HOYA REPORT 2019

We strive daily to be a company that society can continue to rely on.

HOYA REPORT 2019HOYA as an Investment

Portfolio Management

Portfolio Management

Milestones in Our GrowthMarket Growth

Maximizing Shareholder Value

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

Information
Technology

HOYA Group’s
Sales by Segment

66%

33%

Mar. 2019

Eyeglass lenses

Mask blanks for semiconductor manufacturing

Contact lens retail sales

Photomasks for LCD/OLED display manufacturing

Intraocular lenses

Glass substrates for HDDs

Endoscopes

Imaging

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

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

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

Rapid Cycle PDCA (Quarterly Review)

Division A

Division B

Division C

Division D

Execute and verify

Execute and verify

Execute and verify

Execute and verify

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

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Milestones in Our Growth

Portfolio Management

Milestones in Our GrowthMarket Growth

Maximizing Shareholder Value

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

HOYA´s continued net profit since its TSE listing in 1973
HOYA has never reported a loss since its TSE listing
Net profit(Millions of yen)

150,000

120,000

90,00060,00030,000

0
Mar.
1973

Mar.
1980

Mar.
1990

HOYA REPORT 2019

Mar.
2000

03

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Mar.
2010

Mar.
2019

HOYA REPORT 2019

1962

Began production of eyeglass lenses.

1972

Began production of contact lenses.

1973

Listed on the First Section of the Tokyo Stock Exchange.

1974

Began production of photomask substrates for semiconductors.

1983

Began production of semiconductor photomasks.

1986

Constructed the R&D Center.

1987

Began production of intraocular lenses and glass mold lenses.

1991

Began sales of glass disks for HDDs.

1995

Invited the first outside director.

1997

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

2003

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

2008

Merged with PENTAX Corporation.

2009

Terminated the Crystal Glass business.

2010

Sold the hard disk glass media manufacturing operation.

2011

Sold the PENTAX Imaging Systems business.

2013

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

2014

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

2017

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

2019

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

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Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA as an Investment

Market Growth

Portfolio Management

Milestones in Our GrowthMarket Growth

Maximizing Shareholder Value

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

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

Aging global population expands market

World aging population (65 and over)

The aging global population is expected to boost demand for(Billions)

eyeglasses due to normal deterioration of vision by aging. De-

2.5

mand for medical flexible endoscopes is also anticipated torise as a result of policies to restrain an increase in government
medical expenditures, through preventive screening.

2.0

3%

Europe

GR
CA

North
America
Latin
America

1.5
1.0

Asia Pacific

0.5
Africa

0
2015

2030

(Year)

Source: United Nations

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Emerging countries’ improving living standards expands
the market

World Middle-Class Population

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

nomic growth of emerging countries. More people will have

4.9

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

billion2020

3.2 billion
2015

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

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

World Eyeglass Lens Market

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

3%

CA

GR

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

2018

2030

(Year)HOYA’s estimate

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

World Medical Endoscope Market

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

billion

3%

CA

GR

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

2030

(Year)HOYA’s estimate

Market Growth Drivers■ Aging population■ Desire for improvement of QOL and minimally invasive■ Increase in cancer ratediagnosis and treatment devices■ Initiatives for disease prevention■ Improved medical infrastructure in emerging countries

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

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

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Maximizing Shareholder Value

Portfolio Management

Milestones in Our GrowthMarket Growth

Maximizing Shareholder Value

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

Independent Director

Mitsudo Urano

Yukako Uchinaga

Leader Independent Director
Chairperson of the Nomination Committee

Chairperson of the Audit Committee

Biography

Biography

24P

Independent Director

25P

Independent Director

Shuzo Kaihori

Takeo Takasu
Chairperson of the Compensation Committee

Biography

Biography

25P

26P

Independent Director

Hiroshi Suzuki

Hiroaki Yoshihara
Biography

Biography

26P

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27P

HOYA REPORT 2019

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

Major management indicators and return to shareholders

Dividend per Share

ROE and EPS

(Yen)

(Yen)

100

500

¥ 90

(%)

EPS

ROE

21.2%

25

80

400

60

300

15

40

200

10

20

100

5

0

Mar.
2014

Mar.
2015

Mar.
2016

Mar.
2017

0

Mar.
2018

¥ 321.55

Mar.
2014

Mar.
2015

Share Buyback(Billions of yen)

150

100

¥ 55 billion
50

0

Mar.
2014

Mar.
2015

Mar.
2016

Mar.
2017

Mar.
2018

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Mar.
2016

Mar.
2017

Mar.
2018

20

0

HOYA REPORT 2019

Highlights of the Year under Review

Financial
Sales

Sales Breakdown
OthersImaging

+5.6%

1%

6%

Information
Technology

33%

Electronics

26%

Health Care50%

565.8billion yen

Life Care

66%

Medical16%

The HOYA Group’s consolidated sales revenue reached a record high in the fiscal year ended March 31, 2019, increasing
5.6% year on year, to 565,810 million yen. Sales rose in both the Life Care segment, which HOYA considers its growth
driver, as well as the Information Technology segment.

Pretax Profits
Pretax Profit Breakdownby Segment+16.4%

Information
Technology

52％

144.7billion yen

Life Care48%

Pretax profits rose 16.4% year on year, to 144,657 million yen. Profits also reached record highs, boosted by increased sales
growth and expanded sales of high-value-added products.

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Product Sales/Profit
Margins/Sales Growth Rate

30

25

Mask blanks

Sales growth rate (%)

20

15
Endoscopes
Artificial bones, etc.
10
Contaclenses5

Eyeglass lenses

Photomasks

0Intraocular lenses

-5

Glass
substrates
for HDDs

Imaging

Low

Profit margins

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

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Sales in the Life Care Segment+5.8%
373.4billion yen

Sales in the Life Care segment rose 5.8% from the previous fiscal year, to 373,388 million yen. Segment sales grow steadily
supported by such efforts as new shop openings for retail sales of contact lenses and launches of new endoscope products.

Life Care Sales Breakdown

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

Others(%)

8

Intraocularlenses6

Endoscopes

4Eyeglass lenses
Contac lenses

20Eyeglass
lensesContaclensesEndoscopes Intraocularlenses* Year-on-year comparison on the same basis as the previous period,
adjusted to eliminate the effect of changes in exchange rates or
M&A activities.

Pretax Profits in
the Life Care Segment+22.8%
69.3billion yen

Pretax profits rose 22.8% year on year, to 69,290 million yen due to steady expansion of earnings from ordinary businessactivities.

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Sales in the
Information Technology Segment+5.1%
187.5billion yen

Sales in the Information Technology segment rose 5.1% from the previous fiscal year, to 187,546 million yen. A significant
contributing factor was the growth in semiconductor mask blanks driven by increasing development demand for products
compatible with next-generation EUV lithography.

Information Technology
Sales Breakdown

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

30

ImagingMaskblanksGlass
substrates
for HDDs

20

10Photomasks

0
-5
Mask
blanksPhotomasksGlasssubstrates
for HDDs

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

Pretax Profits in the
Information Technology Segment+15.2%
80.5billion yen

Pretax profits increased significantly, rising 15.2% from the previous fiscal year, to 80,596 million yen. This was due mainly
to expanded sales of high-value-added products such as semiconductor mask blanks for EUV lithography.

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ESG
Proportion of Independent Directors

83.3%(5 of 6)HOYA appointed its first independent director in 1995, when corporate governance was barely discussed in Japan. In 2003,
the Articles of Incorporation were amended to stipulate that more than half of directors be outside directors. Currently,
83% of HOYA’s directors are outside directors, an extremely high level even by global standards.
*As of the end of June 2019

Corporate Management Experience of Independent Directors

100%(5 of 5)

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

Number of Employees by Region
Americas

Japan

EuropeAsia/Oceania

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

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Proportion of Female Employees*/Proportion of Female Leaders*

24.7%

1.7percentage points YoY

1.2

9.3%

Up
percentage points YoY—Higher thanthe manufacturing industry average (5.6%)

Up

Female leaders

Female employees

Male managers

Male employees

HOYA is increasing the proportion of female employees and managers as part of its “Minkatsu” diversity project to createa friendly work environment for everyone. In addition to expanded recruitment and occupational fields for women, HOYA
holds career advancement seminars for female employees, and promotes cross-divisional exchange.
* Cumulative total of all Group companies in Japan

Proportion of Local Employees in Top Management Positions at
Overseas Subsidiaries

94.1%

Proportion of
local employees in
top management
positions

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

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Milestones in Our Growth
Net Income by Fiscal Year

1941–1981

Business Portfolio

1941
Optics

Products and Technologies

History

1941
HOYA founded
Production of optical glass

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

1941
1945
Production of crystal
stemware

1950

1960
Optics Crystal

1962
Production ofeyeglass lenses

1960

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

1970
1972
Production ofcontact lenses
1974
Production of photomask
substrates forsemiconductors

Electronics
OpticsEye Care1980

Crystal

1979

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Copyright ©2019 HOYA GROUP

1973
Listed on the First Section of
the Tokyo Stock Exchange

HOYA REPORT 2019

Net Income by Fiscal YearBusiness Portfolio

1982‒2019

Products and Technologies

1983
Production ofphotomasks forsemiconductors

1987
Production of
intraocular lens forcataracts

History

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

Production ofmolded glass lenses

1990

1991
Launch of HDD glass disks

1995
Introduction of outside
director system

Electronics
Optics1997
Introduction of
the Company System

CrystalEye Care

2000

1998

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

2009
Withdrawal fromthe crystal business

2010

2010
Sale of HDD glass disk media
business

OpticsHealth Care

2019

Electronics

2011
Sale of PENTAX
digital camera
business

Medical

2018

HOYA REPORT 20192008
Merger with PENTAX
Corporation2010
Voluntary adoption of IFRS

2017
Acquisition of
Performance Optics,
LLC (manufacture andsales of eyeglass lenses)
2019
Acquisition of U.S.-based Mid
Labs and Germany-based
Fritz Ruck (manufacture ofophthalmic medical devices)17

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

Interview with the CEO

HOYA’s essential strength lies in its management stylein which we constantly maintain multiple business lines
and select the strongest ones among them to keep in ourbusiness portfolio.

Hiroshi Suzuki
President & CEO

Q Would you give us a recap of the financial results for the fiscal year ended
March 31, 2019?
For the consolidated financial results for the fiscal year ended March 31, 2019, we achieved record-high sales
revenue and profit once again. Sales revenue reached 565.8 billion yen, up 5.6% from the previous fiscal year.
Profit before tax increased 16.4% to 144.6 billion yen, and profit attributable to owners of the Company increased 22.7% to 122.1 billion yen. The market environment in which we operate was not particularly favorable, but we were able to achieve balanced growth in both Life Care and Information Technology businesses,
mainly thanks to the effect of M&A activities and the growth in competitive product groups. In the Life Carebusiness, sales of eyeglass lenses, contact lenses, and endoscopes were particularly strong. In the Information
Technology business, semiconductor mask blanks and photomasks for LCDs achieved notable sales growth.

Q What is the “essential strength” that supports the strong financial results?
Shareholders’ and investors’ attention is often drawn to our excellent capability to develop applications to connect core technologies such as optical technology we have developed over many years to actual profit or our
unique product groups. However, it is my long-standing understanding that HOYA’s essential strength lies in its
management style in which we constantly maintain multiple business lines and select the strongest ones among
them to keep in our business portfolio. In other words, we have constructed the current business portfolio mix
that combines profitability and growth potential through the many years of organic selection and evolution
process. We will continue to stick to this approach. We will always evaluate our business portfolio from a longer-term standpoint and will continue to add new businesses and keep only those that are strong and fit withHOYA REPORT 201918

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the times. I believe that HOYA can realize sustainable growth as a result although its specific business portfolio
mix is likely to change over time.
In addition, we shouldn’t overlook our profit-oriented corporate culture. It is in our corporate DNA that people at
HOYA are traditionally particular about money, that is, we share a common value to put profit first. This is consistently reflected in their behavior. For example, “let’s make a profit” can be communicated more easily throughout the Company than “let’s increase sales.” It can be said that the management philosophy that “short-term
profit should not be sacrificed for long-term growth” is firmly embedded in our corporate culture. The existenceof such a common value and judgment criteria is perhaps one of the factors that helped the successful evolutionof our business portfolio mentioned above.

Q What is the “essential strength” that supports the strong financial results?
As the domestic market matures, we inevitably had to look to overseas markets with larger growth potential. In
particular, overseas sales growth we have achieved over the last several years depended largely on the growth of
the Life Care business. We achieved this by actively investing cash generated from the Information Technology business, which has already had a high market share in a maturing market, in the Life Care business that has a higher
growth potential on a global scale. With the product lines of eyeglass lenses, intraocular lenses, and endoscopes,
HOYA has already established a notable market position, but still has significant room for market share expansion.
Given the economic growth in emerging countries, we can also expect growth in the market as a whole.

Q On the other hand, what do you see as management challenges?
Our global presence, which has been expanding through the business expansion into overseas markets and theacquisition of foreign companies, will have to continue to expand in the future. In this situation, I recognize
as a management challenge the establishment of a global management structure to ensure effective overseas
business operations. Most of the top management executives at our overseas subsidiaries are local hires, andwe are actively delegating the management authority to the local management team. However, the delegationof authority alone will not ensure success. Difficulties lie in the establishment of the scope of parent company
controls and a clear division of responsibilities between the headquarters in Japan and local management, as
well as in taking the balance between human factors and system factors in local business management. Thatsaid, the quality of human resources and what incentives should be provided to them will matter most in theend. It is not just a matter of bonuses, but the overall framework to foster a mindset of awareness and aspirationas management will prove to be the key to success.
Another management challenge, as I see it, is the need to add new businesses to our business portfolio for the
future. Each business has its own lifecycle and there are some businesses that have already passed the peak
and are on a downhill. Unless we have secured new growth drivers by the time they have to be discontinued
eventually, we cannot deny the possibility that our overall business ground will sink. We will continue to workon adding and developing new growth drivers, mainly leveraging M&A activities.

Q In what specific business segments do you hope to add new growth drivers?
Specifically, we are exploring “medical services” for the Life Care business and “semiconductors” for the Information Technology business as major themes in terms of business segments that we hope to add to our businessportfolio. In the Life Care business, we will seek to identify business opportunities at a point that is closer to end

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products and consumers (patients). As we see more inefficiency downstream in the industry structure especiallywith regard to medical devices and services, I believe that we can find sufficient revenue opportunities by offering efficiency improvements there.
With regard to the Information Technology business, looking at potential areas that are not so far away from ourexisting business areas, we see “semiconductors” as a segment with high future potential as it supports a wide
range of industry areas and technological innovation. The “semiconductors” segment actually consists of a variety of different sub-segments ranging from raw materials to manufacturing equipment, and we will apply thesame old approach mentioned above to them to identify niche markets where we can leverage our strengths.

Q What is your vision for future growth? Where is the growth area?
It is in the segment of eyeglass lenses that we plan to seek growth most earnestly. Our insistent approach to“strong business” is “to become the largest fish (gain the highest share) in a small pond.” We still have enoughroom for further growth in eyeglass lenses and, for that matter, endoscopes. As both of these businesses havea structure in which we can secure profit relatively easily but for a major market change or technological innovation, we will strive to improve profitability further, while also striving to expand market share. Speaking ofmarket share, we do not necessarily seek to seize the largest share in the global market. Rather, we start withsecuring the top position in a specific regional market. Our strategy is to accelerate growth by keeping doing
this, and we plan to implement it within a few years. Regarding other products we offer such as contact lenses
and intraocular lenses, we predict that part of contact lenses will be replaced with intraocular lenses in the future
in much the same way as part of eyeglass lenses have been replaced with contact lenses. In other words, ourstrategic crux lies in running multiple businesses at the same time while forecasting the lifecycle of each businessso as not to miss any further demand. In January 2019, we expanded the product portfolio of intraocular lenses
through M&A, and this was also a measure that was consistent with this strategic purpose.

Q ESG management is drawing increasing attention. What do you see as mostimportant in corporate governance? And what is the unique feature of HOYA’s
corporate governance structure?
I see the ability to avoid downside risks in management as one of the most important functions of corporate governance. In particular, whether a company can replace top executives following poor earnings results to make quick
responses for recovery would make a huge difference. I believe that this process will not work well unless a majority
of Board members are outside directors. HOYA has a unique governance structure among Japanese companies in that
I am the only internal director (also serving as CEO) among the Board members, and all other members are outside
directors. This structure encourages me to keep a feeling of tension all the time while managing the Company andto report a wide range of issues to Board meetings. This feeling of tension may be the most valuable thing. Anotherimportant feature is that all outside directors have experience in corporate management. They would raise objections
and questions from various angles and I have found that their approaches to risk management and viewpoints werereally to the point, and we together have an active and high-quality discussion at each Board meeting.

Q What are among the most important themes currently discussed at Board
meetings?
One of the most important themes is successor planning for my position (CEO). In anticipation of a situation in

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which I resign including an event of an unforeseeable accident, we need to choose candidates to succeed me as
CEO in advance. The successor may be selected from inside or outside the Company. In any case, the Nomination
Committee is responsible for the selection of final candidates, and I will not be involved in the selection process
as I am not a member of the Committee. Highly competent candidates are currently being proposed in various
forms by the Nomination Committee to the Board of Directors for evaluation. Regular surveys are also conducted
to identify competent candidates from outside the Company using external executive search firms.

Q What is your view on environmental issues and social contribution activities?
I treat social contribution activities and revenue-generating businesses in an integrated manner. In other words,
if we can excel in both, the Company will be able to achieve sustainable growth and continue to contribute tosociety. For HOYA, health care (eyeglass lenses, contact lenses, etc.) and medical (endoscopes, etc.) segments
are both the drivers of its growth strategy and businesses that contribute to the promotion of health of people
all over the world at the same time. Our aim is to augment growth and to work on further social contributions
at the same time by capitalizing on the expansion of markets related to such issues as aging population aroundthe world and improving living standards in emerging countries.

Q Could you give a message to shareholders and investors?
I would like shareholders and investors to evaluate our attractiveness from a long-term perspective. As I mentioned
above, the current business structure has been developed to generate adequate return as a result of investments invarious businesses over the long term, with business portfolio rebalancing and risk diversification along the way. It
needs to continue to evolve into the future. For this reason, there are also values that we cannot realize in the shortterm. Under this structure, we will invest the funds entrusted to us from our shareholders in an efficient mannerwith proper risk management, to realize sustainable value creation. We always value your support very much.

HOYA REPORT 201921

Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA Value Creation ModelManagement capitalBusiness activities

Products and services

Human capital

Employees:

Healthcare

37,412(end of 2019/3)

Businessplanning

50

R&D

More than
production
bases around the world
Capital investment

Financial capital
Cash flow generation ability
Stable financial condition

AA R&I)（

Feedback from customers

30

of around ¥billionper year

Life Care business

Manufactured capital

Manufacturing

7,309

Sales

R&D expenses of28around ¥billionper yearSocial capital
HOYA
Customers, suppliers, etc.

MANAGEMENTSYSTEM

Electronics

Information Technology businessIntellectual capital

Contribution to the health ofpeople around the world

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

Partnering

Marketing

Patents:

MedicalSocial value

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

Imaging

Business portfolio management,
rapid cycle PDCA, etc.

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

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

Corporate mission + Management principles

HOYA REPORT 201922

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

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

Corporate governance structure (As of the end of June 2019)

General meeting of shareholders
Election

Board of Directors

Executive officer system(Management Supervision)

Executive Officers

Board of Directors
Election

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

Supervision &Advice2 Executive Officers

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

Compensation Committee
5 Independent Directors

Audit Committee
5 Independent Directors

Nomination Committee
Secretariat

Compensation
Committee
Secretariat

Audit Committee
Secretariat

HOYA REPORT 201923

Divisions

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

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

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

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

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

Average“The Company needs to formulate a medium-term management plan.”

At HOYA, directors are required to maintain an attendance ratio at meetings of the Board of Directors at or above 75% as
one of the preconditions for reappointment as a director. For the fiscal year ended March 31, 2019, the attendance ratio of
all directors was 100%, and there was no problem with regard to the number of positions of other companies that were held
concurrently by any of the directors.

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

Mitsudo Urano(Born on Mar. 20, 1948)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

6 years

5,000 shares

10/10 times (100%)

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

Important positions of other companies
concurrently helds
Outside Director of Yokogawa Electric Corporation (scheduled to retire the position in June
2019)
Outside Director of Resona Holdings, Inc.
Outside Director of Hitachi Transport System,
Ltd.

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

HOYA REPORT 201924

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

Yukako Uchinaga(Born on Jul. 5, 1946)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

6 years

1,000 shares

10/10 times (100%)

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

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

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

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

Takeo Takasu(Born on Jun. 24, 1945)

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

5 years

2,800 shares

10/10 times (100%)

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

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

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

HOYA REPORT 201925

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

Shuzo Kaihori

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

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

4 years

1,000 shares

10/10 times (100%)

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

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

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

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

Hiroaki Yoshihara

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

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

1 year0 shares

8/8 times (100%)

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

Important positions of other companies
concurrently helds
Outside Director of Murata Manufacturing Co.,Ltd.
Outside Director of Hitachi, Ltd

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

HOYA REPORT 201926

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

Hiroshi Suzuki

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

Number of years in office of the
Director of the Company

Number of shares of theCompany held

Number of attendances to theBoard meetings

26 years

942,080 shares

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

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

Outside Director of Toshiba Memory Holdings
Corporation

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

Independent directors’ skills matrix
Corporate
management

Globalbusiness

Mitsudo
Urano

●

●

YukakoUchinaga●●

Takeo Takasu

●

●

Shuzo
Kaihori●●

Hiroaki
Yoshihara●●

HOYA REPORT 2019

Finance/accounting

Technology

M&A

Developmentof human
resources/
diversity
●

●
●

●
●

●

●

27

●

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

Hiroshi Suzuki
Director, Representative Executive Officer
President & CEO

Ryo Hirooka
Representative Executive Officer & CFO

Eiichiro Ikeda
Executive Officer & COO, Information Technology andChief Technology Officer (CTO)

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

HOYA REPORT 201928

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

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

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

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

Those who previously worked for the HOYA Group•

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

Those who are major shareholders (10% or more) of the HOYA Group, or those who are directors, executive officers, corporate
auditors, or employees of companies that are major shareholders of the HOYA Group or those who have a family member who
holds a top management position at such companies•Those who execute operations of a company of which a major shareholder is the HOYA GroupHOYA REPORT 201929

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

<Those who are related to major business partners>•

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

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

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

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

When directors are exchanged•

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

Compensation Committee
The objective of the Compensation Committee is to establish a remuneration system that incentivizes directors and executive officers and to contribute to improved financial performance for HOYA by undertaking appropriate evaluations of theirperformance. The Compensation Committee decides on a remuneration package for each director and executive officer inaccordance with the following policies:
Policy concerning remuneration for Directors
The remuneration of Directors consists of a fixed salary and a medium- and long-term incentive (stock options). The fixed salaries
consist of a basic compensation and compensation for being a member or a chairperson of the Nomination, Compensation, or Audit Committee. The compensation levels are set appropriately by taking into consideration such factors as the Company’s businessenvironment and the levels set by other companies as determined by a survey conducted by an outside professional organization.
Furthermore, fixed numbers of stock options are granted to newly appointed and reappointed officers in order that they may
hold a common viewpoint with shareholders regarding the share price and share interests with shareholders on a medium- tolong-term basis. A reasonable number of stock options, which is calculated to be commensurate with the number of stock
options granted at the time of new appointment, are also granted annually on an ongoing basis in consideration of the exercise

HOYA REPORT 201930

Copyright ©2019 HOYA GROUPHOYA REPORT 2019price at the time of granting (the market price one day prior to the resolution regarding the grant), fluctuations in the shareprice during the exercise period, and fixed annual salaries.
[Composition ratio of compensation for directors]
Fixed salary: Medium- and long-term incentive (stock options) = Approximately 1:0.3–0.6(Note) The ratio of the above medium- and long-term incentive shall fluctuate with changes in the Company’s share price and other factors.

Policy concerning remuneration for Executive Officers
The remuneration of Executive Officers consists of a fixed salary, an annual incentive (performance-based bonuses), and a
medium- and long-term incentive (Performance Share Unit). For fixed salaries, basic compensation is set appropriately according to the office and responsibility of each Executive Officer (Representative Executive Officer, CFO, etc.) and by taking into
consideration such factors as the Company’s business environment and the levels set by other companies as determined by asurvey conducted by an outside professional organization. Other than basic compensation described above, benefits granted
to expatriates (such as housing) are also set at appropriate levels in consideration of the Company’s business environment andthe levels set by other companies as determined by a survey conducted by an outside professional organization.
The annual incentive is determined according to quantitative results and qualitative evaluations and varies within the range
roughly from 0% to 200%. As indicators of quantitative results, net sales, profit attributable to owners of the Company, andbasic earnings per share (EPS) stated in the Consolidated Financial Statements of the Company have been adopted.
As a medium- and long-term incentive, the Company introduced the Performance Share Unit.
Performance Share Unit
The Company’s Compensation Committee, at a meeting held on May 7, 2019, resolved to introduce the Performance Share
Unit (PSU) in place of the existing stock option plan, as a medium- to long-term incentive plan for Executive Officers. The
objective of the new plan is to further increase the motivation and drive of the Company’s Executive Officers to medium- tolong-term business performance goals and enhance the corporate value of the HOYA Group, and also to serve as mechanism
for retention of highly talented human resources by setting a competitive compensation level.
Under this plan, after determining the basic deliverable number of shares according to the position and responsibilities of eacheligible recipient (CEO, CFO, and others), the Company grants compensation in an amount equivalent to the market price of
the Company’s shares according to the degree of achievement of the medium- to long-term performance targets shown in thetable below.
The Company also plans to issue new PSU covering the next three fiscal years in the following fiscal year onwards.

Basic deliverable number of shares
Position/responsibilities

Medium- to long-term performance targets

Basic deliverable
number of shares

Indicator

CEO

8,600

Net sales

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

CFO

2,500

Earnings per
share (EPS)

390 yen from the same perspective as shareholders.

ROE

20.00% has generated return on shareholders’ investment effectively.

Other Executive
Officers

2,200

Target(consolidated)

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

Selected as an indicator to measure whether the Company

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

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Copyright ©2019 HOYA GROUPHOYA REPORT 2019

Total amount of remuneration, etc., Directors and Executive Officers for the fiscal year under review(before the introduction of PSU)Classification
Directors

Independent
Internal
Total

Total amount of remuneration by type

Number of payees

Total amount of
remuneration, etc.

Fixed salary

6 persons

93 million yen

Performancebased bonuses

Stock options

58 million yen-

35 million yen

1 person

8 million yen

8 million yen--

7 persons

101 million yen

66 million yen-

35 million yen

Executive Officers

5 persons

517 million yen

272 million yen

182 million yen

62 million yen

Total

11 persons

618 million yen

338 million yen

182 million yen

98 million yen(Notes) 1. At the end of the fiscal year under review, there were seven Directors and four Executive Officers. One of the four Executive Officers served concurrently as Internal Director. The
reason for the discrepancy with the number of Executive Officers in the above table is because the above table includes one Executive Officer who retired at the closing of the 80th
Ordinary General Meeting of Shareholders.
2. The total amount of remuneration includes remuneration paid to one Executive Officer who retired as of the conclusion of the 80th Ordinary General Meeting of Shareholders.
3. Fixed salary for Executive Officers includes overseas Executive Officer’s benefit as expatriate of 103 million yen.
4. For stock options, fair values of stock acquisition rights were calculated and the table above shows amounts to be recorded as expenses for the fiscal year under review.
5. Stock options granted to Executive Officers are compensation reflecting performance that is linked to share price.

Amount of consolidated remuneration for each Director and Executive Officer(CEO and those with remuneration totaling 100 million yen or more)
Name

Hiroshi Suzuki
Representative Executive Officer
President & CEO

Ryo Hirooka
Representative Executive Officer &CFO

Executiveclassification

Total amount

Fixed salary

Performancebased bonuses

Stock options

Director

8 million yen

8 million yen––

Representative
Executive Officer

192 million yen

99 million yen

70 million yen

23 million yen

Representative Executive Officer

111 million yen

59 million yen

41 million yen

11 million yen

Executive Officer

102 million yen

54 million yen

36 million yen

12 million yen

Executive Officer

107 million yen

55 million yen

36 million yen

16 million yen

Eiichiro Ikeda
Executive Officer & COO, Information
Technology and Chief Technology
Officer (CTO)

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

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

HOYA REPORT 201932

Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA Group Environmental, Occupational Safety and Health Philosophy andFundamental Environmental, Occupational Safty and Health Policies
Outlined below are the environmental protection, occupational safety and health activities being
performed within the HOYA Group companies.

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

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

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

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

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

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Environmental Protecion and Occupational Safety and Health System
In October 2008, the Group´s environmental protection organization and the occupational safety and health organization
were merged with each other. Since then, with the new structure supervised by the HOYA Group Director for Environmental
Protection, Occupational Safety and Health, the Group has been carrying out various activities of environmental protection andoccupational safety and health.
HOYA Group Environmental Protection and Occupational Safety and Health Organization

Chief Executive Officer (CEO)HOYA Group Director for
Environmantal Protection,
Occupational Safety and HealthStrategic Business Units (Divisions)
The person in charge of Occupational Safety
and Health of Division
The person in charge ofEnvironmantal Protection of Division
Plants and facilities (including local subsidaries)
The person in charge of Occupational Safety
and Health of Facility
The person in charge ofEnvironmantal Protection of Facility

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Environmental

Climate Change

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

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

CO2 emissions:
The CO2 emissions of the HOYA Group in the fiscal year ended March 31, 2019 were 405,770 tons of CO2. (Scope 1 and 2
emissions)
The reduction of CO2 emissions was 19.3 percent in Japan from the level of the fiscal year ended March 31, 2015.
The emissions were 6.6 percent increased overseas.
As a result, the emissions were 1.2% increased globally.
CO2 emissions of the HOYA Group (t-CO2 equivalent)% Change fromthe fiscal year
ended March 31,
2015

Mar.
2015

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Japan

82,83585,261

69,992

71,37566,824-19.3%

Overseas317,976

332,206

328,124

337,960

338,946

+6.6%

Total

400,811

417,467

398,116

409,335

405,770+1.2%

Note that CO2 emissions are calculated, for each of the production bases*1, from electric power and fuel consumptions as
determined by the summation formulas standardized for the whole HOYA Group.
*1 Some non-production bases are included

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

Heating process

Cooling process

Deionizer

Process chiller

Heat recovery heat pumpToshiba CAONS
Heat
exchanger

10℃

30℃

63℃

59℃

10℃

65℃

15℃

15℃

Cooling
water tank

Electric heater

10℃

Heating

80℃
Manufacturing process

15℃

Manufacturing process

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

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Environmental

Pollution and Waste

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

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

Japan

Overseas

Global

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Total
emissions

2,656

3,462

3,362

3,478

3,144

Recycling
rate

79.0%

60.1%

66.1%

62.6%

65.9%

Total
emissions

43,992

43,76049,88856,35456,766

Recycling
rate

61.0%

66.5%

66.3%

68.4%

69.1%

Total
emissions

46,64847,22253,25059,832

59,911

Recycling
rate

62.0%

66.1%

66.3%

68.1%

68.9%

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

HOYA REPORT 201937

Copyright ©2019 HOYA GROUPHOYA REPORT 2019SocialHuman Capital

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

Modern Slavery Statement
In accordance with the UK Modern Slavery Act 2015 legislation, the HOYA Group publishes a statement on the steps it has
taken to identify and eradicate slavery and human trafficking within its business and supply chains.
http://www.hoya.co.jp/english/csr/pdf/HOYAGroupModernSlaveryStatement2018_fin.pdf

Diversity
Equal opportunities for men and women
At the HOYA Group, we work to achieve fair employment opportunities and benefits for both genders.
At the HOYA Group in Japan, currently 99 women (9.3% of total employees) are active as women leaders.* In addition, as ofthe end of June 2019, one of the independent directors is a woman (16.7% of total directors). We do not discriminate basedon gender in hiring, promotions, or pay increases, and instead focus on actively employing human resources with highly specialized capabilities and morals.
In order to increase the women in management percentage in Japan going forward, we will promote the development of aworking environment that allows the women working at HOYA to feel reassured in their continual employment. Specifically, torealize our goal of increasing the percentage of women in managerial positions to at least 15% by the end of March 2021, we
will conduct female leadership training, managerial training, lectures by role models, and networking activities to help foster
female leaders.
*Women leaders: Subsectional chief equivalent to or above section and highly skilled professionals

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

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Utilizing global human resources
The HOYA Group implements sales and production at optimal locations on a global level. In addition, efforts are being madeto globalize the entire Group by promoting the localization of top management of subsidiaries through actively promoting andcreating opportunities for high-quality local human resources. The HOYA Group will work to provide equal opportunities tolarge numbers of high-quality human resources going forward.
In addition, as of the end of June 2019, at HOYA Corporation we have promoted a non-Japanese to the position of executive,
and three non-Japanese are engaged as division managers in our global business.

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

Development of Human Resources
Enhancement and development of human rights
Basic approach
At the HOYA Group, we provide a work environment that respects individuality and diversity and promotes the growth ofindividuals while giving consideration to the safety and health of employees. Furthermore, each and every employee works to
improve the knowledge and skills and we provide the innovative value sought by society. In this manner, we aim to create afree-spirited work environment.
Human resource development
People differ in terms of things such as values, how they live, personality, and individual capabilities. There are also a wide variety of stances toward jobs and ways of working. For this reason, organizational management in the current era needs to provide frameworks that leverage the individuality of employees and allow employees to increase their capabilities in environmentsthat match individual aptitudes. The new ideal employee environment sought by HOYA is one in which all employees can fully
exploit their capabilities and contribute to the organization and business through friendly competition.
In response to the wide variety of capacity development needs of employees and in order to learn the specialized knowledge
and skills required for the industry, the HOYA Group individually deploys the employee educational programs that are mostsuitable for each business division and region.

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Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA Prize
The HOYA Prize is an award system that has been established for all employees with the aim of recognizing and rewarding thedaily hard work and efforts of employees in order to communicate a spirit of gratitude toward employees that always do theirutmost amidst a difficult business environment. The award system does not stipulate any detailed standards, but winners arerather decided on by the CEO based on recommendations received by the President from the managers of each business andhuman resources representatives.

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

Structuring of a global management system for its environmental and occupationalsafety and health management system
The HOYA Group has been structuring a globally-operated management system based on ISO (International Organization forStandardization) 14001 and OHSAS (Occupational Health and Safety Assessment Series) 18001 with the purpose of promoting
environmental protection activities by employees and ensuring the safety and health of employees.
In February 2013, the certification of the Group switched to a global multisite certification.
In January 2019, the certification is applied to 52 sites in 18 countries.

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

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

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

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

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Training in HOYA Group safety and health
The facility environment, occupational safety and health personnel conference is held twice a year. The HOYA Group foremen
training is held twice a year. The intra-Group consulting program for guidance and training is held several times a year mainly
for the overseas production bases. These are all designed to enhance the performance of the occupational safety and healthactivities within the HOYA Group.
Go to Occupational Accidents at HOYA Facilities page
http://www.hoya.co.jp/english/csr/accidents.html

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

White 500 certification for health and productivity management organizations
The HOYA Group has been certified under the METI’s White 500 certification program for outstanding health and productivity
management organizations every year since the start of the program in 2017 (as of April 1, 2019). This program is administeredby the Ministry of Economy, Trade and Industry jointly with Nippon Kenko Kaigi and in coordination with insurers to certify
and announce companies practicing excellent health and productivity management. HOYA is practicing health and productivity
management on a daily basis.

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

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

Smoking control
To prevent passive smoking, indoor smoking has been prohibited in principle in all facilities located in Japan and overseas sinceApril 2008. HOYA has also established a standard for the designation of outdoor smoking spaces to prevent any passive smoking by passersby or people taking a break. Furthermore, we have adopted stricter rules to prevent passive smoking in April 2018
to ensure that for parties, diners, etc., hosted by HOYA, a venue that is entirely non-smoking or provides a separate smoking
area will be selected. HOYA is currently preparing for the introduction of rules to totally prohibit smoking at all facilities insideand outside Japan during the regular working hours by the end of the fiscal year ending March 31, 2020. HOYA aims to create
a comfortable work environment at the workplace where employees spend a significant part of their living hours.

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Specific Health Checkups and Specific Health Guidance
As part of efforts to prevent metabolic syndrome, HOYA has provided health guidance focusing on the prevention of lifestylediseases of employees (lifestyle improvement program) in coordination with the health insurance association since 2002 before
the start of the national Specific Health Guidance program. The scope of the health guidance has been expanded to coveremployees less than 40 years old (for the groups less than 25, 30, and 35 years old) for the early detection and treatment oflifestyle-related disease. We also monitor the participation rate and the achievement rate of Specific Health Checkups and Specific Health Guidance annually and are considering the introduction of a program to improve the participation rate.

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

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

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

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Product Safety and Quality

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

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

Board of Directors

Executive Officer, CLO

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

Person in charge of product liability
at each Information Technology business

Plants and facilities (including local subsidiaries)

Plants and facilities (including local subsidiaries)

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Product Safety and Quality

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

Social Opportunities

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

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Review of Operations

Life Care Segment

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

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

Lens material
manufacturer

Lens manufacturer

OpticianMarket Conditions
Eyeglass lens demand is increasing globally on account of a worldwide aging population, enhanced purchasing power owing to burgeoning economies in emerging
countries, increased awareness of health-related issues, and long hours of PC andsmartphone use that leads to vision impairment.
Globally, the rate of growth is around 3% in value terms, although expansion varies
according to region, such as is seen with the mature markets of Japan and Europe, andgrowth markets in the Americas as well as Asia. Within this, there are the emerging countries of Asia and South America, which are expanding notably beyond the middle-income
range, and are driving the growth in volume terms of emerging countries.
Regions around the world have differing and respective characteristics, although
overall global trends, namely the consolidation and emergence of giant retail-type

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store chains, and resulting declines in unit sales prices are continuing. Given this, theMarket Share (Mar. 2019)

key to growth for lens manufacturers will be to reduce production costs and to increase sales of value-added products, such as those with different varieties of surface
coatings (anti-glare coatings and anti-scratch coatings) and progressive lenses.

OthersHOYA Position and Market ShareA Company

HOYA stands at the No. 2 position in the industry, and, in addition to organic growth, has
expanded its share of the market through M&A initiatives, including the 2013 acquisitionof SEIKO’s eyeglass lens unit, and U.S.-based Performance Optics, LLC in 2017.
HOYA Outlook
Eyeglass lens products account for over 50% of Life Care business sales, and are a
growth driver for business expansion.
In the Americas, we have already established a strong presence in the channel of in-

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

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

dependent eyeglass stores, while there is still much room for market share expansion

Otherin the channel of chain stores, on which we will continue to focus. In addition, we will

Dept. storesstrengthen sales activities also in Asia, where markets continue to grow. This is how

Massmerchants

we aim to achieve worldwide organic growth of 5% per year. On top of that, we will
also pursue M&A opportunities to boost growth.

ChainsIndependents

To respond to the increasing demand, we have started the construction of oursecond plant in Vietnam. The new plant is scheduled to start operation in December 2019.
(HOYA estimate on a value basis)

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

HOYA REPORT 201946

Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA Position and Market ShareHOYA holds the top share in the retail channel for sales made through brick-andmortar stores.
On top of sales growth from existing stores based on, among others, the promotionof high value-added products, we are working to expand sales through new stores.
Sales per Customer(Presented as an index with Mar. 2015 as 100)

300
237

110

200

100

100

Mar.
2015

Mar.
2016

Mar.
2017

Mar.
2018

Eyeglasses stores
Onlinechannels
Ophthalmologists

OthersNumber of Eyecity Stores in Japan

120

90

Sales Composition Ratio
by Sales Channel (Mar. 2019)

Mar.
2019

0

257

273

276

289

Contac lens
specialty stores

HOYA
No. 1
Mar.
2015

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

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

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

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

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Copyright ©2019 HOYA GROUPHOYA Market Shareat Contact Lens Specialty Stores(HOYA estimate on a value basis)

HOYA REPORT 2019

Supply Chain

Component manufacturer

PENTAX (HOYA)

Customer: Hospital,
joint purchasing organization, agency

Sales by Region
By geographical region, a large volume of sales takes place outside Japan; in fact, thisSales by Region (Mar. 2019)Japan

accounts for almost all of our sales.
Market Conditions
Medical expenses are increasing worldwide in line with the aging of society.

Americas

Asia/
Oceania

To keep medical expenses in check, governments in countries across the globe arepromoting the early detection of disease and minimally invasive medical procedures.

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

Market Share (Mar. 2019)HOYA Position and Market ShareWith its strengths lying in high image quality, ultrasonic endoscopes and small-diameter endoscopes that strike a balance between image quality, exterior diameter, andchannel size, HOYA holds the No. 2 position in the industry.
HOYA Outlook
HOYA continues to secure stable earnings in Europe, which accounts for about 50%
of total sales, and strives to achieve growth by boosting sales activities in APAC and

B Company
HOYA
No. 2
A Company

the Americas.
While steadily engaging in products for gastrointestinal devices, the main battlefieldin the flexible endoscope market, we will also seek product differentiation by devel-

HOYA REPORT 201948

Copyright ©2019 HOYA GROUP(HOYA estimate on a value basis)

HOYA REPORT 2019

oping treatment instruments that can be used in combination with endoscopes anddisposable endoscopes.

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

Sales by Region
Component manufacturer

Customer: Hospital, agency

Americas

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

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

Japan

Asia/
Oceania

On a monetary basis, growth in high-end products—such as for corrective lenses
for astigmatism and progressive lenses to correct presbyopia—are driving overall expansion in the market, which continues to grow at a rate in the lower half of theMarket Share (Mar. 2019)

single-digit range.
HOYA Position and Market Share
Owing to the product competitiveness of Vivinex™ (introduced in the market in2015), a product with few side effects that is easily implanted into the eye and hasreceived high post-surgery evaluations, our sales in Europe continues to grow at apace that is significantly above the market.

Other
A Company
C Company
HOYA B Company
No. 3

HOYA is steadily increasing its market share and currently holds the No. 3 place inglobal terms.

(HOYA estimate on a value base)

HOYA REPORT 201949

Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA Outlook
We will expand customer reach by bolstering the sales workforce in regions in which
we already have sales bases, while entering into new regions one by one, whether
directly or indirectly (collaboration with sales agents). As Mid Labs and Fritz Ruck,
which HOYA acquired in January 2019, have product lineups covering devices usedin cataract surgeries, we will realize an increase in sales of intraocular lenses by making a comprehensive proposal combining intraocular lenses with ophthalmic medical
devices to customers.
We are striving to expand sales and earnings by bolstering sales capabilities, increasing sales area, and aggressively launching new products in both standard andhigh-value-added categories.

HOYA REPORT 201950

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

Review of Operations

Information Technology Segment

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

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

Raw material
manufacturer

Mask blanks manufacturer

Semiconductor manufacturer,
foundry

Note: In some cases product goes via photomask manufacturer

Market Conditions
The semiconductor market continued to growth in 2017 and 2018, but the market
as a whole saw a negative growth rate in 2019 mainly due to falling memory prices.
On the other hand, semiconductor manufacturers and foundries are conducting active research and development activities focusing on the further miniaturization ofelectronic circuits using extreme ultraviolet (EUV) lithography, a next-generation manufacturing technology.
Sales of blanks are primarily driven by the research and development demand of customers as they are necessary for each different circuit design.

HOYA REPORT 201951

Copyright ©2019 HOYA GROUPHOYA REPORT 2019Market Share (Mar. 2019)HOYA Position and Market Share
Putting to use our core technologies of glass polishing and thin film technology has

Otherenabled us to capture a large share of the market over the long term.
Moreover, we have continued to conduct EUV blanks research for nearly 20 years,

A Companyand have demonstrated a firm presence in this field which has exceptionally highhurdles to clear for entry.

HOYA No. 1

For HOYA, opportunities will continue to rise as we advance EUV lithography technology and expand market share.
(HOYA estimate on a value base)

HOYA Outlook
Along with the advance of miniaturization in semiconductors, itappears that demand for mask blanks for EUV lithography will

Global Semiconductor Market andSales Growth in Mask Blanks

continue to be strong in the fiscal year ending March 31, 2020(%)

and beyond.

30

Mask blank sales are difficult to accurately predict due to the20

dramatic fluctuations that occur in line with customers’ development speeds, and also because they are not consumables and10

are not necessarily linked to movements in the semiconductor
industry as a whole. However, sales in volume terms for EUV ap-

0plications are expected to double from leves of the fiscal year-10

ended March 31, 2019 in about three years.
Based on this demand forecast, we decided to expand the man-

2014

2015

2016

2017

2018

2019

ufacturing line for mask blanks for EUV lithography, and the newRate of growth in the semiconductor market

manufacturing line is scheduled to start operation around mid-

Sales growth in the mask blanks business

2020.

Reference: World Semiconductor Trade Statistics

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

Supply Chain

Raw material manufacturer

Photomask blanks andphotomasks manufacturer

HOYA REPORT 2019Panel
manufacturer

52

Copyright ©2019 HOYA GROUPHOYA REPORT 2019HOYA sources the substrate from raw materials manufacturers, and on that substrateperforms polishing, deposition, and resist applications (blanks manufacturing). Whenthe manufacture of the blanks is completed, HOYA conducts circuit pattern drawing,developing, etching, and resist stripping and cleaning, and delivers it to panel manufacturers (photomask manufacturing).
Sales Composition by Application
The ratio of sales by application is stated as follows. The end-product market for
smartphone applications continues to grow, and this seems to have come to accountfor the largest proportion. In addition, sales for automotive applications are expanding, it became the proportion next to TVs.
Market Conditions
In the fiscal year ended March 31, 2019, the LCD/OLED display photomask market

Sales Composition
by Application (Mar. 2019)as a whole expanded over the previous fiscal year owing to the growth in the sixth
generation, primarily for smartphones (LTPS*1/OLED).
*1 LTPS: Low Temperature Poly Silicon

Ohers
Smartphone

The market as a whole is expected to continue to expand going forward, driven by
growth in the sixth generation for the manufacturing of high-resolution panels (resolution over 300 ppi) and recovery in the 10+ generation.

AutomotiveTV

With regard to regions, it appears that continued expansion will occur in the Chinese
market where new factory construction is ongoing.
HOYA Position and Market Share

Market Share (Mar. 2019)HOYA possesses expertise in high-precision products, and holds the top-class market share.
HOYA Outlook

Other

We will strive for steady business growth focusing on high-precision sixth generation
products where there are future prospects for growth and on the Chinese market interm of geographic region.
Panel Generations

C Company

HOYA

A Company

B Company

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

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Copyright ©2019 HOYA GROUP(HOYA estimate on a value basis)

HOYA REPORT 2019

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

Raw material
manufacturer

Substrate manufacturer

Media manufacturer

HDD manufacturer

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

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

2.5 Inch Substrates
Sales Composition by Application(Mar. 2019)

Other
From the fiscal year ended March 31, 2018, we commenced mass production of
3.5-inch glass substrates, as these are expected to see an expansion of demand in
the future.
The 3.5-inch substrates we produce are used in HDDs for near line (NL) servers that
perform such functions as backup in data centers.
Sales of the 3.5-inch substrates are steadily growing, and by the fourth quarter had
expanded to 29% of business overall.

Market Conditions
In the fields of laptop computers, mission critical servers, and other products, the2.5-inch HDD market is being replaced by solid state drives (SSDs), which have fasterdata read/write speeds. SSDs were used in about 60% of the notebook PCs shippedin the fiscal year ended March 31, 2019, and the percentage of SSDs is expected tocontinue to increase steadily in the future.

HOYA REPORT 201954

Copyright ©2019 HOYA GROUP

Games
Mission criticalservers

Laptopcomputers

External
HDDs

HOYA REPORT 2019

On the other hand, in the 3.5-inch HDD market, NL servers, having a comparatively
low access frequency with backup applications, predominantly use HDDs due to theircost advantages over SSDs. Although investments in facilities associated with data
centers by large-scale cloud service vendors fluctuate significantly even in the shortterm, a significant market expansion is expected in the long term as data generation
volumes expands throughout the world.
3.5-inch Substrates for
HDDs Market Share (Mar. 2019)HOYA Position and Market Share
Currently, all 2.5-inch substrates are made of glass. As the sole glass substrate manufacturer in the market, HOYA supports the HDD industry behind the scenes.
In the 3.5-inch substrate segment, products made of aluminum used to completely

HOYA(glass)dominate the market based on their price advantage. However, our glass substrate
products are now being adopted for HDDs as they are highly rigid and can increase
the number of mounting disks by thinning the disks, and their market share in volume terms has risen to 11% (and 16% speaking only of our shares for HDDs used

Aluminum
A社
substrates
manufacturers

in NL servers). As the storage capacity of HDDs expands, our market share is also
expected to expand.

(HOYA estimate on a value base)

HOYA Outlook
Although we expect solid demand for external HDDs, sales of 2.5-inch substrate
products, primarily for laptop computers, mission critical servers, and game consoles,
are expected to decline by being replaced by solid state drives (SSDs).
For 3.5-inch substrate products, an increase in the adoption of HDDs equipped withHOYA products by cloud service providers is expected to lead to sales growth.
In the medium to long term, we anticipate growth of 3.5-inch substrate products that
more than compensate for the contraction of 2.5-inch substrate products.
Under these circumstances, construction of a new plant that manufactures 3.5-inch
substrate products is being carried out in Laos in preparation for the future increasein demand, and the new manufacturing line is scheduled to start operation aroundmid-2020.
Potential for glass substrates in the 3.5-inch market
In response to the expansion of data volume and the storage volume generated
worldwide, HDD manufacturers are continually introducing in the market new products with higher data capacity per HDD.
The increase in data capacity per HDD has been realized by increasing the recording
density or area of the disk, but, at present, the development of technologies designed
to improve recording density is stagnating, and the expansion of the recording area
remains key to capacity expansion.
In the 3.5-inch market, the disk material is now mainly aluminum alloy. However,since a further increase in area can be realized by increasing the number of mounting
disks by thinning the disks, it is becoming necessary to use glass instead of aluminumalloy as the former has higher rigidity and allows for more thinning. More specifically,

HOYA REPORT 201955

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

after the point where the number of disks mounted in an HDD reaches 10 (substrate
thickness: 0.5 mm), glass substrates are required (rigidity of glass and aluminum alloyin terms of Young’s modulus are 95 GPa and 71 GPa, respectively).
In the event that HAMR (Heat-Assisted Magnetic Recording) is realized and commercialized, glass substrates, which have excellent heat-resistance characteristics, would be
the only option because HAMR would entail heat at the production process of magnetic film (the heat resistant temperature of glass is 691 degrees Celsius, whereas that ofaluminum alloy is 290 degrees Celsius).

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

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

Raw material
manufacturer

Lens manufacturer

Cameramanufacturer

HOYA sources materials from optical glass material manufacturers, conducts compound and solution treatments, manufactures lens materials and lens products, anddelivers to lens and camera manufacturers.
Sales Composition by Application(Mar. 2019)

Sales Composition by Application
The ratio of sales by application is as the right figure. Digital camera-related items
for compact digital cameras and for lens modules that had previously made up the

Optical glass materials/
optical lenses

majority of sales are trending toward a decline, and now account for 40% of the sales
composition ratio.
As for products for security cameras, which is a new area of application, demand foraspherical glass lenses is increasing due to the increasing adoption of higher-pixel
imaging. However, growth in our sales decelerated as the Chinese market is undergoing inventory adjustment for end products following a rapid market growth in thepast years, and demand for end products outside China also fell due to the effect of
U.S.–China trade friction. As a result, the composition ratio of products for security
cameras is flat from the previous fiscal year.

HOYA REPORT 201956

Copyright ©2019 HOYA GROUP

Compact
Optical filters digital cameras
and laser
oscillators
Interchangeable
lensesOthersfor SLRs
SecuritycamerasCar-mounted
camerasHOYA REPORT 2019Market Conditions
Compact digital cameras are increasingly being replaced by smartphones, and theirdecline is ongoing.
Modular camera lenses are undergoing a gradual decline together with a shrinking
market for single-lens reflex cameras, but the market for mirrorless cameras is growing at a solid pace.
Growth in the market for security cameras has subsided for the time being.
HOYA Position and Market Share
From research and development of optical glass composition to manufacturing offinished products of lenses, HOYA takes a consistent approach to its activities while

Share of Aspherical
GMO lenses (Mar. 2019)(Digital Camera-Related)building a structure that makes possible the mass production of an array of products.
HOYA maintains a high market share with its exceptional skills in aspherical glass
molded (GMO) lenses.

Other

GMOs are formed by directly pressing optical glass that has been subjected to highHOYA

temperatures to make it malleable. These are optical lens products that require nopolishing, and possess an excellent ability to correct distortions. Enabling a high angle
design, the number of lenses used in optical systems can be reduced, and this contributes to compact, lightweight, and highly functional end-product cameras.
HOYA Outlook
As for products for digital cameras, sales of products for compact digital cameras
are expected to continue to fall as higher-quality imaging is increasingly realized bysmartphone cameras. On the other hand, we should be able to realize stable growthin the field of high-end cameras (interchangeable-lens cameras, such as single-lensreflex and mirrorless cameras), which is relatively immune to the effect of the erosion
by smartphone cameras, by leveraging our strengths, such as the quality of GMO.
Although products for security cameras are currently facing inventory adjustment asa backlash to previous rapid growth, we predict that they will continue to grow moderately in the medium to long term due to the increasing adoption of higher-pixel
imaging and the increasing number of security cameras installed.
We also expect growth in the market for car-mounted cameras used for image recognition in advanced driver assistance systems (ADASs), although it will be several
more years before this technology is widely applied in the market and this offers asignificant contribution to our business results.

HOYA REPORT 201957

Copyright ©2019 HOYA GROUP(HOYA estimate on a value base)

HOYA REPORT 2019

Financial Review
Scope of Consolidation
As of March 31, 2019, the HOYA Group consisted of HOYA CORPORATION, 146 consolidated subsidiaries (11 of which aredomestic and 135 overseas), and 10 affiliates (4 of which are domestic and the other 6 overseas).
The HOYA Group has adopted a business management structure where the Life Care and Information Technology business segments control subsidiaries around the world based on their respective responsibilities. Regional headquarters in the Americas,
Europe, and Asia support business operations by strengthening relationships with countries and areas in the respective regions,such as by providing legal support and conducting internal audits. The HOYA Group has its Financial Head Quarters (FHQ) at its
Europe Regional Headquarters (Netherlands).

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

HOYA REPORT 201958

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

Review of Performance in the Fiscal Year Ended March 31, 2019
Sales for the consolidated fiscal year under review amounted to565,810 million yen, a 5.6% increase year on year.

Sales(Billions of yen)

600

Profit before income tax and profit for the year increased comparedto the preceding consolidated fiscal year by 16.4% to 144,657
million yen and 23.0% to 122,072 million yen, respectively. The

535.6

505.7

565.8

478.9

500
400

profit before tax ratio rose to 25.6%, an increase of 2.4 percentage
300

points from 23.2% in the preceding consolidated fiscal year.

200

Sales in the Life Care segment increased by 5.8% compared to thepreceding consolidated fiscal year to 373,388 million yen. Segment
profit increased by 22.8% to 69,290 million yen.

100
0
Mar.
2016

Overall sales increased compared to the preceding consolidated fis-

Mar.
2017

Mar.
2018

Mar.
2019

cal year as eyeglass lenses saw growth in existing business in theoverseas market of the Americas, and we saw growth from ourPretax profit, Net profit attributableto owners of the company

acquisition of Performance Optics, LLC.

(Billions of yen)

Sales of contact lenses increased compared to the preceding consolidated fiscal year due to an increase in new customers caused by
opening new “Eyecity” retail stores and enhancing existing stores.

144.7

150
119.1

120

124.2
99.5

93.2

Medical endoscopes trended strongly in Europe and the U.S. dueto the launch of new products and the strengthening of our sales

122.1

110.8
86.7

90

60

framework, bringing overall sales higher than in the preceding consolidated fiscal year.

30

Intraocular lenses for cataracts trended well in Japan, while over-

0

Mar.
2016

seas, Vivinex—a product with considerable competitive strength—

Mar.
2017

Mar.
2018

made a contribution, leading to sales coming in above the preced-

Pretax profit

ing consolidated fiscal year.

Net profit attributable to owners of the company

Sales in the Information Technology segment increased by 5.1% com-

Mar.
2019

Profit margins

pared to the preceding consolidated fiscal year to 187,546 million yen,(%)

and segment profit increased by 15.2% to 80,596 million yen.

30

The saturation of the market for finished products such as personal
computers and tablets continues, and the smartphone market is

25.6
25

23.6

beginning to slow down. However, sales of the Company’s mask

23.1

23.2
21.6

blanks for semiconductors increased compared to the preceding
consolidated fiscal year due to the capture of an active researchand development demand related to leading-edge products, such

20

18.5

18.1

18.6

as those based on next-generation EUV lithography.
15

With regard to photomasks for liquid-crystal displays, recovery of

Mar.
2016

research and development demand, mainly in displays for smart-

Pretax profit ratio

phones, and development of new customers in the still growing

Net profit ratio

HOYA REPORT 201959

Copyright ©2019 HOYA GROUP

Mar.
2017

Mar.
2018

Mar.
2019

HOYA REPORT 2019

Chinese market, led to higher sales compared to the preceding
consolidated fiscal year.

Efficiency(%)

25

Regarding glass substrates for HDDs, sales from 2.5-inch substrates,

21.2

which account for most of sales, decreased from the previous fiscal
year, as HDDs are being replaced with SSDs, particularly for use in lap-

19.2

20

top computers. Increasing use of 3.5-inch substrates by data center

17.3

17.2

end users brought sales higher than the preceding consolidated fiscal

17.3
15

year. As a result, overall sales was nearly flat from the year earlier.

12.5

Market contraction in the digital camera market eased in the last
fiscal year, but competition from smartphones took the market into10

a further downward trend and sales fell versus the preceding consolidated fiscal year.

15.1

13.6

Mar.
2016

ROE

Mar.
2017

Mar.
2018

Mar.
2019

ROA

(For further information on performance by product, please refer to the Review ofOperations section.)

Financial Position
Total assets at March 31, 2019 increased by 113,270 million yen
from the end of the preceding consolidated fiscal year to 763,915
million yen.

Total assets, Equity attributableto owners of the company(Billions of yen)

763.9

800

Non-current assets increased by 51,347 million yen to 255,802 million yen. This is primarily due to increases of 10,951 million yen in
goodwill, 7,445 million yen in intangible assets, and 28,508 million

700

659.6

639.0

600
493.3

500

510.9

650.6

623.2

526.2

400

yen in long-term financial assets.

300

Current assets increased by 61,924 million yen to reach 508,113

200

million yen. This is primarily due to an increase in cash and cash

100

equivalents of 47,562 million yen.

0

Total equity increased by 97,030 million yen to 627,707 million yen.

Mar.
2016

Total assets

Mar.
2017

Mar.
2018

Mar.
2019

Equity attributable to owners of the company

This is primarily due to an increase in retained earnings by 87,641
million yen.
Ratio of assets attributableto owners of the Company

Equity attributable to owners of the company increased by 96,962
million yen to 623,155 million yen. Liabilities increased by 16,241
million yen to 136,208 million yen.
The ratio of assets attributable to owners of the company to total

(%)

100

90

assets at March 31, 2019 increased by 0.7 percentage points fromthe end of the preceding consolidated fiscal year and reached to

77.2

77.5

Mar.
2016

Mar.
2017

80

80.9

81.6

Mar.
2018

Mar.
2019

81.6%, which was 80.9% in the preceding consolidated fiscal year.
70

60

HOYA REPORT 201960

Copyright ©2019 HOYA GROUPHOYA REPORT 2019

Cash Flow
Cash and cash equivalents at the end of the fiscal year ended March
31, 2019 increased by 47,562 million yen (including the effect ofchanges in exchange rates of 3,910 million yen) from the end of

Cash flow(Billions of yen)

146.6

135.5

150 131.9
107.7

the previous fiscal year to 293,397 million yen.

100

Net cash provided by operating activities increased by 11,089 million

50

yen from the previous fiscal year to 146,588 million yen. This was0mainly attributable to profit before tax of 144,657 million yen (an-50increase of 20,409 million yen in inflow from the previous fiscal year),depreciation and amortization of 26,416 million yen in (a decrease

-15.2

-27.5

-100

of 2,296 million yen in inflow), an increase of 6,128 million yen in-150

inventories (a decrease of 7,892 million yen in inflow), an increase of

-200

-32.8

-64.3

-68.5

-70.1

-117.3-161.5

3,066 million yen in trade and other accounts receivable (an increase

Mar.
2016

Mar.
2017

of 3,497 million yen in inflow), an increase of 4,985 million yen in

Operating cash flow

trade and other accounts payable (a decrease of 932 million yen in

Financing cash flow

Mar.
2018

Mar.
2019

Investing cash flow

outflow), and corporate income tax paid of 31,637 million yen (anincrease of 5,212 million yen in outflow).
Net cash used in investing activities increased by 1,611 million yen fromthe previous fiscal year to 70,144 million yen. This was mainly attributable to purchase of property, plant and equipment of 26,672 million
yen (an increase of 8,698 million yen in outflow from the previous fiscal
year), acquisition of investments of 27,777 million yen (an increase of
26,444 million in outflow), and acquisition of subsidiaries of 19,742 million yen (a decrease of 34,276 million yen in outflow).
Net cash used in financing activities decreased by 84,541 million yen
from the previous fiscal year to 32,792 million yen. This was mainly
attributable to dividends paid of 34,141 million yen (an increase of
5,099 million yen in outflow from the previous fiscal year).

Capital Expenditures/Depreciation and Amortization
Capital expenditures,
Depreciation and amortization

The total capital expenditures of all operations of the HOYA Groupamounted to 29,204 million yen during the consolidated fiscal year
ended March 31, 2019, an increase of 9,915 million yen over thepreceding consolidated fiscal year.

(Billions of yen)

34.5

35

34.5
30.1

30
25

In the consolidated fiscal year under review, investment in the Life Carebusiness increased 78.8% to 19,108 million yen year on year, and investment in the Information Technology business increased 18.1% to9,933 million yen year on year, which account for 65.4% and 34.0%,
respectively, of the total capital expenditures by the Group.

20

HOYA REPORT 2019

19.3

10
5
Mar.
2016

Capital expenditures

61

27.5

22.9

15

0

The investment was covered by internally generated funds.

20.3

29.2

Copyright ©2019 HOYA GROUP

Mar.
2017

Mar.
2018

Mar.
2019

Depreciation and amortization

HOYA REPORT 2019

During the consolidated fiscal year under review, in the Life Carebusiness, the HOYA Group invested in production facilities, primarily for eyeglass lenses, with the aim of increasing capacity of production plants and production efficiency, and optimization.
In the Information Technology business, the HOYA Group invested
in production facilities, primarily for glass substrates for HDDs offering new areas of application.
Depreciation and amortization (including impairment losses) for
the fiscal year under review were 27,515 million yen, 20.3% lower
than in the previous fiscal year.

Policy Concerning Decisions on Appropriation of Retained Earnings, etc.
The HOYA Group aims to maximize corporate value by developing

Dividend per share, Payout ratio

its business operations under Group management from a global

(Yen)

(%)

perspective and adjusting the business portfolio in the process to

100

50

80

40

60

30

40

20

20

10

suit changes in the times and the environment.
Our basic policy on the appropriation of retained earnings is todetermine the amount of dividend in consideration of the financial results of the fiscal year under review and medium- to longterm funding needs, striving to maintain an appropriate balance
between shareholder return and the need for internal reserves for
future growth of the Company.
0

We plan to apply the internal reserves for investments in the Life

Mar.
2016

Care business, which we position as a growth business, for the pur-Dividend per sharepose of increasing market share, entering into new markets, anddeveloping and acquiring new technologies, on a priority basis. In
addition to internal growth of existing businesses, we will actively
pursue M&A opportunities to expand the business portfolio andachieve speedy business expansion.
In the Information Technology business, which we position as a stable revenue business, we will continue to make capital investments
to increase technological strength, which is to become the sourceof our competitiveness, as well as investments for the developmentof next-generation technologies and new products.
The annual dividend, including the interim dividend of 45 yen per
share that was already paid, was 90 yen per share. The consolidated dividend payout ratio was 28.0%.
In the fiscal year ending March 31, 2020, the Board of Directors of
the Company passed a resolution for the acquisition of own sharesin the amount of 60.0 billion yen in total.

HOYA REPORT 201962

Copyright ©2019 HOYA GROUP

Mar.
2017

Mar.
2018
Payout ratio

Mar.
2019

0