ANNUALREPORT2010

For the Year Ended March 31, 2010

Onwards and Upwards

video(2:26min)

Apr. 1985
May 1993
Jun. 1993
Jun. 1997
Apr. 1999

Joined the Company
President of HOYA Corporation USA
Director of the Company
Managing Director of the Company
Managing Director of the Company
President, Electro Optics Company
Executive Managing Director of the Company
President and Representative Director of the Company
Director, President, Representative Executive Officer and CEOof the Company (present post)

Jun. 1999
Jun. 2000
Jun. 2003

Fiscal 2010, the year ended March 31, 2010, was a difficult period for business, marked by a global economic slumpthat followed the financial crisis in the US. However, as Hoya struggled to address this harsh business environment, wemade dramatic structural reforms that have transformed the Company into a leaner, more muscular organization which
could ride out the economic storm and prepare for a renewed growth phase. I would like to take this opportunity to thankHoya customers and shareholders for their support over the past year, and discuss the company´s current position, andprospects for the future.

Review of Fiscal 2010
At the start of fiscal 2010, Hoya faced an extremely harsh business climate. There was no sign of a letup in theeconomic slump, and we approached the new fiscal period with a real sense of crisis. Market demand – particularly for
digital products such as semiconductors, PCs, LCD panels and the like – plunged to extremely low levels at the end of
fiscal 2009, and the industry as a whole was forced to conduct extensive inventory adjustments. Hoya had little choice
but to respond to this slump with aggressive measures to slim down operations. We temporarily suspended production inseveral business segments, and made exhaustive efforts to reduce fixed costs to a level that matched the low sales
levels. By summer, the strict production cuts and inventory adjustments began to take effect, and demand began torecover rapidly. However, this rebound was more sudden than expected, and it took some time to adjust to the improved
demand conditions. Thus, even though volume rebounded in the latter part of the year, unit prices remained weak, andhave yet to regain the levels they held before the economic crisis. Consequently, even in the second half, we continued
to face a rather difficult earnings structure.
In the Eye Care and Medical businesses, demand remained fairly solid even in the immediate wake of the "Lehman
Shock". Earnings contributions from these segments remained relatively firm. Although we have been trying toaccelerate business expansion by investing in growth segments, during fiscal 2010 it was necessary to place theemphasis on balanced earnings, and Hoya had to cut back investments in future growth businesses. Consequently,
Hoya will need to review the roadmap for future growth, and address the associated issues during fiscal 2011.
Due to the business conditions described above, consolidated net sales for the period declined 9.0% year on year, to¥413,524 million. Operating income rose 8.9%, to ¥64,327 million, ordinary income was down 18.7% year on year, to¥57,805 million, but net income increased by 50.8%, to ¥37,875 million.
Although the adverse business climate caused sales to drop off, year on year, the efforts we made to improve Hoya´scost structure have turned the Company into a leaner, more muscular organization. As a result, operating income
registered year-on-year growth. Furthermore, the asset impairment losses and write-offs that Hoya booked in fiscal
2009, on the Pentax business, among others, amounted to ¥30.4 billion. Since these items disappeared from theaccounts in fiscal 2010, net income grew more than 50% year on year.
In the Information Technology business, Hoya´s Electro-Optics Division posted ¥143,375 million in net sales, a declineof 12.5% year on year. Operating income fell 27.4% to ¥28,823 million.

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In the Eye Care business, sales in the Vision Care Division declined 6.4%, to ¥103,625 million, but operating income
increased by 2.5% year on year, to ¥22,350 million. Sales in the Health Care Division, meanwhile, rose 8.1% to¥54,012 million, and operating income expanded 6.9% year on year, to ¥12,336 million.
Sales in Pentax fell 13.1% year on year, to ¥106,150 million, but the unit posted an operating profit of ¥2,768 million,
following an operating loss in fiscal 2009.

Portfolio Management Aimed at Perpetuating Growth
Since Hoya was founded in 1941, as Japan´s first specialized manufacturer of optical glass products, the Company has
focused its efforts on developing businesses in its area of core competence – optical technology. The Company has
expanded steadily, and now operates businesses in a variety of related fields, including electronics, photonics, eye careand health care.
However, the Company´s growth has not been simply a haphazard diversification. Hoya´s management philosophy isbased on careful business portfolio management. Each of the business units overseen by the Hoya Group has a
specific role to play in contributing to the group´s overall growth and earnings performance. Though the characteristics
of each individual business may differ, we strive to maintain an effective balance among the parts, adjusting the portfolio
carefully to address changes in market needs and the conditions of the business environment. By managing its businessportfolio effectively, Hoya aims to achieve sustainable growth over the long term.
About ten years ago, Hoya´s portfolio of businesses could be divided into two roughly equal halves – the information
technology business and the eye care business. However, as the global market for digital electronics products
expanded, the information technology business steadily increased its contributions to overall sales and profits, and it has
now become the main engine of growth for the Hoya Group. Favorable market trends have supported the Company´sgrowth, but we have steadily enhanced our competitive edge by developing optical technology to a level that few
competitors can match. This technology forms the basis for Hoya´s success in generating high profitability.
The unprecedented financial crisis which struck in fiscal 2008 triggered structural changes in many industries andconsumer markets, and accelerated other global changes such as the growing importance of emerging industrializedcountries. It also had major implications for the economic growth that has been driven by the global shift to digitaltechnology.
To address these changes, Hoya is reappraising its business portfolio. In the Information Technology business, we
intend to continue focusing on the optical technology that has always been Hoya´s greatest strength, seeking to maintaina competitive edge in existing businesses and thus generating a steady flow of earnings. However, we also plan toexpand our focus over the next decade and seek to accelerate growth in the Company´s other business segments – eyecare, health care and medical equipment. Hoya already has a long history of success in these businesses. We will seek
to generate growth in industrialized countries, where the average age of the population is rising, by providing higher
value-added products. At the same time, we will work to expand into markets in emerging economies.
Hoya will continue adjusting its business portfolio on the basis of long-term strategies that aim to perpetuate company
growth.

Outlook for the Future
The specific direction of Hoya´s business portfolio management will be based on the trends we anticipate in our major
markets. Although in the Electro-Optics field, many manufactures might appear to have suspended technologicaldevelopments during fiscal 2010, there has been a great deal of technological advancement behind the scene. Hoya isalso preparing to implement its advances, timing the launch of new technologies to match market needs. Meanwhile,
emerging economies are taking a more prominent role in the electronics industry in every respect, from production to
the final consumer markets for the products. By cooperating closely with manufacturers in these countries, Hoya
intends to establish an even stronger global presence. From a long-term perspective, the expanding volume of
information that is generated and demanded by today´s information technology products will make our opticaltechnologies increasingly vital to the processing, storage and transmission of information. This trend could open up
entirely new fields of business for Hoya.
In the Vision Care business, the market is steadily polarizing into two major formats – independent store channels andmajor eyeglass chains. We intend to refine our business model and pursue a two-channel strategy, in an effort to satisfy
both of these retail customers.
The Eye City business, which operates a chain of contact lens specialty stores, is expanding steadily in Japan with the
opening of new stores. However, in order to derive the maximum benefits from this chain store strategy, Hoya intends toaccelerate the pace of new store openings and thereby increase market share. Our intraocular lens business, which
provides artificial lenses for cataract surgery, received a boost in August 2009 when the FDA approved these lenses forsale in the US. This will allow us to move forward with a global expansion strategy. We are now on the same footing as

2

business rivals, and we will strive to establish a competitive edge by providing distinctive products through a unique sales
channel strategy.
In the two years since Hoya acquired Pentax, the business has been reorganized to achieve a better fit with Hoya´smanagement strategy, with Pentax operations restructured into three segments – medical endoscopes, digital cameras
and other products. We expect the merits of this business integration to become steadily more apparent in the future.
The economic dislocation and confusion which followed the collapse of Lehman Brothers is gradually fading, and theglobal economy moving back towards normalcy. Still, major global changes are very likely to continue, and as acorporate manager, I consider it crucial to repay the trust and confidence invested in Hoya by its shareholders by
anticipating and responding to the changing environment with decisive yet carefully considered actions. I believe thatbusiness conditions in fiscal 2011 will be considerably better than last year, and the challenges that each of ourbusinesses face will become clearer. On behalf of the entire Hoya management team, I want to assure stakeholders that
we will carefully consider all the risks, and try to chart a course for even greater success in the future.

Closing Thoughts
In today´s world, a company must constantly seek ways to justify its existence by contemplating the value that it provides
to society and how it can satisfy the needs of the communities in which it operates. Naturally, these considerations must
evolve in accordance with the changes taking place in society itself, and the value a company creates must be flexible
enough to respond to these changes. Globalization is one example of such a change; Hoya must decide where and how
it can manufacture products most efficiently, where we can sell the most of products, and how we can generate thegreatest value from their sale. In order to maximize all of these factors, we will need to build a global organization thathas the optimal production locations and the optimal sales channels.
During fiscal 2010, Hoya was forced to slam on the brakes. However, since all Company employees understood thechallenges and conditions we faced, and followed management´s decision to implement them swiftly, we were able topull through the difficult adjustment period successfully. Now it is time for the Company to focus its energies on
accelerating smoothly into the next phase of growth.
I want to thank Hoya´s customers and shareholders for their understanding, and welcome their continuing support as wemove towards a brighter future.

HOYA Annual Report 20103

video(3:17min)

Apr. 1982
Mar. 1987
Nov. 1992
Jan. 1995
Aug. 2000
May 2006
Apr. 2008
Jun. 2008

Joined Yamashita Shinnihon Steamship Co., Ltd. (present
Mitsui O.S.K. Lines, Ltd.)ALICO Japan
Clarke Consulting Group of the United States
Dell Computer Corporation (present Dell Inc.)
President and Representative Director of the above company
Vice President of Dell Inc. of the United States
Representative partner of Revamp Corporation
Executive Chief Operating Officer of the Company (present
post)
Director of the Company (present post)

Extensive structural reforms have made Hoya a slimmer, more muscular competitor
Fiscal 2010 was my second year as the COO of Hoya. I took the post in April 2008, and the economic crisis which
unfolded later that year set off a global recession of truly historic proportions, but over the past year, Hoya made some
important steps forward in our effort to climb out of this slump, by implementing large-scale structural reforms. During
the first half of fiscal 2010, in particular, the economic downturn created a very difficult operating environment,characterized by weak demand and depressed prices. Hoya responded to these pressures by making major structuralchanges, closing down plants, temporarily halting production lines and working to cut procurement costs. In this way, we
succeeded in cutting expenses dramatically. These measures have improved the profitability of operations considerablycompared with fiscal 2009, and made Hoya a leaner, more muscular organization.

Five Initiatives to Support Future Growth
Now that the first stage of restructuring has been completed, I am eager to begin the next step of the process. In fiscal
2011, I am implementing five initiatives that we believe will put the Company firmly on the path to future growth.
Over the past year we have been building on Hoya’s strengths by pursuing greater globalization (establishing the mostappropriate structure and location for both production and management, to target the most appropriate markets) and
improving the Company’s technological competitiveness. This year, as COO, I will implement the five initiatives, startingwith (1) preparing the necessary personnel training and diversification and (2) improvements to IT infrastructure needed
to support growth in the longer term. We will then follow with (3) market-driven business expansion, an (4) accelerated
advance into emerging markets and (5) efforts to enhance customer satisfaction. I believe that these five initiatives will
help Hoya move quickly into a new phase of growth.
Pyramid: 5 Initiatives

4(1) Personnel Training and Diversification
Hoya employs over 34,000 people worldwide, and we believe that the diverse skills and capabilities of this work force areindispensible to the Company’s progress and success. In order to effectively address and overcome the multitude ofnational borders and social customs that exist in the markets Hoya serves, we need to take the maximum advantage of
our employees’ diverse capabilities. To this end, we have introduced a fair and transparent personnel structure whichhires, trains and rewards employees based on their contributions, regardless of their age, nationality, sex or ethnic
background. We also are developing a thorough training structure to ensure that each employee can realize their fullpotential.
(2) Improvements to IT Infrastructure
Hoya has a long track record of using technology to help enhance productivity, but a careful survey of our global
operations indicates that there is still room for improvement and further rationalization in each of the Company’sbusiness segments. One measure that can help improve efficiency is to develop an integrated, global IT infrastructure
for the Hoya Group. This IT infrastructure will be indispensible in the coming years, as the volume of information and the
speed at which it flows continue to increase. By doing so, we can enhance the value of Hoya products and make themeven more cost competitive.
(3) Market-Driven Business Expansion
In the past, Hoya has developed products from a technician’s perspective, focusing on the technology. Because thequality of the technology has been such a defining factor in the electronics industry, manufacturers could usually be
sure of achieving customer satisfaction, simply by developing and delivering the most advanced technology. Hoya has
succeeded in building several strong businesses by following this technology-driven course. However, with the purchaseof the Pentax business, Hoya advanced into a realm of business that is much more market-driven. The Company’sbusiness portfolio now encompasses millions of customers, with very diverse needs. Our clients now range fromindividual consumers to hospitals to major product manufacturers, and the importance of direct sales and marketing
efforts has greatly increased. In order to make further progress with our current portfolio of businesses, we may need toadopt a much more market-driven approach. This is true not only of the Pentax division; further expansion in Hoya’s eye
care business will also require such an approach. Therefore, we are making efforts to enhance research into market
needs, track the efforts of rival manufacturers and thus remain abreast of trends in what customers value, using thisinformation to create a global product development roadmap and marketing strategy that can best satisfy their needs.
(4) Accelerated Advance into Emerging Markets
If Hoya adopts a market-driven focus, then we cannot ignore the fact that emerging economies are making a major
contribution to global demand growth. For that reason, we are placing top priority on addressing and developing theseemerging markets.
(5) Efforts to Enhance Customer Satisfaction
A market-driven approach to business expansion is based on determining where value lies for the customer, and finding
a way to deliver that value. Therefore, it is essential that Hoya develops a clear awareness of and dedication to customer5

satisfaction. We are implementing a variety of programs that aim to enhance customer satisfaction.
I believe that by diligently implementing the initiatives outlined above, Hoya will be able to resume a steady andsustainable growth trajectory. As COO, I will take the lead and work closely with employees worldwide, as well as dealers
and customers in each region, doing my utmost to guide our businesses on an expanding course.

Continued efforts to enhance valueOver the past year, Hoya has implemented structural reforms to improve profitability, making the organization leaner andstronger. This year, we intend to build on that success and move the Company back on the path of earnings growth. By
implementing the five initiatives outlined above, we can provide shareholders and all our other stakeholders withincreased value to reward them for their ongoing support.
I trust that you will continue to support Hoya as we embark on the next stage of growth and development, and share in
the rewards we cultivate.

HOYA Annual Report 20106

Business Overview

The Electro-Optics Division provides mask blanks and photomasks used in the production ofsemiconductors and LCD panels which are embedded in digital equipments such as personal
computers, LCD televisions, digital cameras and mobile phones, as well as cuttingedge glass
memory disks and optical lenses to support the miniaturization and enhanced functionality of
those products. Hoya maintains a large global share of each of these markets, based on
proprietary technologies at each stage from development to production.
Share of net sales

Net Sales

Operating Income /Operating Margin

The Photonics Division applies optics technologies cultivated over many years to provide laser
Oscillators and UV Light sources used in manufacturing processes for semiconductors, LCD
panels and optical devices. The Division also provides colored glass filters and special glass
products for various purposes.
Share of net sales

Net Sales

Operating Income /Operating Margin

7

The Vision Care Division is engaged in manufacturing and sales of eyeglass lenses in global
markets. The IT system linking the factories and sales points enables the division to deliver high-value-added lenses to customers around the world quickly and efficiently. The Company holds
the top market share in Japan.
Share of net sales

Net Sales

Operating Income /Operating Margin

The Health Care Division is responsible for the development of the over 170 Eye City stores,
Japan’s largest chain of contact lens specialty stores. It also manufactures and sells intraocularlenses (IOLs) used in the treatment of cataracts globally.
Share of net sales

Net Sales

Operating Income /Operating Margin

8

The Pentax business leverages its optics and precision processing technologies to develop andsell a broad selection of products, including medical devices, digital cameras, lens units for
digital cameras, and Small-size Lenses. In the medical devices market, the division is focusing
on endoscopes with the expectation that medical care will progress and the market will grow inthe long-term. In cameras, the Company is working to develop unique products based aroundthe globally recognized PENTAX brand.
Share of net sales

Net Sales

Operating Income /Operating Margin

HOYA Annual Report 20109

Business Overview

Electro-Optics Division

Fiscal 2010 Business Overview and Results
The semiconductor market started out sluggish in the first half of the year underreview in the wake of the global financial crisis, but recovered gradually from thesummer such that some companies stepped up capital investment and advanced
R&D. Some manufacturers made aggressive changes to their business structuresduring the period of limited investment, pursuing greater manufacturing efficiencies
and cost cuts, and therefore achieved a marked improvement in earnings from thesecond half as the economy recovered.

Mask blanks for semiconductor
production

Hoya’s mask blanks business reported a recovery from the second half in line with
the increased investment by semiconductor manufacturers. However, across the semiconductor market as a whole,
fewer manufacturers were pursuing cutting-edge R&D and many companies cut costs by streamlining their productline-up, therefore taking a cautious approach on mask blank orders. As a result, slow growth by high-end products anddownward pressure on prices meant this segment recorded a fall in both sales and profits compared with the previous
year.
In the year under review, Hoya continued to focus on developing mask blank materials and cutting costs in order to
respond to further miniaturization by semiconductor manufacturers and cost pressures. Hoya is developing advanced
photoresist films that can be used for 32 nanometer node microtechnologies, and is working to achieve quality control
with a defect rate of zero. The Company is also focusing its efforts on improving manufacturing efficiencies, including
better yields on manufacturing lines that have been shifted overseas.

Outlook for Fiscal 2011
In fiscal 2011, the semiconductor market is expected to continue recovering and cutting-edge R&D may be earmarked
for significant investment. Hoya will therefore continue to pursue R&D into advanced technologies as a leader in themask blanks field. As well as redoubling its efforts in component technologies that underpin advanced R&D, Hoya is
working to ensure the stable supply of high-precision mask blanks through rigorous product assessment and analysis
and the sharing of in-house expertise. At the same time, Hoya will cut costs to create robust business structures.

In semiconductor production, extreme ultraviolet (EUV) lithography is drawing
attention as a promising technology for the next generation of lithography
light sources after the current ArF light source. Semiconductor
manufacturers are developing this technology with the goal ofcommercializing EUV lithography around 2013; Hoya is leading thecompetition in the development of cutting-edge mask blanks and photomasks
for use with EUV lithography. The Company aims to respond to market needs
quickly and accurately by combining mask blanks materials technologies withstate-of-the-art lithography techniques developed in its photomask
business.

HOYA Annual Report 201010

EUV Mask blanks

Business Overview

Electro-Optics Division

Photomasks for Semiconductor Production
Fiscal 2010 Business Overview and Results
The structure of the semiconductor market has changed
significantly since the onset of the financial crisis in 2008 as aresult of restraint in R&D investment, increased corporate
restructuring, and other factors. With emerging economies,
primarily China, now playing a leading role in the market, driving
global demand, even greater pricing pressures are evident.

Photomasks forsemiconductor production

Reflecting these difficult operating conditions, Hoya's performancein the first half of fiscal 2010 was sluggish. In the second half, various semiconductor
manufacturers that had exercised restrain because of the financial crisis resumed development
investment, leading to gradual signs of a recovery in photomask demand. Nevertheless, fullyear demand was down year on year, resulting in lower sales and profits.
Hoya worked to develop business, focusing on advanced domains, and to strengthen
competitiveness through rigorous development of advanced technologies. In addition to the
cutting-edge lithography equipment released in fiscal 2009, the Company introduced inspection
equipment for advanced 22nm node products, stealing a march on competitors. This
achievement enabled Hoya to capture demand for photomasks for development after
semiconductor manufacturers resumed R&D investment.

Outlook for Fiscal 2011
In semiconductors, companies are aiming to improve chip performance through finer design
rules and reduce costs by boosting production capacity. However, the investment cost inadvanced domains is increasing year by year, while the number of companies engaging in
advanced development is on the decline as more and more companies seek to reduce costs byusing general-purpose parts to produce devices. Against this backdrop, Hoya's photomask
business intends to expend every effort to supply customers with high-quality photomasksneeded to support advanced semiconductor development, while at the same time focus on
enhancing cost-competitiveness.

HOYA Annual Report 201011

Business Overview

Electro-Optics Division

Fiscal 2010 Business Overview and Results
During the fiscal year under review, the LCD panel market expanded, supported by
global demand for LCD televisions, mainly in China and other emerging economies.
The past several years have seen productivity gains resulting from an increase inpanel sizes, which has led in turn to competition to produce larger photomasks. The
trend toward larger photomasks has paused for the moment, however, and themarket is proceeding with product development focused on higher-resolution andhigher-performance LCD panels. In 2010, which is being called "the first year of
3D," still more intense technological competition is beginning.

Photomasks for LCD Panelproduction

Amid this environment, Hoya is working to rapidly supply products in response tocustomers' needs and individual specifications. These products include high-end, high-quality photomasks for panelswith improved performance and cost-competitive products for general-use items. During fiscal 2010, both sales andprofits fell as a result of severe downward pressure on prices. This was despite higher shipments of photomasks
accompanying expansion of the LCD panel market. In terms of production, the Company made continuous efforts to
reduce production costs and also worked to strengthen the production framework at its three bases in Taiwan, South
Korea and Japan, pursuing certain efficiencies on a local basis and seeking to boost efficiency across all three bases inother areas.

Outlook for Fiscal 2011
In fiscal 2011, overall demand will be driven by development in high-performance LCD televisions, with 3D andhigh-definition sets at the forefront, as well as by volume growth in low-priced products, mainly in emerging economies.
Hoya, as a leading company in the field of photomasks, will continue to focus efforts on developing technologies for andexpanding production of high-performance photomasks to make these advanced functions possible. More specifically,
demand is growing each year for multi-tone masks able to transfer extremely fine circuit patterns to substrates, andHoya intends to use its technological capabilities gained through development of photomasks for semiconductor
production to set itself apart from the competition.

HOYA Annual Report 201012

Business Overview

Electro-Optics Division

Glass Memory Disks for Hard Disk Drives
Fiscal 2010 Business Overview and Results
Hoya develops and manufactures 2.5-inch glass memory disks for
HDDs, which are used mainly in mobile devices such as notebook
PCs and external hard drives. During the fiscal year under review,the notebook PC market saw strong growth including for netbooks
and low-priced PCs. In the HDD market, some lingering inventory
adjustment effects spilled over from fiscal 2009 into the firstquarter, but from the second quarter onward performance wasstrong as production increased and demand surged.

Glass Memory Disks for
Hard Disk Drives

Amid this environment, Hoya's glass disk business maintained ahigh operating rate, boosted by strong demand from the second
quarter. As sales volume rose, sales in monetary terms grew year on year despite the effects ofthe strong yen and lower prices.
Regarding glass substrate products, in fiscal 2010, Hoya focused on enhancing precision,
including reducing defects and improving the smoothness of disk surfaces, mindful that higher
density will be in even greater demand going forward. At factories in Thailand and thePhilippines, Hoya made progress switching production lines to enable them to handle highprecision products. In media products, the Company developed high-density-compatible
materials, and worked to reduce costs by improving product quality and productivity.

Outlook for Fiscal 2011
Fiscal 2011 is expected to bring continued growth for the HDD market, mainly in demand foruse in notebook PCs. In order to respond to strong demand growth going forward, Hoya plans
to both reinforce its existing factories and build new manufacturing facilities in Philippines andVietnam. The Company will work to improve disk precision to stay in step with the increasing
memory capacity of HDDs. In substrate products, we aim to maintain our No. 1 industry positionin terms of quality, cost, and delivery timeframes.
As of June 30 2010, HOYA completed the agreement regarding the transfer the hard disk
media manufacturing operation and related assets to Western Digital Corporation. Goingforward, HOYA will focus on and allocate its resources to its glass substrates business toenhance its competitiveness and boost future growth.

In HDD recording media, developers are working on new technologies to increase storage
capacity. At present, perpendicular magnetic recording is being used to improve recording
capacity by aligning the poles of magnetic writing elements perpendicular to the recording
layer. But the industry is now developing new technologies such as discrete track13

recording1 and assist recording2 to replace existing methods
and achieve even greater increases in recording capacity. Asa leading glass disk company, Hoya is also working actively
to develop technologies for next-generation media.
1 In this method, channels are created between the tracks of therecording material to reduce 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.

HOYA Annual Report 2010

14

Mold for Discrete trackrecording media

Business Overview

Electro-Optics Division

Fiscal 2010 Business Overview and Results
Demand in the digital camera market, Hoya's main market for optical lenses, whichplummeted following the Lehman Shock in fiscal 2009, began to show signs ofrecovery from the second half of fiscal 2010, and had picked back up again by theend of the fiscal year. The market for digital cameras saw shipment volume riseyear on year due to expanded lineups in both top-end and entry-class models, aswell as the addition of the new mirrorless category. The market for interchangeable
lenses also performed firmly in step with expansion in digital interchageable lensmolded lenses
cameras. Compact cameras recorded the largest year-on-year drop in sales inseveral years as rising demand in emerging economies failed to compensate for stagnant sales in developed nations
because of the economic recession.
Amid this environment, Hoya's optical lens business saw growth in sales volume of aspherical molded lenses and polishedlenses. Due to lower product prices, changes in the product mix, and the appreciation of the yen, however, sales
declined in monetary terms.
The digital camera market is seeing increasing demand for high zoom power, slimmer bodies, and wide-angle shooting
capabilities. In lenses as well, camera manufacturers are looking for high-function lenses that enable advanced
photography.
During fiscal 2010, as these customer needs became more sophisticated, Hoya worked to develop high-performance
optical materials with superior optics and establish volume production processing technology for aspherical molded
lenses using these new materials. High-precision aspherical molded lenses using a new high-index, high-dispersion
optical material (M-FDS2) won a particularly strong reception for addressing wide-angle shooting and zoom needs, andcontributed to sales.
At the same time, the competitive environment especially for polished lenses intensified as a result of the growing
prominence of lens manufacturers in Asia, particularly China, meaning downward pressure on prices was as strong as
ever. In response, Hoya relocated and reinforced manufacturing facilities at production bases in Japan and overseas, andstrove to boost productivity, including improving the yield rate. Hoya also focused on strengthening sales, production,and service in Asia as more corporate customers shift their production processes to that region.

Outlook for Fiscal 2011
In fiscal 2011, Hoya expects to see demand for digital cameras grow due to the Shanghai Expo and the 2010 FIFA World
Cup. However, customers will also increasingly demand high performance lenses that require a high degree of
manufacturing competence as camera users seek higher zoom power, slimmer camera bodies, and wider-angle shooting
capabilities. Stiffer price-based competition is also anticipated. Based on its integrated production system, from opticalmaterial development to lens manufacturing, Hoya will leverage its cost-competitiveness and proposal-making
capabilities backed by unparalleled technologies and experties to meet the demand for more advanced digital cameras
and other optical products.

HOYA Annual Report 201015

Business Overview

Fiscal 2010 Business Overview and Results
UV (ultraviolet) light source products are used in digital device manufacturing
processes for UV-resin bonding. The fiscal year under review saw vitalization ofcapital expenditure by customers in the HDD, optical pickup, and touch panel
markets, and a recovery in demand. Hoya secured firm orders, and was able tomaintain sales on a par with the previous year in the UV light source category.
Sales of laser oscillators, which are mainly used to repair pattern defects in flat
panel manufacturing, dropped significantly as a result of extreme selectivity incapital expenditures at our customers.

Polarized glass (CUPO)In addition, color filter glass and special glass used in various applications including
industry and medicine performed well, supported by steady sales in the medical
market. And infrastructure investments by the Chinese government pushed up thedemand for the polarized glass (CUPO) used in optical communications isolators, ofwhich the Company launched full-fledged sales in fiscal 2009. However, amid theeconomic recession following the Lehman shock, in this product segment, sales fell
year on year due to a sharp drop in demand for certain parts used in video cameras.
Market conditions made it difficult to gauge demand during the economic recessionin fiscal 2010. In this environment, Hoya took measures actively promoting
efficiencies in its sales activities, streamlining the organization to enable timely
response to changes in the scale of demand, and working to reduce fixed costs.
Thanks to these efforts, the company secured higher profits year on year.

UV-LED spot light source(EXECURE-H-1VC)

Outlook for Fiscal 2011
In fiscal 2011, it is likely that demand will remain difficult to anticipate. However, there is expected to be continuous
demand for optical pickups, camera modules, and other digital products. Hoya will implement changes in its businessmodel and internal structures to enable the Company to continue to customize existing products to accurately meet
individual customer needs, to shorten the timeframes from receipt of orders to delivery, and to respond to demands for
low pricing. In product development, the Company intends to make use of existing technologies to expand business into
new domains. Growth is expected in Asia, led by China, as the region becomes the center of demand going forward. In
response, Hoya will accelerate the shift to Asia on both the sales and manufacturing fronts.

Hoya is proceeding with the development of a new light source device that
can handle the full range of UV exposure, from spot to area exposure. The
fiscal year under review, Hoya developed UV-LED exposure unit withline-type illumination.
Hoya is developing highly competitive new products in the field of opticaltechnologies, where it has built up experience in fiber optics.

HOYA Annual Report 201016

line-type UV-LED

Business Overview

Vision Care Division

Fiscal 2010 Business Overview and Results
During the fiscal year under review, the market for eyeglass lenses felt the impactof the economic recession that followed the global financial crisis. In eyeglass
retail markets in developed countries, consumers wore lenses longer before buying
replacement ones, and purchasing sentiment fell for high-value-added products
such as photochromic and progressive lenses. Market polarization became more
pronounced. Prices fell and eyeglass lenses were increasingly commoditized as
major eyeglass retailers expanded flat-price and 2-for-1 promotions to drive traffic.
At the same time, independent opticians saw growth in high-performance eyeglass lenses customized to each individual
customer's eyes and lifestyle. In emerging economies such as India and China, rising standards of living due to rapid
economic development saw a growing number of customers purchase high-performance lenses, resulting in firm growth.
In the eyeglass lens business, in Japan Hoya saw lower revenues year on year as a result of market contraction due tothe declining population and falling prices. In the United States, sales were down as consumption dropped in theaftermath of the financial crisis and the yen was strong against the dollar. Sales also fell in natural resource-based
economies such as Canada and Australia as consumer sentiment weakened amid lackluster commodity markets. In theEuropean market, by contrast, sales grew despite the strong yen. This was because the Company was able to offset pricedeclines with higher volumes in some markets, and sales of high-value-added lenses grew. Sales were up in Asia as well,on the back of higher volumes and robust demand for high-value-added eyeglass lenses amid economic development.
In fiscal 2010, Hoya strategically rolled out a range of products for each region,
from high-value-added lenses to mid- and low-priced lenses. Positioned at the topof the premium lens category is the Hoyalux iD MyStyle (Hoyalux Trinity in Japan)
progressive lens, which fuses Hoya's optical and materials technologies. Using themeasuring devices installed at each eyeglass retailer and a unique softwarealgorithm, customers can get MyStyle lenses customized not only for theirprescription, frame and face shapes, but also their individual lifestyle. The lens
calculation algorithm also takes into account the customer’s previous lens design, resulting in higher comfort and much
faster adaptation.
During fiscal 2010, Hoya prepared to launch TrueForm in Europe and Asia and IQ in
North America, a new lens developed to bridge the gap between conventional lens
technology and Hoya's proprietary FreeForm Technology, used to produce thepremium MyStyle line. In addition to the reasonable price, TrueForm lenses can beproduced at regional labs, enabling fast turnaround times with delivery in just three
to four days of order. In Europe, the Company launched lenses treated with LongLife (EX-3 in the United States)
anti-reflective coating, a scratch resistant, water-repellent coating that is among the best in the industry in terms of
quality performance coatings.
Regarding the production framework, Hoya worked to expand global market shareand enhance profitability, by striving to raise price-competitiveness while growing
volume through efficient operation of:

Global production systems

Mass production factories to produce semi-finished and finished stock lenses;
Global Rx Labs for high-volume processing of unique prescription lenses for all
markets; andRegional Rx Labs, consisting of 52 facilities in 30 countries to deliverprescription lenses with fast turnaround and local service.
In July 2009, the Company commenced activities at HOLT Japan, a neworganization enabling the quick supply of large product volumes from Thai mass
production facilities to Japanese eyeglass retailers. This new approach addressedmarket needs and led to higher sales. In October 2009, with its sights set on
growth in the global market, the division relocated its headquarters from the Netherlands to Thailand, home to a
cutting-edge production facility. The move to Asia resulted in a framework that will allow the Company to pursue

17

regional and product strategies by promoting collaboration between the Thailand factory and the various labs and sales
channels around the world.

Outlook for Fiscal 2011
The global market for eyeglass lenses has substantial room for growth for the Company as societies age and customer
bases in emerging economies grow. Hoya currently has a global market share of just over 10%, and in fiscal 2011 intends
to increase that share by growing sales of mid- to low-priced lenses as well as high-value-added lenses. Specifically,
the Company will expand sales of TrueForm, which targets the middle sector of the market, and introduce its
anti-reflective coatings to new markets. In addition, Hoya will develop second brands for emerging economies in Asia,
India and South America, which are experiencing striking economic growth. The Company will also promote tie-ups andjoint ventures with local manufacturers in these regions in order to efficiently and quickly enter and establish a footingin the local markets.
In the medium to long term, Hoya will accelerate global growth by focusing on speeding up expansion in thehigh-value-added lens domain, opening up new markets, and leveraging IT to deliver efficient and innovative services.
HOYA Annual Report 201018

Business Overview

Health Care Division

Fiscal 2010 Business Overview and Results
During the fiscal year under review, the retail market for contact lenses in Japan
felt the impact of the economic recession, recording negative year-on-year growthin both conventional long-wear and disposable lenses. Amid the economic
slowdown, there was a decline in consumer sentiment for one-day and two-weekdisposable lenses, which had been growing until the previous fiscal year, leading todecreases in both unit sales and average prices. As a result, the contact lensindustry marked its first-ever year-on-year decline.
In this difficult business environment, Hoya's Eye City stores, one of Japan’slargest chains of contact lens specialty stores, was the only industry player toachieve increases in both sales and profits. This helped it to raise its market shareby 2 percentage points year on year and maintain its leading position.

Eye-City

Number of Eye-City
stores(Japan)

In fiscal 2010, Hoya vigorously pursued a strategy of opening new stores based on
detailed sales area analysis. As a result, the Company opened a record 21 newstores, bringing the total number of Eye City stores to 168 nationwide as of March
31, 2010. In addition to increased sales from the new stores, existing stores(opened before fiscal 2010) saw positive growth in sales as a result of
improvements to customer interfacing, and the deployment of effective marketingstrategies utilizing digital media and member databases, which succeeded in
attracting new and repeat customers. The cumulative number of customers
continued to grow, reaching 7.5 million by the end of the fiscal year under review.
Sales of Hoya Airy One month disposable lenses were strong in their debut year, growing quickly to capture the thirdlargest share in the one-month type market.
In the Chinese market, which Hoya entered in 2005, there are currently 7 Eye City stores in Shanghai. During the fiscal
year under review, the Company focused on building a business model with an eye toward further market expansion.

Outlook for Fiscal 2011
The market for contact lenses in Japan is expected to contract due to cooling consumer sentiment as well as the lowbirthrate and aging demographics. Amid this environment, Hoya intends to provide higher-quality service by listening
carefully to customer feedback, while stepping up store staff education and training, and renewing store design and logos
in order to reinforce the brand. We will also aim to expand the scale of business by raising sales at existing stores andaccelerating the pace of new store openings. With the rise of the Internet, we expect online contact lens sales to growin addition to conventional in-store sales. We will therefore explore possible business models in order to expand ouroperations.

During fiscal 2010, we launched Hoya Airy One month, a softlens made of an advanced silicon hydrogel that can be worn
for up to a month. Using proprietary Hoya technology, thislens reduces drying without preventing the eye frombreathing, offering consumers a healthier, more comfortable
experience. The product has been well-received for its
excellent performance.

19

HOYA Airy One month1/2

Business Overview

Health Care Division

Fiscal 2010 Business Overview and Results
The global market for intraocular lenses (IOLs) used in cataract surgery is
expanding as the number of cataract surgery patients increases alongside aging
demographics and increased economic development in emerging economies. The
majority of intraocular lenses used to replace the natural lens in cataract patientsare currently standard, spherical monofocal IOLs. However, in many developed
nations around the world, patients' increasing demand for improved Quality of Lifeis creating new markets for aspherical, multifocal, toric and accommodating IOLs.
Currently, the worldwide market is $2.1 billion and is projected to grow to $3.1
billion in the next five years.

Intraocular Lenses (IOL)
IOL Global Market size expectation

Hoya's hydrophobic IOLs, using a precision lathe-cut manufacturing method1,
which results in superior optical quality. Hoya IOLs are available in a novel
pre-loaded insertion system that provides safety, efficiency and predictability for
surgical outcomes. The lenses are currently available in Japan, Europe, Asia andthe United States. In Japan, the Company has already captured 30% of the total
market. During fiscal 2010, performance was driven by sales growth in Japan,
China, Italy, and the United States, allowing the division to achieve year-on-year
growth in revenues.
During the fiscal year under review Hoya began selling the iMics1™ series ofhydrophobic IOLs, which enable surgeons to insert the lens through an incision
size as small as 1.8mm, resulting in superior patient outcomes. Japan salescommenced in June 2009, and sales were launched in European countries inJanuary 2010, with the series receiving strong reception in all markets. In August
2009, the Company launched iSert™ pre-loaded IOL delivery system in the UnitedStates, the only small incision system of its kind currently available in the UnitedStates, the world's largest market for IOLs. The pre-loaded system has earned apositive response from ophthalmological associations and ophthalmologists formaking safer, more efficient cataract surgery possible. Hoya launched iSert™ in
Korea in January 2010, and plans to follow up with launches in India. BothiMics1™ and iSert™ contribute to ophthalmological medicine by providing not only
high-quality, precision lenses, manufactured using Hoya's outstanding proprietary
optical technologies and materials, but also revolutionary insertion devices thatmake surgery more predictable for both patients and doctors.

(company estimate)

Market share in Japan(company estimate)

In addition to developing improved products, Hoya also offers hospitals and clinics
iSert™ pre-loaded IOL delivery
unique supply chain systems to support their business operations. One example ofsystemsuch support is SAMI™ (Smart Automated Micro-tag Inventory), an inventory
management system that the Company has launched in the United States. SAMI™ uses RFID tags on product packages
to reduce doctors' administrative load, while automating inventory management and ordering processes and increasing
efficiencies.
1 Lathe cutting is a manufacturing process which fabricates lenses precisely one by one from button shaped materials using computer
controlled machine. In HOYA, a cutting-edge line combined with pad polishing and tumble polishing processes is used to achieve sharpedge and smooth optic surface.

20

2/2

Outlook for Fiscal 2011
The market for IOLs is projected to see significant growth going forward. In fiscal 2011, Hoya will enhance and expand
sales of existing products, including refined versions of the iSert™ pre-loaded delivery system. The Company will also
accelerate development of premium IOLs for which growth is anticipated, including toric IOLs and multifocal IOLs. With
regard to sales, following the entry into the North American market in 2009 that launched full-fledged global development,
Hoya will work to increase its market share in developed countries while opening up markets mainly for high-end
products in China, India and other emerging economies in order to capture global market share. In line with this global
expansion, the Company will also work to educate ophthalmologists around the world about the Hoya brand.

In cataract surgery, artificial IOLs are introduced to the eye through an
incision of just a few millimeters. The smaller the incision size, the quicker
the healing and the lower the risk of infection. Hoya's iMics1™, launched inJapan in 2009, is a revolutionary IOL that uses a proprietary loop design anddedicated insertion tool to enable insertion through an incision size as small
as1.8 mm. Following the highly successful Japan launch, Hoys plans to roll out the product in the United States,
Europe and Asia.

HOYA Annual Report 201021

Business Overview

PENTAX

Fiscal 2010 Business Overview and Results
In fiscal 2010, the medical endoscopes market felt the effects of the 2008 financial
crisis, with capital expenditures by medical institutions mainly in developed
economies falling off sharply, and with many U.S. medical institutions paying close
attention to developments in U.S. healthcare system reform. As a result, theEuropean and North American markets contracted year on year. Meanwhile,
markets expanded in emerging economies such as China, which is building up its
healthcare systems.

ultrathin video laryngoscope(VNL-90s)

Against this backdrop, sales fell year on year in the medical endoscopes business,
which derives a high proportion of sales from overseas, due to restraint andpostponement of capital expenditures by European and North American medical institutions and to the major impact of
the strong yen.
In fiscal 2010, an ultrathin video laryngoscope released in September 2009 (VNL-90s) and a ultrasonic video
bronchoscope put on the market in the previous fiscal year received strong acclaim, contributing to sales. The
otolarynogical field is currently shifting from using fiberscopes to using high-resolution videoscopes, and the VNL-90s
has an outer tip diameter as narrow as 3mm, while still retaining the high image quality of conventional scopes.
With regard to image processing, the Company upgraded the software for its
EPK-i high-resolution endoscope system, and added a new "twin mode" which
improves on the observational power of conventional single-screen models througha function that enables physicians to simultaneously view both standard and special
displays. This new feature has earned attention in the medical world. The
expansion of the lineup of upper and lower digestive tract endoscopes in the EPK-i
Twin mode (left:nomal image,series, which launched in 2007, is almost complete. Now able to meet a wide range
right:i-scan image)of customer needs, this enhanced lineup will lead to higher sales in fiscal 2011 andbeyond. With a view to full-fledged global development going forward, the Company
also appointed personnel with a firm track record in the business in the U.S., which represents the largest market, to top
positions in the division, and reviewed its business strategy.

Outlook for Fiscal 2011
Going forward, there will likely be increased demand for flexible endoscopes with higher-function image-processing
technology and greater operability to help physicians perform accurate and quick diagnoses. In fiscal 2011, market
conditions will remain uncertain in light of U.S. healthcare system reform and economic trends. Nevertheless, Hoya
intends to continue to strengthen collaboration with doctors, and to focus on developing products that respondaccurately to frontline medical needs. The Company will also further enhance marketing efforts in China and otheremerging economies.

The EB-1970UK ultrasonic videoscope, which enables physicians to observeat depths of 1-5 cm from the surface structure, is unique as the firstultrasonic bronchoscope with a CCD on the tip. In fiscal 2009, Hoya
launched the EB-1970UK in Europe and North America, and in fiscal 2010,
the Company saw growth in demand from advanced medical institutions inboth regions. In areas where precise observation and diagnosis are
required, such as examining the lymph nodes around the bronchial tubes forsigns that cancer has spread, the device has won praise for its highresolution and ease of use.

HOYA Annual Report 201022

Ultrasonic videoscope(EB-1970UK)

Business Overview

PENTAX

Fiscal 2010 Business Overview and Results
During the fiscal year under review, the composite bone market continued to see
gentle growth, mainly in Japan. The global market for chromatography media for thebiopharmaceutical manufacturing process also grew steadily. In these markets,
which are experiencing stable albeit moderate growth, the new ceramics businessachieved another year of increases in both sales and profits.
Hoya's mainstay product in this business is APACERAM, which holds the top sharein the apatite products category. A prosthetic filler for bone defects, APACERAM isused mainly in the fields of orthopedics, brain surgery, and dentistry. Composite
bone products break down into two major categories: solid-types such as
APACERAM, and paste types. During fiscal 2010, BIOPEX-R, a paste-type
composite bone material, sold well. In October 2009, the company released a new,fast-drying product, BIOPEX QUICK TYPE, aimed at the brain surgery field, andsucceeded in winning new customers. Hoya also pressed forward with businessexpansion policies that reach beyond conventional ceramics. For example, inNovember 2009, Hoya launched an implant product for brain surgery made oftitanium materials, which it had been considering releasing for some time.

New Ceramics

Market share in Japan(apatite products)(company estimate)

Many major pharmaceutical manufacturers in Japan and around the world use
Ceramic Hydroxyapatite as a chromatography media. These are often used in processes where a higher degree of
purification is required. During fiscal 2010, sales of Hoya’s Ceramic Hydroxyapatite grew firmly, in part due to improved
product recognition.

Outlook for Fiscal 2011
The composite bone market is expected to continue growing steadily in fiscal 2011, but Hoya has set its growth target
higher than the market growth rate. In order to meet its goals, the company aims to boost its share in existing markets
and expand business to new markets by enhancing the product lineup. Specifically, it will work to expand sales of theabovementioned products released in fiscal 2010, accelerate the speed to market of new products that improve on thefunctions of conventional products, and consider introducing new metallic materials. The company will also accelerate
growth in the chromatography media market, which is expected to grow strongly. Going forward, Hoya will work to provide
patients and medical professionals alike with outstanding implant products and the related medical tools.

HOYA Annual Report 201023

Business Overview

PENTAX

Fiscal 2010 Business Overview and Results
The digital camera market showed signs of recovery during the fiscal year underreview. This was in part because inventory adjustments sparked by the 2008
Lehman shock had run their course by the end of fiscal 2009, and because various
companies released new models from the first quarter of fiscal 2010. Globally, SLR
camera units shipped were up year on year due to the expansion of entry-level
models, but full-year results were down as a consequence of a significant drop incompact cameras. In what was a severely competitive environment, companies
competed to differentiate products and prices declined.
Against this backdrop, PENTAX focused on combining its optical and advanced
technologies, honed over many years, to develop and manufacture products worthyof the PENTAX name. In June 2009, the company released the PENTAX K-7 digital
SLR camera, which features high reliability and ease-of-use along with advanced
shooting functions in a compact body, making it easy for users to takehigh-resolution photos. The new model won high praise for its ability to satisfy
advanced amateur photographers and other photo enthusiasts. In October 2009,
the company rolled out 100 color variations of the PENTAX K-x, which features
functionality approaching that of top-end models in a compact, lightweight,
easy-to-operate body (color variations only available in Japan). The concept behindthe multi-color lineup espond to diversifying user needs by making cameras a more
personal tool to enjoy as a hit, mainly among female consumers and novice
photographers. In March 2010, the company unveiled the PENTAX 645D, thefirst-ever PENTAX medium-format digital SLR, which drew attention for its highreliability and super-high resolution as an industry-leading field camera. In compact
cameras, the company released a total of nine new models with a focus on design
or featuring high-zoom lenses and water- and dust-resistance in addition to
improved standard functions.

PENTAX K-x"PENTAX K-x"was selected theBest DSLR Entry Level in Europe
2010 at TIPAPENTAX 645D

In fiscal 2010, sales fell year on year, due not only to the difficult market conditions but also the major impact of the
weak euro and dollar on overseas sales, which account for the majority of sales. However, profitability rose considerably
thanks to major structural reforms implemented in fiscal 2009, including a more efficient production system and greater
focus on the product lineup.

Outlook for Fiscal 2011
The digital camera market in fiscal 2011 is expected to remain the same size as in fiscal 2010. With the market still
driven by demand in emerging economies, it is anticipated that product prices will drop. Nevertheless, the trend toward
multi-functional models, offering improved basic functions such as high resolution and high zoom along with various
other functions such as face recognition, shake reduction, HD video, and image-processing effects, is expected tocontinue. PENTAX intends to firmly grasp these market needs, and develop business in a timely manner, from productdevelopment through to production and sales.

24At the International Security Conference & Exposition, heldin Las Vegas in March 2010, PENTAX's PAIR (PENTAX
Atmospheric Interference Reduction) H55ZAME long-range
zoom lens beat out the competition to win Best in Video
Device in the New Product Showcase. Featuring a 55x
long-range zoom, PAIR also has a newly developed
fog-cancellation system that can reduce noise caused byatmospheric interference to facilitate outdoor live security
surveillance of national borders, coastlines, ports, andairports.

Lens for Security Camera PAIRH55ZAMEAt the International Security
Conference & Exposition, PAIRH55ZAME wan Best in Video
DeviceHOYA Annual Report 201025

Business Overview

PENTAX

In this business, HOYA manufactures and sells DVD/CD-compatible hybrid
lenses, Blu-ray pickup lenses, and plastic lens units for digital cameras.

Fiscal 2010 Business Overview and Results
The market recovered rapidly from the first quarter of the fiscal year underreview, with DVD/CD-compatible lenses showing firm growth in line withincreasing PC demand. Blu-ray pickup lenses also recorded significantly
higher volumes year on year. With the Blu-ray market expected to growgoing forward, Pentax will focus on product development in order to meetcustomers' future needs as quickly as possible.

Blu-ray objective lenses

Outlook for Fiscal 2011
Furthermore, we are proceeding as planned with efforts to strengthen the organization and production bases. Thisshould help us to improve production efficiency and reduce costs going forward. We will utilize our strengths in
high-precision lens molding technology to create a framework for meeting all the various needs of our customers.

HOYA Annual Report 201026

Financial Review

Management Discussion and Analysis(Notation)
The Company has been preparing its consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and now plans to get it ready by the end of
this year. In the meantime, please also refer to the following documents.
Quarterly Business Report for the fiscal year ended March 31, 2010
The 72nd Business Report; attached documents for the Notice of the 72nd Ordinary General
Meeting of Shareholders
We are sorry for any inconvenience that may cause to you.

Hoya Group and Scope of Consolidation
The Hoya Group (the "Groupquot;) consists of Hoya Corporation (the quot;Companyquot;), 106
consolidated subsidiaries (5 in Japan and 101 overseas) and 9 affiliates (5 in Japan and 4
overseas). Of the affiliates, 3 (2 in Japan and 1 overseas) are accounted for by the equity
method.
The Hoya Group is managed on a global, consolidated basis. Each of the Group's businessdivisions and subsidiaries carries out their business strategies as formulated by the global
headquarters at Hoya Corporation, yet with their own management responsibility. Each region?
North America, Europe and Asia?has its own headquarters, which focuses on enhancing
relations with the countries or regions of its operations, as well as supporting businesspromotion activities, including with legal assistance and internal auditing. Hoya's branch in the
Netherlands is the financial headquarters for the Group.

Net Sales
Consolidated net sales for the fiscal year ended March 31, 2010, amounted to ¥413,524 million,
declining 9.0% year on year. By principal business segment, net sales in the Electro-Optics
Division of the Information Technology business declined 12.5% year on year. Within the Eye
Care business, net sales in the Vision Care Division were down 6.4% year on year, while in the
Health Care Division net sales rose 8.1% year on year. For the Pentax divisions, net sales
dropped 13.1%, compared with the previous fiscal year.
By customer region, net sales to customers in Japan decreased 10.6%, to ¥152,266 million,
while net sales to overseas customers declined 8.0%, to ¥261,258 million. As a result, thecomposition of net sales was 36.8% domestic and 63.2% overseas, meaning that overseas net
sales accounted for an even higher proportion of total net sales than in the previous fiscal year.
Hoya calculated the effect of exchange rates on operating results during the fiscal year underreview by comparing the foreign currency-denominated financial statements of its overseas
subsidiaries when converted into yen at the average exchange rates during the fiscal year withthe same statements when converted into yen at the average exchange rates during theprevious fiscal year. In currency markets during the fiscal year under review, the yen rose 8.0%
against the U.S. dollar, to ¥92.61, 8.8% against the euro, to ¥130.68, and 6.5% against the Thai27

baht, to ¥2.75 compared with the previous year. As a result of the yen's appreciation against
these currencies, the operating results of Group companies in major overseas regions werelower than they would have been if converted using the previous fiscal year's rates. For theGroup overall, exchange rates reduced net sales by ¥15,547 million, operating income by¥3,618 million, and net income by ¥3,290 million.
Net Sales

Sales to Domestic and Foreign Customers(Based on the location of customers)

Please go to Business Overview for more information

28

Sales by Region(Based on the office location)

IncomeAlthough net sales fell year on year due to declining product prices, the impact of the strong yen
and other factors, efforts at cost reduction centered around fixed costs resulted in a lower costof sales. Gross profit margin improved 1.8 percentage points from 41.8% in the previous year to43.6%. Selling, general and administrative expenses decreased 11.2% to ¥116,121 million, withthe ratio of SG&A expenses to net sales falling 0.8 percentage points, from 28.8% to 28.0%. As
a result, operating income increased 8.9%, to ¥64,327 million, and the operating margin rose
2.6 percentage points, to 15.6%.
Although income in the Electro-Optics Division declined as a result of lower shipment volumes
and a significant decrease in sales due to falling product prices, which could not be offset byefforts to reduced fixed costs, earnings were up in the Vision Care Division and Health Care
Division, and at Pentax profitability moved into the black from the significant loss in the previous
year due to the effects of structural reform.
Ordinary income fell 18.7% year on year, to ¥57,805 million. This was attributable to a foreignexchange loss of ¥6,488 million, as compared to a foreign exchange gain of ¥7,151 million in
the previous fiscal year.
Net income was 50.8% higher year on year, at ¥37,875 million. Contributing factors included
the following. In the previous year, the Company recorded a ¥9,704 million gain on sales ofinvestment securities from the partial transfer of part of Hoya's equity interest in an equitymethod affiliate, and an extraordinary gain of ¥3,200 million representing commission fees
received for prior years as a result of a review of a licensing contract. During the fiscal year
under review, this commission fee fell to ¥1,013 million. Also in the previous fiscal year, Hoya
recorded an asset impairment loss of ¥30,458 million in each of the Pentax divisions andothers; in the fiscal year under review this asset impairment loss was reduced to ¥833 million.
Return on assets (ROA) was 6.6%, and return on owners' equity (ROE) was 11.1%, both
representing year-on-year improvements.

29

Operating income/Ordinary income/Net income

Profit Ratios

Profitability

30

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
to actively 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, foran aggregate dividend of ¥65 per share for the full year, on a par with the previous fiscal year.
Dividends per share

Results by Region
In Japan, the Electro-Optics Division recorded decreases in both sales and earnings because offalling unit prices for products and declining sales volume. In the Vision Care Division as well,both sales and earnings fell as a result of the protracted market slowdown. With the Pentax
divisions, however, sales fell due to steep price competition with competitors amid theeconomic recession, but earnings rose thanks to cost-reduction effects achieved through31

structural reforms, implemented in the previous fiscal year, and other factors. As a result, net
sales in Japan totaled ¥240,187 million and operating income came to ¥18,057 million,
representing lower sales but higher earnings year on year.
In America, despite signs of a recovery in certain areas of the economy, the overall stagnation
continued and consumer sentiment remained cool, resulting in lower sales and earnings in the
major divisions. As a result, net sales in North America totaled ¥49,264 million and operating
income came to ¥391 million, representing both lower sales and lower earnings year on year.
In Europe, the Vision Care Division recorded a decline in sales due to factors such as thestrong yen, but achieved higher profits thanks to cost reduction efforts. The Pentax Division saw
sales fall due to a significant drop in the digital camera market, but earnings increased as cost
reductions resulting from structural reforms implemented in the previous fiscal year took effect.
As a result, net sales in Europe totaled ¥82,693 million and operating income came to ¥6,708
million, representing lower sales but higher earnings year on year.
In Asia, the Electro-Optics Division recorded a drop in both sales and earnings due to theimpact of the strong yen and declining product prices. Meanwhile the Vision Care Division saw
both sales and earnings climb thanks to growth in volume of value-added products, but theincrease was not enough to offset the decline in the Electro-Optics Division. As a result, net
sales in Asia totaled ¥41,379 million and operating income came to ¥34,133 million, both lower
year on year.
Sales by Region(Based on the office location)

Sales Growth and Profitability of Main Business Segments (Fiscal Year Ended March 31 2010,(comparedwith the previous fiscal year))32

Group Employees by Region

Financial Position
Total assets as of March 31, 2010 stood at ¥549,736 million, a ¥41,360 million or 7.0%
decrease compared with a year earlier. Current assets declined ¥39,218 million, or 10.2% year
on year, to ¥345,247 million. Within this, cash and cash equivalents were down ¥41,233 million
from a year earlier, to ¥173,307 million, while notes and accounts receivable-trade increased¥10,738 million to ¥93,612 million and inventories (total of products, finished goods, work inprogress, materials and stored items) decreased ¥9,791 million to ¥61,466 million.
Non-current assets decreased ¥2,141 million, or 1.0%, from the previous fiscal year-end to¥204,489 million, due in part to a decrease of ¥8,360 million in machinery and transportationequipment.
Total liabilities were down ¥54,822 million from the previous fiscal year-end, to ¥198,264
million. Although notes and accounts payable-trade increased by ¥3,571 million, commercial
paper declined by ¥41,978 million and long-term debt (including long-term debt with current
maturities) declined by ¥8,983 million.
Total interest-bearing debt, including short-term loans, long-term debt with current maturities,
commercial paper, other long-term debt, and corporate bonds and other, amounted to ¥107,034
million, resulting in a 19.5% rate of leverage, an improvement of 7.5 percentage points from theprevious year.
Total equity rose ¥13,463 million year on year, to ¥351,472 million due to increases of ¥9,619
million in retained earnings, ¥3,026 million in treasury stock (less capital portion), and foreign
currency translation adjustments of ¥6,695 million. Owners' equity, total equity less stock
subscription rights and minority interests, amounted to ¥349,052 million, for an owners' equity
ratio of 63.5%, an improvement of 6.8 percentage points year on year.

33

Total Assets/Owners' Equity/Owners' Equity Ratio

Interest Baring Debt

Capital Expenditures/Depreciation and Amortization
Capital expenditures during the fiscal year under review totaled ¥29,019 million, 16.7% lessthan in the previous fiscal year. Investment in the Electro-Optics Division accounted forapproximately 60% 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 Vision Care
Division, the company invested to boost production capacity, centering on Asian production
plants with a view to expanding eyeglass lens production volume.
Depreciation and amortization costs for the fiscal year under review decreased 31.0%, to¥34,503 million. The Electro-Optics Division accounted for approximately 60% of this, at¥20,430 million.
Moreover, as shown in the lower graph, amortization of goodwill and impairment losses areincluded in addition to the depreciation costs. In the previous fiscal year, each of the Pentax

34

divisions and others applied impairment accounting, resulting in an impairment loss of ¥30,458
million.
Capital Expenditure/Depreciation and Amortization

Cash FlowsNet cash provided by operating activities amounted to ¥83,981 million, a decrease of ¥6,994
million from the previous fiscal year. The main positive factors were income before income
taxes and minority interests of ¥49,761 million (up ¥5,703 million year on year), depreciation
and amortization of ¥34,503 million (down ¥15,527 million), decrease in inventory of ¥9,990
million (up ¥3,750 million) and foreign currency loss of ¥6,975 million (up ¥15,007 million). The
main negative factors included an increase in notes and accounts receivable of ¥10,829 million(up ¥41,372 million year on year), and ¥10,726 million in income taxes paid (down ¥24,264
million).
Net cash used in investing activities amounted to ¥40,723 million, an increase of ¥6,395 million
compared with the previous fiscal year. This was primarily attributable to payments of ¥26,650
million (down ¥7,523 million) for property, plant and equipment, centered on investments
related to next-generation products and increased production in the Electro-Optics Division.
Net cash used in financing activities amounted to ¥84,976 million, an increase of ¥79,176
million from the net cash used in the previous fiscal year. This was mainly due to a net
decrease of ¥41,978 million in commercial paper, and a total of ¥28,236 million in dividends
paid (an increase of ¥121 million year on year).
As a result of the above, the balance of cash and cash equivalents as of March 31, 2010, was¥167,938 million, a decrease of ¥39,989 million.
Cash flow provided by operating activities

35Subsequent Events
On April 28, 2010, Hoya Corporation completed an agreement to transfer the hard disk glass
media manufacturing business and related assets operated by Hoya Corporation and HOYA
MAGNETICS SINGAPORE, PTE LTD., its wholly owned subsidiary, to the U.S. company
Western Digital Corporation as of June 30, 2010. The hard disk market is expected to continue
to see high growth going forward, mainly for notebook computers and digital household
appliances. Following the transfer, Hoya aims to leverage its glass materials technology andprecision processing technology and concentrate management resources on its glass
substrates for hard disks business, which currently hold the leading global market share, tofurther enhance business competitiveness and achieve growth.
HOYA Annual Report 201036

R&D Activities

R&D Policy
R&D Expenses
Hoya is involved in a wide range of businesses. In each businessdivision, the Group promotes R&D based on the medium-term
plan, aiming to maintain and enhance its technologicalcompetitiveness. The Corporate R&D Center at the global
headquarters provides development support for the technologicalissues embraced by each division, as well as conducting basic
research that will supply the seeds for future growth and acquiringand cultivating new businesses and technologies from a long-term
perspective. Hoya is currently shifting the core of R&D from theInformation Technology field to medical and healthcare, andaggressively introducing development resources in order tobolster the R&D system. In the medical and healthcare field, theCompany is focusing not only on areas where it already has technologies, but also on
regenerative medicine and diagnostic and treatment methods other than endoscopy, looking to
expand the range of future possibilities.

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.

Major R&D themes
Nanoimprint Technology
Hoya is putting its years of expertise in lithographic technologies
to good use in the development of nanoimprint molds, which will
be used to create the discrete track recording (DTR) media and bit
pattern media (BPM) for next-generation hard disk drives (HDDs).
Various HDD manufacturers are pursuing R&D to commercialize
this technology as early as possible, and Hoya has launchedshipment of samples. In BPM, Hoya has succeeded in using its
microfabrication technologies to achieve a track pitch of 30
nanometers or less.1

Quartz nanoimprint mold for
DTR media

1 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, which are expected to offer superior energy efficiency. 3C-SiC can be used37

in automobiles and home appliances such as air conditioners to
help combat global warming. Taking volume production efficiency
into account, Hoya is currently developing six-inch wafers andtesting and evaluating the power devices that will be the end
product.
3C-SiC wafers

Optical Communications Parts
As the FTTH (Fiber to the Home) environment widens around theworld, Hoya has developed a module for converting optical signals
to electrical ones at optical communication access points that iscompliant with GE-PON/G-PON2, a high-speed opticalcommunications standard. By building a functional device on top
Connectors for opticalof a wafer, Hoya has succeeded in creating products that arecommunications
significantly smaller than existing products. In fiscal 2010, theCompany received approval from customers and launched
product shipments. Hoya first invested in this technology in 2005, and produced the first productthrough joint development with the former Xponent Photonics, Inc., a U.S. company thatmerged with Hoya in 2008. As optical networks continue to develop going forward, the market is
expected to grow to the ¥10 billion scale.
2 GE-PON/G-PON (Gigabyte Passive Optical Network): A technology that enables high-speed transmission of
1.25-2.5 gigabyte per second over fiber optic lines and networks.

Biocompatible Materials
Hoya is researching biocompatible materials for ophthalmological applications. Hoya alreadyhas 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
better for the eyes. As part of this research, Hoya is investigating an artificial crystalline lensmaterial 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.

Microfiberscope with 0.8mm external diameterIn the field of endoscopy, Hoya is working to develop component
technologies and products that will allow minimally invasive
procedures, thereby reducing discomfort and the burden on thepatient, and that will enable observation of minute lesions. The
challenge lies in developing small yet high-resolution imaging
devices and advanced image processing technologies.
In the year under review, Hoya developed a microfiberscope withan external diameter of 0.8mm. The Company now plans toincorporate this technology in endoscopic systems for the
diagnosis and treatment of peripheral lung cancer and otherdiseases.
Hoya's Seven Core Technologies
HOYA Annual Report 201038

Upper:microfiberscope withan external diameter of
0.8mm.
lower:FNL-7RP3, existingproduct with smallest
diameter (Φ2.4mm at the tipof rigid part)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 particular emphasis on growth areas such as medical care andhealthcare.

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

Obtaining Patent Rights
To ensure the most efficient possible patent prosecution for obtaining patent rights, technical development managers
and intellectual property managers work closely as a team. The Company aims to secure all necessary intellectual
property rights from the initial stage of the development of leading-edge 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 competitivemarkets, Hoya concentrates on promoting efficient patent prosecution while preventing infringement of the patents heldby other companies. To achieve these ends, careful technical searches of patent information of other firms are
performed, and the Company supports the patent prosecution that is most appropriate for each field. Hoya is also
devoting itself to the formation of global patent networks that will be coordinated with the moves of its production bases
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 the patents that are the cornerstone of the competitive position
its businesses enjoy. This means 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, or where theCompany can expect out-licensing of its patents to other companies to result in an 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 technologies are not imitated by third parties. Whenits technologies are imitated, the Company issues warnings and, where necessary, takes appropriate steps such as filingfor 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 andconsideration of the available technologies, the Company finds that third parties have superior technologies, patents orother 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.

Systems Supporting Intellectual Property Activities
The Hoya Group is organized according to business divisions and companies, with extensive delegation of authority fromstrategic business planning to decision-making. Each division has an intellectual property group responsible for working
in conformity with the respective strategies of their divisions—for instance, by filing patent applications and other rights-

39

related management 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 that necessitate
decision- making for the Group—for example those requiring coordination of intellectual property issues that run acrossmore than one business division, or that involve bringing a case to court or reaching an amicable settlement—aredeemed to require the approval of headquarters and are strictly managed under the direction of the Corporate
Intellectual Property Division. Because intellectual property activities are dispersed across all business divisions, there
is a need to reduce any adverse effect from potential difficulties in information sharing. At the same time, to improvesynergies between business 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

Global applications

During the year under review, Hoya had registered 4,351 patents and utility
models in Japan. The main businesses of the Electro-Optics and Vision Caredivisions accounted for 32% of these, while PENTAX medical-related devices
accounted for 34% and camera and optical products for 28%.
In 2009, 842 patent applications were lodged in Japan, of which the ElectroOptics and Vision Care divisions accounted for 43% and the PENTAXDivision 53%. Of the Company’s patent applications, 36% were lodged outside
Japan during the year under review. As shown by this high percentage ofglobal patent applications, Hoya is making the fullest possible use of
intellectual property in line with its policy of increasing the competitive
strengths of its global businesses.
Percentage of Patents Granted
The percentage of patents granted Group-wide in Japan (including those in
the prior examination and review stages) was approximately 58% for 2009,
the most recent year for which data are available.

HOYA Annual Report 201040

Registerd patents andutility models(as of March 31, 2010)

Corporate Governance

Please click here for HOYA’s corporate governance systems.

Board of Directors(As of June 18, 2010)
Directors
Name
Takeo Shiina1

careerJun. 1953
May 1962
Feb. 1975
Jan. 1993
Jun. 1995
Dec. 1999
May 2007
Apr. 2010

Yuzaburo Mogi1

Apr. 1958
Mar. 1979
Mar. 1982
Oct. 1985
Mar. 1989
Mar. 1994
Feb. 1995
Jun. 2001
Jun. 2004

Eiko Kono1

Dec. 1969
Apr. 1984
Aug. 1985
Nov. 1986
Jul. 1994
Jun. 1997
Jun. 2003
Jun. 2003
Apr. 2004
Jun. 2005

Apr. 1957
Jun. 1985
Jun. 1988

Joined IBM Japan, Ltd.
Director of IBM Japan, Ltd.
President and Representative Director of IBM Japan, Ltd.
Chairman of IBM Japan, Ltd.
Director of the Company (present post)
Senior Adviser to IBM Japan, Ltd.
Adviser of IBM Japan, Ltd.
Honorary Adviser to IBM Japan, Ltd. (present post)
Joined Noda Shoyu Co., Ltd. (present Kikkoman Corporation)
Director of Kikkoman Corporation
Managing Director of Kikkoman Corporation
Managing Director and Representative Director of Kikkoman
Corporation
Executive Managing Director and Representative Director of
Kikkoman Corporation
Executive Vice President and Representative Director of Kikkoman
Corporation
President and Representative Director of Kikkoman Corporation
Director of the Company (present post)
Representative Director, Chairman and CEO of Kikkoman
Corporation (present post)
Joined RECRUIT Co., Ltd.
Director of RECRUIT Co., Ltd.
Managing Director of RECRUIT Co., Ltd.
Senior Managing Director of RECRUIT Co., Ltd.
Executive Vice President of RECRUIT Co., Ltd.
President and Representative Director of RECRUIT Co.,Ltd.
Director of the Company (present post)
Chairperson and CEO of RECRUIT Co., Ltd.
Chairperson and Chairperson of the Board of Directors of RECRUIT
Co., Ltd.
Special Advisor of RECRUIT Co., Ltd.

Joined the Ministry of International Trade and Industry (MITI) (nowthe Ministry of Economy, Trade and Industry (METI))
Director General of the Minister's Secretariat MITI
Director General of Industrial Policy Bureau MITI

41

Yukiharu Kodama1 Jun. 1989
Jun. 1991
Jun. 1991
Feb. 1992
Jun. 1993
Jul. 2001
Jun. 2005
Nov. 2007

Itaru Koeda1

Apr. 1965
Jun. 1993
May 1998
May 1999
Apr. 2003
Jun. 2003
Jun. 2003
Jul. 2003
Jun. 2008
Jun. 2009

Hiroshi Suzuki

Apr. 1985
May 1993
Jun. 1993
Jun. 1997
Apr. 1999
Jun. 1999
Jun. 2000
Jun. 2003

Hiroshi Hamada

Apr. 1982
Mar. 1987
Nov. 1992
Jan. 1995
Aug. 2000
May 2006
Apr. 2008
Jun. 2008

Kenji Ema

Mar. 1970
Jun. 1993
Jun. 1997
Jun. 2000
Jun. 2001
Jun. 2003
Jul. 2003
Jan. 2007

Administrative Vice-Minister of MITI.
Retired from MITI
Advisor to Japan Industrial Policy Research Institute(JIPRI)
Advisor to the Industrial Bank of Japan (IBJ)
President of The Shoko Chukin Bank
Chairman of the Japan Information Processing Development
Corporation (present post)
Director of the Company (present post)
Chairman of the Mechanical Social Systems Foundation (present
post)

Joined Nissan Motor Co., Ltd.
Director of Nissan Motor Co., Ltd.
Managing Director of Nissan Motor Co., Ltd.
Vice President of Nissan Motor Co., Ltd.
Representative Director of Nissan Motor Co., Ltd.
Co-Chairman of Nissan Motor Co., Ltd.
Chairman of Calsonic Kansei Corporation (present post)
Director of Renault S.A
Chairman Emeritus and Advisor of Nissan Motor Co., Ltd. (present
post)
Director of the Company (present post)
Joined the Company
President of HOYA Corporation USA
Director of the Company
Managing Director of the Company
Managing Director of the Company
President, Electro Optics Company
Executive Managing Director of the Company
President and Representative Director of the Company
Director, President, Representative Executive Officer and CEO of
the Company (present post)

Joined Yamashita Shinnihon Steamship Co., Ltd. (present Mitsui
O.S.K. Lines, Ltd.)ALICO Japan
Clarke Consulting Group of the United States
Dell Computer Corporation (present Dell Inc.)
President and Representative Director of the above company
Vice President of Dell Inc. of the United States
Representative partner of Revamp Corporation
Executive Chief Operating Officer of the Company (present post)
Director of the Company (present post)
Joined the Company
Director of the Company, in charge of Administration Planning,
Accounting and Purchase
Managing Director of the Company, in charge of Strategy, Planning
and Treasury
Executive Managing Director of the Company, in charge ofCorporate Finance
Executive Managing Director and CFO of the Company
Director, Executive Officer and CFO of the Company (present post)
President of HOYA HOLDINGS N.V.
Executive Officer Chief Financial of HOYA CORPORATION,
Netherlands Branch

1 indicates outside directors as provided for in Article 2, Item 15 of the Company Law.

42

Executive Officers
Hiroshi Suzuki2
Hiroshi Hamada2
Kenji Ema2
Taro Hagiwara

President & CEO
Executive Officer & Chief Operating Officer
Executive Officer & Chief Financial Officer
Executive Officer, Technology

2 indicates Director

HOYA Annual Report 201043

Corporate Governance

Itaru Koeda (Executive Advisor, Honorary Chairman of Nissan Motor Co., Ltd.)I was newly appointed as an outside director of Hoya at the Ordinary General
Meeting of Shareholders in June 2009. Prior to assuming this position, I wasaware of Hoya's eyeglass lens business, the merger with PENTAX, and theCompany's high profits. Once I began participating in management, however, I
truly came to understand how different Hoya is from the automotive company
format where I spent so many years working. Unlike the auto industry, where acompany is focused on developing and manufacturing a single type of end
product, Hoya covers an extremely broad range of businesses, from theGroup's high-tech parts and materials to eyeglass lenses and medical-related
products—the sum of all these varied parts is the company we know as Hoya.
Within the business, authority and responsibility is distributed broadly, fromexecutive officers to business divisions, resulting in a truly efficient underlying
management structure in which division systems are firmly in place.
Looking back over fiscal 2010 from my perspective as an outside director, the most striking aspect of Hoya's
management is the substantial debate at meetings of the Board of Directors. At each meeting, the five outside directors
from different backgrounds took time to ask perceptive questions based on their wealth of knowledge and experience. In
terms of execution, based on the concept of portfolio management, decision-making about the allocation of management
resources was dynamic and timely.
In this type of corporate entity, I believe that stakeholders look to outside directors such as myself to act as a safetyvalve to check whether management decisions are correct from the perspectives of societal common sense. At thesame time, having come from an automotive company where brand value has a major impact on sales, I feel it is of great
importance in conducting oversight of management to consider whether any individual business activities may bedamaging the value of the overall Hoya brand. Hoya already has strong brand value, and as I continue my duties as
outside director I am committed to fulfilling my responsibility to ensure that appropriate management decisions are madeto further enhance that value.
The market environment remains severe, still reverberating from the impact of the Lehman shock. Under these
conditions, simultaneously managing multiple businesses of different types is a difficult task, but I believe that Hoya's
four executive officers (three of whom are also internal directors) are doing a fine job of assigning responsibilities in abalanced manner and steering the Company ahead. Going forward, I anticipate that they will wield Hoya's brand power
based as it is on the Company's unrivalled dynamism, first-rate specialist abilities and the reliability of Hoya quality andtechnologies, to achieve further growth.
I hope that all shareholders will continue to watch over Hoya's business with an understanding of its great future
potential.

HOYA Annual Report 201044

Environment, Health and Safety

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.
In October 2008 the Company merged its environmental protection and occupational safety andhealth 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 organization

On March 31, 2010, the Hoya Group Director for Environmental Protection, Occupational Safety
and Health issued the Hoya Group Facility Standard for Environmental Protection, for the
purpose of determining the basic specifications for environmental facility and preventing harmful
effects both within and outside of facilities. With the creation of these standards, the Group has
prepared a system that enables it to consider environmental effects both within and outside offacilities from the design stage and introduce environmental facility.

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.

45

Aiming to Reduce CO2 Emissions (energy conservation)
In order to respond to amendments to Japan's Law Concerning Act on the Rational Use ofEnergy, Hoya has created an internal organization in line with the stipulations of the law.
At the Kumamoto facility, Hoya has taken energy conservation measures by efficiently
deploying air cooling refrigerator and ice thermal storage refrigerator, and reducing the supplied
steam pressure and the number of times the boiler started and stopped. The former measureeffectively controls the amount of heat released based on outside temperatures, limiting theamount of electric power consumed in the daytime. The latter provides steam at the minimum
required pressure, eliminating excess pressure and carefully controlling activation pressure to
reduce the number of times the boiler is started and stopped (ignited) by approximately 30%.

Activities to Reduce Waste Disposal Volumes and Increase Waste Recycling(1) Recycling nitrates
At the facility in Hokuto, Yamanashi Prefecture, the nitrates
used in glass processing materials used to be processed aswaste. Nitrates are used as a processing materials for
precision glass. Because they contain few impurities evenafter processing, we investigated whether they could bereused, and discovered that they could be turned into a
product as a metal heat processing agent. Thus, Hoya has
been able to turn used nitrates in to a valuable product, selling
it for re-use.

Used nitrates turned into avaluable product(Nagasaka
facility)(2) 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
168 stores collect empty cases from customers' used
lenses for recycling.
The empty cases collected from around the country
are then sold to a manufacturer of the recycling
products, and the proceeds are donated, with amatching contribution from Hoya, to the Japan Eye
Bank Association.

Contact lens case andrecycling box

In the past, there was no effective system for recycling empty contact lens cases, andcustomers' used cases and the empty cases from samples used in stores were discarded
as waste. When 1 kg of plastic waste is burned, approximately 2.6 kg(*) of CO2 arereleased. This initiative therefore contributes to reducing CO2 emissions.
(*)Ministry of the Environment, Japan: Calculation based on figures for emissions generated by burning
waste plastic in the Report on Calculation of Greenhouse Gas Emissions(3) "Zero emissions" waste reduction initiatives
Certain Hoya facilities in Japan have achieved "zero emissions" status, meaning that
thanks to advances in recycling activities almost no waste is sent to landfills or disposed of46

by simple burning. Going forward, Hoya will work to raise the quality of recycling at thesefacilities.
(4) Promoting separation of waste at overseas
facilities
Hoya is continuously expanding the scope of waste
separation at its overseas facilities. In fiscal 2010, thefacility in Hungary installed PET bottle compression
equipment and established a dedicated receptacle forthe compressed bottles, further advancing separation.
A PET bottle compresser
and a recycling box

Efforts to Reduce Environmental Impact of Operations on Surrounding Areas
In October 2009, the facility in Koka, Shiga Prefecture, participated in a water contamination
prevention drill hosted by the local environmental association. The exercises involved creating
an oil fence and piling sandbags in the event of a hypothetical leak of hazardous substancesfrom a facility into the river. The drill was held in order to promote cooperation of local
companies in responding to such an event, and proved a meaningful exercise from an external
communications perspective as well.
In order to ensure that Hoya could provide a certain response if a leak of hazardous substances
occur, participants traced for themselves the rainwater drainage ways around the facility thatmight provide a ditch for the hazardous substances to reach rivers. They contributed theirfindings to a map of rainwater drainage ways being created by the environmental association.

Cooperation in Community Activities
As part of their environmental activities, Hoya's major facilities in Japan conduct activities in
conjunction with community projects, such as holding clean-up activities in the surrounding area
during a local "clean" campaign.
Examples include the participation of the Itabashi, Tokyo facility in Itabashi Ward's Spring
Cleaning campaign, and joint cleanup activities with local welfare facilities.

AwardsOn October 28, 2009 the facility in Hachioji, Tokyo wasrecognized with a 2009 Tokyo Environmental Award (Governor'sAward) in recognition of its efforts to prevent disasters related tohigh-pressure gas and its significant record in ensuring public
safety.

Introduction of Environmental Management Systems (ISO 14001 Certification)
In October 1996, Hoya proclaimed introduction of ISO 14001 environmental management
systems. In December 1997, HOYA LENS DEUTSCHLAND GmbH became the first Group
company to achieve certification.

47

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 (13domestic sites and 29 overseas sites, as of March 31, 2010) were certified under ISO 14001
standards.
HOYA Annual Report 201048

Environment, Health and Safety

Occupational Safety and Health System
In 1995, the Hoya Group formulated its Occupational Safety and Health (OSH) Principles and Basic Policy, under which
the Group promotes its OSH activities at its facilities both in Japan and overseas. In October 2008 the Company
integrated its environmental protection and occupational safety and health systems. Environmental protection andoccupational safety and health 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 Syste m
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,
2010, 8 facilities in Japan and 26 facilities in 19 countries overseas have beencertified by OHSAS 18001, a process that began in March 2002.

Risk assessment work-sitetraining(Vietnam)

Measures to Ensure Machinery and Equipment Safety
In April 2005, with the aim of preventing accidents related to operating machinery and equipment, the Hoya Group
Machinery Safety Standard was issued. Within the field of occupational safety measures, Hoya is prioritizing
implementation of risk reduction measures for machinery and equipment from the design stage.
Implementing Occupational Safety and Health Audits
To improve and enhance the performance of occupational safety and health systems, audits are conducted on a regularbasis at facilities in Japan and overseas by a director and staff for Environmental Protection, occupational safety andhealth. Measures are in place for implementing their providing advice and guidance with regard to legal compliance,
improving safety and health performance.

OSH Audit (Thailand)

Implementing Safety Education for the Hoya GroupIn order to share information related to the environment, safety and health and to improve employee skills, Hoya holds
Environmental Protection, occupational safety and health Staff Meetings at location in Japan and overseas. Currently,

49

meetings of the persons in charge of Environmental Protection, occupational safety and health for each Division areheld around three times a year, Hoya Group foreman training is held twice a year, and hands-on safety training seminars
taught by outside educational institutions are held once a year. Each of these activities contributes to raising the levelof safety at the Hoya Group.

Employee training (Japan)

Audit Meeting (USA)HOYA Annual Report 201050

Environment, Health and Safety

Health Promotion Activities

Mental Health Care
Hoya has implemented measures to deepen understanding of employee's stress and stress-related illnesses (mental
disorder) through mental health courses for managers and supervisors and for regular employees led by occupational
physicians. Based on the Hoya Group Mental Health Measures Guidelines, the Company has also established a system toensure thorough care by managers and supervisors with the support of staff in charge of personnel and occupational
physicians.

Preventing Health Problems due to Excessive Work
In compliance with the 2006 revision of the Industrial Safety and Health Act, Hoya
has implemented standards to address excessive working hours. Employees who
exceed these standards meet with occupational physicians and address the
problem through work management overseen by a personnel officer and otheron-site supervisor, and healthcare management programs provided by occupational
physicians.
Counseling with occupational
physicianPreventing Lifestyle Diseases and Metabolic Syndrome
Since 2002, Hoya has implemented lifestyle improvement programs aimed at helping
employees to reduce body fat. Starting in 2008, the Company began conducting
special health educational guidance led by public health nurses to combat
metabolic syndrome. In fiscal 2010, approximately 440 employees have participatedin these programs for preventing lifestyle diseases and metabolic syndrome.
Health educational guidance :testing age of blood vessel

Healthcare Consultation for Employees Assigned Overseas
As a health consultation for employees assigned overseas, occupational physicians meet with the employees and theirfamilies to conduct a health check-up and to provide hygiene education and health care advice before they leave Japanor while they are overseas. In addition, occupational physicians pay periodic visits to facilities and to discuss healthcondition and other issues as necessary with employees located overseas.

Measures for Addressing New Influenza Strains
In May 2009, led by the Influenza Infection Crisis Management Team, Hoya updated existing manual for infectious
diseases crises. After determining that infectiousness and fatality rates were roughly the same as the seasonal flu, theCompany decided to adopt the same measures as for the seasonal flu. As a result of infection prevention measures
based on the existing manual for infectious disease crises, there have been no confirmed cases of serious illness due toinfectious disease or mass infection in the Group.

HOYA Annual Report 201051

Disclaimers
HOYA has made all possible efforts with regard to information posted on this website and other linked 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, arisingfrom the use of this information. In addition, HOYA and its information providers accept no responsibility whatsoever for
any losses, financial or otherwise, arising from computer 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 statements with 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 notguarantee the accuracy or completeness 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. Such factors 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 toBusiness 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 the investor’s own discretion.

HOYA Annual Report 201052