual home appliances. The result would be a big contribution to solving problems involving
energy.
EUV has the potential to become a force behind progress like this on a virtually unlimited scale.
Furthermore, these dreams will most likely become reality in the not-too-distant future.

HOYA Annual Report 2011

Medical Endoscopes - ClinicalApplication and Market Opportunity
Introduction to medical flexible endoscopes
Flexible endoscopes are used by physicians to
examine the interior of human organs (such as
esophagus, stomach, duodenum, colon, lung,etc.) and to assist in minimally invasive medical
procedures pertaining to the observation andtreatment of disease in these organs. Although
the most common use of flexible endoscopes so
far has been in the area of colo-rectal cancer
screening, flexible endoscopy is also gaining
prominence in assisting the observation andtreatment of disease in esophageal cancer,
gastric cancer, lung cancer, etc.

Medical Flexible Endoscopes

Market growth potential and drivers
Healthcare providers around the world are looking for innovative medical solutions that reducethe cost of healthcare delivery, while improving both the quality of service provided and theaccess to superior healthcare.
Our aim at PENTAX Lifecare is to serve the evolving needs of the market and grow our annual
revenue by at least 10% in the developed countries and by over 30% in the emerging countries.

HOYA Annual Report 2011

Best-in-Class Quality and Customer
Satisfaction
To improve the standard of patient care and quality of healthcare delivery
PENTAX Lifecare is a division of Hoya Corporation andour mission is to improve the standard of patient careand quality of healthcare delivery by providing the bestendoscopic products and services with a focus on
QUALITY, CLINICALLY RELEVANT INNOVATION,
and SIMPLICITY.
Through leading edge R&D and manufacturing, we
provide endoscopic imaging devices and solutions to
the global medical community under the brand name of
PENTAX. We specialize in the development of video
and fiber endoscopy equipment for observation,therapeutic and research applications in the GI, ENT
and Pulmonary medical fields, offering a full range of
products and services.
In addition to our manufacturing facilities and global
headquarters in Japan, PENTAX Lifecare has aworldwide focus and presence with R&D, regionalsales, service, and in-country facilities around theglobe. Our global employees represent the diverse
countries where we do business, allowing us to provide
innovative solutions tailored to meet the specific needs
across diverse geographical regions. It is our ultimate goal to provide the highest level ofcustomer satisfaction within our industry.

Advantages and Features
What customers say about our products
Best-in-class image quality

Leading edge technology

Superior image acquisition and processing
technology with high-definition, megapixel
imagesAdvanced imaging technologies such as
endoscopic ultrasound and confocal
endoscopy

World-class product quality andBroad portfolio

reliability

Leading the market with a broad portfolio of

Ensuring the optimal durability, usability andproduct offerings to suit each customer inquality of products to increase customer

every clinical field of endoscopy

productivity

HOYA Annual Report 2011

Plans for future growth
Products and technology
Focus on enhancing the clinical value proposition·Address unmet clinical needs·Increase customer benefit and quality of clinical outcome·Create and leverage a competitive advantage
Lead with “Advanced Application” products and solutions
Innovate premium end technology and partner with top-tier technology providers to develop
differentiated and clinically relevant products.
Specific solutions for both developed and emerging countries
Innovate new technologies for developed countries while developing new cost-effective products
for the emerging healthcare markets. In effect, pursue a two pronged strategy enabling
leadership in the premium segment along with technology flow down towards the lower cost
segment.
Expand product portfolio into therapeutics
Lead with the flexible endoscopy platform in minimally invasive surgery with growth inendoscope enabled therapeutics.

Operations
Improve profitability while investing for growth.
Accelerate product development cycle and continually improve quality while reducing cost of
goods.
Improve global organization and process by investing in new leadership talent from top-tier
medical device companies.

Sales Strategy
Focus on customer satisfaction.
Strengthen our brand.
Expand rapidly into emerging markets and broaden
global reach with local distributors.
Physician training.

HOYA Annual Report 2011

Hoya Group and Scope of Consolidation
As of March 31, 2011, the Hoya Group consists of Hoya Corporation, 102 consolidated
subsidiaries (4 in Japan and 98 overseas), and 10 affiliates (5 in Japan and 5 overseas).
The Hoya Group is managed on a global, consolidated basis. Each of the Group's businesssegments, including Information Technology and Life Care, carries out its business strategies as
formulated by the global headquarters at Hoya Corporation, yet with its own management
responsibility. Regional headquarters in North America, Europe and Asia support business
operations by strengthening relationships with countries and areas in the respective regions, bysuch means as providing legal support and conducting internal audits. The Hoya Group's
headquarters for finance is in the Netherlands.
Adoption of IFRSs
Dividends

Net Sales

IncomeFinancial Position

Capital Expenditures/Depreciation and Amortization
Cash Flows

Subsequent Event

Adoption of IFRSs
Effective from the fiscal year ended March 31, 2011, the Company prepares its consolidated
financial statements in compliance with IFRSs. With respect to reporting segments presented in
the overview of operation by business category, Hoya divides its business into three reporting
segments in accordance with IFRS 8. These segments are Information Technology, Life Care,and Other Businesses.
The reporting segments are constituent units of the Group for which separate financial
information is obtained and reviewed regularly by the Board of Directors, the Group’s chief
operating decision making body, to determine the allocation of management resources andevaluate business performance. In accordance with its management philosophy, the Group has
categorized "information technology" and "life and culture" as its business domains. To achievesustained growth in corporate value in these business domains, the Group makes decisions on
the allocation of management resources and monitors their operating results. As a consequence,
the Group consists of three reporting segments consistent with the above business domains:
Information Technology, Life Care and Other Businesses.
The Information Technology business handles products for the myriad of applications spawnedby the digitalization of information and the emergence of the Internet. This segment produces
and sells a broad array of I/O (input/output) device related products in the information technology
sector, including electronics related products that are essential for modern digital information andcommunications technologies, and optical technology-based imaging related products that arenecessary to import pictures and video images as digital information.
The Life Care business produces and sells health care related products for daily use in thehealthcare and medical sectors, and medical related products, including equipment andmaterials for use in medical procedures. This segment is typically required to obtain approvals
and permissions in accordance with the Pharmaceutical Affairs Act in Japan and otherregulations. As a result, sophisticated technologies and highly reliable quality control systems
are critical for smooth business operation in this sector.
The Other Businesses segment mainly offers information system services, and takes charge of
new businesses.

Net Sales
In the fiscal year under review, the global economy saw a measure of recovery, mainly inemerging nations. However, the economic outlook for the U.S. and Europe remains clouded. In
Japan, the continued strength of the yen has produced an elevated sense of caution, especiallyamong exporters. To make matters worse, the Great East Japan Earthquake that struck on
March 11, 2011, together with the resulting crisis at affected nuclear power plants, havecombined darken the mood, not only in the affected regions, but indeed the entire Japanese
economy.
Against this backdrop, the Hoya Group's production and shipments increased year on year
owing to growth in orders accompanying the markets’ recovery. However, sales weresignificantly affected by lower product prices and the strong yen. Hoya was also affected byquake related damage at both customers and suppliers, and by a decline in shipments enforced
by production stoppages at some of its own plants.
As a consequence, consolidated net sales amounted to ¥413,349 million, up ¥10,920 million(2.7%) year on year. By principal business segment, net sales increased 3.9% year on year in
the Information Technology business, and rose 1.9% year on year in the Life Care business.
By customer region, net sales to customers in Japan increased 5.1%, to ¥160,210 million, while
net sales to overseas customers grew 1.2%, to ¥253,139 million. As a result, the composition of
net sales was 38.8% domestic and 61.2% overseas.
In currency markets during the fiscal year under review, the yen rose 8.0% against the U.S.
dollar, to ¥85.22, 13.8% against the euro, to ¥112.61, and 0.4% against the Thai baht, to ¥2.74
compared with the previous year. For the Group overall, exchange rates reduced net sales by¥17,324 million. If converted using the previous fiscal year's rates, net sales would haveincreased by ¥28,244 million (7.0%) year on year.

SalesIncomeAs outlined above, net sales increased 2.7% year on year to ¥413,349 million. In addition, cost
cutting initiatives centering on fixed costs resulted in lower expenditure. As a result, income
before taxes from continuing operations rose 26.2% year on year, to ¥63,758 million.
The pretax margin was 15.4%, up 2.8 percentage points year on year from 12.6%.
Contributing factors to the increase in income before taxes included the following: The Company
reported brisk growth in sales of glass disks for hard disk drives (HDDs), optical lenses andoptical glass. In digital cameras, meanwhile, new product launches and price protection
initiatives combined with cost reductions in sales promotion to boost profitability, such that thebusiness went from posting a large pretax loss the previous fiscal year to delivering a pretax
profit in this.
In the Life Care business, healthcare related products (eyeglass lenses and contact lenses)
fared well, while in medical related products (endoscopes for medical use), profitability improved
year on year amid a recovery in the market.
On April 28, 2010, moreover, Hoya Corporation completed an agreement to transfer the harddisk glass media manufacturing business and related assets operated by Hoya Corporation andHoya Magnetics Singapore, Pte., Ltd., its wholly owned subsidiary, to the U.S. company Western
Digital Corporation as of June 30, 2010. For the fiscal year under review, Hoya classified the
HDD glass media business as a discontinued operation, booking a ¥10,343 million gain on thesale. Including income for the year from discontinued operations, income for the year from all
operations increased 43.5% year on year, to ¥59,579 million.
The hard disk market is expected to continue to see high growth going forward, mainly for
notebook PCs and digital household appliances. Following the transfer, Hoya aims to leverage
its glass materials technology and precision processing technology and concentrate
management resources on its HDD glass substrates, which currently holds the leading global
market share, to further enhance business competitiveness and achieve growth.
Return on assets (ROA) was 10.5%, and return on equity attributable to owners of the Company(ROE) was 16.3%, both representing year-on-year improvements.

Profit before tax/Net income

Profit Ratios

Profitability

Stock Price Data

Dividends
Hoya determines dividends for each fiscal year by taking into account the Company's
performance and medium- and long-term capital requirements. It also tries to strike a balance
between returning profits to shareholders, employee welfare benefits, and supplementing
internal reserves to fund future growth. Hoya's policy regarding internal reserves is to continue toactively appropriate resources for marketing for consumer products, primarily in the medical
field, while also making timely investments in corporate mergers and acquisitions and R&D for
future growth, as well as investing to ensure sufficient production capacity and to develop nextgeneration technologies and new products.
In the fiscal year under review, after balancing the need for internal reserves for future growth,Hoya paid an interim dividend of ¥30 per share and a year-end dividend of ¥35 per share, for an
aggregate dividend of ¥65 per share for the full year, on a par with the previous fiscal year.

Dividends per share

Financial Position
Total assets as of March 31, 2011 stood at ¥578,641 million, an ¥18,351 million or 3.3%
increase compared with a year earlier.
Non-current assets declined ¥16,953 million, or 7.7% year on year, to ¥204,185 million.
Current assets increased ¥35,304 million, or 10.4%, year on year to ¥374,456 million. This waslargely attributable to other short-term financial assets increasing ¥21,379 million year on year,to ¥26,964 million, and to cash and cash equivalents rising ¥17,313 million year on year, to¥185,252 million.
Non-current liabilities were down ¥2,658 million from the previous fiscal year-end, to ¥111,961
million, largely because of a ¥2,226 million drop in interest-bearing long-term debt.
Current liabilities increased by ¥2,218 million year on year, to ¥201,100 million.
Total equity rose ¥18,792 million year on year, to ¥377,541 million, due in part to an increase of¥31,703 million in retained earnings. Equity attributable to owners of the Company, which is
obtained by deducting non-controlling interest in equity from total equity, amounted to ¥376,836
million, improving the ratio of equity attributable to owners of the Company by 1.3 percentage
points year on year, to 65.1%.

Total Assets/Total equity/Owners' Equity Ratio

Capital Expenditures / Depreciation and Amortization
Capital expenditures during the fiscal year under review totaled ¥38,488 million, 32.6% morethan in the previous fiscal year. Investment in the Information Technology business accounted
for approximately 70% of the total. These investments were aimed at next-generation advanced
technologies and expanding production capacity, with a focus on expanding and strengthening
facilities for semiconductor-related products and glass disks for HDDs. In the Life Care business,the company invested to boost production capacity, centering on Asian production plants, with aview to expanding eyeglass lens production volume.
Depreciation and amortization costs for the fiscal year under review decreased 2.6%, to ¥30,369
million. The Information Technology segment accounted for approximately 60% of this, at¥19,111 million.

Capital Expenditure/Depreciation and Amortization

Cash flows
Net cash provided by operating activities amounted to ¥92,514 million, an increase of ¥8,780
million from the previous fiscal year. The main positive factors were income before taxes fromcontinuing operations of ¥63,758 million (up ¥13,244 million year on year), and depreciation andamortization of ¥31,294 million (down ¥2,660 million). The main negative factors included anincrease in inventories of ¥10,126 million (down ¥20,219 million) and ¥8,370 million in income
taxes paid (down ¥2,357 million).
Net cash used in investing activities amounted to ¥38,491 million, a decrease of ¥2,232 million
compared with the previous fiscal year. This was primarily attributable to ¥20,654 million inproceeds from the transfer of the glass media business, the agreement for which was signed in
the first quarter, as well as payments of ¥36,041 million (up ¥9,390 million) for the acquisition ofproperty, plant and equipment (mostly in the Information Technology business), and of ¥20,000
million for negotiable certificates of deposit (acquired for the purpose of investing surplus funds).
Net cash used in financing activities amounted to ¥31,244 million, a decrease of ¥53,486 million
from the net cash used in the previous fiscal year. This was mainly due to a total of ¥27,971
million in dividends paid (a decrease of ¥265 million year on year) and ¥3,337 million in
repayments of long-term borrowings (a decrease of ¥5,808 million).
As a result of the above, the balance of cash and cash equivalents as of March 31, 2011, was¥185,252 million, a year on year increase of ¥17,313 million.

Cash flow provided by operating activities

Subsequent Events
Nothing of note.
HOYA Annual Report 2011

The HOYA Group remains committed to its management philosophy, which identifies“information technology” and “life and culture” as its principal business domains. In order toensure sustainable growth in its corporate value in each of these domains, the Group continues
to make decisions with respect to the allocation of management resources while monitoring
operating results.
In this context, the HOYA Group has further identified three reportable business segments:
Information Technology; Life Care and Other, which are aligned to the aforementioned businessdomains effective from the fiscal year ended March 31, 2011.

In electronics-related products, conditions were bolstered by theSales

global recovery in semiconductor- and liquid crystal-related
markets driven mainly by demand from emerging countries.
While the HOYA Group experienced a year-on-year increase in
overall shipment volumes primarily of advanced, high-precision
products, this was not reflected in substantial sales growth due
mainly to the continued decline in product prices and rapid
appreciation of the yen.
In imaging-related products, sales volumes were up from theprevious year on the back of robust activity in the digital camera
market. This was largely attributable to the positive turnaroundin global demand particularly in emerging countries. Shipment volumes of camera modules
incorporating interchangeable lenses were also strong. In its finished stock lens lineup, HOYA’s
Pentax brand digital cameras witnessed ongoing growth in single lens reflex cameras reflecting
robust demand mainly for entry-level models. Buoyed by the subsequent upswing ininterchangeable lens sales, volumes rose from a year ago.
Accounting for each of the aforementioned factors, sales in the Information Technology segment
were 208,735 million yen, up 3.9% year on year. Profit for the year before tax amounted to36,506 million yen, 12.3% higher than the previous year.

Electronics related products
Mask blanks for Semiconductor Production

Imaging related products
Optical Lenses
Photonics Division

Photomasks for Semiconductor Production
PENTAX Digital Cameras
Photomasks for LCD Panel Production

Glass Memory Disks for Hard Disk Drives

PENTAX Small-size lenses

In healthcare-related products, shipments of eyeglass lenses

Sales

increased compared with the previous year. In Japan, however,results were affected by lower unit sales prices. Overseas, whilesales also climbed on a local currency basis, results were
substantially impacted by appreciation of the yen.
Sales volumes of contact lenses rose year on year with anincrease in the number of customers visiting directly-owned
stores. This was also attributable to higher sales of value-added
products and the increase in the number of stores following
aggressive expansion initiatives.
In medical-related products, results were affected by ongoing
restraint toward purchases by medical institutions in Europe and the United States. This largely
reflected financial instability in Europe and the slump in economic conditions in the U.S. Despiterobust trends in emerging countries, shipment volumes stalled compared with the previous year
due to such factors as the high proportion of medical endoscope products to total sales in
Europe and the U.S. and the significant impact of appreciation of the yen. On a positive note,sales of intraocular lenses (IOLs) were firm owing to strong sales of soft lenses.
As a result, sales in the Life Care segment were 203,006 million yen, up 1.9% compared with theprevious year. Profit for the year before tax amounted to 36,743 million yen, up 12.4% year on
year.

Health Care related products

Medical related products

Eyeglass Lenses

Endoscopes for Medical Use

Contact Lenses and Eyecity

Intraocular Lenses (IOL)
New Ceramics
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
The year under review was marked by further progress insemiconductor miniaturization and leading to increased activity
for mass production at the 45 nanometer node. At the sametime, consolidation among semiconductor makers at home andabroad has resulted in fewer types of photomasks being used.
The market for mask blanks used in semiconductor production
grew steadily through 2007 but subsequently went through aperiod of contraction amid worldwide economic stagnation until

Mask blanks for semiconductor
production

2010, when demand recovered somewhat.
Such a backdrop contributed to Hoya’s mask blanks business in the volume shipped. In value
terms, however, sales declined year on year as a consequence of falling unit prices andunfavorable exchange rates. Hoya faces continued competition in both cutting-edge and genericproducts, but maintains a high share of the mask blanks market by virtue of an aggressive
approach to development, service and marketing.
Among semiconductor manufacturers there are mounting expectations that extreme ultraviolet(EUV) lithography will prove a promising successor to ArF lithography currently in use for themost complex devices. Hoya has been active in the R&D of mask blanks for use with EUV
lithography, and aims to ramp up trial production of EUV mask blanks soon.
Hoya was fortunate in that its Nagasaka Plant sustained no direct damage due to the Great East
Japan Earthquake. As a precaution against power restrictions in summer, the Company ismaking back-up arrangements including facilities for in-house power generation.

Outlook for Fiscal 2012
Semiconductor makers are migrating to even finer process technologies; namely, 32 and 22
nanometers. As the leading manufacturer of mask blanks for semiconductor production, Hoya
will continue investing in R&D and manufacturing facilities with a view to satisfying thetechnology and quality requirements of next-generation products.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
Mergers among major manufacturers led to further
consolidation of the semiconductor industry in 2010, yet themarket grew more than 30% overall on such factors as arenewal of momentum following the Lehman Shock, and robust
demand for smartphones, tablet PCs and other mobile devices.
If we confine our discussion to photomasks, however, therecovery was somewhat muted. This was for the reason the
upturn for semiconductor makers was sharp enough that they

Photomasks for semiconductor
production

had little time for rolling out new products. Most were busy
mass producing to keep up with demand, and many had to resort to continually using their
existing photomasks. As a consequence, photomask demand from foundries actually declined
year on year. Even so, Hoya achieved slight growth in photomask sales.
Moreover, a trend had begun to emerge for major semiconductor makers to produce their highprecision photomasks in-house. Against this backdrop, Hoya took initiatives to supply premiumquality photomasks needed to support advanced semiconductor development, along with its
emphasis of the middle and lower end of the photomask market.

Outlook for Fiscal 2012
In fiscal 2012, demand for leading-edge products at the 40 nanometer node is expected to rise.
On the other hand for Hoya, the middle and low end of the domestic market therefore holds
promise. In fiscal 2012, the Company will endeavor to increase its exposure to these segmentsof the market, with a view to steadily growing earnings. In addition to cementing its position inthis manner, Hoya remains committed to supplying high-precision photomasks as well.
The Company also aims to leverage its advantages as an integrated photomasks manufacturer
from mask blanks on up. Ties between the photomask and mask blank businesses will bestrengthened more than ever with a view to encouraging information sharing and cooperation insuch areas as process evaluation and product development.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
By the second half of 2009, the LCD panel market had made aremarkable recovery from the previous year’s Lehman Shock.
In the first half of 2010, however, momentum stalled due tofactors such as inventory build-up. Growth resumed in thesecond half amid robust demand for smartphones, tablet PCs
and other mobile devices.
Low-temperature polycrystalline silicon (LTPS) and organic EL

Photomasks for LCD Panelproduction

panels are used in smartphone displays, and this migration
toward these higher-resolution panels is creating increased demand for high-end, high-quality
photomasks. The year under review was expected to be the “breakout year for 3D,” but that title
seems likely to be conferred on 2011 or later years, as sales have not risen to the extent
anticipated.
Under these circumstances, Hoya as a leading manufacturer of photomasks for LCD panel
production strove to supply products catering to the every need of its valued customers. Squaremeasurement shipment volume of photomasks grew strongly as a result in the year underreview. In monetary terms, however, sales rose only slightly as price declines continued
unabated.
Meanwhile, specialty masks came to occupy an increasingly large share of the photomask
market. In fiscal 2011 such masks accounted for roughly 30% of Hoya's photomask sales, or
double the level from the year before. Such value-added growth in sales composition went some
way to offset the decline in prices.

Outlook for Fiscal 2012
Demand for smartphones and tablet PCs is expected to continue expanding in 2011, andalthough these mobile devices feature small displays, the photomasks used command a higher
price per square measurement than those found in televisions. Hoya aims to tap growing
demand for such products by developing technologies for high-performance photomasks
delivering higher resolution. Ultimately, the Company expects these technologies will be
employed in televisions also.
In response to increasing demand for higher-spec photomasks in Japan, Taiwan, and South
Korea, Hoya is also working to share information and integrate functions across its bases in all
three countries. Concurrently, the Company is analyzing the medium-term market outlook with aview to creating a clearly defined roadmap and manufacturing products that accurately meetmarket needs.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
Hoya develops and manufactures glass disk substrates for 2.5inch memory disks in hard disk drives (HDDs), which are usedmainly in notebook PCs and external hard drives. During the
fiscal year under review, the market for these HDDs and theglass memory disks inside them expanded steadily, driven bystrong demand in notebook PCs for both business and personaluse.
The HDD market is expected to continue expanding alongside
growing demand for even larger capacities in data storage, with
HDDs remaining competitive in terms of both price andGlass Memory Disks for Hard
Disk Drives

reliability. This is despite the emergence of a number ofcompeting storage device technologies, including Internet-based cloud computing and solid statedrives (SSD) using flash memories. At the same time, higher storage densities in HDDs will
require glass disks of even higher quality. To address both these output and quality demands,
Hoya in 2010 began production at its second factory in the Philippines and also started
constructing a second factory in Vietnam. As an upside to the large investment this entailed,
Hoya’s capacity for producing glass disk substrates will surge 70% once these two facilities areready.
By contrast, a challenge in the past year was the sharply higher price of cerium, a rare earth
consumed in polishing glass disks. This squeezed profit margins, as it was difficult for Hoya to
ask customers to shoulder this cost increase, and there were limits to cost-reduction efforts. To
solve this problem, Hoya is developing alternative technologies for eliminating the use of cerium.
Hoya believes that it may be able to switch to these alternatives in 2011.
In other developments, on June 30, 2010, Hoya sold its operations for applying magnetic
coatings to glass disk substrates, to concentrate instead on fabricating and polishing glass
substrates. This move will eliminate competitive relationships that stood in the way of in-depth
communications between Hoya and its customers, enabling the free exchange of ideas formutually improving product competitiveness.

Outlook for Fiscal 2012
HDD have advanced rapidly in density from 160GB (gigabyte) per square inch, to 250GB and
320GB. In the near term, mass production will commence on 500GB products. In the first half offiscal 2012, the challenge for Hoya will be improving the quality of glass disks to meet the more
rigorous approval standards HDD manufacturers will impose when they raise density. On theother hand, those higher approval standards will also mean higher barriers to entry that work to
Hoya’s quality advantage. The fundamentals of maintaining high quality, remaining costcompetitive and meeting tight delivery timeframes are lasting strengths we will continue topursue as a manufacturer. Hoya forecasts mass production in 500GB to start in the second halfof 2012.
Moreover, we expect the notebook PC market to gather momentum in the second half of 2012.
Apart from the traditional Christmas sales season, the Chinese New Year has recently begun toboost demand in January and February. Previously, January and February saw a drop-off indemand. We will remain on the lookout to capture this new demand.

TopicsIn HDD recording media, developers are working on newtechnologies to increase storage capacity. At present,
perpendicular magnetic recording is being used to
improve recording capacity by aligning the poles ofmagnetic writing elements perpendicular to the recording
layer. New technologies that hold the promise ofachieving even greater storage densities of one terabyte
per square inch include discrete track recording1 andassist recording2. Although it remains to be seen whichamong these technologies will become mainstream, mass

Mold for Discrete trackrecording media

production of the next generation of media is projected to begin in around 2013. As aleading glass disk company, Hoya is working actively to develop materials and processing
technologies for next-generation media.
1:In this method, channels are created between the tracks of the recording material toreduce the magnetic interference between adjacent tracks. It is expected that this will
enable higher areal recording density.
2:In this method, lasers are used to locally apply heat to the recording medium before
writing to reduce the magnetic coercive force.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
In the fiscal year under review, sales volume in the digitalproducts market compared favorably with a year earlier. Thiscame as demand picked up worldwide, but especially inemerging economies. Hoya similarly posted year-on-year
growth in shipment volume for optical lenses, amid increasing

Molded lenses

orders for high-precision products including compact camera
interchangeable lenses and lenses for digital video cameras.
On the other hand, the Company experienced declining product prices, improvement in the
product mix, and yen appreciation. That Hoya nonetheless achieved year-on-year growth insales from both a volume and value standpoint is attributable to its launch of high-performance
optical materials with superior optics, anticipating market needs for higher zoom power, slimmer
bodies and wide-angle shooting capabilities.
In addition to the boost provided by high-refractive-index, high-dispersion optical materials
launched the previous year, there were contributions also from an expanded lineup of highrefractive-index, low-dispersion materials.
At the same time, the competitive environment especially for polished lenses intensified,meaning downward pressure on prices was as strong as ever. As was the case the previous
year, however, Hoya’s aspherical glass molded lenses—which give advanced performance andcompact construction—were well received in the market for interchangeable lenses used indigital cameras, and contributed to sales.

Outlook for Fiscal 2012
The market risk inherent in fiscal 2012 is the previous year’s problems of soaring prices for
optical materials (rare metals and rare earths), compounded by effects from the earthquake.
Against this backdrop the Hoya will continue investing in the development of high-performance
optical materials and manufacture of high precision lenses with a view to distinguishing itself
from rivals. Hoya’s unique competitive strength is its integrated production system, from opticalmaterial development to lens manufacturing, which it will continue leveraging to meet demandfor optical lenses supporting ever more advanced digital products.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
In fiscal 2011, sales of color filter glass were buoyant throughout the year. Sales of light source
products rose in the first half but fell as the second half began. Toward the end of the fiscal year,
however, their sales picked up visibly amid rapid expansion of the market for smartphones. This
expansion should further boost sales in fiscal 2012.
All in all, sales at existing businesses grew 16% year on year in fiscal 2011, meeting theCompany’s goal. Sales of specialty glass for image sensors was added for reporting in October
2010, upon the product category was split from Hoya for merger with a wholly owned subsidiarycomprising the Photonics Division.

Outlook for Fiscal 2012
In fiscal 2012, UV-LED light source devices will be a major
theme for the Company. UV light sources have a range ofapplications, including the curing of electronic and opticaladhesives. Hoya is developing new light source devices forwidening the area of UV irradiation from spot to area exposure,and in the fiscal year under review the Company developed a
UV-LED exposure unit capable of exposing a broad area. Hoya
is already exploring new applications for this technology,

UV-LED spot light source

including UV printing, and in fiscal 2012 it will be looking toramp up sales.
The Company will also aim to increase sales of the specialty
glasses that currently underpin its business framework, with aview to capturing top share of the market in each application.
In color filter glass, which is used in various applications

Polarized glass (CUPO)

including industry and medicine, a glass melting joint venture in China began operating in thefirst half of 2011. The Company expects this joint venture to enhance its cost competitiveness,affording it an extra edge over global rivals.
Hoya’s polarized glass is used in optical communications isolators, demand for which is
expected to grow in tandem with rising investment in optical communications networks,
especially by China, India, and other emerging economies.
In addition, the Company’s image sensor glass is an essential component of the CCD and
CMOS image sensors that in turn are critical elements of digital cameras. By improving both
performance and finish, Hoya aims to increase its share of the digital SLR camera market, forwhich particularly strong growth is projected.

Topics
UV inkjet printing light sources
By developing new light source devices for widening thearea of UV irradiation from spot to area exposure, Hoya
has gained access to new markets, one such application
being UV curing of industrial inkjet printer inks. Broadsurface UV irradiation will enable the ink to be cured
rapidly, which in turn contributes to good print quality.
ANNUAL REPORT 2011

Line-type UV-LED

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
The digital camera market in the year under review exhibited
growth on a volume basis, with SLR cameras gaining 30% andcompact cameras increasing 13% compared to the previous
calendar year. Those volumes, however, remained below levels
prior to the global financial crisis, when in aftermath sales fell
precipitously in 2009. In addition, a marked decline in productunit prices that started last year continued to accelerate. Unit

PENTAX K-x

prices for SLR cameras in particular fell abruptly with thegrowing popularity of mirrorless models. Moreover, the strong
yen led companies to rein activities in Europe and North
America in and focus on sales in the Japanese market, which
prompted fierce competition at stores and further price cuts.
Alternately, it also appears more consumers were waiting forthe price of older models to fall, as there were no assurances
the new models would be as groundbreaking and equipped withPENTAX 645D

new technologies they sought.
PENTAX began the year in review with momentum from the
PENTAX K-x launched in 2009, which was a huge hit, setting
the record in volume sales for the company's line of digital SLR
cameras. The uniqueness of the 100 color variations to thesecameras went over well with consumers and even novice SLR
users actively purchased interchangeable lenses, which
contributed substantially to revenues. In addition, the PENTAX
645D, the company's first-ever medium-format digital SLR, aninternationally acclaimed model that won two prestigious“PENTAX K-x” was selected theBest DSLR Entry Level in
Europe 2011 at TIPA

camera awards in Japan and Europe, and the PENTAX K-5, adigital SLR for advanced amateur photographers, both
continued to be well received as serious, technology-richcameras, even by longtime PENTAX enthusiasts. In compact
digital cameras, the PENTAX Optio RS1000, which features aremovable faceplate that can be customized with any number ofdesigner skins, proved to be a hit with new customers in

PENTAX Optio RS1000

addition to established PENTAX enthusiasts.
As mentioned above, the company exhibited a firm presence in the camera market by following
a two-pronged strategy of developing serious products with distinctive PENTAX technologies, on
one hand, and unique and creative products, on the other. The television commercials thecompany ran during the holiday sales season in December was also effective in raising
recognition levels. As a result, PENTAX as an independent operating segment turned a fiscal-

year profit for the first time since the merger.

Outlook for Fiscal 2012
Prices in the digital camera market are projected to continue falling in fiscal 2012, particularly
among SLR cameras from the onslaught of mirrorless models. With no groundbreaking
technologies on the horizon, the market as a whole moreover is expected to remain in deadlock.
Under these circumstances, Hoya has decided to transfer the PENTAX Imaging Systems
Business to Ricoh on October 1, 2011.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
Hoya manufactures and sells DVD/CD-compatible hybrid
lenses, plastic Blu-ray pickup lenses, and plastic lens units for
digital cameras. We were the first company in the world tosuccessfully mass produce plastic Blu-ray lenses.
Blu-ray was expected to see increased demand from lower
product prices and the growing popularity of large, highresolution televisions, but the market did not expand as
projected due to economic stagnation in Europe and the U.S.

Blu-ray objective lenseand other factors.
DVD/CD-compatible hybrid lenses for computers sold briskly
initially, but adjustments to drive inventories during the year
under review along with lower unit prices held sales below initial
forecasts.

Plant in the Philippines

On the flipside, during the year under review, we aggressively
developed overseas production to strengthen the business. Manufacturing processes weretransferred to a plant established on Cebu Island in the Philippines and localization wascompleted for post-molding processes.

Outlook for Fiscal 2012
In fiscal 2012 we are working to rapidly turn the business around by addressing a range ofissues in technology, manufacturing and sales.
Our products are largely dependent on the high-precision aspect of technology. In particular, we
will work to achieve even higher precision by reducing lens aberrations. We will also focus ondeveloping a single triple-wavelength lens that will work with three types of media, DVD, CD and
Blu-ray. In the Blu-ray market, which is about to enter a growth phase, we will firmly
accommodate technology-related needs so that no opportunities are missed.
In terms of manufacturing, efforts will be made to raise the functionality of the Philippines plant,
where production processes were transferred. Local productivity will be enhanced, costs
reduced and quality improved. We will revamp conventional processes, create procedure
manuals and thoroughly implement numerical evaluations in order to further ensure high-quality
manufacturing at the site.
On the sales side we will more carefully identify customer requirements to pursue customer
satisfaction and cultivate new customers.
The plastic lens market remains promising, and Hoya will utilize its proficiencies to take on thechallenge of developing new market sectors.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
During the fiscal year under review, the retail market foreyeglass lenses slowly recovered from the economic downturn
that followed the financial crisis. Fiscal 2011 was a year of
pronounced regional differences. Whereas trading in thedeveloped markets of Western Europe and North America
improved slightly, conditions in Japan, Australia, Spain and theNordic countries were much more difficult. Meanwhile, eyeglass
retail markets in the BRIC countries expanded at a rate ofaround 20%.

FFS lenses

Wholesale markets for eyeglass lenses saw competition intensify because of the entry of lowpriced, single-vision commodity eyeglass lens suppliers from China, India, Eastern Europe andelsewhere, pushing the wholesale sector closer to competition based on low prices.
Against this backdrop, in local currency terms Hoya delivered sales growth of 10% in Europe,
11% in the U.S. and Canada, and 20% in Asia. In the Japanese market, Hoya performed
strongly, but certain client eyeglass retailers were damaged by the Great East Japan
Earthquake. Consequently, sales in Japan decreased about 2% year on year.
Despite this mixed regional performance, Hoya still outperformed the average market growthrate in each region for several reasons. The first reason is its sophisticated technology. For
example, in recent years, Free Form Surface (FFS) lenses have started to replace traditional
Progressive Addition Lenses (PALs) in the market for line-free bifocal eyeglasses. By separating
vision correction into horizontal and vertical components on the two surfaces of the lens, Hoya
FFS technology can address an individual’s visual acuity with greater precision and comfort.
Hoya is among the few global suppliers with a robust and growing patent and IP portfolio in thistechnology. FFS lenses command a premium price in the market. While conventional PALs stillaccount for the majority of multi-focal lenses on the global market in volume terms, PALs and
FFS lenses are evenly matched when compared on a monetary basis. In terms of sales volume,
FFS lenses are achieving steady growth worldwide.
Another contributing factor behind Hoya’s strong performance was its brand strategy.
Hoya successfully developed a new base of customers for whom Hoya products were previously
outside of their price range, particularly in the Asian market. This was done by offering lenses
under different brand names with more commoditized features than what is offered in theJapanese market. Hoya opened new doors by providing commodity lenses to retailers to whom it
previously did not supply products at all. Going forward, the Company intends to go further andprovide these retailers with the in-depth knowledge and experience they would need to carry
Hoya’s top product line. Hoya also established a joint venture with a Chinese company to roll out
a line of lenses priced even lower, under an entirely separate brand and company name.
In essence, Hoya’s strategy is to address the high-end market with the traditional Hoya brand,
while developing the mid-range market with a new brand, and entering the low-end market

through a new company. This strategy enabled Hoya to cultivate markets in second- and thirdtier networks, and to deliver strong growth in excess of the average market growth rate.
As a new initiative, Hoya opened specialized and dedicatedtraining centers in Budapest, Hungary and Shanghai, China, forsales optometrists of eyeglass retailers. Hoya believes thatsuch training centers will play an increasingly important role in
the quest to expand sales of premium products in emerging
markets.
Training center

Outlook for Fiscal 2012
In Fiscal 2012, Hoya will step up its effort to enhance this brandstrategy. Hoya’s ultra-premium, personalized FFS progressive
lens, named Hoyalux Trinity in Japan, has been rebranded as
MyStyle in the U.S., Canada and Europe, and Thea in China.
This lens, furthermore, will be offered in a wider array ofmaterials, functions and attributes, to offer consumers an evenfiner choice in prescriptions in accordance with their design andlifestyle preferences.

Hoyalux iD MyStyle

Moreover, to fill a wide gap in price that remains between
conventional PALs and higher quality FFS lenses, Hoya willcontinue to expand the marketing of an entry-model FFS
product named TrueForm in Europe and Asia, TF in Japan, and
IQ in the U.S. and Canada. This so-called bridging product will
be developed strategically to encourage as well as ease the

HOYA TrueForm
TECHNOLOGY

transition of consumers from PAL, to the comfort and acuity of a pair of multifocal glasses madewith FFS lenses of the highest quality.
Another strategic thrust for Hoya in fiscal 2012 will be the introduction of its first polycarbonate
material lens. The type of impact-resistant polycarbonate offers is particularly suited forwithstanding a ball-drop test instituted by the Food and Drug Administration in the U.S. for
certification purposes. For this reason, the market share of polycarbonate lenses in the U.S., thelargest eyeglass market in the world, is roughly 50%. The addition of polycarbonate to a wide
range of other unique lens materials will enable Hoya to strive for an even greater share of thismarket.
Yet another aspect of Hoya’s strategy will be service innovation. As lenses have evolved incomplexity, so has the technical expertise required of eyeglass retailers. Customers need sales
staff in eyeglass stores to explain and service the technology of these sophisticated lenses totheir satisfaction. To address this need, Hoya will continue to develop proprietary equipment withleading-edge imaging software to automate the process of taking precise ocular measurements
and calculating highly refined vision prescriptions. Plans are also underway to open new training
centers in India and Brazil for mastering this equipment and software.
Much of Hoya’s manufacturing of conventional eyeglass lenses was consolidated in 2010, in ahighly cost efficient and integrated 24/7/365 facility in Thailand. By contrast, FFS manufacturingbases will be localized and placed closer to customers to accelerate growth and ensure fast,
flexible and superior delivery service.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
The contact lens market in Japan faces the demographic
problem of low birthrate and longevity. Young people in the
population, who are potentially new contact lens customers, arein decline, while people in the baby boom generation are
growing older and leaving the contact lens market. As a result,the overall market continued to decline slightly in the year underreview. In terms of individual products, there was growth in themarket for one-day and two-week disposable lenses, but also
large decreases in users of conventional long-wear hard andsoft lenses, which put a damper on the sector. As for

EyeCity
Number of EyeCity stores(Japan)distribution channels, contact lens specialty stores and online
outlets experienced growth, but eye clinics and eyeglass
retailers saw their channels contract significantly.
Despite such challenging market conditions, Eyecity, Hoya's
directly managed chain of contact lens specialty stores,
achieved increases in both sales and profits. Sales rose doubledigit on year. In sales amount， the chain’s top share of themarket rose roughly two percentage points on year to 18%.
Our targeted pricing strategy was one of the major reasons forthis success. With contact lens users on the decline, acquiring first-time customers at Eyecity
was a key objective. We adopted a targeted pricing strategy, involving a promotional discount for
first-time customers, to get customers to switch to Eyecity from other competitors. And, in certain
sales territories, we set prices with an awareness of the peers to compete locally. The
economies of scale as the largest contact lens chain in Japan made Eyecity to executecompetitive pricing strategy. As a strategy, it proved highly effective in acquiring new customers
for existing stores.
On the advertising and sales promotion front, we continued to convert from paper media such as
flyers and free community paper inserts to digital media. An email newsletter issued to over 30%
of existing Eyecity members has proven a very effective sales promotion. As digital marketingcan be carried out at a low cost, its importance as a marketing tool can only increase.
We opened 18 new stores during the year under review, which was just short of our initial 20store projection. As of March 2011, there were 181 Eyecity stores nationwide.

Outlook for Fiscal 2012
In fiscal 2012, we will strive more than ever to stay on track of the success we had continuallyraising sales, profits and market share in fiscal 2011.

One top priority in fiscal 2012 will be to achieve another double-digit increase in sales. To
accomplish this, we will aim to open 20 new stores while initiating measures to boost brandawareness and penetration of Eyecity.
In fiscal 2012 we will consider investing in advertisements on new mass media, with the aim ofenhancing the service-oriented brand image of Eyecity. The contact lens industry tends toprimarily promote location and price. But, through out mass media advertising, we hope to bringour superior service orientation as a new rule of games in the market competition. Mass media
advertising has been an issue at Eyecity for many years, but judging the present to be theperfect opportunity, we have made the decision to embark on a campaign.
In China, fiscal 2012 will be the first year in the development of a five-year strategy. We intend toformulate a manufacturing strategy with a global perspective that considers both where to
produce and where to sell.
The Great East Japan Earthquake caused store closings in March and April at numerous Eyecity
stores due to rolling power outages and shopping centers that closed. At present, all stores, withthe exception of one store operating in temporary quarters, have returned to business as usual.
We will not let this disaster stand in the way of moving aggressively forward in fiscal 2012.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
Fiscal 2011 was a year of transformation within the Life Carebusiness segment. Although there were no major productlaunches, numerous changes in the segment’s organization andcommercial execution ensured that operating income
surpassed the prior-year level. The market environment
continued to slowly improve in North America and in Europe,
while in Asia emerging markets such as China and India
achieved particularly brisk growth.
Against this backdrop, we implemented changes in five major
objectives.
(1) Commercial execution

Medical Flexible Endoscopes

In the fiscal year under review, we identified disparate
issues confronting each operation, clarified common goals for our business as a whole, andformulated strategies for improving commercial execution in endoscopes accordingly.
Whereas before there was considerable variation in strategy depending on the region or
product, in the year in review we took up a global marketing perspective in accordance witha mandate to “sell everything, everywhere.%rd Particular effort was put into expanding
sales channels in emerging markets, including South America, China, India, Eastern
Europe and the Middle East.
(2) Clear vision for people and process
The segment’s management team was renewed and changes were made to theorganization to attract the right people and bring out their best. We began building aprocess that above all values efficiency, training, opportunity and merit to draw out the best
performance in all employees. In addition, we put in place new teams and leaders charged
with overseeing the Asian including Japanese operation as a whole, in a bid to better
harness the abundant growth opportunities offered by China and India. These changes
were also directed at increasing the market share in Japan.
(3) Product development
A new product development process in the endoscope business is in the process of being
implemented, where the objective is now to combine the best-in-class products expected ofa large company with the nimbleness and clinically relevant innovation of a startup
company. Changes were also made to ensure a more customer-oriented approach to
product development. Implementation of these changes will continue into the next fiscal
year.
(4) Global quality control system
A global system of product assurance and quality control is also in the process of being
established. In the year under review, stringent standards for our endoscopes met withapproval of the FDA in two audits of a routine nature. The goal, however, is to raise thosestandards even higher to enable the business to position quality as a competitive advantage.
(5) Operational excellence
While on the one hand campaigning to improve quality, Hoya also undertook cost-cutting
initiatives in the year under review. By means of procurement globalization, yield
improvement and a more targeted approach to product development, the endoscopebusiness reduced costs while simultaneously improving quality.
With regard to the earthquake, Hoya has three endoscope manufacturing facilities in EasternJapan but fortunately the damage they incurred was small and inconsequential. While damage
sustained by some suppliers caused disruptions to the supply chain, this was quickly restored.
As of June, production was back to full capacity.

Outlook for Fiscal 2012
In fiscal 2012, we will pursue the changes undertaken in fiscal 2011 with further enhancements.
In marketing, the attributes of each market will be recorded in a database that will underpin
future marketing activity. At the same time the endoscope business will work on further
strengthening the PENTAX brand, along with its launch of global Website.
In terms of organization, the endoscope business aims to transform its corporate culture toward
more focus on accountability and results, through a still-greater emphasis on speed, execution,and customer satisfaction. The business will also continue on the path to becoming more global,
with ongoing upgrades in leadership talent and business process.
New product launches are scheduled, and it is Hoya’s intention that newly released products bedistinguished from the competition by industry-leading quality coupled with clinical relevance andcustomer-focused design.
The segment has set itself the goal of double-digit revenue growth in fiscal 2012, and over the
medium term looks for growth to be stronger still. Over the next five years, we aim for growth inrevenue over 10% per annum in Europe and North America, and over 30% in emerging markets.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
The global economy remained overcast in 2010. Yet, it wasagainst this backdrop that the global market for intraocularlenses (IOL) in the surgical treatment of cataracts grew 7% to
8% in size. In terms of the number of these cataract
procedures, growth among major markets was approximately
3% in the U.S., 1% in Japan, 2% in Western Europe and 6% in
China. Among emerging markets, India in particular exhibited
exceptional growth. Longer term, the dollar value of this global

Intraocular Lenses (IOL)

market for cataract procedures is projected to grow from anestimated US$2.2 billion in 2010, to US$3.3 billion in 2015.

IOL Global Market size

Currently the majority of IOL surgically implanted to replace the
eye’s clouded crystalline lens and restore vision are standard,aspheric single-focus lenses. But there is also a growing market
for premium IOL, with a variety of corrective functions, that anincreasing number of patients concerned with their quality of life
are willing to pay for. Such premium, micro-incision IOL andtoric IOL for correcting astigmatism, multi-focal IOL, and even a
special IOL Hoya is developing for correcting presbyopia. Thispremium segment, involving not only the developed markets but
the wealthier patients from China, India and other emerging
markets, is where much of the market growth is expected toconcentrate over the next five years.
Hoya is the fastest growing IOL company globally, particularlyin the micro-incision IOL and enhanced monofocal segments. It
is also the first company in the world to package softhydrophobic IOL, lathe-cut to precision*, in a novel pre-loaded

iSert™ pre-loaded IOL delivery
systemsurgical insertion system. Together, this package delivers safeand efficient procedures for surgeons, while minimizing the incision size and surgically induced
astigmatism. Combining such superior products with agile marketing, Hoya’s market share of
IOL increased in practically every region of the world; from Japan, the U.S. and Europe, to Asia.
Moreover, the Company waged a very successful brand awareness campaign involving
presentations at medical congresses in the U.S. and reports published in various medical
journals, among other tactics.
The fiscal year in review was also the year in which Hoya’s IOL business truly began to
globalize. In the U.S., the single largest IOL market in the world, a business Hoya launched in2009 with the iSert™ preloaded IOL system performed exceedingly well. No more than two
years after establishment, this embryonic business captured 4% to 5% of the market share
where the three other key competitors controlled the remaining 93%. This was an exceptionally
good start. Currently, the Company has three major IOL products in the U.S. undergoing clinicaltests. Hoya will strive for another substantial expansion in U.S. market share, once it receives
regulatory approval to launch these products.
Meanwhile, back in Japan, Hoya captured a 30% market share and was all but about to overtakeits competitor in first place. In fact, Hoya had already overtaken this competitor as the top
supplier in the market for IOL among ophthalmology clinics in Japan. Leveraging its key
attributes of agility and expertise, Hoya is now just a few steps away from gaining the top overall
share of IOL (for both hospitals and clinics) in this market.
Business was also strong in the emerging markets in Asia, where Hoya’s earnings on IOL grew
anywhere from 20% to 30% in China, India, Australia, Thailand, Singapore and South Korea.
To accelerate the global development of this business, Hoya’s IOL Headquarters was moved toSingapore at the end of the consolidated 2011 fiscal year. For seven years, Hoya had a very big
and important operation in Singapore for manufacturing all its IOL. Consolidation of the head
office functions and R&D center for IOL in Singapore, also, will enable Hoya to take advantage
of all possible business efficiencies. This will be a move strategically important to the uniquenessof Hoya’s business, as the other three major IOL competitors are all based in the U.S.

Outlook for Fiscal 2012
Developing this business further in all major markets spanning
the U.S., Japan, Western Europe, China, India and otheremerging markets will be a top priority in fiscal 2012. Along withiSert™, Hoya will expand the launch of its groundbreaking
iMic1™ series of preloaded IOL systems into these newmarkets.
Hoya will continue to focus its R&D and Commercial teams into two key areas; the developmentof lens optics that provide enhanced vision and lens delivery systems that minimize patient
recovery thru micro-incision surgery. Hoya will leverage these technologies to promote global
business growth in the premium IOL market.
In addition, the Company made a strategic investment in a Swiss company named Adoptics AG
in 2010, for the aim of developing and launching an accommodative IOL in the Hoya brand. An
accommodative IOL changes shape in response to pressure in the eye, when the muscles in theeye move. This will correct presbyopia, or farsightedness caused when, with age, the humanlens in the eye loses accommodation, or the elasticity to change shape and focus on different
distances. Although still a number of years away from approval, this is an epoch-making productthat will literally change ophthalmology, mentioned here as an example of Hoya’s tremendously
rich product pipeline.
*:Lathe cutting is a manufacturing process which fabricates lenses precisely one by one frombutton shaped materials using a computer controlled machine. In Hoya, a cutting-edge line
combined with pad polishing and tumble polishing processes is used to achieve sharp edge andsmooth optic surface.
ANNUAL REPORT 2011

Fiscal 2011 Business Overview and Results

Outlook for Fiscal 2012

Fiscal 2011 Business Overview and Results
In the fiscal year under review、 Japan's composite bonemarket grew 3-4% in terms of patient numbers. However, themarket was nearly flat compared to the previous year on avalue basis due to medical fee reforms. In this climate, Hoya's
composite bone segment achieved sales growth of double-digit
year on year. By contrast, segment sales of chromatography
media, used in the refinement of biopharmaceuticalSUPERPORE™

compounds, declined 30% compared to the previous year:
Although, to be sure, this was because a big order from a major
customer was held up and booked after the fiscal year ended.
Given the global market for chromatography media has grown
at a rate of 10-15% annually, we expect steady expansion inthis business going forward.

BIOPEX® ADVANCE
Market share in Japan(apatite products)

Against this market backdrop, New Ceramics saw earnings
increase on flat sales, as a result of initiatives the business took
to improve operational efficiency.
A prosthetic filler for bone defects, APACERAM, Hoya's
mainstay in the apatite product category, is used mainly in thefields of orthopedics, brain surgery and dentistry. A new solidtype prosthetic filler, SUPERPORE™, was launched in July2010 and went on to meet initial sales targets as of the end of
the term. This achievement was the combined result of exceptional product strength and swift
marketing. The Company also launched a new paste-type prosthetic filler, BIOPEX® ADVANCE,
which reaches maximum strength in just 12 hours after surgery. This gained kudos for greatly
improving the quality of life of patients, by enabling them to rise up the day after surgery. Salesof this product were also strong.
The goals during the fiscal year under review for the business division were to expand market
share, maintain a highly profitable operating structure and to enter the market for metallic
implants. Market share increased from the launch of promising new products and vigorous
marketing initiatives. The division was also successful in enhancing the profitability of its
operations. Unfortunately, the other goal of entering the market for metallic implants went
unachieved.

Outlook for Fiscal 2012
The composite bone market is expected to see stable growth over the long term. In fiscal 2012,
Hoya will strive to build on the momentum of SUPERPORE™ and BIOPEX® ADVANCE andincrease sales in this business category 15% year on year. The Company will focus in particularon significantly increasing market share for SUPERPORE™. In terms of products, Hoya is
considering the development of new products that use metal alternatives. Entering the metallic
implant market will continue to be a goal, and the business will target the European market inparticular. The market for chromatography media is expected to continue to grow steadily infiscal 2012 as well.
ANNUAL REPORT 2011

R&D Activities
Aiming to achieve sustainable growth andR&D Expenses

increase corporate value, the Hoya Groupdevotes considerable effort to formulating
business strategy from a long-term
perspective and developing technology, as
well as acquiring and cultivating new
businesses.
Hoya is involved in a wide range ofbusinesses. In each business division, theGroup promotes R&D based on the mediumterm plan, aiming to maintain and enhance its
technological competitiveness. The Corporate
R&D Center at the global headquarters
provides development support for the technological issues embraced by each division, as well as
conducting basic research that will supply the seeds for future growth and acquiring andcultivating new businesses and technologies from a long-term perspective.
Hoya reorganized its Corporate R&D Center in fiscal 2011, with a view to strengthening theoptical technology and technical planning departments. The objective is to provide technicalsupport to each business division, all of which have optical technology as their bedrock, andfrom a longer-term perspective to aid in fostering and acquiring new businesses andtechnologies.
Within the Corporate R&D Center, the technical planning department is central to all joint
development activities undertaken with external research organs. By dint of actively collaboratingwith such organizations the Company is shifting the core of R&D from the information technology
field to the medical and healthcare arenas.
The Corporate R&D Center and the R&D function in each business division share information as
they work to maximize the results of each R&D project.

Optical technology department:
Hoya is pursuing research into technologies for simulating the behavior of geometric and wave
optics, and studying applications in optical measuring. Based on this research the Company isdeveloping optical measuring instruments that will aid each of its business divisions in
manufacturing products with greater precision and enhanced quality. These include technologies

for analyzing and visualizing the optical phenomena of defects in phase-type diffractive lenses,
improving surface profilometry resolution with digital holography, and for measuringtransmittance in microscopic thin films. The department is also working to develop new opticalproducts.

Nanoimprint Technology:
Hoya is putting its lithographic technologies to use in thedevelopment and trial production of nanoimprint molds, which
will be used in the creation of patterned media (DTM, BPM) for
use in increasing the areal density of hard disk drives (HDDs),and in high-brightness LEDs.
Various HDD manufacturers are vigorously pursuing R&D tocommercialize patterned media technology, and Hoya has
begun shipping DTM molds enabling nanoimprint processing on

Nano-imprint mold for HDD
patterned media

all surfaces of 2.5-inch media. In BPM, Hoya has used thelatest microfabrication technologies to develop a moldproducing a bit pitch of 25 nanometers and surface recording
density of 1 Tbit/inch*.
In molds for use in manufacturing LEDs, the Company has
developed and started shipping samples of molds with 100–300
nanometer pitch size, suitable for high-brightness chip designs.

Nano-imprint mold for highintensity LED (x100,000)*Nanometer (nm):1 nanometer = 1 billionth of a meter

3C-SiC:
Hoya is promoting the development of 3C-SiC (cubic
monocrystal silicon carbide) semiconductor wafers and devices.
The superior energy efficiencies expected of this materialmeans it would be a counterweight to global warming whenapplied in automobiles and home appliances such as air
conditioners. Hoya has reported at various international
conferences and symposia that it obtained very high channel

3C-SiC

mobility of 200 cm2/Vs with a prototype 3C-SiC MOSFET(metal oxide semiconductor field-effect transistor) it fabricated in fiscal 2011.

Optical Communications Parts:
As the FTTH (Fiber to the Home) environment widens aroundthe world, Hoya has developed a module for converting opticalsignals to electrical ones at optical communication accesspoints that is compliant with GE-PON/G-PON2*, a high-speed
optical communications standard. By building a functional
device on top of a wafer, Hoya has succeeded in creatingproducts that are significantly smaller than existing products.
Hoya received approval from customers and launched productAn optical telecommunications
deviceshipments in fiscal 2011, and plans to ramp up mass production
in step with full-blown product acceptance in fiscal 2012. As optical networks continue to develop

going forward, the market is expected to grow in magnitude to around ¥30 billion.
*GE-PON/G-PON (Gigabyte Passive Optical Network):A technology that enables high-speed transmissionof 1.25-2.5 gigabyte per second over fiber optic lines and networks.

Biocompatible Materials:
Hoya is researching biocompatible materials for ophthalmological applications. Hoya already has
a visual correction lens business that handles intraocular lenses (IOLs) and contact lenses. The
Company is now developing materials that are more durable and functional and that are betterfor the eyes. As part of this research, Hoya is investigating an artificial crystalline lens.
Material that fills the crystalline lens capsule. This material has the potential to regulate visualacuity and is expected to become a therapeutic method on a par with IOLs. The Company isalso conducting research on ways to enhance the biocompatibility of intraocular lenses and otherdevices by applying special coatings and microscopic structures to their surface.

i10 series endoscopes designed to alleviating burden on doctors
In recent years, endoscopes have come to perform therapeuticfunctions as well as clinical examinations.
The burden on doctors can become large in protracted clinicalendoscopic procedures, and to alleviate this load Hoya has
been developing new endoscopic controller parts that it
envisions will allow lengthy use without fatigue.
In this manner the Company hopes not just to reduce theController to the i10 series
endoscopefatigue of doctors, but also to shorten the time of clinicalexaminations with controllers that are easier to operate, in doing so easing the burden on thepatient.

HOYA Annual Report 2011

Hoya works to enhance Group intellectual property rights in a broad range of fields, including
Information Technology, eye care, medical care, and cameras and optics, with a particularemphasis on growth areas such as medical care and healthcare.

Intellectual Property Policy
One of the Hoya Group’s fundamental objectives in intellectual property activities is to make thefullest possible use of intellectual property to bolster the competitive strengths of its global
businesses.

Obtaining and Formulating Patent Rights
To ensure the most efficient possible patent prosecution for obtaining and formulating patentrights, technical development managers and intellectual property managers work in close
consultation with one another. The Company aims to secure all necessary intellectual property
rights from the initial stage of the development of the relevant technologies, with an eye toward
peripheral, applied and alternative technologies. In relation to those fields in which Hoya
commands a leading position, the Company focuses on accelerating the process of securing
patents in cutting-edge areas. At the same time, in competitive markets, Hoya concentrates on
promoting efficient prosecution of patent formulation while preventing infringement of the patents
held by other companies. To achieve these ends, careful technical searches of patent
information of other firms are performed, and the Company supports the patent prosecution thatis most appropriate for each field. Hoya is also engaged in patent portfolio management
activities devoted to the formation of global patent networks that will be coordinated with the
moves of its production bases and sales and trading partners into international markets.

Cross-Licensing and Out-Licensing
Hoya’s individual businesses are not large, but the Company strives to improve its
competitiveness in each respective market. Hoya focuses on effectively and fully utilizing thepatent rights that are the cornerstone of the competitive position its businesses enjoy. Thismeans there are cases in which Hoya might assign licenses to third parties: for instance, where
it is appropriate to sign cross-licensing agreements granting mutual exercise of patent rights, orwhere the Company can expect out-licensing of its patent rights to other companies to result inan expansion of the overall market, or when dictated by changes in Hoya’s competitiveness.
This enables the Company to pursue effective utilization of its intellectual property in line with its
business strategy.

Prevention of Imitation and Infringement
Hoya maintains a constant watch on the market to ensure that its development technologies are
not imitated by third parties. When its technologies are imitated, the Company issues warnings
and, where necessary, takes appropriate steps such as filing for injunction.

Utilization of Third-Party Patents and Technologies
Hoya does not rely excessively on its own proprietary technologies and patents. If, after careful
technical search and consideration of the available technologies, the Company finds that third
parties have superior technologies, patents or other advantages, and if it decides that using
them would be most efficient in commercializing a product, Hoya takes steps to seek licenses to
use third-party patents or introduce their technologies. As just described, respect for theintellectual property rights of the Company and of others is a basic stance of the Hoya Group.

Systems Supporting Intellectual Property Activities
The Hoya Group is organized according to business divisions and companies, with extensive
delegation of authority from strategic business planning to decision-making. Each division has anintellectual property group responsible for working in conformity with the respective strategies of
their divisions—for instance, by filing patent applications and other rights formulation, activities,
taking actions in relation to patents held by others and licensing out Hoya’s own patents. The
Corporate Intellectual Property Division is responsible for working to improve the intellectual
property functions of the Group. This includes such matters as establishing and promoting
overall intellectual property strategy, assisting business divisions in the establishment of patent
strategies, the training and skill enhancement of employees, managing intellectual property
assets, and the development of patent management systems. In particular, matters thatnecessitate decision-making for the Group-for example those requiring coordination of
intellectual property issues that run across more than one business division, or that involve
bringing a case to court or reaching an amicable settlement-are deemed to require the approvalof global headquarters and are strictly managed under the direction of the Corporate Intellectual
Property Division. Because intellectual property activities are dispersed across all businessdivisions, there is a need to reduce any adverse effect from potential difficulties in information
sharing. At the same time, to improve synergies between the intellectual property activities ofbusiness divisions, the Company periodically holds joint intellectual property meetings for theexchange and sharing of information on each division’s intellectual property activities.

Status of Intellectual Property
Number of Registered Patents and Patent Applications Filed
During the year under review, Hoya had

Registered patents and utility models(as ofregistered 4,065 patents and utility models inJapan. The main businesses of the ElectroOptics and Vision Care divisions accounted
for 29% of these, while PENTAX medicalrelated devices accounted for 38% andMarch 31, 2011)

camera and optical products for 28%.
In 2010, 680 patent applications were lodged
in Japan, of which the Electro-Optics andVision Care divisions accounted for 45% and
the PENTAX Division 44%. Of the Company’s
patent applications, 36% were lodged outside
Japan during the year under review. As
shown by this high percentage of global
patent applications, Hoya is making the fullest
possible use of intellectual property in linewith its policy of increasing the competitive strengths of its global businesses.
Japanese patent applications by segment

Global applications(April 2010 to March 2011)

Percentage of Patents Granted
The percentage of patents granted Group-wide in Japan (including those in the prior examination
and review stages) was approximately 55% for 2010, the most recent year for which data are
available.

HOYA Annual Report 2011

Please click here for HOYA’s corporate governance systems.

Board of Directors (As of June 23, 2011)
Directors
Yuzaburo Mogi*
Apr.1958

Joined Noda Shoyu Co., Ltd. (present Kikkoman Corporation)

Mar.1979

Director of Kikkoman Corporation

Mar.1982

Managing Director of Kikkoman Corporation

Oct.1985

Managing Director and Representative Director of Kikkoman

Mar.1989

Executive Managing Director and Representative Director of

Corporation

Comment froman Outside
Director

Kikkoman Corporation
Mar.1994

Executive Vice President and Representative Director of
Kikkoman Corporation

Feb.1995

President and Representative Director of Kikkoman Corporation

Jun.2001

Director of the Company (present post)

Jun.2004

Representative Director, Chairman and CEO of Kikkoman
Corporation (present post)

Eiko Kono*
Dec.1969

Joined RECRUIT Co., Ltd.

Apr.1984

Director of RECRUIT Co., Ltd.

Aug.1985

Managing Director of RECRUIT Co., Ltd.

Nov.1986

Senior Managing Director of RECRUIT Co., Ltd.

Jul.1994

Executive Vice President of RECRUIT Co., Ltd.

Jun.1997

President and Representative Director of RECRUIT Co.,Ltd.

Jun.2003

Director of the Company (present post)

Jun.2003

Chairperson and CEO of RECRUIT Co., Ltd.

Apr.2004

Chairperson and Chairperson of the Board of Directors of
RECRUIT Co., Ltd.

Jun.2005

Special Advisor of RECRUIT Co., Ltd.

Yukiharu Kodama*Apr.1957

Joined the Ministry of International Trade and Industry (MITI)(now the Ministry of Economy, Trade and Industry (METI))

Jun.1985

Director General of the Minister's Secretariat MITI

Jun.1988

Director General of Industrial Policy Bureau MITI

Jun.1989

Administrative Vice-Minister of MITI.

Jun.1991

Retired from MITI

Jun.1991

Advisor to Japan Industrial Policy Research Institute(JIPRI)

Feb.1992

Advisor to the Industrial Bank of Japan (IBJ)

Jun.1993

President of The Shoko Chukin Bank

Jul.2001

Chairman of the Japan Information Processing Development
Corporation (present post)

Jun.2005

Director of the Company (present post)

Nov.2007

Chairman of the Mechanical Social Systems Foundation(present post)

Itaru Koeda*
Apr.1965

Joined Nissan Motor Co., Ltd.

Jun.1993

Director of Nissan Motor Co., Ltd.

May 1998

Managing Director of Nissan Motor Co., Ltd.

May 1999

Vice President of Nissan Motor Co., Ltd.

Apr.2003

Representative Director of Nissan Motor Co., Ltd.

Jun.2003

Co-Chairman of Nissan Motor Co., Ltd.

Jun.2003

Chairman of Calsonic Kansei Corporation (present post)

Jul.2003

Director of Renault S.A

Jun.2008

Chairman Emeritus and Advisor of Nissan Motor Co., Ltd.

Jun.2009

Director of the Company (present post)

Nov.1973

Joined Osawa Shokai (presently J. Osawa Group Co., Ltd.)(present post)

Yutaka Aso*
May 1975

Auditor of Aso Cement Co., Ltd. (present Aso Corporation)

Jun.1977

Senior Managing Director of Aso Cement Co., Ltd.

Dec.1979

President of Aso Cement Co., Ltd.

Aug.2001

President and Representative Director of Aso Cement Co., Ltd.

Aug.2001

President and Representative Director of Aso Cement Co.,Ltd.

Jun.2010

Chairman and Representative Director of Aso Corporation

Jun.2011

Director of the Company (present post)(present LAFARGE ASO CEMENT Co., Ltd.) (present post)(present post)

Hiroshi Suzuki
Apr.1985

Joined the Company

May 1993

President of HOYA Corporation USA

Jun.1993

Director of the Company

Jun.1997

Managing Director of the Company

Apr.1999

President, Electro Optics Company

Jun.1999

Executive Managing Director of the Company

Jun.2000

President and Representative Director of the Company

Jun.2003

Director, President, Representative Executive Officer and CEOof the Company (present post)

Hiroshi Hamada
Apr.1982

Joined Yamashita Shinnihon Steamship Co., Ltd. (present Mitsui
O.S.K. Lines, Ltd.)Mar. 1987

ALICO JapanNov.1992

Clarke Consulting Group of the United States

Jan.1995

Dell Computer Corporation (present Dell Inc.)

Aug.2000

President and Representative Director of the above company,
Vice President of Dell Inc. of the United States

May 2006

Representative partner of Revamp Corporation

Apr.2008

Executive Chief Operating Officer of the Company (present post)

Jun.2008

Director of the Company (present post)

Mar.1970

Joined the Company

Jun.1993

Director of the Company, in charge of Administration Planning,

Kenji Ema

Accounting and PurchaseJun.1997

Managing Director of the Company, in charge of Strategy,
Planning and Treasury

Jun.2000

Executive Managing Director of the Company, in charge ofCorporate FinanceJun.2001

Executive Managing Director and CFO of the Company

Jun.2003

Director, Executive Officer and CFO of the Company (present
post)

Jul.2003

President of HOYA HOLDINGS N.V.

Jan.2007

Executive Officer Chief Financial of HOYA CORPORATION,
Netherlands Branch*:indicates outside directors as provided for in Article 2, Item 15 of the Company Law.

Executive Officers
Hiroshi Suzuki*

President & CEO

Hiroshi Hamada*
Kenji Ema*

Executive Officer & Chief Operating Officer

Taro Hagiwara

Executive Officer, Technology

Executive Officer & Chief Financial Officer*:indicates Director

HOYA Annual Report 2011

Dynamic Board of Directors Symbolic of Hoya's
Energetic Corporate Culture
Yuzaburo Mogi
Outside Director and Chairman of the Nomination Committee(Honorary Chairman and Chairman of the Board of Kikkoman
Corporation)
I began serving as an outside director for Hoya Corporation in 2001. I was aware of Hoya and its
products prior to that, but I remember when I was appointed listening to a presentation on thecompany and thinking it to be truly exceptional. Hoya is characterized by its outstanding profit
margins. This means none other than Hoya’s strategy of concentrating resources in areas where
it excels and capturing large market is a successful strategy. At the time, this was quite a
discovery for me.
I also remember thinking that the atmosphere surrounding the Board of Directors was cheerful
and optimistic.
Hoya board meetings start at 9:00 in the morning and sometimes run until around 1:00 in theafternoon. Although the meetings can be long, serious discussion and debate always takes
place throughout. The meetings are very dynamic and conducted in an atmosphere that is neverbrutal, but always cheerful. When an important agenda such as an M&A is discussed, theopinions of directors often clash, but the same convivial atmosphere prevails.
Hoya's executive officers work quite hard so that they represent this kind of corporate culture.
For corporate management to function the people at the top must work hard. I think Hoya is acompany that lives by this ironclad rule.
Globalization remains a major issue not only for Hoya but for Japanese companies in general. In
Hoya's case, from CEO Suzuki on down, executive officers have extensive experience overseas,
global perspective and a firm grasp of international business. In fact, Hoya was among the first inJapan to deliberately expand overseas, and has established a large number of businessstrongholds outside Japan. I have a lot to look forward to because expansion in Hoya’s global
operations can only accelerate.
I’m also attracted in particular to Hoya’s Life Care segment which includes products related toeye care and medical care. Businesses promoting health will no doubt experience major growth
globally, including in emerging markets, and so I expect will Hoya’s Life Care segment going
forward. Medical businesses are involved in none other than human life, and technologicalcapability is extremely important. On this point, Hoya has proprietary technologies and it
continues to refine them.
Our expected role as outside directors is to monitor the proper management conduct ofexecutive officers from a perspective that differs from the internal management team. For thisreason I feel it’s important to ask tough questions at board meetings without reservation.
I sense even from a long-term perspective that Hoya is a company with a great future. I sincerely
ask that shareholders also take a long-term view in their guidance and support of Hoya.

Yuzaburo Mogi
Outside Director and Chairman of the Nomination Committee
HOYA Annual Report 2011

Hoya actively engages in environmental preservation efforts aspart of its corporate social responsibility in order to pass on to
future generations a global environment in better shape than
today.
Environmental Management System
Hoya's environmental protection activities got underway in 1976 with the establishment ofpollution countermeasure committees at each facility. In 1993, the Group drew up its
Environmental Philosophy and a set of Fundamental Environmental Principles. The next step
came in 1996 with the formulation of the Group Environmental Management Regulation, on
which Hoya's environmental protection system is based. The Conference of the Environmental
Office, the most senior body of the system and responsible for all environmental decisions, washeaded up by the Company's chief executive officer.
However, in October 2008 the Company merged its environmental protection and occupationalsafety and health systems, abolishing both the environmental Management Regulation and theConference of the Environmental Office. Environmental protection activities are now carried out
under a new system headed up by the Hoya Group Director for Environmental Protection,
Occupational Safety and Health.
Hoya Group Environmental and Occupational Safety and Health(OSH) Organization

At the end of March 31, 2010, the Company issued a Hoya Group Facility Standard forEnvironmental Protection to set forth the basic specifications of environmental facilities theGroup installs to protect the environment against harmful impact both inside and outside its
premises. The standards established a framework for taking internal and external environmental
impacts into consideration from the design stages of the environmental facilities the Hoya Groupinstalls.

Examples of Activities Aimed at Reducing Environmental Impact
Based on the Environmental Philosophy and Fundamental Environmental Principles, Hoya is
promoting activities aimed at reducing environmental impact.

Energy Conservation Measures
Amendments to Japan's Act on the Rational Use of Energy required a response from Hoya as acorporate entity.
Responding to the amended Act was an important component of the Hoya Group environmental
protection initiatives in fiscal 2011. The Company gave a briefing on the Act’s key amendments
to the officers and employees in charge of environmental protection at each division to make thedetails widely known. The amendments required Hoya to keep track of the energy the Group
consumed not only at the level of manufacturing bases, but down at the level of individual sales
operations and stores. Most of the energy the Hoya Group consumes is electricity. In preparing
to adapt to the amended Act, the group developed a framework for a detailed account of thepower each facility consumed in fiscal 2010, based on data from electricity bills and otherresources. In fiscal 2011, a system to effectively monitor power consumption was introduced,
and the reports the system generated, stipulated by the amended Act, were duly submitted to
the relevant government ministries and agencies.
Replacement of Transformers at Power Intake Facilities
Transformers at the power intake facility at one of Hoya’s factories in Koka, Shiga Prefecture
were replaced for renewal with the most efficient, state-of-the-art model. This measure had theimpact of reducing power consumption 34,588 kWh per year, equivalent to a reduction in CO2emission of 12 tons annually. The old transformers were disposed after they were properly
inspected to contain no PCB. These measures were duly recorded in the aforementioned reports
stipulated in the amended Act.
Energy Efficient Lighting Fixtures
The Hoya Group’s factories, buildings and offices have also been re-equipped in stages withenergy efficient lighting fixtures.
A Hoya Group factory in Nagai City, Yamagata Prefecture, for example, completely re-equippedwith energy efficient lighting fixtures in March 2011 is projected to consume 3.2% less power for
lighting in fiscal 2012.
As an additional measure, the factory’s vending machines are scheduled to be replaced withenergy-efficient models.

Measures to Prevent Water Pollution
Replacement of Old and Worn Out Feed Pipes for Chemical Agents in Waste Water
Treatment Facilities
Chemical agents had begun to crystallize inside the aging feeder pipes to a waste water
treatment facility in Hoya’s factory in Koka, Shiga Prefecture. As it was conceivable for the pipes
to clog and affect the treatment of waste water, steps were taken to prevent an environmental
accident beforehand. Together with renovating the water treatment facility, the polyvinyl chloride
feeder pipes were replaced with hard vinyl chloride more resistant to rupturing under impact,
insulated to prevent freezing in the winter and equipped with a dedicated valve for flushing out
clogs.

Activities to Increase Waste Recycling
Recycling Empty Contact Lens Containers
Disposable lenses are the most popular contact lens product at
the Eye City contact lens specialty chain operated by the Eye Care Division. In fiscal 2010, Hoya

began the Eye City ECO Project, in which all 184 stores collectempty cases from customers' used lenses for recycling. The
empty plastic cases collected from around the country werethen sold to a manufacturer of recycled products, and theproceeds were donated, with a matching contribution from
Hoya, to the Japan Eye Bank Association.
In the first half of fiscal 2011, the Hoya group donated ¥306,000
in proceeds from recycling and matched contributions to the

A letter of appreciation fromJapan Eye Bank Association

Japan Eye Bank Association.
The weight in empty contact lenses cases recovered, including those disposed at the Kodama
factory, amounted to 19,564 kilograms counting the second half, for all of fiscal 2011.
Incinerating such a volume in empty cases would have released 61.6 tons of CO2 into theatmosphere. The woodlands needed to absorb that amount of atmospheric CO2 would amountto 4.85 hectares, a space more expansive than the Tokyo Dome baseball stadium.
As part of recycling activities, Hoya separates and collects the aluminum seals to the empty
plastic cases for sale to manufacturers of recycled products as well.

Measures to Handle Waste Containing Asbestos
Asbestos is categorized into three levels from 1 to 3 in descending danger of scattering into theair. Level 1 includes sprayed asbestos coatings, while level 2 includes asbestos used as pipe
insulation and level 3 includes asbestos roofing and exterior boards.
The Hoya Group has removed all level 1 asbestos most at risk of scattering into the air from its
premises. All matter of level 2 asbestos accessible for removal has been removed as well. Level
3 asbestos boards have been placed under strict control to prevent breaking and scattering, andthe plan is to remove them in stages and bring the risk of their fibers scattering to the air closer
to zero.

Introduction of Environmental Management Systems (ISO 14001
Certification)
In October 1996, Hoya proclaimed the introduction of ISO 14001 environmental management
systems. In December 1997, HOYA LENS DEUTSCHLAND GmbH became the first Group
company to achieve certification.
Since then, Hoya has been introducing ISO 14001 environmental management systems both inJapan and overseas, with focus on production facilities. Group-wide, a total of 42 sites (10domestic sites and 32 overseas sites, as of March 31, 2011) were certified under ISO 14001
standards.
HOYA Annual Report 2011

Hoya works to create a comfortable environment where every
employee can work safely and in good health, both to support ameaningful life plan for employees and ensure the lastingdevelopment of the Company.
Occupational Safety and Health System
In 1995, the Hoya Group formulated its Occupational Safety and Health (OSH) Principles andBasic Policy, under which the Group promotes its OSH activities at its facilities throughout Japanand overseas. In October 2008 the Company integrated its environmental protection andoccupational safety and health systems. Environmental protection and occupational safety andhealth activities are now carried out under a new system headed up by the Hoya Group Director
for Environmental Protection, Occupational Safety and Health.

Safety Activities
Establishing an Occupational Safety and Health Management System
To ensure the safety and health of its employees, Hoya has established an occupational safety
and health management system based on the Occupational Health and Safety Assessment
Series (OHSAS) 18001 standards. As of March 31, 2011, 8 facilities in Japan and 26 facilities in
18 countries overseas have been certified by OHSAS 18001, a process that began in March
2002.

Initiatives to Utilize Risk Assessments in Reducing Risk
Along with the rising popularity of OHSAS18001 certification, the Company issued the Hoya
Group Risk Management Guidelines for Occupational Safety and Health in November 2009. This
guideline has since been used to bring more cohesion to the risk assessments among facilities,
and to focus on safety measures based on hierarchy of risk reduction measures.

Measures to Ensure Machinery and Equipment Safety
In April 2005, with the aim of preventing accidents related to operating machinery andequipment, the Hoya Group Machinery Safety Standard was issued. Within the field ofoccupational safety measures, Hoya has placed utmost priority on the implementation of risk
reduction measures for machinery and equipment right from the design stage.

Implementing Occupational Safety and Health Audits
To improve and enhance the performance of occupationalsafety and health systems, audits are conducted on a regularbasis at facilities in Japan and overseas by a director and staffof the Hoya Group Environmental Protection and occupationalsafety and health. Measures are in place for implementing theirproviding advice and guidance with regard to legal compliance,
improving safety and health performance.

OSH Audit

Implementing Safety Education for the Hoya Group
Hoya holds meetings with occupational safety and health staff
in Japan and overseas and provides consulting within the groupto share information and improve skills on issues pertaining tothe occupational safety and health. Currently, meetings of thepersons in charge of environmental protection and occupationalsafety and health for each Division are held around three times
a year and Hoya Group foreman training is held twice a year.

Employee training

Consulting on the subject matter within the group is provided
mainly to the business bases overseas. Each of these activities contributes to raising the level ofsafety at the Hoya Group.
HOYA Annual Report 2011

In order to support a meaningful life plan for employees andensure the lasting development of the Company, Hoya works tomaintain and enhance health throughout the Group so that
employees can work energetically, healthy in both mind andbody.
Mental Health Measures
Hoya has implemented measures to raise mental health awareness through mental healthcourses for managers and supervisors and for regular employees. Based on the Hoya Group
Mental Health Measures Guidelines, the Company has also established a system to ensure
thorough care by managers and supervisors with the support of staff in charge of personnel andoccupational physicians.

Measures to Prevent Excessive Work
In compliance with a 2000 Administrative Guideline of the Ministry of Health, Labour and Welfare
and the Industrial Safety and Health Law of 2006, Hoya has created and implemented excessive
working hours standards. Employees who exceed these standards meet with physicians(occupational physicians) and address the problem through work management (overseen by apersonnel officer and a supervisory officer) and healthcare management (occupational
physicians) programs.

Special Health Checkups and Healthcare Instruction
Since 2002, Hoya has run a lifestyle habits improvement program for employees designed toprevent metabolic syndrome. In the fiscal year under review, the Company held special healtheducational seminars and lifestyle habits improvement programs to prevent and alleviate
metabolic syndrome and lifestyle diseases for approximately 600 employees.

Health Consultation for Employees Assigned Overseas
To provide health consultation for employees assigned overseas, occupational physicians meetwith employees and their families to provide hygiene education , conduct a health check-up anddiscuss health consultation before they leave Japan or while they are overseas. In addition,
occupational physicians pay periodic visits to facilities and to discuss health condition and otherissues as necessary with employees located overseas.

Hoya Obtains Occupational Health Certification
Hoya applied for Occupational Health Certification with the University of Occupational andEnvironmental Health, Japan and was approved this certification on November 15, 2010. The
certification program objectively evaluates health and hygiene management initiatives
companies with comprehensive industrial health programs implement. The certification indicatesthe Hoya Group scored well in an objective evaluation of its health and hygiene management
initiatives.

Occupational Health Certification
HOYA Annual Report 2011

HOYA has made all possible efforts with regard to information posted on this website and otherlinked company’s websites. However, no guarantee is given regarding the accuracy,completeness, validity, immediacy or timeliness of this information, any of which could include
errors, misprints or other defects.
HOYA and its information providers accept no responsibility whatsoever for any losses, financial
or otherwise, arising from the use of this information. In addition, HOYA and its information
providers accept no responsibility whatsoever for any losses, financial or otherwise, arising fromcomputer system malfunction or any other cause resulting in error, invalidity, delay, omission,
defect or suspension of the information provided.
HOYA may make comments and disclose information which include forward-looking statementswith respect to HOYA's plans and future performance. Such forward-looking statements that are
not historical fact are based on management's assumptions and beliefs in light of the information
available to it when such statements were prepared. We do not guarantee the accuracy orcompleteness of the information herein. HOYA cautions that a number of factors could cause
actual results to differ materially from those discussed in the forward-looking statements. Suchfactors include but are not limited to fluctuation of exchange rates and interest rates,international situations, market trends and economic conditions, competition, production capacity
and research and development capabilities and so on. Please refer to Business Risk.
The information posted on this HOYA Annual Report website is not provided for the purpose of
inducing investment activities. Investors are advised that any investment must be made at theinvestor’s own discretion.
HOYA Annual Report 2011